Wintek Corporation · 2012. 3. 14. · December 31, 2011 and 2010 of Wintek Electro-Optics...

Wintek Corporation

Financial Statements for the Years Ended December 31, 2011 and 2010 and Independent Auditors’ Report

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and the Shareholders

Wintek Corporation

We have audited the accompanying balance sheets of Wintek Corporation as of December 31, 2011

and 2010, and the related statements of income, changes in shareholders’ equity and cash flows for

the years then ended. These financial statements are the responsibility of the Corporation’s

management. Our responsibility is to express an opinion on these financial statements based on

our audits. However, we did not audit the financial statements as of and for the years ended

December 31, 2011 and 2010 of Wintek Electro-Optics Corporation, Wintek (Central Europe)

GmbH and Wintek Technology (India) Private Limited, and as of and for the year ended December

31, 2011 of Wintek Vietnam Co., Ltd., the investments in which were accounted for by the equity

method. These four investees’ financial statements were audited by other auditors whose reports

have been furnished to us and our opinion, insofar as it relates to the amounts included for these

investees as well as the investees’ information disclosed in Note 27 to the financial statements, is

based solely on the reports of the other auditors. The carrying values of these investments were

NT$4,715,851 thousand and NT$760,084 thousand as of December 31, 2011 and 2010,

respectively, or 6% and 1%, respectively, of the Corporation’s total assets as of those dates. On

these investments, there were a loss at 18% (NT$358,629 thousand) of net loss before income tax

and a gain at 1% (NT$19,290 thousand) of net income before income tax in 2011 and 2010,

respectively.

We conducted our audits in accordance with the Rules Governing the Audit of Financial

Statements by Certified Public Accountants and auditing standards generally accepted in the

Republic of China. Those rules and 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 and the reports of the other auditors provide a reasonable

basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the financial statements

referred to above present fairly, in all material respects, the financial position of Wintek

Corporation as of December 31, 2011 and 2010, and the results of its operations and its cash flows

for the years then ended, in conformity with the Guidelines Governing the Preparation of Financial

Reports by Securities Issuers, the requirements of the Business Accounting Law and the Guidelines

Governing Business Accounting relevant to financial accounting standards, and accounting

principles generally accepted in the Republic of China.

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We have also audited the consolidated financial statements of Wintek Corporation and subsidiaries

as of and for the years ended December 31, 2011 and 2010 and have issued a modified unqualified

opinion report thereon (not presented herewith) dated February 23, 2012.

February 23, 2012

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results

of operations and cash flows in accordance with accounting principles and practices generally

accepted in the Republic of China and not those of any other jurisdictions. The standards,

procedures and practices to audit such financial statements are those generally accepted and

applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying financial

statements have been translated into English from the original Chinese version prepared and used

in the Republic of China. If there is any conflict between the English version and the original

Chinese version or any difference in the interpretation of the two versions, the Chinese version

auditors’ report and financial statements shall prevail.

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WINTEK CORPORATION

BALANCE SHEETS

DECEMBER 31, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Par Value)

2011 2010 2011 2010

ASSETS Amount % Amount % LIABILITIES AND SHAREHOLDERS’ EQUITY Amount % Amount %

CURRENT ASSETS CURRENT LIABILITIES

Cash and cash equivalents (Notes 2 and 4) $ 2,915,473 4 $ 1,651,967 3 Short-term bank loans (Note 14) $ 5,612,686 7 $ 3,373,031 6

Financial assets at fair value through profit or loss - current Short-term bills payable (Note 15) 248,583 - - -

(Notes 2 and 5) 56,969 - 100,752 - Financial liabilities at fair value through profit or loss -

Available-for-sale financial assets - current (Notes 2 and 6) 106,523 - 208,824 - current (Notes 2 and 5) 23,753 - 127,586 -

Notes receivable (Notes 2 and 3) Notes payable

Third parties 527 - 603 - Third parties 13,551 - 7,040 -

Accounts receivable (Notes 2 and 3) Accounts payable

Third parties (Note 7) 15,150,896 20 10,638,715 17 Third parties 12,028,460 16 8,946,736 14

Related parties (Note 23) 91,009 - 376,295 1 Related parties (Note 23) 5,854,605 8 4,047,975 7

Other receivables (Notes 7 and 23) 3,459,660 5 6,927,679 11 Income tax payable (Notes 2 and 19) 20,775 - 170,480 1

Other financial assets - current (Note 2) 74,193 - 61,790 - Accrued expenses (Note 23) 2,248,919 3 1,835,795 3

Inventories (Notes 2, 8 and 24) 9,557,941 12 8,266,468 13 Payables for the acquisition of equipment (Note 23) 906,261 1 164,136 -

Deferred income tax assets - current (Notes 2 and 19) 397,912 - 324,720 1 Current portion of long-term bank loans (Notes 16 and 24) 3,249,940 4 1,945,952 3

Restricted assets - current (Note 4) - - 5,413 - Other current liabilities (Note 23) 1,441,579 2 1,722,955 3

Other current assets (Notes 2 and 23) 596,792 1 496,557 1

Total current liabilities 31,649,112 41 22,341,686 37

Total current assets 32,407,895 42 29,059,783 47

LONG-TERM BANK LOANS, NET OF CURRENT PORTION (Notes

16 and 24)

8,989,029 12 10,551,169 17

INVESTMENTS (Note 2)

Financial assets carried at cost - noncurrent (Note 9) 170,189 - 304,519 1 OTHER LIABILITIES

Investments accounted for by the equity method (Note 10) 23,770,652 31 14,030,533 23 Deferred intercompany gain (Notes 2 and 23) 117,527 - 1,602 -

Others 620 - - -

Total investments 23,940,841 31 14,335,052 24

Total other liabilities 118,147 - 1,602 -

PROPERTY, PLANT AND EQUIPMENT (Notes 2, 11, 23 and 24)

Cost Total liabilities 40,756,288 53 32,894,457 54

Land 2,770,253 4 2,365,861 4

Buildings 6,763,601 9 6,268,676 10 SHAREHOLDERS’ EQUITY

Machinery and equipment 22,915,986 30 21,406,358 35 Capital stock, NT$10.00 par value

Transportation equipment 19,927 - 31,272 - Authorized - 1,800,000 thousand shares in 2011; 1,500,000

Furniture and fixtures 64,601 - 73,443 - thousand shares in 2010

Leasehold improvements 14,396 - 2,380 - Issued and outstanding - 1,647,778 thousand shares in 2011;

Miscellaneous equipment 3,032,210 4 3,129,954 5 1,296,950 thousand shares in 2010 16,477,784 22 12,969,498 21

Total cost 35,580,974 47 33,277,944 54 Capital surplus

Less: Accumulated depreciation (19,021,755) (25) (16,474,698) (27) Additional paid-in capital from share issuance in excess of par 17,658,360 23 11,711,412 19

Less: Accumulated impairment (38,273) - (38,273) - Treasury stock transactions 172,402 - 172,402 -

Construction in progress 341,973 1 33,405 - Long-term investments 3,262 - 3,090 -

Prepayments for equipment 2,632,508 3 507,904 1 Merger 48,478 - 48,478 -

Employee stock options 3,264 - 6,614 -

Property, plant and equipment, net 19,495,427 26 17,306,282 28 Others 318 - 318 -

Retained earnings

OTHER ASSETS Legal reserve 1,576,205 2 1,403,641 2

Refundable deposits 51,086 - 72,619 - Unappropriated earnings (accumulated deficit) (1,904,878) (2) 1,725,640 3

Deferred charges (Notes 2, 12 and 23) 34,507 - 55,685 - Cumulative translation adjustments 1,670,453 2 316,648 1

Deferred income tax assets - noncurrent (Notes 2 and 19) 459,812 1 470,955 1 Unrealized gain on financial instruments 30,014 - 138,055 -

Others (Notes 2, 13 and 17) 102,382 - 89,877 -

Total shareholders’ equity 35,735,662 47 28,495,796 46

Total other assets 647,787 1 689,136 1

TOTAL $ 76,491,950 100 $ 61,390,253 100 TOTAL $ 76,491,950 100 $ 61,390,253 100

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche audit report dated February 23, 2012)

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WINTEK CORPORATION

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Earnings [Loss] Per Share)

2011 2010

Amount % Amount %

GROSS SALES $ 93,298,497 101 $ 63,261,263 101

SALES RETURNS 655,078 1 718,476 1

SALES ALLOWANCES 98,045 - 203,301 -

NET SALES (Notes 2 and 23) 92,545,374 100 62,339,486 100

COST OF GOODS SOLD (Notes 8, 20 and 23) 91,020,280 98 58,761,662 94

GROSS PROFIT 1,525,094 2 3,577,824 6

REALIZED (UNREALIZED) GROSS

INTERCOMPANY GAIN (Notes 2 and 23)

(4,812) - 14,563 -

REALIZED GROSS PROFIT 1,520,282 2 3,592,387 6

OPERATING EXPENSES (Notes 20 and 23)

Selling 514,196 1 528,826 1

General and administrative 644,850 1 740,279 1

Research and development 1,325,724 1 840,440 2

Total operating expenses 2,484,770 3 2,109,545 4

OPERATING INCOME (LOSS) (964,488) (1) 1,482,842 2

NONOPERATING INCOME AND GAINS

Interest income (Notes 5 and 23) 42,626 - 9,966 -

Investment income recognized under equity method,

net (Notes 2 and 10)

- - 1,037,505 2

Dividend income (Note 2) 13,902 - 9,015 -

Valuation gain on financial instruments, net (Notes 2

and 5)

- - 320,616 1

Royalty income (Notes 2 and 23) 9,574 - 53,894 -

Government subsidy income (Note 2) 10,055 - 28,054 -

Others (Note 23) 157,777 - 190,666 -

Total nonoperating income and gains 233,934 - 1,649,716 3

(Continued)

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WINTEK CORPORATION

STATEMENTS OF INCOME


(In Thousands of New Taiwan Dollars, Except Earnings [Loss] Per Share)

2011 2010

Amount % Amount %

NONOPERATING EXPENSES AND LOSSES

Interest expense, net of amount capitalized (Notes 2,

5, 7 and 11)

$ 379,972 - $ 359,654 1

Investment loss recognized under the equity method,

net (Notes 2 and 10)

571,678 1 - -

Loss on disposal of assets (Notes 2, 11 and 23) 10,353 - 12,590 -

Foreign exchange loss, net (Note 2) 55,178 - 565,952 1

Impairment loss on assets (Notes 2, 9 and 13) 159,327 - 4,944 -

Valuation loss on financial instruments, net (Notes 2

and 5)

38,528 - - -

Others (Note 20) 20,897 - 24,928 -

Total nonoperating expenses and losses 1,235,933 1 968,068 2

INCOME (LOSS) BEFORE INCOME TAX (1,966,487) (2) 2,164,490 3

INCOME TAX EXPENSE (BENEFIT) (Notes 2 and

19)

(61,609) - 105,770 -

NET INCOME (LOSS) $ (1,904,878) (2) $ 2,058,720 3

2011 2010

Before

Income

Tax

After

Income

Tax

Before

Income

Tax

After

Income

Tax

EARNINGS (LOSS) PER SHARE (NT$; Note 21)

Basic $ (1.20) $ (1.16) $ 1.59 $ 1.51

Diluted $ (1.20) $ (1.16) $ 1.57 $ 1.49


(With Deloitte & Touche audit report dated February 23, 2012) (Concluded)

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WINTEK CORPORATION

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


(In Thousands of New Taiwan Dollars, Except Amount Per Share)

Retained Earnings (Note 18)

Unappropriated Cumulative Unrealized

Capital Stock (Note 18) Earnings Translation Gain on Financial Total

Issued and Capital Surplus (Accumulated Adjustments Instruments Shareholder’s

Authorized Outstanding (Notes 2 and 18) Legal Reserve Deficit) (Note 2) (Notes 2 and 18) Equity

BALANCE, JANUARY 1, 2010 $ 15,000,000 $ 11,320,411 $ 9,327,858 $ 1,403,641 $ (333,080) $ 1,273,615 $ 135,908 $ 23,128,353

Exercise of employee stock options - 149,087 354,826 - - - - 503,913

Recognition of an equity-method investee's remuneration to

employees due to the investee's newly granted employee stock

options - - 1,749 - - - - 1,749

Issuance of capital stock for GDRs - May 3, 2010 - 1,500,000 2,257,859 - - - - 3,757,859

Decrease in the Corporation's equity in the net assets of a subsidiary

due to the subscription for the subsidiary's newly issued shares at a

percentage different from the Corporation's current equity in the

subsidiary - - 22 - - - - 22

Net income in the year ended December 31, 2010 - - - - 2,058,720 - - 2,058,720

Translation adjustments on investments in shares of stock - - - - - (956,967) - (956,967)

Unrealized gain on available-for-sale financial instruments - - - - - - 2,147 2,147

BALANCE, DECEMBER 31, 2010 15,000,000 12,969,498 11,942,314 1,403,641 1,725,640 316,648 138,055 28,495,796

Increase in authorized capital stock 3,000,000 - - - - - - -

Issuance of capital stock for GDRs - January 19, 2011 - 2,000,000 7,416,934 - - - - 9,416,934

Recognition of an equity-method investee's remuneration to

employees due to the investee's newly granted employee stock

options - - (3,350) - - - - (3,350)

Issuance of common stock from capital surplus - 1,496,950 (1,496,950) - - - - -

Exercise of employee stock options - 11,336 26,964 - - - - 38,300

Decrease in the Corporation's equity in the net assets of a subsidiary

due to the subscription for the subsidiary's newly issued shares at a

percentage different from the Corporation's current equity in the

subsidiary - - 172 - - - - 172

Appropriations of 2010 earnings

Legal reserve - - - 172,564 (172,564) - - -

Cash dividends - NT$1.037 per share - - - - (1,553,076) - - (1,553,076)

Net loss in the year ended December 31, 2011 - - - - (1,904,878) - - (1,904,878)

Translation adjustments on investments in shares of stock - - - - - 1,353,805 - 1,353,805

Unrealized loss on available-for-sale financial instruments - - - - - - (108,041) (108,041)

BALANCE, DECEMBER 31, 2011 $ 18,000,000 $ 16,477,784 $ 17,886,084 $ 1,576,205 $ (1,904,878) $ 1,670,453 $ 30,014 $ 35,735,662


(With Deloitte & Touche audit report dated February 23, 2012)

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WINTEK CORPORATION

STATEMENTS OF CASH FLOWS


(In Thousands of New Taiwan Dollars)

2011 2010

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) $ (1,904,878) $ 2,058,720

Adjustments to reconcile net income (loss) to net cash provided by

operating activities

Deferred income taxes (62,049) (55,402)

Depreciation 4,609,789 4,400,623

Allowance for loss on inventories 1,253,000 794,088

Investment loss (gain) recognized under the equity method, net 571,678 (1,037,505)

Impairment loss on assets 159,327 4,944

Unrealized (realized) deferred intercompany gain 115,925 (1,602)

Cash dividends received from equity method investees 52,354 13,089

Amortization 43,124 82,184

Valuation loss (gain) on financial instruments, net 38,528 (320,616)

Loss on disposal of assets, net 10,353 12,590

Unrealized (realized) gross intercompany gain 4,812 (14,563)

Allowance for doubtful accounts 537 -

Gain on sale of investments (715) -

Others 620 -

Net changes in operating assets and liabilities

Financial instruments held for trading (98,578) 292,774

Notes receivable 76 1,230

Accounts receivable (4,228,646) (6,064,483)

Other receivables 3,469,233 (6,534,799)

Other financial assets - current (12,403) (15,207)

Inventories (2,544,892) (3,776,594)

Other current assets (105,047) (116,068)

Notes payable 6,511 6,823

Accounts payable 4,888,354 8,216,002

Income tax payable (149,705) 142,792

Accrued expenses 413,124 640,928

Other current liabilities (281,115) 1,295,999

Net cash provided by operating activities 6,249,317 25,947

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of investments accounted for by equity method (9,019,264) (1,967,730)

Acquisition of property, plant and equipment (6,103,713) (967,354)

Proceeds from disposal of available-for-sale financial assets 310,718 -

Acquisition of available-for-sale financial assets (310,003) -

Decrease in refundable deposits 21,533 11,129

Increase in deferred charges (21,527) (31,038)

(Continued)

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WINTEK CORPORATION

STATEMENTS OF CASH FLOWS



2011 2010

Increase in other assets $ (12,505) $ (12,677)

Proceeds from disposal of assets 11,554 84,051

Decrease in restricted assets 5,413 384,360

Net cash used in investing activities (15,117,794) (2,499,259)

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of capital stock for GDRs 9,416,934 3,757,859

Repayment of long-term bank loans (3,945,952) (10,049,453)

Proceeds from long-term bank loans 3,687,800 9,012,300

Net increase (decrease) in short-term bank loans 2,239,655 (1,603,302)

Cash dividends (1,553,076) -

Net increase (decrease) in short-term bills payable 248,583 (199,866)

Exercise of employee stock options 38,300 503,913

Increase (decrease) in guarantee deposits received (261) 5

Net cash provided by financing activities 10,131,983 1,421,456

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS

1,263,506 (1,051,856)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,651,967 2,703,823

CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,915,473 $ 1,651,967

SUPPLEMENTARY CASH FLOW INFORMATION

Interest paid, net of amount capitalized $ 381,294 $ 354,580

Income tax paid $ 152,231 $ 17,614

NONCASH INVESTING AND FINANCING ACTIVITIES

Current portion of long-term bank loans $ 3,249,940 $ 1,945,952

INVESTING ACTIVITIES AFFECTING BOTH CASH AND

NONCASH ITEMS

Acquisition of property, plant and equipment $ 6,845,838 $ 891,190

Decrease (increase) in payable for equipment (742,125) 76,164

Cash paid for acquisition of property, plant and equipment $ 6,103,713 $ 967,354


(With Deloitte & Touche audit report dated February 23, 2012) (Concluded)

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WINTEK CORPORATION

NOTES TO FINANCIAL STATEMENTS


(In Thousands of New Taiwan Dollars, Except Amounts Per Share and Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

Wintek Corporation (the “Corporation”) was incorporated on April 26, 1990. It manufactures and sells

liquid crystal displays (LCDs), liquid crystal modules (LCMs) and touch panels.

The Corporation’s shares have been listed on the Taiwan Stock Exchange (TSE) since December 19, 1998.

The Corporation had 5,005 and 4,196 employees as of December 31, 2011 and 2010, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in conformity with the Guidelines Governing the Preparation

of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business

Accounting, and accounting principles generally accepted in the Republic of China (ROC). Significant

accounting policies are summarized as follows:

Foreign Currencies

Nonderivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in

effect when the transactions occur. Exchange differences arising from the settlement of foreign-currency

assets and liabilities are recognized in profit or loss.

At the balance sheet date, foreign-currency monetary assets and liabilities are revalued using prevailing

exchange rates, and the exchange differences are recognized in profit or loss.

At the balance sheet date, foreign-currency nonmonetary assets (such as equity instruments) and liabilities

that are measured at fair value are revalued using prevailing exchange rates, with the exchange differences

treated as follows:

a. Recognized in shareholders’ equity if the changes in fair value are recognized in shareholders’ equity;

b. Recognized in profit and loss if the changes in fair value are recognized in profit or loss.

Foreign-currency nonmonetary assets and liabilities that are carried at cost continue to be stated at

exchange rates at trade dates.

If the functional currency of an equity-method investee is a foreign currency, translation adjustments will

result from the translation of the investee’s financial statements into the reporting currency of the

Corporation. Such adjustments are accumulated and reported as a separate component of shareholders’

equity.

Accounting Estimates

Under the above guidelines, law and principles, certain estimates and assumptions have been used for the

allowance for doubtful accounts, allowance for loss on inventory, depreciation of property, plant and

equipment, impairment loss on assets, amortization of deferred charges, income tax, pension cost, bonuses

to employees, directors and supervisors, etc. Actual results may differ from these estimates.

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For readers’ convenience, the accompanying financial statements have been translated into English from

the original Chinese version prepared and used in the ROC. If inconsistencies arise between the English

version and the Chinese version or if differences arise in the interpretations between the two versions, the

Chinese version of the financial statements shall prevail.

Current and Noncurrent Assets and Liabilities

Current assets include cash, cash equivalents and those assets held primarily for trading purposes or to be

realized, sold or consumed within one year from the balance sheet date. All other assets such as property,

plant and equipment are classified as noncurrent. Current liabilities are obligations incurred for trading

purposes or to be settled within one year from the balance sheet date. All other liabilities are classified as

noncurrent.

Cash Equivalents

Cash equivalents, consisting of commercial paper, are highly liquid financial instruments with maturities of

three months or less when acquired and with carrying amounts that approximate their fair values.

Financial Assets/Liabilities at Fair Value through Profit or Loss

Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss

(FVTPL) include financial assets or financial liabilities held for trading and those designated as at FVTPL

on initial recognition. The Corporation recognizes a financial asset or a financial liability on its balance

sheet when the Corporation becomes a party to the contractual provisions of the financial instrument. A

financial asset is derecognized when the Corporation loses control of its contractual rights over the financial

asset. A financial liability is derecognized when the obligation specified in the relevant contract is

discharged, cancelled or expired.

Financial instruments at FVTPL are initially measured at fair value plus transaction costs. At each

balance sheet date, financial assets or financial liabilities at FVTPL are remeasured at fair value, with

changes in fair value recognized directly in profit or loss in the year in which they arise. Cash dividends

received subsequently (including those received in the year of investment) are recognized as income for the

year. On the derecognition of a financial asset or a financial liability, the difference between its carrying

amount and the sum of the consideration received and receivable or consideration paid and payable is

recognized as profit or loss.

A derivative that does not meet the criteria for hedge accounting is classified as a financial asset or a

financial liability held for trading. If the fair value of the derivative is positive, the derivative is

recognized as a financial asset; otherwise, the derivative is recognized as a financial liability. All regular

way purchases or sales of financial assets are recognized and derecognized on a settlement date basis. The

fair value of financial assets and financial liabilities without quoted prices in an active market are

determined using valuation techniques.

Available-for-sale Financial Assets

Available-for-sale financial assets are initially measured at fair value plus transaction costs that are directly

attributable to the acquisition. At each balance sheet date subsequent to initial recognition,

available-for-sale financial assets are remeasured at fair value, with changes in fair value recognized in

equity until the financial assets are disposed of, at which time, the cumulative profit or loss previously

recognized in equity is included in profit or loss for the year. All regular way purchases or sales of

financial assets are recognized and derecognized on a settlement date basis.

The recognition, derecognition of available-for-sale financial assets are the same with those of financial

assets at FVTPL.

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Fair values of financial assets and financial liabilities at the balance sheet date are determined as follows:

publicly traded stocks - at closing prices; and open-end mutual funds - at net asset values.

Cash dividends are recognized on the ex-dividend date, except for dividends distributed from the

pre-acquisition profit, which are treated as a reduction of investment cost. Stock dividends are not

recognized as investment income but are recorded as an increase in the number of shares. The total

number of shares subsequent to the increase is used for the recalculation of cost per share.

An impairment loss is recognized when there is objective evidence that the financial asset is impaired.

Any subsequent decrease in impairment loss for an equity instrument classified as available-for-sale is

recognized directly in equity.

Financial Assets Carried at Cost

Investments in equity instruments with no quoted prices in an active market and with fair values that cannot

be reliably measured, such as non-publicly traded stocks and stocks traded in the Emerging Stock Market,

are measured at their original cost. The accounting treatment for dividends on financial assets carried at

cost is the same with that for dividends on available-for-sale financial assets. An impairment loss is

recognized when there is objective evidence that the asset is impaired. A reversal of this impairment loss

is disallowed.

Impairment of Accounts Receivable

An allowance for doubtful accounts is provided on the basis of a review of the collectibility of accounts

receivable. The Corporation assesses the probability of collections of accounts receivable by aging

analysis of the outstanding receivables and assessing the economic environment.

As discussed in Note 3 to the financial statements, on January 1, 2011, the Corporation adopted the

third-time revised Statement of Financial Accounting Standards (SFAS) No. 34 - “Financial Instruments:

Recognition and Measurement.” One of the main revisions is that the impairment of receivables

originated by the Corporation should be covered by SFAS No. 34. Accounts receivable are assessed for

impairment at the end of each reporting period and considered to be impaired when there is objective

evidence that, as a result of one or more events that occurred after the initial recognition of the accounts

receivable, the estimated future cash flows of the asset have been affected. Objective evidence of

impairment could include:

Significant financial difficulty of the debtor;

Accounts receivable becoming overdue; or

It becoming probable that the debtor will enter bankruptcy or financial re-organization.

Accounts receivable that are assessed not to be impaired individually are further assessed for impairment on

a collective basis. Objective evidence of impairment for a portfolio of accounts receivable could include

the Corporation’s past experience of collecting payments and an increase in the number of delayed

payments, as well as observable changes in national or local economic conditions that correlate with

defaults on receivables.

The amount of the impairment loss recognized is the difference between the asset carrying amount and the

present value of estimated future cash flows.

The carrying amount of the accounts receivable is reduced through the use of an allowance account.

When accounts receivable are considered uncollectible, they are written off against the allowance account.

Recoveries of amounts previously written off are credited to the allowance account. Changes in the

carrying amount of the allowance account are recognized as bad debt in profit or loss.

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Impairment of Assets

If the recoverable amount of an asset (mainly property, plant and equipment, deferred charges, idle assets

and investments accounted for by the equity method) is estimated to be less than its carrying amount, the

carrying amount of the asset is reduced to its recoverable amount. An impairment loss is charged to

earnings unless the asset is carried at a revalued amount, in which case the impairment loss is first treated as

a deduction to the unrealized revaluation increment and any remaining loss is charged to earnings.

If an impairment loss subsequently reverses, the carrying amount of the asset is increased accordingly, but

the increased carrying amount may not exceed the carrying amount that would have been determined had

no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is

recognized in earnings, unless the asset is carried at a revalued amount, in which case the reversal of the

impairment loss is first recognized as gain to the extent that an impairment loss on the same revalued asset

was previously charged to earnings. Any excess amount is treated as an increase in the unrealized

revaluation increment.

For the purpose of impairment testing, goodwill is allocated to each of the relevant cash-generating units

(“CGUs”) that are expected to benefit from the synergies of the acquisition. A CGU to which goodwill

has been allocated is tested for impairment annually or whenever there is an indication that the CGU may

be impaired. If the recoverable amount of the CGU becomes less than its carrying amount, the

impairment is allocated to first reduce the carrying amount of the goodwill allocated to the CGU and then to

the other assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU. A

reversal of an impairment loss on goodwill is disallowed.

For long-term equity investments on which the Corporation has significant influence but over which it has

no control, the carrying amount (including goodwill) of each investment is compared with its own

recoverable amount for the purpose of impairment testing.

Inventories

Inventories consist of raw materials, supplies, work-in-process and finished goods. Inventories are stated

at the lower of cost or net realizable value. Inventory write-downs are made item by item, except where it

may be appropriate to group similar or related items. Net realizable value is the estimated selling price of

inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are

recorded at standard cost and adjusted to approximate weighted-average cost on the balance sheet date.

Investments Accounted for by the Equity Method

Investments in which the Corporation holds 20% of the investees’ voting shares or exercises significant

influence on the investees’ operating and financial policy decisions are accounted for by the equity method.

The acquisition cost is allocated to the assets acquired and liabilities assumed on the basis of their fair

values at the date of acquisition, and the acquisition cost in excess of the fair value of the identifiable net

assets acquired is recognized as goodwill. Goodwill is not being amortized. The fair value of the net

identifiable assets acquired in excess of the acquisition cost is used to reduce the fair value of each of the

noncurrent assets acquired in proportion to the respective fair values of the noncurrent assets, with any

excess recognized as an extraordinary gain.

When the Corporation subscribes for its investee’s newly issued shares at a percentage different from its

percentage of ownership in the investee, the Corporation records the change in its equity in the investee’s

net assets as an adjustment to investments, with a corresponding amount credited or charged to capital

surplus. When the adjustment should be debited to capital surplus, but the capital surplus arising from

long-term investments is insufficient, the shortage is debited to retained earnings.

- 13 -

Unrealized Intercompany Gains

All gains on product or other sales to subsidiaries are wholly deferred or, in the case of other equity-method

investees that are not majority owned, are deferred only to the extent of the Corporation’s equity interest,

with the deferred profit reported as deferred intercompany gains. The gains or losses on sales between

subsidiaries are deferred at the percentage of equity interest in the subsidiary that incurred the gain or loss.

In addition, the Corporation recognizes its proportionate share in net income from product and other sales

of its subsidiaries and other equity-method investees in the year they are realized through the subsequent

sale of the related items to unrelated third parties.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment

losses. Major additions and improvements to property, plant and equipment are capitalized, while costs of

repairs and maintenance are expensed currently. Borrowing costs directly attributable to the acquisition or

construction of property, plant and equipment are capitalized as part of the cost of those assets.

Depreciation expense is provided on a straight-line basis over useful lives estimated as follows: buildings

- 10 to 30 years; machinery and equipment - 3 to 10 years; transportation equipment - 3 to 5 years; furniture

and fixtures - 3 to 5 years; leasehold improvements - 2 to 3 years; and miscellaneous equipment - 3 to 10

years. Property, plant and equipment still in use beyond their original estimated useful lives are further

depreciated over their newly estimated service lives.

Upon retirement or disposal of property, plant and equipment, the related cost, accumulated depreciation

and accumulated impairment are removed from the accounts. Any resulting gain or loss is recorded as

nonoperating gain or loss in the current year.

Intangible Assets

Expenditures for research activities are recognized as expenses when incurred. An internally generated

intangible asset arising from development activities is capitalized and then amortized on a straight-line

basis if the recognition criteria for intangible assets have been met; otherwise, the development expenditure

is recognized as an expense when incurred.

Deferred Charges

Deferred charges, which pertain to technical assistance royalty, molding equipment, the enterprise resource

planning (ERP) system, supplies and manufacturing information system, are amortized using the

straight-line basis over 2 to 20 years.

Idle Assets

Idle assets are classified as other assets and stated at the lower of net fair value or carrying value. The

related cost, accumulated depreciation and accumulated impairment are written off, and any cost in excess

of net realizable value is recognized as loss. The remaining value is depreciated using the straight-line

basis.

Pension Costs

Pension cost under a defined benefit plan is determined by actuarial valuations. Contributions made under

a defined contribution plan are recognized as pension cost during the period in which employees render

services.

Curtailment or settlement gains or losses on the defined benefit plan are recognized as part of the net

periodic pension cost for the year.

- 14 -

Income Tax

The Corporation applies the inter-year allocation method to its income tax, whereby deferred income tax

assets and liabilities are recognized for the tax effects of temporary differences, unused loss carryforwards

and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than

not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as

current or noncurrent in accordance with the classification of its related asset or liability. However, if a

deferred income tax asset or liability does not relate to an asset or liability in the financial statements, then

it is classified as either current or noncurrent based on the expected length of time before it is realized or

settled.

The Corporation can control the timing of the reversal of a temporary difference arising from the difference

between the book value and the tax basis of a long-term equity investment in a foreign subsidiary and if the

temporary difference is not expected to reverse in the foreseeable future and will, in effect, exist

indefinitely, then a deferred tax liability or asset is not recognized.

The tax credits for purchases of eligible equipment and technology, research and development expenditures

and personnel training expenditures are recognized in the current period.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s income tax

provision.

Income tax (10%) on unappropriated earnings is recorded as expense in the year the shareholders resolve to

retain the earnings.

Stock-based Compensation

Employee stock options granted on or after January 1, 2008 are accounted for under SFAS No. 39 -

“Accounting for Share-based Payment.” Under the statement, the value of the stock options granted,

which is equal to the best available estimate of the number of stock options expected to vest multiplied by

the grant-date fair value, is expensed on a straight-line basis over the vesting year, with a corresponding

adjustment to capital surplus - employee stock options. The estimate is revised if subsequent information

indicates that the number of stock options expected to vest differs from previous estimates.

Employee stock options granted between January 1, 2004 and December 31, 2007 were accounted for

under the interpretations issued by the Accounting Research and Development Foundation (ARDF). The

Corporation adopted the intrinsic value method, under which compensation cost was recognized on a

straight-line basis over the vesting period.

Revenue Recognition

Revenue is recognized when the Corporation has transferred to the buyer the significant risks and rewards

of ownership of the goods, primarily upon shipment, because the earnings process has been completed and

the economic benefits associated with the transaction have been realized or are realizable. The

Corporation does not recognize sales revenue on materials delivered to subcontractors because this delivery

does not involve a transfer of risks and rewards of materials ownership.

Revenue is measured at the fair value of the consideration received or receivable and represents amounts

agreed between the Corporation and the customers for goods sold in the normal course of business, net of

sales discounts and volume rebates. For trade receivables due within one year from the balance sheet date,

as the nominal value of the consideration to be received approximates its fair value and transactions are

frequent, fair value of the consideration is not determined by discounting all future receipts using an

imputed rate of interest.

- 15 -

Royalties are recognized when:

a. It is probable that the economic benefits of a transaction will flow to the Corporation; and

b. The revenue can be measured reliably.

Royalties are recognized on an accrual basis in accordance with the substance of the contract.

If a contract meets the recognition criteria for sales of goods and the following conditions, royalties are

recognized at the time of sale:

a. The amount of the royalties is fixed or the royalties are nonrefundable;

b. The contract is noncancelable;

c. The contract permits the licensee to exploit the assigned rights freely; and

d. The licensor has no remaining obligations to perform.

Government Subsidy

Government subsidies that are realized should be recognized as income for the period and should be

presented as government subsidy income or other income. Government subsidies that are not yet realized

should be presented as deferred income. Deferred income should be recognized as government subsidy

income or other income only when the Corporation has met the related conditions and has fulfilled its

obligations.

Reclassifications

Certain accounts in the financial statements as of and for the year ended December 31, 2010 have been

reclassified to conform to the presentation of the financial statements as of and for the year ended

December 31, 2011.

3. EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES

Financial Instruments

On January 1, 2011, the Corporation adopted the newly revised SFAS No. 34 - “Financial Instruments:

Recognition and Measurement.” The main revisions include (1) finance lease receivables are now

covered by SFAS No. 34; (2) the scope of the applicability of SFAS No. 34 to insurance contracts is

amended; (3) loans and receivables originated by the Corporation are now covered by SFAS No. 34; (4)

additional guidelines on impairment testing of financial assets carried at amortized cost when a debtor has

financial difficulties and the terms of obligations have been modified; and (5) accounting treatment by a

debtor for modifications in the terms of obligations. This accounting change had no significant impact on

the financial statements for the year ended December 31, 2011.

Operating Segments

On January 1, 2011, the Corporation adopted the newly issued SFAS No. 41 - “Operating Segments.” The

requirements of the statement are based on the information about the components of the Corporation that

management uses to make decisions about operating matters. SFAS No. 41 requires identification of

operating segments on the basis of internal reports that are regularly reviewed by the Corporation's chief

operating decision maker in order to allocate resources to the segments and assess their performance. This

statement supersedes SFAS No. 20 - “Segment Reporting.” For this accounting change, the Corporation

restated the segment information in the consolidated financial statements as of and for the year ended

December 31, 2010 to conform to the disclosures as of and for the year ended December 31, 2011.

- 16 -

4. CASH AND CASH EQUIVALENTS

December 31

2011 2010

Cash in banks $ 2,687,776 $ 567,355

Time deposits 205,158 1,087,390

Cash equivalents

Commercial paper - interest - 0.68% 19,951 -

Cash on hand and petty cash 2,588 2,635

2,915,473 1,657,380

Less: Restricted cash - current - (5,413)

$ 2,915,473 $ 1,651,967

5. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT

December 31

2011 2010

Financial assets held for trading

Forward exchange contracts

Domestic banks $ 582 $ 93,943

Foreign banks - 6,809

582 100,752

Swap contracts

Domestic banks 1,540 -

Cross-currency swap contracts


Foreign banks 38,771 -

54,847 -

$ 56,969 $ 100,752

Financial liabilities held for trading

Cross-currency swap contracts

Domestic banks $ - $ 49,492

Foreign banks - 51,938

- 101,430

Forward exchange contracts

Domestic banks 1,042 2,333

Swap contracts


Interest rate swap contracts

Domestic banks 20,888 23,823

$ 23,753 $ 127,586

- 17 -

The Corporation entered into forward exchange contracts, swap contracts, cross-currency swap contracts

and interest rate swap transactions for the years ended December 31, 2011 and 2010 to hedge against its

exposures to adverse exchange rate and interest rate fluctuations of its foreign-currency assets or liabilities.

The financial risk management objective of the Corporation is to minimize risks due to changes in fair

values or cash flows.

a. Forward exchange contracts

Outstanding forward exchange contracts as of December 31, 2011 and 2010 were as follows:

Contract Amount

Currency Maturity (In Thousands)

December 31, 2011

Sell/buy US$/JPY January 4, 2012 US$4,000/JPY311,840

Sell/buy US$/NT$ January 4, 2012 to January 13, 2012 US$18,000/NT$543,576

December 31, 2010

Sell/buy US$/JPY January 4, 2011 to March 1, 2011 US$34,000/JPY2,814,821

Sell/buy US$/NT$ January 4, 2011 to February 25, 2011 US$99,100/NT$2,991,497

Sell/buy INR/US$ January 10, 2011 to January 31, 2011 INR452,450/US$10,000

The contracts resulted in net a gains of $18,406 thousand and $401,829 thousand for the years ended

December 31, 2011 and 2010, respectively.

b. Swap contract

Outstanding swap contract as of December 31, 2011 was as follows:

Contract Amount

Currency Maturity (In Thousands)

December 31, 2011

Sell/Buy US$/NT$ January 12, 2012 to February 7, 2012 US$79,900/NT$2,418,513

The contract resulted in a net loss of $216,144 thousand for the year ended December 31, 2011.

c. Cross-currency swap contracts

Outstanding cross-currency swap contracts as of December 31, 2011 and 2010 were as follows:

Contract Amount

(In Thousands)

Maturity Date

Interest Rates

for Payment

(Receivables)

Interest Rates for

Receivables

December 31, 2011

US$16,500/NT$483,450 January 30, 2012 - USD Libor 1M+0.26%

US$10,000/NT$294,000 March 9, 2012 1.10% USD Libor 1M+0.50%

US$10,000/NT$290,000 May 23, 2012 0.90% USD Libor 3M+0.65%

US$6,000/NT$176,400 February 21, 2012 1.07% USD Libor 3M+1.20%

US$6,000/NT$176,358 February 22, 2012 1.05% USD Libor 3M+1.15%

US$10,000/NT$295,800 March 22, 2012 (1.00%) USD Libor 3M+1.00%

(Continued)

- 18 -

Contract Amount

(In Thousands)

Maturity Date

Interest Rates

for Payment

(Receivables)

Interest Rates for

Receivables

December 31, 2010

US$15,600/NT$498,810 January 28, 2011 0.16% USD Libor 1 M

US$10,000/NT$319,000 March 9, 2011 1.40% USD Libor 1 M+0.20%

US$10,000/NT$308,000 January 13, 2011 1.10% USD Libor 3 M+0.4%

US$4,740/NT$149,784 March 22, 2011 - 0.34%

US$3,000/NT$95,814 September 9, 2011 1.26% 1%+USD Libor 3M

US$5,000/NT$160,155 September 3, 2011 1.18% 1%+USD Libor 3M

(Concluded)

The contracts resulted in net gains of $164,332 thousand and net losses of $103,425 thousand for the

years ended December 31, 2011 and 2010, respectively.

d. Interest rate swap contracts

The Corporation entered into interest rate swap contracts with bank to hedge against adverse

fluctuations of the floating interest rates for its long-term bank loans. The contracts resulted in net

losses of $17,918 thousand and $10,417 thousand for the years ended December 31, 2011 and 2010,

respectively.

Outstanding interest rate swap contracts as of December 31, 2011 and 2010 are summarized as follows:

Principal Amount

(In Thousands)

Maturity Date

Interest Rates for Payments

Interest Rates for

Receivables

December 31, 2011

NT$571,429 (Note) December 15, 2012 Daily range accrual, 2.35% + (3*TWD 90D

CP)*N/M

N is the number of days which TWD 5Y CMS -

TWD 1Y CMS≤ 0 in that calculation period

90-day commercial paper

US$10,000 July 20, 2015 2.05% (Yearly, ACT/360) LI USD 3M+0bP

(Quarterly, ACT/360)

December 31, 2010

NT$1,142,857 (Note) December 15, 2012 Daily range accrual, 2.35% + (3*TWD 90D

CP)*N/M

N is the number of days which TWD 5Y CMS -

TWD 1Y CMS≤ 0 in that calculation period

90-day commercial paper

US$10,000 July 20, 2015 2.05% (Yearly, ACT /360) LI USD 3M+0bP

(Quarterly, ACT/360)

Note: The principal amounts of the interest rate swap contracts decrease gradually as bank loans are

repaid.

6. AVAILABLE-FOR- SALE FINANCIAL ASSETS - CURRENT

These assets comprised publicly listed stocks.

- 19 -

7. ACCOUNTS RECEIVABLE

December 31

2011 2010

Accounts receivable - third parties $ 15,167,453 $ 10,653,521

Less: Allowance for doubtful accounts (16,557) (14,806)

$ 15,150,896 $ 10,638,715

The movements of the allowance of doubtful accounts are summarized as follows:

Year Ended December 31

2011 2010

Beginning balance $ 14,806 $ 14,806

Allowance for doubtful accounts 537 -

Reclassification 1,214 -

Ending balance $ 16,557 $ 14,806

Factored notes and accounts receivable for the years ended December 31, 2011 and 2010 were as follows:

Counter-parties

Receivables

Sold (US$ in

Thousands)

Amounts

Collected

(US$ in

Thousands)

Advances

Received at

Year-end

(US$ in

Thousands)

Interest Rates

on Advances

Received (%)

Credit Line

(US$ in

Thousands)

Year ended December 31, 2011

Land Bank $ 73,464 $ 65,975 $ 6,740 1.48-2.67 $ 11,500

Shanghai Commercial & Savings Bank 27,195 23,287 3,517 1.48-2.67 6,000

Ta Chong Bank 47,180 40,668 5,861 1.48-2.67 10,000

Yuanta Commercial Bank 76,658 68,843 7,034 1.48-2.67 12,000

China Development Industrial Bank 53,569 46,405 6,447 1.48-2.67 11,000

Taichung Commercial Bank 77,159 66,739 9,378 1.48-2.67 16,000

Taipei Fubon Bank 77,159 66,739 9,378 1.48-2.67 16,000

Industrial Bank of Taiwan 38,329 34,422 3,517 1.48-2.67 6,000

Taiwan Business Bank 73,464 65,975 6,740 1.48-2.67 11,500

Bank of Taiwan 244,112 205,037 35,168 1.48-2.67 60,000

E.SUN Commercial Bank 77,159 66,739 9,378 1.48-2.67 16,000

Mega International Commercial Bank 27,195 23,287 3,517 1.48-2.67 6,000

Bank of Panhsin 19,165 17,211 1,758 1.48-2.67 3,000

DBS Bank 44,717 40,159 4,103 1.48-2.67 7,000

Bank of Kaohsiung 39,150 34,591 4,103 1.48-2.67 7,000

Cathay United Bank 25,553 22,948 2,345 1.48-2.67 4,000

First Commercial Bank 78,801 67,078 10,550 1.48-2.67 18,000

Hua Nan Commercial Bank 51,106 45,895 4,689 1.48-2.67 8,000

Far Eastern International Bank 44,717 40,159 4,103 1.48-2.67 7,000

Taishin Bank 22,494 14,211 - 2.66-2.75 30,000

$ 1,218,346 $ 1,056,368 $ 138,326

(Continued)

- 20 -

Counter-parties

Receivables

Sold (US$ in

Thousands)

Amounts

Collected

(US$ in

Thousands)

Advances

Received at

Year-end

(US$ in

Thousands)

Interest Rates

on Advances

Received (%)

Credit Line

(US$ in

Thousands)


Land Bank $ 11,512 $ 10,350 $ 10,350 1.58-1.62 $ 10,500

Shanghai Commercial & Savings Bank 4,004 3,600 3,600 1.58-1.62 4,000

Ta Chong Bank 7,007 6,300 6,300 1.58-1.62 7,000

Yuanta Bank 12,012 10,800 10,800 1.58-1.62 12,000

China Development Industrial Bank 8,008 7,200 7,200 1.58-1.62 8,000

Taichung Bank 11,512 10,350 10,350 1.58-1.62 11,500

Taipei Fubon Bank 11,512 10,350 10,350 1.58-1.62 11,500

Industrial Bank of Taiwan 6,006 5,400 5,400 1.58-1.62 6,000

Taiwan Business Bank 11,512 10,350 10,350 1.58-1.62 11,500

Bank of Taiwan 35,036 31,500 31,500 1.58-1.62 35,000

E.SUN Commercial Bank 11,512 10,350 10,350 1.58-1.62 11,500

Mega International Commercial Bank 4,004 3,600 3,600 1.58-1.62 4,000

Bank of Panhsin 3,003 2,700 2,700 1.58-1.62 3,000

DBS Bank 7,007 6,300 6,300 1.58-1.62 7,000

Bank of Kaohsiung 6,006 5,400 5,400 1.58-1.62 6,000

Cathay United Bank 4,004 3,600 3,600 1.58-1.62 4,000

First Commercial Bank 11,512 10,350 10,350 1.58-1.62 11,500

Hun Nan Bank 8,008 7,200 7,200 1.58-1.62 8,000

Far Eastern International Bank 7,007 6,300 6,300 1.58-1.62 7,000

$ 180,184 $ 162,000 $ 162,000

(Concluded)

Note 1: Under the factoring agreements, the Corporation, irrevocably and without recourse, transferred

accounts receivable to underwriting banks. Any risks of default on the factored accounts

receivable by customers having financial difficulties are borne by respective banks. The

Corporation is not responsible for the collection of factored receivables or for any legal

proceedings and costs of recovering these receivables.

Note 2: As of December 31, 2011 and 2010, total outstanding receivables resulting from the above

transactions, net of advances received, were classified under other receivables.

Note 3: For the years ended December 31, 2011 and 2010, underwriting banks’ fees of $69,158 thousand

and $6,632 thousand, respectively, were classified under bank expense and interest expense.

8. INVENTORIES

December 31

2011 2010

Finished goods $ 2,228,727 $ 1,267,005

Work in process 4,495,054 3,814,816

Raw materials and supplies 2,834,160 3,184,647

$ 9,557,941 $ 8,266,468

As of December 31, 2011 and 2010, the allowances for inventory devaluation were $2,174,295 thousand

and $1,360,815 thousand, respectively.

- 21 -

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2011 and 2010

was $91,020,280 thousand and $58,761,662 thousand, respectively, which included $1,253,000 thousand

and $794,088 thousand, respectively, due to write-downs of inventories.

9. FINANCIAL ASSETS CARRIED AT COST - NONCURRENT

December 31

2011 2010

% of % of

Carrying Owner- Carrying Owner-

Value ship Value ship

Unlisted stocks

Kingpak Technology Corporation (“Kingpak”) $ 113,160 6 $ 113,160 6

Calin Technology Co., Ltd. (“Calin Technology”) 40,748 4 40,748 4

Transcom Corporation (“Transcom”) 9,595 5 9,595 5

Integrated Solutions Technology, Inc. (“Integrated

Solutions”)

3,510 1

3,510 1

Uniflex Technology Inc. (“Uniflex”) 3,176 1 59,156 1

Mobilic Technology (Cayman) Corp. (“Mobilic

Cayman”)

- 11

- 11

Asia Pacific Microsystems, Inc. (“Microsystems”) - 4 63,890 4

Andes Technology Corporation (“Andes”) - 2 14,460 2

$ 170,189 $ 304,519

The above equity investments, which had no quoted prices in an active market and had fair values that

could not be reliably measured, were carried at cost.

Uniflex and Andes reduced their capital to offset their deficits in May 2011 and June 2010, respectively.

Thus, the Corporation recognized impairment losses of 55,980 thousand and 4,944 thousand for the year

ended December 31, 2011 and 2010, respectively.

The Corporation reassessed the recoverable amount of its investments as of December 31, 2011 and

recognized impairment losses of $63,890 thousand on Microsystems and $14,460 thousand on Andes.

10. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

December 31

2011 2010

% of % of



Unlisted

Wintek Technology (Cayman) Corporation (“Wintek

Technology Cayman”) $ 10,735,097 100 $ 9,390,864 100

Masstop LLC 7,174,204 100 3,241,286 100

Wintek (B.V.I.) Corporation (“Wintek BVI”) 5,104,835 100 487,597 100

Wintek International Holding (Cayman) Corporation

(“Wintek International Holding”) 254,091 100 331,007 100

(continued)

- 22 -

December 31

2011 2010

% of % of



Unlisted

Wintek Electro-Optics Corporation (“Wintek

Electro-Optics”) $ 164,101 100 $ 168,229 100

Wintek (Central Europe) GmbH (“Wintek Central

Europe”) 124,867 100 122,873 100

Mactech Corporation (“Mactech”) 112,919 50 113,843 51

United Win Investment Corporation (“United Win

Investment”) 83,322 100 174,834 100

WinPower Optronics Corporation (“WinPower”) 17,216 36 - -

$ 23,770,652 $ 14,030,533

(Concluded)

The difference between the cost of investment and the Corporation’s equity in the carrying value of the

investee’s net assets resulted in goodwill. The movements of goodwill for the years ended of

December 31, 2011 and 2010 are summarized as follows:


2011 2010

Beginning balance $ 36,031 $ 39,568

Effect of exchange rate changes 1,416 (3,537)

Ending balance $ 37,447 $ 36,031

In March 2010, the Investment Commission (IC) of the Ministry of Economic Affairs (MOEA) approved

the Corporation’s investment in Wintek (China) Technology Ltd. (“Wintek China”), which was formerly

named Wintek Technology Dongguan Limited. This investment was made through United Win

Technology (Cayman) Corporation (“United Win Cayman”) and Wintek Technology (H.K.) Limited

(“Wintek Technology H.K.”). Wintek China researches, develops, manufactures and sells liquid crystal

modules.

In December 2010, the Corporation established Wintek Vietnam Co., Ltd. (“Wintek Vietnam”) in Vietnam

through its investee Wintek BVI and Wintek International (Samoa) Corporation (“Wintek Samoa”) in

Samoa Island. Wintek Vietnam manufactures and processes LCDs, LCMs and touch panels.

- 23 -

Investment net income (loss) recognized was as follows:


2011 2010

Net Income

(Loss) of the

Investee

Investment

Net Income

(Loss)

Recognized

Net Income

(Loss) of the

Investee

Investment

Net Income

(Loss)

Recognized

Wintek BVI $ (363,747) $ (363,534) $ 2,533 $ 2,533

Wintek Technology Cayman (84,812) (112,274) 946,889 904,002

United Win Investment (85,772) (85,772) (6,821) (6,821)

Mactech 230,671 54,716 172,945 20,549

Masstop LLC (9,346) (34,552) 98,213 97,952

Wintek International Holding (28,738) (28,738) 8,297 8,297

WinPower (17,780) (6,517) - -

Wintek Electro-Optics 3,843 3,769 8,094 8,977

Wintek Central Europe 1,224 1,224 2,016 2,016

$ (354,457) $ (571,678) $ 1,232,166 $ 1,037,505

Investments in which the Corporation holds over 50% of the investees’ voting shares or has controlling

interest were included in the consolidated financial statements. All significant intercompany accounts and

transactions have been eliminated from the consolidation.

11. PROPERTY, PLANT AND EQUIPMENT

Year Ended December 31, 2011

Beginning Ending

Balance Addition Reclassification Disposal Balance

Cost

Land $ 2,365,861 $ 404,392 $ - $ - $ 2,770,253 Buildings 6,268,676 53,547 441,378 - 6,763,601

Machinery and equipment 21,406,358 492,486 2,550,221 (1,533,079 ) 22,915,986

Transportation equipment 31,272 3,321 1,070 (15,736 ) 19,927 Furniture and fixtures 73,443 13,894 - (22,736 ) 64,601

Leasehold improvements 2,380 10,330 2,104 (418 ) 14,396

Miscellaneous equipment 3,129,954 52,915 85,451 (236,110 ) 3,032,210 Construction in progress 33,405 749,946 (441,378 ) - 341,973

Prepayments for equipment 507,904 5,065,007 (2,940,403 ) - 2,632,508

33,819,253 $ 6,845,838 $ (301,557 ) $ (1,808,079 ) 38,555,455

Accumulated depreciation

Buildings 1,554,409 $ 330,940 $ - $ - 1,885,349

Machinery and equipment 12,747,499 3,660,892 (276,560 ) (1,512,114 ) 14,619,717

Transportation equipment 26,704 2,801 - (15,488 ) 14,017 Furniture and fixtures 49,640 10,621 - (22,596 ) 37,665

Leasehold improvements 1,906 1,845 - (418 ) 3,333

Miscellaneous equipment 2,094,540 602,690 - (235,556 ) 2,461,674 16,474,698 $ 4,609,789 $ (276,560 ) $ (1,786,172 ) 19,021,755

Accumulated impairment

Land 33,981 $ - $ - $ - 33,981

Buildings 4,292 - - - 4,292

38,273 $ - $ - $ - 38,273

Property, plant and equipment, net $ 17,306,282 $ 19,495,427

- 24 -


Beginning Ending

Balance Addition Reclassification Disposal Balance

Cost

Land $ 2,365,861 $ - $ - $ - $ 2,365,861

Buildings 6,118,193 37,032 113,451 - 6,268,676

Machinery and equipment 20,381,436 169,389 1,058,178 (202,645 ) 21,406,358 Transportation equipment 31,940 - - (668 ) 31,272

Furniture and fixtures 69,569 4,433 - (559 ) 73,443

Leasehold improvements 2,380 - - - 2,380 Miscellaneous equipment 3,077,700 9,148 46,382 (3,276 ) 3,129,954

Construction in progress 79,043 67,813 (113,451 ) - 33,405

Prepayments for equipment 1,009,089 603,375 (1,104,560 ) - 507,904 33,135,211 $ 891,190 $ - $ (207,148 ) 33,819,253

Accumulated depreciation

Buildings 1,236,864 $ 317,545 $ - $ - 1,554,409

Machinery and equipment 9,383,770 3,471,885 - (108,156 ) 12,747,499

Transportation equipment 24,103 3,204 - (603 ) 26,704 Furniture and fixtures 39,565 10,465 - (390 ) 49,640

Leasehold improvements 1,476 430 - - 1,906

Miscellaneous equipment 1,499,088 597,094 - (1,642 ) 2,094,540 12,184,866 $ 4,400,623 $ - $ (110,791 ) 16,474,698

Accumulated impairment

Land 33,981 $ - $ - $ - 33,981

Buildings 4,292 - - - 4,292

38,273 $ - $ - $ - 38,273


Under an operating lease, the Corporation rents the sites of its manufacturing facilities from the MOEA

under various contracts, with the latest expiry in April 2020. The monthly rentals are $235 thousand.

Interest capitalization was as follows:


2011 2010

Interest expense $ 426,110 $ 374,460

Interest capitalized (recorded under prepayments for equipment and

construction in progress)

46,138 14,806

Interest rates 1.96%-2.78 % 1.82%-2.98%

12. DEFERRED CHARGES

December 31

2011 2010

Technical assistance royalty $ 11,304 $ 13,297

ERP system 10,553 5,051

Molding equipment 1,684 20,005

Supplies 111 780

Others 10,855 16,552

$ 34,507 $ 55,685

- 25 -

13. OTHER ASSETS - OTHERS

December 31

2011 2010

Idle assets

Cost $ 56,289 $ 162,946

Less: Accumulated depreciation (29,219) (106,615)

Accumulated impairment (27,070) (56,331)

- -

Others 102,382 89,877

$ 102,382 $ 89,877

The Corporation recognized impairment losses of $24,997 thousand for the year ended December 31, 2011,

which was recorded under nonoperating expenses and losses - impairment loss on assets.

14. SHORT-TERM BANK LOANS

December 31

2011 2010

Usance L/C loans : Interest - 0.95%-2.30% in 2011 and

0.79%-1.80% in 2010

$ 2,749,049 $ 1,664,887

Export loans : Interest - 0.82%-2.22% in 2011 and 0.46%-1.99% in

2010

2,073,837 1,408,144

Revolving loans : Interest - 1.97%-2.21% in 2011 and 1.43%-1.91%

in 2010

789,800 300,000

$ 5,612,686 $ 3,373,031

15. SHORT-TERM BILLS PAYABLE

Short-term bills payable were commercial paper. These instruments were issued with an annual discount

rate of 1.00%.

16. LONG-TERM BANK LOANS

December 31

2011 2010

Secured loans : Repayable in installments from October 2012 to

December 2015; interest - 1.46%-2.48% in 2011 and

1.20%-2.25% in 2010

$ 8,050,755 $ 9,538,193

Unsecured loans : Repayable in installments from June 2012 to

August 2014; interest - 1.46%-2.66% in 2011 and 1.20%-2.56% in

2010

4,188,214 2,958,928

12,238,969 12,497,121

Less: Current portion (3,249,940) (1,945,952)

$ 8,989,029 $ 10,551,169

- 26 -

The Corporation entered into loan agreements amounting to $6 billion in December 2007and $6.5 billion in

November 2010, with a syndicate of banks led by Bank of Taiwan. These loans were for constructing

plants and buying equipment. The agreements provided that the Corporation (a) should maintain certain

current, debt and interest coverage ratios based on the Corporation’s annual consolidated financial

statements and (b) should not, without the prior written consent of the majority of the banking syndicate,

sell important assets and royalties, buy back its own shares and reduce capital during the contract period.

Under SFAS No. 34 - “Financial Instruments: Recognition and Measurement” and No. 36 - “Financial

Instruments: Disclosure and Presentation”, the arrangement fee of a syndicate of banks is recognized as

deduction of financial liabilities and been amortized equally during the loan period.

To raise working capital, the Corporation entered into loan agreements with Chinatrust Commercial Bank,

Cosmos Bank and SinoPac Bank. Under the agreements, the Corporation should maintain certain current,

debt and interest coverage ratios based on the Corporation’s annual consolidated financial statements

during the contract term.

In September 2009, the Corporation signed a revised loan repayment contract with Bank of Taiwan, in

which the deadline for the one-time repayment of the principal of $7,116,000 thousand of the secured loan

was extended from September 2010 to September 2012. The loan was fully repaid ahead of schedule in

December 2010.

17. PENSION PLAN

The pension plan under the Labor Pension Act (the “LPA”) is a defined contribution plan. Based on the

LPA, the Corporation makes monthly contributions to the employees’ individual pension accounts at 6% of

monthly salaries and wages. Such pension costs recognized were $127,691 thousand and $104,919

thousand for the years ended December 31, 2011 and 2010, respectively.

Based on the defined benefit plan under the Labor Standards Law, pension benefits are calculated on the

basis of the length of service and average monthly salaries of the six months before retirement. The

Corporation contributes amounts equal to 2% of total monthly salaries and wages to a pension fund

administered by the pension fund monitoring committee. The pension fund is deposited in the Bank of

Taiwan in the committee’s name.

Other defined benefit pension information was as follows:

a. Components of net pension cost:


2011 2010

Service cost $ 2,622 $ 2,580

Interest cost 4,534 4,310

Actual return on plan assets (3,106) (3,879)

Loss on plan assets (2,114) (976)

Amortization 935 701

$ 2,871 $ 2,736

- 27 -

b. Reconciliation of funded status of the plan and prepaid pension cost:

December 31

2011 2010

Benefit obligations:

Vested benefit obligation $ (25,837) $ (21,408)

Non-vested benefit obligation (130,729) (123,712)

Accumulated benefit obligation (156,566) (145,120)

Additional benefits based on future salaries (80,066) (81,558)

Projected benefit obligation (236,632) (226,678)

Fair value of plan assets 271,575 253,094

Funded status 34,943 26,416

Unrecognized net loss 47,987 44,010

Prepaid pension cost (recorded under other assets - others) $ 82,930 $ 70,426

Vested benefit $ (28,949) $ (24,420)

c. Actuarial assumptions:

December 31

2011 2010

Discount rate used in determining present values 2.00% 2.00%

Future salary increase rate 3.00% 3.00%

Expected rate of return on plan assets 2.00% 2.00%

d. Pension fund changes:


2011 2010

Contributions $ 15,375 $ 15,425

Payment of benefits $ - $ 1,224

18. SHAREHOLDERS’ EQUITY

a. Issuance of global depositary receipts (GDRs)

The Corporation increased its capital by listing its shares in the form of GDRs. Each GDR represented

the right to receive 5 common shares. Other information about GDRs was as follows:

Issued Units

Issued Shares of Stock

(In Thousands) Issue Price (US$)

November 2002 16,000,000 80,000 $3.835

November 2004 19,000,000 95,000 5.24

October 2007 20,000,000 100,000 6.00

May 2010 30,000,000 150,000 4.07

January 2011 40,000,000 200,000 8.264

As of December 31, 2011, the GDR holders had exchanged GDRs amounting to US$624,480 thousand

and representing 642,823 thousand common shares, and total outstanding GDRs were equal to 4,274

thousand common shares, or 0.26% of total capital shares issued.

- 28 -

The GDR holders have the same rights as the Corporation’s shareholders. In addition, under the

related laws and depositary agreement, the GDR depositary will act on behalf of the GDR holders when

they:

1) Exercise voting rights;

2) Sell the securities of depositary receipts;

3) Receive dividends and subscribe for capital stock.

b. Common share issuance through private placement

In October 2006, the Corporation issued － in accordance with Article 43 of the Securities and

Exchange Act － 32,444 thousand common shares at par value of NT$10.00 through private

placement to certain investors. The issuance price was NT$27.74 per share. These shares may be

resold only after three years from the delivery date (November 23, 2006).

c. Employee stock options plans

Under a stock option plan (the “Plan”), the Corporation issued to employees 29,000 units in August

2007. Each unit represents one thousand common shares. Employees eligible to receive options

under the Plan are full-time employees of the Corporation and subsidiaries. The option is exercisable

two years from the grant dates. The option certificate is valid for six years and the vested right is

exercisable on the basis of an employee’s service years. The exercise price of the stock option is the

closing price of the Corporation’s share on the grant date. If any change is made in the common stock

subject to the Plan, the exercise price of any options under the Plan then outstanding will be

appropriately adjusted in accordance with a certain formula.

Other information about employee stock options was as follows:


2011 2010

Weighted Weighted

- average - average

Exercise Exercise

Price Price

Employee Stock Options Units (NT$) Units (NT$)

Balance, beginning of year 9,933 $33.80 29,000 $34.90

Options forfeited (4,142) 29.91 (4,158) 33.80

Options exercised (1,134) 33.79 (14,909) 33.80

Balance, end of year 4,657 29.91 9,933 33.80

Options exercisable, end of year 4,657 29.91 9,933 33.80

The weighted-average stock prices at the date of exercise for stock options exercised during the years

ended December 31, 2011 and 2010 was NT$52.20 and NT$47.75, respectively.

- 29 -

Information about outstanding options as of December 31, 2011 and 2010 was as follows:

December 31

2011 2010

Exercise

Price (NT$)

Weighted-average

Remaining

Contractual Life

(Years) Exercise Price (NT$)

Weighted-average

Remaining

Contractual Life

(Years)

$29.91 1.67 $33.80 2.67

The compensation cost recognized under the intrinsic value method for the years ended December 31,

2011 and 2010 was NT$0. Had the Corporation used the Black-Scholes Model to evaluate the options

granted, the method, the assumptions and pro forma information assuming employee stock options

granted before January 1, 2008 had been accounted for under the SFAS No. 39 would have been as

follows:

Black-Scholes Model


2011 2010

Assumptions:

Risk-free interest rate 2.28% 2.28%

Expected life 4 years 4 years

Expected volatility 44.06% 44.06%

Expected dividend yield - -

Net income (loss)

Pro forma $ (1,904,878) $ 2,058,720

After income tax basic earnings (loss) per share (NT$)

Pro forma ($1.16) $1.49

d. Capital surplus

Under the Company Law, capital surplus can only be used to offset deficit. In addition, under the

regulations of the Securities and Futures Bureau (SFB), the capital surplus from equity-method

investments cannot be used under any circumstances. The capital surplus from any paid-in capital in

excess of par value and from donations can only be capitalized once a year within a certain percentage

of paid-in capital and distributed as stock dividends; under the revised Company Law issued on January

4, 2012, the foregoing capital surplus may also be distributed in cash.

e. Appropriation of earnings and dividends policy

The Corporation’s Articles of Incorporation provide that, after (a) the payment of all taxes required by

law; (b) the offset of deficit; and (c) the deduction of legal reserve and special reserve, the remaining

earnings will be reserved for the operating requirements of its business or allocated as follows:

1) Up to 2% as remuneration of directors and supervisors;

2) 15% as employees’ bonus; and

3) The remainder, as dividends.

The Corporation’s dividend policy takes the following aspects into consideration:

1) Investment environment;

2) Global competition;

- 30 -

3) Shareholders’ benefits;

4) Dividend stability;

5) The Corporation’s capital expenditure budget, capital requirement and long-term financial plan.

Under the Company Law, the board of directors should draft a proposal on earnings distribution for

approval at the shareholders’ meeting. In principle, cash dividends should be more than 10% of total

dividends.

For the year ended December 31, 2011, the Corporation had no profits; thus, it did not had to estimate

the bonus to employees and remuneration to directors and supervisors. For the year ended December

31, 2010, the bonus to employees was $232,961 thousand and the remuneration to directors and

supervisors was $31,062 thousand, respectively. The bonus to employees and remuneration to

directors and supervisors represented 15% and 2%, respectively, of net income (net of the bonus and

remuneration). Material differences between such estimated amounts and the amounts proposed by

the Board of Directors in the following year are adjusted for in the year. If the actual amounts

subsequently resolved by the shareholders differ from the proposed amounts, the differences are

recorded in the year of shareholders’ resolution as a change in accounting estimate. If a share bonus is

resolved to be distributed to employees, the number of shares is determined by dividing the amount of

the share bonus by the closing price (after considering the effect of cash and stock dividends) of the

shares of the day immediately preceding the shareholders’ meeting.

Under the regulations of the SFB, a special reserve equivalent to the debit balance of any shareholders’

equity account, other than deficit and treasury stock is appropriated from retained earnings. The

balance of the special reserve is adjusted on the basis of the debit balance of the applicable

shareholders’ equity account at year-end.

Under the Company Law, legal reserve should be appropriated each year until the balance of the

reserve equals the Corporation’s paid-in capital. Under the revised Company Law issued on January 4,

2012, when the legal reserve has exceeded 25% of the Corporation’s paid-in capital, the excess net of

an amount equal to 25% of paid-in capital may be transferred to capital or distributed in cash.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax

credit equal to their proportionate share of the income tax paid by the Corporation.

The appropriation of earnings for 2010 had been approved in the shareholders’ meeting in June 2011.

The appropriation of earnings and dividends per share were as follows:

For Year 2010

Appropriation

of Earnings

Dividends

Per Share

(NT$)

Offset of deficit $ 333,080 $ -

Legal reserve 172,564 -

Cash dividends 1,553,076 1.037

The Corporation had an operating loss in 2009; thus, in their meeting on June 17, 2010, the

shareholders resolved not to have an appropriation for 2009.

The bonus to employees and the remuneration to directors and supervisors for 2010, which were

approved in the shareholders’ meeting on June 10, 2011, were $232,961 thousand and $31,062

thousand, respectively. These amounts were the same as those appropriations made against the 2010

earnings.

- 31 -

In their meeting held on June 10, 2011, the shareholders also resolved the transfer of $1,496,950

thousand of capital surplus to paid-in capital. The Corporation then issued 149,694,980 shares, with a

NT$10.00 par value. This capital stock transaction was approved by the SFB, and the effective date of

issuance was August 8, 2011.

As of February 23, 2012, the date of the accompanying auditors’ report, the board of directors had not

resolved the appropriation of the 2011 earnings. Information on the bonus to employees and

remuneration to directors and supervisors is available on the Market Observation Post System website

of the Taiwan Stock Exchange.

f. Unrealized gain or loss on financial instruments

For the years ended December 31, 2011 and 2010, movements of the unrealized gain or loss on

financial instruments were as follows:

Available-

for-sale

Financial Assets

Equity-method

Investments

Total


Beginning balance $ 137,822 $ 233 $ 138,055

Recognized in shareholders’ equity (102,301) (5,740) (108,041)

Ending balance $ 35,521 $ (5,507) $ 30,014


Beginning balance $ 135,958 $ (50) $ 135,908

Recognized in shareholders’ equity 1,864 283 2,147

Ending balance $ 137,822 $ 233 $ 138,055

19. INCOME TAX

a. A reconciliation of income tax expense (benefit) based on income (loss) before income tax at the

statutory rate and income tax expense was as follows:


2011 2010

Income tax expense (benefit) based on income (loss) before

income tax at the statutory rate

$ (334,303) $ 367,963

Tax effects of adjusting items

Tax-exempt income (122) -

Permanent differences 62,582 (190,946)

Temporary differences 91,367 87,522

Loss carryforwards 180,476 -

Investment tax credits - (159,155)

Current income tax expense $ - $ 105,384

- 32 -

b. The details of income tax expense (benefit) were as follows:


2011 2010

Current income tax expense $ - $ 105,384

Deferred

Investment tax credits 183,922 50,023

Loss carryforwards (155,026) 10,102

Temporary differences (90,945) (96,451)

Effect of tax law changes on deferred income tax - 174,603

Valuation allowance - (193,679)

Additional income tax under the Alternative Minimum Tax Act - 50,027

Others 440 5,761

Income tax expense (benefit) $ (61,609) $ 105,770

Under Article 10 of the Statute for Industrial Innovation passed by the Legislative Yuan in April 2010,

a profit-seeking enterprise may deduct up to 15% of its research and development expenditures from its

income tax payable for the fiscal year in which these expenditures are incurred, but this deduction

should not exceed 30% of the income tax payable for that fiscal year. This incentive took effect from

January 1, 2010 and is effective till December 31, 2019.

In May 2010, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which

reduced a profit-seeking enterprise’s income tax rate from 20% to 17%, effective January 1, 2010.

c. Net deferred income tax assets (liabilities) were as follows:

December 31

2011 2010

Current:

Allowance for loss on inventories $ 369,630 $ 231,339

Unrealized cost of goods sold 32,670 21,327

Unrealized foreign exchange loss (gain) (5,566) 73,616

Employee welfare expense in excess of payment 1,972 2,079

Realized gross gain (920) (1,738)

Unrealized valuation loss (gain) on financial instruments 126 (1,903)

$ 397,912 $ 324,720

Noncurrent:

Loss carryforwards $ 883,483 $ 728,457

Investment tax credits 659,656 843,578

Unrealized deferred gain (loss) 18,280 (1,428)

Unrealized impairment loss 17,306 7,023

Unrealized valuation loss (gain) on financial instruments (5,773) 6,465

1,572,952 1,584,095

Less: Valuation allowance (1,113,140) (1,113,140)

$ 459,812 $ 470,955

- 33 -

d. Information about integrated income tax was as follows:

The Corporation had no unappropriated earnings generated before January 1, 1998.

As of December 31, 2011 and 2010, the balance of the imputation credits to be allocated to the

shareholders amounted to $225,527 thousand and $397,636 thousand, respectively.

The Corporation had an operating loss in 2011; thus, the shareholders resolved not to make

appropriations for that year. The actual ratio for distribution of earnings of 2010 is 20.48%.

e. In November 2010, the Industrial Development Bureau (IDB) approved the tax credits for Emerging,

Important and Strategic Industries. The credits can be used to reduce the Corporation’s tax obligations

for five years from 2013.

f. As of December 31, 2011, the investment tax credits that can be used to offset the Corporation’s future

income taxes were as follows:

Tax Amount

Regulatory Basis of Credit of Unused Expiry

Tax Credits Source of Tax Credits Granted Credit Year

Statute for Upgrading Eligible equipment $ 256,465 $ 256,465 2012

Industries Research and development 208,680 208,680 2012

(Same as above) Personnel training 307 307 2012

Eligible equipment 61,876 61,876 2013

Research and development 123,613 123,613 2013

Personnel training 2,628 2,628 2013

Eligible equipment 6,087 6,087 2014

$ 659,656

g. As of December 31, 2011, the loss carryforwards were as follows:

Year of Operating Loss

Tax Credit

Granted

Amount of

Unused Credit Expiry Year

2008 $ 1,758,726 $ 1,758,726 2018

2009 2,377,325 2,377,325 2019

2011 1,060,906 1,060,906 2021

$ 5,196,957 $ 5,196,957

h. Income tax returns through 2009 had been examined and cleared by the tax authorities.

- 34 -

20. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSE


2011 2010

Operating

Costs

Operating

Expenses Total

Operating

Costs

Operating

Expenses/

Nonoperating

Expenses and

Losses Total

Labor cost

Salaries $ 2,665,975 $ 772,505 $ 3,438,480 $ 1,741,326 $ 788,854 $ 2,530,180

Insurance 178,281 53,598 231,879 139,283 44,084 183,367

Pension 101,697 28,865 130,562 82,690 24,965 107,655

Others 643,837 41,460 685,297 498,344 32,984 531,328

Depreciation 4,425,677 184,112 4,609,789 4,276,091 124,532 4,400,623

Amortization 8,729 34,395 43,124 44,876 37,308 82,184

21. EARNINGS (LOSS) PER SHARE (E/LPS)

Number of Earnings (Loss)

Per Share (NT$)

Amounts (Numerator) Shares Before After

Before After (In Thousands) Income Income

Income Tax Income Tax (Denominator) Tax Tax


Basic $ (1,966,487) $ (1,904,878) 1,636,709 $ (1.20) $ (1.16)

Dilutive effects

Employee stock options - - 149

Employee bonus - - 3,537

Diluted $ (1,966,487) $ (1,904,878) 1,640,395 $ (1.20) $ (1.16)


Basic $ 2,164,490 $ 2,058,720 1,359,849 $ 1.59 $ 1.51

Dilutive effects

Employee stock options - - 11,646

Employee bonus - - 6,035

Diluted $ 2,164,490 $ 2,058,720 1,337,530 $ 1.57 $ 1.49

The ARDF issued Interpretation 2007-052 that requires companies to recognize bonuses paid to employees,

directors and supervisors as compensation expenses. These bonuses were previously recorded as

appropriations from earnings. If the Corporation may settle the bonus to employees by cash or shares, the

Corporation should presume that the entire amount of the bonus will be settled in shares and the resulting

potential shares should be included in the weighted average number of shares outstanding used in the

calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by

dividing the entire amount of the bonus by the closing price of the shares at the balance sheet date. Such

dilutive effect of the potential shares should be included in the calculation of diluted EPS until the

shareholders resolve the number of shares to be distributed to employees at their meeting in the following

year.

The weighted average number of shares outstanding for EPS calculation has been retroactively adjusted for

the issuance of employee stock bonuses distributed out of earnings for the year ended December 31, 2010

and stock dividends. This adjustment caused the basic and diluted after income tax EPS for the year

ended December 31, 2010 to decrease from NT$1.67 and NT$1.65 to NT$1.51 and NT$1.49.

- 35 -

22. FINANCIAL INSTRUMENTS

a. Fair values of financial instruments (consisting of financial assets not evaluated at the fair value) were

as follows:

December 31

2011 2010

Carrying

Value

Fair Value

Carrying

Value

Fair Value

Nonderivative instruments

Assets

Financial assets carried at cost -

noncurrent

$ 170,189 $ -

$ 304,519 $ -

b. Methods and assumptions used to estimate the fair values of financial instruments were as follows:

1) The short-term financial instruments include cash and cash equivalents, notes and accounts

receivable, other receivables, other financial assets - current, restricted assets - current, refundable

deposits, short-term bank loans, short-term bills payable, notes and accounts payable, accrued

expenses and payables for the acquisition of equipment. The carrying values of these financial

instruments approximate their fair values because of their short maturities.

2) Fair values of financial instruments designated as at FVTPL and available-for-sale are based on

their quoted prices in an active market. Fair values of derivatives are based on their quoted prices

in an active market. For those derivatives with no quoted market prices, their fair values are

determined using valuation techniques incorporating estimates and assumptions consistent with

those generally used by other market participants to price financial instruments.

3) Financial assets carried at cost are investments in unquoted shares, which have no quoted prices in

an active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore,

no fair value is presented.

4) Fair value of long-term bank loans are estimated using the present value of future cash flows. If

the interest rate is floating, fair values approximate carrying values. Otherwise, the discount rate is

based on the Corporation’s current incremental borrowing rates for similar types of borrowings.

c. Following are the fair values of the Corporation’s financial instruments, which were based on quoted

prices in an active market; otherwise, the fair value were estimated using valuation techniques:

December 31

2011 2010

Assets

Available-for-sale financial assets - current $ 106,523 $ 208,824

d. For financial instruments with fair values determined using valuation techniques, there were losses of

$38,528 thousand and gains of $320,616 thousand for the years ended December 31, 2011 and 2010,

respectively.

- 36 -

e. As of December 31, 2011 and 2010, financial assets exposed to fair value interest rate risk amounted to

$279,956 thousand and $87,390 thousand, respectively; financial liabilities exposed to fair value

interest rate risk amounted to $4,782,536 thousand and $3,565,518 thousand, respectively; financial

assets exposed to cash flow interest rate risk amounted to $2,713,339 thousand and $1,566,645

thousand, respectively; and financial liabilities exposed to cash flow interest rate risk amounted to

$13,338,590 thousand and $12,429,887 thousand, respectively.

f. On financial assets (liabilities) other than the financial assets (liabilities) at fair value through profit or

loss, for the years ended December 31, 2011 and 2010, interest incomes were $27,182 thousand and

$6,059 thousand, respectively, and interest expenses (including capitalized interest) were $397,870

thousand and $337,924 thousand, respectively.

g. Financial risks

1) Market risk

Market risk arise from the fluctuation of market exchange rates and interest rates. All derivative

financial instruments are used to hedge against adverse exchange rate and interest rate fluctuations

of the Corporation’s foreign currency-denominated receivables or payables and interest rate

fluctuations of its floating rate long-term loans. Gains or losses on derivative transactions have a

negative correlation with the gains or losses on the hedged receivables and payables. Interest rate

risks are also controlled because the cost of capital is fixed. Thus, market risks are believed to be

minimal.

2) Credit risk

Credit risk represents the potential loss that would be incurred by the Corporation if the

counter-parties breach contracts. Financial instruments with positive fair values at the balance

sheet date are evaluated for credit risk. The counter-parties to the foregoing financial instruments

are reputable financial institutions and business organizations. Management does not expect the

Corporation’s exposure to default by those parties to be material.

3) Liquidity risk

The Corporation’s operating funds are deemed sufficient to meet the cash flow demand; therefore,

liquidity risk is not considered to be significant.

4) Cash flow interest rate risk

The interest rates for the Corporation’s short-term and long-term bank loans are floating, i.e., the

effective interest rate will change because of changes in market interest rates. Thus, future cash

flows are expected to fluctuate because of these changes in market interest rates.

23. RELATED-PARTY TRANSACTIONS

a. Related parties

Related Party Relationship with the Corporation

Wintek Technology Cayman Wholly owned subsidiary

Masstop LLC Wholly owned subsidiary

Wintek BVI Wholly owned subsidiary

Wintek Electro-Optics Wholly owned subsidiary

United Win Investment Wholly owned subsidiary

(Continued)

- 37 -

Related Party Relationship with the Corporation

Wintek Central Europe Wholly owned subsidiary

Wintek International Holding Wholly owned subsidiary

Mactech Equity-method investee

WinPower Equity-method investee

United Win Cayman Wholly owned subsidiary of Wintek Technology

Cayman

United Win (H.K.) Technology Limited

(“United Win H.K.”)

Wholly owned subsidiary of United Win Cayman

Wintek Technology H.K. Wholly owned subsidiary of United Win Cayman

United Win (China) Technology Limited

(“United Win China”)

Wholly owned subsidiary of United Win H.K.

Wintek China Wholly owned subsidiary of Wintek Technology H.K.

Masstop Asia Pacific Ltd. (“Masstop”) Wholly owned subsidiary of Masstop LLC

Dongguan Masstop Liquid Crystal Display

Co., Ltd. (“Dongguan Masstop”)

Wholly owned subsidiary of Masstop

Dongguan Innolife Import and Export

Trading Co., Ltd. (“Dogguan Winova”)

Wholly owned subsidiary of Dongguan Masstop

Wintek Samoa Wholly owned subsidiary of Wintek BVI

Wintek Vietnam Wholly owned subsidiary of Wintek Samoa

Wintek Far East (Cayman) Corporation

(“Wintek Far East”)

Equity-method investee of Wintek International Holding

and Wintek Electro-Optics

Wintek Technology (India) Private Limited

(“Wintek Technology India”)

Equity-method investee of Wintek Far East

Hannstar Display Corporation (“Hannstar”) Hannstar’s president was a director of the Corporation

until April 26, 2010; on the same date, Hannstar

become a corporate director of the Corporation

Walsin Technology Corporation (“Walsin”) The president of Walsin is a brother of the Corporation’s

ex-director; the Corporation reelected the director on

April 26, 2010

(Concluded)

b. Significant transactions with related parties (in addition to those disclosed in other notes)


2011 2010

Amount % Amount %

1) Net sales

Wintek Technology India $ 723,630 1 $ 1,144,898 2

United Win China 422,718 - 1,834,092 3

Wintek Electro-Optics 156,180 - 374,011 -

Dongguan Masstop 15,630 - - -

Others 181 - 383 -

$ 1,318,339 1 $ 3,353,384 5

- 38 -

The deferred gross profits (losses) (recorded under other current assets) on the above sales were as

follows:

December 31

2011 2010

Amount % Amount %

Wintek Technology India $ (13,376) (247) $ (11,233) (110)

United Win China 7,963 147 (199) (2)

Wintek Electro-Optics - - 1,207 12

$ (5,413) (100) $ (10,225) (100)

The prices of sales to related parties were individually negotiated on the basis of the difference

between the product price and the related market quotation. The collection periods for receivable

from sales to related parties were as follows:


Related Party 2011 2010

Wintek Technology India T/T 90 days T/T 90 days

United Win China T/T 90 days T/T 90 days

Wintek Electro-Optics T/T 60 days T/T 60 days

Dongguan Masstop T/T 60 days -


2011 2010

Amount % Amount %

2) Purchase

Dongguan Masstop $ 135,678 - $ 178,871 -

Hannstar 92,216 - 103,307 -

Wintek Technology India 16,552 - 44,077 -

Others 71 - 5,732 -

$ 244,517 - $ 331,987 -

The prices for purchases from related parties are individually negotiated on the basis of the

difference between the product price and the related market quotation. The payment terms were as

follows:


Related Party 2011 2010

Dongguan Masstop T/T 60 days T/T 60 days

Hannstar 15 days after the end of the

transaction month

15 days after the end of the

transaction month

Wintek Technology India T/T 90 days T/T 90 days

- 39 -


2011 2010

Amount % Amount %

3) Cost of goods sold - outsourced production

activities, packing expenses and spare parts

United Win China $ 8,724,985 10 $ 8,046,381 14

Dongguan Masstop 8,396,439 9 4,538,692 8

Wintek Vietnam 26,701 - - -

Mactech 19,413 - 13,271 -

Wintek Technology India - - 3,119 -

$ 17,167,538 19 $ 12,601,463 22

4) Operating expenses - commissions

Wintek Central Europe $ 12,995 1 $ 21,243 1

5) Nonoperating income and gains - royalty

and others

Wintek Vietnam $ 28,926 12 $ - -

United Win China 12,982 6 90,741 6

Dongguan Masstop 12,125 5 73,869 4

Walsin - - 932 -

Others 767 - 542 -

$ 54,800 23 $ 166,084 10

Other income is revenue of the Corporation on its purchase of raw materials, supplies and

machinery and equipment on behalf of its subsidiaries. The unrealized gain on this transaction as

of December 31, 2011 was $117,527 thousand (recorded under deferred intercompany gain).

December 31

2011 2010

Amount % Amount %

6) Accounts receivable

Wintek Technology India $ 62,235 68 $ 312,099 83

Wintek Electro-Optics 16,053 18 63,863 17

Dongguan Masstop 12,721 14 - -

Others - - 333 -

$ 91,009 100 $ 376,295 100

7) Other receivables

Dongguan Masstop $ 1,631,061 47 $ 5,084,238 73

Wintek China 460,155 13 - -

Wintek Vietnam 319,041 9 - -

United Win China 274,947 8 1,256,317 18

Others 633 - 41 -

$ 2,685,837 77 $ 6,340,596 91

- 40 -

The Corporation bought machinery and equipment on behalf of Dongguan Masstop, Wintek China,

Wintek Vietnam and United Win China for production use. Generally, the collection period was

three months after the date of shipping or inspection.

December 31

2011 2010

Amount % Amount %

8) Accounts payable

United Win China $ 5,829,474 100 $ 4,047,878 100

Wintek Vietnam 25,060 - - -

Others 71 - 97 -

$ 5,854,605 100 $ 4,047,975 100

9) Accrued expenses

Wintek Central Europe $ 5,797 - $ 6,340 -

10) Payables for the acquisition of equipment

Mactech $ 466,713 51 $ 121,406 74

11) Other payables (recorded under other

current liabilities)

Mactech $ 1,077,087 75 $ 788,165 46

Wintek Electro-Optics 6,630 - 7,935 -

Others - - 104 -

$ 1,083,717 75 $ 796,204 46

The Corporation bought machinery and equipment on behalf of related parties.

12) Transactions involving property, plant and equipment

Acquisitions Amount


Mactech Prepayments for equipment $ 1,366,475

Machinery and equipment 119,150

United Win China Machinery and equipment 131,406

Wintek Electro-Optics Prepayments for equipment 54,986


$ 1,679,297


Mactech Prepayments for equipment $ 105,758


Wintek Electro-Optics Prepayments for equipment 78,080

Machinery and equipment 272

(Continued)

- 41 -

Acquisitions Amount


United Win China Machinery and equipment $ 111,354

Dongguan Masstop Machinery and miscellaneous equipment 12,134

$ 366,512

(Concluded)

Gain on

Disposal

Fair Carrying of

Sale/Disposal Value Value Properties

Year ended December 31,

2011

United Win China Machinery and equipment $ 2,492 $ 2,361 $ 131

Wintek Vietnam Machinery and equipment 4,267 3,858 409

Furniture and fixtures 71 71 -

Miscellaneous equipment 454 - 454

Dongguan Masstop Machinery and equipment 3,681 3,394 287

Deferred expense 112 - 112

$ 11,077 $ 9,684 $ 1,393

Year ended December 31,

2010

United Win China Machinery and equipment $ 21,280 $ 21,129 $ 151

Dongguan Masstop Machinery and equipment 59,424 52,308 7,116

Miscellaneous equipment 2,350 1,766 584

Wintek Electro-Optics Machinery and equipment 631 618 13

$ 83,685 $ 75,821 $ 7,864

In 2007, the Corporation sold to Dongguan Masstop property, plant and equipment with a carrying

value of $82,597 thousand. The gain of $8,010 thousand on this sale, which was a downstream

transaction with an equity-method investee, should be deferred and amortized. The amortization

of the deferred gain of $1,602 thousand had been completed as of December 31, 2011.

13) Financing to related party (recorded under other receivables)


Related Party

Maximum

Balance Ending Balance Interest Rate Interest Income

Dongguan Masstop $ 1,732,352 $ - 1.24% $ 7,294

- 42 -

14) Guarantees

Counterparty Guaranteed Item Guarantee Amount

As of December 31, 2011

United Win H.K. Loans from banks $ 3,621,140 (US$122,000 thousand)

Masstop Loans from banks 2,889,310 (US$97,500 thousand)

Dongguan Masstop Loans from banks 5,202,787 (US$5,000 thousand and

RMB1,100,000 thousand)

United Win China Loans from banks 143,900 (US$5,000 thousand)

As of December 31, 2010

United Win H.K. Loans from banks $ 1,324,580 (US$42,000 thousand)

Masstop Loans from banks 1,521,655 (US$47,000 thousand)

Dongguan Masstop Loans from banks 3,207,526 (US$5,000 thousand,

RMB650,000 thousand)

United Win China Loans from banks 97,440 (US$3,000 thousand)

In August 2011, Masstop and United Win H.K. entered into a US$200,000 thousand loan agreement

with a syndicate of banks led by Bank of Taiwan. The Corporation guaranteed this loan.

Under the loan agreement, the Corporation should (a) maintain current, debt and interest coverage

ratios every fiscal year based on the Corporation’s audited annual consolidated financial statements

and (b) ensure that as a direct or indirect owner of an equity interest of more than 75% each in

Masstop, United Win H.K., Dongguan Masstop and United Win China, it maintains operating

control over these four subsidiaries.

c. Compensation of directors, supervisors and management personnel


2011 2010

Salaries $ 33,376 $ 26,454

Incentives 68,152 64,234

Bonus - 57,887

Service fees 413 315

$ 101,941 $ 148,890

24. MORTGAGED OR PLEDGED ASSETS

The Corporation mortgaged or pledged as collaterals for letters of credit, long-term bank loans and

endorsements provided to subsidiaries were as follows:

December 31

2011 2010


Inventory - 419

$ 6,510,655 $ 9,239,279

- 43 -

25. SIGNIFICANT COMMITMENTS AS OF DECEMBER 31, 2011

a. Unused letters of credit were about $516,121 thousand.

b. The purchase of machinery and equipment amounted to about $528,436 thousand.

c. The purchase of buildings amounted to about $159,493 thousand.

d. Checks for $6,799,150 thousand had been issued for various financial guarantees provided (please see

Note 23 and Table 2)

e. The Corporation issued a promissory note amounting to US$266,000 thousand as collateral to a bank

counter-party that allegedly suffered loss due to a commercial dispute involving factoring agreements.

f. Under sales agreements expiring between 2012 and 2017, the Corporation should pay royalty fees at a

percentage of net sales of certain products. For the years ended December 31, 2011 and 2010 royalty

fees were $177,465 thousand and $232,500 thousand, respectively.

g. The Corporation leases transportation equipment, office and warehouses under renewable operating

lease agreements expiring between April 2012 and April 2016.

As of December 31, 2011, future lease payables were as follows:

Year Amount

2012 $ 12,821

2013 2,920

2014 1,242

2015 1,242

2016 and after 2016 311

$ 18,536

26. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND

LIABILITIES

The significant foreign-currency assets and liabilities of the Corporation were as follows:

December 31

2011 2010

Foreign

Currencies

(In Thousands)

Exchange

Rate

New Taiwan

Dollars

Foreign

Currencies

(In Thousands)

Exchange

Rate

New Taiwan

Dollars

Financial assets

Monetary items

USD $ 670,171 30.28 $ 20,292,778 $ 629,418 29.13 $ 18,334,946

JPY 72,968 0.39 28,458 23,733 0.36 8,544

EUR 2,481 39.18 97,206 1,037 38.92 40,360

Nonmonetary items

USD 1,281 30.28 38,789 234 29.13 6,816

Investments accounted for

by the equity method

USD 777,182 30.28 23,533,071 469,046 29.13 13,663,310

EUR 3,187 39.18 124,867 3,157 38.92 122,870

- 44 -

December 31

2011 2010

Foreign

Currencies

(In Thousands)

Exchange

rate

New Taiwan

Dollars

Foreign

Currencies

(In Thousands)

Exchange

rate

New Taiwan

Dollars

Financial liabilities

Monetary items

USD $ 709,747 30.28 $ 21,491,139 $ 471,724 29.13 $ 13,741,320

JPY 1,254,479 0.39 489,247 3,191,546 0.36 1,148,957

Nonmonetary items

USD 482 30.28 14,595 1,888 29.13 54,997

27. ADDITIONAL DISCLOSURES

The following disclosures are made as required by the Securities and Futures Bureau for the Corporation

and its investees:

a. Financings provided: Table 1 (attached)

b. Endorsements/guarantees provided: Table 2 (attached)

c. Marketable securities held: Table 3 (attached)

d. Marketable securities acquired or disposed of at cost or prices of at least NT$100 million or 20% of the

paid-in capital: Table 4 (attached)

e. Acquisition of individual real estate at costs of at least NT$100 million or 20% of the paid-in capital:

Table 5 (attached)

f. Disposal of individual real estate at prices of at least NT$100 million or 20% of the paid-in capital:

None

g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital:

Table 6 (attached)

h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital:

Table 7 (attached)

i. Names, locations, and related information of investees over which the Corporation exercises significant

influence: Table 8 (attached)

j. Derivative transactions of investees over which the Corporation has a controlling interest: Table 9,

Table 9-1 and Table 9-2 (attached)

k. Investments in Mainland China:

1) Name of the investees in Mainland China, main businesses and products, paid-in capital, method of

investment, information on inflow or outflow of capital, percentage of ownership, Investment net

income or loss, ending balance of investment, dividends remitted by the investee, and the limit of

investment in Mainland China: Table 10 (attached)

2) Significant direct or indirect transactions with the investees, prices and terms of payment, and

unrealized gain or loss: Please see Notes 10 and 23

- 45 -

3) Significant direct or indirect endorsement or guarantees provided to the investees: Table 2

(attached)

4) Significant direct or indirect financing provided to the investees: Table 1 (attached)

5) Other transactions with significant effect on the current income statement or financial position:

None

28. OPERATING SEGMENT FINANCIAL INFORMATION

The Corporation’s operating segment financial information has been disclosed in the consolidated financial

statement as of and for the years ended December 31, 2011 and 2010.

- 46 -

TABLE 1

WINTEK CORPORATION AND INVESTEES

FINANCINGS PROVIDED

YEAR ENDED DECEMBER 31, 2011

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. Financier Counter-party Financial Statement Account Highest Balance

for the Period

Ending Balance

(Note 4)

Actual Amount

Used

Interest

Rate

Type of

Financing

Transaction

Amounts

Reasons for

Short-term

Financing

Allowance for

Doubtful

Accounts

Mortgage Maximum

Amount of the

Financing That

Can Be Provided

by the Financier

Item Value

0 Wintek Corporation Dongguan Masstop Other receivables - related parties $ 1,732,352 $ - $ - - Note 1 $ - Operating capital $ - - - Note 2

(US$ 60,026)

Wintek Vietnam Other receivables - related parties 24,657 - - - Note 1 - Operating capital - - - Note 2

(US$ 814)

1 United Win Cayman United Win H.K. Receivables from related parties US$ 40,000 US$ 40,000 US$ 32,000 1.79% Note 1 - Operating capital - - - Note 3

2 United Win H.K. United Win China Receivables from related parties US$120,000 US$120,000 US$ 91,000 1.79%-2.62% Note 1 - Operating capital - - - Note 3

Wintek China Receivables from related parties US$ 40,000 US$ 40,000 US$ 40,000 0.90-1.74% Note 1 - Operating capital - - - Note 3

3 Masstop Dongguan Masstop Receivables from related parties US$ 83,000 US$ 83,000 US$ 83,000 1.74%-2.58% Note 1 - Operating capital - - - Note 3

4 Wintek BVI Wintek Far East Receivables from related parties US$ 2,000 US$ 2,000 US$ 2,000 - Note 1 - Operating capital - - - Note 3

5 United Win China Wintek China Receivables from related parties US$ 80,000 US$ 80,000 US$ - - Note 1 - Operating capital - - - Note 3

4 Dongguan Masstop Wintek China Receivables from related parties US$ 63,000 US$ 63,000 US$ - - Note 1 - Operating capital - - - Note 3

Note 1: Necessary for short-term financing.

Note 2: The maximum amount provided to a signal entity was 6.25% of the Corporation’s net assets as of December 31, 2010 ($28,495,796 thousand x 6.25% = $1,780,987). For total financing provided, the maximum amount was 12.5% of the net assets of December 31, 2010 ($28,495,796

thousand x 12.5% = $3,561,975 thousand).

Note 3: For the financing provided by each subsidiary, the maximum amount should not exceed 25% of the net assets of the Corporation as of December 31, 2010 ($28,495,796 thousand x 25% = $7,123,949 thousand).

Note 4: The ending balance amount has been approved by the board of directors.

- 47 -

TABLE 2


ENDORSEMENTS/GUARANTEES PROVIDED



No. Endorser/

Guarantor

Counterparty Maximum Amount of

the Guarantee that

Can be Provided to

Each Counterparty

Maximum

Balance for the Period Ending Balance

Value of Collaterals

Properties

Ratio of Accumulated

Amount of Guarantee

Provided to Net Equity

of the Latest Financial

Statements

Maximum Amount of

the Total Guarantee

that Can be Provided

by the Guarantor

Name Nature of Relationship

0 Wintek Corporation United Win H.K. Note 1 Note 2 $ 4,806,860

(US$ 162,000)

$ 3,621,140

(US$ 122,000) $ - 9.53% Note 3

Masstop Note 1 Note 2 3,711,579

(US$ 124,500)

2,889,310

(US$ 97,500) - 7.60% Note 3

Dongguan Masstop Note 1 Note 2 5,218,037

(US$ 5,000 and

RMB 1,100,000)

5,202,787

(US$ 5,000 and

RMB 1,100,000)

- 13.69% Note 3

United Win China Note 1 Note 2 143,900

(US$ 5,000)

143,900

(US$ 5,000) - 0.38% Note 3

Note 1: See Note 23 to the financial statements.

Note 2: The maximum amount was 25% of the Corporation’s net assets as of December 31, 2010 ($28,495,796 x 25% = $7,123,949).

Note 3: The maximum was 50% of the Corporation’s net assets as of December 31, 2010 ($28,495,796 x 50% = $14,247,898).

Note 4: For the guarantees jointly provided by the Corporation and subsidiaries, the maximum amount of guarantee to each counterparty and total guarantee were 50% of the Corporation’s net assets as of December 31, 2010.

- 48 -

TABLE 3


MARKETABLE SECURITIES HELD

DECEMBER 31, 2011


Holding Company Type and Issuer of Securities Held Relationship with the

Holding Company Financial Statement Account

December 31, 2011

Note Shares Carrying Value

Percentage of

Ownership

Market Value or

Net Asset Value

(Note)

Wintek Corporation Capital stock

Sitronix Technology Co., Ltd. - Available-for-sale financial assets - current 3,247,657 $ 106,523 3 $ 106,523

Wintek Technology Cayman Investee Investments accounted for by the equity method 114,760,801 10,735,097 100 10,803,567

Wintek BVI Investee Investments accounted for by the equity method 169,730,328 5,104,835 100 5,104,835

Wintek International Holding Investee Investments accounted for by the equity method 16,610,003 254,091 100 254,091

Wintek Electro-Optics Investee Investments accounted for by the equity method 1,000 164,101 100 167,348

Mactech Equity-method Investee Investments accounted for by the equity method 18,324,187 112,919 50 393,052

United Win Investment Investee Investments accounted for by the equity method 20,704,000 83,322 100 83,322

WinPower Equity-method Investee Investments accounted for by the equity method 1,950,000 17,216 36 17,216

Kingpak The president of Wintek

Corporation is a brother

of Kingpak’s president

Financial assets carried at cost - noncurrent 7,792,952 113,160 6 91,673

Calin Technology - Financial assets carried at cost - noncurrent 3,037,852 40,748 4 39,902

Transcom - Financial assets carried at cost - noncurrent 1,324,166 9,595 5 8,002

Integrated Solutions - Financial assets carried at cost - noncurrent 322,044 3,510 1 2,642

Uniflex - Financial assets carried at cost - noncurrent 384,860 3,176 1 2,427

Mobilic Cayman - Financial assets carried at cost - noncurrent 2,340,839 - 11 13

Microsystems - Financial assets carried at cost - noncurrent 6,388,936 - 4 43,177

Andes - Financial assets carried at cost - noncurrent 1,156,955 - 2 7,683

Share capital

Masstop LLC Investee Investments accounted for by the equity method 187,702,422 7,174,204 100 7,199,554

Wintek Central Europe Investee Investments accounted for by the equity method - 124,867 100 124,867

Wintek Technology Cayman Capital stock

United Win Cayman Investee Investments accounted for by the equity method 110,902,030 US$ 349,433 100 US$ 349,433

Apticon Inc. - Investments accounted for by the equity method 3,333,333 US$ - 23 US$ -

Focal Tech Systems Inc. - Financial assets carried at cost - noncurrent 1,000,000 US$ 1,000 2 US$ 566

Share capital

IDesia Ltd. - Financial assets carried at cost - noncurrent 358,822 US$ - 10 US$ -

United Win Cayman Capital stock

United Win H.K. Investee Investments accounted for by the equity method 476,971,586 US$ 265,660 100 US$ 265,660

Wintek Technology H.K. Investee Investments accounted for by the equity method 49,700,000 US$ 50,692 100 US$ 50,692

United Win H.K. Share capital

United Win China Investee Investments accounted for by the equity method - HK$ 2,057,127 100 HK$ 2,057,127

(Continued)

- 49 -

Holding Company Type and Issuer of Securities Held Relationship with the

Holding Company Financial Statement Account

December 31, 2011

Note Shares Carrying Value

Percentage of

Ownership

Market Value or

Net Asset Value

(Note)

Wintek Technology H.K. Share capital

Wintek China Investee Investments accounted for by the equity method - HK$ 393,822 100 HK$ 393,822

Masstop LLC Capital stock

Masstop Investee Investments accounted for by the equity method 1,460,304,927 US$ 237,805 100 US$ 236,568

Masstop Share capital

Dongguan Masstop Investee Investments accounted for by the equity method - HK$ 1,809,940 100 HK$ 1,809,940

Donggan Masstop Share capital

Dongguan Innolife Investee Investments accounted for by the equity method - RMB 996 100 RMB 996

Wintek BVI Capital stock

Wintek Samoa Investee Investments accounted for by the equity method 166,000,000 US$ 154,842 100 US$ 154,842

Wintek Samoa Share capital

Wintek Vietnam Investee Investments accounted for by the equity method 149,000,000 US$ 137,830 100 US$ 137,830

United Win Investment Mutual funds

Capital Greater China - Available-for-sale financial assets - current 1,300,000 $ 12,987 - $ 12,987

Cathay Emerging Markets Fund - Available-for-sale financial assets - current 1,500,000 11,655 - 11,655

BNP Paribas TCB Elite Taiwan Fund - Available-for-sale financial assets - current 1,000,000 7,860 - 7,860

Capital stock

Uniflex - Financial assets carried at cost - noncurrent 394,728 3,258 1 2,489

Andes - Financial assets carried at cost - noncurrent 1,735,434 - 4 11,525

Kingpak - Financial assets carried at cost - noncurrent 2,066,000 20,000 2 24,304

Hsin Chu Golf Country Club Co., Ltd. - Financial assets carried at cost - noncurrent 3 9,260 - 220

Microsystems - Financial assets carried at cost - noncurrent 622,736 - - 4,209

Integrated Solutions - Financial assets carried at cost - noncurrent 322,044 3,308 1 2,642

Ultra Chip Inc. - Financial assets carried at cost - noncurrent 83,325 1,489 - 782

Calin Technology - Financial assets carried at cost - noncurrent 72,000 900 - 946

Mobilic Cayman - Financial assets carried at cost - noncurrent 1,280,000 - 6 7

Wintek International Holding Capital stock

Wintek Far East Equity-method Investee Investments accounted for by the equity method 16,610,000 US$ 8,393 81 US$ 8,393

Wintek Technology India Equity-method Investee Investments accounted for by the equity method 3 US$ - - US$ -

Wintek Electro-Optics Capital stock

Wintek Far East Equity-method Investee Investments accounted for by the equity method 4,000,000 US$ 2,021 19 US$ 2,021

Wintek Far East Capital stock

Wintek Technology India Equity-method Investee Investments accounted for by the equity method 22,610,000 US$ 12,414 100 US$ 12,414

Mactech Mutual funds

Allianz Glbl Inv All Seasons Hvest - Available-for-sale financial assets - current 3,000,000 $ 30,000 - $ 30,000

Capital stock

Taichung International Country Club - Financial assets carried at cost - noncurrent 3 2,940 - 490

Note: The estimated fair values of the securities held with no quoted market prices were based on the investees’ net assets. (Concluded)

- 50 -

TABLE 4


MARKETABLE SECURITIES ACQUIRED OR DISPOSED OF AT COST OR PRICES OF AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL



Company Name Type and Issuer of

Marketable Securities Financial Statement Account Counterparty

Nature of the

Relationship

Beginning Balance (Note) Acquisition

Investment

Gains (Losses)

Translation

Adjustments

Disposal Unrealized

(Realized) Gains

on Financial

Instruments

Ending Balance (Note)

Number of

Shares Amount

Number of

Shares Amount

Number of

Shares Amount Carrying Value

Gain (Loss) on

Disposal

Number of

Shares Amount

Wintek Corporation Mutual funds

YWT Money Market

Fund

Available-for-sale financial

assets - current

- - - $ - 19,948,409 $ 290,003 $ - $ - 19,948,409 $ 290,078 $ 290,003 $ 75 $ - - $ -

Capital stock

Wintek Technology

Cayman

Investments accounted for by

equity method

Wintek Technology Cayman Investee 95,060,801 9,390,864 19,700,000 594,595 (112,274 ) 861,912 - - - - - 114,760,801 10,735,097

Wintek BVI Investments accounted for by

equity method

Wintek BVI Investee 5,730,328 487,597 164,000,000 4,849,120 (363,534 ) 131,652 - - - - - 169,730,328 5,104,835

Share capital

Masstop LLC Investments accounted for by

equity method

Masstop LLC Investee 68,000,174 3,241,286 119,702,248 3,551,924 (34,552 ) 415,546 - - - - - 187,702,422 7,174,204

Wintek Technology

Cayman

Capital stock

United Win Cayman Investments accounted for by

equity method

United Win Cayman Investee 91,202,030 US$ 313,529 19,700,000 US$ 19,700 US$ 877 US$ 15,327 - - - - - 110,902,030 US$ 349,433

United Win Cayman Capital stock

Wintek Technology H.K. Investments accounted for by

equity method

Wintek Technology H.K. Investee 30,000,000 US$ 29,963 19,700,000 US$ 19,700 US$ (625 ) US$ 1,654 - - - - - 49,700,000 US$ 50,692

Wintek Technology H.K. Capital stock

Wintek China Investments accounted for by

equity method

Wintek China Investee - HK$ 232,883 - HK$ 153,214 HK$ (4,860 ) HK$ 12,585 - - - - - - HK$ 393,822

Masstop LLC Capital stock

Masstop Investments accounted for by

equity method

Masstop Investee 528,951,683 US$ 111,275 931,353,244 US$ 119,702 US$ (766 ) US$ 7,594 - - - - - 1,460,304,927 US$ 237,805

Masstop Share capital

Dongguan Masstop Investments accounted for by

equity method

Dongguan Masstop Investee - HK$ 821,064 - HK$ 931,348 HK$ 530 HK$ 56,998 - - - - - - HK$ 1,809,940

Wintek BVI Capital stock

Wintek Samoa Investments accounted for by

equity method

Wintek Samoa Investee 2,000,000 US$ 2,000 164,000,000 US$ 164,000 US$ (11,158 ) - - - - - - 166,000,000 US$ 154,842

Wintek Samoa Capital stock

Wintek Vietnam Investments accounted for by

equity method

Wintek Vietnam Investee - US$ - 149,000,000 US$ 149,000 US$ (11,170 ) - - - - - - 149,000,000 US$ 137,830

Note: Beginning and ending balances include the investees’ income (loss) and cumulative translation adjustments.

- 51 -

TABLE 5


ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL



Company Name Type of Property Transaction Date Transaction

Amount Payment Term Counter-party

Nature of

Relationship

Prior Transaction made by Related Counter-party Price Reference

Purpose of

Acquisition Other Terms

Owner Relationship Transfer Date Amount

Wintek Corporation Land January 11, 2011 $ 404,392 $ 404,392 Wu Chin-Kuan and

Huang Shun-Lan

Nil - - - $ - Valuation report For production

expansion

-

Wintek Vietnam Land use rights March 2011 US$ 9,354 US$ 9,354 Sai Gon-Bac Giang

Industrial Park

Corporation

Nil - - - - - For production

expansion

-

Land use rights September 2011 US$ 6,821 US$ 2,728 Sai Gon-Bac Giang

Industrial Park

Corporation

Nil - - - - - For production

expansion

-

Factory buildings

of S area and Q

area

September 2011 US$ 3,423 US$ 3,423 Sai Gon-Bac Giang

Industrial Park

Corporation

Nil - - - - Estimation of

construction

For production

expansion

-

Buildings of R area August 2011 US$ 25,976 US$ 16,586 Kim Vuon

Construction &

Consulting Co.,

Ltd.


construction

For production

expansion

-

August 2011 US$ 19,280 US$ 13,496 Jianxing Vietnam

Construction

Development

Company Limited


construction

For production

expansion

-

August 2011 US$ 6,600 US$ 4,331 Cong Ty Tnhh Phat

Trien Quoc Te

Thang Viet


construction

For production

expansion

-

December 2011 US$ 8,965 US$ 1,608 Jianxing Vietnam

Construction

Development

Company Limited


construction

For production

expansion

-

Buildings of Q

area

August 2011 US$ 4,945 US$ 2,588 Cong Ty Trach Nhiem

Huu Han Kim Dinh


construction

For production

expansion

-

August 2011 US$ 844 US$ 136 Kim Vuon

Construction &

Consulting Co.,

Ltd.


construction

For production

expansion

-

September 2011 US$ 1,640 US$ 1,032 Jianxing Vietnam

Construction

Development

Company Limited


construction

For production

expansion

-

September 2011 US$ 860 US$ 516 Cong Ty Tnhh Phat

Trien Quoc Te

Thang Viet


construction

For production

expansion

-

November 2011 US$ 200 US$ - Cong Yu Sheng

Construction Co.,

Ltd.


construction

For production

expansion

-

(Continued)

- 52 -

Company Name Type of Property Transaction Date Transaction

Amount Payment Term Counter-party

Nature of

Relationship

Prior Transaction made by Related Counter-party Price Reference

Purpose of

Acquisition Other Terms

Owner Relationship Transfer Date Amount

Wintek Vietnam Buildings of S area August 2011 US$ 728 US$ 112 Kim Vuon

Construction &

Consulting Co., Ltd.

Nil - - - $ - Estimation of

construction

For production

expansion

-

August 2011 US$ 413 US$ 207 Jianxing Vietnam

Construction

Development

Company Limited


construction

For production

expansion

-

September 2011 US$ 3,837 US$ 833 Cong Ty Trach Nhiem

Huu Han Kim Dinh


construction

For production

expansion

-

October 2011 US$ 75 US$ 8 Jianxing Vietnam

Construction

Development

Company Limited


construction

For production

expansion

-

November 2011 US$ 88 US$ - Cong Ty Tnhh Phat

Trien Quoc Te

Thang Viet


construction

For production

expansion

-

November 2011 US$ 134 US$ - Lap Thanh Co., Ltd. Nil - - - - Estimation of

construction

For production

expansion

-

-

Wintek China Restaurant July 2011 RMB 18,200 RMB 13,650 Dongguan Stralight

Construction

(Group) Co., Ltd.


construction

For production

expansion

-

July 2011 RMB 26,400 RMB 19,800 Hunan Wangcheng

Construction

(Group) Co., Ltd.


construction

For production

expansion

-

Office buildings July 2011 RMB 28,000 RMB 23,800 Hunan Wangcheng

Construction

(Group) Co., Ltd.


construction

For production

expansion

-

July 2011 RMB 19,000 RMB 16,150 Dongguan Stralight

Construction

(Group) Co., Ltd.


construction

For production

expansion

-

July 2011 RMB 1,797 RMB 1,032 Fing Living Desing

Studio


construction

For production

expansion

-

Integrated

Construction

October 2011 RMB 4,285 RMB 1,928 Foshan Huadun Civil

Defence Engineering

Co., Ltd.


construction

For production

expansion

-

October 2011 RMB 189 RMB - DongGuan

SongShanHu Water

Supply and sewerage

engineering Co., Ltd.


construction

For production

expansion

-

October 2011 RMB 922,630 RMB 161,902 Dongguan Stralight

Construction

(Group) Co., Ltd.


construction

For production

expansion

-

October 2011 RMB 145 RMB - DongGuan YueDong

Fire-fighting Co.,

Ltd.


construction

For production

expansion

-

October 2011 RMB 357,200 RMB 71,880 Mao Ming Shi Mao

Han Jian An Ji Tuan

Co., Ltd.


construction

For production

expansion

-

October 2011 RMB 22,425 RMB 10,361 Fing Living Desing

Studio


construction

For production

expansion

-

October 2011 RMB 116,400 RMB - Human Wangcheng

Construction

(Group) Co., Ltd.


construction

For production

expansion

-

(Concluded)

- 53 -

TABLE 6


TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL



Purchaser or Seller Related Party Nature of Relationship

with the Purchaser or Seller

Transaction Details Abnormal Transaction Notes and Accounts

Receivable (Payable) Note

Purchase

or Sale Amount

% to

Total Collection Terms Unit Price Collection Terms

Ending

Balance

%

to Total

Wintek Corporation Wintek Technology India Note Sale $ (723,630) (1%) T/T 90 days - - $ 62,235 -

United Win China Note Sale (411,189) - T/T 90 days - - - -

Wintek Electro-Optics Note Sale (156,180) - T/T 60 days - - 16,053 -

Dongguan Masstop Note Purchase 135,678 - T/T 60 days - - - -

Dongguan Masstop Wintek Corporation Note Sale (135,678) (2%) T/T 60 days - - - -

Wintek Technology India Wintek Corporation Note Purchase 723,630 84% T/T 90 days - - (62,235) (100%)

Wintek Electro-Optics Wintek Corporation Note Purchase 156,180 82% T/T 60 days - - (16,053) (100%)

United Win China Wintek Corporation Note Purchase 411,189 33% T/T 90 days - - - -

Note: See Note 23 to the financial statements.

- 54 -

TABLE 7


RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL

DECEMBER 31, 2011


Company Name Related Party Nature of Relationship Ending Balance Turnover

Rate

Overdue Amounts Received

in Subsequent

Period

Allowance for

Doubtful Accounts Amount Action Taken

Wintek Corporation Dongguan Masstop (Note 1) $ 1,643,782

(Note 4)

2.46 $ - - $ 2,840 $ -

Wintek China (Note 1) 460,155

(Note 3)

- - - 114,777 -

Wintek Vietnam (Note 1) 319,041

(Note 3)

- - - - -

United Win China (Note 1) 274,947

(Note 3)

- - - - -

United Win China Wintek Corporation (Note 1) 5,829,474

(Note 4)

5.43 - - 1,484,554 -

Mactech Wintek Corporation (Note 1) 1,543,800

(Note 2)

3.68 - - 1,072,356 -

United Win Cayman United Win H.K. (Note 1) US$ 32,000

(Note 5)

- - - US$ 32,000 -

United Win H.K. United Win China (Note 1) US$ 91,000

(Note 5)

- - - US$ 32,000 -

Wintek China (Note 1) US$ 40,000

(Note 5)

- - - - -

Masstop Dongguan Masstop (Note 1) US$ 83,000

(Note 5)

- - - - -

Note 1: See Note 23 to the financial statements.

Note 2: The ending balance was under accounts receivable.

Note 3: The ending balance was under other receivables.

Note 4: The ending balance was under accounts receivable and other receivables.

Note 5: The ending balance was under other receivables from related parties.

- 55 -

TABLE 8

WINTEK CORPORATION AND INVESTEES NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE



Investor Investee Location Main Businesses and Products

Investment Amount Balance as of December 31, 2011 Net Income (Loss)

of the Investee

Investment Net

Income (Loss)

Recognized

Note December 31,

2011

December 31,

2010 Shares

Percentage of

Ownership Carrying Value

Wintek Corporation Wintek Technology Cayman British Cayman Islands Overseas reinvested holding company $ 3,676,432 $ 3,081,837 114,760,801 100 $ 10,735,097 $ (84,812) $ (112,274) Subsidiary

Masstop LLC United States Overseas reinvested holding company 5,760,840 2,208,916 187,702,422 100 7,174,204 (9,346) (34,552) Subsidiary

Wintek BVI British Virgin Islands Overseas reinvested holding company 5,029,705 180,585 169,730,328 100 5,104,835 (363,747) (363,534) Subsidiary

Wintek International Holding British Cayman Islands Overseas reinvested holding company 530,754 530,754 16,610,003 100 254,091 (28,738) (28,738) Subsidiary

Wintek Electro-Optics United States Sells LCD/LCM products 111,393 111,393 1,000 100 164,101 3,843 3,769 Subsidiary

Wintek Central Europe Germany Seller of LCD/LCM products 53,475 53,475 - 100 124,867 1,224 1,224 Subsidiary

Mactech Taichung, Taiwan Manufactures machinery and equipment 54,581 54,581 18,324,187 50 112,919 230,671 54,716 Investments accounted

for by the equity

method

United Win Investment Taichung, Taiwan Investment 202,000 202,000 20,704,000 100 83,322 (85,772) (85,772) Subsidiary

WinPower Hsinchu Hsien, Taiwan IC design 23,625 - 1,950,000 36 17,216 (17,780) (6,517) Investments accounted

for by the equity

method

Wintek Technology Cayman United Win Cayman British Cayman Islands Overseas reinvested holding company US$ 110,902 US$ 91,202 110,902,030 100 US$ 349,433 US$ 877 (Note) Indirectly owned

subsidiary

Apticon Inc. British Cayman Islands Overseas reinvested holding company US$ 6,000 US$ 6,000 3,333,333

23

US$ - - (Note) Investments accounted

for by the equity

method

United Win Cayman United Win H.K. Hong Kong Overseas reinvested holding company US$ 61,202 US$ 61,202 476,971,586 100 US$ 265,660 US$ 952 (Note) Indirectly owned

subsidiary

Wintek Technology H.K. Hong Kong Overseas reinvested holding company US$ 49,700 US$ 30,000 49,700,000 100 US$ 50,692 US$ (625) (Note) Indirectly owned

subsidiary

United Win H.K. United Win China Suzhou, People’s Republic of China Manufactures and sells electronic

components, accessories and related

products

US$ 60,912 US$ 60,912 - 100 HK$ 2,057,127 HK$ 13,453 (Note) Indirectly owned

subsidiary

Wintek Technology H.K. Wintek China Dongguan, People’s Republic of China Researches, develops, manufactures and sells

LCM products

US$ 49,700 US$ 30,000 - 100 HK$ 393,822 HK$ (4,860) (Note) Indirectly owned

subsidiary

Masstop LLC Masstop Hong Kong Overseas reinvested holding company and

seller of LCD/LCM products

US$ 187,702 US$ 68,000 1,460,304,927 100 US$ 237,805 US$ (766) (Note) Indirectly owned

subsidiary

Masstop Dongguan Masstop Dongguan, People’s Republic of China Manufactures and sells LCM and touch panel

products

HK$ 1,437,213 HK$ 505,865 - 100 HK$ 1,809,940 HK$ 530 (Note) Indirectly owned

subsidiary

Dongguan Masstop Dongguan Innolife Dongguan, People’s Republic of China Import and export trading RMB 1,000 RMB - - 100 RMB 996 RMB (4) (Note) Indirectly owned

subsidiary

Wintek BVI Wintek Samoa Samoa Islands Overseas reinvested holding company US$ 166,000 US$ 2,000 166,000,000 100 US$ 154,842 US$ (11,158) (Note) Indirectly owned

subsidiary

Wintek Samoa Wintek Vietnam Vietnam Manufactures and processes LCD/LCM and

touch panel products

US$ 149,000 US$ - 149,000,000 100 US$ 137,830 US$ (11,170) (Note) Indirectly owned

subsidiary

Wintek International Holding Wintek Far East British Cayman Islands Overseas reinvested holding company US$ 16,610 US$ 16,610 16,610,000 81 US$ 8,393 US$ (1,191) (Note) Indirectly owned

subsidiary

Wintek Technology India India Manufactures and sells LCD/LCM products US$ - US$ - 3 - US$ - US$ (1,191) (Note) Indirectly owned

subsidiary

Wintek Electro-Optics Wintek Far East British Cayman Islands Overseas reinvested holding company US$ 4,000 US$ 4,000 4,000,000 19 US$ 2,021 US$ (1,191) (Note) Indirectly owned

subsidiary

Wintek Far East Wintek Technology India India Manufactures and sells LCD/LCM products US$ 22,610 US$ 22,610 22,610,000 100 US$ 12,414 US$ (1,191) (Note) Indirectly owned

subsidiary

Note: Under certain regulations, the net investment income recognized need not be disclosed.

- 56 -

TABLE 9


DERIVATIVE TRANSACTIONS


United Win H.K. used an interest rate swap contract to hedge against its exposures to rising interest rates on its

floating-rate (USD LIBOR) long-term bank loan. The contract had already expired at the end of December

2011. The transaction resulted in a loss of HK$53 thousand for the year ended December 31, 2011.

United Win H.K. used a currency structured instrument, which resulted in a net receivable of HK$1,185

thousand, recorded as financial assets at fair value through profit or loss - currency-structured instruments as of

December 31, 2011. The transaction resulted in net a gain of HK$1,506 thousand for the year ended

December 31, 2011. The structured currency instruments is summarized as follows:

Contract Amount (In Thousands) Maturity Exchange Rate

US$ 4,000

From November 10, 2011 to

October 11, 2013

RMB6.7:US$ 1.00

- 57 -

TABLE 9-1


DERIVATIVE TRANSACTIONS OF INVESTEES OVER WHICH THE CORPORATION HAS A

CONTROLLING INTEREST


Mactech entered into forward exchange contracts, which resulted in a net receivable of NT$152 thousand,

recorded as financial assets at fair value through profit or loss - forward exchange contracts as of December 31,

2011. The contracts resulted in net losses of NT$4,833 thousand for the year ended December 31, 2011. The

open forward exchange contracts are summarized as follows:

Forward Exchange

Contracts - Sell

Contract Amount

(In Thousands)

Credit Risk

(In Thousands)

Fair Value

(In Thousands)

December 31, 2011 NT$19,509, US$1,501

and JPY22,275

NT$ 152 NT$ 152

- 58 -

TABLE 9-2


DERIVATIVE TRANSACTIONS OF INVESTEES OVER WHICH THE CORPORATION HAS A

CONTROLLING INTEREST


United Win China had no derivative financial instruments as of December 31, 2011 but had net losses of

RMB722 thousand on financial instruments at fair value through profit or loss - forward exchange contracts for

the year ended December 31, 2011.

- 59 -

TABLE 10


INFORMATION ON INVESTMENTS IN MAINLAND CHINA



Investee Main Businesses and Products Paid-in Capital Method of

Investment

Accumulated

Outflow of

Capital

Investment from

Taiwan as of

January 1, 2011

Outflow or Inflow of

Capital Investment

Accumulated

Outflow of

Capital

Investment from

Taiwan as of

December 31,

2011

Percentage of

Ownership

Investment Net

Income (Loss)

Recognized

(Note 4)

Carrying Value

as of

December 31,

2011

Accumulated

inward

Remittance of

Earnings as of

December 31,

2011

Accumulated

Investment as of

December 31,

2011

Investment

Amounts

Authorized by

the Investment

Commission,

MOEA (Note 5)

Maximum

Allowable

Investment

Authorized by

the Investment

Commission,

MOEA

Outflow Inflow

United Win China Manufactures and sells electronic

components, accessories and

related products

$ 3,723,825 Note 1 $ 1,844,111 $ - $ - $ 1,844,111 100% $ (3,562) $ 7,948,154 $ 484,400 $ 8,395,690 $ 11,631,201 (Note 6)

Dongguan Masstop Manufactures and sells LCMs and

touch panel products

6,097,686 Note 1 1,907,325 3,623,986 - 5,531,311 100% (11,251) 7,027,986 -

Apticon Technology

(Nanjing) Co.,

Ltd.

Manufactures LCD back light

modules

505,623 Note 2 (Note 3) - - - 23% - - -

Wintek China Researches, develops,

manufactures and sells LCM

products

1,504,668 Note 1 908,250 596,418 - 1,504,668 100% (18,205) 1,534,724 -

Note 1: The investment was made by establishing a corporation in a third country and then making the new corporation invest in companies located in Mainland China.

Note 2: The investment was made through a corporation established in a third country, which, in turn, invested in companies located in Mainland China.

Note 3: The investment in Mainland China was made by Apticon Inc., the investee of Wintek Technology Cayman, an investee of the Corporation. The capital of the investment was put up by Apticon Inc.

Note 4: Except for its investment in Apticon Technology (Nanjing) Co, Ltd., which had discontinued its operation, the Corporation recognized its equity in the net income (loss) of investees on the basis of financial statements audited by the Corporation’s independent CPA.

Note 5: The amount includes the investment amounts approved by the Investment Commission, MOEA but does not include the common stock issuance by the Mainland China-based subsidiary from its earnings.

Note 6: According to the “Regulations for Screening of Application to Engage in Technical Cooperation in Mainland China” issued by the Investment Commission of the Ministry of Economic Affairs on August 29, 2008, there is no limit on the investment in Mainland China since the Corporation

had acquired the IDB approval of the Corporation’s establishment of operating headquarters in Taiwan.

Note 7: The foreign-currency amounts were translated into New Taiwan dollars at the exchange rates of December 31, 2011.

Wintek Corporation · 2012. 3. 14. · December 31, 2011 and 2010 of Wintek Electro-Optics...

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