CONSOLIDATED FINANCIAL STATEMENTS. With Independent Auditors Review Report For the Six Months Ended June 30, 2018 and 2017

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1 Stock Code:2382 (English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) CONSOLIDATED FINANCIAL STATEMENTS With Independent Auditors Review Report For the Six Months Ended June 30, 2018 and 2017 Address: No.188 Wenhua 2nd Rd., Guishan Dist. Taoyuan City, Taiwan, R.O.C. Telephone: (03) The independent auditors review report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors review report and consolidated financial statements, the Chinese version shall prevail. 1

2 Table of contents Contents 1. Cover Page 1 2. Table of Contents 2 3. Independent Auditors Review Report 3 4. Consolidated Statements of Financial Position 4 5. Consolidated Statements of Comprehensive Income 5 6. Consolidated Statements of Changes in Equity 6 7. Consolidated Statements of Cash Flows 7 8. Notes to the Consolidated Financial Statements (1)Overview 8 (2)Financial Statements Authorization Date and Authorization Process 8 (3)New Standards and Interpretations Adopted (4)Significant Accounting Policies (5)Major Sources of Accounting Assumptions, Judgments and Estimation Uncertainties (6)Explanation to Significant Accounts (7)Related Party Transactions Page 8~17 17~ ~61 61~63 (8)Pledged Assets 63 (9)Significant Commitments and Contingencies 63~65 (10)Losses Due to Major Disasters 65 (11)Subsequent Events 65 (12)Others 65 (13)Other disclosures i) Information on significant transactions 66~78 ii) Information on investees iii)information on investment in mainland China (14)Segment Information 78~80 80~83 83~84 2

3 Independent Auditors Review Report To the Board of Directors of Quanta Computer Inc.: Introduction We have reviewed the accompanying consolidated financial statements of Quanta Computer Inc. and its subsidiaries which comprise the consolidated statements of financial position as of June 30, 2018 and 2017, and the consolidated statements of comprehensive income for the three months ended June 30, 2018 and 2017 and for the six months ended June 30, 2018 and 2017, as well as the consolidated statements of changes in equity and cash flows for the six months ended June 30, 2018 and 2017, and notes to the consolidated financial statements, including a summary of significant accounting policies. The management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standards ( IASs ) 34, Interim Financial Reporting endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our review. Scope of Review Except as explained in the Basis for Qualified Conclusion paragraph, we conducted our reviews in accordance with Statement of Auditing Standards 65, Review of Financial Information Performed by the Independent Auditor of the Entity. A review of the consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the generally accepted auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Basis for Qualified Conclusion As stated in Note 4 (b), the consolidated financial statements included the financial statements of certain nonsignificant subsidiaries, which were not reviewed by independent auditors. These financial statements reflect the total assets amounting to NT$178,116,661 thousand and NT$154,416,938 thousand, constituting 27.52% and 24.11% of the consolidated total assets at June 30, 2018 and 2017, respectively, the total liabilities amounting to NT$134,747,671 thousand and NT$105,588,906 thousand, constituting 26.20% and 20.78% of the consolidated total liabilities at June 30, 2018 and 2017, respectively, and the total comprehensive income (loss) amounting to NT$(347,500) thousand, NT$625,809 thousand, NT$(338,527) thousand and NT$545,945 thousand, constituting (8.13)%, 12.07%, (4.54)% and 8.71% of the consolidated total comprehensive income (loss) for the three months ended June 30, 2018 and 2017 and for the six months ended June 30, 2018 and 2017, respectively. 3

4 Furthermore, as stated in Note 6 (h), the other equity accounted investments of Quanta Computer Inc. and its subsidiaries in its investee companies of NT$315,255 thousand and NT$404,218 thousand at June 30, 2018 and 2017, respectively, and its equity in net earnings on these investee companies amounted to gain (loss) of NT$1,629, NT$(13,762), NT$(7,199) thousand and NT$(44,875) thousand for the three months ended June 30, 2018 and 2017 and for the six months ended June 30, 2018 and 2017, respectively, were recognized solely on the financial statements prepared by these investee companies, but not reviewed by independent auditors. Qualified Conclusion Except for the adjustments, if any, as might have been determined to be necessary had the financial statements of certain consolidated subsidiaries and equity accounted investee companies described in the Basis for Qualified Conclusion paragraph above been reviewed by independent auditors, based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of Quanta Computer Inc. and its subsidiaries as of June 30, 2018 and 2017, and of its consolidated financial performance for the three months ended June 30, 2018 and 2017 and for the six months ended June 30, 2018 and 2017, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IASs 34, Interim Financial Reporting endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Emphasis of Matter As stated in Note 3 (a), Quanta Computer Inc. and its subsidiaries initially adopt the IFRS 9, Financial Instruments and the IFRS 15, Revenue from Contracts with Customers at January 1, 2018, with no restatement of comparative period amounts. Our conclusion is not qualified in respect of this matter. The engagement partners on the reviews resulting in this independent auditors review report are Wan-Wan Lin and Liu-Fong Yang. KPMG Taipei, Taiwan (Republic of China) August 8, 2018 Notes to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial statements position, financial performance and its cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China. The independent auditors review report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors review report and consolidated financial statements, the Chinese version shall prevail. 3-1

5 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION JUNE 30, 2018, DECEMBER 31, 2017, AND JUNE 30, 2017 (AMOUNTS EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) June 30, 2018 December 31, 2017 June 30, 2017 ASSETS Amount % Amount % Amount % Current assets: 1100 Cash and cash equivalents (Note (6)(a)) $ 257,324, ,763, ,998, Current financial assets at fair value through profit or loss (Note (6)(b)) 1120 Current financial assets at fair value through other comprehensive income (Note (6)(c)) 1126 Current available-for-sale financial assets (Note (6)(d)) 9,978, ,440,533-1,113,923-6,636, ,544, ,183, Accounts receivable, net (Notes (6)(e) and (7)) 149,286, ,994, ,874, Other receivables, net (Notes (6)(f) and (7)) 4,629, ,163, ,326, Inventories (Note (6)(g)) 129,345, ,255, ,297, Other current financial assets (Note (8)) 32,367, ,748, ,936, Other current assets, others 4,201, ,771,163-3,116,687 - Non-current assets: 1510 Non-current financial assets at fair value through profit or loss (Note (6)(b)) 1517 Non-current financial assets at fair value through other comprehensive income (Note (6)(c)) 1523 Non-current available-for-sale financial assets (Note (6)(d)) 1550 Investments accounted for using equity method (Note (6)(h)) 593,771, ,682, ,848, ,370, ,092,723-1,142, , , , Property, plant and equipment (Note (6)(j)) 43,990, ,184, ,247, Investment property, net (Note (6)(k)) 69,979-70,302-70, Intangible assets (Note (6)(l)) 730, , , Deferred tax assets 4,987, ,358, ,004, Other non-current financial assets (Note (8)) 266, , , Other non-current assets, others 1,738,928-1,620,383-1,585,224-53,469, ,694, ,536,029 8 TOTAL ASSETS $ 647,240, ,376, ,384, June 30, 2018 December 31, 2017 June 30, 2017 LIABILITIES AND EQUITY Amount % Amount % Amount % Current liabilities: 2100 Short-term borrowings (Note (6)(m)) $ 269,248, ,706, ,120, Current financial liabilities at fair value through profit or loss (Note (6)(b)) - - 3,272-3, Current contract liabilities 29,506, Accounts payable 147,334, ,244, ,698, Other payables (Note (7)) 42,838, ,526, ,333, Current tax liabilities 5,784, ,855, ,453, Other current financial liabilities 4,577, ,400, ,818, Long-term liabilities, current portion(note (6)(n)) 4,432, ,897, ,293, Current refund liabilities 1,365, Other current liabilities, others 98,332-24,754, ,297,403 4 Non-Current liabilities: 505,187, ,389, ,018, Long-term borrowings (Note (6)(n)) 7,917, ,970, Deferred tax liabilities 298, , , Net defined benefit liability, non-current 815, , , Other non-current liabilities, others 152,973-90, ,724-9,184, ,198,578-12,193,075 2 Total liabilities 514,371, ,587, ,212, Equity attributable to owners of parent (Note (6)(r)): 3100 Share capital 38,626, ,626, ,626, Capital surplus 14,085, ,072, ,068, Retained earnings 79,452, ,043, ,509, Other equity interest (5,202,405) (1) (5,987,359) (1) (5,098,679) (1) 3500 Treasury shares (333,094) - (333,094) - (333,094) - Total equity attributable to owners of parent 126,628, ,422, ,772, XX Non-controlling interests 6,240, ,366, ,400,446 1 Total equity 132,868, ,788, ,172, TOTAL LIABILITIES AND EQUITY $ 647,240, ,376, ,384,

6 (ENGLISH TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS AND REPORT ORIGINALLY ISSUED IN CHINESE) REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED (AMOUNTS EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) For the Three Months Ended June 30 For the Six Months Ended June Amount % Amount % Amount % Amount % 4000 Operating revenue (Notes (6)(t), (u) and (7)) $ 208,226, ,365, ,154, ,280, Operating costs (Note (6)(g)) 198,961, ,694, ,646, ,825, Gross profit from operations 9,265, ,670, ,507, ,455, Less: Unrealized profit from sales 1,042-1,388-1,042-1, Add: Realized profit from sales 878-1,342-1,261-2,220 - Operating expenses: 9,265, ,670, ,507, ,456, Selling expenses 1,211,179-1,724, ,301,474-3,177, Administrative expenses 2,290, ,959, ,449, ,979, Research and development expenses 3,344, ,003, ,401, ,640, ,846, ,687, ,152, ,797,778 3 Net operating income 2,419, ,982, ,355, ,658,357 2 Non-operating income and expenses: 7010 Other income (Notes (6)(w) and (7)) 2,520, ,540, ,023, ,696, Other gains and losses, net (Note (6)(w)) 1,336, ,123-1,704,791 - (68,890) Interest expenses (Note (6)(w)) (1,569,792) (1) (874,460) - (2,965,616) - (1,715,291) (1) 7060 Share of profit (loss) of associates and joint ventures accounted for using equity method (Note (6)(h)) 1,629 - (13,762) - (7,199) - (44,875) - 2,288, ,600, ,755, , Profit before tax 4,708, ,583, ,110, ,525, Less: Tax expenses (Note (6)(q)) 1,183,155-1,549, ,825,409-2,655,856 1 Profit 3,524, ,033, ,285, ,869,701 1 Other comprehensive income (loss): 8310 Other components of other comprehensive income that will not be reclassified to profit or loss 8311 Losses on remeasurements of defined benefit plans (98) (98) Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income (239,173) , Income tax related to components of other comprehensive income that will not be reclassified to profit or loss , Components of other comprehensive income that will not be reclassified to profit and loss (239,271) , Other components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation 984, , ,658 - (1,464,027) Unrealized gains on valuation of available-for-sale financial assets , , Share of other comprehensive income of associates and joint ventures accounted for using equity method (Note (6)(h)) 2,891-5,891-2,386-17, Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit and loss 987,248-1,150, ,826 - (602,240) - Other comprehensive income, net 747,977-1,150,109-1,164,097 - (602,240) Total comprehensive income for the period $ 4,272, ,183, ,449, ,267,461 1 Profit attributable to: 8610 Profit, attributable to owners of parent $ 3,534, ,977, ,269, ,771, Profit, attributable to non-controlling interests (10,026) - 55,577-15,597-98,676 - Comprehensive income attributable to: $ 3,524, ,033, ,285, ,869, Comprehensive income, attributable to owners of parent $ 4,240, ,039, ,326, ,423, Comprehensive income, attributable to non-controlling interests 32, , ,887 - (155,714) - Earnings per share attributable to parent company (Note (6)(s)) $ 4,272, ,183, ,449, ,267, Basic earnings per share (NT dollars) $ Diluted earnings per share (NT dollars) $

7 (ENGLISH TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS AND REPORT ORIGINALLY ISSUED IN CHINESE) REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED (AMOUNTS EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) Share Capital Owners' Equity Attributable to Equity Holders of the Parent Company Other Equity Interest Unrealized Gains Retained Earnings (Losses) from Exchange Financial Assets Differences on Measured at Translation of Fair Value Foreign Through Other Financial Comprehensive Ordinary Share Capital Surplus Legal Reserve Special Reserve Unappropriated Retained Earnings Statements Income Assets Treasury Shares Parent Non- Controlling Interests Total Equity Balance at January 1, 2017 $ 38,626,274 14,053,893 28,748,759 4,423,795 52,084,636 5,109,127 - (9,859,956) (333,094) 132,853,434 6,863, ,716,786 Unrealized Gains (Losses) on Available-for- Sale Financial Profit for the period ,771, ,771,025 98,676 6,869,701 Other comprehensive income for the period (1,202,793) - 854,943 - (347,850) (254,390) (602,240) Total comprehensive income ,771,025 (1,202,793) - 854,943-6,423,175 (155,714) 6,267,461 Appropriation and distribution of retained earnings: Legal reserve appropriated - - 1,513,816 - (1,513,816) Special reserve appropriated ,034 (327,034) Cash dividends of ordinary share (13,519,196) (13,519,196) - (13,519,196) Other changes in capital surplus: Changes in equity of associates and joint ventures accounted for using equity method - 4, ,272-4,272 Adjustments of capital surplus for company's cash dividends received by subsidiaries - 10, ,433-10,433 Changes in ownership interests in subsidiaries - (3) (3) 3 - Changes in non-controlling interests (307,195) (307,195) Balance at June 30, 2017 $ 38,626,274 14,068,595 30,262,575 4,750,829 43,495,615 3,906,334 - (9,005,013) (333,094) 125,772,115 6,400, ,172,561 Balance at January 1, 2018 $ 38,626,274 14,072,745 30,262,575 4,750,829 51,030,373 3,725,479 - (9,712,838) (333,094) 132,422,343 6,366, ,788,475 Effects of retrospective application ,760 - (9,904,598) 9,712, Balance at January 1, 2018 after adjustments 38,626,274 14,072,745 30,262,575 4,750,829 51,222,133 3,725,479 (9,904,598) - (333,094) 132,422,343 6,366, ,788,475 Profit for the period ,269, ,269,867 15,597 6,285,464 Other comprehensive income for the period , , , ,056, ,290 1,164,097 Total comprehensive income ,294, , , ,326, ,887 7,449,561 Appropriation and distribution of retained earnings: Legal reserve appropriated - - 1,436,710 - (1,436,710) Special reserve appropriated ,236,530 (1,236,530) Cash dividends of ordinary share (13,132,933) (13,132,933) - (13,132,933) Other changes in capital surplus: Changes in equity of subsidiaries accounted for using equity method Adjustments of capital surplus for company's cash dividends received by subsidiaries - 12, ,492-12,492 Changes in ownership interests in subsidiaries - (2) (2) 2 - Changes in non-controlling interests (248,916) (248,916) Disposal of investments in equity instruments measured at fair value through other comprehensive income ,855 - (55,855) Balance at June 30, 2018 $ 38,626,274 14,085,280 31,699,285 5,987,359 41,765,920 4,315,140 (9,517,545) - (333,094) 126,628,619 6,240, ,868,828 Total Equity Attributable to Owners of 6

8 (ENGLISH TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS AND REPORT ORIGINALLY ISSUED IN CHINESE) REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED (AMOUNTS EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) Cash flows from (used in) operating activities: For the Six Months Ended June 30, Profit before tax $ 8,110,873 9,525,557 Adjustments: Adjustments to reconcile profit (loss): Depreciation expense 2,940,313 2,917,120 Amortization expense 470, ,323 Expected credit loss / reversal of provision for bad debt expense 39,616 (221,773) Net gain on financial assets or liabilities at fair value through profit or loss (55,890) (2,147) Interest expense 2,965,616 1,715,291 Interest income (3,352,434) (2,429,783) Dividend income (671,209) (266,473) Share of losses of associates and joint ventures accounted for using equity method 7,199 44,875 Loss on disposal of property, plan and equipment 50, ,131 Gain on disposal of intangible assets - (11) Loss on disposal of subsidiaries Gain on disposal of investments - (52,232) Loss on disposal of investments accounted for using equity method Impairment loss on non-financial assets 15, Unrealized foreign exchange loss (gain) 140,160 (613,200) Total adjustments to reconcile profit 2,550,077 1,803,241 Changes in operating assets and liabilities: Changes in operating assets: Financial assets held for trading - 264,636 Financial assets at fair value through profit or loss, mandatorily measured at fair value 55,822 - Accounts receivable 24,201,032 18,619,242 Other receivable 182,535 49,819 Inventories 8,525,294 (30,473,018) Other current assets (1,334,462) 130,590 Other financial assets 319, ,469 Total changes in operating assets 31,949,746 (11,098,262) Changes in operating liabilities: Contract liabilities 4,688,552 - Accounts payable (20,082,238) 10,155,764 Other payable 1,456,934 (1,487,791) Other financial liabilities (662,542) (438,406) Other current liabilities (275,184) (294,554) Net defined benefit liabilities (1,570) (1,525) Other liabilities (219) (831) Total changes in operating liabilities (14,876,267) 7,932,657 Total changes in operating assets and liabilities 17,073,479 (3,165,605) Total adjustments 19,623,556 (1,362,364) 7

9 (ENGLISH TRANSLATION OF CONSOLIDATED FINANCIAL STATEMENTS AND REPORT ORIGINALLY ISSUED IN CHINESE) REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED (AMOUNTS EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) For the Six Months Ended June 30, Cash generated from operations 27,734,429 8,163,193 Interest received 2,525,250 1,670,151 Dividends received 3,437 15,457 Interest paid (2,232,529) (1,163,839) Income taxes paid (2,478,446) (3,121,368) Net cash provided by operating activities 25,552,141 5,563,594 Cash flows from investing activities: Acquisition of financial assets at fair value through other comprehensive income (199,290) - Proceeds from disposal of financial assets at fair value through other comprehensive income 81,806 - Proceeds from capital reduction of financial assets at fair value through other comprehensive income 17,418 - Acquisition of financial assets at fair value through profit or loss (42,075,274) (2,232,078) Proceeds from disposal of financial assets at fair value through profit or loss 43,774,807 1,607,096 Acquisition of available-for-sale financial assets - (52,266,363) Proceeds from disposal of available-for-sale financial assets - 54,483,951 Proceeds from capital reduction of available-for-sale financial assets - 4,476 Acquisition of investments accounted for using equity method (25,000) (55,658) Proceeds from disposal of subsidiaries - (2,618) Proceeds from capital reduction of investments accounted for using equity method - 4,061 Acquisition of property, plant and equipment (3,860,584) (2,326,529) Proceeds from disposal of property, plant and equipment 244, ,628 Increase in other receivables - (2,958) Acquisition of intangible assets (88,064) (267,830) Proceeds from disposal of intangible assets - 11 Increase in other financial assets (15,827) (8,863,111) Decrease in other financial assets 2,856,083 22,618 Increase in other non-current assets (452,200) (246,883) Decrease in other non-current assets 15,051 7,908 Net cash provided by (used in) investing activities 273,136 (9,971,279) Cash flows from financing activities: Increase in short-term borrowings 44,490,909 69,619,289 Decrease in short-term borrowings (11,155,728) (5,073,920) Proceeds from long-term borrowings 561,110 - Repayments of long-term borrowings (6,477,840) - Increase in other financial liabilities 62,568 13,264 Decrease in other financial liabilities (2,620) (577) Increase in other non-current liabilities Decrease in other non-current liabilities (1,266) - Other financing activities Net cash provided by financing activities 27,477,503 64,558,056 Effect of exchange rate changes on cash and cash equivalents 5,258,804 (8,062,883) Net increase in cash and cash equivalents 58,561,584 52,087,488 Cash and cash equivalents at beginning of period 198,763, ,911,112 Cash and cash equivalents at end of period $ 257,324, ,998,

10 (1) Overview Quanta Computer Inc. (the Company) was incorporated on May 9, 1988, as a company limited by shares and registered under the Ministry of Economic Affairs, R.O.C.. The address of the Company's registered office is No. 188, Wenhua 2nd Rd., Guishan Dist., Taoyuan City, Taiwan, R.O.C.. The Company and its subsidiaries (the Group) engage primarily in the manufacturing, processing, and sales of laptop computers and telecommunication products. (2) Financial Statements Authorization Date and Authorization Process The consolidated financial statements were authorized for issuance by the Board of Directors on August 8, (3) New Standards and Interpretations Adopted: (a) The impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Financial Supervisory Commission, R.O.C. ("FSC") which have already been adopted. The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, New, Revised or Amended Standards and Interpretations Amendment 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" Effective date per IASB January 1, 2018 January 1, 2018 IFRS 9 "Financial Instruments" January 1, 2018 IFRS 15 "Revenue from Contracts with Customers" January 1, 2018 Amendment to IAS 7 "Statement of Cash Flows -Disclosure Initiative" January 1, 2017 Amendment to IAS 12 "Income Taxes- Recognition of Deferred Tax Assets for Unrealized Losses" January 1, 2017 Amendments to IAS 40 "Transfers of Investment Property" January 1, 2018 Annual Improvements to IFRS Standards Cycle: Amendments to IFRS 12 January 1, 2017 Amendments to IFRS 1 and Amendments to IAS 28 January 1, 2018 IFRIC 22 "Foreign Currency Transactions and Advance Consideration" January 1,

11 Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of significant changes are as follows: (i) IFRS 15 "Revenue from Contracts with Customers" IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 "Revenue" and IAS 11 "Construction Contracts". The Group applies this standard retrospectively with the cumulative effect, it needs not to restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related interpretations for comparative reporting period. The Group recognizes the cumulative effect upon the initial application of this Standard as an adjustment to the opening balance of retained earnings on January 1, The Group uses the practical expedients for completed contracts, which means it needs not to restate those contracts that have been completed on January 1, The following are the nature and impacts on changing of accounting policies: 1) Sales of goods For the sale of products, revenue was recognized when the related risks and rewards of ownership have been transferred to the customer. Revenue was recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods. The Group assessed that the changes of this accounting policy does not have related impact on its consolidated financial statements. 2) Rending of services Under IFRS 15, the total consideration in the service contracts will be allocated to all services based on their stand-alone selling prices. The stand-alone selling prices will be determined based on the list prices at which the Group sells the services in separate transactions. The Group assessed that the changes of this accounting policy does not have related impact on its consolidated financial statements. 9

12 3) Contract liabilities If customer pays consideration, or the Group has a right to an amount of consideration that is unconditional, before the Group transfers goods or services to the customer, the Group previously present the contract as advance sales receipts. Under IFRS 15, the Group shall recognize the contract liabilities when the payment is made or the payment is due. The contract liabilities are the Group's obligation to transfer goods or services to customer for which the Group has received consideration (or an amount of consideration is due) from the customer. 4) Refund liabilities The Group shall recognize a refund liabilities if the Group receives consideration from a customer and expects to refund some or all of that consideration to the customer. 5) Impacts on financial statements The following tables summarize the impacts of adopting IFRS15 on the Group's consolidated financial statements: June 30, 2018 January 1, 2018 Impacted line items on the consolidated statement of financial position Balances prior to the adoption of IFRS 15 Impact of changes in accounting policies Balances upon adoption of IFRS 15 Balances prior to the adoption of IFRS 15 Impact of changes in accounting policies Balances upon adoption of IFRS 15 Accounts receivable $ 147,920,689 1,365, ,286, ,994,797 1,635, ,630,154 Impact on assets $ 1,365,357 1,635,357 Current contract liabilities $ - 29,506,947 29,506,947-24,818,395 24,818,395 Current refund liabilities - 1,365,357 1,365,357-1,635,357 1,635,357 Other current liabilities, others 29,415,424 (29,317,092) 98,332 24,754,951 (24,656,754) 98,197 Other current financial liabilities 4,767,746 (189,855) 4,577,891 5,400,057 (161,641) 5,238,416 Impact on liabilities $ 1,365,357 1,635,357 (ii) IFRS 9 "Financial Instruments" IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and Measurement" which contains classification and measurement of financial instruments, impairment and hedge accounting. 10

13 As a result of the adoption of IFRS 9, the Group adopted the consequential amendments to IAS 1 "Presentation of Financial Statements" which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Group's approach was to include the impairment of accounts receivables in operating expenses. Additionally, the Group adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018 but generally have not been applied to comparative information. The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below: 1) Classification of financial assets and financial liabilities IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Group classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see Note (4)(c). The adoption of IFRS 9 did not have any significant impact on its accounting policies on financial liabilities. 2) Impairment of financial assets IFRS 9 replaces the incurred loss' model in IAS 39 with the expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS 39, please see Note (4)(c). 3) Transition The adoption of IFRS 9 has been applied retrospectively, except as described below, Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as of January 1, Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9. 11

14 The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application. The determination of the business model within which a financial asset is held. The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL. The designation of certain investments in equity instruments not held for trading at FVOCI. If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the Group assumed that the credit risk on its asset will not increase significantly since its initial recognition. 4) Classification of financial assets on the date of initial application of IFRS 9 The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group's financial assets and financial liabilities as of January 1, Financial Assets and Liabilities Cash and cash equivalents IAS39 Measurement categories Carrying Amount IFRS9 Measurement categories Carrying Amount Loans and receivables 198,763,364 Amortized cost 198,763,364 Derivative instruments Held-for-trading (3,272)Mandatorily at FVTPL (3,272) Debt instruments Available-for-sale (note 1) 68,350 FVOCI 68,350 Available-for-sale (note 2) 9,204,359 Mandatorily at FVTPL 9,204,359 Held for trading (note 3) 16,039 Mandatorily at FVTPL 16,039 Designated as at FVTPL (note 4) 2,424,494 Mandatorily at FVTPL 2,424,494 Equity instruments Available-for-sale (note 5) 7,364,040 FVOCI 7,364,040 Accounts receivable and other receivables Available-for-sale 770 Mandatorily at FVTPL 770 Loans and receivables (note 6) 173,158,240 Amortized cost 158,231,908 Loans and receivables (note 7) - FVOCI 14,926,332 Other financial assets Loans and receivables 35,041,852 Amortized cost 35,041,852 12

15 Note1: The debt instruments categorized as available-for-sale under IAS 39 are held by the Group's treasury unit in a separate portfolio to provide interest income; however, they may be sold to meet liquidity requirements arising in the normal course of business. The Group considers that these securities are held within a business model whose objective is achieved both by collecting contractual cash flows and by selling securities. The debt instruments mature in one to two years and the contractual terms of these financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These assets have therefore been classified as financial assets at FVOCI under IFRS 9. Note2: The beneficiary certificates-open-end mutual funds are categorized as availablefor-sale under IAS 39. The Group assesses that these securities are held within a business model whose objective is achieved by selling securities. Consequently, the Group has designated these investments at the date of initial application as measured mandatorily at FVTPL. Due to the above change, the book value of beneficiary certificates-open-end mutual funds increases $9,204,359, and other equity and retained earnings decreases $4,365 and increases $4,365, respectively. Note3: Under IAS 39, these debt instruments were classified as held-for-trading financial assets because they were managed on a fair value basis and their performance was monitored on this basis. These assets have been classified as mandatorily measured at FVTPL under IFRS 9. Note4: Under IAS 39, these debt instruments were designated at FVTPL because they were managed on a fair value basis and their performance was monitored on this basis. These assets have been classified as mandatorily measured at FVTPL under IFRS 9. Note5: These equity instruments, public quoted and private equities, represent investments that the Group intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVOCI. Accordingly, an increase of $7,364,040 in those assets recognized, and a decrease of $187,395 in other equity, as well as the increase of $187,395 in retained earnings were recognized on January 1, Note6: Accounts receivable and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortized cost. Note7: Accounts receivable that were classified as loans and receivables under IAS 39, Group considers that the business model of holding financial assets is expected to sale financial assets. Therefore, these financial assets are classified as FVOCI under IFRS 9. 13

16 The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on 1 January, Financial assets (liabilities) measured at fair value through profit or loss December 31, 2017 IAS 39 Carrying Amount Reclassifications Remeasurements January 1, 2018 IFRS 9 Carrying Amount January 1, 2018 January 1, Changes of 2018 retained Changes of earnings other equity Beginning balance of FVTPL (IAS 39) $ 2,437,261 (2,437,261) Additions debt instruments: From available-for-sale (beneficiary certificatesopen-end mutual funds) - 9,204,359-4,365 (4,365) From designated at FVTPL - 2,424, From held for trading - 12, Additions equity instruments: From available-for-sale (equity certificate) Total $ 2,437,261 9,205,129-11,642,390 4,365 (4,365) Financial assets measured at fair value through other comprehensive income Beginning balance of available-for- sale (IAS 39) $ 16,637,519 (16,637,519) Available-for-sale to FVOCI - 7,432, ,395 (187,395) Additions debt instruments: From loans and receivables - 14,926, Total $ 16,637,519 5,721,203-22,358, ,395 (187,395) Financial assets measured at amortized cost Beginning balance of cash and cash equivalents, debt investment without an active market, accounts receivable, and other financial assets (IAS 39) Subtractions: $ 406,963, To FVOCI - (14,926,332) Total $ 406,963,456 (14,926,332) - 392,037, (iii) Amendments to IAS 7 "Disclosure Initiative" The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. To satisfy the new disclosure requirements, the Group presents a reconciliation between the opening and closing balances for liabilities with changes arising from financing activities as Note (6)(aa). 14

17 (b) The impact of IFRS endorsed by the FSC but not yet effective The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No issued by the FSC on July 17, 2018: Effective date New, Revised or Amended Standards and Interpretations per IASB IFRS 16 Leases January 1, 2019 IFRIC 23 Uncertainty over Income Tax Treatments January 1, 2019 Amendments to IFRS 9 Prepayment features with negative compensation January 1, 2019 Amendments to IAS 19 Plan Amendment, Curtailment or Settlement January 1, 2019 Amendments to IAS 28 Long-term interests in associates and joint ventures January 1, 2019 Annual Improvements to IFRS Standards Cycle January 1, 2019 Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows: (i) IFRS 16 Leases IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of lowvalue items. The lessor accounting remains similar to the current standard i.e. the lessors will continue to classify leases as finance or operating leases. The Group has completed an initial assessment of the potential impact on its consolidated financial statements, wherein the detailed assessment has yet to be completed. The actual impact of applying IFRS 16 on its financial statements in the period of initial application will depend on future economic conditions, including the Group s discounting rate, the composition of the Group s lease portfolio at that date, the Group s latest assessment of whether it will exercise any lease renewal options and the extent to which the Group chooses to use practical expedients and recognition exemptions. 15

18 So far, the most significant impact identified is that the Group will have to recognize the new assets and liabilities for its operating leases of offices, warehouses, and factory facilities. The impact amount is still under assessment. No significant impact is expected for the Group s finance leases. Besides, the Group does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant. 1) Determining whether an arrangement contains a lease The Group has an arrangement that was not in the legal form of a lease, for which it concluded that the arrangement contains a lease of equipment under IFRIC 4. On transition to IFRS 16, the Group can choose to apply either of the following: -IFRS 16 definition of a lease to all its contracts; or - a practical expedient that does not need any reassessment whether a contract is, or contains, a lease. The Group plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4. 2) Transition As a lessee, the Group can apply the standard using either of the following: -retrospective approach; or -modified retrospective approach with optional practical expedients. On January 1, 2019, the Group plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information. When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Group is assessing the potential impact of using these practical expedients. The Group is not required to make any adjustments for leases in which the Group is the lessor where the Group is the intermediate lessor in a sub-lease. 16

19 (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC The following IFRSs have been issued by the IASB, but have yet to be endorsed by the FSC: New, Revised or Amended Standards and Interpretations Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture Effective date per IASB Effective date to be determined by IASB IFRS 17 Insurance Contracts January 1, 2021 The abovementioned stardards or interpretations may not be relevant to the Group. (4) Significant Accounting Policies (a) Statement of compliance These consolidated financial statements have been prepared in accordance with the preparation and guidelines of IAS 34 Interim Financial Reporting which are endorsed and issued into effect by FSC and do not include all of the information required by the Regulations and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect by the FSC (hereinafter referred to IFRS endorsed by the FSC) for full annual consolidated financial statements. Except the following accounting policies mentioned below, the significant accounting policies adopted in the consolidated financial statements are the same as those in the consolidated financial statement for the year ended December 31, For the related information, please refer to Note (4) of the consolidated financial statements for the year ended December 31, (b) Basis of consolidation 1.List of subsidiaries in the consolidated financial statements: Name of Name of Principal Shareholding Investor Subsidiary Activity June 30, 2018 December 31, 2017 June 30, 2017 Note The Company Quanta International Limited (QIL) Holding company % % % QCJ Corp. Manufacture, after-sales service and sale of computers and telecommunication products % % % Note 3 17

20 Name of Name of Principal Shareholding Investor Subsidiary Activity June 30, 2018 December 31, 2017 June 30, 2017 Note The Company Quanta Computer Technology Investment Corp. (QCTI) Investment company % % % Note 3 Quanta Venture Capital Co., Ltd. (QVC) Quanta Cloud Technology Inc. (QCTTW) FaceVsion Technology Inc. (FVT) THINKTECH COMERCIO DE INFORMATICA LTDA (ThinkTech) The Company and QCTI QIL Quanta Storage Inc. (QSI) RoyalTek Company Ltd. (RTK) Quanta Microsystem Inc. (QMIT) QCE Computer B.V. (QCE) Access International Company (AIC) Quanta ASIA LTD. (QAL) Quanta Capital Management Ltd. (QCML) Venture capital % % % Note 3 Wholesale of computers and peripherals Wholesale of electric components, equipment and retail of other telecommunication products Sale of computers and peripherals % % % Note % % % Note % % - % Note 2 and Note 3 Optical industry % % % Note 1 Design, manufacture, processing, distribute, and sale of satellite guided navigation systems and peripherals, navigated maps, and digital maps % % % Note 1 Electronic company % % % Note 3 Sale and after-sales service of computer peripherals % % % Note 3 Holding company % % % Investment company and after-sales service QCT LLC (QCT-USA) Sale of computer peripherals QCT Cayman Inc. (QCTC) % % % Investment company % % % Note % % % Note 3 Investment company % % % Note 3 18

21 Name of Name of Principal Shareholding Investor Subsidiary Activity June 30, 2018 December 31, 2017 June 30, 2017 Note QCE THINKTECH COMERCIO DE INFORMATICA LTDA (ThinkTech) Sale of computers and peripherals % % % Note 2 and Note 3 AIC QMI QSI-USA QCA QCH QAL Quanta Manufacturing Incorporation (QMI) Assembly and processing of laptop computers and peripherals Quanta Service After-sales service of Incorporation (QSI-USA) computers and peripherals Quanta Computer USA, Inc. (QCA) QCH, Inc., a Nevada corporation (QCH) Quanta Manufacturing Nashville LLC (QMN) Quanta Service Nashville LLC (QSN) Quanta Computer Nashville LLC (QCN) QCH Nashville LLC (QCHN) Quanta Development LTD. (QDL) Quanta International Technology LTD. (QIT) Q_Bus International Limited (Q_Bus) After-sales service of laptop computers and peripherals Sale of laptop computers and peripherals Assembly and processing of laptop computers and peripherals After-sales service of computers and peripherals After-sales service of laptop computers and peripherals Sale of laptop computers and peripherals After-sales service and Investment company Sale of computers and peripherals, and investment company QCTC QCT Korea Inc.(QCTK) Sale of computers and peripherals QIT QDL QCG Computer GMBH Assembly and processing of computers and peripherals Quanta Development (HONG KONG) Limited (QDLHK) % % % Note % % % Note % % % Note % % % % % % Note % % % Note % % % Note % % % Note % % % % % % Note 3 Holding company % % % Note 3 Sale of computers and peripherals, and investment company % % % Note % % % Note % % % 19