[Translation] Stock Code: 2382 QUANTA COMPUTER INC. 2017 Annual General Shareholders Meeting Meeting Minutes June 16, 2017
QUANTA COMPUTER INC. 2017 Annual General Shareholders Meeting Minutes Time: June 16, 2017 (Friday) at 9:00 am Venue: Quanta Computer (No. 188, Wen-Hwa 2 nd Road, Kuei Shan Dist, Taoyuan Shien, Taiwan) Total shares represented by shareholders present in person or proxy: 3,412,415,230 shares, or 88.34% of total outstanding shares of 3,862,627,432. Chairman: Barry Lam Attended Directors: Barry Lam, C.C. Leung, Tim Li, Wei-Ta Pan, Chi-Chih Lu Attendees: Wan-Wan, Lin (CPA), Pei-Chi Hung (Lawyer) Recorder: Hsin-Yi, Chien The aggregate shareholding of the shareholders present in person or proxy constituted a quorum. The Chairman called the meeting to order. Chairman s Address: (Omitted) I. Report Items: Item 1. To report distribution of employees bonus and remuneration to directors. Description: (1) The distribution plan is in accordance with Article 27 of the Article of Incorporation. (2) The distribution plan for employees bonus and remuneration to directors has been resolved by the Company s Board of Directors and the Remuneration Committee. The Company is to allocate NT$1,425,120,949 for employees bonus and NT$42,000,000 for Directors remuneration. Both employees bonus and remuneration for Directors are distributed in cash. (3) The distribution plan for employees bonus and remuneration to directors are calculated based on the most recent financial statements, which is no different from the original estimate. II. Approval Items: Item 1. Description: To accept FY2016 business report and financial statements (including independent auditor's report and Audit Committee review report) Quanta Computer s 2016 Financial Statements, including Balance Sheet, Income Statement, Statement of Changes in Shareholders Equity, and Cash Flow Statement, were audited and certified by KPMG Certified Public Accountants. Aforementioned documents were also reviewed by the Audit Committee and approved by the Board of the Directors. Please refer to attachment I ~ III for - 2 -
details, and for financial reports please refer to website: http://mops.twse.com.tw Voting Results: The number of votes casted for the proposal was 83.97% of the votes represented by the shareholders present. Item 2. RESOLVED, that the 2016 business report and financial statements hereby were accepted as submitted. Item Votes Casted For Against Invalid Abstain Shares 3,412,415,230 2,865,733,225 91,933 0 546,590,072 Percentage 100.00% 83.97% 0.00% 0.00% 16.01% Note: the number of shares listed above includes votes casted from the electronic voting platform. To approve the allocation of FY2016 distributable earnings Description: (1) The amount of FY2016 distributable earnings is derived from net income after tax and after a 10% legal capital reserve. In accordance with Article 27-1 of the Articles of Incorporation, the distribution details are shown in attachment IV. (2) Allocation of distributable earnings was reviewed by the Audit Committee and approved by the Board of Directors. After shareholders meeting approval, the Board of Directors will separately announce the dividend distribution date. (3) Cash dividend of NT$3.50 per share is proposed and distribution of cash dividend will be rounded up to dollar, or yuan, the total round off will be allotted to other income. (4) Each of the distribution item may need to be adjusted should regulations change or officials request resulting in adjustment on distribution plan. It is proposed to the shareholders meeting that the Chairman be authorized to make necessary adjustments on distribution plan in the event of regulation changes. Voting Results: The number of votes casted for the proposal was 84.12% of the votes represented by the shareholders present. RESOLVED, that the allocation of FY2016 distributable earnings hereby were accepted as submitted. Item Votes Casted For Against Invalid Abstain Shares 3,412,415,230 2,870,688,225 103,933 0 541,623,072 Percentage 100.00% 84.12% 0.00% 0.00% 15.87% Note: the number of shares listed above includes votes casted from the electronic voting platform. - 3 -
III. Discussion Items: Item 1. To approve the revision of the Procedures for Assets Acquisition or Disposal Description: (1) Amend in accordance with relevant regulations and development of the Company. (2) The proposed discussion item has been reviewed by the Audit Committee and approved by the Board of Directors. Comparison table is described in Attachment V. Voting Results: The number of votes casted for the proposal was 84.12% of the votes represented by the shareholders present. RESOLVED, that the revision of the Articles of Incorporation hereby were accepted as submitted. Item Votes Casted For Against Invalid Abstain Shares 3,412,415,230 2,870,676,743 110,491 0 541,627,996 Percentage 100.00% 84.12% 0.00% 0.00% 15.87% Note: the number of shares listed above includes votes casted from the electronic voting platform. IV. Special Motion: Shareholder Comments: Shareholder 59278 raised questions regarding the Company s procedure on donation, remuneration to Directors and litigations. Upon solicitation of comments by Chairman and CFO, aforementioned shareholder had no further comments. V. Meeting Adjourned: 09:30am **In case of any discrepancy between the English and Chinese version of those minutes of 2017 Annual General Shareholders Meeting, the Chinese version shall prevail. - 4 -
Attachment I (English Translation of Financial Report Originally Issued In Chinese) Independent Auditors Report To the Board of Directors of Quanta Computer Inc.: Opinion We have audited the consolidated financial statements of Quanta Computer Inc. and its subsidiaries ( the Group ), which comprise the consolidated statement of financial position as of December 31, 2016 and 2015, and the consolidated statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2016 and 2015, 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 at December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years ended December 31, 2016 and 2015 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards ( IFRSs ), International Accounting Standards ( IASs ), interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China. Basis for Opinion We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Certified Public Accountants Code of Professional Ethics in 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 of 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 thereon, and we do not provide a separate opinion on these matters. 1. Revenue Recognition Please refer to Note 4(q) for accounting policies of revenue recognition. Description of the key audit matter: The Group engages primarily in the manufacturing, processing, and sales of laptop computers and telecommunication products. Varying transaction terms will cause different timing for risks and rewards of products' ownership being transferred. Therefore, the timing for revenue recognition has been identified as a audit matter. - 5 -
How the matter was addressed in our audit: In relation to the key audit matter above, our key audit procedures include understanding and testing the design and implementation of internal control over revenue recognition; understanding the Group s main sources of revenues, contract provisions, and transaction terms to evaluate the adequacy of revenue recognition period; applying computer audit for selected samples to evaluate whether the data collected from external system is consistent with those input to the internal system; and analyzing the agreements of selected customers to understand the sales terms and conditions for revenue recognition, and to further inspect related transaction document to ensure that the revenue is recorded in the appropriate period. 2. Allowance for Inventory Valuation and Obsolescence Losses Please refer to Note 4(h), Note 5, and Note 6(d) for accounting policies, accounting assumptions and estimation uncertainty, and related disclosure information for inventory, respectively. Description of the key audit matter: Inventories are stated at the lower of cost or net realizable value. With the rapid development of technology, the advance of new electronic products may significantly change consumer demands, which leads to product obsolescence that may result in the cost of inventory to be higher than the net realizable value. Consequently, the valuation of inventories has been identified as a key audit matter. How the matter was addressed in our audit: In relation to the key audit matter above, our key audit procedures include selecting samples to examine their net realizable values to verify the accuracy of inventory aging; evaluating the reasonableness of the Group s inventory valuation policy and the management s assumption used when measuring allowance for inventory valuation and obsolescence losses; performing a retrospective review of the Group s historical accuracy of judgments with reference to inventory valuation and compare them with the current year s calculation to evaluate the appropriateness of the estimation and assumption used for inventory valuation; and evaluating the adequacy of the Group s disclosure for inventories. 3. The agreements of financial assets and liabilities offsetting Please refer to Note 4(g) and 6(j) for accounting policy and detailed information on the agreements of financial assets and liabilities offsetting. Description of the key audit matter: The Group had financial assets and liabilities offsetting agreements with financial institutions. Since whether the accounting treatment and disclosure of the agreements complied with the accounting standards or not will materially affect the financial statements, the said matter has been identified as a key audit matter. How the matter was addressed in our audit: In relation to the key audit matter above, our key audit procedures include understanding and testing the design and implementation of internal control over assets and liabilities offsetting; acquiring the offsetting agreements and inspecting the contractual terms to determine whether the accounting treatment used is in compliance with the related accounting standards; and evaluating the adequacy of the Group s disclosure for financial assets and liabilities offsetting. Other Matter Quanta Computer Inc. has additionally prepared its parent company only financial statements as of and for the years ended December 31, 2016 and 2015, on which we have issued an unqualified opinion. - 6 -
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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, 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 members of 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 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 the auditing standards generally accepted in the Republic of China 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 auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. 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 control. 2. 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 control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. 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 auditors 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 auditor s report. However, future events or conditions may cause the Group to cease to continue as a going concern. 5. 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. - 7 -
6. 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 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. 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 auditors 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. The engagement partners on the audit resulting in this independent auditors report are Lin, Wan Wan and Yang, Leou Fong. KPMG Taipei, Taiwan (Republic of China) March 28, 2017 Note to Readers The accompanying consolidated financial statements are intended only to present the consolidated statement of financial 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 audit such consolidated financial statements are those generally accepted and applied in the Republic of China. The auditor s 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 auditor s report and consolidated financial statements, the Chinese version shall prevail.
- 10 -
- 11 -
- 12 -
- 13 -
(English Translation of Financial Report Originally Issued In Chinese) Independent Auditors' Report To the Board of Directors of Quanta Computer Inc.: Opinion We have audited the financial statements of Quanta Computer Inc.( the Company ), which comprise the statement of financial position as of December 31, 2016 and 2015, and the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2016 and 2015, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2016 and 2015, and its financial performance and its cash flows for the years ended December 31, 2016 and 2015 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards ( IFRSs ), International Accounting Standards ( IASs ), interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China. Basis for Opinion We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in 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 of 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 financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 1. Revenue Recognition Please refer to Note 4(p) for accounting policies of revenue recognition. Description of the key audit matter: The Company engages primarily in the manufacturing, processing, and sales of laptop computers and telecommunication products. Varying transaction terms will cause different timing for risks and rewards of products' ownership being transferred. Therefore, the timing for revenue recognition has been identified as a key audit matter. - 14 -
How the matter was addressed in our audit: In relation to the key audit matter above, our key audit procedures include understanding and testing the design and implementation of internal control over revenue recognition; understanding the Company s main sources of revenues, contract provisions, and transaction terms to evaluate the adequacy of revenue recognition period; applying computer audit for selected samples to evaluate whether the data collected from external system is consistent with those input to the internal system; and analyzing the agreements of selected customers to understand the sales terms and conditions for revenue recognition, and to further inspect related transaction document to ensure that the revenue is recorded in the appropriate period. 2. Allowance for Inventory Valuation and Obsolescence Losses Please refer to Note 4(g), Note 5, and Note 6(d) for accounting policies, accounting assumptions and estimation uncertainty, and related disclosure information for inventory, respectively. Description of the key audit matter: Inventories are stated at the lower of cost or net realizable value. With the rapid development of technology, the advance of new electronic products may significantly change consumer demands, which leads to product obsolescence that may result in the cost of inventory to be higher than the net realizable value. Consequently, the valuation of inventories has been identified as a key audit matter. How the matter was addressed in our audit: In relation to the key audit matter above, our key audit procedures include selecting samples to examine their net realizable values to verify the accuracy of inventory aging; evaluating the reasonableness of the Company s inventory valuation policy and the management s assumption used when measuring allowance for inventory valuation and obsolescence losses; performing a retrospective review of the Company s historical accuracy of judgments with reference to inventory valuation and compare them with the current year s calculation to evaluate the appropriateness of the estimation and assumption used for inventory valuation; and evaluating the adequacy of the Company s disclosure for inventories. 3. The agreements of financial assets and liabilities offsetting Please refer to Note 4(f) and 6(i) for accounting policy and detailed information on the agreements of financial assets and liabilities offsetting. Description of the key audit matter: The Company had financial assets and liabilities offsetting agreements with financial institutions. Since whether the accounting treatment and disclosure of the agreements complied with the accounting standards or not will materially affect the financial statements, the said matter has been identified as a key audit matter. How the matter was addressed in our audit: In relation to the key audit matter above, our key audit procedures include understanding and testing the design and implementation of internal control over assets and liabilities offsetting; acquiring the offsetting agreements complied the accounting standards or and inspecting the contractual terms to determine whether the accounting treatment used is in compliance with the related accounting standards; and evaluating the adequacy of the Company s disclosure for financial assets and liabilities offsetting. - 15 -
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the 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 members of the Audit Committee) are responsible for overseeing the Company s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the 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 the auditing standards generally accepted in the Republic of China 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 financial statements. As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the 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 control. 2. 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 control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. 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 auditors report to the related disclosures in the 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 auditor s report. However, future events or conditions may cause the Company to cease to continue as a going concern. 5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. - 16 -
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. 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 financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors 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. The engagement partners on the audit resulting in this independent auditors report are Lin, Wan Wan and Yang, Leou Fong. KPMG Taipei, Taiwan (Republic of China) March 28, 2017 Note to Readers The accompanying financial statements are intended only to present the statement of financial 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 audit such financial statements are those generally accepted and applied in the Republic of China. The auditor s report and the accompanying 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 auditor s report and financial statements, the Chinese version shall prevail. - 17 -
- 18 -
- 19 -
- 20 -
Attachment II. Business Report Enterprise operation faces tougher challenges as Internet access becomes more widely adopted and changes in the market continues to accelerate. Facing new competition and dynamic market condition, Quanta believes firmly in our ideology of Innovation, Change and Transcend, leveraging our positive attitude to tackle challenges ahead through continuous exploration and strong desire to excel. We believe doing so would inspire better product design ideas and deliver stronger business performance. In recent years, Quanta continues to focus on advancing our core business, aside from introducing light-weight and fully equipped notebook computers, the Company also introduces more advanced high performance servers in response to the increasing needs in cloud computing industry. Moreover, the Company further invests in Virtual Reality (VR), Augmented Reality (AR), and Mixed Reality (MR) areas to capture new market opportunities. Furthermore, Quanta begins to develop solutions leveraging advanced technology in medical field in order to explore new business potentials. Building on the superior corporate value of Truthfulness, Kindness and Beauty, Quanta Computer continues to move forward step by step in order to realize our Corporate vision in creating greater value for our shareholders. Quanta s performance for FY2016 and outlook for FY2017 are as follow: I. Revenue and Income FY2016 was a tough year filled with harsh challenges for Quanta as industry competition intensified and global market faced greater uncertainties. Although consolidated revenue of NT$894BN in FY2016 was weaker than the previous year, gross margin and operating margin of 5.21% and 2.14% were both stronger than the previous year margins of 4.61% and 1.81% respectively. Despite harsh environment the Company faced in 2016, core business profitability remained steady. Net income after tax in FY2016 and FY2015 was NT$15.4BN and NT$17.7BN respectively. Net income attributable to owners of parent in FY2016 and FY2015 was NT$15.1BN and NT$17.8BN respectively. EPS in FY2016 was NT$3.93, while non-operating income was NT$1.2BN. Facing the ever-changing challenges ahead, Quanta leverages its four principals of Superior Quality, Superior Technology, Detailed Management, and Brighten Future to continue to innovate and to excel ourselves. In terms of business operation, Quanta responds to new market trend towards greater product variety at lesser volume by investing more resources in new technology advancement and new product introduction. Doing so enables ourselves to tackle the challenge of different technologies integration and to ensure the Company s sustainability and growth. II. Outlook in 2017 Year 2017 is the year that Quanta continues to push for automation in overall manufacturing process. Manufacturing techniques are expected to further advance and accelerate with upgraded equipment. Quanta is aggressively reaching for the target of Industrial 4.0 and pushing for companywide detailed management. Quanta is able to effectively control cost structure through shortened manufacturing process and simplified work flow.
Specific action plans include the following: Solidify Industrial 4.0 Target - Through simplified new product design, smart manufacturing management, increased material and shipment process efficiency, as well as instant feedback system implementation. The Company further develops smart system to manage material and schedule, as well as implements smart system and equipment to realize smart management and smart manufacturing process. Increase strategy flexibility and responsiveness- In response to fast changes in the market, Quanta maintains its leadership position through responsive manufacturing, development and management process. We proactively identify problems, take actions and maintain high flexibility to respond to changes. Maintain speedy R&D capability Cultivate a sense of judgment that accurately reflects current market condition, be responsible and accountable even under the pressure of shortened product life cycle in order to maintain speedy R&D capability. Strict cost control - Production costs continue to hike year after year, making cost control a much tougher challenge. At Quanta, we focus on deepened detail management, perfection in quality control, attention to details in production management, detailed calculation in cost control and express caring in man power management. There s no limit in operation improvement. Innovative thinking and demand creation - Facing the ever-changing industry and intensified competition, we continue to focus on innovation and strengthening our R&D expertise. Not only do we aim to sustain our leadership position, talents development and advancement are also crucial to our success. In terms of talents management, we focus on professional knowledge enhancement and deepened positive work attitude. Leverage innovative thinking as the fundamental to sustain our leadership position in the market. Maintain strong bond with customers - Market share allocation concentrated towards tier one companies has been a key market trend in the technology industry, thus maintaining high customer satisfaction in our products and services are crucial to our success. Quanta has launched a company-wide exercise entitled 2B- To Be The propose of the 2B exercise is to encourage employees To Be The Owners and for managers To Be The Leaders. Through the 2B exercise, we hope to cultivate a work atmosphere that encourages employees to act proactively and to have high self-discipline. The positive changes that each employee makes should transit well into his/her daily work and continue to improve work attitude and to accelerate selfexpectation. Greater changes within the Company can then be achieved from the small changes each employee makes. The 2B exercise is aim to create more competitive corporate culture, to sustain business growth and to spark motivation. We believe firmly that hard work brings prosperity. Through hard working, mindful thinking and non-quitting spirit, fruitful outcome should eventually be realized. Opportunities may vanish at any second, employees at Quanta should think of themselves as sponges to continue to absorb new knowledge, to think fast and to continuously challenge themselves. Be well prepared so we can seize
the opportunity when it comes. With strong dedication and hard working spirit from the entire Company, together we can achieve greater success and continue to accelerate Company value. Chairman: Vice Chairman: Chief Financial Officer: Barry Lam C.C. Leung Elton Yang
Attachment III Quanta Computer Inc. Audit Committees Review Report 28 th March, 2017 The Board of Directors has prepared and submitted to us the Company's 2016 business report, financial statements and proposal for allocation of distributable earnings. FY2016 financial statements have been audited and certified by KPMG. The business report, financial statements and allocation of distributable earnings proposal have been reviewed by the Audit Committee. We, the Audit Committee, have duly examined the same as correct and accurate. We hereby report to the 2016 Annual General Meeting of Shareholders in accordance with Article 14-4 of the Securities and Exchange Act as well as Article 219 of the Company Law. Quanta Computer lnc. Chairman of the Audit Committee : Wei-Ta Pan ( 潘維大 )
Attachment IV Allocation of Distributable Earnings Quanta Computer Inc. FY2016 Allocation of Distributable Earnings Unit: NT$ Item Total Undistributed surplus at the beginning of the period 36,979,820,097 Add: adjustment on defined benefit plan 43,556,551 Less: changes in equity of subsidiaries (76,904,332) Undistributed surplus at the beginning of the period post adjustments 36,946,472,316 Add: net income after tax for the period 15,138,164,028 Less: legal reserve from surplus (1,513,816,403) Less: special reserve (327,034,478) Available earnings for distribution 50,243,785,463 Distribution items: Less: stock dividends 0 Less: cash dividends (13,519,196,012) Undistributed earnings at the end of the period 36,724,589,451 Note: The stock dividend is NT$0 per share, cash dividend is NT$3.50 per share.
Attachment V. Amendments to the Procedures for Assets Acquisition or Disposal Quanta Computer Inc. The Procedures for Assets Acquisition or Disposal Before Amendment After Amendment Remarks Article 7: Acquiring or Disposing of Assets Section II Terms and conditions of the transaction and level of authorization (1) (2) Related party transactions: Relevant documents should be prepared in accordance with Chapter II Section II entitled Purchase of Real Estate from Related Parties of the Procedure. Prepared documents should be approved by the Board of Directors and reported to Supervisors. (3) (4) Section IV Evaluation Procedure for Acquisition and Disposal of Assets Article 7: Acquiring or Disposing of Assets Section II Terms and conditions of the transaction and level of authorization (1) (2) Related party transactions: Relevant documents should be prepared in accordance with Chapter II Section II entitled Purchase of Real Estate from Related Parties of the Procedure. Prepared documents should be submitted to the Audit Committee and approved by the Board of Directors. (3) (4) Section IV Evaluation Procedure for Acquisition and Disposal of Assets When the Company acquires or disposes of real property or other fixed assets, if the transaction amount reaches 20% of the Company s paidin capital or exceeds NT$300 million, except in transactions with government agencies, hiring others to build on its own land, hiring others to build on rented land, or acquiring or disposing of operating machinery and equipment, it shall first obtain an appraisal report from a professional When the Company acquires or disposes of real property or other fixed assets, if the transaction amount reaches 20% of the Company s paid-in capital or exceeds NT$300 million, except in transactions with government, hiring others to build on its own land, hiring others to build on rented land, or acquiring or disposing of operating machinery and equipment, it shall first obtain an appraisal report from a professional appraiser and shall further comply with the following provisions: Amend in accordance with regulation changes
appraiser and shall further comply with the following provisions: Section V: When acquiring or disposing membership certificates or intangible assets where the transaction price reaches 20% of the Company s paidin capital or exceeds NT$300 million, opinions regarding the transaction price from CPA shall be obtained prior to the date of occurrence, except when trading with a government agency. Where CPA s opinion is based on the professional opinions, it shall be prepared in accordance to the provisions of Statement of Auditing Standards No. 20 published by the ARDF. Article 9: Decision Making Process: When the Company acquires or disposes real estate or other assets and amount reaches 20% of the Company s paid-in capital or 10% of the Company s total assets or exceeds NT$300 million from a related party, except when trading government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds. The Company shall prepare the following documentation and submit to the Board of Directors and the Audit Committee for approval. Contracts can then be signed and payments may be made. Section V: When acquiring or disposing membership certificates or intangible assets where the transaction price reaches 20% of the Company s paid-in capital or exceeds NT$300 million, opinions regarding the transaction price from CPA shall be obtained prior to the date of occurrence, except when trading with government. Where CPA s opinion is based on the professional opinions, it shall be prepared in accordance to the provisions of Statement of Auditing Standards No. 20 published by the ARDF. Article 9: Decision Making Process: When the Company acquires or disposes real estate or other assets and amount reaches 20% of the Company s paid-in capital or 10% of the Company s total assets or exceeds NT$300 million from a related party, except when trading government bonds or bonds under repurchase and resale agreements, or subscription or buy back of domestic money market funds issued by security investment trust funds. The Company shall prepare the following documentation and submit to the Audit Committee and approved by the Board of Directors and the Audit Committee for approval. Contracts can then be signed and payments may be made. Word adjustments in accordance with regulation changes
Article 21 Prior to convening the Board of Directors for a resolution, the Company engaging in a merger, split, acquisition or share transference shall retain accountants, attorneys or securities underwriters for opinions on the reasonableness of the share conversion rates, acquisition price or the cash or other assets distributed to shareholders, and submit the opinions to the Board of Directors for approval. Article 23: When participating in a merger, demerger or acquisition, the Company shall prepare the following information in written record and retain it for 5 years for check: (1) Basic identification data for personnel: Including the occupational titles, names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, split, acquisition, or transfer of another company's shares prior to disclosure of the information. (2) Dates of material events: Including the signing of any Article 21 Prior to convening the Board of Directors for a resolution, the Company engaging in a merger, split, acquisition or share transference shall retain accountants, attorneys or securities underwriters for opinions on the reasonableness of the share conversion rates, acquisition price or the cash or other assets distributed to shareholders, and submit the opinions to the Board of Directors for approval. Professional opinions may be exempted in the case that the Company merges a subsidiary it directly or indirectly holds 100% of the issued shares or authorized capital, and in the case of a merger between subsidiaries in which the Company directly or indirectly holds 100% of the respective subsidiaries issued shares or authorized capital. Article 23: When participating in a merger, demerger or acquisition, the Company shall prepare the following information in written record and retain it for 5 years for check: (1) Basic identification data for personnel: Including the occupational titles, names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, split, acquisition, or transfer of another company's shares prior to disclosure of the information. (2) Dates of material events: Including the signing of any letter of intent or Amend in accordance with regulation changes and exempt professional opinions requirements in the event of mergers between subsidiaries the Company directly or indirectly holds100% of its shares or capital. Correct correspondent paragraph numbers
letter of intent or memorandum of understanding, the hiring of a financial or legal advisor, the execution of a contract, and the convening of a board of directors meeting. (3) Important documents and minutes: Including merger, demerger, acquisition, and share transfer plans, any letter of intent or memorandum of understanding, material contracts, and minutes of board of directors meetings. The Company shall, within two days of passage of a resolution by the Board of Directors, report (in the prescribed format and via the Internet-based information system) the information set out in subparagraphs 1 and 2 of the preceding paragraph to the FSC for recordation. Article 27: Procedures for public reporting: (1) When acquiring or disposing of assets, the Company shall publicly announce and report relevant information in accordance with its type on the Financial Supervisory Commission s Designated webs site in the prescribed format before the start of trading hours within two business days after the event in any of the following circumstances: I. Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20% or more of paid-in memorandum of understanding, the hiring of a financial or legal advisor, the execution of a contract, and the convening of a board of directors meeting. (3) Important documents and minutes: Including merger, demerger, acquisition, and share transfer plans, any letter of intent or memorandum of understanding, material contracts, and minutes of board of directors meetings. The Company shall, within two days of passage of a resolution by the Board of Directors, report (in the prescribed format and via the Internet-based information system) the information set out in subparagraphs 2 and 3 of the preceding paragraph to the FSC for recordation. Article 27: Procedures for public reporting: (1) When acquiring or disposing of assets, the Company shall publicly announce and report relevant information in accordance with its type on the Financial Supervisory Commission s Designated webs site in the prescribed format before the start of trading hours within two business days after the event in any of the following circumstances: I. Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20% or more of paid-in capital, 10% or more of the company's total assets, or Amend in accordance with regulation changes
capital, 10% or more of the company's total assets, or exceeds NT$300 million; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements or subscription or redemption of domestic money market funds. II. Merger or consolidation, split, acquisition, or assignment of shares. III. Losses from derivative trading exceeding the overall limit or individual contract limit specified in these Procedures IV. When asset transactions other than those referred to in the preceding three subparagraphs amount reaches twenty percent of the Company s paid-in capital or NT$300 million or more; this shall not apply, however, in the following circumstances: i. Trading of government bonds ii. Securities trading by investment professionals on foreign or domestic securities exchanges or over-the-counter markets, or subscription of securities by a securities firm, either in the primary market or in accordance with relevant regulations. iii. Trading of bonds under repurchase/resale agreements, or subscription or redemption of domestic money market funds. iv. Where the type of asset acquired or disposed is equipment/machinery for business use, the trading counterparty is not a exceeds NT$300 million; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements or subscription or buy back of domestic money market funds issued by security investment trust funds. II. Merger or consolidation, split, acquisition, or assignment of shares III. Losses from derivative trading exceeding the overall limit or individual contract limit specified in these Procedures IV. Where the type of asset acquired or disposed is equipment for business use, the trading counterparty is not a related party, and the transaction amount meets any of the following criteria: i. For a public company whose paid-in capital is less than NT$10 billion, the transaction amount reaches NT$500 million or more. ii. For a public company whose paid-in capital is NT$10 billion or more, the transaction amount reaches NT$1 billion or more V. Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company expects to invest in the transaction reaches NT$500 million. VI. When asset transactions other than those referred to in the