HTC 2007 Annual Report Download

Download and view the complete annual report

Please find the complete 2007 HTC annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

T
S
E: 2 4 9 8
w w w .ne w
m
o p s. t se.co
m
. t w
www.htc.co
m
Printed on May 20, 2008

Table of contents

  • Page 1
    TSE: 2498 www.newmops.tse.com.tw www.htc.com Printed on May 20, 2008

  • Page 2
    ... > Auditors Deloitte & Touche Auditors: Ming-Hsien Yang, Kwan-Chung Lai Add: 12F, No. 156, Min Sheng East Rd., Sec. 3, Taipei 105, Taiwan, R.O.C. Tel: +886-2-2545-9988 www.deloitte.com.tw > Overseas Stock Exchange Information Trading: Luxembourg Stock Exchange www.bourse.lu > HTC Website www.htc.com

  • Page 3
    A N N U A L RE P O RT

  • Page 4
    CO N TE N TS

  • Page 5
    ... > 36 Analysis of 2007 Business Operation Results > 36 Brand Strategies > 39 Research and Development Technologies > 43 Corporate Governance > 44 Major Suppliers/Customers Representing at Least 10% of Grosspurchase/Revenue for Most RecentTwo-Year Period > 44 Production and Sales for Most Recent Two...

  • Page 6
    I LETTER T O S H A RE H O LDERS

  • Page 7
    ... value of ongoing product innovation efforts and set the stage for enhanced competitiveness into the HTC sales growth last year reflected strong global demand for converged devices. This demand is fueled by new advances in wireless communications and related technologies that are delivering mobile...

  • Page 8
    ... customer loyalty, HTC is on track to developing a global brand that is emotive and inspiring - a brand set to create a new wave of competitive advantages that will benefit shareholders, HTC customers and employees alike. LETTER TO SHAREHOLDERS FINANCIAL OVERVIEW Consolidated revenue in 2007...

  • Page 9
    II I N TR O D U C TI O N

  • Page 10
    ...'s products, customers, and distributors. HTC's strong emphasis on product development and market sales have allowed it to form strategic partnerships with some of the world's top names in telecommunications and high technology. significantly expanding the company's capabilities to address global...

  • Page 11
    ... Microsoft® operating system designed specifically for consumer electronic products. HT Cho (thenPresident and now Board Director) and Peter Chou (then-Vice President and now CEO & President ), organized an HTC R&D team to develop and launch the world's first handheld PDA. This positive first step...

  • Page 12
    ... communications; they now offered information and entertainment on the move-a platform over which to plug into the world. It was at this stage that HTC began actively working with customers to develop test devices to help better understand the full range of customer telecommunication service needs...

  • Page 13
    ... converged devices built on the Microsoft Windows Mobile platform. Work includes the development of product styling/designs, operating systems, interface software, human-machine interfaces, and application software. In November 2007, HTC, in conjunction with Google, developed a mobile phone based on...

  • Page 14
    ... ODUCTI O N l BOARD OF DIRECTORS l BOARD OF SUPERVISORS l II BOARD OF SUPERVISORS INTRODUCTION BOARD OF DIRECTORS Cher Wang > Chairman > Chairman of the Compensation Committee H.T. Cho > Director > Member of the Compensation Committee Po-Cheng Ko > Supervisor Wen-Chi Chen > Director Shao-Lun...

  • Page 15
    ... > Global Operations Center al systems related to human resource development and management, hiring, salaries, training and HR services. The Center is responsible to plan out HTC's global production capabilities and factory AG M lA ud expansion work. The Center also conducts > Marketing The...

  • Page 16
    ... WORLDWIDE OFFICE LOCATIONS Statistics related to HTC human resources in Taiwan are shown in the following table: > Employees by Position Type numbered 5,569 in total, a 21.3% increase over the previous year that included 72 newlyhired managers, 787 new specialists and 35 new production-line...

  • Page 17
    III O VERVIE W

  • Page 18
    ... The wireless communications industry has experienced tremendous growth in recent years. In 2007, global mobile phone usage passed the three billion mark - equivalent to half the world's population - for the first time. In line with this strong market growth, product developers, wireless network...

  • Page 19
    ... of 2008 should begin affecting global converged device competition and sales from 2009 onward. Regarding raw material and component supplies, a survey published by Strategy Analytics reported a 10% growth in global sales of mobile phones in 2007, with total annual sales topping 1.12 billion units...

  • Page 20
    ... leverage HTC innovative product design capabilities to provide added value to its ODM customers. Key markets for HTC during 2007 continued to be Europe and the Americas. ODM business relationships were largely centered in the United States. In terms of total annual sales, the Americas accounted for...

  • Page 21
    ... entirely new management systems dedicated to supporting brand business needs. This strategy includes the creation of a global sales organization responsible to increase recognition of the HTC brand in all principal markets, improve product market access, and track the performance of key competitors...

  • Page 22
    ... to develop a strong relationship between a corporation and its consumers. For example, points in time when a consumer first hears about HTC, decides to learn more about HTC and its products, Success in transforming HTC's business model has meant that most growth has been centered on sales through...

  • Page 23
    ... development models in order to better reflect user needs and establish lasting competitive advantages. Leveraging years of consistent, innovative product research, we are now pursing a new business strategy framed around developing and marketing the HTC brand worldwide. • During 4Q 2007, revenue...

  • Page 24
    ... in Recent Years and To Date telecommunication product market, HTC will place increasing emphasis and investments on TDSCDMA and WiMAX technologies. NT$ millions OVERVIEW RESEARCH AND DEVELOPMENT TECHNOLOGIES Item R&D Expenses As a Percentage of Total Revenue Note: 2006 2,954 2.8% 2007 3,866...

  • Page 25
    ... assist board directors to implement their supervisory responsibilities. During 2007, to address risk management needs and accounting policy changes and raise the quality of company assets, HTC implemented relatively stricter control and assessment measures for warranty service provision, accounts...

  • Page 26
    ... shall be made in accordance with agreement terms. Authorizations cover GSM wireless communications technologies. Royalty payments shall be made based on production quantity, with the value of such defined in the agreement. (1) Authorization for digital communications patents based on TDMA and CDMA...

  • Page 27
    T H E C O R P O R A T E G O V E R N A N C E R E P O RT IV THE CORPORATE GOVERNANCE REPORT 48 49

  • Page 28
    ...) into the motherboard business while in the position of General Manager of the PC Division. Positions held concurrently in the company and/or in any other company > Chairman, VIA TECHNOLOGIES, INC. > Chairman (Representative), H.T.C.(B.V.I)Corp. > Director, HTC Social Welfare Foundation. > Chairman...

  • Page 29
    ... Shareholders Cher Wang Name of Juridical Person Shareholders Way-Chih Investment Co., LTD. THE CORPORATE GOVERNANCE REPORT > Major Shareholder(s) to The Company Listed in The Above Table Is on The Right Hand Column: Not applicable > Directors' and Supervisors' Information(II) Conditions Meet...

  • Page 30
    ... and New Zealand) Pty. Ltd. > Director (Representative), HTC Philippines Corp. > Director (Representative), HIGH TECH COMPUTER (SUZHOU) CO., LTD > Director (Representative), Hua-chuang Automobile Information Technical Center Co., Ltd. Positions held concurrently in any other company Managers Who...

  • Page 31
    ... name % 0.00% Principal work experience and academic (note 2) qualifications > EMBA, Business Management, National Chengchi University. > Director, Accounting, LITE-ON TECHNOLOGY CORP. > Manager, Financial Analysis,Motorola. Positions held concurrently in any other company > Director, HTC Social...

  • Page 32
    ... Consolidated Entities (note 7) Cash HTC Stock Employee profit sharing (E ) (note 5) All Consolidated Entities (note 7) THE CORPORATE GOVERNANCE REPORT Title (note1) General Counsel Name Grace Lei Date Elected shares 05/08/2007 82,500 Shareholding (note3) % 0.01% shares 3,900 Spouse & Minor...

  • Page 33
    ... affiliates 2007; Unit: thousand shares; NT$ thousands THE CORPORATE GOVERNANCE REPORT Remuneration Paid to Directors Name Scale of remunerations to directors of the Company Under NT$ 2,000,000 Total Remuneration (A+B+C) HTC Cher Wang, HT Cho, Wen-Chi Chen Chen-Kuo Lin, Yue-Jiang Yu, Hong-Chung...

  • Page 34
    ...affiliates Exercisable Employee Stock Options (note 4) THE CORPORATE GOVERNANCE REPORT > Compensation Paid to President and Vice Presidents 2007;Unit: thousand shares; NT$ thousands Salary (A) (note 1) HTC Title Chief Executive Officer & President Chief Operating Officer Chief Financial Officer...

  • Page 35
    ...,000 in cash bonus and NTD THE CORPORATE GOVERNANCE REPORT > Employee Profit Sharing Granted to Management Team 2007; Unit: thousand shares; NT$ thousands Manager Title Chief Executive Officer & President Chief Operating Officer Chief Financial Officer & Spokesman Accounting Director Associate...

  • Page 36
    ...of the month following the end of each quarter, it announces its preliminary revenue figures, while also convening online investor conferences on a regular, quarterly basis to allow investors timely access to information on company operations and performance in each quarter. HTC's investor relations...

  • Page 37
    ... meetings, and audit reports. HTC plans to set up a supervisors' mailbox for the convenience of employees in communicating directly with supervisors. > HTC provides detailed contact information, including telephone numbers and email address, in the "contact us" space on its corporate website...

  • Page 38
    ... officers for the period of the 2007 fiscal year up to the date of annual report publication can be found in Appendixes 1 and 2. (2) Status of liability insurance provided by HTC for directors and supervisors: 3/12/2008 3/12/2008 Accounting Research and Development Foundation in Taiwan Financial...

  • Page 39
    ....htc.com. (5) Other important information helpful to understanding the company's corporate governance may also be disclosed. (6) The section on the state of implementation of the company's internal control system shall furnish the following: 72 High Tech Computer Corp. > Chairman: Cher Wang Where...

  • Page 40
    ... separately purchase the principal assets of a directly held subsidiary of Dopod International Inc. in Taiwan, Hong Kong, Singapore, and Australia for a total acquisition cost of US$12,216,000. The deal was closed in F ebruary 2008. Board of directors meeting 6/19/2007 1. Adopted resolution to...

  • Page 41
    ... shall be disclosed. HTC did not change its accounting firm. Disclose the information (Other matters required for disclosure under Article 10, subparagraph 5, item 1, point 4 of the Regulations Governing Information to be Published in Annual Reports of Public Companies). Negative Description None...

  • Page 42
    ... pledged amounts are applicable from the date the post was assumed. Note 6: On 26 September 2007 Jason Mackenzie was made a new managing director; the disclosures regarding increases or decreases in shares and pledged amounts are applicable from the date the post was assumed. Note 7: On 1 December...

  • Page 43
    ...SHARES PLEDGED l RELATED PARTIES l IV 7. WHETHER ANY OF THE COMPANY'S 10 LARGEST SHAREHOLDERS ARE RELATED PARTIES AS DEFINED UNDER THE STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 6 Price Name (note 1) Way-Chih Investment Co., LTD. THE CORPORATE GOVERNANCE REPORT (2) Stock Transfer Information...

  • Page 44
    ...100% 8. THE TOTAL NUMBER OF SHARES AND TOTAL EQUITY STAKE HELD IN ANY SINGLE ENTERPRISE BY THE COMPANY, ITS DIRECTORS ANDSUPERVISORS, MANAGERS, AND ANY COMPANIES CONTROLLED EITHER DIRECTLY OR INDIRECTLY BY THE COMPANY 03/31/2008 Unit: share: dollar: % Long-term investments (note) H.T.C(B.V.I) Corp...

  • Page 45
    ... Supervisory Commission Executive Yuan. Unit: Share Authorized Capital Type of Stock Common stock Outstanding shares 573,133,736 Unissued Shares 76,866,264 Total 650,000,000 Remark 16,000,000 shares are reserved for the holders of stock warrants, preferred shares with warrants, or corporate bonds...

  • Page 46
    ... HTC Depositary Receipts Special Account under custodial administration of Citibank N.A. Kuan Tseng Investment Co., Ltd. (5) Provide Share Prices for The Past Two Fiscal Years, Together with The Company's Net Worth Per Share, Earnings Per Share, Dividends Per Share, and Related Information: Year...

  • Page 47
    ...shall be prescribed by the board of directors. • For any remainder, the board of directors shall propose allocation ratios based on the dividend policy set forth in paragraph 2 of this Article and Company is not required to make public Company's 2008 financial forecast information; therefore it is...

  • Page 48
    ...,000 shares; Ratio of total stock bonus as employee bonus to total stock dividends from retained earnings (%) : 5.66224%. 4. GLOBAL DEPOSITORY RECEIPTS 04/30/2008 Item Issuing Date Issuance & Listing Total amount Offering price per GDR Units issued Underlying securities Common shares represented...

  • Page 49
    ... companies: None • After issuing 3 million units, HTC capitalized undistributed earnings and employee bonuses through the issuance of new shares. It therefore adjusted the number and price of the warrants, in accordance with the company's Bylaws for the Issuance and Exercise of Employee Stock...

  • Page 50
    ... After appropriation Unrealized loss on financial instruments Cumulative translation adjustments Net loss not recognized as pension cost Treasury stock Total stockholders' equity Before appropriation After appropriation * Subject to change after shareholders' meeting resolution 2007 83,172,719...

  • Page 51
    ... AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS (2) Abbreviated Income Statements NT$ thousands (Except EPS:NT$) Item Revenues Gross profit Operatng income Non operating income and gains Non operating expenses and losses Income from continuing operations before income tax Income from continuing...

  • Page 52
    ... return on assets: The reduction resulted primarily from the increase in operating revenues during this period, meaning there was an increase in related cash and inventory assets; new investments and contracted building of plants and offices on HTC land were also completed, further increasing assets...

  • Page 53
    ... related statements of income, changes in stockholders' equity, and cash flows for the years then ended, all expressed in New Taiwan dollars. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based...

  • Page 54
    ...,916 TOTAL (Concluded) AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS ASSETS CURRENT ASSETS Cash (Note 5) Financial assets at fair value through profit or loss Bond investments with no active market (Notes 2 and 13) Notes receivable, net (Notes 2 and 8) (Notes 2, 4, 6 and 25) Accounts receivable...

  • Page 55
    ... administrative Research and development Total operating expenses OPERATING INCOME NONOPERATING INCOME AND GAINS Interest income Gain on equity-method investments Gain on sale of properties Gain on physical inventory Foreign exchange gain (Note 2) Valuation gain on financial assets (Notes 2, 4 and...

  • Page 56
    ... earnings Legal reserve Special reserve Stock dividends Transfer of employee bonuses to common stock Employee bonuses Cash dividends Net income in 2007 Translation adjustments on long-term equity investments Unrealized loss on financial instruments Purchase of treasury stock Retirement of treasury...

  • Page 57
    ... payable Accrued expenses Other current liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of properties Proceeds of the sales of properties Acquisition of investments accounted for by the equity method Acquisition of financial assets carried at cost...

  • Page 58
    ... 2003, the Company started trading Global Depositary Receipts on the Luxembourg Stock Exchange. Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the Republic of China (R.O.C.). In preparing financial statements in...

  • Page 59
    ...the Company and the customers for goods sold in the normal course of business, net of sales discounts and volume rebates. For trade receivables due within one year from the quoted prices in an active market and with fair values that cannot be reliably measured, such as non-publicly traded stocks and...

  • Page 60
    ... purchase price. AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS equity in an investee's net assets when an investment is acquired or when the equity method is first adopted is amortized over five years. Effective January 1, 2006, based on the revised Statement of Financial Accounting Standards...

  • Page 61
    ... eligible employees. Based on the Statement of Financial Accounting Standards No. 18 - "Accounting for Pensions" issued by the Accounting Research and Development Foundation of the ROC, pension cost under the defined benefit pension plan should be > Bonds Payable Bonds are issued at face value and...

  • Page 62
    ...and for the year ended December 31, 2007. Foreign-currency nonmonetary assets and liabilities that are carried at cost continue to be stated at exchange rates at the trade dates. If the functional currency of an equity-method The financial statements are stated in New Taiwan dollars. The translation...

  • Page 63
    ...' Equity (After Tax) $ 48 • On time deposits, interest rates ranged from 1.315% to 1.840%, 1.610% to 2.145% and 1.809% to 4.400%, as of December 31, 2005, 2006 and 2007, respectively. • The accounting changes had no material effect on the Company's financial statements as of and for the year...

  • Page 64
    ... were primarily overseas value-added tax receivables from customers, compensation from service charges, prepayment for employees' travel expenses and proceeds of sales of properties. 12. FINANCIAL ASSETS CARRIED AT COST Financial assets carried at cost as of December 31, 2005, 2006 and 2007 were as...

  • Page 65
    .... issued 12,000 thousand shares of common stock at a price of NT$12.50 per share of which the Company didn't method. equipment-in-transit and construction-in-progress referred to building construction and miscellaneous equipment. In June 2007, the Company acquired 100% equity interest in HTC Asia...

  • Page 66
    ... • The Company provides warranty service for one to two years, depending on the contracts with our customers. The The number of shares issued upon the conversion of any bond is determined by dividing the principal amount of the bonds (translated into New Taiwan dollars at a fixed exchange rate of...

  • Page 67
    ...182 6,724 $ ( $ 2007 US$(Note 3) 152 265 277) 67 207 AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS 2005 NT$ Service cost Interest cost Projected return on plan assets Amortization of unrecognized net transition obligation, net Amortization of net pension benefit Net pension cost $ ( $ 44,766 10...

  • Page 68
    ... the investment's carrying value and capital surplus. As part of a high-technology industry and a growing enterprise, the Company considers its operating environment, industry developments, and long-term interests of stockholders as well as its programs to maintain operating efficiency and meet its...

  • Page 69
    ... Board of Directors. Information on earnings appropriation can be accessed online through the Market Observation Post System on the Web site of the Taiwan Stock Exchange. For maintaining the Company's credit and stockholders' equity Based on the Securities and Exchange Act of the ROC, the number...

  • Page 70
    ... foreign exchange losses (gains), net Unrealized warranty expense Unrealized marketing expenses Unrealized profit from intercompany transactions Unrealized valuation (gain) loss on financial instruments ( Capitalized expense Other Total income Less tax-exempt income tax Taxable income Tax rate...

  • Page 71
    ...976) 505,763 Valuation allowance is based on management's evaluation of the amount of tax credits that can be carried forward for four years, based on the Company's financial forecasts. > The income taxes in 2005, 2006 and 2007 were as follows: > The integrated income tax information is as follows...

  • Page 72
    ... (In Dollars) Income after Income Tax NT$ $ 20.55 NT$ Denominator Income after Income Tax NT$ $ 25,247,327 $ 25,247,327 Shares (Thousands) NT$ - AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS > The employee stock options had dilutive effects on the 2005 and 2006 EPS. The related information is as...

  • Page 73
    ... cost Bond investments with no active market Investments accounted for using equity method Liabilities Financial liabilities at fair value through profit or loss $ 60,085 836 - 2006 NT$ $1,733 76,470 NT$ $784 96,256 2007 US$(Note 3) $24 2,968 • Cash Flow Risk The Company has sufficient working...

  • Page 74
    ... Inc. (formerly HTC USA Inc. until August 2, 2006) HTC Europe Co., Ltd. Subsidiary of H.T.C. (B.V.I.) Corp. HTC Nippon Corporation High Tech Computer Corp. (Suzhou) High Tech Computer Corp. (WGQ) HTC Belgium BVBA/SPRL HTC Singapore Pte. Ltd. HTC (H.K.) Limited HTC (Australia and New Zealand) Pty...

  • Page 75
    ... 1,581 523 42 $ 7,527 AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS > Other Receivables Related Party HTC Belgium BVBA/SPRL High Tech Computer Corp. (Suzhou) HTC Nippon Corporation HTC Europe Co., Ltd. Others Amount NT$ $304 1,318 1,382 $ 3,004 % to Total Other Receivable > Prepaid Expenses...

  • Page 76
    ...81 AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS > Service and Marketing Fees In 2007, the Company sold equipment to High Tech Computer Corp. (Suzhou) for NT$5,080 thousand, resulting in a gain of NT$2,046 thousand. Related Party HTC America Inc. HTC Europe Co., Ltd. HTC Nippon Corporation HTC...

  • Page 77
    ... to the High Tech Computer Foundation; and NT$300 million (US$9,251 thousand) in 2007 to the HTC Education Foundation for Social Welfare Charity to help the disadvantaged minority, teenagers and other people in need. These assets had been audited by independent certified public accountants as of...

  • Page 78
    ...2006 and 2007, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the years then ended, all expressed in New Taiwan dollars. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express...

  • Page 79
    ...ASSETS Cash (Note 5) Financial assets at fair value through profit or loss (Notes 2, 4, 6 and 25) Bond investments with no active market (Notes 2 and 13) Notes receivable, net (Notes 2 and 8) Accounts receivable, net (Notes 2, 8 and 26) Other current financial assets (Notes 9, 26 and 27) Inventories...

  • Page 80
    ...50.48 $ 50.48 2007 After Income Tax US$(Note 3) $ 1.56 $ 1.56 The accompanying notes are an integral part of the financial statements. AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS 2005 NT$ REVENUES (Notes 2 and 26) COST OF REVENUES (Notes 22 and 26) GROSS PROFIT OPERATING EXPENSES (Notes 22 and...

  • Page 81
    ...' EQUITY YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007 (In Thousands) Capital Stock New Taiwan Dollars BALANCE, JANUARY 1, 2005 Appropriation of the 2004 net earnings Legal reserve Special reserve Stock dividends Transfer of employee bonuses to common stock Employee bonuses Cash dividends Net income...

  • Page 82
    ... Dollars BALANCE, JANUARY 1, 2007 Appropriation of the 2006 net earnings Legal reserve Special reserve Stock dividends Transfer of employee bonuses to common stock Employee bonuses Cash dividends Net income in 2007 Translation adjustments on long-term equity investments Unrealized loss on financial...

  • Page 83
    ... and accounts payable Income tax payable Accrued expenses Other current liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of properties Proceeds of the sales of properties Increase in restricted assets Acquisition of financial assets carried at cost...

  • Page 84
    ... offering and, in March 2002, had its stock listed on the Taiwan Stock Exchange. On November 19, 2003, HTC started trading Global Depositary Receipts on the Luxembourg Stock Exchange. Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing...

  • Page 85
    ... liability. Fair values of financial assets and financial liabilities at the balance sheet date are determined as follows: publicly traded stocks - at closing prices; open-end mutual funds - at net asset values; bonds - at prices quoted by the Taiwan GreTai Securities Market; and financial Cash...

  • Page 86
    ...> Financial Assets Carried At Cost Investments in equity instruments with no quoted prices in an active market and with fair values that cannot be reliably measured, such as non-publicly traded stocks and stocks traded in the emerging stock market, are measured at their original cost. The accounting...

  • Page 87
    ... 6% of the employee's monthly wages, and the contribution should be recognized as pension expense in the income statement. as an increase in marketing expenses or as a decrease in revenues. the par value of the bonds are written off. The common stock should be valued at the carrying amount net of...

  • Page 88
    ... at > Foreign Currencies The financial statements of foreign operations are translated into New Taiwan dollars at the following exchange rates: At the balance sheet date, foreign-currency nonmonetary assets (such as equity instruments) a. Assets and liabilities - at exchange rates prevailing on the...

  • Page 89
    ... Effect ofChange in Accounting Principles (After Tax) Available-for-sale financial assets $ As Adjustments of Stockholders' Equity (After Tax) $ 48 Foreign-currency nonmonetary assets and liabilities that are carried at cost continue to be stated at exchange rates at the trade dates. If the...

  • Page 90
    ... CONSOLIDATED REPORT l VI 6. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets and liabilities at fair value through profit or loss as of December 31, 2005, 2006 and > 2005 Buy/Sell Forward exchange contracts Forward exchange contracts Forward exchange contracts...

  • Page 91
    ...3) $ 17,960 62,742 177,037 257,739 (34,591) $223,148 Technical Center Co., Ltd. Answer Online, Inc. $ AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS 9. OTHER CURRENT FINANCIAL ASSETS Other current financial assets as of December 31, 2005, 2006 and 2007 were as follows: 2005 NT$ Restricted current...

  • Page 92
    ... $ 130,156 Reserve for warranty expenses Agency receipts Advance receipts Directors' remuneration Employee bonus payable Others AN OVERVIEW O F THE COMPANY'S F INANCIAL STATUS 14. PROPERTIES Properties as of December 31, 2005, 2006 and 2007 were as follows: 2005 Carrying Value NT$ Land Buildings...

  • Page 93
    ... Trust of China (which merged with the Bank of Taiwan in July Based on the Statement of Financial Accounting Standards No. 18 - "Accounting for Pensions" issued by the Accounting Research and Development Foundation of the ROC, pension cost under a defined benefit pension plan should be calculated...

  • Page 94
    ...into 573,134 thousand common shares at NT$10.00 (US$0.30) par value. In their meeting on December 11, 2002, the Company's Board of Directors resolved to issue 7,000 thousand units of employee stock options in accordance with Article 28.3 of the Securities and Exchange Law. Each option represents the...

  • Page 95
    ...by the Board of Directors. Information on earnings appropriation can be accessed online through the Market Observation Post System on the Web site of the Taiwan Stock Exchange. Purpose For maintaining the Company's credit and stockholders' equity As of January 1, 2007 374 Increase 3,250 Decrease...

  • Page 96
    ..., HTC was granted exemption from corporate income tax, as follows Item Exempt from Corporate Income Tax Sales of pocket PCs and Smartphones Sales of pocket PCs (wireless) and Smartphones Sales of Win CE products Sales of pocket PCs, pocket PCs (wireless) and Smartphones Sales of pocket PCs...

  • Page 97
    ...expenses Provision for loss on decline in value of inventory Unrealized royalties Unrealized bad debt expense Capitalized expense Unrealized reserve for warranty expense Unrealized valuation loss on financial instruments Unrealized foreign exchange loss, net Other Income Tax Expense (Benefit) NT$ US...

  • Page 98
    ... average number of shares outstanding was adjusted retroactively for the effect of stock dividend distribution in 2007. Valuation allowance is based on management's evaluation of the amount of tax credits that can be carried forward for four years, based on the Company's financial forecasts. 190...

  • Page 99
    ... December 31 2007 Fair Value NT$ US$(Note 3) $ Denominator Shares (Thousands) Income before Income Tax NT$ 46.65 $ EPS (In Dollars) Income after Income Tax NT$ 43.69 Assets Available-for-sale financial assets - noncurrent Financial assets carried at cost Bond investments with no active market $ 836...

  • Page 100
    ... Financial assets carried at cost Bond investments with no active market Liabilities Financial liabilities at fair value through profit or loss 60,085 836 $ 2006 NT$ 1,733 76,470 $ NT$ 784 96,256 2007 US$(Note 3) $ 24 2,968 15,455 1,019 - • Cash Flow Risk The Company has sufficient working...

  • Page 101
    ... and Accounts Amount Payable NT$ $ $ NT$ 521 521 $ 2007 % to Total Notes and Accounts Payable 16 16 - Amount US$(Note 3) $ • Terms of payment and purchasing prices for both related and third parties were similar. > Other Receivables December 31 > Sales and Services Provided 2005 Related Party...

  • Page 102
    ... warranty expense resulted from authorizing the above related party to provide after-sales services. 27. MORTGAGED OR PLEDGED ASSETS As of December 31, 2007, Communication Global Certification Inc. had provided time deposits of NT$34,500 (US$1,064 thousand) as collateral for the secured loans...

  • Page 103
    ... 2006 to the High Tech Computer Foundation; and NT$300 million (US$9,251 thousand) in 2007 to the HTC Education Foundation for Social Welfare Charity 31. SEGMENT INFORMATION > Industry Type The Company mainly manufactures and sells converged handheld devices. > Foreign Operations Because sales to...

  • Page 104
    ... FINANCIAL OR CASH FLOW DIFFICULTIES IN 2007 AND AS OF THE DATE OF THIS ANNUAL REPORT: None. 7. OTHER MATTERS REQUIRING SUPPLEMENTARY EXPLANATION: EXPLANATION OF SIGNIFICANT ACCOUNTING POLICIES: > Financial assets/liabilities at fair value through profit or loss The financial products whose change...

  • Page 105
    VII A R E V I E W A N D A N A LY S I S O F T H E C O M PA N Y ' S F I N A N C I A L C O N D I T I O N A N D O P E R AT I N G R E S U LT S , A N D A LISTI N G O F RISKS

  • Page 106
    ... office buildings HTC engaged others to build on its own land. (4) Increases for other assets in the current period were primarily due to increases in deferred income tax assets, resulting from increased allocations to warranty reserves and marketing fees payable based on an increase in revenues...

  • Page 107
    ... in sales prices, cost prices, the sales mix, and sales volume for primary product lines are as follows: Year Unit : NT$ thousands A REVIEW AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AND OPERATING RESULTS, AND A LISTING OF RISKS 2. BUSINESS PERFORMANCE (1) Operating Results: Comparative...

  • Page 108
    ... of Taiwan's Ministry of Economic Affairs. Future investment plans will focus on developing core business by expanding investment in related businesses. Our ultimate goal is to reduce product costs, boost overall product value, enhance customer service, and improve the company's operational...

  • Page 109
    ... growth of the market brings development potential With continuing change and innovation in products, advances in key parts and components, and new software vying to replace the old, product applications grow broader by the day. Market research reports forecast that over the next few years, markets...

  • Page 110
    ... in the production chain, strengthen time management, standardize work processes, and implement Total Quality Control (TQC) policy through ISO certification to help HTC reduce operating and communications costs, and reach TQC goals to effectively improve HTC's competitiveness. > HTC still depends...

  • Page 111
    ..., HTC will continue to innovate and develop new products to provide more customized services that will meet customer needs. To ensure the company's R&D competitiveness, projected R&D investment costs for fiscal 2008 will be approximately 3 to 5 percent of the operating revenue for the year. 216...

  • Page 112
    ...change in HTC managerial control in the 2007 fiscal year. in the proportion of own-brand sales, HTC will strengthen its management distributors maintain strong relationships with them in order to lower operational risk and sales concentration risk. (1) involve the company and/or any company director...

  • Page 113
    ... and management, investment plans, client credit control, operations analysis, and cost analysis Evaluation of internal control system soundness and effectiveness Future product development trends and customer demand Ensure quality design of software/hardware in HTC products and product safety...

  • Page 114
    A FF I L I A T E I N F O R M A T I O N A N D O THER SPE C I A L N O TES VIII H ig A FF ILIATE IN F ORMATION AND OTHER SPECIAL NOTES 1. AFFILIATES HTC Affiliated Companies Chart AS OF 12/31/2007 hT ec h Co m Co lia H ig HT put hT er S ec h ing ap o mp re P ) Li )P C( ute t e. Aus ...

  • Page 115
    ... services Investment High Tech Computer Singapore Pte. Ltd. 07/12/2007 260 Orchard Road #07-04 Heeren, Singarpore Unit 808-09A, 8th Floor, AIA Tower, 183 Electric Road, North Point, Hong Kong Suite 3002, Level 30, 100 Miller Street, North Sydney, Australia 810 Antel Global Corporate Center, Julio...

  • Page 116
    ... * The primary business of H.T.C. (B.V.I.) Corp., HTC HK, Limited, and High Tech Computer Asia Pacific PTE. Ltd. is international investments. * BandRich Inc. engages in product design Company High Tech Computer Corp. Title Chairman Director Director Independent Director Name Cher Wang Wen-Chi Chen...

  • Page 117
    ... HTC Italia SRL High Tech Computer Singapore Pte. Ltd. High Tech Computer(H.K.) Limited HTC (Australia and New Zealand) Pty.Ltd. HTC Philippines Corp. PT. High Tech Computer Indonesia (Concluded) Capital Stock Assets Liabilities Net Worth Net Sales Income from Operation Net Income (Net of Tax...

  • Page 118
    ... calendar and name card management, multimedia entertainment, meeting records, pending project reminders, the sending/receiving of e-mail, real-time information searches, financial transactions, data base management, medical history information access, and process control Affiliates Report There...

  • Page 119
    ... workplace by the Department of Health. Planned improvements > HTC has also placed its Environmental Health & Safety Management Handbook and Health & Safety and Work Code on the company's internal website for employees, to inspire them to embrace their social responsibility towards environmental...

  • Page 120
    ... the board of directors that are adopted by resolutions at annual shareholders' meetings. Employee performance bonus and bonus amounts are based on work performance and level of Training Item New Employee Language Professional Supervisory Management Quality Systems General Education Total Hours 16...

  • Page 121
    ... communication, providing numerous channels for suggestions and responses such as a complaint hotline, written complaint box, email complaint box, labor-management meetings, and regular surveys of employee opinion that have fostered harmonious labormanagement relations. • List any losses sustained...

  • Page 122
    SI G N IFIC A N T EVE N T IX 1. ANY EVENTS IN 2007 AND AS OF THE DATE OF THIS ANNUAL REPORT THAT HAD SIGNIFICANT IMPACTS ON SHAREHOLDERS' RIGHT OR SECURITY PRICES AS STATED IN ITEM 2 PARAGRAPH 2 OF ARTICLE 36 OF SECURITIES AND EXCHANGE LAW OF TAIWAN: None. SIGNI F ICANT EVENT 238 239

  • Page 123
    X M A N D AT O R Y C O N T E N T S

  • Page 124
    ...financial information, customer lists, venders/supplier lists, distributor lists, raw materials and product inventory information, all quality records, trade secrets, and other information related to the Company's business activities; party with which HTC desires to establish a business relationship...

  • Page 125
    ... at all times. The Company strives to improve the quality of products and service in compliance with the related safety regulations/laws in order to benefit our customers and venders/suppliers and achieve world-class competitiveness. To maintain HTC's valuable reputation and the benefits to our...

  • Page 126
    ... to the Company. have personal relationships, to engage in business ventures the same as or similar to HTC or to invest exceeding five percent of total market value in such a company. Employees are also prohibited from use so-called "Inside Information" to gain personal profit or to influence...

  • Page 127
    If there is any discrepancy between different language versions of this document then the Chinese version shall prevail.

  • Page 128
    High Tech Computer Corp. Chairman