hon hai precision industry co., ltd.2 hon hai precision industry co., ltd. annual shareholders’...

[Summary Translation]

HON HAI PRECISION INDUSTRY CO., LTD.

Stock Code: 2317

Annual General Shareholders’ Meeting For Year 2007

Meeting Handbook

June 8, 2007

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Annual Shareholders’ Meeting For Year 2007

Meeting Procedure

Time of Meeting: June 8, 2007 (Friday) at 9:00 am Location of Meeting: 2 Tze-yiu Street, 5 Floor

Tu-cheng Industrial Park Tu-cheng City, Taipei Hsien, Taiwan

I. To report the total number of shares represented in this AGM meeting II. To announce the commencement of meeting III. Chairman’s addresses IV. Items to be reported V. Matters to be acknowledged and discussed VI. Extraordinary Motions VII. Adjourned Meeting

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Regular Shareholders’ Meeting for Year 2007 Agenda

I. Chairman to announce the commencement of meeting.

II. Chairman’s report.

i. To report business of 2006.

ii. Statutory Auditors’ review of 2006 audited financial statements.

iii. Status Report of Company's indirect investment in Mainland China.

iv. Status Report of Company’s Taiwan Convertible Debenture Issuance

v. Status Report of Company’s Premier M&A execution

vi. Amend Company’s “Rule and Procedure for Board Meeting”

vii. Tther miscellaneous items.

III. Matters to be acknowledged and discussed, including board members election:

i. To acknowledge 2006 business operation report and 2006 audited financial

statements.

ii. To acknowledge the proposal for distribution of 2006 profits.

iii. To approve the new shares issuance for capital increase by earnings

re-capitalization.

iv. To approve the overseas depository receipts (“DR”s) issuance.

v. To amendment "Rule and Procedure For Election of Board Directors and Statutory

Auditors ".

vi. To amendment "Rule and Procedure For Asset Acquisition or Disposal ".

vii. To amend the Company’s Articles of Incorporation

viii. Election of Board Directors and Statutory Auditors

ix. To approve removal of non-compete restriction for board members

IV. Extraordinary Motions

V. Adjourned Meeting

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Matters to be Reported:

Proposal One: Reporting the Company’s Business Operation Reports and Financial Statements for year 2006. Description: 1. Please refer to addendum 1 for detailed Business Operation Reports. 2. Please refer to addendum 3 for detailed financial statements.

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Proposal Two: Please review Statutory Auditors’ review reports and the audited financial statements for the year ended 31 December 2006. Description: 1. Please refer to addendum 2 for audited financial statements.

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Proposal Three: Reporting the Company’s new indirect investments in Mainland China during 2006. Description: The new 2006 investments in Mainland China made via overseas subsidiaries are as follows: Approval Certificate # Company Name Amount Approved (US$)

09500223890 Ambit Microsystems (Shanghai) Ltd. 7,000,000

09500223900 Foxconn Computer Connectors (Kunshan) Co., Ltd. 5,160,000

09500248110 Fupeng Precision Industrial (Kunshan) Co., Ltd. 90,000,000

09500070810 Hongzhun Precision Tooling (Kunshan) Co., Ltd. 20,800,000

09500003000 Antec Auto Electric System (Kunshan) Co., Ltd. 3,011,094

09500015690 Shenzhen Fu Tai Hong Precision Industry Co., Ltd. 14,614,000

094028965 Hong Fujin Precision Industrial (Shenzhen) Co., Ltd. 100,000,000

09500015680 Honxun Electrical Industry (Hangzhou)Co.,Ltd 13,152,600

09500223910 Foxconn Precision Component (Beijing) Co., Ltd. 43,812,000

09500242670 Foxconn Precision Electrons (Yantai) Co., Ltd. 5,841,600

09500050990 Liuzhou Antec Fangsheng Electric System Co., Ltd. 814,000

09500308690 Dongfeng Antec (Wuhan) Automotive Electric System Co., Ltd.

1,300,000

09500401120 Fuyu Electronical Technology (Huaian) Co., Ltd. 4,950,000

09500421740 Fuzhun Precision Tooling (Huaian) Co., Ltd. 4,950,000

09500404590 CJ Electric Systems Co., Ltd. 1,500,000

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Proposal Four: Reporting the issuance status of Company’s 2006 Convertible Debenture. Description: 1. To further strengthen working capital base, Financial Supervisory Commission, Executive

Yuan, via Document numbered 0950137670, approved company to raise NT 18 billion from issuance of local NT convertible debenture.

2. The aforementioned convertible debenture carries 5 year maturity and pays no interest. It was issued and available for OTC trading on November 10, 2006. Holder can requests conversion any time between one month after issuance date and ten days before maturity or five business days before call date, with exceptions including regulation requirement or book closure period. 3. The aforementioned fund raising for working capital had been executed in full by 2007Q1.

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Proposal Five: Status Report over Premier Image M&A. Description: 1. Aim to further improve Company’s competitive advantage and operating efficiency, Board of Directors at both Company and Premier Image resolute to merge, and had also been approved by Premier’s extraordinary AGM on August 7, 2006. 2. The share swap ratio is one Company’s share for 3.4083246 Premier shares. The record date is December 1, 2006. 3. The capital increase new share issuance resulted from the Premier merger is 178,194,654 shares, had been approved by Financial Supervisory Commission, Executive Yuan, via Document numbered 0950147071, on October 19, 2006 and by Ministry of Economic Affairs, via Document numbered 09601041950, on March 14, 2007. The new issued shares from aforementioned merger will be tradable on March 20, 2007.

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Proposal Six: Amend Company’s “Rule and Regulation for Board Meeting”. Description: Per March 28, 2006 Financial Supervisory Commission, Executive Yuan regulation numbered 0950001615, Company proposed to modify “Rule and Policy for Board Meeting” and change name to “Rule and Regulation for Board Meeting”. The amended version, please see appendix 4.

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Motions for acknowledgement, discussion and election (Proposed by the Board of Dircetors, “BoD”)

Motion 1: The operation performance reports and financial statements of the Company in 2006 have been completed and submitted. Please acknowledge. Descriptions: The operation performance reports and financial statements of the Company in 2006 have been approved by BoD, and have also been reviewed and audited by Supervisors. Please refer to Appendix 1 and Appendix 3 (on page XX) for the Books mentioned as above. Resolution:

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(Proposed by BoD)

Motion 2: The proposal of dividends repatriation program for the year of 2006. Please acknowledge. Description: 1. The dividend repatriation program of the Company for the year of 2006 has been submitted by BoD, in accordance with Company Act as well as Articles of Incorporation of the Company, as follows. 2. NT$5.0 of dividends per common share is proposed to be repatriated, which includes stock dividends of NT$2.0 and cash dividends of NT$3.0 per share. 3. After subjecting to the passage by regular shareholders’ meeting, the ex-dividend date for the cash and stock dividend repatriations would be decided by BoD. 4. If the number of total shares outstanding, prior to the ex-dividend date for the repatriation, has been changed due to the shares repurchasing by the Company, or treasury shares transferred to employees, shares conversion from domestic convertible bonds, etc., so as affecting the ratios of the stock dividends and cash dividends to be adjusted, BoD is authorized for such adjustments. Resolution:

Hon Hai Precision Ind. Co., Ltd.

Table of Earning Appropriations

Year of 2006 Unit: New Taiwan Dollar

Items Amounts Note

Unappropriated earnings at beginning period 61,017,448,972Including the retained earnings NT$280,605,200 in 2005 from Premier Tech. Co., Ltd.

Add: net profits after taxes for the year 59,862,727,575 Less: Equity in the valuation gain on available-for-sale financial assets of equity method investees 41,893,922

Less: Appropriated as legal capital reserve 5,982,083,365

Available for appropriation of earnings 114,856,199,260

Items of Repatriations

Cash dividends to shareholders 15,504,416,259 NT$3.0 per share

Stock dividends to shareholders 10,336,277,500 NT$2.0 per share

Employee bonus 2,247,016,849

Total repatriations 28,087,710,608

Unappropriated earnings 86,768,488,652 Notes: 1. To repatriate the earnings of 2006 in higher priority 2. The Company plans to issue 89,000,000 shares for employees’ stock bonus. According to the average daily close price of NT$231.69 per share in December 2006, the total market value of such shares is NT$20,620,410,000. By adding the cash bonus of NT$1,357,016,849, the total bonus to employees is equal to NT$21,977,426,849. 3. The proposed stock dividends for employees’ bonus of 89,000,000 shares would be accounted for 7.9278% of the capital increase from retained earnings。 4. The earnings per share after the proposed employees’ bonus will be NT$11.1528 per share.

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(Proposed by BoD)

Motion 3: Proposal of capital increase from retained earnings. Please review and discuss. Description: In order to expand the manufacturing capacity, it’s to propose to have capital increase from retained earnings as well as employees’ bonus to issue new shares of 1,122,627,750.

1. Capital increase from retained earnings: appropriated from shareholders’ bonus of NT$10,336,277,500 as well as employees’ bonus of NT$890,000,000 to be total of NT$11,226,277,500 for the capital increase.

2. The conditions of the new share issuance: (1) According to the proposed capital increase plan, 200 common shares will be repatriated for every 1,000 common shares for free, except for the part of employees’ stock bonus, recorded in the shareholders’ books and calculated as their shares held on the ex-dividend date. The number of shares repatriated to each shareholder for less one share will be purchased by the welfare committee of the Company in par value as calculated to the rounding of New Taiwan Dollar. (2) The new shares issuance by the capital increase will carry the same rights and obligations as the current outstanding shares. (3) The repatriation of employees’ bonus will be in accordance with the employees’ bonus policy of the Company. (4) The ex-dividend date will be decided by the Board of directors meeting after the regulators’ approval. (5) If the number of total shares outstanding, prior to the ex-dividend date for the repatriation, has been changed due to the shares repurchasing by the Company, or treasury shares transferred to employees, shares conversion from the convertible bonds, etc., so as affecting the ratios of the stock dividends to be adjusted, BoD is authorized for such adjustments. (6) BoD is authorized for any necessary amendments of the capital increase plan due to the needs of actual practices or by the instructions of regulators’ authorities.

Resolution:

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(Proposed by BoD)

Motion 4: Propose to conduct a capital increase from cash, by means of common shares issuance to participate Global Depositary Receipts (“GDRs”) offerings. Description:

1. In order to raise funds to support future developments of the Company, as well as to raise capitals by ways of internationalized and diversified, it’s to propose to shareholders’ meeting for the authorization to BoD to increase capitals from cash by means of common shares issuance to participate GDRs offerings.

2. The offerings of GDRs should be in compliance with the following rules, by authorizing BoD to handle the related matters:

(1) The newly issued common shares by the capital increase from cash to participate GDRs offering would not be exceeded 300 million shares. (2) The offering price will be referred to the market price of the common shares at offering; while the decision of the final offering price will be authorized to Chairman of the Board in discussion with securities underwriters in accordance with market condition at offering. The “market price of the common share at offering” would be referred to and calculated, in accordance with capital market practices and by the agreement between the Company and underwriters, either the close price of the common shares on the pricing date of the GDRs offering, or the average close price of those in certain period prior to the offerings. (3) Besides the 10% of those reserved for the Company employees’ subscriptions by the Article 267 of the Company Act, the remaining 90% of the newly issued common shares would be proposed to Shareholders’ meeting, by Article 28-1 of the Securities and Exchange Law, for public offering to become the original shares for the GDRs offering. The unsubscribed portion of the reserved shares for employees is authorized Chairman for delegated parties to subscribe or to be participated as the original shares on the GDRs (4) The offering details for the capital increase from cash, by means of common shares issuance to participate GDRs offering, including the offering price, number of shares (or quota) to be issued, terms and conditions, uses of proceed, amount to be raised, the offering schedule and possible effects, as well as other related offering procedures, are authorized to BoD for the arrangements and modifications according to market conditions. It’s also fully authorized to Chairman for any necessary amendments pursuant to the opinions from regulator authorities or due to the changes from operating valuation or market conditions. (5) To comply with the capital increase from cash, by means of common shares issuance to participate GDRs offering, it’s to authorize Chairman or other designated persons by Chairman to represent the Company to sign for all of the related documents as well as

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handling the related matters. 3. The offering price of the issuance should be fair as referred to the market practices and

related regulations. In addition, the proposed capital increase from cash by means of new common shares will be issued for up to 300 million, which accounts for 5.80% of the total shares outstanding of the Company. It would not substantially diluted for the shares of the original shareholders, so as not having major impact on the shareholding rights of them.

4. BoD could also be, within the authorized condition of Phrase (1) of Clasue 2, offering and issuance of stocks overseas in compliance of the principles of Clause 1, 2 and 3

5. After obtaining the approval from regulators, it’s to authorize BoD for the related matters on the cash capital increase program. Resolution:

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(Proposed by BoD)

Motion 5: Amend “Election policy for the directors and supervisors of the Board” of the Company. Please review and discuss. Description: To comply with Securities and Exchange Law and the Company’s Articles of Incorporation, it’s to propose to amend “Election policy for the directors and supervisors of the Board” of the Company. Please refer to Appendix 5 (PageXX) for the comparison table of the amended and the original articles. Resolution:

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(Proposed by BoD)

Motion 6: Amend “Operating procedures for handling acquisition and disposal of assets” of the Company. Please review and discuss. Description: According to the memo issued FSC- Securities 1st No.0960001463 by Financial Supervisory Commission dated January 19, 2007, it’s to amend “the operating procedures for handling acquisition and disposal of assets”. Please refer to Appendix 6 (PageXX) for the comparison table of the amended and the original articles.

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(Proposed by BoD)

Motion 7: Amend the Articles of Incorporation of the Company. Please review and discuss. Description: To meet the operation needs and in compliance with the related regulations, it’s to propose to amend certain articles of the Articles of Incorporation. Please refer to Appendix 7 (PageXX) for the comparison table of the amended and the original articles. Resolution:

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(Proposed by BoD) Motion 8: Election of Directors and Supervisors of the Board. Please review and discuss. Description: 1. The tenor for the Directors and Supervisors of the Board would be due by June 30, 2007. According to the Articles of Incorporation, all of the Directors and Supervisors should be re-elected during the regular shareholders’ meeting of the year. 2. Seven Directors should be elected, which includes two independent Directors and two Supervisors. The tenor will be started from July 1, 2007 to June 30, 2010 for three years. 3. The candidates for independent Directors is listed as follows. 4. Please proceed for the election.

Candidates for Independent Directors Education Experience

HWU, TSONG MIN

MBA, Santa Clara University, California, USA M.S. – E.E. The University of Cincinnati, Ohio USA

Researcher (Sr. Manager) at the research labs of Sprint Communications Corporation

LIU, CHENG YU M.S. in Finance, National Taiwan University

Attorney in law, IS-Law (InfoShare Tech Law Office)

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(Proposed by BoD)

Motion 9: To discharge the restriction of any Director who does anything for himself or on behalf of another person that is within the scope of the company's business. Please review and discuss. Description: The elected Directors by this regular shareholders’ meeting might have conducted anything for himself or on behalf of another person that is within the scope of the company's business in accordance with Article 209 of Company Act. In order to facilitate the business developments of the Company, and by without any harm to the benefits of the Company, it’s to proposed to discharge for such restriction to the Directors. Resolution:

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Other Business or Special Motion

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[Attachment I]

2006 Business Report The business of 2006 is reported as follows:

1. The operating results of 2006 are described as below:

The Company has delivered another excellent performance, and for another record year on the revenues and net profits. The consolidated net revenues of 2006 was NT$1,320,000 million, compared with NT$948,505 million in 2005 (re-edited for the merge of Premier Technology Co. Ltd), by increase of NT$371,871 million, a 39.21% YoY growth. The net profit was NT$59,863 million, compared with NT$42,359 million in 2005 (re-edited for the merge of Premier Technology Co. Ltd), for a 41.32% YoY increase.

2. The review of 2006 and the outlook for 2007

Looking back, 2006 were a year when global 3C (computers, communications, and consumer electronics) industry continued facing many pressures and challenges: not only the oil and other raw material prices continued to escalate due the ferocious growths from BRICs and other emerging countries, Federal Reserve’s repeated rate hikes, but also the consolidation and convergence trends continued for the 3C industries due to intensified competitions. Yet, the Company had, again, delivered another excellent result for 2006 through what we called “forced innovation, succession amid growth, and expansion with luck”. The Company has not only ranked number one by all industries in Taiwan on the consolidated revenues, but with the trusts and supports from strategic partner customers, further leaping ahead of other global contract manufacturers.

Due to intensive globalization trend, it is no longer sufficient to satisfy clients’ heightened needs by simply offers superior speed, quality, engineering services, flexibility, and cost. Guided by the vision to eventual elevate the standard of overall global 3C industry and to make comfort of electronic products usage an attainable reality for all mankind, Hon Hai aggressively promotes the proprietary model of “Muster and Alliance” by inviting all excellent enterprises with the like kind vision to joint force and leverage Hon Hai’s global platforms to create a stronger entrepreneur environment, to further expand the 6Cs industries and achieving “longevity, stability, development, technology, international” as well as to create higher shareholders’ values.

Today, Hon Hai Technology Group is not only the largest, fastest growing, but also most notable, international group in the 3C contracted manufacturing field. Through the devotion to greater social harmony and higher ethical standards, the Company is on a continuous conquest to achieve a win-win model for all stakeholders including shareholders, customers, employees, partners, community and management.

Looking ahead, the Company will continue to work harder based on its long standing kaizen spirit, not only further sharpening its proprietary eCMMS business model, but also furthering “Muster and Alliance” collaboration with all liked minded enterprises around the world, further take root in the 6C industries, as well as to further grow with all strategic partner customers. We sincerely thank all supports and trust from all shareholders and stakeholders for all these years and look forward to potentially another record setting year in 2007.

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The Audited Report by Supervisors

The financial statements, business report and the profit distribution table have been audited by us as Supervisors of the Company. We deem no inappropriateness on these documents. In accordance with Article 219 of the Company Law, hereto we present for the audited report. Please review.

Submitted to:

2007 Regular Shareholders’ Meeting of the Company


Supervisor: Fu rui International Investment Co., Ltd.

Representative: Wan Jui-Hsia

Supervisor: Lin, C. W.

On the Date of April 28, 2007

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Attachment 3 Audited Reports by CPA and Financial Statements

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Appendix IV


The Meeting Norm for the Board of Directors (the

“Board”) Article 1

In order to set up a well-mannered governance policy for the Board, to strengthen the supervision role, as well as to enhance the managerial function, it is to set up the meeting norm to comply, in accordance with the Article 2 of “Board of Directors Meeting Procedures for a Public Company” by regulation

Article 2

All of the meeting rules for the Board of the Company, including meeting contents, operating procedures, what shall be stated clearly in the minutes, announcements, and other compliance matter, shall be pursuant to the norm stated hereto.

Article 3

The Board of the Company shall meet at least once every quarter

The call for Board meeting shall be stated by reasoning for meeting, and shall notify directors and supervisors no less than seven days; however, in case of emergency, the Board could be met at anytime.

For the matters stated in Item 1 of Article 12, unless there is any emergency or adequate reason, it should be stated in the meeting agenda and shall not be proposed by special motion.

Article 4

The preparation for the Board meeting of the Company is designated to the Finance, Accounting and Investment Management Division of General Management Office.

The meeting responsible unit shall prepare the agenda for Board meeting, and provide sufficient meeting documents, to be delivered together with the meeting notice.

Directors could make request to the meeting responsible unit for any insufficient documents for the meeting. Director could request to adjourn a motion for insufficient details by means of the resolution of the Board.

Article 5

The signing sheet shall be prepared for the Board meeting as future reference.

Directors shall attend the Board meeting in person. If he could not attend the meeting in person, a proxy by another director could be designated by himself according to the Articles of Incorporation of the Company. If attending the meeting through a video conference, he deems to attend in person.

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In case a director appoints another director to attend the Board meeting on his behalf, he shall, in each time, issue a written proxy and state therein the scope of authority with reference to the subjects to be discussed at the meeting.

A director may accept the appointment to act as the proxy referred to in the preceding Paragraph of one the other director only.

Article 6 The meeting time and place of the Board meeting of the Company shall be arranged at the Company’s office and in office hours, or other places and time convenient for directors’ attendance and appropriate space for the meeting.

Article 7 Meetings of the Board shall be convened by the chairman of the Board, except for the first meeting of each term of the Board which shall be convened by the director who received a ballot representing the largest number of votes at the election of directors. The meeting shall be chaired by that director with the right to call for meeting; shall there’s two or more persons with the right to call, they shall elected one amongst themselves to be chaired for the Board meeting.

When Chairman on leaves or unable to behave for duties, Vice Chairman shall be the delegated person; if there is no Vice Chairman, or Vice Chairman on leaves or unable to behave for duties, a managing director would be delegated by Chairman; if there is no managing director, a director would be delegated by Chairman; if Chairman does not make any delegation, one delegated director shall be appointed amongst managing directors or directors themselves.

Article 8 When the Board meeting is convened, the management (or the meeting responsible unit) shall prepare any relevant material for directors’ reference during the meeting.

When a Board meeting is convened, by subject to the need of related motions, non-director management could be asked for attendance in meeting. When necessary, accountants, attorneys, or other professionals could be invited for attendance as well.

The Chairperson of the Board meeting shall immediately announce the commencement on the meeting time and with presence of over half number of directors.

When the scheduled meeting time is up but still less than half of all directors not present, the Chairperson could adjourn the meeting; the adjournments could not be more than twice and shall not be over one hour in total. If there is still no enough attendants for the meeting after twice adjournments, the meeting shall be reschedule in accordance with the procedures stated as of Item 2 of Article 3

The so called “all directors” in previous item as well as in Phrase 2 of Item 2 of Article 16 are calculated by actual number on duties.

Article 9 All of the meeting process at the Board meeting of the Company shall be taped or video taped, and the taped records shall be kept for at least five years. It could be kept by electronic formats.

Prior to the due date of the record keeping as previous item, if there are any dispute in relation to any Board resolution, the relevant tapes or video tapes shall be kept continually and not applicable to the rule in previous item.

The taping or video taping for any meeting by video conference serves as part of the minute and shall be kept permanently.

Article 10 The meeting agenda for any regular Board meeting of the Company shall be included the following items:

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1. Report items:

(1) the minutes and the execution results of last Board meeting

(2) Essential financial performance results

(3) Internal auditing results

(4) Other important matters to be reported

2. Discuss items:

(1) The issues on hold during last meeting

(2) The planned discuss motions for the meeting

3. Other motions

Article 11 The motions shall be preceded as stated in the notice, unless agreed by over half of the directors in presence for any change.

The planned motions and other motion could not be dismissed by Chairperson unless agreed by over half of the attending directors.

When the Board meeting is in progress, if the number of attending director in presence at anytime is not over half of the attended directors, Chairperson could call on hold for the meeting, and also applicable for Item 3 of Article 8

Article 12 The following matters shall be proposed for discussion on the Board meeting of the Company:

1. The business plans of the Company

2. The annual financial statements and semi-annual financial statements

3. The formation or amendment of Internal Audit Policy in accordance with Article 14-1 of Securities and Exchange Act

4. In accordance with Article 36-1 of Securities and Exchange Act for acquisition or disposal of assets, engaging in derivatives trading, extension of monetary loans to others, endorsements or guarantees for others, and disclosure of financial projections.

5. Issuance, offering or private placement of any equity-typed securities

6. The appointment or discharge of a financial, accounting, or internal auditing officer.

7. By Article 14-3 of Securities and Exchange Act, and others set by regulations or Articles of Incorporation of those shall be resolved by shareholders’ meeting or shall be proposed to the Board or any other material matter so required by the Competent Authority.

For the matters stated by Article 14-3 of Securities and Exchange Act shall be submitted to the Board for approval by resolution, independent directors shall attend the meeting in person and could not be

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delegated by a non-independent director; when an independent director has a dissenting opinion or reserved opinion, it shall be noted in the minutes of the directors meeting; if an independent director is unable to attend the meeting in person for a dissenting opinion or reserved opinion, unless there is a sufficient reasoning, it shall be stated in a written statement and noted on the meeting minute.

Article 13 The Chairperson could announce for ceasing the discussion if he deems the discussion of any motion has been adequate for a resolution.

For any motion after the Chairperson inquiring for no dissenting opinions could be deems as approval, which carries equal effect as a vote. If there is any dissenting opinion when the Chairperson inquires, it shall be voted.

The Chairperson could choose one of the manners for the vote as follows; however, if there is any dissenting opinion for the manner among the attendants, it shall be resolved by the majority.

1. Vote by raising hands or counting machine

2. Vote by name pronunciation

3. Vote by voting tickets

4. Other methods decided by the Company

Article 14 Any resolution by the Board meeting shall be effected by when there are over half of directors attending the meeting and more than half of directors in presence agree on.

When there is an amendment or alternation on a motion, the Chair shall combine it with the original motion for resolution; however, if there is a motion passed, other motions shall deem as denial, and no need for further resolution.

If necessary, the Chairperson could appoint one as voting supervision and counting the votes. But the person shall be selected from a director.

The result of a voting shall be reported on site and shall be recorded into the minute.

Article 15 If a director has his personal or the entity he represents has its conflict of interests with a discussed matter; he shall not join for the discussion or voting, and could not be delegated by the other director for his vote.

The resolution of the Board meeting of the Company for those directors could be behaved for his voting rights is in accordance with Item 2 of Article 206 of Company Act for adapting Item 2 of Article 180

Article 16 All discussed matters at the Board meeting of the Company shall be recorded in the minutes. The minute shall record the following items in details:

1. Times of Board tenor (or year), meeting time and venue

2. Name of the Chairperson

3. The summary of directors in presence, including names and the number of directors in presence, taking leave, and absence

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4. The name and title of the attendants

5. The name of secretary

6. Report Items

7. Motions for discussion: the approach to make the resolution, the resolution result, the summary of the speech by directors, supervisors, professionals and other persons, any objection or conserved opinions or any written statements as well as those proposed by independent directors in accordance with Item 2 of Article 12.

8. Other contingent motions: The name of person for raising the motion, the approach to make the resolution, the resolution result, the summary of the speech by directors, supervisors, professionals and other persons, any objection or reserved opinions or any written statements.

9. Others shall be recorded in the minutes:

For all of the resolutions in the Board meeting, if there is any objection or reserved opinion by an independent director, it shall be posted to the Market Observation Post System within two days after the meeting, in addition to be recorded in the minute.

The signing sheet shall be treated as part of the meeting minute, and shall be kept permanently.

The meeting minute shall be signed or chopped by Chairperson and secretary of the meeting, and be delivered to each director and supervisor within 20 days after the meeting. It shall be treated as important files of the Company and shall be kept permanently.

The preparation and distribution of the minutes could be by electronic formats.

Article 17 Except for Item 1 of Article 12 shall be discussed on the Board of the Company, during the recess period the Board could authorize delegated persons, in accordance with regulations and Articles of Incorporation, to act for authorities of the Board by clearly specifying the authorized capacity, contents, or items. The general authorization is not allowed. For those matters involved with major interests of the Company shall still be resolved by the Board.

Article 18 The setup and any amendment of the Norm shall be approved by the Board of the Company and shall be reported to shareholders’ meeting.

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Appendix V


The Comparison Table of the Election Policy of

Directors and Supervisors

Before amendment After amendment Reasons

4. In accordance with the quota set in the Articles of Incorporation, directors and supervisors of the Company will be elected from those who received higher vote rights. For a person as both director and supervisor, he shall decide either to be director or supervisor. The vacancy then would be filled by the one with next higher voting rights. If there are two or more than two received the same ballot but thus exceed the quota, they would draw lots to decide who will be elected; if in absence, the Chairperson will be delegated for the draw lots.

4. (1) In accordance with the quota set in the Articles of Incorporation, directors and supervisors of the Company will be elected from those who received higher vote rights. For a person as both director and supervisor, he shall decide either to be director or supervisor. The vacancy then would be filled by the one with next higher voting rights. If there are two or more than two received the same ballot but thus exceed the quota, they would draw lots to decide who will be elected; if in absence, the Chairperson will be delegated for the draw lots.

(2) The election of independent directors of the Company in compliance with the nomination procedures as specified in Article 192-1 of Company Act.

The election for independent directors and non-independent directors shall be held together; in separately calculating the quota for the election, the candidate receiving more voting rights shall be elected.

Clearly specify the election manner of independent director in accordance with Securities and Exchange Act and Articles of Incorporation

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Appendix VI


Comparison Table for the Amendment on Procedures

for Acquisition or Disposal of Assets Before Revision After Revision

These Regulations are adopted in accordance with the provisions of Article 36-1 of the Securities and Exchange Act (“the Act”)and MoF’s SFC memo dated Dec. 10, 2002 (91)TaiChaiChen # (1) No 0910006105 for the related items from “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”

These Regulations are adopted in accordance with the provisions of Article 36-1 of the Securities and Exchange Act (“the Act”) and Financial Supervisory Commission of Executive Yuan (“FSC”) memo dated Dec. 10, 2002 (91)TaiChaiChen # (1) No 0910006105 and January 19, 2007 FSC JinGuanChen # (1) No. 0960001463 for the related items from “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”

Article 3: “Assets” used herein shall mean: (1) Long and short term investment on stocks, bonds, corporate bonds, bank indentures, and domestic security certificates, overseas mutual funds, depositary receipts, warrants, entitlement certificates and asset-back securities, etc. (2) real estate and other fixed assets (3) membership (4) patent, copyright, trademark, charter right of any intangible assets, etc. (5) beneficiary securities issued by financial institutions (6) derivatives (7) assets are acquired or disposed through merger, spin-off, acquisition or share transfer (8) other major assets

Article 3: “Assets” used herein shall mean: (1) Investment on stocks, bonds, corporate bonds, bank indentures, fund securities, depositary receipts, warrants, entitlement certificates and asset-back securities, etc. (2) real estate and other fixed assets (3) membership (4) patent, copyright, trademark, charter right of any intangible assets, etc. (5) derivatives (6) assets are acquired or disposed through merger, spin-off, acquisition or share transfer (7) other major assets

Item 8 of Article 4 “Within one year” used herein shall mean within one year backwards from the date of the subject acquisition or disposal of assets. The transactions having been published shall be excluded.

[Deleted]

Article 6: Any professional appraiser and its appraisal personnel, certificated public accountants, lawyers, or securities underwriters who the Company has acquired

Article 6: by newly adding Item 2

The statement of appraisal or professional opinion

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appraisal reports and opinion from, shall not be a related party of the Company or the other party of the transaction.

1. Any professional appraiser and its appraisal personnel, certificated public accountants, lawyers, or securities underwriters who the Company has acquired appraisal reports and opinion from, shall not be a related party of the Company or the other party of the transaction.

2. If the assets acquired or disposed by the Company through the auction by the court for the assets stated on Article 7, 8, 9 and 10, a certificate issued by the court could be substituted for the appraisal report or professional opinion report

1st Clause of Item 2 of Article 7: Except transactions with government institutions, contracting third parties to construct on land owned or rented by the Company, or acquisition of machinery and equipment for operation purpose, an appraisal report issued by professional appraisal shall be obtained in advance.

1st Clause of Item 2 of Article 7: Except transactions with government institutions, contracting third parties to construct on land owned or rented by the Company, or acquisition of machinery and equipment for operation purpose, for acquisition or disposal of real estate or other fixed assets by the Company whose amount reaches 20% of the Company’s paid-in capital or NT$300 million, an appraisal report issued by professional appraisers shall be obtained in advance and the following provisions shall be complied with:

(1) If for any special reason, restricted price, specific price, or special price must be used as a reference for the transaction price, the transaction shall be approved by the Board of Directors (the “Board”) in advance. The above procedures shall also be followed in case the transaction terms are changed subsequently.

(2) If the transaction price is over NT$ 1 billion, the Company shall retain at least two professional appraisers to perform the appraisal.

(3) Under one of the following circumstances, the Company shall request a certified public accountant to handle the matter in accordance with the provision of Auditing Standard No. 20 and comment the reason for the discrepancy and the fairness of the transaction price: (a) if the discrepancy between the result of the appraisal report of

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professional appraisal and the transaction price exceeds 20%; (b) The appraisal prices from two professional appraisers exceed 10% of discrepancy

(4) If the appraisal is made prior to the contract date, the appraisal report shall be issued within 3 months before the contract date; and the appraisal report was issued no longer than 6 months, the original professional appraiser may present supplemental opinions.

Clause 2 of Item 2 of Article 7:

(2) Finance Department shall periodically check on the face value for all of the acquired real estate and fixed assets. Also to make sure the value is within the coverage quota of insurance, and may adjust the coverage quota in time.

[deleted]

Clause 1 of Item 3 of Article 7: The methodology for the price determination or reference data for the acquisition or disposal of real estate or other fixed assets shall be explained by the requested department through internal reporting. It shall be decided by Finance Department in the way of referring to current published values, the actual transaction prices in the neighborhood area, etc., then making some quotations, negotiations as well as conducting auctions.

Clause 1 of Item 3 of Article 7: The methodology for the price determination or reference data for the acquisition or disposal of real estate or other fixed assets shall be explained by the requested department through internal reporting. It shall be decided in the way of referring to current published values, the actual transaction prices in the neighborhood area, etc., then making some quotations, negotiations as well as conducting auctions.

Phrase 1 of Clause 2 of Item 3 of Article 7: While the transaction for the acquisition or disposal of fixed assets are in compliance with the condition set in Article 12 of this procedure, it shall be conducted after the process of the internal approval and then reporting to the Board.

Phrase 1 of Clause 2 of Item 3 of Article 7: The transaction amount for acquisition or disposal of fixed assets is less than NT$300 million, it is authorized the requested Department for execution; if the amount of the transaction is NT$300 million or above, it shall obtain the prior approval from the Board.

1st to 4th Clause of Item 4 of Article 7 Except transactions with government institutions, contracting third parties to construct on land owned or rented by the Company, or acquisition of machinery and equipment for operation purpose, for acquisition or disposal of real estate or other fixed assets by the Company whose amount reaches 20% of the Company’s paid-in capital or NT$300 million, an appraisal report issued by professional appraisers shall be

[deleted]

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obtained in advance (the appraisal report shall note the details listed as the Attachment 1) and the following provisions shall be complied with:

(1) If for any special reason, restricted price, specific price, or special price must be used as a reference for the transaction price, the transaction shall be approved by the Board in advance. The above procedures shall also be followed in case the transaction terms are changed subsequently.

(2) If the transaction price is over NT$ 1 billion, the Company shall retain at least two professional appraisers to perform the appraisal.

(3) Under one of the following circumstances, the Company shall request a certified public accountant to handle the matter in accordance with the provision of Auditing Standard No. 20 and comment the reason for the discrepancy and the fairness of the transaction price: (1) if the discrepancy between the result of the appraisal report of professional appraisal and the transaction price exceeds 20%; (b) The appraisal prices from two professional appraisers exceed 10% of discrepancy

(4) If the appraisal is made prior to the contract date, the appraisal report shall be issued within 3 months before the contract date; and the appraisal report was issued no longer than 6 months, the original professional appraiser may present supplemental opinions.

Clause 5 of Item 4 of Article 7 : If assets acquired or disposed by the Company through the auction by the court, a certificate issued by the court could be substituted for the appraisal report or public accountant’s opinion report

[deleted]

Clause 8: Investment procedures for acquisition or disposal of securities

1. Evaluation procedures

The evaluation for acquisition or disposal of long/short term securities shall be prior approved by Finance Department in accordance with the

Clause 8: Procedures for acquisition or disposal of securities


(1) When making for acquisition or disposal of securities by the Company, a recent audited or reviewed financial statement by certified public accountant of the

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approving authorities of the Company.

2. Operation procedures

The long/short term securities of the assets shall be fairly evaluated by general accepted accounting principles; all of the securities certificates shall be recorded in the book by Finance Department, then be collected together or kept in the safe-deposit box.

3. The procedures for transaction conditions and authorized quota limits

(1) The price decision and reference source

1. To acquire or dispose the securities that have been traded on an exchange or at the OTC markets, the price would be decided according to the reference market prices.

2. To acquire or dispose the securities that have been traded on an exchange or at the OTC markets, the reference sources or the calculation methods for the transaction price shall be approved by Chairman before the execution.

(2) Authorization rank level

(a) For those acquisition or disposal of assets met the criteria set on the Article 12 of the procedures, it must be reported to the Board with completeness of internal approval before the execution; for the acquisition or disposal of short term securities, if for the purpose of financial arrangement (i.e. buy or sell of Bonds with re-po or re-sell, Bond funds, etc.), the transactions could be executed after obtaining Chairman’s approval, and then to be confirmed on the next Board meeting.

(b) On signing business contracts with counterparties, for those who have immediate business needs, with prior approval by Chairman the contracts could be signed and in conduct of the related transaction, then confirmed on the next Board meeting.

(c) It shall be complied with that for those acquisitions or disposals of assets be resolved or acknowledged by shareholders’ meeting or be reported to shareholders’ meeting as stated by

target securities company shall be prior obtained for reference to the transaction price.

(2) When the transaction amount achieving 20% of paid-in capital of the Company, or over NT$300 mill ion, i t shall be conducted with cert ified public accountants for the fairness opinion on the transaction; but i t is not l imited for those securit ies with active market trading prices or those specifically regulated by FSC.

2. Operation procedures

(1) Evaluation, trade, settlement, book-keeping: handled by each requested Department

(2) Custody: all of the securities acquired by the Company are in collected custody by Finance Department or kept in the safe-deposit box.

3. The decision procedures for the transaction terms and authorized quota limit

(1) For the government bonds, corporate bonds, bank indentures, fund securities, and asset back securities as specified in Item 1 of Article 3 of the Procedures, if the transaction amount is less than 20% of the paid-in capital of the Company, CFO is authorized for the execution; if it’s achieved 20% or more of that, it shall be approved by the Board before the execution.

(2) For the equity, depositary receipts, call (put) warrants and entitlement of certificates as specified in Item 1 of Article 3 of the Procedures, if the transaction amount is less than or equal to 5% of paid-in capital of the Company, the request Department is authorized for the execution; if it exceed 5% of that, it shall be approved by the Board meeting before the execution.

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regulations or Company Law.

4. Execution Department

For all of the long/short term securities investment of the Company, it shall be approved in accordance with the appropriate rank level as previously stated, then executed by Finance Department.

5. Professional opinion acquired

(1) On the acquisi t ion or disposal of securit ies, i f i t meets with one of the following condit ions as well as the transaction amount achieving 20% of paid-in capital of the Company or over NT$300 mill ion, i t shall be conducted with cert if ied public accountants for the fairness opinion on the transaction:

(a) Acquisit ion or disposal of any non-exchange trades or non-the OTC markets traded securi t ies

(b) Acquisit ion or disposal of any private placed securi t ies.

(2) If the acquisi t ion or disposal of assets is through the auction by the court , the cert if icate document issued by the court could be substituted for the appraisal report or cert if ied public accountant’s opinion.

[Article newly added] Article 9: Procedure for the acquisition or disposal of intangible assets


The acquisition or disposal of intangible assets of the Company shall be evaluated on the feasibility by the request Department, and also reporting to Intellectual Properties Department

2. Operation procedures:

An appraisal report shall be acquired from professional appraisal institution in advance for the acquisition or disposal of intangible assets

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of the Company; if the transaction amount would be or above 20% of the paid-in capital of the Company or over NT$ 300 million, it shall additionally request for fairness opinion on the transaction price from certified public accountant.

3. The decision procedures for the transaction terms and authorized quota limit

(1) Price decision method and reference source: reported by the requested Department for reference transaction prices on similar intangible asset transaction in the markets; if there is no transaction price available in the market, the report from professional appraisal institutions shall be referred.

(2) It shall be complied with that for those acquisitions or disposals of intangible assets be resolved or acknowledged by shareholders’ meeting or be reported to shareholders’ meeting as stated by regulations or Company Law.

Article 9: Procedures for acquisition or disposal of assets through an affiliate of the Company

Article 10: Procedures of acquisition or disposal of assets through an affiliate of the Company

Article 10: Procedures for acquisition or disposal of derivatives transaction

Article 11: Procedures for acquisition or disposal of derivatives transaction

Article 11: Procedures for acquisition or disposal of assets through merger, spin-off, acquisition or share transfer by the Company

Article 12: Procedures for acquisition or disposal of assets through merger, spin-off, acquisition or share transfer by the Company

Clause 1 of Item 2 of Article 11: Board meeting date: If the Company participating in a merger, spin off, or acquisition, it shall convene a Board meeting and shareholders meeting on the day of the transaction to resolve matters relevant to the merger, spin off, or acquisition, unless another act provides otherwise or the Commission is notified in advance of extraordinary circumstances and grants consent. A company participating in a transfer of shares shall call a Board meeting on the day of the transaction, unless another act provides otherwise or the Commission is notified in advance of extraordinary circumstances and grants consent.

Clause 1 of Item 2 of Article 11:

Board meeting date: If the Company participating in a merger, spin off, or acquisition, it shall convene a Board meeting and shareholders meeting on the day of the transaction to resolve matters relevant to the merger, spin off, or acquisition, unless another act provides otherwise or FSC is notified in advance of extraordinary circumstances and grants consent. A company participating in a transfer of shares shall call a Board meeting on the day of the transaction, unless another act provides otherwise or FSC is notified in advance of extraordinary circumstances and

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grants consent.

Clause 7 of Item 2 of Article 12 Clause 7 of Item 2 of Article 12 (newly added article)

When participating in a merger, spin off, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall prepare a full written record of the following information and retain it for five years for reference:

1. Basic identification data for personnel: Including the occupational titles, names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, spin off, acquisition, or transfer of another company's shares prior to disclosure of the information.

2. Dates of material events: Including the signing of any letter of intent or memorandum of understanding, the hiring of a financial or legal advisor, the execution of a contract, and the convening of a Board meeting.

3. Important documents and minutes: Including merger, spin off, acquisition, and share transfer plans, any letter of intent or memorandum of understanding, material contracts, and minutes of Board meetings.

Clause 8 of Item 2 of Article 12 Clause 8 of Item 2 of Article 12 (newly added article)

When participating in a merger, spin off, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall, within two days of passage of a resolution by the Board, report (in the prescribed format and via the Internet-based information system) the information set out in subparagraphs 1 and 2 of the preceding paragraph to the FSC for recordation.

Article 12: Procedures for information public disclosure

Article 13: Procedures for information public disclosure

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Item 4 of Article 12

4. Format of Post

[Deleted](for Item 4 of Article 12 on the amended version)

Article 13: The Company’s Subsidiary shall follow the procedure hereof as follows.

Article 14: The Company’s Subsidiary shall follow the procedure hereof as follows.

Item 1 of Article 13: A subsidiary shall follow the related rules of “Regulations Governing the Acquisition and Disposal of Assets by Public Companies” to build its “Procedures for Acquisition or Disposal of Assets”, and then submitting for the approval by the subsidiary’s Board meeting, and then submitting for shareholders’ meetings of both Companies. So does for the amendment.

Item 1 of Article 14: A subsidiary shall follow the related rules of “Regulations Governing the Acquisition and Disposal of Assets by Public Companies” to build its “Procedures for Acquisition or Disposal of Assets”. If the subsidiary is not a public company, the Procedures shall be approved by its Board meeting, so does for the amendment; if the subsidiary is a public company, the Procedures shall be ruled by “Regulations Governing the Acquisition and Disposal of Assets by Public Companies” and then submitting for the approval by the subsidiary’s Board meeting, and then submitting to shareholders’ meetings of both Companies. So does for the amendment.

Article 14: Penalty Article 15: Penalty

Article 15: Implementation and Amendment Article 16: Implementation and Amendment

Article 16: Ancillary items Article 17: Ancillary items

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Appendix VII


The Comparison Table for the Amendment of Articles

of Incorporation Before amendment After amendment Reasons Article 3: the Company could provide guarantees to the companies with the similar industry

Article 3: the Company could guarantees to others.

In accordance with「Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies」

for the amendment

Article 6: The total capital stock of the Company is NT$57 billion, divided into 5 billion shares with NT$10 each. The shares could be paid-up in installment by authorized to the Board for the issuance. Among which 2 billion shares are reserved for the warrants or entitlement certificates for the convertible debt issuance. The Board is also authorized for the issuance in installment.

Article 6: The total capital stock of the Company is NT$70 billion, divided into 7 billion shares with NT$10 each. The shares could be paid-up in installment by authorized to the Board for the issuance. Among which 2 billion shares are reserved for the warrants or entitlement certificates for the convertible debt issuance. The Board is also authorized for the issuance in installment.

Complied with the capital increase plan

Article 28: The audited net profit of the Company for fiscal year will be distributed in the order of the following:

(1) Offset its losses in previous years

(2) Set aside a legal capital reserve at 10% of the profit left over

(3) Other special reverses by regulations

The Board could propose the repatriation plan of the retained earnings by submitting to shareholders’ meeting for the distribution. Employee bonus is set to be 8%, while the remaining would be shareholders’ dividends. Additionally, the employee stock bonus could be allocated into qualified employees which condition specified by the procedures prepared by the Board.

Article 28: The audited net profit of the Company for fiscal year will be distributed in the order of the following:

(1) Offset its losses in previous years

(2) Set aside a legal capital reserve at 10% of the profit left over

(3) Other special reverses by regulations

(4) Employee bonus is set for 8%; the employee stock bonus provides to qualified employees which entitlement and procedure to be specified by the Board.

(5) Others by authorizing to the Board to decide for the proposal of earning distribution related to Item (2)

For the convenience of the calculation of employees’ bonus

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The Company is at the steady growth stage of its business. To meet the business expansion in the future, distribution of profits shall be considered the future capital budgeting and expenditures, which shall be proposed by the Board and resolved at the shareholders’ meeting. However the ratio in distribution of profits by way of stock dividends shall not exceed 50% of total distribution for the year.

The Company is at the steady growth stage of its business. To meet the business expansion in the future, distribution of profits shall be considered the future capital budgeting and expenditures, which shall be proposed by the Board and resolved at the shareholders’ meeting. However the ratio in distribution of profits by way of stock dividends shall not exceed 2/3 of total distribution for the year.

Article 30: the Articles of Incorporation is formed on January 5, 1974…with the 35th amended on December 24, 2003; with the 37th amended on June 14, 2005, and with the 38th amended on June 14, 2006.

Article 30: the Articles of Incorporation is formed on January 5, 1974…with the 35th amended on December 24, 2003; with the 37th amended on June 14, 2005, and with the 38th amended on June 14, 2006, and the 39th amended on June 8, 2007

Adding an amendment date of the Articles of Incorporation

hon hai precision industry co., ltd.2 hon hai precision industry co., ltd. annual shareholders’...

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