FORMOSA ADVANCED TECHNOLOGIES CO., LTD. · wafer processing undergo miniaturization, yield...

FORMOSA ADVANCED TECHNOLOGIES CO., LTD.

2018 ANNUAL SHAREHOLDERS’ MEETING

MEETING HANDBOOK (SUMMARY)

(This English translation is prepared in accordance with the Chinese version and is for reference purposes only. If there are any inconsistency between the Chinese original and this translation, the Chinese version shall prevail.)

JUNE 22, 2018

Table of Contents

Meeting Procedure …………………………………………… Page 1 Meeting Agenda …………..………………..………………… Report Items …..…………………………………………… Page 3 Ratification Items ……………………………………………. Page 9 Discussion Items ………………………………………… Page 11Appendices …………………………………………………... Page 55

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Notice of the 2018 Annual Shareholders’ Meeting (Summary)


PROCEDURE

1. Call Meeting to Order

2. Chairman’s Address

3. Report Items

4. Ratification Items

5. Discussion Items

6. Extraordinary Motions

7. Meeting Adjourned

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AGENDA Time: 1:30 p.m., Friday, June 22, 2018 Venue: Briefing Room, FORMOSA TAFFETA CO., LTD.

(No. 317, Shu Liu RD. , Touliu City, Yunlin County, Taiwan, R.O.C.) 1. Report Items

(1)Business Report for 2017 (2)Supervisors’ Review Report on the 2017 Financial Statements (3)Distribution of 2017 Employees, Directors and Supervisors

Compensation 2. Ratification Items

(1) Please approve the 2017 Business Report and Financial Statements as required by the Company Act.

(2) Please approve the Proposal for Distribution of 2017 Profits as required by the Company Act.

3. Discussion Items (1) Amendment of the Articles of Incorporation of the Company. (2) Amendment to the Procedures for Engaging in Derivatives

Transactions of the Company. (3) Amendment to the Rules for Election of Directors and Supervisors

of the Company.

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Report Items 1. About the Company’s business operation condition of 2017,

please refer to Business Report for further details (on page 4 of the Handbook.), the above is hereby reported for record.

2. The Company’s Supervisors reviewed the 2017 Business Report and Financial Statements and issued their Review Report according to the applicable laws. Please refer to Supervisors’ Review Report (on page 8 of the Handbook.), the above is hereby reported for record.

3. The Company has issued the report on the compensation distributed to its Employees’, Directors’ and Supervisors’ for 2017. The Company of pre-tax profit prior to deducting Employees , Directors and Supervisors compensation distributable for 2017 is NT$ 1,629,564,082. The Company has no accumulated losses. Adopted by the Board Meeting on March 16, 2018, 2.45% of the profit is allocated as Employees’, 0.25% of the profit is allocated as Directors' and Supervisors' compensation in accordance with Article 19 of the Articles of Incorporation. The total allocated amount of Employees is NT$ 39,924,320 and the Directors and Supervisors is NT$ 4,073,910. The total amount of compensation given by the aforementioned the Employees, Directors and Supervisors was NT$43,998,230. The Employees, Directors and Supervisors compensation paid in full in cash. The above is hereby reported for record.

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Formosa Advanced Technologies Co., Ltd. 2017 Business Report

I. Summary of 2017 Operations The 2017 revenue of Formosa Advanced Technologies Co., Ltd.

(hereinafter "FATC" or "the Company") was US$264,280,000. This represented a US$20,199,000 reduction, or 7.1% decrease, from the 2016 revenue at US$284,479,000. Pretax profit was valued at US$53,120,000, showing a US$10,924,000 increase from the US$42,196,000 in 2016, representing a 25.9% increase. The primary reasons for the decrease in revenue were due to the appreciation of TWD against USD in 2017 , as our revenue is mostly based on USD and this foreign exchange gap has negatively impacted our revenue, and the productivity losses from clients' processing transitions. The Company has proposed multiple countermeasures including the following: in terms of productivity, we will expand our packaging and testing capacity to remain in a more favorable position to take in orders after processing transitions and to seize opportunities for product upgrades. In terms of orders, we will strive for niche product orders for low-capacity products such as DDR1, DDR2, and DDR3, in addition to certifying high-capacity DDR4 products. In terms of product R&D, we plan to develop more layered packaging products and to introduce new processing technology for Flip Chip Package (FCP) to pave the way to quantitative and qualitative growth.

II. Marketing and Sales Volume

Please see the following for information on sales and production volume for each FATC product in 2017:

Product Name Production volume Sales volume

Packaging 896,606,000 units 918,208,000 units

Testing 898,419,000 units 920,054,000 units

Module 3,609,000 units 3,632,000 units

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Revenue from Packaging products was US$152,813,000, accounting for 57.8% of FATC's total revenue and showing a 10.2% reduction from the US$170,148,000 in 2016. OEM volume has been 918,208,000 units, showing a reduction of 932,307,000 units, or 1.5% decrease from 2016.

Revenue from testing products was US$93,375,000, accounting for 35.3% of the Company's total revenue, and showing a 5.8% reduction from the US$99,123,000 in 2016. OEM volume was 920,054,000 units, showing a 1.1% reduction, or 930,327,000 units less than the volume in 2016.

Revenue from module products was US$18,092,000, accounting for 6.9% of the Company’s total revenue, and showing a 19.0% increase from the US$15,208,000 in 2016. OEM volume increased from 2,514,000 units to 3,632,000 units, showing a 44.5% increase. III. Business Operations

The revenue for 2017 was US$264,280,000. This represented a reduction of US$20,199,000 from the US$284,479,000 in 2016. After deducting operating cost of US$220,446,000, and marketing, administration and R&D expenses of US$4,705,000, we had achieved an operating profit of US$39,129,000 (profit margin 14.8%). After adding non-operating income of US$13,991,000, we had achieved a pre-tax net income of US$53,120,000 for this period. IV. 2018 Outlook

The applications of terminal products will continue to expand in the IC memory industry in 2018, creating more demand; however, the increase in supply is rather moderate, and steady growth in the overall market can be anticipated while supply and demand both remain healthy and in balance. As opportunities including productivity enhancement from clients, wafer processing undergo miniaturization, yield enhancement and increase in FATC capacity present themselves, we will seize such opportunities and strive to increase our sales volume. The following is a summary of our key management objectives in 2018:

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1. In terms of market expansion, since memory applications are even more diverse nowadays, our technology can be applied toward a wide range of applications, from the standard personal computer, laptop computer, mobile devices including tablet PC, smartphones, to cloud-based servers, niche-market 4K smart Internet TV, set-top box, Wi-Fi wireless device, super computer and automobile market. Besides cultivating our existing customers in wafer and IC design, to enhance our market share, we will also look for client acquisition and to develop new client base as well as to strengthen our partnership with our clients.

2. In terms of R&D, the Company will continue to focus on developing processes and technologies for niche and mobile memory products. Our R&D efforts will focus on more advanced production processes of IC layering and embedded chip packaging, and we will also introduce Flip Chip technology to increase the added value of our products. In particular, the development of packaged memory capacity is from 2Gb to 4Gb and finally to 8Gb. The processed wafers are refined from 30nm to 20nm processes in cooperation with customers. The package type is from single chip packaging, homogeneous chip stacking, heterogeneous chip stacking, system in package, to flip chip package. Test products evolve from DDR2 , DDR3 , DDR4 to the development of software and hardware for the burn-in test of chips for automobile use, industrial-grade products, and multi-chip products. Module products evolve from memory modules, modules for advanced cloud servers, to the development of niche modules such as industrial control modules, mobile device modules, household appliance modules, networking and communications modules, and storage modules.

3. In terms of capacity planning, apart from increasing the capacity of packaging, the Company will also cooperate with customers to develop advanced DDR4 products, and proceed to expand the

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capacity of burn-in machines and high speed test machines, hoping to satisfy customers’ needs by planning the capacities ahead of time.

4. In terms of operations management, the Company stands by the spirit of "get down to the root of matter, and only stop at the perfection" to continue pushing for improvements, such as commodities, process, quality, staffing, and energy. With emphasis on equipment automation to improve the overall production performance.

In the coming year, the Company will continue to work on top of the current foundations in the field of packaging and testing OEM for mobile memory, niche memory, server memory and standard memory. The company will also be researching and developing in the new relevant technical fields of multi-chip packaging and flip-chip packaging. In the future, the Company will satisfy customers’ needs by having good grasp of the trends in end products to provide innovative packaging, testing, and process technologies and solutions, as well as improvements like accelerating new product development verification time, increase packaging and testing yields, and reducing manufacturing cycle time. Concurrently, we also aspire to enhance FATC's technical skill-sets, diversify our product lineup, expand retail channels, and further enhance the Company's operating performance to create more value for our shareholders.

Chairman: Wen-Yuan Wong President: Shih-Ming Hsieh Chief Accountant: Tzu-Yun Wen

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FORMOSA ADVACED TECHNOLOGIES CO., LTD. Supervisors’ Review Report

The Board of Directors has prepared the Company’s 2017 Business Report, Proposal for Profits Distribution, and Financial Statements audited by the CPA. We as the Supervisors of the Company have examined the aforementioned documents and found no unconformities. According to Article 219 of Company Act, we hereby submit this report. Please be advised accordingly. Submitted to: The Company’s 2018 Annual Shareholders’ Meeting

Supervisors: Chiu-Ming Chen Ming-Ta Hsieh Bo-Lie Hou Chen-Nan Lin

March 16, 2018

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Ratification Items Proposal 1 Proposal: For approval of the 2017 Business Report and Financial Statements as required by the Company Act.

Proposed by the Board of Directors Explanation: 1. The preparation of the Company’s 2017 Consolidated and

Individual Financial Statements were completed and the same were approved at the Board meeting on March 16, 2018 , and audited by independent auditors, Mr. Chien-Hung Chou and Ms. Juanlu Nan-Yu of PwC. The aforesaid Financial Statements together with the Business Report were reviewed by the Supervisors, which the Supervisors’ Review Report is presented.

2. For the aforementioned Business Report, please refer to page 4 through page 7 of the Meeting Handbook. As for the Financial Statements, please refer to page 49 through page 53 of the Handbook. Please approve the Business Report and the Financial Statements.

Resolution:

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Ratification Items Proposal 2 Proposal: For Approval of the Proposal for Distribution of 2017 Profits as required by the Company Act.

Proposed by the Board of Directors Attachment: Please refer to page 54 of the Handbook for the Statement of Profits Distribution, which has been approved by the Board of Directors on March 16, 2018 . Please approve the Statement of Profits Distribution. Resolution:

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Discussion Items Proposal 1

Summary: Amendment to the Company's Articles of Association. Please proceed to vote on the motion.

Proposed by the Board

Article Article Before Amendment

Article After Amendment

Purpose of Amendment

Chapter IV

Directors and Supervisors

Director In response to directives from the securities supervisory institution, the Company has established an Audit Committee and deleted relevant regulations pertaining to supervisors.

Article 13

The Company has established 11 seats of directors and 4 seats of supervisors. All directors and supervisors shall be elected from a nomination system

The Company has established 11 seats of directors. All directors shall be elected from a nomination system by shareholders among a list of nominees for

In response to the formation of the Audit Committee, relevant clauses pertaining to the supervisor role have been deleted.

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by shareholders among a list of nominees for directors and supervisors. The directors and supervisors shall have a term of office of three years and may be re-elected. The directors in the above Paragraph include three seats of Independent Directors. The nomination and election methods of Independent Directors need to be proceeded in accordance with the Company Act and the Securities Exchange Act. The Board is delegated to determine the

directors. The directors shall have a term of office of three years and may be re-elected. The directors in the above Paragraph include three seats of Independent Directors. The nomination and election methods of Independent Directors need to be proceeded in accordance with the Company Act and the Securities Exchange Act. Pursuant to Article 14-4 of the Securities and Exchange Act, the Company has established an Audit Committee,

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remuneration to directors and supervisors based on their involvement in the Company's business operation and their contributions to the Company with reference to the remuneration standard of the industry. The Company may buy liability insurance for its directors and supervisors, within the scope of business during their term of office.

and all Independent Directors of the Company will serve as members of the Audit Committee. Roles and obligations and relevant matters regarding the Audit Committee and its members will be proceeded in accordance with the Securities and Exchange Act and relevant legal regulations. The Board is delegated to determine the remuneration to directors based on their involvement in the Company's business operation

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and their contributions to the Company with reference to the remuneration standard of the industry. The Company may buy liability insurance for its directors, within the scope of business during their term of office.

Article 15

(Omitted) The reasons for calling a board of directors meeting shall be notified to each director and supervisor at least seven days in advance. However, in the case of emergency, the meeting may be convened at any time.

(Omitted) The reasons for calling a board of directors meeting shall be notified to each director at least seven days in advance. However, in the case of emergency, the meeting may be convened at any time. The notice

In response to the formation of the Audit Committee, relevant clauses pertaining to supervisor have been deleted.

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The notice may also be affected by written correspondence or by electronic transmission.

may also be affected by written correspondence or by electronic transmission.

Article 19

If the Company has gained profits within a fiscal year, 0.1~2.45% of the pretax profit before deducting compensations for employee and directors and supervisors shall be allocated as employee compensations, and a maximum of 0.5% shall be allocated as remuneration for directors and supervisors. However, if the Company has accumulated losses, the profits shall be

If the Company has gained profits within a fiscal year, 0.1~2.45% of the pretax profit before deducting compensations for employee and directors and supervisors shall be allocated as employee compensations, and a maximum of 0.5% shall be allocated as remuneration for directors. However, if the Company has accumulated losses, the profits shall be reserved to make up for the losses.

In response to the formation of the Audit Committee, relevant clauses pertaining to supervisor have been deleted.

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reserved to make up for the losses. Distribution of employee and directors' and supervisors' compensation shall proceed pursuant to Article 235-1 of the Company Act.

Distribution of employee and directors' compensations shall proceed pursuant to Article 235-1 of the Company Act.

Article 20

(Omitted) The Company's business operation is in growth stage, and our dividend policy has adopted a combination of three methods of cash dividend, reinvestment of earnings and reinvestment of capital reserve to satisfy our business expansion needs. In consideration of the Company's future

(Omitted) The Company's business operation is growing steadily, and our dividend policy has adopted a combination of three methods of cash dividend, reinvestment of earnings and reinvestment of capital reserve to satisfy our business expansion needs. After deducting legal earned

Dividend distribution policy shall be amended based on actual needs.

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major investment plans or any capital need to improve our financial structure, FATC will distribute dividends through reinvestment of earnings or reinvestment of capital reserve to satisfy our capital needs. In case surplus is present, cash dividend may be distributed after retaining an appropriate amount. However, in order to avoid over-expansion of capital and possible impacts on dividend payment standards in the future, the combined ratio of reinvestment of

surplus reserve and special reserve from the earnings available for appropriation of the year, no less than 50% shall be allocated and cash dividend will take precedence. The combined ratio of reinvestment of earnings and reinvestment of capital reserve cannot exceed 50% of the year's total dividend.

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earnings and reinvestment of capital reserve cannot exceed 80% of the year's total dividend.

Article 22

(Omitted) Added to the original provision: 'Twenty-third amendment to be made on June 22, 2018. Relevant provisions concerned the creation of an Audit Committee and the deletion of provisions regarding the supervisors. To be effective when the term of office for supervisors elected by the regular Shareholders' Meeting on June 24, 2016 comes to

Article and date of implementation added pursuant to amendment of the Article.

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term.'

Resolution:

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Summary: Amendment to the Company's 'Procedures to handle transactions of derivative products.' Please proceed to discuss.

Proposed by the Board Explanation: the Board has proposed to amend partial

Articles in the 'Procedures to handle transactions of derivative products' in response to actual procedural needs. Relevant Articles before and after the amendments have been attached. Please discuss the feasibility of this amendment. Please vote on the motion.

Article Original provisions Article Provisions after

amendment Article

4 The characteristics of the Company's derivative product transactions are for the purposes of 'hedging' and 'trading-oriented' transactions. The Company has stipulated compulsory stop-loss limit and accounting principles

Article 4 The main strategy of the Company is to select derivatives trading as to minimize risks from foreign exchange losses, interest rates, and fluctuations in asset prices.

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amendment appropriate for each risk position.

Article 5 The Company's total transaction value of a derivative trading contract cannot exceed 50% of the Company's net worth. All and individual contractual losses are limited to 10% of the contractual price. The Board of Directors has delegated senior management to approve individual contracts.

Article 5 The Company's total transaction value of a derivative trading contract cannot exceed 50% of the Company's net worth. All and individual contractual losses are limited to 10% of the contractual price. The Board of Directors has delegated senior management to approve individual contracts. The level of authority for the transaction will be proceeded in accordance with the Company's designated levels of authorization.

In case an Audit

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amendment Committee has been established, approval from one-half or more of all Audit Committee members need to be obtained and submitted for approval from the Board of Directors before a material derivative transaction can begin. Any matter that has not been approved with the consent of one-half or more of the entire membership of the Audit Committee may be adopted with the consent of two-thirds or more of the entire Board of Directors, and the resolution of the

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amendment Audit Committee shall be recorded in the Board of Directors meeting minutes.

Article 6 When engaging in derivative trading, the personnel engaged in trading shall establish trading strategies as well as undertake the trading directly to the trading counterparty in accordance with the authorized transaction content. After the transaction, the personnel engaged in trading shall submit transaction receipts to the settlement personnel to proceed with settlement processes. The settlement personnel shall process contract

Article 6 When engaging in derivative trading, the personnel engaged in trading shall establish trading strategies and undertake the trading directly with the trading counterparty in accordance with the authorized transaction content. After the transaction, the personnel engaged in trading shall submit transaction receipts to the settlement personnel to proceed with settlement processes. The

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amendment signing, opening bank accounts, settlement, and closing of the books with the trading counterparty in accordance with the content of the transaction. The department responsible for carrying out the derivative trading will be special project teams from the Financial Department. Authorized transaction value is at US$1 million for each transaction. Analysis will be needed for every single transaction that exceeds this amount, and the transaction shall not proceed until permission has been obtained.

settlement personnel shall process contract signing, opening bank accounts, settlement, and closing of the books with the trading counterparty in accordance with the content of the transaction. The department responsible for carrying out the derivative trading will be special project teams from the Financial Department. Authorized transaction value is at US$1 million for each transaction. Analysis will be needed for every single transaction that exceeds this

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amendment amount, and the transaction shall not proceed until permission has been obtained.

Article 7 In dealing with derivative transactions, the unit of management system shall establish departmental management information system for the balance and profit and loss analysis for all positions to allow for risk control and to make timely response to abnormal conditions.

Article 7 In dealing with derivative transactions, the Company shall establish comprehensive information system for the balance and profit and loss analysis for the trading positions to allow for risk control and to make timely response to abnormal conditions.

Article 8 The Company shall input the derivative transaction information (including hedging and trading-oriented

Article 8 The Company shall input the derivative transaction information as of the end of the previous month on the

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amendment transactions) as of the end of the previous month on the information disclosure website as designated by the Financial Supervisory Committee before the 10th of each month. However, for transactions that have reached the 10% transaction value stop-loss limit, and for any transaction contracts that have been altered or terminated, the Company shall publicly announce the information within two days of the occurrence on the designated information disclosure website from the Financial

information disclosure website as designated by the Financial Supervisory Committee before the 10th of each month. However, for transactions that have reached the 10% transaction value stop-loss limit, and for any transaction contracts that have been altered or terminated, the Company shall publicly announce the information within two days of the occurrence on the designated information disclosure website from the Financial Supervisory Committee.

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amendment Supervisory Committee.

Article 9 For any derivative transactions from the Company's subsidiaries that are not publicly listed on the domestic stock exchange, the Company shall proceed with such transactions pursuant to Article 8 of this Procedure.

Article 9 For any derivative transactions from the Company's subsidiaries that are not publicly listed on the domestic stock exchange, the Company shall proceed with such transactions pursuant to Article 8 of this Procedure, and to publicly announce the information on behalf of the subsidiary.

Chapter IV

Accounting Principles (This Chapter is deleted)

Article 13

The accounting of any derivative transaction of the Company is

(This Article is deleted)

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amendment conducted in accordance with the Generally Accepted Accounting Principles (GAAP) and the regulations of the relevant financial accounting standards from the Accounting Research Development Foundation (ARDF).

Article 14

In preparing periodical financial reports (including Annual Report, Semi-Annual, Quarterly Financial Reports, and Consolidated Financial Statements), the Company shall disclose general matters to be disclosed pertaining to the nature of the


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amendment derivative transaction in the Notes to Financial Statements in accordance with Taiwan's SFAS No. 34: Accounting for Financial Instruments and No. 36: Presentation and Disclosure of Financial Instruments from the Accounting Research and Development Foundation (ARDF).

Article 15

For 'trading-oriented' derivative products, besides ordinary disclosure items, the Company shall also disclose the net profit or loss arising from transaction activities for the period and the positions on the Income Statement by product type.


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amendment Article

16 For 'hedging-oriented' derivative products, besides ordinary disclosure items, the Company shall also disclose the following: A. For risk-hedging

for assets or liabilities held: (1) Assets or

liabilities that have been hedged and the types of derivative products used.

(2) Hedged profit/loss that has been recognized and clearly deferred.

B. Hedging for


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amendment expected transactions (including committed future transactions and transactions that are predicted to occur but have not been committed to): (1) Description of

the expected transaction.

(2) Description of the types and content of the derivative products used.

(3) Hedged profit/loss that have been clearly deferred.

Chapter Internal Control and Chapter Internal Control and

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amendment V Internal Audit IV Internal Audit

Article 17

In engaging in derivative transactions, the Company shall adopt risk management for credit, market, liquidity, cash flow, operations, and legal risk management. The functions of dealing, confirmation and settlement of derivatives trading shall be performed by different personnel. Evaluation of the appropriateness of risk assessment, monitoring and control shall be regularly reported to the senior management delegated by the Board of Directors by the President's Office.

Article 13 In engaging in derivative transactions, the Company shall adopt risk management for credit, market, liquidity, cash flow, operations, and legal risk management. The functions of dealing, confirmation and settlement of derivatives trading shall be performed by different personnel. Evaluation of the appropriateness of risk assessment, monitoring and control shall be regularly reported to the senior management delegated by the Board of Directors by the President's Office.

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amendment Article

18 Positions held in derivatives trading shall be assessed at least once weekly. For hedging trades held for business needs, assessment shall be undertaken at least twice monthly. Supervisors of the trading department shall monitor the supervision and control of the risks involved in derivative trading, and to regularly assess whether the performance of such trading is in line with the Company's management strategies and the risks are within the Company's risk tolerance. The evaluation report shall

Article 14

Positions held in derivatives trading shall be assessed at least once weekly. For hedging trades held for business needs, assessment shall be undertaken at least twice monthly. Supervisors of the trading department shall monitor the supervision and control of the risks involved in derivative trading, and to regularly assess whether the performance of such trading is in line with the Company's management strategies and the risks are within the Company's risk tolerance. The

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amendment be remitted to senior managers authorized by the Board of Directors. When abnormalities (for example, when a position held has exceeded the stop loss limit) occur in the market evaluation report, necessary response measures shall be taken and the Board of Directors shall be immediately notified. If Independent Directors have been established, Independent Directors shall be present and to form opinions.

evaluation report shall be remitted to senior managers authorized by the Board of Directors. When abnormalities (for example, when a position held has exceeded the stop loss limit) occur in the market evaluation report, necessary response measures shall be taken and the Board of Directors shall be immediately notified. Independent Directors shall be present and to form opinions.

Article 19

In engaging in derivative transactions, the Company shall establish files for future reference, and

Article 15 In engaging in derivative transactions, the Company shall establish files for future reference, and

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amendment to make detailed recordation on information including types and amounts of derivative trading and matters that shall be carefully assessed pursuant to Article 18. The Company's internal audit personnel shall regularly understand the reasonableness of the internal control for derivative trading, and to check the levels of obeying of the trading department for the Procedures on a monthly basis. The internal audit personnel shall also analyze the trading cycle and to compile and submit an audit report to the senior

to make detailed recordation on information including types and amounts of derivative trading and matters that shall be carefully assessed pursuant to Article 14. The Company's internal audit personnel shall regularly understand the reasonableness of the internal control for derivative trading, and to audit the levels of compliance of the trading department for the Procedures on a monthly basis. The internal audit personnel shall compile and submit an audit report to the senior management

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amendment management delegated by the Board of Directors to review. If material breach has been found, each supervisor shall be notified in writing, and punitive actions shall be taken based on the Company's Human Resources Management Principles depending on the severity of the breach.

delegated by the Board of Directors to review. If material breach has been found, each supervisor shall be notified in writing, and punitive actions shall be taken based on the Company's Human Resources Management Principles depending on the severity of the breach. If an Audit Committee has been established, processes shall be carried out pursuant to the above Paragraph.

Article 20

The Company's control procedures for subsidiaries engaged in derivative

Article 16

The Company's control procedures for subsidiaries engaged in derivate

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amendment transactions: A. In case any

Subsidiary of the Company wishes to engage in derivative transaction, the Company shall supervise the Subsidiary to establish a set of 'Procedures to handle transactions of derivative products' in accordance with legal regulations.

B. The Subsidiary shall submit reference information on the derivative transactions in the previous month to the Company for

transactions: A. In case any

Subsidiary of the Company wishes to engage in derivate transaction, the Company shall supervise the Subsidiary to establish a set of 'Procedures to handle transactions of derivative products' in accordance with legal regulations.

B. The Subsidiary shall submit reference information on the derivative transactions in the previous

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amendment review before the 5th of each month.

C. In case material breach has been found by the internal audit personnel of the Subsidiary, the Company shall immediately be notified in writing. The Company shall monitor the handling and subsequent improvement measures.

month to the Company for review before the 5th of each month.

C. In case material breach has been found by the internal audit personnel of the Subsidiary, the Company shall immediately be notified in writing. The Company shall monitor the handling and subsequent improvement measures.

Chapter VI

Supplementary Principles

Chapter V

Supplementary Principles

Article 21

The Procedures, any amendments thereto, shall be submitted to the supervisors and

Article 17

The Procedures, any amendments thereto, shall be submitted to the supervisors and

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amendment reported to the Board of Directors for approval prior to implementation. If any director expresses dissent and it is contained in the minutes or a written statement, the Company shall submit the director's dissenting opinion to each supervisor. Where the position of independent director has been created, if an independent director agrees on or objects to any matter, it shall be recorded in the minutes of the Board of Directors meeting.

reported to the Board of Directors for approval prior to implementation. If any director expresses dissent and it is contained in the minutes or a written statement, the Company shall submit the director's dissenting opinion to each supervisor. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the Board of Directors meeting. Where an Audit Committee has been created, pursuant to Article 1 and a matter has been submitted to the

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amendment Board for resolution, approval from one-half or more of all Audit Committee members need to be obtained. Any matter that has not been approved with the consent of one-half or more of the entire membership of the Audit Committee may be adopted with the consent of two-thirds or more of the entire Board of Directors, and the resolution of the Audit Committee shall be recorded in the Board of Directors meeting minutes.

Resolution:

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Summary: In establishing an Audit Committee pursuant to regulations from the Financial Supervisory Committee, the Board of Directors has proposed to amend the Company's 'Procedures for Election of Directors and Supervisors.' Please vote on the motion.

Proposed by the Board Explanation: In order to comply with the provisions of the

Financial Supervisory Commission, the Company shall, after re-election of all Directors from 2019 , the Company will hold re-elections of all Directors and create an Audit Committee in place of the Supervisors. Therefore, the Company plans to amend partial articles from the Company's Procedures for Election of Directors and Supervisors,' and the articles before and after such amendments have been attached. Please discuss the feasibility of this motion. Please vote on the motion.

Article Original provisions Provisions after

amendment Procedures for Elections of

Directors and Supervisors Procedures for Election of Directors

Article 1 Unless otherwise stipulated Unless otherwise stipulated

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amendment by the Company Act and this Company's charter, the election of this Company's directors and supervisors shall be according to this Procedure.

by the Company Act and this Company's charter, the election of this Company's directors shall be according to this Procedure.

Article 2 The Company shall adopt a cumulative voting method where one share shall have the same voting rights as the number of directors and supervisors to be elected, and the total number of votes per share may be consolidated for the election of one candidate or may be split for the election of two or more candidates. The same principle shall be applied to the election of supervisors. The shareholder account number or attendance card numbers on the ballot may be used to replace the names of shareholders on

The Company shall adopt a cumulative voting method where one share shall have the same voting rights as the number of directors to be elected, and the total number of votes per share may be consolidated for the election of one candidate or may be split for the election of two or more candidates. The shareholder account number or attendance card numbers on the ballot may be used to replace the names of shareholders on the ballots.

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amendment the ballots.

Article 4 The number of directors and supervisors will be as specified in the Company's Articles of Association. Those receiving ballots representing the highest numbers of voting rights will be elected sequentially according to their respective numbers of votes. Those elected for both director and supervisor positions can autonomously decide whether to serve as directors or supervisors, and any vacancy will be filled by nominees with the highest number of votes. When two or more persons receive the same number of votes, thus exceeding the specified number of positions, they shall draw lots to determine the winner, with the chair

The number of directors will be as specified in the Company's Articles of Association. Those receiving ballots representing the highest numbers of voting rights will be elected sequentially according to their numbers of votes. When two or more persons receive the same number of votes, thus exceeding the specified number of positions, they shall draw lots to determine the winner, with the chair drawing lots on behalf of any person not in attendance.

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amendment drawing lots on behalf of any person not in attendance.

Article 5 Elections of both directors and supervisors of the Company shall be conducted in accordance with the candidate nomination system pursuant to the Company's Articles of Association. The shareholders shall elect the directors and supervisors from among the nominees listed in the roster of candidates. Independent directors and non-independent directors shall be elected together. Quota for the independent director and non-independent director shall be counted separately pursuant to Article 4. When establishing the Audit Committee, at least one independent

Elections of directors of the Company shall be conducted in accordance with the candidate nomination system pursuant to the Company's Articles of Association. The shareholders shall elect the directors from among the nominees listed in the roster of candidates. Independent directors and non-Independent directors shall be elected together. Quota for the independent director and non-independent director shall be counted separately pursuant to Article 4. At least one independent director-elect shall be equipped with accounting or financial expertise. Methods, seats, and venue

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amendment director-elect shall be equipped with accounting or financial expertise. Methods, seats, and venue for nomination and other relevant matters for nomination of director and supervisor candidates shall be announced prior to the book closure period before convening a Shareholders' Meeting. The nomination period shall be no less than 10 days. The Board of Directors and shareholders holding 1% or more of the Company's issued shares shall be eligible to recommend a list of nominees for directors and supervisors. However, the number of nominees cannot exceed the number of directors and supervisors to be elected. When providing the candidacy of nominees,

for nomination and other relevant matters for nomination of director candidates shall be announced prior to the book closure period before convening a Shareholders' Meeting. The nomination period shall be no less than 10 days. The Board of Directors and shareholders holding 1% or more of the Company's issued shares shall be eligible to recommend a list of nominees for directors. However, the number of nominees cannot exceed the number of directors to be elected. When providing the candidacy of nominees, shareholders and Board of Directors member shall provide the nominees' names, academic background, experiences,

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amendment shareholders and Board of Directors member shall provide the nominees' names, academic background, experiences, affidavit to serve upon election, affidavit for non-violation of Article 30 in the Company Act and other certification documents. When a nominee is a legal person or its representative, the shareholder registration of the legal person and certification document for number of shares held shall be provided. When the Board of Directors or other person with convening rights convenes a Shareholders' meeting, the nominees for directors and supervisors shall be reviewed, and shall be included in the list of nominees for directors

affidavit to serve as a Director upon election, affidavit for non-violation of Article 30 in the Company Act and other certification documents. When a nominee is a legal person or its representative, the shareholder registration of the legal person and certification document for number of shares held shall be provided. When the Board of Directors or other person with convening rights convenes a Shareholders' meeting, the nominees for directors shall be reviewed, and shall be included in the roster of nominees for directors unless one of the following conditions apply:(1) A shareholder

recommends a nominee outside of the nomination

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amendment or supervisors unless one of the following conditions apply: (1) A shareholder

recommends a nominee outside of the nomination period.

(2) A shareholder who wishes to recommend a nominee does not own 1% or more of the Company's shares before book closure pursuant to Article 165-2 or 165-3 of the Company Act.

(3) The number of nominees has exceeded the number of directors or supervisors to be voted on.

(4) Relevant certification documents have not been supplemented per regulation in the

period. (2) A shareholder who

wishes to recommend a nominee does not own 1% or more of the Company's shares before book closure pursuant to Article 165-2 or 165-3 of the Company Act.

(3) The number of nominees has exceeded the number of directors to be voted on.

(4) Relevant certification documents have not been supplemented per regulation in the above Paragraph.

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amendment above Paragraph.

Resolution:

FORMOSA ADVANCED TECHNOLOGIES CO., LTD. STATEMENTS OF COMPREHENSIVE INCOME

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT FOR EARNINGS PER SHARE AMOUNTS)

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Year ended December 31 2017 2016

Items Notes AMOUNT % AMOUNT % 4000 Operating Revenue 6(15) and 7 $ 7,888,494 100 $ 8,491,396 100 5000 Operating Costs 6(6)(18)(19) and 7 ( 6,580,089) ( 83 ) ( 7,117,109) ( 84)5900 Net Operating Margin 1,308,405 17 1,374,287 16 Operating Expenses 6(18)(19) and 7 6100 Selling expenses ( 19,274) - ( 18,651) - 6200 General and administrative

expenses

( 61,370) ( 1 ) ( 62,803) ( 1)6300 Research and development

expenses

( 59,813) ( 1 ) ( 53,925) - 6000 Total Operating Expenses ( 140,457) ( 2 ) ( 135,379) ( 1)6900 Operating profit 1,167,948 15 1,238,908 15 Non-Operating Income and

Expenses

7010 Other income 6(16) 148,643 2 117,519 1 7020 Other gains and losses 6(17) 268,976 3 ( 96,923) ( 1)7050 Finance costs ( 1) - - - 7000 Total Non-Operating Income

and Expenses

417,618 5 20,596 - 7900 Profit before income tax 1,585,566 20 1,259,504 15 7950 Income tax expense 6(20) ( 192,480) ( 3 ) ( 236,948) ( 3)8200 Profit for the year $ 1,393,086 17 $ 1,022,556 12 Other Comprehensive Income Components of other

comprehensive income that will not be reclassified to profit or loss

8311 Other comprehensive income,

before tax, actuarial losses on defined benefit plan

($ 7,269) - ( $ 14,759) - 8349 Income tax related to

components of other comprehensive income that will not be reclassified to profit or loss

1,236 - 2,509 - Components of other

comprehensive income that will be reclassified to profit or loss

8362 Unrealised gain on valuation of

available-for-sale financial assets

308,164 4 335,784 4 8500 Total comprehensive income for

the year

$ 1,695,217 21 $ 1,346,090 16 Basic earnings per share 6(21) Before tax $ 3.59 $ 2.85 After tax $ 3.15 $ 2.31 Diluted earnings per share 6(21) Before tax $ 3.57 $ 2.84 After tax $ 3.14 $ 2.30

FORMOSA ADVANCED TECHNOLOGIES CO., LTD. BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

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December 31, 2017 December 31, 2016 Assets Notes AMOUNT % AMOUNT %

Current assets

1100 Cash and cash equivalents $ 3,479,352 29 $ 3,954,890 35

1110 Financial assets at fair value

through profit or loss - current

6(2)

629,998 5 627,621 6

1125 Available-for-sale financial assets

- current

6(3)

1,737,645 14 733,417 6

1150 Notes receivable, net 8,303 - 5,094 -

1170 Accounts receivable, net 6(5) 522,396 4 622,386 5

1180 Accounts receivable - related

parties

6(5) and 7

964,030 8 1,005,610 9

1200 Other receivables 7,218 - 2,782 -

130X Inventories, net 6(6) 826,956 7 1,098,366 10

1470 Other current assets 107,475 1 48,140 -

11XX Total current assets 8,283,373 68 8,098,306 71

Non-current assets

1523 Available-for-sale financial assets

- non-current

6(3)

630,800 5 726,491 7

1543 Financial assets carried at cost -

non-current

6(4)

30,353 - 30,353 -

1600 Property, plant and equipment,

net

6(7)

3,111,590 26 2,365,600 21

1840 Deferred income tax assets 13,141 - 17,770 -

1900 Other non-current assets 105,924 1 118,847 1

15XX Total non-current assets 3,891,808 32 3,259,061 29

1XXX TOTAL ASSETS $ 12,175,181 100 $ 11,357,367 100

(Continued)

FORMOSA ADVANCED TECHNOLOGIES CO., LTD. BALANCE SHEETS


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December 31, 2017 December 31, 2016

Liabilities and Equity Notes AMOUNT % AMOUNT %

Current liabilities

2120 Financial liabilities at fair value

through profit or loss - current

6(8)

$ - - $ 1,381 -

2150 Notes payable 1,002 - 113 -

2170 Accounts payable 314,304 2 402,365 4

2180 Accounts payable - related parties 7 44,272 - 39,247 -

2200 Other payables 6(9) 558,395 5 447,249 4

2230 Current income tax liabilities 84,334 1 109,216 1

2300 Other current liabilities 8,471 - 9,925 -

21XX Total current liabilities 1,010,778 8 1,009,496 9

Non-current liabilities

2600 Other non-current liabilities 82,910 1 77,201 1

25XX Total Non-Current Liabilities 82,910 1 77,201 1

2XXX TOTAL LIABILITIES 1,093,688 9 1,086,697 10

Share capital 6(11)

3110 Share capital - common stock 4,422,222 36 4,422,222 39

Capital surplus 6(12)

3200 Capital surplus 2,411,161 20 2,411,111 21

Retained earnings 6(13)

3310 Legal reserve 1,060,111 9 957,855 8

3320 Special reserve - - - -

3350 Unappropriated retained earnings 2,505,930 20 2,105,577 19

Other equity interest

3400 Other equity interest 6(14) 682,069 6 373,905 3

3XXX TOTAL EQUITY 11,081,493 91 10,270,670 90

Contingent liabilities and

commitments

8

3X2X TOTAL LIABILITIES AND

EQUITY

$ 12,175,181 100 $ 11,357,367 100

epFORMOSA ADVANCED TECHNOLOGIES CO., LTD. STATEMENTS OF CHANGES IN EQUITY

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) Retained Earnings

NotesShare capital - common stock

Total capital surplus,

additional paid-in capital Legal reserve

Special reserve

Unappropriated retained earnings

Unrealised gain or loss on available-for-sale financial

assets

Total equity

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Year ended December 31, 2016 Balance at January 1, 2016 $ 4,422,222 $ 2,411,111 $ 845,147 $ 856 $ 2,091,567 $ 38,121 $ 9,809,024 Appropriation of retained earnings and distribution 6(13) Legal reserve - - 112,708 - ( 112,708 ) - - Reversal of special reserve - - - ( 856 ) 856 - - Cash dividends - - - - ( 884,444 ) - ( 884,444 ) Net income for 2016 - - - - 1,022,556 - 1,022,556 Other comprehensive income (loss) for 2016 6(14) - - - - ( 12,250 ) 335,784 323,534 Balance at December 31, 2016 $ 4,422,222 $ 2,411,111 $ 957,855 $ - $ 2,105,577 $ 373,905 $ 10,270,670Year ended December 31, 2017 Balance at January 1, 2017 $ 4,422,222 $ 2,411,111 $ 957,855 $ - $ 2,105,577 $ 373,905 $ 10,270,670 Expired cash dividends transferred to capital surplus - 50 - - - - 50 Appropriation of retained earnings and distribution 6(13) Legal reserve - - 102,256 - ( 102,256 ) - - Cash dividends - - - - ( 884,444 ) - ( 884,444 ) Net income for 2017 - - - - 1,393,086 - 1,393,086 Other comprehensive income (loss) for 2017 6(14) - - - - ( 6,033 ) 308,164 302,131 Balance at December 31, 2017 $ 4,422,222 $ 2,411,161 $ 1,060,111 $ - $ 2,505,930 $ 682,069 $ 11,081,493

F FORMOSA ADVANCED TECHNOLOGIES CO., LTD. STATEMENTS OF CASH FLOWS


Notes 2017 2016

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CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax $ 1,585,566 $ 1,259,504 Adjustments Adjustments to reconcile profit (loss) Depreciation 6(7)(18) 883,831 1,290,343 Amortisation 6(18) 92,367 115,170 Gain on doubtful debt recoveries 6(5) ( 228 ) - Impairment loss 6(4)(17) - 69,022 Gain on disposal of investment 6(17) ( 275,611 ) - Gain on disposal and scrap of property, plant and equipment 6(17) ( 47,200 ) ( 6,460 ) Gain on valuation of financial assets 6(17) ( 3,758 ) ( 1,343 ) Interest income 6(16) ( 16,420 ) ( 13,550 ) Dividend income 6(16) ( 101,720 ) ( 69,020 ) Changes in operating assets and liabilities Changes in operating assets Financial assets held for trading - 30,371 Notes receivable, net ( 3,209 ) 1,960 Accounts receivable, net 100,218 ( 48,498 ) Accounts receivable - related parties 41,580 97,689 Other receivables ( 4,436 ) 2,749 Inventories, net 271,410 ( 8,167 ) Other current assets ( 59,335 ) 104,230 Changes in operating liabilities Notes payable 889 ( 2,663 ) Accounts payable ( 88,061 ) 77,618 Accounts payable - related parties 5,025 26,066 Other payables 73,857 ( 70,124 ) Other current liabilities ( 1,454 ) 2,525 Other non-current liabilities 5,709 ( 3,434 ) Cash inflow generated from operations 2,459,020 2,853,988 Interest received 16,420 13,550 Dividends received 101,720 69,020 Income tax paid ( 218,716 ) ( 294,487 ) Net cash flows from operating activities 2,358,444 2,642,071

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of available-for-sale financial assets ( 848,817 ) ( 528,788 ) Proceeds from sale of available-for-sale financial assets 524,055 - Acquisition of property, plant, and equipment 6(22) ( 1,592,532 ) ( 718,987 ) Proceeds from disposal of property, plant and equipment 47,200 9,837 Increase in other non-current assets ( 79,444 ) ( 85,753 ) Net cash flows used in investing activities ( 1,949,538 ) ( 1,323,691 )

CASH FLOWS FROM FINANCING ACTIVITIES Payment of cash dividends ( 884,444 ) ( 884,444 ) Net cash flows used in financing activities ( 884,444 ) ( 884,444 )Net (decrease) increase in cash and cash equivalents ( 475,538 ) 433,936Cash and cash equivalents at beginning of year 3,954,890 3,520,954Cash and cash equivalents at end of year $ 3,479,352 $ 3,954,890

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Formosa Advanced Technologies CO.,LTD Statement of Profits Distribution

For the year of 2017 Unit：NT$

Items Amount Items Amount Explanation Available for Distribution: (1)Unappropriated

Less: Other comprehensive income transferred into unappropriated earnings

(2) Net profit after tax of current year

1,118,876,979

-6,033,211

1,393,086,232

Distribution Items: (1) Appropriation of legal

reserve (10% of the after-tax profit )

(2) Distribution of dividends and bonus in cash ( $2.5 per share)

(3) Unappropriated retained earnings carried forward to next year

139,308,623

1,105,555,558

1,261,065,819

1. Registered capital of the company is NT$4,422,222,230.

2. The Company plans to distribute dividends of $2.5 per share for current year (among which, $0.9397 will be distributed as dividends and $1.5603 will be distributed as bonus); all of which are cash dividends.

3. The Company distributes dividends and bonus were all from 1998 of net profit after tax..

4. While the distribution of cash dividends to each individual shareholder is less than 1 dollar, the distribution will be rounded to the nearest dollar.

Total 2,505,930,000 Total 2,505,930,000

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Formosa Advanced Technologies Co., Ltd. Opinion We have audited the accompanying balance sheets of Formosa Advanced Technologies Co., Ltd. (the “Company”) as at December 31, 2017 and 2016, and the related statements of comprehensive income, of changes in equity and of cash flows for the years then ended, 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, 2017 and 2016, and its financial performance and its cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission. Basis for opinion We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the 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, we do not provide a separate opinion on these matters. The key audit matters of Formosa Advanced Technologies Co., Ltd. for 2017 are as follows:

Allowance for inventory valuation losses Description Refer to Note 4(12) for description of accounting policy, Note 5(2) for accounting estimates and assumption uncertainty in relation to inventory valuation, and Note 6(6) for details of inventory. As of

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December 31, 2017, the Company’s inventory and allowance for inventory valuation losses amounted to NT$863,905 thousand and NT$36,949 thousand, respectively. The Company is primarily engaged in packaging, testing, and manufacturing integrated circuit. These kinds of products are easily affected by fluctuations in market prices due to the rapidly changing industry. As a result, the Company’s inventories are subject to higher risk of decline in market value that would result to inventory valuation loss. Given that the amount of inventory is material to the financial statements, inventory items are voluminous, and determination of net realisable value of individually identified obsolete or scrap inventory rely on subjective management judgement, we consider the estimation of allowance for inventory valuation loss a key audit matter. How our audit addressed the matter: Our audit procedures in relation to the above key audit matter included:

Comparing whether the allowance for inventory valuation loss in the financial period is in accordance with the Company’s policy, and evaluating the reasonableness of policy;

Verifying whether the systematic method used in preparing the inventory aging report and individually identifying obsolete or scrap inventory by management is appropriate, and checking whether obsolete inventories that are over a certain age are listed in the report;

Evaluating the reasonableness of individually identified obsolete or scrap inventory by management against supporting documents;

Verifying the information from inventory physical count against the waste, slow-moving, scrap, and damaged inventory report by management; and

Discussing the calculation of net realisable value from waste, slow-moving, scrap, and damaged inventory report with management, and gathering supporting documents.

Audit of cash and cash equivalents Refer to Note 4(5) for description of accounting policy on cash equivalents, and Note 6(1) for details of cash and cash equivalents. As of December 31, 2017, cash and cash equivalents amounted

NT$3,479,352 thousand.

Cash and cash equivalents comprise 29% of total assets as of December 31, 2017. Cash and cash equivalents are assets with high liquidity and generally have a high degree of inherent risk. Further, management needs to determine whether its time deposits meet the definition of cash equivalents. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash, and subject to insignificant risk of changes in value. Considering the related risk mentioned above, we consider the audit of cash and cash equivalents a key audit matter.

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How our audit addressed the matter: Our audit procedures in relation to the above key audit matter included:

Evaluating and testing the internal control over cash management, including segregation of duties for cash receipts and recording, authorisation of receipts and payments in cash, reviewing bank reconciliation, etc.

Verifying the existence, rights and obligations of cash and cash equivalents by sending out confirmation for bank accounts and special agreements with financial institutions, if any.

Examining whether the condition of short-term notes and bills are in agreement with the definition of cash equivalents.

Testing the correctness of calculation and checking for unusual reconciling items, including:

a) Amount of bank reconciliation at year end against general ledger;

b) Bank balance against bank account statement; and

c) Passbook or amount in confirmation reply.

Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of 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 audit committee (or supervisors), 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

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includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 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 auditor’s 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.

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.

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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 auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Chou, Chien-Hung Juanlu, Man-Yu For and on behalf of PricewaterhouseCoopers, Taiwan March 16, 2018 -------------------------------------------------------------------------------------------------------------------------------------------------The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

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Information regarding the Proposed Employees, Directors’ and Supervisors’ Compensation to Adopted by the Board of Directors of the Company:

1. Amounts of Employees’ cash compensation, stock compensation, and Directors’ & Supervisors’ compensation: Employees’ cash Compensation NT$ 39,924,320 Employees’ stock Compensation NT$ 0 Directors and Supervisors Compensation NT$ 4,073,910

2. Share amount of the Employees’ stock compensation and the percentage of the share amount to that of all stock dividend: Share amount of employees’ stock compensation 0 share Percentage of the share amount to that of all stock dividend

0%

The above-listed amount of Employees’, Directors’ and Supervisors’ cash compensation is consistent with the proposed amount adopted by the Board of Directors of the Company. Effect upon Business Performance and Earnings Per Share of the Company by the Stock Dividend Distribution Proposed at the 2018 Annual Shareholders’ Meeting: Not applicable since the Company does not propose the stock dividend distribution at the 2018 Annual Shareholders’ Meeting and does not required to prepare financial forecast information.

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Formosa Advanced Technologies Corporation Current Shareholdings of Directors and Supervisors

Title Name Shareholding

(share) Chairman Wen-Yuan Wong

Representative of

Formosa Taffeta Corporation

290,464,472

Vice Chairman Shih-Ming Hsieh Representative of


290,464,472

Director Fu-Yuan Hong Representative of


290,464,472

Director Dong-Terng Huang Representative of


290,464,472

Director Ming-Chang Lee Representative of


290,464,472

Director Solomon Chang 139,983Director Wen-Tsai Chen 247,669Director Chun-Ming Huang 100,000Independent Director Yu Cheng 0Independent Director Hui-Ya Shen 0Independent Director Chia-chi Kuo 0Supervisor Chiu-Ming Chen 0

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Title Name Shareholding

(share) Supervisor Chen-Nan Lin

Representative of Yu-Yuang Textile Corporation

1,600,851

Supervisor Ming-Ta Hsieh 766,750Supervisor Bo-lie Hou 0Note: According to Article 26 of Securities and Exchange Act, the minimum

shareholdings of the Company’s Directors and Supervisors are 16,000,000 shares and 1,600,000 shares. As of April 24, 2018, the actual shareholdings of the Company’s Directors and Supervisors are 290,952,124 shares and 2,367,601 shares.

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