The company’s spokesman: Taiwan, R.O.C. Lin Kou …mitac.com/InvestorRelations/AnnualReport/2012annualReport.pdf · Financial analysis for the past ... specific assembly business

I. The company’s spokesman:

Spokesman: Billy Ho / President Acting Spokesperson: Doris Huang / Vice President of Finance Center Tel: (03)328-9000 E-mail: [email protected]

II. MiTAC International Corp. Headquarters and Factory No.1, Yen-Fa 2nd Rd., Hsin-Chu Science Based Industrial Park, Hsinchu County, Taiwan, R.O.C. Tel: (03)577-9250 Lin Kou Office No.200, Wenhua 2nd Rd., Guishan Township, Taoyuan, Taiwan, R.O.C. Tel: (03)328-9000 Nangang Office Building B, No.209, Sec. 1, Nangang Rd., Nangang Dist., Taipei, Taiwan, R.O.C. Tel: (02)2652-5888

III. Stock Agency (the Company’s stock transfer agent) Name: China Trust Commercial Bank - Stock Agency Department Address: 5F., No.83, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei, Taiwan, R.O.C. Tel: (02)2181-1911 Website: http://www.chinatrust.com.tw

IV. CPAs for the most recent Independent Auditor’s Report CPA: Liu Yin-Fe, Lin Yu-Kuan Name of CPA firm: Pricewaterhouse Coopers Address: 27F., No.333, Sec. 1, Keelung Rd., Xinyi Dist., Taipei, Taiwan, R.O.C. Tel: (02)2729-6666 Website: http://www.pwc.tw/

V. Foreign securities listing: None

VI. Company Website: http://www.mitac.com

Contents

Page

One. Letter to Shareholders 4

Two. Company profile 6

I. Date of incorporation: December 8, 1982 ............................................................. 6

II. Company milestones ............................................................................................... 6

Three. Corporate Governance 8

I. Organizational system ............................................................................................ 8

II. Information on Directors, Supervisors, Presidents, Vice Presidents,

Assistant Presidents, and managers of each department and division ............ 10

VIII. Relation between the top ten shareholders......................................................... 22

IX. Proportion of shareholding in aggregate ............................................................ 24

Four. Status of Capital 25

I. Capital and Shares................................................................................................ 25

V. Employee Stock Options ...................................................................................... 30

Five. Operation Overview 35

I. Business Activities ................................................................................................. 35

II. Market and an overview of production and sales .............................................. 41

Six. Financial Position 47

I. Condensed Balance Sheet and (comprehensive) Income Statement for five

years ....................................................................................................................... 47

II. Financial analysis for the past five years ............................................................ 50

III. Supervisors’ Report on Financial Statement of the most recent year ............. 53

IV. The most recent audited consolidated financial statements ............................. 54

Seven. Important Notice 131

I. Information on affiliates .................................................................................... 131

grace.lu

文字方塊

128

grace.lu

文字方塊

128

4

One. Letter to Shareholders

Dear shareholders, On behalf of MiTAC and staff, I would like to extend my appreciation to our shareholders for your continued support and encouragement.

Impacts of external competition, regulatory environment and the overall business

environment

In light of global economy changes, the rapid growth of smart phones and tablets, fast-evolving big data and cloud computing, the industry in which MiTAC operates has been deeply affected by the fluctuations of the overall economic condition. Facing changes in the environment and shifts in product application, MiTAC has been working hard to transform itself and focusing on an optimized product mix, securing profit potential for the long-run, improving risk management, increasing internal operating efficiency, and innovation. Therefore, even though we are confronted with formidable challenges in the industry and the operating environment, our total profitability has increased nicely.

Operating results, budget execution, revenue and expenditure, and profitability analysis from

year 2012

Regarding the overall operating results from 2012, of MiTAC, it should be noted that the primary goal is not pursuing higher revenue in the short run. Rather, our primary goal is improving profitability by executing the strategy of adjusting our product mix and improving the composition of our profit. Consolidated revenue for the whole year was NT$ 44.508 billion. While this figure shows a decline of 3.88% compared to 2011, the net profit before tax, at NT$ 880 million, has increased by NT$ 360 million over the previous year. EPS was $ 0.4, showing that the adjustments to the company’s strategy were working as planned and the development was steady. Since our company did not publicize its financial forecasts in 2012, we could not report on the execution of the budget.

Implementation of the operating results from year 2012 and the status of our research and

development

1. We launched the First ARM® Processor-Based Servers products.

2. We launched the Mio Cyclo product series dedicated to sports and fitness purposes. 3. We launched the Magellan Switch series watch products, which had won iF Product Design

awards 2012. 4. We launched a navigation system dedicated to RV and commercial vehicles. 5. Magellan wireless back-upcameras won the 2012 CES Innovation award. 6. MioCARE 6290 professional tablet products won the 2012 Computex Best-Choice award. Aside from its ceaseless effort to launch new products, MiTAC places heavy emphasis on the management and protection of intellectual property rights. As a result, it won the “2012 Intellectual Property and Management of Quality Award ” and “Beast Management Force Award for 2012,” recognitions that were supervised by MOEA’s Department of Industrial Technology and organized by the Institute for Information Industry (III), Science and Technology Law Institute (STLI).

5

Corporate Development Strategies for 2013

Cloud computing industry has been growing robustly. Even though many players seek to enter this market, but the industry as a whole is still trying to establish a method for cloud service or relevant applications, and a standardized modus operandi does not exist yet. MiTAC adjusts its product mix again with its extensive experience in the industry, the brands it owns, and the market channels it controls, and positions itself as an ICT firm that provides cloud service, smart clients, and cloud computing solutions.

1. Marketing

In terms of ODM, we seek to improve relationship management with existing customers, as well as developing new markets and customers. In terms of our brands, we will continue to develop and convey the value of the following brands: Mio, Magellan, Navman, and TYAN. We will utilize our brand advantages and user groups to promote products and services with high added value.

2. Products and services

As a response to trends in the market and technological development, we will roll out products and services with high added value. Our central direction is developing the cloud industry, providing smart clients, and their associated cloud service. We also seek to provide cloud hardware equipment and solution in private cloud, public cloud, or hybrid cloud. In the future, MiTAC will set its core development goal as the provision of smart handheld devise and cloud service and computing. MiTAC will continue to promote the essence of “Integration, Innovation, and Execution” from inside to outside the company. MiTAC will adjust the company’s product mix, improve the structure of profit, create the value of the corporation, and shape MiTAC’s unique industry value and position, thereby creating the greatest profit for shareholders, customers, and employees. May I wish you all good health and good luck

Matthew Miau, Chairman

Billy Ho, President

6

Two. Company profile

I. Date of incorporation: December 8, 1982

II. Company milestones

(I) Major events:

2009 • MiTAC signed on to be the Exclusive Global Positioning Equipment Senior Sponsor of the 2010 World Expo. • Mio C230 PND won the iF Product Design Award China 2008. • Mio Leap K1 dual-face phone, Moov380 connecting PND and G50 won the 2009 iF Product Design Award.

• TYAN motherboards TN28 and B4988 ranked 16th and 20th, respectively, in the Supercomputer Institute top 500 award.

• TYAN THUNDER N6650W s2915 was adopted by USA’s NASA. • Received the Supplier Meritorious Performance Award by leading server supplier SUN. • Received the Outstanding Supplier Award by Hewlett-Packard. • Purchased the consumer satellite navigatior business and related operating assets and liabilities of Magellan Navigation, Inc. and its subsidiaries to position MiTAC better in the portable navigation products segment and to add sales channels.

2009 • Established a subsidiary, MiTAC Digital Corp., in the USA to expand the handheld navigation products business in North America.

• MiTAC received the Green Partner Certificate from SONY. • MiTAC received the Best Supplier of Year 2009 award from Riverbed. • TYAN B7029 and S4982 products were adopted by customers and ranked in the supercomputer top-500 list.

• TYAN S8208 and S5376 were adopted by the world-famous sites, MSN.com and Amazon.com.

• Mio Moov380, Moov410 and MoovS700 received the iF Product Design Awards.

• Mio K75 navigation phone received the Computex “Best Choice” Award. • Invested NT$150 million in Loyalty Founder Enterprise Co., Ltd. for a 25.24% equity in order to strengthen vertical integration, to benefit from synergies of a strategic alliance and to improve the overall quality of service provided to customers.

2010 • Purchased the specific assembly business and related inventory of Synnex Corp. in the USA and its subsidiaries through MiTAC Information Systems Corp., the overseas subsidiary, to expand and integrate the supply chain.

• Magellan launched the first outdoor GPS with a treasure hunting feature. • MiTAC’s server and storage devices are used at the 2010 Shanghai World Expo. • TYAN FT72 ranked 19th place in the Supercomputer Institute top 500 and ranked 3rd place in China.

• The first manufacturer to obtain ISO / IEC 20000 IT Service process certification.

• Completed the world first “portable navigation device product classification rule” (PND PCR).

• The Multimedia Tablet PC-Valinor, and outdoor GPS-Compass won the “2010 iF Product Design Award.”

• “I Love Green City” network videogame won the “2010 iF Communication Design Award.”

• Mio was elected as the No. 1 brand of GPS products in the Ideal Brand in Consumers organized by Management Magazine.

7

• Received the 2009 Best Support Award from Inspur. • Received the 2009 Outstanding Supplier Award from Dawning.

2011 • Magellan ToughCase rugged iPhone waterproof case and Magellan eXplorist 710 won the “iF Product Design Award 2011.”

• Multimedia Tablet PC Valinor won Taiwan Excellence Award. • Magellan RoadMate 3065 PND received CES Innovations 2011. • All factories in China were certified by major Japanese and German car manufacturers in 2010; at the same time, our ODM automotive electronics products were approved by customers. We began to ship automotive electronics and accessories to manufacturers since the beginning of 2011.

• Mio was elected as the No. 1 brand of GPS products in the Ideal Brand in Consumers organized by Management Magazine for the third year.

• Mio launched the world’s first 6-inch tablet for vehicles - MioPad containing professional navigation, drive video recorders and tablet PC features.

• Mio launched the world’s first handheld tablet device –specially designed for the healthcare field, MioCARE.

• MiTAC received the Best Supplier of Year 2011 from Riverbed, a major multinational corporation, for the third consecutive year.

• TYAN introduced TYAN Micro Server, 4U server equipped with 18-computing points, which was the first high-density low-power micro-server in the market.

• TYAN introduced a series of storage servers The 2U conventional rack-mounted servers were equipped with 26 2.5-inch hard drives or 14 3.5-inch hard drives. In addition, MiTAC launched the 2U storage server equipped with CPU and GPU.

• Received the Thin Mini ITX Platform appreciation award from Intel. • Our ODM division’s Ray 3 series Thin Client computer manufactured under contract was awarded the Silver Medal of the IDEA Award in the US.

• We collaborated with Intel to produce Thin Mini ITX based All-In-One PC, an innovative platform that gives channel resellers an option for DIY AIO. The product has successfully entered the US and European markets.

• The newly designed credit card terminal was successfully launched and went into mass production.

2012 • Mio was elected as the No. 1 brand of GPS products in the Ideal Brand in Consumers organized by Management Magazine for the fourth year.

• Mio GPS entered the multi-functional GPS application market with the Mio Cyclo series dedicated to sport and fitness training.

• Magellan Wireless Back-up Camera received the CES Innovations Award 2012. • Magellan Switch received the “iF Product Design Award 2012.” • MiTAC successfully developed the Point of Sale (POS) system. • MioCARE 6290 professional tablet device received the 2012 Computex Best Choice.

• Launched the first ARM-processor-based server products.

2013 • Magellan® SmartGPS received the 2013 CES Innovations, Design and Engineering Award.

• Magellan® SmartGPS was chosen by AOL Autos as one of the best CES products.

• MiTAC plans to transform itself into “MiTAC Holdings Corporation” by share swap in order to excute our policy of forming an industrial holding corporation, pursuing specialized management, and committing ourselves to independent development.

8

Three. Corporate Governance

I. Organizational system

(I) Organizational Chart (May 15, 2013)

Supervisor

Auditing Office Compensation Committee

Cloud computing

Business Group

Mobile communication Business Group

Finance Center Legal Affairs Center

Human Resource Development Center

Technical Support

& Service Center

Management of Information System Center

Corporate Knowledge Management Divisi

President

Chairman

Board of Directors meeting

Shareholders’ meeting

9

(II) Departmental business operation

Principal departments Principal business operation

Compensation Committee

• Define and review the board of directors, supervisors, company executives and managers’ performance evaluation indexes, compensation policies, systems, standards and structure

• Regular review the annual remuneration, short term and long term compensation package for the board of directors, supervisors; company executives and managers

Auditing Office • Review the condition of the company’s operations and

offer recommendations for improvement

Cloud Computing Business Group

• The research and development, sales and business promotions of the terminal electronic products and corporate enterprise professional system products

Mobile communication products Business Group

• The research and development, sales and business promotions of smart mobile devices and user experienced cloud services products

Financial Center

• Financial operations and planning • Evaluation and research of domestic and international

investment opportunities • Financial planning and various tax-related accounting

treatment • Preparation for Board of Directors meeting and

shareholders’ meeting

Legal Affairs Center

• Contract formulation and review • Consultation, support, and provision of business-related

legal service ; legal issues in other aspects • Application and management of patents, domestic and

foreign, intellectual property rights and associated risk issues

Human Resource Development Center

• Human resources strategic planning and execution • Human resource management and talent development • Office management, general administration, safety and

hygiene management

Technical Support & Service Center

• Customer Service • Overseas technical support

Management of Information System Center

• The planning and construction of the company’s global information system

• Maintenance and control of global information system and security mechanisms

Corporate Knowledge Management Division

• Improvement of internal business process and the promotion of quality assurance activities

10

II. Information on Directors, Supervisors, Presidents, Vice Presidents, Assistant Presidents, and managers of each department and division

(I) Information on Directors and Supervisors April 26, 2013

Titles Names Date of office

Term Date First Elected

Shares held at time of election

Quantity of shares held Shares currently held

by spouse or dependents

Shares held in the names of others Education and Experience

Positions currently held at MiTAC or other companies

Spouse or kin within two degrees of consanguinity

serving as executive, director, or supervisor

Quantity Percentage Quantity Percentage Quantity Percentage Quantity Percentage Titles Names Relationship

Chairman Matthew Miau 2010.06.18 3-y 1986.05.17 21,805,999 1.42% 21,885,999 1.43% 0 0.00% 0 0.00%

Santa Clara University, EMBA California Berkley University, Bachelor, Electrical Engineering

CEO, MiTAC International Corp. Chairman, SYNNEX International Corp. Chairman, Lien Hwa Industrial Corp. Chairman, UPC Technology Corporation Chairman, MiTAC Inc Vice chairman, MiTAC Information Technology Corp Director, Getac Technology Corporation

None None None

Director Billy Ho 2010.06.18 3-y 2004.05.18 4,823,727 0.31% 5,103,727 0.33% 0 0.00% 0 0.00%

MIS in Computer Science, Fairleigh-Dickinson University Master UC San Diego Marketing Manager, Pao Hwa Trading Co., Ltd.

President, MiTAC International Corp. Director, Gemtek Technology Corp. Director, Loyalty Founder Enterprise Co., Ltd. Director, Linpus Technologies, Inc. Chairman, MIO Technology Corp. Chairman, DLC Technology Corp. Director, 3-Probe Technologies Co., Ltd. Chairman , SUIIO Inc.

None None None

Director

MiTAC Inc. 2010.06.18 3-y 1982.11.24 (Note 2)

122,456,572 7.97% 122,456,572 8.00% 0 0.00% 0 0.00% None None None None None

Rep: Kuo Yun 2010.06.18 3-y 2001.05.25 0 0.00% 0 0.00% 11,342 0.00% 0 0.00%

Bachelor, Industrial College of the Armed Forces Vice Chairman and CEO of Institute for Information Industry Executive Secretary of the NII Committee, Executive Yuan Head of Military Procurement Council, Ministry of National Defense Head of Management College, National Defense University Deputy Commander of the Army Logistics Command Officer at the Defense Management Center, Ministry of National Defense Officer at the Air Force Logistics Center

Vice-Presidents, MiTAC Inc. Chairman, MiTAC Information Technology Corp Director, ARES International Corp. Chairman, Xinda Computers Co., Ltd. Chairman, MiTAC Education Co. Ltd. Director, ONSYS Corporation Director, Lien-Shun-Tsan Venture Capital Co., Ltd. Director, Far Eastern Electronic Toll Collection Co., Ltd.

None None None

Director

UPC Technology Corporation

2010.06.18 3-y 1989.02.29 129,628,156 8.44% 129,628,156 8.47% 0 0.00% 0 0.00% None None None None None

Rep.: Yung-Do Way 2010.06.18 3-y 2008.07.02 0 0.00% 0 0.00% 0 0.00% 0 0.00%

MBA of Georgia University BA of Accountancy, Soochow University Senior auditor, Deloitte & Sells, USA CEO, Deloitte

Independent Director, SYNNEX International Corp. Independent Director, Taiwan Cement Company Independent Director, Far Eastern Department Stores Co. Ltd. Independent Director, Apex biotechnology Corp Director of Wang Steak Co., Ltd. Director, Vanguard International Semiconductor Corporation Supervisor, SerComm Corp Supervisor, Chilisin Electronics Corp

None None None

Rep.: Simon Wu 2010.06.18 3-y 2001.05.25 0 0.00% 7,856 0.00% 0 0.00% 0 0.00% MBA, University of Dallas CFO, Acer Group affiliated company Executive VP, Finance Best Power Technology (U.S.)

Assistant President, UPC Technology Corporation Chairman, Wei Chen Investment Co. None None None

Supervisor Arthur Chiao 2010.06.18 3-y 2004.05.18 0 0.00% 0 0.00% 0 0.00% 0 0.00%

MSEE and researcher in Business Administration, Washington University Chairman, Walsin Lihwa

Chairman, Winbon Vice-Chairman, Walsin Lihwa Chairman, Nuvoton Technology Corp. Chairman, Capella Microsystems (Taiwan) Inc., Independent Director, SYNNEX International Corp. Independent Director, Taiwan Cement Company

None None None

Supervisor

Lien Hwa Industrial Corp

2010.06.18 3-y 1986.06.17 91,625,310 5.96% 91,625,310 5.99% 0 0.00% 0 0.00% None None None None None

Rep: Hu-Shi, Charles Ching

2010.06.18 3-y 2006.07.14 0 0.00% 1,166 0.00% 0 0.00% 0 0.00%

Master of Engineering at National Tsing Hua University Council for Economic Planning and Development Adjunct Lecturer, Dept. of Chemical Engineering Feng Chia University Asst President, UPC Technology Corporation

Director and President, Lien Hwa Industrial Corp. Director, SYNNEX International Corp. Director, Pao long international co., ltd. Supervisor, Getac Technology Corporation

None None None

Note 1:Please refer to Table 1 below for information on the main shareholders of corporate shareholders Note 2:Did not serve as The Company’s director during 06.12.2007–06.24.2008

11

Table 1: Dominant shareholders of institutional shareholders

April 26 2013

Name of institutional shareholders (Note 1)

Major shareholders of institutional shareholders (Note 2)

Name of shareholder Percentage of

shareholding (%)


Lien Hua Industrial Corp. 29.57%

Synnex Technology International Corporation 5.24%

Shin Kong Life Insurance Co., Ltd. 3.76%

Ma Chang-Long 2.34%

Liberty Stationery Corp. 1.84%

Yi Yuan Investment Co., Ltd. 1.64%

Tong Da Investment Corporation 1.25%

MiTAC International Corp. 1.23%

Hua Mao Trading Co., Ltd. 1.14%

Tsu Fung Investment Corp. 1.09%

Lien Hua Industrial Corp.

UPC Technology Corporation 9.70%


Yi Feng Investment Co., Ltd. 4.87%

Cathay Life Insurance Co., Ltd. 3.82%

Nan Shan Life Insurance Co., Ltd. 3.43%

Matthew Miau 3.29%

Miao, Feng-Sheng. 3.28%


Miao Feng-Chuan 3.02%

Y.S. Education Foundation 3.00%

MiTAC Inc.




Mei An Investment Co., Ltd. 8.18%

Matthew Miau 5.42%


Hua Cheng Construction Co., Ltd. 1.92%

Omron Corporation, Japan 1.70%

Bao Hsin International Investment Co., Ltd. 1.18%


Note 1: If Directors and Supervisors serve as representatives of institutional shareholders, then the names of institutional shareholders must be provided.

Note 2: Name the major shareholders (the top 10 owners) of corporate shareholders and their shareholding percentage. Table 2 below is applicable if any of the major shareholders is also a corporate entity.

12

Table 2: Dominant shareholders of dominant institutional shareholders

April 26 2013

Name of institutional shareholder (note 1)

Dominant shareholders of institutional shareholders (note 2)

Name of shareholder Percentage of shareholding







Matthew Miau 3.29%

Miao, Feng Sheng. 3.28%


Miao Feng-Chuan 3.02%

Y.S. Education Foundation 3.00%

Synnex Technology International Corporation

MiTAC Inc. 13.64%


Oppenheimer Developing Markets Fund account held in trust by Chase Bank

4.53%


Matthew International Fund investment account held in custody by HSBC Bank (Taiwan) Limited

3.35%

Bureau of Labor /Insurance 3.07%

Chunghwa Post Co., Ltd. 2.68%

Morgan Stanley & Co International PLC investment account held in custody by HSBC Bank (Taiwan) Limited

2.36%

Tu Shu-Wu 2.17%


Shin Kong Life Insurance Co., Ltd.

Shin Kong Financial Holding Co., Ltd. 100.00%

Liberty Stationery Corp.

Zhi-Jiang Investment Co., Ltd. 21.10%

Masateru Kadota 10.40%

Akira Kadota 8.90%

Yayoi Kadota 8.90%

Takanori Kadota 8.80%

Complete Connection Limited 5.70%

Yu Jing-Shen 5.10%

Sun Li-Gang 5.30%

Sun Jian-Chung 4.60%

Chang Zheng 3.50%

Yi Yuan Investment Co., Ltd. Shang Chuan Neng Ltd. (British Virgin Islands) 100.00%

13




Tong Da Investment Corporation

Ho Li Investment Co., Ltd. 19.99%

Chou Te-Chien 0.05%


Hua Cheng Construction Co., Ltd. 19.99%

Wei Cheng Investment Co., Ltd. 19.99%


MiTAC International Corp.


MiTAC Inc. 8.00%


Mei An Investment Co., Ltd. 2.00%

Matthew Miau 1.43%


Investment Account held under the custody of Citibank Taiwan.

1.31%


Getac Technology Corporation 0.87%

Ho Li Investment Co., Ltd. 0.71%

Hua Mao Trading Co., Ltd. Foreign investment (n/a) －

Tsu Fung Investment Corp. MiTAC International Corp. 100.00%





Ma Chang-Long 2.34%

Liberty Stationery Corp. 1.84%


Tong Da Investment Corporation 1.25%


Hua Mao Trading Co., Ltd. 1.14%


Yi Feng Investment Co., Ltd. Heng Fu Ltd. (British Virgin Islands) 100.00%

Cathay Life Insurance Co., Ltd. Cathay Financial Holdings Co., Ltd. 100.00%

Y.S. Education Foundation Non-corporate entity (n/a) －

14




Nan Shan Life Insurance Co., Ltd.

Run Chen Holdings Co., Ltd. investment trust account held under the Custody of First Bank

83.10%

Ruen Chen Investment Holding Co., Ltd. 7.57%

Tu Ying-Chung 3.24%

Ruen Hua Dyeing & Weaving Co., Ltd. 0.42%

Kuo Wen-Deh 0.10%

Ji Pin Investment Co. Ltd. 0.10%

Global Cheer Investment Limited 0.05%

Bao Yi Investment Co. Ltd. 0.05%

Bao Hui Investment Co., Ltd. 0.05%

Bao Huang Investment Co., Ltd. 0.05%

Mei An Investment Co., Ltd.

Vision Quest Overseas Ltd. 82.08%

JumpStart Investments Ltd. 16.67%

Others 1.25%

Hua Cheng Construction Co., Ltd.


Omron Corporation, Japan

State Street Bank & Trust Company 505223 7.96%

Japan Trustee Services Bank, Ltd. (trust account)

4.12%

The Master Trust Bank of Japan, Ltd. (trust account)

3.47%

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 3.23%

The Bank of Kyoto, Ltd. 2.96%

Nippon Life Insurance Company 2.18%

Omron Employee Stock Ownership Plan 1.94%

The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account

1.81%

RBC IST LONDON-LENDING ACCOUNT 1.79%

State Street Bank and Trust Company 1.51%

Bao Hsin International Investment Co., Ltd.

Hon Hai Precision Industry Co., Ltd. 100.00%

Note 1: If any of the major shareholders listed in Table 1 is an institution, then the name of the institution must be provided.

Note 2: Name the major shareholders (the top 10 owners) of corporate shareholders and their shareholding percentage.

15

Information on the directors and supervisors

Qualification requirement

Names

Whether this person has more than five years of work experience and the

following professional qualifications

Compliance with independence requirements (note 1)

The no. of public

companies where the person acts

as independent director

Lecturer or higher level instructor at a public or private college or university in business, law, finance,

accounting or other fields related to the operations of the company

Judge, public

prosecutor, attorney at law, CPA, or

other professionals licensed by national exams that are pertinent to the

operation of the company

Work experience in business, law, finance,

accounting, or other areas required for the operation

of the company

1 2 3 4 5 6 7 8 9 10

Chairman Matthew Miau

- - � - - - � - � � � � � -

Director Billy Ho

- - � - - - � - - � � � � -

Director MiTAC Inc. Rep: Kuo Yun

- - � � - � � - � � � � - -

Director UPC Technology Corporation Rep.: Yung-Do Way

- � � � - � � � � � � � - 2

Director UPC Technology Corporation Rep.: Simon Wu

- - � � - � � - � � � � - -

Supervisor Lien Hwa Industrial Corp Rep: Hu-Shi, Charles Ching

- - � � - � � - � � � � - -

Supervisor Arthur Chiao

- - � � - � � � � � � � � 1

Note 1: Directors and Supervisors who meet the following requirements two years before their assumption of office or during their term of office shall put a “�” in the appropriate box for specifying the qualification requirements. (1) Not an employee of the Company or its subsidiaries or affiliates. (2) Not a director or supervisor of the Company or its subsidiaries or affiliates (except an independent director

of an investee of the Company, of the parent of the Company, or directly or indirectly controlled by the Company with more than 50% of its stakes).

(3) The person, the spouse, underage children, who hold more than 1% of the outstanding shares or one of the top 10 shareholders who are natural persons or who hold shares of this company under the title of a third party.

(4) Not the spouse, kin within the 2nd tier or the next of kin within the 3rd tier of any of the parties mentioned in (1) ~(3).

(5) Not a director, supervisor or employee of an institutional shareholders holding more than 5% of the outstanding shares of the Company, or of the top five institutional shareholders.

(6) Not a director, supervisor, manager, or shareholder holding more than 5% of the outstanding shares of specific company or institution having business of financial transactions with the Company.

(7) Not a professional, proprietor, partner, company or the owner, partner, director, supervisor, manager or spouse of the professional consulting entities providing services or consultation in business, law, finance, accounting and other for the Company or its subsidiaries or affiliates. The Remuneration Committee members who perform duties in accordance with the “Guidelines Governing the Listed/OTC Company’s Remuneration Committee Establishment and Duty Performance” Article 7 are not subjectto this restriction.

(8) Not a spouse or kin within the 2nd tier of another director. (9) The provisions of Article 30 of the Company Law are not applicable. (10) Not elected to the government, institution or their representatives under Article 27 of the Company Law.

16

(II) Information on Presidents, Vice Presidents, Assistant Presidents, and managers of each department and division April 26 2013


Shareholding Shares currently held by spouse or dependents

Shares held in the names of others Education and Experience Positions in other companies

Manager who is the spouse or kin within the 2nd tier.

Quantity Percentage Quantity Percentage Quantity Percentage Titles Names Relationship

CEO Matthew Miau

1998.09.01 21,885,999 1.43% 0 0.00% 0 0.00% Santa Clara University, EMBA California Berkley University, Bachelor, Electrical Engineering

Chairman, SYNNEX International Corp. Chairman, Lien Hwa Industrial Corp. Chairman, UPC Technology Corporation Chairman, MiTAC Inc Vice chairman, MiTAC Information Technology Corp Director, Getac Technology Corporation

None None None

President Billy Ho 2000.03.27 5,103,727 0.33% 0 0.00% 0 0.00%

MIS in Computer Science, Fairleigh-Dickinson University Master UC San Diego Marketing Manager, Pao Hwa Trading Co., Ltd.

Director, Gemtek Technology Corp. Director, Loyalty Founder Enterprise Co., Ltd. Director, Linpus Technologies, Inc. Chairman, MIO Technology Corp. Chairman, DLC Technology Corp. Director, 3-Probe Technologies Co., Ltd. Chairman,SUIIO Inc.

None None None

Senior Vice President

Michael Lin 2010.07.26 2,174,408 0.14% 11,420 0.00% 0 0.00%

MBA, Senior management, National Chiao Tung University Bachelor, Electrical Engineering, National Taiwan University

None None None None

Vice President Percy Chen 1997.03.20 540,626 0.04% 0 0.00% 0 0.00%

EMBA class, National Sun Yat-Sen University Electronics Dept., Taipei Technology University Manager, MiTAC Inc.

Director, 3-Probe Technologies Co., Ltd.

None None None

Vice President James Juan 1997.06.06 70,003 0.00% 0 0.00% 0 0.00% LLD, Rutgers State University, NJ, USA LLM, University of Washington, USA

Director, Mio Technology Corp. Director, DLC Technology Corp.

None None None

Vice President Ted Chang 1999.09.01 20,005 0.00% 0 0.00% 0 0.00% Bachelor, Medical Engineering, Christian Chung Yuan University

None None None None

Vice President Alice Fang 2005.02.23 766,483 0.05% 0 0.00% 0 0.00%

Master, Institute of Technology Management, National Chengchi University Bachelor’s degree from the Department of International Trade, Fu Jen Catholic University

Director, MiTAC Construction and Development Co., Ltd.

None None None

Vice President Johnson Wang

2007.12.19 229,532 0.02% 5,884 0.00% 0 0.00% MBA, Tulane University, USA None None None None

Vice President King Chen 2009.06.18 1,297,654 0.08% 0 0.00% 0 0.00% Bachelor, Electrical Engineering, National Taiwan University

Director, DLC Technology Corp. Director, Mio Technology Corp.

None None None

Vice President Albert Mu 2009.08.24 80,000 0.01% 0 0.00% 0 0.00% Master, Engineering Management, Stanford University Master, Electrical Engineering, University of

None None None None

17


Shareholding Shares currently held by spouse or dependents

Shares held in the names of others Education and Experience Positions in other companies

Manager who is the spouse or kin within the 2nd tier.

Quantity Percentage Quantity Percentage Quantity Percentage Titles Names Relationship

Texas at Austin Bachelor, Electronic Engineering, National Chiao Tung University President, Intel Global Server Innovation Corp. Vice President, Promise Corp. Chief Technology Officer, Wistron Corporation Senior Manager, Cisco

Vice President J.J. Huang 2010.01.25 25,000 0.00% 0 0.00% 0 0.00%

MBA, National Taipei University Electronics Dept., Taipei Technology University Section Manager of QC, Great electronics corp

None None None None

Vice President Doris Huang

2011.01.31 30,541 0.00% 0 0.00% 0 0.00%

Bachelor, Taxation and Finance, National Chung Hsing University Director of General Management Dept., Hanrei Technology Corporation

Supervisor, Tsu Fung Investment Corp. Supervisor, Loyalty Founder Enterprise Co., Ltd. Supervisor, Tsu Fung Investment Corp. Director, Lian Jie Investment Co., Ltd. Supervisor, 3Probe Technologies

None None None

Vice President Steve Chang

2012.08.23 51,208 0.00% 0 0.00% 0 0.00%

Master’s degree from the Department of International Business Management, National Taiwan University Bachelor, Electrical Engineering, National Taiwan University

Director,SUIIO Inc. None None None

Head of Accounting

Ting Hui-Yuan

2009.02.17 25,000 0.00% 0 0.00% 0 0.00% Bachelor, Accounting, Tamkang University None None None None

18

(III) Remunerations to the Directors, Supervisors, Presidents, and Vice Presidents Remunerations to the Directors

2012 In thousands of New Taiwan Dollars/ thousand shares

Titles Names

Remunerations to the Directors Total of A, B, C, and D in proportion to earnings before taxation (%)

Remuneration from holding employee positions Total of A, B, C, D, E, F and G in proportion to earnings before taxation (%) Remuneratio

n from subsidiaries or other investees (H)

Remuneration (A) Pension (B) Remuneration from

distribution of earnings (C) (Note 1)

Business expenses (D) Salaries, bonus, and special expenses (E)

Pension (F) Employee bonuses (G)

(Note 1)

Quantity of share subscription entitled by

ESO (Note 5)

Acquired new shares with employees’ rights

restricted

The Company

All companies in the

consolidated financial statements

The Company



The Company



The Company



The Company



The Company



The Company



The Company

All companies in the consolidated

financial statements The

Company



The Company



The Company



Cash dividend

Stock dividend

Cash dividend

Stock dividend

Chairman Matthew Miau

408 408 - - 1,400 1,400 100 100 0.32% 0.32% 8,554 10,554 105 105 530 - 530 - 10,900 10,900 - - 1.88% 2.22% 104

Director Billy Ho

Director MiTAC Inc.

Rep: Kuo Yun

Director

UPC

Technology

Corporation

Rep.: Yung-Do

Way

Rep.: Simon

Wu

Note 1: The figures were the amount of earnings for distribution proposed by the Board of Directors before the approval of the general meeting of shareholders for approval. Note 2: The total remuneration of the Company and the companies included in the consolidated financial statements in 2011 amounted to 0.79% of the net income and it is 0.32% this year mainly due to the increase in the current net income from the year 2011, resulting in the ratio of the remuneration to directors to the net

income decreasing from the year of 2011. Note 3: The remunerations from retained earnings that directors are entitled to are compiled in a table for distribution of earnings subject to the resolution of the Board meeting and the general meeting of shareholders. The remunerations to directors were proposed at the recommendation of the Remuneration Committee,

industry level, and the possible risks in the future by the Board of Directors at the authorization under the Articles of Incorporation. Note 4: Pension as stated is the amount of appropriation. Note 5: This refers to the quantity of shares that the directors are eligible to from Employee stock optionexcluding the exercised portion, as of the date (2013/05/15) of this annual report. These directors also hold employee positions (including the President, Vice Presidents, other managers and employees) . Note 6: The Company does not single out the name and remuneration of particular director for disclosure. Therefore, the disclosure of remunerations was presented on a salary scale with the names of all concerned.

Salary Scale Bracket of salaries to directors of the

Company Name of director

Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)+(H)

The Company All companies in the consolidated

financial statements The Company All investees

Less than NT$2,000,000 Matthew Miau/Billy Ho/UPC Technology Corp/Yung-Do Way/Simon Wu/MiTAC

Inc./Kuo Yun

Matthew Miau/Billy Ho/UPC Technology Corp/Yung-Do Way/Simon Wu/MiTAC

Inc./Kuo Yun

Matthew Miau/UPC Technology Corp/Yung-Do Way/Simon Wu/MiTAC

Inc./Kuo Yun

Matthew Miau/UPC Technology Corp/Yung-Do Way/Simon Wu/MiTAC

Inc./Kuo Yun

NT$2,000,000～NT$5,000,000 (Exclusive)

NT$5,000,000～NT$10,000,000(Exclusive) Billy Ho Billy Ho

NT$10,000,000～NT$15,000,000(Exclusive)

NT$15,000,000～NT$30,000,000(Exclusive)

NT$30,000,000～NT$50,000,000(Exclusive)

NT$50,000,000～NT$100,000,000(Exclusive)

More than NT$100,000,000

Total 7 7 7 7

19

Remuneration to supervisors

2012 In thousands of New Taiwan Dollars

Titles Names

Remuneration to supervisors Total of A, B, and C in proportion to

earnings before taxation (%) Remuneration from

subsidiaries or other

investees (D)

Remuneration (A) Remuneration from distribution of

earnings (B) (Note 1) Operating expenses (C)

The Company



The Company



The Company



The Company



Supervisor Arthur Chiao

144 144 600 600 32 32 0.13% 0.13% - Supervisor


Rep: Hu-Shi, Charles Ching

Note 1: The figures were the amount of earnings for distribution proposed by the Board of Directors before the approval of the general meeting of shareholders for approval. Note 2: The total remuneration of the Company and the companies included in the consolidated financial statements in 2011 amounted to 0.28% of the net income and it is 0.13% this year mainly due to the increase in the

current net income from the year 2011, resulting in the ratio of the remuneration to supervisors to the net income decreasing from the year of 2011. Note 3: The remunerations to supervisors from earnings are compiled in a table for distribution of earnings subject to the approval of the Board of Directors and finalization of the general meeting of shareholders. The

remunerations to supervisors were proposed at the recommendation of the Remuneration Committee, industry level, and the possible risks in the future by the Board of Directors at the authorization under the Articles of Incorporation.

Note 4: The Company does not single out the name and remuneration of particular supervisor for disclosure and the disclosure of remunerations was presented on a salary scale with the names of all concerned.

Salary Scale

Bracket of salaries to supervisors of the Company

Name of supervisor

Total of (A+B+C)

The Company All companies in the consolidated financial

statements

Less than NT$2,000,000 Arthur Chiao/ Lien Hwa Industrial Corp./Hu-Shi,

Charles Ching Arthur Chiao/ Lien Hwa Industrial Corp./Hu-Shi, Charles Ching

NT$2,000,000～NT$5,000,000 (Exclusive)

NT$5,000,000～NT$10,000,000(Exclusive)

NT$10,000,000～NT$15,000,000(Exclusive)

NT$15,000,000～NT$30,000,000(Exclusive)

NT$30,000,000～NT$50,000,000(Exclusive)

NT$50,000,000～NT$100,000,000(Exclusive)


Total 3 3

20

Remunerations to President and Vice Presidents In thousands of New Taiwan Dollars/ thousand shares

Titles Names

Salaries (A) Pension (B) Bonus and special expenses (C)

Remuneration from distribution of earnings (D) (Note 1)

Total of A, B, C, and D in proportion to earnings before taxation (%)

Quantity of share subscription entitled by

ESO (Note 6)

Acquired new shares with employees’ rights

restricted Remuneration from

subsidiaries or other investees (E)

The Company

All companies in

the consolidated financial statements

The Company

All companies in


The Company

All companies in


The Company All companies in the consolidated financial

statements The Company

All companies in


The Company



The Company



Cash dividend

Stock dividend

Cash dividend

Stock dividend

CEO Matthew Miau

30,967 37,956 1,187 1,267 16,780 22,050 2,730 - 2,730 - 8.75% 10.84% 35,035 35,035 - - 111

President Billy Ho


Michael Lin

Vice President Percy Chen

Vice President James Juan

Vice President Ted Chang

Vice President Alice Fang


Vice President King Chen

Vice President Albert Mu

Vice President J.J. Huang

Vice President Huang Hsiu-Ling

Vice President Chang Yao-Chun


C. J. Lin (resigned November 1,2012)

Vice President Bjorn Tsai (resigned April 1,2013)

Note 1: The figures were the amount of earnings for distribution proposed by the Board of Directors before the approval of the general meeting of shareholders for approval. Note 2: The total remuneration of the Company in 2011 amounted to 21.46% of the net income and it is 8.75% this year mainly due to the increase in the current net income from the year 2011. Note 3: The total remuneration of the companies included in the consolidated financial statements in 2011 amounted to 27.57% of the net income and it is 10.84% this year mainly due to the increase in the current net income

from the year 2011, resulting in the ratio of the remuneration to the President and the Vice Presidents to the net income decreasing from the year 2011. Note 4: The remunerations to the President and the Vice Presidents commensurate with their personal contribution to the overall operation performance of the Company at the recommendation of the Remuneration Committee,

industry level, and the possible risks in the future. Note 5: Pension as stated is the amount of appropriation. Note 6: The quantity of shares (excluding the exercised portion) entitled to the President and the Vice Presidents under Employee Stock Options as of the date this report was printed (5/15/2013).

Salary Scale

Brackets of salaries to the President and all Vice Presidents

Name of President and Vice Presidents

Total of (A+B+C+D)+(E)

The Company All investees

Less than NT$2,000,000 Matthew Miau/Chang Yao-Chun Matthew Miau/Chang Yao-Chun

NT$2,000,000～NT$5,000,000 Albert Mu/Bjorn Tsai/Huang Hsiu-Ling/James Juan/Alice Fang/ Johnson Wang/Percy Chen/J.J. Huang/Ted Chang/C.J, Lin

Bjorn Tsai/Huang Hsiu-Ling/James Juan/Alice Fang/ Johnson Wang/Percy Chen/J.J. Huang/Ted Chang/C.J, Lin

NT$5,000,000 (inclusive) ~NT$10,000,000 Billy Ho /Michael Lin/King Chen Billy Ho /Michael Lin/King Chen/Albert Mu

NT$10,000,000 (inclusive)~NT$15,000,000

NT$15,000,000 (inclusive) ~NT$30,000,000

NT$30,000,000 (inclusive) ~NT$50,000,000

NT$50,000,000 (inclusive) ~NT$100,000,000


Total 15 15

2012

21

Names of managers with distributions of employee bonuses In thousands of New Taiwan Dollars

Titles Names Stock dividend

Cash dividend Total

Total amount in proportion to earnings before taxation (%)

Managers

CEO Matthew Miau

- 2,875 2,875 0.49%

President Billy Ho


Michael Lin


Vice President James Juan

Vice President Ted Chang

Vice President Alice Fang


Vice President King Chen

Vice President Albert Mu

Vice President J.J. Huang

Vice President Huang Hsiu-Ling

Vice President Chang Yao-Chun

Head of Accounting Ting Hui-Yuan


C. J. Lin (resigned November 1, 2012)

Vice President Bjorn Tsai (resigned April 1, 2013)

Note: The figures were the amount of earnings for distribution proposed by the Board of Directors before the approval of the general meeting of shareholders for approval.

22

VIII. Relation between the top ten shareholders April 26 2013

Names

Shares held in own name Shares currently held by spouse or dependents

Shares held in the names of others

Disclosure of relationships between the top ten shareholders including spouses, 2nd tier relatives or closer, or the relationships defined under Statement

of Financial Accounting Principle No.6. Remarks

Quantity Percentage of shareholding



Name Relationship

UPC Technology Corporation Rep.: Matthew Miau

129,628,156 8.47% 0 0.00% 0 0.00%

MiTAC Inc. The Chairman of the company is the Chairman of this company


Investee with gains or losses recognized using the equity method

Matthew Miau Chairman of this company

Tsu Fung Investment Corp.

The Chairman of the company also acts as Chairman of the parent

company

SYNNEX International Corp.

Common chairman

Getac Technology Corporation

The Chairman of the company is the Director of this company

Ho Li Investment Co., Ltd.

The Chairman of the company also acts as Chairman of the parent company

MiTAC Inc. Rep.: Matthew Miau

122,456,572 8.00% 0 0.00% 0 0.00%


The Chairman of the company is the Chairman of this company




Tsu Fung Investment

Corp.

The Chairman of the company also acts as

Chairman of the parent company

SYNNEX

International Corp.



The Chairman of the

company is the Director of this company


A subsidiary to the company

Lien Hua Industrial Corp. Rep.: Matthew Miau

91,625,310 5.99% 0 0.00% 0 0.00%


Investee with gains or losses recognized using the equity method

MiTAC Inc. Investee with gains or losses recognized using the equity method





Common chairman





Mei An Investment Co., Ltd. Rep.: Tseng Chung-Lung

30,570,278 2.00% 0 0.00% 0 0.00% None None

Matthew Miau 21,885,999 1.43% 0 0.00% 0 0.00%


Chairman of this company

MiTAC Inc. Chairman of this company



Tsu Fung Investment

Corp.

Chairman of the parent

company




Director of this company


The chairman of the parent of this company

23

Names

Shares held in own name Shares currently held by spouse or dependents

Shares held in the names of others

Disclosure of relationships between the top ten shareholders including spouses, 2nd tier relatives or closer, or the relationships defined under Statement

of Financial Accounting Principle No.6. Remarks




Name Relationship

Tsu Fung Investment Corp. Rep.: Billy Ho

20,366,568 1.33% 0 0.00% 0 0.00%

UPC Technology

Corporation

Common Chairman of the

parent of the company

MiTAC Inc. The Chairman of the parent of the company is the chairman of this company


Common Chairman of the parent of the company

Matthew Miau Chairman of the parent company


The company is an institutional director of this company


The Chairman of the parent of the company is the director of this company


The Chairman of the parent of the company is the chairman of the parent company

Investment Account held under the custody of Citibank Taiwan.

20,047,450 1.31% 0 0.00% 0 0.00% None None

Synnex Technology International Corporation Rep.: Matthew Miau

14,168,951 0.93% 0 0.00% 0 0.00%


Common chairman

MiTAC Inc. The Chairman of the company is the Chairman of this company


Common chairman



Institutional director of this company





Getac Technology Corporation Rep.: Huang Ming-Han

13,378,094 0.87%0 0.00% 0 0.00%


A director of the company is the Chairman of this company

MiTAC Inc. A director of the company is the Chairman of this company



Matthew Miau Director of this company


A director of the company is the Chairman of the parent of this company




A director of the company is the chairman of the parent of this company

Ho Li Investment Co., Ltd. Rep.: Deh-Chien Chou

10,828,602 0.71% 0 0.00% 0 0.00%


The Chairman of the parent of the company is the chairman of this company

MiTAC Inc. The parent of the company



Matthew Miau The chairman of the parent of this company


The Chairman of the parent of the company is the chairman of the parent company




The Chairman of the parent of the company is the director of this company

24

IX. Proportion of shareholding in aggregate

May 15, 2013 Unit: share %

Investee

(Note)

Holding of the company

Holding of directors,

supervisors, managers

and enterprises directly or

indirectly controlled by

the company

Aggregate investment

Quantity

Percentage

of

shareholding

Quantity

Percentage

of

shareholding

Quantity

Percentage

of

shareholding

Getac Technology Corporation 190,396,939 32.71% 16,635,419 2.86% 207,032,358 35.57%

Tsu Fung Investment Corp. 128,584,651 100.00% 0 0.00% 128,584,651 100.00%

3-Probe Technologies Co., Ltd. 1,086,000 23.25% 0 0.00% 1,086,000 23.25%

Lian Jie Investment Co., Ltd. 11,305,650 49.98% 0 0.00% 11,305,650 49.98%

Shen-Tong Construction & Developments Co., Ltd.

8,559,400 47.55% 0 0.00% 8,559,400 47.55%

DLC Technology Corp. 6,600,000 100.00% 0 0.00% 6,600,000 100.00%

Silver Star Developments Ltd. 215,495,404 100.00% 0 0.00% 215,495,404 100.00%

Foreground Technology Ltd. 9,045,492 100.00% 0 0.00% 9,045,492 100.00%

Loyalty Founder Enterprise Co., Ltd.

39,180,000 25.24% 718,300 0.46% 39,898,300 25.70%

Mio Technology Corp. 2,000,000 100.00% 0 0.00% 2,000,000 100.00%

SUIIO Inc. 116,667 70.00% 0 0.00% 116,667 70.00%

Note: The company’s investments under the equity method

25

Four. Status of Capital

I. Capital and Shares

(I) Source of Paid-in Capital 1. Outstanding shares

May 15, 2013 Unit: NTD; share

Date Issuing price

Authorized capital Paid-in capital Remarks

Quantity Amount Quantity Amount Sources of capital Investment by properties other than cash

Effective date (approval date) of new capital and approval document number

2012.03 10 2,200,000,000 22,000,000,000 1,529,769,942 15,297,699,420

$340,000 subscribed following the exercise of employees’ stock warrant - 2012 1st quarter

- Notice Yuan-Shang-1010013792 dated 05.10.2012

2012.09 10 2,200,000,000 22,000,000,000 1,529,799,942 15,297,999,420

300,000 subscribed following the exercise of employees’ stock warrant - 2012 3rd quarter


2012.12 10 2,200,000,000 22,000,000,000 1,529,829,942 15,298,299,420

$300,000 subscribed following the exercise of employees’ stock warrant - 2012 4th quarter


2013.03 10 2,200,000,000 22,000,000,000 1,529,834,942 15,298,349,420

50,000 subscribed following the exercise of employees’ stock warrant - 2013 1st quarter

- Registration in process

Note: In addition, the board meeting held on May 9, 2013 resolved to cancel 18,700,000 shares of treasury stock on the date of capital reduction, May 15, 2013.

April 26, 2013 Unit: share

Type of share

Authorized capital Remarks

Outstanding (note) Unissued Total

Common share

1,529,834,942 670,165,058 2,200,000,000 250,000,000 of the authorized shares were reserved for the exercise of employees’ warrants.

Note: The outstanding shares are publicly traded before the deduction of the treasury stock for 44,969,000 shares (including 18,700,000 shares expected to be canceled).

2. Information relevant to the aggregate reporting policy: none. (II) The composition of Shareholders

April 26 2013 The composition of

Shareholders Qty

Government institutions

Financial institutions

Other institutions QFII Natural persons Treasury Stock Total

Number of persons 3 24 137 269 113,660 1 114,094

Qty of shareholding 74 9,441,855 465,063,942 136,952,809 873,407,262 44,969,000 1,529,834,942

Percentage % 0.00% 0.62% 30.40% 8.95% 57.09% 2.94% 100.00%

(III) Diversification of Shareholding 1. Common share

April 26 2013 Level of holding No. of shareholders Number of shares owned Percentage %

1 ~ 999 37,471 10,193,210 0.67%

1,000 ~ 5,000 47,170 113,000,128 7.39%

5,001 ~ 10,000 13,720 105,993,088 6.93%

10,001 ~ 15,000 5,131 61,760,092 4.04%

15,001 ~ 20,000 3,179 58,445,972 3.82%

20,001 ~ 30,000 2,720 67,642,832 4.42%

30,001 ~ 40,000 1,307 45,947,382 3.00%

40,001 ~ 50,000 847 39,372,618 2.57%

50,001 ~ 100,000 1,442 103,976,656 6.80%

100,001 ~ 200,000 640 90,691,373 5.93%

200,001 ~ 400,000 252 69,773,798 4.56%

400,001 ~ 600,000 80 38,026,093 2.49%

600,001 ~ 800,000 38 26,687,847 1.74%

800,001 ~ 1,000,000 17 15,326,957 1.00%

Classify for holding of more than 1,000,001 shares

80 682,996,896 44.64%

Total 114,094 1,529,834,942 100.00%

26

2. Preferred share: none.

(IV) List of dominant shareholders April 26 2013

Shareholding Name of dominant shareholder

Number of shares owned Percentage owned

UPC Technology Corporation 129,628,156 8.47%

MiTAC Inc. 122,456,572 8.00%

Lien Hua Industrial Corp. 91,625,310 5.99%

Note: Three shareholders of the Company each holds more than 5% of the outstanding shares.

(V) Market price, Net worth, Earnings, and Dividend per share

Year Item

2011 2012 Jan 1 to May 15, 2013 (Note 6)

Before adjustment

After adjustment

Before adjustment

After adjustment

Market price per share

High 15.60 15.45 12.85 12.70 11.45

Low 8.20 8.20 (note 7) 9.00 8.85 9.98

Average (note 2) 12.09 10.79 10.80

Net Worth per Share

Before Distribution 20.19 20.17 20.44

After Distribution 20.04 19.97 (note 1) -

EPS Weighted Average Shares 1,504,227 1,504,227 1,482,794

1,482,794 (note 1)

1,468,862

EPS 0.17 0.17 0.40 0.40 (note 1) (0.10)

Dividend per share

Cash dividend 0.15 0.15 0.20 0.20 (note 1) -

Dividends from Retained Earnings

- - -

Dividends from Capital Surplu

- - -

Accumulated unpaid dividend

- -

-

Analysis of ROI

P/E Ratio (note 3) 68.76 25.38 -

P/D Ratio (note 4) 77.93 50.75 (note 1) -

Cash Dividend Yield Rate (note 5)

1.28% 1.97% (note 1) -

Note 1: The allocation of earnings for 2012 has approved by the Board of Directors, but need to be recognized by shareholders’ meeting.

Note 2: Average market price is calculated by the trade amount and shares each year. Note 3: Price/Earnings Ratio = Average Market Price / Earnings per Share. Note 4: Price/Dividend Ratio = Average Market Price / Cash Dividends per Share. Note 5: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price. Note 6: Net worth and earnings per share must be stated in the financial statements and audited (reviewed) by CPAs;

other columns should be filled with same-year data in the annual report up to the publication date of this report. Note 7: The lowest market price per share is the price after ex-right day, so no adjustment is required

27

(VI) Dividend policy and its implementation 1. Dividend policy under the Articles of Incorporation:

The company is in a growing industry; hence the life cycle of the company grows with the industry. In consideration of the Company’s business environment, long-term financial planning and future fund demands and meeting shareholder’s cash demands, the Company’s should appropriate 10% of earnings after final accounting as legal reserve, after offsetting retained losses from previous years and tax payments, and appropriate or reverse special reserve as required by law. After paying dividend from the remainder, the company shall appropriate at least 5% of what remained as employee bonus. The Board may draft a proposal to distribute the remainder for a resolution at the shareholders’ meeting.

If employee bonuses is distributed in the form of stock dividends, employees who meet specific conditions are entitled to such distribution. Such conditions shall be determined at the discretion of the Chairman of the Board.

The ratio of cash and stock dividends will be determined by the Board of Directors taking into consideration issues such ascorporate financial structure, future cash flow, and profitability. The cash dividend shall not be less than 10% of the total dividend, however, the ratio may be adjusted with shareholder approval.

2. The resolution for dividend distribution at the general meeting of shareholders: Based on the principles above, the Board of Directors drafted a proposal for

dividend distribution at its meeting on May 9, 2013. This proposal covers dividends for the fiscal year 2012 and the dividend per share is NT$0.20. The proposal will be presented for approval at the general meeting of shareholders held on June 24th, 2013.

3. Anticipated significant changes in dividend policy: none. (VII) Impacts of stock dividends, to be proposed during the next general meeting of

shareholders, to the company’s business performance and earnings per share. The Company did not have such motion in the distribution of income in 2012, and is

not applicable here. (VIII) Employee bonuses and Remuneration to the Directors and Supervisors

1. Percentage or scope of employee bonuses and remuneration to directors and supervisors as stated in the Articles of Incorporation. (1) Bonus to employees: Annual earnings, in addition to offsetting the prior years’

losses and withholding taxes, according to the law and withholding taxes, should be with a 10% set aside as a legal reserve and have a special reserve set aside or reversed pursuant to the law. In addition to the payment of dividends afterwards, appropriate at least 5% of the remaining balance as bonus to employees.

(2) Percentage of remuneration to directors and supervisors: Not specified in the Articles of Incorporation.

2. After accounting for changes in the basis of the estimation of employee bonuses, remunerations to directors and supervisors, changes to the calculation basis for stock dividends, and discrepancies between the amounts actually paid and the amounts it is estimated: (1) The basis for the estimation of employee bonuses and remunerations to the

directors and supervisors: The estimation of employee bonuses and remunerations to the directors and supervisors for fiscal year 2012 was based on the corporate earnings as of the end of current period net of mandatory reserves and capital surplus at the percentage stated in the Articles of Incorporation (5% for employee bonuses) and was recognized as operating expenses.

(2) The basis for the calculation of stock dividends: The number of common shares to be distributed as stock dividends is calculated on the basis of the fair value per share (closing price) one trading day before the general meeting of shareholders

28

for resolution held in the year after the fiscal period in consideration of ex-right and ex-dividend effect.

(3) The accounting of the difference between the actual amount distributed and the estimated amount for distribution: The difference resolved by the general meeting of shareholders for distribution and the estimated amount for distribution shall be recognized as income or loss in the next fiscal period in accounting.

3. Information on the resolution of the general meeting of shareholders on employee bonuses: The proposal for the distribution of earnings in fiscal year 2012 was resolved by the general meeting of shareholders dated May 9, 2013, and specified as follows: (1) The general meeting of shareholders resolved to distribute to employees cash

bonus of NTD 27,909,795 and pay NTD2,000,000 as remunerations to the directors and supervisors . No difference arose between the estimated and actual amount.

(2) The ratio of estimated stock bonus for employees to the corporate earnings of the current period and total dividends paid to the employees: Our company did not propose the distribution of stock dividends for fiscal year 2012. this rule is not applicable.

(3) The assumed EPS is $ 0.4 for the distribution of employee bonus and remuneration for directors and supervisors.

4. Employee bonuses and Remuneration to the Directors and Supervisors in fiscal year 2011:

Actual number of shares

distributed

Employee Bonus – in Cash Directors' and Supervisors' Remuneration

5,831 thousand 2,000 thousand

Note: There is no difference between the actual amount distributed and the bonus to employees and the recognized remuneration to directors and supervisors .

29

(IX) Buyback of Treasury Stock May 15, 2013

In thousands of New Taiwan Dollars; thousand shares

Treasury stocks in Batches

13th Batch 14th Batch 15th Batch 16th Batch 17th Batch

Date of Board Resolution

2011.8.10 2011.11.24 2012.1.17 2012.6.15 2012.12.28

Purpose of Buy-back

Assignment of shares to employees




Protect the company’s credit and shareholder’s

equity

Timeframe of Buy-back

August 11, 2011 to October 7,

2011

November 25, 2011 to January

13, 2012

January 18. 2012 to March 2.2012

July 6, 2012 to August 17, 2012

January 3, 2013 to March 1, 2013

Price range NTD 9~13 NTD 9~12 NTD 9~12 NTD 9~12 NTD 9~12

Class, quantity of shares bought back

Common share 10,000

Common share 10,000

Common share 20,000

Common share 10,000

Common share 20,000

Class, quantity of shares Buy-back

Common share 6,350

Common share 10,000

Common share 4,772

Common share 9,000

Common share 18,700

Value of bought-back shares

68,202 91,880 49,108 85,132 205,505

Average cost for the repurchase of each share (NTD)

10.74 9.19 10.29 9.46 10.99

Reasons for incomplete accomplishment of the Board Resolution

The reason we did not completely execute the Board resolution is preserving shareholders’ equity and consideration of market mechanism and the effectiveness for subsequent use of capital.

Not applicable




Shares sold/Transferred

0 Transferred to employees 3,853

0 0 18,700 (Note)

Accumulated number of company shares held

6,350 12,497 17,269 26,269 26,269

Percentage of total company shares held (%)

0.42% 0.82% 1.13% 1.72% 1.72%

Note: The board meeting held on May 9, 2013 resolved to handle the stock share cancelation on the date of the capital reduction, May 15, 2013.

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V. Employee Stock Options

(I) Issuance of Employee Stock Options May 15, 2013

Type of Employee Stock Options 6th (1st term)

Employee Stock Options 6th (2nd term)

Employee Stock Options

7th Employee Stock Options

(4th time after merging with TYAN Computer Corp. shares)

8th (1st term) Employee Stock Options

8th e (2nd term) Employee Stock Options

The effective date of declaration 4.16.2007 4.16.2007 8.24.2007 9.30.2008 9.30.2008

Issuing (processing) date 7.30.2007 8.17.2007 9.26.2007 10.13.2008 10.27.2008

Issuance (Note 1) 32,000 units 32,000 units 1,245.222 units (Note 2) 42,500 units 42,500 units

Option shares to be issued as a percentage of outstanding shares

2.09% 2.09% 0.08% 2.78% 2.78%

Duration 6 years 6 years 6 years 6 years 6 years

Conversion measures Issue new stock shares Issue new stock shares Issue new stock shares Issue new stock shares Issue new stock shares

Conditional conversion periods and percentages (%)

Employees holding stock options for more than two years can exercise their options until ten days before the expiration date, except when transfer of stock is suspended by law. DurationExercise Percentage More than 2 years 50% More than 3 years 75% More than 4 years 100%





Converted shares 0 share 0 share 0 share 1,095,000 share 2,567,531 share

Exercised amount NT$0 NT$0 NT$0 NT$14,235,000 NT$28,743,348

Number of shares yet to be converted (note 3)

130,000 shares 120,000 shares 489,676 shares 32,799,500 share 31,594,127 shares

Adjusted exercise price for those who have yet to exercise their rights

NT$34.6 NT$31.3 NT$19.3 NT$12.8 NT$11.0

Unexercised shares as a percentage of total issued shares(%)

0.01% 0.01% 0.03% 2.14% 2.07%

Impact on possible dilution of shareholdings

Holders of our company’s options cannot exercise the options according to these regulations until two years after the options are granted. As a result, said options do not create significant impact on shareholders’ equity.





Note 1: Each stock option is entitled to the subscription of 1,000 common shares of MiTAC when exercised. Note 2: Per the merger agreement, the number of shares for the subscription and price per unit have been adjusted according to the ratio of share exchange (MiTAC: TYAN = 1: 1.26). Note 3: After deduction of relinquished shares.

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May 15, 2013

Type of Employee Stock Options


9th (2nd term) Employee Stock Options


10th (2nd term) Employee Stock Options

10th (3rd term) Employee Stock Options

11th Employee Stock Options

The effective date of declaration

1.6.2009 1.6.2009 9.22.2009 9.22.2009 9.22.2009 9.18.2012

Issuing (processing) date

4.29.2009 7.3.2009 10.5.2009 4.19.2010 5.6.2010 10. 11.2012

Issuance (Note 1) 21,500 units 21,500 units 47,500 units 23,000 units 24,500 units 39,000 units

Option shares to be issued as a percentage of outstanding shares

1.41% 1.41% 3.10% 1.50% 1.60% 2.55%

Duration 6 years 6 years 6 years 6 years 6 years 6 years

Conversion measures Issue new stock shares Issue new stock shares Issue new stock shares Issue new stock shares Issue new stock shares Issue new stock shares

Conditional conversion periods and percentages (%)

Employees holding stock options over two years can exercise their options until ten days before their expiration, except for any suspension by law. TimeExercise Percentage More than 2 years 25% More than 3 years 50% More than 4 years 100%



Employees holding stock options over two years can exercise their options until ten days before their expiration, except for any suspension by law. Time Exercise Percentage More than 2 years 30% More than 3 years 60% More than 4 years 100%

Employees holding stock options over two years can exercise their options until ten days before their expiration, except for any suspension by law. Time Exercise Percentage More than 2 years30% More than 3 years60% More than 4 years100%


Converted shares 0 share 0 share 0 share 0 share 0 share 0 share

Exercised amount NT$0 NT$0 NT$0 NT$0 NT$0 NT$0

Number of shares yet to be converted (note

3) 16,920,000 share 17,042,000 share 26,445,000 share 7,183,000 share 21,411,000 share 39,000,000 share

Adjusted exercise price for those who have yet to exercise

their rights

NT$13.9 NT$12.9 NT$13.7 NT$14.2 NT$12.9 NT$10.15

Unexercised shares as a percentage of total issued shares(%)

1.11% 1.11% 1.73% 0.47% 1.40% 2.55%

Impact on possible dilution of shareholdings

Employees cannot exercise their stock options for two years; therefore, it does not cause significant dilution effect on shareholder’s equity.






Note 1: Each stock option can exercise 1,000 common shares of MiTAC. Note 2: After deduction of relinquished shares.

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(II) Names, acquisition and subscription of the managers with employees’ stock options and employees who are top ten employees with stock options and obtained

May 15, 2013 In thousands of New Taiwan Dollars/ shares

Type Titles Names No. of Option

Shares (Note 1)

Option Shares as a Percentage of Shares lssued

Exercised Unexercised

No. of Shares Converted

Strike Price (NT$)

Subscription amount

Ratio of shares subscribed to the total number of shares issued


Strike Price (NT$)

Subscription amount


Term Price

Managers

CEO Matthew Miau

35,830,000 2.34% 0 - 0 0.00% 35,830,000

6th (1st term)

34.6

421,477 2.34%

President Billy Ho


Michael Lin 6th (2nd term)

31.3


Vice President James Juan 8th (1st term)

12.8 Vice President Ted Chang

Vice President Alice Fang 8th (2nd term)

11.0 Vice President Johnson Wang

Vice President King Chen 9th (1st term)

13.9 Vice President Albert Mu

Vice President J.J. Huang 9th (2nd term)

12.9 Vice President Huang Hsiu-Ling

Vice President Chang Yao-Chun 10th

(1st term) 13.7 Head of

Accounting Ting Hui-Yuan


C. J. Lin (resigned

November 1, 2012)

10th (2nd term)

14.2

10th (3rd term)

12.9

Vice President Bjorn Tsai

(resigned April 1, 2013)

11th 10.15

Note 1:After deduction of relinquished shares Note 2: The 7th employee stock warrant (accepted the 4th employee stock warrant of former Tyan Computer Corporation): No manager obtained and subscribed

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May 15, 2013 In thousands of New Taiwan Dollars/ shares

Type Titles Names

No. of Option Shares (Note 1)

Option Shares as a

Percentage of Shares lssued

Exercised Unexercised


Strike Price (NT$)

Subscription amount



Strike Price (NT$) Subscription

amount

Ratio of shares subscribed to the total number of shares issued Term Price

Employee

Overseas subsidiaries President

Shu-Chi Peggy Fong

13,474,000 0.88% 0 - 0 0.00% 13,474,000

6th (1st term)

34.6

155,602 0.88%


Chou, Charlotte 6th

(2nd term) 31.3


Di-Yuan Yeh 7th 19.3

8th (1st term)

12.8 Overseas subsidiaries President

Wu Shun-Huang 8th

(2nd term) 11.0

Special Assistant

Crystal Yang 9th

(1st term) 13.9

Senior Director

Kuo Shou-Chien 9th

(2nd term) 12.9

Senior Director

Huang Yuan-Tse 10th

(1st term) 13.7

Senior Director

Li Hsi-Chin 10th

(2nd term) 14.2

Senior Director

Chang Yuan-Hsiang 10th

(3rd term) 12.9

Director Lo Chung-Hao (resigned) 11th 10.15

Note 1:After deduction of relinquished shares

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VI. Issuance of restricted new shares to employees : None VII. Information on new shares from acquisition or assignment by a third party: none. VIII. Progress on the use of funds: The Company did not have any planned use of capital that was

incomplete, or whose expected benefit had yet to materialize, up to the quarter prior to the publication date of this annual report.

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Five. Operation Overview

I. Business Activities

(I) Scope of business 1. Principal business activities

MiTAC’s core businesses: (1) Cloud computing product, including workstations, servers and storage devices; enterprise and channel server / workstation product series, including support for Intel and Advanced Micro Devices (AMD) 2-processor, 4-processor and 8-processor X86 advanced server / workstation products, high-density servers and professional server / workstation total platform specially researched and developed for clients; All-In-One LCD PC, and Thin Client computer. (2) Mobile communication products include automotive electronics (automobile navigation audio-video equipment), consumer electronics (portable navigation devices (PND) and Drive Video Recorders), outdoor and fitness navigation devices, professional products (e.g., fleet management), and smart navigation and cloud services.

2. Business distribution In thousands of New Taiwan Dollars

Year Products

2012 Ratio (%)

Computer & communication products 28,435,903 100.00

3. Major Products (1) Cloud Computing Business Group

‧Cloud Computing Server ‧Rack-mounted servers ‧Blade servers ‧All-In-One LCD computers ‧Thin Client computer

(2) Mobile communication products Business Group

‧Consumer electronics ‧Outdoor navigation devices ‧Fitness navigation device ‧Automotive electronics

4. New products or technology under planning (1) Cloud Computing Business Group

‧Development of cloud computing servers ‧Optimized virtual server. ‧Communication server. ‧Development of storage devices and related technologies. ‧System protocols and integration of Thin Client computers & servers ‧R&D of All-In-One LCD computer technologies ‧Integrated technological development for Point of Sale (mPOS) systems.

(2) Mobile communication products Business Group

‧Cloud service applications and technologies. ‧Integrated data capture, voice, and wireless broadband communication. ‧Global positioning system (GPS), electronic navigation technologies and mobile positioning services.

(II) Industry overview (1) Current condition of the industry and its development

In terms of cloud servers, we see that sale of servers have grown 5.3% globally in 2013 based on MIC industry analysis, and it is expected to grow 4.4% in 2014.

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Shipment in 2013 grew by over nine million units. In terms of product type, the ratio of traditional Pedestal Server shipment has declined in the US market. Instead, Rack Mount servers have replaced them and become the mainstream product in the market. After the rise of Rack Mount servers, we shall see increasing production of Blade servers with higher computational density. As the system cooling requirements accompanying the high computational density of Rack Mount and Blade servers becomes more stringent, the research and investment made by all companies in this field will increase compared to those made for Pedestal servers. Seen from the application end, with help from mobile internet devices and the Internet of Things, cloud computing and its application will continue to grow. On top of these, the requirements from social networks, the analysis and service of big data will also be new market opportunities that will continue to drive up demand for servers and storage device.

In terms of terminal products, while PC products are not showing significant growth, the touch screen functions and exterior design of AIO PCs attracted consumers’ attention and induced them to buy AIO PCs. As a result, the growth momentum in AIO PCs is still quite significant. We saw about 31.1% growth in 2011 and 17.0% growth in 2012, with total shipment of 15.8 million units. Afterwards, this market will maintain stable growth. AIO will continue to play the role of bellwether for growth among desktop computers and is expected to make up 10% of DT shipment in 2013.

In terms of mobile communication products, while global sales of portable satellite navigation products has been declining over the years, related applications of satellite navigation has continued to thrive with other handheld or mobile devises. According to the estimate of Berg Insight, a Swedish market research firm, 28 million units of portable satellite navigation products were sold globally in 2012, a figure that was 15% fewer compared to the year before. The Berg Insight report indicated that in 2013, 230 million portable satellite navigation products were in use globally. Among those, 80 million were installed at the car assembly plants, while 150 million were installed aftermarket. They expect that less than 100 million units will be in service globally by 2016. The report also indicated that, thanks to growth in smart phones and turn-by-turn navigational software, or the availability of free navigational apps, uses of navigation software has increased rapidly. Globally, users who have registered for the use of navigation apps and used them at least once a month has increased from 100 million to 150 million in 2012.

(2) Linkage of industry upstream, midstream, and downstream The industry in which our company operates is at the downstream level. The

upstream is IC and chip manufacturing, the midstream is the manufacturing of related components, and the downstream is the production of terminal products such as servers and consumer products.

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(3) Development trends and degree of competition for our products

a. Cloud computing products:

X86 architecture remains the mainstream among our products, while

SPARC/RISC systems still play significant roles in the high-end server market. System on Chip (SOC) architecture servers built on the ARM-based system are

under development. General-Purpose computing on Graphics Processing Units

(GPGPU) has a certain market share in the application of High-Performance Computing (HPC).

In terms of product types, aside from the standard Rack-mount Units, due

to the requirements on Total Cost of Ownership (TCO) from data centers, high density/multiple computation node and low energy consumption products have

become development trends. Micro-Server have been developed as a result.

Besides, large corporations such as Facebook even set their own specifications based on the needs of their own data centers and require that manufacturer

custom-make their equipment. This phenomenon has become another trend. For

general servers, as the technology has become mature, ODM firms face brutal competition. The demand for cloud computing servers (high density and high

effectiveness servers) can provide more differentiated strategies for ODM firms

because difference exists among all product specifications and require high ability of design and integration.

Because the trend of cloud computing increased the market for Thin Client

computers, demand grew as a result. In the past, only remote access was possible, the computers have grown to support area browser and have evolved

to support VOIP and video conferencing. Computers have evolved from small

screens to the capacity to support multiple high resolution monitors, and fan-less architecture have become the norm. In terms of product structure, Thin

Client computers have evolved from traditional micro independent cases to

All-in-one and Portable computers. In terms of platforms, SOC integrated chips have been developed from x86 architecture. Because All-in-one products allow

the application of many new technologies on the hardware, this feature set them

apart from traditional terminal products. Manufacturers can adopt differentiated strategy in the competition, such as multimedia, green/energy saving, and

sensing technology.

b. Mobile communication products: Regarding consumer products, we see that PNDs have evolved into

personalized navigation service. Combined with LBS data, such service can

integrate smart phones and internet connection functions, retrieve cloud data in

Processing

Units

Key chip

Components

Assembly and

design,

manufacture,

Graphical chip Power

management chip

Wireless

communications chip

Panel Drivers

chip

PC peripherals

chip Touch chip RF chip

Memories Touch Panel Camera

lens

Battery PCB

Connector Passive

components

HD Cabinet Thermal Module

Fans

RAID Power Supply Electro-acoustic

components Active

components Wire rod, solder paste

Server Tablet Workstation

Antennas

38

a timely manner, and perform individualized service. In the outdoor application

of PNDs, the trend is moving toward the area of outdoor sport and leisure

use. Professionals are increasingly adopting them for bicycle and running applications. At this moment, Drive Video Recorders have become the

mainstream in Asia-Pacific markets, while onboard application in vehicles is

prevalent in Europe and the US. Drive Video Recorders are used for “field of view support” (such as rear view cameras or panoramic support systems) or

“image identification” that are used for detecting obstacles and car lanes (such

as car lane support systems or high-beam automatic sensing systems). All of them are part of the vehicle safety system. In the product competition of

professional PND products, we not only need competence in the GPS units, the

brightness of monitors, energy saving design, and waterproof design all require intensive technology integration from upstream to downstream. Additionally,

smart phones with Apps will chip away some consumers. How we can compete

with various software companies is another problem we face in consumer products.

(III) Technology and R&D overview 1. Committed R&D expense

In thousands of New Taiwan Dollars

Year Item

2012 2013Q1 IFRS consolidation

(Note)

Research and development expense

1,644,480 658,829

Note: up to the quarter before the publication of the annual report.

2. Successfully developed technology or product in the most recent year or up to the publication date of the annual report

As a response to the development trends of global wireless communications, mobile communications, and cloud computing, MiTAC’s main R&D strategy is controlling the development schedule of new technology and products, and launching new technology products whenever possible with the R&D talent pool in Taiwan, China, and the US. We follow the product specification set by technology leaders in mainstream markets and create our own technology through R&D. We can also roll out products that meet market demand to control business opportunities. The diversity of our products, the completeness of our product series, well-integrated upstream and downstream supply chain, and global manufacturing locations make up our competitiveness. (1) Significant achievements are as follows:

a. We launched the first server with ARM architecture processor platform – the MiATC GFX Server System. That server synthesized resources from MiTAC, global leading silicon intellectual property firm ARM, US semiconductor powerhouse Marvell Technology Group Ltd., and Ubuntu open operating system provider Canonical Limited of Isles of Man, UK. It will effectively provide a more effective and more power efficient server system on the current server operating system.

b. We formed corporate cooperative alliance with leading brands in the industry. We introduce high efficiency processor technology and provide servers and workstations so that we can become a leading brand in channel sales.

c. We integrate cloud smart solutions and Smart GPS device and integrate our brand-new SoLoMo (Social, Local, Mobile) user experience into navigation service. We offer these products to users eager to discover local information.

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Meanwhile, such smart solution is also a solution designed to integrate on-board education, entertainment, and mobile internet service platform.

(2) Products a. Cloud Computing products series

1. Servers: Due to the rise in cloud computing and demand from data centers, MiTAC has launched a series of single, duo, and quad processor servers with its R&D capability built up over the years and its excellent R&D team. With system integration technology, MiTAC has researched and developed various high density/low energy use servers based on the green/energy saving requirements to lower the Total Cost of Ownership (TCO) when our customers build their server farms. In the future, aside from continuing to invest in the x86 area, we will also commit our resources in the development of ARM-based products.

2. Storage device: Responding to the demand for massive data transmission and storage brought about by cloud computing, and the extent of growth in the storage device market, MiTAC continues to commit its the R&D team to develop storage device technology and products, which include 4U/60Bays products with SAS6G transmission interface and JBOD/RBOD products that are in compliance with SBB 2.0 requirements.

3. At Computex, TYAN unveiled a full range of high density power-saving, energy-efficient cloud products, including: high density cloud computing products, the TYAN Yellow River series; high storage capacity cloud computing product, the TYAN TN series; and even more energy-saving cloud computing products, the TYAN FM65 series micro servers.

4. At SC `12, TYAN performed a firepower display with high power computing (HPC) and cloud computing product series, including the TYAN FT48-B7055 server, which was equipped with LSI Nytro™ MegaRAID® application acceleration card, NVIDIA Tesla K20 graphics processor. This server provides outstanding Data Transmission and Data Migration capabilities.

5. Mid and high end workstations: featuring single and duo Intel and AMD x86 processors.

6. All-In-One highly integrated LCD computer with 21.5” and 23.6” screens with various convenient user interface such as embedded touch screen, webcam, and VoIP communication.

7. In 2012, our company formed a strategic cooperation with Intel and launched the world’s first standard platform for channel customers, the Thin Mini-ITX. We continued to introduce new-generation products in 2013, which features a back cover design that requires only one screw, allowing channel or system firms to better manage cost and making customization easy. The innovative design manifests itself in multimedia, green/energy saving, and sensing technology.

8. Thin-client computer: We provide highly integrated terminal thin-client computers with fan-less design. They come in desktop, portable, and All-in-one formats. In terms of platforms, we are promoting two major types: X86 and SOC.

b. Mobile communication products 1. Mio Drive Video Recorders 388, which is equipped with specially designed optical filter lens that can effectively eliminate glint inside the vehicle and accomplish better traffic video quality. It is embedded with GPS speed sensing alert that can raise safe driving awareness among

40

drivers. 2. At Taipei Cycle exhibition 2013, we unveiled the newest Mio Cyclo 500. Aside from uniquely crafted software and apps, it appeals to cyclists with a slimmer and shorter profile and can wirelessly connect to the internet to update its maps.

3. Magellan Smart GPS: It is the first revolutionary personal navigation service with which users of the service can receive Location Based Service (LBS) real time. The cloud system is capable of integrating smart phones, PCs, and navigation device. Users can access individual navigation cloud data through wireless transmission.

(IV) Long- and short-term business development plan 1. Cloud computing product series

(1) Short-term business development plan: In terms of product strategy, we continue with cooperative development and production plans with existing customers or chip manufacturers in workstations, servers, and storage device. The Chinese demand for servers has been growing in recent years. MiTAC has been aggressively seeking systems integration firms with whom it can build a cooperative relationship for the long run, or a local firm that can provide cash flows and logistics management in order to offer the convenience of real-time service to our customers.

(2) Long-term business development plan: In terms of product strategy, we continue to develop new products in servers and storage device markets and make such development our dynamism for business growth for the next three years. In terms of business strategy, we expand the scope of cooperation with leading server customers in the world, ranging from module shipment to full-system shipment, from low-end to high-end, from individual product line to multiple product line. We aim for long-term, stable cooperation. To this end, we need to improve the capability and speed of product development, control over production quality and delivery date, global supply chain integration, and global logistics and service. These factors can secure MiTAC’s position as a major server system ODM.

2. Mobile communication product series (1) Short-term business development plan: Mobile handheld and digital family

markets are at the initial growing stage. In the short run, our company will operate with market development condition and focus on channels and ODM operation in European and US markets. We will actively develop niche products and explore customers in different areas. Mobile handheld and digital product lines integrate SoLoMo (Social, Location, Mobile) user experience and develop revolutionary and competitive products. We will offer service with high added-value to our customers with innovative and professional product planning, R&D design, and production capability. We will improve our overall effectiveness and raise customer satisfaction. On the basis of bonding with existing customers and increasing brand loyalty, we will integrate personal cloud, social media content, and Point of Interest content. On top of these, we will actively develop customers in different fields to explore new business with niche products.

(2) Long-term business development plan: Our long-term business development strategy calls for expanding our scope and exploring emerging markets in Asia-Pacific, China, Russia, and the Middle East. We will adapt to the changes and needs of different age groups with diversified products. Through our brands and B2B strategy and integrating user experience of Mio, Magellan, and Navman products, we integrate life, health, sports and leisure, and navigation

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service products to allow customers access to real-time information whether they are moving, running, or driving. This strategy will guide MiTAC to the field of cloud service.

II. Market and an overview of production and sales

(I) Market analysis 1. Geographic location of the sales of the company’s major products


Regions 2012

America 14,484,327

Europe 5,351,234

Asia, Australia, Africa 8,354,704

Taiwan 245,638

Total 28,435,903

2. Market share

Based on MIC AISP intelligence consulting service survey, with server shipment of Taiwanese ODM firms as the body of data, in Q4 2012 MiTAC ranked third in both whole unit and motherboard shipment.

In terms of mobile communication products, MiTAC’s car electronics brands rank firmly in top three in terms of market share.

3. Future supply and demand in this market and growth outlook (1) Cloud computing product segment

As signals of economic recovery become clearer and businesses are more willing to make IT investments, the demand for servers has returned. Major international server firms have increased the orders they place to Taiwanese ODMs. Global server shipment showed about 4% average growth.

In light of increased shipment and declining average sales price, recently major international server firms committed themselves to lower production cost and increase product competitiveness and market share. As a result, energy efficiency and lower cost have become the opportunity for future products of these firms. Aside from the new-generation Atom low power consumption processors launched by Intel, ARM also disclosed its schedule for entry into the server industry. The end goal of various technological changes was saving energy and reducing cost. In the future, as computing continues to migrate to server end and energy cost surges, we expect that corporations will gradually emphasize the requirement of server energy consumption. Our company rolled out various server products under the TYAN brand. We adopted six-core or twelve-core technology with newest manufacturing process from entry-level to high-end servers. They support DDRIII, and some products can even support high-level graphics processing units (GPUs). Therefore, our company has suitable products that can help users create a hardware platform, whether the customer needs it for the server room, large computing center, database center, cloud computing center, infrastructure, or government construction projects. These markets will become the focus of our company’s operation in the X86 server market.

(2) Mobile Communication product business With the development of cloud industry, more and more smart terminal

products are used, and their development have been accelerated. Whether they are smart phones, tablet computers, or even any related products with display screens – for example, in-car AV device, watches, glasses – they could be the next smart terminal product with explosive potential. The application of mobile terminal products will be more and more diversified, and more and more people

42

will connect themselves to cloud-related apps. Users will number by hundreds of millions! Our company take SoLoMo as our central usage concept and actively develop cross-platform, cross-content product applications to satisfy the wide variety of consumer tastes.

4. Competitive niche, positive and negative factors for the prospects of our development, and our corresponding strategy

With the advance of cloud application, MiTAC not only controls hardware design and manufacturing capabilities in the cloud arena, it will also integrate global R&D in hardware and software, engineering automation, manufacturing design, and after-sale service into a new operation model to accomplish higher customer satisfaction and competitive advantage, in order to break through the low margin PC contract manufacturing doldrums. (1) Competitive niche

The niches in the wireless communication industry and products are: exploring consumer niche products in the market, investing in R&D of innovative software-hardware integration, maintaining low cost, stable quality, high process yield, quick volume production, inventory management, purchase of key components, adequate logistics support, close cooperation with channel partners in all regions, and strong finances. MiTAC’s niches are as follows: A. Customer demand and control of the market: We grow with location based

service markets. MiTAC jointly explore and invest in markets with regional software and hardware customers to understand terminal demand. MiTAC is also negotiating cooperation plans with various world-class information and communication firms so that it can fully grasp market trends, seize fluctuations in the market, and explore new products.

B. Cooperation with world-class software and hardware firms to secure the supply of material: This advantage includes the support of software firms in software development and the source of key components.

C. Research and development capability: Many of our products lead the market and win international awards, earning “number one” ranks

D. Ceaseless advancement of quality and the expansion of production capacity: We have accumulated years of embedded product software-hardware integration technology, which is a major advantage in design and manufacturing.

E. Through existing regional channel market partners and group global logistics and service network, we can provide more complete customer service.

(2) Favorable factors in development A. A supply chain that integrates internet infrastructure

With our distribution and sales model that is coupled with the development and operation of global e-commerce, MiTAC has developed a model that offers direct production, distribution, and sales for high-priced products, thereby massively increasing shipping efficiency.

B. Global e-manufacturing model After a few years of trials with our logistics model, MiTAC’s e-manufacturing structure is becoming more and more adequate. We have formed a global manufacturing model with division of labor: Taiwan, Australia, and the US concentrate on R&D and design, combined with the modules and semi-finished goods produced by production bases in Mainland China, and joined by the BTO/CTO assembly centers in the US. This combination is our global manufacturing model with division of labor. Components and systems with low level and long transportation

43

time are manufactured in China; main components with high unit price are procured from production bases worldwide. Such global division of labor and integration have turned MiTAC from a regional organization to an international e-manufacturer with global R&D, engineering, manufacturing, and distribution structure.

C. Expand the development of products with high added-value To follow the future trend of wireless IP communication-computer synthesis, MiTAC will continue to form strategic alliances with leading international firms to jointly explore markets. MiTAC possesses spectacular innovative design, R&D, production, and manufacturing integration capabilities in the GPS market and launched various mobile navigation/communication products ahead of the market. For example, in 2012 MiTAC launched Magellan smart GPS that combined cloud service and integrated location based service (LBS), audio-video-navigation (AVN), mobile TV GPS, and outdoor navigation device.

D. Maintaining growth momentum in the market Other than continuing to invest resources in major markets such as North America and Europe, intensified exploration of markets with enormous growth potential in GPS, such as Asia-Pacific, and emerging markets such as China, Japan, and Eastern Europe will be focus points of development.

E. E-supply chain Due to MiTAC’s global production needs and product segregation for regional products at the request of customers, MiTAC not only strove for the design modularization of main components, but also aligned itself with the e-commerce capability of upstream firms, with a hope of achieving global real-time shipment to reduce operational risks, reduce inventory, and offer service of in-time shipment for customers.

(3) Negative factors for the prospects of our development and our corresponding strategy A. Cutthroat competition: Competition comes from cell phones and on-board

navigation and a/v systems. After all major firms successively committed themselves to the R&D, manufacturing, and production of GPS products, the pressure on the price grew fiercer by the day. The average retail price of PND after 2010 has dropped to below US$ 100. Additionally, PND has been integrated with wireless communication products, and smart phones with built-in GPS have become the norm for retail sales. This feature will steal the market away from PNDs more decisively. Our corresponding strategies are as follows: (a) Improve the integration between PNDs and on-board information

application. Differentiate our PNDs from smart phones with GPS functions.

(b) Emphasize R&D and innovation. Improve our result from R&D. Reduce product development cycle. Maintain our ability to launch new products. In addition, we will localize our products, and make them more diversified, differentiated, mass-produced to ensure we have an edge in our products and profit.

(c) Improve the satisfaction of our customer from design in the upstream to mass-production to logistics. We seek strategic alliance with major firms in the world.

(d) We use our global logistics model and establish an entire set of material planning, value chain, and logistics infrastructure.

B. Key components are still controlled by overseas manufacturers. We need

44

further experience in the integration of software and hardware Our corresponding strategy (a) Maintain good supply chain relationship with overseas manufacturers

of key components. We will also do our best to develop talent that is capable of integrating software and hardware in operating platform and communication components.

(b) Diversify the supply channel of key components: we seek more sources of suppliers and secure the source of our suppliers and competitive pricing. We seek to establish good interaction with domestic firms that are already producing or planning to produce key components to maximize our choices.

(c) Gain an advantage with the size of our orders: As the system products are selling well and we have received orders from major OEM/ODM firms, we believe that we can lower our purchase costs enormously because of the size of our orders.

(II) Important applications and production process for main products 1. The functions of major products

Product type Major purpose and functions

Workstations Graphical computing tool for designers

Servers Data computing tool for businesses

Storage Data storage tool for businesses

Desktop PCs For personal, family, school, and company use to manufacture, educate, wireless transmission in home video entertainment and share multi-media information.

Mobile Communication Devices Audio Video Navigation, consumer electronics (sports, fitness training, and driving navigation), fleet management solutions, cloud service applications.

2. Production Process

IQC

inspection

SMT Auto

Insertion

Visual

inspection

AOI/AXI

test

Manual

Insertion

System

assembly

Substrate OQA

inspection

Visual

inspection

Substrate

repair Substrate

solder

Aging test Package Package

inspection Finished

products

45

(III) Supply of key components

Component name Origin Supply status

CPU Original Maker: US., Korea Good

HDD Original Maker: US., Japan Increasingly stable

DRAM Original Maker: US., Japan, Korea, Taiwan Good

Flash Original Maker: US., Japan, Korea, Taiwan Good

PCB Original Maker: Taiwan, US, China Good

LCD panels Original Maker: Taiwan, Korea, Japan, China

Good

CHIPSET Original Maker: Taiwan, US, Korea Good

CDROM Original Maker: Taiwan, Korea, Japan Good

MODEM Original Maker: Taiwan Good

Camera Module Original Maker: Taiwan, Korea, Japan Good

Battery Pack Original Maker: Taiwan, Korea, Japan, China

Good

(IV) Major suppliers and clients in the last two years 1. Major Suppliers Information for the Last Two Calendar Years


2011 2012 2013Q1 IFRS consolidation

Item Name Amount Percent (%)

Relation with the issuer

Name Amount Percent (%)


Name Amount Percent (%) Relation with the issuer

1

MiTAC Computer (Shun De) Ltd.

10,532,923 35 Note 1

MiTAC Computer (Shun De) Ltd.

8,921,915 38 Note 1 Supplier A 707,671 10 None

2

MiTAC Computer (Kunshan) Co., Ltd. (Note 2)

3,901,149 13 Note 1

MiTAC Computer (Kunshan) Co., Ltd. (Note 2)

2,849,305 12 Note 1 Others 6,082,263 90

3 Others 15,761,437 52 Others 11,997,205 50

Net purchase

30,195,509 100 Net purchase

23,768,425 100 Net purchase 6,789,934 100

All variations take into consideration The Company’s production and marketing policies, raw material demands, suppliers’ prices, actual delivery, and quality in each year. Note 1: The Company’s indirectly held investee accounted using the equity method. Note 2: Transactions with MiTAC Computer (Kunshan) Co., Ltd. were conducted through Mio International Ltd. located in another country. Note 3: The 2011 and 2012 ROC individually reported amount and the 2013Q1 IFRS consolidated amount

2. Major Clients Information for the Last Two Calendar Years In thousands of New Taiwan Dollars

2011 2012 2013Q1 IFRS consolidation

Item Name Amount Percent (%)






1

MiTAC Information Systems Corporation

6,479,209 19 Note 1

MiTAC Information Systems Corporation

6,513,179 23 Note 1 Customer E

3,577,357 43 None

2 Customer E 4,947,480 15 None Customer E 3,374,910 12 None Others 4,700,015 57

3 MiTAC Logistics Corporation

3,657,971 11 Note 1 MiTAC Logistics Corporation

2,434,798 9 Note 1

4 Others 18,543,303 55 Others 16,113,016 56

Net sales 33,627,963 100 Net sales 28,435,903 100 Net sales 8,277,372 100

All variations take into consideration future market trends, product demands, industry prospect, R&D technology, profit margins, and customers’ contracts. Note 1: The Company’s indirectly held investee accounted using the equity method. Note 2: The 2011 and 2012 ROC individually reported amount and the 2013Q1 IFRS consolidated amount

46

(V) Production volume and value in the last two years In thousands of New Taiwan Dollars/ unit

Production volume value Year

Main items

2011 2012

Capacity Volume Value Capacity Volume Value

Computer & communication products

11,297,292 5,672,678 27,438,685 8,770,155 4,468,134 21,416,600

Note: These figures listed above include overseas processing work

(VI) Sales volume and value in the last two years In thousands of New Taiwan Dollars/ unit

Sales volume value Year

Main items

2011 2012

Local Export Local Export

Capacity Value Capacity Value Capacity Value Capacity Value

Computer & communication products

98,810 247,216 5,692,108 33,380,747 103,226 245,638 4,635,709 28,190,265

(VII) KPI of MiTAC 1. The cost of labor required for average revenue in the last two years

In thousands of New Taiwan Dollars 2011 2012

Revenue 33,627,963 28,435,903 Labor cost 1,580,727 1,641,076 Labor /revenue 5% 6%

2. Per employee revenue in the last two years

In thousands of New Taiwan Dollars 2011 2012

Revenue 33,627,963 28,435,903 Number of employees 1,282 1,269 Revenue/no. of employees 26,231 22,408

3. Financial structure, liquidity analysis, and operational indicators in the last two years

2011 2012

Debt ratio (%) 37.84 31.42

Current ratio (%) 133.66 136.90

Quick ratio (%) 105.84 110.35

A/R turnover rate (times) 3.08 3.00

Inventory turnover rate (times) 5.41 5.18

47

Six. Financial Position

I. Condensed Balance Sheet and (comprehensive) Income Statement for five years

(I) Condensed Balance Sheet – IFRS (consolidated) Currency: Thousands of New Taiwan Dollars

Year Item

March 31, 2013 (reviewed by CPA)

Current assets 20,409,655

Property, Plant and Equipment 5,202,129

Intangible assets 605,146

Other assets 15,597,623

Total assets 41,814,553

Current liabilities

Before distribution 11,360,118

After distribution Undistribution

Non-Current liabilities 578,824

Total liabilities



Attributable to the shareholder’s equity of the parent company

Equity attributable to owners of parent

Capital 15,298,349

Additional paid-in capital 4,444,535

Retained earnings



Other equity Other equity

Treasury Stock Treasury shares

Non-Controlling Interest Non-Controlling Interest

Total equity Before distribution 29,875,611


(II) Condensed Balance Sheet – ROC Finance and Accounting Standards (individual)


Year Item

Financial information for the past five years

2008 2009 2010 2011 2012

Current assets 23,797,940 24,967,050 22,663,207 23,292,252 18,373,341

Funds and Long-term Investment

22,253,488 22,597,108 20,648,995 21,772,257 21,924,050

Fixed assets 2,196,827 1,782,672 1,772,017 1,698,537 1,640,259

Intangible assets 613,095 1,894,511 649,040 519,232 389,424

Other assets 1,257,969 1,372,991 1,288,682 1,160,501 1,111,722

Total assets 50,119,319 52,614,332 47,021,941 48,442,779 43,438,796

Current liabilities

Before distribution

18,244,889 19,358,928 15,498,179 17,425,207 13,420,519

After distribution 18,550,093 19,587,854 15,727,633 17,651,504 Undistribution

Long-term liabilities 240,500 1,500,000 1,900,000 750,000 --

Other liabilities 507,968 151,224 91,764 156,542 232,190

Total liabilities

Before distribution

18,993,357 21,010,152 17,489,943 18,331,749 13,652,709


Capital stock 15,354,393 15,361,724 15,375,192 15,297,359 15,298,299

Capital surplus 4,169,505 4,153,640 4,361,988 4,398,329 4,471,454

Retained earnings

Before distribution

10,968,317 10,952,275 9,854,316 9,831,538 10,157,012


Unrealized gain or loss on financial instruments

(406,451) 539,949 642,145 65,819 177,616

48

Cumulative translation adjustment

1,649,701 1,206,095 (92,140) 1,019,187 329,116

Total shareholders' equity

Before distribution

31,125,962 31,604,180 29,531,998 30,111,030 29,786,087

After distribution 30,820,758 31,375,254 29,302,544 29,884,733 Unappropriated

49

(III) Condensed Comprehensive Income Statement – IFRS (consolidated) In: thousands of New Taiwan Dollars Year

Item

2013, Q1 (reviewed by CPA)

Revenue 8,277,372

Gross profit 1,119,852

Operating income (loss) (331,069)

Non-Operating Income and Expenses 210,288

Income (Loss) before income tax (120,781)

Net Income (Loss) from the continuing department (150,023)

Loss from the discontinued department -

Net Income (Loss) (150,023)

Other comprehensive income (after tax) 516,022

Total comprehensive income (loss) 365,999

Net income (loss), attributable to owners of parent (149,727)

Net income (loss), attributable to Non-controlling interests

(296)

Comprehensive income (loss), attributable to owners of parent

366,295

Comprehensive income (loss), attributable to Non-controlling interests

(296)

EPS (0.10)

(IV) Condensed Income Statement – IFRS (individual) In: thousands of New Taiwan Dollars

Year

Item

Financial data for five years

2008 2009 2010 2011 2012

Revenue 60,809,425 58,039,415 49,642,411 33,627,963 28,435,903

Gross profit 4,718,214 4,107,767 3,294,635 2,234,065 2,452,399

Operating Income (588,485) (33,913) (248,087) (789,257) (559,625)

Non-operating income 1,433,674 465,950 656,438 1,193,237 1,397,500

Non-operating expense (209,745) (55,927) (1,104,695) (93,776) (126,844)

Income from operations of continued segments - before tax

635,444 376,110 (696,344) 310,204 711,031

Income from operations of continued segments - after tax

459,289 289,162 (823,682) 253,204 590,405

Income from discontinued departments

- - - - -

Extraordinary profit or loss - - - - -

Cumulative effect of accounting principle changes

- - - - -

Net income 459,289 289,162 (823,682) 253,204 590,405

EPS Before retrospection 0.31 0.19 (0.55) 0.17 0.40

After retrospection 0.31 0.19 (0.55) 0.17 Undistribution

(V) Names and audit opinions of CPAs for the past five years

Year CPA Firm CPA's Name Auditing Opinions

2012 PricewaterhouseCoopers,

Taiwan Liu Yin-Fe, Lin Yu-Kuan

Modified unqualified opinion


Taiwan Liu Yin-Fe, Lin Yu-Kuan Unqualified opinion


Taiwan Liu Yin-Fe, Lin Yu-Kuan Unqualified opinion


Taiwan Lin Yu-Kuan, Wang

Wei-Chen Unqualified opinion

50

2008 Pricewaterhouse Coopers Lin Yu-Kuan, Wang

Wei-Chen Unqualified opinion

II. Financial analysis for the past five years

(I) Financial analysis – IFRS (consolidated) Year

Analysis items

2013, Q1 (reviewed by CPA)

(Note 1)

Financial structure (%)

Ratio of liabilities to assets Financial structure (%)

Ratio of long-term capital to property, plant and equipment

585.42

Solvency(%)

Current ratio Solvency(%)

Quick ratio 119.27

Times interest earned ratio -

Operating ability (Note 2)

A/R turnover (turns) Operating ability

(Note 2)

Average collection period 63

Inventory turnover (turns) 3.65

A/P turnover (turns) 5.10

Average days in sales 100

Property, plant and equipment turnover (turns) 6.83

Total assets turnover (turns) 0.78

Profitability

Return on total assets (%) Profitability

Return on equity (%) (0.50)

Ratio to issued capital (%)

Operating Income (2.16)

Net profit before tax (0.79)

Profit ratio (%) (1.81)

EPS ($) (0.10)

Cash flow

Cash flow ratio (%) Cash flow

Cash flow adequacy ratio (%) 129.71

Cash reinvestment ratio (%) 3.20

Leverage Operating leverage -Leverage

Financial leverage -

Note 1: to the end of the quarter before this report was printed. Note 2: The operating capacity in Q1 2013 has been converted to capacity for the full year for comparison purposes.

51

(II) Financial analysis – IFRS (individual)

YearAnalysis items

Financial analysis for five years

2008 2009 2010 2011 2012

Financial structure (%)

Ratio of liabilities to assets

Financial structure

(%) 39.93 37.19 37.84 31.42

Ratio of long-term capital to fixed assets

1,427.81 1,857.00 1,773.79 1,816.91 1,815.93

Solvency (%) Current ratio

Solvency (%) 128.98 146.23 133.66 136.90

Quick ratio 91.95 93.23 113.67 105.84 110.35

Times interest earned ratio 5.88 9.46 - 5.99 11.91

Operating ability

A/R turnover (turns) Operating ability 4.47 4.00 3.08 3.00

Average collection period 87 82 91 119 122

Inventory turnover (turns) 7.14 6.91 6.78 5.41 5.18

A/P turnover (turns) 5.21 5.21 4.91 4.09 3.56

Average days in sales 51 53 54 67 70

Fixed assets turnover (turns)

27.41 29.17 27.93 19.37 17.03

Total assets turnover (turns) 1.08 1.13 0.99 0.70 0.61

Profitability

Return on total assets (%) Profitabili

ty 0.63 (1.60) 0.63 1.40

Return on shareholders' equity (%)

1.41 0.92 (2.69) 0.84 1.97

Ratio to issued capital (%)

Operating Income (3.83) (0.22) (1.61) (5.15) (3.65)

Net profit before tax 4.14 2.45 (4.52) 2.02 4.64

Profit ratio (%) 0.76 0.50 (1.65) 0.75 2.07

EPS ($)

Before retrospective adjustment 0.31 0.19 (0.55) 0.17 0.40

After retrospective adjustment 0.31 0.19 (0.55) 0.17 Undistribution

Cash flow

Cash flow ratio (%) Cash flow 5.59 14.28 - 20.03

Cash flow adequacy ratio (%)

126.67 135.10 137.12 203.99 212.64

Cash reinvestment ratio (%) - 2.37 6.31 - 8.16

Leverage Operating leverage Leverage - - - -

Financial leverage - - - - -

Root causes of changes in each financial ratio in 2011 and 2012 (the changes under 20% are exempt from analyses) 1. The decrease in the current year net operating loss and the increase in the investment income under equity method resulted in the increase of the net income before tax and in turn raised the times interest earned ratio.

2. The decrease in the current net operating loss and the increase in the investment income under the equity method resulted in the increase of the net income before tax and profitability ratios compared tothe prior period.

52

1. Financial structure (1) Ratio of liabilities to assets= Total liabilities / Total assets. (2) Ratio of long-term capital to fixed assets (Property, Plant and Equipment) = (Shareholders'

equity (Total Equity)+ Long-term liabilities (Non-Current liabilities) )/ Fixed assets (Property, Plant and Equipment) net.

2. Solvency (1) Current ratio = Current assets / Current liabilities. (2) Quick ratio = (Current assets - Inventory-Prepayments) / Current liabilities. (3) Times interest earned ratio= Net profit before interest and tax / Interest expenses.

3. Operating ability (1) Receivables (including accounts receivable and notes receivable arising from operations)

turnover = Net sales / Average receivables (including accounts receivable and notes receivable arising from operations) balances.

(2) Average collection period = 365 / Accounts receivable turnover (3) Inventory turnover = Cost of goods sold / Average inventory amount. (4) Payables (including accounts payable and notes payable arising from operations) turnover =

Cost of goods sold / Average payables (including accounts payable and notes payable arising from operation) balances.

(5) Average days in sales = 365 / Inventory turnover. (6) Fixed assets (property, plant, and equipment) turnover = Net sales / Average net fixed assets

(property, plant, and equipment) balances. (7) Total assets turnover = Net sales / Average total assets.

4. Profitability (1) Return on total assets = [Net Income or Loss + Interest expense × (1 - Tax rate)] / Average

total assets. (2) Return on shareholders' equity = Net Income or Loss / Average shareholders' equity (Total

Equity). (3) Ratio to issued capital = Net Income or Loss / Net sales. (4) Earnings per share = (Net income (Net income (loss), attributable to owners of parent)

- Preferred dividends) / Weighted average number of shares issued. 5. Cash flow

(1) Cash flow ratio = Cash flow from operating activities / Current liabilities. (2) Cash flow adequacy ratio = Net cash flow from operating activities for the previous 5 years /

(Capital expenditure + Inventory increase + Cash dividends) for the previous 5 years. (3) Cash flow reinvestment ratio = (Cash flow from operating activities-Cash dividends) /

(Gross fixed asset (Property, Plant and Equipment) + Long term investments + Other assets (Other non-current assets) + Working capital).

6. Leverage (1) Operating leverage = (Net revenue – Variable costs) / Operating Income. (2) Financial leverage = Operating Income / (Operating Income-Interest expense).

53

III. Supervisors’ Report on Financial Statement of the most recent year

MITAC INTERNATIONAL CORP.

SUPERVISORS’ REPORT

Our Company’s financial statements for year 2012 (Januanry 1, 2012 to December 31, 2012), compiled and submitted by the Board of Directors, has been audited by Liu Yin-fei, CPA, and Lin Yu-kuan, CPA, of PwC. Along with the Business Report for year 2012 and the table for the distribution of earnings, the financial statements are deemed to be in compliance with laws such as Company Act after a review by supervisors. Therefore, we furnish this report for your review per regulations in Article 219 of Company Act.

To: General Meeting of Shareholders MiTAC International Corp., 2013

Supervisors: Arthur Chiao

Hu-Shi, Charles Ching

(Representative of Lien Hwa Industrial Co., Ltd.)

May 15, 2013

54

IV. The most recent audited consolidated financial statements

MiTAC INTERNATIONAL CORP. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS

DECEMBER 31, 2012 AND 2011

------------------------------------------------------------------------------------------------------

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

55

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR12000445

To the Board of Directors and Stockholders of MiTAC International Corp.

We have audited the accompanying consolidated balance sheets of MiTAC International Corp.

and its subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of

income, of changes in stockholder’s equity and of cash flows for the years then ended. These

financial statements are the responsibility of the Company’s management. Our responsibility is to

express an opinion on these financial statements based on our audits. The financial statements of

certain investee companies of MiTAC International Corp. and its subsidiaries accounted for

under the equity method as of and for the year ended December 31, 2012 were audited by

other auditors, whose reports thereon were furnished to us. Long-term equity investments in

these investee companies amounted to $6,077,976 thousand as of December 31, 2012, and the

related investment income amounted to $712,112 thousand for the year then ended. Our

opinion, insofar as it relates to the amounts included in the consolidated financial statements

and information disclosed in Note 11 relating to these long-term equity investments, is based

solely on the reports of other auditors.

We conducted our audits in accordance with the“Rules Governing the Examination of Financial

Statements by Certified Public Accountants”and generally accepted auditing standards in the

Republic of China. Those standards and rules require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement. An

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

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

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

presentation. We believe that our audits provide a reasonable basis for an opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all

material respects, the financial position of MiTAC International Corp. and its subsidiaries as of

December 31, 2012 and 2011, and the results of their operations and their cash flows for the years

then ended in conformity with the “Rules Governing the Preparation of Financial Statements by

Securities Issuers” and generally accepted accounting principles in the Republic of China.

MiTAC International Corp. expects to adopt International Financial Reporting Standards,

International Accounting Standards, and Interpretations developed by the International Financial

Reporting Interpretations Committee or the former Standing Interpretations Committee (collectively

referred herein as the IFRSs) as recognized by the Financial Supervisory Commission (FSC) and the

56

“Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be applied in

2013 in the preparation of consolidated financial statements of MiTAC International Corp. and its

subsidiaries starting from January 1, 2013. Information relating to the adoption of IFRSs by MiTAC

International Corp. is disclosed in Note 13 in accordance with Jin-Guan-Zheng-Shen-Zi Letter No.

0990004943 of the FSC, dated February 2, 2010. The IFRSs may be subject to changes during the

time of transition; therefore, the actual impact of IFRSs adoption on MiTAC International Corp. and

its subsidiaries may also change.

PricewaterhouseCoopers, Taiwan

March 27, 2013

------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

57

MiTAC INTERNATIONAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

DECEMBER 31, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

2012 2011 2012 2011

ASSETS LIABILITIES AND STOCKHOLDER’S EQUITY

Current Assets Current Liabilities

Cash and cash equivalents (Note 4 (1)) $ 8,710,292 $ 9,178,900 Short-term loans (Notes 4 (12) and 6) $ 2,689,783 $ 6,675,514

Financial assets at fair value through profit or loss-current Financial liabilities at fair value through profit or loss-current 20,618 64,197

(Note 4 (2)) 4,316 44,392 (Note 4 (13))

Available-for-sale financial assets – current (Note 4 (3)) 628,099 447,836 Accounts payable 5,906,251 6,207,571

Held-to-maturity financial assets -current (Note 4(4)) - 335,646 Accounts payable – related parties (Note 5) 169,560 431,456

Notes receivable – net 167 2,310 Income tax payable (Note 4 (21)) 76,523 1,152,419

Accounts receivable – net (Note 4 (6)) 6,622,842 7,667,199 Accrued expenses 2,934,978 3,536,272

Accounts receivable – related parties (Notes 4 (6) and 5) 36,192 65,338 Other payables (Note 5) 258,567 281,186

Other receivables (Note 5) 129,948 263,908 Receipts in advance 206,811 311,293

Other financial assets – current (Note 6) 14,341 3,104,104 Current portion of long-term debts (Note 4 (14)) - 500,000

Inventories - net (Note 4 (7)) 6,866,615 8,904,425 Deferred income tax liabilities-current (Note 4 (21)) - 10,518

Prepayments 295,959 390,659 Provision for product warranty 521,997 691,557

Deferred income tax assets – current (Note 4 (21)) 357,779 480,836 Other current liabilities 563,823 526,121

23,666,550 30,885,553 13,348,911 20,388,104

Long-term Liabilities

Long-term Investments Long- term loans (Note 4 (14)) - 750,000

Available-for-sale financial assets – non-current Other Liabilities

(Note 4 (3)) 763,323 742,470 Accrued pension payable (Note 4 (15)) 93,767 91,360

Financial assets carried at cost – non-current (Note 4 (5)) 1,525,695 1,548,488 Deposit in 8,176 11,223

Long-term investments accounted for under the equity Deferred income tax liabilities – non current (Note 4 (21)) 117,120 41,363

method (Note 4 (8)) 10,922,591 10,802,020 Other liabilities-other-non current 27,656 28,832

13,211,609 13,092,978 246,719 172,778

Total Liabilities 13,595,630 21,310,882

Property, Plant and Equipment - net Stockholder’s Equity

(Notes 4 (9) , 5 and 6) 4,512,012 5,052,309 Common stock (Note 4 (16)) 15,298,299 15,297,359

Capital reserve (Note 4 (17)) 4,471,454 4,398,329

Intangible Assets (Note 4 (10)) Retained earnings (Note 4 (18))

Patents 389,424 519,232 Legal reserve 2,826,071 2,800,751

Other intangible assets 401,598 455,670 Special reserve 139,361 28,104

791,022 974,902 Unappropriated earnings 7,191,580 7,002,683

Unrealized gain or loss on financial instruments 177,616 65,819

Other Assets Cumulative translation adjustments 329,116 1,019,187

Refundable deposits 40,173 63,762 Treasury stock (Note 4 (20)) ( 647,410 ) ( 501,202 )

Deferred charges 162,005 219,353 Equity attributable to shareholders of the parent 29,786,087 30,111,030

Deferred income tax assets – non-current (Note 4 (21)) 29,484 150,574 Minority interest 1,911 -

Others assets-other-non current (Note 4 (10)) 970,773 982,481 Total Stockholder’s Equity 29,787,998 30,111,030

1,202,435 1,416,170

Commitments and Contingent Liabilities (Note 7)

Significant Subsequent Event (Note 9)

TOTAL ASSETS $ 43,383,628 $ 51,421,912 TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY $ 43,383,628 $ 51,421,912

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated march 27,2013.

58


CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31,

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT EARNINGS PER SHARE)

2012 2011

Operating revenues-net (Note 5) $ 44,507,809 $ 46,304,150

Operating costs (Note 5) ( 38,404,907 ) ( 39,953,086 )

Gross profit 6,102,902 6,351,064

Operating expenses (Note 5)

Selling expenses ( 2,538,643 ) ( 2,950,505 )

Administrative expenses ( 1,419,936 ) ( 1,634,341 )

Research and development expenses ( 2,642,845 ) ( 2,755,192 )

( 6,601,424 ) ( 7,340,038 )

Operating loss ( 498,522 ) ( 988,974 )

Non-operating income and gains

Interest income 162,343 174,051

Investment income accounted for under the equity method (Note 4 (8))

878,210

971,158

Dividend income 122,214 128,643

Gain on disposal of property, plant and equipment 10,156 1,951

Gain on disposal of investments 42,184 19,855

Foreign exchange gain, net 43,253 -

Gain on valuation of financial assets (Note 4 (2)) - 22,380

Gain on valuation of financial liabilities (Note 4 (13)) - 13,044

Other income (Note 5) 306,322 363,971

1,564,682 1,695,053

Non-operating expenses and losses

Interest expense ( 87,867 ) ( 141,730 )

Foreign exchange loss, net - ( 4,040 )

Impairment loss (Note 4 (5)) ( 6,974 ) ( 17,793 )

Loss on valuation of financial assets (Note 4 (2)) ( 35,047 ) -

Loss on valuation of financial liabilities (Note 4 (13)) ( 17,969 ) -

Other losses ( 34,044 ) ( 17,788 )

( 181,901 ) ( 181,351 )

Income before income tax 884,259 524,728

Income tax expense (Note 4 (21)) ( 294,343 ) ( 271,524 )

Consolidated net income $ 589,916 $ 253,204

Attributable to:

Equity holders of the Company $ 590,405 $ 253,204

Minority interest loss ( 489 ) -

$ 589,916 $ 253,204

Before

income tax

After

income tax

Before

income tax

After

income tax

Basic earnings per share (in NT dollars) (Note 4 (22))

Consolidated net income attributable to the Company $ 0.48 $ 0.40 $ 0.21 $ 0.17

Diluted earnings per share (in NT dollars) (Note 4 (22))

Consolidated net income attributable to the Company $ 0.47 $ 0.39 $ 0.20 $ 0.16

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

See report of independent accountants dated march 27,2013.

59

MiTAC INTERNATIONAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

FOR THE YEARS ENDED DECEMBER 31, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Retained Earnings

2011

Common Stock

Capital Reserve

Legal Reserve

Special Reserve

Unappropriated Earnings

Cumulative Translation Adjustments

Unrealized Gain or Loss on Financial Instruments

Treasury Stock

Minority Interest

Total

Balance at January 1, 2011 $15,375,192 $ 4,361,988 $ 2,800,751 $ - $ 7,053,565 ( $ 92,140 ) $ 642,145 ( $ 609,503 ) $ - $ 29,531,998

Distribution of 2010 earnings:

Special reserve - - - 28,104 ( 28,104 ) - - - - -

Cash dividends - - - - ( 229,454 ) - - - - ( 229,454 )

Exercise of employee stock options 22,167 3,855 - - - - - - - 26,022

Employee compensation plan - employee stock options - 149,460 - - - - - - - 149,460

Consolidated net income for 2011 - - - - 253,204 - - - - 253,204

Capital reserve due to change in ownership of long-term investments

-

( 5,859 )

-

-

( 4,697 )

-

-

-

-

( 10,556 )

Recognition of unrealized gain or loss on available-for-sale financial assets

-

-

-

-

-

- ( 576,326 )

-

- ( 576,326 )

Cash dividends received by subsidiaries from the Company

-

3,470

-

-

-

-

-

-

-

3,470

Cumulative translation adjustments - - - - - 1,111,327 - - - 1,111,327

Treasury stock transactions ( 100,000 ) ( 114,585 ) - - ( 41,831 ) - - 108,301 - ( 148,115 )

Balance at December 31, 2011 $15,297,359 $ 4,398,329 $ 2,800,751 $ 28,104 $ 7,002,683 $ 1,019,187 $ 65,819 ( $ 501,202 ) $ - $ 30,111,030

2012

Balance at January 1, 2012 $15,297,359 $ 4,398,329 $ 2,800,751 $ 28,104 $ 7,002,683 $ 1,019,187 $ 65,819 ( $ 501,202 ) $ - $ 30,111,030

Distribution of 2011 earnings:

Legal reserve - - 25,320 - ( 25,320 ) - - - - -

Special reserve - - - 111,257 ( 111,257 ) - - - - -

Cash dividends - - - - ( 226,297 ) - - - - ( 226,297 )

Exercise of employee stock options 940 101 - - - - - - - 1,041

Employee compensation plan - employee stock options - 100,689 - - - - - - - 100,689

Consolidated net income for 2012 - - - - 590,405 - - - ( 489 ) 589,916

Capital reserve due to change in ownership of long-term investments

-

( 31,082 )

-

-

( 38,634 )

-

-

-

-

( 69,716 )

Recognition of unrealized gain or loss on available-for-sale financial assets

-

-

-

-

-

- 111,797

-

- 111,797

Cash dividends received by subsidiaries from the Company

3,417

-

-

-

-

-

-

-

3,417

Cumulative translation adjustments - - - - - ( 690,071 ) - - - ( 690,071 )

Treasury stock transactions - - - - - - ( 146,208 ) - ( 146,208 )

Change in minority interest - - - - - - - - 2,400 2,400

Balance at December 31, 2012 $15,298,299 $ 4,471,454 $ 2,826,071 $ 139,361 $ 7,191,580 $ 329,116 $ 177,616 ( $ 647,410 ) $ 1,911 $ 29,787,998

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated march 27,2013.

60


CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

2012 2011

Cash flows from operating activities:


Adjustments to reconcile consolidated net income to net cash

provided by operating activities:

(Gain) loss on inventory obsolescence and market value decline ( 245,791 ) 242,992

(Reveral of allowance for doubtful accounts) bad debts expense ( 2,356 ) 9,865

Depreciation 595,520 830,369

Amortization 383,691 414,429

Loss on impairment of financial assets carried at cost – non-current

6,974

17,793

Gain on disposal of patent right - ( 1,220 )

Loss (gain) on valuation of financial liabilities 17,969 ( 13,044 )

Loss (gain) on valuation of financial assets 35,047 ( 22,380 )

Long-term investment income accounted for under the equity method

( 878,210 )

( 971,158 )

Cash dividends received from long-term investments accounted for under the equity method

165,429

76,092

Gain on disposal of property, plant and equipment, net ( 10,156 ) ( 1,951 )

Gain on disposal of investments ( 42,184 ) ( 19,855 )

Employee compensation plan - employee stock options 100,689 149,460

Changes in assets and liabilities:

(Increase) decrease in:

Notes receivable 2,143 885

Accounts receivable 730,273 2,328,523

Other receivables 148,830 6,300

Inventories 2,114,642 44,240

Prepayments 94,700 149,607

Deferred income tax assets 244,147 ( 41,353 )

Accounts payable ( 72,791 ) ( 2,117,177 )

Income tax payable ( 1,075,896 ) 10,472

Accrued expenses ( 601,339 ) ( 449,646 )

Other payables ( 22,619 ) ( 77,610 )

Receipts in advance ( 104,482 ) ( 30,513 )

Accrued pension payable 2,407 1,939

Other current liabilities 37,702 ( 45,125 )

Provision for product warranty ( 169,560 ) 25,367

Deferred income tax liabilities 65,239 41,760

Net cash provided by operating activities 2,109,934 812,265

(CONTINUED)

61

MiTAC INTERNATIONAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED DECEMBER 31, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

2012 2011

Cash flows from investing activities: (Increase)decrease in other financial assets $ 3,020,506 ( $ 1,436,426 ) Increase in available-for-sale financial assets ( 184,041 ) ( 5,722 ) Increase in financial assets carried at cost – non-current ( 51,600 ) ( 23,000 ) Decrease in financial assets carried at cost – non-current, net of

cash receive from return of capital 63,821

80,558

Proceeds from disposal of financial assets carried at cost – non-current

-

43,690

Proceeds from disposal of available-for-sale financial assets 14,153 - Decrease (increase) in financial assets in held-to-waturity 335,646 ( 335,646 )

Proceeds from disposal of long-term investments 263,605 37,880 Acquisition of property, plant, equipment and other assets ( 145,005 ) ( 110,293 ) Proceeds from disposal of property, plant, equipment and other

assets 14,274

221,040

Increase in deferred charges ( 158,737 ) ( 200,382 ) Proceeds from disposal of patents 14,870 44,610 Decrease (increase) in refundable deposits, net 23,630 ( 4,593 ) Proceeds from acquisition of subsidiaries ( 8,050 ) - Net cash provided by (used in) investing activities 3,203,072 ( 1,688,284 ) Cash flows from financing activities: (Decrease) increase in short-term debts, net ( 3,916,556 ) 2,081,001

Repayment of long-term loans ( 1,250,000 ) ( 900,000 ) Increase (decrease) in deposit-in ( 3,047 ) 1,032 Exercise of employee stock options 1,041 26,022 Cash dividends paid ( 222,880 ) ( 225,985 ) Purchase of treasury stocks ( 146,208 ) ( 148,115 ) Net cash (used in) provided by financing activities ( 5,537,650 ) 833,955 Effects of changes in exchange rates ( 243,964 ) 294,269 Net (decrease) increase in cash and cash equivalents ( 468,608 ) 252,205 Cash and cash equivalents at beginning of year 9,178,900 8,926,695 Cash and cash equivalents at end of year $ 8,710,292 $ 9,178,900 Supplemental disclosures of cash flow information: Cash paid for interest $ 166,694 $ 137,629 Cash paid for income tax $ 1,060,853 $ 228,567 Cash received from acquisition of subsidiaries

Acquisition of subsidiaries $ 8,050 $ - Non-cash assets acquired ( 2,510 ) - Liabilities assumed 116 - Minority interest 2,400 - Cash received from acquisition of subsidiaries $ 8,056 $ -

Investing activities partially received in cash Decrease in property and equipment Add: property and equipment receivables at beginning of year

$ 14,274 -

$ 23,390 197,650

Cash received $ 14,274 $ 221,040 Investing activities partially received in cash Decrease in patents $ - $ 59,480 Add: Patents receivables at beginning of year 14,870 - Less: patents receivables at end of year - ( 14,870 ) Cash received $ 14,870 $ 44,610

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

See report of independent accountants dated march 27,2013.

62


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION

The Company

MiTAC International Corp. (“the Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.) on December 8, 1982 and started its operations on December 15, 1982. The main activities of the Company include the design, manufacture, sales and services of micro-computers, mobile communications and related products as well as other related investments. As of December 31, 2012, the Company and its subsidiaries had 7,383 employees.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements of the Company and its subsidiaries (collectively referred herein as the “Group”) are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and accounting principles generally accepted in the Republic of China. The Group’s significant accounting policies are summarized below:

1) Basis for preparation of consolidated financial statements

A. All majority-owned subsidiaries and controlled entities are included in the consolidated financial statements. The Company prepares consolidated financial statements on a quarterly basis. Significant inter-company transactions and assets and liabilities arising from inter-company transactions are eliminated.

B. Subsidiaries included in the consolidated financial statements and their changes in 2012 and 2011.

Subsidiary Investor Main activities

Ownership (%)

December 31,

Description

2012 2011

Tsu Fung Investment Corp. MiTAC International Corp. General investments 100% 100%

Silver Star Developments Ltd. MiTAC International Corp. General investments 100% 100%

Foreground Technology Ltd. MiTAC International Corp. General investments 100% 100%

System Glory International Ltd. Silver Star Developments Ltd. General investments 100% 100%

Pacific China Corp. Silver Star Developments Ltd. General investments 100% 100%

Magicmate Group Ltd. Silver Star Developments Ltd. General investments 100% 100%

Best Profit Ltd. Silver Star Developments Ltd. General investments 100% 100%

Sky Universe Enterprise Ltd. Silver Star Developments Ltd. General investments 100% 100%

Great Rich Ltd. Silver Star Developments Ltd. General investments 100% 100%

MiTAC Star Service Ltd. Pacific China Corp. General investments 100% 100%

Software Insights Ltd. Pacific China Corp. General investments 100% 100%

Start Well Technology Ltd. Pacific China Corp. General investments 100% 100%

Dynamic Star Investments Ltd. Pacific China Corp. General investments 100% 100%

Huge Extent Ltd. Pacific China Corp. General investments 100% 100%

Bright Crown Management Ltd. Pacific China Corp. General investments 100% 100%

MiTAC Cooperative U.A. Great Rich Ltd. General investments - 100% Note 2

Booming Enterprises Inc. Best Profit Ltd. General investments 100% 100%

Top Sheen Enterprises Ltd. Best Profit Ltd. General investments 100% 100%

MiTAC Netherlands B.V. MiTAC Cooperative U.A. General investments - 100% Note 2

Strength Value Ltd. Foreground Technology Ltd. General investments 100% 100%

63

Subsidiary Investor Main activities Ownership (%)

December 31,

Description

2012 2011

DLC Technology Corp. MiTAC International Corp. Research, development and manufacture of computer software, sale of own-produced products and related technical advisory services

100% 100%

Mio Technology Corp. MiTAC International Corp. Sale of communication products and related after-sale services

100% 100%

Tyan Computer Corp.(USA) Foreground Technology Ltd. Sale of computer peripherals, hardware/software and related products

100% 100%

Mio Technology GMBH MiTAC Europe Ltd. Sale of communication products and related after-sale services

100% 100%

MiTAC U.S.A. Inc. Silver Star Developments Ltd. Post-sale services and related technical advisory services

- 100% Note 5

MiTAC Japan Corp. Silver Star Developments Ltd. Sale of communication products, computer peripherals, hardware/software and related products and related after-sale services

100% 100%

MiTAC Benelux N.V. Silver Star Developments Ltd. Sale of communication products and related after-sale services

100% 100% Note 3

MiTAC (U.K.) Ltd. Silver Star Developments Ltd. Post-sale services and related technical advisory services

100% 100%

MiTAC Pacific (H.K.) Ltd. Silver Star Developments Ltd. Sale of computer peripherals, hardware/software and related products

100% 100%

Mio International Ltd. Silver Star Developments Ltd. Sale of communication and related products

100% 100%

MiTAC Australia Pty Ltd. Silver Star Developments Ltd. Sale of communication products and related after-sale services

100% 100%

Navman Technology NZ Ltd. Silver Star Developments Ltd. Sale of communication products and related after-sale services

100% 100%

MiTAC Computer (Kunshan) Ltd.

Start Well Technology Ltd. Manufacture of computers, computer peripherals, hardware/software and related products and sale of own-produced products

100% 100%

MiTAC Service (ShangHai) Co.,Ltd.

Pacific China Corp. Testing, maintenance and display of computer components and related technical advisory services and after-sale services

100% 100%

MiTAC Computers (Shunde) Ltd.

MiTAC Star Service Ltd. Manufacture of computer frame, motherboard, interface card, display, power supply, keyboard, related metal stamping parts and plastic parts and maintenance of motherboard

100% 100%

MiTAC Research (Shanghai) Ltd.

Software Insights Ltd. Research, development and manufacture of computer software, sale of own-produced products and related technical advisory services

100% 100%

MiTAC Technology (Kunshan) Co., Ltd.

Dynamic Star Investments Ltd. Testing, maintenance and display of computer components and related technical advisory services and after-sale services

100% 100%

Mio Technology Korea Magicmate Group Ltd. Sale of communication products and related after-sale services

- 100% Note 8

Mio Technology (Chengdu) Ltd.

Mio International Ltd. Development and manufacture of software, sale of own-produced products and related technical services

- 100% Note 1

64

Subsidiary Investor Main activities Ownership (%)

December 31,

Description

2012 2011

Mio Technology Ltd. Mio International Ltd. Sale of communication products and related after-sale services

100% 100%

Mio Technology USA Ltd. Booming Enterprises Inc. Sale of communication products and related after-sale services

- 100% Note 1

MiTAC Europe Ltd. Best Profit Ltd. Sale of communication products and related after-sale services

100% 100% Note 4

MiTAC Logistics Corp. Sky Universe Enterprise Ltd. Sale of computer peripherals, hardware/software and related products

100% 100%

MiTAC Logistic Service (Kunshan) Ltd.

Bright Crown Management Ltd. Agency of freight transport, export and import trading and warehousing services

100% 100%

MiTAC Digital Corp. Top Sheen Enterprises Ltd. Sale of communication products and related after-sale services

100% 100%

MiTAC Information Technology Ltd.

Bright Crown Management Ltd. After-sale maintenance, testing and technical advisory services of computers, communication products and consumer electronic products; establishment of customer service centers; customer data processing, analysis and integrated services and business administration services

100% 100%

MiTAC Information Systems Corp.

Sky Universe Enterprise Ltd. Assembling and sale of computer peripherals, hardware/software and related products

100% 100%

MiTAC Innovation (Kunshan) Ltd.

Software Insights Ltd. Research and development of calculator, server, mobile phone, PDA and GPS, and technical transfer, technical advisory and technical services of related R&D products

100% 100%

Mitac Electronics (Foshan), Co., Ltd.

Mitac Computer (Shunde) Ltd. Manufacture of computer mainboard, motherboard and adapter card

100% - Note 6

Suiio Inc. MiTAC International Corp. Information/software services and retail business

70% - Note 7

Note 1：The company was disposed in the second quarter of 2012.

Note 2：The company was disposed in the third quarter of 2012.

Note 3：Changed its name from Mio Technology Benelux N. V. to MiTAC Benelux N. V. in the first quarter of 2012.

Note 4：Changed its name from Mio Technology UK Ltd. to MiTAC Europe Ltd. in the first quarter of 2012.

Note 5：The company was disposed in the second quarter of 2012 and merged in MiTAC Logistics Corp.

Note 6：The company was established in the third quarter of 2012.

Note 7：The company was newly invested in the fourth quarter of 2012.

Note 8：The company was disposed in the fourth quarter of 2012.

C. Majority-owned subsidiaries excluded in the consolidation: None. D. Adjustment for subsidiaries with different balance sheet dates:

Some of Silver Star Development Ltd.’s subsidiaries adopted accounting periods that are different from the Company’s accounting period. However, as the difference is not over 3 months, the financial reports of these subsidiaries are consolidated without any adjustment.

E. Special operating risks in foreign subsidiaries: None.

65

F. Nature and extent of the restrictions on fund remittance from subsidiaries to the parent company: None.

G. Contents of subsidiaries’ securities issued by the parent Company: Refer to Note 4 (20)

H. Information on convertible bonds and common stock issued by subsidiaries: None

2) Translation of financial statements of foreign subsidiaries

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

3) Foreign currency transactions

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

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

C. When a gain or loss on a non-monetary item is recognized directly in equity, any exchange component of that gain or loss shall be recognized directly in equity. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss shall be recognized in profit or loss. However, non-monetary items that are measured on a historical cost basis are translated using the exchange rate at the date of the transaction.

4) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

a) Assets arising from operating activities that are expected to be realized or consumed, or are intended to be sold within the normal operating cycle;

b) Assets held mainly for trading purposes;

c) Assets that are expected to be realized within twelve months from the balance sheet date;

d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

a) Liabilities arising from operating activities that are expected to be paid off within the normal operating cycle;

b) Liabilities arising mainly from trading activities;

c) Liabilities that are to be paid off within twelve months from the balance sheet

66

date;

d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date.

5) Cash equivalents

Cash equivalents refer to highly-liquid, short-term investments with the following characteristics:

A. Investments that can be readily converted into known amount of cash;

B. Investments of which the values are not significantly affected by the fluctuations in interest rates.

The preparation of cash flow statement is based on cash and cash equivalents.

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

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

B. These financial instruments are subsequently remeasured and stated at fair value, and the gain or loss is recognized in profit or loss. The fair value of listed stocks, OTC stocks and closed-end mutual funds is based on latest quoted fair prices of the accounting period. The fair value of open-end and balanced mutual funds is based on the net asset value at the balance sheet date.

C. When a derivative is an ineffective hedging instrument, it is initially recognized at fair value on the date a derivative contract is entered into and is subsequently remeasured at its fair value. If a derivative is a non-option derivative, the fair value initially recognized is zero.

7) Available-for-sale financial assets

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

B. The financial assets are remeasured and stated at fair value, and the gain or loss is recognized in equity, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in equity shall be recognized in profit or loss. The fair values of listed stocks, OTC stocks and closed-end mutual funds are based on latest quoted fair prices of the accounting period. The fair values of open-end and balanced mutual funds are based on the net asset value at the balance sheet date.

C. If there is any objective evidence that the financial asset is impaired, the cumulative loss that had been recognized directly in equity shall be transferred from equity to profit or loss. When the fair value of an equity instrument subsequently increases, impairment losses recognized previously in profit or loss shall not be reversed. When the fair value of a debt instrument subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss recognized in profit or loss.

8) Held-to-maturity financial assets

A. Held-to-maturity financial asset is recognized or derecognized using trade date accounting and is stated initially, at its fair value plus transaction costs that are

67

directly attributable to the acquisition of the financial asset.

B. The financial assets are carried at amortized cost.

C. If there is any objective evidence that the financial asset is impaired, the impairment loss is recognized in profit or loss. If the fair value of the financial asset subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss.

9) Financial assets carried at cost

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

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

10) Notes, accounts, and other receivables

A. Notes and accounts receivable are claims resulting from the sale of goods or services. Receivables arising from transactions other than the sale of goods or services are classified as other receivables. Notes, accounts and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

B. The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. If such evidence exists, a provision for impairment of financial asset is recognized. The amount of impairment loss is determined based on the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the fair value of the asset subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not result to the asset’s carrying amount being greater than its amortized cost had no impairment loss been recognized. Subsequent recoveries of amounts previously written off are recognized in profit or loss.

11) Inventories

A. The perpetual inventory system is adopted for inventory recognition. Inventories are stated at standard cost, which is adjusted to actual cost at year-end.

B. At the end of period, inventories are evaluated at the lower of cost or net realizable value, and the individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value should be based on the estimated selling price in the normal course of business, net of estimated costs of completion and estimated selling expenses.

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

A. Long-term equity investments in which the Group holds more than 20% of the investee company’s voting shares or has the ability to exercise significant influence on the investee’s operational decisions are accounted for under the equity method. The excess of the initial investment cost over the acquired net

68

asset value of the investee attributable to goodwill is no longer amortized, effective January 1, 2006. Such goodwill is tested for impairment when there is indication that it is impaired. Retrospective adjustment of the amount of goodwill amortized in previous year(s) is not required. The excess of acquired net asset value of investee over the initial investment cost is allocated proportionately and applied as a reduction to the book values of identifiable non-current assets, and any remaining amount of such excess after this allocation is credited to extraordinary gains. However, negative goodwill occurred prior to December 31, 2005 is continuously amortized. All majority-owned (50% or above ownership) subsidiaries and controlled entities are accounted for under the equity method and are included in the consolidated financial statements on a quarterly basis.

B. For investments accounted for under the equity method, the Company recognizes investment gains or losses by quarter. The unrealized profits and losses from intercompany transactions between the Company and investee companies during the current year shall be eliminated.

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

13) Property, plant and equipment

A. Property, plant and equipment are stated at cost. Interest incurred on loans used to finance the construction of fixed assets is capitalized and depreciated accordingly.

B. Depreciation is calculated on a straight-line basis over the assets’ estimated useful lives. The useful lives of the fixed assets are 3 - 10 years, except for buildings, which are 3 - 55 years.

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

D. Idle assets are valued at the lower of book value or net realizable value (based on the appraised value by a real estate appraisal company) and shown as other assets. Rental assets are valued at cost and shown as other assets; current depreciation is recorded as non-operating expense.

14) Intangible assets

A. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition and reviewed for impairment testing annually.

B. Other intangible assets, mainly patent rights, technologies, customer relationships and non-compete agreements, are stated at cost and amortized on a straight-line basis over 5 ~ 10 years.

C. Land use right is stated at cost and amortized over the useful life of 50 years using the straight-line method.

15) Deferred charges

A. Telephone installation expenditure is amortized on a straight-line method over 5 years.

B. Mold expenses are amortized on a straight-line method over 2 years or the units-of-output method.

69

C. Software cost is amortized based on contract stipulations or a straight-line method over 5 years.

16) Impairment of non-financial assets

The Group recognizes impairment loss when there is indication that the recoverable amount of an asset is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell and value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction after deducting any direct incremental disposal costs. The value in use is the present value of estimated future cash flows to be derived from continuing use of the asset and from its disposal at the end of its useful life. When the impairment no longer exists, the impairment loss recognized in prior years shall be recovered.

The recoverable amount of goodwill, intangible assets with indefinite useful lives and intangible assets which have not yet been available for use shall be evaluated periodically. Impairment loss will be recognized whenever there is indication that the recoverable amount of these assets is less than their respective carrying amount. Impairment loss of goodwill recognized in prior years is not recoverable in the following years.

17) Pension plan

Under the defined benefit pension plan, net periodic pension costs are recognized in accordance with the actuarial calculations. Net periodic pension costs include service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets. Unrecognized net transition obligation is amortized on a straight-line basis over 15 years. Under the defined contribution pension plan, net periodic pension costs are recognized as incurred.

18) Warranty

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

19) Income tax

A. Income taxes are allocated on the inter- and intra-period basis. Over or under provision of prior years’ income tax liabilities is included in current year’s income tax.

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

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

20) Share-based payment - employee compensation plan

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

70

for Share-based Payment”.

B. For the grant date of the share-based payment agreements set on or after January 1, 2008, the Company shall measure the services received during the vesting period by reference to the fair value of the equity instruments granted and account for those amounts as payroll expenses during that period.

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

Effective January 1, 2008, pursuant to EITF 96-052 of the Accounting Research and Development Foundation, R.O.C., dated March 16, 2007, “Accounting for Employees’ Bonuses and Directors’ and Supervisors’ Remuneration”, the costs of employees’ bonuses and directors’ and supervisors’ remuneration are accounted for as expenses and liabilities, provided that such a recognition is required under legal or constructive obligation and those amounts can be estimated reasonably. However, if the accrued amounts for employees’ bonuses and directors’ and supervisors’ remuneration are significantly different from the actual distributed amounts resolved by the stockholders at their annual stockholders’ meeting subsequently, the differences shall be recognized as gain or loss in the following year. In addition, in accordance with EITF 97-127 of the Accounting Research and Development Foundation, R.O.C., dated March 31, 2008, “Criteria for Listed Companies in Calculating the Number of Shares of Employees’ Stock Bonus”, the Company calculates the number of shares of employees’ stock bonus based on the closing price of the Company's common stock at the previous day of the stockholders’ meeting held in the year following the financial reporting year, and after taking into account the effects of ex-rights and ex-dividends.

22) Revenues, costs and expenses

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

23) Treasury stock

A. When a company acquires its outstanding shares as treasury stock, the acquisition cost should be debited to the treasury stock account (a contra account under stockholders’ equity) if the shares are purchased.

B. Treasury stocks transferred to employees on or after January 1, 2008 are accounted for in accordance with R.O.C. SFAS No. 39, “Accounting for Share-based Payment”.

C. When a company’s treasury stock is retired, the treasury stock account should be credited, and the capital surplus- premium on stock account and capital stock account should be debited proportionately according to the share ratio. An excess of the carrying value of treasury stock over the sum of its par value and premium on stock should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings. An excess of the sum of the par value and premium on stock of treasury stock over its carrying value should be credited to capital surplus from the same class of treasury stock transactions.

D. The cost of treasury stock is accounted for on a weighted-average basis.

E. When the Company prepares its financial statements and recognizes investment income (loss), it treats the shares of the Company held by subsidiaries as treasury stocks and discloses the pro forma information in the statement of income assuming that the shares of the Company held by subsidiaries are regarded as investments instead of treasury stocks.

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24) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting period. Actual results could differ from those assumptions and estimates.

25) Business combination

The Group adopted the R.O.C. SFAS No. 25, “Accounting for Business Combination - Purchase Method” to account for any business combination transactions.

26) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

In accordance with R.O.C. SFAS No. 41, “Operating Segments”, segment information is disclosed in the consolidated financial statements rather than in the separate financial statements of the Company

3. EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

1) Notes, accounts and other receivables

Effective January 1, 2011, the Group adopted the amendments to R.O.C. SFAS No. 34, “Financial Instruments: Recognition and Measurement”. A provision for impairment (bad debts) of notes, accounts and other receivables is recognized when there is objective evidence that the receivables are impaired. This change in accounting principle had no significant effect on the financial statements for the year ended December 31, 2011.

2) Operating segments

Effective January 1, 2011, the Group adopted the newly issued R.O.C. SFAS No. 41, “Operating Segments” to replace the original R.O.C. SFAS No. 20, “Segment Reporting”. This change in accounting principle had no significant effect on consolidated net income and earnings per share for the year ended December 31, 2011.

4. DETAILS OF SIGNIFICANT ACCOUNTS

1) Cash and cash equivalents

December 31,

2012 2011

Cash:

Petty cash $ 1,803 $ 1,956

Checking and savings accounts 2,202,492 2,523,293

Time deposits 6,144,637 4,880,676

8,348,932 7,405,925

Cash equivalents:

Repurchase bonds 361,360 1,772,975

$ 8,710,292 $ 9,178,900

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2) Financial assets at fair value through profit or loss

December 31,

2012 2011

Current items:

Adjustment of financial assets held for trading

- Derivative financial instruments $ 4,316 $ 44,392

A. The Group recognized net loss of $35,047 and net gain of $22,380 for the years ended December 31, 2012 and 2011, respectively.

B. The trading items and contract information of derivatives are described in Note 11.

3) Available-for-sale financial assets

December 31,

2012 2011

Current items:

Beneficiary certificates $ 98,700 $ 5,700

Listed (TSE and OTC) stocks 559,234 468,193

Adjustments of available-for-sale financial assets ( 29,835 ) ( 26,057 )

$ 628,099 $ 447,836

Non-current items:

Listed (TSE and OTC) stocks $ 437,023 $ 444,124

Adjustments of available-for-sale financial assets 326,300 298,346

$ 763,323 $ 742,470

4) Held-to-maturity financial assets

December 31,

2012 2011

EURO/USD-linked instruments $ - $ 335,646

5) Financial assets carried at cost

December 31,

2012 2011

Non-current items:

Emerging stocks $ 862,992 $ 862,992

Unlisted stocks 662,703 685,496

$ 1,525,695 $ 1,548,488

A. The investments were measured at cost since its fair value cannot be measured reliably.

B. Harbinger Venture Capital Corp. had made a capital reduction in 2012 and 2011 and returned share capital of $49,173 and $42,149, respectively.

C. Silver Star Developments Ltd.’s investee, Budworth Investment Ltd., made a capital reduction in 2011 and returned share capital of $38,409.

D. Such stocks of listed company are subject to certain transfer restrictions pursuant to Article 43-8 of the Securities and Exchange Law.

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E. Silver Star Developments Ltd.’s investee, Global Strategic Investment Ltd., made a capital reduction in 2012 and returned share capital of $14,648.

F. The Company assessed that the investment value on its investee, Rasilent Systems, Inc. had been impaired and the probability of recovery was remote, thus, it recognized impairment loss of $17,793 on its investment in Rasilent Systems, Inc. for 2011.

G. The Company assessed that the investment value on its investee, G. Marso Electronics, Inc had been impaired and the probability of recovery was remote. Thus, it recognized impairment loss of $6,974 on its investment in G. Marso Electronics, Inc for 2012.

6) Accounts receivable - net

December 31,

2012 2011

Third parties $ 7,291,038 $ 8,929,058

Less: Allowance for sales return ( 520,570 ) ( 998,999 )

Allowance for doubtful accounts ( 147,626 ) ( 262,860 )

6,622,842 7,667,199

Related parties 36,192 65,338

$ 6,659,034 $ 7,732,537

7) Inventories – net

December 31,

2012 2011

Raw materials $ 4,236,569 $ 4,870,603

Work in process 416,215 540,967

Finished goods 3,342,129 4,989,497

7,994,913 10,401,067

Less: Allowance for obsolescence and market value decline

( 1,128,298 )

( 1,496,642 )

$ 6,866,615 $ 8,904,425

Expense and loss incurred on inventories for the years ended December 31, 2012 and 2011 were as follows: For the years ended

December 31,

2012 2011

Cost of goods sold $ 38,510,071 $ 39,646,501

Loss (gain) on market value decline ( 245,791 ) 242,992

Others 373,924 309,424

$ 38,638,204 $ 40,198,917

Due to some of the inventories which have been provided an allowance for market price decline in prior years were sold during the period, the Company reversed the related allowance for inventory loss.

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

A. Details of long-term equity investments are set forth below:

December 31,

2012 2011

Percentage Percentage

of direct of direct

Amount ownership Amount ownership

Equity method:

Getac Technology Corp. $ 3,866,325 32.71% $ 3,992,473 33.25%

3 Probe Technology Co., Ltd. 8,783 23.25% 9,196 23.13%

Lian Jie Investment Co., Ltd. 160,490 49.98% 142,855 49.98%

Loyalty Founder Enterprise Co., Ltd. 242,356 25.24% 213,559 25.24%

Shen-Tong Construction & Development Co., Ltd.

83,422

47.55%

83,545

47.55%

Harbinger II (BVI) Venture Capital Corp.

44,138

49.96%

49,438

49.96%

Mainpower International Ltd. 163,558 19.12% 167,984 19.12%

Synnex Corp. 6,077,976 15.86% 5,865,094 16.72%

Suzhou MiTAC Precision Technology Co., Ltd.

243,816

21.62%

248,236

21.62%

Harbinger Ruyi Venture Ltd. 31,727 28.57% 29,640 28.57%

$ 10,922,591 $ 10,802,020

B. Investment income (loss) accounted for under the equity method for the years ended December 31, 2012 and 2011 is set forth below:

For the years ended December 31,

Investee company 2012 2011

Equity method:

Getac Technology Corp. $ 119,563 $ 154,057

3 Probe Technology Co., Ltd. ( 462 ) ( 247 )

Lian Jie Investment Co., Ltd. 6,056 38,159

Loyalty Founder Enterprise Co., Ltd. 36,668 36,253

Shen-Tong Construction & Development Co., Ltd. ( 123 ) ( 111 )

Harbinger II (BVI) Venture Capital Corp. ( 4,898 ) 720

Mainpower International Ltd. 2,161 ( 4,414 )

Synnex Corp. 712,112 746,604

Suzhou MiTAC Preclusion Technology Co., Ltd. 3,119 ( 6,368 )

Harbinger Ruyi Venture Ltd. 4,014 6,505

$ 878,210 $ 971,158

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9) Property, plant and equipment - net

December 31,

2012 2011

Cost

Land $ 920,602 $ 920,902

Buildings 4,644,451 4,757,003

Machinery 2,987,749 3,236,282

Computer and communication equipment 345,943 390,652

Transportation equipment 66,325 68,572

Furniture and fixtures 662,599 653,270

Leasehold improvements 96,590 103,870

Other equipment 700,842 767,974

10,425,101 10,898,525

Accumulated depreciation ( 5,933,392 ) ( 5,862,179 )

Construction in progress and prepayments for equipment 20,303 15,963

Net book value $ 4,512,012 $ 5,052,309

No interest expense was capitalized for the years ended December 31, 2012 and 2011.

10) Intangible Assets

A.

For the year ended December 31, 2012

Patent rights and technologies

Other intangible assets (Note)

Total

Cost:

Book value, January 1, 2012 $ 908,657 $ 576,636 $ 1,485,293

Effects of exchange rate changes - ( 24,764 ) ( 24,764 )

Book value, December 31, 2012 908,657 551,872 1,460,529

Accumulated amortization:

Book value, January 1, 2012 ( 389,425 ) ( 120,966 ) ( 510,391 )

Amortization for current period ( 129,808 ) ( 38,730 ) ( 168,538 )

Effects of exchange rate changes - 9,422 9,422

Book value, December 31, 2012 ( 519,233 ) ( 150,274 ) ( 669,507 )

Net book value, December 31, 2012 $ 389,424 $ 401,598 $ 791,022


Patent rights and technologies

Other intangible assets (Note)

Total

Cost:

Book value, January 1, 2012 $ 908,657 $ 584,515 $ 1,493,172

Effects of exchange rate changes - ( 7,879 ) ( 7,879 )

Book value, December 31, 2012 908,657 576,636 1,485,293

Accumulated amortization:

Book value, January 1, 2012 ( 259,617 ) ( 119,905 ) ( 379,522 )

Amortization for current period ( 129,808 ) ( 38,346 ) ( 168,154 )

Effects of exchange rate changes - 37,285 37,285

Book value, December 31, 2012 ( 389,425 ) ( 120,966 ) ( 510,391 )

Net book value, December 31, 2012 $ 519,232 $ 455,670 $ 974,902

Note: Other intangible assets include customer relationships, non-compete agreements and land use rights.

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11) Other assets

December 31,

2012 2011

Land $ 808,963 $ 808,963

Building 105,933 108,967

Rental buildings, net 21,142 29,080

Others 34,735 35,471

$ 970,773 $ 982,481

12) Short-term loans

December 31,

2012 2011

Unsecured bank loans

Secured bank loans

$ 2,689,783

-

$ 2,689,783

$ 3,687,582

2,987,932

$ 6,675,514

Interest rates 0.692%~0.98% 0.64%~3.289%

13) Financial liabilities at fair value through profit or loss - current

December 31,

2012 2011

Current items:

Adjustment of financial liabilities held for trading

-Derivative financial instruments $ 20,618 $ 64,197

A. The Group recognized the net loss of $17,969 and a net gain of $13,044 for the years ended December 31, 2012 and 2011, respectively.

B. The trading items and contract information of derivatives are described in Note 1

14) Long-term loans

December 31,

Bank Due date 2012 2011

The Land Bank of Taiwan (LBOT)-led 10 bank consortium:

The last repayment due before April 22, 2014

$ - $ 1,250,000

Less: Current portion - ( 500,000 )

$ - $ 750,000

Interest rates - 1.5842%

Note : The loans had been totally repaid in June 2012.

Under the syndicated facility agreement, the Company should maintain the following financial ratios during the contract period based on its annual consolidated financial statements audited by independent accountants:

A. Current assets to current liabilities ratio of at least 100%;

B. Liabilities not exceeding 125% at December 31, 2009 and 110% at December 31, 2011 and 100% from December 31, 2012 to the end of contract;

77

C. When the Company fails to comply with any one of the above financial ratios, it should make financial ratio improvements within 5 months from May 1 of the year following the audited year (i.e. the consolidated financial statement year) and obtain a certificate from the independent accountants, showing that its financial ratios have improved and met the requirements within the prescribed period above. If its financial ratios have improved and met the requirements within the prescribed period, the Company is not considered to be in default on financial commitments; however, the interest rates of the loans charged to the Company shall be increased by an additional 0.20% per annum from the date of notification by the management bank to the day before the financial ratios’ improvements are completed.

15) Pension plan

A. The Company has a non-contributory and funded defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees. Under the defined benefit plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee.

B. Based on the actuarial assumptions for 2012 and 2011, the discount rate were 1.875% and 2%, respectively, the expected rate of return on plan assets were 1.875% and 2%, respectively, and both the rate of compensation increase were 2%.

C. The following sets forth the pension information based on the actuarial report:

a. Funded status of the pension plan:

December 31, (the measurement date)

2012 2011

Vested benefit obligation ( $ 97,558 ) ( $ 96,507 )

Non-vested benefit obligation ( 228,102 ) ( 218,827 )

Accumulated benefit obligation ( 325,660 ) ( 315,334 )

Effect of projected salary increase ( 87,846 ) ( 90,704 )

Projected benefit obligation ( 413,506 ) ( 406,038 )

Fair value of plan assets 243,445 251,089

Funded status ( 170,061 ) ( 154,949 )

Unrecognized gain 86,234 73,260

Accrued pension cost ( $ 83,827 ) ( $ 81,689 )

Vested benefit $ 120,165 $ 123,750

b. Net pension cost comprises the following:

2012 2011

Service cost $ 5,568 $ 5,063

Interest cost 8,121 9,818

Expected return on plan assets ( 5,107 ) ( 6,218 )

Amortization of unrecognized gain on plan assets

1,814

2,182

Net periodic pension cost $ 10,396 $ 10,845

78

D. Effective July 1, 2005, the Company established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act, covering all regular employees of R.O.C. nationality. Employees have the option to be covered under the New Plan. Under the New Plan, the Company and its subsidiary contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are portable upon termination of employment. Pensions are paid by monthly installments or in lump sum based on the accumulated balances of the employees’ individual pension accounts.

E. The Company’s mainland subsidiaries have a defined contribution plan. Monthly contributions are based on a certain percentage of employees' monthly salaries and wages to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China.

F. The pension costs were $82,330 and $82,737 in 2012 and 2011, respectively.

16) Capital

As of December 31, 2012, the Company′s authorized capital was $22,000,000, consisting of 2,200,000 thousand shares of common stock (including 250,000 thousand shares reserved for employee stock options), and the paid-in capital was $15,298,299 with a par value of $10 (in dollars) per share.

17) Capital reserve

Pursuant to the Company Law, capital reserve, including additional paid-in capital in excess of par and donation, shall be exclusively used to cover accumulated deficit or issuing new stock or cash to shareholders in proportion to their ownership when the Company has no accumulated deficit. However, pursuant to the R.O.C. Securities and Exchange Law, capital reserve arising from paid-in capital in excess of par value on issuance of common stock and donations can be capitalized once a year, provided that the Company has no accumulated deficit and the amount to be capitalized does not exceed 10% of the paid-in capital.

18) Retained earnings

A. Legal reserve

Pursuant to the Company Law, 10% of current year’s earnings, after payment of all taxes, shall be appropriated as legal reserve, until the total equals the issued share capital. Such reserve can only be used to offset accumulated deficit. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

B. Retained earnings

Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior year’s operating losses and then 10% of the remaining amount shall be set aside as legal reserve. Special reserve shall also be set aside pursuant to the decrees. After dividends are appropriated, at least 5% of the remainder may be appropriated as

79

employees’ bonus. Appropriation of the remainder plus prior year’s accumulated unappropriated retained earnings shall be proposed by the Board of Directors and resolved by the stockholders.

Earnings appropriation ratio and cash dividends ratio are decided by the Board of Directors, taking into account the Company’s financial structure, future capital requirements and profitability, and cash dividends shall account for at least 10% of the total dividends appropriated. Earnings appropriation ratio and cash dividends ratio are subject to adjustments once approved by the stockholders.

C. The appropriation of 2011 and 2010 earnings had been resolved at the stockholder’s meeting on June 12, 2012 and June 17, 2011, respectively. Details are summarized below:

2011 2010

Amount

Dividends per share (in dollars)

Amount

Dividends per share (in dollars)

Legal reserve $ 25,320 $ - $ 28,104 $ -

Special reserve 111,257 - - -

Cash dividends 226,297 0.15 229,454 0.15

Total $ 362,874 $ 0.15 $ 257,558 $ 0.15

(a) The amounts of directors’ and supervisors’ remuneration of 2011 and 2010 are $2,000 and $0, respectively, and employees’ bonus are $5,831 and $0, respectively. Employees’ bonus and directors’ and supervisors’ remuneration of 2011 and 2010 as resolved by the stockholder were in agreement with those amounts recognized in the 2011 and 2010 financial statements.

(b) The appropriation of 2011 and 2010 earnings had been resolved at the stockholder’s meeting and coincided with the proposal by the Board of Directors, on April 25, 2012 and April 25, 2011, respectively.

D. The estimated amounts of employees’ bonus and directors’ and supervisors’ remuneration of 2012 are $27,910 and $2,000, respectively, and are recognized as operating costs or operating expenses for 2012. The basis of estimates for employees’ bonus is based on a 5% percentage (as prescribed by the Company’s Articles of Incorporation) of net income in 2012 after taking into account the legal reserve and other factors.

The estimated amounts of employees’ bonus and directors’ and supervisors’ remuneration of 2011 are $5,831 and $2,000, respectively, and are recognized as operating cost or operating expenses for 2011. The basis of estimates for employees’ bonus is based on a 5% percentage (as prescribed by the Company’s Articles of Incorporation) of net income in 2011 after taking into account the legal reserve and other factors.

E. As of the audit report date, the Company had not yet held the meeting of Board of Directors to discuss the earnings distribution proposal for 2012. Information on the appropriation as resolved by the Board of Directors and approved by the stockholder will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

80

19) Share-based payment - employee compensation plan

A.As of December 31, 2012, the Company’s share-based payment transactions are set forth below:

Type of arrangement

Grant date

Quantity granted (in thousands of

shares)

Contract period

Vesting conditions

Actual resignation rate in the current

period

Estimated future resignation rate

Third stock option incentive plan

(Note 1)

2005.08.31 and

2006.03.10

3,279 (Note 4)

6 years 50% can be exercised after 2 years of grant

75% can be exercised after 3 years of grant


- -

Fourth stock option incentive plan

(Note 2)

2006.06.30 and

2007.03.19

1,117 (Note 4)

6 years ″ - -

Fifth stock option incentive plan

2006.12.07 and

2007.01.11

64,000 6 years ″ - -

Sixth stock option incentive plan

2007.07.30 and

2007.08.17

64,000 6 years ″ - -

Seventh stock option incentive plan

(Note 3)

2007.09.26 1,245 (Note 4)

6 years ″ - -

Eighth stock option incentive plan

2008.10.13 and

2008.10.27

85,000 6 years ″ 16.12% 15%

Ninth stock option incentive plan

2009.04.29 and

2009.07.03

43,000 6 years 25% can be exercised after 2 years of grant



17.86% 20%

Tenth stock option incentive plan

2009.10.05 and

2010.04.19 and

2010.05.06

95,000 6 years 30% can be exercised after 2 years of grant



9.35% 15~20%

Eleventh Option incentive plan

2012.10.11 39,000 6 years 50% can be exercised after 2 years of grant



- 5%

Note 1：Assumed second stock option incentive plan of Tyan Computer Technology Co., Ltd.

Note 2：Assumed third stock option incentive plan of Tyan Computer Technology Co., Ltd.

Note 3：Assumed fourth stock option incentive plan of Tyan Computer Technology Co., Ltd.

Note 4：According to the business merger agreement of Tyan Computer Technology Co., Ltd. could

be exchanged for one unit of the Company’s employee stock options.

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B. (a) A summary of the movements under the Company’s assumed stock option plan

of Tyan Computer Technology Co., Ltd. is set forth below:

December 31,

2012 2011

In thousands of shares

Weighted average exercisable price (in NT dollars)



Options outstanding at the beginning of the year

1,496

$ 19.41

2,043

$ 18.11

Options granted - -

Stock dividends or adjustment of number of options

-

-

Options exercised - -

Options revoked ( 521 ) ( 547 )

Options outstanding at the end of the year

975

19.45

1,496

19.41

Options exercisable at the end of the year

975

1,496

Options approved and not yet issued at the end of the year

-

-

(b) As of December 31, 2012, the summary of the outstanding stock option plan

was as follows:

Number of options outstanding at the end of the year Exercisable options at the end of the year

Range of exercise price (in NT dollars)


Expected weighted average residual years

Weighted average exercise price (in NT dollars)



$ 19.6 485 0.21 $ 19.6 485 $ 19.6

19.3 490 0.71 19.3 490 19.3

975 $ 19.45 975

82

C. (a) A summary of the movements under the Company’s fifth stock option is set forth below:

December 31, 2012 2011






260

$ 29.75

284

$ 29.85

Options granted - - Stock dividends or

adjustment of number of options

-

-

Options exercised - - Options revoked ( 130 ) ( 24 ) Options outstanding

at the end of the year

130

29.30

260

29.75


130

260


-

-

(b) As of December 31, 2012, the summary of the outstanding fifth stock option plan was as follows:







$29.3 130 0.03 $ 29.30 130 $ 29.30

D. (a) A summary of the movements under the Company’s sixth stock option is set forth below:

December 31, 2012 2011






250

$ 33.22

274

$ 33.31



-

-

Options exercised - - Options revoked - ( 24 ) Options outstanding


250

33.02

250

33.22


250

250


-

83

(b) As of December 31, 2012, the summary of the outstanding sixth stock option plan was as follows:








$31.3 and 34.6 250 0.60 $ 33.02 250 $ 33.02

E. (a) A summary of the movements under the Company’s eighth stock option plan is set forth below:

December 31,

2012 2011






67,012

$ 12.12

71,019

$ 12.11

Options granted - -

Stock dividends or adjustment of number of options

-

-

Options exercised ( 94 ) 11.07 ( 2,217 ) 11.74

Options revoked ( 1,267 ) ( 1,790 )

Options outstanding at the end of the year

65,651

11.92

67,012

12.12


65,651

50,260


-

-

(b) As of December 31, 2012, the summary of the outstanding eighth stock option plan was as follows:


Range of exercisable price (in NT dollars)






$ 11 and 12.8 65,651 1.8 $ 11.92 65,651 $ 11.92

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F. (a) A summary of the movements under the Company’s ninth stock option plan is set forth below:

December 31, 2012 2011






35,565

$ 13.60

38,106

$ 13.60



-

-

Options exercised - - Options revoked ( 571 ) ( 2,541 ) Options outstanding


34,994

13.40

35,565

13.60


17,497

8,891


-

(b) As of December 31, 2012, the summary of the outstanding ninth stock option plan was as follows:








$12.9 and 13.9 34,994 2.41 $ 13.40 17,497 $ 13.40

G. (a) A summary of the movements under the Company’s tenth stock option plan is set forth below:

December 31, 2012 2011






88,052

$ 13.83

93,500

$ 13.83



-

-

Options exercised - - Options revoked ( 15,696 ) ( 5,448 ) Options outstanding


72,356

13.56

88,052

13.83


32,310

-


-

-

85

(b) As of December 31, 2012, the summary of the outstanding tenth stock option

plan was as follows:








$12.9 and 14.2 72,356 3.05 $ 13.56 32,310 $ 13.61

H. (a) A summary of the movements under the Company’s eleventh stock option plan is set forth below:

December 31, 2012 2011






39,000

$ 10.15

-

$ -



-

-

Options exercised - - Options revoked - - Options outstanding


39,000

10.15

-

-


-

-


-

-

(b) As of December 31, 2012, the summary of the outstanding eleventh stock option

plan was as follows:








$ 10.15 39,000 5.78 $ 10.15 - $ -

86

I. The following sets forth the pro forma net income and earnings per share based on the assumption that the compensation cost is accounted for using the fair value method (the intrinsic value method) for the stock options granted before the effectivity of R.O.C. SFAS No. 39, “Accounting for Share-based Payment”:



Net income Net income stated in the statement of income

Pro forma net income

$ 590,405

590,405

$ 253,204

241,243

Basic EPS (in dollars)

EPS stated in the statement of income

Pro forma EPS

0.40

0.40

0.17

0.16

Diluted EPS (in dollars)

EPS stated in the statement of income

Pro forma EPS

0.39

0.39

0.16

0.15

(a) The Company assumed the employee stock options issued by Tyan Computer Technology Co, Ltd. as a result of the merger. The Company estimated the fair value of stock options as of grant date under the Black-Scholes option pricing model except for the grant date of September 26, 2007 which was under the Binomial option pricing model. The factor’s weighted-average information and fair value are listed as follows:

Grant date August 31, 2005

Grant date March 10, 2006

Dividend yield rate 0% 0%

Expected price volatility 50.00% 50.00%

Risk-free interest rate 2.00% 2.00%

Expected vesting period 6 years 6 years

Options granted (in shares) 3,422,000 667,000

Weighted-average fair value per share (in dollars)

12.44 12.46

87

Grant date June 30, 2006

Grant date March 19, 2007

Dividend yield rate 0% 0%

Expected price volatility 50 % 75%

Risk-free interest rate 2.00% 2.00 %

Expected vesting period 6 years 6 years

Options granted (in shares)


510,000

12.78

897,000

10.78

Grant date September 26, 2007

Dividend yield rate 0%

Expected price volatility 27.78%

Risk-free interest rate 2.52%

Expected vesting period 4.375 years

Options granted (in shares) 1,569,000


4.68

(b) The Company estimated the fair value of fifth stock option as of grant date under the Black-Scholes option pricing model. The factor’s weighted average information and fair value are listed as follows:

Grant date December 7, 2006

Grant date January 11, 2007

Dividend yield rate 0% 0% Expected price volatility 29.09% 28.59% Risk-free interest rate 1.83% 1.87% Expected vesting period 3.75 years 3.75 years Options granted (in shares) 32,000,000 32,000,000 Weighted-average fair value per

share (in dollars) 9.39 9.16

(c) The Company estimated the fair value of sixth stock option as of grant date under the Black-Scholes option pricing model. The factor’s weighted average information and fair value are listed as follows:

Grant date July 30, 2007

Grant date August 17, 2007

Dividend yield rate 0% 0% Expected price volatility 29.92% 29.92% Risk-free interest rate 2.44% 2.44% Expected vesting period 3.75 years 3.75 years Options granted (in shares) 32,000,000 32,000,000 Weighted-average fair value per

share (in dollars) 11.46 9.25

88

I. For the stock options granted after January 1, 2008 with the compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option pricing model. The weighted-average parameters used in the estimation of the fair value are as follows:

Type of arrangement Grant date

Stock price (in dollars)

Exercise price (in dollars)

Expected price

volatility (Note)

Expected vesting period

Expected dividend yield rate

Risk-free interest rate

Fair value per unit

(in dollars)

Eighth stock

option

incentive plan

2008.10.13

2008.10.27

$13.2

$11.35

$13.2

$11.35

28.37%

28.42%

3.47 years

3.47 years

0%

0%

1.96%

1.89%

$3.12

$2.67

Ninth stock

option

incentive plan

2009.04.29

2009.07.03

$14.3

$13.3

$14.3

$13.3

34.87%

34.36%

3.67 years

3.67 years

0%

0%

0.93%

1.02%

$3.92

$3.62

Tenth stock

option

incentive plan

2009.10.05

2010.04.19

2010.05.06

$13.9

$14.45

$13.10

$13.9

$14.45

$13.10

35.25%

30.04%

29.85%

3.61 years

3.61 years

3.61 years

0%

0%

0%

0.55%

0.75%

0.74%

$3.75

$3.40

$3.06

Eleventh stock

option

incentive plan

2012.10.11

$10.15

$10.15

36.14%

3.47 years 0% 0.88% $2.79

Note：In accordance with EITF 92-205, if the entity’s historical stock prices were

significantly abnormal, those prices shall be excluded from the reference values in calculating expected price volatility rate. The expected price volatility rate is determined based on the stock prices for the recent period that is as long as the expected vesting period of stock options, and taking into account the effect of earnings appropriation every year on stock price.

J. Expenses incurred on share-based payment transactions are shown below:

2012 2011

Equity-settled $ 100,689 $ 149,460

20) Treasury stock

A. Changes in the treasury stock for the years ended December 31, 2012 and 2011 are set forth below:

2012

(in thousands of shares)

Reason for reacquisition Beginning shares Addition Reduction Ending shares

To be reissued to employees 15,050 15,072 - 30,122

Company’s common shares held by

its subsidiaries, TFC Investment

Co., Ltd.

20,366 - - 20,366


its subsidiaries, SSDL

2,764 - - 2,764

2011

(in thousands of shares)

Reason for reacquisition Beginning shares Addition Reduction Ending shares

To be reissued to employees 10,000 15,050 (10,000) 15,050


its subsidiaries, TFC Investment

Co., Ltd.

20,366 - - 20,366


its subsidiaries, SSDL

2,764 - - 2,764

89

B. Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as treasury stock should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital reserve.

C. Pursuant to the R.O.C. Securities and Exchange Law, treasury stock should not be pledged as collateral and is not entitled to dividends before it is reissued to the employees.

D. Pursuant to the R.O.C. Securities and Exchange Law, treasury stocks should be reissued to the employees within three years and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholder’s equity should be retired within six months of acquisition. Treasury stocks totaling 10,000,000 shares that had been bought back by the Company to be reissued to the employees but were not reissued to the employees within three years were all retired. The change in shares had been registered. As of December 31, 2012, the shares bought back as treasury stock amounted to $294,324.

E. To enhance the Company’s credit rating and the stockholder’s equity, the Board of Directors resolved on December 28, 2012 to make the 17th repurchase of the Company’s shares from January 2, 2013 to March 1, 2013, with the estimated 20,000 thousand shares to be bought back at the price ranging between $9 and $12. As of the closing date, March 1, 2013, treasury stocks totaling 18,700 thousand shares were actually bought back by the Company with $205,505.

F. As of December 31, 2012, the total number of the Company’s shares held by its subsidiaries, Silver Star Developments Ltd., was 2,764 (in thousand shares) with an average book value of $77,002 and $27.86 (in dollars) per share and market value of $10.4 (in dollars) per share.

G. As of December 31, 2012, the total number of the Company’s shares held by its subsidiaries, Tsu Fung Investment Corp., was 20,366 (in thousand shares) with an average book value of $276,084 and $13.56 (in dollars) per share and market value of $10.4 (in dollars) per share.

H. In accordance with (2002) Tai-Cai-Zheng (1) Letter No. 170010, the Company sets aside special reserve for an amount equal to the excess of book value over market value of the Company’s shares held by its subsidiaries on balance sheet date multiplied by the share ownership. This part of special reserve set aside shall not be appropriated. When the excess above subsequently decreases, the special reserve shall be reversed to the extent of the amount decreased multiplied by the share ownership.

90

21) Income tax

A. Income tax expense and payable are reconciled as follows:

2012 2011

Income tax at statutory tax rate $ 229,341 $ 136,730

Tax effect of permanent differences 44,552 ( 35,344 )

Tax effect of investment tax credits 168,529 197,690

Loss carryforwards ( 70,034 ) ( 82,030 )

Estimated effects of income tax assessments by the Tax Authority on the following years’ income tax

43,905

85,767

Adjustment of prior year’s income tax ( 176,031 ) 29,436

Valuation allowance on deferred income tax assets and liabilities

54,081

( 60,725 )

Income tax expense 294,343 271,524

Net effect of deferred income tax liabilities ( 309,385 ) ( 407 )

Adjustment of prior year’s income tax 176,031 ( 29,436 )

Overdue tax assessed and approved by the Tax Authority

27,558

998,522

Prepaid income tax ( 30,386 ) ( 59,866 )

Translation adjustment ( 109,217 ) ( 27,918 )

Income tax payable - net $ 48,944 $ 1,152,419

Prepaid income tax $ 27,579 $ -

Income tax payable $ 76,523 $ 1,152,419

B. Deferred income tax assets and liabilities:

December 31,

2012 2011

Deferred income tax assets – current $ 540,369 $ 1,269,243

Deferred income tax liabilities – current - ( 10,518 )

Valuation allowance ( 182,590 ) ( 788,407 )

$ 357,779 $ 470,318

Deferred income tax assets – non-current $ 343,330 $ 1,587,004

Deferred income tax liabilities – non-current ( 117,120 ) ( 358,845 )

Valuation allowance ( 313,846 ) ( 1,118,948 )

( $ 87,636 ) $ 109,211

C. Components of deferred income tax assets and liabilities:

December 31, 2012 December 31, 2011

Amount Tax Effect Amount Tax Effect

Current:

Temporary differences

Provision for loss on obsolete inventories

$ 908,172

$ 172,631

$ 1,395,122

$ 301,539

Allowance for sales rebate 64,731 16,615 984,621 375,612

Unrealized warranty 446,663 80,969 621,333 122,596

Loss on uncollectible accounts - - 315,928 125,869

Others 325,838 58,615 960,223 154,775

Loss carryforward - - 14,420 9,805

Investment tax credits 211,539 168,529

Valuation allowance ( 182,590 ) ( 788,407 )

$ 357,779 $ 470,318

91


Amount Tax Effect Amount Tax Effect

Non-current:

Temporary differences

Unrealized investment gain ( $ 2,110,854 ) ( $ 358,845 ) ( $ 2,110,629 ) ( $ 358,845 )

Impairment of assets 398,368 67,722 398,368 67,723

Book-tax difference in depreciation 403,817 100,954 973,020 243,255

Others 702,356 138,264 699,112 140,259

Loss carryforward 1,316,027 223,725 2,777,790 923,984

Investment tax credits - 211,783

Valuation allowance ( 259,456 ) ( 1,118,948 )

( $ 87,636 ) $ 109,211

D. The Company is eligible for investment tax credits under the statute for Upgrading Industry as of December 31, 2012 as follows:

Item Total tax credits Unused tax credits Final year tax credits are due

Research and Development $ 216,947 $ 211,539 2013

E. As of December 31, 2012, the expiry date and income tax effect of the Company’s

unused loss carryforwards are as follows:

Year Occurred

Reporting income

Total tax credits

Unused tax credits

Final year tax credits are due

2011 (Amount approved)

$ 537,199 $ 91,324 $ 91,324 2020

2012 (Amount filed)

366,862 62,366 62,366 2021

2013 411,966 70,034 70,034 2022

(Amount estimated)

$ 223,724

F. As of December 31, 2012, the Company’s income tax returns through 2010 have been assessed and approved by the Tax Authority. The appeal and re-trial for its 2004 income tax returns for the issue on R&D investment tax credits were both dismissed.

G. The corporate income tax rate for MiTAC Research (Shanghai) Ltd. was 15% because it obtained the qualification for a national supportive high-tech enterprise on November 25, 2008; the corporate income tax rate for other Mainland China subsidiaries was 25% under the PRC tax regulations.

H. Unappropriated earnings

December 31,

2012 2011

Earnings earned in and after 1998

$ 7,191,580 $ 7,002,683

92

I.


Balance of stockholders’ tax credit account

$ 2,248,790

$ 1,439,632

2012 (estimated) 2011 (actual)

Ratio of deductible tax credit

31.27%

20.56%

22) Earnings per share


Amount Earnings per share (in dollars)

Income before income tax

Net income

Weighted Average Outstanding Common Shares (in thousands of shares)


Net income

Basic earnings per share:


Net income attributable to majority stockholders 711,031 590,405 1,482,794

$ 0.48

$ 0.40

Less: effect of dilutive potential common stocks issued by investee companies ( 15,006 ) ( 15,006 )

Effect of dilutive potential common stocks

Employee stock options - - 2,723

Net income attributable to common stock holders plus dilutive effect of common stock equivalents $ 696,025 $ 575,399 1,485,517

$ 0.47

$ 0.39

93


Amount Earnings per share (in dollars)


Net income

Weighted Average Outstanding Common Shares (in thousands of shares)


Net income

Basic earnings per share:


Net income attributable to majority stockholders 310,204 253,204 1,504,227

$ 0.21

$ 0.17

Less: effect of dilutive potential common stocks issued by investee companies ( 9,941 ) ( 9,941 )

Effect of dilutive potential common stocks

Employee stock options 642

Net income attributable to common stock holders plus dilutive effect of common stock equivalents $ 300,263 $ 243,263 1,504,869

$ 0.20

$ 0.16

a. The weighted-average outstanding common stock for 2012 and 2011 excluded

treasury stock.

b. The employee stock options had anti-dilution effect on earnings per share for the

years ended December 31, 2012 and 2011, so they are not included in the

calculation of diluted earnings per share.

23) Personnel expenses, depreciation and amortization

The personnel expenses, depreciation and amortization for 2012 and 2011 were as

follows:


Operating costs Operating expenses

Non-operating expenses Total

Personnel expenses $ 1,072,371 $ 3,951,558 $ - $ 5,023,929

Salaries 964,767 3,565,891 - 4,530,658

Labor and health insurance 63,650 230,957 - 294,607

Pension 3,097 79,233 - 82,330

Others 40,857 75,477 - 116,334

Depreciation 329,100 262,637 3,783 595,520

Amortization 111,499 272,192 - 383,691

94


Operating costs Operating expenses

Non-operating expenses Total

Personnel expenses $ 1,094,850 $ 4,012,670 $ - $ 5,107,520

Salaries 986,539 3,569,954 - 4,556,493

Labor and health insurance 54,991 266,508 - 321,499

Pension 1,551 81,186 - 82,737

Others 51,769 95,022 - 146,791

Depreciation 532,912 292,602 4,855 830,369

Amortization 140,664 273,765 - 414,429

5. RELATED PARTY TRANSACTIONS

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

Lian Jie Investment Co., Ltd. Investee company accounted for under the equity method.

Shen-Tong Construction & Development Co., Ltd.

Investee company accounted for under the equity method.

Loyalty Founder Enterprise Co., Ltd. Investee company accounted for under the equity method.

Getac Technology Corp.(GTC) and its subsidiaries

Investee company accounted for under the equity method

Synnex Corp. (SYNNEX) and its subsidiaries Indirect investee company accounted for under the equity method.

Synnex Technology International Corp. (SIC) Common board chairman.

Harbinger Venture Management Co., Ltd. Common board chairman.

Lien Hwa Industrial Corp. Common board chairman.

Harbinger II (BVI) Venture Capital Corp. Common board chairman.

UPC Technology Corporation Common board chairman.

Harbinger VI Common board chairman.

BOC Lien Hwa Industrial Gas Corp. The Company’s chairman is BOC’s director.

MiTAC Communication Co., Ltd. The Company’s chairman is MiTAC Inc.’s director.

2) Significant related party transactions and balances

A. Purchases (including process expenditures)

For the years ended December 31, 2012 and 2011, the Company had purchases from

related parties amounting to $1,739,443 and $3,310,646, respectively.

The purchase price to related parties is based on market value. The payment period is

150 days and 90 days after offsetting certain receivables and payables according to

payment terms to overseas and domestic related parties, respectively. The payment

period to regular suppliers is approximately 90 days after purchase date.

B. Sales

For the years end December 31, 2012 and 2011, the Company had sales to related

parties amounting to $449,416 and $351,188, respectively.

The selling price to related parties is based on market value. The collection period is

Names of the related parties Relationship with the Company

3Probe Technologies Corp. Investee company accounted for under the equity method.

Gemtek Technology Co., Ltd. (Gemtek) The Company is Gemtek’s director.

MiTAC Inc. The Company’s chairman is MiTAC Inc.’s director.

95

150 days and 90 days after offsetting certain receivables and payables according to

collection terms to overseas and domestic related parties, respectively. The collection

period for regular customers is approximately 90 days after shipping date.

C.Accounts receivable

As of December 31, 2012 and 2011, the accounts receivable from related parties were

$36,192 and $65,338, respectively.

D. Other receivables

E. Accounts payable

As of December 31, 2012 and 2011, the accounts payable to related parties were $169,560 and $431,456, respectively.

F. Other payables

As of December 31, 2012 and 2011, the other payables to related parties were $12,955 and $19,831, respectively.

G. During 2012 and 2011, the Company paid to related parties expenses amounting to

$81,832 and $81,613, respectively.

H. During 2012 and 2011, the Company purchased machinery and mold equipment from

Getac Technology Corp.(GTC) and its subsidiaries at the purchase price of $37,191

and $2,305, respectively.

During 2012 and 2011, the Company purchased machinery and mold equipment from

other related parties at the purchase price of $4,788 and $30,063, respectively.

I. As of December 31, 2012 and 2011, Getac Technology Corp. provided guarantees for

rent to the Company both amounting to $3,600.

J. (a) In 2012 and 2011, the Company earned rent revenue from related parties

amounting to $40,267 and $44,941, respectively.

(b) In 2012 and 2011, the Company paid rent expenses to related parties amounting to

$940 and $8,384, respectively.

K. Directors’, supervisors’ and key managers’ salary, bonus, and remuneration

December 31,

2012 2011

GTC and its subsidiaries $ 63,822 $ 51,257

Others 5,079 2,016

$ 68,901 $ 53,273

2012 2011

Salaries, bonus, and service execution fees $ 94,899 $ 87,186

Remuneration 4,730 2,583

$ 99,629 $ 89,769

96

(a)Salaries included wages, bonuses, meal expense, retirement pension, employees’

bonuses and travel allowance.

(b)Remuneration included appropriation of directors’ and supervisors’ remuneration and

employees’ bonuses.

(c)The relevant information above was disclosed in the Company’s annual report.

6. ASSETS PLEDGED AS COLLATERAL

December 31,

ASSETS 2012 2011 Subject of collateral

Building $ 339,580 $ 372,847 Short-term loans

Land use rights 13,599 14,394 Short-term loans

Marketable securities - 733,922 Medium-term loans from banks Time deposits 3,390 3,350 Guarantee deposit for land

leasing in Science Park

Time deposits 1,451 1,434 Guarantee deposit for dorm leasing in Science Park

Time deposits 9,500 9,500 Guarantee for application for letters of credit

Time deposits - 3,089,820 Short-term loans

$ 367,520 $ 4,225,267

7. COMMITMENTS AND CONTINGENT LIABILITIES

1) The Company has credit lines for guarantee of customs duties in 2012 and 2011. As of

December 31, 2012 and 2011, the amounts of customs duties guaranteed by the bank

were $2,100 and $3,100, respectively.

2) The Company leased certain land (from 2008 to 2026), factories and offices (up to

December 2013) under operating leases. Annual rental payments amounted to

approximately $55,718.

8. SIGNIFICANT DISASTER LOSS

None.

9. SIGNIFICANT SUBSEQUENT EVENT

In January 2013, the Board of Directors of the Company resolved for its

subsidiary—MiTAC Information Systems Corp. to acquire plants in the amount of

US$22,128 thousand.

97

10. OTHER INFORMATION

1) Financial statement presentation:

Certain accounts in the 2011 financial statements have been reclassified to conform to

the 2012 financial statement presentation.

2) The fair values of the financial instruments.


Fair value Fair value

Financial Assets

Book value

Quotations in an active market

Evaluation model

Book value


Evaluation model

Financial assets with fair value equal to book value

$ 15,553,955

$ -

$ 15,553,955

$ 20,345,521

$ -

$ 20,345,521

Available-for-sale financial assets

1,391,422

1,391,422

-

1,190,306

1,190,306

-

Held-to-maturity financial assets

-

-

-

335,646

-

335,646

Financial assets carried at cost

1,525,695

-

-

1,548,488

-

1,548,488

$ 18,471,072 $ 1,391,422 $ 15,553,955 $ 23,419,961 $ 1,190,306 $ 22,229,655

Derivatives

Forward foreign exchange

$ 4,316

$ -

$ 4,316

$ 44,137

$ -

$ 44,137

Exchange rate contracts - - - 255 - 255

$ 4,316 $ - $ 4,316 $ 44,392 $ - $ 44,392


Fair value Fair value

Book value


Evaluation model

Book value


Evaluation model

Financial Liabilities

Financial liabilities with fair value equal to book value

$ 13,053,135

$ -

$ 13,053,135

$ 18,360,900

$ -

$ 18,360,900

Long-term loans - - - 1,250,000 - 1,250,000

$ 13,053,135 $ - $ 13,053,135 $ 19,610,900 $ - $ 19,610,900

Derivatives

Purchase of forward foreign exchange

$ 20,618

$ -

$ 20,618

$ 63,757

$ -

$ 63,757

Exchange rate contracts - - - 440 - 440

$ 20,618 $ - $ 20,618 $ 64,197 $ - $ 64,197

The methods and assumptions used to measure the fair value of financial instruments are as

follows:

(a) For short-term instruments, the fair values were determined based on their carrying

values because of the short maturities of the instruments. This method was applied to

cash and cash equivalents, notes receivable, accounts receivable, other receivables, other

financial assets, refundable deposits, long-term notes and accounts receivable,

short-term loans, notes payable, accounts payable, accrued expenses, other payables,

provision for product warranty, other current liabilities and deposits-in.

(b) Available-for-sale financial instruments are based on the market value of securities.

98

(c) The book value of long-term loans is used as fair value as the loans bear floating

interest rates.

(d) The fair values of derivative financial instruments are provided by counterparty

financial institutions. The fair value estimate is based on the closing rate or central

parity rate of the foreign exchange market at the last business day of month shown

in the “Reuters Quotation System”. The fair values of derivative financial

instruments which include unrealized gains or losses on unsettled contracts are

determined based upon the amounts to be received or paid assuming that the

contracts were settled as of the reporting date.

2) As of December 31, 2012 and 2011, the financial assets with fair value risk due to the

change of interest amounted to $361,360 and $1,772,975, respectively. The financial

assets with cash flow risk due to the change of interest amounted to $7,786,834 and

$9,976,844, respectively, and the financial liabilities with cash flow risk due to the

change of interest amounted to $2,689,783 and $7,925,514, respectively.

3) Financial risk management

In order to identify, evaluate and manage market risk, credit risk, liquidity risk and cash

flow risk, the Group has established a risk management program and carries out

procedures to monitor the fluctuations in exchange rate and interest rate, as well as

implement credit controls over its transaction counterparties.

By considering factors such as changes in industrial environment, competitive position,

and market risks, the Group adjusts related positions of financial assets and liabilities in

order to optimize its risk exposure, maintain liquidity and centrally manage all market

risks. The Group mainly use derivative financial instruments to hedge the operating risk.

To meet its risk management objectives, the Group adopts the following strategies to

control financial risk:

A. Interest rate

The Group undertakes derivative financial instruments such as interest rate swaps, to

hedge cash flow risk and fair value risk arising from fluctuations in interest rates.

B. Foreign exchange

To hedge cash flow fair value risk arising from fluctuations in exchange rates, the

Group undertakes derivative financial instruments such as forward exchange

contracts to hedge recognized assets and liabilities denominated in foreign

currencies and highly probable forecast transactions.

4) Information of financial risk

A. Market risk

The Group’s business involves some non-functional currency operations. The

information on monetary assets and liabilities denominated in foreign currencies, whose

99

values would be materially affected by the fluctuations of the foreign exchange rates is

as follows:

2012 2011

(Foreign currency:

Functional currency)

Foreign

Currency

Exchange

Rate

Foreign

Currency

Exchange

Rate

Financial Assets

Monetary item

USD：TWD $ 180,917 29.040 $ 167,433 30.275

USD：RMB 1,302 6.2327 6,163 6.3009

Long-term investments accounted for under the equity method

Monetary item

RMB：USD 52,329 0.16044 51,663 0.15871

Financial liabilities

Monetary item

USD：TWD 170,154 29.040 229,307 30.275

USD：RMB 18,512 6.2327 63,856 6.3009

(a) Equity financial instruments: The investments in these financial instruments is influenced by market price. The Group evaluates the investment performance periodically. Thus, the market risk is low.

(b) Short-term financial instruments: Maturities of these financial instruments are within one year. Therefore, the Group expects to have no significant market risk.

(c) Derivative financial instruments: The forward contract was entered into for hedging the fluctuation of exchange rate. Gains or losses on this contract are likely to be offset from the hedged items. Therefore, the market risk is low.

(d) Long-term liabilities of financial instruments: The Group borrows loans with floating interest rate. Thus, the Group expects to have no significant market risk.

B. Credit risk

(a) Equity financial instruments: The Group trades with reputable counterparties. Thus, there is no significant credit risk.

(b) Short-term financial instruments: The Group has established control procedures over the credit management on counterparties, and the counterparties are reputable companies and financial institutions with high credit ratings. The Group believes its exposure to potential default risk is low.

(c) Derivative financial instruments: The Group believes its exposure to potential default risk is low due to the counterparties being reputable institutions, and the Group diversifies the credit risks by entering into transactions with multiple counterparties.

(d) Long-term liabilities of financial instruments: No credit risk is expected to arise from the debt instruments.

C.Liquidity risk

(a) Equity financial instruments:

The Group invests in available-for-sale financial assets, which are traded in

100

active markets and can be readily converted into certain amount of cash approximate to their fair values. The liquidity risk exposure is low.

The Group is exposed to a higher liquidity risk since its investments in financial assets carried at cost have no active market. However, the Group has no intention to hold these financial assets for trading and does not expect to sell those financial assets frequently. Therefore, the exposure to liquidity risk would be effectively reduced.

(b) Short-term financial instruments: Maturities of these financial instruments are within one year. And the Group has set operating plans to deal with future cash needs. Thus, liquidity risk is believed to be minimal.

(c) Derivative financial instruments: The forward for trading was entered for hedging the foreign exchange risk. It results in both cash inflow and cash outflow, respectively, at maturity. Because the Group will receive and pay the cash on settlement dates and the future working capital is sufficient, the liquidity risk and cash flow risk is low.

(d) Long-term liabilities of financial instruments: The Group has sufficient working capital to meet various funding needs and major capital expenditures. Thus, the Group expects to have no significant liquidity risk.

D. Cash flow risk

(a) Derivative financial instruments: These financial instruments are non-interest bearing financial instruments. Thus, there is no cash flow risk.

(b) Short-term financial instruments: Maturities of these financial instruments are within one year. Thus, there is no material cash flow risk.

(c) Long-term liabilities of financial instruments: The Group borrows loans, with floating interest rate. The effective interest rate of loans would be changed due to changes in market interest rates, which would cause the fluctuations in future cash flows. The Group also has established a risk management program and carries out procedures to monitor cash flow risk arising from fluctuations in interest rates. Thus, the Group expects to have no significant cash flow risk.

101

11.SUPPLEMENTARY DISCLOSURES

A. Information of Significant Transactions:

(1) Loans granted during the year ended December 31, 2012:

Collateral

Creditor Borrower

General

ledger

account

Maximum

outstanding

balance

Ending

balance

Interest

rate

Nature of

loan

Amount of

transaction

with

borrower

Reason of

short-term

financing

Allowance

for

doubtful

accounts Item Value

Limit on loans granted

to a single party

Ceiling on total

loans granted


Become

Human Tec

Corp.

Other

receivables

$ 911

(Note 2)

$ 911 1.12% Note 1 $ 4,182 None $ - None $ - $ 4,182

(Note 3)

$ 5,946,593

(Note 3)

Note 1: Intracompany accounts.

Note 2: Noting the actual draw-down amount.

Note 3: Ceiling on total loans granted by the Company to all parties is 20% of the Company’s net assets value on its most recent financial statements, which are audited or reviewed by independent accountants; limit on loans granted by the Company to a single party, which has business association with the Company, is the lower of total transaction amount of the recent one year between the two parties (or estimated total transaction amount of future one year between the two parties) or 10% of the Company’s net assets value on its most recent financial statements, which are audited or reviewed by independent accountants. Total transaction amount as referred to herein means the higher of purchase amount or sales amount between the two parties.

(2) Endorsements and guarantees provided during the year ended December 31, 2012:

Endorser / guarantor

Party being endorsed / guaranteed

Relationship with the endorser /

guarantor

Limit on endorsements /

guarantees provided for a single party

Maximum outstanding

endorsements / guarantees amount

during 2012

Outstanding endorsements /

guarantees amount at Dec. 31, 2012

Amount of endorsements / guarantees with collateral placed

Ratio of accumulated

endorsements / guarantees amount to net asset value of the Company

Ceiling on total amount of

endorsements / guarantees provided



Subsidiary $14,866,482 $160,000 $100,000 $ - 0.34% $14,886,482

(Note) ″ MiTAC Europe Ltd.

″ ″ 190,227 44,978 - 0.15% ″ ″ MiTAC Australia Pty Ltd.

″ ″ 14,487

14,487 - 0.05% ″ ″ Tyan Computer Corp. (USA)

″ ″ 59,860 59,860 - 0.20% ″ ″ MiTAC Digital Corp.

″ ″ 117,705 117,705 - 0.40% ″ ″ Mitac Information Systems Corp.

″ ″ 240,630 237,680 - 0.80% ″

Note: Equal to 50% of the net worth based on the financial statements audited or reviewed by independent accountants.

102

(3) Marketable securities held as of December 31, 2012:

December 31, 2012

Securities held by

Type Name of marketable

securities

Relationship with the issuer

General ledger

account Number of shares Book value Percentage Market value (Note 1)

Notes

MiTAC

International

Corp.

Stocks Getac Technology

Corp.

Investee company

accounted for under

the equity method

Long-term

investment

accounted for

under the equity

method

190,396,939 $3,866,325 32.71% $2,998,752 ″ ″ Tsu Fung Investment

Corp.

″ ″ 128,584,651 1,174,032 100.00% 1,426,365 Note 2 ″ ″ 3 Prode Technologies

Co., Ltd.

″ ″ 1,086,000 8,783 23.25% 8,783 ″ ″ DLC Technology

Corp.

″ ″ 6,600,000 56,388 100.00% 56,388 ″ ″ Lian Jie Investment

Co., Ltd.

″ ″ 11,305,650 160,490 49.98% 160,490 ″ ″ Silver Star

Developments Ltd.

and its subsidiaries

″ ″ 215,495,404 14,327,218 100.00% 14,567,873 Note 2 ″ ″ Loyalty Founder

Enterprise Co. ,Ltd.

″ ″ 39,180,000 242,356 25.24% 196,684 Note 3 ″ ″ Foreground

Technology Ltd. and

its subsidiaries

″ ″ 9,045,492 503,020 100.00% 523,286 ″ ″ Shen-Tong

Construction &

Development Co.,

Ltd.

″ ″ 8,559,400 83,422 47.55% 83,422 ″ ″ Mio Technology

Corp.

″ ″ 2,000,000 23,424 100.00% 23,424 ″ ″ Suiio Inc. ″ ″ 116,667 4,459 70.00% 4,459 ″ ″ MiTAC Inc. The Company’s

chairman is MiTAC

Inc.’s director.

Financial assets

carried at

cost-non current

18,237,991 586,164 8.69% 586,164 ″ ″ MiTAC information

Technology Corp.

The Company’s

chairman is MiTAC

information System

Corp.’s director.

″ 13,041,116 58,887 8.69% 58,887 ″ ″ Overseas Investment

& Development

Corp.

None ″ 1,000,000 10,000 1.11% 10,000 ″ ″ Harbinger Venture

Management Co.,

Ltd.

Common board

chairman

Financial assets carried at cost-non

current

14,049,500 97,806 14.05% 97,806 ″ ″ Harbinger VI ″ ″ 10,000,000 100,000 13.28% 100,000

103

December 31, 2012

Securities held by

Type Name of marketable

securities

Relationship with the issuer

General ledger

account Number of shares Book value Percentage Market value (Note 1)

Notes

MiTAC International

Corp.

Stocks Linpus Technology

Corp.

None ″ 1,211,596 $ 16,094 4.95% $ 16,094

Note 4 ″ ″ UPC Technology

Corp.

Common board

chairman

Available-for-sale

financial

assets-non

current

13,915,275 226,819 1.24% 226,819 ″ ″ Lien Hwa Industrial

Corp.

″ ″ 14,011,961 265,527 1.65% 265,527 ″ ″ Gemtek Technology

Co., Ltd.

Board member of

Gemtek

″ 3,223,883 112,836 1.06% 112,836

Note 1: The market value of listed securities was based on the closing price as at December 31, 2012, while, the market value of unlisted securities accounted for under the equity method was based on the net asset value per share of the investee company; the fair value of financial assets carried at cost was based on their carrying value.

Note 2: Tsu Fung Investment Corp. and Silver Star Developments Ltd. and its subsidiaries in accordance with the Statement of Financial Accounting Standards for treasury stocks.

Note 3: Such stocks are subject to certain transfer restrictions pursuant to Article 43-8 of the Securities and Exchange Law.

Note 4: The Company’s subsidiary- Tsu Fung Investment Corp. transferred share ownership of Linpus Technology Corp. to the Company, Mio Technology Corp. and DLC Technology Corp., respectively. Such disposal gain has not been realized.

(4) Marketable securities for which total buying or selling exceeded $100,000 or 20 percent of capital for the year ended December 31, 2012: None.

(5) Real estate acquired amounting to over $100,000 or 20 percent of the Company’s capital stock for the year ended December 31, 2012: None.

(6) Real estate disposed amounting to over $100,000 or 20 percent of the Company’s capital stock for the year ended December 31, 2012: None.

(7) Purchases or sales transactions with related parties exceeding $100,000 or 20 percent of capital for the year ended December 31, 2012:

Transactions Reason and situation of having different transaction terms between related parties

Accounts and notes receivable (payable)

The company buying /selling

products Name of related

parties Relationship with the counterparty

Purchases / Sales Amount

Percentage of purchase /

sales Credit Term Unit price Credit Term Balance Percentage of

account Footnote

MiTAC

International

Corp.

MiTAC

Logistics Corp.

Indirect investee

company

accounted for

under the equity

method.

Sales $2,434,798 8.57% Note 1 Note 2 Note 1 $352,395 4.47% ″ MiTAC Digital

Corp.

″ Sales 817,610 2.88% Note 1 ″ Note 1 432,673 5.49% ″ MiTAC

Information

Systems Corp.

″ Sales 6,513,179 22.92% Note 1 ″ Note 1 3,801,225 48.21% ″ MiTAC Benelux

N.V.

″ Sales 189,354 0.67% Note 1 ″ Note 1 119,195 1.51% ″ MiTAC Europe

Ltd.

″ Sales 669,463 2.36% Note 1 ″ Note 1 442,097 5.61%

104

Transactions Reason and situation of having different transaction terms between related parties

Accounts and notes receivable (payable)

The company buying /selling

products Name of related

parties Relationship with the counterparty

Purchases / Sales Amount



account Footnote

MiTAC

International Corp.

MiTAC

Australia Pty

Ltd.

Indirect investee company

accounted for under the equity

method.

Sales $ 420,504 1.48% Note 1 Note 2 Note 1 $ 219,287 2.78% ″ MiTAC

Computer

(Kunshan) Co.,

Ltd.

″ Purchases 2,849,305 11.99% Note 3 ″ Note 3 ( 1,710,771 ) 24.88% ″ MiTAC

Computer

(Shunde) Corp.

″ Purchases 8,921,915 37.54% Note 3 ″ Note 3 ( 3,119,534 ) 45.37% ″ Tyan Computer

Corp.(USA)

″ Sales 1,926,983 6.78% Note 1 ″ Note 1 133,234 1.69%

Tyan Computer

Corp.(USA)

″ Purchases 504,756 2.12% Note 3 ″ Note 3 -

- ″ Loyalty

Founder

Enterprise Co.,

Ltd.

Investee company

accounted for

under the equity

method

Purchases 274,350 1.15% Note 1 ″ Note 1 ( 94,469 ) 1.37%

Note 1：The collection period is 150 days and 90 days after offsetting certain receivables and payables according to collection terms to overseas and domestic related parties,

respectively. The collection period for regular customers is approximately 90 days after shipping date.

Note 2：The selling price to related parties is based on market value.

Note 3：The payment period is 150 days and 90 days after offsetting certain receivables and payables according to payment terms to overseas and domestic related parties,

respectively. The payment period for regular suppliers is approximately 90 days after purchase date.

105

(8) Receivables from related parties exceeding $100,000 or 20 percent of capital as of December 31, 2012:

Balance of receivable from related party Overdue receivables

Company Name Name of the counterparty

Relationship with the

counterparty

Note receivable

Accounts receivable

Other

receivables Total

Turnover rate (times)

Amount Collection

method

Subsequent received amount

MiTAC

International

Corp.

MiTAC Logistics Corp. Indirect investee

company accounted

for under the equity

method.

- $ 352,395 $ 1 $ 352,396 3.41 $ - N/A $ 240,142 ″ MiTAC Digital Corp. ″ - 432,673 3,343 436,016 0.74 - N/A 411,882 ″ MiTAC Europe Ltd. ″ - 442,097 413 442,510 1.05 71,342 on demand 66,678 ″ MiTAC Benelux N.V. ″ - 119,195 30 119,226 1.32 28,604 ″ 25,732 ″ MiTAC Australia Pty

Ltd.

″ - 219,287 - 219,287 1.55 - N/A 219,287 ″ Tyan Computer

Corp.(USA)

″ - 133,234 - 133,234 11.20 - N/A 152,383 ″ MiTAC Information

Systems Corp.

″ - 3,801,225 6 3,801,231 1.74 486,245 on demand 1,328,797

(9) Information on derivative transactions:

(a) Purpose: Derivative financial instruments are undertaken for non-trading purposes and to hedge the fluctuation of exchange rate of foreign currency denominated assets

and liabilities.

(b) To hedge existing assets denominated in foreign currencies:

December 31, 2012

Financial Instrument

Item Notional Amount

(in thousands)

Fair Market Value

(in thousands)

Sell of forward foreign exchange Advance booking USD to buy TWD. USD 10,000 NTD 334

″ ″ USD 22,000 ( NTD 2,463 )

″ Advance booking EUR to buy USD. EUR 700 NTD 7

″ ″ EUR 11,040 ( NTD 16,629 )

″ Advance booking AUD to buy USD AUD 3,644 NTD 484

″ ″ AUD 3,100 ( NTD 522 )

″ Advance booking GBP to buy USD. GBP 700 NTD 33

″

″

″

Advance booking JPY to buy USD

GBP 1,860

JPY 50,000

( NTD 214 )

( NTD 11 )

Buy of forward foreign exchange Advance booking USD to sell USD. USD 25,000 NTD 1,560

″ ″

USD 5,000 ( NTD 779 )

106

December 31, 2011

Financial Instrument

Item Notional Amount

(in thousands)

Fair Market Value

(in thousands)

Sell of forward foreign exchange Advance booking USD to buy TWD. USD 10,000 NTD 491

″ ″ USD 1,000 (NTD 45)

″ Advance booking EUR to buy USD. EUR 21,560 NTD 32,090

″ Advance booking AUD to buy USD AUD 7,356 NTD 3,304

″ ″ AUD 2,751 (NTD 1,789)

″ Advance booking GBP to buy USD. GBP 3,900 NTD 3,230

″ Advance booking NZD to buy USD. NZD 500 NTD 28

″ ″ NZD 500 (NTD 375)

Purchase of currency SWAP USD 3,000 NTD 255

″ USD 5,000 (NTD 400)

107

B. Information of Subsidiaries:

(1) Related information of Subsidiaries as of December 31, 2012:

Original amount Shares held by the Company

Investor Investee

Company

Location

(Country)

Main business

operations Currency

Ending

balance Currency

Beginning

balance

Number of

shares

Percentage

owned Currency

Book value Currency

Income

(loss) of the

investee

Company

Currency

Gain/Loss

recognized by

the Company

Note

MiTAC

International

Corp.

Getac

Technology

Corp.

Taiwan Manufacturing and

sale of notebook

computer, military

and industrial

computer systems,

etc.

NTD $ 1,391,549 NTD $ 1,391,549 190,396,939 32.71% NTD $ 3,866,325 NTD $ 326,868 NTD $ 119,563 Investee

accounted

for under

equity

method

MiTAC

International

Corp.

Tsu Fung

Investment

Corp.

Taiwan Investment NTD 625,000 NTD 625,000 128,584,651 100.00% NTD 1,174,032 NTD 54,654 NTD 35,505 Subsidiary

MiTAC

International

Corp.

3Probe

Technologies

Corp.

Taiwan Information process

service, sales of

software and

international trading.

NTD 16,839 NTD 16,800 1,086,000 23.25% NTD 8,783 NTD ( 1,994) NTD ( 462) Investee

accounted

for under

equity

method

MiTAC

International

Corp.

DLC

Technology

Corp.

Taiwan Manufacturing of

data storage media ,

computer and

communication

equipment

NTD 65,755 NTD 65,755 6,600,000 100.00% NTD 56,388 NTD 3,553 NTD 3,553 Subsidiary

MiTAC

International

Corp.

Lian Jie

Investment Co.,

Ltd.

Taiwan Investment NTD 113,057 NTD 113,057 11,305,650 49.98% NTD 160,490 NTD 12,117 NTD 6,056 Investee

accounted

for under

equity

method

MiTAC

International

Corp.

Silver Star

Developments

Ltd. and its

subsidiaries

British

Virgin

Islands

Investment USD 215,495

USD 215,495 215,495,404 100.00% NTD 14,327,218 NTD 729,180 NTD 802,370 Subsidiary

MiTAC

International

Corp.

Loyalty

Founder

Enterprise

Co.,Ltd.

Taiwan Sales and

manufacturing of

metal and plastic

electronics enclosure

NTD 150,000 NTD 150,000 39,180,000 25.24% NTD 242,356 NTD ( 11,084)

NTD 36,668 Investee

accounted

for under

equity

method

MiTAC

International

Corp.

Foreground

Technology

Ltd. and its

subsidiaries

British

Virgin

Islands

Investment USD $ 9,045

USD $ 9,045 9,045,492 100.00% NTD $ 503,020 NTD $ 22,506 NTD $

13,001

Subsidiary

MiTAC

International

Corp.

Shen-Tong

Construction &

Development

Co., Ltd.

Taiwan Building and factory

construction, leasing

and sales

NTD 85,594 NTD 85,594 8,559,400 47.55% NTD 83,422 NTD ( 258) NTD ( 123) Investee

accounted

for under

equity

method

108

Original amount Shares held by the Company

Investor Investee

Company

Location

(Country)

Main business

operations Currency

Ending

balance Currency

Beginning

balance

Number of

shares

Percentage

owned Currency

Book value Currency

Income

(loss) of the

investee

Company

Currency

Gain/Loss

recognized by

the Company

Note

MiTAC

International

Corp.

Mio

Technology

Corp.

Taiwan Sale of

communication

products and related

after-sale services

NTD

30,704

NTD

40,000

2,000,000 100.00% NTD

23,424

NTD

3,424

NTD

4,137

Subsidiary

MiTAC

International

Corp.

Suiio Inc. Taiwan

Information/software

services and retail

business

NTD 8,050 NTD - 116,667 70.00% NTD 4,459 NTD (1,632) NTD ( 3,591) Subsidiary

Silver Star

Developments

Ltd. (SSDL)

Harbinger II

(BVI) Venture

Capital Corp.

British

Virgin

Islands

Investment USD 1,458 USD 1,458 1,457,850 49.96% NTD 44,138 NTD (9,804) NTD - Investee

accounted

for under

equity

method by

SSDL

Silver Star

Developments

Ltd. (SSDL)

Mainpower

International

Ltd.

British

Virgin

Islands

″ USD 5,500 USD 5,500 5,500,001 19.12% NTD 163,558 NTD 11,300 NTD - Investee

accounted

for under

equity

method by

SSDL

Silver Star

Developments

Ltd. (SSDL)

Synnex Corp. USA Information process

services, sales of

computer peripheral,

system and network

products

USD 17,331 USD 18,064 5,907,796 15.87% NTD 6,077,976 NTD 4,476,698 NTD - Investee

accounted

for under

equity

method by

SSDL

Silver Star

Developments

Ltd. (SSDL)

Suzhou MiTAC

Precision

Technology

Co., Ltd.

China Manufacturing of

mainboard, desktop

computers, interfere

cards, etc.

USD 8,000 USD 8,000 - 21.62% NTD 243,816 NTD 14,427 NTD - Investee

accounted

for under

equity

method by

SSDL

Silver Star

Developments

Ltd. (SSDL)

Harbinger Ruyi

Venture Ltd.

British

Virgin

Islands

Investment USD 1,000 USD 1,000 1,000,000 28.57% NTD 31,727 NTD 14,046 NTD - Investee

accounted

for under

equity

method by

SSDL

109

(2) Loans granted during the year ended December 31, 2012: Collateral

Creditor Borrower General ledger

account

Maximum outstanding

balance

Ending balance

(Note 7) Interest

rate Nature of loan

Amount of transaction

with borrower

Reason of short-term financing

Allowance for

doubtful accounts Item Value

Limit on loans granted to a singly party

Ceiling on total loans

granted

Foot Note

Silver Star

Developments

Ltd. (SSDL)

MiTAC

International

Corp.

Affiliated loans

receivable

$ 1,686,243 $1,013,248 - Note 1 $ - Operations $ - None $ - $5,549,171

(Note 2)

$5,549,171

(Note 2)

″ MiTAC

Cooperative

Corp.

″ 839 - - ″ - ″ - ″ - ″ ″ ″ Sky Universe

Enterprise

Ltd.

″ 89,970 87,120 - ″ - ″ - ″ - ″ ″ ″ Top Sheen

Enterprise

Ltd.

″ 749,750 726,000 - ″ - ″ - ″ - ″ ″ ″ Software

Insights ltd.

″ 29,990 29,040 - ″ - ″ - ″ - ″ ″ ″ MiTAC

Digital Corp.

″ 719,760 696,960 - ″ - ″ - ″ - ″ ″ ″ MiTAC

Europe Ltd.

″ 431,088 431,088 - ″ - ″ - ″ - ″ ″ ″ Mio

Technology

Korea

″ 26,991 - - ″ - ″ - ″ - ″ ″ ″ MiTAC

(U.K.) Ltd.

″ 10,900 - - ″ - ″ - ″ - ″ ″ ″ Mitac Japan

Corp.

″ 11,628 - - ″ - ″ - ″ - ″ ″

Pacific China

Corp.

Bright Crown

Management

Ltd.

″ 17,994 17,424 - ″ - ″ - ″ - 1,448,999

(Note 3)

1,448,999

(Note 3)

Tyan Computer

Corp.(USA)

MiTAC

Digital Corp.

Accounts

receivable from

related parties

194,935 188,760 0.87% ″ - ″ - ″ - 193,371

(Note 4)

193,371

(Note4)

Booming

Enterprises Inc.

Silver Star

Developments

Ltd.

Affiliated loans

receivable

46,305 44,928 - ″ - ″ - ″ - 90,605

(Note 5)

90,605

(Note5)

System Golry

International

Ltd.

MiTAC

International

Corp.

″ 45,868 45,593 - ″ - ″ - ″ - 95,415

(Note 6)

95,415

(Note 6)

Note 1: Intracompany accounts.

Note 2: Limit on loans granted by Silver Star Developments Ltd. to a single party and ceiling on total loans granted by Silver Star Developments Ltd. to all parties is both 40% of the net assets value per its most recent financial statements audited by independent accountants.

110

Note 3: Limit on loans granted by Pacific China Corp. to a single party and ceiling on total loans granted by Pacific China Corp. to all parties is both 40% of the net assets value per its most recent financial statements audited by independent accountants.

Note 4: Limit on loans granted by Tyan Computer Corp.(USA) to a single party and ceiling on total loans granted by Tyan Computer Corp.(USA) to all parties is both 40% of the net assets value per its most recent financial statements audited by independent accountants.

Note 5: Limit on loans granted by Booming Enterprises Inc. to a single party and ceiling on total loans granted by Booming Enterprises Inc. to all parties is both 40% of the net assets value per its most recent financial statements audited by independent accountants.

Note 6: Limit on loans granted by System Golry International Ltd. to a single party and ceiling on total loans granted by System Golry International Ltd. to all parties is both 40% of the net assets value per its most recent financial statements audited by independent accountants.

Note 7: Noting the actual draw-down amount.

(3) Endorsements and guarantees provided during the year ended December 31, 2012: None

(4) Marketable securities held as of December 31, 2012:

December 31, 2012

Security held by Type Name of marketable

securities Relationship with the issuer General ledger account

Number of

shares Book value Percentage

Market value

(Note 1)

Notes

Tsu Fung

Investment

Corp.

Stocks Synnex Technology

International Corp.

None Available-for-sale

financial assets -current

1,817,119 $ 97,216 0.12% $ 97,216 ″ ″ UPC Technology

Corp.

″ ″ 12,349,730 201,301 0.11% 201,301 ″ ″ MiTAC International

Corp.

Tsu Fung’s investor

company accounted for

under the equity method

″ 20,366,568 211,812 1.33% 211,812 ″ ″ Getac Technology

Corp.

None ″ 14,329,741 225,693 2.46% 225,693 ″ ″ Loyalty Founder

Enterprise Co.,Ltd.

″ ″ 65,300 328 0.04% 328

″ ″ National Aerospace

Fasteners Corporation

″ ″ 1,000 42 - 42 ″ Fund stock Prudential Financial

money market

″ ″ 1,548,078 23,700 - 23,700 ″ ″ Uni-President

AssetsManagement

Corp.

″ ″ 4,622,126 75,000 - 75,000 ″ Stocks Linpus Technology

Corp.

″ Financial assets carried

at cost-non current

897,499 690 3.66% 690 Note 3 ″ ″ Harbinger Venture

Management Co.,

Ltd.

″ ″ 581,902 479 19.99% 479 ″ ″ Cirocomm

Technology Corp.

″ ″ 2,352,086 24,560 4.73% 24,560 ″ ″ Lien Yung Investment

Corp.

″ ″ 9,015,254 87,969 19.99% 87,969

111

December 31, 2012



Number of


Market value

(Note 1)

Notes

Tsu Fung

Investment

Corp.

Stocks G. Marso Electronics,

Inc.

None Financial assets carried

at cost-non current

1,266,816 $ 7,164 3.73% $ 7,164 ″ ″ UPC Technology

Corp.

″ ″ 1,720,932 20,464 0.15% 20,464 Note 2 ″ ″ Mitac Inc. ″ ″ 9,192,603 276,828 4.38% 276,828 ″ ″ MiTAC Information

Technology Corp.

″ ″ 7,918,551 74,800 5.28% 74,800 ″ ″ Tung Da Investment

Co., Ltd.

″ ″ 4,630,492 72,884 19.99% 72,884 Note 4

Mio

Technology

Corp.

″ Linpus Technology

Corp.


at cost-non current

1,211,596 16,094 4.95% 16,094 Note 3

DLC

Technology

Corp.

″ Linpus Technology

Corp.

″ Financial assets carried

at cost-non current

1,211,596 16,094 4.95% 16,094 Note 3

Silver Star

Developments

Ltd. And its

subsidiaries

″ Harbinger II (BVI)

Venture Capital Corp.

SSDL’s investee company

accounted for under the

equity method

Long-term investment


equity method.

1,457,850 44,138 49.96% 44,138 ″ ″ Synnex Corporation ″ ″ 5,907,796 6,077,976 15.87% 5,898,315 ″ ″ Suzhou MITAC

Precision Technology

Co., Ltd.

″ ″ - 243,816 21.62% 243,816 ″ ″ Mainpower

International Ltd.

″ ″ 5,500,001 163,558 19.12% 163,558 ″ ″ Harbinger Ruyi

Venture Ltd.

″ ″ 1,000,000 31,727 28.57% 31,727 ″ ″ Budworth

Investments Ltd.


at cost-non current

3,483,875 44,517 14.83% 44,517 ″ ″ Gapura Inc. ″ ″ 295,831 - 5.55% - ″ ″ Global Strategic

Investment Inc.

″ ″ 500,000 5,886 1.26% 5,886 ″ ″ Global Strategic

Investment Inc.

(SAMOA)

″ ″ 250,000 7,260 0.65% 7,260 ″ ″ Panasas Inc. ″ ″ 1,391,354 - 0.98% - ″ ″ Cirocomm

Technology Corp.

″ ″ 2,352,086 22,012 4.73% 22,012

112

December 31, 2012



Number of


Market value

(Note 1)

Notes

Silver Star

Developments

Ltd. And its

subsidiaries

Stocks Rasilent Systems,

Inc.


at cost-non current

1,210,763 - 4.16% - ″ ″ Physi-Cal Enterprises ″ ″ 212,450 44,341 5.61% 44,341 ″ ″ Synnex Technology

International Corp.

″ Available-for-sale

financial assets-non

current

2,955,921 158,142 0.19% 158,142 ″ ″ MiTAC International

Corp.

SSDL’s investor company


equity method

″ 2,763,889 28,744 0.18% 28,744

Note 1: The market value of marketable securities held was based on the closing price as of December 31, 2012, if listed, while the market value of marketable securities held was based on the net asset value of the investee company, if not listed.

Note 2: Such stocks are subject to certain transfer restrictions pursuant to Article 43-8 of the Securities and Exchange Law.

Note 3: The Company’s subsidiary- Tsu Fung Investment Corp. transferred share ownership of Linpus Technology Corp. to the Company, Mio Technology Corp. and DLC Technology Corp., respectively. Such disposal gain has not been realized.

Note 4: MiTAC International Corp disposed of the shares of Tung Da Investment Co., Ltd. and Tsu Fung Investment Corp., such disposal gain has not been realized.

(5) Marketable securities for which total buying or selling exceeded $100,000 or 20 percent of capital for the year ended December 31, 2012:

Balance as at January 1, 2012 Addition Disposal Balance as at December 31, 2012

Investor Marketable

securities General

Ledger account Counterparty

Relationship with

the Company

Number of shares (in thousands) Amount

Number of shares (in thousands) Amount

Number of shares (in thousands) Selling price Book value

Gain (loss) on disposal

Number of shares (in thousand) Amount

Silver Star Developments Ltd.

Synnrx Corp

Long-term equity investments accounted for under the equity mehod

Note 1 None 6,157,796 $ 5,865,094 -

$ - 250,000 $ 263,605 (USD8,876)

$ 231,080 (USD7,776)

$ 32,525 5,907,796 $ 6,077,976 (Note 2)

MiTAC Computers (Shunde) Ltd.

Mitac Electronics (Foshan), Co., Ltd.

″

Note 3

Note 3

- -

-

119,274

-

-

-

-

-

119,057 (Note 2)

Note 1: Sold in the open market without a specific object.

Note 2: Closing amount includes investment income and cumulative translation adjustments.

Note 3: Subsidiary of the Company.

(6) Real estate acquired exceeding $100,000 or 20 percent of the Company’s capital for the year ended December 31, 2012: None.

(7) Real estate disposed exceeding $100,000 or 20 percent of the Company’s capital for the year ended December 31, 2012: None.

(8) Purchases or sales transactions with related parties exceeding $100,000 or 20 percent of capital for the year ended December 31, 2012:

113

Transactions

Reason and situation of having different transaction term between related parties and others Accounts and notes receivable (payable)

The company buying/selling

products Name of

related parties Relationship with

counterparty Purchase / Sales Amount



account Note

Silver Star

Developments

Ltd. (SSDL)

and its

subsidiaries

MiTAC

International

Corp.

SSDL’s Investor

company accounted


mehod

Sales $11,803,414 26.09% Note 1 Note 3 Note 1 $4,830,304 57.28% ″ ″ ″ Purchases 11,149,900 26.14% Note 2 ″ Note 2 ( 5,372,864) 49.87% ″ Getac

Technology

Corp. and its

subsidiaries

Associated company Sales 33,148 0.07% Note 1 ″ Note 1 477 - ″ ″ ″ Purchase 934,267 2.19% Note 2 ″ Note 2 ( 72,391) 0.70%

Tyan computer corp. (USA)

MiTAC

International

Corp.

Tyan’s Investor

company accounted


method

Sales 504,756 23.75% Note 4 ″ Note 4 - - ″ ″ ″ Purchases 1,926,983 96.73% Note 5 ″ Note 5 ( 133,234) 74.92%

Note 1：The collection period is 150 days and 90 days after offsetting certain receivables and payables according to payment terms to overseas and domestic related parties,

respectively. The collection period for regular customers is approximately 90 days after shipping date.

Note 2：The payment period is 150 days and 90 days after offsetting certain receivables and payables according to payment terms to overseas and domestic related parties,

respectively. The payment period to regular supplies is approximately 90 days after purchase date.

Note 3：The selling price to overseas related parties is based on market value. The selling price to domestic related parties is based on common domestic price.

Note 4：The collection period is 150 days after offsetting certain receivables and payables according to payment terms to overseas related parties. The collection period to its domestic

related parties is 90 days after shipping date by offsetting certain receivables and payables. The collection period for regular customers is approximately 90 days after shipping date.

Note 5：The payment period is 150 days after offsetting certain receivables and payables according to payment terms to overseas related parties. The payment period to its domestic

related parties is 90 days after offsetting certain receivables and payables. The payment period to regular supplies is approximately 90 days after purchase date.

(9) Receivables from related parties exceeding $100,000 or 20 percent of capital as of December 31, 2012:

Balance of receivables from related party Overdue receivable

Company Name Name of the

counterparty

Relationship with the

counterparty

Notes / Accounts

receivable Other receivables Total

Turnover rate

(times) Amount Collection method

Subsequent

amount received

Silver Star

Developments Ltd. and

its subsidiaries

MiTAC International

Corp.

SSDL’s Investor

company accounted


method

$4,830,304 $83,314 $4,913,618 2.30 $ - N/A $1,469,271

114

(10) Information on derivative transactions:

December 31, 2011

Company Financial Instrument Item Notional Amount (in thousands) Fair Market Value (in thousands)

MiTAC Computer

(Shunde) Corp.

Buy of forward

foreign exchange

Advance booking USD to sell RMB USD 18,392

( CNY 1,724 )

″ ″ Advance booking HKD to sell RMB HKD 183,400 CNY 1,716 ″ Structured Notes USD option CNY 145 CNY 1,039

MiTAC Computer (Kunshan) Co., Ltd

Buy of forward foreign exchange

Advance booking USD to sell RMB USD 58,727

( CNY 10,836 )

MiTAC Digital Corp Sell of forward foreign exchange

Advance booking CAD to buy USD CAD 1,905

USD 15

December 31, 2012

Company Financial Instrument Item Notional Amount (in thousands) Fair Market Value (in thousands)

MiTAC Digital Corp. Sell of forward

foreign exchange

Advance booking CAD to buy USD CAD 200 USD 1

MiTAC Europe Ltd. Buy of forward foreign exchange

Advance booking GBP to sell EUR GBP 600 ( USD 20 )

Silver Star Development

Ltd.

Sell of forward

foreign exchange

Advance booking EUR to buy USD EUR 11,200 USD 65

115

C. Relevant Information Regarding Investments In Mainland China:

a) Basic information, change in investment balance and profits/losses recognized from the direct investment:

Amount of remittance

out in 2012

Name of

investee in

Mainland China

Main activities of

investee

Capital

Method of

investment

Beginning balance

of remittance in

2012

Remittance

out

Remittance

in

Ending balance of

remittance from

Taiwan on

December 31,

2012

Shares held by

the Company

(Direct/indirect)

Profit/loss

recognized in

2012 (Note 1)

Ending balance of

book value on

December 31,

2012

Ending balance

of profit

remittance into

Taiwan

Note

MiTAC

Computer

(Shunde) Corp.

Manufacturing of

computer cases and

monitors, etc.

$ 2,874,027 Invest in

Mainland

China

through

investing

company in

third area

$ 2,026,992 $ - $ - $ 2,026,992 100.00% ( $ 96,677 ) $ 3,101,166 $ -

MiTAC

Computer

(Kunshan) Co.,

Ltd.

Sales and

manufacturing of

computer

accessories,

hardware, software

and related

services.

1,417,921 ″ 833,448 - - 833,448 100.00% 8,341 1,810,345 -

MiTAC Service

(Shanghai) Co.,

Ltd.

Testing, repair and

display of computer

components and

related products,

and related

technical advisory

services and

post-sale services.

38,566 ″ 29,040 - - 29,040 100.00% ( 1,549 ) 42,957 -

MiTAC

Technology

(Kunshan) Co.,

Ltd.

Testing, repair and

display of computer

components and

related products,

and related

technical advisory

services and

post-sale services.

38,565 ″ 29,040 - - 29,040 100.00% 2,106 66,991 -

MiTAC

Research

(ShangHai)

Ltd.

Research,

development and

production of

computer software,

sales of

own-produced

products and

related technical

advisory services

200,537 ″ 151,008 - - 151,008 100% 18,737 324,271 -

116


out in 2012

Name of

investee in

Mainland China

Main activities of

investee

Capital

Method of

investment

Beginning balance

of remittance in

2012

Remittance

out

Remittance

in

Ending balance of

remittance from

Taiwan on

December 31,

2012

Shares held by

the Company

(Direct/indirect)

Profit/loss

recognized in

2012 (Note 1)

Ending balance of

book value on

December 31,

2012

Ending balance

of profit

remittance into

Taiwan

Note

Suzhou MITAC

Precision

Technology

Co., Ltd.

Design and

manufacturing of

computer chassis

and its components,

precision plastic

injection mould,

molding parts and

molding equipment

processing, and

maintenance and

repair services.

1,290,912 Invest in

Mainland

China

through

investing

company in

third area

392,040 - - 392,040 36.61% ( 5,281 ) 412,820 -

Mio

Technology

Ltd.

Sale of

communication

products and

related after-sale

services

9,132 ″ 7,260 - - 7,260 100.00% ( 10,869 ) 7,237 -

MiTAC

Logistic

Service

(Kunshan) Ltd.

Agency of freight

transport, export

and import trading

and warehousing

services

31,780 ″ 29,040 - - 29,040 100.00% 465 32,427 -

MiTAC

Information

Technology

Ltd.

After-sales

maintenance,

testing, consulting

services and related

supporting

technology services

9,544 ″ 8,712 - - 8,712 100.00% 4,911 34,031 -

MiTAC

Innovation

(Kunshan) Ltd

Research and

development of

computer, server,

mobile phone,

PDA, GNSS and

GPS, and related

technology transfer,

technical advisory

services and

technical services

30,614 ″ 29,040 - - 29,040 100.00% 5,111 37,128

117


out in 2012

Name of

investee in

Mainland China

Main activities of

investee

Capital

Method of

investment

Beginning balance

of remittance in

2012

Remittance

out

Remittance

in

Ending balance of

remittance from

Taiwan on

December 31,

2012

Shares held by

the Company

(Direct/indirect)

Profit/loss

recognized in

2012 (Note 1)

Ending balance of

book value on

December 31,

2012

Ending balance

of profit

remittance into

Taiwan

Note

CGK Zhong

Shan Co., ltd.

Manufacture and

sales of optical

glass, in-touch

display system

components and touch display mode

Organizations.

235,371 Invest in

Mainland

China

through

investing

company in

Mainland

China.

- 1,577 - 1,577 0.70% - 1,577

MiTAC

Electronics

(Foshan) Co,

Ltd.

Manufacture of

computer

mainboard,

motherboard and

adapter card

119,231 ″ - - - - 100.00% ( 175 ) 119,057

Company name

Ending balance of investment from Taiwan

on December 31, 2012

Approved investment amount by Ministry

of Economic Affairs R.O.C.

The ceiling amount of the Company for investment

in Mainland China

MiTAC International Corp. $ 3,884,981 $ 3,884,981 N/A

Note 1: Profit/Loss recognized based on the unaudited financial statements, except for MiTAC Computer (Shunde) Corp., MiTAC Computer (Kunshan) CO., Ltd., MiTAC Research (ShangHai) Ltd. and Suzhou MITAC Precision Technology Co., Ltd.

Note 2: The Company has obtained the certificate of conforming to the business scope of headquarters (Certificate No.: Gong-Zhi-Zi Letter No. 09900112601), issued by the Industrial Development Bureau, MOEA, in accordance with “Regulations Governing Investment and Technology Cooperation in Mainland China”. Accordingly, the ceiling on investments in Mainland China imposed on the Company is not limited.

118

b) Major transactions with the subsidiaries in third region and Mainland China:

1) Purchases

The Company’s purchases from Mainland China subsidiaries (Note):

2012 2011

MiTAC Computer (Shunde) Corp. $ 12,151,596 $ 18,305,784

MiTAC Computer (Kunshan) Co., Ltd. 6,166,754 8,414,526

Others 1,318 76

$ 18,319,668 $ 26,720,386

Note: The above purchase amounts included raw materials and supplies and processing overhead charged to the Company since the Company commissioned its Mainland China subsidiaries to process products for it. In addition, some of the Company’s transactions with MiTAC Computer (Kunshan) Co., Ltd. were conducted indirectly through Mio International Ltd. located in the third territory which amounted to $6,304,663 and $8,082,315 for the years ended December 31, 2012 and 2011, respectively.

The purchase prices from Mainland China subsidiaries are negotiated based on the material and manufacturing cost. The payment period is 150 days after offsetting certain receivables and payables according to the payment terms.

The purchase prices that the Company purchases from regular suppliers are negotiated based on local market value. The payment period is approximately 90 days from shipping date.

As of December 31, 2012, there is no unrealized intercompany gain due to upstream sales.

2) Sales

The Company’s sales to Mainland China subsidiaries:

2012 2011

MiTAC Computer (Shunde) Co., Ltd. $ 3,229,681 $ 7,772,861


Others 26,648 41,394

$ 6,573,778 $ 12,327,632

The sales prices to Mainland China subsidiaries are negotiated based on the product cost. The collection period is 150 days after offsetting certain receivables and payables according to the collection terms.

The sales prices to regular customers are negotiated based on local market value. The collection period is approximately 90 days from shipping date.

As of December 31, 2012 and 2011, there is no unrealized intercompany gain due to down stream sales.

3) Property transactions:

In 2012 and 2011, the Company purchased equipments and molds from third region and Mainland China subsidiaries amounting to $1,165 and $2,025, respectively.

119

4) Accounts payable:

The Company to Mainland China subsidiaries:

December 31,

2012 2011

MiTAC Computer (Shunde) Corp. $ 3,119,534 $ 3,302,803


$ 4,830,305 $ 5,291,669

5) Loans to third region and Mainland China subsidiaries: None.

6) The endorsements and guarantees provided by the Company to Mainland China subsidiaries: None.

7) Other significant transactions which affect current income or financial conditions:

In 2012 and 2011, the Company paid warranty expense to the subsidiaries in Mainland China amounting to $235,509 and $242,713, respectively.

12. SEGMENT INFORMATION

1) General information:

Management has determined the operating segments based on the reports reviewed by the chief operating decision-maker that are used to make strategic decisions.

The chief operating decision-maker considers the business from both a brand business and non-brand business (product business) perspective. The main business lines of the Company are development, design, manufacture and sale of computers, computer peripherals and communication-related products.

2) Measures of segment information:

The chief operating decision-maker assesses the performance of the operating segments based on the operating income (loss). This measurement basis excludes the effects of non-recurring expenditures from the operating segments such as non-operating expenses.

120

3) Information about segment profit or loss, assets and liabilities:

The segment information provided to the chief operating decision-maker for the reportable segments and reconciliations are as follows: 2012

Item

Cloud computing business group

Mobile communications business group

Other

Total

Revenue $ 33,990,514 $ 9,878,521 $ 638,774 $ 44,507,809

Segment (Loss) Gain 946,243 ( 1,021,352 ) ( 423,413 ) ( 498,522 )

Segment Assets - - -

2011

Item

Cloud computing business group

Mobile communications business group

Other

Total

Revenue $ 34,120,511 $ 11,311,828 $ 871,811 $ 46,304,150

Segment (Loss) Gain 326,994 ( 1,121,602 ) ( 194,366 ) ( 988,974 )

Segment Assets - - - -

The measurement amount of segment assets is not provided to the chief operating decision-maker. Therefore, in accordance with EITF 99-151 of ROC Accounting Research and Development Foundation, the measurement amount of segment assets that should be disclosed is zero.

4) Reconciliation for segment profit (loss)

A reconciliation of Loss for reportable segments to profit (loss) before tax and discontinued operations is provided as follows:


2012 2011

Loss for reportable segments ( $ 498,522 ) ( $ 988,974 )

Unallocated: Investment income accounted for under the equity method 878,210 971,158 Gain on disposal of investments 42,184 19,855 Other income 462,387 522,689 Profit before tax and discontinued operations $ 884,259 $ 524,728

5) Information on product/service categories:


2012 2011

Sales $ 44,063,819 $ 45,834,139

Other revenue 443,990 470,011

$ 44,507,809 $ 46,304,150

121

6) Information by regions：

In 2012 and 2011, revenues and noncurrent assets from certain regions are listed below:

2012 2011

Revenue Assets-Noncurrent Revenue Assets-Noncurrent

Taiwan $ 288,940 $ 3,141,464 $ 350,033 $ 3,378,922

USA 21,360,936 197,272 20,864,916 260,564

Europe 9,455,203 170,992 11,321,512 176,169

Others 13,402,730 2,966,256 13,767,689 3,477,153

Total $ 44,507,809 $ 6,475,984 $ 46,304,150 $ 7,292,808

7) Major customer information:

In 2012 and 2011, the major customer information of the Company are listed below:


Customer Revenue Segment

Customer A $ 5,934,463 All Department

Customer B 17,508,131 All Department


Customer Revenue Segment

Customer A $ 8,810,197 All Department

Customer B 13,711,120 All Department

13.Disclosures relating to the adoption of IFRSs

Pursuant to the regulations of the Financial Supervisory Commission, Executive Yuan, R.O.C., effective January 1, 2013, a public company whose stock is listed on the Taiwan Stock Exchange Corporation or traded in the GreTai Securities Market should prepare financial statements in accordance with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), and relevant interpretations and interpretative bulletins that are ratified by the Financial Supervisory Commission.

The Company discloses the following information in advance prior to the adoption of IFRSs under the requirements of Jin-Guan-Zheng-Shen-Zi Order No. 0990004943 of the Financial Supervisory Commission, dated February 2, 2011:

122

A. Major contents and status of execution of the Company’s plan for IFRSs adoption: The Company has formed an IFRSs group and set up a plan relative to the Company’s transition to IFRSs. The major contents and status of execution of this plan are outlined below:

Working Items for IFRSs Adoption Status of Execution

1.Formation of an IFRSs group Done

2.Setting up a plan relative to the Company’s transition to IFRSs

Done

3.Identification of the differences between current accounting policies and IFRSs

Done

4.Identification of consolidated entities under the IFRSs framework

Done

5.Evaluation of the impact of each exemption and option on the Company under IFRS 1 – First-time Adoption of International Financial Reporting Standards

Done

6.Evaluation of needed information system adjustments Done

7.Evaluation of needed internal control adjustments Done

8.Establish IFRSs accounting policies Done

9.Selection of exemptions and options available under IFRS 1 – First-time Adoption of International Financial Reporting Standards

Done

10. Preparation of statement of financial position on the date of transition to IFRSs

Done

11. Preparation of IFRSs comparative financial information for 2012

Done

12. Completion of relevant internal control (including financial reporting process and relevant information system) adjustments

Done

B. Material differences that may arise between the current accounting policies used in the

preparation of financial statements and the IFRSs and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be used in the preparation of financial statements in the future and the impact of such differences are outlined below: The Company uses the IFRSs already ratified currently by the Financial Supervisory Commission and the “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be applied in 2013 as the basis for evaluation of material differences in accounting policies as mentioned above. However, the Company’s current evaluation results may be different from the actual differences that may arise when new issuances of or amendments to IFRSs are subsequently ratified by the Financial Supervisory Commission or relevant interpretations or amendments to the “Rules Governing the Preparation of Financial Statements by Securities Issuers” come in the future. Material differences identified by the Company that may arise between current accounting policies used in the preparation of financial statements and IFRSs and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be used in the preparation of financial statements in the future are set forth below:

123

1.Reconciliation for asset and liability on January 1, 2012

R.O.C. GAAP

Effect of transition from R.O.C. GAAP

to IFRSs

IFRSs

Remark

Deferred income tax assets-current

$ 480,836 ( $ 480,836 ) $ - (1)

Long-term investments under equity method

10,802,020 ( 66,341 ) 10,735,679 (3)

Available-for-sale financial assets-noncurrent

742,470 353,720 1,096,190 (2)

Financial assets carried at cost-noncurrent

1,548,488 ( 272,865 ) 1,275,623 (2)

Property, plant and equipment-net

5,052,309 ( 26,153 ) 5,026,156 (4)

Investment property - 1,020,280 1,020,280 (4)

Intangible assets 974,902 ( 122,834 ) 852,068 (5)

Deferred income tax assets-noncurrent

150,574 818,669 969,243 (1)

Other assets 1,265,596 ( 871,292 ) 394,304 (4)

Other 30,404,717 - 30,404,717

Total assets $ 51,421,912 $ 352,348 $51,774,260

Accrued expenses $ 3,536,272 $ 32,765 $ 3,569,037 (6)

Deferred income tax liabilities-current

10,518 ( 10,518 ) - (1)

Accrued pension liabilities

91,360 86,947 178,307 (7)

Deferred income tax liabilities-noncurrent

41,363 328,000 369,363 (1)

Other 17,631,369 - 17,631,369

Total liabilities $ 21,310,882 $ 437,194 $21,748,076

Capital surplus $ 4,398,329 ( $ 114,911 ) $ 4,283,418 (3)(8)

Unappropriated earnings

7,002,683 ( 126,073 ) 6,876,610 (9)


65,819 156,138 221,957 (2)(3)

Other 18,644,199 - 18,644,199

Total stockholder’s equity

$ 30,111,030 ( $ 84,846 ) $30,026,184

124

2.Reconciliation for asset and liability on December 31, 2012

R.O.C. GAAP


to IFRSs

IFRSs

Remark

Deferred income tax assets-current

$ 357,779 ( $ 357,779 ) $ - (1)

Long-term investments under equity method

10,922,591 ( 118,562 ) 10,804,029 (3)

Available-for-sale financial assets-noncurrent

763,323 382,395 1,145,718 (2)

Financial assets carried at cost-noncurrent

1,525,695 ( 316,525 ) 1,209,170 (2)

Property, plant and equipment-net

4,512,012 ( 24,732 ) 4,487,280 (4)

Investment property - 1,007,651 1,007,651 (4)

Intangible assets 791,022 ( 139,086 ) 651,936 (5)

Deferred income tax assets-noncurrent

29,484 623,014 652,498 (1)

Other assets 1,172,951 ( 843,834 ) 329,117 (4)

Other 23,308,771 - 23,308,771

Total assets $ 43,383,628 $ 212,542 $ 43,596,170

Accrued expenses $ 2,934,978 $ 38,879 $ 2,973,875 (6)

Accrued pension liabilities

93,767 99,412 193,179 (7)

Deferred income tax liabilities-noncurrent

117,120 241,725 358,845 (1)

Other 10,449,765 - 10,449,765

Total liabilities $ 13,595,630 $ 380,016 $ 13,975,646

Capital surplus $ 4,471,454 ( $ 83,817 ) $ 4,387,637 (3)(8)

Unappropriated earnings

7,191,580 ( 180,453 ) 7,011,127 (9)


177,616 96,796 274,412 (2)(3)

Minority interest 1,911 - 1,911

Other 17,945,437 - 17,945,437

Total stockholder’s equity

$ 29,787,998 ( $ 167,474 ) $29,620,524

125

3.Reconciliation for income for the year ended December 31, 2012

R.O.C. GAAP


to IFRSs

IFRSs

Remark

Operating revenues-net $ 44,507,809 $ - $ 44,507,809

Operating costs ( 38,404,907 ) ( 396,115 ) ( 38,801,022 ) (10)

Operating expenses ( 6,601,424 ) 391,179 ( 6,210,245 ) (6)(7)

Non-operating gain and losses

1,382,781 ( 8,926 ) 1,373,855 (3)(8)


$ 884,259 ( $ 13,862 ) $ 870,397

Income tax expense ( 294,343 ) 712 ( 293,631 )

Income after income tax

$ 589,916 ( $ 13,150 ) $ 576,766

(1) In accordance with current accounting standards in R.O.C., a deferred tax asset

or liability should, according to the classification of its related asset or liability, be classified as current or noncurrent. However, a deferred tax asset or liability that is not related to an asset or liability for financial reporting should be classified as current or noncurrent according to the expected time period to realize or settle a deferred tax asset or liability. However, under IAS 1, “Presentation of Financial Statements”, an entity should not classify a deferred tax asset or liability as current. Therefore, the Company reclassified deferred income tax assets and liabilities-current to deferred income tax assets and liabilities-noncurrent.

(2) In accordance with the amended “Rules Governing the Preparation of Financial Statements by Securities Issuers”, dated July 7, 2012, unlisted stocks and emerging stocks held by the Company should be measured at cost and recognized in “Financial assets carried at cost”. However, in accordance with IAS 39, “Financial Instruments: Recognition and Measurement”, investments in equity instruments without an active market but with reliable fair value measurement (i.e. the variability of the estimation interval of reasonable fair values of such equity instruments is insignificant, or the probability for these estimates can be made reliably) should be measured at fair value. Therefore, the Company designated such financial assets measured at cost as ‘Available-for-sale financial assets’ and increased (decreased) other comprehensive income, which was the difference between the fair value and the carrying amount, at the transition date in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” amended on December 22, 2011.

(3) Current accounting standards in R.O.C. do not prescribe that the investor and the associate should use uniform accounting policies in the preparation of financial statements. However, in accordance with IAS 28, “Investments in Associates”, an associate should use uniform accounting policies as the investor in the preparation of its financial statements for like transactions and other events in similar circumstances; otherwise, the associate’s financial statements should be adjusted to reflect the investor’s accounting policies for the purpose of applying the equity method. Therefore, the Company has adjusted the accounting treatments of its investees accounted for under the equity method that were inconsistent with its accounting treatments.

126

(4) In accordance with current accounting standards in R.O.C., the Company’s property that is leased to others is presented in ‘Other assets’ account. In accordance with IAS 40, “Investment Property”, property that meets the definition of investment property is classified and accounted for as ‘Investment property’. Therefore, the Company reclassified certain leased assets and idle assets to ‘investment property’.

(5) The current accounting standards in R.O.C. specify that royalties paid on acquisition of land use right shall be presented as ‘Intangible assets’. However, IAS 17, ‘Leases’, specifies that royalties on land use right, which meets the definition of long-term operating lease, shall be presented as ‘Long-term rental prepayment’. Therefore, the Company reclassified the related amounts.

(6) The current accounting standards in R.O.C. do not specify the rules on the cost recognition for accumulated unused compensated absences. The Company recognizes such costs as expenses upon actual payment. However, IAS 19, “Employee Benefits”, requires that the costs of accumulated unused compensated absences should be accrued as expenses at the end of the reporting period. Therefore, the Company increased accrued expenses and decreased retained earnings and recognized related deferred income tax assets at the date of transition to IFRSs.

(7) (a)The Company has elected to recognise all cumulative actuarial gains and losses relating to all employee benefit plans in ‘retained earnings’ at the transition date in accordance with IFRS 1, ‘First-time Adoption of International Financial Reporting Standards’. Therefore, the Company increased accrued pension liabilities and decreased retained earnings.

(b)The discount rate used to calculate pensions shall be determined with reference to the factors specified in R.O.C. SFAS 18, paragraph 23. However, IAS 19, “Employee Benefits”, requires an entity to determine the rate used to discount employee benefits with reference to market yields on high quality corporate bonds that match the currency at the end day of the reporting period and duration of its pension plan; when there is no deep market in corporate bonds, an entity is required to use market yields on government bonds (at the end day of the reporting period) instead.

(c)In accordance with current accounting standards in R.O.C., actuarial pension gain or loss of the Company is recognized in net pension cost of current period using the ‘corridor’ method. However, IAS 19, “Employee Benefits”, requires that actuarial pension gain or loss should be recognized immediately in other comprehensive income.

(8) The Company has elected not to apply the requirements in IFRS 3, ‘Business Combinations’, retrospectively to investments in associates that occurred prior to the date of transition to IFRSs, and has adjusted the retained earnings on the date of transition to IFRSs for the capital surplus under ROC GAAP that did not meet the regulations of IFRSs.

(9) Amount of retained earnings adjusted due to the transition to IFRSs. (10) Under ROC GAAP, post-sale service costs shall be presented in ‘selling

expenses’. However, under IFRSs, these costs shall be presented in ‘operating costs’. Therefore, the Company reclassified the related amounts.

C. The Company has elected the following exemptions in accordance with IFRS 1, “First-time Adoption of International Financial Reporting Standards” and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that are expected to be applicable in 2013: (1) Business combinations

127

The Company has elected not to apply the requirements in IFRS 3, “Business Combinations”, retrospectively to business combinations that occurred prior to transition to IFRSs. This exemption is also applied to the investments in associates acquired before the date of transition to IFRSs.

(2) Share-based payment transactions The Company has elected not to apply the requirements in IFRS 2, “Share-based Payment”, retrospectively to equity instruments arising from share-based payment transactions prior to transition to IFRSs.

(3) Employee benefits The Company has elected to recognize all cumulative actuarial gains and losses for all employee benefit plans in ‘retained earnings’ at the opening IFRS balance sheet date, and to disclose the information of present value of defined benefit obligation, fair value of plan assets, gain or loss on plan assets and experience adjustments under the requirements of paragraph 120A (P), IAS 19, “Employee Benefits”, based on their prospective amounts for financial periods from the opening IFRS balance sheet date.

(4) Compound financial instruments The Company has elected not to segregate between liability components and equity components of compound financial instruments whose liability components were not outstanding at the opening IFRS balance sheet date.

(5) Designation of previously recognized financial instruments The Company has elected to designate certain financial assets carried at cost as ‘Available-for-sale financial assets’.

(6) Borrowing costs The Company has elected to apply the transitional provisions in paragraphs 27 and 28 of IAS 23, “Borrowing Costs”, amended in 2007 from the opening IFRS balance sheet date.

The selections of exemptions above may differ from the actual selections due to relevant regulations released by competent authorities, the change in economic environment, and the changes in the evaluation of the impact of the Company’s selection of exemptions.

128

Seven. Important Notice

I. Information on affiliates

(I) Consolidated report on the operation of affiliates 1. Organizational Chart of Affiliates

100% 70%

100% 100%

100% 100% 100% 100% 100%

100% 100% 100% 100%

100%

MiTAC Star

Service Ltd.

100% 100%

Start Well

Technology

Ltd.

100%

MiTAC

Service

(ShangHai)

Co., Ltd.

Software

Insights Ltd.

Tyan Computer

Corporation - USA

Strength Value Ltd.

Bright Crown

Management Ltd. Huge

Extent Ltd.

Dynamic

Star

Investments

Ltd.

Pacific China

100%

See the next

page

100%

100%


100% 100%100%

MiTAC Electronics

(Foshan) Co., Ltd.

Foreground

Technology Ltd.

100%

DLC Technology

Corp.

Tsu Fung

Investment

Corp.

Mio

Technology

Corp. SUIIO Inc

Mitac

Information

Technology Ltd.

MiTAC

Computer

(Kunshan)

Co., Ltd.

Mitac

Computer

(Shunde)

Co., Ltd.

MiTAC Logistic

Service

(KunShan) Ltd.

MiTAC

Technology

(KunShan)

Co., Ltd.

MiTAC

Research

(ShangHai)

Co., Ltd.

MiTAC

Innovation

(Kun Shan)

Co., Ltd.


129

100%

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

100% 100% 100% 100% 100% 100%

100% 100%

Mio

Technology

GmbH

蘇州宇達電通蘇州宇達電通蘇州宇達電通蘇州宇達電通

有限公司有限公司有限公司有限公司

MiTAC

Pacific

(H.K.) Ltd.

MiTAC

Logistics

Corporation

MiTAC

Japan

Corp.

MiTAC

Information

Systems

Corp.

神達電腦股份有限公司

MiTAC

(U.K.)

Ltd.

Sky Universe

Enterprise Ltd.

System

Glory

International

Ltd.

Top Sheen

Enterprises

Ltd.

Mitac Digital

Corporation


Best Profit Ltd.

Mio

International

Ltd.

MiTAC

Europe Ltd.

Booming

Enterprises

Inc.

Great

Rich Ltd.

MiTAC

Benelux

N.V.

Magicmate

Group Ltd.

MiTAC

Australia Pty

Ltd.

Navman

Technology

NZ Ltd.


Mio

Technology

(Suzhou) Ltd

130

2. Basic information of all subsidiaries and affiliates:

Currency: 1,000NTD

Enterprise name Date of

incorporation Address Paid-in capital Principal business or running items

Tsu Fung Investment Corp. Feb. 16, 1998 10/F, No. 77. MinSheng East Road Section III, Taipei NT$1,285,847 General Investment

Silver Star Developments Ltd. Jun. 05, 1990 P.O. Box 71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands US$215,495 General Investment

MiTAC Japan Corp. Apr. 30, 1983 Yasuda Shibaura-building No2 3F, Kaigan 3-2-12, Minato-ku, Tokyo, Japan 108-0022 YEN 50,000 Sales of communication, computer peripherals, software and hardware and post-delivery maintenance and repair service

MiTAC Benelux N.V. Sept. 13, 1993 Z5 Mollem 318 - 1730 Asse (Mollem), Belgium EUR 1,618 Sales of communication products and related post-delivery service

MiTAC (U.K.) Ltd. Nov. 21, 2000 Mitac House, Nedge Hill, Telford, Shropshire TF3 3AH, U.K. GBP 524 Post-delivery maintenance and repair service and provide related technical consultation service

MiTAC Pacific (H.K.) Ltd. Jun. 13, 1991 20th Floor, Sunning Plaza 10 Hysan Avenue Causeway Bay, Hong Kong US$10 Sales of computer peripherals, software and hardware and related products

System Glory International Ltd. Oct. 25, 1995 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$0 General Investment

Pacific China Corp. Dec. 27, 1996 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$120,924 General Investment

MiTAC Star Service Ltd. Jan. 12, 2001 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$74,500 General Investment

Software Insights Ltd. Jul. 18, 2000 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$5,200 General Investment

MiTAC Computer (Kunshan) Co., Ltd. Nov. 01, 2000 No.269, No.2 Avenue, Export Processing Zone Kunshan, Jiangsu CNY 304,321 Production of communication, computer and peripheral products, software and hardware and related products, sales of own products.

MiTAC Service (ShangHai) Co., Ltd. Oct. 11, 2001 2nd Floor, No.129 Fute RD(N.), Waigaoqiao Free Trade Zone, Shanghai, China CNY 8,277

Testing, maintenance, display of computer parts and components and related products, and technical consultation and post-delivery service of related products.

MiTAC Computer (Shunde) Ltd. Jan. 18, 1993 No .1, Shunda Road, Lunjiao Street, ShunDe District, Foshan City, Guangdong CNY 616,837

Production of mainboard, motherboard, interface cards, display card, power supply, keyboards, related metal molding parts, plastic parts, and repair of motherboard.

MiTAC Research (ShangHai) Ltd. Nov. 23, 2004 No.213, Jiang Chang San Road, Zha Bei District, Shanghai CNY 43,040 R&D, production of computer software, sales of own products and related technical consultation service.

Mio Technology Corp. Jan. 17, 2000 10/F, No. 209, NanGang Road, Section 1, Nan Gang, Taipei NT$20,000 Sales of communication products and related post-delivery service

Start Well Technology Ltd. Apr. 20, 2000 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$29,900 General Investment

Dynamic Star Investments Ltd. Nov. 28, 2001 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$550 General Investment

MiTAC Technology (KunShan) Co., Ltd. Jan. 28, 2002 No.269, No.2 Avenue, Export Processing Zone Kunshan, Jiangsu CNY 8,277

Testing, maintenance, display of computer parts and components and related products, and technical consultation and post-delivery service of related products.

Mio International Ltd. Feb. 06, 2004 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$1,275 Sales of communication related products

Magicmate Group Ltd. Jul. 27, 2006 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$111 General Investment

Huge Extent Ltd. Jun. 22, 2006 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$8,000 General Investment

Booming Enterprises Inc. May. 18, 2006 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$7,800 General Investment

MiTAC Australia Pty Ltd. Mar. 06, 2007 Suite 2, 408 Victoria Rd, Gladesville NSW 2111 Australia AUD 127 Sales of communication products and related

131

Enterprise name Date of

incorporation Address Paid-in capital Principal business or running items

post-delivery service

Navman Technology NZ Ltd. Mar. 06, 2007 7-11 Kawana Street, Northcote Auckland, New Zealand NZD 140 Sales of communication products and related post-delivery service

MiTAC Europe Ltd. May. 10, 2001 Spectrum House, Beehive Ring Road, London Gatwick Airport, RH6 0LG, UNITED KINGDOM EUR 6,665 Sales of communication products and related post-delivery service

DLC Technology Corporation Jun. 20, 2007 1/F, No. 40, WenHua 2nd Road, GuiShan, Taoyuan County NT$66,000 R&D, production of computer software, sales of own products and related technical consultation service.

Mio Technology (Suzhou) Ltd. Dec. 04, 2003 No. 300, Di Yi Da Dao, Kunshan Development Zone, Jiangsu Province. CNY 1,960 Sales of communication products and related post-delivery service

Foreground Technology Ltd. Jun. 05, 2002 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$9,045 General Investment

Tyan Computer Corporation - USA Jul. 17, 1989 3288 Laurelview Ct., Fremont, CA 94538 U.S.A. US$3,950 Sales of computer peripherals, software and hardware and related products

Mio Technology GmbH Dec. 03, 1998 Einsteinstr. 14 85716 Unterschleißheim Germany EUR 26 Sales of communication products and related post-delivery service

Top Sheen Enterprises Ltd. Jan. 23, 2003 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$20,440 General Investment

Best Profit Ltd. Jan. 03, 2007 Scotia Centre, 4th Floor., P.O. Box 2804, George Town, Grand Cayman KY1-1112, Cayman Islands US$37,131 General Investment

Bright Crown Management Ltd. Mar. 13, 2007 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$700 General Investment

Sky Universe Enterprise Ltd. Mar. 13, 2007 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$100 General Investment

MiTAC Logistics Corporation Apr. 17, 2007 3288 Laurelview Ct., Fremont, CA 94538 U.S.A. US$100 Sales of computer peripherals, software and hardware and related products

Great Rich Ltd. Jan. 08, 2007 Scotia Centre, 4th Floor, P.O.Box 2804, George Town, Grand Cayman KY1-1112, Cayman Islands US$2,115 General Investment

MiTAC Logistic Service (KunShan) Ltd. Mar. 17, 2008 No. 269, Di-er Da Dao, Kunshan Export Processing Zone CNY 6,821 Shipping agent, import/export, and warehouse service.

MiTAC Digital Corporation Nov. 21, 2008 471 El Camino Real, Santa Clara, CA 95050 USA US$45,000 Sales of communication products and related post-delivery service

Mitac Information Technology Ltd. Nov. 19, 2009 No. 300, Di Yi Da Dao, Kunshan Development Zone, Jiangsu Province. CNY 2,048

Post-delivery maintenance, testing, consultation service of computers, communication products and consumer electronics and related technical services. Establish customer service center, provide professional data processing, analysis and integration service and ERP service.

Strength Value Ltd. May. 25, 2010 P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands US$0 General Investment

MiTAC Information Systems Corp. Jul. 08, 2010 44131 Nobel Dr., Fremont, CA 94538 U.S.A. US$3,000 Assembly, sales of computer peripherals, software and hardware and related products

MiTAC Innovation (KunShan) Ltd. Jan. 21, 2011 No. 300, Di Yi Da Dao, Kunshan Development Zone, Jiangsu Province. CNY 6,571

R&D of computers, servers, cell phone, portable personal digital device and GPS navigation devices, transfer of technologies, technical consultation of related inventions and technical services.

MiTAC Electronics (Foshan) Co., Ltd. Sep. 11, 2012 4th Floor, Building S6, No. 1 Factory, Shunda Road, Lunjiao St., Shunde District, Foshan City CNY 25,590 Production of computer motherboards, motherboards and adapter cards

SUIIO Inc. Sep. 21, 2011 No.165, Sec. 2, Xi’an St., Beitou Dist., Taipei City NT$1,667 Information software services, retailing

132

3. Information on the same shareholder deemed as controlling or in a parent-subsidiary relationship: none.

4. The industries in which the affiliates operate and the linkage between the affiliates

Industry Name of subsidiary/affiliate Connection with other subsidiaries/affiliates in business operation

Manufacturing and sales of PC and

communication products

MiTAC Computer (Kunshan) Co., Ltd. Production and sales of MiTAC products

MiTAC Computer (Shunde) Ltd. Production and sales of MiTAC products

MiTAC Electronics (Foshan) Co., Ltd. Production and sales of MiTAC products

Investment and Holding Companies

Silver Star Developments Ltd. Investment in overseas subsidiaries for the production and sales of MiTAC products with post-delivery service

System Glory International Ltd. General Investment

Pacific China Corp. Investment in overseas subsidiaries for the production and sales of MiTAC products with post-delivery service

Software Insights Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Start Well Technology Ltd. Investment in overseas subsidiaries for the production and sales of MiTAC products with post-delivery service

MiTAC Star Service Ltd. Investment in overseas subsidiaries for the production and sales of MiTAC products with post-delivery service

Dynamic Star Investments Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Magicmate Group Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Huge Extent Ltd. General Investment

Booming Enterprises Inc. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Foreground Technology Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Top Sheen Enterprises Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Best Profit Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Bright Crown Management Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Sky Universe Enterprise Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Great Rich Ltd. Investment in overseas subsidiaries for the sales of MiTAC products with post-delivery service

Strength Value Ltd. General Investment

Tsu Fung Investment Corp. General Investment

Technical Service

MiTAC Research (ShangHai) Ltd. R&D, production of computer software, sales of own products and related technical

consultation service.

DLC Technology Corporation R&D, production of computer software, sales of own products and related technical consultation service.

MiTAC Technology (KunShan) Co., Ltd. Post-delivery maintenance and repair services on MiTAC products and provide related technical consultation services

MiTAC Service (ShangHai) Co., Ltd. Post-delivery maintenance and repair services on MiTAC products and provide related technical consultation services

Mitac Information Technology Ltd. Post-delivery maintenance and repair services on MiTAC products and provide related technical consultation services

MiTAC (U.K.) Ltd. Post-delivery maintenance and repair services on MiTAC products and provide related

technical consultation services

MiTAC Innovation (KunShan) Ltd. R&D, production of computer software, sales of own products and related technical consultation service.

SUIIO Inc. Information software services, retailing

Trading

MiTAC Pacific (H.K.) Ltd. Sales of MiTAC products and provide post-delivery service

Mio Technology Corp. Sales of MiTAC products and provide post-delivery service

MiTAC Japan Corp. Sales of MiTAC products and provide post-delivery service

MiTAC Benelux N.V. Sales of MiTAC products and provide post-delivery service

Mio International Ltd. Sales of MiTAC products

Mio Technology (Suzhou) Ltd. Sales of MiTAC products and provide post-delivery service

MiTAC Australia Pty Ltd. Sales of MiTAC products and provide post-delivery service

Navman Technology NZ Ltd. Sales of MiTAC products and provide post-delivery service

MiTAC Europe Ltd. Sales of MiTAC products and provide post-delivery service

Tyan Computer Corporation - USA Sales of MiTAC products and provide post-delivery service

Mio Technology GmbH Sales of MiTAC products and provide post-delivery service

MiTAC Logistics Corporation Sales of MiTAC products and provide post-delivery service

MiTAC Digital Corporation Sales of MiTAC products and provide post-delivery service

Trading and assembly

MiTAC Information Systems Corp. Assembly and sales of MiTAC products and provide post-delivery service

Shipping agent and import/export trade

MiTAC Logistic Service (KunShan) Ltd. Shipping agent, import/export, and warehouse service.

133

5. Information on the Directors, Supervisors, and Presidents of the subsidiaries and affiliates

Enterprise name Titles Name or representative

Shareholding



Chairman MiTAC International Corp/Rep: Billy Ho 128,584,651 100%

Director MiTAC International Corp/Rep: Crystal Yang 128,584,651 100%

Director MiTAC International Corp/Rep: Chung Shu-Ling 128,584,651 100%

Supervisor MiTAC International Corp/Rep: Huang Hsiu-Ling 128,584,651 100%


Director Ho Jhi-Wu 0 0%

Director Yang Hsiang-Yun 0 0%

Director Yuan Chi-Ying 0 0%

MiTAC Japan Corp.



Director/President Toshihiko Hara 0 0%

Supervisor Hsiu-Ling Huang 0 0%

MiTAC Benelux N.V. Director Ho Jhi-Wu 0 0%


MiTAC (U.K.) Ltd. Director Ho Jhi-Wu 0 0%


MiTAC Pacific (H.K.) Ltd. Director Ho Jhi-Wu 0 0%


System Glory International Ltd.




Pacific China Corp.




MiTAC Star Service Ltd.




Software Insights Ltd.




MiTAC Computer (Kunshan) Co., Ltd.

Chairman Start Well Technology Ltd./Rep: Percy Chen N/A 100%

Director Start Well Technology Ltd./Rep: Chang Yao-Chun N/A 100%

Director Start Well Technology Ltd./Rep: King Chen N/A 100%

Director/President Start Well Technology Ltd./Rep: Wu Shun-Huang N/A 100%

Supervisor Huang Hsiu-Ling N/A 0%

MiTAC Service (ShangHai) Co., Ltd.

Chairman Pacific China Corp. /Rep: Billy Ho N/A 100%

Director/President Pacific China Corp. /Rep: Percy Chen N/A 100%

Director Pacific China Corp. /Rep: King Chen N/A 100%

MiTAC Computer (Shunde) Ltd.

Chairman MiTAC Star Service Ltd./Rep: Michael Lin N/A 100%

Vice chairman MiTAC Star Service Ltd./Rep: J.J. Huang N/A 100%

Director/President MiTAC Star Service Ltd./Rep: Chen Chien-Hung N/A 100%


MiTAC Research (ShangHai) Ltd.

Chairman Software Insights Ltd./Rep: Billy Ho N/A 100%

Director/President Software Insights Ltd./Rep: Di-Yuan Yeh N/A 100%

Director Software Insights Ltd./Rep: Crystal Yang N/A 100%

Mio Technology Corp.


Director MiTAC International Corp/Rep: James Juan 2,000,000 100%

Director/President MiTAC International Corp/Rep: King Chen 2,000,000 100%

Supervisor MiTAC International Corp/Rep: Huang Hsiu-Ling 2,000,000 100%

Start Well Technology Ltd.




Dynamic Star Investments Ltd.




MiTAC Technology (KunShan) Co., Ltd.

Chairman Dynamic Star Investments Ltd./Rep: Billy Ho N/A 100%

Director Dynamic Star Investments Ltd./Rep: King Chen N/A 100%

Director/President Dynamic Star Investments Ltd./Rep: Percy Chen N/A 100%


Mio International Ltd. Director Ho Jhi-Wu 0 0%

134


Shareholding




Magicmate Group Ltd.




Mio Technology Korea Director Ho Jhi-Wu 0 0%


Huge Extent Ltd.




Booming Enterprises Inc.




MiTAC Australia Pty Ltd.



Director Liu Fung Kiu 0 0%

Navman Technology NZ Ltd. Director Ho Jhi-Wu 0 0%


MiTAC Europe Ltd. Director Ho Jhi-Wu 0 0%


DLC Technology Corporation


Director MiTAC International Corp/Rep: James Juan 6,600,000 100%

Director MiTAC International Corp/Rep: King Chen 6,600,000 100%

Supervisor MiTAC International Corp/Rep: Crystal Yang 6,600,000 100%

Mio Technology (Suzhou) Ltd.

Chairman Mio International Ltd./Rep: Billy Ho N/A 100%

Director Mio International Ltd./Rep: James Juan N/A 100%

Director Mio International Ltd./Rep: King Chen N/A 100%


President Di-Yuan Yeh N/A 0%

Foreground Technology Ltd.




Tyan Computer Corporation - USA Director Ho Jhi-Wu 0 0%

Director Robert Chen 0 0%

Mio Technology GmbH Director Ho Jhi-Wu 0 0%


Top Sheen Enterprises Ltd.




Best Profit Ltd.




Bright Crown Management Ltd.




Sky Universe Enterprise Ltd.




MiTAC Logistics Corporation



Director/Vice President Robert Chen 0 0%

Great Rich Ltd.




MiTAC Logistic Service

(KunShan) Ltd.

Chairman Bright Crown Management Ltd./Rep: Billy Ho N/A 100%

Director Bright Crown Management Ltd./Rep: Percy Chen N/A 100%

Director Bright Crown Management Ltd./Rep: King Chen N/A 100%


President Wu Shun-Huang N/A 0%

MiTAC Digital Corporation Director Ho Jhi-Wu 0 0%

Director/President Fong Shu-Chi 0 0%

135


Shareholding


Director Hsiang-Yun 0 0%

Mitac Information Technology Ltd.

Chairman Bright Crown Management Ltd./Rep: Billy Ho N/A 100%

Director Bright Crown Management Ltd./Rep: Percy Chen N/A 100%

Director/President Bright Crown Management Ltd./Rep: King Chen N/A 100%


Strength Value Ltd.




MiTAC Information Systems Corp.



Director Robert Chen 0 0%

Director/President Charlotte C.Y. Chou 0 0%

MiTAC Innovation (KunShan) Ltd.

Chairman Software Insights Ltd./Rep: Billy Ho N/A 100%

Director/President Software Insights Ltd./Rep: Di-Yuan Yeh N/A 100%

Director Software Insights Ltd./Rep: Michael Lin N/A 100%

Supervisor Crystal Yang N/A 0%

MiTAC Electronics (Foshan) Co., Ltd.

Director/President Software Insights Ltd./Rep: J.J. Huang N/A 100%

Vice chairman Software Insights Ltd./Rep: Billy Ho N/A 100%

Director Software Insights Ltd. /Rep: James Juan N/A 100%


SUIIO Inc.

Chairman MiTAC International Corp/Rep: Billy Ho 116,667 70%

Director MiTAC International Corp/Rep: Chang Yao-Chun 116,667 70%

Director Chang Po Lun 49,000 29.4%

Supervisor Yen Wen Ching N/A 0%

President Chang Yuan-Hsiang N/A 0%

136

6. The operation of the subsidiaries and affiliates: In thousands of New Taiwan Dollars

Enterprise name Capital Total assets Total

liabilities Net worth Revenue

Operating Income

Earnings in current period (after taxation)

EPS (after taxation)

MiTAC International Corp. 15,298,299 43,438,796 13,652,709 29,786,087 28,435,903 (559,625) 590,405 0.40

Tsu Fung Investment Corp. 1,285,847 1,426,784 419 1,426,365 65,592 54,863 54,654 0.43

Silver Star Developments Ltd. 6,257,987 27,616,356 13,048,483 14,567,873 46,175,234 (30,076) 729,180 3.38

MiTAC Japan Corp. 16,820 54,992 15,405 39,587 159,717 23,264 23,628 23,628.00

MiTAC Benelux N.V. 62,285 267,351 188,314 79,037 445,444 (4,851) (1,928) (29.55)

MiTAC (U.K.) Ltd. 24,518 15,324 882 14,442 14,620 2,054 2,677 5.35

MiTAC Pacific (H.K.) Ltd. 290 31,750 29,013 2,737 0 (195) 19 1.90

System Glory International Ltd. 0 226,319 27,656 198,663 0 0 9,418 9,418,000.00

Pacific China Corp. 3,511,629 3,625,410 0 3,625,410 0 0 9 0.00

MiTAC Star Service Ltd. 2,163,480 2,179,474 0 2,179,474 0 0 0 0.00

Software Insights Ltd. 151,011 156,421 29,040 127,381 0 0 0 0.00

MiTAC Computer (Kunshan) Co., Ltd.

1,417,921 3,767,269 1,956,924 1,810,345 6,069,886 (32,142) 8,341 N/A

MiTAC Service (ShangHai) Co., Ltd. 38,566 54,663 11,706 42,957 82,776 (1,790) (1,549) N/A

MiTAC Computer (Shunde) Ltd. 2,874,027 5,957,311 2,856,145 3,101,166 12,365,235 (110,370) (96,677) N/A

MiTAC Research (ShangHai) Ltd. 200,537 415,320 91,049 324,271 297,583 11,002 18,737 N/A

Mio Technology Corp. 20,000 23,639 215 23,424 66,834 333 3,424 1.71

Start Well Technology Ltd. 868,296 1,129,089 28,457 1,100,632 0 0 0 0.00

Dynamic Star Investments Ltd. 15,972 29,047 0 29,047 0 0 0 0.00

MiTAC Technology (KunShan) Co., Ltd.

38,565 85,393 18,402 66,991 57,432 593 2,106 N/A

Mio International Ltd. 37,026 1,607,763 1,555,769 51,994 6,306,238 0 0 0.00

Magicmate Group Ltd. 3,227 3,233 0 3,233 0 0 0 0.00

Huge Extent Ltd. 232,320 232,320 0 232,320 0 0 0 0.00

Booming Enterprises Inc. 226,512 44,931 9,444 35,487 0 0 997 0.13

MiTAC Australia Pty Ltd. 3,831 642,184 607,948 34,236 950,219 12,252 9,735 76.65

Navman Technology NZ Ltd. 3,340 141,209 58,005 83,204 246,620 10,151 8,588 61.34

MiTAC Europe Ltd. 256,536 289,142 1,117,068 (827,926) 1,370,185 (83,845) (90,666) (16.46)

DLC Technology Corporation 66,000 56,743 355 56,388 0 (41) 3,553 0.54

Mio Technology (Suzhou) Ltd. 9,132 40,273 33,036 7,237 93,807 (11,872) (10,869) N/A

Foreground Technology Ltd. 262,681 523,329 43 523,286 0 0 22,506 2.49

Tyan Computer Corporation - USA 114,717 732,217 226,944 505,273 2,145,735 33,515 22,446 22,446.00

Mio Technology GmbH 1,001 9,430 1,925 7,505 22,516 3,211 2,997 N/A

Top Sheen Enterprises Ltd 593,565 1,306,800 726,000 580,800 0 0 0 0.00

Best Profit Ltd. 1,078,291 887,268 0 887,268 0 0 989 0.03

Bright Crown Management Ltd. 20,328 37,752 17,424 20,328 0 0 0 0.00

Sky Universe Enterprise Ltd. 2,904 90,024 87,120 2,904 0 0 0 0.00

MiTAC Logistics Corporation 2,904 557,821 392,512 165,309 2,595,708 35,455 26,818 268.18

Great Rich Ltd. 61,420 16,452 0 16,452 0 0 0 0.00

MiTAC Logistic Service (KunShan) Ltd.

31,780 32,748 321 32,427 3,338 18 465 N/A

MiTAC Digital Corporation 1,306,800 2,218,965 2,038,508 180,457 2,639,407 (5,309) (10,504) (0.23)

Mitac Information Technology Ltd. 9,544 75,239 41,208 34,031 173,530 6,818 4,911 N/A

Strength Value Ltd. 0 0 0 0 0 0 0 0.00

MiTAC Information Systems Corp. 87,120 5,109,476 4,859,213 250,263 18,805,082 127,662 77,477 25,825.67

MiTAC Innovation (KunShan) Ltd. 30,614 47,705 10,577 37,128 72,552 2,968 5,111 N/A

MiTAC Electronics (Foshan) Co., Ltd.

119,231 119,494 437 119,057 0 (686) (175) N/A

SUIIO Inc. 1,667 6,863 492 6,371 426 (1,635) (1,632) (9.79)

Note 1: Related figures of the subsidiaries incorporated in foreign countries shall be denominated in NTD at the exchange rate between NTD and respective foreign currencies as of the day of reporting.

Note 2: The information on Silver Star Developments Ltd.-Consolidated is the consolidated information of this company and its subsidiaries. Note 3: At the exchange rate on December 31 2012: December 31 2012 Average

USD: 29.040 29.573 GBP: 46.830 46.872 EUR: 38.490 38.016 JPY: 0.336 0.371 RMB: 4.659 4.687 KRW: 0.027 0.026

AUD: 30.165 30.621 NZD: 23.860 23.950

137

(II) Consolidated financial statement of subsidiaries


Declaration of Consolidated Financial Statements of Affiliates The subsidiaries under our control and should be consolidated into the consolidated financial statements in year 2012 (from January 1, 2012 to December 31, 2012) according to “The Criteria for Compiling Consolidated Report on Operation, Financial Statements, and Report with Subsidiaries” and the subsidiaries that should be consolidated into the consolidated financial statements pursuant to SFAS No.7 are identical. Furthermore, information that should be disclosed in consolidated financial statements of affiliates have been disclosed in said financial statements. Therefore, our company will not compile another set of consolidated financial statements. Hereby declared

Company name: MiTAC International Corp. Representative: Matthew Miau

March 27, 2013

(III) Stakeholder Report: none

Documents

The company’s spokesman: Taiwan, R.O.C. Lin Kou …mitac.com/InvestorRelations/AnnualReport/2012annualReport.pdf · Financial analysis for the past ... specific assembly business