Advantech - Interim / Quarterly Report 2020

Advantech Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Three Months Ended March 31, 2020 and 2019 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

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

Introduction

We have reviewed the accompanying consolidated financial statements of Advantech Co., Ltd. and its subsidiaries (collectively referred to as the “Group”) as of March 31, 2020 and 2019, the consolidated statements of comprehensive income, changes in equity and cash flows for the three months periods then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

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

Basis for Qualified Conclusion

As disclosed in Note 12 to the consolidated financial statements, the financial statements of some non-significant subsidiaries included in the consolidated financial statements referred to in the first paragraph were not reviewed. As of March 31, 2020 and 2019, the combined total assets of these non-significant subsidiaries were NT$7,827,426 thousand and NT$10,601,096 thousand, respectively, representing 15.97% and 22.57%, respectively, of the consolidated total assets, and the combined total liabilities of these subsidiaries were NT$1,927,332 thousand NT$1,846,651 thousand, respectively, representing 9.46% and 12.07%, respectively, of the consolidated total liabilities; for the three months periods ended March 31, 2020 and 2019, the amounts of combined comprehensive income of these subsidiaries were NT$5,625 thousand and NT$264,329 thousand, respectively, representing 0.46% and 14.04%, 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$3,157,270 thousand and NT$2,524,911 thousand as of March 31, 2020 and 2019, respectively. The equities in profit and loss of the associates were NT$(17,907) thousand and NT$4,949 thousand of the Company’s consolidated net income in the three months ended March 31, 2020 and 2019, respectively, and these investment amounts as well as additional disclosures in Note 31 “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 investees that are accounted for using 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 financial position of the Group as of March 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the three months periods then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

The engagement partners on the reviews resulting in this independent auditors’ review report are Jr-Shian Ke and Kwan-Chung Lai.

Deloitte & Touche Taipei, Taiwan Republic of China

April 29, 2020

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 27) Financial assets at amortized cost - current (Note 9) Notes receivable (Note 10) Trade receivables (Note 10) Trade receivables from related parties (Note 28) Other receivables (Note 28) Inventories (Note 11) Other current assets (Note 28) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Notes 7 and 27) Financial assets at fair value through other comprehensive income - non-current (Notes 8 and 27) Investments accounted for using the equity method (Note 13) Property, plant and equipment (Notes 14 and 29) Right-of-use assets (Note 15) Goodwill (Note 16) Other intangible assets Deferred tax assets (Notes 4 and 22) Prepayments for business facilities Prepayments for investments Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 17) Financial liabilities at fair value through profit or loss - current (Notes 7 and 27) Notes payable and trade payables (Note 28) Dividends payable Other payables (Notes 18 and 28) Current tax liabilities (Notes 4 and 22) Short-term warranty provisions Lease liabilities - current (Note 15) Current portion of long-term borrowings (Note 17) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 17 and 29) Deferred tax liabilities (Notes 4 and 22) Lease liabilities - non-current (Note 15) Net defined benefit liabilities (Note 19) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 20) 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 translating the financial statements of foreign operations Unrealized gain on financial assets at fair value through other comprehensive income Other equity - employees' unearned shares Total other equity Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		March 31, 2020 (Reviewed) Amount % $ 4,966,278 10 5,303,514 11 751,170 2 1,175,068 2 6,815,902 14 21,273 - 155,311 - 9,092,958 19 721,527 1 29,003,001 59 100,959 - 1,679,268 3 3,157,270 7 9,649,619 20 754,359 2 2,525,244 5 948,506 2 698,831 1 435,022 1 - - 54,875 - 20,003,953 41 $ 49,006,954 100 $ 266,025 1 1,390 - 5,291,320 11 5,463,198 11 3,295,649 7 1,766,367 4 192,469 - 221,250 - 5,422 - 1,112,868 2 17,615,958 36 34,742 - 1,945,138 4 255,096 1 389,415 1 126,754 - 2,751,145 6 20,367,103 42 7,004,100 14 4,600 - 7,008,700 14 7,616,628 16 6,285,079 13 798,763 1 7,342,955 15 14,426,797 29 (969,806) (2) 73,929 - 1,372 - (894,505) (2) 28,157,620 57 482,231 1 28,639,851 58 $ 49,006,954 100		December 31, 2019 (Audited) Amount % $ 6,003,936 13 3,647,963 8 316,994 1 1,546,340 3 7,265,106 15 20,174 - 101,407 - 7,782,824 17 688,167 1 27,372,911 58 101,156 - 1,639,321 4 3,009,860 6 9,732,490 21 723,106 2 2,519,514 5 980,061 2 690,212 1 389,221 1 - - 58,227 - 19,843,168 42 $ 47,216,079 100 $ 250,678 1 521 - 4,799,196 10 - - 3,732,224 8 1,522,874 3 208,611 1 199,493 - 7,957 - 1,022,904 2 11,744,458 25 36,132 - 1,942,189 4 242,263 1 384,914 1 134,663 - 2,740,161 6 14,484,619 31 6,999,230 15 4,870 - 7,004,100 15 7,478,568 16 6,285,079 13 798,763 2 11,515,121 24 18,598,963 39 (878,261) (2) 30,970 - 1,298 - (845,993) (2) 32,235,638 68 495,822 1 32,731,460 69 $ 47,216,079 100	March 31, 2019 (Reviewed after Restatement)	March 31, 2019 (Reviewed after Restatement)
						Amount % $ 7,075,773 15 2,224,078 5 11,166 - 1,305,287 3 7,357,164 16 20,166 - 186,953 - 8,178,654 17 588,655 1 26,947,896 57 - - 1,423,914 3 2,524,911 5 9,959,215 21 905,085 2 2,834,940 6 1,173,942 3 563,398 1 352,032 1 238,000 1 48,078 - 20,023,515 43 $ 46,971,411 100 $ 424,096 1 8,171 - 5,755,560 12 - - 3,272,813 7 1,872,843 4 193,461 - 201,334 1 7,220 - 838,604 2 12,574,102 27 45,784 - 1,807,949 4 393,299 1 329,188 1 146,399 - 2,722,619 6 15,296,721 33 6,986,955 15 3,800 - 6,990,755 15 7,179,266 15 5,655,613 12 369,655 1 11,623,823 24 17,649,091 37 (371,942) (1) (182,526) - 1,010 - (553,458) (1) 31,265,654 66 409,036 1 31,674,690 67 $ 46,971,411 100

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

(With Deloitte & Touche auditors’ review report dated April 29, 2020)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

OPERATING REVENUE (Note 28) Sales Other operating revenue Total operating revenue OPERATING COSTS (Notes 11, 21 and 28) GROSS PROFIT OPERATING EXPENSES (Notes 21 and 28) Selling and marketing expenses General and administrative expenses Research and development expenses Expected credit loss Total operating expenses OPERATING PROFIT NONOPERATING INCOME Share of the profit (loss) of associates accounted for using the equity method (Note 13) Interest income Losses (gains) on disposal of property, plant and equipment Losses on disposal of investments Foreign exchange gains (losses), net (Note 21) Losses (gains) on financial instruments at fair value through profit or loss Other income (Note 28) Finance costs (Note 21) Other losses Total non-operating income (loss) PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 22) NET PROFIT FOR THE PERIOD		For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 Amount % $ 10,963,830 97 308,359 3 11,272,189 100 6,876,954 61 4,395,235 39 1,153,329 11 656,930 6 925,097 8 6,257 - 2,741,613 25 1,653,622 14 (17,907) - 7,935 - (6,197) - (916) - (2,291) - (29,617) - 22,840 - (6,331) - (572) - (33,056) - 1,620,566 14 (340,159) (3) 1,280,407 11		2019
				Amount % $ 11,974,873 97 325,717 3 12,300,590 100 7,576,536 62 4,724,054 38 1,231,976 10 663,940 5 973,440 8 2,783 - 2,872,139 23 1,851,915 15 4,949 - 9,002 - 45,348 - - - 69,744 1 49,362 1 25,597 - (6,175) - (1,447) - 196,380 2 2,048,295 17 (431,680) (4) 1,616,615 13 (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss (Notes 13 and 20): Unrealized gains on investments in debt instruments at fair value through other comprehensive income Share of the other comprehensive income (loss) of associates accounted for using the equity method Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations (Note 20) Share of the other comprehensive income of associates accounted for using the equity method (Notes 13 and 20) Income tax relating to items that may be reclassified subsequently to profit or loss (Notes 20 and 22) Other comprehensive income (loss) for the period, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD NET PROFIT ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Company Non-controlling interests		For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 Amount % $ 41,557 1 (158) - (126,159) (1) 8,210 - 22,886 - (53,664) - $ 1,226,743 11 $ 1,294,665 11 (14,258) - $ 1,280,407 11 $ 1,244,519 11 (17,776) - $ 1,226,743 11		2019
				Amount % $ 120,818 1 20,366 - 146,448 1 3,951 - (25,826) - 265,757 2 $ 1,882,372 15 $ 1,613,136 13 3,479 - $ 1,616,615 13 $ 1,857,623 15 24,749 - $ 1,882,372 15 (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

EARNINGS PER SHARE (Note 23) Basic Diluted	For the Three Months Ended March 31	For the Three Months Ended March 31
	2020 Amount % $ 1.85 $ 1.82	2019
		Amount % $ 2.31 $ 2.28

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

(With Deloitte & Touche auditors’ review report dated April 29, 2020) (Concluded)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

		Equity Attributable to Owners of the Company
Issued Capital (Notes 20 and 24) Advance Receipts Share Capital for Ordinary Shares Total Capital Surplus (Notes 20 and 24) $ 6,982,275 $ 4,680 $ 6,986,955 $ 7,073,348 4,680 (880 ) 3,800 27,937 - - - 84,673 - - - 1,037 - - - (7,729 ) - - - - - - - - - - - - - - - - $ 6,986,955 $ 3,800 $ 6,990,755 $ 7,179,266 $ 6,999,230 $ 4,870 $ 7,004,100 $ 7,478,568 - - - - - - - - 4,870 (270 ) 4,600 32,642 - - - 61,789 - - - 35,360 - - - 8,048 - - - 221 - - - - - - - - - - - - $ 7,004,100 $ 4,600 $ 7,008,700 $ 7,616,628		Retained Earnings (Note 20)	Total $ 16,036,499 - - - - - 1,613,136 (544) 1,612,592 $ 17,649,091 $ 18,598,963 (5,463,198 ) - - - - (2,073 ) - 1,294,665 (1,560) 1,293,105 $ 14,426,797	Other Equity (Note 20)
				Exchange Differences on Translating the Unrealized Loss on Financial Assets at Fair Value through Financial Other U Statements of Foreign Operations Comprehensive Income B $ (475,245 ) $ (324,254 ) - - - - - - - - - - - - 103,303 141,728 103,303 141,728 $ (371,942) $ (182,526) $ (878,261 ) $ 30,970 - - - - - - - - - - - - - - - - (91,545) 42,959 (91,545) 42,959 $ (969,806) $ 73,929	nearned Stock - ased Employee Compensation $ 736 - - 274 - - - - - $ 1,010 $ 1,298 - - - - 74 - - - - - $ 1,372
A Share Capital $ 6,982,275 4,680 - - - - - - - $ 6,986,955 $ 6,999,230 - - 4,870 - - - - - - - $ 7,004,100	dvance Receipts for Ordinary Shares $ 4,680 (880 ) - - - - - - - $ 3,800 $ 4,870 - - (270 ) - - - - - - - $ 4,600
		Legal Reserve Special Reserve Unappropriated Earnings $ 5,655,613 $ 369,655 $ 10,011,231 - - - - - - - - - - - - - - - - - 1,613,136 - - (544) - - 1,612,592 $ 5,655,613 $ 369,655 $ 11,623,823 $ 6,285,079 $ 798,763 $ 11,515,121 - - (5,463,198 ) - - - - - - - - - - - - - - (2,073 ) - - - - - 1,294,665 - - (1,560) - - 1,293,105 $ 6,285,079 $ 798,763 $ 7,342,955

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

(With Deloitte & Touche auditors’ review report dated April 29, 2020)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Expected loss on credit impairment Net loss (gain) on financial assets or liabilities at fair value through profit or loss Compensation costs of employee share options Finance costs Interest income Share of profit (loss) of associates accounted for using the equity method Net loss (gain) on disposal of property, plant and equipment Net loss on disposal of investments Changes in operating assets and liabilities Financial assets at fair value through profit or loss Notes receivable Trade receivables Trade receivables from related parties Other receivables Inventories Other current assets Notes payable and trade payables Net defined benefit liabilities Other payables Short-term warranty provisions Other current liabilities Other non-current liabilities Cash generated from (used in) operations Interest received Interest paid Income tax paid Net cash generated from (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at amortized cost Proceeds from sale of financial assets at amortized cost Acquisition of investments accounted for using the equity method Net cash inflow on acquisition of associates		For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 1,620,566 216,705 48,414 6,257 29,617 61,789 6,331 (7,935) 17,907 6,197 916 (1,684,102) 371,272 444,391 (1,099) (53,904) (1,310,134) (33,360) 492,124 4,501 (436,943) (16,142) 89,964 (7,901) (134,569) 7,935 (975) (127,287) (254,896) (442,165) - (130,000) 7,255	2019 $ 2,048,295 227,010 48,288 2,783 (49,362) 84,673 6,175 (9,002) (4,949) (45,348) - (74,132) 156,117 125,155 (1,197) (139,502) (173,714) (67,348) (486,063) (48,547) (435,136) (3,321) 57,131 (3,198) 1,214,808 9,002 (309) (181,660) 1,041,841 - 146,839 (63,214) - (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

Increase in prepayments for investments Net cash outflow on acquisitions of subsidiaries (net of carrying amount of cash) Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in refundable deposits Payments for intangible assets Decrease (increase) in prepayments for business facilities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Repayment of long-term borrowings Decrease in guarantee deposits received Repayments of the principal portion of lease liabilities Exercise of employee share options Dividends paid to non-controlling interests Changes in non-controlling interests Net cash generated from financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ - - (212,455) 52,453 3,352 (7,500) (679) (729,739) 16,150 (2,228) (7) (58,946) 37,242 (3,713) 14,094 2,592 (55,615) (1,037,658) 6,003,936 $ 4,966,278	2019 $ (238,000) (542,156) (189,443) 68,260 (122) (11,809) 16,059 (813,586) 181,548 (2,406) (138) (54,857) 31,737 - (29,998) 125,886 88,471 442,612 6,633,161 $ 7,075,773

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

(With Deloitte & Touche auditors’ review report dated April 29, 2020)

(Concluded)

ADVANTECH CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (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 April 29, 2020.

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

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

Except for the following, the initial application of the IFRSs endorsed and issued into effect by the FSC did not have material impact on the Group’s accounting policies:

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

The Group applies the amendments to IFRS 3 to transactions that occur on or after January 1, 2020. The amendments require that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. To judge whether the acquired process is substantive, there will be different judgement requirements depending on whether there is output on the acquisition date. 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.

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2) Amendments to IAS 1 and IAS 8 “Definition of Material”

The Group adopted the amendments starting from January 1, 2020. The threshold for materiality influencing users has been changed to “could reasonably be expected to influence” and, therefore, the disclosures in the consolidated financial report have been adjusted and immaterial information that may obscure material information has been deleted.

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

Effective Date New IFRSs Announced by IASB (Note) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 “Classification of Liabilities as Current or January 1, 2022 Non-current”

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

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

The amendments stipulate that, when the Group sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when the Group loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full.

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

2) Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

The amendments clarify that for a liability to be classified as non-current, the Group shall assess whether it has the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. If such rights are in existence at the end of the reporting period, the liability is classified as non-current regardless of whether the Group will exercise that right. The amendments also clarify that, if the right to defer settlement is subject to compliance with specified conditions, the Group must comply with those conditions at the end of the reporting period even if the lender does not test compliance until a later date.

The amendments stipulate that, for the purpose of liability classification, the aforementioned settlement refers to a transfer of cash, other economic resources or the Group’s own equity instruments to the counterparty that results in the extinguishment of the liability. However, if the terms of a liability that could, at the option of the counterparty, result in its settlement by a transfer of the Group’s own equity instruments, and if such option is recognized separately as equity in accordance with IAS 32: Financial Instruments: Presentation, the aforementioned terms would not affect the classification of the liability.

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Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

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

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d. Other significant accounting policies

Except for the following, refer to significant accounting policies to the consolidated financial statements for the years ended December 31, 2019 and 2018.

1) 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.

2) 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.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

Key Sources of Estimation Uncertainty

Write-down of inventories

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

6. CASH AND CASH EQUIVALENTS

			December 31,	December 31,
	March 31, 2020			2019	March 31, 2019
Cash on hand	$	5,165	$	141,615	$	109,880
Checking accounts and demand deposits		4,122,407		4,744,550		5,685,442
Cash equivalents (time deposits with original
maturities less than three months)		838,706		1,117,771		1,280,451
	$	4,966,278	$	6,003,936	$	7,075,773

13 -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

			December 31,	December 31,
	March 31, 2020			2019	March 31, 2019
Financial assets at FVTPL-current
Financial assets mandatorily classified as at
FVTPL
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts	$	7,884	$	9,320	$	6,711
Non-derivative financial assets
Domestic quoted shares		145,439		118,392		96,005
Foreign quoted shares		51,509		50,157		6,843
Mutual funds		5,098,682		3,470,094		2,114,519
	$	5,303,514	$	3,647,963	$	2,224,078
Financial assets at FVTPL-non-current
Financial assets mandatorily classified as at
FVTPL
Non-derivative financial assets
Foreign unquoted shares	$	100,959	$	101,156	$	-
Financial liabilities at FVTPL-current
Financial assets mandatorily classified as at
FVTPL
Derivative financial assets (not under hedge
accounting)
Foreign exchange forward contracts	$	1,390	$	521	$	8,171

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

					Notional Amount
			Currency	Maturity Date	(In Thousands)
March	31,	2020
Sell			EUR/NTD	2020.04-2020.07	EUR12,700/NTD426,382
			USD/NTD	2020.04-2020.05	USD7,500/NTD226,516
			JPY/NTD	2020.04-2020.08	JPY320,000/NTD89,222
			RMB/NTD	2020.04-2020.06	RMB50,000/NTD214,579
			EUR/USD	2020.04-2020.08	EUR900/USD1,012
					(Continued)

14 -

			Notional Amount
	Currency	Maturity Date	(In Thousands)
December 31, 2019
Sell	EUR/NTD	2020.01-2020.05	EUR12,000/NTD406,441
	EUR/USD	2020.01-2020.04	EUR700/USD789
	JPY/NTD	2020.01-2020.05	JPY380,000/NTD108,979
	RMB/NTD	2020.01-2020.03	RMB47,000/NTD201,967
	USD/NTD	2020.01-2020.02	USD4,000/NTD121,501
March 31, 2019
Sell	EUR/NTD	2019.04-2019.07	EUR11,400/NTD400,761
	USD/NTD	2019.04	USD2,100/NTD64,630
	JPY/NTD	2019.04-2019.09	JPY370,000/NTD102,818
	RMB/NTD	2019.04-2019.08	RMB89,000/NTD400,087
			(Concluded)

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

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

			December	31,
	March 31, 2020		2019		March 31, 2019
Non-current
Investments in equity instruments at fair value
through other comprehensive income
(FVTOCI)	$	1,679,268	$ 1,639,321		$ 1,423,914
Investments in equity instruments at FVTOCI:
			December	31,
	March 31, 2020		2019		March 31, 2019
Non-current
Domestic investments
Listed shares and emerging market shares
Ordinary shares - ASUSTek Computer Inc.	$	969,220	$ 1,097,185		$ 1,056,900
Ordinary shares - Allied Circuit Co., Ltd.		562,552	392,306		246,117
Unlisted shares
Ordinary shares - BroadTec System Inc.		3,437	3,917		4,155
Ordinary shares - BiosenseTek Corp.		-		-	-
Ordinary shares - Juguar Technology		7,415	4,949		4,943
Ordinary shares - Taiwan DSC PV Ltd.		-		-	-
Ordinary shares - iSAP Solution Corp.		8,994	9,994		-
		1,551,618	1,508,351		1,312,115

(Continued)

15 -

			December 31,	December 31,
	March 31, 2020			2019	March 31, 2019
Foreign investments
Shanghai Shangchuang Xinwei Investment
Management Co., Ltd.	$	127,650	$	129,150	$	109,919
JamaPro Co., Ltd.		-		1,820		1,880
		127,650		130,970		111,799
	$	1,679,268	$	1,639,321	$	1,423,914
						(Concluded)

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

9. FINANCIAL ASSETS AT AMORTIZED COST

		December 31,
	March 31, 2020	2019	March 31, 2019
Current
Foreign investments
Time deposits with original maturity of more
than 3 months	$ 751,170	$ 316,994	$	11,166

10. NOTES RECEIVABLE AND TRADE RECEIVABLES

		December 31,
	March 31, 2020	2019	March 31, 2019
Notes receivable-operating	$ 1,175,068	$ 1,546,340	$ 1,305,287
Trade receivables
Amortized cost
Gross carrying amount	$ 6,907,967	$ 7,352,407	$ 7,443,723
Less: Allowance for impairment loss	(92,065)	(87,301)	(86,559)
	$ 6,815,902	$ 7,265,106	$ 7,357,164

Trade Receivables

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.

16 -

The Group measures the loss allowance for trade receivables at an amount that equals to lifetime ECLs. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience with the respective debtors and an analysis of the debtors’ current financial positions. As the Group’s historical credit loss experience show different loss patterns for different customer geographical segments, the Group adopts respective approaches to prepare the provision matrix for loss allowance based on past due status of the Group’s different geographical customer base, and sets out the expected credit loss rate for accounts receivable that are overdue and based on geographical economic conditions.

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

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

March 31, 2020

Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost December 31, 2019 Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost March 31, 2019 Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECLs) Amortized cost	Not Past Due - $ 5,805,889 (1,326) $ 5,804,563 Not Past Due 0.15% $ 5,860,824 (8,890) $ 5,851,934 Not Past Due - $ 6,246,759 - $ 6,246,759	Less than 90 Days 91 to 180 Days 0.5% 20% $ 943,392 $ 75,017 (5,118) (15,040) $ 938,274 $ 59,977 Less than 90 Days 91 to 180 Days 0.2% 28.89% $ 1,354,411 $ 82,778 (2,681) (23,914) $ 1,351,730 $ 58,864 Less than 90 Days 91 to 180 Days - 20% $ 1,061,121 $ 33,574 (3,113) (6,715) $ 1,058,008 $ 26,859	181 to 360 Days Over 360 Days 50.62% 100% $ 26,503 $ 57,166 (13,415) (57,166) $ 13,088 $ - 181 to 360 Days Over 360 Days 70.55% 100% $ 8,755 $ 45,639 (6,177) (45,639) $ 2,578 $ - 181 to 360 Days Over 360 Days 46% 100% $ 47,422 $ 54,847 (21,884) (54,847) $ 25,538 $ -	Total - $ 6,907,967 (92,065) $ 6,815,902 Total - $ 7,352,407 (87,301) $ 7,265,106 Total - $ 7,443,723 (86,559) $ 7,357,164

17 -

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

Balance at January 1 Add: Amount of expected loss recognized on credit impairment Less: Amounts written off (Note) Business combination Foreign exchange gains and losses Balance at March 31	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 87,301 6,257 (49) - (1,444) $ 92,065	2019 $ 87,491 2,783 (4,360) (35) 680 $ 86,559

Note: The Group wrote off trade receivables and related loss allowance for the three months ended March 31, 2020 and 2019 of $49 thousand and $4,360 thousand, respectively, as the customers’ trade receivables have been aged more than 2 years and the legal attest letters were served without receivables collected.

11. INVENTORIES

		December 31,
	March 31, 2020	2019	March 31, 2019
Raw materials	$ 4,671,515	$ 3,235,906	$ 3,784,440
Work in process	1,948,516	1,803,484	1,978,173
Finished goods	1,779,851	1,987,600	1,446,656
Inventories in transit	693,076	755,834	969,385
	$ 9,092,958	$ 7,782,824	$ 8,178,654

The cost of inventories recognized as cost of goods sold for the three months ended March 31, 2020 and 2019 was $6,750,226 thousand and $7,425,918 thousand, respectively.

The costs of inventories were decreased by $821,200 thousand, $821,488 thousand and $759,458 thousand as of March 31, 2020, December 31, 2019 and March 31, 2019, 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	Proportion of Ownership (%) March 31, 2020 December 31, 2019 March 31, 2019 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 l (Continued)

18 -

Investor
Investee
Nature of Activities
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
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 ISRAEL
LTD. (AIL)
Sale of industrial network
communications systems
Advantech KR Co.,
Ltd. (AKR)
Advantech Kostec Co., Ltd.
(AKST)
Production and sale of intelligent
medical displays
Advantech Japan Co.,
Ltd. (AJP)
Advantech Technologies
Japan Corp. (ATJ)
Production and sale of electronic and
mechanical devices
Advantech Corporate
Investment
Cermate Technologies Inc.
(Cermate 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
Advantech Automation
Corp. (HK) (ATC
(HK))
Advantech Technology
(China) Company Ltd.
(AKMC)
Production and sale of components of
industrial automation products
Advantech Automation
Corp. (AAC (BVI))
Advantech Corp. (ANA)
Sale and fabrication of industrial
automation products
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 Technology
DMCC (ADB) (former
B&B DMCC)
Sale of industrial network
communications
Advantech Corp.
(ANA)
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

Proportion of Ownership (%)
March 31,
2020
December 31,
2019
March 31,
2019
Remark
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
60.68
64.10
64.10
a
100.00
100.00
100.00
a
100.00
100.00
100.00
a
60.00
60.00
60.00
100.00
100.00
100.00
a
76.00
76.00
76.00
a
51.00
51.00
51.00
a
60.00
60.00
60.00
a
100.00
100.00
100.00
a
50.00
50.00
50.00
a, b
60.00
60.00
60.00
a, c
100.00
100.00
-
a, k
24.00
24.00
24.00
a
28.61
28.61
30.00
a, b
55.00
55.00
55.00
a
50.00
50.00
50.00
a
50.00
50.00
50.00
a
100.00
100.00
100.00
a, d
79.30
79.30
-
a, g
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
100.00
100.00
-
a, j
40.00
40.00
40.00
100.00
100.00
100.00
100.00
100.00
100.00
a
(Continued)

19 -

Investor
Investee
Nature of Activities
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)
Design, R&D and sale of industrial
automation vehicles and related
products
Advantech Intelligent Health
Co., Ltd. (AIH)
Information software and date
processing services
Beijing Yan Hua Xing
Ye Electronic
Science &
Technology Co., Ltd.
(ACN)
Xi’an Advantech Software
Ltd. (AXA)
Development and production of
software products
Shanghai Advantech
Intelligent Services
Co., Ltd. (AiSC)
Advantech Service-IoT
(Shanghai) Co., Ltd.
(SIoT (China))
Technology development consulting
and services in the field of intelligent
technology
Advantech Europe
Holding
Advantech Europe B.V.
(AEU)
Sale of industrial automation products
B.V. (AEUH)
Advantech Poland Sp z o.o.
(APL)
Sale of industrial automation products
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
B+B Smartworx Inc.
(B+B)
B+B Smartworx Limited
(BBIE) (former BBI)
Sale of industrial network
communications systems
B+B Smartworx
Limited (BBIE)
(former BBI)
B&B Electronics Holdings
LLC (B&B Electronics)
Sale of industrial network
communications systems
Advantech B+B SmartWorx
s.r.o.CZ (ACZ)
Manufacturing of cellular and
automation solutions
Conel Automation s.r.o.
CZ (Conel Automation)
Sale of industrial network
communications systems
Advantech Technology
DMCC (ADB)
Sale of industrial network
communications systems
B&B Electronics
Holdings LLC (B&B
Electronics)
Advantech B+B SmartWorx
s.r.o.CZ (ACZ)
Manufacturing of cellular and
automation solutions
Advantech B+B
SmartWorx s.r.o.CZ
(ACZ)
Conel Automation s.r.o.
CZ (Conel Automation)
Sale of industrial network
communications systems

Proportion of Ownership (%)
March 31,
2020
December 31,
2019
March 31,
2019
Remark
99.00
99.00
99.00
a
100.00
100.00
100.00
a
100.00
70.00
-
a, e
100.00
100.00
100.00
a
1.00
1.00
1.00
a
100.00
100.00
100.00
100.00
100.00
100.00
a
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
100.00
100.00
-
-
100.00
h
100.00
100.00
99.99
f
-
-
1.00
i
-
-
100.00
j
-
-
0.01
f, h
-
-
99.00
i

(Concluded)

Remark a: Not significant subsidiaries and their financial statements had not been reviewed.
Remark b: 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. In the third quarter of 2019, AJP sold 1.39% of the equity of ATJ, which led its equity investment in ATJ to decrease from 30% to 28.61%.
Remark c: In the first quarter of 2019, the Group acquired 60% of the equity of ATR.
Remark d: In the first quarter of 2019, Advantech Corporate Investment founded ACISM and acquired 100% of its equity.
20 -
Remark e: In the second quarter of 2019, SioT (Cayman) founded AIH and acquired 100% of its equity. In the third quarter of 2019, AIH held its equity offering, which led SioT (Cayman)’s equity investment in AIH to decrease from 100% to 70%. In the first quarter of 2020, SioT (Cayman) acquired 30% of the equity of AIH, which led its equity investment in AIH to increase from 70% to 100%.
Remark f: In the second quarter of 2019, the Group adjusted its investment structure. The ownership of ACZ originally held by B&B Electronics was adjusted to be held by BBIE, which led to BBIE’s equity investment in ACZ to increase from 99.99% to 100%, and ACZ directly held Conel Automation afterward.
Remark g: In the second quarter of 2019, Advantech Corporate Investment founded ACI IOT Investment Fund-I Corporation and acquired 79.30% of its equity.
Remark h: In the third quarter of 2019, B&B Electronics filed for liquidation.
Remark i: In the third quarter of 2019, Conel Automation was disposed of.
Remark j: In the fourth quarter of 2019, the Group adjusted its investment structure; hence, AAC (BVI) directly held 100% of the equity of ADB.
Remark k: In the fourth quarter of 2019, the Group founded AIL.
Remark l: From the second quarter of 2019, financial statements of Advantech Corporate Investment would be reviewed.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

			December 31,	December 31,
	March 31, 2020			2019	March 31, 2019
Associates that are not individually material
Listed companies
Axiomtek Co., Ltd. (“Axiomtek”)	$	679,146	$	627,632	$	649,934
Winmate Inc. (“Winmate”)		562,035		553,145		551,581
AzureWare Technologies, Inc. (“AzureWare”)		486,272		506,867		513,909
Nippon RAD Inc. (Nippon RAD)		304,198		296,400		306,603
Mildex Optical Inc. (“Mildex”)		181,740		181,388		200,381
Hwacom Systems Inc. (“Hwacom”)		374,771		392,645		-
Unlisted companies
AIMobile Co., Ltd. (“AIMobile”)		57,510		66,133		97,333
Deneng Scientific Research Co., Ltd.
(“Deneng”)		13,643		14,013		13,975
Jen Hsiang Electronics Co., Ltd. (“Jen
Hsiang”)		-		8,114		7,784
CDIB Innovation Accelerator Co., Ltd.
(“CDIB”)		163,092		161,043		149,003
DotZero Co., Ltd. (“DotZero”)		6,127		6,238		4,573
iLink Co., Ltd. (“iLink”)		6,061		7,050		7,490
Shanghai Yanle Co., Ltd. (“Yanle”)		1,964		3,092		4,382
						(Continued)

21 -

			December 31,	December 31,
	March 31, 2020			2019	March 31, 2019
GSD Environmental Technology Co., Ltd.
(“GSD”)	$	12,794	$	13,608	$	17,963
Information Technology Total Services Co.,
Ltd. (“ITTS”)		159,383		154,910		-
Smasoft Technology Co., Ltd. (“Smasoft”)		14,037		15,000		-
Impelex Data Transfer Co., Ltd. (“Impelex”)		9,496		-		-
VSO Electronics Co., Ltd. (“VSO”)		122,449		-		-
Tianjin Anjie IOT Science and Technology
Co., Ltd. (“GSD”)		2,552		2,582		-
	$	3,157,270	$	3,009,860	$	2,524,911
						(Concluded)

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

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

In the third quarter of 2019, the Group subscribed shares of Hwacom Systems Inc. through a private placement; after the subscription, the Group’s percentage of ownership in Hwacon was 19.99% and had significant influence over Hwacom Systems Inc.

In the fourth quarter of 2019, the Group founded Tianjin Anjie IOT Science and Technology Co., Ltd. by investing cash of $2,594 thousand and acquired 20% of its equity. The Group had significant infouence over Tianjin Anjie IOT Science and Technology Co., Ltd.

In the fourth quarter of 2019, the Group paid cash of $15,000 thousand for 20% of the equity of Smasoft Technology Co., Ltd. The Group had significant influence over Smasoft Technology Co., Ltd.

In the first quarter of 2020, the Group paid cash of $10,000 thousand for 20% of the equity of Impelex Data Transfer Co., Ltd. The Group had significant influence over Impelex Data Transfer Co., Ltd.

In the first quarter of 2020, the Group paid cash of $120,000 thousand for 14.29% of the equity of VSO Electronics Co., Ltd. The Group had significant influence over VSO Electronics Co., Ltd.

Aggregate Information of Associates That Are Not Individually Material

The Group’s share of Profit (loss) from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) for the period	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ (17,907) 8,052 $ (9,855)	2019 $ 4,949 24,317 $ 29,266

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

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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; the management believe that financial statements of those investee mentioned above had not been reviewed by independent CPAs would not contribute to significant effect on review results.

14. PROPERTY, PLANT AND EQUIPMENT

a. 2020

b.	Cost Balance at January 1, 2020 Additions Disposals Reclassifications Effect of foreign currency exchange differences Balance at March 31, 2020 Accumulated depreciation and impairment Balance at January 1, 2020 Disposals Depreciation expenses Reclassifications Effect of foreign currency exchange differences Balance at March 31, 2020 Carrying amounts at March 31, 2020 2019 Cost Balance at January 1, 2019 Additions Disposals Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at March 31, 2019 Accumulated depreciation and impairment Balance at January 1, 2019 Disposals Depreciation expenses Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at March 31, 2019 Carrying amounts at March 31, 2019	Freehold Land $ 3,067,589 - (232 ) - 394 $ 3,067,751 $ - - - - - $ - $ 3,067,751 Freehold Land $ 2,934,127 - (7,100 ) 148,160 - (1,158) $ 3,074,029 $ - - - - - - $ - $ 3,074,029	Buildings $ 8,049,532 314 - (1,358 ) (18,707) $ 8,029,781 $ 2,597,296 - 50,157 (153 ) (2,382) $ 2,644,918 $ 5,384,863 Buildings $ 7,195,732 12 (13,147 ) 942,802 32,713 42,768 $ 8,200,880 $ 1,591,282 (5,673 ) 50,920 867,976 (580 ) 9,248 $ 2,513,173 $ 5,687,707	Equipment $ 1,866,463 14,013 (63,773 ) 25,698 (7,215) $ 1,835,186 $ 1,378,129 (57,117 ) 51,913 (19,741 ) (4,195) $ 1,348,989 $ 486,197 Equipment $ 1,709,936 20,495 (9,475 ) 130,912 (11,696 ) 11,804 $ 1,851,976 $ 1,172,613 (7,915 ) 51,975 109,364 8,947 6,111 $ 1,341,095 $ 510,881	Office Equipment $ 877,799 22,753 (5,680 ) (19,529 ) (5,053) $ 870,290 $ 685,252 (5,349 ) 19,897 (15,591 ) (3,842) $ 680,367 $ 189,923 Office Equipment $ 850,021 14,879 (18,987 ) 15,916 (7,862 ) 4,344 $ 858,311 $ 654,746 (13,112 ) 23,105 9,961 (8,002 ) (371) $ 666,327 $ 191,984	Other Facilities $ 1,874,078 28,575 (11,368 ) (98,313 ) (9,969) $ 1,783,003 $ 1,351,086 (10,800 ) 40,743 (103,624 ) (6,314) $ 1,271,091 $ 511,912 Other Facilities $ 1,743,263 24,484 (19,821 ) 34,650 (4,192 ) 15,278 $ 1,793,662 $ 1,234,142 (19,349 ) 47,387 33,018 (1,441 ) 9,922 $ 1,303,679 $ 489,983	Construction in Progress $ 8,792 146,800 (50,863 ) (90,729 ) (5,027) $ 8,973 $ - - - - - $ - $ 8,973 Construction in Progress $ 2,485 101,367 (431 ) 1 (104,744 ) 5,953 $ 4,631 $ - - - - - - $ - $ 4,631	Total $ 15,744,253 212,455 (131,916 ) (184,231 ) (45,577) $ 15,594,984 $ 6,011,763 (73,266 ) 162,710 (139,109 ) (16,733) $ 5,945,365 $ 9,649,619 Total $ 14,435,564 161,237 (68,961 ) 1,272,441 (95,781 ) 78,989 $ 15,783,489 $ 4,652,783 (46,049 ) 173,387 1,020,319 (1,076 ) 24,910 $ 5,824,274 $ 9,959,215

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The above items of property, plant and equipment were depreciated on a straight-line basis over their estimated useful lives as follows:

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

Property, plant and equipment pledged as collateral for borrowings are set out in Note 29.

15. LEASE ARRANGEMENTS

a. Right-of-use assets

March 31, 2020 Carrying amounts Land $ 281,158 Buildings 410,144 Machinery 3,283 Office equipment 14,028 Transportation equipment 45,711 Other equipment 35 $ 754,359 Additions to right-of-use assets Depreciation charge for right-of-use assets Land Buildings Machinery Office equipment Transportation equipment Other equipment	December 31, 2019 March 31, 2019 $ 286,549 $ 311,514 396,887 527,035 2,202 2,694 9,254 13,546 28,214 50,296 - - $ 723,106 $ 905,085 For the Three Months Ended March 31	December 31, 2019 March 31, 2019 $ 286,549 $ 311,514 396,887 527,035 2,202 2,694 9,254 13,546 28,214 50,296 - - $ 723,106 $ 905,085 For the Three Months Ended March 31	December 31, 2019 March 31, 2019 $ 286,549 $ 311,514 396,887 527,035 2,202 2,694 9,254 13,546 28,214 50,296 - - $ 723,106 $ 905,085 For the Three Months Ended March 31
		2020 $ 39,556 2,090 41,962 221 2,633 7,084 5 $ 53,995	2019 $ - 2,213 42,454 164 1,431 7,361 - $ 53,623

Except for the aforementioned addition and recognized depreciation, the Group did not have significant sublease or impairment of right-of-use assets during the three months ended March 31, 2020 and 2019.

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b. Lease liabilities

		December 31,
	March 31, 2020	2019	March 31, 2019
Carrying amounts
Current	$ 221,250	$ 199,493	$ 201,334
Non-current	255,096	242,263	393,299
	$ 476,346	$ 441,756	$ 594,633
Range of discount rate for lease liabilities was as follows:
		December 31,
	March 31, 2020	2019	March 31, 2019
Buildings	0.25%-10.20%	0.25%-12.00%	0.25%-12.00%
Machinery	0.87%-4.20%	0.87%-5.46%	0.87%-5.46%
Office equipment	0.87%-4.75%	0.87%-4.75%	0.87%-4.75%
Transportation equipment	0.25%-5.00%	0.25%-5.90%	0.25%-5.90%
Other equipment	2.05%	-	-

c. Other lease information

Expenses relating to short-term leases Expenses relating to low-value asset leases Total cash outflow for lease	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 3,490 $ 3,045 $ 70,469	2019 $ 3,490 $ 3,045 $ 65,902

16. GOODWILL

Cost Balance at January 1 Additional amounts recognized from business combinations occurring during the year (Note 25) Adjustments for goodwill after acquisition Effect of foreign currency exchange differences Balance at March 31		For the Three Months Ended March 31
		2020 2019 (Restatement) $ 2,892,879 $ 2,934,254 - 124,029 - (104,889) 5,730 (20,666) $ 2,898,609 $ 2,932,728 (Continued)

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Accumulated impairment losses Balance at January 1 Effect of foreign currency exchange differences Balance at March 31 Carry amount at March 31		For the Three Months Ended March 31
		2020 2019 (Restatement) $ (373,365) $ (97,788) - - $ (373,365) $ (97,788) $ 2,525,244 $ 2,834,940 (Concluded)

On September 30, 2019, the Group obtained the fair value assessed at the acquisition date. Based on the results of the assessment, the fair value of ATR’s intangible assets at the acquisition date was $34,783 thousand. The comparative figures have been restated as if the initial accounting was completed at the acquisition date.

		February 28,	February 28,
			2019
	March 31, 2019	(Acquisition
	(Restatement)		Date)
Goodwill adjustments	$ (12,494)	$	(12,494)
Intangible assets	$ 34,254	$	34,598
Retained earnings	$ (344)	$	-
Non-controlling interests	$ 13,609	$	13,839

On December 31, 2019, the Group obtained the fair value assessed at the acquisition date. Based on the results of the assessment, the fair value of ATJ’s property, plant and equipment and intangible assets at the acquisition date was $251,399 thousand and $65,649 thousand, respectively. The comparative figures have been restated as if the initial accounting was completed at the acquisition date.

			January 31,	January 31,
				2019
	March 31, 2019		(Acquisition
	(Restatement)			Date)
Goodwill adjustments	$	(92,395)	$	(92,395)
Property, plant and equipment	$	106,412	$	106,379
Intangible assets	$	60,062	$	61,223
Net defined benefit liabilities	$	75,680	$	74,932
Retained earnings	$	(1,876)	$	-
Non-controlling interests	$	22,630	$	23,099

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17. BORROWINGS

a. Short-term borrowings

		December 31,
	March 31, 2020	2019	March 31, 2019
Unsecured borrowings
Line of credit borrowings	$ 266,025	$ 250,678	$ 424,096

The range of weighted average effective interest rates on bank loans was 0.23%-2.60%, 0.23%-3.00% and 0.19%-3.15% per annum as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.

b. Long-term borrowings

		December 31,
	March 31, 2020	2019	March 31, 2019
Secured borrowings
Other loans	$ 40,164	$ 44,089	$ 53,004
Less: Current portions	(5,422)	(7,957)	(7,220)
Long-term borrowings	$ 34,742	$ 36,132	$ 45,784

Other borrowings are loans from the government. As of March 31, 2020, December 31, 2019 and March 31, 2019, the effective interest rate was 2.91%-3.16%.

With demand of borrowings, the Group pledged time deposits, freehold land and buildings, refer to Note 29.

18. OTHER LIABILITIES

		December 31,
	March 31, 2020	2019	March 31, 2019
Other payables
Payables for salaries or bonuses	$ 1,919,294	$ 2,484,026	$ 1,812,215
Payables for employee benefits	172,696	188,988	200,213
Payables for royalties	226,058	86,822	121,515
Others (Note)	977,601	972,388	1,138,870
	$ 3,295,649	$ 3,732,224	$ 3,272,813

Note: Including marketing expenses and freight expenses, etc.

19. RETIREMENT BENEFIT PLANS

Employee benefit expenses in respect of the Group’s defined benefit retirement plans were $2,510 thousand and $1,339 thousand for the three months ended March 31, 2020 and 2019, respectively, and were calculated using the actuarially determined pension cost discount rate as of December 31, 2018 and 2017.

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20. EQUITY

a. Share capital

Ordinary shares

		December 31,
	March 31, 2020	2019	March 31, 2019
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)	700,870	700,310	699,076
Shares issued	$ 7,008,700	$ 7,004,100	$ 6,990,755

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

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

b. Capital surplus

		December 31,
	March 31, 2020	2019	March 31, 2019
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	98,265	90,217	80,831
Share of changes in capital surplus of
associates	55	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)	4,858	4,637	4,263
Employee share options	1,992,259	1,888,945	1,615,779
Share of changes in capital surplus of
associates	47,721	12,361	28,927
Not note be used for any purpose
Employee share options	1,066,119	1,075,002	1,042,060
	$ 7,616,628	$ 7,478,568	$ 7,179,266

1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).

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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

The amended policies were approved in the shareholders’ meeting on May 28, 2020, and the Group authorized the board to resolve the distribution of dividends and bonuses in the form of cash and then reported to the stockholders.

Under the dividends policy before the amendments, 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 21, d.

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

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

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

The appropriations of earnings, for 2019 and 2018 which have been approved in the shareholders’ meetings on March 6, 2020 and on May 28, 2019, respectively, were as follows:

Legal reserve Special reserve Cash dividends Share dividends Cash dividends per share (NT$) Share dividends per share (NT$)		Appropriation of Earnings	Appropriation of Earnings
		For the Year Ended December 31
		2019 $ 735,122 $ 47,230 $ 5,463,198 $ 700,410 $ 7.8 $ 1.0	2018 $ 629,466 $ 429,108 $ 4,751,129 $ - $ 6.8 $ -

The distribution of cash dividends was approved by the board of directors on March 6, 2020. The appropriation of earnings for 2019 are subject to the resolution in the shareholders’ meeting to be held on May 28, 2020.

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d. Special reserves

Beginning at January 1 Balance atMarch31		For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 798,763 $ 798,763	2019 $ 369,655 $ 369,655

e. Other equity items

1) Exchange differences on translating the financial statements of foreign operations

For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
2020 2019 $ (878,261) $ (475,245) $ (98,113) $ 100,142 6,568 3,161 (91,545) 103,303 $ (969,806) $ (371,942) For the Three Months Ended March 31
2020 2019 $ 30,970 $ (324,254) 41,557 120,818 1,402 20,910 42,959 141,728 $ 73,929 $ (182,526) For the Three Months Ended March 31
	2020 $ 1,298 74 $ 1,372	2019 $ 736 274 $ 1,010

2) Unrealized gain or loss on Financial Assets at FVTOCI

3) Unearned employee benefits compensation
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f. Non-controlling interests

Balance at January 1 Share of profit (loss) for the year Other comprehensive income during the year Exchange differences on translating the financial statements of foreign operations Increase in non-controlling interests arising from decrease in investment in subsidiaries (Note 26) Decrease in non-controlling interests arising from increase in investment in subsidiaries (Note 26) Increase in non-controlling interests arising from the acquisition of subsidiary, ATJ (Note 25) Increase in non-controlling interests arising from the acquisition of subsidiary, ATR (Note 25) Cash dividends distributed by subsidiaries Employees’ holding outstanding vest share option related non-controlling interests issued by subsidiaries Balance at March 31		For the Three Months Ended March 31
		2020 2019 (Restatement) $ 495,822 $ 245,436 (14,258) 3,479 (3,518) 21,270 10,346 - (2,481) (22,487) - 125,868 - 35,252 (3,713) - 33 218 $ 482,231 $ 409,036

21. NET PROFIT FROM CONTINUING OPERATIONS

a. Finance costs

Interest on bank loans Interest on lease liabilities Others b. Depreciation and amortization An analysis of depreciation by function Operating costs Operating expenses	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
	2020 2019 $ 616 $ 778 4,988 4,510 727 887 $ 6,331 $ 6,175 For the Three Months Ended March 31
		2020 $ 46,275 170,430 $ 216,705	2019 $ 38,392 188,618 $ 227,010 (Continued)

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An analysis of amortization by function Operating costs Operating expenses	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 1,515 46,899 $ 48,414	2019 $ 943 47,345 $ 48,288 (Concluded)

c. Employee benefits expense

Short-term benefits Post-employment benefits Defined contribution plans Defined benefit plans (Note 19) Share-based payments Equity-settled Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses		For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 2,257,264 66,608 2,510 69,118 61,789 168,356 $ 2,556,527 $ 532,534 2,023,993 $ 2,556,527	2019 $ 2,266,458 91,661 1,339 93,000 84,673 152,799 $ 2,596,930 $ 561,783 2,035,147 $ 2,596,930

d. Employees’ compensation and remuneration of directors and supervisors

The Company accrued employees’ compensation at the rates of no less than 5% and remuneration of directors at the rates of no higher than 1%, of net profit before income tax, employees’ compensation, and remuneration of directors. For the three months ended March 31, 2020 and 2019, the employees’ compensation and the remuneration of directors were accrued of net profit after income tax.

Employees’ compensation Remuneration of directors	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 150,000 $ 3,000	2019 $ 116,455 $ 2,650

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

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The appropriations of employees’ compensation and remuneration of directors and supervisors for 2019 and 2018 having been resolved by the board of directors on March 6, 2020 and May 3, 2019, respectively, were as below:

Employees’ compensation Remuneration of directors and supervisors		For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 Cash $ 600,000 $ 12,000		2018
				Cash $ 452,355 $ 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, 2019 and 2018.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

e. Gain or loss on foreign currency exchange

Foreign exchange gains Foreign exchange losses Net gain (loss)	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 229,369 (231,660) $ (2,291)	2019 $ 186,054 (116,310) $ 69,744

22. INCOME TAXES

a. Income tax recognized in profit or loss

Major components of tax expense were as follows:

Current tax In respect of the current period Adjustment for prior years Deferred tax In respect of the current period Income tax expense recognized in profit or loss	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 339,255 (16,312) 17,216 $ 340,159	2019 $ 465,526 22,516 (56,362) $ 431,680

In July 2019, the President of the ROC announced the amendments to the Statute for Industrial Innovation, which stipulate that the amounts of unappropriated earnings in 2018 and thereafter that are reinvested in the construction or purchase of certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings. The Group has already deducted the amount of capital expenditure from the unappropriated earnings in 2018 that was reinvested when calculating the tax on unappropriated earnings for the year ended December 2019.

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b. Income tax recognized in other comprehensive income

Deferred tax In respect of current period Translating the financial statements of foreign operations Income tax recognized in other comprehensive income	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ (22,886) $ (22,886)	2019 $ 25,826 $ 25,826

c. Income tax assessments

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

23. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 1.85 $ 1.82	2019 $ 2.31 $ 2.28

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

Net Profit for the Period

For the Three Months Ended March 31 2020 2019 Earnings used in the computation of basic earnings per share $ 1,294,665 $ 1,613,136 Earnings used in the computation of diluted earnings per share $ 1,294,665 $ 1,613,136 Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares) For the Three Months Ended March 31 2020 2019 Weighted average number of ordinary shares in computation of basic earnings per share 700,573 698,744 Effect of potentially dilutive ordinary shares: Employee share options 7,763 6,372 Employees’ compensation 2,109 1,911 Weighted average number of ordinary shares used in the computation of diluted earnings per share 710,445 707,027		For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
			2020 700,573 7,763 2,109 710,445	2019 698,744 6,372 1,911 707,027

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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.

24. SHARE-BASED PAYMENT ARRANGEMENTS

Qualified employees of the Company and its subsidiaries were granted 8,000 options in 2018, 6,500 options in 2016, and 5,000 options in 2014. Each option entitles the holder to subscribe for one thousand ordinary shares of the Company. The holders of these shares include employees whom meet certain criteria set by the Company, from both domestic and overseas subsidiaries in which the Company directly or indirectly invests over 50%. Options issued in 2018, 2016 and 2014 are all valid for six years. All options are exercisable at certain percentages after the second anniversary year from the grant date. The options issued in 2018 were granted at an exercise price equal to the share price at the grant date. The exercise price of those granted in 2016 and 2014 was both NT$100 per share. For any subsequent changes in the Company’s capital surplus, the exercise price and the number of options will be adjusted accordingly.

Information on employee share options was as follows:

Balance at January 1 Options exercised Balance at March 31 Options exercisable, end of the period Weighted-average fair value of options granted (NT$)	For the Three Months Ended March 31	For the Three Months Ended March 31
	2020 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 14,250 $ 149.88 (460) 80.96 13,790 152.19 5,790 82.68 $ -	2019
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 15,965 $ 143.64 (380) 83.52 15,585 145.11 7,585 84.58 $ -

The weighted-average share price at the date of exercise of share options for the three months ended March 31, 2020 and 2019 were from NT$257 to NT$304 and NT$223 to NT$249, respectively.

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Information about outstanding options as of March 31, 2020 and 2019 was as follows:

Issuance in 2018 Issuance in 2016 Issuance in 2014	For the Three Months Ended December 31	For the Three Months Ended December 31
	2020 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 202.50 4.33 83.30 2.20 79.40 0.38	2019
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 202.50 5.33 85.60 3.20 81.50 1.38

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

	2018	2016	2014
Grant-date share price (NT$)	$202.5	$235	$239.5
Exercise price (NT$)	$202.5	$100	$100
Expected volatility	28.42%-28.73%	31.42%-32.48%	28.28%-29.19%
Expected life (in years)	4-4.5	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 $61,789 thousand and $84,673 thousand for the three months ended March 31, 2020 and 2019, 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 expired Balance at March 31 Options exercisable, end of period Weighted-average fair value of options granted (NT$)	For the Three Months Ended March 31	For the Three Months Ended March 31
	2020 Number of Options (In Thousands of Units) Weighted- average Exercise Price ($) 740 $ 20 (24) 20 716 20 156 $ -	2019
		Number of Options (In Thousands of Units) Weighted- average Exercise Price ($) 814 $ 20 - 814 20 - $ -

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Information on outstanding options for the three months ended March 31, 2020 and 2019 was as follows:

Employee Share Options Issuance in 2018 Issuance in 2017	For the Three Months Ended March 31	For the Three Months Ended March 31
	2020 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 20 2.28 20 1.17	2019
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 20 3.28 20 2.17

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%	25.60%-29.45%
Expected life (in years)	2.5-4	2.5-4
Expected dividend yield	1.04%	0%
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%

37 -

25. BUSINESS COMBINATIONS

a. Subsidiaries acquired

			Proportion of
			Voting Equity
		Date of	Interests	Consideration
	Principal Activity	Acquisition	Acquired (%)	Transferred
Advantech	Production and sale of	January 31,	80	$	517,008
Technologies	eletronical and	2019
Japan Corp. (ATJ)	mechanical device
Advantech Turkey	Wholesale of computers	February 28,	60	$	58,482
Teknoloji A.S.	and peripheral devices	2019
(ATR)

The Group acquired 80% of the shares of Advantech Technologies Japan Corp. (former Omron Nohgata Co., Ltd.) 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. (former Alitek Teknoloji Urunleri San. ve Tic. A.S.) in order to expand the sales of industrial PCs in the Turkey market. The Group increased capital; thus the Group’s equity investment in ATR increased to 60%.

b. Consideration transferred

Cash c. Assets acquired and liabilities assumed at the dates of acquisitions Current assets Cash and cash equivalents Trade receivables and other receivables Inventories Other current assets Non-current assets Plant and equipment Intangible assets Deferred tax assets Other non-current assets Current liabilities Short-term borrowings Trade and other payables Current tax liabilities Other current liabilities Non-current liabilities Net defined benefit liabilities Other non-current liabilities	ATJ $ 517,008 ATJ $ - 600,640 437,154 7,220 251,399 65,649 96,606 - (157,819) (501,113) (32,436) (15,770) (122,190) - $ 629,340	ATR $ 58,482 ATR $ 33,334 15,759 9,966 353 723 34,783 - 238 (311) (2,206) (193) (4,230) - (86) $ 88,130

38 -

d. Non-controlling interests

The non-controlling interest (20% and 40% ownership interest in ATJ and ATR) recognized at the acquisition date was measured by reference to the identifiable net assets of the non-controlling interest and amounted to $125,868 thousand and $35,252 thousand, respectively.

e. Goodwill recognized on acquisitions

		ATJ		ATR
	(Restatement)		(Restatement)
Consideration transferred	$	517,008	$	58,482
Less: Fair value of identifiable net assets acquired		(503,472)		(52,878)
Goodwill recognized on acquisitions	$	13,536	$	5,604

In the acquisition of ATR, 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.

In the acquisition of ATJ, the adjustment of the fair value of intangible assets, property, plant and equipment, and goodwill was based on the intangible asset - fair value valuation on client relationship and the appraisal report of property, plant and equipment. Refer to Note 16 for goodwill adjustments.

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 $ 58,482 (33,334) $ 25,148

g. Impact of acquisitions on the results of the Group

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

Operating revenue Profit or loss	For the Three Months Ended March 31, 2019	For the Three Months Ended March 31, 2019	For the Three Months Ended March 31, 2019
		ATJ $ 249,067 $ 17,419	ATR $ 9,858 $ 2,505

26. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

In the first quarter of 2020, the Group sold 3.42% of the equity of LNC, which led the Group’s equity investment in LNC to decrease from 64.10% to 60.68%.

In the first quarter of 2020, the Group acquired 30% of the equity of AIH, which led the Group’s equity investment in AIH to increase from 70% to 100%.

In the first quarter of 2020, the Group subscribed 18% of the equity of ATR during its capital increase, which led the Group’s equity investment in ATR to increase from 42% to 60%.

39 -

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 Unappropriated earnings			March 31	March 31
			2020	Total $ 13,840 (7,865) $ 5,975 $ 8,048 (2,073) $ 5,975		2019
		LNC $ 18,394 (10,346) $ 8,048 $ 8,048 - $ 8,048	AIH $ (4,554) 2,481 $ (2,073) $ - (2,073) $ (2,073)			ATR $ (30,216) 22,487 $ (7,729) $ (7,729) - $ (7,729)

27. FINANCIAL INSTRUMENTS

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

1) Fair value hierarchy

March 31, 2020 Financial assets at FVTPL Derivative financial assets Securities listed in ROC Securities listed in other countries Securities unlisted in other countries Mutual funds	Level 1 $ - 145,439 51,509 - 5,098,682 $ 5,295,630	Level 2 $ 7,884 - - - - $ 7,884	Level 3 $ - - - 100,959 - $ 100,959	Total $ 7,884 145,439 51,509 100,959 5,098,682 $ 5,404,473 (Continued)

40 -

Financial assets at FVTOCI Investments in equity instruments at FVTOCI Securities listed in ROC Securities unlisted in ROC Securities unlisted in other countries Financial liabilities at FVTPL Derivative financial liabilities December 31, 2019 Financial assets at FVTPL Derivative financial assets Securities listed in ROC Securities listed in other countries Securities unlisted in other countries Mutual funds Financial assets at FVTOCI Investments in equity instruments at FVTOCI Securities listed in ROC Securities unlisted in ROC Securities unlisted in other countries Financial liabilities at FVTPL Derivative financial liabilities	Level 1 $ 1,531,772 - - $ 1,531,772 $ - Level 1 $ - 118,392 50,157 - 3,470,094 $ 3,638,643 $ 1,489,491 - $ 1,489,491 $ -	Level 2 $ - - - $ - $ 1,390 Level 2 $ 9,320 - - - - $ 9,320 $ - - - $ - $ 521	Level 3 $ - 19,846 127,650 $ 147,496 $ - Level 3 $ - - - 101,156 - $ 101,156 $ - 18,860 130,970 $ 149,830 $ -	Total $ 1,531,772 19,846 127,650 $ 1,679,268 $ 1,390 (Concluded) Total $ 9,320 118,392 50,157 101,156 3,470,094 $ 3,749,119 $ 1,489,491 18,860 130,970 $ 1,693,321 $ 521

41 -

March 31, 2019

Financial assets at FVTPL Derivative financial assets Securities listed in ROC Securities listed in other countries Mutual funds Financial assets at FVTOCI Investments in equity instruments at FVTOCI Securities listed in ROC Securities unlisted in ROC Securities unlisted in other countries Financial liabilities at FVTPL Derivative financial liabilities	Level 1 $ - 96,005 6,843 2,114,519 $ 2,217,367 $ 1,303,017 - - $ 1,303,017 $ -	Level 2 $ 6,711 - - - $ 6,711 $ - - - $ - $ 8,171	Level 3 $ - - - - $ - $ - 9,098 111,799 $ 120,897 $ -	Total $ 6,711 96,005 6,843 2,114,519 $ 2,224,078 $ 1,303,017 9,098 111,799 $ 1,423,914 $ 8,171

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

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

For the three months ended March 31, 2020

Financial assets Balance at January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance at March 31, 2020	Financial Assets at Fair Value Through Profit of Loss Financial Assets at Fair Value Through Other Comprehensive Income Equity Instruments Equity Instruments $ 101,156 $ 149,830 (197) - - (2,334) $ 100,959 $ 147,496	Total $ 250,986 (197) (2,334) $ 248,455

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For the three months ended March 31, 2019

Financial assets Balance at January 1, 2019 Purchase Recognized in other comprehensive income Balance at March 31, 2019	Financial Assets at Fair Value Through Other Comprehensive Income Equity Instruments $ 118,765 2,132 $ 120,897	Total $ 118,765 2,132 $ 120,897

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

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

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

The fair values of unlisted equity securities - ROC were under the asset approach. In this approach, the fair value of net assets was used to capture the present value of the expected future economic benefits.

b. Categories of financial instruments

			December 31,	December 31,
	March 31, 2020			2019	March 31, 2019
Financial assets
Fair value through profit or loss (FVTPL)
Mandatorily at FVTPL	$	5,404,473	$	3,749,119	$	2,224,078
Financial assets at amortized cost (Note 1)		13,885,002		15,253,957		15,956,509
Financial assets at FVTOCI
Equity instruments		1,679,268		1,639,321		1,423,914
Financial liabilities
Fair value through profit or loss (FVTPL)
Mandatorily at FVTPL		1,390		521		8,171
Financial assets at amortized cost (Note 2)		14,356,356		8,826,187		9,505,473

Note 1: The balances included financial assets measured at amortized cost, which comprise cash and cash equivalents, financial assets at amortized cost - current, notes receivable, trade receivables, trade receivables from related parties and other receivables.

43 -
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.

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 30. 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.

44 -

The following table details the Group’s sensitivity to a 5% increase in New Taiwan dollars (i.e., the functional currency) against the relevant foreign currencies. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 5%.

The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign exchange forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 5% change in exchange rates.

The range of the sensitivity analysis included cash and cash equivalents, trade receivables and trade payables. A positive number below indicates an increase in pre-tax profit associated with New Taiwan dollar weakening 5% against the relevant currency. For a 5% strengthening of the New Taiwan dollar against the relevant currency, there would be an equal and opposite impact on pre-tax profit, and the balances below would be negative.

Profit or loss	U.S. Dollar Impact For the Three Months Ended March 31 2020 2019 $ 21,178 (Note 1) $ 107,874 (Note 1)	Euro Impact For the Three Months Ended March 31 2020 2019 $ 57,105 (Note 2) $ 65,293 (Note 2)	Renminbi Impact
			For the Three Months Ended March 31
			2020 2019 $ 90,945 (Note 3) $ 53,088 (Note 3)

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

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

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

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

		December 31,
	March 31, 2020	2019	March 31, 2019
Fair value interest rate risk
Financial assets	$ 1,589,876	$ 1,434,765	$ 1,291,616
Financial liabilities	153,450	165,600	373,605
Cash flow interest rate risk
Financial assets	2,922,415	4,055,867	4,891,093
Financial liabilities	152,739	129,167	103,495

45 -

Sensitivity analysis

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

If interest rates had been 50 basis points higher and all other variables were held constant, the Group’s pre-tax profit for the three months ended March 31, 2020 and 2019 would have increased by $3,462 thousand and $5,984 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.

If equity prices had been 1% higher, pre-tax profit for the three months ended March 31, 2020 and 2019 would have increased by $2,979 thousand and $1,028 thousand, respectively, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the three months ended March 31, 2020 and 2019 would have increased by $16,792 thousand and $14,239 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’s sensitivity to equity prices increased mainly because of its increase in financial assets investment in 2019.

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.

46 -

3) Liquidity risk

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

The Group relies on bank borrowings as a significant source of liquidity. As of March 31, 2020, December 31, 2019 and March 31, 2019, 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.

March 31, 2020

On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 6,473,400 Lease liabilities 25,749 Variable interest rate liabilities 20,290 Fixed interest rate liabilities 29 $ 6,519,468	1-3 Months $ 1,001,830 31,020 31,546 153,495 $ 1,217,891	Over 3 Months to 1 Year $ 6,574,937 168,320 63,873 - $ 6,807,130	Over 1 Year $ - 278,914 48,068 - $ 326,982

Additional information about the maturity analysis for lease liabilities:

Less than 1 Year Lease liabilities $ 225,089	1-5 Years 5-10 Years 10-15 Years 15-20 Years $ 240,794 $ 38,120 $ - $ -	20+ Years $ -

47 -

December 31, 2019

On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 5,585,880 Lease liabilities 33,111 Variable interest rate liabilities 20,293 Fixed interest rate liabilities 165,632 $ 5,804,916	1-3 Months $ 2,277,916 51,455 541 - $ 2,329,912	Over 3 Months to 1 Year $ 666,661 117,915 75,470 - $ 860,046	Over 1 Year $ 963 270,158 45,756 - $ 316,877

Additional information about the maturity analysis for lease liabilities:

Less than 1 Year 1-5 Years Lease liabilities $ 202,481 $ 206,664 March 31, 2019 On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 6,912,073 Lease liabilities 16,605 Variable interest rate liabilities 30,172 Fixed interest rate liabilities 270 $ 6,959,120	5-10 Years 10-15 Years 15-20 Years 20+ Years $ 63,494 $ - $ - $ - 1-3 Months Over 3 Months to 1 Year Over 1 Year $ 1,182,308 $ 933,992 $ - 31,518 156,993 445,201 275 21,727 64,165 250,741 125,085 - $ 1,464,842 $ 1,237,797 $ 509,366

Additional information about the maturity analysis for lease liabilities:

Less than 1 Year Lease liabilities $ 205,116	1-5 Years 5-10 Years 10-15 Years 15-20 Years $ 317,242 $ 127,959 $ - $ -	20+ Years $ -

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.

48 -

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

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

March 31, 2020

On Demand or
Less than
1 Month
1-3 Months
Over 3 Months
to 1 Year
Gross settled
Foreign exchange
forward contracts
Inflows
$ 367,457
$ 506,139
$ 113,680

Outflows

364,956

504,292

111,534

$ 2,501
$ 1,847
$ 2,146

December 31, 2019
On Demand or
Less than
1 Month
1-3 Months
Over 3 Months
to 1 Year
Gross settled
Foreign exchange
forward contracts
Inflows
$ 330,202
$ 430,604
$ 101,721

Outflows

325,163

427,666

100,899

$ 5,039
$ 2,938
$ 822

March 31, 2019
On Demand or
Less than
1 Month
1-3 Months
Over 3 Months
to 1 Year
Gross settled
Foreign exchange
forward contracts
Inflows
$ 299,707
$ 441,062
$ 227,528

Outflows

301,936

440,601

227,220

$ (2,229)
$ 461
$ 308

Total
$ 987,276

980,782
$ 6,494
Total
$ 862,527

853,728
$ 8,799
Total
$ 968,297

969,757
$ (1,460)

49 -
c) Financing facilities

			December 31,	December 31,
	March 31, 2020			2019	March 31, 2019
Unsecured bank overdraft facilities
reviewed annually and payable at
call:
Amount used	$	266,025	$	250,678	$	423,872
Amount unused		6,821,825		6,741,182		6,747,868
	$	7,087,850	$	6,991,860	$	7,171,740
Secured bank overdraft facilities:
Amount used	$	40,164	$	44,089	$	53,004

28. TRANSACTIONS WITH RELATED PARTIES

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

a. Names and categories of related parties

Name Related Party Category Axiomtek Co., Ltd. Associate AIMobile Co., Ltd. Associate Deneng Scientific Research Co., Ltd. Associate Winmate Inc. Associate AzureWave Technologies, Inc. Associate i-Link Co., Ltd. Associate DotZero Co., Ltd. Associate Mildex Optical Inc. Associate Nippon RAD Inc. Associate Shanghai Yanle Co., Ltd. Associate Information Technology Total Services Co., Ltd. Associate Hwacom Systems Inc. Associate Smasoft Technology Co., Ltd. Associate Impelex Data Transfer Co., Ltd. Associate VSO Electronics Co., Ltd. (“VSO”) Associate VSO Electronics (Suzhou) Co., Ltd. Associate K&M Investment Co., Ltd. Other related party AIDC Investment Corp. Other related party Advantech Foundation Other related party

b. Sales of goods

Related Party Categories/Name Associates	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 28,580	2019 $ 23,179

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c. Purchases of goods

			For the Three Months Ended	For the Three Months Ended
			March 31
Related Party Categories/Name			2020	2019
Associates			$ 95,625	$ 42,920
Receivables from related	parties (excluding loans to related parties)
	Related Party	March 31,	December 31,	March 31,
Line Items	Categories/Name	2020	2019	2019
Trade receivables from	Associates	$ 21,273	$ 20,174	$ 20,166
related parties

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

The outstanding trade receivables from related parties are unsecured. For the three months ended March 31, 2020 and 2019, no impairment loss was recognized for trade receivables from related parties.

e. Other receivables from related parties

	Related Party	March 31,	March 31,	December 31,	December 31,	March 31,	March 31,
Line Items	Categories/Name		2020		2019		2019
Other receivables	Associates	$	83	$	-	$	-
	Other related parties		-		29		-
		$	83	$	29	$	-
Payables to related parties (excluding loans from		related	parties)
	Related Party	March 31,		December 31,		March 31,
Line Items	Categories/Name		2020		2019		2019
Trade payables	Associates	$	57,489	$	43,367	$	37,206
Other liabilities	Other related parties	$	-	$	7,965	$	-

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

The outstanding trade payables to related parties are unsecured.

g. Prepayments to related parties

	Related Party	March 31,	December 31,	March 31,	March 31,
Line Items	Categories/Name	2020	2019		2019
Other current assets	Associates	$ 23,347	$ 25,470	$	-

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h. Other transactions with related parties

Related Party Category/Name Research and development expenses Associates Selling and marketing expenses Associates	Operating Expenses	Operating Expenses	Operating Expenses
	For the Three Months Ended March 31
		2020 $ 360 $ 4	2019 $ 160 $ -

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 Associates Other related parties Others Other related parties	Other Income	Other Income	Other Income
	For the Three Months Ended March 31
		2020 $ 120 15 $ 135 $ 676	2019 $ - 15 $ 15 $ 676

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

h. Compensation of key management personnel

Short-term employee benefits Post-employment benefits Share-based payments	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 11,336 40 8,523 $ 19,899	2019 $ 11,290 39 10,411 $ 21,740

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

52 -

29. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

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

Property, plant and equipment	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2020 $ 62,100	2019 $ 67,068

30. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

March 31, 2020

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 122,010 30.225 (USD:NTD) RMB 527,818 4.255 (RMB:NTD) EUR 24,055 33.240 (EUR:NTD) USD 15,881 7.1034 (USD:RMB) Financial liabilities Monetary items USD 83,891 30.225 (USD:NTD) USD 38,488 7.1034 (USD:RMB) RMB 150,863 4.255 (RMB:NTD)	Carrying Amount $ 3,687,752 2,245,866 799,588 480,002 $ 7,213,208 $ 2,535,605 1,163,300 641,922 $ 4,340,827

53 -

December 31, 2019

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 169,388 29.980 (USD:NTD) RMB 608,066 4.3050 (RMB:NTD) USD 30,704 6.9640 (USD:RMB) EUR 23,196 33.590 (EUR:NTD) Financial liabilities Monetary items USD 99,339 29.980 (USD:NTD) RMB 271,690 4.3050 (RMB:NTD) USD 37,132 6.9640 (USD:RMB)	Carrying Amount $ 5,078,252 2,617,724 920,508 779,154 $ 9,395,638 $ 2,978,183 1,169,625 1,113,217 $ 5,261,025

March 31, 2019

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 206,550 30.82 (USD:NTD) RMB 488,040 4.580 (RMB:NTD) EUR 28,349 34.61 (EUR:NTD) USD 15,813 6.7293 (USD:RMB) Financial liabilities Monetary items USD 126,877 30.82 (USD:NTD) RMB 167,961 4.580 (RMB:NTD) USD 24,384 6.7293 (USD:RMB)	Carrying Amount $ 6,365,871 2,235,209 981,159 487,355 $ 10,069,594 $ 3,910,349 769,257 751,514 $ 5,431,120

For the three months ended March 31, 2020 and 2019, realized and unrealized net foreign exchange gains (or losses) were $(2,291) thousand and $69,744 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.

54 -

31. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and b. information on investees:
1) Financing provided to others. (Table 1)
2) Endorsement/guarantee provided. (Table 2)
3) Marketable securities held. (Table 3)
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital. (Table 4)
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in
- capital. (None)
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital. (None)
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the
- paid-in capital. (Table 5)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 6)
9) Transactions of financial instruments. (Notes 7 and 27)
10) Significant transactions between the Company and subsidiaries. (Table 10)
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)
d. Information of major shareholders:

The following is the information of major shareholders: name of major shareholder, number of shares owned and percentage of ownership of shareholders whose percentage of ownership of shareholders is higher than 5%. (Table 9)

55 -

32. SEGMENT INFORMATION

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

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

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

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

Segment Revenue and Results

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

Industrial Interest of Thing Services (IIoT) For the three months ended March 31, 2020 Revenue from external customers $ 3,438,934 Inter-segment revenue - Segment revenue $ 3,438,934 Eliminations $ - Consolidated revenue - Segment income $ 641,469 Other revenue Other income and expense Finance costs Share of profits of associates for using the equity method Profit before tax (continuing operations) For the three months ended March 31, 2019 Revenue from external customers $ 3,724,205 Inter-segment revenue - Segment revenue $ 3,724,205 Eliminations $ - Consolidated revenue - Segment income $ 858,618 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)	Embedded Boards and Design-in Services (EIoT) $ 2,885,304 - $ 2,885,304 $ - - $ 385,929 $ 3,110,924 - $ 3,110,924 $ - - $ 496,686	Allied Design Manufacture Services (Allied DMS) $ 2,668,858 - $ 2,668,858 $ - - $ 337,398 $ 2,970,837 - $ 2,970,837 $ - - $ 427,537	Intelligent Services (SIoT) $ 986,006 - $ 986,006 $ - - $ 61,657 $ 1,145,359 - $ 1,145,359 $ - - $ 92,764	Global Customer Services (AGS & APS) $ 1,266,261 - $ 1,266,261 $ - - $ 145,412 $ 1,330,210 - $ 1,330,210 $ - - $ 170,423	Others $ 26,826 - $ 26,826 $ - - $ 81,757 $ 19,055 - $ 19,055 $ - - $ -	Total $ 11,272,189 - 11,272,189 - 11,272,189 1,653,622 30,775 (39,613 ) (6,331 ) (17,907) $ 1,620,566 $ 12,300,590 - 12,300,590 - 12,300,590 2,046,028 34,599 (194,113 ) 163,007 (6,175 ) 4,949 $ 2,048,295

56 -

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.

57 -

TABLE 1

ADVANTECH CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE THREE MONTHS ENDED MARCH 31, 2020 (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	LNC	LNC Dong Guan	Trade receivables - related parties	Yes	$ 70,000	$ 70,000	$ 23,065	-	Short-term financing	$ -	Financing need	-	None	None	$ 31,956 (Note D)	$ 127,823 (Note D)
2	Advantech Corporate Investment	The Company	Trade receivables - related parties	Yes	1,000,000	1,000,000	-	1.00	Short-term financing	-	Financing need	-	None	None	1,353,017 (Note E)	1,353,017 (Note E)
3	AAC (BVI)	ATJ	Trade receivables - related parties	Yes	177,000 (JPY 600,000 thousand )	-	-	0.55	Short-term financing	-	Financing need	-	None	None	2,727,277 (Note C)	2,727,277 (Note C)

Note A: Investee companies are numbered sequentially from 1.

Note B: Translated based on the exchange rate as of March 31, 2020 was JPY1=NT$0.279.

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

Note E: The financing limit for each borrower and for the aggregate financing were both 40%, of the Advantech Corporate Investment’s net asset values, and were supervised by the Company.

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.

58 -

TABLE 2

ADVANTECH CO., LTD. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED FOR THE THREE MONTHS ENDED MARCH 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorser/ Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note A)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collaterals	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Maximum Collateral/ Guarantee Amounts Allowable (Note B)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Relationship
0	The Company	ANA AAC (BVI) Advantech Corporate Investment AJP ATJ AKST AKMC ACISM SIoT (Cayman) B+B ABR	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762	$ 907,500 (US$ 30,000 thousand) 302,500 (US$ 10,000 thousand) 302,500 (US$ 10,000 thousand) 302,500 (JPY 500,000 thousand) 279,000 (JPY1,000,000 thousand) 181,500 (US$ 6,000 thousand) 181,500 (US$ 6,000 thousand) 151,250 (US$ 5,000 thousand) 302,500 (US$ 10,000 thousand) 151,250 (US$ 5,000 thousand) 45,375 (US$ 1,500 thousand)	$ 906,750 (US$ 30,000 thousand) 302,250 (US$ 10,000 thousand) 302,250 (US$ 10,000 thousand) 139,500 (JPY 500,000 thousand) 279,000 (JPY1,000,000 thousand) 181,350 (US$ 6,000 thousand) 181,350 (US$ 6,000 thousand) 151,125 (US$ 5,000 thousand) 302,250 (US$ 10,000 thousand) 151,125 (US$ 5,000 thousand) 45,338 (US$ 1,500 thousand)	$ - - - 41,850 (JPY 150,000 thousand) 111,600 (JPY 400,000 thousand) 62,575 (US$ 2,070 thousand) - - - - -	$ - - - - - - - - - - -	3.22 1.07 1.07 0.50 0.99 0.64 0.64 0.54 1.07 0.54 0.16	$ 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286	Y Y Y Y Y Y Y Y Y Y Y	N N N N N N N N N N N	N N N N N N Y N N N N

(Continued)

59 -

No.	Endorser/ Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note A)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collaterals	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Maximum Collateral/ Guarantee Amounts Allowable (Note B)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Relationship
		A-SIoT AVN Cermate (Taiwan) Cermate (Shenzhen) ACZ ATR Advanixs Corp. AAU Advantech Intelligent Service AKR AIH ARU ACI IOT Investment Fund-I Corporation AMY	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	$ 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762 2,815,762	$ 33,290 (EUR 1,000 thousand) 30,250 (US$ 1,000 thousand) 30,250 (US$ 1,000 thousand) 30,250 (US$ 1,000 thousand) 15,125 (US$ 500 thousand) 15,125 (US$ 500 thousand) 15,125 (US$ 500 thousand) 6,050 (US$ 200 thousand) 90,675 (US$ 3,000 thousand) 1,513 (US$ 50 thousand) 90,675 (US$ 3,000 thousand) 30,225 (US$ 1,000 thousand) 6,045 (US$ 200 thousand) 3,023 (US$ 100 thousand)	$ 33,240 (EUR 1,000 thousand) 30,225 (US$ 1,000 thousand) 30,225 (US$ 1,000 thousand) 30,225 (US$ 1,000 thousand) 15,113 (US$ 500 thousand) 15,113 (US$ 500 thousand) 15,113 (US$ 500 thousand) 6,045 (US$ 200 thousand) 90,675 (US$ 3,000 thousand) 1,511 (US$ 50 thousand) 90,675 (US$ 3,000 thousand) 30,225 (US$ 1,000 thousand) 6,045 (US$ 200 thousand) 3,023 (US$ 100 thousand)	$ - - - - - - - - - - - - - -	$ - - - - - - - - - - - - - -	0.12 0.11 0.11 0.11 0.05 0.05 0.05 0.02 0.32 0.01 0.32 0.11 0.02 0.01	$ 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286 8,447,286	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 Y N N N N N N N N N N

(Continued)

60 -

(Concluded)

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

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

Note C: The exchange rates as of March 31, 2020 were US$1= NT$30.225, EUR1= NT$33.24, and JPY1=NT$0.279.

Note D: The latest net equity is from the financial statements for the three months ended March 31, 2020.

61 -

TABLE 3

ADVANTECH CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE THREE MONTHS ENDED MARCH 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		March 31, 2020	March 31, 2020		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
The Company Advantech Corporate Investment	Share ASUSTek Computer Inc. Allied Circuit Co., Ltd. Fund Mega Diamond Money Market Capital Money Market FSITC Money Market FSITC Taiwan Money Market Share Contec GSD Technologies Co., Ltd. WT Microelectronics Co., Ltd. Lelon Electronics Corp. Yuan High-Tec Development Co., Ltd. eGalax_Empia Technology Corp. Nuvoton Technology Corp. Lanner Electronics Inc. Polytronics Technology Corp. Posiflex Technology Inc. Phison Electronics Corp. ISI TRMB LTRX ALGN China Mobile Ltd. Maxnerva Technology Services Ltd. Allied Circuit Co., Ltd. BiosenseTek Corp. BroadTec System Inc. Juguar Technology Taiwan DSC PV Ltd., iSAP Solution Corp.	- - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Financial assets at fair value through other comprehensive income or loss - non-current Same as above Financial assets at fair value through profit or loss - current Same as above Same as above Same as above Financial assets at fair value through profit or loss - current Same as above Same as above Same as above Same as above 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 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 Same as above Same as above Same as above Financial assets at fair value through other comprehensive income or loss - non-current	4,739,461 1,200,000 116,944,579 16,650,648 1,117,303 91,762,736 16,000 463,000 495,000 250,000 249,000 293,000 516,799 421,000 75,000 97,000 76,000 640 8,490 46,000 593 74,000 3,812,000 2,501,000 37,500 225,000 500,000 1,600 942,850	$ 969,220 182,400 1,474,485 270,042 200,364 1,411,687 5,272 27,780 16,880 6,850 16,185 12,042 16,072 19,282 4,147 7,353 18,848 9,579 8,168 2,725 3,118 16,629 6,018 380,152 - 3,437 7,415 - 8,994	0.64 2.41 - - - - 0.24 1.36 0.08 0.19 0.74 0.49 0.18 0.36 0.09 0.13 0.04 - - 0.17 - - 0.58 5.03 1.79 7.50 16.67 3.20 15.00	$ 969,220 182,400 1,474,485 270,042 200,364 1,411,687 5,272 27,780 16,880 6,850 16,185 12,042 16,072 19,282 4,147 7,353 18,848 9,579 8,168 2,725 3,118 16,629 6,018 380,152 - 3,437 7,415 - 8,994	Note A Note A Note B Note B Note B Note B Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note A Note C Note C Note C Note C Note C

(Continued)

62 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		March 31, 2020	March 31, 2020		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
Advanixs Corporate Advantech Intelligent Service AdvanPOS SioT (Cayman) Advantech Innovative Design Co., Ltd. Cermate (Taiwan) AiSC Yun Yan, Wu-Lian Co., Ltd. Huan Yan, Jhih-Lian Co., Ltd.	Fund Mega Diamond Money Market Taishin 1699 Money Market FSITC Taiwan Money Market FSITC Money Market Mutual Fund CBC Capital Fund Jih Sun Money Market Mega Diamond Money Market Fund Jih Sun Money Market Fund Mega Diamond Money Market Fund FSITC Taiwan Money Market Taishin 1699 Money Market Fund Capital Money Market Fund Mega Diamond Money Market Mutual Fund Shanghai Shangchuang Xinwei Investment Management Co., Ltd. Fund FSITC Money Market Fund FSITC Money Market	- - - - - - - - - - - - - - - -	Financial assets at fair value through profit or loss - current Same as above Same as above Same as above Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - current Same as above Same as above Same as above 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 Financial assets at fair value through profit or loss - current Same as above	889,841 29,087,859 31,716,678 279,625 - 6,266,221 4,541,197 1,257,444 999,130 15,901,726 25,064,061 625,517 373,960 - 27,649 54,616	$ 11,219 395,676 487,933 50,145 100,959 93,356 57,257 18,734 12,597 244,634 340,941 10,145 4,715 127,650 4,958 9,794	- - - - - - - - - - - - - 8.43 - -	$ 11,219 395,676 487,933 50,145 100,959 93,356 57,257 18,734 12,597 244,634 340,941 10,145 4,715 127,650 4,958 9,794	Note B Note B Note B Note B Note C Note B Note B Note B Note B Note B Note B Note B Note B Note C Note B Note B

Note A: Market value was based on the closing price on March 31, 2020.

Note B: Market value was based on the net asset values of the open-ended mutual funds on March 31, 2020.

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

(Concluded)

63 -

TABLE 4

ADVANTECH CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE THREE MONTHS ENDED MARCH 31, 2020 (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 Taiwan Money Market Fund Mega Diamond Money Market	Financial assets at fair value through profit or loss - current Same as above Same as above	- - -	- - -	74,093,066 32,562,860 24,633,086	$ 931,183 500,000 310,158	42,851,513 59,199,876 -	$ 540,000 910,000 -	- - 24,633,086	$ - - 310,412	$ - - 310,158	$ - - 254	116,944,579 91,762,736 -	$ 1,471,183 1,410,000 -

64 -

TABLE 5

ADVANTECH CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE THREE MONTHS ENDED MARCH 31, 2020

(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 AEU AJP ACN AKR ANA Advanixs Corp. SIoT (Cayman) ANA	AEU AJP ACN AKR ANA Advanixs Corp. SIoT (Cayman) AKMC The Company The Company The Company The Company The Company The Company The Company The Company ANA SIoT (Cayman)	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent company Parent company Parent company Parent company Parent company Parent company Parent company Parent company Related enterprise Related enterprise	Sale Sale Sale Sale Sale Sale Sale Purchase Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Purchase	$ 1,071,018 167,143 1,244,711 226,750 1,912,257 149,267 281,436 (2,062,306) 2,062,306 (1,071,018) (167,143) (1,244,711) (226,750) (1,912,257) (149,267) (281,436) 208,999 (208,999)	14.40 2.25 16.74 3.05 25.71 2.01 3.78 42.45 94.16 66.49 86.21 76.69 59.66 69.25 99.21 66.51 32.6 0.08	30 days after month-end 60-90 days 45 days after month-end 60 days after invoice date 45 days after month-end 60-90 days Usual trade terms Usual trade terms Usual trade terms 30 days after month-end 60-90 days 45 days after month-end 60 days after invoice date 45 days after month-end 60-90 days Usual trade terms Usual trade terms Usual trade terms	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	$ 973,367 69,808 1,496,358 78,423 927,751 49,639 217,338 (1,045,892) 1,045,892 (973,367) (69,808) (1,496,358) (78,423) (927,751) (49,639) (217,338) 116,234 (116,234)	17.39 1.25 26.73 1.40 16.57 0.89 3.88 26.25 92.71 68.65 69.79 82.62 46.91 65.26 97.13 78.06 31.89 0.08	Note A

Note A: Unrealized gain for the period was $6,136 thousand.

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

65 -

TABLE 6

ADVANTECH CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE THREE MONTHS ENDED MARCH 31, 2020

(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) AKMC ANA The Company LNC Dong Guan ANA	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent company Related enterprise Related enterprise	$ 1,496,358 975,409 217,453 143,692 930,780 1,045,892 223,164 116,234	3.21 4.1 4.3 Note 1 5.71 7.4 1 9.45	$ - - - - - - - -	- - - - - - - -	$ 629,739 145,276 - 154,883 - 563,277 38,755 94,078	$ - - - - - - - -

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

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

66 -

TABLE 7

ADVANTECH CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE THREE MONTHS ENDED MARCH 31, 2020 (In Thousands of New Taiwan Dollars/Foreign Currency)

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of March 31, 2020	Balance as of March 31, 2020	Balance as of March 31, 2020	Net Income (Loss) of the Investee for the Period	Investment Gain (Loss) for the Period	Note
				March 31, 2020	December 31, 2019	Shares	Percentage of Ownership	Carrying Value
The Company AKR AJP Advantech Corporate Investment	AAC (BVI) ATC Advanixs Corporate Advantech Corporate Investment Axiomtek AdvanPOS LNC AMX AEUH ASG ATH AAU AJP AMY AKR ABR Advantech Innovative Design Co., Ltd. AiST B+B AIN AIMobile Co., Ltd. AKST Winmate AVN Nippon RAD Inc. ARU ATJ ATR AIL 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 Inc. i-Link Co., Ltd. DotZero Co., Ltd	BVI BVI Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taichung, Taiwan Mexico Helmond, the Netherlands Techplace, Singapore Thailand Sydney, Australia Tokyo, Japan Malaysia Seoul, Korea Sao Paulo, Brazil Taipei, Taiwan Taipei, Taiwan Delaware, USA India Taipei, Taiwan Gangwon-do, Korea Taipei, Taiwan Hanoi, Vietnam Tokoyo, Japan Moscow Nogatashi, Japan Turkey Israel Gangwon-do, Korea Nogatashi, 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 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 Sale of industrial network communications systems 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 2,900,000 249,059 266,192 286,415 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 8,653 55,579 184,649 71,500 18,095 150,000 578,563 5,000 5,000 49,733 9,126 8,100	$ 2,332,397 998,788 226,000 2,900,000 249,059 266,192 304,865 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 8,653 55,579 184,649 71,500 18,095 150,000 578,563 5,000 5,000 49,733 9,237 8,100	74,623,834 33,850,000 10,000,000 300,000,000 20,537,984 1,000,000 18,205,000 - 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 1 500,000 260,870 100 22,023 286,100 5,500,000 658,000 15,000,000 29,599,000 500,000 500,000 154,310 845,000 490,000	100 100 100 100 24.89 100 60.68 100 100 100 51 100 100 100 100 80 100 100 60 99.99 45 76 16.62 60 16.08 100 50 60 100 24 28.61 55 39.69 17.86 19.67 50 50 2.92 21.13 27	$ 6,456,364 3,768,681 260,697 3,381,634 679,146 297,249 409,526 625 896,434 116,597 59,672 15,976 413,696 64,664 327,150 56,897 10,153 96,535 1,712,821 14,566 57,510 (33,579) 562,035 60,625 258,686 4,136 386,474 49,630 2,894 - 226,473 116,219 13,643 163,092 486,272 4,993 2,596 45,512 6,061 6,127	$ 105,973 (72,396) 15,781 (74,423) 67,384 17 (16,168) 103 (46,806) 4,289 1,829 938 4,894 1,465 13,093 (3,633) 58 (317) 33,925 1,339 (20,201) (1,642) 36,187 1,735 17,663 (6,732) 6,638 3,524 (5,898) (1,642) 6,638 (4,443) (934) (11,605) (117,519) 12 6 17,663 (3,824) (412)	$ 102,366 (74,616) 15,781 (74,463) 16,607 17 (10,391) 103 (45,433) 4,482 945 869 4,285 1,457 13,026 (2,731) 58 (317) 22,074 1,251 (9,090) (1,655) 9,023 (966) 5,034 (6,732) 2,273 1,224 (5,898) - 1,899 (2,484) (371) (2,072) (23,113) 6 3 - (878) (111)	Subsidiary Subsidiary Subsidiary Subsidiary Equity-meth investee Subsidiary Subsidiary 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 Subsidiary Equity-meth investee Equity-meth investee Equity-meth investee Subsidiary Subsidiary Equity-meth investee Equity-meth investee Equity-meth investee

(Continued)

67 -

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of March 31, 2020	Balance as of March 31, 2020	Balance as of March 31, 2020	Net Income (Loss) of the Investee for the Period	Investment Gain (Loss) for the Period	Note
				March 31, 2020	December 31, 2019	Shares	Percentage of Ownership	Carrying Value
ATC AAC (BVI) SIoT (Cayman) ANA AEUH ASG Cermate (Taiwan) LNC Better Auto B+B BBIE	Mildex Optiocal Inc. Information Technology Total Service Co., Ltd. ACI IOT Investment Fund-I Corporation ACISM Samsoft Technology Co., Ltd. Impelex Data Transfer Co., Ltd. VSO Electronics Co., Ltd. Hwacom Systems Inc. ATC (HK) ANA AAC (HK) ADB SIoT (Cayman) A-SIoT AIH B+B AEU APL ATH AID LandMark Better Auto Famous Now BBIE B+B (CZ)	Kaohsiung, Taiwan Taipei, Taiwan Taipei, Taiwan Samoa Taipei, Taiwan Taichung, Taiwan Taipei, Taiwan Taipei, Taiwan Hong Kong Sunnyvale, USA Hong Kong Dubai Cayman Munich, Germany Taipei, Taiwan Delaware, USA Eindhoven, The Netherlands Warsaw, Poland Thailand Indonesia BVI BVI BVI Ireland Czech Republic	Manufacturing of electronic parts Service of electronic information Investment holding company General investment Production and sale of electronics equipment Production and sale of electronics equipment Production and sale of electronics equipment Computer systems service Investment and management service Sale and fabrication of industrial automation products Investment and management service Sale of industrial network communications systems 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 Manufacturing automation	$ 202,948 147,444 238,000 18,214 15,000 10,000 120,000 357,119 1,212,730 504,179 539,146 - US$ 50,000 522,719 12,254 1,328,004 431,963 14,176 7,537 4,797 28,200 244,615 US$ 4,000 US$ 39,481 -	$ 202,948 147,444 238,000 18,214 15,000 - - 357,119 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 -	15,710,000 5,084,273 23,800,000 1 170,455 2,500,000 28,000,000 24,575,000 57,890,679 10,952,606 15,230,001 - 30,000,000 1 1,100,000 153,644 32,315,215 7,030 49,000 300,000 972,284 7,900,000 1 - -	15.01 18.61 79.30 100 20 40 14.29 19.99 100 100 100 100 100 100 100 40 100 100 49 100 100 100 100 100 100	$ 181,740 159,383 208,510 12,794 14,037 9,496 122,449 374,771 3,840,681 2,872,119 2,080,195 2,551 1,867,924 520,685 7,626 1,162,413 1,019,542 33,231 58,431 13,201 103,135 12,544 19,973 65,874 257,643	$ (21,260) 25,312 (41,602) (665) (4,817) (2,521) 18,110 (76,217) (72,334) 34,030 12,107 117 59,718 17,304 (2,086) 33,925 (47,528) 1,052 1,829 (1,541) 1,540 (10,168) (10,168) 308 10,277	$ (3,191) 4,710 (33,004) (665) (964) (504) 2,588 (13,804) (74,554) 33,306 13,309 117 56,389 18,316 (1,654) 13,569 (46,858) 1,000 908 (1,318) 2,075 (10,845) (10,168) - - 10277	Equity-meth investee Equity-meth investee Subsidiary Subsidiary Equity-meth investee Equity-meth investee Equity-meth investee Equity-meth investee 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 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)

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TABLE 8

ADVANTECH CO., LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA FOR THE THREE MONTHS ENDED MARCH 31, 2020 (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, 2020	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of March 31, 2020	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of March 31, 2020	Accumulated Inward Remittance of Earnings as of March 31, 2020
					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$ 8,000 thousand US$ 1,000 thousand US$ 4,000 thousand RMB 2,000 thousand US$ 520 thousand	Indirect Indirect Indirect Indirect Indirect Indirect Indirect	$ 1,127,393 (US$ 37,300 thousand) 161,160 (US$ 5,332 thousand) 241,800 (US$ 8,000 thousand) (Note C) 96,539 (US$ 3,194 thousand) 9,309 (US$ 308 thousand) 17,289 (US$ 572 thousand)	$ - - - - - - -	$ - - - - - - -	$ 1,127,393 (US$ 37,300 thousand) 161,160 (US$ 5,332 thousand) 241,800 (US$ 8,000 thousand) (Note C) 96,539 (US$ 3,194 thousand) 9,309 (US$ 308 thousand) 17,289 (US$ 572 thousand)	$ (69,964) 16,642 (5,395) 3 (10,168) 1,020 622	100 100 100 100 100 90 100	$ (74,554) 17,851 (5,395) 3 (10,153) 1,453 622	$ 3,890,912 1,437,561 616,618 28,482 19,968 77,343 33,648	$ - 339,487 (US$ 11,232 thousand) - - - 40,087 (US$ 717 thousand) (RMB 4,328 thousand) -

(Continued)

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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, 2020	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of March 31, 2020	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of March 31, 2020	Accumulated Inward Remittance of Earnings as of March 31, 2020
							Outflow	Inflow
Advantech Service-IoT (Shanghai) Co., Ltd. (“SIoT (China)”) Shanghai Yanlo Co., Ltd. (“Yanlo”) Tianjin Anjie IOT Science and Technology Co., Ltd. (“Anjie”) GSD Environmental Technology Co., Ltd. (“GSD”)	Development, consulting and services in intelligent technology Retail of intelligent technology Operation and maintenance for intelligent general equipment, and consulting service for comprehensive energy issues Development, consulting and services in environmental technology		RMB 15,000 thousand RMB 2,200 thousand RMB 3,000 thousand RMB 10,000 thousand	Indirect Other Other Indirect		(Note F) (Note G) (Note G) $ 17,621 (US$ 583 thousand)	$ - - - -	$ - - - -	(Note F) (Note G) (Note G) 17,621 (US$ 583 thousand)	$ (3,549) (2,457) - (1,663)	100 45 20 40	$ (3,532) (1,106) - (665)	$ 32,278 1,964 2,552 12,794	$ - - - -

Accumulated Investment in		Investment Amounts
Mainland China as of March 31, 2020		Authorized by Investment Commission, MOEA			Allowable Limit on Investment
$1,677,155 (US$55,489 thousand) (Note D)		$2,873,642 (US$95,075 thousand)			$17,183,911 (Note J)

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

Note C: Remittance by ACN.

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

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

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

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

(Continued)

70 -

(Concluded)

Note H: Capital used in investment in GSD Environmental Technology Co., Ltd. is still not yet approved by Investment Commission, MOEA

Note I: The exchange rate was US$1=NT$30.225 and RMB1=NT$4.255.

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.

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TABLE 9

ADVANTECH CO., LTD. AND SUBSIDIARIES

INFORMATION OF MAJOR SHAREHOLDERS FOR THE THREE MONTHS ENDED MARCH 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Name of Major Shareholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
ASUSTek Computer Inc. K&M Investment Co., Ltd. AIDC Investment Corp.	100,628,870 83,073,163 82,093,182	14.36 11.85 11.71

Note A: The percentage of ownership of major shareholders included in the table should be more than 5%, which was calculated based on the total number of ordinary shares, preference shares and treasury shares owned in the last trading day of the quarter that were traded in and registered electronically and was prepared by the Taiwan Depository & Clearing Corporation. In addition, the share capital and the actual number of traded shares with the completion of electronic registration stated in the consolidated financial statements might vary due to different calculation basis.
72 -

TABLE 10

ADVANTECH CO., LTD. AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS BETWEEN ADVANTECH CO., LTD. AND SUBSIDIARIES FOR THE THREE MONTHS ENDED MARCH 31, 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Number (Note A)	Company Name	Counterparty	Flow of Transaction (Note A)		Transaction Details	Transaction Details
				Financial Statement Account	Amount	Payment Terms	% to Consolidated Assets/Revenue (Note C)
0	Advantech Co., Ltd.	AAU ACN ACN AEU AEU AJP AKR ANA ANA ASG B+B SIoT (Cayman) Advanixs Corp.	1 1 1 1 1 1 1 1 1 1 1 1 1	Sales revenue Sales revenue Receivables from related parties Sales revenue Receivables from related parties Sales revenue Sales revenue Sales revenue Receivables from related parties Sales revenue Sales revenue Sales revenue Sales revenue	$ 57,913 1,244,711 1,496,358 1,071,018 973,367 167,143 226,750 1,912,257 927,751 57,129 61,877 281,436 149,267	Normal Normal 45 days EOM Normal 30 days EOM Normal Normal Normal 45 days EOM Normal Normal Normal Normal	1 11 3 10 2 1 2 17 2 1 1 2 1
1	ACZ	AEU	3	Sales revenue	85,975	Normal	1
2	AKMC	The Company The Company ACN	2 2 3	Sales revenue Receivables from related parties Sales revenue	2,062,306 1,045,892 57,755	Normal 60 days EOM Normal	18 2 1
3	SIoT (Cayman)	AEU ANA A-SIoT	3 3 3	Sales revenue Sales revenue Sales revenue	68,041 208,999 85,757	Normal Normal Normal	1 2 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 March 31, 2019, while revenues, costs and expenses are shown as a percentage to consolidated total operating revenues for the three months ended March 31, 2020.

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

73 -

AI assistant

Advantech — Interim / Quarterly Report 2020

52053_rns_2020-11-06_afabc746-b34a-4d4b-9d4a-a199bd180fe9.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

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

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

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

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed after Restatement, 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) Amendments to IFRS 3 “Definition of a Business”

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Key Sources of Estimation Uncertainty

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

9. FINANCIAL ASSETS AT AMORTIZED COST

10. NOTES RECEIVABLE AND TRADE RECEIVABLES

Trade Receivables

March 31, 2020

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. 2020

15. LEASE ARRANGEMENTS

b. Lease liabilities

c. Other lease information

16. GOODWILL

17. BORROWINGS

a. Short-term borrowings

18. OTHER LIABILITIES

19. RETIREMENT BENEFIT PLANS

20. EQUITY

Ordinary shares

b. Capital surplus

d. Special reserves

e. Other equity items

2) Unrealized gain or loss on Financial Assets at FVTOCI

f. Non-controlling interests

21. NET PROFIT FROM CONTINUING OPERATIONS

a. Finance costs

d. Employees’ compensation and remuneration of directors and supervisors

22. INCOME TAXES

c. Income tax assessments

23. EARNINGS PER SHARE

Unit: NT$ Per Share

Net Profit for the Period

24. SHARE-BASED PAYMENT ARRANGEMENTS

Issuance in 2018

25. BUSINESS COMBINATIONS

d. Non-controlling interests

g. Impact of acquisitions on the results of the Group

26. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

27. FINANCIAL INSTRUMENTS

March 31, 2019

For the three months ended March 31, 2019

Sensitivity analysis

Sensitivity analysis

Advantech Interim / Quarterly Report 2020