HTC 2012 Annual Report Download

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Table of contents

  • Page 1

  • Page 2

  • Page 3
    ...CORPORATE GOVERNANCE CHAPTER 5 CAPITAL AND SHARES TABLE OF CONTENTS CHAPTER 6 FINANCIAL STATUS, OPERATING RESULTS AND RISK MANAGEMENT 94 4 34 CHAPTER 7 AFFILIATE INFORMATION AND OTHER SPECIAL NOTES CHAPTER 1 LETTER TO HTC SHAREHOLDERS 50 CHAPTER 2 COMPANY PROFILE CHAPTER 3 BUSINESS OPERATIONS...

  • Page 4
    CHAPTER 1 LETTER TO HTC SHAREHOLDERS

  • Page 5
    ...-catching, user-focused designs. These smartphones were positively received by the market. In addition, HTC jointly launched with Microsoft the Windows Phone 8X by HTC and the Windows Phone 8S by HTC, which won the "red dot award: product design 2013®". HTC have worked closely with global telecom...

  • Page 6
    ... HTC in 2012 released multiple smartphones that combine performance and ergonomic design. For instance, the release of the first 4G LTE Windows Phone named for the control of most TVs, box units, and receivers by transforming the smartphone into a remote control. By utilizing cloud services, users...

  • Page 7
    ... Device Manufacturer of the Year award at the Mobile World Congress Social Responsibility HTC has always cared for the community, promoting public service as a duty and hoping to make a contribution. HTC Social Welfare Foundation has been a long-term sponsor of the welfare of disadvantaged groups...

  • Page 8
    ...-designed products that will allow users whether at home, work, or on the move, a seamless audio and visual experience. In 2013, HTC will focus on its core corporate development, as well as a global marketing strategy in order to continue to create value for our shareholders, customers and employees...

  • Page 9
    CHAPTER 2 COMPANY PROFILE

  • Page 10
    ... was the first company to launch 3G, 4G WiMAX and LTE smartphone devices in the world. In terms of product design, our belief in putting customer at the center leads to the birth of HTC Sense®, a user-centric perspective featuring the Amazing Camera that let users to capture every precious moment...

  • Page 11
    ...launched operating system designed specifically for consumer electronic products. The President (now the Director of the Board) HT Cho and the Vice President (now Chief Executive Officer) Peter Chou put together HTC's first R&D team and developed the world's first handheld personal data assistant...

  • Page 12
    ... in the stadium watching the game, or viewing content on a HTC device, fans will be there to share every moment. While bringing the exceptional innovation and design capabilities to the world, HTC also invested significant resources into global marketing and operations. Looking forward, we firmly...

  • Page 13
    ...set to different themes, and can be easily shared on social networks, email and other services. To enable this innovative camera experience, HTC developed a custom HTC slinkFeed™: A personal live stream right on the home screen At the center of the new HTC One experience is HTC BlinkFeed™. HTC...

  • Page 14
    ... an easy-to-set up accessory, HTC Media Link HD, HTC phones can wirelessly project content onto any television. Users can now easily watch photos, video, movies from their phones on a big screen TV. HTC changes how people listen to music in the car. With just one touch, users can easily access over...

  • Page 15
    ... PROFILE BOARf OF fIRECTORS ANf SUPERVISORS 2 COMPANY PROFILE Chen-Kuo Lin sOARD OF DIRECTORS Cher Wang Chairperson HT Cho Cher Wang Wen-Chi Chen Director Member of the Compensation Committee Wen-Chi Chen Director David sruce Yoffie Director Tan Ho-Chen Director Chen-Kuo Lin HT Cho Josef...

  • Page 16
    ...Engineering and Operations Chief Financial Officer Chief Engineering Officer Chief Marketing Officer Senior Vice President and Head of Design Chief Operating Officer General Counsel Vice President, Talent Management President of Global Sales Strategy President of North America President of...

  • Page 17
    ... Chialin Chang˙Chief Financial Officer Responsible for corporate governance, investor relations, global tax planning, cash management, investment planning, risk management, shareholder services and business and cost analyses. Board and Operations Responsible for execution of products research and...

  • Page 18
    ...Resources Employees represent one of HTC's most valuable assets. The company has, in recent years, actively recruited outstanding talent into its ranks - particularly in the areas of product design, user interface, brand promotion, and sales and marketing. While bringing on professionals from Europe...

  • Page 19
    CHAPTER 3 BUSINESS OPERATIONS

  • Page 20
    ... 4G LTE Windows phones, amongst others. Global mobile data traffic grew by 70% in 2012 with mobile video traffic reaching 51% of all mobile data by the end of the year. The intensity of usage is quite remarkable when you put a super device on a super network - for a 4G connection, traffic per user...

  • Page 21
    ... we have researched and developed bespoke content, user interface innovations and application based offerings to really cater to local custom and practice. This will continue as we leverage our exceptionally fast time to market and our desire to make an HTC phone an extremely personal and relevant...

  • Page 22
    ... think will buy for their next mobile phone after Samsung and Apple and the brand that most 18 - 29 year old consumers think is "on the way up" (Hall & Partners 2013) Our ï¬,agship device for launch in Spring 2013 is the new HTC One. It features three major new innovations in camera, sound and...

  • Page 23
    ... latest HTC Sense® that incudes BlinkFeed™ , which gives the user a real-time dynamic homepage to access global and personal social networks news. HTC Zoe™ shooting mode uses HTC's UltraPixel-powered camera to bring image galleries to life. It redefines how people take pictures, play and share...

  • Page 24
    ...management, intercompany transactions, changes in accounting policies, assessments of IPR infringement risk, and reasonableness of provision and accrual items to be presented on financial reports. 3 3 BUSINESS OPERATIONS Corporate Governance 4. Disclosure of Information & Financial Forecasts HTC...

  • Page 25
    ...BUSINESS OPERATIONS Unit: NT$ millions 2012 Supplier Code a Others Total Amount 20,780 139,025 159,805 % 13 87 100 Relation to HTC None 3 BUSINESS OPERATIONS 2011 2011 Supplier Code a Others Total Amount 39,439 220,538 259,977 % 15 85 100 Relation to HTC None Customer Code A B C Others Total 2013...

  • Page 26
    ... embedded operating system; royalty payment based on agreement. Authorization to use CDMA technology to manufacture and sell units; royalty payment based on agreement. 3 Production Capacity BUSINESS OPERATIONS Smartphones Total 59,517 59,517 Production Quantity 32,863 32,863 2012 Production Value...

  • Page 27
    CHAPTER 4 CORPORATE GOVERNANCE

  • Page 28
    ... State University. ˙ Advanced study at the Department of Economics, Harvard University. ˙Chairman, Board of Tunghai University. ˙Minister, Ministry of Finance, Executive Yuan. ˙ Chairman, Taiwan External Trade Development Council. (TAITRA) ˙Chairman, Taiwan Asset Management Corporation...

  • Page 29
    ...II) 2013.05.15 Meet one of the following professional qualification requirements, together with at least five years work experience Conditions Name An instructor (or higher) in a department of commerce, law, finance, accounting, or other academic departments related to the business of the company...

  • Page 30
    ... branch units: 2013.05.15 Unit Share; % Other persons holding shares in their name (note) shares % ˙ Bachelor in Electronic Engineering, National Taiwan Ocean University. ˙ Director, Server Platform Design Division, Digital Equipment Corporation. ˙Director (Representative), High Tech Computer...

  • Page 31
    ... University. ˙ Design Engineer, Premier Image Technology Corporation. ˙MBA, National Chen-Chi University. ˙Manager, TSMC. ˙BU Controller, LITE-ON. ˙Director (Representative), HTC Communication Canada, Ltd. ˙Director (Representative), Beats Electronics, LLC None Mike Woodward 2012.10.26...

  • Page 32
    ...relating to business execution by directors in the most recent fiscal year (includes transportation allowances, special allowances, various subsidies, accommodations, and personal cars). Note 4: All salary, allowances, severance pay, various bonuses, cash rewards, transportation allowances, special...

  • Page 33
    .... Note 3: Expenses relating to business execution by Supervisors in the most recent fiscal year (includes transportation allowances, special allowances, various subsidies, accommodations, and personal cars). Note 4: The 2012 net income NT$ 16,780,968 thousand.(Financial Statements), NT$17,589...

  • Page 34
    .... Note 5: Number of shares represented by employee stock warrants (not including the portion already exercised) received by General Manager and Assistant General Managers up to the date of printing of this annual report. Note 6: The 2012 net income NT$ 16,780,968 thousand.(Financial Statements), NT...

  • Page 35
    ....22 Estimated number 353,000.22 2.10% Note: The 2012 employee cash bonuses distribution and the appropriated employee incentive and retention bonuses of the 2012 total remuneration are estimated amount. (0) HTC's reward programs and policies are designed to support HTC's business strategy and the...

  • Page 36
    ... to the Board of Directors for resolution. In 2012, the management team continuously emphasized and provided full support on corporate governance. Headquarters actively reviewed and enhanced the processes of supervision and management of subsidiaries, and developed global policies and procedures...

  • Page 37
    ... and Responsibilities of the Board of Directors (1) Independent Directors Ë™ At the end-of-term elections for Directors and Supervisors at the 2010 ordinary Shareholders' Meeting, HTC elected two Independent Directors in accordance with the provisions of the Securities and Exchange Act; the number...

  • Page 38
    ... Education/Training of Management Team Date of Training 2012.05.17 Title Name Organization Accounting Research and Development Foundation Accounting Research and Development Foundation Training Latest International Multilateral Trade Accounting, Taxation and Customs Practices Relationship by...

  • Page 39
    ... is evaluated through management review. The CSR department is responsible for the planning and implementation of HTC's CSR activities, and attends Electronic Industry Citizenship Coalition (EICC) meetings on behalf of HTC. HTC conducts annual training with regard to company policy, employee code of...

  • Page 40
    ... the limited warranty sheet included in the HTC phone package ˙Customer service contact numbers in all countries ˙Customer service center contact info card in Taiwan ˙ Include the telephone numbers and methods of connecting to its dedicated customer service lines on its official Website ˙Live...

  • Page 41
    ... employees may report any questionable conduct discovered. Reason for Nonimplementation HTC has not established a dedicated (or part-time) unit with responsibility for the enforcement of ethical corporate management. Item 1. Adoption of ethical corporate management policies and programs (1) Status...

  • Page 42
    ... regularly reviews the internal control system to ensure the continued effectiveness of its design and implementation in light of changes in HTC's internal and external environment. The internal auditors conduct scheduled or unscheduled site audits of audited units according to internal audit plans...

  • Page 43
    ...the investment framework by the Company's subsidiary in the US, HTC America Holding, Inc. Please refer to the note for an execution summary of the material resolutions of the shareholders meeting Date Material resolutions Note HTC Corporation Internal Control System Statement Date: 02/19/2013 The...

  • Page 44
    ... Period System Company Human Others Subtotal Design Registration Resource (note) 56 1,100 Years Ended 1,156 December 31, 2012 Note Transfer pricing report and international tax consultation Supervisor Supervisor Accounting Name of CPA Firm Audit Fee Chief Executive Officer & Peter Chou President...

  • Page 45
    ... and Scott Croyle Head of Design (note 3) Chief Operating Officer General Counsel Vice President, Talent Management (note 4) President of Global Sales President of North America (note 5) President of EMEA (note 6) President of North Asia Head of HTC Communication, China Vice President, Studio...

  • Page 46
    ... persons, shall be disclosed. 8. Total number of shares and total equity stake held in the same enterprise by the Company, its firectors and Supervisors, Managers directly or indirectly 2013.03.31 Unit: share; dollar; Investments directly or indirectly Investments by HTC Long-term investments...

  • Page 47
    ... (note) Shares/Investment Amount HTC America Content Services, Inc. HTC Communication Technologies (Shanghai) Limited HTC Investment One (BVI) Corporation S3 Graphics Co., Ltd. Dashwire, Inc. Inquisitive Minds, Inc. Beats Electronics, LLC FunStream Studio, Inc. Yoda Co., Ltd. HTC Middle East FZ-LLC...

  • Page 48
    ... project initiated by the Ministry of Economic Affairs Industrial Development programs across the company. 4.4 Green Building Designs Situated in Xindian District of New Taipei City, Taiwan, the new HTC global corporate headquarters was awarded the Leadership in Energy and Environmental...

  • Page 49
    CHAPTER 5 INFORMATION ON CAPITAL RAISING ACTIVITIES

  • Page 50
    ... 5 INFORMATION ON CAPITAL RAISING ACTIVITIES 2013.04.23 Unit Share Authorized Capital Outstanding shares Unissued Shares Total Type of stock Remark (1) Of our authorized capital, 16,000,000 shares are reserved for the exercise of stock warrants, preferred shares with warrants, or corporate bonds...

  • Page 51
    ..., balancing dividends with long-term financial planning of the Company. Dividends are proposed by the Board of Directors to the Shareholders' Meeting on a yearly basis. Earnings may be allocated in cash or stock dividends, provided that the ratio of cash dividends may not be less than 50% of total...

  • Page 52
    ... for Directors and Supervisors: Distributions of earnings in 2011 (3) There is no material change in dividend policy. Date of the Board resolution Date of Annual Shareholders' Meeting Total stock bonus as employee bonus Total Number of Shares Total Amount (NT$1,000) 2012.04.24 2012.06...

  • Page 53
    ...report. The annual report shall also disclose the names of the ten employees holding employee subscription warrants authorizing purchase of the most shares where the purchase price of 4. Global depository receipts 2013.03.31 Issue Date Issuance and Listing Total amount Offering price per GDR Units...

  • Page 54
    CHAPTER 6 FINANCIAL STATUS, OPERATING RESULTS AND RISK MANAGEMENT

  • Page 55
    ...term investment under the equity method. Other assets saw an increase from 2011 to 2012; mainly due to uncollected sales proceeds from the partial disposal of Beats Electronic LLC. 6 Intensifying competition in the world's mobile phone market led to lower revenue in 2012 compared to 2011. Operating...

  • Page 56
    ... production and providing HTC employees with an appropriate working environment. HTC promotes products directly to mass-market consumers via long-term, unique relationships with the world's largest telecommunications service providers that include the four big mobile operators in the United States...

  • Page 57
    ... and innovations in user experience allow us to develop a wide range of products tailored to meet diverse consumer needs. HTC Sense® is designed with customer at the center to make mobile phones more intuitive and easy to use. denominated accounts receivable, HTC uses forward exchange contracts to...

  • Page 58
    ...and LTE Android mobile phones. The launch of a diverse range of products through many carriers worldwide has built up HTC's In addition to further developing its existing smartphone product line, the Company will continue to research and develop technologies that enhance the user experience, such as...

  • Page 59
    ... in order to remain at the fore of market trends. HTC is also developing the HTC brand and strengthening relationships with channel retailers in order to reduce business and sales concentration risks. In March 2012, Washington Court granted on the Company's summary judgment motion and ruled on...

  • Page 60
    ...MANAGEMENT Responsible for capital allocation and management, Business Strategy and Financial Risks investment planning, customer credit control, operational analysis, and cost analysis Internal Control Risk Product Trend Risk Product Design and Quality Risks Production Quality Risk Product Quality...

  • Page 61
    CHAPTER 7 AFFILIATE INFORMATION AND OTHER SPECIAL NOTES

  • Page 62
    ... & Company Design, Inc. HTC America Innovation Inc. AFFILIATE INFORMATION AND OTHER SPECIAL NOTES HTC America Content Services, Inc. Dashwire, Inc. HTC NIPPON Corporation 00.33% 000.00% Communication Global Certification Inc. 000.00% HTC South Eastern Europe Limited Liability Company HTC Italia...

  • Page 63
    ... investing activities, marketing, repair and after-sales service International holdings Design, research and development of application software Design, research and development of graphics technology Restaurants and parking lot business, and building cleaning services 2009.01.30 HTC Corporation...

  • Page 64
    ...Saffron Media Group Ltd. is international holdings. 2. Communication Global Certification Inc. engages in the import of controlled telecommunications radio frequency devices and information software services. 3. The primary business of HTC Investment Corporation and HTC I Investment Corporation is...

  • Page 65
    ... Executive WGQ) Director Chairperson HTC Communication Technologies (SH) S3 Graphics Co, Ltd. Chairperson HTC Corporation Representative: Peter Chou Director Supervisor HTC Investment One (BVI) Corporation FunStream Studio, Inc. HTC Tech Computer Corp. (Suzhou) High Tech Computer (H.K.) Limited HTC...

  • Page 66
    ... Electronics (Shanghai) Co., Ltd. HTC Netherlands B.V. HTC EUROPE CO., LTD. HTC BRASIL HTC Belgium BVBA/SPRL HTC NIPPON Corporation HTC FRANCE CORPORATION HTC South Eastern Europe Limited Liability Company One & Company Design, Inc. Director HTC America Innovation, Inc. HTC America Content Services...

  • Page 67
    ... Lines: HTC's primary products are converged devices designed on Android® and Windows Phone® operating systems (OS). Note: Authorized capital and the balance sheet foreign exchange rate is based on the exchange rate on the balance sheet date. The foreign exchange rate for the income statement...

  • Page 68
    ... solid wastes at various production stages. HTC's production processes do not generate no wastewater. Fiscal Year Anticipated Equipment Purchases / Expenditures Item 2013 1. Energy efficient lighting system 2. Water conservation facilities 3. Energy efficient air conditioning equipment 4. Inverters...

  • Page 69
    .... HTC aims to offer all employees a high quality menu of health service items including regular health checkups, programs / activities, health-related seminars, group management for specific health problems, and psychological counseling. HTC staff give each new HTC product an optimal balance...

  • Page 70
    ... by the board of directors based on current year business performance. Employee profit sharing bonuses are also allocated to employees each year based on motions from the board of directors that are adopted by resolutions at annual shareholders' meetings. Both bonuses are allocated based on work...

  • Page 71
    CHAPTER 8 FINANCIAL INFORMATION

  • Page 72
    ... As Pension Cost Treasury Stock Equity Attribute To The Stockholders Of The Parent *Subject to change after shareholders' meeting resolution. Unit NT$ thousands Year Item 2012 Current Assets Long-term Investments Properties Intangible Assets Other Assets Total Assets Current Liabilities Before...

  • Page 73
    ... Extraordinary Items Cumulative Effect of Changes in Accounting Principle Net Income Basic Earnings Per Share 0.1 5 The Name of the Certified Public Accountant and the Auditor's Opinion 16,780,968 20.17 61,975,796 73.32 39,533,600 46.18 22,608,902 26.04 28,635,349 32.80 Year 2008 2009 2010 2011...

  • Page 74
    ...for 2012 and lowering net cash ï¬,ows from operating activities. 2 Financial Analysis (Consolidated) 1. ROC GAAP Year Item 2012 Capital Structure Analysis Debt Ratio (%) Long-term Fund to Fixed Assets Ratio (%) Current Ratio (%) Liquidity Analysis Quick Ratio (%) Debt Services Coverage Ratio (Times...

  • Page 75
    ... year to maintain cash dividend ratio for 2012 and lowering net cash ï¬,ows from operating activities. Note 1: Glossary a. Capital Structure Analysis (1) Debt Ratio Total Liabilities / Total Assets. (Shareholders' Equity + Long-term Liabilities) / Net Fixed Assets. (2) Long-term Fund to Fixed Assets...

  • Page 76
    ... of HTC Corporation (the "Company") as of December 31, 2011 and 2012, and the related statements of income, changes in stockholders' equity, and cash ï¬,ows for the years then ended, all expressed in New Taiwan dollars. These financial statements are the responsibility of the Company's management...

  • Page 77
    ... 20) Capital stock - NT$10.00 par value Authorized: 1,000,000 thousand shares Issued and outstanding: 852,052 thousand shares in 2011 and 2012 Common stock Capital surplus Additional paid-in capital - issuance of shares in excess of par Treasury stock transactions Long-term equity investments Merger...

  • Page 78
    HTC CORPORATION STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2011 AND 2012 (In Thousands, Except Earnings Per Share) 2011 NT$ REVENUES (Notes 2 and 26) Sales Sales returns and allowances Net sales Other operating revenues Total revenue $456,791,548 (2,533,270) 454,258,278 820,908 455,079,186 $272,...

  • Page 79
    HTC CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2011 AND 2012 (In Thousands of New Taiwan Dollars) Capital Stock Issued and Issuance of Treasury Long-term Outstanding Shares in Stock Equity Common Excess of Par Transactions Investments Stock BALANCE, JANUARY ...

  • Page 80
    HTC CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2012 (In Thousands of U.S. Dollars) Capital Stock Issued and Issuance of Treasury Long-term Outstanding Shares in Stock Equity Common Excess of Par Transactions Investments Stock BALANCE, JANUARY 1, 2012 ...

  • Page 81
    ... bonus to employees to stock dividends for distribution and other capital surplus INCREASE IN LONG-TERM INVESTMENTS - EQUITY METHOD Increase in investments accounted for by the equity method Decrease in payable for purchase of investments Cash paid for increase in long-term investments CASH AND CASH...

  • Page 82
    ...Taiwan Stock Exchange. On November 19, 2003, the Company listed some of its shares of stock on the Luxembourg Stock Exchange in the form of global depositary receipts. The Company had 14,506 and 14,252 employees as of December 31, 2011 and 2012, respectively. (5) Available-for-sale Financial Assets...

  • Page 83
    ... to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weightedaverage cost on the balance sheet date. is recognized in stockholders' equity. The...

  • Page 84
    ... events, the accrued marketing expenses are accounted for as an increase in marketing If the Company can control the timing of the reversal of a temporary difference arising from the difference between the book value and the tax basis of a long-term equity investment in a foreign subsidiary...

  • Page 85
    ... statement are based on the information on the components of the Company that management uses to make decisions about operating matters. SFAS No. 41 requires identification of operating segments on the basis of internal reports that are regularly reviewed by the Company's chief operating decision...

  • Page 86
    ...("High Tech Asia"), whose main businesses are international holding investment, marketing, repair and after-sales services, and accounted for this investment by the equity method. The Company increased its investment in High Tech Asia by US$393,316 thousand in 2011 and by US$115,000 thousand in 2012...

  • Page 87
    ... thousand (NT$338,653 thousand) was temporarily accounted for under "prepayments for long-term investments." In February 2012, the Company acquired 100% equity interest in FunStream Corporation, whose main business is design, research and development of three-D technology, for NT$45,090 thousand (US...

  • Page 88
    ... marketing activities, research and design and business consulting services provided by related parties. These fees were calculated based on contract duration. 18. OTHER CURRENT LIAsILITIES Other current liabilities as of December 31, 2011 and 2012 were as follows: 2011 NT$ Warranty provisions...

  • Page 89
    ... of the Company's outstanding common stock as of December 31, 2012 increased to NT$8,520,521 thousand (US$292,510 thousand), divided into 852,052 thousand common shares at NT$10 (US$0.34) par value. Long-term equity investments As of January 1, 2011, the capital surplus from long-term equity-method...

  • Page 90
    ... auditors' report, the 2012 earnings appropriation has not been approved by the Company's Board of directors. Information about earnings appropriation and the bonus to employees, directors and supervisors is available on the Market Observation Post System website of the Taiwan Stock Exchange. $13...

  • Page 91
    ...in their respective annual consolidated income tax return for the current year the amount of income tax payable by them on the dividend or the surplus earning distributed to them by the said profit-seeking enterprise. The imputation credit allocated to stockholders is based on its balance as of the...

  • Page 92
    ...the average number of shares outstanding that was adjusted retroactively for the effect of stock dividend distribution in 2012. The Accounting Research and Development Foundation issued Interpretation 2007-052 that requires companies to recognize bonuses paid to employees, directors and supervisors...

  • Page 93
    ... of HTC America Holding Inc. Investment received in October 2011. The Company lost control of the subsidiary in August 2012 due to the partial disposal of its shares but continued to account for the investment by the equity method. Subsidiary of ABAXIA SAS Subsidiary of Saffron Media Group Ltd...

  • Page 94
    ... 2012 % to Total Net Purchases Terms of payment and purchase prices for both related and third parties were similar. (0) Sales and Services Provided 2011 Amount % to Total Revenues Related Party HTC America Inc. HTC Communication Co., Ltd. HTC NIPPON Corporation Faith Hope & Love Limited Employees...

  • Page 95
    ... rate and the payment terms were similar to those paid to third parties. (00) Warranty Expenses FINANCIAL INFORMATION FINANCIAL INFORMATION 1 35 Service and market fees resulted from authorizing the related parties to expand business overseas and render design, research and development support...

  • Page 96
    ... 14 2012 % to Total Donation Expenses On July 19, 2012, the Company's board of directors passed a resolution to offer US$225,000 thousand short-term loan to Beats Electronics, LLC to support the transition of Beats into a product company. This loan was secured by all the assets of Beats. Term loan...

  • Page 97
    ...fically set forth in the agreement, with royalties payable as prescribed. Authorization to use an embedded operating system; royalty payment based on agreement. Authorization to use CDMA technology to manufacture and sell units; royalty payment based on agreement. Apple, Inc. November 11, 2012...

  • Page 98
    ... 31, 2011 and 2012, and the related consolidated statements of income, changes in stockholders' equity and cash ï¬,ows 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...

  • Page 99
    ... 21) Capital stock - NT$10.00 par value Authorized: 1,000,000 thousand shares Issued and outstanding: 852,052 thousand shares in 2011 and 2012 Common stock Capital surplus Additional paid-in capital - issuance of shares in excess of par Treasury stock transactions Long-term equity investments Merger...

  • Page 100
    HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2011 AND 2012 (In Thousands, Except Earnings Per Share) 2011 NT$ REVENUES (Notes 2 and 27) Sales Sales returns and allowances Net sales Other operating revenues Total revenues $466,488,311 (2,609,461) 463,...

  • Page 101
    HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2011 AND 2012 Capital Stock Issued and Issuance of Treasury Long-term Outstanding Shares in Stock Equity Common Excess of Par Transactions Investments Stock BALANCE, JANUARY 1, 2011 ...

  • Page 102
    HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2012 Capital Stock Issued and Issuance of Treasury Long-term Outstanding Shares in Stock Equity Common Excess of Par Transactions Investments Stock BALANCE, JANUARY 1, 2012 ...

  • Page 103
    ..., BEGINNING OF YEAR NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS Decrease in long-term bank loans Increase in guarantee deposits received Cash dividends Purchase of treasury stock Transfer of treasury stock to employees Increase...

  • Page 104
    ... (BVI) Corporation HTC HK, Limited Remark Incorporated in August 2000 Investment received in January 2007 HTC Holding Cooperatief U.A. HTC Holding Cooperatief International holding company U.A. HTC Communication Technologies (SH) Design, research and development of application software Operation of...

  • Page 105
    ... INFORMATION FINANCIAL INFORMATION HTC EUROPE CO., HTC America Holding Inc. International holding company LTD. Design, research and Beats Electronics, LLC development of audio technology HTC FRANCE CORPORATION International holding company, design, research and development of application software...

  • Page 106
    ... 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 assets and financial liabilities without quoted...

  • Page 107
    ... to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weightedaverage cost on the balance sheet date. (05) Intangible Assets Intangible assets...

  • Page 108
    ... No. 30 - "Accounting for Treasury Stocks," when the Company acquires its outstanding shares that have not been disposed or retired, treasury stock is stated at cost and shown as a deduction in stockholders' equity. When treasury shares are sold, if the selling price is above the book value, the di...

  • Page 109
    ...related to exchange rate ï¬,uctuations. Outstanding forward exchange contracts that did not meet the criteria for hedge accounting as of December 31, 2011 and 2012 were as follows: Forward Exchange Contracts FINANCIAL INFORMATION 2011 Currency Buy USD/CAD USD/RMB Sell EUR/USD GBP/USD 2012.01.04-2012...

  • Page 110
    ...,819 thousand). In January 2007, HTC acquired 10% equity interest in HuaChuang Automobile Information Technical Center Co., Ltd. 13. HELD-TO-MATURITY FINANCIAL ASSETS Held-to-maturity financial assets as of December 31, 2011 and 2012 were as follows: 2011 NT$ Corporate bonds Less: Current portion...

  • Page 111
    ...the Company continued to account for this investment by the equity method. In April 2011, HTC bought land approximately 49 thousand square meters adjacent to its Taoyuan plant for NT$1,770,000 thousand, the price based on the appraisal report, from an unrelated party, to build a complete technology...

  • Page 112
    ... and overseas value-added tax. The provision for contingent loss on purchase orders is estimated after taking into account the effects of changes in the product market, in inventory management and in the Company's purchases. FINANCIAL INFORMATION Bonus to employees Salaries and performance...

  • Page 113
    ...'s name. The Company recognized pension costs of NT$4,217 thousand in 2011 and NT$4,104 thousand (US$141 thousand) in 2012. H.T.C. (B.V.I.) Corp., HTC Investment Corporation, HTC I Investment Corporation, High Tech Computer Asia Pacific Pte. Ltd., HTC Investment One (BVI) Corporation, HTC Holding...

  • Page 114
    ... or distributed in cash. As part of a high-technology industry and as a growing enterprise, HTC considers its operating environment, industry developments, and long-term interests of stockholders as well as its programs to maintain operating efficiency and FINANCIAL INFORMATION meet its capital...

  • Page 115
    ...Inc. HTC America Innovation Inc. One & Company Design, Inc. HTC Corporation (Shanghai WGQ) HTC Belgium BAVA/SPRL HTC (Australia and New Zealand) PTY. Ltd. HTC HK, Limited HTC India Private Limited HTC (Thailand) Limited HTC Netherlands B.V. HTC Italia SRL. HTC BRASIL HTC Communication Co., Ltd. 2012...

  • Page 116
    .... HTC Communication Sweden AB HTC Communication Canada, Ltd. Inquisitive Minds, Inc. HTC Communication Technologies (SH) FunStream Corporation PT. High Tech Computer Indonesia HTC South Eastern Europe Limited liability Company Yoda Co., Ltd. HTC Middle East FZ-LLC HTC America Content Services, Inc...

  • Page 117
    ... of diluted EPS until the stockholders resolve the number of shares to be distributed to employees at their meeting in the following year. The related EPS information of HTC for 2011 and 2012 is as follows: Assets Financial assets at fair value through profit or loss - current Hedging derivative...

  • Page 118
    .... Captec Partners Management Corp. WTI Investment International, Ltd. VIABASE CO., LTD. Faith Hope & Love Limited Wozai Information Technology (Beijing), LLC Openmoko, Inc. VIA Telecom Company Limited Beats Electronics, LLC (3) Fair Values of Financial Instruments Based on Quoted Market Prices or...

  • Page 119
    ... To enhance product diversity, the Company entered into a trademark and technology license agreement with Beats FINANCIAL INFORMATION Electronics, LLC. The agreement took effect in August 2011 and will end in December 2016. The royalty expense was NT$269,565 thousand (US$9,254 thousand) in 2012. As...

  • Page 120
    ...2012, HTC's board of directors passed a resolution to offer US$225,000 thousand short-term loan to Beats Electronics, LLC to support the transition of Beats into a product company. This loan was secured by all the assets of Beats. Term loan must be repaid in full no later than one year from signing...

  • Page 121
    ... in London High Court. The Company evaluated that there is no direct relation between the associated technology used in the Company's devices and patents claimed by Nokia. The Company believes the lawsuits have limited impact on its financial results or sales activities. As of March 18, 2013, the...

  • Page 122
    ...the existing accounting policies. Assess the applicability of IFRS 1 - "First-time Adoption of International Financial Reporting Standards." Assess the adjustments of the related information technology system and internal control. Preparation phase: January 1, 2011 to December 31, 2012 Determine how...

  • Page 123
    ...the balance sheet as of December 31, 2012: Effect of the Transition from ROC GAAP to IFRSs Measurement Presentation Amount or Recognition Difference Inconsistency NT$ Assets Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Available-for-sale...

  • Page 124
    ... 508,415 - issuance of shares in excess of par 59,407 Treasury stock transactions i) Long-term investments Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Investments accounted for by the equity method Total long-term investments Properties $197 4,304...

  • Page 125
    ... 194,052 (5,383) 915 FINANCIAL INFORMATION (893,332) $16,728,461 OCI for the year (net of (30,669) tax) $574,289 Total comprehensive income Note: a) Under ROC GAAP, the term "cash" used in the financial statements includes cash on hand, demand deposits, check deposits, time deposits that are...

  • Page 126
    ...the International Accounting Statements Board ("IASB") continues to issue or amend standards, and as the FSC may issue new rules governing the FINANCIAL INFORMATION adoption of IFRSs by companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market...

  • Page 127
    ... for the purpose of executing work for HTC. "Confidential Information" shall mean all business, technical, operational or other information that is not generally known to the public and that an employee develops, has access to, and becomes acquainted with during the term of employment, whether or...

  • Page 128
    ... or development program. Therefore, employees may never use inside information to trade or inï¬,uence the trading of stocks of HTC or other companies and should also not provide "tips" or share inside information with any other person who might trade stock. Insider trading violates company policies...

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