FTC - Annual Report 2018 | FinancialReports.eu

Stock Code 2354

Foxconn Technology Co., Ltd.

Annual Report 2018

Websites for Annual Report Publication Taiwan Stock Exchange Market Observation Post System: http://mops.twse.com.tw Company Website: http://www.foxconntech.com.tw

Published Date: April 30, 2019

I. Company’s Spokesperson: Name: Cheng-Kuang Liu Title: Investment Management Department Manager Tel: +886-2-2268-0970 E-mail: [email protected] Deputy: Name: Cheng-Kuang Liu Title: Investment Management Department Manager Tel: +886-2-2268-0970 E-mail: [email protected]

II. Address of the Company: Headquarter: No. 66-1, Zhongshan Rd., Tucheng Dist., New Taipei City 236, Taiwan Tel: +886-2-2268-0970

III. Shareholders’ Services: Name: Grand Fortune Securities Co., Ltd. Address: 6F., No. 6, Sec. 1, Zhongxiao W. Rd., Zhongzheng Dist., Taipei City 100, Taiwan Website: http://www.gfortune.com.tw/ Tel: +886-2-2371-1658

IV. Auditing CPAs in the Most Recent Year: Name: Sheng-Chung Hsu and Han-Chi Wu Company: PricewaterhouseCoopers Taiwan Address: 27F., No. 333, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City 110, Taiwan Website: http://www.pwc.tw/ Tel: +886-2-2729-6666

V. Overseas Securities Exchange: None

VI. Foxconn Technology Co., Ltd. Website: http://www.foxconntech.com.tw

Content

One. Letter to Shareholders ............................................................................................................. 1	One. Letter to Shareholders ............................................................................................................. 1	One. Letter to Shareholders ............................................................................................................. 1
Two. Company Overview ···················································································· 6
I.	Date of Establishment ······································································ 6
II.	Organization and Operations ······························································ 6
Three. Corporate Governance················································································ 9
I.	Organization ·················································································· 9
II.	Implementation of Corporate Governance ··············································24
III.	Audit Fees ···················································································66
IV. Information Regarding FTC’s Independent Auditor ··································67
V. Any of the Company’s Chairman, General Manager, or managers
	responsible for Financial or Accounting Affairs Being Employed by the
	Auditor’s Firm or Any of Its Affiliated Company in the Most Recent Year ·······68
VI. Movement on Transfer and Pledge by Directors, Managerial Officers and
	Shareholders Holding 10% or more of Shares of the Company ·····················68
VII. Information on Relationships among Top 10 Largest Shareholders ················70
VIII.	Combined Shareholding Ratio ····························································71
Four. Fund Raising ···························································································72
I.	Capital and Shares ··········································································72
II.	Corporate Bonds ············································································77
III.	Preferred Shares (with Warrants) ·························································77
IV. Global Depository Receipts (GDRs) ····················································77
V. Subscription of Warrants for Employee ·················································77
VI. Names of Managers holding Warrants for Employee and Top 10		Employee
	in terms of Subscription of Warrants, and the Acquisition Status	···················77
VII. Employee Restricted Stock Plans ························································77
VIII.	Names of Managers holding New Shares for Employee Restricted Stocks
	and Top 10 Employee in terms of Subscription of the New Shares, and the
	Acquisition Status ··········································································77
IX. Issuance of New Shares Regarding to Acquisitions of the Other
	Companies ···················································································77
X.	Implementation of Fund Usage ···························································78
Five. Operating Highlights ··················································································79
I.	Business Activities ·········································································79
II.	Production and Market Analysis ·························································89
III.	Employee Data for the Past Two Years by Annual Report Printing Date ··········97
IV. Information on Environmental Protection Costs ·······································98
V. Labor-Management Relations ·························································· 100
VI. Important Contracts ······································································ 105
Six. Financial Information ················································································· 106
I.	Most Recent 5-Year Concise Balance Sheet and Comprehensive Income
	Statement ·················································································· 106
II.	Most Recent 5-Year Financial Analysis ··············································· 110
III.	Audit Committee’s Review Report on the Most Recent Financial
	Statements ················································································· 113
IV. Most Recent Financial Reports ························································· 114
V. Most Recent Stand Alone Financial Statements Audited by CPAs ················ 208

VI. Financial insolvency incidents encountered by the Company and affiliates	VI. Financial insolvency incidents encountered by the Company and affiliates
	for the most recent years, up till the printing date of this annual report ·········· 298
Seven. Review	of Financial Position, Business Performance and Risk Issues ···················· 299
I.	Financial Position Analysis ····························································· 299
II. Financial Performance Analysis ························································ 300
III.	Cash Flow Analysis ······································································ 301
IV. Impacts of Major Capital Expenditures in the Most Recent Year to
	Financial Performance ··································································· 302
V. Causes of Profit or Loss Incurred on Investments in the Most Recent Year,
	and Any Improvements or Investments Planned for the Next Near ··············· 302
VI.	Analysis of Risk Factors ································································· 302
VII. Other Material Items ····································································· 311
Eight. Specific	Notes ······················································································· 312
I.	Information On Affiliated Companies ················································· 312
II.	Private Placement of Securities in the Most Recent Year Up Till the
	Printing Date of This Annual Report ·················································· 327
III.	Holding or Disposal of the Company's Shares by Subsidiaries in the Last
	Financial Year, Up Till the Printing Date of this Annual Report ·················· 327
IV. Other Supplementary Information ····················································· 327
Nine. Matters Affecting Shareholders’ Equity Stock Price ··········································· 327

One. Letter to Shareholders

Dear Shareholders:

2018 is year of high uncertainty. From the financial aspects, the US economy is not bad, and as driven by the tax cuts, its performance was even stronger, leading the global stock market to have repeatedly hit new highs in the first half of the year. However, due to the austerity policies of the central banks in many countries, the global macroeconomic indicators are half good half bad. The global financial market may therefore begin to fluctuate in the second half of the year. Under the gloom of the possible economic slowdown, the stock market fluctuated and fell. From the political aspects, North Korea’s geopolitical risks have been reduced with the holding of the Trump-Kim summit. However, the economic cold war brought about by the US-China trade conflict, the confrontation between the United States and Russia in the Middle East, and the confrontation between the United States and China in the South China Sea depict a sense that the international disputes are diverging rather than converging, and tensions are rising rather than lowering. Due to the overall demand for oil has risen while the supply not being able to increase substantially, and the effect of the US sanctions against Iran, the oil price smashed through US$80 per barrel and greatly boosted inflation expectations. On the other hand, the global economy has expanded for many years and central banks of many countries has been implementing quantitative easing policy for many years. From the perspective of many recent economic indicators, the inflation risk has gradually emerged. Therefore, under the lead of the Fed, central banks in many countries began to shrink their balance sheets and raise interest rates, thus causing capital tightening. This is bound to bringing great volatility and instability to the global financial market.

From the economic aspect, Taiwan made outstanding achievements in year 2018. This is especially valuable in the face of the intensifying global trade conflicts. The only dissatisfaction are that the main growth momentum still comes from export growth, private consumption is declining due to the factors of annual reform, and the tourism industry continues to weaken. Although the stock market rose, it was mainly driven by the minority weighted stocks. Therefore, the people did not enjoy the wealth effect brought about by economic expansion. Looking into the future, there are many hidden concerns. One is the continued competition in the red supply chain. The other is that the trade war will have a negative impact on the export-oriented Taiwan economy. The third is that the economic expansion period is nearing the end, not far from downturn. How to overcome these hidden concerns and have the economy continue to grow is the major challenge that Taiwan will face next.

In 2018, the revenue of Foxconn Technology showed a slight decline. The main reason was that China-US trade conflicts brought uncertainty to the global economy. The increase in tariffs also caused a sharp downturn in the overall demand in the fourth quarter, and the visibility suddenly decreased sharply. In the case of conservative imports, the traditional shopping season ends early. There are three main reasons to the unsatisfactory gross profit margin and profitability. 1) The proportion of low-margin products is still high. 2) The global economy suddenly fell in the fourth quarter, the peak season is not prosperous. 3) the labor cost continues to rise. However, these negative factors are expected to be eased in the coming year, and the Company's gross profit margin and profit will also have an opportunity to improve.

Finally, the company management team would like to thank the shareholders for your support. In the face of the changing situation in the coming year, the company management team is confident to take hold, to grasp the opportunity amidst adverse economic situations, and to

-1-

lead all employees to work hard together to achieve the goal of revenue and profit growth. Thank you.

I. 2018 Operation Performance Report:
(I) 2018 income before taxation was NT$11.332 billion, which decreased by NT$0.114 billion, or 0.99%, from NT$11.446 billion in 2017. 2018 net profit of the parent company was NT$9.147 billion, which decreased by NT$0.818 billion, or 8.20%, from NT$9.965 billion in 2017. Earnings per share was NT$6.47. For related financial information and fiscal year comparison, please refer to the table below.

Consolidated Profit or Loss

		Unit: NTD thousand	Unit: NTD thousand
Items	2018	2017	% ofgrowth
Net operatingincome	142,057,432	147,815,617	-3.90%
Operatingcost	(128,564,689)	(133,556,310)	-3.74%
Grossprofit	13,492,743	14,259,307	-5.38%
Operatingexpenses	(4,886,359)	(3,733,165)	30.89%
Net OperatingIncome	8,606,384	10,526,142	-18.24%
Non-OperatingIncome	2,726,067	920,086	196.28%
Profit before tax	11,332,451	11,446,228	-0.99%
Income Tax Expense	(2,181,604)	(1,477,893)	47.62%
Consolidated Profit or Loss	9,150,847	9,968,335	-8.20%
Parent companyNet Profit	9,146,659	9,965,386	-8.22%
MinorityInterest Profit or loss	4,188	2,949	42.01%

(II) Execution of Budgets

There were no budget plans for 2018. Thus, there is no achieving of dudget goals.

(III) Receipt and Expenditure Analysis

Information on Consolidated Statements of Cash Flow

		Unit: NTD thousand	Unit: NTD thousand
Items	2018	2017	Change in amount
Net cash inflow (outflow) from operatingactivities	11,749,938	8,354,545	3,395,393
Net cash inflow (outflow) from investingactivities	(4,396,850)	(5,621,154)	1,224,304
Net cash inflow (outflow) from financingactivities	(15,176,525)	9,943,009	(25,119,534)

-2-

(IV) Profitability Analysis

Consolidated Financial Performance Analysis

Items		Year	2018	2017
Profitability	ROA(%)		5.16%	5.60%
	ROE(%)		7.82%	8.26%
	Paid-in Capital (%)	Operating profit	60.84%	74.42%
		Income before taxation	80.12%	80.92%
	Netprofit rate(%)		6.44%	6.74%
	Earningsper share(NTD)		6.47	7.05

(V) Research and Development:

In recent years, the growth rate of the technology industry has slowed down. Partly due to the saturation of the market, and lack of breakthrough in hardware technology is also one of the main reasons. The only solution is to continue investment in research and development, as breakthrough technological innovation can not only create demand, but also maintain the company's competitiveness. In the current phase, the company focuses research and development on:

  - 1 New application: Automobile application market 2. New technology: Surface treatment technology for various materials 3. New Manufacturing process: To increase yield rate and decrease cost The company has a higher risk of single-handed R&D. In order to improve

  - the success rate, the company adopts a cooperative approach. The potential partners are: 1. International clients: To understand the direction of international technology development and confirm the product roadmap

  - 2. College campus: To recruit talents and explore the latest technological developments

  - 3. Potential suppliers: To understand the diversification of industrial technology and suppliers

  - 4. Equipment suppliers: To acquire equipment and analyze competitors' dynamics In case production, we still adhere to high-end products. The design of

  - "metal frame" plus "glass back cover" should still be staying in the market for quite some time. The surface treatment technology develops toward "multi-color", "anode" and "sputter”. The development of heat-dissipation has been advancing towards developing new heat-dissipating materials, and the application advances toward hand-held devices, data storage, automotive and communication network equipment.

II. 2019 Business Plans:
(I) Operating Strategy:

In long-term, the outlook of technology industry is promising. However, the the following trend in the near future shall be placed under close scrutiny. 1. China-US trade war will affect the supply chain.

The rise of trade protectionism will reduce demand.

-3-

Killer applications are uncommon.
The difficulty to raise sales price has increased.
The rise in inflation rate will increase production cost.

Though these development trends are not controllable by the Company, the Company can still take corresponding measures to mitigate the impacts. The Company has taken the following measures to reduce the related impacts: 1. Implement strict control over inventory to reduce the inventory price loss caused by uncertain demand

Continue to invest in R&D
Develop exclusive technology, and increase added-value of high-technology 4. Implement strict control over cost to improve yield and enhance automation to reduce overall costs

In order to achieve revenue growth, the company continues to adopt the following practices to ensure that the company's revenue achieves the target growth rate:

Expand market share and develop new customers 2. Add new applications and enter into new industries 3. Develop new products and enter new markets

(II) Business Objectives and Important Production and Marketing Policies: The company is prudent and optimistic about the prospects for the coming year. The Company holds a prudent approach because the prediction of global economy is difficult, trade conflicts are constant, and the uncertainty is very high. The Company is optimistic because it has been adjusting its structure. The company can withstand risks in fluctuations better than its competitors, and the company will increase investment in R&D. When the economy recovers, the company will gain a firm foothold in the leading position in the casing and cooling industry.

Sales Strategies:
(1) Sales aspect: In international big companies, the Company continuously increase market share, and will also focus on customer diversification. In emerging markets, the Company maintains relationship with existing customers and increase market share. In future growth, the Company develops customers in non-3C industries to expand new sources of revenue.
(2) Price aspect: In the high-end technology segment, priority is given to the increase of unit price and gross profit margin. In non-high-end technology, priority is given in maintaining product unit price and economies of scale.
(3) Marketing aspect: The Company continues to develop customers in Europe, Japan, India and other regions.
Production Strategies:
(1) Moderately expand the plants and capacity in low-cost regions (2) Continue to increase the proportion and yield of automation to reduce production costs
(3) Improve existing manufacture processes and improve production efficiency
R&D Strategies:
(1) Develop jointly with international customers to confirm the correctness of the technology development direction
(2) Collaborate in projects with universities to recruit talent and learn about the latest technological developments

-4-

(3) Develop in cooperation with potential suppliers to understand the current state of industrial technology development
(4) Collaborate with equipment suppliers to understand the relevant vendor dynamics and understand the possibilities of various process developments.
(III) External Competitive Environment and Overall Business Environment

From the observations of the trend in the past one year, there are several points worth noting in the competition trend of the thermal module industry: 1) The merging and consolidation of the industry continues. 2) Demand for PC cooling remains weak. 3) The emerging of graphene brought about a possibility of restructuring of industry. 4) With the advent of the 5G era, there is an opportunity to drive new cooling needs. Foxconn Technology has always been a leader in the thermal industry. In addition to its leading position in R&D, the the adjustment of competitive strategy is prompt. Therefore, Foxconn Technology will retain its position as an industry leader in the future.

From the observations of the trend in the past one year, there are several points worth noting in the competition trend of the

metal casing industry:1) The importance of surface treatment technology has increased, and more colors have been developed and used in products. 2) New competitors are weaker than expected and it will take quite a while to be worth noting. 3) The red supply chain is still dominated by low-end technology products, and it does not pose a major threat to Taiwanese manufacturers with high-end technology. 4) The importance of stainless steel metal casings continues to increase. 5) The design of the metal frame plus glass back cover has become the mainstream of high-end models. Therefore, the future development of the metal casing industry is optimistic. Foxconn Technology is not only a leader in the metal casing industry, but some of its cutting-edge technologies are significantly ahead of competitors by 1 to 2 years, and therefore has a larger market share. Looking forward to the competitive environment in the future, the company has absolute confidence in maintaining its leading competitive advantage through the economies of scale brought by leading position in technology advance and market share.

As is known to all, in the past year, trade protectionism has become more and more intense, and its impact on the global economy has also emerged. The global demand has also been revised downward. It is expected that this situation will last in the future, which is considerably unfavorable for export-oriented Taiwanese manufacturers. No matter how the global political and economic situation evolves, the Company's management team has absolute confidence to face the challenges. The company's management team will continue to work hard, actively increase market share and expand new markets to improve the Company's profitability, and ensure the growth of shareholders' equity.

Finally, the Company and its employees would like to thank all shareholders for their continued support. The enthusiastic support of the shareholders gives the management team greater confidence to face all the adversities and challenges. The Company's management team is also looking forward to the support of shareholders in the coming year, and continue to surge amidst all adversities to achieve better results, thank you all shareholders, thank you!

Chairman Chih-Chien Hung

-5-

Two. Company Overview

I. Establishment date: April 26, 1990 Listing date: October 8, 1996

II. Organization and Operations

1990 1. Q-RUN Technology Co., Ltd. was established with paid-in capital of NT$25 million.
Paid-in capital was increased from NT$25 million to NT$40 million.
1991 The Company successfully developed the first 20” ultra-high resolution, multi-frequency, dual focus, auto scan non-interlaced color display (SRC-1901) in Taiwan.
1992 Paid-in capital was increased from NT$40 million to NT$100 million. Burrard Investment Pte Ltd. Singapore and Chung-Tien Lin came as shareholders of the Company.
1993 A contract was signed with NCD Co., Ltd, and the Company was entrusted to develop a 15" high-resolution black-and-white terminal (SRT-1501), and successfully completed the technology transfer.
1994 1. The Company purchased the plant of 3823 ping, at No. 3 Zhongshan Road, Tucheng City, Taipei County, and established the Tucheng Factory to meet the needs of the company's rapid growth.
1. Securities and Exchange Commission, Ministry of Finance approved the public offering of the Company's shares.
1995 1. The Company developed and manufactured the first multimedia computer, MONIPUTER (PM1550), with a rotating base and a fax machine, data machine, answering machine, image decompression (MPEG) card, sound card and TV function, which adopted INTEL Pentium 586 CPU. This added greatly to the niche for the emerging multimedia market.
Paid-in Capital was increased to NT$436 million. 3. SRC-1502 was selected the best 15” models by the one of the top three German magazines, WIN.
1996
The Company arranged capital increase from surplus and capital reserve and increased the paid-in capital to NT$596.72 million.
Securities and Exchange Commission approved the listing of shares for sale.
1997 Paid-in capital was increased to NT$877.75 million.
1998 1. The Company obtained TÜV Rheinland certification ISO 14001, environmental management system.
The Company conducted a cash capital increase, and the paid-in capital was increased to NT$1.457 billion.

-6-

1999 1. R&D department was established to dedicate to system development of desktop computers and video products.
The Company signed a purchase contract with Compaq Computer Corporation, and the Company sold the finished products of desktop computer to Compaq.
2000 The Company’s R&D developed Analog Board, Down Converter Board and Video Board and conducted PCB assembly of iMAC.
2001 The Company conducted a cash capital increase, and the paid-in capital was increased to NT$2.125billion.

2002 The Company arranged capital increase from surplus and increased the paid-in capital to NT$2,240,499,180.

2003 The Company arranged capital increase from surplus and increased the paid-in capital to NT$2.484 billion.

2004 1. On March 1, 2004, Foxconn Technology was merged into the Company, and the Surviving company was renamed to “Foxconn Technology Co., LTD”. The paid-in capital was increased to NT$4.56876 billion.
The Company arranged capital increase from surplus and increased the paid-in capital to NT$5.065 billion.
2005 The Company arranged capital increase from surplus and increased the paid-in capital to NT$5.62135 billion.

2006 The Company arranged capital increase from surplus and increased the paid-in capital to NT$6,537,872,500.

2007 1. 2006 The Company arranged capital increase from surplus and increased the paid-in capital to NT$7,589,553,370.
1. Unsecured domestic convertible corporate bonds were issued, totaling to NT$12 billion.
2008 The Company arranged capital increase from surplus and increased the paid-in capital to NT$8,479,008,700.
2009 The Company arranged capital increase from surplus and increased the paid-in capital to NT$9,720,408,740.
2010 The Company arranged capital increase from surplus and increased the paid-in capital to NT$11,129,901,720.
2011 The Company arranged capital increase from surplus and increased the paid-in capital to NT$11,727,199,810.
2012 The Company arranged capital increase from surplus and increased the paid-in capital to NT$12,370,159,720.
2013 The Company arranged capital increase from surplus and increased the paid-in capital to NT$13,064,902,250.
2014 The Company arranged capital increase from surplus and increased the paid-in capital to NT$13,767,258,270.
2015 The Company arranged capital increase from surplus and increased the paid-in capital to NT$13,950,239,520.

-7-

2016 1. The Company arranged capital increase from surplus and increased the paid-in capital to NT$14,144,851,920.
1. The Company invested JPY56.88320 billion in Sharp Corporation through its subsidiary company, Foxconn Technology Pte., Ltd.
2017 FuZhun Precision Industry (Shenyang) Co., Ltd. was established and Shenyang Plant was built.
2018 The subsidiary company, FuZhun Precision Industry (Shenzhen) Co., Ltd. and FuYu Precision Components (Kunshan) Co., Ltd. acquired Champ Tech Optical (Foshan) Corporation.

-8-

Three. Corporate Governance

I. Organization

(I) Organization Chart

==> picture [469 x 438] intentionally omitted <==

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

Shareholders’
Meeting
Audit
Committee
Board of Compensation
Directors Committee
Internal Audit
Division
Chairman
President
Business Division Electronic Part and Division System
Component R&D Center Finance and Accounting Department Department information Department
Product Trading Service Division Administration
----- End of picture text -----

-9-

(II) Department Function Description:

	President is responsible for working out	President is responsible for working out	President is responsible for working out	President is responsible for working out	President is responsible for working out
	business objectives, taking		charge of the
	implementation of overall businesses, guiding
	and supervising the departments to deal					with
	their respective businesses.
Internal Audit Division: Audit internal regulations and rules					and	put
	forward proposals for improvement.
Business Division:	Implement the company's established product
	sales strategies and action plans. Responsible
	for the achievement of sales			budget
	performance. Responsible for the development
	of the market, establish a marketing network						to
	deliver products to customers at the right price,
	right time and right place, establish				after-sales
	service centers to provide customers with
	complete after-sales service and to be the
	connection between customers and factories
	for technical problems, introduce new
	technologies or demand on		the market into the
	company and mediate between the customers
	and the factory on issues regarding products.
Electronic Product Trading Service Division: Responsible for providing 3C electronics and
	information products sales services.
Part and Component Division: Responsible for the manufacture of					parts and
	components of information products.
R&D Center:	In order to cater to consumers' expectations of
	information products and meet customer
	needs, the company's R&D center integrates
	the basic technology of experts in the
	academic community and the existing
	technologies	of the industry to develop the
	best quality functions and the most
	cost-effective products and		services.
Finance and Accounting Department	Responsible for financial and accounting
	matters, cost analysis, budget preparation and
	control, capital planning and			scheduling,
	operations concerning stock.
Administration Department:	Responsible for personnel,		attendance, general
	affairs, factory affairs and other affairs.
System information Department:	Responsible for the company's information
	policy formulation, information system
	planning and	maintenance,	network
	communication planning, construction and
	maintenance.

-10-

Spouse or Immediate Family Holding Managerial Position	Relationship	None	None
	Name	None	None
	Title	None	None
	Concurrent Positions in the Company and Other Companies	None	Chairman of HongFuJin Precision Industry (Taiyuan) Co., Ltd. Chairman of FuJin Precision Industry (Jincheng) Co., Ltd. Director of HongZhun Precision Tooling (Shenzhen) Co., Ltd. Chairman of FuTaiHua Precision Electronics (Chengdu) Co., Ltd. Director of HongFuJin Precision Electronics (Zhengzhou) Co., Ltd. Director of FUSING International Inc. Pte., Ltd. Chairman of Nanjing HongFuXia Precision Electronics Co., Ltd. Director of Shenzhen FLNet IoT Smart Home Co., Ltd.
	Main Education Background and Work Experience	None	Master's Degree in Mechanical Engineering, National Central University Vice Executive General Manager of Hon Hai Precision Industry Co., Ltd.
Shares Held in the Name of Others	Percentage of Shareholding (%)	0.00	0.00
	Number	0	0
Shares Held by Spouse & Minors	Percentage of Shareholding (%)	0.00	0.00
	Number	0	0
Current Shares Held	Percentage of Shareholding (%)	6.01	0.00
	Number	85,003,766	12,562
Shares Held when Elected	Percentage of Shareholding (%)	6.03	0.00
	Number	84,162,145	12,562
First Elected Date		20040610	20100608
Tenure		3	3
Date of Election (Assumption of Duty)		20160622	20170120
Gender		-	Male
Name		HongYang Venture Capital Investment Co., Ltd.	Representative: Chih-Chien Hung
Nationality or Place of Registration		R.O.C.	R.O.C.
Title		Chairman

-11-

Spouse or Immediate Family Holding Managerial Position	Relationship	None	None
	Name	None	None
	Title	None	None
	Concurrent Positions in the Company and Other Companies	None	Chief Manager of C-Subgroup, Hon Hai Precision Industry Co., Ltd. Director of JinJiZhe Trading Holdings Co., Ltd. Director of JiZhun Precision Industry (Huizhou) Co., Ltd. Director of FuTaiHua Precision Electronics (Jiyuan) Co., Ltd. Representative of Foxnum Technology Co., Ltd. Director of JiYuanJi Precision Electronics Co., Ltd. Supervisor of Henan FuChi Technology Co., Ltd. Supervisor of Foxconn Precision Electronics (Taiyuan) Co., Ltd. Supervisor of Hong FuZhun Precision Industry (Shenzhen) Co., Ltd.
	Main Education Background and Work Experience	None	Bachelor's Degree in Business Administration, Fu Jen Catholic University Manager/IE Manager of Production Division, Chunghwa Picture Tubes, Ltd. General Manager of Chunghwa Picture Tubes (Fuzhou) Fuxing Picture Tubes Ltd. Division Chief of Operation and Management Division and Manager of Quality Control of Chunghwa Picture Tubes Malaysia
Shares Held in the Name of Others	Percentage of Shareholding (%)	0.00	0.00
	Number	0	0
Shares Held by Spouse & Minors	Percentage of Shareholding (%)	0.00	0.00
	Number	0	1,943
Current Shares Held	Percentage of Shareholding (%)	6.01	0.00
	Number	85,003,766	1,780
Shares Held when Elected	Percentage of Shareholding (%)	6.03	0.00
	Number	84,162,145	1,763
First Elected Date		20040610	20160622
Tenure		3	3
Date of Election (Assumption of Duty)		20160622	20160622
Gender		-	Male
Name		HongYang Venture Capital Investment Co., Ltd.	Representative: Fang-Yi Cheng
Nationality or Place of Registration		R.O.C.	R.O.C.
Title		Director

-12-

Spouse or Immediate Family Holding Managerial Position	Relationship	None	None	None	None
	Name	None	None	None	None
	Title	None	None	None	None
	Concurrent Positions in the Company and Other Companies	None	Group Chief Technology Officer of Global R&D Center, Hon Hai Precision Industry Co., Ltd. Director of LanKao YuFu Precise Technology Co., Ltd Chairman of RuiZhiDa Optoelectronics (Shenzhen) Co., Ltd. Director of Zhengzhou YuTeng Precise Technology Co., Ltd	None	Director of HongFuJin Precision Industry (Taiyuan) Co., Ltd. Director of FuZhun Precision Industry (Shenzhen) Co., Ltd. Director of Nanning Funing Precision Electronics Ltd.
	Main Education Background and Work Experience	None	Ph.D. in Synthetic Chemistry, School of Engineering, The University of Tokyo, Japan Chairman of Surface Treatment Technology Development Committee, Foxconn Group (Vice General Manager)	None	Taipei Institute of Technology Associate Manager of Foxconn Technology Co., LTD
Shares Held in the Name of Others	Percentage of Shareholding (%)	0.00	0.00	0.00	0.00
	Number	0	0	0	0
Shares Held by Spouse & Minors	Percentage of Shareholding (%)	0.00	0.00	0.00	0.00
	Number	0	0	0	0
Current Shares Held	Percentage of Shareholding (%)	0.00	0.00	0.00	0.02
	Number	45,230	0	45,230	242,867
Shares Held when Elected	Percentage of Shareholding (%)	0.00	0.00	0.00	0.01
	Number	44,783	0	44,783	163,007
First Elected Date		20100608	20170120	20100608	20100608
Tenure		3	3	3	3
Date of Election (Assumption of Duty)		20160622	20170120	20160622	20160622
Gender		-	Male	-	Male
Name		Caixin International Capital Investment Co., Ltd.	Representative: Feng-Yuan Dai	Caixin International Capital Investment Co., Ltd.	Representative: Hsueh-Kun Li
Nationality or Place of Registration		R.O.C.	R.O.C.	R.O.C.	R.O.C.
Title		Director		Director

-13-

Spouse or Immediate Family Holding Managerial Position	Relationship	None	None	None
	Name	None	None	None
	Title	None	None	None
	Concurrent Positions in the Company and Other Companies	Director of Board, Chief of Tax, Partnership Accountant of Crowe Horwath Audit Committee Member of Foxconn Technology Co., LTD Compensation Committee Member of Foxconn Technology Co., LTD Independent Director of Genie Networks Ltd.	Audit Committee Member of Foxconn Technology Co., LTD Compensation Committee Member of Foxconn Technology Co., LTD	Audit Committee Member of Foxconn Technology Co., LTD Compensation Committee Member of Foxconn Technology Co., LTD Director of General Interface Solution (GIS) Holding Ltd. Independent Director of Advanced Optoelectronic Technology Inc.
	Main Education Background and Work Experience	Master's Degree in Accounting, National Taiwan University Assistant Manager KPMG Partnership Accountant and Chairman of DinKum Member of Taipei CPA Association Tax Regulation and Tax Affairs Committee Adjunct Lecturer of NTUSPECS, Lecturer of Taiwan SMECF	Bachelor's Degree in Cooperative Economics and Social Entrepreneurship, Feng Chia University Chief Comptroller and Vice General Procurement Manager of Ford Lio Ho Motor Co., Ltd. Chairman of YouQuan Trading Co., Ltd.	Keio University Faculty of Business and Commerce, Japan Deputy General Manager, International Affairs Department Daiwa Asset Management Co., Ltd.
Shares Held in the Name of Others	Percentage of Shareholding (%)	0.00	0.00	0.00
	Number	0	0	0
Shares Held by Spouse & Minors	Percentage of Shareholding (%)	0.00	0.00	0.00
	Number	0	0	0
Current Shares Held	Percentage of Shareholding (%)	0.00	0.00	0.00
	Number	0	0	7,177
Shares Held when Elected	Percentage of Shareholding (%)	0.00	0.00	0.00
	Number	0	0	7,106
First Elected Date		20160622	20130626	20160622
Tenure		3	3	3
Date of Election (Assumption of Duty)		20160622	20160622	20160622
Gender		Male	Male	Male
Name		Sung-Shu Lin	Yao-Ching Chen	Hsiang-Tun Yu
Nationality or Place of Registration		R.O.C.	R.O.C.	R.O.C.
Title		Independent Director	Independent Director	Independent Director

-14-

(IV) Major Shareholders of Institutional Shareholders

		April 23 2019
Name of Institutional Shareholder	Name of Major Shareholders	Percentage of Shareholding
HongYang Venture Capital Investment Co., Ltd.	Hon Hai Precision IndustryCo.,Ltd.	97.95%
	BaoXin International Investment Co., Ltd.	2.05%

(V) Principal Shareholder of Corporate Shareholders with a Juridical Person as its major shareholder April 23 2019	(V) Principal Shareholder of Corporate Shareholders with a Juridical Person as its major shareholder April 23 2019	(V) Principal Shareholder of Corporate Shareholders with a Juridical Person as its major shareholder April 23 2019
Name of Institutional Shareholder	Name of Major Shareholders	Percentage of Shareholding
Hon Hai Precision Industry Co., Ltd.	TerryGou	9.63%
	CTBC as custodian of Terry Gou Trust Treasury Account	2.89%
	Citibank as custodian of Government of Singapore Investment Account	1.89%
	JPMorgan Chase as custodian of Vanguard EmergingMarket Stock Index Fund	1.35%
	JPMorgan Chase Bank as custodian of Vanguard Star Vanguard Total International Stock Index	1.32%
	Citibank as custodian of Hon Hai Precision IndustryCo.,Ltd. DepositaryReceipts Account	1.30%
	CathayLife Insurance Co.,Ltd.	1.24%
	Fubon Life Insurance Co.,Ltd.	1.24%
	Citibank as custodian of Norwegian Central Bank Investment Account	1.19%
	Standard Chartered Bank as custodian of the Fidelity Puritan Trust: Fidelity Low-Priced Stocks Fund	1.05%
BaoXin International Investment Co.,Ltd.	Hon Hai Precision Industry Co., Ltd.	100.00%

-15-

(VI) Professional Knowledge and Independence Check Matrix of Directors

Criteria Name	Has over five years work experience and meets the following professionalqualifications	Has over five years work experience and meets the following professionalqualifications	Has over five years work experience and meets the following professionalqualifications	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director
	An Instructor or Higher Position in a	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
	Department of
	Commerce,
	Law, Finance,
	Accounting, or Other Academic Department
	Related to the
	Business Needs of the
	Company in a
	Public or
	Private Junior
	College, College or University
Chih-Chien Hung			�	�		�	�		�	�	�	�		0
Fang-Yi Cheng			�	�		�	�		�	�	�	�		0
Feng-Yuan Dai			�	�	�	�	�		�	�	�	�		0
Hsueh-Kun Li			�			�	�	�	�	�	�	�		0
Sung-Shu Lin		�	�	�	�	�	�	�	�	�	�	�	�	1
Yao-Ching Chen			�	�	�	�	�	�	�	�	�	�	�	0
Hsiang-Tun Yu			�	�	�	�	�	�	�	�	�	�	�	1

Note: Please tick the corresponding boxes if directors or supervisors have been any of the following during the two years prior to being elected or during the term of office. (1) Not an employee of the Company or any of its affiliates.

(2) Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.
(3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs.
(5) Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as of its top five shareholders.
(6) Not a director, supervisor, managerial officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company.
(7) Not a professional individual who, or an owner, partner, director, supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof. However, this does not apply to members of remuneration committees carrying out their duties in accordance with Article 7 of the Regulations Governing the Appointment and Exercise of

-16-

Powers by the Compensation Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.

(8) Not a spouse or a relative within two degrees of consanguinity to any director.
(9) Does not meet any of the criteria described in Article 30 of the Company Act.
(10) Not the proxy of any government agency, juridical person, or their representative that is a shareholder in the Company as outlined in Article 27 of the Company Act.

-17-

Spouse or Immediate Family Holding Managerial Position	Relationship	None	None
	Name	None	None
	Title	None	None
	Concurrent Positions in Other Companies	Director of Foreign Technology Ltd. Director of HighTempo International Ltd. Director of Q-Run Far East Corporation Director of Q-Run Holdings Limited Director of Foxconn Technology Pte. Ltd. Director of Topfry Industrial Ltd. Director of World Trade Trading Limited Director of Atkinson Holdings Ltd. Director of Kenny International Ltd. Director of Double Wealth Profits Ltd. Director of Precious Star International Ltd. Director of Foxconn Precision Components Holding Co., Ltd. Director of Gold Glory International Ltd. Director of Eastern Star Limited	Corporate Auditor of Foxconn Japan Co., Ltd Director of New Glory Holdings Limited
	Main Education Background and Work Experience	Department of Industrial Design National Cheng Kung University	University of Leeds, Communications Studies Department of Accounting, Providence University Manager of Ernst & Young Senior Manager of Accounting Department, Hon Hai Precision Industry Co., Ltd.
Shares Held in the Name of Others	Percentage of Shareholding (%)	0.00	0.00
	Number	0	0
Shares Held by Spouse & Minors	Percentage of Shareholding (%)	0.00	0.00
	Number	895	0
Shareholding	Percentage of Shareholding (%)	0.03	0.00
	Number	369,875	0
	Gender	Male	Female
Date of Election (Assumption of Duty)		02/01/2009	04/01/2018
Name		Han-Ming Li	Yuan-Wen Lan
Nationality		R.O.C.	R.O.C.
Title		President	Accounting Director

-18-

Spouse or Immediate Family Holding Managerial Position	Relationship	None
	Name	None
	Title	None
	Concurrent Positions in Other Companies	Director of FuJin Precision Industry (Shenzhen) Co., Ltd. Director of FuTaiKang Precision Components (Shenzhen) Co., Ltd. Supervisor of FuNeng New Energy Technology Services Co., Ltd. Supervisor of Qingdao Hygen Innovative Alloy Materials Co., Ltd
	Main Education Background and Work Experience	MBA, University of Alabama, U.S.A. Chief of Finance Division, Hon Hai Precision Industry Co., Ltd. Senior Manager of Financial Director, Integrated Silicon Solution Inc. Financial Manager of ShiShin Electronic Co., Ltd.
Shares Held in the Name of Others	Percentage of Shareholding (%)	0.00
	Number	0
Shares Held by Spouse & Minors	Percentage of Shareholding (%)	0.00
	Number	0
Shareholding	Percentage of Shareholding (%)	0.00
	Number	36,080
	Gender	Male
Date of Election (Assumption of Duty)		04/01/2015
Name		Tzu-Hung Li
Nationality		R.O.C.
Title		Financial Director

-19-

	Compensation from Affiliates Other than Subsidiaries	Compensation from Affiliates Other than Subsidiaries	Compensation from Affiliates Other than Subsidiaries	335	335	335	335	335	335	335	335	335	335	335
	Sum of A, B, C, D, E, F and G as a percentage of net income	All consolidated companies		0.2129%
		Foxconn Technology		0.2129%
Compensation to Directors Also Serving as Company Employees	Number of acquired new restricted employee stock	All consolidated companies		None
		Foxconn Technology		None
	Number of subscribable employee stock options (H)	All consolidated companies		None
		Foxconn Technology		None
	Employee Earnings Distribution (G) (Note)	All consolidated companies	Stock Amount	0
			Cash Amount	15,319
		Foxconn Technology	Stock Amount	0
			Cash Amount	15,319
	Pensions (F)	All consolidated companies		126
		Foxconn Technology		126
	Salary, Bonuses, and Special Allowance (E)	All consolidated companies		2,157
		Foxconn Technology		2,157
	Sum of A, B, C and D as a percentage of net income	All consolidated companies		0.0205%
		Foxconn Technology		0.0205%
Remunerations of Directors	Business Expenses (D)	All consolidated companies		72
		Foxconn Technology		72
	Director Earnings Distributio n (C)	All consolidated companies		0
		Foxconn Technology		0
	Pensions (B)	All consolidated companies		0
		Foxconn Technology		0
	Remunerations (A)	All consolidated companies		1,800
		Foxconn Technology		1,800
		Name		HongYang Venture Capital Investment Co., Ltd.	Representative: Chih-Chien Hung	HongYang Venture Capital Investment Co., Ltd.	Representative: Fang-Yi Cheng	Caixin International Capital Investment Co., Ltd.	Representative: Feng-Yuan Dai	Caixin International Capital Investment Co., Ltd.	Representative: Hsueh-Kun Li	Sung-Shu Lin	Yao-Ching Chen	Hsiang-Tun Yu
		Title		Director		Director		Director		Director		Independent Director	Independent Director	Independent Director

-20-

Sum of the first 7 items (A+B+C+D+E+F+G)	All consolidated companies I	HongYang Venture Capital Investment Co., Ltd. Chih-Chien Hung and Fang-Yi Cheng Caixin International Capital Investment Co., Ltd. Feng-Yuan Dai, Sung-Shu Lin, Yao-Ching Chen and Hsiang-Tun Yu	-	-	-	Hsueh-Kun Li	-	-	-	9
	Foxconn Technology	HongYang Venture Capital Investment Co., Ltd. Chih-Chien Hung and Fang-Yi Cheng Caixin International Capital Investment Co., Ltd. Feng-Yuan Dai, Sung-Shu Lin, Yao-Ching Chen and Hsiang-Tun Yu	-	-	-	Hsueh-Kun Li	-	-	-	9
Sum of the first 4 items (A+B+C+D)	All consolidated companies H	HongYang Venture Capital Investment Co., Ltd. Chih-Chien Hung and Fang-Yi Cheng Caixin International Capital Investment Co., Ltd. Feng-Yuan Dai, Hsueh-Kun Li, Sung-Shu Lin, Yao-Ching Chen and Hsiang-Tun Yu	-	-	-	-	-	-	-	9
	Foxconn Technology	HongYang Venture Capital Investment Co., Ltd. Chih-Chien Hung and Fang-Yi Cheng Caixin International Capital Investment Co., Ltd. Feng-Yuan Dai, Hsueh-Kun Li, Sung-Shu Lin, Yao-Ching Chen and Hsiang-Tun Yu	-	-	-	-	-	-	-	9
Range of Remuneration Paid to Directors		Less than NT$2,000,000	NT$2,000,000 (incl.) ~ NT$5,000,000	NT$5,000,000 (incl.) ~ NT$10,000,000	NT$10,000,000 (incl.) ~ NT$15,000,000	NT$15,000,000 (incl.) ~ NT$30,000,000	NT$30,000,000 (incl.) ~ NT$50,000,000	NT$50,000,000 (incl.) ~ NT$100,000,000	NT$100,000,000 and above	Total

-21-

	Compensation from Affiliates	Other than Subsidiaries	None	Name(s) of General Manager and Vice General Manager(s)	All consolidated companies E	-	-	-	Han-Ming Li	-	-	-	-	1
Sum of A, B, C and D as a percentage of net income (%)		All consolidated companies	0.1483%
		Foxconn Technology	0.1483%
Employee Earnings Distribution (D) (Note)	All consolidated companies	Stock	0
		Cash	11,053		Foxconn Technology	-	-	-	Han-Ming Li	-	-	-	-	1
	Foxconn Technology	Stock	0
		Cash	11,053
Bonuses and Special Allowance (C)	All consolidated companies		633
	Foxconn Technology		633
Pensions (B)	All consolidated companies		141
				Range of Remuneration Paid to General Managers and Vice General Manager(s)		Less than NT$2,000,000	NT$2,000,000 (incl.) ~ NT$5,000,000 (excl.)	NT$5,000,000 (incl.) ~ NT$10,000,000 (excl.)	NT$10,000,000 (incl.) ~ NT$15,000,000 (excl.)	NT$15,000,000 (incl.) ~ NT$30,000,000 (excl.)	NT$30,000,000 (incl.) ~ NT$50,000,000 (excl.)	NT$50,000,000 (incl.) ~ NT$100,000,000 (excl.)	NT$100,000,000 and above	Total
	Foxconn Technology		141
Salary (A)	All consolidated companies		1,736
	Foxconn Technology		1,736
	Name		Han-Ming Li
	Title		President

-22-

Earnings granted to managerial officers:

Unit: NTD thousand

						Unit: NTD thousand
	Title	Name	Stock	Cash (Note)	Total	Total as a percentage of after-tax income
Managerial Officers	President	Han-MingLi	0	20,792	20,792	0.2273
	Financial Director	Tzu-Hung Li
	Accounting Director	Yuan-Wen Lan

Note: Up till the printing date of this annual report, the earnings distribution has not yet been determined. These figures are based on the ratio of actual distributed amount in 2017.

Analysis of the proportion of the total remuneration of directors, supervisors, general managers and vice general managers of the Company paid by the Company and all companies in the consolidated financial statement to net profit after tax in individual financial statements of the recent two years.

Item Title	Total compensation as apercentage of after-tax income	Total compensation as apercentage of after-tax income	Total compensation as apercentage of after-tax income	Total compensation as apercentage of after-tax income
	2018(Note)		2017
	Foxconn Technology	All consolidated companies	Foxconn Technology	All consolidated companies
Director	0.2129	0.2129	0.1474	0.1474
General Manager and Vice General Manager(s)	0.1483	0.1483	0.1026	0.1026

Note: Up till the printing date of this annual report, the earnings distribution has not yet been determined. These figures are based on the ratio of actual distributed amount in 2017.

The policies for payment of remuneration and its linkage to business performance and future risk exposure (1) According to the distribution of earnings as stipulated by Articles of Incorporation of the Company, there is no compensation distributed to Directors or Supervisors except employee compensation.

(2) In the past two years, the remunerations paid to general managers and vice general managers are salaries, bonuses, and staff compensation. The salaries and bonuses are paid according to the relevant personnel-related provisions of the Company. The staff compensation is provided by the Company's Articles of Incorporation. In the case where Company makes a profit, 4% to 6% of the profit shall be set aside for staff compensation. The Board of Directors shall pass a resolution based on the annual profit distribution conditions and provisions provide by the Articles of Incorporation, and submit a report to the shareholders’ meeting.

(3) According to the Company’s policy for compensation, reasonable compensation shall be paid based on job evaluation of the personnel in the Company.

-23-

II. Implementation of Corporate Governance

(I) Operations of the Board of Directors:

Five meetings were held by the Board of Directors in the most recent fiscal year (2018). The attendance information were showed below in details:

Title	Name	Attenance in Person	Attendance by Proxy	Attendance Rate in Person	Remarks
Chairman	HongYang Venture Capital Investment Co., Ltd. Representative: Chih-Chien Hung	5	0	100%	-
Director	HongYang Venture Capital Investment Co., Ltd. Representative: Fang-Yi Cheng	4	1	80%	-
Director	Caixin International Capital Investment Co., Ltd. Representative: Feng-Yuan Dai	5	0	100%	-
Director	Caixin International Capital Investment Co., Ltd. Representative: Hsueh-Kun Li	3	1	60%	-
Independent Director	Sung-Shu Lin	5	0	100%	-
Independent Director	Yao-Ching Chen	5	0	100%	-
Independent Director	Hsiang-Tun Yu	5	0	100%	-
Other issues to be noted: I. In the event of either of the following situations, dates, sessions, contents of resolutions of the Board Meetings, opinions from all independent directors, and Company responses to their opinions should be noted: (I) Issues specified in Article 14-3 of the Securities and Exchange Act: The company had set up the Audit Committee on June 26, 2016. The items related to Article 14-3 are listed as follows: 1. Items approved by the 9thBoard Meeting of the the 10thBoard of Directors on March 29, 2018 are as follows: (1) The proposing of the Company’s 2018 Financial Statements to be audited and certified by PwC Taiwan, the evaluation of independence of CPAs and the service fees (2) The change of accounting manager 2. Items approved by the 13thBoard Meeting of the the 10thBoard of Directors on November 13, 2018 are as follows: (1) Amendments to the Company’s internal control policies (2) Indirect acquisition of Champ Tech Optical (Foshan) Corporation, investment in Mainland China (II) Other issues opposed by independent directors or about which directors have reservations that have been noted in the record or declared in writing: None. II. In situations where independent directors recuse themselves due to conflict of interest,the

-24-

director's name, content of the resolution, reason for recusal, and his or her voting participation should be properly recorded: None.

III. Enhancements to the functionality of the board of directors in the current and the most recent year (e.g. Establishment of an Audit Committee, improvement of information transparency etc.), and the progress of such enhancements: The Company has a Compensation Committee and an Audit Committee in place which assist directors to supervise the Company's operations.

(II) Operations of the Audit Committee: There has been a total of 5 meetings of the Audit Committee in year 2018. Director attendance is detailed below:

Title	Name	Meetings Attended Personally	Meetings Attended by Proxy	% of Meeting Attended Personally	Remarks
Independent Director	Sung-Shu Lin	5	0	100%	-
Independent Director	Yao-Ching Chen	5	0	100%	-
Independent Director	Hsiang-Tun Yu	5	0	100%	-
Other issues to be noted: I. In the event of either of the following situations, dates, sessions, proposal contents, resolutions of the Audit Committee, and Company responses to their opinions should be noted: (I) Issues specified in Article 14-5 of the Securities and Exchange Act: All the resolutions were approved by the Audit Committee members and then by the Board meetings. 1. Items approved by the 9thBoard Meeting of the the 10thBoard of Directors on March 29, 2018 are as follows: (1) 2017 Business reports and financial reports (2) The proposing of the Company’s 2018 Financial Statements to be audited and certified by PwC Taiwan, the evaluation of independence of CPAs and the service fees. (3) The change of accounting manager 2. Items approved by the 12th Board Meeting of the the 10th Board of Directors on August 13, 2018 are as follows: 2018 Q2 consolidated financial statements 3. Items approved by the 13thBoard Meeting of the the 10thBoard of Directors on November 13, 2018 are as follows: (1) Amendments to the Company’s internal control policies (2) Indirect acquisition of Champ Tech Optical (Foshan) Corporation, investment in Mainland China (II) Other matters not passed by the Audit Committee, which were then agreed upon by two-thirds of the entire membership of the Board of Directors: None. II. In situations where independent directors recuse themselves due to conflict of interest,the

-25-

independent director's name, content of the resolution, reason for recusal, and his or her voting participation should be properly recorded: None

III. Communication between Independent Directors, head of internal audit, and CPAs (including communication methods and results for material issues and the Company's finances and businesses):
Communication policy for Independent Directors and head of internal audit:
- (1) Head of internal auditors shall submit an audit report and correction follow-up report at the end of each month to the Independent Directors, stating the status of annual audit plan execution and follow-up on internal control corrections.
- (2) Work progress shall be reported to the Director at least once a quarter. Shall there be material irregularities, the internal auditors should prepare a report and submit it immediately to the independent directors. There is no aforementioned irregularities in 2018.

Up to now, communication between Independent Directors and head of internal audit is good.

Summary of previous communications between Independent Directors and the head of internal audit:

Item	Meeting Time	Items Discussed
1.	March 29, 2018	(1) 2017 Q4 audit work progress. (2) Proposal of 2017 internal control system declaration. (3) The head of internal audit responded to questions raised duringthe meeting.
2.	May 10, 2018	(1) 2018 Q1 audit work progress. (2) The head of internal audit responded to questions raised duringthe meeting.
3.	August 13, 2018	(1) 2018 Q2 audit work progress. (2) The head of internal audit responded to questions raised duringthe meeting.
4.	November 13, 2018	(1) 2018 Q3 audit work progress. (2) Proposal of the 2019 Annual Audit Plan (3) The head of internal audit responded to questions raised duringthe meeting.
Results: All above-mentioned matters had been reviewed or approved by the Audit Committee,and Independent Directorsposed no adverse opinions.

Communication policy for Independent Directors and head of internal audit:
(1) CPAs and Independent Directors shall hold at least two regular audit committee meetings per year, and as occasion requires, communication and discussion shall be conducted in writing by the CPAs. Such communication and discussion shall include the independence and relevant responsibility of CPAs auditing the Group’s consolidated financial statement, relevant matters on audit plans, material audit findings (including adjusted entries and significant deficiencies of internal controls), content of audit report and audit results on interim consolidated financial statements.
(2) The Audit Committee shall prepare an inspection report after reviewing the consolidated financial statements audited by the CPAs and the auditor’s reports.
Summary of previous communications between Independent Directors and the CPAs:

-26-

Date	Items Discussed
March 29, 2018 Meeting on corporate governance was held	1. The CPAs reported the audited contents of the 2017 consolidated financial statements, material audit findings (including adjusted entries and significant deficiencies of internal controls), and content of audit report in the meeting. 2. The CPAs explained, discussed, and communicated with the meeting attendees on the questions they raised.
August 13, 2018 Meeting on corporate governance was held	1. The CPAs explained its responsibilities, independence, and audit plans for the 2018 consolidated financial statements. 2. The CPAs explained the contents of the audit report of the audited Q2 2018 consolidated financial statements during the corporate governance meeting. 3. The CPAs explained, discussed, and communicated with the meeting attendees on the questions they raised. 4. The CPAs explained the initial views on the key audit matters of the 2018 consolidated financial statements.

Date

Items Discussed

March 29, 2018
Meeting on corporate
governance was held

1.
The CPAs reported the audited contents of the 2017
consolidated financial statements, material audit
findings (including adjusted entries and significant
deficiencies of internal controls), and content of audit
report in the meeting.
2.
The CPAs explained, discussed, and communicated
with the meeting attendees on the questions they
raised.

August 13, 2018
Meeting on corporate
governance was held

1.
The CPAs explained its responsibilities,
independence, and audit plans for the 2018
consolidated financial statements.
2.
The CPAs explained the contents of the audit report of
the audited Q2 2018 consolidated financial statements
during the corporate governance meeting.
3.
The CPAs explained, discussed, and communicated
with the meeting attendees on the questions they
raised.
4.
The CPAs explained the initial views on the key audit
matters of the 2018 consolidated financial statements.

IV. Major key focus and operation status:

(I) 2018 key focus:
Communicating according to the audit plans with the Company’s internal auditors about the results of internal audit reports on a regular basis.
Communicating with the Company’s auditing accountants about the audit on consolidated financial statements of each quarter or audit results on a regular basis.
Reviewing financial reports
Assessing the effectiveness of internal control
Appointing auditing accountants.
Reviewing the independence and service fees of CPAs.
The change of accounting manager
8 Review of major asset transactions of the indirect acquisition of Champ Tech Optical (Foshan) Corporation, investment in Mainland China
(II) 2018 operation status:

All matters in audit committee meetings had been reviewed or approved by the Audit Committee, and Independent Directors posed no adverse opinions.

-27-

(III) Discrepancies between Company policy and Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
I. Has the Company established and disclosed its corporate governance principles based on "Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?	�		The Company has set a corporate governance code of practice, for the protection of shareholders’ rights, to strengthen the functions of the Board of Directors, respect the interests of stakeholders, enhance the transparency of information and relevant rules. Please refer to the Company’s website for detailed information.	None
II. Equity structure and shareholder rights (I) Has the Company set internal operating procedures to deal with shareholder proposals, doubts, disputes and litigation matters, and does it implement these in accordance with its procedures? (II) Does the Company maintain a list of major Company shareholders and the ultimate owners of these shareholders? (III) Has the Company built and executed a risk management mechanisms and “firewall” between the Company and its affiliates?	� � �		(I) The Investor Relations Department has been established to handle shareholder proposals or disputes. (II) The Company maintains a list of major Company shareholders and the ultimate owners of these shareholders and discloses this information pursuant to the laws. (III) The Company has established appropriate internal risk control mechanisms and firewalls, pursuant to the rules for specific companies or groups related business operations and financial transactions, supervision measures for subsidiaries, Procedures Procedures for Handling Endorsement/Guarantee,	None

-28-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
(IV) Has the Company set internal standards to prohibit the use of undisclosed insider information to trade securities on the market?	�		loans to others and guidelines for acquisition or disposal of assets. Business relations between affiliated enterprises have been evaluated by an independent third party to prevent violations of unlawful transactions. (IV) The Company has established “Procedure on Insider Trading Prevention and Control” to prevent insider trading.
III. Composition and responsibilities of the Board of Directors (I) Has the Company established a diversification policy for the composition of its Board of Directors and has it been implemented accordingly?	�		(I) The Company has established “Corporate Goverance Practical Principles” to ensure boards’ diversity and its implementation. The company’s Board of Directors (including Independent Directors) has adopted nomination system. The members of the Board of Directors are diverse, possessing technology and finance backgrounds and experience of management practices with a view to implement the policy of diversification and build a robust structure of the Company’s Board of Directors. (Please refer to page 11 for the professional knowledge and independence of all Board of Director members.)	None

-29-

		Implementation Status	Implementation Status	Implementation Status	Implementation Status	Implementation Status
Yes	No	Explanation
		Status of Director
		Director Name	Operation and Management	Leadership Decision	Knowledge of the Industry	Finance and Accounting
		Chih-Chien Hung	�	�	�
		Fang-Yi Cheng	�		�
		Feng-Yuan Dai	�		�
		Hsueh-Kun Li	�		�
		Sung-Shu Lin				�
		Yao-Ching Chen			�
		Hsiang-Tun Yu				�

-30-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
(II) Has the Company establish other functional committees besides the Compensation Committee and Audit Committee of its own accord? (III) Has the Company established performance evaluation guidelines and evaluation methods for the Board of Directors and does it evaluate its performance regularly each year? (IV) Does the Company assess the independence of external auditors on a regular basis?	� � �		diversificationpolicy: Managerial goals Status of Implementation It is advisable that Directors who are also serving as the Company’s employees not account for more than one third of the all Directors. Achieved (II) The Company has established an Audit Committee and a Compensation Committee. Other functional committees will be established based on future needs. (III) The Company’s Articles of Incorporation did not instill incentives for directors, and the Company directors will only be compensated for fixed compensations such as honorariums and traveling expenses. Variable incentives will not be appropriated. (IV) The Company regularly assesses the performance and independence of the CPAs through the Board of Directors every year. The recommended CPA is required to provide CVs and declarations (not in violation of Ethical Standards Publication No.

-31-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
			10) for the Board of Directors to discuss the appointment and independence of the CPAs. The assessments in the most recent are completed on May 10, 2017 and March 29, 2018. Items Assessed 1. Does the CPA have direct or significant indirect financial interest in the Company? 2. Does the CPA have loans or guarantees with the Company’s Directors or Supervisors? 3. Does the CPA have a close business relationship with the Company? 4. Does the CPA have a potential employment with his/her audit customer?
IV. Does the TWSE/TPEx listed company have a dedicated unit/staff member in charge of the Company' corporate governance affairs (including but not limited to providing information required for director/supervisor's operations, convening board/shareholder meetings in compliance with the law, apply for/change company registry,andproducing	�		The Company passed the resolution at the board meeting on May 13, 2019, and appointed Tzu-Hung Li to be the head of corporate governance,and be responsible for corporate governance related matters. The main responsibilities are as follows: 1. Handling of matters related to the board meeting and shareholders’ meeting pursuant to the law: (1) Proposed the agenda of the Board of Directors meetingand to notify	None

-32-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
meeting minutes of board/shareholder meetings)?			the directors seven days prior to the designated date of meeting. Convene the meeting and provide information for the meeting. Notify the Board members to abstain from certain motions if conflict of interest is anticipated before the meeting. (2) Process filing of Shareholders’ Meeting and to produce meeting notice within the legally-stipulated deadline, meeting agenda, meeting minutes and annual reports. 2. Preparation of complete board meeting minutes and shareholders’ meeting minutes: The board meeting minutes and shareholders’ meeting minutes shall be prepared within 20 days after the meeting. 3. Assistance of the director’s inauguration and continuing education: The Company assists Directors in continuing education plans and training schedules according to the nature of the Company’s industry, and the directors’ education background and work experience. 4. Providing information needed by the Board of Directors to carryout its

-33-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
			functions: (1) Regularly notify Board members on the latest legal amendments and developments regarding company management and corporate governance. (2) Inspect level of information secrecy and provide company information needed by the Board, maintaining smooth bi-lateral communications between directors and various business managers. (3) Pursuant to the corporate governance code of practice, when independent directors need meet with internal audit supervisors in private to understand the Company’s financial status, the designated personnel shall assist to arrange such meetings. 5. Assisting the Directors in legal compliance: (1) Report implementations of corporate governance to the Board, to ensure that the Company’s Shareholders’ Meeting and Board are in compliance with relevant laws and corporate governance practiceprinciples.

-34-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
			(2) Assist or remind the Board to comply with relevant legal regulations when performing relevant duties or while making resolutions, and to propose opinions before the Board forms an illegal resolution. (3) Responsible for reviewing the announcement for material decisions made by the Board to ensure the content of the announcement is in compliance with the law. 2018 business execution is as follows: 1. Five Board of Directors meetings, five Audit Committees and two Compensation Committees were held 2. One general shareholders’ meeting 3. Member of Directors Hsiang-Tun Yu has completed an 18 - point refresher course (Please refer to page 42 of Annual Report for further details.)

-35-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
V. Has the Company established a means of communicating with its Stakeholders (including but not limited to shareholders, employees, customers, suppliers, etc.) or created a Stakeholders Section on its Company website? Does the Company respond to stakeholders’ questions on corporate responsibilities?	�		The Company has established “Stakeholder Division” and provided contact information MOPS and Company website to respond to major stakeholders’ concerns regarding corporate social responsibilities.	None
VI. Does the company appoint a professional shareholder service agency to deal with shareholder affairs?	�		The Company authorized “Fubon Securities Co., Ltd.” as stock service agency to handle shareholder transactions.	None
VII. Information Disclosure (I) Has the Company established a corporate website to disclose information regarding its financial, business and corporate governance status? (II) Does the Company adopt other information disclosure channels (e.g. maintaining an English-language website, designating staff to handle information collection and disclosure, appointing spokespersons, webcasting investors conference etc.)?	� �		(I) The Company has placed financial and corporate governance information of each year on its website. (II) The Company has an English website to disclose relevant information. The Company has a spokesperson(s), investor relations department and shareholder services related department(s) to disclose relevant information.	None
VIII. Does the Company have other important information for better	�		(I) Interests and wellness of employees: Based on the Company's concept of	None

-36-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
understanding the Company’s corporate governance system (including but not limited to interests and rights of employees, care for employees, relation with investors, relation with suppliers, relation with interested parties, continuing education of directors and supervisors, execution of risk management policies and risk measuring standards, execution of customer policies, liability insurance for the Company’s directors and supervisors)?			human-centered approach toward human resource, the Company spares no effort in creating employee welfare and providing a safe and healthy working environment. The Company regards employees as the most valuable asset. The Company's success lies in attracting and retaining talents of diverse fields to work as a team. Each employee is assessed based on his/her qualifications and skills, regardless of his/her personal traits. The company fully supports all the principles of hiring and abides by the labor laws of the countries where the business is located. In order to be pursuant to the amendments of the labor policies and promote gender equality, The Company has established “Guidelines for the Prevention and Management of Sexual Harassment” to ensure gender equality in employment and one’s dignity, and order employees’ behavior in the workplace. The confidentiality of employees’ basic information, with a view to protect organizational needs and employee privacy,such information

-37-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
			should not be disclosed under any circumstances, unless required by the government regulations. (II) Investor Relations: the Investor Relations Department was set up to specifically deal with shareholder proposals. (III) Supplier Relationship: Good relations with suppliers are maintained at all times, and signing of the Integrity Commitment is required. (IV) Interests and Rights of Stakeholders: In order to protect the interests of the Company and its stakeholders, purchase contracts are signed with all suppliers to clearly define the trading and cooperation relationship between the parties to protect the legitimate rights and interests of both parties. (V) Continuing Education of Directors: the Company’s directors are qualified with industrial professional knowledge and practice experience in operation management. Please refer to the following table for more information on continuing education. Please refer to the table below for details. (VI) Execution of risk management policy and risk measuringstandards:

-38-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies
	Yes	No	Explanation
			The management of various operational risks shall be managed by the relevant management unit according to the nature of its business, and the existing or potential risks of each business operation shall be reviewed by the audit office. The audit office shall prepare an implementation risk-oriented annual audit plan. The risk management of each department are as follows: All Divisions: Responsible for business decision-making planning, assessing medium- and long-term investment benefits to reduce strategic risks. Finance Department: Responsible for financial planning and fund scheduling, and establishment of hedging mechanisms to reduce business operational risks. System information Department: Responsible for network information security control, protection measures and responsible for network planning, construction, operation and maintenance, and continuously inspecting network quality to reduce network operation risks and information security risks. Accounting Department: Responsible for the

-39-

	Items Assessed	Items Assessed	Implementation Status	Implementation Status	Implementation Status	Implementation Status
			Yes	No	Explanation
					revision of the accounting system, budgeting, collection and analysis of execution cost data, and providing correct and immediate financial information to assess operational performance and operational risk. (VII) Recusal of Directors due to conflict of interest: The Company’s directors recuse themselves in all cases regarding conflict of interest. (VIII) Liability insurance for the Company’s Directors: Liability insurance has been covered for Directors. (IX) Qualification of personnel associated with financial transparency: The company's accounting and auditing personnel have professional knowledge and practical experience. They have not obtained the relevant licenses specified by the competent authority. Relevant personnel will be encouraged and planned to obtain relevant licenses in the future.
IX.	Please explain improvements that have been made as well as priorities and measures to improve the results of the Corporate Governance Evaluation issued by the Taiwan Stock Exchange Corporate Governance Center: Number Evaluation Indicators Improvements that have been made as well as priorities and measures to improve the results
	Number	Evaluation Indicators				Improvements that have been made as well as priorities and measures to improve the results

-40-

Items Assessed	Items Assessed	Implementation Status	Implementation Status	Implementation Status	Implementation Status
		Yes	No	Explanation
1	Do more than one third of the Directors (including at least 1 independent director) attend the shareholders’ meetings, and be disclosed in the attendance list?				Strengthen the functionality of independent directors and invite independent directors to attend shareholders’ meetings.
2	Do the Company’s independent directors participate in training courses and complete course hours as required in the Rules Governing Implementation of Continuing Education for Directors and Supervisors of TWSE/TPEx Listed Companies?				The Company proactively promotes the continuing education of independent directors.
3	Has the Company disclosed its integrity principles and progress onto its website and MOPS? Does the Company have any specific procedures and measures against dishonest conducts?				Improved. The Company has held a training course on integrity management in 2018.

Continuing Education of Directors in 2018:

Title	Name	Date	Organizer	Course	Hours
	Hsiang- Tun Yu	April 20, 2018	Taiwan Securities &	2018 Insider Trading Prevention	3 hours
			Futures Institute
		May 8, 2018	TWSE	New Governance Blueprint for Listed Companies Summit	3 hours
		August 6, 2018	Taiwan Corporate Governance Association	Standards for Directors' Fiduciary Duties and Business Judgment	3 hours
Independent
Director		September 19, 2018	Taiwan Corporate Governance Association	The 14thCorporate Governance International Summit - Compliance and Supervision of Directors’ Obligations	6 hours
		November 5, 2018	Taiwan Corporate Governance Association	Business Secret Protection and Non-competition Agreement	3 hours

-41-

(IV) Organization, responsibilities and operation status of the Compensation Committee: 1. Information on members of the Compensation Committee

Title		Has over five years work experience and meets the following professional qualifications	Has over five years work experience and meets the following professional qualifications	Has over five years work experience and meets the following professional qualifications	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Number of Other Public Companies in Which the Individual is Concurrently Serving as a Member of the Compensation Committee
		An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Work Experience in the Areas of Commerce, Law, Finance, or	1	2	3	4	5	6	7	8
				Accounting,
				or Otherwise Necessary for the Business of the Company
Independent Director	Sung-Shu Lin		�	�	�	�	�	�	�	�	�	�	1
Independent Director	Yao-Ching Chen			�	�	�	�	�	�	�	�	�	0
Independent Director	Hsiang-Tun Yu			�	�	�	�	�	�	�	�	�	1

Note: Please tick the corresponding boxes if the members have been any of the following during the two years prior to being elected or during the term of office.

(1) Not an employee of the Company or any of its affiliates.

(2) Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.

(3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs.
(5) Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as of its top five shareholders.
(6) Not a director, supervisor, managerial officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company.
(7) Not a professional individual who, or an owner, partner, director, supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof,
(8) Does not meet any of the criteria described in Article 30 of the Company Act.

-42-

Operations of the Compensation Committee
(1) There are 3 members in the Company’s Compensation Committee. (2) Current Term: From July 27, 2016 to June 25, 2019. The Compensation Committee held two meetings in the recent year as of the publication of this annual report, the qualifications and attendance of the Committee are as follows:

Title		Meetings Attended Personally	Meetings Attended by Proxy	% of Meeting Attended Personally	Remarks
Convener	Sung-Shu Lin	2	0	100%	None
Member	Yao-ChingChen	2	0	100%	None
Member	Hsiang-Tun Yu	2	0	100%	None
Other issues to be noted: I. Compensation Committee’s suggestions that are not accepted or amended by the the Board of Directors: None II. The resolutions of the Compensation Committee which Committee member has oppositions or reservations: None. III. The handling of the 2019 Compensation Committee’s proposal and resolutions, and the Company’s opinion towards the committee members. Date Discussion Resolution The handling of the Company's opinion towards committee members. 5thmeeting of the 3rd Compensation Committee March 29, 2018 1. Ratification of the appropriation of Company's 2016 managerial officers’ renumeration 2. Ratification of the appropriation of the Company’s 2017 managerial officers’ annual bonuses and performance bonuses. Approved by all members of the Compensation Committee. Submitted to the board meeting and approved by all attending Directors. 6thmeeting of the 3rd Compensation Committee November 13, 2018 1. Discussion of Directors’ re numeration and appropriation of compensation. 2. Discussion of the policies, system, standards and structure of the evaluation of managerial officers’ performance and compensation. Approved by all members of the Compensation Committee. None.

-43-

(V) Performance ofSocial Responsibilities	(V) Performance ofSocial Responsibilities	(V) Performance ofSocial Responsibilities	(V) Performance ofSocial Responsibilities
Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
I. Implementation of Corporate Governance (I) Has the Company established corporate social responsibility policies or a CSR system and reviewed the effectiveness of implementation?	�		(I) At present, the Company has established its corporate social responsibility policy, covering ethnics, laborers, safety, health, environment and management, pursuant to the policies of FGSC to drive and supervise the execution of relevant CSR operations. The Company has never slackened its corporate social responsibility efforts. It continues to uphold its commitment of “respect for employees, continued improvement, benefit to society, and sustainable management”. The Company published its “Social and Environmental Responsibility Code of Conduct” in 2014, and regularly reviews and updates it. The Company has fully implemented its corporate social responsibility, to ensure the interests of employees in the work process and occupational health and safety, to prevent environmental pollution during the manufacturing process, and to execute audit management for the supply chains, in order to achieve an economically, societallyand	None

-44-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
(II) Does the Company regularly provide CSR education and training? (III) Has the Company designated personnel to implement corporate social responsibility policy with senior management authorized by the Board of Directors to manage them? Do they prepare status reports to the Board of Directors?	� �		environmentally balanced development. (II) The Company carries out regular trainings and education on corporate business ethnics for its employees every year. For its new employees, trainings on personnel rules, management system, business ethnics and morals are carried out on their first working day to clarify their due social responsibilities and obligations (III) In 2014, the Company established CSR Committee, with General Manager as the Director General responsible for instruction of the CSR strategy planning, and reporting to the supreme person in charge, the Chairman. Manager of each factory area shall assume the role of Deputy Director General, responsible for the leading of CSR projects, and Director General is responsible for the execution of CSR projects. Each Business Group of the Company has set up a CSR branch in charge of the CSR affairs of the Business Groups. At the end of each year is an annual CSR meeting to formulate CSR work plans and goals for the coming year. After being approved by the Director General,work

-45-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
(IV) Has the Company established reasonable remuneration policies and integrated employee performance evaluation system and CSR policies, and established a clear and effective incentive and discipline system?	�		plans and regular internal audits of each factory area’s annual CSR are carried out, to ensure that the plants are in line with the relevant CSR policies of the Company. Each Business Group also periodically reviews the operation of branch performance and reports to the Committee with issues concerning stakeholders for the year. Then the relevant written materials are compiled to produce an annual CSR report, which is submitted to the CSR chairman and Board of Directors. (IV) The Company has established performance bonuses, employee compensation and other reward systems. The Company’s operating profit is distributed to employees according to employee performance, allowing the employees’ compensation to grow with the Company’s operation. In addition, the Company has set a code of employee ethics, employee self-discipline, performance evaluation and reward system, leading employees to behavior in line with the Company’s corporate social responsibility policy.

-46-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
II. Development of a Sustainable Environment (I) Is the Company committed to achieving efficient use of resources, and using renewable materials that produce less impact on the environment? (II) Has the Company developed an appropriate environmental management system, given its distinctive characteristics? (III) Is the Company aware of how climate changes affect its business activities? Are there any actions taken to measure and reduce greenhouse gas emission and energy use?	� � �		(I) The Company actively promotes water recycling, and adopts renewable/biodegradable raw materials to effectively reduce the impact of production and manufacturing on the environment. (II) In response to the international trend and customer demands, the Company step-by-step established environment management systems for its business units, and passed the certification of ISO 14001. Factory area Certification acquisition date Expiry date Yantai FuZhun 2003/6/27 2018/6/27~ 2021/6/27 HongFuJin (Taiyuan) 2011/5/12 2017/5/12~ 2020/5/13 FuZhun (Hebi) 2008/11/10 2017/11/18~ 2020/1/4 Champ Tech Optical (Foshan) 2011/3/24 2018/2/5~ 2020/3/24 Nanning Funing 2014/12/1 2018/2/6~ 2019/3/8 (III) Environmental Friendly Management Goals 1. Carbon-reduction Goal: The company has started to examine the carbon dioxide emission since 2014. Some parts of our factory areas have passed the inspection, to fulfill the role of a member	None

-47-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
			in the global village. The Company has widely promoted energy management, setting and striving to achieve the energy conservation and emission reduction targets, including air-con temperature setting, office lighting, installation of chain-switches, increase spacing of corridor lights, and resource management of environment and the 3R3. The green house gas emissions of all factory areas in 2016, 2017, 2018 are 551K tons, 357K tons and 425K tons of CO2e/year respectively. In view to further promoting emission reduction, The Company has taken 2017 as the reference year, with a project period of 3 years, to achieve the goal of 5% carbon reduction per revenue unit in 2019. 2. Electricity-reduction Goal: According to the regulations in IOS 14064, 99% of the Company’s source of green house gas emission was identified to be electricity. Thus, Foxconn Technology adopts the approach of energy-saving to reduce carbon emission. With the promotion of smart energy management as the basis,

-48-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
			the Company actively promoted all energy-saving projects through optimization of manufacture procedures, upgrading of equipments, automation and unmanning, while adopting a benchmarking management approach. , The Company has taken 2017 as the reference year, with a project period of 3 years, to achieve the goal of 5% carbon reduction per revenue (or production) unit in 2019. Specific practices for energy conservation and environmental protection: �Air-con temperature is set at 26 or above. ℃ �3R3 resource management �Installation of chain-switches on office lightings �Increase spacing between corridor lights �No neckties �Posting of small energy-saving signs �Sensor lights in pantries 3. Measures of energy-saving promotions in factory offices and offices: The following is a summary of the 2018 energy saving measures andprojects of the main

-49-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
			Foxconn Technology factories (Taiyuan, Hebi) and the Taipei factory area. Energy-saving projects include: CNC process optimization and air compressor connection improvement, station equipment optimization and lean improvement, fixture optimization, machine equipment energy saving improvement, flushing process optimization and improvement, lighting energy saving improvement on 1F of the plants, replacement of metal halide lamps with LED bay lights to improve energy saving, energy saving improvement of air conditioning system in spraying rooms, cooling tower’s cooling fan of air conditioning system energy saving improvement, process optimization improvement, adoption of LED energy saving lamps in assembly lines, split type air conditioner refrigerant replacement, installation of entire heat switchboard in air conditioning system, pasting of heat-insulating window films on the side of the sun of the buildings, cooling tower energy-saving improvement, installation of low-voltage capacitors (APFR)inpower system,

-50-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
			and all-factory lightings are replaced with LEDs. The Company has achieved an energy-saving result of 40,462,997 kWh.
III. Enforcement of Social Welfare (I) Does the Company establish policies and procedures in compliance with regulations and internationally recognized human rights principles?	�		(I) The Company has set employees’ codes of conduct in accordance with the “Labor Standards Act” and related personnel regulations, to protect the legitimate rights and interests of employees. As a member of the RBA, the company has established the "Foxconn Technology Precision Industry Co., Ltd. Corporate Social Responsibility (CSR) Code of Conduct" with reference to the RBA Code of Conduct, the Universal Declaration of Human Rights (UDHR), and the International Labor Organization (ILO) to disclose the protection of labor rights policy. According to the Company's Code of Conduct and related work practices, the Company identifies those factory areas with high social, environmental, and moral risk each year, and conducts social, environmental, and ethical on-site audits. Monitoringmechanism:	None

-51-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
(II) Does the Company have means through which employees may raise complaints? Are employee complaints being handled properly? (III) Does the Company provide employees with a safe and healthy work environment? Are employees trained regularlyon safetyand	� �		The Company conducts annual self-inspection for all factory areas. In 2018, it implemented and inspected the potential hazards of chemicals management, fire compartmentation, fire-fighting equipment, electronic device and equipment safety, gas safety, construction safety, occupational health and other areas. The Company ensures that all employees fully understand the importance of employee health and safety, and that the company's operations comply with local laws and regulations and relevant operating standards. (II) The Company provides a standardized system to receive employee complaints. New employees are informed about this system from the first day of employment. There are appropriate compliant channels for all kinds of complaints, including compliant of illegal practice of company personnel, complaints to safeguard personal legitimate rights and interests. (III) The Company provides its employees with safe and healthy working environment, and lay much emphasis on employees’ mental andphysical health.

-52-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
health issues? (IV) Does the Company have means to communicate with employees on a regular basis, and inform them of operational changes that maybe of significant impact? (V) Has the Company implemented an effective training program that helps employees develop skills over their career? (VI) Has the Company implemented consumer protection and grievance policies with regards to its R&D, procurement,	� � �		At the same time, the Company also has Health Management Center to provide medical and health-care related consultation to employees. In addition, the Company provides also health-related lectures, with an aim to create a healthy environment for all employees. (IV) The Company has established communication channels, enabling employees to have access to information and to express their opinions on the Company's operation management activities. (V) The Company adopts horizontal integration of Technology Development Committees. Employees are designated to different Technology Development Committees according to their attributes and expertise. Technology Development Committees introduce the latest knowledge and technology for various professional fields, and promote information exchange to prepare complete technical training plans for employees. (VI) The Company abides to the regulations on restricted/prohibited hazardous substances and conflict minerals,to

-53-

Items Assessed			Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
production, operation and service activities? (VII) Has the Company complied with laws and international standards with regarding the marketing and labeling of products and services? (VIII) Does the Company evaluate suppliers' past records on environmental and social conducts before commencing business relationships? (IX) Does the Company, in its contract with its major suppliers, include clauses such as that the Company may terminate the contract any time when the supplier is found violating its social responsibilities, and when such violation has significant impact on the environment and society?	� � �		provide related information to customers in order to protect consumer safety and rights. (VII) The Company complies with applicable regulations and international standards for the regulation of commercial activity and integrity management. (VIII) The company works with its suppliers on social and environmental issues such as hazardous substance control, environmental protection, labor safety and health, human rights, conflict metals and carbon footprints, and to promote the transformation of upstream suppliers into green supply chains to comply with the requirements of the local laws and regulations. In 2018, there were a total of 79 deficiencies in annual supplier SER inspection. All deficiencies have been corrected. (IX) The Company requests suppliers to sign a “procurement contract,” which includes the policies of corporate social responsibility: Suppliers shall comply to ISO14001 and OHSAS18001 in social responsibility, environmental responsibility and occupational health and

-54-

Items Assessed	Implementation Status	Implementation Status	Implementation Status	Deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
			safety requirements, while abiding to “Foxconn Supplier Social and Environmental Codes of Conduct,” as well as the Electronics Industry Code of Conduct (EICC). If the suppliers violate the above requirements, the Company has the right to terminate such contracts or purchase orders, and the supplier is responsible for the Company’s damages.
IV. Enhancement of Information Disclosure (I) Has the Company disclosed relevant and reliable CSR information on its website and at the Market Observation Post System?	�		As an EICC member, the Company is dedicated to promoting social and environmental responsibilities (SER), and developing “Foxconn Technology Codes of Conduct: Social and Environmental Responsibilities”.	None
V. If the Company has established CSR principles in accordance with "Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies," please describe its currentpractices and anydeviations from the Best Practice Principles: None.
VI. Other information useful to the understanding of corporate social responsibilities: (I) The Company has adopted a new processing system to enhance the capacity to recover wastes and sewage. The new system has been installed and put into operation in some manufacturing factory areas. (II) Based on the respect to employees, the Company emphasizes that it does not hire child labor, and does not force employees to work overtime. Managers are prohibited to discriminate or harass against employees. All these measures are all announce officially, and compliant channels have been established to listen to employees, and execute the filing of the complaints, follow-ups and corrections. (III) The company has safety and health management units in each factory area that examine the facilities, provide training to employees on industrial safety and health and conduct performance review on a regular basis. (IV) The company has a supplier management division that provides inspection and trainings on corporate social responsibilities to suppliers.
VII. Describe the criteria undertaken by any institution to certify the Company's CSR report: The Company’s CSR Report is prepared by the CSR Committee, and are assured and verified byGuangdongSoonfine Law Offices in accordance with GRI G4.

-55-

(VI) Status of Implementation of Integrity Operation

Items			Implementation Status	Deviation from the Integrity Operation Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
I. Establishment of Corporate Conduct and Ethics Policy and Implementation Measures (I) Does the company have bylaws and publicly available documents addressing its corporate conduct and ethics policy and measures, and the commitment regarding implementation of such policy from the Board of Directors and the management team? (II) Does the company establish relevant policies which are duly enforced to prevent unethical conduct and provide implementation procedures, guidelines, consequence of violation and complaint procedures in such policies? (III) Does the company establish appropriate compliance measures for the business activities prescribed in paragraph 2, article 7 of the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies and any other such activities associated with high risk of	� � �		(I) The Company operates based on principles of legality, fairness, equality, consensus and good faith. These principles of integrity are set down and implemented through the provisions of the Company’s “Declaration of Human Resources and Code of Conduct” section of the Employee Handbook. (II) The Company provides Ethical Corporate Management for all employees annually. For its new employees, trainings on personnel rules, management system, business ethnics and morals are carried out on their first working day to clarify their due responsibilities and obligations (III) The Company has always insisted on strictly adhering to corporate ethics, establishing a corporate culture of integrity, and creating a business environment of sustainable development with the business philosophy of transparency, honesty and responsibility.	None

-56-

Items			Implementation Status	Deviation from the Integrity Operation Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
unethical conduct?
II. Enforcement of ethical management (I) Does Company evaluate the ethical records of the businesses with which it has dealings and include clear ethical corporate behavior provisions in contracts with such counterparties? (II) Does the company set up a unit which is dedicated to or tasked with promoting the company’s ethical standards and reports directly to the Board of Directors with periodical updates on relevant matters?	� �		(I) The Company upholds a corporate culture of dignity and integrity. The Company is committed to full compliance with local and international anti-corruption and anti-bribery laws and regulations. The Company has a zero-tolerance policy towards activities or behaviors that are in violation of the anti-corruption policy. Corruption, bribery, embezzlement or improper activities are strictly prohibited. All employees are inducted with anti-corruption trainings. In addition, partnership with downstream suppliers, vendors and customers may only be established under the premise that they comply strictly to the highest standards of the anti-corruption policy. (II) Under the Board of Directors, there are Audit Committees,Compensation Committee and Auditing Office, which are responsible for monitoring and checking the compliance of integrity management. The Company designates the General Security Office to be responsible for the promotion of the integrity	None

-57-

Items			Implementation Status	Deviation from the Integrity Operation Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
(III) Does the company establish policies to prevent conflict of interests, provide appropriate communication and complaint channels and implement such policies properly?	�		management of the Company. The office is responsible for the promotion of the development and supervision of the integrity management policy and prevention of dishonesty, and it shall report to the Board of Directors annually. The implementation of integrity management in 2018: No corruption or involvement in dishonest behavior. In addition, the Company requires employees to sign agreements including “Employees’ Declaration”, “Employee Integrity Commitment” and “Integrity and Intellectual Property Right Agreement”, and frequently invites internal and external experts to conduct trainings so that employees may always be aware of such matters, and to keep employees informed of the latest regulatory changes to prevent employees from violating the rules or repeating similar mistakes. (III) All new employees of the Company are required to sign “Integrity and Intellectual Property Confidentiality Agreement” and are requested to comply strictly to the regulations. The Company also asks its suppliers and other related

-58-

Items			Implementation Status	Deviation from the Integrity Operation Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
(IV) To implement relevant policies on ethical conducts, does the company establish effective accounting and internal control systems that are audited by internal auditors or CPA periodically? (V) Does the Company provide internal and external ethical conduct training programs on a regular basis?	� �		parties to sign the “Partner Commitment”, to ensure that business transactions with the suppliers are conducted in a transparent and fair manner, and that annual supplier meetings and occasional SER audits are conducted to convey the Company's requirements of the supply chain to the suppliers. (IV) The Company has established accounting system and internal control system pursuant to the law in order to implement the integrity management. The internal audit staff of the Company prepares annual audit plans based on the risk assessment results, performs inspection, and then submits the audit reports to the Board of Directors. (V) Training courses on integrity management held in 2018 include internal transactions, business secrets and legal knowledge, guidelines for communication network operations, and introduction to the company's information security policy, with a total of 7 participants, or 14 man-hours.
III. Implementation of the Whistleblowing System (I) Has the Company established specific whislteblowing and rewardprocedures,	�		(I) The company has established various r misconduct reporting channels,and all reports	None

-59-

Items			Implementation Status	Deviation from the Integrity Operation Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
accessible reporting channels, and designated personnel to handle the reported misconducts? (II) Has the Company established standard operating procedures for confidential reporting and investigation of accusation cases? (III) Has the Company provided proper whistleblower protection?	� �		will be assigned to designated audit personnel and be handled with confidentiality. Employees and related personnel can report any misconducts through this system. Anyone who violates the rules of integrity management will be punished according to the company's regulation regarding rewards and punishments. Shall there be any violations of the law, legal actions will also be taken. (II) The Company has set up the dedicate groups for the handling and investigation of misconducts, which will be performed in accordance with the principles of confidentiality and standards of investigation procedures, while protecting the confidentiality of whistleblowers. (III) The company clearly defines in the SER Code of Conduct that confidentiality and anonymity will be guaranteed to ensure the confidentiality of the identity of suppliers and employees.

-60-

Items			Implementation Status	Deviation from the Integrity Operation Practice Principles for TWSE/TPEx Listed Companies and reasons for the discrepancies:
	Yes	No	Explanation
IV. Enhancement of Information Disclosure Does the Company disclose its guidelines on business ethics as well as information about implementation of such guidelines on its website and Market Observation Post System?	�		External Company website in Chinese and English: (http://www.foxconntech.com.tw)	None
V. If the Company has established integrity management principles in accordance with "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies," please describe its current practices and any deviations from the Best Practice Principles: None.
VI. Other important information to facilitate better understanding of the Company’s corporate conduct and ethics compliance practices (e.g., review the company’s corporate conduct and ethics policy). For “Principle for Integrity Management” and “CSR Report”, please refer to the Company website: http://www.foxconntech.com.tw/

(VII) If the Company has established corporate governance principles or other relevant guidelines, references to such principles must be disclosed: Please refer to the Company’s website for the company’s Corporate Governance Principles.
(VIII) Other important information material to the understanding of corporate governance within the Company: None.

-61-

(IX) Status of Implementation of Internal Control System
Statement of internal control system

Foxconn Technology Co., LTD Statement of Internal Controls

Date: March 27, 2019

The following statement has been made based on a self-assessment of the Company’s internal control system in 2018:

I. The Company is aware that creation, implementation, and maintenance of internal control system are the responsibilities of its board of directors and management, and has duly established such a system. The purpose of internal control system is to provide reasonable assurances concerning the outcomes and efficiency of the Company’s operations (including profitability, business performance, and asset security), the reliability, timeliness, and transparency of reported information, and compliance and accomplishment of relevant regulations and goals.
II. There are inherent limitations to even the most well designed internal control system. As such, an effective internal control system can only reasonably assure the achievement of the three goals mentioned above. Furthermore, changes in the environment and circumstances may all affect the effectiveness of the internal control system. However, the internal control system of the Company features a self-monitoring mechanism that rectifies any deficiencies immediately upon discovery.
III. The Company evaluates the effectiveness of its internal control system design and execution based on the criteria specified in “Regulations Governing Establishment of Internal Control Systems by Public Companies” (hereinafter referred to as the “Regulations”). The criteria introduced by the “Regulations” consists of five major elements, each representing a different stage of internal control: 1. Control environment, 2. Risk assessment, 3. Control activities, 4. Information and communication, and 5. Monitoring activities. Each major element is further divided into several subelements. Please refer to the “Regulations” for the above mentioned elements.
IV. The Company has adopted the abovementioned criteria to validate the effectiveness of its internal control system design and execution.
V. Based on the assessments described above, the Company considers the design and execution of its internal control system to be effective as at December 31, 2018. This system (including the supervision and management of subsidiaries) has provided assurance concerning the Company's business results, target accomplishments, reliability, timeliness, and transparency of reported information, and its compliance with relevant laws.
VI. This statement constitutes part of the Company’s annual report and prospectus, and shall be disclosed to the public. Any illegal misrepresentation or non-disclosure in the public statement above are subject to legal consequences described in Articles 20, 32, 171, and 174 of the Securities and Exchange Act.
VII. This statement was passed at the board meeting held on March 27, 2019 by all 6 attending Directors.

Foxconn Technology Co., LTD Chairman: Chih-Chien Hung General Manager: Han-Ming Li

-62-

If the Company is required by the Security and Futures Bureau to hire an accountant to audit the Company’s internal control system, the audit report prepared by the CPAs should be disclosed: Not applicable.
(X) Penalties imposed against the Company for regulatory violation, or penalties against employees for violation of internal control policy in the most recent year up till the printing date of this annual report; describe areas of weakness and any corrective actions taken: None.
(XI) Major resolutions passed at shareholders’ meetings and board meetings held in the most recent year up till the printing date of this annual report: 1. Resolutions passed by all attending shareholders at the shareholders’ meeting

dated June 22, 2018 and the corresponding executions:

Resolutions	Execution
Approved 2017 business reports and financial statements.	-
Approved 2017 retained earnings distributionplans.	Shareholders’ cash dividend: NT$3.6 per share,distributed on August 24,2018.

Major resolutions passed in board meetings held in FY2018 till April 30, 2019

	2019
	Date	Major Resolutions
March 29, 2018		1. Approval of 2017 Business reports and financial reports. 2. In compliance with the introduction of IFRS 16 “Leases”, the Company’s initial assessment of the possible impacts and CPA’s assessment opinions of the Company’s applicability to IFRS 16. 3. Setting of the date and convening of the Company's 2018 general shareholders’ meeting. 4. Proposal of formulating the period for accepting shareholders' proposals. 5. Proposal of application for the relevant credit line from the financial institution and sign related contracts, to meet the needs of operating turnover and interest rate risk management. 6. Approved the statement of 2017 internal control system.
		7. Proposal of the Company’s 2018 Financial Statements to
		be audited and certified by PwC Taiwan, the evaluation of independence of CPAs and the service fees. 8. The change of accounting manager 9. Ratification of the appropriation of Company's 2016 managerial officers’ renumeration. 10. Ratification of the appropriation of the Company’s 2017 managerial officers’ annual bonuses and performance bonuses.
May 10, 2018		1. Proposal of the distribution of 2017 remuneration to employees 2. Proposed 2017 retained earnings distributionplans.
May14,2018		The Company’s 2018Q1 financial reports

-63-

Date	Major Resolutions
August 13, 2018	Proposed to apply for the relevant credit line from the financial institution and sign related contracts, to meet the needs of operating turnover and interest rate risk management.
November 13, 2018	1. Proposed to apply for the relevant credit line from the financial institution and sign related contracts, to meet the needs of operating turnover and interest rate risk management. 2. Amendments to the Company’s internal control policies 3. Setting of the 2019 Annual Audit Plan 4. Proposal of indirect acquisition of Champ Tech Optical (Foshan) Corporation, investment in Mainland China 5. Proposal of merging of Furui Precise Component (Kunshan) Co., Ltd. into FuYu Precision Components (Kunshan) Co., Ltd., the Company’s investment in Mainland China.
March 27, 2019	1. Ratification of 2018 business reports and financial reports. 2. Proposed to apply for the relevant credit line from the financial institution and sign related contracts, to meet the needs of operating turnover and interest rate risk management. 3. Set the date and convening of the Company's 2019 general shareholders’ meeting. 4. Proposal of approving shareholders’ approval and nomination of Director Candidate. 5. Director election. 6. Releasing of the prohibition on Directors from participation in competitive business 7. Amendments to the Company’s “Procedures for Acquisition and Disposal of Assets” 8. Amendments to the Company’s “Procedures of Loans to Others” 9. Amendments to the Company’s “Procedures Procedures for Handling Endorsement/Guarantee” 10. Amendments to the Company’s “Procedures for Acquisition and Disposal of Assets” 11. Formulation of the “Statement of 2018 Internal Control System”.
	12. Proposal of the Company’s 2019 Financial Statements to
	be audited and certified by PwC Taiwan, the evaluation of independence of CPAs and the service fees. 13. Ratification of the appropriation of Company's 2017 managerial officers’ renumeration. 14. Ratification of the appropriation of the Company’s 2018 managerial officers’ annual bonuses and performance bonuses.

-64-

(XII) Written opinions or declarations made by Directors or Supervisors against board resolutions in the most recent year, up till the printing date of this annual report: None.

Resignation or dismissal of chairman, general managers, accounting directors, financial directors,internal auditors,and R&D supervisors:	Resignation or dismissal of chairman, general managers, accounting directors, financial directors,internal auditors,and R&D supervisors:	Resignation or dismissal of chairman, general managers, accounting directors, financial directors,internal auditors,and R&D supervisors:	Resignation or dismissal of chairman, general managers, accounting directors, financial directors,internal auditors,and R&D supervisors:	Resignation or dismissal of chairman, general managers, accounting directors, financial directors,internal auditors,and R&D supervisors:
financial directors,internal auditors,and R&D supervisors:
Title	Name	On-board Date	Date of Resignation or Dismissal	Summary of Resignation or Dismissal
Chief Accounting Officer:	Chung-Chun Wang	August 15, 2017	April 1, 2018	Transfer of Duties

-65-

III. Audit Fees

III. Audit Fees
(I) Audit Fees
Name of accounting firm	Name of CPA		Audit period	Remarks
PricewaterhouseCoopers Taiwan	Sheng-Chung Hsu	Han-Chi Wu	2018	-

Unit: NTD thousand

Fee category Range	Fee category Range	Fee category Range	Fee category Range	Fee category Range	Audit fees	Audit fees	Non-Audit fees	Non-Audit fees	Non-Audit fees	Total	Total
1	Less than NT$2,000,000						�
2	NT$2,000,000(incl.)~ NT$4,000,000
3	NT$4,000,000(incl.)~ NT$6,000,000				�					�
4	NT$6,000,000(incl.)~ NT$8,000,000
5	NT$8,000,000(incl.)~ NT$10,000,000
6	NT$10,000,000 and above
									Unit: NTD thousand
Name of accounting firm		Name of CPA	Audit fees		Non-Audit fees						CPA audit period
				System design	Commercial registration	Human resources		Other (Note)	Subtotal
Pricewaterhouse Coopers Taiwan		Sheng-Chung Hsu Han-Chi Wu	4,810	0	0	0		1,140	1,140		2018.01.01 ~ 2018.12.31

Unit: NTD thousand

Note: The other service includes $700,000 of transfer pricing service; Group's Master File and NT$400,000 of Country By Country Report; and NT$40,000 of Certification of Business/Income Tax for the concurrent business operator.
(II) Non-audit remuneration to external auditors, accounting firms and related businesses that amount to one-quarter or higher of audit remuneration: Not applicable
(III) If there is a reduction of audit fees paid compared to that in the previous year due to change of accounting firms, the amount of fees reduced, percentage, and reason shall be disclosed: None.
(IV) If the audit fees paid is less than 15% of that in the previous year, the amount of fees reduced, percentage, and reason shall be disclosed: None.

-66-

IV. Information Regarding FTC’s Independent Auditor

(I) FormerCPAs:
Date of change	January1,2018 and January1,2019
Reason and Summary of change	The Company was formally audited by accountants, Yung-Chien Hsu and Sheng-Chung Hsu, of PricewaterhouseCoopers Taiwan. Due to the internal adjustment of PricewaterhouseCoopers Taiwan, the accountants have been changed to Sheng-Chung Hsu and Han-Chi Wu, since Q1 of 2018. The Company was formally audited by accountants, Sheng-Chung Hsu and Han-Chi Wu, of PricewaterhouseCoopers Taiwan. Due to the internal adjustment of PricewaterhouseCoopers Taiwan, the accountants have been changed to Min-Chuan Feng and Han-Chi Wu,sinceQ1 of 2019.
State whether the Appointment is Terminated or Rejected by the Consignor or CPAs	Client Status		Name of CPA	Consignor
	Appointment terminated automatically		-	-
	Appointment rejected (discontinued)		-	-
The Opinions other than Unmodified Opinion Issued in the Last Two Years and the Reasons for the Said Opinions	None
Is there any disagreement in opinion with the issuer	Yes	-	Accounting principle or practice
		-	Disclosure of financial statements
		-	Auditingscope orprocedures
		-	Others
		-
	None	�
	Remark
Other Disclosures	None

-67-

(II) SuccessorCPAs:
Name of accountingfirm	PricewaterhouseCoopers Taiwan
Name of CPA	Sheng-Chung Hsu and Han-Chi Wu (2018) Min-Chuan Fengand Han-Chi Wu(2019)
Date of Engagement	January 1, 2018 January1,2019
Prior to the Formal Engagement, Any Inquiry or Consultation on the Accounting Treatment or Accounting Principles for Specific Transactions, and the Type of Audit Opinion that Might be Rendered on the Financial Report	None
Written Opinions from the Successor CPAs that are Different from the Former CPA’s Opinions	None

(III) The Reply of former CPAs: None.

V. Any of the Company’s Chairman, General Manager, or managers responsible for financial or accounting affairs being employed by the auditor’s firm or any of its affiliated Company in the most recent year: None.
VI. Movement on Transfer and Pledge by Directors, Managerial Officers and Shareholders Holding 10% or more of Shares of the Company

-68-

(I) Changes in Equity

	Changes in Equity
				Unit: Shares
Title	Name	2018		As of April 30 of current
				year
		Net increase (decrease) in shares held	Net increase (decrease) in shares pledged	Net increase (decrease) in shares held	Net increase (decrease) in shares pledged
Director	HongYang Venture Capital Investment Co.,Ltd.	0	0	0	0
	Representative: Chih-Chien Hung	0	0	0	0
Director	HongYang Venture Capital Investment Co.,Ltd.	0	0	0	0
	Representative: Fang-Yi Cheng	0	0	0	0
Director	Caixin International Capital Investment Co.,Ltd.	0	0	0	0
	Representative: Feng-Yuan Dai	0	0	0	0
Director	Caixin International Capital Investment Co.,Ltd.	0	0	0	0
	Representative: Hsueh-Kun Li	52,680	0	0	0
Independent Director	Sung-Shu Lin	0	0	0	0
Independent Director	Yao-Ching Chen	0	0	0	0
Independent Director	Hsiang-Tun Yu	0	0	0	0
President	Han-MingLi	35,679	0	0	0
Accounting Director	Yuan-Wen Lan	0	0	0	0
Financial Director	Tzu-Hung Li	35,280	0	0	0

(II) Information on equity transfer: The counterparties of equity transfer are not related parties.

(III) Information on equity pledge: The counterparties of share pledges are not related parties.

-69-

VII. Information on Relationships among Top 10 Largest Shareholders:

							April 23,2019 / Unit: Shares	April 23,2019 / Unit: Shares	April 23,2019 / Unit: Shares
Name	Shareholding		Shares Held by Spouse & Minors		Total shares held in the name of others		Names of spouse or other relatives within two degrees of consanguinity who are also among the Company’s top 10 largest shareholders		Remarks
	Number	Percentage of Shareholding	Number	Percentage of Shareholding	Number	Percentage of Shareholding	Name
								Relationship

Hon Hai Precision Industry Co., Ltd. Person in Charge: Terry Gou	139,725,801	9.88%	0	0.00%	0	0.00%	BaoXin International Investment Co., Ltd. HongYang Venture Capital Investment Co., Ltd. HongYuan International	Investors whose investment is under equity method	－
	0
		0.00%	0	0.00%	0	0.00%	Investment Co., Ltd
							HongQi International Investment Co.,Ltd.
BaoXin International Investment Co., Ltd. Person in Charge: Chiu-Lien Huang							HongYuan International Investment Co., Ltd HongQi International Investment Co., Ltd.	Chairman Same as above	－
	126,181,274	8.92%	0	0.00%	0	0.00%

	0	0.00%	0	0.00%	0	0.00%
HongYang Venture Capital Investment Co., Ltd.	85,003,766	6.01%	0	0.00%	0	0.00%	None	None	－
HongYang Venture Capital Investment Co., Ltd. Representative: Chih-Chien Hung	12,562	0.00%	0	0.00%	0	0.00%	None	None	－
XinSheng Investment Co., Ltd.	78,883,000	5.58%	0	0.00%	0	0.00%	None	None	－
HongYuan International Investment Co. Ltd Person in Charge: Chiu-Lien Huang							BaoXin International Investment Co., Ltd. HongQi International Investment Co., Ltd.	Chairman Same as above	－
	34,139,368	2.41%	0	0.00%	0	0.00%

	0
		0.00%	0	0.00%	0	0.00%

HongQi International Investment Co., Ltd. Person in Charge: Chiu-Lien Huang							HongYuan International Investment Co., Ltd BaoXin International Investment Co. Ltd.	Chairman Same as above	－
	31,870,165	2.25%	0	0.00%	0	0.00%

	0	0.00%	0	0.00%	0	0.00%

-70-

Name	Shareholding	Shareholding	Shares Held by Spouse & Minors	Shares Held by Spouse & Minors	Total shares held in the name of others	Total shares held in the name of others	Names of spouse or other relatives within two degrees of consanguinity who are also among the Company’s top 10 largest shareholders	Names of spouse or other relatives within two degrees of consanguinity who are also among the Company’s top 10 largest shareholders	Remarks
	Number	Percentage of Shareholding	Number	Percentage of Shareholding	Number	Percentage of Shareholding	Name
								Relationship

JPMorgan Chase as custodian of Vanguard Emerging Market Stock Index Fund Account	17,847,583	1.26%	0	0.00%	0	0.00%	None	None	－
JPMorgan Chase Bank as custodian of Vanguard Star Vanguard Total International Stock Index	17,363,703	1.23%	0	0.00%	0	0.00%	None	None	－
Bank of Taiwan as custodian of Designated Account for Mars Investment Limited	17,204,010	1.22%	0	0.00%	0	0.00%	None	None	－
XianJin International Investment Co., Ltd.	15,131,000	1.07%	0	0.00%	0	0.00%	None	None	－

VIII. Combined Shareholding Ratio

March 31, 2019/Unit: thousand shares

Affiliated Enterprise	Ownership by the Company	Ownership by the Company	Ownership by Directors, Supervisors, Managerial officers, and directly/indirectly owned subsidiaries	Ownership by Directors, Supervisors, Managerial officers, and directly/indirectly owned subsidiaries	Total Ownership	Total Ownership

	Shares	% of Shareholding	Shares	% of Shareholding	Shares	% of Shareholding
Foxconn Precision Components HoldingCo., Ltd.	135,840	100%	-	-	135,840	100%
Q-Run Holdings Ltd.	480,078	100%	-	-	480,078	100%
Hua-Zhun Investment Co.,Ltd.	125,478	100%	-	-	125,478	100%
Syntrend Digital Co., Ltd.	49,032	20%	-	-	49,032	20%

-71-

Four. Fund Raising

I. Capital and Shares

(I) Capital and Shares

Unit: Thousand shares

Share categories		Authorized capital	Authorized capital
	Outstanding shares (public listed)	Unissued shares	Shares retained for employee share warrants or convertible bonds with warrants		Total
Registered Common Shares	1,414,485	35,515	50,000		1,500,000

(II) Sources of Capital

Unit: Thousand shares / NTD thousand

		Authorized capital	Authorized capital	Paid-in capital	Paid-in capital	Remarks	Remarks
Year / Month	Issue price (NTD)	Number	Amount	Number	Amount	Source of capital (NTD thousand)	Paid-in properties other than cash	Others
1990.4	−	2,500	25,000	2,500	25,000	Establishment	None	−
1990.9	−	4,000	40,000	4,000	40,000	Capital increase from	None	−
						cash 15,000
1992.6	−	10,000	100,000	10,000	100,000	Capital increase from	None	−
						cash 60,000
1994.5	10 10	30,000	300,000	30,000	300,000	Capital increase from	None	Note 1
						cash 120,000
						Capital increase from
						surplus 80,000
1995.5	20 10	43,600	436,000	43,600	436,000	Capital increase from	None	Note 2
						cash 40,000
						Capital increase from
						surplus 96,000
1996.8	10	100,000	1,000,000	59,672	596,720	Capital increase from	None	Note 3
						surplus 121,480
						Capital increase from
						capital reserve 39,240
1997.6	35	100,000	1,000,000	74,672	746,720	Capital increase from	None	Note 4
						cash 150,000
1997.7	10	100,000	1,000,000	87,775	877,750	Capital increase from	None	Note 5
						surplus 131,030
1998. 12	21	200,000	2,000,000	145,700	1,457,000	Capital increase from	None	Notes 6 and 8
						cash 579,250
2002.2	20	250,000	2,500,000	212,500	2,125,000	Capital increase from	None	Notes 7 and 8
						cash 668,000
2002.9	10	500,000	5,000,000	224,049	2,240,499	Capital increase from	None	Note 9
						surplus 115,499
2003.9	10	500,000	5,000,000	248,400	2,484,000	Capital increase from	None	Note 10
						surplus 243,501
2004.4	10	700,000	7,000,000	458,876	4,568,760	Capital increase from	None	Note 11
						acquisition 2,084,760

-72-

		Authorized capital	Authorized capital	Paid-in capital	Paid-in capital	Remarks	Remarks
Year / Month	Issue price (NTD)	Number	Amount	Number	Amount	Source of capital (NTD thousand)	Paid-in properties other than cash	Others
2004.9	10	700,000	7,000,000	506,500	5,065,000	Capital increase from	None	Note 12
						surplus 496,240
2005.9	10	900,000	9,000,000	562,135	5,621,350	Capital increase from	None	Note 13
						surplus 556,350
2006.9	10	900,000	9,000,000	653,787	6,537,873	Capital increase from	None	Note 14
						surplus 916,523
2007.9	10	900,000	9,000,000	758,955	7,589,553	Capital increase from	None	Note 15
						surplus 1,051,680
2008. 10	10	1,000,000	10,000,000	847,901	8,479,009	Capital increase from	None	Note 16
						surplus 889,455
2009.8	10	1,100,000	11,000,000	972,041	9,720,409	Capital increase from	None	Note 17
						surplus 1,241,400
2010.9	10	1,250,000	12,500,000	1,112,990	11,129,902	Capital increase from	None	Note 18
						surplus 1,409,493
2011.8	10	1,500,000	15,000,000	1,172,720	11,727,200	Capital increase from	None	Note 19
						surplus 597,298
2012.8	10	1,500,000	15,000,000	1,237,016	12,370,159	Capital increase from	None	Note 20
						surplus 642,959
2013.7	10	1,500,000	15,000,000	1,306,490	13,064,902	Capital increase from	None	Note 21
						surplus 694,742
2014.7	10	1,500,000	15,000,000	1,376,726	13,767,258	Capital increase from	None	Note 22
						surplus 702,356
2015.9	10	1,500,000	15,000,000	1,395,024	13,950,240	Capital increase from	None	Note 23
						surplus 182,982
2016.7	10	1,500,000	15,000,000	1,414,485	14,144,852	Capital increase from	None	Note 24
						surplus 194,612

Note 1: Approved by FSC August 29, 1994 (83), TCZ(I) No. 31973 Note 2: Approved by FSC May 5, 1995 (84), TCZ(I) No. 23841 Note 3: Approved by FSC May 10, 1996 (85), TCZ(I) No. 30388 Note 4: Approved by FSC March 14, 1997 (86), TCZ(I) No. 20306 Note 5: Approved by FSC June 3, 1997 (86), TCZ(I) No. 43820 Note 6: Approved by FSC October 27, 1998 (87), TCZ(I) No. 53727; with restrictions on listing or trading Note 7: FSC October 31, 2001 (90), TCZ(I) No. 162346; with restrictions on listing or trading Note 8: FSC May 23, 2002 (91), TCZ(I) No. 125626; approved to lift the restrictions of shares on listing or trading. Note 9: Approved by FSC July 19, 2002 (91), TCZ(I) No. 0910140539 Note 10: Approved by FSC July 16, 2003 (92), TCZ(I) No. 0920132018 Note 11: Approved by FSC January 7, 2004 (93), TCZ(I) No. 0920161216 Note 12: Approved by FSC September 16, 2004 (93), TCZ(I) No. 09301177690 Note 13: Approved by FSC July 22, 2005 (94), JGZYZ No. 0940129818 Note 14: Approved by FSC July 11, 2006 (95), JGZYZ No. 0950129698 Note 15: Approved by FSC July 5, 2007 (96), JGZYZ No. 0960034305 Note 16: Approved by FSC June 30, 2008 (97), JGZYZ No. 0970032406 Note 17: Approved by FSC June 23, 2009 (98), JGZFZ No. 0980031085 Note 18: Approved by FSC July 1, 2010 (99), JGZFZ No. 0990034119 Note 19: Approved by FSC June 23, 2011 (100), JGZFZ No. 1000028745 Note 20: Approved by FSC July 5, 2012 (101), JGZFZ No. 1010029787 Note 21: Approved by FSC July 11, 2013 (102), JGZFZ No. 1020027015 Note 22: Approved by FSC July 17, 2014 (103), JGZFZ No. 1030027391 Note 23: Approved by FSC July 24, 2015 (104), JGZFZ No. 1040028127 Note 24: Declaration approved on July 27, 2016 by the FSC.

-73-

(III) Information relevant to the aggregate reporting policy: None.

(IV) Shareholder Structure

					April 23 2019	April 23 2019
Shareholder Structure Quantity	Government agencies	Financial institutions	Others institutional investors	Foreign institutions & individuals	Individuals	Total
Number of Shareholders	6	40	177	694	122,929	123,846
Shareholding	26,687,624	53,744,236	521,585,038	403,751,745	408,716,549	1,414,485,192
Percentage of Shareholding	1.89%	3.80%	36.87%	28.54%	28.90%	100.00%

(V) Shareholding Distribution Status 1. Distribution of common shares

			April 23 2019
Tiers of Shareholding	Number of Shareholders	Total Shares Held	Holding Percentage (%)
1 to 999	37,797	6,839,681	0.48%
1,000 to 5,000	67,742	139,524,588	9.86%
5,001 to 10,000	10,397	76,138,713	5.38%
10,001 to 15,000	3,152	38,358,950	2.71%
15,001 to 20,000	1,528	27,494,168	1.94%
20,001 to 30,000	1,346	33,379,411	2.36%
30,001 to 40,000	531	18,570,583	1.31%
40,001 to 50,000	293	13,362,270	0.95%
50,001 to 100,000	533	36,701,267	2.60%
100,001 to 200,000	237	32,624,499	2.31%
200,001 to 400,000	113	31,816,722	2.25%
400,001 to 600,000	43	20,397,221	1.44%
600,001 to 800,000	21	14,706,613	1.04%
800,001 to 1,000,000	15	13,152,816	0.93%
1,000,001 and above	98	911,417,690	64.44%
Total	123,846	1,414,485,192	100.00%

Distribution of preferred stocks: The Company does not issue preferred stocks.

-74-

(VI) List of major shareholders


		April 23 2019
Shares Name of major shareholders	Shares Held (Shares)	Holding Percentage (%)
Hon Hai Precision IndustryCo.,Ltd.	139,725,801	9.88%
BaoXin International Investment Co.,Ltd.	126,181,274	8.92%
HongYangVenture Capital Investment Co.,Ltd.	85,003,766	6.01%
XinShengInvestment Co.,Ltd.	78,883,000	5.58%
HongYuan International Investment Co. Ltd	34,139,368	2.41%
HongQi International Investment Co.,Ltd.	31,870,165	2.25%
JPMorgan Chase as custodian of Vanguard Emerging Market Stock Index Fund Account	17,847,583	1.26%
JPMorgan Chase Bank as custodian of Vanguard Star Vanguard Total International Stock Index	17,363,703	1.23%
Bank of Taiwan as custodian of Designated Account for Mars Investment Limited	17,204,010	1.22%
XianJin International Investment Co.,Ltd.	15,131,000	1.07%

(VII) Information on Market Price, Book Value, Earnings Per Share and Dividends

Items	Year	Year	2017	2018	As of March 31, 2019 of currentyear
Market price per share (Note 1)	Highest		102	88.7	64.4
	Lowest		81.1	59.2	57.5
	Average		90.63	74.08	60.65
Equity per share	Before distribution		95.10	70.35	73.70
	Before distribution		91.50	-	-
Earnings per share	Weighted-average shares (thousand shares)		1,414,485	1,414,485	1,414,485
	Earningsper share(NTD) (Note 2)		7.05	6.47	0.57
Dividend per share (NTD) (Note 3)	Cash dividends		3.60	3.20	-
	Stock dividends	From earnings	0	0	-
		From capital surplus	None	None	-
	Cumulative undistributed dividends (Note 4)		None	None	-
Investment return analysis	P/E ratio		12.86	11.45	-
	Price-dividend ratio		25.18	23.15	-
	Cash dividendyield		3.97%	4.32%	-

Where stock dividends were paid from earnings or capital reserves, market price and cash dividends per share are adjusted retrospectively for the number of new shares issued. Note 1: The market price per share is adjusted due to the distributed stock dividends. Note 2: The earnings per share is adjusted due to the distributed stock dividends. Note 3: 2018 dividend per share has not yet been approved by the Shareholders’ Meeting.

-75-

(VIII) Dividend Policy and Execution Status
Dividend policy: The Company is in a growing stage. Therefore, the Company’s dividend distribution policy is subject to the Company’s current and future investment environment, capital requirements, domestic and foreign competition, capital budgets and other factors, taking into account the interests of shareholders and long-term financial planning considerations, stock dividends on the accumulated allocable earnings should not be less than 15% of the accumulated allocable earnings and cash dividends of not less than 10%.
Distribution of stock dividends at this Shareholders’ Meeting: The Company plans to distribute dividends of NT$4,526,352,615 to shareholders from the distributable surplus of 2018, and to distribute the cash dividend of NT$3.2 per share. The Board of Directors will authorize the Chairman to determine the ex-dividend date, issuance date and other relevant matters after the resolution is approved at the Shareholders’ Meeting.
(IX) Impact of stock dividends on Company’s operating performance, EPS and ROE: Not Applicable.
(X) Remuneration to employees and Directors
Information on limit or percentage of remuneration to employees, directors, and supervisors, as set forth in the Company’s Articles of Incorporation: According the Articles of Incorporation adopted by the Board, 4-6% of the company profit (Surplus refers to profit before tax deducted appropriated employee compensation) is to set aside for employee remuneration.
The estimation basis of the remuneration amount to employees, directors, and supervisors for the current period; the estimation basis of the number of shares of stock dividend to employees; and the the accounting treatment of the discrepancy, if any, between the actual distributed amount of employees’ stock bonus and estimated figure thereof: (1) In May 9, 2019, the Board of Directors approved 5.98% of the 2018 earnings to be set aside as cash dividend for 2018 employees compensation.
(2) Where there is discrepancy between the actually distributed and the estimated amount, it shall be treated in accordance with the estimates.
1. Remuneration resolved by the board of directors: (1) The proposed employee compensation totaled NT$666,180,470, and remuneration for Directors is NT$0.
(2) In circumstances where any differences between the actual distributed and recognized amount, the difference, reasons and handling of such matter shall be stated as follows: There is no difference between the actual distributed amount and the recognized amount.
1. Actual distribution of remuneration to employees and Directors in the previous fiscal year. (1) Actual distribution:

Unit: NTD; shares

previous fiscal year. (1) Actual distribution:	previous fiscal year. (1) Actual distribution:	previous fiscal year. (1) Actual distribution:	Unit: NTD;shares
Remuneration to employees			Directors' remuneration
Amount of employee stock dividends	Number of shares of the employee stock dividends	Employee cash dividends
0	0	457,835,087	0

-76-

(2) In circumstances where any differences between the actual distributed and recognized amount, the difference, reasons and handling of such matter shall be stated as follows: There is no difference between the actual distributed amount and the recognized amount.
(XI) Share repurchases: None

II. Corporate Bonds

(I) Corporate Bonds: None
(II) Convertible Corporate Bonds: None
(III) Exchangeable Corporate Bonds: None
(IV) Shelf Registration Statement for Issuing Corporate Bonds: None
(V) Corporate Bonds: None.
III. Preferred Shares(with Warrants): None.
IV. Global Depository Receipts (GDRs): None.
V. Subscriptions of Warrants for Employees : None.
VI. Names of Managers holding Warrants for Employee and Top 10 Employee in terms of Subscription of Warrants, and the Acquisition Status: None
VII. Employee Restricted Stock Plans: None.
VIII. Names of Managers holding New Shares for Employee Restrickted Stocks and Top 10 Employee in terms of Subscription of the New Shares, and the Acquisition Status: None.
IX. Issuance of New Shares Regarding to Acquisitions of the Other Companies:
(I) Issuance of new shares to merge with or acquire other companies in the most recent fiscal year and the current year as of the printing date of this annual report: 1. The assessment opinions of the lead securities underwriter concerning the issuance of new shares to merge with or acquire other companies in the most recent quarter: None.
1. The implementation status of the past quarter. If the progress or benefit of such implementation does not meet the targets, its impact on shareholders’ equity and an improvement plan shall be specified: None.

-77-

(II) Issuance of new shares that has been approved at the board meeting to merge with or acquire other companies in the most recent fiscal year and the current year as of the printing date of this annual report: None.

X. Implementation of Fund Usage

The Company has no uncompleted issuance plans or completed plans with unrealized benefits in the last three years of the issuance or private placement of securities.

-78-

Five. Operating Highlights

I. Business Activities:

(I) Business scope:
Major content of business activities (1) Manufacturing, processing and sales of televisions, fax machines, video recorders, audio and related components.

(2) Manufacturing, processing and sales of computer terminals, computers, monitors, electronic computers and peripheral device, power supplies and related components.

(3) Manufacturing, processing and trading of uninterruptible power system equipment.

(4) Manufacturing, processing and trading of telephone, and communication devices.

  - (5) Imports and exports of the aforementioned products. (6) Agenting for the distribution, quotation and bidding of domestic and foreign manufacturers’ products.

  - (7) G801010 Warehousing and Storage (8) CC01080 Electronic Parts and Components Manufacturing (9) C805050 Industrial Plastic Products Manufacturing (10) CC01010 Electric Power Supply, Electric Transmission and Power Distribution Machinery Manufacturing

  - (11) C801010 Basic Industrial Chemical Manufacturing (12) CA02990 Other Fabricated Metal Products Manufacturing Not Elsewhere Classified (Metal Computer Casings)

  - (13) I301010 Software Design Services (14) I301020 Data Processing Services (15) I301030 Digital Information Supply Services (16) C805030 Plastic Made Grocery Manufacturing (17) ZZ99999 All business items that are not prohibited or restricted by law, except those that are subject to special approval.

Operational proportion: The business operation is mainly on 3C electronic devices. Please refer to the Production and Sales Table for the output and sales volumes in the most recent two years.
Current product items:
- (1) Production and sales of hand-held device casings and related components of devices including feature phones, smart phones, laptops, tablet computers, consumer electronics and digital cameras.
- (2) Production and sales of metal parts and related machine components for automobiles and electric vehicles.
- (3) Production and sales of thermal modules for system products including desktop computers, laptops, tablet computers, servers, smart phones and game consoles.
- (4) Production and sales of MIM related products.
- (5) Manufacturing of consumer electronics components, and system assembly and sales of consumer electronics.

-79-

New products to be developed:
- (1) Surface treatment technology Surface treatment techniques such as anodizing, micro-arc oxidation, electrostatic coating, high-speed grinding, high-gloss technology, powder coating and PVD.
- (2) New materials R&D of composite materials such as aluminum alloy, special magnesium alloy, graphene, stainless steel, carbon fiber and AlSiC.
- (3) Process technology Process technology development for precision stamping, large extrusion technology, heterogeneous welding, friction welding, wet polishing and high precision sintering.
- (4) Thermal products Product development of micro heat pipes, Slim Fan, heat exchange plates, fixing devices, spring clips, thermal paste, graphene, vapor chamber and MEMS thermal modules.
(II) Industry overview:
Industry overview and its development (1) Metal casing Since the millennium, the metal casing industry has been booming.

Besides the continuous growth of the overall market, its application has also extended, and the penetration rate of various products has also increased year by year. After years of development, the metal casings have been widely used in the following products:

     1. Mobile: Including smart phones and feature phones. 2. Laptops: Metal casings are mainly used in commercial laptops, and partly in consumer laptops.

     3. Tablet computers. 4. Consumer electronics: Consumer electronics such as MP3s and digital cameras.

     5. Transportation vehicles: Traditional vehicles, electric vehicles or other transportation vehicles shows a trend of an expanding adoption of light metal parts.

     6. Others.

     - Although the current development of the industry is divergent, it

     - can be summarized in the following aspects: 1. Competitors: Taiwanese manufacturers still dominate the industry, and accounting for over 80% of the market share. It is still difficult for manufacturers from other regions to join the competition.

     - 2. Technology: The R&D of die casting, extrusion and forging technology requires large amount of financial investment, and has a long learning curve. Thus, it bears a high entry threshold for new competitors to enter the competition in a short time.

     - 3. Materials: From alloys of magnesium, aluminum, titanium and others in the early stage, the manufacturers gradually adopted stainless steel and composite materials.

     - 4. Surface treatment: In the early stage, it was mainly coated, and recently, it has mainly developed to anodization and PVD.

-80-

As for the future of the industry, its the forming of the future of the industry should an extension of the past and an modification of the present. Based on the past information and the latitude and longitude observation of the development, the future development of the industry may be concluded as follows:

Competition trend: Taiwanese manufacturers dominate the high-end and high-margin markets, and the new competitors dominate the low-end and low-margin markets.
Product Trend: The main focus of short- to medium-term product development is high-end smart phones, while that of long-term product development is automobiles and machine tools.
Material trends: Aluminum alloys, magnesium alloys and stainless steels are still the main focus of short- to medium-term material development while that of long-term product development is moving toward composite materials.
Technology trends: multi-technology combination, supplemented by single technology.

As far as the above-mentioned industrial development is concerned, the Company has the most complete and diversified technology, and was one of the first to enter the non-3C industry such as automobiles, with strong capital backing from Foxconn Group. Therefore, the Company will undoubtedly still be the leader of the metal casing industry, and has a promising future.

(2) Thermal modules

In the past, the development of the thermal module industry has been inextricably linked to the working hours of desktop CPUs. Indeed, with the increasing demand of computing speed for electronic products such as desktop computers, the demand for heat dissipation has increased with the increase in the clock rate of computer CPUs. Therefore, the thermal module industry is prosperous. Its application has also extended from desktop computers to the following products: 1. Laptops: Including commercial laptops, consumer laptops and AIO computers.

Game consoles.
Servers 4. Smart phones. 5. LED lights
Others.

As for the current development of the heat-dissipation industry, although it is divergent, it can be summarized in the following aspects: 1. The demand for desktop computer thermal modules is still declining year by year. However, the demand cooling modules for devices including e-sports computers, cloud and smart phones continues to grow. 2. The technology is developing towards diversification. The technologies such as heat sinks, thermal modules, vapor chamber, graphite sheets and water-cooling heat dissipation are all prospering.

-81-

Cooling or thermal conductive materials have evolved from copper to aluminum, and then to graphene and other composites.
For portable products, heat sink combining with metal casing to dissipate heat has becoming the trend.
The trend of miniaturization and thinning continues.

The Company is very optimistic about the future of the thermal module industry. The future development can be summarized as follows:

Competitive trend: The continual consolidation is inevitable, which can be seen in the case where Nidec Corporation acquired partial shareholding in a Taiwanese manufacturer, Asia Vital Components Co., Ltd.
Product Trends: The application aspect will continue to expand into new areas, such as smart phones, base stations and data centers.
Technology trends: New composite heat sink materials will be the focus of future development.

As the functions of modern electronic products are becoming more and more integrated, the performance is becoming more and more powerful, the number of components is gradually increasing, and the power consumption is also increasing. Therefore, with the increasing of heat source and heat energy, the application and use of and demand of the thermal modules continues to grow, the design is becoming more and more diverse, and the difficulty of technical integration is also increasing. These lead to high challenges for the thermal module designers. Foxconn Technology has always had the best talent pool in the industry, with best quantity and quality. The Company has always been proud of it. Therefore, it has absolute confidence in the integrated design of future thermal modules to continue to maintain its leading position in the thermal model industry.

(3) Game consoles.

In the past few years, the global game console market is divided in three main sections, game consoles, PC consoles and mobile devices. It was widely believed that with the rise of the smart phones and tablet computers, it would be difficult for the game console market to boom. However, the performance of Sony and Nintendo in the past two to three years shows that the game console still has a place in the market, and plays an unneglectable role in the market.

Amidst the popularity of mobile games and the e-sports market, the game console still has its share in the market, and shows no signs of slumping. The main reasons for this are as follows:

Due to the high development cost of the game consoles, the update cycle has been extended from 3 years to 6 years, which reduces the cost of developers and consumers. The manufacturers attract consumers through yearly small modifications, to ensure a dose of novelty.
The market is well positioned. Some manufacturers target traditional games consoles supporters and heavy game players,

-82-

while some manufacturers aim at children or housewives. All have achieved certain success.
1. Resorting to human sensory instinct, senses such as visual (VR), touch, hearing and vibration, also attract a certain number of players.
1. Expanding consumer groups. The emergence of Switch has attracted many fans of different ages.

In the past three years, the game console industry has achieved certain level of success, but the further development in personalization, mobilization and platformization of game consoles is also undetectable in the future. If manufacturers want to have a place in the market, how to sustain innovation and ingenuity to increase loyalty of existing players while attracting new game players will be the main challenge in the future.

-83-

The upper, middle and lower streams of the industry

【Manufacture of aluminum extrusion thermal products】

==> picture [442 x 312] intentionally omitted <==

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

Upper Stream Middle Stream Lower Stream
Stamping
Coloring treatment
i
d
i Fan
i
Fixing device heat dissipaters System supplier
Aluminum extrusion Processing to length Cross-cutting di
Cleaning treatment Aluminum extrusion heat Heat-conducting medium
CNC
Anodizing
----- End of picture text -----

【Processing and manufacture of metal casing】

==> picture [422 x 182] intentionally omitted <==

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

Upper Stream Middle Stream Lower Stream
magnesium ingots, Die casting / 3C products
magnesium extrusion and others Automobile
granular balls, Precision processing Industry
recycled
Lapping Machine tool
magnesium,
Conversion coating industry
aluminum ingots,
recycled aluminum, Coating Bicycle industry
stainless steel, other Quality control Raised floor
metals
----- End of picture text -----

-84-

【Manufacture of welding thermal products】

==> picture [397 x 316] intentionally omitted <==

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

Upper Stream Middle Stream Lower Stream
Stamping Sole plate
Aluminum plate
Cleaning of nickel plating
Fan
Stamping
Aluminium strip Cooling fins Fixing device heat dissipaters System supplier
Heat-conducting medium
Cleaning of nickel plating Welding heat dissipation device
Heat pipe
----- End of picture text -----

【System assembly of consumer electronics products (game consoles)】

==> picture [423 x 207] intentionally omitted <==

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

Upper Stream Middle Stream Lower Stream
Microprocessor
Plastic material
Plastic, rubber
industry Sheet metal
Steel, metal Small LCD
Branded
industry Motor
manufacturer
Electronic industry Printed circuit board
Electrical wire, Electronic parts and
cable industry components
Electrical wire
----- End of picture text -----

-85-

Development trend and competition by products
(1) Metal casing
- A. Development trend of products
a. The design of "metal frame + glass back cover" is the current trend, and there is no expected changes in the near future.
b. Stainless steel will be more and more widely used in mobile phones, while aluminum-magnesium alloy is the main material in laptops.
c. Narrow borders are more and more popular, and therefore the requirement for precision has become higher.
d. The demand for the decrease in thinness of the whole machine remains unchanged, and the related machine components are becoming more and more intricate.
e. The complexity of surface treatment is increasing, and the color and design requirements are becoming more and more varied.
B. Metal case product competition The main competitors are listed as follows:
Company Competitions Remarks Catcher Magnuminium alloy, aluminum-magnesium alloy, Listed
Technology 3C parts and components, metal casing entity
Co., Ltd. Casetek Magnuminium alloy, aluminum-magnesium alloy, Listed
Holdings 3C parts and components, metal casing entity
Limited. Waffer magnuminium alloy, aluminum-magnesium alloy, Listed
Technology automobile metal parts entity
Corp.

(2) Thermal modules

A. Development trend
a. The heat dissipation requirements of e-sports NB continue is becoming higher, and the design of the thermal module has also become more complicated. The heat dissipation requirements of other PC applications are slightly reduced, and the design of the thermal module has become simpler.
b. There has been a larger proportion of thermal modules in the servers that adopt heat pipes.
c. Some smart phones continue to use heat pipes to dissipate heat, but the difficulty of thinning heat pipes is high, so it might be a short-term phenomenon, not a long-term trend. However, this is yet to be scrutinized.
d. As more and more manufacturers enter the competition, the tenancy of graphene becoming the highlight in manufacture remains unchanged.
e. The demand of mining for digital currency has come to an abrupt end, and there is no sign of revitalizing yet to be seen.
B. Competition a. The number of competitors is still large, so consolidation of manufacturers continues. The case of the Japanese

-86-

manufacturer's acquisition of a Taiwanese plant this year is the best evidence.

b. Due to the relative stagnation of 3C market growth, competition within the industry continue to intensify. Though 3C has been the main battle field, the secondary battlefield is shifting to automotive, Netcom devices and hand-held devices.
c. However, the core capabilities of individual manufacturers are not the same, and thus the cooling components each manufacture has developed are different. Please see the table below for manufacturers classified according to the nature of their products:
Products Company Asia Vita Components, Auras Technology, Chaun-Choung
Thermal modules Technology, Forcecon Tech. Asia Vita Components, Sunonwealth Electric Machine
Fan Industry , Nidec, NMB, ADDA Corp., Forcecon Tech. Asia Vita Components, Yeh-Chiang Technology Corp.,
Heat pipe Chaun-Choung Technology, Fujikura
(III) Summary of Technology and R&D; The Company has invested NT$1,758,191 thousand in R&D in 2018, accounting for 1% of the revenue. The amount invested in R&D this year as of March 31, 2019 is NT$316,930 thousand, accounting for 2.49% of the revenue.
Successfully developed technologies or manufacture process improvements
- (1) Friction Stir Welding (2) Vacuum Die Casting
- (3) Micro-Arc-Oxidation
- (4) Hydrolic long life recirculation bearing
- (5) Physical Vapor Decomposition
- (6) PWM circuit design
- (7) Thermal product with vapor chamber heat spreader
- (8) Liquid Impulse Cooling
- (9) Lead Free Soldering Process
- (10) Phase Change Material
- (11) Multi-color Anodizing (12) Metal Insert Molding Process (13) MIM-Metal Injection Molding (14) Graphene-based composite materials
Technnology trend There are two trends in electronic product development. One is light and thin, and the other is increase in number of functions. The trend of demanding light and thin products urges the design of thermal modules more complicated, while the trend of demanding more functions, has urged an increase in numbers of components that lead to an increase in heat source and total amount of heat given off. In order to solve the problem of overheating, in order to enhance the efficiency of electronic products and increase the service life, the technical level of heat dissipation has been improved in the following aspects:

-87-

(a) Thermal conductivity: It consists of heat sinks, vapor chambers, thermal paste and heat pipes. The interior of the heat pipe is divided into grooves, fibers, sintering and composite technology.
(b) Heat dissipation: Aluminum fins are currently the most widely used material.
(c) Convective heat transfer: It includes fans and water cooling. (d) Development of new material: Graphene.

(e) Improve of technology is exhibited in the components. For example: i. Fan motor: From DC motor, to single-phase motor, to three-phase motor with thinning technology. ii. manufacturing process of cooling fins: Integration of techniques from aluminum extrusion, die casting, forging, fold bending, machine tooling to powder injection molding. iii. Combination of different components. The main function of thermal modules is to systematically transfer and dissipate heat generated by CPUs, GPUs and the power. Thus, the product designers and manufacturing personnel have to have competent knowledge and experience in the theory of heat dissipation and product design. Over the years, Foxconn Technology has been hiring many highly educated and experienced people who, in addition to being able to handle the development trend of related technologies, can create new technologies and new trends, and also lead the company to enter new fields, allowing Foxconn Technology to maintain its position as an industry leader.

Since the metal casing is mainly used in portable devices, the thinner and lighter has always been the trend, in addition, the design trend is moving towards a combination of metal and glass. As product differentiation will be more and more difficult to achieve, the industrial design and surface treatment has been gaining importance. In order to be in line with the aforementioned trends and developments, the future technical level of metal casings will be mainly laid upon the following aspects: (a) Level of precision is higher for the thinning trend of products. (b) The surface treatment techniques are becoming more complex for larger variety of colors. (c) Demand for precise machine tooling has increase for finer touches. (d) Streamline is demanded in the integration of components for higher quality.

(IV) Long- and Short-term business development plans:

Short-term business development plans
(1) Metal casing
- a. Develop new customers to respond to the low growth of the 3C industry.
- b. Streamline personnel, strictly manage inventory, and improve processes to prepare for upcoming economic downturn.
- c. Continue to extend into emerging markets.
(2) Thermal modules
- a. Personnel reorganized to focus on high-growth businesses. b. Strengthen the existing market share and actively enter into the smart phone cooling market.
(3) Game consoles.

-88-

  - a. Customer products are selling well. The company only needs to stabilize orders, manage inventory and keep abreast of new product development progress.

Long-term business development plans
(1) Metal casing
- a. Improve metal forming process and develop diverse surface treatment technology.
- b. Strengthen the existing market share and actively increase orders to develop customers and products in the vehicle market.
- c. Re-adjust the production base to better meet customer and market needs.
(2) Thermal modules
- a. Integrate production and sales, improve operational efficiency to reduce costs.
- b. Re-adjust production line, optimize engineering resource usage. c. Continue on the development customers of thermal product in white goods.
(3) Game consoles.
- a. Grow with the customers, and be the best manufacture partner of the customers.
- b. Improve customer satisfaction, and maintain relationship with quality long-term customers.

II. Production and Market Analysis

(I) Market Analysis
Main product sales by area:

Unit: NTD thousand

Product				Sales areas	Sales areas	Sales areas			Total
	USA		China		Japan		Others		Amount	%
	Amount	%	Amount	%	Amount	%	Amount	%
3C products	4,879,435	3.43	47,434,625	33.39	80,855,315	56.92	8,888,057	6.26	142,057,432	100

Market share
A. Metal casing
- At present, there is no research or statistics from relevant industry
- research institutions on the market share of metal casings. Therefore, there is no reliable statistic to serve as a reasonable reference. However, the relative situation of competition of the industry can be understood through a rough description of the product category: (1) Laptops: Metal casings are mainly used in commercial laptops, but rarely in consumer laptops. The main suppliers are mainly Taiwanese manufacturers, and the market is also divided among Taiwanese manufacturers.
- (2) Tablet computers: The market has been in a recession for many years and shows a tendency towards of monopoly. The main suppliers are mainly Taiwanese manufacturers, and the market is also divided among Taiwanese manufacturers.

-89-

  - (3) Smart phones: Metal casings are mainly used in the high-end mobile phone markets. Due to high precision requirement and high entry threshold of the market, the red supply chain can not yet pose any threat. Therefore, the market is still dominated by two main Taiwanese suppliers.

  - (4) Wearable devices: The market for wearable products consist of a wide range of items but in small quantities. Although there is potential for high growth in the future, the focus of each manufacturer at this stage is different, and thus it is difficult to determine the market share.

B. Thermal modules Similar to the situation of the metal casing industry, there is no
relevant industrial research institution that conducts official statistic analysis on market share of the thermal module industry. Moreover, the core competitiveness of each manufacturer is different, and their development focuses are thus different. Therefore, only a rough market share analysis can be drawn based on the product category. (1) Desktop computer: Due to the maturity of the market, it has become to be the situation that the bigger the stronger. Foxconn Technology has always been the leader in the market and dominates the largest market share.
(2) Laptops: Due to the intense price competition, the stagnation of market growth for years, and the abundance of suppliers, the market share of each company accounts for 10%~20% on average.
(3) Game console: Foxconn Technology is the leading manufacturer. There are a couple Japanese companies engaging in thus industry. However, there are few Taiwanese companies involved.
(4) Non-3Cs: The focus and development trend of each manufacturer is not the same. Therefore, the market share cannot be accurately analyzed. Nonetheless, cut-throat competitions are less common as each manufacturer has its own focal point in development and production.
Future market supply and demand and potential growth
A. Metal casing

From the supply aspect, there will be no new manufacturer joining the metal casing industry in the near future. Thus, there shouldn’t be much change in supply. The application metal casings are still mainly for high-end smart phones, business laptops, tablet computers and wearable devices. Therefore there is not much change in the overall demand, and in the relative competition positions in the supply chain. Thus, the the future supply and demand situation of the market is relatively stable.

As for potential growth, in terms of high-end smart phones, growth is mainly comes from the increase in unit price. The growth of business laptops mainly comes from the increase in penetration rate, while the growth of wearable devices comes from the increase in sales volume. No matter the sources of growth, we can expect a stable growth of metal casing industry in the future.

-90-

B. Thermal modules

The supply of the thermal industry varies with different products. The Company has been the main supplier for desktop computers and game consoles, and other manufacturers account only for a relatively small market share. The supply and demand are balanced and industrial price is stable. As for computer products, the number of suppliers is large. Due to the imbalance between supply and demand, the competition is intense and the price volatility is high. As for the thermal modules in other new applications, the development focuses of manufacturers are different, so the supply and demand are balanced and there was no cut-throat competition in the price.

As for the potential growth, the PC thermal module is in its mature stage with only little growth. The growth of the game console thermal module depends on the new model released each year. High growth is often expected in the first year, and followed by declines in the years after. As for the thermal modules in other new applications, as it is still in the introduction stage, the growth is good.

Competitive niche
A. Good capacity scheduling

With the rise of trade protectionism and the increasing demand for domestic manufacturing in various regions, how to quickly and smoothly respond to this trend has been a major challenge for the manufacturing industry. However, the Group posses great advantage to receive more orders as it has established factories in various regions, and potential competitors are not able to have land, plats and manpower in place, and complete all relative applications and registrations to start production in a short period of time as they are only starting. This is a challenge for competitors, but our advantage and competitive niche.

B. Excellent product integration ability

As expected many years ago, due to the requirement for "light and thin", metal casings have been widely used in 3C products. Because of the trend for multi-function, the heat generated by portable products are getting higher. How to achieve efficient heat dissipation and also take into account the "light and thin" trend is the demand of the brand factory and the challenge of the OEMs. Foxconn Technology has started to produce these two products many years ago, and has related Know-How, and the technology and skills of integrating these two components. Therefore, this unique property will be Foxconn Technology’s unique competitive niche.

C. Rapid mass production capacity

The company has been engaged in manufacturing businesses for decades and has been accumulating experience and developing excellent rapid mass production capabilities. This capability has helped customers solve many problems, and has won the trust of customers and obtained many orders. For example, in the past two years, there have been reports of competitors not delivering satisfactory yield-rate or efficient mass-production right before their customers’ release of new products, which in many cases, led to the transfer of orders to the Company. This is the results of the company's accumulation of

-91-

experience over the years, and is also a competition niche of the Company.

D. Sufficient mass-production capability

The slife-cyle of 3C products has become shorter and shorter. Young consumers often want to get the latest and highest technology products in first time. If the waiting period is too long, there is possibility that consumers may turn to other products. Therefore, to successfully produce relative products in the earliest time possible to satisfy the demand of consumers is a responsibility and also essential survival skills of OEMs. With the accumulation of decades of manufacturing experience, Foxconn Technology has long possessed the mass-production capability, and the competition advantage.

Positive and negative factors for future growth and strategic responses
A. Positive factors
- (1) The trend of using metal cases for smart phones stays unchanged, and the penetration rate of commercial laptops with metal casings continues to increase slowly, which facilitate the medium- and long-term development of the metal casing industry.
- (2) The metal casing is integrated with the heat dissipation product to attain many electronic devices’ demand for “light and thin” and “multi-function without overheating”. This long-term trend beneficial to the Company's future development.
- (3) As competitors frequently faces problems with low yield-rate and production bottle-neck, the Company’s high yield-rate and high mass-production ability have become a positive factor in the Company’s long-term development.
- (4) Compared with the competitors, the Company is an important member of Hon Hai Group, and the support from the Group is an incomparable advantage of the Company.
- (5) The Company has diverse products, technology and customers. Therefore, so the operating risk is much lower than its competitors.
B. Negative factors
- (1) The trade protectionism resulted from the trade war continues, which is not constructive to the development of the technology industry.
- (2) The 3C market has reached saturation, and parts of the market are already showing a recession, so the future growth is worrying.
- (3) Due to the lack of technological innovation, and high product homogeneity, the unit price is not expected to rise.
- (4) The red supply chain is waiting for an opportunity enter the competition, and has become a long-term instability factor.
C. Strategic responses
- (1) The Group has production bases in different regions in the world. When necessary, the Company can quickly build production capacity in different regions to appropriately avoid the risks brought by trade wars.
- (2) Due to the saturation of the 3C product market, it is necessary for the Company to actively enter new industries, develop new applications, and promote diverse growth to reduce the risk brought by the stagnation in the 3C market.

-92-

(3) The Company continues to invest in R&D, and increase quality and quantity with innovative technologies.
(4) The Company continues to enhance the leading position in technology, and strengthen the overall competitiveness, and to prepare for competition brought by the red supply chain with more R&D and technology innovation, to maintain the Company’s leading position in the industry.

(II)	The mainpurpose and manufactureprocess of majorproducts	The mainpurpose and manufactureprocess of majorproducts
	Majorproduct	Mainpurpose
	Metal casings, parts and components	Laptops, mobile phones, tablet computers, digital single-lens reflex cameras and transportation vehicles
	Thermal modules	Desktop computers, laptops, servers, workstation heat dissipaters, data centers, consoles and smart phones
	Game consoles assembly	Forpersonal and familyentertainment

Metal casing production flow:

==> picture [387 x 257] intentionally omitted <==

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

Raw metal Manufacture Quality Coating
materials Control
Die casting Lapping Final Quality Control
Manufacture Quality Manufacture Quality
Control Control Packaging
Machining Conversion coating
Shipment of products
Manufacture Quality
Control
----- End of picture text -----

-93-

2. Thermal module production flow:

==> picture [357 x 242] intentionally omitted <==

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

Aluminum Stamping Fan
extrusion
Processing to Coloring Fixing device
length
Cross-cutting Cleaning Heat-conducting
medium
CNC Anodizing
Shipment of
finished heat
dissipater
Welding heat
dissipation
device
----- End of picture text -----

Game consoles production flow:

==> picture [357 x 243] intentionally omitted <==

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

Electronic Soldering of Functional
parts and substrates testing
SMT auto Substrate repair Packaging
insertion
In-Circuit-Test Baking of Sampling
substrate inspection
Manual insertion Functional
testing Shipment of
finished products
System assembly
----- End of picture text -----

-94-

(III) Status of main materialsupply	(III) Status of main materialsupply
Product item	Material	Status of supply
	Metal ingots
	Coloring pigments	As the Company has built good
Electronic parts and components	Motor	long-term relationships with suppliers and major international customers, has many years of experience in collaborative development and cooperation, and has established long-term high-quality production and sales cooperation, a stable supply of key components can ensured.
	Aluminum extrusion
	Heatpipe
	Coolingfins
	Fans
Electronic system assembly	Graphics ProcessingUnits
	Memorysticks
	Optical disc drives
	Motherboards
	Parts and components

-95-

As of the previous quarter in 2019	Relationship with the issuer	d y			nd		hip e		Affiliated company	Affiliated company	-	-
		ffiliate ompan	-	-	housa		ations ith th issuer	None
		A c			D t	9	Rel w
	f e				T	1	t of net f the us f the year	34.04%	4.21%	12.39%	49.36%	100%
					N	0
	Percent of annual net urchase as o he previous uarter of th urrent year (%)	.28	.72	100	nit:	in 2
		34	65		U	rter	cen ual as o evio ter o ent (%)
						qua	Per ann sales pr quar curr
	p t q c
						s
						u
	Amount	8	0	8		io	Amount	4,325,275	535,337	1,573,976	6,272,707	12,707,295
		4,018,34	7,702,80	1,721,14		the prev
				1		As of
	Name	HY	Others	Net purchase			Name	C	FT	SY	Others	Net sales
2018	Relationship with the issuer	d y					hip e		Affiliated company	Affiliated company	-	-
		ffiliate ompan	-	-	cost.		ations ith th issuer	None
		A c			and		Rel w
	Percent of annual net purchase (%)	59.10%	40.90%	100%	al demand		Percent of annual net sales (%)	59.24%	1.66%	12.13%	26.97%	100%
					mpany's consideration on raw materi s in the most recent two years	2018
	Amount	75,331,600	52,113,648	127,455,248			Amount	84,156,871	2,356,542	17,229,287	38,314,732	142,057,432
	Name	HY	Others	Net purchase			Name	C	FT	SY	Others	Net sales
2017	Relationship with the issuer	d y					hip e		Affiliated company	Affiliated company	-	-
		ffiliate ompan	-	-	the Co omer		ations ith th issuer	None
		A c			om ust		Rel w
	Percent of annual net purchase (%)	51%	49%	100%	nt results fr n major c		Percent of annual net sales (%)	52%	15%	10%	23%	100%
					Note: Difference in the purchase amou 2. Information o	2017
	Amount	68,665,605	65,384,738	134,050,343			Amount	76,731,852	21,734,839	14,862,525	34,483,401	147,812,517
	Name	HY	Others	Net purchase			Name	C	FT	SY	Others	Net sales
	Item	1					Item	1	2	3

-96-

(V) Table of production volume/value in the most recent two years:

Unit: thousand pcs, NTD thousand

Year Production volume/value Major product					2018
		2017

	Capacity	Volume	Value	Capacity	Volume	Value
3Cproducts	936,799	918,430	137,709,387	1,706,059	1,671,938	127,455,248

(VI) Table of sales volume/value in the most recent two years:

Unit: thousand pcs, NTD thousand

Sales	Year	Year		2017	2017						2018	2018
volume/value			Domestic			Export				Domestic		Export

Major product			Volume Value		Volume			Value	Volume		Value	Volume	Value
3Cproducts			3,225 892,665		883,065			146,763,206		16	8,978	1,684,071	141,815,189
	Others		0 159,746			0		0		0	173	0	233,092
	Total		3,225 1,052,411		883,065			146,763,206		16	9,151	1,684,671	142,048,281
III.	Employee Data for the Past Two Years								by Annual Report Printing
	Date
	The following table shows only			the number of employees in the parent								company, but not
	the number of employees of subsidiaries						in the consolidated financial statements.
												As of March 31,
		Year				2017				2018		2019 of	current
												year
Number of employees			Staff Operator Total					192 - 192			151 - 151		146 - 146
	Average age							46.01			47.08		47.35
	Average seniority							12.28			12.74		12.78
			PhD Degree					5.73%			3.31%		3.42%
Education distribution			Master Degree College High school					38.02% 48.96% 5.21%			38.41% 52.99% 3.97%		36.99% 54.11% 4.11%
		Below high school						2.08%			1.32%		1.37%

-97-

IV. Information on Environmental Protection Costs The total amount of losses (incl. compensation) and dispositions of the Company due to environmental pollution in the most recent year up to the annual report, and the future counter-measures (incl. improvement measures) and possible expenditures (incl. estimation of possible losses, punishment, compensation due to failure to take counter-measures. If it cannot be reasonably estimated, the reason shall be stated): None.
(I) The Company has designated personnel to be responsible for environmental protection work pursuant to the law, and the environment is well maintained. Therefore, in the recent two years and up to the printing date of the annual report, there have been no pollution disputes, or losses or compensation due to environmental pollution.
(II) Expenditure on environmental protection The amount of the Company's environmental protection expenditure was NT$138,058 thousand in 2018, which decreased by 16% from NT$163,952 thousand in 2017. The Company attaches great importance to environmental protection and continues to support environmental protection with practical actions. The expenses are mainly used in the maintenance of waste gas treatment facilities, related inspection of hazardous wastes disposal, improvement of temporary storage for hazardous wastes, new installment of waste gas treatment gantry cleaning lines, improvement of the connectivity of systems, anode waste gas scrubber, intelligent integrated oil mist machine, sheltered air duct, sandblasting air duct and and tower body maintenance. There is no serious environmental leakage incidents found in the Company's factory areas in 2018.

Factory area	Expenditure on environmental protection	Proposed purchase of pollution-prevention equipment or expenditure	Predicted improvement
Yantai	264,828	2018 expenditure on hazardous waste treatment	Handled hazardous waste through hazardous waste treatment companies with competent certifications
Taiyuan	1,700,000	D1 New installment of waste gas dust removal equipment in die-casting centralized meltingfurnace	To prevent exhaust gas emitted from furnace from exceeding relative standards
	22,500	D1 Replacement of pressureless water return pipes of die-casting water circulation	To prevent circulating water backflow causing circulating water overflow and lead to water waste
	200,000	D6 Replacement of coloring waste gas scrubber and waste air duct	To prevent organic exhaust gas leakage
	1,656,980	Maintenance of Oil mist treatment equipment	To ensure waste gas, wastewater and solid waste treatments are handled according to regulations to reduce environmental risks
	1,847,600	Maintenance of ERCO equipment
	49,120	Maintenance of wastegas scrubbers
	165,978	Maintenance of sheltered air ducts, sandblastingair ducts and towers
	58,932	Maintenance of interconnectedpumps
	14,080	Maintenance of paint mist purification tower
	15,991,631	Expenditure on hazardous waste treatment
	119,436	Expenditure on general industrial solid waste
	7,490,175	Expenditure on high concentration waste water

-98-

Factory area	Expenditure on environmental protection	Proposed purchase of pollution-prevention equipment or expenditure	Predicted improvement
Pan-Shen zhen	597,000	Improvement of wastewater station facilities	Replacement of compression pumps and pipeline valves, and improvement of operation room
	97,701	Expenditurepaid for wastewater treatment	Reuse of service water
Total	30,275,961	Currency: RMB
NTD	138,058,382	Exchange rate: 1RMB�4.56NTD

(1) Prevention of stationary pollution source

The air pollutants generated in the manufacture process are collected into the wet scrubbers through the exhaust pipes, and the pollutants in the exhaust gas are removed before discharged to the atmosphere. The factory area has lawfully obtained a stationary pollution source operating permit, regularly reports the pollutant concentration of the exhaust gas every year, and declares it to relevant environmental protection authorities in accordance with the law. There is no ozone-depleting substance discharge in any plants. In 2018, only small amount of air pollutants were emitted from certain factory areas due to manufacture needs. It includes 0.53 metric tons of sulfur oxides, 0.55 metric tons of nitrogen oxides, and 0.03 metric tons of volatile organic compounds in Yantai factory area; 3.61 metric tons of sulfur oxides and 1.13 metric tons of nitrogen oxides in Taiyuan factory area; and 0.19 metric tons of sulfur oxides and 6.1 metric tons of nitrogen oxides in Hebi factory area.

(2) Prevention of water pollution
All factory areas of Foxconn Technology have obtained wastewater discharge permit from the government. The wastewater from each factory area is treated with chemical or biochemical methods before being discharged. The pollutants in the water are removed before discharged into the municipal sewage treatment plant through the discharge outlets. Water quality analysis laboratories and testing instruments for the inspection of temperature, pH-value, suspended solids, heavy metals, chemical oxygen demand are set up in each factory area, and the Company inspects the discharged water on a daily basis to ensure the compliance with wastewater discharge standards. The government measures the concentration of discharged water at the factory areas every quarter to ensure compliance with relevant standards, and ensure that the discharged wastewater does not pose any serious impact on the water body and related habitats.
(3) Cleaning of wastes

Treatment of waste removal in all factory areas has been handled in accordance with local laws and regulations. External firms are appointed for recycling and disposal of general waste. Hazardous waste will be temporarily stored in the hazardous waste warehouses of the factory areas. After the quantity reaches a certain level, government approved professional hazardous waste disposal firms will be appointed for the disposal of the waste. At the same time, relevant documents will be issued and reported to the local government environmental protection department.

-99-

									Unit: ton	Unit: ton
Factory area	Yantai		Hebi		Taiyuan		Pan-Shenzhen		Total
Year	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018
Wastewater	124,020	114,657	775,686	868,899	773,429	933,586	110	71,073	1,673,245	1,988,215
Non-hazardous waste	16,106	2,420	1,807	3,073	14,067	8,167	222	103	32,202	13,763
Hazardous waste	3,912	80	2,362	3,674	1,520	2,580	18	52	7,812	6,386
Total	144,038	117,157	779,855	875,646	789,016	944,333	350	71,228	1,713,259	2,008,364

(4) Toxic chemical substances management Currently, there are no toxic chemical substances generated during the production process in factory areas.
(III) Compliance with RoHS: In production processes, in addition to complying with industry regulations, the company will also produce according to customers' environmental requirements, using traceability management procedures to attach obvious labels indicating the source and composition of materials, which can be traced back at any time. EU Restriction on Hazardous Substances Directive, RoHS is carried out on all products to ensure that the product does not contain hazardous substances such as lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls and polybrominated diphenyl ethers. Suppliers are required to provide source of raw materials and conduct RoHS testings. The Company also requires its suppliers to have complete policies and investigation procedures for the management of conflict minerals, identifying that the raw materials provided are obtained from illegal mining of gold (Au), tantalum (Ta), tin (Sn) and tungsten (W) from conflict areas to ensure that the products produced by the Company are not directly or indirect funding the armed groups that violate human rights in the Democratic Republic of the Congo or neighboring countries. The company promotes upstream smelters to obtain certifications of Conflict Free Smelter, CFS.

V. Labor-Management Relations

Current important labor agreement and implementation:

The Company has been treating its employees with sincerity and established mutual trust with them through its welfare system and good training system that guarantee a fulfilling and stable life for them. Though there is no union in the Company, but the Company has established “Workers and Employers Meeting” and meets regularly pursuant to the law, over the years, its employees can give full play to their team spirit, coordinate the Company’s decision, cooperate with each other to create a harmonious environment for working. The Company pursuant to the relevant labor laws and regulations, to protect the legitimate interests of employees, provides employees with safe and healthy working environment, and set up an employee feedback and complaints mechanism. The Company adopts the followings measures to build a harmonious labor relation:

(I) Employee benefits measures: Founded in June 1990, the Welfare Committee is composed of 7 members, including 1 appointed by the employer and 6 by employees. The committee

-100-

members are re-elected every four years, and there are adjunct staff under the committee. At present, the welfare offerings by the Welfare Committee are as follows:

(1) Food allowance;
(2) Birthday gift (cash presents);
(3) Gifts on three traditional holidays, Chinese New Year, Dragon boat Festival, and Mid-autumn Festival;
(4) Lucky draw during get-togethers;
(5) Health promotion activities and medical consultation;
(6) Employee maternity pension, child allowance, and provide traffic subsidy, nutrition subsidy, and health care for pregnant employees;
(7) Employee wedding gifts and funeral relief funds;
(8) Training subsidiaries;
(9) Group insurance.
(II) Career Development and Training for Employees: In order to enhance employees' knowledge, exert their personal potential, and allow them to pursue their goal of organizational learning and the lifelong learning, the Company has invested a lot of resources in employee education and training courses and the establishing of related facilities. Each year, human resources department and various business units develop and open courses, to promotes employees to attend various courses such as general education, management, and professional skills according to their professions. They also have established an on-line learning platform to enable employees to learn anytime and anywhere in order to cultivate employees’ professional competence, thereby increase the productivity to improve the company's operating efficiency. (1) The Company has established a Human resource training department that develops employee training procedures and training schedules. The curriculum design is classified according to the Group's four major management systems, and is based on the premise of comprehensively improvement on Company's productivity. Being in line with the requirements Technology Development Committees of each business units, the Company carries out module training courses on IE, economy and management, general knowledge, professional knowledge and core technology. The courses are carried out to strengthen the employees’ professional abilities to increase productivity and improve Company’s operational profits.
(2) E-learning and libraries are built to enhance learning anytime and anywhere. (3) Employee training system is established to integrate related information on trainings.
(4) In 2018, the Company provided 23,552 hours of trainings for Company employees (151 persons) with the training fees reaching up to NT$48 thousand.
(III) Code of conduct or ethics: In order to help employees have a better understanding of ethics, rights, obligations and the code of conduct, the Company hereby works out the relevant measures and regulations to provide basis for all employees. The relevant measures are briefed as follows:
(1) Rules on decision-making right and decentralization: To improve work efficiency, strengthen the management on decentralization and effectively standardize the rights of employees at different levels.

-101-

(2) Organizational structure and duties of each department: Clearly define the organizational functions of each unit and the duties of each position.
(3) The Employee Handbook is prepared to help employees understand the relevant measures and procedures.
- a. New employee orientation program: To eliminate new employees’ insecurity towards the new environment and help them to familiarize with the working environment and colleagues after reporting for duty as soon as possible, and help them to be mentally and physically ready in a short period of time, to exert productivity and reduce the turnover rate of new colleagues.
- b. Code of business ethics: To improve all employees’ behavioral quality, business ethics and expertise and try to maximize the Company’s profit within the legal scope. Every employee has the responsibility to prevent the Company’s interests from loosing or being impaired and is obliged to maintain the Company’s reputation so as to guarantee its permanent growth and development.
- c. Working rules: To clearly regulate various working conditions, personnel management regulations, etc., so that employees can follow.
- d. Regulations on Employee attendance: To Strengthen the attendance and leave system to establish a good employee working discipline.
- e. Reward and punishment system: Rewards or punishment are given to employees whose behavior or conduct has brought benefit or loss to the Company’s operation.
- f. Performance assessment method for employees: Employees’ working achievements and performance are assessed annually as the basis for salary adjustment, promotion, distribution of bonus and arrangement for training courses.
(IV) Working environment and protective measures for employees’ personal safety (1) According to the regulations of the competent authority, the Company formulates safety and health work codes for employees to follow the safety and health practices.
(2) Safety and health management unit and personnel: a. In accordance with the provisions of the Occupational Safety and Health Act, the labor safety and health management division was set up. The change to current state of the safety and health management unit is approval (New Taipei City Labor Inspection Office registration number: B105001519).
- b. In the workplace, on-site safety and health supervision personnel are set up in accordance with the law and sufficient emergency personnel are deployed.
- c. Annual security management plans are established and implemented accordingly.
- d. Annual automatic inspection plans are prepared in accordance with the Regulations on Occupational Health and Safety Management.
- e. According to the regulations, the occupational disaster reports were submitted on a monthly basis. There was no occupational disaster occurred in 2018.
- f. Safety and health management monthly reports are compiled on a monthly basis and kept for future reference.

-102-

g. Safety and health committee meetings are held convened quarterly, at which reports and discussion of safety and health related matters are carried out.
h. Pursuant to regulations, the operation environment monitoring was carried out every six months. There were no discrepancies found in 2018.
i. All factory areas of Yantai, Kunshan, Taiyuan, Hebi and Pan-Shenzhen have obtained OHSAS 18001 certification and still within expiration date.

Table of certifications obtained by each factory area of the Company

Certification	Factory area	Starting year	Expiration year	Issuer
Occupational Health and Safety Management Systems (OHSAS 18001)	Yantai	2018	2021	DNV.GL
	Taiyuan	2011	2020	Universal Certification Centre
	Hebi	2017	2020	SGS
	Pan-Shenzhen	2017	2020	SGS

(3) Facility safety
a. An automatic inspection procedure for mechanical equipment shall be set and be implemented in compliance to the prepared annual plans.
b. High and low voltage electrical equipment or facilities are maintained monthly by designated qualified firms in accordance with the regulations.
c. According to the statistics in the past five years provided by the Fire Department, electrical fires account for more than 30% of the total fires. For this reason, infra-red thermographers tests were carried out on electrical equipment in the factory areas every six months. Uninterrupted power supply detections are carried out to determine if maintenance is required, in order to reduce the risk of electrical fires.
d. Elevators are maintained monthly by designated qualified firms in accordance with the regulations.
e. According to the regulations of the competent authority, the Elevators should be inspected by the inspection agencies every year before they may be used.
f. When signing the contracts with contractors, safety and health precautions shall be provided in writing. Before the personnel enter the scene, they shall first implement the hazard notification workshop, organize an consultative organization every quarter, conduct inspections of the work area from time to time, and issue improvement notice for any violation of company's contract management regulations and follow up on the improvements to ensure appropriate implement contract management.
g. When new production process and new equipment are installed, machine safety check will be carried out, and strengthen the spirit of change management through form management and cross-department joint checking mechanism.
(4) Environmental sanitation:
a. The Company implements drinking water management, water dispensers are maintained by designated qualified firms on a monthly basis. Such monthly drinking water inspections are based on standards higher than regulatory and legal standards.

-103-

  - b. The staff conducts a general health check every year, and the expenses are fully compensated by the Welfare Committee.

  - c. Automated external defibrillators are set up and qualified operators are trained according to the proportion of the unit.

  - d. Emergency rescue equipment such as emergency response cabinets, fire-fighting clothing and air cylinders (SCBA) are set up, and equipment inspection are included in the automatic inspection project. For the members of the internal response system, corresponding education and training will be conducted every year.

(5) Fire safety
- a. The whole plant fire differential detector was upgraded to a smoke heat composite model.
- b. A complete fire protection system is set up in accordance with the provisions of the Fire Protection Law, and the Company designate qualified firms to maintain the fire protection facilities or equipment on a monthly basis, and improve on any defects.
- c. The Company plans annual training programs and implement fire group training.
- d. Every year, the Company conducts whole factory evacuation drills and cooperate with the Group's labor safety and health management division to hold safety and health month related activities.
- e. The Company sends personnel to participate in external training courses (including damage prevention, emergency response, etc.) on irregular basis.
(V) Retirement System:
The Company has formulated the retirement and pension plans for employees in accordance with the Labor Standards Act and the Labor Pension Act, including:
(1) Qualification for Labor Standards Act (old system): A defined benefit pension plan is adopted.
- a. Retirement application: A worker may apply for voluntary retirement under any of the following conditions: where the worker attains the age of fifty-five and has worked for fifteen years; where the worker has worked for more than twenty-five years; where the worker attains the age of sixty and has worked for ten years.
- b. Pension payment: The retirement pension base shall be one month’s average wage of the worker at the time when his or her retirement is approved. According to employees’ serving years, two bases shall be given for each full year of service. One base is given for each full year exceeding the 15th year of serving. The total number of bases shall be no more than 45. The length of service is calculated as half year when it is less than six months and as one year when it is more than six months. As set forth in Article 54 of the Labor Standards Act, an additional 20% on top of the amount calculated according to the preceding shall be given to workers forced to retire due to conditions incurred from the execution of their duties.
- c. Employee retirement reserve allocation: The Company shall set aside 2% of the total employee monthly salary amount and deposit them into the employee retirement reserve account pursuant to the applicable retirement system provided by the Labor Standards Act; and ensure that this amount cannot be used as a subject of transfer, seizure, offset, or collateral. Before the end of each year, the employee retirement reserve

-104-

account balance shall be calculated. If the balance is insufficient to pay employees with conditions specified in Article 53 or Subparagraph 1, Paragraph 1 of Article 54 of the Labor Standard Act for the next year, the Company shall make up the differences before the end of March next year

  - d. The supervision of pension funds: Since September 1990, the Company legally established the Supervisory Committee of Workers’ Retirement Fund, which is re-elected every four years and in charge of checking the amount, deposit and withdrawal as well as payment of retirement fund so as to ensure employees’ rights.

(2) Qualification for the Labor Pension Act (new system): A defined contribution pension plan is adopted.
- a. The Company appropriates 6% employee’s pension reserve every month: According to the Monthly Contribution Wages Classification of Labor Pension issued by the Bureau of Labor Insurance, the Company appropriates 6% of the worker’s monthly wage to his/her personal pension fund account.
- b. Employee contribution: Workers may also voluntarily contribute within 6% of their wage to the labor pension reserve.
(VI) Other important agreements: None.

Loss suffered from labor disputes in the latest year and up to the printing date of this Annual Report: The Company has no major dispute on labor relation or labor agreement in the latest year and up to the printing date of this Annual Report.

VI. Im rtant Contracts po

	Contract type	Contracting party	Term of agreement	Summary	Clauses
Sales Agreement		PKM Corporation	Effective for one year from 2012/05/01, unless either party terminates the contract 2 months before the expiration of the term, each session will be automatically extended for one year.	Terms and conditions of the sale and purchase of finished products	None

-105-

Six. Financial Information

I. Most Recent 5-Year Concise Balance Sheet and Comprehensive Income Statement

(I) Concise Balance Sheet and Statement of Comprehensive Income - IFRS 1. Concise Consolidated Balance Sheet

			Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand
Items		Year	Financial information for the most recent five years					As of 2019 March 31 Financial information

			2014	2015	2016	2017	2018
Current assets			108,418,633	102,516,113	99,607,682	138,389,929	107,023,860	88,209,886
Property, plant, and equipment			14,303,803	12,023,059	9,150,769	7,444,897	7,404,149	7,303,692
Intangible Assets			-	-	-	-	1,944,619	1,966,492
Other assets			8,273,142	8,845,713	39,493,826	69,629,601	39,957,937	44,323,938
Total assets			130,995,578	123,384,885	148,252,277	215,464,427	156,330,565	141,804,008
Current liabilities	Before Distribution		48,436,013	31,706,661	40,800,971	80,153,382	56,020,510	35,893,737
	After Distribution		51,877,828	35,891,733	46,176,015	85,245,529	Note	Note
Non-current liabilities			503,684	704,866	705,029	716,112	720,121	1,586,601
Liability	Before Distribution		48,939,697	32,411,527	41,506,000	80,869,494	56,740,631	37,480,338
	After Distribution		52,381,512	36,596,599	46,881,044	85,961,641	Note	Note
Equity of the parent company			81,957,442	90,891,655	106,672,366	134,519,139	99,511,661	104,243,740
Capital stock			13,767,258	13,950,240	14,144,852	14,144,852	14,144,852	14,144,852
Capital surplus			7,035,542	7,470,233	7,793,643	7,768,067	7,767,553	7,767,553
Retained Earnings	Before Distribution		54,029,408	62,648,228	69,042,525	73,623,018	77,645,748	78,447,142
	After Distribution		50,449,920	58,463,156	63,667,481	68,530,871	Note	Note
Other equity			7,125,234	6,822,954	15,691,346	38,983,202	(46,492)	3,884,193
Treasurystock			-	-	-	-	-	-
Non-controllinginterests			98,439	81,703	73,911	75,794	78273	79,930
Total equity	Before Distribution		82,055,881	90,973,358	106,746,277	134,594,933	99,589,934	104,323,670
	After Distribution		78,614,066	86,788,286	101,371,233	129,502,786	Note	Note

Note: As of April 30, 2019, the amount of after distribution is not stated as the proposal of earnings distribution of year 2018 had not yet been submitted to the Shareholders' Meeting.

-106-

2. Concise Entity Balance Sheet

Unit: NTD thousand

Year Items	Year Items	Financial information for the most recent five years	Financial information for the most recent five years	Financial information for the most recent five years	Financial information for the most recent five years	Financial information for the most recent five years	Financial information as of March 31,2019

		2014	2015	2016	2017	2018
Current assets		18,501,163	8,793,559	15,998,217	42,418,271	26,564,916	Not applicable
Property, plant, and equipment		85,524	69,765	97,796	95,304	77,567
Intangible Assets		-	-	-	-	-
Other assets		81,924,188	93,920,601	113,009,379	143,801,286	111,068,680
Total assets		100,510,875	102,783,925	129,105,392	186,314,861	137,711,163
Current liabilities	Before Distribution	18,088,279	11,316,231	21,852,492	51,220,029	37,576,040
	After Distribution	21,530,094	15,501,303	27,227,536	56,312,176	Note
Non-current liabilities		465,154	576,039	580,534	575,693	623,462
Liability	Before Distribution	18,553,433	11,892,270	22,433,026	51,795,722	38,199,502
	After Distribution	21,995,248	16,077,342	27,808,070	56,887,869	Note
Equity of the parent company		-	-	-	-	-
Capital stock		13,767,258	13,950,240	14,144,852	14,144,852	14,144,852
Capital surplus		7,035,542	7,470,233	7,793,643	7,768,067	7,767,553
Retained Earnings	Before Distribution	54,029,408	62,648,228	69,042,525	73,623,018	77,645,748
	After Distribution	50,449,920	58,463,156	63,667,481	68,530,871	Note
Other equity		7,125,234	6,822,954	15,691,346	38,983,202	(46,492)
Treasurystock		-	-	-	-	-
Non-controllinginterests		-	-	-	-	-
Total equity	Before Distribution	81,957,442	90,891,655	106,672,366	134,519,139	99,511,661
	After Distribution	78,515,627	86,706,583	101,297,322	129,426,992	Note

Note: As of April 30, 2019, the amount of after distribution is not stated as the proposal of earnings distribution of year 2018 had not yet been submitted to the Shareholders' Meeting.

-107-

3. Concise Consolidated Income Statement

		Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand
Items	Year	Financial information for the most recent five years					Financial information as of March 31,2019

		2014	2015	2016	2017	2018
Operatingreve	nue	83,895,142	99,425,613	80,110,459	147,815,617	142,057,432	12,707,295
Grossprofit		15,264,149	16,318,851	14,603,024	14,259,307	13,492,743	1,029,430
Operating profit or loss		9,709,257	12,165,046	11,324,204	10,526,142	8,606,384	335,435
Non-operating revenues and expenses		1,258,656	2,396,718	2,390,050	920,086	2,726,067	590,517
Profit before tax		10,967,913	14,561,764	13,714,254	11,446,228	11,332,451	925,952
Business units in current continuing operation income		9,382,287	12,182,417	10,719,973	9,968,335	9,150,847	801,018
Discontinued operation loss		-	-	-	-	-	-
Current period net profit (loss)		9,382,287	12,182,417	10,719,973	9,968,335	9,150,847	801,018
Other comprehensive income of the current period (net amount after taxation)		4,428,146	(303,125)	8,859,498	23,280,941	(39,030,627)	3,932,718
Total current period comprehensive income		13,810,433	11,879,292	19,579,471	33,249,276	(29,879,780)	4,733,736
Net profit attributed to the parent company		9,402,359	12,198,244	10,721,108	9,965,386	9,146,659	801,394
Net profit attributed to non-controllinginterests		(20,072)	(15,827)	(1,135)	2,949	4,188	(376)
Total comprehensive income attributable to owners of the parent company		13,827,105	11,896,028	19,587,263	33,247,393	(29,882,259)	4,732,079
Total comprehensive income attributable to non-controllinginterests		(16,672)	(16,736)	(7,792)	1,883	2,479	1,657
Earningsper share(NTD)		6.77	8.67	7.59	7.05	6.47	0.57

-108-

4. Concise Entity Income Statement

Unit: NTD thousand

Year Items	Financial information for the most recent five years	Financial information for the most recent five years	Financial information for the most recent five years	Financial information for the most recent five years	Financial information for the most recent five years	Financial information as of March 31,2019

	2014	2015	2016	2017	2018
Operatingrevenue	24,922,897	25,670,721	26,732,882	84,414,971	93,824,119	Not applicable
Grossprofit	948,366	863,748	2,202,046	4,296,827	4,875,876
Operating profit or loss	310,519	356,352	1,770,422	3,879,340	4,152,958
Non-operating revenues and expenses	9,615,766	12,525,621	9,966,364	7,108,702	6,328,638
Profit before tax	9,926,285	12,881,973	11,736,786	10,988,042	10,481,596
Business units in current continuing operation income	9,402,359	12,198,244	10,721,108	9,965,386	9,146,659
Discontinued operation loss	-	-	-	-	-
Current period net profit (loss)	9,402,359	12,198,244	10,721,108	9,965,386	9,146,659
Other comprehensive income of the current period (net amount after taxation)	4,424,746	(302,216)	8,866,155	23,282,007	(39,028,918)
Total current period comprehensive income	13,827,105	11,896,028	19,587,263	33,247,393	(29,882,259)
Net profit attributed to the parent company	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable
Net profit attributed to non-controllinginterests	-	-	-	-	-
Total comprehensive income attributable to owners of the parent company	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable
Total comprehensive income attributable to non-controllinginterests	-	-	-	-	-
Earningsper share(NTD)	6.77	8.67	7.59	7.05	6.47

(II)	Names and opinions of external auditors over thepast fiveyears	Names and opinions of external auditors over thepast fiveyears	Names and opinions of external auditors over thepast fiveyears
Year	Name of CPA	Audit Opinions	Reasons for changingexternal auditors
2014	Yung-Chien Hsu, Sheng-Chung Hsu	Unqualified	-
2015	Yung-Chien Hsu, Sheng-Chung Hsu	Unqualified	-
2016	Yung-Chien Hsu, Sheng-Chung Hsu	Unqualified	-
2017	Yung-Chien Hsu, Sheng-Chung Hsu	Unqualified	-
2018	Sheng-Chung Hsu, Han-Chi Wu	Unqualified	Adjustment of internal administrative structure

-109-

II. Most Recent 5-Year Financial Analysis

(I) Consolidated Financial Analysis - IFRS

Year Items (Note)	Year Items (Note)	Financial analysis for the most recent five years	Financial analysis for the most recent five years	Financial analysis for the most recent five years	Financial analysis for the most recent five years	Financial analysis for the most recent five years	As of 2019 March 31 Financial analysis
		2014	2015	2016	2017	2018
Financial structure (%)	Total liabilities to total assets	37.36%	26.27%	28%	37.53%	36.30%	26.43%
	Long-term capital to PP&E	573.66%	762.52%	1,166.53%	1,807.88%	1,345.06%	1428.37%
	Current ratio	223.84%	323.33%	244.13%	172.66%	191.04%	245.75%
Debt-paying	Quick ratio	150.61%	256.73%	188.73%	141.77%	153.46%	179.82%
ability (%)	Interest protection multiples	121.39	82.10	193.97	45.83	19.91	7.46
	Accounts receivable turnover(times)	3.04	3.30	3.29	3.91	3.34	0.52
	Average collection days	120.06	110.60	110.60	93.36	109.28	175.18
	Inventoryturnover(times)	20.15	18.16	15.21	34.19	35.73	3.81
Operating performance	Accounts payable turnover(times)	5.03	4.98	3.78	4.44	3.78	0.63
	Average inventory turnover days	18.11	20.09	23.99	10.67	10.22	23.95
	Property, plant and equipment turnover (times)	5.39	7.55	7.57	17.81	19.13	1.73
	Total Assets Turnover (times)	0.74	0.78	0.59	0.81	0.76	0.09
	ROA(%)	8.36%	9.67%	7.93%	5.60%	5.16%	0.59%
	ROE(%)	12.40%	14.08%	10.84%	8.26%	7.82%	0.79%
Profitability	Pre-tax profit to paid-in capital net margin(%)	79.67%	104.38%	96.96%	80.92%	80.12%	6.55%
	Netprofit rate(%)	11.18%	12.25%	13.38%	6.74%	6.44%	6.30%
	Earningsper share(NTD)	6.77	8.76	7.59	7.05	6.47	0.57
	Cash flow ratio(%)	28.77%	63.54%	35.56%	10.42%	20.97%	-11.70%
Ch fl	Cash flow adequacy (%)	258.63%	371.37%	408.43%	271.79%	166.68%	132.67%
as ow	Cash flow reinvestment ratio(%)	11.48%	14.20%	7.72%	1.81%	5.15%	-3.14%
L	Operatingleverage	2.71	2.31	1.00	1.00	1.00	1.00
everage	Financial leverage	1.01	1.01	1.01	1.03	1.07	1.39
Please state the reasons for all financial ratio changes within the most recent two years. (Analysis may be exempt for changes less than 20%) 1. The decrease in the ratio of long-term capital to PP&E is due to a decreases in fixed assets and shareholders’ equity. 2. Interest protection multiples has decreased mainly due to an increase in interest expense in current period. 3. Cash flow ratio has increased, mainly due to a decrease in current liabilities and an increase in cash flow from operating activities. 4. Cash flow adequacy ratio has decreased, as the capital expenditure within the most recent 5 years is more than that within the previous 5 years. 5. Cash flow reinvestment ratio has increased mainlydue to an increase in cash flow from operatingactivities.

Cash flow reinvestment ratio has increased mainly due to an increase in cash flow from operating activities. Note: Please refer page 111 for detailed calculation formulas.

-110-

(II) StandaloneFinancial Analysis- IFRS	(II) StandaloneFinancial Analysis- IFRS	(II) StandaloneFinancial Analysis- IFRS	(II) StandaloneFinancial Analysis- IFRS	(II) StandaloneFinancial Analysis- IFRS	(II) StandaloneFinancial Analysis- IFRS	(II) StandaloneFinancial Analysis- IFRS	(II) StandaloneFinancial Analysis- IFRS
Year Items (Note)		Financial analysis for the most recent five years					Financial analysis as of March 31,2019
		2014	2015	2015	2017	2018
Financial structure (%)	Total liabilities to total assets	18.46%	11.57%	17.38%	27.80%	27.74%	Not
	Long-term capital to PP&E	95,829.76%	130,282.60%	109,076.41%	141,147.42%	128,291.23%
	Current ratio	102.28%	77.71%	73.21%	82.82%	70.70%
Debt-paying	Quick ratio	83.4%	75.57%	64.99%	80.36%	69.78%
ability (%)	Interest protection multiples	348.67	329.47	838.30	50.37	21.40
	Accounts receivable turnover(times)	2.80		6.46	7.11	6.43
			4.68

	Average collection days	91.79	77.93	56.49	51.33	56.76
	Inventoryturnover(times)	51.98	68.48	27.55	53.10	116.92
Operating performance	Accounts payable turnover(times)	3.97	3.10
				2.41	4.33	3.84

	Average inventory turnover days	7.02		13.25	6.87	3.12
			5.33

	Property, plant and equipment turnover (times)	275.02	330.62	546.71	874.31	1,085.48
							applicable

	Total Assets Turnover (times)	0.27	0.25	0.41	0.54	0.58
	ROA(%)	10.35%	12.03%	16.63%	6.44%	5.90%
	ROE(%)	12.44%	14.11%	20.1%	8.26%	7.82%
Profitability	Pre-tax profit to paid-in capital(%)	72.10%	92.34%	82.98%	77.68%	74.10%
	Netprofit rate(%)	37.73%	47.52%	40.10%	11.81%	9.75%
	Earningsper share(NTD)	6.77	8.76	7.59	7.05	6.47
	Cash flow ratio(%)	-2.24%	81.82%	-13.48%	20.81%	2.08%
Ch fl	Cash flow adequacy (%)	200.89%	161.85%	65.29%	72.75%	81.95%
as ow	Cash flow reinvestment ratio(%)	-2.07%	6.45%	-6.75%	3.91%	-4.30%
L	Operatingleverage	2.88	2.30	1.22	1.10	1.17
everage	Financial leverage	1.11	1.11	1.01	1.06	1.14
Please state the reasons for all financial ratio changes within the most recent two years. (Analysis may be exempt for changes less than 20%) 1. Interest protection multiples has decreased due to an increase in interest expense in current period. 2. The decrease in inventory turnover and average sales turnover days is mainly because that the current period-end inventory is significantly less that in the previous period. 3. The increase in property, plant and equipment turnover is mainly due to a decrease in fixed assets. 4. The increase in total asset turnover is mainly due to a significant decrease in the financial assets at fair value through other comprehensive income of total assets of the current period. 5. Cash flow ratio and cash re-investment ratio has decreased as cash flow from operating activities in the current period is less than that of thepreviousperiod.

Note: Please refer to 1-6 below for detailed calculation formula of the items.

Financial structure
(1) Total liabilities to total assets = Total liabilities / Total assets
(2) Long-term capital to PP&E = (Net equity + Long-term debts) / Net property, plant and equipment
Debt-paying ability
(1) Current ratio = Current Assets / Current liability
(2) Quick ratio = (Current assets - Inventory - Prepaid expenses) / Current liability
(3) Interest protection multiple = Net income before income tax and interest expense / Interest expense
Operating performance

-111-

(1) Account receivable (including account receivable and notes receivable from operation) turnover = Net sales / the Average of account receivable (including account receivable and notes receivable from operation) balance
(2) Average collection days = 365 / account receivable turnover (3) Inventory turnover = Cost of goods sold / Average inventory (4) Account payable (including account payable and notes payable from operation) turnover = Cost of goods sold / the average of account payable (including account payable and notes payable from operation) balance
(5) Average inventory turnover days = 365 / Inventory turnover (6) Property, plant and equipment turnover = Net sales / Net property, plant and equipment (7) Total assets turnover = Net sales / Total assets
Profitability
(1) ROA = [PAT + Interest expense × (1 - Interest rate)] / Average total assets (2) ROE = PAT / Average net equity (3) Net income ratio = PAT / Net sales (4) EPS = (PAT - Dividend from prefer stock) / Weighted average outstanding shares
1. Cash flow
(1) Cash flow ratio = Net cash flow from operating activities / Current liabilities (2) Cash flow adequacy ratio = Most recent 5-year cash flow from operating activities / Most recent 5-year (Capital expenditure + Increase of inventory + Cash dividend)
(3) Cash investment ratio = (Cash flow from operating activities - cash dividend) / (Gross fixed assets + Long-term investment + Other assets + Working capital)
Leverage
(1) Operating leverage = (Net revenue - Variable cost of goods sold and operating expense) / Operating income
(2) Financial leverage = Operating income / (Operating income - Interest expenses)

-112-

III. Audit Committee’s Review Report on the Most Recent Financial Statements

Audit Committee’ Review Report

The Board of Directors has prepared the Company’s 2018 Financial Statements, Business Report and the proposal for distribution of earnings, of which, the Financial Statements have been audited by PricewaterhouseCoopers Taiwan and relevant audit reports have been prepared. The aforementioned 2018 Financial Statements, Business Report and the proposal for distribution of earnings have been audited by the Company’s Audit Committee. We deem no inappropriateness on these documents. Pursuant to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report.

Foxconn Technology Co., Ltd.

Convener of the Auditing Committee: Sung-Shu Lin

May 9, 2019

-113-

IV. Most Recent Financial Reports

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Stockholders of Foxconn Technology Co., Ltd.

Opinion

We have audited the accompanying consolidated balance sheets of Foxconn Technology Co., Ltd. and its subsidiaries (the “Group”) as of December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (“ROC GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion

-114-

thereon, we do not provide a separate opinion on these matters.

Key audit matters on the consolidated financial statements for the year ended December 31, 2018 are stated as follows:

Revenue cutoff

Description

Refer to Note 4(29) for accounting policy on revenue recognition and Note 6(22) for details of revenues. The Group has three revenue types, including (1) direct shipment from the factory, (2) FOB destination, and (3) hub. For FOB destination and hub, revenue is recognised when goods are shipped to destination or picked up by customers (when control of the products is transferred). The supporting documents for revenue recognition include receipts from customers (FOB destination), reports or other information provided by hub custodians and inventory movement record of hub. As the hubs are located around the world with numerous custodians, the frequency and contents of statements provided by custodians vary, and the process of revenue recognition involves numerous manual procedures, these factors may potentially result in inaccurate timing of sales revenue recognition and discrepancy between the physical inventory quantities in the hubs and the quantities as reflected in accounting records.

Since there are numerous daily revenue from hubs and from FOB destination and the transaction amounts prior to and after the balance sheet date are significant to the financial statements, revenue cutoff has been identified as a key audit matter.

How our audit addressed the matter

We performed the following key audit procedures in respect of the above key audit matter:

Evaluated and tested the Group’s internal controls over revenue recognition.
Tested sales transactions that took place shortly before and after the balance sheet date by verifying the customers’ receipt notes, supporting documents provided by hub custodian, and inventory movement records, and ascertained whether cost of goods sold was recognised in the correct reporting period.
Confirmed physical inventory quantities held by distribution warehouses and agreed to accounting records. Assessed the reasonableness of reconciling items identified through

-115-

confirmation or physical inventory, if any, and inspected related supporting documents and rationale.

Provision for inventory valuation losses

Description

Refer to Note 4(14) for accounting policies on inventory valuation, Note 5(2) for uncertainty of accounting estimates and assumptions in relation to inventory valuation losses, and Note 6(7) for details of inventories. As at December 31, 2018, the Group’s inventories and provision for inventory valuation losses amounted NT$3,043,636 thousand and NT$138,194 thousand, respectively.

The Group is primarily engaged in manufacturing and sales of 3C electronic products. Due to rapid technological innovations, short electronic product life cycles and fluctuation of market prices, there is a higher risk of inventory losses arising from market value decline or obsolescence. The Group recognises inventories at the lower of cost and net realisable value, which is determined based on historical data of inventory closeout and range of discount. Inventory valuation losses are provided against inventory aged over a certain time period and individually identified as obsolete or damaged.

As the amounts of inventory are material, types of inventories vary, the identification of obsolete or damaged inventories and determination of net realisable value are subject to management and audit judgement, we consider provision for inventory valuation losses as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

A. Ensured consistent application of accounting policies on provision for inventory valuation losses and ascertain compliance with respective accounting guidance.
B. Validated the appropriateness of system logic of inventory aging report utilised by management in assessing inventory valuation losses and sampled and tested transactions for proper categorisation in inventory aging report.
C. Assessed the reasonableness of inventory valuation losses through discussion with management as to the determination of net realisable value of obsolete or damaged inventories and validating related supporting documents.

-116-

Other matter – Parent company only financial reports

We have audited and expressed an unmodified opinion on the parent company only financial statements of Foxconn Technology Co., Ltd. as of and for the years ended December 31, 2018 and 2017.

Responsibilities of management and those charged with governance for 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 the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the Audit Committee, are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,whether due to fraud or error, and to issue a report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

-117-

A. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal controls.
C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
D. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Group to cease to continue as a going concern.
E. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

-118-

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Hsu, Sheng-Chung Wu, Han-Chi For and on behalf of PricewaterhouseCoopers, Taiwan March 27, 2019

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

-119-

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Assets	December 31, 2018 AMOUNT % � �� �� �� � �� �� �� �� �� �� �� � �� � �� � �� �� �� �� � � �� � � � �� � �� � �� � �� � �� � �� � �� �� � �� ��	December 31, 2017	December 31, 2017
	AMOUNT � �� �� �� �� �� �� �� �� �� �� � �� � �� �� �� �� �� �� �� � ��	AMOUNT � �� �� � �� �� �� �� �� �� � �� � �� �� �� �� � �� �� �� � ��	%
Current assets 1100 Cash and cash equivalents 1110 Current financial assets at fair value through profit or loss 1136 Financial assets at amortised cost- current 1170 Accounts receivable, net 1180 Accounts receivable due from related parties, net 1200 Other receivables 130X Inventories 1470 Other current assets 11XX Total current assets Non-current assets 1517 Financial assets at fair value through other comprehensive income-non-current 1523 Non-current available-for-sale financial assets 1535 Financial assets at amortised cost- non-current 1546 Investments in debt instruments without active market-non-current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1760 Investment property - net 1780 Intangible assets 1840 Deferred tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets			�� � � � �� � � �
			��
			� �� � � � � � � � �
			��
			��

(Continued)

-120-

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December 31, 2017	December 31, 2017
	AMOUNT � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � ��	%
Current liabilities 2100 Short-term borrowings 2120 Current financial liabilities at fair value through profit or loss 2170 Accounts payable 2180 Accounts payable to related parties 2200 Other payables 2230 Current tax liabilities 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2570 Deferred tax liabilities 2600 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total liabilities Equity attributable to owners of parent Share capital 3110 Ordinary share Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3350 Unappropriated retained earnings Other equity interest 3400 Other equity interest 31XX Total equity attributable to owners of parent 36XX Non-controlling interests 3XXX Total equity Commitments and Contingent Liabilities 3X2X Total liabilities and equity		�� � � �� � � �
		��
		� �
		�
		��
		� � � �� ��
		�� �
		��
		��

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

-121-

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except for earnings per share amounts)

Items

2018
2017
Notes
AMOUNT
%
AMOUNT
%
6(22) and 7
�
��
��
�
��
��
6(7)(25) and 7
�
��
��
��
��
��
�
��
��
6(25) and 7
�
��
��
��
��
�
��
��
��
��
�
��
��
��
��
�
��
��
��
��
��
�
��
�
6(23)
��
�
��
�
6(24)
��
��
��
��
�
��
��
��
�
6(9)
�
��
��
��
�
��
�
��
�
��
�
��
�
6(27)
�
��
��
��
��
�
��
�
�
��
�

4000
Operating revenue
5000
Operating costs
5900
Gross profit from
operations
Operating expenses
6100
Selling expenses
6200
Administrative expenses
6300
Research and development
expenses
6000
Total operating expenses
6900
Net operating income
Non-operating income and
expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7060
Share of loss of associates
and joint ventures accounted
for using equity method
7000
Total non-operating
income and expenses
7900
Profit before income tax
7950
Tax expense
8200
Profit

(Continued)

-122-

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except for earnings per share amounts)

Items

2018
2017
Notes
AMOUNT
%
AMOUNT
%
��
��
��
��
�
6(3)
�
��
��
�
�
��
�
��
�
�
��
��
��
�
6(20)(21)
��
��
��
��
�
�
��
��
��
�
��
��
��
��
��
��
��
�
��
�
�
��
�
��
�
��
�
�
��
�
�
��
�
��
��
��
��
��
��
�
��
�
��
��
��
��
��
6(28)
�
��
�
��
�
��
�
��

Components of other
comprehensive income that
will not be reclassified to
profit or loss
8311
Actuarial losses on defined
benefit plans
8316
Unrealised loss on valuation
of financial assets at fair
value through other
comprehensive income
8349
Income tax related to
components of other
comprehensive income that
will not be reclassified to
profit or loss
8310
Other comprehensive loss
that will not be
reclassified to profit or
loss
Components of other
comprehensive income that
will be reclassified to profit or
loss
8361
Exchange differences on
translation
8362
Unrealised gains (losses) on
valuation of available-for-
sale financial assets
8360
Other comprehensive
income that will be
reclassified to profit or
loss
8500
Total comprehensive (loss)
income
Profit attributable to:
8610
Owners of parent
8620
Non-controlling interests
Comprehensive income (loss)
attributable to:
8710
Owners of parent
8720
Non-controlling interests
Earnings per share (in
dollars)
9750
Basic earnings per share
9850
Diluted earnings per share

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

-123-

												Total equity		��	��	��	��		�	��		��	��		��	��	��	��	��	��		�	��		��		��	��
														�						�		�	�		�	�			�	�			�		�		�	�
											Non-controlling	interests		� ��	��	� ��	��		�	�		�	� ��		� ��	�	��	��	� ��	��		�	�		�		�	� ��
												Total		��	��	��	��		�	��		��	��		��	��	��	��	��	��		�	��		��		��	��
														�						�		�	�		�	�			�	�			�		�		�	�
									Unrealised gains	(losses) on available-	for-sale financial	assets		� ��	�	��	��		�	�		�	� ��		� ��	� ��	�	�	�	�		�	�		�		�	� �
					Other Equity Interest	Unrealised gains	(losses) from	financial assets	measured at fair	value through other	comprehensive	income		� �	�	�	�		�	�		�	� �		� �	��	��	�	� ��	� ��		�	�		�		�	� ��
FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES	CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	YEARS ENDED DECEMBER 31, 2018 AND 2017	(Expressed in thousands of New Taiwan dollars)	Equity attributable to owners of the parent	Retained Earnings				Exchange differences	on translation of	Unappropriated foreign financial	Ordinary share Capital surplus Legal reserve retained earnings statements		� �� � �� � �� � �� � ��	� � � �� �	� � � � �� � ��	� � � �� � ��		� � �� � �� �	� � � � �� �		� � �� � � �	� �� � �� � �� � �� �� ��		� �� � �� � �� � �� �� ��	� � � � �� �	�� �� �� �� � ��	� � � �� �	� � � �� ��	� � � �� ��		� � �� � �� �	� � � � �� �		� � �� � � �		� � � � �� �	� �� � �� � �� � �� �� ��
												Notes	2017	Balance at January 1, 2017	Profit	Other comprehensive income (loss) 6(20)	Total comprehensive income (loss)	Appropriations of 2016 earnings 6(19)	Legal reserve	Cash dividends	Changes in equity of associates and joint ventures accounted for using	equity method	Balance at December 31, 2017	2018	Balance at January 1, 2018	Effects of retrospective application and retrospective restatement 12(4)	Balance at January 1 after adjustments	Profit	Other comprehensive income (loss) 6(20)	Total comprehensive income (loss)	Appropriations of 2017 earnings 6(19)	Legal reserve	Cash dividends	Changes in equity of associates and joint ventures accounted for using	equity method	Disposal of investments in equity instruments designated at fair value	through other comprehensive income	Balance at December 31, 2018

-124-

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Income and expenses having no effect on cash
flows
Depreciation (including investment property)
Amortisation
Expected credit gain
Net loss on financial assets or liabilities at fair
value through profit or loss
(Gain) loss on disposal of property, plant and
equipment
Interest expense
Interest income
Dividend income
Share of loss of associates and joint ventures
accounted for using equity method
Changes in assets/liabilities relating to operating
activities
Changes in operating assets
Accounts receivable net
Accounts receivable due from related parties
Other receivables
Inventories
Other current assets
Other non-current assets
Net changes in liabilities relating to operating
activities
Accounts payable
Accounts payable to related parties
Other payables
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Income taxes paid
Net cash flows from operating activities

Notes
2018
2017
�
��
�
��
6(25)
��
��
6(25)
��
��
12(2)
�
��
�
6(2)
�
��
��
6(24)
�
��
��
��
��
6(23)
�
��
��
6(23)
�
��
��
6(9)
��
��
��
�
��
��
�
��
��
�
��
��
�
��
�
��
��
��
�
��
��
�
��
�
��
��
�
��
��
��
��
�
��
��
��
��
�
��
��
��
��

(Continued)

-125-

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in financial assets at amortised cost-
current
Net increase in financial assets at amortised cost-
non-current
Acquisition of investments accounted for using
equity method
Proceeds from disposal of financial assets at fair
value through other comprehensive income
Acquisition of investments in debt instruments
without active market
Increase in other financial assets
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and
equipment
(Increase) decrease in net receivable/ payable on
raw materials
Interest received
Dividends received
Net cash flow from acquisition of subsidiaries
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid
(Decrease) increase in short-term loans
Cash dividends paid
Net cash flows (used in) from financing
activities
Effect of changes in foreign currency exchange rates
on cash
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2018
2017
�
��
�
�
�
��
�
6(9)
�
��
�
6(3)
��
�
6(4)
�
�
��
�
�
��
6(30)
�
��
��
6(30)
��
��
�
��
��
��
��
��
��
6(29)
��
�
�
��
��
�
��
��
�
��
��
�
��
��
�
��
��
��
�
��
�
��
��
��
��
�
��
�
��

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

-126-

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANISATION

The Company was originally known as Q-RUN Technology Co., Ltd. and established on April 26, 1990. On March 1, 2004, the Company merged with Foxconn Precision Components Co., Ltd. and was renamed as Foxconn Technology Co., Ltd. The Company and its subsidiaries (collectively referred herein as “the Group”) are primarily engaged in manufacturing, processing and sales of case, heat dissipation modules and consumer electronics products.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on March 27, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by FSC effective from 2018 are as follows:

New Standards,InterpretationsandAmendments

Effective Date by
International Accounting
StandardsBoard

Amendments to IFRS 2, ‘Classification and measurement of share-based
payment transactions’
Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4
Insurance contracts’
IFRS 9, ‘Financial instruments’
IFRS 15, ‘Revenue from contracts with customers’
Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts
with customers’
Amendments to IAS 7, ‘Disclosure initiative’
Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised
losses’
Amendments to IAS 40, ‘Transfers of investment property’
IFRIC 22, ‘Foreign currency transactions and advance consideration’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1,
‘First-time adoption of International Financial Reporting Standards’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12,
‘Disclosure of interests in other entities’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28,
‘Investments in associates and joint ventures’

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2018

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete.

-127-

A. IFRS 9, ‘Financial instruments’
(a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.
(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.
(c) The Group has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Notes 12(4) B and C.
B. IFRS 15, ‘Revenue from contracts with customers’ and amendments
(a) The Group has elected not to restate prior period financial statements when initially applying IFRS 15.
(b) Presentation of assets and liabilities in relation to contracts with customers

The Group will recognise revenue in the amount of consideration to which the Group expects to be entitled. Revenue would not be recognised for products that the Group expects to be returned. The Group recognises a refund liability and an asset which are presented separately.

(c) Under IFRS 15, liabilities in relation to expected volume discounts and refunds to customers are recognised as refund liabilities, but were previously presented as accounts receivable - allowance for sales returns and discounts in the balance sheet. The balance was $64,929 on January 1, 2018.
(d) Please refer to Note 12(5) for other disclosures in relation to the first application of IFRS 15.
(2)Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

-128-

New Standards,InterpretationsandAmendments	Effective Date by International Accounting StandardsBoard
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Effects of the Group’s financial condition and financial performance arising from the above standards and interpretations based on the Group’s assessment are as follows:

IFRS 16, ‘Leases’

IFRS 16, ‘Leases’ replaces IAS 17, ‘Leases’and related interpretations and SICs. The standard requires lessees to recognise a ‘right-of-use asset’ and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

The Group expects to recognise the lease contract of lessees in line with IFRS 16. However, the Group intends not to restate the financial statements of prior period (referred herein as the “modified retrospective approach”). On January 1, 2019, it is expected that ‘right-of-use asset’ and lease liability will be increased by $1,884,333 and $1,308,751, and other non-current assets will be decreased by $575,582.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

New standards, interpretations and amendments issued by IASB but not endorsed by the FSC are as follows:	yet included in the IFRSs
New Standards,InterpretationsandAmendments	Effective Date by International Accounting StandardsBoard
Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’	January 1, 2020 January 1, 2020 To be determined by International Accounting Standards Board January 1, 2021

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stat ed.

-129-

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:
(a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
(b) Financial assets at fair value through other comprehensive income / Available-for-sale financial assets measured at fair value.
(c) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.
B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.
C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 11 (‘IAS 11’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting policies and details of significant accounts.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements:
(a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.
(b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
(c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

-130-

(d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.
(e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss.
B. Subsidiaries included in the consolidated financial statements:

Investor	Subsidiary	Main BusinessActivities Investment holdings in companies in Mainland China, Hong Kong and America primarily engaged in manufacturing, sale, research and development of computer thermal module and computer components Investment holdings in companies in Mainland China, Hong Kong, Singapore and America primarily engaged in manufacturing, sale, research and development of aluminum magnesium case and computer components Investment holdings in R.O.C. companies Investment holding and reinvestment Investment holding and reinvestment Investment holding and reinvestment	December December 31,2018 31,2017 100 100 100 100 100 100 100 100 100 100 100 100 Ownership (%)	Note
			December 31,2018 100 100 100 100 100 100

-131-

Investor	Subsidiary	Main BusinessActivities Investment holding and reinvestment Investment holding and reinvestment Sales, investment holdings and reinvestment Investment holding and reinvestment Investment holding and reinvestment Investment holding and reinvestment Investment holding and reinvestment Investment holding and reinvestment Investment holding and reinvestment Investment holding and reinvestment Investment holding and reinvestment Investment holding and reinvestment Electrical board components processing; manufacturing and marketing of optoelectronics and computer cables	December December 31,2018 31,2017 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Ownership (%)	Note
			December 31,2018 100 100 100 100 100 100 100 100 100 100 100 100 100
Q-RUN Ltd. Q-RUN Ltd. Q-RUN Ltd. Atkinson Ltd. Atkinson Ltd. Atkinson Ltd. Q-RUN Far East Corporation Q-RUN Far East Corporation Q-RUN Far East Corporation Q-RUN Far East Corporation Q-RUN Far East Corporation Foxconn Technology Pte. Ltd. Kenny International Ltd.	High Tempo International Ltd. FTC Technology Inc. Foxconn Technology Pte. Ltd. Kenny International Ltd. Double Wealth Profits Ltd. Precious Star International Ltd. Eastern Star Limited Foreign Technology Ltd. Topfry Industrial Ltd. Gold Glory International Ltd. New Glory Holdings Ltd. FTP Technology Inc. Fu Rui Precision Components (Kunshan) Co., Ltd.

-132-

Investor	Subsidiary	Main BusinessActivities Manufacturing and marketing of computer components (computer thermal module) Production of LED lamps and LED display; engagement in smart light pole and other products in relation to LED Manufacturing and marketing of computer components (computer thermal module) Manufacturing and marketing of computer components and peripherals and computer cases New alloy material, precision molds, new electronic components, portable computers and their components Manufacturing and marketing of computer components and related peripherals, computer cases and metal stamping Research, development, production and sales of aluminum alloy materials, rail vehicle components, car accessories and electronic components; manufacturing and sales of structured metal products and metal container (not including precious metal and electroplating)	December December 31,2018 31,2017 100 100 100 100 65 - 87.63 87.63 100 100 12.37 12.37 70 70 Ownership (%)	Note
			December 31,2018 100 100 65 87.63 100 12.37 70
Double Wealth Profits Ltd. Fuzhun Precision (Shenzhen) Industry Co., Ltd. Fuzhun Precision (Shenzhen) Industry Co., Ltd. Eastern Star Limited Eastern Star Limited Precious Star International Ltd. Hon Fujin Precision Industry (Taiyuan) Co., Ltd.	Fuzhun Precision (Shenzhen) Industry Co., Ltd. Fuyu Technology (Nanyang) Co., Ltd. Champ Tech Optical (Foshan) Corporation Hon Fujin Precision Industry (Taiyuan) Co., Ltd. Fuzhun Precision (Hebi) Electronics Co., Ltd. Hon Fujin Precision Industry (Taiyuan) Co., Ltd. Qingdao Hiyn Materials Co., Ltd.			Note

-133-

Investor	Subsidiary	Main BusinessActivities Manufacture and sale of automobile parts; manufacture and sale of aluminum alloy parts used for automobiles and electronics. Manufacturing and marketing of computer case – electronic and electrical components Manufacturing and marketing of power plug and wall socket, micro ribbon connectors for terminals, etc. Manufacturing and marketing of computer components (computer thermal module) Manufacturing and marketing of computer case – electronic and electrical components Manufacturing and marketing of computer components (computer thermal module)	December December 31,2018 31,2017 100 100 100 100 100 100 35 - 100 100 100 100 Ownership (%)	Note
			December 31,2018 100 100 100 35 100 100
Hon Fujin Precision Industry (Taiyuan) Co., Ltd. Topfry Industrial Ltd. Gold Glory International Ltd. Fu Yu Precision Components (Kunshan) Co., Ltd. New Glory Holdings Limited New Glory Holdings Limited	Fuzhun Precision Industry (Shenyang) Co., Ltd. Fuhuigang Industral (Shenzhen) Co., Ltd. Fu Yu Precision Components (Kunshan) Co., Ltd. Champ Tech Optical (Foshan) Corporation YanTai Fuzhun Precision Electronics Co., Ltd. Nanning Funing Precision Electronics Co., Ltd.			Note

Note: Champ Tech Optical (Foshan) Corporation was acquired by the Company in 2018 through the Company’s subsidiaries, Fuzhun Precision (Shenzhen) Industry Co., Ltd. and Fu Yu Precision Components (Kunshan) Co., Ltd. and included in the consolidated financial statements since the effective date of share transfer. Please refer to Note 6(29) for the details.

C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Significant restrictions: None.
F. Subsidiaries that have non-controlling interests that are material to the Group: None.

(4) Foreign currency translation

The consolidated financial statements are presented in NTD, which is the Company’s functional and the Group’s presentation currency.

A. Foreign currency transactions and balances

-134-

(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
(d) All foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other gains and losses’.
B. Translation of foreign operations
(a) The operating results and financial position of all the group entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
- iii. All resulting exchange differences are recognised in other comprehensive income.
(b) When the foreign operation partially disposed of or sold is an associate, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even the Group still retains partial interest in the former foreign associate after losing significant influence over the former foreign associate, such transactions should be accounted for as disposal of all interest in these foreign operations.
(c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even the Group still retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

(5) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

-135-

(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realised within twelve months from the balance sheet date;
(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a) Liabilities that are expected to be paid off within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be paid off within twelve months from the balance sheet date;
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(6) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits and bands sold under repru chase agveement that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(7) Financial assets at fair value through profit or loss

Effective 2018

A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income. Financial assets at amortised cost or fair value through other comprehensive income are designated as at fair value through profit or loss at initial recognition when they eliminate or significantly reduce a measurement or recognition inconsistency.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.
D. The Group recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(8) Financial assets at fair value through other comprehensive income

Effective 2018

A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:
(a) The objective of the Group’s business model is achieved both by collecting contractual cash

-136-

flows and selling financial assets; and

(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value:
(a) The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.
(b) Except for the recognition of impairment loss, interest income and gain or loss on foreign exchange which are recognised in profit or loss, the changes in fair value of debt instruments are taken through other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss.

(9) Financial assets at amortised cost

Effective 2018

A. Financial assets at amortised cost are those that meet all of the following criteria:
(a) The objective of the Group’s business model is achieved by collecting contractual cash flows.
(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and derecognised using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognised in profit or loss when the asset is derecognised or impaired.
D. The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

(10) Accounts and notes receivable

A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(11) Impairment of financial assets

For debt instruments measured at fair value through other comprehensive income and financial assets at amortised cost including accounts receivable or contract assets that have a significant financing component, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or

-137-

contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

(12) Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(13) Operating leases (lessor)

Lease income from an operating lease (net of any incentives given to the lessee) is recognised in profit or loss on a straight-line basis over the lease term.

(14) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in process comprises raw materials, direct labour, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(15) Investments accounted for under equity method / associates

A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 per cent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.
B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
C. When changes in an associate’s equity are not recognised in profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognises change in ownership interests in the associate in ‘capital surplus’ in proportion to its ownership.
D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and ‘investments accounted for under the equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or

-138-

liabilities were disposed of.

F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss.
G. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.
(16) Property, plant and equipment
A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives for buildings and structures machinery and equipment and other equipment are 3~55 years, 1~10 years and 1~10 years, respectively.

(17) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 8 ~ 55 years.

(18) Intangible assets

Goodwill

Goodwill arises in a business combination accounted for by applying the acquisition method.

(19) Impairment of non-financial assets

A. The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognising impairment loss for an asset in prior years no longer

-139-

exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

B. The recoverable amounts of goodwill that have not yet been available for use are evaluated periodically. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.
C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

(20) Borrowings

A. Borrowings comprise long-term and short-term bank borrowings and other long-term and shortterm loans. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

(21) Accounts and notes payable

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(22) Financial liabilities at fair value through profit or loss

A. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorised as financial liabilities held for trading unless they are designated as hedges.
B. At initial recognition, the Group measures the financial liabilities at fair value. All related transaction costs are recognised in profit or loss. The Group subsequently measures these financial liabilities at fair value with any gain or loss recognised in profit or loss.

(23) Derecognition of financial liabilities

A financial liability is derecognised when the obligation specified in the contract is either discharged or cancelled or expires.

(24) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

-140-

(25) Non-hedging derivatives

Non-hedging derivatives are initially recognised at fair value on the date a derivative contract is entered into and recorded as financial assets or financial liabilities at fair value through profit or loss. They are subsequently remeasured at fair value and the gains or losses are recognised in profit or loss.

(26) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

B. Pensions
(a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plans

i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.
ii. Remeasurements arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

iii. Past service costs are recognised immediately in profit or loss.

C. Employees’ compensation, directors’ and supervisors’ remuneration

Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employees compensation is paid by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution�

(27) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate

-141-

and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.
E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

(28) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are approved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(29) Revenue recognition

A. The Group is primarily engaged in manufacturing and sales of consumer electronics products. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.
B. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated sales discounts and allowances. Revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each reporting date. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Group does not adjust the transaction price to reflect the time value of money.

-142-

C. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(30) Government grants

Government grants are recognised at their fair value only when there is reasonable assurance that the Group will comply with any conditions attached to the grants and the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises expenses for the related costs for which the grants are intended to compensate.

(31) Business combinations

A. The Group uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisitionrelated costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. For each business combination, the Group measures at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to the proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other non-controlling interests should be measured at the acquisition-date fair value.
B. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date. If the total of consideration transferred, non-controlling interest in the acquiree recognised and the fair value of previously held equity interest in the acquiree is less than the fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognised directly in profit or loss on the acquisition date.

(32) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

(1) Critical judgements in applying the Group’s accounting policies

A. Revenue recognition

The Group determines whether the nature of its performance obligation is to provide the specified goods or services itself (i.e. the Group is a principal) or to arrange for the other party to provide

-143-

those goods or services (i.e. the Group is an agent) based on the transaction model and its economic substance. The Group is a principal if it controls a promised good or service before it transfers the good or service to a customer. The Group recognises revenue at gross amount of consideration to which it expects to be entitled in exchange for those goods or services transferred. The Group is an agent if its performance obligation is to arrange for the provision of goods or services by another party. The Group recognises revenue at the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the other party to provide its goods or services. Indicators that the Group controls the good or service before it is provided to a customer include the following:

The Group provides integrated electronics manufacturing services to meet the following criteria by judgment, and recognises revenue on a gross basis:

(a) The Group is primarily responsible for the provision of goods or services;
(b) The Group assumes the inventory risk before transferring the specified goods or services to the customer or after transferring control of the goods or services to the customer.
(c) The Group has discretion in establishing prices for the goods or services.
B. Offsetting financial instruments

The determination of whether the Group’s financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(2) Critical accounting estimates and assumptions

Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

As of December 31, 2018, information on the carrying amount of inventories is provided in Note 6(7).

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Cash equivalents Time deposits Repurchase Agreement Bond	December31,2018 �� � �� �� �� �� �	December31,2017
		�� � �� �� �� �� �

A. The Group associates with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

-144-

B. The Group has no cash and cash equivalents pledged to others. Time deposits with maturity in excess of three months on December 31, 2018 and 2017 have been listed under “financial assets at amortised cost-current” and “other current assets”, respectively.
(2) Financial assets or liabilities at fair value through profit or loss

Assets December 31, 2018 Current items: Financial assets mandatorily measured at fair value through profit or loss Derivatives �� Liabilities

Current items: Financial liabilities mandatorily measured at fair value through profit or loss Derivatives ��

A. The Group recognised net profit of $766,548 (including unrealised gain on valuation of $573,619) on the financial assets and liabilities for the year ended December 31, 2018.
B. The Group entered into contracts relating to derivative financial assets or liabilities which were not accounted for under hedge accounting. The information is listed below:

Derivativeinstruments Current items: Cross currency swap contracts Foreign exchange contracts	December31,2018	December31,2018
	TWD (SELL) �� USD (BUY) �� TWD (SELL) �� USD (BUY) �� TWD (SELL) �� USD (BUY) �� TWD (SELL) �� USD (BUY) �� Contract amount (Nominal Principal in thousands)	Contractperiod
		2018/03~2019/03 2018/04~2019/04 2018/12~2019/01 2018/03~2019/03

(a) Cross currency swap contracts

The Company signed cross currency swap contracts aiming to satisfy capital requirement. In terms of exchange rate swaps, the principal in two currencies are exchanged at the beginning and the end of period to reduce exchange rate risk. In terms of rate swaps, the fixed interest rates of two currencies are exchanged to reduce interest rate risk.

(b) Foreign exchange contracts

The Company entered into foreign exchange contracs to satisfy capital requirement. The principal in two currencies are swapped using the same exchange rate at the beginning and the end of the period to reduce exchange rate risk.

C. The counterparties of derivative instruments held by the Group are all banks with good credit

-145-

quality or financial institutions with investment grade credit ratings that are above A.

D. The Group has no financial assets at fair value through profit or loss pledged to others.
E. Information on December 31, 2017 is provided in Note 12(4).

(3) Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income
Items Non-current items: Equity instruments Listed and emerging stocks	December31,2018
	�� �

A. The Group has elected to classify investments that are considered to be strategic investments as financial assets at fair value through other comprehensive income.
B. The Group has no financial assets at fair value through other comprehensive income pledged to others.
C. Information on December 31, 2017 is provided in Note 12(4).
D. The Group sold $290,985 equity investments at fair value which resulted in cumulative losses on disposal amounting to $15,715 during the year ended December 31, 2018.
E. Amounts recognised in profit or loss and other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

Fair value change recognised in other comprehensive (loss) income � Cumulative losses reclassified to retained earnings due to derecognition	Years endedDecember 31,	Years endedDecember 31,
	2018 �� � �� �	2017
		�� �
		� �

The abovementioned fair value change that were recognised in other comprehensive (loss) income arose mainly from change in fair value of SHARP CORPORATION. For the years ended December 31, 2018 and 2017, the Group recognised loss amounting to $37,227,088 and gain amounting to $25,258,260, respectively.

(4) Financial assets at amortised cost

Financial assets at amortised cost
Items Current items: Capital guarantee financial products Time deposits with maturity in excess of three months Non-current items: Bank debentures-trust fund	December31,2018
	�� � �� �� � �� �

A. Please refer to Note 6(23) for information on recognised gains and losses on financial assets at amortised cost. The Group entered into a capital guarantee financial product contract with banks, with returns ranging from 3.50% to 4.55% for the year ended December 31, 2018.
B. In March 2018 and December 2017, the Group invested in the trust fund named Guangdong Finance Trust - Peng Yun Tian Hua Collection Fund Trust for RMB 500 million and RMB 1 billion,

-146-

respectively. The fund was mainly created for the investment in Guangzhou Guangyin Nanyue Intelligent Technology Industrial Investment Partnership. This investment is included in “financial assets at amortised cost-non-current.”

The significant rights and obligations of the aforementioned investment are outlined as follows:

(a) The preferred beneficiary has priority over ordinary beneficiary in the distribution of investment returns, including return of principal.
(b) The Group is the ordinary beneficiary, whose claim to trust interests is lower than the preferred beneficiary.
(c) For the December 31, 2018, the Group received returns in the amount of $1,397,100 in accordance with the investment agreement.
C. As of December 31, 2018, the Group has no financial assets at amortised cost pledged to others.
D. Investments that the Group invests in are all with high credit quality.
E. Information on December 31, 2017 is provided in Notes 6(8) and 12(4).

(5) Notes and accounts receivable

Notes and accounts receivable
December31,2018 Notes receivable �� � Accounts receivable �� �� Less: Allowance for bad debts �� � Less: Allowance for sales discounts � � �� �	December31,2017
	�� � �� �� � �� �� �

A. The Group does not hold any collateral as security.
B. Information relating to credit risk is provided in Note 12(2).
C. Information on the Group’s expected volume discounts reclassified to refund liabilities (shown as “other current liabilities”) under IFRS 15 is provided in Note 12(5).

(6) Other receivables

Other receivables
Receivable from purchases made on behalf of others Interest receivable Receivable from disposal of equipment Others	December31,2018 �� � �� �� �� �� �	December31,2017
		�� � �� �� �� �� �

‘Others’ refer to payments such as water and electricity fee and power expense on behalf of related parties.

-147-

(7) Inventories

Inventories
	December31,2018		December31,2017
Raw materials	�� �		�� �
Work in process		��	��
Finished goods		��	��
		��	��
Less: Allowance for inventory obsolescence and
market price decline	�� �		�� �
	�� �		�� �
The cost of inventories recognised as expense for the year:
		Years ended	December31,
		2018	2017
Cost of inventories sold	�	��	�� �
Gain on inventory obsolescence and market price
decline		��	�� �
Revenue from sale of scraps	�� �		�� �
	�	��	�� �

As the Group sold some inventory with net realisable value lower than its cost, the allowance for inventory obsolescence and market price decline was reversed for the year ended December 31, 2017.

(8) Other current assets

Other current assets
Prepaid expenses Overpaid sales tax Capital guarantee financial products Time deposits with maturity over three months Others	December31,2018 �� � �� � � �� �� �	December31,2017
		�� � �� �� �� �� �� �

A. The Group has signed a contract for capital guarantee financial products with the bank for the year ended December 31, 2017, and the rate of return was between 3.7%~4.8%.

B. Information on the Group’s capital guarantee financial products and time deposits with maturity over three months reclassified to financial assets at amortised cost under IFRS 9 is provided in Note 6(4).

-148-

(9) Investments accounted for using equity method

Investments accounted for using equity method
Investees IDG Energy Investment Limited FE Holding USA, Inc. Syntrend Creative Park Co., Ltd. FSK Holdings Limited Foxstar Technology Co., Ltd.	December31,2018 �� � �� �� �� �� �� �	December31,2017
		� � � �� �� �� �� �

A. On December 13, 2017, the Board of Directors resolved to acquire 1,485,000 thousand common shares of IDG Energy Investment Limited, a listed company in Hong Kong, at HKD 1 per share. The total investment amount was $5,572,590 (HKD 1,485,000 thousand), representing an ownership stake of 24%. The aforementioned investment was completed in January 2018.
B. In 2018, the Group subsequently acquired the common stock of FE Holdings USA, Inc. at USD 1 per share in accordance with the resolution passed by the Board of Directors in January, 2018. The total investment amount was $2,461,701 (USD 80,400 thousand), representing an ownership stake of 33%.
C. The carrying amount of the Group’s interests in all individually immaterial associates and the Group’s share of the operating results are summarised below:

	Years ended	December31,
	2018	2017
Loss for the year from continuing operations	�� ��	�� ��
Other comprehensive loss, net of tax	�� �	�
Total comprehensive loss for the year	�� ��	�� ��

D. The Group’s investment, IDG Energy Investment Limited, has quoted market prices. As of December 31, 2018, the fair value was $6,696,088.

-149-

			Total		�� �	�� �	�� �			�� �	��	�	�� �	�� �		��	�� �	�� �		�� �		�� �	�� �	�� �
Construction in	progress and	equipment under	acceptance		�� �	�	�� �			�� �	��	�� �	�	�		�	�	�� �		�� �		�� �	�	�� �
			Others		�� �	�� �	�� �			�� �	��	��	�	�� �		��	�� �	�� �		�� �		�� �	�� �	�� �
		Machinery and	equipment		�� �	�� �	�� �			�� �	��	��	�	�� �		��	�� �	�� �		�� �		�� �	�� �	�� �
		Buildings and	structures		�� �	�� �	�� �			�� �	��	��	�� �	�� �		��	�� �	�� �		�� �		�� �	�� �	�� �
			Land		�� �	�	�� �			�� �	�	�	�	�		�	�	�		�� �		�� �	�	�� �
				At January 1, 2018	Cost	Accumulated depreciation		2018	Opening net book amount as	at January 1	Additions	Reclassifications	Transfer	Disposals	Acquired from bussiness	combinations	Depreciation charge	Net exchange differences	Closing net book amount as	at December 31	At December 31, 2018	Cost	Accumulated depreciation

-150-

			Total		�� �	�� �	�� �			�� �	��	�� �	�� �	�� �	�� �	�� �		�� �		�� �	�� �	�� �
Construction in	progress and	equipment under	acceptance		�� �	�	�� �			�� �	��	�� �	�	�	�	�� �		�� �		�� �	�	�� �
			Others		�� �	�� �	�� �			�� �	��	�	�	�� �	�� �	�� �		�� �		�� �	�� �	�� �
		Machinery and	equipment		�� �	�� �	�� �			�� �	��	��	�	�� �	�� �	�� �		�� �		�� �	�� �	�� �
		Buildings and	structures		�� �	�� �	�� �			�� �	��	��	�� �	�� �	�� �	�� �		�� �		�� �	�� �	�� �
			Land		�� �	�	�� �			�� �	�	�	�	�	�	�		�� �		�� �	�	�� �
				At January 1, 2017	Cost	Accumulated depreciation		2017	Opening net book amount as	at January 1	Additions	Reclassifications	Transfer	Disposals	Depreciation charge	Net exchange differences	Closing net book amount as	at December 31	At December 31, 2017	Cost	Accumulated depreciation

-151-

(11) Investment property

Land
At January 1, 2018
Cost
��
Accumulated depreciation and impairment
�
��
�
2018
Opening net book amount as at January 1
��
Transfer in
�
Depreciation charge
�
Net exchange differences
�
Closing net book amount as at December
31
��
�
At December 31, 2018
Cost
��
Accumulated depreciation and impairment
�
��
�
Land
At January 1, 2017
Cost
��
Accumulated depreciation and impairment
�
��
�
2017
Opening net book amount as at January 1
��
Transfer in
�
Depreciation charge
�
Net exchange differences
�
Closing net book amount as at December
31
��
�
At December 31, 2017
Cost
��
Net exchange differences
�
��
�

A. Rental income from investment property and direct operating expenses arising from investment property are shown below:

-152-

Rental income from investment property Direct operating expenses arising from the investment property that generated rental income during the year

Years endedDecember31,	Years endedDecember31,
2018 �� � �� �	2017
	�� �
	�� �

B. The fair value of the investment property held by the Group as at December 31, 2018 and 2017 was $1,920,639 and $1,198,857, respectively. Valuations were made using the income approach which is categorised within Level 3 in the fair value hierarchy.

(12) Intangible assets

Intangible assets
January 1, 2018 Cost Accumulated impairment 2017 At January 1 Acquired from business combinations Net exchange differences December 31 December 31, 2018 Cost Accumulated impairment	Patent rights and technicalskills � � � � � � � �� �� �� � �� � � �� �	Buildings and structures � � � � � � � �� �� �� � �� � � �� �	Total
			� � �
			� �
			� � �� ��
			�� �
			�� � �
			�� �

The information relating to business combination is provided in Note 6(29).

(13) Other non-current assets

Other non-current assets
Receivable from payment on behalf of others Long-term prepaid rents Prepayments for equipment Other assets - others	December 31,2018 �� � �� �� �� �� �	December 31,2017
		�� � �� �� �� �� �

The long-term prepaid rents are for a land use right contract that the Group signed for the use of the land in China. All rentals had been paid on the contract date. The Group recognised rental expenses of $13,825 and $13,658 for the years ended December 31, 2018 and 2017, respectively.

-153-

(14) Short-term borrowings

Short-term borrowings
Type ofborrowings Bank borrowings Unsecured borrowings Other short-term borrowings Type ofborrowings Bank borrowings Unsecured borrowings Other short-term borrowings	December31,2018 �� � �� �� � December31,2017 �� � �� �� �	Interest raterange	Collateral
		0.69%~5.09% 4.35% Interest raterange	None � Collateral
		0.55%~5.0% 4.35%	None �

The Group has signed an agreement to offset financial assets and liabilities with financial institutions. Details of the offset as of December 31, 2018 are as follows:

	December31,2018
Gross amount of recognised financial liabilities �� �	Gross amount of recognised financial assetsin the balance sheet �� �	Net amount of financial liabilities presented in the balance sheet
		� �

The Group did not have abovementioned transaction as of December 31, 2017.

(15) Other payables

Payable for investments Awards and salaries payable Employees’ compensation payable Payable on module expense Consumption goods expense payable Payable for purchases made by parties on behalf of others Payables for miscellaneous purchase Payables for equipment Others	December31,2018 �� � �� �� �� �� �� �� �� �� �	December31,2017 � � �� �� �� �� �� �� �� �� �

The information on the abovementioned payable for investments is provided in Note 6(29).

(16) Pensions

A. Defined benefit plans

(a) The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of

-154-

employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company and its domestic subsidiaries contribute monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee.

(b) The amounts recognised in the balance sheet are as follows (shown as ‘other non-current liabilities’):

liabilities’):
	December31,2018		December31,2017
Present value of defined benefit obligations	��	��	��	��
Fair value of plan assets		��		��
Net defined benefit liability	��	��	��	��

	Present value of
	defined benefit	Fair value of			Net defined
	obligations	plan assets			benefit liability
Year ended December 31, 2018
Balance at January 1	�� ��	�	��		�� ��
Current service cost	�� �			�	�� �
Interest income	�� �			��	�� �
	�� �		��		�� �
Remeasurements
Return on plan assets (Note)	�	��			��
Change in demographic
assumptions	�� �			�	�� �
Change in financial assumptions	�� �			�	�� �
Experience adjustments	�� �			�	�� �
	�� �			��	�� �
Pension fund contribution	�			��	��
Paid pension	��	�		��	�
	��	�		��	��
Balance at December 31	��	�	��		�� ��

-155-

	Present value of
	defined benefit	Fair value of		Net defined
	obligations	plan assets		benefit liability
Year ended December 31, 2017
Balance at January 1	�� ��	�	��	�� ��
Current service cost	�� �		�	�� �
Interest income	�� �		��	�� �
	�� �		��	�� �
Remeasurements
Return on plan assets (Note)	�	��		�� �
Change in demographic
assumptions	�� �		�	�� �
Change in financial assumptions	�� �		�	�� �
Experience adjustments	�� �		�	�� �
	�� �	�� �		�� �
Pension fund contribution	�		��	��
Paid pension	��	�� �		��
	��	�� �		��
Balance at December 31	��	�	��	�� ��

Note: The amount included in interest income or expense is excluded.

(d)The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitisation products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after approval by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2018 and 2017 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	Years endedDecember31,	Years endedDecember31,
	2018 �� ��	2017
		��
		��

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory.

-156-

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

Increase Decrease 0.25% 0.25% �� �� � �� �� � Discount rate	Future salaryincreases	Future salaryincreases
Increase 0.25% �� � �� �	Increase 0.25% �� ��	Decrease 0.25%
		��
		��

The sensitivity analysis above was based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

(f) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2019 are $1,600.
B. Defined contribution plans
(a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.
(b) The subsidiaries in mainland China have defined contribution pension plans and the Group contributes an amount monthly based on 14%~20% of employees’ monthly salaries and wages to an independent fund administered by a government agency. The plan is administered by the government of mainland China. Other than the monthly contributions, the Group does not have further pension liabilities.
(c) The pension costs under the defined contribution pension plans of the Group for the years ended December 31, 2018 and 2017 were $788,662 and $724,536, respectively.

(17) Share capital

As of December 31, 2018, the Company’s authorised capital was $15,000,000 (including subscription warrant or 50 million shares reserved for convertible bonds issued by the Company), outstanding ordinary shares were 1,414,485 thousand shares with a par value of $10 (in dollars) per share, and the paid-in capital was $14,144,852.

(18) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the

-157-

paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

(19) Retained earnings

A. In accordance with the Company’s Articles of Incorporation, current year’s earnings must be distributed in the following order:
(a) Covering accumulated deficit;
(b) Setting aside as legal reserve equal to 10% of current year’s net income after tax and distribution pursuant to clause (A);
(c) Setting aside a special reserve in accordance with applicable legal and regulatory requirements;

The remaining earnings along with the unappropriated earnings at the beginning of the period are considered as accumulated distributable earnings. In accordance with dividend policy, the proposal of earnings appropriation is prepared by the Board of Directors and resolved by the shareholders.

The Company is at the growing stage. The Company’s stock dividend policy shall consider the Company’s current and future investment environment, capital needs, local and foreign competition situation and capital budget, along with shareholders’ profit and the Company’s long-term financial plans. The shareholders’ dividends are appropriated based on accumulated distributable earnings, which shall not be lower than 15% of the distributable earnings for the period and the cash dividends shall not be less than 10% of the shareholders’ dividends.

B. According to related regulations, 10% of the balance of earnings after tax less the accumulated loss of prior years should be set aside as legal reserve, until such legal reserve amount reaches the total authorised capital. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.
C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.
D. The appropriations of earnings for 2017 and 2016 had been resolved at the stockholders’ meeting on June 22, 2018 and June 22, 2017, respectively. Details are summarised below:

on June 22, 2018 and Jun	e 22, 2017, respectively. Details are summarised below:	e 22, 2017, respectively. Details are summarised below:	e 22, 2017, respectively. Details are summarised below:
Legal reserve Cash dividends	Years endedDecember31,
	Dividends per Amount share (indollars) �� � � � �� �� �� � �� � 2017	2016
	Amount �� � �� �� �	Amount �� � �� �� �	Dividends per share (indollars)
			� � �� �� �

The appropriations of earnings for 2018 had not yet been approved at the Board of Directors’ meeting as of March 27, 2019. The information on distribution of earnings will be posted in the

-158-

“Market Observation Post System” of the TSEC.

E. For the information relating to employees’ compensation, please refer to Note 6(26). (20) Other equity items

Unrealised gain

	Unrealised gain	Unrealised gain	Unrealised gain	Unrealised gain
	(loss) on financial
	assets at fair					Unrealised
	through other				gain (loss) on			Currency
	comprehensive				available-for-sale			translation
			income		financial assets		adjustments				Total
At January 1, 2018	�			�	�	��	��	��	�	��
Adjustments under new
standards		��			�	��		�				�
Revaluation of fair value	�	��				�		�	�	��
Currency translation
differences:
- Group				�		�		��				��
- Associates				�		�	�� �		�			��
At December 31, 2018	�		��		� �		��	��	��			��
						Unrealised
					gain (loss) on			Currency
					available-for-sale			translation
					financial assets		adjustments				Total
At January 1, 2017					�	��	�	��	�	��
Revaluation of fair value						��		�		��
Currency translation
differences:
– Group						�	�	��	�		��
At December 31, 2017					�	��	��	��	�	��

(21) Non-controlling interests

Non-controlling interests
At January 1 Shares attributable to non-controlling interests: Profit for the year Currency translation differences At December 31	2018 2017 �� � �� � �� �� �� � �� � �� � �� � Years endedDecember31,
	2018 �� � �� �� � � �� �

-159-

(22) Operating revenue

Revenue from contracts with customers

	YearendedDecember31,2018
	�� �

The disclosures relating to operating revenue by geography for the years ended December 31, 2018 and 2017 are provided in Note 14(5).

(23) Other income

Other income
Interest income: Interest income from bank deposits Interest income from capital guarantee financial products Government grants revenue Rental revenue Dividend income Others	Years endedDecember31,
	2018 �� � �� �� �� �� �� �� �	2017
		�� � �� �� �� �� ��
		�� �

(24) Other gains and losses

Other gains and losses
	Years ended		December31,
	2018		2017
Gains (losses) on disposal of property, plant and
equipment	�	��	�� ��
Net currency exchange (losses) gains	�	��	��
Gains (losses) on financial assets (liabilities) at fair
value through profit or loss		��	�� �
Others	�	��	�� �
	�	��	�� ��

(25) Expenses by nature

Expenses by nature
Employee benefit expense Depreciation Amortisation (including long-term prepaid rent amortisation)	Years endedDecember31,
	2018 �� � �� �� �� �	2017
		�� � �� ��
		�� �

-160-

(26) Employee benefit expense

Employee benefit expense
Wages and salaries Labor and health insurance fees Pension costs Other personnel expenses	Years endedDecember31,
	2018 �� � �� �� �� �� �	2017
		�� � �� �� �� �� �

A. According to the Company’s Articles of Incorporation, if the Company accrues profit (referring to profit before tax prior to deducting the appropriation of employees’ compensation and directors’ remuneration), 4%~6% should be appropriated as employees’ compensation.
B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $666,180 and $457,835, respectively. The aforementioned amounts were recognised in salary expenses. For the years ended December 31, 2018 and 2017, the employees’ compensation was estimated and accrued based on 4% and 6% of profit of current year distributable as of the end of reporting period.
C. Employees’ compensation for 2017 as resolved by the Board of Directors was in agreement with those amounts recognised in the 2017 financial statements. In 2017, the employees’ compensation was distributed in the form of cash amounting to $457,835.
D. Information about employees’ compensation of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(27) Income tax

A. Components of income tax expense:

Components of income tax expense:
	Years ended		December31,
	2018		2017
Current tax:
Current tax on profits for the year	�	��	�	��
Prior year income tax overestimation	�� �		�� �
Total current tax		��		��
Deferred tax:
Origination and reversal of temporary
differences	�� �			��
Impact of change in tax rate		��		�
Income tax expense	�	��	�	��

-161-

B. Reconciliation between income tax expense and accounting profit:

	Years ended	December 31,	December 31,
	2018	2017
Tax calculated based on profit before tax and
statutory tax rate (Note)	�� �	�	��
Tax effects of unrecognised deferred tax assets	�� �	�	��
Impact of change in tax rate	��		�
Additional 10% tax on undistributed earnings	��		��
Prior year income tax overestimation	�� �	�� �
Income tax expenses	��		��
Origination and reversal of temporary differences	�� �	�� �
Prior year income tax overestimation	��		��
Acquired from business combinations	��		�
Prepaid income tax	�� �	�� �
Net exchange differences	�� �		��
Current income tax liabilities	�� �	�	��

Note: The basis for computing the applicable tax rate are the rates applicable in the respective countries where the Group entities operate.

-162-

C. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:

January1 Temporary differences: Deferred tax assets: Reserve for inventory obsolescence and market price decline �� � Permanent loss on market value decline of long-term equity investments �� Differences in useful lives of property, plant and equipment �� Unused compensated absences for employees �� Others �� �� � Deferred tax liabilities: Foreign investment income using equity method �� �� Unrealised exchange gain �� � Unrealised valuation gain on financial instruments � �� ��			2018
		Acquired from Recognised Business in profit combinations or loss � � �� � � �� � �� � �� �� � � �� �� � �� � � � �� �� � �� � �� � � � �� ��

-163-

Recognised in profit January1 or loss Temporary differences: Deferred tax assets: Reserve for inventory obsolescence and market price decline �� � � � Permanent loss on market value decline of long-term equity investments �� � Differences in useful lives of property, plant and equipment �� �� � Unused compensated absences for employees �� �� Others �� �� �� � �� �� Deferred tax liabilities: Foreign investment income using equity method �� �� �� � Unrealised exchange gain � �� � Unrealised valuation gain on financial instruments �� � �� �� �� �� �			2017
			Recognised in other Net comprehensive exchange income differences December31 � � � � �� � � � �� � �� � �� � �� � �� �� �� � �� �� � �� �� �� � � � � � �� �� � � �� � � � � � � � � �� ��		December31

D. The Company did not recognise taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2018 and 2017, the temporary differences unrecognised as deferred tax liabilities were $87,657,473 and $116,426,043, respectively. Abovementioned taxable temporary differences arose from the differences between estimated carrying amounts of long-term investments in foreign subsidiaries and tax payable. The Company will not dispose the subsidiaries in the foreseeable future nor remit back earnings and thus, did not recognise deferred income tax liabilities.
E. The Company’s income tax returns through 2016 have been assessed and approved by the Tax

-164-

Authority.

F. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

(28) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	YearendedDecember 31,2018
	Weighted average number of ordinary Earnings Amount shares outstanding per share after tax (sharesin thousands) (indollars) �� � �� �� � �� � � �� �� � �� �� � YearendedDecember 31,2017		Earnings per share (indollars)
			�� �
			�� �
	Amount after tax �� � �� � � �� �	Weighted average number of ordinary shares outstanding (sharesin thousands) �� �� ��	Earnings per share (indollars)
			�� �
			�� �

-165-

(29) Business combinations

A. The Group’s Fuzhun Precision (Shenzhen) Industry Co., Ltd. and Fu Yu Precision Components (Kunshan) Co., Ltd. acquired 100% equity of the Champ Tech Optical (Foshan) Corporation from Function Well Limited, which is the subsidiary of Hon Hai Precision Industry Co., Ltd. and the record date for equity transfer was set on December 1, 2018, as resolved by the Board of Directors on November 3, 2018. As of December 31, 2018, the Group has not yet made the investment payment and presented the payable as ‘other payables’.
B. The following table summarises the consideration paid for Champ Tech Optical (Foshan) Corporation and the fair values of the assets acquired and liabilities assumed at the acquisition date:

date:
Purchase consideration - cash paid	�	��
Fair value of the identifiable assets acquired and liabilities assumed
Cash		��
Accounts receivable, net		��
Accounts receivable due from related parties, net		��
Other receivables		��
Inventories		��
Other current assets		��
Property, plant and equipment		��
Intangible assets		��
Deferred tax assets		��
Other non-current assets		��
Short-term borrowings	�� �
Accounts payable	�	��
Accounts payable to related parties	�� �
Other payables	�	��
Current tax liabilities	�� �
Other current liabilities	�� �
Other non-current liabilities	�� �
Total identifiable net assets		��
Goodwill	�	��

As of December 31, 2018, the acquisition is still in the process of purchase price allocation, and the Group commissioned experts to assess the fair value of the identifiable assets.

C. The operating revenue included in the consolidated statement of comprehensive income since December 1, 2018 contributed by Champ Tech Optical (Foshan) Corporation was $185,220. Champ Tech Optical (Foshan) Corporation also contributed loss before income tax of $48,898 over the same period. Had Champ Tech Optical (Foshan) Corporation been consolidated from January 1, 2018, the consolidated statement of comprehensive income would show operating revenue of $143,827,851 and profit before income tax of $11,812,094.

-166-

(30) Supplemental cash flow information

Investing activities with partial cash payments:

Investing activities with partial cash payments:
Purchase of property, plant and equipment Add: Opening balance of payable on equipment Less: Ending balance of payable on equipment � Cash paid during the year Disposal of property, plant and equipment Add: Opening balance of receivable on equipment Less: Ending balance of receivable on equipment � Cash received during the year	2018 2017 �� � �� � �� �� �� �� � �� � �� � Years endedDecember31, 2018 2017 �� � �� � �� �� �� �� � �� � �� � Years endedDecember31,
	2018 �� � �� �� � �� �

(31) Changes in liabilities from financing activities

For the year ended December 31, 2018, changes in liabilities from financing activities all arose from the changes on cash flows from financing activities and effects of exchange rate, non-cash items were excluded. Please refer to consolidated statements of cash flows for more information.

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship

Names of related parties and relationship

Names of related parties

Relationship with the Group

Hon Hai Precision Industry Co., Ltd. and Subsidiaries
(Hon Hai and Subsidiaries)
Function Well Limited
Foxconn Precision Electronics (Taiyuan) Co., Ltd.
Foxstar Technology Co., Ltd.
Pan-International Industrial Corporation and Subsidiaries
Eson Precision Ind. Co., Ltd. and Subsidiaries
Sharp Corporation and Subsidiaries
Hong Qi Sheng Precision Electronics (Qinhuangdao) Co., Ltd.
Innolux Corporation
CyberTAN Technology Inc. and Subsidiaries
FOXSEMICON INTEGRATED TECHNOLOGY
(Shanghai) INC.
Foxconn Global Network

Entities with significant influence to
the Group
�
�
Associate of the Group
Other related party
�
�
�
�
�
�
�

-167-

(2) Significant related party transactions

A. Sales

Sales
Sales of goods and services: Entities with significant influence to the Group -Hon Hai and Subsidiaries Other related parties Associates of the Group	Years endedDecember31,
	2018 �� � �� � �� �	2017
		�� � �� ��
		�� �

Except for circumstances in which there are no similar transactions for reference and the prices and credit periods are negotiated by both parties, the aforementioned related party is offered prices very close to those offered to other customers and given a payment period of 30 to 90 days. For transactions involving the sale of raw materials to the aforementioned related party and subsequent repurchase of goods made from the same raw materials from the same party, the initial sale of raw materials is eliminated due to economic substance.

B. Purchases

Purchases
Purchases of goods and services: Entities with significant influence to the Group -Hon Hai and Subsidiaries Other related parties	Years endedDecember31,
	2018 �� � �� �� �	2017
		�� � ��
		�� �

Except for circumstances in which there are no similar transactions for reference and the prices and payment terms are negotiated by both parties, the Group makes purchases from the aforementioned related party at the prevailing market price, with payment periods of 30 to 90 days.

-168-

C. Receivables from related parties

December 31, 2018 December 31, 2017

Accounts receivable: Entities with significant influence to the Group -Hon Hai and Subsidiaries Other related parties Associates of the Group Less: Allowance for uncollectible accounts � Other receivables-purchases made on behalf of associates: Entities with significant influence to the Group -Hon Hai and Subsidiaries Other receivables- sale of property, plant and equipment: Entities with significant influence to the Group -Hon Hai and Subsidiaries	�� � �� � �� �� �� �� �� �� �� �	�� � �� ��
		�� �
		��
		�� ��
		��
		�� �

The receivables from related parties arise mainly from sales transactions. The amount is due three months after the invoice date. The receivables are unsecured and non-interest bearing. No allowance for doubtful debts was provided against receivables from related parties.

-169-

D. Payables to related parties

December 31, 2018 December 31, 2017

Accounts payable: Entities with significant influence to the Group -Hon Hai and Subsidiaries Other related parties Other payables-purchases made by associates on behalf of the Company: Entities with significant influence to the Group -Hon Hai and Subsidiaries Other payables-payables for investment: Entities with significant influence to the Group -Hon Hai and Subsidiaries Other payables-management service fees: Other related parties Other payable-sale of property, plant and equipment: Entities with significant influence to the Group -Hon Hai and Subsidiaries	�� � �� �� �� �� �� �� �� �� �	�� � ��
		��
		�� � �� ��
		��
		�� �

The payables to related parties arise mainly from purchase transactions and are at arm’s-length, non-interest bearing and payable within 30~90 days.

The information on other payables-payables for investment is provided in Note 7(2)G(c).

E. Management service fees payable

Management service fees payable
Management service fees Entities with significant influence to the Group -Hon Hai and Subsidiaries	Years endedDecember31,
	2018 �� �	2017
		�� �

-170-

F. Raw materials purchased on behalf of others

Raw materials purchased on behalf of others
Entities with significant influence to the Group -Hon Hai and Subsidiaries Raw materials purchased on behalf of associates Associates purchasing raw materials on behalf of the Group	Years endedDecember31,
	2018 �� � �� �� �	2017
		�� � �� �� �

G. Property transactions

(a) Acquisition of property:

cquisition of property:
Acquisition of property, plant and equipment: Entities with significant influence to the Group -Hon Hai and Subsidiaries Other related parties	Years endedDecember31,
	2018 �� � � �� �	2017
		�� � �� �� �

(b) Proceeds from sale of property, plant and equipment:

roceeds from sale of property, plant and equipment:	nt and equipment:	nt and equipment:	nt and equipment:
Proceeds from Proceeds from sale of property, sale of property, Sale of property, plant and plant and plant and equipment: equipment Gain equipment Entities with significant influence to the Group -Hon Hai and Subsidiaries �� � �� � �� � Other related parties � � �� �� � �� � �� � Years endedDecember31, 2018 2017	Years endedDecember31,
	2018	Proceeds from sale of property, plant and Gain equipment �� � �� � � �� �� � �� � 2017	2017
				Gain
				�� � ��
				�� �

(c) Acquisition of subsidiaries

The Group acquired 100% equity of Champ Tech Optical (Foshan) Corporation from the subsidiary of Hon Hai Precision Industry Co., Ltd. , Function Well Limited, as resovled by the Board of Directors on November 13, 2018. The information is provided in Note 6(29). As of December 31, 2018, the Group has not yet made the payment and presented the payable as ‘other payables’.

H. Rental income

Foxconn Precision Electronics (Taiyuan) Co., Ltd. (referred herein as “Foxconn (Taiyuan)”), a subsidiary of Hon Hai, leases part of plants, offices and dormitories in Taiyuan from the Group in April, 2016. Lease price is agreed upon by both parties and the Group collects rent monthly

-171-

from Foxconn (Taiyuan) in accordance with the agreement. The rental income under operating leases for the years ended December 31, 2018 and 2017 were $92,212 and $78,985, respectively.

(3) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Share-based payments	Years endedDecember31,
	2018 �� � �� �� �� �	2017 �� � �� �� �� �

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

(1) Contingencies

None.

(2) Commitments

A. Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:

Property, plant and equipment

December31,2018 �� �	December31,2017
	�� �

B. Operating lease commitments:

The future aggregate minimum lease payments for operating lease commitments of leasing dormitory are as follows:

dormitory are as follows:
Not later than one year Later than one year but not later than five years Later than five years	December 31,2018 �� � �� �� �� �	December 31,2017
		�� � �� � �� �

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to operate with the goal to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total

-172-

capital. Net debt is calculated as total borrowings (including “current and non-current borrowings” as shown in the consolidated balance sheet) less cash and cash equivalents. Total is calculated as “equity” as shown in the consolidated balance sheet less total intangible assets capital.

During 2018, the Group’s strategy, which was unchanged from 2017, was to maintain the gearing ratio below 70%.

(2) Financial instruments

A. Financial instruments by category

Financial instruments by category
Financial assets Financial assets at fair value through profit or loss Financial assets at fair value through comprehensive income Available-for-sale financial assets Financial assets at amortised cost Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities at amortised cost	December31,2018 �� � �� � �� �� � �� � �� �� �	December31,2017
		�� � � �� �� �� � �� � �� �� �

Note: Financial assets at amortised cost included cash, accounts receivable, accounts receivable due from related parties and other receivables; financial liabilities at amortised cost included short-term borrowings, accounts payable, accounts payable to related parties and other payables.
B. Risk management policies

(a) Risk categories

The Group employs a comprehensive financial risk management and control system to clearly identify, measure and control the various kinds of financial risk it faces, including market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.

(b) Management objectives:

i. Except for market risk, which is controlled by outside factors, the remainder of the foregoing types of risks can be controlled internally or removed from business processes. Therefore, the goal in managing each of these risks is to reduce them to zero.
ii. As for market risk, the goal is to optimize its overall position through strict analysis, suggestion, execution and audit processes, and proper consideration of a) long-term trends in the external economic/financial environment, b) internal operating conditions, and c) the actual effects of market fluctuations.
iii. The Group’s overall risk management policy focuses on the unpredictable items in financial markets and seeks to reduce the risk that potentially pose adverse effects on the Group’s financial position and financial performance.
iv. For the information on the derivative financial instruments that the Group enters into,

-173-

please refer to Note 6(2).

(c) Management system:
- i. Risk management is executed by the Group’s finance department by following policies approved by the Board. Through cooperation with the Group's operating units, finance department is responsible for identifying, evaluating and hedging financial risks.
- ii. The Board has a written policy covering overall risk management. It also has written policies covering specific issues, such as exchange rate risk, interest rate risk, credit risk, derivative and non-derivative financial instruments used, and the investment of excess working capital.
C. Significant financial risks and degrees of financial risks
(a) Market risk

Foreign exchange risk

i. Nature�

The Group is a multinational group in the Electronic manufacturing services industry. Most of the exchange rate risk from operating activities comes from:

(i) Foreign exchange risk arises from different exchange rates to functional currency as the invoice dates of accounts receivable and payable denominated in non-functional foreign currency are different. Because the amount after the assets and liabilities are offset is insignificant, income/loss is insignificant as well. (Note: The Group has several sites in various countries and thus is exposed to various foreign exchange risks. The main risk arises from USD and RMB.)
(ii) Changes in exchange rates of functional currencies to presentation currency at different timing will cause another foreign exchange risk.
(iii) Except for the above transactions (operating activities) recognised in the income statement, assets and liabilities recognised in the balance sheet and the net investment in foreign operations also result in the exchange rate risk.
ii. Management:
(i) For such risks, the Group has set up policies requiring companies in the Group manage its exchange rate risks.
(ii) As to the exchange rate risk arising from the difference between various functional currencies and the reporting currency in the consolidated financial statements, it is managed by the Group’s finance department.
iii. Sources of risk:
(i) U.S. dollars and NT dollars: Foreign exchange risk arises primarily from gains or losses from translating U.S. dollar-denominated assets, such as cash, cash equivalents, accounts receivable, other receivables and time deposits with maturity in excess of three months, and U.S. dollar-denominated liabilities, such as loans, accounts payable and other payables, into New Taiwan dollars.
(ii) U.S. dollars and RMB:

Foreign exchange risk arises primarily from U.S. dollar-denominated cash, cash equivalents, accounts receivable and other receivables, other assets, loans, accounts

-174-

payable and other payables and other liabilities, which results in exchange loss or gain when they are translated into RMB.

iv. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

December 31, 2018

		December31,2018	December31,2018
(Foreign currency: functional currency) Financial assets Monetary items USD�NTD USD�RMB Non-monetary items Foreign operations USD�NTD Financial liabilities Monetary items USD�NTD USD�RMB (Foreign currency: functional currency) Financial assets Monetary items USD�NTD USD�RMB Non-monetary items Foreign operations USD�NTD Financial liabilities Monetary items USD�NTD USD�RMB	Foreign currency amount (in thousands) �� �� �� �� ��	Exchange Book value rate (NTD) �� �� � �� �� �� �� �� �� �� �� December31,2017		Degree of variation �� �� �� ��	Effect on profitor loss
					�� � �� �� ��
	Foreign currency amount (in thousands) �� �� �� �� ��	Exchange rate �� �� �� �� ��	Book value (NTD) �� � �� �� �� ��	Degree of variation �� �� �� ��	Effect on profitor loss
					�� � �� �� ��

-175-

v. Total exchange (loss) gain, including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2018 and 2017 amounted to ($713,184) and $39,898, respectively.

Price risk

i. Nature

The Group primarily invests in domestic and foreign publicly traded and unlisted equity instruments, which are accounted for as financial assets at fair value through other comprehensive income and available-for-sale financial assets. The price of those equity instruments will be affected by the uncertainty of the future value of the investment.

ii. Extent

If the price of such equity instrument rises or falls by 1%, with all other factors held constant, the impact on other comprehensive income due to equity instruments measured at fair value through other comprehensive income and available-for-sale equity instruments are $230,852 and $618,612, respectively, for the years ended December 31, 2018 and 2017.

Cash flow and fair value interest rate risk

The Group’s interest rate risk arises from short-term loans. Short-term loans with floating rates expose the Group to cash flow interest rate risk, but most of the risks are offset by cash and cash equivalents with variable interest rates.

If short-term loans interest rates rise or fall by 1%, with all other factors held constant, profit after tax would increase/decrease by $111,016 and $193,377 for the years ended December 31, 2018 and 2017, respectively.

(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments.

According to the Group’s credit policy, each local entity in the Group is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. The Group assesses the credit quality of the customers by taking into account their financial position, past experience and other factors to conduct its internal risk management.

Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored. Major credit risk arises from cash and cash equivalents, derivative financial instruments, deposits and short-term investments with banks and financial institutions, and other financial instruments. The counterparties are banks with good credit quality, financial institutions with investment grade credit ratings and government agencies, so there is no significant default concerns and credit risk.

ii. If the contract payments were past due over 90 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
iii. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:

-176-

(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganisation due to their financial difficulties;
(ii) The disappearance of an active market for that financial asset because of financial difficulties;
(iii) Default or delinquency in interest or principal repayments;
(iv) Adverse changes in national or regional economic conditions that are expected to cause a default.
iv. The ageing analysis of accounts receivable (including related parties) that were past due but not impaired is as follows:

but not impaired is as follows:
Not past due 0 to 90 days 91 to 180 days 181 to 270 days 271 to 360 days Over 361 days	December31,2018 �� � �� �� �� �� �� �� �	December31,2017
		�� � �� �� �� �� �� �� �

The above ageing analysis was based on past due date.

v. The Group assesses the expected credit losses of accounts receivable (including those from related parties) as follows:
(i) Accounts receivable are divided into segments according to the Group’s credit rating standards; expected credit losses for each segment are assessed based on the specific loss rate or provision matrix for the segment.
(ii) Loss rates are calculated based on past and current information, taking into account forward-looking information provided by the Business Indicators Database of the National Development Council and the Basel Committee on Banking Supervision.
(iii) As of December 31, 2018, the loss allowance for accounts receivable (including those from related parties), assessed using loss rate or provision matrix, is as follows:

December31,2018 Expected loss rate Total book value Allowance for uncollectible accounts	Group1 and2 �� �� � �� �	Group 3 �� �� � �� �	Group4 �� �� � �� �	Total
				�� �
				�� �

Group 1: Standard Poor’s, Fitch’s, or Moody’s rating of A-level, or rated as A-level in accordance with the Group’s credit policies for those that have no external credit ratings.
Group 2: Standard Poor’s or Fitch’s rating of BBB, Moody’s rating of Baa, or rated as B or C in accordance with the Group’s credit policies for those that have no

-177-

external credit ratings.

Group 3: Standard Poor’s or Fitch’s rating of BB + and below, or Moody’s rating of Ba1 and below.
Group 4: Rated as other than A, B, or C in accordance with the Group’s credit policies for those that have no external credit ratings.
vi. The aging analysis of accounts receivable (including related parties) that were past due but not impaired is as follows:

but not impaired is as follows:
	YearendedDecember31,2018
At January 1_IAS 39	� �
Adjustments under new standards	��
At January 1_IFRS 9	��
Gain on reversal of expected credit
impairment loss	�� �
Effect of foreign exchange	�� �
At December 31	�� �

vii. Credit risk information for 2017 is provided in Note 12(4).

(c) Liquidity risk
i. Cash flow forecasting is performed by each of the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements, for example, currency restrictions.
ii. The Group’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities.

As of December 31, 2018 and 2017, the Group’s non-derivative financial liabilities (including short-term borrowings, accounts payable and other payables) and derivative financial liabilities (including foreign exchange contracts, cross currency swap contracts and forward foreign exchange contracts) will expire within 1 year.

(3) Fair value estimation

A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability takes place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks is included in Level 1.

-178-

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group’s investment in derivative instruments is included in Level 2.

Level 3: Unobservable inputs for the asset or liability.

B. Fair value information of investment property at cost is provided in Note 6(11).
C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities is as follows:
(a) The related information of the nature of the assets and liabilities is as follows:

December 31, 2018		Level 1				Level 2	Level 2	Level 2	Level 2		Level3			Total	Total	Total	Total
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Derivative instruments	�			�	�		��				�	�	�		��
Financial assets at fair value
through other comprehensive
income
Equity instruments	�	��			�					�	�	�	�	��
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Derivative instruments	�			�	�			��			�	�	�			��
December31,2017		Level 1				Level 2					Level3			Total
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Derivative instruments	�		�		�				��		�	�	�				��
Available-for-sale financial
assets
Equity instruments	�	��			�	��					�	�	�	��
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Derivative instruments	�		�		�			��			�	�	�			��

(b) The methods and assumptions the Group used to measure fair value are as follows:

i. The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

-179-

Listed shares

Market quoted price Closing price

ii. The fair value of foreign investment fund is measured by reference to counterparty quotes.
iii. When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange contracts and options, the Group adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.
iv. The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models. Forward exchange contracts are usually valued based on the current forward exchange rate.
v. The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, liquidity risk and etc. In accordance with the Group’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and nonfinancial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.
vi. The Group takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Group’s credit quality.
D. As Sharp Corporation held by the Group ended its lock-up period, the Group transferred the fair value from Level 2 to Level 1 at the end of the month when the event occurred.
E. For the years ended December 31, 2018 and 2017, there was no transfer into or out from Level 3.

(4) Effects on initial application of IFRS 9

A. Summary of significant accounting policies adopted for the year ended December 31, 2017:
(a) Financial assets at fair value through profit or loss
- i. Financial assets held for trading financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:
  - (i) Hybrid (combined) contracts; or
  - (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or
  - (iii) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

-180-

ii. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.
iii. Financial liabilities at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognised in profit or loss.
(b) Available-for-sale financial assets
i. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.
ii. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting.
iii. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in ‘financial assets measured at cost’.
(c) Loans and receivables
i. Accounts receivable

Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

ii. Investments in debt instruments without active markets
- (i) Investments in debt instrument without active market are loans and receivables not originated by the entity. They are bond investments with fixed or determinable payments that are not quoted in an active market, and also meet all of the following conditions:
  - a. Not designated on initial recognition as at fair value through profit or loss;
  - b. Not designated on initial recognition as available-for-sale;
  - c. Not for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.
- (ii) On a regular way purchase or sale basis, investments in debt instrument without active market are recognised and derecognised using trade date accounting.
- (iii) They are initially recognised at fair value on the trade date plus transaction costs and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Amortisation of a premium or a discount on such assets is recognised in profit or loss.
(d) Impairment of financial assets
i. The Group assesses at each balance sheet date whether there is objective evidence that a

-181-

financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

ii. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:
(i) Significant financial difficulty of the issuer or debtor;
(ii) A breach of contract, such as a default or delinquency in interest or principal payments;
(iii) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;
(iv) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
(v) The disappearance of an active market for that financial asset because of financial difficulties;
(vi) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;
(vii) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;
(viii)A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
iii. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:
(i) Financial assets measured at amortised cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

-182-

(ii) Available-for-sale financial assets

The amount of the impairment loss is measured as the difference between the asset’s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from ‘other comprehensive income’ to ‘profit or loss’. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognised, such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

B. The reconciliations of carrying amount of financial assets transferred from December 31, 2017, IAS 39, to January 1, IFRS 9, were as follows:

Available-for- sale-equity �� � �	Debt instruments Other without active current assets markets � � � � �� ��	Total
		�� � ��

(a) Under IAS 39, because the equity instruments which were classified as available-for-sale financial assets amounting to $61,861,247 were not held for the purpose of trading, they were reclassified as "financial assets at fair value through other comprehensive income (equity instruments)" amounting to $61,861,247 on initial application of IFRS 9.
(b) Under IAS 39, because the cash flows of debt instruments which were classified as debt instruments without active market amounting to $4,571,000, met the condition that it is intended to settle the principal and interest on the outstanding principal balance, they were reclassified as "financial assets at amortised cost" amounting to $4,571,100 on initial application of IFRS 9.
(c) Under IAS 39, capital guarantee financial products and time deposits with maturity in excess of three months were classified as “other current assets” amounting to $13,775,019 and $6,766,549, respectively, were reclassified as “financial assets at amortised cost” amounting to $20,541,568 in accordance with IFRS 9.
(d) Information relating to credit risk of allowance for impairment from December 31, 2017, as these are impaired under IAS 39, to January 1, 2018, as these are expected to be impaired under IFRS 9, is provided in Note 12(2) C (b).
C. The significant accounts as of December 31, 2017 for the year ended December 31, 2017 are as follows:

-183-

(a) Financial assets at fair value through profit or loss

December 31, 2017

Assets Current items: Cross currency swap contracts Liabilities Current items: Foreign exchange contracts Cross currency swap contracts	�� � December31,2017
	�� � �� �� �

i. Due to the financial assets and liabilities recognised above for the year ended December 31, 2017, the Group recognised net loss of $699,473 (including unrealised loss on valuation of $527,612).
ii. The counterparties of the Group’s investments in derivatives are banks with good credit quality or financial institutions with investment grade or above, and their credit ratings are all above “A” category.

iii. The non-hedging derivative instruments transaction and contract information are as follows:

Derivative Financial Assets Current items: Cross currency swap contracts Foreign exchange contracts	December31,2017	December31,2017
	TWD (sell) �� USD (buy) �� TWD (sell) �� USD (buy) �� TWD (sell) �� USD (buy) �� Contract amount (Nominal Principal in thousands)	Contractperiod
		2017/09~2018/03 2017/09~2018/04 2017/09~2018/03

(i) Cross currency swap contracts

(ii) Forward exchange contracts

The Company signed forward exchange contracts to hedge exchange rate risks arising from the activities listed below:

Business activity: The payables due from exporting materials and supplies as well as receivables from exports.

Investment activity: The payment due from importing machinery and equipment.

Financial activity: Assets and liabilities (financing) resulted from long-term or short-

-184-

term borrowings.

(iii) Foreign exchange contracts

iv. The Group has no financial assets at fair value through profit or loss pledged to others.

(b) Available-for-sale financial assets

Available-for-sale financial assets
Items Non-current items: Listed and emerging stocks Foreign investment fund Adjustment of available-for-sale financial assets	December31,2017
	�� � �� �� �� �

i. Q-RUN Holdings Limited, a subsidiary of the Company, has disposed 7,737 thousand shares, 6,097 thousand shares and 2,426 thousand shares of China Harmony New Energy Auto Holding Limited (formerly China Harmony Auto Holding Limited) to non-related parties, amounting to US$4,211 thousand, US$3,367 thousand and US$1,573 thousand in July, June and April, 2016, respectively. The loss on disposal of China Harmony New Energy Auto Holding Limited was $24,572 (USD $762 thousand).
ii. On April 2, 2016, the subsidiary, Foxconn Technology Pte. Ltd., signed an investment agreement with the Japanese listed company, Sharp Corporation, to purchase 646,400,000 newly issued ordinary shares of Sharp Corporation with ¥88 per share, amounting to 12.97% of equity. The total price of acquisition was $17,495,657 (¥56,883,200 thousand). On August 12, 2016, the transaction for the abovementioned investment was completed.
iii. The Group recognised net loss or gain in other comprehensive income for fair value change for the years ended December 31, 2018 and 2017. Please refer to Note 6(19) for details.

iv. The Group has no available-for-sale financial assets pledged to others.

Investments in debt instruments without active markets
Items Non-current items: Financial debentures-trust fund	December31,2017
	�� �

i. In March 2018 and December 2017, the Group invested in the trust fund named Guangdong Finance Trust – Peng Yun Tian Hua Collection Fund Trust for RMB 500 million and RMB 1 billion, respectively. The fund was mainly created for the investment in Guangzhou Guangyin Nanyue Intelligent Technology Industrial Investment Partnership.
ii. The significant rights and obligations of the aforementioned investment are outlined as follows:
(i) The preferred beneficiary has priority over ordinary beneficiary in the distribution of investment returns, including return of principal.

-185-

     - (ii) The Group is the ordinary beneficiary, whose claim to trust interests is lower than the preferred beneficiary.

  - iii. Under IAS 39, ‘Financial Instruments: Recognition and Measurement’, they are “investments in debt instruments without active markets-non-current” that do not have a quoted market price in an active market, but have fixed or determinable amount.

  - iv. No financial assets at amortised cost were pledged to others as collateral as of December 31, 2018.

  - v. The counterparties of the Group’s investments have good credit quality.

D. Credit risk information for the year ended December 31, 2017 is as follows:
(a) Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments.
- i. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. The Group assesses the credit quality of the customers by taking into account their financial position, past experience and other factors to conduct its internal risk management.
- ii. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board of directors. The utilisation of credit limits is regularly monitored. Major credit risk arises from cash and cash equivalents, derivative financial instruments and other financial instruments. The counterparties are banks with good credit quality and financial institutions with investment grade or above and government agencies, so there is no significant compliance concerns and credit risk.
(b) As of December 31, 2017, no credit limits were exceeded during the reporting period, and management does not expect any significant losses from non-performance by these counterparties.
(c) The credit quality information of accounts receivable (including related parties) that are neither past due nor impaired is in the following categories based on the Group’s Credit Quality Control Policy:

Quality Control Policy:
Group 1 Group 2 Group 3 Group 4	December 31,2017
	�� � �� �� �� �� �

Group 1: Standard Poor’s, Fitch’s, or Moody’s rating of A-level, or rated as A-level in accordance with the Group’s credit policies for those that have no external credit ratings.
Group 2: Standard Poor’s or Fitch’s rating of BBB, Moody’s rating of Baa, or rated as B or C in accordance with the Group’s credit policies for those that have no external credit ratings.
Group 3: Standard Poor’s or Fitch’s rating of BB + and below, or Moody’s rating of Ba1 and below.

-186-

Group 4: Rated as other than A, B, or C in accordance with the Group’s credit policies for those that have no external credit ratings.
(d) The aging analysis of accounts receivable (including related parties) that were past due but not impaired is as follows:

not impaired is as follows:
Up to 30 days 31 to 90 days 91 to 180 days 181 to 360 days Over 360 days	December31,2017
	�� � �� �� �� �� �� �

(5) Effects on initial application of IFRS 15

A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below.

The Group manufactures and sells 3C products. Revenue is measured at the fair value of the consideration received or receivable, taking into account business tax or value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods is recognised when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

B. The revenue recognised by using above accounting policies for 2017 is as follows:

Year ended December 31, 2017 3C products (including components and related electronic products) ��

C. The effects and description of current balance sheet and comprehensive income statement if the Group continues adopting above accounting policies for the year ended December 31, 2018 are as follows:

as follows:
		December 31,2018
		Balance by	Effects	from
	Balance by using	using previous	changes in
Balance sheet items	IFRS15	accounting policies	accounting policy
Accounts receivable, net	�� �	�� �	�	��
Other current liabilities	�� �	�� �	�	��
Under IFRS 15, liabilities in relation to expected volume discounts and refunds to customers are
recognised as refund liabilities (shown as other current liabilities), but were previously				presented
as accounts receivable - allowance for sales returns		and discounts in the balance sheet.

-187-

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: None.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 2.
D. Acquisition or sale of the same security with the accumulated cost reaching $300 million or 20% of paid-in capital or more: Please refer to table 3.
E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.
I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(2), 6(23), 12(3) and 12(4).
J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 7.

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 8.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 6.

14. SEGMENT INFORMATION

(1) General information

The Group is primarily engaged in the assembly and sales of cases, heat dissipation modules and consumer electronics products. The chief operating decision-maker manages abovementioned items by business activities. Currently, business activities can be categorised into trading services of electronic products and manufacturing and sales of mechanism and components.

Revenue and operating income of operating segments are used by the Group’s chief operating decision-maker for imputation of internal costs and allocation of expenses to segment profit (loss) and are used as an indication for assessment of performance and allocation of resources.

(2) Measurement of segment information

The financial information of reportable segments provided to the chief operating decision maker is as follows:

-188-

Year ended December 31, 2018

	YearendedDecember31,2018	YearendedDecember31,2018	018
External revenue Revenue from internal customers Segment revenue Measurement of segment profit or loss Depreciation and amortisation Interest income Interest expense Total segment assets (Note) External revenue Revenue from internal customers Segment revenue Measurement of segment profit or loss Depreciation and amortisation Interest income Interest expense Total segment assets (Note)	Production and Electronic products sales of mechanical trading services components Total �� � �� � �� � �� �� �� �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � � � � � � � YearendedDecember31,2017		Total
			�� � ��
			�� �
			�� �
			�� �
			�� �
			�� �
			� �
	Electronic products trading services �� � �� �� � �� � �� � �� � �� � � �	Production and sales of mechanical components �� � �� �� � �� � �� � �� � �� � � �	Total
			�� � ��
			�� �
			�� �
			�� �
			�� �
			�� �
			� �

Note: The measurement of operating segment assets is not provided to the operating decision-maker; thus, the measurement that shall be disclosed is zero.

(3) Reconciliation for segment income (loss)

Sales between segments are carried out at arm’s length. The revenue from external parties reported to the chief operating decision-maker is measured in a manner consistent with that in the income statement.

A reconciliation of reportable segment profit or loss to the profit/ (loss) before tax and discontinued operations for the years ended December 31, 2018 and 2017 is provided as follows:

-189-

Years ended December 31,

	Years endedDecember31,	ecember31,
Operatingrevenue Reportable segments income Other segments income Elimination of inter-segment revenue � Total corporate revenue Profit andloss Profit of reported segment Profit of other operating segments Profit before income tax	2018 2017 �� � �� � �� �� �� �� � �� � �� � Years endedDecember31,	2017
	2018 �� � �� �� �	2017
		�� � �� �� �

(4) Information on product

Years ended December 31,

Electronic products Mechanism and components Others	2018 �� � �� �� �� �	2017
		�� � �� �� �� �

(5) Geographical information

Geographical information for the years ended December 31, 2018 and 2017 is as follows:

Years ended December 31,

Revenue Non-current assets �� � �� � �� � �� �� �� �� �� �� �� � �� � 2018	2017	2017
Revenue �� � �� �� �� �� �� �	Revenue �� � �� �� �� �� �� �	Non-current assets
		�� � � �� �� ��
		�� �

(6) Major customer information

Details of customers contributing more than 10% of operating revenue of the Group for the years ended December 31, 2018 and 2017 are as follows:

Years ended December 31,

Customer A Group B Group	2018	% �� ��	2017
	Revenue �� � �� �� �		Revenue �� � �� �� �	%
				�� ��

-190-

Item
Value
Ceiling on total
loans granted
Note
Interest rate
Nature of
loan
Amount of
transactions
with the
borrower
Borrower
General
ledger
account
Is a
related party
Collateral
Limit on loans
granted to a
single party
Reason for
short-term
financing
Allowance
for doubtful
accounts
Maximum
outstanding
balance during
the year ended
December 31, 2018
Balance at
December 31, 2018
Actual amount
drawn down
No.
Creditor

1
Hon Fujin Precision
Industry (Taiyuan)
Co., Ltd.
Qingdao Hiyn
Materials Co., Ltd.
Other
receivables
Y
692,714
$ 661,353
$ 661,353
$ 4.35000% Short-term
financing
$ -
Business
operation
$ -
None
$ -
3,969,488
$ 15,877,951
$ Note 1
2
Fu Rui Precision
Components (Kunshan)
Co., Ltd.
Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Other
receivables
Y
462,970
-
-
- Short-term
financing
-
Business
operation
-
None
-
29,853,499
59,706,999
Note 2
3
Q-Run Holdings Ltd.
YanTai Fuzhun Precision
Electronics Co., Ltd.
Other
receivables
Y
619,700
615,720
615,720
2.66513% Short-term
financing
-
Business
operation
-
None
-
29,853,499
59,706,999
Note 2

-191-

Number of shares
Book value
Ownership (%)
Fair value
Note
Securities held by
Marketable securities
Relationship with
the securities issuer
General
ledger account
As of December 31, 2018
Foxconn Technology Co., Ltd. and Subsidiaries
Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)
Year ended December 31, 2018
Table 2
Expressed in thousands of NTD
(Except as otherwise indicated)

Foxconn Technology Co., Ltd.
Common stock of CyberTAN Technology Inc.
None
Financial assets at fair value through other
comprehensive income - non-current
10,035,348
154,544
$ 3.05
154,544
$ �
Common stock of Pan-International Industrial Corp.
�
�
1,079,986
21,438
0.21
21,438
�
Common stock of Innolux Corporation
�
�
127,556,349
1,239,847
1.28
1,239,847
�
Common stock of Advanced Optoelectronic
Technology, Inc.
�
�
1,000
17 -
17
Huazhun Investment Co., Ltd.
Common stock of Innolux Corporation
�
�
121,036,800
1,176,478
1.22
1,176,478
�
Common stock of Advanced Optoelectronic
Technology, Inc.
�
�
7,672,000
128,890
5.13
128,890
Q-Run Holdings Ltd.
Common stock of China Harmony Auto Holding Ltd.
�
�
38,452,340
450,618
2.51
450,618
Foxconn Technology Pte. Ltd.
Common stock of Sharp Corporation
�
�
64,640,000
19,913,406
12.14
19,913,406
Hon Fujin Precision Industry
(Taiyuan) Co., Ltd
Shanghai Pudong Development Bank for Liduoduo�
18JG2061�RMB public structured deposits
�
Financial assets at amortised cost - current
-
2,236,400
-
2,236,400
�
Shanghai Pudong Development Bank for Liduoduo�
18JG2060�RMB public structured deposits
�
�
-
1,341,840 -
1,341,840
�
Shanghai Pudong Development Bank for Liduoduo�
18JG2704�RMB public structured deposits
�
�
-
1,341,840 -
1,341,840
�
Shanghai Pudong Development Bank for Liduoduo�
18JG2675�RMB public structured deposits
�
�
-
2,236,400 -
2,236,400
�
Yun Tong Fortune Increasing Profits 32 Days Financial
Products
�
�
-
2,236,400 -
2,236,400
�
Yun Tong Fortune Increasing Profits 33 Days Financial
Products
�
�
-
2,236,400 -
2,236,400
�
Yun Tong Fortune Increasing Profits 34 Days Financial
Products
�
�
-
2,236,400 -
2,236,400
Fuzhun Precision (Hebi) Electronics
Co., Ltd.
Liduoduo�18JG2528�RMB public structured deposits
�
�
-
581,464 -
581,464
�
Liduoduo�18JG2723�RMB public structured deposits
�
�
-
1,568,699 -
1,568,699
Fu Rui Precision Components
(Kunshan) Co., Ltd
Shanghai Pudong Development Bank for Liduoduo�
18JG2621�RMB public structured deposits
�
�
-
1,120,768 -
1,120,768
Hon Fujin Precision Industry
(Taiyuan) Co., Ltd
Guangdong Finance Trust - Peng Yun Tian Hua Collection
Fund Trust
�
Financial assets at amortised cost - non-current
-
1,565,480 -
1,565,480
�
Guangdong Finance Trust - Peng Yun Tian Hua Collection
Fund Trust
�
�
-
2,236,400 -
2,236,400
Fuzhun Precision (Shenzhen)
Industry Co., Ltd.
Guangdong Finance Trust - Peng Yun Tian Hua Collection
Fund Trust
�
�
-
1,565,519 -
1,565,519

-192-

Amount
Amount
Selling price
Book value
Amount
Addition
Disposal
Balance as at December 31, 2018
Number of
shares
Number of
shares
Number of
shares
Gain (loss) on
disposal
Number of
shares
Balance as at
January 1, 2018
Investor
Marketable securities
General
ledger
account
Counterparty
Relationship
with
the investor
Table 3
Expressed in thousands of NTD
(Except as otherwise indicated)

Q-RUN HOLDING
LTD.
Q-RUN FAR EAST CORP.
Note 1
Q-RUN HOLDING
LTD.
Subsidiary
1,013,973
USD 1,013,973
thousand
38,100
USD 38,100
thousand
-
-
-
-
1,052,073
USD1,052,073
thousand
Q-RUN HOLDING
LTD.
WORLD TRADE TRADING LTD.
Note 1
WORLD TRADE
TRADING LTD.
�
-
-
38,100
USD 38,100
thousand
-
-
-
-
38,100
USD 38,100
thousand
Q-RUN HOLDING
LTD.
FE HOLDINGS USA, INC
Note 1
FE HOLDINGS
USA, INC
None
-
-
80,400
USD 80,400
thousand
-
-
-
-
80,400
USD 80,400
thousand
Q-RUN HOLDING
LTD.
IDG Energy Investment Limited
Note 1
IDG Energy
Investment Limited
�
-
-
297,000
HKD 297,000
thousand
-
-
-
-
297,000
HKD 297,000
thousand
Q-RUN HOLDING
LTD.
IDG Energy Investment Limited
Note 1
�
�
-
-
297,000
HKD 297,000
thousand
-
-
-
-
297,000
HKD 297,000
thousand
FOXCONN
TECHNOLOGY PTE.
LTD.
IDG Energy Investment Limited
Note 1
�
�
-
-
297,000
HKD 297,000
thousand
-
-
-
-
297,000
HKD 297,000
thousand
HIGH TEMPO
INTERNATIONAL
LTD.
IDG Energy Investment Limited
Note 1
�
�
-
-
297,000
HKD 297,000
thousand
-
-
-
-
297,000
HKD 297,000
thousand
WORLD TRADE
TRADING LTD.
IDG Energy Investment Limited
Note 1
�
�
-
-
297,000
HKD 297,000
thousand
-
-
-
-
297,000
HKD 297,000
thousand
Fuzhun Precision
(Shenzhen) Industry
Co., Ltd.
Champ Tech Optical (Foshan)
Corporation
Note 1
Function Well
Limited
Subsidiary
-
-
225,291
RMB 642,993
thousand
-
-
-
-
225,291
RMB 636,852
thousand
Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Champ Tech Optical (Foshan)
Corporation
Note 1
Function Well
Limited
Subsidiary
-
-
121,310
RMB 346,227
thousand
-
-
-
-
121,310
RMB 342,920
thousand
Fuzhun Precision
(Shenzhen) Industry
Co., Ltd.
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle)(WG17151S)
financial products
Note 2
Bank of Shanghai
None
-
RMB 450,000
thousand
-
-
-
RMB 454,242
thousand
RMB 450,000
thousand
RMB 4,242
thousand
-
-
Fuzhun Precision
(Shenzhen) Industry
Co., Ltd.
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle)(WG18028S)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 280,000
thousand
-
RMB 282,126
thousand
RMB 280,000
thousand
RMB 2,126
thousand
-
-
Fuzhun Precision
(Shenzhen) Industry
Co., Ltd.
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG18054S)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 490,000
thousand
-
RMB 493,679
thousand
RMB 490,000
thousand
RMB 3,679
thousand
-
-
Fuzhun Precision
(Shenzhen) Industry
Co., Ltd.
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG18067S)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 500,000
thousand
-
RMB 201,461
thousand
RMB 500,000
thousand
RMB 1,726
thousand
-
-

-193-

Fuzhun Precision
(Shenzhen) Industry
Co., Ltd.
Agricultural Bank of China "Ben Li
Feng" Targeted (BFDG180170)
RMB Wealth Managements
Products
Note 2
Agricultural Bank of
China
�
-
-
-
RMB 200,000
thousand
-
RMB 501,727
thousand
RMB 200,000
thousand
RMB 1,461
thousand
-
-
Fuzhun Precision
(Shenzhen) Industry
Co., Ltd.
Guangdong Finance Trust - Peng
Yun Tian Hua Collection Fund Trust
Note 3
Guangdong Yuecai
Intrust & Investment
Company
�
-
RMB 500,000
thousand
-
-
-
RMB 164,780
thousand
RMB 150,000
thousand
RMB 14,780
thousand
-
RMB 350,000
thousand
Fuhuigang Industrial
(Shenzhen) Co., Ltd.
RMB Continuous Serial Deposits
Financial Products
Note 2
Bank of China
�
-
RMB 65,000
thousand
-
-
-
RMB 65,415
thousand
RMB 65,000
thousand
RMB 415
thousand
-
-
Fuhuigang Industrial
(Shenzhen) Co., Ltd.
RMB Continuous Serial Deposits
Financial Products
Note 2
Bank of China
�
-
-
-
RMB 64,000
thousand
-
RMB 64,477
thousand
RMB 64,000
thousand
RMB 477
thousand
-
-
Fuhuigang Industrial
(Shenzhen) Co., Ltd.
RMB Continuous Serial Deposits
Financial Products
Note 2
Bank of China
�
-
-
-
RMB 64,000
thousand
-
RMB 64,423
thousand
RMB 64,000
thousand
RMB 423
thousand
-
-
Fuhuigang Industrial
(Shenzhen) Co., Ltd.
RMB Continuous Serial Deposits
Financial Products
Note 2
Bank of China
�
-
-
-
RMB 64,000
thousand
-
RMB 64,423
thousand
RMB 64,000
thousand
RMB 423
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Liduoduo Huizhi 28 Days Financial
Products
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 60,000
thousand
-
RMB 60,189
thousand
RMB 60,000
thousand
RMB 189
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Liduoduo RMB public structured
deposits in 2018 JG470 period
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 250,000
thousand
-
RMB 250,947
thousand
RMB 250,000
thousand
RMB 947
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Liduoduo�18JG2184�RMB
public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 250,000
thousand
-
RMB 250,833
thousand
RMB 250,000
thousand
RMB 833
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Liduoduo�18JG2466�RMB
public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 120,000
thousand
-
RMB 120,400
thousand
RMB 120,000
thousand
RMB 400
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Yun Tong Fortune Increasing Profits
32 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 300,000
thousand
-
RMB 301,236
thousand
RMB 300,000
thousand
RMB 1,236
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Yun Tong Fortune Increasing Profits
33 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 100,000
thousand
-
RMB 100,411
thousand
RMB 100,000
thousand
RMB 411
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Yun Tong Fortune Increasing Profits
32 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 50,000
thousand
-
RMB 50,202
thousand
RMB 50,000
thousand
RMB 202
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Yun Tong Fortune Increasing Profits
33 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 100,000
thousand
-
RMB 100,398
thousand
RMB 100,000
thousand
RMB 398
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Yun Tong Fortune Increasing Profits
33 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 300,000
thousand
-
RMB 301,180
thousand
RMB 300,000
thousand
RMB 1,180
thousand
-
-
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Liduoduo�18JG2528�RMB
public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 130,000
thousand
-
-
-
-
-
RMB 130,431
thousand

-194-

Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Liduoduo�18JG2723�RMB
public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 350,000
thousand
-
-
-
-
-
RMB 350,196
thousand
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Yun Tong Fortune Increasing Profits
40 Days Financial Products
Note 2
Bank of
Communications
�
-
RMB 110,000
thousand
-
-
-
RMB 110,579
thousand
RMB 110,000
thousand
RMB 579
thousand
-
-
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Yun Tong Fortune Increasing Profits
67 Days Financial Products
Note 2
Bank of
Communications
�
-
RMB 130,000
thousand
-
-
-
RMB 131,145
thousand
RMB 130,000
thousand
RMB 1,145
thousand
-
-
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Yun Tong Fortune Increasing Profits
40 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 130,000
thousand
-
RMB 130,670
thousand
RMB 130,000
thousand
RMB 670
thousand
-
-
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Yun Tong Fortune Increasing Profits
48 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 35,000
thousand
-
RMB 35,221
thousand
RMB 35,000
thousand
RMB 221
thousand
-
-
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Yun Tong Fortune Increasing Profits
90 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 250,000
thousand
-
RMB 253,021
thousand
RMB 250,000
thousand
RMB 3,021
thousand
-
-
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Yun Tong Fortune Increasing Profits
90 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 100,000
thousand
-
RMB 101,171
thousand
RMB 100,000
thousand
RMB 1,171
thousand
-
-
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Yun Tong Fortune Increasing Profits
90 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 250,000
thousand
-
RMB 252,651
thousand
RMB 250,000
thousand
RMB 2,651
thousand
-
-
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2161�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 250,000
thousand
-
RMB 251,172
thousand
RMB 250,000
thousand
RMB 1,172
thousand
-
-
Fu Rui Precision
Components (Kunshan)
Co., Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2621�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 250,000
thousand
-
-
-
-
-
RMB 250,604
thousand
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG17144SA)
financial products
Note 2
Bank of Shanghai
�
-
RMB 500,000
thousand
-
-
-
RMB 502,047
thousand
RMB 500,000
thousand
RMB 2,047
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing Profits
35 Days Financial Products
Note 2
Bank of
Communications
�
-
RMB 200,000
thousand
-
-
-
RMB 200,786
thousand
RMB 200,000
thousand
RMB 786
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG17144SB)
financial products
Note 2
Bank of Shanghai
�
-
RMB 400,000
thousand
-
-
-
RMB 401,637
thousand
RMB 400,000
thousand
RMB 1,637
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG17145SA)
financial products
Note 2
Bank of Shanghai
�
-
RMB 500,000
thousand
-
-
-
RMB 501,990
thousand
RMB 500,000
thousand
RMB 1,990
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG17145SB)
financial products
Note 2
Bank of Shanghai
�
-
RMB 400,000
thousand
-
-
-
RMB 401,592
thousand
RMB 400,000
thousand
RMB 1,592
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG18020SA)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 500,000
thousand
-
RMB 501,938
thousand
RMB 500,000
thousand
RMB 1,938
thousand
-
-

-195-

Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) WG18032SA)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 500,000
thousand
-
RMB 502,182
thousand
RMB 500,000
thousand
RMB 2,182
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG18049SA)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 500,000
thousand
-
RMB 502,356
thousand
RMB 500,000
thousand
RMB 2,356
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG18049SB)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 500,000
thousand
-
RMB 502,356
thousand
RMB 500,000
thousand
RMB 2,356
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle)(WG18061SB)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 500,000
thousand
-
RMB 502,030
thousand
RMB 500,000
thousand
RMB 2,030
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by
bit make a mickle)(WG18061SA)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 500,000
thousand
-
RMB 502,030
thousand
RMB 500,000
thousand
RMB 2,030
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by
bit make a mickle) (WG18068S)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 300,000
thousand
-
RMB 302,071
thousand
RMB 300,000
thousand
RMB 2,071
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing
Profits 35 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
RMB 502,182
thousand
RMB 500,000
thousand
RMB 2,182
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing
Profits 36 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 300,000
thousand
-
RMB 301,287
thousand
RMB 300,000
thousand
RMB 1,287
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing
Profits 40 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 400,000
thousand
-
RMB 401,907
thousand
RMB 400,000
thousand
RMB 1,907
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing
Profits 46 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
RMB 502,458
thousand
RMB 500,000
thousand
RMB 2,458
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing
Profits 49 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
RMB 502,618
thousand
RMB 500,000
thousand
RMB 2,618
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing
Profits 54 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
RMB 502,885
thousand
RMB 500,000
thousand
RMB 2,885
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing
Profits 62 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
RMB 503,567
thousand
RMB 500,000
thousand
RMB 3,567
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing
Profits 67 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
RMB 503,304
thousand
RMB 500,000
thousand
RMB 3,304
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Guangdong Finance Trust - Peng
Yun Tian Hua Collection Fund
Trust
Note 3
Guangdong Yuecai
Intrust & Investment
Company
�
-
RMB 500,000
thousand
-
RMB 500,000
thousand
-
RMB 173,356
thousand
RMB 150,000
thousand
RMB23,356
thousand
-
RMB 850,000
thousand

-196-

Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Industrial Bank "Golden
Snowball-selected" 2018 9th
Guaranteed return Closed-end
Note 2
Industrial Bank
�
-
-
-
RMB 500,000
thousand
-
RMB 503,593
thousand
RMB 500,000
thousand
RMB 3,593
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Industrial Bank "Golden
Snowball-selected" 2018 9th
Guaranteed return Closed-end
Note 2
Industrial Bank
�
-
-
-
RMB 500,000
thousand
-
RMB 503,593
thousand
RMB 500,000
thousand
RMB 3,593
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Wealth Bus No. 3
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 500,000
thousand
-
RMB 505,610
thousand
RMB 500,000
thousand
RMB 5,610
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Wealth Bus No. 2
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 500,000
thousand
-
RMB 503,411
thousand
RMB 500,000
thousand
RMB 3,411
thousand
-
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by
bit make a mickle) (WG18074S)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 500,000
thousand
RMB 503,279
thousand
RMB 500,000
thousand
RMB 3,279
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Bank of Shanghai for "Winer"
currency and bonds series (bit by bit
make a mickle) (WG18077S)
financial products
Note 2
Bank of Shanghai
�
-
-
-
RMB 300,000
thousand
RMB 301,812
thousand
RMB 300,000
thousand
RMB 1,812
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Industrial Bank "Golden Snowball-
selected" 2018 8th Guaranteed
return Closed-end
Note 2
Industrial Bank
�
-
-
-
RMB 500,000
thousand
RMB 505,293
thousand
RMB 500,000
thousand
RMB 5,293
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Industrial Bank "Golden Snowball-
selected" 2018 8th Guaranteed
return Closed-end
Note 2
Industrial Bank
�
-
-
-
RMB 500,000
thousand
RMB 505,293
thousand
RMB 500,000
thousand
RMB 5,293
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2081�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 500,000
thousand
RMB 501,658
thousand
RMB 500,000
thousand
RMB 1,658
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2016�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 400,000
thousand
RMB 401,497
thousand
RMB 400,000
thousand
RMB 1,497
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2017�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 500,000
thousand
RMB 503,470
thousand
RMB 500,000
thousand
RMB 3,470
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2059�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 300,000
thousand
RMB 301,975
thousand
RMB 300,000
thousand
RMB 1,975
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2424�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 500,000
thousand
RMB 501,794
thousand
RMB 500,000
thousand
RMB 1,794
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2435�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 500,000
thousand
RMB 501,742
thousand
RMB 500,000
thousand
RMB 1,742
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2425�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 500,000
thousand
RMB 501,874
thousand
RMB 500,000
thousand
RMB 1,847
thousand
-
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo�18JG2061�
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 500,000
thousand
-
-
-
RMB 504,315
thousand

-197-

Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo (18JG2060)
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 300,000
thousand
-
-
-
RMB 302,558
thousand
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo (18JG2704)
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 300,000
thousand
-
-
-
RMB 300,395
thousand
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Shanghai Pudong Development
Bank for Liduoduo (18JG2675)
RMB public structured deposits
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 300,000
thousand
- -
-
RMB 500,666
thousand
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing Profits
32 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
-
-
RMB 500,284
thousand
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing Profits
33 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
-
-
RMB 500,284
thousand
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd
Yun Tong Fortune Increasing Profits
34 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 500,000
thousand
-
-
-
RMB 500,284
thousand
Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Yun Tong Fortune Increasing Profits
48 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 60,000
thousand
RMB 60,379
thousand
RMB 60,000
thousand
RMB 379
thousand
-
Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Yun Tong Fortune Increasing Profits
90 Days Financial Products
Note 2
Bank of
Communications
�
-
-
-
RMB 300,000
thousand
RMB 303,513
thousand
RMB 300,000
thousand
RMB 3,513
thousand
-
Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Wealth Bus No. 3
Note 2
Shanghai Pudong
Development Bank
�
-
-
-
RMB 200,000
thousand
RMB 202,219
thousand
RMB 200,000
thousand
RMB 2,219
thousand
-
Nanning Funing
Precision Electronics
Co., Ltd.
Agricultural Bank of China "Ben Li
Feng" Targeted RMB Wealth
Managements Products
(BFDG180013)
Note 2
Agricultural Bank of
China
�
-
-
-
RMB 200,000
thousand
RMB 201,325
thousand
RMB 200,000
thousand
RMB 1,325
thousand
-
Nanning Funing
Precision Electronics
Co., Ltd.
Agricultural Bank of China "Ben Li
Feng" Targeted RMB Wealth
Managements Products
(BFDG170475)
Note 2
Agricultural Bank of
China
�
-
RMB 250,000
thousand
-
-
RMB 251,812
thousand
RMB 250,000
thousand
RMB 1,812
thousand
-
Champ Tech Optical
(Foshan) Corporation
RMB Continuous Serial
Deposits Financial Products
Note 2
Bank of China
�
-
-
-
RMB 100,000
thousand
RMB 100,335
thousand
RMB 100,000
thousand
RMB 335
thousand
-
Champ Tech Optical
(Foshan) Corporation
Yun Tong Fortune Increasing
Profits 34 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 100,000
thousand
-
RMB 100,419
thousand
RMB 100,000
thousand
RMB 419
thousand
-
-
Champ Tech Optical
(Foshan) Corporation
Yun Tong Fortune Increasing
Profits 32 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 100,000
thousand
-
RMB 100,395
thousand
RMB 100,000
thousand
RMB 395
thousand
-
-
Champ Tech Optical
(Foshan) Corporation
Yun Tong Fortune Increasing
Profits 32 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 100,000
thousand
-
RMB 100,395
thousand
RMB 100,000
thousand
RMB 395
thousand
-
-
Champ Tech Optical
(Foshan) Corporation
Yun Tong Fortune Increasing
Profits 34 Days Financial
Products
Note 2
Bank of
Communications
�
-
-
-
RMB 80,000
thousand
RMB 80,320
thousand
RMB 80,000
thousand
RMB 320
thousand
-
Note 1�Recorded in "investments accounted for using equity method".
Note 2�Recorded in "financial assets at amortised cost-current".
Note 3�Recorded in "financial assets at amortised cost-non-current".
Note 4�Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave the columns blank.

-198-

Purchases
(sales)
Amount
Percentage of
total purchases
(sales)
Credit term
Unit price
Credit term
Balance
Percentage of total
notes/accounts
receivable (payable)
Table 4
Expressed in thousands of NTD
(Except as otherwise indicated)
Note
Purchaser/seller
Counterparty
Relationship with the counterparty
Transaction
Differences in transaction
terms compared to third
party transactions
Notes/accounts receivable (payable)

Foxconn Technology
Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The indirect subsidiaries of Hon Hai
Precision Industry Co., Ltd.
Sales
2,286,740
$ 2
90 days
Note
Note
388,612
$ 3
Foxconn Technology
Co., Ltd.
Hon Hai Precision Industry Co.,
Ltd.
Associate which accounted the Company by
using equity method
Sales
348,952
-
90 days
Note
Note
106,979
1
Foxconn Technology
Co., Ltd.
HIGH TEMPO
INTERNATIONAL LTD.
The investee is an indirect subsidiary of the
Company
Sales
148,541
-
90 days
Note
Note
23,080
-
Foxconn Technology
Co., Ltd.
FTC Technology Inc.
The investee is an indirect subsidiary of the
Company
Sales
145,309
-
90 days
Note
Note
112,541
1
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Sales
30,344,085
86
90 days
Note
Note
11,531,115
96
Note 2
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd.
Foxconn Technology Pte. Ltd.
The investee is an indirect subsidiary of the
Company
Sales
3,785,406
11
90 days
Note
Note
327,762
3
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd.
Fuzhun Precision (Hebi)
Electronics Co., Ltd.
The investee is an indirect subsidiary of the
Company
Sales
239,347
1
90 days
Note
Note
11,856
-
Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Sales
515,278
10
90 days
Note
Note
137,023
6
Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Foxconn Technology Pte. Ltd.
The investee is an indirect subsidiary of the
Company
Sales
4,476,543
88
60 days
Note
Note
2,211,723
93
Qingdao Hiyn Materials
Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Sales
184,162
33
90 days
Note
Note
144,367
57
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Sales
5,111,453
87
90 days
Note
Note
1,813,097
79
Foxconn Technology
Pte. Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Sales
4,966,603
33
90 days
Note
Note
647,082
14

-199-

Purchases
(sales)
Amount
Percentage of
total purchases
(sales)
Credit term
Unit price
Credit term
Balance
Percentage of total
notes/accounts
receivable (payable)
Note
Purchaser/seller
Counterparty
Relationship with the counterparty
Transaction
Differences in transaction
terms compared to third
party transactions
Notes/accounts receivable (payable)

Foxconn Technology
Pte. Ltd.
Hon Fujin Precision Industry
(Taiyuan) Co., Ltd.
The investee is an indirect subsidiary of the
Company
Sales
2,549,704
$ 17
90 days
Note
Note
1,401,047
$ 31
Fuzhun Precision
(Shenzhen)
Industry Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Sales
150,863
94
90 days
Note
Note
10,835
100
Nanning Funing
Precision Electronics
Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Sales
191,530
8
90 days
Note
Note
54,799
4
YanTai Fuzhun
Precision Electronics
Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Sales
629,446
44
90 days
Note
Note
293,851
65
YanTai Fuzhun
Precision Electronics
Co., Ltd.
Fu Yu Precision Components
(Kunshan) Co., Ltd.
The investee is an indirect subsidiary of the
Company
Sales
595,739
42
90 days
Note
Note
114,134
25
Foxconn Technology
Co., Ltd.
YanTai Fuzhun Precision
Electronics Co., Ltd.
The investee is an indirect subsidiary of the
Company
Purchases
175,260
-
90 days
Note
Note
-
-
Foxconn Technology
Co., Ltd.
Champ Tech Optical (Foshan)
Corporation
The investee is an indirect subsidiary of the
Company
Purchases
399,463
-
90 days
Note
Note
2,163,732)
(
10)
(
Note 3
Foxconn Technology
Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The indirect subsidiaries of Hon Hai
Precision Industry Co., Ltd.
Purchases
80,260,884
91
90 days
Note
Note
14,941,798)
(
72)
(
Foxconn Technology
Co., Ltd.
Nanning Funing Precision
Electronics Co., Ltd.
The investee is an indirect subsidiary of the
Company
Purchases
1,858,404
2
30 days
Note
Note
-
-
Foxconn Technology
Co., Ltd.
Fuzhun Precision (Hebi)
Electronics Co., Ltd.
The investee is an indirect subsidiary of the
Company
Purchases
675,589
1
90 days
Note 1
Note 1
446,545)
(
2)
(
Foxconn Technology
Co., Ltd.
INNOLUX CORPORATION
Other related parties
Purchases
2,286,490
3
60 days
Note
Note
14,423)
(
-
Foxconn Technology
Co., Ltd.
SHARP CORPORATION
Other related parties
Purchases
1,219,329
1
60 days
Note
Note
402,447)
(
2)
(
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Purchases
4,983,346
18
90 days
Note
Note
1,079,014)
(
30)
(
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd.
Hon Hai Precision Industry Co.,
Ltd.
The counterparty of the investee is an
investment company which accounts the
Company using equity method
Purchases
674,569
2
90 days
Note
Note
10,456)
(
-

-200-

Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Pan-International Industrial Corp.
and subsidiaries
The company and its subsidiaries
accounted for using equity method
Purchases
339,773
$ 8
90 days
Note
Note
193,558)
($ 14)
(
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Purchases
775,858
18
90 days
Note
Note
49,675)
(
3)
(
Foxconn Technology
Pte. Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Purchases
1,887,881
13
90 days
Note
Note
406,512)
(
7)
(
Foxconn Technology
Pte. Ltd.
Hon Hai Precision Industry Co.,
Ltd.
The counterparty of the investee is an
investment company which accounts the
Company using equity method
Purchases
935,457
6
90 days
Note
Note
548,523)
(
10)
(
YanTai Fuzhun
Precision Electronics
Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
Purchases
326,435
25
90 days
Note
Note
28,526)
(
14)
(

-201-

Amount
Action taken
Amount collected
subsequent to the
balance sheet date
Expressed in thousands of NTD
(Except as otherwise indicated)
Allowance for
doubtful accounts
Creditor
Counterparty
Relationship with the counterparty
Balance as at
December 31, 2018
Turnover rate
Overdue receivables
Table 5

Foxconn Technology Co., Ltd. Foxconn (Far East) Ltd. and
subsidiaries
The indirect subsidiaries of Hon Hai
Precision Industry Co., Ltd.
388,612
$ 3.97
39,350
$ Subsequent collection
219,855
$ -
$ Foxconn Technology Co., Ltd. Foxconn (Far East) Ltd. and
subsidiaries
The indirect subsidiaries of Hon Hai
Precision Industry Co., Ltd.
358,273
Not applicable
-
-
-
-
Foxconn Technology Co., Ltd. Hon Hai Precision Industry Co.,
Ltd.
Associate which accounted the Company
by using equity method
106,979
1.16
-
-
62,533
-
Foxconn Technology Co., Ltd. FTC Technology Inc.
Subsidiary which indirectly reinvested by
the Company
112,541
2.52
38,104
-
112,541
-
Hon Fujin Precision Industry
(Taiyuan) Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
11,531,115
1.63
5,351,028
Subsequent collection
4,238,344
-
Hon Fujin Precision Industry
(Taiyuan) Co., Ltd.
FOXCONN TECHNOLOGY
PTE. LTD.
The investee is an indirect subsidiary of
the Company
327,762
1.96
45,321
Subsequent collection
34,287
-
Fu Yu Precision Components
(Kunshan) Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
137,023
1.65
1,334
Subsequent collection
215,423
-
Fu Yu Precision Components
(Kunshan) Co., Ltd.
FOXCONN TECHNOLOGY
PTE. LTD.
The investee is an indirect subsidiary of
the Company
2,211,723
2.87
528,605
Subsequent collection
1,814,020
-
Qingdao Hiyn Materials Co.,
Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
144,367
1.29
81,951
Subsequent collection
144,367
-
Fuzhun Precision (Hebi)
Electronics Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
1,813,097
2.24
722,193
Subsequent collection
168,863
-
Fuzhun Precision (Hebi)
Electronics Co., Ltd.
Foxconn Technology Pte Ltd.
The Company's ultimate parent company
446,545
2.71
106,555
Subsequent collection
42,972
-
FOXCONN TECHNOLOGY
PTE. LTD.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
647,082
1.75
188,672
Subsequent collection
251,595
-
FOXCONN TECHNOLOGY
PTE. LTD.
Hon Fujin Precision Industry
(Taiyuan) Co., Ltd.
The investee is an indirect subsidiary of
the Company
1,401,047
1.98
178,074
Subsequent collection
15,685
-
(shown as other receivables)(Note 1)

-202-

Amount
Action taken
Amount collected
subsequent to the
balance sheet date
Allowance for
doubtful accounts
Creditor
Counterparty
Relationship with the counterparty
Balance as at
December 31, 2018
Turnover rate
Overdue receivables

YanTai Fuzhun Precision
Electronics Co., Ltd.
Foxconn (Far East) Ltd. and
subsidiaries
The counterparties of the investee are
indirect subsidiaries of Hon Hai Precision
Industry Co., Ltd. and its subsidiaries
293,851
$ 1.56
152,713
$ Subsequent collection
174,669
$ -
YanTai Fuzhun Precision
Electronics Co., Ltd.
Fu Yu Precision Components
(Kunshan) Co., Ltd.
The investee is an indirect subsidiary of
the Company
114,134
4.48
-
-
121,959
-
Champ Tech Optical (Foshan)
Corporation
Foxconn Technology Pte Ltd.
The Company's ultimate parent company
2,163,732
0.17
585,141
Subsequent collection
1,837,843
-
HIGH TEMPO
INTERNATIONAL LTD.
Foxconn Technology Pte Ltd.
The Company's ultimate parent company
1,362,382
Not applicable
-
-
-
-
Note 1: Receivables from purchases of materials on behalf of Foxconn (Far East) Ltd. and subsidiaries.
Note 2: Receivables from purchases of materials by investees on behalf of the final parent company.
Note 3: It refers to receivable arising from investee's purchase of materials and raw materials on behalf of subsidiaries in which the Company directly re-invested.
Note 4: For information of loans to others, please refer to table 1.
(shown as other receivables)(Note 2)

-203-

General ledger account
Amount
Transaction
terms
Percentage of consolidated
total operating
revenues or total assets
Transaction
Number
(Note 1)
Company name
Counterparty
Relationship
(Note 2)

0
Foxconn Technology Co., Ltd.
HIGH TEMPO INTERNATIONAL LTD.
1
Sales
148,541
$ Note 4
0
0
Foxconn Technology Co., Ltd.
Nanning Funing Precision Electronics Co., Ltd.
1
Purchases
1,858,404
�
1
0
Foxconn Technology Co., Ltd.
FTC Technology Inc.
1
Sales
145,309
�
0
0
Foxconn Technology Co., Ltd.
�
1
Accounts receivable
112,541
�
0
0
Foxconn Technology Co., Ltd.
Fuzhun Precision (Hebi) Electronics Co., Ltd.
1
Purchases
675,589
�
0
0
Foxconn Technology Co., Ltd.
YanTai Fuzhun Precision Electronics Co., Ltd.
1
Purchases
175,260
�
0
0
Foxconn Technology Co., Ltd.
Champ Tech Optical (Foshan) Corporation (Note 7)
1
Purchases
399,463
�
0
1
Hon Fujin Precision Industry (Taiyuan) Co., Ltd.
Foxconn Technology Pte. Ltd.
3
Sales
3,785,406
�
3
1
�
�
3
Accounts receivable
327,762
�
1
1
�
Fuzhun Precision (Hebi) Electronics Co., Ltd.
3
Sales
239,347
�
0
2
Fu Yu Precision Components (Kunshan) Co., Ltd.
Foxconn Technology Pte. Ltd.
3
Sales
4,476,543
�
3
2
�
�
3
Accounts receivable
2,211,723
�
1
3
�
�
2
Accounts receivable
446,545
�
0
4
Foxconn Technology Pte. Ltd.
Hon Fujin Precision Industry (Taiyuan) Co., Ltd.
3
Sales
2,549,704
�
2
4
�
�
3
Accounts receivable
1,401,047
�
1
5
YanTai Fuzhun Precision Electronics Co., Ltd.
Fu Yu Precision Components (Kunshan) Co., Ltd.
3
Sales
595,739
�
0
5
�
�
3
Accounts receivable
114,134
�
0
6
High Tempo International Ltd.
Foxconn Technology Co., Ltd.
2
Other receivable
1,362,382
�
1
7
�
�
2
Accounts receivable
2,163,732
�
1
Note 1: The information of transactions between the Company and the subsidiaries should be noted in “Number” column.
Note 2:(1) Number 0 represents the Company.
Note 2:(2) The consolidated subsidiaries are numbered in order from number 1.
Note 2: The transaction relationship with counterparties are as follows:
Note 2:(1) The Company to the consolidated subsidiary.
Note 2:(2) The consolidated subsidiaries to the Company.
Note 2:(3) The consolidated subsidiaries to other consolidated subsidiaries.
Note 3: Disclosure standard of transactions between the Company and subsidiaries is when purchases, sales and receivables (payables) from (to) related parties account for at least $100,000 or 20% of capital. Relative related are not disclosed.
Note 4: Except for circumstances in which there are no similar transactions for reference and the prices and credit periods are negotiated by both parties, the aforementioned related party is offered prices very close to those offered to other
customers and given a payment period of 30 to 90 days.
Note 5: In calculating the ratio, the transaction amount is divided by consolidated total assets for balance sheet accounts and is divided by consolidated total revenues for income statement accounts.
Note 6: For information of loans to others, please refer to table 1.
Note 7: Champ Tech Optical (Foshan) Corporation is an indirect subsidiary of the Company on December 1, 2018, and the disclosed purchase is starting with the date of acqusition.

-204-

Balance as at
December 31, 2018
Balance as at
December 31, 2017
Number of shares
Ownership (%)
Book value
Net profit (loss)
of the investee for
the year ended
December 31, 2018
Investment income (loss)
recognised by the
Company for the year
ended December 31, 2018
Note
Investor
Investee
Location
Main business
activities
Initial investment amount
Shares held as at December 31, 2018

Foxconn Technology
Co., Ltd.
Q-Run Holdings Ltd.
Cayman
Islands
Investment holding
9,851,192
$ 9,851,192
$ 480,077,600
100
92,037,098
$ 5,670,361
$ 5,670,361
$ Foxconn Technology
Co., Ltd.
Foxconn Precision Components
Holding Co., Ltd.
Cayman
Islands
Investment holding
492,742
492,742
135,839,643
100
15,692,164
555,721
555,721
Foxconn Technology
Co., Ltd.
Huazhun Investment Co., Ltd.
Taiwan
Investment
1,254,780
1,254,780
125,478,000
100
1,440,657
101,597
101,597
Foxconn Technology
Co., Ltd.
Syntrend Creative Park Co., Ltd.
Taiwan
Retail of office machinery
and equipment and electronic
appliances, and information
software services.
490,322
490,322
49,032,250
20
286,222
85,477)
(
17,062)
(
Note 1: Besides Foxconn Precision Components Holding Co., Ltd., Q-Run Holdings Ltd. and Huazhun Investment Co., Ltd. are subsidiaries of the Company, Atkinson Holdings Ltd., Q-Run Far East Corporation, World Trade Trading Ltd., High Tempo International
Ltd., FTC Technology Inc., Foxconn Technology Pte. Ltd., Kenny International Ltd., Double Wealth Profits Ltd., Precious Star International Ltd., Eastern Star Limited., Foreign Technology Ltd., Topfry Industrial Ltd., Gold Glory International Ltd., New Glory
Holdings Ltd., FTP Technology Inc., Fu Rui Precision Components (Kunshan) Co., Ltd., Fuzhun Precision (Shenzhen) Industry Co., Ltd., Fuyu Technology (Nanyang) Co., Ltd., Hon Fujin Precision Industry (Taiyuan) Co., Ltd., Fuzhun Precision (Hebi)
Electronics Co., Ltd., Qingdao Hiyn Materials Co., Ltd., Fuhuigang Industrial (Shenzhen) Co., Ltd., Fu Yu Precision Components (Kunshan) Co., Ltd., YanTai Fuzhun Precision Electronics Co., Ltd., Nanning Funing Precision Electronics Co., Ltd. and Fuzhun
Precision (Shenyang) Industry Co., Ltd. are subsidiaries of the Company as well.

-205-

Remitted to
Mainland China
Remitted back
to Taiwan
Note
Accumulated amount
of remittance
from Taiwan
to Mainland
China as of
December 31, 2018
Net income of
investee for the
year ended
December 31, 2018
Investee in
Mainland China
Main business
activities
Paid-in
capital
Investment
method
(Note 1)
Accumulated amount
of remittance
from Taiwan
to Mainland
China as of
January 1, 2018
Ownership
held by the
Company
(direct or
indirect)
Investment income
(loss) recognised by
the Company for
the year ended
December 31, 2018
(Note 2)
Book value of
investments in
Mainland China
as of
December 31, 2018
Accumulated amount
of investment income
remitted back to
Taiwan as of
December 31, 2018
Amount remitted from Taiwan
to Mainland China / Amount
remitted back to Taiwan for the
year ended
December 31, 2018

Fuhuigang Industrial
(Shenzhen) Co., Ltd.
Computer case – electronic and
electrical components
238,295
$ 2
238,295
$ �
�
�
�
238,295
$ 10,554
$ 100
10,554
$ 437,350
$ �
�
Fu Yu Precision
Components (Kunshan)
Co., Ltd.
Manufacturing and marketing of
power plug and wall socket,
micro ribbon connectors for
terminals, etc.
1,203,425
2
604,754
�
�
604,754
371,194
100
371,194
4,421,617
�
Fuzhun Precision
(Shenzhen) Industry
Co., Ltd.
Manufacturing and marketing of
computer components
(computer thermal module)
599,040
2
61,440
�
�
61,440
90,088
100
90,088
4,738,787
�
Fu Rui Precision
Components (Kunshan)
Co., Ltd.
Electrical board components
processing; manufacturing and
marketing of optoelectronics
and computer cables
377,580
2
242,196
�
�
242,196
22,379
100
22,379
1,735,310
�
Hon Fujin Precision
Industry (Taiyuan) Co.,
Ltd.
Manufacturing and marketing of
computer components and
related peripherals, computer
cases and metal stamping
12,595,200
2
4,285,440
�
�
4,285,440
3,543,367
100
3,543,367
39,694,878
�
Nanning Funing
Precision Electronics
Co., Ltd.
Manufacturing and marketing of
computer components
(computer thermal module)
301,056
2
-
�
�
-
270,146
100
270,146
2,558,462
�
YanTai Fuzhun
Precision Electronics
Co., Ltd.
Manufacturing and marketing of
computer case - electronic and
electrical components
1,213,440
2
1,213,440
�
�
1,213,440
69,573
100
69,573
681,339
�
Fuzhun Precision
(Hebi) Electronics Co.,
Ltd.
New alloy material, precision
molds, new electronic
components, portable computers
and their components
4,537,344
2
1,526,784
�
�
1,526,784
1,234,136
100
1,234,136
6,813,175
�

-206-

-207-

V. Most Recent Stand Alone Financial Statements Audited by CPAs

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Stockholders of Foxconn Technology Co., Ltd.

Opinion

We have audited the accompanying parent company only balance sheets of Foxconn Technology Co., Ltd. (the “Company”) as at December 31, 2018 and 2017, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (“ROC GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in

-208-

forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Company’s parent company only financial statements of the year ended December 31, 2018 are stated as follows:

Revenue cutoff

Description

Refer to Note 4(26) for accounting policy on revenue recognition and Note 6(18) for details of revenues.

The Company has three revenue types, including (1) direct shipment from the factory, (2) FOB destination, and (3) hub. For FOB destination and hub, revenue is recognised when goods are shipped to destination or picked up by customers (when control of the products is transferred). The supporting documents for revenue recognition include receipts from customers (FOB destination), reports or other information provided by hub custodians and inventory movement record of hub. As the hubs are located around the world with numerous custodians, the frequency and contents of statements provided by custodians vary, and the process of revenue recognition involves numerous manual procedures, these factors may potentially result in inaccurate timing of sales revenue recognition and discrepancy between the physical inventory quantities in the hubs and the quantities as reflected in accounting records.

Since there are numerous daily revenue transactions from hubs and from FOB destination and the transaction amounts prior to and after the balance sheet date are significant to the financial statements, revenue cutoff has been identified as a key audit matter.

How our audit addressed the matter

We performed the following key audit procedures in respect of the above key audit matter:

Evaluated and tested the Company’s internal controls over revenue recognition.
Tested sales transactions that took place shortly before and after the balance sheet date by verifying the customers’ receipt notes, supporting documents provided by hub custodian, and inventory movement records, and ascertained whether cost of goods sold was recognised in the correct reporting period.
Confirmed physical inventory quantities held by distribution warehouses and agreed to

-209-

accounting records. Assessed the reasonableness of reconciling items identified through confirmation or physical inventory, if any and inspected respective supporting documents and rationale.

Provision for inventory valuation losses

Description

Refer to Note 4(13) for accounting policies on inventory valuation, Note 5(2) for uncertainty of accounting estimates and assumptions in relation to inventory valuation losses, and Note 6(6) for details of inventories.

The Company is primarily engaged in the sales of 3C electronic products manufactured by its subsidiaries. Due to rapid technological innovations, short electronic product life cycles and fluctuation of market prices, there is a higher risk of inventory losses arising from market value decline or obsolescence. The Company and its subsidiaries recognise inventories at the lower of cost and net realisable value which is determined based on historical data of inventory closeout and range of discount. Inventory valuation losses are provided against inventory aged over a certain time period and individually identified as obsolete or damaged.

As the amounts of the Company and its subsidiaries’ inventory are material, types of inventories vary, the identification of obsolete or damaged inventories and determination of net realisable value are subject to management and audit judgement, we consider provision for inventory valuation losses as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

A. Ensured consistent application of accounting policies on provision for inventory valuation losses and ascertain compliance with respective accounting guidance.
B. Validated the appropriateness of system logic of inventory aging report utilised by management in assessing inventory valuation losses and sampled and tested transactions for proper categorisation in inventory aging report.
C. Assessed the reasonableness of inventory valuation losses through discussion with management

-210-

as to the determination of net realisable value of obsolete or damaged inventories and validating related supporting documents.

Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the Audit Committee, are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

A. Identify and assess the risks of material misstatement of the parent company only financial

-211-

statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls.
C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
D. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Company to cease to continue as a going concern.
E. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We also provide those charged with governance with a statement that we have complied with

-212-

relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Hsu, Sheng-Chung Wu, Han-Chi For and on behalf of PricewaterhouseCoopers, Taiwan March 27, 2019

------------------------------------------------------------------------------------------------------------------------------------------------The accompanying parent company only financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

-213-

FOXCONN TECHNOLOGY CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Assets	December 31, 2018 AMOUNT % � �� � �� � �� � �� � �� � �� � �� � �� � �� �� �� � � � �� �� �� � �� � �� � �� � �� �� � �� ��	December 31, 2017	December 31, 2017
	AMOUNT � �� �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� � ��	AMOUNT � �� �� � �� �� �� �� �� �� � �� �� �� �� �� �� �� � ��	%
Current assets 1100 Cash and cash equivalents 1110 Current financial assets at fair value through profit or loss 1136 Financial assets at amortised cost - current 1170 Accounts receivable, net 1180 Accounts receivable due from related parties, net 1200 Other receivables 130X Inventories 1470 Other current assets 11XX Total current assets Non-current assets 1517 Financial assets at fair value through other comprehensive income - non-current 1523 Non-current available-for-sale financial assets 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1760 Investment property-net 1840 Deferred tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets			�� � � � � � � �
			��
			� � �� � � � �
			��
			��

(Continued)

-214-

FOXCONN TECHNOLOGY CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

				December 31, 2018				December 31, 2017
	Liabilities and Equity	Notes		AMOUNT	%			AMOUNT	%
	Current liabilities
2100	Short-term borrowings	6(11)	�	��	��		�	��	��
2120	Current financial liabilities at fair	6(2)
	value through profit or loss			��		�		��	�
2170	Accounts payable			��		�		��	�
2180	Accounts payable to related
	parties			��	��			��	��
2200	Other payables	6(12)		��		�		��	�
2230	Current tax liabilities	6(23)		��		�		��	�
2300	Other current liabilities			��		�		��	�
21XX	Total current liabilities			��	��			��	��
	Non-current liabilities
2570	Deferred tax liabilities	6(23)		��		�		��	�
2600	Other non-current liabilities	6(13)		��		�		��	�
25XX	Total non-current liabilities			��		�		��	�
2XXX	Total liabilities			��	��			��	��
	Equity
	Share capital	6(14)
3110	Ordinary share			��	��			��	�
	Capital surplus	6(15)
3200	Capital surplus			��		�		��	�
	Retained earnings	6(16)
3310	Legal reserve			��		�		��	�
3350	Unappropriated retained earnings			��	��			��	��
	Other equity interest	6(17)
3400	Other equity interest	�		��		�		��	��
3XXX	Total equity			��	��			��	��
	Commitments and Contingent
	Liabilities
3X2X	Total liabilities and equity		�	��	��		�	��	��
	The accompanying notes are an integral part of these			parent company only	financial		statements.

-215-

FOXCONN TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except for earnings per share amounts)

Items

Years ended December 31
2018
2017
Notes
AMOUNT
%
AMOUNT
%
6(18)
�
��
��
�
��
��
6(6)(21)
�
��
��
��
��
��
�
��
�
6(21)
�
��
�
�
��
�
�
��
�
�
��
�
�
��
��
��
�
�
��
��
��
�
��
�
��
�
6(19)
��
�
��
�
6(20)
��
�
�
��
��
�
��
��
��
�
6(8)
��
�
��
�
��
�
��
�
��
��
��
��
6(23)
�
��
��
��
��
�
��
��
�
��
��
6(13)
��
��
�
��
��
�
6(17)
�
��
��
�
�
6(17)
�
��
��
�
�
6(23)
��
�
��
�
�
��
��
��
�
6(16)
��
�
�
��
��
�
�
��
�
�
�
��
��
��
�
��
��
��
��
��
�
��
��
6(24)
�
��
�
��
�
��
�
��

4000
Operating revenue
5000
Operating costs
5900
Gross profit from operations
Operating expenses
6100
Selling expenses
6200
Administrative expenses
6300
Research and development expenses
6000
Total operating expenses
6900
Net operating income
Non-operating income and expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7070
Share of profits of associates and joint
ventures accounted for using equity
method
7000
Total non-operating income and
expenses
7900
Profit before income tax
7950
Tax expense
8200
Profit
Components of other comprehensive
income that will not be reclassified to
profit or loss
8311
Actuarial losses on defined benefit plans
8316
Unrealised loss on valuation of financial
assets at fair value through other
comprehensive loss
8330
Share of other comprehensive loss of
associates and joint ventures accounted
for using equity method
8349
Income tax related to components of other
comprehensive income that will not be
reclassified to profit or loss
8310
Other comprehensive loss that will
not be reclassified to profit or loss
Components of other comprehensive
income that will be reclassified to profit or
loss
8361
Exchange differences on translation
8362
Unrealised gains (losses) on valuation of
available-for-sale financial assets
8380
Share of other comprehensive income of
associates and joint ventures accounted
for using equity method
8360
Other comprehensive income that
will be reclassified to profit or loss
8500
Total comprehensive (loss) income
Earnings per share
9750
Basic earnings per share
9850
Diluted earnings per share

The accompanying notes are an integral part of these parent company only financial statements.

-216-

											Total		��	��	��	��		�	��		��	��		��		��	��	��	��	��		�	��		��	��
													�									�		�												�
																			�		�					�			�	�			�		�
								Unrealised gains	(losses) on	available-for-sale	financial assets		� ��	�	��	��		�	�		�	� ��		� ��		��	�	�	�	�		�	�		�	� �
																										�
				Other Equity Interest	Unrealised gains	(losses) from	financial assets	measured at fair	value through other	comprehensive	income		� �	�	�	�		�	�		�	� �		� �		��	��	�	� ��	� ��		�	�		�	� ��
FOXCONN TECHNOLOGY CO., LTD.	PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY	YEARS ENDED DECEMBER 31, 2018 AND 2017	(Expressed in thousands of New Taiwan dollars)	Retained Earnings			Exchange	differences on	translation of	Unappropriated foreign financial	Capital surplus Legal reserve retained earnings statements		� �� � �� � �� � ��	� � �� �	� � � �� � ��	� � �� � ��		� �� � �� �	� � � �� �		� �� � � �	� �� � �� � �� �� ��		� �� � �� � �� �� ��		� � � �� �	�� �� �� � ��	� � �� �	� � �� ��	� � �� ��		� �� � �� �	� � � �� �		� �� � � �� �	� �� � �� � �� �� ��
											Ordinary share		��	�	�	�		�	�		�	��		��		�	��	�	�	�		�	�		�	��
													�									�		�												�
											Notes				6(16)		6(16)														6(16)
												2017	Balance at January 1, 2017	Profit	Other comprehensive income (loss)	Total comprehensive income (loss)	Appropriations of 2016 earnings	Legal reserve	Cash dividends	Changes in equity of associates and joint	ventures accounted for using equity method	Balance at December 31, 2017	2018	Balance at January 1, 2018	Effects of retrospective application and	retrospective restatement	Balance at January 1 after adjustments	Profit	Other comprehensive income (loss)	Total comprehensive income (loss)	Appropriations of 2017 earnings	Legal reserve	Cash dividends	Changes in equity of associates and joint	ventures accounted for using equity method	Balance at December 31, 2018

-217-

FOXCONN TECHNOLOGY CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation (including investment property)
Amortisation
Expected credit gain
Interest expense
Share of profits of associates and joint ventures
accounted for using equity method
Net loss on financial assets or liabilities at fair value
through profit or loss
Dividend income
Interest income
Changes in operating assets and liabilities
Changes in operating assets
Accounts receivable, net
Accounts receivable due from related parties
Other receivables
Inventories
Other current assets
Changes in operating liabilities
Accounts payable
Accounts payable to related parties
Other payables
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Income taxes paid
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in financial assets at amortised cost-current
Acquisition of property, plant and equipment
Increase in other financial assets
Decrease (increase) in other non-current assets
Interest received
Dividends received
Net cash flows from (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings
Cash dividends paid
Interest paid
Net cash flows (used in) from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2018
2017
�
��
�
��
6(21)
��
��
6(21)
��
��
�
��
�
��
��
6(8)
�
��
��
6(2)
�
��
��
6(19)
�
��
��
6(19)
�
��
��
��
�
��
��
��
��
��
��
��
�
��
��
��
��
�
��
��
��
�
��
��
��
�
��
��
��
��
�
��
��
��
��
��
�
�
��
��
�
�
��
��
�
��
��
��
��
��
��
�
��
�
��
��
6(15)
�
��
��
�
��
��
�
��
��
�
��
��
��
��
�
��
�
��

The accompanying notes are an integral part of these parent company only financial statements.

-218-

FOXCONN TECHNOLOGY CO., LTD. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANISATION

The Company was originally known as Q-RUN Technology Co., Ltd. and established on April 26, 1990. On March 1, 2004, the Company merged with Foxconn Precision Components Co., Ltd. and was renamed as Foxconn Technology Co., Ltd. The Company is primarily engaged in manufacturing, processing and sales of case, heat dissipation modules and consumer electronics products.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE FINANCIAL STATEMENTS AND

PROCEDURES FOR AUTHORISATION

The accompanying parent company only financial statements were authorised for issuance by the Board of Directors on March 27, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting
Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by FSC effective from 2018 are as follows:

New Standards,InterpretationsandAmendments

Effective Date by
International Accounting
StandardsBoard

Amendments to IFRS 2, ‘Classification and measurement of share-based
payment transactions’
Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4
Insurance contracts’
IFRS 9, ‘Financial instruments’
IFRS 15, ‘Revenue from contracts with customers’
Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts
with customers’
Amendments to IAS 7, ‘Disclosure initiative’
Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised
losses’
Amendments to IAS 40, ‘Transfers of investment property’
IFRIC 22, ‘Foreign currency transactions and advance consideration’
Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 1,
‘First-time adoption of International Financial Reporting Standards’
Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 12,
‘Disclosure of interests in other entities’
Annual improvements to IFRSs 2014-2016 cycle - Amendments to IAS 28,
‘Investments in associates and joint ventures’

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2018

-219-

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment. The quantitative impact will be disclosed when the assessment is complete.

A. IFRS 9, ‘Financial instruments’

(a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.
(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.
(c) The Company has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Notes 12(4) B and C.
B. IFRS 15, ‘Revenue from contracts with customers’ and amendments
(a) The Company has elected not to restate prior period financial statements when initially applying IFRS 15.
(b) Presentation of assets and liabilities in relation to contracts with customers

The Company will recognise revenue at the amount of consideration which the Company expects to be entitled. Revenue is not recognised for products that the Company expects to be returned. The Company recognises a refund liability and an asset, and the asset is presented separately from the refund liability.

(c) Under IFRS 15, liabilities in relation to expected volume discounts and refunds to customers are recognised as refund liabilities, but were previously presented as accounts receivable -

-220-

allowance for sales returns and discounts in the balance sheet. The balance was $52,399 on January 1, 2018.

(d) Please refer to Note 12(5) for other disclosures in relation to the first application of IFRS 15.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Company

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

New Standards,InterpretationsandAmendments	Effective Date by International Accounting StandardsBoard
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Effects on the Company’s financial condition and financial performance arising from the above standards and interpretations based on the Company’s assessment are as follows:

IFRS 16, ‘Leases’

The Company expects to recognise the lease contract of lessees in line with IFRS 16. However, the Company intends not to restate the financial statements of prior period (referred herein as the “modified retrospective approach”). On January 1, 2019, it is expected that ‘right-of-use asset’ and lease liability will both be increased by $2,687, and there is no impact on retained earnings.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

-221-

Effective Date by International Accounting New Standards, Interpretations and Amendments Standards Board Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition January 1, 2020 of Material’ Amendments to IFRS 3, ‘Definition of a business’ January 1, 2020 Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets To be determined by between an investor and its associate or joint venture’ International Accounting Standards Board IFRS 17, ‘Insurance contracts’ January 1, 2021

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the accompanying parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stat ed.

(1) Compliance statement

The accompanying parent company only financial statements of the Company have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

A. Except for the following items, the accompanying parent company only financial statements have been prepared under the historical cost convention:
(a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
(b) Financial assets at fair value through other comprehensive income / Available-for-sale financial assets measured at fair value.
(c) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.
B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the accompanying parent company only financial statements are disclosed in Note 5.

-222-

C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Company has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 11 (‘IAS 11’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting policies and details of significant accounts.
(3) Foreign currency translation

The accompanying parent company only financial statements are presented in New Taiwan dollars, which is the Company’s functional and presentation currency.

A. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
(d) All foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other gains and losses’.
B. Translation of foreign operations
(a) The operating results and financial position of all the company, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

-223-

i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

iii. All resulting exchange differences are recognised in other comprehensive income.

  - (b) When the foreign operation partially disposed of or sold is an associate, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale.

  - (c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even the Company still retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

(4) Classification of current and non-current items
A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
- (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;
- (b) Assets held mainly for trading purposes;
- (c) Assets that are expected to be realised within twelve months from the balance sheet date;
- (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
- (a) Liabilities that are expected to be paid off within the normal operating cycle;
- (b) Liabilities arising mainly from trading activities;
- (c) Liabilities that are to be paid off within twelve months from the balance sheet date;
- (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the

-224-

counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(5) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits and bands sold under repru chase agveement that meet definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(6) Financial assets at fair value through profit or loss Effective 2018

A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income. Financial assets at amortised cost or fair value through other comprehensive income are designated as at fair value through profit or loss at initial recognition when they eliminate or significantly reduce a measurement or recognition inconsistency.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Company subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.
D. The Company recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

(7) Financial assets at fair value through other comprehensive income

Effective 2018

A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Company has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:
(a) The objective of the Company’s business model is achieved both by collecting contractual cash flows and selling financial assets; and
(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.

-225-

C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. The Company subsequently measures the financial assets at fair value:
(a) The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.
(b) Except for the recognition of impairment loss, interest income and gain or loss on foreign exchange which are recognised in profit or loss, the changes in fair value of debt instruments are taken through other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss.

(8) Financial assets at amortised cost

Effective 2018

A. Financial assets at amortised cost are those that meet all of the following criteria:
(a) The objective of the Company’s business model is achieved by collecting contractual cash flows.
(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and derecognised using trade date accounting.
C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognised in profit or loss when the asset is derecognised or impaired.

The Company’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

(9) Accounts and notes receivable

A. Accounts and notes receivable entitle the Company a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(10) Impairment of financial assets

For debt instruments measured at fair value through other comprehensive income and financial

-226-

assets at amortised cost including accounts receivable or contract assets that have a significant financing component, at each reporting date, the Company recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Company recognises the impairment provision for lifetime ECLs.

(11) Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(12) Operating leases (lessor)

Lease income from an operating lease (net of any incentives given to the lessee) is recognised in profit or loss on a straight-line basis over the lease term.

(13) Inventories

(14) Investments accounted for under equity method / associates
A. Subsidiary is an entity where the Company has the right to dominate its finance and operation policies (includes special purpose entity), normally the Company owns more than 50 percent of the voting rights directly or indirectly in that entity. Subsidiaries are accounted for under the equity method in the Company's parent company only financial statements.
B. Unrealised gains or losses resulted from inter-company transactions with subsidiaries are eliminated. Necessary adjustments are made to the accounting policies of subsidiaries, to be consistent with the accounting policies of the Company.
C. After acquisition of subsidiaries, the Company recognises proportionately for the share of profit and loss and other comprehensive incomes in the income statement as part of the Company's profit and loss and other comprehensive income, respectively. When the share of loss from a subsidiary exceeds the carrying amount of Company's interests in that subsidiary, the Company continues to recognise its shares in the subsidiary's loss proportionately.
D. Associates are all entities over which the Company has significant influence but not control. In

-227-

general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 per cent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.

E. The Company’s share of its investements’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
F. When changes in an associate’s equity are not recognised in profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognises change in ownership interests in the associate in ‘capital surplus’ in proportion to its ownership.
G. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
H. In the case that an associate issues new shares and the Company does not subscribe or acquire new shares proportionately, which results in a change in the Company’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and ‘investments accounted for under the equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Company’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.
I. Upon loss of significant influence over an associate, the Company remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss.
J. When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate

-228-

are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

K. When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss. If it retains significant influence over this associate, the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss proportionately.
L. According to “Rules Governing the Preparations of Financial Statements by Securities Issuers”, 'profit for the year' and 'other comprehensive income for the year' reported in an entity's parent company only statement of comprehensive income, shall equal to 'profit for the year' and 'other comprehensive income' attributable to owners of the parent reported in that entity's consolidated statement of comprehensive income. Total equity reported in an entity's parent company only financial statements, shall be equal to the equity attributable to owners of parent reported in that entity's consolidated financial statements.

(15) Property, plant and equipment

A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives for buildings and structures machinery and equipment and other equipment are 3~55 years, 1~10 years and 1~10 years, respectively.

-229-

(16) Investment property

(17) Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

(18) Borrowings

A. Borrowings comprise long-term and short-term bank borrowings and other long-term and shortterm loans. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

(19) Accounts and notes payable

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(20) Financial liabilities at fair value through profit or loss

A. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorised as financial liabilities held for trading unless they are designated as hedges.
B. At initial recognition, the Company measures the financial liabilities at fair value. All related transaction costs are recognised in profit or loss. The Company subsequently measures these

-230-

financial liabilities at fair value with any gain or loss recognised in profit or loss.

(21) Derecognition of financial liabilities

A financial liability is derecognised when the obligation specified in the contract is either discharged or cancelled or expires.

(22) Offsetting financial instruments

(23) Employee benefits

A. Short-term employee benefits

B. Pensions

(a) Defined contribution plans

(b) Defined benefit plans

i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.
ii. Remeasurements arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

iii. Past service costs are recognised immediately in profit or loss.

C. Employees’ compensation, directors’ and supervisors’ remuneration

-231-

(24) Income tax
A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.
E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally

-232-

enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

(25) Dividends

(26) Revenue recognition

A. The Company is primarily engaged in manufacturing and sales of consumer electronics products. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Company has objective evidence that all criteria for acceptance have been satisfied.
B. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated sales discounts and allowances. Revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each reporting date. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Company does not adjust the transaction price to reflect the time value of money.
C. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of the accompanying parent company only financial statements requires management to make critical judgements in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

-233-

(1) Critical judgements in applying the Company’s accounting policies

A. Revenue recognition

The Company determines whether the nature of its performance obligation is to provide the specified goods or services itself (i.e. the Company is a principal) or to arrange for the other party to provide those goods or services (i.e. the Company is an agent) based on the transaction model and its economic substance. The Company is a principal if it controls a promised good or service before it transfers the good or service to a customer. The Company recognises revenue at gross amount of consideration to which it expects to be entitled in exchange for those goods or services transferred. The Company is an agent if its performance obligation is to arrange for the provision of goods or services by another party. The Company recognises revenue at the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the other party to provide its goods or services. Indicators that the Company controls the good or service before it is provided to a customer include the following:

The Company provides integrated electronics manufacturing services to meet the following criteria by judgment, and recognises revenue on a gross basis:

(a) The Company is primarily responsible for the provision of goods or services;
(b) The Company assumes the inventory risk before transferring the specified goods or services to the customer or after transferring control of the goods or services to the customer.
(c) The Company has discretion in establishing prices for the goods or services.

(2) Critical accounting estimates and assumptions

Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

As of December 31, 2018, information on the carrying amount of inventories is provided in Note 6(6).

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash and cash equivalents
Checking accounts and demand deposits Cash equivalents Time deposits	December 31,2018 �� � �� �� �	December 31,2017
		�� � �� �� �

-234-

A. The Company associates with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.
B. The Company has no cash and cash equivalents pledged to others. Time deposits with maturity in excess of three months on December 31, 2018 and 2017 have been listed under “financial assets at amortised cost-current” and “other current assets”, respectively.

(2) Financial assets or liabilities at fair value through profit or loss

Assets Current items: Financial assets mandatorily measured at fair value through profit or loss Derivatives Liabilities Current items: Financial liabilities mandatorily measured at fair value through profit or loss Derivatives	December31,2018
	�� � �� �

A. For the year ended December 31, 2018, the Company recognised net profit of $769,013 (including unrealised gain on valuation of $573,619) on the financial assets and liabilities.
B. The Company entered into contracts relating to derivative financial assets or liabilities which were not accounted for under hedge accounting. The information is listed below:

Derivativeinstruments Current items: Cross currency swap contracts Foreign exchange contracts	December31,2018	December31,2018
	TWD (SELL) �� USD (BUY) �� TWD (SELL) �� USD (BUY) �� TWD (SELL) �� USD (BUY) �� TWD (SELL) �� USD (BUY) �� Contract amount (Nominal Principal in thousands)	Contractperiod
		2018/03~2019/03 2018/03~2019/03 2018/04~2019/04 2018/12~2019/01

(a) Cross currency swap contracts

The Company signed cross currency swap contracts aiming to satisfy capital requirement. In

-235-

terms of exchange rate swaps, the principal in two currencies are exchanged at the beginning and the end of period to reduce exchange rate risk. In terms of rate swaps, the fixed interest rates of two currencies are exchanged to reduce interest rate risk.

(b) Foreign exchange contracts

The Company entered into foreign exchange contracts to satisfy capital requirement. The principal in two currencies are swapped using the same exchange rate at the beginning and the end of the period to reduce exchange rate risk.

C. The counterparties of derivative instruments held by the Company are all banks with good credit quality or financial institutions with investment grade credit ratings that are above A.
D. The Company has no financial assets at fair value through profit or loss pledged to others.
E. Information on December 31, 2017 is provided in Note 12(4).

(3) Financial assets at fair value through other comprehensive income

Items December 31, 2018 Non-current items: Equity instruments ��

A. The Company has elected to classify equity instruments that are considered to be strategic investments as financial assets at fair value through other comprehensive income.
B. The Company recognised other comprehensive income of $375,409 for fair value change for the year ended December 31, 2018.
C. As of December 31, 2018, the Company has no financial assets at fair value through other comprehensive income pledged to others.
D. Information on available-for-sale financial assets as of December 31, 2017 is provided in Note 12(4).

(4) Financial assets at amortised cost

Financial assets at amortised cost
Items Current items: Time deposits with maturity in excess of three months	December31,2018
	�� �

A. As of December 31, 2018, the Company has no financial assets at amortised cost pledged to others.
B. The financial institutions of the Company's financial institutions are of good quality and the probability of default is expected to be very low.
C. Information on December 31, 2017 is provided in Notes 6(7) and 12(4).

-236-

(5) Notes and accounts receivable

December 31,2018 Accounts receivable �� � Less: Allowance for bad debts �� � Less: Allowance for sales discounts � � �� �	December 31,2017 �� � � �� �� �

A. The Company does not hold any collateral as security.
B. Information relating to credit risk is provided in Note 12(2).
C. Information on the Company’s expected volume discounts reclassified to refund liabilities (shown as “other current liabilities”) under IFRS 15 is provided in Note 12(5).

(6) Inventories

Inventories
	December31,2018	December31,2017
Finished goods	�� �	�� �
Less: Allowance for inventory obsolescence and
market price decline	�� �	�� �
	�� �	�� �
The cost of inventories recognised as expense for the year:
	Years ended	December31,
	2018	2017
Cost of inventories sold	�� �	�� �
Other current assets
	December31,2018	December31,2017
Time deposits with maturity over three months	� �	�� �
Others	��	��
	�� �	�� �
Investments accounted for using equity method
Investees	December31,2018	December31,2017
Q-RUN HOLDINGS LTD.	�� �	�� �
FOXCONN PRECISION COMPONENTS
HOLDING CO., LTD.	��	��
HUAZHUN INVESTMENT CO., LTD.	��	��
SYNTREND CREATIVE PARK CO., LTD.	��	��
	�� �	�� �

(7) Other current assets

(8) Investments accounted for using equity method

A. The Company’s subsidiary:

(a) Details of the Company’s subsidiaries are provided in Note 4(3) of the Company’s

-237-

consolidated financial statements as of and for the year ended December 31, 2018.

(b) The Company's investments in China through FOXCONN PRECISION COMPONENTS HOLDING CO., LTD. and Q-RUN HOLDINGS LTD. are based on the production and sales of computer components (computer radiators, magnesium alloys and computer components). Please refer to Note 13 for the disclosure of information on investments in China.
B. The Company’s associates:

The operating results of the Company’s share in all individually immaterial associates are summarized below:

Other comprehensive income, net of tax �	2018 2017 �� � �� �� Years endedDecember31,
	2018 �� � �

C. The Company’s subsidiary, HUAZHUN INVESTMENT CO., LTD., issued cash dividends of $13,392 and $32,442 in October 2018 and October 2017, respectively, which resulted in the decrease of investments accounted for using equity method.
D. The Company’s share of profit of associates accounted for using equity method in 2018 and 2017 is $6,310,617 and $7,326,434, respectively.

-238-

(9) Property, plant and equipment

At January 1, 2018 Cost Accumulated depreciation 2018 Opening net book amount as at January 1 Additions Transfer Disposals Depreciation charge Closing net book amount as at December 31 At December 31, 2018 Cost Accumulated depreciation At January 1, 2017 Cost Accumulated depreciation 2017 Opening net book amount as at January 1 Additions Transfer Depreciation charge Closing net book amount as at December 31 At December 31, 2017 Cost Accumulated depreciation	Land �� � � �� � �� � � � � � �� � �� � � �� � Land �� � � � �� � �� � � � � � � �� � �� � � � �� �	Buildings and structures	Machinery and equipment �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � Machinery and equipment �� � �� � �� � �� � �� � �� � �� � �� � �� � �� �	Others Total �� � �� � �� � �� � �� � �� � �� � �� � �� �� � �� � � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � Others Total �� � �� � �� �� � �� � �� � �� � �� � �� �� � �� � �� �� � �� � �� � �� � �� � �� �� � �� � �� �
		�� � �� � �� � �� � � �� � � �� � �� � �� � �� � �� � Buildings and structures
		�� � �� � �� � �� � � �� �� � �� � �� � �� � �� �

-239-

(10) Investment property

Land
At January 1, 2018
Cost
��
Accumulated depreciation and impairment
�
��
�
2018
Opening net book amount as at January 1
��
Transfer in
�
Depreciation charge
�
Closing net book amount as at December
31
��
�
At December 31, 2018
Cost
��
Accumulated depreciation and impairment
�
��
�
Land
At January 1, 2017
Cost
��
Accumulated depreciation and impairment
�
��
�
2017
Opening net book amount as at January 1
��
Transfer in
�
Depreciation charge
�
Closing net book amount as at December
31
��
�
At December 31, 2017
Cost
��
Net exchange differences
�
��
�

A. Rental income from investment property and direct operating expenses arising from investment property are shown below:

property are shown below:
Rental income from investment property Direct operating expenses arising from the investment property that generated rental income during the year	Years endedDecember31,
	2018 �� � �� �	2017
		�� �
		�� �

-240-

B. The fair value of the investment property held by the Company as at December 31, 2018 and 2017 was $783,686 and $313,507, respectively. Valuations were made using the income approach which is categorised within Level 3 in the fair value hierarchy.

(11) Short-term borrowings

Short-term borrowings
Other payables Type ofborrowings December31,2018 Bank borrowings Unsecured borrowings �� � Type ofborrowings December31,2017 Bank borrowings Unsecured borrowings �� � Employees’ compensation payable Payable for purchases made by parties on behalf of others Awards and salaries payable Others	Interest raterange	Collateral
	0.69%~3.05563% Interest raterange	None Collateral
	0.49%~2.0521% December31,2018 �� � �� �� �� �� �	None December31,2017
		�� � �� �� �� �� �

(12) Other payables
(13) Pensions
A. Defined benefit plans
- (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee.
- (b) The amounts recognised in the balance sheet are as follows (shown as ‘other non-current liabilities’):

liabilities’):
	December31,2018		December31,2017
Present value of defined benefit obligations	��	��	��	��
Fair value of plan assets		��		��
Net defined benefit liability	��	��	��	��

-241-

	Present value of
	defined benefit	Fair value of		Net defined
	obligations	plan assets		benefit liability
Year ended December 31, 2018
Balance at January 1	�� ��	�	��	�� ��
Current service cost	�� �		�	�� �
Interest income	�� �		��	�� �
	�� �		��	�� �
Remeasurements
Return on plan assets (Note)	�	��		��
Change in demographic
assumptions	�� �		�	�� �
Change in financial assumptions	�� �		�	�� �
Experience adjustments	�� �		�	�� �
	�� �		��	�� �
Pension fund contribution	�		��	��
Paid pension	��	�� �		�
	��	�� �		��
Balance at December 31	��	�	��	�� ��
	Present value of
	defined benefit	Fair value of		Net defined
	obligations	plan assets		benefit liability
Year ended December 31, 2017
Balance at January 1	�� ��	�	��	�� ��
Current service cost	�� �		�	�� �
Interest income	�� �		��	�� �
	�� �		��	�� �
Remeasurements
Return on plan assets (Note)	�	��		�� �
Change in demographic
assumptions	�� �		�	�� �
Change in financial assumptions	�� �		�	�� �
Experience adjustments	�� �		�	�� �
	�� �	�� �		�� �
Pension fund contribution	�		��	��
Paid pension	��	�� �		��
	��	�� �		��
Balance at December 31	��	�	��	�� ��

Note: The amount included in interest income or expense is excluded.

(d)The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the

-242-

“Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitisation products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after approval by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2018 and 2017 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	Years endedDecember31,	Years endedDecember31,
	2018 �� ��	2017
		��
		��

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

Increase Decrease 0.25% 0.25% �� �� � �� �� � Discount rate	Future salaryincreases	Future salaryincreases
Increase 0.25% �� � �� �	Increase 0.25% �� ��	Decrease 0.25%
		��
		��

(f) Expected contributions to the defined benefit pension plans of the Company for the year ending December 31, 2019 are $1,600.
B. Defined contribution plans
(a) Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump

-243-

sum upon termination of employment.

(b) The pension costs under the defined contribution pension plans of the Company for the years ended December 31, 2018 and 2017 were $11,076 and $11,230, respectively.
(14) Share capital

Movements in the number of the Company’s ordinary shares outstanding are as follows:

At January 1 (December 31)	2018 Number of ordinary shares (in thousands) ��	2017
		Number of ordinary shares (in thousands)
		��

(15) Capital surplus

(16) Retained earnings
A. In accordance with the Company’s Articles of Incorporation, current year’s earnings must be distributed in the following order:
- (a) Covering accumulated deficit;
- (b) Setting aside as legal reserve equal to 10% of current year’s net income after tax and distribution pursuant to clause (A);
- (c) Setting aside a special reserve in accordance with applicable legal and regulatory requirements;

B. According to related regulations, 10% of the balance of earnings after tax less the accumulated loss of prior years should be set aside as legal reserve, until such legal reserve amount reaches the total authorised capital. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used

-244-

for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.
D. The appropriations of earnings for 2017 and 2016 had been resolved at the stockholders’ meeting on June 22, 2018 and June 22, 2017, respectively. Details are summarised below:

Years endedDecember31,	Years endedDecember31,	Years endedDecember31,
Dividends per Amount share (indollars) �� � � � �� �� �� � �� � 2017	2016
Amount �� � �� �� �	Amount �� � �� �� �	Dividends per share (indollars)
		� � �� �� �

The appropriations of earnings for 2018 has not yet been approved at the Board of Directors’ meeting as of March 27, 2019. The information on distribution of earnings will be posted in the “Market Observation Post System” of the TSEC.

E. For the information relating to employees’ compensation, please refer to Note 6(22).

-245-

(17) Other equity items

Unrealised gain

Other equity items	Unrealised gain	Unrealised gain	Unrealised gain	Unrealised gain	Unrealised gain
	(loss) on financial
	asset		at	fair value			Unrealised
	through other					gain (loss) on				Currency
	comprehensive					available-for-sale				translation
			income			financial assets			adjustments						Total
At January 1, 2018	�				�	�	��	��		��		�	��
Adjustments under new		��				�	��				�					�
standards
Revaluation of fair value											�
- Parent	�			��			�				�	�				��
- Subsidaries	�	��					�				�	�	��
Currency translation
- Parent and subsidaries					�		�			��						��
At December 31, 2018	�		��			� �		��		��		�� ��
							Unrealised
						gain (loss) on				Currency
						available-for-sale				translation
						financial assets			adjustments						Total
At January 1, 2017						�	��		�	��		�	��
Revaluation of fair value
- Parent							��				�					��
- Subsidaries							��				�		��
Currency translation
differences:
- Parent and subsidaries							�	�		��		�		��
At December 31, 2017						�	��	��		��		�	��
Operating revenue

							Year		endedDecember31,						2018
Revenue from contracts with customers							�� �
Other income
								Years endedDecember31,
								2018					2017
Interest income from bank	deposits						�		��		�					��
Dividend income									��							��
Rental revenue										��						��
Others										��						��
							�		��		�					��

(18) Operating revenue

(19) Other income

-246-

(20) Other gains and losses

Other gains and losses
	Years ended	December31,
	2018	2017
Gains (losses) on financial assets (liabilities) at fair
value through profit or loss	�� �	�� ��
Net currency exchange (losses) gains	�� �	��
Others	��	�� �
	�� �	�� ��

Information related to gain (losses) on financial assets at fair value through profit or loss is provided in Note 6(2).

(21) Expenses by nature

in Note 6(2). Expenses by nature
Employee benefit expense Depreciation (Note) Amortisation	Years endedDecember31,
	2018 �� � �� �� �� �	2017
		�� � �� ��
		�� �

Note: Including investment property

(22) Employee benefit expense

Employee benefit expense Note: Including investment property
Wages and salaries Labor and health insurance fees Pension costs Other personnel expenses	Years endedDecember31,
	2018 �� � �� �� �� �� �	2017
		�� � �� �� �� �� �

A. According to the Company’s Articles of Incorporation, if the Company accrues profit (referring to profit before tax prior to deducting the appropriation for employees’ compensation and directors’ remuneration), 4%~6% should be appropriated as employees’ compensation.
B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $666,180 and $457,835, respectively. The aforementioned amounts were recognised in salary expenses and share of profit of associates and joint ventures accounted for using equity method. For the year ended December 31, 2018, the employees’ compensation was estimated and accrued based on 6% of profit of current year distributable as of the end of reporting period.
C. Employees’ compensation for 2017 as resolved by the Board of Directors was in agreement with the amount recognised in the 2017 financial statements. In 2017, the employees’ compensation was distributed in the form of cash amounting to $457,835.
D. Information about employees’ compensation of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

-247-

(23) Income tax

A. Components of income tax expense:

ome tax Components of income tax expense:
	Years endedDecember31,
	2018	2017
Current tax:
Current tax on profits for the year	�� �	�� �
Prior year income tax underestimation	��	��
Total current tax	��	��
Deferred tax:
Impact of change in tax rate	��	�
Origination and reversal of temporary
differences	�� �	�� �
Income tax expense	�� �	�� �
Reconciliation between income tax expense and accounting profit:
	Years ended	December31,
	2018	2017
Tax calculated based on profit before tax and
statutory tax rate (Note)	�� �	�� �
Tax effects of unrecognised deferred tax assets	�� �	�� �
Impact of change in tax rate	��	�
Additional 10% tax on undistributed earnings	��	��
Prior year income tax underestimation	��	��
Income tax expenses	��	��
Origination and reversal of temporary differences	�� �	��
Prior year income tax overestimation	�� �	�� �
Prepaid income tax	�� �	�� �
Current income tax liabilities	�� �	�� �

B. Reconciliation between income tax expense and accounting profit:

-248-

C. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:

2018

Recognised
in profit
January1
or loss
Temporary differences:
Deferred tax assets:
Reserve for inventory
obsolescence
��
�
��
�
Permanent loss
on market value decline of
long-term equity investments
��
��
Unused compensated absences for
employees
��
��
Unrealised loss on financial
instruments
��
��
�
Others
��
��
��
�
��
�
Deferred tax liabilities:
Foreign investment income using
equity method
��
��
��
��
Unrealised valuation gain
on financial instruments
�
��
�
Others
��
�
��
��
��
��
��

Recognised
in other
comprehensive
income
December31
�
�
��
�
�
��
�
��
�
�
��
��
��
�
��
�
�
�
��
��
�
��
�
�
�
�
�
��
��

-249-

							2017
							Recognised
					Recognised		in other
					in	profit	comprehensive
	January1				or loss		income			December31
Temporary differences:
Deferred tax assets:
Reserve for inventory
obsolescence	�			��	� �		�		�	�			��
Permanent loss
on market value decline of
long-term equity investments			��			�			�			��
Unused compensated absences for
employees				��	�� �				�				��
Unrealised loss on financial
instruments				�		��			�				��
Others				��	�� �			��					��
	�		��		�� �		�	��		�		��
Deferred tax liabilities:
Foreign investment income using
equity method	��	��			�	��	�		�	��	��
Unrealised valuation gain
on financial instruments	�		��			��			�				�
Others				�	�	��			�	�		��
	��	��			�	��	�		�	��	��

D. The Company did not recognise taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2018 and 2017, the temporary differences unrecognised as deferred tax liabilities were $87,657,473 and $116,426,043, respectively. Abovementioned taxable temporary differences arose from the differences between estimated carrying amounts of long-term investments in foreign subsidiaries and tax payable. The Company will not dispose the subsidiaries in the foreseeable future nor remit back earnings and thus, did not recognise deferred income tax liabilities.
E. The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority.
F. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate.

-250-

(24) Earnings per share

(24) Earnings per share	(24) Earnings per share	(24) Earnings per share	(24) Earnings per share
RELATED PARTY TRANSACTIONS (1)Names of related parties and relationship Weighted average number of ordinary Earnings Amount shares outstanding per share after tax (sharesin thousands) (indollars) Basic earnings per share Net income �� � �� �� � Diluted earnings per share Net income �� � Assumed conversion of all dilutive potential ordinary shares Employees’ compensation � �� Net income plus assumed conversion of all dilutive potential ordinary shares �� � �� �� � YearendedDecember 31,2018 Weighted average number of ordinary Earnings Amount shares outstanding per share after tax (sharesin thousands) (indollars) Basic earnings per share Net income �� � �� �� � Diluted earnings per share Net income �� � Assumed conversion of all dilutive potential ordinary shares Employees’ compensation � �� Net income plus assumed conversion of all dilutive potential ordinary shares �� � �� �� � YearendedDecember 31,2017 Names of related parties Relationship with the Company Hon Hai Precision Industry Co., Ltd. and Subsidiaries Entity with significant influence to (Hon Hai and Subsidiaries) the Company Hongfujin Precision Electronics (Yantai) Co., Ltd. � Pan-International Industrial Corporation Other related party Innolux Corporation � Sharp-Roxy Sales (Singapore) Pte., Ltd. � CyberTAN Technology, Inc. �
		Amount after tax �� � �� � � �� �



(1)
	Hon Hai Precision Industry Co., Ltd. and Subsidiaries (Hon Hai and Subsidiaries) Hongfujin Precision Electronics (Yantai) Co., Ltd. Pan-International Industrial Corporation Innolux Corporation Sharp-Roxy Sales (Singapore) Pte., Ltd. CyberTAN Technology, Inc.		Entity with significant influence to the Company � Other related party � � �

RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship

For the more information about the Company and other subsidiaries, please refer to Note 7.

-251-

(2) Significant related party transactions A. Sales

nificant related party transactions Sales
Sales of goods and services: Entities with significant influence to the Company -Hon Hai and Subsidiaries Subsidiaries Other related parties	Years endedDecember31,
	2018 �� � �� �� �� �	2017
		�� � �� ��
		�� �

B. Management service revenue

B. Management service revenue
C. Purchases Management service revenue: Subsidiaries Purchases of goods and services: Entities with significant influence to the Company -Hon Hai and Subsidiaries Other related parties Subsidiaries	Years endedDecember31,
		2017
		�� �

Except for circumstances in which there are no similar transactions for reference and the prices and payment terms are negotiated by both parties, the Company makes purchases from the aforementioned related party at the prevailing market price, with payment periods of 30 to 90 days.

D. Receivables from related parties

-252-

December 31, 2018 December 31, 2017

Accounts receivable: Entities with significant influence to the Company -Hon Hai and Subsidiaries Subsidiaries Other related parties Less: Allowance for uncollectible accounts �	�� � �� �� �� �� �� �	�� � �� ��
		�� �
		�� �

E. Payables to related parties

Payables to related parties
Accounts payable: Entities with significant influence to the Company -Hon Hai and Subsidiaries Subsidiaries Other related parties	December31,2018 �� � �� �� ��	December31,2017
		�� � �� ��
		��

The payables to related parties arise mainly from purchase transactions and are made at arm’slength, non-interest bearing and payable within 30~90 days.

F. Raw materials purchased on behalf of others

	F. Raw materials purchased on behalf of others
(3)	Key management compensation 2018 2017 Raw materials purchased on behalf of others Entities with significant influence to the Company �� � �� � December31,2018 December31,2017 Receivable for raw materials purchased on behalf of others Entities with significant influence to the Company �� � �� � Years endedDecember31, 2018 2017 Salaries and other short-term employee benefits �� � �� � Post-employment benefits �� �� Share-based payments �� �� �� � �� � Years endedDecember31,	Years endedDecember31,
			2017
			�� � December31,2017
		2018 �� � �� �� �� �	2017
			�� � �� ��
			�� �

8. PLEDGED ASSETS

None.

-253-

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

Operating lease commitments:

The future aggregate minimum lease payments for operating lease commitments of leasing dormitory are as follows:

are as follows:
Not later than one year Later than one year but not later than five years	December31,2018 �� � �� �� �	December31,2017
		�� � �� �� �

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to operate with the goal to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including “current and noncurrent borrowings” as shown in the consolidated balance sheet) less cash and cash equivalents. Total is calculated as “equity” as shown in the consolidated balance sheet less total intangible assets capital.

During 2018, the Company’s strategy, which was unchanged from 2017, was to maintain the gearing ratio below 70%.

(2) Financial instruments

A. Financial instruments by category

Financial instruments by category
Financial assets Financial assets at fair value through profit or loss Financial assets at fair value through comprehensive income Available-for-sale financial assets Financial assets at amortised cost Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities at amortised cost	December31,2018 �� � �� � �� �� � �� � �� �� �	December31,2017
		�� � � �� �� �� � �� � �� �� �

Note: Financial assets at amortised cost included cash, accounts receivable, accounts receivable due from related parties and other receivables; financial liabilities at amortised cost included short-term borrowings, accounts payable, accounts payable to related parties and other payables.

-254-

B. Risk management policies
(a) Risk categories

The Company employs a comprehensive financial risk management and control system to clearly identify, measure and control the various kinds of financial risk it faces, including market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.

(b) Management objectives:
- i. Except for market risk, which is controlled by outside factors, the remainder of the foregoing types of risks can be controlled internally or removed from business processes. Therefore, the goal in managing each of these risks is to reduce them to zero.
- ii. As for market risk, the goal is to optimize its overall position through strict analysis, suggestion, execution and audit processes, and proper consideration of a) long-term trends in the external economic/financial environment, b) internal operating conditions, and c) the actual effects of market fluctuations.
- iii. The Company’s overall risk management policy focuses on the unpredictable items in financial markets and seeks to reduce the risk that potentially pose adverse effects on the Company’s financial position and financial performance.
- iv. For the information on the derivative financial instruments that the Company enters into, please refer to Note 6(2).
(c) Management system:
- i. Risk management is executed by the Company’s finance department by following policies approved by the Board. Through cooperation with the Company's operating units, finance department is responsible for identifying, evaluating and hedging financial risks.
- ii. The Board has a written policy covering overall risk management. It also has written policies covering specific issues, such as exchange rate risk, interest rate risk, credit risk, derivative and non-derivative financial instruments used, and the investment of excess working capital.
C. Significant financial risks and degrees of financial risks
(a) Market risk

Foreign exchange risk

i. Nature�

The Company is a multinational group in the Electronic manufacturing services industry. Most of the exchange rate risk from operating activities comes from:

(i) Foreign exchange risk arises from different exchange rates to functional currency as the invoice dates of accounts receivable and payable denominated in non-functional foreign currency are different. Because the amount after the assets and liabilities are offset is insignificant, income/loss is insignificant as well. (Note: The Company has several sites in various countries and thus is exposed to various foreign exchange risks. The main risk arises from USD and RMB.)
(ii) Changes in exchange rates of functional currencies to presentation currency at different timing will cause another foreign exchange risk.

-255-

(iii) Except for the above transactions (operating activities) recognised in the income statement, assets and liabilities recognised in the balance sheet and the net investment in foreign operations also result in the exchange rate risk.
ii. Management:
(i) For such risks, the Company has set up policies requiring the Company to manage its exchange rate risks.
(ii) As to the exchange rate risk arising from the difference between various functional currencies and the reporting currency in the parent company only financial statements, it is managed by the Company’s finance department.
iii. Sources of risk:
U.S. dollars and NT dollars:

Foreign exchange risk arises primarily from gains or losses from translating U.S. dollardenominated assets, such as cash, cash equivalents, accounts receivable, other receivables and time deposits mature in excess of three months, and U.S. dollar-denominated liabilities, such as loans, accounts payable and other payables, into New Taiwan dollars.

iv. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

-256-

December 31, 2018

		December31,2018	December31,2018
(Foreign currency: functional currency) Financial assets Monetary items USD�NTD Non-monetary items Foreign operations USD�NTD Financial liabilities Monetary items USD�NTD (Foreign currency: functional currency) Financial assets Monetary items USD�NTD Non-monetary items Foreign operations USD�NTD Financial liabilities Monetary items USD�NTD	Foreign currency amount (in thousands) �� �� ��	Exchange Book value rate (NTD) �� �� � �� �� �� �� December31,2017		Degree of variation �� ��	Effect on profitor loss
					�� � ��
	Foreign currency amount (in thousands) �� �� ��	Exchange rate �� �� ��	Book value (NTD) �� � �� ��	Degree of variation �� ��	Effect on profitor loss
					�� � ��

v. Total exchange (loss) gain, including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2018 and 2017 amounted to ($738,994) and $304,086, respectively.

Price risk

i. Nature

The Company primarily invests in domestic and foreign publicly traded and unlisted equity instruments, which are accounted for as financial assets at fair value through other comprehensive income and available-for-sale financial assets. The price of those equity

-257-

instruments will be affected by the uncertainty of the future value of the investment.

ii. Extent

If the price of such equity instrument rises or falls by 1%, with all other factors held constant, the impact on other comprehensive income due to equity instruments measured at fair value through other comprehensive income and available-for-sale equity instruments are $14,158 and $17,913, respectively, for the years ended December 31, 2018 and 2017.

Cash flow and fair value interest rate risk

The Company’s interest rate risk arises from short-term loans. Short-term loans with floating rates expose the Company to cash flow interest rate risk, but most of the risks are offset by cash and cash equivalents with variable interest rates.

If short-term loans interest rates rise or fall by 1%, with all other factors held constant, profit after tax would decrease/increase by $109,513 and $186,329 for the years ended December 31, 2018 and 2017, respectively.

(b) Credit risk

Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments.

i. According to the Company’s credit policy, the Company is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. The Company assesses the credit quality of the customers by taking into account their financial position, past experience and other factors to conduct its internal risk management.

ii. If the contract payments were past due over 90 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
iii. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganisation due to their financial difficulties;
(ii) The disappearance of an active market for that financial asset because of financial difficulties;
(iii) Default or delinquency in interest or principal repayments;
(iv) Adverse changes in national or regional economic conditions that are expected to cause a default.
iv. The ageing analysis of accounts receivable (including related parties) that were past due but not impaired is as follows:

-258-

Not past due 0 to 90 days 91 to 180 days 181 to 270 days 271 to 360 days Over 361 days	December31,2018 �� � �� � � �� � �� �	December31,2017
		�� � �� �� � � �� �� �

The above ageing analysis was based on past due date.

v. The Company assesses the expected credit losses of accounts receivable (including those from related parties) as follows:
(i) Accounts receivable are divided into segments according to the Company’s credit rating standards; expected credit losses for each segment are assessed based on the specific loss rate or provision matrix for the segment.
(ii) Loss rates are calculated based on past and current information, taking into account forward-looking information provided by the Business Indicators Database of the National Development Council and the Basel Committee on Banking Supervision.
(iii) As of December 31, 2018, the loss allowance for accounts receivable (including those from related parties), assessed using loss rate or provision matrix, is as follows:

December31,2018 Expected loss rate Total book value Allowance for uncollectible accounts	Group1 �� �� � �� �	Group2 �� �� � �� �	Group 3 �� �� � �� �	Group4 �� �� � � �	Total
					�� �
					�� �

Group 1: Standard Poor’s, Fitch’s, or Moody’s rating of A-level, or rated as A-level in accordance with the Group’s credit policies for those that have no external credit ratings.
Group 2: Standard Poor’s or Fitch’s rating of BBB, Moody’s rating of Baa, or rated as B or C in accordance with the Group’s credit policies for those that have no external credit ratings.
Group 3: Standard Poor’s or Fitch’s rating of BB + and below, or Moody’s rating of Ba1 and below.
Group 4: Rated as other than A, B, or C in accordance with the Group’s credit policies for those that have no external credit ratings.
vi. The ageing analysis of accounts receivable (including related parties) that were past due but not impaired is as follows:

-259-

	YearendedDecember31,2018
At January 1_IAS 39	� �
Adjustments under new standards	��
At January 1_IFRS 9	��
Gain on reversal of expected credit
impairment loss	�� �
Effect of foreign exchange	�
At December 31	�� �

vii. Credit risk information for 2017 is provided in Note 12(4).

  - (c) Liquidity risk

     - i. Cash flow forecasting is performed by each of the operating entities of the Company and aggregated by Company treasury. Company treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Company’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements, for example, currency restrictions.

     - ii. The Company’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities.

        - As of December 31, 2018 and 2017, the Company’s non-derivative financial liabilities (including short-term borrowings, accounts payable and other payables) and derivative financial liabilities (including foreign exchange contracts, cross currency swap contracts and forward foreign exchange contracts) will expire within 1 year.

(3) Fair value estimation
A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability takes place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company’s investment in listed stocks is included in Level 1.
- Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Company’s investment in derivative instruments is included in Level 2.
- Level 3: Unobservable inputs for the asset or liability.
B. Fair value information of investment property at cost is provided in Note 6(10).
C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities is as follows:

-260-

(a) The related information of the nature of the assets and liabilities is as follows:

December 31, 2018			Level 1			Level 2	Level 2	Level 2	Level 2		Level3			Total	Total	Total	Total
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Derivative instruments	�				�	�	��				�	�	�		��
Financial assets at fair value
through other comprehensive
income
Equity instruments	�		��			�				�	�	�	�	��
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Derivative instruments	�				�	�		��			�	�	�			��
December31,2017			Level 1			Level 2					Level3			Total
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Derivative instruments	�			�		�			��		�	�	�				��
Available-for-sale financial
assets
Equity instruments	�	��				�				�	�	�	�	��
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Derivative instruments	�			�		�		��			�	�	�			��

(b) The methods and assumptions the Company used to measure fair value are as follows:
i. The instruments the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Listed shares

Market quoted price Closing price

ii. When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange contracts and options, the Group adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

-261-

iii. The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models. Forward exchange contracts are usually valued based on the current forward exchange rate.
iv. The Company takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Company’s credit quality.
D. For the years ended December 31, 2018 and 2017, there was no transfer into or out from Level 1 to Level 2.
E. For the years ended December 31, 2018 and 2017, there was no transfer into or out from Level 3.

(4) Effects on initial application of IFRS 9

A. Summary of significant accounting policies adopted for the year ended December 31, 2017:
(a) Financial assets at fair value through profit or loss
- i. Financial assets held for trading financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:
  - (i) Hybrid (combined) contracts; or
  - (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or
  - (iii) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
- ii. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.
- iii. Financial liabilities at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognised in profit or loss.
(b) Available-for-sale financial assets
- i. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.
- ii. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting.
- iii. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in ‘financial assets measured at cost’.

-262-

(c) Loans and receivables
i. Accounts receivable

ii. Investments in debt instruments without active markets
(i) Investments in debt instruments without active markets are loans and receivables not originated by the entity. They are bond investments with fixed or determinable payments that are not quoted in an active market, and also meet all of the following conditions:
- a. Not designated on initial recognition as at fair value through profit or loss;
- b. Not designated on initial recognition as available-for-sale;
- c. Not for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.
(ii) On a regular way purchase or sale basis, investments in debt instrument without active market are recognised and derecognised using trade date accounting.
(iii) They are initially recognised at fair value on the trade date plus transaction costs and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Amortisation of a premium or a discount on such assets is recognised in profit or loss.

(d) Impairment of financial assets

i. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
ii. The criteria that the Company uses to determine whether there is objective evidence of an impairment loss is as follows:
(i) Significant financial difficulty of the issuer or debtor;
(ii) A breach of contract, such as a default or delinquency in interest or principal payments;
(iii) The Company, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;
(iv) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
(v) The disappearance of an active market for that financial asset because of financial difficulties;
(vi) Observable data indicating that there is a measurable decrease in the estimated future

-263-

cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;

(vii) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;
(viii)A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
iii. When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:
(i) Financial assets measured at amortised cost

(ii) Available-for-sale financial assets

B. The reconciliations of carrying amount of financial assets transferred from December 31, 2017, IAS 39, to January 1, IFRS 9, were as follows:

-264-

IAS 39 IFRS 9 Transferred into and measured at fair value through other comprehensive income-equity Transferred into and measured at amortised cost	Available-for- sale-equity �� � �	Other current assets � � ��	Total
			�� � ��

(a) Under IAS 39, because the equity instruments, which were classified as available-for-sale financial assets amounting to $1,791,255, were not held for the purpose of trading, they were reclassified as "financial assets at fair value through other comprehensive income (equity instruments)" amounting to $1,791,255 on initial application of IFRS 9.
(c) Under IAS 39, capital guarantee financial products and time deposits with maturity in excess of three months which were classified as “other current assets” amounting to $6,647,700, were reclassified as “financial assets at amortised cost” amounting to $6,647,700 in accordance with IFRS 9.
(d) Information relating to credit risk of allowance for impairment from December 31, 2017, as these are impaired under IAS 39, to January 1, 2018, as these are expected to be impaired under IFRS 9, is provided in Note 12(2) C (b).
C. The significant accounts as of December 31, 2017 are as follows:
(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss
Assets Current items: Cross currency swap contracts Liabilities Current items: Foreign exchange contracts Cross currency swap contracts	December31,2017
	�� �
	December31,2017
	�� � ��
	�� �

i. Due to the financial assets and liabilities recognised above for the year ended December 31, 2017, the Group recognised net loss of $747,827 (including unrealised loss on valuation of $293,209).
ii. The counterparties of the Group’s investments in derivatives are banks with good credit quality or financial institutions with investment grade or above, and their credit ratings are all above “A” category.
iii. The non-hedging derivative instruments transaction and contract information are as follows:

-265-

December 31, 2017

Derivative Financial Assets Current items: Foreign exchange contracts Cross currency swap contracts	TWD (sell) �� USD (buy) �� TWD (sell) �� USD (buy) �� TWD (sell) �� USD (buy) �� Contract amount (Nominal Principal in thousands)	Contractperiod
		2017/09~2018/04 2017/09~2018/03 2017/09~2018/03

(i) Cross currency swap contracts

(ii) Foreign exchange contracts

iv. The Company has no financial assets at fair value through profit or loss pledged to others.

(b) Available-for-sale financial assets

Items Non-current items: Listed and emerging stocks Adjustment of available-for-sale financial assets	December 31,2017 �� � �� �� �

  - i. The Company recognised net loss or gain in other comprehensive income for fair value change for the year ended December 31, 2017. Please refer to Note 6(16) for details.

  - ii. The Company has no available-for-sale financial assets pledged to others.

D. Credit risk information for the year ended December 31, 2017 is as follows:
(a) Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments.
- i. According to the Company’s credit policy, each local entity in the Company is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. The Company assesses the credit quality of the customers by taking into account their financial position, past experience and other factors to conduct its internal risk management.
- ii. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board of directors. The utilisation of credit limits is regularly monitored. Major credit risk arises from cash and cash equivalents, derivative financial instruments and

-266-

other financial instruments. The counterparties are banks with good credit quality and financial institutions with investment grade or above and government agencies, so there is no significant compliance concerns and credit risk.

(b) As of December 31, 2017, no credit limits were exceeded during the reporting period, and management does not expect any significant losses from non-performance by these counterparties.
(c) The credit quality information of accounts receivable (including related parties) that are neither past due nor impaired is in the following categories based on the Company’s Credit Quality Control Policy:

Quality Control Policy:
Group 1 Group 2 Group 3 Group 4	December 31,2017
	�� � �� �� �� �� �

Group 1: Standard Poor’s, Fitch’s, or Moody’s rating of A-level, or rated as A-level in accordance with the Group’s credit policies for those that have no external credit ratings.
Group 2: Standard Poor’s or Fitch’s rating of BBB, Moody’s rating of Baa, or rated as B or C in accordance with the Group’s credit policies for those that have no external credit ratings.
Group 3: Standard Poor’s or Fitch’s rating of BB + and below, or Moody’s rating of Ba1 and below.
Group 4: Rated as other than A, B, or C in accordance with the Group’s credit policies for those that have no external credit ratings.
(d) The ageing analysis of accounts receivable (including related parties) that were past due but not impaired is as follows:

not impaired is as follows:
Up to 30 days 31 to 90 days 91 to 180 days 181 to 360 days	December 31,2017
	�� � �� �� �� �� �

(5) Effects on initial application of IFRS 15

A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below.

The Company manufactures and sells 3C products. Revenue is measured at the fair value of the consideration received or receivable, taking into account business tax or value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Company’s activities. Revenue arising from the sales of goods is recognised when the Company has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to

-267-

the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

B. The revenue recognised by using above accounting policies for 2017 are as follows:

Year ended December 31, 2017

3C products (Including components and related electronic products) ��

C. The effects and description of current balance sheet and comprehensive income statement if the Group continues adopting above accounting policies for the year ended December 31, 2018 are as follows:

as follows:
		December 31,2018
		Balance by	Effects from
	Balance by using	using previous	changes in
Balance sheet items	IFRS15	accounting policies	accounting policy
Accounts receivable, net	�� �	�� �	�� �
Other current liabilities	�� �	�� �	�� �
Under IFRS 15, liabilities in relation to expected volume discounts and refunds to customers are
recognised as refund liabilities (shown as other current liabilities), but were previously presented
as accounts receivable - allowance for sales returns		and discounts in the balance sheet.

13. SEGMENT INFORMATION

(1) Significant transactions information

A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: None.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 2.
D. Acquisition or sale of the same security with the accumulated cost reaching $300 million or 20% of paid-in capital or more: Please refer to table 3.
E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.
I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(2), 6(19) and 12(3).
J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China)��Please refer to table 7.

-268-

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 8.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 6.

14. SEGMENT INFORMATION

None.

-269-

-270-

-271-

-272-

-273-

-274-

-275-

-276-

-277-

Purchases
(sales)
Amount
Percentage of
total purchases
(sales)
Credit term
Unit price
Credit term
Balance
Percentage of total
notes/accounts
receivable (payable)
Year ended December 31, 2018
Table 4
Expressed in thousands of NTD
(Except as otherwise indicated)
Note
Purchaser/seller
Counterparty
Relationship with the counterparty
Transaction
Differences in transaction
terms compared to third
party transactions
Notes/accounts receivable (payable)

-278-

-279-

-280-

-281-

-282-

General ledger account
Amount
Transaction
terms
Percentage of consolidated
total operating
revenues or total assets
Transaction
Number
(Note 1)
Company name
Counterparty
Relationship
(Note 2)

-283-

Balance as at
December 31, 2018
Balance as at
December 31, 2017
Number of shares
Ownership (%)
Book value
Information on investees
Year ended December 31, 2018
Table 7
Expressed in thousands of NTD
(Except as otherwise indicated)
Net profit (loss)
of the investee for
the year ended
December 31, 2018
Investment income (loss)
recognised by the
Company for the year
ended December 31, 2018
Note
Investor
Investee
Location
Main business
activities
Initial investment amount
Shares held as at December 31, 2018

-284-

-285-

-286-

��

�� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� � �� � �� �� �� �� ��	��
	�� � �� �� �� �� �� �� �� �� � ��
	�� �

��

-287-

��

�� �� �� ��	�� �	�� �� �� � �� �� �� �� �� �� �� �

��

-288-

							��	��	��		�	�	�
��	��	��	��	��	��	�� �� �� �� ��	�� �� �� �� �� ��	�� �� �� �� �� �� �� �� �� �� �� ��	�� �� �� � � �� � � �� �� �� � �� � �� � �� ��	��	�� �� �� � �� � �� � �� � �� �� �	�� �� �� � �� � �� � �� � �� �� �	�� �� �� � � � �� � �� � �� �� �		�� � �� � �� �� �� � �� �	��	��	��	��

-289-

					��
					��	��	�		�	�
��	��	��	��		�� �� �� ��	�� � �� �� ��	�� ��		�� �� �� ��	�� �� �� ��	�� �
				��	�� ��	��	� ��	� ��	��	� ��

-290-

��

�� �� �� �� ��	�� �� �	�� �� � �� �� �� �� �	��

��

��

-291-

��

�� �� �� �� �� �� �� �� �� �� �� �� � �� �� ��	�� � � � � � �� �� � � �� �� �� �� � � �� �

��

-292-

��

==> picture [480 x 230] intentionally omitted <==

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

��
��
��
��
��
��
��
��
��
��
��
----- End of picture text -----

-293-

��

-294-

��

-295-

��

==> picture [480 x 210] intentionally omitted <==

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

��
��
��
��
��
��
��
��
��
��
��
----- End of picture text -----

��

-296-

��	��	��	��	��	�� ��	�� ��	�� �� �� �� �� ��	�� �� �� �� �� �� �� �� ��	��	�� �� � �� � � � �� � �� � �� � � � �� �	�� �� �� � �� �� �� � ��	�� �� �� � �� �� �� � ��	�� � �� � �� � �� � ��	�� �� �� � �� �� �� � ��	�� � �� � � � �� � �� � �� � � � �� �	�� �� � �� � �� � �� � �� � �� � �� � �� �		�� � � �� � � � �� � � � �� � � � �� �	��

-297-

VI. Financial insolvency incidents encountered by the Company and affiliates for the most recent years, up till the printing date of this annual report: None.

-298-

Seven. Review of Financial Position, Business Performance and Risk Issues

I. Financial Position Analysis

	Analysis
			Unit:		NTD thousand
Year Items	2018	2017	Difference		Analysis of changes (Note)
			Amount	%
Current assets	107,023,860	138,389,929	-31,366,069	-23%	1
Investments under equitymethod	8,713,290	563,534	8,149,756	1446%	2
Property,plant, and equipment	7,404,149	7,444,897	-40,748	-1%
Other assets	33,189,266	69,066,067	-35,876,801	-52%	3
Total assets	156,330,565	215,464,427	-59,133,862	-27%
Current liabilities	56,020,510	80,153,382	-24,132,872	-30%	4
Other liabilities	720,121	716,112	4,009	1%
Long-term liabilities	-	-	-	-
Liability	56,740,631	80,869,494	-24,128,863	-30%
Share capital	14,144,852	14,144,852	0	0%
Capital surplus	7,767,553	7,768,067	-514	0%
Retained earnings	77,645,748	73,623,018	4,022,730	5%
Other equity	31,781	39,058,996	-39,027,215	-100%	5
Total equity	99,589,934	134,594,933	-35,004,999	-26%

Note: Percentage of change analysis: Detailed description shall be stated if the percentage of change exceeds 20% and the amount exceeds NT$10,000,000.

The decrease in current assets is mainly due to the decrease in accounts receivable – related parties. 2. The increase in investments under equity method is mainly due to in investment in IDG Energy Investment Group Ltd. and FE Holdings USA, Inc.
The decrease in other assets is mainly due to a significant decrease in financial assets at fair value through other comprehensive income.
The decrease in current liabilities is mainly due to the decrease in accounts payable and short-term loans.
The decrease in other equity is mainly due to a significant decrease in financial assets at fair value through other comprehensive income. (Same as Note3)

II. Financial Performance Analysis

				Unit:	NTD thousand
Year Items	2018	2017	Amount of change	Percentage of change	Analysis of changes (Note)
Operatingrevenue	142,057,432	147,815,617	(5,758,185)	-4%
Grossprofit	13,492,743	14,259,307	(766,564)	-5%
Operating profit or loss	8,606,384	10,526,142	(1,919,758)	-18%
Non-operatingrevenues and expenses	2,726,067	920,086	1,805,981	196%	1
Profit before tax	11,332,451	11,446,228	(113,777)	-1%
Business units in current continuing operation income	9,150,847	9,968,335	(817,488)	-8%
Discontinued operation loss	-	-	-	-
Currentperiod netprofit(loss)	9,150,847	9,968,335	(817,488)	-8%
Other comprehensive income in current period (Net amount after tax)	(39,030,627)	23,280,941	(62,311,568)	-268%	2
Total current period comprehensive income	(29,879,780)	33,249,276	(63,129,056)	-190%

Note: Percentage of change analysis: Detailed description shall be stated if the percentage of change exceeds 20% and the amount exceeds NT$10,000,000.

The increase in Non-operating income and Expense is mainly due to the increase in current period interest income, government grant income and dividend income.
The comprehensive income is less than that in previous period, mainly due to a significant decrease in financial assets at fair value through other comprehensive income.

-300-

III. Cash Flow Analysis

(I) Summary of cash flow change analysis in the most recent year:

III. Cash Flow Analysis (I) Summary of cash flow change analysis in the most recent year:	III. Cash Flow Analysis (I) Summary of cash flow change analysis in the most recent year:	III. Cash Flow Analysis (I) Summary of cash flow change analysis in the most recent year:	III. Cash Flow Analysis (I) Summary of cash flow change analysis in the most recent year:
Unit: NTD thousand
Year Item	2018	2017	Percentage of increase (decrease) (%)
Cash flow ratio(%)	20.97	10.42	101%
Cash flow adequacy (%)	166.68	271.79	-39%
Cash flow reinvestment ratio(%)	5.15	1.81	185%
Summary of change: 1. Cash flow ratio has increased, mainly due to a decrease in current liabilities and an increase in cash flow from operating activities. 2. Cash flow adequacy ratio has decreased, as the capital expenditure within the most recent 5 years is more than that within the previous 5 years. 3. Cash flow reinvestment ratio has increased, as cash flow from operating activities is more than that from the previous period.

(II) Cash flow analysis for the coming year:

	(II) Cash flow analysis for the coming year:	(II) Cash flow analysis for the coming year:	(II) Cash flow analysis for the coming year:
				Unit: NTD thousand
Cash balance at the beginning of period (1)	Estimated yearly net cash inflow from operating activities (2)	Estimated yearly net cash outflow (3)	Anticipated Cash Surplus (Shortage) (1)+(2)-(3)	Remedies for cash shortage
				Investment plan	Financial plan
52,191,701	11,162,441	10,085,549	53,268,593	-	-
Current year (2019) cash flow change analysis: 1. Operating activities: Operation is expected to grow continuously. 2. Investing activities: To expand production equipment and conduct strategic overseas investment in line with business needs. 3. Financing activities: The Company will distribute cash dividend and repay short-term bank loans.

-301-

IV. Impacts of Major Capital Expenditures in the Most Recent Year to Financial Performance

(I) Major capital expenditures and sources of capital:

				Unit: NTD thousand	Unit: NTD thousand
Project	Actual or planned source of capital	Actual or planned source of capital date of project completion	Total capital required	Actual or planned capital expenditures
				2018 (Actual)	2019 (Planned)
Expansion of factories and machineries	Working capital	2019	3,356,428	1,916,428	1,440,000

(II) Estimated benefits:

The aforementioned capital expenditure is incurred for the additional acquisition of necessary production and R&D machinery and equipment, as well as for the expansion of production lines, sales and maintenance bases at home and abroad, in order to meet the Company's needs on business development and enhance product competitiveness, and actively develop related technologies such as heat transfer modules, metal casings and electronic assembly.

V. Causes of Profit or Loss Incurred on Investments in the Most Recent Year, and Any Improvements or Investments Planned for the Next Near

The Company's reinvestment is mainly used to expand the production capacity of overseas subsidiaries to enhance the overall cost competitiveness and quality advantages. The investment company's current operating conditions are good and stable.

VI. Analysis of Risk Factors

(I) The impact of interest rates, exchange rate and inflation on the Company's profit and loss and future response measures:
Interest rates:
- (1) Fluctuation of interest rates in 2018: In 2018, the global economy continued to grow moderately, but the pace of expansion showed an uneven development. The US economic growth exceeded market expectations. The economic growth of the Eurozone countries and Japan had declined. The capital outflowed of emerging market countries had intensified. The Fed continued to carry out the monetary policy of “interest rate hiking + shrinking of balance sheets”. The interest rate was raised four times during the year, raising the Federal Funds Rate to the 2.25%-2.5%. However, indications suggest that the 2019 rate hike will be slow down. Due to the impact of the global trade war, the domestic exportted demand had been relatively weakened. The annual economic growth had been slightly reduced. The

-302-

central bank continued a moderate monetary easing policy, and maintained the current re-discount rate at 1.375%.

(2) The net interest income for 2018 was NT$2,052 million, which contributed a significant amount of revenue to the company as a whole.
(3) Future measures: In 2019, the global economy will be affected by several factors including the Fed’s interest rate policy, the US-China trade war, and the UK’s Brexit, which lead to the overall downside risks. Our Company will continue to utilize HH Group's advantages and mechanism to obtain preferential interest rates from financial institutions to reduce dounding costs.
Interest rates:
(1) Exchange rates in 2018: � In January, the European Central Bank issued a summary of the Hawk’s meeting. The German government successfully ended a four-month political standoff. EUR/USD rose all the way up to around 1.25, and reached its peak of1.2555 on February 16. During March and April, EUR/USD showed a small bounce between 1.2200-1.2450. Late in April, the China-US trade war intensified, US bond yields repeatedly hit record high, and the Eurozone economy had slowed down. The two Italian political parties were in a seesaw battle for formation of the cabinet. The Euro had continued to fall and hit at 1.1511 on the 5/29, which was 6 and a half months low. From end of June to July, the US-European trade warfare was on the rise, and Fed Chairman Powell issued a dovish speech which led down the US dollar index. EUR/USD fluctuated within the range between 1.1509-1.1791. In early August, market news indicated that the United States will further increase tariffs on Chinese goods, and the news stimulated the US dollar index to rise, and meanwhile, EUR/USD continued to fall. With the collapse of Turkish Lira that caused market panic, EUR/USD plummeted to 1.1301. After the US President D. Trupm’s predecessor lawyer pleaded guilty and the US and Mexico reached a new trade agreement, the EUR/USD exhibited a sharp reversal. From October to mid November, the relationship between EU and Italy was tense due to budgetary problems. The Brexit negotiations were in a deadlock. As the political risk in the Eurozone rose and the economy slowed down, the EUR fell to a minimum of 1.1216 in the year. In December, the tension between China and the United States eased. The European Central Bank’s interest rate was determined to remain unchanged. The economy status of the euro zone countries varied dramatically. EUR/USD fluctuated slightly and closed at 1.1467 at the end of the year. The annual shock rate reached 11.16%.
� At the beginning of 2018, USD/JPY opened at 112.69, and it reached the highest price at 114.58 on January 3. At the beginning of the year, the Bank of Japan and the European Central Bank exhibited signs of tightening monetary policy. The US Secretary of the Treasury, Steven Mnuchin, said that the dollar's decline is helpful to the US trade at the World Economic Forum in Davos on January 25. Coupled with political turmoil in Washington, the market worried that the US president, Trump, will launch a global

-303-

trade war, the USD dollar index continued to weaken, while the JPY rised. In February, Japan announced that its economic growth in the fourth quarter increased to eight consecutive quarters. The decline of global stock market also boosted risk aversion. USD/JPY went further down and reached the lowest at 104.63 on March 23. From April to September, the US economy growth was optimistic. The yield on the US 10-year government bonds climbed steadily. With the political instability and weak economic growth in the Eurozone, and the going up of the USD, the USD/JPY gradually fell back to around 114.50. In October, the Asian European stock market fell and the budget deficit problem in Italy caused the market risk aversion to heat up. JPY quickly rose to around 112. During November and December, USD/JPY exchange rate showed a small bounce between 112.3-114. In late December, US President Trump’s twitten continued to lay pressure on the Fed, the US stock market was selling more and more, the US federal government closed due to the budget of the border wall, and the market risk aversion surged. JPY benefited largely, and closed at 109.70 at the end of the year. The annual shock rate reached 8.83%.

� At the beginning of 2018, USD/NTD opened at 29.755. In January, the US dollar index plummeted. The KRW and other Asian currencies rose. Foreign investors returned to the market. Taiwan stocks rose and led the NTD to rise, which reached the highest point of 29.035 on January 25. During February and March, USD/NTD exchange rate showed a small bounce between 29.10-29.40. From April to September, due to factors including the rise of geopolitical risks in the Middle East, the intensification of China-US trade war, and the soaring dividend yields of 10-year US bonds, the US dollar gradually rose, while the RMB continued to weaken and pressured NTD. USD/TWD rose all the way to 30.80. At the end of September, US President Trump’s speech at UN criticized China, and the European Central Bank’s president made a hawkish speech. The US dollar index fell back and the NTD rebounded slightly. At the beginning of October, Taiwan stocks fell sharply due to the sharp fall in US stocks, and reached the greatest fall of 660 points in a day in the history on October 11. The NTD exchange rate plummet over 31, to the lowest point of 31.126. From November to December, the US-China trade war showed some traces of easing. The US mid-term elections were in line with expectations, the Fed announced a slower rate hike, and NTD rebounded slightly after a narrow consolidation, eventually closing at 30.733 at the end of the year, with a shock rate of 7.03% for the whole year. � At the beginning of 2018, USD/RMB opened at 6.5045. At the beginning of January, the US dollar index weakened across the board. The domestic flow trading settlement demand pushed the RMB to appreciate rapidly to around 6.3. From February to March, the global stock market accelerated its rebound, and the USD/RMB fluctuated within a narrow range and reached a minimum of 6.24 in the year on March 27. From May to the middle of August, the US economy showed a strong growth, the

-304-

Fed raised interest rates as expected, the US 10-year bond yield rose over 3%, the US dollar index rose rapidly, China’s economic growth continued to slow down, and trade tensions intensified. The RMB gradually returned to around 6.92. Subsequently, the People's Bank of China raised the forward foreign exchange sales risk provision to 20%, and restarted the countercyclical factor regulation. The RMB depreciation pressure eased and the USD/RMB fell back to around 6.8. From September to October, China-US trade negotiations had not further progress. The domestic stock market fell sharply. The People's Bank of China announced that it would cut the deposit reserve by 100 basis points. The RMB went all the way downward and reached the lowest point of 6.9799 on October 31. In November, the US mid-term elections Democratic Party won the House of Representatives, and the sign of Fed rate hike was ambiguous. USD/RMB bounced within the 6.87-6.92 range. In December, China and the United States restarted negotiations and boosted risk sentiment.RMB fluctuated and rose to a final year closing at 6.8785, with a shock rate of 11.33% for the whole year. � Although the market expects the Fed to raise interest rates 1-2 times in 2019, the impact of US economic growth reaching its limit and global trade disputes on the US dollar has to be taken into consideration. It is estimated that the exchange rate of the USD against major currencies may still be going strong in 2019. However, the impact of economic and political events is still inevitable.

(2) The impact on the Company's profit and loss: In response to changes in the external environment, the Company operates steadily in the foreign exchange position to minimize the impact of exchange rate changes on the Company's operations. The net profit and loss of the 2018 consolidated statement and the profit and loss of financial commodity transactions amounted to NT$ 53.36 million.
(3) Future response measures: In order to avoid the risk of exchange rate fluctuations, the Company will continue to adopt the natural hedging method of assets and liabilities offsetting to avoid risk exposure and reduce the impact of exchange rate risk.
Inflation In 2018, the international commodity market price fluctuated greatly due to factors such as the imbalance of global economic recovery, the escalation of trade friction and the frequent occurrence of geopolitical conflicts. The overall market was weak. Due to the increase in international oil prices and raw material prices in the first half of the year, the import cost increased and the prices in general rose. The domestic consumer price index (CPI) demonstrated a yearly increase of 1.35%, which was significantly higher than the 0.62% in 2017. This showed little impact on the Company's profit and loss. The global economic growth uncertainty has risen in 2019, and the commodity price decline may remain the same in short-term or expected not to be changing. However the threat of rising raw material cost and price in the future is still necessary to be addressed. The managerial officers of the Company will maintain a consistent policy and adjust the strategy models in

-305-

a timely manner as the external environment changes due to factors such as inflation or deflation. The managerial officers will continue to work toward strengthening procurement advantages, reduction of costs, and diversification of customers to improve business performance.

(II) The main reasons for the profit or loss and and future response measures of high-risk, high-leverage investment, capital loan to others, endorsement/guarantee and derivative trading:
High-risk, high-leverage investment: None.
Loan lending policy (applicable to both the Company and subsidiaries): (1) The counterparties of the Company’s loans are subject to the followings:
- Companies that the Company has business dealing with.
- � Where a company or firm short-term financing facility is necessary, provided that such amount of loan to others shall not exceed 40% of the Company’s net worth.
- (2) The term "short-term" mentioned in the preceding paragraph refers to one year. Where the Company's operating cycle exceeds one year, such operating cycle shall prevail.
- (3) The term "amount of loan to others” in paragraph 1 subparagraph 2 refers to the cumulative balance of the Company's short-term financing.
- (4) The restriction in paragraph 1 subparagraph 2 shall not apply to the inter-company loans between overseas companies in which Company holds, directly or indirectly, 100% of the voting shares.
- (5) Future response measures: When the Company grants loans, such matter may be processed according to the Procedure for Loaning Funds, only after being approved at board meeting.
Endorsements and guarantees policy (applicable to both the Company and subsidiaries):
- (1) The counterparties of the Company’s endorsement/guarantee are subject to the followings:
  - Companies that the Company has business dealing with.
  - � A company in which the Company directly or indirectly holds more than fifty percent (50%) of the voting shares.
- A company that directly or indirectly holds more than fifty percent (50%) of the voting shares in the Company.
- (2) Companies in which the Company holds, directly or indirectly, ninety percent (90%) or more of the voting shares may make endorsements/guarantees for each other, and the amount of endorsements/guarantees may not exceed ten percent (10%) of the net worth of the Company. This restriction shall not apply to endorsements/guarantees made between companies in which the Company holds, directly or indirectly, one hundred percent (100%) of the voting shares.
- (3) Where the Company fulfills its contractual obligations by providing mutual endorsements/guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project, or where all capital contributing shareholders make endorsements/ guarantees for their jointly invested company in proportion to their shareholding percentages, or where companies in the

-306-

same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other, such endorsements/guarantees may be made free of the restriction of the preceding two paragraphs.

(4) Capital contribution as referred to in the preceding paragraph shall mean a capital contribution made directly by the Company, or through a company in which the Company holds one hundred percent (100%) of the voting shares.
(5) Future response measures: When the Company issues endorsements/guarantees, such matter may be processed according to the Procedure for Handling Endorsements/Guarantees, only after being approved at board meeting.
Derivative trading policies:
(1) Policy: The Company engages in derivative commodity transactions, which are mainly used for risk aversion. Hedged positions include: exchange rate, interest rate and raw materials related to the Company's production activities, the scope of which covers the assets and liability positions held by the Company or expected assets and liabilities to be held. The trading direction shall be subject to the trading direction of hedging transaction which is the reverse of the trading direction of hedged positions.
(2) The main reason for profit or loss: The Company inevitably generates risk exposures of exchange rate, interest rate or cost of procurement from ordinary operating activities or necessary financial activities required for business operation, resulting in fluctuations and uncertainties in the Company's profit and loss. The Company mainly conducts hedging transactions, in order to exclude such uncertainty from operation risks, to allow the Company to focus on ordinary sales activities, with an ultimate goal of minimizing the impact of non-operating gains and losses.
(3) Future response measures: According to the Company's procedures for derivative transactions, the Company formulate detailed and standardized operation procedures on the division of powers and responsibilities. In terms of internal control, the relevant personnel of the Company must strictly safeguard and control the following six types of risk management: credit risk, market risk, liquidity risk, operational risk, legal risks, cash flow risk, etc. In addition to regular performance evaluation, analysis, and discussion, the Company's internal auditors check the operational processes of the transactions on a regular and irregular basis, identify and immediately make correction to the problems found, and provide timely improvement suggestions on whether the Company's matters comply with relevant government laws and Company procedures, to improve management performance.

-307-

(III) Future R&D plans and projected investment in R&D expenses:
Integrate existing technologies related to heat transfer, materials, automation, surface treatment, electronic products, etc., review the needs of new technologies, and summarize the relevant strategies of these technologies.2. Development of cooling case integration technology.
Development of cooling case integration technology. In the past three years, the R&D expenses accounted for 1.00% to 1.24% of the revenue of the corresponding periods. R&D expenses lied between 976 million and 1,758 million. The percentage projected R&D to revenue is also expected to lie within that range. Build a cooling case integration technology R&D center to expand the development of new products. Combining existing key components and system product design/integration/manufacturing capabilities, the Company is confident to break the current 3C market share structure, where US and Japan domesticating the majority. The progress of important plans is as follows.


		Unit: NTD thousand
Annual plans of coming years	Current plan	Projected investment in R&D expenses of revenue	Duration to complete mass production
Innovative thermal flow	Under research	1.00%~1.24%	2019
Surface treatment technology	Under research		2019
Material/Process technology	Under research		2019

(IV) Effect on the Company's financial operations of important policies adopted and changes in the legal environment at home and abroad, and measures to be taken in response: None.

(V) Effect on the Company's financial operations of developments in science and technology as well as industrial change, and measures to be taken in response. With the advancement and evolution of technology, in recent years, 3C products such as computers, communications and consumer electronics have sought to differentiate in terms of design, functional reorganization and materials to attract consumers' attention and consumption temptation. At the same time, the rise of emerging markets and intense competition among manufacturers have kept the price decline trend unchanged. However the speed is different depending on the products. Besides, as the taste of the consumer changes rapidly, the product life cycle has also been shortened rapidly. These trends are serious challenges for OEMs’ capabilities in R&D, rapid mass production, operation, cost control, inventory control, and capital scheduling. Nonetheless, the Company and its customers adopt a collaborative development mechanism, where the Company tailors to customer's needs, product design directly adopts the mass production concept, and strictly control the inventory level with computer system and administrative mechanism. The Company also has been working hard to reduce costs over the years to maintain its leading position in cost, increase operational efficiency and maximize profits for shareholders. Therefore, when major changes

-308-

in technology lead to changes in industry trends, restructuring of supply chain segments and price competition are inevitable. The Company is able to cope with the changes and convert the advantages created by past efforts into profits. Therefore, the changes in new technology has a fairly positive impact on the Company's finance.

(VI) Effect on the Company's crisis management of changes in the company's corporate image, and measures to be taken in response: In addition to the product quality, mass production speed, cost control, delivery punctuality and system integration capabilities, the Company's corporate image is more importantly built on customer trust in the Company's execution, management capabilities and overall service. At the same time, in order to increase the customer's trust in the Company, the Company is self-motivated to set up a complete crisis management mechanism. After years of accumulated experience, the crisis management mechanism is becoming completed. In the event of a major crisis, the Company is able to properly handle the Company's reputation and corporate image.

(VII) Expected benefits and possible risks associated with any merger and acquisitions, and mitigation measures being or to be taken: There is no plans for acquisition up till the printing date of the annual report.
(VIII) Expected benefits and possible risks associated with any plant expansion, and mitigation measures being or to be taken: The Company’s main manufature bases are in Shenzhen, Kunshan, Shanxi,
Foshan, and Hebi, with Taiwan as the headquarter and R&D Center. We take the industry prospects, customer needs and opportunities for expansion into consideration for suitable future layout. The Company will alo continue to introduce innovative technologies and operational concepts to improve the manufacturing process to improve quality, reduce cost, and provide customers with more timely and appropriate services.

(IX) Risks associated with any consolidation of sales or purchasing operations, and mitigation measures being or to be taken: The Company is a vertically integrated supplier, aiming at providing customers with the best service. The Company’s customers include various famous domestic and foreign manufacturers. There is currently no consolidation of sales or purchasing operations. The product we actually provide is “speed, quality, engineering services, flexibility, and cost”. We believe that as long as we can carry out the above five elements thoroughly enough, customers naturally continue to flow. The industry or the supply chain is changing rapidly. Continuous strengthening of the Company’s "competitiveness" is the only long-term solution. A truly competitive company can continue to grow and profit even if its industry is in a recession. How to improve its competitiveness is The subject of our company's concern.

(X) Effect upon and risk to the company in the event a major quantity of shares belonging to a director, supervisor, or shareholder holding greater than a 10 percent stake in the company has been transferred or has otherwise changed hands, and mitigation measures being or to be taken: There is no such situation up till the printing date of the annual report.

-309-

(XI) Effect upon and risk to company associated with any change in governance personnel or top management, and mitigation measures being or to be taken: There is no change in the Company's governance personnel or top
management up till the printing date of the annual report.
(XII) Litigious and non-litigious matters: None.
(XIII) Information security risk
Information security structure The Company has established an organization structure for Information Security Committee, with its top executive of a business sector as a committee member, its deputy director as a deputy committee member, its chief information officer as a member of the Information Security Standing Committee member. The committee's director-general is the director of the information security, and the executive director is the head of each department. Regular management review meetings are held to formulate and review information security management objectives and policies. In order to effectively implement the information security management policy, the information security consists of a procedure/operation team, an audit team, an education training team, and an emergency response team, which are held by senior management personnel of various functional departments to promote the information security management review meeting resolutions of safe operation. In order to enable the information security management system to continue to operate in a stable and steady manner.
Information security policy: The Company's information security policy is to "maintain the Company's information confidentiality, integrity, availability and legality, and avoid improper use, leakage, tampering, damage, loss, etc. in the event of human error, vandalism or natural disasters, which affects the Company’s operation or brings harm to the Company’s benefits.” Over the years, we have followed the requirements of the security policy, regularly conducted information security promotion, and staff information security education and training. In order to better comply with the international information security management trend and respond to customer information security requirements, we began to introduce the ISO27001 information security management system in 2011, and passed ISO27001 certification for important information system services on June 2011. The certificate is valid until July 2019. Through the introduction of the ISO27001 information security management system, the Company has implemented information security policies, protected customer information and corporate intellectual property, strengthened the flexibility at information security incidents, and achieved information security policy metrics standards. The Company actively grasps the exposure degree of the security risks through the technical aspects of the security strategy, the contingency mechanism, the soft and hard construction, etc., but considering that the security insurance is still an emerging insurance category, the Company will appoint professional insurance Company to evaluate and compare the risk of the Group and transfer the degree, and review the qualifications of the claims forensic institutions and confirm the claim practice. In order to ensure that

-310-

the Group obtains the best insurance coverage. The Company will arrange insurance coverage immediately after the research is completed.

Information security control: The cyber attack method is changing with each passing day. The information system can't completely prevent cyber attacks from any third party. The cyber attacks can embed malicious programs on the Company's intranet to destroy or stealing of data through e-mail, phishing, brute force and other methods. Destructive attacks may result in disruption of the Company's production operations, and data theft attacks may result in the loss of important operational information or employees’ and customers’ personal data. The company actively plans to deploy information security measures to continuously improve the information security environment and reduce information security risks. Management related specifications are formulated in various aspects inlcude, policy system, organizational responsibility, human security, document management, asset management, communication and operation management, access control, physical environment, system development and maintenance, operational continuity management, security incident management, regulatory compliance. The Company has installed network firewalls, intrusion detection systems, email security systems, automated detection and update of operating systems, virus protection systems, network authorization systems, security monitoring systems, and vulnerability scanning system. Every six months, internal and external professional auditors and audit organizations performs audit on the Company's information security management system. Each year, the security operations, risk control and event improvement are reviewed and reported to the Security Committee to control and reduce the security risks.
Employee information security training: New employees are given basic information security training upon entering the Company. Regular education training, posters and film promotions are used to strengthen the in-service employees' awareness of security. For the problems found in the internal information audit, the information security management and control are immediately implemented through the corrective prevention process, to reduce the leakage of data and confidential information of the Company and the customers. When external information security incidents occur, a security breach will be reported to strengthen the Company's information security maturity, and improve the employees’ awareness of external malicious attack prevention, etc., providing information security for the Company's production and operation activities.
The Company has not experienced any major cyber attacks that have affected the Company's operations in 2018.
(XIV) Other important risks, and mitigation measures being or to be taken: None.

VII. Other Material Items: None

-311-

	0% 100%	0% 100%		0%	Foxconn Technology Pte. Ltd. - Singapore	0%	0%	FTP Technology Inc.	100%	100%	Nanning Funing Precision Electronics Ltd
				0% 10		10				10

					FTC Technology Inc.	100%		NEW GLORY HOLDINGS LTD HK		0%	Yantai Fuzhun Precision Co., Ltd
				10			10		10

			Q-Run Holdings Ltd.. -Cay man	0%	High Tempo International Ltd. -B.V.I.		0%	Gold Glory International Ltd. -Bahamas	0%		Fuyu Precision Components (Kunshan) Co., Ltd
		0% 10		10			10		10
				0%
					World Trade Trading Ltd. -B.V.I.		0%	Topfry Industrial Ltd. -B.V.I.	0%		Fuzhun Precision Electronics (Hebi) Co., Ltd
				0% 10			10		10

					Q-Run Far East Corp. -B.V.I.		0%	Foreign Technology Ltd. -B.V.I.	100%		Fuzhun Precision Electronics (Hebi) Co., Ltd
				10			10
Foxconn Technology Co., Ltd.
			Hua-Zhun Investment Co., Ltd			100%	%	Eastern Star Ltd. -Bahamas			Qingdao Hy gen Innovative Alloy Materials Co., Ltd
	10 100%	10 0%
						100%
								Precious Star International Ltd. -B.V.I.	37%		Hongfujin Precision Industrial (Taiyuan) Co., Ltd
							10		12.

			Foxconn Precision Components Holding Co.,Ltd.- Cay man	0%	Atkinson Holdings Ltd. -Bahamas						Fuzhun Precision Industry (Shen Zhen) Co., Ltd
				10
						100% 100%
								Double Wealth Profits Ltd. -Samoa	%		Fuzhun Precision Industry (Shen Zhen) Co., Ltd
									100

								Kenny International Ltd. -Bahamas	%		Furui Precise Component (Kunshan) Co., Ltd
									100

-312-

Business scope	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.
Paid-in capital	US$250,000	US$1.00	US$1,052,073,076	US$480,077,600	US$519,575,996.19	US$7,500,000	US$38,100,000	US$34,839,000	US$6,793,000	US$2,000,000	US$21,896,000	US$135,839,643	US$18,512,000	US$100,000	US$250,000
Address	Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands	Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands	Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands	P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205 Cayman Islands	79 Anson Road # 07-03 Singapore (079906)	Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands	Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands	Vistra Corporate Services Centre, Marlborough & Queen Streets, Nassau, New Providence, Bahamas	Vistra Corporate Services Centre, Marlborough & Queen Streets, Nassau, New Providence, Bahamas	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands	P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205 Cayman Islands	Vistra Corporate Services Centre, Marlborough & Queen Streets, Nassau, New Providence, Bahamas	2525 Brockton Dr., Austin, TX 78758	8809B Fallbrook Dr. Houston, TX 77064
Date of incorporation	2000/03/28	1999/03/18	1999/04/30	1999/01/06	2005/04/18	1998/03/18	1999/01/05	1998/06/29	1995/08/10	1998/09/08	1999/07/02	1998/12/04	1998/03/18	2005/09/02	2005/10/07
Company name	Foreign Technology Ltd.	HIGH TEMPO INTERNATIONAL LIMITED	Q-Run Far East Corporation	Q-RUN HOLDINGS LIMITED	Foxconn Technology Pte. Ltd.	Topfry Industrial Ltd.	World Trade Trading Limited	Atkinson Holdings Ltd.	Kenny International Ltd.	Double Wealth Profits Ltd.	Precious Star International Ltd.	Foxconn Precision Components Holdin Co.,Ltd.	Gold Glory International Ltd.	FTC Technology Inc.	FTP Technology Inc.

-313-

Business scope	Not limited, but subject to local laws and regulations.	Not limited, but subject to local laws and regulations.	Production of new alloy materials, precision molds, new electronic components, portable computers and spare parts for the above-mentioned products, new architectural materials, aluminum alloy architectural profile, construction doors and windows and construction curtain walls, automotive, electronic related aluminum alloy components, sales of Company products. Production and operation of new environmental protection and energy-saving lamps. Production and operation of metal display casings, metal automotive components. Production, operation and installation of metal construction materials. Sales of company-produced products and provide after-sales service. Production and sales of barreled drinking water. Production and development of mobile communication systems, base stations, switching equipment and digital trunking system equipment and components, electronic product testing equipment, digital cameras and key components, third-generation and subsequent mobile communication system mobile phones, base stations, core network equipment, network monitoring equipment and relevant molds of the above-mentioned products. Providing relevant technical consultation and after-sales service, and sales of the Company's own products. Import and Export of the above-mentioned products Mobile phone repair and maintenance
Paid-in capital	US$302,809,000	HK$ 5,389,670,315	US$410,000,000
Address	Vistra Corporate Services Centre, Marlborough & Queen Streets, Nassau, New Providence, Bahamas	Rm. 19C, Lockhart Ctr., 301-307 Lockhart Rd., Wan Chai, Hong Kong.	No1, Longfei St., Economic & Technological Development Zone, Taiyuan City, Shanxi Province, 030032 China
Date of incorporation	1997/05/21	2007/11/29	2002/08/26
Company name	Eastern Star Limited	New Glory Holdings Limited	HongFuJin Precision Industry (Taiyuan) Co., Ltd.

-314-

Business scope	Development and production of new flat panel displays, new electronic components, materials for semiconductor and component purpose, LCD TVs, portable microcomputers, large and medium-sized electronic computers, large precision instruments, metal molds, mold standard parts, new and high-tech non-ferrous metal Materials, construction hardware, heat dissipation components, large-capacity memory, digital TV, digital camcorder, motor, new environmental protection and energy-saving lamps, new game consoles (100% export), equipment for electronics, testing equipment, tool and die manufacturing, manufacturing of high-end CNC machine tools and the manufacture of parts of the above-mentioned products. Sales of the above-mentioned Company-produced products and after-sales service.	Own property leasing (operable under the Company's legal property certificate). Production and operation of computer casing components, electronic components and power electronic components 80% export Addition: Computer-aided design, auxiliary testing, auxiliary manufacturing, auxiliary engineering systems, and other computer application systems. 80% export	Development and production of new alloy materials, precision molds and new electronic components, portable computers, optoelectronic materials, optoelectronic devices, fiber optic connectors and accessories for the above products; sales of self-produced products. The following items are limited to the production in branch factories: Production of special materials for components include tape, foam, conductive aluminum foil, conductive fabric, dustproof net, cushion and other computer and computer peripherals, mobile phones and other digital audio and video codec equipment.
Paid-in capital	US$39,500,000	US$7,750,715	US$38,000,000
Address	No.18, Changsha Avenue, Economic Technology Development Zone, Yantai City, Shandong Province, 265701 China	Yousong No. 10 Industry Zone, Longhua Town, Baoan, Shenzhen, 518000 China	No. 880, Zizhu Road, Yushan Town Kunshan, Jiangsu, 215316 China
Date of incorporation	2007/02/13	1998/08/18	1998/07/09
Company name	Yantai FuZhun Precision Electronics Co., Ltd.	Fuhuigun Industry (Shenzhen) Co., Ltd.	FuYu Precision Components (Kunshan) Co., Ltd.

-315-

Business scope	Development, production, and process of new electronic components such as heat dissipation modules and optoelectronic devices, special materials for components, precision molds and components for the above-mentioned products used in network, communication equipment, game consoles, digital cameras, CD players, and digital audio and video codec devices including for high-end servers, computers and computer peripherals, mobile phones, routers. The following products are limited to the production of in branch facotries: LED lighting products and spare parts. Sales of self-produced products.	Production of new alloy materials, precision molds, new electronic components, portable computers and spare parts for the above-mentioned products. Production and operation of new architectural materials, aluminum alloy architectural profile, construction doors and windows, construction curtain walls, automotive, electronic related aluminum alloy components, new environmental protection and energy-saving lamps, metal display casings, and metal automotive components. Production, operation and installation of metal construction materials. Sales of company-produced products and provide after-sales service. Labor dispatch services.
Paid-in capital	US$11,200,000	US$147,700,000
Address	Bldg. M, No. 880, Zizhu Road, Yushan Town Kunshan, Jiangsu, 215316 China	The North Of Weiliu Street, Middle Of Heqi Road, Heqi Industrial Agglomeration Area, Hebi City, Henan Province, P.R.China
Date of incorporation	1995/11/29	2003/01/31
Company name	Furui Precise Component (Kunshan) Co., Ltd.	FuZhun Precision Electronics (Hebi) Co., Ltd.

-316-

Business scope	Production and operation of new electronic components, heat-dissipating components for new electronic, electrical and communication products, hardware and plastic parts, materials specially for electronic components for insulation, heat dissipation, adhesive tape, electronic masking, buffering and protection. Automotive heat sinks, audio-visual equipment and related spare parts, motors and related spare parts, electronic and industrial aluminum profiles, new environmentally-friendly and energy-saving lamps, aluminum profiles for architectural decoration and aluminum alloy doors and windows and glass curtain walls. Addition: Production and operation of magnesium alloy, aluminum alloy automotive components, and magnesium alloy, aluminum alloy raised floor products. Production and operation of digital TV sets, computer peripherals, digital audio and video equipment and spare parts. After-sales service for self-produced products Production and operation of new electronic components, heat-dissipating components for new electronic, electrical and communication products, hardware and plastic parts, materials specially for electronic components for insulation, heat dissipation, adhesive tape, electronic masking, buffering and protection. Automotive heat sinks, audio-visual equipment and related spare parts, motors and related spare parts, electronic and industrial aluminum profiles, new environmentally-friendly and energy-saving lamps, aluminum profiles for architectural decoration and aluminum alloy doors and windows and glass curtain walls. Addition: Production and operation of magnesium alloy, aluminum alloy automotive components, and magnesium alloy, aluminum alloy raised floor products. Production and operation of digital TV sets, computer peripherals, digital audio and video equipment and spare parts. After-sales service for self-produced products
Paid-in capital	US$19,500,000
Address	F1-4, Plant 2, Sec. K1, Longhua St., Foxconn Longhua Technology Park, Shenzhen City, Guangdong Province, 518109 China
Date of incorporation	1998/07/24
Company name	FuZhun Precision Industry (Shenzhen) Co., Ltd.

-317-

Business scope	Research, development, and production of new electronic components, portable microcomputers, high-end servers, computer peripherals, high-end routers, game consoles, digital cameras, digital audio/video codec devices, televisions, mobile communication devices, LED lamps, solar system and heat dissipation modules and related components of the above-mentioned products. Production of automotive heat sinks, hardware and plastic parts, new architectural materials, aluminum profiles for industrial and architectural decoration and glass curtain wall. Sales of self-produced products and after-sales services. Import and export of architectural materials (excluding steel), electronics and related products. Wholesale business and related services. Production, processing and operation of precision molds. Manufacture of plastic pellets. Property leasing. Labor dispatch services.	Investment	Production of LED lamps, LED displays. Operation of smart light poles and other LED related products. Provide after-sales service for self-produced products. Import and export business (excluding distribution business).
Paid-in capital	US$9,800,000	NTD1,254,780,000	RMB 60,000,000
Address	Bldg 67, No. 45, Tinghong Rd., Nanning City, Guangxi Province, 530031 China	8F.-5, No. 1, Sec. 1, Dunhua S. Rd., Da’an Dist., Taipei City 106, Taiwan	No. 6, Longsheng Avenue, Nanyang City, Henan Province, 473006 China
Date of incorporation	2007/09/10	2004/04/13	2012/02/21
Company name	Nanning Funing Precision Electronics Ltd.	Hua-Zhun Investment Co., Ltd.	FuYu Technology (Nanyang) Co., Ltd.

-318-

Business scope	R&D, production and sales of aluminum alloy profiles, rail vehicle accessories, auto parts and electronic components. Manufacture and sales of structural metal products, metal packaging containers (excluding electroplating), aluminum alloy profile grinding fluids, detergents, metal surface treatment additives (All above do not contain products that are restricted or prohibited from operating or hazardous chemical. Excluding storage of freezing, cold storage, refrigeration, of hazardous chemicals). Manufacturing, sales, wholesale and retail of products: Chemical products (The above do not contain products that are restricted or prohibited from operating or hazardous chemical. Excluding storage of freezing, cold storage, refrigeration, of hazardous chemicals), mechanical parts, hardware, lubricants, metal surface treatment (excluding electroplating). Import and export of Company’s products and technologies, and mechanical equipment, spare parts, raw and auxiliary materials and technologies required by the Company (excluding goods and technologies that the Company is restricted or prohibited from by the country.)	Manufacture and sales of auto parts. Manufacture and sales of new alloy materials, precision molds, new electronic components, portable computers and components. Manufacture and sales of new architectural materials, new environmental-friendly and energy-saving lamps, metal display casings, aluminum alloy architectural profiles, construction doors and windows, building curtain wall, automobile, electronic related aluminum alloy parts. Manufacture, sales and installation of metal building materials. Manufacture and sales of barreled drinking water. Import and export of self-operated and agent commodities and technologies, excluding goods and technologies that the Company is restricted or prohibited from by the country.
Paid-in capital	RMB70,000,000	RMB72,770,000
Address	Chen family port village, Ligezhuang Town, Jiaozhou City, Qingdao, Shandong Province, 266300, China	No. 50-2, Yingkesong 2nd Rd., Sujiatun District, Shenyang City, Liaoning Province, 110100 China
Date of incorporation	2006/07/06	2017/01/10
Company name	Qingdao Hygen Innovative Alloy Materials Co., Ltd	FuZhun Precision Industry (Shenyang) Co., Ltd.

-319-

Business scope	Production and operation of new electronic products, computers, electrical appliances, communication products, network equipment and peripheral equipment and their spare parts, as well as special materials and automation equipment, control systems and spare parts for the above-mentioned products. New environmental-friendly and energy-saving lamps and control systems, LED display application products, intelligent access controllers, in-vehicle and indoor air purification equipment, wireless charging equipment, bathroom-master and ventilation systems, fly and mosquito-trap lamps, vanity mirror lamps and other smart home products and spare parts. Electronic cigarettes. Drones, projectors, cameras, video cameras and other related video recording products and spare parts. New printing devices and accessories. Product cleaning automation equipment and spare parts. Precision stamping dies, precision cavity molds, mold standard parts, jigs and spare parts. Maintenance service and installation of various types of optical lenses and Multi-dimensional glasses. R&D, testing, maintenance service and installation of self-produced products. Wholesale, retail import and export of electrical appliances, equipment, modular jigs, consumer electronics and spare parts (no stores, no handling of state managed products. Products engaging quota control delegated management are handled in accordance with relevant state regulations.) and testing and maintenance services. Design and sales and technical services of energy management projects.	3. Shareholders in common of the Company and its affiliates with deemed control and subordination: None. 4. Business scope of the Company and its affiliates: The business scope of the Company and its affiliates includes manufacturing, processing and trading of related components of OEM for electronic system assembly and electronic products.
Paid-in capital	RMB46,670,000
Address	No. 35, Huabao N. Rd., Chengxi Industrial Zone, Chancheng District, Foshan City, Guangdong Province, 528000 China
Date of incorporation	2005/03/16
Company name	Champ Tech Optical (Foshan) Corporation

-320-

Percentage of Shareholding	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%
Number	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Name or Representative	Han-Ming Li	Han-Ming Li	Han-Ming Li	Han-Ming Li	Chun-Jung Chang / Han-Ming Li / Hui-Fang Li	Han-Ming Li	Han-Ming Li	Han-Ming Li	Han-Ming Li	Han-Ming Li	Han-Ming Li	Han-Ming Li	Han-Ming Li	Han-Ming Li	Chien-Hua Wang	Yun-Chu Tien	Yuan-Wen Lan	Wen-Hsiung Chang	Ping-Neng Chang	Chung-Tai Cheng
Title	Director	Director	Director	Director	Director	Director	Director	Director	Director	Director	Director	Director	Director	Director	Director	Director	Director	Chairman	Director	Director
Company name	Foreign Technology Ltd.	HIGH TEMPO INTERNATIONAL LIMITED	Q-Run Far East Corporation	Q-RUN HOLDINGS LIMITED	Foxconn Technology Pte. Ltd.	Topfry Industrial Ltd.	World Trade Trading Limited	Atkinson Holdings Ltd.	Kenny International Ltd.	Double Wealth Profits Ltd.	Precious Star International LTD	Foxconn Precision Components Holding Co., Ltd.	Gold Glory International Ltd.	Eastern Star Limited	FTC Technology Inc.	FTP Technology Inc.	New Glory Holdings Limited	Fuhuigun Industry (Shenzhen) Co., Ltd.

-321-

Percentage of Shareholding	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%	0%
Number	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Name or Representative	Chan-Ming Liu	Chao-Chin Hu	Ming-Hui Lin	Tsai-Jung Liu	Nien-Tien Cheng	Tai-Yu Kai	Heng-Sheng Lin	Lun-Chieh Wang	Kao-Chung Chieh	Yun-Chu Tien	Hsueh-Kun Li	Pin-Yi Chen	Chin-Cheng Tang	Chen-Fu Lin	Wu-Kuang Chen	Hsuan-Kai Huang	Chih-Chien Hung	Wu-Kuang Chen	Hsueh-Kun Li	Chien-Min Wang	Yung-Pin Lin	Chiu-Jih Chang	Hsueh-Kun Li	Ying-Sen Chen
Title	Chairman	Director	Director	Supervisor	Chairman	Director	Director	Supervisor	Chairman	Director	Director	Supervisor	Chairman	Director	Director	Supervisor	Chairman	Director	Director	Supervisor	Chairman	Director	Director	Supervisor
Company name	FuYu Precision Components (Kunshan) Co., Ltd.				Furui Precise Component (Kunshan) Co., Ltd.				FuZhun Precision Industry (Shenzhen) Co., Ltd.				FuZhun Precision Electronics (Hebi) Co., Ltd.				HongFuJin Precision Industry (Taiyuan) Co., Ltd.				Nanning Funing Precision Electronics Ltd.

-322-

Percentage of Shareholding	0%	0%	0%	0%	0%	0%	100%	0%	100%	0%	100%	0%	100%	0%	0%	0%	0%	0%	0%	0%	0%	0%
Number	0	0	0	0	0	0	125,478,000	0	125,478,000	0	125,478,000	0	125,478,000	0	0	0	0	0	0	0	0	0
Name or Representative	Ping-Lung Ou	Chien-Ting Wang	Chih-Chiang Wang	Chin-Hsiu Chen	Chun-Chi Li	Tzu-Hung Li	Foxconn Technology Co., LTD	Hsu-Tung Lu	Foxconn Technology Co., LTD	Chun-Jung Chang	Foxconn Technology Co., LTD	Kao-Chung Chieh	Foxconn Technology Co., LTD	Pi-Kuang Hsu	Hsiao-Te Li	Hsiao-Te Li	Fu-Feng Tang	Chung-Tai Cheng	Lung-Fei Tseng	Yun-Chu Tien	Chien-Hsun Kang	Kao-Chung Chieh
Title	Chairman	Director	Director	Director	Director	Supervisor	Chairman	Representative	Director	Representative	Director	Representative	Supervisor	Representative	President	Director	Director	Supervisor	Chairman	Director	Director	Supervisor
Company name	Qingdao Hygen Innovative Alloy Materials Co., Ltd						Hua-Zhun Investment Co., Ltd.								Yantai FuZhun Precision Electronics Co., Ltd.				FuYu Technology (Nanyang) Co., Ltd.

-323-

Percentage of Shareholding	0%	0%	0%	0%	0%	0%	0%	0%
									Earnings per share (after tax)	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
									Net Income (after tax)	548,406,249	87,689,466	4,339,170,151	34,341	555,721,122	515,510,730	6,115,807	4,272,225	368,858,055	(32,080)	22,380,375	438,336,408	340,601,022
Number	0	0	0	0	0	0	0	0
									Operating profit	0	0	0	0	0	(2,148,640)	6,075,315	9,816,508	0	(602,126)	0	(1,387)	0
Name or Representative	Wen-Hsiung Chang	Mo-Hsi Tu	Te-He Chiu	Ching-Hsien Chang	Chen-Tien Lai	Yung-Pin Lin	Kao-Chung Chieh	Pin-Yi Chen	Operating revenue	0	0	0	0	0	15,012,407,605	143,774,014	96,844,755	0	943,159,446	0	0	0
									Shareholders’ equity	11,441,327,032	4,784,053,555	41,598,638,223	7,983,176	15,692,163,717	22,033,326,643	96,554,220	87,538,023	4,464,945,992	1,107,272,356	1,745,636,045	4,911,423,467	3,781,469,645
									Liability	0	0	0	0	0	10,611,369,216	116,103,782	5,725,501	0	2,406,082,652	0	21,680,671	0
Title	Chairman	Director	Director	Supervisor	Chairman	Director	Director	Supervisor
									Total assets	11,441,327,032	4,784,053,555	41,598,638,223	7,983,176	15,692,163,717	32,644,695,859	212,658,002	93,263,524	4,464,945,992	3,513,355,008	1,745,636,045	4,933,104,138	3,781,469,645
Company name	FuZhun Precision Industry (Shenyang) Co., Ltd.				Champ Tech Optical (Foshan) Corporation
									Paid-in capital	1,070,254,080	61,440,000	9,302,292,480	7,680,000	4,172,993,833	15,961,374,597	3,072,000	7,680,000	568,688,640	0	208,680,960	672,645,120	21,270,745,405
									Company name	Atkinson Holdings Ltd.	Double Wealth Profits Ltd.	Eastern Star Limited	Foreign Technology Ltd.	Foxconn Precision Components Holding Co., Ltd.	Foxconn Technology Pte. Ltd.	FTC Technology Inc.	FTP Technology Inc.	Gold Glory International Ltd.	High Tempo International Limited	Kenny International Ltd.	Precious Star International Ltd.	New Glory Holdings Ltd., - HK

-324-

Earnings per share (after tax)	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA	NA
Net Income (after tax)	5,670,359,982	5,692,169,371	10,553,736	(45,165)	90,087,689	22,379,470	371,194,422	10,553,796	101,596,935	3,543,367,477	270,146,023	69,573,361	3,560,153	18,174,703	1,234,136,228	(64,701,479)	(43,066,841)
Operating profit	0	(10,673)	0	0	(2,829,056)	(28,768,264)	350,612,954	(8,535,673)	(86,535)	2,666,274,855	200,231,931	61,690,804	(10,296,061)	56,747,176	838,791,053	(70,886,987)	(21,759,696)
Operating revenue	0	0	0	0	160,949,827	152,079,723	5,072,156,118	0	0	35,109,883,343	2,392,967,515	1,429,361,184	623,038	554,438,325	5,894,538,510	18,832,974	588,625,799
Shareholders’ equity	51,462,439,219	92,091,403,746	437,352,806	1,170,476,820	4,738,787,312	1,735,309,591	4,421,617,410	437,349,762	1,440,656,855	39,694,877,812	2,558,462,278	681,339,271	328,921,808	97,178,611	6,813,175,031	250,252,409	2,437,708,969
Liability	0	83,329,382	0	0	2,920,001,077	45,708,196	3,396,919,531	23,693,701	0	10,211,822,602	778,572,160	949,038,610	4,944,247	977,699,217	2,354,681,832	27,059,089	3,035,113,160
Total assets	51,462,439,219	92,174,733,128	437,352,806	1,170,476,820	7,658,788,389	1,781,017,787	7,818,536,941	461,043,463	1,440,656,855	49,906,700,414	3,337,034,438	1,630,377,881	333,866,055	1,074,877,828	9,167,856,863	277,311,498	5,472,822,129
Paid-in capital	32,319,684,895	14,747,983,872	230,400,000	1,170,432,000	661,417,671	401,784,875	1,336,428,878	277,512,626	1,254,780,000	13,348,624,275	324,288,556	1,133,849,656	268,368,000	313,096,000	4,074,308,676	325,485,656	1,550,278,482
Company name	Q-Run Far East Corporation	Q-Run Holdings Limited	Topfry Industrial Ltd.	World Trade Trading Limited	FuZhun Precision Industry (Shenzhen) Co., Ltd.	Furui Precise Component (Kunshan) Co., Ltd.	FuYu Precision Components (Kunshan) Co., Ltd.	Fuhuigun Industry (Shenzhen) Co., Ltd.	Hua-Zhun Investment Co., Ltd.	HongFuJin Precision Industry (Taiyuan) Co., Ltd.	Nanning Funing Precision Electronics Ltd.	Yantai FuZhun Precision Electronics Co., Ltd.	FuYu Technology (Nanyang) Co., Ltd.	Qingdao Hygen Innovative Alloy Materials Co., Ltd	FuZhun Precision Electronics (Hebi) Co., Ltd.	FuZhun Precision Industry (Shenyang) Co., Ltd.	Champ Tech Optical (Foshan) Corporation

-325-

(II) Consolidated financial statements of affiliates

Declaration of consolidated financial statements of affiliated enterprises (2018 Q4 Consolidated financial statements P4)

-326-

(III) Business reports of affiliates: None.

II. Private Placement of Securities in the Most Recent Year Up Till the Printing Date of This Annual Report: None.
III. Holding or Disposal of the Company's Shares by Subsidiaries in the Last Financial Year, Up Till the Printing Date of this Annual Report: None.

IV. Other Supplementary Information:

THIS IS A TRANSLATION OF THE HANDBOOK FOR THE 2019 ANNUAL SHAREHOLDERS’ MEETING (THE “AGENDA”) OF FOXCONN TECHNOLOGY CO., LTD. (THE “COMPANY”). THIS TRANSLATION IS INTENDED FOR REFERENCE ONLY AND NOTHING ELSE, THE COMPANY HEREBY DISCLAIMS ANY AND ALL LIABILITIES WHATSOEVER FOR THE TRANSLATION. THE CHINESE TEXT OF THE HANDBOOK SHALL GOVERN ANY AND ALL MATTERS RELATED TO THE INTERPRETATION OF THE SUBJECT MATTER STATED HEREIN.

Nine. Matters Affecting Shareholders' Equity or Stock Prices: None.

-327-

Foxconn Technology Co., LTD

Chairman Chih-Chien Hung

AI assistant

FTC — Annual Report 2018

52024_rns_2019-07-09_5a853543-823c-4cee-8642-48b467936b93.pdf

Foxconn Technology Co., Ltd.

Annual Report 2018

V. Overseas Securities Exchange: None

Content

One. Letter to Shareholders

Dear Shareholders:

Consolidated Profit or Loss

Two. Company Overview

I. Establishment date: April 26, 1990 Listing date: October 8, 1996

II. Organization and Operations

Three. Corporate Governance

I. Organization

(VI) Professional Knowledge and Independence Check Matrix of Directors

II. Implementation of Corporate Governance

IV. Major key focus and operation status:

Continuing Education of Directors in 2018:

(VI) Status of Implementation of Integrity Operation

Foxconn Technology Co., LTD Statement of Internal Controls

III. Audit Fees

IV. Information Regarding FTC’s Independent Auditor

VII. Information on Relationships among Top 10 Largest Shareholders:

VIII. Combined Shareholding Ratio

March 31, 2019/Unit: thousand shares

Four. Fund Raising

I. Capital and Shares

(II) Sources of Capital

(IV) Shareholder Structure

(V) Shareholding Distribution Status 1. Distribution of common shares

II. Corporate Bonds

X. Implementation of Fund Usage

Five. Operating Highlights

I. Business Activities:

(2) Thermal modules

(3) Game consoles.

【Manufacture of welding thermal products】

(2) Thermal modules

II. Production and Market Analysis

B. Thermal modules

2. Thermal module production flow:

V. Labor-Management Relations

Current important labor agreement and implementation:

Six. Financial Information

I. Most Recent 5-Year Concise Balance Sheet and Comprehensive Income Statement

2. Concise Entity Balance Sheet

3. Concise Consolidated Income Statement

4. Concise Entity Income Statement

II. Most Recent 5-Year Financial Analysis

Audit Committee’ Review Report

IV. Most Recent Financial Reports

Opinion

Basis for opinion

Key audit matters

Revenue cutoff

Description

How our audit addressed the matter

Provision for inventory valuation losses

Description

How our audit addressed the matter

Other matter – Parent company only financial reports

Responsibilities of management and those charged with governance for the consolidated financial statements

Auditor’s responsibilities for the audit of the consolidated financial statements

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2018 AND 2017

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2018 AND 2017

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2018 AND 2017

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2018 AND 2017

FOXCONN TECHNOLOGY CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2018 AND 2017

1. HISTORY AND ORGANISATION

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(3) IFRSs issued by IASB but not yet endorsed by the FSC

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Compliance statement

(2) Basis of preparation

(3) Basis of consolidation

(4) Foreign currency translation

FTC Annual Report 2018