Operational Performance and Corporate Governance Structure

Since its establishment in 1983, Advantech has focused on the global IIoT field, providing corporate customers with a full range of services such as software and hardware system integration, customized design services, and global technical support. And the vision of the corporate brand of “Enabling an intelligent planet”.

Advantech is a Taiwan listed company and has been listed on the Taiwan Stock Exchange since 1999 (TWSE: 2395); Headquartered in Neihu Science Park, Taipei, Taiwan, our business base spans 27 countries in Europe, America, Asia, and other regions. Our three major manufacturing centers are located in Linkou (Taiwan), Kunshan (China), and Fukuoka (Japan). Furthermore, we have built four logistics management centers and 21 local service centers to provide global customers with real-time and comprehensive integrated services via a complete service system.

Advantech and its affiliated companies focus on the manufacturing, assembly, sales, and after-sales service of industrial computer-related products (see Organization chart in 2.1.2 for details). The major 3 business groups include: Industrial IoT Business Group, Embedded IoT Platform Business Group, and Service IoT Business Group, providing customers with diversified application solutions such as smart manufacturing, smart healthcare, smart energy, transportation infrastructure, communication network security, and smart logistics. To embrace the global trends of the

IoT, AI, and ESG sustainability, Advantech has introduced software and hardware solutions centered around WISE-IoT, the industrial IoT cloud platform, to help partners and customers in connecting the industrial chain. Moreover, we actively work with various industrial partners to "co-create" an industrial ecosystem to accelerate the realization of the goal of industrial intelligence.

The industries that Advantech and its affiliated companies work on are mainly in the manufacture, assembly, sales and after-sales service of industrial computerrelated products. Some affiliated companies invest in related technologies and business activities connected to the aforementioned products to form their business scopes. The organization chart of the Company is shown in Figure.

An evaluation was conducted by Interbrand, an internationally renowned brand evaluation agency commissioned by the Industrial Development Bureau of the Ministry of Economic Affairs.

Please refer to the website: Internal Audit, Advantech Code of Ethics and Business Conduct , Guideline for Insider Trading revention Management

Advantech is committed to optimizing the functions of the Board of Directors and has established a comprehensive director selection system. The selection of Board members adheres to the diversity policy and comprehensive assessments include industry background, professional field, age, and gender balance to promote diverse perspectives. In addition to considering the international market outlook, professional and academic accomplishment, and risk management, Advantech will also consider including the expertise in the field of sustainability in the evaluation indicators of the board members. The process of selecting director candidates is outlined in Article 192-1 of the Company Act. The shareholders' meeting appoints directors from the candidate list. The recruitment process for independent directors is regulated by the "Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies." Each term of the board of directors consists of three years in office.

Advantech is currently in the 15th term of the Board of Directors, consisting of nine directors, and the term of the Board of Directors is from May 25, 2023 to May 24, 2026. The composition of the current Board of Directors and the evolutionary goals of the next Board of Directors (16th term) are shown in the figure below; Advantech Cultural and Educational Foundation will occupy one seat on the board, and the stakeholders of the public welfare aspect are also included in the composition of the Board of Directors. Overall, the composition of Advantech's Board of Directors complies with the principle of diversity. The diverse professional perspectives of the directors are constructive and beneficial to the Company's ability to cope with operational, industry, and sustainability impacts. The average tenure of the 15th Board of Directors as of the end of December 2023 was 6.7 years.

Advantech holds the Lita spirit, a concept of altruism within the company, and expects to give back to society while growing the business. Therefore, we take it as our responsibility to contribute reasonable taxes to societies and economies where we conduct our business. We seek to comply with relevant tax laws and regulations but do not seek to conduct aggressive tax planning. According to Advantech Tax Policy, headquarters and its subsidiaries should abide by the following principles:

1. Act at all times in compliance with the spirit and the letter of the relevant tax laws and regulations in the countries in which we operate.
2. Advantech complies with Organization for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines to prepare three-tier transfer pricing documentation.
3. Transfer pricing is set based on the “arm’s length principle.” Profits from each operating entity are reasonably remunerated for the risk and complexity of each entity’s activities.
4. Advantech’s major decisions are made mainly based on business purposes, and then supplemented by tax analysis to search for optimal solutions.
5. Do not engage in any arrangement that transfers value created to low tax jurisdictions or tax havens simply for reducing tax burden. Do not use tax havens or tax structures whose sole purpose is for tax avoidance.
6. Assess tax risk periodically and reduce it by negotiating Advance Pricing Agreement (APA) with local tax authorities in the countries Advantech generates high income.
7. Build mutually respectful relations with tax authorities based on mutual trust and communication, information transparency, and tax payment with integrity.

* Note：
1. The revenue, net profit before tax, and tax information are aggregated amounts from local entities' statutory financial statements and related party transactions are not excluded.
2. The net profit before tax includes investment gain (loss) accounted using the equity method.
3. For the names of all resident entities and their primary business activities, please refer to the appendix of Advantech Co., Ltd.'s 2023 Sustainability Report.

Source: pages 12 to 13 of the FY2023 Advantech Co., Ltd. Consolidated Financial Statements; please refer to the "Consolidated Statements of Cash Flows" on page 15 for income tax paid.

Advantech is subject to tax laws and regulations in the various jurisdictions in which it operates or conducts business. Changes in tax laws and regulations will increase tax liabilities and compliance burdens, which will have an adverse impact on business operation. In order to effectively manage tax risks, Advantech complies with the tax laws and regulations; understands the tax liability and compliance status; identifies potential tax risks; prioritizes the issues and handles them on case-by-case basis. Technology tools are also been used for effective tax management. Aforementioned tasks and results are regularly reviewed by the management. The strategy development of global finance and tax is led by the management, who delegates day-to-day responsibility to headquarters finance manager. Local accounting teams execute the tax filings complying with tax laws and regulations. In addition, Advantech also engaged external tax consultants and CPA firms for tax reporting and compliance services. Advantech's Audit and Risks Committee is delegated by the Board to oversee the quality and integrity of the accounting, auditing, and financial control practices of Advantech through periodic review of certain major matters, including accounting policies and procedures, internal controls systems, legal compliance, and corporate risk management, etc. Advantech's Tax Policy is reviewed in the Audit and Risks Committee and approved by the Board.

Integrity Management: Compliance with Laws and Regulations, Anti-Corruption and Anti-Competition

Integrity management is an important part of the internal control mechanism of corporate governance. Advantech identifies various laws and regulations in advance, and then communicates with relevant internal units to evaluate the formulation and implementation of the Company's relevant rules, in order to ensure smooth compliance with laws and regulations and practical practices. The concepts of compliance with laws, anti-corruption, anti-competitive, and social responsibility in integrity management are closely related to the Company's goodwill, which is one of Advantech's sustainable operations.