opto tech corporation · 2009-12-03 · opto tech corporation . financial statements . and report...

OPTO TECH CORPORATION FINANCIAL STATEMENTS

AND REPORT OF INDEPENDENT ACCOUNTANTS SEPTEMBER 30, 2009 AND 2008

For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

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Report of Independent Accountants Translated from Chinese

(09)PWCR09001564 To the Board of Directors and Stockholders of Opto Tech Corporation

We have reviewed the accompanying balance sheets of Opto Tech Corporation as of September 30, 2009 and 2008, and the related statements of income and of cash flows for the nine-month periods then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express a conclusion on these financial statements based on our reviews.

Except as discussed in the following paragraph, we conducted our reviews in accordance with the Statement of Auditing Standards No. 36, “Review of Financial Statements” in the Republic of China. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

The Company’s long-term investments accounted for under the equity method and the amounts and

information disclosed in Note 11 as of September 30, 2009 and 2008 were based on their respective financial statements which were not reviewed by independent accountants. As of September 30, 2009 and 2008, these long-term investments amounted to $1,053,154 thousand and $1,001,486 thousand, representing 9.83% and 9.55% of total assets, respectively. The related investment loss was $77,889 thousand and $141,778 thousand for the nine-month periods ended September 30, 2009 and 2008, respectively.

Based on our reviews, except for the effect on the financial statements of such adjustments, if any, as might have been determined to be necessary had the financial statements of these investee companies been reviewed by independent accountants as explained in the preceding paragraph, we are not aware of any material modifications that should be made to the financial statements referred to in the first paragraph to be in conformity with the “Rules Governing the Preparation of Financial Statements by Securities Issuers”, “Business Entity Accounting Law”, “Regulation on Business Entity Accounting Handling” and generally accepted accounting principles in the Republic of China.

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As discussed in Note 3 to the financial statements, effective January 1, 2009, the Company adopted the amendments to R.O.C. SFAS No. 10, “Accounting for Inventories”.

As discussed in Note 3 to the financial statements, effective January 1, 2008, the Company adopted the

newly-issued EITF 96-052, “Accounting for Employees’ Bonus and Directors’ and Supervisors’ Remuneration”, as prescribed by the R.O.C. Accounting Research and Development Foundation. The expected costs of employees’ bonus and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and the amounts can be estimated reasonably.

We have also reviewed the consolidated financial statements of Opto Tech Corporation and its subsidiaries

(not presented herein) as of and for the nine-month period ended September 30, 2008. In our report dated November 3, 2008, we issued a qualified conclusion on the consolidated financial statements since the financial statements of the investee companies were not reviewed by independent accountants. The consolidated financial statements of Opto Tech Corporation and its subsidiaries (not presented herein) as of and for the nine-month period ended September 30, 2009 have not yet been reviewed by us. PricewaterhouseCoopers, Taiwan October 27, 2009 The accompanying financial statements are not intended to present the financial position and results of operations and cash flows of the Company in accordance with accounting principles generally accepted 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 the 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.

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OPTO TECH CORPORATION BALANCE SHEETS

SEPTEMBER 30, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

(UNAUDITED)

2009 2008 2009 2008 ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Current Assets Current Liabilities

Cash and cash equivalents (Note 4(1)) $ 1,878,051 $ 1,387,097 Short-term loans (Note 4(9)) $ 529,336 $ 1,167,265

Notes receivable 39,217 79,749 Financial liabilities at fair value through profit or loss - current (Note 4(10)) 165 4,727

Notes receivable - related parties (Note 5) - 750 Accounts payable 627,221 706,913

Accounts receivable - net (Note 4(2)) 1,416,957 1,590,868 Accounts payable - related parties (Note 5) 543,643 400,917

Accounts receivable - related parties - net (Note 5) 177,264 296,370 Income tax payable (Note 4(18)) - 127

Other receivables (Note 4(18)) 8,477 17,193 Accrued expenses 176,848 310,201

Other receivables - related parties (Note 5) 36,769 - Other payables 40,701 27,732

Other financial assets - current (Note 6) 295,580 40,719 Unearned revenue collected in advance 30,434 3,033

Inventories - net (Note 4(3)) 1,186,717 1,539,869 Long-term liabilities - current portion (Note 4(11)) 410,714 180,000

Prepaid expenses 4,551 12,151 Other current liabilities 23,990 33,124

Prepayments 6,973 20,877 Total current liabilities 2,383,052 2,834,039

Deferred income tax assets - current (Note 4(18)) 87,862 163,345

Other current assets 629 229 Long-term Liability

Total current assets 5,139,047 5,149,217 Long-term loans (Note 4(11)) 1,822,511 1,644,400

Funds and Investments Available-for-sale financial assets - non-current (Note 4(4)) 76,174 36,740 Other Liabilities

Financial assets carried at cost - non-current (Note 4(5)) 580,327 218,533 Accrued pension liabilities (Note 4(12)) 96,301 53,618

Long-term investments - accounted for under the equity method (Note 4(6)) 1,085,750 1,005,250 Guarantee deposits (Note 5) 80 86

Total funds and investments 1,742,251 1,260,523 Other liabilities - other (Note 4(6)) 39,170 20,392

Total other liabilities 135,551 74,096

Property, Plant and Equipment (Notes 4(7), 5 and 6) TOTAL LIABILITIES 4,341,114 4,552,535

Cost Land 12,493 12,493 Stockholders' Equity

Buildings 1,725,022 1,720,625 Capital Machinery 3,220,781 2,990,280 Common stock (Notes 4(13)(17)) 5,453,088 5,237,023

Utility facilities 938,547 930,904 Capital Reserves (Note 4(14)) Pollution prevention equipment 607,730 604,043 Paid-in capital in excess of par 304,558 89,417

Transportation equipment 6,223 7,391 Additional paid-in capital - treasury stock transactions (Note 4(16)) 60,625 60,625

Office equipment 74,679 79,616 Capital reserve from long-term investments 57,419 -

Other equipment 1,405,402 1,381,417 Capital reserve from employees' stock options (Note 4(17)) 39,660 21,585

Cost and revaluation increments 7,990,877 7,726,769 Retained Earnings

Less: Accumulated depreciation ( 5,119,413) ( 4,635,550) Legal reserve 126,982 92,095

Accumulated impairment ( 8,805) ( 6,075) Special reserve 113,890 7,012

Construction in progress and prepayments for equipment 224,151 241,474 Unappropriated earnings (Notes 4(15)(18)) 281,008 499,652

Total property, plant and equipment 3,086,810 3,326,618 Other Adjustments to Stockholders' Equity

Unrealized gain or loss on available-for-sale financial assets (Note 4(4)) ( 58,775) ( 98,210)

Intangible Asset Cumulative translation adjustments 70,137 63,041

Deferred pension costs (Note 4(12)) 2,618 2,836 Unrecognized pension cost (Note 4(12)) ( 46,850) ( 7,969)

Treasury stock (Note 4(16)) ( 26,699) ( 26,699)

Other Assets TOTAL STOCKHOLDERS' EQUITY 6,375,043 5,937,572

Idle assets (Note 4(8)) 263,771 273,839 Commitments and Contingent Liabilities (Note 7)

Deposits out 8,403 964 Deferred expenses 34,128 44,551 Deferred income tax assets - non-current (Note 4(18)) 439,129 431,559

Total other assets 745,431 750,913

TOTAL ASSETS $ 10,716,157 $ 10,490,107 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,716,157 $ 10,490,107

The accompanying notes are an integral part of these financial statements. See review report of independent accountants dated October 27, 2009.

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OPTO TECH CORPORATION STATEMENTS OF INCOME

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT FOR EARNINGS PER SHARE AMOUNTS)

(UNAUDITED)

2009 2008 Operating Revenues Sales revenue $ 3,589,533 $ 5,233,172

Sales returns ( 58,942) ( 56,354)

Sales discounts ( 73,125) ( 78,973)

Net sales revenue (Note 5) 3,457,466 5,097,845

Other operating revenues 149,746 145,078

Total operating revenues 3,607,212 5,242,923

Operating Costs

Cost of goods sold (Notes 4(20) and 5) ( 2,797,341) ( 3,799,842)

Other operating costs ( 121,360) ( 90,984)

Total operating costs ( 2,918,701) ( 3,890,826)

Gross profit 688,511 1,352,097

Unrealized gain from intercompany transactions ( 6,574) ( 16,629)

Realized gain from intercompany transactions 2,410 6,645

Gross profit, net 684,347 1,342,113

Operating Expenses (Note 4(20))

Selling expenses ( 81,150) ( 108,870)

General and administrative expenses ( 349,246) ( 453,852)

Research and development expenses ( 98,379) ( 144,753)

Total operating expenses ( 528,775) ( 707,475)

Operating income 155,572 634,638

Non-operating income and gains

Interest income 2,792 6,018

Dividend income 9,414 1,750

Gain on sale of investments 5,143 9,762

Rental income (Note 5) 1,540 1,900

Gain on reversal of impairment losses - 1,466

Miscellaneous income (Note 5) 43,968 6,795

Total non-operating income and gains 62,857 27,691

Non-operating expenses and losses

Interest expense ( 36,265) ( 56,410)

Adjustment loss of financial liabilities held for trading ( 2,302) ( 4,727)

Investment loss accounted for under the equity method (Note 4(6)) ( 77,889) ( 141,778)

Other investment loss (Note 4(5)) - ( 9,700)

Loss on disposal of property, plant and equipment ( 3,822) ( 3,092)

Foreign exchange loss ( 1,931) ( 29,799)

Financing charges ( 2,067) ( 3,695)

Depreciation of idle assets ( 3,733) -

Miscellaneous losses ( 5,817) ( 289)

Total non-operating expenses and losses ( 133,826) ( 249,490)

(Loss) income from continuing operations before income tax 84,603 412,839

Income tax expense (Note 4(18)) ( 49,807) ( 80,892)

Net income $ 34,796 $ 331,947

Before Tax After Tax Before Tax After Tax Basic earnings per share (Note 4(19))

Net income $ 0.16 $ 0.07 $ 0.79 $ 0.64 Diluted earnings per share (Note 4(19))

Net income $ 0.16 $ 0.07 $ 0.78 $ 0.63 Pro forma information based on the assumption that the Company’s shares held by its subsidiary are not treated as treasury stocks: Net income $ 103,980 $ 54,173 $ 392,797 $ 311,905 Basic earnings per share Net income $ 0.20 $ 0.10 $ 0.75 $ 0.60 Diluted earnings per share

Net income $ 0.20 $ 0.10 $ 0.74 $ 0.59


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OPTO TECH CORPORATION STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

(UNAUDITED)

2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 34,796 $ 331,947 Adjustments to reconcile net income to net cash provided by

operating activities

Reclassification to income from bad debts expense ( 28,774) ( 2,968)

Depreciation of property, plant and equipment 380,642 373,569

Depreciation of idle assets 3,733 -

Amortization 19,234 24,342 Investment loss accounted for under equity method in excess

of cash dividends received in the current period 85,098 153,322

Net loss on financial assets and liabilities 2,302 4,727 (Gain on price recovery of inventories) provision for

inventory obsolescence and market price declines ( 4,138) 1,974

Reclassification to financial charges from deferred expenses 1,116 2,453

Gain on reversal of impairment losses ( 16) ( 1,919)

Loss on other investments - 9,700

Gain on sale of investments ( 5,143) ( 9,762)

Loss on disposal of property, plant and equipment 3,822 3,093

Changes in assets and liabilities

(Increase) decrease in: Financial assets at fair value through profit or loss -

current 4 764

Notes receivable ( 5,265) 106,673

Notes receivable – related parties - 90

Accounts receivable ( 129,338) 21,369

Accounts receivable – related parties 49,702 ( 223,134)

Other receivables 2,546 ( 5,470)

Other receivables – related parties ( 6,652) ( 357)

Inventories 227,489 ( 35,685)

Prepaid expenses 313 7,298

Prepayments 12,805 ( 16,157)

Other current assets ( 71) 1,115

Deferred income tax assets 49,222 80,115

Increase (decrease) in:

Accounts payable 99,467 ( 118,866)

Accounts payable – related parties 171,320 66,190

Income tax payable - ( 2,554)

Accrued expenses ( 77,933) 88,575

Other payables 1,949 27,728

Unearned revenue collected in advance 30,006 ( 70,191)

Other current liabilities ( 8,000) ( 4,560)

Accrued pension liabilities 2,694 ( 638)

Deferred credit - gain from intercompany transactions 4,164 9,984

Net cash provided by operating activities 917,094 822,767

(Continued)

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OPTO TECH CORPORATION STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

(UNAUDITED)

2009 2008 CASH FLOWS FROM INVESTING ACTIVITIES

Increase in restricted cash and cash equivalents ($ 235,366) ($ 22,882)

Increase in financial assets carried at cost - ( 4,000)

Proceeds from disposal of financial assets carried at cost 5,139 - Increase in long-term investments accounted for under equity

method - ( 37,300) Proceeds from disposal of long-term investments accounted for

under equity method - 15,909

Acquisition of property, plant and equipment ( 156,765) ( 409,267) Proceeds from disposal of property, plant and equipment

(including idle assets) 1,203 27,458

(Increase) decrease in deposits out ( 7,300) 297

Increase in deferred expenses ( 16,904) ( 25,936)

Net cash used in investing activities ( 409,993) ( 455,721)

CASH FLOWS FROM FINANCING ACTIVITIES

(Decrease) increase in short-term loans ( 544,249) 84,681

Increase in long-term loans (including long-term loans maturing within one year) 550,325 776,292

(Decrease) increase in guarantee deposits ( 10) 2

Exercise of employees’ stock options 46,635 74,601

Proceeds from capital increase by cash 402,221 -

Distribution of cash dividends ( 130,936) ( 520,312)

Distribution of directors’ and supervisors’ remuneration - ( 32,520)

Distribution of employees’ bonuses - ( 97,558)

Net cash provided by financing activities 323,986 285,186

Net increase in cash and cash equivalents 831,087 652,232

Cash and cash equivalents at beginning of period 1,046,964 734,865

Cash and cash equivalents at end of period $ 1,878,051 $ 1,387,097

Supplemental disclosures of cash flow information

Interest paid $ 44,702 $ 56,759

Less: Interest capitalized ( 3,061) ( 6,277)

Interest paid (net of interest capitalized) $ 41,641 $ 50,482

Income tax paid $ - $ 3,331

Investing and financing activities not affecting cash flows

Long-term liabilities maturing within one year $ 410,714 $ 180,000

Reclassification to deferred expenses from property, plant and equipment $ 2,715 $ 5,537


OPTO TECH CORPORATION NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009 AND 2008 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT AS OTHERWISE INDICATED) (UNAUDITED)

1. HISTORY AND ORGANIZATION

Opto Tech Corporation (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.) on December 21, 1983. The shares of the Company have been traded on the Taiwan Stock Exchange since May 2, 1995. The Company is primarily engaged in the manufacture and sales of semiconductor components as well as research and development, design, manufacture and sales of systems products. As of September 30, 2009, the Company had approximately 1,208 employees.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements of the Company are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers”, “Business Entity Accounting Law”, “Regulation on Business Entity Accounting Handling” and generally accepted accounting principles in the Republic of China. The Company’s significant accounting policies are summarized below:

1) Translation of financial statements of foreign subsidiaries

Assets and liabilities of foreign subsidiaries are translated into New Taiwan dollars using the exchange rates prevailing at the balance sheet date. Equity accounts are translated at historical rates except for beginning retained earnings, which is carried forward from prior year’s balance. Dividends are translated at the rates prevailing at the date of declaration. Profit and loss accounts are translated at weighted-average rates during the year. The resulting translation differences are included in “cumulative translation adjustments” under stockholders’ equity.

2) Foreign currency transactions

A. The Company maintains its accounts in New Taiwan dollars. Transactions denominated in foreign currencies are translated into New Taiwan dollars at the spot exchange rates prevailing at the transaction dates. Exchange gains or losses due to the difference between the exchange rate on the transaction date and the exchange rate on the date of actual receipt and payment are recognized in current year’s profit or loss.

B. Receivables, other monetary assets and liabilities denominated in foreign currencies are translated at the spot exchange rates prevailing at the balance sheet date. Exchange gains or losses are recognized in profit or loss.

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C. At the end of the period, foreign currency non-monetary assets and liabilities at fair value through profit or loss are evaluated at the spot exchange rates prevailing at the balance sheet date. Any exchange gain or loss resulting from the evaluation shall be recognized in current period’s profit or loss. Conversely, foreign currency non-monetary assets and liabilities at fair value through shareholders’ equity are evaluated at the spot exchange rates prevailing at the balance sheet date. Any exchange gain or loss resulting from the evaluation shall be recognized in stockholders’ equity. However, non-monetary items that are measured not based on the fair value are evaluated using the historical exchange rates at the date of the transaction.

3) Criteria for classifying current or 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) Cash and cash equivalents

Cash equivalents represent highly liquid investments that meet the following requirements:

A. Readily convertible to cash; and

B. With maturities less than three months and which are subject to insignificant risk of changes in value resulting from fluctuations in interest rates.

The Company’s statement of cash flows is prepared on the basis of cash and cash equivalents.

5) Financial assets and financial liabilities at fair value through profit or loss

A. Financial assets and financial liabilities at fair value through profit or loss are recognized and derecognized using trade date accounting and are recognized initially at fair value.

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B. These financial assets and liabilities are subsequently remeasured and stated at fair value and the gain or loss is recognized in profit or loss. The fair value of open-end mutual funds is based on the net asset value at the balance sheet date.

6) Available-for-sale financial assets

A. Available-for-sale financial assets are recognized and derecognized using trade date accounting and are initially stated at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.

B. The financial assets are remeasured and stated at fair value, and the gain or loss is recognized in equity, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in equity shall be recognized in profit or loss. The fair values of listed stocks and OTC stocks are based on the closing prices quoted in the Taiwan Stock Exchange and the GreTai Securities Market at the balance sheet date.

C. If there is any objective evidence that the financial asset is impaired, the cumulative loss that had been recognized directly in equity shall be transferred from equity to profit or loss. When the fair value of an equity instrument subsequently increases, impairment losses recognized previously in profit or loss shall be reversed and recognized as adjustments in equity.

7) Financial assets carried at cost

A. Investment in unquoted equity instruments is recognized or derecognized using trade date accounting and is stated initially at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.

B. If there is any objective evidence that the financial asset is impaired, the impairment loss is recognized in profit or loss. Such impairment loss shall not be reversed when the fair value of the asset subsequently increases.

8) Accounts receivable

Accounts receivable are claims resulting from the sale of goods or services. The fair value of accounts receivable is calculated based on the imputed interest rate. Accounts receivable which are collectible within one year, and where the difference between the fair value and the value at maturity is insignificant are measured at carrying value.

9) Allowance for doubtful accounts

Allowance for doubtful accounts is provided according to the evaluation of the collectibility of notes, accounts and other receivables, taking into account the bad debts incurred in prior years and the aging analysis of the receivables.

10) Inventories

The perpetual inventory system is adopted for inventory recognition. Inventories are stated at cost. The cost is determined using the weighted-average method. Fixed manufacturing costs are allocated on the basis of the normal capacity of production equipment. At the end of period, inventories are evaluated at the lower of cost or net realizable value, and the individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value should be based on the estimated selling price in the normal course of business,

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net of estimated costs of completion and estimated selling expenses. Allowance for slow moving items is provided when necessary.

11) Long-term equity investments accounted for under the equity method

A. Long-term equity investments in which the Company holds more than 20% of the investee company’s voting shares or has the ability to exercise significant influence on the investee’s operational decisions are accounted for under the equity method. However, if the Company has no significant control ability over the investees, the equity method is exempted from being applied in the preparation of the first and third quarter financial statements. The excess of the initial investment cost over the acquired net asset value of the investee attributable to goodwill is no longer amortized, effective January 1, 2006. Retrospective adjustment of the amount of goodwill amortized in previous year(s) is not required.

B. Long-term equity investments in which the Company holds more than 50% of the voting shares of the investees or has significant control ability on the investees’ operations are accounted for under the equity method and included in the quarterly consolidated financial statements.

C. Effective January 1, 2005, if the Company has the control ability over the investees, the Company recognizes all the losses incurred by such entities that will not be covered by other stockholders. When the operations of such investees become profitable, the Company recognizes the profits until the amount of losses previously recognized by the Company is fully recovered.

D. The unrealized gains (losses) on the downstream transactions between the Company and the investees accounted for under the equity method are eliminated at period-end according to the Company’s percentage of shareholding in these investees. Where the Company has controlling power over the investees, the unrealized gains (losses) are eliminated in full amount and are recognized only when they are realized. Additionally, the unrealized gains (losses) on the upstream transactions and sidestream transactions between the Company and the investees accounted for under the equity method are eliminated based on the Company’s equivalent percentage of shareholding in these investees.

E. Exchange differences arising from translation of the financial statements of overseas investee companies accounted for under the equity method are recorded as “cumulative translation adjustments” under stockholders’ equity.

F. The accounting policy on impairment of long-term investments accounted for under the equity method is described in Note 2(14).

12) Property, plant and equipment

A. Property, plant and equipment are stated at cost. Interests incurred on the loans used to bring the assets to the condition and location necessary for their intended uses are capitalized.

B. Depreciation is provided under the straight-line method based on the assets’ estimated economic service lives. Salvage value of the fully depreciated assets that are still in use is depreciated based on the re-estimated economic service lives. The estimated useful lives are 30~50 years for buildings and 3~10 years for the other property, plant and equipment.

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C. Major improvements and renewals are capitalized and depreciated accordingly. Maintenance and repairs are expensed as incurred.

D. Property, plant and equipment that are idle or have no value in use are reclassified to “other assets” at the lower of the fair value less costs to sell or book value. The resulting difference is included in current operations. Depreciation provided on these assets is charged to non-operating expense.

E. The accounting policy on impairment of property, plant and equipment is described in Note 2(14).

13) Deferred assets

Deferred assets, which mainly consist of telephone line installation, computer software expenses and expenses related to commercial papers, are amortized on a straight-line basis over their estimated useful lives of 2~21 years.

14) Impairment of non-financial assets

The Company recognizes impairment loss when there is indication that the recoverable amount of an asset is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell or value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction after deducting any direct incremental disposal costs. The value in use is the present value of estimated future cash flows to be derived from continuing use of the asset and from its disposal at the end of its useful life. When the impairment no longer exists, the impairment loss recognized in prior years shall be recovered. The recoverable amount of goodwill shall be evaluated periodically. Impairment loss will be recognized whenever there is indication that the recoverable amount of these assets is less than their respective carrying amount. Impairment loss on goodwill is not recoverable in the following years.

15) Warranty

Warranty is estimated based on historical experience. Service warranty expense is included in the current year’s operating expense.

16) Pension plan

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 25 years. Under the defined contribution pension plan, net periodic pension costs are recognized as incurred.

B. Minimum pension liabilities in the interim financial statements are adjusted in accordance with the net periodic pension cost and funds contributed.

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17) Income tax

A. Inter-period and intra-period income taxes are allocated in accordance with the R.O.C. SFAS No. 22, “Accounting for Income Taxes”. Over or under provision of prior years’ income tax liabilities is included in current period’s income tax.

B. Investment tax credits arising from expenditures incurred on acquisitions of equipment or technology, research and development, employees training, and equity investments are recognized in the year the related expenditures are incurred.

C. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

D. When the tax laws are amended, the deferred tax assets or liabilities are recalculated in accordance with the new tax laws in the year the new tax law is announced. The effect of the change in accounting principle for deferred tax assets or liabilities is recognized in current income tax expense.

18) Treasury stock

A. When the Company acquires its issued stocks, the cost is debited as “treasury stock” and recognized as a reduction to stockholders’ equity. Treasury stocks acquired are stated at cost using the weighted-average method.

B. Upon disposal of the treasury stock, if the disposal price exceeds the cost of the treasury stock, the difference is credited to “capital reserve – treasury stock”. If the disposal price is less than the cost, the difference is debited to the capital reserve arising from the treasury stock of the same class. Where the capital reserve is insufficient to cover the difference, the remaining amount is charged against retained earnings.

C. Upon registration of cancellation, credit to “treasury stock”, and debit to “common stock” and “capital reserve-additional paid-in”, which is in proportion to shareholding. Except for the book value sum of “common stock” and “capital reserve-additional paid-in”, the related gain is credited to “capital reserve-treasury stock transaction” and any loss is offset against this capital reserve account. However, when the balance of this capital reserve account is insufficient to offset the loss, then the remaining amount is charged against retained earnings.

D. The Company’s shares held by its subsidiaries are accounted for as treasury stock.

19) Share-based payment - employee compensation plan

The employee stock options granted from January 1, 2004 through December 31, 2007 are accounted for in accordance with EITF 92-070, EITF 92-071 and EITF 92-072 “Accounting for Employee Stock Options” as prescribed by the Accounting Research and Development Foundation, R.O.C., dated March 17, 2003. Under the share-based employee compensation plan, compensation cost is recognized using the intrinsic value method and pro forma disclosures of net income and earnings per share are prepared in accordance with the R.O.C. SFAS No. 39, “Accounting for Share-based Payment”.

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20) Employees’ bonuses and directors’ and supervisors’ remuneration

Effective January 1, 2008, pursuant to EITF 96-052 of the Accounting Research and Development Foundation, R.O.C., dated March 16, 2007, “Accounting for Employees’ Bonuses and Directors’ and Supervisors’ Remuneration”, 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 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. In addition, according to EITF 97-127 of the Accounting Research and Development Foundation, R.O.C., dated March 31, 2008, “Criteria for Listed Companies in Calculating the Number of Shares of Employees’ Stock Bonus”, 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.

21) Revenues and expenses

Revenues are recognized when the earning process is substantially completed and are realized or realizable. Costs and expenses are recognized as incurred.

22) 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.

23) Settlement date accounting

If an entity recognizes financial assets using settlement date accounting, any change in the fair value of the asset to be received during the period between the trade date and the settlement date is recognized in profit or loss for financial assets or liabilities classified as at fair value through profit or loss.

3. CHANGES IN ACCOUNTING PRINCIPLES

1) Effective January 1, 2009, the Company adopted the amendments to R.O.C. SFAS No. 10, “Accounting for Inventories”. As a result of this change in accounting principle, operating costs and non-operating income and gains related to inventories decreased by $4,137 and $2,694, respectively, for the nine-month period ended September 30, 2009. In addition, investment income increased by $7,294 due to the subsidiaries’ adoption of the amendments to SFAS No. 10. Overall, net income increased by $3,593 and earnings per share increased by $0.01 for the nine-month period ended September 30, 2009.

～14～

2) Effective January 1, 2008, the Company adopted EITF 96-052 of the Accounting Research and Development Foundation, R.O.C., dated March 16, 2007. As a result of the adoption of EITF 96-052, net income decreased by $73,776 and earnings per share decreased by $0.14 for the nine-month period ended September 30, 2008.

4. DETAILS OF SIGNIFICANT ACCOUNTS

1) Cash and cash equivalents

September 30, 2009 2008 Cash on hand $ 100 $ 103Checking and demand deposits 921,925 784,937

Time deposits 366,026 247,000

Cash equivalents-Repurchase bonds 590,000 355,057

$ 1,878,051 $ 1,387,097

2) Accounts receivable

September 30, 2009 2008 Accounts receivable $ 1,528,469 $ 1,690,463

Less: Allowance for doubtful accounts ( 111,512) ( 99,595)

$ 1,416,957 $ 1,590,868

3) Inventories

September 30, 2009 2008 Raw materials $ 666,014 $ 801,429

Supplies 115,500 129,565

Work in process 191,480 253,067

Semi-finished goods 267,120 218,860

Finished goods 383,814 489,134

1,623,928 1,892,055

Less: Allowance for obsolescence and market value decline ( 437,211) ( 352,186)

$ 1,186,717 $ 1,539,869

～15～

The related expenses and losses of inventories:

For the nine-month periods ended

September 30, 2009 2008 Cost of goods sold $ 2,843,160 $ 3,759,108

Provision for inventory market price declines - 1,974

Gain on price recovery of inventories ( 4,138) -

Others ( 41,681) 38,760

$ 2,797,341 $ 3,799,842

As a consequence of the sale of inventories previously provided with allowance for obsolescence and market value decline, and lower expense rate of Systems & Products Division, a gain on price recovery of inventories was recognized for the nine-month period ended September 30, 2009.

4) Available-for-sale financial assets

September 30,

2009 2008 Non-current items:

Listed (TSE and OTC) stocks

American Xtal Technology, Inc. $ 2,881 $ 2,881

United Radiant Technology Corp. 132,069 132,069

134,950 134,950

Adjustment of available-for-sale financial assets ( 58,776) ( 98,210)

$ 76,174 $ 36,740

5) Financial assets carried at cost

September 30, 2009 2008 Non-current items:

Unlisted stocks

Nichia Corp. $ 379,252 $ -

Formosa Industrial Computing, Inc. 7,632 7,632

Shin-Etsu Opto Electronic Co., Ltd. 20,000 20,000

Lanyo Technology Co., Ltd. - 1,142

Giga Epitaxy Technology Corp. 33,000 33,000

Pictologic Inc. 2,794 4,000

Lu Zhu Development Co., Ltd. 127,648 130,572

Omniad Media Incorporation - 6,993

Oriental System Technology Inc. 10,001 15,194

Top Increasing Technology Co., Ltd. - -

$ 580,327 $ 218,533

～16～

A. The above investments were measured at cost since these have no quoted prices and their fair value cannot be measured reliably.

B. On July 24, 2009, the Company had objection to the division of Omniad Media Incorporation. Pursuant to the Company Law, the Company exercised the right of purchase request. Omniad Media Incorporation purchased the Company’s stocks, and paid the common stocks of Top Increasing Technology Co., Ltd. to the Company as compensation.

C. On December 12, 2008, the Board of Directors resolved to participate in the capital increase by cash of Nichia Corp. with a price per share of 105,700 yen, amounting to 1,057,000 thousand yen, converted into 379,252 thousand new taiwan dollars in total investment with a shareholding percentage of 0.47%. The investment was accounted for as “financial assets carried at cost – non-current”.

D. For the year ended December 31, 2008, the Company recognized impairment losses of $3,342, $1,206, $10,424, $6,993 and $5,193 on its investments in Lanyo Technology Co., Ltd., Pictologic Inc., Lu Zhu Development Co., Ltd., Omniad Media Incorporation and Oriental System Technology Inc., respectively, because the Company had assessed that the recoverable amount is lower than the book value.

6) Long-term investments accounted for under the equity method

A. Information of long-term investments as of September 30, 2009 and 2008 are summarized below:

September 30, 2009 September 30, 2008

Investee company Carrying amount

% of ownership

Carrying amount

% of ownership

OPTO Technology International Group Co., Ltd. $ 786,391 100.00 $ 752,300 100.00

Ho Chung Investment Co., Ltd. 60,501 100.00 77,218 100.00

Opto Tech (H.K.) Co., Ltd. 9,399 100.00 9,572 100.00

Opto Tech (Macao) Co., Ltd. 1,411 99.90 - -

Viking Tech Corporation 116,285 9.90 85,295 11.61

Jyu Shin Investment Co., Ltd. 111,763 100.00 80,865 100.00

Neostones Microfabrication Corporation - - - 48.61

$ 1,085,750 $ 1,005,250

Shown as“other liability - other＂: China Semiconductor

Corporation ($ 32,596) 28.37 ($ 1,813) 28.37

Opto Tech (Macao) Co., Ltd. - - ( 1,951) 99.90

($ 32,596) ($ 3,764)

B. Investment income (loss) accounted for under the equity method for the nine-month periods ended September 30, 2009 and 2008 is set forth below:

～17～


September 30, Investee company 2009 2008

OPTO Technology International Group Co., Ltd. ($ 43,099) ($ 108,797)

Ho Chung Investment Co., Ltd. ( 4,950) ( 23,265)

Opto Tech (H.K.) Co., Ltd. ( 43) ( 8)

Opto Tech (Macao) Co., Ltd. ( 1,280) ( 2,026)

China Semiconductor Corporation ( 33,035) ( 20,140)

Viking Tech Corporation 2,623 10,272

Jyu Shin Investment Co., Ltd. 1,895 2,186

($ 77,889) ($ 141,778)

C. Long-term investments accounted for under the equity method were based on the financial statements as of and for the nine-month periods ended September 30, 2009 and 2008 which were not reviewed by independent accountants, except for Viking Tech Corporation, because the ownership was less than 50%, the investment income and loss was not recognized under the equity method.

D. Since the Company had control ability over China Semiconductor Corporation, the Company recognized the entire losses incurred by such entity that would not be covered by other stockholders. As of September 30, 2009 and 2008, the related balances of the long-term investment were ($32,596) and ($1,813), respectively, which were shown as “other liability - other”.

E. Since the Company had control ability over Opto Tech (Macao) Co., Ltd., the Company recognized the entire losses incurred by such entity that would not be covered by other stockholders. As of September 30, 2008, the related balance of the long-term investment was ($1,951), which was shown as “other liability - other”.

F. In April 2008, the Company invested in Jyu Shin Investment Co., Ltd., a 100% owned subsidiary, by contributing 6,200 thousand shares of Viking Tech Corporation. As a result, the Company’s direct ownership percentage in Viking Tech Corporation was reduced to below 20%. However, as Jyu Shin Investment Co., Ltd. owns the 6,200 thousand shares of Viking Tech Corporation, the total ownership percentage in Viking Tech Corporation exceeded 20%. Accordingly, the Company’s investment in Viking Tech Corporation is accounted for under the equity method.

～18～

7) Property, plant and equipment

September 30, 2009

Asset Initial cost Accumulateddepreciation

Accumulated impairment Carrying value

Land $ 12,493 $ - $ - $ 12,493

Buildings 1,725,022 ( 507,595) ( 59) 1,217,368

Machinery 3,220,781 ( 2,298,325) ( 8,272) 914,184

Utility facilities 938,547 ( 694,856) - 243,691

Pollution prevention facilities 607,730 ( 539,321) - 68,409

Transportation equipment 6,223 ( 4,474) ( 64) 1,685

Office equipment 74,679 ( 60,101) ( 289) 14,289

Other equipment 1,405,402 ( 1,014,741) ( 121) 390,540

Construction in progress and prepayments for equipment 224,151 - - 224,151

$ 8,215,028 ($5,119,413) ($ 8,805) $ 3,086,810

September 30, 2008

Asset Initial cost Accumulateddepreciation


Land $ 12,493 $ - $ - $ 12,493

Buildings 1,720,625 ( 453,341) ( 59) 1,267,225

Machinery 2,990,280 ( 2,089,473) ( 5,521) 895,286

Utility facilities 930,904 ( 613,466) - 317,438

Pollution prevention facilities 604,043 ( 504,208) - 99,835

Transportation equipment 7,391 ( 5,381) ( 64) 1,946

Office equipment 79,616 ( 61,618) ( 310) 17,688

Other equipment 1,381,417 ( 908,063) ( 121) 473,233

Construction in progress and prepayments for equipment 241,474 - - 241,474

$ 7,968,243 ($4,635,550) ($ 6,075) $ 3,326,618

Interest capitalized to property, plant and equipment amounted to $3,061 and $6,277 for the nine-month periods ended September 30, 2009 and 2008, respectively.

～19～

8) Idle assets

September 30, 2009

Cost Accumulateddepreciation


Machinery $ 2,228,078 ($ 527,824) ($1,436,483) $ 263,771

September 30, 2008

Cost Accumulateddepreciation


Machinery $ 2,287,521 ($ 558,005) ($1,455,677) $ 273,839

Since the Company discontinued the operations of OLED division on June 13, 2007, the Company actively looked for buyers. According to R.O.C. SFAS No. 38, “Accounting for Non-current Assets Held-for-Sale and Discontinued Operations”, the fixed assets of OLED division which were to be disposed was reclassified to “Non-current assets held-for-sale”. However, the buyer was not able to complete the sale on schedule due to factors beyond its control and the contract was terminated. In accordance with R.O.C. SFAS No. 38, the Company subsequently reclassified the fixed assets from “Non-current assets held-for-sale” to non-current assets (shown as idle assets) as they are no longer highly likely to be sold. Such assets were then re-measured at the lower of the carrying amount before classification as held for sale adjusted for any depreciation, depletion or amortizations that would have been recognized if not held for sale; and the recoverable amount.

9) Short-term loans

September 30, 2009 2008

Unsecured loans $ 529,336 $ 1,167,265

Interest rate 1.05%-2.75% 1.70%-7.35% `10) Financial liabilities at fair value through profit or loss

September 30, 2009 2008

Current items:

Adjustment of financial liabilities held for trading

Forward exchange contracts $ 165 $ 4,727

～20～

11) Long-term loans

Amount of loans

Bank Credit line Period September 30,

2009 September 30,

2008

China Development Industrial Bank $ 100,000

2008.11.18~

2009.11.18 $ 100,000 $ -

100,000

2007.09.13~

2008.10.13 - 100,000

Yuanta Commercial Bank 200,000

2009.05.26~

2012.05.26 200,000 -

200,000

2006.05.11~

2009.05.11 - 80,000

Syndicated loans with 8 financial institutions including Taishin International Bank 2,000,000

2008.02.15~

2013.03.06 1,933,225 1,644,400

2,233,225 1,824,400

Less: Current portion ( 410,714) ( 180,000)

$ 1,822,511 $ 1,644,400

A. On February 15, 2008, the Company signed a mortgage contract with a credit limit of $2 billion with 8 banks, including Taishin International Bank, and paid the loans used for plants and commercial papers to Taiwan Cooperative Bank. At the same time, the Company transferred the mortgaged assets, which was originally pledged to Taiwan Cooperative Bank, to the 8 banks including Taishin International Bank.

B. Pursuant to the syndicated loan facility agreement entered into by the Company with Taishin International Bank and 7 other banks, the Company is required to maintain particular financial ratios at agreed rates in the periods of syndicated loan facility agreement. (Please refer to Note 7)

C. Please refer to Note 6 for details of the collateral.

12) Pension plans

A. The Company has a non-contributory and funded defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 3.39% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan. The pension costs under the defined benefit pension plan for the nine-month periods ended September 30, 2009 and 2008 were $11,235 and $17,123, respectively. The fund balances with Bank of Taiwan were $193,412 and $212,282 as of September 30, 2009 and 2008, respectively.

～21～

B. Effective July 1, 2005, the Company established a funded defined contribution pension plan (the “New Plan”) under the Labor Pension Act. Employees have the option to be covered under the New Plan. Under the New Plan, the Company contributes monthly an amount based on 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 employment is terminated. The pension costs under the defined contribution pension plan for the nine-month periods ended September 30, 2009 and 2008 were $16,373 and $18,417, respectively.

13) Common stock

A. In accordance with the resolution adopted by the Board of Directors on April 26, 2007, the Company decided to reduce its capital by $2,559,658 at a ratio of 33.31251% to cover its accumulated deficit, which was set to take effect on August 11, 2007. The capital reduction was approved at the stockholders’ meeting on June 13, 2007 and approved by the Financial Supervisory Commission, Executive Yuan, R.O.C. on August 1, 2007. As of September 30, 2009, the Company’s authorized capital was $10,000,000, and paid-in capital was $5,453,088, consisting of 545,309 thousand shares of common stock with a par value of $10 (in dollars) per share.

B. On June 16, 2009, the Company’s meeting of stockholders resolved to increase its capital by 18,708 thousand shares through the private equity method. With the price per share of $21.5, the Company raised $402,221, and set the record date on July 31, 2009. The right and obligation of the common stocks raised is the same with those that have been issued for the restriction of ownership transfer. Besides, the common stocks can not be applied for listed unless they have been turned over for three years and applied for initial public offerings.

14) Capital reserve

The R.O.C. Securities and Exchange Law requires that capital reserve shall be exclusively used to cover any accumulated deficit or to increase capital and shall not be used for any other purpose. However, capital reserve arising from paid-in capital in excess of par value on issuance of common stock and donations can be capitalized once a year, provided that the Company has no accumulated deficit and the amount to be capitalized does not exceed 10% of the paid-in capital.

15) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be distributed as follows:

1) Offset prior years’ operating losses.

2) 10% of the remaining amount shall be set aside as legal reserve, unless the accumulated legal reserve equals the total capital of the Company.

3) Appropriation of the remainder shall be proposed by the Board of Directors and resolved by the stockholders.

4) Bonus distributed to the employees and shareholders, and remuneration paid to the directors and supervisors should account for 15%, 80% and 5%, respectively, of the total distributed amount.

～22～

B. The Company operates in the high-tech industry and its business life cycle is in the growth stage. In view of its capital expenditure demand and comprehensive financial plan for continuous development, the Company issues both stock and cash dividends. The proportion of dividends to be distributed in stocks and cash is determined based on the Company’s rate of growth and capital expenditures. However, the amount of cash dividends shall not be lower than 20% of the dividends distributed.

C. Pursuant to the regulation of the Financial Supervisory Commission, Executive Yuan, R.O.C., if there are any negative stockholders’ equity items recorded by the Company, such as unrealized losses on the decline in market value of available-for-sale financial assets, cumulative translation adjustments, and unrecognized pension cost (except for treasury stock), the Company is required to set aside a special reserve from the current after-tax net income and the unappropriated retained earnings accumulated from previous years with an amount equal to the total amount of the negative items. For the negative stockholders’ equity items which occurred in previous years, the special reserve is set aside from the previous years’ unappropriated retained earnings. Additionally, if the market value of the Company’s shares held by its subsidiaries is less than their book value, an amount equal to the Company’s proportionate share of the difference should also be set aside as special reserve. If there is a subsequent recovery in the market value, a reversal based on the Company’s equity interest should be made to the special reserve.

D. Legal reserve can only be used to cover accumulated losses or to increase capital. Legal reserve can be used to increase capital only if the accumulated amount of legal reserve is more than 50% of paid-in capital, and the amount is limited to 50% of its balance.

E. The appropriation of 2008 and 2007 earnings had been resolved at the stockholders’ meeting on June 16, 2009 and June 13, 2008. Details are summarized below:

2008 2007

Amount

Dividends per share

(in dollars)

Amount

Dividends per share

(in dollars) Legal reserve $ 34,887 $ 92,095

Special reserve 106,878 7,012

Cash dividends 130,936 $ 0.25 520,312 $ 0.99

Directors’ and supervisors’ remuneration - 32,520

Employees’ cash bonus - 97,558

Total $ 272,701 $ 749,497

The appropriations of 2008 earnings are not different from the resolution of the Board of Directors on April 28, 2009.

～23～

F. The estimated amounts of employees’ bonus and directors’ and supervisors’ remuneration for the nine-month period ended September 30, 2009 are $5,498 and $1,832, respectively based on 15% and 5% (prescribed by the Company’s Articles of Incorporation) of net income for the nine-month period ended September 30, 2009, after taking into account the legal reserve and other factors. The calculation of shares of stock bonus distributed is based on the closing price of the Company’s common stock at the previous day of the 2010 stockholders’ meeting after taking into account the effects of ex-rights and ex-dividends. The estimated amounts of employees’ bonus and directors’ and supervisors’ remuneration are recognized as operating expenses for the nine-month period ended September 30, 2009. Whereas, if the estimated amounts are different from the amounts approved by the stockholders subsequently, the difference is recognized as gain or loss in 2010. The actual appropriation of 2008 earnings as mentioned in the paragraph above, and the employees’ bonus and directors’ and supervisors’ remuneration for the year ended December 31, 2008 resolved by the stockholders during their meeting are the same with the amount recognized in the financial statements for the year ended December 31, 2008.

G. Information on the appropriation of the Company’s earnings as resolved by the Board of Directors and approved by the stockholders will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

16) Treasury stock

A. Pursuant to the R.O.C. Securities and Exchange Law, 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. As of September 30, 2009, the shares bought back as treasury stock amounted to $0.

B. Pursuant to the R.O.C. Securities and Exchange Law, treasury stocks should be reissued to the employees within 3 years and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and stockholders’ equity should be retired within 6 months of acquisition.

C. As of September 30, 2009 and 2008, the total number of the Company’s shares held by its subsidiary, Ho Chung Investment Co., Ltd., was both 1,107 thousand shares with an average book value of $24.11 (in dollars) per share, and fair value of $28.55 and $13.60 (in dollars) per share, respectively.

17) Employee stock options

The Company did not recognize compensation costs under the stock-based employee compensation plan for the nine-month periods ended September 30, 2009 and 2008. The exercise price under the stock-based employee compensation plan is based on the closing price of the Company’s common stock at the grant date and is subject to adjustments due to changes in the number of common shares and issuance of cash dividends. The vesting period of the Company’s employee stock option plan is 7 years. The employees may exercise the stock options in installment within a period of 2 years after the stock options are granted.

～24～

A. Details of the employee stock options are set forth below:

For the nine-month periods ended September 30, 2009 2008

Stock options No. of shares (in thousands)

Weighted- average

exercise price (in dollars)

No. of shares (in thousands)

Weighted- average


Options outstanding at beginning of period 15,737 $ 23.51 23,520 $ 20.35

Option granted - -

Options exercised ( 2,856) 16.33 ( 6,845) 10.90

Options revoked ( 640) ( 126)

Options outstanding at end of period 12,241 16,549

Options exercisable at end of period 2,844 4,224

B. Details of the employee stock options outstanding as of September 30, 2009 and 2008 are set forth below:

Stock options outstanding as at

September 30, 2009 Stock options exercisable at

September 30, 2009

Range of exercise price

(in dollars) No. of shares (in thousands)

Weighted- average expected remaining

vesting period(in years)

Weighted- average



Weighted- average


$ 16.30 2,844 1.25 $ 16.30 2,844 $ 16.30

27.70 9,397 5.25 27.70 - 27.70

Stock options outstanding as at

September 30, 2008 Stock options exercisable at

September 30, 2008

Range of exercise price

(in dollars) No. of shares (in thousands)

Weighted- average expected remaining

vesting period(in years)

Weighted- average



Weighted- average


$ 10.00 432 0.25 $ 10.00 432 $ 10.00

16.50 6,117 2.25 16.50 3,792 16.50

27.90 10,000 6.25 27.90 - 27.90

On June 16 and July 24, 2009, the Board of Directors of the Company approved the issuance of employees’ stock options authorized in 2004 and 2007. The exercise prices were adjusted from $16.50 and $27.90 to $16.30 and $27.70, respectively on July 8 and August 1, 2009.

～25～

C. The following sets forth the pro forma net income and earnings per share based on the assumption that the compensation cost is accounted for using the fair value method for the stock options granted (amended) on or after January 1, 2007:


September 30, 2009 2008

Net income Net income stated in the statement of income $ 34,796 $ 331,947

Pro forma statement of income $ 7,152 $ 295,432

Basic earnings per share (EPS) (in dollars)

EPS stated in the statement of income

$ 0.07 $ 0.64 Pro forma EPS $ 0.01 $ 0.57Diluted EPS (in dollars)

EPS stated in the statement of income $ 0.07 $ 0.63

Pro forma EPS $ 0.01 $ 0.56

For the stock options granted (amended) on or after January 1, 2007 with the compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The weighted-average parameters used in the estimation of the fair value are as follows:


September 30, 2009 2008

Risk-free interest rate 2.77% 2.77%Expected vesting period 1.25~5.25 years 0.25~6.25 yearsExpected price volatility 44.40% 33.60%~44.40%Dividend yield rate 0.00% 0.00%

18) Income tax

A. The income tax (refundable) payable and income tax expense are reconciled as follows:


September 30, 2009 2008

Income tax expense from continuing operations $ 49,807 $ 80,892Income tax expense overstated 779 - Add: Net change in deferred income tax assets 53,170 ( 80,115)Less: Income tax effect of revised tax law ( 102,392) -

Prepaid and withholding taxes from foreign income which will not be realized ( 1,364) -

Prepaid and withholding taxes ( 974) ( 650) ($ 974) $ 127Income tax refundable (shown as “other receivable”) ($ 974) $ -Income tax payable $ - $ 127

～26～

～27～

B. Deferred income tax assets and liabilities

September 30, 2009 2008

Deferred income tax assets – current $ 160,994 $ 265,192

Deferred income tax assets – non-current 686,873 996,912

Valuation allowance ( 320,876) ( 667,200)

$ 526,991 $ 594,904

C. Details of temporary differences, loss carryforwards and investment tax credits resulting in deferred income tax assets and liabilities are as follows:

September 30, 2009 2008 Amount Tax effect Amount Tax effect

Current items:

Unrealized losses on sales to affiliated companies $ 6,574 $ 1,315 $ 16,628 $ 4,157

Unrealized losses on foreign exchange transactions 16,982 3,396 2,569 642

Unrealized losses on valuation of financial assets and liabilities 165 33 4,727 1,182

Loss on inventory value decline 413,239 82,648 328,215 82,054

Over provision of allowance for bad debts 348,275 69,655 678,977 169,744

Employee benefits - - 1,079 270

Service warranty expense 19,735 3,947 28,572 7,143

Less: Valuation allowance ( 73,132) ( 101,847)

$ 87,862 $ 163,345

Non-current items:

Investment loss $ 142,595 $ 28,519 $ 158,440 $ 39,610

Impairment loss 546,539 109,308 865,014 216,254

Net pension costs 42,049 8,410 38,027 9,507

Loss carryforwards 1,633,904 326,781 1,322,855 330,713

Investment tax credits 213,855 400,828

Less: Valuation allowance ( 247,744) ( 565,353)

$ 439,129 $ 431,559

D. The Company is eligible for investment tax credits under the Statute for Upgrading Industry. Details as of September 30, 2009 are as follows:

Year of approval Qualifying item

Total tax credits

Unused tax credits

Final year tax credits

are due 2005 Research and development $ 23,968 $ 16,351 2009

Machinery and equipment 796 796 〞 Employees’ training 419 419 〞 Investments in emerging

important strategic industries 29,631 29,631

〞 54,814 47,197

2006 Research and development 19,185 19,185 2010 Machinery and equipment 7,617 7,617 〞 Employees’ training 414 414 〞 27,216 27,216



2009 Research and development 18,467 18,467 2013 Machinery and equipment 1,851 1,851 〞 Employees’ training 190 190 〞 20,508 20,508 $ 221,472 $ 213,855

E. As of September 30, 2009, losses available to be carried forward were as follows:

Year in which loss was incurred

Amount filed / approved

Losses available to be

carried forwardUnused loss

carryforwards

Final year lossescan be

carried forward2003 $ 467,252 $ 93,450 $ 75,108 2013 2004 861,121 172,224 172,224 2014 2005 162,697 32,539 32,539 2015 2008 119,259 23,852 23,852 2018 2009 115,288 23,058 23,058 2019

$ 1,725,617 $ 345,123 $ 326,781

～28～

～29～

F. As of September 30, 2009, the Company’s income tax returns through 2007 have been assessed and approved by the Tax Authority.

G. Details of unappropriated retained earnings as of September 30, 2009 and 2008 are summarized below:

September 30, 2009 2008 On or after January 1, 1998

Earnings subjected to 10% income tax $ 246,212 $ 167,705

Earnings not subjected to 10% income tax 34,796 331,947

$ 281,008 $ 499,652

H. The Company, in accordance with Regulation No. 273 issued by the Accounting Research and Development Foundation in Taiwan on December 31, 1998, discloses the following information:

September 30, 2009 2008 Balance of shareholders account of

deductible tax $ 1,957 $ 2,284

2009 Expected creditable tax ratio 0.69%

2008 Actual creditable tax ratio 0.44%

I. The Company’s equipment expansion is entitled to a four-year exemption on income tax under the Article 15 of Act for Establishment and Administration of Science Parks prior to amendment. Details as of September 30, 2009 are as follows:

Approval date and no.

Date of tax-exempt related equipment ready for production

Tax-exempt period

Cost of tax-exempt related equipment

Gung-Jung-Tz No. 0930012176 on May 5, 2004 May 4, 2004

January 1, 2008 ~ December 31, 2011

$ 660,224

Gung-Jung-Tz No. 0950008215 on March 31, 2006 March 29, 2006

January 1, 2010 ~ December 31, 2013

392,248

$ 1,052,472

19) Earnings per share

For the nine-month period ended September 30, 2009

Weighted-average

outstanding

Net income common shares Earnings per share (in dollars)

Before tax After tax (in thousands) Before tax After tax

Basic earnings per share

Net income attributable to common stockholders $ 84,603 $ 34,796 523,331 $ 0.16 $ 0.07

Dilutive effect of common stock equivalents:

Stock options - - 1,053

Employees’ bonus - - 257

Diluted earnings per share

Net income attributable to common stockholders plus dilutive effect of common stock equivalents $ 84,603 $ 34,796 524,641 $ 0.16 $ 0.07

Effective January 1, 2008, as employees’ bonus could be distributed in the form of stock, the diluted EPS computation shall include those estimated shares that would increase from employees’ stock bonus issuance in the calculation of the weighted-average number of common shares outstanding during the reporting year, taking into account the dilutive effects of stock bonus on potential common shares; whereas, basic EPS shall be calculated based on the weighted-average number of common shares outstanding during the reporting year that include the shares of employees’ stock bonus for the appropriation of prior year earnings, which have already been resolved at the stockholders’ meeting held in the reporting year. Since capitalization of employees’ bonus no longer belongs to distribution of stock dividends (or retained earnings and capital reserve capitalized), the calculation of basic EPS and diluted EPS for all periods presented shall not be adjusted retroactively. However, the accounting treatment for the appropriation of employees’ bonus for 2008 earnings resolved at the stockholders’ meeting held in 2009 shall be accounted for in accordance with the regulations on capitalization of employees’ bonus under paragraphs 19 and 39 of R.O.C. SFAS No. 24, “Earnings per Share”.

～30～


Weighted-average

outstanding

Net income common shares Earnings per share (in dollars)

Before tax After tax (in thousands) Before tax After tax

Basic earnings per share

Net income attributable to common stockholders $ 412,839 $ 331,947 519,851 $ 0.79 $ 0.64

Dilutive effect of common stock equivalents:

Stock options - - 3,974

Employees’ bonus - - 6,747

Diluted earnings per share

Net income attributable to common stockholders plus dilutive effect of common stock equivalents $ 412,839 $ 331,947 530,572 $ 0.78 $ 0.63

21) Personnel, depreciation and amortization expenses

Personnel, depreciation and amortization expenses are summarized as follows:


Operating costOperating expense

Non-operating expenses and

losses Total Personnel expenses

Salaries $ 274,864 $ 174,316 $ - $ 449,180

Labor and health insurance 26,090 13,235 - 39,325

Pension 16,830 10,778 - 27,608

Others 6,219 2,406 - 8,625

$ 324,003 $ 200,735 $ - $ 524,738

Depreciation $ 250,162 $ 130,480 $ 3,733 $ 384,375

Amortization $ 12,403 $ 6,831 $ - $ 19,234

～31～


Operating costOperating expense

Non-operating expenses and

losses Total Personnel expenses

Salaries $ 339,628 $ 283,167 $ - $ 622,795

Labor and health insurance 28,050 13,292 - 41,342

Pension 21,928 13,612 - 35,540

Others 7,767 3,356 - 11,123

$ 397,373 $ 313,427 $ - $ 710,800

Depreciation $ 233,468 $ 140,101 $ - $ 373,569

Amortization $ 4,874 $ 19,468 $ - $ 24,342

～32～

5. RELATED PARTY TRANSACTIONS

1) Names of the related parties and their relationship with the Company

Related party Relationship with the Company Ho Chung Investment Co., Ltd. (Ho Chung Investment) Subsidiary of the Company Opto Tech (H.K.) Co., Ltd. (Opto H.K.) Subsidiary of the Company Opto Tech (Macao) Co., Ltd. (Opto Macao) Subsidiary of the Company China Semiconductor Corporation (CSC) Subsidiary of the Company Jyu Shin Investment Co., Ltd. Subsidiary of the Company Opto Technology International Group Co., Ltd. (Opto) Subsidiary of the Company Graceful Business Co., Ltd. (Graceful) Indirect subsidiary of the Company; subsidiary

of Opto (liquidated in July 2009) Opto Tech (Cayman) Co., Ltd. (Cayman) Indirect subsidiary of the Company; subsidiary

of Opto Opto Grand (Cayman) Co., Ltd. (Opto Grand) Indirect subsidiary of the Company; subsidiary

of Opto Bright Investment International Ltd. (Bright) Indirect subsidiary of the Company; subsidiary

of CSC Everyung Investment Ltd. (Everyung) Indirect subsidiary of the Company; subsidiary

of Bright Opto Tech (Suzhou) Co., Ltd. (Opto Tech Suzhou) Indirect subsidiary of the Company; subsidiary

of Cayman Opto Tech Semiconductor (Ningbo) Co., Ltd.

(Opto Tech Ningbo)

Indirect subsidiary of the Company; subsidiary of Opto Grand

Opto Plus Technology Co., Ltd. (Opto Plus) Indirect subsidiary of the Company; subsidiary of Everyung

Neostones Microfabrication Corporation (Neostones Microfabrication)

Investee of the Company accounted for under the equity method

Viking Tech Corporation (Viking Tech) Investee of the Company accounted for under the equity method

United Radiant Technology Corp. (United Radiant) The Company is a director of United Radiant Oriental System Technology Inc. (OST) The Company is a supervisor of OST Shin-Etsu Opto Electronic Co., Ltd. (Shin-Etsu Opto) The Company is a director of Shin-Etsu OptoLanyo Technology Co., Ltd. (Lanyo Tech) The Company was a director of Lanyo Tech

but recalled on March 20, 2009 Shunag Xin Investment Consulting Co., Ltd.

(Shunag Xin) Shunag Xin is a director of the Company

Nichia Taiwan Corp. Nichia Taiwan Corp. is a director of the

Company Hitachi, Ltd. Hitachi, Ltd. is a director of the Company Nichia Corp. Nichia Corp. is the affiliated company

～33～

2) Significant related party transactions and balances

A. Sales

For the nine-month periods ended September 30,

2009 2008 Amount % of net sales Amount % of net sales

Nichia Taiwan Corp. $ 163,731 5 $ 137,785 3

Shin-Etsu Opto 103,480 3 187,009 4

Opto Plus 19,401 1 33,953 -

Opto Tech Suzhou 17,734 - 145,366 3

Opto Macao 15,539 - - -

Nichia Corp. 6,732 - - -

Others 462 - 549 -

$ 327,079 9 $ 504,662 10

The selling prices charged to the above related parties are not materially different from those charged to non-related parties. The credit term is 46~100 days for related parties and 90~150 days for non-related parties.

The unrealized gains (losses) on the transactions between the Company and its affiliated companies have been eliminated.

B. Purchases


Amount % of net

purchases Amount % of net

purchases Nichia Taiwan Corp. $ 540,762 27 $ 702,857 24

Shin-Etsu Opto 159,215 8 284,737 10

Nichia Corp. 65,698 3 - -

OST 6,066 - 2,691 -

Opto Tech Suzhou 2,051 - ( 6,318) -

Others 220 - 1,797 -

$ 774,012 38 $ 985,764 34

The purchase prices charged by the above related parties were not materially different from those charged by non-related parties. For the nine-month periods ended September 30, 2009 and 2008, the credit term is 75~120 days and 75~150 days for the related parties, respectively and 90~120 days for non-related parties for both years.

～34～

C. Notes receivable and accounts receivable September 30, 2009 2008

Amount

% of notes receivable and

accounts receivable Amount

% of notes receivable and

accounts receivable

Nichia Taiwan Corp. $ 96,963 6 $ 74,713 4

CSC 84,894 5 115,048 6

Shin-Etsu Opto 59,021 4 89,613 4

Opto Macao 11,718 1 12,613 1

Opto Tech Suzhou 10,677 1 128,791 6

Opto Plus 3,360 - 3,944 -

OST 199 - 815 -

266,832 17 425,537 21

Less: Allowance for doubtful accounts ( 4,674) - ( 13,406) ( 1)

Reclassified to other accounts receivable ( 84,894) ( 5) ( 115,011) ( 6)

$ 177,264 12 $ 297,120 14

As of September 30, 2009 and 2008, the accounts receivable from CSC was reclassified to other receivables because it exceeded the normal credit term.

D. Other receivables September 30,

2009 2008

Amount % of other receivables Amount

% of other receivables

CSC $ 84,894 188 $ 115,011 669

Opto Tech Suzhou 36,769 81 - -

Less: Allowance for doubtful accounts ( 84,894) ( 188) ( 115,011) ( 669)

$ 36,769 81 $ - -

～35～

E. Accounts payable

September 30, 2009 2008

Amount % of accounts

payable Amount % of accounts

payable Nichia Taiwan Corp. $ 420,865 36 $ 267,723 24

Shin-Etsu Opto 88,108 8 130,545 12

Nichia Corp. 27,050 2 - -

Opto Tech Suzhou 3,550 - - -

Others 4,070 - 2,649 -

$ 543,643 46 $ 400,917 36

F. Operating leases

For the nine-month period ended September 30, 2009: None.


Asset Period

Method of rent payment

Guarantee deposits

Rental income

Lanyo Tech Plant and

equipmentSep. 1, 2006~ Aug. 31, 2008 Quarterly

Sep. 1, 2008~

Dec. 31, 2008Immediate

Check $ 12 $ 132G. Miscellaneous revenue


Amount

% of miscellaneous

revenue Amount

% of miscellaneous

revenue Opto Tech Suzhou $ - - $ 2,807 41

This account includes the compensation revenue obtained from the related party of OEM due to goods returned by the customers and the revenue from sale of molds.

H. Disposal of assets

For the nine-month period ended September 30, 2009: None.

For the nine-month period ended

September 30, 2008 Asset Disposal price Gain on disposal

OST Miscellaneous assets $ 20 $ -

～36～

I. Loans granted to related parties

Loans granted to related parties as of September 30, 2009 and 2008 are as follows:

September 30, 2009 2008 Opto Tech Suzhou $ 306,042 $ 351,198

CSC 153,215 232,328

Opto Macao 145,168 211,329

Opto - 193,320

$ 604,425 $ 988,175

6. PLEDGED ASSETS

The Company’s assets pledged as collateral as of September 30, 2009 and 2008 are as follows:

Carrying value Purpose

September 30,

2009 September 30,

2008 Creditor Bank Type Buildings $ 1,028,414 $ 1,063,764 Taishin International

Bank and 7 other banks Long-term loans

Restricted assets – Special account for payment

295,580 23,053 Taishin International Bank and 7 other banks

Long-term loans

Restricted assets – Time deposits

- 17,666 Mega International Commercial Bank

Loans granted for subsidiaries

$ 1,323,994 $ 1,104,483

7. COMMITMENTS AND CONTINGENT LIABILITIES

A. Please refer to Note 5 for details of the endorsements and guarantees provided to subsidiaries.

B. As of September 30, 2009, the guarantees provided by the Company through banks were as follows:

Guarantor Nature of Guarantee Amount

Chang Hwa Commercial Bank Customs duty $ 20,000

C. As of September 30, 2009, the outstanding letters of credit issued for the importation of raw materials and machinery were as follows:

Currency Amount NTD $ 175,650

USD 3,758

JPY 44,175

～37～

～38～

D. As of September 30, 2009, the Company had signed major contracts for the purchase of case facilities. Details are as follows:

Case Currency Total amount Paid amount Unpaid amountTetrad epitaxy facility USD $ 4,600 $ 2,300 $ 2,300

Prober station TWD 16,530 4,959 11,571

E. The Company had entered into an agreement to lease land from Hsinchu Science Park for the period from 1990 to 2017. Total rent payable as of September 30, 2009 are as follows:

Year Amount 2009 $ 2,995

2010 17,196

2011 13,336

2012 13,336

2013 13,336

After 2013 (Note) 36,512

$ 96,711

Note: Total rent payable of $43,341 is discounted based on the standard rate of Bank of Taiwan of 2.636% on September 30, 2009.

F. Pursuant to the syndicated loan facility agreement entered into by the Company with Taishin International Bank and 7 other banks, the Company is required to maintain its current ratio at 100% or above, debt ratio at 150% or below, interest coverage ratio at 300% or above and net value of tangible assets at $0.5 billion or above. If the Company breaches the above debt covenants, it is required to propose specific plans for improvement and the related details. However, the Company may request for immunity and it can be exempted from the breach after a resolution by the majority of the banks.

G. As of September 30, 2009 and 2008, the promissory notes issued by the Company for loans and performance guarantee for purchases amounted to $9,142,806 and $7,804,772, respectively.

8. SIGNIFICANT DISASTER LOSS

None.

9. SIGNIFICANT SUBSEQUENT EVENTS

None.

10. OTHERS

1) Financial statement presentation

Certain accounts in the September 30, 2008 financial statements were reclassified to conform with the September 30, 2009 financial statement presentation.

2) The fair values of the financial instruments

September 30, 2009 September 30, 2008

Fair value Fair value

Book value

Quotations in an active market

Estimated using a

valuation technique Book value

Quotations in an active market

Estimated using a

valuation technique

Non-derivative financial instruments

Assets Financial assets with fair values equal to book

values $ 3,852,944 $ - $ 3,852,944 $ 3,412,975 $ - $ 3,412,975

Financial assets at fair value through profit or loss - - - - - -

Available-for-sale financial assets 76,174 76,174 - 36,740 36,740 -

Financial assets carried at cost 580,327 - - 218,533 - -

Deposits out 8,403 - 8,403 964 - 964

Liabilities Financial liabilities with fair values equal to

book values 2,352,453 - 2,352,453 2,826,279 - 2,826,279

Long-term loans 1,822,511 - 1,822,511 1,644,400 - 1,644,400

Guarantee deposits 80 - 80 86 - 86

Derivative financial instruments Liabilities

Financial liabilities at fair value through profit or loss Forward exchange contracts 165 165 - 4,727 4,727 -

～39～

The methods and assumptions used to estimate the fair values of the above financial instruments are summarized below:

A. The fair values of short-term financial instruments were determined based on their carrying values because of the short maturities of the instruments. This method was applied to cash and cash equivalents, notes and accounts receivable (including related parties), other receivables (including related parties), other financial assets – current, other current assets, short-term loans, accounts payable (including related parties), income tax payable, accrued expenses, other payables, long-term liabilities with maturity within one year and other current liabilities.

B. Since quoted market prices are available for available-for-sale financial assets, the fair values are determined by the quoted market price.

C. The fair value of deposits out and guarantee deposits is the book value since the amount is insignificant.

D. The fair value of long-term loans is based on the present value of expected future cash flows. Since long-term loans have floating interest rates, the carrying value is equivalent to the fair value.

E. Since quoted market prices are available for derivative financial assets and liabilities, the fair values are determined by the quoted market price.

3) As of September 30, 2009 and 2008, the financial assets with fair value risk due to the change of interest amounted to $956,026 and $619,723, respectively, and the financial liabilities with fair value risk due to the change of interest were both $0. As of September 30, 2009 and 2008, the financial assets with cash flow risk due to the change of interest were $1,088,682 and $622,470, respectively, and the financial liabilities with cash flow risk due to the change of interest were $2,762,561 and $2,991,665, respectively.

4) For available-for-sale financial assets, during the nine-month periods ended September 30, 2009 and 2008, the amount of gain or loss recognized directly in equity were $50,897 and $63,825, respectively.

5) Procedure of financial risk control and hedge

A. The primary financial products the Company holds in addition to derivative instruments include bank loans, capital leases and cash and cash equivalents. The Company meets operating capital needs through these financial instruments. The Company also holds other financial assets and liabilities, such as accounts receivable and payable resulting from operating activities.

B. The key risk of the financial instruments of the Company is exchange rate risk, credit risk and liquidity risk. To meet its risk management objectives, the Company adopts the following strategies to control financial risk:

(A) Exchange rate risk

The Company is exposed to exchange rate risk because some of its purchases or sales are denominated in foreign currencies. The percentage of foreign currency denominated purchases and sales over total purchases and sales by the Company are estimated to be 58% and 78%, respectively.

～40～

(B) Price risk

The price risk of the Company is low.

(C) Credit risk

Before making trades with third parties, the Company has to follow credit assessment procedures based on its credit policy, and evaluates the recovery of accounts receivable and notes receivable continuously.

The credit risk of other financial assets (including cash and cash equivalents, and available-for-sale financial assets) mainly results from the risk of failing to meet the contract requirements by the counterparty. The maximum credit risk is equal to the book value.

(D) Liquidity risk

The Company maintains sufficient capital and reaches the objective of flexible use and stabilization of capital through bank loans and cash and cash equivalents. As of September 30, 2009 and 2008, current loans are 34% and 45% of the total loans, respectively.

6) Information of material financial risk

A. Financial investments in equity: Financial assets carried at cost – non-current and available-for-sale financial assets – non-current.

(A) Market risk

The financial investments in equity of the Company are affected by the change in market prices. However, the Company has set stop-loss limits and it is expected that there will be no significant market risk.

As the Company’s financial assets carried at cost are not affected by the change in market prices, it is expected that there will be no significant market risk.

(B) Credit risk

The Company invests in available-for-sale financial assets in listed market and GreTai Securities Market or makes trade through underwriters. In addition, when investing in available-for-sale financial assets and financial assets carried at cost, the Company has evaluated the credit standing of the counterparties and does not expect any non-fulfillment of the terms of the contract. Therefore, the credit risk is low.

(C) Liquidity risk

All of the available-for-sale financial assets of the Company have quoted prices in active markets and therefore it is expected that the Company can quickly sell the financial assets in the market at prices close to their fair values.

There is no active market for financial assets carried at cost of the Company, so the Company expects to have liquidity risk.

～41～

～42～

(D) Cash flow risk due to the change of interest

As the Company has no significant interest-bearing assets, cash flows are substantially independent of changes in market interest rates.

B. Receivables (including related parties): Notes receivable, accounts receivable and other

receivables.

(A) Market risk

The receivables of the Company are all due within one year, therefore there is no significant market risk.

(B) Credit risk

The debtors of the Company have good credit standing. Thus, there is no significant credit risk.

(C) Liquidity risk

The receivables of the Company are all due within one year, therefore there is no significant liquidity risk.


The receivables of the Company are all due within one year. There is no cash flow risk due to the change of interest.

C. Loans: Long-term loans (including loans maturing within one year or one operating cycle).

(A) Market risk

The loans of the Company are operating advances with floating interest. Thus, there is no significant market risk.

(B) Credit risk

None.

(C) Liquidity risk

The working capital of the Company is sufficient to cover the loans, so it expects no significant liquidity risk.


The loans of the Company are financial instruments with floating interest and therefore the change in market interest will result in the change in the effective interest of financial instruments in debts and will result in the fluctuation of future cash flows.

7) Information on derivative financial instruments

The transaction of derivative financial instruments during the nine-month period ended September 30, 2009 is as follows (in thousand dollars): Terms of transaction Future cash flows

Derivative financial instruments

Par value, amount of the contract or nominal

principal Date of contract Date of performance

Price of performance/

agreed interest

Loss recognized for the nine-month period ended

September 30, 2009 Cash outflow Cash inflow

Advanced forward exchange contracts

JPY$ 50,000 2009.09.03

2009.09.03~ 2009.10.30 0.3552 ($ 165) JPY$ 50,000 $ 17,760

～43～

11. SUPPLEMENTAL DISCLOSURES 1) Significant transactions

A. Loans granted during the nine-month period ended September 30, 2009:

Business relationship Collateral

Number (Note 1)

Creditor Borrower General

ledger account

Maximum outstanding

balance during

the nine-month

period endedSeptember 30,

2009

Balance at September 30,

2009 Interest rate

Nature of loan

(Note 2)Nature of

loan

Amount oftransactions

with the borrower

Reason for short-term financing

Allowancefor doubtful

accounts Item Value

Limit on loans

granted to a single

party (Note 3)

Ceiling on total loans

granted (Note 4)

0 Opto Tech Corp.

China Semiconductor Corp.

Other receivables –related parties

$ 115,011 $ 84,894 - 2 - $ - Operating needs

$ 84,894 None $ - $ 318,752 $ 637,504

1 China Semiconductor Corp.

Opto Plus Other receivables –related parties

78,191 78,191 5.000% 1 Sales Purchases

21,878

( 44,815)

〞

64,596 〞

- 44,815

- (Note 5)

Note 1: The numbers filled in for the loans provided by the Company or subsidiaries are as follows:

(1) The Company is “0”.

(2) The subsidiaries are numbered in order starting from “1”.

Note 2: Relationship with the borrower is classified into the following categories:

(1) The borrower having business relationship is numbered as “1”.

(2) The borrower having the needs of short-term financing is numbered as “2”.

Note 3: Limit on loans granted to a single party, which has the needs of short-term financing with the Company should not exceed 5% of the Company’s latest net asset value. Besides, limit on loans granted to a single

party, which has business relationship with the subsidiaries should not exceed total amount that the two sides trade in the recent year.

Note 4: Total amount of loans of the Company should not exceed 10% of the net value of the Company’s latest net asset value, and total amount of loans of the subsidiaries should not exceed 20% of the net values of

the subsidiaries’ latest net asset values.

Note 5: Initially, the amount of loans which China Semiconductor Corp. (the subsidiary of Opto Tech Corp.) granted to Opto Plus (the indirect subsidiary of Opto Tech Corp.) did not exceed the ceiling on total loans

granted. However, due to disadvantageous operating conditions and decreasing net assets value of China Semiconductor Corp., the loans granted have exceeded the limit.

～44～

B. Endorsements and guarantees provided during the nine-month period ended September 30, 2009:

Number (Note 1)

Endorser/ guarantor

Party being endorsed/ guaranteed

Relationship with the endorser/ guarantor (Note 2)

Limit on endorsements/

guarantees provided for a single party

(Note 3)

Maximum outstanding endorsement/

guarantee amount during the nine-month

period ended September 30, 2009

Outstanding endorsement/

guarantee amount atSeptember 30, 2009

Amount of endorsements/

guarantees secured with collateral

Ratio of accumulatedendorsement/

guarantee amount to net asset value of

the Company

Ceiling on total amount of endorsements/

guarantees provided 0 Opto Tech Corp.

China Semiconductor Corp.

3 $ 1,275,009 $ 198,964 $ 153,215 $ - 2.40 $ 3,187,522

0 〞 Opto Tech Suzhou

3 1,275,009 391,927 306,042 - 4.80 3,187,522

0 〞 Opto Macao 2 1,275,009 218,202 145,168 - 2.28 3,187,522

$ 604,425 9.48

Note 1: The numbers filled in for the endorsements and guarantees provided by the Company or subsidiaries are as follows:

(1) The Company is “0”.

(2) The subsidiaries are numbered in order starting from “1”.

Note 2: Relationship with the endorser/guarantor is classified into the following categories:

(1) Having business relationship.

(2) The Company owns more than 50% voting shares of the endorsed/guaranteed company.

(3) The Company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company.

(4) The endorsed/guaranteed company directly or indirectly owns more than 50% voting shares of the endorser/guarantor.

(5) Mutual guarantees in the same trade due to construction undertaking pursuant to the contracts.

(6) Due to joint venture, each shareholder provides guarantees for the company in proportion to its ownership.

Note 3: The ceiling on total amount and its calculation should be disclosed. If there is contingent loss recognized on the financial statements, the amount should be noted. Under the Company’s “Procedures for

Provision of Endorsements and Guarantees”, the Company’s total guarantees and endorsements to others should not exceed 50% of the Company’s net asset value, and total guarantees and endorsements

provided for a single party should not exceed 20% of the Company’s net asset value. Besides, according to “Procedures for Provision of Endorsements and Guarantees” of the subsidiaries, total guarantees and

endorsements to others should not exceed 50% of the subsidiary’s net asset value, and total guarantees and endorsements provided for a single party should not exceed 30% of the subsidiary’s net asset value.

The calculation is shown below:

(1) 6,375,043 thousand dollars × 20% ＝ 1,275,009 thousand dollars

(2) 6,375,043 thousand dollars × 50% ＝ 3,187,522 thousand dollars

～45～

C. Marketable securities held as at September 30, 2009:

As of September 30, 2009

Securities held by

Type of marketable securities Name of marketable securities

Relationship of the securities issuer with the Company

General ledger account

Number of shares(in thousands) Book value

Ownership (%)

Market value or equity per share

(in dollars)

Remark Opto Tech Corp. stock American Xtal Technologies,

Inc. None Available-for-sale

financial assets-non-current

134 $ 616 0.05 $ 616 None

〞〞 United Radiant Technology Corp.

The Company is the director of this company. 〞 13,141 75,558 5.56 75,558 〞

$ 76,174

〞〞 Nichia Corp. Affiliated company Financial assets carried at cost-non-current

10 $ 379,252 0.47 $ 595,481 〞

〞〞 Formosa Industrial Computing, Inc.

None 〞 699 7,632 4.49 7,351 〞

Shin-Etsu Opto Electronic Co., Ltd.

The Company is the director of this company.

〞 2,000 20,000 10.00 60,280 〞

Lanyo Technology Co., Ltd. None 〞 120 - 7.75 - 〞

〞〞 Giga Epitaxy Technology Corp.


〞 3,300 33,000 4.55 29,002 〞

〞〞 Pictologic Inc. None 〞 400 2,794 1.71 2,746 〞

〞〞 Lu Zhu Development Co., Ltd.


〞 15,870 127,648 6.38 128,147 〞

〞〞 Top Increasing Technology Co., Ltd.

None 〞 10,000 - 16.67 - 〞

〞〞 Oriental System Technology Inc.

The Company is the supervisor of this company.

〞 2,137 10,001 19.25 5,985 〞

〞〞 Action Media Technologies, Inc.

None 〞 75 - 1.96 - 〞

〞〞 Metrodyne Microsystem Corp.


〞 1 - 0.01 - 〞

〞〞 Mentor Data System, Inc. The Company is the director of this company.

〞 4,509 - 19.19 - 〞

$ 580,327

～46～


Securities held by





Ownership (%)


(in dollars)

Remark Opto Tech Corp. stock Opto Tech International

Group Co., Ltd. Subsidiary of the

Company Long-term investment

accounted for under equity method

26,110 $ 786,391 100.00 $ 786,391 None

〞〞 Ho Chung Investment Corp. Subsidiary of the Company

〞 23,830 60,501 100.00 60,501 〞

〞〞 Opto Tech Co, Ltd. (H.K.) Subsidiary of the Company

〞 2,000 9,399 100.00 9,399 〞

〞〞 Opto Tech Co, Ltd. (Macao) Subsidiary of the Company

〞 989 1,411 99.90 1,411 〞

〞〞 China Semiconductor Corp. Subsidiary of the Company

〞 1,963 ( 32,596) 28.37 ( 32,596) 〞

〞〞 Viking Tech Corporation Investee of the Company accounted for under the equity method

〞 7,209 116,285 9.90 116,285 〞

〞〞 Jyu Shin Investment Co., Ltd. Subsidiary of the Company 〞 7,868 111,763 100.00 111,763 〞

$ 1,053,154

$ 96,363Jyu Shin Investment Co., Ltd.

stock Viking Tech Corporation Investee of the Company accounted for under the equity method

Long-term investment accounted for under equity method

6,198 8.51 96,363 〞

Ho Chung Investment Corp.

stock Opto Tech Corp. Parent company of the Company

Financial assets at fair value through profit or loss-current

1,107 31,613 0.20 31,613 〞

〞〞 China Semiconductor Corp. Investee of the Company accounted for under the equity method


2,528 - 36.54 - 〞

〞〞 Viking Tech Corporation Investee of the Company accounted for under the equity method

〞 2,726 44,160 3.74 44,160 〞

〞〞 VML Technologies B.V. Investee of the Company accounted for under the equity method

〞 6 2,408 25.00 2,408 〞

〞〞 Brilliance Semiconductor, Inc.

None Financial assets carried at cost-non-current 15 293 0.06 - 〞

$ 78,474

～47～

～48～


Securities held by





Ownership (%)


(in dollars)

Remark China Semiconductor

Corp. stock Gigantic Pacific Investment

Ltd. Subsidiary of the

Company Long-term investment

accounted for under equity method

USD 9,002 $ 43,822 100.00 $ 43,822 None

〞〞 Bright Investment International Ltd.

Subsidiary of the Company


USD 4,980 ( 12,849) 100.00 ( 12,849) 〞

〞〞 China Semiconductor Corp. (M) Sdn Bhd.


Long-term investment accounted for under equity method MYR 1,000 56 100.00 56 〞

$ 31,029

Gigantic Pacific Investment Ltd.

stock Shaoxing Yilida Electronics Co., Ltd.



USD 5,069 USD$ 642 100.00 USD$ 642 〞

Bright Investment International Ltd.

stock Everyung Investment Ltd. Subsidiary of the Company


USD 4,980 (USD 380) 100.00 (USD 380) 〞

Everyung Investment Ltd.

stock Opto Plus Technology Co., Ltd.



USD 4,980 (USD 380) 100.00 (USD 380) 〞

Opto Technology International Group Co., Ltd.

stock Opto Tech (Cayman) Co., Ltd.



USD 6,010 USD 2,659 100.00 USD 2,659 〞

〞〞 Graceful Business Co., Ltd. Subsidiary of the Company


USD - USD - 100.00 USD - 〞

〞〞 Opto Grand (Cayman) Co., Ltd. Subsidiary of the Company


USD 20,000 USD 22,202 100.00 USD 22,202 〞

Opto Tech (Cayman) Co., Ltd.

stock Opto Tech (Suzhou) Co., Ltd. Subsidiary of the Company


USD 6,000 USD 2,120 100.00 USD 2,120 〞

Opto Grand (Cayman) Co., Ltd.

stock Opto Tech Semiconductor (Ningbo) Co., Ltd.



USD 20,000 USD 22,188 100.00 USD 22,188 〞

Note: Graceful Business Co. Ltd., an indirect subsidiary of the Company, was liquidated in July 2009.

D. Acquisition or sale of the same security with the accumulated cost exceeding $100 million or 20% of the Company’s paid-in capital during the nine-month period ended September 30, 2009: None.

E. Acquisition of real estate properties exceeding $100 million or 20% of the Company’s paid-in capital during the nine-month period ended September 30, 2009: None.

F. Disposal of real estate properties exceeding $100 million or 20% of the Company’s paid-in capital during the nine-month period ended September 30, 2009: None.

G. Purchases from or sales to related parties exceeding $100 million or 20% of the Company’s paid-in capital during the nine-month period ended September 30, 2009:

Transaction Differences in transaction terms

compared to third party transactionsNotes/accounts

receivable (payable)

Purchaser/seller Counterparty Relationship with the Company Purchases

(sales)

Amount

Percentage oftotal purchases

(sales) Credit term Unit price Credit term

Balance

Percentage of total

notes/accounts receivable (payable)

Opto Tech Corp. Nichia Taiwan Corp. This company is the director of the Company Purchases $540,762 27 75 daysequivalent to normal transaction - ($420,865) ( 36)

〞 Shin-Etsu Opto Electronic Co., Ltd. The Company is the director of this company 〞 159,215 8 90 days 〞 - ( 88,108) ( 8)

〞 Nichia Taiwan Corp. This company is the director of the Company Sales (163,731) ( 5) 90 days 〞 - 96,963 6

〞 Shin-Etsu Opto Electronic Co., Ltd. The Company is the director of this company 〞 (103,480) ( 3) 90 days 〞 - 59,021 4

H. Receivable from related parties exceeding $100 million or 20% of the Company’s paid-in capital as at September 30, 2009: None.

I. Derivative financial instruments undertaken during the nine-month period ended September 30, 2009: Please refer to Note 10(7).

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2) Information on investee companies for the nine-month period ended September 30, 2009 Initial investment amount Shares held as at September 30, 2009

Investee Location Main activities Balance

as at 9/30/09 Balance

as at 1/1/09 No. of shares(in thousands)

Ownership (%) Book value

Net income (loss) of the

investee

Investment income (loss) recognized by the Company Remark

Opto Tech Corp. holds—

Opto Technology International Group Co., Ltd.

Cayman Islands Holding Company $ 862,989 $ 862,989 26,110 100.00 $ 786,391 ($ 43,099) ($ 43,099) Subsidiary of the Company

Ho Chung Investment Co., Ltd.

Taiwan Investment business 288,300 288,300 23,830 100.00 60,501 14,810 ( 4,950) 〞

Opto Tech (H.K.) Co., Ltd. Hong Kong International trading 8,878 8,878 2,000 100.00 9,399 ( 43) ( 43) 〞

Opto Tech (Macao) Co., Ltd.

Macao International trading 4,088 4,088 989 99.90 1,411 ( 1,281) ( 1,280) 〞

China Semiconductor Corporation

Taiwan Manufacture and Sales of Displays, SMD Lamps and other LED related products

577,247 577,247 1,963 28.37 ( 32,596) ( 35,583) ( 33,035) 〞

Viking Tech Corporation Taiwan R&D, Manufacture and Sales of SMD Chip Resistor, DIP Power Resistor, High Frequency Ceramic Chip Inductor, SMD Ferrite Inductor, Power Inductor, Capacitor Integrated Passive Devices

291,301 291,301 7,209 9.90 116,285 25,501 2,623 Long-term investment accounted for under equity method

Jyu Shin Investment Co., Ltd.

Taiwan Investment business 78,678 78,678 7,868 100.00 111,763 1,895 1,895 Subsidiary of the Company

Ho Chung Investment Co., Ltd. holds— China Semiconductor Corporation

Taiwan Manufacture and Sales of Displays, SMD Lamps and other LED related products

25,285 25,285 2,528 36.54 - ( 35,583) ( 1,064) Long-term investment accounted for under equity method

Viking Tech Corporation Taiwan R&D, Manufacture and Sales of SMD Chip Resistor, DIP Power Resistor, High Frequency Ceramic Chip Inductor, SMD Ferrite Inductor, Power Inductor, Capacitor Integrated Passive Devices

49,068 49,068 2,726 3.74 44,160 25,501 954 〞

VML Technologies B.V. Holland Manufacture and Design of system products 37,436 37,436 6 25.00 2,408 ( 18,921) ( 4,721) 〞

Jyu Shin Investment Co., Ltd. holds— Viking Tech Corporation Taiwan R&D, Manufacture and Sales of SMD Chip Resistor,

DIP Power Resistor, High Frequency Ceramic Chip Inductor, SMD Ferrite Inductor, Power Inductor, Capacitor Integrated Passive Devices

78,651 78,651 6,198 8.51 96,363 25,501 2,170 Long-term investment accounted for under equity method

China Semiconductor Corporation holds— Gigantic Pacific Investments Ltd.

B.V. I. Investment business 281,707 281,707 USD 9,002 100.00 43,822 8 8 Indirect subsidiary

Bright Investment International Ltd.

B.V. I. Investment business 168,421 168,421 USD 4,980 100.00 ( 12,849) ( 6,755) ( 6,755) 〞

China Semiconductor Corp. (M) Sdn. Bhd.

Malaysia Manufacture and Sales of Displays, SMD Lamps and other LED related

9,748 9,748 MYR 1,000 100.00 56 - - 〞

Initial investment amount Shares held as at September 30, 2009

Investee Location Main activities Balance

as at 9/30/09 Balance

as at 1/1/09 No. of shares(in thousands)

Ownership (%) Book value

Net income (loss) of the

investee

Investment income (loss) recognized by the Company Remark

Gigantic Pacific Investments Ltd. holds—

Shaoxing Yilida Electronics Co., Ltd.

China Manufacture and Sales of LED and Electronic Products

USD$ 5,069 USD$ 5,069 USD 5,069 100.00 USD$ 642 USD$ - USD$ - Indirect subsidiary

Bright Investment International Ltd. holds –

Everyung Investment Ltd. B.V.I. Investment business USD 4,980 USD 4,980 USD 4,980 100.00 (USD 380) (USD 203) (USD 203) Indirect subsidiary

Everyung Investment Ltd. holds –

Opto Plus Technology Co., Ltd.

China Manufacture and Sales of LED and Electronic Products

USD 4,980 USD 4,980 USD 4,980 100.00 (USD 380) (USD 203) (USD 203) Indirect subsidiary

Opto Technology International Group Co., Ltd. holds – Opto Tech (Cayman) Co., Ltd.

Cayman Islands Holding Company USD 6,010 USD 6,010 USD 6,010 100.00 USD 2,659 (USD 1,295) (USD 1,295) Indirect subsidiary

Graceful Business Co., Ltd.

B.V.I. International trading USD - USD 50 USD - 100.00 USD - USD 1 USD 1 〞

Opto Grand (Cayman) Co., Ltd.

Cayman Islands Holding Company USD 20,000 USD 20,000 USD 20,000 100.00 USD 22,202 (USD 27) (USD 27) 〞

Opto Tech (Cayman) Co., Ltd. holds –

Opto Tech (Suzhou) Co., Ltd.

China Research, Design and Manufacture of LED Display, Wireless Communication Equipment and related parts

USD 6,000 USD 6,000 USD 6,000 100.00 USD 2,120 (USD 1,276) (USD 1,276) Indirect subsidiary

Opto Grand (Cayman) Co., Ltd. holds –

Opto Tech Semiconductor (Ningbo) Co., Ltd.

China Manufacture and Sales of LED and Electronic products

USD 20,000 USD 20,000 USD 20,000 100.00 USD 22,188 (USD 31) (USD 31) Indirect subsidiary

Note: Graceful Business Co., Ltd., an indirect subsidiary of the Company, was liquidated in July 2009.

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3) Information on Mainland China investments

A. Information on Mainland China investments for the nine-month period ended September 30, 2009

Investee in Mainland China Main activities Paid-in capital

Investment method

Accumulated amount of remittance to

Mainland China as of September 30, 2009

Amount remittedto Mainland Chinaduring the period

Amount remitted back to Taiwan during

the period

Accumulated amount of remittance to

Mainland China as of September 30, 2009

Ownership held by the Company (direct and indirect)

Investment income (loss) recognized by the Company for the period

(Note 2)

Book value of investments in

Mainland China as of September

30, 2009

Accumulated amount of

investment income remitted back to

Taiwan as of September 30, 2009

Opto Tech (Suzhou) Co., Ltd.

Research, Design and Manufacture of LED Display, Wireless Communication Equipment and related parts

$ 207,510

USD 6,000

Note 1(2) $ 207,510

USD 6,000$ - $ - $ 207,510

USD 6,000

100.00% ($ 42,468)(USD 1,276)

$ 68,190

USD 2,120

$ -

Opto Tech Semiconductor (Ningbo) Co., Ltd.

Manufacture and Sales of LED and Electronic products

651,721

USD 20,000

Note 1(2) 651,721

USD 20,000

- - 651,721

USD 20,000

100.00% ( 1,032)(USD 31)

713,677

USD 22,188

-

Shaoxing Yilida Electronics Co., Ltd.

〞

176,753

USD 5,069

Note 1(2) 176,753

USD 5,069

- - 176,753

USD 5,069

64.91% -

USD -

20,650

USD 642

-

Opto Plus Technology Co., Ltd.

〞

168,617

USD 4,980

Note 1(2) 168,617

USD 4,980- - 168,617

USD 4,980

64.91% ( 6,756)(USD 203)

( 12,223)

(USD 380)

-

Accumulated amount of remittance from Taiwan to Mainland China as of September 30, 2009

Investment amount approved by the Investment Commission of the

Ministry of Economic Affairs (MOEA)

Ceiling on investments in Mainland China imposed by

the Investment Commission of MOEA $ 1,204,601 USD 34,000 $ 3,825,026

Note 1: The investment methods are classified into five categories as follows: (1) Remitting investment funds to the investee company in Mainland China through the third area. (2) Setting up a company in the third area, which then invested in the investee company in Mainland China. (3) Through investing in an existing company in the third area, which then invested in the investee company in Mainland China. (4) Directly investing in the investee company in Mainland China. (5) Other.

Note 2: The investment income or loss was recognized by indirect weighted ownership based on the financial statements of these investees which were not audited by independent accountants of the parent company for the corresponding periods.

B. The significant events occurring due to investment through the third area and the investees in Mainland China for the nine-month period ended September 30, 2009 are as follows:

(1)The Company sold semi-finished goods and finished goods of LED to Opto Tech (Suzhou) Co., Ltd. during the nine-month period ended September 30, 2009, amounting to $17,734, comprising 0.5% of net sales of the Company. As of September 30, 2009, accounts receivable from Opto Tech (Suzhou) Co., Ltd. was $10,677, comprising 0.6% of the accounts receivable of the Company. The Company sold semi-finished goods to Opto Plus Technology Co., Ltd., during the nine-month period ended September 30, 2009 amounting to $19,401, comprising 1% of net sales of the Company. As of September 30, 2009, accounts receivable from Opto Plus Technology Co., Ltd. was $3,360, comprising 0.2% of the accounts receivable of the Company.

(2)The Company purchased semi-finished goods from Opto Tech (Suzhou) Co., Ltd. during the nine-month period ended September 30, 2009 amounting to $2,051, comprising 0.1% of net purchases of the Company. As of September 30, 2009, accounts payable from Opto Tech (Suzhou) Co., Ltd. was $3,550, comprising 0.3% of the accounts payable of the Company.

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12. SEGMENT INFORMATION

According to R.O.C. SFAS No. 23, “Presentation and Disclosure of Interim Financial Statements”, the segment information is not required.

opto tech corporation · 2009-12-03 · opto tech corporation . financial statements . and report...

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