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HON HAI PRECISION INDUSTRY CO., LTD.
Annual Report2012
Annual Report Website
Market Observation Post System: http://mops.twse.com.tw
Company Website: http://www.foxconn.com.tw
Printing Date: April 30, 2013
Stock Code
2317
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THIS IS A TRANSLATION OF THE 2012 ANNUAL REPORT (THE ANNUAL
REPORT) OF HON HAI PRECISION INDUSTRY CO., LTD. (THE COMPANY).
THIS TRANSLATION IS INTENDED FOR REFERENCE ONLY AND NOTHING ELSE,
THE COMPANY HEREBY DISCLAIMS ANY AND ALL LIABILITIES WHATSOEVER
FOR THE TRANSLATION. THE CHINESE TEXT OF THE ANNUAL REPORT SHALLGOVERN ANY AND ALL MATTERS RELATED TO THE INTERPRETATION OF THE
SUBJECT MATTER STATED HEREIN.
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I. Spokesperson: Deputy Spokesperson:
Name: Simon Hsing Name: Jack Hsiao
Title: Spokesperson Title: Director of Public Relations Office
Tel: (02)2268-3466#3629 Tel: (02)2268-3466#3628
E-mail:[email protected]
II. Contact information of the head office, branch offices and factories
Head officeAdd: No. 66, Zhongshan Road, Tucheng Industrial Zone, Tucheng District, New Taipei CityTel: (02)2268-3466
Hsinchu Science Park Branch OfficeAdd: 5F-1, No. 5, Hsin-an Road, Hsinchu Science and Industrial Park, East Area, HsinchuCityTel: (03)578-4975
Neihu Branch OfficeAdd: 1F-11F, No. 32, Jihu Road, Neihu District, Taipei CityTel: (02)2799-6111
California (US) Branch OfficeAdd: 288 S. Mayo Ave City of Industry, CA 91789 U.S.A.Tel: 1-714-680-2066
Huyue Factory
Add: No. 2, Zihyou Street, Tucheng Industrial Zone, Tucheng District, New Taipei CityTel: (02)2268-3466
Minsheng FactoryAdd: No. 4-1, Minsheng Road, Tucheng Industrial Zone, Tucheng District, New Taipei City.Tel: (02)2267-6511
Dingpu No. 1 FactoryAdd: No. 53, Section 4, Zhongyang Road, Tucheng District, New Taipei CityTel: (02)2268-3466
Dingpu No. 2 FactoryAdd: 2F, No. 53, Section 4, Zhongyang Road, Tucheng District, New Taipei CityTel: (02)2268-3466
Dingpu No. 5 Factory
Add: 4F, No. 53, Section 4, Zhongyang Road, Tucheng District, New Taipei City
Tel: (02)2268-3466
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III. Share Transfer Agency
Name: Grand Fortune Securities Co., Ltd.Address: 3F, No. 51, Section 1, Minsheng East Road, Taipei CityTel: (02)2562-1658
Website: http://www.gfortune.com.tw
IV. Contact information of the Certified Public Accountants for the Latest Financial
Repot
Name: Hsu, Yong-jian, Xue, Ming-lingCPA Firm: Pricewaterhouse Coopers (PwC) TaiwanAddress: 27F, No. 333, Section 1, Keelong Road, Taipei CityTel: (02)2729-6666Website: http://www.pwc.tw
V. Overseas trade places for listed negotiable securities
London Stock Exchange: http://www.londonstockexchange.com
Singapore Stock Exchange: http://www.sgx.com/wps/portal/marketplace/mp-ch/home
VI. Company Website: http://www.foxconn.com
http://www.gfortune.com.tw/http://www.gfortune.com.tw/http://www.pwc.tw/http://www.pwc.tw/http://www.londonstockexchange.com/http://www.londonstockexchange.com/http://www.sgx.com/wps/portal/marketplace/mp-ch/homehttp://www.sgx.com/wps/portal/marketplace/mp-ch/homehttp://www.foxconn.com/http://www.foxconn.com/http://www.foxconn.com/http://www.sgx.com/wps/portal/marketplace/mp-ch/homehttp://www.londonstockexchange.com/http://www.pwc.tw/http://www.gfortune.com.tw/ -
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Table of ContentsI. Letter to Shareholders .................................................................................................................. 1II. Company Introduction ................................................................................................................. 3
A. Founding date: February 20, 1974 ............................................................................................... 3B. Formation History ....................................................................................................................... 3
III. Corporate Governance Report ..................................................................................................... 9
A. Organization ................................................................................................................................ 9B. Implementation of corporate governance .................................................................................. 31C. Information on Accountants Fees............................................................................................ 49D. Alternation of CPA .................................................................................................................... 49E. The Companys chairman, general manager, or any managerial officer in charge of
finance or accounting matters has in the most recent year held a position at theaccounting firm of its CPA or at an affiliated enterprise: .......................................................... 49
F. Transfer & pledge of stock equity by directors, supervisors, managerial officers andholders of 10% or more of company shares: ............................................................................. 50
G. Information on relation among top ten shareholders ................................................................. 52H. Combined shareholding percentage ........................................................................................... 53
IV. Company Shares and Fund Raising ........................................................................................... 54
A. Company capital and shares ...................................................................................................... 54B. Section on Corporate Bonds ...................................................................................................... 63C. Preferred Shares (with warrants): .............................................................................................. 67D. Global Depository Receipts (GDR) ........................................................................................... 67E. Subscription of warrants for employees: ................................................................................... 68F. Name of managers holding warrants for employees and top ten employees in terms of
subscription of warrants, and the acquisition status: ................................................................. 69G. Subscription of new shares for employee restricted stocks: ...................................................... 69H. Name of managers holding the new shares for employee restricted stocks and top ten
employees in terms of subscription of the new share, and the acquisition status: ..................... 69I. Issuance of new shares for merging and transferring the stocks of other companies: ............. 69J. Implementation of fund usage plan: .......................................................................................... 69
V. Operational Highlights .............................................................................................................. 70
A. Business Activities .................................................................................................................... 70B. Production and Sales Status ....................................................................................................... 72C. Information on Environmental Protection Costs ....................................................................... 75D. Labor Relations ......................................................................................................................... 76
VI. Financial Standing ..................................................................................................................... 81
A. Most Recent 5-Year Concise Financial Information ................................................................. 81B. Most Recent 5-Year Financial Analysis .................................................................................... 85C. Audit Report by Supervisors ..................................................................................................... 89D. 2012 Financial Statements Consolidated With Subsidiaries Audited by CPA .......................... 91
VII. Financial Analysis ................................................................................................................... 237
A. 2012 vs. 2011 Financial Analysis ............................................................................................ 237B. 2012 vs. 2011 Operating Result Analysis ............................................................................... 237C. Cash Flow Analysis ................................................................................................................. 238
VIII. Special Notes ........................................................................................................................... 239
A. Consolidated Financial Statements of Affiliates ..................................................................... 239
B. Affiliated Companies Reports: ................................................................................................ 240
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I. Letter to ShareholdersAlthough the political and economic environments are so turbulent, the industrial aspects alsohave been through tremendous changes, our Company has gained better performance since
last year, the consolidated revenue and profit once both hit record highs! On behalf of theBoard of Directors of the Company, I want to thank all my colleagues for their hard workingand dedicated contributions. Once again, I sincerely thank our strategic partners andcustomers for their continued trust and also thank all the shareholders of the Company for
their long-term support.
The international economic environment of 2012 was again precarious. From the very
beginning of 2012, although the United States government extended the low interest ratepolicy to stimulate the economy, the debt problems of Greece, Italy and Spain expanded andonce again triggered a debt crisis in Europe, which restrained the global economic recovery.The presidential elections of many countries were in the second half of 2012, the uncertainty
of which created a more unpredictable situation around the world. Especially, the U.S. fiscalcliff problem has lowered global consumer confidence significantly, and bogged downeconomic development. Fortunately, after the U.S. Federal Reserve Board initiated the third
and fourth quantitative easing monetary policy, the tension of the global economy has beeneased.
Despite operating in such a difficult business environment, under the concerted efforts of all
my colleagues our Company not only achieved excellent performance results but also earnedour remarkable reputation around the world: According to the U.S. Fortune Global 500
ranking report, our Company has moved up to the next level, from 60th in 2011 to once againadvance to 43rd last year. In addition, our Company has already obtained 2,013 U.S. patentsin 2012, ranking 8th in the whole world. We have proved Hon Hais strong competitive
strength once again.
Looking forward to 2013, the steady growth of the U.S. economy may gradually lead theglobal economic recovery, but while the U.S. deficit reduction programs take effectautomatically, whether the debt ceiling can be increased and other issues will affect consumerconfidence. Meanwhile, the most important is that the U.S. policy of quantitative easing mayexit in the second half of this year, it will be a big challenge weather the economy is capableof sustained recovery at that time. In addition, high unemployment rates and low growth rates
persist in the European market, new developing countries face different issues such as
inflation, unemployment, growth slows etc., coupled with the rapid changes in the ecologicalstructure of the technology industries, 2013 is still full of uncertainty. In view of this, in
addition to continuous investment in research and development of different areas of scienceand technology, our Company is committed to efficiency, automation, unmanned
productions and globalization to enable our Company to continue to take the leadingposition in the eight-screens-one-network-one-cloud business territory. The Groupdescribes 2013 as a key year, and looks forward to extend the business from core
manufacturing and technology to technology services whichthe development goal is to gothrough from the first mile to last mile. We are confident that even though the overall
business recovery cycle is still highly uncertain, we will be able to break through all thedifficulties and challenges to bring you all more value!
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Once again, on behalf of all shareholders of the Company, I sincerely thank all the employees
and their families. I also encourage the Companys management team continue to work hardto maintain the excellent operating results. Thank you so much for all your support.
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II. Company IntroductionA. Founding date: February 20, 1974
Listing date: June 18, 1991
B. Formation HistoryIn 1994
1. Increased capital to NT$1,303,000,000.2. Reinvested Vate Technology Co., Ltd.3. Reinvested LUNG HWA Electronics.4. Many new products like AN and AT were developed.
In 1995
1. Increased capital to NT$2,279,000,000.2. Reinvested Unimicron Technology Corporation.3. Reinvested United Microelectronics Corporation.4. Many new products like L/P MCA, SGC and RF were developed.5. Huyue Factory carried out its third phase for expansion.
In 1996
1. Increased capital to NT$3,580,000,000.2. Reinvested Hongyang Venture Capital Investment Co., Ltd.3. Reinvested Guifeng Co., Ltd.
In 1997
1. Increased capital to NT$5,118,000,000.2. Set up the heat transfer product business office and environmental-friendly
electro-plating technique development department.
3. Established the Material Testing Center.In 1998
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1. Increased capital to NT$7,346,000,000.2. Established the High-Speed Electrical Test Lab, the EMI/RFI Lab and Heat
Transfer Lab.
3. Listed into The Information Technology 100 (IT 100) by the Business Weekof America for the first time.In 1999
1. Increased capital to NT$11,000,000,000.2. Capital was first raised from the international finance market via GDR
issuance with 10% premium for issuing, creating a new high in overseas
capital raising by domestic enterprises.
3.
Selected as the Best Management Company in Taiwan by Asian Money.
In 2000
1. Increased capital to NT$14,529,000,000.2. Issued US$345 million of overseas unsecured and transferable corporate
bonds.
3. Invested Foxconn Optical Technology Inc. through its subsidiary FOTIHoldings Corporation.
In 2001
1. Increased capital to NT$17,687,800,000.2. Evaluation of Taiwan Ratings as long-term issuer: grade AA- and its prospect:
stability.
3. Evaluation of Standard & Poors (S & P): grade BBB and its prospect:stability.
4. Became the first largest private manufacturing enterprise in Taiwan.5. It is the earliest manufacturer of quantity production around the world for Intel
Pentium 4 CPU Stocket478.
6. Issued NT$5 billion of domestic unsecured ordinary corporate bonds.In 2002
1. Increased capital to NT$20,648,970,000.2. According to survey of Taiwan Ratings, it was the first largest manufacturing
enterprise in Taiwan.
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3. Won the first prize of the Best Corporate Strategy by Asiamoney.com.4. Became the first largest exporter in Greater China.
In 2003
1. Increased capital to NT$25,109,744,000.2. Issued US$450 million of overseas unsecured and transferable corporate
bonds.
3. According to evaluation of IR Magazine, it was awarded the Best InvestorRelation in Taiwan.
4. Acquired Motorola Chihuahua Factory in Mexico.In 2004
1. Increased capital to NT$32,310,231,030.2. Acquired Eimo Oyji of Finland.3. Merged Taiwan Ambit Microsystems (Stock) Company.4. Became the first largest 3C OEM globally.
In 2005
1. Increased capital to NT$40,383,230,780.2. Invested Antai Power (Stock) Company through its subsidiary Hongyang
Venture Capital Investment (Stock) Company.
3. Invested Chi Mei Communication Systems Inc. through its subsidiary Transworld Holdings Limited.
4. Issued NT$11,500,000,000 of domestic unsecured ordinary corporate bonds.5. Its overseas subsidiary Foxconn International Holdings Ltd. was listed in
Hong Kong.
6. Selected as the first largest enterprise in Taiwan firstly by Common Wealth.7. Ranked among the Top 15 of the Worlds Most Admired Companies in
Electronics byFortune.
8. Became a member of Electronic Industry Code of Conduct (EICC), dedicatedto promoting corporate social and environmental responsibilities (hereinafterreferred to as SER).
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In 2006
1. Increased capital to NT$51,681,387,530.2. Merged Taiwan Premier Image Technology Corp.3. Issued NT$18,000,000,000 of domestic unsecured and transferable corporate
bonds.
4. Selected as the Happiest Taiwan Enterprise according to the questionnairesurvey of 104 Job Bank.
5. Selected as the Most Desirable Company of office staff of Taiwan accordingto the survey of Cheers.
6. Nominated as the Best Investor Relation Company in Taiwan by IR Magazine.7. Nominated as the Best Corporate Governance of the Year in Taiwan by IR
Magazine.
In 2007
1. Increased capital to NT$62,907,665,030.2. Awarded as the Most Admired Enterprise in Taiwan by Common Wealth.3. Nominated as the Best Investor Relation Company in Taiwan by IR Magazine.4. Awarded the Progress Prize for the best investor relation company in Taiwan
by IR Magazine.
5. Awarded the title of the Worlds Top 10 Chinese Enterprises of the Year byAsiaweek.
6. Ranked 154thamong Fortune Global 500 Enterprises.In 2008
1. Increased capital to NT$74,146,234,780.2. Issued NT$5,180,000,000 of domestic unsecured ordinary corporate bonds.3. Awarded as the Most Admired Enterprise in Taiwan by Common Wealth.4. Ranked 132ndamong Fortune Global 500 Enterprises.
In 2009
1. Increased capital to NT$85,789,318,550.2. Issued NT$6,820,000,000 of domestic unsecured ordinary corporate bonds.3. Ranked 109thamong Fortune Global 500 Enterprises.
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4. Ranked first among Taiwan enterprises for four consecutive years by TaiwanRatings.
5. Awarded as the Best Management Enterprise in Taiwan by Finance Asia.6. Recognized as one of Asias Fabulous 50 of Asia by Forbes.
In 2010
1. Increased capital to NT$96,612,482,030.2. Issued US$1,000,000,000 of overseas transferable corporate bonds.3. Issued NT$6,000,000,000 of domestic unsecured ordinary corporate bonds.4. Ranked 176thamong the Forbes Global 2000.5. Ranked first among Taiwan Top 1000 Enterprises for five consecutive years
according to the evaluation of Common Wealth.
6. Ranked first among Taiwan enterprises for five consecutive years by TaiwanRatings.
7. Ranked 194thamong the Global 500 Enterprises by (Britain) Financial Times.8. Ranked 112thamong Fortune Global 500.9. Awarded as the Most Admired Companies in Taiwan by Common Wealth.
In 2011
1. Increased capital to NT$106,890,066,630.2. Issued NT$18,000,000,000 of domestic unsecured ordinary corporate bonds.3. Ranked 189thamong Forbes Global 2000.4. Ranked first among Top 1000 Taiwan Enterprises for six consecutive years by
Common Wealth.
5. Ranked first among Taiwan enterprises for six consecutive years according tothe evaluation of Taiwan Ratings.
6. Ranked 60thamong Fortune Global 500 by Fortune.7. Awarded the Most Admired Enterprise in Taiwan by Common Wealth.
In 2012
1. Increased capital to NT$108,358,665,270.2. Issued NT$16,300,000,000 of domestic unsecured ordinary corporate bonds.
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III. Corporate Governance ReportA. Organization
(1)Organization Chart
Chairman Chairmans Office
Board of Directors
President
HumanR
esourcesDivision
CESBGBu
sinessGroup
iDSBGBusinessGroup
iDPBGBusinessGroup
CNSBGBu
sinessGroup
CMMSGB
usinessGroup
NWInGBusinessGroup
SHZBG
B
usinessGroup
GlobalR&
DCenter
F&Aand
Investment
Managem
entDivision
SysteminformationDivision
GlobalProcurementDivision
GlobalLegalDivision
PCEBGBu
sinessGroup
Executive Secretary
Internal Audit Division
CCPBGBusinessGroup
Shareholders Meeting
Compensation Committee
Supervisors
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(2)Department functionsInternal Audit Division
Audit internal regulations and rules and put forward proposals for improvement.
President
President is responsible for working out business objectives, taking charge of theimplementation of overall businesses, guiding and supervising the departments to dealwith their respective businesses.
Business Group
Provide customers with such services as the best design development, trial
production, small scale production, mass production, global logistics and after-sale
services, etc.
F&A and Investment Management Division
Responsible for financial and accounting matters, budget preparation and control,capital planning and scheduling, operations concerning stock.
Global R&D Center
Mainly to make overall planning for R&D resources, work out R&D direction andintegrate R&D with production and manufacturing.
System Information Division
Responsible for establishing, maintaining, managing, controlling and auditing theglobal information system of the Company and setting up safe management andcontrol and firewall and other relevant mechanisms. Also in charge of connectingglobal network communication systems of the Company, ERP, KM, virtual office andother platforms.
Global Procurement Division
Responsible for purchasing raw materials needed by the Company for production and
manufacturing and adjusting the procurement strategies according to industrialprospects.
Global Legal Division
Responsible for developing, applying and maintaining intellectual property rights forthe Company and dealing with relevant lawsuits.
Human Resources Division
Responsible for comprehensive management of such businesses of the Company as
personnel, checking attendance and recruitment etc.
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(3)Directors and SupervisorsDate: 04/28/2013
Title Name
Date of
Election
(appointment)
Term
of
Office
First
Elected
Date
Shares held when
electedCurrent shareholding
Shares currently
held by their
spouses and
minor children
Shares held in
the name of
othersMain working (education)
experience
Current positions in the Company and
other companies
Spouse or second-degree
relative holding a
position as key manager,
director or supervisor
Number % Number % Number % Number % Title NameRelatio
n
ChairmanGou, Tai-ming
(Terry Gou)
Jun. 8,2010Jul. 1,2010
3 Feb. 20,
1974
925,961,760 10.79 1,473,989,536 12.45 0 0 0 0
Graduated from China MarineTechnical CollegeDirector of Taiwan ElectricalEquipment Association,
Chairman of Mold IndustryAssociation
None
None None None
Director
Hon Chiao
International
Investment Co.,
Ltd
Jun. 8,2010Jul. 1,2010
3 Jun. 10,1995
13,767,634 0.16 18,657,897 0.16 0 0 0 0None None
None None None
Representative:
Tai, Jeng-wu
Jun. 8,2010Jul. 1,2010
3 Jul. 1,2001
8,399,832 0.09 10,869,951 0.09 905,138 0 0 Tatung Institute of Technology,Taiwan
President of Shenzhen Fujun MaterialTechnology Co., Ltd.President of Futaijie Science and TechnologyDevelopment (Shenzhen) Co., Ltd.Director of Fuhongyuan EnvironmentalTechnology (Shenzhen) Co., Ltd.Representative of directors of XinxiTechnology (Stock) CompanyRepresentative of Fitipower IntegratedTechnology Inc.
None None None
Director
Hon Chiao
International
Investment Co.,
Ltd
Jun. 8,2010Jul. 1,2010
3 Jun. 15,1998
13,767,634 0.16 18,657,897 0.16 0 0 0 0None None
None None None
Representative:
Lu, Sung-ching
Jun. 8,2010Jul. 1,2010
3 Feb. 21,2000
20,470,434 0.23 17,120,384 0.14 3,097 0 0 0 Masters Degree, University ofIllinois, U.S.A
None
None None None
Director
Hon Jin
International
Investment Co.,
Ltd
Jun. 8,2010Jul. 1,2010
3 Jun. 8,2007
961,344 0.01 1,302,812 0.01 0 0 0 0None None
None None None
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Title Name
Date of
Election
(appoint
ment)
Term
of
Office
First
Elected
Date
Shares held when
electedCurrent shareholding
Shares currently
held by their
spouses and
minor children
Shares held in
the name of
othersMain working (education)
experience
Current positions in the Company and
other companies
Spouse or second-degree
relative holding a
position as key manager,
director or supervisor
Number % Number % Number % Number % Title NameRelatio
n
Representative:
Lu, Fang-ming
Jun. 8,2010Jul. 1,2010
3 Jun. 8,2010
3,120,623 0.04 6,344,859 50.05 1,535,802 0.01 0 0
Masters Degree of Institute ofApplied Physics, Chung YuanChristian UniversityTaiwan General Manager of AsiaPacific Region, Lingyun Scienceand Technology Co. Ltd. GeneraManager of Taiwan ComputerSystem, Hewlett Packard
None
None None None
Director
Hon JinInternational
Investment Co.,
Ltd
Jun. 8,2010Jul. 1,2010
3 Jun. 8,2007
961,344 0.01 1,302,812 0.01 0 0 0 0None None
None None None
Representative:
Chien, Yi-bin
Jun. 8,2010Jul. 1,2010
3 Jun. 8,2007
1,6,83,250 0.02 1,589,324 0.01 0 0 0 0International trade department ofTamkang University
Supervisor of Bao Xin InternationalInvestments Co., Ltd.Director of Expressive Profits Incorporated
None None None
ndependent
DirectorWu, Yu-Chi
Jun. 8,2010Jul. 1,2010
3 Jun. 8,2010
0 0 0 0 0 0 0 0
Masters Degree in Accounting,National Taiwan UniversityBachelor degree in accounting,Tunghai University
President of Ji-Tou United Accountant Firm
S u p e r v i s o r o f I - S h e n g E l e c t r i c
W i r e & C a b l e C o . , L t d .
Supervisor of Procystal Technology Co.,
Ltd.
None None None
ndependent
DirectorLiu, Cheng-Yu
Jun. 8,2010Jul. 1,2010
3 Jun. 8,2007
0 0 0 0 0 0 0 0Masters Degree in Finance,
National Taiwan UniversityAttorney of I-Si Technology Law Firm None None None
Supervisor
Fu-Rui
International
Investment Co.,Ltd.
Jun. 8,2010Jul. 1,2010
3 Jun. 15,1998
41,718,123 0.49 56,536,398 0.48 0 0 0 0None NoneNone None None
Representative:
Wan, Jui-hsia
Jun. 8,2010Jul. 1,2010
3 Jun. 10,2004
14,706 0.00 0 0 0 0 0 0
Masters Degree in Accounting,Soochow UniversityDeputy professor, Departmentof Account, National TaiwanUniversity
Supervisor of Cheng Uei Precision IndustryCo., Ltd. None None None
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Title Name
Date of
Election
(appoint
ment)
Term
of
Office
First
Elected
Date
Shares held when
electedCurrent shareholding
Shares currently
held by their
spouses and
minor children
Shares held in
the name of
othersMain working (education)
experience
Current positions in the Company and
other companies
Spouse or second-degree
relative holding a
position as key manager,
director or supervisor
Number % Number % Number % Number % Title NameRelatio
n
upervisor Huang, Qing-Yuan
Jun. 8,
2010Jul. 1,2010
3 Jun. 8,2007
0 0 0 0 1,161,318 0.01 0 0
Masters Degree, GraduateSchool of Business, Nihon
University, JapanPhD, Graduate School ofBusiness, Nihon University
Independent Director of Cathay FinancialHoldingsIndependent Director of Cathay LifeInsuranceIndependent Director of Cathay SecuritiesCorporationIndependent Director of Cathay United BankSupervisor of Maishi Venture Capital
Investment Co., Ltd.Director of DFI Inc.Director of Taiwan Stock ExchangeCorporation (TWSE)Independent Director of TAIWANGLASSGROUPSupervisor of Maishi #2 Venture CapitalInvestment Co., Ltd.President of WeiHeng Asset ManagementCo., Ltd
None None None
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(4)Major shareholders of institutional shareholdersDate: 04/28/2013
Name of Institutional Shareholder Name of Major Shareholders Percentage
Hongqiao International Investment Co., Ltd.Outstanding Growth Ltd., British Virgin Islands 90.99%
Shijun International Investment Co., Ltd. 9.01%
Hongjing International Investment Co., Ltd.Hongyuan International Investment Co., Ltd. 50%
Hongqi International Investment Co., Ltd. 50%
Furui International Investment Co., Ltd.Xu Muji 99.83%
Chien, Yi-bin 0.17%
(5)Principal shareholder of corporate shareholders with a juridical person as itsmain shareholder
Name Major shareholders Percentage
Outstanding Growth Ltd., British VirginIslands
INB Holdings Limited 100%
Shijun International Investment Co., Ltd. Great Century International Limited 100%
Hongyuan International Investment Co., Ltd. Hon Hai Precision Industry Co., Ltd. 100%
Hongqi International Investment Co., Ltd. Hon Hai Precision Industry Co., Ltd. 100%
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(6)Professional knowledge and independence check matrix of directors and supervisorsQualification
Name
Has over five years work experience and following
professional qualifications Independence Attribute (See Notes Below)
Current
Positions at
Other
Companies
Business, LegalAffairs, Finance,
Accounting,Lecturer or above inColleges in Related
departments
Judge, Prosecutor,Attorney, CPA or
National CertifiedProfessionals
Business,Legal Affairs,
Finance,Accounting orRelated Work
Experience
1 2 3 4 5 6 7 8 9 10
Gou, Tai-ming 0
Tai, Jeng-wu 0
Lu, Sung-ching 0
Lu, Fang-ming 0
Chien, Yi-bin 0
Wu, Yu-Chi 0
Liu, Cheng Yu 0
Huang, Qing-Yuan 3
Wan, Jui-hsia 0
Notes:The Directors and Supervisors comply with the following conditions from two years before being elected and during his tenure in office:(1) Not an employee of this Company or its affiliates.(2) Not a Director or Supervisor of the Company or its affiliates. (However, this does not apply, in cases where the person is an Independent Director of the company,
its parent company, or any subsidiary in which the company directly or indirectly holds more than 50% of the voting shares.)(3) Not a natural-person shareholder who holds shares, together with those held by the persons spouse, minor children, or held by the person under others names, in an
aggregate amount of one percent or more of the total number of outstanding shares of the Company or ranking in the top ten in holdings.(4) Not a spouse, second-degree relative or fifth degree relative of those listed in the above three items.(5)
Not a director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total numb er of outstanding shares of the Companyor that holds shares ranking in the top five in holdings.
(6) Not a director, supervisor, manager or a shareholder holding five percent or more of the shares of a company or institution that has a business or financialrelationship with the Company.
(7) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, providescommercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the company, or a spouse thereof.
(8) Not a spouse of or a second degree relative of any other Director of the Company.(9) No violations of Article 30 of the Company Act.(10) Not a governmental, judicial person or its representative as defined by Article 27 of the Company Act.
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(7)Management Team InformationDate: 04/28/2013
Title NameInaugura
tion date
Shareholding
Currently
holding shares of
spouses and
minor children
Holding
shares in the
name of
othersMain experience (education
experience)Current positions at other companies
Spouse or second-
degree relative holding
a position as manager
Number % Number % Number % Title Name Relation
hairman
ndresident
TerryGou Feb. 20,1989 1,473,989,536 12.45 0 0 0 0
Graduated from China MarineTechnical College
Director of Taiwan ElectricalAppliances Equipment AssociationChairman of Mold IndustryAssociation
None None None None
DepartmentGeneralManager
Tai,Jeng-wu
Aug. 1,1992
10,869,951 0.09 905,138 0.01 0 0Tatung Institute of Technology,Taiwan
President of Shenzhen Fujun MaterialTechnology Co., Ltd.President of Futaijie Science and TechnologyDevelopment (Shenzhen) Co., Ltd.Director of Fuhongyuan EnvironmentalTechnology (Shenzhen) Co., Ltd.Representative of directors of XinxiTechnology (Stock) CompanyRepresentative of Fitipower IntegratedTechnology Inc.
None None None
DepartmentGeneralManager
Lu,Sung-ching
Aug. 1,1992
17,120,384 0.14 3,097 0.00 0 0 Masters Degree, University ofIllinois, U.S.A.
None None None None
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Title NameInaugura
tion date
Shareholding
Currently
holding shares of
spouses and
minor children
Holding
shares in the
name of
othersMain experience (education
experience)Current positions at other companies
Spouse or second-
degree relative holding
a position as manager
Number % Number % Number % Title Name Relation
Department
GeneralManager
You,Xiang-fu
May 27,1992
36,643,284 0.31 57,169,569 0.48 0 0 Graduated from Tamsui Institute ofBusiness Administration, Taiwan
President of Huaian Fulitong Trade Co., Ltd.President of Qunkang Electronics (Kunshan)Co., Ltd.
President of Fuyu Energy Technology(Kunshan) Co., Ltd.President of Fuyu ElectronicTechnology(Huaian) Co., Ltd.
None None None
DepartmentGeneralManager
Lu,Fang-ming
Apr. 1,2003
6,344,859 0.05 1,535,802 0.01 0 0
Masters Degree of Institute ofApplied Physics, Chung-YuanChristian UniversityTaiwan General Manager of Asia-Pacific Region, Lingyun Scienceand Technology Co., Ltd.General Manager of Taiwan
Computer System, Hewlett Packard
None None None None
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Title NameInaugura
tion date
Shareholding
Currently
holding shares of
spouses and
minor children
Holding
shares in the
name of
othersMain experience (education
experience)Current positions at other companies
Spouse or second-
degree relative holding
a position as manager
Number % Number % Number % Title Name Relation
DepartmentGeneralManager
Jiang,Hao-liang
May 1,2005
2,958,872 0.02 0 0 0 0Univ. of Birmingham. UKBachelor of EE
None None None None
DepartmentGeneralManager
Chien,Yi-bin
Jun. 1,2005
1,589,324 0.01 0 0 0 0International Trade Department ofTamkang University, Taiwan
Director of Expressive Profits IncorporatedRepresentative of supervisors of BaoxinInternationalInvestment (Stock) Company
None None None
DepartmentGeneralManager
Xu,Mu-ji
Jun. 1,2005
9,365,774 0.08 0 0 0 0Graduated from National Chin-YiUniversity of Technology, Taiwan
President of Hongzhun Precision Tooling(Kunshan)Co., Ltd.
President of Hongzhun Precision Tooling(Shenzhen)Co., Ltd.
None None None
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Title NameInaugura
tion date
Shareholding
Currently
holding shares of
spouses and
minor children
Holding
shares in the
name of
othersMain experience (education
experience)Current positions at other companies
Spouse or second-
degree relative holding
a position as manager
Number % Number % Number % Title Name Relation
DepartmentGeneralManager
Zhong,Yi-wen
Jan. 1,2007
186,045 0.00 0 0 0 0
Bachelor degree in economics,Iowa State University, U.S.A.Manager of Hon Hai PrecisionIndustry (Stock) Company
President of Hongfujin Precision Industry(Shenzhen) Co., Ltd.
None None None
DepartmentGeneralManager
Ling,Zhi-ping
Jan. 21,2009
1,808,065 0.02 0 0 00
Enterprise Research Institute ofUniversity of Washington, U.S.A.School of Business, TaiwanUniversity
President of Amworld Microsystems(Shanghai) Ltd.President of Ambit Microsystems (Shanghai)Ltd.President of Ambit Microsystems(Zhongshan) Ltd.
None None None
DeputyDepartmentGeneral
Manager
Xiong,Bing-zheng
Aug. 31,2008
894,861 0.001 120,110 0.00 0 0
Industrial Management Departmentof Taiwan Institute of IndustrialSkillsIndustrial Engineering Department
of Taiwan Institute of Technology
Director of Foxconn Precision Electronics(Yantai) Co., Ltd.Director of Jing Fu Tai Precision Electronics(Yantai) Company LimitedDirector of Fu Hongyuan (Shenzhen)Company Limited Director Environmental
TechnologyDirector of Hongfujin Precision Electronics(Yantai) Co., Ltd.
None None None
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Title NameInaugura
tion date
Shareholding
Currently
holding shares of
spouses and
minor children
Holding
shares in the
name of
othersMain experience (education
experience)Current positions at other companies
Spouse or second-
degree relative holding
a position as manager
Number % Number % Number % Title Name Relation
HeadOfficeGeneralManager
Li,Jin-ming
Oct. 17,1997
237,373 0.00 0 0 0 0
Graduated from National ChengchiUniversity, TaiwanDeputy general manager of HuafeiColor Display System (Stock)CompanyManager of Taiwan Philip (Stock)Company
President of Fertile Plan InternationalLogistics (Vietnam) Co., LtdDirector of Foxconn (Far East) Ltd.(Cayman)Director of Foxconn (Far East) Ltd.(HK)Director of Foxconn International HoldingsLtd.Board director of Foxconn Japan Co., Ltd.Director of Foxteq Holdings Inc.Director of Foxteq Integration, Inc.(Cayman)
None None None
inancialDirector
Huang,De-cai
Apr.15,1998
2,655,813 0.02 0 0 0 0
Graduated from National ChiaoTung University, TaiwanFinancial director of VanguardInternational SemiconductorCorporationManager of Taiwan Philip (Stock)Company
Director and president of Hongyang VentureCapital Investment (Stock) CompanyRepresentative of directors of HongqiInternational Investment (Stock) CompanyRepresentative of directors of BaoxinInternational Investment (Stock) CompanyRepresentative of supervisors of HongjingInternational Investment (Stock) CompanyRepresentative of supervisors of Liyi
None None None
AccountingDirector
Chou,Zong-kai
Jul. 20,2010
61,750 0.00 0 0 0 0
Masters Degree in accounting,Long Island UniversityManager of Deloitte & Touche,TaiwanLecturer of Hsing Wu University ,Taiwan
Director of FAST VICTOR LIMITEDDirector of Focus PC Enterprises Limited.Supervisor of FUCHUAN CO., LTD.Director of Full Bonus International LimitedDirector of FUYONG CO., LTDDirector of Glory Star Investments Limited.Director of Great Name Investments LimitedDirector of Great World Technology Pte. Ltd.Director of HIGH PRECISION HOLDINGS
None None None
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(8)Remunerations paid to directors, supervisors and management team in the latest year(a)Director Remuneration
Unit: NT$Thousand
Title DirectorJuristicDirector
JuristicDirectorRepresentative
JuristicDirectorRepresentative
JuristicDirector
JuristicDirectorRepresentative
JuristicDirectorRepresentative
IndependentDirector
IndependentDirector
NameGou, Tai-ming(Terry Gou)
Hon ChiaoInternationalInvestmentCo., Ltd.
Tai, Jeng-wu
Lu, Sung-ching
Hon JinInternationalInvestmentCo., Ltd.
Lu, Fang-ming
Chien, Yi-bin
Wu, Yu-ChiLiu, Cheng-Yu
RemunerationofDirectors
Remunerations(A)
The Company 3,600
All companies within theconsolidated financialstatements
3,600
Retirementallowance(B)
The Company 0
All companies within theconsolidated financialstatements
0
Remunerationfrom distributionof earnings(C)
The Company 0
All companies within theconsolidated financialstatements
0
Businessexecutionexpenses (D)
The Company 480
All companies within theconsolidated financialstatements
480
Proportion of A, B, Cand D to net profit aftertax
The Company 0.00%
All companies within theconsolidated financialstatements
0.00%
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Relevantremunerationofpart-timepersonnel
Remuneration,money award andspecial expensesetc. (E)
The Company 25,674
All companies within theconsolidated financialstatements
25,674
Retirementallowance (F)
The Company 0
All companies within theconsolidated financialstatements
0
Employee profitsharing fromearningsdistribution (G)
The
Company
CashDividends
0
StockDividends
213,283
Allcompanieswithin theconsolidated financialstatements
CashDividends
0
StockDividends
213,283
Number of stockcertificates ofemployee (H)
The Company None
All companies within theconsolidated financialstatements
None
Number of sharesof EmployeesRestricted Stock(I)
The Company None
All companies within theconsolidated financialstatements
None
Proportion of A, B, C,D, E, F and G to netprofit after tax
The Company 0.26%
All companies within theconsolidated financialstatements
0.27%
Is there any remuneration from other investedbusinesses apart from subsidiaries
No
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Range of Remunerations
Range of Remunerations paid to directors
Names of directors
Summation of the first 4 items (A+B+C+D) Summation of the first 7 items (A+B+C+D+E+F+G)
The CompanyAll companies involved in
financial statement (I)The Company
All companies in the financial
statement (J)
Under NT$2,000,000
Terry Gou, Hon ChiaoInternational Investment Co.,Ltd., Tai Jeng-wu, Lu Sung-ching, Hon Jin InternationalInvestment Co., Ltd., Lu Fang-ming, Chien Yi-bin
Terry Gou, Hon ChiaoInternational Investment Co.,Ltd., Tai Jeng-wu, Lu Sung-ching, Hon Jin InternationalInvestment Co., Ltd., Lu Fang-ming, Chien Yi-bin
Terry Gou, Hon ChiaoInternational Investment Co.,Ltd., Hon Jin InternationalInvestment Co., Ltd.
Terry Gou, Hon ChiaoInternational Investment Co.,Ltd., Hon Jin InternationalInvestment Co., Ltd.
NT$2,000,000 (included) ~ NT$5,000,000 (excluded) Wu Yu-Chi, Liu Cheng-Yu Wu Yu-Chi, Liu Cheng-Yu Wu Yu-Chi, Liu Cheng-Yu Wu Yu-Chi, Liu Cheng-Yu
NT$5,000,000 (included) ~ NT$10,000,000 (excluded) - - - -
NT$10,000,000 (included) ~ NT$15,000,000 (excluded) - - - -
NT$15,000,000 (included) ~ NT$30,000,000 (excluded) - - Chien Yi-bin Chien Yi-bin
NT$30,000,000 (included) ~ NT$50,000,000 (excluded) - - Lu Sung-ching Lu Sung-ching
NT$50,000,000 (included) ~ NT$100,000,000 (excluded) - - Tai Jeng-wu Tai Jeng-wu
Over NT$100,000,000 - - Lu Fang-ming Lu Fang-ming
Total 9 9 9 9
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(b)Remunerations of SupervisorsUnit: NT$Thousand
Title Name
Remuneration of supervisors
Proportion of A, B and Cto net profit after tax
Is there anyremunerationfrom otherinvestedbusinessesapart fromsubsidiaries
Remunerations (A)Remuneration fromearnings distribution (B)
Business executionexpenses (C)
TheCompany
Allcompanies inthe financial
statement
TheCompany
Allcompaniesin the
financialstatements
TheCompany
Allcompaniesin the
financialstatements
TheCompany
Allcompaniesin the
financialstatements
Supervisor Huang, Qing-Yuan
3,600 3,600 0 0 480 480 0.0043% 0.0044% No
Supervisor
Fu-Rui InternationalInvestment Co., Ltd.
Representative:Wan Jui-hsia
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Range of Remunerations
Range of Remuneration Paid to Supervisors
Name of Supervisor
Summation of the first three items (A+B+C)
The Company All companies in the financial statement (D)
Under NT$2,000,000Fu-Rui International Investment Co., Ltd.Representative: Wan Jui-Hsia
Fu-Rui International Investment Co., Ltd.Representative: Wan Jui-Hsia
NT$2,000,000 (included) ~ NT$ 5,000,000 (excluded) Qing-Yuan Huang Qing-Yuan Huang
NT$5,000,000 (included) ~ NT$10,000,000 (excluded) - -
NT$10,000,000 (included) ~ NT$15,000,000 (excluded) - -
NT$15,000,000 (included) ~ NT$30,000,000 (excluded) - -
NT$30,000,000 (included) ~ NT$50,000,000 (excluded) - -
NT$50,000,000 (included) ~ NT$100,000,000 (excluded) - -
Over NT$100,000,000 - -
Total 2 2
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(c)Remunerations paid to the management teamUnit: NT$Thousand
Title Name
Remunerations(A)
Retirementallowance (B)
Money award andspecial paymentetc. (C)
Earning distribution as dividendsfor personnel (D)(Note)
Rate of totalamount of A, B,C and D to pureprofits after tax(%)
Number ofstockcertificates ofemployee
Number of sharesof EmployeesRestricted Stock
Remunerationfromo
therinvested
businessesapartfroms
ubsidiaries.
TheCompany
Allcom
paniesinthe
financia
lstatement
TheCompany
Allcom
paniesinthe
financia
lstatement
TheCompany
Allcom
paniesinthe
financia
lstatement
The Company
All companiesinvolved infinancialstatement
TheCompany
Allcom
paniesinthe
financia
lstatement
TheCompany
Allcom
paniesinthe
financia
lstatement
TheCompany
Allcom
paniesinthe
financia
lstatement
Cash
Dividen
ds
Stock
Dividen
ds
Cash
Dividen
ds
Stock
Dividen
ds
GeneralManager
Terry Gou
23,340 23,340 0 0 44,165 44,165 0 356,087 0 356,087 0.447% 0.462% None None None None None
DepartmentGeneralManager
Lu,Sung-ching
DepartmentGeneralManager
You, Xiang-fu
DepartmentGeneralManager
Tai,Jeng-wu
DepartmentGeneralManager
Lu, Fang-ming
DepartmentGeneralManager
Jiang,Hao-liang
DepartmentGeneralManager
Chien,Yi-bin
DepartmentGeneralManager
Xu,Mu-ji
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DepartmentGeneralManager
Zhong,Yi-wen
DepartmentGeneralManager
Ling,Zhi-ping
DeputyDepartmentGeneralManager
Xiong,Bing-zheng
Head OfficeGeneralManager
Li,Jin-ming
Financial
Director
Huang,
De-caiAccountingDirector
Chou,Zong-kai
Note: NT$6,822,891Thousand of earnings were distributed to employees as dividends in 2012 according to the resolution of board of directors. In thisyear, the actual distribution rate will be considered for distributing dividends.
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Range of Remunerations
Range of remuneration paid to the management team
Names of General Managers and Deputy General Managers
The Company All companies in the financial statement (E)
Under NT$2,000,000 Terry Gou, You Xiangfu, Xu Muji Terry Gou, You Xiangfu, Xu Muji
NT$2,000,000 (included) ~ NT$5,000,000 (excluded) Zhong Yiwen Zhong Yiwen
NT$5,000,000 (included) ~ NT$10,000,000 (excluded) Xiong Bingzheng, Chou Zongkai Xiong Bingzheng, Chou Zongkai
NT$10,000,000 (included) ~ NT$15,000,000 (excluded) - -
NT$15,000,000 (included) ~ NT$30,000,000 (excluded) Chien Yi-bin Chien Yi-bin
NT$30,000,000 (included) ~ NT$50,000,000 (excluded) Lu, Sung-ching, Jiang Haoliang, Huang Decai, Li Jinming Lu, Sung-ching, Jiang Haoliang, Huang Decai, Li Jinming
NT$50,000,000 (included) ~ NT$100,000,000 (excluded) Tai, Jeng-wu, Ling Zhiping Tai, Jeng-wu, Ling Zhiping
Over NT$100,000,000 Lu, Fang-ming Lu, Fang-ming
Total 14 14
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(d)Employee profit sharing granted to the management teamUnit: NT$Thousand
Note: As of the printing date of this Annual Report, the distribution list of employee profit sharing has not been fixed, and shall be proposed asstipulated according to the actual distribution of the last year.
Title NameStock Dividends
(Note)
Cash Dividends
(Note)Total
Proportion of total amount to net
profits after tax (%)
ManagementTeam
General manager Terry Gou
356,087 0 356,087 0.376%
Department General Manager Lu, Sung-ching
Department General Manager You, Xiang-fu
Department General Manager Tai, Jeng-wu
Department General Manager Lu, Fang-ming
Department General Manager Jiang, Hao-liang
Department General Manager Chien, Yi-bin
Department General Manager Xu, Mu-ji
Department General Manager Zhong, Yi-wen
Department General Manager Ling, Zhi-ping
Department Vice President Xiong, Bing-zheng
Head Office General Manager Li, Jin-ming
Financial Director Huang, De-cai
Accounting Director Chou, Zong-kai
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(e)Analysis of the proportion of the total remuneration of directors,supervisors, general managers and deputy general managers of the
Company paid by the Company and all companies in the consolidated
financial statement to net profit after tax in individual financial
statements of the recent two years.
ItemTitle
Proportion of the total compensation to net profit after tax
2012 2011
The CompanyAll companies inthe consolidatedfinancial statement
The Company
All companies inthe consolidatedfinancialstatement
Directors 0.256% 0.265% 0.261% 0.260%
Supervisors 0.004% 0.004% 0.005% 0.005%
General Manager and DeputyGeneral Managers
0.447% 0.461% 0.561% 0.559%
(f) Procedures for payment and relevance with operation performance andfuture risks
(i) According to the distribution of earnings as stipulated in the CompanyArticles of Incorporation, except employee profit sharing, there is nodistribution to directors or supervisors.
(ii) The remunerations paid to general managers and deputy generalmanagers during the recent two years include salary, money award andemployee profit sharing from earnings distribution. As for salary and
money award, the payment is handled according to the relevantprocedures of the Companys personnel regulations. As for employeeprofit sharing from earnings distribution, the distribution is proposedby board of directors according to the distribution of annual earningsand the earnings distribution as stipulated in the Company Articles ofIncorporation and upon the approval of the shareholder meeting.
(iii) According to the Companys policy for payment of compensation,reasonable compensation shall be paid based on job evaluation of the
personnel in the Company.
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B. Implementation of corporate governance(1)Information on implementation of Board of Directors
Five meetings were held by the Board of Directors in the recent year (2012) withtheir attendance shown as follows:
Title NameAttendance in
personBy proxy
Attendance rate
in person (%)Remarks
Chairman Terry Gou 2 2 40 -
Director
Representative of HonChiao InternationalInvestment Co., Ltd.: Tai,Jeng-wu
3 2 60 -
Director
Representative of Hon
Chiao InternationalInvestment Co., Ltd.: Lu,Sung-ching
2 0 40 -
DirectorRepresentative of Hon JinInternational InvestmentCo., Ltd.: Lu, Fang-ming
5 0 100 -
DirectorRepresentative of Hon JinInternational InvestmentCo., Ltd.: Chien, Yi-bin
0 1 0 -
IndependentDirector
Wu, Yu-Chi 5 0 100 -
Independent
Director Liu, Cheng-Yu 5 0 100 -
Other noteworthy matters:1. Matters specified in Article 14.3 of Taiwans Securities and Exchange Act or Board resolutions where otherIndependent Directors have expressed opposition or qualified opinions that have been noted in the record ordeclared in writing: None2. Avoidance of Conflict of Interest by directors. None3. Assessment of objectives (such setting of an audit committee and improvement of information transparencyetc.) and implementation status in the area of strengthening the powers of the board of directors for current andimmediately past years: None.
(2)Operation status of Audit Committee:The Company does not have an audit committee.
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(3)Participation of supervisors in the operation of the Board of Directors:Five meetings were held by the Board of Directors in the recent year (2012) withthe attendance of supervisors shown as follows:
Title Name Attendance inperson
By proxy (%) Remarks
SupervisorRepresentative of Fu-RuiInternational InvestmentCo., Ltd.: Wan, Jui-hsia
5 100 -
Supervisor Huang, Qing-Yuan 4 80 -
Other noteworthy matters:1. Organization and responsibilities of supervisors
(a) Communication of between supervisors with and the Companys employees and shareholders:Supervisors regard direct connection and dialogue with the Companys employees and shareholders
from the perspective of supervisors(b) Communication between supervisors with and internal audit director and accountants.(1) Supervisors have no objection to the Audit director shall submit audit report submitted bythe audit director of audit items to supervisors in the next following month after the audit iscompleted.(2) Audit director shall attend the regular meeting of the Board of Directors and make preparethe audit service report to which supervisors do not have any no objection.(3) Supervisors carry out face-to-face regular quarterly communication and communication inwritten form with accountants on finance regularly in each quarter in person and in writing.
2. If supervisors participating in board meetings have expressed opinions, meeting minutes shall recorddate and session of the board meeting, content of the resolution, resolution of the meeting and theresponse of the Company regarding the supervisors opinion: None.
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(4)Corporate governance implementation and the difference from the Corporate Governance Best Practice Principles forTWSE/GTSM-Listed Companies and reasons
Item Operation
Difference fromcorporate governancepr ac ti ce pr inc ip le s fo rTWSE/GTSM-Listedcompanies and reasons
1. Equity structure and shareholder rights(1) How the Company handles shareholder suggestions of shareholdersand disputes.(2) Companys control of the list of its major shareholders and finaldecision-makers(3) How the Company establishes its risk management mechanism and
firewalls involving related enterprises.
1. An investor relation office was set up to deal with shareholdersuggestions and disputes.2. The Company can control the list of its major shareholders and finaldecision-makers, and disclose them legally.3. The Company, according to such relevant internal methods as operatingmethods for operating, service and financial operations with specific
companies and group enterprises, supervision methods for subsidiaries,endorsement guarantee method, capital loan and other methods and assetsto get or deal with assets, has established proper risk management andcontrol mechanism and firewalls. Those who have business contact withany materially related enterprise shall be deemed as independent thirdperson so as to avoid non-conventional transactions.
In conformity with thecorporate governance practiceprinciples
2. Organization and responsibilities of the Board of Directors(1) Establishment of Independent Directors(2) Regular assessment on independence of CPA
1. Two Independent Directors were selected at the General ShareholderMeeting in 2010.2. Carry out regular assessment on independence of CPA.
In conformity with thecorporate governance practiceprinciples
III. Establishment of communication channels with materially relatedparties
Direct communication and dialogue with stakeholders shall be done whensupervisors regard it necessary.
In conformity with thecorporate governance practiceprinciples
4. Disclosure of information(1) Establishment of a Website where information on financialoperations and corporate governance is disclosed.(2) Use of other methods for information disclosure (such as setting anEnglish website, appointing personnel in charge of collecting anddisclosing information, implementing spokesman system andpublication of shareholder meeting records on the Companys website).
1. The Company has established a website where relevant information onfinancial operations and business is disclosed, or the Companys relevantinformation on financial operations, business and corporate governance canbe inquired through an open information observation station.2. The Company has appointed special person in charge of informationdisclosure of the open information observation station of exchange throughobservation station and information release on website of company.3. The Company has set up positions for spokesperson and deputyspokesperson.
In conformity with thecorporate governance practiceprinciples
5.Operation of Functional Commissions such as the Nomination, orCompensation Committees established by the Company
The Company has set up the Compensation Committee according to theregulations.
At present, the Companydoesnt set up such functionalcommissions as NominationCommittee and AuditCommittee.
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Item Operation
Difference fromcorporate governancepr ac ti ce pr inc ip le s fo rTWSE/GTSM-Listedcompanies and reasons
6. If the Company works out its corporate governance system according to the rule of Corporate Governance Best Practice Principles for TWSE/GTSM-Listed Companies, pleasestate the differences from other companies.The Company is still planning its corporate governance system, but the rights of directors and supervisors and the internal control syste ms are made according to the spirit andstandards in Corporate Governance Best Practice Principles for TWSE/GTSM-Listed Companies.
7. Other important information for better understanding the Companys corporate governance operation (1)Interests and rights of employees: The Company treats employees in an honest way all the time to ensure their legal interests and rights according to the Labor Standards Act.(2)Care for employees: by adopting welfare system and good education and training, mutual trust relationship established with employees, such as assistance to employees in groupactivities and supply of entertainment facilities, subsidy for health diagnosis and medical consulting, supply of employee dormitory, care for lodging life of employees and parking lotetc.(3)Relation with investors: The investor relation office was set up to deal with shareholder suggestions.
(4)Relation with suppliers: good relations with suppliers are maintained all the time.(5)Relation with materially related parties: materially related parties shall communicate with the Company and put forward proposals to protect their due legal rights and interests.(6)Further study of directors and supervisors: the Companys directors are qualified with industrial professional knowledge and practice experience in operation management.(7)Execution of risk management policy and risk measuring standards: various internal regulations are established legally for various risk management and evaluation.(8)Execution of customer policies: stable and good relations with customers are maintained with the view of creating profits.(9)Liability insurance for the Companys directors and supervisors: liability insurance has been covered for directors and supervisors.
8.If there exist corporate governance evaluation reports done by the Company itself or outsourced to professional agencies, please state the evaluation result, major shortcomings (orrecommendations) and improvement: NA.
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(5)Organization, responsibilities and operation status of the Compensation Committee:(a)Information on members of the Compensation Committee
ID(Note 1)
Conditions
Name
Has over 5 years of work experience andfollowing professional qualifications. Independence Attribute (Note 2)
Currentpositions atothercompanies
Remarks(Note 3)
Business,LegalAffairs,Finance,Accounting,Lecturer orabove inColleges in
Relateddepartments
Judge,Prosecutor ,Attorney,CPA orNa t io na lCert if iedProfessionals
Business,LegalAffairs,Finance,Accounting orRelatedWork
Experience
1 2 3 4 5 6 7 8
IndependentDirector
Wu, Yu-Chi 0
IndependentDirector
Liu, Cheng-Yu 0
Director Lu, Fang-ming 0 Yes
Note 1: For ID column, please fill in director, Independent Director or others.Note 2: If the member complies with the following conditions from 2 years before being elected and during his tenure in office, please mark in the correspondingspace.
(1) They are neither employees of the Company nor its affiliates(2) They are neither directors nor supervisors of the Company or its affiliates, unless they are Independent Directors of the Company or its parent company or
subsidiaries in which the Company holds, directly or indirectly, more than 50% of the voting shares.(3) They are not individual shareholders who hold shares, together with those held by their spouses, minor children or held under others name, in an aggregate
amount of more than 1% of the total outstanding shares of the Company or ranks among the top ten shareholders who are natural persons in terms of the sharevolume held.
(4) They are not spouses or relative within the second degree of kinship or lineal relative within the third degree of kinship, or any of the persons in the precedingthree subparagraphs.
(5) They are not directors, supervisors or employees of a corporate shareholders that directly holds 5% or more of the total outstanding shares of the Company orranks among the top 5 corporate shareholders in the terms of share volume held.
(6) They are not directors, supervisors, managers or shareholders holding 5% or more shares of a specific company or institution and who also have financial orbusiness dealings with the Company.
(7) They are not professionals or owners, partners, directors, supervisors, or executive officer and the spouse thereof of a sole proprietorship, partnership, company, orinstitution that provides commercial, legal, financial, accounting or consulting services to the Company or to its affiliates.
(8) Not any of the circumstances in Article 30 of the Company Act.Note 3: If the member is a director, please explain whether it complies with Article 6.5 of the Regulations Governing the Appointment and Exercise of Powers by theCompensation Committee of a Company Whose Stock is listed on the Stock Exchange or Traded over the Counter.
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(b)Operation status of the Compensation Committee(1)There are 3 members in the Companys Compensation Committee.(2)Current Term: From September 30, 2011 to June 30, 2013. The Compensation
Committee held two meetings (A) in the recent year (in 2012), the qualifications andattendance of the Committee are shown as follows:
Title NameAttendance inperson (B)
By proxyAttendance rate inperson (%) (B/A)
(Note)Remarks
Convener Wu, Yu-Chi 2 0 100 -
Member Liu, Cheng-Yu 2 0 100 -
Member Lu, Fang-ming 2 0 100 -
Other noteworthy matters:1. If the proposals of the Compensation Committee are not accepted or revised by the Board of Directors,
meeting minutes shall record date and session of the board meeting, content of the resolution, resolution ofthe meeting and the response of the Company regarding the Compensation Committees opinion (if thecompensation approved by the Board of Directors is superior to the proposal of the Compensationcommittee, the difference and causes shall be stated clearly).2. If members have opposition or qualified opinions to the resolution of the Compensation Committee thathave been noted in the record or declared in writing, meeting minutes shall record date and session of themeeting, content of resolution, proposals of all members and the response.
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(6)Performance of Social Responsibilities
Items Implementation Status
Difference from the
Corporate Social
Responsibil ity Best
Practice Principles for
TWSE/GTSM-ListedCompaniesand
reasons
1. Exercise and enhance corporategovernance(1) The Company works out its corporatesocial responsibility policy and checks theresults of the implementation.(2) The Company sets up exclusively (orconcurrently) dedicated units to be incharge of proposing and enforcing thecorporate social responsibility policies.(3) The Company organizes regular
education and training on business ethnicsand advocating principles for directors,supervisors and employees, and shouldincorporate the foregoing into itsemployee performance assessment systemto establish a clear and effective rewardand punishment system.
1. At present, the Company has worked out itscorporate social responsibility policy, covering ethnics,laborers, safety, health, environment and management,and established Foxconn Global SER Committee(FGSC) to drive and supervise the execution ofrelevant CSR operations.2. In 2007, The Company set up FGSC organization,which is composed of 7 full-time personnel in chargeof driving and supervising relevant work, including theimplementation of internal audit, performance
assessment, CSR education and training, and thepublication of CSR annual report. In addition, there areover 60 part-time personnel in each business group andsurrounding units in charge of executing CSR relatedwork.3. The Company carries out regular trainings and
propaganda on corporate business ethnics for itsemployees every year. For its new employees,trainings on personnel rules, management system,
business ethnics and morals are carried out on theirfirst working day to clarify their due responsibilitiesand obligations.
Conformity
2. Environment for sustainabledevelopment(1) The Company endeavors to utilize allresources more efficiently and usesrenewable materials which have a lowimpact on the environment.(2) Based on its industrial features, theCompany establishes proper environmentmanagement systems.(3) The Company establishes dedicatedunits or assigns dedicated personnel forenvironment management to maintain theenvironment.(4) The Company monitors the impact ofclimate change on its operations, andshould establish company strategies tosave energy and reduce the emission ofcarbon and greenhouse gas.
1. The Company actively advocates water recycling,and adopts some renewable/biodegradable rawmaterials to effectively reduce the impact of
production and manufacturing on the environment.2. In response to the international trend and customerrequirements, the Company gradually establishedenvironment management systems for its businessunits, and passed the certification of ISO 14001.3. In 2008, environmental protection office wasestablished to be in charge of planning, design,management and operation maintenance ofenvironmental protection facilities, which wereinstalled in all working areas. Moreover, the Companyobtained the discharge license issued by thegovernment, and assigned dedicated personnel to be incharge of equipment operation in accordance with lawsand regulations.4. From 2008, the Company started the examination ofthe emission of carbon dioxide, and some workingareas obtained certificates after passing thecertification. At the same time, the examination reportwas submitted to relevant UN agencies with a view toactively participating in important international topics.The Company also started to promote energymanagement by means of working out the objectives
of energy conservation and emission reduction andendeavoring to the achieve them.
Conformity
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Items Implementation Status
Difference from the
Corporate Social
Responsibil ity Best
Practice Principles for
TWSE/GTSM-Listed
Companiesand
reasons3. Protect social public interests(1) According to the relevant labor lawsand internationally acknowledged humanrights of laborers, the Companyestablishes proper management methods,
procedures and non-discriminationemployment policy to ensure the legalrights and interests of employees.(2) The Company provides safe andhealthy working environment for itsemployees and organizes training onsafety and health on a regular basis.
(3) The Company establishes regularcommunication mechanism foremployees, and informs employees of theoperation changes that may havesignificant impact on employees in areasonable way.(4) The Company works out and disclosesits policies on consumer rights andinterests and establishes transparent andeffective procedures for acceptingconsumer complaints in its products andservice.(5) The Company cooperates with its
suppliers to jointly foster a stronger senseof corporate social responsibilities.(6) Through commercial activities, non-cash property endowments, voluntaryservice or other free professional services,the company participates in communitydevelopment and charities events.
1. The Company abides by the labor law of the region(or the country) where its working plants are located
by transferring relevant contents into its labormanagement policy. The Company has establishedcorresponding procedures and special lines for labormanagement to ensure the legal interests and rights ofits employees.2. The Company provides safe and healthy workingenvironment for its employees and focus on employeehealth care, a health management center to provideemployee health and health-related advice andassistance, and regular health and safety at work
seminars.3. The Company regularly holds variouscommunication meetings with employees to conveythe Companys policies and information.4. The Company follows the regulations on limiteduse/prohibited use of hazardous substance and conflictminerals in an all-round way and provides relevantinformation to customers.5. The Company has thousands of suppliers in differentregions, but we learn from each other for common
progress in the aspects of society and environment likehazardous substance control, environmental protection,labor safety and health, human rights, conflict metal
and carbon footprint. At the same time, our suppliersare required to practice their corporate socialresponsibilities.6. As the Company actively participates in socialactivities for public interests and charitable activities,donations are provided for affected people in the Floodof August 8th (in Taiwan), Sichuan Earthquake, JapanEarthquake as well as Floral Expo Charitable GardenParty.
Conformity
4. Enhance information disclosure(1) The ways for the company to disclose
1. A special column for corporate responsibilities isestablished on the Companys website.
Conformity
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Items Implementation Status
Difference from the
Corporate Social
Responsibil ity Best
Practice Principles for
TWSE/GTSM-Listed
Companiesand
reasonsrelevant critical and reliable informationon corporate social responsibilities.(2) The Company compiles with thereport on corporate social responsibilitiesto disclose the performance of corporatesocial responsibilities.
2. As a EICC member, the Company is dedicated topromoting social and environmental responsibilities(hereinafter referred to as SER), and worked outFoxconn Global Codes of Conducts: Social and
Environmental Responsibilities.
5. If the Company makes its own corporate social responsibilities according to the rule of Corporate Social ResponsibilityBest Practice Principles for TWSE/GTSM-Listed Companies, please state the differences.The Company carries out regular trainings and propaganda on corporate business ethnics for its employees every year. Forits new employees, trainings on personnel rules, management system, business ethnics and morals are carried out on theirfirst working day to clarify their due rights and obligations. However, the Company hasnt prepared its own Corporate
Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies, which will be worked out in the futureaccording to the specific regulations.
6. Other important information for better understanding of corporate social responsibilities (such as systems and measuresthat the company has adopted with respect to environmental protection, community participation, social contributions,social services, social and public interest, legal rights and interests of consumers, human rights, safety, health and othercorporate social responsibilities, and the status of implementation.):(1) New processing systems are introduced to enhance the capacity to recover wastes and sewage, and installed and putinto operation in some workshop areas.(2) Donated NT $ 825,000 to Law Foundation, NTU.(3) Donated NT$980,000 to Qingling Foundation, NTU for NTU 3D IC packaging and versatile & Flexible organicdisplay device.(4) Contributed NT$300,000 to Hakka Cultural and Economic Exchanges Association Summit Forum.(5) Donated NT $ 200,000 to China Poly Industries Promote Common Standard Foundation.
(6) Donated NT $ 5,465,301 to National Tsing Hua University scholarships.(7) Donated NT$9,432,500 to Graduate School Scholarship, National Kaohsiung Applied Sciences University.(8) Contributed NT$500,000 to National Science Museum for Edison Learning Activity Funds.(9) The Company has hosted lots of charity party to support disadvantaged people and social charitable organizations.(10) Based on respect employees, the Company emphasizes employment of no children and no compulsory overtime work,and cadres are required to pay no discrimination or harass employees. Above measures are announced formally.(11) The Company established a safety and health department to regularly examine plant facilities and provide educationand training on industrial safety and health and relevant performance assessment.(12) The Company set up a supplier management office for auditing the corporate social responsibilities and training of itssuppliers every year.
7. Clear statement shall be made if the products or corporate social responsibility report of the Company pass theinspection of relevant certification agencies:The Company hasnt submitted its annual report on corporate social responsibilities to any certification organization for
inspection, but plans to submit it to a third-party certification institution for inspection in the near future.
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(7)Status of Implementation of Integrity ManagementImplementation of Integrity Operation
Items Implementation
Difference from the Integrity
Operation Practice Pri nciples for
TWSE/GTSM-L isted Companies
and reasons
1. Adopt integrity operation policy andscheme(1) The company clarifies the integrityoperation policy in its regulations andexternal documents and the commitment of
board of directors and managers to activeimplementation.(2) The company works out scheme,operation procedures and guidelines ofconducts for employee education and
training to prevent dishonest behaviors(3) When working out a scheme to preventdishonest behaviors, the company adoptsmeasures to prevent bribery and illegal
political contributions in business activitieswith high risks of dishonest behaviors.
The Company sticks to the corporateculture with integrity operation as thecore and works out codes of conduct(CoC) for stakeholders to performrelevant social and environmentalresponsibilities, includingLetter ofCommitment of Manufacturerssignedwith suppliers, clearly stating thatsuppliers should ensure transparent andfair commercial trading activities. In
addition, the Company has madecommitment to customers andshareholders in its CoC.The Company carries out education andtraining for all employees on CoC everyyear regularly. For its new employees,trainings on personnel regulations,management system, business ethnicsand morals are provided to clearly statetheir due rights and obligations.The Company, strictly sticking to
business ethnics from its top level todown level, establishes integrity
corporate culture and creates anoperation environment for sustainabledevelopment based on transparent,incorruptible and responsible operationconcepts.
Conformity
2. Put integrity operation into practice(1) The company should keep itscommercial activities away from peoplewith records of dishonest behaviors, andarticles on honest behaviors shall beexplicitly stated in commercial contracts.(2) The company sets up company sets upexclusively (or concurrently) dedicated
units to be in charge of corporate integrityoperation and supervision of the board ofdirectors.(3) The company works out policies to
prevent interest conflicts and provideproper statement channels.(4) The company shall establish effectiveaccounting system, internal control systemand auditing of internal auditors to putintegrity operation into practice.
The Company adheres to integrityculture and operation, commits toabiding by requirements of internationaland domestic laws and regulations onanti-corruption and anti-bribery, takeszero-tolerance policy for any behavior oractivity against the regulations, andstrictly prohibits any corruption, bribery,
embezzlement and other illegal earningactivities. All employees shall receiveanti-corruption trainings for at least 2hours every year. In addition, theCompany asks its downstream suppliers,manufacturers and customers to strictlyimplement high-standard anti-corruption
policies as the premise for cooperation.After approved by the chairman of theGlobal SER Committee and the generalmanagers of the business group, thecodes of conducts on corporate socialand environmental responsibilities have
become the basic principles andstandards of the Company to deal with
Conformity
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Items Implementation
Difference from the Integrity
Operation Practice Pri nciples for
TWSE/GTSM-L isted Companies
and reasons
relationship with all stakeholders(employees, customers, shareholders,
suppliers, public community, investorsand non-governmental organizations).The whole management team of theCompany must strictly abide by the
principles of conducts and the statedspirit and guiding principle. Under thesupervision of board of directors,directors of each business group mustensure their commercial operations inconformity with the regulations of CoC.The Company demands all newemployees to sign theAgreement on
Integrity, Incorruption and
Confidentiality of Intellectual PropertyRightsand asks other employees toabide by it. At the same time, theCompany also requires that its suppliersor other cooperators should sign the
Letter of Commitment of Manufacturersto ensure transparent and faircommercial trading activities. TheCompany holds annual suppliermeetings and carries out irregular SERaudit, conveying its requirements forsuppliers.The Company establishes accounting
and internal control systems to putintegrity operation into practice. Afterits internal auditors work out and reviewthe annual audit program according tothe risk evaluation results, the Companywill compile them into audit report andsubmit it to the board of directors.
3. The company establishes reportingchannels and punishments for violationagainst the regulations of integrityoperation as well as the appeal system.
The Company establishes variousreporting channels so that employeesand relevant people can report theimproper business behaviors through thesystem. Anyone who violates theregulations on integrity operation will be
punished according to the Companysregulations on reward and punishment.In case of any illegal affairs, legalactions will be taken as well.
Conformity
4. Enhance information disclosure(1) The company establishes a website todisclose relevant information on integrityoperation.(2) Other information disclosure methodsof the company (such as setting up anEnglish website, appointing a dedicated
person in charge of collecting anddisclosing company information throughthe website etc.).
On the Companys official website bothin Chinese and English(http://www.foxconn.com), there arerelevant information on integrityoperation such as annual report oncorporate social and environmentalresponsibilities and CoC.
Conformity
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Items Implementation
Difference from the Integrity
Operation Practice Pri nciples for
TWSE/GTSM-L isted Companies
and reasons
5. If the company makes its own integrity operation according to theIntegrity Operation Best Practice Principles forTWSE/GTSM-Listed Companies, please state the differences.
The Company has its own regulations on integrity and incorruption, which shall be respected by all employees, managersand board of directors.
6. Other important information for better understanding of the integrity operation (such as the companys determination onadvocating the integrity operation and policy among manufacturers who have business dealings with the company, invitingthem to participate in relevant trainings and review and revise the regulations on integrity operation).
Please refer to the Companys official website:http://www.foxconn.com/CSR_REPORT.html (Annual Report onCorporate Social and Environmental Responsibilities).
(8)Other Company-established corporate governance rules and regulations:N/A
(9)Other Important Corporate Governance Information:None
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(10) Status of Implementation of Internal Control System(a)Statement of internal control system
Hon Hai Precision Industry Co., Ltd.
Statement of Internal Controls
Date: 03/25/2013
According to the examination on internal control system done by the Company itself in 2012, wehereby states as follows:
(1) The Companys board of directors and management team understand their responsibilities ofdeveloping, implementing and maintaining the Companys internal control system, and such a
system has been established. The purpose of establishing the internal control system is to
reasonably assure the following objectives: (a) The effectiveness and efficiency of businessoperation (including earnings ,operation performance and the safeguard of company assets); (b)
The reliability of the financial and related reports; and (c) The compliance of the relevantlaws/regulations and company policies;
(2) Due to the innate limitation in designing a faultless internal control system, this system canonly assure the reasonableness of the above three objectives have been fairly achieved. Inaddition, the effectiveness of internal control system could alter over time due to the change of
business environment or situation. Since the Companys internal control system has includedself-examination capability, the Company will make immediate corrections when errors are
detected.
(3) The evaluation of effectiveness of the internal control system design and implementation ismade in accordance with the Guidelines for the Establishment of Internal Control Systems by
Public Companies (the Guidelines). The Guidelines are made to examine the following fivefactors during the management and control process: (1) control environment, (2) risk assessment
and response, (3) control activities, (4) information and communication, and (5) supervision.Each factor also includes several items. Details of each factor can be found in the Guidelines.
(4) The Company has examined the effectiveness of each respected area in the internal control
system based on the Guidelines.
(5) The examination result indicated that the Companys internal control system (includingsubsidiary governance) dated December 31, 2012has effectively assured that the followingobjectives have been reasonably achieved during the assessing period: (a) The degree thateffectiveness and efficiency of business operation; (b) The reliability of the financial and relatedreports; (c) The compliance of the relevant laws/regulations and company policies
(6) This Statement is a significant part of the Companys annual report and prospectus availableto the general public. If it contains false