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ASUSTeK Computer Inc.
2011 ANNUAL REPORT
Taiwan Stock Exchange Market Observation Post System：http://newmops.twse.com.tw ASUS annual report is available at http://taiwan.asus.com.tw/investor.aspx
Printed on April 27, 2012
321 I. SPOKESPERSON & DEPUTY SPOKESPERSON Spokesperson: David Chang Title: Chairman Office - Chief Special Assistant Tel.: 886(2)2894-3447 EXT: 2330 E-mail: [email protected]
Deputy Spokesperson: Nick Wu Title: Management Headquarters - Finance Division - Senior Director Tel.: 886(2) 2894-3447 EXT: 2343 E-mail: [email protected]
II. HEADQUARTERS AND PLANTS Taipei Headquarters: 15, Li-Te Road, Beitou District, Taipei City Tel.: 886(2) 2894-3447 Address: 4F, 150, Li-Te Road, Beitou District, Taipei City
III.SECURITIES DEALING INSTITUTE Name : Grand Cathy Securities Corporation, Registrar and Transfer Services Address : 5F, 2, Sec. 1, Chung-Chin S. Rd., Zhongzheng Dist., Taipei City Tel. : 886(2) 2389-2999 Website : http://www.toptrade.com.tw
IV. AUDITORS Name : CPA: CHOU TSENG HUI-CHIN & HSUEH MING-LING CPA Firm : PricewaterhouseCoopers, Taiwan Address : 27F., No.333, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City 110 Tel. : 886(2)2729-6666 E-mail : http://www.pwc.com/tw
V. EXCHANGEABLE BOND EXCHANGE MARKETPLACE Marketable security: GDR London Stock Exchange: http://www.londonstockexchange.com
VI. COMPANY WEBSITE http://www.asus.com
322 �� CONTENTS �� Page I. Letter to shareholders ……………………………………………………………………… 1 II. Introduction of the company ……………………………………………………………… 3 1. Establishment date ………………………...……………………………………………….. 3 2. Development history ……………………………………………………………………… 3 III. Corporate governance report ……………………………………………………………... 16 1. Organization of company ………………………………………………………………… 16 2. Directors, Supervisors, President, Vice President, Assistant V.P., and department heads.... 18 3. Corporate governance …………………………………………………………………….. 27 4. CPAs fees …………...…..………………………………………………………………….. 45 5. CPA’s information …………………………………………………………………………. 45 6. The chairman, president, and financial or accounting manager of the company who had worked for the independent auditor or the related party in the most recent years ………… 46 7. Information on Net Change in Shareholding and Net Change in Shares Pledged by Directors, Supervisors, Department Heads, and Shareholders of 10% shareholding or more ……………………………………………………………………………………….. 47 8. The relation of the top ten shareholders as the definition of Finance Standard Article 6 …. 48 9. Investment from Directors, Supervisors, Managers, and directly or indirectly controlled businesses ………………………………………………………………………………… 49 IV. Stock subscription …………………………………………………………………………. 53 1. Capital and shares …………………………………………………………………………. 53 2. Corporate bonds …………………………………………………………………………… 60 3. Preferred stock ……………………………………………………………………………. 62 4. Issuance of global depository receipts …………………………………………………….. 62 5. Employees stock option certificates ………………………………………………………. 64 6. Merger and acquisitions or stock shares transferred with new stock shares issued……….. 64 7. Fund implementation plan ………………………………………………………………… 64 V. Overview of business operation………………………………..…………………………… 65 1. Principal activities ………………………………………………………………………… 65 2. Market analysis and the condition of sale and production ………………………………… 69 3. Status of employees ……………………………………………………………………….. 75 4. Expenditure on environmental protection ………………………………………………… 75 5. Employee / employer relation …………………………………………………………….. 78 6. Important agreements ……………………………………………………………………… 83
323 VI. Financial information ………………………………………………………………. 84 1. Condensed balance sheet and income statement over the last five years …………………. 84 2. Financial analysis in the past five years …………………………………………………… 86
3. Supervisor’s report in the most recent years ………………………………………………. 90
4. Financial statements in the most recent years …………………………………………….. 91 5. Consolidated financial statements in the most recent years ………………………………. 91
6. Impact of financial difficulties of the Company and related party on the Company’s financial position ………………………………………………………………………….. 91
VII. Review of financial position, management performance and risk management ………. 195 1. Financial position ………………………………………………………………………….. 195
2. Management performance …………………………………………………………………. 195
3. Analysis of cash flows ……………………………………………………………………... 197 4. Impact of major capital expenditure on finance and business …………………………….. 198
5. Policies, reasons for gain or loss and action plan in regard to investment plans in current year and the next year…………………………………………………………………….. 198
6. Risk management …………………………………………………………………………. 198 7. Other important matters …………………………………………………………………… 202
VIII Special disclosures …………………………………………………………………………. 203
1. Related party ……………………………………………………………………………… 203 2. Subscription of marketable securities privately in the most recent years …………………. 203
3. The stock shares of the company held or disposed by the subsidiaries in the most recent years ……………………………………………………………………………………… 203
4. Supplementary disclosures ……………………………………………………………….. 203 5. Occurrence of events defined in Securities Transaction Law Article 36.2.2 that has great impact on shareholder’s equity or security price in the most recent years and up to the date of the report printed …………………………………………………………………. 203
324 I. Letter to Shareholders
First of all, I would like to thank you for your continuing support to ASUS. Subject to the nearing saturation and economic downturn for the European and American computer markets which lead to the reduction in consumer expenditures and the rise of tablet PC, the global computer market growth rate continued to decline in 2011. Ultrabook featuring ultra-slim body is bringing the hope of growth in the laptop computer industry. Nonetheless, due to higher initial cost, the overall laptop computer demand has been suppressed. Asian, South America and emerging markets from other regions are in stark contrast to the European and American market with observations of continuous growth in shipments. The tablet PC market continues to grow substantially with major appeals in “light, thin, short, and compact.＂ Due to a high demand for information in life, consumers need to browse the websites, receive email, search for data, and share information at all time. Moreover, the leisure, entertainment and gaming functions are turning tablet PC into another main tool for information, browsing and entertainment, following the footsteps of laptop computers and SMART phones. Under this industry situation, the turnover of ASUS headquarters was NTD317.7 Billion, profit before tax was NTD19.795 Billion, and the net income was NTD16.578 Billion for 2011, a growth rate of 1% as compared with 2010. The computer brands of ASUS were consolidated in 2011 (the Company＇s Financial Report) and the turnover reached NTD350.5 Billion, a growth rate of 9% as compared with 2010. The consolidated net income was NTD16.578 Billion and although with a mere 1% growth rate in net income, the profits related to the main business line have in fact increased from NTD13.641 Billion to 17.830 Billion, a significant growth rate of 31% as compared with 2010.
ASUS is highly recognized on an international level, for its innovation and Koreyoshi. In 2011 alone, ASUS products have been awarded with 3,886 internationally renowned awards from worldwide, receiving in average of 10.6 international awards daily. These honors best exhibit the “brilliant innovation, perfect quality＂ implemented by ASUS employees and at the same time serve as the best proofs for the superiority and quality assurance of ASUS products. Additionally, ASUS has been ranked at the top 3 of the 2011 Taiwan Global Brand Value Survey organized by Interbrand and sponsored by Bureau of Foreign Trade, Ministry of Economic Affairs, for the ninth consecutive year with a high growth rate of 27.4%. The brand valued at USD1.638 Billion.
ASUS is creating a number of popular products through its design thinking and is in constant pursuit of ultimate fashion and beauty. ASUS not only appeals with fashion in product appearance but also includes attentive design of user experience that puts products back to user orientation. The unparalleled user experience plus the aesthetically stunning craft are making inroads to the consumer market vigorously.
This year in CES, ASUS was a huge hit in one fell swoop to have won six CES Product Innovation Awards in the wireless handheld, four areas of personal electronic products, audio equipment, computer hardware and parts. In particular, Padphone won the wireless handheld product category in Best Innovation Award. Padphone integrated the two most popular products, namely the SMART phone and the tablet PC, with which the consumers can easily switch between mobile phone and PC for any occasions and events, depending on the required size of monitors. The battery run-time can also be extended via the power of tablet PC. Meanwhile, the mobile phone also provides 3G mobile internet for tablet PC, to share exciting digital content. The advantage of dual function as SMART phone and tablet PC in one Padfone is bringing consumers with more flexibility and brand-new mobile experience.
ASUS won the 2012 iF Gold Award from Germany in February with its exquisite design in
1 innovation and quality. The P1 Featherweight Portable Projector featuring lightweight and neat appearance, has won iF Gold Award in one fell swoop. The P1 LED projector is targeting at business elites, weighing only 415 gram, which size is equivalent to one CD Box (W12.5 x H3.3 x L13 cm). Lightweight, minimalist fashion design combining with portability are ideal for meetings during the travel. The simple and attentive operating interface upgrades the user experience of business projects to a whole new level. Other products such as the eye-catching ZENBOOK, the award-winning ASUS deformation plate EeePad, Sabertooth P67 TUF Motherboard, ET Series All-in-One PC, Asus CG Desktop Series Desktop, Asus Eee PC X101 Ultra-Slim, Asus Laptop G74, collectively won a total of eight categories in iF Product Design Awards. Furthermore, ZENBOOK Screensaver and the package for ASUS Rampage III Black Edition motherboard won iF Communication Award and iF Packaging Design Award respectively, distinguishing ASUS's continuous efforts and sophistication in design.
Under the efforts of all colleagues, Asus has created numerous extraordinary hero products and success. The rise of cloud computing has ushered in a new digital era. Many top companies such as APPLE, NOKIA, HTC, and SAMSUNG are catching up with this trend, while this trend can mean greater challenges. Looking into the future, cloud computing draws the new digital era closer and the industry competitions are likely to intensify, whereas the ranking for companies of processing and operating systems is likely to be re-shuffled. The future industries are likely to face with greater challenges. We project to constantly progress and always take the hard way to produce more hero products based on simplicity, focus, essence, and sophistication, in attempt to become the most respected world-class leader.
Based on the global economic outlook, industry conditions and forecast institutions, the goal is to sell 22 million units of NB in 2012. We would like to thank you for your support. ASUS will sure work hard to achieve the sales target for the benefit of shareholders.
Wish you a good health and good life!
Sincerely yours,
------Chairman
2 II. Introduction of the Company
I. Establishment date: April 2, 1990
II. Development history
April 1990 ASUS was incorporated at 2F, 14-2, Sec. 2, Chung-Young S. Road, Beitou District, Taipei City and with a paid-in capital of NT$30 million collected. April 1990 Became a direct customer of Intel (U.S.A.) May 1990 Cache 386/33 and 486/25 personal computer motherboard was popular. 486/25 was market launched with IBM and ALR synchronously and it was the milestone of computer development in Taiwan. May 1990 Expanded the instrument and equipment of R&D department and recruited R&D talents progressively for the development of EISA 486 motherboard. July 1990 ASUS completed the registration of the manufacturing facility and with production initiated. The in-house made quality products were popular. October 1990 The head office and manufacturing facilities were relocated to 4F, 10, Alley 25, Lane 425, Sec. 4, Chung-Young N. Road (changed name to “Li-Te Road” by Taipei City Government in 1993) with an area of 602 pings due to business expansion. November 1990 EISA 486 motherboard was market launched officially and became a market-leading product while attending COMDEX exhibition in early November. December 1990 Increased the paid-in capital to NT$80 million by cash capitalization for an amount of NT$50 million. December 1990 Generated sales revenue of NT$230 million in the first year of the incorporation and 16.01% net income for an amount of NT$36.82 million.
January 1991 The 286 and 386SX were popular in 1990 while the 486-mother board technology was difficult and expensive. ASUS was in control of advanced product technology and marketing. The market demand for advanced motherboard was growing this year. March 1991 The profit of 486 in this month exceeded the profit of 386 for the first time that meant the 486 advanced products had become the major product of the company. April 1991 Substantiated management team and reinforced marketing ability with multiple marketing and sales talents recruited by the company. August 1991 The sales of high unit price EISA 486 product were satisfactory and the said product had helped the company generate millions of dollars of profit. December 1991 INTEL (USA) provided the company with O/A credit quota for over five times. December 1991 Increased the paid-in capital to NT$150 million with retained earnings for an amount of NT$30 million and with cash for an amount of NT$40 million. December 1991 The sales revenue of this year amounted to NT$1.399 billion and net income amounted to NT$116 million.
January 1992 Monthly production exceeded 30,000 units. March 1992 Attended an exhibition in Hanover Germany to present the 32-bit SCSI interface EISA-SC100. The said product was popular with the IC developed in-house by ASIC, the self-developed software, and driver software. April 1992 Signed an agreement with AWARD for software authorization. April 1992 The business development of the company was reported in the electronic industry section of Economic Daily News. June 1992 Sales had gone up dramatically in the year before and were ranked in the 372nd place of the Top 500 Industries in Taiwan by China Credit Information Service
3 Ltd., ranked in the 193rd place by manufacturing index, and ranked in the 92nd place of information electronics by Excellence Monthly. June 1992 Management Magazine had the company’s Return of Net Worth ranked in the 6th place, the company’s Return of Assets in the 2nd place, the Employee’s Average Earnings in the 19th place, and the Earnings per Dollar in the 10th place. December 1992 Monthly production of motherboard and interface card exceeded 75,000pcs representing 132% growth from the same month of the prior year. December 1992 Sales revenue of the year amounted to NT$2.18 billion representing 55.8% growth from the year before and the net income amounted to NT$205 million.
March 1993 Promoted PENTIUM (586) motherboard. ASIAN SOURCES Magazine had the company recognized as one of the few manufacturers that was able to have this advanced mother board promoted. April 1993 Increased the paid-in capital to NT$199 million with cash for an amount of NT$49 million. May 1993 Invested to have SMT production line setup. May 1993 China Credit Information Service Ltd. had the company’s business performance ranked in the 7th place of the TOP-500 Manufacturers in 1992 and the company’s sales revenue ranked in the 263rd place of the TOP-500 Manufacturers. June 1993 Increased the paid-in capital to NT$308.45 million with retained earnings. Public offering was arranged accordingly. June 1993 Bureau of Foreign Trade MOEA ranked the company’s importing/exporting business in the 168th place in 1992. July 1993 The Ministry of Finance awarded the company as an honest taxpayer. October 1993 The mass production of PCI486 was initiated. PCI was the new generation bus structure standard and it was a high-speed and high-tech product. November 1993 The company and the head engineer, Mr. Ted Hsu, were awarded with the “32-bit personal computer milestone award” of “Taiwan personal computer ten-year milestone award” that was organized by Commonwealth Magazine, co-organized by the Institute for Information Industry, and sponsored by Intel for “having high-speed 486 advanced mother board developed successfully” and “the first Taiwanese information business to develop the fastest personal computer synchronized with the world that has helped Taiwan open up a path to the successes and helped define the competition of speed and flexibility in technology development.” November 1993 Mass production of PCI486 and Pentium motherboard was initiated. Pentium was the new generation of CPU and was the PC compatible with the highest speed. December 1993 The first SMT production line was completed with pilot run and put into service. Another set of SMT was acquired in response to the expansion of production. December 1993 Sales revenue of the year amounted to NT$2.303 billion representing 5.6% growth from the year before and the net income amounted to NT$220.7 million.
January 1994 ASIAN SOURCES Magazine had the company’s technological innovation ranked in the first place of The TOP-10 mother board manufacturers in Taiwan and the company’s quality ranked in the second place that was “second to ACER only” in 1993. February 1994 C.T.Mag. (Germany) had the company’s PCI rated and with the capacity and memory of PCI Pentium and 486 awarded with an honorary rating. March 1994 Attended Cebit Show in Hanover Germany and was the only motherboard manufacturer at the show having Dual Pentium manufactured successfully and recognized by the industry and Intel. May 1994 Bureau of Foreign Trade MOEA ranked the company’s importing/exporting business in the 161st place in 1993. July 1994 ASUS’s initial name was Hung-Shuo Computer Inc., in July gets up changes the name officially as ASUSTeK Computer Inc. August 1994 Increased the paid-in capital to NT$450.337 million with retained earnings. August 1994 Setup subsidiary in the United States and Germany for marketing, service, and
4 repair and maintenance. October 1994 China Development Industrial Bank became the institute shareholder of the company. November 1994 PCI Pentium and Dual Pentium were popular in market and with monthly sales exceeding NT$300 million for the first time. December 1994 Taipei Factory was certified with ISO 9002. December 1994 Purchased Taoyuan Lu-Chu Plant with an area of 2,417 pings and a constructed area of 1,200 pings that was put into service in mid-1995. December 1994 Sales revenue of the year amounted to NT$3.36 billion representing 45.9% growth from the year before and the net income amounted to NT$756 million.
January 1995 ASIAN SOURCES Magazine had the company’s quality ranked in the first place and the company’s technological innovation in the first place of the Top-10 mother board manufacturers in 1994 ahead of First International Computer Inc. and Acer. May 1995 China Credit Information Service, Ltd. had the company’s business performance ranked in the 5th place of the TOP-500 Manufacturers in 1994. May 1995 Taoyuan Lu-Chu Plant was put into service for production officially. June 1995 Increased the paid-in capital to NT$600 million with retained earnings. September 1995 CitiSelect Asia Tilt Growth Portfolio became the institute shareholder of the company. October 1995 Monthly income exceeded NT$1 billion for the first time. November 1995 Presented Pentium Pro server, work station, and motherboard. December 1995 Sales revenue of the year amounted to NT$7.87 billion representing 134% growth from the year before and the net income amounted to NT$1.95 billion.
January 1996 Purchased the head office on Li-Te Road and the building that was rented for Taipei Plant with an area of 3,159 pings. April 1996 Chung-Hua Institution for Economic Research awarded the company with “Product of the Year Award” and “Enterprise of the Year Award.” June 1996 China Credit Information Service Ltd. had the company’s business performance ranked in the 1st place of The TOP-500 Manufacturers in 1995. August 1996 SEC had the company authorized as Class II stock listing company. August 1996 Increased the paid-in capital to NT$1.2 billion with retained earnings. November 1996 ASUS went public at Taiwan Stock Exchange Corporation officially. December 1996 Sales revenue of the year amounted to NT$13.327 billion representing 69% growth from the year before and the net income amounted to NT$3.808 billion.
January 1997 Taoyuan Lu-Chu Plant was certified with ISO-9002. February 1997 Leased Taoyuan Nan-Kan Plant with an area of 4,400 pings ready for production. February 1997 P/I-P65UP5 of the company was awarded with the “5th Symbol of Excellence” award. April 1997 Setup Nan-Kan Plant with an area of 4,400 pings right next to Lu-Chu Plant for a total monthly production of 800,000 motherboards. May 1997 Increased the paid-in capital to NT$3.23 billion with retained earnings and cash. May 1997 Collected funds for US$230 million with cash in the form of overseas depository receipt GDR. September 1997 Acquired automation SMT for expanding automatic production scale over three times. September 1997 Monthly income exceeded NT$2 billion for the first time. October 1997 Purchased Quay-Sun Plant with an area of 7,900 pings for the production of new
5 NB and CD-ROM. November 1997 Held new product presentation including NB and CD-ROM. December 1997 Sales revenue of the year amounted to NT$21.371 billion representing 60.4% growth from the year before and the net income amounted to NT$7.038 billion.
February 1998 Asiamoney awarded the company as “Best Managed Companies in Taiwan.” April 1998 Finance Asia awarded the company as “Asia’s Strongest Companies.” June 1998 Increased the paid-in capital to NT$8.115 billion with retained earnings. June 1998 Monthly income exceeded NT$3 billion for the first time. October 1998 Increased the paid-in capital to NT$8.135 billion with cash for an amount NT$20 million and with NT$420 million collected. October 1998 Acquired automation SMT for expanding automatic production scale and with over one million motherboards manufactured monthly. October 1998 Presented the lightest all-in-one NB. November 1998 The company was certified with ISO-14000. November 1998 Asia Week had the company ranked in the first place of The International Chinese Enterprises 500 & Top-10 Manufacturer in 1998. November 1998 Asia Week had the company’s business performance in the first three quarters of 1998 ranked in the first place of The InfoTech 100. November 1998 Business Week (U.S.A.) had the company ranked in the 18th place worldwide and the first place in Asia of The InfoTech 100. December 1998 Completed the construction of Lu-Chu Plant with an area of 3,600 pings ready for use. December 1998 Sales revenue of the year amounted to NT$35.2 billion representing 64.7% growth from the year before and the net income amounted to NT$11.575 billion.
March 1999 Initiated the construction of Beitou II Plant for an area of 1,453 pings planned for use. May 1999 Ranked in the 21st place of Top-1000 Manufacturers in the special issue of Commonwealth Magazine. Ranked in the 2nd place of Top-50 Enterprises 50 for three consecutive years (2007~2009) in the special issue of Commonwealth Magazine. Ranked in the 6th place of Top-1000 Manufacturers as the most profitable operation in the special issue of Commonwealth Magazine (hit the mark of NT$10 billion and become the leader of information and telecommunication industry). Ranked as one of the National Top-20 Private Businesses in the special issue of Commonwealth Magazine. June 1999 China Credit Information Service Ltd. awarded the company with the honorary citation of “1999 Taiwan TOP 500.” China Credit Information Service Ltd. ranked the company in the fourth place as the most profitable business of “1999 Taiwan TOP 500.” China Credit Information Service Ltd. ranked the company in the third place as the highest earnings business of “1999 Taiwan TOP 500.” China Credit Information Service Ltd. ranked the company in the third place as the best assets-management business of “1999 Taiwan TOP 500.” China Credit Information Service Ltd. ranked the company in the fourth place as the most productive employees of “1999 Taiwan TOP 500.” Increased the paid-in capital to NT$11.449 billion with retained earnings. July 1999 Presented ASUS super thin NB. October 1999 Increased the paid-in capital to NT$11.464 billion with cash for an amount NT$15 million and with NT$300 million collected. December 1999 Sales revenue of the year amounted to NT$49 billion representing 39.2% growth from the year before.
6
January 2000 Purchased the eight pieces of land of the 4th lot, Fong-Nien Lot, Beitou District, Taipei where adjacent to the head office on Li-Te road for business expansion with an area of 7,186 pings. Asiamoney ranked the company in the second place of “Best Managed Companies in Taiwan.” February 2000 Presented new NB L8400. May 2000 Completed the construction of Beitou II Plant with an area of 1,453 pings for use. June 2000 Increased the paid-in capital to NT$15.671 billion with retained earnings. August 2000 Ranked in the first place of Tech 200 by Globalviews Magazine. September 2000 China Credit Information Service Ltd. ranked the company’s business performance in the third place of Top-10 Manufacturers in 1990-1999. October 2000 Commonwealth Magazine ranked the company in the first place of Taiwan Electronics and in the seventh place nationwide. November 2000 Business Week (U.S.A.) had the company ranked the 44th place worldwide of The InfoTech 100. December 2000 Sales revenue of the year amounted to NT$70.7 billion representing 44.38% growth from the year before.
March 2001 ODC (ODC is for the certification of environmental protection without using any material that is dangerous to Ozone layer) was awarded to ASUS. June 2001 Increased the paid-in capital to NT$19.769 billion with retained earnings. June 2001 Business Weekly ranked ASUS in the 26th place of World Business 100. November 2001 Business Week ranked ASUS in the 28th place of The InfoTech 100. November 2001 Completed the construction of Taipei Plant with an area of 9,073 pings for use. December 2001 Readers of PC Magazine had awarded ASUS with the “Product of the Year Award” for the motherboard, NB, CD-ROM, and VGA in 2001. December 2001 Far Eastern Economic Review ranked the quality service/product of ASUS in the fourth place. December 2001 Sales revenue of the year amounted to NT$77.9 billion representing 10.16% growth from the year before.
January 2002 Seventeen products of the company were awarded with the “Symbol of Excellence” this year; therefore, the company was the biggest winner of the 10th national “Symbol of Excellence” award. April 2002 Awarded as the excellent health and safe institute by Taipei City Government. April 2002 Ranked in the Top-10 of Manufacturers 1000 by Commonwealth Magazine, the Top-3 of computer and elements, and the Top-3 of most profitable business. June 2002 Launched MyPal A600 that was the first PDA supporting Intel’s 400MHz PXA250CPU; also, it was the most light weighted, thin, and functional pocket PC. July 2002 Increased the paid-in capital to NT$19.988 billion with retained earnings. October 2002 Awarded as the excellent health and safe institute nationwide. October 2002 Asia Week ranked ASUS in the Top-10 of Chinese Businessmen 500. December 2002 The company had 17 million mother boards shipped this year; therefore, one out of six computers was built with ASUS mother board. December 2002 The consolidated income of the year amounted to NT$114.7 billion representing a substantial growth in sales.
January 2003 Constructed Quay-Sun Plant with 16,976.8 pings available for use.
77 February 2003 The design of super-thin portable dual CD-R & CD-REW SCB-2408-D was awarded with the Industrie Forum (iF) in Germany. March 2003 ASUS had based on the powerful R&D capability and the excellent cooperation with Intel to have Centrino NB market launched with attention drawn upon. May 2003 After receiving the award of “Symbol of Excellence” with 20 citations that was beyond the reach of competitors, ASUS was awarded with the “11th Branding Taiwan” with three citations that was beyond the reach of competitors. It evidenced the good quality and image of ASUS to compete in the world on behalf of Taiwan. June 2003 Purchased the assets of Elite Group in Chungli Plant including land, manufacturing facilities and equipment, and specific raw material through the subsidiary, ASUSALPHA COMPUTER INCORPORATION August 2003 Increased the paid-in capital to NT$22.817 billion with retained earnings. September 2003 Presented S200N Centrino NB that weighted 905g and was the most light-weighted NB in the world. October 2003 Presented the first 3G foldable color phone J100. November 2003 DiGiMatrix was awarded with “Taiwan Outstanding Design Award” in 2003. December 2003 The consolidated income of the year amounted to NT$195.889 billion representing a substantial growth in sales.
April 2004 Setup TPC product line (thermal conduction, power, and chassis) to provide consumers with comprehensive system solution. May 2004 ASUS W1 NB with built-in TV card and powerful multimedia software was market launched. The outstanding hair-like pattern design was awarded with multiple global awards. June 2004 Presented the small and with big screen ASUS J101 phone. June 2004 The industrial design team received eleven G-Mark in Japan, five iF awards in Germany and five Red Dot design awards. December 2004 Awarded with 1,048 global professional media and networking awards that were second to none. December 2004 ASUS was the largest motherboard and VGA manufacturer; therefore, one out of three computers was made with ASUS motherboard in the world. December 2004 The company had 42 million motherboards and 7.8 million VGA shipped in 2004. December 2004 ASUS became the Top-10 NB brands and the Top-5 NB manufacturers. December 2004 The consolidated income of the year amounted to NT$250.042 billion representing a substantial growth of 26% from the year of 2003.
January 2005 ASUS was the biggest winner of “Symbol of Excellence” award for two consecutive years and with all forty nominated products awarded. March 2005 ASUS W1 NB was awarded by iF (Germany) with industrial design award that was known as Oscar Award in computer business. This was the first Chinese design awarded with iF. Invested in AzureWave Technologies, Inc., the subsidiary, to manufacture office machine, electronic components, and computer and peripheral equipment; also, to conduct the wholesales and retails of precision instrument and camera equipment. October 2005 ASUS had the first environment-friendly mother board developed successfully in Taiwan. Invested in AMA PRECISION INC., the subsidiary, to conduct computer elements R&D. November 2005 ASUS was awarded with thirteen awards in 2005 “Channel Award” that was second to none. Invested in Enertronix, Inc., the subsidiary, to conduct R&D and manufacture radio receiver and wireline communication equipment. December 2005 The company issued 59,592,835 stock shares in exchange for 15% stock shares of
8 Advantech Co., Ltd. to achieve the goal of stock exchange and strategic alliance; then, the company entered industrial computer field. ASUS entered CES exhibition for the first time to take advantage of the wave of digital family. W5A NB was awarded with CES Innovative Design & Technology Award. The consolidated income of the year amounted to NT$357.8 billion representing a substantial growth of 43.11% from the year of 2004.
January 2006 The company and Advantech Co., Ltd. each acquired 50% shareholding of Advansus Corp. on January 3, 2006 with cash capitalization. January 2006 The company’s R&D was trusted by the industry. ASUS AS-D770 was crowned as Top-50 Industrial Purchasers. March 2006 The company had stock exchanged with Askey Computer Corporation according to Merger Law and with 73,662,961 shares issued for merger. Askey Computer Corporation had become a subsidiary of the company. March 2006 The company had organizational structure adjusted in response to business development. Most of the BU was defined as the Business Division for the realization of process-oriented and customer-oriented service. April 2006 ASUS W3A, W5A, and V600V were awarded with Red Dot Award for the outstanding function and fashionable and elegant design. May 2006 ASUS NB W2, W3, and V6 were nominated for “iF China, Design award” Top-10. A great achievement of the company to share and it did evidence the leading position of ASUS in computer world. June 2006 Business Weekly awarded ASUS with InfoTech 100 for eight consecutive years. October 2006 ASUS that was known for creating trust and sentiment was awarded with the “2005 Top-10 Taiwan Brand Value.” December 2006 ASUS ATEC was awarded with the “7th Management of Technology Award” by Chinese Society for Management of Technology. December 2006 The consolidated income of the year amounted to NT$560.235 billion representing a substantial growth of 45.49% from the year of 2005.
January 2007 ASUS worked with Automobili Lamborghini to present ASUS Lamborghini VX series NB high-speed version. January 2007 ASUS AS-D770 and NB were crowned for Top-50 Industrial Purchasers in 2005. ASUS products were the first choice of industry, professionals, and networking users for consumption. February 2007 ASUS was awarded with three citations in MIS Best Choice by Institute for Information Industry: Barebones and server were ranked in the first place and advanced NB was ranked in the second place. March 2007 ASUS presented the first 3.5G NB in Taiwan that led consumers entering new mobile phone era. June 2007 ASUS were awarded with 39 citations in the 15th “Symbol of Excellence” award for its excellent quality and innovation that was second to none. June 2007 ASUS was recognized by Mercedes-Benz and with ASUS P526 “C-Class Mobile Phone” promoted. July 2007 AUSU announced to have brand name business and OEM/ODM business divided at the press conference of SEC in July 2007. ASUS was dividend into three divisions, in which, brand name business was the responsibility of ASUS while OEM/ODM was the responsibility of Pegatron Corporation and Unihan Corporation on the baseline date of January 1, 2008. July 2007 ASUS was crowned for the “2007 Top-10 Brands Taiwan” with a brand value of US$1.196 billion recognized representing a growth of 166% from the year of 2003. October 2007 ASUS Eee PC was market launched in Taiwan for the satisfaction of consumers.
99 ASUS Eee PC was popular worldwide and was sold at the rate of one Eee PC per five-second. November 2007 Oekom, an international reputable institute for environmental protection valuation, ranked ASUS in the first place of “2007 Environmental Protection.” The environmental protection effort of ASUS was awarded for the first time; also, ASUS was the first Chinese IT industry received such honor in the last fifty years. December 2007 ASUS was ranked in the first place of “Sustainability Award” by the Executive Yuan and with the award presented to the Chairman of ASUS by the Minister. December 2007 President Republic of the Gambia, Dr. Jammeh, and his 32 officers visited the head office of ASUS and shown strong interest in Eee PC. December 2007 Chunghwa Telecom and ASUS announced a strategic alliance to integrate the resources for the construction of a perfect digital center and to get involved in charity activity with 1,000 Eee PC donated to schools in the remote area of north, center, south, and east Taiwan for narrowing down Taiwan’s digital divide. December 2007 ASUS entered optical field for the first time and with BrightCam AF-200 and MF-200 presented. December 2007 The consolidated income of the year amounted to NT$755.361 billion representing a substantial growth of 34.83% from the year of 2006.
January 2008 ASUS had brand name business and OEM/ODM business divided officially. The brand name business was the responsibility of ASUS while OEM/ODM was the responsibility of Pegatron Corporation and Unihan Corporation for value generation. March 2008 The “Dual Hundred-Million-Plan” of ASUS was to have one hundred million NTD budgeted to win over the heart of one hundred million customers. The goal was to provide professional repair and maintenance and consulting service to more customers of ASUS. April 2008 ASUS had the second-generation 8.9’ Eee PC 900 market launched. April 2008 Intel and ASUS held the “Recycling Computer, Project of Hope” press conference to demonstrate the collaboration between businesses and the determination and action of enterprises in saving energy and recycling for the good of the earth. April 2008 Setup ASUS Foundation to have resources integrated effectively to feedback society and to fulfill social responsibility. May 2008 ASUS Computer was awarded with the 16th “Symbol of Excellence” this year and ASUS was the biggest winner. The excellent technology R&D, humanity technology, and innovation of ASUS have helped have fifty-one products of the company been awarded with the “Product of the year award” at the “Symbol of Excellence” this year, in which, EeePC and R700t navigator were awarded with the “gold medal” award. Six products of ASUS were awarded with the “silver medal” awards. ASUS is second to none in the industry in the sense of quality and quantity. June 2008 10” Eee PC1000 was market launched officially with a great appreciation received from international and domestic media while attending Computex exhibition in Taipei. July 2008 Enforced “Reverse Recycling Green Marketing Business Plan” August 2008 ASUS was the designated hardware brand for Advanced Overlocking Championship (AOCC) in 2008 and with great response received to the products. The combination of ASUS P5Q3 Deluxe, Striker II Extreme, and ENGTX280 had broken the record successfully at the extreme temperature of 100℃ below. October 2008 ASUS has Eee PC market launched for one year. The sales of Eee PC are growing worldwide that has overturned the imagination of the world about mobile communication and has lead the minicomputer market successfully. EeePC is elected as the best seller of 3C product this year. ASUS has Eee PC S101, the stat-of-the-art; market launched this month targeting on global business commuters and fashion Yapese. November 2008 ASUS Eee Family promoted new products, all-in-one touch-panel screen computer Eee Top ET16 series with 15.6” touch big screen. The computer can be operated with a screen touch for an effective interaction and operation with the
1010 computer that is different from convention table-top computer. November 2008 The tough Japanese market was conquered by the easy-to-learn and easy-to-use Eee PC! According to the survey in November of the most creditable 3C survey company, Business Computer News (BCN), EeePC was the champion in sales of Notebook and the most popular product of the year by the Japanese lifestyle and fashion magazine DIME. December 2008 ASUS Eee PC was named the product of the year by Forbes and Stuff Magazine in the U.K., the Japanese lifestyle and fashion magazine Dime gave the Eee PC top product honors. Sweeping from the west side to the east side of the Atlantic, America’s benchmark on-line retailer Amazon also selected the Eee PC as the most popular Christmas gift and recommended by 13 medias as the best gifts to give noted how consumers loved the high mobility of the Eee PC. Spanning Japan, Taiwan, Europe and the U.S., there is no place in the world that has not felt the effect of the Eee PC.
January 2009 According to the 24th “ideal brand in the mind of consumers” survey of Management Magazine V. 451 and the “ideal brand in the mind of businessmen” of Today V. 626, February 2009 ASUS Computer and the world leading GPS brand Garmin announced the establishment of a strategic alliance to launch a joint Garmin-ASUS brand smart phone that combines leading smart phone and GPS technology. March 2009 Eee PC™ series had been the top-three models on the shopping list of the benchmark online mall “AMAZON” for more than once. The newly launched 1000HE model of Eee PC™ had taken up the top-two spots with successful pre-order. It had evidenced the popularity of Eee PC and ASUS had owned the heart of American consumers with Eee PC™. March 2009 Global design prize “reddot” was awarded in Germany. ASUSTeK had been awarded with industrial design awards in recent years including “Product Design 2009 Winners” this year for the five products of Eee PC S101, Eee Keyboard PC innovative computer, S121 notebook, P30 notebook, and innovative “chocolate keyboard.” April 2009 ASUSTeK was the biggest winner in the 3rd Annual Taiwan Excellence Award for three consecutive years where a total of 53 products received the Excellence Award, in which, Eee PC S101 was awarded with the “Gold Award” this year while ASUS Bamboo U6V and P552w smart phone were warded with “Silver Award.” April 2009 ASUSTeK launched the energy-saving motherboards P5Q PRO Turbo and P5Q Turbo on the Earth Day. P5Q PRO Turbo and P5Q Turbo were designed with unique Xtreme Phase power design and ASUS 2nd generation EPU smart energy-saving chips to save power consumption; also, allow the system to monitor automatically, adjust power supply, reduce temperature, and increase power efficiency up to 96%. April 2009 ASUSTeK was reckoned as the canon of green products to the world by CNN and TIME Magazine. Eee PC 1000HE was appraised by CNN in the program of ”Your Green World”. ASUS Bamboo U6V was awarded” Green Design 100” by TIME Magazine for the artistic design and environmental protection value. May 2009 ASUSTeK introduced the thinnest mini notebook – Eee PC 1008HA seashell! Seamless Eee PC 1008HA seashell gave a sense of fashion, which was originated from the idea of seashell, weighted only 1.1kgs, sexy slim body with only 18mm in thickness, 92% Baby Touch keyboard, and power-saving 10.1” LED display. May 2009 ASUSTeK was ranked No. 1 for “product and service quality” and “innovation” in the “Asian Business 200” by Wall Street Journal in Asia. ASUSTeK was ranked No. 2 for “domestic industry” in the “Asian Business 200,” which was the highest ranking in the 3C industry. June 2009 ASUSTeK was the winner with three products including “Game Republic” ASUS G51 Notebook, digital Eee family member EeeNAS PC, and Garmin-Asus nüvifone G60 navigator mobile phone awarded in the “Best Choice of COMPUTEX.”
11 June 2009 ASUS motherboard was pioneering and was the first to pass Energy Star 5.0 certification. ASUSTeK was certified for professional energy-saving for the second time since the first recognition as the canon of green products manufacturer by CNN and TIME Magazine. September 2009 ASUSTeK introduced brand new ASUS UL Series demonstrating Turbo 33 duo-core effect, 12-hour long-lasting power, 1” super-thin notebook, broke the myth of permanence and efficiency conflict, and setup a brand new standard of mobile computation. October 2009 ASUSTeK was awarded for innovation in energy-saving effort. ASUS computer was the first one in the world to receive the validation of “Environmental Product Declaration (EPD)” and “carbon footprint.” ASUSTeK was the first enterprise in Taiwan to receive gold environmental protection logo of EPEAT of the United States; also, first top-ten computer brand in the world to receive the “EU Flower” certification. ASUSTeK has dedicated itself to the efforts of green environment, carbon-reduction, and care for the Earth. December 2009 The consolidated sales revenue for the ASUS Computer brand was NT$248.2 billion from the year of 2009.
January 2010 Five ASUS products were awarded with the innovation award of the CES in 2010 including ASUS Videophone Touch AiGuru SV1T Skype, ASUS MATRIX GTX285/HTDI/1GD3 video graphics array, Disney Netpal™ Eee PC MK90H notebook, ASUS MS238H super thin LED display, and ASUS RT-N16 flagship wireless router. January 2010 ASUS P6X58D Premium was the first USB 3.0 motherboard in the world to receive USB-IF (USB Implementers Forum) certification and to lead consumers entering USB3.0 high-speed transmission era. February 2010 The Company held its extraordinary shareholders’ meeting on February 9, 2010, and passed a resolution for the spin-off of its ODM business. Such resolution requires the Company to spin off the ODM assets and business (the Company's 100%-owned long-term equity investment in Pegatron) to the Company's wholly owned existing subsidiary Pegatron International Investment Co., Ltd. Pegatron International Investment Co., Ltd. will issue new shares to the Company and the shareholders of the Company as consideration. The Company will have a capital reduction of $36,097,609 or a capital reduction of approximately 85%. It is expected that the Company will acquire approximately 25% of the equity in Pegatron International Investment Co., Ltd. and that the shareholders of the Company will in total acquire approximately 75% of the equity in Pegatron International Investment Co., Ltd. The spin-off date is expected to be June 1, 2010. February 2010 ASUSTeK introduced the first Smart3 Garmin-Asua M10 perfect smart phone for navigation, daily life, superpower community function, and multi-functional Windows smart phone. February 2010 ASUSTeK introduced the first USB 3.0 ASUS N series mobile video flagship notebook with built-in SonicMaster sound technology. It is the canon of mobile video and audio theater. March 2010 ASUSTeK was awarded with industrial design prize again – the chocolate keyboard was awarded with the gold medal of iF design in Germany. ASUS EeePC™ seashell, excellent superlight US series and UX30 notebook, EddKeyboard PC, fashionable CG 5290, super thin blue burner SBC-04D1S-U, and professional and compact P30 notebook seven in total were awarded with the product design prize of iF award. ASUS quality in design is seen in the world again! April 2010 Participated in Taiwan Pavilion Shanghai Expo2010 with high-performance computer BA5190 exhibited for light screen performance, water table lamps, and window on Taiwan. Present the beauty of Taiwan to the guests from all over the world with an attitude of unsung hero. April 2010 The 18th “Symbol of Excellence” was awarded to ASUS, the biggest winner of the year; also, Gold Medal was awarded to EeeKeyboard PC including five nominations of Gold Medal and 36 “Symbol of Excellence” Awards. The biggest winner of the “Symbol of Excellence” for seven consecutive years; also,
1212 awarded with the “Outstanding Award” of the year. June 2010 The G51 3D notebook of ASUS was awarded with the 2010 Taipei International Computer “Product of the Year Award” and “Display & Digital Entertainment Award.” Eee PC™ 1015PE was awarded with the RedDot Design Award in Germany and “Green ICT Award” of COMPUTEX 2010. AP-N53 Mini Dual Band Wireless Router had won the recognition of the review panel with its light, compact, portable, and powerful network shareware. AP-N53 Mini Dual Bank Wireless Router is the Best Choice and with four awards awarded consecutively. August 2010 ASUS “own SonicMaster and enjoy the sound of music” SonicMaster notebook was marketed. Mr. David Lewis of Bang & Olufsen was the designer. NX90 gave not only extreme video shock but also stylish classic design elements. August 2010 ASUS had dedicated to environmental protection, energy saving, and society involvement for years. ASUS was awarded with the 2010 Top-Ten Corporate Citizenship Award by CommonWealth Magazine. September 2010 ASUS was awarded with the Top-Three Brands of the “2010 Top-Ten Taiwan Brands” by the MOEA, Foreign Trade Association, and Interbrand. The overall brand value had gone up by 5% from the year of 2009 for a record high of US$1.285 billion. September 2010 Twelve products of ASUS were awarded with G-Mark Design Award in Japan including six notebooks, four Eee PC notebooks, and one monitor and motherboard. October 2010 ASUS constructed “Florabot” technology view for the four chambers of the dream house at “Taipei Expo2010.” December 2010 ASUS was awarded in the category of industrial design and visual communication design for the Eee PC 1008P KR and NX90 screensaver at the 2010 “Golden Pin.” December 2010 Brand sales in 2010 amounted to NT$321.3 billion.
January 2011 ASUS was awarded with eight CES product innovation awards, the biggest winner at the CES. ASUS had outperformed others in the fields of personal electronics, computer hardware, home network, and digital audio evidencing ASUS’s leading role in digital life. January 2011 ASUS was awarded with eight awards at iF Product Design in Germany, the biggest winner of the year. The winning products included Rampage III Extreme motherboard, Eee Note, Eee PC KR, SBW-06C2S-U Burner, RT-N56U wireless router, game notebook G53/G73, N-series audio notebook, and U36 Ultrathin notebook. March 2011 ASUS introduced the Eee Pad Transformer of Android® 3.0 operating system. The Eee Pad Transformer was with the “deformation” function and Eee three-in-one base and multiple expansion better than other tablet PC in market (USB 2.0/SD/micro SD slot) and 16-hour UPS. March 2011 e” first introduced green brands chart in Taiwan with a focus on ten industries and 155 brands to encourage the green brands for the good of the society taking as a whole. ASUS had outperformed others and was crowned in the category of information industry with the “Super Green” award. April 2011 ASUS participated in the largest design convention in the world: The design week in Milano Italy with the theme of “Senses Remix” embracing all kinds of sensory experience, directing visitors to explore how technology enrich hearing sense, sense of sight, and sense of touch. The exhibition center was the best ever. ASUS was on the Top-Ten list of Elita Award. April 2011 The Gold Medal and Silver Medal of the 19th “Symbol of Excellence” were awarded to the 45 products of ASUS, the biggest winner of the year. April 2011 The 2011 Energy Star was held in Washington D.C. in the United States. ASUS was awarded with “Excellence in Efficient Product Design”. The exclusively developed Super Hybrid Engine (SHE) with super energy-saving techniques has been appraised by the Environmental Protection Agency (EPA). May 2011 ASUS Eee Pad Transformer won the 2011 Taipei Computex Best Choice Award
13 in category of the Best Choice of the Year, Best Design Award and the Best Choice in “Computer and Systems.” The world’s first halogen-free monitor, VW247H-HF and Bamboo series notebooks, U43SD were awarded with the Green ICT Award. o!Play Gallery high-speed USB 3.0 player was awarded with the Best Choice in category of “Display and Digital Entertainment” while the Two-Way HDMI Streaming Media Center WAVI won the Best Choice in “Telecommunication category.” ASUS have outperformed with seven awards. ASUS agreed to establish the Shou Yang Digital Technology Co., Ltd with June 2011 AAEON Technology for M&A, based on the consolidation date of June 1st, 2011. Shou Yang was the surviving corporation after M&A and was renamed to AAEON Technology on July 4th, 2011. ASUS Group is holding 65% of the integrated ownership. June 2011 ASUS disclosed the new branding spirit of “In Search of Incredible” which was incorporated ASUS N series and debuted with Jay Chou’s special version of notebook, exhibiting the cross—boundary interaction of technology and arts. July 2011 The TAITRA organized the Top 100 Taiwan brands for centennial founding while Taiwan was recognized by the judgers and consumers to be selected as one of the top 100 Taiwan products. September 2011 ASUS was ranked as the top 3 international brands of Taiwan for the 9th year, whereas the market value of the brand is valued at NT1.637 billion. October 2011 ASUS released the latest ZENBOOK super-slim notebook in global synchronization. Chairman Jonney Shi first released the product in New York, followed by London, Milan and Taipei. The global disclosure in synchronization implies exquisite era of opening, exhibiting the love-at-first-sight intellectual notebook paradigm. November 2011 Famous international composing singer, Jason Mraz visited ASUS headquarters in Guangdu and collaborated with ASUS “In Search of Incredible” November 2011 ASUS cooperated with NVIDIA and launched the world’s first 10.1-in Android-based tablet PC carrying NVIDIA® Tegra® 3 4-core processor. The product inherits the concept and spirit of “transformation” from ASUS but exclusively equipping with the ASUS Eee keyboard base, exhibiting the exceptional action and battery life. November 2011 ASUS announced its major deployment in cloud computing by launching the “ASUS Private Clouding” to integrate clouding platform, enterprise application software and comprehensive solutions for server systems, so that enterprises can quickly build exclusive private clouds with convenience and safety all in one. December 2011 ASUS officially released the worlds’ first 4-core processor carrying NVIDIA® Tegra® 3 while exhibiting Google Android 4.0 ICS (Ice Cream Sandwich) based ASUS transformation tablet PC for the first time. December 2011 Brand sales in 2011 amounted to NT$350.3 billion.
January 2012 ASUS won six product innovation awards in CES exhibition, in the category of wireless portable, personal electronic products, audio equipment, computer hardware, and components. Padfone was even awarded with the Best of Innovations Award in the category of wireless portable products, witnessing ASUS’s leadership in the field of digital life products. January 2012 ASUS was the biggest winner for the 9th consecutive year in Boutique product awards in the 20th Taiwan Boutique Awards; a total of 50 products were awarded while 7 products entered the finals for Golden Quality Award. January 2012 The National Center for High-Performance Computing adopted ASUS ESC4000 server to complete the establishment of the largest GPU super computer in Taiwan. It was the first time for ASUS to be listed on the 234th place in the global Top 500 super computers and the 37th place in the Green 500 Super computers. February 2012 ASUS released the latest Padfone and multiple tablet PC in theme of “Incredible Innovation Endless Possibilities” at the Mobile World Congress in Barcelona. March 2012 ASUS held global seminar on the brand-new motherboard series by exhibiting multiple exclusive innovation techniques in Taiwan and applies the technology
14 on the Intel® 7 motherboards to be launched so that the motherboards can fully bring its tough potential into full play.
15 III. Corporate governance report
I. Corporate Organization (I) Organization Chart
Effective date: 2011.12.31
16 (II) Department Function Description
Chairman Plan and control the vision of the company. Shape industrial culture and operating concept. CEO & President Plan and manage the company’s strategies, draft up operating objectives, direct and supervise the operation of business units. CSO Integrate green environment, social charity, and international enterprise ongoing protocol to construct the core competence of an enterprise for long-lasting business operation. Audit Office Audit the company’s system and enforcement of internal regulations, procedures, and authorization with corrective actions offered. Lean Management Headquarters Provide professional consulting service, reinforce lean management, and pursue wonderful innovation and quality perfection.
Da Vinci Innovation Lab. It is responsible for the company’s technology and innovative product development. Q-Committee Integrate overall and companywide product R&D and customer service; also, offer suggestions and guidance for process improvement and establishment in order to upgrade product quality. Systems Business System Business is responsible for the R&D and operation of the Systems. Open Platform Business Open Platform Business is responsible for the R&D and operation of open platform business. R&D Center, ASUS Design Center, Firmware R&D Center, EM & Wireless Communication R&D Div. and Power R&D. Develop the common R&D technology need by each business unit. Management Headquarters Arrange the planning and enforcement of the company’s finance, accounting, regulatory, administration, and public works. CSC Provide customers with comprehensive service and total solutions. Human Resources Human Resources are responsible for the development and management of the company’s manpower planning, recruitment, training, personnel administration, career development, salary welfare, and employee’s public relation. MIS Take charge of information planning and integration of the company’s business, finance, bookkeeping, and raw materials; also, maintain and control global networking linking and safety control mechanism. Investment Division Arrange planning and investment in accordance with the company’s vision and development.
1717 2nd 2nd 2nd consanguinity consanguinity consanguinity consanguinity consanguinity April 14,2012 Shih, Tsang Tsang, Jonney Jonathan Jonathan consanguinity consanguinity L.H. Yang L.H. L.H. Yang L.H. Jonney Shih Jonney
Title Name Relation Vice Vice None None None None None None None None None None None None None None None None None None None None None Executives who are spousesExecutives secondwho or are Chairman Chairman Chairman Chairman Supervisor Supervisor None Note 5 Note 6 Note 7 Note Note 1 Note 2 Note 3 Note 4 Note 8 Note 9 Note Current position company with other
ASTP
,
Experience (Education) Experience CorporateVice President MBA of National Chiao Tung University TungUniversity Chiao ofNational MBA BusinessPresident of ACER Division’s University MBAof Houston Ltd. Co., Computer of Youngmen President Engineering Institute, Electrical Graduate University Taiwan National of Manager ACER of Mathematics, Department Applied NationalTungChiao University of Department Lycer of R&D VP Junior Technology DepartmentOf Mathematics, Tamkang University Specialistof Shi-Chin Industry ofEMBA National Chengchi University Engineerof Won-Chuan Co. Ltd. Institute of Computer BostonUniversity Engineering of Engineerof ASUS (USA) National Ph.Dof Business Management, ChengChiUniversity Minister,MinistryofPolitical Deputy the Finance,R.O.C. Ph.DStanfordof Law, (U.S.A.) University Shin ProfessorUniversity of Hsin Law, ChinaMedical of Department Medicine, University MaternityDirectorof Kwong-Tien Shalu Hospital 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 their name theirname Sharesby held other in persons 0 0 0 0 18 11,760 0.00 Shareholdingof spouseand minors 0 0.00 0 Currentshareholding resident, Junior VP, and department heads department and VP, Junior resident, 0 0.00 80,774 0.0175,094 107,019 0.01 0.01 99,202 8,233 0.01 0.00 805 0.00 elected 114,174 0.02 157,527 0.02 12,275 0.00 Shares Shares % Shares % Shares % Shares % Shareholdingwhen first elected Date of Date 1994.04 14,584,5811999.04 2.36 30,093,638 1,166,4702002.05 4.00 0.19 1,676,155 1,423,0932002.05 0.27 0.19 0 2,471,309 318,0242008.06 0.33 0.05 0 505,313 0.06 2011.06 404,577 0.052011.06 02005.06 0 2005.06 2005.12 1,322 0.00 2,007,863 0.33 1,612 4,005,092 0.00 0.53 0 3 3 3 3 3 3 3 3 3 3 3 Term 2011.06 2011.06 2011.06 2011.06 2011.06 (appointed) Date elected Date
1. Directors and Supervisors Yang Tsang Cheng Jonathan JoeHsieh Tze-Kaing S.Y. Shian Chung-Jen
(I) Directors and Supervisors and Supervisors (I) Directors Title Name Vice II. Directors, Supervisors, President, Vice P II. Directors, Supervisors, President, Director JerryShen 2011.06 Director Hung H.C. 2011.06 Director Chen Eric 2011.06 Director Director Chairman JonnyShih 2011.06 Chairman Supervisor Supervisor Supervisor L.H.Yang 2011.06
18 *) Independent DirectorIndependent ； TECHNOLOGY (H.K.) CORPORATION , AAEON TECHNOLOGY INC., SITI,, Youngmen Director ofACI. ASUS TECHNOLOGY (HONG KONG) LIMITED, ASUS heng Venture Capital Corp., Hua-Min Investment Co., Ltd. and Ltd.(*) ； GmbH Company Limited andNext System Limited Investment Co., Ltd. d., AGAiT Technology Corp., AGAIT .,LTD., NATIONALFIBER TECHNOLOGY(*) –SHIHCHUN and NATIONAL( oTouchTechnology Inc.and Nan Shan Life InsuranceCompany, Ltd. td., WAVEFACE INC., ASUSTO R INC., Asustek Holdings, Asus INTL, Asus Holland B.V., terconnectTechnology Corp. ngs,WAVEFACE Holding ） ntureCapital Corp. and Hua-Min
LOGY INCORPORATION, AGAiT Technology Corp. liance to 2011 2011 to liance 19 VATELIMITED and HSIN-HO Biotechnology Co., Course obostar,Unimax Holdi The risk management courses of courses management risk The industry Insurance Insurance Life Shan （ Nan Advocacy for comp for Advocacy equity Insider Listing Company’s trading laws Prevention of insider trade and and trade insider of Prevention act illegal e Capital Corp., Hua-Min Investment Co., L ector ofLOTES andsupervisor of Kinsus In Limitedand AGAiTech Holding Ltd.
odappointmentof until June 11, 2012.
INC., Enertronix, Inc., International United Technology Co., Lt c., ASUS TECHNOLOGY INCORPORATION, AAEON TECHNOLOGY INC., Hua-C are “rightsthe with reserved.use” to ION, ASUSCOMPUTER GmbH,ASUS POLSKA SP.z.o.o., ASUSSWIZERLAND ., AAEON TECHNOLOGY INC.,Hua-Cheng Ve Directoroffollowingcompanies: the GOING CHAMPION ENTERPRISECO HuiyangPrivate EquityFund RITEK Ltd, Co., CORPORATION, eTurb ； y’sname or individual’s name. Taiwan Insurance Taiwan Insurance Institute Accounting Research Research Accounting and Development Taiwan in Foundation Accounting Research Research Accounting and Development Taiwan in Foundation CO, ASUSKOREA Co., ASUSTECHNOLOGY PRI SHINEWAVE INTERNATIONAL INC., ASUS TECHNO light,ASUSCHANNEL, Channel Pilot Limited, M
s: s: ASUS TECHNOLOGY INCORPORATION, UNIMAX ELECTRONICS INC., ASUS TECHNOLOGY PTE LTD., Yang ies: ASMEDIA TECHNOLOGY Cheng s: Axus Microsystems Inc., Hua-Cheng Ventur Tze-Kaing Tze-Kaing Chung-Jen Chung-Jen Independentsupervisor of Apacer Taiwan, Dir tterofresignation onApril 11,2012; peri etable exclude trust shareholdings that
Englishtransliteration ofcompan Title Name Sponsor Supervisor Supervisor 2. Education and training of directors and supervisors Asus Computer Corp.,Asus Computer Central Tec, DeepDe ofASROCK Incorporation. LIMITED,International United, Enertr onixHolding, Enertronix International Directorof thefollowing companies: AxusMicrosystems Inc TechnologyHolland ASUS B.V., MiddleEastFZ ComputerCo., TeYang Ltd., Tech Inc. and Ming-Chun Computer(*). Director of the following companies: ASKEY, Axus Microsystems In ACI. Director of the following companies: ASKEY,
Note12:(*) Standards forthe Note11: The shareholdings stated in th Note10:.Director H.C.Hung proposed le Note9:Independent Director of Wistron, Note6: Director of Enertronix, Inc. Chairman7: Note ofKUO-CHENG ENTERPRISECO., LTD.(*) Note8:Director of thefollowing companies: Yangtze Associates, Note 4: Chairman4: Note ofSHINEWAVE INTERNATIONALINC Note5:Chairman ofthefollowing companies: ASUS CLOUD CORPORAT Note 3: Chairman of the following compan Note 2: Chairman of the following companie Note 1: Chairman of the following companie
19 3. Professional knowledge and independence of Directors and Supervisors
With over five years of job experience and the Independence (Note) Condition following business qualification Teachers of Judge, prosecutor, Also an
public or attorney, With job independent private colleges accountant, or experience in director of
for the subject business commerce, other public of commerce, salespersons passed law, finance, 1 2 3 4 5 6 7 8 9 10 company Name law, finance, national exam & accounting, or accounting, or certified specialists business business or technicians Jonney Shih 0 Jonathan Tsang 0 Jerry Shen 0 H.C. Hung 0 Eric Chen 0 Tze-Kaing Yang 1 Chung-Jen Cheng 1 L.H. Yang 0 Note: Directors and supervisors who have qualified the following conditions two years before being elected and during the term are to tick the box (“”) of the corresponding condition. （1）Not an employee of the company or any related party; （2）Not a director or supervisor of the company or any related party (except for being an independent director of the company or any related party, or, the subsidiary that is with over 50% shareholding with voting rights held directly or indirectly by the company); （3）Does not hold more than 1% of total stock issued directly or indirectly nor a natural shareholder on the top-ten shareholdings list; （4）Not the spouse nor a relative within two degrees of lineal consanguinity of an individual falling in the first three categories; （5）Not a Director, Supervisor, or employee of the legal shareholder that holds over 5% of total stock issued directly or indirectly; or on the top-five shareholdings list of the Company; （6）Not a Director (executive), Supervisor, management, or a shareholder with over 5% shareholdings of a company or organization that is in business with the Company; （7）Not an owner, partner, Director, Supervisor, management of a partnership or institution and his/her spouse that provides commerce, law, finance, accounting and consulting service to the Company or related party; （8） Not the spouse nor a relative within two degrees of lineal consanguinity of an individual; （9）Free of any of the behaviors as defined in Article 30 of Company Act; （10）Not a governmental officer, juridical person or its representative as defined in Article 27 of Company Act.
4. State the name and shareholdings ratio of the directors and supervisors who are an institutional shareholder; also, the name and shareholding ratio of the top-ten shareholders: Not applicable since the company’s directors and supervisors are nature persons.
20 2nd 2nd Relation consanguinity consanguinity Shih Tsang Jonney Jonathan or second consanguinity consanguinity or second None None None Chief Title Name Group Officer ofOpen Executives who are spouses spouses who are Executives Platform Business Branding President None None None None None None None None Note4 None None None Note2 Note6 None Note7 None None None None None Note8 None None None Note1 Note3 None5 None None None Current position with other companies
r
d Experience (Education) (Education) Experience MBA of National Chiao Tung University University Chiao MBA Tung of National Business Division’s President ACER of MBA of Houston University Computer Co., President Youngmen Ltd. of Institute, Graduate Engineering Electrical National UniversityTaiwan ACER Manager of University EMBA Chengchi of National Engineer Won-Chuan of Co. Ltd. Institute Engineering, of Computer Boston University Engineer ASUS of (USA) Electrical Department Engineering, of National UniversityTaiwan V.P.TwinHea of Institute of National Science, Computer Tung Chiao University Junior V.P. Ace of EMBA, Chiao National University Tung Junior V.P. IBM of Electronic Department Engineering, of University Southern of California Deputy-researcher, Chung-Shan institute of and Science Technology Drexel University Finance, Department of Pennsylvania) (Philadelphia StaffYoung & Ernst of 21 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 by other by other persons in in persons their name their Shares held Shares 0 0 0 0 0 0 0 0 805 0.00 316 0.00 8,233 0.00 3,412 0.00 minor minor 40,531 0.00 505,313 0.06 Shareholding Shareholding of spouse and spouseof and 51,735 0.01 99,202 0.01 48,781 0.01 41,039 0.01 22,786 0.00 107,019 0.01 100,592 0.01 2,471,309 0.33 1,423,093 0.19 Shares Shares % Shares % Shares % 30,093,638 4.00 Shareholding Shareholding Date Elected Elected 1994.04.30 2006.07.07 1999.01.12 Shih David Tsang Chang Jonney Name Jonathan AlexSun 2010.07.01 JoeHsieh 2008.03.10 JerryShen 2002.04.12 S.Y. Shian 2008.03.10 HenryYeh 2008.09.10 SamsonHu 2008.09.10 Benson Lin 2009.06.01 Vice Vice Vice Vice Vice Vice Open Chief Chief Chief Title Title Group Officer Officer Officer Platform Business Branding Financial President President President President President President Executive Corporate Corporate Corporate Corporate Corporate Corporate Presidentof (II) Information of the management
April 14,2012
21 ., ., Hua-MinInvestment ustek Holdings, Asus INTL, Asus on of IFRS” Co., Ltd.(*)Co., hengVenture Capital Corp ASUS TECHNOLOGY(HONG KONG)LIMITED, Asus MiddleEast FZCO. Personal Data Protection “ Personal Data Protection of common disputes in of business common in disputes directors and senior managers directors and in l report preparation laws and Investment Co., Ltd. “Domestic Adopti VEFACEHolding Company Limited and Next System Limited Course Course d., AGAiT Technology Corp., AGAIT TECHNOLOGY (H.K.) td., WAVEFACE INC., ASUSTOR INC., As PRISE CO., LTD., NATIONAL FIBER TECHNOLOGY(*) and CHUN –SHIH gement did notgement have stock option shares. promulgated by competent authority competent by promulgated LIMITEDand HSIN-HO Biotechnology ＂ and the Discussion of law enforcement agencies investigating Discussion investigating of ＂ agencies the law and enforcement ntureCapital Corp. and Hua-Min Mobostar,Unimax Holdings,WA Direction for revision on Direction revision financia for regulations under the policy of Law violation cases Legal responsibilities forenterprise on tax income and discussion Business Coping strategies for supervisors, responsibility in “ Guidelines compsocial listing OTC for anies and practices income tax income tax HNOLOGY INCORPORATION, AGAiT Technology Corp. , AAEON TECHNOLOGY INC., SITI,, 22 Inc., International United Technology Co., Lt Co. ASUS , TECHNOLOGYPRIVATE Sponsor Sponsor c.,ASUS TECHNOLOGY INCORPORATION, AAEONTECHNOLOGY INC., Hua-C and Hua-Cheng Venture Capital Corp. E.LTD., ASUS TECHNOLOGY (HONGKONG) LIMITED, ASUS KOREA CO. and INCORPORATION, UNIMAXELECTRONICS INC., ASUS TECHNOLOGYPTE LTD., ., AAEON TECHNOLOGY INC.,Hua-Cheng Ve
Director of the following companies: GOING CHAMPION ENTER Accounting Research and Development Development and Accounting Research Foundationin Taiwan Accounting Research and Development Development and Accounting Research Foundationin Taiwan Development and Accounting Research Foundationin Taiwan Development and Accounting Research Foundationin Taiwan Inc., Hua-Cheng Venture Capital Corp., Hua-Min Investment Co., L dateof the annual reportissued; therefore, the company’s mana ； y’sname or individual’s name. Enertronix Holding, Enertronix International andLimited AGAiTech Holding Ltd. t shareholdingst that are with the“rights touse” reserved. Y, SHINEWAVE INTERNATIONAL INC., ASUS TEC ies: ASMEDIA TECHNOLOGY INC., Enertronix, Training Date Date Training companies: Hua-MinCo., Investment Ltd. Start Start End Englishtransliteration ofcompan Sep 5, 2011 Sep 5, 2011 Sep 5, 2011 Sep 5, 2011 Sep 5, 2011 Sep 5, 2011 Sep 6, 2011 Sep 6, 2011 Sep 6, 2011 Sep 6, 2011 David Chang HollandB.V., Corp.,Asus Computer CentralTec, Deep Delight,ASUSCHANNEL, Channel PilotLimited, YoungmenComputer Co., Ltd.,TeYang Tech Inc. andMing-Chun Computer(*). ASUS TechnologyHolland B.V.,ASUS Middle EastFZCO, ASUSKOREA CORPORATION LIMITED,International United, Co., Ltd. Co.,Ltd. andACI. NATIONAL(*). Director of the following companies: ASKE Directorof the following companies: ASKEY, AxusMicrosystems In Directorof thefollowing companies: AxusMicrosystems Inc \ \ Name Chief Officer Financial Note11:(*) Standards forthe Note 1: Chairman of the following companies: Axus Microsystems Education and training of the management Note2:Chairman ofthefollowing companies: ASUS TECHNOLOGY Note 3: Chairman of the following compan Note4: Director of Enertronix Inc. Note 5: Chairman of KUO-CHENG ENTERPRISE CO., LTD.(*) Note 6: Director6: Note of ASUS CLOUD CORPORATION. Director7: Note offollowing the companies: ASUS TECHNOLOGY PT Note8: Supervisor of the following Note9:Theshareholdings stated inthetable exclude trus Note10: The Company did not have stock option upissued to the
22 than thethan invested invested from the from subsidiary subsidiary company’s company’s Remuneration Remuneration company other company the the financial financial statements statements consolidated Companies in Companies
) Ratio of Ratio J income (%) income ( +F+G to Net Net to +F+G A+B+C+D+E A+B+C+D+E The company company in the the in
financial financial statements Companies consolidated Option Jerry ShenJerry H.C. HungH.C. The Certificates (H) Certificates Employee Stock Employee company EricChen, Joe Hsieh 0 0 0 0 1.5% 1.59% None financial statements financial Stock dividend Companies in the consolidated consolidated in the Companies JonneyShih, Jonathan Tsang, S.Y. Shian financial financial statements statements consolidated consolidated Cash 29,361 dividend Companies in the in Companies thousand
0 0 Stock dividend A+B+C+D+E+F+G A+B+C+D+E+F+G (Estimated amount) amount) (Estimated Cash From Distributable Earnings (G) (G) Distributable Earnings From The company Thecompany Employees’ Cash Bonus Derived Derived Cash Bonus Employees’ 26,575 dividend thousand
the the JoeHsieh Jerry ShenJerry financial financial statements consolidated Companies in The company The company Remunerationof part-time employees H.C. Hung,,H.C. Eric Chen Pension (F) (F) Pension 0 0 0 The company JonneyShih, Jonathan Tsang, S.Y. Shian his tableis used forthe purpose of disclosure instead of tax levy. in the the in financial financial statements Companies 102,923 102,923 consolidated thousand The ) 90,480 compensation (E) compensation I Salary, bonus, and bonus, Salary, thousand thousand company company ( Name of Directors Directors of Name in the financial financial 23 statements Companies Companies consolidated consolidated
The H.C.Hung to Net income (%) income toNet Ratio of A+B+C+D of Ratio company financial statements financial in the statements d financial d financial Eric Chen, Eric S.Y.Shian, HsiehJoe Companies Companies consolidate (D) (D) Companies in the consolidated consolidated in the Companies JonneyShih, Jonathan Tsang, JerryShen 0 0 0 0.8% 0.8% The Business expense expense Business company
A+B+C+D A+B+C+D
in the 132,000 statements d financial d financial Companies Companies consolidate thousand rent from therentfrom income defined Income by Tax Law;therefore, t quantity) (estimated The 132,000 Remuneration from from Remuneration thousand company retained earnings (C) earnings retained
H.C.Hung in the The company The company statements d financial d financial Companies Companies consolidate (B) Pension Pension Eric Chen, Eric S.Y.Shian, HsiehJoe The Remuneration of Directorsof Remuneration company company JonneyShih, Jonathan Tsang, JerryShen in the statements statements d financial d financial Companies Companies consolidate (A) (A) 0 0 0 0 0 Remuneration Remuneration The company 15,000,000 30,000,000 50,000,000 100,000,000 ～ ～ ～ ～ ～ 5,000,000 ～ 10,000,000 Name Name (Note 1) 1) (Note Joe Hsieh JoeHsieh Eric Chen Chen Eric Jerry Shen Jerry S.Y. Shian Shian S.Y. H.C. Hung H.C. Jonathan Tsang Jonathan 1. Remuneration of Directors Remuneration Bracket (III) Remuneration of Directors, Supervisors, President, and Vice President
Remuneration to directors to directors Remuneration Below2,000,000 2,000,000 5,000,000 10,000,000 15,000,000 30,000,000 50,000,000 Over100,000,000 Total NoteThe: contentofremuneration disclosed inthis table isdiffe
Title Title Vice Director Director Director Director Director Chairman Chairman Shih Jonney Chairman Chairman
23
the company’s the company’s None None subsidiary Remuneration from the invested from Remuneration
company other than other company le is used for the purpose of disclosure instead
financial financial statements Companies in in Companies the consolidated the consolidated income ze-Kaing Yang, Chung-Jen Cheng, L.H. Chung-Jen ze-Kaing Yang Yang, Companies inthe consolidated(E) financial statements The A+B+C Ratio of A+B+C to Net Net to of A+B+C Ratio company
Name of Supervisors Name of Supervisors
financial financial
statements Companies in in Companies the consolidated the consolidated (C) 24 0 0 0 0.06% 0.06% Business expense Business The
company
The Company 9,676 9,676 financial financial statements thousand thousand ) Companies in in Companies B the consolidated the consolidated ( Tze-Kaing Yang, Chung-Jen Cheng, L.H. Chung-Jen Tze-Kaing YangYang, T
table is different from the income defined by Income Tax Law; therefore, this tab retained earnings earnings retained The Remuneration from from Remuneration 9,676 9,676 company thousand Remuneration of Supervisors of Remuneration
financial financial
statements Companies in in Companies the consolidated the consolidated (A)
Remuneration Remuneration 0 0 0 The company Remuneration to supervisors to Remuneration
5,000,000 ～ 5,000,000 ～ 10,000,000
of tax levy. Below 2,000,000 Below 2,000,000 2,000,000 5,000,000 10,000,000 ～ 15,000,000 15,000,000 ～ 30,000,000 30,000,000 ～ 50,000,000 50,000,000 ～ 100,000,000 Over 100,000,000 Total ＊ The content of remuneration disclosed in this Name Remuneration Bracket L.H.Yang Tze-KaingYang Chung-JenCheng
2. Remuneration of Supervisors Title Supervisor Supervisor Supervisor
24 than the than invested from the from subsidiary subsidiary company’s company’s Remuneration Remuneration company other company
ed inthe financial consolidat statements Companies The Employee Stock Employee Stock company Option Certificates disclosure instead of tax of levy. instead disclosure
lidatedstatementsfinancial (D) Jerry Shen Jerry S.Y. Shian the
financial statements consolidated HenryYeh, AlexSun Companiesin Net income The Ratio of to A+B+C company Companiesin the conso 0 0.88% 0.88% 0 0 None Stock dividend his table is used for the purpose his is of table used the for
consolidated Cash Companiesinthe 33,160 dividend financialstatements thousand Nameof President andV.P.
0 Stock dividend Employees’ Cash Bonus Derived From From Derived Cash Bonus Employees’ Thecompany Cash 33,160 33,160 Distributable Earnings (G) (Estimated amount) (Estimated (G) Earnings Distributable dividend thousand
25
inthe 81,405 Jerry Shen Jerry financial statements thousand Companies Companies S.Y. Shian consolidated
TheCompany HenryYeh, AlexSun Bonus and The compensation (C) 81,405 company thousand financial financial statements Companies in Companies the consolidated consolidated the JonneyShih, Jonathan Tsang, Joe Hsieh, Samson Hu, Benson Lin J onneyShih, Jonathan Tsang, Joe Hsieh, Samson Hu, Benson Lin (B) fferent from the income defined by Income Tax Law; t therefore, Law; Tax Income defined theincome by from fferent
Pension 0 0 The company financial financial 32,136 32,136 statements thousand Companies in Companies the consolidated consolidated the (A) Remuneration The 32,136 32,136 company thousand
Jerry ShenJerry JonneyShih JonathanTsang Remuneration of PresidentRemuneration and V.P. 15,000,000 30,000,000 50,000,000 100,000,000 ～ ～ ～ ～ ～ 5,000,000 ～ 10,000,000 Remuneration Bracket 3. Remuneration of President and V.P. Title Title Name Officer Officer Note : The content of remuneration disclosed in this table is disclosed this table di ofNote in content remuneration The :
Presidentof OpenPlatform CorporateV.P. CorporateV.P. S.Y. Shian CorporateV.P. JoeHsieh CorporateV.P. HenryYeh CorporateV.P. Hu Samson CorporateV.P. Benson Lin AlexSun ChiefBranding BusinessGroup ChiefExecutive Below2,000,000 2,000,000 5,000,000 10,000,000 15,000,000 30,000,000 50,000,000 Over100,000,000 Total
25 e responsibility and o yearso to net income: ion of remuneration paid; 0.21% 0.21% company and the companies net income (%) (%) net income Ratio of total amount to amount total of Ratio Total Total
Cash Dividend Dividend Cash 35,060 thousand thousand 35,060 thousand 35,060 amount) (estimated
26 muneration muneration is based on the salary level of the industry and th ％ ％ 1.82 1.79 0 0 and V.P. in the last two years to net income net income to two years last in the V.P. and tion and its relation to business performance: nd and the distribution of dividend muneration by paid the to the Directors, company’s Supervisors, President, and V.P. Jerry ShenJerry JonathanTsang Ratio of the total remuneration paid to the company’s Directors, Supervisors, President, President, Supervisors, Directors, company’s paidthe to remuneration of the total Ratio Title Name Stock Dividend Group 2010 2010 2011 CorporateV.P. CorporateV.P. S.Y. Shian CorporateV.P. CorporateV.P. JoeHsieh HenryYeh CorporateV.P. Hu Samson CorporateV.P. Benson Lin AlexSun Presidentof Open PlatformBusiness ChiefBranding Officer JonneyShih ChiefFinancial Officer DavidChang ChiefExecutive Officer Year (Note 1) 1) (Note Year Notefor year1: It meant the the income generated. of contributionof each employee.
A. in the last tw Directors,Analyze Supervisors, the ratioV.P. totalof President,the remunerati on paidthe andto company’s B. In terms of the company’s remuneration policy, a reasonable re in the consolidated financial statements to net income in the last two years; also , describe the standard, policy, and combinat the proceduredefining of remunera moreover, Managers (IV) Compare and state the ratio of total re 4. Name of Managers who received divide
26 III. Corporate governance
(I) Board of Directors
Board of Directors
The attendance of Directors for the 6 (A) Board Meeting in 2011: Frequency of Attendance Title Name Proxy attendance (%) Remarks (B) (B/A) Chairman Jonney Shih 6 0 100.00 Vice Jonathan 6 0 100.00 Chairman Tsang Director Jerry Shen 6 0 100.00
Director H.C. Hung 5 0 83.33
Director Eric Chen 4 0 66.67 100.06.09 New Director S.Y. Shian 4 0 100.00 Director 100.06.09 New Director Joe Hsieh 4 0 100.00 Director Remarks: 1. For the events stated in SEC Article 14.3 and other opposing or qualified opinion of independent directors that are recorded or declared in writing: Not applicable since the company does not have independent directors appointed. 2. Directors who have excused themselves from the meeting due to a conflict of interest: Not applicable since the company does not have directors who need to have themselves excluded from the meeting due to a conflict of interest. 3. The goal and the enforcement of reinforcing the function of the board of directors in the most recent years (for example, setup an Auditing Committee, upgrade information transparency, etc.): To cooperate with the establishment of Salary and Remuneration and the revision to practice specification, the BOD adopted the “BOD Meeting Agenda Specification” on December 22, 2011.
(II) The operation of the Auditing Committee or the attendance of supervisors at the board meeting:
1. Attendance of supervisors at the board meeting Attendance of supervisors at the board meeting The attendance of Supervisors for the 6 (A) Board Meeting in 2011: Frequency of Attendance attendance (%) Title Name (Times) (B) Remark (B/A) Supervisor Tze-Kaing Yang 4 66.67 Chung-Jen Supervisor 5 83.33 Cheng Supervisor L.H. Yang 5 83.33
27 Remarks: I. Composition and responsibility of Supervisors: (I) Communication between the company’s supervisors and employees and shareholders: Supervisors may contact and communicate with employees and shareholders if it is necessary. (II) Communication between the company’s supervisors and internal chief director and CPA: 1. Chief auditor is to have the auditing report submitted to the supervisors in the following month upon the completion of the audit; also, the chief auditor is to report the audit at the board meeting. 2. Supervisors may communicate with the CPA if it is necessary. II. For the opinions of the supervisors stated in the board meeting, the date, term, the content of the case, the resolution reached, and the company’s response to the supervisor’s opinion must be stated in details: None.
2. Operation of audit committee: Not applicable since the Company did not have an audit committee setup.
2828 (III) Corporate governance and the deviation from the Rules Governing Listed & OTC corporate governance and the causes
Deviation from the Rules Governing Listed Item Operation & OTC corporate governance and the causes 1. Equity structure and shareholders’ equity (1) The way the company processes the 1. The spokesman is designated. Stock agent is No deviation suggestion and disputes of shareholders to process stock affairs. (2) The main shareholders of the company 2. The main shareholders of the company and No deviation and the responsible personnel of the main the responsible personnel of the main shareholders shareholders are in the shareholders’ roster and the company is to have a good relation kept with them. (3) The company establishes the business 3. The company has established risk control No deviation risk control mechanism and firewall mechanism and firewall in accordance with with the related party the “Corporate Governance Law of Subsidiary,” “Loans and Endorsement and Guarantee Procedures,” and “Assets Acquisition and/or Disposition Procedure.” 2. The formation and the responsibility of the board of directors (1) The independent directors of the 1. Not yet setup Under consideration company (2) Evaluate the independence of the 2. The CPA’s independence must be evaluated No deviation independent auditor periodically periodically. The company’s Board of Directors has the CPAs contracted. 3. Establish a communication channel with There are proper communication channels No deviation the related party available by phone and e-mail. 4. Publication of information (1) The company has a website setup to 1. The company has a website No deviation disclose financial information and (http://www.asus.com) setup to disclose business management financial information and business management (relationship with investors) and to explain the corporate governance of the company to the investors in the shareholders meeting and public offering meeting. (2) The company has adopted other 2. Designate personnel to collect and disclose No deviation information disclosure methods (for information of the company; also, example, setup website in English, substantiate the spokespersons system to designate personnel to collect and communicate to the public. disclose information of the company, substantiate the spokesman system, and publish the public offering meeting on the website) 5. The operation of the company’s The company already set up the Compensation No deviation nomination, remuneration, and other Committee. Please refer to the (IV) functional committees Compensation Committee Operations for more information. 6. If the company has corporate governance rules stipulated according to the “Rules governing Listed/OTC corporate governance,” please state the variation of the business operation from the rules: The company’s corporate governance rules are in planning; however, directors and supervisors have exercised their obligations and internal control system in accordance with the spirit and regulation of the “Rules governing Listed/OTC corporate governance.”
2929 Deviation from the Rules Governing Listed Item Operation & OTC corporate governance and the causes 7. Other information that helps understand the corporate governance (for example, advanced study of directors and supervisors, attendance of directors and supervisors for board meeting, enforcement of risk management policy and risk measurement standards, protection for consumers and customers, director’s excusing himself/herself from a case involving conflict of interest, liability insurance acquired for directors and supervisors, and corporate social responsibilities): 1. Directors and supervisors usually attend the board meeting for discussion unless there is a reason not to. Directors must be excused from a case involving conflict of interest according to the “Rules Governing the Conduct of Board Meetings.” The resolutions of the Board of Directors are disclosed in the Market Observation Post System by law. 2. Liability insurance is acquired for directors and supervisors according to the Articles of Incorporation. 3. In order to improve the governance of the Board of Directors, substantiate the function of supervision, and reinforce the mechanism of governance, the company has the “Regulations Governing the Conduct of Board Meetings” stipulated in accordance with “Rules Governing the Conduct of Board Meeting by Public Company” for the reference of the competent authority. 4. The company has repair and maintenance stations and consumer’s hot line setup nationwide for protecting the interest of consumers. The company has an agreement signed with each customer before providing services and products to them. 5. The company obeys law, maintains a good labor relation, provides job opportunity, builds up brand name, expands exporting business, and fulfills corporate social responsibility. 6. The company is to have other corporate governances promoted and substantiated gradually in accordance with the current condition and regulations. 8. If there is an internal evaluation report or an independent appraisal report furnished on corporate governance, the internal (external) performance evaluation report must be furnished with the nonconformities (or suggestions) and corrective actions detailed: N/A
(IV) Compensation Committee Operations: 1. Formation and Responsibilities of ASUS Compensation Committee： (1)Formation of Committee： The Member of Committee consists of three people appointed by the BOD resolution, whereas one of them is the convener. The professional qualification and independence of the members should comply with the provisions set forth in Article 5 and Article 6 of Guidelines for Functions in Compensation Committee. (2) Responsibilities of Committee： The Committee should apply attention of good administrators to truthfully fulfill the following functions and to submit recommendations to the BOD for discussion. Nonetheless the recommendations on supervisor＇s salary and remuneration submitting to the BOD for discussion are limited to the specification of Articles of Association for Supervisor salary and remuneration or shareholder resolution with authorization to BOD for processing: i. Periodically review the guidelines and propose recommendation for revision. ii. Formulate and periodically review the performance appraisal for ASUS directors, supervisors and managers with policy, system, standards, and structure for salary and remuneration. iii. Periodically evaluate and specify the salary and remuneration for ASUS directors, supervisors and managers. Committee fulfilling the aforementioned functions should comply with the following principles： i. Ensure the arrangement of salary and remuneration in line with relevant laws and regulations that are sufficient to attract outstanding personnel. ii. The performance appraisal and salary/remuneration for directors, supervisor
30 and managers should refer to common peer standards for payout with consideration of personal performance and company salary/remuneration concept, business performance and rationality of future risk association. iii. Directors and managers should not be misled with introduction of pursuit of salary/remuneration to engage in conducts exceeding the risk appetite of the company. 4. The proportion of dividend payout to directors and senior managers in short-term performance and the payout time for some changing salary and remuneration should be determined with consideration of industry characteristics and the business nature.
2. Operations of ASUS Compensation Committee: Date Operation The BOD resolved to establish ASUS “Compensation Committee” and formulate the rules of organization with Dec. 22, 2011 appointment to Mr. Li Ming-yi, Mr. Shao, Zhong-he and Ms. Wang, Xio-Zhi for taking position as the first Committees of the “Compensation Committee” The first Compensation Committee Preparatory Meeting Feb. 24, 2012 was convened to select Li, Ming-yi committee as the convener and meeting chairman for this Committee. The first session of the first Compensation Committee Meeting was convened and adopted the 2011 Mar. 9, 2012 Recommendation for Director and Supervisor Reward Allocation and the Recommendation for ASUS Remuneration System
31 OTC corporate governance and the cause cause and the governance OTC corporate Deviation from the Rules Governing Listed & & Listed Governing the Rules from Deviation ASUS online course for codes of ethical conducts obligatory are for employees, which are not rewards listed and in punishment the system. ASUS will andimprovementan draft plan. evaluate No deviation ment System CA annually. gas reduction; also, disclose ils are not used at the cafeteria ecological ecological design to enhance d d for waste and sewage system ronmental ronmental Manage an effective reward/punishment at at ASUS corporate sustainability olicy olicy and meet regularly to review & Anti-Bribery Policy defined. In p at http://csr.asus.com. at http://csr.asus.com. responsibility policy and guidelines lied with PD lied with Operation Operation romotion is arranged for external suppliers. p 32
corporate corporate social responsibility To ensure the aforementioned education training and propagation effectiveness, ASUS will offer rewards and punishment according to the case through the participating attitudes and learning effects of employees, in addition to build gradual system improvement. through and improve. and improve. addition to regular internal education, process training, auditing and and promotion, defined defined that can be looked up and report ASUS CSR website water; also, reduced 131 tons of CO2 emission in 2011 comparing to 2010. Disposable cups and utens and conference rooms of ASUS for minimizing the impact on the environment. ASUS products have gases. energy use in efficiency greenhouse reduction for undergone Certification in 1998 comp in and Certification management and filing. and management greenhouse gas emission information that can be looked up on the corporate sustainabilityASUS CSR report and website. (1) ASUS saved 190,000 degrees of power, and 30,000 degrees of (2) ASUS had passed ISO14001 Envi (2) ASUS has corporate sustainability office setup to promote (1) ASUS has corporate social (3) ASUS has the Business Ethics (3) (3) ASUS has two personnel designate (4) ASUS has committed to greenhouse rectors, supervisors, and gement gement specialists unit to protect ctiveness ctiveness of resources utilization; al responsibility policy or system Item Item romotion periodically for the di social (V) of Fulfillment responsibility also, uses recycled materials that also,are recycledthat to friendlythe environment uses materials theindustrial features the environment the also, drafts up energy saving and carbon reduction and greenhouse strategy. gas reduction and review the effect of implementation and implementation ofthe effect review p employees; also, it evaluation is system for a integrated clear and effective reward with and punishment system. employee’s performance 1. Promote the implementation of corporate governance corporate of implementation 1. the Promote (1) Corporate defines corporate soci 2. environmenta development of The sustainable (1) ASUS strives to upgrade the effe (2) ASUS establishes adequate en vironmental management system by (3) ASUS setups environmental mana (4) ASUS stays alert the of impact change climate on business activities; social responsibility (2) (part-time) corporate Operation full-time unit of (3) Corporate arranges business ethics education, training, and
32 lly lly studied the corrective plan the deviation from the “Rules tion of business ethics education on and standards GRI outlines for ection, ection, community involvement, social OTC corporate governance and the cause cause and the governance OTC corporate Deviation from the Rules Governing Listed & & Listed Governing the Rules from Deviation No deviation No deviation e.” e.” Article 11 regarding “Integra e,” please state the operation and for improvement. ASUS has gradua in accordance with AA1000 inspecti periodically periodically and company related to environmental prot : : tline / e-mail or Support Please refer to the Corporate ovides ovides labor safety and health bor bor laws, protects employee’s responsibility by suppliers and alth alth unit setup lawfully; also, sponsibility of the suppliers and nding suppliers and contractors to statement. ainability report mmunity development and charity Operation Operation sponsibility. sponsibility. For monitoring the full d otheractivities) social upport.asus.com.tw 33 ures, and of performance the ication level A+ level ication Governing Governing Listed & OTC corporate governanc sus.com/chinese/index.aspx#120 ctive reward and punishment system” remains room
interest; interest; also, drafts up “Employee’s Code of Ethics” and opinion box employee’s an for filing appeal. disclose information of corporate time to time. website from social responsibility on the sign sign and comply awareness of with corporate social re the contractors. Code of Conduct, enhance the corporate corporate social substantiation of corporate social re contractors, in addition to dema qualified OHSAS certification continuously. ASUS 18001 pr labor education safety and training and protection. contractors their health for safetyand to health the new system recruits, employees, and 0800-093-456 Technical Service Ho at website http://s Sustainability Participation”. Report “Social activities through ASUS Foundation. disclose information of corporate social responsibility. social corporate responsibility. of information disclose (1) ASUS follows the governing la (2) ASUS has labor safety and he (2) ASUS issues corporate sustainability report periodically in July and (1) ASUS issues corporate sust (5) ASUS has participated in co (4) ASUS arranges regularly supplier conference to propaganda (3) ASUS has setup consumer complaints procedures and methods by n right, safety and an health, ied by GRI (Global reporting Initiative) and verified by DNV ce ce with the “Rules Governing Listed & OTC corporate governanc y (such as the system, meas were in line with line were G3.1applin GRI of ASUS at of ASUS http://csr.a al responsibility institutions: report any certified isby the component authorities and theand affiliates.thecomponent authorities sponsibility sponsibility in accordance with the “Rules y, consumer’s interest, huma interest, y,consumer’s laws, protect employee’s lawful corporate social responsibilit s donation, corporate volunteers responsibility report and disclose onsumer policy; also, the clear and and healthy working environment; ce evaluation system; also, setup clear and effe upgrade corporate social responsibility. social upgrade corporate Item Item y commercial activities, material responsibility information service, and other free special services services service,and free special other b responsibility corporat e social of the promotion effective consumer complaints products services and procedures provided for ASUS Governing Listed & OTC corporate governance”: Governing governance”: Listed corporate & OTC te management and procedure interest, procedure andestablishand te adequa management also, provide regularly safety and health education education health regularly also, and safety provide system and employee’s performan ASUS has substantiated corporate social re and of procedure expectation the fulfilling in Please refer to the business sustainabilitythe to Please report and refer website contribution, charit service, social social the significance, inclusiveness and response this that of report and inclusiveness the significance, The 2010 Corporate Report Sustainable announced in 2011 was certif (4) ASUS works with suppliers to (4) ASUS to works with suppliers (5) ASUS participates in community development and charity activities (2) ASUS provides workers with safe 3. Maintenance of social welfare 3. Maintenance (1) ASUS follows the governing labor (3) ASUS defines and announces the c 4. disclosureEnhance information (1) The way ASUS discloses relevant and reliable corporate social (2) ASUS composes corporate social 5. If ASUS has corporate social responsibility defined in accordan 6. Other material information crucial to ASUS 7. if products Please or soci detail corporate
33
Since Corporate Social Responsibility (CSR) is becoming one of the indexes used for assessing enterprise’s perpetual development, ASUS’s responsibility for social environment, in addition to the original environmental management including air, sewage, waste, hazard substance, noise, and energy-saving measures and control includes labor safety and health risk evaluation and measures, labor’s interest promotion, balanced work and leisure, free of discrimination, free of sexual harassment and abuse, occupational safety and employee’s mental and physical health, obedience of business morale, intellectual property right, the protection of business secrets, and community watch. ASUS had SERASUS organized in July 2006 to promote corporate social responsibility with the international certification of ISO14001 Environmental Management System and OHSAS 18001 Occupational Safety and Health Management System.
The scope of SERASUS is based on the spirit of EICC to integrate the standard requirements of environment, safety, and health, labor and business moral as the structure of management system and is in conformity with the company’s social responsibility policy: 1. Comply with laws and standards and reduce the risk of environmental safety 2. Cherishing natural resources and reduce environmental impact 3. Satisfying customer’s demand and realizing green enterprises 4. Actively take care of employees and enhance human care 5. Full participation and substantiate social responsibility The company’s promoting corporate social responsibility: (1) Establish SERASUS organization and promote corporate social responsibility (2) Complete SERASUS regulations and enforce internal audit (3) Conduct supplier’s promotion, investigation, and consultation (4) Continuing improvement and perpetual operation
In terms of human right, ASUS has strong belief in humanity and care for employees. ASUS has honored the requirement of age, local regulations, and EIC in recruitment and without discrimination of race, sex, age, political party, religion, and handicap. ASUS takes good care of and protect the work and living conditions of employees and with comprehensive training and self-development provided to employees. ASUS has declared the human right policy in accordance with the Declaration of Human Right of the United Nations: 1.No child labor: In conformity with the low and requirement of minimum age; therefore, no child labor. 2.In conformity with the minimum wage: Provide employees with the minimum wage or better than local minimum wage and welfare. 3.Working hours: Provide employees with the benefit of leave with pay periodically. Labor will not be forced to work over the maximum working hours regulated by local law. In conformity with the requirement of overtime wages or necessary compensation. 4.No discrimination: No discrimination of race, skin color, age, sex, sexual orientation, race, religion, disability, union, or political preference. All men and women are equal and are entitled to protection and free of discrimination. 5. Free of inhuman treatment: Harassment and/or physical abuse is prohibited.
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6.No forced labor: ASUS products or service will not be provided by forced, restrained, or involuntary prison workers. All employed workers for ASUS products and service work at their own free will. 7.Health and safety: Provide employees with a trustworthy, respectful, healthy, and safe working environment. 8.Employee’s training and self-development: Provide facility, training program, time, and grants to support employee’s occupational development. In addition to the aforementioned human rights policy fulfilled by ASUS, the suppliers of ASUS are expected to protect labor’s human rights; also, enhance the awareness of corporate social responsibility of the ASUS suppliers and contractors. Therefore, CSR audit is performed on suppliers periodically to ensure their protecting labor’s human rights, health and safe, and environment.
ASUS has taken part of social charity activity from time to time to fulfill corporate social responsibility in addition to providing basic protection. ASUS has based its long-term orientation and goal on “shortening digital gap,” “upgrading innovative ability,” “incubating science and technology talents,” “promoting industry and academy collaboration,” and “promoting environmental protection and energy saving.” ASUS has ASUS Foundation setup in 2008 to have resources integrated effectively and to feedback the society with substantiated action for the fulfillment of corporate social responsibility. Activities promoted by ASUS and ASUS Foundation in 2011:
1. Sponsoring culture/art/music activities: (1) Humanistic care Sponsor DaAi TV continuously to engage in producing and promoting mini-purifying programs. Work with Public TV to organize the 2nd 99-series National Documentary Competition with the theme of “Touched – Search for Taiwan’s new vitality.” (2) Promotion of digital art Extend the sponsorship to Taipei Museum of Contemporary Art. Loan the products of ASUS to the artists and organizers of Taipei Museum of Contemporary Art free of charge. Worked with 15 domestic and international contemporary art exhibitions in 2010 for the participation of 300,000 visitors including “Biennial visual assault animamix – special attack animation” and “playing all the way – game aesthetics.” Sponsor cross-strait culture and art festival and assist cross-strait digital art and music culture communication for promoting digital art. In extension of the sponsoring model with Museum of Contemporary Arts Taipei in 2011, ASUS lent relevant products to the artists and organizers of MOCA free of charge. A total of 11 domestic and international contemporary art exhibitions were cooperated and over 220,000 people visited the exhibitions. (3) Promotion of Physical Education a. Sponsor of ZhongZheng Senior High School Dance Class： Continued sponsoring fees related to ZhongZheng Dance Presentation in 2011. This activity platform allows students to learn how to produce a professional performance program, who can gain experience in leadership, communication, obedience, facing problems, overcoming difficulties and others. ASUS expects to offer students with on-stage performance experience and promote dance and art education in schools through this “Zhongzheng
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Dance Exhibition” to promote on-campus demonstration, enhance teaching quality, and fostering more quality artists in the future. b. Sponsor of MONSTER Cheerleading： To assist this rare and valuable team that has survived for over ten years, ASUS continued to promote the nationwide cheerleading sports and the participation in international competition. ASUS has sponsored this team since 2011 and supported the MONSTER cheerleading winning special honors from the national cheerleading competition with fees for daily practice sites, so that the cheerleaders could continue their study and practices for experiences and techniques in a safer and comfortable site. MONSTER cheerleading was founded in the summer of 2011, which is the most professional and only registered cheerleading performance team. They have accumulated over 600 sessions of performance experience with outstanding performance in the national and international competitions. The team has won the national cheerleading tournament in the category of social team for the consecutive 7th year. The team also participated in public cheerleading competition in Japan, Thailand, United States, Finland, and Germany, who have won two gold, three silver and one bronze medal in the past. (4) Child care Help Rainbow Paradise Association arrange the “Angel Love Children Charity Concert” to help raise funds for the institutions for children and senior citizens as scholarship, lunch, and medical care. (5) Concern farmers a. Participate in PayEasy continuously to care for farmers. Adopt 0.5 hectare of toxic-free rice under the care of L.B. Wang, the farmer and work with the employees of ASUS to care for farmers. b. The foundation continued to adopt rice fields and fruit gardens for supporting the farmers. In 2011, ASUS directly purchased approximately 4200 Kgs of Jinhuang Mango in about 236 cartons that were in line with safe agricultural planting from Liuguei farmers through Liuguei Disaster Reconstruction Association, supporting Liuguei farmers improving practices of traditional agricultural methods and operating towards safe and ecological farming. Additionally, Asus assist farmers with online marketing by cooperating with Red Cross and information Society Promotion Association to use the recycled computers donated by ASUS with website building and relevant course training. By reducing the marketing and administrative fees for e-commerce and collection of intermediary profits, the Liuguei farmers are stepping into the path to livelihood and industrial reconstruction. Additionally, the mangos purchased by ASUS were re-donated to Haoren Foster Home, Taipei Children’s Family Support Center, HOLY WORD CHILDREN’S HOME, St. Anna Home, and Tihui Orphanage, to care for farmers and the disadvantaged. (6) Seniors care Care for senior citizens in remote community. Work with Hondao Senior Citizen’s Welfare Foundation and Cycling & Health Industry R&D Center on “Community Digital Activity for Senior Citizen.” Setup two digital fitness classes in Lin-Ben where the Morakot typhoon (August 8) was. The ASUS Foundation provides ASUS products together with the health equipment
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developed by Cycling & Health Industry R&D Center for the volunteers and social workers of Work with Hondao Senior Citizen’s Welfare Foundation to design fitness courses for senior citizens. (7) Care for victims a. In 2011, adopt continuously the 2nd year biotech reconstruction project of Dashe Village, Sandimen to inherit the traditional crafts of Paiwan Tribe and to help develop cultural and creative industry. b. Continued disaster area reconstruction in 2011 by donating 75 EeePC, assisted the Red Cross with establishing 13 disaster communities and life reconstruction workstation and counseled residents with various life skills rebuilding; whereas residents learned basic instruction of computer, e-commerce, lesion studying, education and training for environmental protection, and administrative operation applications related to reconstruction.
2. Shortening digital divide: (1) Domestic a. Work with Microsoft / Intel / ACER to promote digital care program and provide enhancement of teacher roles at where the Morakot typhoon was (August 8). The ASUS Foundation donates around one thousand Eee PCs to help promote the enhancement of teacher roles programs at where the Morakot typhoon was (August 8) through the Ministry of Education and TAECT in order to reinforce the digital teaching and computer learning techniques in the disaster area; also, to upgrade students’ digital learning ability. b. Donate ASUS notebook computers for the reconstruction of the flooded area due to the Morakot typhoon (August 8); also, help promote shortening digital care program in the disaster area. The donated objects include information marketing association, Red Cross 2, Tzi-Sun Salvation, Yuan-Shay Solvation, Shout-Lin Salvation, Kai Hui Reconstruction, and Taimali Reconstruction to assist with the biotech reconstruction service. c. Donate recycled computer to local non-profit organization and disadvantaged group including family support center, Down Syndrome Foundation, the Republic of China, Eden Social Welfare Foundation, and Tzu Chi Center to help promote digital teaching, ease social digital divide, and improve livelihood of disadvantaged group and upgrade competitiveness. d. Sponsor ADOC 2.0 Project Office maintenance and operating expense to help promote shortening digital divide. e. Continued co-sponsor for aboriginal ASUS science education awards with National Tsing Hua University. The third award was held in 2010 to combine with science education with promotion of local aboriginal culture. f. Continued to promote reverse logistics and recycling, whereas waste computers are disposed through reverse logistics to resemble the usable components and re-install the software. In 2011, 770 recycled computers were donated to assist 33 domestic, non-profit organizationsn to engage in computer teaching, provide disadvantaged with learning opportunities, intensify digital and computer learning related skilsl, enhance student and resident digital learning capability to improve life. Donatged non-profit organizations with cooperation include 3 religious groups, 18 charity
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institutions, and 2 disaster area reconstruction untis, 6 schools and 1 individual. g. Participated in private-sector ADOC 2.0 office in 2011 to organize the “Senior Digital LOHAs.” Other organizations such as Institute for Information Technology, CPC, ChungHwa Telecom, Acer, Asus, and Dlink jointly collaborated to call for 200 volunteers in leading the seniors to experience the internet world via tablet PC, in attempt to assist over tens of thousands of seniors with rare opportunity to access the internet, to cross the information gap and effectively reduce digital gap. The Institute for Information Technology and CPC supported the volunteers, ChungHwa Telecom offered 3G internet connection service, Acer and Asus provided discounts on tablet PCs, while Dlink donated networking equipments to successfully promote this public welfare program. (2) Overseas a. Work with the secretariat of the ADOC and local non-profit organization to donate computers in the following nations and help setup 12 digital centers: - Bright Angel Call Center in Beijing China - Indonesia Tzi Chi Red Creek Da-Ai Village - Indonesia Scripture School Digital Learning Center - Indonesia Syiah Kuala University two centers - Indonesia Syiah Kuala Sumatra Orangutan Center Vehicles - Malaysia Ministry of Rural Development, Malacca, and Terengganu two centers - Thailand ZOA-Mae La Center - Thailand Zoa-Umphiem Mai Center - Guatemala Villa de los Niños vocational school and Esperanza de Vida middle school two computer classrooms b. Co-organized the ADOC Digital Learning Centers Blog contest with ADOC Secretariat in 2010, ASUS intended to encourage the remote digital learning at the digital centers. The ADOC photo competition held in 2011 aimed to encourage students participating in digital learning to exchange and share their experience in digital learning. c. Continued to participate in ADOC 2.0 projects of APEC and cooperated with the Ministry of Foreign Affairs, ASUS assists ADOC member states and locally non-profit organizations in countries with diplomatic relations with Taiwan to establish the digital learning center, and shortening digital gap between digital learning. ASUS provides the residents and students from locally remote areas to learn fairly through equipment donation, volunteer training and continuing education. The digital gap between nations, towns and cities, and even ages and marital status, so that the public could more conveniently and happily live. A total of 16 digital opportunities centers were founded in Vietnam (7), Peru (2), Philippines (1), and Guatemala (6). d. The Asus Citizens of the World and International Volunteer Project, non-profit organization such as domestic and international school associations or providing international volunteer services are combined to connect to the professionalism, training and experiences offering international volunteer, who jointly plan for services of international volunteers in order to give feedback to the society and implement ASUS’s dreams to implement world citizens. ASUS donated foreign non-profit organization (digital learning center) and attempts to use green technology
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and social humanity through actual commitment in international community. Such act effectively and closely connected the friendship relationship and network relations between Taiwan and the locality in addition to assisting the issues of digital gap and promotion of green technology using green energy-saving as well as sharing cultural interaction and interesting stories with local villagers to the world in real time through the website, ASUS notebook in films, photos and text records of volunteer services. This year the third volunteer delegation activity was held: International Indonesian orangutans reservation forest volunteers, Indonesian Aceh International Volunteers, and Vietnam Hue International Volunteers. 3. Environmental conservation: (1) Sponsor Public TV with NT$500,000 to film a documentary “Eight Thousand Miles Away From Home” on black-faced spoonbill for promoting green environment education. (2) Sponsor the clustering power for nationwide environmental protection clips with the Public Television Service to enhance awareness for environmental protection. The first activity theme in “Long-term environmental protection to sustain the beauty of Earth” in 2009 was recognized by youth enthusiastically. The second “Long-term movement in search of Taiwan Vitality” is a clip-based theme, whereas the clip recruiting also performed exceptionally. The success to this event was a result of cohesion in youth power so that they could care for society with their own creativity, sharing positive and touching stories of the society through actual works. The third event was led by the Government Information Office to become one of the centennial found activities. Asus was the sponsor while the Public Television Service was the executing unit. The theme of clip recruitment was “100 touching photos, stories and film creativity competition.” The competition started in February and ended in April. A total of 423 works have applied while over one thousand of people participated in this event. (3) In cooperation with the International Disaster Relief Carnival Activity held by the Environmental Protection Agency in 2011, ASUS was invited to set up a “Green Fishing Pool” at the Taipei Children's Recreation Center for the public to participate. All public could learn about environmental protection issues with more profound knowledge and valuation throughout the games. (4) Hold environmental protection and recycling, mercy donation… activities on 422 “Global Earth Day” every year. (5) Organize and participate in Taipei City Environmental Volunteer Brigade; also, Support Taipei City Flora Expo and adopt community parks and public roads. (6) Convene staff to organize Environmental Volunteer Brigade and arrange regularly environmental public activities including Taipei City Guandu Nature Park Environmental public service, Santa Ana Home environment clean, community citizens “Ten Carbon Reduction Measures No Regrets Signing” propaganda… for the good of the earth. (7) Arrange environmental and ecological tour activities and promote low carbon travel to help the staffs understand the importance of ecological and environmental protection. Enhance the awareness of environmental protection by getting close to the nature. Substantiate environmental protection concept and work with local elementary schools to arrange understanding of wetland eco tour activities. (8) Sponsor the “±2°C” documentary promoting green environment education and form group cohesion force to upgrade environmental awareness.
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4. Cooperation between industry and academia (1) Offer scholarship and financial aid to Tsing Hua University and Zhejiang University to help incubate science and technology talents for the nation. (2) Work with Public TV to host 2010 Campus Speech activities; also, upgrade and inspire young individual’s creativity and potential. 5. Care for employees: Arrange Employee Assistance Program(EAP) psychological counseling, free eyesight, muscle, and bones check up, arranging H1N1 vaccine injection onsite, and obeying the operating concept of “incubation, cherish, and care for employees.” 6. Care for minority: (1) “Children Are Us” Bakery stationed in the food court of the headquarters with job opportunities for minority. ASUSTeK included “Children Are Us” on the payroll as a way to care for and feedback the society. (2) Sponsor the Matthew Lien concert of HiNet for fund raising for children who need help. ASUS Foundation donated ASUS Bamboo Notebook for rummage sales. (3) Take care of senior citizens in remote community. Work with Hondao Senior Citizen’s Welfare Foundation and Taiwan Cycling & Health R&D Center to host the “Community Digital Exercise Group, Senior Citizen eCommunity.” The first class was held in Taichung Sunchaio Community with the ASUS products provided by ASUS Foundation, health equipment developed by Taiwan Cycling & Health R&D Center, and exercise courses designed by volunteers and social workers of Hondao Senior Citizen’s Welfare Foundation to help senior citizens stretch out and stay healthy. (4) Arrange environmental protection recycling and flea market bazaar. All recycling and bazaar income is donated to Santa Ana Home for the fulfillment of local corporate social responsibility. 7. Offer aids: (1) ASUSTeK announced to join the “August 8 Flood Relief Program” on August 12, 2009. ASUS fellows initiated the “donating one-day income” activity voluntarily. (2) Make an announcement with Acer, INTC-US Taiwan, and MSFT-US Taiwan to donate 4,500 computers and software to the schools and communities destructed by Typhoon Morakot in seven schools and communities. Assist with the education and community development of the disaster area after Typhoon Morakot through the assistance of The Red Cross Society of the Republic of China and Taiwan Association for Educational Communications and Technology.
ASUS’s fulfillment of corporate social responsibility: 1. Awarded by Taipei City Government with “Gold Award for Energy Saving” for the first place of Business Group A in 2010. 2. Rated as the “Energy Saving and Carbon Reduction” outstanding unit by Environmental Protection Department in 2010 and awarded with the “Environmental Protection and Energy Saving and Carbon Reduction Mark.” 3. Adopted the Taipei City Excellence in Breastfeeding Certificate in 2011. 4. Participate in the CDP Supply Chain Program of the Carbon Disclosure Project (CDP) in 2010 and 2011; also, asked suppliers to fill out the questionnaires and
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disclose the responsive strategies of the ASUS suppliers to global change issues. 5. Published the “2010 Corporate Sustainability Report” in 2011 that is verified with DNV（Det Norske Veritas）and in compliance of GRI GRI Application Level Statement A. 6. Participated in the “Enterprise Citizen” contest held by CommonWealth Magazine in 2011 and was awarded with the “2011 Best Reputed Benchmark Enterprise” from one of the top ten inter-industries. 7. Awarded the “Excellence in Corporate Social Responsibility of Disclosure” granted by Taiwan Stock Exchange in 2011. 8. Participated in Taiwan Corporate Sustainability Report Award in 2009 and was awarded with the Honorable Mention Award. Awarded bronze metal for non-manufaturing industry in 2011 and a special award for excellence in coping with climate change. 9. Participated in “CSR Taiwan Corporate Social Responsibility” of Global Views Magazine in 2010 with the CSR Performance Excellence Award in technology industry awarded. 10. ASUS was awarded with the “Corporate Sustainability Operation Development 1st Place” by the Executive Yuan on December 3, 2007. The recognition had indeed helped build up the faith of consumers in ASUS and it had evidenced the like-a-rock product quality of ASUS and dedication to meet environmental protection standard. Also, ASUS has realized its business commitment to consumers. 11. ASUSTeK was awarded with a “B+” of the “computer and computer peripherals” category in Oekom in 2007, which was the highest rank among the international brands in competition. Please visit the website of ASUS at http://csr.asus.com/english/ for the updated information of corporate social responsibility. Please refer to the following website for ASUS’s business operation report (Chinese) (English) http://csr.asus.com/chinese/index.aspx#120 http://csr.asus.com/english/index.aspx#114
(VI) ASUS performs integrity operation and adopts measures 1. Abide by company law, security exchange act, business accounting law, and integrity and management principles for listing or OTC companies and other related laws and regulations. Stipulate various internal system control and regulatory system for employees to follow and as basis for implementing integral management. 2. Specify “Code of Employee Conduct and Behavior” with stipulation of not seeking illegal benefits through authorities or accepting reception, Gifts, kickbacks, embezzlement, or other illegal benefits, thereby to prevent any behaviors of bad faith that affect the business relations or transactions. 3. Employees must sign employee confidentiality agreement and maintain obligation of absolute confidentiality for the business, affairs, documents and customer data under the employee’s handling, who shall not disclose the information mentioned without legal cause or authorization. 4. Pay attention to the development of domestic and foreign integrity management related specification to review and improve the company’s integrity management policy and thereby enhance the effectiveness of the company’s integrity management.
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(VII) The company does not have corporate governance rules and regulations defined; therefore, it is not applicable.
(VIII) Other important information that helps understand corporate governance: ASUSTeK has the “International Material Information Processing Procedure” stipulated for establishing excellence internal material data processing and disclosure mechanism, avoiding unauthorized information disclosure, and ensuring ASUSTeK’s information published in consistence and accurately. The “International Material Information Processing Procedure” was resolved by the directors of board on December 25, 2009. ASUSTeK informs directors, supervisors, managers, and employees at least once a year by the company’s internet, agreement and education and training courses notice regarding the education of the operating procedure and governing regulations.
Please refer to the “internal rules” of “corporate governance” on the company’s homepage for the operating procedure in details: http://tw.asus.com/investor.aspx
(IX) Enforcement of internal control 1. Declaration of Internal Control: Please refer to Page 222. 2. If the company is requested by the SEC to retain CPA’s service for examining internal control system, the Independent Auditor’s Report must be disclosed: None
(X) The punishment delivered to the company and the staff of the company, or, the punishment delivered by the company to the staff for a violation of internal control system, the major nonconformity, and the corrective action in the most recent years and up to the date of the annual report printed: None
(XI) Resolutions reached in the Shareholders’ Meeting or by the board of directors in the most recent years and up to the date of the annual report printed: 1. The important resolutions of the general shareholder meeting: Time Subjects Enforcement
June 9, 2011 1. The company’s 2010 financial statements were resolved in the board meeting and audited by the supervisors and CPAs. The proposal was passed in the meeting unanimously upon the inquiry of the presiding chairman. 2. The company’s 2010 distribution of The base date for retained earnings was presented for dividend distribution was recognition. scheduled on August 6, The proposal was passed in the meeting 2011 and with cash unanimously upon the inquiry of the dividend distributed on presiding chairman. September 1, 2011. 3. ASUS 2010 Issuing new shares with Ex-stock benchmark day capitalization of retained earnings. To on 8/6/2011 and new retain sufficient working capital, ASUS shares of replenishment proceeded with capitalization of retained went public on 9/1/2011. earnings in a total of NTD1,357,436,570 and 135,743,657 new shares issued. The Par Value of each share was NT10. The
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Time Subjects Enforcement proposal was adopted with Chairman consulting to all attending shareholders without objection. 4. In cooperation with the practices for Implemented by relevant operating demand, some articles of “the units after complying acquisition or disposition of processing content of revision. assets” were revised. The proposal adopted with Chairman consulting to all attending shareholders without objection. 5. In cooperation with modification to the Implemented by relevant laws and regulations specified by units after complying competent authorities, some articles of content of revision. “Operating procedures for capital loan and endorsement guarantee” were revised. The proposal adopted with Chairman consulting to all attending shareholders without objection. 6. The ninth director and supervisor Completed registration of re-election. The proposal elected 7 company affaird directors and 3 supervisors. The period of modification to the appointment lasted from June 9th, 2011 to Ministry of Economic June 8th, 2014. Affairs on June 23, 2011. The list is provided below: Directors: Jonney Shih, Jonathan Tsang, Jerry Shen, HC Hung, Eric Chen, S.Y. Shian, Joe Hsieh Supervisors: Tze-Kaing Yang, Chung-Jen Cheng, L.H. Yang 7. Proposal of dismissing new directors with noncompete. The proposal adopted with Chairman consulting to all attending shareholders without objection.
2. The important resolutions of the Board of Directors:
Time Subjects June 9, 2011 1.Elected Jonney Shih as Chairman and Jonathan Tsang as Vice Chairman. 2. Approved the for the company appointment of audit officer. June 30, 2011 1 Report on IFRS implementation progress(2011Q2). 2. Adopted the benchmark day for ASUS 2010 Issuing new shares with capitalization of retained earnings and benchmark day for cash ex-divident. 3. Adopted proposal for ASUS Annual Credit Renewal from the Financial Institutions Aug 25, 2011 1. Report on IFRS implementation progress (2011 Q3) 2. Adopted proposal for ASUS 2011 first half financial statement and consolidated financial reports 3. Adopted Asus revision for “subsidiary management guidelines＂ 4. Adopted Asus “Specifications for assignment of re-investment
4343 Time Subjects business director and supervisor＂ 5. Adopted Asus revision for “Securities Investment Management Guidelines＂ Dec 22, 2011 1. Report on IFRS implementation progress (2011 Q4) 2. Adopted Asus Annual Credit Renewal from the Financial Institutions 3. Adopted fundraising for indirect reinvestment project for “ASUS Technology (Suzhou) Co. Ltd.＂ 4. Adopted fundraising for indirect reinvestment project for “ASUSTEK Computer (Chongqing) CO., LTD.＂ 5. Adopted the establishment of ASUS “Compensation Committee” and the specification of rules of organization 6. Adopted Asus Committees appointment for first “Compensation Committee”. 7. Adopted Asus revision for “BOD Meeting Specification.＂ 8. Adopted Asus submission for “2012 Annual Audit Plan.＂ Mar 23, 2012 1. Report on IFRS implementation progress (2012 Q1). 2. ASUS 2011 Annual Operation report 3. Recognition of ASUS 2011 Final Accounts and Consolidated Financial Statements 4. Adopted the revision to “acquisition or disposition of assets processing.＂ 5. Adopted ASUS “Internal Control System” and “Internal Audit System ” Revision 6. Adopted submission for ASUS 2010 “Internal Control System Statement.” 7. Adopted ASUS 2012 General Shareholder Convening Affairs. Apr 27, 2012 1. Report on IFRS implementation progress (2012 Q2) and the 2012 Q1 Number of Account reporting 2. Shareholder proposal to admissibility report for general shareholder meeting in current year. 3. Recognized 2011 Asus Earning distribution. 4. Adopted the director re-election case. 5. Adopted the lifting of non-competition restrictions for new directors. 6. Adopted the 2012 Asus General Shareholders＇Meetings Modification
(XII) The directors or supervisors who have objected to the resolutions reached by the board of directors and the objections are recorded or declared in writing in the most recent years and up to the date of the annual report printed: None
(XIII) The resignation or discharge of personnel who are responsible for financial statements in the most recent years and up to the date of the annual report printed:
Apr 27, 2012 REASONS FOR DATE OF DATE OF RESIGNATION Title Name APPOINTMENT DISMISSAL OR DISMISSAL May 18, Audit Officer CK Hsieh Feb 10, 1999 Personal factors 2011
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IV. CPAs fees
CPA firm CPA Auditing period Note Pricewaterhouse CHOU TSENG HSUEH Coopers, Jan 1, 2011~Dec 31, 2011 HUI-CHIN MING-LING Taiwan
The tem of CPAs fee Amount bracket Auditing fees Non-auditing fees Total
1 Below 2,000 thousand 2 2,000 thousands（included）~4,000 thousand V 3 4,000 thousands（included）~6,000 thousand 4 6,000 thousands（included）~8,000 thousand V 5 8,000 thousands（included）~10,000 thousand V 6 Over 10,000 thousand（included）
(I) The non-auditing fees paid to CPAs, CPA firm, and the CPA firm’s related party accounted for over a quarter of the total auditing fees, the auditing amount and non-auditing amount; also, the non-auditing service must be disclosed:
Non-auditing fees Auditing Auditing Industrial CPA firm CPA period Note fees System and Human Others Total design commercial resources registration CHOU TSENG Non-audit fees- Others for Jan 1, 2011~ KPMG HUI-CHIN 7,500 0 190 0 2,700 2,890 introducing IFRS and Due Dec 31, 2011 diligence assessment services HSUEH MING-LING
(II) If the auditing fee paid in the year retaining service from another CPA Firm is less than the auditing fee paid in the year before, the amount of auditing fee before and after the change of CPA Firm and the reasons for the said change must be disclosed: None.
(III) If the auditing fee paid in the year retaining service from another CPA Firm is over 15% less than the auditing fee paid in the year before, the amount and ratio of auditing fee reduced and the reasons for the said change must be disclosed: None.
V. CPA’s information: (I) Former CPAs
Date of change Jun 28, 2010 Reasons and explanation To upgrade the professional ethics and comunication performance of of changes CPA firms
State whether the Client appointment is CPA Consignor terminated or rejected by Status the consignor or CPAs Appointment terminated V automatically
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Appointment rejected (discontinued) The opinions other than unqualified opinion issued in the last two None years and the reasons for the said opinions Accounting principle or practice Disclosure of financial statements Yes Auditing scope or procedures Is there any difference in opinion with the issuer Others No V
Explanation
Supplementary disclosure None (disclosures specified in Article 10.5.1.4 of the standards)
(II) Successor CPAs
CPA firm PricewaterhouseCoopers, Taiwan CHOU TSENG HUI-CHIN CPA HSUEH MING-LING
Date of Appointment Oct 1, 2010
Inquiry made on the accounting process of specific None transactions, accounting principle, and possible opinions issued on the financial statements, and the result
Written opinions of the successing CPAs that are different None from the former CPA’s opinions
(III) The reply of former CPAs on Article 10.5.1 and Article 10.5.2.3 of the standards: None
VI. If the chairman, president, and financial or accounting manager of the company who had worked for the independent auditor or the related party in the most recent year, the name, title, and the term with the independent auditor or the related party must be disclosed: None
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VII. Information on Net Change in Shareholding and Net Change in Shares Pledged by Directors, Supervisors, Department Heads and Shareholders of 10% Shareholding or More: (1) Information on Net Change in Shareholding
2011 As of April 14 (Note 2)
Title Name Net Change in Net Change in Net Change in Net Change in Shareholding Share Pledged Shareholding Share Pledged
Chairman & Chief 15,509,057 Jonney Shih 0 0 0 Branding Officer (Note 3) Vice Chairman & President of Open Jonathan Tsang 346,623 0 0 0 Platform Business Group Director & Chief Jerry Shen 675,154 0 120,000 0 Executive Officer
Director H.C. Hung 86,553 0 0 0
Director Eric Chen 33,353 0 10,000 0
Director & S.Y. Shian 26,245 0 0 0 Corporate V.P. Director & Joe Hsieh 24,108 0 0 0 Corporate V.P.
Supervisor Tze-Kaing Yang 0 0 0 0 Chung-Jen Supervisor 290 0 0 0 Cheng 1,997,229 Supervisor L.H. Yang 0 0 0 (Note 3) Corporate V.P. Henry Yeh (18,163) 0 0 0
Corporate V.P. Samson Hu 31,736 0 0 0
Corporate V.P. Benson Lin 7,097 0 0 0
Corporate V.P. Alex Sun (33,793) 0 0 0 Chief Financial David Chang 10,386 0 0 0 Officer Note 1: The parties involved in shares transfer or equity pledge are known as the related party and they must have the following forms filled out. Note 2: The data collected up to April 14, 2012 were included in the report that was printed on April 27, 2012 for data accuracy. Note 3: In the number of shares increased by Chairman Jonney Shih, 10,320,450 shares were the returns of trust expired from the trusts reserve discretion. In the number of increased shares for Supervisor Yang, Long-Hui, 1,275,000 shares were the returns of trusts expired from the trust reserve discretion.
(2) Information of shares transferred: There is no party involved in shares transfer known as the related party.
(3) Information of equity pledged: There is no party involved in equity pledge knows as the related party.
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VIII. The relation of the top ten shareholders as defined in the Finance Standard Article 6: The relation and Shares held name of the top Shareholding of by other ten shareholders as Shareholding spouse and minor persons in defined in the Name their name Finance Standard Article 6 Shares % Shares % Shares % Name Relation ASUS’s Certificate of Depository with 31,599,227 4.20% 0 0 0 0 None None CitiBank (Taiwan)
Jonney Shih 30,093,638 4.00% 0 0 0 0 None None
Governemnt of Singapore Investment 15,679,193 2.08% 0 0 0 0 None None Commissioned to Citibank (Taiwan)
T.H. Tung 14,772,819 1.96% 3,646,814 0.48% 0 0 None None
ChungHwa Post Co., Ltd. 14,255,200 1.89% 0 0 0 0 None None Standard Chartered managed Van Gardner emerging 12,309,858 1.64% 0 0 0 0 None None market stock index fund account Chase Bank managed Saudi Arabia Central 11,481,739 1.53% 0 0 0 0 None None Bank investment account Standard Chartered managed 10,732,054 1.43% 0 0 0 0 None None Wayne Hsieh Old labor pension fund 10,516,700 1.40% 0 0 0 0 None None Public Service Pension Fund 9,969,734 1.32% 0 0 0 0 None None Management Board
4848
IX. Investments of Directors, Supervisors, Managers and directly or indirectly controlled business on the reinvested business and the total shareholding ratio:
Total Shareholding Ratio Baseline date: 12.31.2011, Unit: Share; % Investments from Directors, Supervisors, Investment of the Managers and directly Total Investment Reinvestment Company or Indirectly Controlled Business Shares % Shares % Shares % ASUS TECHNOLOGY 19,000,000 100.00 19,000,000 100.00 INCORPORATION Askey Computer Corporation 815,640,733 100.00 815,640,733 100.00 Enertronix, Inc. 40,238,437 100.00 40,238,437 100.00 AGAiT Technology Corporation 30,000,000 100.00 30,000,000 100.00 UNIMAX ELECTRONICS INC. 21,300,000 100.00 21,300,000 100.00 WAVEFACE INC. 16,006,000 100.00 16,006,000 100.00 ASUSTOR INC. 5,000,000 100.00 5,000,000 100.00 Hua-Cheng Venture Capital Corp. 114,500,000 100.00 114,500,000 100.00 Hua-Min Investment Co., Ltd. 68,000,000 100.00 68,000,000 100.00 AXUS MICROSYSTEMS INC. 10,046,980 85.00 10,046,980 85.00 ASUS CLOUD CORPORATION 16,500,000 82.50 16,500,000 82.50 ASMEDIA TECHNOLOGY INC. 24,841,414 52.31 6,424,192 12.73 31,265,606 65.04 AAEON TECHNOLOGY INC. 45,120,000 47.00 17,280,000 18.00 62,400,000 65.00 International United Technology Co., Ltd. 11,402,092 56.73 11,402,092 56.73 SHINEWAVE INTERNATIONAL INC. 5,469,750 51.00 5,469,750 51.00 Yu-Lian Technology Co., Ltd. 5,250,000 16.55 2,625,000 8.28 7,875,000 24.83 PEGATRON CORPORATION 551,523,484 24.46 551,523,484 24.46 Jie-Li Technology Co., Ltd. 2,473,500 8.89 3,876,000 13.93 6,349,500 22.82 APAQ Technology Co., Ltd. 11,063,163 18.91 11,063,163 18.91 ADVANTECH Co., Ltd. 83,719,956 15.17 83,719,956 15.17 AzureWave Technologies, Inc. 8,346,000 7.60 2,576,500 2.35 10,922,500 9.95 YUAN-SHENG Technology Co., Ltd.(*) 1,500,000 8.06 1,500,000 8.06 Kwong-Yuan Investment Co., Ltd. 10,000,000 7.81 10,000,000 7.81 uPI Semiconductor Corp. 500,000 1.12 2,601,500 5.82 3,101,500 6.94 ENE Technology Inc. 1,717,247 2.28 1,717,247 2.28 LEDLINK OPTICS,INC 455,000 1.63 260,000 0.93 715,000 2.56 Alcor Micro Corp. 1,099,879 1.34 1,099,879 1.34 Nuvoton Technology Corporation 660,000 0.32 660,000 0.32 United Microelectronics Corporation 4,142,260 0.03 4,142,260 0.03 ASUS TECHNOLOGY (HONG KONG) 500,000 100.00 500,000 100.00 LIMITED
4949
Investments from Directors, Supervisors, Investment of the Managers and directly Total Investment Reinvestment Company or Indirectly Controlled Business Shares % Shares % Shares % ASUS Technology (Suzhou) Co. Ltd. - 100.00 - 100.00 ASUSTEK COMPUTER (SHANGHAI) - 100.00 - 100.00 CO. LTD. ASUSTEK Computer (Chongqing) CO., - 100.00 - 100.00 LTD. ASUS COMPUTER (SHANGHAI) CO., - 100.00 - 100.00 LTD. ASUS COMPUTER INTERNATIONAL 50,000 100.00 50,000 100.00 Asus Holland B. V. 3,000,000 100.00 3,000,000 100.00 ASUS INTERNATIONAL LTD 89,730,042 100.00 89,730,042 100.00 Asustek Holdings Limited 20,452,104 100.00 20,452,104 100.00 ASUSCHANNEL Corp. 50,000 100.00 50,000 100.00 CHANNEL PILOT LIMITED 30,033,000 100.00 30,033,000 100.00 ASUS TECHNOLOGY PTE. LIMITED 30,002,500 100.00 30,002,500 100.00 ASUS COMPUTER GmbH - 100.00 - 100.00 Asus Middle East FZCO 5 100.00 5 100.00 ASUS COMPUTER Benelux B.V. - 100.00 - 100.00 ASUS FRANCE SARL 5,300 100.00 5,300 100.00 ASUSTEK (UK) LIMITED 50,000 100.00 50,000 100.00 ASUS KOREA Co., Ltd. 358,433 100.00 358,433 100.00 ASUSTEK COMPUTER (S) PTE, LTD. 20,002 100.00 20,002 100.00 ASUS Polska Sp. z o.o. 1,000 100.00 1,000 100.00 ASUS Technology Private Limited 14,040,797 100.00 14,040,797 100.00 ASUS Technology Holland B.V. 375,000 100.00 375,000 100.00 ASUS Technology (Vietnam) Co., LTD. - 100.00 - 100.00 ASUSTEK ITALY S.R.L. - 100.00 - 100.00 ASUS IBERICA S.L. 3,000 100.00 3,000 100.00 Asus Japan Incorporation 20,500 100.00 20,500 100.00 ASUS COMPUTER Czech Republic s.r.o. - 100.00 - 100.00 ASUS EGYPT L.L.C. - 100.00 - 100.00 ASUS CZECH SERVICE S. R. O. - 100.00 - 100.00 ASUS Hungary Services Limited Liability - 100.00 - 100.00 Company ASUS PORTUGAL, SOCIEDADE 30,000 100.00 30,000 100.00 UNIPESSOAL LDA Asus Switzerland GmbH 3,400 100.00 3,400 100.00 ASUS SERVICE AUSTRALIA PTY 950,000 100.00 950,000 100.00 LIMITED ASUS AUSTRALIA PTY LIMITED 350,000 100.00 350,000 100.00
5050
Investments from Directors, Supervisors, Investment of the Managers and directly Total Investment Reinvestment Company or Indirectly Controlled Business Shares % Shares % Shares % ACBZ IMPORTACAO E COMERCIO 51,210,000 100.00 51,210,000 100.00 LTDA. ASUS India Private Limited 33,500,000 100.00 33,500,000 100.00 Askey International Corp. 3,700,000 100.00 3,700,000 100.00 Dynalink International Corp. 39,160,172 100.00 39,160,172 100.00 Magic International Co., Ltd. 102,525,738 100.00 102,525,738 100.00 Askey (Vietnam) Company Limited 2,883,359 100.00 2,883,359 100.00 (be liquidated) Big Profit Limited 50,000 100.00 50,000 100.00 Famous Star Investments Limited 20,050,000 100.00 20,050,000 100.00 Magicom International Corp. 91,030,000 100.00 91,030,000 100.00 Askey Technology (Shanghai) Limited - 100.00 - 100.00 Openbase Limited 50,000 100.00 50,000 100.00 Leading Profit Co., Ltd. 50,000 100.00 50,000 100.00 UNI Leader International Ltd. 50,000 100.00 50,000 100.00 Askey Technology (Jiangsu) Limited - 100.00 - 100.00 ASON TECHNOLOGY (SUZHOU) LTD - 100.00 - 100.00 ASHINE TECHNOLOGY (SUZHOU) - 100.00 - 100.00 LTD. Wise Acess (HK) Limited 1,600,000 100.00 1,600,000 100.00 SILIGENCE SAS 780,000 80.00 780,000 80.00 eMES (SHUZHOU) CO., LTD. - 100.00 - 100.00 GREAT EXTEND INVESTMENT 676,730 100.00 676,730 100.00 CORP. International United Technology Co., Ltd. - 100.00 - 100.00 AGAiTech Holding Limited 1,000,000 100.00 1,000,000 100.00 AGAIT TECHNOLOGY (H.K.) 100,000 100.00 100,000 100.00 CORPORATION LIMITED AGAIT TECHNOLOGY (SHENZHEN) - 100.00 - 100.00 LIMITED CENTRAL TEC ASIA LIMITED 2,120,000 100.00 2,120,000 100.00 Waveface Holding Company Limited 14,000,000 77.78 14,000,000 77.78 NEXT SYSTEM LIMITED 4,993,902 51.47 4,993,902 51.47 ENERTRONIX HOLDING LIMITED 11,270,551 100.00 11,270,551 100.00 ENERTRONIX INTERNATIONAL 10,000 100.00 10,000 100.00 LIMITED Enertronix (HuiZhou) Co., Ltd. - 100.00 - 100.00 DEEP DELIGHT LIMITED 11,422,000 100.00 11,422,000 100.00 UNIMAX HOLDINGS LIMITED 6,500,000 100.00 6,500,000 100.00
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Investments from Directors, Supervisors, Investment of the Managers and directly Total Investment Reinvestment Company or Indirectly Controlled Business Shares % Shares % Shares % ASUS COMPUTER CORPORATION 3,000,000 100.00 3,000,000 100.00 MOBOSTAR TECHNOLOGY LIMITED 50,000 100.00 50,000 100.00 Potix Corporation (Cayman) 5,000,000 22.22 5,000,000 22.22 Azurewave (Cayman) Holding Inc. - 9.13 - 5.32 - 14.45 Investar Burgeon Venture Capital Inc. 379 10.84 379 10.84 AAEON ELECTRONICS,INC. 250,000 100.00 250,000 100.00 AAEON DEVELOPMENT,INC. 559,822 100.00 559,822 100.00 AAEON TECHNOLOGY CO.,LTD 8,807,113 100.00 8,807,113 100.00 AAEON SYSTEMS, INC. 2,400 100.00 2,400 100.00 AAEON TECHNOLOGY (EUROPE) 1,000 100.00 1,000 100.00 B.V. AAEON TECHNOLOGY GMBH 300 100.00 300 100.00 AAEON INVESTMENT CO., LTD. 15,000,000 100.00 15,000,000 100.00 ONYX Healthcare Inc. 3,000,000 100.00 3,000,000 100.00 AAEON TECHNOLOGY SINGAPORE 465,840 100.00 465,840 100.00 PTE. LTD. AAEON TECHNOLOGY (SUZHOU) - 100.00 - 100.00 INC. ONYX HEALTHCARE USA, INC. 5,000,000 100.00 5,000,000 100.00 ADVANTECH Co., Ltd. 40,625 0.01 40,625 0.01 TECH ELECTRONIC CO., LTD. 549,600 1.15 549,600 1.15 Lilee Systems 468,750 - 468,750 - Litemax Electronics Inc. 5,798,019 12.16 5,798,019 12.16 ATECH OEM INC. 12,936,773 17.80 12,936,773 17.80 MACHVISION,INC 1,911,960 6.23 1,911,960 6.23 ENTRA TECHNOLOGY CO., LTD 266,600 7.27 266,600 7.27 ALLIED BIOTECH CORP 300,000 0.32 300,000 0.32 STAR TEC HNOLOGIES, INC. 287,308 0.95 287,308 0.95 TELEION WIRELESS, INC. 149,700 - 149,700 - Mutto Optronics Corporation 460,000 0.77 460,000 0.77 Sunengine Co., Ltd. 2,000,000 3.02 2,000,000 3.02 Note: (*) Standards for the English transliteration of company’s name or individual’s name.
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IV. Stock Subscription
I. Capital and shares (1) History of capitalization 1. Type of shares April 27, 2012 / Unit: Shares Authorized Shares Type of Shares Listed Remarks (Available for trading on the Unissued shares Total TSE) (Note) Order common 752,760,280 3,997,239,720 4,750,000,000 stock Note: Listed stock
2. Stock capital
Authorized shares Issued shares Remarks Month / Par value Approval date and Shares Amount Shares Amount Non-monetary approval no. of Year (NT$) Source of capital (1,000) ($1,000) (1,000) ($1,000) capital capitalization by the SEC, Ministry of Finance 1990.03 10 3,000 30,000 3,000 30,000 Incorporation － － 1990.11 10 8,000 80,000 8,000 80,000 Cash $50 million － － Cash $40 million 1991.12 10 15,000 150,000 15,000 150,000 Retained earnings $30 － － million 1993.04 10 19,900 199,000 19,900 199,000 Cash $49 million － － 1993.08.27 SFE Ruling Retained earnings 1993.09 10 30,845 308,450 30,845 308,450 － (82) Tai-Tsai-Cheng (1) $109.45 million No. 30832 1994.07.21 SFE Ruling Retained earnings 1994.08 10 45,033.7 450,337 45,033.7 450,337 － (83) Tai-Tsai-Cheng (1) $141.887 million No. 32675 1995.06.15 SFE Ruling Retained earnings 1995.06 10 60,000 600,000 60,000 600,000 － (84) Tai-Tsai-Cheng (1) $149.663 million No. 35196 Cash $12 million 1996.06.28 SFE Ruling 1996.09 10 200,000 2,000,000 120,000 1,200,000 Retained earnings $588 － (85) Tai-Tsai-Cheng (1) million No. 40947 1997.05.05 SFE Ruling Cash (GDR) $210 (86) Tai-Tsai-Cheng (1) million No. 30903 1997.05 10 650,000 6,500,000 323,000 3,230,000 － Retained earning $1.82 1997.04.17 SFE Ruling billion (86) Tai-Tsai-Cheng (1) No. 30279 1998.05.21 SFE Ruling Retained earning $4.885 1998.06 10 1,400,000 14,000,000 811,500 8,115,000 － (87) Tai-Tsai-Cheng (1) billion No. 44748 1998.08.30 SFE Ruling 1998.10 10 1,400,000 14,000,000 813,500 8,135,000 Cash $20 million － (87) Tai-Tsai-Cheng (1) No. 35007 1999.05.20 SFE Ruling Retained earning $3.314 1999.06 10 1,400,000 14,000,000 1,144,900 11,449,000 － (88) Tai-Tsai-Cheng (1) billion No. 47786 1999.06.16 SFE Ruling 1999.08 10 1,400,000 14,000,000 1,146,400 11,464,000 Cash $15 million － (88) Tai-Tsai-Cheng (1) No. 53605 2000.05.26 SFE Ruling Retained earnings 2000.06 10 2,000,000 20,000,000 1,567,104 15,671,040 － (89) Tai-Tsai-Cheng (1) $4.20704 billion No. 45450 1,976,880 2001.06.06 SFE Ruling Retained earnings 2001.06 10 2,100,000 21,000,000 19,768,800 － (90) Tai-Tsai-Cheng (1) $4.09776 billion No. 135654 2002.06.26 SFE Ruling Retained earnings $220 2002.07 10 2,100,000 21,000,000 1,998,880 19,988,800 － (91) Tai-Tsai-Cheng (1) million No. 0910134921
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Authorized shares Issued shares Remarks Month / Par value Approval date and Shares Amount Shares Amount Non-monetary approval no. of Year (NT$) Source of capital (1,000) ($1,000) (1,000) ($1,000) capital capitalization by the SEC, Ministry of Finance 2003.07.08 SFE Ruling Retained earnings 2003.07 10 2,450,000 24,500,000 2,281,740 22,817,400 － Tai-Tsai-Cheng (1) No. $2.8286 billion 0920130466 2004.07.12 FSC Ruling Retained earnings 2004.08 10 2,872,000 28,720,000 2,552,914 25,529,140 － Jin-Kwong-Cheng (1) No. $2.71174 billion 0930130836 2005.06.23 FSC Ruling Retained earnings 2005.07 10 3,380,000 33,800,000 2,861,205 28,612,054 － Jin-Kwong-Cheng (1) No. $3.082914 billion 0940125161 2005.12.22 FSC Ruling Stock shares 2005.12 10 3,380,000 33,800,000 2,920,798 29,207,982 － Jin-Kwong-Cheng (1) No. $595,928,350 0940157381 Convertible bond for 2006.02.03 Jin-So-Son-Tzi 2006.01 10 3,380,000 33,800,000 2,924,521 29,245,209 － stock $37,226,200 No. 09501019910 2006.01.13 FSC Ruling Jin-Kwong-Cheng (1) No. Stock shares 0940161197 2006.03 10 3,380,000 33,800,000 2,998,184 29,981,838 － $736,629,610 2006.02.27 FSC Ruling Jin-Kwong-Cheng (1) No. 0950106726 Convertible bond for 2006.04.21 Jin-So-Son-Tzi 2006.04 10 3,380,000 33,800,000 3,040,064 30,400,638 － stock $418,799,510 No. 09501073310 2006.06.27 FSC Ruling Retained earnings 2006.08 10 3,860,000 38,600,000 3,407,070 34,070,701 － Jin-Kwong-Cheng (1) No. $3.67006377 billion 0950126632 Convertible bond for 2007.04.26 Jin-So-Son-Tzi 2007.04 10 3,860,000 38,600,000 3,412,083 34,120,829 － stock $50,127,660 No. 09601090540 2007.06.29 FSC Ruling Retained earnings 2007.09 10 4,250,000 42,500,000 3,652,687 36,526,871 － Jin-Kwong-Cheng (1) No. $2.40604146 billion 0960033204 2007.08.27 FSC Ruling Stock share 2007.09 10 4,250,000 42,500,000 3,682,512 36,825,116 － Jin-Kwong-Cheng (1) No. $298,245,610 0960044647 Convertible bond for 2007.10.22 Jin-So-Son-Tzi 2007.10 10 4,250,000 42,500,000 3,708,507 37,085,068 － stock $259,951,830 No. 09601256950 Convertible bond for 2008.01.17 Jin-So-Son-Tzi 2008.01 10 4,250,000 42,500,000 3,728,359 37,283,589 － stock $198,521,460 No. 09701012350 Convertible bond for 2008.05.13 Jin-So-Son-Tzi 2008.04 10 4,250,000 42,500,000 3,740,652 37,406,517 － stock $122,927,710 No. 09701109460 Convertible bond for 2008.08.19 Jin-So-Son-Tzi 2008.08 10 4,250,000 42,500,000 3,751,832 37,518,315 － stock $111,798,020 No. 09701207890 Retained earnings 2008.07.17 Jin-So-Son-Tzi 2008.09 10 4,750,000 47,500,000 4,245,897 42,458,967 － $4.94065172 billion No. 0970036193 Convertible bond for 2008.10.22 Jin-So-Son-Tzi 2008.10 10 4,750,000 47,500,000 4,246,051 42,460,513 － stock $1,545,780 No. 09701269640 Purchased Treasury stock for cancellation 2009.07.15 Jin-So-Son-Tzi 2009.07 10 4,750,000 47,500,000 4,219,926 42,199,262 － with decrease of No. 09801153240 $261,250,000 Retained earnings 2009.07.01 Jin-So-Son-Tzi 2009.08 10 4,750,000 47,500,000 4,246,777 42,467,77 － $268,512,150 No. 0980032762 spin-off and capital 2010.04.09 Jin-So-Son-Tzi 2010.06 10 4,750,000 47,500,000 637,016 6,370,166 reduction － No. 0990013609 $36,097,608,610 Purchased Treasury stock for cancellation 2010.09.14 Jin-So-Son-Tzi 2010.09 10 4,750,000 47,500,000 627,016 6,270,166 － with decrease of No. 09901209730 $100,000,000 Purchased Treasury stock for cancellation 2011.04.01 Jin-So-Son-Tzi 2011.03 10 4,750,000 47,500,000 617,016 6,170,166 － with decrease of No. 10001064750 $100,000,000 Retained earnings 2011.06.29 Jin-So-Son-Tzi 2011.08 10 4,750,000 47,500,000 752,760 7,527,603 － $1,357,436,570 No. 1000030060
3. Self-registration system: None
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(2) Status of shareholders Status of Shareholders April 14, 2012 Status of Domestic Foreign Government Financial Other Juridical shareholders Natural Institutions & Total Agencies Institutions Persons QTY Persons Natural Persons Number of 6 26 541 139,390 1,150 141,113 Shareholders Shareholding 4,716,017 13,711,088 96,242,128 255,828,210 382,262,837 752,760,280
Shareholding ratio (%) 0.63 1.82 12.79 33.98 50.78 100.00
(3) Status of Shareholding Distributed
1. Status of Shareholding Distributed (The par value of each share is NT$10) April 14, 2012 Number of Shareholding Classification Shareholding Shareholder Ratio 1- 999 107,973 28,061,421 3.73% 1,000- 5,000 28,081 51,911,078 6.90% 5,001- 10,000 2,410 17,021,447 2.26% 10,001- 15,000 738 8,939,148 1.19% 15,001- 20,000 379 6,673,935 0.89% 20,001- 30,000 332 8,165,244 1.08% 30,001- 50,000 264 10,313,573 1.37% 50,001- 100,000 303 21,976,551 2.92% 100,001- 200,000 247 35,692,515 4.74% 200,001- 400,000 155 43,228,806 5.74% 400,001- 600,000 56 27,387,592 3.64% 600,001- 800,000 37 25,527,827 3.39% 800,001-1,000,000 22 20,068,548 2.67% Over 1,000,001 116 447,792,595 59.48% Total 141,113 752,760,280 100.00%
2. Preferred Stock Shares: None
(4) Roster of Major Shareholders Roster of Major Shareholders As of April 14, 2012
Shareholding Shareholding Shareholding Ratio (%) Shareholder’s Name ASUS’s Certificate of Depository with CitiBank 31,599,227 4.20% (Taiwan)
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Shareholding Shareholding Shareholding Ratio (%) Shareholder’s Name Jonney Shih 30,093,638 4.00% Governemnt of Singapore Investment 15,679,193 2.08% Commissioned to Citibank (Taiwan) T.H. Tung 14,772,819 1.96%
Chunghwa Post Co., Ltd. 14,255,200 1.89% Standard Chartered managed Van Gardner 12,309,858 1.64% emerging market stock index fund account Chase Bank managed Saudi Arabia Central Bank 11,481,739 1.53% investment account Standard Chartered managed 10,732,054 1.43% Wayne Hsieh Old labor pension fund 10,516,700 1.40%
Public Service Pension Fund Management Board 9,969,734 1.32%
Note: The shareholdings stated in the table exclude trust shareholdings that are with the “rights to use” reserved.
(5) Market Price, Net Worth, Earnings & Dividend per Share of the Last Two Years Market Price, Net Worth, Earnings & Dividend per Share Unit: NT$/Share As of March 31, Fiscal year 2010 2011 2012 Item (Note 10) Market price per Max. 289.50 311 292 share Min. 49.00 178 212 (Note 1) (Note 3) Average 168.97 246.87 256.18 Net worth per Before appropriation 169.12 152.70 - share (Note 2) After appropriation 155.35 (Note 9) 2,607,155 753,776 Weighted average shares thousand thousand - (Note 3) Earnings per share shares shares Earnings per Before adjustment 7.72 21.99 - shares (Note 4) After adjustment 6.32 (Note 9) Cash dividends 14 (Note 9) - Stock dividends from Retained 2.2 (Note 9) - earnings Dividends per Stock share dividends Stock dividends from Additional 0 (Note 9) - paid-in capital Accumulated unpaid dividends - - - (Note 5) Price/Earning Ratio (Note 6) 11.69 11.23 - Analysis of return Price/Dividend Ratio (Note 7) 6.45 (Note 9) - on investment Cash dividends yield rate (Note 8) 8.29% (Note 9) - Note 1: List the highest and lowest market price per share; also, calculate the average market price per share in accordance with the trade amount and shares. Note 2: Please base the information on the shares issued at yearned and the resolution for stock distribution in shareholders
5656
meeting. Note 3: ASUS arranged split and capital reduction in 2010. The base date for capital reduction by 85% was on June 1, 2010 with 3,609,761 thousand shares cancelled; also, ASUS was listed for trade again at NT$225.1 on June 24, 2010. Note 4: If the stock dividend is to be adjusted retroactively, please list the earnings per share before and after the adjustment. Note 5: According to the regulations of security issuance, if the dividend that is not distributed can be accumulated till the year with retained earnings, the accumulated unpaid dividend of the year must be disclosed. Note 6: Profit ratio = Closing price per share of the year / Earning per share Note 7: Earning ratio = Closing price per share of the year / Cash dividend per share Note 8: Cash dividend yield rate = Cash dividend per share / Closing price per share of the year Note 9: Subject to the approval of the annual shareholders meeting. Note 10: The data collected up to March 31, 2012 were included in the report printed on April 27, 2012 for data accuracy.
(6) Execution of Dividend Policy
1. Dividend Policy The company is in a changing industrial environment and a growing industrial life cycle. For the company’s long-term financial planning and the shareholder’s need for cash inflow, the annual distribution of cash dividend may not be for an amount below 10% of cash dividend and stock dividend together. 2. Proposed Distribution of Dividends: (1) The company’s had appropriated legal surplus for an amount of NT$16,578,158,673 equivalent to 10% of net income, NT$1,657,815,867, in 2011. Therefore, an amount of NT$14,920,342,806 was available for distribution in 2011 and with the retained earnings of prior periods available for distribution amounted NT$60,715,166,045 for a grand total of NT$75,635,508,851 at yearend that was distributed in accordance with the “Articles of Incorporation” as follows (Please refer to the distribution of retained earrings table for details): i. Shareholder dividend: NT$ 752,760,280, distributed in cash. ii. Shareholder cash dividends: NT$ 10,162,263,780. (2) If shareholder’s cash dividend is less than NT$ 1, the distribution will be made in the form of cash rounded and adjusted by a specific represent arranged by the Chairman of the Board of Directors. (3) For earnings distribution, in case of changes in outstanding shares that causes changes in payout ratios and require modification, the shareholder meeting is hereby requested to authorize the board of directors for process within the scope of the said amount and stock shares. (4) The board of directors is authorized upon the resolution of the general shareholder meeting to define the dividend, distribution base date, and the related events.
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Distribution of Retained Earnings
In 2011 Unit: NT$ Account Name Amount Remarks
Unappropriated Earning, Beginning (Before 63,157,510,195 adjusted)
(-) Disposition and cancellation of Treasury 2,442,344,150 stock Unappropriated Earning 60,715,166,045 FY2011 Profit After Tax 16,578,158,673 (-)10% Legal Reserve 1,657,815,867 FY 2011 Distributable Profit 14,920,342,806 Distributable Earnings 75,635,508,851 Appropriation Items: Dividend Interest (10%) 752,760,280 NT$1 / share Cash Dividend 10,162,263,780 NT$13.5 / share Stock Dividend 0 FY2011 Undistributed Profit 4,005,318,746 Unappropriated Earnings, Ending 64,720,484,791 Notes: Employee’s Bonus 708,379,127 Remuneration for Directors and Supervisors 141,675,825 Note: The proposed profit distribution is allocated from 2011 retained earnings available for distribution.
(7) Impact of the proposed stock dividend in shareholders meeting on business performances and EPS: None Note: The Company did not have financial forecast proposed up to the date of the annual report printed.
(8) Bonus to employees and remuneration to directors and supervisors 1. Information of dividend to employee and remuneration to directors and supervisors was prescribed in the Articles of Incorporation. The Company's net income before tax must be used to pay tax and make up accumulated loss first, then with 10% legal reserve and 10% special reserve appropriated; also, 10% dividend interest paid thereafter; also, an amount not less than 1% of the balance thereafter is appropriated for the distribution of dividend to employees, an amount not over 1% of the balance thereafter is appropriated for the distribution of remuneration to directors and supervisors. The subsidiary’s employees are entitled to the distribution of stock dividend of the parent company. The board of directors is then proposed the distribution of the net balance in shareholders meeting for approval.
2. Accounting process applied to the estimation base of dividend to employee and remuneration to directors and supervisors, outstanding shares computing base for stock dividend distribution, and the spread between amount distributed and estimated: The appropriation of bonus to employees and remuneration to directors and supervisors is based on the net income after loss appropriation, 10% legal surplus, and 10% dividend; 1% or more of the remaining balance as bonus to employees and 1% or less of the remaining balance as remuneration to directors and supervisors. The distribution of stock dividend is based on the closing price one day prior to the resolution reached in the shareholder meeting and the ex-right and ex-dividend effect.
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If the actual amount of distribution resolved in shareholder meeting differs from the estimated amount, it is deem as changes in accounting estimation and booked as gain or loss of the year upon distribution.
3. Dividend distribution of employees in 2011 resolved by the board of directors (1)Distribution amount of cash dividend and stock dividend to employees and remuneration to directors and supervisors proposed: Amount of Distribution (NTD) Cash dividend to employees 708,379,127 Stock dividend to employees 0 Remuneration to directors 141,675,825 and supervisors The spread amount between the expense accrued and estimated must be disclosed and with the causes and processes detailed: None (2) Proposed stock dividend amount to employees and the ratio of that amount to the total amount of net income and total dividend to employees (3) Earnings per share including the proposed stock dividend to employees and remuneration to directors and supervisors: Not applicable since the stock dividend to employees and remuneration to directors and supervisors is expensed in accounting books.
4. The distribution of dividend to employees and remuneration to directors and supervisors (including shares and amount distributed and stock price) in 2010; the spread between the accrued amount and estimated amount must be disclosed and with the causes and processes detailed: (1) Distribution of dividend to employees and remuneration to directors and supervisors in the year: Cash dividend to employees: NT$ 710,625,213 Remuneration to directors and supervisors: NT$ 142,125,042 (2) The spread between the accrued amount and estimated amount of dividend to employees and remuneration to directors and supervisors must be disclosed and with the causes and processes detailed: None
(9) Purchase of Treasury stock:
Term of call 3rd time Date of Board Resolution Dec 9, 2010 For protecting the company’s credit and Purpose of call shareholder’s interest Call period Dec 10, 2010 ~ Feb 9, 2011 Call price NT$240 ~ 300 Type and volume of stock shares called Common stock 10,000,000 shares Amount of call NT$ 2,609,421,797 Stock shares written off and transferred Common stock 10,000,000 shares Shareholdings 0 shares Ratio of shareholdings to total shares issued 1.59 ％
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II. Arrangement of corporate bond:
(I) Arrangement of corporate bond: 1. CB
Type of corporate bond The 1st domestic convertible bond Date of issuance (process) November 7, 2006 Face value NT$100 thousand Location of issuance and trade Taiwan, GreTai securities market Issuing price Issued at the face value 100% Total amount NT$12,000,000 thousand Interest rate 0% Five-year term Term Due date: November 7, 2011 Guarantee institute - Trust Department of TAIPEIFUBON COMMERCIAL Trustee BANK CO., LTD Underwriter Fubon Securities Co., Ltd. Attorney - CPA - Unless the bondholders have the corporate bonds converted to the company’s common stock in accordance with Article 11 of Corporate Bond Issuance & Conversion Act, or, the corporate bonds are “put” in accordance with Article 20 of Solvency Corporate Bond Issuance & Conversion Act, or, the company has the corporate bonds “called” in accordance with Article 11 of Corporate Bond Issuance & Conversion Act, the corporate bonds are liquidated at the face value on the due date. Outstanding Principal NT$0 (up to the date of the report printed) （a）The company may have the convertible bonds “called” from the 31st day of the issuance date to forty days before the due date. If the closing price of the company’s common stock at SEC exceeds the conversion price for over 50% for thirty working days consecutively, the company may send a “bond call notice” (the said period starts from the date of notice sent by the company; also, the baseline date for “call” is on the last day of the period; moreover, the baseline Redeemed or liquidated before maturity date for “call” may not fall in the no-conversion date period of this convertible bond) in thirty working days to creditors (based on the roster on the fifth working day before sending the “Bond Call Notice; however, a notice is published for the knowledge of investors who have acquired the convertible bond by trade or other means) by certified mail. Inform GreTai in writing to have it published; also, the convertible bonds are “called” at face value on the due date. （b）From the 31st day of the bond issuance to forty days
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Type of corporate bond The 1st domestic convertible bond before the due date, if the convertible bond in circulation is for an amount less than 10% of total issuance, the company may send a “bond call notice” (the said period starts from the date of notice sent by the company; also, the baseline date for “call” is on the last day of the period; moreover, the baseline date for “call” may not fall in the no-conversion period of this convertible bond) to creditors (based on the roster on the fifth working day before sending the “Bond Call Notice;” however, a notice is published for the knowledge of investors who have acquired the convertible bond by trade or other means) by certified mail. Inform GreTai in writing to have it published; also, the convertible bonds are “called” at face value on the due date. Restrictive clauses - Rating institute, rating date, corporate - bond rating Converted NT$7,000,000 (up to the date of the report printed) (exchanged or subscribed) common Other rights stock, GDR, or marketable security up to the date of the report printed Except for periods of (1) the no-conversion period defined by law (2) from three working days prior to ex-right date for stock dividend registered with SEC by the company to the baseline date of equity distribution; from three working days prior to ex-dividend date for cash capitalization to the baseline date of stock distribution; three working days prior Issuance & to cut-off date for cash capitalization to the baseline date of conversion (exchange equity distribution; and three working days prior to the or subscription) Act baseline day for merger or stock split to the baseline date, creditors may request the company to have convertible bonds converted to the company’s common stock in accordance with Article 11, Article 12, and Article 17 of this Act at any time from the 31st day of the issuance date to ten days before the due date. （a）The convertible bond helps avoid profit erosion and minimize the dilution of shareholder’s equity and ERP resulted from the substantial increase of stock shares; ssuance and conversion, exchange or therefore, it is to the best interest of shareholders. subscription measures; the influence of （b）Based on the conversion price of NT$105.4, the dilution issuance conditions on the dilution of of shareholder’s equity caused by the convertible equity and shareholder’s equity corporate bond is 3.23%; Nonetheless, the bond was redeemed on November 7, 2011 and therefore there is no potential dilution effect or has no effect on stockholders equity. Depository institute -
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(II) Convertible Bonds
1st domestic convertible bond Type of Corporate Bond 1st domestic convertible bond Year Item 2011 As of April 27, 2012 Max. NT$ 103.5 N/A Market price of convertible bond Min. NT$ 99.25 N/A Average NT$ 101.01 N/A NT$269.2 Conversion price (The conversion price of convertible bonds was adjusted from 345.8 to 269.2 due to ex-interests ) Issuing (processing) date & conversion price November 7, 2006 NT$105.4 Obligation of Conversion New stock issuance Note:The bond was expired on November 7th, 2011 and recoved in one cash repayment according to the face value of bond.
(III) Information of CB: None
(IV) Self registration of CB: None
(V) Bond with stock option: None
III. Preferred stock (with stock option): None
IV. Issuance of global depository receipts: GDR
Date of issuance (process) May 30, 1997 Item
Date of issuance (process) May 30, 1997 Location of issuance and trade London Total amount US$235, 830,000 Unit Price US$11.23 / GDR Total issuance 21,000,000 GDRS One GDR stands for one common stock share of ASUS Note 1: The Company’s stock exchange ratio has changed from one GDR for one common stock share to one GDR to Source of common stock recognition five common stock shares since January 2, 2008. Note 2: ASUS had capital reduction arranged on June 24, 2010. The proportion of outstanding convertible is 1,000 shares for 150 shares. Total marketable security shares recognized Stands for 21,000,000 common stock shares of ASUS Rights and obligations of GDR holders Please refer to Attachment A Trustee None GDR institute CITIBANK, NA Depository institute Citibank Taiwan Limited
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Date of issuance (process) May 30, 1997 Item
Outstanding GDR 6,319,844 GDRS (December 31, 2011) Issuance and expense amortization throughout the It is to be amortized in three years on average after issuance issuance period according to Article 243 of Company Law GDR agreement and depository agreement Please refer to Attachment B Max. US$ 50.80
2011 Min. US$ 32.09 Market price Average US$ 38.86 per unit (US$) Max. US$ 50.00 As of April 27, 2012 Min. US$ 39.00 Average US$ 44.97
Attachment A
1. Voting rights: May not exercise voting rights directly but instructing the GDR institute to exercise voting rights according to the GDR agreement. 2. Dividend distribution, stock option, and other rights: (1) Entitled to distribution of dividend and stock shares just like the common shareholders of ASUS. GDR institute may have GDR issued proportionally to shareholdings or increase the common stock shares recognized with each GDR or have stock dividend sold on behalf of GDR holders and with the income distributed to GDR holders proportionally. (2) GDR institute may have the said rights provided to GDR holders within the scope defined by the law of R.O.C. or international law, or, GDR institute may have the said rights sold on behalf of GDR holder and with the income distributed to GDR holders proportionally.
Attachment B
1. GDR agreement: (1) Transfer/split: The ownership of GDR is evidenced by EUROCLEAR and CEDEL book transaction and split system. (2) Dividend and others: Cash dividend in US$ net of GDR institute fees and tax withholding is distributed to GDR holders proportionally to their holdings. For the distribution of stock dividend, GDR holders are to have the total GDR adjusted proportionally to the shareholding ratio recognized with GDR holdings; also, adjusted the GDR of GDR holders accordingly. GDR institute may have the income distributed to GDR holders proportionally. While having new stock shares issued for cash capitalization or arranging stock option, GDR institute may (I) arrange stock subscription or (II) entrust the said right to GDR holders; however, the new stock shares for cash capitalization are limited to the exemption registered with SFC. GDR institute must strive to have cash dividend and stock dividend distributed to GDR holders. (3) Voting rights: Unless otherwise agreed upon, GDR institute must base on the GDR agreement, law of R.O.C., and the instruction of GDR holders to exercise the voting rights of the marketable security recognized with GDR. 2. Depository agreement:
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(1) Submit marketable security for the issuance of GDR. (2) Inform GDR institute to have GDR issued. (3) Deliver marketable security for the exchange of GDR (4) Confirm the volume of GDR monthly (5) Confirm the volume of GDR on the registration date
V. Employee stock option certificates: None
VI. Merger and acquisitions or stock shares transferred with new stock shares issued: (1) The merger completed, stock shares transferred, and new stock shares issued in recent years and up to the date of the annual report printed: 1. The opinions of the security underwriter who is responsible for merger, accepting other company’s stock share, and issuing new stock shares in the most recent quarter: None 2. If the business performance of the last quarter does not meet the expectation, please state the impact on shareholder’s equity and the corrective action proposed: None (2) If the merger is completed, stock shares is transferred, and new stock shares are issued in recent years and up to the date of the annual report printed, the information of the merger and the merged or acquired company must be disclosed: None
VII. Fund implementation plan Up to the last quarter before the printing of the financial statements, outstanding equity issuance or marketable security subscription or the completed equity issuance or subscribed marketable security without success: Not Applicable
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V. Overview of Business Operation
I. Principal activities (I) Operating Scope
The company’s 3C integrated products are awarded with many honors for the excellent quality and advanced technology this year. ASUS received 3,886 awards worldwide from media and professional rating institutes in 2011. ASUSTeK had generated sales revenue of NTD350.3 billion in 2011. In terms of sales generated from branded products, 23.2 million pieces motherboards and 19.6 million notebooks were sold.
1. Product lines of the company a. Desktop / server b. 3D AutoCAD c. Advanced sound blaster d. NB e. Eee Pad f. EeePC computer and Eee series Eee PC g. PadFone h. LED display i. Broadband & communication products j. Advanced server
2. Product development projects a. Digital control wireless transmission technology dual core CPU MB b. Advanced 3D image display and wireless TV transmission graphic card c. Multi-function, three-in-one smartphone & Padfone Note d. Ultra Mobile PC e. High-speed router / exchanger / firewall / VPN f. New-generation advanced server g. Professional LED display h. Eee Top PC, Eee Box PC i. Transformer Pad
(II) Industry Overview 1. Progress and development of the industry The market demand for light-weighted and thin notebook will continue to grow. The surface of digital content industry and multimedia entertainment; also, the increasing demands of game players, demand for 3D-multimedia and high-performance video and audio will be activated. Multimedia entertainment will sure increase the demand of high quality notebook accessories. The development of notebook goes for not only the quality of “light-weighted, thin, small, and look” but also “personalization, video and audio entertainment, wireless communication, and green environment.”
2. Correlation of the upper-stream, mid-stream, and down-stream of the industry
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In terms of the correlation of upper-stream, mid-stream, and down-stream of the industry, upper-stream industry includes semiconductor (IC design, wafer foundry, and testing and packaging), electronic parts (passive components, rectifier diode, etc.), and others (LED, printed circuit board, connector, etc.). Mid-stream industry includes optoelectronic (monitor, LCD, etc.), electronic parts (motherboard, VGA, etc.), and computer peripherals (computer case, mouse, keyboard, etc.). Down-stream industry includes the business of table-top computer and notebook computer.
3. Product development trends Cloud Computing is to provide data access and/or application service by terminal installation and through Internet connection to remote server or device. Cloud Computing is the next innovative technology for the world after Web 2.0/3.0. On the arrival of Cloud Computing era, ASUSTeK plans to introduce a series of Cloud Computing related services and products with the quality of portability, easy to use, connection, and service in depth reinforced in order to provide the more comprehensive products and solutions: notebook, nettop, e-books, Tablet PC, super personal computer, home server, storage equipment, and communication products that allow users enjoying the convenience provided by Cloud Computing and information flowing through the diversified equipment freely.
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4. Competition The continuing volume growth of notebook is expected; however, low-price effect remains in effect due to severe market competition; therefore, product design is focusing on personalization to stimulate demands. ASUSTeK goes for product differentiation and segmentation in accordance with the demand of each consumer. The importance of marketing strategy is more than ever in order to create profit niche for each enterprise. At the same time, the development of notebook is moving towards upgrading product value by integrating it with new technology, for example, light-weighted, thin, portable, energy and power saving, and green environment to help ASUSTeK outperform competitors in the minds of consumers. In addition to the quality of light-weighted, thin, and long-lasting effect, ASUS notebook is designed with unique power management technology to increase using time and power efficiency; also, is with LED and nature material such as bamboo blended in response to the calling for environmental protection.
MB, VGA, and CD-ROM are computer elements industry that has a supply chain formed with CPU, module, PCB, and Connector. ASUS has kept a profound and excellent relationship with the aforementioned businesses currently. ASUS has setup subsidiaries to manufacture the aforementioned components for refining product development technology and securing stable supply of components. Therefore, ASUS has a comprehensive deployment of vertical integration substantiated. In terms of global distribution structure, ASUS has worked with over 300 agents and over twenty thousand distributors closely worldwide. ASUS is the world number one brand in Europe, Asia, and America; in other words, ASUS is a dominant brand name in market.
(III) Research and Development ASUS has striven in R&D since the day of incorporation to control self-developed technology for the R&D, production, and marketing of advanced MB, Graphics Cards, Notebook, Eee PC, Server, mobile phone and to develop 4C (computer, communication, consumer electronics, and automobile electronics) integrated products. ASUS has ATEC setup in 2003 and with three R&D divisions setup including broadband wireless communication, wireline / wireless exchanger, and VCD / DVD key technology. For ASUS, R&D Division and R&D Center work together reciprocally. R&D Center focuses on technology study and commercialization of creativity. R&D Center is entrusted with the responsibility to conduct preliminary study and assessment on the software and hardware key technology, module, and applied program development platform in depth for the reference of R&D director in judging technology movement and selecting partners. R&D Division focuses on system integration and product introduction and commercialization. Technology is transformed into income eventually; also, part of the income is contributed to the creativity or technology supplier reasonably. R&D Center will be operated permanently under such a positive cycle. The attention of and incentives provided by the company’s management will allow ASUS to recruit R&D talents for technology R&D continuously. In the constantly changing computer world, the company has key technologies and leading products to compete in market and to create product value. ASUS was with a R&D expense of $4,924,199 thousand booked in 2011.
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ASUS is known for fast product R&D and Time to Volume. ASUS leads the industry to develop advanced products successfully and with the following new products to show for:
1. Product R&D in 2011: a. Digital control wireless transmission technology dual core CPU MB b. Advanced 3D image display and wireless TV transmission graphic card c. Intelligent phone GPS d. Ultra Mobile PC e. High-speed router / exchanger / firewall / VPN f. New-generation advanced server g. Professional LED display h. WiMAX broadband products i. Eee PC touch, long-lasting computer j. Eee Top PC, Eee Box PC k. Eee Note l. Eee Pad
2. R&D planned in 2012: a. Digital control wireless transmission technology dual core CPU MB b. Advanced 3D image display and wireless TV transmission graphic card c. Multi-function, three-in-one smartphone & Padfone Note d. Ultra Mobile PC e. High-speed router / exchanger / firewall / VPN f. New-generation advanced server g. Professional LED display h. Eee Top PC, Eee Box PC i. Transformer Pad
(IV) Long-term and short-term development plan 1. Short-term development plan ASUSTeK will continue to exercise the brand spirit of “fabulous innovation and quality perfection” to develop products with the quality of green technology, multimedia video and audio entertainment, and Cloud Computing. The product development cover two platforms with advanced digital technology and user’s life experienced blend in: Open platform products including motherboard, drawing card, play station, LCD, and network server; system products including notebook and Eee PC™ Eee series and other handheld products.
2. Long-term development plan We have entered into a people-oriented mobile computing model, whereas all physical and virtual computation, data access and interaction are integrated through internet. In the future, users will not have to adapt to product functions but the product functions be arbitrarily converted due to user demand. The boundary for mobile, tablet PC, notebook and other mobile devices will eventually be eliminated. In the new digital era of the future, the power of internet
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will eventually turn the screens of mobile devices into media connecting to cloud computing. The value of information will not be owned exclusively but readily availability, transmission and sharing are the key. As the leader of brand technology, Asus believes in the power of open platform and we must embrace the ubiquitous era of cloud computing with open mind, building a versatile solution for the new generation of cloud computing.
II. Market analysis and the conditions of sales and production (1) Market analysis 1. Sales regions Unit: NT$ thousands Year 2010 2011 Item Subtotal Total Subtotal Total Domestic operating income 16,749,977 18,159,962
Internal operating income 280,001,152 299,509,813 America / Canada 427,623 991,465 Asia Pacific 279,466,604 298,343,390 Europe 42,203 22,587 Africa 64,722 152,371 Net operating income 296,751,129 317,669,775
2. Market share and market demand and supply and market growth (1) Market demand and supply of computer components The MB of ASUS took up the largest market share worldwide in 2011 with the strength of excellent R&D capability, scale of mass production, comprehensive supply chain of upper-stream and down-stream components, product quality, and competitive production cost.
Energy saving is the fundamental goal of ASUS throughout the process of production. ASUS is the first one to develop EPU with power source adjusted smartly and instantly by detecting PC loading in order to supply energy effectively to the entire system. By providing elements with automatic phase switching (including CPU, VGA Card, memory, chips, hard drive, and fans), EPU is able to provide adequate power supply by smart acceleration and overclocking in order to save power and cost.
USB3.0 becomes global standard for new generation digital data transmission. In addition to have the motherboard converted at once, ASUS has True USB 3.0 released comprehensively by leading technology that is ten times faster than USB2.0 and it is easy to share, download, and make backup. It is with twice of bandwidth and 34% more effective than other USB3.0 solution.
ASUSTeK had sold 23.2 million pieces motherboards in 2011. If motherboard is the soul of a computer, VGA drawing card and CD ROM are the body and extremes of a computer. ASUSTeK had managed to kept competitors in distance in 2011 by the “Lion King” strategy. ASUSTeK had led VGA and CD ROM to a new territory that symbolized several more “Lion Kings” of the enterprise. ASUSTeK continues to progress towards “55 Project,” aiming to take up 50% market share of motherboards in 2014. ASUSTeK has introduced excellent products with high quality, high
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performance, and high cost-performance value to the upper-stream, mid-stream, and lower-stream market. ASUSTeK is determined to be dominant in global motherboard market and construct its lion kingdom of technology.
(2) Market demand and supply of NB: The prevailing rate of notebook is growing rapidly in the world. ASUSTeK has been in the business for fifty years and has performed wonderfully in the sense of product quality, R&D technology, and business development. According to the statistical data of 2011Q4 of international market survey institutes, ASUS notebook is on the Top-Five list with 19.6 million notebook computers shipped in 2011 representing 79.82% growth from the year before. ASUSTeK had done well with this products in market.
(3) Short-term development of IT industry: On the arrival of Cloud Computing era, ASUSTeK plans to introduce a series of Cloud Computing related services and products with a specific solution designed for the cloud computing of mobile computation, multimedia entertainment, and eCommerce and the quality of portability, easy to use, connection, and service in depth reinforced in order to provide users with a boundary-free and timeless convenient life and information at fingertip. Professionals may apply cloud computing business tool freely to explore business opportunities, upgrade competitiveness, and share rich and diversified multimedia entertainment with family members.
3. Business goals The company’s strategic planning has matched up to market development trend in recent years. ASUSTeK had generated sales revenue of NTD350.3 billion in 2011. In addition to care for the core businesses, ASUSTeK will initiate diversified business operation carefully too. Sales of new products have grown by several folds. ASUSTeK will continue to serve customers with practical and stable business operation; also, world-class technology innovation, and excellent product quality.
4. Competitiveness, advantages and disadvantages of development, and responsive strategies
Industrial development and vision
(1) Advantages
a. For the rise of mobile computing, lightweight and thin become the way to go for notebook computer. ASUS computer development has been focusing on effectiveness and energy saving since 2008 and with a low power-consumption and Super Hybrid Engine (SHE) technology developed alone as the best solution to the request for lightweight, think, and powerful. ASUS has mature technology ready for the market once the demand emerges. b. The output value of hardware in 2012 is expected to grow. Notebook and motherboard are both with positive growth expected. Moreover, the impact of Eee Pad development will be significant. ASUS has the development of Eee Pad well planned with positive advantage expected. The integration of product and market is to the great advantage of ASUS.
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(2) Disadvantages and responsive strategies
Global warming is getting worse. The awareness of environmental protection is awakening; therefore, power saving is the notion shared by the world. Governments announce strict environmental protection provisions on electronic products for power saving effort to the industry; therefore, enterprises must be able to respond to global environmental protection polices for smooth business development. ASUSTeK, a global citizen, has been researching and developing lead-free and cadmium-free green motherboard since the year of 2002; moreover, the concept of environmental protection has been introduced into other product lines and with the first power-saving motherboard with “smart EPU” introduced in 2007 to save CO2 emission throughout the power-on process. ASUSTeK has become the benchmark of green industry and has substantiated the responsibility of a business citizen. While the surge of green production takes up the world, for solving the problem of global warming and environmental issues, green technology is the driving force of economy. Products in conformity with EuP directive are “green products with environmental protection design” that can be circulated freely in European Community and demonstrate ASUSTeK’s green competition advantage.
ASUSTek was awarded with the “Enterprises Ongoing Business Development First Prize” in Taiwan in 2007; also, the company was the first technology enterprise in the world to receive the EuP directive certification. AUSUTeK notebook was the first product to receive Environmental Product Declaration (EPD), BSI Carbon Footprint, and EU Flower certification in 2010 evidencing ASUSTeK’s endless effort in power saving and environmental protection.
Moreover, ASUSTeK expects have a more flexible and efficient organizational operation with two business groups formed including: System business group and open platform business in order to collect recourses and respond to market changes with responsive measures. Each business group will then be able to focus on improving procedure, form optimal strategy, and execute strategy completely.
ASUS will continue to have recourses used for the products with economic scale and competition advantage; also, to support the two business groups with the most competitive product lines and sales channels. ASUS is dedicating itself to provide consumers with better products and services; also, to upgrade the brand value in the mind of consumers, finally, to turn consumer’s brand recognition into market share.
Operating environment
(1) Advantages a. ASUSTeK demonstrates R&D capability and introduces the first notebook and motherboard compatible with USB 3.0 ahead of competitors in the sense of advanced technology development with business opportunity and leading position secured. b. Comprehensive notebook and motherboard related components industry is constructed breaking free from the technology restriction of Japan and Korea. ASUSTeK is able to cope with the rapid growth of motherboard and notebook computer in the sense of production. c. ASUSTeK dedicates itself to the tasks of environmental protection, power saving, and earth ongoing concern. Several innovative products are launched at CES and
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Cebit international exhibitions this year with the core green technology for the appreciation of the media from all over the world. ASUSTeK has innovative green energy applied to the R&D and production of notebook computer, Eee PC™, Eee Box, LED backlight screen, and motherboard that shall help gain leverage in business opportunity and market under the surge of green environmental protection.
(2) Disadvantages The significant fluctuation of exchange rate in both directions has affected exporting business negatively.
(3) Responsive strategies Monitor exchange rate closely and adjust the position of foreign exchange to the optimal level.
Internal conditions
(1) Advantages a. Profound finance and sufficient funds b. Profound inventory control and healthy turnover rate c. The R&D technologies and talents of ASUS are world class; also, the technology of ASUS dominants the industry. d. The strategic planning of ASUS is with profound and moderate vision; also, market trend matches up industrial development. e. Talents are assets of ASUS. ASUS has improved employee’s welfare and salary and welfare facilities constantly to keep employee’s morale high and employee’s performance outstanding.
(2) Disadvantages ASUS grows significantly in both business operation and organizational structure; therefore, it is crucial to improve the management effectively.
Product and technological development
(1) Advantages a. ASUS is with a strong R&D team for the development of MB, Graphics Cards, CD-ROM, NB, server, desktop computer, Intelligent Navigation phone, wireless broadband mobile device, and Eee series. The excellent R&D talents of ASUS are known in the industry and with many patents received and many products in development constantly. b. The department heads and the management of ASUS are mostly with technological background; moreover, they understand industrial trend and product development technology well; therefore, they are able to take advantage of the development, to plan product lines in depth, to apply recourses effectively, and to generate added value. c. ASUS has contributed significant R&D and marketing resources to promote the star product Eee Pad in order to develop products with the merits of good price, cosmetic design, industrial design, light weight, and easy interface.
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(2) Disadvantages The sales channel of mobile device is different from the one for information products; therefore, it is necessary to have the sales channel for mobile device developed.
Sales and marketability
(1) Advantages a. Under a profound sales management plan, ASUS has products distributed to all areas evenly; therefore, negative economic development in any area will not cause critical loss to ASUS. The said balanced market development does provide ASUS with the best risk management. b. Chinese and Russian market are with significant growth in recent years; therefore, ASUS has deployment arranged progressively and does expect to perform well this year with the emerging business opportunities in the said areas. c. French market, Italian market, German market, and Russian market are the developed regions in Europe. Since 2002, ASUS motherboards still come out on top, ranked highest in the first place in global market share. In terms of notebook computer, ASUSTeK is ranked number one in Taiwan, number three in Europe, number two in China, number one in Eastern Europe, and number three in Western Europe; also, is ranked world number five worldwide. In terms of global network service, fifty-five official websites are constructed in thirty-one languages for substantiating localized operating strategy and developing local market.
(2) Disadvantages The availability of resources and the control of cost are crucial to the business performance of the subsidiaries overseas; therefore, the head office must be able to control the said key elements effectively.
(2) Application and production process of major products 1. Application of major products a. MB, VGA, and CD-ROM are important elements to desktop computer and server. ASUS is in a leading position with all the aforementioned products worldwide. b. NB and PDA are with potential to grow in commercial market (governmental offices and business) and home market (personal consumption and use). NB and PDA of ASUS are with bright future along with the prevailing concept of mobile office. c. For the development of information products, wireless broadband mobile device should be linked to personal life; therefore, the most important communication interface is wireless broadband communication technology. For the development of the professional and star product, it is necessary to control the key technology for developing marketable products and ASUS is moving towards the said direction.
2. Production Process of Major Products a. MB and VGA: Automatic SMT →Pick and place→soldering pot→burning→test. b. NB and other products: Automatic SMT→pick and place→soldering pot →burning→PCB test→assemblying→system test。
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(III) Supply of major raw materials Major raw materials Suppliers Chips AMD, Intel, Nvidia Logic IC Winbond, Newland, RT PCB HSB, GCE, Nova Connectors HON HAI, LOTES, Tyco DRAM ELPIDA, HYNIX, SAMSUNG, Nanya LCD LGD, AUO, CMI, HannStar
Most of the aforementioned manufacturers are domestic and international with good quality and reputation built; moreover, they have been in business with ASUS for years in a good term with raw materials supplied to ASUS that help the company to stay competitive.
(IV) Major Customers with over 10% net sales and Suppliers with over 10% total purchases of the last two fiscal years 1. Major Suppliers of the last two fiscal years Unit: NT$ thousands 2010 2011 2012Q1 (Note 1) Percentage of Relation Percentage of Relation Percentage of Relatio Item Name Amount net annual with Name Amount net annual with Name Amount net purchase n with purchase (%) issuer purchase (%) issuer of Q1 (%) issuer Invested Invested company company valued valued 1 PEGA 206,113,685 47.34 PEGA 166,608,812 34.85 with with equity equity method method 2 F customer 90,541,846 20.8 None F customer 109,280,057 22.86 None 3 T customer 9,368,209 2.15 None T customer 67,516,795 14.13 None 4 Others 129,351,285 29.71 Others 134,610,962 28.16 Others Net Net Net purchase 435,375,025 100 purchase 478,016,626 100 purchase 100 amount amount amount Note 1: The 2012Q1 financial statements audited by the CPA were not yet available up to the print of annual report on April 27, 2012. Note 2: The purchase amount from the last two years included raw material amount purchased for clients. Note 3: Causes of increase and decrease – for business operation
2. Major Customers of the last two fiscal years Unit: NT$ thousands 2012Q1 2010 2011 (Note 1) Percentage Percentage Relati Percentage of annual Relation with of annual Relation Name on Item Name Amount Name Amount Amount of net sales net sales issuer net sales with issuer with of Q1 (%) (%) (%) issuer Invested Invested company company 1 ASTP 273,375,997 92 ASTP 295,505,139 93 valued with valued with equity equity method method Others 23,375,132 8 Others 22,164,636 7 Others Net Net sales Net sales 296,751,129 100 317,669,775 100 sales amount amount amount
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Note 1: The 2012Q1 financial statements audited by the CPA were not yet available up to the print of annual report on April 27, 2012. Note 2: Causes of increase and decrease – for business operation
(V) Production/Sales Quantities and Value over the Past Two Year: N/A
(VI) Sales quantities and value of the last two fiscal years: Unit: Piece (unit); NT$ thousands year 2010 2011
Domestic Sales Export Sales Domestic Sales Export Sales Major product QTY Amount QTY Amount QTY Amount QTY Amount Computer 838,101 10,759,852 16,540,763 214,008,847 968,076 12,720,100 19,073,794 227,465,040 system 3C products 2,240,321 4,949,575 36,291,056 59,110,087 2,202,063 4,222,203 43,201,580 66,975,980 Others - 1,040,550 - 6,882,218 - 1,217,659 - 5,068,793 Total - 16,749,977 - 280,001,152 - 18,159,962 - 299,509,813
III. Employees Status of employees over the past two years and up to the date of the report printed April 27, 2012 As of Year 2010 2011 April 27, 2012 Direct Labor 0 0 0 Employee Indirect labor 3,612 4,061 4,116 Total 3,612 4,061 4,116 Average age 31.71 31.84 32.08 Average years of service 4.1 4.2 4.3 Ph. D. 0.64% 0.64% 0.63% Masters 48% 49.2% 50.02% Education College /University 46.2% 45.5% 45.34% （%） Senior High School 4.3% 3.9% 3.84% Junior High School and below 0.86% 0.76% 0.17%
IV. Expenditure on environmental protection (I) Material capital expenditure invested in environmental protection activity: 1. ASUS is certified with ISO14001; also, bases on the spirit of reserving natural resources moving towards the direction of preventing and improving pollution. 2. ASUS is certified with OHSAS18001; also, has safety and health risk in control and goes for the on going concern of the company with zero disaster. 3. The external CD-ROM drive of the company followed the carbon footprinting PAS 2050 announced by British Standards Institution to complete the Life-Cycle Greenhouse-Gas Emissions Inventory and was awarded with the certificate for Pas 2050 carbon footprinting implementation from DNV. 4. The product U53SD notebook followed the carbon neutrality standards PAS2060 announced by British Standards Institution and reached product neutrality state for the residual carbon emission after carbon reduction in the offsetting of products through carbon credit trading. The company was awarded with the Implementation of
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Neutrality Certificate in compliance with PAS 2060 from DNV. 5. ASUS fellows will join environmental protection organizations and get involved in environmental protection activities. 6. ASUS has promoted green product and recycling mechanism in compliance with the environmental requirement of RoHS and WEEE. 7. ASUS has joined Taipei Environmental Protection Volunteers Squad to help clean up the beach and perform environmental protection community service in Beitou are. ASUS has striven to fulfill social responsibility and protect our environment as a green corporate should do. 8. Arrange environmental protection, recycling, and merciful donation activities from time to time; also, contribute the income generated to charities activities.
(II) The total amount of loss and fine paid for environmental pollution in 2011 and up to the date of the report printed: None
(III) Estimated environmental protection expenses: 1. ASUSTeK will continue to conduct ISO14064 Greenhouse Gas Emission Validation and product carbon footprint validation process. 2. ASUS will introduce energy management system forcefully to save energy and reduce green house gas emission. 3. ASUS will continue to invest in green design, green procurement, green production, and green marketing for fulfilling corporate social responsibility to the earth.
(IV) The responsive actions of ASUS to environmental regulations: ASUS cares about environmental protection, perpetual application of resources, and ecosystem issues; also, bases on the company’s environmental and occupational safety and health policy to establish environmental protection and health management system in order to substantiate ASUS’s on going concern with continuing improvement. ASUS does not take the importance of “green design, green procurement, green production, and green marketing” lightly and ASUS has initiated many tasks that are new in Taiwan and leads to and activates the industry for on going concern. In addition to promoting GreenASUS internally, the SERASUS is promoted to work with suppliers promoting green supply chain, reinforcing green design, developing green products, encouraging green products recycling mechanism and power-saving products design in compliance with the global environmental protection equipments of WEEE, RoHS, and EuP; also, ASUS has received international environmental protection citation and awards as a leading green high-tech enterprise should be.
1. ASUS has complied with global environmental regulations: ASUS has GreenASUS setup to monitor and to respond to global environmental protection regulations including RoHs, WEEE, ErP, battery and packing material application and waste management in order to comply with the requirements for products shipped to the world directly and indirectly. ASUS has RoHS test equipment available to have the components, work-in-process goods, and by-product tested; also, to ensure the finished goods shipped complying with international environmental protection standard.
2. The certification of environmental protection system: In fulfilling the quality assurance of environmental protection system, ASUS’s Quality Management System is stipulated in accordance with ISO and HSPM of IECQ QC 080000. ASUS has received the certification of IECQ QC080000 and IECQ hazard substances procedure management system.
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3. International environmental protection citation and award:
Asus constantly implements the following solutions for environmental protection: (1) Asus takes into consideration at product design for the reduction in choosing environmentally hazardous raw materials, green product design, reducing product energy consumption, extension of product service life, waste product management, and product packaging and management, thereby to acquire various green marks such as the EPEAT, EU Flower green mark, Czech Ecolabelling, Energy Star, Taiwan Green Mark, J-Moss Green mark, and China Energy Label. (2) Asus introduced the halogen free policy since 2008 by launching multiple halogen-free demonstration products such as laptop computer (NB), PDAs, monitors, EeePC, and VGA in addition to continuous parts inventory and moving towards the objective of halogen free for all product lines. Asus developed the first Halogen Free Full-HD (1920x1080) LED Monitor (VW247H-HF) and the world's first Halogen-free Motherboard (P7P55D-E/HF). In the future, the company will progress towards a comprehensive range of non halogenated products. (3) The company implements product life cycle inventory (LCI) and analysis of environmental impacts assessment to further complete Type III environmental declaration and carbon footprint verification. (4) The Asus Corporate Social Responsibility website (http://csr.asus.com/) was founded disclose information related to Asus in the environmental and social responsibilities as well s the interactive platform for stakeholders concerning environmental information of ASUS. (5) To ensure suppliers and outsourcers in compliance with Asus standards, Asus implements the Quality Business Review (QBR) each year on the key focus and new suppliers, including the written review and annual audit. Suppliers and outsourcers passing the QBR will be further audited through international standards such as QC080000 and ISO 9001, Asus technology stands, and three aspects of management audit, including QSA (Quality System Audit), QPA (Quality Process Audit), and GA (Asus HSF recognized green parts, Hazardous Substance Free）, to implement the concept of pursuing perfect quality to Asus's green supply chain management.
The company has achieved green marks and relevant certifications below: (1) After achieving the first Taiwan laptop computer to comply with EPEAT Gold and the world's first laptop computer in compliance with EU Flower in 2008, Asus continues to positively launch green products and exhibits its outstanding concepts of green design. In 2011, Asus comprehensively extend from EPAET green marks to EeePC, EeeBox and monitors series while concurrently expands to other regional certifications worldwide. Asus also offer multiple laptop computers and desktop computers with achievement of EU flower. Moreover, Asus also achieved Eco Mark from Japan and Eco-Label from South Korea as well as other green marks from Asian countries. In 2010, Asus＇s US laptop achieved Japan＇s Eco Mark among the top 10 IT companies. (2) Asus follows the carbon footprint standards PAS 2050: 2008 announced by the British Standards Institution (BSI) to complete the Life-Cycle Greenhouse-Gas Emissions Inventory and was granted the first certificate of carbon footprint implementation for notebook from DVN, an international certification body. A
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further analysis of the carbon inventory shows the result of Asus adopting ecological design with concept of green innovation to paunch notebook U53SD, Bamboo Notebook. Other than using natural bamboo to replace traditional plastic materials, U53SD is equipped with exclusive Super Hybrid Engine (SHE) energy-saving technology to improve product carbon footprinting with material replacement and increase in energy efficiency. The company followed the carbon neutrality standards PAS2060: 2012 announced by British Standards Institution in 2011 and reached product neutrality state for the residual carbon emission after carbon reduction in the offsetting of products through carbon credit trading. The company was awarded with the Implementation of Neutrality Certificate in compliance with PAS 2060 from DNV. (3) The company＇s development in effective reduction of power consumption, Super Hybrid Engine (SHE) for enhancing endurance and the superb technology relied by the monitors with easy recycling and energy saving, have urged Asus to constantly improve product efficiency, winning the Excellence in Efficient Product Design from the 2011 Energy Star Awards held by US Environmental Protection Agency. (4) Asus halogen free monitor, VW247H-HF and Bamboo notebook series, U43SD, have concurrently been awarded Green ICT Award from the 2011 Best Choice of COMPUTEX TAIPEI award. (5) In 2010, International Green Peace held the Electronics Survey to assess the use of chemical substance, energy efficiency, prolonged product service life, and other projects of the products. The company＇s first halogen-free monitor, VW247H-HF, scored 7.5 out of 10 in total score, leading other brands and was awarded with the first place in monitor product assessment. In addition, notebook UL30A was also awarded with the first place in notebook product assessment. Asus became the only company worldwide to have achieved champions for two products. (6) In 2010, Asus was invited to participate in the assessment for Electronics Take Back Coalition recycling assessment and was awarded with outstanding performance in the category of computer. Please visit ASUS’s website for more products awarded with environmental protection citations: http://csr.asus.com/chinese/index.aspx#74
V. Employee/employer relations The realization of business goals relies on the commitment, deduction, and effort of employees; however, employees cannot exercise their talents without the support of the employer; therefore, a harmonious employer-employee relation is what ASUS after. ASUS has treated employees with an honest and open attitude; also, has working regulations and rules defined in the company’s Work Code for the reference of employees. In terms of salary, benefit, and training policy, it is designed to help employees realize their objectives; therefore, they are able to have themselves heard and to have their working safety secured; also, their work satisfaction and profound economic interest fulfilled without the need of organizing an union. Employer and employees are unified and share the same concept to work for the future of the organization.
(I) Employee’s welfare package ASUS has made the “respecting humanity and caring for employees” one of the operating concepts. For the purpose of taking care of employees sufficiently and protecting their living security in order to work for the company worry-free, ASUS provides basic
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protection to employees; also, provides or sponsors welfare projects specially. Employee’s Welfare Committee is formed by the employees to plan and enforce welfare activities as follows: 1. ASUS has the following benefits provided in accordance with Company Law: Health insurance, labor insurance, group insurance, pension reserve, accrual pension reserve according to old contribution plan deposited in Bank of Taiwan, arrearage reserve, and appropriating welfare fund with a percentage of sales revenue and paid-in capital. 2. ASUS has the following benefits provided specially: Season-greeting bonus and performance bonus, annual physical check up, libraries, EAP, and indoor warm water swimming pool and gym; also, encouraging employees to propose their advanced study plan for financial aid. 3. “Employee Welfare Committee” Season-greeting bonus, wedding/funeral/celebration and emergency financial aid, group activities, birthday, scholarship and financial aid to employee’s children, sending birthday cards and issue commodity coupons, and using departmental-based “Asus Department Day” and “Teamwork” activities to cooperate with literary units for discount offers so that the peers can implement art and literature appreciation.
(II) Education and training ASUS has years of experience in cultivating talents in accordance with operating concepts of “cultivation, cherishment, caring for employees, and helping ASUS fellows reaching their potential;” moreover, ASUS has a profound operating model setup in education and training and with excellent internal tradition formed. The talents cultivation and development is illustrated as follows:
1. Personal learning & growth plan ASUS has promoted the “Learning & Growth Plan” forcefully to help the management assist employees developing capability; also, to provide alternatives in conformity with organizational and personal development. Base on the concept of “individualization” to plan personal learning and growth plan by the management and the staff together in accordance with the core value of the company and the occupational ability needed for job performance. The idea is to have the learning process become more systematic and effective. There were 2,118 individuals participated in the learning and growth plan in 2011. Please refer to the learning and growth plan procedure below:
Figure 1: Learning & Growth Plan Procedure
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Figure 2: Personally Oriented Learning & Growth Plan 2. Diversified learning resources Talents are the key to the success of an enterprise. ASUS has never taken it light in the sense of talents training. The mission of ASUS is to help each worker learn and grow at work continuously; also, to exercise their potentials to the extreme. ASUS has a series of training courses and learning resources planned for the staffs taking as a whole. The training course includes orientation, newly promoted directors training, core value training, management functions training, and professional competence training. In addition to the internal training courses, external training courses, on-job training, and self-development training are also available.
Figure3: Diversify Learning & Development Resources
(1) Internal training courses - Management and core vocational training AUSUTeK plans comprehensive learning blueprint for each employee to help build up their occupational competence. Annual management training program including junior management training and management competency training in all level is to help the management upgrade managing ability systematically and exercise management effectiveness. Plan core value training courses to help staff generate ASUS DNA and upgrade staff’s work skills and performance. Individual received 7 hours of training in average in 2011 with the following courses: Cumulative Course Cumulative Course attendance Expense Type hours (NTD) (hr.) times Classroom 226 1074.5 8,252 2,550,659 E-learning 30 62 2,188 870,640 Total 256 1136.5 10,440 3,421,299
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(2) Internal training courses - Professional training ASUS has new recruits trained with various professional and practical courses to help them adapt to working culture and accumulate professional skills in depth and width. Professional training courses arranged by each department in 2011 included 524 courses.
Figure 4: Internal Training Course
(3) Self-development resources and seminars For the purpose of encouraging staffs for independent study, ASUS provides various learning resources for independent development, such as, free elective online courses, ASUS Library, industry database, E-Book, document sharing, and community discussion of diverse topics. Build up colleague’s active learning and personal capability and positive work attitude and sense of value. ASUS library, MP talking book, and VCD/DVD are 817 items in total in 2011. (4) On-job training Directors have on-job training arranged in accordance with the mission assigned and personal development added it with the participating in the projects, coaching, internship, job enlargement, and job enrichment to upgrade employee’s competence. Let employees learn from daily operation systematically and apply the learned skills to work. Directors have 565 on-job training programs planned and arranged in 2011, representing 9.08% of learning and growth plan. (5) External training In addition to the internal training courses planned in accordance with the demands of the staff taking as a whole, employees are assigned to be trained externally in response to the demand of each individual in order to upgrade the professional ability needed for performing the task. ASUS grants employees financial support for the external training courses related to their job performance. ASUS had 284 external training courses arranged in 2011 with NT$1,797,931 granted as follows: Expense Item Course (NTD) Professional 178 1,135,329 Management 54 289,485 Language 3 59,400 Others 49 313,717 Total 284 1,797,931
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(III) Code of employee’s conducts and ethics The “sincerity, thrift, profundity, and practicality” is one of the company’s operating concepts. For the common understanding of ASUS fellows, the company has the Chinese traditions “modesty, sincerity, theft, swiftness, courage” made to be the code of employee’s conduct socially and personally. The importance of industry’s moral and social responsibility cannot be stressed enough internationally; therefore, industry with the continuous trust and respect of consumers, business partners, and the public will be able to operate permanently. For regulating employee’s conducts in compliance with the company’s moral code and helping the company’s related party understand the moral standard of the employees in performing job responsibilities, the “Codes of Ethics” is stipulated for reference. The mail box at [email protected] is for the complaints filing of employees. Human Resources Office and Legal Center also re-wrote the Code of Ethical Conduct for Employee into 9 case studies (Chinese and English Version) on the internal announcement of the website homepage in addition to mailing the information to all peers. Moreover, a digital teaching material for Code of Ethical Conduct for Employee was prepared for all employees to study. The announcement will be made by the beginning of 2012 and all employees will receive training. In addition, after the course launch, it will be listed in the compulsory digital curriculum which all new employees must complete within one month after the employees have reported to work, in order to assure true conveyance of that concept. The peers will undergo promotion and interpretation for “Code of Ethical Conduct for Employees” to intensify the codes of practices and professional competency” of the company and all peers, so that all peers will exhibit the respective morals and help ASUS become a reputable organization. ASUS has based on the “Electronic Industry Code of Conduct (EICC)” and “Listed Companies to set standards of ethical conduct” to stipulate the “Code of Ethics” as follows: Chapter 1 General rules Chapter 2 Regulatory compliance Chapter 3 Preventing conflict of interest Chapter 4 Gifts, business entertainment, and social standard Chapter 5 Avoid the personal gain chance Chapter 6 Information fully preserved and disclosure Chapter 7 Fair trade, advertisement, and competition Chapter 8 Safeguard the interest Chapter 9 Community watch Chapter 10 Punishment Chapter 11 Others
(IV) Working environment and worker’s safety protection: 1. Establishment of Labor Health & Safety Committee: The company has labor safety and health department setup according to the regulations and with the responsible personnel designated to protect the working environment and the safety and health of employees; also, to carry out labor safety and health tasks in accordance with the regulations and governmental rules. 2. Arrange labor safety and health education and training and employee’s health check-up periodically In addition to having labor safety and health department organized, the company must have labor safety and health education and training arranged for the new recruits. The designated area for special working process is with directors assigned to monitor the
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related activities. The company has arranged special education and training and physical check up for the workers who are responsible for special working process annually for their own protection and safety. 3. Establishment of medical units There are nurses at the ASUS Medical Units to care for the staff; also, physicians are there to provide outpatient and advisory service to the staff. 4. ASUS setup EAP counseling and arranges health promotion activities including employee benefits health check, healthy stair climbing, weight-loss contest, fitness test, vision care, cancer screening, hepatoprotective activity, and human factors improvement plan in accordance with the operating concept of “incubation, treasure, and care for employees.” 5. ASUS has received “Healthy workplace health promotion self-certification mark” and Taipei City Government “Excellent Milk Pumping Room” certification for the physical and spiritual care of employees. 6. Conduct fire drill and emergency evacuation training and hydrant equipment inspection periodically Draft up firefighting plan, organize firefighting team and rehearse firefighting equipment application. ASUS will arrange in-house firefighters training, notice, evacuation drill, rescue training, firefighting seminars and firefighting training in accordance with regulations to substantiate firefighting tasks and protect the safety of employees. 7. Conduct working environment inspection periodically, define safety and health goals, and ensure employee’s safety and health ASUS conducts working environment inspection periodically in accordance with domestic regulations and arrange special workers education and training and health inspection to ensure the health of workers responsible for special working process.
(V) Retirement plan In response to the company’s having the business operation dividend into brand name business and OEM/ODM since 2008, the seniority of the workers with ROC nationality was settled and with the pension paid on the end of January 2008. Workers with ROC nationality who have been employed in 2008 are entitled to the Defined Contribution Pension Plan. White-collar workers without ROC nationality are entitled to the prior-existing pension plan. Blue-collar workers are contracted for three years without the concern of pension.
(VI) Other agreements The company’s loss from employee-employer dispute in recent years and up to the date of the report printed: None
VI. Major agreements: None.
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VI. Financial Information
I. Condensed balance sheet, income statement, and auditor’s opinions over the last five years (I) Summarized Balance Sheets Unit: NT$ thousands Summarized Balance sheets of Year fiscal year 2006~2010 (Note 2) As of April 27, 2007 2012 2008 2009 2010 2011 Item (adjusted) (Note3) Current Assets 184,002,080 94,196,563 99,144,691 110,079,794 112,832,696 - Funds & 105,954,737 121,141,147 121,788,684 52,970,757 65,560,476 - investments Fixed assets 8,582,153 4,710,986 4,273,269 4,269,103 3,937,811 - Intangible Assets 233,383 223,647 174,074 89,987 123,425 - Other Assets 1,703,097 301,871 3,548,961 320,959 283,504 - Total Assets 300,475,450 220,574,214 228,929,679 167,730,600 182,737,912 - Before 122,013,748 50,793,105 52,939,062 57,719,960 61,689,874 Current allocation - Liabilities After allocation 132,488,611 59,232,957 61,857,294 66,358,193 (Note1) - Long-term 15,823,297 - - - - - Liabilities Other Liabilities 3,309,838 2,494,491 2,806,640 3,966,980 6,099,788 - Before 141,146,883 53,287,596 55,745,702 61,686,940 67,789,662 - Total allocation Liabilities After - allocation 151,621,746 61,727,448 64,663,934 70,325,173 (Note1) Capital Stock 37,283,589 42,460,513 42,460,513 6,270,166 7,527,603 - Additional paid-in 28,380,731 29,696,393 29,696,393 4,482,124 - capital 4,662,555 Before 92,029,109 93,003,248 96,525,371 94,960,135 99,100,280 Retained allocation - earnings After allocation 76,613,594 84,478,998 87,607,139 84,964,465 (Note1) - Unrealized gain - from the financial 511,248 (1,568,528) 2,159,201 1,197,335 1,514,237 assets for sales Cumulative translation 1,124,179 3,696,120 1,490,885 (1,006,766) 715,457 - adjustments Net loss not recognized as （289） (1,128) (3,202) 11 122 - pension cost Unrealized - Reevaluation - - - - 73,526 Present Value Unrealized gains on cash flow - - 306,361 200,655 1,354,470 hedges Before - Total allocation 159,328,567 167,286,618 173,183,977 106,043,660 114,948,250 Shareholder’s Equity After - allocation 148,853,704 158,846,766 164,265,745 97,405,427 (Note1) Note 1: General shareholders meeting has not yet been summoned up to April 27, 2012; therefore, the amount after
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adjustment is not disclosed. Note 2: The financial information of the last five years is reviewed by CPA. Note 3: The 2012Q1 financial statements have not yet been audited by CPA up to the date of the report printed on April 27, 2012. Note 4: ASUS has adopted the principles under Accounting Research and Development Foundation in Taiwan (97) Kee.mi.tzi No. 331 Letter and (98) Kee.mi.tzi No. 046 Letter to have the convertible bond adjusted retroactively. Therefore, the 2007 financial information were adjusted retroactively.
(II) Summarized Income Statements Unit: NT$ thousands
As of Year Summarized Income Statements of fiscal year 2007~2011 (Note 1) April 27, 2007 2012 2008 2009 2010 2010 (Note 2) Item (adjusted) Net sales 589,905,832 249,350,951 232,576,904 296,751,129 317,669,775 - Gross Profit 41,209,222 16,382,030 11,965,792 17,325,020 21,318,101 - Operating Income 16,032,957 7,187,803 3,545,695 9,663,446 10,723,456 - Non-operating Income 18,436,763 14,063,659 9,764,265 9,904,547 9,761,549 - Non-operating Expenses 1,418,726 694,914 489,190 659,123 689,540 - Income from Continuing 33,050,994 20,556,548 12,820,770 18,908,870 19,795,465 - Operations before Tax Income from Continuing 27,283,328 16,456,567 12,479,066 16,488,357 16,578,159 - Operations Income from ------Discontinued Operations Extraordinary Gain and ------Loss Cumulative effect of Change in Accounting ------Principle Net Income 27,283,328 16,456,567 12,479,066 16,488,357 16,578,159 - Earnings per share 7.43 3.88 2.94 6.32 21.99 - (non-retroactive) Note 1: The financial information of the last five years is reviewed by CPA. Note 2: The 2012Q1 financial statements have not yet been audited by CPA up to the date of the report printed on April 27, 2012. Note 3: No capitalized interest expenses booked in the last five years. Note 4: ASUS has adopted the principles under Accounting Research and Development Foundation in Taiwan (97) Kee.mi.tzi No. 331 Letter and (98) Kee.mi.tzi No. 046 Letter to have the convertible bond adjusted retroactively. Therefore, the 2007 financial information were adjusted retroactively.
(III) Auditing by CPAs CPAs and their auditing opinions in the past five years Auditing Year CPAs Opinions 2007 Lee Ming-Yu, Yang Chih-Huei Modified unqualified 2008 Lee Ming-Yu, Yang Chih-Huei Modified unqualified 2009 Yen Hsin-Fu, Lo Jui-Lan Modified unqualified 2010 Chou Tseng Hui-Chin, Hsuen Ming Ling Modified unqualified 2011 Chou Tseng Hui-Chin, Hsuen Ming Ling Modified unqualified
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II. Financial analysis in the past five years
Financial analysis in the past five years Year As of April 27, 2007 2010 2012 2008 2009 2011 (Note 5) Item (Note 2) (adjusted) (Note 9)
Financial Ratio of liabilities to assets 46.97 24.16 24.35 36.78 37.10 - structure Ratio of long-term capital to fixed （％） 2040.88 3,550.99 4,052.73 2,483.98 2,919.09 - assets Current ratio (%) 150.80 185.45 187.28 190.71 182.90 - Solvency Quick ratio (%) 105.90 126.91 154.53 150.40 146.56 - (%) Times interest earned ratio 62.11 66.82 127.32 234.31 421.29 - Account receivable turnover 5.56 3.38 5.41 6.04 5.96 - (times) Days sales in accounts receivable 65.64 107.98 67.46 60.43 61.24 - Inventory turnover (times) 8.47 5.43 9.26 15.99 15.28 - Operating Account payable turnover (times) 5.50 4.41 7.20 6.94 6.59 - ability Average days in sales 43.09 67.21 39.41 22.86 23.88 - Fixed assts turnover (times) 68.74 52.93 54.43 69.51 80.67 - Total assets turnover (times) 1.96 1.13 1.02 1.77 1.74 - Ratio of return on total assets (%) 9.24 6.41 5.60 8.35 9.48 - Ratio of return on shareholders’ 18.78 10.08 7.33 11.81 15.00 - equity (%) Operating income 43.00 16.93 8.35 154.12 142.46 - Ratio to issued Profitability capital stock (%) Income before tax 88.65 48.41 30.19 301.57 262.97 - Profit ratio (%) 4.62 6.60 5.37 5.56 5.22 - Earnings per share ($) 7.43 3.88 2.94 6.32 21.99 - Cash flow ratio (%) 9.44 34.82 46.17 36.41 14.83 - Cash flow Cash flow adequacy ratio (%) (％) 26.37 31.01 51.68 85.46 122.16 - Cash reinvestment ratio (%) 3.54 4.86 9.01 10.87 0.42 - Degree of operating leverage 9.44 1.26 2.60 1.54 1.61 - Balance Degree of financial leverage 26.37 1.05 1.03 1.01 1.00 -
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The root causes of the financial ratio change in the last two years: Ratio of liabilities to assets: The rise in the revenue growth, accounts payable and accrued expenses from relevant stock preparation. Ratio of long-term capital to fixed assets: Due to the current profits leading to increase in shareholder’s equity while the fixed assets were slightly declined due to depreciation and amortization, the long-term funds to fixed assets ratio increased. Current ratio: The rise in current revenue growth and the accounts payable from relevant stock preparation led to increase in current liabilities. Quick ratio: The rise in current revenue growth and accounts payable to relevant stock preparation and expense caused the increase in current liabilities. Times interest earned ratio: The expiration of current CB and the reduction in amortization amount (The CE and ECB issued by the company does not pay out relevant interests. However, in cooperation with the provisions of new Declaration, the company liabilities were depreciated and amortized to interest expense without the actual cash disbursements) led to increase in time interest earned ratio. Inventory turnover (times): Due to the current revenue growth, the relevant stock preparation was reflected on inventory ending balance. Account payable turnover (times): Due to the current revenue growth, the accounts payable balance generated from stock preparation was higher. Fixed assets turnover (times): Due to the current revenue growth, the fixed assets net values were amortized and depreciated to reveal minor decline. Ratio of return on total assets: Due to the increase in net operating profit after tax for the current year, the Return On Total Assets increased. Ratio of return on shareholders’ equity: Due to the capital reduction last year, the revenue growth and return on equity increased. Ratio of operating income to issued capital stock: Due to the increase in the operating profit for the current year was smaller than the increase in capitalization of returned earnings, the operating profits to paid-up capital ratio declined. Cash flow ratio: The revenue growth, the accounts receivable generated from sales of goods and net inventory increased, causing the net cash inflow of current operating activities to decline and thereby the cash flow ratio declined. Cash flow adequacy ratio: Due to the regulatory agency’s positive control over the quantity in stock, the inventory increase for the last five years was reduced and the net cash inflow of total operating activities in the last five years increased. Therefore, the Cash Flow Adequacy Ratio increased. Cash reinvestment ratio: Due to the revenue growth of current year, the accounts receivable generated from sales of goods and net inventory increased, causing the net cash inflow from operating activities to be decreased compared with last period. Note 1: ASUS has adopted the principles under Accounting Research and Development Foundation in Taiwan (97) Kee.mi.tzi No. 331 Letter and (98) Kee.mi.tzi No. 046 Letter to have the convertible bond adjusted retroactively. Therefore, the 2007 financial information were adjusted retroactively. Note 2: The financial information is reviewed by CPA. Note 3: Accounts receivable includes the amount of long-term accounts receivable- related party that is in compliance with trade terms and conditions. Note 4: The 2012Q1 financial statements have not yet been audited by CPA up to the date of the report printed on April 27, 2012. Note 5: Equations: 1. Financial structure (1) Ratio of liabilities to assets = Total liability/Total assets (2) Ratio of long-Term capital to fixed assets = (Net shareholders’ equity + Long-term liability) / Net fixed assets 2. Solvency (1) Current ratio = Current assets / current liability (2) Quick ratio = (Current assets – Inventory – Prepaid expense) / Current liability (3) Times interest earned ratio = Net income before tax and interest expense / Interest expense of the year 3. Operating ability
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(1) Account receivable turnover (including accounts receivable and notes receivable derived from business operation) = Net sales / Average accounts receivable (including accounts receivable and notes receivable derived from business operation) (2) Days sales in accounts receivable = 365 / Account receivable turnover (3) Inventory turnover = Cost of goods sold / Average inventory amount (4) Account payable turnover (including accounts payable and notes payable derived from business operation) = Cost of goods sold/ Average accounts payable (including accounts payable and notes payable derived from business operation) (5) Average days in sales = 365 / Inventory turnover (6) Fixed assts turnover = Net sales / Net fixed assets (7) Total assets turnover = Net sales / Total assets 4. Profitability (1) Return on assets = [Net income (loss) + interest expense x (1-tax rate)] / Average total assets (2) Return on shareholder’s equity = Net income (loss) / Net average shareholders’ equity (3) Ratio to issued capital stock = Net income before tax / Issued capital stock (4) Profit ratio = Net income (loss) / Net sales (5) Earnings per share = (Net income – preferred stock dividend) / Weighted average stock shares issued 5. Cash flow (1) Cash flow ratio = Net cash flow from operating activity / Current liability (2) Cash flow adequacy ratio = Net cash flow from operating activity in the past five years / (Capital expenditure + Inventory increase + Cash dividend) in the past five years (3) Cash reinvestment ratio = (Net cash flow from operating activity – Cash dividend) / (Fixed assets + Long-term investment + Other assets + Working capital) 6. Balance: (1) Degree of operating leverage = (Net operating income – Variable operating cost and expense) / Operating income (2) Degree of financial leverage = Operating income / (Operating income – interest expense) Note 6: The following factors are to be included for consideration for the calculation of earnings per share: 1. It is based on the weighted average common stock shares instead of the outstanding stock shares at yearend. 2. For capitalization with cash or Treasury stock trade, the stock circulation must be included for consideration to calculate weighted average stock shares. 3. For capitalization with retained earnings and additional paid-in capital, the earnings per share calculated semi-annually and annually must be adjusted retroactively and proportionally to the capitalization but without considering the issuance period of the capitalization. 4. If preferred stock shares are nonconvertible and cumulative, the dividend of the year (whether it is distributed or not) should be deducted from net income or added to the net loss. If preferred stock shares are not cumulative, preferred stock dividend should be deducted from net income if there is any but it needs not be added to net loss if there is any. Note 7: The following factors are to be included for consideration for the analysis of cash flow: 1. Net cash flow from operating activity meant for the net cash inflow from operating activity on the Statement of Cash Flow. 2. Capital expenditure meant for the cash outflow of capita investment annually. 3. Increase of inventory is counted only when ending inventory exceeds beginning inventory. If the ending inventory is decreased, it is booked as zero value. 4. Cash dividend includes the amount for common stock and preferred stock. 5. Gross fixed assets meant for the total fixed assets before deducting the cumulative depreciation. Note 8: Issuers are to have operating cost and operating expenses classified into the category of fixed and
8888
variable. If the classification of operating cost and operating expense involves estimation or discretional judgment, it must be made reasonably and consistently. Note 9: Some accounts and amounts in the financial statements of 2010 were adjusted in response to the presentation of 2011 financial statements. The said reclassification did not have a material impact on the financial statements.
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III. Supervisors’ report in the most recent years
(I) Review report of the supervisors of ASUSTeK Computer Inc.
ASUSTek Computer Inc. SUPERVISORS’ REPORT
The Board of Director has prepared the Company’s 2011 business report and financial statements. All of the above have been reviewed and determined to be correct and accurate by the undersigned. According to Article 219 of the Company Act, we hereby submit this report.
ASUSTek Computer Inc.
Supervisors: Tze-Kaing Yang
Chung-Jen Cheng
L.H. Yang
March 23, 2012
(II) Review report of the supervisors of ASUSTeK Computer Inc.
ASUSTek Computer Inc. SUPERVISORS’ REPORT
The Board of Director has prepared the Company’s 2011 proposal for distribution of profits. All of the above have been reviewed and determined to be correct and accurate by the undersigned. According to Article 219 of the Company Act, we hereby submit this report.
ASUSTek Computer Inc.
Supervisors: Tze-Kaing Yang
Chung-Jen Cheng
L.H. Yang
April 27, 2012
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IV. Financial statements of the most recent years: Please refer to Page 92-129 for details.
V. Consolidated financial statements of the parent company and subsidiary in the most recent years: Please refer to Page 130-194 for details.
VI. Financial difficulties faced by the company and the related party in the most recent years and up to the date of the annual report printed: None
9191 Independent Auditors’ Report
To the Board of Directors and Shareholders of
ASUSTEK COMPUTER INC.:
We have audited the accompanying balance sheets of ASUSTEK COMPUTER INC. as of December 31, 2011 and 2010, the related statements of income, of changes in stockholders’ equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain investee companies accounted for under the equity method. These long-term equity investments amounted to $22,868,192,000 and $22,605,982,000 as of December 31, 2011 and 2010, respectively, the investments with credit balances amounted to $793,962,000 and $757,225,000 as of December 31, 2011 and 2010, respectively, and the related investment (loss) income amounted to ($9,735,000) and $2,763,939,000 for the years then ended, respectively. The financial statements of these investee companies were audited by other auditors whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included in the financial statements and information disclosed relative to these investee companies, is based solely on the reports of other auditors.
We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of ASUSTEK COMPUTER INC. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended, in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and generally accepted accounting principles in the Republic of China.
~2~92 As described in Note 4(7), ASUSTEK COMPUTER INC. spun off the OEM assets and business (ASUSTEK COMPUTER INC.’s long-term equity investment in PEGATRON CORPORATION) to PEGATRON INTERNATIONAL INVESTMENT CO. on June 1, 2010. PEGATRON INTERNATIONAL INVESTMENT CO. then issued new shares to the Company and its shareholders as consideration. Further, the Company had a capital reduction of 85%.
We have also audited the consolidated financial statements of ASUSTEK COMPUTER INC. and its subsidiaries (not presented herein) as of and for the years ended December 31, 2011 and 2010. We expressed an unqualified opinion with an explanatory paragraph thereon resulted from the financial statements of certain subsidiaries were audited by other auditors.
PricewaterhouseCoopers, Taiwan March 23, 2012
The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in accordance with the accounting principles in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
~3~93 ASUSTEK COMPUTER INC. BALANCE SHEETS DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
DECEMBER 31, 2011 DECEMBER 31, 2010 ASSETS Notes AMOUNT % AMOUNT %
Current Assets Cash and cash equivalents 4(1) $ 16,608,239 9 $ 25,414,890 15 Financial assets at fair value through profit or loss - current 4(2) 9,737,303 5 8,137,398 5 Available-for-sale financial assets - current 4(3) 274,792 - 136,793 - Financial assets carried at cost - current 4(4) 372 - 372 - Accounts receivable 4(5) 2,669,758 1 9,083,914 6 Accounts receivable - related parties 5 52,847,656 29 41,845,943 25 Other receivables 5 8,251,210 5 2,176,324 1 Inventories 4(6) 20,149,506 11 15,580,297 9 Prepayments 7 1,364,840 1 6,673,156 4 Deferred income tax assets - current 4(17) 907,554 1 1,014,641 1 Other current assets - others 21,466 - 16,066 - 112,832,696 62 110,079,794 66 Funds and Investments Available-for-sale financial assets - non-current 4(3) 7,068,339 4 6,346,516 4 Financial assets carried at cost - non-current 4(4) 107,579 - 400,520 - Long-term equity investments accounted for under the equity method 4(7) 58,384,558 32 46,223,721 28 65,560,476 36 52,970,757 32 Property, Plant and Equipment 4(8) and 5 Cost Land 981,191 1 981,191 1 Buildings 2,312,270 1 2,312,517 1 Instruments and equipment 379,407 - 442,298 - Other equipment 943,706 1 1,796,127 1 4,616,574 3 5,532,133 3 Less: Accumulated depreciation and impairment ( 948,816 ) ( 1 ) ( 1,355,422 ) ( 1 ) Prepayments for equipment 270,053 - 92,392 - 3,937,811 2 4,269,103 2 Intangible Asset Computer software 123,425 - 89,987 - Other Assets Leased assets 4(9) 95,988 - 97,372 - Refundable deposits 6 161,799 - 158,972 - Deferred expenses 25,717 - 56,001 - Other assets - others 4(10) - - 8,614 - 283,504 - 320,959 - TOTAL ASSETS $ 182,737,912 100 $ 167,730,600 100 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Financial liabilities at fair value through profit or loss - current 4(2)(11) $ 32,695 - $ 105,895 - Notes and accounts payable 37,098,952 20 34,291,831 21 Notes and accounts payable - related parties 5 9,068,411 5 9,435,702 6 Income tax payable 4(17) 1,612,235 1 1,316,542 1 Accrued expenses 4(15) and 5 13,244,609 7 9,448,180 6 Receipts in advance 5 573,677 1 648,550 - Current portion of bonds payable 4(11) - - 2,412,309 1 Other currents liabilities 5 59,295 - 60,951 - 61,689,874 34 57,719,960 35 Other Liabilities Deferred credits 4(7) and 5 3,279,112 2 2,051,225 1 Deferred income tax liabilities- non-current 4(17) 2,808,698 1 1,903,869 1 Other Liabilities - Others 11,978 - 11,886 - 6,099,788 3 3,966,980 2 Total liabilities 67,789,662 37 61,686,940 37 Stockholders' Equity Capital 4(13) Common stock 7,527,603 4 6,270,166 4 Additional paid-in capital 4(14) Common stock share premium 4,284,888 2 4,205,880 2 Others 377,667 - 276,244 - Retained earnings 4(15)(17) Legal reserve 21,806,955 12 20,158,120 12 Undistributed earnings 77,293,325 42 74,802,015 45 Other adjustments to stockholders' equity Cumulative translation adjustments 715,457 1 ( 1,066,766 ) ( 1 ) Net loss not recognized as pension cost 122 - 11 - Unrealized gain on financial instruments 4(3)(7) 1,514,237 1 1,197,335 1 Unrealized revaluation increment 73,526 - - - Unrealized gain on cash flow hedges 4(7) 1,354,470 1 200,655 - Total stockholders' equity 114,948,250 63 106,043,660 63 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 182,737,912 100 $ 167,730,600 100
The accompanying notes are an integral part of these financial statements. See report of independent accountants dated March 23, 2012.
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94 ASUSTEK COMPUTER INC. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT EARNINGS PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31, 2011 2010 Items Notes AMOUNT % AMOUNT %
Operating revenues 5 Sales revenue $ 327,013,339 103 $ 299,768,014 101 Sales returns and allowances ( 9,343,564 ) ( 3 ) ( 3,016,885 ) ( 1 ) Net sales revenues 317,669,775 100 296,751,129 100 Operating costs 4(6)(12) (15)(19) and 5 Cost of goods sold ( 296,351,674 ) ( 93 ) ( 279,426,109 ) ( 94 ) Gross profit 21,318,101 7 17,325,020 6 Change in unrealized inter-company 5 ( 1,191,149 ) ( 1 ) ( 89,344 ) - profits Net gross profit 20,126,952 6 17,235,676 6 Operating expenses 4(12)(15) (19)and 5 Selling ( 2,549,132 ) ( 1 ) ( 1,968,285 ) ( 1 ) General and administrative ( 1,930,165 ) ( 1 ) ( 1,780,233 ) ( 1 ) Research and development ( 4,924,199 ) ( 1 ) ( 3,823,712 ) ( 1 ) Total operating expenses ( 9,403,496 ) ( 3 ) ( 7,572,230 ) ( 3 ) Operating income 10,723,456 3 9,663,446 3 Non-operating income and gains Interest income 160,270 - 91,168 - Investment income accounted for 4(7) 7,274,803 2 8,541,113 3 under the equity method Dividends 292,051 - 338,950 - Foreign currency exchange gain, net 1,645,648 1 - - Gain on valuation of financial assets, 4(2) 163,466 - 466,044 1 net Others 225,311 - 467,272 - Total non-operating income and 9,761,549 3 9,904,547 4 gains Non-operating expenses and losses Interest expense 4(11) ( 47,099 ) - ( 81,045 ) - Foreign currency exchange loss, net - - ( 400,516 ) - Loss on valuation of financial 4(2)(11) ( 522,198 ) - ( 44,971 ) - liabilities, net Others ( 120,243 ) - ( 132,591 ) - Total non-operating expenses and ( 689,540 ) - ( 659,123 ) - losses Income before income tax 19,795,465 6 18,908,870 7 Income tax expense 4(17) ( 3,217,306 ) ( 1 ) ( 2,420,513 ) ( 1 ) Net income $ 16,578,159 5 $ 16,488,357 6
Before Tax After Tax Before Tax After Tax Earnings per share (In dollars) 4(18) Basic earnings per share $ 26.26 $ 21.99 $ 7.25 $ 6.32 Diluted earnings per share $ 25.75 $ 21.55 $ 7.11 $ 6.19
The accompanying notes are an integral part of these financial statements. See report of independent accountants dated March 23, 2012.
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95
) ) ) ) ) ) ) ) )
- - - - - 283 , 2,706 1,204
41,764 31,287 15,491 125 366,362 639,744 130,595 521,721 8,918,232 2,457,079 2,321,248 8,638,233 1, 1,782,200 2,609,422 70,197,726 16,488,357 16,578,159 Total 114,948,250 173,183,977 106,043,660 106,043,660
$ $ $ $ ( ( ( ( ( ( ( ( (
) )
------3,105 2,321,248 2,318,143 2,609,422 2,609,422
Treasury Stock Treasury $ $ $ $
( (
)
------
306,361 105,706 200,655 200,655 1,153,815 1,354,470 hedges
on cashon flow $ $ $ $ Unrealized gain (
------
73,526 73,526 increment Unrealized revaluation $ $ $ $
) ) ) )
------
gain 16,379 364,194 639,744 204,819 521,721 2,159,201 1,221,037 1,197,335 1,197,335 1,514,237 instruments on on financial
$ $ $ $ Unrealized ( ( ( (
)
) ------
11 11 32
111 779 122 3,202 2,402 Other Adjustments to Stockholders’ AdjustmentsEquity to Stockholders’ Other DOLLARS Net loss not pension cost
recognized as recognized $ $ $ $ (
) ) ) ) )
------
23 1,342 99,230 715,457 1,490,885 2,457,079 1,066,766 1,066,766 1,782,200
~ translation Cumulative adjustments
6 $ $ $ $ ( ( ( ( ( ~
) ) ) ) ) ) ) ) )
------399
ASUSTEK ASUSTEK COMPUTER INC. independent accountants dated 23,March 2012. 1,247,907 8,918,232 6,983,398 2,151,564 1,648,835 1,357,437 8,638,233 2,442,344
77,615,158 16,488,357 74,802,015 74,802,015 16,578,159 77,293,325 earnings YEARS 2010 AND ENDED DECEMBER 31, 2011 Undistributed
$ $ $ $ ( ( ( ( ( ( ( ( (
See of report FOR THE
------EXPRESSED IN THOUSANDS OF NEW TAIWAN EXPRESSEDTHOUSANDS IN TAIWAN OF NEW
STATEMENTS OF CHANGESSTATEMENTS IN STOCKHOLDERS’ EQUITY ( Retained Retained Earnings The The accompanying notes are integral partan these of statements.financial 1,247,907 1,648,835 18,910,213 20,158,120 20,158,120 21,806,955 Legal reserve
$ $ $ $
) ) ) ) )
------1,227 capital 24,075 31,287 66,579 15,491 67,078
102,759 102,650 130,595 in - 4,482,124 4,482,124 4,662,555 30,237,586 25,798,854 Additional
paid $ $ $ $
( ( ( ( (
) ) )
------100,000 100,000 6,270,166 6,270,166 1,357,437 7,527,603 42,467,775 36,097,609
$ $ $ $ Common Common stock
( ( (
term term investments term investments
- -
2011 2010 term term equity investments
-
sale financial assets sale financial assets
- -
for for
- - reduction investee companies' net stockholders' equity accounted for the equityunder method employees available investee companies' net stockholders' equity accounted for the equityunder method employees increasing in long accounted for the equityunder method available
Legal reserve Cash dividends Legal reserve Dividends transferred to common stock Cash dividends
Balance at 1,January 2010 Appropriations of 2009 earnings (Note 4(15)) of adjustments Effect and to spincapital off of changes Effect ownershipin percentage of Effect of disposal of long Dividends on shares trust held paid in to Foreign currency translation adjustments of changes Effect in valuation of Purchase of treasury stock of treasury stock Transfer Retirement of treasury stock Net income 2010 for Balance at December 31, 2010 Balance at 1,January 2011 Appropriations of 2010 earnings (Note4(15)) of changes Effect ownershipin percentage of Effect of disposal of long Dividends on shares trust held paid in to Dividends on shares trust held transferredin for Foreign currency translation adjustments of changes Effect in valuation of Purchase of treasury stock Retirement of treasury stock Net income 2011 for Balance at December 31, 2011
96 ASUSTEK COMPUTER INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
FOR THE YEARS ENDED DECEMBER 31, 2011 2010
Cash flows from operating activities Net income $ 16,578,159 $ 16,488,357 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, amortization and impairment 1,509,094 1,284,844 Cash dividends received from long-term investee companies accounted for under the equity method 1,303,736 4,018,073 Investment income accounted for under the equity method ( 7,274,803 ) ( 8,541,113 ) Changes in assets and liabilities Financial assets at fair value through profit or loss - current ( 1,599,905 ) 5,098,429 Notes and accounts receivable (including related parties) ( 4,587,375 ) ( 3,839,449 ) Other receivables (including related parties) ( 6,680,610 ) 3,873,937 Inventories ( 4,569,209 ) ( 492,802 ) Prepayments and other current assets 5,359,651 ( 1,925,006 ) Financial liabilities at fair value through profit or loss - current ( 73,200 ) ( 28,546 ) Notes and accounts payable (including related parties) 3,047,839 5,800,854 Income tax payable 295,693 ( 1,160,711 ) Accrued expense, receipts in advance and other current liabilities 3,663,165 ( 354,680 ) Deferred credits 1,191,149 89,344 Deferred income tax assets and liabilities 888,226 830,365 Others 96,672 ( 123,226 ) Net cash provided by operating activities 9,148,282 21,018,670 Cash flows from investing activities Increase in financial assets carried at cost ( 56,000 ) - Proceeds from disposal of available-for-sale financial assets 60,444 453,354 Increase in long-term equity investments accounted for under the equity method ( 3,185,945 ) ( 610,098 ) Proceeds from disposal of long-term investments accounted for under the equity method 83,748 857,577 Proceeds from capital reduction of long-term equity investments accounted for under the equity method - 1,061,951 Acquisition of property, plant and equipment ( 1,074,166 ) ( 1,098,447 ) Increase in deferred expense and intangible assets ( 91,469 ) ( 63,697 ) Decrease in other assets - others 8,614 20,617 Others 6,804 ( 50,499 ) Net cash (used in) provided by investing activities ( 4,247,970 ) 570,758 Cash flows from financing activities Redemption of bonds payable ( 2,459,400 ) ( 1,346,450 ) Redemption of treasury stock ( 2,609,422 ) ( 2,321,248 ) Payment of cash dividends ( 8,638,233 ) ( 8,918,232 ) Others 92 9,302 Net cash (used in) financing activities ( 13,706,963 ) ( 12,576,628 ) (Decrease) increase in cash and cash equivalents ( 8,806,651 ) 9,012,800 Cash and cash equivalents at beginning of the year 25,414,890 16,402,090 Cash and cash equivalents at end of the year $ 16,608,239 $ 25,414,890 Supplemental disclosures of cash flow information Cash paid during the year for interest $ 8 $ 5 Cash paid during the year for income tax $ 2,336,873 $ 2,750,859 Investing and financing activities that result in non-cash flows: Bonds payable - payable in one year $ - $ 2,412,309 Dividends transferred to common stock $ 1,357,437 $ -
The accompanying notes are an integral part of these financial statements. See report of independent accountants dated March 23, 2012.
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ASUSTEK COMPUTER INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)
1. HISTORY AND ORGANIZATION (1) ASUSTEK COMPUTER INC. (ASUS or the Company) was established on April 2, 1990. The Company’s common shares are listed on the Taiwan Stock Exchange (TSE) on November 14, 1996. Its main activities are to produce, design and sell notebook PCs, main boards, software, add-on cards, optics, wired and wireless communication equipment and telecom-restricted radio frequency devices. (2) The Company resolved to spin-off its OEM businesses on January 1, 2008. Pursuant to the Company’s resolution, the Company transferred its computer and non-computer OEM businesses to its spun-off subsidiaries, PEGA and UNIHAN, respectively. On June 1, 2010, however, the Company transferred further its OEM assets and business (the Company’s long-term equity investment in PEGA) to the Company’s another investee, PII. PII issued new shares to the Company and its shareholders as consideration. (3) The Company’s headcount totaled 4,061 and 3,612 employees as of December 31, 2011 and 2010, respectively. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and generally accepted accounting principles in the Republic of China. The Company’s significant accounting policies are as follows: (1) Foreign currency transactions and translation of financial statements in foreign currencies A. Transactions involving non-derivative financial instruments denominated in foreign currencies are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occurred. Translation gain or loss arising from the settlement of assets and liabilities denominated in foreign currencies are included in profit or loss in the year of actual settlement. B. Monetary assets and liabilities denominated in foreign currencies are remeasured at the balance sheet date using the exchange rates in effect on that date, with related exchange gain and loss included in the statement of income. C. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through stockholders’ equity are remeasured at the exchange rate prevailing at the balance sheet date, with related exchange gain or loss recorded as cumulative translation adjustment in stockholders’ equity. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through profit or loss are remeasured at the exchange rate prevailing at the balance sheet date, with related exchange gain or loss recorded in the statement of income. Non-monetary assets and liabilities denominated in foreign currencies that are measured at cost are remeasured at the historical exchange rate.
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98
D. Long-term investments in foreign investees, which are accounted for under the equity method, are stated on the basis of stockholders’ equity in the foreign-currency financial statements of investees. Translation gain or loss from long-term investments is recognized as cumulative translation adjustment in stockholders’ equity. (2) Classification of current and non-current assets and liabilities A. Assets that meet one of the following criteria are classified as current assets; otherwise, they are classified as non-current assets: (A) Assets arising from operating activities that are expected to be realized or consumed, or are intended to be sold within the normal operating cycle; (B) Assets held mainly for trading purposes; (C) Assets that are expected to be realized within twelve months from the balance sheet date; (D) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date. B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise, they are classified as non-current liabilities: (A) Liabilities arising from operating activities that are expected to be paid off within the normal operating cycle; (B) Liabilities arising mainly from trading activities; (C) Liabilities that are to be paid off within twelve months from the balance sheet date; (D) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. (3) Financial instruments A. In accordance with SFAS No. 34, “Accounting for Financial Instruments” and the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, financial assets are classified as financial assets at fair value through profit or loss, financial assets carried at cost, or available-for-sale financial assets, as appropriate. Financial liabilities are classified either as financial liabilities at fair value through profit or loss, or as financial liabilities at cost. B. The Company accounts for purchases and sales of financial assets on the trade date, or the date when the Company commits to purchase or sell the asset. At initial recognition, financial assets are recognized at fair value plus, in the case of investments that are not reported at fair value through profit or loss, directly attributable transaction costs. (A) Financial assets measured at fair value through profit or loss These financial assets are subsequently measured at fair value with changes in fair value recognized in profit or loss. Stocks of listed companies, convertible bonds and closed-end funds are measured at closing prices at the balance sheet date. Open-end funds are measured at the unit price of the net assets at the balance sheet date.
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(B) Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, or loans and receivables. These assets are then measured at fair value. The difference adjustments arising from change in fair value, excluding impairment loss and exchange gain or loss from the translation of monetary financial assets denominated in foreign currencies which are recognized in current profit or loss, are recognized in a separate component of stockholders’ equity until such investment is reclassified or disposed of, upon which the cumulative separate component of stockholders’ equity is transferred to current profit or loss. (C) Financial assets carried at cost Equity investments without reliable market prices, including emerging and other unlisted stocks, are measured at cost. If objective evidence of impairment exists, the Company recognizes impairment loss, which is not reversed in subsequent periods. C. Subsequent to initial recognition, the Company measures all financial liabilities at amortized cost except for financial liabilities at fair value through profit or loss, which are measured at fair value. (4) Notes and accounts receivable and other receivables A. Notes and accounts receivable are claims resulting from the sale of goods or services. Other receivables are those arising from transactions other than the sale of goods or services. Before December 31, 2010, allowance for doubtful accounts is provided according to the evaluation of the collectibility of notes and accounts receivable and other receivables, taking into account the bad debts incurred in prior years and the aging analysis of the receivables. B. Effective January 1, 2011, notes and accounts receivable and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for accumulated impairment. A provision for impairment is established when there is objective evidence that the receivables are impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the fair value of the asset subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not make the asset’s carrying amount more than its amortized cost where no accumulated impairment loss was recognized. Subsequent recoveries of amounts previously written off are recognized in profit. (5) Inventories The costs of inventories consist of those necessary expenditures incurred in bringing each item of inventory to its usable condition and location. Cost is calculated on a weighted-average basis. Inventories are valued at the lower of cost or net realizable value. Net realizable value by item is determined based on the estimated selling price in the ordinary course of business, less estimated costs of completion and costs to sell.
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(6) Long-term equity investments accounted for under the equity method A. Long-term investments are accounted for under the equity method when the percentage of ownership held by the Company and its subsidiaries exceeds 20% or if the Company and its subsidiaries own less than 20% of the investee’s capital but have significant influence on the investee’s operations. If an investee company accounted for under the equity method issues new shares and the Company does not purchase new shares proportionately, then the investment percentage, and therefore the equity in net assets of the investee, will be changed. The effect of such change is adjusted against the additional paid-in capital resulting from long-term equity investments or retained earnings. B. The difference between the cost of the investment and the amount of underlying equity in net assets of an investee attributed to depreciable, depletable, or amortizable assets is amortized over the estimated remaining economic years. The difference attributed to the carrying amount in excess of or lower than the fair value of assets is written off entirely when the difference disappear. The cost of investment in excess of the fair value of identifiable net assets is recognized as goodwill and is no longer amortized. The difference attributed to the fair value of identifiable net assets in excess of the cost of investment causes a proportional decrease in the carrying amount of non-current assets. When the carrying amount of non-current assets is reduced to zero, the remaining difference is recorded as extraordinary gain. C. When the equity of long-term equity investments under the equity method including unrealized gain on financial instruments, foreign currency translation adjustments, net loss not recognized as pension cost, and unrealized losses on cash flow hedges is changed, the changes in percentage of ownership are reflected in those related accounts and long-term equity investments under the equity method. D. Unrealized inter-company profit or loss resulting from transactions between the Company and investees accounted for under the equity method are accounted in unrealized gain on inter-affiliate accounts and deferred until realized. E. The investees over which the Company has control are accounted for under the equity method. The Company prepares consolidated financial statements on a quarterly basis. (7) Property, plant and equipment, leased assets and idle assets A. Property, plant and equipment are stated at cost. Cost associated with significant additions, improvements, and replacements to property, plant and equipment are capitalized. Expenditures for regular repairs and maintenance are charged against operating income. B. Property, plant and equipment leased to other parties under operating leases are classified as leased assets. The related depreciation is provided under the straight-line method based on the assets’ estimated useful lives and accounted for as a reduction of rental income. Property, plant and equipment not currently used in operations are transferred to idle assets. The cost, accumulated depreciation, and accumulated impairment of the original assets not currently used in operations are all transferred to idle assets, and depreciated. C. Depreciation is provided under the straight-line method over the estimated useful lives of the assets. Salvage value of the fully depreciated assets that are still in use is depreciated over the re-estimated useful lives. The estimated useful lives of buildings are 3~50 years, machinery and equipment are 3~8 years and other equipment are 1~15 years.
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(8) Intangible assets and deferred expenses Intangible assets represent computer software, which are amortized using the straight-line method over 3 years. Deferred expenses represent office decorations, which are amortized using the straight-line method over 2~5 years. (9) Impairment of non-financial assets A. The Company assesses all applicable assets subject to SFAS No. 35 for indication of impairment at the balance sheet date. If any indication of impairment exists, the Company then compares the carrying amount with the recoverable amount of the assets or the cash-generating unit (“CGU”) and writes down the carrying amount to the recoverable amount. If the recoverable amount of an asset other than goodwill has increased as a result of the increase in its estimated service potential, the Company reverses the impairment loss to the extent that the carrying amount after the reversal would not exceed the amount (net of amortization or depreciation) that would otherwise result had no impairment loss been recognized in prior periods. B. The Company assesses the goodwill and intangible assets that have indefinite lives or that are not yet available for use periodically on an annual basis and recognizes an impairment loss on the carrying value in excess of the recoverable amount. The loss is first recorded against the goodwill allocated to the CGU, with any remaining loss allocated to other assets on a pro rata basis proportionate to their carrying amounts. The write-down of goodwill cannot be reversed in subsequent periods under any circumstances. (10) Convertible bonds payable Bonds issued after January 1, 2006 are accounted for in accordance with SFAS No. 36 and Interpretations (95) 290, (97) 331 and (98) 046 by the Accounting Research and Development Foundation (ARDF) as follows: A. The issuance costs are allocated to the related liability and equity components in proportion of the initially recognized amounts. B. Convertible bonds bearing a clause on conversion price adjustment based on stock market price do not include the equity component. For the liability components, the fair value of the conversion right and call/put option is determined first, and then the book value of main debt component is determined based on the net amount of the issuance price after deducting the fair value of the call/put option and conversion right with a clause on price adjustment. C. Convertible bonds are subsequently measured at amortized cost. Derivatives with call/put options and conversion rights with a clause on price adjustment are recognized as “financial liabilities at fair value through profit or loss” and are subsequently measured at fair value. Movements in the fair value of the derivatives are recognized as “gain/(loss) on valuation of financial liabilities”. D. If the bondholder exercises the right to convert the bonds ahead of the maturity date of the bond, the book value of the liability component is adjusted to the value on the conversion date, which serves as the basis for the recording of the issuance of common stock so that no conversion gain and loss is recognized thereon.
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E. If the bondholder is eligible to exercise the put option within one year, the bonds payable are reclassified as current liability. When the put option expires, those bonds payable are reclassified as long-term liability if the liability meets the definition of long-term liability. (11) Pension A. Under the defined benefit pension plan, net periodic pension costs are recognized in accordance with the actuarial calculations. Net periodic pension costs include service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gain or loss on plan assets. Unrecognized net transition obligation is amortized on a straight-line basis over the employees’ remaining service period. B. Under the defined contribution pension plan, net periodic pension costs are recognized as incurred. (12) Income tax A. Income tax is calculated on the basis of accounting income. The differences between the tax bases and the book values of assets and liabilities are recorded as deferred tax using the enacted tax rates for the periods in which the deferred tax is expected to be reversed. The tax effects from taxable temporary differences are recognized as deferred tax liabilities, while the deductible temporary differences and investment tax credits are accounted for as deferred tax assets, which are assessed for an allowance for deferred tax assets based on future realization. B. Deferred income tax assets or liabilities are classified as current or non-current based on the classification of items that resulted in the deferred item or based on the timing of the expected reversal, for certain transactions not directly related to an asset or liability. When a change in the tax laws is enacted, the deferred tax liability or asset is recomputed accordingly in the period of change. The difference between the new amount and the original amount, that is, the effect of changes in the deferred tax liability or asset, is recognized as an adjustment to current income tax expense (benefit). C. Over or under provision of prior years’ income tax liabilities is included in current year’s income tax. D. The 10% additional income tax on unappropriated earnings is recorded as current income tax expense in the year when the shareholders resolve not to distribute the earnings. E. Current income tax is the higher of current income tax payable or the Alternative Minimum Tax (“AMT”) calculated by applying the Income Basic Tax Act (“IBTA”). The Company has taken into consideration the impact of the AMT in the determination of its current income tax expense and its future impact when estimating the realizable value of the deferred tax assets. (13) Treasury stock A. When the Company acquires its outstanding shares as treasury stock, the acquisition cost should be debited to the treasury stock account (a contra account under stockholders’ equity). B. When the Company’s treasury stock is retired, the treasury stock account should be credited, and the capital surplus-premium on stock account and capital stock account should be debited proportionately according to the share ratio. An excess of the carrying value of treasury stock over the sum of its par value and premium on stock should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to
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retained earnings. An excess of the sum of the par value and premium on stock of treasury stock over its carrying value should be credited to additional paid-in capital from the same class of treasury stock transactions. C. The cost of treasury stock is accounted for on a weighted-average basis. (14) Employees’ bonuses and directors’ and supervisors’ remuneration and share-based payment Pursuant to Interpretation (96) 052 issued by the ARDF, the costs of employees’ bonuses and directors’ and supervisors’ remuneration are accounted for as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and the amounts can be estimated reasonably. However, if the accrued amounts for employees’ bonuses and directors’ and supervisors’ remuneration are significantly different from the distributed amounts resolved by the Board of Directors, then the differences shall be adjusted in current year’s gain or loss (the year of recognition) and, if the accrued amounts for employees’ bonus and directors’ and supervisors’ remuneration are significantly different from the actual distributed amounts resolved by the stockholders at their annual stockholders’ meeting subsequently, the differences shall be recognized as gain or loss in the following year treated as accounting estimate difference. In addition, according to Interpretation (97) 127 issued by the ARDF, the Company calculates the number of shares of employees’ stock bonus based on the closing price of the Company’s common stock at the previous day of the stockholders’ meeting held in the year following the financial reporting year, and after taking into account the effects of ex-rights and ex-dividends. The Company adopts SFAS No. 39 to account for the transfer of equity instruments from shareholders to the Group’s employees. (15) Earnings per share A. Earnings per share of common stock is computed based on the weighted-average number of common shares outstanding during the period. Earnings per share for the prior period is retroactively adjusted to reflect the effects of new shares issued from the capitalization of additional paid-in capital or retained earnings. B. The convertible bonds and employee stock bonuses which have not yet been approved in the stockholders’ meeting are potential common shares. Only basic earnings per share is disclosed if there is no dilutive effect. Otherwise, both basic and diluted earnings per share are disclosed. For the purpose of calculating diluted earnings per share, the potential common shares are deemed to have been converted into common stock at the beginning of the period, and the effect on net income of the additional common shares outstanding is considered accordingly. (16) Revenues, costs and expenses The Company recognizes revenue when the earning process has been significantly completed, which means the revenue has been realized or is readily realizable and earned. Cost is recognized when the related revenue is accrued; expenses are recognized as current expenses when incurred.
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(17) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting period. Actual results could differ from those assumptions and estimates. (18) Spin-off transaction The Company resolved to spin off its OEM assets and businesses. The Company adopted Interpretations (91) 128, (92) 106 and (92) 107 issued by the ARDF to account for its spin-off transactions. Since the transferee company continues the transferor company’s economic activities, the Company did not record any gain or loss from the said spin-off transaction but has adjusted the net assets and long-term equity investment related additional paid-in capital and other equity account against retained earnings or other components. (19) Operating segments In accordance with SFAS No. 41, “Segment reporting”, operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. 3. CHANGES IN ACCOUNTING PRINCIPLES (1) Notes and accounts receivable and other receivables Effective January 1, 2011, the Company adopted the amended SFAS No. 34, “Accounting for Financial Instruments”. Under this standard, a provision for impairment (bad debt) of accounts and notes receivable and other receivables is established when there is objective evidence that they are impaired. This change in accounting principle had no significant effect on the net income for the year ended December 31, 2011. (2) Operating segments Effective January 1, 2011, the Company adopted the SFAS No. 41, “Segment Reporting”, replacing the original SFAS No. 20, “Disclosure of Segment Financial Information”. In accordance with such standard, the Company restated the segment information for 2010 upon the first adoption of SFAS No. 41. This change in accounting principle had no significant effect on the net income and earnings per share for the years ended December 31, 2011 and 2010. 4. DETAILS OF SIGNIFICANT ACCOUNTS (1) Cash and cash equivalents 2011/12/31 2010/12/31 Petty cash and cash on hand $ 250 $ 264 Checking and demand deposits 5,677 4,632 Time deposits 16,602,312 25,409,994 $ 16,608,239 $ 25,414,890
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(2) Financial assets (liabilities) at fair value through profit or loss The financial instruments held by the Company are as follows: Items 2011/12/31 2010/12/31 Current: Financial assets at fair value through profit or loss: Open-end funds $ 9,623,062 $ 8,022,694 Convertible bonds 92,850 111,700 Forward exchange contracts 21,391 - Currency options contracts - 3,004 $ 9,737,303 $ 8,137,398 Financial liabilities at fair value through profit or loss: Call/put options and conversion $ - $ 104,525 right - convertible bonds Forward exchange contracts 32,695 - Currency options contracts - 1,370 $ 32,695 $ 105,895
A. For the years ended December 31, 2011 and 2010, the Company recognized net financial assets gain on valuation of $163,466 and $466,044, respectively, and net financial liabilities loss on valuation of $522,198 and $44,971, respectively. B. The trading items and contract information of derivatives are as follows:
2011/12/31 2010/12/31 Contract Amount Contract Amount (Nominal principal) (Nominal principal) Items (in thousands) Contract Period (in thousands) Contract Period Derivative financial assets Forward exchange contracts USD 80,000 2011.10~2012.01 - - Currency options contracts - - USD 10,000 2010.12~2011.01 Derivative financial liabilities Forward exchange contracts USD 278,000 2011.11~2012.03 - - Currency options contracts - - USD 30,000 2010.12~2011.01
The main purpose of the Company’s trading derivatives was to hedge foreign currency risk from operating activities. As of December 31, 2011 and 2010, the Company did not meet the criteria for hedge accounting, so the Company recognized them at fair value. C. For convertible bonds information, please refer to Note 4(11), “Bonds payable.”
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(3) Available-for-sale financial assets Items 2011/12/31 2010/12/31 Current: Listed and OTC stocks AZURE $ 191,541 $ - EDISON - 100,625 Others 83,251 36,168 $ 274,792 $ 136,793 Non-Current: Listed and OTC stocks ADVANTECH $ 7,015,732 $ 6,278,997 Others 52,607 67,519 $ 7,068,339 $ 6,346,516
A. For available-for-sale financial assets, the amount of gain recognized directly in equity was $521,721 and $639,744 for the years ended December 31, 2011 and 2010, respectively. B. After evaluating and comparing the carrying value of available-for-sale financial assets and the recoverable amount, the Company recognized impairment loss amounting to $12,000 and $0 for the years ended December 31, 2011 and 2010, respectively. (4) Financial assets carried at cost Items 2011/12/31 2010/12/31 Current: Unlisted and non-OTC stocks Others $ 372 $ 372 Non-current: Unlisted and non-OTC stocks AZURE $ - $ 202,660 AMTRUST CAPITAL I 100,000 100,000 Others 56,001 135,001 156,001 437,661 Less: provision for impairment ( 48,422) ( 37,141) $ 107,579 $ 400,520
A. The above investments were measured at cost since there are no public quotes in active markets and their fair value cannot be measured reliably. B. The Company and its subsidiaries lost significant influence on AZURE on June 1, 2010, the spin-off date, and accordingly discontinued applying the equity method. C. After evaluating and comparing the carrying value of financial assets carried at cost and the recoverable amount, the Company recognized impairment loss amounting to $11,281 and $0 for the years ended December 31, 2011 and 2010, respectively.
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(5) Accounts receivable 2011/12/31 2010/12/31 Accounts receivable $ 2,700,985 $ 9,191,918 Less: allowance for doubtful accounts ( 31,227) ( 108,004) (provision for impairment) $ 2,669,758 $ 9,083,914
(6) Inventories 2011/12/31 2010/12/31 Raw materials $ 5,378,508 $ 5,602,157 Work in process 1,169,467 826,566 Finished goods 636,649 712,639 Merchandise inventories 13,957,561 10,249,608 Inventories in transit 183,848 80,601 21,326,033 17,471,571 Less: allowance for decline in value of inventories ( 1,176,527) ( 1,891,274) $ 20,149,506 $ 15,580,297
Except for cost of goods sold, the inventories recognized as decrease in operating costs amounted to $712,105 and $492,549, of which $714,747 and $496,780 were net realizable value recovery of inventories because some inventories with allowance for decline in value had been sold during the years ended December 31, 2011 and 2010, respectively.
(7) Long-term equity investments A. Details of long-term equity investments accounted for under the equity method are as follows: 2011/12/31 2010/12/31 Percentage Percentage Carrying of Carrying of Investee company amount ownership amount ownership PEGA $ 22,374,681 24.46 $ 22,165,896 24.45 AIL 19,415,417 100.00 10,839,491 100.00 ASKEY 9,584,598 100.00 8,845,738 100.00 AAEON 2,607,452 47.00 4,527 47.00 HCVC 1,069,666 100.00 1,208,539 100.00 HMI 717,382 100.00 695,349 100.00 AHL 670,831 100.00 867,926 100.00 ASUTC 484,986 100.00 496,762 100.00 Others 1,459,545 1,099,493 $ 58,384,558 $ 46,223,721
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B. The investment income recognized under the equity method amounted to $7,274,803 and $8,541,113 for the years ended December 31, 2011 and 2010, respectively which were determined based on the investees’ audited financial statements. As of December 31, 2011 and 2010, the related long-term equity investments (deferred credits) amounted to $58,384,558 ($793,962) and $46,223,721 ($757,225), respectively. C. The effect of changes in unrealized gain (loss) on financial assets (including unrealized gain on cash flow hedge) resulting from long-term equity investments were $948,996 and ($469,900) for the years ended December 31, 2011 and 2010, respectively. D. The Company received cash dividends amounting to $1,303,736 and $4,018,073 for the years ended December 31, 2011 and 2010, respectively, accounted for as a deduction from long-term equity investments. E. The change of long-term equity investments accounted for under the equity method are as follows: (A) On June 1, 2010, the Company transferred the OEM assets and business (the Company’s long-term equity investment in PEGA) to PII. PII then issued new shares to the Company and its shareholders as consideration. The Company then obtained 25% ownership of the consolidated PEGA and PII (PII is the dissolved company). The long-term investment decreased by $70,197,726 after this transaction. (B) AHL decreased its capital and the Company received a return of capital amounting to $1,061,951 for the year ended December 31, 2010. (C) SYT had a cash capital increase on January 10, 2010, and the Company invested $2,500,400. After the capital increase, the Company held 45,120,000 shares of SYT, representing 47% ownership. (D) As approved by the authorities and in compliance with the related regulations, SYT had obtained 86,220,000 shares of AAEON, and the merger record date was set on June 1, 2011. After the merger, SYT was the surviving company, and SYT has been approved by the authorities on July 4, 2011 to change its name to AAEON. (8) Property, plant and equipment 2011/12/31 Accumulated depreciation Initial cost and impairment Book value Land $ 981,191 $ - $ 981,191 Buildings 2,312,270 ( 390,140) 1,922,130 Instruments and equipment 379,407 ( 203,084) 176,323 Other equipment 943,706 ( 355,592) 588,114 Prepayments for equipment 270,053 - 270,053 $ 4,886,627 ($ 948,816) $ 3,937,811
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2010/12/31 Accumulated depreciation Initial cost and impairment Book value Land $ 981,191 $ - $ 981,191 Buildings 2,312,517 ( 343,308) 1,969,209 Instruments and equipment 442,298 ( 246,961) 195,337 Other equipment 1,796,127 ( 765,153) 1,030,974 Prepayments for equipment 92,392 - 92,392 $ 5,624,525 ($ 1,355,422) $ 4,269,103
After evaluating and comparing the carrying value of property, plant and equipment and its recoverable amount, the Company recognized impairment loss amounting to $335,171 and $0 for the years ended December 31, 2011 and 2010, respectively. (9) Leased assets 2011/12/31 2010/12/31 Initial cost Land $ 38,233 $ 38,233 Buildings 70,678 80,731 108,911 118,964 Less: accumulated depreciation - buildings ( 12,923) ( 21,592) $ 95,988 $ 97,372
(10) Idle assets 2011/12/31 2010/12/31 Other equipment $ 963,354 $ 1,338,232 Less: accumulated depreciation ( 571,287) ( 1,028,773) Less: accumulated impairment ( 392,067) ( 309,459) $ - $ -
After evaluating and comparing the carrying value of idle assets and their recoverable amount, the Company recognized impairment loss amounting to $82,608 and $7,842 for the years ended December 31, 2011 and 2010, respectively.
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(11) Bonds payable The details of domestic unsecured convertible bonds are as follows:
2011/12/31 2010/12/31 Aggregate principal amount $ 12,000,000 $ 12,000,000 Accumulated converted amount ( 7,000) ( 7,000) Accumulated redeemed amount ( 11,993,000) ( 9,533,600) Discount on bonds payable - ( 47,091) - 2,412,309 Less: convertible bonds payable- - ( 2,412,309) Less: redeemable within one year Total $ - $ -
2011/12/31 2010/12/31 Debt-component embedded derivative: －conversion rights $ - $ 104,525
2011/1/1~12/31 2010/1/1~12/31 Gain on valuation of financial liabilities- call/put option and conversion rights $ 104,525 $ 151,382 Interest expense $ 47,091 $ 81,039
A. The Company issued the redeemable domestic unsecured convertible bonds on November 7, 2006. The main issuance terms are as follows: (A) Total amount of the convertible bonds at issuance: $12,000,000 (B) Nominal rate: 0% (C) Duration of issuance: 5 years (from November 7, 2006 to November 7, 2011) (D) Conversion period: Each bondholder has the right to convert all or from time to time any portion of its convertible bonds into common shares during the conversion period (up to 31 days after the original issue date to 10 days before the maturity date). (E) Conversion price and adjustment: The conversion price is $105.4 (in dollars) per common share initially. The conversion price will be adjusted upon the occurrence of an increase in the number of common shares. On July 14, 2011, the Company adjusted further the conversion price to $269.2 (in dollars), considering the effect of capitalization from retained earnings. (F) Call option: The Company could redeem the convertible bonds at par value at any time during the period from December 8, 2006 to September 28, 2011, under the following conditions: the closing price of the common shares on each of 30 consecutive trading days reaches or exceeds 50% of the conversion price, or the outstanding balance of the bonds is less than 10% of the original issuance. (G) Put option: Each bondholder has the right to put the convertible bonds at par value after the 3rd and 4th year.
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B. The fair value of non-equity convertible options, put options, call options and resetting options embedded in bonds payable was separated from bonds payable, and was recognized in “Financial assets or liabilities at fair value through profit or loss” in accordance with SFAS No. 34. C. As of December 31, 2011, except for some bonds which had been converted, all bonds of the Company had matured and been redeemed. (12) Pension A. Effective from 1995, the Company adopted SFAS No. 18, “Accounting for Pensions”. The funding status of the pension plan as of December 31, 1995 was measured on an actuarial basis. In accordance with SFAS No. 18, net pension cost was recognized from January 1, 1996. Because the accrued pension liability was equal to the funding status of the pension plan, no unrecognized transitional net assets or net obligations shall be amortized in the future. In addition, except for a few foreign employees, the Company had settled its financial obligations to its employees under the pension plan accounted for based on SFAS No. 18 at December 31, 2007. B. Effective July 1, 2005, the Company has established a funded defined contribution pension plan (the “New Plan”) under the Labor Pension Act for all employees except for few foreign employees. Under the New Plan, the Company contributes monthly an amount based on not less than 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are portable when the employees are terminated. The pension costs under the defined contribution pension plan were $142,574 and $131,082 for the years ended December 31, 2011 and 2010, respectively. C. The Company obtained approval from the Labor Affairs Bureau, Taipei, for the suspension of the monthly contributions to the pension fund for foreign employees under the Labor Standards Law. (13) Common stock A. As of December 31, 2011, the Company’s authorized capital was $47,500,000, consisting of 4,750,000,000 shares of common stock (including 50,000,000 shares which were reserved for employee stock options), and the outstanding capital was $7,527,603 with a par value of $10 (in dollars) per share. B. In order to maximize the efficiency of the own-brand business and to diversify the OEM business, the Company held a special shareholders’ meeting on February 9, 2010 and resolved to decrease its authorized capital by 85% and transfer its OEM business. The record date for the capital reduction and transfer is June 1, 2010. The capital reduction, which amounted to $36,097,609, was authorized by Financial Supervisory Commission, Executive Yuan, on April 9, 2010. The registration procedures related to the reduction were completed on June 21, 2010. C. In June 2011, the shareholders resolved to declare stock dividends of $1,357,437. The capital increase has been approved by the Financial Supervisory Commission, Executive Yuan, and the Company announced August 6, 2011 as the ex-right (ex-dividend) record date.
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D. As of December 31, 2011, the Company issued Global Depositary Receipts (GDRs), of which 6,320,000 units of the GDRs are now listed on the London Stock Exchange. Per unit of GDR represents 5 shares of the Company’s common stock and total GDRs represent 31,599,000 shares of the Company’s common stock. The terms of GDR are as follows: (A) Voting rights GDR holders may, pursuant to the Depositary Agreement and the relevant laws and regulations of the R.O.C., exercise the voting rights pertaining to the underlying common shares represented by the GDRs. (B) Dividends, stock warrants and other rights GDR holders and common shares holders are all entitled to receive dividends. The Depositary may issue new GDRs in proportion to GDRs holding ratios or raise the number of shares of common stock represented by each unit of GDR or sell stock dividends on behalf of GDR holders and distribute selling income to them in proportion to their GDRs holding ratios. (14) Additional paid-in capital The Company Act requires that capital reserve arising from paid-in capital in excess of par value on issuance of common stock and donations can be used to cover accumulated deficit, or to increase capital or payment of cash in proportion to ownership percentage when the Company has no accumulated deficit. Besides, the Securities and Exchange Act requires that the capital reserve can be capitalized once a year and the amount shall not exceed 10% of the paid-in capital. (15) Retained earnings A. According to the Company’s articles of incorporation, annual net income after covering prior years’ losses, if any, should be distributed as follows: 10% as legal reserve, an appropriate amount as special reserve according to relevant regulation or as required by the government, 10% of capital stock as capital interest, no less than 1% as employees’ bonuses, and no more than 1% as directors’ and supervisors’ bonuses. When the employees’ bonuses are distributed in stock, the recipients must include the employees of subsidiaries. After the distribution of earnings, the remaining earnings, if any, may be appropriated according to a resolution adopted in the stockholders’ meeting. B. The Company is facing a rapidly changing industrial environment, with the life cycle of the industry in the growth phase. In light of the long-term financial plan of the Company and the demand for cash by the stockholders, the Company should distribute cash dividends of not less than 10% of the total dividends declared. C. Except for covering accumulated deficit, increasing capital or payment of cash, the legal reserve shall not be used for any other purpose. The amount capitalized or the cash payment shall not exceed 25% of the paid-in capital. D. The appropriation of 2010 and 2009 earnings had been resolved at the stockholders’ meeting on June 9, 2011 and April 22, 2010, respectively. Details are summarized as follows:
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2010 2009 Dividends Dividends per share per share Amount (in dollars) Amount (in dollars) Cash dividends $ 8,638,233 $ 14.00 $ 8,918,232 $ 2.10 Stock dividends 1,357,437 2.20 - - Directors' and 142,125 69,844 supervisors' remuneration Employees' cash 710,625 698,438 bonus (A) The appropriation of 2010 earnings stated above is the same as that proposed by the Board of Directors on April 20, 2011. (B) There was no difference between the actual amounts of employees’ bonuses and directors’ and supervisors’ remuneration for 2010 and 2009 with the amounts accrued as expenses in the 2010 and 2009 financial statements. E. The Company estimates the amount of employees’ bonuses and directors’ and supervisors’ remuneration according to the Company Act and the Company’s articles of incorporation. The employees’ bonuses and directors’ and supervisors’ remuneration were estimated and recognized based on a specific percentage approved by the management in accordance with the Company’s articles of incorporation. The Company recognized employees’ bonuses of $708,379 and $710,625, and directors’ and supervisors’ remuneration of $141,676 and $142,125 for the years ended December 31, 2011 and 2010, respectively. The number of shares of the dividend distribution is based on the closing price of the day before the stockholders’ meeting date and considering the effect of ex-rights and ex-dividends. Differences between the amounts approved in the stockholders’ meeting and those recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the year of distribution. (16) Treasury stock A. In order to maintain the Company’s credit worthiness and stockholders’ interest, the Company purchased its outstanding shares as treasury stock under the Securities and Exchange Act No. 28(2) during the years ended December 31, 2011 and 2010, respectively. Movements of treasury stock are as follows:
2011/1/1~12/31 2010/1/1~12/31 Shares Shares (in thousands) Amount (in thousands) Amount Beginning of the year - $ - - $ - Addition 10,000 2,609,422 10,000 2,321,248 Retirement and transfer ( 10,000) ( 2,609,422) ( 10,000) ( 2,321,248) Ending of the year - $ - - $ -
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B. Pursuant to the Company Act, the Company purchased 54,000 shares, amounting to $3,105, from shareholders who disagreed with the transfer of the Company’s OEM business. However, the Company subsequently disposed those shares in the open market after they were purchased. C. Pursuant to the Securities and Exchange Act, the number of shares bought back as treasury stock should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital reserve. D. Pursuant to the Securities and Exchange Act, treasury stock should not be pledged as collateral and is not entitled to dividends before it is reissued. E. Pursuant to the Securities and Exchange Act, treasury stock for the purpose of enhancing the Company’s credit worthiness and stockholders’ right should be retired within six months after acquisition. (17) Income tax A. According to the amended tax law issued on May 27, 2009, the statutory income tax rate was reduced from 25% to 20%, effective January 1, 2010. However, further amendment of this tax law was made and announced on June 15, 2010, under which, the statutory income tax rate has been reduced further to 17%. The Company is subject to income tax rate at a statutory rate of 17% for the years ended December 31, 2011 and 2010. The Company is also subject to the “Income Basic Tax Act” to calculate income tax. The components of income tax expense of the Company for the years ended December 31, 2011 and 2010, respectively, are as follows: 2011/1/1~12/31 2010/1/1~12/31 Current income tax $ 1,844,695 $ 1,727,447 10% additional income tax on 484,385 - unappropriated earnings Investment tax credits - ( 137,299) 2,329,080 1,590,148 Deferred income tax expense (benefit): Increase in unrealized sales profit on ( 202,495) ( 15,188) inter-affiliate accounts Decrease (increase) in unrealized 102,942 ( 241,628) purchase discounts Decrease in allowance for decline in value 121,507 84,452 of inventories Increase in investment income under 832,893 955,740 the equity method Effect of change in income tax rate - ( 21,060) Others 33,379 68,049 888,226 830,365 Income tax expense $ 3,217,306 $ 2,420,513
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B. The income tax computed on pre-tax financial income at the statutory rate was reconciled with the income tax expense as follows:
2011/1/1~12/31 2010/1/1~12/31 Income tax calculated on pre-tax financial $ 3,365,229 $ 3,214,508 income 10% additional income tax on 484,385 - unappropriated earnings Investment tax credits - ( 137,299) Tax effect of tax exemption on ( 477,662) ( 322,635) investment income Tax effect of correction of minimum tax ( 431,700) - Effect of change in income tax rate - ( 21,060) Unrealized valuation gain or loss ( 12,541) ( 64,051) Difference between prior year's income tax 243,057 ( 16,321) estimation and assessed results Effect of change in exchange rate 73,839 ( 173,614) Tax-exempt cash dividends ( 49,649) ( 57,622) Others 22,348 ( 1,393) Income tax expense $ 3,217,306 $ 2,420,513
C. The components of deferred income tax assets (liabilities) are as follows: 2011/12/31 2010/12/31 Deferred income tax assets: Unrealized sales profit $ 422,475 $ 219,980 Unrealized purchase discounts 333,289 436,231 Allowance for decline in value of inventories 200,010 321,517 Unrealized accrued expenses 145,741 147,767 Others 46,393 51,371 1,147,908 1,176,866 Deferred income tax liabilities: Investment income accounted for under the ( 2,772,728) ( 1,939,835) equity method (overseas) Others ( 276,324) ( 126,259) ( 3,049,052) ( 2,066,094) ($ 1,901,144) ($ 889,228)
2011/12/31 2010/12/31 Net deferred income tax assets - current $ 907,554 $ 1,014,641 Net deferred income tax liabilities - non-current ( 2,808,698) ( 1,903,869) ($ 1,901,144) ($ 889,228)
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D. The tax authorities have examined the Company’s income tax returns through 2009. The tax authorities assessed the Company for additional income tax of $716,266 for the years 1996 and 1998. The Company disagreed with the assessment and filed formal tax appeals. The additional income tax liability for these assessments was recognized in current income tax. E. Imputation credit account and creditable ratio 2011/12/31 2010/12/31 ICA balance $ 12,143,365 $ 12,282,090
2010 (Actual) 2009 (Actual) Creditable ratio for earnings distribution 18.05% 20.34%
F. Unappropriated retained earnings 2011/12/31 2010/12/31 Earnings generated in and before 1997 $ - $ 706,803 Earnings generated in and after 1998 77,293,325 74,095,212 $ 77,293,325 $ 74,802,015 (18) Earnings per share 2011/1/1~12/31 Weighted average outstanding Earnings per share Amount common shares (in dollars) Before tax After tax (in thousands) Before tax After tax Basic earnings per share: Net income $ 19,795,465 $ 16,578,159 753,776 $ 26.26 $ 21.99 Dilutive effect of common stock equivalents: Convertible bonds ( 57,434) ( 57,434) 7,994 Employees' bonus - - 4,694 Net income attributable to common stockholders plus dilutive effect of common stock equivalents $ 19,738,031 $ 16,520,725 766,464 $ 25.75 $ 21.55
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2010/1/1~12/31 Weighted average outstanding Earnings per share Amount common shares (in dollars) Before tax After tax (in thousands) Before tax After tax Basic earnings per share: Net income $ 18,908,870 $ 16,488,357 2,607,155 $ 7.25 $ 6.32 Dilutive effect of common stock equivalents: Convertible bonds ( 69,835) ( 69,921) 36,355 Employees' bonus - - 7,453 Net income attributable to common stockholders plus dilutive effect of common stock equivalents $ 18,839,035 $ 16,418,436 2,650,963 $ 7.11 $ 6.19
(19) Personnel, depreciation, and amortization expenses Personnel, depreciation, and amortization expenses are summarized as follows:
2011/1/1~12/31 2010/1/1~12/31
Operating Operating Operating costs expenses Total Operating costs expenses Total Personnel expenses
Salaries $ 191,180 $ 6,045,213 $ 6,236,393 $ 151,106 $ 4,394,515 $ 4,545,621 Labor and health 8,325 225,835 234,160 7,190 183,749 190,939 insurances
Pension 4,567 138,007 142,574 4,738 126,344 131,082 Others 7,392 156,115 163,507 7,934 141,786 149,720 Depreciation 775,520 196,329 971,849 845,076 218,987 1,064,063 Amortization 319 95,866 96,185 579 212,360 212,939
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5. RELATED PARTY TRANSACTIONS (1) Names and relationship of the related parties Related Party Relationship with the Company ASUS COMPUTER INTERNATIONAL (ACI) Subsidiary of the Company ASKEY COMPUTER CORP. (ASKEY) Subsidiary of the Company AXUS MICROSYSTEMS INC. (AXUS) Subsidiary of the Company SHINEWAVE INTERNATIONAL INC. (SWI) Subsidiary of the Company ASUS HOLLAND B.V. (ACH) Subsidiary of the Company ASUSTEK HOLDINGS LIMITED (AHL) Subsidiary of the Company ASUS INTERNATIONAL LIMITED (AIL) Subsidiary of the Company ASUSCHANNEL CORPORATION (ASUSCH) Subsidiary of the Company ASUS TECHNOLOGY INCORPORATION (ASUTC) Subsidiary of the Company ASMEDIA TECHNOLOGY INC. (ASMEDIA) Subsidiary of the Company ASUS CLOUD CORPORATION (ASUSCLOUD) (Note 8) Subsidiary of the Company INTERNATIONAL UNITED TECHNOLOGY CO., Subsidiary of the Company LTD. (TAIWAN) (IUT) HUA-CHENG VENTURE CAPITAL CORP. (HCVC) Subsidiary of the Company HUA-MIN INVESTMENT CO., LTD. (HMI) Subsidiary of the Company AGAIT TECHNOLOGY CORPORATION (AGA) Subsidiary of the Company ENERTRONIX, INC. (EN) Subsidiary of the Company CHANNEL PILOT LIMITED (CHANNEL) Subsidiary of the Company ASUS TECHNOLOGY PTE. LIMITED (ASTP) Subsidiary of the Company ASUS TECHNOLOGY (HONG KONG) LIMITED (ACHK) Subsidiary of the Company ASUS COMPUTER BENELUX B.V. (ACBNL) Subsidiary of the Company ASUS COMPUTER GMBH (ACG) Subsidiary of the Company ASUS FRANCE SARL (ACF) Subsidiary of the Company ASUSTEK (UK) LIMITED (ACUK) Subsidiary of the Company ASUS KOREA CO., LTD. (ACKR) Subsidiary of the Company ASUSTEK COMPUTER (S) PTE. LTD. (ACSG) Subsidiary of the Company ASUS POLSKA SP. Z O.O. (ACPL) Subsidiary of the Company ASUS TECHNOLOGY PRIVATE LIMITED (ACIN) Subsidiary of the Company ASUS TECHNOLOGY HOLLAND B.V. (ACNL) Subsidiary of the Company ASUS TECHNOLOGY (VIETNAM) CO. LTD. (ACVN) Subsidiary of the Company ASUSTEK ITALY S.R.L. (ACIT) Subsidiary of the Company ASUS MIDDLE EAST FZCO (ACAE) Subsidiary of the Company ASUS IBERICA S.L. (ACIB) Subsidiary of the Company ASUS TECHNOLOGY (SUZHOU) CO., LTD. (ACSZ) Subsidiary of the Company ASUSTEK COMPUTER (SHANGHAI) CO., LTD. (ACSH) Subsidiary of the Company ASUS JAPAN INCORPORATION (ACJP) Subsidiary of the Company ASUS COMPUTER CZECH REPUBLIC S.R.O. (ACCZ) Subsidiary of the Company ASUS EGYPT L. L. C. (ACEG) Subsidiary of the Company ASUS CZECH SERVICE S.R.O. (ACCZS) Subsidiary of the Company DEEP DELIGHT LIMITED (DDL) Subsidiary of the Company
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Related Party Relationship with the Company ASUS COMPUTER CORPORATION (ACBVI) Subsidiary of the Company ASUS SERVICE AUSTRALIA PTY LIMITED (ASAU) Subsidiary of the Company ASUS AUSTRALIA PTY LIMITED (ACAU) Subsidiary of the Company UNIMAX HOLDINGS LIMITED (UHL) Subsidiary of the Company UNIMAX ELECTRONICS INCORPORATION (UEI) Subsidiary of the Company CENTRAL TEC ASIA LIMITED (CTEC) Subsidiary of the Company ASUS COMPUTER (SHANGHAI) CO., LTD. (ACS) Subsidiary of the Company ASUS HUNGARY SERVICES LIMITED Subsidiary of the Company LIABILITY COMPANY (ACHU) ASUS PORTUGAL, SOCIEDADE UNIPESSOAL Subsidiary of the Company LDA. (ACPT) ASUS SWITZERLAND GMBH (ACCH) Subsidiary of the Company EMES (SUZHOU) CO., LTD. (EMES) Subsidiary of the Company GREAT EXTEND INVESTMENT CORP. (GEI) Subsidiary of the Company INTERNATIONAL UNITED TECHNOLOGY CO., Subsidiary of the Company LTD. (IUTS) MOBOSTAR TECHNOLOGY LIMITED (MOBO) Subsidiary of the Company ASKEY INTERNATIONAL CORP. (ASKEYI) Subsidiary of the Company DYNALINK INTERNATIONAL CORP. (DIC) Subsidiary of the Company MAGIC INTERNATIONAL CO., LTD. (MIC) Subsidiary of the Company ASKEY (VIETNAM) COMPANY LIMITED (ASKEYVN) Subsidiary of the Company MAGICOM INTERNATIONAL CORP. (MAGICOM) Subsidiary of the Company ASKEY TECHNOLOGY (SHANGHAI) LTD. (ASKEYSH) Subsidiary of the Company LEADING PROFIT CO., LTD. (LP) Subsidiary of the Company UNI LEADER INTERNATIONAL LTD. (UNI) Subsidiary of the Company OPENBASE LIMITED (OB) Subsidiary of the Company WISE ACCESS (HK) LIMITED (WISE) Subsidiary of the Company SILIGENCE SAS (SILIGENCE) Subsidiary of the Company AGAITECH HOLDING LTD. (AGAHL) Subsidiary of the Company AGAIT TECHNOLOGY (SHENZHEN) LIMITED Subsidiary of the Company (AGASZ) AGAIT TECHNOLOGY (H.K.) CORPORATION Subsidiary of the Company LIMITED (AGAHK) ENERTRONIX INTERNATIONAL LIMITED Subsidiary of the Company (ENIL) ENERTRONIX HOLDING LIMITED (ENHL) Subsidiary of the Company ENERTRONIX (HUIZHOU) LTD. (ENHZ) Subsidiary of the Company AAEON TECHNOLOGY INC. (AAEON) (Note 6) Subsidiary of the Company AAEON ELECTRONICS, INC. (AAEONEI) Subsidiary of the Company AAEON SYSTEMS, INC. (AAEONSI) Subsidiary of the Company AAEON DEVELOPMENT, INC. (AAEONDI) Subsidiary of the Company AAEON TECHNOLOGY CO., LTD. (AAEONTCL) Subsidiary of the Company AAEON TECHNOLOGY (EUROPE) B.V. Subsidiary of the Company (AAEONEU)
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Related Party Relationship with the Company AAEON TECHNOLOGY GMBH (AAEONG) Subsidiary of the Company AAEON INVESTMENT, CO., LTD. (AAEONI) Subsidiary of the Company ONYX HEALTHCARE INC. (ONYX) Subsidiary of the Company AAEON TECHNOLOGY SINGAPORE PTE. LTD. Subsidiary of the Company (AAEONSG) AAEON TECHNOLOGY (SUZHOU) INC. Subsidiary of the Company (AAEONSZ) ONYX HEALTHCARE USA, INC. (ONYXHU) Subsidiary of the Company ACBZ IMPORTACAO E COMERCIO Subsidiary of the Company LTDA. (ACBZ) ASUSTEK COMPUTER (CHONGQING) CO., Subsidiary of the Company LTD. (ACCQ) BIG PROFIT LIMITED (BP) Subsidiary of the Company FAMOUS STAR INVESTMENTS LIMITED (FSI) Subsidiary of the Company ASKEY TECHNOLOGY (JIANGSU) LTD. Subsidiary of the Company (ASKEYJS) ASON TECHNOLOGY (SUZHOU) LTD. (ASON) Subsidiary of the Company ASHINE TECHNOLOGY (SUZHOU) LTD. Subsidiary of the Company (ASHINE) WAVEFACE HOLDING COMPANY LIMITED Subsidiary of the Company (WAVEFACEH) (Note 9) WAVEFACE INC. (WAVEFACE) Subsidiary of the Company NEXT SYSTEM LIMITED (NEXTS) Subsidiary of the Company ASUSTOR INC. (ASUSTOR) Subsidiary of the Company ASUS INDIA PRIVATE LIMITED (ASIN) Subsidiary of the Company PEGATRON CORPORATION (PEGA) Investee company accounted for under the equity method (Note 1) PIOTEK COMPUTER (SUZHOU) CO., LTD. Subsidiary of investee company accounted for (PIOTEK) (Note 4) under the equity method (Note 1) PIOTEK (H.K.) TRADING LIMITED Subsidiary of investee company accounted for (PIOTEKHK) (Note 4) under the equity method (Note 1) ASIAROCK TECHNOLOGY LIMITED (ASIAROCK) Subsidiary of investee company accounted for under the equity method (Note 1) AZUREWAVE TECHNOLOGIES, INC. (AZURE) Subsidiary of investee company accounted for under the equity method (Note 1) ABILITY ENTERPRISE CO., LTD. (ABILITY) Subsidiary of investee company accounted for under the equity method (Note 1) CASETEK COMPUTER (SUZHOU) CO., LTD. Subsidiary of investee company accounted for (CASE) under the equity method (Note 1) AMA PRECISION INC. (AMAP) Subsidiary of investee company accounted for under the equity method (Note 1) PEGATRON JAPAN INC. (PJ) Subsidiary of investee company accounted for under the equity method (Note 1) PEGATRON CZECH S.R.O. (PCZ) Subsidiary of investee company accounted for under the equity method (Note 1) ASFLY TRAVEL SERVICE LIMITED (ASFLY) Subsidiary of investee company accounted for under the equity method (Note 1) CORE-TEK (SHANGHAI) LIMITED (CORE) Subsidiary of investee company accounted for under the equity method (Note 1) POWTEK (SHANGHAI) CO., LTD. (POW) Subsidiary of investee company accounted for under the equity method (Note 1)
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Related Party Relationship with the Company UNIHAN CORPORATION (UNIHAN) Subsidiary of investee company accounted for under the equity method (Note 1) KAEDAR ELECTRONICS (KUNSHAN) CO., Subsidiary of investee company accounted for LTD. (KAEDARKS) under the equity method (Note 1) ASUSPOWER CORPORATION (ASUSP) Subsidiary of investee company accounted for under the equity method (Note 1) MAINTEK COMPUTER (SUZHOU) CO., LTD. Subsidiary of investee company accounted for (MAIN) under the equity method (Note 1) ASLINK (H.K) PRECISION CO., LIMITED (ASLINKHK) Subsidiary of investee company accounted for under the equity method (Note 1) ASROCK INCORPORATION (ASROCK) Subsidiary of investee company accounted for under the equity method (Note 1) ADVANSUS CORP. (ADVANSUS) Subsidiary of investee company accounted for under the equity method (Note 1) TOPTEK PRECISION INDUSTRY (SUZHOU) CO., LTD. Subsidiary of investee company accounted for (TOPSZ) under the equity method (Note 1) PEGA INTERNATIONAL LIMITED (PIL) Subsidiary of investee company accounted for under the equity method (Note 1) RIH LI INTERNATIONAL LIMITED (RIHLI) Subsidiary of investee company accounted for under the equity method ASINT TECHNOLOGY CORPORATION (ASINT) Investee company accounted for under the equity method LITEMAX ELECTRONICS INC. (LITEMAX) Investee company accounted for under the equity method EXCELLIANCE MOS CORPORATION (EMC) Investee company accounted for under the equity method POTIX CORPORATION (CAYMAN) (POTIXC) Investee company accounted for under the equity method POTIX CORPORATION (TAIWAN) (POTIX) Investee company accounted for under the equity method ATECH OEM INC. (ATECH) Investee company accounted for under the equity method MACHVISION, INC. (MACHVISION) Investee company accounted for under the equity method WUJIANG WILL STAR INVESTMENTS LIMITED Non-related party of the Company (Note 7) (WJWS) ASAP INTERNATIONAL CO., LTD. (ASAPHK) Non-related party of the Company (Notes 1 and 3) SHANGHAI INDEED TECHNOLOGY CO., Non-related party of the Company (Note 2) LTD. (SHINDEED) PEGATRON INTERNATIONAL INVESTMENT Non-related party of the Company (Note 5) CO., LTD. (PII) Directors, supervisors, and key management of the Company Directors, supervisors, and key management of the Company Others (related parties with non-significant transactions) Related parties under the definition of SFAS No. 6
Note 1: Subsidiary of the Company before May 31, 2010. Note 2: Investee company accounted for under the equity method before May 31, 2010. Note 3: Subsidiary of investee company accounted for under the equity method from June 1 to December 30, 2010.
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Note 4: BOARDTEK (H.K.) TRADING LIMITED and BOARDTEK COMPUTER (SUZHOU) CO., changed their names to PIOTEK (H.K.) TRADING LIMITED and PIOTEK COMPUTER (SUZHOU) CO., respectively, in 2010. Note 5: Subsidiary of the Company before May 31, 2010 and PII was dissolved on June 10, 2010. Note 6: AAEON merged with SYT on June 1, 2011 with SYT as the surviving company, and changed its name to AAEON on July 4, 2011. Note 7: Subsidiary of the Company before June 29, 2011. Note 8: ECAREME TECHNOLOGIES, INC. changed its name to ASUS CLOUD CORPORATION on November 18, 2011. Note 9: FULLTEK GLOBAL HOLDINGS LTD. changed its name to WAVEFACE HOLDING COMPANY LIMITED on October 26, 2011. (2) Significant transactions and balances with related parties A. Sales 2011/1/1~12/31 2010/1/1~12/31 Amount % Amount % ASTP $ 295,505,139 93 $ 273,375,997 92 ASUTC 16,137,090 5 14,983,948 5 Others 468,018 - 402,380 - $ 312,110,247 98 $ 288,762,325 97 (A) The sales prices of transactions with related parties were decided on the basis of the economic environment and market competition in each sales area. The terms of the transactions are O/A 90 days or open account 30 to 90 days. The terms of the above transactions are similar to those for third parties. (B) The unrealized gain resulting from the above transactions was $2,485,149 and $1,294,000 as of December 31, 2011 and 2010, respectively, and will be realized when the inventories are sold to the third parties.
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B. Purchases (including purchases on behalf) 2011/1/1~12/31 2010/1/1~12/31 Amount % Amount % PEGA $ 166,608,812 35 $ 206,113,685 47 ASINT 2,771,766 1 5,190,484 2 EN 1,329,531 - 403,455 - PIOTEKHK 747,822 - 1,075,565 - PIOTEK 718,067 - 918,880 - Others 916,319 - 1,242,052 - $ 173,092,317 36 $ 214,944,121 49 Purchase terms are open account 30 to 60 days or 7 to 90 days from receipt of goods, which were similar to those for third parties. C. Costs or expenses of processing and rework
2011/1/1~12/31 2010/1/1~12/31 Items Amount Amount PEGA Processing and rework $ 2,105,819 $ 2,162,305 Others 42,533 73,856 $ 2,148,352 $ 2,236,161
D. Accounts receivable 2011/12/31 2010/12/31 Amount % Amount % ASTP $ 50,997,317 92 $ 40,556,458 80 ASUTC 1,829,170 3 1,223,877 2 Others 21,169 - 65,608 - $ 52,847,656 95 $ 41,845,943 82 The Company reclassified accounts receivable from related parties which were overdue for three months to other receivables - related parties amounting to $16 and $198 as of December 31, 2011 and 2010, respectively. E. Other receivables from affiliated companies (non-financing)
2011/12/31 2010/12/31 Amount % Amount % Others $ 16 - $ 198 -
F. Property transactions The Company acquired some equipment from PEGA, CASE, and CORE totaling to $219,662 for the year ended December 31, 2010.
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G. Notes and accounts payable
2011/12/31 2010/12/31 Amount % Amount % PEGA $ 7,969,573 17 $ 8,462,601 19 Others 1,098,838 3 973,101 2 $ 9,068,411 20 $ 9,435,702 21
H. Accrued expenses, other current liabilities and receipts in advance
2011/12/31 2010/12/31 Amount % Amount % PEGA $ 743,454 5 $ 229,181 2 Others 197,878 2 39,410 1 $ 941,332 7 $ 268,591 3
I. Compensation of key management
2011/1/1~12/31 2010/1/1~12/31 (Estimated) (Actual) Salaries $ 105,072 $ 104,548 Bonuses and service execution fees 172,882 161,691 Directors' and supervisors' remuneration and 225,660 226,109 employees' bonuses $ 503,614 $ 492,348
Note: The other information will be available in the annual report for the stockholders’ meeting. 6. PLEDGED ASSETS Book Value Pledged assets Item 2011/12/31 2010/12/31 Purpose Guarantee deposits Pledged time deposit $ 150,206 $ 150,025 Guarantee for import duty
7. COMMITMENTS AND CONTINGENCIES (1) Lawsuits for infringement of intellectual property rights A. In January 2007, a Japanese company filed a lawsuit against the Company and its US subsidiary for infringement of intellectual property rights, but the Japanese company has already withdrawn the lawsuit. In May and September 2007, another plaintiff, a US company, also filed a lawsuit against the Company and its US subsidiary for patent infringement and violation of trade secrets. These lawsuits are currently under investigation in a Utah court in the US. In January 2012, the Company was judged to compensate for the plaintiff by the court, but the Company will appeal to a higher court.
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B. In July 2009, a US B company filed a lawsuit against the Company’s US subsidiary and other third parties for patent infringement of flash memory chips. In July 2009, B company also filed for an investigation with the United Sates International Trade Commission (ITC) against the Company’s suppliers and its customers. In 2011, B Company and Supplier S have reached a settlement and the court has made a judgment and this case was closed. C. In February 2011, a US patentee, GO Company, filed a lawsuit with the United States District Court of Delaware (“Court”) against several defendants including the Company’s client, GA Company, alleging infringement, among others, of its patent. Based on the contract previously signed by the Company and GA Company, the Company has a guaranty liability to GO Company for the event above, and shall bear the lawyer’s fees. The court has currently agreed to suspend this case, but the Company has already recognized the possible loss in the books. D. Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in a Northern California court, in an East Texas court, in a Delaware court and in United States International Trade Commission. The Company cannot presently determine the ultimate outcome of these lawsuits, but has already recognized the possible loss in the books. E. Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in an East Texas court, in a Florida court, in a New Hampshire court, in a Washington court, in a Northern Illinois court, in a California court, in a Delaware court and in United States International Trade Commission. The ultimate outcome of these lawsuits cannot be presently determined as of the report date. (2) To ensure the supply of raw materials, the Company entered into an agreement with a supplier for a guaranteed quantity of materials supply at a discount to market price or at an agreed price. The payment was recognized as prepayment of $150,667 and $5,453,742 as of December 31, 2011 and 2010, respectively. (3) The Company entered into operating lease contracts for its offices and parking spaces. Future lease payments under those leases are as follows:
Year Amount 2012 $ 207,981 2013 131,496
8. SIGNIFICANT DISASTER LOSS: NONE. 9. SUBSEQUENT EVENTS: On February 24, 2012, the Company resolved to increase its capital in UPI Semiconductor Corp. (UPI). The Group will pool $438,128 to acquire 49.5% shares of UPI, which will then become a subsidiary as the Group’s total shares in UPI will account for 53% after combining with the original indirect investment. 10. OTHERS (1) Financial statement presentation Certain accounts in the 2010 financial statements were reclassified to conform with the 2011 financial statement presentation.
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(2) Fair values of the financial instruments
2011/12/31 2010/12/31 Fair value Fair value Estimated Estimated Quotations using a Quotations using a in an active valuation in an active valuation Book value market technique Book value market technique Financial instruments Non-derivative financial instruments Assets Financial assets at fair value $ 9,715,912 $ 9,715,912 $ - $ 8,134,394 $ 8,134,394 $ - through profit or loss - current Available-for-sale financial assets - current 274,792 274,792 - 136,793 136,793 - Available-for-sale financial assets - non-current 7,068,339 7,068,339 - 6,346,516 6,346,516 - Financial assets caried at cost - current 372 - - 372 - - Financial assets caried at cost - non-current 107,579 - - 400,520 - - Liabilities Bonds payable (including current portion) - - - 2,412,309 - 2,415,377
Derivative financial instruments Assets Financial assets at fair value through profit or loss - current Forward exchange contracts 21,391 - 21,391 - - - Currency options contracts - - - 3,004 - 3,004 Liabilities Financial liabilities at fair value through profit or loss - current Call/put option and conversion right - - - 104,525 - 104,525 - bonds payable Forward exchange contracts 32,695 - 32,695 - - - Currency options contracts - - - 1,370 - 1,370
The methods and assumptions used to estimate the fair values of the above financial instruments are summarized below: A. The above financial instruments exclude cash and cash equivalents, notes/accounts receivable (including related parties), other receivables (including related parties), refundable deposits, notes/accounts payable (including related parties), accrued expenses, dividends payable, other current liabilities and guarantee deposits received. For such financial instruments, the fair values were determined based on their carrying values because of the short maturities of the instruments. B. The fair values of financial assets at fair value through profit or loss and available-for-sale financial assets are based on quoted market prices in an active market. If the market for a financial instrument is not active, an entity establishes fair value by using a valuation technique. The Company uses estimates and assumptions that are consistent with information that market participants would use in setting a price for these financial instruments.
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C. The fair value of convertible bonds payable is not available, and a valuation technique is used. The assumptions used in the said valuation are the same as those used by financial market traders when quoting their prices. However, the fair value is not expected to equal future cash outflow. D. The fair values of derivative financial instruments which include unrealized gain or loss on unsettled contracts were determined based on the amounts to be received or paid assuming that the contracts were settled as of the reporting date. E. Financial assets carried at cost and held to maturity are invested in unquoted equity instruments and mutual fund bond obligations whose fair value cannot be estimated. (3) Procedure of financial risk control The management can effectively control significant market risks after appropriately taking into consideration the economic environment, competition, and changes of market value risk by setting the goal of risk management. (4) Information of material financial risk A. Market risk (A) The main currency for purchases and sales of the Company is the US dollar. The Company uses the principle of natural hedge to mitigate the risk and utilizes spot or forward exchange contracts and currency option contracts to hedge foreign currency risk. The forward exchange and currency option contracts’ duration corresponds to the Company’s foreign currency assets’ and liabilities’ due date and future cash flows. The exchange gain and loss resulting from foreign currency assets and liabilities will be offset by the exchange gain and loss resulting from the hedged item. (B) The open-end funds and listed and OTC stocks held by the Company are classified as financial assets at fair value through profit or loss and available-for-sale financial assets. As these assets are measured at fair value, the Company has risk exposure related to changes in fair value in an equity securities market. (C) Information of significant foreign currency denominated assets and liabilities:
2011/12/31 2010/12/31 Foreign Currency Foreign Currency (in dollars) Rate NTD (in dollars) Rate NTD Financial assets Monetary item USD $ 2,069,185,553 30.275 $ 62,644,593 $ 1,790,476,186 29.13 $ 52,156,571 Long-term equity investments accounted for under the equity method USD 663,488,476 30.275 20,087,114 401,932,589 29.13 11,708,296 Financial liabilities Monetary item USD 1,692,874,003 30.275 51,251,760 1,566,947,170 29.13 45,645,171
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128
B. Credit risk (A) Credit risk means the potential loss of the Company if the counterparty involved in that transaction defaults. Since the Company’s derivative financial instrument agreements are entered into with international financial institutions with good credit ratings, management believes that there is no significant credit risk from these transactions. (B) The primary potential credit risk is from financial instruments like cash, bank deposits, equity securities under non-equity method, and accounts receivable. The Company deposits cash in different financial institutions. Equity securities under non-equity method were funds and listed and OTC stocks issued by companies with good credit ratings. The Company manages credit risk exposure related to each financial institution and believes that there is no significant concentration of credit risk of cash and equity securities. The customers of the Company have good credit and profit records. The Company evaluates the financial condition of these customers in order to reduce credit risk of accounts receivable. C. Liquidity risk (A) The Company adjusts its funding mainly through corporate bonds, cash and bank deposits. The Company maintains funding sufficient to fulfill all contract obligations, and thereby expects no significant liquidity risk would arise from lack of funding. (B) The Company invests in funds and listed and OTC stocks, which are traded in active markets and are expected to be readily converted into certain amount of cash approximate to their fair values in the market. The Company has lower funding risk for forward exchange contracts and currency option contracts because sufficient working capital is maintained to fulfill contract obligations, and lower cash flow risk as the exchange rate of those contracts was known. (C) The Company is expected to have liquidity risk since investments in equity instruments carried at cost have no active market.
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129 Independent Auditors’ Report
To the Board of Directors and Shareholders of
ASUSTEK COMPUTER INC.:
We have audited the accompanying consolidated balance sheets of ASUSTEK COMPUTER INC. and its subsidiaries as of December 31, 2011 and 2010, the related consolidated statements of income, of changes in stockholders’ equity and of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of certain consolidated subsidiaries and long-term equity investments accounted for under the equity method, which statements reflect total assets of $38,879,274,000 and $34,108,817,000 (including the long-term equity investments amounting to $22,656,486,000 and $22,353,615,000), constituting 17.85% and 17.48% of consolidated total assets as of December 31, 2011 and 2010, respectively, total operating revenues of $56,439,989,000 and $128,983,343,000, constituting 14.69% and 30.01% of consolidated operating revenues for the years then ended, respectively, and the related consolidated investment income of $22,472,000 and $1,110,908,000 for the years then ended, respectively. The financial statements of these investee companies were audited by other auditors whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included in the consolidated financial statements and information disclosed relative to these consolidated subsidiaries and long-term equity investments, is based solely on the reports of the other auditors.
We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. ~2~
130 In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of ASUSTEK COMPUTER INC. and its subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and generally accepted accounting principles in the Republic of China.
As described in Note 4(8), ASUSTEK COMPUTER INC. spun off the OEM assets and business (ASUSTEK COMPUTER INC.’s long-term equity investment in PEGATRON CORPORATION) to PEGATRON INTERNATIONAL INVESTMENT CO. on June 1, 2010. PEGATRON INTERNATIONAL INVESTMENT CO. then issued new shares to the Company and its shareholders as consideration. Further, the Company had a capital reduction of 85%.
PricewaterhouseCoopers, Taiwan March 23, 2012
The accompanying consolidated financial statements are not intended to present the financial position, and results of operations and cash flows in accordance with accounting principles in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such consolidated financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the consolidated financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any error or misunderstandings that may derive from the translation. ~3~
131 ASUSTEK COMPUTER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
December 31, 2011 December 31, 2010 ASSETS Notes AMOUNT % AMOUNT % Current Assets Cash and cash equivalents 4(1) $ 41,197,108 19 $ 41,746,540 21 Financial assets at fair value through profit or loss - current 4(2) 11,610,195 5 10,641,206 6 Available-for-sale financial assets - current 4(3) 333,923 - 136,793 - Derivative financial assets for hedging - current 4(5) 1,354,470 1 386,387 - Financial assets carried at cost - current 4(4) 372 - 372 - Notes and accounts receivable 4(6) 43,104,012 20 41,641,686 21 Notes and accounts receivable - related parties 5 558,248 - 398,299 - Other receivables 5 9,096,576 4 3,807,594 2 Inventories 4(7) 57,897,547 27 45,797,185 24 Prepayments 4(16) and 7 4,266,674 2 7,148,143 4 Deferred income tax assets - current 4(21) 2,107,897 1 1,638,031 1 Other current assets - others 6 604,051 - 107,939 - 172,131,073 79 153,450,175 79 Funds and Investments Available-for-sale financial assets - non-current 4(3) 7,087,683 3 6,366,348 3 Financial assets carried at cost - non-current 4(4) 653,172 - 1,090,035 1 Long-term equity investments accounted for under the 4(8) equity method 22,745,490 11 22,360,166 11 Investments - land use right - - 324,471 - 30,486,345 14 30,141,020 15 Property, Plant and Equipment 4(9), 5 and 6 Cost Land 1,998,367 1 1,443,596 1 Buildings 6,170,284 3 5,528,478 3 Machinery and equipment 2,941,414 1 2,652,243 1 Instruments and equipment 1,663,102 1 1,601,962 1 Other equipment 3,247,137 2 3,775,647 2 Revaluation increments 91,906 - - - Cost and revaluation increments 16,112,210 8 15,001,926 8 Less: Accumulated depreciation and impairment ( 6,043,557 )( 3 )( 5,885,111 )( 3 ) Prepayments for equipment 440,870 - 161,003 - 10,509,523 5 9,277,818 5 Intangible Assets Computer software and others 151,456 - 153,738 - Goodwill 4(12) 1,181,373 1 - - Other intangible assets 1,036,925 - 213,331 - 2,369,754 1 367,069 - Other Assets Leased assets 4(10) 143,108 - 137,316 - Refundable deposits 6 and 7 290,273 - 265,695 - Deferred expenses 162,765 - 198,928 - Deferred income tax assets - non-current 4(21) 1,582,487 1 1,150,216 1 Other assets - others 4(11) and 6 194,622 - 117,951 - 2,373,255 1 1,870,106 1 TOTAL ASSETS $ 217,869,950 100 $ 195,106,188 100
(Continued)
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132 ASUSTEK COMPUTER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
December 31, 2011 December 31, 2010 LIABILITIES AND STOCKHOLDERS' EQUITY Notes AMOUNT % AMOUNT % Current Liabilities Short-term loans 4(13) $ 2,820,856 1 $ 3,860,363 2 Financial liabilities at fair value through profit or loss - 4(2)(14) current 37,052 - 263,704 - Derivative financial liabilities for hedging - current 4(5) - - 185,732 - Notes and accounts payable 44,532,307 20 41,220,842 21 Notes and accounts payable - related parties 5 8,629,782 4 9,287,080 5 Income tax payable 4(21) 2,683,337 1 2,231,977 1 Accrued expenses 4(16)(19) and 5 34,254,013 16 23,790,462 12 Receipts in advance 5 2,513,982 1 1,451,768 1 Current portion of long-term loans 4(15) 983,938 1 291,300 - Current portion of bonds payable 4(14) - - 2,412,309 1 Other current liabilities 5 1,352,781 1 271,064 - 97,808,048 45 85,266,601 43 Long-term liabilities Long-term loans 4(15) 834,498 - 1,456,500 1 Other Liabilities Deferred income tax liabilities - non-current 4(21) 2,845,092 2 1,905,362 1 Other liabilities - others 207,626 - 119,445 - 3,052,718 2 2,024,807 1 Total Liabilities 101,695,264 47 88,747,908 45 Stockholders' Equity Capital 4(17) Common stock 7,527,603 3 6,270,166 3 Additional paid-in capital 4(18) Common stock share premium 4,284,888 2 4,205,880 2 Others 377,667 - 276,244 - Retained earnings 4(19)(21) Legal reserve 21,806,955 10 20,158,120 10 Undistributed earnings 77,293,325 36 74,802,015 39 Other adjustments to stockholders' equity Cumulative translation adjustments 715,457 - ( 1,066,766 ) - Net loss not recognized as pension cost 122 - 11 - Unrealized gain on financial instruments 4(3) 1,514,237 1 1,197,335 1 Unrealized revaluation increment 73,526 - - - Unrealized gain on cash flow hedges 4(5) 1,354,470 1 200,655 - 114,948,250 53 106,043,660 55 Minority interests 1,226,436 - 314,620 - Total Stockholders' Equity 116,174,686 53 106,358,280 55 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 217,869,950 100 $ 195,106,188 100
The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 23, 2012. ~5~
133 ASUSTEK COMPUTER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT EARNING PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31, 2011 2010 Items Notes AMOUNT % AMOUNT %
Sales revenues 5 $ 384,112,294 100 $ 429,721,249 100 Cost of goods sold 4(7)(16) (19)(23) and 5 ( 331,043,154 )( 86 ) ( 377,858,761 )( 88 ) Gross profit 53,069,140 14 51,862,488 12 Operating expenses 4(16)(19) (23) and 5 Selling ( 22,167,328 )( 6 ) ( 18,292,802 )( 4 ) General and administrative ( 4,988,744 )( 1 ) ( 6,224,202 )( 1 ) Research and development ( 7,692,322 )( 2 ) ( 8,370,211 )( 2 ) Total operating expenses ( 34,848,394 )( 9 ) ( 32,887,215 )( 7 ) Operating income 18,220,746 5 18,975,273 5 Non-operating income and gains Interest income 369,387 - 245,222 - Investment income accounted for 4(8) under the equity method 24,826 - 1,110,159 - Dividends 320,720 - 362,148 - Gain on disposal of investments 429,491 - 540,364 - Foreign currency exchange gain, net 1,848,263 1 - - Gain on valuation of financial assets, 4(2) net 256,902 - 1,373,218 1 Others 541,462 - 1,038,379 - Total non-operating income and gains 3,791,051 1 4,669,490 1 Non-operating expenses and losses Interest expense 4(14) ( 128,960 ) - ( 207,620 ) - Foreign currency exchange loss, net - - ( 820,950 ) - Loss on valuation of financial 4(2) liabilities, net ( 1,246,772 )( 1 ) ( 324,249 ) - Others ( 501,834 ) - ( 866,210 )( 1 ) Total non-operating expenses and losses ( 1,877,566 )( 1 ) ( 2,219,029 )( 1 ) Income before income tax 20,134,231 5 21,425,734 5 Income tax expense 4(21) ( 3,286,833 )( 1 ) ( 3,386,131 )( 1 ) Consolidated net income $ 16,847,398 4 $ 18,039,603 4 Attributable to: Parent Company $ 16,578,159 4 $ 16,488,357 4 Minority interests 269,239 - 1,551,246 - $ 16,847,398 4 $ 18,039,603 4
Before Tax After Tax Before Tax After Tax Earnings per share (In dollars) 4(22) Basic earnings per share $ 26.26 $ 21.99 $ 7.25 $ 6.32 Diluted earnings per share $ 25.75 $ 21.55 $ 7.11 $ 6.19
The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 23, 2012.
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134 2,706 1,151 31,287 15,491 Total 197,650,964 106,358,280 106,358,280 116,174,686 - ( 366,362 ) -- - ( 8,918,232 ) -- (- ( 41,764- ) 2,457,079 ) -- 639,744 -- -- - ( 8,638,233 ) -- (- 1,204 ) - 130,595 - 1,782,200 -- 521,721 - - 1,125,283 - ( 2,321,248 ) - ( 2,609,422 ) s 1,151 269,239642,577 16,847,398 642,577 interest 1,551,246 18,039,603 Minority $ 24,466,987 $ $ 314,620$ $ 314,620 $ $ 1,226,436 $ ( 25,704,764 ) ( 95,902,490 ) ) ) - - 3,105 tock s Treasury ------(- 2,321,248 -- -- 2,318,143 ------(-- 2,609,422 -- 2,609,422 1,153,815 Unrealized flow hedges gain on cash $ 306,361 $ - $ 200,655$ $ 200,655 $ - - $ 1,354,470 $ - ( 105,706 ) ------73,526 73,526 Equity ncrement ’ i Unrealized revaluation ------instruments on financial Unrealized gain ------639,744 - - 521,721 - - - - cost Other Adjustments to Stockholders as pension recognized Net loss not ------779 (- 364,194 ) - 111 ( 204,819 ) - - - 3-- - - ~7~ translation Cumulative adjustments - - (- 2,457,079 ) - - -- 1,782,200 - ( 1,342 ) 32 ( 16,379 ) earnings Undistributed ASUSTEK COMPUTER INC. AND SUBSIDIARIES - ( 8,918,232- ) ------(------16,488,357 399 ) -- ( ( 1,357,437- ) 8,638,233 ) ------16,578,159 - ( 6,983,398 )- ( 99,230 ) 2,402 (- 1,221,037 ) ( 2,151,564 ) - ( 2,442,344 ) See report of independent accountants dated March 23, 2012. FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) Retained Earnings 1,247,907 ( 1,247,907 ) 1,648,835 ( 1,648,835 ) $ 18,910,213 $ 77,615,158 $ 1,490,885 ($ 3,202 ) $ 2,159,201 $ $ 20,158,120 $$ 74,802,015 20,158,120 ($ 1,066,766 $ ) 74,802,015 $ ($ 1,066,766 ) 11 $ $ 11 1,197,335 $ $ 1,197,335 $ $ 21,806,955 $ 77,293,325 $ 715,457 $ 122 $ 1,514,237 $ CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY The accompanying notes are an integral part of these consolidated financial statements. Legal reserve ) ) ) )--2 ) ------1,227 24,075 31,287 66,579 15,491 67,078 102,759 102,650 130,595 4,482,124 4,482,124 4,662,555 in capital - 30,237,586 25,798,854 Additional paid - - -( ------( stock 1,357,437 Common $ 6,270,166 $ $ 6,270,166 $ $ 7,527,603 $ $42,467,775 $ ( 36,097,609 ) ( ( 100,000 ) ( ( 100,000 ) ( 2011 2010 accounted for under the equity method companies' net stockholders' equity companies' net stockholders' equity financial assets increasing in long-term equityaccounted investments for under the equity method financial assets accounted for under the equity method Legal reserve Legal reserve Cash dividends Dividends transferred to common stock Cash dividends Balance at December 31, 2010 Effect of disposal of long-term investments Appropriations of 2009 earnings (Note 4(19)) Effect of changes in ownership percentage of investee Balance at January 1, 2011 Appropriations of 2010 earnings (Note 4(19)) Effect of changes in ownership percentage of investee Effect of adjustments to spin off and capital reduction Dividends on shares held inForeign currency trust translation adjustments paid to employees Effect of changes in valuation of available-for-sale Purchase of treasury stock Transfer of treasury stock Retirement of treasury stock Consolidated net income for 2010 Dividends on shares held inDividends trust paid on to shares employees held in trust transferred for Foreign currency translation adjustments Effect of changes in valuation of available-for-sale Purchase of treasury stock Retirement of treasury stock Consolidated net income for 2011 Changes in minority interests Balance at December 31, 2011 Changes in minority interests Balance at January 1, 2010 Effect of disposal of long-term investments
135 ASUSTEK COMPUTER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
2011 2010
Cash flows from operating activities Consolidated net income $ 16,847,398 $ 18,039,603 Adjustments to reconcile consolidated net income to net cash provided by operating activities Depreciation, amortization and impairment 2,791,970 5,836,834 Cash dividends received from long-term investee companies accounted for under the equity method 812,310 4,008,093 Investment income accounted for under the equity method ( 24,826 ) ( 1,110,159 ) Gain on disposal of investments ( 429,491 ) ( 540,364 ) Changes in assets and liabilities Financial assets at fair value through profit or loss - current ( 890,981 ) 4,315,909 Notes and accounts receivable (including related parties) ( 1,171,997 ) ( 9,043,111 ) Other receivables ( 5,867,219 ) 3,105,645 Inventories ( 11,800,519 ) 148,603 Prepayments 2,885,078 ( 2,276,614 ) Other current assets - others ( 495,778 ) 958,210 Financial liabilities at fair value through profit or loss - current ( 228,126 ) 7,073 Notes and accounts payable (including related parties) 3,046,228 2,328,794 Income tax payable 422,609 ( 442,723 ) Accrued expenses 10,215,093 9,066,870 Receipts in advance 1,046,147 42,762 Other current liabilities 1,050,359 ( 8,759,169 ) Deferred income tax assets and liabilities ( 77,135 ) ( 234,543 ) Others 345,926 90,211 Net cash provided by operating activities 18,477,046 25,541,924 Cash flows from investing activities Increase in funds and investments ( 551,383 ) ( 172,424 ) Proceeds from disposal of funds and investments 616,098 2,075,970 Acquisition of property, plant and equipment ( 2,525,073 ) ( 1,628,158 ) Proceeds from disposal of property, plant and equipment 58,554 303,178 Proceeds from disposal of leased assets 222,616 13,898 Increase in deferred expenses and intangible assets ( 199,940 ) ( 130,334 ) Increase in refundable deposits ( 21,656 ) ( 50,898 ) (Increase) decrease in other assets - others ( 77,137 ) 150,611 Acquisition of subsidiaries ( 5,000,097 ) - Proceeds from disposal of subsidiaries 747,404 - Others - 89,198 Net cash (used in) provided by investing activities ( 6,730,614 ) 651,041 Cash flows from financing activities (Decrease) increase in short-term loans ( 1,039,507 ) 2,286,302 Redemption of bonds payable ( 2,459,400 ) ( 1,346,450 ) Increase in long-term loans 288,393 850,102 Redemption of long-term loans ( 299,986 ) ( 1,128,667 ) Redemption of treasury stock ( 2,609,422 ) ( 2,321,248 ) Payment of cash dividends ( 8,638,233 ) ( 8,918,232 ) Changes in minority interests 1,519,071 1,178 Others ( 5,932 ) 7,327 Net cash (used in) financing activities ( 13,245,016 ) ( 10,569,688 ) Effects due to changes in exchange rate 641,780 ( 1,053,209 ) Effects due to changes in consolidated subsidiaries ( 306,150 ) ( 39,076,730 ) Cash acquired from acquisition of subsidiaries 613,522 - Decrease in cash and cash equivalents ( 549,432 ) ( 24,506,662 ) Cash and cash equivalents at beginning of year 41,746,540 66,253,202 Cash and cash equivalents at end of year $ 41,197,108 $ 41,746,540
(Continued)
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136 ASUSTEK COMPUTER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
2011 2010
Supplemental disclosures of cash flow information Cash paid during the year for interest $ 71,973 $ 127,863
Cash paid during the year for income tax $ 3,749,973 $ 3,770,913
Investing and financing activities that result in non-cash flow: Bonds payable - payable in one year $ - $ 2,412,309
Long-term loans - payable in one year $ 983,938 $ 291,300
Cash acquired from acquisition of subsidiaries Cash paid for subsidiaries $ 5,000,097 $ - Cash paid for minitory interests 328,675 - Cash paid for acquisition 5,328,772 - Non-cash assets acquired ( 3,518,714 ) - Liabilities assumed 504,871 - Goodwill ( 1,748,745 ) - Minority interests 50,731 - Other loss ( 3,345 ) - Effects due to changes in exchange rate ( 48 ) - Cash acquired from acquisition $ 613,522 $ -
Effect on statement of cash flow due to disposal of subsidiaries Cash $ 306,150 $ - Other receivables 120 - Investment - land use right 326,182 - Accrued expenses ( 17,668 ) - Net value in subsidiaries' equity 614,784 - Add: gain on disposal of subsidiaries 326,645 - Less: effects due to changes in exchange rate ( 60,983 ) - 880,446 - Less: other receivables ( 133,042 ) - Cash received from disposal of subsidiaries $ 747,404 $ -
Effect on statement of cash flow due to change in consolidated subsidiaries on record date of spin-off Net assets of subsidiaries on record date of spin-off $ - $ 119,504,391 Reduction of parent company's stockholder's equity due to spin-off - ( 70,197,726 ) Reclassified to financial assets carried at cost - ( 202,660 ) Reduction of minority interests due to spin-off - ( 25,704,764 ) Net increase in long-term investment accounted for under the equity method $ - $ 23,399,241
The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated March 23, 2012.
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137 ASUSTEK COMPUTER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)
1. HISTORY AND ORGANIZATION
(1) ASUSTEK COMPUTER INC. (ASUS or the Company) was established on April 2, 1990. The Company’s common shares are listed on the Taiwan Stock Exchange (TSE) on November 14, 1996. Its main activities are to produce, design and sell notebook PCs, main boards, software, add-on cards, optics, wired and wireless communication equipment and telecom-restricted radio frequency devices. (2) The Company resolved to spin-off its OEM businesses on January 1, 2008. Pursuant to the Company’s resolution, the Company transferred its computer and non-computer OEM businesses to its spun-off subsidiaries PEGA and UNIHAN, respectively. On June 1, 2010, however, the Company transferred further its OEM assets and business (the Company’s long-term equity investment in PEGA) to the Company’s another investee, PII. PII issued new shares to the Company and its shareholders as consideration. (3) The Group’s headcount totaled 21,361 and 18,850 as of December 31, 2011 and 2010, respectively. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and generally accepted accounting principles in the Republic of China. The Group’s significant accounting policies are as follows: (1) Basis of consolidation A. When the Group holds more than 50% of the voting rights of investees (including the exercisable and convertible potential voting rights owned by the Group, except when there is any evidence indicating that the Group has no controlling power from their percentage of ownership) or when any one of the criteria listed below is met, the Group is considered to have control over the investees.The Group not only accounts for such investments under the equity method, but also consolidates them into the Group’s consolidated financial statements quarterly. (A) Control over more than half of the voting rights by virtue of an agreement with other investors. (B) Power to govern the financial, operating and personnel policies of the entity under a statute or an agreement. (C) Power to appoint or remove more than half of the members of the board of directors (or its equivalent) and control of the entity is by that board (or its equivalent).
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138 (D) Power to cast more than half of the voting rights of the board of directors (or its equivalent) and control of the entity is by that board (or its equivalent). (E) Other facts and circumstances that contribute to control. B. Subsidiaries included in the consolidated financial statements and the Company’s direct and indirect percentages of ownership are as follows:
Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark ASUS ASUSCOMPUTER Sales and repair service center in 100.00 100.00 INTERNATIONAL (ACI) North America ASUS ASUS TECHNOLOGY Trading electronic appliances, 100.00 100.00 INCORPORATION communication appliances, data (ASUTC) software, electronic material and office equipment ASUS AXUSMICROSYSTEMSINC. Designing, manufacturing, 85.00 85.00 (AXUS) processing and selling storage products ASUS SHINEWAVE Software R&D 51.00 51.00 INTERNATIONAL INC. (SWI) ASUS ASUS HOLLAND B.V. (ACH) Sales and repair service center in 100.00 100.00 Europe ASUS ASUSINTERNATIONAL Investing activities 100.00 100.00 LIMITED (AIL) ASUS ASUSTEK HOLDINGS Investing activities 100.00 100.00 LIMITED (AHL) ASUS ASUSCHANNEL Investing and trading activities 100.00 100.00 CORPORATION (ASUSCH) ASUS ASUS CLOUD Network service 82.50 77.00 Note 6 CORPORATION (ASUSCLOUD) ASUS INTERNATIONALUNITED Database service, wired 56.73 56..73 TECHNOLOGY CO., LTD. communication, manufacturing (TAIWAN) (IUT) mechanical equipment, and manufacturing, selling and developing ink-jet printing technology ASUS ASMEDIA TECHNOLOGY Designing products and data 52.31 46.02 INC. (ASMEDIA) software, information processing and supply ASUS ASKEY COMPUTER CORP. Designing, manufacturing and 100.00 100.00 (ASKEY) selling modems, peripheral equipment, transportable equipment and related spare parts
~11~
139 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
ASUS PEGATRONCORPORATION Designing, manufacturing, - - Note 1 (PEGA) maintaining and selling computer peripherals and audio-video products ASUS PEGATRON Investing activities - - Note 1 INTERNATIONAL Note 5 INVESTMENT CO., LTD. (PII) ASUS HUA-CHENG VENTURE Venture capital investing 100.00 100.00 CAPITAL CORP. (HCVC) activities ASUS HUA-MININVESTMENT Investing activities 100.00 100.00 CO., LTD. (HMI) ASUS AGAITTECHNOLOGY Designing and selling computer 100.00 100.00 CORPORATION (AGA) peripherals ASUS ENERTRONIX, INC. (EN) Wireless receiver and wired 100.00 100.00 communication equipment ASUS SHUO-YANG TECHNOLOGY Manufacturing and selling 47.00 47.00 Note 3 INC. (AAEON) computer peripherals, electronic parts, precision equipment, wireless communication equipment and data software SWI EMES (SUZHOU) CO., LTD. Computer security systems, 100.00 100.00 GROUP (EMES) messenger management systems, and automation systems R&D; providing related technology and after-sales service ASMEDIA GREAT EXTEND Providing management consulting 100.00 100.00 GROUP INVESTMENT CORP. (GEI) service ASKEY ASKEY INTERNATIONAL Providing services and selling 100.00 100.00 GROUP CORP. (ASKEYI) communication products ASKEY DYNALINK Investment in overseas companies 100.00 100.00 GROUP INTERNATIONAL CORP. (DIC) ASKEY MAGIC INTERNATIONAL Investment in overseas companies 100.00 100.00 GROUP CO., LTD. (MIC) ASKEY ASKEY (VIETNAM) Manufacturing and selling 100.00 100.00 GROUP COMPANY LIMITED communication products (ASKEYVN) ASKEY DOUBLE TECH LTD. (DT) Merchandise trading - 100.00 Note 2 GROUP ASKEY BIG PROFIT LIMITED (BP) Merchandise trading 100.00 100.00 GROUP ASKEY FAMOUS STAR Investment in overseas companies 100.00 100.00 GROUP INVESTMENTS LIMITED (FSI) ASKEY MAGICOM Investment in overseas companies 100.00 100.00 GROUP INTERNATIONAL CORP. (MAGICOM)
~12~
140 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
ASKEY ASKEY TECHNOLOGY Developing and selling 100.00 100.00 GROUP (SHANGHAI) communication products LTD. (ASKEYSH) ASKEY OPENBASE LIMITED (OB) Merchandise trading 100.00 100.00 GROUP ASKEY GOODSMART Merchandise trading - 100.00 Note 2 GROUP INTERNATIONAL LTD. (GS) ASKEY LEADING PROFIT CO., LTD. Merchandise trading 100.00 100.00 GROUP (LP) ASKEY UNI LEADER Merchandise trading 100.00 100.00 GROUP INTERNATIONAL LTD. (UNI) ASKEY ASKEY TECHNOLOGY Manufacturing and selling 100.00 100.00 GROUP (JIANGSU) LTD. communication products (ASKEYJS) ASKEY ASON TECHNOLOGY Manufacturing and selling 100.00 100.00 GROUP (SUZHOU) LTD. (ASON) communication products ASKEY ASHINE TECHNOLOGY Manufacturing and selling 100.00 100.00 GROUP (SUZHOU) LTD. (ASHINE) communication products ASKEY WISE ACCESS (HK) Providing services and selling 100.00 - GROUP LIMITED (WISE) communication products ASKEY SILIGENCE SAS Providing services and selling 80.00 - GROUP (SILIGENCE) communication products ASKEY WUJIANG WILL STAR Developing, constructing and - 100.00 Note 2 GROUP INVESTMENTS LIMITED selling real estate projects (WJWS) IUT INTERNATIONAL UNITED Trading activities 100.00 100.00 GROUP TECHNOLOGY CO., LTD. (IUTS) HCVC ASMEDIA TECHNOLOGY Designing products and data 9.08 9.80 GROUP INC. (ASMEDIA) software, information processing and supply HCVC SHUO-YANG TECHNOLOGY Manufacturing and selling 9.00 9.00 Note 3 GROUP INC. (AAEON) computer peripherals, electronic parts, precision equipment, wireless communication equipment and data software HMI ASMEDIA TECHNOLOGY Designing products and data 4.45 4.80 GROUP INC. (ASMEDIA) software, information processing and supply HMI SHUO-YANG TECHNOLOGY Manufacturing and selling 9.00 9.00 Note 3 GROUP INC. (AAEON) computer peripherals, electronic parts, precision equipment, wireless communication equipment and data software
~13~
141 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
HMI MOBOSTAR TECHNOLOGY Investing and trading activities 100.00 100.00 GROUP LIMITED (MOBO) AGA AGAITECH HOLDING LTD. Investing and trading activities 100.00 100.00 GROUP (AGAHL) AGA AGAIT TECHNOLOGY (H.K.) Investing and trading activities 100.00 100.00 GROUP CORPORATION LIMITED (AGAHK) AGA AGAIT TECHNOLOGY Investing and trading activities 100.00 100.00 GROUP (SHENZHEN) LIMITED (AGASZ) EN ENERTRONIX Investing and trading activities 100.00 100.00 GROUP INTERNATIONAL LIMITED (ENIL) EN ENERTRONIX HOLDING Investing and trading activities 100.00 100.00 GROUP LIMITED (ENHL) EN ENERTRONIX (HUIZHOU) Manufacturing and selling new 100.00 100.00 GROUP LTD. (ENHZ) electronic parts AAEON AAEON TECHNOLOGY INC. Manufacturing, developing and - - Note 3 GROUP (AAEON) selling computer peripheral AAEON AAEON ELECTRONICS, INC. Selling computer peripheral 100.00 - GROUP (AAEONEI) devices AAEON AAEON SYSTEMS, INC. Selling computer peripheral 100.00 - GROUP (AAEONSI) devices AAEON AAEON DEVELOPMENT, Trading and investing activities 100.00 - GROUP INC. (AAEONDI) AAEON AAEON TECHNOLOGY CO., Trading and investing activities 100.00 - GROUP LTD. (AAEONTCL) AAEON AAEON TECHNOLOGY Selling computer peripheral 100.00 - GROUP (EUROPE) B.V. devices (AAEONEU) AAEON AAEON TECHNOLOGY Selling computer peripheral 100.00 - GROUP GMBH (AAEONG) devices AAEON AAEON INVESTMENT, CO., Investing activities 100.00 - GROUP LTD. (AAEONI) AAEON ONYX HEALTHCARE INC. Selling computer peripheral 100.00 - GROUP (ONYXHU) devices AAEON ONYX HEALTHCARE USA Selling computer peripheral 100.00 - GROUP INC. (ONYXHU) devices AAEON AAEON TECHNOLOGY Selling computer peripheral 94.20 - GROUP SINGAPORE PTE. LTD. devices (AAEONSG) AAEON AAEON TECHNOLOGY Manufacturing and selling 100.00 - GROUP (SUZHOU) INC. industrial computer and adapter (AAEONSZ) AHL CENTRAL TEC ASIA Investing and trading activities 100.00 100.00 GROUP LIMITED (CTEC)
~14~
142 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
AHL ASUS COMPUTER Repairing computers, electronic 100.00 100.00 GROUP (SHANGHAI) CO., LTD. components and related (ACS) products, and providing after-sales service AHL WAVEFACE HOLDING Investing and trading activities 77.78 - Note 7 GROUP COMPANY LIMITED (WAVEFACEH) AHL WAVEFACE INC. Software R&D 77.78 - GROUP (WAVEFACE) AHL NEXT SYSTEM LIMITED Investing and trading activities 51.47 - GROUP (NEXTS) AHL ASUSTOR INC. (ASUSTOR) Designing and selling data storage 51.47 - GROUP devices and computer peripheral products AIL DEEP DELIGHT LIMITED Investing and trading activities 100.00 100.00 GROUP (DDL) AIL CHANNEL PILOT LIMITED Investing and trading activities 100.00 100.00 GROUP (CHANNEL) AIL UNIMAX HOLDINGS Investing and trading activities 100.00 100.00 GROUP LIMITED (UHL) AIL ASUS COMPUTER Investing and trading activities 100.00 100.00 GROUP CORPORATION (ACBVI) AIL ASUS TECHNOLOGY PTE. Trading of IT products 100.00 100.00 GROUP LIMITED (ASTP) AIL ASUS MIDDLE EAST FZCO Sales and repair service center in 100.00 100.00 GROUP (ACAE) Middle East AIL ASUS EGYPT L.L.C. (ACEG) Sales and service center in Egypt 100.00 100.00 GROUP AIL ASUS COMPUTER GMBH Sales and repair service center in 100.00 100.00 GROUP (ACG) Germany AIL ASUS COMPUTER Sales and service center in 100.00 100.00 GROUP BENELUX B.V. (ACBNL) Netherlands AIL ASUS FRANCE SARL (ACF) Sales and service center in France 100.00 100.00 GROUP AIL ASUSTEK (UK) LIMITED Sales and service center in UK 100.00 100.00 GROUP (ACUK) AIL ASUS TECHNOLOGY (HONG Sales and repair service center in 100.00 100.00 GROUP KONG) LIMITED (ACHK) Hong Kong AIL ASUS KOREA CO., LTD. Sales and repair service center in 100.00 100.00 GROUP (ACKR) Korea AIL ASUSTEK COMPUTER(S) Sales and repair service center in 100.00 100.00 GROUP PTE. LTD. (ACSG) Singapore AIL ASUS POLSKA SP. Z O.O. Sales and service center in Polska 100.00 100.00 GROUP (ACPL) AIL ASUS TECHNOLOGY Sales and repair service center in 100.00 100.00 GROUP PRIVATE LIMITED (ACIN) India AIL ASUS TECHNOLOGY Investing and trading activities 100.00 100.00 GROUP HOLLAND B.V. (ACNL)
~15~
143 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
AIL ASUS TECHNOLOGY Repair service center in Vietnam 100.00 100.00 GROUP (VIETNAM) CO., LTD. (ACVN) AIL ASUSTEK ITALY S.R.L. Sales and service center in Italy 100.00 100.00 GROUP (ACIT) AIL ASUS IBERICA S.L. (ACIB) Sales and service center in Spain 100.00 100.00 GROUP AIL ASUS TECHNOLOGY Researching and developing 100.00 100.00 GROUP (SUZHOU) CO., LTD. LCDs, computers, main boards (ACSZ) and the peripherals of related multimedia and network communication products, and providing after-sales service AIL ASUS JAPAN Sales and repair service center in 100.00 100.00 GROUP INCORPORATION (ACJP) Japan AIL ASUS COMPUTER CZECH Sales and service center in Czech 100.00 100.00 GROUP REPUBLIC S.R.O. (ACCZ) Republic AIL ASUSTEK COMPUTER Selling notebooks, main boards, 100.00 100.00 GROUP (SHANGHAI) CO., LTD. medium-sized computers, high- (ACSH) end personal computers, servers, and computer peripherals; importing/exporting, wholesaling and integrating mobile communication equipment; and providing technology consulting and after-sales services AIL ASUS CZECH SERVICE CPN Service, HUB and other 99.59 99.59 GROUP S. R. O. (ACCZS) services in Europe AIL ASUS SERVICE AUSTRALIA Repair service center in Oceania 100.00 - GROUP PTY LIMITED (ASAU) AIL ASUS AUSTRALIA PTY Sales center in Oceania 100.00 - GROUP LIMITED (ACAU) AIL ACBZ IMPORTACAO Sales and service center in Brazil 100.00 - GROUP E COMERCIAL LTDA. (ACBZ) AIL ASUS INDIA PRIVATE Sales center in India 100.00 - GROUP LIMITED (ASIN) AIL ASUSTEK COMPUTER Selling and researching 100.00 - GROUP (CHONGQING) CO., LTD. notebooks, main boards, (ACCQ) medium-sized computers, high- end personal computers, servers, and computer peripherals; importing/exporting, wholesaling and integrating mobile communication equipment; and providing technology consulting and after-sales services
~16~
144 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark AIL ASUS HUNGARY SERVICES Sales and repair service center in 100.00 100.00 GROUP LIMITED LIABILITY Hungary COMPANY (ACHU) AIL ASUS PORTUGAL, Sales and service center in 100.00 100.00 GROUP SOCIEDADE UNIPESSOAL Portugal LDA (ACPT) AIL ASUS SWITZERLAND GMBH Sales and service center in 100.00 100.00 GROUP (ACCH) Switzerland AIL UNIMAX ELECTRONICS Manufacturing and selling 100.00 100.00 GROUP INCORPORATION (UEI) electronic appliances and telecommunication products ACH ASUS CZECH SERVICE CPN Service, HUB and other 0.41 0.41 GROUP S. R. O. (ACCZS) services in Europe PEGA AZUREWAVE Manufacturing office machinery, - - Note 1 GROUP TECHNOLOGIES, INC. electronic parts, and computer (AZURE) peripherals, and selling precision equipment and digital cameras PEGA ASUS POWER INVESTMENT Investing activities - - Note 1 GROUP CO., LTD. (ASUSPI) PEGA ASUS INVESTMENT CO., Investing activities - - Note 1 GROUP LTD. (ASUSI) PEGA ASUSTEK INVESTMENT Investing activities - - Note 1 GROUP CO., LTD. (ASUSTI) PEGA ADVANSUS CORP. Manufacturing computer - - Note 1 GROUP (ADVANSUS) peripherals PEGA PEGATRON HOLDING LTD. Investing activities - - Note 1 GROUP (PEGAHL) PEGA PEGATRON USA, INC. Sales and repair service center in - - Note 1 GROUP (PUSA) North America PEGA ASUS HOLLAND HOLDING Investing activities - - Note 1 GROUP B.V. (AHH) PEGA AMA PRECISION INC. Designing and developing - - Note 1 GROUP (AMAP) computer parts PEGA ABILITY ENTERPRISE CO., Selling computer peripherals, - - Note 1 GROUP LTD. (ABILITY) office automation equipment, and digital cameras; retailing/ wholesaling of food products; and leasing PEGA UNIHAN HOLDING LTD. Investing activities - - Note 1 GROUP (UNIHANHL) PEGA STARLINK ELECTRONICS Manufacturing electronic parts - - Note 1 GROUP CORPORATION and plastic products, and (STARLINK) manufacturing and wholesaling electronic components PEGA KINSUS INTERCONNECT Manufacturing electronic parts, - - Note 1 GROUP TECHNOLOGY CORP. wholesaling and retailing (KINSUS) electronic components, and providing business management consulting service
~17~
145 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
PEGA ASROCK INCORPORATION Data storage and processing - - Note 1 GROUP (ASROCK) equipment, manufacturing wired and wireless communication equipment, and wholesaling of computer equipment and electronic components PEGA LUMENS DIGITAL OPTICS Researching, manufacturing and - - Note 1 GROUP INC. (LUMENS) selling computer data projectors and related peripherals PEGA PEGAVISION Manufacturing medical - - Note 1 GROUP CORPORATION equipment (PEGAVISION) PEGA ASUSPOWER Investing and trading activities - - Note 1 GROUP CORPORATION (ASUSP) PEGA PEGATRON TECHNOLOGY Sales and repair service center in - - Note 1 GROUP SERVICE INC. (PTSI) North America PEGA PEGA INTERNATIONAL Design service and sales - - Note 1 GROUP LIMITED (PIL) PEGA PEGATRON JAPAN INC. (PJ) Sales and repair service center in - - Note 1 GROUP Japan PEGA PEGATRON MEXICO, S.A. Sales and repair service center in - - Note 1 GROUP DEC.V. (PMX) Mexico PEGA ASFLY TRAVEL SERVICE Travel agency - - Note 1 GROUP LIMITED (ASFLY) PEGA HUA-YUA INVESTMENT Investing activities - - Note 1 GROUP LIMITED (HYI) PEGA PEGATRON CZECH S.R.O. Installing, repairing and selling - - Note 1 GROUP (PCZ) electronic products PEGA AMA TECHNOLOGY Trading of computer peripherals - - Note 1 GROUP CORPORATION (AMAT) PEGA AMA HOLDINGS LIMITED Investing activities - - Note 1 GROUP (AMAH) PEGA METAL TRADINGS LTD. Trading activities - - Note 1 GROUP (METAL) PEGA EXTECH LTD. (EXTECH) Trading of electronic parts - - Note 1 GROUP PEGA TOPTEK PRECISION Manufacturing and selling new - - Note 1 GROUP INDUSTRY (SUZHOU) CO., electronic parts and premium LTD. (TOPSZ) hardware PEGA FENGSHUO TRADING Trading activities - - Note 1 GROUP (TONGZHOU) CO., LTD. (FSTZ) PEGA GRANDTECH PRECISION Manufacturing, developing and - - Note 1 GROUP (TONGZHOU) CO., LTD. selling electronic parts (GRANDP) PEGA KINSUS INVESTMENT CO., Investing activities - - Note 1 GROUP LTD. (KINSUSI)
~18~
146 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark PEGA KINSUS CORP. (USA) Developing and designing new - - Note 1 GROUP (KINSUSU) technology and products, analyzing marketing strategy and developing new customers PEGA KINSUS HOLDING (SAMOA) Investing activities - - Note 1 GROUP LIMITED (KINSUSS) PEGA KINSUS HOLDING Investing activities - - Note 1 GROUP (CAYMAN) LIMITED (KINSUSC) PEGA KINSUS INTERCONNECT Manufacturing and selling circuit - - Note 1 GROUP TECHNOLOGY (SUZHOU) boards CORP. (KINSUSSZ) PEGA ASIAROCK TECHNOLOGY Manufacturing and selling - - Note 1 GROUP LIMITED (ASIAROCK) database storage and processing equipment PEGA LEADER INSIGHT Investing activities - - Note 1 GROUP HOLDINGS LTD. (LEADER) PEGA ASROCK EUROPE B.V. Database service and trading of - - Note 1 GROUP (ASROCKE) electronic components PEGA CALROCK HOLDINGS, Office building leasing - - Note 1 GROUP LLC. (CALROCK) PEGA FIRSTPLACE Investing activities - - Note 1 GROUP INTERNATIONAL LTD. (FIL) PEGA ASROCK AMERICA, INC. Database service and trading of - - Note 1 GROUP (ASROCKA) electronic components PEGA LUMENS INTEGRATION Selling computer communication - - Note 1 GROUP INC. (LUMENSI) products and peripherals PEGA LUMENS DIGIT IMAGE INC. Investing activities - - Note 1 GROUP (LUMENSD) PEGA LUMENS EUROPE BVBA Selling computer communication - - Note 1 GROUP (LUMENSE) products and peripherals PEGA LUMENS INTERNATIONAL Manufacturing and wholesaling - - Note 1 GROUP CORPORATION (LI) electronic parts PEGA LUMENS (SUZHOU) Researching, manufacturing - - Note 1 GROUP DIGITAL IMAGE INC. and selling projectors, projection (LUMENSSZ) screens and related products, and after sales service PEGA PIOTEK HOLDINGS LTD. Investing and trading activities - - Note1 GROUP (CAYMAN) (PIOTEKHC) Note 4 PEGA PIOTEK HOLDINGS Investing and trading activities - - Note1 GROUP LIMITED (PIOTEKH) Note 4
~19~
147 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
PEGA MAGNIFICENT Investing and trading activities - - Note 1 GROUP BRIGHTNESS LIMITED (MAGH) PEGA PROTEK GLOBAL Investing and trading activities - - Note 1 GROUP HOLDINGS LTD. (PROH) PEGA NORTH TEC ASIA LIMITED Investing and trading activities - - Note 1 GROUP (NTEC) PEGA ASLINK PRECISION CO., Investing and trading activities - - Note 1 GROUP LTD. (ASLINKC) PEGA DIGITEK GLOBAL Investing and trading activities - - Note 1 GROUP HOLDINGS LIMITED (DIGI) PEGA COTEK HOLDINGS LIMITED Investing and trading activities - - Note 1 GROUP (COH) PEGA TOP QUARK LIMITED Investing and financial holding - - Note 1 GROUP (TOPQ) activities PEGA POWTEK HOLDINGS Investing and trading activities - - Note 1 GROUP LIMITED (POWH) PEGA PIOTEK COMPUTER Developing, manufacturing and - - Note 1 GROUP (SUZHOU) CO., LTD. selling new electronic (PIOTEK) components, circuit boards and related products, and after-sales service PEGA PIOTEK (H.K.) TRADING Trading activitues - - Note1 GROUP LIMITED (PIOTEKHK) Note 4 PEGA MAINTEK COMPUTER Manufacturing, developing and - - Note 1 GROUP (SUZHOU) CO., LTD. selling power supply units, (MAIN) computer cases, computer systems, notebooks, main boards, and computer peripherals, and providing maintenance service PEGA PROTEK (SHANGHAI) R&D, manufacturing, developing - - Note 1 GROUP LIMITED (PRO) and selling computers, printers and electronic components, and providing after-sales service PEGA COTEK ELECTRONICS R&D, manufacturing and selling - - Note 1 GROUP (SUZHOU) CO., LTD. (CO) new electronic components, providing mold technology, and providing after-sales service
~20~
148 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark PEGA RUNTOP (SHANGHAI) CO., Manufacturing and selling - - Note 1 GROUP LTD. (RUNTOP) computer parts and peripherals of digital automatic data processors, multimedia computer system accessories, power supply units, network switches, and modems PEGA POWTEK (SHANGHAI) CO., Selling main boards, computer - - Note 1 GROUP LTD. (POW) peripherals, notebooks, servers and software, and providing after-sales service PEGA ASLINK (H.K.) PRECISION Investing and trading activities - - Note 1 GROUP CO., LIMITED (ASLINKHK) PEGA ASAP INTERNATIONAL CO., Investing activities - - Note 1 GROUP LIMITED (ASAP) PEGA ASAP TECHNOLOGY Manufacturing and selling data - - Note 1 GROUP (JIANGXI) CO., LIMITED transit wire and cable (ASAPJX) PEGA CASETEK HOLDINGS Investing and trading activities - - Note 1 GROUP LIMITED (CASEH) PEGA CASETEK COMPUTER Manufacturing, developing and - - Note 1 GROUP (SUZHOU) CO., LTD. selling computers, computer (CASE) parts, application systems, and providing after-sales service PEGA SLITEK HOLDINGS Investing and trading activities - - Note 1 GROUP LIMITED (SLIH) PEGA KAEDAR HOLDINGS Investing and trading activities - - Note 1 GROUP LIMITED (KAEDARH) PEGA KAEDAR TRADING LTD. Investing and trading activities - - Note 1 GROUP (KAEDART) PEGA CORE-TEK (SHANGHAI) Researching and producing - - Note 1 GROUP LIMITED (CORE) notebook parts, designing nonmetal tooling, electronic specific equipment and related products, repairing and producing precision equipment, and providing after-sales service PEGA UNITED NEW LIMITED Investing and trading activities - - Note 1 GROUP (UNEW) PEGA APLUS PRECISION Investing and trading activities - - Note 1 GROUP (CAYMAN) LIMITED (APLUSC) PEGA KAEDAR ELECTRONICS Tooling module of stainless steel - - Note 1 GROUP (KUNSHAN) CO., LTD. computer cases (KAEDARKS)
~21~
149 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
PEGA AVY PRECISION Manufacturing and selling - - Note 1 GROUP ELECTROPLATING electronic parts, camera parts (SUZHOU) CO., LTD. and accessories (AVYSZ) PEGA EZWAVE TECHNOLOGIES, Selling computer peripherals - - Note 1 GROUP INC. (EZWAVE) PEGA AZURELIGHTING Manufacturing and selling of - - Note 1 GROUP TECHNOLOGIES, INC. LED lights (ALIGHT) PEGA AZWAVE HOLDING Investing activities - - Note 1 GROUP (SAMOA) INC. (AZURES) PEGA EMINENT STAR COMPANY Investing activities - - Note 1 GROUP LIMITED (ESC) PEGA AZUREWAVE Manufacturing of electronic parts - - Note 1 GROUP TECHNOLOGIES (SHANGHAI) INC. (AZURESH) PEGA JADE TECHNOLOGIES Investing activities - - Note 1 GROUP LIMITED (JADE) PEGA HANNEX INTERNATIONAL Investing activities - - Note 1 GROUP LIMITED (HANNEX) PEGA AZUREWAVE Designing, researching, and - - Note 1 GROUP TECHNOLOGY selling computer products (SHENZHEN) CO., LTD. (AZURESZ) PEGA SCIENTEK NANJING CO., Designing, researching, and - - Note 1 GROUP LTD. (SCIEN) selling computer products PEGA ABILITY ENTERPRISE (BVI) Investing activities - - Note 1 GROUP CO., LTD. (ABILITYBVI) PEGA ACTION PIONEER Trading activities - - Note 1 GROUP INTERNATIONAL LTD. (ACTION) PEGA VIEWQUEST Selling computer peripherals, - - Note 1 GROUP TECHNOLOGIES digital cameras and electronic INTERNATIONAL INC. components (VQI) PEGA VIEWQUEST Manufacturing and selling - - Note 1 GROUP TECHNOLOGIES computer peripherals, digital (BVI) INC. (VQBVI) cameras and electronic components PEGA ASSOCIATION Investing activities - - Note 1 GROUP INTERNATIONAL LTD. (ASSOC) PEGA JIUJIANG VIEWQUEST Manufacturing digital cameras - - Note 1 GROUP ELECTRONICS INC. (JJVQ)
~22~
150 Ownership (%) Investor Subsidiary Main activities 2011/12/31 2010/12/31 Remark
PEGA ABILITY INTERNATIONAL Investing activities - - Note 1 GROUP INVESTMENT CO., LTD. (ABILITYI) PEGA ABILITY TECHNOLOGY Manufacturing and selling digital - - Note 1 GROUP (DONGGUAN) CO., LTD. cameras (ABILITYDG) PEGA AZURELIGHTING Manufacturing and selling of - - Note 1 GROUP TECHNOLOGIES INC. LED, inside and outside (YANGZHOU) (ALIGHTYZ) lightings
PEGA NOENA CORPORATION Selling computers and optical - - Note 1 GROUP (NOENA) products PEGA STRATEGY TECHNOLOGY Investing and trading activities - - Note 2 GROUP CO., LTD. (STRATEGY) PEGA AZUREWAVE (CAYMAN) Investing and trading activities - - Note 2 GROUP HOLDING INC. (AZUREC) PEGA STRONG CHOICE GROUP Investing and trading activities - - Note 2 GROUP LIMITED (STRONG) PEGA WEST TEC ASIA LIMITED Investing and trading activities - - Note 2 GROUP (WTEC) PEGA NORTH TEC ASIA Manufacturing, developing and - - Note 2 GROUP (SHANGHAI) LIMITED selling mobile phones, (NTECSH) computers, routers, DTV and electronic components, and providing after-sales service PEGA LINKTEK PRECISION Manufacturing and selling - - Note 2 GROUP (SUZHOU) CO., LIMITED earphone parts (LINKTEK) ASUS GREENASUS RECYCLING Selling recycled resources and - - Note 2 CO., LTD. (GREENASUS) repairing electrical appliances and products AHL SOUTH TEC ASIA LIMITED Investing and trading activities - - Note 2 GROUP (STEC)
Note 1: The Group had ceased to control the entity effective June 1, 2010. Note 2: The Group did not have control or lost control of the entity during the reporting period. Note 3: AAEON merged with SYT on June 1, 2011 with SYT as the surviving company, and changed its name to AAEON on July 4, 2011. Note 4: BOARDTEK HOLDING LTD. (CAYMAN), BOARDTEK HOLDINGS LIMITED and BOARDTEK (H.K.) TRADING LIMITED changed its name to PIOTEK HOLDINGS (CAYMAN), PIOTEK HOLDINGS LIMITED and PIOTEK (H.K.) TRADING LIMITED, respectively, in 2010.
Note 5: Subsidiary of the Company before May 31, 2010 and PII was dissolved on June 10,
~23~
151 2010. Note 6: ECAREME TECHNOLOIES, INC. changed its name to ASUS CLOUD CORPORATION on November 18, 2011. Note 7: FULLTEK GLOBAL HOLDINGS LTD. changed its name to WAVEFACE HOLDING COMPANY LIMITED on October 26, 2011. (A) On June 1, 2010, the Company transferred further its OEM assets and business (the Company’s long-term equity investment in PEGA) to the Company’s another investee, PII. The Company had discontinued consolidating the accounts of PEGA and its subsidiaries since it lost control of these subsidiaries. (B) The intra-group transactions had been eliminated from the consolidated financial statements. C. Subsidiaries not included in the consolidated financial statements: None. D. Adjustments for subsidiaries with different balance sheet date: None. E. Special operating risks in foreign subsidiaries: None. F. Nature and extent of the restrictions on fund remittance from subsidiaries to the parent company: None. G. Contents of subsidiaries’ securities issued by the parent company: None. H. Information on convertible bonds and common stock issued by subsidiaries: The subsidiaries did not issue convertible bonds and new common stock having significant influence on stockholders’ equity of the parent company. (2) Foreign currency transactions and translation of financial statements in foreign currencies A. Transactions involving non-derivative financial instruments denominated in foreign currencies are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occurred. Translation gain or loss arising from the settlement of assets and liabilities denominated in foreign currencies are included in profit or loss in the year of actual settlement. B. Monetary assets and liabilities denominated in foreign currencies are remeasured at the balance sheet date using the exchange rates in effect on that date, with related exchange gain and loss included in the statement of income. C. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through stockholders’ equity are remeasured at the exchange rate prevailing at the balance sheet date, with related exchange gain or loss recorded as cumulative translation adjustment in stockholders’ equity. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through profit or loss are remeasured at the exchange rate prevailing at the balance sheet date, with related exchange gain or loss recorded in the statement of income. Non-monetary assets and liabilities denominated in foreign currencies that are measured at cost are remeasured at the historical exchange rate.
D. Assets, liabilities and equity accounts of foreign subsidiaries are translated into New Taiwan
~24~
152 dollars using the exchange rates at the balance sheet date except for profit and loss accounts, which are translated at weighted-average rates of the year. Dividends are translated at the rates prevailing at the date of declaration. Profit and loss accounts are translated at weighted-average rates of the year. The resulting translation differences are included in “cumulative translation adjustments” under stockholders’ equity. E. Long-term investments in foreign investees, which are accounted for under the equity method, are stated on the basis of stockholders’ equity in the foreign-currency financial statements of investees. Translation gain or loss from long-term investments is recognized as cumulative translation adjustment in stockholders’ equity. (3) Classification of current and non-current assets and liabilities A. Assets that meet one of the following criteria are classified as current assets; otherwise, they are classified as non-current assets: (A) Assets arising from operating activities that are expected to be realized or consumed, or are intended to be sold within the normal operating cycle; (B) Assets held mainly for trading purposes; (C) Assets that are expected to be realized within twelve months from the balance sheet date; (D) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date. B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise, they are classified as non-current liabilities: (A) Liabilities arising from operating activities that are expected to be paid off within the normal operating cycle; (B) Liabilities arising mainly from trading activities; (C) Liabilities that are to be paid off within twelve months from the balance sheet date; (D) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. (4) Financial instruments A. In accordance with SFAS No. 34, “Accounting for Financial Instruments” and the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, financial assets are classified as financial assets at fair value through profit or loss, financial assets carried at cost, or available-for-sale financial assets, as appropriate. Financial liabilities are classified either as financial liabilities at fair value through profit or loss, or as financial liabilities at cost. B. The Group accounts for purchases and sales of financial assets on the trade date, or the date when the Group commits to purchase or sell the asset. At initial recognition, financial assets are recognized at fair value plus, in the case of investments that are not reported at fair value through profit or loss, directly attributable transaction costs. (A) Financial assets measured at fair value through profit or loss
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153 These financial assets are subsequently measured at fair value with changes in fair value recognized in profit or loss. Stocks of listed companies, convertible bonds and closed-end funds are measured at closing prices at the balance sheet date. Open-end funds are measured at the unit price of the net assets at the balance sheet date. (B) Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, or loans and receivables. These assets are then measured at fair value. The difference adjustments arising from change in fair value, excluding impairment loss and exchange gain or loss from the translation of monetary financial assets denominated in foreign currencies which are recognized in current profit or loss, are recognized in a separate component of stockholders’ equity until such investment is reclassified or disposed of, upon which the cumulative separate component of stockholders’ equity is transferred to current profit or loss. (C) Financial assets carried at cost Equity investments without reliable market prices, including emerging and other unlisted stocks or private fund, are measured at cost. If objective evidence of impairment exists, the Group recognizes impairment loss, which is not reversed in subsequent periods. (D) Derivative financial assets and liabilities for hedging The Group recognizes the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged item when hedging relationships meet the criteria for hedge accounting which is accounted for as follows: a. Fair value hedge: Changes in the fair value of a hedging instrument designated as a fair value hedge are recognized in current profit or loss. The hedged item also is stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in current profit or loss. b. Cash flow hedge: Changes in the fair value of a hedging instrument designated as a cash flow hedge are recognized directly in equity. If a hedge of a expected transaction subsequently results in the recognition of an asset or a liability, then the amount recognized in equity is reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss. For hedges other than those covered by the preceding statement, the associated cumulative gain or loss is removed from equity and recognized in profit or loss in the same period or periods during which the hedged forecast transaction affects profit or loss. C. Subsequent to initial recognition, the Group measures all financial liabilities at amortized cost except for financial liabilities at fair value through profit or loss, which are measured at fair value.
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154 (5) Notes and accounts receivable and other receivables A. Notes and accounts receivable are claims resulting from the sale of goods or services. Other receivables are those arising from transactions other than the sale of goods or services. Before December 31, 2010, allowance for doubtful accounts is provided according to the evaluation of the collectability of notes and accounts receivable and other receivables, taking into account the bad debts incurred in prior years and the aging analysis of the receivables. B. Effective January 1, 2011, notes and accounts receivable and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for accumulated impairment. A provision for impairment is established when there is objective evidence that the receivables are impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the fair value of the asset subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not make the asset’s carrying amount more than its amortized cost where no accumulated impairment loss was recognized. Subsequent recoveries of amounts previously written off are recognized in profit. (6) Inventories The costs of inventories consist of those necessary expenditures incurred in bringing each item of inventory to its usable condition and location. Cost is calculated on a weighted-average basis. Inventories are valued at the lower of cost or net realizable value. Net realizable value by item is determined based on the estimated selling price in the ordinary course of business, less estimated costs of completion and costs to sell. (7) Long-term equity investments accounted for under the equity method A. Long-term investments are accounted for under the equity method when the percentage of ownership held by the Group exceeds 20% or if the Group owns less than 20% of the investee’s capital but have significant influence on the investee’s operations. If an investee company accounted for under the equity method issues new shares and the Company does not purchase new shares proportionately, then the investment percentage, and the equity in net assets of the investee, will be changed. The effect of such change is adjusted against the additional paid-in capital resulting from long-term equity investments or retained earnings. B. The difference between the cost of the investment and the amount of underlying equity in net assets of an investee attributed to depreciable, depletable, or amortizable assets is amortized over the estimated remaining economic years. The difference attributed to the carrying amount in excess of or lower than the fair value of assets is written off entirely when the difference disappear. The cost of investment in excess of the fair value of identifiable net assets is recognized as goodwill and is no longer amortized. The difference attributed to the fair value of identifiable net assets in excess of the cost of investment causes a proportional decrease in the carrying amount of non-current assets. When the carrying amount of non-current assets is reduced to zero, the remaining difference is recorded as extraordinary gain.
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155 C. When the equity of long-term equity investments under the equity method including unrealized gain on financial instruments, foreign currency translation adjustments, net loss not recognized as pension cost, and unrealized losses on cash flow hedges is changed, the changes in percentage of ownership are reflected in those related accounts and long-term equity investments under the equity method. D. Unrealized inter-company profit or loss resulting from transactions between the Group and investees accounted for under the equity method are accounted in unrealized gain on inter-affiliate accounts and deferred until realized. (8) Investment - land use right Investment - land use right is stated at cost, and amortized using the average method over the contract period. If an objective evidence of impairment exists and the recovery is remote, an impairment loss is recognized. (9) Property, plant and equipment, leased assets and idle assets A. Property, plant and equipment are stated at cost. Cost associated with significant additions, improvements, and replacements to property, plant and equipment are capitalized. Expenditures for regular repairs and maintenance are charged against operating income. B. Property, plant and equipment leased to other parties under operating leases are classified as leased assets. The related depreciation is provided under the straight-line method based on the assets’ estimated useful lives and accounted for as a reduction of rental income. Property, plant and equipment not currently used in operations are transferred to idle assets. The cost, accumulated depreciation, and accumulated impairment of the original assets not currently used in operations are all transferred to idle assets and depreciated. C. Depreciation is provided under the straight-line method over the estimated useful lives of the assets. Salvage value of the fully depreciated assets that are still in use is depreciated over the re-estimated useful lives. The estimated useful lives are 3~60 years for buildings, 2~10 years for machinery and equipment and 1~20 years for other property, plant and equipment. (10) Intangible assets and deferred expenses Intangible assets represent goodwill, trademarks, technology know-how, computer software and land use rights. Goodwill and intangible assets with indefinite useful lives are subject to tests of impairment every year, while others are amortized using the straight-line method over their estimated economic lives. Deferred expenses represent office decoration, molds and fixtures which are amortized using the straight-line method over 1~5 years. (11) Impairment of non-financial assets A. The Group assesses all applicable assets subject to SFAS No. 35 for indication of impairment at the balance sheet date. If any indication of impairment exists, the Group then compares the carrying amount with the recoverable amount of the assets or the cash-generating unit (“CGU”) and writes down the carrying amount to the recoverable amount. If the recoverable amount of an asset other than goodwill has increased as a result of the increase in its estimated service potential, the Group reverses the impairment loss to the extent that the carrying amount after the reversal would not exceed the amount (net of amortization or depreciation) that would
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156 otherwise result had no impairment loss been recognized in prior periods. B. The Group assesses the goodwill, intangible assets with indefinite useful lives or that are not yet available for use periodically on an annual basis and recognizes an impairment loss on the carrying value in excess of the recoverable amount. The loss is first recorded against the goodwill allocated to the CGU, with any remaining loss allocated to other assets on a pro rata basis proportionate to their carrying amounts. The write-down of goodwill cannot be reversed in subsequent periods under any circumstances. (12) Convertible bonds payable Bonds issued after January 1, 2006 are accounted for in accordance with SFAS No. 36 and Interpretations (95) 290, (97) 331 and (98) 046 by the Accounting Research and Development Foundation (ARDF) as follows: A. The issuance costs are allocated to the related liability and equity components in proportion of the initially recognized amounts. B. Convertible bonds bearing a clause on conversion price adjustment based on stock market price do not include the equity component. For the liability components, the fair value of the conversion right and call/put option is determined first, and then the book value of main debt component is determined based on the net amount of the issuance price after deducting the fair value of the call/put option and conversion right with a clause on price adjustment. C. Convertible bonds are subsequently measured at amortized cost. Derivatives with call/put options and conversion rights with a clause on price adjustment are recognized as “financial liabilities at fair value through profit or loss” and are subsequently measured at fair value. Movements in the fair value of the derivatives are recognized as “gain/(loss) on valuation of financial liabilities”. D. If the bondholder exercises the right to convert the bonds ahead of the maturity date of the bond, the book value of the liability component is adjusted to the value on the conversion date, which serves as the basis for the recording of the issuance of common stock so that no conversion gain and loss is recognized thereon. E. If the bondholder is eligible to exercise the put option within one year, the bonds payable are reclassified as current liability. When the put option expires, those bonds payable are reclassified as long-term liability if the liability meets the definition of long-term liability. (13) Accrued product warranty liability When a warranty clause is attached to the sale of a product, a warranty liability is accrued based on historical return rates and repair costs, failure rates and warranty periods. Service warranty expense is included in the current year’s operating expenses. (14) Pension A. Under the defined benefit pension plan, net periodic pension costs are recognized in accordance with the actuarial calculations. Net periodic pension costs include service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets. Unrecognized net transition obligation is amortized on a straight-line basis over the employees’ remaining service period.
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157 B. Under the defined contribution pension plan, net periodic pension costs are recognized as incurred. (15) Income tax A. Income tax is calculated on the basis of accounting income. The differences between the tax bases and the book values of assets and liabilities are recorded as deferred tax using the enacted tax rates for the periods in which the deferred tax is expected to be reversed. The tax effects from taxable temporary differences are recognized as deferred tax liabilities, while the deductible temporary differences and investment tax credits are accounted for as deferred tax assets, which are assessed for a valuation allowance based on future realization. B. Deferred income tax assets or liabilities are classified as current or non-current based on the classification of items that resulted in the deferred item or based on the timing of the expected reversal, for certain transactions not directly related to an asset or liability. When a change in the tax laws is enacted, the deferred tax liability or asset is recomputed accordingly in the period of change. The difference between the new amount and the original amount, that is, the effect of changes in the deferred tax liability or asset, is recognized as an adjustment to current income tax expense (benefit). C. Over or under provision of prior years’ income tax liabilities is included in current year’s income tax. D. For the Company and domestic subsidiaries, the 10% additional income tax on unappropriated earnings is recorded as current income tax expense when the shareholders resolve not to distribute the earnings. E. For the Company and domestic subsidiaries, current income tax is the higher of current income tax payable or the Alternative Minimum Tax (“AMT”) calculated by applying the Income Basic Tax Act (“IBTA”). The Group has taken into consideration the impact of the AMT in the determination of its current income tax expense and its future impact when estimating the realizable value of the deferred tax assets. F. The income tax for each consolidated entity is reported on an individual basis with the relevant country and is not reported on a consolidated basis. The consolidated income tax expense is the total of income tax expense for all consolidated entities. (16) Treasury stock A. When the Company acquires its outstanding shares as treasury stock, the acquisition cost should be debited to the treasury stock account (a contra account under stockholders’ equity). B. When the Company’s treasury stock is retired, the treasury stock account should be credited, and the capital surplus-premium on stock account and capital stock account should be debited proportionately according to the share ratio. An excess of the carrying value of treasury stock over the sum of its par value and premium on stock should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings. An excess of the sum of the par value and premium on stock of treasury stock over its carrying value should be credited to additional paid-in capital from the same class of treasury stock transactions.
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158 C. The cost of treasury stock is accounted for on a weighted-average basis. (17) Employees’ bonuses and directors’ and supervisors’ remuneration and share-based payment Pursuant to Interpretation (96) 052 issued by the ARDF, the costs of employees’ bonuses and directors’ and supervisors’ remuneration of the Company and domestic subsidiaries are accounted for as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and the amounts can be estimated reasonably. However, if the accrued amounts for employees’ bonuses and directors’ and supervisors’ remuneration are significantly different from the distributed amounts resolved by the Board of Directors, then the differences shall be adjusted in current year’s gain or loss (the year of recognition) and, if the accrued amounts for employees’ bonus and directors’ and supervisors’ remuneration are significantly different from the actual distributed amounts resolved by the stockholders at their annual stockholders’ meeting subsequently, the differences shall be recognized as gain or loss in the following year treated as accounting estimate difference. In addition, according to Interpretation (97) 127 issued by the ARDF, the Company calculates the number of shares of employees’ stock bonus based on the closing price of the Company’s common stock at the previous day of the stockholders’ meeting held in the year following the financial reporting year, and after taking into account the effects of ex-rights and ex-dividends. The Group adopts SFAS No. 39 to account for the transfer of equity instruments from shareholders to the Group’s employees. (18) Earnings per share A. Earnings per share of common stock is computed based on the weighted-average number of common shares outstanding during the period. Earnings per share for prior period is retroactively adjusted to reflect the effects of new shares issued from the capitalization of additional paid-in capital or retained earnings. B. The convertible bonds and employee stock bonuses which have not yet been approved in the stockholders’ meeting are potential common shares. Only basic earnings per share is disclosed if there is no dilutive effect. Otherwise, both basic and diluted earnings per share are disclosed. For the purpose of calculating diluted earnings per share, the potential common shares are deemed to have been converted into common stock at the beginning of the period, and the effect on net income of the additional common shares outstanding is considered accordingly. (19) Revenues, costs and expenses The Group recognizes revenue when the earning process has been significantly completed, which means the revenue has been realized or is readily realizable and earned. Cost is recognized when the related revenue is accrued; expenses are recognized as current expenses when incurred. (20) Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the amounts of revenues and expenses during the reporting period. Actual results could differ from those assumptions and estimates.
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159 (21) Business combination Business combination transactions are accounted for by the purchase method in accordance with R.O.C SFAS No. 25. The purchase cost of the acquiring corporation in a business combination includes purchase price and all direct costs of an acquisition, and the excess of acquisition cost over the sum of the fair value of the identifiable net assets is recognized as goodwill. (22) Spin-off transaction The Company resolved to spin off its OEM assets and businesses. The Company adopted Interpretations (91) 128, (92) 106 and (92) 107 issued by the ARDF to account for its spin-off transactions. Since the transferee company continues the transferor company’s economic activities, the Company did not record any gain or loss from the said spin-off transaction but has adjusted the net assets and long-term equity investment related additional paid-in capital and other equity accounts against retained earnings or other components. (23) Operating segments In accordance with SFAS No. 41, “Segment reporting”, operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. 3. CHANGES IN ACCOUNTING PRINCIPLES (1) Notes and accounts receivable and other receivables Effective January 1, 2011, the Group adopted the amended SFAS No. 34, “Accounting for Financial Instruments”. Under this standard, a provision for impairment (bad debt) of accounts and notes receivable and other receivables is established when there is objective evidence that they are impaired. This change in accounting principle had no significant effect on the net income for the year ended December 31, 2011. (2) Operating segments Effective January 1, 2011, the Group adopted SFAS No. 41, “Segment Reporting”, replacing the original SFAS No. 20, “Disclosure of Segment Financial Information”. In accordance with such standard, the Group restated the segment information for 2010 upon the first adoption of SFAS No. 41. This change in accounting principle had no significant effect on the net income and earnings per share for the years ended December 31, 2011 and 2010. 4. DETAILS OF SIGNIFICANT ACCOUNTS (1) Cash and cash equivalents 2011/12/31 2010/12/31 Petty cash and cash on hand $ 191,765 $ 10,809 Checking and demand deposits 10,250,177 4,440,096 Time deposits 30,658,013 37,295,574 Cash equivalents 97,153 61 $ 41,197,108 $ 41,746,540
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160 (2) Financial assets (liabilities) at fair value through profit or loss Items 2011/12/31 2010/12/31 Current: Financial assets at fair value through profit or loss: Open-end funds $ 10,787,934 $ 9,822,275 Listed and OTC stocks 3,405 675,311 Convertible bonds 92,850 111,700 Forward exchange contracts 686,335 18,792 Currency options contracts 38,787 6,776 Currency swap contracts 884 6,352 $ 11,610,195 $ 10,641,206
Financial liabilities at fair value through profit or loss: Forward exchange contracts $ 35,595 $ 155,597 Currency options contracts - 3,582 Currency swap contracts 1,457 - Call/put options and conversion right - 104,525 - convertible bonds $ 37,052 $ 263,704
A. For the years ended December 31, 2011 and 2010, the Group recognized net financial assets gain on valuation of $256,902 and $1,373,218, respectively, and net financial liabilities loss on valuation of $1,246,772 and $324,249, respectively.
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161 B. The trading items and contract information of derivatives are as follows:
2011/12/31 2010/12/31 Contract Amount Contract Amount (Nominal principal) (Nominal principal) Items (in thousands) Contract Period (in thousands) Contract Period Derivative financial assets: Forward exchange contracts -USD/NTD USD 80,000 2011.10~2012.1 USD 4,000 2010.11~2011.1 -EUR/NTD EUR 11,500 2011.11~2012.2 EUR -- -EUR/USD EUR 292,200 2011.10~2012.3 EUR 7,000 2010.10~2011.3 -NOK/USD NOK 71,457 2011.10~2012.3 NOK -- -GBP/USD GBP 27,600 2011.11~2012.4 GBP 13,000 2010.11~2011.3 -SEK/USD SEK 75,292 2011.10~2012.3 SEK -- -RUB/USD RUB 1,582,040 2011.11~2012.2 RUB -- -AUD/USD AUD 14,000 2011.10~2012.3 AUD -- -CHF/USD CHF 10,106 2011.10~2012.3 CHF -- -JPY/USD JPY 617,640 2011.11~2012.2 JPY -- Currency options contracts -EUR/USD EUR 111,500 2011.12~2012.3 EUR 9,500 2010.10~2011.1 -USD/NTD USD - - USD 10,000 2010.12~2011.1 Currency swap contracts -USD/NTD USD 29,000 2011.7~2012.1 USD 6,000 2010.6~2011.1
Derivative financial liabilities: Forward exchange contracts -CHF/USD CHF --CHF 8,869 2010.11~2011.3 -USD/NTD USD 278,000 2011.11~2012.3 USD -- -JPY/USD JPY --JPY 417,380 2010.12~2011.1 -NOK/USD NOK --NOK 36,107 2010.12~2011.3 -AUD/USD AUD 10,000 2011.10~2012.2 AUD 12,000 2010.12~2011.3 -EUR/USD EUR --EUR 325,000 2010.11~2011.2 -SEK/USD SEK 54,479 2011.11~2012.3 SEK 139,426 2010.12~2011.3 Currency options contracts -EUR/USD EUR --EUR 14,500 2010.10~2011.3 -USD/NTD USD --USD 30,000 2010.12~2011.1 Currency swap contracts -USD/NTD USD 15,000 2011.7~2012.1 USD -- The main purpose of the Group’s trading derivatives was to hedge foreign currency risk from operating activities. As of December 31, 2011 and 2010, the Group did not meet the criteria for hedge accounting, so the Group recognized them at fair value. C. For convertible bonds information, please refer to Note 4(14), “Bonds payable.”
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162 (3) Available-for-sale financial assets
Items 2011/12/31 2010/12/31 Current: Listed and OTC stocks AZURE $ 250,672 $ - EDISON - 100,625 Others 83,251 36,168 $ 333,923 $ 136,793 Non-current: Listed and OTC stocks ADVANTECH $ 7,015,732 $ 6,278,997 Others 71,951 87,351 $ 7,087,683 $ 6,366,348
A. For available-for-sale financial assets, the amount of gain recognized directly in equity was $316,902 and $275,550 for the years ended December 31, 2011 and 2010, respectively. B. After evaluating and comparing the carrying value of available-for-sale financial assets and the recoverable amount, the Group recognized impairment loss amounting to $37,636 and $64,616 for the years ended December 31, 2011 and 2010, respectively. (4) Financial assets carried at cost
Items 2011/12/31 2010/12/31 Current: Unlisted and non-OTC stocks Others 3 7 2$ 3 7 2$ Non-current: Unlisted and non-OTC stocks AZURE $ - $ 295,608 MSTAR 122,696 122,696 UPI 82,000 150,000 Others 410,529 392,716 Mutual fund-private fund 37,947 129,015 $ 653,172 $ 1,090,035
A. The above investments were measured at cost since there are no public quotes in active markets and their fair value cannot be measured reliably. B. The Group lost significant influence on AZURE on June 1, 2010, the spin-off date, and accordingly discontinued applying the equity method. C. After evaluating and comparing the carrying value of financial assets carried at cost and the recoverable amount, the Group recognized impairment loss amounting to $117,000 and $89,536 for the years ended December 31, 2011 and 2010, respectively.
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163 (5) Derivative financial assets and liabilities for hedging
Items 2011/12/31 2010/12/31 Financial assets for hedging - current: Forward exchange contracts $ 1,354,470 $ 386,387 Financial liabilities for hedging - current: Forward exchange contracts $ - $ 185,732
A. The Group expected risk of changes in the foreign currency cash flow from expected transactions due to changes in market rate for the years ended December 31, 2011 and 2010. The risk was evaluated to be significant, and the Group entered into forward exchange contracts for hedging. B. As of December 31, 2011, the fair value of the derivative financial instruments for cash flow hedging is as follows: Period of gain (loss) Financial instrument Period of recognized was designated for anticipated in income Hedged item hedging instrument Fair value cash flow statement Expected Forward exchange $ 1,354,470 2011.10~2012.6 2011.10~2012.6 transactions contracts C. As of December 31, 2010, the fair value of the derivative financial instruments for cash flow hedging is as follows: Period of gain (loss) Financial instrument Period of recognized was designated for anticipated in income Hedged item hedging instrument Fair value cash flow statement Expected Forward exchange $ 200,655 2010.8~2011.4 2010.8~2011.4 transactions contracts
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164 D. As of December 31, 2011 and 2010, the unexpired financial instrument contracts are as follows: 2011/12/31 2010/12/31
Contract Amount Contract Amount (Nominal principal) (Nominal principal)
Items (in thousands) Contract Period (in thousands) Contract Period Derivative financial assets for hedging: Forward exchange contracts
-GBP/USD GBP 31,000 2011.10~2012.5 GBP 28,900 2010.9~2011.3 -EUR/USD EUR 450,000 2011.10~2012.4 EUR 426,300 2010.9~2011.3 -RUB/USD RUB 4,000,000 2011.10~2012.3 RUB -- -SEK/USD SEK 112,000 2011.10~2012.3 SEK 116,400 2010.10~2011.4 -AUD/USD AUD 60,000 2011.10~2012.3 AUD -- -NOK/USD NOK 77,000 2011.10~2012.3 NOK 55,000 2010.11~2011.4 -CHF/USD CHF 11,000 2011.10~2012.5 CHF -- -JPY/USD JPY 4,500,000 2011.10~2012.6 JPY --
Derivative financial liabilities for hedging: Forward exchange contracts
-AUD/USD AUD - - AUD 49,450 2010.9~2011.3 -JPY/USD JPY - - JPY 2,998,300 2010.8~2011.3 -RUB/USD RUB - - RUB 2,000,000 2010.12~2011.2 -CHF/USD CHF - - CHF 7,600 2010.9~2011.2
For unrealized gain or loss on cash flow hedging, the amount of gain (loss) recognized directly in equity was $1,153,815 and ($105,706) for the years ended December 31, 2011 and 2010, respectively. (6) Notes and accounts receivable 2011/12/31 2010/12/31 Notes receivable $ 5,996,132 $ 3,788,325 Accounts receivable 41,235,374 38,717,905 47,231,506 42,506,230 Less: allowance for doubtful accounts ( 4,127,494) ( 864,544) (provision for impairment) $ 43,104,012 $ 41,641,686
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165 (7) Inventories 2011/12/31 2010/12/31 Raw materials $ 8,358,404 $ 10,656,904 Work in process 1,746,562 1,362,069 Finished goods 1,751,631 1,924,015 Merchandise inventories 49,936,710 34,725,954 Inventories in transit 322,909 768,441 62,116,216 49,437,383 Less: allowance for decline in value of ( 4,218,669) ( 3,640,198) inventories $ 57,897,547 $ 45,797,185
Except for cost of goods sold, the inventories recognized as (increase) decrease in operating costs amounted to ($526,827) and $545,386, of which ($515,850) and $316,125 were net (provision for decline in value) realizable value recovery of inventories because some inventories with allowance for decline in value had been sold during the years ended December 31, 2010, respectively. (8) Long-term equity investments A. Details of long-term equity investments accounted for under the equity method are as follows:
2011/12/31 2010/12/31 Percentage Percentage Carrying of Carrying of Investee company amount ownership amount ownership PEGA $ 22,374,681 24.46$ 22,165,896 24.45 Others 370,809 194,270 $ 22,745,490 $ 22,360,166
B. The investment income recognized under the equity method amounted to $24,826 and $1,110,908 for the years ended December 31, 2011 and 2010, respectively, which were determined based on the investees’ audited financial statements. As of December 31, 2011 and 2010, the related long-term equity investments amounted to $22,745,490 and $22,353,615, respectively. C. On June 1, 2010, the Company transferred the OEM assets and business (the Company's long-term equity investment in PEGA) to PII. PII then issued new shares to the Company and its shareholders as consideration. The Company then obtained 25% ownership amounting to $23,399,241 of the consolidated PEGA and PII (PII is the dissolved company).
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166 (9) Property, plant and equipment
2011/12/31 Accumulated depreciation and Initial cost impairment Book value Land $ 1,998,367 $ - $ 1,998,367 Buildings 6,170,284 ( 1,521,705) 4,648,579 Machinery and equipment 2,941,414 ( 1,569,922) 1,371,492 Instruments and equipment 1,663,102 ( 1,014,118) 648,984 Other equipment 3,247,137 ( 1,937,812) 1,309,325 Revaluation increments 91,906 - 91,906 Prepayments for equipment 440,870 - 440,870 $ 16,553,080 ($ 6,043,557) $ 10,509,523
2010/12/31 Accumulated depreciation and Initial cost impairment Book value Land $ 1,443,596 $ - $ 1,443,596 Buildings 5,528,478 ( 1,147,095) 4,381,383 Machinery and equipment 2,652,243 ( 1,671,502) 980,741 Instruments and equipment 1,601,962 ( 984,712) 617,250 Other equipment 3,775,647 ( 2,081,802) 1,693,845 Prepayments for equipment 161,003 - 161,003 $ 15,162,929 ($ 5,885,111) $ 9,277,818
A. After evaluating and comparing the carrying value of property, plant, and equipment and its recoverable amount, the Group recognized impairment loss amounting to $395,048 and $140,489 for the years ended December 31, 2011 and 2010, respectively. B. Certain fixed assets are pledged for borrowings. Please refer to Note 6, “PLEDGED ASSETS”. (10) Leased assets 2011/12/31 2010/12/31 Initial cost Land $ 4,080 $ 79,156 Buildings 160,561 72,790 164,641 151,946 Less: accumulated depreciation - buildings ( 21,533) ( 14,630) $ 143,108 $ 137,316
In August 2011, ASKEY disposed certain land and buildings with book value totalling $132,402 for a total consideration of $222,616, resulting to a disposal gain of $90,214.
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167 (11) Idle assets
2011/12/31 2010/12/31 Initial cost Machinery and others $ 1,054,970 $ 1,465,032 Less: accumulated depreciation ( 621,765) ( 1,114,453) Less: accumulated impairment ( 433,205) ( 350,579) $ - $ -
After evaluating and comparing the carrying value of idle assets and their recoverable amount, the Group recognized (impairment loss) reversal of accumulated impairment amounting to ($84,939) and $55,280 for the years ended December 31, 2011 and 2010, respectively. (12) Goodwill 2011/12/31 2010/12/31 Acquisition of AAEON $ 1,131,898 $ - Others 49,475 - $ 1,181,373 -$
A. SYT acquired the shares of AAEON at the price of $57.5 (in dollars) per share in January and May, 2011, for a total of 100% ownership. The acquisition transactions are accounted for by the purchase method. The business combination effective date was set on June 1, 2011. SYT is the surviving company and AAEON is the dissolved company. Pursuant to Interpretation (100) 377 and (99) 112 issued by the ARDF, SYT did not recognize goodwill for the acquisition, but the excess of the acquisition cost over the acquired identifiable net asset value has been adjusted as additional paid-in capital common stock share premium. B. The Group totally holds 65% ownership of SYT. The Group recognizes the excess of the acquisition cost over the acquired identifiable net asset value as goodwill for the acquisition as follows: Amount Acquisition cost of SYT $ 5,286,326 Less: identifiable net realizable value of tangible assets and liabilities acquired by SYT ( 2,407,371) Less: identifiable net realizable value of intangible assets and liabilities acquired by SYT ( 1,180,354) Add: minority interests 42,781 The difference between the acquired cost and the identifiable net asset value 1,741,382 The Group's ownership 65% $ 1,131,898 The net assets value of the business combination is based on the expert’s valuation instead of the estimated value disclosed in the announced financial statements before.
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168 (13) Short-term loans 2011/12/31 2010/12/31 Credit loans $ 2,738,361 $ 3,787,863 Secured loans 82,495 72,500 $ 2,820,856 $ 3,860,363 Interest rates 0.98%~4.581% 0.65%~2.15% (14) Bonds payable A. The details of domestic unsecured convertible bonds are as follows:
2011/12/31 2010/12/31 Aggregate principal amount $ 12,000,000 $ 12,000,000 Accumulated converted amount ( 7,000) ( 7,000) Accumulated redeemed amount ( 1,193,000) ( 9,533,600) Discount on bonds payable - ( 47,091) - 2,412,309 Less: convertible bonds payable - redeemable -( 2,412,309) within one year Total $ - $ -
2011/12/31 2010/12/31 Debt-component embedded derivative: －conversion rights -$ $ 104,525
2011/1/1~12/31 2010/1/1~12/31 Gain on valuation of financial liabilities- call/put option and conversion rights $ 104,525 $ 151,382 Interest expense $ 47,091 $ 81,039 (A) The Company issued the redeemable domestic unsecured convertible bonds on November 7, 2006. The main issuance terms are as follows: a. Total amount of the convertible bonds at issuance: $12,000,000 b. Nominal rate: 0% c. Duration of issuance: 5 years (from November 7, 2006 to November 7, 2011) d. Conversion period: Each bondholder has the right to convert all or from time to time any portion of its convertible bonds into common shares during the conversion period (up to 31 days after the original issue date to 10 days before the maturity date). e. Conversion price and adjustment: The conversion price is $105.4 dollars per common share initially. The conversion price will be adjusted upon the occurrence of an increase in the number of common shares. On July 14, 2011, the Company adjusted further the conversion price to $269.2 (in dollars) per share, considering the effect of capitalization from retained earnings.
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169 f. Call option: The Company could redeem the convertible bonds at par value at any time during the period from December 8, 2006 to September 28, 2011, under the following conditions: the closing price of the common shares on each of 30 consecutive trading days reaches or exceeds 50% of the conversion price, or the outstanding balance of the bonds is less than 10% of the original issuance. g. Put option: Each bondholder has the right to put the convertible bonds at par value after the 3rd and 4th year. (B) The fair value of non-equity convertible options, put options, call options and resetting options embedded in bonds payable was separated from bonds payable, and was recognized in “Financial assets or liabilities at fair value through profit or loss” in accordance with SFAS No. 34. (C) As of December 31, 2011, except for some bonds which had been converted, all bonds of the Company had matured and been redeemed. (15) Long-term loans
Bank Usage and redemption duration 2011/12/31 2010/12/31 Mega International 2010.07.13~2014.04.15, payable$ 908,250 $ 873,900 Commercial Bank in 3 semi-annual installments, commencing two years after the initial date of borrowing, with the remaining balance payable in full in the last installment The Shanghai Commercial 2009.06.08~2013.04.06, payable 908,250 873,900 & Savings Bank, Ltd. in 3 semiannual installments, commencing two years after the initial date of borrowing Others 2011.05~2015.09 1,936 - 1,818,436 1,747,800 Less: Current portion ( 983,938) ( 291,300) $ 834,498 $ 1,456,500 Interest rates 0.04%~1.815% 0.902%~1.2%
A. Under long-term contracts, the Group is required to maintain certain covenants semi-annually agreed by both sides, and the bank can inspect at any time when necessary. B. After evaluating and comparing all of the covenants, the Group did not violate any covenant during the years ended December 31, 2011 and 2010.
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170 (16) Pension A. Because of the spin-off, except for a few foreign employees, the Company had settled its financial obligation to employees under the pension plan accounted for based on SFAS No. 18 as of December 31, 2007. Thereafter, the Company is subject to the Labor Pension Act. B. The Company obtained approval from the Labor Affairs Bureau, Taipei, for the suspension of the monthly contributions to the pension funds for foreign employees under the Labor Standards Law. C. The pension cost for the years ended December 31, 2011 and 2010 consisted of the following: 2011/1/1~12/31 2010/1/1~12/31 Defined benefit pension plan $ 56,535 $ 5,029 Defined contribution pension plan 463,374 708,434 (including annuity) D. The reconciliation between the funded status and accrued pension liability as of December 31, 2011 and 2010 are summarized as follows: 2011/1/1~12/31 2010/1/1~12/31 Benefit obligation: Vested benefit obligation ($ 11,831) ($ 10,791) Non-vested benefit obligation ( 95,450) ( 83,519) Accumulated benefit obligation ( 107,281) ( 94,310) Additional benefits based on future salary increases ( 41,195) ( 37,565) Projected benefit obligation ( 148,476) ( 131,875) Fair value of plan assets 210,489 193,576 Funded status 62,013 61,701 Unrecognized transition obligation ( 10,041) 468 Unrecognized net pension gain ( 36,619) ( 49,067) $ 15,353 $ 13,102 Prepaid pension cost $ 35,552 $ 33,212 Accrued pension liability ( 20,199) ( 20,110) $ 15,353 $ 13,102
The related assumptions used for the actuarial valuation are as follows: 2011/1/1~12/31 2010/1/1~12/31 Discount rate 1.70%~2.00% 2.00%~2.25% Future salary increase rate 2.00%~4.00% 2.25%~3.00% Expected return rate on plan assets 1.70%~2.50% 2.00%
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171 The components of net pension costs for the years ended December 31, 2011 and 2010 are as follows:
2011/1/1~/12/31 2010/1/1~/12/31 Service cost $ 51,264 $ 3,719 Interest cost 2,644 3,739 Expected return on plan assets ( 3,926) ( 4,594) Amortization and deferral 6,833 1,905 Curtailment and settlement income ( 280) - Net pension cost $ 56,535 $ 4,769
As of December 31, 2011 and 2010, the vested benefits were approximately $4,778 and $12,107, respectively. (17) Common stock A. As of December 31, 2011, the Company’s authorized capital was $47,500,000, consisting of 4,750,000,000 shares of common stock (including 50,000,000 shares which were reserved for employee stock options), and the outstanding capital was $7,527,603 with a par value of $10 (in dollars) per share. B. In order to maximize the efficiency of the own-brand business and to diversify the OEM business, the Company held a special shareholders’ meeting on February 9, 2010 and resolved to decrease its authorized capital by 85% and transfer its OEM business. The record date for the capital reduction and transfer is June 1, 2010. The capital reduction, which amounted to $36,097,609, was authorized by Financial Supervisory Commission, Executive Yuan, on April 9, 2010. The registration procedures related to the reduction were completed on June 21, 2010. C. In June 2011, the shareholders resolved to declare stock dividends of $1,357,437. The capital increase has been approved by the Financial Supervisory Commission, Executive Yuan, and the Company announced August 6, 2011 as the ex-right (ex-dividend) record date. D. As of December 31, 2011, the Company issued Global Depositary Receipts (GDRs), of which 6,320,000 units of the GDRs are now listed on the London Stock Exchange. Per unit of GDR represents 5 shares of the Company’s common stock and total GDRs represent 31,599,000 shares of the Company’s common stock. The terms of GDR are as follows: (A) Voting rights GDR holders may, pursuant to the Depositary Agreement and the relevant laws and regulations of the R.O.C., exercise the voting rights pertaining to the underlying common shares represented by the GDRs. (B) Dividends, stock warrants and other rights GDR holders and common shareholders are all entitled to receive dividends. The Depositary may issue new GDRs in proportion to GDRs holding ratios or raise the number of shares of common stock represented by each unit of GDR or sell stock dividends on behalf of GDR holders and distribute proceeds to them in proportion to their
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172 GDRs holding ratios. (18) Additional paid-in capital The Company Act. requires that capital reserve arising from paid-in capital in excess of par value on issuance of common stock and donations can be used to cover accumulated deficit, or to increase capital or payment of cash in proportion to ownership percentage when the Company has no accumulated deficit. Besides, the Securities and Exchange Act requires that the capital reserve can be capitalized once a year and the amount shall not exceed 10% of the paid-in capital. (19) Retained earnings A. According to the Company’s articles of incorporation, annual net income after covering prior years’ losses, if any, should be distributed as follows: 10% as legal reserve, an appropriate amount as special reserve according to relevant regulation or as required by the government, 10% of capital stock as capital interest, no less than 1% as employees’ bonuses, and no more than 1% as directors’ and supervisors’ bonuses. When the employees’ bonuses are distributed in stock, the recipients must include the employees of subsidiaries. After the distribution of earnings, the remaining earnings, if any, may be appropriated according to a resolution adopted in the stockholders’ meeting. B. The Company is facing a rapidly changing industrial environment, with the life cycle of the industry in the growth phase. In light of the long-term financial plan of the Company and the demand for cash by the stockholders, the Company should distribute cash dividends of not less than 10% of the total dividends declared. C. Except for covering accumulated deficit, increasing capital or payment of cash, the legal reserve shall not be used for any other purpose. The amount capitalized or the cash payment shall not exceed 25% of the paid-in capital. D. The appropriation of 2010 and 2009 earnings had been resolved at the stockholders’ meeting on June 9, 2011 and April 22, 2010, respectively. Details are summarized as follows:
2010 2009 Dividends Dividends per share per share Amount (in dollars) Amount (in dollars) Cash dividends $ 8,638,233 $ 14.00 $ 8,918,232 $ 2.10 Stock dividends 1,357,437 2.20 - - Directors’ and supervisors’ 142,125 69,844 remuneration Employees’ cash bonus 710,625 698,438
(A) The appropriation of 2010 earnings stated above is the same as that proposed by the Board of Directors on April 20, 2011. (B) There was no difference between the actual amounts of employees’ bonuses and directors’ and supervisors’ remuneration for 2010 and 2009 with the amounts accrued as expenses in the 2010 and 2009 financial statements.
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173 E. The Company estimates the amount of employees’ bonuses and directors’ and supervisors’ remuneration according to the Company Act. and the Company’s articles of incorporation. The employees’ bonuses and directors’ and supervisors’ remuneration were estimated and recognized based on a specific percentage approved by the management in accordance with the Company’s articles of incorporation. The Company recognized employees’ bonuses of $708,379 and $710,625, and directors’ and supervisors’ remuneration of $141,676 and $142,125 for the years ended December 31, 2011 and 2010, respectively. The number of shares of the dividend distribution is based on the closing price of the day before the stockholders’ meeting date and considering the effect of ex-rights and ex-dividends. Differences between the amounts approved in the stockholders’ meeting and those recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the year of distribution. (20) Treasury stock A. In order to maintain the Company’s credit worthiness and stockholders’ interest, the Company purchased its outstanding shares as treasury stock under the Securities and Exchange Act No. 28(2) during the years ended December 31, 2011 and 2010, respectively. Movements of treasury stock are as follows:
2011/1/1~12/31 2010/1/1~12/31 Shares Shares (in thousands) Amount (in thousands) Amount Beginning of the year - $ - - $ - Addition 10,000 2,609,422 10,000 2,321,248 Retirement and transfer ( 10,000) ( 2,609,422) ( 10,000) ( 2,321,248) Ending of the year - -$ -$ -$ B. Pursuant to the Company Act, the Company purchased 54,000 shares, amounting to $3,105, from shareholders who disagreed with the transfer of the Company’s OEM business. However, the Company subsequently disposed those shares in the open market after they were purchased. C. Pursuant to the Securities and Exchange Act, the number of shares bought back as treasury stock should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital reserve. D. Pursuant to the Securities and Exchange Act, treasury stock should not be pledged as collateral and is not entitled to dividends before it is reissued. E. Pursuant to the Securities and Exchange Act, treasury stock for the purpose of enhancing the Company’s credit worthiness and stockholders’ right should be retired within six months after acquisition.
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174 (21) Income tax A. According to the amended tax law issued on May 27, 2009, the statutory income tax rate was reduced from 25% to 20%, effective January 1, 2010. However, further amendment of this tax law was made and announced on June 15, 2010, under which, the statutory income tax rate has been reduced further to 17%. The Company and domestic subsidiaries are subject to income tax rate at a statutory rate of 17% for the years ended December 31, 2011 and 2010. The Company and domestic subsidiaries are also subject to the “Income Basic Tax Act” to calculate income tax. The components of income tax expense of the Group for the years ended December 31, 2011 and 2010 are as follows:
2011/1/1~12/31 2010/1/1~12/31 Current income tax expense $ 2,450,223 $ 3,443,530 10% additional income tax on 485,364 218,914 unappropriated earnings Investment tax credits ( 19,207) ( 206,028) 2,916,380 3,456,416 Deferred income tax expense (benefit): Decrease in investment tax credits 157,535 334,567 (Increase) decrease in unrealized sales profit on ( 239,057) 3,315 inter-affiliate accounts Decrease (increase) in unrealized purchase 125,253 ( 241,628) discounts Increase in unrealized accrued expenses ( 68,237) ( 578,212) Decrease in allowance for decline in value 40,948 3,913 of inventories Increase in investment income under 824,806 963,980 the equity method Effect of change in income tax rate 836 4,169 Net change in deferred income tax assets ( 235,910) ( 335,415) Others ( 235,721) ( 224,974) 370,453 ( 70,285) Income tax expense $ 3,286,833 $ 3,386,131
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175 B. The income tax computed on pre-tax financial income at the statutory rate was reconciled with the income tax expense as follows:
2011/1/1~12/31 2010/1/1~12/31 Income tax calculated on pre-tax $ 3,501,545 $ 3,492,066 financial income 10% additional income tax on unappropriated 485,364 218,914 earnings Investment tax credits occurred and used 142,871 ( 206,028) Tax effect of tax exemption on investment ( 601,802) ( 347,433) income Tax effect of correction of minimum tax ( 431,700) - Effect of change in income tax rate 836 80,659 Unrealized valuation gain or loss ( 2,420) ( 77,065) Difference between prior year's income tax 261,397 479,837 estimation and assessed results Effect of change in exchange rate 73,839 ( 173,614) Tax-exempt cash dividends ( 50,356) ( 59,542) Others ( 92,741) ( 21,663) Income tax expense $ 3,286,833 $ 3,386,131
C. The components of deferred income tax assets (liabilities) are as follows: 2011/12/31 2010/12/31 Deferred income tax assets: Unrealized sales profit $ 511,528 $ 238,628 Unrealized purchase discounts 333,289 436,231 Allowance for decline in value of inventories 685,966 642,029 Unrealized accrued expenses 1,639,395 1,034,479 Tax benefit of loss carryforwards 444,102 353,898 Investment tax credits 379,126 567,236 Others 663,812 577,094 4,657,218 3,849,595 Valuation allowance ( 728,483) ( 840,927) 3,928,735 3,008,668 Deferred income tax liabilities: Investment income from foreign investments ( 2,797,522) ( 1,939,835) Others ( 285,933) ( 185,948) ( 3,083,455) ( 2,125,783) $ 845,280 $ 882,885
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176 2011/12/31 2010/12/31 Deferred income tax assets - current $ 2,107,897 $ 1,638,031 Deferred income tax assets - non-current 1,582,487 1,150,216 Deferred income tax liabilities - current 1 2 )( - Deferred income tax liabilities - non-current ( 2,845,092) ( 1,905,362) $ 845,280 $ 882,885
D. The tax authorities have examined the Company’s income tax returns through 2009. The tax authorities assessed the Company for additional income tax of $716,266 for the years 1996 and 1998. The Company disagreed with the assessment and filed formal tax appeals. The additional income tax liability for these assessments was recognized in current income tax. E. Imputation credit account and creditable ratio
2011/12/31 2010/12/31 ICA balance $ 12,143,365 $ 12,282,090
2011 (Actual) 2010 (Actual) Creditable ratio for earnings distribution 18.05% 20.34%
F. Unappropriated retained earnings 2011/12/31 2010/12/31 Earnings generated in and before 1997 $ - $ 706,803 Earnings generated in and after 1998 77,293,325 74,095,212 $ 77,293,325 $ 74,802,015 G. As of December 31, 2011, the details of the unused investment tax credits are as follows: Company name Unused tax credits Year of expiration Askey and its subsidiaries $ 277,772 2012~2013 Other consolidated subsidiaries 101,354 2012~2013 $ 379,126 H. As of December 31,2011,the details of the tax benefit of loss carryforwards are as follows: Year loss Unused loss Company name was incurred carryforwards Year of expiration Askey and its subsidiaries 2010~2011 $ 116,188 2020~2021 IUT and its subsidiaries 2003~2011 139,556 2013~2021 Other consolidated 2002~2011 188,358 2014~2021 subsidiaries $ 444,102
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177 (22) Earnings per share
2011/1/1~12/31 Weighted average outstanding Amount common shares Earnings per share (in dollars) Before tax After tax (in thousands) Before tax After tax Basic earnings per share: Net income $ 19,795,465 $ 16,578,159 753,776$ 26.26 $ 21.99 Dilutive effect of common stock equivalents: Convertible bonds ( 57,434) ( 57,434) 7,994 Employees' bonus - - 4,694 Net income attributable to $ 19,738,031 $ 16,520,725 $ 766,464 $ 25.75 $ 21.55 common stockholders plus dilutive effect of common stock equivalents
2010/1/1~12/31 Weighted average outstanding Amount common shares Earnings per share (in dollars) Before tax After tax (in thousands) Before tax After tax Basic earnings per share: Net income $ 18,908,870 $ 16,488,357 2,607,155 $ 7.25 6 . 3 2$ Dilutive effect of common stock equivalents: Convertible bonds ( 69,835) ( 69,921) 36,355 Employees' bonus - - 7,453 Net income attributable to $ 18,839,035 $ 16,418,436 2,650,963 $ 7.11 6 . 1 9$ common stockholders plus dilutive effect of common stock equivalents (23) Personnel, depreciation, and amortization expenses Personnel, depreciation, and amortization expenses are summarized as follows: 2011/1/1~12/31 2010/1/1~12/31 Operating Operating Operating Operating Item costs expenses Total costs expenses Total Personnel expenses Salaries $ 2,619,053 $ 11,761,031 $ 14,380,084 $ 6,982,414 $ 11,195,325 $ 18,177,739 Labor and health insurances 157,346 605,100 762,446 494,739 623,883 1,118,622 Pension 152,340 367,569 519,909 313,665 399,798 713,463 Others 39,176 234,794 273,970 335,984 321,421 657,405 Depreciation 1,242,120 625,361 1,867,481 3,339,664 1,107,781 4,447,445 Amortization 30,436 259,430 289,866 528,392 621,636 1,150,028
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178 5. RELATED PARTY TRANSACTIONS (1) Names and relationship of the related parties
Related Party Relationship with the Company ASINT TECHNOLOGY CORPORATION Investee company accounted for under the (ASINT) equity method EXCELLIANCE MOS CORPORATION (EMC) Investee company accounted for under the equity method ATECH OEM INC. (ATECH) Investee company accounted for under the equity method LITEMAX ELECTRONICS INC. Investee company accounted for under the (LITEMAX) equity method MACHVISION, INC. (MACHVISION) Investee company accounted for under the equity method POTIX CORPORATION (TAIWAN) Investee company accounted for under the (POTIX) equity method POTIX CORPORATION (CAYMAN) Investee company accounted for under the (POTIXC) equity method RIH LI INTERNATONAL LIMITED (RIHLI) Subsidiary of investee company accounted for under the equity method ASHINE PRECISION CO., LTD. Non-related party of the Company (Note 1) (ASHINE) HONG HUA TECHNOLOGY (SUZHOU) Non-related party of the Company (Note 1) CO., LTD. (HONGHUA) AVY PRECISION TECHNOLOGY INC. Non-related party of the Company (Note 1) (AVYPT) AVY CO., LTD. (AVY) Non-related party of the Company (Note 1) DONGGUAN CHENGGUANG PRECISION Non-related party of the Company (Note 1) HARDWARE CO., LTD. (DGCG) DONGGUAN AVY PRECISION METAL Non-related party of the Company (Note 1) COMPONENTS CO., LTD. (DGAVY) CHING HONG PRECISE MOULD INDUSTRY Non-related party of the Company (Note 1) (SUZHOU) CO., LTD. (CHINGHONG) SHANGHAI INDEED TECHNOLOGY CO., Non related party of the Company (Note 1) LTD. (SHINDEED) SHINE TRADE INTERNATIONAL LTD. Non-related party of the Company (Note 1) (SHINETI) AVY HIGH TECH LIMITED (AVYHTL) Non-related party of the Company (Note 1) PENTAX VQ CO., LTD. (PENTAX) Non-related party of the Company (Note 1) YORKEY OPTICAL TECHNOLOGY LTD. Non-related party of the Company (Note 2) (SAMOA) (YORKEY) TAISHIBA INTERNATIONAL CO., LTD. Non-related party of the Company (Note 2) (TAISHIBA)
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179 Related Party Relationship with the Company ASAPHK Non-related party of the Company (Note 3) (Note 4) PEGA Investee company accounted for under the equity method (Note 3) UNIHAN Subsidiary of investee company accounted for under the equity method (Note 3) CASE Subsidiary of investee company accounted for under the equity method (Note 3) KAEDARKS Subsidiary of investee company accounted for under the equity method (Note 3) CORE Subsidiary of investee company accounted for under the equity method (Note 3) PJ Subsidiary of investee company accounted for under the equity method (Note 3) ASFLY Subsidiary of investee company accounted for under the equity method (Note 3) ASUSP Subsidiary of investee company accounted for under the equity method (Note 3) MAIN Subsidiary of investee company accounted for under the equity method (Note 3) POW Subsidiary of investee company accounted for under the equity method (Note 3) PCZ Subsidiary of investee company accounted for under the equity method (Note 3) PIOTEK (Note 5) Subsidiary of investee company accounted for under the equity method (Note 3) PIOTEKHK (Note 5) Subsidiary of investee company accounted for under the equity method (Note 3) ASIAROCK Subsidiary of investee company accounted for under the equity method (Note 3) AMAP Subsidiary of investee company accounted for under the equity method (Note 3) ASLINKHK Subsidiary of investee company accounted for under the equity method (Note 3) ASROCK Subsidiary of investee company accounted for under the equity method (Note 3) ADVANSUS Subsidiary of investee company accounted for under the equity method (Note 3) PIL Subsidiary of investee company accounted for under the equity method (Note 3) TOPSZ Subsidiary of investee company accounted for under the equity method (Note 3)
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180 Related Party Relationship with the Company AZURE Subsidiary of investee company accounted for under the equity method (Note 3) ABILITY Subsidiary of investee company accounted for under the equity method (Note 3) PRO Subsidiary of investee company accounted for under the equity method (Note 3) AVYSZ Subsidiary of investee company accounted for under the equity method (Note 3) Directors, supervisors and key management Directors, supervisors and key management of the Group of the Group Others (related parties with non-significant Related parties under the definition of transactions) SFAS No. 6 Note 1: Investee company accounted for under the equity method before May 31, 2010. Note 2: Substantial related party of the Company’s subsidiary before May 31, 2010. Note 3: Subsidiary of the Company before May 31, 2010, and intercompany transactions during January 1 and May 31, 2010 have been eliminated. Note 4: Subsidiary of investee company accounted for under the equity method from June 1 to December 30, 2010. Note 5: BOARDTEK (H.K.) TRADING LIMITED and BOARDTEK COMPUTER (SUZHOU) CO. LTD. changed their name to PIOTEK (H.K.) TRADING LIMITED and PIOTEK COMPUTER (SUZHOU) CO. LTD., respectively, in 2010.
(2) Significant transactions and balances with related parties A. Sales 2011/1/1~12/31 2010/1/1~12/31 Amount % Amount % PEGA $ 2,500,651 1 $ 820,451 - Others 256,242 - 164,922 - $ 2,756,893 1 $ 985,373 -
The terms of the above transactions are 30 to 90 days from sales, open account 60 days or negotiated by both parties, which are similar to those for third parties.
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181 B. Purchases (including purchases on behalf)
2011/1/1~12/31 2010/1/1~12/31 Amount % Amount % PEGA $ 166,608,966 32$ 115,788,644 22 ASINT 2,771,766 1 5,190,484 1 AVYPT -- 597,515 - SHINDEED -- 979,776 - Others 1,777,222 - 1,904,652 - $ 171,157,954 33 $ 124,461,071 23
Purchase terms are open account 45 to 120 days, 45 to 90 days or within 1 to 6 months from receipt of goods, which are similar to those for third parties. C. Costs or expenses of processing and rework
2011/1/1~12/31 2010/1/1~12/31 Items Amount Amount PEGA Processing and rework $ 2,127,109 $ 1,034,313 Others 34,695 37,431 $ 2,161,804 $ 1,071,744
D. Notes and accounts receivable 2011/12/31 2010/12/31 Amount % Amount % Others $ 558,248 1 $ 398,299 -
E. Other receivable from affiliated companies (non-financing)
2011/12/31 2010/12/31 Amount % Amount % Others $ 7,330 - $ 5,720 -
F. Property transactions The Group acquired some equipment from PEGA, CASE and CORE totaling to $219,662 for the years ended December 31, 2010. G. Notes and accounts payable
2011/12/31 2010/12/31 Amount % Amount % PEGA $ 7,970,375 15$ 8,463,362 17 Others 659,407 1 823,718 1 $ 8,629,782 16 $ 9,287,080 18
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182 H. Accrued expenses, other current liabilities and receipts in advance
2011/12/31 2010/12/31 Amount % Amount % PEGA $ 745,637 2 $ 232,393 - Others 35,487 - 34,909 - $ 781,124 2 $ 267,302 - I. Compensation of key management
2011/1/1~12/31 2010/1/1~12/31 (Estimated) (Actual) Salaries $ 129,919 $ 129,083 Bonuses and service execution fees 212,069 199,364 Directors' and supervisors' remuneration and 232,251 232,700 employees' bonuses $ 574,239 $ 561,147
Note: The other information will be available in the annual report for the stockholders’ meeting.
6. PLEDGED ASSETS
Book Value Pledged assets Item 2011/12/31 2010/12/31 Purpose Other current assets - others Pledged time deposit 44,638$ 46,661$ Customs duty guarantee and and other assets - others and restricted deposits bank loans, etc. Refundable deposits Refundable deposits and 156,943 151,927 Guarantee for import duty and pledged time deposit customs deposits for import of processing booklet, etc. Property, plant and equipment Buildings 18,653 - Bank loans 220,234$ 198,588$
7. COMMITMENTS AND CONTINGENCIES (1) Lawsuits for infringement of intellectual property rights A. In January 2007, a Japanese company filed a lawsuit against the Company and its US subsidiary for infringement of intellectual property rights, but the Japanese company has already withdrawn the lawsuit. In May and September 2007, another plaintiff, a US company, also filed a lawsuit against the Company and its US subsidiary for patent infringement and violation of trade secrets. These lawsuits are currently under investigation in a Utah court in the US. In January 2012, the Company was ordered by the court to compensate the plaintiff, but the Company will appeal to a higher court.
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183 B. In July 2009, a US B company filed a lawsuit against the Company’s US subsidiary and other third parties for patent infringement of flash memory chips. In July 2009, B company also filed for an investigation with the United Sates International Trade Commission (ITC) against the Company’s suppliers and its customers. In 2011, B Company and Supplier S have reached a settlement and the court has made a judgment and this case was closed. C. In February 2011, a US patentee, GO Company, filed a lawsuit with the United States District Court of Delaware (“Court”) against several defendants including the Company’s client, GA Company, alleging infringement, among others, of its patent. Based on the contract previously signed by the Company and GA Company, the Company has a guaranty liability to GO Company for the event above, and shall bear the lawyer’s fees. The court has currently agreed to suspend this case, but the Company has already recognized the possible loss in the books. D. Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in a Northern California court, in an East Texas court, in a Delaware court and in United States International Trade Commission. The Company cannot presently determine the ultimate outcome of these lawsuits, but has already recognized the possible loss in the books. E. Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in an East Texas court, in a Florida court, in a New Hampshire court, in a Washington court, in a Northern Illinois court, in a California court, in a Delaware court and in United States International Trade Commission. The ultimate outcome of these lawsuits cannot be presently determined as of the report date. (2) To ensure the supply of raw materials, the Company entered into an agreement with a supplier for a guaranteed quantity of materials supply at a discount to market price or at an agreed price. The payment was recognized as prepayment of $150,667 and $5,453,742 as of December 31, 2011 and 2010, respectively. (3) The Group entered into operating lease contracts for its offices and parking spaces. Future lease payments under those leases are as follows:
Year Amount 2012 $ 338,991 2013 192,780 2014 27,852 2015 26,976 2016 26,643
(4) Details of operating lease for significant property used by ACI are as follows: Lessor Leased Asset Period Refundable Deposits Sobrato Interest, Office and warehouse 2008/06/01~2018/05/31 USD1,500 LP in Fremont, California (in thousands)
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184 The future lease payments are as follows: Amount Year (in thousands) 2012 USD 1,476 2013 1,535 2014 1,597 2015 and afterwards 5,893
8. SIGNIFICANT DISASTER LOSS: None.
9. SUBSEQUENT EVENTS
On February 24, 2012, the Company resolved to increase its capital in UPI Semiconductor Corp. (UPI). The Group will pool $438,128 to acquire 49.5% shares of UPI, which will then become a subsidiary as the Group’s total shares in UPI will account for 53% after combining with the original indirect investment.
10. OTHERS
(1) Financial statement presentation Certain accounts in the 2010 consolidated financial statements were reclassified to conform with the 2011 consolidated financial statement presentation.
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185 (2) Fair values of the financial instruments 2011/12/31 2010/12/31 Fair value Fair value Estimated Estimated Quotations using a Quotations using a in an active valuation in an active valuation Book value market technique Book value market technique Financial instruments
Non-derivative financial instruments
Assets Financial assets at fair value through profit or loss $ 10,884,189 $ 10,884,189 $ - $ 10,609,286 $ 10,609,286 $ - Available-for-sale financial assets 7,421,606 7,421,606 - 6,503,141 6,503,141 - Financial assets carried at cost 653,544 - - 1,090,407 - - Liabilities Bonds payable (including current portion) - - - 2,412,309 - 2,415,377 Long-term loans (including current portion) 1,818,436 - 1,818,436 1,747,800 - 1,747,800
Derivative financial instruments
Assets
Financial assets at fair value through profit or loss Forward exchange contracts 686,335 - 686,335 18,792 - 18,792 Currency swap contracts 884 - 884 6,352 - 6,352 Currency options contracts 38,788 - 38,788 6,776 - 6,776 Derivative financial assets for hedging Forward exchange contracts 1,354,470 - 1,354,470 386,387 - 386,387 Liabilities
Financial liabilities at fair value through profit or loss Forward exchange contracts 35,595 - 35,595 155,597 - 155,597 Currency options contracts - - - 3,582 - 3,582 Currency swap contracts 1,457 - 1,457 - - - Call/put options and conversion right - - - 104,525 - 104,525 - convertible bonds
Derivative financial liabilities for hedging Forward exchange contracts - - - 185,732 - 185,732
The methods and assumptions used to estimate the fair values of the above financial instruments are summarized below: A. The above financial instruments exclude cash and cash equivalents, notes/accounts receivable (including related parties), other receivables, refundable deposits, short-term loans, notes/accounts payable (including related parties), accrued expenses, other current liabilities and guarantee deposits received. For such financial instruments, the fair values were determined based on their carrying values because of the short maturities of the instruments. B. The fair values of financial assets at fair value through profit or loss and available-for-sale financial assets are based on quoted market prices in an active market. If the market for a financial instrument is not active, an entity establishes fair value by using a valuation technique. The Group uses estimates and assumptions that are consistent with information that market participants would use in setting a price for these financial instruments.
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186 C. The fair value of convertible bonds payable is not available, and a valuation technique is used. The assumptions used in the said valuation are the same as those used by financial market traders when quoting their prices. However, the fair value is not expected to equal future cash outflow. D. The fair values of derivative financial instruments which include unrealized gain or loss on unsettled contracts were determined based on the amounts to be received or paid assuming that the contracts were settled as of the reporting date. E. Financial assets carried at cost are invested in unquoted equity instruments and mutual fund bond obligations whose fair value cannot be estimated. F. The fair value of long-term loans was estimated by the discounted value of expected cash flow. The discount rate used was based on the interest rate of long-term loans with similar conditions. Based on the results of the evaluation, the fair value is close to book value. (3) Procedure of financial risk control The management can effectively control significant market risks after appropriately taking into consideration the economic environment, competition, and changes of market value risk by setting the goal of risk management. (4) Information of material financial risk A. Market risk (A) The main currency for purchases and sales of the Group is the US dollar. The Group uses the principle of natural hedge to mitigate the risk and utilizes spot or forward contracts, currency swaps and currency option contracts to hedge foreign currency risk. The forward exchange, currency swaps and currency option contracts’ duration corresponds to the Group’s foreign currency assets’ and liabilities’ due date and future cash flows. The exchange gain and loss resulting from foreign currency assets and liabilities will be offset by the exchange gain and loss resulting from the hedged item. (B) The open-end funds and listed and OTC stocks held by the Group are classified as financial assets at fair value through profit or loss and available-for-sale financial assets. As these assets are measured at fair value, the Group has risk exposure related to changes in fair value in an equity securities market. (C) Information of significant foreign currency denominated assets and liabilities:
2011/12/31 2010/12/31
Foreign Currency Foreign Currency (in dollars) Rate NTD (in dollars) Rate NTD Financial assets Monetary item USD $ 911,800,716 30.275 $ 27,604,767 $ 1,433,223,798 29.13 $ 41,749,809 EUR 351,013,985 39.18 13,752,728 223,388,817 38.92 8,694,293 RMB 5,669,965,355 4.8101 27,273,100 1,665,940,459 4.4205 7,364,290
Financial liabilities Monetary item USD 2,083,890,167 30.275 63,089,775 1,750,708,860 29.13 50,998,149 RMB 1,337,789,905 4.8101 6,434,903 1,013,400,940 4.4205 4,479,739
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187 B. Credit risk (A)Credit risk means the potential loss of the Group if the counterparty involved in the transaction defaults. Since the Group’s derivative financial instrument agreements are entered into with international financial institutions with good credit ratings, management believes that there is no significant credit risk from these transactions. (B) The primary potential credit risk is from financial instruments like cash, bank deposits, equity securities under non-equity method, and accounts receivable. The Group deposits cash in different financial institutions. Equity securities under non-equity method were funds and listed and OTC stocks issued by companies with good credit ratings. The Group manages credit risk exposure related to each financial institution and believes that there is no significant concentration of credit risk of cash and equity securities. The customers of the Group have good credit and profit records. The Group evaluates the financial condition of these customers in order to reduce credit risk of accounts receivable. C. Liquidity risk (A) The Group adjusts its funding mainly through corporate bonds, cash and bank deposits. The Group maintains funding sufficient to fulfill all contract obligations, and thereby expects no significant liquidity risk would arise from lack of funding. (B) The Group invests in funds and listed and OTC stocks, which are traded in active markets and are expected to be able to be readily converted into certain amount of cash approximate to their fair values in the markets. The Group has lower funding risk for forward exchange contracts because sufficient working capital is maintained to fulfill contract obligations, and lower cash flow risk due to the exchange rate of those contracts was known. (C) The Group is expected to have liquidity risk since investment equity instruments carried at cost have no active market. (D) The derivative financial instruments for hedging are intended mainly to hedge the exchange rate risk from future cash flows. The forward exchange contracts’ duration corresponds to the Group’s foreign currency future cash flows. The Group will settle the foreign currency liabilities at expiration of the contracts. Thus, management believes that the cash flow risk is not significant. D. Cash flow risk due to changes in interest rates The Group’s long-term loans are issued at floating interest rates. Accordingly, the future cash flow will fluctuate with the yield rate of these debt instruments. E. Pro forma information The following pro forma information presents the combined results of operations under the assumption that the acquisition of AAEON had occurred at the beginning of 2010.
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188 2011/1/1~12/31 2010/1/1~12/31 Revenues $ 384,112,294 $ 432,584,826 Income before income tax $ 20,134,231 $ 21,861,187 Consolidated net income $ 16,847,398 $ 18,388,880 Before After Before After Earnings per share (in dollars) Tax Tax Tax Tax Basic earnings per share 26.26$ 21.99$ 7.36$ 6.41$
F. Investment – land use right In 2006, WJWS entered into a contract with Wujiang City Government, to obtain two land use rights of RMB 143,825,000. As of December 31, 2009, WJWS has paid RMB 92,360,000 for one of the land use right (recognized as “Investments - land use right”). Due to extension of the canal, the leased area was reduced by Wujiang City Government and part of the proceeds amounting to RMB 18,959,000 was refunded in June, 2010. In consideration of the Group’s restructuring and long-term risk, ASKEY disposed of the shares of WJWS on June 30, 2011, and the ending balance was $0. 11. OPERATING SEGMENTS INFORMATION (1) General information The businesses of the Group are mainly divided into three parts: 3C brand business, 3C OEM business (out of the Group’s businesses from June 1, 2010) and others. 3C brand business focuses on the sales of 3C products, 3C OEM business focuses on OEM of 3C products, and others focus on strategic investments in businesses other than the two above. (2) Measurement basis The Group uses the operating profit as the measurement for operating segment profit and the basis of performance assessment. The accounting policies of the operating segment and the accounting policies described in Note 2 are the same. (3) Financial information 2011/1/1~12/31 3C Brand 3C OEM Others Total Revenues from external $ 344,128,000 $ - $ 39,984,294 $ 384,112,294 customers Segment profit $ 18,051,798 -$ $ 125,518 $ 18,177,316 Identifiable assets (Note) -$ -$ -$ -$
2010/1/1~12/31 3C Brand 3C OEM Others Total Revenues from external $ 321,763,139 $ 81,348,160 $ 26,609,950 $ 429,721,249 customers Segment profit $ 14,111,086 $ 3,789,474 ($ 392,853) $ 17,507,707 Identifiable assets (Note) -$ -$ -$ -$
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189 Note: Because the Group’s segment assets are not provided to the chief operating decision makers, such items are not required to be disclosed. (4) Reconciliation of operating segments’ operating profit A. The revenues from external customers reported to the chief operating decision makers are measured in a manner consistent with that in the income statement. B. The reconciliation between the reportable segment’s profit and segment profit (others are the same as consolidated statements of income) is as follows: 2011/1/1~12/31 2010/1/1~12/31 Reportable operating segments’ profit $ 18,177,316 $ 17,507,707 Unallocated profit or loss 43,430 1,467,566 $ 18,220,746 $ 18,975,273 C. Information by geographic area The Group allocates the revenues and non-current assets on the basis of the location of the single country or area:
2011/1/1~12/31 2010/1/1~12/31 Revenues Non-current assets Revenues Non-current assets Taiwan $ 46,439,088 $ 8,188,151 $ 27,587,768 $ 5,985,435 China 80,532,759 4,353,377 82,552,108 3,763,825 Singapore 197,750,880 6,220 178,166,232 6,502 US 51,871,828 130,881 69,512,900 86,595 Europe 2,327,929 57,724 3,910,192 54,496 Others 5,189,810 643,419 67,992,049 202,229 Total $ 384,112,294 $ 13,379,772 $ 429,721,249 $ 10,099,082
Non-current assets above include property, plant and equipment, intangible assets and other assets-non-current but exclude refundable deposits and deferred income tax assets-non-current. (5) Information on major customers No single customer accounts for more than 10% of the consolidated sales revenues for the years ended December 31, 2011 and 2010. 12. DISCLOSURES RELATING TO THE ADOPTION OF IFRSs Pursuant to the regulations of the Financial Supervisory Commission, Executive Yuan, R.O.C., effective January 1, 2013, a public company whose stock is listed on the Taiwan Stock Exchange Corporation or traded in the GreTai Securities Market should prepare financial statements in accordance with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), and relevant interpretations and interpretative bulletins that are ratified by the Financial Supervisory Commission. The Company discloses the following information in advance prior to the adoption of IFRSs under the requirements of Jin-Guan-Zheng-Shen-Zi Order No. 0990004943 of the Financial Supervisory Commission, dated February 2, 2010:
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190 Major contents and status of execution of the Company’s plan for IFRSs adoption: (1) The Company has formed an IFRSs group headed by the Company’s general manager, which is responsible for setting up a plan relative to the Company’s transition to IFRSs. The major contents and status of execution of this plan are outlined below:
Working Items for IFRSs Adoption Status of Execution a. Formation of an IFRSs group Completed b.Setting up a plan relative to the Company’s transition Completed to IFRSs c.Identification of the differences between current Completed accounting policies and IFRSs d. Identification of consolidated entities under the IFRSs Completed framework e. Evaluation of the impact of each exemption and Completed option on the Company under IFRS 1 – First-time Adoption of International Financial Reporting Standards f.Evaluation of needed information system Completed adjustments g.Evaluation of needed internal control adjustments Completed h.Establish IFRSs accounting policies Completed i. Selection of exemptions and options available Completed under IFRS 1 – First-time Adoption of International Financial Reporting Standards j. Preparation of statement of financial position In progress according to the plan on the date of transition to IFRSs k.Preparation of IFRSs comparative financial In progress according to the plan information for 2012 l. Completion of relevant internal control In progress according to the plan (including financial reporting process and relevant nformation system) adjustments
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191 (2) Material differences that may arise between current accounting policies used in the preparation of financial statements and IFRSs and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be used in the preparation of financial statements in the future: The Company uses the IFRSs already ratified currently by the Financial Supervisory Commission and the “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be applied in 2013 as the basis for evaluation of material differences in accounting policies as mentioned above. However, the Company’s current evaluation results may be different from the actual differences that may arise when new issuances of or amendments to IFRSs are subsequently ratified by the Financial Supervisory Commission or relevant interpretations or amendments to the “Rules Governing the Preparation of Financial Statements by Securities Issuers” in the future. Material differences identified by the Company that may arise between current accounting policies used in the preparation of financial statements and IFRSs and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be used in the preparation of financial statements in the future are set forth below: A. Financial assets: equity instruments In accordance with the amended “Rules Governing the Preparation of Financial Statements by Securities Issuers”, dated July 7, 2011, unlisted stocks and emerging stocks held by the Group should be measured at cost and recognized in “Financial assets carried at cost”. However, in accordance with IAS 39, “Financial Instruments: Recognition and Measurement”, investments in equity instruments without an active market but with reliable fair value measurement (i.e. the variability of the estimation interval of reasonable fair values of such equity instruments is insignificant, or the probability for these estimates can be made reliably) should be measured at fair value. B. Business combinations In accordance with current accounting standards in R.O.C., the minority interest on the consolidated financial statements should be measured based on the book value of the acquired corporation. In accordance with IFRS 3, “Business Combinations”, the non-controlling interest in the acquired corporation should be measured at fair value (or at the non-controlling interest’s proportionate share of the acquired corporation’s identifiable net assets). C. Consolidated financial statements In accordance with current accounting standards in R.O.C., in case the parent company changes its share ownership of the subsidiary and loses control over the subsidiary, any investment retained in the former subsidiary is measured at the book value multiplied by the residual share ownership ratio at the date when control is lost. In accordance with IAS 27, “Consolidated and Separate Financial Statements”, any investment retained in the former subsidiary should be recognized at its fair value at the date when control is lost. D. Investments in associates/long-term equity investments accounted for under the equity method (A) In accordance with current accounting standards in R.O.C., for long-term equity investment under equity method, if an investor company loses its significant influence over an investee company because of a decrease in ownership or other reasons and therefore ceases using the equity method, the cost of investment will be the book value at the time of change. If there is a balance on additional paid-in capital or other equity
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192 adjustment items from the long-term equity investment, then an investor company shall calculate its share when the investment is sold, so that the pro-rata gains or losses from the disposal of the long-term investment can be accounted for. In accordance with IAS 28, “Investments in Associates”, when an investment ceases to be an associate, the fair value of the remaining investment at the date when it ceases to be an associate should be regarded as its fair value on initial recognition of the financial asset. If there is a balance on additional paid-in capital or other equity adjustment items from the long-term equity investment, it shall be written off totally by the investor company when the investment is sold, so that the gains or losses from the disposal of the long-term investment can be accounted for. (B) In accordance with current accounting standards in R.O.C., if an investee company issues new shares and original shareholders do not purchase or acquire new shares proportionately, but the investor company does not lose its significant influence over the investee company, the investment percentage, and therefore the equity in net assets for the investment that an investor company has invested, will be changed. Such difference shall be used to adjust the ‘Additional paid-in capital’ and the ‘Long-term equity investments’ accounts. However, in accordance with IAS 28, “Investments in Associates”, an increase in investment percentage is accounted for as an acquisition of investment; while, a decrease in investment percentage is accounted for as a disposal of investment and any related disposal gain or loss is recognized. E. Employee benefits The current accounting standards in R.O.C. do not specify the rules on the cost recognition for accumulating compensated absences. The Company recognizes such costs as expenses upon actual payment. However, IAS 19, “Employee Benefits”, requires that the costs of accumulating compensated absences should be accrued as expenses at the end of the reporting period. F. Income taxes (A) In accordance with current accounting standards in R.O.C., a deferred tax asset or liability should, according to the classification of its related asset or liability, be classified as current or noncurrent. However, a deferred tax asset or liability that is not related to an asset or liability for financial reporting, should be classified as current or noncurrent according to the expected time period to realize or settle a deferred tax asset or liability. However, under IAS 1, “Presentation of Financial Statements”, an entity should not classify a deferred tax asset or liability as current. (B) The current accounting standards in R.O.C do not specify the rules on the tax rate that shall apply to the deferred tax assets or liabilities associated with unrealized gain or loss arising from transactions between parent company and subsidiaries. The Company adopts the seller’s tax rate to recognize such deferred tax. However, under IAS 12, “Income Taxes”, temporary differences in the consolidated financial statements are determined by comparing the carrying amounts of assets and liabilities in the financial statements and applicable taxation basis. As the Company’s tax base is determined by reference to the Group entities’ income tax returns, the buyer’s tax rate shall apply to the deferred tax associated with unrealized gain or loss arising from transactions between parent company and subsidiaries.
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193 Some of the above differences may not have a material effect on the Group in transition to IFRSs due to the exemption rules in IFRS 1, “First-time Adoption of International Financial Reporting Standards”, adopted by the Company.
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194
VII. Review of financial position, management performance and risk management
I. Analysis of financial position Comparison of Financial Position
Unit: NT$ thousands Year Difference 2011 2010 Item Amount % Current assets 112,832,696 110,079,794 2,752,902 2.50 Fixed assets 3,937,811 4,269,103 (331,292) (7.76) Long-term investment and 65,967,405 53,381,703 12,585,702 23.58 other assets Total assets 182,737,912 167,730,600 15,007,312 8.95 Current liabilities 61,689,874 57,719,960 3,969,914 6.88 Long-term liabilities and 6,099,788 3,966,980 2,132,808 53.76 other liabilities Total liabilities 67,789,662 61,686,940 6,102,722 9.89 Capital stock 7,527,603 6,270,166 1,257,437 20.05 Additional paid-in capital 4,662,555 4,482,124 180,431 4.03 Retained earnings 99,100,280 94,960,135 4,140,145 4.36 Adjustments 3,657,812 331,235 3,326,577 1004.30 Total Shareholders’ Equity 114,948,250 106,043,660 8,904,590 8.40 Analysis of financial ratio change: 1. Current assets: Due to the increase in revenue growth, the accounts receivable generated from sales of goods and net inventory. 2. Long-term investment, intangible assets, and other assets: Due to the increase in long-term investment. 3. Current liabilities: Due to the rise in revenue growth, accounts payable and accrued expenses from relevant stock preparation. 4. Long-term liabilities and other liabilities: Due to the increase in deferred credits and deferred tax liability. 5. Adjustments: Due to the recognition of rise in unrealized gains and losses from cash flow hedging for subsidiaries and investment to subsidiaries overseas, and the devaluation of TWD against the U.S. dollar and the rise in cumulative translation adjustment amount.
II. Business performance (I) Comparison of business performance Unit: NT$ thousands
Item 2011 2010 Amount change Ratio change (%) Total operating income $327,013,339 $299,768,014 27,245,325 9.09 Minus: Sales return and discount (9,343,564) (3,016,885) (6,326,679) 209.71 Net operating income 317,669,775 296,751,129 20,918,646 7.05 Operating cost (296,351,674) (279,426,109) (16,925,565) 6.06 195
195
Item 2011 2010 Amount change Ratio change (%)
Gross profit 21,318,101 17,325,020 3,993,081 23.05 (Minus) add: Realized (unrealized) gross profit of the (1,191,149) (89,344) (1,101,805) 1233.22 affiliates Realized gross profit 20,126,952 17,235,676 2,891,276 16.77 Operating expense (9,403,496) (7,572,230) (1,831,266) 24.18 Operating income 10,723,456 9,663,446 1,060,010 10.97 Non-operating income and gain Interest income 160,270 91,168 69,102 75.80 Investment income (Equity 7,274,803 8,541,113 (1,266,310) (14.83) Method) Dividend income 292,051 338,950 (46,899) (13.84) Gain from exchange 1,645,648 - 1,645,648 100.00 Gain from financial asset 163,66 466,044 (302,578) (64.92) valuation Other income 225,311 467,272 (241,961) (51.78) Total non-operating income 9,761,549 9,904,547 (142,998) (1.44) and gain Non-operating expense and loss Interest expense 47,099 81,045 (33,946) (41.89) Foreign currency exchange - 400,516 (400,516) (100.00) gain, loss Gain on valuation of 522,198 44,971 477,227 1061.19 financial liabilities, loss Other loss 120,243 132,591 (12,348) (9.31) Total Non-operating 689,540 659,123 30,417 4.61 expense and loss Net income before tax 19,795,465 18,908,870 886,595 4.69 Minus: Estimated income tax (3,217,306) (2,420,513) (796,793) 32.92 Net income $16,578,159 $16,488,357 89,802 0.54 Analysis of financial ratio change: 1. Operating income and operating cost: Due to the launch of new products, the sales reached anticipation while both revenues and operating costs grew. 2. Operating expense: Expenses went up due to the increase of sales revenue this year. 3. Non-operating income and gain: Investment earnings with equity method had decreased from the year before. 4. Estimated income tax expense: The higher tax expense this year was due to the increase of taxable income this year.
196
196
(II) Analysis of gross profit Unit: NT$ Thousands Root cause Change amount Difference of sales Difference of Difference of price combination quantity Gross profit 3,993,081 2,167,946 (2,671,817) 4,496,952 Remark The increase of gross profit of 2011 is from the favorable difference of quantity and combination.
III. Analysis of cash flow
(I) Liquidity analysis of the last two years
Year 2011 2010 Financial ratio change Item
Current ratio 14.83％ 36.41％ (21.58)％ Cash adequacy ratio 122.16％ 85.46％ 36.70％ Cash reinvestment ratio 0.42％ 10.87％ (10.45)％ Analysis of financial ratio change: 1. Decrease of cash flow ratio this year: The annual revenue growth, the accounts receivable generated from sales of goods and net inventory were increased. The net cash inflow from operating activity was decreased; therefore, cash flow ratio was down. 2. Increase of cash flow adequacy ratio this year: The management strived to control inventory; therefore, the increase of inventory in the last five years was declining; moreover, the net cash inflow from operating activities in the last five year went up; therefore, cash flow adequacy ratio was up too. 3. Increase of cash reinvestment ratio this year: Due to the annual growth revenue, the accounts receivable generated from sales of goods and the net inventory were increased, leading to a relatively lower Net cash inflow from operating activities than previous fiscal year.
(II) Analysis of cash liquidity in one year Unit: NT$100 million
Beginning cash Expected net Expected Expected cash Remedial measures for the balance cash flow from cash outflow surplus expected insufficient cash operating activity of the year (deficit) Investing Financing of the year ＋－ activity activity 166.08 134.98 120.28 180.78 - -
197197
1. Analysis of cash flow change: (1)Operating activity: Net cash inflow from operating activity for an amount of NT$13.498 billion (2)Investing activity: Net cash outflow from investing activity including long-term investment for an amount of NT$1.113 billion (3)Financing activity: Net cash outflow from financing activity including dividend distribution for an amount of NT$10.915 billion 2. Remedial measures for the expected insufficient cash and liquidity analysis: N/A
IV. The impact of significant capital expenditure on finance in recent years: Significant capital expenditure and the source of fund: N/A
V. Reinvestment in recent years: Unit: NT$ thousands Item Gain or Loss Root cause of Corrective Amount Policy Investment Plans (Note) in 2011 profit or loss action Develop brand business to Focus on brand Own brand improve marketing and - - business 1,513,750 competitiveness 7,032,167 business and operating development performance Commitment in customized applications of Vertical The group of industry application and AAEON hardware integration to - - TECHNOLOGY 2,500,400 93,441 products and enhance INC. development of competitiveness other niche-based business Note: Own brand business included: ASUS TECHNOLOGY PTE. LIMITED, ASUS TECHNOLOGY INCORPORATION, ASUS COMPUTER INTERNATIONAL, ASUSTEK COMPUTER (SHANGHAI) CO. LTD. and ASUSTEK Computer (Chongqing) CO., LTD.
VI. Risk analysis and evaluation in recent years and up to the date of the annual report printed:
(I) The impact of interest rate, exchange rate, and inflation on the company’s income and expense and the responsive measures: 1. The impact of interest rate on the company’s income and expense and the responsive measures: The net interest income in 2011 amounted to less than 0.04% of total operating income; therefore, the impact of interest rate on the company was insignificant. 2. The impact of exchange rate on the company’s income and expense and the responsive measures: The exchange gain recognized in 2011 amounted to 0.52% of total operating income; therefore, the impact of exchange rate on the company was insignificant. 3. The impact of inflation on the company’s income and expense and the responsive measures: There was no inflation issued in 2011
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(II) Conducting high-risk and high-leverage investment, granting loans to others, endorsement & guarantee and directives policy, root cause of profit and loss, and the responsive measures: The company has granted loans to others, endorsement & guarantee, and directives trade processed in accordance with the “Assets Acquisition and/or Disposition Procedure” and “Loans and Endorsement & Guarantee Procedure” of the company and the responsive measures. The company has granted no loan to others in 2011 and had not arranged any endorsement and guarantee on December 31, 2011. (III) R&D plans and budgeted R&D expense: ASUS cannot stress enough the importance of R&D team cultivation and training since the incorporation. ASUS is able to have the key technology of products controlled to secure the timing of mass production. ASUS will base on the said fine tradition to reinforce the R&D capability of the company and add it with market movement to have unique and innovative information products developed. 1. Products development planned in 2012: (1) Digital control wireless transmission technology dual core CPU MB (2) Advanced 3D image display and wireless TV transmission graphic card (3) Multi-functional, three-in-one smartphone & Padfone Note (4) Ultra Mobile PC (5) High-speed router / exchanger / firewall / VPN (6) New-generation advanced server (7) Professional LED display (8) Eee Top PC and Eee Box PC (9) Transformer Pad 2. R&D budget in 2012: NT$5 billion (IV) The impact of domestic and international policies and law change on the company’s finance and the responsive measures: None. (V) The impact of technology change and industrial change on the company’s finance and the responsive measures: ASUS constantly strives to be an integrated 3C solution provider (Computer, Communications, Consumer electronics). Technology change provides the company with business opportunity for new products. The company was with 15.28 times of inventory turnover in 2011; apparently, there was not any significant negative impact on finance. (VI) The impact of industrial image change on business risk management and the responsive measures: ASUS has maintained a fine industrial image and there is not any negative report on the company’s image. (VII) The expected effect, potential risk, and responsive measures of merger: The company’s did not have any merger conducted in 2010 and up to the date of the annual report printed: N/A (VIII) The expected effect, potential risk, and responsive measures of plant expansion: N/A (IX) The risk faced by procurements and sales hub and the responsive measures: The company’s procurements and sales are not centralized and with a good customer relationship established; therefore, no risk of procurements and sales centralization. (X) The impact of massive stock transfer or change by directors, supervisors, and shareholders with over 10% shareholding, the risk, and the responsive measures:
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There was not any massive stock transfer or change by directors, supervisors, and shareholders with over 10% shareholding in 2011 and up to the date of the annual report printed. (XI) The impact of right to operation change on the company, the risk, and the responsive measures: N/A (XII) Legal and non-legal events: 1. The company’s major legal issues, non-legal issues, or administrative lawsuits settled or in pending: (1) In January 2007, a Japanese company filed a lawsuit against the Company and its US subsidiary for infringement of intellectual property rights, but the Japanese company has already withdrawn the lawsuit. In May and September 2007, another plaintiff, a US company, also filed a lawsuit against the Company and its US subsidiary for patent infringement and violation of trade secrets. These lawsuits are currently under investigation in a Utah court in the US. In January 2012, the Company was judged to compensate for the plaintiff by the court, but the Company will appeal to a higher court (2) In July 2009, a US B company filed a lawsuit against the Company’s US subsidiary and other third parties for patent infringement of flash memory chips. In July 2009, B company also filed for an investigation with the United Sates International Trade Commission (ITC) against the Company’s suppliers and its customers. In 2011, B Company and Supplier S have reached a settlement and the court has made a judgment and this case was closed. (3) In February 2011, a US patentee, GO Company, filed a lawsuit with the United States District Court of Delaware (“Court”) against several defendants including the Company’s client, GA Company, alleging infringement, among others, of its patent. Based on the contract previously signed by the Company and GA Company, the Company has a guaranty liability to GO Company for the event above, and shall bear the lawyer’s fees. The court has currently agreed to suspend this case, but the Company has already recognized the possible loss in the books. (4) Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in a Northern California court, in an East Texas court, in a Delaware court and in United States International Trade Commission. The Company cannot presently determine the ultimate outcome of these lawsuits, but has already recognized the possible loss in the books. (5) Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in an East Texas court, in a Florida court, in a New Hampshire court, in a Washington court, in a Northern Illinois court, in a California court, in a Delaware court and in United States International Trade Commission. The ultimate outcome of these lawsuits cannot be presently determined as of the report date. 2. The related party’s major legal issues, non-legal issues, or administrative lawsuits settled or in pending: N/A (XIII) Other significant risks and responsive measures: N/A (XIV) Risk management policy, structure and function 1. Risk management policy
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A special risk management and emergency response policy has been formulated to ensure the sustainable management of ASUS Group and to fulfill the social responsibility of stakeholders. The purpose of the policy aims to establish a good independent risk control mechanism under the principles of cost‑effectiveness to reduce the possible impacts and damages encountered by the Company, and providing a safe, hazardous-free work environment for the employees at the same time. Although the implementation of the policy may not increase company profit, it contains absolute necessity in terms of maintaining the business livelihood of enterprise sustainability. The Risk Control and Emergency Response Commission is responsible for developing risk management policies through the following six meausres: (1) Material incident occurred (2) Potential high risk (3) Extensive scope of influence (4) Lack of experience in risk control (5) Significant impact on business and brand image (6) Incomprehensive system The implementation of risk measurement and the screening of major risks are prioritized to form relevant unit with responsibility to promote and implement relevant process, thereby to advert risks the enterprise could not or unwilling to withhold. The Risk Control & Contingency Commission must respond to an excellent internal audit and control system, coordinate with the chief organizer (deputy organizer), and integrate the management task for material risk. The Risk Control & Contingency Commission is to handle the following tasks: (1) Define profound and actual action plan and regulations in accordance with the vision and objective strategy of the Risk Control & Contingency Commission with modification to it made from time to time. (2) Risk Control & Contingency Commission is to have a decision made over the material risk and crisis reported by each department. (3) Evaluate material risk and emergency scenario periodically and review the performance of the responsible department and SOP strategy. (4) Review and modify the regulations periodically and adjust the subjects and chief organizer (deputy organizer) of risk management in accordance with the actual practice. (5) Monitor and evaluate the risk management performed by each department onsite. 2. Organization and function of risk management To effectively promote the company＇s valuation on risk management and the results of taking consideration of various risk aggregation from the comprehensive perspective, the Risk Control and Emergency Response Commission is under the direct subordination of the Board of Directors, whereas the Commission and relevant unit supervisors are in charge of the formulation, promotion and implementation of risk management policy and procedures with the following functions: (1) Develop specific and true implementation guidelines and specification according to the vision and objective strategies, in addition to review and revise from time to time depending on the actual requirement. (2) Implement ruling on major risks and crisis submitted by all units. 201
201
(3) Periodically evaluate major risks and emergency incidents by reviewing the responsible units and the effectiveness of the policy implementing procedures. (4) Periodically review and revise current system flaws and adjust risk management issues and responsible units according to actual requirement. (5) The actual steering and assessment on the risk management work of each unit is implemented based on principles of objects on fields. 3. Action procedure of risk management (1) Consider internal and external environment of the organization, justice or competent authorities, competitors, and stakeholders including vendors and investors with strategic risk management goal defined. (2) Conduct risk identification and risk quantification. (3) Compute the company’s risk appetite in accordance with the probability of risk and the loss resulted from the risk. (4) Determine the company’s most adequate risk response strategy in accordance with the cost benefit analysis. (5) The management of the Risk Control & Contingency Commission is responsible for risk control and procedure improvement. (6) Follow up the outcomes of risk control. The enforcement of the aforementioned stable procedure helps secure the company’s brand image, enterprise reputation, and value creation; also, fulfill stockholder’s expectation.
VII. Other material events: None
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VIII. Special disclosures
I. Related party (II) Consolidated financial statements of the related party 1. Related party (1) Organizational structure of related party: Please refer to Page 204-206. (2) Company profile of related party: Please refer to Page 207-211. (3) A controlling and hierarchical relationship according to Article 369.3 of Company Law: None (4) Business scope of ASUS Group: The business scope of ASUS and the related party includes computer-related product design, production, processing, and sales. Some related parties are in the business of investment. In general, the collaboration within the organization is to generate the best result through reciprocal support in technology, production, marketing, and sales. (5) Directors, supervisors, and president of the related party: Please refer to Page 212-216. 2. Business operation of the related party: Please refer to Page 217-221.
(II) Consolidated financial statements of the related party: Please refer to Page 130-194.
(III) Related Party Report: N/A
II. Subscription of marketable securities privately in the most recent years and up to the date of the report printed: None
III. The stock shares of the company held or disposed by the subsidiaries in the most recent years and up to the date of the report printed: None
IV. Supplementary disclosures: None
V. Occurrence of events defined in Securities Transaction Law Article 36.2.2 that has great impact on shareholder’s equity or security price in the most recent years and up to the date of the report printed: On February 24, 2012, the Company resolved to increase its capital in UPI Semiconductor Corp. (UPI). The Group will pool $438,128 to acquire 49.5% shares of UPI, which will then become a subsidiary as the Group’s total shares in UPI will account for 53% after combining with the original indirect investment.
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Ltd Corp. Askey 100% Computer (HuiZhou) HOLDING Enertronix Inc. INTERNATIONAL Enertronix, ENERTRONIX ENERTRONIX 100% AGAIT Holding Limited LTD LTD AGAiT TECHNOLOGY Technology (SHENZHEN) LIMITED(SHENZHEN) ASUS AGAIT AGAiTech INTERNATIONAL TECHNOLOGY (H.K.) TECHNOLOGY CORP. LIMITED INC. LIMITED Corp. TECHNOLOGY INVESTMENT GREATEXTEND Technology Co., Ltd. International ASMEDIA INC. ASUSchannel LTD Limited Co., Ltd CORP. LIMITED ASUSTEK HOLDINGS Corp. United COMPUTER (SHANGHAI) CO., LTD. (SHANGHAI)
204 INC. INC. 100% 100% 100% ASUS TECHNOLOGY Company Limited WAVEFACE ASUS ASUSTOR Asustek Computer Inc. Computer Asustek
B.V. ASUS Holland INC. INTERNATIONAL SHINEWAVE (SHUZHOU) Czech Holding TEC ASIA SYSTEM Technology INTERNATIONAL VentureCapital COMPUTER INC. INC. INC. CO., LTD. Service s.r.o. TECHNOLOGY TECHNOLOGY TECHNOLOGY MICROSYSTEMS Ltd. Hua-MinCo., Ltd. AXUS Hua-Cheng INC. ASUS Corp. Investment Technology INC. 82.5%ASUS 100% 85%4.45% 100% 100% 100% 9% 51.00% 100% 9.08% 100% 9% 100% 100% 100% 0.41% 56.73% 77.78% 52.31% 100% 100% 51.47% 100% 100% 100% 100% 100% 100% 100% 100% 100% CORP. CLOUD ASMEDIA Mobostar AAEON ASMEDIA AAEON eMes ASUS Waveface CENTRAL NEXT Int'l United TECHNOLOGY ASUS Organization Chart (2011.12.31) - (1) (2011.12.31) Chart Organization ASUS
204
JAPAN 100% CO. LTD. ASUSTEKCOMPUTER (SHANGHAI) INCORPORATION Technology (Suzhou) Co. Ltd. Co. (Suzhou) IBERICAS.L. Technology (HONGKONG) LIMITED ASUS ASUS ASUS Czech Middle ASUS ASUS ASUS ASUS ASUS ASUS COMPUTER COMPUTER Benelux B.V. GmbH Service s.r.o. East FZCO LIMITED ASUSTEK (UK)ASUSTEK SERVICE ASUS AUSTRALIA AUSTRALIA PTYLIMITED PTYLIMITED INC. UNIMAX LIMITED UNIMAX HOLDINGS COMERCIO LTDA. IMPORTACAO E
205 Inc. ASUS PILOT 100% ASUS LIMITED Asustek CHANNEL LIMITED Computer INTERNATIONAL TECHNOLOGY ELECTRONICS (Chongqing) Co. Ltd. PTE.LIMITED 100% 100% 100% 100% 100% 99.59% 80% 100% 100% 100% Private Computer Limited ASUS IndiaASUS ASUSTEK ACBZ ASUS 100%DEEP 100% Asus 100% ASUS 100% L.L.C. ASUS East FZC 0.07% 20% 100% 100% Polska EGYPT KOREA ITALY FRANCE EGYPT Middle LIMITED Corp. DELIGHT Computer PTE. LTD. Sp.z.o.o. L.L.C. Co., Ltd. S.R.L. SARL COMPUTER (S) COMERCIO LTDA. IMPORTACAO E Gmbh PrivateLimited
ASUS ASUS ACBZ Services LLC Services Holland B.V. ASUS ASUS ASUS ASUSTEK ASUS ASUS ASUS ASUSTEK ASUS 100% 100% 100% 0.00% UNIPESSOAL LDA UNIPESSOAL ASUS PORTUGAL, SOCIEDADE Hungary Switzerland (Vietnam) Ltd Co., 100%Czech 100% Technology Technology 100% Technology 100% 100% 100% 99.93% 100% 100% 100% 100% 100% 100% 100% ASUS COMPUTER Republic Republic s.r.o. ASUS Organization Chart (2011.12.31) - (2) (2011.12.31) Chart Organization ASUS
205 INC. 100% ONYX HEALTHCARE Healthcare USA, AAEON ONYX INVESTMENT GmbH CO., LTD. INC. TECHNOLOGY
SYSTEM,INC. INC. 47% AAEON TECHNOLOGY (EUROPE) B.V. TECHNOLOGY TECHNOLOGY (SUZHOU) INC. AAEON AAEON DEVELOPMENT SINGAPORE LTD. PTE. TECHNOLOGY TECHNOLOGY TECHNOLOGY Corp AAEON AAEON AAEON AAEON AAEON AAEON ELECTRONICS, Technology
206 Ltd. Inc. Corp INC. INC. CO., LTD. Askey 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% ASHINE Askey ASON Asustek Computer TECHNOLOGY (SUZHOU) LTD. (Jiangsu) Limited (SUZHOU) LTD International
Corp. Askey 100% 100% MAGIC Computer CO., LTD. INTERNATIONAL (Shanghai) Limited Leading Askey Openbase UNI Leader Magicom Co., Ltd. Askey(Vietnam) (beliquidated) Corp 100% Dynalink International Limited Investments Limited Co., Ltd Profit Technology Limited International International SAS 80% 100% 100% 100% 100% 100% 100% 100% 100% 100% 94.20% 100% (HK) Limited (HK) Wise Access Famous Star Profit BIG SILIGENCE ASUS Organization Chart (2011.12.31) - (3) (2011.12.31) Chart Organization ASUS
206 ing and selling communication products products communication and selling ing In In thousand NTD / as of Dec 31, 2011 s and repair service center in North America North America in center service repair s and eripheral eripheral equipment, transportable equipment and Designing, manufacturing and selling modems, products communication and selling Manufacturing companies overseas in Investment trading Merchandise Trading Trading electronic appliances, data appliances, software, electronic material and communication office equipment Designing, manufacturing, processing and selling products storage Computer management systems, security and R&D; providing related technology and automation after-sales systems systems, service messenger products communication and selling Manufacturing companies overseas in Investment p related spare parts parts spare related Designing products and data software, information supply and processing companies overseas in Investment 1,514 1,514 activities and trading Investing 40,917 companies overseas in Investment 20,488 service consultant management Providing 38,201 Manufactur 11,245 87,294 15,138 Sale 53,337 in Europe center service repair Sales and 190,000 141,957 R&D Software 474,860 118,200 112,018 607,014 200,000 service Network 8,156,520 1,185,574 1,145,000 activities investing capital Venture 3,103,967 CAPITAL ITEMS / PRODUCTION BUSINESS MAJOR
207 ADDRESS ADDRESS Islands Islands
97.05.27 97.05.27 Taiwan 85.06.28 85.06.28 USA 89.03.24 89.03.24 Taiwan 88.04.20 88.04.20 84.12.29 Taiwan Taiwan 91.03.22 China 88.05.13 85.11.01 Islands Virgin British 95.12.12 Vietnam Islands Samoa 93.03.31 93.03.31 Taiwan 78.11.10 Taiwan 86.08.06 86.08.06 Taiwan 95.06.07 Islands Samoa 97.01.03 97.01.03 Islands Samoa 85.10.01 85.10.01 Islands Virgin British 89.03.29 89.03.29 Netherlands The 92.08.27 92.08.27 Virgin British 100.09.21 100.09.21 100.07.19 Kong Hong France DATE OF DATE ESTABLISHMENT NAME OF CORPORATION CORPORATION OF NAME ASUS COMPUTER INTERNATIONAL INTERNATIONAL COMPUTER ASUS Inc. ASUS Technology 83.06.21 INC. MICROSYSTEMS AXUS USA B.V. HOLLAND ASUS CORPORATION ASUSchannel CORPORATION ASUS CLOUD Corp. Capital Venture Hua-Cheng Inc. International Shinewave Ltd. Co., eMES (Suzhou) Inc. Technology ASMedia INVESTMENT GREAT EXTEND CORP. Corp. Askey Computer Corp. AskeyInternational Corp. International Dynalink Ltd. Co., International Magic Co., Ltd. (Vietnam) Askey Limited Profit Big Limited Investment Star Famous Limited (HK) Acess Wise SAS SILIGENCE (2)Basic Data of Affiliated Enterprises Enterprises of Affiliated Data (2)Basic
207 Developing and selling communication products products communication and selling Developing trading Merchandise trading Merchandise products communication and selling Manufacturing Database manufacturing service, manufacturing, mechanical selling wired technology printing and equipment, developing communication, ink-jet and activities and trading Investing Merchandise trading trading Merchandise products communication and selling Manufacturing activities and trading Investing wireless parts, andelectronic selling Manufacturing communication equipment, software and electronic components Designing and selling computer peripherals peripherals computer selling and Designing activities and trading Investing Investment in overseas companies companies overseas in Investment products communication and selling Manufacturing 949 activities and investing Trading 390 303 activities and trading Investing 1,514 1,514 1,514 1,514 activities and trading Investing 36,631 32,839 30,275 75,688 peripheral devices Selling computer 16, 257,260 parts electronic new and selling Manufacturing 402,384 equipment communication wired Wireless and 201,000 119,435 427,602 300,000 960,000 680,000 activities Investing 341,216 activities and trading Investing 2,755,933 3,331,127 (Note 1) 1) (Note trading International CAPITAL ITEMS / PRODUCTION BUSINESS MAJOR
208 ADDRESS ADDRESS Islands Islands Virgin Islands Islands Virgin Taiwan Taiwan Islands Samoa 92.07.01 92.07.01 China 90.08.30 96.12.26 China China 95.03.30 95.03.30 British 88.06.23 88.06.23 Islands Cayman 93.09.02 Malritius 94.11.24 94.11.24 Taiwan 95.03.30 China 93.03.12 93.03.12 Malritius 94.12.21 94.12.21 Virgin British 87.06.16 87.06.16 Taiwan 91.05.21 97.05.27 Islands Samoa 91.07.09 Taiwan Islands Virgin British 84.06.06 86.11.21 USA Islands Virgin British 98.06.06 98.06.06 98.06.03 94.01.10 94.01.10 Islands Virgin British 96.04.27 96.04.27 China DATE OF DATE 2009.11.11 2009.11.11 Kong Hong 2010.01.18 China 2010.12.01 Taiwan ESTABLISHMENT NAME OF CORPORATION CORPORATION OF NAME Magicom International Corp. International Corp. Magicom Ltd. (Shanghai) AskeyTechnology Limited Openbase Ltd. Co., Profit Leading Ltd. International Leader UNI Ltd. (Jiangsu) AskeyTechnology Ltd. (Suzhou) Technology Ason Ltd. (Suzhou) Ashine Technology Co., Technology United International (Taiwan)) (IUT (Taiwan) Ltd. Co., Technology United International Ltd. Ltd. Co., Investment Hua-Min TECHNOLOGY MOBOSTAR LIMITED Corporation Technology AGAiT Holding Limited AGAiTech (H.K.) TECHNOLOGY AGAIT LIMITED CORPORATION (SHENZHEN) TECHNOLOGY AGAIT LIMITED Enertronix, Inc. Limited International Enertronix Limited Holding Enertronix Ltd. Co., Enertronix Huizhou INC. TECHNOLOGY AAEON INC. ELECTRONICS, AAEON INC. DEVELOPMENT, AAEON
208 Investing activities activities Investing activities and trading Investing Repairing computers, electronic components and service after-sales providing and products, related Designing and selling data products peripheral computer storage devices and Manufacturing and selling electronic products and telecommunication appliances Manufacturing Manufacturing and selling industrial computer and adapter 3 activities and trading Investing 545 activities and trading Investing ,825 activities and trading Investing 3,918 peripheral devices Selling computer 1,175 peripheral devices Selling computer 78,804 30,000 devices peripheral computer Selling 64,183 72,660 peripheral devices Selling computer 50,000 10,858 peripheral devices Selling computer 15,138 devices periphera Selling computer 10,016 Germany in center service repair Sales and 90 213,000 160,060 R&D Software 345,801 activities and trading Investing 346,758 619,187 908,326 products IT of Trading 196,788 activities and trading Investing 266,635 activities and investing Trading 150,000 activities Investing 909,249 activities and trading Investing 2,716,577 Investing activities CAPITAL ITEMS / PRODUCTION BUSINESS MAJOR
lands lands 209 ADDRESS ADDRESS lands lands British Virgin Islands Islands Virgin British 06.15 Islands Cayman 96.02.15 96.02.15 Is Cayman 90.09.11 90.09.11 92.03.18 Islands Virgin British 94.03.04 USA 96.10.23 TheNetherlands 98.06.06 99.02.02 Germeny Taiwan 93.03.30 Taiwan 90.11.01 Singapore China 93.02.17 Islands Virgin British 91.01.23 Is Virgin British 96.04.17 Taiwan 94.04.26 Singapore 88.09.20 Islands Cayman 94.03.30 94.03.30 80.06.19 80.06.19 Germany 89.02.03 89.02.03 Islands Virgin British 91.03.08 91.03.08 Islands Cayman 100. 100.07.27 100.07.27 Taiwan 100.10.27 100.10.27 USA 100.10.13 Taiwan DATE OF DATE ESTABLISHMENT ION ION 87.03.26 Islands Virgin British NAME OF CORPORATION CORPORATION OF NAME AAEON TECHNOLOGY CO., LTD. LTD. CO., TECHNOLOGY AAEON INC. SYSTEMS, AAEON (EUROPE) TECHNOLOGY AAEON B.V. GMBH TECHNOLOGY AAEON LTD. CO., INVESTMENT AAEON Inc. Healthcare ONYX SINGAPORE TECHNOLOGY AAEON LTD. PTE. (SUZHOU) TECHNOLOGY AAEON INC. INC. USA, HEALTHCARE ONYX HOLDINGS LIMITED ASUSTEK LIMITED ASIA TEC CENTRAL COMPANY HOLDING WAVEFACE LIMITED LIMITED SYSTEM NEXT Ltd. Co., (Shanghai) ASUS Computer INC. WAVEFACE INC. ASUSTOR 89.06.30 LTD. INTERNATIONAL ASUS LTD DELIGHT DEEP China LIMITED PILOT CHANNEL LIMITED HOLDINGS UNIMAX Inc. Electronics Unimax CORPORAT ASUS COMPUTER LTD. PTE. TECHNOLOGY ASUS (ASTP) GmbH COMPUTER ASUS
209 ersonal ersonal computers, servers, p ce center in Netherlands Netherlands in center ce service center in Czech Republic Republic Czech in center service es and repair service center in France in France center service repair es and ales and service center in Egypt Egypt in center service and ales CPN Service, HUB and other other HUB and CPN Service, services in Europe Researching and developing main LCDs, boards computers, multimedia and and network communication products, the service after-sales providing and peripherals of related Selling notebooks, main computers, high-class boards, medium-sized and computer peripherals; wholesaling and integrating mobile communication importing/exporting, equipment; and providing technology services and after-sales consulting 2 S 2 Polska in center service and Sales 305 and Sales 881 Italy center in Sales and service 337 UK in center service and Sales 175 Spain in center service and Sales 466 in Singapore center service repair Sales and 44 1, 1, 8,211 1,949 Kong Hong in center service repair and Sales 2, 1,875 Vietnam center in Repair service 1,959 Sales and servi 4,153 Sal 4,122 East in Middle center service repair Sales and 14,693 activities and trading Investing 10,757 Oceania in center Sales 29,198 Oceania center in Repair service 80,073 in Japan center service repair Sales and 46,824 Korea in center service repair Sales and 628,858 319,457 163,802 India in center service repair Sales and CAPITAL ITEMS / PRODUCTION BUSINESS MAJOR
210 ADDRESS ADDRESS nds nds therlands therlands Republic Republic stralia stralia 96.03.06 96.03.06 Ne The 95.09.13 95.09.13 India 95.02.21 95.02.21 Netherla The 93.05.19 Spain 95.04.03 95.04.03 UK 94.07.31 Poland 97.09.11 Egypt 96.10.22 96.10.22 Dubai 94.11.25 94.11.25 Kong Hong 89.07.21 Italy 94.10.31 Republic Czech 89.06.09 China 91.07.12 91.07.12 France 97.05.28 Japan 95.07.01 95.07.01 Korea 100.02.10 100.02.10 Australia DATE OF DATE 2010.02.15 2010.02.15 Czech ESTABLISHMENT NAME OF CORPORATION CORPORATION OF NAME ASUS COMPUTER Benelux B.V. B.V. Benelux ASUS COMPUTER SARL FRANCE ASUS LIMITED (UK) ASUSTEK KONG) (HONG ASUS TECHNOLOGY LIMITED Ltd. Co., KOREA ASUS LTD. PTE, (S) COMPUTER ASUSTEK SP.Z.O.O. POLSKA ASUS Limited Private Asus Technology 92.10.21 Holland B.V. Technology ASUS LTD. Co., (Vietnam) Technology ASUS Singapore S.R.L. ITALY ASUSTEK FZCO East Asus Middle 96.03.01 S.L. IBERICA, ASUS Vietnam Co. Ltd. (Suzhou) ASUS Technology Incorporation Japan ASUS CZECH COMPUTER ASUS 97.03.12 S.R.O. REPUBLIC China (SHANGHAI) COMPUTER ASUSTEK LTD. CO. L.L.C. ASUS EGYPT o. r. Service s. ASUS Czech PTY AUSTRALIA SERVICE ASUS LIMITED LIMITED PTY AUSTRALIA ASUS 100.01.05 Au
210 ersonal ersonal p roviding p pair service center in Hungary Hungary in center service pair d service center in Portugal Portugal in center d service and service center in Brazil center in Brazil and service technology consulting and after-sales services services and after-sales consulting technology computers, servers, and importing/exporting, wholesaling computer and integrating peripherals; mobile communication equipment; and Selling Selling and researching notebooks, main medium-sized boards, computers, highend ,953 Switzerland in center service and Sales 1,534 Salesre and 1,175 Sales an 10 831,315 Sales 186,615 India in center Sales and service 1,530,757 CAPITAL ITEMS / PRODUCTION BUSINESS MAJOR
211 ADDRESS ADDRESS fund up to December 31, 2009. 31, up to December fund any out transferred had not ASUSTeK however, 2002; in WESTERN A 98.05.10 98.05.10 Switzerland 96.05.10 96.05.10 97.05.21 Hungary Portugal 100.05.09 100.05.09 China 100.01.05 Brazil 100.07.05 100.07.05 India DATE OF DATE ESTABLISHMENT NAME OF CORPORATION CORPORATION OF NAME ASUSTEK ASUSTEK Computer (Chongqing) CO., LTD. ACBZ IMPORTACAO E COMERCIO LTDA. LIMITED PRIVATE INDIA ASUS Limited Services Hungary ASUS Company Liability SOCIEDADE PORTUGAL, ASUS LDA. UNIPESSOAL GmbH Asus Switzerland Note 1: ASUSTeK had International United Co., Ltd. setup in SAMO setup Ltd. Co., United had International ASUSTeK 1: Note rate. exchange foreign under exchanged was currency foreign involved capital paid-in 2: The Note
211
(5)Directors, Supervisors and Presidents of Affiliated Enterprises As of Dec 31, 2011 SHAREHOLDING NAME OF CORPORATION TITLE NAME OF PERPRESENTATIVE SHARES % Chairman Asustek Computer Inc.（Representative：Jonathan Tsang） 19,000,000 100.00% Director Asustek Computer Inc.（Representative：Jonney Shih） － － ASUS TECHNOLOGY INC. Director & President Asustek Computer Inc.（Representative：Jerry Shen） － － Supervisor Asustek Computer Inc.（Representative：Sandy Wei） － － Chairman Asustek Computer Inc.（Representative：Cheng-kuei Lin*） 815,640,733 100.00% Director Asustek Computer Inc.（Representative：Jonney Shih） － － Askey Computer Corporation Director & President Asustek Computer Inc.（Representative：Jerry Shen） － － Supervisor Asustek Computer Inc.（Representative：Mark Lee） － － Chairman Pegatron Corporation（Representative：Jerry Shen） 40,238,437 100.00% Director & President Pegatron Corporation（Representative：T.C. Chen） － － Enteronix, Inc. Director Pegatron Corporation（Representative：S.Y. Shian） － － Supervisor Pegatron Corporation（Representative：Mark Lee） － － Chairman Asustek Computer Inc.（Representative：Jerry Shen） 30,000,000 100.00% Director & President Asustek Computer Inc.（Representative：T.C. Chen） － － AGAiT Technology Corporation Director Asustek Computer Inc.（Representative：Jonney Shih） － － Supervisor Asustek Computer Inc.（Representative：Mark Lee） － － Chairman Asustek Computer Inc.（Representative：Jonney Shih） 114,500,000 100% Director Asustek Computer Inc.（Representative：Jonathan Tsang） － － Hua-Cheng Venture Capital Corp. Director Asustek Computer Inc.（Representative：Jerry Shen） － － Supervisor Asustek Computer Inc.（Representative：David Chang） － － Chairman Asustek Computer Inc.（Representative：Jonney Shih） 68,000,000 100% Director Asustek Computer Inc.（Representative：Jonathan Tsang） － － Hua-Min Investment Co., Ltd. Director Asustek Computer Inc.（Representative：Jerry Shen） － － Supervisor Asustek Computer Inc.（Representative：David Chang） － － Chairman Asustek Computer Inc.（Representative：Jonney Shih） 10,046,980 85.00% Director Asustek Computer Inc.（Representative：Jonathan Tsang） － － AXUS MICROSYSTEMS INC. Director Asustek Computer Inc.（Representative：Jerry Shen） － － Supervisor Asustek Computer Inc.（Representative：Sandy Wei） － － President Jeffery Wang 393,999 3.33% Chairman Asustek Computer Inc.（Representative：Eric Chen） 16,500,000 82.5% Director Asustek Computer Inc.（Representative：Tom-Wk Lin） － － ASUS CLOUD CORPORATION Director Asustek Computer Inc.（Representative：Samson Hu） － － (Original name: eCareme Director Chung-Yuan Chu* 2,371,428 11.86% Technologies, Inc.) Director & President Han-Chang Wu* 428,583 2.14% Supervisor Asustek Computer Inc.（Representative：Alan Hsieh） － － Chairman Asustek Computer Inc.（Representative：Jerry Shen） 24,193,000 49.31% Director & President Asustek Computer Inc.（Representative：Chewei Lin） － － Director Ted Hsu － － ASMEDIA TECHNOLOGY INC. Independent director Chan, Hung-Chih(*) － － (Note: Re-election on March 13, Independent director Hsieh, Chieh- Ping(*) － － 2012) Independent director Wu, Ching-Chi(*) － － Supervisor Yi-Li Investment*.（Representative：Tsai, Hsiao-Chen*） 480,000 1.01% Supervisor Liang, Chi-Yen(*) － － Supervisor Lo, Wen-Yi(*) － － Chairman RUI HAI INVESTMENT CO., LTD. 5,424,000 5.60% （Representative：Yung-Shun Chuang Director RUI HAI INVESTMENT CO., LTD. － － （Representative：Ing-Jen Lee） AAEON TECHNOLOGY INC. Director Asustek Computer Inc.（Representative：Jonney Shih） 45,120,000 47.00% Director Asustek Computer Inc.（Representative：Jonathan Tsang） － － Director Asustek Computer Inc.（Representative：Jerry Shen） － － Supervisor Hua-Cheng Venture Capital Corp.（Representative：Mark Lee） 8,640,000 9.00% 212
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SHAREHOLDING NAME OF CORPORATION TITLE NAME OF PERPRESENTATIVE SHARES % Supervisor FU YANG INVESTMENT LIMITED（Representative： 336,000 0.35% Wei-Chyun Yan） President Steve Hsu 700,000 0.73% Chairman Asustek Computer Inc.（Representative：Jerry Shen） 11,402,092 56.73% Director & President Asustek Computer Inc.（Representative：Daniel Lan） － － International United Technology Director HUA ENG WIRE & CABLE CO.,LTD. （Representative：MS Lin*） 1,917,194 9.54% Co., Ltd. Supervisor Asustek Computer Inc.（Representative：Mark Lee） － － Supervisor China International Investment Co., Ltd.（Representative：JP Hsieh） 173,262 0.86% Chairman Asustek Computer Inc.（Representative：H.C. Hung） 5,469,750 51.00% Director Asustek Computer Inc.（Representative：Jonney Shih） － － SHINEWAVE INTERNATIONAL INC. Director Mercuries Data Systems Ltd.（Representative：Shiang-Jhong Chen*） 1,072,000 10.00% Supervisor Asustek Computer Inc.（Representative：Mark Lee） － － President CHUN-HUA YU 264,000 2.46% Director Asustek Computer Inc.（Representative：Jonney Shih） 50,000 100% Director Asustek Computer Inc.（Representative：Jackie Hsu） － － ASUS COMPUTER INTERNATIONAL Director Asustek Computer Inc.（Representative：Eric Chen） － － President Steve Chang － － Asus Holland B. V. Chairman Asustek Computer Inc.（Representative：Jonney Shih） 30,000,000 100% ASUS INTERNATIONAL LTD Chairman Asustek Computer Inc.（Representative：Jonney Shih） 89,730,042 100% Asustek Holdings Limited Chairman Asustek Computer Inc.（Representative：Jonney Shih） 20,452,104 100% ASUSCHANNEL CORP. Chairman Asustek Computer Inc.（Representative：Jonney Shih） 50,000 100% DEEP DELIGHT LTD Chairman ASUS INTL LTD（Representative：Jonney Shih） 11,422,000 100% Asus Computer Corp. Chairman ASUS INTL LTD（Representative：Jonney Shih） 3,000,000 100% Central Tec Asia Ltd. Chairman Asustek Holdings Limited（Representative：Jonney Shih） 2,020,000 100% CHANNEL PILOT LTD. Chairman ASUS INTL LTD（Representative：Jonney Shih） 30,033,000 100% Chairman CHANNEL PILOT LTD. （Representative：Jonathan Tsang） 30,002,500 100% ASUS TECHNOLOGY PTE LTD. Director CHANNEL PILOT LTD. （Representative：Benson Lin） － － Director CHANNEL PILOT LTD. （Representative：Ngalimin Darwin） － － ASUS TECHNOLOGY (HONG Chairman ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang） － 100% KONG) LIMITED Director ASUS TECHNOLOGY PTE LTD.（Representative：Benson Lin） － － Chairman ASUS TECHNOLOGY PTE LTD.（Representative：Peter Shih） － 100% ASUSTEK COMPUTER Supervisor ASUS TECHNOLOGY PTE LTD. － － (SHANGHAI) CO. LTD. （Representative：Kathy Wang） ASUS Technology (Suzhou) Co. Director ASUS TECHNOLOGY PTE LTD.（Representative：Victor Kao） － 100% Ltd. ASUSTEK Computer (Chongqing) Director ASUS TECHNOLOGY PTE LTD.（Representative：Ernest Ke） － 100% CO., LTD. Supervisor ASUS TECHNOLOGY PTE LTD.（Representative：Ally_Su） － － ASUS COMPUTER GmbH Director ASUS TECHNOLOGY PTE LTD.（Representative：Eric Chen） － 100% Chairman ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang） 5 100% Asus Middle East FZC0 Director ASUS TECHNOLOGY PTE LTD.（Representative：Benson Lin） － － Director ASUS TECHNOLOGY PTE LTD.（Representative：Chen-Hung Su*） － － ASUS TECHNOLOGY PTE LTD. － 100% ASUS COMPUTER Benelux B.V. Director （Representative：Ou, Chang-Chu） ASUS FRANCE SARL Director ASUS TECHNOLOGY PTE LTD.（Representative：Madeleine Hung） 5,300 100% ASUSTEK (UK) LIMITED Director ASUS TECHNOLOGY PTE LTD.（Representative：Benjamin Yeh） 50,000 100% Chairman ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang） 358,433 100% ASUS KOREA CO., LTD. Director ASUS TECHNOLOGY PTE LTD.（Representative：Bensom Lin） － － Director ASUS TECHNOLOGY PTE LTD.（Representative：Kevin Du） － － ASUSTEK COMPUTER (S) PTE, Director ASUS TECHNOLOGY PTE LTD.（Representative：Darwin Wu） 20,002 100% LTD. ASUS POLSKA SP.z.o.o. Director ASUS TECHNOLOGY PTE LTD.（Representative：Eric Chen） 1,000 100% ASUS TECHNOLOGY PRIVATE Chairman ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang） 14,040,797 100% LIMITED Director ASUS TECHNOLOGY PTE LTD.
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SHAREHOLDING NAME OF CORPORATION TITLE NAME OF PERPRESENTATIVE SHARES % （Representative：Ngalimin Darwin） － － Director ASUS TECHNOLOGY PTE LTD.（ Representative：Tung, Chi-Chun） － － Director ASUS TECHNOLOGY PTE LTD. （Representative：Ou, Chang-Chu） － － ASUS Technology Holland B.V. Director ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang） 375,000 100% ASUS Technology (Vietnam) Co., Director ASUS TECHNOLOGY PTE LTD.（Representative：Jeff Lo） － 100% LTD. ASUS TECHNOLOGY PTE LTD. ASUSTEK ITALY S.R.L. Director － 100% （Representative：Ou, Chang-Chu） ASUS TECHNOLOGY PTE LTD. ASUS IBERICA S.L. Director 3,000 100% （Representative：Ou, Chang-Chu） Chairman ASUS TECHNOLOGY PTE LTD.（Representative：Kevin Du） 20,500 100% Asus Japan Incorporation Director ASUS TECHNOLOGY PTE LTD.（Representative：Hideki Sato） － － ASUS COMPUTER Czech Republic ASUS TECHNOLOGY PTE LTD. Director － 100% s.r.o. （Representative：Hsieh, Hsiao-Min） Chairman ASUS TECHNOLOGY PTE LTD.（Representative：Li,Yu-Lin） － 0.1% ASUS EGYPT L.L.C. Director CHANNEL PILOT LTD.（Representative：Li,Yu-Lin） － 99.9% Director ASUS TECHNOLOGY PTE LTD.（Representative：David Wu） － 100% ASUS CZECH SERVICE S. R. O. Director ASUS TECHNOLOGY PTE LTD.（Representative：Max XW Huang） － － ASUS Hungary Services Limited Asus Technology Holland B.V. Director － 100% Liability Company （Representative：Ou, Chang-Chu） ASUS PORTUGAL, SOCIEDADE Asus Technology Holland B.V. Director 30,000 100% UNIPESSOAL LDA （Representative：Ou, Chang-Chu） ASUS SWITZERLAND GmbH Chairman Asus Technology Holland B.V.（Representative：Eric Chen） 3,400 100% Director ASUS TECHNOLOGY PTE LTD. 950,000 100% （Representative：Jackie Hsu） ASUS SERVICE AUSTRALIA Director ASUS TECHNOLOGY PTE LTD. － － PTY LIMITED （Representative：Tsai, Hsiao-Ming） Director ASUS TECHNOLOGY PTE LTD. － － （Representative：Lin, Chih-Yuan） Director ASUS TECHNOLOGY PTE LTD. 350,000 100% （Representative：Jackie Hsu） ASUS AUSTRALIA PTY LIMITED Director ASUS TECHNOLOGY PTE LTD. － － （Representative：Tsai, Hsiao-Ming） Director ASUS TECHNOLOGY PTE LTD. 51,208,200 100% ACBZ IMPORTACAO E （Representative：Wu, Ming-Tau） COMERCIO LTDA. Director ASUS TECHNOLOGY HOLLAND B.V. 1,800 － （Representative：Wu, Ming-Tau） Director ASUS TECHNOLOGY PTE LTD. 33,500,000 100% （Representative：Tung, Chi-Chun） ASUS India Private Limited Director ASUS TECHNOLOGY PTE LTD. － － （Representative：Huang, Sheng-Hui） ENERTRONIX INTERNATIONAL LIMITED Chairman Enertronix, Inc. (Representative：Jerry Shen) 10,000 100% ENERTRONIX HOLDING LIMITED Chairman Enertronix, Inc. (Representative：Jerry Shen) 12,835,000 100% ASUS COMPUTER (SHANGHAI) CO., LTD. Chairman Central Tec Asia Ltd.（Representative：David Wu） － 100% Enertronix (HuiZhou) Co., Ltd. Director ENERTRONIX HOLDINGS LTD(Representative：T.C.Chen) － 100% Chairman SHINEWAVE INTERNATIONAL INC. － 100% （Representative：Jiunn-Hwa Yu*） Director SHINEWAVE INTERNATIONAL INC. － － eMES (SHUZHOU) CO., LTD. （Representative：Cheng, Shu-Fen *） Director SHINEWAVE INTERNATIONAL INC. － － （Representative：Chang, Chih-Liang *）
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SHAREHOLDING NAME OF CORPORATION TITLE NAME OF PERPRESENTATIVE SHARES % Supervisor SHINEWAVE INTERNATIONAL INC. － － （Representative：Mark Lee） UNIMAX HOLDINGS LIMITED Director ASUS INTL LTD（Representative：Jonney Shih） 6,500,000 100% Chairman UNIMAX HOLDINGS LIMITED（Representative：Jonathan Tsang） 21,300,000 100% Director UNIMAX HOLDINGS LIMITED（Representative：Justin Lin） － － UNIMAX ELECTRONICS INC. Director & President UNIMAX HOLDINGS LIMITED（Representative：Chih-Peng wu） － － Supervisor UNIMAX HOLDINGS LIMITED（Representative：Mark Lee） － － Waveface Holding Company ASUSTEK HOLDINGS LIMITED Chairman － 77.28% Limited （Representative：Jonney Shih） Chairman Waveface Holding Co Ltd.（Representative：Jonney Shih） 16,006,000 100% Director Waveface Holding Co Ltd. － － WAVEFACE INC. （Representative：Raymond_Chen） Director & President Waveface Holding Co Ltd.（Representative：Will Chuang） － － Supervisor Waveface Holding Co Ltd.（Representative：Mark Lee） － － ASUSTEK HOLDINGS LIMITED NEXT SYSTEM LIMITED Chairman － 51.47% （Representative：Jonney Shih） Chairman NEXT SYSTEM LIMITED（Representative：Jonney Shih） 50,000,000 100% Director NEXT SYSTEM LIMITED（Representative：Tom_Wk_Lin） － － Director & President NEXT SYSTEM LIMITED（Representative:SU, SHIH -YUNG） － － ASUSTOR INC. Director NEXT SYSTEM LIMITED（Representative:HOU, － － YUEH-CHIANG） Director NEXT SYSTEM LIMITED（Representative:CHEN, LI- PAI） － － Supervisor NEXT SYSTEM LIMITED（Representative：Mark Lee） － － AGAIT TECHNOLOGY (H.K.) Director AGAiT Technology Corp.（Representative：Jerry Shen） 100,000 100% CORPORATION LIMITED AGAiTech Holding Ltd. Director AGAiT Technology Corp.（Representative：Jerry Shen） 1,000,000 100% AGAIT TECHNOLOGY Director AGAiT Holding Ltd.（Representative：T.C. Chen） － 100% (SHENZHEN) LIMITED MOBOSTAR TECHNOLOGY LTD. Director Hua-Min Investment Co., Ltd.（Representative：Jonney Shih） 50,000 100% International United Technology Co., Ltd. Director International United Technology Co., Ltd. (Representative：Jerry Shen) － 100% GREAT EXTEND INVESTMENT CORP. Director ASMEDIA TECHNOLOGY INC. (Representative：CheWei Lin) 676,730 100% Askey International Corporation Director Askey Computer Corp. (Representative：Cheng-Kuei Lin*) 3,700,000 100% Dynalink International Corporation Director Askey Computer Corp. (Representative：Cheng-Kuei Lin*) 39,160,172 100% Magic International Company Limited Director Askey Computer Corp. (Representative：Cheng-Kuei Lin*) 102,525,738 100% Magicom International Corporation Director Magic International Company Limited(Representative：Cheng-Kuei Lin*) 91,030,000 100% Leading Profit Company Limited Director Magic International Company Limited(Representative：Cheng-Kuei Lin*) 50,000 100% UNI Leader International Limited Director Magic International Company Limited(Representative：Cheng-Kuei Lin*) 50,000 100% Openbase Limited Director Magic International Company Limited(Representative：Cheng-Kuei Lin*) 50,000 100% Askey (Vietnam) Company Limited Director Dynalink International Corp.(Representative：Cheng-Kuei Lin*) 2,883,359 100% (be liquidated) BIG Profit Ltd. Director Dynalink International Corp.(Representative：Cheng-Kuei Lin*) 50,000 100% Famous Star Investments Ltd. Director Dynalink International Corp.(Representative：Cheng-Kuei Lin*) 20,050,000 100% Wise Acess (HK) Limited Director Dynalink International Corp.(Representative：Han-Wen Lei *) 1,600,000 100% Director & Chief SILIGENCE SAS Didier Zwierski 780,000 80.00% Executive Officer Chairman Magic International Company Limited(Representative：Cheng-Kuei Lin*) － 100% Askey Technology (Shanghai) Limited President Han-Wen Lei * － － Chairman & President Magicom International Corp.(Representative：Cheng-Kuei Lin *) － 100% Director Magicom International Corp.(Representative：Christine Wu) － － Askey Technology (Jiangsu) Limited Director Magicom International Corp.(Representative：Mark Lee) － － Supervisor Magicom International Corp.(Representative：Tina Chu) － － ASHINE TECHNOLOGY (SUZHOU) Chairman & President Magicom International Corp.(Representative：Cheng-Kuei Lin *) － 100% 215
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SHAREHOLDING NAME OF CORPORATION TITLE NAME OF PERPRESENTATIVE SHARES % LTD. Director Magicom International Corp.(Representative：Christine Wu) － － Director Magicom International Corp.(Representative：Mark Lee) － － Supervisor Magicom International Corp.(Representative：Tina Chu) － － Chairman & President Magicom International Corp.(Representative：Chi-Hsish Chang*) － 100% Director Magicom International Corp. － － ASON TECHNOLOGY (SUZHOU) LTD (Representative：Kao, Chung- Ming) Director Magicom International Corp.(Representative：Tina Chu) － － Supervisor Magicom International Corp.(Representative：Christine Wu) － － Chairman AAEON TECHNOLOGY INC. 250,000 100% (Representative：Yuhmin Hwang) Director AAEON TECHNOLOGY INC. － － (Representative：Yuhmin Hwang) AAEON ELECTRONICS, INC Director AAEON TECHNOLOGY INC. － － (Representative：Yung-Shun Chuang) Director AAEON TECHNOLOGY INC. (Representative：I.J. Lee) － － Director & President Jerry Yeh － － AAEON DELELOPMENT AAEON TECHNOLOGY INC. Chairman & President 559,822 100% INCORPORATED (Representative：Yung-Shun Chuang) AAEON TECHNOLOGY INC. AAEON Technology Co., Ltd. Chairman & President 8,807,113 100% (Representative：Yung-Shun Chuang) Chairman AAEON TECHNOLOGY INC. 2,400 100% (Representative：Yuhmin Hwang) Director AAEON TECHNOLOGY INC. － － (Representative：Yuhmin Hwang) AAEON SYSTEMS, INC. Director AAEON TECHNOLOGY INC. － － (Representative：Yung-Shun Chuang) Director AAEON TECHNOLOGY INC. (Representative：Steve Hu) － － Director & President Jerry Yeh － － AAEON TECHNOLOGY INC. AAEON Technology (Europe) B.V. Chairman 1,000 100% (Representative：Yung-Shun Chuang) AAEON TECHNOLOGY INC. AAEON TECHNOLOGY GmbH Chairman 300 100% (Representative：Yung-Shun Chuang) Chairman AAEON TECHNOLOGY INC. 15,000,000 100% (Representative：Yuhmin Hwang) Director AAEON TECHNOLOGY INC. － － (Representative：I.J. Lee) AAEON INVESTMENT CO., LTD. Director AAEON TECHNOLOGY INC. － － (Representative：Wayne Chan) Supervisor AAEON TECHNOLOGY INC. － － (Representative：Yang, Cheng-Li) Chairman & President AAEON TECHNOLOGY INC. 3,000,000 100% (Representative：Yung-Shun Chuang) Director AAEON TECHNOLOGY INC. － － ONYX Healthcare Inc. (Representative：Dill Ha) Director AAEON TECHNOLOGY INC. － － (Representative：Steve Hsu) Supervisor AAEON TECHNOLOGY INC. (Representative：Juno Tu) － － AAEON TECHNOLOGY Chairman AAEON DELELOPMENT INC. (Representative：KS Seng) 263,957 94.20% SINGAPORE PTE. LTD. AAEON TECHNOLOGY (SUZHOU) AAEON Technology Co., Ltd. Chairman － 94.20% INC. (Representative：Yung-Shun Chuang) ONYX Healthcare Inc. ONYX Healthcare USA, Inc. Chairman － 100% (Representative：Yung-Shun Chuang) Note: (*) Standards for the English transliteration of company’s name or individual’s name.
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216 PER PER (LOSS) (LOSS) EARNING EARNING SHARE(NTD) SHARE(NTD) NET (LOSS) (LOSS) INCOME INCOME 259 385 Note 1 (30) (16) - (47) (47) - (243) (120,455) (1.05) (359) (492) - (317) (4,417) - (5,925) (5,737) Note 1 (LOSS) (LOSS) INCOME INCOME In thousand NTD / as of 12/31/2011 OPERATING OPERATING 2 225,288 216,891 5.08 722 (17,723) 338,700 - NET REVENUES REVENUES OPERATING OPERATING 896 10,467 (4,409) (4,469) - 866 - 504 - 33,805 - 908,983 NET WORTH NET
182 117,120 1,046,515 14,469 15,206 - 440 217 279,686 619,797 1,446,30 TOTAL TOTAL LIABILITIES TOTAL TOTAL ASSETS ASSETS 1,514 3,172 1,523 1,649 - 40,917 33,805 - 87,294 134,602 58,032 76,570 - 38,201 37,855 5,177 32,678 3,510 (7,446) (7,384) - 53,337 264,302 147, 15,138 16,202,204 16,996,166 (793,962) 50,906,831 204,705 (6,769)20,488 - 944 112,018 1,963 1,067 190,000 3,443,241 2,958,255 484,986 17,198,544 169,199 141,457 7.45 141,957 183,588 41,632 141,956 102,521 (10,389) (7,627) (0.54) 8,156,520 14,189,058 4,604,460 9,584,598 20,304,742 (471,163) 314,094 0.39 NAME OF CORPORATION CORPORATION OF NAME CAPITAL 2. Summarized Operation Results of Affiliated Enterprises Enterprises Affiliated Results of Operation 2. Summarized ASUS COMPUTER INTERNATIONAL ASUS TECHNOLOGY INC. ASUS MICROSYSTEMS INC. ASUS HOLLAND B.V. ASUSCHANNEL CORPORATION ASUS CLOUD 118,200 CORPORATION Hua-Cheng Venture Capital Corp. 1,514SHINEWAVE INTERNATIONAL 173,044 200,000INC. 1,145,000eMES (SHUZHOU) CO., LTD. 1,071,045 189,502 866 14,531ASMEDIA TECHNOLOGY INC. GREAT EXTEND INVESTMENT CORP. 158,513 474,860 20,643 - 11,245 1,379Askey Computer Corp. Askey International Corp. 899,483 1,069,666 168,859 14,260Dynalink International 81,893 Corp. Magic International Co., Ltd. Askey (Vietnam) Co., Ltd - 51,246 5,816Big Profit Limited 2,255 1,185,574Famous Star Investments Limited 3,103,967 (32,303) 1,005,951Wise Acess (HK) Limited 5,332 3,334,497 8,444SILIGENCE SAS (28,226) 607,014Magicom International Corp. - Askey Technology (Shanghai) Ltd. - 908,983 0.45 13,535 (1.41) 119,435 2,755,933 1,005,951 - 3,334,497 4,651,025 48,470 332,455 192,373 - 332,237 2,081 192,174 332,135 4,651,025 209,824 46,389 - 357,528 - 18,108 226,276 5,268 226,310 6,287 - Note 1
217 - PER PER (LOSS) (LOSS) EARNING EARNING SHARE(NTD) SHARE(NTD) 856 - - 29,087 - NET (34,873) (1.16) (LOSS) (LOSS) INCOME INCOME (9) 17 Note 1 (26) 6,322 - (25) 3 - (74) (6,778) - (168) 33,437 0.49 (369) (368) - (360) (400) Note 1 (2,135) 4,133 Note 1 - - (3,002) - - (LOSS) (LOSS) INCOME INCOME OPERATING OPERATING - NET REVENUES REVENUES OPERATING OPERATING (7) - 556 898,642 - 5,301 - 29,251 - 16,276 - - 176,746 - 217,108 363,865 (25,293) NET WORTH NET - 15,447 -
11 261,944 - 661 717,382 - 374 9,632 - 218 - TOTAL TOTAL LIABILITIES 527 10,210,917 4,185,610 26,449,871 46,374 222,128 Note 1 - TOTAL TOTAL ASSETS ASSETS 303 556 - 602 446,234 2,272 443,962390 - 1,792 1,799 1,514 1,648,605 1,624,299 24,306 17,038,269 (7,792) (3,291) - 1,514 2,191,973 3,613,812 (1,421,839) 9,848,430 (32,239) (42,877) - 1,514 79,471 55,136 24,335 147,220 16,243 5,944 - - 30,275 16,276 - 32,839 20,264 3,991 16,273 19,232 (19,600) (3,002) Note 1 402,384 755,339 493,448 261,891 1,624,546 (3,658) 28,568 0.71 341,216 176,746 - 201,000 238,627 30,488 208,139 127,073 (2,687) 3,568 0.18 266,635 261,955 on 300,000 259,013 41,905 NAME OF CORPORATION CORPORATION OF NAME CAPITAL Openbase Limited Leading Profit Co., Ltd. UNI Leader InternationalLtd. Askey Technology (Jiangsu) Ltd. Ason Technology (Suzhou) Ltd Ashine Technology (Suzhou) Ltd. 3,331,127InternationalUnited Technology Co., 14,396, Ltd. 427, 36,631InternationalUnited Technology Co., Ltd.(Samoa) Hua-Min Investment Co.,Ltd. 15,447 MOBOSTAR TECHNOLOGY Ltd. AGAiT Technology Corporati AGAiTech Holding Ltd. 680,000 1,514AGAIT TECHNOLOGY (H.K.) CORPORATION LIMITED 718,043 AGAIT TECHNOLOGY 5,301(SHENZHEN) LIMITED Enertronix, Inc. Enertronix International Limited - Enertronix Holding Limited Enertronix (HuiZhou) Co.,Ltd. AAEON TECHNOLOGY INC. AAEON ELECTRONICS, INC. AAEON DEVELOPMENT, INC. 257,260AAEON TECHNOLOGY CO., 10,000LTD. 697,658 75,688 16,949 10,006 287,318 522,723 29,251 138,186 174,935 - 1,590,071 149,132 698,436 32,878 29,151 7,585 Note 1 12,867 -
218 PER PER (LOSS) (LOSS) EARNING EARNING SHARE(NTD) SHARE(NTD) NET (LOSS) (LOSS) INCOME INCOME (48) (5,366) (0.36) (72) 7,121,596 - (66) (9,540) - (47) 1,229 - (47) 420 - (50) 7,466 - (401) (401) - (133) (16,832) - (568) 7,158,887 - (375) (221,742) - (268) (23,157) - (23,317) (22,906) (1.43) (11,455) (9,486) (1.90) (29,852) 1,928 - (34,529) 3,427 - (LOSS) (LOSS) INCOME INCOME OPERATING OPERATING NET REVENUES REVENUES OPERATING OPERATING 43,714 - 67,812 - 23,017 - 87,818 - 137,974 - NET WORTH NET
80 146,612 - 97 14,737 - 781 22,239 1,261 (14,707) (16,712) (0.78) 481 19,994,534 - 219 TOTAL TOTAL LIABILITIES 672,314 1,483 670,831 - TOTAL TOTAL ASSETS ASSETS 3 43,714 - 545 137,974 - 3,918 18,947 3,758 15,189 - 30,000 111,718 61,703 50,015 382,360 24,011 21,367 7.12 90,825 87,818 - 50,000 48,662 8,148 40,514 - 72,660 119,282 31,309 87,973 692,748 14,497 6,412 - 10,858 55,923 25,420 30,50378,704 111,790 76,747 6,391 11,925 6,739 64,822 - 148,309 1,115 1,260 Note 1 160,060 141,424 4,270 137,154 - 345,801 274,480 4,104 270,376 - 346,758 313,237 53,361 259,876 155,808 (8,433) (6,704) Note 1 2,716,577 19,995,015 NAME OF CORPORATION CORPORATION OF NAME CAPITAL AAEON SYSTEMS, INC. AAEON TECHNOLOGY (EUROPE) B.V. AAEON TECHNOLOGY GMBH AAEON INVESTMENT CO., LTD. ONYX Healthcare Inc. 150,000 1,175AAEON TECHNOLOGY SINGAPORE PTE. LTD. 146,692 AAEON TECHNOLOGY (SUZHOU) INC. 7,806ONYX HEALTHCARE USA, INC. ASUSTEK HOLDINGS LIMITED CENTRAL TEC 1,841ASIA LIMITED 15,138 619,187 WAVEFACE HOLDING COMPANY LIMITED 14,834 64,183NEXT SYSTEM LIMITED 5,965ASUS COMPUTER (SHANGHAI) CO., LTD. 67,812 - WAVEFACE INC. ASUSTOR INC. - ASUS INTERNATIONAL LIMITED DEEP DELIGHT LIMITED CHANNEL PILOT LIMITED UNIMAX HOLDINGS LIMITED UNIMAX ELECTRONICS INC. ASUS COMPUTER CORP. 196,788 909,249 18,919,690 213,000 23,017 23,020 - - 18,919,690 -
219 PER PER (LOSS) (LOSS) EARNING EARNING SHARE(NTD) SHARE(NTD) NET (LOSS) (LOSS) (596,094) Note 1 INCOME INCOME 303 3,480 - 345 349 - 546 546 Note 1 (LOSS) (LOSS) (1,018,638) INCOME INCOME OPERATING OPERATING NET REVENUES REVENUES OPERATING OPERATING 915 42,765 (784) (748) - NET WORTH NET
231 5,182 5,497 (2,257) (2,158) - 220 TOTAL TOTAL LIABILITIES TOTAL TOTAL ASSETS ASSETS 2 3,186 3,331 (145) 12,869 442 47,931 15,110 32,821 135,769 (3,112) 9,610 - 466 5,413 305 15,384 9,527 5,857 97,337 3,029 2,235 - 4,122 14,629 13,714 1,175 35,381 16,110 19,271 126,603 4,671 4,314 - 4,153 58,342 50,176 8,166 197,741 (6,071) 2,320 - 1,881 80,061 75,990 4,071 242,605 10,741 695 - 2,337 35,303 22,384 12,919 159,564 4,733 3,506 - 1,949 10,449 7,7451,875 2,704 18,862 60,993 13,238 5,624 58,248 3,216 2,314 - 80,073 1,388,878 1,307,932 80,946 4,383,041 6,081 (3,295) - 10,016 409,716 345,152 64,564 2,918,726 25,852 13,393 - 46,824 51,715 5,164 46,551 41,104 (25,051) (1,429) 908,326 94,254,766 71,996,333 22,258,433 319,116,499 8,052,448 7,587,671 - 319,457 18,765,029 22,377,956 (3,612,927) 70,388,742 NAME OF CORPORATION CORPORATION OF NAME CAPITAL ASUS TECHNOLOGY PTE. LTD.(ASTP) ASUS COMPUTER GmbH ASUS COMPUTER Benelux B.V. ASUS FRANCE SARL ASUSTEK (UK) LIMITED 1,959ASUS TECHNOLOGY (HONG KONG) LIMITED ASUS KOREA Co., Ltd 12,259ASUSTEK COMPUTER (S) PTE, Ltd. ASUS Polska Sp. z o.o. 5,457ASUS Technology Private Limited ASUS Technology Holland B.V. ASUS 163,802 Technology (Vietnam) 6,802LTD. Co., ASUSTEK Italy S.R.L 14,693 229,130ASUS Middle East FZCO 96,208 3,140,403ASUS IBERICA S.L. ASUS Technology (Suzhou) Co. Ltd. 9,184 3,119,741ASUS Japan Incorporation 628,858 2,763ASUS COMPUTER Czech Republic 219,946s.r.o. 1,095,442 20,662 2,188ASUSTEK COMPUTER (SHANGHAI) CO. LTD. 118,974 206,405ASUS EGYPT L. L. C. 5,401 - ASUS CZECH SERVICE S. R. O. 889,037 4,730 1,206,485 8,211 3,255 59,919 78,929 - 89,738 35,015 Note 1 24,904 348,764 11,245 8,707 -
220 PER PER (LOSS) (LOSS) EARNING EARNING SHARE(NTD) SHARE(NTD) NET (LOSS) (LOSS) INCOME INCOME (1,188) (327) - (LOSS) (LOSS) INCOME INCOME OPERATING OPERATING NET REVENUES REVENUES OPERATING OPERATING NET WORTH NET
947 186,309 - 221 TOTAL TOTAL LIABILITIES TOTAL TOTAL ASSETS ASSETS 1,5341,175 9,544 12,286 3,790 7,374 5,754 4,912 26,147 49,264 2,096 1,432 1,495 1,150 - - 29,198 103,602 82,319 21,283 81,962 (7,855) (7,698) -
831,315 2,195,733 1,427,487 768,246 778,383 (39,006) (38,976) - 1,530,757 4,557,643 2,978,863 1,578,780 2,564,130 60,125 45,399 Note 1 NAME OF CORPORATION CORPORATION OF NAME CAPITAL ASUS SERVICE AUSTRALIA PTY LIMITED ASUS AUSTRALIA PTY LIMITED ASUSTEK Computer (Chongqing) CO., LTD. 10,757ACBZ IMPORTACAO E COMERCIO LTDA. 26,570ASUS INDIA PRIVATE LIMITED ASUS Hungary Services Limited Liability Company 186,615 24,213ASUS PORTUGAL, SOCIEDADE UNIPESSOAL LDA. 187,256 ASUS SWITZERLAND GmbH 2,357Note 1: It’snot appliedcompany to limited. 10,953 95,250 17,978 (8,124) (8,170) 3,846 - 14,132 51,262 1,927 1,493 -
221
ASUSTeKASUSTeK Computer Computer Inc. Inc. DeclarationDeclaration of Internal of Internal Control Control
Date: MarchDate: 23, March 2012 23, 2012
The internalThe internalcontrol system control in system 2011 in is 2011 with the is withfollowing the following declarations declarations made in made accordance in accordance with the with the self-inspectionself-inspection conducted: conducted:
1. We understand1. We understand it is the itresponsibility is the responsibility of the compan of the y’s compan managementy’s management to have internal to have controlinternal system control system established,established, enforced, enforced, and maintained. and maintained. The company The company has the internalhas the controlinternal system control established system established to to provide aprovide reasonable a reasonable assurance assurance for the realization for the realization of operating of operating effect and effect efficiency and efficiency (including (including profits, profits, performance,performance, and assets and safety), assets thesafety), reliability the reliability of financial of fi report,nancial and report, the and obedience the obedience of relevant of relevant regulations.regulations.
2. Internal2. controlInternal system control is system designed is designed with limitations with limitations; therefore,; therefore, no matter no how matter perfect how it perfect is designed, it is designed, an an effective effectiveinternal controlinternal system control is system to ensure is to the ensure realization the realization of the aforementioned of the aforementioned three objectives. three objectives. Due Due to the changeto the of change environment of environment and condition, and co thendition, effectiveness the effectiveness of an inte ofrnal an controlinternal system control could system change could change at any time.at any Our time. internal Our controlinternal system control is system designed is designed with self-monitoring with self-monitoring mechanism; mechanism; therefore, therefore, we are we are able to haveable corrective to have corrective actions in actionsitiated uponinitiated identifying upon identifying any nonconformity. any nonconformity.
3. We have3. We based have on based the internal on the controlinternal criteria control of criteria “Governing of “Governing Rules for Rules handling for handlinginternal controlinternal system control system by publicby offering public offering companies” companies” (referred (referred to as “the to Governingas “the Governing Rules” hereinafter) Rules” hereinafter) to determine to determine the the effectivenesseffectiveness of internal of controlinternal design control and design enforcem and enforcement. The ent.internal The controlinternal criteria control of criteria the “Governing of the “Governing Rules” isRules” the management is the management control processcontrol andprocess with and the withinternal the controlinternal dividedcontrol intodivided five intoelements: five elements: 1. 1. EnvironmentEnvironment control, 2.control, Risk analysis, 2. Risk analysis, 3. Contro 3.l process, Control process, 4. Information 4. Information and communication, and communication, and 5. and 5. Supervision.Supervision. Each element Each iselement subdivided is subdivided into sever intoal items.sever alPlease items. refer Please to therefer “Governing to the “Governing Rules” for Rules” for the detailsthe of details the said of items.the said items.
4. We have4. We based have on based the aforementioned on the aforementioned internal continternalrol criteriacontrol tocriteria inspect to theinspect effectiveness the effectiveness of internal of internal control designcontrol and design enforcement. and enforcement.
5. We believe5. We thatbelieve our thataudits our provide audits aprovide reasonable a reasonable basis for basis our opinion.for our opinion.On December On December 31, 2011, 31, those 2011, those standardsstandards require that require we planthat weand planperform and performthe audit the to obtainaudit to reasonable obtain reasonable assurance assurance about whether about whetherthe the internal controlinternal system control (including system (including the supervision the supervision and management and management over the oversubsidiaries) the subsidiaries) including including the the fulfillmentfulfillment of business of business performance performance and efficiency, and efficiency, the reliability the reliability of financial of financial statements statements and the and the obedienceobedience of governing of governing regulations, regulations, and the design and the and design enforcement and enforcement of internal of controlinternal system control is system free of is free of material materialmisstatement misstatement and is able and to is ensure able to the ensure realization the realization of the aforementioned of the aforementioned objectives. objectives.
6. The Declaration6. The Declaration of Internal of Internal Control Control is the content is the ofcontent our annual of our report annual and report prospectus and prospectus for the for the informationinformation of the public. of the For public. any Forforgery any andforgery con cealmentand concealment of the aforementioned of the aforementioned information information to the to the public, wepublic, will be we held will responsible be held responsible by law in by acco lawrdance in acco withrdance Securities with Securities Transaction Transaction Regulation Regulation No. 20, No. 20, No. 32, No.No. 171, 32, No.and 171,NO. and174. NO. 174.
7. We hereby7. We declared hereby declaredthat the Declarationthat the Declaration of Intern alof ControlInternal wasControl approved was approved by the Board by the of Board Directors of Directors on on March 23,March 2012 23,unanimously 2012 unanimously by the directors by the directorsat the meeting at the meeting
ASUSTeKASUSTeK Computer Computer Inc. Inc.
Chairman:Chairman: Jonney Shih Jonney Shih
President:President: Jerry Shen Jerry Shen
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ASUSTek Computer Inc.
Chairman