Information updated to 2006.04.20 48 2005 Annual Report Key figures Unit: NT$ million
Year 2001 2002 2003 2004 2005 Sales Revenue 58,820 93,229 108,699 147,770 124,407 Net Income 3,031 7,400 7,500 7,619 (5,226) Net Margin (%) 5 8 7 5 (4) Retroactively Adjusted Earnings Per Share (NT$/share) 1.32 3.08 3.03 3.10 (2.12) Net Asset Value 28,141 41,278 45,462 49,078 44,431
Note: All financials are non-consolidated figures (Taiwan parent company level)
48 2005 Annual Report Message To Our Shareholders Message To Shareholders Our Dear Esteemed BenQ Shareholders, BenQ announced in June 2005 it will acquire Siemens AG’s mobile handset business (Siemens MD) in an acquisition that successfully propelled BenQ onto the global stage as a renowned brand.
Following the closing of the acquisition, we began our first step in Q4 of 2005 when the Company incurred a net loss of 5.2 billion NT$ in 2005, translating to a loss of 2.12 NT$ per share on revenue of NT$ 162.3 billion on consolidated basis. Since fourth quarter 2005, we have worked seamlessly with our Germany-based co-workers and re-enforced managerial resources in areas where BenQ has a strong comparative advantage. In a truly complementary merger of mobile handset assets without breaking our stride, we introduced twelve breathtaking new handsets in Q1 of 2006. Since October, the Company has undertaken restructuring initiatives to cut costs, to accelerate time-to-market for new products, and to restore customer confidence. I believe our initial efforts have resulted in a successful repositioning of the newly launched BenQ-Siemens brand. We are confident BenQ-Siemens will be synonymous with leadership in multimedia innovation, attractive styling and form factors, and potent lifestyle benefits. With the twelve new handsets and others to come, order books should continue to strengthen along with profit contribution.
e Company’s various major product lines continued their strong performance in 2005. BenQ’s LCD displays lead the industry in quality and functionality leveraging our advanced display technology and vertical integration within our business group. In a year when we continued topping previous shipment totals, BenQ gained significant market share to solidify the Company’s position as a global top three manufacturer of LCD displays. In some countries, notably Brazil, Russia, India, and China, BenQ has become the leading name in the display market. In the projector product space, BenQ’s projectors ascended to the number top two spot in sales globally in the fourth quarter of 2005. e company’s success in projector business is anchored by our industry-leading technology, short time-to-market and effective channel strategy.
Continuous innovation has always been central to BenQ's corporate strategy, and we intend to continue creating world-class products with designs that captivate consumers’ imagination. In March 2006, BenQ received 17 major design distinctions— third highest total in the world—at Germany’s prestigious iF Design Award. In total, BenQ received 125 major international design awards in the last four years. Leveraging BenQ’s design prowess and Germany’s heritage in engineering and precision cramanship, we believe BenQ-Siemens will continue to captivate the world with creativity and quality. Reflecting the Company's commitment to innovation, BenQ has allocated about 3% of sales to research & development over the past five years and currently holds approximately 3000 global patents.
On the outside, the Siemens MD acquisition catapulted BenQ onto the world stage. On the inside, the quest for greater focus and profitability is never ending. In April 2006, the company formed a strategic alliance with Lite-On IT through manufacturing integration in optical storage products, bringing together two of the industry’s leading players and enhanced the overall competitiveness of Taiwan’s storage sector. Our management team aims to continue streamlining business processes, driving better focus and higher profitability.
Although the initial integration period at BenQ Mobile is not without pain, we are very upbeat about the initial synergies. Our journey to build a global brand has not been possible without your support. We have the conviction that directing the Company away from the hyper-competitive forces of the ODM business model was the right thing to do. Whichever the corporate direction, we have never let out of our sight the principal objective when it comes to taking care of shareholders: to generate solid returns.
As we look ahead to 2006 and beyond, we expect both the profit-and-loss accounts and balance sheet to strengthen over time, and when they do, return-on-equity and cash flow generation should improve significantly. We thank you for your continued support!
Yours sincerely,
K.Y. Lee - Chairman Sheaffer Lee- Chief Operating Officer
2005 Annual Report 1 Corporate Strategy
Table of Contents Message To Our Shareholders 01 Table of Contents 02 Corporate Strategy 03 Review of Operations and Product Strategy 11 Corporate Governance 30 Company Financials 38
Contact Information
BENQ CORPORATION REGISTRAR & TRANSFER AGENT Headquarters / Taoyuan Plant SinoPac Securities 157 Shan-Ying Road, Gueishan, Taoyuan 333, Taiwan, R.O.C. 3F, 53, Po Ai Road, Taipei 100, Taiwan, R.O.C. Phone: 886-3-359-8800 Phone: 886-2-2381-6288 http://www.sinopacsecurities.com Taipei office 18 Jihu Road, Neihu, Taipei 114, Taiwan, R.O.C. INDEPENDENT ACCOUNTANTS Phone: 886-2-2799-8800 Wu Kuo-Feng & Wang Ming-Jhy, CPA KPMG Peat Marwick INVESTOR RELATIONS CONTACTS 6th Fl., No. 156, Sec.3, Min-Sheng East Road, Taipei 105, Taiwan, Spokesperson R.O.C. Eric ky Yu Phone: 886-2-2715-9999 VP- CFO http://www.kpmg.com.tw Phone: 886-3-359-8800 [email protected] DOMESTIC STOCK EXCHANGE LISTING BenQ Common shares Deputy Spokesperson Taiwan Stock Exchange Corporation Jasmin Hung / David W Huang http://www.tse.com.tw/en/ Controller / Senior Manager of Finance Phone: 886-3-359-8800 OVERSEAS SECURITY EXCHANGE LISTING [email protected] For further information, visit BenQ worldwide website and login at BENQ ON THE INTERNET Investor Relations
BenQ’s Investor Relations home page on the worldwide website BenQ Global Depositary Shares offers a wealth of corporate information, including the latest annual Luxemburg Stock Exchange report and financial results. ISIN: US0823012010 Website: BenQ.com/ir.htm http://www.bourse.lu
BenQ Euro Convertible Bonds Luxemburg Stock Exchange ISIN: UX0124567602 http://www.bourse.lu
2 2005 Annual Report 3 Corporate Strategy
CorporateProjector PE7700 Strategy
BenQ enters 2006 a better known brand in many Asia Pacific and European markets. e company is building its 5C strategy (computing, communications, consumer electronics, crystal & component, cool brand & caring) to better address market trends and consumers’ digital lifestyle needs. At BenQ, we believe the new digital lifestyle is being shaped by the meeting of opposites. No where is the new digital lifestyle more obvious than where work meets play, and where style fuses with function; where connectivity is married with mobility, and where here mixes with there; where the familiar is united with the unexpected, and where technology and enjoyment merge to become one.
Since the inception of the BenQ brand four years ago, BenQ has achieved its initial goals of high growth and awareness.
In 2005 BenQ introduced a new entrant onto the global stage, BenQ Mobile, in the mobile handset industry when BenQ acquired Siemens AG’s mobile devices business group.
We believe this new combination of precision German crasmanship and digital enjoyment will power BenQ- Siemens’ unique growth platform. Having achieved its goals of awareness building in many key markets, BenQ now enters a new phase of growth with the goal of becoming a brand that consumers prefer.
2 2005 Annual Report 2005 Annual Report 3 5C Corporate Strategy Corporate Strategy 5C Strategy Better Addressing Market Trends and Consumer Digital Lifestyles 5C
For a number of years, BenQ has been developing leading–edge products consistent with the company's computing- communications-consumer electronics (3C) roadmap. Today, BenQ is one of a few Asian brands expanding beyond the 3C technology arena; BenQ's business/product strategy now incorporates two additional elements-- BenQ's crystal TFT LCD technology and cool branding -- to make up what we call the 5C strategy.
We are optimistic that BenQ's 5C strategy will enable the company to better address multimedia convergence trends, which we believe will center on three applications having one common element in the crystal TFT LCD technology: mobile phone, laptop computer, and television.
With crystal TFT LCD technology playing an essential role in all these applications and BenQ's group of companies possessing Know-how on key component technologies, BenQ is well positioned to realize 5C vision of building a cool brand strong on lifestyle benefits, leveraging strong core technological strengths.
4 2005 Annual Report 2005 Annual Report 5 Meeting of Opposites Corporate Strategy BenQ's Design Philosophy To fulfill BenQ’s vision of "Bringing Enjoyment and Quality to Life," BenQ established its Lifestyle Design Center (LDC) focused on delivering better designs and technology to meet consumer demands.
BenQ’s design philosophy highlights harmony in the "Meeting of Opposites" and optimal fusion of functional and emotional benefits. BenQ extracts the essence of the Western & Asian culture, philosophy, architecture and artifacts, and infuses it with modern occidental design composition to create a unique design language.
Winner of 125 global awards in the past four years, BenQ is establishing itself as a leader in industrial design and positioned to score winning impressions. - BenQ Lifestyle Design Center
"If we could test design on a temperature meter, we would find modernism or rationalism on the extreme cold side and post- modernism on the extreme hot side."
- Andrea Branzi, highly respected Italian architect/designer
BenQ design, staying abreast of lifestyle trends and moving swily between the extremes of hot and cold, seeks the most optimal temperature.
4 2005 Annual Report 2005 Annual Report 5 BenQ-Siemens Visual Identity - Squound Corporate Strategy Square + Round e BenQ-Siemens visual identity is to present the best combination of both brand values (German heritage engineering and Designing enjoyment) and strengthen the joint brand with instantly recognizable visuals for the brand migration period.
A synthesis of square (stands for Siemens' rational values) and round (stands for BenQ's organic, emotional values), the Squound represents that two companies fusing their respective traits to the market and the consumer: East meets West.
e Squound is not only purely decorative but always has a function. It must be attached to one of the most important elements in the page, e. g. the headline, the product name, the product, etc.
2D Squound is used for restricted purposes and as a base for layout development while 3D Squound is used whenever applicable. Squound is the special identity that represents the connection of these two brands and will be used for mobile phone product line only.
A set of category patterns for BenQ-Siemens were developed based on BenQ's existing patterns, but has been made more dynamic and more recessive in color to communicate the new sophistication and technology that BenQ-Siemens offers.
2D Squound 3D translucent Squound
6 2005 Annual Report 2005 Annual Report 7 Keep Exploring Corporate Strategy Technology meets enjoyment For our new age digital denizen, life flows seamlessly from one new experience to another. And while enjoyment always matters, our vision now pushes it to the next level. Where the old distinctions between work and play, global and local, young and old get blurred. Where styles fuses with functionality, where connectivity is married with mobility, where technology and enjoyment finally merge to become one. Aer all, when opposites embrace, walls are torn down setting you free to explore totally new experiences in digital living.
With the strategic acquisition of the Siemens mobile division, BenQ is poised for the next level in global leadership, powering the 3Cs of digital convergence. e acquisition perfectly represents BenQ's design philosophy - “meeting of opposites”; combining Siemens' engineering reliability with BenQ's acclaimed design innovativeness. e perfect synergy of BenQ's youthful dynamism and Siemens' technological trust; blending BenQ's strengths in connectivity & display technology, with Siemens' wireless & GPRS portfolio. And it reflects the core BenQ philosophy of looking at constant integration of opposites to challenge conventions and create breakthrough ideas.
Exploring possibilities of 3C lifestyle e sheer spirit of exploration has the power to change worlds. is is why BenQ constantly strives for innovative ways to enhance people's lifestyles into 3C digital spheres – communication, consumer electronics and computing. One of the fastest growing spheres is communications, making it the driving force behind BenQ's recent acquisition of Siemens' mobile devices business group.
It's this unique explorative spirit that will drive us into the future. Our brand personality embodies these very values: to be challenging in a way that breaks conventions, to be original such that we deliver the unexpected, to be authentic in terms of simplicity and reliability, to be vibrant in our dynamism and design, and most importantly, to be joyful, so that every new BenQ product delights you with freshness.
Fusing lifestyle with design BenQ's product design is based on the simple belief that technology too must have a human soul. BenQ sees technology products not just as a functional tool, but as a symbol of the user's individuality & lifestyle.
And as with everything else in BenQ, BenQ's product design reflects the harmony of opposites. Blending subtle minimalism with touches of luxury, BenQ extracts the essence of Asian design fluidity and infuses it with modern Western technology. us creating an elegant design language that's totally unique to BenQ.
Bringing enjoyment & quality to life As one of the rare few technology brands with a complete portfolio in the three areas of Computing, Communications and Consumer Electronics, only BenQ can make this vision come alive. So switch on the enjoyment and keep exploring.
BenQ promises to make every experience of networked personal electronics an enjoyable one. Because we believe enjoyment comes when people experience and explore more. When they can create, share and achieve more using better tools and technologies. When they truly fulfil their true potential.
is is why BenQ keeps exploring and pushing every boundary in all areas of 3C Lifestyle Enjoyment, to truly brings enjoyment and quality to life.
6 2005 Annual Report 2005 Annual Report 7 BenQ Group-Sharing Resources and Corporate Strategy Leveraging Synergy
BenQ Group AU Optronics Darfon Electronics ■Digital Media Business ■TFT-LCD Modules ■Keyboard & Mouse ■Mobile Business ■PDP Modules ■Fine Ceramic Power Devices ■Computing Products Business ■OLED/LTPS ■Inverters ■Telecommunication components
Daxon Technology Cando Raydium ■Storage Media/Polarizers ■Color filters for TFT-LCD displays ■TFT-LCD driver IC solution provider
Airoha Technology PBDS BenQ GURU Soware ■RF/mixed signal IC ■Digital Media ■E-Business Solutions & Services ■Solutions for wireless applications
8 2005 Annual Report 2005 Annual Report 9 125 International Design Awards Corporate Strategy
America Germany Japan Germany China America
8 2005 Annual Report 2005 Annual Report 9 iF Design Award 2006 Seventeen BenQ lifestyle designed products will receive the prestigious 2006 iF Design Award for design excellence, including a BenQ scanner which will also receive iF International Forum Design’s top honor, the Gold Award. e addition of the 17 iF awards brings BenQ’s total number of iF Awards to 35.
BenQ expects to reposition itself as an industry leader and secures leadership in innovation, leadership in design and user experience, and leadership in multimedia and applications since BenQ's acquisition of Siemens' mobile devices business group.
e iF Design Award is deemed as one of the most significant design competitions worldwide.
BenQ design philosophy "Meeting the Opposite" is focused on enhancing the consumers' lifestyles by incorporating both functional and emotional elements into our product designs.
Mobile Phone Mobile Phone Mobile Phone Mobile Phone Mobile Phone BenQ M580 BenQ-Siemens S81 BenQ-Siemens S88 BenQ-Siemens E61 BenQ-Siemens CF81
Mobile Phone Mobile Phone Mobile Phone Mobile Phone Digital Camera Digital Camera BenQ-Siemens CL71 Siemens CF110 Siemens SL75 Siemens AX75 BenQ DC E520 BenQ DC X610
Wireless Optical Mouse LCD Monitor LCD Monitor LCD TV Scanner Pocket Writer BenQ M530 BenQ FP72V BenQ FP93V BenQ VL3231 BenQ 7350CT BenQ PW100
10 2005 Annual Report 11 Review of
Operations and Product Strategy Operations and Product Strategy BenQ-Siemens S88
■Mobile Business Group ■Computing Products Business Group ■Digital Media Business Grorp
10 2005 Annual Report 2005 Annual Report 11 Mobile Business Group ings change for the better through exploration. BenQ is constantly striving for innovative ways to enhance people's lifestyles in 3C digital sphere – communication , consumer electronics and computing. One of the fastest growing spheres is communications, making it a strong driver in BenQ's recent acquisition of Siemens' mobile devices business group. Together they form a fresh new player in the mobile industry: BenQ Mobile.
e power of the new BenQ-Siemens brand lies in the ability to unite complementary strengths. BenQ-Siemens brings together the best of two worlds – uniting Siemens, a telecommunications pioneer with BenQ, a technological lifestyle leader. e new brand combines engineering quality and reliability with a true sense of enjoyment and appealing design, reflecting an interplay between design and functionality that is leading to innovative and bringing new surprising and elegant products.
To realize our long-term sustainable business model, we formed a complementary partnership with Siemens Mobile Devices in October of 2005. BenQ Mobile was formed and overnight we became a real 3C powerhouse. is is without a doubt the biggest change BenQ has seen since its establishment.
- K.Y. Lee, Chairman
Main products ■GSM/GPRS/EDGE mobile phones ■W-CDMA mobile phones ■Smartphones ■CDMA IS-95/CDMA 2000 1X RTT mobile phones ■Wireless PDA's
Review of Operations Business Results Since BenQ acquired the Mobile Devices ("MD") business of Siemens AG on 1 October, 2005, this has created the world's sixth handset maker, and the largest mobile phone technology company in Greater China. e company expects its revenue base should come close to doubling with the acquisition.
e partnership, headquartered in Munich, created one of the world's leading global players in the mobile handset industry, with strong global manufacturing, design expertise and a robust intellectual property portfolio. e strategic partnership combined the uniquely complementary strengths of both companies.
With the Siemens trademark for mobile phones and co-branding rights to BenQ-Siemens , this provided immediate global upli to BenQ's business development efforts through an association with the Siemens brand, which ranked number 39 in a recent global brand survey.
12 2005 Annual Report 2005 Annual Report 13 Mobile Business Group
■Merging the organizations in order to simplify and focus: ● Offering a compelling roadmap and introducing global categories to strengthen and “consumerize” portfolio ● Establishing one global product house to comprise important value creation functions (R&D, SCM and Procurement) ● Setting up new regional offices of sales and distribution to better address local markets and needs ■Introducing the combined brand BenQ-Siemens to communicate new identity and positioning ■Signing sponsoring agreement with Real Madrid soccer team to support new brand positioning ■Setting up a persistent cost management program
Product Features and Awards Continuing a tradition of excellence, BenQ-Siemens launched 12 exciting new handsets in first quarter of 2006: BenQ-Siemens EF81 ■UMTS in a 15.9 mm slim magnesium clamshell ■2.0 megapixel camera for video telephony, still photography and video recording ■Two large displays (2.2 inch QVGA and 1.3 inch QQVGA) ■Premium materials ■Wide range of Headset Bluetooth solutions
BenQ-Siemens EF91 ■High-speed data transfer and downloads via HSDPA Swi and easy sharing of photos, videos and multimedia content via 3.5G service ■Excellent high-resolution camera 3.2 megapixel autofocus camera with integrated LED flash and 7x digital zoom. Video recording, playback, streaming and progressive download. ■Brilliant display A brilliant display with 262,144 colors, LTPS TFT, 240 x 320 pixels, 2.0 inches ■Intelligent power saving via light sensors
BenQ-Siemens EL71 Unexpected Finishing ■Real metal finish - brushed aluminum and magnesium ■Slim and compact slider - 16.5 mm thin ■Very bright QVGA display for optimal readability both indoors and outdoors, 262,144 colors
12 2005 Annual Report 2005 Annual Report 13 BenQ-Siemens CF61 Multifaceted Snapshot Phone ■Exchangeable front covers to suit your style ■3D surround sound allows you to enjoy music with friends ■High-quality 1.3 megapixel camera with "9 consecutive shots" & "living picture" options ■MicroSDTM slot
BenQ-Siemens EF51 ■A fully featured music solution: FM-Radio, music-player (MP3/WMA/AAC(+)), music MMI, miniSD? card slot, easy file transfer mobile phone – PC, bundled stereo headset and USB data cable ■ Dual mode design concept: music player style with special music keypad in closed mode, mobile phone in open mode ■More than a music player: Music specials: Speech-to-MusicTM, audio & FM radio recording, 3D surround sound and 6 band equalizers, Show-lyrics function. 1.3 mega pixel camera with 4x digital zoom.
BenQ-Siemens E61 ■iF Design Award 2006 ■Exquisite and fashion ID design ■Musical fun with dedicated MP3 control keys on the top ■Extendable memory card (Mini SD) ■VGA camera, 2x/4x linear digital zoom ■Loud speaker playing
BenQ-Siemens CL71 ■iF Design Award 2006 ■Super slim slide phone with semi-automatic slider mechanism ■Rich multi-media applications ■Large and high-quality TFT display ■Extendable memory
BenQ-Siemens S88 ■Brilliant Active Matrix OLED with 170o viewing angle and 10,000:1 contrast ratio for display of multimedia content, 2.0", 176 x 220 pixels ■2.0 megapixel camera with 16x smooth digital zoom, autofocus and LED flash ■ull multimedia support: video recording/playback, music player, microSDTM card slot ■Direct printing of pictures with PictBridge
14 2005 Annual Report 2005 Annual Report 15 Mobile Business Group
BenQ-Siemens S81 Slim Look – Full UMTS ■UMTS with high-speed data rate (384 Kbps) realized in a slim design ■Video telephony via VGA camera ■Video streaming and downloading with H.264/AAC+ format ■MP3 player – microSDTM card slot (min 30 MB built-in memory) ■Integrated 1.3 megapixel camera with LED flash ■Full PIM function and easy PC synchronization
BenQ-Siemens S68 Professional Convenience ■Premium slim design with an extraordinary finish ■Focus on core business functions ■Convenient usage with voice message and dictaphone key, Fast DialingTM key ■Optimal visibility of display content under all lighting conditions ■Design focused on best ergonomics and usability
BenQ-Siemens C81 Multimedia Companion ■Full multimedia support: video recording, playback and streaming ■Latest audio codecs: MP3-eAAC+ and enhanced music sorting ■Best-in-class loudspeaker for superior sound ■1.3 megapixel camera with 5x digital zoom ■Video ringtones and sound recorder ■128 MB RS-MultiMediaCard & Headset Stereo bundled for up to 10 h of music listening
BenQ-Siemens P51 e Smart Navigator ■Full business functionality: Windows MobileTM 5.0, SKYPE, ActiveSync, e-mail push, document browsing and editing incl. PowerPoint ■Mobile navigator with integrated GPS receiver & onboard navigation solution (optional) ■Seamless connectivity: WLAN 802.11 b/g, Bluetooth , USB, SDIO slot ■Easy date input: QWERTY keyboard, large touchscreen display ■Full multimedia features: 1.3 megapixel camera, media player for video & music, ...
14 2005 Annual Report 2005 Annual Report 15 Research & Development Technologies in deployment ■GSM/GPRS/EDGE tri-band mobile phones ■W-CDMA mobile phones ■HSDPA mobile phones ■WIFI/WLAN enabled mobile phones ■Windows mobile-based smart phones ■CDMA 2000 1X RTT mobile phones ■Symbian-based smart phones
On-going efforts ■Innovative user-interface concepts and materials ■Navigation (GPS) ■Other user experience enhancing technologies (cameras, displays, storage, etc.)
Industry, Product Overview and Outlook Overview and Outlook According to various research estimates, the size of global mobile phone market is expected to grow from 772 million handsets in 2005 to 1,129 million handsets in 2010. Regional markets in descending order of market size are as follows: Asia, North America, Western Europe, Latin America, the Middle East and Africa, and Eastern Europe. Regional markets in descending order of growth rate are Asia, the Middle East and Africa, Latin America, North America, Eastern Europe and Western Europe. With the world's largest population and strong demand in new mobile phones, Asia is the number one market by size and by growth rate. e Middle East and Africa have also grown fast due to strong demand in new mobile phones. Increasing penetration in mobile phones has slowed down the expansion of new users in Latin America. However, growing demand in mobile phone replacement has led to a certain degree of expansion for overall market size. In terms of North America, Western Europe and Eastern Europe, because of steady replacement handset purchases, their market sizes remain the same.
Driven by high growth of new subscribers in emerging markets (e.g. India, Russia) and strong replacement sales in saturated markets we expect that global sales of mobile phones to end users will grow with more than 10% yoy (unit base).
Source: Strategy Analytics, February 2006
16 2005 Annual Report 2005 Annual Report 17 Mobile Business Group
Competition and Market Share Global sell-in mobile phones 2005 (units) -all standards
Source: Strategy Analytics, February 2006
In 2005 worldwide sell-in in all handset technology standards, amongst global top five mobile phone brands in descending order are Nokia with 32% share, Motorola with 18% share, Samsung with 13% share, LG with 7% share and Sony Ericsson with 6% share. BenQ Siemens was ranked No 6 with 5% share.
Global sell-in mobile phones 2005 (units) - GSM only
Source: Strategy Analytics, February 2006
In 2005 worldwide sell-in in GSM standard, global top five mobile phone brands in descending order are Nokia with 38% share, Motorola with 17% share, Samsung with 12% share and Sony Ericsson with 8% share. BenQ Siemens was ranked No 5 with 6 % share.
16 2005 Annual Report 2005 Annual Report 17 Product Strategy in 2006 Key elements of BenQ's product strategy include: ■Enhancing the portfolio BenQ-Siemens focus is on exploring the boundaries of innovation in design and technology, leading with 3G innovations (HSDPA), pioneering display technologies (OLED) and capitalizing on design trends towards slimline phones and leading with authentic materials - like magnesium, aluminum, stainless steel.
■New positioning Driving towards a clear positioning of substance and emotion through the fusion of engineering competence with consumer lifestyle and design, resonating strongly with the targeted Exploration segment. Launching of new BenQ-Siemens brand with a 3-event strategy targeting diverse key audiences: -Brand launch in Berlin & Beijing: Events well covered by top tier news, business and industry media -3GSM Barcelona: Strong technology and trade press, coverage -CeBIT Hanover: Consumer and general media, coverage
12 new BenQ-Siemens handsets in Q1 2006, including first HSDPA phone (3.5 G) Mid- and high-end phones are listed on tier-one operators' roadmaps (e.g. EF81, S68, EF91, etc.) Fusion of engineering competence with lifestyle and design
■Production, R&D and Design Synergies Realizing synergies: One global product house going forward (R&D, SCM, Procurement) with no duplication in functions, increasing speed while driving down cost
Offloading complexity: Consolidation of product and platform development at self-sufficient R&D sites
Structuring market-driven organization: Category managers in charge of each identified key customer segment ensuring enhanced product experience
■Top line and cost improvement Material savings to accelerate beginning in Q2/Q3 with ramped-up production of new models—redoubling BenQ resources to achieve cost-cutting goals. Savings in functional expenses well on track. Driving top line by improving the average selling price
■In less than two quarters, BenQ-Siemens have re-established themselves as a leader: In innovation –Radio Technology HSDPA, Services over the Air –Display Technology OLED –Material Technology
In design and user experience –1/3 of devices with awards –Slim line in all form factors –Dedicated interfaces and “Simplexity”
18 2005 Annual Report 2005 Annual Report 19 Mobile Business Group
In multimedia and applications –10/12 with camera up to 3.2 Mpix –11/12 with Multimedia –Onboard navigation –Cameras incl. autofocus –DRM “Playsforsure” and Google –3D sound
■Restoring customer confidence and market share Restored customer confidence. Reevaluate growth perspectives by product and Region (North America, India, Africa. Increasingly leverage complementary (BenQ-Siemens) presence.
Mobile BG in Q1 2006
BenQ-Siemens EF81 BenQ-Siemens S88 BenQ-Siemens EF51 BenQ-Siemens C81 BenQ-Siemens P51 BenQ-Siemens CL71
BenQ-Siemens S68 BenQ-Siemens S81 BenQ-Siemens EF91 BenQ-Siemens CF61 BenQ-Siemens E61 BenQ-Siemens EL71
18 2005 Annual Report 2005 Annual Report 19 Computing Products Business Group
To better meet the needs of changing business conditions and streamline operations, Display & Imaging Business Group, Computing Products Strategic Business Unit and Storage Business Unit reorganized beginning August 2005 and changed its name to Computing Products Business Group.
To bring together two of the industry's leading players and enhance the overall competitiveness of Taiwan's storage sector, Lite- On IT and BenQ formed a strategic alliance through manufacturing integration in optical storage products in 2006. As part of the alliance, Lite-On IT will acquire BenQ's storage-related assets, including BenQ's ODM customer portfolio and the rights to use BenQ's technology portfolio. Lite-On IT will also receive order commitments on BenQ-branded storage products. BenQ will continue focusing on the marketing and sales of storage products and this strategic transaction will allow BenQ to better address our ODD branded and 3C opportunities.
Main products ■Display Business Division: 15"/17"/19" multimedia LCD monitors, 15"/17"/19" LCD monitors for business use, 19"/20.1"/23" LCD monitors for professional applications ■Storage Business Division: high speed read only optical drive (CD-ROM), high speed re-writable optical drive (CD-RW), digital versatile disc drive (DVD-ROM), combo drive, digital versatile disc writer (DVD-RW) ■Computer Business Division: Joybook notebook persomal computers ( PC ) ■SPC Business Division: color laser printers, flatbed scanners, high resolution film scanners, color inkjet orinters, color multifunction printers
Review of Operations Business Results BenQ in 2005 sold 9.7 million units of LCD displays, representing 35% of year-on-year growth. A top-three global LCD display manufacturer of all sizes categories, BenQ commands number one position in 20"-and-above sizes, with a 25% market share. Overall sales in 2005 remained little changed as a result of declines in average selling price.
BenQ recorded strong unit growth in its sale of Joybook notebook PC’s. e company sold 230,000 units worldwide, a growth of 130% compared with that of 2004. Growth was especially strong in China and Europe.
BenQ enters 2006 a strong player in the notebook space and positioned to enter top-ten position in some targeted markets where the Joybook competes.
20 2005 Annual Report 2005 Annual Report 21 Computing Products Business Group
Product Features and Awards FP72V 17" LCD Monitor ■e FP72V is a the paradigm of BenQ's thoughtful design. e FP72V utilizes an innovative light sensor, which can automatically detect ambient light conditions and adjust the monitor’s brightness and contrast levels. e FP72V is designed to optimize the comfort of your work environment. Utilizing its Timer function, parents can adjust and limit the usage of the computer for their children. ■Best Innovation Award at 2005 CES
DW1655 16X Light Scribe / DVD Writer ■(LightScribe) Light Scribe Technology ■Supports BenQ's exclusive QSuite soware, diversified DVD Writer's Application ■16X High Speed DVDR Writer ■Supports DVD Dual Layer (8.5G) ■Supports BenQ's exclusive DCS, ADCS and AFCS (DCS, Dual Cooling System - ADCS, Anti-Dust Cooling System and AFCS, Air-Flow Cooling System ) ■Supports Solid-Burn, auto-adjusting writing technologies to enhance. ■Editor's Choice award from Europe's CDRInfo magazine ■Obtained Extreme Excellence Award from America's ExtremeMHz
3500 Multi-Function Printer ■BenQ's Multi-Function Printer CM3500 Multifunction printer won National Awards of Excellence 2005; the CM3500 can photocopy pictures and documents in color. ■e CM3500 also won Best Choice of Computex Taipei 2005 Award in peripherals category.
Joybook S72 ■Shares the same ID design with Joybook 7000, which received the G-Mark Award and the Red Dot Award. ■14" widescreen (WXGA 1280 x 768), with 200 nits brightness ■Futuristic Magnesium Alloy Casing ■Pioneering “Front air-intake cooling system ■Ergonomic, curved keyboard design ■Innovative no-latch design ■Integrating a laser-pointed remote control device ■Zero-Gap touchpad design ■Elevated screen hinge design ■Built-in ATIR MobilityTM RadeonTM X600 delivering outstanding graphic performance ■QPower-BenQ's exclusive "Intelligent power management system
20 2005 Annual Report 2005 Annual Report 21 Research & Development Technologies in deployment ■LCD Monitor: On October 21, 2005, BenQ took the lead to launching FP93GX, a monitor with lightning-fast 2-ms gray-to- gray response time. e technology of AMA (Advanced Motion Accelerator) delivers the excellent response time performance to the market. ■Optical Writer: 16X DVDRW, Slim DVDRW, CDRW Modules, Light-Scribe Technology, Intelligent Solid-Burn Technology. ■Joybook: Featuring a full line-up of notebook computers with best-in-class brightness attributes. Joybook R53 is the world’s fastest in terms of response time 15.4” wide-screen display notebook featuring 16ms response time.
On-going efforts ■LCD Monitor: BenQ have had good success developing monitors for everyone use; the Company plans to continue expanding into higher-end monitors for professional use. ■Optical Writer: 2nd generation of Blue-Ray Disc Writer, CDR for game application, slim slot-in type CDR, AV module application. ■Joybook: 1.Launching certified "green" Joybooks in Q1 2006. 2. Integrating an increasing number of mobile multimedia applications. 3. Enhancing interface integration. ■Multi-Function Printer: 1. Developing second generation of print heads to improve printing speed and color processing. 2. Strengthening fax applications and other applications such as card reader, picture bridge... etc. 3. Developing cordless MFP capabilities, enhancing Bluetooth and Wi-Fi connectivity.
Industry, Product Overview and Outlook Overview and Outlook Display Business Division DisplaySearch estimates that the global market size of LCD display to be 106.2 million units in 2005. Total global demand for LCD display in 2006 is forecast to grow to 130 million units. We expect the growth rate to slow in 2006. Beyond 2006 annual growth rate should continue to plateau with growth rates potentially going below 10%. Supply of LCD panels should continue to outpace demand in 2006, and we see this phenomenon continuing over the next several years. We believe companies having advantages accessing key components, economies of scale and advantages in product execution should continue to outdistance competition.
Storage Business Division TSR Data indicates the total market size grew 14% over 2004 to 282 million drives with DVDRW growing the fastest. Estimated total demand for 2006 is 298 million drives, an increase of 6% over 2005. On 10 April 2006, BenQ and Lite-On IT announced that they have formed a strategic alliance that will bring together two of the industry's leading players and enhance the overall competitiveness of Taiwan's storage sector. e transaction is expected to increase Lite-On IT's global market share , making it the world's No. 2 optical disk drive (ODD) maker.
22 2005 Annual Report 2005 Annual Report 23 Computing Products Business Group
Computer Business Division According to IDC, total demand for notebook PC was approximately 65 millions units in 2005 compared with 49 millions units in 2004, which translates to a growth of 33%. With the price point of notebook continuing to come down, we expect demand for notebook PC's to continue exponential growth in the next few years. With introduction of Intel Napa Dual Core platform and Microso Vista, we believe we should see a pick up in demand for replacement PC's. Total demand for notebook PC should reach 95 million units in 2008, according to industry analysts.
SPC Business Division Shipment of multifunction printers has grown nicely over the past several years. Competition, however, was fierce in 2006 with the entry of a number of low-priced products. While we are seeing good momentum with BenQ-brand printers, we have continued to co-operate with leading U.S. and Japanese brands on an ODM basis. With our own-brand printers, we will continue to focus on developing opportunities in emerging markets such as Middle East and China.
Competition and Market Share Display Business Division According to DisplaySearch, BenQ-branded LCD-monitor ranked in 7th place in 2005; BenQ ranked 5 in China, 7th in EMEA and Asia Pacific, 9th in Latin America and 15th in Japan and North America. Importantly, BenQ is No.1 globally in 20-in-or- above segment with a market share over 25% worldwide. A top-three LCD-monitor manufacturer in the world, we believe we are well positioned to improve on market standing in 2006, leveraging BenQ know-how --in particular our "SenseyeTM Technology" -- and the benefits of backward integration with panel makers including AU Optronics.
Storage Business Division Competing in this extremely competitive environment,.Korean and Taiwanese manufacturers have held market share greater than 80%. e global top four are significantly more competitive in material and manufacturing cost. e strategic alliance that Lite-On IT and BenQ form in optical storage products should, we believe, enable Lite-On IT to further improve its competitiveness in the ODM market. With the alliance, Lite-On IT will become the world's second largest ODD manufacturer.
22 2005 Annual Report 2005 Annual Report 23 e World's top four makers of Half Height Optical Drives ( 2005 )
Manufacturer World Ranking Market Share
HLDS 1 30.3%
TSST 2 21.6%
Lite-On 3 19.9%
BenQ/PBDS 4 9.5%
e World's top four makers of Half Height DVD RW drivers ( 2005 )
Manufacturer World Ranking Market Share
HLDS 1 30.4%
NEC 2 15.8%
TSST 3 11.7%
BenQ/PBDS 4 11.6%
Source: TSR Jan/06
Computer Business Division: According to Gartner Dataquest, BenQ-branded joybook ranked 19th wordwide, 13th in Asia Pacific, 24th in Eastern Europe and 19th in Western Europe in 2005. Growth was especially strong in China and Europe.
SPC Business Division BenQ's scanner products commanded a 22.3% global market share in 2005.
Product Strategy in 2006 Key elements of BenQ's product strategy include: Display Business Division ■Continuing to focus on larger-sized, high-performance models where we believe BenQ has distinct advantage. ■Aggressively focusing on promoting the high-performance benefits – including image quality and color brightness – meeting the needs of discerning professional users and video game enthusiasts. ■Continuing cooperating with AU Optronics to develop high quality LCD monitors. Developing partnerships with tier-one panel vendors to ensure smooth procurement. ■Growing market share to maximize the benefits of scale economy. ■Increasing BenQ's market share in Europe, as well as strengthening distribution in the emerging markets transitioning from CRT to LCD monitors.
24 2005 Annual Report 2005 Annual Report 25 Computing Products Business Group
Storage Business Division ■Shortening time to market and product launch. Co-operating with Philips on developing the next generation of Blue-Ray optical drives. ■Increasing shipment of game playing devices driving revenue and profit generation. ■Launching the 2nd generation of DVD-RAM drives and Light Scribe Writers. Computer Business Division ■Enhance interface integration with BenQ's 3C products such as mobile phones, storage, etc…, including incorporating built-in DTV capability and integrating video / audio applications. ■Re-engineer for greater organizational effectiveness and channel efficiency.
SPC Business Division ■Accelerating revenue growth for enhanced scale. ■Strengthening vendor relations and have vertically integrate to increase profitability.
Computing Products BG in Q1 2006
Joybook R53 Joybook S61 Joybook S73 DVD-RW DVD-RW Color multifunction printer DW1670 DW1655 CM3500
LCD Monitor LCD Monitor LCD Monitor LCD Monitor LCD Monitor Color laser printer FP93V FP91R FP241W FP92E FP785+ CP25
24 2005 Annual Report 2005 Annual Report 25 Digital Media Business Group
Digital Media's scope encompasses a number of high-growth products having strong synergies with each other. We aim to capitalize on these synergies in executing leading-edge, high-margin products, beginning with BenQ's market-leading projector, LCD TV and digital camera-center pieces of the digital home, offices and digital mobility.
BenQ provides the total Enjoyment Network in office and at home to customers by integrating strong product technologies. Amongst many of BenQ's innovations, we have continued to leverage BenQ's image-enhancing senseye technology that delivers stunning, theater-like performance in the office and digital home.
Main products Digital projectors, LCD TVs, digital cameras, car displays.
Review of Operations Business Results Projector shipment reached a record high in Q4 last year. BenQ-branded projectors are fast gaining recognition worldwide due to BenQ's innovations, sleek product design and successful channel strategy. BenQ projectors ranked No.2 in the world in terms of units shipped in Q4 of 2005. Equipped with anti-flare Super Multi-Coating technology from Pentax, our digital camera is able to greatly enhance vividness of images. Our partnership with Pentax has enabled BenQ to significantly upgrade our product offerings. Shipment in Q4 also set a record high. LCD TV also scored many wins. Built with exclusive display technology that is more responsive to the full potential of the human eye, BenQ's LCD TV optimizes contrast and sharpness, generating unparalled clarity and depth.
26 2005 Annual Report 2005 Annual Report 27 Digital Media Business Group
Product Features and Awards Home Cinema projector PE8720 ■Cinema class DC3 chip from TI ■Native 16:9 ■High Resolution: 1280x720 ■Ultra-High Contrast Ratio of 10000:1 ■Senseye color engine powering superior color reproduction ■eater-like viewing experience ■Equipped with professional HDMI/HDCP connector
LCD TV DV3251/DV3253 ■SenseyeTM Technology ■Professional Home eater video and audio chip ■HDTV Compatible ■16:9 ratio guarantees zero distortion ■Fast response time
LCD TV DV3750 ■SenseyeTM Technology ■1920x1080 full HD resolution ■High contrast ratio ■High Brightness ■3D Edge Filtering capsulizing video clarity ■DCDi de-interlacing ■SRS TruSurround XT ■HDTV Compatible
Digital Still Camera DC E520 ■High quality Pentax smc lens with slim and stylish DSC body ■Superb high resolution: 2.5" LTPS LCD display ■DVD like quality, high resolution and fluid movie recording capability ■Stylish silver with slim body design, equipped with powerful battery with 300pcs picture shots ■E520, X610 recipients of the iF Design Award 2005
26 2005 Annual Report 2005 Annual Report 27 Research & Development Technologies in deployment ■Projector: the PE8720 offers the highest contrast ratio in the world (10000:1). e MP 610 is the quietest data projector currently available (25dp). e CP120 is the smallest wireless projector in the world. ■LDC TV: BenQ's Home eater LCD Display series will be launched encompassing a full range of sizes: 20", 26", 32", 37", 46". Additionally, the 37" and 46" models will be fully HDTV compatible with an ultra high 1920X1080i resolution.
On-going efforts ■Projector: High Lumens, wireless projector and DLP rear projection TV over 70" in size. ■LCD TV: Future BenQ LCD TV models will integrate an ever greater array of digital-home applications, fully capitalizing on the benefits of ATSC and DVB-T technologies. ■DSC: Developing slim, high-performance DSC/display devices.
Industry, Product Overview and Outlook Overview and Outlook Projector Compared with a spectacular 2004, 2005 was a down year, with volume up 15% year on year and ASP down 30%. Like most projector makers, BenQ faced issues relating to inventory correction in the first half. We were able to regain strength in the second half capturing a greater share of the mid-to lower-priced market segments. BenQ's recovery was complete by year-end when BenQ projectors ascended to the No.2 projector brand in terms of shipment in Q4 of 2005.
LCD TV As global LCD TV sales volume sky rocketed in 2005, several market research associations and vendors are extremely optimistic in the growth of 2006. According to DisplaySearch, the global LCD TV shipment reached 20 million pieces in 2005, and total shipment of LCD TV panels should reach 27 million pieces. e growth of LCD TV in 2006 is estimated to be 80%, as a result, global shipments forecast at 37-38 million pieces, and shipment of LCD panels forecast to reach 42 million units.
DSC 2005 was a turning point in DCS industry. Japanese DSC makers began to co-operate with non-Japanese vendors in response to growing competition. To give an example, Pentax began licensing its world-class lens technology to non-Japanese competitors including BenQ. Slimmer designs and innovative features have added elements of differentiation in an otherwise crowded space. e DSC, it seems, is no longer all about pixel count. We expect migration in favor of slimmer models and strong multimedia functionality to continue. We believe BenQ is nicely positioned in a space that will increasingly reward IT technology players.
Competition and Market Share BenQ projector went from No. 7 in the world in 2004 to No. 6 in the first half of 2005. In Q4 of 2005, BenQ projectors took over 2nd place in global sales.
28 2005 Annual Report 2005 Annual Report 29 Digital Media Business Group
Product Strategy in 2006 Key elements of BenQ's product strategy include: Projector ■Expanded projector line-up including more media and wireless applications.
LCD TV ■All series to be equipped with BenQ's state-of-the-art "senseye" technology. Continuing to elevate core technology in various areas. ■While providing viewing pleasure with stunning picture quality, BenQ's LCD TV will come equipped with enhanced connectivity, interfacing DVD recorder, home theater, gaming console, just to name a few. We expect LCD TV will be the center piece of the new digital home.
DSC ■Driving greater penetration of BenQ's DSC to CE or 3C channels. ■Targeting professional DSC users.
Digital Media BG in Q1 2006
Projector Projector Projector Projector Projector Projector PE7700 W100 W10000 SP820 MP770 CP120
LCD TV LCD TV LCD TV LCD TV Azteca 516 DV3253 PL4271 VL4233 VA421
Digital Camera Digital Camera Digital Camera Digital Camera DC C530/C630 DC E600 DC P500 DC X600
28 2005 Annual Report 2005 Annual Report 29 Corporate Governance Corporate Governance
Joybook R53
30 2005 Annual Report 2005 Annual Report 31 Board of Directors and Supervisors Corporate Governance
Chairman - K. Y. Lee
Director - Sheaffer Lee Director - Stan Shih Director - HB Chen Director - Jerry Wang
Director - Ding-Yuan Yang Director - Philip Peng(*) Supervisor - Ronald Chwang Supervisor - S.C. Hong
Title/Name Education & Experience Current Positions
Chairman: MBA, Switzerland IMD Chairman: AU Optronics Corp., Darly Venture Inc. K.Y. Lee B.S., Electrical Engineering, National Taiwan University Director: Darfon Electrics Corp., Daxon Technology Inc. Vice President of Acer PC Product Marketing
Director: M.S., Electronical Engineering, National Chiao Tung University Chairman: iD SoCapital Inc. Stan Shih Chairman of Acer Group Director: Acer Inc., Wistron Corp., Taiwan Semiconductor Manufacturing Company
Director: B.S., Electrical Engineering, National Cheng Kung University Chairman: Darfon Electronic Corp. Sheaffer Lee Assistant Vice President of Acer America Director: AU Optronics Corp., BenQ Asia Pacific, Darly Venture Inc.
Director: B.S., Communication Engineering, National Chiao Tung University Chairman: Wellypower Optronics Co. Ltd. H.B. Chen General Manager of BenQ Malaysia President: AU Optronics Corp.
Director: EMBA, underbird International Management Institute Chairman: BenQ Asia Pacific Inc. Jerry Wang Vice President, Corporate Brand Management, Acer
Director: M.S., Business of Administration, National ChengChi University Supervisor: Wistron Corp., Philip Peng(*) Senior Vice President & CFO of Acer Inc. President: iD SoCapital Inc.
Director: Ph.D., Princeton University Chairman: UniSVR Global Information Technology Corp., Ding-Yuan Yang M.S., Stanford University Radiantech Inc., Integrated System Solution Corp., President of Winbond Electronics Corp. FameG SOTA Design Technology Inc. Vice Chairman of Winbond Electronics Corp. Director: CheerTek Incorporation, Opnet Technologies Co., Ltd. Supervisor: Aimtron Technology Corp.
Supervisor: Ph.D. Electrical Engineering, University of Southern California,- Chairman: iD Ventures America Ronald Chwang Los Angeles Director: ATI Technologies, Inc., Silicon Storage Technologies, Inc., Acer Technologies Venture, President iRobot Corp. Acer America, America CEO Acer Peripheral Business Unit, President
Supervisor: B.S., Economics, National Taiwan University Chairman: Giga Venture Partners & Co. S.C. Hong Vice President of Far Eastern Textile Ltd. President: Hotung Venture Capital Corp. President of Hotung International Company Ltd. Vice President: Far Eastern Textile Ltd. President of Hotung Venture Capital Corp.
(*): Acer Incorporated resigned from BenQ's board of directors on 14.04.2006 in anticipation of selling down its holdings of BenQ shares.
30 2005 Annual Report 2005 Annual Report 31 Towards Better Corporate Governance
Creating Value for Shareholders and Giving Back to the Community is an Integral Part of BenQ Value Corporate Governance BenQ's board of directors (BOD) aims to continue acting in the best interest of our shareholders, in accordance with commonly accepted corporate governance principles. It's with the highest standard that our board members work closely with a dedicated team of supervisors and certificate public accountants in carrying out its supervisor duty.
e board members shall benchmark BenQ against best-in-class corporate governance practices in safeguarding shareholders' interests and making recommendations that will enhance return-on-investment to our shareholders.
- K.Y. Lee, Chairman
Maximizing Shareholder Value While Supervising the Board of Directors as an External Supervisor "BenQ Supervisor needs to review the integrity and accuracy of the company financial reporting by working closely with the management team, internal and external auditors on a timely and efficient manner. In addition to adherence to accounting principles and assessment of risk control, by supporting the board of director, BenQ's Supervisor can help ensure corporate governance and transparency which are faithfully followed to protect the shareholder value. Ultimately, the shareholder value can be enhanced through the team work of BenQ Supervisor and the board to assist the management in its persistent effort to improve the company overall performance and competitiveness."
- Ronald Chwang, Supervisor
LCD TV VL3231 32 2005 Annual Report 2005 Annual Report 33 Material Resolutions Approved by Shareholders at Annual General Meeting and Board of Directors
Date Meeting Approval Events
04.02.2005 2005 1st BOD Meeting 1.Accepted BenQ 2004 business report and financial statements. Net sales of parent company for 2004 was NT$147.7 billion and of consolidated entity was NT$174.7 billion, and net income aer tax was NT$7,619 Corporate Governance million, with earnings per share of NT$3.30. 2.Approved to revise the Articles of Incorporation. 3.Approved to elect Directors and Supervisors. 4.Approved to invest BenQ (shanghai) Ltd. in Mainland China by BenQ (L) Corp within the amount of US$ 10 million. 5.Approved to convene 2005 Annual General Meeting.
16.03.2005 2005 2nd BOD Meeting 1.Approved the proposal for distribution of 2004 profits and capitalization of 2004 dividends and employee profit sharing. Stock dividend of NT$0.5 per share and cash dividend of NT$1.5 per share will be distributed to shareholders. 2.Approved the record date for entitlement certificates to be transferred to common shares.
28.04.2005 2005 3rd BOD Meeting 1.Accepted BenQ financial statements for the three months ending on March 31, 2005. 2.Approved to issue of 2005 1st Unsecured Corporation Bond within the amount of NT$4 billion. 3.Approved to invest BenQ (IT) Co. Ltd. in Mainland China by BenQ (L) Corp within the amount of US$ 30 million. 4.Approved the change of Chief Internal Auditor.
18.05.2005 2005 Annual General Meeting 1.Accepted BenQ 2004 business report and financial statements. 2.Approved the proposal of BOD for distribution of 2004 profits and capitalization of 2004 dividends and employee profit sharing. 3.Approved the proposal of BOD to revise the Articles of Incorporation. 4.Elected Directors and Supervisors.
18.05.2005 2005 4th BOD Meeting 1.Elected K.Y. Lee as Chairman of BenQ.
06.06.2005 2005 5th BOD Meeting 1.Approved to Acquire Siemens AG's Mobile Devices Business. 2.Approved to propose of the issuance of new common shares to sponsor overseas DR offering within 150 million shares. 3.Approved to convene 2005 extraordinary General Meeting.
28.06.2005 2005 6th BOD Meeting 1.Approved the shareholder, Acer Inc., to offer its BenQ common shares for issuing Global Depositary Shares.
28.07.2005 2005 7th BOD Meeting 1.Approved to set up a new holding company in the Netherlands investing up to US$200 million.
28.07.2005 2005 Extraordinary General Meeting 1.Approved the Proposed Acquisition of Siemens AG's Mobile Devices Business. 2.Approved the Proposed Issuance of New Common Shares or Global Depositary Receipts (GDRs).
18.08.2005 2005 8th BOD Meeting 1.Accepted BenQ's financial statements for the six months ending on June 30, 2005. 2.Approved to propose of the issuance of new common shares to sponsor overseas DR offering within 150 million shares. 3.Approved to invest BenQ (Shanghai) Co. Ltd. in Mainland China by BenQ (L) Corp within the amount of US$ 10 million.
12.10.2005 2005 11th BOD Meeting 1.Approved to buy back 60 million shares within two months and the amount of NT$2.4 billion.
27.10.2005 2005 12th BOD Meeting 1.Accepted BenQ financial statements for the nine months ending on September 30, 2005. 2.Approved to invest BenQ (Shanghai Pudong) Co. Ltd. in Mainland China by BenQ (L) Corp within the amount of US$ 30 million. 3.Approved to invest BenQ (NanJing) Hospital Management Gonsultants Co., Ltd. in Mainland China by BenQ BM Holding Corp within the amount of US$ 1 million. 4.Approved to invest BenQ Guru Systems (Suzhou), Co., Ltd. in Mainland China by BenQ Guru Holding Limited within the amount of US$ 3 million.
14.03.2006 2006 2nd BOD Meeting 1.Accepted BenQ 2005 business report and financial statements. Net sales of parent company for 2005 was NT$125.4 billion and of consolidated entity was NT$176.8 billion, and loss aer tax was NT$5.2 billion, with losses per share of NT$2.12. 2.Approved to revise the Articles of Incorporation. 3.Approved to convene 2006 Annual General Meeting. 4.Approved to issue of 2006 1st Unsecured Corporation Bond within the amount of NT$4 billion. 5.Approved to invest BenQ Logistic (Shanghai) Co.,Ltd in Mainland China by BenQ (L) Corp within the amount of US$ 0.8 million. 6.Approved to invest Gallamt Preoisions (Suzhou) Co.,Ltd. in Mainland China by BenQ (L) Corp within the amount of US$ 8.9 million. 7.Approved to invest BenQ Mobile Holding B.V. within the amount of US$ 300 million. 8.Approved to invest BenQ (L) Corp within the amount of US$ 20 million. 9.Approved to invest China-based BenQ subsidiaries by BenQ (L) Corp within the amount of US$ 10.5 million.
10.04.2006 2006 3rd BOD Meeting 1.Approved Lite-On IT and BenQ to Form a Strategic Alliance through Manufacturing Integration in Optical Storage Products. 2.Approved to issue stock option of 100 million shares.
32 2005 Annual Report 2005 Annual Report 33 Management Team Management Resources Corporate Governance
K.Y. Lee Chairman
Sheaffer Lee President
Eric ky Yu Jerry Wang Irwin S Chen Clemens Joos Hemit Huang Peter Chen Chief Financial Officer Chief Marketing Officer Mobile Mobile Computing Products Digital Media
BenQ is led by a seasoned management team with a proven track record of product innovation and delivering returns to shareholders:
■ Long tenure with BenQ - Solid and Stable ■ One of the Strongest branding management teams in Asia ■ Lifestyle Design Center enhancing value of BenQ products
34 2005 Annual Report 2005 Annual Report 35 Corporate Executive Officers
Title Name Personnel Education & Experience Other Current Positions Corporate Governance Chairman K.Y. Lee MBA, Switzerland IMD Chairman: AU Optronics Corp., Darly Venture Inc. B.S., Electrical Engineering, National Taiwan University Director: Darfon Electrics Corp., Vice President of Acer PC Product Marketing Daxon Technology Inc.
President & COO Sheaffer Lee B.S., Electrical Engineering, National Cheng Kung University Chairman: Darfon Electronic Corp. Assistant Vice President of Acer America Director: AU Optronics Corp., BenQ Asia Pacific Inc., Darly Venture Inc.
Executive Vice President Jerry Wang EMBA, underbird International Management Institute Chairman: BenQ Asia Pacific Inc. CMO VP, Corporate Brand Management, Acer
Senior Vice President Rick Lei EMBA, National ChengChi University Chairman: Airoha Technology Inc. Business Strategy Office B.S., Engineering Science, National Cheng Kung University Director: Raydium Semiconductor Co., President, Acer Digital Service Corp.
Senior Vice President Hermit Huang EMBA, National Taiwan University - Computing Products BG Electronics Engineering, National Taipei Institute of Technology
Senior Vice President Irwin S Chen Ph.D., EE, University of Maryland Director: Airoha Technology Inc. BenQ Mobile Group Manager, Qualcomm Inc.
Senior Vice President Eric Ky Yu MBA, Strathclyde Graduate business School, U.K. Chairman: Daxon Technology Inc. Finance Division Controller, BenQ Malaysia Director: Gallant Precision Machining Co., Ltd. Supervisor: AU Optronics Corp., Darfon Electronics Corp., Airoha Technology Inc., BenQ Asia Pacific Inc., Darly Venture Inc.
Vice President Alpha Tsai EMBA, National Cheng Chi University - Computing Products BG M.S., Electrical Engineering, New York University-Stony Brook B.S., Electrical Engineering, Nation Taiwan University.
Vice President CM Wu EMBA, Pacific Western University - Global Manufacturing B.S., Electronics Engineering, Chung Yuan Christian University Operation Office
Vice President Kelvin Lee Ph.D., Electrical Engineering, National Taiwan University - Advanced Technology M.S., Electrical Engineering, National Cheng Kung University Center
Vice President Peter Chen MBA, National ChengChi University Director: Darfon Electronics Corp. Digital Media BG EMBA, underbird International Management Institute B.S., Electrical Engineering, National Cheng Kung University
Associate Vice President Hank Horng M.S., Mechanical Engineering, National Cheng Kung University - Computing Products BG Executive, PC Division, IBM Taiwan Executive, Strategy & Development, IBM China
Associate Vice President Vince Liaw MBA, National ChengChi University - Computing Products BG B.S., ME, National Taiwan University
Director Daniel Hsueh MBA, National Sun Yat-Sen University - Computing Products BG B.S., ME, National Taiwan University
Director April Huang National Taiwan University - Digital Media BG Daxon Technology Inc.
Director Richard Hsu M.S., ME, University of Oregon - Computing Products BG Acer Incorporated
Director JY Hu MBA, National Taiwan University - Digital Media BG B.S., Applied Mathematics, National Cheng Chi University
Director Robert Chang Dean of College of Commerce,National Cheng Chi University - Digital Media BG B.S., Mathematics, Soochow University
Director Jasmin Hung MBA, Finance, California State University - Finance Division B.S., International Trade, Chung Yuan Christian University Controller, Daxon Technology Inc.
34 2005 Annual Report 2005 Annual Report 35 Group Organization Company Organization Chart Corporate Governance
BenQ Corporation
Shareholders
Supervisiors
Audit Team Borad of Directors
Chairman
President
Corporate Sales Business Administrative Operation Operation Operation Operation
Regional Digital Computing Manufacturing Advanced Finance Legal Office Branding Mobile BG Technology Operation Media BG Products BG Operation Center Division
Business Lifestyle Manufacturing China Taiwan Development HR Division Strategy Office Design Center Office
Corporate Global Quality America China Assurance ITS Division Venture Office Office
Europe Malaysia
Asia Pacific Mexicana
e Czeh Republic
36 2005 Annual Report 2005 Annual Report 37 Affiliated Companies Corporate Governance
36 2005 Annual Report 2005 Annual Report 37 Company Financials CompanyLCD TV VL3231 Financials
38 2005 Annual Report 2005 Annual Report 39 Capital and Shares Shares Type and Shares Outstanding
Authorized Shares Shares Type Notes Company Financials Outstanding shares* Un-issued shares Total shares
Common Shares 2,624,880,011 375,119,989 3,000,000,000 Listing Shares
*include entitlement certificates
Ownership and Distribution of Shares As of March 23, 2004 As of March 20, 2005 As of April 16, 2006 Number of Number of Number of Number of Number of Number of shares held shareholders shares held shareholders shares held shareholders Domestic Individuals 1,106,555,909 148,350 1,243,416,470 159,595 1,405,324,738 180,396 Other Domestic Corporations 470,860,064 358 468,232,477 319 476,911,227 292 Foreign Institutions and Individuals 337,349,511 296 418,149,857 316 585,753,284 326 Government Agencies 79,385,388 6 113,568,260 9 94,742,480 9 Domestic Financial Institutions 73,327,335 29 73,189,767 28 62,148,282 42 Total 2,067,478,207 149,039 2,316,556,831 160,267 2,624,880,011 181,065
38 2005 Annual Report 39 Net Worth, Earning, Dividends and Market Price Per Share Unit: NT$; Per Share Year 2004 Year 2005 Market Price Per Share Highest Market Price 53.50 37.20 Lowest Market Price 30.30 27.20 Company Financials Average Market Price 39.47 32.01 Net Worth Per Share (Note 1) Before Distribution 21.25 17.38 Aer Distribution 19.64 - Earnings Per Share (EPS) Weighted Average Shares 2,310,825 2,459,298 EPS 3.30 (2.12) EPS-adjusted (Note 2) 3.10 - Dividends Per Share Cash dividends 2.0 1.5 Stock dividends- Earnings 1.0 0.5 Stock dividends- Capital Surplus - - Accumulated Undistributed Dividend - - Return On Investment Price/Earning Ratio (Note 3) 11.96 - Price/Dividend Ratio (Note 4) 19.74 21.34 Cash Dividend Yield Rate (Note 5) 5.07% 4.69%
Note 1: Subject to change aer shareholders’ meeting resolution Note 2: Retroactive adjustment for capitalization of bonus Note 3: Price/Earning ratio = Average market price/Earnings per share Note 4: Price/Dividend ratio = Average market price/Cash dividends per share Note 5: Cash dividend yield rate = Cash dividends per share/ Average market price
Dividend Policy According to BenQ's Article of Incorporation, the company's dividend policy is as follows: If the company has surplus profits at the end of each business year, the profits are to be first used to pay taxes and make good of past losses and then set up 10% as legal reserve. e balance, if any, shall be used to pay dividends before being allocated as follows: a. Employee bonus: 5% to 10%; b. Remuneration of directors and supervisors: 1% or less; and c. e balance shall be distributed partially or totally as dividends. Method of distribution and ratio of bonus may be adjusted by the shareholders' meeting.
Share Repurchase History
Instance 2nd Round 3th Round 4th Round Purpose To create shareholders value To create shareholders value To transfer to employees Period 16.12.2003-15.02.2004 30.03.2004-29.05.2004 13.10.2005-12.12.2005 Price Range NT$40-45 per share NT$40-45 per share NT$27-40 per share Volume 30,000,000 common shares 4,457,000 common shares 60,000,000 common shares Amount NT$1,256,063,300 NT$196,605,100 NT$1,759,156,948 Shares Cancelled or Transferred Volume 30,000,000 common shares 4,457,000 common shares 0 Accumulated Holding N/A N/A. 60,000,000 common shares Accumulated Holding as a Percentage of Total Issued Shares(%) 0% 0% 2.29%
40 2005 Annual Report 2005 Annual Report 41 BenQ Corporation Non-consolidated Balance Sheets December 31, 2003, 2004 and 2005 (expressed in thousands of New Taiwan dollars and US dollars) 2003 2004 2005
Assets NT$ NT$ NT$ US$ Company Financials Current assets: Cash and cash equivalents 1,139,573 599,457 161,789 4,932 Short-term investments 3,480,521 5,431,034 104,572 3,188 Notes and accounts receivable 8,300,466 5,463,363 6,498,786 198,134 Accounts receivables from related parties 19,724,408 20,060,826 25,211,100 768,631 Other receivable from related parties 12,685 193,600 911,636 27,794 Other financial assets - current 69,620 91,054 7,548,906 230,150 Inventories 5,464,505 3,859,895 5,581,355 170,163 Prepaid expenses and other current asset 299,150 306,704 1,642,433 50,074 Deferred income tax assets – current 927,183 551,148 463,010 14,116 Total current assets 39,418,111 36,557,081 48,123,587 1,467,182 Long-term equity investments : Equity method 27,416,958 30,393,198 31,670,537 965,565 Cost or lower-of-cost-or-market method 2,429,781 1,594,978 1,435,406 43,763 29,846,739 31,988,176 33,105,943 1,009,328 Property, plant and equipment : Land 2,379,356 2,135,472 2,135,410 65,104 Buildings 3,958,980 3,552,100 3,552,743 108,315 Machinery and equipment 2,285,664 2,452,524 2,436,393 74,280 Furniture and fixtures 131,842 139,819 146,528 4,468 Miscellaneous equipment 74,264 69,770 69,441 2,117 Prepayments for plant and equipment 129,274 212,610 283,095 8,631 8,959,380 8,562,295 8,623,610 262,915 Less: accumulated depreciation (2,087,349) (2,492,858) (2,830,831) (86,306) Net property, plant and equipment 6,872,031 6,069,437 5,792,779 176,609 Other assets: Rental assets 457,208 1,013,907 997,171 30,402 Refundable deposits 7,368 53,083 8,584 262 Deferred expenses 129,718 130,810 1,042,532 31,784 Deferred income tax assets – noncurrent 78,050 788,418 973,344 29,675 Total other assets 672,344 1,986,218 3,021,631 92,123 Total assets 76,809,225 76,600,912 90,043,940 2,745,242
2003 2004 2005 Liabilities and Stockholders’ Equity NT$ NT$ NT$ US$ Current liabilities: Short-term borrowings - - 2,635,137 80,340 Notes and accounts payable 6,963,455 5,875,657 4,706,044 143,477 Accounts payable to related parties 16,085,844 13,237,809 16,395,479 499,862 Other payables to related parties 41,068 101,519 4,787,710 145,967 Bonds payable 201,700 1,400 1,138,662 34,715 Accrued expenses and other current liabilities 4,624,427 3,576,749 3,418,044 104,209 Income taxes payable 61,364 251,707 - - Deferred inter-company profit 167,560 5,377 332,702 10,143 Total current liabilities 28,145,418 23,050,218 33,413,778 1,018,713 Bonds payable 2,697,351 4,287,855 7,050,000 214,939 Other liabilities 504,492 184,976 5,148,897 156,978 Total liabilities 31,347,261 27,523,049 45,612,675 1,390,630 Stockholders’ equity : Common stock 20,838,612 23,150,141 26,186,722 798,376 Convertible bonds applied for conversion 13,436 - 13,063 398 20,852,048 23,150,141 26,199,785 798,774 Capital Surplus: Additional paid-in-capital in excess of the common stock’s par value 5,238,950 5,152,848 8,295,561 252,913 Convertible bonds converted in excess of the common stock's par value 6,923,885 7,106,864 7,168,462 218,551 Capital surplus from treasury stock transactions 7,239 6,812 12,432 379 Capital surplus from long-term equity investments 1,408,202 2,421,756 3,097,893 94,448 13,578,276 14,688,280 18,574,348 566,291 Legal reserve 2,504,415 3,254,424 4,016,353 122,450 Retained earnings 8,931,983 8,144,108 (3,038,409) (92,634) Special reserve - - 81,754 2,492 Translation adjustment 476,861 (81,754) 434,760 13,255 Treasury stock (881,619) (77,336) (1,837,326) (56,016) Total stockholders’ equity 45,461,964 49,077,863 44,431,265 1,354,612 Commitments and contingencies Total liabilities and stockholders’ equity 76,809,225 76,600,912 90,043,940 2,745,242
40 2005 Annual Report 2005 Annual Report 41 BenQ Corporation Non-consolidated Statements of Income Years ended December 31, 2003, 2004 and 2005 (expressed in thousands of New Taiwan dollars and US dollars, except earnings per share) Company Financials 2003 2004 2005 NT$ NT$ NT$ US$ Net Sales 108,698,931 147,770,156 124,406,697 3,792,887 Cost of goods sold (98,448,398) (136,071,972) (117,800,512) (3,591,479) 10,250,533 11,698,184 6,606,185 201,408 Change in unrealized inter-company profits 9,648 162,182 (327,325) (9,979) Gross profit 10,260,181 11,860,366 6,278,860 191,429 Operating expenses : Selling (3,086,025) (3,433,615) (2,970,757) (90,572) Administrative (1,092,148) (957,431) (950,728) (28,986) Research and development (2,838,847) (3,726,225) (3,273,284) (99,795) (7,017,020) (8,117,271) (7,194,769) (219,353) Operating income (loss) 3,243,161 3,743,095 (915,909) (27,924) Non-operating income: Interest income 9,132 6,972 33,317 1,016 Investment income recorded under the equity method, net 3,722,494 3,563,548 - - Dividend income 208,539 169,032 98,243 2,995 Gain on disposal of property, plant and equipment 1,918 3,250 7,551 230 Gain on disposal of investments, net 252,911 382,275 1,787,359 54,493 Foreign currency exchange gain, net 210,004 278,086 - - Others 178,308 200,053 272,198 8,299 4,583,306 4,603,216 2,198,668 67,033 Non-operating expenses: Interest expense (178,167) (245,046) (488,901) (14,905) Investment loss - - (5,515,181) (168,146) Impairment loss on long-term equity investment - (350,000) (149,307) (4,552) Loss on disposal of property, plant and equipment (26,054) (19,269) (2,943) (90) Foreign exchange loss, net - - (381,650) (11,636) Impairment loss - - (18,598) (567) Others (2,729) (3,470) (32,306) (985) (206,950) (617,785) (6,588,886) (200,881) Net income (loss) before income tax 7,619,517 7,728,526 (5,306,127) (161,772) Income tax benefit (expense) (119,422) (109,238) 80,556 2,456 Net income (loss) 7,500,095 7,619,288 (5,225,571) (159,316) Earnings (loss) per share : Basic earnings (loss) per share 3.24 3.10 (2.12) (0.065) Diluted earnings (loss) per share 3.18 3.08 - -
42 2005 Annual Report 2005 Annual Report 43 BenQ Corporation Non-consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 2003,2004 and 2005 (expressed in thousands of New Taiwan dollars) Common Convertible Capital Legal Special Retained Translation Treasury Total
Stock Bonds Applied Surplus Reserve reserve Earnings Adjustment Stock Company Financials for Conversion (Loss) NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ Balance at January 1, 2003 16,810,510 - 13,296,073 1,764,452 - 8,721,127 766,083 (79,923) 41,278,322 Net income for 2003 - - - - - 7,500,095 - - 7,500,095 Appropriation of earnings and capital surplus: - Legal reserve - - - 739,963 - (739,963) - - - Retained earnings transferred to common stock 3,861,102 - - - - (3,861,102) - - - Cash dividends - - - - - (2,521,577) - - (2,521,577) Employee bonus paid in cash - - - - - (100,000) - - (100,000) Directors’ and supervisors’ remuneration - - - - - (66,597) - - (66,597) Convertible bonds converted to common stock and 167,000 13,436 462,616 - - - - - 643,052 capital surplus Treasury stock acquired by the Company ------(802,425) (802,425) Change in treasury stock held by subsidiaries ------729 729 Cash dividends paid to subsidiaries which hold the - - 4,257 - - - 4,257 Company’s share Adjustments in net equity of investee companies - - (184,670) - - - - - (184,670) Change in foreign currency translation adjustment ------(289,222) - (289,222) Balance at December 31, 2003 20,838,612 13,436 13,578,276 2,504,415 - 8,931,983 476,861 (881,619) 45,461,964 Net income for 2004 - - - - - 7,619,288 - - 7,619,288 Appropriation of earnings and capital surplus: - Legal reserve - - - 750,009 - (750,009) - - - Retained earnings transferred to common stock 2,517,592 - - - - (2,517,592) - - - Cash dividends - - - - - (4,123,924) - - (4,123,924) Employee bonus paid in cash - - - - - (50,626) - - (50,626) Directors’ and supervisors’ remuneration - - - - - (67,501) - - (67,501) Convertible bonds converted to common stock and 138,507 (13,436) 301,337 - - - - - 426,408 capital surplus Treasury stock acquired by the Company ------(651,354) (651,354) Treasury stock retired (344,570) - (211,698) - - (897,511) - 1,453,779 - Change in treasury stock held by subsidiaries ------1,858 1,858 Cash dividends paid to subsidiaries which hold the - - 6,812 - - - - - 6,812 Company’s shares Adjustments in net equity of investee companies - - 1,013,553 - - - - - 1,013,553 Change in foreign currency translation adjustment ------(558,615) - (558,615) Balance at December 31, 2004 23,150,141 - 14,688,280 3,254,424 - 8,144,108 (81,754) (77,336) 49,077,863 Net loss for 2005 - - - - - (5,225,571) - - (5,225,571) Appropriation of earnings and capital surplus: Legal reserve - - - 761,929 - (761,929) - - - Special reserve - - - - 81,754 (81,754) - - - Retained earnings transferred to common stock 1,513,755 - - - - (1,513,755) - - - Cash dividends - - - - - (3,473,263) - - (3,473,263) Employee bonus paid in cash - - - - - (152,170) - - (152,170) Directors’ and supervisors’ remuneration - - - - - (54,205) - - (54,205) Convertible bonds converted to common stock and 22,826 13,063 61,598 - - - - - 97,487 capital surplus Issuance of common stock by GDR 1,500,000 - 3,142,713 - - - - - 4,642,713 Treasury stock acquired by the Company ------(1,759,157) (1,759,157) Change in treasury stock held by subsidiaries ------(833) (833) Cash dividends paid to subsidiaries which hold the - - 5,620 - - - - - 5,620 Company’s shares Adjustments in net equity of investee companies - - 676,137 - - 80,130 - - 756,267 Change in foreign currency translation adjustment ------516,514 - 516,514 Balance at December 31, 2005 26,186,722 13,063 18,574,348 4,016,353 81,754 (3,038,409) 434,760 (1,837,326) 44,431,265
42 2005 Annual Report 2005 Annual Report 43 BenQ Corporation Non-consolidated Statements of Cash Flows Years ended December 31, 2003,2004 and 2005 (expressed in thousands of New Taiwan dollars and US dollars) 2003 2004 2005
NT$ NT$ NT$ US$ Company Financials Cash flows from operating activities: Net income (loss) 7,500,095 7,619,288 (5,225,571) (159,316) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 567,446 546,988 490,069 14,941 Amortization 96,092 66,409 185,156 5,645 Change in provision for bad debt 1,068 (20,184) 239,277 7,295 Change in provision for inventory obsolescence 101,025 (78,094) (65,263) (1,990) Investment loss (income) on long-term equity investments, net (3,722,494) (3,563,548) 5,490,018 167,379 Cash dividends received from investees accounted for by equity method 322,528 1,015,008 1,167,779 35,603 Loss (gain) on disposal of long-term equity investments, net (5,850) 2,478 (8,055) (245) Gain on disposal of short-term investments (247,061) (384,753) (1,779,304) (54,247) Impairment loss on long-term investment - 350,000 149,307 4,552 Loss (gain) on disposal of property, plant and equipment, net 24,136 16,019 (4,608) (140) Faxed assets shortage per physical count 865 - - - Fixed assets transferred to expenses 2,400 158 - - Unrealized foreign exchange loss (gain) on overseas convertible bonds (30,361) (22,578) 5,026 153 Reversal for redemption of overseas convertible bonds (20,037) (10,509) (6,733) (205) Impairment loss - - 18,598 567 Amortization of bond issuance costs 4,605 1,067 1,767 54 Differences in accounts in the accompanying balance sheets: Notes and accounts receivable (2,103,226) 2,841,037 (1,274,700) (38,863) Receivables from related parties (5,713,522) (775,212) (5,927,352) (180,712) Inventories (2,330,851) 1,682,705 (1,656,197) (50,494) Other financial assets - current (17,351) (21,434) (435,638) (13,282) Prepaid expenses and other current assets (80,483) (3,418) (255,358) (7,785) Deferred income tax assets (123,896) (334,333) (96,788) (2,951) Notes and accounts payable 909,661 (1,087,798) (1,169,613) (35,659) Payables to related parties 3,294,202 (2,787,584) 3,392,714 103,436 Deferred inter-company profits (9,647) (162,182) 327,325 9,979 Accrued expenses and other current liabilities 659,521 (1,047,679) (272,527) (8,309) Income tax payables (704,620) 190,343 (251,707) (7,674) Other liabilities (19,105) (19,105) (19,105) (582) Net cash provided by (used in) operating activities (1,644,860) 4,013,089 (6,981,483) (212,850) Cash flows from investing activities: Increase in long-term equity investments (948,184) (316,131) (1,323,151) (40,340) Decrease (increase) in short-term investments 6,555,135 (1,565,760) 7,105,766 216,639 Additions to property, plant and equipment (669,858) (343,109) (221,289) (6,747) Proceeds from disposal of long-term equity investments 36,788 5,243 22,433 684 Proceeds from disposal of property, plant and equipment 17,209 52,829 28,136 858 Increase in refundable deposits and deferred assets (97,334) (64,178) (1,003,886) (30,606) Receipt from investees’ capital reduction 114,138 506,586 64,751 1,974 Cash inflow as a result of BMS merger - 215,020 - - Cash paid for acquisition of Siemens’ mobile division - - (3,966,600) (120,933) Net cash provided by (used in) investing activities 5,007,894 (1,509,500) 706,160 21,529 Cash flows from financing activities: Increase (decrease) in short-term borrowings (588,729) - 2,635,137 80,340 Decrease in long-term debt (40,190) - - - Redemption of convertible bonds (2,129,611) (200,300) (1,400) (43) Increase in treasury stock (802,425) (651,354) (1,759,157) (53,633) Directors’ and supervisors’ remuneration (66,597) (67,501) (54,205) (1,653) Issuance of bonds 2,000,000 2,050,000 4,000,000 121,951 Issuance of common stock by GDR - - 4,642,713 141,546 Payment of cash dividends (2,521,577) (4,123,924) (3,473,263) (105,892) Bonuses for employees (100,000) (50,626) (152,170) (4,639) Net cash provided by (used in) financing activities (4,249,129) (3,043,705) 5,837,655 177,977 Net decrease in cash and cash equivalents (886,095) (540,116) (437,668) (13,344) Cash and cash equivalents at beginning of year 2,025,668 1,139,573 599,457 18,276 Cash and cash equivalents at end of year 1,139,573 599,457 161,789 4,932 Additional disclosure of cash flow information: Cash paid during the year for: Interest, excluding capitalized interest 190,853 161,760 404,752 12,340 Income taxes 947,938 253,228 272,511 8,308 Supplemental disclosure of non-cash investing and financing activities: 0 Change in capital surplus from long-term equity investments (184,670) 1,013,553 756,267 23,057 Change in translation adjustment (289,222) (558,615) 516,514 15,747 Convertible bonds converted to common stock and capital surplus 643,052 426,408 97,487 2,972
44 2005 Annual Report 2005 Annual Report 45 BenQ Corporation and Subsidiaries Consolidated Balance Sheets December 31, 2003, 2004 and 2005 (expressed in thousands of New Taiwan dollars and US dollars) 2003 2004 2005
Assets NT$ NT$ NT$ US$ Company Financials Current assets: Cash and cash equivalents 4,730,777 3,218,141 12,551,610 382,671 Short-term investments 4,924,930 6,357,091 197,924 6,034 Notes and accounts receivable 20,454,217 19,151,261 37,490,396 1,143,000 Receivables from related parties 1,663,264 2,954,474 1,197,677 36,514 Other financial assets-current 1,359,189 1,619,547 21,572,124 657,687 Inventories 18,727,921 17,475,733 33,620,461 1,025,014 Prepaid expenses and other current assets 862,341 1,228,357 5,000,025 152,440 Deferred income tax assets-current 1,145,600 713,734 970,617 29,592 Total current assets 53,868,239 52,718,338 112,600,834 3,432,952 Long-term equity investments: Equity method 15,491,051 20,375,230 20,982,173 639,700 Cost or lower-of-cost-or-market method 3,011,574 2,039,273 2,504,661 76,362 18,502,625 22,414,503 23,486,834 716,062 Property, plant and equipment: Land 3,164,504 3,322,173 3,139,301 95,711 Buildings 8,942,134 8,385,559 9,898,775 301,792 Machinery and equipment 12,959,163 14,670,790 18,735,104 571,192 Furniture and fixtures 550,999 691,058 629,047 19,178 Miscellaneous equipment 644,605 728,329 1,071,598 32,671 Leasehold improvements 359,090 425,597 639,573 19,499 Prepayments for plant and equipment 1,724,884 3,345,729 3,083,393 94,006 28,345,379 31,569,235 37,196,791 1,134,049 Less: allowance for impairment of fixed assets - - (89,685) (2,734) Less: accumulated depreciation (7,498,321) (9,621,341) (11,811,762) (360,115) Net property, plant and equipment 20,847,058 21,947,894 25,295,344 771,200 Other assets: Refundable deposits 24,266 57,385 76,993 2,347 Deferred expenses and other assets 1,141,433 1,271,890 3,842,093 117,137 Deferred income tax assets-noncurrent 404,536 1,205,019 1,108,336 33,791 Total other assets 1,570,235 2,534,294 5,027,422 153,275 Total assets 94,788,157 99,615,029 166,410,434 5,073,489
2003 2004 2005 Liabilities and Stockholders’ Equity NT$ NT$ NT$ US$ Current liabilities: Short-term borrowings 4,875,326 3,410,317 10,034,593 305,933 Current portion of long-term debt 477,087 523,961 1,378,529 42,028 Notes and accounts payable 22,980,325 20,643,071 53,161,431 1,620,775 Payables to related parties 4,837,176 6,249,039 6,632,669 202,216 Bonds payable 301,700 101,400 1,338,662 40,813 Accrued expenses and other current liabilities 8,523,620 7,704,191 32,227,154 982,535 Total current liabilities 41,995,234 38,631,979 104,773,038 3,194,300 Bonds payable 2,997,351 4,487,855 7,050,000 214,939 Long-term debt 1,632,989 4,746,883 5,199,618 158,525 Other liabilities 142,227 137,698 2,106,531 64,223 Total liabilities 46,767,801 48,004,415 119,129,187 3,631,987 Stockholders’ equity: Common stock 20,838,612 23,150,141 26,186,722 798,376 Convertible bonds applied for conversion 13,436 - 13,063 398 20,852,048 23,150,141 26,199,785 798,774 Capital surplus 13,578,276 14,688,280 18,574,348 566,291 Legal reserve 2,504,415 3,254,424 4,016,353 122,450 Retained earnings 8,931,983 8,144,108 (3,038,409) (92,634) - - 81,754 2,492 Translation adjustment 476,861 (81,754) 434,760 13,255 Treasury stock (881,619) (77,336) (1,837,326) (56,016) Minority interest 2,558,392 2,532,751 2,849,982 86,890 Total stockholders’ equity 48,020,356 51,610,614 47,281,247 1,441,502 Commitments and contingencies Total liabilities and stockholders’ equity 94,788,157 99,615,029 166,410,434 5,073,489
44 2005 Annual Report 2005 Annual Report 45 BenQ Corporation and Subsidiaries Consolidated Statements of Income Years ended December 31, 2003, 2004 and 2005 (expressed in thousands of New Taiwan dollars and US dollars except earnings per share) Company Financials 2003 2004 2005 NT$ NT$ NT$ US$ Net sales 128,224,676 174,740,823 176,778,165 5,389,578 Cost of goods sold (109,214,343) (153,943,682) (161,950,053) (4,937,501) Gross profit 19,010,333 20,797,141 14,828,112 452,077 Operating expenses: Selling (7,710,533) (10,162,283) (14,641,728) (446,394) Administrative (2,659,289) (2,689,958) (2,865,335) (87,358) Research and development (3,468,174) (4,522,975) (7,705,559) (234,926) (13,837,996) (17,375,216) (25,212,622) (768,678) Operating income (loss) 5,172,337 3,421,925 (10,384,510) (316,601) Non-operating income: Interest income 35,556 71,802 241,227 7,355 Investment income recorded under the equity method, net 2,180,238 4,163,068 2,011,643 61,330 Dividend income 212,109 185,270 142,583 4,347 Gain on disposal of investments, net 706,590 439,356 1,987,464 60,594 Foreign exchange gain, net 206,066 409,510 - Others 331,334 344,864 2,192,135 66,833 3,671,893 5,613,870 6,575,052 200,459 Non-operating expenses: Interest expense (361,178) (475,537) (856,482) (26,112) Impairment loss on long-term equity investment (266,134) (471,879) (235,201) (7,171) Foreign exchange loss, net - - (285,812) (8,714) Impairment loss - - (158,598) (4,835) Others (178,433) (98,921) (271,015) (8,263) (805,745) (1,046,337) (1,807,108) (55,095) Income (loss) before income taxes and minority interest 8,038,485 7,989,458 (5,616,566) (171,237) Income tax expense (473,281) (302,957) (241,669) (7,368) Income (loss) before minority interest 7,565,204 7,686,501 (5,858,235) (178,605) Net Income (loss) 7,500,095 7,619,288 (5,225,571) (159,316) Minority interest in net income (loss) 65,109 67,213 (632,664) (19,289) 7,565,204 7,686,501 (5,858,235) (178,605) Earnings (loss) per share : Basic earnings (loss) per share 3.24 3.10 (2.12) (0.065) Diluted earnings per share 3.18 3.08 - -
46 2005 Annual Report 2005 Annual Report 47 BenQ Corporation and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 2003,2004 and 2005 (expressed in thousands of New Taiwan dollars) Common Convertible Capital Legal Special Retained Translation Treasury Minority Total
Stock Bonds Surplus Reserve Reserve Earnings Adjustment Stock Equity Company Financials Applied for (Loss) Conversion NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ Balance at January 1, 2003 16,810,510 - 13,296,073 1,764,452 - 8,721,127 766,083 (79,923) 1,789,836 43,068,158 Net income for 2003 - - - - - 7,500,095 - - 65,109 7,565,204 Appropriation of earnings and capital surplus: Legal reserve - - - 739,963 - (739,963) - - - - Retained earnings transferred to common stock 3,861,102 - - - - (3,861,102) - - - - Cash dividends - - - - - (2,521,577) - - - (2,521,577) Employee bonus paid in cash - - - - - (100,000) - - - (100,000) Directors’ and supervisors’ remuneration - - - - - (66,597) - - - (66,597) Convertible bonds converted to common stock and 167,000 13,436 462,616 ------643,052 capital surplus Change in Minority equity ------701,848 701,848 Treasury stock acquired by the Company ------(802,425) - (802,425) Change in treasury stock held by subsidiaries ------729 - 729 Cash dividends paid to subsidiaries which hold the - - 4,257 ------4,257 Company’s share Adjustments in net equity of investee companies - - (184,670) - - - - - 12,579 (172,091) Change in foreign currency translation adjustment ------(289,222) - (10,980) (300,202) Balance at December 31, 2003 20,838,612 13,436 13,578,276 2,504,415 - 8,931,983 476,861 (881,619) 2,558,392 48,020,356 Net income for 2004 - - - - - 7,619,288 - - 67,213 7,686,501 Appropriation of earnings and capital surplus: Legal reserve - - - 750,009 (750,009) - - - - Retained earnings transferred to common stock 2,517,592 - - - - (2,517,592) - - - - Cash dividends - - - - - (4,123,924) - - - (4,123,924) Employee bonus paid in cash - - - - - (50,626) - - - (50,626) Directors’ and supervisors’ remuneration - - - - - (67,501) - - - (67,501) Convertible bonds converted to common stock and 138,507 (13,436) 301,337 ------426,408 capital surplus Change in minority equity ------(98,064) (98,064) Treasury stock acquired by the Company ------(651,354) - (651,354) Treasury stock retired (344,570) - (211,698) - - (897,511) - 1,453,779 - - Change in treasury stock held by subsidiaries ------1,858 - 1,858 Cash dividends paid to subsidiaries which hold the - - 6,812 ------6,812 Company’s shares Adjustments in net equity of investee companies - - 1,013,553 - - - - - 63,801 1,077,354 Change in foreign currency translation adjustment ------(558,615) - (58,591) (617,206) Balance at December 31, 2004 23,150,141 - 14,688,280 3,254,424 - 8,144,108 (81,754) (77,336) 2,532,751 51,610,614 Net loss for 2005 - - - - (5,225,571) - - (632,664) (5,858,235) Appropriation of earnings and capital surplus: Legal reserve - - - 761,929 - (761,929) - - - - Special reserve - - - - 81,754 81,754 - - - - Retained earnings transferred to common stock 1,513,755 - - - - (1,513,755) - - - - Cash dividends - - - - - (3,473,263) - - - (3,473,263) Employee bonus paid in cash - - - - - (152,170) - - - (152,170) Directors’ and supervisors’ remuneration - - - - - (54,205) - - - (54,205) Convertible bonds converted to common stock and 22,826 13,063 61,598 ------97,487 capital surplus Change in minority equity ------58,272 58,272 Issuance of common stock by GDR 1,500,000 3,142,713 ------4,642,713 Treasury stock acquired by the Company ------(1,759,157) - (1,759,157) Change in treasury stock held by subsidiaries ------(833) - (833) Cash dividends paid to subsidiaries which hold the - - 5,620 ------5,620 Company’s shares Adjustments in net equity of investee companies - - 676,137 - - 80,130 - - 16,381 772,648 Change in foreign currency translation adjustment ------516,514 - 45,175 561,689 Effect of new consolidated subsidiaries ------830,067 830,067 Balance at December 31, 2005 26,186,722 13,063 18,574,348 4,016,353 81,754 (3,038,409) 434,760 (1,837,326) 2,849,982 47,281,247
46 2005 Annual Report 2005 Annual Report 47 BenQ Corporation and Subsidiaries Consolidated Statements of Cash Flows Years ended December 31, 2003,2004 and 2005 (expressed in thousands of New Taiwan dollars and US dollars) 2003 2004 2005 NT$ NT$ NT$ US$ Cash flows from operating activities: Net income (loss) 7,565,204 7,686,501 (5,858,235) (178,605) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 2,361,880 2,863,015 3,023,577 92,182 Amortization 199,560 154,087 449,294 13,698 Amortization of negative goodwill by merger - - (1,407,000) (42,896) Impairment loss - - 158,598 4,835 Impairment loss of other assets - 12,686 - - Loss on disposal of property, plant and equipment 67,277 38,012 38,522 1,174 Fixed assets transferred to expenses 6,603 3,941 87,550 2,669 Unrealized foreign exchange loss (gain) on overseas convertible bonds (30,361) (22,578) 5,026 153 Loss on physical count of property, plant and equipment 865 - - - Gain on disposal of short-term investments (397,605) (405,605) (1,789,927) (54,571) Gain on disposal of long-term investments (314,040) (33,750) (151,758) (4,627) Impairment loss on long-term investment 269,317 471,879 235,201 7,171 Loss on disposal of common stock of consolidated subsidiaries 5,055 - - - Investment income on long-term equity investments, net (2,180,238) (4,163,068) (2,011,643) (61,330) Cash dividends received from investees accounted for by equity method 302,305 917,217 1,148,856 35,026 Reversal for redemption of overseas convertible bonds (20,037) (10,509) (6,733) (205) Amortization of bond issuance costs 5,770 2,233 2,933 89 Differences in accounts in the accompanying balance sheets: 0 Notes and accounts receivable (5,372,978) 1,302,956 (18,339,135) (559,120) Receivables from related parties (993,120) (1,291,210) 1,756,797 53,561 Inventories (5,601,303) 1,252,188 (16,144,728) (492,217) Other financial assets - current - (260,658) (4,142,815) (126,305) Prepaid expenses and other current assets (523,464) (366,016) (2,341,268) (71,380) Deferred income tax assets (32,947) (368,617) (160,200) (4,884) Notes and accounts payable 5,425,130 (2,337,254) 32,529,785 991,762 Payables to related parties 1,560,337 1,424,117 449,441 13,702 Accrued expenses and other current liabilities 404,221 (819,429) 8,570,890 261,308 Other liabilities 67,803 4,630 1,967,157 59,974 Deferred income tax liabilities 37,754 10,566 - - Net cash provided by (used in) operating activities 2,812,988 6,065,334 (1,929,815) (58,836) Cash flows from investing activities: Proceeds from disposal of property, plant and equipment 406,697 160,257 216,778 6,609 Additions to property, plant and equipment (4,958,721) (5,007,614) (6,534,704) (199,229) Increase in deferred expenses and other assets (242,348) (73,824) (2,945,945) (89,815) Proceeds from disposal of long-term equity investments 662,461 122,299 281,472 8,582 Increase in long-term equity investments (1,203,830) (775,282) (547,827) (16,702) Proceeds from disposal of common stock of consolidated subsidiaries 84,425 - - - Increase in common stock of consolidated subsidiaries 4,560 - - - Receipt from investees’ capital reduction 114,138 539,510 15,298 466 Decrease (increase) in short-term investments 5,837,457 (1,030,884) 7,950,556 242,395 Net cash provided by (used in) investing activities 704,839 (6,065,538) (1,564,372) (47,694) Cash flows from financing activities: Payment for cash dividends (2,517,320) (4,123,924) (3,473,263) (105,892) Bonuses for employee (100,000) (50,626) (152,170) (4,639) Increase (decrease) in short-term borrowings 250,573 (1,465,009) 6,624,276 201,960 Increase in long-term debt 249,113 3,160,768 1,307,303 39,857 Issuance of common stock by GDR - - 4,642,713 141,546 Issuance of bonds 2,000,000 2,050,000 4,000,000 121,951 Redemption of bonds (2,229,611) (300,300) (101,400) (3,092) Directors’ and supervisors’ remuneration (66,597) (67,501) (54,205) (1,653) Increase (decrease) in minority interest 490,905 (98,064) 58,272 1,777 Increase in treasury stock (802,425) (651,354) (1,759,157) (53,633) Net cash provided by (used in) financing activities (2,725,362) (1,546,010) 11,092,369 338,182 Effect of exchange rate changes on cash and cash equivalents (186,393) 33,578 123,423 3,763 Effect of new consolidated subsidiaries - - 1,611,864 49,142 Net increase (decrease) in cash and cash equivalents 606,072 (1,512,636) 9,333,469 284,557 Cash and cash equivalents at beginning of year 4,124,705 4,730,777 3,218,141 98,114 Cash and cash equivalents at end of year 4,730,777 3,218,141 12,551,610 382,671 Supplemental disclosure of cash flow information: Cash paid during the year for: Interest, excluding capitalized interest 360,618 330,517 795,560 24,255 Income taxes 1,082,469 440,847 418,001 12,744 Supplemental disclosure of non-cash investing and financing activities: Convertible bonds converted to common stock and capital surplus 643,052 426,408 97,487 2,972
48 2005 Annual Report BenQ Fact Sheet Founded 21 April, 1984 Paid-In Capital USD 798 Million Revenue 2004: USD 5.1 Billion 2005: USD 5.04 Billion Chairman K.Y. Lee Management Team Executive Management: K.Y. Lee, Sheaffer Lee, Jerry Wang, Eric KY Yu, Jeff CH Li, Rick Lei Business Management: Hermit Huang, Irwin Chen, Peter Chen, Clemens Joos Regional Operations Management: Adrian Chang, Conway Lee, Michael Tseng, Ben Chu Corporate Vision Bringing Enjoyment and Quality to Life Product Focus Networked Digital Lifestyle Devices Computing Products Business Group: ■LCD Monitor: 15”, 17”, 19”, 20.1”, 23” wide screen (BenQ third largest LCD monitor maker worldwide) ■Joybook wide screen series laptop PC: 12”, 13”, 14”, 15.4”, 17” wide screen ■Optical storage product: CD-ROM, CD-RW, DVD-ROM, DVD+RW, Combi ■Imaging products: multi-function peripheral, multi-function printers (MFP) and scanners (e third largest scanner maker worldwide) Digital Media Business Group: ■Digital Projector: Digital Projector (data & video) ■LCD TV: 15”, 20”, 26”, 30”, 32”, 37”, 42”, 46” LCD TV, 72” Rear Projection TV ■Personal AV: Joybee MP3 audio player ■Digital Camera: 2 ~8 Mega Pixels digital cameras ■Car Displays Mobile Business Group: ■Mobile phone: GSM/GPRS mobile phones, CDMA/CDMA 2000/W-CDMA mobile phones, smart phones, PDA phones, 3G mobile phones ■Wireless Communication: GPRS+WiFi combo products, wireless modules Sales Offices 4 Regional Operations, 72 Sales & Branch Offices Worldwide ( *BenQ Mobile Sales Offices) ■Europe Regional HQ Sales Office: e Netherlands (Eindhoven), Germany* (Munich), Austria* (Vienna) Benelux, Germany, UK, France, Italy, Spain, Portugal, Switzerland, Russia, Austria, Greece*, Macedonia*, Cyprus*, Ireland*, Hungary*, Poland*, Romania*, Demark*, Norway*, Sweden*, Finland*, Czech Republic*, Slovakia*, Bulgaria*, Ukraine*, Estonia*, Lithuania*, Latvia*, Slovenia*, Kazakhstan*, Serbia*, Albania*, Croatia* ■e Americas Regional HQ Sales Office: USA (Irvine, CA), Brazil* (Sao Paulo) USA, Canada, Mexico, Brazil, Argentina*, Chile*, Costa Rica*, El Salvador*, Peru*, Columbia*, Ecuador*, Guatemala*, Venezuela* ■China Regional HQ Sales Office: China (Suzhou) Suzhou, Beijing, Shanghai, Chengdu, Guangzhou, Wuhan, Shenyang, Xian, Hong Kong, Shenzhen, Harbin ■AMEA (Asia Pacific, Middle East, Africa)* Sales Region: Taiwan (Taipei) Taiwan, Malaysia, India, ailand, Singapore, Japan, Korea, UAE (Dubai) , Turkey, Australia (New Zealand) Manufacturing ■Taoyuan, Taiwan ■Suzhou, China ■Shanghai, China ■Penang, Malaysia Operations ■Mexicali, Mexico ■Manaus, Brazil ■Kamp-Lintfort, Germany Patents 3,324 global patents, 2,749 patents pending (04/2006) Quality Certifications ■Taoyuan Plant (Taiwan): ISO-9000, ISO-14000, ODC, OHSAS 18001, TL-9000 ■Suzhou Plant (China): ISO-9000, ISO-14000, ODC , TL-9000, OHSAS 18001 ■Penang Plant (Malaysia): ISO-9000, ISO-14000, ODC ■Mexicali Plant (Mexico): ISO-9000, ISO-14000, OHSAS 18001 No. of Employees 19,765 employees (BenQ Mobile: 8,055) in over 70 countries (04/2006) - Taiwan (3,270), China (9,425), Malaysia (196), Other regions (7,000+) - Including R&D personnel (4,000) Sales by Geography & China the Americas Europe APAM* Total Percentages 2005 (%) 18 35 28 19 100 2004 (%) 15 30 31 24 100 2003 (%) 21 18 29 32 100 Market Share Products LCD Monitor Projector Storage Scanner Mobile Phone Market Shares (%) in 2005 9.5 % 14.0 % 12 % 24.0 % 5 % BenQ Group of BenQ Corporation, AU Optronics Corporation, Daxon Technology Inc., Darfon Electronics Corporation, Cando Corporation, Airoha Companies Technology Corporation, BenQ Guru Soware Co., Ltd, Philips BenQ Digital Storage and Raydium Semiconductor Corporation Recognitions / ■Received 11 Red Dot Design Award 2006 (March 2006) Achievements ■Awarded 17 iF Design Awards and one much-coveted Gold Award 2006 (March 2006) ■Interbrand’s Top 10 Global Taiwan Brands Survey: Ranking 4th (Oct. 2005) ■Received 11 Good Design Awards 2005 (Oct. 2005) ■Feature Company / Story on cover of May 2005 edition of Business Week magazine ■Awarded 21 iF China Design Award 2005 (May 2005) ■Received 6 Red Dot Design Award 2005 (March 2005)
48 2005 Annual Report 48 2005 Annual Report