Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

**

(a)

1. Financial Statements. See Item 8.

Financial Statement Schedule. See Item 8.

Exhibit Index:

							Incorporated by Reference Herein
Exhibit Number
			Description		Form		Exhibit			Filing Date
	2.1				Separation and Distribution Agreement among Tyco International Ltd., Covidien Ltd. and Tyco Electronics Ltd., dated as of June 29, 2007		Current Report on Form 8-K			2.1		July 5, 2007
	2.2		†		Stock and Asset Purchase Agreement, dated as of January 27, 2015, by and among TE Connectivity Ltd., CommScope Holding Company, Inc. and CommScope, Inc.		Current Report on Form 8-K			2.1		January 29, 2015
	2.3		†		Share Purchase Agreement dated as of February 1, 2016 by and between TE Connectivity Ltd. and Cregstar Holdco Limited		Quarterly Report on Form 10-Q for the quarterly period ended March 25, 2016			2.1		April 21, 2016
	3.1				Articles of Association of TE Connectivity Ltd., as amended and restated		Current Report on Form 8-K			3.1		May 16, 2017
	3.2				Organizational Regulations of TE Connectivity Ltd., as amended and restated		Current Report on Form 8-K			3.2		March 6, 2015
	4.1(a	)			Indenture among Tyco Electronics Group S.A., Tyco Electronics Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of September 25, 2007		Annual Report on Form 10-K for the fiscal year ended September 28, 2007			4.1(a	)	December 14, 2007
	4.1(b	)			Second Supplemental Indenture among Tyco Electronics Group S.A., Tyco Electronics Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of September 25, 2007		Annual Report on Form 10-K for the fiscal year ended September 28, 2007			4.1(c	)	December 14, 2007
	4.1(c	)			Third Supplemental Indenture among Tyco Electronics Group S.A., Tyco Electronics Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of September 25, 2007		Annual Report on Form 10-K for the fiscal year ended September 28, 2007			4.1(d	)	December 14, 2007

							Incorporated by Reference Herein
Exhibit Number
			Description		Form		Exhibit			Filing Date
	4.1(d	)			Fifth Supplemental Indenture among Tyco Electronics Group S.A., Tyco Electronics Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of December 20, 2010		Current Report on Form 8-K			4.1		December 20, 2010
	4.1(e	)			Seventh Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of February 3, 2012		Current Report on Form 8-K			4.2		February 3, 2012
	4.1(f	)			Eighth Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of November 25, 2013		Current Report on Form 8-K			4.1		November 25, 2013
	4.1(g	)			Ninth Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of July 31, 2014		Current Report on Form 8-K			4.1		July 31, 2014
	4.1(h	)			Tenth Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated July 31, 2014		Current Report on Form 8-K			4.2		July 31, 2014
	4.1(i	)			Twelfth Supplemental Indenture among Tyco Electronics Group S.A., TE Connectivity Ltd. and Deutsche Bank Trust Company Americas, as trustee, dated as of February 27, 2015		Current Report on Form 8-K			4.1		February 27, 2015
	4.1(j	)			Thirteenth Supplemental Indenture among Tyco Electronics Group S.A., as issuer, TE Connectivity Ltd., as guarantor, and Deutsche Bank Trust Company Americas, as trustee, dated as of January 28, 2016		Current Report on Form 8-K			4.1		January 28, 2016
	4.1(k	)			Fourteenth Supplemental Indenture among Tyco Electronics Group S.A., as issuer, TE Connectivity Ltd., as guarantor, and Deutsche Bank Trust Company Americas, as trustee, dated as of August 3, 2017		Current Report on Form 8-K			4.2		August 3, 2017
	10.1				Tax Sharing Agreement among Tyco International Ltd., Covidien Ltd. and Tyco Electronics Ltd., dated as of June 29, 2007		Current Report on Form 8-K			10.1		July 5, 2007

							Incorporated by Reference Herein
Exhibit Number
			Description		Form		Exhibit			Filing Date
	10.2				Five-Year Senior Credit Agreement among Tyco Electronics Group S.A., as borrower, TE Connectivity Ltd., as guarantor, the lenders parties thereto and Deutsche Bank AG New York Branch, as administrative agent, dated as of June 24, 2011		Current Report on Form 8-K			10.1		June 27, 2011
	10.3				First Amendment to the Five-Year Senior Credit Agreement dated as of August 2, 2013 among Tyco Electronics Group S.A., as borrower, TE Connectivity Ltd., as guarantor, the lenders parties thereto and Deutsche Bank AG New York Branch, as administrative agent		Current Report on Form 8-K			10.1		August 2, 2013
	10.4				Second Amendment to the Five-Year Senior Credit Agreement dated as of December 9, 2015 by and among Tyco Electronics Group S.A., as borrower, TE Connectivity Ltd., as guarantor, the lenders parties thereto, and Deutsche Bank AG New York Branch, as existing administrative agent, and Bank of America, N.A., as administrative agent		Current Report on Form 8-K			10.1		December 9, 2015
	10.5		‡		TE Connectivity Ltd. 2007 Stock and Incentive Plan (amended and restated as of March 8, 2017)		Current Report on Form 8-K			10.1		March 9, 2017
	10.6		‡*		TE Connectivity Ltd. Employee Stock Purchase Plan (as amended and restated)
	10.7		‡		Form of Option Award Terms and Conditions		Quarterly Report on Form 10-Q for the quarterly period ended December 24, 2010			10.3		January 24, 2011
	10.8		‡*		Form of Option Award Terms and Conditions for Option Grants Beginning in November 2017
	10.9		‡		Form of Restricted Unit Award Terms and Conditions		Quarterly Report on Form 10-Q for the quarterly period ended December 24, 2010			10.4		January 24, 2011
	10.10		‡*		Form of Restricted Stock Unit Award Terms and Conditions for RSU Grants Beginning in November 2017

							Incorporated by Reference Herein
Exhibit Number
			Description		Form		Exhibit			Filing Date
	10.11		‡		Form of Performance Stock Unit Award Terms and Conditions		Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2012			10.1		January 25, 2013
	10.12		‡		Form of Performance Stock Unit Award Terms and Conditions for Performance Cycles Starting in Fiscal Year 2016 and Fiscal Year 2017		Annual Report on Form 10-K for the fiscal year ended September 30, 2016			10.11		November 15, 2016
	10.13		‡*		Form of Performance Stock Unit Award Terms and Conditions for Performance Cycles Starting in and After Fiscal Year 2018
	10.14		‡		TE Connectivity Change in Control Severance Plan for Certain U.S. Executives (as amended and restated)		Annual Report on Form 10-K for the fiscal year ended September 25, 2015			10.10		November 10, 2015
	10.15		‡		TE Connectivity Severance Plan for U.S. Executives (as amended and restated)		Annual Report on Form 10-K for the fiscal year ended September 25, 2015			10.11		November 10, 2015
	10.16		‡		Tyco Electronics Ltd. Deferred Compensation Plan for Directors		Annual Report on Form 10-K for the fiscal year ended September 28, 2007			10.16		December 14, 2007
	10.17		‡		Tyco Electronics Corporation Supplemental Savings and Retirement Plan		Annual Report on Form 10-K for the fiscal year ended September 25, 2009			10.13		November 18, 2009
	10.18		‡		Tyco Electronics Ltd. UK Savings Related Share Plan		Annual Report on Form 10-K for the fiscal year ended September 28, 2007			10.23		December 14, 2007
	10.19				Form of Indemnification Agreement		Annual Report on Form 10-K for the fiscal year ended September 30, 2016			10.17		November 15, 2016
	10.20		‡*		TE Connectivity Ltd. 2010 Stock and Incentive Plan (amended and restated March 9, 2017)
	10.21		‡		Employment Agreement between Thomas J. Lynch and Tyco Electronics Corporation dated December 15, 2015		Current Report on Form 8-K			10.1		December 16, 2015

							Incorporated by Reference Herein
Exhibit Number
			Description		Form		Exhibit			Filing Date
	10.22		‡		Employment Agreement between Terrence R. Curtin and Tyco Electronics Corporation dated December 15, 2015		Current Report on Form 8-K			10.2		December 16, 2015
	10.23		‡		Employment Agreement between Joseph B. Donahue and Tyco Electronics Corporation dated December 15, 2015		Current Report on Form 8-K			10.4		December 16, 2015
	10.24		‡		Employment Agreement between Steven T. Merkt and Tyco Electronics Corporation dated December 15, 2015		Current Report on Form 8-K			10.6		December 16, 2015
	10.25		‡		Employment Agreement between Heath A. Mitts and Tyco Electronics Corporation dated September 30, 2016		Current Report on Form 8-K			10.1		October 3, 2016
	21.1		*		Subsidiaries of TE Connectivity Ltd.
	23.1		*		Consent of Independent Registered Public Accounting Firm
	24.1		*		Power of Attorney
	31.1		*		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2		*		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1		**		Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101		*		Financial statements from the Annual Report on Form 10-K of TE Connectivity Ltd. for the fiscal year ended September 29, 2017, filed on November 14, 2017, formatted in XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Shareholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements

†

The schedules to the Stock and Asset Purchase Agreement and Share Purchase Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. We will furnish copies of such schedules to the SEC upon its request; provided, however, that we may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934 for any schedule so furnished.

‡

Management contract or compensatory plan or arrangement

Filed herewith

**

Furnished herewith

**SIGNATURES **

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		TE CONNECTIVITY LTD.
		By:		/s/ HEATH A. MITTS Heath A. Mitts Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: November 14, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/ TERRENCE R. CURTIN Terrence R. Curtin		Chief Executive Officer and Director (Principal Executive Officer)		November 14, 2017
/s/ HEATH A. MITTS Heath A. Mitts		Executive Vice President and Chief Financial Officer (Principal Financial Officer)		November 14, 2017
/s/ ROBERT J. OTT Robert J. Ott		Senior Vice President and Corporate Controller (Principal Accounting Officer)		November 14, 2017
* Pierre R. Brondeau		Director		November 14, 2017
* Carol A. Davidson		Director		November 14, 2017
* William A. Jeffrey		Director		November 14, 2017

Signature		Title		Date
* Thomas J. Lynch		Director		November 14, 2017
* Yong Nam		Director		November 14, 2017
* Daniel J. Phelan		Director		November 14, 2017
* Paula A. Sneed		Director		November 14, 2017
* Abhijit Y. Talwalkar		Director		November 14, 2017
* Mark C. Trudeau		Director		November 14, 2017
* John C. Van Scoter		Director		November 14, 2017
* Laura H. Wright		Director		November 14, 2017

John S. Jenkins, Jr., by signing his name hereto, does sign this document on behalf of the above noted individuals, pursuant to powers of attorney duly executed by such individuals, which have been filed as Exhibit 24.1 to this Report.

		By:		/s/ JOHN S. JENKINS, JR. John S. Jenkins, Jr. Attorney-in-fact

TE CONNECTIVITY LTD.

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS **

		Page
Reports of Independent Registered Public Accounting Firm			61
Consolidated Statements of Operations for the Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015			63
Consolidated Statements of Comprehensive Income for the Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015			64
Consolidated Balance Sheets as of September 29, 2017 and September 30, 2016			65
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015			66
Consolidated Statements of Cash Flows for the Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015			67
Notes to Consolidated Financial Statements			68
Schedule II—Valuation and Qualifying Accounts			124

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of TE Connectivity Ltd.:

We have audited the accompanying consolidated balance sheets of TE Connectivity Ltd. and subsidiaries (the "Company") as of September 29, 2017 and September 30, 2016, and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the three fiscal years in the period ended September 29, 2017. Our audits also included the financial statement schedule listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 29, 2017 and September 30, 2016, and the results of its operations and its cash flows for each of the three fiscal years in the period ended September 29, 2017, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of September 29, 2017, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 14, 2017 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania November 14, 2017

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM **

To the Board of Directors and Shareholders of TE Connectivity Ltd.:

We have audited the internal control over financial reporting of TE Connectivity Ltd. and subsidiaries (the "Company") as of September 29, 2017, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 29, 2017, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule of the Company as of and for the fiscal year ended September 29, 2017, and our report dated November 14, 2017 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania November 14, 2017

** TE CONNECTIVITY LTD.**

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015

		Fiscal
		2017			2016			2015
		(in millions, except per share data)
Net sales		$	13,113		$	12,238		$	12,233
Cost of sales			8,663			8,205			8,146
​	​	​	​	​	​	​	​	​	​	​
Gross margin			4,450			4,033			4,087
Selling, general, and administrative expenses			1,591			1,463			1,504
Research, development, and engineering expenses			658			644			627
Acquisition and integration costs			6			22			55
Restructuring and other charges, net			148			2			152
​	​	​	​	​	​	​	​	​	​	​
Operating income			2,047			1,902			1,749
Interest income			20			19			17
Interest expense			(130	)		(127	)		(136	)
Other expense, net			(9	)		(632	)		(55	)
​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations before income taxes			1,928			1,162			1,575
Income tax (expense) benefit			(255	)		779			(337	)
​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations			1,673			1,941			1,238
Income from discontinued operations, net of income taxes			10			68			1,182
​	​	​	​	​	​	​	​	​	​	​
Net income		$	1,683		$	2,009		$	2,420
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Basic earnings per share:
Income from continuing operations		$	4.71		$	5.30		$	3.06
Income from discontinued operations			0.03			0.19			2.92
Net income			4.74			5.49			5.98
Diluted earnings per share:
Income from continuing operations		$	4.67		$	5.26		$	3.01
Income from discontinued operations			0.03			0.18			2.88
Net income			4.70			5.44			5.89
Dividends paid per common share		$	1.54		$	1.40		$	1.24
Weighted-average number of shares outstanding:
Basic			355			366			405
Diluted			358			369			411

See Notes to Consolidated Financial Statements.

** TE CONNECTIVITY LTD.**

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015

		Fiscal
		2017			2016			2015
		(in millions)
Net income		$	1,683		$	2,009		$	2,420
Other comprehensive income (loss):
Currency translation			37			(92	)		(312	)
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes			330			(88	)		(46	)
Gains on cash flow hedges, net of income taxes			15			11			2
​	​	​	​	​	​	​	​	​	​	​
Other comprehensive income (loss)			382			(169	)		(356	)
​	​	​	​	​	​	​	​	​	​	​
Comprehensive income.		$	2,065		$	1,840		$	2,064
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

See Notes to Consolidated Financial Statements.

** TE CONNECTIVITY LTD.**

CONSOLIDATED BALANCE SHEETS

As of September 29, 2017 and September 30, 2016

		Fiscal Year End
		2017			2016
		(in millions, except share data)
Assets
Current assets:
Cash and cash equivalents		$	1,218		$	647
Accounts receivable, net of allowance for doubtful accounts of $21 and $17, respectively			2,290			2,046
Inventories			1,813			1,596
Prepaid expenses and other current assets			605			486
​	​	​	​	​	​	​	​
Total current assets			5,926			4,775
Property, plant, and equipment, net			3,400			3,052
Goodwill			5,651			5,492
Intangible assets, net			1,841			1,879
Deferred income taxes			2,141			2,111
Other assets			444			299
​	​	​	​	​	​	​	​
Total Assets		$	19,403		$	17,608
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt		$	710		$	331
Accounts payable			1,436			1,090
Accrued and other current liabilities			1,626			1,437
Deferred revenue			75			208
​	​	​	​	​	​	​	​
Total current liabilities			3,847			3,066
Long-term debt			3,634			3,739
Long-term pension and postretirement liabilities			1,160			1,502
Deferred income taxes			236			207
Income taxes			293			247
Other liabilities			482			362
​	​	​	​	​	​	​	​
Total Liabilities			9,652			9,123
​	​	​	​	​	​	​	​
Commitments and contingencies (Note 12)
Shareholders' equity:
Common shares, CHF 0.57 par value, 357,069,981 shares authorized and issued, and 382,835,381 shares authorized and issued, respectively			157			168
Contributed surplus			—			1,801
Accumulated earnings			10,175			8,682
Treasury shares, at cost, 5,356,369 and 27,554,005 shares, respectively			(421	)		(1,624	)
Accumulated other comprehensive loss			(160	)		(542	)
​	​	​	​	​	​	​	​
Total Shareholders' Equity			9,751			8,485
​	​	​	​	​	​	​	​
Total Liabilities and Shareholders' Equity		$	19,403		$	17,608
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

See Notes to Consolidated Financial Statements.

** TE CONNECTIVITY LTD.**

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015

		Common Shares						Treasury Shares
								Accumulated Other Comprehensive Loss
		Contributed Surplus			Accumulated Earnings			Total Shareholders' Equity
		Shares			Amount			Shares			Amount
		(in millions)
Balance at September 26, 2014			419		$	184			(11	)	$	(644	)	$	5,231		$	4,253		$	(17	)	$	9,007
Net income			—			—			—			—			—			2,420			—			2,420
Other comprehensive loss			—			—			—			—			—			—			(356	)		(356	)
Share-based compensation expense			—			—			—			—			95			—			—			95
Dividends approved			—			—			—			—			(526	)		—			—			(526	)
Exercise of share options			—			—			3			103			—			—			—			103
Restricted share award vestings and other activity			—			—			1			143			(138	)		—			—			5
Repurchase of common shares			—			—			(18	)		(1,163	)		—			—			—			(1,163	)
Cancellation of treasury shares			(5	)		(2	)		5			305			(303	)		—			—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at September 25, 2015			414		$	182			(20	)	$	(1,256	)	$	4,359		$	6,673		$	(373	)	$	9,585
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income			—			—			—			—			—			2,009			—			2,009
Other comprehensive loss			—			—			—			—			—			—			(169	)		(169	)
Share-based compensation expense			—			—			—			—			91			—			—			91
Dividends approved			—			—			—			—			(512	)		—			—			(512	)
Exercise of share options			—			—			2			90			—			—			—			90
Restricted share award vestings and other activity			—			—			2			146			(145	)		—			—			1
Repurchase of common shares			—			—			(43	)		(2,610	)		—			—			—			(2,610	)
Cancellation of treasury shares			(31	)		(14	)		31			2,006			(1,992	)		—			—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at September 30, 2016			383		$	168			(28	)	$	(1,624	)	$	1,801		$	8,682		$	(542	)	$	8,485
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Adoption of ASU No. 2016-09			—			—			—			—			—			165			—			165
Net income			—			—			—			—			—			1,683			—			1,683
Other comprehensive income			—			—			—			—			—			—			382			382
Share-based compensation expense			—			—			—			—			99			—			—			99
Dividends approved			—			—			—			—			(564	)		—			—			(564	)
Exercise of share options			—			—			3			117			—			—			—			117
Restricted share award vestings and other activity			—			—			2			195			(184	)		(6	)		—			5
Repurchase of common shares			—			—			(8	)		(621	)		—			—			—			(621	)
Cancellation of treasury shares			(26	)		(11	)		26			1,512			(1,152	)		(349	)		—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at September 29, 2017			357		$	157			(5	)	$	(421	)	$	—		$	10,175		$	(160	)	$	9,751
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

See Notes to Consolidated Financial Statements.

** TE CONNECTIVITY LTD.**

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015

		Fiscal
		2017			2016			2015
		(in millions)
Cash Flows From Operating Activities:
Net income		$	1,683		$	2,009		$	2,420
Income from discontinued operations, net of income taxes			(10	)		(68	)		(1,182	)
​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations			1,673			1,941			1,238
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization			635			585			616
Deferred income taxes			(75	)		178			40
Provision for losses on accounts receivable and inventories			19			17			36
Tax sharing expense			8			632			52
Share-based compensation expense			99			91			89
Gain on divestiture			—			(144	)		—
Other			10			102			126
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net			(253	)		116			(210	)
Inventories			(211	)		16			(220	)
Prepaid expenses and other current assets			(72	)		282			36
Accounts payable			308			(75	)		(5	)
Accrued and other current liabilities			225			(4	)		(155	)
Deferred revenue			(137	)		26			12
Income taxes			7			(1,764	)		(52	)
Other			86			45			33
​	​	​	​	​	​	​	​	​	​	​
Net cash provided by continuing operating activities			2,322			2,044			1,636
Net cash provided by (used in) discontinued operating activities			(1	)		(97	)		294
​	​	​	​	​	​	​	​	​	​	​
Net cash provided by operating activities			2,321			1,947			1,930
​	​	​	​	​	​	​	​	​	​	​
Cash Flows From Investing Activities:
Capital expenditures			(702	)		(628	)		(600	)
Proceeds from sale of property, plant, and equipment			19			8			17
Acquisition of businesses, net of cash acquired			(250	)		(1,336	)		(1,725	)
Proceeds from divestiture of business, net of cash retained by sold business			4			333			—
Proceeds from divestiture of discontinued operations, net of cash retained by sold operations			—			(19	)		2,957
Other			(3	)		61			12
​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) continuing investing activities			(932	)		(1,581	)		661
Net cash used in discontinued investing activities			—			—			(25	)
​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) investing activities			(932	)		(1,581	)		636
​	​	​	​	​	​	​	​	​	​	​
Cash Flows From Financing Activities:
Net increase (decrease) in commercial paper			(330	)		330			(328	)
Proceeds from issuance of debt			589			352			617
Repayment of debt			—			(501	)		(473	)
Proceeds from exercise of share options			117			90			103
Repurchase of common shares			(614	)		(2,787	)		(1,023	)
Payment of common share dividends to shareholders			(546	)		(509	)		(502	)
Transfers (to) from discontinued operations			(1	)		(97	)		269
Other			(30	)		(30	)		(17	)
​	​	​	​	​	​	​	​	​	​	​
Net cash used in continuing financing activities			(815	)		(3,152	)		(1,354	)
Net cash provided by (used in) discontinued financing activities			1			97			(269	)
​	​	​	​	​	​	​	​	​	​	​
Net cash used in financing activities			(814	)		(3,055	)		(1,623	)
​	​	​	​	​	​	​	​	​	​	​
Effect of currency translation on cash			(4	)		7			(71	)
Net increase (decrease) in cash and cash equivalents			571			(2,682	)		872
Cash and cash equivalents at beginning of fiscal year			647			3,329			2,457
​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents at end of fiscal year		$	1,218		$	647		$	3,329
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Supplemental Cash Flow Information:
Interest paid		$	128		$	117		$	128
Income taxes paid, net of refunds			323			806			350

See Notes to Consolidated Financial Statements.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The Consolidated Financial Statements reflect the consolidated operations of TE Connectivity Ltd. and its subsidiaries and have been prepared in United States ("U.S.") dollars in accordance with accounting principles generally accepted in the U.S. ("GAAP").

Description of the Business

TE Connectivity Ltd. ("TE Connectivity" or the "Company," which may be referred to as "we," "us," or "our") is a global technology and manufacturing leader creating a safer, sustainable, productive, and connected future. For more than 75 years, our connectivity and sensor solutions, proven in the harshest environments, have enabled advancements in transportation, industrial applications, medical technology, energy, data communications, and the home.

We operate through three reportable segments:

Transportation Solutions. The Transportation Solutions segment is a leader in connectivity and sensor technologies. Our products, which must withstand harsh conditions, are used in the automotive, commercial transportation, and sensors markets.

Industrial Solutions. The Industrial Solutions segment is a leading supplier of products that connect and distribute power, data, and signals. Our products are used in the industrial equipment; aerospace, defense, oil, and gas; and energy markets.

Communications Solutions. The Communications Solutions segment is a leading supplier of electronic components for the data and devices and the appliances markets. We are also a leader in developing, manufacturing, installing, and maintaining some of the world's most advanced subsea fiber optic communications systems.

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Significant estimates in these Consolidated Financial Statements include restructuring and other charges, assets acquired and liabilities assumed in acquisitions, allowances for doubtful accounts receivable, estimates of future cash flows and discount rates associated with asset impairments, useful lives for depreciation and amortization, loss contingencies, net realizable value of inventories, estimated contract revenue and related costs, legal contingencies, tax reserves and deferred tax asset valuation allowances, and the determination of discount and other rate assumptions for pension benefit cost. Actual results could differ materially from these estimates.

Fiscal Year

We have a 52- or 53-week fiscal year that ends on the last Friday of September. For fiscal years in which there are 53 weeks, the fourth quarter reporting period includes 14 weeks. Fiscal 2017, 2016, and 2015 ended on September 29, 2017, September 30, 2016, and September 25, 2015, respectively. Fiscal 2017 and 2015 were 52 weeks in length. Fiscal 2016 was a 53-week year.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies

Principles of Consolidation

We consolidate entities in which we own or control more than 50% of the voting shares or otherwise have the ability to control through similar rights. All intercompany transactions have been eliminated. The results of companies acquired or disposed of are included on the Consolidated Financial Statements from the effective date of acquisition or up to the date of disposal.

Revenue Recognition

Our revenues are generated principally from the sale of our products. Revenue from the sale of products is recognized at the time title and the risks and rewards of ownership pass to the customer. This generally occurs when the products reach the shipping point, the sales price is fixed and determinable, and collection is reasonably assured.

Contract revenues for construction related projects, which are generated in the Communications Solutions segment, are recorded primarily using the percentage-of-completion method. Profits recognized on contracts in process are based upon estimated contract revenue and related cost to complete. Percentage-of-completion is measured based on the ratio of actual costs incurred to total estimated costs. Revisions in cost estimates as contracts progress have the effect of increasing or decreasing profits in the current period. Provisions for anticipated losses are made in the period in which they first become determinable. In addition, provisions for credit losses related to unbilled receivables on construction related projects are recorded as reductions of revenue in the period in which they first become determinable.

We generally warrant that our products will conform to our, or mutually agreed to, specifications and that our products will be free from material defects in materials and workmanship for a limited time. We limit our warranty to the replacement or repair of defective parts, or a refund or credit of the price of the defective product. We accept returned goods only when the customer makes a verified claim and we have authorized the return. Generally, a reserve for estimated returns is established at the time of sale based on historical return experience and is recorded as a reduction of sales.

Additionally, certain of our long-term contracts in the Communications Solutions segment have warranty obligations. Estimated warranty costs for each contract are determined based on the contract terms and technology-specific considerations. These costs are included in total estimated contract costs and are accrued over the construction period of the respective contracts under percentage-of-completion accounting.

We provide certain distributors with an inventory allowance for returns or scrap equal to a percentage of qualified purchases. A reserve for estimated returns and scrap allowances is established at the time of the sale based on an agreed-upon, fixed percentage of sales to distributors and is recorded as a reduction of sales.

Other allowances include customer quantity and price discrepancies. A reserve for other allowances is generally established at the time of sale based on historical experience and is recorded as a reduction of sales. We believe we can reasonably and reliably estimate the amounts of future allowances.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Inventories

Inventories are recorded at the lower of cost or market value using the first-in, first-out cost method, except for inventoried costs incurred in the performance of long-term contracts primarily by the Communications Solutions segment.

Property, Plant, and Equipment, Net

Property, plant, and equipment is recorded at cost less accumulated depreciation. Maintenance and repair expenditures are charged to expense when incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which are 10 to 20 years for land improvements, 5 to 40 years for buildings and improvements, and 1 to 15 years for machinery and equipment.

We periodically evaluate, when events and circumstances warrant, the net realizable value of property, plant, and equipment and other long-lived assets, relying on a number of factors including operating results, business plans, economic projections, and anticipated future cash flows. When indicators of potential impairment are present, the carrying values of the asset group are evaluated in relation to the operating performance and estimated future undiscounted cash flows of the underlying asset group. Impairment of the carrying value is recognized whenever anticipated future undiscounted cash flow estimates are less than the carrying value of the asset. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows and discount rates, reflecting varying degrees of perceived risk.

Goodwill and Other Intangible Assets

Intangible assets include both indeterminable-lived residual goodwill and determinable-lived identifiable intangible assets. Intangible assets with determinable lives primarily include intellectual property, consisting of patents, trademarks, and unpatented technology, and customer relationships. Recoverability estimates range from 1 to 50 years and costs are generally amortized on a straight-line basis. Evaluations of the remaining useful lives of determinable-lived intangible assets are performed on a periodic basis and when events and circumstances warrant.

At fiscal year end 2017, we had six reporting units, five of which contained goodwill. There were two reporting units in each of our three segments. When changes occur in the composition of one or more reporting units, goodwill is reassigned to the reporting units affected based on their relative fair values.

Goodwill impairment is evaluated by comparing the carrying value of each reporting unit to its fair value on the first day of the fourth fiscal quarter of each year or whenever we believe a triggering event requiring a more frequent assessment has occurred. In assessing the existence of a triggering event, management relies on a number of reporting unit-specific factors including operating results, business plans, economic projections, anticipated future cash flows, transactions, and market place data. There are inherent uncertainties related to these factors and management's judgment in applying these factors to the impairment analysis.

When testing for goodwill impairment, we perform a step I goodwill impairment test to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, goodwill may be impaired and a step II

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

goodwill impairment test is performed to measure the amount of impairment, if any. In the step II goodwill impairment test, we compare the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. The implied fair value of goodwill is determined in a manner consistent with how goodwill is recognized in a business combination. We allocate the fair value of a reporting unit to the assets and liabilities of that unit, including intangible assets, as if the reporting unit had been acquired in a business combination. Any excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.

Fair value estimates used in the step I goodwill impairment tests are calculated using an income approach based on the present value of future cash flows of each reporting unit. The income approach generally has been supported by guideline analyses (a market approach). These approaches incorporate a number of assumptions including future growth rates, discount rates, income tax rates, and market activity in assessing fair value and are reporting unit specific. Changes in economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods.

Research and Development

Research and development expenditures are expensed when incurred and are included in research, development, and engineering expenses on the Consolidated Statements of Operations. Research and development expenses include salaries, direct costs incurred, and building and overhead expenses. The amounts expensed in fiscal 2017, 2016, and 2015 were $595 million, $566 million, and $540 million, respectively.

Income Taxes

Income taxes are computed in accordance with the provisions of Accounting Standards Codification ("ASC") 740, Income Taxes. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected on the Consolidated Financial Statements. Deferred tax liabilities and assets are determined based on the differences between the book and tax bases of particular assets and liabilities and operating loss carryforwards using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The calculation of our tax liabilities includes estimates for uncertainties in the application of complex tax regulations across multiple global jurisdictions where we conduct our operations. Under the uncertain tax position provisions of ASC 740, we recognize liabilities for tax and related interest for issues in tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes and related interest will be due. These tax liabilities and related interest are reflected net of the impact of related tax loss carryforwards, as such tax loss carryforwards will be applied against these tax liabilities and will reduce the amount of cash tax payments due upon the eventual settlement with the tax authorities. These estimates may change due to changing facts and circumstances. Due to the complexity of these uncertainties, the ultimate resolution may result in a settlement that differs from our current estimate of the tax liabilities and related interest.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, debt, and derivative financial instruments.

We account for derivative financial instrument contracts on the Consolidated Balance Sheets at fair value. For instruments not designated as hedges under ASC 815, Derivatives and Hedging, the changes in the instruments' fair value are recognized currently in earnings. For instruments designated as cash flow hedges, the effective portion of changes in the fair value of a derivative is recorded in other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the underlying hedged item affects earnings. Ineffective portions of a cash flow hedge, including amounts excluded from the hedging relationship, are recognized currently in earnings. Changes in the fair value of instruments designated as fair value hedges affect the carrying value of the asset or liability hedged, with changes in both the derivative instrument and the hedged asset or liability being recognized currently in earnings.

We determine the fair value of our financial instruments by using methods and assumptions that are based on market conditions and risks existing at each balance sheet date. Standard market conventions are used to determine the fair value of financial instruments, including derivatives.

The cash flows related to derivative financial instruments are reported in the operating activities section of the Consolidated Statements of Cash Flows.

Our derivative financial instruments present certain market and counterparty risks. Concentration of counterparty risk is mitigated, however, by our use of financial institutions worldwide, substantially all of which have long-term Standard & Poor's, Moody's, and/or Fitch credit ratings of A/A2 or higher. In addition, we utilize only conventional derivative financial instruments. We are exposed to potential losses if a counterparty fails to perform according to the terms of its agreement. With respect to counterparty net asset positions recognized at fiscal year end 2017, we have assessed the likelihood of counterparty default as remote. We currently provide guarantees from a wholly-owned subsidiary to the counterparties to our commodity swap derivatives and exchange cash collateral with the counterparties to our cross-currency swap contracts. The likelihood of performance on the guarantees has been assessed as remote. For all other derivative financial instruments, we are not required to provide, nor do we require counterparties to provide, collateral or other security.

Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, specifies a fair value hierarchy based upon the observable inputs utilized in valuation of certain assets and liabilities. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. Fair value measurements are classified under the following hierarchy:

Level 1. Quoted prices in active markets for identical assets and liabilities.

Level 2. Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flows methodologies, and similar techniques that use significant unobservable inputs.

Derivative financial instruments measured at fair value on a recurring basis are generally valued using level 2 inputs.

Financial instruments other than derivative instruments include cash and cash equivalents, accounts receivable, accounts payable, and debt. These instruments are recorded on the Consolidated Balance Sheets at book value. For cash and cash equivalents, accounts receivable, and accounts payable, we believe book value approximates fair value due to the short-term nature of these instruments. See Note 11 for disclosure of the fair value of debt. The following is a description of the valuation methodologies used for the respective financial instruments:

Cash and cash equivalents. Cash and cash equivalents are valued at book value, which we consider to be equivalent to unadjusted quoted prices (level 1).

Accounts receivable. Accounts receivable are valued based on the net value expected to be realized. The net realizable value generally represents an observable contractual agreement (level 2).

Accounts payable. Accounts payable are valued based on the net value expected to be paid, generally supported by an observable contractual agreement (level 2).

Debt. The fair value of debt, including both current and non-current maturities, is derived from quoted market prices or other pricing determinations based on the results of market approach valuation models using observable market data such as recently reported trades, bid and offer information, and benchmark securities (level 2).

Pension Liabilities

The funded status of our defined benefit pension plans is recognized on the Consolidated Balance Sheets and is measured as the difference between the fair value of plan assets and the projected benefit obligation at the measurement date. The projected benefit obligation represents the actuarial present value of benefits projected to be paid upon retirement factoring in estimated future compensation levels. The fair value of plan assets represents the current market value of cumulative company and participant contributions made to irrevocable trust funds, held for the sole benefit of participants, which are invested by the trustee of the funds. The benefits under our defined benefit pension plans are based on various factors, such as years of service and compensation.

Net periodic pension benefit cost is based on the utilization of the projected unit credit method of calculation and is charged to earnings on a systematic basis over the expected average remaining service lives of current participants.

The measurement of benefit obligations and net periodic benefit cost is based on estimates and assumptions determined by our management. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age, and years of service, as well as certain assumptions, including estimates of discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates, and mortality rates.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Share-Based Compensation

We determine the fair value of share awards on the date of grant. Share options are valued using the Black-Scholes-Merton valuation model; restricted share awards and performance awards are valued using our end-of-day share price on the date of grant. The fair value is expensed ratably over the expected service period, with an allowance made for estimated forfeitures based on historical employee activity. Estimates regarding the attainment of performance criteria are reviewed periodically; the cumulative impact of a change in estimate regarding the attainment of performance criteria is recorded in the period in which that change is made.

Earnings Per Share

Basic earnings per share is computed by dividing net income by the basic weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding adjusted for the potentially dilutive impact of share-based compensation arrangements.

Currency Translation

For our non-U.S. dollar functional currency subsidiaries, assets and liabilities are translated into U.S. dollars using fiscal year end exchange rates. Sales and expenses are translated at average monthly exchange rates. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive income (loss) within equity.

Gains and losses resulting from foreign currency transactions, which are included in earnings, were immaterial in fiscal 2017, 2016, and 2015.

Restructuring Charges

Restructuring activities involve employee-related termination costs, facility exit costs, and asset impairments resulting from reductions-in-force, migration of facilities or product lines from higher-cost to lower-cost countries, or consolidation of facilities within countries. We recognize termination costs based on requirements established by severance policy, government law, or previous actions. Facility exit costs generally reflect the cost to terminate a facility lease before the end of its term (measured at fair value at the time we cease using the facility) or costs that will continue to be incurred under the facility lease without future economic benefit to us. Restructuring activities often result in the disposal or abandonment of assets that require an acceleration of depreciation or impairment reflecting the excess of the assets' carrying values over fair value.

The recognition of restructuring costs require that we make certain judgments and estimates regarding the nature, timing, and amount of costs associated with the planned exit activity. To the extent our actual results differ from our estimates and assumptions, we may be required to revise the estimated liabilities, requiring the recognition of additional restructuring costs or the reduction of liabilities already recognized. At the end of each reporting period, we evaluate the remaining accrued balances to ensure these balances are properly stated and the utilization of the reserves are for their intended purpose in accordance with developed exit plans.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Acquisitions

We account for acquired businesses using the acquisition method of accounting. This method requires, among other things, that most assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. We allocate the purchase price of acquired businesses to the tangible and intangible assets acquired and liabilities assumed based on estimated fair values, or as required by ASC 805, Business Combinations. The excess of the purchase price over the identifiable assets acquired and liabilities assumed is recorded as goodwill. We may engage independent third-party appraisal firms to assist us in determining the fair values of assets acquired and liabilities assumed. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets.

Contingent Liabilities

We record a loss contingency when the available information indicates it is probable that we have incurred a liability and the amount of the loss is reasonably estimable. When a range of possible losses with equal likelihood exists, we record the low end of the range. The likelihood of a loss with respect to a particular contingency is often difficult to predict, and determining a meaningful estimate of the loss or a range of loss may not be practicable based on information available. In addition, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must continuously be evaluated to determine whether a loss is probable and a reasonable estimate of that loss can be made. When a loss is probable but a reasonable estimate cannot be made, or when a loss is at least reasonably possible, disclosure is provided.

Recently Issued Accounting Pronouncements

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-16, an update to ASC 740, Income Taxes. This new guidance requires the recognition of the income tax consequences of intra-entity transfers of assets other than inventory in the period in which the transfer occurs. The update, which we will adopt on a modified retrospective basis, is effective for us in the first quarter of fiscal 2019. Based on amounts recorded as of September 29, 2017, adoption would result in approximately a $120 million cumulative-effect adjustment to beginning accumulated earnings and a $120 million decrease in total assets, primarily in other assets. Future transactions prior to adoption of this update could significantly change the impact at adoption.

In February 2016, the FASB issued ASU No. 2016-02 which codified ASC 842, Leases. This guidance, which requires lessees to recognize a lease liability and a right-of-use asset for most leases, is effective for us in the first quarter of fiscal 2020. We will adopt the new standard using a modified retrospective transition approach which requires application of the new guidance for all periods presented. We are currently assessing the impact that adoption will have on our financial position.

In May 2014, the FASB issued ASU No. 2014-09 which codified ASC topic 606, Revenue from Contracts with Customers. This guidance supersedes ASC 605, Revenue Recognition, and introduces a single, comprehensive, five-step revenue recognition model. ASC 606 also enhances disclosures related to revenue recognition. ASC 606, as amended, is effective for us in the first quarter of fiscal 2019 and allows for either a full retrospective or a modified retrospective approach at adoption. We are continuing to assess the impact of adopting ASC 606. Based on the initial evaluation of our current

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

contracts and revenue streams, we do not expect that adoption will have a material impact on our results of operations or financial position and plan to adopt the new standard using the modified retrospective approach. We are in the process of identifying necessary changes to accounting policies, processes, financial statement disclosures, internal controls, and systems to enable compliance with this new standard. We believe we are following an appropriate timeline to allow for the proper recognition, reporting, and disclosure of revenue upon adoption of ASC 606 at the beginning of fiscal 2019.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, an update to ASC 718, Compensation—Stock Compensation, to simplify various aspects of accounting for share-based payments to employees. We elected to early adopt this update in fiscal 2017. The provisions of the update addressing the accounting for excess tax benefits and deficiencies were adopted using a modified retrospective transition approach, with a cumulative-effect adjustment to beginning accumulated earnings and a corresponding increase in deferred tax assets of $165 million. The provision of the update addressing the presentation on the statement of cash flows of employee taxes paid via the withholding of shares was applied retrospectively and did not have a material impact on our Consolidated Financial Statements. Adoption of other provisions, which were applied prospectively, also did not have a material impact on our Consolidated Financial Statements.

3. Restructuring and Other Charges, Net

Net restructuring and other charges consisted of the following:

		Fiscal
		2017			2016			2015
		(in millions)
Restructuring charges, net		$	147		$	125		$	93
Gain on divestiture			—			(144	)		—
Other charges, net			1			21			59
​	​	​	​	​	​	​	​	​	​	​
		$	148		$	2		$	152
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

**Restructuring Charges, Net **

Net restructuring charges by segment were as follows:

		Fiscal
		2017			2016			2015
		(in millions)
Transportation Solutions		$	67		$	39		$	6
Industrial Solutions			72			28			29
Communications Solutions			8			58			58
​	​	​	​	​	​	​	​	​	​	​
Restructuring charges, net		$	147		$	125		$	93
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Restructuring and Other Charges, Net (Continued)

Activity in our restructuring reserves is summarized as follows:

		Balance at Beginning of Fiscal Year			Charges			Changes in Estimate			Cash Payments			Non-Cash Items			Currency Translation and Other			Balance at End of Fiscal Year
		(in millions)
Fiscal 2017 Activity:
Fiscal 2017 Actions:
Employee severance		$	—		$	143		$	(5	)	$	(40	)	$	—		$	5		$	103
Facility and other exit costs			—			2			—			(1	)		—			—			1
Property, plant, and equipment			—			9			—			—			(9	)		—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			—			154			(5	)		(41	)		(9	)		5			104
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fiscal 2016 Actions:
Employee severance			54			8			(9	)		(27	)		—			—			26
Facility and other exit costs			—			3			—			(3	)		—			—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			54			11			(9	)		(30	)		—			—			26
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fiscal 2015 Actions:
Employee severance			13			—			(2	)		(4	)		—			(1	)		6
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pre-Fiscal 2015 Actions:
Employee severance			12			—			(3	)		(3	)		—			(2	)		4
Facility and other exit costs			12			1			—			(4	)		—			—			9
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			24			1			(3	)		(7	)		—			(2	)		13
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total fiscal 2017 activity		$	91		$	166		$	(19	)	$	(82	)	$	(9	)	$	2		$	149
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fiscal 2016 Activity:
Fiscal 2016 Actions:
Employee severance		$	—		$	86		$	—		$	(32	)	$	—		$	—		$	54
Facility and other exit costs			—			3			—			(3	)		—			—			—
Property, plant, and equipment			—			41			—			—			(41	)		—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			—			130			—			(35	)		(41	)		—			54
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fiscal 2015 Actions:
Employee severance			45			3			(4	)		(31	)		—			—			13
Facility and other exit costs			1			—			—			(1	)		—			—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			46			3			(4	)		(32	)		—			—			13
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pre-Fiscal 2015 Actions:
Employee severance			24			—			(6	)		(8	)		—			2			12
Facility and other exit costs			14			2			—			(4	)		—			—			12
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			38			2			(6	)		(12	)		—			2			24
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total fiscal 2016 activity		$	84		$	135		$	(10	)	$	(79	)	$	(41	)	$	2		$	91
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Restructuring and Other Charges, Net (Continued)

		Balance at Beginning of Fiscal Year			Charges			Changes in Estimate			Cash Payments			Non-Cash Items			Currency Translation and Other			Balance at End of Fiscal Year
		(in millions)
Fiscal 2015 Activity:
Fiscal 2015 Actions:
Employee severance		$	—		$	68		$	—		$	(23	)	$	—		$	—		$	45
Facility and other exit costs			—			3			—			(2	)		—			—			1
Property, plant, and equipment			—			21			—			—			(21	)		—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			—			92			—			(25	)		(21	)		—			46
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pre-Fiscal 2015 Actions:
Employee severance			91			2			(4	)		(54	)		—			(11	)		24
Facility and other exit costs			23			3			—			(13	)		—			1			14
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			114			5			(4	)		(67	)		—			(10	)		38
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total fiscal 2015 activity		$	114		$	97		$	(4	)	$	(92	)	$	(21	)	$	(10	)	$	84
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

Fiscal 2017 Actions

During fiscal 2017, we initiated a restructuring program associated with footprint consolidation related to recent acquisitions and structural improvements impacting all segments. In connection with this program, during fiscal 2017, we recorded net restructuring charges of $149 million. We expect to complete all restructuring actions commenced during fiscal 2017 by the end of fiscal 2019 and to incur total charges of approximately $160 million with remaining charges primarily related to employee severance.

The following table summarizes expected, incurred, and remaining charges for the fiscal 2017 program by segment:

		Total Expected Charges			Cumulative Charges Incurred			Remaining Expected Charges
		(in millions)
Transportation Solutions		$	75		$	72		$	3
Industrial Solutions			77			75			2
Communications Solutions			8			2			6
​	​	​	​	​	​	​	​	​	​	​
Total		$	160		$	149		$	11
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

Fiscal 2016 Actions

During fiscal 2016, we initiated a restructuring program associated with headcount reductions impacting all segments and product line closures in the Communications Solutions segment. In connection with this program, during fiscal 2017 and 2016, we recorded net restructuring charges of $2 million and $130 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2016 by the end of fiscal 2019 and to incur total charges of approximately $155 million with remaining charges related primarily to employee severance.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Restructuring and Other Charges, Net (Continued)

The following table summarizes expected, incurred, and remaining charges for the fiscal 2016 program by segment:

		Total Expected Charges			Cumulative Charges Incurred			Remaining Expected Charges
		(in millions)
Transportation Solutions		$	38		$	37		$	1
Industrial Solutions			28			28			—
Communications Solutions			89			67			22
​	​	​	​	​	​	​	​	​	​	​
Total		$	155		$	132		$	23
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

Fiscal 2015 Actions

During fiscal 2015, we initiated a restructuring program associated with headcount reductions and product line closures, primarily impacting the Communications Solutions and Industrial Solutions segments. In connection with this program, during fiscal 2017, 2016, and 2015, we recorded net restructuring credits of $2 million, credits of $1 million, and charges of $92 million, respectively. We do not expect to incur any additional charges related to restructuring programs commenced in fiscal 2015.

Pre-Fiscal 2015 Actions

During fiscal 2017, 2016, and 2015, we recorded net restructuring credits of $2 million, credits of $4 million, and charges of $1 million, respectively, related to pre-fiscal 2015 actions. We do not expect to incur any additional charges related to pre-fiscal 2015 actions.

Total Restructuring Reserves

Restructuring reserves included on the Consolidated Balance Sheets were as follows:

		Fiscal Year End
		2017			2016
		(in millions)
Accrued and other current liabilities		$	130		$	64
Other liabilities			19			27
​	​	​	​	​	​	​	​
Restructuring reserves		$	149		$	91
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

**Gain on Divestiture **

During fiscal 2016, we sold our Circuit Protection Devices ("CPD") business for net cash proceeds of $333 million. We recognized a pre-tax gain of $144 million on the transaction. The CPD business was reported in our Communications Solutions segment.

**Other Charges, Net **

During fiscal 2016, we incurred costs of $21 million, associated primarily with the divestiture of certain businesses.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Restructuring and Other Charges, Net (Continued)

During fiscal 2015, we incurred costs of $59 million, consisting primarily of $36 million of legal and professional fees and $18 million of charges associated with the exit of a facility. These costs were incurred in connection with the sale of our Broadband Network Solutions ("BNS") business but were not directly related to the business sold and accordingly were recorded in continuing operations. See Note 4 for additional information regarding the divestiture of BNS.

4. Discontinued Operations

The following table presents certain components of income from discontinued operations, net of income taxes:

		Fiscal
		2017			2016			2015
		(in millions)
Net sales from discontinued operations		$	—		$	—		$	1,595
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Pre-tax income from discontinued operations		$	3		$	30		$	118
Pre-tax gain on sale of discontinued operations			3			29			1,105
Income tax (expense) benefit			4			9			(41	)
​	​	​	​	​	​	​	​	​	​	​
Income from discontinued operations, net of income taxes		$	10		$	68		$	1,182
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

During fiscal 2015, we sold our BNS business for $3.0 billion in cash and recognized a pre-tax gain of $1.1 billion on the transaction. In the U.S., income taxes associated with the gain on the sale of assets were largely offset by income tax benefits realized on the sale of several subsidiaries. In certain non-U.S. jurisdictions, the sale was exempt from income taxes. During fiscal 2016, we recognized an additional pre-tax gain of $29 million on the divestiture, related primarily to pension and net working capital adjustments.

In fiscal 2006, the former shareholders of Com-Net initiated a lawsuit related to our fiscal 2001 acquisition of Com-Net. In October 2015, the Court of Common Pleas in Allegheny County, Pennsylvania entered final judgment in favor of the sellers and against us for $127 million plus costs. Consequently, we recorded a reserve and pre-tax charges of $127 million during fiscal 2015. During fiscal 2016, we settled all matters in dispute and paid the sellers an aggregate amount of $96 million. In connection with the settlements, we recorded pre-tax credits of $30 million, representing a release of excess reserves, during fiscal 2016. These amounts were reflected in income from discontinued operations on the Consolidated Statements of Operations as the Com-Net case was associated with our former Wireless Systems business which was sold in fiscal 2009.

The BNS and Wireless Systems businesses met the discontinued operations criteria and were reported as such in all periods presented on the Consolidated Financial Statements. Prior to reclassification to discontinued operations, the BNS and Wireless Systems businesses were included in the former Network Solutions and Wireless Systems segments, respectively.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Acquisitions

Fiscal 2017 Acquisitions

During fiscal 2017, we acquired two businesses for a combined cash purchase price of $250 million, net of cash acquired. The acquisitions were reported as part of our Transportation Solutions and Industrial Solutions segments from the date of acquisition.

Fiscal 2016 Acquisitions

In fiscal 2016, we acquired four businesses, including the Creganna Medical group, for a combined cash purchase price of $1.3 billion, net of cash acquired. The acquisitions were reported as part of our Industrial Solutions and Transportation Solutions segments from the date of acquisition.

The following table summarizes the allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed at the date of acquisition, in accordance with the acquisition method of accounting:

		(in millions)
Cash and cash equivalents		$	77
Other current assets			97
Goodwill			802
Intangible assets			530
Other non-current assets			73
​	​	​	​	​
Total assets acquired			1,579
​	​	​	​	​
Current liabilities			46
Deferred income taxes			100
Other non-current liabilities			20
​	​	​	​	​
Total liabilities assumed			166
​	​	​	​	​
Net assets acquired			1,413
Cash and cash equivalents acquired			(77	)
​	​	​	​	​
Net cash paid		$	1,336
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

The fair values assigned to intangible assets were determined using the income approach, specifically the relief from royalty and the multi-period excess earnings methods. Both valuation methods rely on management judgment, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, peer group cost of capital and royalty rates, and other factors. Useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Acquisitions (Continued)

Acquired intangible assets consisted of the following:

		Amount			Weighted-Average Amortization Period
		(in millions)			(in years)
Customer relationships		$	300			18
Developed technology			170			11
Trade names and trademarks			45			25
Customer order backlog			15			3
​	​	​	​	​	​	​	​
Total		$	530			16
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

The acquired intangible assets are being amortized on a straight-line basis over their expected useful lives.

Goodwill of $802 million was recognized in these transactions, representing the excess of the purchase price over the fair value of the tangible and intangible assets acquired and liabilities assumed. This goodwill is attributable primarily to cost savings and other synergies related to operational efficiencies including the consolidation of manufacturing, marketing, and general and administrative functions. The goodwill has been allocated to the Industrial Solutions and Transportation Solutions segments and is not deductible for tax purposes. However, prior to being acquired by us, one of the fiscal 2016 acquisitions completed certain acquisitions that resulted in goodwill with an estimated value of $15 million that is deductible primarily for U.S. tax purposes, which we will deduct through 2025.

Fiscal 2016 acquisitions contributed net sales of $167 million and operating income of $8 million to our Consolidated Statement of Operations during fiscal 2016. The operating income included $10 million of acquisition costs, $7 million associated with the amortization of acquisition-related fair value adjustments related to acquired inventories and customer order backlog, and $2 million of integration costs.

Fiscal 2015 Acquisitions

In October 2014, we acquired 100% of the outstanding shares of Measurement Specialties, Inc. ("Measurement Specialties"), a leading global designer and manufacturer of sensors and sensor-based systems, for $86.00 in cash per share. The total value paid was approximately $1.7 billion, net of cash acquired, and included $225 million for the repayment of Measurement Specialties' debt and accrued interest. Measurement Specialties offers a broad portfolio of technologies including pressure, vibration, force, temperature, humidity, ultrasonic, position, and fluid sensors, for a wide range of applications and industries. This business has been reported as part of our Transportation Solutions segment from the date of acquisition.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Acquisitions (Continued)

The following table summarizes the allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed at the date of acquisition, in accordance with the acquisition method of accounting:

		(in millions)
Cash and cash equivalents		$	37
Accounts receivable			84
Inventories			110
Other current assets			20
Property, plant, and equipment			95
Goodwill			1,064
Intangible assets			547
Other non-current assets			9
​	​	​	​	​
Total assets acquired			1,966
​	​	​	​	​
Short-term debt			20
Accounts payable			48
Other current liabilities			67
Long-term debt			203
Deferred income taxes			98
Other non-current liabilities			9
​	​	​	​	​
Total liabilities assumed			445
​	​	​	​	​
Net assets acquired			1,521
Cash and cash equivalents acquired			(37	)
​	​	​	​	​
Net cash paid		$	1,484
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

The fair values assigned to intangible assets were determined using the income approach, specifically the relief from royalty and the multi-period excess earnings methods. The valuation of tangible assets was derived using a combination of the income, market, and cost approaches. Useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.

Acquired intangible assets consisted of the following:

		Amount			Weighted-Average Amortization Period
		(in millions)			(in years)
Customer relationships		$	370			18
Developed technology			161			9
Trade names and trademarks			4			1
Customer order backlog			12			< 1
​	​	​	​	​	​	​	​
Total		$	547			15
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Acquisitions (Continued)

The acquired intangible assets are being amortized on a straight-line basis over their expected useful lives.

Goodwill of $1,064 million was recognized in the transaction, representing the excess of the purchase price over the fair value of the tangible and intangible assets acquired and liabilities assumed. This goodwill is attributable primarily to cost savings and other synergies related to operational efficiencies including the consolidation of manufacturing, marketing, and general and administrative functions. The goodwill has been allocated to the Transportation Solutions segment and is not deductible for tax purposes. However, prior to its merger with us, Measurement Specialties completed certain acquisitions that resulted in goodwill with an estimated value of $23 million that is deductible primarily for U.S. tax purposes, which we will deduct through 2030.

During fiscal 2015, Measurement Specialties contributed net sales of $548 million to our Consolidated Statement of Operations. Due to the commingled nature of our operations, it is not practicable to separately identify operating income of Measurement Specialties on a stand-alone basis.

During fiscal 2015, we acquired three additional businesses for $241 million in cash, net of cash acquired.

Pro Forma Financial Information

The following unaudited pro forma financial information reflects our consolidated results of operations had the fiscal 2016 acquisitions occurred at the beginning of fiscal 2015 and the Measurement Specialties acquisition occurred at the beginning of fiscal 2014:

		Pro Forma for Fiscal
		2016			2015
		(in millions, except per share data)
Net sales		$	12,471		$	12,613
Net income			2,038			2,448
Diluted earnings per share		$	5.52		$	5.96

The pro forma adjustments, which were not significant, included interest expense based on pro forma changes in our combined capital structure, charges related to acquired customer order backlog, charges related to the amortization of the fair value of acquired intangible assets, charges related to the fair value adjustment to acquisition-date inventories, and acquisition and other costs, and the related tax effects.

Pro forma results do not include any anticipated synergies or other anticipated benefits of these acquisitions. Accordingly, the unaudited pro forma financial information is not necessarily indicative of either future results of operations or results that might have been achieved had these acquisitions occurred at the beginning of the preceding fiscal years.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Inventories

Inventories consisted of the following:

		Fiscal Year End
		2017			2016
		(in millions)
Raw materials		$	306		$	241
Work in progress			580			504
Finished goods			810			669
Inventoried costs on long-term contracts			117			182
​	​	​	​	​	​	​	​
Inventories		$	1,813		$	1,596
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

7. Property, Plant, and Equipment, Net

Net property, plant, and equipment consisted of the following:

		Fiscal Year End
		2017			2016
		(in millions)
Land and improvements		$	178		$	159
Buildings and improvements			1,399			1,272
Machinery and equipment			7,306			6,890
Construction in process			697			567
​	​	​	​	​	​	​	​
Gross property, plant, and equipment			9,580			8,888
Accumulated depreciation			(6,180	)		(5,836	)
​	​	​	​	​	​	​	​
Property, plant, and equipment, net		$	3,400		$	3,052
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

Depreciation expense was $466 million, $436 million, and $463 million in fiscal 2017, 2016, and 2015, respectively.

8. Goodwill

The changes in the carrying amount of goodwill by segment were as follows:

		Transportation Solutions			Industrial Solutions			Communications Solutions			Total
		(in millions)
Fiscal year end 2015(1)		$	1,863		$	2,253		$	708		$	4,824
Acquisitions			60			776			—			836
Divestiture of business			—			—			(117	)		(117	)
Currency translation			(20	)		(24	)		(7	)		(51	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fiscal year end 2016(1)			1,903			3,005			584			5,492
Acquisitions			82			14			—			96
Currency translation			26			28			9			63
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fiscal year end 2017(1)		$	2,011		$	3,047		$	593		$	5,651
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

At fiscal year end 2017, 2016, and 2015, accumulated impairment losses for the Transportation Solutions and Industrial Solutions segments were $2,191 million and $669 million, respectively. Accumulated impairment

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Goodwill (Continued)

losses for the Communications Solutions segment were $1,514 million at fiscal year end 2017 and 2016 and $1,626 million at fiscal year end 2015.

During fiscal 2017, we acquired two businesses and recognized goodwill of $130 million, which benefitted the Transportation Solutions and Industrial Solutions segments. During fiscal 2016, we acquired four businesses and recognized goodwill of $836 million, which benefited the Industrial Solutions and Transportation Solutions segments. In fiscal 2017, we finalized the purchase price allocation of our fiscal 2016 acquisitions, and the associated goodwill was reduced to $802 million. This reduction, which was primarily within the Industrial Solutions segment, is reflected in fiscal 2017 acquisitions in the above table. See Note 5 for additional information regarding acquisitions.

During fiscal 2016, net goodwill of $117 million was written-off in connection with the sale of our CPD business. See Note 3 for additional information regarding the divestiture of CPD.

We completed our annual goodwill impairment test in the fourth quarter of fiscal 2017 and determined that no impairment existed.

9. Intangible Assets, Net

Intangible assets consisted of the following:

		Fiscal Year End
		2017									2016
		Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
		(in millions)
Customer relationships		$	1,433		$	(300	)	$	1,133		$	1,332		$	(212	)	$	1,120
Intellectual property			1,263			(575	)		688			1,300			(563	)		737
Other			36			(16	)		20			36			(14	)		22
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	2,732		$	(891	)	$	1,841		$	2,668		$	(789	)	$	1,879
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

Intangible asset amortization expense was $169 million, $149 million, and $153 million for fiscal 2017, 2016, and 2015, respectively. The aggregate amortization expense on intangible assets is expected to be as follows:

		(in millions)
Fiscal 2018		$	184
Fiscal 2019			181
Fiscal 2020			174
Fiscal 2021			171
Fiscal 2022			170
Thereafter			961
​	​	​	​	​
Total		$	1,841
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following:

		Fiscal Year End
		2017			2016
		(in millions)
Accrued payroll and employee benefits		$	596		$	431
Dividends payable to shareholders			281			263
Income taxes payable			121			149
Restructuring reserves			130			64
Interest payable			58			56
Other			440			474
​	​	​	​	​	​	​	​
Accrued and other current liabilities		$	1,626		$	1,437
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

11. Debt

Debt was as follows:

		Fiscal Year End
		2017			2016
		(in millions)
Commercial paper, at a weighted-average interest rate of 0.69% at fiscal year end 2016		$	—		$	330
6.55% senior notes due 2017			708			708
2.375% senior notes due 2018			325			325
2.35% senior notes due 2019			250			250
4.875% senior notes due 2021			250			250
3.50% senior notes due 2022			500			500
1.10% euro-denominated senior notes due 2023			650			618
3.45% senior notes due 2024			350			250
3.70% senior notes due 2026			350			350
3.125% senior notes due 2027			400			—
7.125% senior notes due 2037			477			477
Other			96			3
​	​	​	​	​	​	​	​
Total principal debt			4,356			4,061
Unamortized discounts and debt issuance costs			(26	)		(26	)
Effects of fair value hedge-designated interest rate swaps			14			35
​	​	​	​	​	​	​	​
Total debt		$	4,344		$	4,070
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

During August 2017, Tyco Electronics Group S.A. ("TEGSA"), our 100%-owned subsidiary, issued $400 million aggregate principal amount of 3.125% senior notes due August 2027 and $100 million aggregate principal amount of 3.45% senior notes due August 2024. The 3.45% senior notes were issued under an existing indenture under which TEGSA had previously issued $250 million aggregate principal amount. The notes are TEGSA's unsecured senior obligations and rank equally in right of payment with all existing and any future senior indebtedness of TEGSA and senior to any subordinated indebtedness that TEGSA may incur.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Debt (Continued)

TEGSA has a five-year unsecured senior revolving credit facility ("Credit Facility") with a maturity date of December 2020 and total commitments of $1,500 million. TEGSA had no borrowings under the Credit Facility at fiscal year end 2017 or 2016.

Borrowings under the Credit Facility bear interest at a rate per annum equal to, at the option of TEGSA, (1) LIBOR plus an applicable margin based upon the senior, unsecured, long-term debt rating of TEGSA, or (2) an alternate base rate equal to the highest of (i) Bank of America, N.A.'s base rate, (ii) the federal funds effective rate plus 1/2 of 1%, and (iii) one-month LIBOR plus 1%, plus, in each case, an applicable margin based upon the senior, unsecured, long-term debt rating of TEGSA. TEGSA is required to pay an annual facility fee ranging from 5.0 to 12.5 basis points based upon the amount of the lenders' commitments under the Credit Facility and the applicable credit ratings of TEGSA.

The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) for the then most recently concluded period of four consecutive fiscal quarters exceeds 3.75 to 1.0, an Event of Default (as defined in the Credit Facility) is triggered. The Credit Facility and our other debt agreements contain other customary covenants.

Periodically, TEGSA issues commercial paper to U.S. institutional accredited investors and qualified institutional buyers in accordance with available exemptions from the registration requirements of the Securities Act of 1933 as part of our ongoing effort to maintain financial flexibility and to potentially decrease the cost of borrowings. Borrowings under the commercial paper program are backed by the Credit Facility.

TEGSA's payment obligations under its senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed by its parent, TE Connectivity Ltd.

Principal payments required for debt are as follows:

		(in millions)
Fiscal 2018		$	710
Fiscal 2019			580
Fiscal 2020			—
Fiscal 2021			250
Fiscal 2022			500
Thereafter			2,316
​	​	​	​	​
Total		$	4,356
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

The fair value of our debt, based on indicative valuations, was approximately $4,622 million and $4,424 million at fiscal year end 2017 and 2016, respectively.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Commitments and Contingencies

Legal Proceedings

In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.

Environmental Matters

We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. As of fiscal year end 2017, we concluded that it was probable that we would incur investigation and remediation costs at these sites in the range of $15 million to $43 million, and that the best estimate within this range was $19 million. We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of operations, financial position, or cash flows.

Leases

We have facility, land, vehicle, and equipment leases that expire at various dates. Rental expense under these operating leases was $153 million, $143 million, and $141 million for fiscal 2017, 2016, and 2015, respectively. At fiscal year end 2017, future minimum lease payments under non-cancelable operating lease obligations were as follows:

		(in millions)
Fiscal 2018		$	110
Fiscal 2019			85
Fiscal 2020			62
Fiscal 2021			51
Fiscal 2022			42
Thereafter			104
​	​	​	​	​
Total		$	454
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

Guarantees

In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Commitments and Contingencies (Continued)

At fiscal year end 2017, we had outstanding letters of credit, letters of guarantee, and surety bonds of $298 million.

We generally record estimated product warranty costs when contract revenues are recognized under the percentage-of-completion method for construction related contracts; other warranty reserves are not significant. The estimation is based primarily on historical experience and actual warranty claims. Amounts accrued for warranty claims were $50 million and $48 million at fiscal year end 2017 and 2016, respectively.

Tax Sharing Agreement

In fiscal 2007, we became an independent, publicly traded company owning the former electronics businesses of Tyco International plc ("Tyco International"). On June 29, 2007, Tyco International distributed all of our shares, as well as its shares of its former healthcare businesses ("Covidien"), to its common shareholders (the "separation"). As a result of subsequent transactions, Tyco International and Covidien now operate as part of Johnson Controls International plc and Medtronic plc, respectively.

Upon separation, we entered into a Tax Sharing Agreement, under which we share responsibility for certain of our, Tyco International's, and Covidien's income tax liabilities based on a sharing formula for periods prior to and including June 29, 2007. We, Tyco International, and Covidien share 31%, 27%, and 42%, respectively, of income tax liabilities that arise from adjustments made by tax authorities to our, Tyco International's, and Covidien's income tax returns. Pursuant to the Tax Sharing Agreement, we entered into certain guarantee commitments and indemnifications with Tyco International and Covidien. We have substantially settled all U.S. federal income tax matters with the Internal Revenue Service ("IRS") for periods covered under the Tax Sharing Agreement. Certain shared U.S. state and non-U.S. income tax matters remain open. We do not expect these matters will have a material effect on our results of operations, financial position, or cash flows.

13. Financial Instruments and Fair Value Measurements

We use derivative and non-derivative financial instruments to manage certain exposures to foreign currency, interest rate, investment, and commodity risks.

The effects of derivative instruments on the Consolidated Statements of Operations were immaterial for fiscal 2017, 2016, and 2015.

Foreign Exchange Risks and Hedges of Net Investment

As part of managing the exposure to changes in foreign currency exchange rates, we utilize cross-currency swap contracts, foreign currency forward contracts, and foreign currency swap contracts, a portion of which are designated as cash flow hedges. The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in foreign currency exchange rates on intercompany and other cash transactions. We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with the cash flow hedge-designated instruments addressing foreign exchange risks will be reclassified into the Consolidated Statement of Operations within the next twelve months.

During fiscal 2015, we entered into cross-currency swap contracts with an aggregate notional value of €1,000 million to reduce our exposure to foreign currency exchange risk associated with certain

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Financial Instruments and Fair Value Measurements (Continued)

intercompany loans. Under the terms of these contracts, which have been designated as cash flow hedges, we make quarterly interest payments in euros at 3.50% per annum and receive interest in U.S. dollars at a weighted-average rate of 5.33% per annum. Upon the maturities of these contracts in fiscal 2022, we will pay the principal amount of the loans in euros and receive U.S. dollars from our counterparties.

We hedge our net investment in certain foreign operations using intercompany non-derivative financial instruments denominated in the same currencies. The aggregate notional value of these hedges was $3,110 million and $3,480 million at fiscal year end 2017 and 2016, respectively. The impacts of our hedging program were as follows:

		Fiscal
		2017			2016			2015
		(in millions)
Foreign exchange gains (losses)		$	(74	)	$	(45	)	$	353

These foreign exchange gains and losses were recorded as currency translation, a component of accumulated other comprehensive income (loss), offsetting foreign exchange losses and gains attributable to the translation of the net investment. See Note 19 for additional information.

Interest Rate and Investment Risk Management

We issue debt, as needed, to fund our operations and capital requirements. Such borrowings can result in interest rate exposure. To manage the interest rate exposure, we use interest rate swaps to convert a portion of fixed-rate debt into variable-rate debt. We use forward starting interest rate swaps and options to enter into interest rate swaps to manage interest rate exposure in periods prior to the anticipated issuance of fixed-rate debt. We also utilize investment swaps to manage earnings exposure on certain nonqualified deferred compensation liabilities.

Commodity Hedges

As part of managing the exposure to certain commodity price fluctuations, we utilize commodity swap contracts designated as cash flow hedges. The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in prices of commodities used in production.

At fiscal year end 2017 and 2016, our commodity hedges had notional values of $314 million and $232 million, respectively. We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with the commodity hedges will be reclassified into the Consolidated Statement of Operations within the next twelve months.

Fair Value Measurements

Financial instruments recorded at fair value on a recurring basis, which consist of derivative instruments and marketable securities, were immaterial at fiscal year end 2017 and 2016.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Retirement Plans

Defined Benefit Pension Plans

We have a number of contributory and noncontributory defined benefit retirement plans covering certain of our U.S. and non-U.S. employees, designed in accordance with local customs and practice.

The net periodic pension benefit cost for all U.S. and non-U.S. defined benefit pension plans was as follows:

		U.S. Plans									Non-U.S. Plans
		Fiscal									Fiscal
		2017			2016			2015			2017			2016			2015
		($ in millions)
Service cost		$	12		$	9		$	9		$	50		$	48		$	45
Interest cost			43			50			48			35			52			58
Expected return on plan assets			(53	)		(59	)		(67	)		(68	)		(68	)		(72	)
Amortization of net actuarial loss			40			40			25			41			36			33
Other			—			—			—			(4	)		(6	)		(5	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net periodic pension benefit cost		$	42		$	40		$	15		$	54		$	62		$	59
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Weighted-average assumptions used to determine net pension benefit cost during the fiscal year:
Discount rate			3.58	%		4.38	%		4.34	%		1.44	%		2.50	%		2.77	%
Expected return on plan assets			5.93	%		6.97	%		7.20	%		5.21	%		5.98	%		6.46	%
Rate of compensation increase			—	%		—	%		—	%		2.52	%		2.81	%		2.86	%

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Retirement Plans (Continued)

The following table represents the changes in benefit obligation and plan assets and the net amount recognized on the Consolidated Balance Sheets for all U.S. and non-U.S. defined benefit pension plans:

		U.S. Plans						Non-U.S. Plans
		Fiscal						Fiscal
		2017			2016			2017			2016
		($ in millions)
Change in benefit obligation:
Benefit obligation at beginning of fiscal year		$	1,250		$	1,170		$	2,535		$	2,188
Service cost			12			9			50			48
Interest cost			43			50			35			52
Actuarial loss			(34	)		102			(301	)		368
Benefits and administrative expenses paid			(82	)		(81	)		(69	)		(85	)
Currency translation			—			—			29			(63	)
Other			2			—			13			27
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Benefit obligation at end of fiscal year			1,191			1,250			2,292			2,535
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Change in plan assets:
Fair value of plan assets at beginning of fiscal year			929			879			1,371			1,167
Actual return on plan assets			115			130			49			261
Employer contributions			1			1			47			66
Benefits and administrative expenses paid			(82	)		(81	)		(69	)		(85	)
Currency translation			—			—			(2	)		(59	)
Other			—			—			6			21
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fair value of plan assets at end of fiscal year			963			929			1,402			1,371
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Funded status		$	(228	)	$	(321	)	$	(890	)	$	(1,164	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Amounts recognized on the Consolidated Balance Sheets:
Other assets		$	—		$	—		$	50		$	—
Accrued and other current liabilities			(5	)		(5	)		(22	)		(20	)
Long-term pension and postretirement liabilities			(223	)		(316	)		(918	)		(1,144	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net amount recognized		$	(228	)	$	(321	)	$	(890	)	$	(1,164	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Weighted-average assumptions used to determine pension benefit obligation at fiscal year end:
Discount rate			3.77	%		3.58	%		1.87	%		1.44	%
Rate of compensation increase			—	%		—	%		2.53	%		2.52	%

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Retirement Plans (Continued)

The pre-tax amounts recognized in accumulated other comprehensive income (loss) for all U.S. and non-U.S. defined benefit pension plans were as follows:

		U.S. Plans						Non-U.S. Plans
		Fiscal						Fiscal
		2017			2016			2017			2016
		(in millions)
Change in net loss:
Unrecognized net loss at beginning of fiscal year		$	428		$	436		$	839		$	711
Current year change recorded in accumulated other comprehensive income (loss)			(96	)		32			(285	)		164
Amortization reclassified to earnings			(40	)		(40	)		(41	)		(36	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Unrecognized net loss at end of fiscal year		$	292		$	428		$	513		$	839
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Change in prior service credit:
Unrecognized prior service credit at beginning of fiscal year		$	—		$	—		$	(70	)	$	(66	)
Current year change recorded in accumulated other comprehensive income (loss)			2			—			5			(10	)
Amortization reclassified to earnings(1)			—			—			6			6
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Unrecognized prior service credit at end of fiscal year		$	2		$	—		$	(59	)	$	(70	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

Amortization of prior service credit is included in other in the above table summarizing the components of net periodic pension benefit cost.

In fiscal 2017, unrecognized actuarial gains recorded in accumulated other comprehensive income (loss) were primarily the result of higher discount rates and favorable asset performance for both U.S. and non-U.S. defined benefit pension plans as compared to fiscal 2016. In fiscal 2016, unrecognized actuarial losses recorded in accumulated other comprehensive income (loss) were primarily the result of lower discount rates partially offset by favorable asset performance for both U.S. and non-U.S. defined benefit pension plans as compared to fiscal 2015.

The estimated amortization of actuarial losses from accumulated other comprehensive income (loss) into net periodic pension benefit cost for U.S. and non-U.S. defined benefit pension plans in fiscal 2018 is expected to be $22 million and $24 million, respectively. The estimated amortization of prior service credit from accumulated other comprehensive income (loss) into net periodic pension benefit cost for non-U.S. defined benefit pension plans in fiscal 2018 is expected to be $6 million.

In determining the expected return on plan assets, we consider the relative weighting of plan assets by class and individual asset class performance expectations.

The investment strategies for U.S. and non-U.S. pension plans are governed locally. Our investment strategy for our pension plans is to manage the plans on a going concern basis. Current investment policy is to achieve a reasonable return on assets, subject to a prudent level of portfolio risk, for the purpose of enhancing the security of benefits for participants. Projected returns are based primarily on pro forma asset allocation, expected long-term returns, and forward-looking estimates of active portfolio and investment management.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Retirement Plans (Continued)

The long-term target asset allocation in our U.S. plans' master trust is 10% equity and 90% fixed income. Asset re-allocation to meet that target is occurring over a multi-year period based on the funded status. We expect to reach our target allocation when the funded status of the plans exceeds 105%. Based on the funded status of the plans as of fiscal year end 2017, our target asset allocation is 45% equity and 55% fixed income.

Target weighted-average asset allocation and weighted-average asset allocation for U.S. and non-U.S. pension plans were as follows:

		U.S. Plans									Non-U.S. Plans
		Target			Fiscal Year End 2017			Fiscal Year End 2016			Target			Fiscal Year End 2017			Fiscal Year End 2016
Asset category:
Equity securities			45	%		50	%		45	%		27	%		30	%		41	%
Fixed income			55			50			55			52			49			33
Insurance contracts and other investments			—			—			—			19			19			24
Real estate investments			—			—			—			2			2			2
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			100	%		100	%		100	%		100	%		100	%		100	%
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

Our common shares are not a direct investment of our pension funds; however, the pension funds may indirectly include our shares. The aggregate amount of our common shares would not be considered material relative to the total pension fund assets.

Our funding policy is to make contributions in accordance with the laws and customs of the various countries in which we operate as well as to make discretionary voluntary contributions from time to time. We expect to make the minimum required contributions of $6 million and $56 million to our U.S. and non-U.S. pension plans, respectively, in fiscal 2018. We may also make voluntary contributions at our discretion.

Benefit payments, which reflect future expected service, as appropriate, are expected to be paid as follows:

		U.S. Plans			Non-U.S. Plans
		(in millions)
Fiscal 2018		$	75		$	71
Fiscal 2019			71			76
Fiscal 2020			72			77
Fiscal 2021			73			79
Fiscal 2022			74			85
Fiscal 2023-2027			371			485

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Retirement Plans (Continued)

Presented below is the accumulated benefit obligation for all U.S. and non-U.S. pension plans as well as additional information related to plans with an accumulated benefit obligation in excess of plan assets and plans with a projected benefit obligation in excess of plan assets.

		U.S. Plans						Non-U.S. Plans
		Fiscal Year End						Fiscal Year End
		2017			2016			2017			2016
		(in millions)
Accumulated benefit obligation		$	1,191		$	1,250		$	2,167		$	2,389
Pension plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation			1,191			1,250			1,402			2,380
Fair value of plan assets			963			929			581			1,361
Pension plans with projected benefit obligations in excess of plan assets:
Projected benefit obligation			1,191			1,250			1,524			2,534
Fair value of plan assets			963			929			583			1,371

We value our pension assets based on the fair value hierarchy of ASC 820, Fair Value Measurements and Disclosures. Details of the fair value hierarchy are described in Note 2. The following table presents our defined benefit pension plans' asset categories and their associated fair value within the fair value hierarchy:

		Fiscal Year End 2017
		U.S. Plans												Non-U.S. Plans
		Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
		(in millions)
Equity:
U.S. equity securities(1)		$	250		$	—		$	—		$	250		$	—		$	—		$	—		$	—
Non-U.S. equity securities(1)			227			—			—			227			—			—			—			—
Commingled equity funds(2)			—			—			—			—			—			418			—			418
Fixed income:
Government bonds(3)			—			59			—			59			—			219			—			219
Corporate bonds(4)			—			351			—			351			—			8			—			8
Commingled bond funds(5)			—			48			—			48			—			455			—			455
Other(6)			—			16			—			16			—			180			117			297
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Subtotal		$	477		$	474		$	—			951		$	—		$	1,280		$	117			1,397
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Items to reconcile to fair value of plan assets(7)												12												5
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fair value of plan assets											$	963											$	1,402
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Retirement Plans (Continued)

		Fiscal Year End 2016
		U.S. Plans												Non-U.S. Plans
		Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
		(in millions)
Equity:
U.S. equity securities(1)		$	248		$	—		$	—		$	248		$	64		$	—		$	—		$	64
Non-U.S. equity securities(1)			190			—			—			190			62			—			—			62
Commingled equity funds(2)			—			—			—			—			—			456			—			456
Fixed income:
Government bonds(3)			—			67			—			67			—			226			—			226
Corporate bonds(4)			—			397			—			397			—			13			—			13
Commingled bond funds(5)			—			—			—			—			—			262			—			262
Other(6)			—			11			—			11			—			177			91			268
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Subtotal		$	438		$	475		$	—			913		$	126		$	1,134		$	91			1,351
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Items to reconcile to fair value of plan assets(7)												16												20
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fair value of plan assets											$	929											$	1,371
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

U.S. and non-U.S. equity securities are valued at the closing price reported on the stock exchange on which the individual securities are traded.

(2)

Commingled equity funds are pooled investments in multiple equity-type securities. Fair value is calculated as the closing price of the underlying investments, an observable market condition, divided by the number of shares of the fund outstanding.

(3)

Government bonds are marked to fair value based on quoted market prices or market approach valuation models using observable market data such as quotes, spreads, and data points for yield curves.

(4)

Corporate bonds are marked to fair value based on quoted market prices or market approach valuation models using observable market data such as quotes, spreads, and data points for yield curves.

(5)

Commingled bond funds are pooled investments in multiple debt-type securities. Fair value is calculated as the closing price of the underlying investments, an observable market condition, divided by the number of shares of the fund outstanding.

(6)

Other investments are composed of insurance contracts, derivatives, short-term investments, structured products such as collateralized obligations and mortgage- and asset-backed securities, real estate investments, and hedge funds. Insurance contracts are valued using cash surrender value, or face value of the contract if a cash surrender value is unavailable (level 2), as these values represent the amount that the plan would receive on termination of the underlying contract. Derivatives, short-term investments, and structured products are marked to fair value using models that are supported by observable market based data (level 2). Real estate investments include investments in commingled real estate funds and are valued at net asset value which is calculated using unobservable inputs that are supported by little or no market activity (level 3). Hedge funds are valued at their net asset value which is calculated using unobservable inputs that are supported by little or no market activity (level 3).

(7)

Items to reconcile to fair value of plan assets include amounts receivable for securities sold, amounts payable for securities purchased, and any cash balances, considered to be carried at book value, that are held in the plans.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Retirement Plans (Continued)

Changes in Level 3 assets in non-U.S. plans were primarily the result of purchases in fiscal 2017 and 2016.

Defined Contribution Retirement Plans

We maintain several defined contribution retirement plans, the most significant of which is located in the U.S. These plans include 401(k) matching programs, as well as qualified and nonqualified profit sharing and share bonus retirement plans. Expense for the defined contribution plans is computed as a percentage of participants' compensation and was $68 million, $59 million, and $60 million for fiscal 2017, 2016, and 2015, respectively.

Deferred Compensation Plans

We maintain nonqualified deferred compensation plans, which permit eligible employees to defer a portion of their compensation. A record keeping account is set up for each participant and the participant chooses from a variety of measurement funds for the deemed investment of their accounts. The measurement funds correspond to a number of funds in our 401(k) plans and the account balance fluctuates with the investment returns on those funds. Total deferred compensation liabilities were $157 million and $132 million at fiscal year end 2017 and 2016, respectively. See Note 13 for additional information regarding our risk management strategy related to deferred compensation liabilities.

Postretirement Benefit Plans

In addition to providing pension and 401(k) benefits, we also provide certain health care coverage continuation for qualifying retirees from the date of retirement to age 65. The accumulated postretirement benefit obligation was $20 million and $45 million at fiscal year end 2017 and 2016, respectively, and the underfunded status of the postretirement benefit plans was included primarily in long-term pension and postretirement liabilities on the Consolidated Balance Sheets. The decrease in the accumulated postretirement benefit obligation during fiscal 2017 was primarily attributable to a plan curtailment that was recognized on the Consolidated Statement of Operations; activity during fiscal 2016 and 2015 was not significant.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Income Taxes

**Income Tax Expense (Benefit) **

Significant components of the income tax expense (benefit) were as follows:

		Fiscal
		2017			2016			2015
		(in millions)
Current income tax expense (benefit):
U.S.:
Federal		$	(2	)	$	(1,115	)	$	(67	)
State			9			(163	)		12
Non-U.S.			323			321			352
​	​	​	​	​	​	​	​	​	​	​
			330			(957	)		297
​	​	​	​	​	​	​	​	​	​	​
Deferred income tax expense (benefit):
U.S.:
Federal			(58	)		173			87
State			(9	)		20			5
Non-U.S.			(8	)		(15	)		(52	)
​	​	​	​	​	​	​	​	​	​	​
			(75	)		178			40
​	​	​	​	​	​	​	​	​	​	​
Income tax expense (benefit)		$	255		$	(779	)	$	337
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

The U.S. and non-U.S. components of income from continuing operations before income taxes were as follows:

		Fiscal
		2017			2016			2015
		(in millions)
U.S.		$	(75	)	$	(115	)	$	(31	)
Non-U.S.			2,003			1,277			1,606
​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations before income taxes		$	1,928		$	1,162		$	1,575
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Income Taxes (Continued)

The reconciliation between U.S. federal income taxes at the statutory rate and income tax expense (benefit) was as follows:

		Fiscal
		2017			2016			2015
		(in millions)
Notional U.S. federal income tax expense at the statutory rate		$	675		$	407		$	551
Adjustments to reconcile to the income tax expense (benefit):
U.S. state income tax expense (benefit), net			—			(93	)		11
Other expense—Tax Sharing Agreement(1)			3			221			18
Tax law changes			7			(3	)		10
Tax credits			(9	)		(10	)		(9	)
Non-U.S. net earnings(2)			(355	)		(342	)		(275	)
Change in accrued income tax liabilities			24			(1,056	)		(183	)
Valuation allowance			(1	)		97			(3	)
Legal entity restructuring and intercompany transactions			(40	)		39			211
Divestitures			—			(31	)		—
Excess tax benefits from share-based payments			(40	)		—			—
Other			(9	)		(8	)		6
​	​	​	​	​	​	​	​	​	​	​
Income tax expense (benefit)		$	255		$	(779	)	$	337
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

(1)

Net other expense pursuant to the Tax Sharing Agreement with Tyco International and Covidien is not taxable or deductible.

(2)

Excludes items which are separately presented.

The income tax expense for fiscal 2017 included a $52 million income tax benefit associated with the tax impacts of certain intercompany transactions and the corresponding reduction in the valuation allowance for U.S. tax loss carryforwards, a $40 million income tax benefit related to share-based payments and the adoption of ASU No. 2016-09, and a $14 million income tax benefit associated with pre-separation tax matters. See Note 2 for additional information regarding recently adopted accounting pronouncements.

The income tax benefit for fiscal 2016 included a $1,135 million income tax benefit related to the effective settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007, partially offset by a $91 million income tax charge related to an increase to the valuation allowance for certain U.S. deferred tax assets. Additionally, the tax benefit for fiscal 2016 included an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions, partially offset by an income tax charge related to certain legal entity restructurings.

In fiscal 2016, the increase to the valuation allowance for deferred tax assets primarily related to certain U.S. federal and state tax loss and credit carryforwards. Based on our forecast of taxable income for certain U.S. tax reporting groups, U.S. tax loss and credit carryforwards finalized as a result of settlement of the disputed debt matter with the IRS, and certain tax planning actions and strategies, we believed it was more likely than not that a portion of our deferred tax assets would not be realized.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Income Taxes (Continued)

The income tax expense for fiscal 2015 included a $264 million income tax benefit related to the effective settlement of all undisputed tax matters for the years 2001 through 2010, partially offset by a $216 million income tax charge associated with the tax impacts of certain intercompany legal entity restructurings made in connection with our integration of Measurement Specialties. Also, income tax expense for fiscal 2015 included an income tax charge of $29 million associated with the tax impacts of certain intercompany dividends related to the restructuring and sale of our BNS business.

See "IRS Audits" below for additional information regarding settlements with the IRS.

**Deferred Tax Assets and Liabilities **

Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the net deferred income tax asset were as follows:

		Fiscal Year End
		2017			2016
		(in millions)
Deferred tax assets:
Accrued liabilities and reserves		$	356		$	286
Tax loss and credit carryforwards			5,265			4,656
Inventories			48			46
Pension and postretirement benefits			231			349
Deferred revenue			8			11
Interest			366			470
Unrecognized income tax benefits			10			10
Other			22			32
​	​	​	​	​	​	​	​
			6,306			5,860
​	​	​	​	​	​	​	​
Deferred tax liabilities:
Intangible assets			(653	)		(761	)
Property, plant, and equipment			(22	)		(15	)
Other			(99	)		(84	)
​	​	​	​	​	​	​	​
			(774	)		(860	)
​	​	​	​	​	​	​	​
Net deferred tax asset before valuation allowance			5,532			5,000
Valuation allowance			(3,627	)		(3,096	)
​	​	​	​	​	​	​	​
Net deferred tax asset		$	1,905		$	1,904
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Income Taxes (Continued)

Our tax loss and credit carryforwards (tax effected) at fiscal year end 2017 were as follows:

		Expiration Period
		Through Fiscal 2022			Fiscal 2023 Through Fiscal 2037			No Expiration			Total
		(in millions)
U.S. Federal:
Net operating loss carryforwards		$	143		$	1,171		$	—		$	1,314
Tax credit carryforwards			24			119			57			200
Capital loss carryforwards			10			—			—			10
U.S. State:
Net operating loss carryforwards.			52			49			—			101
Tax credit carryforwards			9			15			7			31
Non-U.S.:
Net operating loss carryforwards			11			998			2,568			3,577
Tax credit carryforwards			—			1			2			3
Capital loss carryforwards			—			—			29			29
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total tax loss and credit carryforwards		$	249		$	2,353		$	2,663		$	5,265
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

The valuation allowance for deferred tax assets of $3,627 million and $3,096 million at fiscal year end 2017 and 2016, respectively, related principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss, capital loss, and credit carryforwards in various jurisdictions. During fiscal 2017, tax loss and credit carryforwards increased due primarily to tax losses of $709 million (tax effected) generated in connection with the net write-down of investments in subsidiaries in certain jurisdictions, offset by the impacts of a statutory rate reduction in the same jurisdictions. The valuation allowance was increased by a corresponding amount due to the uncertainty of future realization of these tax losses. Additionally, the valuation allowance decreased by $165 million in connection with the adoption of ASU No. 2016-09 related to share-based payments. See Note 2 for additional information regarding recently adopted accounting pronouncements. We believe that we will generate sufficient future taxable income to realize the income tax benefits related to the remaining net deferred tax assets on the Consolidated Balance Sheet.

We have provided income taxes for earnings that are currently distributed as well as the taxes associated with several subsidiaries' earnings that are expected to be distributed in the future. No additional provision has been made for Swiss or non-Swiss income taxes on the undistributed earnings of subsidiaries or for unrecognized deferred tax liabilities for temporary differences related to basis differences in investments in subsidiaries, as such earnings are expected to be permanently reinvested, the investments are essentially permanent in duration, or we have concluded that no additional tax liability will arise as a result of the distribution of such earnings. As of fiscal year end 2017, certain subsidiaries had approximately $22 billion of cumulative undistributed earnings that have been retained indefinitely and reinvested in our global manufacturing operations, including working capital; property, plant, and equipment; intangible assets; and research and development activities. A liability could arise if our intention to permanently reinvest such earnings were to change and amounts are distributed by such subsidiaries or if such subsidiaries are ultimately disposed. It is not practicable to estimate the additional income taxes related to permanently reinvested earnings or the basis differences related to

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Income Taxes (Continued)

investments in subsidiaries. As of fiscal year end 2017, we had approximately $6.3 billion of cash, cash equivalents, and intercompany deposits, principally in our subsidiaries, that we have the ability to distribute to TEGSA, our Luxembourg subsidiary, which is the obligor of substantially all of our debt, and to TE Connectivity Ltd., our Swiss parent company, but we consider to be permanently reinvested. We estimate that approximately $1.2 billion of tax expense would be recognized on the Consolidated Financial Statements if our intention to permanently reinvest these amounts were to change. Our current plans do not demonstrate a need to repatriate cash, cash equivalents, and intercompany deposits that are designated as permanently reinvested in order to fund our operations, including investing and financing activities.

**Uncertain Tax Positions **

As of fiscal year end 2017, we had total unrecognized income tax benefits of $501 million. If recognized in future years, $431 million of these currently unrecognized income tax benefits would impact income tax expense (benefit) and the effective tax rate. As of fiscal year end 2016, we had total unrecognized income tax benefits of $490 million. If recognized in future years, $370 million of these currently unrecognized income tax benefits would impact income tax expense (benefit) and the effective tax rate. The following table summarizes the activity related to unrecognized income tax benefits:

		Fiscal
		2017			2016			2015
		(in millions)
Balance at beginning of fiscal year		$	490		$	1,368		$	1,595
Additions related to prior years tax positions			40			75			24
Reductions related to prior years tax positions			(9	)		(817	)		(291	)
Additions related to current year tax positions			70			124			97
Acquisitions			—			4			—
Settlements			(4	)		(205	)		(29	)
Reductions due to lapse of applicable statute of limitations			(86	)		(59	)		(28	)
​	​	​	​	​	​	​	​	​	​	​
Balance at end of fiscal year		$	501		$	490		$	1,368
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

We record accrued interest and penalties related to uncertain tax positions as part of income tax expense (benefit). As of fiscal year end 2017 and 2016, we had $60 million and $54 million, respectively, of accrued interest and penalties related to uncertain tax positions on the Consolidated Balance Sheets, recorded primarily in income taxes. During fiscal 2017, 2016, and 2015, we recognized income tax benefits of $5 million, benefits of $765 million, and expense of $7 million, respectively, related to interest and penalties on the Consolidated Statements of Operations.

We file income tax returns on a unitary, consolidated, or stand-alone basis in multiple state and local jurisdictions, which generally have statutes of limitations ranging from 3 to 4 years. Various state and local income tax returns are currently in the process of examination or administrative appeal.

Our non-U.S. subsidiaries file income tax returns in the countries in which they have operations. Generally, these countries have statutes of limitations ranging from 3 to 10 years. Various non-U.S. subsidiary income tax returns are currently in the process of examination by taxing authorities.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Income Taxes (Continued)

As of fiscal year end 2017, under applicable statutes, the following tax years remained subject to examination in the major tax jurisdictions indicated:

Jurisdiction		Open Years
China		2007 through 2017
Czech Republic		2014 through 2017
Germany		2013 through 2017
Hong Kong		2011 through 2017
Ireland		2012 through 2017
Italy		2013 through 2017
Japan		2011 through 2017
Korea		2012 through 2017
Luxembourg		2012 through 2017
Netherlands		2012 through 2017
Singapore		2012 through 2017
Spain		2013 through 2017
Switzerland		2012 through 2017
United Kingdom		2015 through 2017
U.S.—federal		2014 through 2017

In most jurisdictions, taxing authorities retain the ability to review prior tax years and to adjust any net operating loss and tax credit carryforwards from these years that are utilized in a subsequent period.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that approximately $40 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Consolidated Balance Sheet as of fiscal year end 2017.

**IRS Audits **

1997-2000 Audit Years

As previously disclosed, in fiscal 2013, the IRS effectively settled its audit of all tax matters for the years 1997 through 2000, excluding one issue involving the tax treatment of certain intercompany debt transactions. In fiscal 2016, the U.S. Tax Court resolved all aspects of the disputed debt matter for the 1997 to 2000 audit cycle and the Appeals Division of the IRS effectively settled the intercompany debt issues on appeal for subsequent audit cycles (years 2001 to 2007). In connection with these developments, in fiscal 2016, we recognized an income tax benefit of $1,135 million, representing a reduction in tax reserves, and other expense of $604 million, representing a reduction of associated indemnification receivables, pursuant to the Tax Sharing Agreement with Tyco International and Covidien. See Note 12 for further information regarding the Tax Sharing Agreement.

During fiscal 2016, in connection with the disputed debt matter, we made a payment to the IRS of $443 million for tax deficiencies for which we were the primary obligor. Concurrent with remitting this

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Income Taxes (Continued)

payment, we received net reimbursements of $303 million from Tyco International and Covidien pursuant to their indemnifications for pre-separation tax matters.

2001-2007 Audit Years

In fiscal 2015, the IRS effectively settled its audit of tax matters for the years 2001 through 2007, excluding the disputed debt matter which was subsequently resolved during fiscal 2016 as discussed above. Consequently, in fiscal 2015, we recognized an income tax benefit of $201 million, representing a reduction in tax reserves for the matters that were effectively settled, and other expense of $84 million, representing a reduction of associated indemnification receivables, pursuant to the Tax Sharing Agreement with Tyco International and Covidien.

2008-2010 Audit Years

In fiscal 2015, the IRS effectively settled its audit of tax matters for the years 2008 through 2010, excluding the disputed debt matter which was subsequently resolved consistent with the terms of the disputed debt settlement discussed above. Consequently, in fiscal 2015, we recognized an income tax benefit of $63 million, representing a reduction in tax reserves for the matters that were effectively settled.

16. Other Expense, Net

In fiscal 2017, 2016, and 2015, we recorded net other expense of $9 million, $632 million, and $55 million, respectively, primarily pursuant to the Tax Sharing Agreement with Tyco International and Covidien. The net other expense in fiscal 2016 included $604 million related to the effective settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007 and $46 million related to a tax settlement in another tax jurisdiction. The net other expense in fiscal 2015 included $84 million related to the effective settlement of undisputed tax matters for the years 2001 through 2007. See Notes 12 and 15 for further information regarding the Tax Sharing Agreement and settlements, respectively.

17. Earnings Per Share

The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per share were as follows:

		Fiscal
		2017			2016			2015
		(in millions)
Basic			355			366			405
Dilutive impact of share-based compensation arrangements			3			3			6
​	​	​	​	​	​	​	​	​	​	​
Diluted			358			369			411
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

There were one million, three million, and one million share options that were not included in the computation of diluted earnings per share for fiscal 2017, 2016, and 2015, respectively, because the instruments' underlying exercise prices were greater than the average market prices of our common shares and inclusion would be antidilutive.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Shareholders' Equity

Common Shares

We are organized under the laws of Switzerland. The rights of holders of our shares are governed by Swiss law, our Swiss articles of association, and our Swiss organizational regulations. Accordingly, the par value of our common shares is stated in Swiss francs ("CHF"). We continue to use the U.S. dollar, however, as our reporting currency on the Consolidated Financial Statements.

Subject to certain conditions specified in our articles of association, we are authorized to increase our conditional share capital by issuing new shares in aggregate not exceeding 50% of our authorized shares. In March 2016, our shareholders approved for a period of two years ending on March 2, 2018, our board of directors' authorization to issue additional new shares, subject to certain conditions specified in the articles of association, in aggregate not exceeding 50% of the amount of our authorized shares.

Common Shares Held in Treasury

At fiscal year end 2017, approximately 5 million common shares were held in treasury and owned by one of our subsidiaries. At fiscal year end 2016, approximately 28 million common shares were held in treasury, of which 2 million were owned by one of our subsidiaries. Shares held both directly by us and by our subsidiary are presented as treasury shares on the Consolidated Balance Sheets.

In fiscal 2017, 2016, and 2015, our shareholders approved the cancellation of 26 million, 31 million, and 5 million shares, respectively, purchased under our share repurchase program. These capital reductions by cancellation of shares were subject to a notice period and filing with the commercial register in Switzerland.

Contributed Surplus

During fiscal 2017, cumulative equity transactions, including dividend activity and treasury share cancellations, reduced our contributed surplus balance to zero with residual activity recorded against accumulated earnings as reflected on the Consolidated Statement of Shareholders' Equity. To the extent that the contributed surplus balance continues to be zero, the impact of future transactions that normally would have been recorded as a reduction of contributed surplus will be recorded in accumulated earnings. Contributed surplus established for Swiss tax and statutory purposes ("Swiss Contributed Surplus"), is not impacted by our GAAP treatment.

Swiss Contributed Surplus, subject to certain conditions, is a freely distributable reserve. As of fiscal year end 2017 and 2016, Swiss Contributed Surplus was CHF 7,300 million and CHF 7,878 million, respectively (equivalent to $6,420 million and $6,992 million, respectively).

Dividends

Under Swiss law, subject to certain conditions, dividends paid from reserves from capital contributions (equivalent to Swiss Contributed Surplus) are exempt from Swiss withholding tax. Dividends on our shares must be approved by our shareholders.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Shareholders' Equity (Continued)

Our shareholders approved the following dividends on our common shares:

Approval Date		Annual Payment Per Share		Payment Dates
March 2014		CHF 1.04 (equivalent to $1.16), payable in four quarterly installments of $0.29		Third quarter of fiscal 2014 Fourth quarter of fiscal 2014 First quarter of fiscal 2015 Second quarter of fiscal 2015
March 2015		$1.32 (equivalent to CHF 1.27), payable in four quarterly installments of $0.33		Third quarter of fiscal 2015 Fourth quarter of fiscal 2015 First quarter of fiscal 2016 Second quarter of fiscal 2016
March 2016		$1.48 (equivalent to CHF 1.48), payable in four quarterly installments of $0.37		Third quarter of fiscal 2016 Fourth quarter of fiscal 2016 First quarter of fiscal 2017 Second quarter of fiscal 2017
March 2017		$1.60 (equivalent to CHF 1.62), payable in four quarterly installments of $0.40		Third quarter of fiscal 2017 Fourth quarter of fiscal 2017 First quarter of fiscal 2018 Second quarter of fiscal 2018

Upon shareholders' approval of a dividend payment, we record a liability with a corresponding charge to shareholders' equity. At fiscal year end 2017 and 2016, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Consolidated Balance Sheets totaled $281 million and $263 million, respectively.

Share Repurchase Program

During fiscal 2016 and 2015, our board of directors authorized increases of $1.0 billion and $3.0 billion, respectively, in the share repurchase program. Common shares repurchased under the share repurchase program were as follows:

		Fiscal
		2017			2016			2015
		(in millions)
Number of common shares repurchased			8			43			18
Repurchase value		$	621		$	2,610		$	1,163

At fiscal year end 2017, we had $480 million of availability remaining under our share repurchase authorization.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. Accumulated Other Comprehensive Income (Loss)

The changes in each component of accumulated other comprehensive income (loss) were as follows:

		Currency Translation(1)			Unrecognized Pension and Postretirement Benefit Costs			Gains (Losses) on Cash Flow Hedges			Accumulated Other Comprehensive Income (Loss)
		(in millions)
Balance at fiscal year end 2014		$	720		$	(692	)	$	(45	)	$	(17	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other comprehensive loss before reclassifications			(536	)		(147	)		(44	)		(727	)
Amounts reclassified from accumulated other comprehensive income (loss)			224	(2)		75			45			344
Income tax benefit			—			26			1			27
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net other comprehensive income (loss), net of tax			(312	)		(46	)		2			(356	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at fiscal year end 2015			408			(738	)		(43	)		(373	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other comprehensive loss before reclassifications			(69	)		(190	)		(14	)		(273	)
Amounts reclassified from accumulated other comprehensive income (loss)			(23	)		70			32			79
Income tax (expense) benefit			—			32			(7	)		25
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net other comprehensive income (loss), net of tax			(92	)		(88	)		11			(169	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at fiscal year end 2016			316			(826	)		(32	)		(542	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other comprehensive income before reclassifications			38			378			32			448
Amounts reclassified from accumulated other comprehensive income (loss)			(1	)		74			(14	)		59
Income tax expense			—			(122	)		(3	)		(125	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net other comprehensive income, net of tax			37			330			15			382
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at fiscal year end 2017		$	353		$	(496	)	$	(17	)	$	(160	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

Includes hedges of net investment foreign exchange gains or losses which offset foreign exchange losses or gains attributable to the translation of the net investments.

(2)

Represents net currency translation reclassified as a result of the sale of our BNS business. This net loss is included in income from discontinued operations on the Consolidated Statement of Operations. See Note 4 for additional information regarding the divestiture of BNS.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Share Plans

Our equity compensation plans, of which the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of March 8, 2017 (the "2017 Plan"), is the primary plan, provide for the award of annual performance bonuses and long-term performance awards, including share options; restricted, performance, and deferred share units; and other share-based awards (collectively, "Awards") and allow for the use of unissued shares or treasury shares to be used to satisfy such Awards. In March 2017, our shareholders approved an increase of 10 million shares in the number of shares available for awards under the 2017 Plan. As of fiscal year end 2017, our plans provided for a maximum of 77 million shares to be issued as Awards, subject to adjustment as provided under the terms of the plans. A total of 23 million shares remained available for issuance under our plans as of fiscal year end 2017.

Share-Based Compensation Expense

Share-based compensation expense, which was included in selling, general, and administrative expenses on the Consolidated Statements of Operations, was as follows:

		Fiscal
		2017			2016			2015
		(in millions)
Share-based compensation expense		$	99		$	91		$	89

We recognized a related tax benefit associated with our share-based compensation arrangements of $32 million, $29 million, and $29 million in fiscal 2017, 2016, and 2015, respectively.

Restricted Share Awards

Restricted share awards, which are generally in the form of restricted share units, are granted subject to certain restrictions. Conditions of vesting are determined at the time of grant. All restrictions on an award will lapse upon death or disability of the employee. If the employee satisfies retirement requirements, a portion of the award may vest, depending on the terms and conditions of the particular grant. Recipients of restricted share units have no voting rights, but do receive dividend equivalents. For grants that vest through passage of time, the fair value of the award at the time of the grant is amortized to expense over the period of vesting. The fair value of restricted share awards is determined based on the closing value of our shares on the grant date. Restricted share awards generally vest in increments over a period of four years as determined by the management development and compensation committee.

Restricted share award activity was as follows:

		Shares			Weighted-Average Grant-Date Fair Value
Nonvested at fiscal year end 2016			2,287,004		$	58.47
Granted			821,016			67.72
Vested			(937,917	)		52.89
Forfeited			(179,319	)		63.12
​	​	​	​	​	​	​	​
Nonvested at fiscal year end 2017			1,990,784		$	64.40
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Share Plans (Continued)

The weighted-average grant-date fair value of restricted share awards granted during fiscal 2017, 2016, and 2015 was $67.72, $64.88, and $62.45, respectively.

The total fair value of restricted share awards that vested during fiscal 2017, 2016, and 2015 was $50 million, $51 million, and $58 million, respectively.

As of fiscal year end 2017, there was $74 million of unrecognized compensation cost related to nonvested restricted share awards. The cost is expected to be recognized over a weighted-average period of 1.7 years.

Performance Share Awards

Performance share awards, which are generally in the form of performance share units, are granted with pay-out subject to vesting requirements and certain performance conditions that are determined at the time of grant. Based on our performance, the pay-out of performance share units can range from 0% to 200% of the number of units originally granted. The grant-date fair value of performance share awards is expensed over the period of performance once achievement of the performance criteria is deemed probable. Recipients of performance share units have no voting rights but do receive dividend equivalents. Performance share awards generally vest after a period of three years as determined by the management development and compensation committee.

Performance share award activity was as follows:

		Shares			Weighted-Average Grant-Date Fair Value
Outstanding at fiscal year end 2016			626,625		$	60.56
Granted			376,380			62.88
Vested			(281,417	)		51.61
Forfeited			(18,181	)		65.12
​	​	​	​	​	​	​	​
Outstanding at fiscal year end 2017			703,407		$	65.13
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

The weighted-average grant-date fair value of performance share awards granted during fiscal 2017, 2016, and 2015 was $62.88, $55.15, and $61.65, respectively.

The total fair value of performance share awards that vested during both fiscal 2017 and 2016 was $15 million. The total fair value of performance share awards that vested in fiscal 2015 was insignificant.

As of fiscal year end 2017, there was $28 million of unrecognized compensation cost related to nonvested performance share awards. The cost is expected to be recognized over a weighted-average period of 1.2 years.

Share Options

Share options are granted to purchase our common shares at prices which are equal to or greater than the market price of the common shares on the date the option is granted. Conditions of vesting are determined at the time of grant. All restrictions on the award will lapse upon death or disability of the employee. If the employee satisfies retirement requirements, a portion of the award may vest,

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Share Plans (Continued)

depending on the terms and conditions of the particular grant. Options generally vest and become exercisable in equal annual installments over a period of four years and expire ten years after the date of grant.

Share option award activity was as follows:

		Shares			Weighted-Average Exercise Price			Weighted-Average Remaining Contractual Term			Aggregate Intrinsic Value
								(in years)			(in millions)
Outstanding at fiscal year end 2016			9,104,380		$	45.79
Granted			2,076,300			66.76
Exercised			(3,313,145	)		34.96
Expired			(2,307	)		45.08
Forfeited			(180,135	)		63.24
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Outstanding at fiscal year end 2017			7,685,093		$	55.70			7.0		$	210
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Vested and expected to vest at fiscal year end 2017			7,228,213		$	55.14			7.0		$	202
Exercisable at fiscal year end 2017			3,482,445		$	44.91			5.4		$	133

The weighted-average exercise price of share option awards granted during fiscal 2017, 2016, and 2015 was $66.76, $65.70, and $61.70, respectively.

The total intrinsic value of options exercised during fiscal 2017, 2016, and 2015 was $130 million, $67 million, and $107 million, respectively. We received cash related to the exercise of options of $117 million, $90 million, and $103 million in fiscal 2017, 2016, and 2015, respectively.

As of fiscal year end 2017, there was $37 million of unrecognized compensation cost related to nonvested share options granted under our share option plans. The cost is expected to be recognized over a weighted-average period of 1.9 years.

Share-Based Compensation Assumptions

The grant-date fair value of each share option grant was estimated using the Black-Scholes-Merton option pricing model. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. We employ our historical share volatility when calculating the grant-date fair value of our share option grants using the Black-Scholes-Merton option pricing model. Currently, we do not have exchange-traded options of sufficient duration to employ an implied volatility assumption in the calculation and therefore rely solely on the historical volatility calculation. The average expected life was based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. The risk-free interest rate was based on U.S. Treasury zero-coupon issues with a remaining term that approximated the expected life assumed at the date of grant. The expected annual dividend per share was based on our expected dividend rate. The recognized share-based compensation expense was net of estimated forfeitures, which are based on voluntary termination behavior as well as an analysis of actual option forfeitures.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Share Plans (Continued)

The weighted-average grant-date fair value of options granted and the weighted-average assumptions we used in the Black-Scholes-Merton option pricing model were as follows:

		Fiscal
		2017			2016			2015
Weighted-average grant-date fair value		$	12.80		$	14.26		$	18.77
Assumptions:
Expected share price volatility			24	%		26	%		36	%
Risk free interest rate			1.9	%		2.0	%		2.0	%
Expected annual dividend per share		$	1.48		$	1.32		$	1.16
Expected life of options (in years)			5.6			5.7			6.0

21. Segment and Geographic Data

We operate through three reportable segments: Transportation Solutions, Industrial Solutions, and Communications Solutions. See Note 1 for a description of the segments in which we operate. We aggregate our operating segments into reportable segments based upon similar economic characteristics and business groupings of products, services, and customers.

Segment performance is evaluated based on net sales and operating income. Generally, we consider all expenses to be of an operating nature and, accordingly, allocate them to each reportable segment. Costs specific to a segment are charged to the segment. Corporate expenses, such as headquarters administrative costs, are allocated to the segments based on segment operating income. Intersegment sales were not material and were recorded at selling prices that approximate market prices. Corporate assets are allocated to the segments based on segment assets.

Net sales and operating income by segment were as follows:

		Net Sales									Operating Income
		Fiscal									Fiscal
		2017			2016			2015			2017			2016			2015
		(in millions)
Transportation Solutions		$	7,039		$	6,503		$	6,351		$	1,299		$	1,191		$	1,193
Industrial Solutions			3,507			3,215			3,179			364			343			352
Communications Solutions			2,567			2,520			2,703			384			368	(1)		204
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	13,113		$	12,238		$	12,233		$	2,047		$	1,902		$	1,749
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

Includes pre-tax gain of $144 million on the sale of our CPD business during fiscal 2016.

No single customer accounted for a significant amount of our net sales in fiscal 2017, 2016, or 2015.

As we are not organized by product or service, it is not practicable to disclose net sales by product or service.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

21. Segment and Geographic Data (Continued)

Depreciation and amortization and capital expenditures were as follows:

		Depreciation and Amortization									Capital Expenditures
		Fiscal									Fiscal
		2017			2016			2015			2017			2016			2015
		(in millions)
Transportation Solutions			$359			$337			$347			$471			$429			$400
Industrial Solutions			165			131			123			122			107			104
Communications Solutions			111			117			146			109			92			96
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			$635			$585			$616			$702			$628			$600
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

Segment assets and a reconciliation of segment assets to total assets were as follows:

		Segment Assets
		Fiscal Year End
		2017			2016			2015
		(in millions)
Transportation Solutions		$	4,072		$	3,501		$	3,310
Industrial Solutions			1,905			1,720			1,720
Communications Solutions			1,526			1,473			1,625
​	​	​	​	​	​	​	​	​	​	​
Total segment assets(1)			7,503			6,694			6,655
Other current assets			1,823			1,133			4,150
Other non-current assets			10,077			9,781			9,784
​	​	​	​	​	​	​	​	​	​	​
Total assets		$	19,403		$	17,608		$	20,589
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

(1)

Segment assets are composed of accounts receivable, inventories, and net property, plant, and equipment.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

21. Segment and Geographic Data (Continued)

Net sales and net property, plant, and equipment by geographic region were as follows:

		Net Sales(1)									Property, Plant, and Equipment, Net
		Fiscal									Fiscal Year End
		2017			2016			2015			2017			2016			2015
		(in millions)
Americas:
U.S.		$	4,063		$	3,901		$	3,817		$	980		$	922		$	887
Other Americas			338			298			321			100			93			87
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Americas			4,401			4,199			4,138			1,080			1,015			974
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Europe/Middle East/Africa:
Switzerland			3,016			2,979			2,992			80			62			55
Germany			235			127			117			412			334			313
Other Europe/Middle East/Africa			1,150			1,010			883			742			630			588
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Europe/Middle East/Africa			4,401			4,116			3,992			1,234			1,026			956
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Asia–Pacific:
China			2,414			2,165			2,367			555			491			529
Other Asia–Pacific			1,897			1,758			1,736			531			520			461
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Asia–Pacific			4,311			3,923			4,103			1,086			1,011			990
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	13,113		$	12,238		$	12,233		$	3,400		$	3,052		$	2,920
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

Net sales to external customers is attributed to individual countries based on the legal entity that records the sale.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

22. Quarterly Financial Data (unaudited)

Summarized quarterly financial data was as follows:

		Fiscal
		2017												2016
		First Quarter			Second Quarter			Third Quarter			Fourth Quarter			First Quarter			Second Quarter(1)			Third Quarter(2)			Fourth Quarter(3)
		(in millions, except per share data)
Net sales		$	3,063		$	3,227		$	3,367		$	3,456		$	2,833		$	2,952		$	3,121		$	3,332
Gross margin			1,065			1,108			1,138			1,139			945			962			1,022			1,104
Acquisition and integration costs			2			2			1			1			5			3			11			3
Restructuring and other charges (credits), net			47			59			19			23			40			(99	)		31			30
Income from continuing operations			406			406			432			429			324			389			791			437
Income (loss) from discontinued operations, net of income taxes			3			(1	)		3			5			29			(9	)		48			—
Net income		$	409		$	405		$	435		$	434		$	353		$	380		$	839		$	437
Basic earnings per share:
Income from continuing operations		$	1.14		$	1.14		$	1.22		$	1.22		$	0.84		$	1.07		$	2.22		$	1.23
Net income			1.15			1.14			1.23			1.23			0.92			1.04			2.35			1.23
Diluted earnings per share:
Income from continuing operations		$	1.13		$	1.13		$	1.21		$	1.21		$	0.83		$	1.06		$	2.19		$	1.22
Net income			1.14			1.13			1.22			1.22			0.91			1.03			2.32			1.22

(1)

Results for the second quarter of fiscal 2016 included a pre-tax gain of $146 million on the sale of our CPD business.

(2)

Results for the third quarter of fiscal 2016 included a $1,135 million income tax benefit associated with the effective settlement of tax matters for the years 1997 through 2000 which resolved all aspects of the disputed debt matter with the IRS through the year 2007 and the related impact of $604 million to other expense pursuant to the Tax Sharing Agreement with Tyco International and Covidien. In addition, results for the third quarter of fiscal 2016 included a $91 million income tax charge related to an increase to the valuation allowance for certain U.S. deferred tax assets, and an $83 million net income tax benefit related to tax settlements in certain other tax jurisdictions and the related impact of $46 million to other expense pursuant to the Tax Sharing Agreement with Tyco International and Covidien.

(3)

Results for the fourth quarter of fiscal 2016 included an additional week. See Note 1 for additional information regarding our fiscal year end.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23. Tyco Electronics Group S.A.

Tyco Electronics Group S.A. ("TEGSA"), a Luxembourg company and our 100%-owned subsidiary, is a holding company that owns, directly or indirectly, all of our operating subsidiaries. TEGSA is the obligor under our senior notes, commercial paper, and Credit Facility, which are fully and unconditionally guaranteed by its parent, TE Connectivity Ltd. The following tables present condensed consolidating financial information for TE Connectivity Ltd., TEGSA, and all other subsidiaries that are not providing a guarantee of debt but which represent assets of TEGSA, using the equity method of accounting.

**Condensed Consolidating Statement of Operations For the Fiscal Year Ended September 29, 2017 **

		TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total
		(in millions)
Net sales		$	—		$	—		$	13,113		$	—		$	13,113
Cost of sales			—			—			8,663			—			8,663
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Gross margin			—			—			4,450			—			4,450
Selling, general, and administrative expenses, net(1)			184			1,911			(504	)		—			1,591
Research, development, and engineering expenses			—			—			658			—			658
Acquisition and integration costs			—			—			6			—			6
Restructuring and other charges, net			—			—			148			—			148
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income (loss)			(184	)		(1,911	)		4,142			—			2,047
Interest income			—			—			20			—			20
Interest expense			—			(129	)		(1	)		—			(130	)
Other expense, net			—			—			(9	)		—			(9	)
Equity in net income of subsidiaries			1,889			3,819			—			(5,708	)		—
Equity in net income of subsidiaries of discontinued operations			10			23			—			(33	)		—
Intercompany interest income (expense), net			(32	)		110			(78	)		—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations before income taxes			1,683			1,912			4,074			(5,741	)		1,928
Income tax expense			—			—			(255	)		—			(255	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations			1,683			1,912			3,819			(5,741	)		1,673
Income (loss) from discontinued operations, net of income taxes(2)			—			(13	)		23			—			10
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income			1,683			1,899			3,842			(5,741	)		1,683
Other comprehensive income			382			382			375			(757	)		382
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Comprehensive income		$	2,065		$	2,281		$	4,217		$	(6,498	)	$	2,065
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

TEGSA selling, general and administrative expenses include losses of $1,965 million related to intercompany transactions. These losses are offset by corresponding gains recorded by other subsidiaries.

(2)

Includes the internal allocation of gains and losses associated with the divestiture of our BNS business.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23. Tyco Electronics Group S.A. (Continued)

**Condensed Consolidating Statement of Operations For the Fiscal Year Ended September 30, 2016 **

		TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total
		(in millions)
Net sales		$	—		$	—		$	12,238		$	—		$	12,238
Cost of sales			—			—			8,205			—			8,205
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Gross margin			—			—			4,033			—			4,033
Selling, general, and administrative expenses, net(1)			168			95			1,200			—			1,463
Research, development, and engineering expenses			—			—			644			—			644
Acquisition and integration costs			—			—			22			—			22
Restructuring and other charges (credits), net			2			(1	)		1			—			2
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income (loss)			(170	)		(94	)		2,166			—			1,902
Interest income			—			—			19			—			19
Interest expense			—			(126	)		(1	)		—			(127	)
Other expense, net			—			—			(632	)		—			(632	)
Equity in net income of subsidiaries			2,139			2,261			—			(4,400	)		—
Equity in net income of subsidiaries of discontinued operations			67			168			—			(235	)		—
Intercompany interest income (expense), net			(28	)		98			(70	)		—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations before income taxes			2,008			2,307			1,482			(4,635	)		1,162
Income tax benefit			—			—			779			—			779
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations			2,008			2,307			2,261			(4,635	)		1,941
Income (loss) from discontinued operations, net of income taxes(2)			1			(101	)		168			—			68
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income			2,009			2,206			2,429			(4,635	)		2,009
Other comprehensive loss			(169	)		(169	)		(143	)		312			(169	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Comprehensive income		$	1,840		$	2,037		$	2,286		$	(4,323	)	$	1,840
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

TEGSA selling, general, and administrative expenses include losses of $80 million related to intercompany transactions. These losses are offset by corresponding gains recorded by other subsidiaries.

(2)

Includes the internal allocation of gains and losses associated with the divestiture of our BNS business.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23. Tyco Electronics Group S.A. (Continued)

**Condensed Consolidating Statement of Operations For the Fiscal Year Ended September 25, 2015 **

		TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total
		(in millions)
Net sales		$	—		$	—		$	12,233		$	—		$	12,233
Cost of sales			—			—			8,146			—			8,146
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Gross margin			—			—			4,087			—			4,087
Selling, general, and administrative expenses, net(1)			163			835			506			—			1,504
Research, development, and engineering expenses			—			—			627			—			627
Acquisition and integration costs			—			—			55			—			55
Restructuring and other charges, net			—			—			152			—			152
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income (loss)			(163	)		(835	)		2,747			—			1,749
Interest income			—			—			17			—			17
Interest expense			—			(135	)		(1	)		—			(136	)
Other expense, net			—			—			(55	)		—			(55	)
Equity in net income of subsidiaries			1,398			2,318			—			(3,716	)		—
Equity in net income of subsidiaries of discontinued operations			1,182			365			—			(1,547	)		—
Intercompany interest income (expense), net			3			50			(53	)		—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations before income taxes			2,420			1,763			2,655			(5,263	)		1,575
Income tax expense			—			—			(337	)		—			(337	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income from continuing operations			2,420			1,763			2,318			(5,263	)		1,238
Income from discontinued operations, net of income taxes			—			817			365			—			1,182
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income			2,420			2,580			2,683			(5,263	)		2,420
Other comprehensive loss			(356	)		(356	)		(368	)		724			(356	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Comprehensive income		$	2,064		$	2,224		$	2,315		$	(4,539	)	$	2,064
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

TEGSA selling, general, and administrative expenses include losses of $846 million related to intercompany transactions. These losses are offset by corresponding gains recorded by other subsidiaries.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23. Tyco Electronics Group S.A. (Continued)

**Condensed Consolidating Balance Sheet As of September 29, 2017 **

		TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total
		(in millions)
Assets
Current assets:
Cash and cash equivalents		$	—		$	—		$	1,218		$	—		$	1,218
Accounts receivable, net			—			—			2,290			—			2,290
Inventories			—			—			1,813			—			1,813
Intercompany receivables			49			1,914			60			(2,023	)		—
Prepaid expenses and other current assets			4			96			505			—			605
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total current assets			53			2,010			5,886			(2,023	)		5,926
Property, plant, and equipment, net			—			—			3,400			—			3,400
Goodwill			—			—			5,651			—			5,651
Intangible assets, net			—			—			1,841			—			1,841
Deferred income taxes			—			—			2,141			—			2,141
Investment in subsidiaries			11,960			20,109			—			(32,069	)		—
Intercompany loans receivable			—			4,027			9,700			(13,727	)		—
Other assets			—			6			438			—			444
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Assets		$	12,013		$	26,152		$	29,057		$	(47,819	)	$	19,403
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt		$	—		$	708		$	2		$	—		$	710
Accounts payable			2			—			1,434			—			1,436
Accrued and other current liabilities			286			59			1,281			—			1,626
Deferred revenue			—			—			75			—			75
Intercompany payables			1,974			—			49			(2,023	)		—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total current liabilities			2,262			767			2,841			(2,023	)		3,847
Long-term debt			—			3,629			5			—			3,634
Intercompany loans payable			—			9,700			4,027			(13,727	)		—
Long-term pension and postretirement liabilities			—			—			1,160			—			1,160
Deferred income taxes			—			—			236			—			236
Income taxes			—			—			293			—			293
Other liabilities			—			96			386			—			482
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Liabilities			2,262			14,192			8,948			(15,750	)		9,652
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Shareholders' Equity			9,751			11,960			20,109			(32,069	)		9,751
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Liabilities and Shareholders' Equity		$	12,013		$	26,152		$	29,057		$	(47,819	)	$	19,403
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23. Tyco Electronics Group S.A. (Continued)

**Condensed Consolidating Balance Sheet As of September 30, 2016 **

		TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total
		(in millions)
Assets
Current assets:
Cash and cash equivalents		$	—		$	—		$	647		$	—		$	647
Accounts receivable, net			—			—			2,046			—			2,046
Inventories			—			—			1,596			—			1,596
Intercompany receivables			37			1,314			48			(1,399	)		—
Prepaid expenses and other current assets			3			17			466			—			486
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total current assets			40			1,331			4,803			(1,399	)		4,775
Property, plant, and equipment, net			—			—			3,052			—			3,052
Goodwill			—			—			5,492			—			5,492
Intangible assets, net			—			—			1,879			—			1,879
Deferred income taxes			—			—			2,111			—			2,111
Investment in subsidiaries			10,053			19,425			—			(29,478	)		—
Intercompany loans receivable			22			3,739			10,313			(14,074	)		—
Other assets			—			14			285			—			299
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Assets		$	10,115		$	24,509		$	27,935		$	(44,951	)	$	17,608
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt		$	—		$	330		$	1		$	—		$	331
Accounts payable			1			—			1,089			—			1,090
Accrued and other current liabilities			266			57			1,114			—			1,437
Deferred revenue			—			—			208			—			208
Intercompany payables			1,363			—			36			(1,399	)		—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total current liabilities			1,630			387			2,448			(1,399	)		3,066
Long-term debt			—			3,737			2			—			3,739
Intercompany loans payable			—			10,314			3,760			(14,074	)		—
Long-term pension and postretirement liabilities			—			—			1,502			—			1,502
Deferred income taxes			—			—			207			—			207
Income taxes			—			—			247			—			247
Other liabilities			—			18			344			—			362
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Liabilities			1,630			14,456			8,510			(15,473	)		9,123
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Shareholders' Equity			8,485			10,053			19,425			(29,478	)		8,485
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Liabilities and Shareholders' Equity		$	10,115		$	24,509		$	27,935		$	(44,951	)	$	17,608
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23. Tyco Electronics Group S.A. (Continued)

**Condensed Consolidating Statement of Cash Flows For the Fiscal Year Ended September 29, 2017 **

		TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total
		(in millions)
Cash Flows From Operating Activities:
Net cash provided by (used in) continuing operating activities(1)		$	(180	)	$	102		$	2,630		$	(230	)	$	2,322
Net cash used in discontinued operating activities			—			—			(1	)		—			(1	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) operating activities			(180	)		102			2,629			(230	)		2,321
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash Flows From Investing Activities:
Capital expenditures			—			—			(702	)		—			(702	)
Proceeds from sale of property, plant, and equipment			—			—			19			—			19
Acquisition of businesses, net of cash acquired			—			—			(250	)		—			(250	)
Proceeds from divestiture of business, net of cash retained by sold business			—			—			4			—			4
Intercompany distribution receipts(1)			—			516			—			(516	)		—
Change in intercompany loans			—			(1,369	)		—			1,369			—
Other			—			(12	)		9			—			(3	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash used in investing activities			—			(865	)		(920	)		853			(932	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash Flows From Financing Activities:
Changes in parent company equity(2)			97			559			(656	)		—			—
Net decrease in commercial paper			—			(330	)		—			—			(330	)
Proceeds from issuance of debt			—			589			—			—			589
Proceeds from exercise of share options			—			—			117			—			117
Repurchase of common shares			—			—			(614	)		—			(614	)
Payment of common share dividends to shareholders			(550	)		—			4			—			(546	)
Intercompany distributions(1)			—			(50	)		(696	)		746			—
Loan activity with parent			633			—			736			(1,369	)		—
Transfers to discontinued operations			—			—			(1	)		—			(1	)
Other			—			(5	)		(25	)		—			(30	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) continuing financing activities			180			763			(1,135	)		(623	)		(815	)
Net cash provided by discontinued financing activities			—			—			1			—			1
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) financing activities			180			763			(1,134	)		(623	)		(814	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Effect of currency translation on cash			—			—			(4	)		—			(4	)
Net increase in cash and cash equivalents			—			—			571			—			571
Cash and cash equivalents at beginning of fiscal year			—			—			647			—			647
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents at end of fiscal year		$	—		$	—		$	1,218		$	—		$	1,218
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

During fiscal 2017, other subsidiaries made distributions to TEGSA in the amount of $696 million and TEGSA made distributions to TE Connectivity Ltd. in the amount of $50 million. Cash flows are presented based upon the nature of the distributions.

(2)

Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23. Tyco Electronics Group S.A. (Continued)

**Condensed Consolidating Statement of Cash Flows For the Fiscal Year Ended September 30, 2016 **

		TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total
		(in millions)
Cash Flows From Operating Activities:
Net cash provided by (used in) continuing operating activities(1)		$	(37	)	$	211		$	2,206		$	(336	)	$	2,044
Net cash used in discontinued operating activities			—			—			(97	)		—			(97	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) operating activities			(37	)		211			2,109			(336	)		1,947
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash Flows From Investing Activities:
Capital expenditures			—			—			(628	)		—			(628	)
Proceeds from sale of property, plant, and equipment			—			—			8			—			8
Acquisition of businesses, net of cash acquired			—			—			(1,336	)		—			(1,336	)
Proceeds from divestiture of business, net of cash retained by sold business			—			199			134			—			333
Proceeds from divestiture of discontinued operations, net of cash retained by sold operations(2)			—			(120	)		101			—			(19	)
Intercompany distribution receipts(1)			1,082			1,729			—			(2,811	)		—
Change in intercompany loans			—			(1,244	)		—			1,244			—
Other			—			—			61			—			61
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) investing activities			1,082			564			(1,660	)		(1,567	)		(1,581	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash Flows From Financing Activities:
Changes in parent company equity(3)			410			300			(710	)		—			—
Net increase in commercial paper			—			330			—			—			330
Proceeds from issuance of debt			—			349			3			—			352
Repayment of debt			—			(500	)		(1	)		—			(501	)
Proceeds from exercise of share options			—			—			90			—			90
Repurchase of common shares			(2,780	)		—			(7	)		—			(2,787	)
Payment of common share dividends to shareholders			(513	)		—			4			—			(509	)
Intercompany distributions(1)			—			(1,250	)		(1,897	)		3,147			—
Loan activity with parent			1,838			—			(594	)		(1,244	)		—
Transfers to discontinued operations			—			—			(97	)		—			(97	)
Other			—			(4	)		(26	)		—			(30	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash used in continuing financing activities			(1,045	)		(775	)		(3,235	)		1,903			(3,152	)
Net cash provided by discontinued financing activities			—			—			97			—			97
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash used in financing activities			(1,045	)		(775	)		(3,138	)		1,903			(3,055	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Effect of currency translation on cash			—			—			7			—			7
Net decrease in cash and cash equivalents			—			—			(2,682	)		—			(2,682	)
Cash and cash equivalents at beginning of fiscal year			—			—			3,329			—			3,329
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents at end of fiscal year		$	—		$	—		$	647		$	—		$	647
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

During fiscal 2016, other subsidiaries made distributions to TEGSA in the amount of $1,897 million and TEGSA made distributions to TE Connectivity Ltd. in the amount of $1,250 million. Cash flows are presented based upon the nature of the distributions.

(2)

Includes the internal allocation of proceeds between TEGSA and other subsidiaries associated with the divestiture of our BNS business.

(3)

Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

** TE CONNECTIVITY LTD.**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

23. Tyco Electronics Group S.A. (Continued)

**Condensed Consolidating Statement of Cash Flows For the Fiscal Year Ended September 25, 2015 **

		TE Connectivity Ltd.			TEGSA			Other Subsidiaries			Consolidating Adjustments			Total
		(in millions)
Cash Flows From Operating Activities:
Net cash provided by continuing operating activities(1)		$	1,186		$	1,270		$	1,841		$	(2,661	)	$	1,636
Net cash provided by discontinued operating activities			—			—			294			—			294
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash provided by operating activities			1,186			1,270			2,135			(2,661	)		1,930
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash Flows From Investing Activities:
Capital expenditures			—			—			(600	)		—			(600	)
Proceeds from sale of property, plant, and equipment			—			—			17			—			17
Acquisition of businesses, net of cash acquired			—			—			(1,725	)		—			(1,725	)
Proceeds from divestiture of discontinued operations, net of cash retained by sold operations			—			709			2,248			—			2,957
Change in intercompany loans			—			(1,304	)		—			1,304			—
Other			—			—			12			—			12
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) continuing investing activities			—			(595	)		(48	)		1,304			661
Net cash used in discontinued investing activities			—			—			(25	)		—			(25	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash provided by (used in) investing activities			—			(595	)		(73	)		1,304			636
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash Flows From Financing Activities:
Changes in parent company equity(2)			80			624			(704	)		—			—
Net decrease in commercial paper			—			(328	)		—			—			(328	)
Proceeds from issuance of debt			—			617			—			—			617
Repayment of debt			—			(250	)		(223	)		—			(473	)
Proceeds from exercise of share options			—			—			103			—			103
Repurchase of common shares			(916	)		—			(107	)		—			(1,023	)
Payment of common share dividends to shareholders			(515	)		—			13			—			(502	)
Intercompany distributions(1)			—			(1,335	)		(1,326	)		2,661			—
Loan activity with parent			165			—			1,139			(1,304	)		—
Transfers from discontinued operations			—			—			269			—			269
Other			—			(4	)		(13	)		—			(17	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash used in continuing financing activities			(1,186	)		(676	)		(849	)		1,357			(1,354	)
Net cash used in discontinued financing activities			—			—			(269	)		—			(269	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net cash used in financing activities			(1,186	)		(676	)		(1,118	)		1,357			(1,623	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Effect of currency translation on cash			—			—			(71	)		—			(71	)
Net increase (decrease) in cash and cash equivalents			—			(1	)		873			—			872
Cash and cash equivalents at beginning of fiscal year			—			1			2,456			—			2,457
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents at end of fiscal year		$	—		$	—		$	3,329		$	—		$	3,329
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(1)

During fiscal 2015, other subsidiaries made distributions to TEGSA in the amount of $1,326 million and TEGSA made distributions to TE Connectivity Ltd. in the amount of $1,335 million. Cash flows are presented based upon the nature of the distributions.

(2)

Changes in parent company equity includes cash flows related to certain intercompany equity and funding transactions, and other intercompany activity.

**TE CONNECTIVITY LTD.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Fiscal Years Ended September 29, 2017, September 30, 2016, and September 25, 2015 **

Description		Balance at Beginning of Fiscal Year			Additions Charged to Costs and Expenses			Acquisitions, Divestitures, and Other			Deductions			Balance at End of Fiscal Year
		(in millions)
Fiscal 2017:
Allowance for doubtful accounts receivable		$	17		$	8		$	—		$	(4	)	$	21
Valuation allowance on deferred tax assets			3,096			1,072			—			(541	)		3,627
Fiscal 2016:
Allowance for doubtful accounts receivable		$	18		$	—		$	1		$	(2	)	$	17
Valuation allowance on deferred tax assets			3,237			283			1			(425	)		3,096
Fiscal 2015:
Allowance for doubtful accounts receivable		$	14		$	2		$	3		$	(1	)	$	18
Valuation allowance on deferred tax assets			1,706			1,627			1			(97	)		3,237