~ 1 ~
CHIMEI INNOLUX CORPORATION
AND SUBSIDIARIES
(FORMERLY INNOLUX DISPLAY CORPORATION
AND SUBSIDIARIES)
CONSOLIDATED FINANCIAL STATEMENTS
AND REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
JUNE 30, 2009 AND 2010
-------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financialstatements have been translated into English from the original Chinese version prepared and used in the Republic ofChina. In the event of any discrepancy between the English version and the original Chinese version or any differences inthe interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.
~ 2 ~
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE
To the Board of Directors and Stockholders of
Chimei Innolux Corporation
We have reviewed the accompanying consolidated balance sheets of Chimei Innolux
Corporation (formerly Innolux Display Corporation) and subsidiaries as of June 30, 2009 and 2010,
and the related consolidated statements of operations, of changes in stockholders’ equity and of
cash flows for the six-month periods then ended. These financial statements are the responsibility
of the Company’s management. Our responsibility is to issue a conclusion on these consolidated
financial statements based on our reviews.
Except as explained in the following paragraph, we conducted our reviews in accordance with
Republic of China Statement on Auditing Standards No. 36, “Review of Financial Statements”. A
review consists principally of inquiries of company personnel and analytical procedures applied to
financial data. It is substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
As disclosed in Note 1(2), the financial statements of certain consolidated subsidiaries were not
reviewed by independent accountants, which statements reflect total assets and liabilities of
$24,232,191,000 and $17,528,166,000, constituting 14% and 22% of the consolidated total assets
and liabilities, respectively as of June 30, 2009, and total net income of $491,979,000, constituting
12% of the consolidated net loss for the six-month period then ended.
Based on our reviews, except for the effect on the 2009 consolidated financial statements of such
adjustments, if any, as might have been determined to be necessary had the financial statements of
certain consolidated subsidiaries been reviewed as explained in the preceding paragraph, we are not
aware of any material modifications that should be made to the consolidated financial statements
referred to above in order for them to be in conformity with the “Rules Governing the Preparation
of Financial Statements by Securities Issuers” and generally accepted accounting principles in the
Republic of China.
As disclosed in Notes 1 and 4(10), Innolux Display Corporation merged with TPO Displays
Corporation and Chi Mei Optoelectronics Corporation on March 18, 2010. Innolux Display
Corporation is the surviving company and renamed as “Chimei Innolux Corporation.”
As disclosed in Note 3, effective January 1, 2009, the Company and its subsidiaries adopted the
amendments to R.O.C. SFAS No. 10, “Accounting for Inventories”.
~ 3 ~
The consolidated financial statements of Chimei Innolux Corporation and subsidiaries as of and
for the six-month period ended June 30, 2010 expressed in U.S. dollars are presented solely for the
convenience of the reader and were translated from the financial statements expressed in New
Taiwan dollars using the exchange rate of U.S. $1.00 :NT $32.27 by the Federal Reserve as of June
30, 2010. This basis of translation is not in accordance with generally accepted accounting
principles in the Republic of China.
PricewaterhouseCoopers, Taiwan
August 5, 2010
-----------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results of
operations and cash flows in accordance with accounting principles and practices generally accepted in countries and
jurisdictions other than the Republic of China. The standards, procedures and practices utilized in the Republic of
China governing the audit of such consolidated financial statements may differ from those generally accepted in countries
and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of
independent accountants are not intended for use by those who are not informed about the accounting principles or
auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial
statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of,
or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
~ 4 ~
CHIMEI INNOLUX CORPORATION AND SUBSIDIARIES(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETSJUNE 30,
(Amounts expressed in thousands of New Taiwan dollars and U.S. dollars)(Reviewed only; not audited in accordance with generally accepted auditing standards)
2009 2010NT$ NT$ US$
(Unaudited)(Note 2)
ASSETSCurrent Assets
Cash and cash equivalents (Note 4(1)) $ 51,800,972 $ 62,079,475 $ 1,923,752Financial assets at fair value through profit or loss - current
(Note 4(2)) 251 1,058,810 32,811Available-for-sale financial assets - current (Note 4(6)) - 54,003 1,673Accounts receivable, net - third parties (Note 4(3)) 18,675,978 65,086,645 2,016,940Accounts receivable, net - related parties (Note 5) 1,587,029 12,246,302 379,495Other receivables (Notes 4(3)(16)) 1,151,903 5,094,019 157,856Other financial assets - current (Note 6) - 5,128 159Inventories, net (Note 4(4)) 15,482,690 66,541,100 2,062,011Prepayments 1,470,611 1,186,154 36,757Deferred income tax assets - current (Note 4(16)) 495,285 1,532,755 47,498Other current assets - 475,974 14,750
90,664,719 215,360,365 6,673,702Funds and Investments
Financial assets at fair value through profit or loss - non-current(Note 4(2)) 236,312 241,956 7,498
Available-for-sale financial assets - non-current (Note 4(6)) - 7,758,251 240,417Financial assets carried at cost - non-current (Note 4(8)) 314,439 4,637,786 143,718Investment in bonds without active market - non-current(Note 4(8)) 45,165 47,042 1,458
Long-term investments accounted for under the equity method(Note 4(5)) - 4,003,147 124,052
Other financial assets - non-current (Note 6) - 2,237 69595,916 16,690,419 517,212
Property, Plant and Equipment, Net (Notes 4(9), 5 and 6)Cost
Land - 4,971,341 154,055Buildings 9,459,287 151,618,245 4,698,427Machinery and equipment 46,589,885 301,868,773 9,354,471Testing equipment 3,243,389 4,427,281 137,195Transportation equipment 61,383 979,777 30,362Office equipment 617,734 1,858,289 57,586Leased assets - 1,519,744 47,095Leasehold improvements 31,741 211,576 6,556Other equipment 1,786,499 8,196,981 254,012
61,789,918 475,652,007 14,739,759Less: Accumulated depreciation ( 29,455,100) ( 89,016,913) ( 2,758,504)Construction in progress and prepayments for equipment 43,884,062 78,755,703 2,440,524
76,218,880 465,390,797 14,421,779Intangible assets (Note 4(10))
Goodwill - 15,232,058 472,019Other intangible assets - 2,108,157 65,329
- 17,340,215 537,348Other Assets
Assets leased to others, net (Note 4(9)) - 1,638,122 50,763Idle assets, net (Note 4(9)) - 981,805 30,424Deferred expenses 3,096,550 7,582,634 234,975Deferred income tax assets - non-current(Note 4(16)) 762,032 7,952,295 246,430
Refundable deposits 254,340 1,125,709 34,8844,112,922 19,280,565 597,476
TOTAL ASSETS $171,592,437 $ 734,062,361 $ 22,747,517
(Continued)
~ 5 ~
CHIMEI INNOLUX CORPORATION AND SUBSIDIARIES(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS (CONTINUED)JUNE 30,
(Amounts expressed in thousands of New Taiwan dollars and U.S. dollars)(Reviewed only; not audited in accordance with generally accepted auditing standards)
2009 2010NT$ NT$ US$
(Unaudited)(Note 2)
LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities
Short-term loans (Notes 4(11) and 5) $ 18,382,949 $ 19,640,386 $ 608,627Short-term bills payable (Note 4(12)) - 4,599,482 142,531Financial liabilities at fair value through profit or loss - current
(Note 4(2)) - 50 2Accounts payable - third parties 26,481,756 96,715,472 2,997,071Accounts payable - related parties (Note 5) 1,618,288 12,660,603 392,334Income tax payable (Note 4(16)) - 411,881 12,764Accrued expenses (Notes 4(15)(21) and 5) 2,868,753 12,456,309 386,003Dividend payable (Note 4(21) 627,707 - -Equipment payable (Note 5) 3,347,250 14,619,243 453,029Other payables (Notes 4(3) and 7) 69,680 2,370,075 73,445Receipts in advance 421,772 1,573,725 48,767Long-term loans - current portion (Notes 4(13), 5 and 6) 3,972,400 77,269,400 2,394,465Lease payable - current (Note 4(9)) 1,980,000 61,357Other current liabilities 1,575,235 4,010,589 124,282
59,365,790 248,307,215 7,694,677Long-term Liabilities
Hedging derivative liabilities - non-current (Note 4(7)) - 859,880 26,647Bonds payable (Note 4(14)) - 4,000,000 123,954Long-term loans (Notes 4(13), 5 and 6) 20,000,000 163,141,227 5,055,507Lease payable - non-current (Note 4(9)) - 3,950,000 122,405Preferred stock liabilities - non-current (Note 4(15)) - 15,000,000 464,828
20,000,000 186,951,107 5,793,341Other Liabilities
Accrued pension cost (Note 4(17)) - 105,137 3,258Other liabilities - other (Note 7) 1,537 5,149,256 159,568
1,537 5,254,393 162,826Total liabilities 79,367,327 440,512,715 13,650,844Stockholders' EquityEquity attributable to shareholders of the parent
Capital stock (Notes 4(18)(19))Common stock 31,285,460 73,091,298 2,264,992Common stock subscribed 100,707 26,600 824Stock dividends distributable 1,290,830 - -
Capital reserve (Note 4(20))Paid-in capital in excess of par value 50,338,046 50,583,821 1,567,518Capital reserve from long-term investments 14,285 14,285 443Capital reserve—from merger 270,648 140,015,445 4,338,873Employee stock option (Note 4(19)) - 375,261 11,629
Retained earnings (Note 4(21))Legal reserve 2,328,981 2,328,981 72,172Undistributed earnings 5,722,199 20,255,490 627,688
Other adjustments to stockholders' equityUnrealized gain on financial instruments (Note 4(6)) - 875,322 27,125Cumulative translation adjustments 873,954 1,913,690 59,303Treasury stock (Note 4(22)) - ( 12,995) ( 403)
92,225,110 289,467,198 8,970,164Minority interests - 4,082,448 126,509Total stockholders’ equity 92,225,110 293,549,646 9,096,673Commitments and Contingent Liabilities (Notes 5, 7 and 11)TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $171,592,437 $ 734,062,361 $ 22,747,517
The accompanying notes are an integral part of these consolidated financial statements.See report of independent accountants dated August 5, 2010.
~ 6 ~
CHIMEI INNOLUX CORPORATION AND SUBSIDIARIES(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE SIX-MONTH PERIODS ENDED JUNE 30,
(Amounts expressed in thousands of New Taiwan dollars and U.S. dollars, except for earnings per share)(Reviewed only; not audited in accordance with generally accepted auditing standards)
2009 2010NT$ NT$ US$
(Unaudited)(Note 2)
Operating revenuesSales (Note 5) $ 71,527,538 $ 218,384,303 $ 6,767,409Less: Sales returns ( 156,160) ( 279,890) ( 8,673)
Sales allowance ( 1,029,194) ( 878,286) ( 27,217)Net operating revenues 70,342,184 217,226,127 6,731,519
Operating costsCost of goods sold (Notes 4(4)(24) and 5) ( 70,987,893) ( 190,716,776) ( 5,910,033)
Gross (loss) profit ( 645,709) 26,509,351 821,486Operating expenses (Note 4(24))
Sales and marketing expenses ( 1,801,842) ( 3,849,105) ( 119,278)General and administrative expenses ( 653,631) ( 2,922,310) ( 90,558)Research and development expenses ( 1,030,394) ( 3,517,745) ( 109,010)Total operating expenses ( 3,485,867) ( 10,289,160) ( 318,846)
Operating (loss) income ( 4,131,576) 16,220,191 502,640Non-operating income
Interest income 113,236 153,837 4,767Gain on valuation of financial assets (Note 4(2)) 106,202 1,360,900 42,172Investment income recognized under
equity-method (Note 4(5)) - 183,232 5,678Gain on sale of investments - 97,993 3,037Foreign exchange gain 157,300 - -Other non-operating income 125,964 811,870 25,159
Total non-operating income 502,702 2,607,832 80,813Non-operating expenses
Interest expense ( 378,637) ( 1,882,774) ( 58,344)Loss on valuation of financial liabilities
(Note 4(2)) ( 13,480) ( 675,983) ( 20,948)Foreign exchange loss - ( 489,507) ( 15,169)Other non-operating losses (Note 4(3)) ( 24,247) ( 157,024) ( 4,866)Total non-operating expenses ( 416,364) ( 3,205,288) ( 99,327)
(Loss) income before income tax ( 4,045,238) 15,622,735 484,126Income tax expense (Note 4(16)) ( 6,576) ( 2,286,243) ( 70,847)Consolidated net (loss) income ($ 4,051,814) $ 13,336,492 $ 413,279
Attributable to:Shareholders of the parent ($ 4,051,814) $ 12,926,895 $ 400,586Minority interests - 409,597 12,693
($ 4,051,814) $ 13,336,492 $ 413,279
Before tax After tax Before tax After tax Before tax After tax(Loss) earnings per common share (in dollars)
(Note 4(23))Basic (loss) earnings per share(Loss) income before income tax ($ 1.26) ($ 1.26) $ 2.78 $ 2.37 $ 0.086 $ 0.073Minority interests - - ( 0.07) ( 0.07) ( 0.002) ( 0.002)Net (loss) income ($ 1.26) ($ 1.26) ($ 2.71) ($ 2.30) ($ 0.084) ($ 0.071)
Diluted (loss) earnings per share(Loss) income before income tax ($ 1.26) ($ 1.26) $ 2.76 $ 2.36 $ 0.086 $ 0.073Minority interests - - ( 0.07) ( 0.07) ( 0.002) ( 0.002)Net (loss) income ($ 1.26) ($ 1.26) $ 2.69 $ 2.29 $ 0.084 $ 0.071
The accompanying notes are an integral part of these consolidated financial statements.See report of independent accountants dated August 5, 2010.
~ 7 ~
CHIMEI INNOLUX CORPORATION AND SUBSIDIARIES(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(Amounts expressed in thousands of New Taiwan dollars and U.S. dollars)
(Reviewed only; not audited in accordance with generally accepted auditing standards)
Capital Stock Capital Reserve Retain Earnings Other
Common
stock
Common
stock
subscribed
Stock
dividends
distributable
Paid-in
capital in
excess of
par value
Capital
reserve from
long-term
investments
Capital
reserve
from
merger
Employee
stock
options
Legal
reserve
Undistributed
Earnings
Unrealized
gain or loss on
financial
instruments
Cumulative
translation
adjustment
Treasury
stock
Minority
interests Total
2009 - New Taiwan Dollars
Balance at January 1, 2009 $31,131,470 $ 105,656 $ - $50,337,808 $ 14,285 $ 270,648 $ - $1,843,886 $11,828,376 $ - $ 892,201 $ - $ - $ 96,424,330
Appropriations of 2008 earnings
Legal reverse - - - - - - - 485,095 ( 485,095) - - - - -
Cash dividends - - - - - - - - ( 627,707) - - - - ( 627,707)
Retained earnings capitalized - - 941,561 - - - - - ( 941,561) - - - - -
Employees’ bonus capitalized - - 349,269 - - - - - - - - - - 349,269
Shares issued for employee stock options 153,990 ( 4,949) - 238 - - - - - - - - - 149,279
Consolidated net loss for the six-month
period ended June 30, 2009 - - - - - - - - ( 4,051,814) - - - - ( 4,051,814)
Cumulative translation adjustments - - - - - - - - - - ( 18,247) - - ( 18,247)
Balance at June 30, 2009 $31,285,460 $ 100,707 $ 1,290,830 $50,338,046 $ 14,285 $ 270,648 $ - $2,328,981 $ 5,722,199 $ - $ 873,954 $ - $ - $ 92,225,110
2010 - New Taiwan Dollars
Balance at January 1, 2010 $32,445,962 $ 102,450 $ - $50,583,821 $ 14,285 $ 270,648 $ - $2,328,981 $ 7,328,595 $ 1,009,179 $ 605,878 $ - $ - $ 94,689,799
Stocks issued pursuant to merger 40,463,816 - - - - 139,744,797 310,999 - - - - - - 180,519,612
Shares issued for employee stock options 181,520 ( 75,850) - - - - - - - - - - - 105,670
Compensation cost of employee stock
options - - - - - - 64,262 - - - - - - 64,262
Consolidated net income for the
six-month period ended June 30, 2010 - - - - - - - - 12,926,895 - - - 409,597 13,336,492
Shares of the parent held by subsidiaries
accounted as treasury stock - - - - - - - - - - - ( 12,995) - ( 12,995)
Changes in unrealized gain or loss on
available-for-sale financial instruments - - - - - - - - - ( 109,706) - - - ( 109,706)
Changes in unrealized gain or loss on
cash flow hedge - - - - - - - - - ( 24,151) - - - ( 24,151)
Cumulative translation adjustments - - - - - - - - - - 1,307,812 - - 1,307,812
Changes in minority interests - - - - - - - - - - - - 3,672,851 3,672,851
Balance at June 30, 2010 $73,091,298 $ 26,600 $ - $50,583,821 $ 14,285 $140,015,445 $ 375,261 $2,328,981 $20,255,490 $ 875,322 $1,913,690 ($12,995) $4,082,448 $293,549,646
(Continued)
~ 8 ~
CHIMEI INNOLUX CORPORATION AND SUBSIDIARIES(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)(Amounts expressed in thousands of New Taiwan dollars and U.S. dollars)
(Reviewed only; not audited in accordance with generally accepted auditing standards)
Capital Stock Capital Reserve Retain Earnings Other
Common
stock
Common
stock
subscribed
Stock
dividends
distributable
Paid-in
capital in
excess of
par value
Capital
reserve from
long-term
investments
Capital
reserve
from
merger
Employee
stock
options
Legal
reserve
Undistributed
earnings
Unrealized
gain or loss onfinancial
instruments
Cumulative
translation
adjustment
Treasury
stock
Minority
interests Total
2010 - US Dollars (Unaudited-Note 2)
Balance at January 1, 2010 $1,005,453 $ 3,175 $ - $1,567,518 $ 443 $ 8,387 $ - $ 72,172 $ 227,102 $ 31,273 $ 18,775 $ - $ - $ 2,934,298
Stocks issued pursuant to merger 1,253,914 - - - - 4,330,486 9,637 - - - - - - 5,594,037
Shares issued for employee stock options 5,625 ( 2,350) - - - - - - - - - - - 3,275
Compensation cost of employee stockoptions - - - - - - 1,991 - - - - - - 1,991
Consolidated net income for the six-monthperiod ended June 30, 2010 - - - - - - - - 400,586 - - - 12,693 413,279
Shares of the parent held by subsidiariesaccounted as treasury stock - - - - - - - - - - - ( 403) - ( 403)
Changes in unrealized gain or loss onavailable-for-sale financial instruments - - - - - - - - - ( 3,400) - - - ( 3,400)
Changes in unrealized gain or loss on cashflow hedge - - - - - - - - - ( 748) - - - ( 748)
Cumulative translation adjustments - - - - - - - - - - 40,528 - - 40,528
Changes in minority interests - - - - - - - - - - - - 113,816 113,816
Balance at June 30, 2010 $2,264,992 $ 825 $ - $1,567,518 $ 443 $4,338,873 $ 11,628 $ 72,172 $ 627,688 $ 27,125 $ 59,303 ($ 403) $ 126,509 $ 9,096,673
The accompanying notes are an integral part of these consolidated financial statements.See report of independent accountants dated August 5, 2010.
~ 9 ~
CHI MEI INNOLUX CORPORATION AND SUBSIDIARIES(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX-MONTH PERIODS ENDED JUNE 30,
(Amounts expressed in thousands of New Taiwan dollars and U.S. dollars)(Reviewed only; not audited in accordance with generally accepted auditing standards)
2009 2010
NT$ NT$ US$
(Unaudited)
(Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net (loss) income ($ 4,051,814) $ 13,336,492 $ 413,279
Adjustments to reconcile net (loss) income to netcash provided by operating activities:
Depreciation and amortization 5,398,356 29,964,971 928,571
Allowance for doubtful accounts - ( 7,061) ( 219)
Loss on market price decline of inventories 137,755 946,251 29,323
Compensation cost of employee stock options - 4,262 1,991
Amortization of investment in bonds without activemarkets ( 919) ( 957) ( 30)
Gain on financial assets and financial liabilities atfair value ( 17,217) ( 1,058,760) ( 32,809)
Investment income recognized under equity-method - ( 183,232) ( 5,678)
Gain on sale of investments - ( 97,993) ( 3,037)
Loss on disposal of property, plant and equipment 610 4,307 133
Changes in assets and liabilities
Accounts receivable - third parties ( 2,576,791) ( 7,979,243) ( 247,265)
Accounts receivable - related parties ( 65,223) ( 5,736,766) ( 177,774)
Other receivables 1,269,918 238,903 7,403
Inventories 2,022,380 ( 17,404,661) ( 539,345)
Prepayments ( 276,836) 1,996,152 61,858
Deferred income tax assets - 1,457,448 45,164
Other current assets 32,919 ( 424,322) ( 13,149)
Accounts payable - third parties 8,832,558 9,787,945 303,314
Accounts payable - related parties 641,754 1,337,907 41,460
Income tax payable ( 449,218) 303,204 9,396
Accrued expenses ( 726,789) 3,676,942 113,943
Other payables 58,860 ( 459,579) ( 14,242)
Receipts in advance 32,412 739,044 22,902
Other current liabilities 434,032 1,149,623 35,625
Accrued pension cost - 19,202 595
Other liabilities - other - 480,167 14,880
Net cash provided by operating activities 10,696,747 32,150,246 996,289
(Continued)
~ 10 ~
CHIMEI INNOLUX CORPORATION AND SUBSIDIARIES(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX-MONTH PERIODS ENDED JUNE 30,(Amounts expressed in thousands of New Taiwan dollars and U.S. dollars)
(Reviewed only; not audited in accordance with generally accepted auditing standards)
2009 2010
NT$ NT$ US$
(Unaudited)
(Note 2)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in financial assets and liabilities at fair valuethrough profit or loss - current ($ 1,896) ($ 217,049) ($ 6,726)
Changes in hedging derivative liabilities - ( 120,129) ( 3,723)
Acquisition of financial assets carried at cost - ( 391,472) ( 12,131)
Proceeds from disposal of long-term equity investmentaccounted for under the equity-method - 199,398 6,179
Proceeds from disposal of financial assets carried at cost - 1,000 31
Decrease in other financial assets - 312,535 9,685
Acquisition of property, plant and equipment ( 23,097,067) ( 39,683,746) ( 1,229,741)
Proceeds from disposal of property, plant and equipment - 265,613 8,231
Decrease in refundable deposits 163,401 146,346 4,535
Increase in deferred expenses ( 1,996,686) ( 570,567) ( 17,681)
Net cash used in investing activities ( 24,932,248) ( 40,058,071) ( 1,241,341)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans, net 2,080,151 ( 10,057,128) ( 311,656)
Increase in short-term notes and bills payable - 3,670,398 113,740
Increase in long-term loans 9,000,000 20,305,000 629,222
Payment of long-term loans ( 4,081,309) ( 21,660,888) ( 671,239)
Decrease in lease payable - ( 990,000) ( 30,679)
(Decrease) increase in guarantee deposits received ( 629) 1,133 35
Proceeds from issuance of common stock for employeestock options 149,279 105,670 3,275
Net cash provided by (used in) financing activities 7,147,492 ( 8,625,815) ( 267,302)
Effect of changes in foreign currency exchange rate on cash ( 17,231) ( 499,114) ( 15,466)
Net cash provided by change in consolidated entities - 42,601,760 1,320,166
Net (decrease) increase in cash and cash equivalents ( 7,105,240) 25,569,006 792,346
Cash and cash equivalents at beginning of the period 58,906,212 36,510,469 1,131,406
Cash and cash equivalents at end of the period $ 51,800,972 $ 62,079,475 $ 1,923,752
Supplemental disclosures of cash flow information
Cash paid for interest $ 428,216 $ 1,819,951 $ 56,398
Cash paid for income tax $ 455,794 $ 74,170 $ 2,298
(Continued)
~ 11 ~
CHIMEI INNOLUX CORPORATION AND SUBSIDIARIES(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX-MONTH PERIODS ENDED JUNE 30,(Amounts expressed in thousands of New Taiwan dollars and U.S. dollars)
(Reviewed only; not audited in accordance with generally accepted auditing standards)
2009 2010
NT$ NT$ US$
(Unaudited)
(Note 2)
Acquisition of property, plant and equipment by cash
Increase in property, plant and equipment $ 23,678,733 $ 36,699,464 $ 1,137,263
Equipment payable at beginning of the period 2,765,584 1,824,086 56,526
Payables for equipment acquired from business merger - 15,779,439 488,982
Equipment payable at end of the period ( 3,347,250) ( 14,619,243) ( 453,029)
Paid in cash $ 23,097,067 $ 39,683,746 $ 1,229,742
Fair value for business combination
Current assets $ - $ 102,111,500 $ 3,164,286
Funds and investments - 47,638,690 1,476,253
Property, Plant and Equipment - 320,179,803 9,921,903
Goodwill - 15,232,058 472,019
Other intangible assets - 844,212 26,161
Other assets - 9,703,774 300,706
Current liabilities - ( 150,121,827) ( 4,652,055)
Long-term liabilities - ( 160,007,155) ( 4,958,387)
Other liabilities - ( 5,061,443) ( 156,847)
Proceeds from business combination - 180,519,612 5,594,039
Less: Stocks issued pursuant to merger (including Capitalreserve - from merger) - ( 180,208,613) ( 5,584,401)
Less: Employee stock options - ( 310,999) ( 9,638)
Net cash provided by business combination $ - $ - $ -
The accompanying notes are an integral part of these consolidated financial statements.See report of independent accountants dated August 5, 2010.
~ 12 ~
CHIMEI INNOLUX CORPORATION AND SUBSIDIARIES
(FORMERLY INNOLUX DISPLAY CORPORATION AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2009 AND 2010
(All amounts expressed in thousands of New Taiwan dollars,
except for earnings per share information or unless otherwise specified)
(Reviewed only; not audited in accordance with generally accepted auditing standards)
1. HISTORY AND ORGANIZATION
(1) Chimei Innolux Corporation
Chimei Innolux Corporation (the “Company”) was organized on January 14, 2003 under theAct for Establishment and Administration of Science Parks. The Company merged with TPODisplays Corporation and Chimei Optoelectronics Corporation on March 18, 2010, with theCompany as the surviving entity, and was then renamed as Chimei Innolux Corporation. TheCompany engages in the research, development, design, manufacture and sales of TFT-LCDpanels, modules and monitors of LCD, color filter, and low temperature poly-siliconTFT-LCD. As of June 30, 2010, the Company and its subsidiaries had 112,649 employees.The Company was listed on the Taiwan Stock Exchange Corporation (TSEC) in October2006.
(2) Consolidated subsidiaries
Ownership (%)
June 30,
Investor Subsidiary Main activities 2010 2009 Description
Chimei InnoluxCorporation
Innolux HoldingLtd.
Investment holdings 100 100 -
Chimei InnoluxCorporation
InnoJoyInvestmentCorporation
Investment company 100 100 -
Chimei InnoluxCorporation
InnoFunInvestmentCorporation
Investment company 100 100 -
Chimei InnoluxCorporation
TPO Hong KongHolding Ltd.
Investment company 100 - C(c)
Chimei InnoluxCorporation
ToppolyOptoelectronics(B. V. I) Ltd.
Investment company 100 - C(c)
Chimei InnoluxCorporation
Golden AchieverInternationalLtd.
Investment company 100 - C(c)
Chimei InnoluxCorporation
Bright InformationHolding Ltd.
Investment company 57 - C(c)
Chimei InnoluxCorporation
LandmarkInternationalLtd.
Investment company 100 - C(c)
Chimei InnoluxCorporation
Leadtek GlobalGroup Limited
Order swapping and
investing company
100 - C(c)
~ 13 ~
Ownership (%)
June 30,
Investor Subsidiary Main activities 2010 2009 Description
Chimei InnoluxCorporation
Yuan ChiInvestmentCo., Ltd.
Investment company 100 - C(c)
Chimei InnoluxCorporation
Chi MeiOptoelectronicsJapan Co., Ltd.
Investing and sellingcompany
100 - C(c)
Chimei InnoluxCorporation
Gold UnionInvestments Ltd.
Investment company 100 - C(c)
Chimei InnoluxCorporation
KeywayInvestmentManagementLimited
Investment company 100 - C(c)
Chimei InnoluxCorporation
Chi MeiOptoelectronicsEurope B. V.
Investing and sellingcompany
100 - C(c)
Chimei InnoluxCorporation
Chi MeiOptoelectronics(Singapore) PteLtd.
Selling company 100 - C(c)
Chimei InnoluxCorporation
Honor LightServices Limited
Trading company 100 - C(c)
Chimei InnoluxCorporation
Chi Mei EnergyCorp.
Manufacturing andselling company
93 - C(c)
Chimei InnoluxCorporation
Chi Mei ElCorporation
Manufacturing andselling company
90 - C(c)
Chimei InnoluxCorporation
Chi Mei LightingTechnologyCorporation
Manufacturing andselling company
36 - C(c)(d)
Chimei InnoluxCorporation
JetronicsInternationalCorp.
Investment company 32 - C(c)(d)
Chimei InnoluxCorporation
ContrelTechnology Co.,Ltd.
Manufacturing andselling company
13 - C(c)
Innolux HoldingLtd.
Lakers TradingLtd.
Order swapping andtrading company
100 100 -
Innolux HoldingLtd.
Rockets HoldingLtd.
Investment company 100 100 -
Innolux HoldingLtd.
InnoluxCorporation Ltd.
Trading company 100 100 -
Innolux HoldingLtd.
Suns Holding Ltd. Investment company 100 100 -
Rockets HoldingLtd.
StanfordDevelopmentsLtd.
Investment company 100 100 -
~ 14 ~
Ownership (%)
June 30,
Investor Subsidiary Main activities 2010 2009 Description
Rockets HoldingLtd.
Mega ChanceInvestments Ltd.
Investment company 100 - C(a)
Rockets HoldingLtd.
Best ChinaInvestments Ltd.
Investment company 100 100 -
Rockets HoldingLtd.
Excel Victory Ltd. Investment company 100 - C(a)
Rockets HoldingLtd.
Sonics TradingLimited
Order swapping andtrading company
100 100 -
Suns HoldingLtd.
WarriorsTechnologyInvestments Ltd.
Investment company 100 100 -
Best ChinaInvestmentsLtd.
AsiawardInvestment Ltd.
Investment company 100 100 C(a)
Excel VictoryLtd.
Glory Ace
Investment Ltd.
Investment company 100 - C(a)
Mega ChanceInvestmentsLtd.
Main Dynasty
Investment Ltd.
Investment company 100 - C(a)
AsiawardInvestmentLtd.
InnocomTechnology(Xiamen) Ltd.
Processing company 100 100 -
StanfordDevelopmentsLtd.
InnocomTechnologyShenzhen Ltd.
Processing company - 100 C(b)
StanfordDevelopmentsLtd.
Full LuckyInvestments Ltd.
Investment company 100 - C(b)
Full LuckyInvestmentsLtd.
InnocomTechnologyShenzhen Ltd.
Processing company 100 - C(b)
Main DynastyInvestmentLtd.
InnocomTechnology(Jia-shan) Ltd.
Processing company 100 - C(a)
Glory AceInvestmentLtd.
InnocomTechnology(Chongqing)Co., Ltd.
Processing company 100 - C(a)
Chi MeiOptoelectronicsJapan Co., Ltd.
Chi MeiOptoelectronicsUSA, Inc.
Selling company 100 - C(c)
LandmarkInternationalLtd.
Ningbo Chi MeiElectronics Ltd.
Processing company 100 - C(c)
Landmark Nanhai Chi Mei Processing company 100 - C(c)
~ 15 ~
Ownership (%)
June 30,
Investor Subsidiary Main activities 2010 2009 Description
InternationalLtd.
ElectronicsCorp.
LandmarkInternationalLtd.
Ningbo Chi MeiOptoelectronicsLtd.
Processing company 100 - C(c)
LandmarkInternationalLtd.
Nanhai Chi MeiOptoelectronicsLtd.
Processing company 100 - C(c)
Yuan ChiInvestmentCo., Ltd.
Fulintec ScienceEngineeringCo., Ltd.
Manufacturing andselling company
53 - C(c)
Yuan ChiInvestmentCo., Ltd.
Chi Mei LogisticsCo., Ltd.
Warehousingcompany
49 - C(c)(d)
Yuan ChiInvestmentCo., Ltd.
Chi Mei LightingTechnologyCorporation
Manufacturing andselling company
9 - C(c)(d)
Yuan ChiInvestmentCo., Ltd.
Chi Mei LogisticsCo., Ltd.
Manufacturing andselling company
1 - C(c)
Fulintec ScienceEngineeringCo., Ltd.
Fu ChengOptoelectronicTechnology(Shanghai) Co.,Ltd.
Manufacturingcompany
100 - C(c)
Chi MeiOptoelectronicsEurope B. V.
Chi MeiOptoelectronicsGermany GmbH
Selling company 100 - C(c)
Chi MeiOptoelectronicsEurope B. V.
Chi MeiOptoelectronicsUK Ltd.
Selling company 100 - C(c)
KeywayInvestmentManagementLimited
Foshan Chi MeiLogistics Co.,Ltd.
Warehosing and
maintenance servicecompany
100 - C(c)
KeywayInvestmentManagementLimited
Ningbo Chi MeiLogistics Co.,Ltd.
Warehousingcompany
100 - C(c)
JetronicsInternationalCorp.
Kunshan Guan JyeElectronics Co.,Ltd.
Manufacturingcompany
100 - C(c)
JetronicsInternationalCorp.
Champ WinTechnologyCorporation
Manufacturingcompany
100 - C(c)
~ 16 ~
Ownership (%)
June 30,
Investor Subsidiary Main activities 2010 2009 Description
Gold UnionInvestmentsLtd.
Ningbo Chi HsinElectrics Ltd.
Processing company 100 - C(c)
Gold UnionInvestmentsLtd.
Dongguan Chi HsinElectronicsCorp.
Processing company 100 - C(c)
Chi Mei LightingTechnologyCorporation
Smart LightGlobal Limited
Investment company 100 - C(c)
Smart LightGlobal Limited
Foshan Chi MeiLightingTechnology Ltd.
Manufacturing andselling company
100 - C(c)
Chi Mei EnergyCorp.
Chi Mei EnergyEurope B. V.
Trading company 100 - C(c)
ContrelTechnologyCo., Ltd.
Far TechnologyCo., Ltd.
Investment company 100 - C(c)
ContrelTechnologyCo., Ltd.
Contrel HoldingLtd.
Investment company 100 - C(c)
Far TechnologyCo., Ltd.
Ningbo ControlTechnology Co.,Ltd.
Processing company 100 - C(c)
Contrel HoldingLtd.
Ningbo ControlTechnology Co.,Ltd.
Trading company 100 - C(c)
ToppolyOptoelectronics(B. V. I.) Ltd.
ToppolyOptoelectronics(Cayman) Ltd.
Investment company 100 - C(c)
ToppolyOptoelectronics(Cayman) Ltd.
Toptech TradingLimited
Trading company 100 - C(c)
ToppolyOptoelectronics(Cayman) Ltd.
TPO Displays(Nanjing) Ltd.
Processing company 100 - C(c)
ToppolyOptoelectronics(Cayman) Ltd.
TPO Displays(Sinepal) Ltd.
Trading company 100 - C(c)
TPO Hong KongHolding Ltd.
TPO DisplaysHong KongHolding Ltd.
Investment company 100 - C(c)
TPO Hong KongHolding Ltd.
TPO DisplaysHong Kong Ltd.
Trading company 100 - C(c)
TPO Hong KongHolding Ltd.
TPO DisplaysJapan K. K.
Manufacturing andselling company
100 - C(c)
~ 17 ~
Ownership (%)
June 30,
Investor Subsidiary Main activities 2010 2009 Description
TPO Hong KongHolding Ltd.
TPO DisplaysEurope B. V.
Trading company 100 - C(c)
TPO Hong KongHolding Ltd.
TPO DisplaysUSA Inc.
Trading company 100 - C(c)
TPO DisplaysHong KongHolding Ltd.
TPO DisplaysShanghai Ltd.
Processing company 100 - C(c)
TPO DisplaysEurope B. V.
TPO DisplaysGermany GmbH.
Trading company 100 - C(c)
TPO DisplaysEurope B. V.
TPO DisplaysSweden AB
Trading company 100 - C(c)
BrightInformationHolding Ltd.
KunpalOptoelectronicsLtd.
Processing company 100 - C(c)
Golden AchieverInternationalLtd.
VAPOptoelectronics(Nanjing)Corp.
Processing company 100 - C(c)
Golden AchieverInternationalLtd.
Dragon FlameIndustrial Ltd.
Selling company 100 - C(c)
Golden AchieverInternationalLtd.
Eastern VisionCo., Ltd.
Selling company 100 - C(c)
A. The financial statements of consolidated subsidiaries as of and for the six-month periodended June 30, 2010 were reviewed by independent accountants.
B. The financial statements of certain consolidated subsidiaries as of and for the six-monthperiod ended June 30, 2009 were not reviewed by independent accountants which reflecttotal assets and liabilities of $24,232,191 and $17,528,166, constituting 14% and 22% ofthe consolidated total assets and liabilities, respectively, as of June 30, 2009, and total netincome of $491,979, constituting 12% of the consolidated net loss for the six-month periodthen ended.
C. Reasons for change in consolidated subsidiaries are set forth below:
(a) In the second half of 2009, the Company’s subsidiary, Rocket Holding Ltd., acquiredthe total shares and established the following companies: Mega Chance InvestmentsLtd., Excel Victory Ltd., Main Dynasty Investment Ltd., Glory Ace Investments Ltd.,Innocom Technology (Jia-shan) Ltd. and Innocom Technology (Chongqing) Ltd.,which were consolidated effective on the acquisition date.
(b) The Company’s subsidiary, Stanford Developments Ltd., originally directly owningInnocom Technology Shenzhen Ltd., established Full Lucky Investment Ltd. inSeptember 2009. The Company indirectly owned Innocom Technology Shenzhen Ltd.with the investment of Full Lucky Investment Ltd. Accordingly, Full Lucky wasconsolidated effective on the company was established date.
(c) Acquired on March 18, 2010 pursuant to business combination. Please refer to Notes 1and 4(10) for the related information of business combination.
~ 18 ~
(d) The Company has 50% or more of the seats on the board of directors of Chi MeiLighting Technology Corporation, Jetronics International Corp. and Chi Mei LogisticsCo., Ltd., respectively. Those companies are included in the consolidated financialstatements of the Company as the Company has control over them.
(e) The Company assigned a representative as the general manager of Contrel TechnologyCo., Ltd. Therefore, the Company has substantial control over the company which wasthen consolidated.
(f) GIO Optoelectronics Corp., the Company’s investee, reelected the directors in June2010, and thereafter the Company’s representatives comprised less than 50% of theboard of directors. Accordingly, the Company discontinued consolidating the revenuesand expenses of GIO Optoelectronics Corp. on the day of losing control.
(3) Subsidiaries not included in the consolidated financial statements: None.
(4) The adjustment and disposition for the accounting period differences between the Companyand the subsidiaries: None.
(5) Special operating risks on the foreign subsidiaries: None.
(6) Significant restriction on remittance of funds for the foreign subsidiaries’ financial activitiesto the Company: None.
(7) Securities issued by the parent company which were held by subsidiaries: The stocks of theCompany held by the subsidiary Contrel Technology Co., Ltd. were accounted as treasurystocks. Please refer to Note 4(22) for the related information of treasury stocks.
(8) Information on convertible bonds and common stock issued by subsidiaries: No materialeffects on the stockholders’ equity of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company and its subsidiaries (collectively referredherein as the Group) are prepared in conformity with the “Rules Governing the Preparation ofFinancial Statements by Securities Issuers” and generally accepted accounting principles in theRepublic of China. The Group’s significant accounting policies are summarized as follows:
(1) Basis for preparation of consolidated financial statements
A. All majority-owned subsidiaries and controlled entities are included in the consolidatedfinancial statements.
B. The income (loss) of the subsidiaries is included in the consolidated statements of incomeeffective the date on which the Company gains control over the subsidiaries. The income(loss) of the subsidiaries is excluded from the consolidated statements of income effectivethe date on which the Company loses control over the subsidiaries.
C. All significant intercompany accounts and transactions are eliminated in the consolidatedfinancial statements.
(2) Translation of financial statements of foreign subsidiaries
Assets and liabilities of foreign subsidiaries are translated into New Taiwan dollars using theexchange rates at the balance sheet date. Equity accounts are translated at historical ratesexcept for beginning retained earnings, which is carried forward from prior year’s balance.Dividends are translated at the rates prevailing at the date of declaration. Profit and lossaccounts are translated at weighted-average rates of the year. The resulting translationdifferences are included in “cumulative translation adjustments” under stockholders’ equity.
~ 19 ~
(3) Use of estimates
The preparation of financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. Actual results could differfrom those assumptions and estimates.
(4) Convenience translation into U.S. dollars
The financial statements are stated in New Taiwan Dollars. Translation of the 2010 NewTaiwan dollar amounts into U.S. dollar amounts is included solely for the convenience of thereaders, using the Federal Reserve exchange rate on June 30, 2010, of NT$32.27 to US$1uniformly applied for all the financial statement accounts. Such translation amounts areunaudited and should not be construed as representations that the New Taiwan Dollaramounts represent, have been, or could be converted into U.S. dollars at this rate or anyother rate for exchange.
(5) Criteria for classifying assets and liabilities as current or non-current items
A. Assets that meet one of the following criteria are classified as current assets; otherwisethey are classified as non-current assets:
(a) Assets arising from operating activities that are expected to be realized or consumed,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 balance sheetdate; and
(d)Cash and cash equivalents, excluding restricted cash and cash equivalents and thosethat are to be exchanged or used to pay off liabilities more than twelve months afterthe balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities;otherwise they are classified as non-current liabilities:
(a) Liabilities arising from operating activities that are expected to be paid off within thenormal operating cycle;
(b)Liabilities arising mainly from trading activities;
(c) Liabilities that are to be paid off within twelve months from the balance sheet date;and
(d)Liabilities for which the repayment date cannot be extended unconditionally to morethan twelve months after the balance sheet date.
(6) Foreign currency translation
A. The Company and its consolidated subsidiaries maintain their accounts in New Taiwandollars and functional currencies, respectively. Transactions denominated in foreigncurrencies are translated into New Taiwan dollars and their functional currencies at thespot exchange rates prevailing at the transaction dates.
B. Receivables, other monetary assets and liabilities denominated in foreign currencies aretranslated at the spot exchange rates prevailing at the balance sheet date. Exchange gainsor losses are recognized in profit or loss.
C. When a gain or loss on a non-monetary item is recognized directly in equity, anyexchange component of that gain or loss shall be recognized directly in equity.Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss,any exchange component of that gain or loss shall be recognized in profit or loss.
~ 20 ~
However, non-monetary items that are measured on a historical cost basis are translatedusing the exchange rate at the date of the transaction.
(7) Cash and cash equivalents
Cash and cash equivalents include cash on hand and in banks and other short-term highlyliquid investments which are readily convertible to known amount of cash and which aresubject to insignificant risk of changes in value resulting from fluctuations in interest rates.
(8) Financial assets and financial liabilities at fair value through profit or loss
A. Equity financial instruments are recognized and derecognized using trade date accounting;bond investments, beneficiary certificates and derivative instruments are recognized andderecognized using settlement date accounting, and are recognized initially at fair value.
B. These financial instruments are subsequently remeasured and stated at fair value, and thegain or loss is recognized in profit or loss. The fair value of listed stocks, OTC stocks andclosed-end mutual funds is based on latest quoted fair prices of the accounting period.The fair value of open-end and balanced mutual funds is based on the net asset value atthe balance sheet date.
C. When a derivative is an ineffective hedging instrument, it is initially recognized at fairvalue on the date a derivative contract is entered into and is subsequently remeasured atits fair value. If a derivative is a non-option derivative, the fair value initially recognizedis zero.
D. Financial assets and financial liabilities at fair value through profit or loss are classifiedinto asset or liability held for trading and those designated at fair value through profit orloss at inception. Financial assets and financial liabilities are classified as held fortrading if acquired principally for the purpose of selling in the short term. Financialassets and financial liabilities designated as at fair value through profit or loss atinception are those that are managed and whose performance is evaluated on a fair valuebasis, in accordance with a documented Group’s investment strategy. Information aboutthese financial assets and financial liabilities is provided internally on a fair value basis tothe Group’s management personnel. The Group has designated almost all of itscompound debt instruments as financial liability at fair value through profit or loss.
(9) Available-for-sale financial assets
A. Available-for-sale financial assets are recognized and derecognized using trade dateaccounting; bond investments are recognized and derecognized using settlement dateaccounting, and are recognized initially at fair value plus transaction costs that aredirectly attributable to the acquisition of the financial asset.
B. The financial assets are remeasured and stated at fair value, and the gain or loss isrecognized in equity, until the financial asset is derecognized, at which time thecumulative gain or loss previously recognized in equity shall be recognized in profit orloss. The fair values of listed stocks, OTC stocks and closed-end mutual funds arebased on latest quoted fair prices of the accounting period. The fair values of open-endand balanced mutual funds are based on the net asset value at the balance sheet date.
C. If there is any objective evidence that the financial asset is impaired, the cumulativeloss that had been recognized directly in equity shall be transferred from equity toprofit or loss. When the fair value of an equity instrument subsequently increases,impairment losses recognized previously in profit or loss shall not be reversed. Whenthe fair value of a loan instrument subsequently increases and the increase can beobjectively related to an event occurring after the impairment loss was recognized inprofit or loss, the impairment loss shall be reversed to the extent of the loss recognizedin profit or loss.
~ 21 ~
(10) Financial assets carried at cost
A. Investment in unquoted equity instruments is recognized or derecognized using tradedate accounting and is stated initially at its fair value plus transaction costs that aredirectly 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 shall not bereversed when the fair value of the asset subsequently increases.
(11) Investment in bonds without active markets
A. Investment in bonds without active markets is recognized and derecognized using tradedate accounting and is stated initially at its fair value plus transaction costs that aredirectly attributable to the acquisition of the financial asset.
B. This financial asset is carried at amortized cost.
C. If there is any objective evidence that the financial asset is impaired; the impairmentloss is recognized in profit or loss. If, subsequently, the fair value of the asset increasesand the increase can be objectively related to an event occurring after the impairmentloss was recognized in profit or loss, the previously recognized impairment loss shall bereversed to the extent of the amount of the amortized cost that would have beenrecognized at the date the impairment is reversed.
(12) Hedging derivative instruments
Derivatives are initially recognized at fair value on the date a contract is entered into andare subsequently remeasured at their fair value. The method of recognizing the resultinggain or loss depends on whether the derivative is designated as a hedging instrument andthe nature of the hedged item.
A. Fair value hedges:
Changes in the fair value of derivatives that are designated and qualify as fair valuehedges are recognized in profit or loss. Changes in the fair value of the hedged asset orliability that are attributable to the hedged item are recognized in profit or loss as anadjustment to the carrying amount of the hedged item. If the hedge no longer meets thecriteria for hedge accounting, the adjustment to the carrying amount of a hedged itemfor which the effective interest method was used is amortized to profit or loss over theperiod of maturity.
B. Cash flow hedges:
The effective portion of changes in the fair value of derivatives that are designated andqualify as cash flow hedges is recognized in equity.
a. If a hedge of a forecast transaction subsequently results in the recognition of afinancial asset or a financial liability, the associated gains or losses that wererecognized directly in equity are transferred to profit or loss in the same period orperiods when the hedged item affects profit or loss.
b. If a hedge of a forecast transaction subsequently results in the recognition of anon-financial asset or a non-financial liability, the associated gains and losses thatwere recognized directly in equity are transferred into profit or loss in the periodsduring which the asset acquired or liability assumed affects profit or loss.
(13) Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on past experience and an evaluation ofthe collectability of notes and accounts receivable, and other receivables taking intoaccount the aging analysis of receivables and other factors.
~ 22 ~
(14) Transactions for accounts receivable securitization
Accounts receivable securitization is the transfer of a designated pool of accountsreceivable to a special purpose entity, in the form of issuing beneficial securities orasset-backed securities based on the accounts receivable. Under ROC Statement ofFinancial Accounting Standards (SFAS) No. 33 “Accounting for Transfers of FinancialAssets and Extinguishments of Liabilities”, such transfer of financial assets in which thetransferor surrenders control over those assets is accounted for as a sale to the extent thatconsideration other than beneficial interests in the transferred assets is received inexchange. The difference between the book value of accounts receivable and total proceedsreceived is recorded as a gain or loss on the disposal of financial assets.
(15) Inventories
The perpetual inventory system is adopted for inventory recognition. Inventories are statedat cost. The cost is determined using the weighted-average method. At the end of period,inventories are evaluated at the lower of cost or net realizable value, and the individualitem approach is used in the comparison of cost and net realizable value. The calculation ofnet realizable value is based on the estimated selling price in the normal course of business,net of estimated costs of completion and estimated selling expenses. As the value of rawmaterials and supplies decline and the cost of finished goods are over net realizable value,the net realizable value of raw materials and supplies becomes the replacement cost.
(16) Long-term investments accounted for under the equity method
A. Long-term equity investments in which the Group holds more than 20% of the investeecompany’s voting shares or has the ability to exercise significant influence on theinvestee’s operational decisions are accounted for under the equity method. The excessof the initial investment cost over the acquired net asset value of the investee isattributable to goodwill, and test impairment every year. Adjustment of the amount ofgoodwill amortized in previous year(s) is not required.
B. Long-term equity investments in which the Group holds more than 50% of the investeecompany’s voting shares or has the ability to exercise significant influence on theinvestee’s operational decisions are accounted for under the equity method andincluded in the consolidated financial statements.
C. Exchange differences arising from translation of the financial statements of overseasinvestee companies accounted for under the equity method are recorded as “cumulativetranslation adjustment”.
(17) Property, plant and equipment
A. Property, plant and equipment are stated at cost. Interest incurred on the acquisition ofproperty, plant and equipment is capitalized. Significant renewals or betterments arecapitalized and depreciated accordingly. Maintenance and repairs are expensed asincurred.
B. Depreciation is provided on a straight-line method using the estimated service lives ofthe assets plus one year as salvage value. The estimated useful lives of the assets are2 to 8 years, except for building which is 3 to 50 years.
C. Rents paid on capital leases are capitalized and depreciated accordingly. Any gain (loss)on the sale and leased back is capitalized and amortized over the lease term.
D. For sale and leased back assets, if the fair value is less than the book value, thedifference is recognized in profit or loss.
E. Property, plant and equipment that are idle or have no value in use are reclassified to“other assets” at the lower of the fair value less costs to sell or book value. The
~ 23 ~
resulting difference is included in current operations. Depreciation provided on theseassets is charged to non-operating expense.
(18) Intangible assets
A. Goodwill is the excess of the initial investment cost over the acquired net asset value ofthe investee when consolidated. Please refer to Note 2(19) for impairment of goodwill.
B. Patents and royalties are stated at cost and amortized over the estimated life of 5 to 10years using the straight-line method.
(19) Deferred expenses
Photo mask, pattern, bank charges for loans, license fee, power line installation cost andcomputer software are capitalized and amortized over the estimated period of economicbenefits under the straight-line method. The estimated period of economic benefits forphoto mask and pattern is 1 to 2 years, and others are 3 to 7 years.
(20) Impairment of non-financial assets
A. The Group recognizes impairment loss when there is indication that the recoverableamount of an asset is less than its carrying amount. The recoverable amount is thehigher of the fair value less costs to sell and value in use. The fair value less costs tosell is the amount obtainable from the sale of the asset in an arm’s length transactionafter deducting any direct incremental disposal costs. The value in use is the presentvalue of estimated future cash flows to be derived from continuing use of the asset andfrom its disposal at the end of its useful life. When the impairment no longer exists, theimpairment loss recognized in prior years shall be recovered.
B. The recoverable amount of goodwill, intangible assets with indefinite useful lives andintangible assets which have not yet been available for use are evaluated periodically.Impairment loss will be recognized whenever there is indication that the recoverableamount of these assets is less than their respective carrying amount. Impairment lossof goodwill recognized in prior years is not recoverable in the following years.
(21) Preferred stock liabilities
The Company issued preferred stocks which are mandatorily redeemable by payment ofcash or another financial asset and are classified as liabilities. The interest, dividends,losses and gains on such preferred shares are recognized in profit and loss.
(22) Retirement plan and pension cost
Under the defined benefit pension plan, net periodic pension costs are recognized inaccordance with the actuarial calculations. Net periodic pension cost includes servicecost, interest cost, and expected return on plan assets, and amortization of unrecognized nettransition obligation and gains or losses on plan assets. Unrecognized net transitionobligation is amortized on a straight-line basis over 15 years. Under the definedcontribution pension plan, net periodic pension costs are recognized as incurred.
(23) Income tax
A. Provision for income tax includes deferred income tax resulting from temporarydifferences, investment tax credits and loss carryforward. Valuation allowance ondeferred tax assets is provided to the extent that it is more likely than not that the taxbenefit will not be realized. Over or under provision of prior years’ income taxliabilities is included in current year’s income tax. When a change in the tax laws isenacted, the deferred tax liability or asset is recomputed accordingly in the period ofchange. The difference between the new amount and the original amount, that is, theeffect of changes in the deferred tax liability or asset, is recognized as an adjustment tocurrent income tax expense (benefit).
~ 24 ~
B. Investment tax credits arising from expenditures incurred on acquisitions of equipmentor technology, research and development, employees’ training, and equity investmentsare recognized in the year the related expenditures are incurred.
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 retain theearnings.
D. According to the “Income Basic Tax Act”, effective January 1, 2006, income tax isaccounted for based on the income tax law or other regulations when income tax isequal or more than the basic tax. When income tax is less than the basic tax, incometax payable shall be equal to the basic tax. The difference cannot be deducted frominvestment tax credits based on other regulations.
(24) Earnings per share
A. The Company adopted R.O.C. SFAS No. 24, “Earnings per share”. Basic earnings pershare is calculated by dividing net income by the weighted average number of sharesoutstanding during the year. Diluted earnings per share is calculated by taking intoaccount the potentially dilutive securities that were assumed to have been converted tocommon stock at the beginning of the year.
B. Effective January 1, 2008, as employees’ bonus could be distributed in the form ofstock, the diluted EPS computation shall include the estimated shares that wouldincrease from employees’ stock bonus issuance in the calculation of theweighted-average number of common shares outstanding during the reporting year,taking into account the dilutive effects of stock bonus on potential common shares;whereas, basic EPS shall be calculated based on the weighted-average number ofcommon shares outstanding during the reporting year that include the shares ofemployees’ stock bonus for the appropriation of prior year earnings, which havealready been resolved at the stockholders’ meeting held in the reporting year. As thecapitalization of employees’ bonus is no longer classified as distribution of stockdividends (or retained earnings or capital reserve capitalized), the calculation of basicEPS and diluted EPS for all periods presented shall not be adjusted retroactively.
C. The potential common shares of the Company and subsidiaries include employee stockoptions and the estimated shares that would increase from employees’ stock bonusissuance as stated above. Treasury stock method is used to test whether or not potentialcommon shares have dilutive effect.
(25) Share-based payment - employee compensation plan
A. The employee stock options granted from January 1, 2004 through December 31, 2007are accounted for in accordance with EITF 92-070, EITF 92-071 and EITF 92-072“Accounting for Employee Stock Options” as prescribed by the Accounting Researchand Development Foundation, R.O.C., dated March 17, 2003. Under the share-basedemployee compensation plan, compensation cost is recognized using the intrinsic valuemethod and pro forma disclosures of net income and earnings per share are prepared inaccordance with the R.O.C. SFAS No. 39, “Accounting for Share-based Payment”.
B. For the grant date of the share-based payment agreements set on or after January 1,2008, the Company shall measure the services received during the vesting period byreference to the fair value of the equity instruments granted and account for thoseamounts as payroll expenses during that period.
C. Subject to elimination of the Company issued employee stock options and theproposed replacement Reward Scheme, the Company should calculate thecompensation cost of employee services before and after the merger. The former as
~ 25 ~
part of the cost of merger; the latter is allocated by the remaining period tocompensation cost.
(26) 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 for Employees’Bonuses and Directors’ and Supervisors’ Remuneration”, 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. However, if the accrued amounts for employees’bonuses and directors’ and supervisors’ remuneration are significantly different from theactual distributed amounts resolved by the stockholders at their annual stockholders’meeting subsequently, the differences shall be recognized as gain or loss in the followingyear. In addition, according to EITF 97-127 of the Accounting Research and DevelopmentFoundation, R.O.C., dated March 31, 2008, “Criteria for Listed Companies in Calculatingthe Number of Shares of Employees’ Stock Bonus”, the Company calculates the number ofshares of employees’ stock bonus based on the closing price of the Company’s commonstock at the previous day of the stockholders’ meeting held in the year following thefinancial reporting year, and after taking into account the effects of ex-rights andex-dividends.
(27) Treasury stocks
A. When a company acquires its outstanding shares as treasury stock, the acquisition costshould be debited to the treasury stock account (a contra account under stockholders’equity) if the shares are purchased.
B. When a company’s treasury stock is retired, the treasury stock account should becredited, and the capital surplus-premium on stock account and capital stock accountshould be debited proportionately according to the share ratio. An excess of thecarrying value of treasury stock over the sum of its par value and premium on stockshould first be offset against capital surplus from the same class of treasury stocktransactions, and the remainder, if any, debited to retained earnings. An excess of thesum of the par value and premium on stock of treasury stock over its carrying valueshould be credited to capital surplus from the same class of treasury stock transactions.
C. The cost of treasury stock is accounted for on a weighted-average basis.
D. Stocks held by subsidiaries of the Company are stated at the subsidiary's carrying valueof the shares, and reclassification from the Company's (16) Long-term investmentsaccounted for under the equity method account to treasury stock.
(28) Revenue and expenses
A. Revenue is recognized when the earning process is completed and payment is realizedor realizable. Expenses, including research and development costs, are charged toincome as incurred.
B. Regarding the sales to Company’s subsidiaries, sales revenue is recognized only whenthe subsidiary has sold the goods of the Company to customers. Goods which remainedunsold by the subsidiary at the end of the accounting period are recorded as inventoriesby the Company.
(29) Subsidy from the Government
The Company receives subsidies from the Government related to the research anddevelopment of certain products pursuant to agreements. The subsidy income is recordedas deferred income upon receipt of the fund and subsequently recorded in incomestatement based on the schedule agreed to by the Company and the Government.
~ 26 ~
(30) Settlement date accounting
If an entity recognizes financial assets using settlement date accounting, any change in thefair value of the asset to be received during the period between the trade date and thesettlement date/balance sheet date is not recognized for assets carried at cost or amortizedcost. For financial assets or financial liabilities classified as at fair value through profit orloss, the change in fair value is recognized in profit or loss. For available-for-sale financialassets, the change in fair value is recognized directly in equity.
(31) Merger
The Company accounts for its merger transaction pursuant to the R.O.C. SFAS No. 25,“Accounting for Business Combinations - Purchase Method”.
3. CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 2009, the Group adopted the amendments to R.O.C. SFAS No. 10,“Accounting for Inventories”. As a result of this change in accounting principle, operating costincreased by $137,755, non-operating loss associated with inventories decreased by $137,755,net loss increased by $137,755 and loss per share increased by $0.04 for the six-month periodended June 30, 2009.
4. DETAILS OF SIGNIFICANT ACCOUNTS
(1) Cash and cash equivalents
June 30,
2009 2010
Cash on hand $ 226 $ 934,158
Checking deposits - 205,991
Savings deposits 2,249,496 6,287,878
Foreign currency deposits 3,310,124 14,969,248
Time deposits 41,491,126 38,062,456
47,050,972 60,459,731
Cash equivalents - Repurchase bonds 4,750,000 1,619,744
$ 51,800,972 $ 62,079,475
(2) Financial assets and liabilities at fair value through profit or loss
June 30,
Item 2009 2010
Current items:
Financial assets held for trading
Derivatives $ 251 $ 1,058,810
Financial liabilities held for trading
Derivatives $ - ($ 50)
Non-current items:Financial assets designated as at fair value
through profit or loss
Convertible bonds -Sintronic Technology Inc. $ 220,000 $ 220,000
Adjustment of designatedas at fair value through profit or loss 16,312 21,956
$ 236,312 $ 241,956
~ 27 ~
A. The trading items and contract information of derivatives are as follows:
June 30, 2009
Book valueContract amount
(in thousands)
Foreign exchange forward contract
Sell TWD dollars (Sell TWD/Buy JPY) $ 251 TWD 171,400
JPY 500,000
June 30, 2010
Book valueContract amount
(in thousands)
Financial assets held for trading
Foreign exchange forward contract $ 17,175 EUR 10,000
- Sell EUR dollars (Sell EUR/Buy JPY) JPY 1,131,050
Foreign exchange forward contract 1,041,549 USD 710,000
- Sell USD dollars (Sell USD/Buy JPY) JPY 65,753,305
Foreign exchange forward contract 86 HKD 20,000
- Sell HKD dollars (Sell HKD/Buy USD) USD 2,572
$ 1,058,810
Financial liability held for trading
Foreign exchange forward contract HKD 12,000
- Sell HKD dollars (Sell HKD/Buy USD) ($ 50) USD 1,540
B. The gain and loss on financial assets and liabilities for the six-month periods ended June30, 2009 and 2010 was a loss of $92,722 and gain of $593,806, including the unrealizedgain on financial assets and liabilities of $17,217 and $1,058,760, respectively.
(3) Accounts receivable
June 30,
2009 2010
Notes receivable $ - $ 191,319
Accounts receivable 18,779,158 65,457,196
18,779,158 65,648,515
Less: Allowance for doubtful accounts ( 103,180) ( 353,955)
Allowance for sales returns anddiscounts - ( 207,915)
$ 18,675,978 $ 65,086,645
Accounts receivable securitization
A. In September 2006, the Company entered into $10 billion, 5-year revolving accountsreceivable securitization agreement with Chinatrust Commercial Bank, the trustee.Under the agreement, the Company transferred a pool of accounts receivable to thetrustee. The Company transferred its receivables to the bank three times a month, andthe bank issued securities backed by these accounts receivable monthly. After thetransfer of the accounts receivable, the Company continues to service, administer, andcollect the accounts receivable on behalf of the bank. The Company does not bear therisk of collectability, nor provide any collateral to the bank.
~ 28 ~
B. As of June 30, 2010, the Company had a one-time sale of accounts receivable totaling$12,955,977 and related rights to the trustee for the issuance of beneficiary certificates.Under the agreement, control over contractual rights of such financial assets wastransferred to the buyers, except for subordinated beneficiary certificates amounting to$1,642,197 for the six months ended June 30, 2010 (recorded as available-for-salefinancial assets). The seller’s beneficiary certificates was $2,241,706 for the six monthsended June 30, 2010 (recorded as available-for-sale financial assets-noncurrent.) TheCompany recognized the difference between the book value of the financial assets andthe proceeds received of $7,312 as a gain on sale of investments for the six monthsended June 30, 2010 (recorded as other revenue.) Collected receivables not yet replacedby new accounts receivable due to timing difference are recorded as accrued expensesand other current liabilities in the balance sheet, which amounted to $1,487,142 as ofJune 30, 2010 (recorded as other payables-other).
a. Assumptions used to evaluate retained interests:
A. Subordinated beneficiary certificates
June 30, 2010
Estimated dilution reserve rate 0.49%
Estimated loss rate of credit 0.00%
Estimated funding cost rate 1.81%
Estimated expense rate 0.05%
B. Seller’s beneficiary certificates
June 30, 2010
Excess of issuance upper-limit $ -
Ineligible accounts receivable 2,204
Aggregate excess concentrations 964,460
Reserved for accounts payable 22,578
b. Sensitivity analysis
As of June 30, 2010, the assumptions and sensitivity of the current fair value ofresidual cash flows with immediate 10% adverse changes in those assumptions wereas follows:
A. Effect to subordinated beneficiary certificates
June 30, 2010
Estimated dilution reserve rate $ 751
Estimated loss rate of credit -
Estimated funding cost rate 18,861
Estimated expense rate 526
B. Effect to seller’s beneficiary certificates
June 30, 2010
Ineligible accounts receivable $ -
Aggregate excess concentrations 31
Reserved for accounts payable -
~ 29 ~
c. Cash flows
Cash inflows from and cash outflows to securitization trustees are as follows:
March 18 to June 30, 2010
Cash from securitization $ 8,886,855
Income from securitization 150
Other cash inflows from retained interest 9
Other charges -
Accounts receivable factoring
A. The Group factored its accounts receivable to certain financial institutions withoutrecourse. Under the agreement, the Group is not required to bear uncollectible risk of theunderlying accounts receivable, but is liable for the losses incurred on any businessdispute. As the Group did not provide any collateral, these accounts receivable meet thederecognition criteria for financial assets. The Group has derecognized the accountsreceivable sold to financial institutions, net of the losses estimated for possible businessdisputes.
As of June 30, 2009 and 2010, the relevant information of accounts receivable factoredbut unsettled is as follows:
June 30, 2009
Institutions
Accounts
receivable
sold/
derecognized
Amount
advanced
Amount
retained
(Note) Limit
Mega International
Commercial Bank $ 2,031,284 $ 2,007,689 $ 23,595 $ 7,710,350
China Trust
Commercial Bank 709,508 631,550 77,958 6,004,230
Taishin Bank 2,516,834 1,968,700 548,134 4,741,045
Ta Chong Bank 1,743,857 1,384,207 359,650 4,101,250
Taipei Fubon Bank 286,264 257,638 28,626 721,820
$ 7,287,747 $ 6,249,784 $ 1,037,963 $23,278,695
June 30, 2010
Institutions
Accounts
receivable
sold/
derecognized
Amount
advanced
Amount
retained
(Note) Limit
Mega International
Commercial Bank $ 2,539,327 $ 2,539,327 $ - $ 6,430,000
Ta Chong Bank 326,969 - 326,969 4,372,400
Taishin Bank 75,992 - 75,992 2,250,500
Taipei Fubon Bank 5,870,597 5,342,820 527,777 39,962,450
$ 8,812,885 $ 7,882,147 $ 930,738 $53,015,350
a.Note: shown as “other receivables”.
~ 30 ~
b.For the six-month periods ended June 30, 2009 and 2010, the rate of the groupeadvanced amount were 0.77 to 1.22% and $0.57 to 0.78%, respectively.
c.For the six-month periods ended June 30, 2009 and 2010, the financing charges(expenses) incurred from accounts receivable factoring were $22,546 and $47,267,respectively, and shown as “other non-operating losses”.
(4) Inventories
June 30,
2009 2010
Raw materials and supplies $ 2,746,240 $ 15,923,669
Work in process 4,448,578 42,705,127
Finished goods 8,857,693 17,490,261
16,052,511 76,119,057
Less: Allowance for obsolescence and market
value decline ( 569,821) ( 9,577,957)
$ 15,482,690 $ 66,541,100
Expense and loss incurred on inventories for the six-month periods ended June 30, 2009 and2010 were as follows:
For the six-month periods ended June 30,
2009 2010
Cost of inventories sold $ 70,926,044 $ 189,730,042
Loss on market price decline 137,755 946,251
Income from sale of remnants, pieces and waste ( 75,906) ( 230,917)
Loss on disposal of inventories - 285,733
Others - ( 14,333)
$ 70,987,893 $ 190,716,776
(5) Long-term investments accounted for under the equity method
June 30,
2009 2010
Investee company
Carrying
value
Percent of
ownership
(%)
Carrying
value
Percent of
ownership
(%)
Ampower Holding Ltd. $ - - $ 1,745,241 45
Chi Mei Materials Technology
Corporation - - 1,126,857 18
TOA Optronics Corporation - - 420,611 40
GIO Optoelectronics Corp. - - 378,223 26
Others - - 332,215 -
$ - $ 4,003,147
A. Because of the merger on March 18, 2010, the long-term investments accounted forunder the equity method increased as of June 30, 2010 compared with the prior period.Please refer to Note 1 for information on merger.
~ 31 ~
B. The Group uses the equity method on its investments with less than 20% ownershipwhen it has significant influence on such companies.
(6) Available-for-sale financial assets
June 30, 2010
Current
Listed stocks $ 54,003
Non-current
Subordinated beneficiary certificates $ 1,642,197
Seller’s beneficiary certificates 2,241,706
Listed stocks
Himax Technologies, Inc. (Himax Cayman) 2,322,309
Entire Technology Co., Ltd. 995,847
China Electric Mfg. Corporation 323,050
Others 233,142
$ 7,758,251
A. Please refer to Note 4(3) for the information of subordinated beneficiary certificates andseller's beneficiary certificates.
B. The loss on available-for-sale financial assets was $109,706 for the six-month periodended June 30, 2010, and is shown as an adjustment to stockholders' equity as unrealizedgain or loss on financial instruments.
(7) Hedging derivative financial liabilities - non-current
June 30, 2010
Non-current
Interest rate swap contracts $ 487,253
Cross currency swap contracts 372,627
$ 859,880
The gain on fair value hedges was $91,111 for the six-month period ended June 30, 2010.Please refer to Note 10(6) for other information
(8) Financial assets carried at cost / Investment in bonds without active market
June 30,
2009 2010
Financial assets carried at cost - non-current
Listed stocks:
TPV Technology Ltd. $ - $ 2,958,216
Emerging stocks:
J TOUCH Corporation - 400,000
G-TECH Optoelectronics Corporation - 104,732
Advanced Optoelectronic Technology Inc. 48,357 -
Entire Technology Co., Ltd. 149,249 -
~ 32 ~
June 30,
2009 2010
Unlisted stocks:
Chi Lin Technology Co., Ltd. $ - $ 277,093
AvanStrate Inc. - 286,740
Top Taiwan VI Venture Capital Co., Ltd. - 198,490
Others 111,313 406,995
Embedded derivatives:
ILI Technology Corp. - Convertible bonds 5,520 5,520
$ 314,439 $ 4,637,786
Investment in bonds without active market -
non-current
Unlisted bonds:
ILI Technology Corp. – Convertible bonds $ 45,165 $ 47,042
A.The increase in above investments for the six-month period ended June 30, 2010, exceptfor J TOUCH Corporation, G-TECH Optoelectronics Corporation, and AvanStrate Inc.,resulted from the merger on March 18, 2010. Please refer to Note 1 for information onmerger.
B. The investment in TPV Technology Ltd. was acquired through private placement withcertain restrictions on the transfer of the shares. The restricted shares, whose fair valuecannot be measured, shall be accounted for as financial assets carried at cost. Theremaining investment is accounted for as financial assets carried at cost because there isno active market for price quoted.
C. The convertible bonds held by the Company’s subsidiaries were recognized in“Investments in bonds without active markets” since these do not have quoted prices in anactive market. The put options, call options and conversion options embedded inconvertible bonds were measured at cost since the convertible bonds have no quotedprices in an active market and their fair value cannot be measured reliably.
D.Advanced Opto-electronic Technology Inc. has terminated its public offering in June,2009. The shareholding percentage of the Company’s subsidiary in AdvancedOpto-electronic Technology Inc. was more than 20% after subscribing for the new sharesin October, 2009. Accordingly, the investment was recognized in “Long-term equityinvestment accounted for under the equity method.” The investment was reclassifized to“Financial assets carried at cost” in March, 2010 due to selling the shareholding.
E. Entire Technology Inc. was listed in TSE in August, 2009, and the investment wasrecognized in “Available-for-sale financial asset - non-current.”
~ 33 ~
(9) Property, plant and equipment
June 30, 2009
Original cost
Accumulated
depreciation Book value
Buildings $ 9,459,287 ($ 3,546,568) $ 5,912,719
Machinery and equipment 46,589,885 ( 23,145,759) 23,444,126
Testing equipment 3,243,389 ( 1,697,629) 1,545,760
Transportation equipment 61,383 ( 30,106) 31,277
Office equipment 617,734 ( 309,743) 307,991
Leasehold improvements 31,741 ( 31,079) 662
Other equipment 1,786,499 ( 694,216) 1,092,283
Construction in progress and
prepayments for equipment 43,884,062 - 43,884,062
$105,673,980 ($ 29,455,100) $ 76,218,880
June 30, 2010
Original cost
Accumulated
depreciation Book value
Land $ 4,971,341 $ - $ 4,971,341
Buildings 151,618,245 ( 11,969,474) 139,648,771
Machinery and equipment 301,868,773 ( 69,263,307) 232,605,466
Testing equipment 4,427,281 ( 2,428,781) 1,998,500
Transportation equipment 979,777 ( 347,182) 632,595
Office equipment 1,858,289 ( 866,376) 991,913
Leased assets 1,519,744 ( 407,946) 1,111,798
Leasehold improvements 211,576 ( 113,899) 97,677
Other equipment 8,196,981 ( 3,619,948) 4,577,033
Construction in progress and
prepayments for equipment 78,755,703 - 78,755,703
$554,407,710 ($ 89,016,913) $ 465,390,797
A.Please refer to Note 6 for property, plant and equipment pledged as collateral.
B. As of June 30, 2010, significant leasing agreements were as follows:
~ 34 ~
a. The contents of leasing agreements:
Leased Assets Period Annual Payment Terms and Conditions
Machinery 2008.05.19- Down payment was 1.The lease transfers ownership
equipment and 2013.05.19 $4,000,000 on May of the leased property to the
factory facility 19, 2008. lessee by the end of the lease
Repayment semi- term.
annually of 2.These leased assets have to be
$990,000 from May fully insured and the
19, 2009 to May 19, Company is responsible for
2013 with annual the maintenance and repair
floating interest of the leased assets.
rate at 2.0708% in
2010.
b. Leased assets and leased obligation payable were initially recognized at fair value atthe inception of the lease. The depreciation is computed using the straight-line methodover the useful economic life.
c. As of June 30, 2010, future lease payments were as follows:
Year Amount
The second half of 2010 $ 990,000
2011 1,980,000
2012 1,980,000
2013 980,000
5,930,000
Less: current portion of lease payable ( 1,980,000)
Lease payable – non-current $ 3,950,000
C. Certain property, plant and equipment of the Group are leased to related parties and othercompanies under operating lease agreements, and were reclassified to assets leased toothers.
June 30, 2010
Cost
Accumulated
Depreciation Book Value
Land $ 196,307 $ - $ 196,307
Buildings 1,497,029 ( 55,214) 1,441,815
$ 1,693,336 ($ 55,214) $ 1,638,122
D.Certain property, plant and equipment of the Group are idle, and were reclassified to idleassets.
June 30, 2010
CostAccumulated
Depreciation Book Value
Machinery and equipment $ 1,365,868 ($ 384,063) $ 981,805
~ 35 ~
The above acquired assets were due to the merger, thus the Company has appointedexperts to evaluate the fair value.
(10) Business combinations and intangible assets
A. The Company, formerly "Innolux Display Corporation", merged with TPO DisplaysCorporation and Chi Mei Optoelectronics Corporation based on the resolution in theshareholders’ meeting on January 6, 2010. Innolux Display Corporation is thesurviving company after the merger and was renamed as Chimei Innolux Corporation.TPO Displays Corporation and the shareholders of Chi Mei OptoelectronicsCorporation exchanged 3.82912866 and 2.05 common stocks, respectively, for 1common stock of Chimei Innolux Corporation; therefore 4,046,381,607 stocks wereissued by Chimei Innolux Corporation for the exchange. In addition, the preferredshareholders of Chi Mei Optoelectronics Corporation also exchanged 2.05 preferredstock for one preferred stock of Chimei Innolux Corporation, and 731,707,317 stockswere issued for the exchange. Please refer to Appendix 4 (15) for detailed explanationsof preferred stocks.
B. TPO Displays Corporation, founded in 1999, operated in the research, development,manufacture, and the sale of Low Temperature Poly Silicon thin film transistor liquidcrystal displays (LTPS/TFT-LCD) and the sale of super-twisted nematic thin filmtransistor liquid crystal displays (STN/TFT-LCD). Chi Mei OptoelectronicsCorporation was established in 1998 and operated in the research, manufacture, and thesale of thin film transistor liquid crystal displays.
C. The merger date was March 18, 2010. The Company accounts for its mergertransaction pursuant to the R.O.C. SFAS No. 25, “Accounting for Businesscombinations - Purchase Method”. The relevant information is as follows:
Business combinations
Amount
Stocks issued pursuant to combination $ 40,463,816
Capital reserve—from merger 139,744,797
Value of employee stock options 310,999
Acquisition cost 180,519,612
Less: fair value of the net assets acquired from TPO Displays
Corporation and Chi Mei Optoelectronics Corporation ( 165,287,554)
Goodwill $ 15,232,058
The purchase price of this merger is still under assessment period, and the Companyhas appointed experts to evaluate the fair value of identifiable net assets. Theinformation above represents only the estimated value.
D. There is no contingent price, options, commitment, or significant disposal of assets inthe merger contract.
E. Pro Forma Supplementary information to the consolidated profit and managementresults.
Since March 18, 2010, the management results of TPO Displays Corporation and ChiMei Optoelectronics Corporation are consolidated into the profit and loss statements ofChi Mei Innolux Corporation. The pro forma profit and loss statement for the first halfof 2010 is based on the assumption that the management results of TPO DisplaysCorporation and Chi Mei Optoelectronics Corporation has already been consolidatedsince January 1, 2010. In order to compile the comparative profit and loss statement, itis assumed that the merger had occurred at the beginning of the last fiscal year for
~ 36 ~
comparison. Pro Forma consolidated profit and loss statement is as follows: (Thefollowing is the pro forma individual statement of the first half of 2009 and 2010 forChi Mei Optoelectronics Corporation.)
For the six-month periods ended June 30,
2009 2010
Amount % Amount %
Operating revenues $ 191,299,649 100 $ 279,795,715 100
Operating costs ( 209,579,778) (110) ( 256,652,572) ( 92)
Gross (loss) profit ( 18,280,129) ( 10) 23,143,143 8
Operating expenses ( 11,710,159) ( 6) ( 10,329,934) ( 4)
Operating (loss) income ( 29,990,288) ( 16) 12,813,209 5
Non-operating income 3,694,072 2 5,908,612 2
Non-operating expenses ( 9,177,130) ( 5) ( 9,054,017) ( 3)
(Loss) income before
income tax ( 35,473,346) ( 19) 9,667,804 3
Income tax benefit
(expense) 1,089,924 - ( 1,908,869) -
Consolidated net (loss)
income ($ 34,383,422) ( 19) $ 7,758,935 3
Before tax After tax Before tax After tax
Pro forma basic earnings
(loss) per share
Net income (loss) ($ 4.94) ($ 4.79) $ 1.32 $ 1.06
Pro forma diluted earnings
(loss) per share
Net income (loss) ($ 4.94) ($ 4.79) $ 1.32 $ 1.06
When calculating the basic and diluted earnings per share above, the Companyassumed that the merger of TPO Displays Corporation and Chi Mei OptoelectronicsCorporation occurred at the beginning of 2010.
Other intangible assets
F. The following intangible assets resulted from the payment on the TFT-LCD relatedtechnology, technical license fees, and land use right in China.
June 30, 2010
Patents $ 1,930,265
Loyalty 177,532
$ 2,108,157
(11) Short-term loans
June 30,
2009 2009
Credit loans $ 18,382,949 $ 19,091,726
Secured loans - 548,660
$ 18,382,949 $ 19,640,386
Range of interest rates 0.76%~5.00% 0.01%~5.31%
Please refer to Note 5(2) G for assets pledged as collateral for short-term loans.
~ 37 ~
(12) Short-term bills payable
June 30, 2010
Commercial bill payable $ 4,600,000
Less: discount on commercial bill payable ( 518)
$ 4,599,482
Issue rate 0.4%~1%
(13) Long-term loans
June 30, 2009
Period Amount
Mega International Commercial Bank
and 22 others - syndicated bank loans
2004/8 ~ 2011/8 $ 3,972,400
Mizuho Corporation Bank and 3 others -
syndicated bank loans
2008/9 ~ 2010/12 2,000,000
Mega International Commercial Bank
and 20 others - syndicated bank loans
2008/11 ~ 2013/11 18,000,000
23,972,400
Less: current portion ( 3,972,400)
$ 20,000,000
Range of interest rates 1.06%~1.62%
June 30, 2010
Period Amount
Syndicated bank loans:
Mega International Commercial Bank
and 20 others - mortgaged syndicated
bank loans
2008/11 ~ 2013/11 $ 30,430,000
Mizuho Corporation Bank and 3 others
- syndicated bank loans
2008/9 ~ 2010/12 2,000,000
Mega International Commercial Bank
and 19 others - mortgaged syndicated
bank loans
2010/5 ~ 2013/11 16,890,000
Mega International Commercial Bank
and 13 others - mortgaged syndicated
bank loans
2005/3 ~ 2012/3 2,800,000
China Trust Commercial Bank and 10
others - mortgaged syndicated bank
loans
2008/9 ~ 2013/8 5,100,000
Bank of Taiwan and 33 others -
mortgaged syndicated bank loans
2004/12 ~ 2011/12 1,814,880
Bank of Taiwan and 33 others -
mortgaged syndicated bank loans
2004/12 ~ 2011/12 9,332,730
~ 38 ~
June 30, 2010
Period Amount
China Trust Commercial Bank and 35
other banks and financial institutions -
mortgaged syndicated bank loans
2006/9 ~ 2012/7 $ 2,484,318
China Trust Commercial Bank and 35
other banks and financial institutions -
mortgaged syndicated bank loans
2006/6 ~ 2012/7 27,720,157
Bank of Taiwan and 30 others -
mortgaged syndicated bank loans
2006/11 ~ 2013/11 34,930,000
Bank of Taiwan and 30 others -
mortgaged syndicated bank loans
2008/10 ~ 2013/11 6,870,777
Bank of Taiwan and 21 others -
mortgaged syndicated bank loans
2008/9 ~ 2015/2 46,201,440
Bank of Taiwan and 17 others -
mortgaged syndicated bank loans
2010/3 ~ 2015/2 500,000
Bank of America and 12 others -
secured syndicated bank loans
2009/6 ~ 2011/6 1,932,188
Bank of America and 16 others -
secured syndicated bank loans
2007/6 ~ 2012/6 1,932,188
Bank of America and 15 others -
secured syndicated bank loans
2007/4 ~ 2011/7 3,354,492
First Bank and 11 others - mortgaged
syndicated bank loans
2008/7 ~ 2013/7 2,248,000
Bank of Taiwan and 22 others - secured
syndicated bank loans
2008/5 ~ 2011/5 19,290,000
Commercial papers 2005/7 ~ 2012/10 5,348,258
Secured loans 2008/11 ~ 2013/9 309,192
Unsecured loans 2005/9 ~ 2010/12 19,670,000
$ 241,158,620
Less: administrative expenses from
syndicated loans ( 747,993)
Less: current portion ( 77,269,400)
$ 163,141,227
Range of interest rates 0.7%~2.72%
A.Please refer to Notes 5(2) G and 6 for assets pledged as collateral for long-term loans.
B. Because of the merger on March 18, 2010, the long-term loans increased as of June 30,2010 compared with the prior period. Please refer to Note 1 for information on merger.
C. The agreements of the syndicated loan, which were acquired from the merger, except forMizuho Bank and other three syndicated loans due before the end of 2010, the rest hasbeen renegotiated with the syndicated loan bank. Under the loan agreements, theCompany is required to maintain the following financial ratios:
a. Current ratio is in excess of 100%
~ 39 ~
b. Debt to total equities ratio is below 150%
c. Times of interest earned ratio is above 3 times.
d. Tangible net value is above $100,000,000.
(14) Bonds payable
June 30, 2010
Secured domestic bonds $ 4,000,000
The bonds payable was acquired because of merger. The bonds payable was originallyissued on December 26, 2008 for a period of four years and forty-four days (maturity dateof February 8, 2013), at par value of $4 billion and a coupon rate of 2.72%. From the issuedate, interest payments are calculated by coupon rate annually; repayable in two equalinstallments on the fourth year and maturity date. For the six-month period ended June 30,2010, the interest expense incurred from bonds payable was $31,299.
(15) Preferred stock liabilities – non-current
June 30, 2010
Preferred shares - series B-private placement $ 15,000,000
A.The preferred shares were acquired because of merger on March 18, 2010. The preferredshares are not applied to trade in OTC market.
B. For the six-month period ended June 30, 2010, the outstanding preferred shares were731,707,317 shares, and par value at $10. Dividends payable was $836,509, and shownas accrued expense.
C. According to the R.O.C. SFAS No. 36, “Presentation and Disclosure of FinancialInstruments”, the following are the preferred shareholders’ rights and other terms andconditions:
a. Preferred shareholders are entitled to receive cumulative cash dividends once a year atthe following annual rates, calculated at the actual issuance price:
Period Annual Rate
From 1st to 3rd years 3.00%
From 4th to 6th years 3.75%
From 7th to 9th years 4.75%
10th year and thereafter 6.00%
After the financial statements are approved at the shareholders’ meeting, the board ofdirectors will determine the grant date for the distribution of preferred dividendsdeclared in the previous year. Preferred cash dividends must be weighted by thefraction of the period they are outstanding in the issuance year. Preferred shareholdersare not entitled to receive any stock dividends for common shareholders (whetherdeclared out of unappropriated earnings or capital surplus);
b. By the end of the year, if the Company has no earnings or the earnings are notsufficient for the declaration of preferred dividends, the undistributed dividends shouldbe accumulated until the Company declares an earnings distribution in the subsequentyear;
c. If the Company will be liquidated or dissolved, preferred shareholders have priorityover the common shareholders on the Company’s assets available for distribution toshareholders. However, the pre-emptive rights to the assets should not exceed the
~ 40 ~
issuance value of the shares;
d. Preferred shareholders have no voting rights;
e. Preferred shareholders have the same right as common shareholders to subscribe tonew shares;
f. Preferred shareholders may not be transferred to common shareholders duringissuance period;
g. Any paid-in capital arising from the excess of par value from issuance of preferredshares may not be transferred to capital.
D.Based on the resolution in the shareholders’ meeting in June, 2010, the issued preferredstock aforementioned are withdrawn through the revenue, the acquired return from newstock issuance, or both. The withdrawing cost is the original issue price plus theaccumulated dividend at the day before cancellation. However, the board of directors hasnot determined the base date of capital reduction by the audit report date.
(16) Income tax
A. Income tax expense and income tax payable were reconciled as follows:
For the six-month periods ended June 30,
2009 2010
Income tax expense $ 6,576 $ 2,286,243
Net changes in deferred income tax assets
(liabilities) - 7,272,011
Loss carryforwards from acquisitions - ( 4,983,627)
Investment tax credits from acquisitions - ( 3,745,832)
Deferred income tax assets of subsidiaries
from acquisitions - ( 316,325)
Over (under) provision of prior year’s
income tax 1,014 ( 7,726)
Prepaid income tax and withholding tax ( 21,030) ( 112,327)
Net (income tax refund receivable) income
tax payable ($ 13,440) $ 392,417
Income tax payable $ - $ 411,881
Income tax refund receivable shown as
“other receivables” ( 13,440) ( 19,464)
($ 13,440) $ 392,417
B. The deferred income tax assets and liabilities were as follows:
June 30,
2009 2010
Deferred income tax liabilities ($ 372,367) ($ 675,773)
Deferred income tax assets 5,509,127 40,046,425
Valuation allowance ( 3,879,443) ( 29,885,602)
$ 1,257,317 $ 9,485,050
~ 41 ~
C. The temporary differences, unused investment tax credits and related amounts ofdeferred income tax assets and liabilities were as follows:
June 30,
2009 2010
Amount Tax effect Amount Tax effect
Current items:
Allowance for
obsolescence and
market value decline
$ 569,821 $ 113,964 $ 1,147,539 $ 195,796
Unrealized gross profit 183,496 45,874 169,160 28,757
Allowance for doubtful
accounts 55,372 11,074 5,372 913
Accrued loyalty and
estimated warranty 1,551,856 310,371 2,828,659 480,872
Allowance for sales
returns and discounts - - 130,300 22,151
Unrealized exchange
loss 56,259 14,065 1,334,771 226,911
Unrealized valuation
gain on financial
assets and liabilities ( 251) ( 63) ( 620,836) ( 105,542)
Loss carryforwards - - 16,854,770 2,865,311
Investment tax credits - - 8,328,031
Others - - 76,966 41,794
495,285 12,084,994
Less: Valuation
allowance -
current - - ( 10,552,239)
$ 495,285 $ 1,532,755
Non-current items:
Unrealized gain on
investments ($1,861,519) ($ 372,304) ($ 3,354,301) ($ 570,231)
Impairment loss of
goodwill 136,148 27,230 125,399 21,318
Impairment loss of
assets - - 1,138,922 352,678
Loss carryforwards 4,530,574 906,115 59,509,294 10,116,580
Investment tax credits - 4,078,434 - 17,285,917
Others - - 274,379 79,396
4,639,475 27,285,658
Less: Valuation
allowance -
non-current ( 3,877,443) ( 19,333,363)
$ 762,032 $ 7,952,295
~ 42 ~
D.As of June 30, 2010, the unused investment tax credits are as follows:
Period Details of tax credit Amount Year of expiry
2006 Tax credits for research and development $ 986,999 2010
2007 Tax credits for research and development 1,159,124 2011
2008 Tax credits for research and development 1,190,722 2012
2009 Tax credits for research and development 1,008,611 2013
2006 Acquisition of equipment or technology 7,390,658 2010
2007 Acquisition of equipment or technology 3,498,098 2011
2008 Acquisition of equipment or technology 4,936,922 2012
2009 Acquisition of equipment or technology 325,645 2013
2006 Tax credits for training 11,032 2010
2007 Tax credits for training 14,537 2011
2008 Tax credits for training 18,788 2012
2009 Tax credits for training 4,958 2013
2007 Tax credits for investment in barren area 1,802,489 2011
2008 Tax credits for investment in barren area 2,754,467 2012
2009 Tax credits for investment in barren area 510,898 2013
$25,613,948
E. As of June 30, 2010, the unused loss carryforwards are as follows:
F. The investment tax credits and loss reliefs listed in item 4 and 5 include the part whichare acquired but not utilized by both surviving and acquired company. In accordancewith Article 38 of Business Mergers and Acquisitions Act, Chimei Innolux Corporationshall deduct the loss reliefs, which are not subtracted before the merger, of all involvedcompanies for the last five years from the net income of each year within the 5 yearssince the loss fiscal year. The amount of deduction is calculated based on the ratio ofsurviving company equity shareholders of all involved companies after the merger. Theamounts of succeeding and potential loss reliefs and investment tax credits of ChimeiInnolux Corporation are $4,983,627 and $3,745,832, respectively.
G.As of June 30, 2010, the Company’s income tax returns through 2006 have beenassessed and approved by the Tax Authority.
H.The Company’s indirectly-owned Mainland China subsidiaries are foreign-investedmanufacturing enterprises established in the PRC. Under the PRC tax regulations, theircorporate income tax shall be levied at the rate of 18% to 25%, and they are exempt fromcorporate income tax for the first and second profit-making years and are subject to a
Year in which
loss was incurred
Unused loss
carryforwards Amount Year of expiry
2006 $ 6,158,386 $ 1,046,926 2011
2007 4,312,017 733,043 2012
2008 6,423,159 1,091,937 2013 ~ 2018
2009 52,016,222 8,842,757 2014 ~ 2019
2010 7,454,280 1,267,228 2015
$ 76,364,064 $ 12,981,891
~ 43 ~
50% reduction of corporate income tax from the third through fifth profit-making years.These subsidiaries can use investment tax credits on national production equipment forthe first profit-making year.
(17) Retirement plan
A. The Company has a non-contributory and funded defined benefit pension plan inaccordance with the Labor Standards Law, covering all regular employees. TheCompany contributes monthly an amount equal to 2% of the employees’ monthly salariesand wages to the retirement fund deposited with Bank of Taiwan, the trustee, under thename of the independent retirement fund committee. For the six-month period endedJune 30, 2010, net pension costs recognized by the Company under the defined benefitplan amounted to $12,450. In January 2009, the Company has obtained an approval letterfrom the Science-based Industrial Park Administration for the suspension ofcontributions to the retirement fund. Accordingly, the Company has not recognized anypension cost for the six-month period ended June 30, 2009. The balance of the retirementfund deposited with Bank of Taiwan was $98,139 and $1,134,680 as of June 30, 2009and 2010, respectively.
B. In accordance with the Labor Pension Act, the Company has established a definedcontribution employee retirement plan, which is applicable to domestic employees.Employees have the option to join the plan and the Company contributes monthly anamount of at least 6% of total monthly salaries and wages to the employees’ individualpersonal pension accounts at the “Bureau of Labor Insurance”. Pension benefits are paidbased on the accumulated balance of the employees’ personal pension account in lumpsum or in monthly payments. The pension expense under the defined contribution planamounted to $55,728 and $212,216 for the six-month periods ended June 30, 2009 and2010, respectively.
C. The Company’s directly-owned Mainland China subsidiaries have a funded definedcontribution plan. Monthly contributions to an independent fund administered by thegovernment in accordance with the pension regulations in the People’s Republic of China(PRC) are based on the employees' monthly salaries and wages. The Company’ssubsidiaries contribute monthly an amount equal to 11% or 10% of the employees’monthly salaries based on the employees’ domiciles to their independent funds. Exceptfor monthly contributions, the Company’s subsidiaries have no other obligation. The netpension costs recognized by the Company’s subsidiaries under the defined contributionplan for the six-month periods ended June 30, 2009 and 2010 amounted to $126,519 and$211,728, respectively.
D. The Company’s subsidiaries in other countries have a funded defined contribution plan inaccordance with relevant local laws and regulations. The net pension costs recognized bythe Company’s subsidiaries under the defined contribution plan for the six-month periodended June 30, 2010 amounted to $45,619.
(18) Common stock
A.As of June 30, 2010, the Company’s authorized and outstanding capital was$105,000,000 (including $2,000,000 reserved for stock options) and $73,091,298,respectively, with a par value of $10 (dollars) per share.
B. The stockholders at the special stockholders’ meeting on January 6, 2010 approved themerger of the Company with other companies by share conversion, with the Company asthe surviving company. The Company issued 4,046,382 thousand new shares accordingto the merger contract. Please refer to Note 4(10) for information on merger.
C. The new stocks, which are issued due to the merger, include the common stock issued byacquired company in May and December, 2006 through private replacement. The
~ 44 ~
issuance of 570,929 thousand stocks was determined based on the exchange ratio in themerger contract. The rights and obligations of the private common equity are the same asother issued common stocks except for the restriction regulated by securities act onnegotiation and listing application after at least three years since the date of negotiablesecurities payment and an additional public issuance. The aforementioned privatecommon equity has not been publicly issued as of June 30, 2010.
D.For the six-month periods ended June 30, 2009 and 2010, the Company issued commonstock for 14,842 and 10,567 thousand shares, respectively, through the exercise ofemployee stock options under the stock-based employee compensation plan. As of June30, 2009 and 2010, the amount of $100,707 and $26,600 (9,991 and 2,660 thousandshares) represents payments received in advance for shares to be issued, respectively, andwas shown as “Common stock subscribed”.
E. In June 2009, the stockholders at their annual stockholders’ meeting resolved to transferunappropriated earnings of $941,561 and employees’ stock bonus of $349,269 tocommon stock (shown as “stock dividends distributable”).
F. In accordance with the Board of Directors’ resolution in August 2007, the Companydecided to issue 300 million shares of common stock for cash, including 149,967.5thousand units of global depository receipts (GDRs), which represent 299,935 thousandshares of common stock with a unit of GDRs representing 2 shares of common stock. Perunit was issued premium 9.02 US dollar.
G.There are 720 thousand units of GDRs outstanding which represent 1,440 shares ofcommon stock as of June 30, 2010.
(19) Share-based payment-employee compensation plan
A. As of June 30, 2010, the Company’s share-based payment transactions are set forthbelow:
Type of arrangement Grant date
Quantity granted
(in thousand units)
Contract
period
Vesting
conditions
Employee stock options 2004.01.09 47,000 6 years Note A, C
Employee stock options 2004. 03.31 20,000 6 years Note A, C
Employee stock options 2004.05.07 15,000 6 years Note A, C
Employee stock options 2004.12.03 28,000 6 years Note A
Employee stock options 2005.09.21 12,000 6 years Note A
Employee stock options 2007.12.20 25,000 6 years Note B
Employee stock options 2010.05.13 20,000 5 years Note A
Note A:The employees may exercise the stock options in installment based on 30%,
30% and 40% of total options granted on completion of the specified year(s)of service (one year to four years) from the grant date.
Note B:The employees may exercise the stock options in installment based on 40%,
30% and 30% of total options granted on completion of the specified years ofservice (three to five years) from the grant date.
Note C:The employee stock options expired in the first semi-annual of 2010.
Note D:The fair value of employee stock options which were granted on May 13, 2010
was estimated using the Black-Scholes option pricing model. The informationis as follows:
~ 45 ~
Type of
arrangement Grant date
Price
(dollar)
Strike
price
(dollar)
Expected
volatility
(%)
Expected
Duration
(Month)
Expected
dividend
yield (%)
Risk-free
interest
rate (%)
Fair
value
per unit
Employee
stock
options
2010.05.13 39.85 39.85 51.57 48.6 0 0.80 15.12~
16.98
B. Employee stock options acquired because of merger
a. Details
Type of arrangement Grant date
Quantity granted
(in thousand units)
Contract
period
Vesting
conditions
Employee stock options 2006.04.01 17 5 years Note 2
Employee stock options 2007.12.27 120 5 years Note 2
Employee stock options 2009.09.30 24,819 5 years Note 2
Employee stock options 2006.07.19 11 (Note 1) 6 years Note 3
Employee stock options 2007.07.02 21 (Note 1) 6 years Note 3
Employee stock options 2007.12.27 2 (Note 1) 6 years Note 3
1. Each unit of stock options can subscribe for 1,000 shares of common stock
2. The employees may exercise the stock options in installment based on 50%, and50% of total options granted on completion of the specified years of service (two tothree years) from the grant date.
3. The employees may exercise the stock options in installment based on 25%, 25%,25% and 25% of total options granted on completion of the specified years ofservice (two to five years) from the grant date.
4. The unit of employee stock options above were adjusted by share conversion rate.
b.For the employee stock options assumed by the Company due to business combination,the cost after calculation attributable to acquisition cost (equal amount was recognizedas capital reserve - employee stock options under stockholders’ equity) andattributable to compensation cost over the remaining vesting period after businesscombination was $310,999 and $453,371, respectively.
c.The fair value of employee stock options is estimated using the Hull & White (2002)Enhanced FASB 123 of the aforementioned binomial model. The information is asfollows:
Type of
arrangement Grant date
Price
(dollar)
Strike
price
(dollar)
Expected
volatility
(%)
Expected
duration
(Month)
Expected
dividend
yield (%)
Risk-free
interest
rate (%)
Fair
value
per unitEmployee stock
options
2006.04.01 51.60 91.20 45.10 24.34 0.61 0.82 0.62
Employee stock
options
2007.12.27 51.60 64.00 45.10 36.30 0.61 0.82 2.66~
2.8
Employee stock
options
2009.09.30 51.60 39.20 45.10 36.78 0.61 0.82 3.57~
4.14
Employee stock
options
2006.07.19 51.60 55.21 45.10 12.04 0.61 0.82 4.64~
4.77
Employee stock
options
2007.07.02 51.60 67.53 45.10 24.78 0.61 0.82 4.23~
4.41
Employee stock
options
2007.12.27 51.60 80.63 45.10 48.54 0.61 0.82 3.65~
3.82
~ 46 ~
C. For the six-month periods ended June 30, 2009 and 2010, details of the employee stockoption plan are as follows:
For the six-month period ended June 30, 2009
Stock Options
Quantity
(in thousand
units)
Weighted
average
exercise
price
(in dollars)
Range of
exercise
price (in
dollars)
Weighted
average
remaining
vesting
period
Weighted
average stock
price of stock
options at
exercise date
Outstanding
options at the
beginning of the
period
71,192 $ 37.30
Options exercised ( 14,842) 10.06 $ 34.51
Outstanding
options at the end
of the period 56,350 43.19 $ 10.00 1.16 years
$ 84.40 4.50 years
Exercisable options
at the end of the
period 26,550 10.00
For the six-month period ended June 30, 2010
Stock Options
Quantity
(in thousand
units)
Weighted
average
exercise
price
(in dollars)
Range of
exercise
price (in
dollars)
Weighted
average
remaining
vesting
period
Weighted
average stock
price of stock
options at
exercise date
Outstanding
options at the
beginning of the
period 44,631 $ 51.09
Options increased
from merger 24,990 53.76
Options granted 20,000 39.84
Options exercised ( 10,567) 10.00 $ 45.43
Options expired ( 3,938) 10.00
Outstanding
options at the end
of the period 75,116 35.81 $ 10.00 0.98 year
$ 66.80 3.50 years
$ 39.85 4.88 years
$39.2~91.2 3.36 years
Exercisable options
at the end of the
period 5,214 46.00
D. The following sets forth the pro forma consolidated net income and earnings per sharebased on the assumption that the compensation cost is accounted for using the fair value
~ 47 ~
method for the stock options granted before the effectiveness of R.O.C. SFAS No. 39,“Accounting for Share-based Payment”:
For the six-month periods
ended June 30,
2009 2010
Consolidated net Net (loss) income as reported ($ 4,051,814) $ 12,926,895
(loss) income Pro forma net (loss) income ($ 4,216,839) $ 12,754,497
Basic (loss) earnings Basic (LPS) EPS as reported ($ 1.26) $ 2.30
per share (LPS/EPS) Pro forma basic (LPS) EPS ($ 1.31) $ 2.29
Diluted (loss) earnings Diluted (LPS) EPS as reported ($ 1.26) $ 2.29
per share (LPS/EPS) Pro forma diluted (LPS) EPS ($ 1.31) $ 2.26
(20) Capital reserve
A. Under R.O.C. Securities and Exchange Act, paid-in capital in excess of par value(including consolidation premium) and donated surplus of capital reserve may be usedto increase the registered capital, and the annual capitalized amount shall not exceed10% of issued and outstanding capital.
B. The capital reserve can only be used to offset losses and /or to increase capital.
C. Please refer to Note 4(19) for employee stock options information.
(21) Retained earnings
A. Pursuant to the ROC Company Law, 10% of the annual after-tax net income of eachcompany must be appropriated as legal reserve until the total amount of the legalreserve equals the share capital. Such reserve can only be used to offset a deficit andcannot be distributed as cash dividends. When the legal reserve has reached 50% of thecompany’s issued share capital, up to 50% thereof can be used to increase share capitalin accordance with resolutions at the stockholders’ meeting.
B. In accordance with the Company’s Articles of Incorporation, net income must bedistributed in the following order:
a. to cover prior years’ losses, if any;
b. as legal reserve equal to 10% of net income after tax and distribution pursuant toclause (a);
c. as any other legally required reserve;
d. to pay dividends on preferred shares;
e. to pay bonuses to employees not less than 8% of net income after tax anddistribution pursuant to clauses a. to d.; and
f. the remaining amount, if any, shall be distributed pursuant to the proposal of theboard of directors in accordance with the Company’s dividend policy and resolutionapproved at the stockholders’ meeting, of which 0.1% should be paid asremuneration to directors and supervisors and the remaining amount as dividends toshareholders.
Dividends may be distributed in the form of cash or shares, or a combination of both;provided, however, that dividends distributed in respect of any fiscal year in the formof shares shall not exceed two-thirds of total dividends to stockholders. All sharesissued, outstanding and fully paid as of the relevant dividend record date are entitled to
~ 48 ~
share equally in any dividend or other distribution approved by the stockholders.
C. The appropriation of 2008 earnings had been resolved at the stockholders’ meeting inJune 2009. Details are summarized below:
2008
AmountDividends per
share (in dollars)Legal reserve $ 485,095 $ -
Stock dividends 941,561 0.30
Cash dividends 627,707 0.20
$ 2,054,363
Information on the appropriation of the Company’s earnings referred above as resolvedby the Board of Directors and approved by the stockholders will be posted in the“Market Observation Post System” at the website of the Taiwan Stock Exchange.
D. The estimated amounts of employees’ bonus and directors’ and supervisors’remuneration for the year ended December 31, 2008 were $349,269 and $1,571,respectively, which were computed based on certain percentages of net income,prescribed by the Company's Articles of Incorporation, and were recognized asoperating costs or operating expenses for the year ended December 31, 2008.Information on the appropriation of the Company’s employees’ bonus and directors’and supervisors’ remuneration as resolved by the Board of Directors and approved bythe stockholders will be posted in the “Market Observation Post System” at the websiteof the Taiwan Stock Exchange Employees’ bonus and directors’ and supervisors’remuneration for 2008 as resolved by the stockholders at the stockholders’ meeting onJune 19, 2009 were not significantly different from those amounts recognized in the2008 financial statements. Employees’ bonus totaling $349,269 was distributedthrough issuance of 10,429,000 shares of stock at $33.49 (in dollars) per share and bycash of $17 (in dollars). The calculation of shares of employees’ stock bonusdistributed is based on the closing price of the Company's common stock on June 18,2009, the previous day of the 2009 stockholders’ meeting, after taking into account theeffects of ex-rights and ex-dividends. The estimated employees’ bonus is $742,686 forthe six-month period ended June 30, 2010 (shown as “Accrued expenses.”)
E. As of June 30, 2010, the undistributed earnings, on a tax basis, is as follows:
Before January 1, 1998: $ -
On and after January 1, 1998:
Subjected to 10% additional tax 7,328,595
Not yet subjected to 10% additional tax ( 12,926,895)
$ 20,255,490
F. Information related to the Imputation Tax System as of and for the six-month periodsended June 30, 2009 and 2010 is as follows:
June 30,2009 2010
Balance of the tax credit account $ 1,246,954 $ 1,030,424
The stockholders at the stockholders’ meeting decided not to pay dividends in 2010, sothere is no creditable tax rate for 2009. The estimated creditable tax rate is 5.09% for2010.
~ 49 ~
(22) Treasury stocks
A. Change in treasury stocks in the first semi-annual of 2010
For the six-month period ended June 30, 2010Number of shares (in thousands)
Reason for reacquisition Beginning Increase Decrease Ending AmountThe stocks of the
Company held bysubsidiaries transferredfrom long-terminvestments - 389 - 389 $12,995
B. Stocks held by subsidiaries of the Company are treated as treasury stock. The treasurystocks held by the subsidiaries which the Company’s ownership is more than 50%cannot be participated in cash capital increase and have no right to vote. The remainingheld by subsidiaries has equal right to common stockholders.
C. The Company's subsidiary, Contrel Technology Co., Ltd., holds 3,004 thousand of theCompany’s stocks, and the book value on Contrel Technology Co., Ltd. is $33.40 dollarper share. Base on the ownership percentage held by Contrel, the treasury stockamounted to $12,995.
(23) (Loss) earnings per common share
For the six-month period ended June 30, 2009
AmountNumber of
shares(in thousands)
Loss percommon share
Before tax After tax Before tax After taxBasic loss per share:
Consolidated net loss ($4,045,238) ($4,051,814) 3,226,207 ($ 1.25) ($ 1.26)
As employee stock options had anti-dilutive effect for the first half of 2009, these were notincluded in the calculation of earnings per share.
For the six-month period ended June 30, 2010
AmountNumber of
shares(in thousands)
Earnings percommon share
Before tax After tax Before tax After taxBasic earnings per share:
Consolidated net income $15,622,735 $13,336,492 5,609,870 $ 2.78 $ 2.37
Minority interests ( 416,617) ( 409,597) ( 0.07) ( 0.07)
Shareholders of the parent $15,206,118 $12,926,895 $ 2.71 $ 2.30
Diluted earnings per share:
Consolidated net income $15,622,735 $13,336,492 $ 2.76 $ 2.36
Minority interests ( 416,617) ( 409,597) ( 0.07) ( 0.07)
Dilutive effect of stockequivalents:Employee stock options - - 13,226 - -
Employee bonus - - 25,645 - -
Shareholders of the parent $15,206,118 $12,926,895 5,648,741 $ 2.69 $ 2.69
There is no significant effect of the treasury stocks shown in Note 4(22) had no significanteffect in the calculation of earnings per share.
~ 50 ~
(24) Personnel, depreciation and amortization expenses
For the six-month period ended June 30, 2009
Operating costs Operating expenses Total
Personnel expenses
Salaries $ 2,557,235 $ 678,675 $ 3,235,910
Labor and health insurance 79,230 33,295 112,525
Pension 142,815 39,432 182,247
$ 2,779,280 $ 751,402 $ 3,530,682
Depreciation $ 4,161,482 $ 369,154 $ 4,530,636
Amortization $ 637,987 $ 229,733 $ 867,720
For the six-month period ended June 30, 2010
Operating
costs
Operating
expenses
Non-operating
expenses (Note) Total
Personnel expenses
Salaries $ 8,384,839 $2,238,232 $ - $10,623,071
Labor and health insurance 493,731 150,059 - 643,790
Pension 367,296 114,717 - 482,013
$ 9,245,866 $2,503,008 $ - $11,748,874
Depreciation $26,853,379 $ 690,141 $ 87,942 $27,631,462
Amortization $ 1,291,669 $1,041,840 - $ 2,333,509
Note: Non-operating expenses pertain to depreciation of rental and idle assets.
5. RELATED PARTY TRANSACTIONS
(1) Names of related parties and their relationship with the Company
Names of related parties Relationship with the Company
Hon Hai Precision Industry Co., Ltd. and
subsidiaries (Hon Hai and subsidiaries)
Same major stockholder
Advanced Optoelectronic Technology Inc.
(Advanced)
An indirect investee company of Hon Hai
accounted for under the equity method
Pan-International Industrial Co. and subsidiaries
(Pan-International and subsidiaries)
An indirect investee company of Hon Hai
accounted for under the equity method
Leadtek Global Group Limited (LGG) Subsidiary (Note B)
Chi Mei El Corporation (CMEC) Subsidiary (Note B)
Ningbo Chi Mei Optoelectronics Ltd. (NBCMO) An indirect wholly-owned subsidiary (Note B)
Nanhai Chi Mei Electronics Corp. (NHCME) An indirect wholly-owned subsidiary (Note B)
TPO Displays Shanghai Ltd. (TPO Shanghai) An indirect wholly-owned subsidiary (Note B)
Chi Mei Corporation and subsidiaries
(CMC and subsidiaries)
A company which accounted the Company and
its subsidiaries under equity method
A. Except for those transactions with the above related parties, there were no materialtransactions between the other related parties for the six-month periods ended June 30,2009 and 2010.
~ 51 ~
B. The Group had new related parties due to the merger on March 18, 2010. The disclosureof transactions between the Company and the related parties is from March 18, 2010, butthe disclosure of balance sheet accounts is as of June 30, 2010.
(2) Significant transactions and balances with related parties
A. Sales
For the six-month periods ended June 30,
2009 2010
Amount
% of
net sales Amount
% of
net sales
CMC and subsidiaries $ - - $15,538,251 7
Hon Hai and subsidiaries 3,194,746 5 7,066,376 4
Others 56,460 - 339,804 -
$ 3,251,206 5 $22,944,431 11
Sales prices charged to related parties were similar to non-related party transactions. Thecollection period was 30~120 days to related parties, and 30~90 days to non-relatedparties.
B. Purchases
There is no similar transaction to compare with, and the transaction terms were decidedby negotiation or at market prices. The payment term was 30~120 days to related parties,and 30~180 days to non-related party after delivery.
C. Processing costs
For the six-month periods ended June 30,
2009 2010
Amount
Accrued
expenses Amount
Accrued
expenses
Hon Hai and subsidiaries $ 347,292 $1,099,235 $ 984,168 $2,106,501
The Group subcontracted the processing of products of Hon Hai and subsidiaries inMainland China. The processing fees were charged based on cost plus method.
D. Accounts receivable
June 30,
For the six-month periods ended June 30,
2009 2010
Amount
% of net
purchases Amount
% of net
purchases
CMC and subsidiaries $ - - $ 9,531,657 5
Hon Hai and subsidiaries 2,270,762 4 3,373,040 2
Advanced 92,953 - 748,915 -
Pan-International and
subsidiaries 184,143 - 298,694 -
Others 81,794 - 668,815 -
$ 2,629,652 4 $14,921,121 7
~ 52 ~
2009 2010
Amount
% of total
accounts
receivable Amount
% of total
accounts
receivable
CMC and subsidiaries $ - - $ 8,014,037 10
Hon Hai and subsidiaries 1,567,630 8 3,987,729 5
Others 19,399 - 244,536 1
$ 1,587,029 8 $12,246,302 16
E. Accounts payable
June 30,
2009 2010
Amount
% of total
accounts
payable Amount
% of total
accounts
payable
CMC and subsidiaries $ - - $ 7,299,268 7
Hon Hai and subsidiaries 1,338,667 6 4,560,572 4
Others 279,621 - 800,763 -
$ 1,618,288 6 $12,660,603 11
F. Property transactions
For the six-month period ended June 30, 2009
Acquisition of
property, plant and
equipment
Payable shown as
“equipment payable”
Hon Hai and subsidiaries $ 149,598 $ 18,523
G. Endorsements and guarantees
The total balance of the Group’s endorsements and guarantees for the secured loan as ofcertain subsidiaries is shown below: Please refer to Notes 11(1) B and 11(2) C forexplanation.
June 30, 2010
Leadtek Global Group Limited $ 27,970,500
Ningbo Chi Mei Electronics Ltd. 11,574,000
Nanhai Chi Mei Optoelectronics Ltd. 8,037,500
Chi Mei El Corporation 1,500,000
TPO Displays Shanghai Ltd. 1,287,081
$ 50,369,081
6. PLEDGED ASSETS
As of June 30, 2009 and 2010, the assets pledged were as follows:
~ 53 ~
Assets Purpose of collateral Book value, June 30,
2009 2010
Other financial assets - current
Pledged time deposits Tariff guarantee $ - $ 5,128
Property, plant, and equipment Pledged for long-term loan andperformance guarantee oflease payable 16,136,435 285,105,530
Deferred assets Pledged for long-term loan - 744,596
Construction in progress andprepayments forequipment
Performance guarantee offreight forwarding contractand research & developmentplan - 2,237
$16,136,435 $285,857,491
7. COMMITMENTS AND CONTINGENT LIABILITIES
Except for the guarantees to certain subsidiaries, the Group had other commitments andcontingent liabilities as follows:
(1) As of June 30, 2010, the future minimum lease payments required to be made by theCompany for land and offices were as follows:
2010.07.01 ~ 2011.06.30 $ 630,260
2011.07.01 ~ 2015.06.30 1,674,645
After 2015.07.01 3,043,230
$ 5,348,135
(2) As of June 30, 2010, the future minimum lease payments required to be made by the Groupfor office and warehouse leases were as follows:
2010.07.01 ~ 2011.06.30 $ 48,260
2011.07.01 ~ 2015.06.30 77,024
After 2015.07.01 17,103
$ 142,387
(3) As of June 30, 2010, the total amount of contracts for machinery and equipment and buildingconstruction was $78,870,928, of which $16,878,781 remains unpaid.
(4) As of June 30, 2010, the total outstanding letters of credit for the purchase of fixed assetswas $7,463,839.
(5) On November 7, 2005, 50 companies including the Company and Apple Computer Inc. werenamed as defendants in a lawsuit brought by Honeywell Int’l Inc. and Honeywell IntellectualProperties Inc., alleging that those 50 companies had infringed upon U.S. Patent No.5280371, held by Honeywell Int’l Inc. and Honeywell Intellectual Properties Inc. Thelawsuit had been rescinded in October, 2009.
(6) On February 2, 2007, the Company was named as defendant in a lawsuit brought by AnvikCompany, alleging that the Company had infringed upon Anvik’s patent of TFT-LCD panelsproduced by the machines purchased from Nikon Company. Based on the opinion of theCompany’s legal counsel, the lawsuit will not have a material adverse effect on theCompany’s financial position or operations in the short-term as this case has not yet enteredinto substantive hearing.
~ 54 ~
(7) Mondis filed a lawsuit with the court against the Company on December 31, 2007, andJanuary 15, 2009, alleging infringement, among others, of its patent on liquid crystal displayand claimed damages for its losses. The Company has appointed attorneys in this areatending to this case. Based on the opinion of the Company’s legal counsel, the ultimateoutcome of this litigation and the damages that the Company may incur cannot reasonably bedetermined as the litigation is still under the trial and investigations of the court andcompetent authorities in the U.S.A. However, the Company does not expect that the lawsuitwill have a material adverse effect on the Company’s financial position or results ofoperations in the short term.
(8) Plasma Physic and Solar Physics filed a lawsuit against the Company and its subsidiary onApril 18, 2008, alleging infringement, among others, of their patents on liquid crystaldisplays used in the Company and its subsidiary’s products. The two sides had come to asettlement and the lawsuit had been rescinded in 2009. According to the attorneys’ opinions,the ultimate outcome of this litigation and the damages that the Company may incur cannotreasonably be determined as the litigation is still under the trial and investigations of thecourt and competent authorities in the U.S.A. However, the Company does not expect thatthe lawsuit will have a material adverse effect on the Company’s financial position or resultsof operations in the short term.
(9) The Company, Chi Mei Optoelectronics Japan Co., Ltd., Chi Mei Optoelectronics UK Ltd.,Chi Mei Optoelectronics Europe B.V. and Chi Mei Optoelectronics USA Inc. have acceptedthe investigations of anti-fair competition from the authorities in United States, Europe,Japan and Canada since December 2006 and from the Taiwan Trade Fair Commission sinceApril 7, 2009, and have also faced class action lawsuits relating to anti-fair competitionmatters in United States and Canada. Regarding the above lawsuits, the Company hadreached an agreement with the United States Department of Justice in December, 2009,agreeing to pay penalties of US$220,000 thousand in installment over five years. The finaljudgment will be rendered by the United States Department of Justice. As of June 30, 2010,the unpaid penalties amounted to $5,883,450 (shown under “Other payables- others” and“Other liabilities- others”). Furthermore, the Company had received a letter from theTaiwan Trade Fair Commission in November 2009, notifying the Company that they hadstopped the investigation into the Company. As of June 30, 2010, it was not possible for theCompany to predict the effects of these litigations in the territories above other than theUnited States.
(10) In December 2006, L.G. Display Co., Ltd. (formerly L.G. Philips LCD Co., Ltd., “LGD”)filed a patent infringement lawsuit against CMO and other companies in the same industrywith the United States District Court in the District of Delaware, alleging that CMO andthe other companies infringed LGD’s patent relating to several products. On May 4, 2007,CMO has filed a patent infringement lawsuit against L.G. Philips LCD Co., Ltd. and itssubsidiary L.G. Philips LCD America, Inc. (LPLA), in the United States District Court inthe Eastern District of Texas. CMO alleged that each defendant infringed its patent. As ofJune 30, 2010, the Company was not able to determine the impact regarding the foregoinglitigation.
(11) On September 8, 2008, Apeldyn Corporation sued companies which infringed its patent inthe United States District Court for the Eastern District of New York. Currently, the casehas been filed and under ongoing litigation. As of June 30, 2010, the Company was notable to determine the impact regarding the foregoing litigation.
(12) Aratech Japan Corporation filed a lawsuit with the Eastern District Court of Texas againstthe Company on July 31, 2008, alleging infringement, among others, of its patent. TheCompany has appointed attorneys in this area tending to this case. Due to initialdiscovery proceedings, there is no damage that the Company may incur promptly for thislitigation and the Company’s production and shipments are not affected by this litigation.
~ 55 ~
(13) Air Liquide Japan filed a civil lawsuit with the Tokyo District Court against the Company’saffiliate - TPO Displays Japan K.K. in July, 2009, claiming damages of around JPY$98,000 thousand for its losses. The two sides had come to a settlement and the lawsuithad been rescinded on June 15, 2010.
(14) Mondis filed a lawsuit with the Duesseldorf District Court (“Court”) in Germany againstthe Company on May 8, 2009, alleging infringement, among others, of its patent on liquidcrystal display and claiming damages for its losses. The Company has appointed externalattorneys in this area tending to this case. Based on the opinion of the Company’s legalcounsel, the ultimate outcome of this litigation and the damages that the Company mayincur cannot reasonably be determined as the litigation is still being tried and investigatedin the Court. However, the Company does not expect that the lawsuit will have a materialadverse effect on the Company’s financial position or results of operations in the shortterm.
(15) Doosan Mecatec Co., Ltd. filed a civil lawsuit against Chi Mei El Corporation and theCompany in February, 2010, alleging their default on debts and infringement, amongothers, of its patent and claiming damages for its losses. As of June 30, 2010, it was notpossible for the Company to predict the effect of this litigation.
(16) Sony Corp. filed a lawsuit with the United States International Trade Commission (USITC)against the Company on March 18, 2010, alleging infringement, among others, of its patent.USITC has put this case on file for investigation in April, 2010; however, the executiveofficer of the court has not decided the length of the suit nor the court date.
(17) Under a memorandum of understanding made with a certain company in September 2009,the Company will purchase raw materials from that company in the amount above theminimum agreed amount each month from September 2009 to October 2010. TheCompany agreed to make partial advance payments and set off the credit loan according tothe agreed proportion on the time of delivery.
(18) In March 2006, under an agreement on a mutual cross-license covering LCD patents withSharp Corporation of Japan, the Company should pay all royalty by installment in theperiod of the contract.
(19) In December 2007, the Company entered into a share subscription agreement to form astrategic alliance with TPV Technology Limited. The Company also agreed to reserve itscertain capacity for TPV Technology Limited for the first three years starting from January2008.
8. SIGNIFICANT CATASTROPHE
None.
9. SUBSEQUENT EVENTS
None.
10.OTHERS
(1) Financial statement presentation
Certain accounts in the June 30, 2009 consolidated financial statements were reclassified toconform to the June 30, 2010 consolidated financial statement presentation.
(2) Fair value of financial instruments
June 30, 2009
~ 56 ~
Fair value
Book value
Quotations
in an active
market
Estimated
using a
valuation
technique Description
Non-derivative financial instruments
Assets
Financial assets with fair value
equal to book value
$73,215,882 $ - $73,215,882 A
Financial assets at fair value
through profit or loss
236,312 - 236,312 B
Financial assets carried at cost 314,439 - - C
Investment in bonds without active
markets
45,165 - - C
Refundable deposits 254,340 - 252,760 D
Liabilities
Financial liabilities with fair value
equal to book value
58,944,018 - 58,944,018 B
Long-term loans 20,000,000 - 20,000,000 E
Guarantee deposits received 1,537 - 1,674 D
Derivative financial instruments
Assets
Forward exchange contracts 251 - 251 F
June 30, 2010
Fair value
Book value
Quotations
in an active
market
Estimated
using a
valuation
technique Description
Non-derivative financial instruments
Assets
Financial assets with fair value
equal to book value
$144,511,569 $ - $144,511,569 A
Available-for-sale financial assets 7,812,254 3,994,308 3,817,946 E
Financial assets carried at cost
- non-current
4,632,266 - - G
Investment in bonds without active
markets
47,042 - - G
Other financial assets - non-current 2,237 - 2,219 B
Refundable deposits 197,484 - 195,858 B
Liabilities
Financial liabilities with fair value $244,753,440 - $244,753,440 A
~ 57 ~
June 30, 2010
Fair value
Book value
Quotations
in an active
market
Estimated
using a
valuation
technique Description
equal to book value
Bonds payable 4,000,000 - 4,069,967 H
Long-term loans 163,141,227 - 163,141,227 C
Preferred stock liabilities 15,000,000 - 15,000,000 J
Lease payable 5,930,000 - 5,930,000 I
Guarantee deposits received 53,163 - 52,725 B
Derivative financial instruments
Assets
Forward exchange contracts 1,058,810 - 1,058,810 D
Derivative instruments with
bond investments embedded5,520 - - G
Liabilities:
Forward exchange contracts 487,250 - 487,250 D
Interest rate swap contract 487,253 - 487,253 D
Cross currency swap contract 372,627 - 372,627 D
Off-balance-sheet financial instruments
Endorsements and guarantees 50,369,081 - 50,369,081 J
The methods and assumptions used to estimate the fair values of the above financialinstruments are summarized below:
A. For short-term instruments, the fair values were determined based on their carryingvalues, not based on quotations in an active market nor estimated using a valuationbecause of the short maturities of the instruments. This method was applied to Cash andcash equivalents, Accounts receivable (including related parties), Other receivables,Other financial assets-current, Short-term loans, Accounts payable (including relatedparties), Income tax payable, Accrued expenses, Dividend payable, Equipment payable,Other payables - other, Long-term loans - current portion and Other current liabilities.
B. The fair value of other financial assets-non-current, Refundable deposits and Guaranteedeposits received was based on the present value of expected cash flow amount. Thediscount rate was the one-year deposit rate of the Directorate General of PostalRemittances and Savings Bank.
C. The fair values of Long-term loans are their carrying values because they bear floatinginterest rates.
D. The fair values of derivative financial instruments which include unrealized gains orlosses on unsettled contracts were determined based on the amounts to be received orpaid assuming that the contracts were settled as of the reporting date.
E. Available-for-sale financial assets are regarded as quoted in an active market if quotedprices are readily and regularly available from an exchange, dealer, broker industry
~ 58 ~
group, pricing service or regulatory agency, and those prices represent actual andregularly occurring market transactions on an arm’s-length basis. If the market for afinancial instrument is not active, an entity establishes fair value by using a valuationtechnique.
F. Financial assets at fair value through profit or loss are regarded as quoted in activemarket if quoted prices are readily and regularly available from an exchange, dealer,broker industry group, pricing service or regulatory agency, and those prices representactual and regularly occurring market transaction on an arms-length basis. If the marketfor a financial instrument is not active, an entity establishes fair value by using avaluation technique.
G. These financial assets are not quoted in an active market, and its fair value cannot bemeasured reliably.
H. Fair value of bonds payable was based on the present value of expected cash flows,which approximates their carrying amount.
I. Leased obligation payable is based on the present value of expected cash flow amount.The discount rate is the effective interest rate of loans. The fair values of Leasedobligation payable are their carrying values because they bear floating interest rates.
J. Liability on preferred stocks - the fair value of the non-current portion is based on thepresent value of future cash flow amount to be paid, with the appropriate yield rate tomaturity as the discount rate. The future cash flow amount is confirmed due to thedividends amount and the dividends day for preferred stocks are fixed for every year.Accordingly, the criterion the Company uses when determining yield rate to maturity onpreferred stocks is the Company’s credit rating.
K. The fair value of endorsements and guarantees depends on the amount of contract.
(3) Information of interest rate risk items
As of June 30, 2009 and 2010, the financial assets with fair value risk due to the change ofinterest amounted to $46,522,603 and $39,978,563, respectively; the financial liabilitieswith fair value risk due to change in interest amounted to $18,382,949 and $43,239,868,respectively; the financial assets with cash flow risk due to the change of interest amountedto $0 and $3,883,903, respectively; and the financial liabilities with cash flow risk due tothe change of interest amounted to $23,972,400 and $247,088,620, respectively.
(4) Procedure of financial risk control
A. The Group adopted a comprehensive risk management and control system to identify allrisks, including market risk, credit risk, liquidity risk, and cash flow risk, so thatmanagement can precisely measure these risks and control them effectively.
B. The objective of the Group’s risk management is to adjust risk exposures to maintainproper liquidity and effectively control significant market risks after appropriatelytaking into consideration the economic environment, competition, operating needs andthe changes of market value risk.
C. The Company’s operations and business activities expose it primarily to the financialrisks of changes in fair value and interest rate. The Company enters into cash flow andfair value hedge transactions to manage the financial risks associated with the changes infair value and interest rates. Cash flow hedge is used to minimize the Company’sexposure to the risk of interest rate changes, and fair value hedge is used to reduce theCompany’s exposure to the risk of market price changes. Fair value hedge is used tohedge the risks of fluctuations in exchange rate on foreign-currency denominated assetsor liabilities. The Company uses foreign exchange forward contracts to hedge theseexposures. The Company enters into transactions at fixed rates to reduce the exposures
~ 59 ~
on transactions vulnerable to both foreign currency and interest rate changes. TheCompany uses interest rate swap contracts and cross currency swap contracts to hedgethese exposures.
(5) Information of material financial risk
A. Market risk
The Group’s major import and export transactions are conducted in USD and JPY. Thechange of fair value will be caused by foreign exchange rate; however, the Groupexamines its net foreign currency position through regularly evaluating the positions offoreign currency assets and foreign currency liabilities, and uses the net foreign currencyposition as the risk management basis when entering into foreign currency loans, forwardexchange contracts and foreign exchange options. Thus, most of the market risk could beoffset or hedged. No material market risk is expected.
The Group is exposed to price risk because of investments in foreign exchange options,with fair value in the active market. The Group sets limits to control the transactionvolume and stop-loss amount of derivatives to reduce its market risk.
B. Credit risk
The counterparties of the Group’s receivables are international computer and electronicscompanies with good credit standing. No significant bad debts occurred in the past threeyears. The Group regularly evaluates the adequacy of its allowance for doubtful accounts.It is assessed that no significant credit risk will arise.
As the counterparties of forward exchange contracts and foreign exchange optionsundertaken by the Group are reputable financial institutions, the possibility of default bythe counterparties is considered low.
Loan guarantees provided by the Group are in compliance with the Group’s “Proceduresfor Provision of Endorsements and Guarantees” and are only provided to affiliatedcompanies of which the Group owns directly or indirectly more than 50% ownership or acompany which trades with the Company. As the Company is fully aware of the creditconditions of these related parties, it has not asked for collateral for the loan guaranteesprovided. In the event that these related parties fail to comply with loan agreements withbanks, the maximum loss to the Group is the total amount of loan guarantees as listedabove. No significant credit risk is expected.
C. Liquidity risk
The major counterparties of the Group’s receivables are high-credit-quality internationalcompanies. Its receivables are due within one year and the collection condition ofreceivables is normal. No significant liquidity risk is expected.
The Group entered into forward exchange contracts, foreign currency option contracts,and cross-currency interest swap contracts for hedging exchange rate fluctuation offoreign-currency assets or liabilities. The expected cash inflow (outflow) upon settlementof derivative transactions will be offset against the inflow (outflow) of hedged assets andliabilities. The Group has sufficient operating capital to meet the above cash demand. Theinterest rate of the interest rate swap contracts and swap contracts have taken the Group’scost of capital into account. In addition, the exchange rate of forward exchange contracts,forward exchange option contracts, and cross-currency swap contracts have been fixed.Therefore, there is no material fund raising risk and cash flow risk.
As of June 30, 2010, the Group’s projected cash flows for the outstanding derivativefinancial instruments were as follows:
~ 60 ~
(in thousands)
Financial instrument Period Cash outflow Cash inflow
Foreign exchange
forward contract 2010/7 EUR 10,000 JPY 1,131,050
2010/7 ~ 2010/9 USD 710,000 JPY 65,753,305
2010/8 ~ 2010/9 HKD 32,000 USD 4,112
Cross currency
swap contracts (Note) 2010/11 ~ 2013/11 TWD 7,263,194 USD 216,406
Interest rate
swap contracts (Note) 2010/8 ~ 2015/2 TWD 1,501,622 TWD 467,905
Note: The cross-currency swap contracts and interest rate swap contracts are calculatedbased on the most recent floating interest rate.
D. Cash flow risk
The Group borrows loans with floating interest rate. The effective rate of loans would bechanged due to change in market interest rate. The Group has also transferred some offloating interest rate loans to fixed interest rate loans to reduce the risk of interest raterising. The Group’s working capital is sufficient to hedge the cash flow risk arising fromfluctuations in interest rates.
The IRS contract is settled based on the fixed amount of interest to be paid or received,which is based on the nominal principal times the difference of interest rates. The Grouphas no sufficient cash flow risk.
(6) Fair value hedge and cash flow hedge
A. Fair value hedge
The Group evaluated the risk of fair value changes on interest payments associated withborrowings denominated in foreign currency and entered into cross currency swapcontracts to hedge the exposure.
Fair value,
Hedge Item Hedging Financial Instrument June 30, 2010
Foreign currency long-term loans Cross currency swap contracts ($ 351,187)
B. Cash flow hedge
The Group evaluates the risk of future cash flow changes on principal paymentsassociated with the Group’s floating interest rate bearing borrowings (bothcurrent-portion and long term) due to interest rate changes to be significant, andaccordingly, entered into interest rate swap and cross-currency swap contracts to hedgesuch exposures.
Hedge Item Hedging Fair value, Future cash Expected Timing for the
~ 61 ~
FinancialInstrument
June 30, 2010 demand Recognition of Gains OrLosses from Hedge
Long-termloans
Interest rateswap contracts
($ 487,253) 2008~2015 2008 ~ 2015
Cross-currencyswap contracts
( 21,440) 2005~2013 2005 ~ 2013
($ 508,693)
Item June 30, 2010
Adjustment to shareholders’ equity ($ 508,693)
~62~
11. ADDITIONAL DISCLOSURES REQUIRED BY THE SECURITIES AND FUTURES BUREAU
(1) Related information of significant transactionsAll the transactions with subsidiaries disclosed below had been eliminated when preparing reviewed consolidated financial statements. The disclosure information as follows is for reference only.
A. Loans granted during the six-month period ended June 30, 2010
Financing
company’s name Counterparty
Financial
statement
account
Maximum
balance for
the period
Ending
balance Interest rate
Type of
financing
(Note A)
Transaction
amount
Reason for
short-term
financing
Allowance
for
bad debts
Collateral
Financing
limit
for each
borrowing
company
Financing
company’s
financing
amount limitName Value
Chimei Innolux
Corporation
Chi Mei
El Corporation
Other receivables
– related parties$ 998,500 $ 998,500 2.152% ~ 2.156% 2 $ - Note B $ - - - Note C Note D
Chimei Innolux
Corporation
Chi Mei
Energy Corp.
Other receivables
– related parties762.000 762.000 2.152% ~ 2.231% 2 - Note B - - - Note C Note D
Note A: The type No. 1 represents business relationship.
The type No. 2 represents necessary for short-term financing.
Note B: Provision of financial support for operations.
Note C: Not to exceed 10% of the Company’s net equity.
Note D: Not to exceed 40% of the Company’s net equity. If it’s for short-term loans, not to exceed 30% of the Company’s net equity.
B. Endorsements and guarantees provided during the six-month period ended June 30, 2010
Endorsement/
guarantee
provider
Guaranteed party
Limits on
endorsement/
guarantee amount
provided to each
counterparty
Maximum
balance for
the period Ending balance
Amount of
endorsement/guarantee
collateralized by properties
Ratio of accumulated
endorsement/guarantee
to net equity per latest
financial statements
Maximum
endorsement/guarantee
amounts allowableName
Nature of
relationship
(Note A)
Chimei Innolux
Corporation
Leadtek
Global Group Limited
1 Note B $ 27,970,500 $ 27,970,500 $ - 10 Note C
Chimei Innolux
Corporation
Ningbo Chi Mei
Electronics Ltd.
2 Note B 11,574,000 11,574,000 - 4 Note C
Chimei Innolux
Corporation
Nanhai Chi Mei
Optoelectronics Ltd.
2 Note B 8,037,500 8,037,500 - 3 Note C
Chimei Innolux
Corporation
Chi Mei El Corporation 1 Note B 1,500,000 1,500,000 - 1 Note C
Chimei Innolux
Corporation
Taiwan TFT LCD Association 3 Note B 36,400 - - - Note C
Note A: The type No. 1 represents the Company’s subsidiary.
The type No. 2 represents the Company’s indirect wholly-owned subsidiary.
The type No. 3 represents mutual guarantors as required by construction contracts.
Note B: Limits on endorsement/guarantee amount provide to each counter party did not exceed 0.5% of the Company’s net equity for each entity. Maximum endorsement/guarantee amounts
allowable should not exceed 1% of the Company’s net equity.
Note C: Maximum endorsement/guarantee amount provided to each counter party did not exceed 50% of the Company’s net equity. If endorsements and guarantees were provided for investees
which the Company directly (or indirectly) owns more than 50% of equity interest, the endorsement/guarantee should not exceed 100% of the Company’s net equity.
~63~
C. Marketable securities held as at June 30, 2010:
Kind and name of marketable securities Relationship with the Company General ledger accounts
June 30, 2010
Number of shares
(in thousands) Book value Percentage
Market value/
Net worth
Common stock of Innolux Holding Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method199,944 $12,663,312 100 $12,733,898
Common stock of InnoJoy Investment Corporation A subsidiary of the Company Long-term investments accounted for under
the equity method150,000 2,174,540 100 2,174,540
Common stock of InnoFun Investment Corporation A subsidiary of the Company Long-term investments accounted for under
the equity method150,000 1,509,064 100 1,509,064
Common stock of TPO Hong Kong Holding Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method1,158,844 2,286,949 100 890,966
Common stock of Toppoly Optoeletronics (B.V. I.) Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method122,430 3,229,318 100 3,229,318
Common stock of Bright Information Holding Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method2,782 70,675 57 70,675
Common stock of Golden Acheiver International Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method39 ( 271,708) 100 ( 230,376)
Common stock of Landmark International Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method480,000 28,461,299 100 28,461,299
Common stock of Leadtek Global Group Limited A subsidiary of the Company Long-term investments accounted for under
the equity method160,005 2,212,129 100 2,212,129
Common stock of Yuan Chi Investment Co., Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method- 1,926,809 100 1,904,218
Common stock of Chi Mei Optoelectronics Japan
Co., Ltd.
A subsidiary of the Company Long-term investments accounted for under
the equity method- 1,529,719 100 1,529,719
Common stock of Gold Union Investments Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method42,000 661,970 100 661,970
Common stock of Keyway Investment
Management Limited
A subsidiary of the Company Long-term investments accounted for under
the equity method6,501 234,747 100 234,747
Common stock of Chi Mei Optoelectronics Europe B.V. A subsidiary of the Company Long-term investments accounted for under
the equity method- 115,470 100 115,470
Common stock of Chi Mei Optoelectronics (Singapore)
PTE Ltd.
A subsidiary of the Company Long-term investments accounted for under
the equity method10 5,419 100 5,419
Common stock of Honor Light Services Limited A subsidiary of the Company Long-term investments accounted for under
the equity method685 1,138 100 1,138
Common stock of Chi Mei Energy Corp. A subsidiary of the Company Long-term investments accounted for under
the equity method115,933 - 93 364,189
Common stock of Chi Mei El Corporation A subsidiary of the Company Long-term investments accounted for under
the equity method40,500 ( 840,433) 90 ( 833,251)
Common stock of Chi Mei Lighting Technology
Corporation
A subsidiary of the Company Long-term investments accounted for under
the equity method71,087 956,255 36 956,337
~64~
Kind and name of marketable securities Relationship with the Company General ledger accounts
June 30, 2010
Number of shares
(in thousands) Book value Percentage
Market value/
Net worth
Common stock of Jetronics International Corp. A subsidiary of the Company Long-term investments accounted for under
the equity method2,690 $ 161,485 32 $ 189,822
Common stock of Contrel Technology Co., Ltd. A subsidiary of the Company Long-term investments accounted for under
the equity method17,009 195,553 13 441,392
Common stock of Global Display Taiwan Co., Ltd. An investee under equity method Long-term investments accounted for under
the equity method3,200 45,377 23 50,114
Common stock of Ampower Holding Ltd. An investee under equity method Long-term investments accounted for under
the equity method14,063 1,745,241 45 2,610,118
Common stock of Chi Mei Materials Technology
Corporation
An investee under equity method Long-term investments accounted for under
the equity method72,567 1,090,977 17 952,109
Common stock of GIO Optoelectronics Corp. An investee under equity method Long-term investments accounted for under
the equity method38,324 375,280 26 375,280
Common stock of Exploit Technology Co., Ltd. An investee under equity method Long-term investments accounted for under
the equity method9,211 - 15 72,936
Common stock of Optivision Technology Incorporated An investee under equity method Long-term investments accounted for under
the equity method2,329 59,265 6 39,306
Common stock of Powerking Optoelectronics Co., Ltd. An investee under equity method Long-term investments accounted for under
the equity method3,120 19,865 15 26,818
Common stock of i3ZD Inc. An investee under equity method Long-term investments accounted for under
the equity method450 - 40 -
Common stock of Himax Technologies Inc.
(Himax Cayman)
None Available-for-sale financial assets - current 577 54,003 - 54,003
Common stock of Formosa Epitaxy Incorporation None Available-for-sale financial assets -
non-current321 13,142 - 13,142
None Available-for-sale financial assets -
non-current- 1,642,197 N/A -
None Available-for-sale financial assets -
non-current- 2,241,706 N/A -
None Available-for-sale financial assets -
non-current- 220,000 N/A Note
Common stock of AvanStrate Inc. None Financial assets carried at cost - non-current 900 286,740 0.91 Note
Common stock of TPV Technology Ltd. None Financial assets carried at cost - non-current 150,500 2,958,216 7 Note
Common stock of Chi Lin Technology Co., Ltd. None Financial assets carried at cost - non-current 15,797 277,093 4 Note
None Financial assets carried at cost - non-current 20,000 198,490 9 Note
Common stock of Himax Media Solutions Company None Financial assets carried at cost - non-current 6,000 11,657 7 Note
Common stock of Himax Analogic Company None Financial assets carried at cost - non-current 1,500 2,817 4 Note
Common stock of Allied Integrated Patterning Corp. None Financial assets carried at cost - non-current 2,430 6,807 3 Note
Common stock of Honest Precision Industries Co., Ltd. None Financial assets carried at cost - non-current 2,085 6,219 7 Note
Note: The investment was measured at cost since its fair value cannot be measured reliably.
~65~
D. Acquisition or sale of the same security with the accumulated cost exceeding $100 million or 20% of the Company’s paid-in capital during the six-month period ended June 30, 2010:
In addition to the information of Toppoly Optoelectronics (B. V. I.) disclosed below, please refer to Note 4(10) for the asset acquired because of merger.
Beginning balance Acquisition from merger Acquisition Disposal Ending balance
Marketable
securities
type and name
Financial
statement
account Counterparty
Nature of
relationship
Shares/units
(thousands) Amount
Shares/units
(thousands) Amount
Shares/units
(thousands) Amount
Shares/units
(thousands) Amount
Carrying
value
Gain (loss)
on disposal
Shares/units
(thousands) Amount
Innolux
Holding Ltd.
Long-term
investments
accounted
for under
the equity
method
Note Note 191,944 $ 6,198,247 - $ - 8,000 $ 252,240 - $ - $ - $ - 199,944 $ 6,450,487
Toppoly
Optoelectronics
(B. V. I.) Ltd.
Long-term
investments
accounted
for under
the equity
method
Note Note - - 93,430 1,995,883 29,000 936,410 - - - - 122,430 2,932,293
AvanStrate Inc. Finacial
assets
carried at
cost
AvanStrate
Inc.
None - - - - 900 286,740 - - - - 900 286,740
$ 6,198,247 $ 1,995,883 $ 1,475,390 $ - $ - $ - $ 9,669,520
Note: The wholly-owned subsidiary capital increase in cash.
E. Acquisition of real estate properties exceeding $100 million or 20% of the Company’s paid-in capital during the six-month period ended June 30, 2010: Please refer to Note 4(10) for the explanation to
the assets acquired because of merger.
F. Disposal of real estate properties exceeding $100 million or 20% of the Company’s paid-in capital during the six-month period ended June 30, 2010: None.
G. Purchases from or sales to related parties exceeding $100 million or 20% of the Company’s paid-in capital during the six-month period ended June 30, 2010:
Company Counterparty
Relationship
with the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases/
Sales Amount
Percentage of
purchases/sales
Credit
terms Unit price Credit terms Balance
Percentage
of balance
Chimei Innolux
Corporation
Innolux Corporation
Ltd.
An indirect wholly-owned
subsidiary
Sales $ 14,439,862 7 90 days Similar with
general
transactions
No material
difference$ 3,535,636 5
Chimei Innolux
Corporation
Innocom Technology
(Shenzhen) Ltd.
An indirect wholly-owned
subsidiary
Sales 7,332,944 4 90 days Similar with
general
transactions
No material
difference2,004,634 3
Chimei Innolux
Corporation
TPO Display HK Ltd. An indirect wholly-owned
subsidiary
Sales 3,199,584 2 50-60 days Similar with
general
transactions
No material
difference3,444,306 5
~66~
Company Counterparty
Relationship
with the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases/
Sales Amount
Percentage of
purchases/sales
Credit
terms Unit price Credit terms Balance
Percentage
of balance
Chimei Innolux
Corporation
Chi Lin Technology Co.,
Ltd.
A subsidiary of Chi Mei
Corporation
Sales $ 14,181,832 7 30-60 days Similar with
general
transactions
No material
difference$ 7,525,180 10
Chimei Innolux
Corporation
Hon Hai Precision
Industry Co., Ltd.
Same major stockholder Sales 3,096,639 1 30-60 days Similar with
general
transactions
No material
difference1,542,726 2
Chimei Innolux
Corporation
Chi Mei Optoelectronics
Japan Co., Ltd.
A subsidiary of the Company Sales 1,722,588 1 45-120 days No transactions
comparable
with sales
from related
parties
No material
difference1,134,168 1
Chimei Innolux
Corporation
Nexgen Mediatech Inc. A subsidiary of Chi Mei
Corporation
Sales 948,000 - 60-90 days Similar with
general
transactions
No material
difference453,459 1
Chimei Innolux
Corporation
Nanhai Chi Mei
Optoelectronics Ltd.
An indirect wholly-owned
subsidiary
Sales 817,210 - 60 days Similar with
general
transactions
No material
difference99,537 -
Chimei Innolux
Corporation
Foxconn Japan Co., Ltd. An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
Sales 672,114 - 90 days Similar with
general
transactions
No material
difference170,288 -
Chimei Innolux
Corporation
Hongfujin Precision
Industry (Wuhan) Co.,
Ltd.
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
Sales 625,805 - 45 days Similar with
general
transactions
No material
difference592,732 1
Chimei Innolux
Corporation
Toptech Trading Limited An indirect wholly-owned
subsidiary
Sales 476,701 - 60 days Similar with
general
transactions
No material
difference325,822 1
Chimei Innolux
Corporation
Futaijing Precision
Electronics (Beijing)
Co., Ltd.
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
Sales 355,207 - 60 days Similar with
general
transactions
No material
difference184,198 -
Chimei Innolux
Corporation
TPO Displays Shanghai
Ltd.
An indirect wholly-owned
subsidiary
Sales 304,474 - 30 days Similar with
general
transactions
No material
difference434,803 1
Chimei Innolux
Corporation
Foxconn CZ S.R.O. An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
Sales 292,903 - 45 days Similar with
general
transactions
No material
difference280,506 -
Chimei Innolux
Corporation
Ningbo Chi Mei
Electronics Ltd.
An indirect wholly-owned
subsidiary
Sales 237,431 - 60 days Similar with
general
transactions
No material
difference3,326 -
~67~
Company Counterparty
Relationship
with the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases/
Sales Amount
Percentage of
purchases/sales
Credit
terms Unit price Credit terms Balance
Percentage
of balance
Chimei Innolux
Corporation
Cheng Uei Precision
Industry Co., Ltd.
The Chairmen of Cheng Uei
and Hon Hai Precision
Industry Co., Ltd. are
immediate family members
Sales $ 166,080 - 30 days Similar with
general
transactions
No material
difference$ 60,987 -
Chimei Innolux
Corporation
Ningbo Chi Mei
Optoelectronics Ltd.
An indirect wholly-owned
subsidiary
Sales 140,176 - 30-60 days Similar with
general
transactions
No material
difference474,683 1
Chimei Innolux
Corporation
Pan-International
Industrial Co.
An indirect investee company
of Hon Hai Precision
Industry Co., Ltd. accounted
for under the equity method
Sales 141,671 - 45 days Similar with
general
transactions
No material
difference64,232 -
Chimei Innolux
Corporation
Funing Precision
Component Co., Ltd
An indirect investee company
of Hon Hai Precision
Industry Co., Ltd. accounted
for under the equity method
Sales 116,133 - 60 days Similar with
general
transactions
No material
difference116,457 -
Chimei Innolux
Corporation
Foxconn Precision
Electronics (Yantai)
Co., Ltd.
An indirect investee company
of Hon Hai Precision
Industry Co., Ltd. accounted
for under the equity method
Sales 100,123 - 45 days Similar with
general
transactions
No material
difference78,403 -
Chimei Innolux
Corporation
Chi Mei Materials
Technology
Corporation
An indirect investee company
accounted for under the
equity method
Purchases 1,849,694 1 30 days No transactions
comparable
with purchases
from related
parties.
No material
difference( 718,431) 1
Chimei Innolux
Corporation
Hon Hai Precision
Industry Co., Ltd.
Same major stockholder Purchases 1,599,621 1 90 days No transactions
comparable
with purchases
from related
parties.
No material
difference( 961,410) 1
Chimei Innolux
Corporation
Chi Mei Corporation Accounted the Company under
equity method
Purchases 942,667 1 90 days No transactions
comparable
with purchases
from related
parties.
No material
difference( 910,167) 1
Chimei Innolux
Corporation
Chi Lin Technology Co.,
Ltd.
A subsidiary of Chi Mei
Corporation
Purchases 902,358 1 30-180 days Similar with
general
transactions
No material
difference( 1,136,736) 1
~68~
Company Counterparty
Relationship
with the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases/
Sales Amount
Percentage of
purchases/sales
Credit
terms Unit price Credit terms Balance
Percentage
of balance
Chimei Innolux
Corporation
Advanced
Optoelectronic
Technology Inc.
An indirect investee company
of Hon Hai Precision
Industry Co., Ltd. accounted
for under the equity method
Purchases $ 748,915 1 90 days No transactions
comparable
with purchases
from related
parties.
No material
difference
($ 279,299) -
Chimei Innolux
Corporation
Glorious Falcon
International Ltd.
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
Purchases 454,837 - 90 days No transactions
comparable
with purchases
from related
parties.
No material
difference
( 47,157) -
Chimei Innolux
Corporation
Ningbo Chi Mei
Material Technology
Corp.
An indirect investee company
accounted for under the
equity method
Purchases 437,912 - 30 days No transactions
comparable
with purchases
from related
parties.
No material
difference
( 238,270) -
Chimei Innolux
Corporation
Foxconn Technology CZ
S. R. O.
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
411,576 - 30 days No transactions
comparable
with purchases
from related
parties.
No material
difference
( 842,718) 1
Chimei Innolux
Corporation
Futaihua Industrial
(Shenzhen) Limited
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
Purchases 318,614 - 45 days No transactions
comparable
with purchases
from related
parties.
No material
difference
- -
Chimei Innolux
Corporation
Best Vision Technology
PTE.Ltd.
An indirect wholly-owned
subsidiary of
Pan-International
Purchases 292,785 - 90 days No transactions
comparable
with purchases
from related
parties.
No material
difference
( 226,670) -
Chimei Innolux
Corporation
TPO Displays Hong
Kong Ltd.
An indirect wholly-owned
subsidiary
Purchases 288,556 - 60 days No transactions
comparable
with purchases
from related
parties.
No material
difference
( 154,739) -
~69~
Company Counterparty
Relationship
with the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases/
Sales Amount
Percentage of
purchases/sales
Credit
terms Unit price Credit terms Balance
Percentage
of balance
Chimei Innolux
Corporation
TPO Displays (Sinepal)
Ltd.
An indirect wholly-owned
subsidiary
Purchases $ 282,334 - 60 days No transactions
comparable
with purchases
from related
parties.
No material
difference
($ 95,988) -
Chimei Innolux
Corporation
G-TECH
Optoelectronics
Corporation
An indirect investee company
of Hon Hai Precision
Industry Co., Ltd. accounted
for under the equity method
Purchases 266,018 - 90 days No transactions
comparable
with purchases
from related
parties.
No material
difference( 215,075) -
Chimei Innolux
Corporation
TPO Displays Japan
K.K.
An indirect wholly-owned
subsidiary
Purchases 218,418 - 50 days No transactions
comparable
with purchases
from related
parties.
No material
difference( 1,228,882) 1
Chimei Innolux
Corporation
Nexgen Mediatech Inc. A subsidiary of Chi Mei
Corporation
Purchases 157,773 - 60 days No transactions
comparable
with purchases
from related
parties.
No material
difference( 191,419) 1
Chimei Innolux
Corporation
Optivision Technology
Incorporated
An indirect investee company
accounted for under the
equity method
Purchases 148,837 - 120 days No transactions
comparable
with purchases
from related
parties.
No material
difference( 119,714) -
Chimei Innolux
Corporation
Armadale Holdings Ltd. An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
Purchases 105,939 - 90 days No transactions
comparable
with purchases
from related
parties.
No material
difference( 78,274) -
Chimei Innolux
Corporation
Leadtek Global Group
Limited
A subsidiary of the Company Processing
costs30,696,654 16 (Note) 90 days Cost plus No material
difference( 43,330,426) 36
Chimei Innolux
Corporation
Lakers Trading Ltd. An indirect wholly-owned
subsidiary
Processing
costs9,441,264 1 (Note) 90 days Cost plus No material
difference- -
Chimei Innolux
Corporation
Toptech Trading Limited An indirect wholly-owned
subsidiary
Processing
costs761,475 - (Note) 90 days Cost plus No material
difference- -
Note: The percentage of cost of goods sold.
~70~
H. Receivables from related parties exceeding $100 million or 20% of the Company’s paid-in capital as at June 30, 2010:
Company Counterparty
Relationship with
the Company
Balance of
receivables
from related
parties
Turnover
rate
Overdue receivables
Subsequent
collection
Allowance for
doubtful
accounts
providedAmount
Action adopted for
overdue accounts
Chimei Innolux
Corporation
Chi Lin Technology Co.,
Ltd..
A subsidiary of Chi Mei
Corporation$ 7,525,180 5.19 $ 10,661 Subsequent collection $ 4,601,903 $ -
Chimei Innolux
Corporation
Innolux Corporation Ltd. An indirect wholly-owned
subsidiary3,535,636 10.52 37,231 Subsequent collection 1,269,925 -
Chimei Innolux
Corporation
TPO Display Hong Kong
Ltd.
An indirect wholly-owned
subsidiary3,444,306 2.56 1,421,084 Accelerate collection 198,183 -
Chimei Innolux
Corporation
Innocom Technology
(Shenzhen) Ltd.
An indirect wholly-owned
subsidiary2,004,634 6.30 - - 964,500 -
Chimei Innolux
Corporation
Hon Hai Precision Industry
Co., Ltd
Same major stockholder 1,542,726 5.56 65,868 Subsequent collection 267,472 -
Chimei Innolux
Corporation
Chi Mei Optoelectronics
Japan Co., Ltd.
A subsidiary of the Company 1,134,168 4.18 79,151 Subsequent collection 549,033 -
Chimei Innolux
Corporation
Hongfujin Precision
Industry (Wuhan)
Co., Ltd.
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
592,732 2.10 264,966 Subsequent collection 212,883 -
Chimei Innolux
Corporation
Ningbo Chi Mei
Optoelectronics Ltd.
An indirect wholly-owned
subsidiary474,683 1.38 - - 80 -
Chimei Innolux
Corporation
Toptech Trading Limited An indirect wholly-owned
subsidiary325,822 2.80 228,364 Accelerate collection 61,404 -
Chimei Innolux
Corporation
Nexgen Mediatech Inc. A subsidiary of Chi Mei
Corporation453,459 7.33 30 Subsequent collection 63,396 -
Chimei Innolux
Corporation
TPO Displays
Shanghai Ltd.
An indirect wholly-owned
subsidiary434,803 1.93 141,246 Accelerate collection 180,086 -
Chimei Innolux
Corporation
Foxconn CZ S. R. O. An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
280,506 4.05 12,747 Subsequent collection 5,098 -
Chimei Innolux
Corporation
Futaijing Precision
Electronics (Beijing) Co.,
Ltd.
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
184,198 3.83 43,763
Subsequent collection
46,851 -
Chimei Innolux
Corporation
Foxconn Japan Co., Ltd. An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
170,288 8.63 - - - -
Chimei Innolux
Corporation
Funing Precision
Component Co., Ltd.
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
116,457 3.99 - - - -
~71~
Company Counterparty
Relationship with
the Company
Balance of
receivables
from related
parties
Turnover
rate
Overdue receivables
Subsequent
collection
Allowance for
doubtful
accounts
providedAmount
Action adopted for
overdue accounts
Chimei Innolux
Corporation
Dragon Flame Industrial
Ltd.
An indirect wholly-owned
subsidiary$ 107,792 - $ 107,792 Accelerate collection $ - -
Chimei Innolux
Corporation
TPO Displays
(Sinepal) Ltd.
An indirect wholly-owned
subsidiary241,644 2.75 148,364 Accelerate collection - -
I. Derivative financial instruments undertaken during the six-month period ended June 30, 2010: Please refer to Notes 4(2), (7) and 10(6).
(2) Disclosure information of investee companyAll the transactions with subsidiaries disclosed below had been eliminated when preparing reviewed consolidated financial statements. The disclosure information as follows is for reference only.
A. Information on Investee Companies:
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Chimei Innolux
Corporation
Innolux Holding Ltd. Samoa Investment holdings $ 6,450,487 $ 6,198,247 199,944 100 $ 12,663,312 $ 1,173,736 $ 1,237,556
Chimei Innolux
Corporation
InnoJoy Investment
Corporation
Miaoli
County
Investment company 1,500,000 1,500,000 150,000 100 2,174,540 104,222 104,222
Chimei Innolux
Corporation
InnoFun Investment
Corporation
Miaoli
County
Investment company 1,500,000 1,500,000 150,000 100 1,509,064 279 279
Chimei Innolux
Corporation
TPO Hong Kong
Holding Ltd.
Hong
Kong
Investment company 2,107,791 Note A 1,158,844 100 2,286,949 ( 1,023,951) ( 1,373)
Chimei Innolux
Corporation
Toppoly
Optoelectronics
(B. V. I.) Ltd.
BVI Investment company 2,932,293 Note A 122,430 100 3,229,318 ( 249,221) 10,785
Chimei Innolux
Corporation
BrightmInformation
Holding Ltd.
Hong
Kong
Investment company 74,924 Note A 2,782 57 70,675 ( 17,245) ( 4,808)
Chimei Innolux
Corporation
Golden Achiever
International Ltd.
BVI Investment company - Note A 39 100 ( 271,708) ( 253,122) ( 27,781)
Chimei Innolux
Corporation
Landmark
International Ltd.
Samoa Investment company 26,511,440 Note A 480,100 100 28,461,299 1,820,630 1,465,188
Chimei Innolux
Corporation
Leadtek Global
Group Limited
BVI Investment and trading
company2,064,427 Note A 160,005 100 2,212,129 ( 21,571) 13,151
Chimei Innolux
Corporation
Yuan Chi Investment
Co., Ltd.
Tainan
County
Investment company 1,817,235 Note A - 100 1,926,809 ( 51,426) 54,328
Chimei Innolux
Corporation
Chi Mei
Optoelectronics
Japan Co., Ltd.
Japan Researching,
manufacturing
and selling of the
film transistor
liquid crystal display
1,335,486 Note A - 100 1,529,719 92,521 53,912
~72~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Chimei Innolux
Corporation
Gold Union
Investment Ltd.
Samoa Investment company $ 655,140 Note A 42,000 100 $ 661,970 ($ 111,550) ($ 5,325)
Chimei Innolux
Corporation
Keyway Investment
Management
Limited
Samoa Investment company 222,343 Note A 6,501 100 234,747 10,795 6,987
Chimei Innolux
Corporation
Chi Mei
Optoelectronics
Europe B. V.
Netherlands Importing, exporting,
buying, selling and
logistics services of
electronic equipment
and TFT-LCD
monitors
121,941 Note A - 100 115,470 6,628 3,489
Chimei Innolux
Corporation
Chi Mei
Optoelectronics
(Singapore) PTE
Ltd.
Singapore Importing, exporting,
buying, selling and
logistics services of
electronic equipment
and TFT-LCD
monitors
5,235 Note A 10 100 5,419 8 121
Chimei Innolux
Corporation
Honor Light
Services Limited
Singapore International
trading business1,395 Note A 685 100 1,138 ( 184) ( 270)
Chimei Innolux
Corporation
Chi Mei
Energy Corp.
Tainan
County
Development, design,
manufacture and
sales of thin film
solar battery
- Note A 115,933 93 - ( 298,613) -
Chimei Innolux
Corporation
Chi Mei
El Corporation
Tainan
County
Developing,
designing,
manufacturing, and
selling of organic
light emitting diodes
( 788,618) Note A 40,500 90 ( 840,433) ( 104,283) ( 51,815)
Chimei Innolux
Corporation
Chi Mei Lighting
Technology
Corporation
Tainan
County
Manufacturing of
electronic equipment
and lighting
equipment
819,312 Note A 71,087 36 956,255 542,112 136,328
Chimei Innolux
Corporation
Jetronics
International Corp.
Samoa Investment company 145,600 Note A 2,690 32 161,485 36,126 6,727
~73~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Chimei Innolux
Corporation
GIOm
OptoelectronicsCorp.
Tainan
County
Developing,
designing,manufacturing andselling of
components of backlight module onTFT-LCD
$ 372,537 Note A 38,324 26 $ 375,280 ($ 46,506) $ 2,743
Chimei InnoluxCorporation
ContrelmTechnologyCo., Ltd.
TainanCounty
Manufacturing andselling of relatedequipments for
film transistor liquidcrystal display
135,423 Note A 17,009 13 195,533 182,491 67,361
Chimei Innolux
Corporation
Global Display Taiwan
Co., Ltd.
Taichung
County
Glass thinning
processing
45,262 Note A 3,200 23 45,377 70 98
Chimei InnoluxCorporation
AmpowerHolding Ltd.
Cayman Glass thinningprocessing
1,717,714 Note A 14,063 45 1,745,241 169,681 40,375
Chimei InnoluxCorporation
Chi Mei MaterialsTechnologyCorporation
TainanCounty
Sellingelectronic materials
973,927 Note A 72,567 17 1,090,977 976,704 123,706
Chimei InnoluxCorporation
ExploitmTechnologyCo., Ltd.
TaoyuanCounty
Selling electronicmaterials andtelecommunications
materials
- Note A 9,211 15 - ( 12,696) -
Chimei InnoluxCorporation
OptivisionTechnology
Incorporated
HsinchuCity
Designing,manufacturing,
researching andselling of opticalelements
59,774 Note A 2,329 6 59,265 ( 803) ( 474)
Chimei InnoluxCorporation
PowerkingOptoelectronicsCo., Ltd.
HsinchuCounty
Manufacturing ofelectronic componentand lighting
equipment
19,875 Note A 3,120 15 19,865 2,177 ( 10)
Chimei InnoluxCorporation
iZ3D Inc. USA Research anddevelopment and sale
of 3D flat monitor - Note A 450 40 - - -$68,003,957 $ 6,920,094 $ 3,301,520 $ 60,619,695 $ 1,446,460 $ 3,232,500
Plus: credit balance of long-term equity investments reclassified to other liabilities 1,112,141
$ 61,731,836
~74~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Innolux Holding Ltd. Rockets Holding Ltd. Samoa Holding company $ 6,279,870 $ 6,027,630 192,785 100 $ 12,456,752 $ 1,165,816 $ 1,165,816
Innolux Holding Ltd. Lakers Trading Ltd. Samoa Trading and order
swap company- - - 100 245,004 61 61
Innolux Holding Ltd. Innolux Corporation
Ltd.
USA Trading company 6,348 6,348 200 100 ( 115,875) 7,858 7,858
Innolux Holding Ltd. Suns Holding Ltd. Samoa Holding company 164,269 164,269 5,072 100 148,220 - -
Rockets Holding Ltd. Stanford
Development Ltd.
Samoa Holding company 5,391,125 5,391,125 164,000 100 11,121,723 1,104,162 1,104,162
Rockets Holding Ltd. Sonics Trading Ltd. Samoa Trading and
order swap198,116 198,116 8,390 100 209,136 - -
Rockets Holding Ltd. Best China
Investments Ltd.
Samoa Investment company 314,740 314,740 10,000 100 324,497 90 90
Rockets Holding Ltd. Mega Chance
Investments Ltd.
Samoa Investment company 573,940 321,700 18,000 100 581,743 ( 3,097) ( 3,097)
Rockets Holding Ltd. Excel Victory Ltd. Samoa Investment company 97,182 97,182 3,000 100 163,130 64,662 64,662
Suns Holding Ltd. Warriors Technology
Investments Ltd.
Samoa Investment company 164,269 164,269 5,072 100 148,220 - -
Best China Investment
Ltd.
Asiaward
Investment Ltd.
Hong
Kong
Investment company 314,740 314,740 77,830 100 324,497 90 90
Asiaward Investment
Ltd.
Innocom Technology
(Xiamen) Ltd.
Xiamen Development, design,
manufacture and sales
of monitors
314,740 314,740 - 100 324,497 90 90
Stanford
Developments Ltd.
Full Lucky
Investment Ltd.
Hong
Kong
Investment company 1,016,035 1,016,035 1,271,015 100 11,121,707 1,104,162 1,104,162
Full Lucky Investment
Ltd.
Innocom Technology
(Shenzhen) Ltd.
Shen-Zhen Development, design,
manufacture and
sales of monitors
5,391,125 5,391,125 - 100 11,121,707 1,104,162 1,104,162
Mega Chance
Investments Ltd.
Main Dynasty
Investment Ltd.
Hong
Kong
Investment company 573,940 321,700 139,624 100 581,742 ( 3,098) ( 3,098)
Main Dynasty
Investment Ltd.
Innocom Technolgy
(Jia-Shan) Ltd.
Jia-Shan Development, design,
manufacture and
sales of monitors
573,940 321,700 - 100 581,742 ( 3,098) ( 3,098)
Excel Victory Ltd. Glory Ace
Investment Ltd.
Hong
Kong
Investment company 97,182 97,182 23,250 100 163,130 64,662 64,662
Glory Ace Investment
Ltd.
Innocom Technology
(Chongqing)
Co., Ltd.
Chongqing Development, design,
manufacture and
sales of monitors
97,182 97,182 - 100 163,130 64,662 64,662
~75~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Chi Mei
Optoelectronics
Japan Co., Ltd.
Chi Mei
Optoelectronics
USA Inc.
USA Selling of electronic
equipment and
computer monitors
$ 2,400 Note A 1 100 $ 162,708 ($ 4,316) ($ 10,767)
Landmark
International Ltd.
Ningbo Chi Mei
Electronics Ltd.
Ningbo Manufacturing and
selling of TFT-LCD
modules
19,524,952 Note A - 100 20,914,500 1,223,134 975,428
Landmark
International Ltd.
Nanhai Chi Mei
Electronics Ltd.
Foshan Manufacturing and
customer service of
TFT-LCD
4,639,372 Note A - 100 5,438,198 996,558 693,629
Landmark
International Ltd.
Ningbo Chi Mei
Optoelectronics
Ltd.
Ningbo Developing,
manufacturing,
customer service
and warehousing of
TFT-LCD
1,149,926 Note A - 100 965,555 ( 400,760) ( 204,900)
Landmark
International Ltd.
Nanhai Chi Mei
Optoelectronics
Corp.
Foshan Manufacturing and
customer service of
TFT-LCD
1,249,033 Note A - 100 1,183,900 - 196
Yuan Chi Investment
Co., Ltd.
Fulintec Engineering
Co., Ltd.
Taipei
County
Researching,
producing,
outsourcing,
importing, and
exporting services
of semiconductor
equipments
249,997 Note A 16,565 53 265,938 25,970 9,806
Yuan Chi Investment
Co., Ltd.
Chi Mei
Logistics Co.,Ltd.
Tainan
County
Warehousing Service 124,485 Note A 12,740 49 124,736 4,174 1,101
Yuan Chi Investment
Co., Ltd.
Chi Mei Lighting
Technology
Corporation
Tainan
County
Trading business,
manufacturing of
electronic
equipment and
lighting equipment
200,482 Note A 17,726 9 238,254 542,112 48,048
Yuan Chi Investment
Co., Ltd.
Optivision
Technology
Incorporated
Hsinchu
City
Designing,
manufacturing,
researching and
selling of
optical elements
116,778 Note A 6,443 16 128,574 ( 803) ( 128)
~76~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Yuan Chi Investment
Co., Ltd.
Powerking
Optoelectronics
Co., Ltd.
Hsinchu
City
Manufacturing of
electronic
component and
lighting
equipments
$ 8,699 Note A 1,010 5 $ 8,667 $ 1,928 $ 94
Yuan Chi Investment
Co., Ltd.
Exploit Technology
Co., Ltd.
Taoyuan
County
Selling electronic
materials and
telecommunications
materials
- Note A 2,989 5 - ( 12,696) -
Yuan Chi Investment
Co., Ltd.
Alpha Crystal
Technology
Corporation
Hsinchu
City
Trading business,
manufacturing of
electronic
equipment and other
service
73,133 Note A 10,285 22 70,467 ( 35,352) ( 7,904)
Yuan Chi Investment
Co., Ltd.
TOA Optronics
Corporation
Hsinchu
County
Selling electronic
materials, trading
business,
manufacturing of
electronic
equipments and
lighting
equipments
423,606 Note A 58,007 40 420,611 ( 10,213) ( 4,086)
Yuan Chi Investment
Co., Ltd.
Chi Mei Materials
Technology
Corporation
Tainan
County
Selling electronic
materials30,721 Note A 2,749 1 35,880 976,704 6,397
Yuan Chi Investment
Co., Ltd.
Chi Mei Energy Corp. Tainan
County
Development, design,
manufacture and
sales of thin film
solar battery
- Note A 994 1 - ( 298,613) -
Yuan Chi Investment
Co., Ltd.
GIO Optoelectronics
Corp.
Tainan
County
Developing,
designing,
manufacturing and
selling of
components of back
light module on
TFT-LCD
2,940 Note A 255 - 2,943 ( 46,506) ( 80)
~77~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Fulintec Engineering
Co., Ltd.
Fu Cheng
Optoelectronic
Technology
(Shanghai) Co.,
Ltd.
Shanghai Developing,
manufacturing and
maintaining
mechanical
products.
$ 6,227 Note A - 100 $ 6,312 $ 113 ($ 142)
Chi Mei
Optoelectronics
Europe B. V.
Chi Mei
Optoelectronics
Germany GmbH.
Germany Importing, buying and
selling electronic
equipment and TFT
- LCD monitors and
providing customer
service
10,324 Note A - 100 12,127 5,060 2,831
Chi Mei
Optoelectronics
Europe B. V.
Chi Mei
Optoelectronics
UK Ltd.
UK Customer service on
electronic
equipment and
computer monitors
4,566 Note A 150 100 4,203 - -
Keyway Investment
Management
Limited
Ningbo Chi Mei
Logistics Co., Ltd.
Ningbo Warehousing Service 151,715 Note A - 100 160,995 9,606 6,084
Keyway Investment
Management
Limited
Foshan Chi Mei
Logistics Co., Ltd.
Foshan Warehousing, testing
and logistics service
of TFT-LCD
monitors
39,972 Note A - 100 41,705 1,182 902
Jetronics International
Corp.
Kunshan Guan Jye
Electronics
Co., Ltd.
Kunshan Manufacturing
transformers521,504 Note A - 100 577,718 41,575 13,315
Jetronics International
Corp.
Champ Win
Technology
Corporation
Taipei
County
Selling electronic
materials,
computers and
equipments,
production designed
and trading
business
12,890 Note A 800 100 12,695 4,965 1,590
Gold Union
Investments Ltd.
Ningbo Chi Hsin
Electronics Ltd.
Ningbo Manufacturing and
selling on TFT-LCD
modules and
touch panel
157,289 Note A - 100 135,100 ( 109,242) ( 25,042)
~78~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Gold Union
Investments Ltd.
Dongguan Chi Hsin
Electronics Ltd.
Dongguan Manufacturing and
selling on TFT-LCD
modules and
touch panel
$ 496,657 Note A - 100 $ 526,833 ($ 2,174) $ 19,717
Chi Mei Lighting
Technology
Corporation
Smart Light Global
Limited
Samoa Investment business 199,634 Note A 8,000 100 214,452 19,327 6,870
Smart Light Global
Limited
Foshan Chi Mei
Lighting
Technology Ltd.
Foshan Designing,
manufacturing
and selling LED
199,541 Note A - 100 214,353 19,326 6,865
Chi Mei Energy Corp. Chi Mei Energy
Europe B. V.
Netherlands Sales of solar products
and service of solar
technology
2,136 Note A 1 100 1,283 ( 386) 12,283
Contrel Technology
Co., Ltd.
Far Technology
Co. Ltd.
Samoa Investment business 71,209 Note A 2,155 100 34,859 ( 6,516) ( 840)
Contrel Technology
Co., Ltd.
Contrel Holding Ltd. Samoa Investment business 5,065 Note A 155 100 53,241 696 90
Far Technology Co.,
Ltd.
Ningbo Contrel
Technology
Co., Ltd.
Ningbo Manufacturing and
selling of TFT-LCD
related mechanical
equipment; cleaning
service of
clean-room garment
63,600 Note A - 100 34,933 ( 6,326) ( 816)
Contrel Holding Ltd. Ningbo Contrel
Trading Co., Ltd.
Ningbo Import and export
trading4,770 Note A - 100 53,185 696 90
GIO Optoelectronics
Corp.
Double Star Inc. Investment business 75,572 Note A 2,350 100 72,315 - -
Double Star Inc. Foshan Chi Mei
LightingTechnolog
y Ltd.
Foshan Designing,
manufacturing
and selling LED
75,572 Note A - 100 72,719 ( 3,198) ( 846)
Toppoly
Optoelectronics
(B.V. I.) Ltd.
Toppoly
Optoelectronics
(Cayman) Ltd.
Cayman Investment company 2,908,357 Note A 122,400 100 3,228,943 ( 249,221) 10,785
Toppoly
Optoelectronics
(Cayman) Ltd.
Toptech
Trading Limited
B. V. I. Import and export
trading company3,660 Note A 300 100 2,926 ( 814) ( 777)
~79~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Toppoly
Optoelectronics
(Cayman) Ltd.
TPO Displays
(Nanjing) Ltd.
Nanjing Liquid crystal devices $ 2,803,402 Note A $ - 100 $ 3,123,961 ($ 262,956) $ 12,851
Toppoly
Optoelectronics
(Cayman) Ltd.
TPO Displays
(Sinepal) Ltd.
Nanjing Purchases and sales of
monitor-related
components
company
101,283 Note A - 100 102,042 14,550 ( 1,289)
TPO Hong Kong
Holding Ltd.
TPO Displays
Hong Kong Ltd.
Hong
Kong
Investment company - Note A 162,898 100 ( 330,997) ( 490,772) 16,894
TPO Hong Kong
Holding Ltd.
TPO Displays
Hong Kong Ltd.
Hong
Kong
Import and export
trading- Note A 35,000 100 ( 2,468,135) 169,177 129,987
TPO Hong Kong
Holding Ltd.
TPO Displays
Japan K. K.
Japan Manufacturing and
selling of panels1,815,603 Note A - 100 2,152,840 ( 360,054) 21,431
TPO Hong Kong
Holding Ltd.
TPO Displays
Europe B. V.
Europe Import and export
trading3,073,072 Note A 1 100 2,759,242 ( 257,625) ( 125,786)
TPO Hong Kong
Holding Ltd.
TPO Displays
USA Inc.
USA Import and export
trading company263,856 Note A 1 100 252,273 ( 24,297) ( 14,050)
TPO Displays Hong
Kong Holding Ltd.
TPO Displays
Shanghai Ltd.
Shanghai Liquid crystal devices - Note A - 100 ( 330,997) ( 490,772) 16,894
TPO Displays Europe
B. V.
TPO Displays
Germany GmbH.
Germany Import and export
trading33,597 Note A - 100 18,623 ( 29,297) ( 17,548)
TPO Displays Europe
B. V.
TPO Displays
Sweden AB
Sweden Import and export
trading681,201 Note A 1 100 687,405 45,837 45,666
Bright Information
Holding Ltd.
Kunpal
Optoelectronics
Ltd.
Nanjing TFT-LCD glass
thinning processing792,390 Note A - 100 740,838 ( 13,648) ( 8,571)
Golden Achiever
International Ltd.
Dragon Flame
Industrial Ltd.
B. V. I. Selling of
components of LCD
module and back
light module and
providing customer
service.
42,007 Note A 1 100 42,515 87 ( 61)
Golden Achiever
International Ltd.
VAP Optoelectronics
(Nanjing)Corp.
Nanjing Manufacturing and
selling of
components of LCD
module and back
light module
- Note A - 100 ( 273,291) ( 253,209) ( 29,850)
~80~
Name of company Investee company Address
Main operating
activities
Original cost
Held by the Company at June 30, 2010Income of
the investee
company
(Note B)
Investment
income
recognized by the
Company (Note B)
Number of
shares
(in thousands)
Percentage of
ownership (%) Book value
June 30,
2010
December 31,
2009
Golden Achiever
International Ltd.
Eastern Vision
Co. Ltd.
B. V. I. Selling of
components of LCD
module and back
light module and
providing customer
service.
$ 79 Note A 1 100 $ 80 $ - $ -
Note A: The investee companies were acquired because of merger. Please refer to Notes 1 and 4(10) for explanation.
Note B: The net income of the investee companies represents the net income for the period from January 1 to June 30, 2010. The investment income recognized under equity-method was calculated
based on the net income from March 18 (the consolidated date) to June 30, 2010.
B. Loans granted during the six-month period ended June 30, 2010
Financing
company’s name Counterparty
Financial
statement
account
Maximum
balance for
the period
Ending
balance Interest rate
Type of
financing
(Note A)
Transaction
amounts
Reason for
short-term
financing
Allowance
for
bad debt
Collateral
Financing
limit
for each
borrowing
company
Financing
company’s
financing
amount limitName Value
Chi Mei
Optoelectronics
Europe B. V.
Chi Mei
Optoelectronics
Germany GmbH.
Other
receivables$ 60,946 $ 60,946 0.678% 2 $ - Note B $ - - - Note C Note D
Ningbo Chi Mei
Electronics Ltd.
Ningbo Chi Mei
Optoelectronics
Ltd.
Other
receivables3,022,100 3,022,100 1.7916% ~ 2.26% 2 - Note B - - - Note C Note D
Ningbo Chi Mei
Electronics Ltd.
Ningbo Chi Mei
Logistics
Co., Ltd.
Other
receivables118,358 71,015 5.310% 2 - Note B - - - Note C Note D
Leadtek Global
Group Limited
Landmark
International
Ltd.
Other
receivables3,215 3,215 - 2 - Note B - - - Note C Note D
TPO Displays
USA Inc.
TPO Displays
Hong Kong Ltd.
Accounts
receivable –
related
parties
192,900 192,900 0.57% ~ 0.72% 2 - Note B - - - Note C Note D
TPO Displays
Sweden AB
TPO Displays
Hong Kong Ltd.
Accounts
receivable –
related parties
695,554 695,554 - 2 - Note B - - - Note C Note D
TPO Displays
Europe B. V.
TPO Displays
Hong Kong Ltd.
Accounts
receivable –
related parties
591,847 561,809 - 2 - Note B - - - Note C Note D
~81~
Financing
company’s name Counterparty
Financial
statement
account
Maximum
balance for
the period
Ending
balance Interest rate
Type of
financing
(Note A)
Transaction
amounts
Reason for
short-term
financing
Allowance
for
bad debt
Collateral
Financing
limit
for each
borrowing
company
Financing
company’s
financing
amount limitName Value
Toptech
Trading Limited
TPO Displays
(Nanjing) Ltd.
Prepayments $ 186,470 $ - - 2 $ - Note B $ - - - Note C Note D
Toptech
Trading Limited
VAP
Optoelectronics
(Nanjing)Corp.
Prepayments 170,395 170,395 - 2 - Note B - - - Note C Note D
Note A: The type No. 1 represents business relationship.
The type No. 2 represents necessary for short-term financing.
Note B: Provision of financial support for operations.
Note C: Not to exceed 10% of the Company’s net equity.
Note D: Not to exceed 40% of the Company’s net equity. If it’s for short-term loans, not to exceed 30% of the Company’s net equity.
C. Endorsements and guarantees provided during the six-month period ended June 30, 2010:
Endorsement/
guarantee
provider
Guaranteed party
Limits on
endorsement/
guarantee amount
provided to each
counterparty
Maximum
balance for
the period Ending balance
Amount of
endorsement/guarantee
collateralized by properties
Ratio of accumulated
endorsement/guarantee
to net equity per latest
financial statements
Maximum
endorsement/guarantee
amounts allowableName
Nature of
relationship
(Note A)
TPO Displays
(Nanjing) Ltd.
TPO Displays Shanghai
Ltd.
2 Note B $ 1,544,281 $ 1,287,081 $ - 0% Note C
Note A: The type No. 1 represents the Company’s subsidiary.
The type No. 2 represents the Company’s indirect wholly-owned subsidiary.
The type No. 3 represents mutual guarantors as required by construction contracts.
Note B: Limits on endorsement/guarantee amount provide to each counter party did not exceed 0.5% of the Company’s net equity for each entity. Maximum endorsement/guarantee amounts
allowable should not exceed 1% of the Company’s net equity.
Note C: Maximum endorsement/guarantee amount provided to each counter party did not exceed 50% of the Company’s net equity. If endorsements and guarantees were provided for investees
which the Company directly (or indirectly) owns more than 50% of equity interest, the endorsement/guarantee should not exceed 100% of the Company’s net equity.
~82~
D. Marketable securities held as at June 30, 2010:
Name of subsidiary
Kind and name of
marketable securities
Relationship
of the issuers with
the investee company
General ledger
accounts (Note 1 )
June 30, 2010
Number of shares
(in thousands) Book value Percentage
Market value/
Net worth
Innolux Holding Ltd. Common stock of Rockets Holding Ltd. An indirect wholly-owned
subsidiary
(1) 192,785 $ 12,456,752 100 $ 12,456,752
Innolux Holding Ltd. Common stock of Lakers Trading Ltd. An indirect wholly-owned
subsidiary
(1) - 245,004 100 245,004
Innolux Holding Ltd. Common stock of Innolux Corporation Ltd. An indirect wholly-owned
subsidiary
(1) 200 ( 115,875) 100 ( 115,875)
Innolux Holding Ltd. Common stock of Suns Holding Ltd. An indirect wholly-owned
subsidiary
(1) 5,072 148,220 100 148,220
InnoJoy Investment
Corporation
Common stock of Entire Technology Co., Ltd. None (5) 5,499 995,847 5.96 995,847
InnoJoy Investment
Corporation
Common stock of G-TECH
Optoelectronics Corporation
None (2) 2,261 49,732 1.5 Note B
InnoJoy Investment
Corporation
Common stock of Advanced
Optoelectronics Technology Co., Ltd.
None (2) 11,212 76,007 8.62 Note B
InnoJoy Investment
Corporation
Bonds of ILI Technology Corp. None (3) - 47,042 - Note B
InnoJoy Investment
Corporation
Bonds of Sintronic Technology Inc. None (4) - 241,956 - Note B
Innofun Investment
Corporation
Common stock of J TOUCH Corporation None (2) 6,965 400,000 9.3 Note B
Innofun Investment
Corporation
Common stock of G-TECH
Optoelectronics Corporation
None (2) 2,500 55,000 1.66 Note B
Rockets Holding Ltd. Common stock of Stanford Development Ltd. An indirect wholly-owned
subsidiary
(1) 164,000 11,121,723 100 11,121,723
Rockets Holding Ltd. Common stock of
Mstar Semiconductor, Inc. (Cayman)
None (2) 1,263 40,058 0.43 Note B
Rockets Holding Ltd. Common stock of Sonics Trading Limited An indirect wholly-owned
subsidiary
(1) 8,390 209,136 100 209,136
Rockets Holding Ltd. Common stock of Best China Investment Ltd. An indirect wholly-owned
subsidiary
(1) 10,000 324,497 100 324,497
Rockets Holding Ltd. Common stock of Mega Chance
Investments Ltd.
An indirect wholly-owned
subsidiary
(1) 18,000 581,743 100 581,743
Rockets Holding Ltd. Common stock of Excel Victory Ltd. An indirect wholly-owned
subsidiary
(1) 3,000 163,130 100 163,130
Suns Holding Ltd. Common stock of Warriors Technology
Investment Ltd.
An indirect wholly-owned
subsidiary
(1) 5,072 148,220 100 148,220
~83~
Name of subsidiary
Kind and name of
marketable securities
Relationship
of the issuers with
the investee company
General ledger
accounts (Note 1 )
June 30, 2010
Number of shares
(in thousands) Book value Percentage
Market value/
Net worth
Warriors Technology
Investment Ltd.
Common stock of ILI Technology Corp. None (2) 3,077 $ 71,255 6.77 Note B
Warriors Technology
Investment Ltd.
Common stock of OED Holding Ltd. None (2) 800 64,936 5.88 Note B
Best China Investment
Ltd.
Common stock of Asiaward Investment Ltd. An indirect wholly-owned
subsidiary
(1) 77,830 324,497 100 $ 324,497
Stanford Development
Ltd.
Common stock of Full Lucky Investment Ltd. An indirect wholly-owned
subsidiary
(1) 1,271,015 11,121,707 100 11,121,707
Mega Chance
Investments Ltd.
Common stock of
Main Dynasty Investment Ltd.
An indirect wholly-owned
subsidiary
(1) 139,624 581,742 100 581,742
Excel Victory Ltd. Common stock of Glory Ace Investment Ltd. An indirect wholly-owned
subsidiary
(1) 23,250 163,130 100 163,130
Full Lucky Investment
Ltd.
Common stock of
Innocom Technology (Shenzhen) Ltd.
An indirect wholly-owned
subsidiary
(1) - 11,121,707 100 11,121,707
Asiaward Investment
Ltd.
Common stock of
Innocom Technology (Xiamen) Ltd.
An indirect wholly-owned
subsidiary
(1) - 324,497 100 324,497
Main Dynasty Investment
Ltd.
Common stock of
Innocom Technology (Jia-Shan) Ltd.
An indirect wholly-owned
subsidiary
(1) - 581,742 100 581,742
Glory Ace Investment
Ltd.
Common stock of
Innocom Technology (Chongqing) Co., Ltd.
An indirect wholly-owned
subsidiary
(1) - 163,130 100 163,130
Chi Mei Optoelectronics
Japan Co., Ltd.
Common stock of
Chi Mei Optoelectronics USA, Ltd.
An indirect wholly-owned
subsidiary
(1) 1 162,708 100 162,708
Landmark International
Ltd.
Common stock of
Ningbo Chi Mei Electronics Ltd.
An indirect wholly-owned
subsidiary
(1) - 20,914,500 100 20,914,500
Landmark International
Ltd.
Common stock of
Nanhai Chi Mei Electronics Ltd.
An indirect wholly-owned
subsidiary
(1) - 5,438,198 100 5,438,198
Landmark International
Ltd.
Common stock of
Ningbo Chi Mei Optoelectronics Ltd.
An indirect wholly-owned
subsidiary
(1) - 965,555 100 965,555
Landmark International
Ltd.
Common stock of
Nanhai Chi Mei Optoelectronics Corp.
An indirect wholly-owned
subsidiary
(1) - 1,183,900 100 1,274,805
Yuan Chi Investment
Co., Ltd.
Common stock of
Fulintec Engineering Co., Ltd.
An indirect wholly-owned
subsidiary
(1) 16,565 265,938 53 265,938
Yuan Chi Investment
Co., Ltd.
Common stock of Chi Mei Logistics Co., Ltd. An indirect wholly-owned
subsidiary
(1) 12,740 124,736 49 124,736
Yuan Chi Investment
Co., Ltd.
Common stock of
Optivision Technology Incorporated
An investee company accounted
for under the equity method
(1) 6,443 128,574 16 117,377
Yuan Chi Investment
Co., Ltd.
Common stock of
Powerking Optoelectronics Co., Ltd.
An investee company accounted
for under the equity method
(1) 1,010 8,667 5 8,667
~84~
Name of subsidiary
Kind and name of
marketable securities
Relationship
of the issuers with
the investee company
General ledger
accounts (Note 1 )
June 30, 2010
Number of shares
(in thousands) Book value Percentage
Market value/
Net worth
Yuan Chi Investment
Co., Ltd.
Common stock of Exploit Technology Co., Ltd. An investee company accounted
for under the equity method
(1) 2,989 $ - 5 $ -
Yuan Chi Investment
Co., Ltd.
Common stock of GIO Optoelectronics Corp. An investee company accounted
for under the equity method
(1) 255 2,943 - 2,943
Yuan Chi Investment
Co., Ltd.
Common stock of
Alpha Crystal Technology Corporation
An indirect investee company
accounted for under the equity
method
(1) 10,285 70,467 22 70,467
Yuan Chi Investment
Co., Ltd.
Common stock of
TOA Optronics Corporation
An indirect investee company
accounted for under the equity
method
(1) 58,007 420,611 40 420,611
Yuan Chi Investment
Co., Ltd.
Common stock of
Chi Mei Lighting Technology Corporation
A subsidiary of the Company (1) 17,726 238,254 9 238,254
Yuan Chi Investment
Co., Ltd.
Common stock of
Chi Mei Materials Technology Corporation
An investee company accounted
for under the equity method
(1) 2,749 35,880 1 35,880
Yuan Chi Investment
Co., Ltd.
Common stock of Chi Mei Energy Corp. A subsidiary accounted for under
the equity method
(1) 994 - 1 3,141
Yuan Chi Investment
Co., Ltd.
Common stock of Trillion Science None (2) 1,000 11,424 5 Note B
Yuan Chi Investment
Co., Ltd.
Common stock of Himax Analogic Company None (2) 1,500 2,818 4 Note B
Yuan Chi Investment
Co., Ltd.
Common stock of
Himax Media Solutions Company
None (2) 241 439 0 Note B
Yuan Chi Investment
Co., Ltd.
Common stock of
Tera Xtal Technology Corporation
None (2) 4,869 112,558 9 Note B
Yuan Chi Investment
Co., Ltd.
Common stock of China Electric Mfg. Corp. None (5) 13,000 323,050 3 323,050
Fulintec Engineering
Co., Ltd.
Common stock of Fu Cheng Optoelectronic
Technology (Shanghai) Co., Ltd.
An indirect wholly-owned
subsidiary
(1) - 6,312 100 6,312
Leadtek Global Group
Limited
Common stock of
Himax Technologies, Inc. (Himax Cayman)
None (5) 49,645 2,322,309 14 2,322,309
Keyway Investment
Management Limited
Common stock of
Ningbo Chi Mei Logistics Co., Ltd.
An indirect wholly-owned
subsidiary
(1) - 160,995 100 160,995
Keyway Investment
Management Limited
Common stock of
Foshan Chi Mei Logistics Co., Ltd.
An indirect wholly-owned
subsidiary
(1) - 41,705 100 41,705
Chi Mei Optoelectronics
Europe B. V.
Common stock of
Chi Mei Optoelectronics Germany GmbH.
An indirect wholly-owned
subsidiary
(1) - 12,127 100 12,127
Chi Mei Optoelectronics
Europe B. V.
Common stock of
Chi Mei Optoelectronics UK Ltd.
An indirect wholly-owned
subsidiary
(1) 150 4,203 100 4,203
~85~
Name of subsidiary
Kind and name of
marketable securities
Relationship
of the issuers with
the investee company
General ledger
accounts (Note 1 )
June 30, 2010
Number of shares
(in thousands) Book value Percentage
Market value/
Net worth
Jetronics International
Corp.
Common stock of
Kunshan Guan Jye Electronics Co., Ltd.
An indirect wholly-owned
subsidiary
(1) - $ 577,718 100 $ 577,718
Jetronics International
Corp.
Common stock of
Champ Win Technology Corporation
An indirect wholly-owned
subsidiary
(1) 800 12,695 100 12,695
Chi Mei Lighting
Technology
Corporation
Common stock of Smart Light Global Limited An indirect wholly-owned
subsidiary
(1) 8,000 214,452 100 214,452
Smart Light Global
Limited
Common stock of
Foshan Chi Mei Lighting Technology Ltd.
An indirect wholly-owned
subsidiary
(1) - 214,353 100 214,353
Chi Mei Energy Corp. Common stock of
Chi Mei Energy Europe B. V.
An indirect wholly-owned
subsidiary
(1) 1 1,283 100 1,283
Gold Union Investments
Ltd.
Common stock of
Ningbo Chi Hsin Electronics Ltd.
An indirect wholly-owned
subsidiary
(1) - 135,099 100 135,099
Gold Union Investments
Ltd.
Common stock of
Dongguan Chi Hsin Electronics Ltd.
An indirect wholly-owned
subsidiary
(1) - 526,833 100 526,833
Contrel Technology Co.,
Ltd.
Common stock of Far Technology Co., Ltd. An indirect wholly-owned
subsidiary
(1) 2,155 34,859 100 34,859
Contrel Technology Co.,
Ltd.
Common stock of Contrel Holding Ltd. An indirect wholly-owned
subsidiary
(1) 155 53,241 100 53,241
Contrel Technology Co.,
Ltd.
Common stock of
Chimei Innolux Corporation
The Company (6) 3,004 100,351 - 100,351
Far Technology Co., Ltd. Common stock of
Ningbo Contrel Technology Co., Ltd.
An indirect wholly-owned
subsidiary
(1) - 34,933 100 34,851
Contrel Holding Ltd. Common stock of
Ningbo Contrel Trading Co., Ltd.
An indirect wholly-owned
subsidiary
(1) - 53,185 100 53,113
Toppoly Optoelectronics
(B. V. I.) Ltd.
Common stock of
Toppoly Optoelectronics (Cayman) Ltd.
An indirect wholly-owned
subsidiary
(1) 122,400 3,228,943 100 3,228,943
Toppoly Optoelectronics
(Cayman) Ltd.
Common stock of Toptech Trading Limited An indirect wholly-owned
subsidiary
(1) 300 2,926 100 2,926
Toppoly Optoelectronics
(Cayman) Ltd.
Common stock of TPO Displays (Nanjing) Ltd. An indirect wholly-owned
subsidiary
(1) - 3,123,961 100 3,123,961
Toppoly Optoelectronics
(Cayman) Ltd.
Common stock of TPO Displays (Sinepal) Ltd. An indirect wholly-owned
subsidiary
(1) - 102,042 100 102,042
~86~
Name of subsidiary
Kind and name of
marketable securities
Relationship
of the issuers with
the investee company
General ledger
accounts (Note 1 )
June 30, 2010
Number of shares
(in thousands) Book value Percentage
Market value/
Net worth
TPO Hong Kong Holding
Ltd.
Common stock of
TPO Displays Hong Kong Holding Ltd.
An indirect wholly-owned
subsidiary
(1) 162,898 ($ 330,997) 100 ($ 330,997)
TPO Hong Kong Holding
Ltd.
Common stock of
TPO Displays Hong Kong Ltd.
An indirect wholly-owned
subsidiary
(1) 35,000 ( 2,468,135) 100 ( 2,468,135)
TPO Hong Kong Holding
Ltd.
Common stock of
TPO Displays Japan Ltd.
An indirect wholly-owned
subsidiary
(1) - 2,152,840 100 2,152,840
TPO Hong Kong Holding
Ltd.
Common stock of TPO Displays Europe Ltd. An indirect wholly-owned
subsidiary
(1) 1 2,759,242 100 2,759,242
TPO Hong Kong Holding
Ltd.
Common stock of TPO Displays USA Inc. An indirect wholly-owned
subsidiary
(1) 1 252,273 100 252,273
TPO Displays Hong
Kong Holding Ltd.
Common stock of TPO Displays Shanghai Ltd. An indirect wholly-owned
subsidiary
(1) - ( 330,997) 100 (330,997)
TPO Displays
Europe B. V.
Common stock of
TPO Displays Germany GmbH.
An indirect wholly-owned
subsidiary
(1) - 18,623 100 18,623
TPO Displays
Europe B. V.
Common stock of
TPO Displays Sweden AB
An indirect wholly-owned
subsidiary
(1) 1 687,405 100 687,405
Bright Information
Holding Ltd.
Common stock of
Kunpal Optoelectronics Ltd.
An indirect wholly-owned
subsidiary
(1) - 740,838 100 740,838
Golden Achiever
International Ltd.
Common stock of
Dragon Flame Industrial Ltd.
An indirect wholly-owned
subsidiary
(1) 1 42,515 100 42,515
Golden Achiever
International Ltd.
Common stock of
VAP Optoelectronics (Nanjing) Corp.
An indirect wholly-owned
subsidiary
(1) - ( 273,291) 100 ( 273,291)
Golden Achiever
International Ltd.
Common stock of Eastern Vision Co., Ltd. An indirect wholly-owned
subsidiary
(1) 1 80 100 80
Note 1: Code of general ledger accounts: (1) Long-term investment accounted for under the equity method
(2) Financial assets carried at cost - non-current
(3) Investment in bonds without active markets - non-current
(4) Financial assets at fair value through profit or loss - non-current.
(5) Available for sale financial asset - non-current
(6) Available for sale financial asset - current
Note 2: The investment was measured at cost since it has no active market price, and its fair value cannot be measured reliably.
~87~
E. Acquisition or sale of the same security with the accumulated cost exceeding $100 million or 20% of the Company’s paid-in capital during the six-month period ended June 30, 2010:
Beginning balance Acquisition Disposal Ending balance
Company
Name
Marketable
securities type
and name
Financial
statement
account Counterparty
Nature of
relationship
Shares/units
(thousands) Amount
Shares/units
(thousands) Amount
Shares/units
(thousands) Amount
Carrying
value
Gain (loss)
on disposal
Shares/units
(thousands) Amount
Innolux
Holding Ltd.
Rockets
Holding Ltd.
Long-term
investments
accounted for
under the equity
method
Note Note 184,785 $ 6,027,630 8,000 $ 252,240 - $ - $ - $ - 192,785 $ 6,279,870
Rockets
Holding Ltd.
Mega Chance
Investments
Ltd.
Long-term
investments
accounted for
under the equity
method
Note Note 10,000 321,700 8,000 252,240 - - - - 18,000 573,940
Mega Chance
Investments
Ltd.
Main Dynasty
Investment
Ltd.
Long-term
investments
accounted for
under the equity
method
Note Note 77,511 321,700 62,113 252,240 - - - - 139,624 573,940
Main Dynasty
Investment Ltd.
Innocom
Technology
(Jia-shan) Ltd.
Long-term
investments
accounted for
under the equity
method
Note Note - 321,700 - 252,240 - - - - - 573,940
Toppoly
Optoelectronics
(B. V. I.) Ltd.
Toppoly
Optoelectronics
(Cayman) Ltd.
Long-term
investments
accounted for
under the equity
method
Note Note 93,400 1,971,947 29,000 936,410 - - - - 122,400 2,908,357
Toppoly
Optoelectronics
(Cayman) Ltd.
TPO Displays
(Nanjing) Ltd.
Long-term
investments
accounted for
under the equity
method
Note Note - 1,866,992 - 936,410 - - - - - 2,803,402
$10,831,669 - $2,881,780 - $ - $ - $ - - $13,713,449
Note: The wholly-owned subsidiary increased capital through cash or was newly established.
~88~
F. Acquisition of real estate properties exceeding $100 million or 20% of the Company’s paid-in capital during the six-month period ended June 30, 2010:
Prior transaction of related counterpart
Company
name
Types of
property
Transaction
date
Transaction
amount
Payment
term Counterparty
Nature of
relationship Owner Relationship
Transfer
date Amount
Price
Reference
Purpose of
Acquisition
Other
terms
Chi Mei Lighting
Technology
Corporation
Building 2010.05.31 $1,130,000 Installment GIO
Optoelectronics
Corp.
Substantive
related party
- - - - Appraisal
report
To use the
Group’s resources
effectively
G. Disposal of real estate properties exceeding $100 million or 20% of the Company’s paid-in capital during the six-month period ended June 30, 2010: None.
H. Purchases from or sales to related parties exceeding $100 million or 20% of the Company’s paid-in capital during the six-month period ended June 30, 2010(Note): refer to Note 11(1) and following information
Company Counterparty
Relationship with
the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases / sales Amount
Percentage of
purchases / sales Terms Unit price Terms Balance
Percentage
of balance
Lakers Trading Ltd. Carston Ltd. B. H. An indirect
wholly-owned
subsidiary of
Hon Hai
Precision Industry
Co., Ltd.
Processing costs $ 449,794 5 90 days Cost plus No material
difference$ 2,106,501 34
Innocom Technology
Shenzhen Ltd.
Hongfujin Precision
Industry (Shenzhen)
Co., Ltd.
An indirect
wholly-owned
subsidiary of
Hon Hai
Precision Industry
Co., Ltd.
Processing costs 534,374 92 90 days Cost plus No material
difference- 0
Innocom Technology
Shenzhen Ltd.
Lakers Trading Ltd. An indirect
wholly-owned
subsidiary
Processing
revenue8,801,525 100 90 days Cost plus No material
difference- 0
TPO Displays
(Nanjing) Ltd.
Toptech
Trading Limited
An indirect
wholly-owned
subsidiary
Processing
revenue987,841 77 60 days Cost plus No material
difference797 0
TPO Displays
(Nanjing) Ltd.
TPO Displays
Hong Kong Ltd.
An indirect
wholly-owned
subsidiary
Processing
revenue293,112 23 60 days Cost plus No material
difference214,012 0
VAP Optoelectronics
(Nanjing)Corp.
Toptech
Trading Limited
An indirect
wholly-owned
subsidiary
Processing
revenue271,391 39 60 days Cost plus No material
difference151,148 58
Ningbo Chi Mei
Electronics Ltd.
Leadtek Global
Group Limited
A subsidiary
of the Company
Processing
revenue31,177,611 100 60 days Cost plus No material
difference21,380,448 96
Nanhai Chi Mei
Electronics Corp.
Leadtek Global
Group Limited
A subsidiary
of the Company
Processing
revenue16,162,041 99 60 days Cost plus No material
difference8,217,161 100
~89~
Company Counterparty
Relationship with
the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases / sales Amount
Percentage of
purchases / sales Terms Unit price Terms Balance
Percentage
of balance
Ningbo Chi Hsin
Electronics Ltd.
Leadtek Global
Group Limited
A subsidiary
of the Company
Processing
revenue$ 2,580,688 100 60 days Cost plus No material
difference$ 234,723 99
Dongguan Chi Hsin
Electronics Corp.
Leadtek Global
Group Limited
A subsidiary
of the Company
Processing
revenue237,457 100 60 days Cost plus No material
difference376,334 100
Ningbo Chi Mei
Optoelectronics
Ltd.
Leadtek Global
Group Limited
A subsidiary
of the Company
Processing
revenue1,166,674 95 60 days Cost plus No material
difference476,394 92
TPO Displays
Shanghai Ltd.
TPO Displays
Hong Kong Ltd.
An indirect
wholly-owned
subsidiary
Processing
revenue2,836,197 84 60 days Cost plus No material
difference1,219,790 87
Toptech Trading
Limited
TPO Displays
(Sinepal) Ltd.
An indirect
wholly-owned
subsidiary
Sales 989,656 44 60 days Cost plus No material
difference463,997 49
Toptech Trading
Limited
VAP Optoelectronics
(Nanjing)Corp.
An indirect
wholly-owned
subsidiary
Sales 121,719 5 60 days Cost plus No material
difference11,936 1
TPO Displays Hong
Kong Ltd.
TPO Displays
(Sinepal) Ltd.
An indirect
wholly-owned
subsidiary
Sales 224,291 4 60 days Cost plus No material
difference225,407 6
Innolux Corporation
Ltd.
Hon Hai
Precision Industry
Co., Ltd.
Same
major stockholder
Sales 1,621,323 11 60 days Similar with
general
transactions
No material
difference845,487 25
Chi Mei Lighting
Technology
Corporation
Foshan
Chi Mei Lighting
Technology Ltd.
An indirect
wholly-owned
subsidiary
Sales 250,051 13 90 days Similar with
general
transactions
No material
difference186,171 15
Innocom Technology
Shenzhen Ltd.
Innocom Technology
(Chongqing) Co.,
Ltd.
An indirect
wholly-owned
subsidiary
Sales 156,395 21 90 days Similar with
general
transactions
No material
difference121,921 5
Innocom Technology
Shenzhen Ltd.
Hongfujin
Precision Industry
(Shenzhen) Co., Ltd.
An indirect
wholly-owned
subsidiary of
Hon Hai
Precision Industry
Co., Ltd.
Purchases 4,675,570 6 90 days Single supplier;
no basis for
comparision
No material
difference254,384 5
~90~
Company Counterparty
Relationship with
the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases / sales Amount
Percentage of
purchases / sales Terms Unit price Terms Balance
Percentage
of balance
Ningbo Chi Mei
Electronics Ltd.
Ampower
Technology Co., Ltd.
Subsidiary of an
investee company
accounted for
under the
equity method
Purchases $ 259,870 0 90 days Single supplier;
no basis for
comparison
No material
difference$ 204,991 1
Ningbo Chi Mei
Electronics Ltd.
Ningbo
Chi Mei Material
Technology Corp.
Subsidiary of an
investee company
accounted for
under the
equity method
Purchases 2,445,024 4 60 days Single supplier;
no basis for
comparison
No material
difference1,138,679 3
Ningbo Chi Mei
Electronics Ltd.
Ningbo Lin Moug
Optronics Co., Ltd.
An indirect
wholly-owned
subsidiary of
Chi Mei
Corporation
Purchases 2,256,793 3 120 days Single supplier;
no basis for
comparison
No material
difference2,335,328 6
Nanhai Chi Mei
Electronics Corp.
Nanhai Lin Chaun
Optronics Co., Ltd.
An indirect
wholly-owned
subsidiary of
Chi Mei
Corporation
Purchases 2,835,488 7 120 days Single supplier;
no basis for
comparison
No material
difference1,616,527 31
Nanhai Chi Mei
Electronics Corp.
Chi Mei Materials
Technology
Corporation
An investee company
accounted for
under the
equity method
Purchases 335,333 1 60 days Single supplier;
no basis for
comparison
No material
difference148,460 3
Nanhai Chi Mei
Electronics Corp.
Ningbo
Chi Mei Material
Technology Corp.
Subsidiary of an
investee company
accounted for
under the
equity method
Purchases 312,649 1 60 days Single supplier;
no basis for
comparison
No material
difference137,749 3
Ningbo Chi Mei
Optoelectronics
Ltd.
Ningbo
Chi Mei Material
Technology Corp.
Subsidiary of an
investee company
accounted for
under the
equity method
Purchases 240,424 8 60 days Single supplier;
no basis for
comparison
No material
difference235,347 8
Ningbo Chi Mei
Optoelectronics
Ltd.
Ningbo
Lin Moug Optronics
Co., Ltd.
An indirect
wholly-owned
subsidiary of
Chi Mei
Corporation
Purchases 165,999 6 60 days Single supplier;
no basis for
comparison
No material
difference167,653 6
~91~
Company Counterparty
Relationship with
the Company
Transactions
Difference with general
transactions
Notes and accounts
receivable (payable)
Purchases / sales Amount
Percentage of
purchases / sales Terms Unit price Terms Balance
Percentage
of balance
Ningbo Chi Hsin
Electronics Ltd.
Ningbo
Lin Moug Optronics
Co., Ltd.
An indirect
wholly-owned
subsidiary of
Chi Mei
Corporation
Purchases $ 158,877 4 60 days Single supplier;
no basis for
comparison
No material
difference$ 109,408 4
Note: The purchases and sales transaction between the investee company of the Company and related parties are disclosed for the first semi-annual of 2010.
I. Receivables from related parties exceeding $100 million or 20% of the Company’s paid-in capital as at June 30, 2010:
Company Counterparty
Relationship with
the Company
Balance of receivable
from related parties Turnover rate
Overdue receivables
Subsequent collection
Allowance for
doubtful
accounts providedAmount
Action adopted
for overdue accounts
Innolux Corporation
Ltd.
Hon Hai Precision
Industry Co., Ltd
Same
major stockholder$ 845,487 1.92 $ - - $ 440,873 $ -
Innocom Technology
Shenzhen Ltd.
Innocom Technology
(Chongqing)
Co., Ltd.
An indirect
wholly-owned
subsidiary
121,921 13.30 - - - -
Ningbo Chi Mei
Electronics Ltd.
Leadtek Global
Group Limited
A subsidiary of
the Company21,380,448 1.46 9,885,452 Subsequent collection 12,217,000 -
Nanhai Chi Mei
Electronics Corp.
Leadtek Global
Group Limited
A subsidiary of
the Company8,217,161 1.97 - - 4,404,721 -
Ningbo Chi Hsin
Electronics Ltd.
Leadtek Global
Group Limited
A subsidiary of
the Company234,723 10.99 - - 234,723 -
Dongguan Chi Hsin
Electronics Corp.
Leadtek Global
Group Limited
A subsidiary of
the Company376,334 0.63 117,786 Subsequent collection 74,045 -
Ningbo Chi Mei
Optoelectronics Ltd.
Leadtek Global
Group Limited
A subsidiary of
the Company476,394 2.50 - - 476,394 -
Chi Mei
Lighting Technology
Corporation
Foshan Chi Mei
Lighting Technology
Ltd.
An indirect
wholly-owned
subsidiary
186,171 6.28 - - - -
Contrel
Technology Co., Ltd.
Nanhai Chi Mei
Electronics Corp.
An indirect
wholly-owned
subsidiary
295,206 0.01 - - - -
Kunshan Guan Jye
Electronics
Co., Ltd.
Amlink
(Shanghai) Ltd.
An indirect
investee company
accounted for
under the
equity method
104,594 1.29 23,004 Accelerate collection - -
~92~
Company Counterparty
Relationship with
the Company
Balance of receivable
from related parties Turnover rate
Overdue receivables
Subsequent collection
Allowance for
doubtful
accounts providedAmount
Action adopted
for overdue accounts
TPO Displays
Shanghai Ltd.
TPO Displays
Hong Kong Ltd.
An indirect
wholly-owned
subsidiary
$ 1,219,790 4.65 $ - - $ - $ -
Toptech
Trading Limited
TPO Displays
(Nanjing) Ltd.
An indirect
wholly-owned
subsidiary
163,594 - - - 159,081 -
Toptech
Trading Limited
TPO Displays
(Sinepal) Ltd.
An indirect
wholly-owned
subsidiary
463,997 4.27 230,335 Subsequent collection 61,087 -
VAP Optoelectronics
(Nanjing)Corp.
Toptech
Trading Limited
An indirect
wholly-owned
subsidiary
151,148 3.72 - - 84,439 -
Dragon Flame
Industrial Ltd.
VAP Optoelectronics
(Nanjing)Corp.
An indirect
wholly-owned
subsidiary
135,674 - - - - -
TPO Displays
(Nanjing) Ltd
TPO Displays
Hong Kong Ltd.
An indirect
wholly-owned
subsidiary
214,012 2.74 - - 80,141 -
TPO Displays
Hong Kong Ltd.
TPO Displays
Shanghai Ltd.
An indirect
wholly-owned
subsidiary
508,899 0.01 507,176 Accelerate collection - -
TPO Displays
Hong Kong Ltd.
TPO Displays
(Sinepal) Ltd.
An indirect
wholly-owned
subsidiary
225,407 1.99 - - - -
J. Information on derivative transactions
a. As of June 30, 2010, the information on derivative financial instruments of investee companies is as follows:
Investee company Financial assets held for trading Book value (namely fair value) Contract amount (in thousands)
Chi Mei Lighting Technology Corporation Foreign exchange forward contract
- Sell HKD dollars (Sell HKD/Buy USD)$ 86 HKD 20,000
USD 2,572
Leadtek Global Group Limited Foreign exchange forward contract
- Sell USD dollars (Sell USD/Buy JPY)86,702 USD 85,000
JPY 7,765,325
$ 86,788
Investee company Financial liabilities held for trading Book value (namely fair value) Contract amount (in thousands)
Chi Mei Lighting Technology Corporation Foreign exchange forward contract
- Sell HKD dollars (Sell HKD/Buy USD)( $ 50) HKD 12,000
USD 1,540
( $ 50)
~93~
b. Additional disclosure:
As of June 30, 2010, the Company recognized net gain of $111,297 on derivative transactions (including net gain of $86,738 on valuation of financial assets and liabilities on June 30, 2010).
(3) Disclosure of information on indirect investments in Mainland China
A. Information on investments in Mainland China:
Name of
investee in
Mainland
China
Main activities
of investee
Capital
(in thousand
of USD)
Method of
investment
Balance of
amount remitted
from Taiwan on
January 1, 2010
(in thousands of USD)
Transactions during
Jan. 1, 2010 ~
Jun. 30, 2010
(in thousands of USD)
Balance of amount
remitted from
Taiwan as of
Jun. 30, 2010
(in thousands of USD)
Ownership
percentage held by
the Company
(Direct/indirect)
Profit recognized
during Jan. 1,
2010 ~ Jun. 30,
2010 (Note A)
Book value of
investment as of
Jun. 30, 2010
Profit remitted
to Taiwan
during Jan. 1,
2010 ~ Jun.
30, 2010
Remittance
out
Remittance
in
Innocom
Technology
Shenzhen Ltd.
Manufacturing and
production of
LCD backend
module
$ 164,000 Investee company
located outside
of Taiwan and
mainland China
remits its own
funds directly to
the investee
companies
located in
mainland China
$ 164,000 $ - $ - $ 164,000 100 $ 1,104,162 $ 11,121,707 $ -
Innocom
Technology
(Xiamen) Ltd.
Manufacturing and
production of
LCD backend
module
10,000 Investee company
located outside
of Taiwan and
mainland China
remits its own
funds directly to
the investee
companies
located in
mainland China
10,000 - - 10,000 100 90 324,497 -
Innocom
Technology
(Jia-shan) Ltd.
Manufacturing and
production of
LCD backend
module
18,000 Investee company
located outside
of Taiwan and
mainland China
remits its own
funds directly to
the investee
companies
located in
mainland China
- 8,000 - 8,000 100 ( 3,098) 581,742 -
~94~
Name of
investee in
Mainland
China
Main activities
of investee
Capital
(in thousand
of USD)
Method of
investment
Balance of
amount remitted
from Taiwan on
January 1, 2010
(in thousands of USD)
Transactions during
Jan. 1, 2010 ~
Jun. 30, 2010
(in thousands of USD)
Balance of amount
remitted from
Taiwan as of
Jun. 30, 2010
(in thousands of USD)
Ownership
percentage held by
the Company
(Direct/indirect)
Profit recognized
during Jan. 1,
2010 ~ Jun. 30,
2010 (Note A)
Book value of
investment as of
Jun. 30, 2010
Profit remitted
to Taiwan
during Jan. 1,
2010 ~ Jun.
30, 2010
Remittance
out
Remittance
in
OED Company Manufacturing andproduction ofLCD backendmodule
$ 5,500 Investee companylocated outsideof Taiwan andmainland Chinaremits its ownfunds directly tothe investeecompanieslocated inmainland China
$ - $ 1,500 $ - $ 1,500 2 $ - $ 117,077 $ -
InnocomTechnology(Chongqing)Co., Ltd.
Manufacturing andproduction ofLCD backendmodule
3,000 Investee companylocated outsideof Taiwan andmainland Chinaremits its ownfunds directly tothe investeecompanieslocated inmainland China
3,000 - - 3,000 100 64,662 163,130 -
Ningbo Chi MeiOptoelectronicsLtd.
Developing,manufacturing,customer serviceand warehousingon TFT-LCDmodule
97,000 Note C 97,000 - - 97,000 100 ( 204,900) 965,555 -
Ningbo Chi MeiElectronics Ltd.
Manufacturingand selling ofTFT-LCDmodules
215,000 Note C 180,000 - - 180,000 100 975,428 20,914,500 -
Nanhai Chi MeiElectronicsCorp.
Manufacturing andcustomer serviceon TFT-LCDmodule
166,600 Note C 160,000 6,600 - 166,600 100 693,629 5,438,198 -
Nanhai Chi MeiOptoelectronicsLtd.
Manufacturing andcustomer serviceon TFT-LCDmodule
36,500 Note C 36,500 - - 36,500 100 196 1,183,900 -
~95~
Name of
investee in
Mainland
China
Main activities
of investee
Capital
(in thousand
of USD)
Method of
investment
Balance of
amount remitted
from Taiwan on
January 1, 2010
(in thousands of USD)
Transactions during
Jan. 1, 2010 ~
Jun. 30, 2010
(in thousands of USD)
Balance of amount
remitted from
Taiwan as of
Jun. 30, 2010
(in thousands of USD)
Ownership
percentage held by
the Company
(Direct/indirect)
Profit recognized
during Jan. 1,
2010 ~ Jun. 30,
2010 (Note A)
Book value of
investment as of
Jun. 30, 2010
Profit remitted
to Taiwan
during Jan. 1,
2010 ~ Jun.
30, 2010
Remittance
out
Remittance
in
Ningbo Chi Hsin
Electronics Ltd.
Manufacturing and
customer service
on TFT-LCD
module
$ 29,150 Note C $ 29,150 $ - $ - $ 29,150 100 ($ 25,042) $ 135,100 $ -
Dongguan
Chi Hsin
Electronics
Corp.
Manufacturing and
customer service
on TFT-LCD
module
13,719 Note C 12,850 - - 12,850 100 19,717 526,833 -
Ningbo Chi Mei
Logistics
Co., Ltd.
Warehousing
Service4,000 Note C 4,000 - - 4,000 100 6,084 160,995 -
Foshan Chi Mei
Logistics
Co., Ltd.
Warehousing,
testing and
logistics service
of TFT-LCD
monitors
1,500 Note C 1,500 - - 1,500 100 902 41,705 -
Kunshan
Guan Jye
Electronics
Co., Ltd.
Manufacturing of
transformers8,400 Note C 2,690 - - 2,690 32 13,315 577,718 -
TPO Displays
(Nanjing) Ltd.
Liquid crystal
device (TN/STN,
assembly of
TFT-LCD device
module, not
including
TFT-LCD panel
process
120,000 Note C 91,000 29,000 - 120,000 100 12,851 3,123,961 -
TPO Displays
(Sinepal) Ltd.
Purchases and sales
of monitor-related
components
2,100 Note C 2,100 - - 2,100 100 ( 1,289) 102,042 -
Kunpal
Optoelectronics
Ltd.
TFT-LCD glass
thinning
processing
4,000 Note C 2,267 - - 2,267 57 ( 4,857) 419,833 -
~96~
Name of
investee in
Mainland
China
Main activities
of investee
Capital
(in thousand
of USD)
Method of
investment
Balance of
amount remitted
from Taiwan on
January 1, 2010
(in thousands of USD)
Transactions during
Jan. 1, 2010 ~
Jun. 30, 2010
(in thousands of USD)
Balance of amount
remitted from
Taiwan as of
Jun. 30, 2010
(in thousands of USD)
Ownership
percentage held by
the Company
(Direct/indirect)
Profit recognized
during Jan. 1,
2010 ~ Jun. 30,
2010 (Note A)
Book value of
investment as of
Jun. 30, 2010
Profit remitted
to Taiwan
during Jan. 1,
2010 ~ Jun.
30, 2010
Remittance
out
Remittance
in
VAP
Optoelectronics
(Nanjing)Corp.
Selling and
customer service
of LCD module,
back light module
and related
component
$ 6,600 Note C $ - $ 300 $ - $ 300 100 ($ 29,850)($ 273,291) $ -
TPO Displays
Shanghai Ltd.
Liquid crystal
devices21,000 Note C - - - - 100 ( 16,894)( 330,997) -
Amlink
(Shanghai) Ltd.
Manufacturing and
selling of power
supply, modem,
ADSL, and other
IT equipments
20,000 Note C 10,000 - - 10,000 45 54,064 490,099 -
B. Information on investments in Mainland China:
Accumulated amount wired
out from Taiwan to mainland
China as of the end of the period
Investment amount
approved by FIC of MOEA
Ceiling of investment
amount of the Company
NT$ 28,848,677 NT$ 37,009,408 Note B
(US$ 897,315) (US$ 1,151,148)
Note A: Profit or loss recognized for the six-month period ended June 30, 2010 were not reviewed by the independent accountants.
Note B: Pursuant to the Jing-Shen-Zi Letter No. 09704604680 of the Ministry of Economic Affairs, R.O.C., dated August 29, 2008, as the Company has obtained the certificate of conforming to the business
scope of headquarters, issued by the Industrial Development Bureau, MOEA, the investment ceiling regulation for Taiwan-based companies investing in Mainland China is not applicable to the Company.
Note C: The company was acquired from merger. The way of investment in Mainland China was through an existing company in third area.
C. Significant transactions with investee in Mainland China:
The significant transactions between the Company and the investee companies for the six-month period ended June 30, 2010 were eliminated in these financial statements and shown in Notes 5(2) 1, 3, 4, 7, and
9 and Notes 11(1) B, G, and H.
~97~
(4) The relationship and significant transactions between the Company and its subsidiaries
For the six-month period ended June 30, 2009
Number
(Note A) Name of counterparty Name of transaction parties
Relationship
(Note B)
Information from transactions (Notes c and d) Percentage of
total combined
revenue or total assetsSubject Amount
Transaction terms
(Note C)
0 Chimei Innolux Corporation Lakers Trading Ltd. 1 Accounts payable $ 4,753,575 - 3
0 Chimei Innolux Corporation Lakers Trading Ltd. 1 Processing costs 6,400,336 - 9
0 Chimei Innolux Corporation Lakers Trading Ltd. 1 Accrued expenses 3,081,159 - 2
0 Chimei Innolux Corporation Lakers Trading Ltd. 1 Sales 190,781 - -
0 Chimei Innolux Corporation Innolux Corporation Ltd. 1 Sales 10,041,318 - 14
0 Chimei Innolux Corporation Innolux Corporation Ltd. 1 Accounts receivable 2,337,830 - 1
0 Chimei Innolux Corporation Innocom Technology Shenzhen Ltd. 1 Sales 7,189,079 - 10
0 Chimei Innolux Corporation Innocom Technology Shenzhen Ltd. 1 Accounts receivable 2,998,436 - 2
1 Lakers Trading Ltd. Innocom Technology Shenzhen Ltd. 3 Processing costs 5,698,116 - 8
1 Lakers Trading Ltd. Innocom Technology Shenzhen Ltd. 3 Accrued expenses 2,316,998 - 1
For the six-month period ended June 30, 2010
Number
(Note A) Name of counterparty Name of transaction parties
Relationship
(Note B)
Information from transactions (Notes c and d)
Percentage of
total combined
revenue or total assetsSubject Amount
Transaction terms
(Note C)
0 Chimei Innolux Corporation Innolux Corporation Ltd. 1 Sales $ 14,439,862 - 7
0 Chimei Innolux Corporation Innolux Corporation Ltd. 1 Accounts receivable 3,535,636 - -
0 Chimei Innolux Corporation Innocom Technology Shenzhen Ltd. 1 Sales 7,332,944 - 3
0 Chimei Innolux Corporation Innocom Technology Shenzhen Ltd. 1 Accounts receivable 2,004,634 - -
0 Chimei Innolux Corporation Nanhai Chi Mei Electronics Corp. 1 Sales 817,210 - -
0 Chimei Innolux Corporation Ningbo Chi Mei Optoelectronics Ltd. 1 Sales 237,431 - -
0 Chimei Innolux Corporation Ningbo Chi Mei Electronics Ltd. 1 Sales 140,176 - -
0 Chimei Innolux Corporation Ningbo Chi Mei Electronics Ltd. 1 Accounts receivable 474,683 - -
0 Chimei Innolux Corporation Chi Mei
Optoelectronics Japan Co., Ltd.
1 Sales 1,722,588 - -
0 Chimei Innolux Corporation Chi Mei
Optoelectronics Japan Co., Ltd.
1 Accounts receivable 1,134,168 - -
0 Chimei Innolux Corporation Toptech Trading Limited 1 Sales 476,701 - -
0 Chimei Innolux Corporation Toptech Trading Limited 1 Accounts receivable 325,822 - -
0 Chimei Innolux Corporation TPO Displays Hong Kong Ltd. 1 Sales 3,199,584 - 1
0 Chimei Innolux Corporation TPO Displays Hong Kong Ltd. 1 Accounts receivable 3,444,306 - -
0 Chimei Innolux Corporation TPO Displays Shanghai Ltd. 1 Sales 304,474 - -
0 Chimei Innolux Corporation TPO Displays Shanghai Ltd. 1 Accounts receivable 434,803 - -
~98~
For the six-month period ended June 30, 2010
Number
(Note A) Name of counterparty Name of transaction parties
Relationship
(Note B)
Information from transactions (Notes c and d)
Percentage of
total combined
revenue or total assetsSubject Amount
Transaction terms
(Note C)
0 Chimei Innolux Corporation TPO Displays Hong Kong Ltd. 1 Purchases $ 288,556 - -
0 Chimei Innolux Corporation TPO Displays Hong Kong Ltd. 1 Accounts payable 154,739 - -
0 Chimei Innolux Corporation TPO Displays (Sinepal) Ltd. 1 Purchases 282,334 - -
0 Chimei Innolux Corporation TPO Displays (Sinepal) Ltd. 1 Accounts receivable 241,644 - -
0 Chimei Innolux Corporation TPO Displays Japan K. K. 1 Purchases 218,418 - -
0 Chimei Innolux Corporation TPO Displays Japan K. K. 1 Accounts payable 1,228,882 - -
0 Chimei Innolux Corporation Leadtek Global Group Limited 1 Processing costs 30,696,654 - 14
0 Chimei Innolux Corporation Leadtek Global Group Limited 1 Accounts payable 43,330,426 - 6
0 Chimei Innolux Corporation Lakers Trading Ltd. 1 Processing costs 9,441,264 - 4
0 Chimei Innolux Corporation Lakers Trading Ltd. 1 Accounts payable 1,218,626 - -
0 Chimei Innolux Corporation Toptech Trading Limited 1 Processing costs 761,475 - -
0 Chimei Innolux Corporation Dragon Flame Industrial Ltd. 1 Accounts payable 107,792 - -
1 Innocom Technology Shenzhen Ltd. Lakers Trading Ltd. 3 Processing costs 8,801,525 - 4
1 Lakers Trading Ltd. Carson Ld. B. H. 3 Processing costs 449,794 - -
1 Lakers Trading Ltd. Carson Ld. B. H. 3 Accounts payable 2,106,501 - -
1 Innocom Technology Shenzhen Ltd. Hongfujin Precision Industry
(Shenzhen) Co., Ltd.
3 Processing costs 534,374 - -
1 Ningbo Chi Mei Electronics Ltd. Leadtek Global Group Limited 3 Processing revenue 31,177,611 - 14
1 Ningbo Chi Mei Electronics Ltd. Leadtek Global Group Limited 3 Accounts receivable 21,380,448 - 3
1 Nanhai Chi Mei Electronics Corp. Leadtek Global Group Limited 3 Processing revenue 16,162,041 - 7
1 Nanhai Chi Mei Electronics Corp. Leadtek Global Group Limited 3 Accounts receivable 8,217,161 - -
1 Ningbo Chi Hsin Electrics Ltd. Leadtek Global Group Limited 3 Processing revenue 2,580,688 - 1
1 Ningbo Chi Hsin Electrics Ltd. Leadtek Global Group Limited 3 Accounts receivable 234,723 - -
1 Dongguan Chi Hsin
Electronics Corp.Leadtek Global Group Limited
3 Processing revenue 237,457 - -
1 Dongguan Chi Hsin
Electronics Corp.Leadtek Global Group Limited
3 Accounts receivable 376,334 - -
1 Ningbo Chi Mei
Optoelectronics Ltd.Leadtek Global Group Limited
3 Processing revenue 1,166,674 - 1
1 Ningbo Chi Mei
Optoelectronics Ltd.Leadtek Global Group Limited
3 Accounts receivable 476,394 - -
1 TPO Displays (Nanjing) Ltd. Toptech Trading Limited 3 Processing revenue 987,841 - -
1 TPO Displays (Nanjing) Ltd. TPO Displays Hong Kong Ltd. 3 Processing revenue 293,112 - -
1 TPO Displays (Nanjing) Ltd. TPO Displays Hong Kong Ltd. 3 Accounts receivable 214,012 - -
~99~
For the six-month period ended June 30, 2010
Number
(Note A) Name of counterparty Name of transaction parties
Relationship
(Note B)
Information from transactions (Notes c and d)
Percentage of
total combined
revenue or total assetsSubject Amount
Transaction terms
(Note C)
1 VAP Optoelectronics
(Nanjing)Corp.
Toptech Trading Limited 3 Processing revenue $ 271,391 - -
1 VAP Optoelectronics
(Nanjing)Corp.Toptech Trading Limited
3 Accounts receivable 151,148 - -
1 TPO Displays Shanghai Ltd. TPO Displays Hong Kong Ltd. 3 Processing revenue 2,836,197 - 1
1 TPO Displays Shanghai Ltd. TPO Displays Hong Kong Ltd. 3 Accounts receivable 1,219,790 - -
1 Toptech Trading Limited TPO Displays (Sinepal) Ltd. 3 Sales 989,656 - -
1 Toptech Trading Limited TPO Displays (Sinepal) Ltd. 3 Accounts receivable 463,997 - -
1 Toptech Trading Limited VAP Optoelectronics (Nanjing)Corp. 3 Sales 292,293 - -
1 TPO Displays Hong Kong Ltd. TPO Displays (Sinepal) Ltd. 3 Sales 224,291 - -
1 TPO Displays Hong Kong Ltd. TPO Displays (Sinepal) Ltd. 3 Accounts receivable 225,407 - -
1 Chi Mei
Lighting Technology Corporation
Foshan Chi Mei LightingTechnology
Ltd.
3 Sales 250,051 - -
1 Chi Mei
Lighting Technology Corporation
Foshan Chi Mei LightingTechnology
Ltd.
3 Accounts receivable 186,171 - -
1 Innocom Technology
Shenzhen Ltd.
Innocom Technology (Chongqing) Co.,
Ltd.
3 Sales 156,395 - -
1 Innocom Technology
Shenzhen Ltd.
Innocom Technology (Chongqing) Co.,
Ltd.
3 Accounts receivable 121,921 - -
Note A: The transaction information of the Company and the consolidated subsidiaries should be noted in column “Number”. The number means:
1. Number 0 represents the Company.
2. The consolidated subsidiaries are in order from number 1.
Note B: The relationships with the transaction parties are as follows:
1. The Company to the consolidated subsidiary.
3. The consolidated subsidiary to another consolidated subsidiary.
Note C: Except for no comparable transactions from related parties, sales prices were similar to non-related parties transactions and the collection period was 30~120 days; the purchases from related parties wereat market prices and payment term was 30~120 days upon receipt of goods.
Note D: Amount disclosure standard: purchases, sales and receivables from related parties in excess of $100,000 or 20% of capital.
Note E: Amount of transactions between subsidiaries represent transactions during the first semi-annual of 2010.
12. SEGMENT INFORMATION
In accordance with R.O.C SFAS No. 23, segment financial information is not required for interim financial statements.
Top Related