Yageo Corporation and Subsidiaries

Yageo Corporation and Subsidiaries 

Consolidated Financial Statements for the 

Years Ended December 31, 2006 and 2007 and 

Independent Auditors’ Report 

- 1 -

INDEPENDENT AUDITORS’ REPORT 

The Board of Directors and Stockholders 

Yageo Corporation 

We have audited the accompanying consolidated balance sheets of Yageo Corporation (the 

“Corporation”) and subsidiaries as of December 31, 2006 and 2007, and the related consolidated 

statements of income, changes in stockholders’ equity and cash flows for the years then ended, all 

expressed in New Taiwan dollars. These consolidated financial statements are the responsibility 

of the Corporation’s management. Our responsibility is to express an opinion on these 

consolidated financial statements based on our audits. However, we did not audit the financial 

statements of Phycomp Holding B.V. (Phycomp) and Ferroxcube International Holding B.V. 

(Ferroxcube) as of and for the years ended December 31, 2006 and 2007 (together, the 

“consolidated subsidiaries”). The total assets of these consolidated subsidiaries were 15.42% 

(NT$7,147,422 thousand) and 15.09% (NT$7,559,921 thousand) of the related consolidated totals 

as of December 31, 2006 and 2007, respectively, and the total revenues of these consolidated 

subsidiaries were 24.29% (NT$4,951,114 thousand) and 22.73% (NT$5,063,164 thousand), of the 

related consolidated totals in 2006 and 2007, respectively. The financial statements of the 

consolidated subsidiaries as of and for the years ended December 31, 2006 and 2007 were audited 

by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to 

the amounts included for these consolidated subsidiaries, is based solely on the reports of the other 

auditors. 

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements 

by Certified Public Accountants and auditing standards generally accepted in the Republic of China. 

Those rules and standards require that we plan and perform the audit to obtain reasonable assurance 

about whether the financial statements are free of material misstatement. An audit includes 

examining, on a test basis, evidence supporting the amounts and disclosures in the financial 

statements. An audit also includes assessing the accounting principles used and significant 

estimates made by management, as well as evaluating the overall consolidated financial statement 

presentation. We believe that our audits and the reports of the other auditors provide a reasonable 

basis for our opinion. 

In our opinion, based on our audits and the reports of the other auditors, the consolidated financial 

statements referred to in the first paragraph present fairly, in all material respects, the financial 

position of Yageo Corporation and subsidiaries as of December 31, 2006 and 2007, and the results 

of their operations and their cash flows for the years then ended, in conformity with Guidelines 

Governing the Preparation of Financial Reports by Securities Issuers, requirements of Business 

Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting 

standards, and accounting principles generally accepted in the Republic of China. 

- 2 -

As disclosed in Note 3 to the consolidated financial statements, on January 1, 2006, the 

Corporation and subsidiaries adopted the newly released Statements of Financial Accounting 

Standards No. 34, “Accounting for Financial Instruments,” and No. 36, “Disclosure and 

Presentation of Financial Instruments” and newly revised No. 5, “Long-term Investments in Equity 

Securities” and No. 25, “Business Combinations - Accounting Treatment under Purchase Method.” 

Since January 1, 2006, amortization of goodwill ceased but will be tested for impairment regularly. 

Our audits also comprehended the translation of the 2007 New Taiwan dollars amounts into U.S. 

dollar amounts and, in our opinion, this translation has been made in conformity with the basis 

stated in Note 4. Such U.S. dollar amounts are presented solely for the convenience of readers. 

April 16, 2008 

Notice to Readers 

The accompanying financial statements are intended only to present the financial position, results 

of operations and cash flows in accordance with accounting principles and practices generally 

accepted in the Republic of China and not those of any other jurisdictions. The standards, 

procedures and practices to audit such financial statements are those generally accepted and 

applied in the Republic of China. 

For the convenience of readers, 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. If there is any conflict between the English version and the original Chinese 

version or any difference in the interpretation of the two versions, the Chinese-language auditors’ 

report and financial statements shall prevail. 

- 3 -

YAGEO CORPORATION AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

DECEMBER 31, 2006 AND 2007 

(In Thousands of Dollars, Except Number of Shares and Par Value) 

New Taiwan Dollars 

U.S. Dollars 

(Note 4) New Taiwan Dollars 

U.S. Dollars 

(Note 4) 

2006 2007 2007 2006 2007 2007 

ASSETS Amount % Amount % Amount LIABILITIES AND STOCKHOLDERS’ EQUITY Amount % Amount % Amount 

CURRENT ASSETS CURRENT LIABILITIES 

Cash and cash equivalents (Notes 2 and 5) $ 1,801,071 4 $ 8,191,567 16 $ 252,491 Short-term loans (Notes 18 and 31) $ 3,951,373 9 $ 3,570,742 7 $ 110,062 

Financial assets at fair value through profit or loss (Notes 2 and 6) 3,176 - 12,233 - 376 Commercial paper issued, net (Note 19) 827,962 2 904,730 2 27,887 

Available-for-sale financial assets (Notes 2 and 7) 278,613 1 2,012,787 4 62,041 Notes payable 79,318 - 41,851 - 1,290 

Hedging derivative financial assets (Notes 2 and 35) 290 - 647 - 20 Accounts payable 3,078,795 7 3,579,525 7 110,333 

Notes receivable (Note 2) 135,664 - 209,070 - 6,444 Accounts and notes payable to related parties (Note 29) 243,223 - 146,294 - 4,509 

Accounts receivable, net of allowance for doubtful receivables of Other payables 275,326 1 130,057 - 4,009 

NT$84,333 thousand in 2006 and NT$82,803 thousand (US$2,552 Income tax payable (Notes 2 and 26) 97,553 - 172,841 1 5,328 

thousand) in 2007 (Notes 2 and 8) 5,432,463 12 6,069,492 12 187,082 Accrued expenses 1,506,112 3 1,286,961 3 39,668 

Accounts and notes receivables from related parties, net of allowance Financial liabilities at fair value through profit or loss (Notes 2 

for doubtful receivables of NT$985 thousand in 2006 (Notes 2 and 29) 238,401 - 99,785 - 3,076 and 6) 10,207 - 3,633 - 112 

Income tax refund receivable (Notes 2 and 26) 22,673 - 28,438 - 877 Hedging derivative financial liabilities (Notes 2 and 35) 9,281 - 2,038 - 63 

Other financial assets (Notes 9, 31 and 33) 931,757 2 237,820 1 7,330 Current portion of long-term liabilities (Notes 2, 20, 21 and 31) 1,104,196 2 129,516 - 3,992 

Inventories, net (Notes 2, 10 and 33) 4,468,051 10 3,790,758 8 116,844 Other current liabilities (Note 30) 78,813 - 201,347 1 6,206 

Deferred income tax assets (Notes 2 and 26) 185,292 - 184,741 - 5,694 

Other current assets (Notes 2 and 28) 464,365 1 314,598 1 9,697 Total current liabilities 11,262,159 24 10,169,535 21 313,459 

Total current assets 13,961,816 30 21,151,936 42 651,972 LONG-TERM LIABILITIES 

Financial liabilities at fair value through profit or loss (Notes 2 

LONG-TERM INVESTMENTS (Notes 2, 7, 11, 12, 13, 14 and 31) and 21) - - 606,625 1 18,698 

Investments accounted for using equity method 2,363,027 5 3,019,867 6 93,082 Bonds payable (Notes 2 and 21) 84,587 - 4,446,144 9 137,045 

Real estate 167,273 - - - - Long-term bank loans (Notes 20 and 31) 5,016,255 11 1,471,951 3 45,370 

Other long-term investments 58,531 - - - - 

Financial assets measured at holding cost 1,038,878 2 320,009 1 9,864 Total long-term liabilities 5,100,842 11 6,524,720 13 201,113 

Available-for-sale financial assets 749,845 2 1,274,256 2 39,277 

Bonds measured at amortized cost 50,000 - 50,000 - 1,541 OTHER LIABILITIES 

Accrued pension costs (Notes 2 and 28) 310,639 1 334,295 1 10,304 

Total long-term investments 4,427,554 9 4,664,132 9 143,764 Deposit received (Note 29) 159,113 - 129,264 - 3,984 

Other liabilities (Note 30) 8,279 - 150,325 - 4,634 

PROPERTY, PLANT AND EQUIPMENT (Notes 2, 15, 31 and 33) 

Cost Total other liabilities 478,031 1 613,884 1 18,922 

Land 822,011 2 814,424 2 25,103 

Buildings 6,131,296 13 7,177,975 14 221,249 Total liabilities 16,841,032 36 17,308,139 35 533,494 

Machinery and equipment 17,248,519 37 19,494,675 39 600,890 

Miscellaneous equipment 1,553,700 4 1,722,826 3 53,103 STOCKHOLDERS’ EQUITY OWNED BY THE PARENT COMPANY 

Total cost 25,755,526 56 29,209,900 58 900,345 Capital stock - NT$10 par value 

Less - accumulated depreciation 9,673,686 21 11,561,009 23 356,348 Authorized - 4,000,000 thousand shares 

accumulated impairment 303,977 1 282,582 - 8,710 Issued - 2,423,025 thousand shares in 2006 and 2,438,221 thousand 

15,777,863 34 17,366,309 35 535,287 shares in 2007 24,230,255 52 24,382,213 49 751,540 

Construction in progress and advances for acquisition of equipment 1,684,376 4 1,073,751 2 33,096 Capital stock - unregistered 13,820 - - - - 

Capital surplus: 

Net property, plant and equipment 17,462,239 38 18,440,060 37 568,383 Paid-in capital in excess of par value 1,077,267 3 1,110,727 2 34,236 

Paid-in capital from conversion of convertible bonds 3,972 - 24,762 - 763 

INTANGIBLE ASSETS Equity in capital surplus reported by equity-method investees 501,643 1 519,112 1 16,001 

Deferred pension costs (Notes 2 and 28) 3,857 - 2,541 - 78 Stock options - - 2,749,975 6 84,763 

Goodwill (Note 2) 2,678,387 6 2,937,412 6 90,541 Total capital surplus 1,582,882 4 4,404,576 9 135,763 

Land use rights 93,157 - 96,761 - 2,983 Retained earnings 

Legal reserve 30,058 - 227,592 - 7,015 

Total intangible assets 2,775,401 6 3,036,714 6 93,602 Special reserve 270,519 1 - - - 

Unappropriated earnings 1,975,340 4 2,029,473 4 62,555 

OTHER ASSETS Total retained earnings 2,275,917 5 2,257,065 4 69,570 

Loans receivable from related parties (Note 29) 46,456 - 25,444 - 784 Others: 

Properties leased to others, net (Notes 2, 15, 16 and 31) 4,342,672 10 161,743 1 4,985 Cumulative translation adjustments 286,103 - 1,587,004 3 48,917 

Idle assets (Notes 2, 15 and 30) 576,461 1 452,092 1 13,935 Net loss not recognized as pension cost (52,079 ) - (42,087 ) - (1,297 ) 

Refundable deposits 97,092 - 58,612 - 1,807 Unrealized gain or loss on financial instrument 323,193 1 (642,339 ) (1 ) (19,799 ) 

Deferred income tax assets (Notes 2 and 26) 2,017,177 4 1,649,359 3 50,839 Total others 557,217 1 902,578 2 27,821 

Pledged assets (Notes 17, 26 and 31) 198,744 1 89,091 - 2,746 Treasury stock - 2,193 thousand shares (28,101 ) - - - - 

Miscellaneous 431,447 1 383,164 1 11,810 

Total stockholders’ equity owned by the parent company 28,631,990 62 31,946,432 64 984,694 

Total other assets 7,710,049 17 2,819,505 6 86,906 

MINORITY INTEREST 864,037 2 857,776 1 26,439 

Total stockholders’ equity 29,496,027 64 32,804,208 65 1,011,133 

TOTAL $ 46,337,059 100 $ 50,112,347 100 $ 1,544,627 TOTAL $ 46,337,059 100 $ 50,112,347 100 $ 1,544,627 

The accompanying notes are an integral part of the consolidated financial statements. 

(With Deloitte & Touche audit report dated April 16, 2008) 

- 4 -


CONSOLIDATED STATEMENTS OF INCOME 

YEARS ENDED DECEMBER 31, 2006 AND 2007 

(In Thousands of Dollars, Except Earnings Per Share) 

U.S. Dollars 


(Note 4) 

2006 2007 2007 

Amount % Amount % Amount 

GROSS SALES $ 20,790,682 102 $ 22,831,846 102 $ 703,753 

LESS: SALES RETURNS 177,302 1 230,291 1 7,099 

SALES ALLOWANCES 227,101 1 321,876 1 9,921 

NET SALES (Note 29) 20,386,279 100 22,279,679 100 686,733 

COST OF SALES (Note 29) 14,391,156 71 16,312,946 73 502,819 

GROSS PROFIT 5,995,123 29 5,966,733 27 183,914 

OPERATING EXPENSES (Note 29) 

Sales and marketing 1,648,204 8 1,607,663 7 49,553 

General and administrative 1,130,570 5 1,208,210 6 37,241 

Research and development 322,150 2 366,492 2 11,297 

3,100,924 15 3,182,365 15 98,091 

OPERATING INCOME 2,894,199 14 2,784,368 12 85,823 

NONOPERATING INCOME AND GAINS 

Gain on disposal of properties, plant and 

equipment and properties leased to others 

(Note 16) - - 730,584 3 22,519 

Interest (Note 29) 102,601 1 278,304 1 8,578 

Rental (Note 29) 194,429 1 44,178 - 1,362 

Financial asset revaluation gain 3,176 - 9,109 - 281 

Foreign exchange gains, net 2,595 - 2,944 - 91 

Investment income, net 600,695 3 - - - 

Gain on insurance recoveries (Note 33) 6,750 - - - - 

Other income 90,455 - 92,624 1 2,855 

Total nonoperating income and gains 1,000,701 5 1,157,743 5 35,686 

NONOPERATING EXPENSES AND LOSSES 

Interest 407,073 2 395,636 2 12,195 

Reorganization cost, net (Note 30) - - 355,897 2 10,970 

Impairment and liquidation loss on financial 

assets measured at holding cost and other 

long-term investments 218,042 1 201,994 1 6,226 

Impairment loss on idle assets (Notes 15 and 

30) 205,988 1 159,504 1 4,916 

Losses on work stoppages (Note 33) 56,598 - 113,125 1 3,487 

Compensation expenses 104,212 1 112,233 - 3,460 

Investment losses, net - - 91,010 - 2,805 

(Continued) 

- 5 -


CONSOLIDATED STATEMENTS OF INCOME 


(In Thousands of Dollars, Except Earnings Per Share) 

U.S. Dollars 


(Note 4) 

2006 2007 2007 


Financial liability valuation loss 10,207 - 90,260 - 2,782 

Inventory losses 215,265 1 71,153 - 2,193 

Loss on disposal of property, plant and 

equipment 140,199 1 - - - 

Other expenses (Note 29) 254,441 1 214,795 1 6,621 

Total nonoperating expenses and losses 1,612,025 8 1,805,607 8 55,655 

INCOME BEFORE INCOME TAX 

EXPENSE 2,282,875 11 2,136,504 9 65,854 

INCOME TAX EXPENSE (Notes 2 and 26) 204,672 1 725,313 3 22,356 

CONSOLIDATED NET INCOME $ 2,078,203 10 $ 1,411,191 6 $ 43,498 

ATTRIBUTE TO: 

Parent company’s stockholders $ 1,978,100 10 $ 1,320,849 6 $ 40,713 

Minority interest 100,103 - 90,342 - 2,785 

$ 2,078,203 10 $ 1,411,191 6 $ 43,498 

U.S. Dollars 

New Taiwan Dollars (Note 4) 

2006 2007 2007 

Income Income Income 

Before Before Before 

Income Income Income 

Tax Net Tax Net Tax Net 

Expense Income Expense Income Expense Income 

NET EARNINGS PER SHARE 

Basic $ 0.90 $ 0.82 $ 0.84 $ 0.54 $ 0.03 $ 0.02 

Diluted $ 0.90 $ 0.82 $ 0.84 $ 0.54 $ 0.03 $ 0.02 



(Concluded) 

- 6 -


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 


(In Thousands of New Taiwan Dollars, Except Issue Price and Dividend Per Share) 

Capital Surplus (Notes 2, 21, 22 and 24) Unrealized 

Equity in Cumulative Net Loss Not Gain or Loss 

Capital Stock Issued Unregistered Premium from Capital Surplus Retained Earnings Translation Recognized as on Financial 

(Notes 21, 22 and 23) Capital Stock Paid-in Capital Conversion of Reported by (Notes 2, 22, 24 and 26) Adjustments Pension Cost Instrument Treasury Stock Total 

Shares (Notes 21 in Excess of Convertible Equity-method Stock Unappropriated (Notes 2 (Notes 2, 22 (Notes 2, 22 (Notes 2 Minority Stockholders' 

(Thousands) Amount and 23) Par Value Bonds Investees Options Legal Reserve Special Reserve Earnings and 22) and 28) and 35) and 24) Interest Equity 

BALANCE, JANUARY 1, 2006 2,406,469 $ 24,064,694 $ - $ 1,037,080 $ - $ 458,433 $ - $ - $ - $ 300,577 $ (489,068 ) $ - $ (39,509 ) $ - $ 740,238 $ 26,072,445 

Effect of adopting the newly released SFAS No. 34 - - - - - - - - - - - - 47,753 - - 47,753 

Appropriation of 2005 earnings 

Legal reserve - - - - - - - 30,058 - (30,058 ) - - - - - - 

Special reserve - - - - - - - - 270,519 (270,519 ) - - - - - - 

Increase in minority interest - - - - - - - - - - - - - - 23,696 23,696 

Consolidated net income for the year ended December 31, 2006 - - - - - - - - - 1,978,100 - - - - 100,103 2,078,203 

Purchase of treasury stock - common stock 2,193 thousand 

shares - - - - - - - - - - - - - (28,101 ) - (28,101 ) 

Exercise of compensation stock options - - 1,408 507 - - - - - - - - - - - 1,915 

Conversion of foreign convertible bonds into common stock - - 12,412 - 3,972 - - - - - - - - - - 16,384 

Changes in unrealized gain or loss on available-for-sale financial 

assets - - - - - - - - - - - - 249,448 - - 249,448 

Changes in unrealized gain or loss on cash flow hedging - - - - - - - - - - - - (8,950 ) - - (8,950 ) 

Net loss not recognized as pension cost - - - - - - - - - - - (46,037 ) - - - (46,037 ) 

Effect of changes in percentages of ownership of investees - - - - - 41,213 - - - (2,760 ) (10,407 ) - (42,904 ) - - (14,858 ) 

Equity in the changes in capital surplus reported by 

equity-method investees - - - - - 1,997 - - - - - - - - - 1,997 

Equity in the changes of unrealized gain or loss on 

available-for-sale financial assets reported by equity-method 

investees - - - - - - - - - - - - 117,355 - - 117,355 

Equity in net loss not recognized as pension cost reported by 

equity-method investees - - - - - - - - - - - (6,042 ) - - - (6,042 ) 

Issue of new stocks to acquire other company's shares - $12.40 

per share 16,556 165,561 - 39,680 - - - - - - - - - - - 205,241 

Changes in translation adjustments - - - - - - - - - - 785,578 - - - - 785,578 

BALANCE, DECEMBER 31, 2006 2,423,025 24,230,255 13,820 1,077,267 3,972 501,643 - 30,058 270,519 1,975,340 286,103 (52,079 ) 323,193 (28,101 ) 864,037 29,496,027 

Unregistered capital stock transferred to capital stock 1,382 13,820 (13,820 ) - - - - - - - - - - - - - 

Decrease in minority interest - - - - - - - - - - - - - - (96,603 ) (96,603 ) 

Appropriation of earnings of prior year 

Legal reserve - - - - - - - 197,534 - (197,534 ) - - - - - - 

Special reserve (reversal) - - - - - - - - (270,519 ) 270,519 - - - - - - 

Bonus to employees - - - - - - - - - (102,416 ) - - - - - (102,416 ) 

Remuneration to directors and supervisors - - - - - - - - - (40,966 ) - - - - - (40,966 ) 

Cash dividend - NT$0.5 per share - - - - - - - - - (1,211,186 ) - - - - - (1,211,186 ) 

Consolidated net income for the year ended December 31, 2007 - - - - - - - - - 1,320,849 - - - - 90,342 1,411,191 

Cancellation of treasury stock - 2,193 thousand common shares (2,193 ) (21,930 ) - (975 ) - - - - - (5,196 ) - - - 28,101 - - 

Exercise of compensatory stock options 9,565 95,651 - 34,435 - - - - - - - - - - - 130,086 

Conversion of foreign unsecured convertible bonds into common 

stock 6,442 64,417 - - 20,790 - - - - - - - - - - 85,207 

Equity component of hybrid financial instrument - - - - - - 2,749,975 - - - - - - - - 2,749,975 


assets - - - - - - - - - - - - (936,630 ) - - (936,630 ) 

Changes in unrealized gain or loss on cash flow hedging - - - - - - - - - - - - 7,562 - - 7,562 

Changes in net loss not recognized as pension cost - - - - - - - - - - - 8,075 - - - 8,075 

Effect of changes in percentages of ownership of investees - - - - - (1,817 ) - - - (534 ) (575 ) - 1,547 - - (1,379 ) 



Equity in the changes of unrealized gain or loss on financial 

instrument reported by equity-method investees - - - - - - - - - - - - (38,011 ) - - (38,011 ) 

Equity in the changes in retained earnings reported by 

equity-method investees - - - - - - - - - (376 ) - - - - - (376 ) 

Equity in the offset of deficit against paid-in capital reported by 

equity-method investees - - - - - (20,973 ) - - - 20,973 - - - - - - 

Equity in the changes in net loss not recognized as pension cost 

reported by equity-method investees - - - - - - - - - - - 1,917 - - - 1,917 

Changes in translation adjustments - - - - - - - - - - 1,301,476 - - - - 1,301,476 

BALANCE, DECEMBER 31, 2007 2,438,221 $ 24,382,213 $ - $ 1,110,727 $ 24,762 $ 519,112 $2,749,975 $ 227,592 $ - $ 2,029,473 $ 1,587,004 $ (42,087 ) $ (642,339 ) $ - $ 857,776 $ 32,804,208 



- 7 -


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 

YEAR ENDED DECEMBER 31, 2007 

(In Thousands of U.S. Dollars, Except Dividend Per Share) 

Capital Surplus (Notes 2, 21, 22 and 24) Unrealized 

Equity in Cumulative Net Loss Not Gain or Loss 

Capital Stock Issued Unregistered Premium from Capital Surplus Retained Earnings Translation Recognized as on Financial 

(Notes 21, 22 and 23) Capital Stock Paid-in Capital Conversion of Reported by (Notes 2, 22, 24 and 26) Adjustments Pension Cost Instrument Treasury Stock Total 

Shares (Notes 21 in Excess of Convertible Equity-method Stock Unappropriated (Notes 2 (Notes 2, 22 (Notes 2, 22 (Notes 2 Minority Stockholders' 

(Thousands) Amount and 23) Par Value Bonds Investees Options Legal Reserve Special Reserve Earnings and 22) and 28) and 35) and 24) Interest Equity 

BALANCE, JANUARY 1, 2007 2,423,025 $ 743,350 $ 424 $ 33,049 $ 122 $ 15,390 $ - $ 922 $ 8,299 $ 60,601 $ 8,777 $ (1,597 ) $ 9,915 $ (862 ) $26,507 $ 904,897 

Translation adjustment (Note 4) - 3,506 2 156 - 72 - 4 39 286 42 (8 ) 47 (4 ) 125 4,267 

Unregistered capital stock transferred to capital stock 1,382 426 (426 ) - - - - - - - - - - - - - 

Decrease in minority interest - - - - - - - - - - - - - - (2,978 ) (2,978 ) 

Appropriation of earnings of prior year 

Legal reserve - - - - - - - 6,089 - (6,089 ) - - - - - - 

Special reserve (reversal) - - - - - - - - (8,338 ) 8,338 - - - - - - 

Bonus to employees - - - - - - - - - (3,157 ) - - - - - (3,157 ) 

Remuneration to directors and supervisors - - - - - - - - - (1,263 ) - - - - - (1,263 ) 

Cash dividend - NT$0.5 per share - - - - - - - - - (37,333 ) - - - - - (37,333 ) 

Consolidated net income for the year ended December 31, 2007 - - - - - - - - - 40,713 - - - - 2,785 43,498 

Cancellation of treasury stock - 2,193 thousand common shares (2,193 ) (676 ) - (30 ) - - - - - (160 ) - - - 866 - - 

Exercise of compensatory stock options 9,565 2,948 - 1,061 - - - - - - - - - - - 4,009 

Conversion of foreign unsecured convertible bonds into common 

stock 6,442 1,986 - - 641 - - - - - - - - - - 2,627 

Equity component of hybrid financial instrument - - - - - - 84,763 - - - - - - - - 84,763 


assets - - - - - - - - - - - - (28,870 ) - - (28,870 ) 

Changes in unrealized gain or loss on cash flow hedging - - - - - - - - - - - - 233 - - 233 

Changes in net loss not recognized as pension cost - - - - - - - - - - - 249 - - - 249 

Effect of changes in percentages of ownership of investees - - - - - (56 ) - - - (16 ) (18 ) - 48 - - (42 ) 



Equity in the changes of unrealized gain or loss on financial 

instrument reported by equity-method investees - - - - - - - - - - - - (1,172 ) - - (1,172 ) 

Equity in the changes in retained earnings reported by 

equity-method investees - - - - - - - - - (11 ) - - - - - (11 ) 

Equity in the offset of deficit against paid-in capital reported by 

equity-method investees - - - - - (646 ) - - - 646 - - - - - - 

Equity in the changes in net loss not recognized as pension cost 

reported by equity-method investees - - - - - - - - - - - 59 - - - 59 

Changes in translation adjustments - - - - - - - - - - 40,116 - - - - 40,116 

BALANCE, DECEMBER 31, 2007 2,438,221 $ 751,540 $ - $ 34,236 $ 763 $ 16,001 $ 84,763 $ 7,015 $ - $ 62,555 $ 48,917 $ (1,297 ) $ (19,799 ) $ - $26,439 $1,011,133 



- 8 -


CONSOLIDATED STATEMENTS OF CASH FLOWS 


(In Thousands of Dollars) 

U.S. Dollars 


(Note 4) 

2006 2007 2007 

CASH FLOWS FROM OPERATING ACTIVITIES 

Consolidated net income $ 2,078,203 $ 1,411,191 $ 43,498 

Adjustments to reconcile net income to net cash 

provided by operating activities: 

Net gain on disposal of investments (375,714 ) (11,549 ) (356 ) 

Depreciation and amortization 2,572,194 2,841,954 87,598 

Net loss (gain) on disposal of property, plant and 

equipment and properties leased to others 140,199 (730,584 ) (22,519 ) 

Losses on work stoppages 56,598 113,125 3,487 

Financial instrument revaluation loss, net 7,031 81,151 2,501 

Provision (reversal of allowance) for decline in 

value of inventories 99,596 (104,917 ) (3,234 ) 

Equity in net loss (income) of investees, net (162,442 ) 112,513 3,468 

Cash dividends from equity method investees 38,963 59,861 1,845 

Impairment loss on idle assets 205,988 159,504 4,916 

Reorganization cost - 355,897 10,970 

Amortization of discounts on available-for-sale 

debt securites - (1,063 ) (33 ) 

Interest expense for bonds payable - 195,805 6,035 

Deferred income taxes 49,776 368,369 11,355 

Gain on insurance recoveries (6,750 ) - - 

Impairment and liquidation loss on financial assets 

measured at holding cost and other long-term 

investments 218,042 201,994 6,226 

Net changes in operating assets and liabilities: 

Financial assets at fair value through profit or 

loss 6,480 9,989 308 

Financial liabilities at fair value through profit 

or loss (5,349 ) - - 

Notes receivable 96,601 (73,406 ) (2,262 ) 

Accounts receivable (479,056 ) (637,029 ) (19,635 ) 

Accounts and notes receivable from related 

parties (115,379 ) 138,616 4,273 

Inventories (411,117 ) 782,210 24,110 

Insurance recoveries receivable - 602,550 18,573 

Income tax refund receivable 4,409 (5,765 ) (178 ) 

Imprest bank account (186,396 ) 206,800 6,374 

Other receivables 123,637 (176,541 ) (5,442 ) 

Other current assets (136,482 ) 149,767 4,616 

Notes payable 5,727 (37,467 ) (1,155 ) 

Accounts payable 692,922 500,730 15,434 

Accounts and notes payable to related parties 249,832 (96,929 ) (2,988 ) 

(Continued) 

- 9 -





U.S. Dollars 


(Note 4) 

2006 2007 2007 

Income tax payable 64,854 75,288 2,321 

Accrued expenses 389,669 (219,151 ) (6,755 ) 

Other payables 171,719 (145,269 ) (4,478 ) 

Other current liabilities (55,357 ) 6,991 216 

Accrued pension costs 47,320 33,047 1,019 

Net cash provided by operating activities 5,385,718 6,167,682 190,108 

CASH FLOWS FROM INVESTING ACTIVITIES 

Proceeds from disposal of financial assets measured 

at holding cost and other financial assets 677,317 542,836 16,732 

Proceeds from disposal of other long-term 

investments 14,990 52,719 1,625 

Proceeds from disposal of long-term investments 

accounted for using equity method 285,578 59,778 1,842 

Proceeds from disposal of subsidiaries 29,844 - - 

Proceeds from disposal of available-for-sale financial 

assets 428,709 253,900 7,826 

Acquisition of long-term investments accounted for 

using equity method (171,494 ) (808,468 ) (24,920 ) 

Acquisition of other long-term investments - (523 ) (16 ) 

Acquisition of available-for-sale financial assets (608,509 ) (3,477,089 ) (107,175 ) 

Acquisition of bonds measured at amortized cost (50,000 ) - - 

Acquisition of property, plant and equipment (2,285,610 ) (3,049,220 ) (93,987 ) 

Proceeds from disposal of property, plant and 

equipment and properties leased to others 7,426 4,981,575 153,549 

Proceeds from disposal of investments in real estate - 192,058 5,920 

Decrease (increase) in pledged time deposits (34,934 ) 111,003 3,421 

Decrease (increase) in refundable deposits (4,163 ) 38,480 1,186 

Increase in other assets (124,205 ) (276,317 ) (8,517 ) 

Decrease (increase) in loans receivable from related 

parties (518 ) 21,012 648 

Proceeds from acquisition of subsidiaries (32,435 ) (29,875 ) (921 ) 

Net cash used in investing activities (1,868,004 ) (1,388,131 ) (42,787 ) 

CASH FLOWS FROM FINANCING ACTIVITIES 

Net increase (decrease) in short-term loans 477,123 (380,631 ) (11,732 ) 

Net increase (decrease) in commercial paper (20,613 ) 76,768 2,366 

Increase in long-term bank loans 4,337,364 1,200,000 36,988 

Issuance of unsecured zero-coupon foreign 

convertible bonds - 7,510,723 231,505 

(Continued) 

- 10 -





U.S. Dollars 


(Note 4) 

2006 2007 2007 

Decrease in long-term bank loans (8,412,313 ) (5,137,636 ) (158,358 ) 

Repayment of unsecured domestic bonds (1,300,000 ) (600,000 ) (18,494 ) 

Increase (decrease) in deposits received 30,344 (29,849 ) (920 ) 

Increase (decrease) in other liabilities 1,764 (1,076 ) (33 ) 

Proceeds from acquisition of treasury stock (28,101 ) - - 

Proceeds from exercise of stock options by 

employees 1,915 130,086 4,009 

Remuneration paid to directors and supervisors - (41,292 ) (1,273 ) 

Bonus paid to employees - (109,656 ) (3,380 ) 

Dividends paid for common stock - (1,235,634 ) (38,086 ) 

Net cash provided by (used in) financing 

activities (4,912,517 ) 1,381,803 42,592 

EFFECTS OF EXCHANGE RATE CHANGES ON 

CASH AND CASH EQUIVALENTS (91,940 ) 229,142 7,063 

EFFECTS OF CHANGES IN CONSOLIDATED 

SUBSIDIARIES (60,533 ) - - 

NET INCREASE (DECREASE) IN CASH AND 

CASH EQUIVALENTS (1,547,276 ) 6,390,496 196,976 

CASH AND CASH EQUIVALENTS, BEGINNING 

OF YEAR 3,348,347 1,801,071 55,515 

CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,801,071 $ 8,191,567 $ 252,491 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW 

INFORMATION 

Interest paid $ 448,724 $ 278,523 $ 8,585 

Less - amounts capitalized 37,295 38,743 1,194 

Net interest paid $ 411,429 $ 239,780 $ 7,391 

Income tax paid $ 71,941 $ 257,939 $ 7,951 

Cash received from disposal of long-term 

investments accounted for using equity method 

Proceeds from disposal of long-term investments 

accounted for using equity method $ 345,356 $ - $ - 

Decrease (increase) in other financial assets - other 

receivables (59,778 ) 59,778 1,843 

Cash received $ 285,578 $ 59,778 $ 1,843 

(Continued) 

- 11 -





U.S. Dollars 


(Note 4) 

2006 2007 2007 

NONCASH INVESTING AND FINANCING 

ACTIVITIES: 

Current portion of long-term liabilities $ 1,104,196 $ 129,516 $ 3,992 

Long-term investments accounted for using equity 

method transferred to financial assets measured at 

holding cost $ 39,208 $ 63,116 $ 1,945 

Bonus to employees (included in other current 

liabilities) $ - $ 5,816 $ 179 

Pledged assets - listed domestic common stock 

transferred to available-for-sale financial assets $ 258,920 $ - $ - 

Conversion of unsecured foreign convertible bonds 

into common stock of the Corporation 

Capital stock $ - $ 64,417 $ 1,986 

Unregistered capital stock 12,412 - - 

Capital surplus - premium from conversion of 

convertible bonds 3,972 20,790 641 

$ 16,384 $ 85,207 $ 2,627 

The Group acquired 84.9% equity interest in Chipcera Technology Co., Ltd. (“Chipcera”) in 2006 with the fair 

value of its assets and liabilities were summarized as follows: 

New Taiwan 

Dollars 

Cash $ 7,595 

Inventories 51,599 

Accounts receivable 64,712 

Property, plant and equipment 132,968 

Other net assets 3,322 

Accounts payable (32,565 ) 

Short and long-term liabilities (34,516 ) 

193,115 

Percentage of ownership acquired 84.9% 

163,955 

Goodwill 88,244 

Total proceeds form acquisition of Chipcera 252,199 

Less: Issue of new common shares by the Corporation for equity 

interest acquisition 205,241 

Cash paid by the Group for the acquisition of Chipcera $ 46,958 

- 12 -



(Concluded) 

- 13 -


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 


(In Thousands of Dollars, Except Exchange Rate and Unless Stated Otherwise) 

1. ORGANIZATION AND OPERATIONS 

Yageo Corporation (the “Corporation”) was incorporated in 1987 in the Republic of China (ROC). The 

Corporation’s shares are traded on the Taiwan Stock Exchange. 

The Corporation manufactures and sells passive components. 

manufacture passive components. 

It also produces and sells equipment used to 

The Corporation and the consolidated subsidiaries had 9,054 and 8,916 employees as of December 31, 2006 

and 2007, respectively. 

The Corporation’s subsidiaries were as follows: 

a. Subsidiaries that manufacture and market passive components - Ferroxcube Taiwan, Ltd., Yageo 

Electronics (Dongguan) Co., Ltd., Yageo Electronics (China) Co., Ltd., Ferroxcube Electronics 

(Dongguan) Co., Ltd., Guo Chuang Electronics (Dongguan) Co., Ltd., Yageo Components (Su Zhou) 

Co., Ltd., Yageo USA (H.K.) Limited, Compostar Technology Co., Ltd., Compostar Technology 

(Dongguan) Co., Ltd., Compostar Technology (Su Zhou) Co., Ltd., Compostar Technology (Shanghai) 

Co., Ltd., Chipcera Technology Co., Ltd., Dongguan Chang An Wusha Chipcera, Dongguan Chen An 

Trading Co., Ltd., Ko-E Corp., Ko-E (H.K.) Limited, Ko-E Technology (Shenzhen) Co., Ltd., Yageo 

Europe GmbH (eliminated after being merged into Vitrohm Holding GmbH in 2006), Vitrohm 

Portuguesa LDA, Paracatu Gestao E Investimentos (liquidated in 2006), Phycomp Holding B.V., 

Ferroxcube International Holding B.V., Yageo Korea, Yageo Japan, Yageo America Corporation, Yageo 

Corporation (South Asia) PTE. LTD. (formerly Phycomp Singapore PTE. LTD.), Phycomp Malaysia 

SDN. BHD. and Steller, Inc. 

b. Investment holding subsidiaries - Yageo Holding (Bermuda) Limited, Ko-E Holding (Cayman Islands), 

Ltd., Chipcera Holding B.V., Vitrohm Holding GmbH, Kuo Shin Investment Limited, Kuo Chung 

Development Limited, Kuo Ding Venture Capital Limited, Ferroxcube Holding (Samoa), Ltd., Hsu Tai 

International (H.K.), Compostar Technology (Cayman), Ltd., Yageo (H.K.) Limited, Ferroxcube 

Technology (H.K.) Limited, Compostar (H.K.) Limited, Rancher International Limited (B.V.I.) 

(eliminated after being merged into Yageo Holding (Bermuda) Limited in 2006), Luminary International 

Limited (B.V.I.) (eliminated after being merged into Yageo Holding (Bermuda) Limited in 2006) and 

Yageo Holding International Limited (liquidated and eliminated in October of 2007). 

The organization chart of the Corporation and the consolidated subsidiaries (collectively, the “Group”) as of 

December 31, 2007 is shown as Table 13. 

- 14 -

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Basis of Presentation 

The accompanying financial statements have been prepared in conformity with the Guidelines Governing 

the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing 

Business Accounting and accounting principles generally accepted in the ROC. In preparing financial 

statements in conformity with these guidelines and principles, the Group is required to make certain 

estimates and assumptions that could affect the amounts of allowance for decline in market value of 

inventories, allowance for doubtful accounts, depreciation, amortization and impairment of tangible assets, 

impairment of intangible assets and pension expenses. Actual results could differ from these estimates 

because of the uncertainty of circumstances. 

For the convenience of readers, the accompanying financial statements have been translated into English 

from the original Chinese version prepared and used in the ROC. If there is any conflict between the 

English version and the original Chinese version or any difference in the interpretation of the two versions, 

the Chinese-language financial statements shall prevail. 

The Group’s significant accounting policies are summarized as follows: 

Current/Noncurrent Assets and Liabilities 

Unrestricted cash and cash equivalents, assets held for trading and other assets to be converted to cash, used 

up or consumed within twelve months are classified as current. Liabilities generated from trading and 

those to be redeemed, paid or settled within twelve months are classified as current. All other assets and 

liabilities are classified as noncurrent. 

Basis of Consolidated Financial Statements 

The consolidated financial statements include the accounts of the Corporation and its direct and indirect 

subsidiaries. 

Significant transactions between the Corporation and the consolidated subsidiaries are eliminated. When a 

subsidiary was acquired, the difference, if any, between the acquisition cost of the investment and the 

Group’s proportionate equity in the fair value of the subsidiary’s net assets was recognized as goodwill and 

was previously amortized over 20 years. 

Effective January 1, 2006, amortization of goodwill ceased but will be tested for impairment at least on an 

annual basis. If an event occurs or circumstances change that more likely than not goodwill is impaired, an 

impairment test is implemented. 

The Corporation and its subsidiaries incorporated in the ROC (hereinafter collectively referred to as 

“Taiwan Entities”) maintain their accounts and prepare their financial statements in New Taiwan dollars. 

The accounts of consolidated foreign subsidiaries are maintained and their separate financial statements are 

prepared using their respective functional currencies. Those financial statements are translated into New 

Taiwan dollars, for consolidation purposes, at the following foreign exchange rates: (a) assets and 

liabilities - prevailing exchange rates on the balance sheet dates, (b) stockholders’ equity - historical rates, 

and (c) profit and loss accounts - weighted average rates of the year. 

- 15 -

The consolidated financial statements as of and for the year ended December 31, 2006 include the accounts 

of following entites: 

a. The Corporation and its subsidiaries-Ferroxcube Taiwan, Ltd., Yageo Electronics (Dongguan) Co., Ltd., 

Yageo Electronics (China) Co., Ltd., Ferroxcube Electronics (Dongguan) Co., Ltd., Guo Chuang 

Electronics (Dongguan) Co., Ltd., Yageo Components (Su Zhou) Co., Ltd, Yageo USA (H.K.) Limited, 

Compostar Technology Co., Ltd., Compostar Technology (Dongguan) Co., Ltd., Compostar Technology 

(Su Zhou) Co., Ltd., Compostar Technology (Shanghai) Co., Ltd., Compostar Technology (Cayman), 

Ltd. Yageo Europe GmbH, Vitrohm Portuguesa LDA, Paracatu Gestao E Investimentos, Phycomp 

Holding B.V., Ferroxcube International Holding B.V., Yageo Korea, Yageo Japan, Yageo America 

Corporation, Yageo Corporation (South Asia) PTE. LTD., Phycomp Malaysia SDN. BHD., Steller, Inc., 

Yageo Holding (Bermuda) Limited, Vitrohm Holding GmbH, Kuo Shin Investment Limited, Kuo 

Chung Development Limited, Kuo Ding Venture Capital Limited, Ferroxcube Holding (Samoa), Ltd., 

Hsu Tai International (H.K.), Rancher International Limited (B.V.I.), Luminary International Limited 

(B.V.I.) and Yageo Holding International Limited. 

b. The consolidated financial statements included the accounts of Chipcera Technology Co., Ltd. 

(“Chipcera”) and its subsidiaries since July 1, 2006 because of the equity interest of Chipcera owned by 

the Corporation and subsidiaries was more than 50% of its outstanding common stock on July 1, 2006. 

c. During 2006, Ko-E Holding, Ltd. (Cayman Islands) was incorporated by Yageo Holding (Bermuda) 

Limited. As a result of this incorporation, Yageo Holding (Bermuda) Limited became a 90% equity 

owner of Ko-E Holding, Ltd. and the accounts of financial statements of Ko-E Holding, Ltd. and its 

subsidiaries, including Ko-E Corp., Ko-E (H.K.) Limited, Ko-E Technology (Shenzhen) Co., Ltd., were 

consolidated into the Corporation's consolidated financial statements. 

d. Yageo Holding (Bermuda) Limited was a 100% equity owner of Guo Chuang Electronics (Dongguan) 

Co., Ltd. To gain the Group's competitive position of passive components in the marketplace, the 

Corporation is proactively seeking opportunities with other players in the same market for collaboration. 

Yageo Holding (Bermuda) Limited subsequently disposed 65% ownership of Guo Chuang Electronics 

(Dongguan) Co., Ltd. to Laser Tek Taiwan Co., Ltd. As a result of this disposal, Yageo Holding 

(Bermuda) Limited's percentage of ownership in Guo Chuang Electronics (Dongguan) Co., Ltd. was 

reduced to 35% and lost its controls over Guo Chuang Electronics (Dongguan) Co., Ltd. as a majority 

shareholder. Beginning in October of 2006, the accounts of the financial statements of Guo Chuang 

Electronics (Dongguan) Co., Ltd. would not be consolidated into the consolidated financial statements 

of the Corporation but due to the Group still has significant influence over Guo Chuang Electronics 

(Dongguan) Co., Ltd., Guo Chuang Electronics (Dongguan) Co., Ltd. was accounted for as an 

equity-method investment in the Corporation's consolidated financial statements. 

Please refer to the following descriptions for the changes of the consolidated entities except for above 

mentioned a, b and c in connection with the aforementioned accounts of Corporation's consolidated 

financial statements for the year ended December 31, 2007: 

a. Yageo Holding (Bermuda), Ltd., 100% owned by the Corporation, transferred its investments of Yageo 

Electronics (China) Co., Ltd., Yageo Components (Su Zhou) Co., Ltd and Yageo Electronics 

(Dongguan) Co., Ltd. to incorporate Yageo (H.K.) Limited in 2007 and have Yageo (H.K.) Limited 

directly hold the investments of the aforementioned companies. The Corporation consolidated the 

accounts of Yageo (H.K) Limited into 2007 consolidated financial statements. 

b. Ferroxcube Holding (Samoa) Ltd, 100% owned by the Corporation, transferred its investments of 

Ferroxcube Electronics (Dongguan) Co., Ltd. to incorporate Ferroxcube Technology (H.K.) Limited in 

2007 and have Ferroxcube Technology (H.K.) Limited directly hold the investments of Ferroxcube 

Electronics (Dongguan) Co.,. The Corporation consolidated the accounts of Ferroxcube Technology 

(H.K.) Limited into 2007 consolidated financial statements. 

- 16 -

c. Compostar Technology (Cayman), Ltd.’s, 100% owned by Compostar Technology Co., Ltd., transferred 

its investments of Compostar Technology (Su Zhou) Co., Ltd. to incorporate Compostar (H.K.) Limited 

in 2007 and have Compostar (H.K.) Limited directly hold the investments of Compostar Technology 

(Su Zhou) Co. The Corporation consolidated the accounts of Compostar (H.K.) Limited into 2007 

consolidated financial statements. 

To simplify structure, the Group adjusted its organization in 2006 and 2007 as follows: 

a. Rancher International Limited (B.V.I.) and Luminary International Limited (B.V.I.) were merged into 

Yageo Holding (Bermuda) Limited in 2006, with Yageo Holding (Bermuda) Limited as the survivor 

entity. 

b. Yageo Europe GmbH was merged into Vitrohm Holding GmbH in 2006, with Vitrohm Holding GmbH 

as the survivor entity. 

c. Paracatu was liquidated in 2006. 

d. Yageo Holding International Limited went in to liquidation since March of 2007. As a result, the 

Group lost its controls and significant influence over Yageo Holding International Limited. Beginning 

in March of 2007, the accounts of the financial statements of Yageo Holding International Limited 

would not be consolidated into the consolidated financial statements of the Corporation. Yageo 

Holding International Limited was liquidated and eliminated in October of 2007. 

Cash Equivalents 

Commercial paper with maturities of up to three months from the date of purchase are classified as cash 

equivalents. 

Financial Instruments at Fair Value Through Profit or Loss 

Financial instruments at fair value through profit or loss are financial assets/liabilities held for trading. 

These financial assets/liabilities are initially recognized at fair value subsequently, measured at fair value 

and the changes in fair value are charged to current income. A regular way purchase or sale of financial 

assets is accounted for based on the trade date accounting. 

Derivatives that do not meet the criteria for hedge accounting are classified as financial assets/liabilities at 

fair value through profit or loss. 

For derivatives with no active market, its fair value is estimated using valuation techniques incorporating 

estimates and assumptions that are consistent with prevailing market conditions. When the fair value is 

positive, the derivative is recognized as a financial asset. When the fair value is negative, the derivative is 

recognized as a financial liability. 

Available-for-sale Financial Assets 

Available-for-sale financial assets are initially recognized at fair value. The changes in fair value from 

subsequent remeasurement are reported as a separate component of stockholders’ equity. The 

corresponding accumulated gains or losses are recognized in earnings when the financial asset is 

derecognized from the balance sheet. Debt securities are carried at amortized cost under the effective 

interest method. The recognized interest is included in current income. A regular way purchase or sale of 

financial assets is accounted for based on the trade date accounting. 

- 17 -

Cash dividends are recognized as investment income upon resolution of the shareholders of an investee but 

are accounted for as reductions to the original cost of investment if such dividends are declared on the 

earnings of the investees attributable to periods prior to the purchase of the investments. Stock dividends 

are recorded as an increase in the number of shares held and do not affect investment income. The cost per 

share is recalculated based on the new number of shares. 

If there is objective evidence that a financial asset is impaired, a loss is recognized. If, in a subsequent 

period, the amount of the impairment loss decreases, for equity securities, the previously recognized 

impairment loss can be reversed to the extent of the decrease and recorded as an adjustment to shareholders’ 

equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease 

is clearly attributable to an event which occurred after the impairment loss was recognized. 

Inventories 

Inventories are stated at the lower of aggregate weighted-average cost or market (net realizable value or 

replacement cost). These are also evaluated for any loss on slow-moving items. 

Investments Accounted for Using Equity Method 

The following investments in shares of stock are accounted for by the equity method if: (a) the combined 

equity of the Group is at least 20% of the investees’ outstanding common shares, or (b) the Group have a 

combined equity of less than 20% of their outstanding shares but exercises significant influence over the 

investee’s financial and operating policy decisions. Under the equity method, the Group’s investment is 

stated at cost on the acquisition date and subsequently adjusted for the proportionate share of the Group in 

the net income or net loss of the investees. Any cash dividends received from the investees are accounted 

for as a reduction of the carrying value of the investments. 

The differences between the acquisition cost of the investments and the Group’s equity in the fair value of 

the investees’ net assets when the investments are acquired or when the equity method is first adopted, are 

amortized over 5 to 20 years. Effective January 1, 2006, pursuant to the revised Statement of Financial 

Accounting Standards No. 5 “Long-term Investments in Equity Securities” (“SFAS No. 5”), the cost of 

acquisition is subjected to initial analysis; the investment cost in excess of the fair value of identifiable net 

assets is accounted for as goodwill, ceased to be amortized but instead tested for impairment on an annual 

basis. An impairment test is also required when there is evidence indicating that goodwill is more likely 

than not impaired due to an event or a change in economic environment. Effective January 1, 2006, the 

unamortized balance of the investment cost in excess of the equity in the investee’s fair value of identifiable 

net assets ceased to be amortized but instead subject to the same accounting treatment as that for goodwill. 

If an investee issues additional shares and the Group subscribes for these shares at a rate not equal to its 

current equity in the investee, the increase in the Group’s equity in the investee’s net assets is credited to a 

capital surplus account. Any decrease in the Group’s equity in the investee’s net assets is debited to the 

balance of the capital surplus account arising from similar transactions. If the capital surplus account is 

not enough for debiting purposes, any remaining decrease is debited to unappropriated retained earnings. 

On the balance sheet date, investments are subjected to an impairment test. If there is objective evidence 

indicating that an impairment is occurred, the impairment loss shall be charged to current income. 

Stock dividends received are recorded only as an increase in the number of shares held and not as 

investment income. The investment carrying value per share is recalculated on the basis of the increased 

number of shares. Costs of investments sold are determined using the weighted-moving-average method. 

If the Group loses its significant influence over an equity-method investee with no quoted market price, the 

carrying value of the investment will be reclassified into financial assets measured at holding cost. 

- 18 -

Real Estate 

The real estate are carried at the lower of recoverable or carrying value. 

Upon sale or other disposal of the real estate, the related costs, accumulated depreciation and accumulated 

impairment are removed from the accounts, and any gain or loss is accounted as nonoperating income or 

loss. 

Financial Assets Measured at Holding Cost 

Investments in equity investments without quoted market prices in an active market and reliably-measured 

fair value, including investments in unlisted stocks and emerging stocks are carried at cost upon initial 

recognition. If there is objective evidence that a financial asset is impaired, an impairment loss should be 

recognized. A subsequent reversal of such impairment is prohibited. 

The accounting treatment for cash and stock dividends arising from financial assets measured at holding 

cost is the same as cash and stock dividends arising from available-for-sale financial assets. 

Bond Measured at Amortized Cost 

Bonds with fixed or determinable payments that are not quoted in an active market are measured at 

amortized cost. Bonds should be measured at original cost plus transaction cost on initial recognition. 

Gains or losses are recognized when de-recognition, impairment loss or amortization occurs. Purchase or 

sale of bonds under customary transactions is recognized and derecognized using trade date accounting. 

An impairment loss should be recognized if there is objective evidence that a financial asset is impaired. If 

later on an indication suggest that the impairment may no longer exist or may have diminished, the 

impairment loss can be reversed to the extend that would otherwise result had no impairment loss been 

recognized for the assets in prior years. 

Other Long-term Investments 

Investments in foreign funds with no objective fair value are measured at cost upon initial recognition. If 

there is objective evidence that the foreign fund is impaired, an impairment loss should be recognized. A 

subsequent reversal of such impairment is prohibited. 

Property, Plant and Equipment and Properties Leased to Others 

These assets are carried at cost, net of accumulated depreciation and accumulated impairment loss. Major 

improvements or renewals are capitalized, while maintenance and repairs are charged to current expense. 

Depreciation is calculated using the straight-line method over service lives initially estimated as follows: 

buildings, 3 to 55 years; and machinery and miscellaneous equipment, 1 to 15 years. Properties still in use 

beyond their originally estimated service life are depreciated over their newly estimated service lives. 

An impairment loss should be recognized whenever the carrying amount of properties leased to others 

exceeds their recoverable amount, and this impairment loss should be charged to current income. An 

impairment loss recognized in prior years could be reversed if there is a recovery in the estimates used to 

determine recoverable amount since the last impairment loss was recognized. However, an impairment 

loss is reversed only to the extent that it does not increase the carrying amount of an asset above the 

carrying amount that would have been determined for the asset (net of depreciation) had no impairment loss 

been recognized in prior years. A reversal of an impairment loss should be recognized in the income 

statement for assets carried at cost and treated as a revaluation increase for assets carried at the revalued 

amount. 

- 19 -

Upon sale or other disposal of assets, the related cost, accumulated depreciation and accumulated 

impairment are removed from the accounts, and any gain or loss is accounted as nonoperating income or 

loss. 

Idle Assets 

These assets are stated at the lower of recoverable amount or carrying value. 

Assets Impairment 

The Group determine the cash-generating unit to which tangible and intangible asset belong in accordance 

with Statement of Financial Accounting Standards No. 35, “Accounting for Asset Impairment,” before the 

impairment test is done. An impairment loss should be recognized whenever the aggregate carrying 

amount of specific cash-generating units exceeds their recoverable amount, and this impairment loss should 

be charged to current income. For the reduction of the carrying amounts of the assets of cash-generating 

units, the impairment loss should be allocated in the following order: 

a. Unidentifiable intangible assets (goodwill) should be allocated to the cash-generating unit if any; and 

b. The identifiable intangible and tangible assets of the unit should be allocated pro rata based on the 

carrying amount of each asset in the unit. 

An impairment loss recognized in prior years may be reversed if there is a recovery in the estimates used to 

determine the recoverable amount since the last impairment loss was recognized. However, an impairment 

loss is reversed only to the extent that it does not increase the carrying amount of an asset above the 

carrying amount that would have been determined for the asset (net of depreciation) had no impairment loss 

been recognized in prior years. Reversal of a previously recognized impairment loss on goodwill is 

prohibited. 

The estimated loss on fixed assets arising from accidents is recognized as assets impairment. 

major improvements or renewals are capitalized. 

Subsequent 

Foreign Convertible Bonds 

Foreign convertible bonds issued prior to December 31, 2005 are carried at their issue price. The 

premium, which is the difference between the specified redemption price and the face value, is accrued from 

the bond issuance date to the contracted redemption date using the effective interest rate method. Direct 

and necessary convertible bond issue cost is classified as a deferred charge (included in other assets - other). 

This cost is amortized as bond issue expense from the bond issuance date to the contracted redemption date 

(included in nonoperating expenses and losses - others). 

The book value approach is used to account for bond conversion by bondholders. Under this method, 

convertible bonds and related accounts are transferred to capital and capital surplus without recording gain 

or loss. Also, the unamortized bond issue costs are debited to capital surplus. 

Effective January 1, 2006, issuances of foreign convertible bonds are required to be separately accounted for 

as equity and liability components. The value of the equity component (shown as capital surplus - stock 

options) is the residual amount of the original bond carrying amount less the value allocated to the liability 

component. The host contract attributable to the liability component is carried at amortized cost. The 

derivative instrument attributable to the liability component is recognized at fair value and accounted for as 

financial liabilities at fair value through profit or loss (included in long-term liabilities) and subsequently 

measured at fair value. When the bondholders exercise their conversion options, the equity and liability 

components are transferred to capital stock and capital surplus without recording gain or loss. 

- 20 -

Pension Costs 

The Group recognizes its pension cost in accordance with the statement of Financial Accounting Standards 

No. 18 “Accounting for Pension”. The gain or loss generated from plan curtailments or settlements is 

recorded as part of net pension cost as they occur. 

Income Tax 

Deferred tax assets are recognized for the tax effects of deductible temporary difference, unused operating 

loss carryforwards, unused income tax credits, and deferred tax liabilities are recognized for the tax effects 

of taxable temporary differences. A valuation allowance is recognized for deferred income tax assets when 

it is more than 50% probable that these assets will not be realized. Deferred tax assets or liabilities are 

classified as current or noncurrent on the basis of the classification of the related assets or liabilities for 

financial reporting. A deferred tax liability or asset that cannot be related to an asset or liability for 

financial reporting, including deferred tax assets related to net loss carryforwards, is classified on the basis 

of the expected realization date of the temporary difference. 

The Group uses the flow-through method to recognize income tax credits for certain purchases of eligible 

equipment, research and development expenditures, personnel training expenditures and investments in 

shares of stock. 

Adjustments to prior years’ tax liabilities are added to or deducted from the current year’s income tax 

expense. 

Income taxes of 10% on undistributed earnings generated starting January 1, 1998 are recorded as expenses 

in the year the stockholders approve the retention of the earnings. 

Revenue Recognition, Account Receivable and Allowance for Doubtful Accounts 

Sales are recognized when titles to products and risks of ownerships are transferred to customers, primarily 

upon shipment. 

Sales are measured at fair value based on the price, including commercial discount and quantity discount, 

negotiated with the buyer. However, for frequent sales transactions, selling price is considered a 

short-term account receivable discounted at an imputed rate when the variance between the fair value and 

the amount due from the buyer is small. 

The allowances are provided on the basis of a review of the collectibility of individual receivables. The 

Group periodically evaluates the collectibility of receivables in consideration of client’s receivable aging 

analysis credit worthiness and economic environment. 

Treasury Stock 

If the Corporation buys back issued stocks, the reacquisition cost will be debited to the account “treasury 

stock.” 

Upon disposal of the treasury stock, if disposal price is higher than carrying value, the difference will be 

recorded as capital surplus - trading of treasury stock. Otherwise, the difference is debited to capital 

surplus - trading of treasury stock. If capital surplus is not enough for debiting purposes, the difference is 

debited to unappropriated retained earnings. 

Compensatory Stock Option Plan 

If the Group decides that the grant date or amendment date of the compensatory stock option plan is after 

January 1, 2004, it will adopt the intrinsic value method to recognize its compensation cost, which will be 

recognized as expense under the plan. 

- 21 -

Foreign-currency Transactions 

Foreign currency transactions (except derivative transactions) are recorded in New Taiwan dollars at the 

rates of exchange in effect when the transactions occur. Upon settlement of foreign-currency assets and 

liabilities at prevailing rates, differences between the transaction rates and settlement rates are credited or 

charged to current income. Period-end balances of foreign-currency assets and liabilities are restated at the 

prevailing exchange rates, and the resulting differences are credited or charged to current income. 

On the balance sheet date, nonmonetary foreign-currency-dominated assets or liabilities measured at fair 

value, such as equity instruments, are restated at the prevailing exchange rates, and the resulting differences 

are accounted for as follows: 

a. Assets and liabilities at fair value through adjustments to stockholders’ equity- as adjustments to 

stockholders’ equity. 

b. Assets and liabilities at fair value through profit or loss - as credits or charges to current income. 

c. Assets and liabilities measured at holding cost - stated at historical rates of transaction date. 

d. Foreign-currency long-term investments accounted for using the equity method are recorded according 

to the results of its translated financial statements. The exchange difference is reported as cumulative 

translation adjustments under stockholders’ equity. 

Hedging Derivative Financial Instruments 

Hedging derivative financial instruments are stated at fair value. The changes of fair value of these 

instruments are either charged to current income or stockholders’ equity, depending on the hedged items. 

Cash Flow Hedge Accounting 

Derivatives that meet all criteria for hedge accounting are recognized as the offsetting effects on profit or 

loss of changes in fair value of hedging instruments and hedged items. 

The gain or loss of hedging instruments is reported in stockholders’ equity until the hedged forecast 

transaction affects net income or loss. If the hedged forecast transaction is recognized as assets or 

liabilities, the gain or loss is charged to current income in the year that the recognized assets or liabilities 

affect net income or loss. If the hedge of forecast transaction would result in the recognition of 

non-financial assets and liabilities, the gain or loss is recognized as an adjustment to the initial cost or 

carrying value of those assets or liabilities. If recognized adjustments to stockholder’s equity result in 

irreversible losses, these losses should be immediately charged to current income. 

3. ACCOUNTING CHANGES 

a. On January 1, 2006, the Group adopted the newly released Statements of Financial Accounting 

Standards No. 34 “Accounting for Financial Instruments” (“SFAS No. 34”) and No. 36 “Disclosure and 

Presentation for Financial Instruments” (“SFAS No. 36”) and related revisions of previously released 

SFASs. 

- 22 -

The Group reclassified its financial assets and liabilities upon initial adoption of the newly released 

SFASs. The cumulative effect of changes in accounting principle should be recognized in the current 

period for adjustments to the carrying values of the financial assets or liabilities at fair value through 

profit or loss. Because the carrying values of those financial assets and financial liabilities were the 

same as their fair values, no cumulative effect was recognized. Available-for-sale financial 

instruments measured at fair value were recognized as adjustments to stockholders’ equity. The 

adjustment is NT$47,753 thousand in credit balance. 

b. On January 1, 2006, the Group adopted the newly released Statements of Financial Accounting 

Standards No. 5, “Long-term Investments in Equity Securities,” and No. 25, “Business Combinations - 

Accounting Treatments under Purchase Method.” These revisions stated that the difference between 

the cost of long-term equity investments and the amount underlying equity in net assets of an investee is 

subject to analysis. If the difference is goodwill, it should be tested for impairment periodically 

instead of being amortized. 

4. TRANSLATION INTO U.S. DOLLARS 

The financial statements are stated in New Taiwan dollars. The translations of the 2007 New Taiwan dollar 

amounts into U.S. dollar amounts are included solely for the convenience of the readers using the rate of 

NT$32.443 to US$1.00 quoted by Reuters at the end of December 2007. This translation should not be 

construed as representations that the New Taiwan dollar amounts have been, could have been, or could in 

the future be, converted into U.S. dollars at this or any other exchange rate. 

5. CASH AND CASH EQUIVALENTS 

U.S. 

Dollars 


2006 2007 2007 

Cash 

Cash on hand $ 3,258 $ 2,921 $ 90 

Checking and demand deposits 990,395 1,239,087 38,193 

Time deposits - yield rate 1.20%-5.27% in 2006 and 

2.61%-5.44% in 2007 622,489 5,190,765 159,996 

Cash equivalents 

Short-term notes and bills - yield rate 1.56% to 1.72% in 

2006 and 1.90%-2.00% in 2007 184,929 1,758,794 54,212 

$ 1,801,071 $ 8,191,567 $ 252,491 

- 23 -

6. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS - 

CURRENT 

Financial assets and liabilities at fair value through profit or loss are forward exchange contracts and foreign 

currency option contracts. The Group is exposed to fair value risk and cash flow risk due to currency 

fluctuation. To manage these risks, the Group entered into forward exchange and foreign currency option 

contracts. However, since certain financial assets and liabilities are not qualified for hedge accounting or 

the hedging relationship qualified for hedge accounting is ended up, those financial assets and liabilities are 

categorized as trading financial assets and liabilities. The fair values are estimated using valuation 

techniques and the changes in fair values are charged to current income. The Group didn’t enter into 

foreign currency option contracts for the year ended December 31, 2006 and there was no open foreign 

currency option contract as of December 31, 2007. The open forward exchange contracts as of December 

31, 2006 and 2007 are summarized as follows: 

As of December 31, 2006 

Contract Carrying Value/ 

Currency Maturity Amount Fair Value 

NT$ US$ 

(Note 4) 

Financial assets - current 

Sale of forward exchange EUR to NTD March 30, 2007 EUR 1,000 $ 221 $ 7 

Sale of forward exchange USD to NTD January 10, 2007 US$ 3,000 1,361 42 

Sale of forward exchange USD to NTD February 27, 2007 US$ 2,000 174 5 


Sale of forward exchange USD to NTD January 3, 2007 US$ 1,000 399 12 




Sale of forward exchange USD to NTD February 16, 2007 US$ 500 12 - 

Sale of forward exchange EUR to PLN January 31, 2007 EUR 400 56 2 

Sale of forward exchange USD to PLN January 31, 2007 US$ 600 530 16 

Sale of forward exchange EUR to PLN February 28, 2007 EUR 400 62 2 

Purchase of forward exchange EUR to USD January 23, 2007 EUR 455 21 - 

$ 3,176 $ 97 

Financial liabilities - current 

Sale of forward exchange EUR to NTD February 27, 2007 EUR 1,500 $ 363 $ 11 

Sale of forward exchange EUR to NTD January 31, 2007 EUR 1,000 606 19 


Sale of forward exchange USD to NTD January 5, 2007 US$ 760 8 - 




Sale of forward exchange USD to PLN March 2, 2007 US$ 600 101 3 

Sale of forward exchange USD to RMB January 22, 2007 US$ 800 19 1 

Purchase of forward exchange JPY to NTD May 30, 2007 JPY 57,000 256 8 

Purchase of forward exchange JPY to NTD March 1, 2007 JPY 53,000 15 - 

Purchase of forward exchange JPY to NTD February 27, 2007 JPY 170,000 1,261 39 

Purchase of forward exchange JPY to NTD March 30, 2007 JPY 440,000 3,179 98 

Purchase of forward exchange JPY to NTD February 27, 2007 JPY 36,000 176 5 



Purchase of forward exchange JPY to NTD January 31, 2007 JPY 81,500 479 15 

Purchase of forward exchange JPY to NTD April 26, 2007 JPY 230,000 1,227 38 







Purchase of forward exchange EUR to NTD January 29, 2007 EUR 300 17 1 

$ 10,207 $ 315 

- 24 -

As of December 31, 2007 


Currency Maturity Amount Fair Value 

NT$ US$ 

(Note 4) 

Financial assets - current 

Purchase of forward exchange JPY to NTD January 7, 2008 JPY 186,020 $ 454 $ 14 


Purchase of forward exchange JPY to NTD January 31, 2008 JPY 145,070 1,051 32 




Purchase of forward exchange JPY to NTD March 31, 2008 JPY 200,000 38 1 

Purchase of forward exchange JPY to NTD April 2, 2008 JPY 186,236 1,508 47 

Purchase of forward exchange JPY to NTD April 2, 2008 JPY 42,940 348 11 




Sale of forward exchange USD to NTD January 22, 2008 US$ 1,000 2 - 


Sale of forward exchange USD to NTD March 26, 2008 US$ 1,000 146 5 

Sale of forward exchange USD to NTD March 31, 2008 US$ 500 27 - 

Sale of forward exchange USD to PLN January 30, 2008 US$ 500 1,240 38 

Sale of forward exchange USD to PLN February 29, 2008 US$ 500 1,230 38 

Sale of forward exchange USD to PLN March 31, 2008 US$ 500 1,213 37 

Sale of forward exchange EUR to PLN January 30, 2008 EUR 500 921 28 

Sale of forward exchange EUR to PLN February 29, 2008 EUR 500 908 28 

Sale of forward exchange EUR to PLN March 31, 2008 EUR 500 897 28 

$ 12,233 $ 376 

Financial liabilities - current 

Sale of forward exchange EUR to NTD January 30, 2008 EUR 800 $ 1,071 $ 33 



Purchase of forward exchange JPY to NTD April 18, 2008 JPY 9,096 47 1 

Purchase of forward exchange JPY to NTD June 2, 2008 JPY 107,012 497 15 

Purchase of forward exchange JPY to NTD June 2, 2008 JPY 104,120 484 15 

Purchase of forward exchange JPY to RMB January 30, 2008 JPY 50,000 280 9 

Purchase of forward exchange JPY to RMB February 29, 2008 JPY 50,000 148 5 

Sale of forward exchange USD to NTD January 15, 2008 US$ 50 10 - 


$ 3,633 $ 112 

Gain or loss on trading financial instruments were loss of NT$44,416 thousand and gain of NT$38,284 

thousand (US$1,180 thousand) for the years ended December 31, 2006 and 2007, respectively. 

- 25 -

7. AVAILABLE-FOR-SALE FINANCIAL ASSETS 

U.S. 

Dollars 


2006 2007 2007 

Foreign bond - U.S. Government Agency Bonds $ - $ 1,642,630 $ 50,631 

Domestic common stock with quoted market price 

TA-I Technology Co., Ltd. 749,845 709,961 21,884 

Tait Marketing & Distribution Co., Ltd. 235,937 148,842 4,588 

Far Eastern Air Transport Corp. 42,676 - - 

1,028,458 858,803 26,472 

Foreign common stock with quoted market price 

SHS KOA Corp. - 564,295 17,393 

Foreign funds - 221,315 6,822 

1,028,458 3,287,043 101,318 

Less: Shown as current assets 

U.S. Government Agency Bonds - 1,642,630 50,631 

Foreign funds - 221,315 6,822 

Tait Marketing & Distribution Co., Ltd. 235,937 148,842 4,588 

Far Eastern Air Transport Corp. 42,676 - - 

278,613 2,012,787 62,041 

$ 749,845 $ 1,274,256 $ 39,277 

In 2007, the Corporation purchased 10-year and 20-year U.S. Government Agency Bonds at discounted 

price of US$24,920 thousand and US$24,911 thousand, respectively. The par value of both bonds was 

US$25,000 thousand; maturity dates were February 13, 2017 and June 7, 2027, respectively; interest rates 

were 5.75% and 6.00%, respectively. 

8. ACCOUNTS RECEIVABLE 

In the situation of default on the accounts receivable and financial insolvency at the Ya Hsin Industrial Co., 

Ltd. and its subsidiaries (collectively, the “Ya Hsin Group”), the amount that the Group due from Ya Hsin 

Group was amounted to NT$9,407 thousand (US$290 thousand) as of December 31, 2007. The 

Corporation is currently running a negotiation process to actively pursue a method to collect the receivables 

from the Ya Hsin Group, and will take necessary legal actions to secure Ya Hsin Group’s indebtedness. In 

addition, the Group controls the delivery of inventories to the Ya Hsin Group. The Group assessed the 

collectibility of Ya Hsin’s accounts receivable and determined the collectibility is uncertain. The Group 

had recognized 100% provision for those accounts receivable as of December 31, 2007. 

- 26 -

9. OTHER FINANCIAL ASSETS 

U.S. 

Dollars 


2006 2007 2007 

a. Other receivables $ 118,468 $ 160,068 $ 4,934 

b. Interest receivables 2,589 77,752 2,396 

c. Insurance recoveries receivables 602,550 - - 

d. Imprest bank account 206,800 - - 

e. Pledged time deposit 1,350 - - 

$ 931,757 $ 237,820 $ 7,330 

a. The majority is VAT refund receivables and proceeds receivable form disposal of securities. 

b. The majority is interest receivables from time deposits and U.S. Government Agency Bond. 

c. Please refer to Note 33. 

d. The balance of imprest bank account in use of payment of the principle and interest of the domestic 

unsecured bonds issued by the Corporation in 2001. 

e. The collateral for hiring foreign laborers. 

10. INVENTORIES, NET 

U.S. 

Dollars 


2006 2007 2007 

Finished goods $ 3,224,850 $ 3,043,786 $ 93,820 

Raw materials 830,036 563,070 17,356 

Work in process 666,850 393,154 12,118 

Supplies 134,950 83,354 2,569 

Goods in transit 30,214 21,326 657 

4,886,900 4,104,690 126,520 

Less allowance for losses 418,849 313,932 9,676 

$ 4,468,051 $ 3,790,758 $ 116,844 

- 27 -

11. LONG-TERM INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD 


U.S. Dollars 

2006 2007 (Note 4) 

% of % of 2007 

Carrying Owner- Carrying Owner- Carrying 

Value ship Value ship Value 

Equity method (with quoted market prices): 

Global Testing Corporation Limited (GTCL) $ 1,111,881 19.2 $ 928,006 19.2 $ 28,604 

Teapo Electronics Corporation 417,634 10.1 774,931 21.0 23,886 

Chilisin Electronics Corporation 414,036 18.4 625,492 22.2 19,280 

Ralec Electronic Corp. 126,836 7.0 452,277 15.3 13,941 

Equity method (with no quoted market prices): 

Strong Components Co., Ltd. 111,660 31.4 109,475 31.4 3,374 

Belkin International 32,760 46.0 54,311 46.0 1,674 

Greater China Disributors Ltd. (B.V.I.) 66,335 26.7 45,810 27.2 1,412 

Guo Chuang Electronics (Dongguan) Co., Ltd. 15,460 35.0 29,565 35.0 911 

Fubon Venture Capital Corp. 66,425 20.0 - - - 

$ 2,363,027 $ 3,019,867 $ 93,082 

The investments in Global Testing Corporation Limited and Ralec Electronic Corp. in 2007 and the 

investments in Global Testing Corporation Limited, Teapo Electronics Corporation, Chilisin Electronics 

Corporation and Ralec Electronic Corp. in 2006 were accounted for by the equity method since the Group 

had significant influence over them. 

Fubon Venture Capital Corp. went into liquidation in June of 2007. The Group lost significant influence 

over it and the carrying value of the investment was reclassified into financial assets measured at holding 

cost. Other statement is shown in Note 12. 

Yageo Holding (Bermuda) Limited was a 100% equity owner of Guo Chuang Electronics (Dongguan) Co., 

Ltd., and the accounts of financial statements of Guo Chuang Electronics (Dongguan) Co., Ltd. were 

consolidated into the consolidated financial statements of the Corporation. To gain the Group's 

competitive position of passive components in the marketplace, the Group is proactively seeking 

opportunities with other players in the same market for collaboration. In October 2006, Yagelo Holding 

(Bermuda) Limited subsequently disposed 65% ownership of Guo Chuang Electronics (Dongguan) Co., Ltd. 

to Laser Tek Taiwan Co., Ltd. As a result of this disposal, Yageo Holding (Bermuda) Limited's percentage 

of ownership in Guo Chuang Electronics (Dongguan) Co., Ltd. was reduced to 35% and lost its controls 

over Guo Chuang Electronics (Dongguan) Co., Ltd. as a majority shareholder. Beginning in October of 

2006, the accounts of the financial statements of Guo Chuang Electronics (Dongguan) Co., Ltd. will not be 

consolidated into the consolidated financial statements of the Corporation but due to the Group still has 

significant influence over Guo Chuang Electronics (Dongguan) Co., Ltd., Guo Chuang Electronics 

(Dongguan) Co., Ltd. was accounted for as an equity-method investment in the Corporation's consolidated 

financial statements. 

In addition, an equity-method investee, Teapo Electronics Corporation (“Teapo”) merged with Luxon 

Electronics Corporation (“Luxon”) on October 31, 2005, with Teapo as the survivor entity. Teapo and 

Luxon were doing business in the same field. Teapo issued 175,581 thousand common shares to acquire 

Luxon’s 295,855 outstanding shares. The Group’s percentage of ownership in Teapo thus declined from 

18.9% to 10.0% as of December 31, 2005. In 2006 and 2007, the Group acquired additional 430 thousand 

and 38,414 thousand shares of Teapo, respectively, and therefore, as of December 31, 2007, the Group’s 

percentage of ownership in Teapo increased to 21.0%. 

- 28 -

In addition, an equity-method investee, Global Testing Corporation (“GTC”), established Global Testing 

Corporation Private Limited (“GTCPL”) in Singapore upon the shareholders’ approval in their special 

meeting in August 2004 for purposes of trading GTCPL’s stock on the Singapore Exchange Limited 

(“SGX”), GTC’s shareholders swapped their GTC’s shares for GTCPL’s stock at a 5:1 ratio, with “5” 

referring to GTCPL. In March of 2005, Global Testing Corporation Private Limited changed its name to 

Global Testing Corporation Limited (“GTCL”). In April of 2005, the Group had completed the stock swap. 

The Group originally held 47,680 thousand shares of GTC before the stock swap and 238,397 thousand 

shares of GTCL after the swap. GTCL’s shares had been traded on the Singapore Exchange Limited (SGX) 

since August 24, 2005. As of December 31, 2007, the Group held 201,427 thousand shares after selling 

36,970 thousand shares. In 2006, GTCL increased cash capital by issuing 175,000 thousand shares. The 

Group didn’t subscribe the new shares and therefore, the Group’s percentage of ownership in GTCL 

declined to 19.2%. 

The carrying values of the equity method investments and the equity in their net income or net loss were 

based on audited financial statements. 

The market values of shares with quoted market prices of equity-method investments as of December 31, 

2006 and 2007 were NT$1,964,231 thousand and NT$2,188,303 thousand (US$67,451 thousand), 

respectively. 

12. FINANCIAL ASSETS MEASURED AT HOLDING COST AND OTHER FINANCIAL ASSETS 


U.S. Dollars 

2006 2007 (Note 4) 

% of % of 2007 

Carrying Owner- Carrying Owner- Carrying 

Value ship Value ship Value 

Financial assets measured at holding cost - stock 

with no quoted market prices: 

Luminous Town Electric Co., Ltd. $ 134,583 15.8 $ 134,583 15.8 $ 4,148 

Parawin Venture Capital Corp. 76,628 10.0 76,628 10.0 2,362 

Fubon Venture Capital Corp. - - 40,000 20.0 1,233 

King Power International Co., Ltd. 39,208 16.6 33,622 16.6 1,036 

Taiwan High Speed Rail Corp. 212,333 0.4 22,694 0.4 700 

Taiwan Fixed Network Co, Ltd. 317,139 0.6 - - - 

Grace T.H.W. Group 142,042 1.8 - - - 

WK Technology Fund Corp. 37,986 2.9 - - - 

Apex Venture Capital Corp. 36,088 9.4 - - - 

FAT Venture Capital Corp 30,389 12.0 - - - 

Others 12,482 - 12,482 - 385 

1,038,878 320,009 9,864 

Other long-term investments-foreign funds 58,531 - - 

$ 1,097,409 $ 320,009 $ 9,864 

The equity securities and foreign funds with no quoted market prices and with fair values that could not be 

reliably measured, including stocks traded on emerging stock, are measured at holding cost. 

To focus on the passive components business, the Group actively sold its assets that are not relevant to the 

core business. On the basis of some objective evidence obtained, the Group recognized impairment loss 

amounted to NT$218,042 thousand on financial assets measured at holding cost and other long-term 

investments in 2006. Meanwhile, the Group actively explored other opportunities to dispose those 

investments. In 2007, the Group entirely sold the common stocks of FAT Venture Capital Corp., WK 

Technology Fund Corp., Apex Venture Corp., Capital Grace T.H.W. Group and foreign funds to Primasia 

ant Bridge No.1 Greater China Secondary Fund, L.P.. The lump sum price and net loss on the disposal 

were NT$271,431 thousand (US$8,366 thousand) and NT$26,684 thousand (US$822 thousand), 

respectively. 

- 29 -

The Group participated in the public tender offer of Taiwan Fixed Network Co., Ltd. and entirely sold the 

common stocks (38,210 thousand shares) held by the Group in NT$8.30 (in dollars) per share with a net loss 

of NT$952 thousand (US$29 thousand). 

On the basis of financial statements and other objective evidence obtained, the Corporation recognized an 

impairment loss of NT$189,639 thousand (US$5,845 thousand) on the investment in Taiwan High Speed 

Rail Corp., included in nonoperating expenses and losses - impairment and liquidation loss on financial 

assets measured at holding cost and other long-term investments. Fubon Venture Capital Corp. went into 

liquidation in June of 2007. Prior to the liquidation, the carrying value of this investment was NT$63,116 

thousand (US$1,945 thousand). In the liquidation process in 2007, the Corporation received cash 

dividends of NT$10,761 thousand (US$332 thousand) as a deduction of the carrying value. In addition, on 

the basis of certain information provided by Fubon Venture Capital Corp., the Corporation expected and 

recognized the loss generated from the liquidation is about NT$12,355 thousand (US$381 thousand), 

included in nonoperating expenses and losses - impairment and liquidation loss on financial assets measured 

at holding cost and other long-term investments. 

In June of 2006, King Power International Co., Ltd. ("King Power"), one of the Group's investees, increased 

its capital by issuing additional common stocks. Because the Group did not participate any additional 

common stock purchase from this transaction, the Group's ownership in King Power is now decreased from 

18.0% to 16.6%. Furthermore, the Group is no longer taking seats on the board of directors for King 

Power. Subsequent to an evaluation process, the Group determined that investment in King Power should 

be reclassified as financial assets measured at holding cost as the Group does not have any significant 

influence over King Power's operation. In 2007, King Power distributed cash dividends of 2006, the 

Group received NT$5,586 thousand (US$172 thousand) as a deduction to investment cost. 

13. INVESTMENTS IN REAL ESTATE 

U.S. 

Dollars 


2006 2007 2007 

Cost $ 201,005 $ - $ - 

Less - accumulated depreciation 9,515 - - 

- accumulated impairment 24,217 - - 

$ 167,273 $ - $ - 

In July of 2007, the subsidiary - Kuo Chung Development Limited signed a real estate transaction contract 

with Mrs. Yu-Chin Li to sell the real estate located on Road Songqin for NT$200,000 thousand (US$6,165 

thousand), Kuo Chung Development Limited completed the real estate transfer in October of 2007, and the 

proceeds was fully collected prior to November 31, 2007. The gain on sale was NT$25,147 thousand 

(US$775 thousand), which represents the selling price less its carrying value and relevant expenditure, 

classified as nonoperating expenses and losses - investment losses (net). 

- 30 -

14. BONDS MEASURED AT AMORTIZED COST 

In November of 2006, Kuo Shin Investment Limited purchased a subordinated bonds issued at par with an 

aggregate value of NT$50,000 thousand. The subordinated bonds was issued by Ta Chong Bank with no 

maturity due date. The terms further states that Ta Chong Bank can exercise its right of redemption at the 

Bond's principal amount with interest payable since November 2016. The interest payable is calculated 

based on an interest rate set at 5.5% per annum in a period of ten years after the Bond's issuance. After ten 

years from the date of issuance, if Ta Chong Bank does not redeem the bonds, the coupon interest rate will 

raise to 6.5% per annum. If Ta Chong Bank is unable to make profits within a year as stated in the Bank's 

financial report and is unable to issue dividends associated with the Bank's common stocks, Ta Chong Bank 

can be exempted from paying interest payments as stated in the Bond's agreement. As a result of this, any 

interest payments not received by Kuo Shin Investment Limited were not accounted for by Kuo Shin 

Investment Limited. 

15. PROPERTY, PLANT AND EQUIPMENT 

Accumulated depreciation and accumulated impairment consisted of: 

U.S. 

Dollars 


2006 2007 2007 

Accumulated depreciation 

Buildings $ 1,491,129 $ 1,698,296 $ 52,347 

Machinery and equipment 7,178,281 8,696,665 268,060 

Miscellaneous equipment 1,004,276 1,166,048 35,941 

$ 9,673,686 $ 11,561,009 $ 356,348 

Accumulated impairment 

Machinery and equipment $ 302,891 $ 281,496 $ 8,677 

Miscellaneous equipment 1,086 1,086 33 

$ 303,977 $ 282,582 $ 8,710 

Depreciation expenses for property, plant and equipment, properties leased to others and idle assets were 

NT$2,340,526 thousand and NT$2,630,479 thousand (US$81,080 thousand) for the years ended December 

31, 2006 and 2007, respectively. Of the depreciation expenses for the years ended December 31, 2006 and 

2007, NT$49,764 and NT$97,838 thousand (US$3,016 thousand) was included in nonoperating expenses 

and losses - loss on work stoppages. 

The interest expenses before interest rate capitalization were NT$444,368 thousand in 2006 and 

NT$434,379 thousand (US$13,389 thousand) in 2007. In 2006 and 2007, cost of properties included 

capitalized interest of NT$37,295 thousand and NT$38,743 thousand (US$1,194 thousand), respectively, 

and capitalization rates ranged from 2.40% to 6.26% and 1.68% to 6.48%, respectively. 

- 31 -

The Corporation incurred loss in connection with a fire damage in the capacitor line factory in village of 

Dashe, Kaohsiung County, on September 25, 2006. The Corporation investigated the damage status and 

invited experts to appraise the indemnity. The loss of property, plant and equipment destruction due to the 

fire damage was amounted to NT$456,165 thousand. Of this amount, NT$148,370 thousand was 

identified and recognized as the carrying value of the fully-destroyed fixed assets. Both the cost and the 

accumulated depreciation of the fully-destroyed fixed assets were removed from the Corporation’s account 

balances of property, plant, and equipment in 2006. The amount of loss recognized in connection with the 

partially-damaged fixed assets was estimated on the basis of expected repair and maintenance expenditure. 

This amount was estimated to be NT$307,795 thousand and recognized as accumulated impairment on the 

Corporation’s account balances of property, plant, and equipment. In 2006 and 2007, the Corporation 

disposed a portion of partially-damaged fixed assets and thus deducted the corresponding accumulated 

impairment of NT$3,818 thousand and NT$124,443 thousand (US$3,836 thousand), respectively, from its 

account balances of property, plant, and equipment. As of December 31, 2007, the balance of accumulated 

impairment of property, plant and equipment was NT$179,534 thousand (US$5,534 thousand). Other 

summary is shown in Note 33. 

European ferrite segment recognized accumulated impairment of NT$103,048 thousand (US$3,176 

thousand) on machinery and equipment in 2007 due to a reorganization plan. Other summary is shown in 

Note 30. 

The Group estimated the recoverable amounts of idle assets, and based on the estimates, impairment loss of 

NT$205,988 thousand and NT$159,504 thousand (US$4,916 thousand) were recognized in 2006 and 2007, 

respectively, included in nonoperating expenses and losses - impairment loss on idle assets. Other 

summary is shown in Note 30. 

16. PROPERTIES LEASED TO OTHERS 

U.S. 

Dollars 


2006 2007 2007 

Land $ 3,654,444 $ 29,140 $ 898 

Buildings 1,122,979 164,520 5,071 

Less - accumulated depreciation 179,499 31,917 984 

accumulated impairment 255,252 - - 

688,228 132,603 4,087 

$ 4,342,672 $ 161,743 $ 4,985 

To focus on the passive components business, the Corporation actively sold its assets that were not relevant 

to the core business in 2007: 

a. In February of 2007, the Corporation signed a real estate contract with Sinyi Realty Inc. to sell the land 

and building located on Sin-Yi Rd. to Sinyi Realty Inc. for NT$4,995,000 thousand (US$153,962 

thousand). The Corporation completed the real estate transfer in May of 2007 and the proceeds was 

fully collected as of December 31, 2007. The gain on sale was NT$666,363 thousand (US$20,540 

thousand), which represents the selling price less its carrying value and relevant expenditure, classified 

as nonoperating income and gains - gain on disposal of property, plant and equipment and properties 

leased to others. The related repayment of bank loans which were secured by foregoing properties was 

disclosed in Note 20. 

- 32 -

. In August of 2007, the Corporation signed a real estate contract with Da-Lin Asset Corporation to sell 

the land and building located on Tianmu for NT$120,000 thousand (US$3,699 thousand). The 

Corporation completed the real estate transfer in September of 2007 and the proceeds was fully 

collected as of December 31, 2007. The gain on sale was NT$81,350 thousand (US$2,507 thousand), 

which represents the selling price less its carrying value and relevant expenditure, classified as 

nonoperating income and gains - gain on disposal of property, plant and equipment and properties 

leased to others. 

17. PLEDGED ASSETS 

U.S. 

Dollars 


2006 2007 2007 

Pledged time deposit $ 196,544 $ 89,091 $ 2,746 

Imprest bank account 2,200 - - 

$ 198,744 $ 89,091 $ 2,746 

On August 15, 2006, the Corporation furnished the court a time deposit of NT$141,300 thousand (recorded 

as pledged time deposit as of December 31, 2006) as collateral for petition of provisional attachments of 

properties of Advanced Connectek, Inc. and other joint defendants in an amount up to NT$423,943 

thousand in connection with the torts and infringement of the trade secrecy involved by Advanced 

Connectek, Inc. and other joint defendants. After the defendants provided a time deposit of NT$423,943 

thousand as bailment, the court canceled the provisional attachments. On September 5, 2006, the 

Corporation filed a civil lawsuit against Advanced Connectek, Inc. claiming for compensation of damages 

in the amount of NT$423,943 thousand due to its torts and infringement of the trade secrecy of the 

Corporation. Furthermore, the Corporation reported to the Fair Trade Commission of Advanced 

Connectek, Inc.’s conduct of unfair competition. On April 24, 2007, the Corporation came to a settlement 

agreement with Advanced Connectek, Inc. and other joint defendants. Afterwards, the Corporation 

withdrew the lawsuit immediately and withdrew said pledged time deposit from the court.. 

On November 1, 2007, the Corporation furnished the court a time deposit of NT$33,400 thousand (recorded 

as pledged time deposit as of December 31, 2007), as collateral for petition of provisional attachment of 

properties of Cai-Bao Jiang, the chairman of Ta-I Technology Co., Ltd., in an amount up to NT$100,000 

thousand in connection with the libel and torts committed by Cai-Bao Jiang, while Taipei District Court 

awarded the provisional attachment. The Corporation filed lawsuits of libel in criminal and torts in civil 

against Cai-Bao Jiang which are proceeded by Taoyuan District Prosecutors Office and Taiwan High Court 

Civil Division respectively. 

The rest of pledged assets are pledged as collateral for credit guarantees. 

- 33 -

18. SHORT-TERM LOANS 

U.S. 

Dollars 


2006 2007 2007 

Unsecured loans. Interest bearing - from 1.83% to 5.92% in 

2006 and 1.46% to 5.62% in 2007 $ 3,911,414 $ 3,318,765 $ 102,296 

Letters of credit. Interest bearing - from 1.38% to 4.46% in 

2006 and 1.47% to 1.69% in 2007 33,391 250,927 7,734 

Zero-interest government loans 6,568 1,050 32 

$ 3,951,373 $ 3,570,742 $ 110,062 

19. COMMERCIAL PAPER ISSUED 

Commercial paper with one-year maturities were issued at discount rates from 1.86% to 2.05% as of 

December 31, 2006 and from 2.40% to 2.64% as of December 31, 2007. 

As of December 31, 2006 and 2007, the carrying values of the commercial paper issued were net of 

unamortized discounts of NT$2,038 thousand and NT$770 thousand (US$24 thousand), respectively. 

20. LONG-TERM BANK LOANS 

U.S. 

Dollars 


2006 2007 2007 

Bank loans $ 5,520,451 $ 1,601,467 $ 49,362 

Less - current portion 504,196 129,516 3,992 

$ 5,016,255 $ 1,471,951 $ 45,370 

To meet its working capital and capital expenditure requirements, the Group obtained loans from several 

banks. The terms of related loans are summarized as follows: 

a. On January 22, 2007, the Corporation signed an NT$4,500,000 thousand (US$138,705 thousand) 

syndicated loan agreement with Hua Nan Bank and ten other financial institutions. The terms and the 

amount drawn down as of December 31, 2007 are summarized as follows: 

Credit Lines Drawn Amount Credit Period Interest Rate Repayment Agreement 

NT$ 4,500,000 NT$ 400,000 Five years after 

(US$ 12,329 ) the date of 

contract 

Fixed rate based on a Eight quarterly 

specific average rate decreases in credit 

of notes transacted lines starting from 

in Taiwan 

three and a fourth 

years after the first 

drawdown date 

- 34 -

In accordance with the loan agreement, the Corporation should collateralize the building, machinery and 

equipment of a factory located in the Nan-Zi Branch and a capacitor-line factory in village of Dashe, 

Kaohsiung County. However, since the capacitor-line factory in village of Dashe, Kaohsiung County 

suffered a fire loss in September of 2006, the collateral appraisal process can not begin. The 

syndicated banks agreed the Corporation to secure the loan by the real estate held by its subsidiaries and 

the common stocks held by the Group in exchange for the capacitor-line factory in village of Dashe, 

Kaohsiung County. When the capacitor-line is reconstructed and operation goes back to normal, the 

banks will take the appraisal process and registration to the mortgage. The Corporation will maintain 

the Group’s semiannual and annual current, debt and interest coverage ratios at percentages specified in 

the agreement. 

b. In December of 2005, the Corporation signed an NT$2,160,000 thousand syndicated loan agreement 

with SCSB and four other financial institutions. The terms were summarized as follows: 

Credit Lines Credit Period Interest Rate Repayment Agreement 

NT$ 2,160,000 Five years after 

the first 

drawdown date 

Fixed rate based on a specific 

average rate of notes 

transacted in Taiwan 

Six semiannual decreases in 

credit lines starting from two 

and a half years after the first 

drawdown date 

As of December 31, 2006, NT$2,160,000 thousand loan had been totally drawn by the Corporation. 

As of December 31, 2007, the Corporation didn’t draw the credit line. Because the credit line still 

exists, the Corporation secured the loan by the main office building and a factory of the Corporation 

located in Hsin Tien in Taipei County, the coating factory located in Ying Ge in Taipei County and land, 

building, machinery and equipment in the Kaohsiung I and II factories (“Kaohsiung factories”). The 

Corporation will maintain the Group’s semiannual and annual current, debt and interest coverage ratios 

at percentages specified in the agreement. 

c. On August 7, 2006, the Corporation signed an NT$3,500,000 thousand syndicated loan agreement with 

Hsinchu International Bank (“HiBank”) and the Entie Commercial Bank. This loan was secured by an 

office building located in the Shin-Yi District in Taipei City. 

The amount drawn down as of December 31, 2006 was NT$2,395,600 thousand. The Corporation 

signed a real estate transaction contract with Sinyi Realty Inc. in February of 2007 to sell the collateral 

to Sinyi Realty Inc. The Corporation repaid the drawn principle of NT$2,337,200 thousand 

(US$72,040 thousand) and interest of NT$9,888 thousand (US$305 thousand) through the syndicated 

bank of Sinyi Realty Inc. on April 12, 2007 and voluntarily terminated the credit line with Hsinchu 

International Bank and EnTie Commercial Bank. 

d. On November 16, 2004, an NT$2,500,000 thousand syndicated loan agreement was signed with Chiao 

Tung Bank (CTB) and nine other financial institutions. Interest on the loan is at a fixed rate based on a 

specific average rate of notes transacted in Taiwan. The loan is repayable in lump sum in four years 

after the first drawdown date. Chiao Tung Bank merged with International Commercial Bank of China 

in August of 2006 and was renamed as Mega International Commercial Bank. The Mega International 

Commercial Bank endorsed the original contract on the credit line of NT$2,500,000 thousand. 

However, the Corporation had totally repaid the drawn amount voluntarily in September of 2006 and 

canceled this credit line in December of 2006. The liens on stocks which the Corporation and its 

subsidiaries pledged for the loan were all lifted in March of 2007. 

e. The loan agreement with TCB amounting to NT$2,965,000 thousand, took effect in January of 2004. 

Credit period of this credit line is from January of 2004 to January of 2019. Interest is at a floating rate 

based on the index rate of TCB’s time deposit. 

- 35 -

The agreement on the NT$2,965,000 thousand loan was a revision of an agreement on a NT$3,500,000 

thousand loan obtained in 2001. The NT$3,500,000 thousand loan is secured by an office building 

located in the Shin-Yi District in Taipei City. However, the Corporation had totally repaid the drawn 

amount voluntarily and canceled this credit line in August of 2006. 

f. On December 31, 2002, an NT$7,000,000 thousand syndicated loan agreement was signed with CTB 

and seven other financial institutions. This loan was secured by certain land, building, machinery and 

equipment in the Kaohsiung III factory and the Nan-Zi branch and land and building held by 

subsidiaries. The syndicated loan originally had two credit lines - NT$3,700,000 thousand and 

NT$3,300,000 thousand. The credit line of NT$3,300,000 thousand was canceled in October of 2004. 

Interest rate on the credit line of NT$3,700,000 thousand is at a floating rate based on the rate of the 

Chunghwa post office’s two-year time deposit. However, the Corporation had totally repaid the drawn 

amount voluntarily and canceled this credit line in July of 2006. 

g. On May 20, 2003, an NT$400,000 thousand loan agreement was signed with CTB. This loan was 

secured by certain machinery in the Kaohsiung III factory and the Nan-Zi branch. The proceeds of this 

loan were for the purchases of automated machinery and equipment. Interest on the loan is at a 

floating rate based on the rate of the Chunghwa post office’s two-year time deposit. However, the 

Corporation had totally repaid the drawn amount voluntarily and canceled this credit line in August of 

2006. 

h. In March of 2006, Yageo Electronics (China) Co., Ltd., obtained a three-year credit line of 

RMB100,000 thousand (or equivalent U.S. dollars) from China Construction Bank to buy fixed assets. 

The principal of this loan is repayable at maturity. The drawdown amount was US$9,000 thousand. 

As of December 31, 2007, Yageo Electronics (China) Co., Ltd. had repaid US$3,000 thousand of the 

loan and the balance of drawn amount is US$6,000 thousand (NT$194,658 thousand). Interest rate is 

at a floating rate based on one-year LIBOR. 

i. On June 23, 2004, Compostar Technology Co., Ltd. signed the NT$1,400,000 thousand and US$12,000 

thousand loan agreements with China Trust Bank and 12 other financial institutions. The terms and 

drawdown amounts as of December 31,2006 and 2007 are summarized as follows: 

Credit Lines 

December 31, 

2006 

Drawn Amount 

December 31, 

2007 Credit Period Interest Rate Repayment Agreement 

1) NT$ 900,000 NT$ 417,319 NT$ 41,511 Five years after 

the first 

drawdown 

date 

2) US$ 12,000 

thousand 

or equivalent 

NT dollars 

243,946 

(US$ 5,187 ) 

thousand and 

NT$ 74,873 


160,896 Five years after 

the first 

drawdown 

date 

3) NT$ 500,000 - - Three years after 

the contract 

signing date 

NT$ 661,265 NT$ 202,407 

(US$ 6,239 ) 

Floating rate based 

on a specific 

average rate of 

notes transacted 

in Taiwan 


on the LIBOR 


on a average rate 

of bank 

Ten semiannual 

installments starting six 

months after the first 

drawdown date 

Nine semiannual 

installments starting 

from one year after the 

first drawdown date 

Drawdown amounts 

repayable on each 

maturity. However, 

the Corporation can 

circularly draw on and 

repay all unpaid 

drawndown amounts on 

June 23, 2007. 

- 36 -

The agreements on the above loans included the following terms: 

1) Securing the loan with certain land, building, machinery and equipment owned by Compostar; 

2) Maintaining Compostar’s current, debt, interest coverage ratios and tangible equity, as shown in 

semiannual standalone financial statements and annual consolidated financial statements, at 

percentages specified in the agreements; 

Under the above loan contracts, the amount repayable by December 31, 2008 is NT$41,511 thousand 

(US$1,279 thousand) for the NT$900,000 credit line and NT$85,705 thousand (US$2,642 thousand) for 

the US$12,000 thousand credit line, included in the current portion of long-term liabilities. 

j. On February 15, 2007, Compostar Technology Co., Ltd. signed the NT$900,000 thousand loan 

agreements with Ta Chong Bank and 7 other financial institutions. The terms and drawdown amounts 

are summarized as follows: 

Credit Lines Drawn Amount Credit Period Interest Rate Repayment Agreement 

1) NT$ 600,000 

or equivalent 

US$18,000 

thousand/ 

JPY2,130,000 


NT$ 

600,000 Five years after 

the first 

drawdown 

date 

Fixed rate based on 

a specific average 

rate of notes 

transacted in 

Taiwan 

Five semiannual 

installments starting 

three years after the 

first drawdown date 

2) NT$ 300,000 200,000 Five years after 

the first 

drawdown 

date with 

decreasing 

credit line 

NT$ 800,000 

(US$ 24,658 ) 

Fixed rate based on 

a specific average 

rate 

Drawdown amounts 

repayable on each 

maturity 

k. In May of 2006, Chipcera Technology Co., Ltd. signed an NT$4,400 thousand loan agreement with 

Taiwan Business Bank (“TBB”) for the purpose of research and development expenditure. Interest 

rate on the loan is at a fixed rate of 1% per annum. The loan is repayable in five seasonal installments 

starting from October of 2006. As of December 31, 2006, the drawn amount was NT$3,520 thousand. 

Chipcera Technology Co., Ltd. had totally repaid the drawn amount in October of 2007. 

l. Chipcera Technology Co., Ltd. signed the total amount of NT$11,502 thousand loan agreement with 

TBB in November of 2004 and TCB in January of 2005. The drawn amount is NT$6,702 thousand 

and NT$4,402 thousand (US$136 thousand) as of December 31, 2006 and 2007. Interest rate on the 

loan is at a fixed rate of 8.78% per annum. Under the loan contract, the amount repayable by 

December 31, 2008 is NT$1,193 thousand (US$37 thousand) for TBB and NT$1,107 thousand (US$34 

thousand) for TCB, included in the current portion of long-term liabilities. 

m. Yageo Europe GmbH (eliminated after being merged into Vitrohm Holding GmbH in 2006) obtained a 

loan of EUR9,800 thousand from the IKB Deutsche Industriebank based in Germany. As of December 

31, 2005, the loan balances were EUR3,050 thousand. Yageo Europe GmbH sold the collateral assets 

at the end of 2005 and the drawndown amount of EUR3,050 thousand was fully repaid in January of 

2006. 

- 37 -

n. On August 20, 2003, Phycomp Electronics (Su Zhou), Ltd. obtained a five-year loan of RMB250 

million from the Industrial and Commercial Bank of China to buy fixed assets, with annual floating 

interest rate based on one-year LIBOR. The loan was originally guaranteed by Yageo Electronics 

(China), but after the liquidation of Phycomp Electronics (Su Zhou), Ltd. upon its merger with Yageo 

Electronics (China), the loan was incepted by Yageo Electronics (China) accordingly. However, Yageo 

Electronics (China) had totally repaid the drawn amount voluntarily and canceled this credit line in 

October of 2006. 

21. BONDS 

U.S. 

Dollars 


2006 2007 2007 

The fourth unsecured zero coupon foreign convertible 

bonds $ - $ 4,446,144 $ 137,045 

The third unsecured zero coupon foreign convertible bonds 84,587 - - 

5-year unsecured domestic bonds 600,000 - - 

684,587 4,446,144 137,045 

Less: Current portion 600,000 - - 

$ 84,587 $ 4,446,144 $ 137,045 

a. On June 11, 2007, the Corporation issued seven-year unsecured zero-coupon foreign convertible bonds 

which were subscribed by the affiliates of the Corporation’s strategic investor, Kohlberg Kravis Roberts 

& Co., with aggregate face value of US$230,000 thousand. The bondholders may convert the bonds 

into common stocks at the fixed exchange rate of NT$33.01 (in dollars) to US$1 (in dollars), and the 

conversion price is NT$16.15 (in dollars) from July 12, 2007 to June 1, 2014, except during a closed 

period. Upon any dilutive events or any other capital restructure events which will cause the 

outstanding shares of the Corporation to change, including issuing new shares, recapitalization of 

retained earnings and similar transactions affecting the common shares, the conversion price shall be 

adjusted downward in accordance with the indenture. The conversion price is prohibited to adjusted 

upward. If the average of the trading prices in a 14 consecutive trading days period (none of which 

shall fall within a closed period) immediately prior to any anniversary date of the issuance of the bonds 

(a “reset date”) is less than the adjusted conversion price after adjustments of all previous resets on such 

date, the adjusted conversion price shall be adjusted to the reset trading price. At any time after the 

issuance of the bonds, if the Corporation distributes any cash dividends, the conversion price shall be 

adjusted as of the relevant dividend record date in accordance with the indenture. Because the 

Corporation distributed cash dividends of earnings in 2006, the conversion price was adjusted 

downward to NT$15.70 (in dollars) on July 22, 2007. Prior to the fourth anniversary of the issue date, 

when the closing price of the shares for each trading day during 14 consecutive trading days period is at 

least 145% of the adjusted conversion price, and subsequent to the fifth to the seventh years, the closing 

price of the shares for each trading day during 14 consecutive trading days period is at least 120%, 

130% and 140% of the adjusted conversion price, the Corporation can redeem the bonds from the 

bondholders by the amount specified in contract terms and conditions. The Corporation should 

redeem all the bonds at face value at maturity on June 11, 2014. 

- 38 -

The Corporation separates the conversion option embedded in the convertible bonds from the liability 

components in accordance with Statements of Financial Accounting Standards No. 36, “Disclosure and 

Presentation of Financial Instruments,” to present the liability and equity components. The equity 

component is assigned to NT$2,749,975 thousand (US$84,763 thousand), which represents the bond 

initial carrying value less the fair value of the liability component, net of the allocated bond issue costs., 

classified as capital surplus - stock options. The liability component is comprised of the host debt 

instrument and the price-reset derivative financial instrument. The host debt instrument was initially 

recognized at NT$4,326,375 thousand (US$133,353 thousand), which represents its fair value on June 

11, 2007 (issue date), net of the allocated bond issue costs. The effective interest rate is 8.06%. From 

the bond issue date to December 31, 2007, the bond discount amortized to interest expenses was 

NT$195,805 thousand (US$6,035 thousand), included in non-operating expenses and losses - interest 

expense. The foreign exchange gain due to exchange rate fluctuation was NT$76,036 thousand 

(US$2,343 thousand), included in nonoperating expenses and losses - foreign exchange loss (net). The 

price-reset derivative financial instrument was initially recognized at NT$509,789 thousand (US$15,713 

thousand), which represents its fair value on the issue date. As of December 31, 2007, the Corporation 

recognized a financial liability valuation loss of NT$96,836 thousand (US$2,985 thousand) based on the 

valuation, included in nonoperating expense and losses - financial liability valuation loss. As of 

December 31, 2007, the fair value of price-reset derivative financial instrument was NT$606,625 

thousand (US$18,698 thousand), classified as long-term liabilities - financial liabilities at fair value 

through profit or loss. 

b. On December 30, 2003, the Corporation issued five-year unsecured zero coupon foreign convertible 

bonds with aggregate face value of US$150,000 thousand. The bondholders may convert them into 

capital stock at the fixed exchange rate of NT$34.028 (in dollars) to US$1 (in dollars), and the 

conversion price is NT$17.135 (in dollars) from January 30, 2004 to December 20, 2008. However, 

on June 30, 2005 and June 30, 2006, the conversion price was reset down to NT$15.55 (in dollars) and 

NT$13.708 (in dollars) based on the issue terms, respectively. Other bond redemption terms are as 

follows: (a) bondholders may request the Corporation to redeem the bonds on December 30, 2005 at 

99% of face value (included in the current portion of long-term liabilities since December 30, 2004 to 

December 30, 2005); (b) the closing price of the shares for 20 consecutive trading days between June 30, 

2004 and December 30, 2008 is at least 120% of the conversion price; or (c) at least 90% of the 

principal amount of the convertible bonds has already been converted, redeemed or purchased and 

canceled. The Corporation should redeem all the bonds at 97.53% of face value at maturity on 

December 30, 2008. 

As of December 31, 2004, convertible bonds with aggregate face value of US$10,485 thousand had 

been converted into 208,220 thousand common shares of the Corporation, and the capital surplus - 

premium from conversion of convertible bonds was NT$135,260 thousand. Under a resolution 

approved at the stockholders’ meeting on June 20, 2005, the capital surplus generated from premium 

from conversion of convertible bonds would be used to offset deficit. No bond was converted in 2005. 

On December 30, 2005, the Corporation redeemed the bonds with aggregate face value of US$136,420 

thousand at the bondholders’ request and bond redemption terms. In the year ended December 31, 

2006, the convertible bonds with aggregate face value of US$500 thousand were converted into capital 

stock of NT$12,412 thousand and capital surplus - paid-in capital from conversion of convertible bonds 

of NT$3,972 thousand. The stock issuance date was January 17, 2007. As of July 31, 2007, the foreign 

convertible bonds with aggregate face value of US$2,595 thousand had been converted into NT$64,417 

thousand (US$1,986 thousand) of capital stock and NT$20,790 thousand (US$641 thousand) of capital 

surplus - paid-in capital from conversion of convertible bonds. 

- 39 -

c. Five-year unsecured domestic bonds with an aggregate face value of NT$2,000,000 thousand were 

issued in 2001. Those bonds with aggregate values of NT$1,400,000 thousand and NT$600,000 

thousand were transacted in December of 2001 and January of 2002, respectively. Interest on these 

bonds is 3.4% per annum. Under the related contract, the Corporation should repay those bonds with 

aggregate value of NT$1,400,000 thousand in December of 2006 and NT$600,000 thousand in January 

of 2007. In December of 2004, the Corporation repaid NT$100,000 thousand of the bonds with 

aggregate value of NT$1,400,000 thousand matured in December of 2006. The remainder with 

aggregate value of NT$1,300,000 thousand matured in December of 2006 and NT$600,000 thousand 

(US$18,494 thousand) matured in January of 2007 are repaid in December of 2006 and in January of 

2007, respectively. 

22. STOCKHOLDERS’ EQUITY 

On August 3, 2001, the Corporation issued 40,000 thousand global depositary receipts (GDRs) representing 

200,000 thousand new common shares, with net proceeds of NT$4,573,292 thousand. As of December 31, 

2007, there were 19,612 thousand units of GDRs outstanding. 

The Corporation acquired 25,047 thousand shares of Chipcera’s outstanding shares by issuing 16,556 

thousand of the Corporation’s common shares at NT$12.40 (in dollars) per share on July 1, 2006 (stock 

issuance date). Thus, the Corporation recognized the issue price in excess of par value of NT$39,734 

thousand, net of the issue cost of NT$54 thousand, as capital surplus - paid-in capital in excess of par value 

of NT$39,680 thousand. 

The Corporation’s Articles of Incorporation provide that prior years’ deficit should be deducted from annual 

net income. From the remainder, 10% should be appropriated as legal reserve. Under a resolution 

approved at the stockholders’ meeting, the rest of the total unappropriated earnings may be reserved for 

business operations or allocated as follows: 

a. At least 2% as employees’ bonus; 

b. Up to 2% as remuneration of directors and supervisors; and 

c. The remainder as dividends. 

These appropriations and other distribution of earnings are approved by the stockholders in the following 

year and given effect to in the financial statements of that year. 

The Corporation’s dividend policy takes into account the Corporation’s current and future competitiveness 

in the domestic and foreign markets, the investment environment and cash requirements. The policy 

provides that above 80% of any earnings distribution could be in the form of shares of stock if the 

Corporation needs to undertake a major expansion project; otherwise, earnings distribution may be in cash. 

- 40 -

The stockholders had approved the Corporation’s appropriations and other distribution for earnings of 2005 

and 2006 on June 14, 2006 and June 13, 2007, respectively. It is summarized as follows: 

Appropriation 

Earnings Per Share 


U.S. 

Dollars 

(Note 4) 

New Taiwan 

Dollars 

U.S. 

Dollars 

(Note 4) 

2005 2006 2006 2005 2006 2006 

Legal reserve $ 30,058 $ 197,534 $ 6,089 $ - $ - $ - 

Provision (reversal) of special 

reserve 270,519 (270,519 ) (8,338 ) - - - 

Cash dividends - 1,211,186 37,333 - 0.5 0.02 

Remuneration to directors and 

supervisors - cash - 40,966 1,263 - - - 

Bonus to employees - cash - 102,416 3,157 - - - 

There was no appropriation for bonus to employees and remuneration to directors and supervisors of 

earnings of 2005. If the appropriation for bonus to employees and remuneration to directors and 

supervisors of earnings of 2006 were recorded as expenses in 2006, the basic and diluted earnings per share 

of 2006 would be decreased from NT$0.82 (in dollars) to NT$0.76 (in dollars). 

As of April 16, 2007, the date of the accompanying independent auditors’ report, the Corporation’s 

appropriations for earnings of 2007 had not yet been approved by the board of directors. Information on 

earnings appropriation can be accessed online through the Market Observation Post System on the Web site 

of the Taiwan Stock Exchange Corporation. 

A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity 

(for example, unrealized loss on financial instrument, cumulative translation adjustments and net loss not 

recognized as pension cost), shall be made from unappropriated earnings pursuant to existing regulations. 

Any special capital reserve appropriated may be reserved to the extent that the net debit balance reserves. 

Under relevant regulations, all components of capital surplus, except capital surplus from equity-method 

investees, may be used to offset deficit. However, only paid-in capital from the issue of stock in excess of 

par value and donated surplus may be capitalized (distributed as stock dividends). Equity in the changes in 

capital surplus reported by equity-method investees should not be used in any way. 

The Company Law provides that legal reserve should be appropriated until the reserve equals the 

Corporation’s paid-in capital. This reserve may only be used to offset a deficit. When the balance of the 

reserve exceeds 50% of the paid-in capital, 50% may be distributed as stock dividends. 

Under the Integrated Income Tax System, which took effect on January 1, 1998, ROC resident stockholders 

are allowed a tax credit for their proportionate share of income tax paid by the Corporation on earnings 

generated since January 1, 1998. An imputation credit account is maintained by the Corporation to 

monitor income taxes paid and the tax credit allocated to each stockholder. 

- 41 -

23. STOCK-BASED COMPENSATION PLAN 

Upon the approval by the board of directors on August 18, 2003, the Corporation adopted a stock option 

plan (the “Plan A”) to grant employees 150,000 thousand units of stock options. Each option represented 

one share of the Corporation’s common stock. The Plan was approved by the Securities and Futures 

Bureau, Ministry of Finance, R.O.C. On September 15, 2003 and March 31, 2004, stock options 

consisting of 100,000 thousand units and 50,000 thousand units, respectively, had been issued, with exercise 

prices of NT$13.8 (in dollars) and NT$17.9 (in dollars), respectively. However, the exercise prices of 

stock options had been revised to NT$13.6 (in dollars) and NT$17.5 (in dollars) in 2005, respectively. The 

term of these options is six years. Half of these options may be exercised after two years from the grant 

date or the options may all be exercised after three years from the issuance date. If the number of the 

Corporation’s common shares changes, the exercise price will be revised in terms of the Plan A. 

Upon the approval by the board of directors on November 30, 2007, the Corporation adopted a stock option 

plan (the “Plan B”) to grant employees 100,000 thousand units of stock options. Each option represented 

one share of the Corporation’s common stock. The Plan was approved by the Securities and Futures 

Bureau, Ministry of Finance, ROC. On December 20, 2007, stock options consisting of 100,000 thousand 

units had been issued entirely, with exercise prices of NT$10.25 (in dollars). The term of these options is 

ten years. 10%, 20%, 40% and 70% of these options may be exercised after two years, three years, four 

years and five years from issuance date, respectively, the options may all be exercised after six years from 

the issuance date. If the number of the Corporation’s common shares changes, the exercise price will be 

revised in terms of the Plan B. 

The Corporation’s stock options in 2006 and 2007 were as follows: 

2006 2007 

Weighted-average 

Weighted-average 

Thousand Exercise Price Thousand Exercise Price 

Stock Option Unit (in Dollars) Unit (in Dollars) 

Outstanding units - beginning of year 150,000 NT$14.90 133,597 NT$15.06 

Granted units - - 100,000 NT$10.25 

Exercised units (141 ) NT$13.60 (9,565 ) NT$13.60 

Eliminated units - - - - 

Forfeited units (16,262 ) NT$13.60 (3,402 ) NT$14.17 

Outstanding units - end of year 133,597 NT$15.06 220,630 NT$12.96 

Exercisable units, end of year 108,597 120,630 

The Corporation calculated the fair value of the 50,000 thousand and 100,000 thousand units of the stock 

options granted in 2004 and 2007 using the Black-Scholes model. The fair value and related assumptions 

were as follows: 

50,000 Thousand Units of 

Stock Options Granted in 2004 

100,000 Thousand Units of 

Stock Options Granted in 2007 

Fair value: NT$286,000 thousand NT$319,000 thousand 

Exercise price: 

NT$17.9 (in dollars) per share 

prior to amendment 

NT$10.25 (in dollars) per share 

prior to amendment 

Risk-free rate: 2.01% 2.48% 

Weighted average remaining life (in 4.25 years 7.30 years 

years): 

Expected volatility of the 

51.66% 48.60% 

Corporation’s stock price: 

Expected dividend yield: 5.15% 4.87% 

- 42 -

Stock options outstanding as of December 31, 2006 and 2007 are summarized as follows: 

Exercisable Stock 

Outstanding Stock Options as of Options as of 

December 31, 2006 December 31, 2006 

Anticipated Weighted- 

Weighted- 

Weighted- average average 

average Exercise Exercise 

Thousand Existence Price Thousand Price 

Exercise Price Units Years (in Dollars) Units (in Dollars) 

NT$13.60 (in dollars) and NT$17.50 

(in dollars) 133,597 1.19 years NT$15.06 108,597 $14.50 

Exercisable Stock 

Outstanding Stock Options as of Options as of 

December 31, 2007 December 31, 2007 

Anticipated Weighted- 

Weighted- 

Weighted- average average 

average Exercise Exercise 

Thousand Existence Price Thousand Price 

Exercise Price Units Years (in Dollars) Units (in Dollars) 

NT$13.60 (in dollars), NT$17.50 

(in dollars) and NT$10.25 (in dollars) 220,630 3.42 years NT$12.96 120,630 $15.20 

There was no compensation cost based on the intrinsic value method in 2006 and 2007. Had the 

Corporation used the fair value method, the pro forma consolidated net income attribute to parent 

company’s stockholders and basic and diluted earnings per share (EPS) would have been as follows: 

(In Thousands of Dollars, Except Per Share Information) 

2006 2007 

New Taiwan New Taiwan U.S. 

Dollars Dollars Dollars 

(Note 4) 

Consolidated net income attribute to parent Actual $ 1,978,100 $ 1,320,849 $ 40,713 

company’s stockholders Pro forma 1,912,999 1,309,747 40,371 

Earnings per share - basic (in dollar) Actual 0.82 0.54 0.02 

Pro forma 0.79 0.54 0.02 

Earnings per share - diluted (in dollar) Actual 0.82 0.54 0.02 

Pro forma 0.79 0.54 0.02 

- 43 -

24. TREASURY STOCK (COMMON STOCK) 

(In Thousand of Shares) 

Reason for Purchase 

Beginning 

of Year Increase Decrease 

End of 

Year 

2006 

To maintain the Corporation’s credit and stockholders’ 

equity 2,193 - 2,193 - 

2007 

To maintain the Corporation’s credit and stockholders’ 

equity - 2,193 - 2,193 

Under the Securities and Exchange Law, the Corporation should not buy back more than 10% of its issued 

stock. In addition, the Corporation may not spend more than the sum of the balances of the retained 

earnings, additional paid-in capital from the issue of stock in excess of par value and realized capital surplus 

to repurchase its issued stock. 

The Corporation may not pledge or hypothecate any treasury stock. 

exercise any stockholders’ rights on the treasury stock. 

In addition, the Corporation may not 

In 2006, the Corporation repurchased 2,193 thousand shares of common stocks amounted to NT$28,101 

thousand and subsequently in February of 2007, the treasury stocks were cancelled and completed the 

change in capital structure by filing a registration. After the capital stocks of NT$21,930 thousand 

(US$676 thousand) and capital surplus - paid-in capital in excess of par value of NT$975 thousand (US$30 

thousand) were proportionately written off, the remaining cost of the original repurchase price of 

NT$28,101 thousand was determined to be NT$5,196 thousand (US$160 thousand) as a write-off to 

retained earnings - unappropriated earnings. 

- 44 -

25. EARNINGS PER SHARE 

The data used in calculating earnings per share were as follows: 

Year ended December 31, 2006 

Weighted- Per Share 

average (in Dollars) 

Income Number of Income 

Income Outstanding Before 

Before Shares Income Net 

Income Tax Net Income (Thousands) Tax Income 

New Taiwan dollars 

Basic 

Consolidated net income 

attribute to parent company’s 

stockholders $ 2,182,772 $ 1,978,100 2,414,501 $ 0.90 $ 0.82 

Diluted effect of common stock 

equivalent 

Zero coupon foreign convertible 

bonds - - 7,590 

Diluted $ 2,182,772 $ 1,978,100 2,422,091 $ 0.90 $ 0.82 

Year ended December 31, 2007 

New Taiwan dollars 

Basic 

Consolidated net income 

attribute to parent company’s 

stockholders $ 2,046,162 $ 1,320,849 2,430,367 $ 0.84 $ 0.54 

Diluted effect of common stock 

equivalent 

Stock option - - 289 

Diluted $ 2,046,162 $ 1,320,849 2,430,656 $ 0.84 $ 0.54 

U.S. dollars (Note 4) 

Basic $ 63,069 $ 40,713 2,430,367 $ 0.03 $ 0.02 

Diluted $ 63,069 $ 40,713 2,430,656 $ 0.03 $ 0.02 

The outstanding stock options as of December 31 2006 and zero coupon foreign convertible bonds as of 

December31, 2007 are potential common stocks. However, due to the anti-dilutive effect of these stock 

options or foreign convertible bonds, they were not included in the calculation of the diluted earnings per 

share for the years ended December 31, 2006 and 2007, respectively. 

26. INCOME TAX 

The Income Basic Tax Act in ROC took effective as of January 1, 2006. According to this Act, the amount 

of income taxes shall be the greater of a pre-determined income taxes under the Income Tax Law (the Law) 

or a multiplied amount using a income tax rate prescribed by the Executive Yuan (10%) on the sum of the 

taxable income and income tax benefits allowable under the Law. The Corporation and subsidiaries 

incorporated in ROC have adopted the effect of this new Act in the current year’s income tax expenses. 

- 45 -

a. Income tax expense consisted of the following: 

U.S. 

Dollars 


2006 2007 2007 

Income tax expense - current $ 106,032 $ 307,578 $ 9,480 

Income tax expense - deferred 56,063 355,108 10,946 

Adjustment of prior years’ income tax 42,577 62,627 1,930 

Income tax expense $ 204,672 $ 725,313 $ 22,356 

b. Current and noncurrent net deferred taxes assets (liabilities) comprise the following: 

U.S. 

Dollars 


2006 2007 2007 

Deferred tax assets (liabilities) - current 

Investment tax credits $ 43,238 $ 169,890 $ 5,236 

Deferred income 33,782 52,596 1,621 

Unrealized foreign exchange gain (19,638 ) (50,374 ) (1,553 ) 

Loss carryforward 56,180 32,009 987 

Allowance for losses on inventories 51,102 25,702 792 

Unrealized compensation expenses 7,622 8,192 253 

Valuation loss on financial instrument, net 1,896 179 6 

Allowance for doubtful accounts 7,342 119 4 

Unrealized reconstructive expenses for fire damage 5,446 - - 

Others 13,305 10,655 328 

200,275 248,968 7,674 

Less - allowance for valuation 14,983 64,227 1,980 

$ 185,292 $ 184,741 $ 5,694 

Deferred tax assets - noncurrent 

Impairment loss on assets $ 1,074,373 $ 931,721 $ 28,719 

Loss carryforward 428,406 596,891 18,398 

Investment tax credits 449,327 348,676 10,748 

Difference in book and tax depreciation and 

amortization 28,302 75,764 2,335 

Losses on investments 385,453 67,645 2,085 

Accrued pension costs 24,042 27,675 853 

Deferred income 19,014 24,799 764 

Loss on disposal of property, plant and equipment 23,569 - - 

Others 8,314 2,108 65 

2,440,800 2,075,279 63,967 

Less - allowance for valuation 423,623 425,920 13,128 

$ 2,017,177 $ 1,649,359 $ 50,839 

- 46 -

As of December 31, 2007, the tax effect of unused investment tax credits and unused operating loss 

carryforward were as follows: 

Tax Effect of 

Unused Investment 

Tax Credits 

New U.S. 

Regulatory Basis of Investment Taiwan Dollars Expiry 

Entity Tax Credits Item Dollars (Note 4) Year 

The Corporation Statute for Upgrading Industries Machinery and equipment $ 64,278 $ 1,981 2008 

Machinery and equipment 22,251 686 2009 

Machinery and equipment 61,261 1,888 2010 


R&D and personnel training 20,872 643 2008 

R&D and personnel training 66,890 2,062 2009 



Chipcera Technology Statute for Upgrading Industries Machinery and equipment 948 29 2008 

Co., Ltd. Machinery and equipment 472 15 2010 

Machinery and equipment 844 26 2011 

R&D and personnel training 168 5 2010 


Compostar Technology Statute for Upgrading Industries Machinery and equipment 77,939 2,402 2008 

Co., Ltd. Machinery and equipment 9,701 299 2009 


Machinery and equipment 42,055 1,296 2011 





$ 518,566 $ 15,984 

Entity 

Year of Loss 

Tax Effect of Unused 

Operating Loss 

Carryforward 

New 

Taiwan 

Dollars 

U.S. 

Dollars 

(Note 4) 

Expiry Year 

The Corporation 2007 $ 190,118 $ 5,860 2012 

Steller Inc. 2003 3,212 99 2023 

2004 1,395 43 2024 

2005 2,693 83 2025 

2006 1,006 31 2026 

Ferroxcube Taiwan Ltd. 2003 20,833 642 2008 

2004 4,868 150 2009 

Yageo America 2001 41,819 1,289 2021 

Corporation 2002 89,088 2,746 2022 

2003 52,428 1,616 2023 

2004 37,537 1,157 2024 

2006 5,449 168 2026 

Compostar Technology (Shanghai) Ltd. 2003 1,806 55 2008 

2004 2,228 69 2009 

2005 3,465 107 2010 

2006 2,948 91 2011 

2007 2,110 65 2012 

(Continued) 

- 47 -

Entity 

Year of Loss 

Tax Effect of Unused 

Operating Loss 

Carryforward 

New 

Taiwan 

Dollars 

U.S. 

Dollars 

(Note 4) 

Expiry Year 

Chipcera Technology Co., Ltd. 2003 $ 806 $ 25 2008 

2004 2,313 71 2009 

2005 2,975 92 2010 

2006 2,082 64 2011 

$ 471,179 $ 14,523 

(Concluded) 

The unused loss carryforward of Ferroxcube International Holding B.V. (Spain factory) amounted to 

NT$157,721 thousand (US$4,862 thousand), included in deferred income tax assets - noncurrent. And, 

their expiry year are 15 years starting from the year of loss. 

The Corporation’s income tax returns through 2003 had been examined and cleared by the tax authorities. 

As of April 16, 2008, the date of the accompanying independent auditors’ report, income tax returns of the 

Corporation through 2004 and 2005 had not been examined and cleared. However, in 2007, during the 

examination of the National Tax Administration of Northern Taiwan Province, the tax authorities had 

decided and notified the Corporation an increase of NT$190,000 thousand to gross profit of 2004 and a 

decrease of NT$10,000 thousand to interest expense of 2005. Based on the conservative principle, the 

Corporation recorded the tax effect of NT$50,000 thousand (US$1,541 thousand) in 2007. The 

Corporation plan to offset the tax effect by using the loss carryforwards of NT$18,774 thousand (US$579 

thousand) and investment tax credits of NT$15,613 thousand (US$481 thousand), the remainder of 

NT$15,613 thousand (US$481 thousand) has been recorded as income tax payable as of December 31, 

2007. 

Phycomp Taiwan, Ltd. was merged into the Corporation on May 31, 2003. The incomes tax returns of 

Phycomp Taiwan, Ltd. have been examined through 2002. Kaohsiung National Tax administration has 

examined the income tax returns of 2001 and 2002, and adjusted the calculation of tax-exempt income and 

creditable amount of investment tax credits. The amount of income tax adjustments and the Corporation’s 

actions were shown as follows: 

a. The income tax return of 2001 has been examined in 2004: The adjusted tax effect of tax-exempt 

income and credits for investment taxes were NT$39,536 thousand and NT$8,874 thousand, 

respectively. The adjustment for investment tax credits was booked in 2004. However, because the 

Corporation was unwilling to accept the results of the examination in connection with the tax-exempt 

income, in turn, a petition for review and administration was appealed according to the appropriate law 

proceedings in Taiwan. A guarantee deposit was recorded in an amount of NT$24,206 thousand, 

included in the account of pledged assets - pledged time deposit. The administration appeal was 

dismissed by Kaohsiung Administrative High Court on January 25, 2007. The Corporation undertook 

an administrative litigation procedure according to the law proceedings on March 20, 2007. In March 

of 2008, the Corporation plans to take a negotiation process with the Kaohsiung National Tax 

administration. As of April 16, 2008, the date of the accompanying independent auditors’ report, such 

negotiation is still going on. The adjustment in the tax effect of NT$39,536 thousand has been 

recorded in 2006, included in income tax payable. 

- 48 -

. The income tax returns of 2002 has been examined in 2005: The result of the examination increased 

the income tax expense by NT$11,667 thousand. The major adjustment was the calculation of 

tax-exempt income. The Corporation was unwilling to accept the content of examination, petitioning 

for review according to law. As a result of this review, Kaohsiung National Tax administration 

reexamined the tax returns on December 4, 2006. The increase of income tax expense dropped from 

NT$11,667 thousand to NT$10,161 thousand. The Corporation was also unwilling to accept the result 

of the reexamination, petitioning for administrative appeal on January 2, 2007. However, the 

administrative appeal has been dismissed by Kaohsiung Administrative High Court on March 21, 2007. 

The Corporation undertook an administrative litigation procedure according to the law proceedings on 

May 16, 2007. In March of 2008, the Corporation plans to take a negotiation process with the 

Kaohsiung National Tax administration. As of April 16, 2008, the date of the accompanying 

independent auditors’ report, such negotiation is still going on. The tax effect of the adjustment of 

NT$10,161 thousand has been recorded in 2006, included in income tax payable. 

As of April 16, 2008, the date of the accompanying independent auditors’ report, income tax returns of 

Phycomp Taiwan, Ltd. for the period January 1, 2003 to May 31, 2003 had not been cleared by the tax 

authority. The Corporation assessed the possible tax effect of tax-exempt income based on the adjustments 

made by Kaohsiung National Tax administration for the years of 2001 and 2002. The tax effect of period 

from January 1, 2003 to May 31, 2003 was an increase of NT$9,747 thousand (US$300 thousand), which 

has been recorded in 2007, included in income tax payable as of December 31, 2007. 

Compostar Technology Co., Ltd.’s income tax returns of 2004 and 2005 have been examined by the tax 

authorities. The R&D investment tax credits were all rejected by the authorities and Compostar 

Technology Co., Ltd.’s actions were as follows: 

a. The income tax return of 2004: The authorities rejected R&D investment tax credits of NT$11,672 

thousand. Compostar Technology Co., Ltd. was unwilling to accept the examination and petitioned for 

review. In 2007, this review concluded to reduced the adjustment to NT$6,024 thousand. Compostar 

Technology Co., Ltd. has adjusted the deferred tax assets based on the foregoing review. 

b. The income tax return of 2005: The authorities rejected R&D investment tax credits of NT$9,379. 

Compostar Technology Co., Ltd. was unwilling to accept the examination and petitioned for review. 

Compostar Technology Co., Ltd. recognized 100% valuation allowance for the deferred tax assets 

resulted from this investment credits. 

The balances of the imputation credit account were NT$674,116 thousand and NT$251,739 thousand 

(US$7,759 thousand) as of December 31, 2006 and 2007, respectively. 

The actual and expected imputed credit rate for earnings distribution were 34.50% for 2006 and 13.93% for 

2007, respectively. Since the imputed credit allocated to the shareholders is based on the balance as of the 

date of the earnings distribution, the expected imputed credit rate may differ from the actual imputed credit 

rate. The Corporation may adjust the rate because of potential differences in conformity with the Income 

Tax Act. 

As of December 31, 2006 and 2007, there were no unappropriated retained earnings generated before 

January 1, 1998. 

- 49 -

27. PERSONNEL EXPENSE, DEPRECIATION AND AMORTIZATION 

2006 


Cost of Operating 

Good Sold Expense Total 

Personnel expense $ 2,619,875 $ 1,388,725 $ 4,008,600 

Depreciation $ 2,038,097 $ 201,941 $ 2,240,038 

Amortization $ 91,195 $ 111,377 $ 202,572 

2007 

U.S. 


Dollars 

Cost of Operating (Note 4) 

Good Sold Expense Total 2007 

Personnel expense $ 2,722,097 $ 1,486,564 $ 4,208,661 $ 129,725 

Depreciation $ 2,316,917 $ 180,586 $ 2,497,503 $ 76,981 

Amortization $ 117,896 $ 90,104 $ 208,000 $ 6,411 

28. PENSION PLAN 

The Labor Pension Act (the “Act”) in ROC took effect on July 1, 2005. Employees of the Corporation and 

subsidiaries incorporated in ROC subject to the Labor Standards Law (the “Law”) before the enforcement of 

the Act were allowed to choose to remain subject to the pension mechanism under the Law or to be subject 

to the pension mechanism under the Act, with their service years accumulated before the enforcement of this 

Act to be retained. Those hired on or after July 1, 2005 automatically become subject to the Act. 

The Act provides for a defined contribution plan featuring a portable pension. Since July 1, 2005, the 

Corporation, subsidiaries - Ferroxcube Taiwan Ltd., Compostar Technology Co., Ltd., Chipcera Technology 

Co., Ltd. and Ko-E Corp. (established in July of 2006) have made monthly contributions at 6% of monthly 

salaries and wages to the pension fund. The pension costs recognized by the foregoing entities in 2006 and 

2007 were NT$66,823 thousand and NT$69,650 thousand (US$2,147 thousand). 

Under the Law, the Corporation, subsidiaries - Ferroxcube Taiwan Ltd., Compostar Technology Co., Ltd. 

and Chipcera Technology Co., Ltd. have defined benefit plans. The benefits under the plan are based on 

length of service and average basic pay of the final six months of employment. The Corporation, 

subsidiaries - Ferroxcube Taiwan Ltd., Compostar Technology Co., Ltd. and Chipcera Technology Co., Ltd. 

make monthly contributions, to a pension fund. The fund is administered by the employees’ pension fund 

committee and deposited in the committee’s name in the Bank of Taiwan (the Central Trust of China has 

been merged into the Bank of Taiwan in 2007). 

- 50 -

a. The components of net pension costs under the defined benefit plan were as follows: 

U.S. 

Dollars 


2006 2007 2007 

Service cost $ 15,689 $ 18,907 $ 583 

Interest cost 11,186 10,484 323 

Expected return on plan assets (4,918 ) (4,982 ) (154 ) 

Amortization of unrecognized net transition obligation and 

unrecognized net actuarial losses 527 7,843 242 

$ 22,484 $ 32,252 $ 994 

b. The reconciliation of the funded status of the defined benefit plan, the vested obligation, the actuarial 

assumptions used in determining net periodic pension costs and the changes in pension funds were as 

follows: 

U.S. 

Dollars 


2006 2007 2007 

Benefit obligation 

Vested $ 33,115 $ 18,870 $ 582 

Non-vested 334,503 352,104 10,853 

Accumulated benefit obligation 367,618 370,974 11,435 

Additional benefits based on future salaries 105,823 98,577 3,038 

Projected benefit obligation 473,441 469,551 14,473 

Fair value of plan assets (200,695 ) (200,922 ) (6,193 ) 

Funded status 272,746 268,629 8,280 

Unrecognized net: 

Transitional obligation (5,807 ) (5,069 ) (156 ) 

Actuarial losses (145,602 ) (130,645 ) (4,027 ) 

Accrued pension cost liabilities 50,487 40,541 1,249 

Other current assets - prepaid pension cost - 1,290 40 

Accrued pension cost $ 171,824 $ 174,746 $ 5,386 

Vested obligation $ 40,313 $ 24,091 $ 743 

The actuarial assumptions used in determining net periodic pension costs for the years presented were 

as follows: 

2006 2007 

Discount rate 2.25-3.50% 2.75% 

Future salary increase rate 2.00-3.00% 2.00-3.00% 

Expected rate of return on plan assets 2.50% 3.00% 

- 51 -

The changes in pension funds were: 

U.S. 

Dollars 


2006 2007 2007 

Contributions $ 10,475 $ 17,372 $ 535 

Payment of benefits $ 4,697 $ 19,080 $ 588 

The Vitrohm Holding GmbH (Yageo Europe GmbH), Yageo Korea and a portion of eligible employees of 

Ferroxcube and Ferroxcube Taiwan, Ltd. have defined benefit plans. As of December 31, 2006 and 2007, 

the pension liabilities amounted to NT$138,815 thousand and NT$159,549 thousand (US$4,918 thousand), 

shown as accrued pension costs. 

Yageo Electronics (Dongguan) Co., Ltd., Yageo Electronics (China) Co., Ltd., Ferroxcube Electronics 

(Dongguan) Co., Ltd., Yageo Components (Su Zhou) Co., Ltd., Yageo USA (H.K.) Limited, Phycomp 

Holding B.V., Ferroxcube International Holding B.V. (except for the portion of eligible employees of 

Ferroxcube as described above), Vitrohm Portuguesa LDA, Yageo Japan, Yageo America Corporation, 

Yageo Corporation (South Asia) PTE. LTD., Phycomp Malaysia SDN. BHD., Steller Inc., Compostar 

Technology (Dongguan) Co., Ltd., Compostar Technology (Su Zhou) Co., Ltd., Compostar Technology 

(Shanghai) Co., Ltd., Ko-E (H.K.) Limited, Ko-E Technology (Shenzhen) Co., Ltd. have defined 

contribution plans and make contribution on a fixed rate of salaries. Yageo Holding (Bermuda) Limited, 

Ko Shin Investment Limited, Kuo Chung Development Limited, Kuo Ding Venture Capital Limited, 

Ferroxcube Holding (Samoa), Ltd., Compostar Technology (Cayman), Ltd., Hsu Tai International (H.K.), 

Ko-E Holding (Cayman Islands), Ltd., Chipcera Holding B.V., Chang An Wusha Chipcera, Chen An 

Trading Co., Ltd., Yageo (H.K.) Limited, Ferroxcube Technology (H.K.) Limited and Compostar (H.K.) 

Limited do not have pension plan. 

29. RELATED-PARTY TRANSACTIONS 

The Group has transactions with related parties in the normal course of business. The relationships are 

summarized as follows: 

Related Party 

Chilisin Electronics Corp. 

Chilisin International Ltd. 

Teapo Electronics Corp. 

Teapo Holding (Bermuda) Ltd. 

Teapo Electronics (H.K.) 

Teapo Electronics (Su Zhou) 

Teapo Electronics (Dongguan) 

King Power International Co., Ltd. 

Ralec Electronic Corp. 

Hwa Jung International Electronics Co., Ltd. 

Juridieal Person, Yageo Foundation 

Hua Jung Components Co., Ltd. 

Hua Jung Components (Shanghai) 

Relationship with the Corporation and Subsidiaries 

Equity-method investee 

Subsidiary of Chilisin Electronics Corp. 

Equity-method investee 

Subsidiary of Teapo Electronics Corp. 

Subsidiary of Teapo Electronics Corp. 

Subsidiary of Teapo Holding (Bermuda) Ltd. 

Subsidiary of Teapo Holding (Bermuda) Ltd. 

Equity-method investee of Kuo Shin Investment Limited 

prior to the end of 2006 

An equity-method investee of Kuo Shin Investment Limited 

and Kuo Chung Development Limited since June of 2006 

Equity-method investee of Hua Jung Components Co., Ltd. 

Prior to November 2007, this nonprofit organization was one 

of the Corporation’s related party due to its funds donated 

by the Corporation exceeds one third of its total Fund 

Its general manager is the chairman of Compostar 

Technology Co., Ltd. 

Subsidiary of Hua Jung Components Co., Ltd. 

(Continued) 

- 52 -

Related Party 

Relationship with the Corporation and Subsidiaries 

Strong Components Co., Ltd. 

Equity-method investee of Compostar Technology Co., Ltd. 

Luminous Town Electric Co., Ltd. 

The Chairman of the Board of Directors at Luminous Town 

Electric Co., Ltd. is the same person at Compostar 

Technology Co., Ltd. 

Belkin International 

Equity-method investee of Yageo Holding (Bermuda) 

Limited 

Horstrong Limited 

Subsidiary of Belkin International 

Guo Chuang Electronics (Dongguan) Co., Ltd. Prior to October of 2006, the accounts of the financial 

statements of Guo Chuang Electronics (Dongguan) Co., 

Ltd. were consolidated into the consolidated financial 

statements of the Corporation, and significant transactions 

between Guo Chuang Electronics (Dongguan) Co., Ltd. 

and the Group are eliminated. Beginning in October of 

2006, because the Group's percentage of ownership in Guo 

Chuang Electronics Co., Ltd. is reduced to 35% and lost 

its control over Guo Chuang Electronics (Dongguan) Co., 

Ltd. as a majority shareholder, the entity is accounted for 

using equity-method of accounting and the accounts of 

this entity is no longer consolidated into the consolidated 

financial statements of the Corporation. 

Yageo Holding International Limited Prior to March of 2007, the accounts of the financial 

statements of Yageo Holding International Limited were 

consolidated into the consolidated financial statements of 

the Corporation, and significant transactions between 

Yageo Holding International Limited and the Group are 

eliminated. Beginning in March of 2007, because Yageo 

Holding International Limited went into liquidation, the 

entity is accounted for as financial assets measured at 

holding cost, and the accounts of this entity is no longer 

consolidated into the consolidated financial statements of 

the Corporation. Yageo Holding International Limited 

was liquidated and eliminated in October of 2007. 

(Concluded) 

The transactions with the foregoing related parties are summarized as follows: 

For the year 

U.S. 

Dollars 


2006 2007 2007 


Sales 

Chilisin International Ltd. $ 39,621 - $ 37,189 - $ 1,146 

Strong Components Co., Ltd. 7,690 - 23,071 - 711 

Hua Jung Components Co., Ltd. 34,623 - 22,017 - 679 

Hua Jung Components (Shanghai) 1,211 - 6,457 - 199 

Ralec Electronic Corp. 487 - 856 - 26 

Chilisin Electronics Corp. 204 - 287 - 9 

King Power International Co., Ltd. 288,693 2 - - - 

$ 372,529 2 $ 89,877 - $ 2,770 

- 53 -

U.S. 

Dollars 


2006 2007 2007 


Purchases 

Belkin International $ 59,062 1 $ 245,762 2 $ 7,575 

Teapo Electronics (Su Zhou) 42,586 - 83,180 1 2,564 

Teapo Electronics (H.K.) 52,655 1 74,405 - 2,293 

Chilisin Electronics Corp. 32,820 - 23,238 - 717 

Horstrong Limited - - 16,522 - 509 

Teapo Electronics Corp. 18,888 - 12,780 - 394 

Chilisin International Ltd. 2,960 - 5,454 - 168 

Ralec Electronic Corp. 946 - 2,618 - 81 

Hua Jung Components Co., Ltd. 2,154 - 41 - 1 

Strong Components Co., Ltd. 1,302 - - - - 


$ 392,355 3 $ 464,000 3 $ 14,302 

Interest income 

Guo Chuang Electronics (Dongguan) Co., 

Ltd. $ 518 1 $ 2,610 1 $ 80 

Donation fees (shown as nonoperating 

expenses - others) 

Yageo Foundation $ 26,810 11 $ - - $ - 

Rental revenue 

Teapo Electronics (Dongguan) $ 6,617 3 $ 7,575 17 $ 233 


Ltd. 699 - 3,980 9 123 

Teapo Electronics Corp. 1,584 1 2,358 5 73 

Hua Jung Components Co., Ltd. 516 - 215 1 7 

Luminous Town Electric Co., Ltd. 61 - 23 - - 

Strong Components Co., Ltd. 861 1 - - - 

$ 10,338 5 $ 14,151 32 $ 436 

Rental expenses (shown as manufacturing 

and marketing expenses) 

Hua Jung International Electronics Co., Ltd $ 1,331 - $ 290 - $ 9 

Hua Jung Components Co., Ltd. 239 - 270 - 8 


Ltd 1,066 - 91 - 3 

$ 2,636 - $ 651 - $ 20 

(Continued) 

- 54 -

As of December 31 

U.S. 

Dollars 


2006 2007 2007 


Receivables from related parties 

Notes receivable 

Strong Components Co., Ltd. $ 1,385 1 $ 1,428 1 $ 44 


Ralec Electronic Corp. 206 - - - - 

Accounts receivable 

Chilisin International Ltd. 20,133 8 17,054 17 526 

Strong Components Co., Ltd. 4,737 2 8,836 9 272 

Hua Jung Components Co., Ltd. 21,225 9 7,397 7 228 

Teapo Electronics (Dongguan) - - 4,647 5 143 

Hua Jung Components (Shanghai) 2,208 1 3,160 3 98 

Ralec Electronic Corp. 504 - 498 1 15 


Other - - 87 - 3 

Payment on behalf of others 

Guo Chuang Electronics (Dongguan) 

Co., Ltd. 58,678 25 56,678 57 1,747 

Allowance for doubtful accounts (985 ) - - - - 

$ 238,401 100 $ 99,785 100 $ 3,076 

Loans receivables from related parties 

(including interest receivable of at the end of 

year) 


Ltd. $ 46,456 100 $ 25,444 100 $ 784 

Loans receivables from related parties - highest 

balance 


Ltd. $ 83,524 $ 48,860 $ 1,506 

Payables to related parties 

Accounts payable 

Belkin International $ 35,053 14 $ 47,241 32 $ 1,456 

Teapo Electronics (Su Zhou) 16,048 7 47,197 32 1,455 

Teapo Electronics (H.K.) 23,213 10 32,629 23 1,006 

Chilisin Electronics Corp. 16,431 7 15,640 11 482 

Chilisin International Ltd. - - 1,565 1 48 

Ralec Electronic Corp. 910 - 1,548 1 48 

Horstrong Limited - - 367 11 11 

Hua Jung Components Co., Ltd. - - 35 - 1 

Teapo Electronics Corp. 8,890 4 33 - 1 


Strong Components Co., Ltd. 1 - - - - 

Other 38 - 39 - 1 

- 55 -

U.S. 

Dollars 


2006 2007 2007 


Donation payable 

Yageo Fundation $ 13,016 5 $ - - $ - 

$ 243,223 100 $ 146,294 100 $ 4,509 

Loans payable to related parties - highest 

balance 

Yageo Holding International Limited $ - $ 242,501 $ 7,475 

Deposits received 

Teapo Holding (Bermuda) Ltd. - rent to 

Teapo Electronics (Dongguan) $ 100,000 63 $ 100,000 77 $ 3,082 

The payment terms for the related receivables from (payables to) the affiliates were based on related 

contracts. The annual interest rate for the financing provided to Guo Chuang Electronics (Dongguan) Co., 

Ltd. was 6.12%. Other related-party transactions were conducted under normal terms. 

30. REORGANIZATION AND ASSET IMPAIRMENT 

To enhance the competitiveness of the production and selling costs of the ferrite segment and improve its 

operation, the Corporation’s management approved a reorganization plan of this segment, the plan includes: 

a) to reduce production of the Spanish ferrite factory and transfer part of equipment to the Dongguan factory 

and Poland factory to boost production, and b) to dedicate in developing the product series with higher 

margins. To implement this plan, major changes included manpower rationalization and the 

revomal/disposal of tangible assets, for which estimated the total cost amounted to NT$355,897 thousand 

(US$10,970 thousand), of this amount, the layoff payments accrued for the Spanish factory and the 

impairment loss on assets were NT$252,849 thousand (US$7,794 thousand) and NT$103,048 thousand 

(US$3,176 thousand), respectively, which were fully accrued in 2007 and was included in nonoperating 

expenses and losses - reorganization loss. Based on the expected payment schedule of layoff payment, 

NT$109,727 thousand (US$3,382 thousand) was classified as current liability and NT$143,122 (US$4,412 

thousand) was classified as other liability - others. 

Certain land and buildings in Europe became idle and were reclassified into other assets - idle assets, stated 

at the lower of recoverable amount or carrying value, thus recognized impairment loss of NT$205,988 

thousand and NT$159,504 thousand (US$4,916 thousand) in 2006 and 2007, respectively, included in 

nonoperating expenses or losses - impairment loss on idle assets. 

The Group periodically evaluates the assets, including goodwill of the cash-generating unit and tests the 

assets for impairment. There was no impairment loss recognized for the years ended December 31, 2006 

and 2007. 

- 56 -

31. COLLATERAL ASSETS 

As of December 31, 2006 and 2007, the following assets of the Group had been pledged as collateral for 

bank loans or for meeting the requirements to hire foreign laborers and as credit guarantees: 

U.S. 

Dollars 


2006 2007 2006 

Properties, net $ 3,226,012 $ 5,426,330 $ 167,257 

Long-term investments 971,197 368,503 11,358 

Pledged assets 198,744 89,091 2,746 

Properties leased to others, net 4,199,403 45,803 1,412 

Other financial assets - imprest bank account for payment 

of the principle and interest of unsecured domestic bonds 206,800 - - 

Other financial assets - pledged time deposit 1,350 - - 

$ 8,803,506 $ 5,929,727 $ 182,773 

The common stocks of Compostar Technology Co., Ltd. and Chipcera Technology Co., Ltd. had been 

pledged as collaterals for long-term bank loans. As of December 31, 2007, the numbers of pledged stocks 

were 140,301 thousand shares and 30,833 thousand shares for Compostar Technology Co., Ltd. and 

Chipcera Technology, Ltd., respectively. The carrying value of those investments prior to elimination were 

NT$1,805,545 thousand (US$55,653 thousand) and NT$262,030 thousand (US$8,077 thousand) for 

Compostar Technology, Ltd. and Chipcera Technology, Ltd., respectively. 

32. COMMITMENTS AND CONTINGENT EVENTS 

The commitments and contingent liabilities as of December 31, 2007 were as follows: 

a. Contracts for purchase of machinery and equipment, buildings and computer hardware and software for 

about NT$809,995 thousand (US$24,967 thousand). 

b. Unused letters of credit amounting to about NT$165,851 thousand (US$5,112 thousand). 

c. Commitment to purchase materials for about NT$59,047 thousand (US$1,820 thousand). 

- 57 -

33. SIGNIFICANT FIRE LOSS 

The Corporation incurred loss in connection with a fire damage in the capacitor line factory in village of 

Dashe, Kaoshiung County, on September 25, 2006. The Corporation investigated the damage status and 

invited experts to appraise the indemnity. Total amount of loss was estimated to be NT$564,971 thousand 

for the damage of its building, machinery and inventories. The damage status and corresponding loss were 

as follows: a) NT$148,370 thousand to the fully-destroyed property, plant and equipment. The cost and 

accumulated depreciation related to these fully-destroyed property, plant, and equipment of NT$228,645 

thousand and NT$80,275 thousand were eliminated from the account balances; (b) impairment loss of 

NT$307,795 thousand related to partially-damaged property, plant and equipment was recorded as 

accumulated impairment; and (c) NT$108,806 thousand related to inventories were written off. Based on 

the relevant insurance coverage, the Corporation reached an agreement to the insurance recoveries with the 

insurance company in January of 2007. The final insurance proceeds were settled at NT$602,550 thousand. 

The insurance proceeds deducted by the aforementioned loss of NT$564,971 thousand and future related 

repair and maintenance expenditure of NT$30,829 thousand were recognized as a gain of NT$6,750 

thousand in the nonoperating income for the year of 2006. The depreciation and amortization expenses of 

the capacitor line factory amounted to NT$56,598 thousand and NT$113,125 thousand (US$3,487 thousand) 

for the period which the business was interrupted and restored and were recorded in the account of 

nonoperating expenses and loss - loss on work stoppages for the years ended December 31, 2006 and 2007, 

respectively. The Corporation is now reconstructing this capacitor line factory, plan to product capacitor 

since June of 2008. 

The insurance recoveries receivable of NT$602,550 thousand recorded as of December 31, 2006 has been 

received on February 15, 2007. 

34. SIGNIFICANT SUBSEQUENT EVENTS 

Upon the approval by the board of directors on February 21, 2008, for the purpose of maintain the 

Corporation’s credit and stockholders’ equity, the Corporation expected to purchase treasury stocks of 

243,822 thousand shares, which were accounted for 9.99% of the Corporation’s outstanding shares, with the 

purchase price range from NT$6.31 (in dollars) to NT$14.42 (in dollars) per share. As of April 16, 2008, 

the Corporation had purchased 143,144 thousand shares of treasury stocks, which were accounted for 5.87% 

of the Corporation’s outstanding shares. The total proceeds for acquisition of those treasury stocks 

amounted to NT$1,424,844 thousand (US$43,918 thousand). 

- 58 -

35. FINANCIAL INSTRUMENTS 

a. The information of fair values of derivative and nonderivative financial instruments as of December 31, 

2006 and 2007 are summarized as follows: 

Nonderivative financial instruments 

U.S. Dollars 


2006 2007 2007 

Carrying Fair Carrying Fair Fair 

Value Value Value Value Value 

Assets 

Cash and cash equivalents $ 1,801,071 $ 1,801,071 $ 8,191,567 $ 8,191,567 $ 252,491 

Available for sale financial assets - current 278,613 278,613 2,012,787 2,012,787 62,041 

Notes receivable 135,664 135,664 209,070 209,070 6,444 

Accounts receivable, net 5,432,463 5,432,463 6,069,492 6,069,492 187,082 

Accounts and notes receivable from related 

parties 238,401 238,401 99,785 99,785 3,076 

Income tax refund receivable 22,673 22,673 28,483 28,483 877 

Other financial assets 931,757 931,757 237,820 237,820 7,330 

Investments accounted for using equity 

method 2,363,027 2,284,793 3,019,867 2,453,157 75,614 

Available-for-sale financial assets - 

noncurrent 749,845 749,845 1,274,256 1,274,256 39,277 

Financial assets measured at holding cost - 

noncurrent 1,038,878 1,133,685 320,009 313,506 9,663 

Bonds measured at amortized cost 50,000 50,000 50,000 50,000 1,541 

Other long-term investments 58,531 108,414 - - - 

Loans receivables from relates parties 46,456 46,456 25,444 25,444 784 

Refundable deposits 97,092 97,092 58,612 58,612 1,807 

Pledged assets 198,744 198,744 89,091 89,091 2,746 

Liabilities 

Short-term loans 3,951,373 3,951,373 3,570,742 3,570,742 110,062 

Commercial paper issued, net 827,962 827,962 904,730 904,730 27,887 

Notes payable 79,318 79,318 41,851 41,851 1,290 

Accounts payable 3,078,795 3,078,795 3,579,525 3,579,525 110,333 

Accounts and notes payable to related 

parties 243,223 243,223 146,294 146,294 4,509 

Others payables 275,326 275,326 130,057 130,057 4,009 

Income tax payable 97,553 97,553 172,841 172,841 5,328 

Accrued expenses 1,506,112 1,506,112 1,286,961 1,286,961 39,668 

Current portion of long-term liabilities 1,104,196 1,104,196 129,516 129,516 3,992 

Long-term bank loans 5,016,255 5,016,255 1,471,951 1,471,951 45,370 

Bonds payable 84,587 84,587 4,446,144 4,446,144 137,045 

Deposits received 159,113 159,113 129,264 129,264 3,984 

Derivative financial instruments 

Domestic 

Financial assets at fair value through profit 

or loss - forward exchange 351 351 4,854 4,854 149 

Financial liabilities at fair value through 

profit or loss - forward exchange 9,118 9,118 1,800 1,800 55 

Hedging derivative financial liabilities 1,326 1,326 2,038 2,038 63 

Foreign 

Financial assets at fair value through profit 

or loss - forward exchange 2,825 2,825 7,379 7,379 227 

Hedging derivative financial assets 290 290 647 647 20 


profit or loss - forward exchange 1,089 1,089 1,833 1,833 57 

Hedging derivative financial liabilities 7,955 7,955 - - - 


profit or loss - price reset value of the 

unsecured foreign convertible bonds - - 606,625 606,625 18,698 

- 59 -

Effective January 1, 2006, the Group adopted the Statements of Financial Accounting Standards No. 34 

“Accounting for Financial Instruments.” The cumulative effect of changes in accounting principles 

arising from the adoption of new SFAS was described in Note 3. 

b. The methods and assumptions used in estimating fair values are as follows: 

1) The fair values of the following short-term instruments approximate their carrying amounts because 

of their short maturities: Cash and cash equivalents, notes receivable and payable, accounts 

receivable and payable, accounts and notes receivable from and payable to related parties, income 

tax refund receivable, other financial assets, pledged assets, short-term loans, commercial paper 

issued, other payables, income tax payable, accrued expenses and current portion of long-term 

loans. 

2) The fair values of available-for-sale financial assets, domestic and foreign listed common stocks are 

based on their quoted market prices, the fair value of US Government Agency Bonds are based on 

the valuation report provided by the underwriter of those bonds. 

3) The fair values of available-for-sale financial assets - foreign funds are based on the net assets value 

provided by issuers. 

4) The fair values of current portion of bonds are estimated at the agreed redemption price. 

5) The fair values of investments accounted for using equity method are based on their quoted market 

prices; or, if quoted market prices are not available, on the Group’s equity in the investees’ net 

assets or carrying amounts. 

6) The fair values of financial assets measured at holding cost and other long-term investments are 

based on the Group’s equity in the investees’ net assets or carrying amounts. 

7) The fair value of bonds measured at amortized cost are based on the fair value provided by issuers. 

8) The fair values of refundable deposits, deposits received, loans receivable from and payable to 

related parties approximate their carrying amounts because there are no definite receipt or payment 

terms. 

9) The fair values of the long-term bank loans are estimated using discounted cash flow analysis based 

on current interest rates for borrowings with similar maturities. If the interest rate is close to 

interest rate of long-term bank loans, the fair value is based on carrying amounts of loans. 

10) The fair values of the bonds payable are estimated using discounted cash flow analysis based on 

current interest rates for borrowings with similar maturities. If the interest rate is close to discount 

rate of bonds, the fair value is based on carrying amounts of bonds payable. 

11) The fair value of derivatives which have quoted market prices in active markets are based on their 

quoted market prices, or, if quoted market prices are not available, are determined using the 

valuation techniques. The estimations and assumptions incorporated in the valuation techniques 

by the Group are the same as those incorporated in participants in the market, which can be 

obtained by the Group. 

- 60 -

c. The fair values of financial assets and financial liabilities based on quoted market prices in active 

markets or determined using valuation techniques, are as follows: 

Assets 

Amount Based on Quoted 

Amount Determined Using 

Market Prices 

Valuation Techniques 

U.S. 

Dollars 

U.S. 

Dollars 

New Taiwan Dollars (Note 4) New Taiwan Dollars (Note 4) 

2006 2007 2007 2006 2007 2007 

Financial assets at fair value through 

profit or loss $ - $ - $ - $ 3,176 $ 12,233 $ 376 

Available-for-sale financial assets 1,028,458 3,287,043 101,318 - - - 

Hedging derivative financial assets - - - 290 647 20 

Long-term investments accounted for 

using equity method 1,964,231 2,188,303 67,451 320,562 264,854 8,163 

Liabilities 


profit or loss - current - - - 10,207 3,633 112 

Hedging derivative financial liabilities - - - 9,281 2,038 63 


profit or loss - noncurrent - - - - 606,625 18,698 

d. Net valuation loss recognized for the changes in fair value estimated using valuation techniques were 

NT$7,031 thousand and NT$81,151 thousand (US$2,501 thousand) for the years ended December 31, 

2006 and 2007, respectively. 

e. As of December 31, 2006 and 2007, the financial assets exposed to fair value interest rate risks were 

NT$1,005,312 thousand and NT$8,681,280 thousand (US$267,585 thousand), respectively, and the 

financial liabilities exposed to fair value interest rate risks were NT$7,549,557 thousand and 

NT$4,879,874 thousand (US$150,414 thousand), respectively. The financial assets exposed to cash 

flow interest rate risks were NT$1,199,395 thousand and NT$1,289,087 thousand (US$39,734 

thousand), and the financial liabilities exposed to cash flow interest rate risks were NT$3,350,229 

thousand and NT$1,197,065 thousand (US$36,897 thousand), respectively. 

f. The Group recognized an unrealized gain of NT$506,863 thousand and an unrealized loss of 

NT$924,777 thousand (US$28,505 thousand) in stockholders’ equity for the changes in fair value of 

available-for-sale financial assets for the years ended December 31, 2006 and 2007, respectively. 

NT$11,853 thousand (US$365 thousand) and NT$257,415 were deducted from the component of 

stockholders’ equity and transferred to current gain on disposal of investments (included in investment 

income or loss, net) for selling available-for-sale financial assets. 

g. Information about financial risks 

1) Market risk 

a) Foreign exchange risk: The foreign exchange rate fluctuations would result in the Group’s 

foreign-currency-dominated assets and liabilities and open forward exchange contracts exposed 

to fair value risk and cash flow risk. 

b) Price risk: The fluctuations in market price would result in changes in fair values of 

available-for-sale financial assets held by the Group. 

- 61 -

2) Credit risk 

Credit risk represents the potential loss that would be incurred by the Group if counter-parties 

breached contracts. The largest credit risk of financial instruments held by the Group is the same 

as their carrying amounts. 

3) Liquidity risk 

The Group had sufficient working capital to meet the cash needs upon settlement of contracts are 

publicly-traded. Therefore, no material liquidity risk was anticipated. 

The Group’s available-of-sale financial instruments are publicly-traded in an active market and 

ready to be sold approximately in their fair values on the market, no material liquidity risk was 

anticipated. Financial assets measured at holding cost and bonds measured at amortized cost have 

significant liquidity risks in that these investments do not have quoted market prices in an active 

market, therefore, it could have material liquidity risk. The outstanding forward exchange 

contracts (included financial assets and liabilities at fair value through profit or loss and hedging 

derivative financial assets and liabilities) as of December 31, 2007 were anticipated to generate cash 

inflows of JPY1,975,757 thousand, NT$183,804 thousand and PLN9,529 thousand, and cash 

outflows of NT$538,658 thousand, EUR2,300 thousand, RMB6,642 thousand and US$6,050 

thousand. No material cash flow risk is anticipated since the exchange rates of forward exchange 

contracts have been determined. 

h. Cash flow hedge 

1) Material price hedge 

Palladium and silver, necessary materials to manufacture passive components may result in risks of 

cash flow as fluctuations of market prices and result in changes in cash outflows of future 

purchases. The Corporation estimated that risk of market price fluctuations is significant and 

therefore, the Corporation entered the hedged transaction through forward purchase contracts. The 

Corporation’s hedging strategy was to enter forward purchase contracts according to the forecast of 

quantity of demand and purchase amount of the production department and purchase department. 

The gain or loss on financial instrument due to these hedged transactions were net gain of NT$3,553 

thousand and net loss of NT$65 thousand (US$2 thousand) for the years ended December 31, 2006 

and 2007, respectively. This amount was wholly adjusted to cost of inventories - raw materials for 

the years ended December 31, 2006 and 2007, respectively. The Corporation expected cash 

outflows of palladium future purchases since January of 2008, and the adjustment of open contracts 

to stockholders’ equity - unrealized loss of financial instrument (included in hedging derivative 

financial assets or liabilities) of NT$1,391 thousand (US$43 thousand) will be wholly adjusted to 

cost of inventories - raw materials in 2008. The Corporation did not have any open forward 

purchase contracts in silver as of December 31, 2007. The Corporation did not have any open 

forward purchase contracts in palladium and silver as of December 31, 2006. 

2) Foreign-currency sales hedge 

The foreign-currency sales of the Corporation may result in risks of cash flow as the fluctuation of 

exchange rates can result in changes in cash inflows. The Corporation estimated that the risk of 

foreign-currency exchange is significant and therefore, the Corporation entered a hedged transaction 

through forward exchange contracts. Our hedging strategy was to enter forward exchange 

contracts according to the forecast of foreign-currency sales from our sales department. 

- 62 -

The total loss on settled forward exchange contracts was NT$842 thousand and wholly charged 

against sales for the year ended December 31, 2006. The fair value of the open forward exchange 

contracts as of December 31, 2006 was NT$5,414 thousand, included in hedging derivative 

financial assets or liabilities and unrealized loss on financial instrument. In 2007, net losses of 

NT$22,243 thousand (US$686 thousand) generated by those transactions was charged against sales. 

Because the hedging relationship qualified for hedging accounting was ended up as of March 31, 

2007, the remainder of open forward exchange contracts had been transferred to financial assets or 

liabilities at fair value through profit or loss and subsequently, measured at fair value and the 

changes in fair value were charged to current income. There was no open forward exchange 

contract as of December 31, 2007. 

Open forward exchange contracts as of December 31, 2006 were as follows: 


Contract Contract 

Carrying 

Value/ 

Fair 

Type of Transaction Currency Due Date Amount Value 

NT$ 

Hedging derivative financing assets - current 

Sale of forward exchange USD to NTD June 14, 2007 US$ 30,000 $ 290 

Hedging derivative financing liabilities - current 

Sale of forward exchange USD to NTD May 8, 2007 US$ 6,000 $ 2,202 

Sale of forward exchange USD to NTD May 8, 2007 US$ 4,000 1,667 

Sale of forward exchange USD to NTD May 18, 2007 US$ 3,000 1,104 

Sale of forward exchange USD to NTD May 29, 2007 US$ 2,000 731 

3) Foreign-currency material and machinery purchase hedge 

a) The Corporation 

$ 5,704 

The foreign-currency purchases of material and machinery may result in risks of cash flow as 

fluctuations of exchange rate can result in changes in cash outflows. The Corporation 

estimated the risk to be significant and therefore, the Corporation entered the hedged transaction 

through forward exchange contracts. The hedging strategy was to enter forward exchange 

contracts according to forecast imported material and machinery of the purchase department. 

All of the foregoing forward exchange contracts were outstanding as of December 31, 2006. 

The fair value was NT$3,449 thousand which was included in hedging derivative financial 

liabilities and unrealized loss on financial instrument. 

The net losses on the related forward exchange contracts were wholly charged to cost of 

inventories of NT$598 thousand (US$18 thousand) and cost of machinery of NT$918 thousand 

(US$28 thousand) for the year ended December 31, 2007. Because the hedging relationship 

qualified for hedge accounting was ended up in March of 2007, the remainder of open forward 

exchange contracts had been transferred to financial assets or liabilities at fair value through 

profit or loss and subsequently, measured at fair value and the changes in fair value were 

charged to current income. 

- 63 -

Open forward exchange contracts as of December 31, 2006 were as follows: 



Type of Transaction Currency Contract Due Date Amount Fair Value 

NT$ US$ 

(Note 4) 

Hedging derivative financing liabilities - 

current 

Purchase of forward exchange JPY to NTD September 14, 2007 JPY300,000 $ 719 $ 22 

Purchase of forward exchange JPY to NTD September 14, 2007 JPY100,000 240 7 

Purchase of forward exchange JPY to NTD September 14, 2007 JPY100,000 240 7 

Purchase of forward exchange JPY to NTD August 31, 2007 JPY500,000 2,250 70 

b) Compostar Technology Co., Ltd. 

$ 3,449 $ 106 

Compostar Technology Co., Ltd. imported foreign equipment for manufacturing passive 

components. It may result in risks of cash flow as fluctuations of exchange rate can result in 

changes in cash outflows of future purchases. Compostar Technology Co., Ltd. estimated the 

risk to be significant and therefore, entered the hedge transaction through forward purchase 

contracts at the end of 2006. The hedge strategy was to enter forward purchase contracts 

according to a firm purchase commitment in 2007. 

As of December 31, 2006, this forward exchange contract remained unsettled, and the fair value 

of NT$128 thousand was shown as unrealized loss on financial instrument. In the year ended 

December 31, 2007, the firm commitment to purchase equipment brought to outflows of foreign 

currency and the forward exchange contracts had generated a gain of NT$264 thousand (US$8 

thousand) (included unrealized loss of NT$128 thousand shown as unrealized loss on financial 

instrument as of December 31, 2006), which had been adjusted to the cost of equipment. 

Compostar Technology Co., Ltd. didn’t enter into other forward exchange contracts which were 

qualified for cash flow hedge accounting for the year ended December 31, 2007. 

The open forward exchange contract as of December 31, 2006 was as follows: 


Contract Contract 

Carrying 

Value/ 

Fair 

Type of Transaction Currency Due Date Amount Value 

NT$ 

Hedging derivative financing liabilities 

Purchase of forward exchange JPY to TWD April 27, 2007 JPY 85,000 $ 128 

36. ADDITIONAL DISCLOSURES 

Following are the additional disclosures required by the Securities and Futures Bureau for significant 

transactions and investees: 

a. Financing provided: Table 1 (attached) 

b. Endorsement/guarantee provided: Table 2 (attached) 

c. Marketable securities held: Table 3 (attached) 

- 64 -

d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of 

the capital stock: Table 4 (attached) 

e. Acquisition of individual real estates at costs of at least NT$100 million or 20% of the paid-in capital: 

None 

f. Disposal of individual real estates at prices of at least NT$100 million or 20% of the capital stock: 

Table 5 (attached) 

g. Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of the capital 

stock: Table 6 (attached) 

h. Receivables from related parties amounting to at least NT$100 million or 20% of the capital stock: 


i. Names, locations, and related information of investees on which the Corporation exercises significant 

influence: Table 8 (attached) 

j. Investment in Mainland China 

1) Investee company name, the description of the primary business activity and products, issued 

capital, nature of the relationship, capital inflow or outflow, ownership interest, gain or loss on 

investment, amounts received on investment, and the limitation on investment: Table 9 (attached) 

2) Significant direct or indirect transactions with the investee company, prices, payment terms, loans, 

guarantee and unrealized gain or loss: 

a) Purchase, purchase percentage and related ending balance, percentage of accounts payable: 


b) Sales, sales percentage and related ending balance, percentage of accounts receivable: Table 6 

(attached) 

c) The amount of property transactions and related transaction’s gain or loss: Eliminated in the 

consolidated statements 

d) Providing collaterals or endorsements, the ending balance and purpose: Table 2 (attached) 

e) Financing to others, related information including highest balance, ending balance, interval of 

interest rate and total current interest: Table 1 (attached) 

f) Significant transactions effect to net income or financial situations. For example, professional 

services provided or received: None 

k. Intercompany relationships and significant transactions: Table 10 (attached) 

- 65 -

37. SEGMENT INFORMATION 

a. Industry information 

In order to allocate resources and fulfill performance evaluation reasonably, since 2006, the department 

in Group engaged in passive components reported industrial financial information separately by product 

groups. Therefore, the Group are divided into the following business segments: 

1) Resistors business segment 

2) Capacitors business segment 

3) Ferrite business segment 

4) Other electronic components and investment business segment 

The industry financial information: Table 11 (attached) 

b. Geographic information: Table 12 (attached) 

c. Export sales: 

U.S. 

Dollars 


Areas 2006 2007 2007 

Asia $ 3,192,458 $ 2,228,627 $ 68,693 

Europe 735,187 738,131 22,752 

America 600,602 505,549 15,583 

d. Important information of customers 

$ 4,528,247 $ 3,472,307 $ 107,028 

Customers accounting for at least 10% of the Group’s total sales: 

None 

- 66 -

TABLE 1 

YAGEO CORPORATION AND INVESTEES 

FINANCING PROVIDED 


(In New Taiwan Dollars, Unless Stated Otherwise; All Amounts in Thousands) 

No. Financing Name Counter-party Financial Statement Account 

Financing Limit 

for Each 

Borrowing 

Company 

Maximum 

Balance for the 

Year 

Ending Balance Interest Rate 

Financing 

Reasons 

Collateral 

Allowance for 

Bad Debt Item Value 

Transaction Amount 

Total Maximum 

Amount of 

Financing 

Allowed for 

Financier 

0 Yageo Corporation Kuo Chung Development Limited Receivable from affiliates $ 12,778,573 $ 140,685 $ - 1.77%-1.78% For revolving fund $ - - $ - $ - $ 12,778,573 

Kuo Shin Investment Limited Receivable from affiliates 12,778,573 100,000 - 1.77%-1.78% For revolving fund - - - - 12,778,573 

1 Yageo Holding (Bermuda) Ltd. Hsu Tai International (H.K.) Receivable from affiliates US$ 694,797 US$ 11,453 US$ 11,444 - For revolving fund - - - - US$ 694,797 

(Note) 

Yageo Corporation Receivable from affiliates US$ 694,797 US$ 15,200 - - For revolving fund - - - Sale 462,061 US$ 694,797 

(Note) 

Purchase 1,911,334 

(Note) 

Yageo USA (H.K.) Limited Receivable from affiliates US$ 694,797 US$ 3,000 US$ 3,000 4.5% For revolving fund - - - Sale US$ 3,300 US$ 694,797 

(Note) 

(Note) 

Yageo Electronics (China) Co., Receivable from affiliates US$ 694,797 US$ 20,000 US$ 20,000 4.5% For revolving fund - - - Sale US$ 75,993 US$ 694,797 

Ltd. 

(Note) 

(Note) 

Purchase US$ 13,971 

(Note) 

Yageo (Hong Kong) Limited Receivable from affiliates US$ 694,797 US$ 9,000 - - For revolving fund - - - - US$ 694,797 

Ferroxcube Technology (Hong Receivable from affiliates US$ 694,797 US$ 6,500 - - For revolving fund - - - - US$ 694,797 

Kong) Limited 

Yageo Korea Receivable from affiliates US$ 694,797 US$ 290 US$ 235 4.5% For revolving fund - - - - US$ 694,797 

(Note) 

Yageo Japan Receivable from affiliates US$ 694,797 US$ 356 US$ 312 4.5% For revolving fund - - - - US$ 694,797 

(Note) 

Yageo America Receivable from affiliates US$ 694,797 US$ 5,681 US$ 5,681 4.5% For revolving fund - - - - US$ 694,797 

(Note) 

Ferroxcube Holding (Samoa) Ltd. Receivable from affiliates US$ 694,797 US$ 5,294 US$ 5,009 4.5% For revolving fund - - - - US$ 694,797 

(Note) 

GCD Receivable from affiliates US$ 694,797 US$ 34 US$ - - For revolving fund - - - - US$ 694,797 

Vitrohm Holding Receivable from affiliates US$ 694,797 US$ 11,551 US$ 10,081 1.25% For revolving fund - - - - US$ 694,797 

(Note) 

Steller Inc. Receivable from affiliates US$ 694,797 US$ 650 US$ 650 4.5% For revolving fund - - - - US$ 694,797 

Phycomp Holding B.V. 

Ferroxcube International Holding 

B.V. 

Loans to subsidiaries 

considered as a component 

of investment 

Loans to subsidiaries 

considered as a component 

of investment 

(Note) 

US$ 694,797 US$ 289,266 US$ 286,804 

(Note) 

US$ 694,797 US$ 74,856 US$ 73,185 

(Note) 

0%-4.5% For revolving fund - - - - US$ 694,797 

0%-4.5% For revolving fund - - - - US$ 694,797 

2 Kuo Ding Venture Capital Kuo Chung Development Limited Receivable from affiliates 77,960 60,790 - 1.24% For revolving fund - - - - 77,960 

Limited Yageo Corporation Receivable from affiliates 77,960 80,800 - 2.21%-2.22% For revolving fund - - - - 77,960 

3 Yageo Holding International Ltd. Yageo Holding (Bermuda) Ltd. Receivable from affiliates US$ 8,516 US$ 7,408 - - For revolving fund - - - - US$ 8,516 

Yageo Corporation Receivable from affiliates US$ 8,516 US$ 7,400 - - For revolving fund - - - - US$ 8,516 

4 Kuo Shin Investment Limited Yageo Corporation Receivable from affiliates 633,674 379,100 - 1.24%-2.27% For revolving fund - - - - 633,674 

Kuo Chung Development Limited Receivable from affiliates 633,674 134,752 - 1.24%-1.77% For revolving fund - - - - 633,674 

5 Kuo Chung Development Limited Yageo Corporation Receivable from affiliates 740,759 900,400 - 1.24%-2.22% For revolving fund - - - - 740,759 

(Continued) 

- 67 -

No. Financing Name Counter-party Financial Statement Account 

Financing Limit 

for Each 

Borrowing 

Company 

Maximum 

Balance for the 

Year 

Ending Balance Interest Rate 

Financing 

Reasons 

Allowance for 

Bad Debt 

Collateral 

Transaction 

Amount 

Total Maximum 

Amount of Financing 

Allowed for 

Financier 

6 Yageo Electronics (Dongguan) Guo Chuang Electronics Receivable from affiliates RMB 475,813 RMB 11,000 RMB 5,000 6.12% For revolving fund - - - Purchase RMB 18 RMB 475,813 

Co., Ltd. 

(Dongguan) Co., Ltd. 

(Note) 

7 Compstar Technology Co., Ltd. Compstar Technology (Cayman) Receivable from affiliates 620,400 US$ 1,732 US$ 1,732 2% For revolving fund - - - Sale $ 448,850 1,034,000 

Ltd. 

(Note) 

(Note) 

8 Compostar Technology Compostar Technology Receivable from affiliates 620,400 RMB 12,400 - 2%-5% For revolving fund - - - - 1,034,000 


(Shanghai) Co., Ltd. 

Compostar Technology (Su Zhou) Receivable from affiliates 620,400 RMB 7,500 - 2% For revolving fund - - - - 1,034,000 

Co., Ltd. 

9 Ferroxcube Holding (Samoa) Ltd. Ferroxcube Electronics 


Receivable from affiliates RMB 165,343 US$ 4,300 US$ 4,300 

(Note) 

- For revolving fund $ - - $ - $ - RMB 165,343 

No. 

10 Chipcera Holding B.V. Chipcera Technology Co., Ltd. Receivable from affiliates US$ (37 ) US$ 32 US$ 30 

(Note) 

- For revolving fund - - - - US$ (37 ) 

11 Yageo Components (Suzhou) Co., 

Ltd. 

Yageo Electronics (China) Co., 

Ltd. 

Receivable from affiliates RMB 40,994 RMB 10,000 RMB 4,000 

(Note) 

- For revolving fund - - - - RMB 40,994 

12 Compostar Technology (Cayman) 

Ltd. 

Compostar Technology 

(Shanghai) Co., Ltd. 

Receivable from affiliates $ 620,400 RMB 12,400 RMB 12,400 

(Note) 

2%-5% For revolving fund - - - - $ 1,034,000 

Note: Eliminated 

(Concluded) 

- 68 -

TABLE 2 


ENDORSEMENT/GUARANTEE PROVIDED 



No. 

Endorsement/Guarantee 

Provider 

Name 

Counter-party 

Nature of 

Relationship 

Limits on Each 

Counter-party’s 

Endorsement/ 

Guarantee Amounts 

Maximum 

Balance for the Year 

Ending Balance 

Value of Collaterals 

Property, Plant, or 

Equipment 

Ratio of Accumulated 

Amount of Collateral 

to Net Equity of the 

Latest Financial 

Statement 

Maximum 

Collateral/Guarantee 

Amounts Allowable 

0 Yageo Corporation Yageo Holding (Bermuda) Ltd. 

(for Yageo Holding (Bermuda) 

Ltd. to guarantee the loans of 

Yageo Electronics (China) Co., 

Ltd., Yageo Electronics 

(Dongguan) Co., Ltd., 

Ferroxcube Electronics 

(Dongguan) Co., Ltd.) 

Subsidiary $ 31,946,432 $ 332,760 

( US$ 10,000 ) 

Yageo Holding (Bermuda) Ltd. Subsidiary 31,946,432 865,842 

( US$25,000 and 

EUR750) 

$ 324,430 

( US$ 10,000 ) 

846,856 

( US$25,000 and 

EUR750) 

$ - 1.02 $ 47,919,648 

- 2.65 47,919,648 

Kuo Shin Investment Limited Subsidiary 31,946,432 300,000 - - - 47,919,648 

Kuo Chung Development Limited Subsidiary 31,946,432 200,000 - - - 47,919,648 

13 Yageo Electronics (China) Co., 

Ltd. 

Yageo Electronics (Dongguan) 

Co., Ltd. 

Affiliate US$ 157,365 US$ 21,129 

(RMB 160,000 ) 

- - - US$ 157,365 

7 Compostar Technology Co., Ltd. Compostar Technology (Cayman) 

Ltd. 

Subsidiary 620,400 54,440 

( US$ 1,500 and 

EUR100) 

- - - 1,360,435 

- 69 -

TABLE 3 


LONG-TERM AND SHORT-TERM INVESTMENTS 

DECEMBER 31, 2007 


Investor Securities Type and Issuer Relationship with the Investor 

Financial Statement 

Account 

Shares/Units 

(Thousands) 

December 31, 2007 

Percentage of 

Carrying Value 

Ownership 

Market Value or 

Net Asset Value 

Note 

Yageo Corporation Stocks 

Teapo Electronics Corporation Equity-method investee Investments accounted for 

47,923 $ 520,408 13.2 $ 303,350 

using equity method 

Kuo Shin Investment Limited Subsidiary Investments accounted for 243,200 1,559,715 100.0 1,559,715 (Note) 


Kuo Ding Venture Capital Limited Subsidiary Investments accounted for 

18,500 195,885 100.0 195,885 (Note) 


GTCL Equity-method investee Investments accounted for 162,023 739,856 15.4 621,855 


Chilisin Electronics Corporation Equity-method investee Investments accounted for 

19,969 315,478 14.0 367,438 


Fubon Venture Capital Corp. 

Member of the board of directors Financial assets measured 

4,000 40,000 20.0 40,000 

at holding cost 

Yageo Holding (Bermuda) Ltd. Subsidiary Investments accounted for 

90,000 22,541,293 100.0 22,541,293 (Note) 


Ferroxcube Taiwan Ltd. Subsidiary Investments accounted for 

372 15,669 100.0 15,669 (Note) 


Compostar Technology Co., Ltd. Subsidiary Investments accounted for 


141,648 1,825,695 68.5 1,863,662 Pledged 136,238 

thousand shares 

(Note) 

Phycomp Holding B.V. Subsidiary Other liabilities - others 747 (5,409,103 ) 100.0 (5,495,262 ) (Note) 

Ferroxcube International Holding B.V. Subsidiary Investments accounted for 

39 315,808 100.0 271,313 (Note) 


Phycomp Malaysia Subsidiary Investments accounted for 

8,628 1,287 100.0 1,287 (Note) 


Yageo America Subsidiary Other liabilities - others 1 (158,873 ) 100.0 (158,873 ) (Note) 

Chipcera Technology Co., Ltd. Subsidiary Investments accounted for 


25,047 215,559 69.0 141,731 Pledged 25,047 


(Note) 

Ralec Electronic Corporation Equity-method investee Investments accounted for 

4,925 299,812 8.3 189,613 


Ferroxcube Holding (Samoa) Ltd. Subsidiary Investments accounted for 

1,000 734,419 100.0 734,419 (Note) 


Taiwan High Speed Rail Corp. - Financial assets measured 

21,233 22,694 0.4 22,694 


Linko International Golf & Country Club - Financial assets measured 

- 482 0.1 635 


TA-I Technology Co., Ltd. - Available-for-sale financial 

assets 

5,593 282,215 3.2 130,879 

(Continued) 

- 70 -



Account 

Shares/Units 



Percentage of 


Ownership 



Note 

Limited company 

Yageo Corporation (South Asia) Subsidiary Investments accounted for 


Kuo Chung Development Limited Subsidiary Investments accounted for 


Bonds 

US Government Agency Bonds - Available-for-sale financial 

assets 

Kuo Shin Investment Stocks 

Limited Tait Marketing & Distribution Co., Ltd. - Available-for-sale financial 

assets 


assets 

Ralec Electronic Corp. Equity-method investee Investments accounted for 




GTCL Equity-method investee Investments accounted for 


King Power International Co., Ltd. - Financial assets measured 


Parawin Venture Capital Corp. Member of the board of directors Financial assets measured 


Compostar Technology Co., Ltd. Equity-method investee Investments accounted for 




Chipcera Technology Co., Ltd. Equity-method investee Investments accounted for 


Jih Sun Securities Investment Trust Co., 

Ltd. 

- Financial assets measured 


Bonds 

Ta Chong subordinated debt - Bonds measured at 

amortized cost 

Yageo Holding (Bermuda) Stocks 

Ltd. GCD Equity-method investee Investments accounted for 


Steller Inc. Subsidiary Investments accounted for 


Yageo (Hong Kong) Limited Subsidiary Investments accounted for 


SHS KOA Corp. - Available-for-sale financial 

assets 

- $ 10,398 100.0 $ 10,398 (Note) 

- 1,851,900 100.0 1,851,900 (Note) 

- 1,640,576 - 1,642,630 

20,114 177,001 12.2 148,842 

12,352 594,117 7.0 289,037 Pledged 7,874 


2,090 75,870 3.5 80,479 

3,502 95,612 2.5 64,435 

28,063 128,148 2.7 107,709 

2,761 33,622 16.6 43,293 

10,000 76,628 10.0 77,120 

4,063 49,578 2.0 53,452 Pledged 4,063 


(Note) 

14,579 130,249 4.0 92,285 

5,786 47,029 15.9 32,636 Pledged 5,786 


(Note) 

1,560 12,000 4.0 26,411 

- 50,000 - 50,000 

3,438 US$ 1,412 27.2 US$ 1,978 

1,000 US$ 1,225 100.0 US$ 1,225 (Note) 

1,030,499 US$ 226,495 100.0 US$ 226,495 (Note) 

888 US$ 9,018 2.0 US$ 7,182 

(Continued) 

- 71 -



Account 

Shares/Units 



Percentage of 


Ownership 



Note 


Yageo USA (H.K.) Limited Subsidiary Investments accounted for 

- $ - $ - 


Vitrohm Holding Subsidiary Other liabilities - others - US$ (1,735 ) 100.0 US$ (1,735 ) (Note) 

Hsu Tai International (H.K.) Subsidiary Other liabilities - others - US$ (2,907 ) 100.0 US$ (2,907 ) (Note) 

Yageo Korea Subsidiary Investments accounted for 

- US$ 483 100.0 US$ 483 (Note) 


Yageo Japan Subsidiary Other liabilities - others - US$ (214 ) 100.0 US$ (214 ) (Note) 

Ko-E Holding (Cayman Islands), Ltd. Subsidiary Investments accounted for 

- US$ 7,155 90.0 US$ 7,155 (Note) 


Belkin International Equity-method investee Investments accounted for 


- US$ 1,674 46.0 US$ 1,900 

Yageo (Hong Kong) Limited company 

Limited Yageo Electronics (China) Co., Ltd. Subsidiary Investments accounted for 


Yageo Electronics (Dongguan) Co., Ltd. Subsidiary 

Investments accounted for 


Guo Chuang Electronics (Dongguan) Equity-method investee Investments accounted for 

Co., Ltd. 


Yageo Components (Su Zhou) Co., Ltd. Subsidiary Investments accounted for 


Kuo Ding Venture Capital Stocks 

Limited GTCL Equity-method investee Investments accounted for 




Kuo Chung Development Stocks 

Limited GTCL Equity-method investee Investments accounted for 



assets 

Ralec Electronic Corp. Equity-method investee Investments accounted for 






- HK$1,201,053 100.0 HK$1,201,053 (Note) 

- HK$ 514,719 100.0 HK$ 514,719 (Note) 

- HK$ 7,108 35.0 HK$ 7,108 

- HK$ 43,778 100.0 HK$ 43,778 (Note) 

8,716 39,799 0.8 33,452 

1,806 42,348 1.3 33,233 

2,625 8,844 0.3 10,075 

9,580 291,833 5.5 224,173 Pledged 7,874 


2,110 76,595 3.5 81,249 

13,835 124,274 3.8 87,576 

6,280 172,054 4.4 115,554 

Ferroxcube Holding Stocks 

(Samoa) Ltd. 

Ferroxcube Technology (Hong Kong) 

Limited 

Subsidiary 



146,209 US$ 17,945 100.0 US$ 17,945 (Note) 

Ferroxcube Technology 

(Hong Kong) Limited 


Ferroxcube Electronics (Dongguan) Ltd. Subsidiary 



- HK$ 139,983 100.0 HK$ 139,983 (Note) 

(Continued) 

- 72 -



Account 

Shares/Units 



Percentage of 


Ownership 



Note 

Compostar Technology Stocks 

Co., Ltd. Luminous Town Electric Co., Ltd. The same chairman of board of 

directors 

Financial assets measured 


Strong Capacitor Company Equity-method investee Investments accounted for 


Compostar Technology (Cayman) Ltd. Subsidiary Investments accounted for 



assets 

12,207 $ 134,583 15.8 $ 103,353 

6,530 109,475 31.4 109,475 

47,000 369,970 100.0 369,970 (Note) 

2,815 107,215 1.6 65,872 

Fund 

Pacific Royal Fund - Global Opportunity 

Income Fund 

- Available-for-sale financial 

assets 

353 117,315 - 43,167 

Compostar Technology Limited company 

(Cayman) Ltd. Compostar Technology (Shanghai) Co., 

Ltd. 

Compostar Technology (Dongguan) Co., 

Ltd. 

Subsidiary Other liabilities - others - US$ (1,687 ) 100.0 US$ (1,687 ) (Note) 

Subsidiary Other liabilities - others - US$ (1,152 ) 100.0 US$ (1,152 ) (Note) 

Stocks 

Compostar (Hong Kong) Limited Subsidiary Investments accounted for 


10,991 US$ 5,016 100.0 US$ 5,016 (Note) 

Compostar (Hong Kong) Stocks 

Limited 

Compostar Technology (Su Zhou), Co., 

Ltd. 

Subsidiary 



- HK$ 39,123 100.0 HK$ 39,123 (Note) 

Ko-E Holding (Cayman Stocks 

Islands) Ltd. Ko-E Corp. Subsidiary Investments accounted for 



Ko-E Technology (Shenzhen) Co., Ltd. Subsidiary Investments accounted for 


Ko-E (H.K.) Limited Subsidiary Investments accounted for 


4,500 US$ 2,373 100.0 US$ 2,373 (Note) 

- US$ 1,251 100.0 US$ 1,251 (Note) 

- US$ 1,837 100.0 US$ 1,837 (Note) 

Chipcera Technology Co., Stocks 

Ltd. Chipcera Holding B.V. Subsidiary Other liabilities - others 800 (1,202 ) 100.0 (1,202 ) (Note) 

Chipcera Holding B.V. Limited company 

Dongguan Chang An Wusha Chipcera Subsidiary Other liabilities - others - US$ (115 ) 100.0 US$ (115 ) (Note) 

Dongguan Chen An Trading Co., Ltd. Subsidiary Investments accounted for 


- US$ 48 100.0 US$ 48 (Note) 

(Continued) 

- 73 -



Account 

Yageo Electronics (China) Funds 

Co., Ltd. 

Bank of China International Money 

Market Fund 

- Available-for-sale financial 

assets 

Credit Suisse Money Market Fund - Available-for-sale financial 

assets 

Phycomp Holding B.V. Stocks 

SHS KOA Corp. - Available-for-sale financial 

assets 

Hsu Tai International Stocks 

(H.K.) SHS KOA Corp. - Available-for-sale financial 

assets 

Shares/Units 



Percentage of 


Ownership 



20,001 RMB 20,000 - RMB 20,039 

20,000 RMB 20,000 - RMB 20,069 

391 EUR 2,404 0.9 EUR 2,151 

872 HK$ 69,483 2.0 HK$ 54,980 

Note 


(Concluded) 

- 74 -

TABLE 4 


LONG-TERM AND SHORT-TERM INVESTMENTS ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL STOCK 



Company Name 

Securities Type and Name 


Account 

Counter-party 

Beginning Balance Acquisition Disposal Adjustment Ending Balance 

Nature of 

Relationship Shares/Units 

Shares/Units 

Shares/Units 

Gain (Loss) on Shares/Units 

Shares/Units 

Amount 

Amount 

Amount Carrying Value Amount 

Amount 




Disposal (Thousands) 


Yageo Corporation Stocks 

TA-I Technology Co., Ltd. 

Kuo Shin Investment Limited 

Taiwan Fixed Network Co., Ltd. 

Ralec Electronic Corp. 

Yageo Holding International Ltd. 

Available-for-sale financial 

assets - noncurrent 



Financial assets measured at 

holding cost - noncurrent 





- - 3,353 $ 124,984 

(Note 2) 

1,936 $ 174,223 300 $ 15,262 $ 16,992 $ (1,730 ) $ 604 

(Note 3) 

$ - 5,593 $ 282,215 

(Note 2) 

Subsidiary Increase in 183,200 1,380,255 60,000 600,000 - - - - - (420,540 ) 243,200 1,559,715 

capital 

(Note 1) 

(Note 7) 

- - 17,500 145,250 - - 17,500 144,814 145,250 (436 ) - - - - 

- - - - 4,925 299,010 - - - - - 802 

(Note 1) 

Subsidiary Liquidation 1,000 277,573 - - 1,000 277,501 277,605 (9,064 ) 

- 32 

(Note 4) 

(Note 1) 

4,925 299,812 

- - 


Kuo Chung Development Limited 



Subsidiary 

Increase in 

capital 

- 341,872 - 1,600,000 - - - - - (89,972 ) 

(Note 1) 

- 1,851,900 

(Note 7) 

Bonds 

US Government Agency Bonds 

Kuo Shin Investment Limited Stocks 

TA-I Technology Co., Ltd. 

Teapo Electronics Corporation 

Taiwan Fixed Network Co., Ltd. 

Fund 

NITC Bond Fund 

NITC Taiwan Bond Fund 

Mega Diamond Bond Fund 

Prudential Financial Bond Fund 

Hua Nan Kirin Fund 

PCA Well Pool Bond Fund 

Taishin Lucky Bond Fund 


assets - current 







Financial assets at fair value 

through profit or loss - 

current 



current 



current 



current 



current 



current 



current 

- - - - - 1,640,576 - - - - - - - 1,640,576 

(Note 2) 

- - 7,875 225,246 

(Note 2) 

3,143 368,871 - - - - 1,334 

(Note 3) 

- 12,352 594,117 

(Note 2) 

- - - - 14,579 129,692 - - - - - 557 14,579 130,249 

(Note 1) 

- - 13,703 113,731 - - 13,703 113,390 113,731 (341 ) - - - - 

- - - - 1,695 280,000 1,695 280,494 280,000 494 - - - - 

- - - - 17,632 250,000 17,632 250,198 250,000 198 - - - - 

- - - - 25,866 299,350 25,866 299,794 299,350 444 - - - - 

- - - - 13,896 204,400 13,896 204,603 204,400 203 - - - - 

- - - - 20,433 228,000 20,433 228,239 228,000 239 - - - - 

- - - - 16,185 204,500 16,185 204,760 204,500 260 - - - - 

- - - - 15,729 162,800 15,729 163,004 162,800 204 - - - - 

Yageo Holding (Bermuda), Stocks 

Ltd. Grace T.H.W. Group Financial assets measured at 


SHS KOA Corp. 



- - 3,833 US$ 4,358 - - 3,833 US$ 3,964 US$ 4,358 US$ (394 ) - - - - 

- - - - 888 US$ 9,018 - - - - - - 888 US$ 9,018 

(Note 2) 

(Continued) 

- 75 -

Company Name 



Account 

Counter-party 


Nature of 


Shares/Units 

Shares/Units 


Shares/Units 

Amount 

Amount 


Amount 







Yageo (Hong Kong) Limited 



Yageo Electronics (China) Co., Ltd. Investments accounted for 


Yageo Electronics (Dongguan) Co., Ltd. Investments accounted for 


Yageo Components (Su Zhou) Co., Ltd. Investments accounted for 


- Increase in 

capital 

- $ - 1,030,499 US$ 216,948 - $ - $ - $ - - US$ 9,547 

(Note 1) 

Subsidiary - - US$ 125,578 - - - US$ 144,359 US$ 144,359 - - US$ 18,781 

(Note 1) 

Subsidiary - - US$ 58,350 - - - US$ 66,527 US$ 66,527 - - US$ 8,177 

(Note 1) 

Subsidiary - - US$ 5,370 - - - US$ 5,230 US$ 5,230 - - US$ (140 ) 

(Note 6) 

1,030,499 US$ 226,495 

(Note 7) 

- - 

- - 

- - 

Yageo (Hong Kong) Limited Limited company 

Yageo Electronics (China) Co., Ltd. Investments accounted for 


Yageo Electronics (Dongguan) Co., Ltd. Investments accounted for 


Yageo Components (Su Zhou) Co., Ltd. Investments accounted for 


Subsidiary 

Subsidiary 

Subsidiary 

Increase in 

capital 

Increase in 

capital 

Increase in 

capital 

- - - HK$ 1,120,223 - - - - - HK$ 80,830 

(Note 1) 

- - - HK$ 516,250 - - - - - HK$ (1,531 ) 

(Note 1) 

- - - HK$ 40,582 - - - - - HK$ 3,196 

(Note 1) 

- HK$ 1,201,053 

(Note 7) 

- HK$ 514,719 

(Note 7) 

- HK$ 43,778 

(Note 7) 

Kuo Chung Development Stocks 

Limited Teapo Electronics Corporation Investments accounted for 


Chilisin Electronics Corporation Investments accounted for 


- - - - 13,835 123,739 - - - - - 535 

(Note 1) 

- - - - 6,218 169,149 - - - - 62 2,905 

(Note 3) (Note 1) 

13,835 124,274 

6,280 172,054 

Fund 

ING Taiwan Income Fund 


Dresdner Bond Dam Fund 

Prudential Financial Bond Fund 

JF (Taiwan) Bond Fund 

NITC Bond Fund 

Mega Diamond Bond Fund 

Hua Nan Kirin Fund 


Capital Income Fund 

Taishin Lucky Bond Fund 

Yuanta Wan Tai Bond Fund 

Polaris De-Li Fund 



current 



current 



current 



current 



current 



current 



current 



current 



current 



current 



current 



current 



current 

- - - - 13,742 219,000 13,742 219,216 219,000 216 - - - - 

- - - - 34,185 485,000 34,185 485,506 485,000 506 - - - - 

- - - - 75,694 884,000 75,694 885,009 884,000 1,009 - - - - 

- - - - 34,724 511,000 34,724 511,556 511,000 556 - - - - 

- - - - 19,288 295,400 19,288 296,046 295,400 646 - - - - 

- - - - 1,786 295,000 1,786 295,632 295,000 632 - - - - 

- - - - 51,281 594,200 51,281 595,092 594,200 892 - - - - 

- - - - 26,437 295,000 26,437 295,312 295,000 312 - - - - 

- - - - 26,221 331,500 26,221 331,908 331,500 408 - - - - 

- - - - 16,434 245,900 16,434 246,243 245,900 343 - - - - 

- - - - 28,888 299,000 28,888 299,376 299,000 376 - - - - 

- - - - 34,376 486,300 34,376 486,785 486,300 485 - - - - 

- - - - 19,561 299,000 19,561 299,209 299,000 209 - - - - 

Kuo Ding Venture Capital Fund 

Limited NITC Bond Fund Financial assets at fair value 


current 

- - - - 719 118,781 719 119,016 118,781 235 - - - - 

(Continued) 

- 76 -

Company Name 



Account 

Counter-party 


Nature of 


Shares/Units 

Shares/Units 


Shares/Units 

Amount 

Amount 


Amount 










current 



current 

- - - $ - 16,498 $ 234,102 16,498 $ 234,349 $ 234,102 $ 247 - $ - - $ - 

- - - - 14,599 184,702 14,599 184,912 184,702 210 - - - - 

Compostar Technology Fund 

Co., Ltd. 

Pacific Royal Fund-Global Opportunity 

Income Fund 


assets - current 

- - - - 594 197,565 241 52,979 80,250 (27,271 ) - - 353 117,315 

(Note 2) 


Compostar Technology (Cayman) Ltd. 



Subsidiary 

Increase in 

capital 

47,000 233,889 - 123,844 - - - - - 12,237 

(Note 1) 

47,000 369,970 

(Note 7) 

Compostar Technology Limited company 

(Cayman) Ltd. Compostar (Hong Kong) Limited Investments accounted for 


Subsidiary 

Increase in 

capital 

- - 10,991 US$ 5,036 - - - - - US$ (20 ) 

(Note 1) 

10,991 US$ 5,016 

(Note 7) 

Compostar (Hong Kong) Limited company 

Limited 

Compostar Technology (Su Zhou) Co., 

Ltd. 



Subsidiary 

Increase in 

capital 

- - - HK$ 39,080 - - - - - HK$ 43 

(Note 1) 

- HK$ 39,123 

(Note 7) 

Ferroxcube Holding (Samoa) Stocks 

Ltd. 

Ferroxcube Technology (Hong Kong) 

Limited 



Subsidiary 

Increase in 

capital 

- - 146,209 US$ 17,953 - - - - - US$ (8 ) 

(Note 1) 

146,209 US$ 17,945 

(Note 7) 


Ferroxcube Electronics (Dongguan) Ltd. Investments accounted for 


Ferroxcube Technology Limited company 

(Hong Kong) Limited Ferroxcube Electronics (Dongguan) Ltd. Investments accounted for 


Subsidiary - - US$ 17,499 - - - US$ 17,953 US$ 17,953 - - US$ 454 

(Note 1) 

Subsidiary - - - - HK$ 140,044 - - - - - HK$ (61 ) 

(Note 1) 

- - 

- HK$ 139,983 

(Note 7) 

Ko-E Corp. Fund 

Dresdner Bond Dam Fund 

Phycomp Holding BV Stocks 

SHS KOA Corp. 

Hsu Tai International (H.K.) Stocks 

SHS KOA Corp. 



current 





- - - - 17,915 209,000 17,915 209,549 209,000 549 - - - - 

- - - - 391 EUR 2,404 - - - - - - 391 EUR 2,404 

(Note 2) 

- - - - 872 HK$ 69,483 - - - - - - 872 HK$ 69,483 

(Note 2) 

Note 1: Equity in net gain or loss of investees and other equity-method adjustment. 

Note 2: Represent original carrying value before market price adjustment. 

Note 3: Represent stock dividends. 

Note 4: Represent difference between selling price and carrying value of NT$(104) thousand, add reversal of prior year adjustment of stockholders’ equity of NT$(8,960) thousand in debit balance. 

Note 5: Represent investment income and other adjustment by equity method of US$23,676 thousand and cash dividends of US$(4,895) thousand from investee. 

Note 6: Represent investment income and other adjustment by equity method US$635 thousand and cash dividends of US$(775) thousand from investee. 

Note7: Eliminated 

(Concluded) 

- 77 -

TABLE 5 


DISPOSAL OF LAND AND BUILDING AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL STOCK 



Corporation 

Name 

Date of 

Transaction 

Occurred 

Year of 

Acquirement 

Book Value 

Transaction 

Amount 

Condition 

Gain on Disposal 

Opposite 

Company 

Relation Object Direction of Price Other 

Yageo Corporation Land and building located 2007.5.30 Since 1999 $ 4,153,713 $ 4,995,000 Collected $ 666,363 Sinyi Realty Inc. - Finance According to appraisal - 

on Road Sinyi, Taipei 

report and negotiation 

Land and building located in 2007.9.17 Since 1988 33,892 120,000 Collected 81,350 Talin Assets 

- Finance According to negotiation - 

Tianmu, Taipei 

Limited 

Kuo Chung 

Development 

Limited 

Land and building located 

on Road Songqin, Taipei 

2007.10.15 Since 1999 166,911 200,000 Collected 25,147 Mrs. Yu-Chin Li - Finance According to negotiation - 

- 78 -

TABLE 6 


TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL STOCK 



Company Name Related Party Nature of Relationship 

Purchase/ 

Sale 

Amount 

Transaction Details 

% to 

Total 

Notes/Accounts (Payable) or 

Abnormal Transaction 

Receivable 

% to 

Payment Terms Unit Price Payment Terms Ending Balance 

Total 

Note 

Yageo Corporation Yageo Holding (Bermuda) Ltd. Subsidiary Sale $ 1,911,334 17 T/T 90 days $ - - $ 368,955 13 

(Note) 

(Note) 

Purchase 462,061 8 T/T 90 days - - (78,144 ) 3 

(Note) 

(Note) 

Yageo Electronic (China) Co., Ltd. Subsidiary of Yageo Holding Sale 183,809 2 T/T 90 days - - 237,546 8 

(Bermuda) Ltd. 

(Note) 

(Note) 

Yageo USA (H.K.) Limited 

Subsidiary of Yageo Holding Sale 2,109,556 19 Offset account T/T 90 days - - 558,154 20 


(Note) 

(Note) 

Yageo Europe KFT Subsidiary Sale 1,332,625 12 Offset account T/T 45 days - - 211,956 7 

(Note) 

(Note) 

Ko-E Corp. 

Subsidiary of Yageo Holding Sale 941,671 9 T/T 60 days - - 212,837 7 


(Note) 

(Note) 

Compostar Technology Co., Ltd. Subsidiary Sale 474,454 4 T/T 60 days - - 215,493 8 

(Note) 

(Note) 

Purchase 1,701,935 30 T/T 60 days - - (542,177 ) 23 

(Note) 

(Note) 

Ko-E (H.K.) Limited 

Subsidiary of Yageo Holding Sale 224,387 2 T/T 60 days - - 84,825 3 


(Note) 

(Note) 

Yageo Corporation (South Asia) Subsidiary Sale 373,160 3 T/T 90 days - - 209,583 7 

(Note) 

(Note) 

Belkin International 

An equity-method investee of Purchase 132,898 2 T/T 30 days - - (18,213 ) 1 

Yageo Holding (Bermuda) 

Ltd. 

Chipcera Technology Co., Ltd. Subsidiary Sale 103,247 

(Note) 

1 T/T 90 days 57,682 

(Note) 

2 

Yageo Holding (Bermuda) Ltd. Yageo Electronics (China) Co., Ltd. Subsidiary Sale US$ 75,993 

(Note) 

Yageo USA (H.K.) Limited Subsidiary Sale US$ 3,300 

(Note) 

81 T/T 90 days - - US$ 47,124 

(Note) 

4 T/T 90 days - - US$ 20 

(Note) 

95 

- 

Yageo USA (H.K.) Limited Yageo Electronics (Dongguan) Co., Ltd. Affiliate Sale 2,109,556 

(Note) 

100 Offset account T/T 90 days - - - - 

Ferroxcube Holding (Samoa) Ltd. Ferroxcube H.K. Ltd. Affiliate Sale RMB 162,193 

(Note) 

Ferroxcube Poland Ltd. Affiliate Purchase RMB 30,492 

(Note) 

99 T/T 60 days - - RMB 27,733 

(Note) 

62 T/T 60 days - - RMB (3,246 ) 

(Note) 

96 

15 

Yageo Electronics (China) Co., Ltd. Yageo Electronics (Dongguan) Co., Ltd. Subsidiary of Yageo Holding Sale RMB 307,356 19 T/T 90 days - - RMB 102,383 16 


(Note) 

(Note) 

Yageo Holding (Bermuda) Ltd. Parent company Sale RMB 106,264 7 T/T 90 days - - RMB 24,818 4 

(Note) 

(Note) 

Yageo Europe KFT Affiliate Sale RMB 94,003 6 T/T 90 days - - RMB 23,425 4 

(Note) 

(Note) 

Guo Chuang Electronics (Dongguan) Co., An equity-method investee of Sale RMB 58,844 4 T/T 60 days - - RMB 20,737 3 

Ltd. 


Ko-E Technology (Shenzhen) Co., Ltd. Subsidiary of Yageo Holding 


Sale RMB 187,663 

(Note) 

12 T/T 65 days - - RMB 102,292 

(Note) 

16 

(Continued) 

- 79 -

Company Name Related Party Nature of Relationship 

Notes/Accounts (Payable) or 


Abnormal Transaction 

Receivable 

Purchase/ 

% to 

Purchase/ 

Amount 

Payment Terms Unit Price Payment Terms Ending Balance 

Sale 

Total 

Sale 

Compostar Technology (Su Zhou) Co., Affiliate Sale RMB 38,230 2 T/T 90 days - - RMB 22,606 4 

Ltd. 

(Note) 

(Note) 

Yageo Corporation (South Asia) Affiliate Sale RMB 24,092 1 T/T 90 days - - RMB 21,468 3 

(Note) 

(Note) 

Note 

Amount 

Yageo Electronics (Dongguan) Co., Ltd. Ko-E (H.K.) Limited 

Subsidiary of Yageo Holding Sale RMB 173,110 16 T/T 60 days - - RMB 52,602 14 


(Note) 

(Note) 

Yageo Electronics (China) Co., Ltd. Subsidiary of Yageo Holding Sale RMB 41,015 4 T/T 90 days - - RMB 24,284 7 


(Note) 

(Note) 

Belkin International Affiliate Purchase RMB 26,133 3 T/T 90 days - - RMB (6,535 ) 2 

Ko-E Technology (Shenzhen) Co., Ltd. Guo Chung Electronics (Dongguan) Co., 

Ltd. 

An equity-method investee of 


Purchase RMB 85,864 31 T/T 60 days - - RMB (25,425 ) 19 

Compostar Technology Co., Ltd. Compostar Technology (Cayman) Ltd. Subsidiary Sale $ 448,850 

(Note) 

Compostar Technology (Cayman) Ltd. Compostar Technology (Su Zhou) Co., Subsidiary Sale US$ 9,653 

(Note) 

Ltd. 

Compostar Technology (Dongguan) Co., Subsidiary Sale US$ 4,096 

Ltd. 

(Note) 

Purchase US$ 5,460 

(Note) 

15 T/T 180 days $ - - $ 46,611 

(Note) 

45 T/T 180 days - - US$ 6,765 

(Note) 

19 T/T 180 days - - US$ 2,641 

(Note) 

25 T/T 180 days - - US$ (281) 

(Note) 

5 

55 

21 

8 


(Concluded) 

- 80 -

TABLE 7 


RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF CAPITAL STOCK 



Company Name Related Party Nature of Relationship Ending Balance Turnover Rate 

Amount 

Overdue 

Action Taken 

Amounts Received in 

Subsequent Period 

Allowance for Bad 

Debts 

Yageo Corporation Yageo USA (H.K.) Limited Subsidiary of Yageo Holding (Bermuda) Ltd. $ 558,154 (Note 3) 4.33 $ - - $ 558,154 $ - 

Ko-E Corp. Subsidiary of Yageo Holding (Bermuda) Ltd. 212,837 (Note 3) 3.24 - - 202,688 - 

Yageo Holding (Bermuda) Ltd. Subsidiary 368,955 (Note 3) 7.93 - - 153,875 - 

Yageo Europe KFT Subsidiary 211,956 (Note 3) 6.65 - - 211,956 - 

Compostar Technology Co., Ltd. Subsidiary 215,493 (Note 3) 3.07 - - 215,493 - 

Yageo Corporation (South Asia) Subsidiary 209,583 (Note 3) 3.56 - - 114,775 - 

Yageo Electronics (China) Co., Ltd. Subsidiary of Yageo Holding (Bermuda) Ltd. 237,546 (Note 3) 1.96 - - 139,204 - 

Yageo Holding (Bermuda) Ltd. Yageo Electronics (China) Co., Ltd. Subsidiary US$ 47,124 (Note 3) 1.66 - - US$ 27,673 - 

US$ 20,000 (Note 3) - (Note 1) - - - - 

Hsu Tai International (H.K.) Subsidiary US$ 11,444 (Note 3) - (Note 1) - - US$ 540 - 

Yageo USA (H.K.) Limited Subsidiary US$ 3,000 (Note 3) - (Note 1) - - - - 

Ferroxcube Holding (Samoa) Ltd. Subsidiary US$ 5,009 (Note 3) - (Note 1) - - - - 

Phycomp Holding B.V. Subsidiary US$ 286,804 (Notes 2 - (Note 1) - - US$ 1,097 - 

and 3) 

Ferroxcube International Holding B.V. Subsidiary US$ 73,185 (Notes 2 - (Note 1) - - US$ 1,846 - 

and 3) 

Vitrohm Holding Subsidiary US$ 10,081 (Note 3) - (Note 1) - - US$ 99 - 

Yageo America Subsidiary US$ 5,681 (Note 3) - (Note 1) - - - - 

Yageo Electronics (China) Co., Ltd. Yageo Electronics (Dongguan) Co., Ltd. Subsidiary of Yageo Holding (Bermuda) Ltd. RMB 102,383 (Note 3) 3.36 - - RMB 13,345 - 

Yageo Holding (Bermuda) Ltd. Parent company RMB 24,818 (Note 3) 4.00 - - RMB 12,349 - 

Ko-E Technology (Shenzhen) Co., Ltd. Subsidiary of Yageo Holding (Bermuda) Ltd. RMB 102,292 (Note 3) 2.58 - - RMB 82,501 - 

Yageo Europe KFT Affiliate RMB 23,425 (Note 3) 6.21 - - RMB 4,505 - 

Compostar Technology (Su Zhou) Co., Ltd. Affiliate RMB 22,606 (Note 3) 2.37 - - RMB 3,094 - 

Yageo Electronics (Dongguan) Co., Ltd. Ko-E (H.K.) Limited Subsidiary of Yageo Holding (Bermuda) Ltd. RMB 52,602 (Note 3) 3.88 - - RMB 49,954 - 

Yageo Electronics (China) Co., Ltd. Subsidiary of Yageo Holding (Bermuda) Ltd. RMB 24,284 (Note 3) 3.08 - - RMB 16,200 - 

Compostar Technology Co., Ltd. Yageo Corporation Parent company 542,177 (Note 3) 3.49 - - 538,587 - 

Compostar Technology (Caymen)., Ltd. Compostar Technology (Su Zhou) Co., Ltd. Subsidiary US$ 6,765 (Note 3) 1.60 - - US$ 701 - 

Ferroxcube Holding (Samoa) Ltd. Ferroxcube Electronics (Dongguan) Ltd. Subsidiary US$ 4,300 (Note 3) - (Note 1) - - - - 

Ferroxcube H.K. Ltd. Affiliate RMB 27,733 (Note 3) 8.56 - - RMB 27,733 - 

Note 1: Flexible payment term based on borrower’s financial condition. 

Note 2: Foreign-currency loans to long-term investee. 

Note 3: Eliminated. 

- 81 -

TABLE 8 


NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE 



Investment Amount Balance as of December 31, 2007 

Investor Company Investee Company Location Main Businesses and Products December 31, December 31, Shares Percentage of 


2007 2006 (Thousands) Ownership 

Net Income 

(Loss) of the 

Investee 

Investment 

Gain (Loss) 

Note 

Yageo Corporation Yageo Holding (Bermuda) Ltd. Bermuda Investment US$ 382,770 US$ 382,770 90,000 100.0 $ 22,541,293 $ 1,176,876 $ 1,176,876 Subsidiary 

(Note 3) 

(Note 3) 

Yageo Holding International Ltd. Bermuda Investment - US$ 48,825 - - - 429 32 Subsidiary (Note 1) 

(Note 3) 

Teapo Electronics Corporation Taipei Capacitor manufacture and marketing 1,044,203 958,939 47,923 13.2 520,408 (126,532 ) (14,828 ) Equity-method investee 

Kuo Shin Investment Limited Taipei Investment 2,529,881 1,929,881 243,200 100.0 1,559,715 24,238 24,238 Subsidiary 

(Note3) 

(Note 3) 

Kuo Ding Venture Capital Limited Taipei Venture capital 185,000 185,000 18,500 100.0 195,885 (6,302 ) (6,311 ) Subsidiary 

(Note 3) 

(Note 3) 

GTCL Singapore Investment 390,078 390,078 162,023 15.4 739,856 (929,901 ) (143,491 ) Equity-method investee 

Fubon Venture Capital Corp. Taipei Venture capital 40,000 40,000 4,000 20.0 40,000 (16,556 ) (3,311 ) Equity-method investee (Note 2) 

Chilisin Electronics Corporation Hsinchu Inductance manufacture and marketing 319,184 319,184 19,969 14.0 315,478 254,734 34,001 Equity-method investee 

Kuo Chung Development Ltd. Taipei Investment 1,727,288 127,288 - 100.0 1,851,900 39,580 39,580 Subsidiary 

(Note 3) 

(Note 3) 

Ferroxcube Taiwan Ltd. Hsinchu Ferrite core manufacture and marketing 16,175 16,175 372 100.0 15,669 4,429 4,414 Subsidiary 

(Note 3) 

(Note 3) 

Compostar Technology Co., Ltd. Kaohsiung Electronic component manufacture and 1,441,867 1,411,992 141,648 68.5 1,825,695 307,417 203,001 Subsidiary 

marketing 

(Note 3) 

(Note 3) 

Chipcera Technology Co., Ltd. Kaohsiung Capacitor manufacture and marketing 205,910 205,910 25,047 69.0 215,559 (12,905 ) (9,311 ) Subsidiary 

(Note 3) 

(Note 3) 

Ralec Electronic Corp. Kaohsiung Resistor manufacture and marketing 299,010 - 4,925 8.3 299,812 226,927 2,814 Equity-method investee 

Ferroxcube Holding (Samoa) Ltd. West Samoa Investment US$ 23,513 US$ 21,928 1,000 100.0 734,419 (15,705 ) (15,705 ) Subsidiary 

(Note 3) 

(Note 3) 

Phycomp Holding B.V. Netherlands Holding company US$ 142,572 US$ 142,572 747 100.0 (5,409,103 ) (133,582 ) (148,899 ) Subsidiary 

(Note 3) 

(Note 3) 

Ferroxcube International Holding B.V. Netherlands Holding company US$ 70,155 US$ 70,155 39 100.0 315,808 (473,361 ) (473,361 ) Subsidiary 

(Note 3) 

(Note 3) 

Phycomp Malaysia Malaysia Electronic component manufacture and MYR$ 759 MYR$ 759 8,628 100.0 1,287 

(102 ) (102 ) Subsidiary 

marketing 

(Note 3) 

(Note 3) 

Yageo Corporation (South Asia) Singapore Electronic component manufacture and SG$ 780 SG$ 780 - 100.0 10,398 (3,674 ) (3,674 ) Subsidiary (formerly Phycomp 

marketing 

(Note 3) 

(Note 3) Singapore) 

Yageo America America Electronic component manufacture and US$ 2,347 US$ 196 1 100.0 (158,873 ) (40,140 ) (40,140 ) Subsidiary 

marketing 

(Note 3) 

(Note 3) 

Kuo Shin Investment Limited Chilisin Electronics Corporation Hsinchu Inductance manufacture and marketing 76,988 76,988 3,502 2.5 95,612 254,734 5,967 Equity-method investee 

Teapo Electronic Corporation Taipei Capacitor manufacture and marketing 129,692 - 14,579 4.0 130,249 (126,532 ) (3,440 ) Equity-method investee 

GTCL Singapore Investment 96,943 96,943 28,063 2.7 128,148 (929,901 ) (24,853 ) Equity-method investee 

Ralec Electronic Corp. Kaohsiung Resistor manufacture and marketing 62,907 62,907 2,090 3.5 75,870 226,927 11,450 Equity-method investee 

Chipcera Technology Co., Ltd. Kaohsiung Capacitor manufacture and marketing 46,289 46,289 5,786 15.9 47,029 (12,905 ) (1,743 ) Subsidiary 

(Note 3) 

(Note 3) 

Compostar Technology Co., Ltd. Kaohsiung Electronic component manufacture and 

marketing 

42,631 42,631 4,063 2.0 49,578 

(Note 3) 

307,417 5,732 

(Note 3) 

Subsidiary 

Yageo Holding (Bermuda) Ltd. Vitrohm Holding Germany Investment EUR$ 15,849 EUR 15,849 - 100.0 US$ (1,735 ) US$ 3,391 US$ 3,391 Subsidiary 

(Note 3) 

(Note 3) 

Yageo (Hong Kong) Limited Hong Kong Investment HK$ 1,030,499 - 1,030,499 100.0 US$ 226,495 US$ 3,234 US$ 3,234 Subsidiary 

(Note 3) 

(Note 3) 

GCD B.V.I. Investment US$ 3,551 US$ 3,502 3,438 27.2 US$ 1,412 US$ 744 US$ 199 Equity-method investee of subsidiary 

Hsu Tai International (H.K.) Hong Kong Investment US$ 2,400 US$ 2,400 - 100.0 US$ (2,907 ) 

(Note 3) 

Yageo Korea Korea Resistor marketing US$ 236 US$ 236 - 100.0 US$ 483 

(Note 3) 

US$ 88 US$ 88 

(Note 3) 

US$ 222 US$ 222 

(Note 3) 

Subsidiary 

Subsidiary 

(Continued) 

- 82 -

Investor Company Investee Company Location Main Businesses and Products 

Investment Amount Balance as of December 31, 2007 Net Income 

Investment 

(Loss) of the 

December 31, December 31, Shares Percentage of 

Gain (Loss) 

Note Investee 


Note 

Yageo Japan Japan Resistor marketing US$ 339 US$ 339 - 100.0 US$ (214 ) US$ (63 ) US$ (63 ) Subsidiary 

(Note 3) 

(Note 3) 

Ko-E Holding (Cayman Islands), Ltd. Cayman Islands Holding company US$ 4,500 US$ 4,500 - 90.0 US$ 7,155 US$ 2,386 US$ 2,147 Subsidiary 

(Note 3) 

(Note 3) 

Belkin International Samoa Investment US$ 920 US$ 920 - 46.0 US$ 1,674 US$ 1,158 US$ 589 Equity-method investee 

Steller Inc. U.S.A. Electronic component manufacture and US$ 8,882 - 1,000 100.0 US$ 1,225 US$ 110 US$ 110 Subsidiary 

marking 

(Note 3) 

(Note 3) 

Yageo Electronics (Dongguan) Co., Ltd. China Passive Component manufacture and 

- US$ 33,931 - - $ - RMB 30,974 US$ 5,787 Subsidiary 

marketing 

(Note 3) 

Yageo Electronics (China) Co., Ltd. China Passive Component manufacture and 

- US$ 81,000 - - - RMB 192,717 US$ 18,287 Subsidiary 

marketing 

(Note 3) 

Guo Chuang Electronics (Dongguan) Co., China Passive Component manufacture and 

- US$ 598 - - - RMB 5,953 US$ 230 Equity-method investee of subsidiary 

Ltd. 

marketing 

Yageo Components (Su Zhou) Co., Ltd. China Passive Component manufacture and 

- US$ 5,000 - - - RMB 4,836 US$ 412 Subsidiary 

marketing 

(Note 3) 

Yageo USA (H.K.) Limited. Hong Kong Passive Component marketing HK$ 8,000 HK$ 8,000 - 100.0 - $ - $ - Subsidiary 

Yageo (Hong Kong) Limited Yageo Electronics (China) Co., Ltd. China Passive Component manufacture and 

marketing 

Yageo Electronics (Dongguan) Co., Ltd. China Passive Component manufacture and 

marketing 

Guo Chuang Electronics (Dongguan) Co., China Passive Component manufacture and 

Ltd. 

marketing 

Yageo Components (Su Zhou) Co., Ltd. China Passive Component manufacture and 

marketing 

HK$ 1,120,223 $ - - 100.0 HK$ 1,201,053 

(Note 3) 

RMB 192,717 HK$ 40,752 

(Note 3) 

Subsidiary 

US$ 516,250 - - 100.0 HK$ 514,719 RMB 30,974 HK$ (17,606 ) Subsidiary 

(Note 3) 

(Note 3) 

HK$ 6,458 - - 35.0 HK$ 7,108 RMB 5,953 HK$ 345 Equity-method investee of subsidiary 

HK$ 40,582 - - 100.0 HK$ 43,778 

(Note 3) 

RMB 4,836 HK$ 1,739 

(Note 3) 

Subsidiary 

Kuo Ding Venture Capital GTCL Singapore Investment $ 29,020 29,020 8,716 0.8 $ 39,799 $ (929,901 ) $ (7,719 ) Equity-method investee 

Limited Chilisin Electronic Corporation Hsinchu Inductance manufacture and marketing 33,739 33,739 1,806 1.3 42,348 254,734 3,075 Equity-method investee 

Kuo Chung Development Limited GTCL Singapore Investment 6,345 6,345 2,625 0.3 8,844 (929,901 ) (2,325 ) Equity-method investee 

Ralec Electronic Corp. Kaohsiung Resistor manufacture and marketing 63,483 63,483 2,110 3.5 76,595 226,927 11,566 Equity-method investee 

Teapo Electronics Corporation Taipei Capacitor manufacture and marketing 123,739 - 13,835 3.8 124,274 (126,532 ) (3,258 ) Equity-method investee 

Chilisin Electronics Corporation Hsinchu Inductance manufacture and marketing 169,149 - 6,280 4.4 172,054 254,734 6,307 Equity-method investee 

Ferroxcube Holding (Samoa) Ltd. Ferroxcube Electronics (Dongguan) Co., Ltd. China Ferrite manufacture and marketing - US$ 18,628 - - - US$ (478 ) US$ (357 ) Subsidiary 

(Note 3) 

Ferroxcube Technology (Hong Kong) Limited Hong Kong Investment HK$ 146,209 - 146,209 100.0 US$ 17,945 

(Note 3) 

US$ (121 ) US$ (121 ) Subsidiary 

(Note 3) 

Ferroxcube Technology (Hong 

Kong) Limited 

Ferroxcube Electronics (Dongguan) Co., Ltd. China Ferrite manufacture and marketing HK$ 140,044 - - 100.0 HK$ 139,983 

(Note 3) 

HK$ (3,730 ) HK$ (946 ) 

(Note 3) 

Subsidiary 

Compostar Technology Co., Ltd. Strong Components Co., Ltd. Kaohsiung Electronic component and capacitor 

184,146 184,146 6,530 31.4 109,475 (23,356) (7,338 ) Equity-method investee of subsidiary 

manufacture and marketing 

Compostar Technology (Cayman) Ltd. Cayman Islands Marketing of passive component 626,361 502,517 47,000 100.0 369,970 

(Note 3) 

15,567 15,567 

(Note 3) 

Subsidiary 

Compostar Technology (Cayman) 

Ltd. 

Compostar Technology (Shanghai) Co., Ltd. China Resistor, capacitor and related electronic 

production storehouse and marketing 

Compostar Technology (Dongguan) Co., Ltd. China Resistor and capacitor manufacture and 

marketing 

Compostar Technology (Su Zhou) Co., Ltd. China Resistor and capacitor manufacture and 

marketing 

Compostar Technology (Hong Kong) Co., 

Ltd. 

US$ 500 US$ 500 - 100.0 US$ (1,687 ) US$ (164 ) US$ (164 ) Subsidiary 

(Note 3) 

(Note 3) 

US$ 1,502 US$ 1,502 - 100.0 US$ (1,152 ) US$ 430 US$ 430 Subsidiary 

(Note 3) 

(Note 3) 

- US$ 1,400 - - - RMB 8,759 US$ 1,278 Subsidiary 

(Note 3) 

HK$ (991 ) HK$ (991 ) Subsidiary 

(Note 3) 

Hong Kong Investment US$ 5,036 - 10,991 100.0 US$ 5,016 

(Note 3) 

(Continued) 

- 83 -

Investment Amount Balance as of December 31, 2007 

Investor Company Investee Company Location Main Businesses and Products December 31, December 31, Shares Percentage of 



Compostar Technology (Su Zhou) Co., China Resistor and capacitor manufacture and HK$ 39,080 - - 100.0 US$ 39,123 

Ltd. 

marketing 

(Note 3) 

Compostar Technology (Hong 

Kong) Co., Ltd. 

Chipcera Technology Co., Ltd. Chipcera Holding B.V. B.V.I. Investment 8,931 8,931 800 100.0 (1,202 ) 

(Note 3) 

Ko-E Holding (Cayman Islands), Ko-E Corp. Taipei Electronic components marketing US$ 1,393 US$ 1,393 4,500 100.0 US$ 2,373 

Ltd. 

(Note 3) 

Ko-E Technology (Shenzhen) Co., Ltd. China Electronic components marketing US$ 1,000 US$ 1,000 - 100.0 US$ 1,251 

(Note 3) 

Ko-E (H.K.) Limited Hong Kong Electronic components marketing US$ 1 US$ 1 - 100.0 US$ 1,837 

(Note 3) 

Chipcera Holding B.V. Dongguan Chang An Wusha Chipcera China Capacitor manufacture and marketing - - - 100.0 US$ (115 ) 

(Note 3) 

Dongguan Chen An Trading Co., Ltd. China Capacitor manufacture and marketing US$ 63 US$ 63 - 100.0 US$ 48 

(Note 3) 

Net Income 

(Loss) of the 

Investee 

Investment 

Gain (Loss) 

RMB 8,759 HK$ (991 ) 

(Note 3) 

Subsidiary 

(6,595 ) (6,595 ) Subsidiary 

(Note 3) 

US$ 963 US$ 958 Subsidiary 

(Note 3) 

US$ 167 US$ 167 Subsidiary 

(Note 3) 

US$ 1,588 US$ 1,588 Subsidiary 

(Note 3) 


(Note 3) 


(Note 3) 

Note 

Note 1: Yageo Holding International Ltd. was liquidated and eliminated in October of 2007. 

Note 2: Fubon Venture Capital Corp. went into liquidation in June of 2007. The Corporation lost significant influence over the entity and reclassified the carrying value into financial assets measured at holding cost. 

Note 3: Eliminated. 

(Concluded) 

- 84 -

TABLE 9 


INVESTMENT IN MAINLAND CHINA 



Investee 

Company Name 

Main Businesses and 

Products 

Total Amount of 

Paid-in Capital 

Investment Type 

(e.g., Direct or Indirect) 

Accumulated 

Outflow of 

Investment from 

Taiwan as of 

January 1, 2007 

Outflow 

Investment Flows 

Inflow 

Accumulated 

Outflow of 

Investment from 

Taiwan as of 

December 31, 

2007 

% Ownership of 

Direct or 

Indirect 

Investment 

Investment Gain 

(Loss) 


as of 

December 31, 

2007 

Accumulated 

Inward 

Remittance of 

Earnings as of 

December 31, 

2007 

Accumulated 

Investment in 

Mainland China 

as of 

December 31, 

2007 

Investment 

Amounts 

Authorized by 

Investment 

Commission, 

MOEA 

Upper Limit on Investment 

Yageo Electronics 


Manufacture and 

marketing of passive 

components 

US$ 33,931 Indirect: Through a company 

($ 1,100,823 ) registered in a third region 

US$ 33,931 $ - $ - US$ 33,931 

($ 1,100,823 ) 

($ 1,100,823 ) 

100% US$ 3,530 

( $ 114,524 ) 

(Note) 

HK$ 514,719 

( $ 2,140,922 ) 

(Note) 

$ - US$ 33,931 US$ 37,790 

($ 1,100,823 ) 

Yageo Electronics 

(China) Co., Ltd. 



components 


($ 2,627,883 ) registered in a third region 

US$ 81,000 

($ 2,627,883 ) 

- - US$ 81,000 

($ 2,627,883 ) 

100% US$ 23,511 

($ 762,767 ) 

(Note) 

HK$ 1,201,053 US$ 7,751 US$ 81,000 US$ 118,000 

($ 4,995,660 ) ( $ 251,466 ) ($ 2,627,883 ) 

(Note) 

Ferroxcube Electronics 



marketing of Ferrite 


($ 623,327 ) registered in a third region 

US$ 18,628 US$ 585 

($ 604,348 ) ( $ 18,979 ) 

- US$ 19,213 

($ 623,327 ) 

100% US$ (478 ) 

($ (15,508 ) 

(Note) 

HK$ 139,983 

($ 582,245 ) 

(Note) 

- US$ 19,213 US$ 26,600 $ 7,889,286 

($ 623,327 ) 

Guo Chuang Electronics 




components 



US$ 789 

($ 25,598 ) 

- - US$ 789 

($ 25,598 ) 

35% US$ 274 HK$ 7,108 

($ 8,889 ) ($ 29,565 ) 

- US$ 789 US$ 2,926 

($ 25,598 ) 

Yageo Components (Su 

Zhou) Co., Ltd. 



components 



US$ 5,000 

($ 162,215 ) 

- - US$ 5,000 

($ 162,215 ) 

100% US$ 636 

($ 20,634 ) 

(Note) 

HK$ 43,778 

($ 182,090 ) 

(Note) 

- US$ 5,000 US$ 5,000 

($ 162,215 ) 

Ko-E Technology 

(Shenzhen) Co., Ltd. 


marketing of 

Electronic 

components 



US$ 900 

($ 29,199 ) 

- - US$ 900 

($ 29,199 ) 

90% US$ 150 

($ 4,866 ) 

(Note) 

US$ 1,251 

($ 40,586 ) 

(Note) 

- US$ 900 US$ 3,150 

($ 29,199 ) 

Guo Ray Electronics Co., 

Ltd. 



components 



US$ 230 

($ 7,462 ) 

- - US$ 230 

($ 7,462 ) 

46% US$ 276 US$ 2,173 

($ 8,954 ) ($ 70,499 ) 

- US$ 230 US$ 736 

($ 7,462 ) 

Chen-Xin Electronic 

(Shenzhen) Co., Ltd. 



components 

HK$ 1,000 Indirect: Through a company 


- US$ 79 

( $ 2,563 ) 

- US$ 79 

($ 2,563 ) 

46% US$ 228 US$ 1,078 

($ 7,397 ) ($ 34,974 ) 

- US$ 79 US$ 79 

($ 2,563 ) 

Chen-Xin Electronic 

(Chiao-Tao) Co., Ltd. 

Manufacture passive 

components 

HK$ 130 Indirect: Through a company 


- HK$ 59 

($ 1,914 ) 

- HK$ 59 

($ 1,914 ) 

46% US$ 61 US$ 248 

($ 1,979 ) ($ 8,046 ) 

- US$ 59 US$ 59 

($ 1,914 ) 

Note: Eliminated. 

- 85 -


TABLE 10 

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS 



2006 

No. Company Name Related Party 

Nature of 

Relationship 

(Note) 


Financial Statement Account Amount Payment Terms 

% to 

Total Sales or 

Assets 

0 Yageo Corporation Yageo Holding (Bermuda), Ltd. 1 Sales $ 1,941,407 T/T 90 days 10 

Yageo Holding (Bermuda), Ltd. 1 Accounts and notes receivables from related parties 215,649 T/T 90 days - 

Yageo Components (Su Zhou) Co., Ltd. 1 Sales 42,523 T/T 90 days - 

Yageo Components (Su Zhou) Co., Ltd. 1 Accounts and notes receivables from related parties 7,547 T/T 90 days - 

Yageo USA (H.K.) Limited 1 Sales 1,652,492 Offset account T/T 90 days 8 

Yageo USA (H.K.) Limited 1 Accounts and notes receivables from related parties 415,427 Offset account T/T 90 days 1 

Ko-E Corp. 1 Sales 370,943 T/T 60 days 2 

Ko-E Corp. 1 Accounts and notes receivables from related parties 367,374 T/T 60 days 1 

Ko-E (H.K.) Limited 1 Sales 29,582 T/T 60 days - 

Ko-E (H.K.) Limited 1 Accounts and notes receivables from related parties 29,161 T/T 60 days - 

Yageo Europe KFT 1 Sales 1,358,792 Offset account T/T 60 days 7 

Yageo Europe KFT 1 Accounts and notes receivables from related parties 189,091 Offset account T/T 60 days - 

Yageo Japan 1 Sales 1,810 Offset account T/T 90 days - 

Steller, Inc. 1 Sales 6,201 T/T 150 days - 

Steller, Inc. 1 Accounts and notes receivables from related parties 1,991 T/T 150 days - 

Compostar Technology Co., Ltd. 1 Sales 368,767 T/T 90 days 2 

Compostar Technology Co., Ltd. 1 Accounts and notes receivables from related parties 183,193 T/T 90 days - 

Compostar Technology Co., Ltd. 1 Rental revenue 4,229 T/T 30 days - 

Compostar Technology Co., Ltd. 1 Consulting revenue 9,600 Receipt in advance by seasons - 

Chipcera Technology Co., Ltd. 1 Sales 33,817 T/T 90 days - 

Chipcera Technology Co., Ltd. 1 Accounts and notes receivables from related parties 28,523 T/T 90 days - 

Kuo Chung Development 1 Interest income 426 - - 

Kuo Shin Investment Limited 1 Interest income 82 - - 

Ko-E Corp. 1 Rental revenue 936 T/T 30 days - 

Kuo Chung Development Limited 1 Other receivable 14,235 T/T 90 days - 

(Continued) 

- 86 -


Nature of 

Relationship 

(Note) 



% to 


Assets 

1 Yageo Holding (Bermuda), Ltd. Ferroxcube International Holding B.V. 3 Loans to subsidiaries considered as a component of $ 2,138,232 - 5 

investment 

Phycomp Holding B.V. 3 Loans to subsidiaries considered as a component of 

8,444,646 - 18 

investment 

Hsu Tai International (H.K.) 1 Receivable from affiliates 109,588 - - 

Ferroxcube Holding (Samoa), Ltd. 3 Receivable from affiliates 172,563 - - 

Vitrohm Holding 1 Receivable from affiliates 337,206 - 1 

Yageo America 3 Receivable from affiliates 175,399 - - 

Yageo Corporation 2 Receivable from affiliates 495,459 - 1 

Yageo Electronics (China) Co., Ltd. 1 Accounts and notes receivables from related parties 1,443,514 T/T 90 days 3 

Yageo Electronics (China) Co., Ltd. 1 Sales and commission income 1,941,407 T/T 90 days 10 

Yageo Corporation 2 Sales 350,578 T/T 90 days 2 

Yageo Corporation 2 Accounts and notes receivables from related parties 168,695 T/T 90 days - 

2 Yageo USA (H.K.) Limited Yageo Corporation 2 Sales 13,108 Offset account T/T 90 days - 

Yageo Electronics (Dongguan) Co., Ltd. 3 Sales 1,652,492 Offset account T/T 90 days 8 

3 Yageo Electronics (China) Co., Ltd. Yageo Holding (Bermuda), Ltd. 2 Sales 370,788 T/T 90 days 2 


Yageo Electronics (Dongguan) Co., Ltd. 3 Sales 875,144 T/T 90 days 4 

Yageo Electronics (Dongguan) Co., Ltd. 3 Accounts and notes receivables from related parties 336,627 T/T 90 days 1 

Yageo Europe KFT 3 Sales 190,025 T/T 90 days 1 

Yageo Europe KFT 3 Accounts and notes receivables from related parties 28,674 T/T 90 days - 

Ko-E Technology (Shenzhen) Co., Ltd. 3 Sales 154,436 T/T 65 days 1 

Ko-E Technology (Shenzhen) Co., Ltd. 3 Accounts and notes receivables from related parties 179,940 T/T 65 days - 

4 Yageo Components (Su Zhou) Co., Ltd. Yageo Europe KFT 3 Sales 40,547 T/T 90 days - 

5 Yageo Electronics (Dongguan) Co., Ltd. Yageo USA (H.K.) Limited 3 Sales 13,108 Offset account T/T 90 days - 

Ko-E (H.K.) Limited 3 Sales 161,627 T/T 60 days 1 


6 Compostar Technology Co., Ltd. Yageo Corporation 2 Sales 857,532 T/T 90 days 4 

Yageo Corporation 2 Accounts and notes receivables from related parties 433,969 T/T 90 days 1 

Yageo Corporation 2 Rental revenue 3,537 T/T 30 days - 

Compostar Technology (Cayman), Ltd. 1 Sales 367,679 T/T 180 days 2 

Compostar Technology (Cayman), Ltd. 1 Accounts and notes receivables from related parties 73,520 T/T 180 days - 

7 Ferroxcube Holding (Samoa), Ltd. Ferroxcube H.K., Ltd. 3 Sales 657,096 T/T 30 days 3 

Ferroxcube Electronics (Dongguan) Co., 1 

140,163 - - 

Receivable from affiliates 

Ltd. 

8 Yageo International Yageo Corporation 2 Receivable from affiliates 241,210 - 1 

9 Yageo America Yageo Corporation 2 Accounts and notes receivables from related parties 3,253 T/T 30 days - 

Yageo Corporation 2 Commission revenue 56,860 T/T 30 days - 

(Continued) 

- 87 -


Nature of 

Relationship 

(Note) 



% to 


Assets 

10 Yageo Korea Yageo Corporation 2 Commission revenue $ 12,727 T/T 30 days - 


11 Yageo Japan Yageo Corporation 2 Commission revenue 3,504 Offset account T/T 30 days - 

Yageo Corporation 2 Accounts and notes receivables from related parties 1,369 Offset account T/T 30 days - 

12 Ferroxcube International Holding B.V. Ferroxcube Holding (Samoa), Ltd. 3 Sales 179,872 T/T 60 days 1 

13 Ferroxcube Taiwan, Ltd. Ferroxcube H.K., Ltd. 3 Commission revenue 31,388 T/T 60 days - 

Yageo Corporation 2 Interest income 2 - - 

14 Compostar Technology (Cayman), Ltd. Compostar Technology (Dongguan) Co., 

Ltd. 

Compostar Technology (Dongguan) Co., 

Ltd. 


Ltd. 


Ltd. 

1 Sales 137,066 T/T 180 days 1 

1 Accounts and notes receivables from related parties 212,004 T/T 180 days 1 

1 

Sales 

145,313 T/T 180 days 1 

1 

Accounts and notes receivables from related parties 

172,498 T/T 180 days - 

15 Compostar Technology (Dongguan) Co., Ltd. Compostar Technology (Cayman), Ltd. 2 Sales 191,730 T/T 180 days 1 


16 Kuo Shin Investment Limited Yageo Corporation 2 Receivable from affiliates 22,531 - - 


Kuo Chung Development Limited 3 Receivable from affiliates 134,292 - - 

17 Kuo Ding Venture Capital Limited Yageo Corporation 2 Interest income 182 - - 

Kuo Chung Development Limited 3 Receivable from affiliates 60,790 - - 

18 Kuo Chung Development Limited Yageo Corporation 2 Receivable from affiliates 2,002 - - 


19 Chipcera Technology Co., Ltd. Yageo Corporation 2 Sales 3,752 T/T 120 days - 


20 Ko-E Corp. Yageo Corporation 2 Accounts and notes receivables from related parties 1,998 T/T 60 days - 

Yageo Corporation 2 Sales expenses 1,998 T/T 60 days - 

21 Hsu Tai International (H.K.) Yageo Corporation 2 Other receivable 19,608 - - 

(Continued) 

- 88 -

2007 


Nature of 

Relationship 

(Note 1) 



% to 


Assets 

0 Yageo Corporation Yageo Holding (Bermuda), Ltd. 1 Sales $ 1,911,334 T/T 90 days 9 

Yageo Holding (Bermuda), Ltd. 1 Accounts and notes receivables from related parties 368,955 T/T 90 days 1 

Yageo Components (Su Zhou) Co., Ltd. 1 Sales 29,780 T/T 90 days - 

Yageo Components (Su Zhou) Co., Ltd. 1 Accounts and notes receivables from related parties 6,368 T/T 90 days - 

Yageo USA (H.K.) Limited 1 Sales 2,109,556 Offset account T/T 90 days 9 

Yageo USA (H.K.) Limited 1 Accounts and notes receivables from related parties 558,154 Offset account T/T 90 days 1 

Yageo Europe KFT 1 Sales 1,332,625 Offset account T/T 45 days 6 

Yageo Europe KFT 1 Accounts and notes receivables from related parties 211,956 Offset account T/T 45 days - 

Compostar Technology Co., Ltd. 1 Sales 474,454 T/T 60 days 2 

Compostar Technology Co., Ltd. 1 Accounts and notes receivables from related parties 215,493 T/T 60 days - 

Compostar Technology Co., Ltd. 1 Rental revenue 2,958 T/T 30 days - 

Compostar Technology Co., Ltd. 1 Consulting revenue 9,600 Receipt in advance by seasons - 

Steller, Inc. 1 Sales 5,931 T/T 150 days - 

Steller, Inc. 1 Accounts and notes receivables from related parties 2,445 T/T 150 days - 

Chipcera Technology Co., Ltd. 1 Sales 103,247 T/T 90 days - 

Chipcera Technology Co., Ltd. 1 Accounts and notes receivables from related parties 57,682 T/T 90 days - 



Ko-E Corp. 1 Sales 941,671 T/T 60 days 4 

Ko-E Corp. 1 Accounts and notes receivables from related parties 212,837 T/T 60 days - 

Ko-E Corp. 1 Service revenue 2,859 T/T 60 days - 

Ko-E Corp. 1 Rental revenue 2,808 T/T 30 days - 

Yageo America 1 Sales 32,793 Offset account T/T 90 days - 

Yageo America 1 Accounts and notes receivables from related parties 12,950 Offset account T/T 90 days - 

Kuo Chung Development Ltd. 1 Interest income 73 - - 

Kuo Shin Investment Limited 1 Interest income 61 - - 

Yageo Corporation (South Asia) 1 Sales 373,160 T/T 90 days 2 

Yageo Corporation (South Asia) 1 Accounts and notes receivables from related parties 209,583 T/T 90 days - 

Yageo Electronics (China) Co., Ltd. 1 Sales 183,809 T/T 90 days 1 

Yageo Electronics (China) Co., Ltd. 1 Accounts and notes receivables from related parties 237,546 T/T 90 days - 

1 Yageo Holding (Bermuda), Ltd. Ferroxcube International Holding B.V. 3 Loans to subsidiaries considered as a component of 

2,380,811 - 5 

investment and interest receivable 

Phycomp Holding B.V. 3 Loans to subsidiaries considered as a component of 

9,306,870 - 19 

investment and interest receivable 

Ferroxcube Holding (Samoa), Ltd. 3 Receivable from affiliates and accrued interest 170,025 - - 

Yageo America 3 Receivable from affiliates and accrued interest 192,611 - - 

Yageo Electronics (China) Co., Ltd. 1 Accounts and notes receivables from related parties 1,528,844 T/T 90 days 3 

Yageo Electronics (China) Co., Ltd. 1 Receivable from affiliates and accrued interest 650,563 - 1 

Yageo Electronics (China) Co., Ltd. 1 Sales 2,496,203 T/T 90 days 11 

Yageo Corporation 2 Sales 462,061 T/T 90 days 2 


Vithrohm Holding B.V. 1 Receivable from affiliates and accrued interest 331,781 - 1 

Yageo USA (H.K.) Limited 1 Receivable from affiliates and accrued interest 97,913 - - 

Yageo USA (H.K.) Limited 1 Sales 108,398 T/T 90 days - 

Yageo USA (H.K.) Limited 1 Accounts and notes receivables from related parties 649 T/T 90 days - 

(Continued) 

- 89 -


Nature of 

Relationship 

(Note 1) 



% to 


Assets 

Hsu Tai International (H.K.) 1 Receivable from affiliates and accrued interest $ 371,278 - 1 

Yageo Korea 1 Receivable from affiliates and accrued interest 7,982 - - 

Yageo Japan 1 Receivable from affiliates and accrued interest 10,591 - - 

Steller, Inc. 1 Receivable from affiliates and accrued interest 22,043 - - 

2 Yageo USA (H.K.) Limited Yageo Corporation 2 Sales 45,271 Offset account T/T 90 days - 

Yageo Electronics (Dongguan) Co., Ltd. 3 Sales 2,109,556 Offset account T/T 90 days 9 

3 Yageo Electronics (China) Co., Ltd. Yageo Holding (Bermuda), Ltd. 2 Sales 458,922 T/T 90 days 2 


Yageo Electronics (Dongguan) Co., Ltd. 3 Sales 1,327,378 T/T 90 days 6 

Yageo Electronics (Dongguan) Co., Ltd. 3 Accounts and notes receivables from related parties 454,765 T/T 90 days 1 

Ko-E Technology (Shenzhen) Co., Ltd. 3 Sales 810,460 T/T 65 days 4 

Ko-E Technology (Shenzhen) Co., Ltd. 3 Accounts and notes receivables from related parties 454,361 T/T 65 days 1 

Yageo Europe KFT 3 Sales 405,971 T/T 90 days 2 

Yageo Europe KFT 3 Accounts and notes receivables from related parties 104,049 T/T 90 days - 

Compostar Technology (Su Zhou) Co., Ltd. 3 Sales 165,104 T/T 90 days 1 

Compostar Technology (Su Zhou) Co., Ltd. 3 Accounts and notes receivables from related parties 100,411 T/T 90 days - 

Yageo Corporation (South Asia) 3 Sales 104,046 T/T 90 days - 

Yageo Corporation (South Asia) 3 Accounts and notes receivables from related parties 95,357 T/T 90 days - 

Yageo Corporation 2 Sales 24,330 T/T 90 days - 


4 Yageo Components (Su Zhou) Co., Ltd. Yageo Europe KFT 3 Sales 44,306 T/T 90 days - 

Yageo Electronics (China) Co., Ltd. 3 Receivable from affiliates 17,767 - - 

5 Yageo Electronics (Dongguan) Co., Ltd. Yageo USA (H.K.) Limited 3 Sales 45,271 Offset account T/T 90 days - 

Yageo Electronics (China) Co., Ltd. 3 Sales 177,131 T/T 90 days 1 

Yageo Electronics (China) Co., Ltd. 3 Accounts and notes receivables from related parties 107,865 T/T 90 days - 

Yageo Corporation (South Asia) 3 Sales 30,127 T/T 90 days - 



6 Ferroxcube Holding (Samoa), Ltd. Ferroxcube H.K., Ltd. 3 Sales 700,463 T/T 60 days 3 

Ferroxcube H.K., Ltd. 3 Accounts and notes receivables from related parties 123,184 T/T 60 days - 

Ferroxcube Electronics (Dongguan) Co., 

Ltd. 

1 Receivable from affiliates 139,505 - - 

7 Ferroxcube Taiwan, Ltd. Ferroxcube H.K., Ltd. 3 Commission revenue 21,958 T/T 60 days - 

Ferroxcube Holding (Samoa), Ltd. 3 Research revenue 18,801 T/T 90 days - 

8 Ferroxcube Poland Ltd. Ferroxcube Holding (Samoa), Ltd. 3 Sales 131,686 T/T 60 days 1 

Ferroxcube Holding (Samoa), Ltd. 3 Accounts and notes receivables from related parties 14,418 T/T 60 days - 

(Continued) 

- 90 -


Nature of 

Relationship 

(Note 1) 



% to 


Assets 

9 Compostar Technology Co., Ltd. Yageo Corporation 2 Sales $ 1,701,935 T/T 90 days 8 

Yageo Corporation 2 Accounts and notes receivables from related parties 542,177 T/T 90 days 1 

Yageo Corporation 2 Rental revenue 4,716 T/T 30 days - 

Yageo Corporation 2 Professional service expense 2,880 T/T 30 days - 

Compostar Technology (Cayman), Ltd. 1 Sales 448,850 T/T 180 days 2 


Compostar Technology (Cayman), Ltd. 1 Receivable from affiliates and accrued interest 56,490 - - 

10 Compostar Technology (Cayman), Ltd. Compostar Technology (Dongguan) Co., 1 Sales 134,545 T/T 180 days 1 

Ltd. 

Compostar Technology (Dongguan) Co., 1 Accounts and notes receivables from related parties 85,682 T/T 180 days - 

Ltd. 


1 Sales 317,080 T/T 180 days 1 

Ltd. 


1 Accounts and notes receivables from related parties 219,477 T/T 180 days - 

Ltd. 

Compostar Technology (Shanghai) Co., Ltd. 1 Receivable from affiliates and accrued interest 58,173 - - 

11 Compostar Technology (Dongguan) Co., Ltd. Compostar Technology (Cayman), Ltd. 2 Sales 179,349 T/T 180 days 1 


12 Chipcera Technology Co., Ltd. Yageo Corporation 2 Sales 75,279 T/T 120 days - 


13 Yageo America Yageo Corporation 2 Commission revenue 72,499 T/T 30 days - 

14 Yageo Korea Yageo Corporation 2 Commission revenue 39,112 T/T 30 days - 


15 Yageo Japan Yageo Corporation 2 Commission revenue 2,019 Offset account T/T 30 days - 

Yageo Corporation 2 Accounts and notes receivables from related parties 5,401 Offset account T/T 30 days - 

16 Kuo Shin Investment Limited Yageo Corporation 2 Interest income 2,660 - - 

17 Kuo Chung Development Limited Yageo Corporation 2 Interest income 6,144 - - 

18 Kuo Din Venture Capital Limited Yageo Corporation 2 Interest income 546 - - 

19 Hsu Tai International (H.K.) Yageo Corporation 2 Other receivable 9,804 - - 

20 Chipcera Holding B.V. Chipcera Technology Co., Ltd. 2 Receivable from affiliates 973 - - 

Note: Nature of relationship: 

1. The Corporation to subsidiaries. 

2. Subsidiaries to the Corporation. 

3. Subsidiaries to subsidiaries. (Concluded) 

- 91 -

TABLE 11 


INDUSTRY SEGMENT INFORMATION 


(In Thousands of New Taiwan Dollars and U.S. Dollars) 

New Taiwan Dollars U.S. Dollars (Note 4) 

2006 2007 2007 

Other Other Other 

Electronic Electronic Electronic 

Components Components Components 

and Adjustment and Adjustment and Adjustment 

Resistor Capacitor Ferrite Investment and Resistor Capacitor Ferrite Investment and Resistor Capacitor Ferrite Investment and 

Segment Segment Segment Segment Elimination Total Segment Segment Segment Segment Elimination Total Segment Segment Segment Segment Elimination Total 

Revenues generated from customers 

excluding the Group (2) $ 7,137,654 $ 9,805,298 $ 2,484,429 $ 1,402,533 $ - $ 20,829,914 $ 7,494,694 $ 10,649,138 $ 2,606,305 $ 2,327,526 $ - $ 23,077,663 $ 231,011 $ 328,242 $ 80,335 $ 71,742 $ - $ 711,330 

Revenues generated from the Group 2,359,943 6,472,527 674,599 790,140 (10,297,209 ) - 4,091,112 10,642,318 879,151 685,528 (16,298,109 ) - 126,102 328,031 27,098 21,130 (502,361 ) - 

Total revenues $ 9,497,597 $ 16,277,825 $ 3,159,028 $ 2,192,673 $ (10,297,209 ) $ 20,829,914 $ 11,585,806 $ 21,291,456 $ 3,485,456 $ 3,013,054 $ (16,298,109 ) $ 23,077,663 $ 357,113 $ 656,273 $ 107,433 $ 92,872 $ (502,361 ) $ 711,330 

Segment operating income (loss) (3) $ 2,528,232 $ 1,023,347 $ 37,562 $ 284,321 $ - $ 3,873,462 $ 2,510,508 $ 1,001,670 $ (371,098 ) $ 795,079 $ - $ 3,936,159 $ 77,382 $ 30,875 $ (11,439 ) $ 24,507 $ - $ 121,325 

Equity in net gain (loss) of investee 

company 162,442 (112,513 ) (3,468 ) 

Interest expense (407,073 ) (395,636 ) (12,195 ) 

General revenue (2) 394,624 381,262 11,752 

General expense (4) (1,740,580 ) (1,672,768 ) (51,560 ) 

Income before income tax $ 2,282,875 $ 2,136,504 $ 65,854 

Identifiable assets (5) $ 9,368,208 $ 12,097,747 $ 3,323,696 $ 6,793,563 $ 31,583,214 $ 9,897,371 $ 11,721,423 $ 3,261,944 $ 4,370,924 $ 29,251,662 $ 305,069 $ 361,293 $ 100,544 $ 134,726 $ 901,632 

Long-term equity investments 2,363,027 3,019,867 93,082 

Assets not identifiable to a specified 

segment (5) 12,390,818 17,840,818 549,913 

Total assets $ 46,337,059 $ 50,112,347 $ 1,544,627 

Depreciation expense $ 605,527 $ 1,376,748 $ 310,310 $ 47,941 $ - $ 2,340,526 $ 650,861 $ 1,581,482 $ 335,849 $ 62,287 $ - $ 2,630,479 $ 20,062 $ 48,746 $ 10,352 $ 1,920 $ - $ 81,080 

Capital expenditure $ 1,205,540 $ 937,590 $ 141,941 $ 539 $ - $ 2,285,610 $ 983,077 $ 1,840,316 $ 207,387 $ 18,440 $ - $ 3,049,220 $ 30,302 $ 56,725 $ 6,392 $ 568 $ - $ 93,987 

Note 1: 

Note 2: 

Note 3: 

Note 4: 

Note 5: 

The Group is distinguished into segments of Resistor, Capacitor, Ferrite, other electronic components and investment. 

Represents revenues and other income among segments, excluding non-segment-related revenues. 

Represents the balance of revenue minus costs and operating expenses. Costs and operating expenses represents costs and expenses that are related to revenue of segments. 

Represents general and administrative expenses and non-attributed expenses. 

Represents enterprise assets used by the industry segment, excluding: 

a. Assets not for operation by the specific industry segment. 

b. Advances or loans to another industry segment. 

c. Long-term stock investments under equity method. 

- 92 -

TABLE 12 


GEOGRAPHIC INFORMATION 


(In Thousands of New Taiwan Dollars and U.S. Dollars) 

New Taiwan Dollars U.S. Dollars (Note 4) 

2006 2007 2007 

Adjustment Adjustment Adjustment 

and and and 

Domestic Europe Asia Others Eliminations Combined Domestic Europe Asia Others Eliminations Combined Domestic Europe Asia Others Eliminations Combined 

Revenues generated from customers 

excluding the Group $ 7,466,059 $ 5,479,019 $ 7,733,614 $ 151,222 $ - $ 20,829,914 $ 6,602,996 $ 5,579,384 $ 10,483,511 $ 411,772 $ - $ 23,077,663 $ 203,526 $ 171,975 $ 323,137 $ 12,692 $ - $ 711,330 

Revenues generated from the Group 7,125,603 4,385 3,167,221 - (10,297,209 ) - 9,977,153 141,489 5,720,895 458,572 (16,298,109 ) - 307,529 4,361 176,336 14,135 (502,361 ) - 

Total revenues $ 14,591,662 $ 5,483,404 $ 10,900,835 $ 151,222 $ (10,297,209 ) $ 20,829,914 $ 16,580,149 $ 5,720,873 $ 16,204,406 $ 870,344 $ (16,298,109 ) $ 23,077,663 $ 511,055 $ 176,336 $ 499,473 $ 26,827 $ (502,361 ) $ 711,330 

Segment operating income (loss) $ 1,115,969 $ 526,140 $ 2,203,881 $ 27,472 $ - $ 3,873,462 $ 1,025,629 $ 119,789 $ 2,847,663 $ (56,922 ) $ - $ 3,936,159 $ 31,613 $ 3,692 $ 87,774 $ (1,754 ) $ - $ 121,325 

Equity in net gain (loss) of investee 

companies 162,442 (112,513 ) (3,468 ) 

Interest expense (407,073 ) (395,636 ) (12,195 ) 

General revenue 394,624 381,262 11,752 

General expense (1,740,580 ) (1,672,768 ) (41,560 ) 

Income before income tax $ 2,282,875 $ 2,136,504 $ 65,854 

Identifiable assets $ 17,463,426 $ 5,757,857 $ 8,361,931 $ - $ 31,583,214 $ 13,321,488 $ 5,958,854 $ 9,917,996 $ 53,324 $ 29,251,662 $ 410,612 $ 183,671 $ 305,705 $ 1,644 $ 901,632 

Long-term equity investments 2,363,027 3,019,867 93,082 

Assets not identifiable to a specified 

geographic location 12,390,818 17,840,818 549,913 

Total assets $ 46,337,059 $ 50,112,347 $ 1,544,627 

- 93 -

TABLE 13 


THE GROUP’S ORGANIZATION CHART 


Yageo Corporation 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 100% 100% 

Yageo America 


69% 

Ferroxcube 

Holding 

(Samoa), Ltd. 

Kuo Shin 

Investment 

Limited 

Kuo Chung 

Development 

Limited 

Kuo Ding 

Venture 

Capital 

Limited 

Yageo 

Holding 

(Bermuda), 

Ltd. 



(South Asia) 

Phycomp 

Malaysia 

SDN. BHD. 

Ferroxcube 

Taiwan, Ltd. 

Phycomp 

Ferroxcube 

100% 

2% 

68.5% 

Ferroxcube 

Technology 

(Hong Kong) 

Limited 

Compostar 

Technology 

Co., Ltd. 

100% 

100% 

100% 

100% 

100% 

90% 

100% 

100% 

Chipcera 

Technology 

Co., Ltd. 

15.9% 

100% 

Ferroxcube 

Electronics 

(Dongguan) 

Co., Ltd. 

100% 

Compostar 

Technology 

(Cayman), 

Ltd. 

Yageo USA 

(H.K.) 

Limited 


Japan 

Yageo Korea 


(Hong Kong) 

Limited 

Vitrohm 

Holding 

GmbH 

100% 

Vitrohm 

Portuguesa 

Ko-E 

Holding 

(Cayman 

Islands) Ltd. 

Hsu Tai 

International 

(H.K.) 

Steller Inc. 

100% 

Chipcera 

Holding 

Co., Ltd. 

100% 100% 

100% 

Compostar 

Technology 

(Shanghai) 

Co., Ltd. 

100% 

Compostar 

Technology 

(Dongguan) 

Co., Ltd. 

100% 

Compostar 

(Hong Kong) 

Limited 

100% 

100% 


Electronics 

(Dongguan) 

Co., Ltd. 

100% 


Electronics 

(China) Co., 

Ltd. 

100% 


Components 

(Su Zhou) 

Co., Ltd. 

Ko-E Corp. 

100% 100% 100% 

Ko-E (H.K.) 

Limited 

Ko-E 

Technology 

(Shenzhen) 

Co., Ltd. 

Dongguan 

Chang An 

Wusha Chipcera 

Dongguan 

Chen An 

Trading Co., 

Ltd. 

Compostar 

Technology 

(Su Zhou) 

Co., Ltd. 

- 94 -

Yageo Corporation and Subsidiaries

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