Altek - Interim / Quarterly Report 2012

ALTEK CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS JUNE 30, 2012 AND 2011

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

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR12000012

To the Board of Directors and Stockholders of Altek Corporation

We have audited the accompanying consolidated balance sheets of Altek Corporation and its subsidiaries as of June 30, 2012 and 2011, and the related consolidated statements of income, of changes in stockholders' equity and of cash flows for the six-month periods then ended. These consolidated financial statements are the responsibility of the Company‟s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Except as discussed in the following paragraph, we conducted our audits in accordance with the “Rules Governing the Examination of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 1, the financial statements of major subsidiaries-Altek International Investment Co., Ltd. and its subsidiary-Altek (Kunshan) Co., Ltd., were consolidated based on their reviewed on major accounts of financial statements as of and for the six-month periods ended June 30, 2012 and 2011. Total assets of these subsidiaries amounted to $8,469,018 and $10,316,433, representing 44% and 50% of the consolidated total assets, as of June 30, 2012 and 2011, respectively. The financial statements of other subsidiaries were consolidated based on their unaudited or unreviewed financial statements as of and for the six-month periods ended June 30, 2012 and 2011. Total assets of these subsidiaries amounted to $2,607,285 and $2,287,427, representing 13% and 11% of the consolidated total assets, as of June 30, 2012 and 2011. Total net operating revenues of these subsidiaries for the six-month periods ended June 30, 2012 and 2011 representing less than 10% of the consolidated net operating revenues for the six-month periods then ended. In addition, as described in Note 4(6), the financial statements of long-term investments accounted for under the equity method were not audited by independent accountants. Long-term equity investments in these companies amounted to $383,986 and $339,385 as of June 30, 2012 and 2011, respectively, and the related investment loss amounted to $11,046 and $5,200 for the six-month periods then ended. These amounts were based solely on their unaudited or unreviewed financial statements.

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In our opinion, except for the effect of such adjustments, if any, as might have been determined to be necessary had the financial statements of subsidiaries and investee companies been audited by independent accountants as described in the preceding paragraph, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Altek corporation and subsidiaries as of June 30, 2012 and 2011, and the results of their operations and their cash flows for the six-month periods then ended in conformity with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and generally accepted accounting principles in the Republic of China.

Altek Corporation expects to adopt International Financial Reporting Standards, International Accounting Standards, and Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee (collectively referred herein as the IFRSs) as recognized by the former Financial Supervisory Commission, Executive Yuan, R.O.C (FSC) and the “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be applied in 2013 in the preparation of consolidated financial statements of Altek Corporation and its subsidiaries starting from January 1, 2013. Information relating to the adoption of IFRSs by Altek Corporation is disclosed in Note 13 in accordance with Jin-Guan-Zheng-Shen-Zi Order No.0990004943 of the FSC, dated February 2, 2010. The IFRSs may be subject to changes during the time of transition; therefore, the actual impact of IFRSs adoption on Altek Corporation and its subsidiaries may also change.

PricewaterhouseCoopers, Taiwan Hsinchu, Taiwan Republic of China August 17, 2012

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of the independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of NT dollars)

ASSETS Current Assets Cash and cash equivalents (Note 4 (1)) Financial assets at fair value through profit or loss - current (Note 4 (2)) Notes receivable, net Accounts receivable, net (Note 4 (3)) Other receivables Inventories, net (Note 4 (4)) Prepaid expenses Deferred income tax assets - current (Note 4 (16)) Other current assets Funds and Investments Financial assets carried at cost - non-current (Note 4 (5)) Long-term equity investments accounted for under the equity method (Note 4 (6)) Property and Equipment (Note 4 (7)) Cost Buildings Machinery and equipment Test equipment Transportation equipment Furniture and fixtures Leasehold improvements Other equipment Less: Accumulated depreciation ( Construction in progress and prepayments for equipment Intangible Asset Other intangible assets Other Assets Assets leased to other (Note 4(8)) Deposits out Deferred charges TOTAL ASSETS		June 30,	June 30,	% 33 3 - 19 - 15 1 1 - 72 1 2 3 14 6 1 - 1 - 2 24 ( 7 ) - 17 - 7 1 - 8 100
	2012	% 30 3 - 21 - 11 1 2 - 68 1 2 3 16 9 1 - 1 - 1 28 ( 9 ) ( 1 20 1 8 - - 8 100	2011
	Amount $ 5,912,005 518,824 - 4,005,740 23,308 2,158,366 291,493 321,897 14,767 13,246,400 236,077 383,986 620,063 3,004,392 1,674,778 193,093 25,478 175,146 47,264 250,531 5,370,682 1,651,323 ) 129,347 3,848,706 105,247 1,477,047 42,672 14,494 1,534,213 $ 19,354,629		Amount $ 6,877,517 594,642 13,209 3,978,664 18,384 3,040,612 128,708 115,418 32,652 14,799,806 256,855 339,385 596,240 2,857,752 1,287,566 153,277 20,571 139,571 37,664 396,374 4,892,775 1,400,228 ) 100,492 3,593,039 101,211 1,488,341 45,261 20,879 1,554,481 $ 20,644,777

(Continued)

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ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

(Expressed in thousands of NT dollars)

LIABILITIES AND STOCKHOLDERS‟EQUITY Current Liabilities Notes payable Accounts payable Accounts payable – related parties (Note 5) Income tax payable (Note 4 (16)) Accrued expenses Other payables (Note 4(9)) Provision for product warranty Other current liabilities Other Liabilities Accrued pension liabilities (Note 4 (10)) Guarantee deposits received Deferred income tax liabilities – non-current (Note 4 (16)) Total Liabilities Stockholders‟Equity Capital (Note 4 (11)) Common stock Stock dividends distributable Capital reserve (Note 4 (14)) Paid-in capital in excess of par value Capital reserve from conversion of convertible bonds Additional paid-in capital - treasury stock transactions Long-term investment Capital reserve from employee stock options (Note 4(12)) Retained earnings (Note 4 (15)) Legal reserve Special reserve Unappropriated earnings Cumulative translation adjustments Treasury stock (Note 4 (13)) ( Stockholders‟ equity of parent company Total Stockholders‟Equity Commitments and contingent liabilities (Note 7) TOTAL LIABILITIES AND STOCKHOLDERS‟EQUITY		June 30,	June 30,	% - 29 - - 3 7 2 4 45 - - 4 4 49 19 1 6 4 - - 1 6 2 17 ( 2 ) ( 3 ) 51 51 100
	2012	% - 27 - - 4 5 2 4 42 - - 5 5 47 20 - 7 5 - - 1 7 - 17 - ( ( 4 ) ( 53 53 100	2011
	Amount $ 674 5,259,090 613 53,201 753,129 936,992 356,992 823,846 8,184,537 2,624 22,530 821,833 846,987 9,031,524 3,961,013 - 1,371,589 894,836 6,841 13,187 100,398 1,291,466 - 3,385,631 12,846 714,702 ) 10,323,105 10,323,105 $ 19,354,629		Amount $ 8,810 5,937,444 27,346 32,015 534,625 1,519,432 316,802 811,791 9,188,265 1,288 22,530 822,613 846,431 10,034,696 3,889,361 132,144 1,281,564 894,836 19,575 13,187 135,104 1,272,282 488,347 3,580,972 506,501 ) 590,790 ) 10,610,081 10,610,081 $ 20,644,777

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated August 17, 2012.

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ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Expressed in thousands of NT dollars, except for earnings per share amount)

Operating revenues Sales Sales returns ( Sales allowances ( Net operating revenues Operating costs (Notes 4 (4) and (18)) Cost of sales ( Gross profit Operating expenses (Note 4 (18)) Selling expenses ( Administrative and general expenses ( Research and development expenses ( ( Operating income Non-operating revenues and income Interest income Gain on disposal of property and equipment Foreign currency exchange gain, net Rent revenues Gain on valuation of financial assets (Note 4 (2)) Other income Non-operating expenses and losses Investment loss accounted for under the equity method (Note 4(6)) ( Other expenses ( ( Income before income tax Income tax expense (Note 4 (16)) ( Consolidated net income Attributable to: Equity holders of the Company Minority interest Basic and diluted earnings per share (in NT dollars) (Note 4 (17)) Basic earnings per share Net income Diluted earnings per share Net income	For the six-month periods ended June 30,	For the six-month periods ended June 30,
	2012
	Amount $ 13,422,449 1,219 ) 63 ) 13,421,167 12,465,333 ) 955,834 62,613 ) 145,860 ) 633,222 ) 841,695 ) 114,139 64,656 384 16,338 16,418 1,856 5,154 104,806 11,046 ) 73 ) 11,119 ) 207,826 35,018 ) $ 172,808 $ 172,808 - $ 172,808 Before Tax $ 0.44 $ 0.44

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated August 17, 2012.

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ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS‟ EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2012 AND 2011

	FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2012 AND 2011	FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2012 AND 2011
Balance at January 1, 2011 Distribution of 2010 earnings (Note 1): Legal reserve Special reserve Employees‟ bonus - stock Cash dividends Stock dividends Employee stock options exercised Share-based payment transactions - employee stock options Consolidated net income for the six-month period ended June 30, 2011 Cumulative translation adjustments Sale of treasury stock to employees Purchase of treasury stock Balance at June 30, 2011 Balance at January 1, 2012 Distribution of 2011 earnings (Note 2): Legal reserve Special reserve Cash dividends Employee stock options exercised Share-based payment transactions - employee stock options Consolidated net income for the six-month period ended June 30, 2012 Cumulative translation adjustments Balance at June 30, 2012	(Expressed in thousands of NT dollars) Capital Retained earnings Common Stock dividends stock distributable Capital reserve Legal reserve Special reserve $ 3,888,721 $ - $ 2,321,763 $ 1,139,515 $ - - - - 132,767 - ( - - - - 488,347 ( - 94,679 - - - - - - - - ( - 37,465 - - - ( 640 - 905 - - - - 29,410 - - - - - - - - - - - - - - ( 7,812 ) - - - - - - - $ 3,889,361 $ 132,144 $ 2,344,266 $ 1,272,282 $ 488,347 $ 3,955,214 $ - $ 2,367,802 $ 1,272,282 $ 488,347 - - - 19,184 - ( - - - - ( 488,347 ) - - - - - ( 5,799 - 7,953 - - - - 11,096 - - - - - - - - - - - - $ 3,961,013 $ - $ 2,386,851 $ 1,291,466 $ -		Unappropriated earnings $ 4,524,497 132,767 ) 488,347 ) - 749,292 ) 37,465 ) - - 464,346 - - - $ 3,580,972 $ 3,308,469 19,184 ) 488,347 564,809 ) - - 172,808 - $ 3,385,631	Cumulative translation adjustments ( $ 488,347 ) - - - - - - - - ( 18,154 ) - - ($ 506,501 ) $ 143,987 - - - - - - ( 131,141 ) $ 12,846	Treasury stock Total ( $ 491,032 ) $ 10,895,117 - - - - - 94,679 - ( 749,292 ) - - - 1,545 - 29,410 - 464,346 - ( 18,154 ) 55,241 47,429 ( 154,999 ) ( 154,999 ) ($ 590,790 ) $ 10,610,081 ( $ 714,702 ) $ 10,821,399 - - - - - ( 564,809 ) - 13,752 - 11,096 - 172,808 ( 131,141 ) ($ 714,702 ) $ 10,323,105
	Common stock $ 3,888,721 - - - - - 640 - - - - - $ 3,889,361 $ 3,955,214 - - - 5,799 - - - $ 3,961,013	Special reserve $ - - ( 488,347 ( - - ( - ( - - - - - - $ 488,347 $ 488,347 - ( 488,347 ) - ( - - - - $ -

Note 1: Directors‟ and supervisors‟ remuneration amounting to $14,131 and employees‟ bonus amounting to $141,312 had been deducted from the Consolidated Statement of Income. Note 2: Directors‟ and supervisors‟ remuneration amounting to $13,220 and employees‟ bonus amounting to $99,151 had been deducted from the Consolidated Statement of Income.

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated August 17, 2012.

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ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of NT dollars)

Cash flows from operating activities:
Consolidated net income

Adjustments to reconcile consolidated net income to net cash (used in) provided
by operating activities:
Payroll expense - employee stock options
Depreciation (including depreciation of leased assets)
Amortization
Gain on valuation of financial assets
(
Provision for doubtful accounts
Provision for inventory obsolescence
Investment loss accounted for under the equity method
Cash dividends on long-term equity investments accounted for under the
equity method
Loss on disposal of property and equipment, net
(
Write-off of property and equipment
Deferred income tax
(
Changes in assets and liabilities:
(Increase) decrease in assets:
Financial assets at fair value through profit or loss - current
(
Notes receivable
Accounts receivable
(
Other receivables
(
Inventories
(
Prepaid expenses
Other current assets
Increase in liabilities:
Notes payable
(
Accounts payable
Accounts payable - related parties
(
Income tax payable
(
Accrued expenses
(
Other payables
Provision for product warranty
Other current liabilities
Accrued pension liabilities

Net cash (used in) provided by operating activities
(
Cash flows from investing activities:
Acquisition of financial assets carried at cost-non-current
Acquisition of property and equipment
(
Proceeds from disposal of property and equipment
Decrease in deposits out, net
Increase in deferred charges
(
Net cash used in investing activities
(
(Continued)

For the six-month periods ended June 30,
2012
2011
$ 172,808
$ 464,346
11,096
29,410
135,805
172,922
7,352
8,420

1,856 ) (
958 )
17,061
-
25,784
25,519
11,046
5,200
14,234
5,056

384 )
-
678
127

29,472 )
13,693

19,316 )
229,581
9 (
8,775 )

607,444 )
930,814

4,113 ) (
125 )

136,273 ) (
725,656 )
5,201
19,957
1,216
(
28,135 )

283 )
5,344
72,592
909,923

14,213 ) (
22,814 )

1,429 ) (
101,847 )

14,532 ) (
345,418 )
70,512
(
45,284 )
70,184
(
271,653 )
209,483
163,161
992

-

3,262
)
1,432,808
- (
5,337 )

307,256 ) (
519,276 )
7,073
-
334
14,837

2,936
) (
23,638
)

302,785
) (
533,414
)

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ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Expressed in thousands of NT dollars)

Cash flows from financing activities: Proceeds from sales of treasury stock to employees Proceeds from employee stock options exercised Purchase of treasury stock Increase in guarantee deposits received Net cash provided by (used in) financing activities Effect of foreign exchange rate ( Net (decrease) increase in cash and cash equivalents ( Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental disclosures of cash flow information Interest paid Income tax paid Investing activities partially paid by cash Increase in property and equipment Add: property and equipment and construction billings payable at beginning of period Less: property and equipment and construction billings payable at end of period ( Cash paid Declared directors‟ and supervisors‟ remuneration Declared employees‟ cash dividends Declared cash dividends Less: Other payables at end of period ( Cash paid	For the six-month periods ended June 30,	For the six-month periods ended June 30,
	2012 $ - 13,752 - ( - 13,752 ( 99,546 ) ( 391,841 ) 6,303,846 $ 5,912,005 $ - $ 65,919 $ 220,793 151,403 64,940 ) ( $ 307,256 $ 13,220 103,348 564,809 681,377 ) ( $ -	2011 $ 47,429 1,545 154,999 ) 22,530 83,495 ) 39,020 ) 776,879 6,100,638 $ 6,877,517 $ - $ 112,647 $ 812,612 159,053 452,389 ) $ 519,276 $ 14,131 46,633 749,292 810,056 ) $ -

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated August 17, 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011

ALTEK CORPORATION AND SUBSIDIARIES

(Expressed in thousands of NT dollars, unless stated otherwise)

1. HISTORY AND ORGANIZATION

Altek Corporation (the “Company”) was incorporated on December 24, 1996 under the provisions of the Company Law of the Republic of China (“R.O.C.”) and commenced its operations on April 1, 1999. The Company engages in the development, manufacturing and sale of digital image technology application, related export and import trade.

The Company was listed in the Taiwan Stock Exchange on December 24, 2002, as approved by the Tai-Tz (91) Letter No. 024976 of the former Securities and Futures Commission, Ministry of Finance, R.O.C., dated September 27, 2002.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

A. Basis For Preparation Of Consolidated Financial Statements:

The income (loss) of the subsidiaries is included in the consolidated statement of income effective on the date the Company gains control over the subsidiaries. Consolidated financial statements are prepared quarterly since January 1, 2008. The income (loss) of the subsidiaries is excluded from the consolidated statement of income effective the date on which the Company loses control over the subsidiaries. Significant inter-company transactions and assets and liabilities arising from inter-company transactions are eliminated.

B. Names of consolidated subsidiaries, their main operating activities, the percentage owned by the Company and their changes in 2012 were as follows:

Name of the investor Altek Corporation " "	Name of subsidiaries Altek International Investment Co., Ltd. Altek Japan Corporation Altek Investment Co., Ltd.	Main operating activities Investments and general business operations Sales and design of digital camera and its optical instruments Investments	Percentage of ownership as of June 30,
			2012 2011
			100% 100% 100% 100% 100% 100%

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Percentage of ownership as of June 30,

Name of the investor Altek Corporation Altek International Investment Co., Ltd. " " " " " " " " Leading Tech. Co., Ltd. Toptek Investment Cayman Co., Ltd. Altek Imaging Technology (Cayman) Co., Ltd. " Altek Trading (Cayman) Co., Ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek Trading (Shanghai) Limited Altek Optical Technology (Cayman) Co., Ltd.	Name of subsidiaries Altek Autotronics Corporation Altek Lab. Inc. Leading Tech. Co., Ltd. Toptek Investment Cayman Co., Ltd. Altek Imaging Technology (Cayman) Co., Ltd. RICH-ALTEK U.S.A., INC. Altek Optical (Cayman) Co., Ltd. Altek Trading (Cayman) Co., Ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek Optical Technology (Cayman) Co., Ltd. Altek (Kunshan) Co., Ltd. Altek EMS (Kunshan) Co., Ltd. Altek Imaging Technology (Shanghai) Limited Altek Precision (Kunshan) Co.,Ltd. Altek Trading (Shanghai) Limited Altek Semiconductor Corporation Beijing Altek Image Communication Technology Co., Ltd. Altek Optical Technology (Kunshan) Co., Ltd.	Main operating activities Research design, manufacture and sales of car electronic components Design and sales of engineering and optical components Investment and general business operations " " Delivery and storage Investments and general business operations " " " Manufacture and sales of digital still camera and its accessories SMT processing and related engineering services Manufacture and sales of optical components Design, manufacture and sales of digital camera parts Wholesale, import and export of digital cameras, digital video camera and their associated accessories Research design and sales of ASIC Sales of digital camera, handheld device and their related accessories Manufacture and sales of digital camera and its accessories and optical components	2012 2011
			100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Note 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Note

Note: Became a new subsidiary during the fourth quarter of 2011.

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C. Unconsolidated subsidiaries: None.

D. Different accounting periods adopted by subsidiaries: None.
E. Special operating risks in foreign subsidiaries: None.
F. Significant restriction of funds for the subsidiaries‟ financial activities to the Company: None.
G. Contents of subsidiaries‟ securities issued by the parent company: None.
H. Information on convertible bonds and new common stock issued by subsidiaries:

No subsidiaries issued convertible bonds during the period. Altek Optical Technology (Cayman) Co., Ltd. and Altek Optical Technology (Kunshan) Co., Ltd. raised additional cash capital of US$9,000 thousand (9,000,000 shares) and US$9,000 thousand respectively by issuing new common stock in 2012. Altek Imaging Technology (Cayman) Co., Ltd., Altek Precision (Kunshan) Co., Ltd., Altek Optical Technology (Cayman) Co., Ltd. and Altek Optical Technology (Kunshan) Co., Ltd. raised additional cash capital of US$5,800 thousand (5,800,000 shares), US$5,800 thousand, US$3,000 thousand (3,000,000 shares) and US$3,000 thousand, respectively, by issuing new common stock in 2011.

(2) TRANSLATION OF FINANCIAL STATEMENTS OF SUBSIDIARIES

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

(3) FOREIGN CURRENCY TRANSACTIONS

A. Transactions denominated in foreign currencies are translated into functional currencies at the spot exchange rates prevailing at the transaction dates. Exchange gains or losses due to the difference between the exchange rate on the transaction date and the exchange rate on the date of actual receipt and payment are recognized in current year‟s profit or loss.
B. Receivables, other monetary assets and liabilities denominated in foreign currencies are translated at the spot exchange rates prevailing at the balance sheet date. Exchange gains or losses are recognized in profit or loss.
C. When a gain or loss on a non-monetary item is recognized directly in equity, any exchange component of that gain or loss shall be recognized directly in equity. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss shall be recognized in profit or loss. However, non-monetary items that are measured on a historical cost basis are translated using the exchange rate at the date of the transaction.

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(4) CLASSIFICATION OF CURRENT AND NON-CURRENT ITEMS

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
a) Assets arising from operating activities that are expected to be realized or consumed, or are intended to be sold within the normal operating cycle;
b) Assets held mainly for trading purposes;
c) Assets that are expected to be realized within twelve months from the balance sheet date;
d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
a) Liabilities arising from operating activities that are expected to be paid off within the normal operating cycle;
b) Liabilities arising mainly from trading activities;
c) Liabilities that are to be paid off within twelve months from the balance sheet date;
d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date.

(5) CASH EQUIVALENTS

A. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to insignificant risk of changes in value resulting from fluctuations in interest rates.
B. The Group‟s statement of cash flows is prepared on the basis of cash and cash equivalents.

(6) FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

A. Financial assets and financial liabilities at fair value through profit or loss are recognized and derecognized using settlement date accounting and are recognized initially at fair value.
B. These financial instruments are subsequently remeasured and stated at fair value, and the gain or loss is recognized in profit or loss. The fair value of open-end and balanced mutual funds is based on the net asset value at the balance sheet date.

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(7) FINANCIAL ASSETS CARRIED AT COST

A. Investment in unquoted equity instruments is recognized or derecognized using trade date and is stated initially at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.
B. If there is any objective evidence that the financial asset is impaired, the impairment loss is recognized in profit or loss. Such impairment loss shall not be reversed when the fair value of the asset subsequently increases.

(8) NOTES RECEIVABLE / ACCOUNTS RECEIVABLE / OTHER RECEIVABLES

Notes and accounts receivable are claims resulting from the sale of goods or services. Receivables arising from transactions other than the sale of goods or services are classified as other receivables. Notes, accounts and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. If such evidence exists, a provision for impairment of financial asset is recognized. The amount of impairment loss is determined based on the difference between the asset‟s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the fair value of the asset subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not result to the asset‟s carrying amount greater than its amortized cost where no impairment loss was recognized. Subsequent recoveries of amounts previously written off are recognized in profit or loss.

(9) INVENTORIES

The perpetual inventory system is adopted for inventory recognition. Inventories are stated at cost. The cost is determined using the weighted-average method. At the end of period, inventories are evaluated at the lower of aggregate cost or net realizable value, and the individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value should be based on the estimated selling price in the normal course of business, net of estimated cost of completion and estimated selling expenses.

(10) LONG-TERM EQUITY INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD

A. Long-term equity investments in which the Group holds more than 20% of the investee company‟s voting shares or has the ability to exercise significant influence on the investee‟s operational decisions are accounted for under the equity method. The excess of the initial investment cost over the acquired net asset value of the investee attributable to goodwill is no longer amortized, effective January 1, 2006. Retrospective adjustment of the amount of goodwill amortized in previous year(s) is not required.

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B.Exchange differences arising from translation of the financial statements of overseas investee companies accounted for under the equity method are recorded as “cumulative translation adjustments” under stockholders‟ equity.

(11) PROPERTY AND EQUIPMENT

A. Property and equipment are stated at cost.
B. Depreciation is provided using the straight-line method over the assets' economic service lives. The estimated economic service lives of property, plant and equipment are 2~39 years.
C. Significant renewals and improvements are capitalized and depreciated accordingly. Maintenance and repairs are expensed as incurred.
D. When an asset is disposed or sold, its original cost and accumulated depreciation are written-off, and the related gain or loss on disposal of property and equipment is recorded as non-operating income or loss.

(12) INTANGIBLE AND DEFERRED CHARGES

Intangible and deferred charges consist of software costs and cost for land-use rights. The cost of software is amortized over 2-3 years using the straight-line method. The cost of land-use rights is amortized over 50 years (the lease period) using the straight-line method.

(13) IMPAIRMENT OF NON-FINANCIAL ASSETS

The Group recognizes impairment loss when there is indication that the recoverable amount of an asset is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell and value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm‟s length transaction after deducting any direct incremental disposal costs. The value in use is the present value of estimated future cash flows to be derived from continuing use of the asset and from its disposal at the end of its useful life. When the impairment no longer exists, the impairment loss recognized in prior years shall be recovered.

The recoverable amount of goodwill, intangible assets with indefinite useful lives and intangible assets which have not yet been available for use shall be evaluated periodically. Impairment loss will be recognized whenever there is indication that the recoverable amount of these assets is less than their respective carrying amount. Impairment loss of goodwill recognized in prior years is not recoverable in the following years.

(14) RESERVE FOR PRODUCT WARRANTY

Reserve for product warranty is provided based on the sales and an analysis of past warranty, etc.

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(15) PENSION PLAN

Under the defined benefit pension plan, net periodic pension cost, which includes service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets, is recognized based on the actuarial valuation report. Unrecognized net transition obligation is amortized on a straight-line basis over 15 years.

Under the defined contribution pension plan, net periodic pension cost is recognized as incurred.

(16) TREASURY STOCK

A. When common stock is reacquired, a temporary account entitled Treasury Stock is debited for the cost of the shares. The Treasury Stock account is treated as contra-stockholders‟ equity account representing a temporary reduction in stockholders‟ equity.
B. Treasury stocks transferred to employees on or after January 1, 2009 are accounted for in accordance with R.O.C. SFAS No. 39, “Accounting for Share-Based Payment”.
C. When a company‟s treasury stock is retired, the treasury stock account should be credited, and the capital reserve- premium on stock account and capital stock account should be debited proportionately according to the share ratio. An excess of the carrying value of treasury stock over the sum of its par value and premium on stock should first be offset against capital reserve from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings. An excess of the sum of the par value and premium on stock of treasury stock over its carrying value should be credited to capital reserve from the same class of treasury stock transactions.

D. Treasury stock cost is determined using the weighted-average cost method.

(17) INCOME TAX

A. Provision for income tax includes deferred income tax resulting from temporary differences, investment tax credits and loss carryforward. Valuation allowance on deferred tax assets is provided to the extent that it is more likely than not that the tax benefit will not be realized. Over or under provision of prior years‟ income tax liabilities is included in current year‟s income tax.
B. Investment tax credits arising from expenditures incurred on acquisitions of equipment or technology, research and development, employees‟ training, and equity investments are recognized in the year the related expenditures are incurred.
C. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

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D. When a change in the tax laws is enacted, the deferred tax liability or asset should be recomputed accordingly in the period of change. The difference between the new amount and the original amount, that is, the effect of changes in the deferred tax liability or asset, should be recognized as an adjustment to income tax expense (benefit) for income from continuing operations currently.

(18) SHARE-BASED PAYMENT – EMPLOYEE COMPENSATION PLAN

For the grant date of the share-based payment agreements set on or after January 1, 2008, the Company shall measure the services received during the vesting period by reference to the fair value of the equity instruments granted and account for those amounts as payroll expenses during that period.

(19) EMPLOYEES‟ BONUSES AND DIRECTORS‟ AND SUPERVISORS‟ REMUNERATION

Effective January 1, 2008, pursuant to EITF 96-052 of the Accounting Research and Development Foundation, R.O.C., dated March 16, 2007, “Accounting for Employees‟ Bonuses and Directors‟ and Supervisors‟ Remuneration”, the costs of employees‟ bonuses and directors‟ and supervisors‟ remuneration are accounted for as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and the amounts can be estimated reasonably. However, if the accrued amounts for employees‟ bonuses and directors‟ and supervisors‟ remuneration are significantly different from the actual distributed amounts resolved by the stockholders at their annual stockholders‟ meeting subsequently, the differences shall be recognized as gain or loss in the following year. In addition, according to EITF 97-127 of the Accounting Research and Development Foundation, R.O.C., dated March 31, 2008, “Criteria for Listed Companies in Calculating the Number of Shares of Employees‟ Stock Bonus”, the Company calculates the number of shares of employees‟ stock bonus based on the closing price of the Company's common stock at the previous day of the stockholders‟ meeting held in the year following the financial reporting year, after taking into account the effects of ex-rights and ex-dividends.

(20) REVENUES,COSTS AND EXPENSES

Revenues are recognized when the earning process is substantially completed and are realized or realizable. Costs and expenses are recognized as incurred.

(21) USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those assumptions and estimates.

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(22) SETTLEMENT DATE ACCOUNTING

If an entity recognizes financial assets using settlement date accounting, any change in the fair value of the asset to be received during the period between the trade date and the settlement date / balance sheet date is not recognized for assets carried at cost or amortized cost. For financial asset or financial liability classified as at fair value through profit or loss, the change in fair value is recognized in profit or loss. For available-for-sale financial asset, the change in fair value is recognized directly in equity.

(23) OPERATING SEGMENTS

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

The Group discloses the segment information on the consolidated financial statements in accordance with R.O.C SFAS No. 41 “Operating Segments”.

3. CHANGES IN ACCOUNTING PRINCIPLES

(1) NOTES RECEIVABLE / ACCOUNTS RECEIVABLE / OTHER RECEIVABLES

Effective January 1, 2011, the Group adopted the amended R.O.C. SFAS No. 34, “Financial Instruments：Recognition and Measurement”. This change in accounting principle had no effect on the Group‟s consolidated net income and earnings per share for the six-month period ended June 30, 2011.

(2) OPERATING SEGMENTS

Effective January 1, 2011, the Group adopted R.O.C. SFAS No. 41, “Operating Segments” in place of R.O.C. SFAS No. 20, “Segment Reporting”. Segment information for prior years shall be restated when the Group applies this standard for the first time. This change in accounting principle had no effect on the Group‟s consolidated net income and earnings per share for the six-month period ended June 30, 2011.

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4. DETAILS OF SIGNIFICANT ACCOUNTS

(1) CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash: Petty cash Savings accounts Checking accounts Time deposits	June 30,
	2012 $ 1,151 988,141 162 4,922,551 $ 5,912,005	2011
		$ 1,170 524,198 759 6,351,390
		$ 6,877,517

(2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

FINANCIAL ASSETS AT FAIR VALUE THROUGH	PROFIT OR LOSS	PROFIT OR LOSS
Current items: Financial assets held for trading Adjustment of financial assets held for trading	June 30,
	2012 $ 514,594 4,230 $ 518,824	2011
		$ 591,575 3,067 $ 594,642

The Group recognized net gain on valuation of financial assets of $1,856 and $958 for the six-month periods ended June 30, 2012 and 2011, respectively.

(3) ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET
Accounts receivable Less: Allowance for doubtful accounts (	June 30, 2012 2011 $ 4,658,415 $ 3,987,323 652,675 ) ( 8,659 ) $ 4,005,740 $ 3,978,664
	2012 $ 4,658,415 652,675 ) ( $ 4,005,740

(4) INVENTORIES

NVENTORIES
Raw materials Work in process Finished goods Total		June 30, 2012	Net Book Value
	Cost $ 1,306,856 418,567 619,875 $ 2,345,298	Allowance ( $ 78,129 ) ( 50,372 ) ( 58,431 ) ($ 186,932 )
			$ 1,228,727 368,195 561,444 $ 2,158,366

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Raw materials Work in process Finished goods Total		June 30, 2011	Net Book Value $ 1,346,588 556,908 1,137,116 $ 3,040,612
	Cost $ 1,400,526 ( 585,881 ( 1,219,579 ( $ 3,205,986 (	Allowance $ 53,938 ) 28,973 ) 82,463 ) $ 165,374 )

Cost and losses incurred related to inventories:

Cost and losses incurred related to inventories:
Cost of inventories sold Loss for market price decline and obsolescence of inventories Others	For the six-month periods ended June 30, 2012 2011 $ 12,439,496 $ 11,773,829 25,784 25,519 53 604 $ 12,465,333 $ 11,799,952
	2012 $ 12,439,496 25,784 53 $ 12,465,333

(5) FINANCIAL ASSETS CARRIED AT COST

FINANCIAL ASSETS CARRIED AT COST
Non-current items: Unlisted stocks Less: Accumulated impairment loss (	June 30,	2011 $ 321,638 64,783 ) $ 256,855
	2012 $ 300,860 64,783 ) ( $ 236,077

The investments were measured at cost since their fair value cannot be measured reliably.

(6) LONG-TERM EQUITY INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD

A. Details of long-term equity investments accounted for under the equity method are set forth below:

set forth below:
Investee company JinJing Optical Technology Co., Ltd. Phoenix Optical (Shanghai) Co., Ltd. Less: Accumulated impairment loss	June 30,	2012 Percentage of ownership 23.33% 40%	June 30,	2011 Percentage of ownership
	Amount $ 52,700 354,873 407,573 ( 23,587 ) $ 383,986		Amount $ 58,745 304,227 362,972 ( 23,587 ) $ 339,385
				23.33% 40%

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B. Investment gain or loss accounted for under the equity method for the six-month periods ended June 30, 2012 and 2011 were based on the investees‟ unaudited financial statements as set forth below:

			For	the six-month periods	the six-month periods	the six-month periods	the six-month periods	ended June 30,	ended June 30,
			2012					2011
JinJing Optical Technology Co., Ltd.		(	$			3,349 ) ( $			5,820	)
Phoenix Optical (Shanghai) Co., Ltd.		(				7,697 )			620
		(	$			11,046 ) ($			5,200	)
PROPERTY AND EQUIPMENT
					June 30, 2012
						Accumulated
		Cost				Depreciation		Net Book Value
Buildings	$	3,004,392		( $		223,866	)	$	2,780,526
Machinery and equipment		1,674,778		(		1,035,007	)		639,771
Test equipment			193,093	(		106,948	)		86,145
Transportation equipment			25,478	(		17,181	)		8,297
Furniture and fixtures			175,146	(		104,834	)		70,312
Leasehold improvements			47,264	(		28,476	)		18,788
Other equipment			250,531	(		135,011	)		115,520
Construction in progress and
prepayments for equipment			129,347			-			129,347
	$	5,500,029		($		1,651,323	)	$	3,848,706
					June 30, 2011
						Accumulated
		Cost				Depreciation		Net Book Value
Buildings	$	2,857,752		( $		137,806	)	$	2,719,946
Machinery and equipment		1,287,566		(		851,058	)		436,508
Test equipment			153,277	(		80,369	)		72,908
Transportation equipment			20,571	(		13,157	)		7,414
Furniture and fixtures			139,571	(		76,224	)		63,347
Leasehold improvements			37,664	(		14,917	)		22,747
Other equipment			396,374	(		226,697	)		169,677
Construction in progress and
prepayments for equipment			100,492			-			100,492
	$	4,993,267		($		1,400,228	)	$	3,593,039

(7) PROPERTY AND EQUIPMENT

No interest expense was capitalized for the six-month periods ended June 30, 2012 and 2011.

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(8) ASSETS LEASED TO OTHER

ASSETS LEASED TO OTHER
Buildings (including leased land) Buildings (including leased land)		June 30, 2012	Net Book Value
	Cost $ 1,493,989	Allowance ($ 16,942 ) June 30, 2011
			$ 1,477,047
			Net Book Value
	Cost $ 1,493,989	Allowance ($ 5,648 )
			$ 1,488,341

The Company acquired the Taipei building for operating use at the end of 2010. However, since this building is still under a certain unexpired lease agreement, the Company continuously leases the building to the lessee until the lease agreement is expired, and is currently recognized as “Assets leased to other”.

(9) OTHER PAYABLES

OTHER PAYABLES
Accrued dividends, employees‟ bonuses and remuneration to directors and supervisors Payables on equipment and construction Others	June 30,
	2012 $ 713,331 64,940 158,721 $ 936,992	2011 $ 967,687 452,389 99,356 $ 1,519,432

(10) PENSION PLAN

A.The Company has set up a defined benefit pension plan in accordance with the Labor Standards Law, which applies to all regular employees before the enforcement of the Labor Pension Act (the “Act”) on July 1, 2005 and the employees who elect to be covered under the pension scheme of the Labor Standards Law after the enforcement of the Act. Under the defined benefit plan, two units are accrued for each year of service for the first 15 years and one unit is accrued for each additional year of service thereafter, subject to a maximum of 45 units. Pensions paid upon retirement are based on the number of units accrued and the average monthly salaries and wages of the last current month prior to retirement. The Company contributes monthly an amount equal to 2% of the employees' monthly salaries and wages to the retirement fund deposited with Bank of Taiwan under the name of the independent retirement fund committee. The pension costs under defined benefit pension plan for the six-month periods ended June 30, 2012 and 2011 were $995 and $0, respectively. The fund balance with Bank of Taiwan was $45,961 and $45,554 as of June 30, 2012 and 2011, respectively.
B. In accordance with the Labor Pension Act (the “Act”), since July 1, 2005, the Company has in place a defined contribution pension plan, applicable to all employees who are Taiwan nationals. For employees who have chosen to join the Act pension scheme, the Company makes a monthly pension contribution of not less than 6% of salary to the employee‟s special personal accounts with the Bureau of Labor Insurance. Upon retirement, employees may choose to receive their employee personal retirement account and accumulated earnings, in one lump-sum payment or in monthly payments. As of June 30, 2012 and 2011, the Company had

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recognized pension costs of $19,020 and $18,116, respectively, under the above pension scheme.

C. The subsidiaries provided defined contribution for its employees. Pursuant to local regulations, participants and the subsidiaries each make contributions based on a certain percentage based of the salaries and wages to the pension funds. The subsidiaries have recognized pension costs of $40,596 and $34,291 for the six-month periods ended June 30, 2012 and 2011, respectively.

(11) COMMON STOCK

A. As of June 30, 2012, the Company‟s authorized capital was $5,000,000 shares at $10 (in NT dollars) par value per share. As of June 30, 2012, the total issued and outstanding capital was $3,961,013.
B. The stockholders at their meeting on June 15, 2011 adopted a resolution to capitalize retained earnings of $37,465 and employees‟ bonus of $94,679 by issuing 6,237,361 shares of new common stocks (including 2,490,900 shares for employees‟ stock bonus). In accordance with the resolution adopted by the Board of Directors on August 31, 2011, the Company set November 6, 2011 as the base date for this capital increase. The registration of this capital increase had been completed.
C. As of June 30, 2012, the Company‟s employees had exercised 7,642 units of employee stock options in accordance with the Option Plan, representing 7,642,000 shares of common stock. The exercise price was $10~$29.5 (in NT dollars) per share. The registration of this capital increase had been completed.

(12) SHARE-BASED PAYMENT-EMPLOYEE COMPENSATION PLAN

A. As of June 30, 2012, the Company‟s share-based payment transactions are set forth below:

Quantity granted Actual resignation Type of (in thousand Contract Vesting rate in the current Estimated future arrangement Grant date shares) period conditions period resignation rate Employee stock June 13, 2008 、 18,000 8.8years~ Note - 10 ～ 20% options October 31, 2008 、 9.6years March 23, 2009 、 October 28, 2011 and March 21, 2012 Treasury stock March 15,2011 and 2,264 - Vest - - transferred to September 9, 2011 immediately employees

Note: 2 years‟ service vest 40%, 3 years‟ service vest 70%, 4 years‟ service vest 100%.

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B. Details of the employee stock options are set forth below:

Outstanding at the beginning of the period Options granted Distribution of stock dividends or adjustments for number of options Options waived Options exercised ( Options forfieted Outstanding at the end of the period Exercisable options at the end of the period Approved and not yet issued options at the end of the period	For the six-month period ended June 30, 2012 In thousands of shares Weighted average exercise price (in NT dollars) 13,788 $ 25.8 3,000 27.85 - - - - ( 580 ) 23.7 ( - - 16,208 26.3 9,062 -	For the six-month period ended June 30, 2011 In thousands of shares Weighted average exercise price (in NT dollars) 11,530 $ 27.5 - - - - 150 ) - 64 ) 24.1 - - 11,316 27.5 6,636 -
	In thousands of shares 13,788 3,000 - - 580 ) - 16,208 9,062 -	In thousands of shares 11,530 - - 150 ) 64 ) - 11,316 6,636 -

C.The weighted-average stock price of stock options at exercise date of the six-month period ended June 30, 2012 was $ 24.16 (in dollars).
D. The exercise price and weighted-average remaining vesting period of the employee stock options outstanding as of June 30, 2012 and 2011 are set forth below:

Employee stock option		June 30, 2012	June 30, 2012		June 30, 2011	June 30, 2011
			Weighted-average remaining vesting period 6.61 years			Weighted-average remaining vesting period 6.51 years

E. For the stock options granted of the six-month period ended June 30, 2012 with the compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The parameters used in the estimation of the fair value are as follows:

Exercise price Expected Expected Expected Risk-free Fair value Type of Stock price (in NT dollars) price vesting dividend interest per unit arrangement Grant date (in NT dollars) (Note) volatility period yield rate rate (in NT dollars) Employee March 21, 2012 $ 27.85 $ 27.85 33.54% 4.9 years 1.4% 1.08% $ 7.35 stock options

Note: The exercise price of stock options was adjusted based on the cash dividends and stock dividends per share distributed.

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F. Liabilities arising from share-based payment transactions are shown below:

Equity - settled Cash - settled	For the six-month periods ended June 30, 2012 2011 $ 11,096 $ 29,410 - - $ 11,096 $ 29,410
	2012 $ 11,096 - $ 11,096

(13) TREASURY STOCK

A.

.
Reason of reacquiring Transfer to employees Reason of reacquiring Transfer to employees	For the six-month period ended June 30, 2012 (in thousands of shares)
	Beginning shares Additions Disposals Ending shares 19,086 - - 19,086 For the six-month period ended June 30, 2011 (in thousands of shares)			Ending shares
				19,086
	Beginning shares 12,460	Additions 3,140 (	Disposals 1,334 )	Ending shares
				14,266

As of June 30, 2012, the shares bought back as treasury stock amounted to $714,702.

B. Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as treasury stock should not exceed 10% of the number of the Company‟s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital reserve.
C. Pursuant to the R.O.C. Securities and Exchange Law, treasury stock should not be pledged as collateral and is not entitled to dividends before it is reissued to the employees.
D. The transfer price of treasury stock to employees was initially set at $45.8 (in NT dollars), $28.51 (in NT dollars) and $41.61 (in NT dollars) in 2010, 2008 and 2007, respectively, and the transfer price was adjusted to $25.4 (in NT dollars) and $33.4 (in NT dollars) per share in accordance with the earnings distribution for the fiscal years of 2008 and 2007, respectively.

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(14) CAPITAL RESERVE

A. Pursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital reserve to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital reserve should not be used to cover accumulated deficit unless the legal reserve is insufficient.
B. Please see Note 4 (12) for details of capital reserve from employee stock options.

(15) RETAINED EARNINGS

A. According to the Company‟s Articles of Incorporation, the annual earnings, if any, shall first be used to pay all taxes and offset prior years‟ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. Special reserve shall be set aside in accordance with the rules set forth in the Securities and Exchange Law, and remaining amount shall be distributed in the following order:
(a) allocating 10% to 20% as employees‟ bonus;
(b) allocating 2% as directors‟ and supervisors‟ remuneration; and
(c) distributing the remaining amount as common stockholders‟ dividends in accordance with the resolution adopted by the Board of Directors and approved at the stockholders‟ meeting.
B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company‟s paid-in capital.
C. In accordance with relevant laws or regulations of the Securities and Futures Bureau, the Company shall set aside special reserve at the same amount as the reduction in stockholders‟ equity, and is not entitled to dividends.
D. The amount of dividends appropriated is based on the Company‟s current year‟s net income and prior years‟ retained earnings, taking into account the Company‟s financial structure and future operating plans. The distribution ratio of cash dividends to stock dividends is based on the Company‟s funding status, diluted earnings per share and other factors. According to the dividend policy adopted by the Board of Directors, cash dividends shall account for at least 20% of the total dividends distributed. Dividends appropriation shall be resolved by the stockholders at the stockholders‟ meeting.
E. The appropriation of 2011 earnings had been resolved at the stockholders‟ meeting on June 13, 2012 and the appropriation of 2010 earnings had been resolved at the stockholders‟ meeting on June 15, 2011. Details are summarized below:

～ 25 ～

Legal reserve Special reserve Stock dividends Cash dividends		2011 earnings Amount Dividends per share (in NT dollars) $ 19,184 - 488,347 ) - - - 564,809 Around $1.5 $ 95,646		2010 earnings Amount Dividends per share (in NT dollars) $ 132,767 - 488,347 - 37,465 Around $ 0.1 749,292 Around $ 2.0 $ 1,407,871
		Amount $ 19,184 488,347 ) - 564,809 $ 95,646		Amount $ 132,767 488,347 37,465 749,292 $ 1,407,871
	(

The appropriation of 2011 earnings was the same as that approved by the Board of Directors on March 21, 2012; the 2011 directors‟ and supervisors‟ remuneration and employees‟ cash bonus as appropriated during the stockholders‟ meeting on June 13, 2012 were $13,220 and $99,151, respectively. The 2010 directors‟ and supervisors‟ remuneration, employees‟ stock bonus and cash bonus as appropriated during the stockholders‟ meeting on June 15, 2011 were $14,131, $94,679 and $46,633, respectively.

F. The estimated amounts of employees‟ bonus were $23,329 and $83,582 and the estimated amounts of directors‟ and supervisors‟ remuneration were $3,111 and $8,358 for the six-month periods ended June 30, 2012 and 2011, respectively, and were recognized as operating costs or operating expenses for 2012 and 2011, respectively. While, if the estimated amounts are different from the amounts approved by the stockholders subsequently, the difference is recognized as gain or loss in the next year. Information on the appropriation of the Company‟s earnings as resolved by the Board of Directors and approved by the stockholders will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(16) INCOME TAX

A. Income tax expense and payable are reconciled as follows:

Tax on pretax income at statutory tax rate Permanent differences Temporary differences Estimated 10% corporate income tax on unappropriated earnings Increase in investment tax credit Tax effect of valuation allowance Adjustment of income tax expense in prior years Income tax expense Income tax payable in prior years Adjustment of income tax expense in prior years Net effect of deferred income tax assets Prepaid income tax Income tax payable	For the six-month periods ended June 30, 2012 2011 $ 61,855 $ 137,746 ( 5,077 ) ( 322 ) 4,105 ( 110,005 ) 11,820 - ( 23,087 ) ( 2,429 ) ( 29,472 ) 13,693 14,874 ( 14,190 ) 35,018 24,493 15,963 11,885 ( 14,874 ) 14,190 29,472 ( 13,693 ) ( 12,378 ) ( 4,860 ) $ 53,201 $ 32,015	For the six-month periods ended June 30, 2012 2011 $ 61,855 $ 137,746 ( 5,077 ) ( 322 ) 4,105 ( 110,005 ) 11,820 - ( 23,087 ) ( 2,429 ) ( 29,472 ) 13,693 14,874 ( 14,190 ) 35,018 24,493 15,963 11,885 ( 14,874 ) 14,190 29,472 ( 13,693 ) ( 12,378 ) ( 4,860 ) $ 53,201 $ 32,015
	( ( ( ( (	2012 $ 61,855 5,077 ) ( 4,105 ( 11,820 23,087 ) ( 29,472 ) 14,874 ( 35,018 15,963 14,874 ) 29,472 ( 12,378 ) ( $ 53,201

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B. As of June 30, 2012 and 2011, the balance of deferred income tax assets and liabilities were as follows:

iabilities were as follows:
Deferred income tax assets - current Deferred income tax liabilities - current Valuation allowance Deferred income tax assets – non current Deferred income tax liabilities – non current ( Valuation allowance ( (	June 30,	2011 $ 146,419 - 31,001 ) 115,418 177,705 921,670 ) 78,648 ) 822,613 ) $ 707,195 )
	2012 $ 321,897 - - ( 321,897 46,333 868,166 ) ( - ( 821,833 ) ( $ 499,936 ) (

C. As of June 30, 2012 and 2011, the tax effects of temporary differences and investment tax credits resulting in deferred income tax assets and liabilities were as follows:

June 30 2012 Current items: Temporary differences Provision for product warranty $ 46,803 Estimation of expenses and losses on obsolescence of inventories, etc. 204,240 Investment tax credits 70,854 Valuation allowance - ( 321,897 Non-current items: Temporary differences Investment gain under the equity method ( 865,535 ) ( Cumulative translation adjustments ( 2,631 ) Others 46,333 Investment tax credits - Valuation allowance - ( ( 821,833 ) ( ($ 499,936 ) (	June 30	, 2011 $ 22,748 123,671 - 31,001 ) 115,418 921,670 ) - 78,648 99,057 78,648 ) 822,613 ) $ 707,195 )

D. As of June 30, 2012, the Company‟s income tax returns through 2009 have been assessed and approved by the Tax Authority.
E. The Company is eligible for investment tax credits under the Statute for Upgrading Industry. Details as of June 30, 2012 are as follows:

Qualifying item Research and development	Total tax credits $ 298,875	Unused tax credits $ 70,854	Final year tax credits are due
			2013

～ 27 ～

F. The Taiwan imputation tax system requires that any undistributed current earnings, on tax basis, of a company derived on or after January 1, 1998 be subject to an additional 10% corporate income tax if the earnings are not distributed in the following year. This 10% additional tax on undistributed earnings paid by the company may be used as tax credit by stockholders, including foreign stockholders, against the withholding tax on dividends. In addition, the domestic stockholders can claim a proportionate share in the company‟s corporate income tax credit against its individual income tax liability effective 1998. The Company‟s related information was as follows:

was as follows:
Imputation credit account (ICA) Estimated creditable ratio for the appropriation of earnings Unappropriated earnings In and after 1998	June 30, 2012 2011 $ 264,114 $ 376,978 For the years ended December 31,
	2012 2011 7.80% 6.96% June 30,	2011
		6.96%
	2012 $ 3,385,631	2011
		$ 3,580,972

G. Altek (Kunshan) Co., Ltd. and Toptek Electronics (Kunshan) Co., Ltd. pursuant to the tax laws in the People‟s Republic of China, will be levied corporate income taxes at a tax rate of 24% and 25% for the years 2011 and 2012, respectively.

(17) EARNINGS PER SHARE

For the six-month period ended June 30, 2012 Weighted-average outstanding Amount common shares Earnings per share (in NT dollars) Before tax Before tax (Note) Before tax After tax $ 207,826 $ 172,808 $ 166,204 $ 172,808 376,743 $ 0.44 $ 0.46 - - 171 - - 1,228 $ 166,204 $ 172,808 378,142 $ 0.44 $ 0.46	For the six-month period ended June 30, 2012 Weighted-average outstanding Amount common shares Earnings per share (in NT dollars) Before tax Before tax (Note) Before tax After tax $ 207,826 $ 172,808 $ 166,204 $ 172,808 376,743 $ 0.44 $ 0.46 - - 171 - - 1,228 $ 166,204 $ 172,808 378,142 $ 0.44 $ 0.46	For the six-month period ended June 30, 2012 Weighted-average outstanding Amount common shares Earnings per share (in NT dollars) Before tax Before tax (Note) Before tax After tax $ 207,826 $ 172,808 $ 166,204 $ 172,808 376,743 $ 0.44 $ 0.46 - - 171 - - 1,228 $ 166,204 $ 172,808 378,142 $ 0.44 $ 0.46	For the six-month period ended June 30, 2012 Weighted-average outstanding Amount common shares Earnings per share (in NT dollars) Before tax Before tax (Note) Before tax After tax $ 207,826 $ 172,808 $ 166,204 $ 172,808 376,743 $ 0.44 $ 0.46 - - 171 - - 1,228 $ 166,204 $ 172,808 378,142 $ 0.44 $ 0.46
Amount Before tax Before tax $ 207,826 $ 172,808 $ 166,204 $ 172,808 - - - - $ 166,204 $ 172,808	Weighted-average outstanding common shares (Note) 376,743 171 1,228 378,142
Before tax $ 207,826 $ 166,204 - - $ 166,204		Before tax $ 0.44 $ 0.44	After tax $ 0.46 $ 0.46

～ 28 ～

For the six-month period ended June 30, 2011 Weighted-average outstanding Amount common shares Earnings per share (in NT dollars) Before tax After tax (Note) Before tax After tax $ 488,839 $ 464,346 $ 466,855 $ 464,346 378,195 $ 1.23 $ 1.23 - - 3,934 - - 873 - - 4,282 $ 466,855 $ 464,346 387,284 $ 1.21 $ 1.20	For the six-month period ended June 30, 2011 Weighted-average outstanding Amount common shares Earnings per share (in NT dollars) Before tax After tax (Note) Before tax After tax $ 488,839 $ 464,346 $ 466,855 $ 464,346 378,195 $ 1.23 $ 1.23 - - 3,934 - - 873 - - 4,282 $ 466,855 $ 464,346 387,284 $ 1.21 $ 1.20	For the six-month period ended June 30, 2011 Weighted-average outstanding Amount common shares Earnings per share (in NT dollars) Before tax After tax (Note) Before tax After tax $ 488,839 $ 464,346 $ 466,855 $ 464,346 378,195 $ 1.23 $ 1.23 - - 3,934 - - 873 - - 4,282 $ 466,855 $ 464,346 387,284 $ 1.21 $ 1.20	For the six-month period ended June 30, 2011 Weighted-average outstanding Amount common shares Earnings per share (in NT dollars) Before tax After tax (Note) Before tax After tax $ 488,839 $ 464,346 $ 466,855 $ 464,346 378,195 $ 1.23 $ 1.23 - - 3,934 - - 873 - - 4,282 $ 466,855 $ 464,346 387,284 $ 1.21 $ 1.20
Amount Before tax After tax $ 488,839 $ 464,346 $ 466,855 $ 464,346 - - - - - - $ 466,855 $ 464,346	Weighted-average outstanding common shares (Note) 378,195 3,934 873 4,282 387,284
Before tax $ 488,839 $ 466,855 - - - $ 466,855		Before tax $ 1.23 $ 1.21	After tax $ 1.23 $ 1.20

Note: In thousands of shares.

(18) PERSONNEL EXPENSES, DEPRECIATION AND AMORTIZATION

The personnel expenses, depreciation and amortization for the six-month periods ended June 30, 2012 and 2011 are as follows:

		For the six-month periods ended June 30	For the six-month periods ended June 30	For the six-month periods ended June 30	For the six-month periods ended June 30
		2012			2011
	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Personnel expenses	$ 569,390	$ 579,060	$1,148,450	$ 541,601	$ 549,912	$1,091,513
Salary	477,007	514,447	991,454	469,898	491,867	961,765
Insurance	16,201	34,252	50,453	14,879	30,522	45,401
Pension	39,308	21,303	60,611	33,912	18,495	52,407
Others	36,874	9,058	45,932	22,912	9,028	31,940
Depreciation	104,962	25,195	130,157	144,095	23,180	167,275
Amortization	1,357	5,995	7,352	897	7,523	8,420

5. RELATED PARTY TRANSACTIONS

(1) Names of the related parties and their relationship with the Company

Names of related parties Relationship with the Company JinJing Optical Technology Co., Ltd. An investee company accounted for under the equity method by the Company‟s subsidiary Gianta Co., Ltd. A corporate director of Gianta Co., Ltd. Pac-link Opportunity Fund Co., Ltd. A corporate supervisor of Pac-link Opportunity Fund Co., Ltd. Phoenix Optical (Shanghai) Co., Ltd. An investee company accounted for under the equity method by the Company‟s subsidiary

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(2) Significant related party transactions and balances

A. Purchases

For the six-month periods ended June 30, 2012 and 2011, the net purchases from the related parties were $12,097 and $91,016, respectively, which were less than 10% of the total amount of net purchases.

Purchase prices and payment terms from related parties are comparable with those from other suppliers. The payment term was approximately net 30~120 days.

B. Accounts payable

As of June 30, 2012 and 2011, the total accounts payable from related parties were $613 and $27,346, respectively, which were less than 10% of the total amount of accounts payable.

6. ASSETS PLEDGED AS COLLATERAL

None.

7. COMMITMENTS AND CONTINGENT LIABILITIES

Kodak US has filed a civil lawsuit against the Company in the New York District Court on January 12, 2012 (herein referred to as the “Lawsuit”) due to a dispute in the calculation of royalty payment. The Lawsuit is not a patent infringement litigation. The Company is currently trying to negotiate with Kodak US to settle the Lawsuit out-of-court. The financial effect to the Company cannot be reasonably determined as of the report signing date of the report of independent accountants as the court proceeding is still under the initial process without any specific damage claim.

8. SIGNIFICANT CASUALTY LOSS

None.

9. SIGNIFICANT SUBSEQUENT EVENTS

None.

～ 30 ～

10. OTHERS

(1) FAIR VALUE OF FINANCIAL INSTRUMENTS

June 30, 2012 Fair value Book value Quotations in an active market Estimated using a valuation technique $ 9,941,053 $ - $ 9,941,053 518,824 518,824 - 236,077 - - 7,307,490 - 7,307,490	June 30, 2012 Fair value Book value Quotations in an active market Estimated using a valuation technique $ 9,941,053 $ - $ 9,941,053 518,824 518,824 - 236,077 - - 7,307,490 - 7,307,490	June	30, 2011 Fair value Quotations in an active market Estimated using a valuation technique $ - $ 10,887,774 594,642 - - - - 8,344,459	30, 2011 Fair value Quotations in an active market Estimated using a valuation technique $ - $ 10,887,774 594,642 - - - - 8,344,459
Book value $ 9,941,053 518,824 236,077 7,307,490		Book value $ 10,887,774 594,642 256,855 8,344,459
	Quotations in an active market $ - 518,824 - -		Quotations in an active market $ - 594,642 - -
				$ 10,887,774 - - 8,344,459

The methods and assumptions used to estimate the fair values of the above financial instruments are summarized below:

For short-term instruments, the fair values were determined based on their carrying values because of the short maturities of the instruments. This method was applied to cash and cash equivalents, notes receivable, accounts receivable, short-term loans, notes payable and accounts payable.

(2) INFORMATION ON INTEREST RATE RISK POSITIONS

A. As of June 30, 2012 and 2011, the financial assets with fair value risk due to the change of interest amounted to $4,922,551 and $6,351,390, respectively. There were no financial liabilities with fair value risk; the financial assets with cash flow risk due to the change of interest amounted to $988,141 and $524,198, respectively. There were no financial liabilities with cash flow risk due to the change of interest as of June 30, 2012 and 2011.
B. For the six-month periods ended June 30, 2012 and 2011, the interest income on financial assets or financial liabilities that are not at fair value through profit or loss amounted to $64,656 and $77,624, respectively, and there were no interest expense.

(3) PROCEDURES OF FINANCIAL RISK CONTROL AND HEDGE

The Group‟s activities expose the Group to a variety of financial risks: market risk, credit risk, liquidity risk and cash flow interest rate risk. The Group‟s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group‟s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Group Treasury) in accordance with the policies approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group‟s

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operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and the investment of excess liquidity.

(4) INFORMATION OF MATERIAL FINANCIAL RISK

A. Market risk

(A) Foreign exchange risk

The Group adopts the forward contract to hedge the currency exchange risk. As the amounts and period of the Group‟s foreign currency exposure and forward contracts are similar, the Group estimates no material risk would arise.

The foreign exchange risk largely arises from the Group‟s business that are not denominated in the functional currency (the Company‟s and some subsidiaries‟ functional currency is NTD, some subsidiaries‟ functional currency is RMB). Financial assets and financial liabilities relevant to foreign exchange risk were as follows:

as follows:
Financial Assets Monetary item USD:NTD USD:RMB Long-term equity investment accounted for under the equity method USD:NTD Financial Liabiltiies Monetary item USD:NTD USD:RMB	For the	six-month periods ended June 30,
	2012	Exchange rate 1:29.88 1:6.3249 1:29.88 1:29.88 1:6.3249	2011
	Foreign currency (in thousands) USD 159,792 USD 108,069 USD 12,851 USD 7,440 USD 157,258		Foreign currency (in thousands) USD 144,768 USD 105,217 USD 11,815 USD 7,658 USD 193,189	Exchange rate
				1:28.725 1:6.4716 1:28.725 1:28.725 1:6.4716

(B) Price risk

The Group is exposed to equity securities price risk because of investments held by the Group. The Group sets limits to control the transaction volume and stop-loss amount to reduce its market risk.

B. Credit risk

The Group has lower significant concentrations of credit risk. It has policies in place to ensure that wholesale sales of products are made to customers with an appropriate credit history. The maximum loss to the Group is the book value of accounts receivable.

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C. Liquidity risk

The Group invests in financial assets which are traded in active market and can be readily converted into certain amount of cash approximate to their fair values. The liquidity risk exposure is low.

D. Interest risk: None.

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11.ADDITIONAL DISCLOSURES REQUIRED BY THE SECURITIES AND FUTURES BUREAU

(1)RELATED INFORMATION OF SIGNIFICANT TRANSACTIONS

The related information of investee companies are as follows: Except for the major subsidiaries – Altek International Investment Co., Ltd. and Altek (Kunshan) Co., Ltd. which are based on the reviewed on major accounts of financial statements, others are based on the financial statements of the investee companies that were unaudited or unreviewd by independent auditors. Significant intercompany transactions between the Company and the consolidated subsidiaries are eliminated when preparing consolidated financial statements.

The details are as follows:

A. Loans granted to others: None.
B. Endorsements and guarantees for others: None.
C. Details of marketable securities as of June 30, 2012:

(Expressed in thousands of NT dollars, thousands of US dollars and thousands of RMB dollars)

Name of the company Altek Corporation ″ ″ ″ ″ ″ ″ ″ ″ Altek International Investment Co., Ltd. ″ ″ ″ ″ ″ ″ ″	Type and name of marketable securities Money Market Fund Altek International Investment Co., Ltd. – Common stock Altek Japan Corporation – Common stock Altek Investment Co., Ltd. – Common stock Altek Autotronics Corporation – Common stock Gianta Co., Ltd. – Common stock Pac-line Opportunity Fund – Common stock Yung Li Investments Inc. – Common stock Hua-chuang Automobile Information Technical Center Co., Ltd. – Common stock Altek Lab Inc. – Common stock and preferred stock Leading Tech. Co., Ltd. – Common stock Toptek Investment Cayman Co., Ltd. – Common stock Altek Imaging Technology (Cayman) Co., Ltd. – Common stock RICH-ALTEK U.S.A., INC. – Common stock Altek Trading (Cayman) Co., Ltd. – Common stock JinJing Optical Technology Co., Ltd. – Common stock Altek Optical (Cayman) Co., Ltd. – Common Stock	Relationship of the investee with the Company None Subsidiary accounted for under the equity method ″ ″ ″ Director Supervisor None ″ Subsidiary accounted for under the equity method ″ ″ ″ ″ ″ ″ ″	General ledger account Financial assets at fair value through profit or loss-current Long-term equity investments accounted for under the equity method ″ ″ ″ Financial assets carried at cost-non-current ″ ″ ″ Long-term equity investments accounted for under the equity method ″ ″ ″ ″ ″ ″ ″		June 30, 2012	June 30, 2012
				Number of shares 15,639,851 94,333,839 1,000 5,000,000 5,000,000 317,865 15,488,000 30 10,000,000 11,311,875 (Note) 45,000,000 1,400,000 16,700,000 500,000 8,500,000 3,500,000 8,864,432	Book value $ 224,174 10,442,657 6,874 23,103 99,048 10,311 102,693 23,954 93,450 US$ 1,656 US$ 125,739 US$ 28,344 US$ 12,354 ( US$ 15,469 ) US$ 10,210 US$ 974 US$ 11,942	Ownership Percentage N/A 100% 100% 100% 100% 14.98% 7.06% 4.84% 2% 100% 100% 100% 100% 100% 100% 23.33% 100%	Market value
							$ 225,023 10,442,657 6,874 23,103 99,048 10,311 102,693 23,954 93,450 US$ 1,656 US$ 125,739 US$ 28,344 US$ 12,354 ( US$ 15,469 ) US$ 10,210 US$ 974 US$ 11,942

～ 34 ～

Name of the company Altek International Investment Co., Ltd. ″ Leading Tech Co., Ltd. Toptek Investment Cayman Co., Ltd. Altek Imaging Technology (Cayman) Co., Ltd. Altek Imaging Technology (Cayman) Co., Ltd. Altek Trading (Cayman) Co., Ltd. Altek Optical (Cayman) Co., Ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek Optical Technology (Cayman) Co., Ltd. Altek (Kunshan) Co., Ltd. Altek Trading (Shanghai) Co., Ltd. Altek Investment Co., Ltd. Altek Autotronics Corporation Altek Semiconductor Corporation	Type and name of marketable securities Altek Semiconductor (Cayman) Co., Ltd. – Common stock Altek Optical Technology (Cayman) Co., Ltd. – Common stock Altek (Kunshan) Co., Ltd. Toptek Electronics (Kunshan) Co., Ltd. Altek Imaging Technology (Shanghai) Limited Altek Precision (Kunshan) Co., Ltd Altek Trading (Shanghai) Co., Ltd. Phoenix Optical (Shanghai) Co., Ltd. Altek Semiconductor Corporation Altek Optical Technology (Kunshan) Co., Ltd. Guangdong Kingding Optical Machine Co., Ltd. Beijing Altek Image Communication Technology Co., Ltd. Market Fund Market Fund Market Fund	Relationship of the investee with the Company ″ Subsidiary accounted for under the equity method ″ ″ ″ ″ ″ ″ ″ ″ None Subsidiary accounted for under the equity method None ″ ″	General ledger account ″ Long-term equity investments accounted for under the equity method ″ ″ ″ ″ ″ ″ ″ ″ Financial assets carried at cost-non-current Long-term equity investments accounted for under the equity method Financial assets at fair value through profit or loss-current ″ ″		June 30, 2012	June 30, 2012
				Number of shares 6,147,226 12,000,000 N/A ″ ″ N/A ″ ″ 20,000,000 N/A N/A N/A 1,478,740 5,822,547 8,321,580	Book value US$ 6,766 US$ 11,424 US$ 125,739 US$ 26,153 US$ 1,661 US$ 10,693 US$ 10,210 US$ 11,877 US$ 6,766 US$ 11,424 US$ 190 ( US$ 96 ) $ 23,077 $ 70,519 $ 200,206	Ownership Percentage 100% 100% 100% 100% 100% 100% 100% 40% 100% 100% N/A 100% N/A ″ ″	Market value
							US$ 6,766 US$ 11,424 US$ 125,739 US$ 26,153 US$ 1,661 US$ 10,693 US$ 10,210 US$ 11,877 US$ 6,766 US$ 11,424 US$ 190 ( US$ 96 ) $ 23,077 $ 70,519 $ 200,206

Note ： Including common stock of 9,311,875 shares and preferred stock of 2,000,000 shares.

D. Acquisition or sale of the same security with the accumulated cost exceeding $100 million or 20% of the Company‟s paid-in capital during the six-month period ended June 30, 2012:

Name of the Company	Type and name of marketable securities	General ledger account	Name of the counterparty Relationship of the investee with the Company	Beginningbalance	Beginningbalance	Additio	ns		(Expressed Disposals	(Expressed Disposals	in thousands o	f NT dollars and thousands of US dollars) Endingbalance Number of shares Amount Note
				Number of shares	Amount	Number of shares	Amount	Number of shares	Selling price	Book Value	Disposalgain
Altek International Investment Co., Ltd. Altek Optical Technology (Cayman) Co., Ltd.	Altek Optical Technology (Cayman) Co., Ltd. Altek Optical Technology (Kunshan) Co., Ltd.	Subsidiary accounted for under the equity method ″	Note 1 Note 1 ″ ″	3,000,000 N/A	US$ 2,969 US$ 2,969	9,000,000 N/A	US$ 9,000 US$ 9,000		$ - $ -	$ - $ -	$ - $ -	12,000,000 US$ 11,424 Note 2 N/A US$ 11,424 Note 2

Note 1 : Proceeds from new issuance.

Note 2 : The ending balance amount includes cumulative translation adjustment and investment gain (loss) accounted for under the equity method.

E. Acquisition of real estate properties exceeding $100 million or 20% of the Company‟s paid -in capital during the six-month period ended June 30, 2012: None.

F. Disposal of real estate properties exceeding $100 million or 20% of the Company‟s paid-in capital during the six-month period ended June 30, 2012: None.

～ 35 ～

G. Purchases and sales transactions with related parties for the six-month period ended June 30, 2012 over $100 million or 20% of the Company‟s capital stock:

Company Altek Corporation Altek International Investment Co., Ltd. Altek International Investment Co., Ltd. Altek (Kunshan) Co., Ltd.	Counterparty Altek International Investment Co., Ltd. Altek Corporation Altek (Kunshan) Co., Ltd. Altek International Investment Co., Ltd.	Relationship with the counterparty Affiliated enterprise Parent company Affiliated enterprise Parent company		Tran	sactions	Term Net 75 days ″ ″ ″	Difference in transaction t compared with general tran	erms sactions		Accounts (payable) receivable	Accounts (payable) receivable
			Purchases (sales) Amount Purchases $ 11,145,531 Sales ( 11,145,531 ) Purchases 11,541,744 Sales ( 11,541,744 )		Percentages of purchases (sales) 98% 92% 100% 100%		Unit price	Term	Amount ( $ 5,319,743 ) 5,319,743 ( 1,356,085 ) 1,356,085		Percentage of accounts (payable) receivable
							Approximately the same price with third parties ″ ″ ″	Note ″ ″ ″			95% 100% 100% 98%

Note ：The payment term with third parties was net 30~120 days, the collection term with third parties was net 30~90 days.

H. Receivables from related parties exceeding $100 million or 20% of the Company‟s paid-in capital stock as of June 30, 2012:

Companyas a creditor	Name of the counterparty	Relationship with the counterparty	Balance of receivable from relatedparty	Turnover rate	Ove	rdue receivable	Subsequent collection $ 3,528,088	Balance of allowance for bad debts
					Amount	Action adopted for overdue accounts
Altek International Investment Co., Ltd.	Altek Corporation	Parent company	$ 5,319,743	7.16	$ -	N/A		$ -

I. Derivative financial instrument transactions: None.

～ 36 ～

(2) INFORMATION OF INVESTEE COMPANIES：

Investor Altek Corporation ″ ″ ″ Altek International Investment Co., Ltd. ″ ″ ″ ″ ″ ″ ″ ″ ″ Leading Tech Co., Ltd. Toptek Investment Cayman Co., Ltd.	Investee Company Altek International Investment Co., Ltd. Altek Japan Corporation Altek Investment Co., Ltd. Altek Autotronics Corporation Altek Lab Inc. Leading Tech Co., Ltd. Toptek Investment Cayman Co., Ltd. Altek Imaging Technology (Cayman) Co., Ltd. RICH-ALTEK U.S.A., INC. Altek Trading (Cayman) Co., Ltd. JinJing Optical Technology Co., Ltd. Altek Optical (Cayman) Co., Ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek Optical Technology (Cayman) Co., Ltd. Altek (Kunshan) Co., Ltd. Toptek Electronics (Kunshan) Co., Ltd.	Location British Virgin Islands Japan Republic of China Republic of China U.S.A. Cayman Islands Cayman Islands Cayman Islands U.S.A. Cayman Islands Samoa Cayman Islands Cayman Islands Cayman Islands Mainland China Mainland China	Main business scope Investment and general business operations Sale and design of digital cameras and its optical instruments Investment Research design, manufacture and sales of car electronic components Design and sale of engineering and optical components Investment and general business operations Investment and general business operations Investment and general business operations Delivery and storage Investment and general business Operations Investment and general business operations Investment and general business operations Investment and general business operations Investment and general business operations Manufacture and sale of digital cameras and its accessories. SMT processing and related engineering services	Original amo	unt January 1, 2012 $ 3,086,363 2,869 50,000 50,000 US$ 3,680 US$ 45,000 US$ 9,083 US$ 16,700 US$ 500 US$ 8,500 US$ 3,500 US$ 8,864 US$ 6,147 US$ 3,000 US$ 45,000 US$ 8,983	Shares held by the Company	Shares held by the Company	(Expressed in Book value $ 10,442,657 6,874 23,103 99,048 US$ 1,656 US$ 125,739 US$ 28,344 US$ 12,354 (US$ 15,469 ) US$ 10,210 US$ 974 US$ 11,942 US$ 6,766 US$ 11,424 US$ 125,739 US$ 26,153	thousand of NT dollars a Net income (loss) of the investee Company $ 43,131 1,165 28 25,731 US$ 61 US$ 128 US$ 2,344 ( US$ 1,163 ) ( US$ 592 ) ( US$ 80 ) ( US$ 472 ) ( US$ 259 ) US$ 18 ( US$ 513 ) US$ 128 US$ 2,344	nd thousands of US dollars) Investment income (loss) recorded by the Company Note $ 44,810 Note 1 1,165 28 25,731 US$ 61 Note 2 Note 4 US$ 128 Note 4 US$ 2,344 Note 1 Note 4 ( US$ 1,163 ) Note 4 ( US$ 592 ) Note 4 ( US$ 80 ) Note 4 ( US$ 113 ) Note 4 ( US$ 259 ) Note 4 US$ 18 Note 4 ( US$ 513 ) Note 4 US$ 128 Note 4 US$ 2,344 Note 3 Note 4
				June 30, 2012 $ 3,086,363 2,869 50,000 50,000 US$ 3,680 US$ 45,000 US$ 9,083 US$ 16,700 US$ 500 US$ 8,500 US$ 3,500 US$ 8,864 US$ 6,147 US$ 12,000 US$ 45,000 US$ 8,983		Shares 94,333,839 1,000 5,000,000 5,000,000 11,311,875 45,000,000 1,400,000 16,700,000 500,000 8,500,000 3,500,000 8,864,432 6,147,226 12,000,000 N/A ″	Percentage 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 23.33% 100% 100% 100% 100% 100%

～ 37 ～

Investor Altek Imaging Technology (Cayman) Co., Ltd. ″ Altek Trading (Cayman) Co. Ltd. Altek Optical (Cayman) Co., Ltd. JinJing Optical Technology Co., Ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek Trading (Shanghai) Limited Altek Optical Technology (Cayman) Co., Ltd.	Investee Company Altek Imaging Technology (Shanghai) Limited Altek Precision (Kunshan) Co., Ltd. Altek Trading (Shanghai) Limited Phoenix Optical (Shanghai) Co., Ltd. Kinko Optical (Suzhou) Co., Ltd. Altek Semiconductor Corporation Beijing Altek Image Communication Technology Co., Ltd. Altek Optical Technology (Kunshan) Co., Ltd.	Location Mainland China Mainland China Mainland China Mainland China Mainland China Republic of China Mainland China Mainland China	Main business scope Manufacture and sale of digital still cameras or related optical components Design, manufacture and sales of digital camera parts Wholesale, import and export of digital cameras, digital video cameras and their associated accessories Manufacturing and marketing of digital cameras and its key components photo sensor and optoelectronic equipment Manufacture and sale of optical components Research design and sales of ASIC Sales of digital camera, cell phone and related accessories and supporting products Manufacturing and sales of digital camera and its accessories and optical components	Original amo	unt January 1, 2012 US$ 2,900 US$ 13,800 US$ 8,500 US$ 8,864 US$ 15,000 US$ 6,147 US$ 1,025 US$ 3,000	Shares held by the Company	Shares held by the Company	Book value US$ 1,661 US$ 10,693 US$ 10,210 US$ 11,877 US$ 11,190 US$ 6,766 ( US$ 96 ) US$ 11,424	Net income (loss) of the investee Company US$ 8 ( US$ 1,172 ) ( US$ 80 ) ( US$ 649) ( US$ 530 ) US$ 18 ( US$ 39 ) ( US$ 513 )	Investment income (loss) recorded by the Company Note US$ 8 Note 4 ( US$ 1,172 ) Note 4 ( US$ 80 ) Note 4 ( US$ 259) Note 4 ( US$ 530 ) Note 4 US$ 18 Note 4 ( US$ 39 ) Note 4 ( US$ 513 ) Note 4
				June 30, 2012 US$ 2,900 US$ 13,800 US$ 8,500 US$ 8,864 US$ 15,000 US$ 6,147 US$ 1,025 US$ 12,000		Shares N/A ″ ″ ″ ″ 20,000,000 N/A ″	Percentage 100% 100% 100% 40% 100% 100% 100% 100%

Note 1: The Company received the remittance of cash dividends of $3,895 (US$ 117 thousand). The difference is the adjustment of unrealized gain or loss from the upstream inter-company transactions between subsidiaries.

Note 2: Common stock of 9,311,875 shares and preferred stock of 2,000,000 shares. Note 3: The Company received the remittance of cash dividends of US$217 thousand. Note 4: In thousands of dollars.

～ 38 ～

(3) RELEVANT INFORMATION REGARDING INVESTMENT IN MAINLAND CHINA：

A. The related information of investments in Mainland China are as follows:

(Expressed in thousands of NT dollars and thousands of US dollars)

Name of investee in Mainland China Altek (Kunshan) Co., Ltd. (Note 1) Toptek Electronics (Kunshan) Co., Ltd. (Note 2) Altek Imaging Technology (Shanghai) Limited Altek Trading (Shanghai) Limited Kinko Optical (Suzhou) Co., Ltd. Phoenix Optical (Shanghai) Co., Ltd. Beijing Altek Image Communication Technology Co., Ltd. Altek Precision (Kunshan) Co., Ltd. Altek Optical Technology (Kunshan) Co., Ltd.	Main activities of investee	Capital $ 1,482,048 149,400 86,652 253,980 448,200 472,971 30,627 412,344 358,560	Method of investment Indirect investment in PRC through existing companies located in the third area. ″ ″ ″ ″ ″ ″ ″ ″	Beginning balance of remittance in 2012	Amount of r out in	emittance 2012 Remittance in $ - - - - - - - - -	Ending balance of remittance from Taiwan on June 30, 2012 $ 1,344,600 271,400 86,652 253,980 104,580 264,856 - 412,344 358,560	Shares held by the Company (direct and indirect) 100% 100% 100% 100% 23.33% 40% 100% 100% 100%	Profit/loss recognized during theperiod $ 3,797 69,539 237 ( 2,373 ) ( 3,668 ) ( 7,697 ) ( 1,157 ) ( 34,769 ) ( 15,219 )	Ending balance of book value on June 30, 2012 $ 3,757,081 781,452 49,631 305,075 56,671 354,873 ( 2,868 ) 319,507 341,349	Ending balance of profit remitted into Taiwan
					Remittance out $ - - - - - - - - 268,920
	Manufacture and sale of digital still cameras and its accessories SMT processing and related engineering services Manufacture and sale of optical components Wholesale, import and export of digital cameras, digital video cameras and their associated accessories Manufacture and sale of optical components Manufacturing and marketing of digital cameras and its key components, photo sensor and optoelectronic equipment Sales of digital camera, cell phone and related accessories and supporting products Design, manufacture and sales of digital camera parts Manufacture and sales of digital camera and its accessories and optical components			$ 1,344,600 271,400 86,652 253,980 104,580 264,856 - 412,344 89,640							$ - 3,895 - - - - - - -

Note 1: Including retained earnings capitalized of US$4,600.

Note 2: Including retained earnings capitalized of US$3,600.

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Name of the company	Accumulated investment balance from Taiwan to China	Approved investment amount by Ministry of Economic Affairs R.O.C.	Ceiling amount of investment in Mainland China by Ministry of Economic Affairs R.O.C.
Altek Corporation	$ 3,096,972	$ 4,271,466	Note

Note: According to “REGULATIONS GOVERNING THE APPROVAL OF INVESTMENT OR TECHNICAL COOPERATION IN MAINLAND CHINA” on August 29, 2008, Altek Corporation obtained the demonstration offered by the Industrial Development Bureau of Ministry of Economics Affairs issue to Headquarters, so there is no need to compute the ceiling amount of the Company .

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B. Significant transactions with the direct and indirect investments in Mainland China (the amounts are the figures prior to eliminating the purchase and sales transactions between the Company and the investee companies in China through its subsidiaries (the middlemen) in other countries).

(a) Purchases:

(i) The Company‟s net purchases from Altek International Investment Co., Ltd. (“AII”), which indirectly invested in a Mainland China company.

	For the six-month periods ended June 30,	For the six-month periods ended June 30,
2012	Percentage of net purchases 98%	2011
Amount $ 11,653,089		Amount $ 11,126,098	Percentage of net purchases
			99%

(ii) AII‟s net purchases from Altek (Kunshan) Co., Ltd., which was AII‟s indirect investee in Mainland China.

	For the six-month periods ended June 30,	For the six-month periods ended June 30,
2012	Percentage of net purchases 95%	2011
Amount $ 11,523,569		Amount $ 11,200,245	Percentage of net purchases
			95%

(b) Accounts payable:
(i) The Company‟s accounts payable to AII (Note)

	June 30,		Percentage of accounts payable
2012	Percentage of accounts payable 95%	2011
Amount $ 5,137,122		Amount $ 4,273,203
			95%

(ii) AII‟s accounts payable to Altek (Kunshan) Co., Ltd. (Note)

Altek (Kunshan) Co., Ltd.		June 30,		Percentage of accounts payable -
	2012	Percentage of accounts payable 99%	2011
	Amount $ 41,566		Amount $ -

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(c) Sales:

(i) The Company‟s net sales to the consolidated subsidiaries in third countries

For the six-month periods ended June 30, 2012 and 2011, the net sales to the consolidated subsidiaries in third countries were $556,095 and $604,621, respectively, which were less than 10% of the total amount of net sales.

(ii) The consolidated subsidiaries in third countries‟ net sales to investee in Mainland China

For the six-month periods ended June 30, 2012 and 2011, the consolidated subsidiaries in third countries‟ net sales to investee in Mainland China were $556,095 and $604,621, respectively, which were less than 10% of the total amount of net sales.

(d) Accounts receivable: (Note)

As of June 30, 2012 and 2011, the consolidated subsidiaries in third countries‟ accounts receivable from investee in Mainland China were $0 and $22,359, respectively, which were less than 10% of the total amount of accounts receivable.

Note: The balance was offset by accounts receivable or accounts payable.

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(4) THE RELATIONSHIP AND SIGNIFICANT TRANSACTIONS BETWEEN THE COMPANY AND ITS SUBSIDIARIES

For the six-month period ended June 30, 2012:

Company	Counterparty	Relationship with the Company (Note 1)		General transactions	General transactions
			General ledger account	Amount	Terms	Percentage of revenue or assets (Note 2)
Altek Corporation ″ Altek International Investment Co., Ltd. ″ ″ Altek (Kunshan) Co., Ltd.	Altek International Investment Co., Ltd. ″ Altek Corporation ″ Altek (Kunshan) Co., Ltd. Altek International Investment Co., Ltd.	(1) (1) (2) (2) (3) (3)	Purchases Accounts Payable Sales Accounts Receivable Purchases Sales	$ 11,145,531 5,319,743 11,145,531 5,319,743 11,541,744 11,541,744	Net 75 days ″ ″ ″ ″ ″	83% 27% 83% 27% 86% 86%

For the six-month period ended June 30, 2011:

Company	Counterparty	Relationship with the Company (Note 1)		General transactions	General transactions
			General ledger account	Amount	Terms	Percentage of revenue or assets (Note 2)
Altek Corporation ″ Altek International Investment Co., Ltd. ″ ″ Altek (Kunshan) Co., Ltd.	Altek International Investment Co., Ltd. ″ Altek Corporation ″ Altek (Kunshan) Co., Ltd. Altek International Investment Co., Ltd.	(1) (1) (2) (2) (3) (3)	Purchases Accounts Payable Sales Accounts Receivable Purchases Sales	$ 10,614,583 4,351,795 10,614,583 4,351,795 11,208,530 11,208,530	Net 75 days ″ ″ ″ ″ ″	82% 21% 82% 21% 87% 87%

Note 1: The relationship with the transaction parties are as follows:

(1) The Company to the consolidated subsidiary.

(2) The consolidated subsidiary to the Company.

(3) The consolidated subsidiary to the consolidated subsidiary.

Note 2: Ratio of asset/liability accounts is divided by consolidated total assets, and ratio of profit/loss accounts is divided by consolidated sales revenue.

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12. OPERATING SEGMENTS

(1) General Information

The Group mainly operates in one segment. The chief operating decision-maker reviews the Group‟s reporting to assess performance and allocate resources. The Group mainly has a single reportable segment.

(2) Measurement of segment information

The chief operating decision-maker assesses the segment performance through the consolidated financial statements which are prepared in accordance with the generally accepted accounting principles in the Republic of China.

13. DISCLOSURES RELATING TO THE ADOPTION OF IFRSs

Pursuant to the regulations of the former Financial Supervisory Commission, Executive Yuan, R.O.C., effective January 1, 2013, a public company whose stock is listed on the Taiwan Stock Exchange Corporation or traded in the GreTai Securities Market should prepare financial statements in accordance with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), and relevant interpretations and interpretative bulletins that are ratified by the Financial Supervisory Commission.

The Group discloses the following information in advance prior to the adoption of IFRSs under the requirements of Jin-Guan-Zheng-Shen-Zi Order No. 0990004943 of the Financial Supervisory Commission, dated February 2, 2010:

Major contents and status of execution of the Company‟s plan for IFRSs adoption:

A. The Company has formed an IFRSs group headed by the group leader, which is responsible for setting up a plan relative to the Company‟s transition to IFRSs. The major contents and status of execution of this plan are outlined below:

major contents and status of execution of thisplan are outlined below:
Working Items for IFRSs Adoption	Status of Execution
a. Formation of an IFRSs group	Completed
b. Setting up a plan relative to the Company‟s transition to IFRSs	Completed
c. Identification of the differences between current accounting policies and IFRSs	Completed
d. Identification of consolidated entities under the IFRSs framework	Completed
e. Evaluation of the impact of each exemption and option on the Company under IFRS 1 – First-time Adoption of International Financial Reporting Standards	Completed
f. Evaluation of needed information system adjustments	Completed
g. Evaluation of needed internal control adjustments	Completed

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Working Items for IFRSs Adoption	Status of Execution
h. Establish IFRSs accounting policies	Completed
i. Selection of exemptions and options available under IFRS 1 – First-time Adoption of International Financial Reporting Standards	Completed
j. Preparation of statement of financial position on the date of transition to IFRSs	Completed
k. Preparation of IFRSs comparative financial information for 2012	In process
l. Completion of relevant internal control (including financial reporting process and relevant information system) adjustments	In process

B. Material differences that may arise between current accounting policies used in the preparation of financial statements and IFRSs and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be used in the preparation of financial statements in the future:

The Group uses the IFRSs already ratified currently by the Financial Supervisory Commission and the “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be applied in 2013 as the basis for evaluation of material differences in accounting policies as mentioned above. However, the Group‟s current evaluation results may be different from the actual differences that may arise when new issuances of or amendments to IFRSs are subsequently ratified by the Financial Supervisory Commission or relevant interpretations or amendments to the “Rules Governing the Preparation of Financial Statements by Securities Issuers” come in the future.

Material differences identified by the Group that may arise between current accounting policies used in the preparation of financial statements and IFRSs and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be used in the preparation of financial statements in the future. The Group has also elected to use certain exemption under rules in IFRS 1, “First-time Adoption of International Financial Reporting Standards”, please refer to Note 13(c). The effects are outlined below:

Material differences of adjustments on assets and liabilities on January 1, 2012.

	R.O.C. SFAS	Adjustments	IFRSs	Explanation
Deferred income tax assets-current	$ 235,716	( $ 235,716 )	$ -	(i)
Deferred income tax assets-non-current	47,125	325,742	372,867	(i)
Others	18,715,707	-	18,715,707
Total assets	$ 18,998,548	$ 90,026	$ 19,088,574
Accrued pension liabilities	$ 1,632	$ 14,718	$ 16,350	(ii)
Deferred income tax liabilities-non-current	839,109	90,026	929,135	(i)
Others	7,336,408	-	7,336,408

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	R.O.C. SFAS	Adjustments	IFRSs	Explanation
Total liabilities	$ 8,177,149	$ 104,744	$ 8,281,893
Capital reserve-long-term investments	$ 13,187	( $ 13,187 )	$ -	(iii)
Retained earnings	5,069,098	142,456	5,211,554	( v )
Cumulated translation adjustments	143,987	( 143,987 )	-	(iv)
Others	5,595,127	-	5,595,127
Total stockholders‟ equity	$ 10,821,399	( $ 14,718 )	$ 10,806,681

Explanation for adjustments:

(i) In accordance with current accounting standards in the R.O.C., a deferred tax asset or liability should, according to the classification of its related asset or liability, be classified as current or noncurrent. However, a deferred tax asset or liability that is not related to an asset or liability for financial reporting should be classified as current or noncurrent according to the expected time period to realize or settle a deferred tax asset or liability. However, under IAS 1, “Presentation of Financial Statements”, an entity should not classify a deferred tax asset or liability as current. Accordingly, the Company should reclassify the account “deferred income tax assets” from current to non-current on transition date.
(ii) The discount rate used to calculate pensions shall be determined with reference to the factors specified in R.O.C. SFAS 18, paragraph 23. However, IAS 19, “Employee Benefits”, requires an entity to determine the rate used to discount employee benefits with reference to market yields on high quality corporate bonds that match the currency at the end day of the reporting period and duration of its pension plan; when there is no deep market in corporate bonds, an entity is required to use market yields on government bonds (at the end day of the reporting period) instead. Besides, in accordance with current accounting standards in the R.O.C., the unrecognized transitional net benefit obligation should be amortized on a straight-line basis over the average remaining service period of employees still in service and expected to receive benefits. However, in accordance with IAS 19, “Employee Benefits”, the unrecognized transitional net benefit obligation should be recognized as an expense immediately at the date of adoption. Due to the above differences and in order to eliminate the difference in employee benefits upon adoption of IFRS, the Company increased the accrued pension liabilities by $14,718 and simultaneously reduced retained earnings by $14,718 on transition date.
(iii) In accordance with current accounting standards in the R.O.C., if an investee company issues new shares and original shareholders do not purchase or acquire new shares proportionately, but the investor company does not lose its significant influence over the investee company, the investment percentage, and therefore the equity in net assets for the investment that an investor company has invested, will be changed. Such difference shall be used to adjust the „Additional paid-in capital‟ and the „Long-term equity investments‟ accounts. However, in accordance with IAS 28, “Investments in Associates”, increases in investment percentage is accounted for as an acquisition of investment; conversely, decreases in investment percentage is accounted for as a disposal of investment and any related disposal gain or loss is recognized.

～ 46 ～

Accordingly, the Company reduced the additional paid-in capital from investee under equity method by $13,187 and simultaneously increased the retained earnings by $13,187 on transition date.

(iv) The Group elected to use the exemption of the cumulative translation differences relating to the investment in a foreign operation. The subsequent changes in foreign exchange rate are treated in accordance with IAS 21, “Effects of Changes in Foreign Exchange Rates”. Therefore, the Group decreased the cumulative translation differences and increased retained earnings by $143,987, respectively.
(v) In accordance with Jin-Guan-Zheng-Fa-Zi Order No. 1010012865 of the FSC, dated April 6, 2012, the Group shall set aside special reserve by $142,456 for the net increases of retained earnings upon adoption of IFRS.
Material differences of adjustments on assets and liabilities on June 30, 2012.

	R.O.C. SFAS	Adjustments	IFRSs	Explanation
Deferred income tax assets-current	$ 321,897	( $ 321,897)	$ -	(i)
Deferred income tax assets-non-current	46,333	321,897	368,230	(i)
Others	19,032,733	-	19,032,733
Total assets	$ 19,400,963	$ -	$ 19,400,963
Accrued pension liabilities	$ 2,624	$ 14,718	$ 17,342	(ii)
Deferred income tax liabilities-non-current	868,166	-	868,166
Others	8,207,068	-	8,207,068
Total liabilities	$ 9,077,858	$ 14,718	$ 9,092,576
Capital reserve-long-term investments	$ 13,187	( $ 13,187)	$ -	(iii)
Retained earnings	4,677,097	142,456	4,819,553	( v )
Cumulated translation adjustments	12,846	( 143,987)	( 131,141)	(iv)
Others	5,619,975	-	5,619,975
Total stockholders‟ equity	$ 10,323,105	( $ 14,718)	$ 10,308,387

Explanation for adjustments:

(i) In accordance with current accounting standards in the R.O.C., a deferred tax asset or liability should, according to the classification of its related asset or liability, be classified as current or noncurrent. However, a deferred tax asset or liability that is not related to an asset or liability for financial reporting should be classified as current or noncurrent according to the expected time period to realize or settle a deferred tax asset or liability. However, under IAS 1, “Presentation of Financial Statements”, an entity should not classify a deferred tax asset or liability as current. Accordingly, the Company should reclassify the account “deferred income tax assets” from current to non-current on transition date.
(ii) The discount rate used to calculate pensions shall be determined with reference to the factors specified in R.O.C. SFAS 18, paragraph 23. However, IAS 19, “Employee Benefits”, requires an entity to determine the rate used to discount

～ 47 ～

employee benefits with reference to market yields on high quality corporate bonds that match the currency at the end day of the reporting period and duration of its pension plan; when there is no deep market in corporate bonds, an entity is required to use market yields on government bonds (at the end day of the reporting period) instead. Besides, in accordance with current accounting standards in the R.O.C., the unrecognized transitional net benefit obligation should be amortized on a straight-line basis over the average remaining service period of employees still in service and expected to receive benefits. However, in accordance with IAS 19, “Employee Benefits”, the unrecognized transitional net benefit obligation should be recognized as an expense immediately at the date of adoption. Due to the above differences and in order to eliminate the difference in employee benefits upon adoption of IFRS, the Company increased the accrued pension liabilities by $14,718 and simultaneously reduced retained earnings by $14,718 on transition date.

(iii) In accordance with current accounting standards in the R.O.C., if an investee company issues new shares and original shareholders do not purchase or acquire new shares proportionately, but the investor company does not lose its significant influence over the investee company, the investment percentage, and therefore the equity in net assets for the investment that an investor company has invested, will be changed. Such difference shall be used to adjust the „Additional paid-in capital‟ and the „Long-term equity investments‟ accounts. However, in accordance with IAS 28, “Investments in Associates”, increases in investment percentage is accounted for as an acquisition of investment; conversely, decreases in investment percentage is accounted for as a disposal of investment and any related disposal gain or loss is recognized. Accordingly, the Company reduced the additional paid-in capital from investee under equity method by $13,187 and simultaneously increased the retained earnings by $13,187 on transition date.
(iv) The Group elected to use the exemption of the cumulative translation differences relating to the investment in a foreign operation. The subsequent changes in foreign exchange rate are treated in accordance with IAS 21, “Effects of Changes in Foreign Exchange Rates”. Therefore, the Group decreased the cumulative translation differences and increased retained earnings by $143,987, respectively.
(v) In accordance with Jin-Guan-Zheng-Fa-Zi Order No. 1010012865 of the FSC, dated April 6, 2012, the Group shall set aside special reserve by $142,456 for the net increases of retained earnings upon adoption of IFRS.

～ 48 ～

Material differences of adjustments on profit and loss for the six-month period ended June 30, 2012.

ended June 30, 2012.
	R.O.C. SFAS	Adjustments	IFRSs	Explanation
Operatingrevenues	$ 13,421,167	$ -	$ 13,421,167
Operatingcosts	( 12,465,333)	-	( 12,465,333)
Grossprofit	955,834	-	955,834
Operatingexpenses	( 841,695)	-	( 841,695)
Operatingincome	114,139	-	114,139
Non-operating revenues and income	104,806	-	104,806
Non-operating expenses and loss	( 11,119)	-	( 11,119)
Income before income tax	207,826	-	207,826
Income tax expense	( 35,018)	-	( 35,018)
Consolidated net income	$ 172,808	$ -	$ 172,808

Explanation for adjustments: No significant differences.

C. The Group elected to use the following exemptions in accordance with IFRS 1 “First-time adoption of International Financial Reporting Standards” and “Rules Governing the Preparation of Financial Statements by Securities Issuers” effective in 2013.
Business Combinations

For business combinations before the date of transition to IFRSs (transition date), the Group elects not to apply IFRS 3 “Business Combinations” retrospectively.

Share-based payment transactions

For the vested equity instruments of share-based payment transactions before the transition date, the Group elects not to apply IFRS 2 “Share-base Payment” retrospectively.

Employee benefits

The Group elects to recognize all actuarial gains or losses up to the transition date into retained earnings.

Cumulated translation differences

The Group elects to use the exemption of the cumulative translation differences relating to the investment in a foreign operation. The subsequent changes in foreign exchange rate are treated in accordance with IAS 21, “Effects of Changes in Foreign Exchange Rates”.

Compound financial instruments

For compound financial instruments which were not outstanding at the transition date, the Group elects the exemptions and does not have to split into separate liability and equity components.

Some of the above differences may not have a material effect on the Group in transition to IFRSs due to the exemption rules in IFRS 1, “First-time Adoption of International Financial Reporting Standards”, adopted by the Group.

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AI assistant

Altek — Interim / Quarterly Report 2012

52290_rns_2013-03-20_acd41738-3750-4567-9593-830c55efe66f.pdf

ALTEK CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS JUNE 30, 2012 AND 2011

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Stockholders of Altek Corporation

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS‟ EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2012 AND 2011

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

ALTEK CORPORATION AND SUBSIDIARIES

1. HISTORY AND ORGANIZATION

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

C. Unconsolidated subsidiaries: None.

(2) TRANSLATION OF FINANCIAL STATEMENTS OF SUBSIDIARIES

(3) FOREIGN CURRENCY TRANSACTIONS

(4) CLASSIFICATION OF CURRENT AND NON-CURRENT ITEMS

(5) CASH EQUIVALENTS

(6) FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

(7) FINANCIAL ASSETS CARRIED AT COST

(8) NOTES RECEIVABLE / ACCOUNTS RECEIVABLE / OTHER RECEIVABLES

(9) INVENTORIES

(10) LONG-TERM EQUITY INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD

(11) PROPERTY AND EQUIPMENT

(12) INTANGIBLE AND DEFERRED CHARGES

(13) IMPAIRMENT OF NON-FINANCIAL ASSETS

(14) RESERVE FOR PRODUCT WARRANTY

(15) PENSION PLAN

(16) TREASURY STOCK

(17) INCOME TAX

(18) SHARE-BASED PAYMENT – EMPLOYEE COMPENSATION PLAN

(19) EMPLOYEES‟ BONUSES AND DIRECTORS‟ AND SUPERVISORS‟ REMUNERATION

(20) REVENUES,COSTS AND EXPENSES

(21) USE OF ESTIMATES

(22) SETTLEMENT DATE ACCOUNTING

(23) OPERATING SEGMENTS

3. CHANGES IN ACCOUNTING PRINCIPLES

(1) NOTES RECEIVABLE / ACCOUNTS RECEIVABLE / OTHER RECEIVABLES

(2) OPERATING SEGMENTS

4. DETAILS OF SIGNIFICANT ACCOUNTS

(1) CASH AND CASH EQUIVALENTS

(2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

(3) ACCOUNTS RECEIVABLE, NET

(4) INVENTORIES

(5) FINANCIAL ASSETS CARRIED AT COST

(6) LONG-TERM EQUITY INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD

(7) PROPERTY AND EQUIPMENT

(8) ASSETS LEASED TO OTHER

(9) OTHER PAYABLES

(10) PENSION PLAN

(11) COMMON STOCK

(12) SHARE-BASED PAYMENT-EMPLOYEE COMPENSATION PLAN

B. Details of the employee stock options are set forth below:

(13) TREASURY STOCK

A.

(14) CAPITAL RESERVE

(15) RETAINED EARNINGS

(16) INCOME TAX

A. Income tax expense and payable are reconciled as follows:

(17) EARNINGS PER SHARE

(18) PERSONNEL EXPENSES, DEPRECIATION AND AMORTIZATION

5. RELATED PARTY TRANSACTIONS

(1) Names of the related parties and their relationship with the Company

(2) Significant related party transactions and balances

A. Purchases

B. Accounts payable

6. ASSETS PLEDGED AS COLLATERAL

7. COMMITMENTS AND CONTINGENT LIABILITIES

8. SIGNIFICANT CASUALTY LOSS

9. SIGNIFICANT SUBSEQUENT EVENTS

Altek Interim / Quarterly Report 2012