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2013 HTC ANNUAL REPORT
Mops.twse.com.tw / htc.com / printed on May 15, 2014

Table of contents

  • Page 1
    2013 HTC ANNUAL REPORT Mops.twse.com.tw i htc.com i printed on May 15, 2014

  • Page 2
    ... & TOUCHE ADUITORS Ming-Hsien Yang and Wen-Ya Hsu ADDRESS 12th Floor, Hung Tai Financial Plaza, 156 Min Sheng East Road. Sec 3, Taipei, Taiwan, R.O.C. TEL +886 2 25459988 WEB www.deloitte.com.tw OVERSEAS STOCK TRANSFER INFORMATION TRADING Luxembourg Stock Exchange WEB www.bourse.lu HTC WEBSITE WEB...

  • Page 3
    ... 5 CAPITAL AND SHARES 106 122 136 156 CHAPTER 2 CHAPTER 6 COMPANY PROFILE FINANCIAL STATUS, OPERATING RESULTS AND RISK MANAGEMENT CHAPTER 3 CHAPTER 7 BUSINESS OPERATIONS AFFILIATE INFORMATION AND OTHER SPECIAL NOTES CHAPTER 4 CHAPTER 8 CORPORATE GOVERNANCE FINANCIAL INFORMATION

  • Page 4
    CHAPTER 1 LETTER TO HTC SHAREHOLDERS

  • Page 5

  • Page 6
    ... BlinkFeed home screen experience that lets users customize their home screen with contents from Facebook, Twitter, and hundreds of global media partners including the AOL family of properties, CNN, ESPN, Reuters, and many more. The HTC One also introduced HTC's own proprietary sound technology, HTC...

  • Page 7
    ...This corporate social responsive initiative spells a new era for HTC brand and our drive to tackle some of the biggest opportunities that a connected, mobile world can unite to solve. Social Responsibility HTC has always cared for the community, promoting public service as a duty and hoping to make...

  • Page 8

  • Page 9
    CHAPTER 2 COMPANY PROFILE

  • Page 10
    ... and Windows Phones systems. With Google, HTC developed the world's first Android smartphone. Also ahead of the competition, HTC 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...

  • Page 11
    ... together HTC's first R&D team and developed the world's first handheld personal data assistant (PDA) to run on Windows CE. This significant first step helped HTC become an important partner of Microsoft Corporation and built the solid foundation on which the HTC-Microsoft partnership continues...

  • Page 12
    ... recent years, HTC has actively recruited outstanding talent in product design, user interface, brand and sales and marketing. Thanks to the great team work, HTC has received many global high recognitions and awards including: "Device Manufacturer of the Year" at the Mobile World Congress (MWC) 2011...

  • Page 13
    ..., photos and videos set to music with professionally designed cuts, transitions and effects. These highlight videos can be remixed or 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...

  • Page 14
    ...Motion Launch by double tapping the dot view case, in addition to checking the time, weather, new texts, emails and calls - without touching or revealing the screen. An outstanding phone deserves a case that protects and extends its innovative design and leading functionality. Optimised by HTC Sense...

  • Page 15

  • Page 16

  • Page 17
    ... the company. Finance & Accounting Chialin Chang President of Global Sales & 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. Internal...

  • Page 18
    ... (UAE) and Brazil. Human 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...

  • Page 19
    CHAPTER 3 BUSINESS OPERATIONS

  • Page 20
    ... mobile platform is now the main driver behind growth in semi-conductor firms, social networks, content providers and applications. Smartphone penetration globally now stands at 22% (eMarketer) and 2013 marked the first year that smartphone volume passed 1bn, growing 39.2% over 2012 sales volume...

  • Page 21
    ... each generation of the Windows Phones, and the world's first Android smartphone. Also ahead of the competition, HTC was the first company to launch 3G, 4G WiMAX and LTE smartphone devices in the world. In short-term business development, We sell devices in the affordable, mid-tier and super-phone...

  • Page 22
    ...HTC One launch included Germany, Russia and Taiwan where HTC grew significantly over H1 2013. With marketing credibility on the rise, HTC took another bold step in Autumn 2013 to launch a new brand campaign, featuring our new global brand champion, Robert Downey Jr - officially the world's biggest...

  • Page 23
    ...by exciting marketing campaigns across the world celebrating beautiful design and confidently asking consumers to"ask the internetï¼,about how good the new HTC One (M8) is. Another very rewarding program for HTC revealed in Barcelona was the shared processing initiative, Power To Give. Working with...

  • Page 24
    ... sliding to unlock screen in standby mode, opening the BlinkFeed home screen, opening the function home screen, launching the voice In October 2013, the user experience of the HTC One (M7) was enhanced even further with the release of the HTC One Max. A super-large 5.9" Full HD display and metallic...

  • Page 25
    ... OPERATIONS BUSINESS OPERATIONS 47 control function, double-tapping the screen to wake, take incoming calls, or pressing the volume control to launch the camera. The new and improved HTC One (M8) incorporates all of these functions without compromising the battery life. More demanding conditions...

  • Page 26
    ... gross purchase Unit: NT$ millions 2013 Supplier Code a Others Total Amount 22,566 100,375 122,941 % 18 82 100 Relation to HTC None 2. Major customers representing at least 10% of gross revenue Unit: NT$ millions 2013 Customer Code Others Total Amount 203,403 203,403 % 100 100 Relation to HTC None...

  • Page 27
    ...The Company specializes in the research, design, manufacture and sale of smart mobile devices. To enhance the quality of its products and manufacturing technologies, the Company has patent agreements, as follows: Production Unit: 1,000 units / NT$ millions 2013 Production Capacity Smartphones Total...

  • Page 28
    CHAPTER 4 CORPORATE GOVERNANCE

  • Page 29
    ... work experience and academic qualifications Positions held concurrently in the company and/or and other company ‧Chairman, Via Technologies, Inc. ‧Director, Formosa Plastics Corporation ‧Chairman (Representative), H.T.C. (B.V.I) Corp. ‧Chairman (Representative), HTC Investment One (BVI...

  • Page 30
    ... 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. ‧ Professor, Department of Economics in National...

  • Page 31
    ...ve years work experience An instructor (or higher) in a department of commerce, law, finance, accounting, or other academic departments related to the business of the company in a public or private junior college, college or university Conditions Conforms to criteria for independence (note) Name...

  • Page 32
    ..., DuPont ‧ APAC Business Group HR Manager, Intel Microelectronics Asia Ltd. ‧ HR Manager, BRS Nike Taiwan ‧ Bachelor in Business Administration, Point Loma Nazarene University. ‧ Vice President, Siemens Communications. None None None Chief Marketing Officer Ben Ho 2013.02.19 0 0.00...

  • Page 33
    ...) Shares % Other persons holding shares in their name (note) Shares % Principal work experience and academic qualifications Managers with spouses or relatives within seconddegree of kinship Positions held concurrently in any other company ‧Director (Representative), HTC Communication Sweden...

  • Page 34
    ...note) Shares % Other persons holding shares in their name (note) Shares % Principal work experience and academic qualifications Managers with spouses or relatives within seconddegree of kinship Positions held concurrently in any other company ‧ Supervisor (Representative), Communication Global...

  • Page 35
    ... General Manager, or other managerial officers or employees) received employee bonuses (including stock and cash bonuses) in the most recent fiscal year. Since there's a net loss in fiscal 2013, it is approved by the Board of Directors not to distribute employee bonuses. Note 6: Number of shares...

  • Page 36
    ...Note9: Since the Company did not issue restricted employee shares up to the date of printing of this annual report, the number in this column is not applicable. Note 10: This chart lists persons who have served as HTC's General Manager and Assistant General Managers on 31 December 2013. Note a: Note...

  • Page 37
    ... sharing granted to management team Since there's a net loss in fiscal 2013, it is approved by the Board of Directors not to distribute employee bonuses. (2) HTC's reward programs and policies are designed to support HTC's business strategy and the focus of performance differentiation. Our reward...

  • Page 38
    ...Appointment and Exercise of Powers by the Remuneration Committee of a Company whose stock is listed on the Stock Exchange or Traded Over-the-Counter" as per Letter No.1000009747 issued by the Financial Supervisory Commission of the Executive Yuan on March 18, 2011, the Board of Directors resolved to...

  • Page 39
    ... information on the Market Observation Post System, HTC also convenes online investor conferences on a quarterly basis to allow investors timely access to information on the company's operations and performance. In December 2008, the HTC Investor Relations Website was revised. A special corporate...

  • Page 40
    ... courses are also planned on finance, business, commerce, law, and accounting subjects that are related to corporate governance, as well as courses on internal control and responsibility in connection with preparation of financial reports. Details of professional development courses taken by...

  • Page 41
    ... HTC's enterprise management and corporate governance. (Concluded) Simon Hsieh 2013.10.28 2013.10.28 The Company commissioned Taiwan Securities & Futures Institute (SFI) The Company commissioned Taiwan Securities & Futures Institute (SFI) The Prevention and The Avoidance of Insider Trading...

  • Page 42
    ... departments related to the business of the company in a public or private junior college, college or university V Title Convener Have work experience in commerce, law, finance, accounting, or other areas relevant to the business of the company V Number of other public companies concurrently...

  • Page 43
    ... in Taiwan ‧Include the telephone numbers and methods of connecting to its dedicated customer service lines on its official Website ‧Live customer chat service ‧Customer service e-mail ‧Home pickup and delivery service ‧Customer service center address None (4) The status of the company...

  • Page 44
    ... corporate social responsibility report to communicate its related activities. In 2013, HTC prepared its first corporate social responsibility report and received the 2013 Taiwan Corporate Sustainability Award of Excellence in Manufacturing. None 5. For companies who follow the Listed Company...

  • Page 45
    ... that guide its internal operations, such as the " Specific Companies, Enterprise Groups and Related Parties", "Budget Management Procedures", "Corporate Bylaws for Subsidiaries" and "Operational Procedures for Handling Material Inside Information, and Prevention of Insider Trading". Latest drafts...

  • Page 46
    ... internal control system: (1) Statement on Internal Control HTC Corporation 10. For the most recent fiscal year and during the current fiscal year up to the date of printing of this annual report, there were no sanctions imposed upon the Company or its internal personnel. Internal Control System...

  • Page 47
    ...Audit Fee System Design Company Human Registration Resource Others （note） CPA's Audit Subtotal Period Note Transfer pricing Years Ended report and 1,238 December international tax 31, 2013 consultation Appointed Date Consultation about accounting treatment or applicable accounting principles for...

  • Page 48
    ... response to the matters referred to in Article 10.5(1) and 10.5(2).(iii) of the"Regulations Governing Information to be Published in Annual Reports of Public Companiesï¼, : None. 1. Changes in shareholdings of Directors, Supervisors, Managers, and major shareholders Unit：Shares 2013 Change...

  • Page 49
    ... as Defined in the Statement of Financial Accounting Standards No. 6, Among the Company's 10 Largest Shareholders. 2014.04.21 Shareholding under spouse and children of minor age % Shares % Shareholding under the title of third party Shares % Top 10 shareholders who are related parties to each other...

  • Page 50
    ... Ltd HTC Communication Technologies (Shanghai Limited) 0 0% 100% USD27,500 thousands 100% HTC Belgium BVBA/SPRL HTC NIPPON Corporation 0 0 0% 0% 100% 100% 18.55 thousands Shares 1 thousands Shares 100% 100% 0 0% 100% USD4,000 thousands 100% Note：Investments accounted for using the...

  • Page 51
    ... with health management helps cultivate the self-health management ability of employees. In 2013, a total of 2,843 people took part in the health promoting classes. HTC has a professional-grade fitness center with fitness instructors to develop personalized fitness programs for employees such as...

  • Page 52
    ... regulations governing supplier factories. The audits cover labor rights, labor conditions, environment, safety and health, integrity and ethics as well as the operation of related management systems. Apart from on-site audits, the HTC audit team plays the role of consultant as well. Suppliers...

  • Page 53
    ... product and trial schedule. The management platform was upgraded in 2008 with an even more simple and convenient user interface, along with better controls over hazardous substances. Apart from the regular annual GHG emission inventory and verification, HTC also reports our planning and systems...

  • Page 54
    ...poor families. Apart from providing education plans for continuous learning to help students learn through practice as well as build up their self-confidence and self-worth, HTC also works with students to cultivate the core values of honesty, integrity, love, respect, compassion, positive thinking...

  • Page 55
    CHAPTER 5 CAPITAL AND SHARES

  • Page 56
    ...ï¼›NT$ Authorized Paid-in Remark Capital increase by assets other than cash None None None None None Authorized Paid-in Remark Capital increase by assets other than cash Month/ Year 03/1998 10/1998 08/2000 04/2001 06/2002 Price 10 10 40 163.5 10 Shares 19,500,000 200,000,000 200,000,000 200,000...

  • Page 57
    ..., or corporate bonds with warrants (2) The outstanding shares include 16,914,000 shares of treasury stock bought back by HTC to be used for transfer to employees. 1,000 ~ 5,000 5,001 ~ 10,000 10,001 ~ 15,000 15,001 ~ 20,000 20,001 ~ 30,000 30,001 ~ 40,000 40,001 ~ 50,000 50,001 ~ 100,000 100,001...

  • Page 58
    ... employees at 5% minimum of the balance after withholding the amounts under 5. Share prices for the past two fiscal years, the Company's net worth per share, earnings per share, dividends per share, and related information: Year Item Highest market price Market price per share Lowest market price...

  • Page 59
    ... total outstanding shares) (Note 1) Purpose of the share buy-back (2) Employee bonus proposal adopted by the Board： HTC will not distribute Employee Bonus at the 2014 Annual Shareholders' Meeting; therefore it is not applicable. Eleventh Actual Stock Buy-back Status Buy-back period Number of buy...

  • Page 60
    ... Yuan on September 9, 2013 and the total quantity of the current issue is 15,000,000 units. Each stock warrant unit may be used to purchase one share of common stock of HTC. The share purchase price shall be the closing price of HTC common stock on the date of issuance of the employee stock warrants...

  • Page 61
    118 CAPITAL AND SHARES CAPITAL AND SHARES 119 2. Employee stock options granted to management team and to top 10 employees 2014.05.15 Exercised Number of Option Acquired Number of Option Acquired / Number of Option Issued (Note1) Exercise Price (NTD) Number of Option /Number of Option Issued (...

  • Page 62
    ... acquisitions. 2. During the current fiscal year up to the date of printing of this annual report, the Board of Directors has not adopted any resolution to issue new shares for mergers and acquisitions. 8. Implementation of the Company's Funds Utilization Plan The Company does not have unfinished...

  • Page 63
    CHAPTER 6 FINANCIAL STATUS, OPERATING RESULTS AND RISK MANAGEMENT

  • Page 64
    ... 2012 to 2013, mainly due to lower revenues and related reductions in purchasing and accounts payables. Explanations for any material changes in HTC's revenues, operating income, and pre-tax income in the most recent two fiscal years Intensifying competition in the world's mobile phone market led...

  • Page 65
    ... HTC's core businesses and long-term strategic developments. Project evaluation is based on industry dynamics, market competition, founding team experience, business model, risk analysis, et cetera. The final goal is to make key strategic investments ,whether via minority or control, in companies...

  • Page 66
    ...consumer needs. HTC Sense® is designed with customer at the center to make mobile phones more intuitive and easy to use. (1) We work actively to establish HTC's brand value, enhance global brand recognition and preference, and leverage effective brand management activities and product promotions to...

  • Page 67
    ...support and after-sales service. Note: Calculation is based on HTC consolidated financial numbers In addition to further developing its existing smartphone product line, the Company will continue to Working capital required to support the expansion of HTC business operations has over recent years...

  • Page 68
    ... meet the demands of global telecom carriers to ensure HTC's leadership position in 4G market and technology. HTC will continue to use its resources to develop new technologies and enhance the holistic user experience in order to deliver products and services that fit all high-end, mid-end, and low...

  • Page 69
    ... product development trends and customer demands Ensure design quality of HTC products with regard to hardware, software and product safety Enhance production quality Provide after-sales service and enhance the quality of such Internal Audit Internal Control Risk Global Product Division Product...

  • Page 70
    CHAPTER 7 AFFILIATE INFORMATION AND OTHER SPECIAL NOTES

  • Page 71
    .... 100.00% HTC Tech Computer Corp. (Suzhou) 100.00% HTC Belgium BVBA/SPRL 100.00% One & Company Design, Inc. HTC America Innovation Inc. HTC America Content Services, Inc. Dashwire, Inc. High Tech Computer (H.K.) Limited 100.00% HTC NIPPON Corporation 99.33% 100.00% Communication Global Certi...

  • Page 72
    ... INFORMATION AND OTHER SPECIAL NOTES 141 2. HTC affiliated companies Amount in thousands Company Investor： Principally engaged in the design, manufacture and marketing of PDA phones, smartphones and handheld devices, as well as the provision of related technologies and after services HTC India...

  • Page 73
    ... after-sales services Sale of smart handheld devices and electronic components Marketing, repair and after-sales services Online/download media services Marketing, repair and after-sales services International holdings Design, research and development of application software Sale of smart handheld...

  • Page 74
    ... AND OTHER SPECIAL NOTES 145 5. Information of Directors, Supervisors, and Presidents of HTC affiliated companies Unit: NT$ thousands, except shareholding Shareholding Investment Holding Percentage Company HTC (Thailand) Limited Title Director Director HTC India Private Limited Director Name or...

  • Page 75
    ... & Company Design, Inc. Director 60,000 shares 100.00% HTC India Private Limited HTC Malaysia Sdn. Bhd. HTC America Innovation, Inc. HTC America Content Services, Inc. Dashwire, Inc. Director 1,000 shares 100.00% HTC Innovation Limited HTC Communication Co., Ltd. HTC HK, Limited HTC Holding...

  • Page 76
    ... for primary product lines: HTC's primary products are converged devices designed on Android and Windows Phone operating systems (OS). HTC products support voice communication, mobile Internet, multimedia, global positioning service (GPS), personal data assistant (PDA), e-mail, instant data search...

  • Page 77
    ... AFFILIATE INFORMATION AND OTHER SPECIAL NOTES 151 The workï¬,ow for handheld devices, from R&D through production, is as follows: Setting Product Specifications Finished Product Enters Warehouse Software/ Hardware R&D Finished Product Testing & Inspection Substrate Manufacturing Item System...

  • Page 78
    ... covering professional, managerial and personal development as well as language courses and training for new employees. These programs help staff acclimate quickly to HTC's corporate culture and acquire essential knowledge and skills. We've introduced e-Learning and Mobile Learning platforms to make...

  • Page 79
    ... with management team. Long service awards: Awards are presented at a company-wide ceremony that recognize employees who have provided with 5-year, 10-year and 15-year of services. Internal transfer assistance: In order to help enhance employees' professional experience and career planning, HTC...

  • Page 80
    CHAPTER 8 FINANCIAL INFORMATION

  • Page 81
    158 FINANCIAL INFORMATION FINANCIAL INFORMATION 159 FINANCIAL INFORMATION 1. Abbreviated Balance Sheets for the Past Five Fiscal Years 1. Abbreviated Balance Sheets - IFRSs Unit：NT$ thousands Year Item 2013 Current Assets Properties Intangible Assets Other Assets Total Assets Before ...

  • Page 82
    160 FINANCIAL INFORMATION FINANCIAL INFORMATION 161 3. Abbreviated Consolidated Balance Sheets - IFRSs Unit：NT$ thousands Year Item 2013 Current Assets Properties Intangible Assets Other Assets Total Assets Before Appropriation Current Liabilities After Appropriation Non-Current Liabilities ...

  • Page 83
    ...22,608,902 - 5. The Name of the Certified Public Accountant and the Auditor's Opinion Year 2009 2010 2011 CPA Firm Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu Certified Public Accountant Ming-Hsien Yang and Tze-Chun...

  • Page 84
    ...ed market competition, price competition and sustainability for branding activities. Net margin declined to -0.68% and EPS was NT$-1.6 in 2013. 7.85 2.84 46 13.72 1.37 7.57 18.52 173.35 Financial analysis was based on ROC GAAP 4. Cash Flow Analysis Due to the global competition in 2013, HTC faced...

  • Page 85
    ... Turnover（Times） Days Sales Outstanding Average Inventory Turnover ( Times） Operating Performance Analysis Average Payment Turnover ( Times） Average Inventory Turnover Days Fixed Assets Turnover（Times） Total Assets Turnover ( Times） Return on Total Assets（ï¼...） Return on Equity...

  • Page 86
    ...to previous year given by intensified market competition. Return on total assets and return on equity turned negative. Net margin was -0.65% and basic earnings per share came to NT$-1.6 per share. Operating Performance Analysis Average Inventory Turnover（Times） Average Payment Turnover（Times...

  • Page 87
    ... Expenses) The Board of Directors has prepared the Company's 2013 Financial Statements. HTC Corporation's Financial Statements have been audited and certified by Yang, Ming-Hsien, CPA, and Hsu Wen-Ya, CPA, of Deloitte & Touche and an audit report relating to the Financial Statements has been...

  • Page 88
    ... sheets of HTC Corporation (the "Company") as of December 31, 2013, December 31, 2012 and January 1, 2012, and the related statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2013 and 2012. These financial statements are the responsibility of the...

  • Page 89
    174 FINANCIAL INFORMATION FINANCIAL INFORMATION 175 HTC CORPORATION BALANCE SHEETS (In Thousands of New Taiwan Dollars) December 31, 2013 ASSETS Amount CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Notes 7 and 32) Available-...

  • Page 90
    176 FINANCIAL INFORMATION FINANCIAL INFORMATION 177 HTC CORPORATION STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars) For the Years Ended December 31 2013 Amount REVENUES (Notes 24 and 33) COST OF REVENUES (Notes 14, 25 and 33) GROSS PROFIT UNREALIZED GAINS REALIZED GAINS...

  • Page 91
    ...HTC CORPORATION STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) Retained Earnings Other Equity Unrealized Gain (Loss) on Availablefor-sale Financial Assets $2,939 $ Common Stock BALANCE, JANUARY 1, 2012 Appropriation of 2011 earnings Legal reserve Special reserve reversed Cash...

  • Page 92
    ... FINANCIAL INFORMATION 181 HTC CORPORATION STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) For the Years Ended December 31 2013 CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before income tax Adjustments for: Depreciation Amortization Impairment loss recognized on trade...

  • Page 93
    ... HTC Corporation (the"Company") was incorporated on May 15, 1997 under the Company Law of the Republic of China to design, manufacture, assemble, process, and sell smart mobile devices and provide after-sales service. In March 2002, the Company had its stock listed on the Taiwan Stock Exchange...

  • Page 94
    ... and practices generally applied in the Republic of China but are required by the Securities and Futures Bureau for their oversight purposes. 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The Company's financial statements for the year ended December 31, 2013 is its...

  • Page 95
    ... less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weightedaverage cost on the balance sheet date. Investments in Subsidiaries Subsidiaries (including special purpose entities) are the entities controlled by the Company. Under the equity method...

  • Page 96
    ... not related to the Company. only financial statements using the equity method of accounting. Under the equity method, an investment in an jointly controlled entity is initially recognized in the parent company only balance sheet at cost and adjusted thereafter to recognize the Company's share of...

  • Page 97
    ... business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Company's cash-generating units (or groups of cash-generating units). A cash-generating unit...

  • Page 98
    ... assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the grouping is provided internally on that basis. In addition, if a contract...

  • Page 99
    ... assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the grouping is provided internally on that basis. In addition, if a contract...

  • Page 100
    ...provision for contingent loss on purchase orders is estimated after taking into account the effects of changes in the product market, evaluating the foregoing effects on inventory management and adjusting the Company's purchases. For defined benefit retirement benefit plans, the cost of providing...

  • Page 101
    ... - employee share options. 5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company's accounting policies, which are described in Note 4, the management is required to make judgments, estimates and assumptions about the carrying amounts of assets...

  • Page 102
    ...and are subject to an insignificant risk of change in value; these were held for the purpose of meeting short-term cash commitments. The market rate intervals of cash in bank at the end of the reporting period were as follows: December 31, 2013 Bank deposits 0.20%-0.85% December 31, 2012 0.20%-1.05...

  • Page 103
    ... FINANCIAL INFORMATION 203 The Company entered into forward exchange contracts to manage exposures due to exchange rate ï¬,uctuations of foreign currency denominated assets and liabilities. At the end of the reporting period, outstanding forward exchange contracts not under hedge accounting...

  • Page 104
    ... FINANCIAL INFORMATION 205 The market interest rates of the time deposits with original maturity more than three months were as follows: December 31, 2013 Time deposits with original maturities more than three months December 31, 2012 0.39%~1.10% January 1, 2012 0.39%~1.345% end of the reporting...

  • Page 105
    ... FINANCIAL INFORMATION 207 At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by the Company were as follows: December 31, 2013 H.T.C. (B.V.I.) Corp. Communication Global Certification Inc. High Tech Computer Asia Pacific Pte. Ltd. HTC...

  • Page 106
    ...losses Balance, end of the year Net book value, end of the year - 20. OTHER LIABILITIES December 31, 2013 Other payables December 31, 2012 January 1, 2012 The major component parts of the buildings held by the Company included plants, electro-powering machinery and engineering systems, etc., which...

  • Page 107
    ... the Year Ended December 31 2013 Service cost Interest cost Expected return on plan assets $4,598 6,388 (9,858) $1,128 An analysis by function Cost of revenues Selling and marketing General and administrative Research and development 2012 $5,600 6,662 (9,893) $2,369 Movement in the present value of...

  • Page 108
    ... are recorded in the year of stockholders' resolution as a change in accounting estimate. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price (after considering the effect of cash and stock dividends...

  • Page 109
    ... the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards. Information on the earnings appropriation and the bonus to employees, directors and supervisors is available on the Market Observation Post System website of the Taiwan Stock Exchange...

  • Page 110
    ... benefits expense For the Year Ended December 31 2013 Post-employment benefits (Note 23) Defined contribution plans Defined benefit plans $428,469 1,128 429,597 Share-based payments Equity-settled share-based payments Other employee benefits T otal employee benefits expense Classification - by...

  • Page 111
    ... the number of shares to be distributed to employees at their meeting in Unit: NT$ Per Share For the Year Ended December 31 2013 Basic (loss) earnings per share Diluted (loss) earnings per share $(1.60) $(1.60) 2012 $20.21 $20.12 g. Unrecognized deferred tax liabilities associated with investments...

  • Page 112
    ..., 2013 Carrying Amount December 31, 2012 January 1, 2012 Financial assets at FVTPL Derivative financial instruments Availablefor-sale financial assets Domestic listed stocks - equity investments Level 1 Level 2 Level 3 Total FunStream Design, February Corporation research and 2012 development...

  • Page 113
    ... equity and debt investments, trade receivables, other receivables, trade payables and other payables. The Company's Department of Financial and Accounting provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial...

  • Page 114
    ... significant stockholder, is the Company's chairperson 33. RELATED-PARTY TRANSACTIONS Sales For the Year Ended December 31 2013 Subsidiaries Key management personnel Other related parties - Employees' Welfare Committee Other related parties - other related parties' chairperson or its significant...

  • Page 115
    ... parties assisted the Company to expand business overseas and render design, research and development support, consulting services and after-sales services. The Company recognized related expenses amounting to NT$9,815,920 thousand and NT$14,359,973 thousand for the years ended December 31, 2013...

  • Page 116
    ... Board of Directors approved the retirement of 1,998 thousand shares of treasury stock on February 10, 2014. 38. SIGNIFICANT CONTRACTS The Company specializes in the research, design, manufacture and sale of smart mobile devices. To enhance the quality of its products and manufacturing technologies...

  • Page 117
    ...) 6) Item Assets Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Available-for-sale financial assets - current Restricted assets current Note and trade receivables, net Trade receivables related parties Other financial assets current Other...

  • Page 118
    ...6,950 Cash and cash equivalents Financial assets at fair value through profit or loss - current Available-for-sale financial assets - current Derivative financial assets for hedging - current Other financial assets current Note and trade receivables, net Trade receivables - related parties Other...

  • Page 119
    ...fit plan Share of other comprehensive income of subsidiaries, associates and joint ventures Income tax relating to components of other comprehensive income Other comprehensive income and loss for the period, net of income tax Total comprehensive income 4) 4) 3) 4) Selling and marketing General and...

  • Page 120
    ...of revenues" by NT$422 thousand, "selling and marketing expenses" by NT$505 thousand, "general and administrative expenses" by NT$171 thousand, "research and developing expenses" by NT$524 thousand and an increase in "share of the profit or loss of subsidiaries, associates and joint ventures" by NT...

  • Page 121
    ... of Financial Reports by Securities Issuers and International Financial Reporting Standards endorsed by the Financial Supervisory Commission of the Republic of China. We have also audited the parent company only financial statements of HTC Corporation as of and for the years ended December 31, 2013...

  • Page 122
    240 FINANCIAL INFORMATION FINANCIAL INFORMATION 241 HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) December 31, 2013 ASSETS Amount CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - ...

  • Page 123
    242 FINANCIAL INFORMATION FINANCIAL INFORMATION 243 HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars) For the Years Ended December 31 2013 Amount REVENUES (Notes 24 and 33) COST OF REVENUES (Notes 14, 25 and 33) GROSS PROFIT ...

  • Page 124
    ...-sale Financial Assets $2,939 Common Stock BALANCE, JANUARY 1, 2012 Appropriation of 2011 earnings Legal reserve Special reserve reversed Cash dividends Profit for the year ended December 31, 2012 Other comprehensive income and loss for the year ended December 31, 2012 Purchase of treasury shares...

  • Page 125
    246 FINANCIAL INFORMATION FINANCIAL INFORMATION 247 HTC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) For the Years Ended December 31 2013 CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before income tax Adjustments for: ...

  • Page 126
    ... Company Law of the Republic of China to design, manufacture, assemble, process, and sell smart mobile devices and provide after-sales service. In March 2002, HTC had its stock listed on the Taiwan Stock Exchange. On November 19, 2003, HTC listed some of its shares of stock on the Luxembourg Stock...

  • Page 127
    ... 2013, companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare their consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers...

  • Page 128
    ... investing activities Marketing, repair and after-sales service General investing activities International holding company Software service Holding S3 Graphics Co., Ltd. and general investing activities Design, research and development of three-D technology Manufacture and sale of smart mobile...

  • Page 129
    ...-sales services International holding company Marketing, repair and after-sales services Online/download media services Marketing, repair and after-sales services International holding company International holding company, design, research and development of application software Sale of smart...

  • Page 130
    ... by item, except where it may be appropriate 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...

  • Page 131
    ... FINANCIAL INFORMATION 259 the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 "Impairment of Assets" as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying...

  • Page 132
    ... assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the grouping is provided internally on that basis. In addition, if a contract...

  • Page 133
    ... be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period and are recognized in a separate line item as financial assets carried at cost. The financial assets are remeasured at fair value if they can...

  • Page 134
    ... assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the grouping is provided internally on that basis. In addition, if a contract...

  • Page 135
    ... FINANCIAL INFORMATION FINANCIAL INFORMATION 267 a. Warranty provisions The Company provides warranty service for one year to two years. The warranty liability is estimated on the basis of evaluation of the products under warranty, past warranty experience, and pertinent factors. this delivery...

  • Page 136
    ... the years ended December 31, 2013 and 2012, respectively. d. Impairment of goodwill Test of impairment on goodwill depends on the subjective judgment of management. The management uses subjective judgment to identify cash-generating units, allocates assets and liabilities to cash-generating units...

  • Page 137
    ...OR LOSS December 31, 2013 Financial assets held for trading Derivatives (not designated as hedging instruments) Exchange contracts $162,297 $6,950 $256,868 December 31, 2012 January 1, 2012 8. AVAILABLE-FOR-SALE FINANCIAL ASSETS December 31, 2013 Domestic investments Listed stocks Mutual funds $239...

  • Page 138
    ... designated hedged items. The outstanding forward exchange contracts of the Company at the end of the reporting period were as follows: Notional Amount (In Thousands) 11. FINANCIAL ASSETS MEASURED AT COST December 31, 2013 Domestic unlisted equity investment Overseas unlisted equity investment...

  • Page 139
    ... investments Beats Electronics, LLC SYNCTV Corporation $$$5,650,859 $5,650,859 $71,732 $71,732 December 31, 2012 January 1, 2012 The percentage of ownership and voting rights held by the Company at the end of reporting period were as follows: December 31, 2013 Beats Electronics, LLC Ownership 100...

  • Page 140
    ...of disposal Less: Carrying amount of investment at the date of disposal Add: Share of other comprehensive income of the associate Gain recognized $7,883,326 (5,285,537) 39,884 In December 2009, the Company acquired 100% equity interest in Huada, whose main business is software services, for NT$245...

  • Page 141
    ... and engineering systems, etc., which were depreciated over their estimated useful lives of 40 to 50 years, 20 years and 5 to 10 years, respectively. There were no interests capitalized for the years ended December 31, 2013 and 2012. 18. INTANGIBLE ASSETS December 31, 2013 Carrying amounts Patents...

  • Page 142
    ..., NT$119,833 thousand and NT$123,877 Operating cost Selling and marketing General and administrative Research and development Interest cost Expected return on plan assets The Company accrued marketing expenses on the basis of related agreements and other factors that would significantly affect the...

  • Page 143
    ... of Securities by Issuers. Where bonus to employees is allocated by means of new share issuance, the employees to receive bonus may include the affiliates' employees who meet Movements in the present value of the plan assets in the current year were as follows: For the Year Ended December 31 2013...

  • Page 144
    ... the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards. Information on the earnings appropriation and the bonus to employees, directors and supervisors is available on the Market Observation Post System website of the Taiwan Stock Exchange...

  • Page 145
    ... on financial assets For the Year Ended December 31 2013 Trade receivables (included in operating expense) Financial assets measured at cost (included in other gains and losses) $1,010,405 2012 $531,364 Equity-settled share-based payments Other employee benefits Total employee benefits expense...

  • Page 146
    288 FINANCIAL INFORMATION FINANCIAL INFORMATION 289 g. Items that were reclassified to other comprehensive income For the Year Ended December 31 2013 Exchange differences on translating foreign operations Exchange differences arising during the year Reclassification adjustments relating to ...

  • Page 147
    ... potential ordinary shares: Bonus issue to employees Weighted average number of ordinary shares used in the computation of diluted (loss) earnings per share 829,082 3,748 835,728 Shares For the Year Ended December 31 2013 829,082 2012 831,980 e. Items for which no deferred tax assets have been...

  • Page 148
    ... Beats specializes in design, research and development of audio technology. After the above transactions were completed, the Company lost its control on Beats. 28. SHARE-BASED PAYMENT ARRANGEMENTS Qualified employees of HTC and its subsidiaries were granted 15,000 thousand options in November 2013...

  • Page 149
    ...on observable market data (unobservable inputs). December 31, 2013 Level 1 Financial assets at FVTPL Derivative financial instruments Available-for-sale financial assets Domestic listed stocks - equity investments Level 2 Level 3 Total Gain (Loss) on Disposal of Subsidiary Saffron Media Group Ltd...

  • Page 150
    ... generally accepted pricing models based on discounted cash ï¬,ow analysis. Financial assets FVTPL-Held for trading Derivative instruments in designated hedge accounting relationships Held-to-maturity investments Loans and receivables (Note 1) Available-for-sale financial assets (Note 2) Financial...

  • Page 151
    ... $59,999 $59,999 3 to 12 Months Sales Over 1 Year For the Year Ended December 31 2013 Key management personnel Other related parties - Employees' Welfare Committee Other related parties - other related parties' chairperson or its significant stockholder, is HTC's chairperson $2,002 23,454 12,439...

  • Page 152
    .... Other Related-party Transactions a. To enhance product diversity, the Company entered into a trademark and technology license agreement with associates and other related parties. The royalty expense was NT$219,026 thousand and NT$271,701 thousand for the years ended December 31, 2013 and 2012...

  • Page 153
    ... of the contingent lawsuits on its business and financial condition. 38.SIGNIFICANT CONTRACTS The Company specializes in the research, design, manufacture and sale of smart mobile devices. To enhance the quality of its products and manufacturing technologies, the Company has patent agreements, as...

  • Page 154
    ... is organized and managed as a single reportable business segment. The Company's operations are mainly in the research, design, manufacture and sale of smart mobile devices and the operating revenue is more than 90 percent of the total revenue. Operating segment financial information was as follows...

  • Page 155
    ... Investments accounted for using the equity method Properties Amount Presentation Difference Amount Item Assets Current assets $53,878,067 6,950 $- $(2,911,924) - $50,966,143 6,950 Cash and cash equivalents Financial assets at fair value through profit or loss - current Available-for-sale...

  • Page 156
    ... stock Capital surplus Retained earnings Amount Presentation Difference Amount Item Liabilities and stockholders' equity Current liabilities Item Revenues Cost of revenues Gross profit Operating expenses f) Selling and marketing General and administrative e) e) Research and development Total...

  • Page 157
    ... value adjustments arising from business combinations that occurred before the date of transition to IFRSs. Thus, goodwill and fair value adjustments that occurred before the date of transition to IFRSs are expressed in New Taiwan dollars using the historical exchange rates. c) Share-based payment...

  • Page 158
    ...addressed in existing ROC GAAP; thus, the Company has not recognized the expected cost of employee benefits in the form of accumulated compensated absences at the end of reporting periods. However, under IFRSs, when the employees render services that increase their entitlement to future compensated...

  • Page 159
    ...fidential information may include, but is not limited to the following: 1. Business plans, manufacturing and marketing plans, procurement plans, product roadmaps, product design records, product test plans and reports, product software and source codes, product pricing, product appearance, product...

  • Page 160
    ...best interests of HTC by considering the venders'/suppliers' suitability, quality, price, and delivery of products or services; any personal preferences are not allowed for special offers. Purchasing agreements/sales contracts and related However, regardless of the amount, employees are not allowed...

  • Page 161
    ...as from customers, suppliers or companies with which HTC has a joint research 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 "tipsï¼, or share inside information with any...

  • Page 162
    320 321 HTC Corporation Chairperson: Cher Wang