Advantech - Interim / Quarterly Report 2019

Advantech Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Six Months Ended June 30, 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 balance sheets of Advantech Co., Ltd. and its subsidiaries (collectively referred to as the “Group”) as of June 30, 2019 and 2018, the related consolidated statements of comprehensive income for the three months and six months ended June 30, 2019 and 2018, the consolidated statements of changes in equity and cash flows for the six months 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 June 30, 2019 and 2018, the combined total assets of these non-significant subsidiaries were NT$7,992,045 thousand and NT$6,362,974 thousand, respectively, representing 16.10% and 14.03%, respectively, of the consolidated total assets, and the combined total liabilities of these subsidiaries were NT$1,889,015 thousand NT$985,034 thousand, respectively, representing 9.14% and 5.22%, respectively, of the consolidated total liabilities; for the three months and six months ended June 30, 2019 and 2018, the amounts of combined comprehensive income of these subsidiaries were NT$251,772 thousand, NT$5,943 thousand, NT$516,101 thousand, and NT$307,321 thousand, respectively, representing 12.54%, 0.37%, 13.22% and 9.84%, 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$2,623,911 thousand and NT$2,108,693 thousand as of June 30, 2019 and 2018, respectively. The Group’s share of profit of associates accounted for using the equity method was NT$37,647 thousand, NT$26,349 thousand, NT$42,596 thousand, and NT$47,856 thousand for the three months and six months ended June 30, 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.

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 and the investees accounted for using the equity method as described in the preceding paragraph been reviewed, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not give a true and fair view of the consolidated financial position of the Group as of June 30, 2019 and 2018, its consolidated financial performance for the three months ended June 30, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the six months ended June 30, 2019 and 2018 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

August 2, 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.

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 (Notes 9 and 30) Notes receivable (Note 10) Trade receivables (Note 10) Trade receivables from related parties (Note 29) Other receivables Other receivables from related parties (Note 29) Inventories (Note 11) Other current assets (Notes 5 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 Long-term prepayments for leases (Note 17) Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 18) Financial liabilities at fair value through profit or loss - current (Notes 7 and 28) Notes payable and trade payables (Note 29) Dividends payable Other payables (Note 19) Current tax liabilities (Notes 4 and 23) Short-term warranty provisions Lease liabilities - current (Notes 3, 4 and 15) Current portion of long-term borrowings (Notes 18 and 30) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 18 and 30) Deferred tax liabilities (Notes 4 and 23) Lease liabilities - non-current (Notes 3, 4 and 15) Net defined benefit liabilities (Notes 4 and 20) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 21) 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 compensation Total other equity Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		June 30, 2019 (Reviewed) Amount % $ 6,640,795 13 4,719,536 10 89,115 - 1,291,609 3 7,894,853 16 22,952 - 8,316 - 108,285 - 8,446,053 17 671,187 1 29,892,701 60 1,433,553 3 2,623,911 5 9,815,812 20 844,218 2 2,970,534 6 1,073,302 2 556,690 1 396,195 1 - - 47,477 - 19,761,692 40 $ 49,654,393 100 $ 318,781 1 8,432 - 6,518,560 13 4,751,129 10 3,685,906 7 1,505,456 3 166,882 - 198,527 - 7,062 - 857,565 2 18,018,300 36 43,535 - 1,879,009 4 342,982 1 231,811 1 145,001 - 2,642,338 6 20,660,638 42 6,990,755 14 650 - 6,991,405 14 7,269,690 14 6,285,079 13 798,763 2 7,690,065 15 14,773,907 30 (324,717) (1) (171,473) - 1,240 - (494,950) (1) 28,540,052 57 453,703 1 28,993,755 58 $ 49,654,393 100		December 31, 2018 (Restated 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 5 9,782,781 22 - - 2,824,007 6 1,115,892 3 501,260 1 273,386 1 297,665 1 47,718 - 18,574,498 42 $ 43,941,071 100 $ 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 10,011,897 23 16,037,165 37 (475,245) (1) (324,254) (1) 736 - (798,763) (2) 29,298,705 67 245,880 - 29,544,585 67 $ 43,941,071 100		June 30, 2018 (Restated Reviewed)
						Amount % $ 5,294,861 12 5,163,405 11 37,808 - 1,263,877 3 7,056,104 16 37,865 - 38,283 - 143,482 - 7,173,586 16 574,617 1 26,783,888 59 1,753,637 4 2,108,693 5 9,859,110 22 - - 2,812,731 6 1,138,722 2 419,556 1 124,484 - 310,175 1 44,956 - 18,572,064 41 $ 45,355,952 100 $ 8,100 - 4,637 - 6,251,295 14 4,600,414 10 3,576,341 8 1,461,693 3 188,171 - - - 16,808 - 746,079 2 16,853,538 37 80,924 - 1,554,127 4 - - 236,053 1 145,478 - 2,016,582 5 18,870,120 42 6,974,575 15 870 - 6,975,445 15 6,760,672 15 5,655,613 12 369,655 1 6,705,513 15 12,730,781 28 (360,128) (1) 178,175 1 - - (181,953) - 26,284,945 58 200,887 - 26,485,832 58 $ 45,355,952 100

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

(With Deloitte & Touche review report dated August 2, 2019)

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 NON-OPERATING INCOME Share of profit of associates accounted for using the equity method (Note 13) Interest income Gains (losses) on disposal of property, plant and equipment Gains on disposal of investments Foreign exchange gains (losses), net (Notes 22 and 31) Gains on financial instruments at fair value through profit or loss (Note 7) Dividends income 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 June 30	For the Three Months Ended June 30	For the Three Months Ended June 30		For the Six Months	For the Six Months	Ended June 30
		2019		2018		2019		2018
		Amount % $ 13,619,092 97 356,922 3 13,976,014 100 8,565,638 61 5,410,376 39 1,300,952 9 716,426 5 1,060,163 8 3,077,541 22 2,332,835 17 37,647 - 10,134 - (1,857 ) - - - 12,207 - 22,093 - 939 - 21,915 - (6,141 ) - (7,362 ) - (136) - 89,439 - 2,422,274 17 (512,673) (4) 1,909,601 13		Amount % $ 12,342,455 98 302,989 2 12,645,444 100 7,852,972 62 4,792,472 38 1,188,770 10 623,911 5 1,038,340 8 2,851,021 23 1,941,451 15 26,349 - 14,082 - (1,126 ) - 2,225 - 45,671 1 (31,307 ) - 853 - 37,199 - (1,265 ) - (4,949 ) - (653) - 87,079 1 2,028,530 16 (433,891) (3) 1,594,639 13		Amount % $ 25,593,965 97 682,639 3 26,276,604 100 16,142,174 61 10,134,430 39 2,528,622 10 1,381,201 5 2,033,603 8 5,943,426 23 4,191,004 16 42,596 - 19,136 - 43,491 - - - 81,951 - 92,801 1 939 - 47,512 - (12,316 ) - (28,708 ) - (1,583) - 285,819 1 4,476,823 17 (944,353) (3) 3,532,470 14		Amount % $ 23,400,552 98 600,087 2 24,000,639 100 14,869,936 62 9,130,703 38 2,365,446 10 1,218,111 5 1,963,102 8 5,546,659 23 3,584,044 15 47,856 - 18,617 - (4,163 ) - 2,618 - 42,915 - 60,957 1 853 - 52,762 - (2,487 ) - (32,316 ) - (1,634) - 185,978 1 3,770,022 16 (807,445) (4) 2,962,577 12 (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss Share of the other comprehensive income of associates accounted for using the equity method (Notes 13 and 21) Unrealized gains (losses) on investments in equity instruments as at fair value through other comprehensive income (Note 21) Income tax relating to items that will not be reclassified subsequently to profit or loss (Note23) 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 income 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 June 30	For the Three Months Ended June 30	For the Three Months Ended June 30		For the Six Months	For the Six Months	Ended June 30
		2019		2018		2019		2018
		Amount % $ 3,934 - (15,942 ) - - - 105,185 1 16,539 - (11,817) - 97,899 1 $ 2,007,500 14 $ 1,894,118 14 15,483 - $ 1,909,601 14 $ 1,929,379 14 78,121 - $ 2,007,500 14		Amount % $ 1,861 - (115,314 ) (1 ) 2,127 - 110,949 1 3,757 - (5,874) - (2,494) - $ 1,592,145 13 $ 1,584,195 13 10,444 - $ 1,594,639 13 $ 1,562,767 13 29,378 - $ 1,592,145 13		Amount % $ 24,300 - 104,876 - - - 259,911 1 20,490 - (37,632) - 371,945 1 $ 3,904,415 15 $ 3,511,476 13 20,994 - $ 3,532,470 13 $ 3,791,180 14 113,235 1 $ 3,904,415 15		Amount % $ 1,861 - 46,203 - 2,127 - 114,027 1 2,094 - (4,898) - 161,414 1 $ 3,123,991 13 $ 2,946,865 12 15,712 - $ 2,962,577 12 $ 3,100,407 13 23,584 - $ 3,123,991 13 (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

EARNINGS PER SHARE (Note 24) Basic Diluted	For the Three Months Ended June 30	For the Three Months Ended June 30	For the Six Months Ended June 30	For the Six Months Ended June 30
	2019	2018	2019	2018
	Amount % $ 2.71 $ 2.69	Amount % $ 2.27 $ 2.25	Amount % $ 5.02 $ 4.97	Amount % $ 4.23 $ 4.18

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

(With Deloitte & Touche review report dated August 2, 2019)

(Concluded)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

			Equity Attributable to Owners of the Company	Equity Attributable to Owners of the Company
Issued Capital (Notes 21and 25)		Total Capital Surplus (Notes 21 and 25) $ 6,972,825 $ 6,554,842 - - 6,972,825 6,554,842 - - - - - - 2,620 19,440 - 182,766 - 2,091 - 2,290 - (757 ) - - - - - - - - $ 6,975,445 $ 6,760,672 $ 6,986,955 $ 7,073,348 - - - - - - 4,450 32,761 - 169,347 - 1,963 - (7,729 ) - - - - - - - - - - $ 6,991,405 $ 7,269,690	Retained Earnings (Note 21)	Total $ 14,423,062 (34,002) 14,389,060 - - (4,600,414 ) - - - - - 2,946,865 2,247 2,949,112 (6,977) $ 12,730,781 $ 16,037,165 - - (4,751,129 ) - - - - - 3,511,476 (544) 3,510,932 (23,061) $ 14,773,907		Other Equity (Note 21)	nearned Stock - Based Employee Compensation $ - - - - - - - - - - - - - - - $ - $ 736 - - - - - 504 - - - - - - $ 1,240
					Exchange Differences on Translating Foreign Operations A $ (463,479 ) - (463,479 ) - - - - - - - - - 103,351 103,351 - $ (360,128) $ (475,245 ) - - - - - - - - - 150,528 150,528 - $ (324,717)	Unrealized Gain Unrealized Gain or Loss on Financial Assets at Fair Value or Loss on through Other U vailable-for-sale Financial Assets Comprehensive Income $ 93,824 $ - (93,824) 123,254 - 123,254 - - - - - - - - - - - - - - - - - - - 47,944 - 47,944 - 6,977 $ - $ 178,175 $ - $ (324,254 ) - - - - - - - - - - - - - - - - - - - 129,720 - 129,720 - 23,061 $ - $ (171,473)
Share Capital A for $ 6,970,325 - 6,970,325 - - - 4,250 - - - - - - - - $ 6,974,575 $ 6,982,275 - - - 8,480 - - - - - - - - $ 6,990,755	dvance Receipts Ordinary Shares $ 2,500 - 2,500 - - - (1,630 ) - - - - - - - - $ 870 $ 4,680 - - - (4,030 ) - - - - - - - - $ 650		Legal Reserve Special Reserve Unappropriated Earnings $ 5,039,962 $ 85,204 $ 9,297,896 - - (34,002) 5,039,962 85,204 9,263,894 615,651 - (615,651 ) - 284,451 (284,451 ) - - (4,600,414 ) - - - - - - - - - - - - - - - - - 2,946,865 - - 2,247 - - 2,949,112 - - (6,977) $ 5,655,613 $ 369,655 $ 6,705,513 $ 5,655,613 $ 369,655 $ 10,011,897 629,466 - (629,466 ) - 429,108 (429,108 ) - - (4,751,129 ) - - - - - - - - - - - - - - - - - 3,511,476 - - (544) - - 3,510,932 - - (23,061) $ 6,285,079 $ 798,763 $ 7,690,065

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

(With Deloitte & Touche review report dated August 2, 2019)

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 Dividend 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 held for trading 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 Dividends received Interest paid Income tax paid Net cash generated from operating activities		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 4,476,823 420,241 107,563 - 27,295 (64,093) 169,347 12,316 (19,136) (939) (42,596) (43,491) - - (2,554,598) 169,795 (435,967) (3,983) 39,068 (440,760) (150,181) 276,937 (23,734) (96,927) (29,900) 76,044 (4,449) 1,864,675 19,136 939 (2,519) (974,073) 908,158	2018 $ 3,770,022 287,503 76,610 4,500 24,907 (28,641) 182,766 2,487 (18,617) (853) (47,856) 4,163 (2,618) (2,095,078) - (8,096) (468,187) (23,798) 37,015 (926,698) (128,211) 950,749 (1,172) (49,081) 7,196 68,749 (1,235) 1,616,526 18,617 853 (2,259) (513,021) 1,120,716 (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at amortizes cost Purchase of financial assets at fair value through other comprehensive income Proceeds from sale of financial assets at amortizes cost Acquisition of associates 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 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 used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ - (27,360) 71,903 (210,658) (542,156) (403,293) 76,826 422 (44,686) 89,697 (989,305) 67,089 (4,813) (291) (112,491) 37,211 (29,952) (43,247) 132,028 7,634 6,633,161 $ 6,640,795	2018 $ (40) - - (760,352) (60,322) (288,274) 53,908 611 (47,911) 17,378 (1,085,002) - (12,365) - - 22,060 (18,450) (8,755) 63,683 90,642 5,204,219 $ 5,294,861

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

(With Deloitte & Touche review report dated August 2, 2019)

(Concluded)

ADVANTECH CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 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 on August 2, 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), IFRIC Interpretations (IFRIC), and SIC Interpretations (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.

10 -

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.
11 -

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.

12 -
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. The IFRSs endorsed by the FSC for application starting from 2020

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

Note 1: 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 2: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.
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.

13 -
c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

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

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

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.

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.

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 consolidated 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;
14 -
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.
c. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries). Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective dates of acquisitions up to the effective dates of disposals, as appropriate. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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.

15 -
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.

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, estimations, 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 is 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. 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.

6. CASH AND CASH EQUIVALENTS

			December 31,	December 31,
	June 30, 2019			2018	June 30, 2018
Cash on hand	$	80,911	$	76,179	$	69,429
Checking accounts and demand deposits		5,278,336		5,350,844		4,900,957
Cash equivalents (time deposits with original
maturities of less than three months)		1,281,548		1,206,138		324,475
	$	6,640,795	$	6,633,161	$	5,294,861

17 -

7. FINANCIAL INSTRUMENTS AT FVTPL

			December 31,	December 31,
	June 30, 2019			2018	June 30, 2018
Financial assets at FVTPL-current
Financial assets mandatorily at FVTPL
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts	$	3,569	$	5,198	$	10,992
Non-derivative financial assets
Domestic quoted shares		148,093		202,622		199,735
Foreign quoted shares		7,164		5,270		10,285
Mutual funds		4,560,710		1,885,462		4,942,393
	$	4,719,536	$	2,098,552	$	5,163,405
Financial liabilities at FVTPL-current
Financial liabilities held for trading
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts	$	8,432	$	6,139	$	4,637

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

			Notional Amount
	Currency	Maturity Date	(In Thousands)
June 30, 2019
Sell	EUR/NTD	2019.07-2019.11	EUR14,000/NTD491,771
	USD/NTD	2019.07-2019.08	USD5,000/NTD156,591
	JPY/NTD	2019.07-2019.12	JPY420,000/NTD118,367
	RMB/NTD	2019.07-2019.09	RMB83,000/NTD375,652
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
June 30, 2018
Sell	EUR/NTD	2018.07-2018.11	EUR12,500/NTD449,644
	EUR/USD	2018.07-2018.08	EUR500/USD633
	USD/NTD	2018.07-2018.08	USD4,133/NTD123,113
	JPY/NTD	2018.07-2018.11	JPY360,000/NTD98,047
	RMB/NTD	2018.07-2018.09	RMB57,000/NTD263,162

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.

18 -

8. FVTOCI

		December 31,	December 31,
	June 30, 2019		2018	June 30, 2018
Non-current
Investments in equity instruments at FVTOCI	$ 1,433,553	$	1,300,267	$ 1,753,637
Investments in equity instruments at FVTOCI:
		December 31,
	June 30, 2019		2018	June 30, 2018
Non-current
Domestic investments
Listed shares and emerging market shares
Ordinary shares - ASUSTek Computer Inc.	$ 1,056,900	$	955,001	$ 1,319,940
Ordinary shares - Allied Circuit Co., Ltd.	229,462		226,501	350,485
Unlisted shares
Ordinary shares - BroadTec System Inc.	4,474		3,879	4,797
Ordinary shares - BiosenseTek Corp.	-		-	173
Ordinary shares - Juguar Technology	5,146		4,743	5,824
Ordinary shares - Taiwan DSC PV Ltd.	-		-	383
	1,295,982		1,190,124	1,681,602
Foreign investments
Shanghai Shangchuang Xinwei Investment
Management Co., Ltd.	135,629		107,328	68,895
JamaPro Co., Ltd.	1,942		2,815	3,140
	137,571		110,143	72,035
	$ 1,433,553	$	1,300,267	$ 1,753,637

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes.

9. FINANCIAL ASSETS AT AMORTIZED COST

			December 31,
	June	30, 2019	2018	June	30, 2018
Current
Foreign investments
Time deposits with original maturities of more
than 3 months	$	89,115	$ 157,426	$	37,808

Refer to Note 30 for information relating to investments in financial assets at amortized cost pledged as security.

19 -

10. NOTES RECEIVABLE AND TRADE RECEIVABLES

		December 31,
	June 30, 2019	2018	June 30, 2018
Notes receivable - operating	$ 1,291,609	$ 1,461,404	$ 1,263,877
Trade receivables
Amortized cost
Gross carrying amount	$ 8,004,256	$ 6,958,369	$ 7,162,047
Less: Allowance for impairment loss	(109,403)	(87,491)	(105,943)
	$ 7,894,853	$ 6,870,878	$ 7,056,104

Trade Receivables

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 the 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.

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.

June 30, 2019

Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost	Not Past Due - $ 6,555,934 (9,811) $ 6,546,123	Less than 60 Days 1% $ 1,275,696 (12,353) $ 1,263,343	61 to 90 Days 91 to 120 Days Over 120 Days 20% 58% 100% $ 91,092 $ 30,728 $ 50,806 (18,580) (17,853) (50,806) $ 72,512 $ 12,875 $ -	Total $ 8,004,256 (109,403) $ 7,894,853

20 -

December 31, 2018

Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost June 30, 2018 Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost	Not Past Due - $ 5,358,360 (21,319) $ 5,337,041 Not Past Due - $ 6,247,283 (3,663) $ 6,243,620	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 4% 28% 61% 100% $ 792,829 $ 43,450 $ 46,069 $ 32,416 (29,618) (12,188) (28,058) (32,416) $ 763,211 $ 31,262 $ 18,011 $ -	Total - $ 6,958,369 (87,491) $ 6,870,878 Total - $ 7,162,047 (105,943) $ 7,056,104

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

Balance at January 1 Add: Net remeasurement of loss allowance (a) Less: Amounts written off (b) Business combination Foreign exchange gains and losses Balance at June 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 87,491 27,295 (6,132) (35) 784 $ 109,403	2018 $ 90,455 24,907 (9,326) - (93) $ 105,943

a. Compared to January 1, 2019 and 2018, the net increases in the carrying amount of trade receivables were $1,045,887 thousand and $475,562 thousand at June 30, 2019 and 2018, respectively, resulting in the increases in loss allowances of $27,295 thousand and $24,907 thousand, respectively.
b. The Group wrote off trade receivables and related loss allowance for the six months ended June 30, 2019 and 2018 of $6,132 thousand and $9,326 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,
	June 30, 2019	2018	June 30, 2018
Raw materials	$ 3,996,120	$ 3,773,265	$ 3,734,627
Work in process	1,924,593	1,533,978	1,499,466
Finished goods	1,701,781	1,531,644	1,148,048
Inventories in transit	823,559	718,933	791,445
	$ 8,446,053	$ 7,557,820	$ 7,173,586

21 -

The cost of inventories recognized as cost of goods sold for the three months and six months ended June 30, 2019 and 2018 was $8,418,741 thousand, $7,754,730 thousand, $15,844,659 thousand, and $14,675,095 thousand, respectively.

The costs of inventories were decreased by $792,808 thousand, $630,341 thousand, and $646,851 thousand as of June 30, 2019, December 31, 2018 and June 30, 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
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

Proportion of Ownership (%)
June 30, 2019
December 31,
2018
June 30, 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
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, g
100.00
100.00
100.00
a
100.00
100.00
100.00
a
-
-
60.00
h
60.00
60.00
-
h
100.00
100.00
100.00
a
76.00
76.00
36.00
a, b
51.00
51.00
51.00
a
60.00
60.00
60.00
a, c
100.00
100.00
-
a, i
50.00
-
-
a, k
60.00
-
-
a, l
24.00
24.00
24.00
a
30.00
-
-
a, k

(Continued)

22 -

Investor
Investee
Nature of Activities

Advantech Corporate
Investment
Cermate Technologies Inc.
(Cermate Taiwan)
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
ACI IOT Investment Fund-I
Corporation
Investment holding company
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
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
Advantech Intelligent Health
Co., Ltd. (AIH)
Information software and data
processing service
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 B.V.
Advantech Europe B.V.
(AEU)
Sale of industrial automation products
(AEUH)
Advantech Poland Sp z o.o.
(APL)
Sale of industrial automation products
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
Taiwan)
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)
Sale of industrial network
communications systems

Proportion of Ownership (%)
June 30, 2019
December 31,
2018
June 30, 2018 Remark
55.00
55.00
55.00
a
50.00
50.00
50.00
a,
50.00
50.00
50.00
a
100.00
-
-
a, m
79.30
-
-
p
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
a, d
-
-
40.00
h
40.00
40.00
-
h
100.00
100.00
100.00
100.00
100.00
100.00
a
99.00
99.00
99.00
a, d
100.00
100.00
-
a, e
100.00
-
-
a, n
100.00
100.00
100.00
a
1.00
1.00
-
a, f
100.00
100.00
100.00
100.00
100.00
100.00
a
-
-
100.00
a, e
49.00
49.00
49.00
a
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
h
-
-
100.00
h
100.00
100.00
100.00

(Continued)

23 -

Investor
Investee
Nature of Activities

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
Advantech B+B Smartworx
s.r.o.CZ (ACZ) (former
B+B (CZ))
Manufacturing of cellular and
automation solutions
Conel Automation s.r.o
(Conel Automation)
Sale of industrial network
communications systems
Advantech Technology
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 (ACZ) (former
B+B (CZ))
Manufacturing of cellular and
automation solutions
Advantech B+B
Smartworx s.r.o.CZ
(ACZ) (former B+B
(CZ))
Conel Automation s.r.o
(Conel Automation)
Sale of industrial network
communications systems

Proportion of Ownership (%)
June 30, 2019
December 31,
2018
June 30, 2018 Remark
-
-
100.00
j
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.99
99.99
o
-
1.00
1.00
o
100.00
100.00
100.00
-
0.01
0.01
o
100.00
99.00
99.00
o

(Concluded)

Remark a: No 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 second quarter of 2018, the Group acquired 60% of the equity of AVN.
Remark d: In the second quarter of 2018, the Group founded SIoT (Cayman) and SIoT (China).
Remark e: 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 f: In the third quarter of 2018, AiSC invested in SIoT (China) and held 1% of the equity of SIoT (China).
Remark g: In the third quarter of 2018, the Group sold 15.96% of the equity of LNC, which led the Group’s equity investment in LNC to decrease from 80.06% to 64.10%.
Remark h: 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 i: In the fourth quarter of 2018, the Group founded ARU.
Remark j: In the fourth quarter of 2018, Quatech was in the process of liquidation.
Remark k: 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 l: In the first quarter of 2019, the Group acquired 60% of the equity of ATR.
Remark m: In the first quarter of 2019, Advantech Corporate Investment founded ACISM and acquired 100% of its equity.
Remark n: In the second quarter of 2019, SIoT (Cayman) founded AIH and acquired 100% of its equity.
Remark o: In the second quarter of 2019, the Group adjusted its investment structure. BBIE directly holds ACZ, and ACZ directly holds Conel Automation.
24 -

Remark p: In the second quarter of 2019, Advantech Corporate Investment founded ACI IOT Investment Fund-I Corporation and acquired 79.30% of its equity.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

			December 31,	December 31,
	June 30, 2019			2018	June 30, 2018
Associates that are not individually material
Listed companies
Axiomtek Co., Ltd. (“Axiomtek”)	$	619,725	$	619,411	$	563,971
Winmate Inc. (“Winmate”)		534,385		542,761		523,160
AzureWare Technologies, Inc. (“AzureWare”)		510,308		534,780		538,289
Nippon RAD Inc. (Nippon RAD)		312,209		298,700		297,647
Mildex Optical Inc. (“Mildex”)		202,371		183,210		-
Unlisted companies
AIMobile Co., Ltd. (“AIMobile”)		84,757		65,012		77,878
Deneng Scientific Research Co., Ltd.
(“Deneng”)		13,820		14,100		14,438
Jan Hsiang Electronics Co., Ltd. (“Jan
Hsiang”)		8,012		8,010		10,742
CDIB Innovation Accelerator Co., Ltd.
(“CDIB”)		159,211		147,109		72,501
DotZero Co., Ltd. (“DotZero”)		3,650		4,629		-
iLink Co., Ltd. (“iLink”)		6,626		9,407		10,067
Shanghai Yanle Co., Ltd. (“Yanle”)		4,151		4,393		-
GSD Environmental Technology Co., Ltd.
(“GSD”)		17,242		-		-
Information Technology Total Services Co.,
Ltd. (ITTS)		147,444		-		-
	$ 2,623,911		$	2,431,522	$ 2,108,693

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.

25 -

In the second quarter of 2019, the Group paid cash of $147,444 thousand for a 20% equity of Information Technology Total Services Co., Ltd. The Group had significant influence over Information Technology Total Services Co., Ltd.

Aggregate Information of Associates That Are Not Individually Material

The Group’s share of Profit from continuing operations Other comprehensive income Total comprehensive income for the period	For the Three Months Ended June 30 2019 2018 $ 37,647 $ 26,349 20,473 5,618 $ 58,120 $ 31,967	For the Three Months Ended June 30 2019 2018 $ 37,647 $ 26,349 20,473 5,618 $ 58,120 $ 31,967		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 37,647 20,473 $ 58,120		2019 $ 42,596 44,790 $ 87,386	2018 $ 47,856 3,955 $ 51,811

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.

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 June 30, 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 June 30, 2019 Carrying amounts at June 30, 2019 2018 Cost Balance at January 1, 2018 Additions Disposals Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at June 30, 2018	Freehold Land $ 2,934,127 - (7,100 ) 39,543 - 5,254 $ 2,971,824 $ - - - - - - $ - $ 2,971,824 Freehold Land $ 2,943,980 - - - - 4,407 $ 2,948,387	Buildings $ 7,195,732 2,044 (13,147 ) 945,040 31,217 58,192 $ 8,219,078 $ 1,591,282 (5,673 ) 102,253 867,976 (583 ) 34,285 $ 2,589,540 $ 5,629,538 Buildings $ 7,274,546 11,739 (40,390 ) - - 20,627 $ 7,266,522	Equipment $ 1,709,936 42,375 (20,217 ) 130,912 877 10,400 $ 1,874,283 $ 1,172,613 (18,965 ) 83,079 109,364 8,992 7,154 $ 1,362,237 $ 512,046 Equipment $ 1,634,925 40,503 (59,114 ) 57 8,638 2,088 $ 1,627,097	Office Equipment $ 850,021 47,023 (32,885 ) 15,916 (7,905 ) 5,760 $ 877,930 $ 654,746 (18,292 ) 42,429 9,952 (8,021 ) 711 $ 681,525 $ 196,405 Office Equipment $ 830,623 28,472 (15,346 ) 524 (23,005 ) 3,399 $ 824,667	Other Facilities $ 1,743,263 77,413 (26,379 ) 34,650 80,009 10,999 $ 1,919,955 $ 1,234,142 (23,894 ) 85,705 32,988 83,952 6,925 $ 1,419,818 $ 500,137 Other Facilities $ 1,729,582 64,114 (33,055 ) 1,483 3,929 7,266 $ 1,773,319	Construction in Progress Total $ 2,485 $ 14,435,564 234,438 403,293 (431 ) (100,159 ) 1 1,166,062 (232,364 ) (128,166 ) 1,733 92,338 $ 5,862 $ 15,868,932 $ - $ 4,652,783 - (66,824 ) - 313,466 - 1,020,280 - 84,340 - 49,075 $ - $ 6,053,120 $ 5,862 $ 9,815,812 Construction in Progress Total $ 4,257 $ 14,417,913 143,446 288,274 (7 ) (147,912 ) - 2,064 (143,357 ) (153,795 ) (869) 36,918 $ 3,470 $ 14,443,462 (Continued)

b. 2018

26 -

Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Depreciation expenses Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at June 30, 2018 Carrying amounts at June 30, 2018	Freehold Land $ - - - - - - $ - $ 2,948,387	Buildings $ 1,414,696 (102 ) 100,558 - - 5,443 $ 1,520,595 $ 5,745,927	Equipment $ 1,186,494 (47,220 ) 53,973 5 (50,763 ) 1,109 $ 1,143,598 $ 483,499	Office Equipment $ 651,244 (15,085 ) 38,315 151 (26,587 ) 3,985 $ 652,023 $ 172,644	Other Facilities $ 1,198,147 (27,434 ) 94,657 738 (2,203 ) 4,231 $ 1,268,136 $ 505,183	Construction in Progress Total $ - $ 4,450,581 - (89,841 ) - 287,503 - 894 - (79,553 ) - 14,768 $ - $ 4,584,352 $ 3,470 $ 9,859,110 (Concluded)

The above items of property, plant and equipment are 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.

15. LEASE ARRANGEMENTS

a. Right-of-use assets - 2019

June 30, 2019

Carrying amounts
Land			$	305,309
Buildings				481,329
Machinery				2,530
Office equipment				12,115
Transportation equipment				42,935
			$	844,218
	For the Three		For the Six
	Months Ended		Months Ended
	June 30, 2019		June 30, 2019
Depreciation charge for right-of-use assets
Land	$	2,209	$	4,422
Building		41,988		84,442
Machinery		164		328
Office equipment		1,430		2,861
Transportation equipment		7,361		14,722
	$	53,152	$	106,775

27 -

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

	June 30, 2019
Carrying amounts
Current	$ 198,527
Non-current	342,982
	$ 541,509
Discounted rate ranges of lease liabilities were as follows:
	June 30, 2019
Buildings	0.25%-12.00%
Machinery	0.87%-5.46%
Office equipment	0.87%-4.75%
Transportation equipment	0.25%-5.90%

16. GOODWILL

Cost Balance at January 1 Additional amounts recognized from business combinations occurring during the year (Note 26) Goodwill adjustment Effect of foreign currency exchange differences Balance at June 30 Accumulated impairment losses Balance at January 1 Effect of foreign currency exchange differences Balance at June 30 Carry amount at June 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 2,921,795 124,028 - 22,499 $ 3,068,322 $ (97,788) - $ (97,788) $ 2,970,534	2018 $ 2,828,958 65,207 (15,994) 32,348 $ 2,910,519 $ (101,409) 3,621 $ (97,788) $ 2,812,731

As of June 30, 2019, the Group obtained the fair value valuation at the acquisition date. According to the valuation, the fair value of AVN’s intangible assets at the acquisition date was $26,727 thousand. The comparative figures have been restated as if the initial accounting was completed at the acquisition date.

28 -

The adjustments in the consolidated balance sheets are as follows:

			June 30, 2018	June 30, 2018
	December 31,		(Acquisition
		2018		Date)
Goodwill adjustments	$	(15,994)	$	(15,994)
Intangible assets	$	19,993	$	26,657
Retained earnings	$	(3,998)	$	-
Non-controlling interests	$	7,997	$	10,663

17. PREPAYMENTS FOR LEASES

	December 31,	December 31,
		2018	June 30, 2018
Current assets (included in other current assets)	$	8,673	$	8,908
Non-current assets		297,665		310,175
	$	306,338	$	319,083

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

18. BORROWINGS

a. Short-term borrowings

			December	December	31,
	June 30, 2019			2018		June	30, 2018
Secured borrowings
Bank loans	$	-	$		-	$	8,100
Unsecured borrowings
Line of credit borrowings		318,781		87,581			-
	$	318,781	$	87,581		$	8,100

The range of weighted average effective interest rates on bank loans were 0.19%-3.15%, 1.38%-3.15% and 2.87% per annum as of June 30, 2019, December 31, 2018 and June 30, 2018, respectively.

b. Long-term borrowings

			December 31,	December 31,
	June	30, 2019		2018	June 30, 2018
Secured borrowings
Bank loans	$	-	$	-	$ 38,788
Other loans		50,597		55,410	58,944
		50,597		55,410	97,732
Less: Current portions		(7,062)		(9,626)	(16,808)
Long-term borrowings	$	43,535	$	45,784	$ 80,924

29 -

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

Other borrowings are loans from the government. As of June 30, 2019, December 31, 2018 and June 30, 2018, the effective interest rate was 2.91%-3.16%.

Due to the Group’s demand for borrowings, the Group pledged land and buildings as security (refer to Note 30).

19. OTHER LIABILITIES

		December 31,
	June 30, 2019	2018	June 30, 2018
Other payables
Payables for salaries or bonuses	$ 2,205,647	$ 2,143,770	$ 2,186,409
Payables for employee benefits	195,006	207,175	188,042
Payables for royalties	176,335	107,409	177,226
Others (Note)	1,108,918	1,203,845	1,024,664
	$ 3,685,906	$ 3,662,199	$ 3,576,341

Note: The marketing expenses and freight expenses were included.

20. RETIREMENT BENEFIT PLANS

Employee benefit expenses in respect of the Group’s defined benefit retirement plans were $1,338 thousand and $1,413 thousand, $2,677 thousand and $2,825 thousand for the three months and six months ended June 30, 2019 and 2018, respectively, and were calculated using the actuarially determined pension cost discount rate as of December 31, 2018 and 2017.

21. EQUITY

a. Share capital

Ordinary shares

		December 31,
	June 30, 2019	2018	June 30, 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)	699,141	698,696	697,545
Shares issued	$ 6,991,405	$ 6,986,955	$ 6,975,445

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.

30 -

b. Capital surplus

		December 31,
	June 30, 2019	2018	June 30, 2018
May be used to offset a deficit,
distributed as cash dividends, or
transferred to share capital (1)
Issuance of ordinary shares	$ 2,692,238	$ 2,692,238	$ 2,692,238
Conversion of bonds	1,636,499	1,636,499	1,636,499
The difference between consideration
received or paid and the carrying amount of
subsidiaries’ net assets during actual
disposal or acquisition	80,831	88,560	20,134
Share of changes in capital surplus of
associates	55	55	-
Employees’ share compensation	78,614	78,614	78,614
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	1,675,671	1,519,818	1,323,645
Share of changes in capital surplus of
associates	29,853	27,890	27,376
Not note be used for any purpose
Employee share options	1,071,666	1,025,411	977,920
	$ 7,269,690	$ 7,073,348	$ 6,760,672

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).
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

31 -

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 approved in the shareholders’ meetings on May 28, 2019 and 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

d. Special reserves

Beginning at January 1 Appropriations in respect of debits to other equity items Balance atJune 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 369,655 429,108 $ 798,763	2018 $ 85,204 284,451 $ 369,655

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

Balance at January 1 Effect of change in tax rate Recognized during the period Exchange differences arising on translating the financial statements of foreign entities Share of those of associates accounted for using the equity method Other comprehensive income recognized for the period Balance at June 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ (475,245) - 134,136 16,392 150,528 $ (324,717)	2018 $ (463,479) 16,752 84,924 1,675 103,351 $ (360,128)

32 -
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 Cumulative unrealized gain/(loss) of equity instruments transferred to retained earnings due to disposal by related parties Balance at June 30 3) Unearned employee benefits compensation Balance at January 1 Share from associates accounted for using the equity method Balance at June 30 f. Non-controlling interests Balance at January 1 Share of profit for the year Other comprehensive income during the year Exchange difference on translation of foreign financial statements Non-controlling interests increased arising from decreased investment in subsidiaries (Note 27) Non-controlling interests decreased arising from increased investment in subsidiaries (Note 27) Non-controlling interests increased arising from the acquisition of subsidiary, ATJ (Note 26) Non-controlling interests increased arising from the acquisition of subsidiary, ATR (Note 26) Non-controlling interests increased arising from the acquisition of subsidiary, AVN (Note 26) Employees’ holding outstanding vest share option related non-controlling interests issued by subsidiaries Balance at June 30		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 2018 $ (324,254) $ 123,254 104,876 46,203 24,844 1,741 129,720 47,944 23,061 6,977 $ (171,473) $ 178,175 For the Six Months Ended June 30, 2019 $ 736 504 $ 1,240 For the Six Months Ended June 30
		2019 $ 245,880 20,994 92,241 - (22,487) 102,770 14,041 - 264 $ 453,703	2018 $ 179,366 15,712 7,872 1,876 (22,701) - - 17,920 842 $ 200,887

33 -

22. NET PROFIT FROM CONTINUING OPERATIONS

a. Finance costs

Interest on bank loans Interest on lease liabilities Others Depreciation and amortization An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Operating expenses	For the Three Months Ended June 30 2019 2018 $ 968 $ 307 4,510 - 663 958 $ 6,141 $ 1,265 For the Three Months Ended June 30 2019 2018 $ 47,953 $ 32,488 145,245 110,838 $ 193,198 $ 143,326 $ 948 $ 1,697 59,480 32,414 $ 60,428 $ 34,111	For the Three Months Ended June 30 2019 2018 $ 968 $ 307 4,510 - 663 958 $ 6,141 $ 1,265 For the Three Months Ended June 30 2019 2018 $ 47,953 $ 32,488 145,245 110,838 $ 193,198 $ 143,326 $ 948 $ 1,697 59,480 32,414 $ 60,428 $ 34,111		For the Six Months Ended June 30	For the Six Months Ended June 30
				2019 2018 $ 1,746 $ 500 9,020 - 1,550 1,987 $ 12,316 $ 2,487 For the Six Months Ended June 30
		2019 $ 47,953 145,245 $ 193,198 $ 948 59,480 $ 60,428		2019 $ 86,345 333,896 $ 420,241 $ 1,891 105,672 $ 107,563	2018 $ 67,418 220,085 $ 287,503 $ 2,611 73,999 $ 76,610

b. Depreciation and amortization
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		For the Three Months Ended June 30 2019 2018 $ 2,365,151 $ 2,181,795 90,481 89,157 1,338 1,413 91,819 90,570 84,674 83,747 180,886 151,978 $ 2,722,530 $ 2,508,090		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 2,365,151 90,481 1,338 91,819 84,674 180,886 $ 2,722,530		2019 $ 4,631,609 182,142 2,677 184,819 169,347 353,196 $ 5,338,971	2018 $ 4,231,491 165,945 2,825 168,770 182,766 297,609 $ 4,880,636 (Continued)

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An analysis of employee benefits expense by function Operating costs Operating expenses		For the Three Months Ended June 30 2019 2018 $ 614,483 $ 537,490 2,108,047 1,970,600 $ 2,722,530 $ 2,508,090		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 614,483 2,108,047 $ 2,722,530		2019 $ 1,176,266 4,162,705 $ 5,338,971	2018 $ 1,030,208 3,850,428 $ 4,880,636 (Concluded)

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 and six months ended June 30, 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 June 30 2019 2018 $ 132,435 $ 68,250 $ 2,650 $ 2,650	For the Three Months Ended June 30 2019 2018 $ 132,435 $ 68,250 $ 2,650 $ 2,650		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 132,435 $ 2,650		2019 $ 248,890 $ 5,300	2018 $ 136,500 $ 5,300

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 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
	2018 Cash $ 452,355 10,600	2017
		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.

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.

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e. Gain or loss on foreign currency exchange

Foreign exchange gains Foreign exchange losses Net gain (loss)	For the Three Months Ended June 30 2019 2018 $ 208,642 $ 407,516 (196,435) (361,845) $ 12,207 $ 45,671	For the Three Months Ended June 30 2019 2018 $ 208,642 $ 407,516 (196,435) (361,845) $ 12,207 $ 45,671		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 208,642 (196,435) $ 12,207		2019 $ 394,696 (312,745) $ 81,951	2018 $ 666,001 (623,086) $ 42,915

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 Income tax on unappropriated earnings 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 June 30 2019 2018 $ 498,914 $ 376,348 21,176 31,746 (50,812) (78,985) 43,395 56,449 - 48,333 $ 512,673 $ 433,891	For the Three Months Ended June 30 2019 2018 $ 498,914 $ 376,348 21,176 31,746 (50,812) (78,985) 43,395 56,449 - 48,333 $ 512,673 $ 433,891		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 498,914 21,176 (50,812) 43,395 - $ 512,673		2019 $ 964,440 21,176 (28,296) (12,967) - $ 944,353	2018 $ 738,604 31,746 (110,885) 61,090 86,890 $ 807,445

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 $98,640 thousand has not been recognized as of June 30, 2018. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%.

b. Income tax recognized in other comprehensive income

Deferred tax Change in tax rate In respect of current period Translation of foreign operations Income tax recognized in other comprehensive income	For the Three Months Ended June 30 2019 2018 $ - $ (15,335) 11,817 19,082 $ 11,817 $ 3,747	For the Three Months Ended June 30 2019 2018 $ - $ (15,335) 11,817 19,082 $ 11,817 $ 3,747		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ - 11,817 $ 11,817		2019 $ - 37,632 $ 37,632	2018 $ (18,879) 21,650 $ 2,771

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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 June 30 2019 2018 $ 2.71 $ 2.27 $ 2.69 $ 2.25	For the Three Months Ended June 30 2019 2018 $ 2.71 $ 2.27 $ 2.69 $ 2.25	For the Six Months Ended June 30	For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 2.71 $ 2.69		2019 $ 5.02 $ 4.97	2018 $ 4.23 $ 4.18

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

Net Profit for the Period

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 June 30 2019 2018 $ 1,894,118 $ 1,584,195 $ 1,894,118 $ 1,584,195		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 1,894,118 $ 1,894,118		2019 $ 3,511,476 $ 3,511,476	2018 $ 2,946,865 $ 2,946,865

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 June 30 2019 2018 699,076 697,490 5,853 5,379 502 340 705,431 703,209	For the Three Months Ended June 30 2019 2018 699,076 697,490 5,853 5,379 502 340 705,431 703,209		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 699,076 5,853 502 705,431		2019 698,910 6,591 1,659 707,160	2018 697,447 5,551 1,536 704,534

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.

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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 June 30 Options exercisable, end of the period Weighted-average fair value of options granted (NT$)	For the Six Months Ended June 30	For the Six Months Ended June 30
	2019 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 15,965 $ 143.64 (445) 83.62 15,520 - 7,520 84.58 $ -	2018
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 9,378 $ 95.15 (262) 84.20 9,116 - 2,616 84.20 $ -

The weighted-average share price at the date of exercise of share options for the six months ended June 30, 2019 and 2018 ranged from NT$223 to NT$261 and NT$204 to NT$226, respectively.

Information about outstanding options as of June 30, 2019 and 2018 was as follows:

Issuance in 2018 Issuance in 2016 Issuance in 2014	For the Six Months Ended December 31	For the Six Months Ended December 31
	2019 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 202.50 5.08 85.60 2.95 81.50 1.13	2018
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ - - 88.50 3.95 84.20 2.13

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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 $169,347 thousand and $182,766 thousand for the six months ended June 30, 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 Options forfeited Balance at June 30 Options exercisable, end of period Weighted-average fair value of options granted (NT$)	For the Six Months Ended June 30	For the Six Months Ended June 30
	2019 Number of Options (In Thousands of Units) Weighted- average Exercise Price ($) 814 $ 20 (4) 810 20 - -	2018
		Number of Options (In Thousands of Units) Weighted- average Exercise Price ($) 980 $ 20 - 980 20 - -

Information on outstanding options for the six months ended June 30, 2019 and 2018 was as follows:

Employee Share Options Issuance in 2018 Issuance in 2017	June 30	June 30
	2019 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 20 3.03 20 1.92	2018
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ - - 20 3.17

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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

	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

	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%

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26. BUSINESS COMBINATIONS

a. Subsidiaries acquired

			Proportion of
			Voting Equity
		Date of	Interests	Consideration
	Principal Activity	Acquisition	Acquired (%)	Transferred
Advantech Vietnam	Sales of industrial	June 6, 2018	60	$	76,092
Technology	automation products
Company Limited
(AVN)
Advantech	Production and sale of	January 31, 2019	80	$	517,008
Technologies	electronical and
Japan Corp. (ATJ)	mechanical device
Advantech Turkey	Wholesale of computers	February 28, 2019	42	$	28,266
Teknoloji A.S.	and peripheral devices
(ATR)

The Group acquired 60% of the shares of Advantech Vietnam Technology Company Limited (AVN) in order to expand the sales of industrial PC in the Vietnam market.

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 PC 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 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	ATJ $ 517,008 of acquisitions ATJ $ - 600,641 437,154 7,220 145,020 4,426 73,782 -	ATR $ 28,266 ATR $ 3,118 16,907 10,319 52 762 195 - 181	AVN $ 76,092 AVN $ 15,770 16,701 4,637 615 1,170 26,727 - 354 (Continued)

c. Assets acquired and liabilities assumed at the dates of acquisitions
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Current liabilities Short-term borrowings Trade and other payables Current tax liabilities Other current liabilities Non-current liabilities Other non-current liabilities	ATJ $ (157,819) (548,370) (32,436) (15,770) - $ 513,848	ATR $ (311) (2,206) (444) (4,278) (86) $ 24,209	AVN $ - (20,302) - (873) - $ 44,799 (Concluded)

d. Non-controlling interests

The non-controlling interest (20%, 58%, and 40% ownership interest in ATJ, ATR, and AVN) 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, $14,041 thousand, and $17,920 thousand for each.

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	AVN $ 76,092 (26,879) $ 49,213

In the acquisition of AVN, the adjustment of the fair value of the intangible assets and goodwill was based on the intangible asset - fair value valuation on client relationship. Refer to Note 16 for information related to goodwill adjustments.

The acquisitions of ATJ and ATR mainly represent 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	AVN $ 76,092 (15,770) $ 60,322

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g. Impact of acquisitions on the results of the Group

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

Revenue Profit		For the Six Months Ended June 30, 2019 ATJ ATR $ 1,167,827 $ 37,908 $ 68,705 $ 5,927	For the Six Months Ended June 30, 2018	For the Six Months Ended June 30, 2018
		ATJ $ 1,167,827 $ 68,705		AVN $ 21,019 $ 680

27. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

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

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	For	the Six Months Ended June 30	the Six Months Ended June 30
		2019 ATR $ (30,216) 22,487 $ (7,729) $ (7,729)			2018
				ATH $ (21,926) 22,701 $ 775 $ 775	LNC $ 3,391 (1,876) $ 1,515 $ 1,515	Total $ (18,535) 20,825 $ 2,290 $ 2,290

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28. FINANCIAL INSTRUMENTS

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

June 30, 2019 Financial assets at FVTPL Derivative financial assets Securities listed in ROC Securities listed in other countries Mutual funds Financial assets at FVTOCI Securities listed in ROC Unlisted securities - ROC Securities listed in other countries Financial liabilities at FVTPL Derivative financial liabilities 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	Level 1 $ - 148,093 7,164 4,560,710 $ 4,715,967 $ 1,286,362 - - $ 1,286,362 $ - Level 1 $ - 202,622 5,270 1,885,462 $ 2,093,354 $ 1,181,502 - - $ 1,181,502 $ -	Level 2 $ 3,569 - - - $ 3,569 $ - - - $ - $ 8,432 Level 2 $ 5,198 - - - $ 5,198 $ - - - $ - $ 6,139	Level 3 $ - - - - $ - $ - 9,620 137,571 $ 147,191 $ - Level 3 $ - - - - $ - $ - 8,622 110,143 $ 118,765 $ -	Total $ 3,569 148,093 7,164 4,560,710 $ 4,719,536 $ 1,286,362 9,620 137,571 $ 1,433,553 $ 8,432 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

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June 30, 2018

Financial assets at FVTPL Derivative financial assets Securities listed in ROC Securities listed in other country Mutual funds Financial assets at FVTOCI Investments in equity instruments at FVTOCI Securities listed in ROC Unlisted securities - ROC Unlisted shares in other country Financial liabilities at FVTPL Derivative financial liabilities	Level 1 $ - 199,735 10,285 4,942,393 $ 5,152,413 $ 1,670,425 - - $ 1,670,425 $ -	Level 2 $ 10,992 - - - $ 10,992 $ - - - $ - $ 4,637	Level 3 $ - - - - $ - $ - 11,177 72,035 $ 83,212 $ -	Total $ 10,992 199,735 10,285 4,942,393 $ 5,163,405 $ 1,670,425 11,177 72,035 $ 1,753,637 $ 4,637

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

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

Financial assets Balance at January 1, 2019 Reclassification Recognized in other comprehensive income Balance at June 30, 2019		FVTOCI	FVTOCI
		Equity Instruments
		For the Six Months Ended June 30
		2019 $ 118,765 - 28,426 $ 147,191	2018 $ - 89,893 (6,681) $ 83,212

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.

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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.

b. Categories of financial instruments

			December 31,	December 31,
	June 30, 2019			2018	June 30, 2018
Financial assets
FVTPL
Mandatorily at FVTPL	$	4,719,536	$	2,098,552	$	5,163,405
Financial assets at amortized cost (Note 1)		16,055,925		15,187,794		13,872,280
Financial assets at FVTOCI
Equity instruments		1,433,553		1,300,267		1,753,637
Financial liabilities
FVTPL
Mandatorily at FVTPL		8,432		6,139		4,637
Financial assets at amortized cost (Note 2)		15,324,973		9,616,094		14,533,882

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, other receivables and other receivables from related parties.
Note 2: The balances included financial liabilities measured at amortized cost, which comprise short-term borrowings, notes payable and trade payables, other payables, dividends payable, 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.

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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 Six Months Ended June 30 2019 2018 $ 106,130 (Note 1) $ 65,000 (Note 1)	Euro Impact For the Six Months Ended June 30 2019 2018 $ 29,634 (Note 2) $ 84,980 (Note 2)	Renminbi Impact
			For the Six Months Ended June 30
			2019 2018 $ 72,642 (Note 3) $ 65,050 (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.

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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,
	June 30, 2019	2018	June 30, 2018
Fair value interest rate risk
Financial assets	$ 1,370,663	$ 1,363,564	$	362,284
Financial liabilities	231,200	-		31,498
Cash flow interest rate risk
Financial assets	4,537,874	4,527,415		4,203,036
Financial liabilities	138,178	142,991		74,334

Sensitivity analysis

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

If interest rates had been 50 basis points higher and all other variables were held constant, the Group’s pre-tax profit for the six months ended June 30, 2019 and 2018 would have increased by $10,999 thousand and $10,322 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 six months ended June 30, 2019 and 2018 would have increased by $1,553 thousand and $2,100 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 six months ended June 30, 2019 and 2018 would have increased by $14,336 thousand and $17,536 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 current period.

2) Credit risk

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

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

3) Liquidity risk

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

The Group relies on bank borrowings as a significant source of liquidity. As of June 30, 2019, December 31, 2018 and June 30, 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 -

June 30, 2019

On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 10,476,657 Variable interest rate liabilities 325 Fixed interest rate liabilities 42 $ 10,477,024 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 June 30, 2018 On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 10,231,249 Variable interest rate liabilities 179 Fixed interest rate liabilities 49 $ 10,231,477	1-3 Months $ 3,316,642 20,646 173,486 $ 3,510,774 1-3 Months $ 1,601,148 20,649 $ 1,621,797 1-3 Months $ 3,010,690 358 100 $ 3,011,148	Over 3 Months to 1 Year $ 1,162,296 73,229 57,837 $ 1,293,362 Over 3 Months to 1 Year $ 835,388 70,407 $ 905,795 Over 3 Months to 1 Year $ 1,186,111 9,709 17,540 $ 1,213,360	Over 1 Year $ - 56,827 - $ 56,827 Over 1 Year- 5 Years $ - 67,039 $ 67,039 Over 1 Year $ - 79,627 14,582 $ 94,209

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

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

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

June 30, 2019

On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 352,400 Outflows 352,878 $ (478) December 31, 2018 On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 245,998 Outflows 245,440 $ 558 June 30, 2018 On Demand or Less than 1 Month Gross settled Foreign exchange forward contracts Inflows $ 362,426 Outflows 361,571 $ 855	1-3 Months Over 3 Months to 1 Year $ 592,508 $ 197,471 596,340 198,024 $ (3,832) $ (553) 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 $ 419,039 $ 171,768 413,457 171,850 $ 5,582 $ (82)	Total $ 1,142,379 1,147,242 $ (4,863) Total $ 861,923 862,864 $ (941) Total $ 953,233 946,878 $ 6,355

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c) Financing facilities

			December 31,	December 31,
	June 30, 2019			2018	June 30, 2018
Unsecured bank overdraft facilities
reviewed annually and payable at
call:
Amount used	$	318,781	$	67,581	$	-
Amount unused		6,909,139		3,955,919		4,000,000
	$	7,227,920	$	4,023,500	$	4,000,000
Secured bank overdraft facilities:
Amount used	$	50,597	$	55,410	$	105,832

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

b. Sales of goods

Related Party Categories/Name Associates	For the Three Months Ended June 30 2019 2018 $ 23,744 $ 36,550	For the Three Months Ended June 30 2019 2018 $ 23,744 $ 36,550		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 23,744		2019 $ 46,923	2018 $ 57,447

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c. Purchases of goods

Related Party Categories/Name Associates	For the Three Months Ended June 30 2019 2018 $ 49,846 $ 32,657	For the Three Months Ended June 30 2019 2018 $ 49,846 $ 32,657		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 49,846		2019 $ 92,766	2018 $ 52,324

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

	Related Party			December 31,	December 31,
Line Items	Categories/Name	June	30, 2019		2018	June	30, 2018
Trade receivables from	Associates	$	22,952	$	18,969	$	37,865
related parties

The outstanding trade receivables from related parties are unsecured. For the six months ended June 30, 2019 and 2018, no impairment loss was recognized for trade receivables from related parties.

e. Other receivables from related parties

	Related Party		December	31,
Line Items	Categories/Name	June 30, 2019	2018		June 30, 2018
Other receivables from	Associates	$ 108,217	$	-	$ 143,482
related parties	Other related parties	68		-	-
		$ 108,285	$	-	$ 143,482

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

	Related Party			December 31,	December 31,
Line Items	Categories/Name	June	30, 2019		2018	June	30, 2018
Trade payables	Associates	$	39,020	$	27,653	$	39,236

The outstanding trade payables to related parties are unsecured.

g. Other transactions with related parties

Related Party Category/Name Selling and market expenses Associates Research and development expenses Associates	Operating Expenses	Operating Expenses	Operating Expenses	Operating Expenses	Operating Expenses
	For the Three Months Ended June 30 2019 2018 $ 34,451 $ - $ 312,718 $ 684			For the Six Months Ended June 30
		2019 $ 34,451 $ 312,718		2019 $ 34,451 $ 312,878	2018 $ - $ 2,372

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

Rental income Other related parties Others Other related parties	Other Income	Other Income	Other Income	Other Income	Other Income
	For the Three Months Ended June 30 2019 2018 $ 15 $ 15 $ 675 $ 675			For the Six Months Ended June 30
		2019 $ 15 $ 675		2019 $ 30 $ 1,351	2018 $ 30 $ 1,351

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

h. Compensation of key management personnel

Short-term employee benefits Post-employment benefits Share-based payments	For the Three Months Ended June 30 2019 2018 $ 11,289 $ 11,793 10 50 10,411 6,377 $ 21,710 $ 18,220	For the Three Months Ended June 30 2019 2018 $ 11,289 $ 11,793 10 50 10,411 6,377 $ 21,710 $ 18,220		For the Six Months Ended June 30	For the Six Months Ended June 30
		2019 $ 11,289 10 10,411 $ 21,710		2019 $ 22,579 21 20,822 $ 43,422	2018 $ 23,587 100 13,764 $ 37,451

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:

			December	December	31,
	June	30, 2019		2018		June 30, 2018
Pledge deposits (classified as financial assets at
amortized cost)	$	-	$		-	$ 28,912
Property, plant and equipment		67,068		67,068		67,068
	$	67,068	$	67,068		$ 95,980

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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:

June 30, 2019

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 216,152 31.06 (USD:NTD) RMB 582,077 4.521 (RMB:NTD) EUR 25,270 35.38 (EUR:NTD) USD 17,430 6.8702 (USD:RMB) Financial liabilities Monetary items USD 133,665 31.06 (USD:NTD) RMB 270,512 4.521 (RMB:NTD) USD 34,577 6.8702 (USD:RMB) December 31, 2018	Carrying Amount $ 6,713,681 2,631,555 894,053 541,378 $ 10,780,667 $ 4,151,635 1,222,978 1,073,962 $ 6,448,575

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 211,836 30.715 (USD:NTD) RMB 493,302 4.472 (RMB:NTD) EUR 24,059 35.200 (EUR:NTD) USD 15,998 6.8683 (USD:RMB) Financial liabilities Monetary items USD 142,257 30.715 (USD:NTD) RMB 246,686 4.472 (RMB:NTD) USD 29,534 6.8683 (USD:RMB)	Carrying Amount $ 6,506,543 2,206,044 846,877 491,378 $ 10,050,842 $ 4,369,424 1,103,178 907,135 $ 6,379,737

55 -

June 30, 2018

Unit: In Thousands for Currencies, Except Exchange Rates

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

For the three months and six months ended June 30, 2019 and 2018, realized and unrealized net foreign exchange gains (or losses) were $12,207 thousand, $45,671 thousand, $81,951 thousand and $42,915 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:

a. Industrial internet of thing services (IIoT): Focus on the market of industrial internet-of-things;
b. Embedded board and design-in services (EIoT): Provide services involving embedded boards, systems and peripheral hardware and software;
c. Allied design manufacture services (AlliedDMS): Including Networks and Communications, data acquisition and control, and provide the customized collaboration designs and services;
d. Intelligent services (SIoT): Provide services involving digital logistic, digital healthcare and intelligent retail;
e. 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 six months ended June 30, 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 six months ended June 30, 2018 Revenue from external customers Inter-segment revenue Segment revenue Eliminations Consolidated revenue Segment income Other unamortized expense Other revenue Other income and expense Finance costs Share of profits of associates for using the equity method Profit before tax (continuing operations)	Industrial Interest of Thing Services (IIoT) $ 8,032,715 - $ 8,032,715 $ - - $ 1,906,229 $ 8,478,064 - $ 8,478,064 $ - - $ 1,927,614	Embedded Boards and Design-in Services (EIoT) $ 6,744,286 - $ 6,744,286 $ - - $ 1,111,329 $ 6,429,555 - $ 6,429,555 $ - - $ 1,047,648	Allied Design Manufacture Services (Allied DMS) $ 6,097,826 - $ 6,097,826 $ - - $ 960,535 $ 3,706,214 - $ 3,706,214 $ - - $ 526,674	Intelligent Services (SIoT) $ 2,229,816 - $ 2,229,816 $ - - $ 193,768 $ 2,155,581 - $ 2,155,581 $ - - $ 133,448	Global Customer Services (AGS & APS) $ 3,107,254 - $ 3,107,254 $ - - $ 419,851 $ 3,135,943 - $ 3,135,943 $ - - $ 345,255	Others $ 64,707 - $ 64,707 $ - - $ - $ 95,282 - $ 95,282 $ - - $ 112	Total $ 26,276,604 - 26,276,604 - 26,276,604 4,591,712 67,587 (400,708 ) 187,952 (12,316 ) 42,596 $ 4,476,823 $ 24,000,639 - 24,000,639 - 24,000,639 3,980,751 (396,707 ) 72,232 68,377 (2,487 ) 47,856 $ 3,770,022

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.

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TABLE 1

ADVANTECH CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE SIX MONTHS ENDED JUNE 30, 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	$ 16,668 (CZK 12,000 thousand )	$ 16,668 (CZK 12,000 thousand )	$ 16,668 (CZK 12,000 thousand )	2.00	Short-term financing	$ -	Financing need	$ -	None	None	$ 124,774 (Note C)	$ 124,774 (Note C)
2	B+B (CZ)	Conel Automation	Trade receivables - related parties	Yes	13,196 (CZK 9,500 thousand )	13,196 (CZK 9,500 thousand )	13,196 (CZK 9,500 thousand )	2.00	Short-term financing	-	Financing need	-	None	None	124,774 (Note C)	124,774 (Note C)
3	B+B (CZ)	Conel Automation	Trade receivables - related parties	Yes	4,119 (CZK 3,000 thousand )	-	-	2.00	Short-term financing	-	Financing need	-	None	None	124,774 (Note C)	124,774 (Note C)
4	AAC (BVI)	ATJ	Trade receivables - related parties	Yes	174,600 (JPY 600,000 thousand )	173,400 (JPY 600,000 thousand )	-	0.55	Short-term financing	-	Financing need	-	None	None	2,677,832 (Note D)	2,677,832 (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 June 30, 2019 were CZK1=NT$1.389 and JPY1=NT$0.289.

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.

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TABLE 2

ADVANTECH CO., LTD. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED FOR THE SIX MONTHS ENDED JUNE 30, 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 A-SIoT AVN Cermate (Taiwan) Cermate (Shenzhen) B+B (CZ)	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005	$ 948,000 (US$ 30,000) 316,000 (US$ 10,000) 316,000 (US$ 10,000) 316,000 (US$ 10,000) 291,000 (JPY 1,000,000) 189,600 (US$ 6,000) 189,600 (US$ 6,000) 158,000 (US$ 5,000) 316,000 (US$ 10,000) 158,000 (US$ 5,000) 47,400 (US$ 1,500) 35,380 (EUR 1,000) 31,600 (US$ 1,000) 31,600 (US$ 1,000) 31,600 (US$ 1,000) 15,800 (US$ 500)	$ 931,800 (US$ 30,000) 310,600 (US$ 10,000) 310,600 (US$ 10,000) 310,600 (US$ 10,000) 289,000 (JPY 1,000,000) 186,360 (US$ 6,000) 186,360 (US$ 6,000) 155,300 (US$ 5,000) 310,600 (US$ 10,000) 155,300 (US$ 5,000) 46,590 (US$ 1,500) 35,380 (EUR 1,000) 31,060 (US$ 1,000) 31,060 (US$ 1,000) 31,060 (US$ 1,000) 15,530 (US$ 500)	$ - - - 57,800 173,400 67,581 - - - - - - - - - -	$ - - - - - - - - - - - - - - - -	3.26 1.09 1.09 1.09 1.01 0.65 0.65 0.54 1.09 0.54 0.16 0.12 0.11 0.11 0.11 0.05	$ 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015	Y Y Y Y Y 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 N N N N N Y N N N N N N N Y 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
		ATR Advanixs Corp. AdvanPOS AAU Advantech Intelligent Service AKR	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005 2,854,005	$ 15,800 (US$ 500) 15,800 (US$ 500) 15,800 (US$ 500) 6,320 (US$ 200) 4,740 (US$ 150) 1,580 (US$ 50)	$ 15,530 (US$ 500) 15,530 (US$ 500) 15,530 (US$ 500) 6,212 (US$ 200) 4,659 (US$ 150) 1,553 (US$ 50)	$ - - - - - -	$ - - - - - -	0.05 0.05 0.05 0.02 0.02 0.01	$ 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015 8,562,015	Y Y Y Y Y Y	N N N N N 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 June 30, 2019 were US$1=NT$31.06, EUR1=NT$35.38, and JPY1=NT$0.289.

Note D: The latest net equity is from the financial statements for the six months ended June 30, 2019.

(Concluded)

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TABLE 3

ADVANTECH CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE SIX MONTHS ENDED JUNE 30, 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		June 30, 2019	June 30, 2019		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
The Company Advantech Corporate Investment Advanixs Corporate AiST AdvanPOS	Share ASUSTek Computer Inc. Allied Circuit Co., Ltd. Fund Mega Diamond Money Market Capital Money Market FSITC Money Market FSITC Taiwan Money Market Share HwaCom System Inc. 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 Fund Mega Diamond Money Market	- - - - - - - - - - - - - - - - - -	Financial assets at fair value through other comprehensive income or loss - non-current Same as above Financial assets at FVTPL - current Same as above Same as above Same as above Financial assets at FVTPL - current 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 FVTPL - current Same as above Same as above Same as above Same as above Financial assets at FVTPL - current	4,739,461 1,200,000 26,412,587 8,702,880 2,800,584 88,154,057 5,175,000 15,500 2,501,000 225,000 37,500 500,000 160,000 55,077,478 3,767,575 2,224,953 6,696,511 1,311,144 1,110,468	$ 1,056,900 74,400 331,597 140,580 500,257 1,350,503 93,409 6,186 155,062 4,474 - 5,146 - 746,035 672,987 33,005 84,071 19,449 13,941	0.64 2.41 - - - - 5.00 0.23 5.03 7.50 1.79 16.67 3.20 - - - - - -	$ 1,056,900 74,400 331,597 140,580 500,257 1,350,503 93,409 6,186 155,062 4,474 - 5,146 - 746,035 672,987 33,005 84,071 19,449 13,941	Note A Note A Note B Note B Note B Note B Note A Note A Note A Note C Note C Note C Note C Note B 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		June 30, 2019	June 30, 2019		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
SIoT (Cayman) Advantech Innovative Design Co., Ltd. Cermate (Taiwan) AiSC Yun Yan, Wu-Lian Co., Ltd. Huan Yan, Jhih-lian Co., ACI IOT Investment Fund-I Corporation AIH	Fund FSITC Money Market FSITC Taiwan 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 Share GSD Technologies Co., Ltd. Amazing Microelectronic Corp. WT Microelectronics Co., Ltd. E Ink Holdings Inc. Lelon Electronics Corp. Yuan High-Tec Development Co., Ltd. eGalax_eMPIA Technology Inc. ISI Fund Mega Diamond Money Market Fund Capital Money Market	- - - - - - - - - - - - - - - - - -	Same as above 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 FVTPL - current Same as above Financial assets at FVTPL - current Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above	1,598,386 6,139,189 625,517 1,526,509 - 583,300 27,649 54,616 208,000 120,000 259,000 300,000 120,000 90,000 2,000 60 19,097,264 309,540	$ 285,513 94,051 10,104 19,165 135,629 1,942 4,939 9,756 12,875 9,696 10,347 9,990 4,908 6,768 100 978 239,757 5,000	- - - - 11.11 10.00 - - 0.06 0.16 0.04 0.03 0.09 0.27 - - - -	$ 285,513 94,051 10,104 19,165 135,629 1,942 4,939 9,756 12,875 9,696 10,347 9,990 4,908 6,768 100 978 239,757 5,000	Note B Note B Note B Note C Note C Note B Note B Note A Note A Note A Note A Note A Note A Note A Note A Note B Note B

Note A: Market value was based on the closing price on June 30, 2019

Note B: Market value was based on the net asset values of the open-ended mutual funds on June 30, 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 SIX MONTHS ENDED JUNE 30, 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 FSITC Money Market FSITC Taiwan Money Market Share ATJ Fund FSITC Money Market Taishin 1699 Money Market	Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Investments accounted for using the equity method Financial assets at FVTPL - current Financial assets at FVTPL - current	- - - - - -	- - - Subsidiary - -	97,030,420 - - - - -	$ 1,212,819 - - - - -	23,917,913 2,800,584 88,154,057 500,000 4,596,707 55,077,478	$ 300,002 500,003 1,350,004 323,130 820,004 745,004	94,535,746 - - - 829,132 -	$ 1,185,000 - - - 148,000 -	$ 1,181,637 - - - 147,908 -	$ 3,363 - - - 92 -	26,412,587 2,800,584 88,154,057 500,000 3,767,575 55,077,478	$ 331,184 500,003 1,350,004 323,130 672,096 745,004

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 SIX MONTHS ENDED JUNE 30, 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 AKMC AAU ACN A-SIoT AEU AJP AKR ANA ASG B+B SIoT (Cayman) Advanixs Corp.	AAU ACN A-SIoT AEU AJP AKR ANA ASG B+B SIoT (Cayman) Advanixs Corp. AKMC The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company	Sale Sale Sale Sale Sale Sale Sale Sale Sale Sale Sale Purchase Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase	$ 133,348 3,677,165 163,531 2,706,321 493,861 497,674 4,984,913 150,851 131,225 639,468 326,615 (5,575,406) 5,575,406 (133,348) (3,677,165) (163,531) (2,706,321) (493,861) (497,674) (4,984,913) (150,851) (131,225) (639,468) (326,615)	0.74 20.29 0.90 14.93 2.73 2.75 27.51 0.83 0.72 3.53 1.80 45.49 92.07 3.98 79.29 39.89 74.26 98.34 66.60 79.26 75.68 31.46 54.79 99.56	60-90 days 45 days after month-end 30 days after invoice date 30 days after month-end 60-90 days 60 days after invoice date 45 days after month-end 60-90 days 45 days after month-end 30 days after month-end 60-90 days 60 days after month-end 60 days after month-end 60-90 days 45 days after month-end 30 days after invoice date 30 days after month-end 60-90 days 60 days after invoice date 45 days after month-end 60-90 days 45 days after month-end 30 days after month-end 60-90 days	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 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 No significant difference in terms for related parties No significant difference in terms for related parties	$ 86,056 1,668,811 28,720 1,225,790 207,167 78,766 1,902,973 74,709 39,163 437,627 132,748 (1,621,394) 1,621,394 (86,056) (1,668,811) (28,720) (1,225,790) (207,167) (78,766) (1,902,973) (74,709) (39,163) (437,627) (132,748)	1.09 21.23 0.37 15.59 2.64 1.00 24.21 0.95 0.50 5.57 1.69 28.26 90.14 83.95 83.99 37.08 75.90 92.17 58.24 79.11 75.38 37.16 65.81 98.38	Note A

(Continued)

65 -

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
AKMC B+B (CZ) SIoT (Cayman) LNC ACN AEU ANA SIoT (Cayman) Advantech LNC Dong Guan Co., Ltd.	ACN SIoT (Cayman) AEU AEU ANA Advantech LNC Dong Guan Co., Ltd. AKMC B+B (CZ) SIoT (Cayman) SIoT (Cayman) AKMC LNC	Related enterprise Related enterprise Related enterprise Related enterprise Related enterprise Subsidiary Related enterprise Related enterprise Related enterprise Related enterprise Related enterprise Parent company	Sale Sale Sale Sale Sale Sale Purchase Purchase Purchase Purchase Purchase Purchase	$ 176,260 121,821 117,653 259,356 543,508 183,924 (176,260) (117,653) (259,356) (543,508) (121,821) (183,924)	2.91 2.01 67.68 25.43 53.28 77.91 3.80 3.65 7.12 8.64 10.44 77.14	Usual trade terms Usual trade terms Usual trade terms Usual trade terms Usual trade terms 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	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	$ 54,675 94,792 43,540 77,770 207,077 254,464 (54,675) (43,540) (77,770) (207,077) (94,792) (254,464)	20.88 36.21 60.72 20.65 54.98 93.87 2.75 3.07 4.82 8.61 14.25 93.91

Note A: Unrealized gain for the period was $1,668 thousand.

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

(Concluded)

66 -

TABLE 6

ADVANTECH CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 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 SIoT (Cayman)	ACN AEU SIoT (Cayman) AJP AKMC ANA Advanixs Corp. The Company LNC Dong Guan ANA	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent company Parent company Related enterprise	$ 1,668,811 1,225,790 437,627 207,167 513,823 1,902,973 132,748 1,621,394 254,464 207,077	4.59 3.77 5.84 6.14 (Note 2) 5.71 4.12 1.81 1.56 10.5	$ - - - - - - - - - -	- - - - - - - - - -	$ 791,169 245,899 93,002 - 482,852 683,320 70,880 394,808 36,085 -	$ - - - - - - - - - -

Note 1: All intercompany gains and losses from investment have been eliminated from consolidation.

Note 2: Sales revenue on materials delivered to subcontractors have been eliminated from consolidation.

67 -

TABLE 7

ADVANTECH CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE SIX MONTHS ENDED JUNE 30, 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 June 30, 2019	Balance as of June 30, 2019	Balance as of June 30, 2019	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				June 30, 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 ARU ATJ ATR AKST ATJ Cermate Taiwan Deneng CDIB Innovation Accelerator Co., Ltd. AzureWave Technologies, Inc. Huan Yan, Jhih-Lian Co., Ltd. Yun Yan, Wu-Lian Co., Ltd. Nippon RAD 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 Tokyo, 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	$ 6,261,121 3,816,758 217,397 3,172,195 619,725 297,192 435,964 8,012 692 911,492 104,323 61,078 39,279 366,731 53,945 302,568 68,597 10,067 96,810 1,948,771 15,586 84,757 (36,634) 534,385 68,765 266,476 18,362 367,182 44,824 - 220,309 131,344 13,820 159,211 510,308 4,984 2,596 45,733 6,626 3,650	$ 342,236 85,409 26,685 46,238 551,518 (370) 8,867 8 463 36,274 19,545 11,617 3,074 37,128 7,659 31,007 6,877 23 1,038 521 1,649 (56,122) (8,960) 114,593 3,543 11,459 (5,301) 87,558 7,438 (8,960) 87,558 4,838 (705) 53,393 (137,943) 27 (940) 11,459 (11,122) (1,997)	$ 330,888 68,893 27,562 46,173 73,950 (104) 5,672 2 463 39,290 19,545 5,925 3,074 37,128 7,659 31,007 5,502 23 1,038 (5,113) 1,649 (25,255) (8,984) 21,881 (3,967) 2,613 (5,301) 34,353 3,556 - 20,612 2,596 (280) 9,534 (27,107) 13 (470) - (2,781) (978)	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)

68 -

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of June 30, 2019	Balance as of June 30, 2019	Balance as of June 30, 2019	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				June 30, 2019	December 31, 2018	Shares	Percentage of Ownership	Carrying Value
ATC AAC (BVI) SIoT (Cayman) ANA AEUH ASG Cermate (Taiwan) LNC Better Auto B+B BBIE ACZ (former B+B (CZ))	Mildex Optiocal Inc. Information Technology Total Service Co., Ltd. ACI IOT Investment Fund-1 Corporation ACISM ATC (HK) ANA AAC (HK) SIoT (Cayman) A-SIoT (Former A-DLoG) AIH B+B AEU APL ATH AID LandMark Better Auto Famous Now BBIE IMC ACZ (former B+B (CZ)) B&B Electronics DMCC (former B&B DMCC) Conel Automation	Kaohsiung, Taiwan Taipei, Taiwan Taipei, Taiwan Samoa Hong Kong Sunnyvale, USA Hong Kong Cayman Munich, Germany Taipei, Taiwan Delaware, USA Eindhoven, The Netherlands Warsaw, Poland Thailand Indonesia BVI BVI BVI Ireland Delaware, USA Czech Republic Delaware, USA Dubai Czech Republic	Manufacturing of electronic parts Service of electronic information Investment holding company 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 Service of software 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 Manufacturing automation Sale of industrial network communications systems Sale of industrial network communications systems Sale of industrial network communications systems	$ 202,948 147,444 238,000 18,214 1,212,730 504,179 539,146 US$ 50,000 522,719 7,700 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 5,084,273 23,800,000 1 57,890,679 10,952,606 15,230,001 30,000,000 1 770,000 153,644 32,315,215 6,350 49,000 300,000 972,284 7,900,000 1 - - - - - -	15.00 20.00 79.30 100.00 100.00 100.00 100.00 100.00 100.00 100.00 40.00 100.00 100.00 49.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	$ 202,371 147,444 239,496 17,242 3,887,105 2,857,065 2,004,450 1,831,264 615,803 7,427 1,331,363 1,075,909 34,655 59,832 9,378 120,003 22,843 31,986 95,639 - 311,933 - 2,214 (19,525)	$ (52,398) 25,404 1,886 (849,157) 85,473 93,423 93,717 165,699 59,284 (273) 521 34,384 2,321 11,617 545 9,047 2,824 2,819 (8,409) - 15,424 - 504 (5,322)	$ (7,832) - 1,496 (849) 68,957 92,581 91,857 160,067 62,300 (273) 208 34,384 2,321 5,692 545 8,899 2,894 2,819 (8,409) - 15,424 - 504 (5,322)	Equity-meth investee 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, Advantech Corporate Investment, 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)

69 -

TABLE 8

ADVANTECH CO., LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA FOR THE SIX MONTHS ENDED JUNE 30, 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 June 30, 2019	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of June 30, 2019	Accumulated Inward Remittance of Earnings as of June 30, 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	$ 1,158,538 (US$ 37,300 thousand) 165,612 (US$ 5,332 thousand) 248,480 (US$ 8,000 thousand) (Note C) 99,206 (US$ 3,194 thousand) 9,566 (US$ 308 thousand) 17,766 (US$ 572 thousand)	$ - - - - - - -	$ - - - - - - -	$ 1,158,538 (US$ 37,300 thousand) 165,612 (US$ 5,332 thousand) 248,480 (US$ 8,000 thousand) (Note C) 99,206 (US$ 3,194 thousand) 9,566 (US$ 308 thousand) 17,766 (US$ 572 thousand)	$ 90,488 108,213 (15,474) 14 2,819 7,722 1,326	100 100 100 100 100 90 100	$ 68,957 106,392 (15,513) 14 2,889 6,801 1,326	$ 3,887,104 1,322,660 654,636 30,228 32,050 88,252 32,304	$ - 348,866 (US$ 11,232 thousand) - - - 41,837 (US$ 717 thousand) (RMB 4,328 thousand) -
												(Continued)

70 -

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 June 30, 2019	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of June 30, 2019	Accumulated Inward Remittance of Earnings as of June 30, 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)	$ (14,759) (671) (2,123)	100 45 40	$ (14,759) (302) (849)	$ 45,976 4,151 17,242	$ - - -

Accumulated Investment in		Investment Amounts
Mainland China as of June 30, 2019		Authorized by Investment Commission, MOEA			Allowable Limit on Investment
$1,705,380 (US$54,906 thousand) (Note D)		$2,934,921 (US$94,492 thousand)			$17,396,253 (Note J)

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, Advantech Corporate Investment, 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 5.

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: AKMC’s paid-in capital, including capital increase via retained earnings, amounted to US$6,450 thousand.

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 were US$1=NT$31.06 and RMB1=NT$4.521.

Note J: The maximum allowable limit on investment was at 60% of the consolidated net asset value of the Company.
Note K: All intercompany gains and losses from investment have been eliminated from consolidation.

(Concluded)

71 -

TABLE 9

ADVANTECH CO., LTD. AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS BETWEEN ADVANTECH CO., LTD. AND SUBSIDIARIES FOR THE SIX MONTHS ENDED JUNE 30, 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 ACZ ACZ ACZ ACZ AEU AEU AEU AEU AID AID AID AID AIN AIN AJP AJP AJP AJP 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 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 receivables from related parties Other revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Other revenue Other receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Other revenue Other receivables from related parties Sales revenue Receivables from related parties	$ 45 133,348 86,056 1,115 717 60,930 18,300 2,043 1,431 1,668,811 3,677,165 107 81 1,199 476 2,706,321 1,225,790 12,700 4,175 13,608 8,480 348 717 43,619 21,374 493,861 207,167 3,050 532 513,823 2 497,674 78,766 3,826 669 3,675 3,647	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 Normal 60 days EOM Normal 30 days EOM Normal 30 days EOM Normal 45 days after invoice date 45 days after invoice date Normal Normal 60 days EOM Normal 60-90 days Normal 60-90 days 45 days EOM Normal Normal 60 days after invoice date Normal 60 days after invoice date 30 days EOM 30 days EOM	- 1 - - - - - - - 3 14 - - - - 10 2 - - - - - - - - 2 - - - 1 - 2 - - - - -
							(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)
		AMY AMY AMY AMY ANA ANA ANA ANA APL APL APL ARU ARU ASG ASG ASG ASG A-SIoT A-SIoT A-SIoT ATH ATH ATH ATH ATJ ATJ ATJ ATR ATR AVN AVN B+B B+B B+B B+B BBIE BBIE SIoT (Cayman) SIoT (Cayman) SIoT (Cayman) Cermate (Taiwan) Cermate (Taiwan) Cermate (Taiwan) Advantech Corporate Investment Advanixs Corp. Advanixs Corp. Advanixs Corp. Advanixs Corp.	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 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 Other 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 Sales revenue Receivables from related parties Other revenue Other receivables from related parties Other receivables from related parties Receivables from related parties Sales revenue 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 receivables from related parties Sales revenue Receivables from related parties Other revenue Sales revenue Other receivables from related parties Rental revenue Sales revenue Receivables from related parties Rental revenue Other receivables from related parties	$ 64,404 30,014 954 461 1,902,973 8,258 2,269 4,984,913 11,150 4,066 5 14 14 150,851 74,709 1,266 649 163,531 28,720 1,509 62,006 26,331 1,000 388 147 546 478 30,529 9,035 13,202 34,780 131,225 39,163 2,211 777 501 87 3,593 639,468 437,627 600 11 215 18 326,615 132,748 300 636	Normal 45 days EOM Normal 45 days EOM 45 days EOM Normal 45 days EOM Normal Normal 45 days EOM 45 days EOM Normal 45 days EOM Normal 60-90 days Normal 60-90 days Normal 30 days after invoice date Normal Normal 30 days after invoice date Normal 30 days after invoice date 30 days EOM 30 days EOM Normal Normal 45 days EOM 45 days EOM Normal Normal 60 days EOM Normal 60 days EOM Normal 45 days after invoice date 30 days EOM Normal 30 days EOM Normal Normal 30 days EOM Normal Normal 60-90 days Normal 60-90 days	- - - - 4 - - 19 - - - - - 1 - - - 1 - - - - - - - - - - - - - - - - - - - - 2 1 - - - - 1 - - -

(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)
		LNC LNC LNC LNC	1 1 1 1	Other revenue Receivables from related parties Sales revenue Other receivables from related parties	$ 800 19 44 420	Normal 60-90 days EOM Normal 60-90 days EOM	- - - -
1	AAC (HK)	Advantech Co., Ltd.	2	Other revenue	4,067	Normal	-
2	AAU	Advantech Co., Ltd. Advantech Co., Ltd. ANA	2 2 3	Receivables from related parties Sales revenue Sales revenue	14 185 3	60-90 days Normal Normal	- - -
3	ABR	Advantech Co., Ltd. Advantech Co., Ltd.	2 2	Receivables from related parties Sales revenue	852 2	30 days after invoice date Normal	- -
4	ACN	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. AEU AEU AiSC AiSC AKMC AKMC AKR AMY ANA ANA AXA SIoT (China) SIoT (China)	2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3	Other 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 Sales revenue Receivables from related parties Sales revenue Other receivables from related parties Receivables from related parties Sales revenue	93 1,622 3,884 3,550 7,980 18,896 4,209 19,129 12,565 27 2 41 265 62 11,307 38,764	30 days EOM 30 days EOM Normal 30 days EOM Normal Normal Immediate payment Normal 60-90 days Normal Normal 30 days EOM Normal 60 days EOM 30 days EOM Normal	- - - - - - - - - - - - - - - -
5	ACZ	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. AEU AEU AEU AEU ANA ANA B+B B+B Conel Automation Conel Automation Conel Automation	2 2 2 2 3 3 3 3 3 3 3 3 3 3 3	Sales revenue Other receivables from related parties Receivables from related parties Other revenue Receivables from related parties Sales revenue Other revenue Other receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Other revenue Other receivables from related parties Interest revenue	21,655 617 5,614 2 43,540 117,653 3,504 881 4,511 4,428 13,961 24,351 272 279 279	Normal 45 days EOM 45 days EOM Normal 45 days EOM Normal Normal 45 days EOM 45 days EOM Normal 45 days EOM Normal 45 days EOM 45 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)
6	AEU	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. ACN ACN ACZ ACZ AID AID AJP AKR ANA ANA APL APL A-SIoT A-SIoT BBIE	2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Other receivables from related parties Sales revenue Receivables from related parties Other revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Sales 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	$ 52,316 14,597 3,997 135 127 309 39 13 5 5 19 10 5,366 693 1,808 309 10,835 6,007 34	30 days EOM Normal 30 days EOM Normal 30 days after invoice date Normal 45 days EOM Normal 30 days after invoice date Normal Normal Normal Normal 30 days after invoice date Normal 30 days after invoice date Normal 30 days after invoice date 30 days after invoice date	- - - - - - - - - - - - - - - - - - -
7	AID	ASG ASG	3 3	Receivables from related parties Other revenue	77 1,019	45 days after invoice date Normal	- -
8	AIN	Advantech Co., Ltd. Advantech Co., Ltd.	2 2	Other revenue Receivables from related parties	9 525	Normal 60 days EOM	- -
9	AiSC	AAC (HK) ACN ACN ACN ACN SIoT (China) SIoT (China) SIoT (China) SIoT (China)	3 3 3 3 3 3 3 3 3	Other receivables from related parties Other receivables from related parties Sales revenue Rental revenue Receivables from related parties Other receivables from related parties Other revenue Receivables from related parties Sales revenue	4,537 39,441 99 9,825 2 1,400 1,506 88 1,445	90 days Immediate payment Normal Normal Immediate payment 30 days EOM Normal 30 days EOM Normal	- - - - - - - - -
10	AJP	Advantech Co., Ltd. Advantech Co., Ltd. ACN AKMC AKMC ATJ ATJ	2 2 3 3 3 3 3	Receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue	879 1,948 64 2,445 6,771 2,966 3,016	60-90 days Normal 45 days EOM 45 days EOM Normal 45 days EOM Normal	- - - - - - -
11	AKMC	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd.	2 2 2	Sales revenue Unearned revenue Receivables from related parties	5,575,406 84 1,621,394	Normal 60 days EOM 60 days EOM	21 - 3
							(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)
		CAN ACN ACN AEU AEU AiSC AiSC AKST AKST ANA ANA SIoT (Cayman) SIoT (Cayman) SIoT (China) SIoT (China) Cermate (Taiwan) Cermate (Taiwan) Cermate (Shenzhen) Cermate (Shenzhen) Advanixs Corp. Advanixs Corp.	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Sales revenue Receivables from related parties Rental revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue	$ 176,260 54,675 1,961 2,375 655 72 11 15 3,567 4,028 3,125 94,792 121,821 1,392 2,846 2 27 12,753 16,226 762 1,485	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 60 days EOM Normal 60 days EOM Normal 30 days EOM Normal	1 - - - - - - - - - - - - - - - - - - - -
12	AKR	Advantech Co., Ltd. Advantech Co., Ltd. AVN	2 2 3	Receivables from related parties Other revenue Sales revenue	1,856 1,896 59	90 days EOM Normal Normal	- - -
13 14	AKST AMX	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. AKMC AKMC AKR Advantech Co., Ltd.	2 2 2 2 3 3 3 2	Other receivables from related parties Other revenue Receivables from related parties Sales revenue Sales revenue Receivables from related parties Sales revenue Other revenue	2,492 42 6,403 818 1,053 1,129 174 3,857	30 days EOM Normal 30 days EOM Normal Normal 30 days EOM Normal Normal	- - - - - - - -
15	AMY	Advantech Co., Ltd. Advantech Co., Ltd. ASG ASG	2 2 3 3	Other revenue Receivables from related parties Other revenue Other receivables from related parties	27 27 13 13	Normal 45 days EOM Normal 30 days EOM	- - - -
16	ANA	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. ABR ACZ AEU	2 2 2 2 3 3 3	Other receivables from related parties Sales revenue Receivables from related parties Other revenue Sales revenue Receivables from related parties Sales revenue	6,277 60,545 5,284 497 696 697 3,281	45 days EOM Normal 45 days EOM Normal Normal 30 days after invoice date Normal	- - - - - - -

(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)
		AKMC AKMC AKR A-SIoT B+B B+B B+B	3 3 3 3 3 3 3	Sales revenue Receivables from related parties Sales revenue Sales revenue Rental revenue Receivables from related parties Sales revenue	$ 2,556 681 21 1,374 74 4,894 9,287	Normal 30 days EOM Normal Normal Normal 60-90 days Normal	- - - - - - -
17	APL	Advantech Co., Ltd. Advantech Co., Ltd. AEU AEU A-SIoT	2 2 3 3 3	Receivables from related parties Other revenue Sales revenue Receivables from related parties Receivables from related parties	166 254 62,002 12,575 3,204	30 days after invoice date Normal Normal 30 days after invoice date 30 days after invoice date	- - - - -
18	ASG	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. AKMC AMY AMY ANA ATH ATH ATH ATH	2 2 2 3 3 3 3 3 3 3 3	Sales revenue Receivables from related parties Other revenue Sales revenue Sales revenue Receivables from related parties Sales revenue Other receivables from related parties Sales revenue Other revenue Receivables from related parties	167 322 295 16 1,721 111 1,721 106 4,708 942 346	Normal 60-90 days Normal Normal Normal 30 days EOM Normal 30 days EOM Normal Normal 30 days EOM	- - - - - - - - - - -
19	A-SIoT	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. AAU AEU AEU AEU AEU AKMC AKMC AKR AKR ANA ANA APL APL ATH	2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Other revenue Sales revenue Receivables from related parties Other receivables from related parties Receivables from related parties Receivables from related parties Other revenue Sales revenue Other receivables from related parties Receivables from related parties Sales revenue Sales revenue Receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Sales revenue	67 21,986 12,351 47,279 7 770 1,303 928 695 25 2 2,516 2,243 2,234 5,068 3,967 19,035 53	Normal Normal 30 days after invoice date 60 days EOM 30 days after invoice date 30 days after invoice date Normal Normal 30 days EOM 60 days after invoice date Normal Normal 60 days EOM 30 days after invoice date Normal 60 days after invoice date Normal Normal	- - - - - - - - - - - - - - - - - -
20	ATR	Advantech Co., Ltd.	2	Other revenue	313	Normal	-
							(Continued)

77 -

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)
21	AVN	AKR	3	Sales revenue	$ 15	Normal	-
22	AXA	ACN ACN	3 3	Other receivables from related parties Other revenue	9,042 427	30 days EOM Normal	- -
23	B+B	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. AEU AEU AEU BBIE BBIE AIN AIN AKR ANA ANA	2 2 2 2 3 3 3 3 3 3 3 3 3 3	Other revenue Unearned revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Other revenue Receivables from related parties Receivables from related parties Sales revenue Sales revenue Other revenue Receivables from related parties	105 43 29,407 5,220 22,365 9,934 13,831 767 590 4 4 26 1,525 7,035	Normal 90 days EOM Normal 90 days EOM Normal 90 days EOM Normal Normal 45 days EOM 30 days after invoice date Normal Normal Normal 30 days EOM	- - - - - - - - - - - - - -
24	BBIE	Advantech Co., Ltd. ACZ AEU AEU B+B B+B	2 3 3 3 3 3	Receivables from related parties Other revenue Sales revenue Receivables from related parties Receivables from related parties Other revenue	5,656 10,798 25,869 6,812 168 2,687	60 days after invoice date Normal Normal 60 days after invoice date 60 days after invoice date Normal	- - - - - -
25	DMCC	Advantech Co., Ltd.	2	Other revenue	9,737	Normal	-
26	SIoT (Cayman)	AAU AAU AEU AEU AEU AJP AJP AKMC AKMC AKR AKR ANA ANA ASG ASG A-SIoT A-SIoT	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Receivables from related parties Sales revenue Other receivables from related parties Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Sales revenue Receivables from related parties	3,740 3,724 43 77,770 259,356 293 3,229 151 150 4,619 5,821 207,077 543,508 7,470 9,637 59,589 35,184	60 days EOM Normal 45 days EOM 45 days EOM Normal 60 days EOM Normal 45 days EOM Normal 60 days EOM Normal 30 days EOM Normal 60 days EOM Normal Normal 30 days EOM	- - - - 1 - - - - - - - 2 - - - -
							(Continued)

78 -

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)
27	SIoT (China)	CAN	3	Sales revenue	$ 9	Normal	-
28	Advantech LNC Dong Guan Co., Ltd.	LNC LNC	3 3	Sales revenue Receivables from related parties	3,098 1,138	Normal 90 days EOM	- -
29	Cermate (Shanghai)	Cermate (Shenzhen) Cermate (Shenzhen)	3 3	Sales revenue Receivables from related parties	364 54	Normal 60 days EOM	- -
30	Cermate (Taiwan)	Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. Advantech Co., Ltd. AKMC AKMC Cermate (Shenzhen) Cermate (Shenzhen)	2 2 2 2 3 3 3 3	Sales revenue Receivables from related parties Other receivables from related parties Other revenue Sales revenue Receivables from related parties Receivables from related parties Sales revenue	2,437 1,050 124 30 2,340 479 8,547 41,979	Normal 30-60 days 30-60 days Normal Normal 60 days EOM 30 days EOM Normal	- - - - - - - -
31	Cermate (Shenzhen)	ACN AKMC AKMC Cermate (Shanghai) Cermate (Shanghai) Cermate (Taiwan) Cermate (Taiwan)	3 3 3 3 3 3 3	Sales revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Receivables from related parties	3 16,853 3,838 14,424 803 31,562 10,874	Normal Normal 40 days EOM Normal 30 days EOM Normal 60 days EOM	- - - - - - -
32	Advanixs Corp.	Cermate (Taiwan) Cermate (Taiwan)	3 3	Receivables from related parties Sales revenue	5 825	30 days EOM Normal	- -
33	LNC	Advantech LNC Dong Guan Co., Ltd. Advantech LNC Dong Guan Co., Ltd.	3 3	Receivables from related parties Sales revenue	254,464 183,924	90 days EOM Normal	1 1

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

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

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

From the parent company to its subsidiary.
From the subsidiary to its parent company.
Between subsidiaries.

Note C: For assets and liabilities, amounts are shown as a percentage to consolidated total assets as of June 30, 2019, while revenues, costs and expenses are shown as a percentage to consolidated total operating revenues for the six months ended June 30, 2019.

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

(Concluded)

79 -

AI assistant

Advantech — Interim / Quarterly Report 2019

52053_rns_2019-11-12_c3cc95a7-9ad9-41d4-ba26-6db4a0252933.pdf

Advantech Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Introduction

Scope of Review

Basis for Qualified Conclusion

Qualified Conclusion

Notice to Readers

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

ADVANTECH CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

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

1) IFRS 16 “Leases”

Definition of a lease

The Group as lessee

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

b. Basis of preparation

2019

a) The Group as lessor

2018

3) Taxation

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

a. Inventory write-downs

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FVTPL

8. FVTOCI

9. FINANCIAL ASSETS AT AMORTIZED COST

10. NOTES RECEIVABLE AND TRADE RECEIVABLES

Trade Receivables

At amortized cost

June 30, 2019

December 31, 2018

11. INVENTORIES

12. SUBSIDIARIES

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

Aggregate Information of Associates That Are Not Individually Material

14. PROPERTY, PLANT AND EQUIPMENT

a. 2019

b. 2018

15. LEASE ARRANGEMENTS

June 30, 2019

b. Lease liabilities - 2019

16. GOODWILL

17. PREPAYMENTS FOR LEASES

18. BORROWINGS

b. Long-term borrowings

19. OTHER LIABILITIES

20. RETIREMENT BENEFIT PLANS

21. EQUITY

Ordinary shares

b. Capital surplus

22. NET PROFIT FROM CONTINUING OPERATIONS

a. Finance costs

e. Gain or loss on foreign currency exchange

23. INCOME TAXES

b. Income tax recognized in other comprehensive income

c. Income tax assessments

24. EARNINGS PER SHARE

Unit: NT$ Per Share

Net Profit for the Period

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

25. SHARE-BASED PAYMENT ARRANGEMENTS

Issuance in 2018

Issuance in 2017

26. BUSINESS COMBINATIONS

Advantech Interim / Quarterly Report 2019