Delta Electronics€¦ · With our solid foundation in technology and years of efforts on...
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Transcript of Delta Electronics€¦ · With our solid foundation in technology and years of efforts on...
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A Letter to Our Shareholders
Dear Shareholders:
Driven by the belief of "dare to change" and "dedicate to innovate", every business group at Delta always sets aggressive growth target and budget plans before the year ends and we used to surpass our goals. However, due to adverse economic conditions resulting from global financial tsunami starting from end of Q3, 2008, we failed to achieve our plans set for the year. Delta's consolidated sales revenues totaled NT$142.6 billion, an increase of 9.2% from 2007. To be consistent with international financial accounting standards, the Taiwan government implemented a new accounting rule to expense employee bonuses and remuneration to board of directors and supervisors at fair market value last year. Based on the new Statement of Financial Accounting Standards, our gross profit totaled NT$25.5 billion (17.9% of revenues), 7% decrease from 2007 figure which was based on old accounting standard. Our net operating profit totaled NT$10.9 billion (7.6% of revenues), 30.6% decrease and net income of NT$10.3 billion (7.2% of revenues) which represented a decrease of 31.9% from the previous year. Earnings per share (EPS) was NT$4.69.
With our solid foundation in technology and years of efforts on innovation, Delta has been widely recognized as the leader in switching power supplies for global electronics industry. We are the world's number one in power supplies for servers, workstations and notebook computers and we continue to grow market share in consumer electronics sector through relentless increase in power conversion efficiency which contributes greatly to energy conservation and reduction in greenhouse gases emission. Among all progresses made last year, our achievement in telecom power systems and PV systems was noteworthy in particular. We not only increased the efficiency of our new generation telecom base station power system from 90% to 92% but also reduced the size by two thirds and achieved market leadership in both China and India. We also designed and installed the world's largest stadium solar systems for 2009 World Games in Kaohsiung with solar cells from DelSolar, a subsidiary to Delta, and our own 98% efficiency photovoltaic inverters. Although the capacity of this solar system was one mega watt by design, the actual electricity generated exceeded our expectation. Those examples clearly demonstrated our commitment to innovation and courage to take challenges to realize our corporate mission. We believe our potential to develop system-level businesses is greatly strengthened by the excellent performance of the teams.
For display solutions business, we secured our competitive advantage through in-house key components which weathered us from severe competition in business projector market. Our projection display products such as home theaters, video walls, and large venue projectors with ultra-high brightness for professional markets also earned customer recognition. We partnered with a content provider to broadcast on live the opening ceremony and selected programs of 2008 Beijing Olympics through our full HD DLP projection display on a 300-inch outdoor screen to the general public, who enjoyed an unprecedented visual experience with absolute clarity and exceptional images. Delta also announced the industry's first full HD LED Home Theater DLPR Projector at IFA 2008 in Berlin featuring energy-saving, high resolution, wide color gamut, long life time, and immediate image display when powering on. We will work harder on marketing initiatives to bring more of our excellent products to customers. In order to provide customers with a complete line of products, we acquired an outstanding team specialized in outdoor large screen LED. We also exhibited our LED streetlamp and e-paper at IFA 2008 in Berlin, and we will continue to develop green products that are eco-friendly to meet the demand of the new century.
Delta was founded in 1971 at a time when the Taiwan government implemented investment incentive programs to attract foreign companies to set up manufacturing bases in Taiwan. We started from scratch to develop electronics components to meet market demand. We witnessed the massive abuse of natural resources and environmental pollution resulting from industrialization as well as the shortage in energy due to rapid increase in demand. We believed energy conservation was the best solution to the problem and since then we made it our corporate mission to develop high-efficiency switching power supplies and provide the world with energy efficient products and services. Over the years we continued to grow our business and
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the world with energy efficient products and services. Over the years we continued to grow our business and market share as a result of strong customer satisfaction to our innovation capability, product quality, agility, and services. Each year we earned vendor awards from customers as a token for recognition. HP, Nokia Siemens, Fujitsu Siemens, for example, awarded Delta in 2008. We also received the "Excellent Innovation Achievement Award", the best of its kind from Ministry of Economic Affairs, last year. Besides innovation, we take corporate social responsibility as a primary consideration. Delta was named the most admired company in electronics industry by CommonWealth Magazine for the seventh consecutive year, and we were listed in the first place with distinction for Corporate Social Responsibility Award from GlobalView Magazine for the third consecutive year. Delta was ranked among Forbe's Asian Fabulous 50 Companies for the second consecutive year, and we received the best Investment Meetings Award from IR Magazine. In addition, Delta was the only Chinese enterprise featured on the list of "Global Top 100 Low-Carbon Pioneers" by CNBC European Business Magazine. We will continue our dedication to making Delta a highly regarded global company making long-lasting impact to the society.
The global financial tsunami caused by the American subprime mortgage crisis has affected Delta's business just as it has created adverse impact on global economy. Although an enterprise is bound to have ups and downs during its history, we will exercise special caution to voyage through this turmoil. We believe the market will be handicapped by large-scale workforce restructuring and compensation reduction measures adopted by major multinational corporations. As a result, we will further scrutinize our operation processes to identify every productivity increase opportunity, while at the same time spearheading our R&D and marketing efforts to adapt our organization and business activities to meet market requirements. Over the years Delta has committed resources to develop advanced eco-friendly new products with energy-efficient features such as solar systems, LEDs, E-paper, super-capacitor, and key components for electric vehicles. These visionery new products will be launched to the market at the soonest possible pace. With the announcement by major countries to engage in large-scale programs and green technology development to stimulate local economy, we see good potential in renewable energy, products with energy-saving features, telecom business and infrastructure projects. Our mission and new business development direction fit right into the picture. Our sound financial stance and healthy cash flow serve as another competitive weapon to our advantage in difficult economy. We also feel encouraged to keep staying firmly in our areas of core competences and avoid investment into manufacturing businesses with low entry barriers.
Delta is a company that consistently monitors the market trend and takes challenges to change and innovate. This economic downturn brought to our attention the need to expedite our speed of change and new product development. We wish to take this opportunity to thank all Delta members for their contributions to the Company. We believe everyone at Delta will continue to do their best to steer our course up on profitable growth. We would also like to express our gratitude to all shareholders for their support. Please be re-assured that Delta will run at full speed to meet your expectation and we will bring the Company to the next level of success.
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Product Overview
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Corporate Governance
“Maintain sound corporate governance and strictly abide by commercial and ethical standards” is a core commitment at Delta. We believe that high quality corporate governance is the best way to ensure that the company always delivers excellent performance and provides an optimum balance for all stakeholders’ interests.
At Delta, the Board of Directors currently consists of nine directors and two supervisors, including one independent director and one independent supervisor. To enhance the Board’s responsibility and trust, a board meeting is convened at least once a quarter to review the company’s performance and to discuss important strategic issues (seven meetings were held in 2008).
In addition to participating in board meetings, the independent director and supervisor attend Delta’s internal strategic meeting to learn better about company’s operation and further make recommendations; the compensation of senior executives also needs to be reviewed by the independent director.
Information disclosure is also an important aspect of Delta’s corporate governance. Not only are all announcements on the Taiwan Stock Exchange issued in a timely manner, but our Chairman’s report to shareholders, financial statements, corporate governance regulations, as well as share price and dividend information are all available for download on Delta’s website. Most of these are in both Chinese and English for the benefit of local and foreign investors.
Delta also hosts analyst meetings on a regular basis where we announce and explain each quarter’s consolidated financial data, business performance, and future plans. These meetings are webcasted live over the Internet. Apart from providing investors with updates on the company’s operations, we also welcome constructive feedback on our operations, finance and governance.
Delta’s efforts towards high quality corporate governance are well recognized. In 2008, Delta won the Corporate Citizenship Award from CommonWealth Magazine and received the CSR Honor Award from Global View Magazine after winning its CSR Award for three consecutive years. In addition, we were honored to receive Forbes Magazine’s “Asia's Fabulous 50" award for the second time and also recognized as a CommonWealth Magazine Most Admired Company in the electronics industry for the 7th year in a row. We do not intend to rest on our laurels however and will continue to improve the quality of our corporate governance to fulfill our commitment to all stakeholders.
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Consolidated Financial Highlights
SalesGross profitGross marginOperating profitOperating MarginNet Income After TaxNet MarginEPS (NT$)Total AssetsTotal Shareholders' EquityROE (%)
2008142,64525,49517.9%10,9107.6%
10,2517.2%4.69
117,55758,34317.4%
2007130,61427,40421.0%15,71712.0%15,06111.5%7.15
117,91559,78127.5%
(in NT$ million, except otherwise indicated)
Revenues
56,475
-
20,000
40,000
60,000
80,000
100,000
120,000
160,000
140,000
2004 2005 2006 2007 2008
NT$ million
Net Profits
-2004 2005 2006 2007 2008
NT$ million
Return on Stockholders' Equity
20.6%
19.7%
24.3%
27.5%
17.4%
-2.0%
3.0%
8.0%
13.0%
18.0%
23.0%
28.0%
33.0%
2004 2005 2006 2007 2008
Earnings Per Share
3.96
5.76
4.69
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
2004 2005 2006 2007 2008
NT$
3.68
7.15
80,826
105,216
130,614
142,645
20,000
40,000
60,000
80,000
100,000
120,000
180,000
160,000
140,000
6,662
7,553
11,331
15,061
10,251
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Financial Report
DELTA ELECTRONICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT ACCOUNTANTS
DECEMBER 31, 2007 AND 2008
For the convenience of readers and for information purpose only, the auditors’ report andthe accompanying financial statements have been translated into English from the originalChinese version prepared and used in the Republic of China. In the event of anydiscrepancy between the English version and the original Chinese version or anydifferences in the interpretation of the two versions, the Chinese-language auditors’ reportand financial statements shall prevail.
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Report of Independent Accountants Translated from Chinese
PWCR08000269
To Delta Electronics, Inc.
We have audited the accompanying consolidated balance sheets of Delta Electronics, Inc.and subsidiaries as of December 31, 2007 and 2008, and the related consolidatedstatements of income, of changes in stockholders' equity and of cash flows for the yearsthen ended. These financial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audits. As explained in Note 1(2), we did not audit the financial statementsof certain consolidated subsidiaries for the years ended December 31, 2007 and 2008,which statements reflect total assets of $718,468,000 and $596,215,000, constituting0.61% and 0.51% of the consolidated total assets as of December 31, 2007 and 2008,respectively, and total operating revenues of $1,639,658,000 and $1,896,736,000,constituting 1.26% and 1.33% of the consolidated operating revenues for the years thenended, respectively. In addition, we did not audit the financial statements of certainlong-term equity investments, accounted for under the equity method. Long-term equityinvestments in these companies amounted to $5,407,332,000 and $5,926,150,000,constituting 4.59% and 5.04% of the consolidated total assets as of December 31, 2007 and2008, respectively, and total investment income was $504,416,000 and $466,104,000,constituting 2.58% and 3.15% of the consolidated income before income tax and minorityinterest for the years then ended, respectively. Those statements were audited by otherauditors whose reports thereon have been furnished to us, and our opinion expressed herein,insofar as it relates to the amounts and the information disclosed in Note 11. 2) includedfor such subsidiaries and investee companies, is based solely on the reports of the otherauditors.
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We conducted our audits in accordance with the “Rules Governing Examination ofFinancial Statements by Certified Public Accountants” and generally accepted auditingstandards in the Republic of China. Those standards and rules require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. Webelieve that our audits and the reports of the other auditors provide a reasonable basis forour opinion.
In our opinion, based on our audits and the reports of the other auditors, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financialposition of Delta Electronics, Inc. and subsidiaries as of December 31, 2007 and 2008, andthe results of their operations and their cash flows for the years then ended in conformitywith the “Rules Governing the Preparation of Financial Statements by Securities Issuers”and generally accepted accounting principles in the Republic of China.
As described in Note 3, effective January 1, 2008, Delta Electronics, Inc. and itssubsidiaries adopted the R.O.C. Statement of Financial Accounting Standards (SFAS) No.39, “Accounting for Share-based Payment” and EITF 96-052 “Accounting for Employees’Bonuses and Directors’ and Supervisors’ Remuneration” prescribed by the AccountingResearch and Development Foundation, R.O.C., whereby the costs of employees’ bonusesand directors’ and supervisors’ remuneration are accounted for as expenses and liabilities,provided that such recognition is required under legal or constructive obligation and theamounts can be estimated reasonably.
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The consolidated financial statements of Delta Electronics, Inc. and subsidiaries as of andfor the year ended December 31, 2008, expressed in US dollars are presented solely for theconvenience of the reader and were translated from the financial statements expressed inNew Taiwan dollars using the exchange rate of NT$32.82 to US$1.00 at December 31,2008. This basis of translation is not in accordance with generally accepted accountingprinciples in the Republic of China.
Pricewaterhouse CoopersFebruary 16, 2009_________________________________________________________________________
The accompanying consolidated financial statements are not intended to present the financial position andresults of operations and cash flows in accordance with accounting principles generally accepted in countriesand jurisdictions other than the Republic of China. The standards, procedures and practices in theRepublic of China governing the audit of such consolidated financial statements may differ from thosegenerally accepted in countries and jurisdictions other than the Republic of China. Accordingly, theaccompanying consolidated financial statements and report of independent accountants are not intended foruse by those who are not informed about the accounting principles or auditing standards generally acceptedin the Republic of China, and their applications in practice.As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot acceptany liability for the use of, or reliance on, the English translation or for any errors or misunderstandings thatmay derive from the translation.
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DELTA ELECTRONICS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,(EXPRESSED IN THOUSANDS OF DOLLARS)
New Taiwan Dollars US Dollars
Cash flows from operating activities (Unaudited - Note 2)Consolidated net incomeAdjustments to reconcile consolidated net income to net cashprovided by operating activities:
Changes in unrealized valuation of financial assetsChanges in unrealized valuation of financial liabilitiesProvision for doubtful accountsProvision for inventory obsolescence and market prices decline(Gain) loss on disposal of financial assets for non-tradingpurposes
Impairment loss on financial assets carried at costForeign exchange loss (gain) on investments in bonds without
active marketsInvestment income recognized under equity methodCash dividends received from investee companies accounted for
under the equity methodGain on disposal of equity in subsidiaries to minorityshareholders
Depreciation (including assets leased to others) and amortizationLoss on disposal of property, plant and equipment, netImpairment loss on fixed assets, intangible assets and assetsleased to others
Amortization of long-term deferred incomeChanges in assets and liabilities:
Financial assets at fair value through profit or loss - currentNotes and accounts receivableAccounts receivable - related partiesOther receivablesInventoriesPrepaymentsOther current assetsOther assets - otherAccounts payableAccounts payable - related partiesIncome tax payableAccrued expenses, other payables and receipts in advanceOther current liabilitiesDeferred income taxAccrued pension liabilitiesOther liabilities - others
Net cash provided by operating activities
(Continued on next page)
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DELTA ELECTRONICS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,(EXPRESSED IN THOUSANDS OF DOLLARS)
New Taiwan Dollars US Dollars
Cash flows from investing activities (Unaudited - Note 2)(Increase) decrease in financial assets at fair value through
profit or loss - currentIncrease (decrease) in financial liabilities at fair value through
profit or loss - currentIncrease in other financial assets - currentIncrease in available-for-sale financial assets and financial
assets carried at costProceeds from disposal of available-for-sale financial assetsand financial assets carried at cost
Proceeds from capital reduction of available-for-sale financialassets and financial assets carried at cost
Decrease in investments in bonds without active marketsIncrease in long-term equity investments accounted for under
the equity methodProceeds from liquidation of long-term equity investmentsaccounted for under equity method
Increase in cash surrender value of life insuranceAcquisition of property, plant and equipment, intangibleassets and deferred expenses
Proceeds from disposal of property, plant and equipmentPurchase of minority interests(Increase) decrease in refundable depositsDecrease (increase) in other assets - otherProceeds from disposal of equity in subsidiaries to minority
shareholdersNet cash used in investing activitiesCash flows from financing activities
Increase in short-term loansIncrease in long-term loansIncrease in guarantee deposits receivedPayment of directors' and supervisors’ remunerationPayment of cash dividendsDividends paid to minority interestsIncrease in subsidiaries’capital from minority shareholders
Net cash used in financing activitiesEffect due to changes in exchange rateEffect due to changes in consolidated subsidiariesNet increase in cash and cash equivalentsCash and cash equivalents at beginning of the yearCash and cash equivalents at end of the yearSupplemental disclosures of cash flow informationCash paid during the year for interestCash paid during the year for income tax
Non-cash flows from financing activity:Employees’ stock bonus
The accompanying notes are an integral part of these consolidated financial statements.See report of independent accountants dated February 16, 2009.
��
DELTA ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2008
(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,EXCEPT AS OTHERWISE INDICATED)
1. HISTORY AND ORGANIZATION
1) Delta Electronics, Inc.
The Company was incorporated in April 1971 under the provisions of theCompany Law of the Republic of China (R.O.C.) as a company limited by sharesand was listed on Taiwan Stock Exchange Corporation (TSEC) since December1988. The authorized capital of the Company amounted to $25,000,000 and theissued and outstanding capital was $21,850,456 as of December 31, 2008. Themain activities of the Company are installation of electronic control systems andmanufacturing of communication products and components, computerinformation system and power supply. As of December 31, 2008, the Companyhad approximately 5,000 employees and all consolidated entities hadapproximately 49,000 employees.
2) Consolidated subsidiaries
% of shares held as ofDecember 31,
Name of company Relationship Main activities1. Delta International
Holding Ltd.(DIH)
Note A Equity investments
(1) Delta Electronics(H.K.) Ltd.(DHK)
Note B Equity investments,operationsmanagement andengineering services
A. Delta Electronics(Dongguan)Co., Ltd. (DDG)
Note C Manufacturingof power supplies
B. Delta ElectronicsComponents
(Dongguan) Co., Ltd.(DEC)
Manufacturingof transformers
��
% of shares held as ofDecember 31,
Name of company Relationship Main activitiesC. Delta Electronics
Power (Dongguan)Co., Ltd. (DEP)
Note C Manufacturingof power supplies
D. Delta Electronics(Shanghai) Co.,Ltd. (DPEC)
Product design
E. Delta Electronics(Jiangsu) Ltd.(DWJ)
Manufacturing ofpower supplies
F. Delta ElectronicsComponents(Wujiang) Ltd.(DWC)
Manufacturing oftransformers
G. Delta Eectro-Optics(Wujiang) Ltd.(DWO)
Manufacturing ofperipherals andelectronic controlequipments
H. Delta VideoDisplay System(Wujiang) Ltd.(DWV)
Manufacturing andsales of variousprojectors
I. Delta Electronics(Wuhu) Co., Ltd.(DWH)
Manufacturing ofpower supplies andtransformers
J. Delta Electronics(Chenzhou) Co.,
Ltd. (DCZ)
Manufacturing ofpower supplies andtransformers
(2) Delta ElectronicsAgent Ltd. (DAL)
Note B Operationsmanagement andengineeringservices
(3) Delta ElectronicsInternational Ltd.(Labuan)(DEIL-Labuan)
Sales of electronicproducts
(4) Delta Power SharpLtd. (DPS)
Operationsmanagement andengineering services
(5) DEI Logistics (USA)Corp. (ALI)
Warehousing andlogistics services
��
% of shares held as ofDecember 31,
Name of company Relationship Main activities(6) Delta Electronics
(Japan), Inc. (DEJ)Note B Sales of
electronic productsA. Addtron
Technology(Japan) Co.,Ltd. (AT Japan)
Note D Trading ofnetworking systemand peripherals
B. DeltaElectronics(Korea), Inc.(Delta Korea)
Sales of electronicproducts
(7) DAC Holding (Cayman)Ltd. (DAC)
Note B Equity investments
A. DeltaElectronicsMexico S.A.DE C.V.(DEM)
Note E Manufacturing ofelectronic products
B. Delta VideoTechnologyLtd. (DVT)
Sales of electronicproducts
(8) Newton Power Ltd.(NPL)
Note B R&D, sales andmarketing services ofpower conversionproducts
2. Delta Networks HoldingLtd. (DNH)
Note A Equity investments
(1) Delta Networks,Inc. (Cayman) (DNICayman)
Note F Equity investments
A. Delta Networks,Inc. (Taiwan)(DNIT)
Note G Manufacturing ofnetworking systemand peripherals
B. DNI Logistics(USA) Co.,(ALN)
Trading ofnetworking systemand peripherals
C. Delta NetworksInternationalLtd. (Labuan)(DNIL-Labuan)
Trading ofnetworking systemand peripherals
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% of shares held as ofDecember 31,
Name of company Relationship Main activitiesD. Delta Networks
(H.K.) Ltd.(DNHK)
Note G Equity investments
(A) Delta Networks(Dongguan)Ltd. (DII)
Note H Manufacturing andsales of other radiotransmissionapparatus,incorporatingreception apparatusand otherradio-broadcastreceivers, combinedwith sound recordingor reproducingapparatus
(B) Delta Networks(Wujiang) Ltd.(DNW)
Note I Manufacturing andsales of other radiotransmissionapparatus,incorporatingreception apparatusand otherradio-broadcastreceivers, combinedwith sound recordingor reproducingapparatus
(C) Delta Networks(Shanghai)Ltd. (DNS)
Note J Design computersoftware
3. Deltronics (Netherlands)B.V. (DEN)
Note A Trading ofequipment,components andmaterials of telecomand computersystems
�1
% of shares held as ofDecember 31,
Name of company Relationship Main activities4. Delta Optoelectronics,
Inc. (Delta Optoelectronics)Note A Manufacturing of
displays withpolymer lightemission display(PLED) and carbonnano-tube electronicemitter (ENT)technology
Note N
5. DelSolar Co., Ltd.(DelSolar)
Manufacturing ofsolar batteriesand related systems
6. NuLight TechnologyCo. (NuLight)
Note K Manufacturing ofelectronic productsand audiocomponents
Note O
7. PreOptix Co., Ltd. (PreOptix) Note A Manufacturing andsales of lenses andoptical engines forprojectors
(1) PreOptix (Hong Kong)Co., Ltd. (PHK)
Note L Equity investments
(A)PreOptix (Jiang Su)Co., Ltd.
Note M Manufacturing andsales of lenses andoptical engines forprojectors
Note A: Majority-owned subsidiary.Note B: A subsidiary of Delta International Holding Ltd. (DIH).Note C: A subsidiary of Delta Electronics (H.K.) Ltd. (DHK).Note D: A subsidiary of Delta Electronics (Japan), Inc. (DEJ).Note E: A subsidiary of DAC Holding (Cayman) Ltd. (DAC).Note F: A subsidiary of Delta Networks Holding Ltd. (DNH).Note G: A subsidiary of Delta Networks, Inc. (Cayman) (DNI Cayman).Note H: A subsidiary of Delta Networks (H.K.) Ltd. (DNHK).Note I: It became the subsidiary of DNHK (originally, the subsidiary of DNI Cayman) in the
first quarter of 2008 as a result of investment restructuring.Note J: It became the subsidiary of DNHK (originally, the subsidiary of DNI Cayman) in the
second quarter of 2008 as a result of investment restructuring.
��
Note K: The combined ownership percentage of NuLight Technology Corporation’s commonshares held by the Company and Delta Optoelectronics Inc. was more than 50%.
Note L: A subsidiary of PreOptix Co., Ltd. (PreOptix).Note M: A subsidiary of PreOptix (Hong Kong) Co., Ltd. (PHK)Note N: Dissolved by a resolution approved during the special shareholder’s meeting on
December 12, 2007 and is under the process of liquidation effective January 18, 2008.From then on, Delta Optoelectronics ceased to be accounted for under the equitymethod and was excluded from the consolidated financial statements.
Note O: Dissolved by a resolution approved during the special shareholder’s meeting on April18, 2008 and is under the process of liquidation effective April 20, 2008. From then on,Nulight ceased to be accounted for under the equity method and was excluded from theconsolidated financial statements.
A. The financial statements of DEN, NPL and ALN for the years endedDecember 31, 2007 and 2008 were audited by other independent accountants.The total assets of these subsidiaries as of December 31, 2007 and 2008 were$718,468 and $596,215, constituting 0.61% and 0.51% of the consolidatedtotal assets, respectively, and the related total operating revenues were$1,639,658, and $1,896,736 constituting 1.26% and 1.33% of theconsolidated operating revenues for the years ended December 31, 2007 and2008, respectively.
B. The shares of DNI Cayman were listed on the Stock Exchange of Hong KongLimited since July 6, 2007. DNI Cayman issued 359,200 thousand sharesof new common stock at HK$4.5 (in dollars) per share. In July 2007, DNH,the subsidiary of the Company, sold 75,184 thousand shares of DNICayman’s common stock to the underwriter at HK$4.5 (in dollars) per sharethrough the exercise of Over-Allotment Option. The gain on disposal ofshares was $936,436.
��
3) Changes in the consolidated subsidiaries
A. The following subsidiaries were newly included in the consolidated financialstatements:
% of shares held as ofDecember 31,
Name of company Relationship Main activities 7
PreOptix Co., Ltd.(PreOptix)
Note A Please refer to
Note 1.2)
(1) PreOptix (Hong Kong)Co., Ltd. (PHK)
Note B
(A)PreOptix (JiangSu) Co., Ltd.
Note C
Note A: Majority-owned subsidiary.Note B: A subsidiary of PreOptix Co., Ltd. (PreOptix).Note C: A subsidiary of PreOptix (Hong Kong) Co., Ltd. (PHK).
B. The following subsidiaries were excluded from the consolidated financialstatements:
% of shares held as ofDecember 31,
Name of company Relationship Main activities Note
Delta Optoelectronics, Inc.(Delta Optoelectronics)
Note A Please refer toNote 1.2)
Note C -
NuLight Technology Co.(NuLight)
Note B Note D -
Note A: Majority-owned subsidiary.Note B: Majority-owned subsidiary.Note C: Dissolved by a resolution approved during the special shareholder’s meeting on
December 12, 2007 and is under the process of liquidation effective January 18,2008. From then on, Delta Optoelectronics ceased to be accounted for under theequity method and was excluded from the consolidated financial statements.
Note D: Dissolved by a resolution approved during the special shareholder’s meeting onApril 18, 2008 and is under the process of liquidation effective April 20, 2008.From then on, Nulight ceased to be accounted for under the equity method andwas excluded from the consolidated financial statements.
4) Subsidiaries not included in the consolidated financial statements: None.
��
5) Adjustments for subsidiaries with different balance sheet dates: None.
6) Difference in the accounting policies adopted between the Company and thesubsidiaries: No significant differences.
7) Special operating risk of foreign subsidiaries: No significant special operatingrisks which would have impact on the Company.
8) Nature and extent of the restrictions on fund remittance from subsidiaries to theparent company: None.
9) Details of the parent’s stock that is held by the subsidiary: None.
10) The related information regarding a subsidiary’s issuance of convertible bondsand new common stock: The issuance of convertible bonds and new commonstock by subsidiaries had no significant effects on stockholders’ equity of theparent company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company and its subsidiaries(collectively referred herein as the Group) are prepared in accordance with the “RulesGoverning the Preparation of Financial Statements by Securities Issuers” and generallyaccepted accounting principles in the Republic of China. The Group’s significantaccounting policies are summarized as follows:
1) Basis for preparation of consolidated financial statements
All majority-owned subsidiaries and controlled entities are included in theconsolidated financial statements, and the Company prepares consolidated financialstatements on a quarterly basis. The income (loss) of the subsidiaries is includedin the consolidated statement of income effective the date on which the Companygains control over the subsidiaries. The income (loss) of the subsidiaries isexcluded from the consolidated statement of income effective the date on which theCompany loses control over the subsidiaries.
Significant inter-company transactions and assets and liabilities arising frominter-company transactions are eliminated.
2) Translation of financial statements of foreign subsidiaries
Assets and liabilities of the foreign subsidiaries are translated into New Taiwandollars using the exchange rate at the balance sheet date; equity accounts aretranslated at historical rates, except for beginning retained earnings which is carried
��
forward from prior year's ending retained earnings. Dividends are translated at therates prevailing at the date of declaration. Profit and loss accounts are translatedusing the weighted-average rate for the year. Exchange differences are recorded ascumulative translation adjustments and are included as a component of thestockholders' equity.
3) Foreign currency transactions
(1)The Company and its consolidated subsidiaries maintain their accounts in NewTaiwan dollars and their respective functional currencies, respectively.Transactions denominated in foreign currencies are translated into New Taiwandollars and the respective functional currencies at the spot exchange ratesprevailing at the transaction dates.
(2)Monetary assets and liabilities denominated in foreign currencies are translatedat the spot exchange rates prevailing at the balance sheet date. Exchange gains orlosses are recognized in profit or loss.
(3)When a gain or loss on a non-monetary item is recognized in profit or loss, anyexchange component of that gain or loss shall be recognized in profit or loss.Conversely, when a gain or loss on a non-monetary item is recognized directlyin equity, any exchange component of that gain or loss shall be recognizeddirectly in equity. However, non-monetary items that are measured on ahistorical cost basis are translated using the exchange rate at the date of thetransaction.
4) Classification of current and non-current items
A. Assets that meet one of the following criteria are classified as current assets;otherwise they are classified as non-current assets:
a) Assets arising from operating activities that are expected to be realized orconsumed, or are intended to be sold within the normal operating cycle;
b) Assets held mainly for trading purposes;
c) Assets that are expected to be realized within twelve months from the balancesheet date;
d) Cash and cash equivalents, excluding restricted cash and cash equivalents andthose that are to be exchanged or used to pay off liabilities more than twelvemonths after the balance sheet date.
��
B. Liabilities that meet one of the following criteria are classified as currentliabilities; otherwise they are classified as non-current liabilities:
a) Liabilities arising from operating activities that are expected to be paid offwithin the normal operating cycle;
b) Liabilities arising mainly from trading activities;
c) Liabilities that are to be paid off within twelve months from the balance sheetdate;
d) Liabilities for which the repayment date cannot be extended unconditionally tomore than twelve months after the balance sheet date.
5) Cash equivalents
Cash equivalents are short-term, highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to insignificant risk ofchange in value resulting from fluctuations in interest rate.
The Group’s statement of cash flows is prepared on the basis of cash and cashequivalents.
6) Settlement date accounting
If an entity recognizes financial assets using settlement date accounting, any changein the fair value of the asset to be received during the period between the trade dateand the settlement date is not recognized for assets carried at cost or amortized cost.For financial asset or financial liability classified as at fair value through profit orloss, the change in fair value is recognized in profit or loss. For available-for-salefinancial asset, the change in fair value is recognized directly in equity.
7) Financial assets and financial liabilities at fair value through profit or loss
A. Derivative financial instruments are recognized and derecognized usingsettlement date accounting and are recognized initially at fair value.
B. Financial assets and financial liabilities at fair value through profit or loss aresubsequently remeasured and stated at fair value, and the gain or loss isrecognized in profit or loss. The fair value of listed stocks and OTC stocks isbased on latest quoted fair prices at the balance sheet date.
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8) Available-for-sale financial assets
A. Equity investments are recognized and derecognized using trade date accountingand are recognized initially at its fair value plus transaction costs that are directlyattributable to the acquisition of the financial asset.
B. Available-for-sale financial assets are remeasured and stated at fair value and thegain or loss is recognized in equity. When the financial assets are derecognized,the cumulative gain or loss shall be removed from equity and recognized inprofit or loss. The fair value of listed stocks and OTC stocks is based on latestquoted fair prices at the balance sheet date.
C. If there is any objective evidence that the financial asset is impaired, thecumulative loss that had been recognized directly in equity shall be removedfrom equity and recognized in profit or loss. Impairment losses recognizedpreviously in profit or loss for an investment in an equity instrument shall not bereversed through profit or loss, and if, subsequently, the fair value of a debtinstrument increases and the increase can be objectively related to an eventoccurring after the impairment loss was recognized in profit or loss, theimpairment loss shall be reversed, with the amount of the reversal recognized inprofit or loss.
9) Financial assets carried at cost
A. Investment in unquoted equity instruments is recognized or derecognized usingtrade date accounting and is stated initially at its fair value plus transaction coststhat are directly attributable to the acquisition of the financial asset.
B. If there is any objective evidence that the financial asset is impaired, theimpairment loss is recognized in profit or loss. Such impairment loss cannot bereversed.
10) Investments in bonds without active markets
A. Investment in bonds without active markets is recognized and derecognizedusing settlement date accounting and is recognized initially at its fair value plustransaction costs that are directly attributable to the acquisition of the financialasset.
B. This financial asset is carried at amortized cost.
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C. If there is any objective evidence that the financial asset is impaired, theimpairment loss is recognized in profit or loss. If, subsequently, the fair valueof the asset increases and the increase can be objectively related to an eventoccurring after the impairment loss was recognized in profit or loss, thepreviously recognized impairment loss shall be reversed to the extent of theamount of the amortized cost that would have been recognized at the date theimpairment is reversed.
11) Derivative financial instruments for hedging
Derivatives are initially recognized at fair value on the date a contract is enteredinto and are subsequently remeasured at their fair value. The method ofrecognizing the resulting gain or loss depends on whether the derivative isdesignated as a hedging instrument and the nature of the hedged item.
A. Fair value hedges: Changes in the fair value of derivatives that are designatedand qualify as fair value hedges are recognized in profit or loss. Changes in thefair value of the hedged asset or liability that are attributable to the hedged itemare recognized in profit or loss as an adjustment to the carrying amount of thehedged item.
B. Cash flow hedges: The effective portion of changes in the fair value ofderivatives that are designated and qualify as cash flow hedges is recognized inequity.
a) If a hedge of a forecast transaction subsequently results in the recognition ofa financial asset or a financial liability, the associated gains or losses thatwere recognized directly in equity are transferred to profit or loss in thesame period or periods when the hedged item affects profit or loss.
b) If a hedge of a forecast transaction subsequently results in the recognitionof a non-financial asset or a non-financial liability, the associated gains andlosses that were recognized directly in equity, are reversed and included inthe initial cost or other carrying amount of the asset or liability.
12) Allowance for doubtful accounts
A. Allowance for doubtful accounts is provided based on an evaluation of thecollectibility and the aging analysis of ending balances of notes, accounts andother receivables, taking into account the bad debts incurred in prior years.
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B. The amount of allowance for doubtful accounts is calculated monthly using apercentage range for overdue accounts receivable based on the aging analysis.The related percentages of provision recognized were as follows:
Overduedays
1~15days
16~30days
31~60days
61~90days
91~180days
181~365days
Over 365days (Note)
Percentageprovided
None
(Note) Effective April 1, 2008, the Group adjusted the percentage of provisionfor accounts over 365 days from 80% to 100%
C. Accounts receivable due from related parties which exceed regular credit termsare reclassified to other receivables and the related allowance for doubtfulaccounts is calculated individually based on the evaluation of the collectibility.
13) Inventories
Inventories are stated at the lower of aggregate cost or market value. Cost isdetermined based on the weighted-average method using perpetual inventorysystem. The market value is based on the replacement cost for raw materials andsupplies and net realizable value for work in process, finished goods andmerchandise. Allowance for slow moving items and decline in the market valueis provided when necessary.
14) Funds and investments
A. Long-term equity investments accounted for under the equity method
a) Long-term equity investments in which the Company holds more than 20%of the investee company’s voting shares or has the ability to exercisesignificant influence on the investee’s operational decisions are accountedfor under the equity method. The excess of the initial investment cost overthe acquired net asset value of the investee attributable to goodwill is nolonger amortized effective January 1, 2006. Retrospective adjustment ofthe amount of goodwill amortized in previous years is not required. Theexcess of acquired net asset value of investee over the initial investment costis allocated proportionately and applied as a reduction to the book values ofidentifiable non-current assets, and any remaining amount of such excessafter this allocation is credited to Extraordinary gains. However, negativegoodwill prior to December 31, 2005 is continuously amortized.
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b) Pursuant to EITF 92-047 of the Accounting Research and DevelopmentFoundation of the Republic of China, for shares transfer among parentcompany and subsidiaries, the carrying value of long-term investmentstransferred is the book value of the investment. The difference betweenpayment for the equity and acquisition cost is recorded as capital reserve orretained earnings.
c) Exchange differences arising from translation of the financial statements ofoverseas investee companies accounted for under the equity method arerecorded as “cumulative translation adjustments” under stockholders’equity.
d) The Company credits long-term equity investments accounted for under theequity method when cash dividends are declared by investee companies onex-dividend date.
B. Cash surrender value of life insurance
The cash surrender value of life insurance is recorded as an asset and classifiedas long-term investment. The increase in cash surrender value during theperiod is accounted for as an adjustment to insurance premiums paid.
15) Property, plant and equipment
A. Property, plant and equipment are stated at cost except for land which is carriedat appraised value.
B. Depreciation is provided on a straight-line method over the estimated lives ofthe assets. Leasehold improvements are amortized over the life of the leases.
Salvage value of the fully depreciated assets that are still in use is depreciatedbased on the re-estimated economic service lives.
The Group uses $1 (depending on their respective reporting currency) assalvage value after 2001.
The estimated useful lives of fixed assets are 2 to 8 years, except for buildingswhich are 5 to 55 years.
C. Major renewals and improvements are capitalized and depreciated accordingly.Maintenance and repairs are charged to expense as incurred. When an asset issold or retired, the cost and accumulated depreciation are removed from therespective accounts and the resulting gain or loss is included in current
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non-operating results.
D. “Assets leased to others” were reclassified to “other assets” at their carryingvalue. Depreciation expense incurred in current period is accounted for asnon-operating expense.
16) Intangible assets
Intangible assets, mainly patents, technology authorization fee and land use right,acquired in Mainland China are amortized on a straight-line basis over the periodof contractual or other legal rights.
17) Deferred charges
Deferred charges are recorded at actual cost and amortized over the estimateduseful lives based on the straight-line method.
18) Impairment of non-financial assets
A. The Group recognizes impairment loss when there is indication that therecoverable amount of an asset is less than its carrying amount. Therecoverable amount is the higher of the fair value less costs to sell and value inuse. The fair value less costs to sell is the amount obtainable from the sale ofthe asset in an arm’s length transaction after deducting any direct incrementaldisposal costs. The value in use is the present value of estimated future cashflows to be derived from continuing use of the asset and from its disposal at theend of its useful life.
B. When the impairment no longer exists, the impairment loss recognized in prioryears shall be recovered. However, impairment loss of goodwill is notrecoverable.
19) Retirement plan
A. Under the defined benefit pension plan, net periodic pension costs arerecognized in accordance with the actuarial calculations. Net periodic pensioncosts include service cost, interest cost, expected return on plan assets, andamortization of unrecognized net transition obligation and gains or losses onplan assets. Unrecognized net transition obligation is amortized on astraight-line basis over the employees’ remaining service period.
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B. Under the defined contribution pension plan, net periodic pension costs arerecognized as incurred.
20) Income tax
A. The Company and subsidiaries registered in Taiwan adopt the inter-period andintra-period allocation of income tax. Over or under provision of prior years’income tax liabilities is included in the current year’s income tax expense.
B. Investment tax credits arising from expenditures incurred on acquisitions ofequipment or technology, research and development, employees training, andequity investments are recognized in the year the related expenditures areincurred.
C. An additional 10% tax is levied on the unappropriated retained earnings and isrecorded as income tax expense in the year the stockholders resolve to retainthe earnings.
D. The Company and subsidiaries registered in Taiwan adopt the “Income BasicTax Act”. If the amount of regular income tax is equal or more than theamount of basic tax, the income tax payable shall be calculated in accordancewith the Income Tax Act and other relevant laws. Whereas, if the amount ofregular income tax is less than the amount of basic tax, the income tax payableshall be equal to the basic tax. The difference between the regular income taxand basic tax shall not be subject to deductions of investment tax creditsgranted under the provisions of other laws.
E. Some of the Company’s overseas subsidiaries adopt the liability method.
21) Share-based payment employee compensation plan
A. The employee stock options granted from January 1, 2004 through December31, 2007 are accounted for in accordance with EITF 92-070, EITF 92-071 andEITF 92-072 of the Accounting Research and Development Foundation, R.O.C.,dated March 17, 2003. Under the share-based employee compensation plan,compensation cost is recognized using the intrinsic value method and pro formadisclosures of net income and earnings per share is prepared under the fairvalue method.
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B. For the grant date of the share-based payment agreements set on or afterJanuary 1, 2008, the Company shall measure the services received during thevesting period by reference to the fair value of the equity instruments grantedand account for those amounts as payroll expenses during that period.
22) Employees’ bonuses and directors’ and supervisors’ remuneration
Effective January 1, 2008, pursuant to EITF 96-052 of the Accounting Researchand Development Foundation, R.O.C., dated March 16, 2007, “Accounting forEmployees’ Bonuses and Directors’ and Supervisors’ Remuneration”, the costs ofemployees’ bonuses and directors’ and supervisors’ remuneration are accountedfor as expenses and liabilities, provided that such recognition is required underlegal or constructive obligation and the amounts can be estimated reasonably.However, if the accrued amounts for employees’ bonuses and directors’ andsupervisors’ remuneration are significantly different from the actual distributedamounts resolved by the stockholders at their annual stockholders’ meetingsubsequently, the differences shall be recognized as gain or loss in the followingyear. In addition, according to EITF 97-127 of the Accounting Research andDevelopment Foundation, R.O.C., dated March 31, 2008, “Criteria for ListedCompanies in Calculating the Number of Shares of Employees’ Stock Bonus”, theCompany calculates the number of shares of employees’ stock bonus based on theclosing price of the Company’s common stock at the previous day of thestockholders’ meeting held in the year following the financial reporting year, andafter taking into account the effects of ex-rights and ex-dividends.
23) Earnings per share
A. The Company’s capital structure is a complex capital structure. Pursuant tothe R.O.C. SFAS No. 24, “Accounting for Earnings Per Share”, an enterprisewith complex capital structure shall present both basic EPS and diluted EPS.The calculations of basic EPS and diluted EPS are as follows:
a) Basic EPS: The amount of earnings (or loss) per share is computed bydividing the amount of net income (or loss) attributable to common stockoutstanding for the reporting period by the weighted average number ofcommon shares outstanding during that period.
b) Diluted EPS: The calculation of diluted EPS is consistent with thecalculation of basic EPS assuming that all dilutive potential common shares
��
have been converted into common shares at the beginning of the reportingperiod and the amount of net income (or loss) attributable to common stockoutstanding for the reporting period has been adjusted by the after-taxeffect of any other changes in income or expense that would result from theconversion of the dilutive potential common shares.
B. The Company’s potential common shares are the employee stock optionsissued by the Company and employees’ bonus that could be distributed in theform of stock. The treasury stock method will be used to test whether or notpotential common shares have dilutive effect in calculating diluted EPS.
24) Revenue, cost and expense recognition
Revenue is recognized when the earning process is substantially completed and isrealized or realizable. Costs and expenses are recognized as incurred.
25) Accounting estimates
The preparation of consolidated financial statements in conformity with generallyaccepted accounting principles in the Republic of China requires management tomake estimates and assumptions that affect the amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the balance sheet date andreported amounts of revenues and expenses during the reporting period. Actualresults could differ from those assumptions and estimates.
3. CHANGES IN ACCOUNTING PRINCIPLES
1) Share-based payment employee compensation plan
Effective January 1, 2008, the Group adopted R.O.C. SFAS No. 39, “Accountingfor Share-based Payment”. The adoption of SFAS No. 39 had no significantimpact on the consolidated financial statements as of and for the year endedDecember 31, 2008.
2) Employees’ bonuses and directors’ and supervisors’ remuneration
Effective January 1, 2008, pursuant to EITF 96-052 of the Accounting Research andDevelopment Foundation, R.O.C., dated March 16, 2007, “Accounting forEmployees’ Bonuses and Directors’ and Supervisors’ Remuneration”, the costs ofemployees’ bonuses and directors’ and supervisors’ remuneration are accounted foras expenses and liabilities, provided that such recognition is required under legal orconstructive obligation and the amounts can be estimated reasonably. As a result
��
of the adoption of EITF 96-052, consolidated net income decreased by $2,091,649and basic earnings per share decreased by $0.96 (in dollars), respectively, for theyear ended December 31, 2008.
4. DETAILS OF SIGNIFICANT ACCOUNTS
1) Cash and cash equivalents
December 31,
Cash on handChecking and demand depositsTime depositsCash equivalents-commercial paperand government bonds
As of December 31, 2007 and 2008, the Group’s overseas checking and demanddeposits were $1,864,370 (USD $53,909 thousand, HKD $15,546 thousand, JPY$94,800 thousand, THB$14 thousand, MOP $443 thousand, PLN $4 thousand andEUR $459 thousand) and $11,727,785 (USD $350,866 thousand, HKD $23,510thousand, JPY $304,050 thousand, THB$14 thousand PLN $3 thousand and EUR$38 thousand), respectively. The overseas time deposits were $9,787,741 (USD$293,771 thousand, HKD $27,522 thousand and JPY $500,000 thousand) and$12,591,535 (USD $382,878 thousand, HKD $6,013 thousand), respectively.
2) Financial assets at fair value through profit or loss
December 31,
Current items:Financial assets held for trading
Listed stocksDerivatives
Adjustment of financial assets heldfor trading
A. The Group recognized a net gain of $299,385 (including the gain from disposalof open-ended mutual funds) and $364,990 for the years ended December 31,2007 and 2008, respectively.
��
B. The nature of derivative transactions and related information are summarized asfollows:
December 31, 2007
Financial instruments
Contract amount(Nominal principal)
(in thousands) Contract periodForward exchange contracts:
Sell USD/Buy TWD USDBuy USD/Sell TWD USD
Sell USD/Buy RMB USDBuy USD/Sell RMB USD
Forward currency optioncontracts
USD
December 31, 2008
Financial instruments
Contract amount(Nominal principal)
(in thousands) Contract periodMultiple-stage inflatingforward
USD
Forward exchange contracts:
Buy USD/Sell RMB USD
Sell USD/Buy JPY USD
Note A: Will be exercised if the spot rate is below or above the strike price orknock in price.
Note B: If the exchange rate is above the predetermined exchange rate, thenominal principal will be multipled by 2 and the maximum exerciseprincipal will become USD 9 million.
(1) The Group entered into forward exchange contracts to manage exposures toforeign exchange rate fluctuations of import or export sales. However, theforward exchange contracts did not meet the criteria for hedge accounting.Therefore, the Group did not apply hedge accounting.
(2) The subsidiaries entered into multiple-stage inflating forward to manageexposures to foreign exchange rate fluctuations of import or export sales.
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However, the multiple-stage inflating forward did not meet the criteria forhedge accounting. Therefore, the subsidiaries did not apply hedgeaccounting.
(3) The Company entered into forward currency option contracts to manageexposures to foreign exchange rate fluctuations of export sales. However, theforward currency option contracts did not meet the criteria for hedgeaccounting. Therefore, the Company did not apply hedge accounting.
(4) Certain forward exchange contracts of the Company and certain subsidiariesmet all the criteria for hedge accounting. The related information is describedin Note 10.9).
3) Accounts receivable and overdue receivables
December 31,
Accounts receivableLess: Allowance for doubtful accounts
Overdue receivables (shown as otherassets)
Less: Allowance for doubtful accounts
4) Inventories
December 31,
Raw materialsWork in processFinished goodsInventory in transit
Less: Allowance forinventory obsolescence andmarket price decline
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5) Available-for-sale financial assets
December 31,
Current items:Listed (TSE and OTC) stocksAdjustment of available-for-sale financialassets
Non-current items:Listed (TSE and OTC) stocksAdjustment of available-for-sale
financial assets
6) Financial assets carried at cost
December 31,
Non-current items:Unlisted stocksLess: Accumulated impairment
(1) The investments held by the Group were measured at cost since the fair valuecannot be measured reliably.
(2) The net asset value of Quintum Technologies, Inc., Ezonics Corporation,Primarion, Inc., MHCC IT Fund 2000, Lightech Fiberoptic, Inc. and AsanteTechnologies Inc. held by DIH and DNH was lower than the cost.Accordingly, an impairment loss of $229,221 and $7,053 was recognized inprofit or loss for the years ended December 31, 2007 and 2008, respectively.
7) Investments in bonds without active markets
December 31,
Non-current item:Structured time deposits
The interest rates of structured time deposits were based on the contracts.
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8) Long-term equity investments accounted for under the equity method
(1) Details of long-term equity investments accounted for under the equity methodare set forth below:
December 31,
Investee company%
(Note A) Book value%
(Note A) Book valueDelta Electronics (Thailand) Public
Co., Ltd. (DET) (Note B)Cyntec Co., Ltd. (Cyntec)Trillion Science, Inc. (Trillion)Amita Technologies, Inc. (Amita)NeoEnergy Microelectronics, Inc.
(NeoEnergy), etc.
(Note A): The percentage of long-term equity investments include the percentage of commonshares held by the Group.
(Note B): The combined ownership percentage of DET's common shares held by DEI and DIHwas more than 20%. Accordingly, the investment was accounted for under theequity method.
(2) Investment income accounted for under the equity method are set forth below:
For the years ended December 31,Name of investee company 2007 2008
DETCyntecTrillion, etc.
(3) The financial statements of other investee companies for the years endedDecember 31, 2007 and 2008 were audited by other independent accountants.Long-term equity investments in these companies amounted to $5,407,332 and$5,926,150 as of December 31, 2007 and 2008, respectively, and the relatedinvestment income was $504,416 and $466,104 for the years then ended,respectively.
(4) Grand Advance Technology Ltd. had been dissolved during 2005. Theprocess of liquidation has been completed in the fourth quarter of 2008.
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(5) Delta Optoelectronics and NuLight were dissolved based on a resolutionapproved during the special shareholder’s meeting on December 12, 2007 andApril 18, 2008, respectively, and are under the process of liquidation effectiveJanuary 18, 2008 and April 20, 2008, respectively. Pursuant to EITF 88-233 ofthe Accounting Research and Development Foundation, R.O.C., datedDecember 29, 1999, “Accounting Treatment of Investee Company Accountedfor under the Equity Method during Liquidation”, these subsidiaries ceased tobe accounted for under the equity method and were excluded from theconsolidated financial statements.
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10) Assets leased to others
December 31, 2007
Original costAccumulated
depreciationAccumulated
impairmentNet
book valueLand
Buildings
December 31, 2008
Original costAccumulated
depreciationAccumulated
impairmentNet
book value
Land
Buildings
DEJ, an indirect majority-owned subsidiary, recognized an impairment loss of$12,836 for the year ended December 31, 2007 as the market value of the landlocated at Tokyo, Japan was lower than the book value.
11) Asset impairment
The subsidiaries recognized an impairment loss of $679,227 and $7,907 for theyears ended December 31, 2007 and 2008, respectively. Details are set forthbelow:
For the year ended December 31, 2007Item Amount included in
statement of incomeAmount included in
stockholders’ equityImpairment loss:
Property, plant and equipmentFinancial assets carried at costAssets leased to othersOther intangible assets
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For the year ended December 31, 2008Item Amount included in
statement of incomeAmount included in
stockholders’ equityImpairment loss:
Financial assets carried at costOther intangible assetsProperty, plant and equipment
12) Short-term loans
December 31,
Unsecured bank loansSecured bank loans
Credit linesInterest rate per annum
13) Financial liabilities at fair value through profit or loss
December 31,
Current items:Financial liabilities held for trading
DerivativesAdjustment of financial liabilities held for
trading
(1) The Group recognized a net loss of $4,746 and $14,102 for the years endedDecember 31, 2007 and 2008, respectively.
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(2) The nature of derivative transactions and related information are summarizedas follows:
December 31, 2007
Financial instruments
Contract amount(Nominal principal)
(in thousands) Contract periodMultiple-stage inflating
forwardMultiple-stage inflating
forwardForward currency option
contracts
December 31, 2008
Financial instruments
Contract amount(Nominal principal)
(in thousands) Contract periodMultiple-stage inflating
forwardMultiple-stage inflating
forwardForward exchange
contracts:Buy USD/Sell RMB
Sell USD/Buy RMB
Buy USD/Sell EUR
Buy USD/Sell KRW
Note A: Will be exercised if the spot rate is below or above the strike priceor knock in price.
Note B: If the exchange rate is above the predetermined exchange rate, thenominal principal will be multipled by 1.5 and the maximumexercise principal will become USD27 million.
Note C: If the exchange rate is above the predetermined exchange rate, thenominal principal will be multiplied by 2 and the maximumexercise principal will become USD4 million.
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Note D: If the exchange rate is above the predetermined exchange rate, thenominal principal will be multiplied by 2 and the maximumexercise principal will become USD1.125 million.
Note E: If the exchange rate is above the predetermined exchange rate, thenominal principal will be multiplied by 2 and the maximumexercise principal will become USD7.4 million.
(1) The Group entered into multiple-stage inflating forward to manageexposures to foreign exchange rate fluctuations of export sales.However, these transactions did not meet all the criteria for hedgeaccounting. Therefore, the Group did not apply the hedge accounting.
(2) The subsidiaries entered into forward exchange contracts to manageexposures to foreign exchange rate fluctuations of imports or exportsales. However, these transactions did not meet all the criteria forhedge accounting. Therefore, the subsidiaries did not apply the hedgeaccounting.
(3) The Group entered into forward currency option contracts to manageexposures to foreign exchange rate fluctuations of imports or exportsales. However, the forward currency option contracts did not meet thecriteria for hedge accounting. Therefore, the Group did not apply thehedge accounting.
(4) The Group entered into forward exchange contracts to manageexposures to foreign exchange rate fluctuations of imports or exportsales which meet all the criteria for hedge accounting. The relatedinformation is described in Note 10. 9).
14) Long-term loans
December 31,
Unsecured bank loansInterest rate per annum
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15) Accrued pension liabilities
(1) The Company, DelSolar, Delta Optoelectronics and DNIT (collectivelyreferred herein as the subsidiaries registered in Taiwan) have anon-contributory and funded defined benefit plan in accordance with theLabor Standards Law, covering all regular employees before theimplementation of the Labor Pension Act on July 1, 2005. The definedbenefit plan will continue to cover the employees who choose to remain withthe defined benefit plan. Upon retirement, pension payments are calculatedbased on total years of service and average salary of the last six months priorto retirement. Two base units are earned for the first 15 years of service andone unit for each additional year thereafter, with a maximum number of 45units. The Company and these subsidiaries contribute 2% of the employees’monthly salaries and wages to an independent retirement trust fund with theBank of Taiwan, the trustee. For the years ended December 31, 2007 and2008, the net periodic pension costs of the Company and these subsidiarieswere $166,023 and $127,471, respectively. The balance of the retirementtrust fund with the Bank of Taiwan was $507,586 and $536,548 as ofDecember 31, 2007 and 2008, respectively. The fund balances are notreflected in the consolidated financial statements.
(2) The reconciliation of the pension plan’s funded status to accrued pensionliability of the Company, DelSolar, Delta Optoelectronics and DNIT as ofDecember 31, 2007 and 2008, the respective measurement dates, are asfollows:
December 31,
Benefit obligation:Vested benefit obligationNon-vested benefit obligationAccumulated benefit obligationEffect of future salary incrementsProjected benefit obligation
Fair value of plan assetsFunded statusUnrecognized transition obligationUnrecognized net pension lossAccrued pension liabilityAccrued pension liability (total)
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The related assumptions used for the actuarial valuation were as follows:
Discount rate
Expected return rate on plan assets
Average rate of salary increase
In 2007 and 2008, the details of net periodic pension cost are as follows:
December 31,
Service costInterest costExpected return on plan assetsAmortization of unrecognizedtransition obligation
Unrecognized pension lossCurtailment or settlement lossNet pension cost
(3) The subsidiaries, DIH and DNH, do not maintain an employee retirement plan.However, certain subsidiaries of DIH and DNH, located in Mainland Chinamaintain a defined contribution retirement plan covering all employees.Under the plan, the employees of DIH and DNH subsidiaries contribute to aseparate fund an amount based on a certain percentage of the monthly basicsalary of the employees. Further, each DIH’s and DNH’s subsidiary alsoprovides pension reserves for its employees for amounts depending on theemployee’s position. As of December 31, 2007 and 2008, the pensionreserves of DIH’s and DNH’s subsidiaries were $441,150 and $653,234,respectively.
(4) NPL, DEJ and the subsidiaries of DIH and DNH located in the United Stateshave defined contribution plans in accordance with the local regulations.
(5) Effective July 1, 2005, the Company and the subsidiaries registered in Taiwanhave established a defined contribution pension plan under the Labor PensionAct (the “New Plan”) for eligible employees holding Republic of Chinacitizenship. The Company and the subsidiaries registered in Taiwan depositthe pension amount based on 6% of the employees’ monthly salaries andwages into each employee’s personal pension account with the Bureau of
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Labor Insurance. For the years ended December 31, 2007 and 2008, thepension costs of the Company and these subsidiaries were $143,570 and$160,680, respectively.
16) Common stock
(1) In accordance with the Company’s Articles of Incorporation, the totalauthorized common stock is 2,500,000,000 shares (including 100,000,000shares for stock warrants conversion). As of December 31, 2008, the totalissued and outstanding common stock was 2,185,046,000 shares with parvalue of $10 (in dollars) per share.
(2) On December 20, 2004, the Board of Directors of the Company adopted aresolution that allowed certain stockholders to issue 16,000,000 units of globaldepository receipts (GDRs), represented by 80,000,000 shares of commonstock (Deposited Shares), a unit of GDRs represents 5 shares of common stock.After obtaining approval from SFB, these GDRs were listed on the SecuritiesExchange of Luxembourg, with total proceeds of US$134,666,000. Theissuance of GDRs was represented by outstanding shares, therefore, there is nodilutive effect on the common shares’ equity. The main terms and conditionsof the GDRs are as follows:
A. Voting rights
GDR holders may, pursuant to the Depositary Agreement and the relevantlaws and regulations of the R.O.C., exercise the voting rights pertaining tothe underlying common shares represented by the GDRs.
B. Sales and redemption of the underlying common shares represented by theGDRs
When the holders of the GDRs request the Depositary to redeem the GDRsin accordance with the relevant R.O.C. regulations and the provisions in theDepositary Agreement, the Depositary may (i) deliver the underlyingcommon shares represented by the GDRs to the GDR holders, or (ii) sell theunderlying common shares represented by the GDRs in the R.O.C. stockmarket on behalf of the GDR holder. The payment of proceeds from suchsale shall be made subject to the relevant R.O.C. laws and regulations andthe provisions in the Depositary Agreement.
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C. Distribution of dividends, preemptive rights and other rights and interests of
GDR units bear the same rights as common shares.
D. Taking into account the stock dividend distribution year by year, there were531 thousand units outstanding, representing 2,657,000 common shares ofthe Company’s common stock.
(3) The Company issued 60,000,000 units of employee stock options on December18, 2007, with a unit of employee stock option representing one share ofcommon stock, as resolved by the Board of Directors on October 29, 2007.The exercise price under the stock-based employee compensation plan is basedon the closing price of the Company’s common stock at the grant date and issubject to adjustments due to changes in the number of common shares andissuance of cash dividends. The vesting period of the Company’s employeestock option plan is six years. The employees may exercise the stock optionsin installments after the stock options are granted for two years.
A. Details of the employee stock options are set forth below:For the year ended December 31, 2007
Weighted-averageexercise price
Stock options No. of shares (in dollars) (Note)Options outstanding at beginning of
yearOptions grantedOptions exercised
Options revokedOptions outstanding at end of yearOptions exercisable at end of yearOptions authorized but not granted at end
of year
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For the year ended December 31, 2008Weighted-average
exercise priceStock options No. of shares (in dollars) (Note)
Options outstanding at beginning ofyear
Options grantedOptions exercised
Options revokedOptions outstanding at end of yearOptions exercisable at end of yearOptions authorized but not granted at end
of year
(Note) Weighted-average exercise price of options outstanding at beginning of year was
adjusted due to the change in common stock after taking into account stock
dividends and employees’ bonus distributed.
B. Details of the employee stock options outstanding as of December 31, 2007and 2008 are set forth below:
Stock options outstanding at Stock options exercisable at
December 31, 2007 December 31, 2007
Weighted-average
Range of expected Weighted-average Weighted-average
exercise price remaining exercise price exercise price
(in dollars) No. of shares vesting period (in dollars) No. of shares (in dollars)
years
Stock options outstanding at Stock options exercisable at
December 31, 2008 December 31, 2008
Weighted-average
Range of expected Weighted-average Weighted-average
exercise price remaining exercise price exercise price
(in dollars) No. of shares vesting period (in dollars) No. of shares (in dollars)years
C. For the stock options granted (amended) on or after January 1, 2004, thecompensation cost is zero using the intrinsic value method. The followingsets forth the pro forma net income and earnings per share based on theassumption that the compensation cost is accounted for using the fair value
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method.
a) Pricing Model: the Black-Scholes option-pricing
b) Parameters:
For the years ended December 31,
Stock options outstanding as at 2007 2008
December 31, 2007 and 2008
Dividend yield rate
Expected price volatility
Risk-free interest rate
Expected vesting period years years
Weighted-average fair value per share(in dollars)
c) Conclusion:
For the years ended December 31,
Stock options outstanding as at 2007 2008
December 31, 2007 and 2008
Weighted-average fair value of stockoptions per share (in dollars) (in dollars)
Compensation cost accounted forusing the fair value method
d) Pro forma information:
For the years ended December 31,
2007 2008
Net income Net income stated in thestatement of income
Pro forma net income
Basic earningsper share (EPS)(in dollars)
EPS stated in the statementof income
Pro forma EPS
Diluted EPS(in dollars)
EPS stated in the statementof income
Pro forma EPS
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17) Capital reserve
The R.O.C. Company Law requires that the capital reserve shall be exclusivelyused to offset against accumulated deficit or increase capital and shall not be usedfor any other purpose. The capital reserve can be used to offset againstaccumulated deficit only when legal reserve and special reserve are insufficient.Only capital reserve from paid-in capital in excess of par value and donated surpluscan be used to increase capital and the total amount shall be limited to 10% ofoutstanding capital each year.
18) Legal reserve
The R.O.C. Company Law requires that the Company shall set aside 10% of its netincome as legal reserve after offsetting against prior years’ losses until the legalreserve equals the Company’s capital. The legal reserve can be used only tooffset against accumulated deficit or increase capital. The legal reserve can beused to increase capital only when the reserve exceeds 50% of the Company’scapital, and shall be limited to 50% of the excess portion of the reserve.
19) Undistributed earnings
(1) As stipulated in the Company's Articles of Incorporation, the current year'searnings, if any, shall be distributed in the following order:
A. Payment of all taxes and dues.
B. Offset against prior years' operating losses, if any.
C. Set aside 10% of the remaining amount as legal reserve.
D. Set aside a certain amount as special reserve, if necessary.
E. The amount of distributable earnings after deducting items A, B, C and D,plus beginning undistributed earnings (the earnings), shall be distributed inthe following percentage according to the resolution approved at thestockholders’ meeting:
a) Directors' and supervisors' remuneration: up to 1% of the earnings.
b) Employees' bonus: at least 3% of the earnings. In addition, under theshareholders’ resolution at their annual meeting on May 19, 2005, theCompany can issue the employee stock bonus to qualified employees ofsubsidiaries. The related regulations should be authorized by theCompany’s Board of Directors or authorized person.
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c)Stockholders' bonus: balance of the earnings after deducting a) and b).
(2) In addition to the legal reserve, the Company may, based on its Articles ofIncorporation or by a resolution adopted at the meeting of stockholders, setaside an additional special reserve to cover accounts under stockholders’equity with negative balance. Subsequently, the special reserve can beavailable for distribution after approval of the stockholders after the negativebalance in these accounts has been fully recovered.
(3) As of February 16, 2009, the distribution of 2008 earnings had not beenapproved by the Company’s Board of Directors. The information will beposted in the “Market Observation Post System” of the Taiwan StockExchange Corporation.
(4) The distribution of 2007 earnings was approved by the shareholders on June 13,2008 which included legal reserve of $1,506,130, employees’ stock bonuses of$365,000, employees’ cash bonuses of $365,000, stock dividends of $210,642,cash dividends of $11,585,295, directors’ and supervisors’ remuneration of$16,200, and capitalization of capital reserve of $210,642. The earningsdistribution had been approved by SFB and the Company set July 21, 2008 asthe ex-rights/dividend date.
(5) The Company’s dividend policy is summarized below:
As the Company operates in a volatile business environment and is in thestable growth stage, the residual dividend policy is adopted taking intoconsideration the Company’s financial structure, operating results and futureexpansion plans. According to the dividend policy adopted by the Board ofDirectors, at least 50% of the Company’s earnings shall be appropriated asdividends, and cash dividends shall account for at least 5% of the totaldividends distributed.
(6) According to the resolutions adopted at the shareholders’ meeting, theCompany paid cash dividends of $4.5 (in dollars) and $5.5 (in dollars) pershare, and stock dividends of $0.1 (in dollars) and $0.1 (in dollars) per share in2007 and 2008, respectively. In addition, the stockholders at the 2007 and2008 annual meeting declared the distribution of stock dividends throughcapitalization of capital reserve for $0.4 (in dollars) and $0.1 (in dollars) pershare, respectively.
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(7) The Group’s estimated amounts of employees’ bonus and directors’ andsupervisors’ remuneration for 2008 are $2,196,262 and $28,957, respectively,and are recognized as operating costs or operating expenses for 2008. While,if the estimated amounts are different from the amounts approved by thestockholders subsequently, the difference is recognized as gain or loss in 2009.
The basis of estimates is based on a certain percentage of undistributedearnings as of December 31, 2008. The calculation of shares of stock bonusdistributed will be based on the closing price of the Company’s common stockat the previous day of the 2009 stockholders’ meeting after taking into accountthe effects of ex-rights and ex-dividends.
(8) For the distribution of 2007 and 2006 earnings, details on employees’ bonusare as follows:
A. The distribution of employees’ bonus and directors’ and supervisors’remuneration set forth in the Articles of Incorporation: Please refer to Note(1). E.
B. The appropriation of 2007 earnings included employees’ cash bonus of$365,000, stock bonus of $365,000, and directors’ and supervisors’remuneration of $16,200. Employees’ stock bonus of 36,500 thousandshares constituted 1.73% of the outstanding shares as at December 31, 2007.The appropriation of 2006 earnings included employees’ cash bonus of$192,500, stock bonus of $385,000, and directors’ and supervisors’remuneration of $16,700. Employees’ stock bonus of 38,500 thousandshares constituted 1.95% of the outstanding shares as at December 31, 2006.
The effect on the 2006 and 2007 earnings per share (EPS) is as follows:
2006 EPS 2007 EPSBasic Diluted Basic Diluted
Original EPS in thefinancial statements ofcurrent year
Effect of employees’bonus and directors’ andsupervisors’remuneration
Pro forma EPS
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C. The distribution of 2006 and 2007 earnings approved at the stockholders’meeting was the same as that proposed at the Board of Directors’ meeting.
(9) The Taiwan imputation tax system requires that any undistributed currentearnings, on tax basis, be subject to an additional 10% corporate income tax ifthe earnings are not distributed in the following year.
(10) As of December 31, 2007 and 2008, details on tax credits of the Company areas follows:
December 31,
Imputation tax credit account balance
Creditable tax ratio
(11) As of December 31, 2007 and 2008, the undistributed earnings are as follows:
December 31,
Before January 1, 1998On and after January 1, 1998
-10% additional tax assessed-10% additional tax unassessed
20) Income tax
1. Deferred income tax assets and liabilities as of December 31, 2007 and 2008are as follows:
December 31,
(A) Total deferred income tax assets(B) Valuation allowance(C) Total deferred income tax
liabilities
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2. The components of deferred income tax assets and liabilities are as follows:
December 31, 2007 December 31, 2008Original Originalamount Tax effect amount Tax effect
Current:Allowance for
inventoryobsolescence
Unrealized exchangeloss
OthersLoss carryforwardsInvestment tax credits
Less: Valuationallowance -current
Net deferred income taxassets (liabilities) -current
December 31, 2007 December 31, 2008Original Originalamount Tax effect amount Tax effect
Non-current:Investment income
accounted forunder the equitymethod, net
Depreciation differencebetween tax andfinancial book
Unfunded pensionLoss carryforwardsAssets impairmentOthersInvestment tax credits
Less: Valuationallowance -non-current
Net deferred income taxliabilities - non-current
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3. As of December 31, 2007 and 2008, income tax payable (refundable) iscomputed as follows:
For the years ended December 31,
Current year's income tax expenseEffect of deferred income taxInterest income subject to separate taxOver provision of income tax in prior
years, netPrepaid income taxIncome tax receivable last periodOthersIncome tax payable-netIncome tax refundableIncome tax payable
D. As of December 31, 2008, according to the “Income Tax Law” and “Statute forUpgrading Industries”, investments tax credits of the Company, DNIT andDelSolar are as follows:
Source of investments tax credits Unused credits Year of expirationLoss carryforwards Between 2014 and 2019
R&D expenditures Between 2009 and 2012Training expenditures Between 2009 and 2012Expenditures for procurement ofmachinery and equipment Between 2009 and 2012
Emerging important strategicindustries Between 2010 and 2011
5. Cold Cathode Fluorescence Lamp (CCFL) and Projection System (includingColor Projection Television) are entitled to a five-year exemption on income taxunder the “Incentives for Emerging Important Strategic Industries inManufacturing and Technology Services”, which expires in December 2011.The income entitled to tax-exemption for the years ended December 31, 2007and 2008 amounted to $72,211 and $6,526, respectively. Under the “BasicIncome Tax Act” regulations, the income entitled to tax-exemption prior to theend of 2005 is excluded from the computation of basic tax.
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6. Effective January 1, 2008, DDG, DEP, DEC and DII are high and newenterprises which can apply the preferential tax rate of 15%.
7. Effective January 1, 2008, DWJ and DWO adopted the law of the People’sRepublic of China on Enterprise Income Tax. The rate of foreign enterpriseincome tax is 25%.
8. DWC and DWV are subject to tax laws applicable to foreign investmententerprises in the P.R.C. and are fully exempt from PRC income tax for twoyears starting from the first profit-making year followed by a 50% reduction forthe next three years. The current enterprise income tax rate is 25%.
9. Effective January 1, 2008, DWH is subject to the law of the People’s Republicof China on Enterprise Income Tax, and the rate of enterprise income taxchanged from 15% to 18%. DWH is still in the status of deficit, as a result,income tax is not recognized.
10. As of December 31, 2008, the Company and its subsidiaries’ assessed andapproved conditions of income tax returns are as follows:
Years Assessed by Tax AuthorityDelSolar and DNITThe CompanyPreOptix Not assessed yet
21) Earnings per share
For the year ended December 31, 2007Amount Earnings per share (in dollars)
Income beforeincome tax Net income
Weighted-averageoutstanding
common shares(in thousands)
(Note C)Income before
income tax Net incomeBasic EPS
Net incomeDilutive effect ofcommon stockequivalents:Employee stock
optionsDiluted EPS
Net income
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For the year ended December 31, 2008Amount Earnings per share (in dollars)
Income beforeincome tax Net income
Weighted-averageoutstanding
common shares(in thousands)
(Note C)Income before
income tax Net incomeBasic EPS
Net incomeDilutive effect ofcommon stockequivalents:
Employee stockoptions
Employee bonus(Note B)
Diluted EPSNet income
Note A: The stock options will result in anti-dilutive effect when using the treasury method, therefore suchshares shall not be included.
Note B: Effective January 1, 2008, as employees’ bonus could be distributed in the form of stock, the dilutedEPS computation shall include those estimated shares that would increase from employees’ stockbonus issuance in the calculation of the weighted-average number of common shares outstandingduring the reporting year, taking into account the dilutive effect of stock bonus on potential commonshares; whereas, basic EPS shall be calculated based on the weighted-average number of commonshares outstanding during the reporting year including the shares of employees’ stock bonus for theappropriation of prior year earnings, which have already been resolved at the stockholders’ meetingheld in the reporting year. Since capitalization of employees’ bonus no longer belongs to distributionof stock dividends, the calculation of basic EPS and diluted EPS for all periods presented shall not beadjusted retroactively. However, the accounting treatment for the appropriation of employees’ bonusfor 2007 earnings resolved at the stockholders’ meeting held in 2008 is still in accordance with theregulations on capitalization of employees’ bonus under paragraphs 19 and 39 of R.O.C. SFAS No.24, “Earnings per Share”.
Note C: The weighted-average outstanding common shares were retroactively adjusted for stock dividendsand employee bonuses distributed in 2008.
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5. RELATED PARTY TRANSACTIONS
1) Names and relationship of related parties
Names of related parties Relationship with the CompanyCyntec Co., Ltd. (Cyntec) Investee company accounted for under the
equity methodGrand Advance Technology Inc. (Grand
Advance) (Note)Delta Electronics (Thailand) Public Co.,
Ltd. (DET)Amita Technologies, Inc. (Amita)
NeoEnergy Microelectronics, Inc.(NeoEnergy)
Delta Products Corporation (DPC) Related party in substanceDelta Greentech (China) Co,. Ltd.
(Delta Greentech)Progressive Optoelectronics Technology
Co., Ltd. (Progressive)Another investor of PreOptix,
subsidiary of the CompanyJurong Progressive Optoelectronics
Technology Co., Ltd.A subsidiary of Progressive
DET International Holding Ltd.(DET Holding)
A subsidiary of DET
Delta Energy Systems (Switzerland) AG.(DES Switzerland)
Delta Electronics Europe Ltd. (DEU) A subsidiary of DET HoldingDelta Energy Systems (Germany) GMBH
Delta Energy Systems (India) PVT Ltd.(DES India)
Delta Power Solutions India PVT Ltd.(DPS India)
DET Logistics (USA) Corporation
DET Video Technology Ltd. (DETVideo)
Delta Electronics (Slovakia) s.r.o.
Delta Energy Systems (Brasil) S.A. A subsidiary of DES SwitzerlandDelta Energy Systems (Guangzhou) Ltd.
(DES Guangzhou)
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Names of related parties Relationship with the CompanyDelta Energy Systems (Sweden) AB (DES
Sweden)A subsidiary of DES Switzerland
Delta Energy Systems (Finland) Oy
Delta Green (Tianjin) Industries Co., Ltd.(Delta Green (Tianjin))
Indirectly held investee, accounted forunder the equity method by DET
Cyntec Electronics (SuZhou) Co., Ltd. Affiliated enterprise of Cyntec
(Note) Dissolved in 2005, and had been completely liquidated in 2008.
2) Significant transactions and balances with related parties
(1) Sales
For the years ended December 31,
Delta GreentechDPS IndiaDPCDES IndiaDETOthers
The sales terms, including prices and collections, were negotiated based oncost, market, competitors and other factors.
(2) Purchases
For the years ended December 31,
Delta Green (Tianjin)DETOthers
The purchase terms, including prices and payments, were negotiated based oncost, market, competitors and other factors.
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(3) Accounts receivable
December 31,
Delta GreentechDES IndiaDPS IndiaDPCOthers
(4) Accounts payable
December 31,
Delta Green (Tianjin)Others
(5) Property transactions
PreOptix (Jiang Su), the indirect-majority-owned subsidiary of the Company,purchased land use right and fixed assets from Jurong ProgressiveOptoelectronics Technology Co., Ltd. during 2008 in the amount of $47,379 and$201,372, respectively.
(6) Remuneration information of main management (including directors,supervisors, general manager and vice general managers)
Salaries (Note 1)Bonuses (Note 2)Services fees (Note 3)Distribution of earnings (Note 4)
Note 1: Including wages allowance, retirement pension and compensation.
Note 2: Including all kinds of incentives.
Note 3: Including traveling allowance, payment for special disbursement, cars anddorms provided by the Group.
Note 4: Including directors’ and supervisors’ remuneration and employees’ bonus.
For related information, please refer to Annual Report.
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6. DETAILS OF PLEDGED ASSETS
As of December 31, 2007 and 2008, the details of pledged assets are as follows:
December 31,Assets pledged
Purposeof pledge
Demand deposits (shown asother financial assets -current)
Collateral forcustoms duties
Time deposits (shown as otherfinancial assets - current)
Collateral fordisposition andseizure
Time deposits (shown as otherfinancial assets - current)
Performance bonds
Time deposits (shown as otherfinancial assets - current)
Collateral forloans
7. COMMITMENTS AND CONTINGENT LIABILITIES
The Group’s major commitments as of December 31, 2008 were as follows:
1) Effective May 2004, the Company has a 20-year land and building lease in TainanScience-Based Industrial Park. As of December 31, 2008, the future leasepayments and the net present value discounted at 1.39%, one-year time depositinterest rate given by the Chunghwa Post Co., Ltd., as of December 31, 2008 are asfollows:
Year Amount200920102011201220132014~2018 (the net present value is $20,305)2019~2022 (the net present value is $15,265)2023 (the net present value is $ 3,686)
2) In December 2006, the Company entered into a three-year contract ofhigh-efficiency LED (Light Emitting Diodes) for monitors and patent licensingagreement with Industrial Technology Research Institute. The Company has topay technology and patent royalties amounting to $31,000. In addition, the
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Company commits to pay royalties based on a certain percentage of total salesfrom the day the related products are sold and the maximum amount of the royaltyis $130,000. As of December 31, 2008, the Company has paid the relatedroyalties of $18,500.
3) In October 2007, the Company entered into an agreement with the Institute ofNuclear Energy Research, Atomic Energy Council, Executive Yuan, R.O.C. fortechnology authorization of Concentrating Photovoltaic Modules. The contract isvalid through October 2017. In addition to the authorization fee of $5,000, theCompany commits to pay royalties based on a certain percentage of total salesfrom the day the authorized products are sold and the maximum amount of theroyalty is $100,000. As of December 31, 2008, the Company has paid theauthorization fee totaling $5,000 to the Institute of Nuclear Energy Research.
4) As of December 31, 2008, the unused letters of credit of the Group was $19,145.
5) The Group entered into contracts for land lease, construction of new factories andbuildings and acquisition of equipments with total future payments ofapproximately $2,545,592.
6) DelSolar entered into long-term contracts for materials supply with local andforeign suppliers. The period of supply is from December 2006 to December2018. DelSolar agreed to pay certain amounts which are non-refundable.
8. MAJOR CATASTROPHES
None.
9. SUBSEQUENT EVENTS
The subsidiary, Delsolar, applied to establish DelSolar Holding (Cayman) Ltd. in theamount of US$9,000 as capital on December 17, 2008, and will invest in DelSolar (WuJiang) Ltd. via DelSolar Holding (Cayman) Ltd.
The above investment was approved by the Investment Commission on January 19,2009.
10. OTHERS
1) Certain accounts in the 2007 consolidated financial statements were reclassified toconform with the 2008 financial statement presentation.
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The methods and assumptions used to estimate the fair values of the abovefinancial instruments are summarized below:
(1) Financial assets and liabilities with fair values equal to book values
A. For short-term instruments, the fair values were determined based ontheir carrying values because of the short maturities of the instruments.This method was applied to cash and cash equivalents, notes and accountsreceivable (including related parties), other receivables, other financialassets - current, short-term loans, accounts payable (including relatedparties), income tax payable, accrued expenses, other payables and othercurrent liabilities.
B The fair value of cash surrender value of life insurance is based on thebook value at the balance sheet date.
C The fair values of refundable deposits and guarantee deposits received arebased on book values, which approximate present value.
D. The fair values of long-term loans is based on book value, whichapproximate present value.
(2) The fair values of available-for-sale financial assets are based on thequotations in the active market, which are the latest quoted closing prices atthe balance sheet date.
(3) The fair values of derivative financial instruments which include unrealizedgains or losses on unsettled contracts were determined based on the amountsto be received or paid assuming that the contracts were settled as of thereporting date.
3) Information on available-for-sale financial assets
The Group recognized the adjustment in equity from available-for-sale financialassets amounting to $612,639 and ($1,267,990), and the amount removed fromequity and recognized in profit or loss was $94,762 and $136,931 for the yearsended December 31, 2007 and 2008, respectively.
4) Information on interest rate risk positions
As of December 31, 2007 and 2008, the Group’s financial assets with fair valuerisk due to the change of interest amounted to $28,696,745 and $18,330,085,respectively, and the financial liabilities with fair value risk due to the change of
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interest rate amounted to $0 and $2,899,553, respectively. The financial assetswith cash flow risk due to the change of interest rate amounted to $12,738,600and $10,493,040, respectively, and the financial liabilities with cash flow risk dueto the change of interest amounted to $4,043,062 and $4,259,134, respectively.
5) Procedure of financial risk control and hedge
The main objective of financial risk control and hedge strategy is to reduce theloss of assets or liabilities (including forecast transactions) resulting from theexchange rate and interest rate fluctuations. The Group achieves financialhedge by entering into derivatives and all activities of hedge follow the principleslisted below to achieve the objective of risk control:
(1) Nature hedge
(2) Not eroding the profit of main business
(3) Not entering into the financial instruments besides the transaction currency
(4) To execute the stop-loss point
(5) To execute the operating process
In monitoring control, the Group Chief Financial Officer and the internal auditorsshould monitor and manage derivative transactions. Aside from evaluating theposition twice a month, the authorized persons should monitor financialinstrument transactions and the related profit or loss resulting from thetransactions at any time. If any unusual event occurred, necessary actionsshould be taken and reported to the Board of Directors immediately. In addition,the performance of derivative transactions will be evaluated periodically todetermine if these transactions are in compliance with the operating strategy andthe risk of these transactions is within the tolerable range of the Group. TheGroup has established the procedures for derivative transactions.
6) Information of major financial risk
(1)Investments in equity financial instruments
December 31,Items
Available-for-sale financial assetsFinancial assets carried at cost
��
A. Market risk
The investments in equity financial instruments owned by the Group areexposed to price risk.
B. Credit risk
The Group assessed the credit condition of counterparties and default isnot expected. Therefore, the possibility of credit risk is low.
C. Liquidity risk
(A) The Group’s investments in equity financial instruments which haveactive markets are expected to be sold easily and quickly in the marketat the price close to their fair value.
(B) The Group’s investments in equity financial instruments withoutactive markets are expected to have liquidity risk.
D. Cash flow risk due to changes in interest rate
The Group’s investments in equity financial instruments are non-interestrate instruments; therefore, there is no cash flow risk related to changes ininterest rate.
(2)Other financial instruments investments
December 31,Item
Investments in bonds without activemarkets
A. Market risk
The investments in bonds without active markets are structured timedeposits, particularly, the principal guaranteed product; therefore, theGroup expects no significant market risk.
B. Credit risk
The counterparties of the structured time deposits invested by the Groupare international financial institutions which are all in good credit standing;therefore, the credit risk is extremely low.
�0
C. Liquidity risk
The Group’s working capital is sufficient to support the capital demand ofthe Group. Therefore, the Group expects no significant liquidity risk.
D. Cash flow risk due to changes in interest rate
The future cash flows of the principal guaranteed financial instrumentswill fluctuate with the changes in market interest rate. Since these areprincipal guaranteed financial instruments, the market interest ratefluctuations will not reduce the cash flow of the principal.
(3)Receivables
December 31,Items
Notes receivable, netAccounts receivable (including
related parties), netOther receivables
A. Market risk
The Group’s receivables are all due within one year, therefore, the Groupexpects no significant market risk.
B. Credit risk
The Group’s receivables are all approved through rigorous credit reviewprocedures and some of which have to take out an insurance policy orprovide necessary collaterals; therefore, the Group expects no significantcredit risk.
C. Liquidity risk
The Group’s receivables are all due within one year and their workingcapital is sufficient to support its capital requirements; therefore, theGroup expects no significant liquidity risk.
D. Cash flow risk due to changes in interest rate
The Group’s receivables are all due within one year; therefore, there is nosignificant cash flow risk due to changes in interest rate.
�1
(4)Loans
December 31,Item
Short-term loansLong-term loans
A. Market risk
The loans of the Group have no significant market risk.
B. Credit risk
None.
C. Liquidity risk
The future cash flow is expected to be sufficient to cover the capitalrequirements of Group; therefore, the Group expect no significant liquidityrisk.
D. Cash flow risk due to changes in interest rate
The loans of the Group are issued at floating interest rate, accordingly, thefuture cash flow of which will fluctuate with the yield rate of these debtinstruments. However, due to the short duration of the short-term loans,there is no significant cash flow risk due to changes in interest rate.
7) Information of derivative transactions
(1) The balance of the Group’s derivative transactions as of December 31, 2007and 2008 are shown in Notes 4.2), 13) and 10.9). The related riskinformation are as follows:
A. Market risk: The Group entered into certain derivative contracts in orderto hedge risk. Accordingly, no material market risk is expected.
B. Credit risk: The banks, which the Group deals with, are all in good creditstanding and the Group deals with several banks to disperse the creditrisk; therefore, the possibility that the banks will not comply with theterms of the contracts is low.
C. Liquidity risk: The Group has sufficient working capital; therefore nomaterial liquidity risk is expected.
��
D. Cash flow risk due to changes in interest rate: The Group did not enterinto any derivative contract that is interest rate related; therefore, nomaterial cash flow risk due to changes in interest rate is expected.
8) Off-balance sheet financial instruments with credit risk
None.
9) Cash flow hedge
(1) Fair value hedge
The foreign currency deposits held by the subsidiaries may face the riskresulting from fair value changes due to foreign exchange rate changes. Thesubsidiaries entered into foreign currency forward contracts which meet allcriteria for hedge accounting. The related information is as follows:
Designated for hedging instrument
Hedge item
Financial instrumentwas designated ashedging instrument
Fair value as ofDecember 31, 2008
Deposits in foreign currencies Forward exchangecontracts
(2) Cash flow hedge
In order to prevent the risk resulting from future cash flow fluctuation due toforeign exchange rate fluctuations, the Group entered into foreign currencyforward contracts which meet all criteria for hedge accounting. The relatedinformation is as follows:
Designated for hedging instrument
Hedge item
Financial instrumentwas designated ashedging instrument
Fair value as ofDecember 31, 2008
Period ofanticipatedcash flow
Period of gain (loss)anticipated to be
recognized inincome statement
Receivablesin foreigncurrencies
Forward exchangecontracts
Payables inforeigncurrencies
Forward exchangecontracts
��
10)
Sign
ifica
ntin
terc
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nytra
nsac
tions
betw
een
the
Com
pany
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epar
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cial
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emen
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deta
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Tra
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-term
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and
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-term
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ts3.
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C.S
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rent
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pens
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inor
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unda
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11.
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rmat
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1)R
elat
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ifica
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All
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hen
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arin
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idat
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atem
ents
.The
disc
losu
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form
atio
nas
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refe
renc
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ly.
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inan
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ities
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mpa
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pers
on:N
one.
(2)G
uara
ntee
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rmat
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)N
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ount
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elta
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age
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rmat
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)O
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ased
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ased
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ity,
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an
Res
earc
h,de
velo
pmen
t,m
anuf
actu
ring
and
sale
sof
vario
usth
infil
mco
mpo
nent
s
〃A
mita
Tech
nolo
gies
,In
c.
Gue
isha
nTo
wns
hip,
Taoy
uan
Cou
nty,
Taiw
an
Man
ufac
turin
gof
lithi
umpo
lym
erba
tterie
sand
rela
ted
syst
ems
Del
taO
ptoe
lect
roni
cs,
Inc.
,etc
.
��
Orig
inal
inve
stm
ent(
Not
ei)
Hel
das
ofD
ecem
ber3
1,20
08
Nam
eof
inve
stor
Nam
eof
inve
stee
com
pany
Add
ress
Mai
nac
tiviti
es
Bala
nce
asof
Dec
embe
r31,
2008
Bala
nce
asof
Dec
embe
r31,
2007
Num
ber
ofsh
ares
(Inth
ousa
nds)
Perc
enta
geof
owne
rshi
pB
ook
valu
eIn
com
e(lo
ss)o
fthe
inve
stee
com
pany
Inve
stm
enti
ncom
e(lo
ss)r
ecog
nize
dby
the
Com
pany
Not
eD
elta
Inte
rnat
iona
lH
oldi
ngLt
d.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)
Mal
aysi
aSa
leso
fele
ctro
nic
prod
ucts
(Not
ea)
Del
taEl
ectro
nics
(H.K
.)Lt
d.H
ong
Kon
gEq
uity
inve
stm
ents
DA
CH
oldi
ng(C
aym
an)L
td.
Cay
man
Isla
nds
Equi
tyin
vest
men
ts
Trill
ion
Scie
nce,
Inc.
Cal
iforn
ia,U
.S.A
R&
Dof
anis
otro
pic
cond
uctiv
efil
mD
elta
Elec
troni
cs(J
apan
),In
c.Ja
pan
Sale
sofe
lect
roni
cpr
oduc
tsD
elta
Pow
erSh
arp
Ltd.
,etc
.H
ong
Kon
g,et
c.O
pera
tions
man
agem
enta
nden
gine
erin
gse
rvic
es,e
tc.
Del
taEl
ectro
nics
(H.K
.)Lt
d.
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,
Ltd.
Don
ggua
nC
ity,
Gua
ngdo
ng,
Prov
ince
,P.R
.C.
Man
ufac
turin
gof
pow
ersu
pplie
s(N
ote
b)
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Lt
d.
Man
ufac
turin
gof
pow
ersu
pplie
s
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,
Ltd.
Man
ufac
turin
gof
trans
form
ers
Del
taEl
ectro
nics
(Sha
ngha
i)C
o.,
Ltd.
Pudo
ngN
ewD
istri
ct,S
hang
hai
City
,P.R
.C.
Prod
uctd
esig
n
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.W
ujia
ngC
ity,J
iang
SuPr
ovin
ce,
P.R
.C.
Man
ufac
turin
gof
pow
ersu
pplie
s
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.
Man
ufac
turin
gof
trans
form
ers
Del
taEl
ectro
-Opt
ics
(Wuj
iang
)Ltd
.
Man
ufac
turin
gof
perip
hera
lsan
del
ectro
nic
cont
rol
equi
pmen
tsD
elta
Vid
eoD
ispl
aySy
stem
(Wuj
iang
)Ltd
.
Man
ufac
turin
gan
dsa
leso
fva
rious
proj
ecto
rs
Del
taEl
ectro
nics
(Wuh
u)C
o.,L
td.
Wu
Hu
City
,A
nhui
Prov
ince
,P.
R.C
.
Man
ufac
turin
gof
pow
ersu
pplie
s
��
Orig
inal
inve
stm
ent(
Not
ei)
Hel
das
ofD
ecem
ber3
1,20
08
Nam
eof
inve
stor
Nam
eof
inve
stee
com
pany
Add
ress
Mai
nac
tiviti
es
Bala
nce
asof
Dec
embe
r31,
2008
Bala
nce
asof
Dec
embe
r31,
2007
Num
ber
ofsh
ares
(inth
ousa
nds)
Perc
enta
geof
owne
rshi
pB
ook
valu
eIn
com
e(lo
ss)o
fthe
inve
stee
com
pany
Inve
stm
enti
ncom
e(lo
ss)r
ecog
nize
dby
the
Com
pany
Not
eD
elta
Elec
troni
cs(H
.K.)
Ltd.
Del
taEl
ectro
nic
(Che
nzho
u)C
o.,
Ltd.
Che
nzhu
City
,H
unan
Prov
ince
,P.
R.C
.
Man
ufac
turin
gof
pow
ersu
pplie
s(N
ote
b)
Del
taN
etw
orks
Hol
ding
Ltd.
Del
taN
etw
orks
,In
c.(C
aym
an)
Cay
man
Isla
nds
Equi
tyin
vest
men
ts(N
ote
c)
Del
taN
etw
orks
,In
c.(C
aym
an)
Del
taN
etw
orks
,In
c.(T
aiw
an)
Gue
isha
nTo
wns
hip,
Taoy
uan
Cou
nty
Man
ufac
turin
gof
netw
orki
ngsy
stem
and
perip
hera
ls(N
ote
d)
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)
Mal
aysi
aTr
adin
gof
netw
orki
ngsy
stem
and
perip
hera
ls
Del
taN
etw
orks
(H.K
.)Lt
d.H
ong
Kon
gEq
uity
inve
stm
ents
DN
ILog
istic
s(U
SA)C
o.U
.S.A
.Tr
adin
gof
netw
orki
ngsy
stem
and
perip
hera
lsD
elta
Net
wor
ks(H
.K.)
Ltd.
Del
taN
etw
orks
(Don
ggua
n)Lt
d.D
ongg
uan
City
Gua
ngdo
ngPr
ovin
ce,P
.R.C
.
Man
ufac
turin
gan
dsa
leso
fot
herr
adio
trans
mis
sion
appa
ratu
sinc
orpo
ratin
gre
cept
ion
appa
ratu
sand
othe
rra
dio-
broa
dcas
trec
eive
rs,
com
bine
dw
ithso
und
reco
rdin
gor
repr
oduc
ing
appa
ratu
s
(Not
ee)
〃D
elta
Net
wor
ks(W
ujia
ng)L
td.
Wuj
iang
City
,Jia
ngSu
Prov
ince
,P.
R.C
.〃
Del
taN
etw
orks
(Sha
ngha
i)Lt
d.Sh
angh
aiC
ityD
esig
nof
com
pute
rsof
twar
e
PreO
ptix
Co.
,Ltd
.Pr
eOpt
ix(H
ong
Kon
g)C
o.,L
td.
Hon
gK
ong
Equi
tyin
vest
men
ts(N
ote
f)
PreO
ptix
(Hon
gK
ong)
Co.
,Ltd
.
PreO
ptix
(Jia
ngSu
)C
o.,L
td.
Jhen
gjia
ngC
ity,
Jian
gSu
Prov
ince
,P.
R.C
.
Man
ufac
turin
gan
dsa
leso
fle
nses
and
optic
alen
gine
sfor
proj
ecto
rs
(Not
ej)
Not
ea:
Inve
stm
enti
ncom
e/lo
ssre
cogn
ized
byD
elta
Inte
rnat
iona
lHol
ding
Ltd.
Not
eb:
The
inve
stm
enti
ncom
e/lo
sson
the
subs
idia
ryis
orig
inal
lyac
coun
ted
fort
hrou
ghD
elta
Inte
rnat
iona
lHol
ding
Ltd.
,but
isno
wac
coun
ted
fort
hrou
ghD
elta
Elec
troni
cs(H
.K.)
Ltd.
due
toin
vest
men
tstru
ctur
ech
ange
inth
efo
urth
quar
ter
of20
07.
Not
ec:
Inve
stm
enti
ncom
e/lo
ssre
cogn
ized
byD
elta
Net
wor
ksH
oldi
ngLt
d.N
ote
d:In
vest
men
tinc
ome/
loss
reco
gniz
edby
Del
taN
etw
orks
,Inc
.(C
aym
an).
Not
ee:
The
inve
stm
enti
ncom
e/lo
sson
the
subs
idia
ryis
orig
inal
lyac
coun
ted
fort
hrou
ghD
elta
Net
wor
ks,I
nc.(
Caym
an)b
utis
now
acco
unte
dfo
rthr
ough
Del
taN
etw
orks
(H.K
.)Lt
d.du
eto
inve
stm
entr
estru
ctur
ing
betw
een
the
four
thqu
arte
rof
2007
and
the
seco
ndqu
arte
rof2
008.
Not
ef:
The
inve
stm
enti
ncom
e/lo
ssre
cogn
ized
byPr
eOpt
ixC
o.,L
td.
Not
eg:
The
inve
stm
enti
ncom
e/lo
ssis
neto
fthe
elim
inat
ion
ofin
terc
ompa
nytra
nsac
tions
.N
ote
h:Th
ew
eigh
ted
aver
age
shar
ehol
ding
ratio
was
20.0
1%an
dth
ein
vest
men
tinc
ome
incl
uded
the
elim
inat
ion
ofin
terc
ompa
nytra
nsac
tions
.N
ote
i:Th
eor
igin
alin
vest
men
trep
rese
nted
the
capi
talc
ertif
ied.
Not
ej:
Inve
stm
enti
ncom
e/lo
ssre
cogn
ized
byPr
eOpt
ix(H
ong
Kon
g)C
o.,L
td.
�0
(2)
Fina
ncin
gac
tiviti
esto
any
com
pany
orpe
rson
:
Col
late
ral
Num
ber
(Not
ea)
Cre
dito
rB
orro
wer
Gen
eral
ledg
erac
coun
t
Max
imum
outs
tand
ing
bala
nce
durin
gth
eye
aren
ded
Dec
embe
r31,
2008
Bal
ance
atD
ecem
ber3
1,20
08In
tere
stra
teN
atur
eof
loan
Am
ount
oftra
nsac
tions
with
the
borro
wer
Rea
son
for
shor
t-ter
mfin
anci
ng
Allo
wan
cefo
rdo
ubtfu
lac
coun
tsIte
mV
alue
Lim
iton
loan
sgr
ante
dto
asi
ngle
party
(Not
eb)
Cei
ling
onto
tal
loan
sgra
nted
(Not
ec)
Del
taIn
tern
atio
nal
Hol
ding
Ltd.
Del
taEl
ectro
nics
(Jia
ngsu
)Lt
d.
Oth
erre
ceiv
able
s-re
late
dpa
rties
Shor
t-te
rmfin
anci
ng
N/A
Add
ition
alop
erat
ing
capi
tal
Non
e
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Lt
d.D
elta
Elec
tro-
Opt
ics
(Wuj
iang
)Lt
d.D
elta
Elec
troni
cs(W
uhu)
Co.
,Lt
d.D
elta
Elec
troni
cs(D
ongg
uan)
Co.
,Ltd
.D
elta
Elec
troni
csC
ompo
nent
s(D
ongg
uan)
Co.
,Ltd
.
Not
ea:
Num
ber0
repr
esen
tsth
eC
ompa
ny;t
hein
vest
eeco
mpa
nies
are
inor
derf
rom
num
ber1
.N
ote
b:In
acco
rdan
cew
ithth
esu
bsid
iary
’sO
pera
ting
Proc
edur
esof
Fund
Lend
ing,
the
limit
fore
ach
reci
pien
tacc
ordi
ngto
reas
onso
flen
ding
are
asfo
llow
s:(1
)Whe
nle
ndin
gfu
nds
toot
herc
ompa
nies
oren
terp
rises
with
whi
chth
eC
ompa
nyha
sbu
sine
ssre
latio
ns,t
heam
ount
lent
toa
sing
lere
cipi
ents
hall
note
xcee
dth
eto
talt
rans
actio
nam
ount
betw
een
the
reci
pien
tand
the
com
pany
inth
em
ostr
ecen
tyea
rand
shal
lnot
exce
ed10
perc
ento
fthe
com
pany
’sne
twor
thas
stat
edin
the
com
pany
’sla
test
finan
cial
stat
emen
ts.
(2)W
hen
prov
idin
gsh
ort-t
erm
finan
cing
toot
herc
ompa
nies
oren
terp
rises
,the
shor
t-ter
mfin
anci
ngam
ount
toa
sing
lere
cipi
ents
hall
note
xcee
d10
perc
ento
fthe
com
pany
’sne
twor
thas
stat
edin
the
com
pany
’sla
test
finan
cial
stat
emen
ts.
Not
ec:
Inac
cord
ance
with
the
subs
idia
ry’s
Ope
ratin
gPr
oced
ures
ofFu
ndLe
ndin
g,th
elim
itfo
rtot
alam
ount
offu
ndle
ndin
gac
cord
ing
toits
reas
onsa
reas
follo
ws:
(1)W
hen
lend
ing
fund
sto
othe
rcom
pani
esor
ente
rpris
esw
ithw
hich
the
Com
pany
has
busi
ness
rela
tions
,the
amou
ntle
ntto
asi
ngle
reci
pien
tsha
llno
texc
eed
the
tota
ltra
nsac
tion
amou
ntbe
twee
nth
ere
cipi
enta
ndth
eco
mpa
nyin
the
mos
trec
enty
eara
ndth
eto
tala
mou
ntle
ntsh
alln
otex
ceed
20pe
rcen
toft
heco
mpa
ny’s
netw
orth
asst
ated
inth
eco
mpa
ny’s
late
stfin
anci
al
�1
stat
emen
ts.
(2)W
hen
prov
idin
gsh
ort-t
erm
finan
cing
toot
her
com
pani
esor
ente
rpris
es,t
heto
tals
hort-
term
finan
cing
amou
ntsh
alln
otex
ceed
20pe
rcen
toft
heco
mpa
ny’s
netw
orth
asst
ated
inth
eco
mpa
ny’s
late
stfin
anci
alst
atem
ents
.(3
)The
aggr
egat
eam
ount
ofto
talf
unds
lent
toot
herc
ompa
nies
oren
terp
rises
with
whi
chth
eco
mpa
nyha
sbu
sines
sre
latio
nsan
dto
tals
hort-
term
finan
cing
prov
ided
toot
herc
ompa
nies
oren
terp
rises
shal
lnot
exce
ed20
perc
ento
fthe
com
pany
’sne
twor
thas
stat
edin
the
com
pany
’sla
test
finan
cial
stat
emen
ts.
(3)
Gua
rant
eein
form
atio
n:
Nam
eof
the
com
pany
prov
idin
ggu
aran
tee
Parti
esbe
ing
guar
ante
ed
Num
ber
(Not
ea)
Nam
eN
ame
Rel
atio
nshi
pw
ithth
eCo
mpa
ny
Lim
iton
guar
ante
espr
ovid
edfo
rasi
ngle
party
(Not
ed)
Hig
hest
outs
tand
ing
guar
ante
eam
ount
in20
08
Out
stan
ding
guar
ante
eam
ount
at12
/31/
2008
Am
ount
ofgu
aran
tee
with
colla
tera
lpl
aced
Rat
ioof
accu
mul
ated
guar
ante
eam
ount
tone
tval
ueof
the
com
pany
Cei
ling
ofth
eou
tsta
ndin
ggu
aran
tee
toth
ere
spec
tive
party
(Not
ee)
1D
elSo
larC
o.,L
td.
Del
taEl
ectro
nics
,Inc
(Not
esb
and
f)
2Pr
eOpt
ixC
o.,L
td.
PreO
ptix
(Jia
ngSu
)C
o.,L
td.
(Not
ec)
Not
ea
:Num
ber0
repr
esen
tsth
eC
ompa
ny;t
hein
vest
eeco
mpa
nies
are
num
bere
dst
artin
gfro
m“1
”.N
ote
b:T
heul
timat
epa
rent
com
pany
.N
ote
c:T
hesu
bsid
iary
ofPr
eOpt
ix(H
ong
Kon
g)C
o.,L
td.
Not
ed
:In
acco
rdan
cew
ithth
egu
aran
tee
proc
edur
eof
the
Com
pany
,the
Com
pany
’slim
iton
guar
ante
espr
ovid
edfo
rasi
ngle
party
shou
ldno
tbe
inex
cess
of40
perc
ento
fthe
com
pany
’sne
tass
ets.
Not
ee
:In
acco
rdan
cew
ithth
egu
aran
tee
proc
edur
eof
the
Com
pany
,the
Com
pany
’sgu
aran
tee
toot
hers
shou
ldno
tbe
inex
cess
of80
perc
ento
fthe
com
pany
’sne
tass
ets.
Not
ef:
Mut
ualg
uara
ntee
sin
the
trade
due
toco
nstru
ctio
nun
derta
king
purs
uant
toth
eco
ntra
cts.
��
(4)
Mar
keta
ble
secu
ritie
shel
dby
the
com
pany
onD
ecem
ber3
1,20
08:(
Com
bine
dth
ein
divi
dual
amou
ntle
ssth
an$1
00,0
00on
Dec
embe
r31,
2008
)
Nam
ean
dki
ndof
mar
keta
ble
secu
ritie
sD
ecem
ber3
1,20
08
Nam
eof
inve
stor
Kin
dof
mar
keta
ble
secu
ritie
s
Nam
eof
mar
keta
ble
secu
ritie
s
Rel
atio
nshi
pof
the
issu
ersw
ithth
eC
ompa
nyG
ener
alle
dger
acco
unts
Num
ber
ofsh
ares
(inth
ousa
nds)
Boo
kva
lue
Perc
enta
geM
arke
tval
ueD
elta
Inte
rnat
iona
lH
oldi
ngLt
d.(D
IH)
Com
mon
stoc
kD
elta
Elec
troni
csIn
tern
atio
nalL
td.(
Labu
an)
Asu
bsid
iary
ofD
IHLo
ng-te
rmin
vest
men
tsac
coun
ted
foru
nder
the
equi
tym
etho
dD
AC
Hol
ding
(Cay
man
)Ltd
.D
elta
Elec
troni
cs(H
.K.)
Ltd.
Del
taEl
ectro
nics
(Jap
an),
Inc.
Del
taEl
ectro
nics
(Tha
iland
)Pub
licC
o.,L
td.
Inve
stee
com
pany
acco
unte
dfo
rund
erth
eeq
uity
met
hod
ofth
eC
ompa
nyPr
efer
red
shar
esTr
illio
nSc
ienc
e,In
c.In
vest
eeco
mpa
nyac
coun
ted
foru
nder
the
equi
tym
etho
dof
DIH
Com
mon
stoc
kD
elta
Gre
ente
ch(C
hina
)Co.
,Ltd
.R
elat
edpa
rtyin
subs
tanc
eFi
nanc
iala
sset
scar
ried
atco
st-n
on-c
urre
ntPr
efer
red
shar
esSo
larfl
are
Com
mun
icat
ion,
Inc.
Non
eD
elta
Pow
erSh
arp
Ltd.
,etc
.D
elta
Elec
troni
cs(H
.K.)
Ltd.
(DH
K)
Cer
tific
ate
ofam
ount
cont
ribut
edD
elta
Elec
troni
cs(D
ongg
uan)
Co.
,Ltd
.A
subs
idia
ryof
DH
KLo
ng-te
rmin
vest
men
tsac
coun
ted
foru
nder
the
equi
tym
etho
dD
elta
Elec
troni
csPo
wer
(Don
ggua
n)C
o.,
Ltd.
Del
taEl
ectro
nics
Com
pone
nts(
Don
ggua
n)C
o.,L
td.
Del
taEl
ectro
nics
(Sha
ngha
i)C
o.,L
td.
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.D
elta
Elec
troni
csC
ompo
nent
s(W
ujia
ng)
Ltd.
Del
taEl
ectro
-Opt
ics(
Wuj
iang
)Ltd
.D
elta
Vid
eoD
ispl
aySy
stem
(Wuj
iang
)Ltd
.D
elta
Elec
troni
cs(W
uhu)
Co.
,Ltd
.D
elta
Elec
troni
cs(C
henz
hou)
Co.
,Ltd
.D
elta
Net
wor
ksH
oldi
ngLt
d.(D
NH
)
Com
mon
stoc
kD
elta
Net
wor
ks,I
nc.(
Cay
man
)A
subs
idia
ryof
DN
H
Del
taN
etw
orks
,Inc
.(C
aym
an)
(DN
ICay
man
)
Del
taN
etw
orks
,Inc
.(Ta
iwan
)A
subs
idia
ryof
DN
IC
aym
an
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(La
buan
)
��
Nam
ean
dki
ndof
mar
keta
ble
secu
ritie
sD
ecem
ber3
1,20
08
Nam
eof
inve
stor
Kin
dof
mar
keta
ble
secu
ritie
s
Nam
eof
mar
keta
ble
secu
ritie
s
Rel
atio
nshi
pof
the
issu
ersw
ithth
eC
ompa
nyG
ener
alle
dger
acco
unts
Num
ber
ofsh
ares
(inth
ousa
nds)
Boo
kva
lue
Perc
enta
geM
arke
tval
ueD
elta
Net
wor
ks,I
nc.
(Cay
man
)(D
NIC
aym
an)
Com
mon
stoc
kD
elta
Net
wor
ks(H
.K.)
Ltd.
Asu
bsid
iary
ofD
NI
Cay
man
Long
-term
inve
stm
ents
acco
unte
dfo
rund
erth
eeq
uity
met
hod
DN
ILog
istic
s(U
SA)C
o.
Del
taN
etw
orks
,Inc
.(T
aiw
an)(
DN
IT)
Net
wor
kEq
uipm
entT
echn
olog
y,In
c.,e
tc.
Del
taN
etw
orks
(H.K
)Ltd
.(D
NH
K)
Cer
tific
ate
ofam
ount
cont
ribut
edD
elta
Net
wor
ks(D
ongg
aun)
Ltd.
Asu
bsid
iary
ofD
NH
KLo
ng-te
rmin
vest
men
tsac
coun
ted
foru
nder
the
equi
tym
etho
dD
elta
Net
wor
ks(W
ujia
ng)L
td.
Del
taN
etw
orks
(Sha
ngha
i)Lt
d.
PreO
ptix
Co.
,Ltd
.C
omm
onst
ock
PreO
ptix
(Hon
gK
ong)
Co.
,Ltd
.A
subs
idia
ryof
PreO
ptix
Co.
,Ltd
.Pr
eOpt
ix(H
ong
Kon
g)C
o.,L
td.
Cer
tific
ate
ofam
ount
cont
ribut
edPr
eOpt
ix(J
iang
Su)C
o.,L
td.
Asu
bsid
iary
ofPr
eOpt
ix(H
ong
Kon
g)C
o.,L
td.
��
(5)
Mar
keta
ble
secu
ritie
sacq
uire
dor
sold
inex
cess
of$1
00,0
00or
20%
capi
tal:
Janu
ary
1,20
08A
dditi
onD
ispo
sal
Dec
embe
r31,
2008
Acq
uire
r/se
ller
Nam
eof
mar
keta
ble
secu
rity
Gen
eral
ledg
erac
coun
tsN
ame
oftra
nsac
tion
parti
esR
elat
ions
hip
Num
ber
ofsh
ares
(inth
ousa
nds)
Am
ount
Num
ber
ofsh
ares
(inth
ousa
nds)
Am
ount
Num
ber
ofsh
ares
(inth
ousa
nds)
Selli
ngpr
ice
Boo
kva
lue
Dis
posa
lga
in/(l
oss)
Num
ber
ofsh
ares
(inth
ousa
nds)
Am
ount
Del
taIn
tern
atio
nal
Hol
ding
Ltd.
Del
taEl
ectro
nics
(H.K
.)Lt
d.C
omm
onsto
ck
Long
-term
inve
stm
ents
acco
unte
dfo
run
dert
heeq
uity
met
hod
Del
taEl
ectro
nics
(H.K
.)Lt
d.Su
bsid
iary
(Not
ea)
Del
taG
reen
tech
(Chi
na)C
o.,L
td.
Com
mon
stock
Fina
ncia
lass
ets
carri
edat
cost
-non
-cur
rent
Del
taG
reen
tech
(Chi
na)C
o.,
Ltd.
Rel
ated
party
insu
bsta
nce
(Not
ec)
Sola
rfla
reC
omm
unic
atio
nsIn
c.Pr
efer
red
shar
es
Sola
rflar
eC
omm
unic
atio
nsIn
c.
Non
e
Del
taEl
ectro
nics
(H.K
.)Lt
d.
Del
taEl
ectro
nics
(Wuh
u)C
o.,L
td.
Cer
tifca
teof
amou
ntco
ntrib
uted
Long
-term
inve
stm
ents
acco
unte
dfo
run
dert
heeq
uity
met
hod
Del
taEl
ectro
nics
(Wuh
u)C
o.,
Ltd.
Subs
idia
ry(N
ote
d)
Del
taEl
ectro
nics
(Che
nzho
u)C
o.,
Ltd.
Cer
tifca
teof
amou
ntco
ntrib
uted
Del
taEl
ectro
nics
(Che
nzho
u)C
o.,
Ltd.
(Not
ee)
Del
taN
etw
orks
,In
c.(C
aym
an)
Del
taN
etw
ork
(Wuj
iang
)Ltd
.C
ertif
cate
ofam
ount
cont
ribut
ed
Del
taN
etw
orks
(H.K
.)Lt
d.(N
ote
b)(
(Not
ef)
(Not
ej)
Del
taN
etw
orks
(H.K
.)Lt
d.D
elta
Net
wor
ks(W
ujia
ng)L
td.
Cer
tifca
teof
amou
ntco
ntrib
uted
Del
taN
etw
orks
,In
c.(C
aym
an)
Subs
idia
ry(N
ote
g)
PreO
ptix
Co.
,Lt
d.Pr
eOpt
ix(H
ong
Kon
g)C
o.,L
td.
Com
mon
stoc
k
PreO
ptix
(Hon
gK
ong)
Co.
,Ltd
.(N
ote
h)
��
Janu
ary
1,20
08A
dditi
onD
ispo
sal
Dec
embe
r31,
2008
Acq
uire
r/se
ller
Nam
eof
mar
keta
ble
secu
rity
Gen
eral
ledg
erac
coun
tsN
ame
oftra
nsac
tion
parti
esR
elat
ions
hip
Num
ber
ofsh
ares
(inth
ousa
nds)
Am
ount
Num
ber
ofsh
ares
(inth
ousa
nds)
Am
ount
Num
ber
ofsh
ares
(inth
ousa
nds)
Selli
ngpr
ice
Boo
kva
lue
Dis
posa
lga
in/(l
oss)
Num
ber
ofsh
ares
(inth
ousa
nds)
Am
ount
PreO
ptix
(Hon
gK
ong)
Co.
,Ltd
.
PreO
ptix
(Jia
ngSu
)Co.
,Ltd
.C
ertif
cate
ofam
ount
cont
ribut
ed
Long
-term
inve
stm
ents
acco
unte
dfo
run
dert
heeq
uity
met
hod
PreO
ptix
(Jia
ngSu
)Co.
,Lt
d.
Subs
idia
ry(N
ote
i)
Not
ea
:Del
taIn
tern
atio
nalH
oldi
ngLt
d.in
vest
ed$3
04,5
07in
Del
taEl
ectro
nics
(H.K
.)C
o.,L
tdin
the
first
quar
tero
f200
8.In
vest
men
tinc
ome
acco
unte
dfo
rund
erth
eeq
uity
met
hod
and
adju
stmen
trec
ogni
zed
due
toch
ange
insu
bsid
iary
’sne
tas
setv
alue
was
$2,6
02,9
27.
Not
eb:
The
coun
terp
arty
forp
urch
ase
trans
actio
nsis
the
subs
idia
ry,a
ndth
eco
unte
rpar
tyfo
rsal
etra
nsac
tions
isD
elta
Net
wor
ks(H
.K.)
Ltd.
Not
ec
:Del
taIn
tern
atio
nalH
oldi
ngLt
d.in
vest
ed$1
19,8
43in
Del
taG
reen
tech
(Chi
na)C
o.,L
td.a
ndre
cogn
ized
chan
gein
cum
ulat
ive
trans
latio
nad
just
men
tin
the
amou
ntof
$1,1
81.
Not
ed
:Del
taEl
ectro
nics
(H.K
.)Lt
d.in
vest
ed$8
36,9
10in
Del
taEl
ectro
nics
(Wuh
u)C
o.,L
td.
Inve
stm
entl
oss
acco
unte
dfo
rund
erth
eeq
uity
met
hod
and
adju
stmen
trec
ogni
zed
due
toch
ange
insu
bsid
iary
’sne
tass
etva
lue
was
($45
,343
).N
ote
e:D
elta
Elec
troni
cs(H
.K.)
Ltd.
inve
sted
$820
,500
inD
elta
Elec
troni
cs(C
henz
hou)
Co.
,Ltd
.In
vest
men
tlos
sacc
ount
edfo
rund
erth
eeq
uity
met
hod
and
adju
stmen
trec
ogni
zed
due
toch
ange
insu
bsid
iary
’sne
tass
etva
lue
was
($25
,587
).N
ote
f:D
elta
Net
wor
ks,I
nc.(
Cay
man
)rec
ogni
zed
incl
uded
inve
stm
enti
ncom
eac
coun
ted
foru
nder
the
equi
tym
etho
d,ad
just
men
tdue
toch
ange
ofin
vest
ees’
equi
tyin
the
amou
ntof
($7,
161)
.N
ote
g:D
elta
Elec
troni
cs(H
.K.)
Ltd.
inve
sted
$590
,760
inD
elta
Net
wor
ks(W
ujia
ng)L
td.
Inve
stm
enti
ncom
eac
coun
ted
foru
nder
the
equi
tym
etho
dan
dad
justm
entr
ecog
nize
ddu
eto
chan
gein
subs
idia
ry’s
neta
sset
valu
ew
as$1
7,00
1.N
oteh
:Pre
Opt
ixC
o.,L
td.i
nves
ted
$162
,376
inPr
eOpt
ix(H
ong
Kon
g)C
o.,L
td.
Inve
stm
entl
ossa
ccou
nted
foru
nder
the
equi
tym
etho
dan
dad
justm
entr
ecog
nize
ddu
eto
chan
gein
subs
idia
ry’s
neta
sset
valu
ew
as($
4,03
8).
Not
ei:
PreO
ptix
(Hon
gK
ong)
Co.
,Ltd
.inv
este
d$1
62,3
76in
PreO
ptix
(Jia
ngSu
)Ltd
.In
vest
men
tlos
sacc
ount
edfo
rund
erth
eeq
uity
met
hod
and
adju
stmen
trec
ogni
zed
due
toch
ange
insu
bsid
iary
’sne
tass
etva
lue
was
($4,
106)
.N
ote
j:A
sthe
trans
actio
nsar
eth
eG
roup
’sin
vest
men
tres
truct
urin
g,no
disp
osal
gain
(loss
)isi
ncur
red
inac
cord
ance
with
the
rela
ted
law
sand
regu
latio
ns.
(6)
Acq
uisi
tion
ofre
ales
tate
inex
cess
of$1
00,0
00or
20%
ofca
pita
l:
Prev
ious
trans
feri
nfor
mat
ion
(ast
hetra
nsac
tion
parti
esw
ere
rela
ted
parti
es)
Prop
erty
acqu
ired
byPr
oper
tyac
quire
dD
ate
oftra
nsac
tion
Tran
sact
ion
amou
ntSt
atus
ofpa
ymen
tC
ount
erpa
rty
Rel
atio
nshi
pw
ithth
eC
ompa
ny
Orig
inal
owne
rw
hoso
ldth
epr
oper
tyto
coun
terp
arty
Rel
atio
nshi
pof
the
owne
rwith
the
Com
pany
Dat
eof
the
orig
inal
trans
fer
Am
ount
Bas
isor
refe
renc
eus
edin
setti
ngth
epr
ice
Rea
son
for
acqu
isiti
onof
prop
ertie
sand
stat
usof
the
prop
ertie
sO
ther
com
mitm
ent
PreO
ptix
(Jia
ngSu
)C
o.,L
td.
Fact
ory
Cas
hJu
rong
City
,Ji
angs
uPr
ovin
ceEc
onom
icD
evel
opm
ent
Zone
Dev
elop
men
tan
dC
onst
ruct
ion
Cor
pora
tion
Cou
nter
party
’sbo
okva
lue
Con
stru
ctio
nof
ane
wfa
ctor
yN
one
(7)
Dis
posa
lofr
eale
stat
ein
exce
ssof
$100
,000
or20
%of
capi
tal:
Non
e.
��
(8)
Rel
ated
party
purc
hase
sors
ales
trans
actio
nsin
exce
ssof
$100
,000
or20
%of
capi
tal:
The
trans
actio
nof
the
Com
pany
and
itsco
nsol
idat
edsu
bsid
iarie
s:Pl
ease
see
Not
es5.
2)(1
)and
(3)
Tran
sact
ion
term
s
Des
crip
tion
ofan
dre
ason
sfor
diffe
renc
ein
trans
actio
nte
rms
com
pare
dto
non-
rela
ted
party
trans
actio
nsA
ccou
ntso
rnot
esre
ceiv
able
(pay
able
)
Nam
eof
the
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p
Purc
hase
s(s
ales
)(N
ote)
Am
ount
%of
tota
lpu
rcha
ses(
sale
s)C
redi
tter
ms
Uni
tpric
eC
redi
tper
iod
Bal
ance
%of
tota
lacc
ount
sor
note
srec
eiva
ble
(pay
able
)D
elta
Elec
troni
csIn
tern
atio
nal
Ltd.
(Lab
uan)
Del
taG
reen
(Tia
njin
)In
dust
ries
Ltd.
Rel
ated
party
insu
bsta
nce
Purc
hase
sda
ys
Del
ta Elec
troni
cs(T
haila
nd)
Publ
icC
o.,
Ltd.
Ass
ocia
te
Del
ta Elec
troni
cs(C
henz
hou)
Co.
,Ltd
.
Affi
liate
den
terp
rise
Del
ta Elec
troni
cs(J
apan
),In
c.
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,L
td.
〃Sa
les
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Ltd
.D
elta
Elec
troni
csC
ompo
nent
s(D
ongg
uan)
Co.
,Ltd
.D
elta Elec
troni
cs(J
iang
su)L
td.
��
Tran
sact
ion
term
s
Des
crip
tion
ofan
dre
ason
sfor
diffe
renc
ein
trans
actio
nte
rms
com
pare
dto
non-
rela
ted
party
trans
actio
nsA
ccou
ntso
rnot
esre
ceiv
able
(pay
able
)
Nam
eof
the
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p
Purc
hase
s(s
ales
)(N
ote)
Am
ount
%of
tota
lpu
rcha
ses(
sale
s)C
redi
tter
ms
Uni
tpric
eC
redi
tper
iod
Bal
ance
%of
tota
lacc
ount
sor
note
srec
eiva
ble
(pay
able
)D
elta
Elec
troni
csIn
tern
atio
nal
Ltd.
(Lab
uan)
Del
ta Elec
troni
csC
ompo
nent
s(W
ujia
ng)
Ltd.
Affi
liate
den
terp
rise
Sale
sda
ys
Del
taEl
ectro
-O
ptic
s(W
ujia
ng)
Ltd.
Del
troni
cs(N
ethe
rland
s)B
.V.
Del
taV
ideo
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play
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em(W
ujia
ng)
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taEl
ectro
nics
Inte
rnat
iona
lLt
d.(L
abua
n)D
elta Elec
troni
cs(C
henz
hou)
Co.
,Ltd
.
〃
Del
taEn
ergy
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em(I
ndia
)PV
TLt
d.
Ass
ocia
te
Del
taPo
wer
Solu
tions
(Ind
ia)P
VT
Ltd.
Del
taEl
ectro
nics
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an),
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liate
den
terp
rise
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Logi
stic
s(U
SA)C
orp.
��
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sact
ion
term
s
Des
crip
tion
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dre
ason
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diffe
renc
ein
trans
actio
nte
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pare
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rela
ted
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actio
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ccou
ntso
rnot
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ceiv
able
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able
)
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eof
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terp
arty
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eof
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actio
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rties
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atio
nshi
p
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hase
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ales
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ote)
Am
ount
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redi
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ms
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tpric
eC
redi
tper
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Bal
ance
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ount
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ble
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able
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elta
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troni
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tern
atio
nal
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uan)
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taN
etw
orks
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rnat
iona
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abua
n)
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liate
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terp
rise
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s
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taPr
oduc
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orpo
ratio
nR
elat
edpa
rtyin
subs
tanc
eD
elta Elec
troni
cs,
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Ulti
mat
epa
rent
com
pany
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taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
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taEl
ectro
nics
Pow
er(D
ongg
uan)
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,Ltd
.
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liate
den
terp
rise
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ta Elec
troni
csIn
tern
atio
nal
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uan)
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taEl
ectro
nics
Pow
er(D
ongg
uan)
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,Ltd
.D
elta
Net
wor
ks(D
ongg
uan)
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ta Elec
troni
cs(D
ongg
uan)
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,Ltd
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elta
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troni
cs(D
ongg
uan)
Co.
,Ltd
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elta Elec
troni
csIn
tern
atio
nal
Ltd.
(Lab
uan)
Del
taN
etw
orks
(Don
ggua
n)Lt
d.D
elta
Net
wor
ksIn
tern
atio
nal
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uan)
��
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sact
ion
term
s
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crip
tion
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dre
ason
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diffe
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ein
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nte
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pare
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ccou
ntso
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ceiv
able
(pay
able
)
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eof
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terp
arty
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eof
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actio
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rties
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atio
nshi
p
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hase
s(s
ales
)(N
ote)
Am
ount
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tota
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rcha
ses(
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redi
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ms
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eC
redi
tper
iod
Bal
ance
%of
tota
lacc
ount
sor
note
srec
eiva
ble
(pay
able
)D
elta
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wor
ksIn
tern
atio
nal
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(Lab
uan)
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ILog
istic
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)Co.
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liate
den
terp
rise
Sale
s
Del
taN
etw
orks
(Don
ggua
n)Lt
d.D
elta
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wor
ksIn
tern
atio
nal
Ltd.
(Lab
uan)
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taN
etw
orks
,Inc
.(Ta
iwan
)D
elta
Elec
troni
cs(J
iang
su)L
td.
Del
taG
reen
tech
(Chi
na)C
o.,
Ltd.
Rel
ated
party
insu
bsta
nce
Del
ta Elec
troni
csIn
tern
atio
nal
Ltd.
(Lab
uan)
Affi
liate
den
terp
rise
Del
ta Elec
troni
cs(W
uhu)
Co.
,Ltd
.
Purc
hase
s
Del
taEl
ectro
-Opt
ics(
Wuj
iang
)Lt
d.D
elta
Gre
ente
ch(C
hina
)Co.
,Lt
d.
Rel
ated
party
insu
bsta
nce
Sale
s
Del
ta Elec
troni
csIn
tern
atio
nal
Ltd.
(Lab
uan)
Affi
liate
den
terp
rise
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
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elta Elec
troni
cs(J
iang
su)L
td.
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ta Elec
troni
csIn
tern
atio
nal
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(Lab
uan)
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taV
ideo
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play
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em(W
ujia
ng)L
td.
100
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sact
ion
term
s
Des
crip
tion
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dre
ason
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diffe
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nte
rms
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pare
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ted
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ntso
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eof
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ales
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ote)
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ount
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redi
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ms
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eC
redi
tper
iod
Bal
ance
%of
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lacc
ount
sor
note
srec
eiva
ble
(pay
able
)D
elta
Vid
eoD
ispl
aySy
stem
(Wuj
iang
)Ltd
.D
elta
Gre
ente
ch(C
hina
)Co.
,Lt
d.
Rel
ated
party
insu
bsta
nce
Sale
sda
ys
Del
Sola
rCo.
,Ltd
.D
elta Elec
troni
cs,
Inc.
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mat
epa
rent
com
pany
Not
e:I
nclu
ding
the
serv
ice
inco
me
inex
cess
of$1
00,0
00.
101
(9)R
ecei
vabl
efro
mre
late
dpa
rties
inex
cess
of$1
00,0
00or
20%
capi
tal:
Ove
rdue
rece
ivab
leSu
bseq
uent
Allo
wan
ceB
alan
ceof
rece
ivab
leA
ctio
nad
opte
dfo
rco
llect
ions
ford
oubt
ful
Nam
eof
cred
itor
Tran
sact
ion
parti
esR
elat
ions
hip
from
rela
ted
parti
esTu
rnov
erra
teA
mou
ntov
erdu
eac
coun
ts(N
ote
)ac
coun
tspr
ovid
edD
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,L
td.
Aff
iliat
eden
terp
rise
Con
tinue
dco
llect
ion
expe
cted
in20
09
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Ltd
.D
elta
Elec
troni
csC
ompo
nent
s(D
ongg
uan)
Co.
,Ltd
.D
EILo
gist
ics(
USA
)C
orp.
Del
taEl
ectro
nics
(Jia
ngsu
)Lt
d.D
elta
Elec
troni
csC
ompo
nent
s(W
ujia
ng)
Ltd.
Del
taEl
ectro
-Opt
ics
(Wuj
iang
)Ltd
.D
elta
Vid
eoD
ispl
aySy
stem
(Wuj
iang
)Ltd
.D
elta
Ener
gySy
stem
(Indi
a)PV
TLt
d.A
ssoc
iate
Del
taPo
wer
Solu
tions
(Indi
a)PV
TLt
d.D
elta
Elec
troni
cs(J
apan
),In
c.A
ffili
ated
ente
rpris
e
Del
taPr
oduc
tsC
orpo
ratio
nR
elat
edpa
rtyin
subs
tanc
eD
elta
Elec
troni
cs,I
nc.
Ulti
mat
epa
rent
com
pany
Con
tinue
dco
llect
ion
expe
cted
in20
09D
elta
Elec
troni
csC
ompo
nent
s(D
ongg
uann
)Co.
,Ltd
.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)
Aff
iliat
eden
terp
rise
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Ltd
.D
elta
Elec
troni
cs(D
ongg
uan
)Co.
,Ltd
.
10�
Not
e:T
heam
ount
colle
cted
subs
eque
ntto
Dec
embe
r31,
2008
upto
Febr
uary
16,2
009.
Ove
rdue
rece
ivab
leSu
bseq
uent
Allo
wan
ceB
alan
ceof
rece
ivab
leA
ctio
nad
opte
dfo
rco
llect
ions
ford
oubt
ful
Nam
eof
cred
itor
Tran
sact
ion
parti
esR
elat
ions
hip
from
rela
ted
parti
esTu
rnov
erra
teA
mou
ntov
erdu
eac
coun
ts(N
ote)
acco
unts
prov
ided
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Aff
iliat
eden
terp
rise
Con
tinue
dco
llect
ion
expe
cted
in20
09$
Del
taG
reen
tech
(Chi
na)
Co.
,Ltd
.R
elat
edpa
rtyin
subs
tanc
eD
elta
Elec
troni
csC
ompo
nent
s(W
ujia
ng)L
td.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)
Aff
iliat
eden
terp
rise
Con
tinue
dco
llect
ion
expe
cted
in20
09
Del
taEl
ectro
-Opt
ics
(Wuj
iang
)Ltd
.D
elta
Gre
ente
ch(C
hina
)C
o.,L
td.
Rel
ated
party
insu
bsta
nce
Del
taV
ideo
Dis
play
Syst
em(W
ujia
ng)
Ltd.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)
Aff
iliat
eden
terp
rise
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)
DN
ILog
istri
cs(U
SA)C
o.C
ontin
ued
colle
ctio
nex
pect
edin
2009
Del
taN
etw
orks
(Don
ggua
n)Lt
d.D
elta
Net
wor
ks(D
ongg
uan)
Ltd.
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)D
elta
Net
wor
ks,I
nc.
(Tai
wan
)D
elta
Elec
troni
cs(C
henz
hou)
Co.
,Lt
d.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)
Con
tinue
dco
llect
ion
expe
cted
in20
09
10�
(10)
Info
rmat
ion
onde
rivat
ive
trans
actio
nsTh
ein
form
atio
non
deriv
ativ
etra
nsac
tions
ofin
vest
eeco
mpa
nies
fort
heye
aren
ded
Dec
embe
r31,
2008
are
asfo
llow
s:A
.M
arke
tris
k:Th
ein
vest
eeco
mpa
nies
ente
red
into
thes
eco
ntra
ctsi
nor
dert
ohe
dge.
Acc
ordi
ngly
,no
mat
eria
lmar
ketr
isk
isex
pect
ed.
B.
Cre
dit
risk:
The
bank
s,w
hich
the
subs
idia
ries
deal
with
,are
all
ingo
odcr
edit
stan
ding
and
the
subs
idia
ries
deal
with
seve
ral
bank
sto
disp
erse
the
cred
itris
k,th
eref
ore,
the
poss
ibili
tyis
low
fort
heba
nksn
otto
com
ply
with
the
term
soft
heco
ntra
cts.
C.
Liqu
idity
risk:
Subs
idia
riesh
ave
suffi
cien
twor
king
capi
tal;
ther
efor
e,no
mat
eria
lliq
uidi
tyris
kis
expe
cted
.D
.C
ash
flow
risk
due
toch
ange
sin
inte
rest
rate
:Sub
sidia
ries
did
note
nter
into
any
deriv
ativ
eco
ntra
ctth
atis
inte
rest
rate
rela
ted;
ther
efor
e,no
mat
eria
lcas
hflo
wris
kdu
eto
chan
ges
inin
tere
stra
teis
expe
cted
.Th
ena
ture
and
rela
ted
info
rmat
ion
ofin
vest
eeco
mpa
nies
’out
stan
ding
deriv
ativ
etra
nsac
tions
asof
Dec
embe
r31,
2008
are
sum
mar
ized
asfo
llow
s:
Der
ivat
ive
trans
actio
ns
Parv
alue
,con
tract
amou
ntor
nom
inal
prin
cipa
l(N
ote
a)Co
ntra
ctpe
riod
A.D
elta
Elec
troni
csIn
tern
atio
nalL
td.(
Labu
an)(
Asu
bsid
iary
ofD
IH)
Forw
ard
fore
ign
curr
ency
cont
ract
s–B
uyU
SD,s
ellR
MB
Forw
ard
fore
ign
curr
ency
cont
ract
s–B
uyR
MB
,sel
lUSD
Forw
ard
fore
ign
curr
ency
cont
ract
s–B
uyU
SD,s
ellE
UR
Forw
ard
fore
ign
curr
ency
cont
ract
s–B
uyJP
Y,s
ellU
SDFo
rwar
dfo
reig
ncu
rren
cyco
ntra
cts–
Buy
USD
,sel
lKR
WM
ultip
le-s
tage
infla
ting
forw
ard
(Not
eb)
Mul
tiple
-sta
gein
flatin
gfo
rwar
d(N
ote
c)Th
ene
tlos
srec
ogni
zed
onfo
rwar
dfo
reig
ncu
rren
cyco
ntra
ctsf
orth
eye
aren
ded
Dec
embe
r31,
2008
amou
nted
to$7
63,1
60an
dth
eun
real
ized
gain
reco
gniz
edon
finan
cial
inst
rum
ents
unde
rsto
ckho
lder
s’eq
uity
amou
nted
to$9
57,3
12as
thes
em
etal
lthe
crite
riafo
rhed
geac
coun
ting.
B.D
elta
Elec
troni
cs(D
ongg
uan)
Co.
,Ltd
.(A
subs
idia
ryof
DH
K)
Forw
ard
fore
ign
curr
ency
cont
ract
s–Se
llU
SD,b
uyR
MB
Forw
ard
fore
ign
curr
ency
cont
ract
s–Se
llR
MB
,buy
USD
Forw
ard
fore
ign
curr
ency
cont
ract
s–Se
llR
MB
,buy
USD
The
netg
ain
reco
gniz
edon
forw
ard
fore
ign
curr
ency
cont
ract
sfor
the
year
ende
dD
ecem
ber3
1,20
08am
ount
edto
$336
,887
and
the
unre
aliz
edlo
ssre
cogn
ized
onfin
anci
alin
stru
men
tsun
ders
tock
hold
ers’
equi
tyam
ount
edto
$120
,694
asth
ese
met
allt
hecr
iteria
forh
edge
acco
untin
g.
C.D
elta
Elec
troni
csPo
wer
(Don
ggua
n)C
o.,L
td.(
Asu
bsid
iary
ofD
HK
)Fo
rwar
dfo
reig
ncu
rren
cyco
ntra
cts–
Sell
USD
,buy
RM
BFo
rwar
dfo
reig
ncu
rren
cyco
ntra
cts–
Sell
RM
B,b
uyU
SDFo
rwar
dfo
reig
ncu
rren
cyco
ntra
cts–
Sell
RM
B,b
uyU
SDTh
ene
tgai
nre
cogn
ized
onfo
rwar
dfo
reig
ncu
rren
cyco
ntra
ctsf
orth
eye
aren
ded
Dec
embe
r31,
2008
amou
nted
to$8
21,2
47an
dth
eun
real
ized
loss
reco
gniz
edon
finan
cial
inst
rum
ents
unde
rsto
ckho
lder
s’eq
uity
amou
nted
to$2
72,2
62as
thes
em
etal
lthe
crite
riafo
rhed
geac
coun
ting.
10�
Der
ivat
ive
trans
actio
ns
Parv
alue
,con
tract
amou
ntor
nom
inal
prin
cipa
l(N
ote
a)Co
ntra
ctpe
riod
D.D
elta
Elec
troni
csC
ompo
nent
s(D
ongg
uan)
Co.
,Ltd
.(A
subs
idia
ryof
DH
K)
Forw
ard
fore
ign
curr
ency
cont
ract
s–Se
llU
SD,b
uyR
MB
Forw
ard
fore
ign
curr
ency
cont
ract
s–Se
llR
MB
,buy
USD
The
netg
ain
reco
gniz
edon
forw
ard
fore
ign
curr
ency
cont
ract
sfor
the
year
ende
dD
ecem
ber3
1,20
08am
ount
edto
$79,
069
and
the
unre
aliz
edlo
ssre
cogn
ized
onfin
anci
alin
stru
men
tsun
ders
tock
hold
ers’
equi
tyam
ount
edto
$22,
137
asth
ese
met
allt
hecr
iteria
forh
edge
acco
untin
g.
E.D
elta
Net
wor
ks(D
ongg
uan)
Ltd.
(Asu
bsid
iary
ofD
NH
K)
Forw
ard
fore
ign
curr
ency
cont
ract
s–Se
llU
SD,b
uyR
MB
Forw
ard
fore
ign
curr
ency
cont
ract
s–Se
llR
MB
,buy
USD
The
netl
ossr
ecog
nize
don
forw
ard
fore
ign
curr
ency
cont
ract
sfor
the
year
ende
dD
ecem
ber3
1,20
08am
ount
edto
$5,6
46.
F.D
elta
Net
wor
ks,I
nc.(
Taiw
an)(
regi
ster
edin
Taiw
an,a
subs
idia
ryof
DN
ICay
man
)Th
ede
rivat
ive
finan
cial
inst
rum
ents
held
byD
elta
Net
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ount
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edfro
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inve
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osti
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llars
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oved
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vest
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ep:
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eca
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tifie
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ote
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cept
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elta
Gre
ente
ch(C
hina
)Co.
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chth
eC
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nyho
lds
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mpa
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ares
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DIH
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sed
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cial
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ts.
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er:
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inve
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enti
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eof
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embe
r29,
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from
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inve
stee
com
pani
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Mai
nlan
dCh
ina
and
was
perm
itted
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vest
men
tCom
mis
sion
onJa
nuar
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whi
chis
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ctib
lefro
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accu
mul
ated
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ntre
mitt
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anto
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ote
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ccor
ding
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egul
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ning
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App
rova
lofI
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tmen
torT
echn
ical
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pera
tion
inM
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and
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na”,
the
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obta
ined
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appr
oval
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erat
ion
head
quar
ters
from
Indu
stria
lDev
elop
men
tBur
eau
ofM
inis
tryof
Econ
omic
Affa
irs,t
here
isno
ceili
ngof
inve
stm
enta
mou
nt.
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eof
inve
stor
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umul
ated
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ntre
mitt
edou
tofT
aiw
anto
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nlan
dCh
ina
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enta
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ntap
prov
edby
the
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entC
omm
issi
onC
eilin
gof
inve
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ent
amou
ntof
the
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pany
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es)
Del
taEl
ectro
nics
,Inc
.
(Not
er)
(Not
er)
PreO
ptix
Co.
,Ltd
.
(Not
eo)
(Not
eo)
(2)T
hesi
gnifi
cant
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ctan
din
dire
cttra
nsac
tions
ofth
eC
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nyw
ithth
ein
vest
eeco
mpa
nies
inM
ainl
and
Chin
a:
The
sign
ifica
nttra
nsac
tions
dire
ctly
betw
een
the
Com
pany
and
the
inve
stee
com
pani
esfo
rthe
year
ende
dD
ecem
ber3
1,20
08ar
ede
scrib
edin
Not
e5.
The
sign
ifica
ntpu
rcha
ses,
sale
s,ac
coun
tspa
yabl
ean
dac
coun
tsre
ceiv
able
ofth
eC
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nyin
dire
ctly
cond
ucte
dw
ithin
vest
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mpa
nies
inM
ainl
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nath
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hth
eD
IH's
subs
idia
ry,D
elta
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troni
csIn
tern
atio
nal
Ltd.
(Lab
uan)
(DEI
L-La
buan
),an
dD
NIC
aym
an's
subs
idia
ry,D
elta
Net
wor
ksIn
tern
atio
nalL
td.(
Labu
an)(
DN
IL-L
abua
n)fo
rthe
year
ende
dD
ecem
ber3
1,20
08ar
esh
own
inN
ote
11.2
)(8)
.
10�
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ere
latio
nshi
pan
dsi
gnifi
cant
trans
actio
nsbe
twee
nth
eC
ompa
nyan
dits
subs
idia
ries
Fort
heye
aren
ded
Dec
embe
r31,
2008
:
Num
ber
(Not
ea)
Nam
eof
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p(N
ote
b)Su
bjec
tR
elat
ions
hip
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ef)
Tran
sact
ion
term
s
Perc
enta
geof
tota
lco
mbi
ned
reve
nue
orto
tala
sset
s(N
ote
c)D
elta
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troni
cs,I
nc.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)Se
rvic
esre
venu
e(N
ote
d)
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)D
elta
Elec
troni
cs(D
ongg
uan)
Co.
,Ltd
.Sa
les
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Lt
d.〃
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
〃
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.〃
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.〃
Del
taEl
ectro
-Opt
ics(
Wuj
iang
)Ltd
.〃
Del
taV
ideo
Dis
play
Syst
em(W
ujia
ng)
Ltd.
〃
Del
taEl
ectro
nics
(Che
nzho
u)C
o.,L
td.
〃
Del
troni
cs(N
ethe
rland
s)B
.V.
〃
Del
taEl
ectro
nics
(Jap
an),
Inc.
〃
DEI
Logi
stic
s(U
SA)C
orp.
〃
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taEl
ectro
nics
,Inc
.〃
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Ltd
.〃
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Ltd
.〃
Del
taN
etw
orks
(Don
ggua
n)Lt
d.〃
10�
Num
ber
(Not
ea)
Nam
eof
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p(N
ote
b)Su
bjec
tR
elat
ions
hip
(Not
ef)
Tran
sact
ion
term
s
Perc
enta
geof
tota
lco
mbi
ned
reve
nue
orto
tala
sset
s(N
ote
c)D
elta
Elec
troni
cs(D
ongg
uan)
Co.
,Ltd
.〃
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,
Ltd.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)Sa
les
(Not
ed)
Del
taN
etw
orks
(Don
ggua
n)Lt
d.〃
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)〃
DN
ILog
istic
s(U
SA)C
o.〃
Del
taN
etw
orks
(Don
ggua
n)Lt
d.D
elta
Net
wor
ksIn
tern
atio
nalL
td.
(Lab
uan)
〃
Del
taN
etw
orks
,Inc
.(Ta
iwan
)〃
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
〃
Del
taEl
ectro
-Opt
ics(
Wuj
iang
)Ltd
.〃
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.〃
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.〃
Del
taV
ideo
Dis
play
Syst
em(W
ujia
ng)L
td.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taEl
ectro
nics
(Che
nzho
u)C
o.,
Ltd.
〃
Del
taEl
ectro
nics
(Wuh
u)C
o.,L
td.
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.〃
Del
taEl
ectro
nics
(Jap
an),
Inc.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
Sola
rCo.
,Ltd
.D
elta
Elec
troni
cs,I
nc.
〃
Del
taEl
ectro
nics
,Inc
.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Oth
erre
ceiv
able
s
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)D
elta
Elec
troni
cs,I
nc.
〃
Del
taEl
ectro
nics
,Inc
.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Acc
ount
sre
ceiv
able
110
Num
ber
(Not
ea)
Nam
eof
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p(N
ote
b)Su
bjec
tR
elat
ions
hip
(Not
ef)
Tran
sact
ion
term
s
Perc
enta
geof
tota
lco
mbi
ned
reve
nue
orto
tala
sset
s(N
ote
c)D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,L
td.
Acc
ount
sre
ceiv
able
(Not
ed)
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Lt
d.〃
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
〃
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.〃
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.〃
Del
taEl
ectro
-Opt
ics(
Wuj
iang
)Ltd
.〃
Del
taV
ideo
Dis
play
Syst
em(W
ujia
ng)
Ltd.
〃
Del
taEl
ectro
nics
(Jap
an),
Inc.
〃
DEI
Logi
stic
s(U
SA)C
orp.
〃
Del
taEl
ectro
nics
,Inc
.〃
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Ltd
.〃
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,
Ltd.
〃
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.〃
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.〃
Del
taEl
ectro
-Opt
ics(
Wuj
iang
)Ltd
.〃
Del
taV
ideo
Dis
play
Syst
em(W
ujia
ng)L
td.
〃
Del
taEl
ectro
nics
(Che
nzho
u)C
o.,
Ltd.
〃
111
Num
ber
(Not
ea)
Nam
eof
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p(N
ote
b)Su
bjec
tR
elat
ions
hip
(Not
ef)
Tran
sact
ion
term
s
Perc
enta
geof
tota
lco
mbi
ned
reve
nue
orto
tala
sset
s(N
ote
c)D
elta
Net
wor
ksIn
tern
atio
nalL
td.
(Lab
uan)
Del
taN
etw
orks
(Don
ggua
n)Lt
d.A
ccou
nts
rece
ivab
le(N
ote
d)
DN
ILog
istic
s(U
SA)C
o.〃
Del
taN
etw
orks
(Don
ggua
n)Lt
d.D
elta
Net
wor
ksIn
tern
atio
nalL
td.
(Lab
uan)
〃
Del
taN
etw
orks
,Inc
.(Ta
iwan
)〃
Del
taEl
ectro
nics
,Inc
.D
elta
Net
wor
ks,I
nc.(
Taiw
an)
Leas
edas
sets
(Not
ee)
Not
ea:
The
trans
actio
nin
form
atio
nof
the
Com
pany
and
the
cons
olid
ated
subs
idia
riess
houl
dbe
note
din
colu
mn
“Num
ber”
.Th
enu
mbe
rmea
ns:
1.N
umbe
r0re
pres
ents
the
Com
pany
.2.
The
cons
olid
ated
subs
idia
riesa
rein
orde
rfro
mnu
mbe
r1.
Not
eb:
The
rela
tions
hips
with
the
trans
actio
npa
rties
are
asfo
llow
s:1.
The
Com
pany
toth
eco
nsol
idat
edsu
bsid
iary
.2.
The
cons
olid
ated
subs
idia
ryto
the
Com
pany
.3.
The
cons
olid
ated
subs
idia
ryto
anot
herc
onso
lidat
edsu
bsid
iary
.N
ote
c:R
atio
sofa
sset
/liab
ility
are
divi
ded
byco
nsol
idat
edto
tala
sset
s,an
dra
tioso
fgai
n/lo
ssac
coun
tsar
edi
vide
dby
cons
olid
ated
sale
srev
enue
.N
ote
d:Th
ere
isno
sim
ilart
rans
actio
nto
com
pare
with
.Itw
illfo
llow
the
agre
edpr
ice
and
trans
actio
nte
rmsa
ndal
lthe
cred
itte
rmsa
re75
days
.N
ote
e:Th
ere
isno
sim
ilart
rans
actio
nto
com
pare
with
.Itw
illfo
llow
the
agre
edpr
ice
and
trans
actio
nte
rmsa
ndch
arge
the
rent
alm
onth
ly.
Not
ef:
Onl
yre
late
dpa
rtytra
nsac
tions
inex
cess
of$1
00,0
00ar
edi
sclo
sed
and
the
oppo
site
side
ofw
hich
are
notd
iscl
osed
.
11�
Fort
heye
aren
ded
Dec
embe
r31,
2007
:
Num
ber
(Not
ea)
Nam
eof
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p(N
ote
b)Su
bjec
tR
elat
ions
hip
(Not
ef)
Tran
sact
ion
term
s
Perc
enta
geof
tota
lco
mbi
ned
reve
nue
orto
tala
sset
s(N
ote
c)D
elta
Elec
troni
cs,I
nc.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)Se
rvic
esre
venu
e(N
ote
d)
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)D
elta
Elec
troni
cs(J
iang
su)L
td.
Sale
s
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.〃
Del
taV
ideo
Dis
play
Syst
em(W
ujia
ng)
Ltd.
〃
Del
taEl
ectro
nics
(Jap
an),
Inc.
〃
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,L
td.
〃
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Lt
d.〃
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
〃
DEI
Logi
stic
s(U
SA)C
orp.
〃
Del
troni
cs(N
ethe
rland
s)B
.V.
〃
Del
taEl
ectro
nics
,Inc
.〃
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Lt
d.〃
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Ltd
.〃
Del
taN
etw
orks
(Don
ggua
n)Lt
d.(N
ote
g)〃
11�
Num
ber
(Not
ea)
Nam
eof
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p(N
ote
b)Su
bjec
tR
elat
ions
hip
(Not
ef)
Tran
sact
ion
term
s
Perc
enta
geof
tota
lco
mbi
ned
reve
nue
orto
tala
sset
s(N
ote
c)D
elta
Elec
troni
cs(D
ongg
uan)
Co.
,Lt
d.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Sale
s(N
ote
d)
Del
taN
etw
orks
(Don
ggua
n)Lt
d.(N
ote
g)〃
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
〃
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.〃
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.〃
Del
taEl
ectro
-Opt
ics(
Wuj
iang
)Ltd
.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
〃
Del
taV
ideo
Dis
play
Syst
em(W
ujia
ng)L
td.
〃
Del
taEl
ectro
nics
(Jap
an),
Inc.
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.〃
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)D
elta
Net
wor
ks(D
ongg
uan)
Ltd.
(Not
eg)
〃
DN
ILog
istic
s(U
SA)C
o.〃
Del
taN
etw
orks
(Don
ggua
n)Lt
d.(N
ote
g)D
elta
Net
wor
ksIn
tern
atio
nalL
td.
(Lab
uan)
〃
Del
taN
etw
orks
,Inc
.(Ta
iwan
)〃
Del
taEl
ectro
nics
,Inc
.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Oth
erre
ceiv
able
s
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)D
elta
Elec
troni
cs,I
nc.
〃
Del
taEl
ectro
nics
,Inc
.D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Acc
ount
sre
ceiv
able
11�
Num
ber
(Not
ea)
Nam
eof
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p(N
ote
b)Su
bjec
tR
elat
ions
hip
(Not
ef)
Tran
sact
ion
term
s
Perc
enta
geof
tota
lco
mbi
ned
reve
nue
orto
tala
sset
s(N
ote
c)D
elta
Elec
troni
csIn
tern
atio
nalL
td.
(Lab
uan)
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
Acc
ount
sre
ceiv
able
(Not
ed)
DEI
Logi
stic
s(U
SA)C
orp.
〃
Del
taEl
ectro
nics
,Inc
.〃
Del
taEl
ectro
nics
(Jap
an),
Inc.
〃
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,L
td.
〃
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Lt
d.〃
Del
taEl
ectro
nics
(Don
ggua
n)C
o.,
Ltd.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taN
etw
orks
(Don
ggua
n)ltd
.(N
ote
g)〃
Del
taEl
ectro
nics
Com
pone
nts
(Don
ggua
n)C
o.,L
td.
Del
taEl
ectro
nics
Inte
rnat
iona
lLtd
.(L
abua
n)〃
Del
taEl
ectro
nics
Pow
er(D
ongg
uan)
Co.
,Ltd
.〃
Del
taEl
ectro
nics
(Jia
ngsu
)Ltd
.〃
Del
taEl
ectro
nics
Com
pone
nts
(Wuj
iang
)Ltd
.〃
Del
taEl
ectro
-Opt
ics(
Wuj
iang
)Ltd
.〃
Del
taV
ideo
Dis
play
Syst
em(W
ujia
ng)L
td.
〃
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)D
elta
Net
wor
ks(D
ongg
uan)
Ltd.
(Not
eg)
〃
DN
ILog
istic
s(U
SA)C
o.〃
Del
taN
etw
orks
(Don
ggua
n)Lt
d.(N
ote
g)D
elta
Net
wor
ksIn
tern
atio
nalL
td.
(Lab
uan)
〃
11�
Num
ber
(Not
ea)
Nam
eof
coun
terp
arty
Nam
eof
trans
actio
npa
rties
Rel
atio
nshi
p(N
ote
b)Su
bjec
tR
elat
ions
hip
(Not
ef)
Tran
sact
ion
term
s
Perc
enta
geof
tota
lco
mbi
ned
reve
nue
orto
tala
sset
s(N
ote
c)D
elta
Net
wor
ks,I
nc.(
Taiw
an)
Del
taN
etw
orks
Inte
rnat
iona
lLtd
.(L
abua
n)A
ccou
nts
rece
ivab
le(N
ote
d)
Del
taEl
ectro
nics
,Inc
.D
elta
Net
wor
ks,I
nc.(
Taiw
an)
Leas
edas
sets
(Not
ee)
Not
ea:
The
trans
actio
nin
form
atio
nof
the
Com
pany
and
the
cons
olid
ated
subs
idia
riess
houl
dbe
note
din
colu
mn
“Num
ber”
.Th
enu
mbe
rmea
ns:
1.N
umbe
r0re
pres
ents
the
Com
pany
.2.
The
cons
olid
ated
subs
idia
riesa
rein
orde
rfro
mnu
mbe
r1.
Not
eb:
The
rela
tions
hips
with
the
trans
actio
npa
rties
are
asfo
llow
s:1.
The
Com
pany
toth
eco
nsol
idat
edsu
bsid
iary
.2.
The
cons
olid
ated
subs
idia
ryto
the
Com
pany
.3.
The
cons
olid
ated
subs
idia
ryto
anot
herc
onso
lidat
edsu
bsid
iary
.N
ote
c:R
atio
sofa
sset
/liab
ility
are
divi
ded
byco
nsol
idat
edto
tala
sset
s,an
dra
tioso
fgai
n/lo
ssac
coun
tsar
edi
vide
dby
cons
olid
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