DELTA - Capital/Financing Update 2015

==> picture [151 x 48] intentionally omitted <==

U.S.$185,000,000

Delta Electronics, Inc.

(incorporated as a company limited by shares in Taiwan, Republic of China)

Zero Coupon Convertible Notes Due 2008

The Zero Coupon Convertible Notes due 2008 are being offered by Delta Electronics, Inc. outside the United States in reliance on Regulation S under the United States Securities Act of 1933. The Notes are not being offered in the Republic of China.

The Notes will be direct and unconditional obligations of Delta Electronics, Inc. and will rank at least pari passu in right of payment with all other unsecured and unsubordinated debt of Delta Electronics, Inc., except as otherwise provided herein. The Notes will not bear interest except in the limited circumstances set forth herein. Holders of the Notes may convert the Notes into Common Shares of Delta Electronics, Inc. at any time (subject to certain restrictions) after August 29, 2003 and up to 30 days prior to maturity. The conversion rate is 624.5455 Common Shares per U.S.$1,000 principal amount of Notes, subject to adjustment in certain circumstances. This is equivalent to a conversion price of NT$55 per Common Share determined at the fixed exchange rate of NT$34.35 = U.S.$1.00. The Common Shares are listed on the Taiwan Stock Exchange and application will be made to list the Common Shares deliverable on conversion of the Notes on the Taiwan Stock Exchange. The closing sale price per Common Share on the Taiwan Stock Exchange on July 10, 2003 was NT$44.

Unless the Notes have been previously converted, redeemed or purchased and cancelled, holders of Notes will have the right to require Delta Electronics, Inc. to purchase for cash the Notes at a price equal to 97.82% of their outstanding principal amount on July 30, 2005. Holders of Notes will also have the right to require Delta Electronics, Inc. to redeem the Notes at a price equal to their Early Redemption Amount upon the Common Shares ceasing to be listed on the Taiwan Stock Exchange or the occurrence of a Material Asset Transfer with respect to Delta Electronics, Inc.

Unless the Notes have been previously converted, redeemed or purchased and cancelled, Delta Electronics, Inc. will redeem the Notes at maturity at a price equal to 94.63% of their outstanding principal amount. The Notes may be redeemed at the option of Delta, in whole but not in part, at any time on or after July 30, 2006, at their Early Redemption Amount (as defined herein) on such redemption date if (i) the closing price of the Common Shares (translated into U.S. dollars at the prevailing exchange rate) on each of 20 consecutive trading days is at least 125% of the conversion price (translated into U.S. dollars at the fixed exchange rate of NT$34.35 = U.S.$1.00), or at any time if (ii) at least 90% in principal amount of the Notes have been converted, redeemed or purchased and cancelled. The Notes may also be redeemed, in whole but not in part, at any time at the option of Delta Electronics, Inc. at their Early Redemption Amount in the event of certain changes relating to Republic of China taxation.

Application has been made to list the Notes on the Luxembourg Stock Exchange.

See “Risk Factors” on page 17 for a discussion of certain factors to be considered in connection with an investment in the Notes.

Offering Price: 100%

Goldman Sachs International is entitled at any time, in whole or in part on one or more occasions, up to and including the day 30 days after the Closing Date, to purchase up to a further U.S.$15,000,000 aggregate principal amount of the Notes (“Optional Notes”). As the Closing Date is expected to be on July 30, 2003, the date by which the option in respect of the Optional Notes must be fully exercised is expected to be on August 29, 2003. The Company shall inform the Luxembourg Stock Exchange in the event that any Optional Notes are issued.

The Notes and the Common Shares issuable upon conversion of the Notes have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws. The Notes are only being sold outside the United States to non-U.S. persons in accordance with Regulation S under the Securities Act. Because the Notes and the Common Shares issuable upon conversion of the Notes are not, and will not be registered under the Securities Act, they are subject to certain restrictions on resale described under “Underwriting”.

The Notes will be represented by beneficial interests in a global certificate (the “Global Certificate”) in registered form, which will be registered in the name of a nominee of, and deposited on or about July 30, 2003 (the “Closing Date”) with, a common depositary (“Common Depositary”) for Euroclear Bank S.A./N.V., as operator of the Euroclear System (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”). Beneficial interests in the Global Certificate have been accepted for clearance through Euroclear and Clearstream. Except as described in this Offering Circular, certificates for the Notes will not be issued in exchange for interests in the Global Certificate.

The Managers expect to deliver the Bonds against payment in New York on or about the Closing Date.

Global Coordinator and Sole Bookrunner

Goldman Sachs International

Co-Lead Managers

Barits Securities (Hong Kong) Limited

MasterLink Securities Corporation

Offering Circular dated July 28, 2003

Delta Electronics, Inc. (the ”Company”) having made all reasonable enquiries, confirms that this Offering Circular contains all information with respect to the Company, the Company and its subsidiaries and affiliates taken as a whole, the Notes and the Common Shares which is material in the context of the issue and offering of the Notes, that the information contained herein is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed herein are honestly held and have been reached after considering all relevant circumstances and are based on reasonable assumptions, that there are no other facts the omission of which would, in the context of the issue and offering of the Notes, make this Offering Circular as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect, and that all reasonable enquiries have been made by the Company to verify the accuracy of such information and that this Offering Circular does not contain an untrue statement of a material fact or omit to state a material fact required to be stated herein or necessary in order to make the statements herein, in the light of the circumstances under which they are made, not misleading. The Company accepts responsibility accordingly. Information provided herein with respect to the Republic of China, its political status and economy, has been derived from governmental and other public sources, such as statistical data published by the Taiwan Stock Exchange, and the Company accepts responsibility only for accurately extracting information from such sources.

The distribution of this Offering Circular and the offering and sale of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Company and the Managers (as defined in “Underwriting”) to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of the Notes and distribution of this Offering Circular, see “Underwriting”. This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Company or the Managers to subscribe for or purchase, any of the Notes in any jurisdiction in which such offer or invitation would be unlawful.

No person is authorized in connection with the issue, offering or sale of the Notes to give any information or to make any representation not contained in this Offering Circular and any information or representation not contained herein must not be relied upon as having been authorized by the Company or the Managers. Neither the delivery of this Offering Circular nor any sale or allotment made in connection with the issue of the Notes shall, under any circumstances, constitute a representation or create any implication that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to its date.

In connection with this issue, Goldman Sachs International may over-allot or effect transactions with a view to supporting the market price of the Notes (and subject to applicable ROC laws, the Common Shares) at a level higher than that which might otherwise prevail for a limited period after the Closing Date. However, there may be no obligation on Goldman Sachs International to do this. Such stabilizing, if commenced, may be discontinued at any time, and must be brought to an end after a limited period.

The Managers make no representations or warranties as to the accuracy or completeness of the information contained herein.

References to the “ROC” are to the island of Taiwan and other areas under the effective control of the Republic of China.

The Company has prepared audited consolidated financial statements as of and for the three years ended December 31, 2000, 2001 and 2002 and has prepared unaudited non-consolidated financial statements as of and for the three-month periods ended March 31, 2002 and 2003 contained herein. See “Index to financial statements”. These financial statements were prepared in conformity with generally accepted accounting principles in the ROC (“ROC GAAP”) which differ in certain material respects from

generally accepted accounting principles in the United States (“U.S. GAAP”). See “Summary of significant differences between ROC GAAP and U.S. GAAP”.

ENFORCEABILITY OF FOREIGN JUDGMENTS IN THE ROC

The Company is a company limited by shares and incorporated under the Company Law of the ROC (the “Company Law”). Substantially all of the Company’s directors and executive officers, its supervisors and certain other parties named herein are residents of the ROC and a substantial portion of the assets of the Company and such persons are located in the ROC. As a result, it may not be possible for investors to effect service of process upon the Company or such persons outside of the ROC, or to enforce against any of them judgments obtained in courts outside of the ROC. The Company has been advised by Lee and Li, its legal advisers in the ROC, that any final judgment obtained against the Company or such persons in any court other than the courts of the ROC in respect of any legal suit or proceeding arising out of or relating to the Notes will be enforced by the courts of the ROC without further review of the merits only if the court of the ROC in which enforcement is sought is satisfied that: (i) the court rendering the judgment has jurisdiction over the subject matter according to the laws of the ROC; (ii) the judgment is not contrary to the public order or good morals of the ROC; (iii) if the judgment was rendered by default by the court rendering the judgment, the Company or such persons was served within the jurisdiction of such court, or process was served on the Company or such persons with judicial assistance of the ROC; and (iv) judgments of the courts of the ROC are recognized and enforceable in the court rendering the judgment on a reciprocal basis. Remittance out of the ROC of any amount recovered from enforcing a foreign judgment in the ROC is also subject to the Foreign Exchange Control Statute and regulations as described in “Foreign investment and exchange controls in the ROC” herein.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

Certain statements under “Summary”, “Risk Factors”, “Recent Development and Outlook”, “The Delta Group”, “The Business” and elsewhere in this Offering Circular constitutes “forward-looking statements”. All statements other than statements of historical facts included in this Offering Circular, including, without limitation, those regarding the financial position, business strategy, capital expenditure and investment plans of the Delta Group (as defined in “Key definitions and technical terms”) and the plans and objectives of the Delta Group’s management for its future operations (including development plans and objectives relating to the Delta Group’s products), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results or performance of the Delta Group, or industry results to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Delta Group’s present and future business strategies and the environment in which the Delta Group will operate in the future. Among the important factors that could cause the Delta Group’s actual results or performance to differ materially from those in the forwardlooking statements include, among others, the status of the global computer, networking products and telecommunications industries, the ability of the Delta Group to develop and introduce new products to meet the competitive requirements of the market place, and the Delta Group’s ability to earn repeat orders from its key customers. Additional factors that could cause actual results or performance to differ materially include, but are not limited to, those discussed in “Risks factors”. These forward-looking statements speak only as of the date of this Offering Circular. The Delta Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Delta Group’s expectations with regard thereto or any change of events, conditions or circumstances, on which any such statement was based.

Certain Defined Terms, Conventions And Currency

The Company publishes its financial statements in NT$. All translations from New Taiwan dollars to U.S. dollars were made (unless otherwise indicated) on the basis of the average buying and selling rate published by Hua Nan Bank on December 31, 2002 of NT$34.75 = U.S.$1.00. All amounts translated into U.S. dollars as described above are provided solely for convenience and no representation is made that the NT dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or NT dollars, as the case may be, at any particular rate or at all. See “Exchange rates”. Any discrepancies in the tables included herein between the amounts listed and the totals thereof are due to rounding.

In this Offering Circular, the following terms have the following meanings:

A ...............................................................	Ampere
ABS systems ............................................	Automatic backup shutdown systems
AC ............................................................	Alternating current
ADSL ........................................................	Asynchronous digital subscriber line
Agency Agreement ...................................	The paying, conversion and transfer	agency agreement to
	be dated July 30, 2003 by and between the Company, the
	Agents and the Trustee
Agents ......................................................	The Principal Agent, the Registrar, the other		paying,
	conversion and transfer agents and the Replacement
	Agent under the Agency Agreement
ASICs .......................................................	Application-specific integrated circuit
ATM ..........................................................	Asynchronous transfer mode
ATMs .........................................................	Automatic teller machines
AVI ............................................................	Audio video interleaved
Brushless DC fans ....................................	Fan driven by DC voltage with brushless structure
CCFL ........................................................	Cold cathode florescent lamp
Certificate .................................................	A note certificate
CD ............................................................	Compact disc
CD-ROM drive ..........................................	Disc drive of compact disc read-only-memory
CD-RW .....................................................	Compact disc rewritable
CD-RW drive ............................................	Compact disc rewritable drive
CE .............................................................	Certification as to compliance with the relevant European
	Union directives
CNC machines .........................................	Computer numeric control machines
Coil ...........................................................	Wire wound component. A coil	offers considerable
	opposition to the passage of AC, but very little opposition
	to DC
Common Shares or Shares ......................	The common shares, par value NT$10 per share, of the
	Company
Conversion Price ......................................	The conversion price of the Note, which will initially be
	NT$ d i h fi d f	h li	bl

NT$55 and with a fixed rate of exchange applicable on conversion of the Notes of U.S.$1.00 equals NT$34.35

	NT$55 and with a fixed rate of exchange applicable on conversion of the Notes of U.S.$1.00 equals NT$34.35
Cores ........................................................	Soft ferrite or magnetic metal alloy which is used in
	inductors or transformers for increasing magnetic flux at a
	given magnetic field
CPU ..........................................................	Central processing unit
CRT ..........................................................	Cathode ray tube. A device in which controlled electron
	beams are used to present data in visual form
CSA ..........................................................	Canadian Standards Association, a testing and approval
	agency for products sold in Canada
DC ............................................................	Direct current
Delta Group ..............................................	The Company and its subsidiaries
Delta Power Sharp ...................................	Delta Power Sharp Ltd.
Delta Thailand ..........................................	Delta Electronics (Thailand) Public Company Limited
Delta US ...................................................	Delta America Ltd.
DIH ...........................................................	Delta International Holding Ltd.
DNI ...........................................................	Delta Networks, Inc. (Taiwan)
DVD ..........................................................	Digital versatile disk
DVD-ROM drive .......................................	Disc drive of digital versatile disk read-only-memory
Efficiency ..................................................	A ratio of output power to input power expressed in per
	cent
Electronic ballasts ....................................	Control devices to regulate power to fluorescent and high
	intensity discharge lamps
EMI filters .................................................	Electromagnetic interference filters
Ethernet ....................................................	A type of LAN
FTTx ..........................................................	A network where an optical fiber runs from a telephone
	switch to the subscriber's premises - business or home
Gbps .........................................................	Giga bits per second
GHZ ..........................................................	Giga hertz
Global Certificate ......................................	A global certificate evidencing beneficial interests in the
	Notes
Hybrid circuit .............................................	A circuit with active and passive components
ICs ............................................................	Integrated Circuits
IEC ............................................................	International Electrotechnical Commission
Inverter .....................................................	An electronic converter used to convert DC into AC
IP ..............................................................	Internet Protocol
ISDN .........................................................	Integrated Service Digital Network
ISO ...........................................................	International Standards Organization an organization

International Standards Organization, an organization formed by delegates from member countries to establish international quality assurance standards for engineering

and manufacturing processes

Unit of power capacity


KVA ..........................................................	Unit of power capacity
Kw ............................................................	Kilowatt. One thousand watts as a unit of power
LAN ..........................................................	Local area network
Layer three switches ................................	Switches that perform layer 3 functions: (i) identifying the
	addresses of the neighbouring nodes in the network; (ii)
	selecting routes, and quality of	service, and (iii)
	recognising and forwarding incoming messages to the
	transport layer for local host domains
LCCS ........................................................	Liquid crystal colour shutter
LCD ..........................................................	Liquid crystal display, a display device consisting basically
	of a liquid crystal hermetically sealed between two glass
	plates
LCoS ........................................................	Liquid crystal on silicon
Line interactive UPS .................................	Special circuit design for UPS, using	bilateral technics for
	the inverter
Lumen ......................................................	The international unit of luminous flux
MEMs .......................................................	Mirco-electromechanical systems
MIT ...........................................................	Massachusetts Institute of Technology
MSA...........................................................	Multi source agreement
mm ...........................................................	Millimeters
Mbp ..........................................................	Mega bits per second
New Taiwan dollars, NT dollars or NT$ ....	The lawful currency of the ROC
ODM .........................................................	Original design manufacturing
OEM .........................................................	Original equipment manufacturing
Off-line UPS .............................................	UPS functioning to bypass city power	to loaded equipment
	under normal conditions and to	supply energy by
	converting battery DC power to AC	when city power is
	interrupted
On-line UPS .............................................	UPS functioning to directly convert city power to DC then
	to AC under normal conditions and	to supply energy by
	converting battery DC power to AC	when city power is
	interrupted
P-4 ............................................................	Pentium-4
PC ............................................................	Personal computer
PC board ..................................................	Printed circuit board
PCMCIA ...................................................	Personal Computer Memory	Card International
	Association
PCS ..........................................................	Personal communications services,	a wireless phone
	service similar to cellular telephone service but
	emphasizing personal service and extended mobility
PFC ..........................................................	Power factor correction

PLED ........................................................	Plane light emitter design
POTS.........................................................	Plain old telephone services
PRC ..........................................................	People’s Republic of China (but excluding the Special
	Administrative Region of Hong Kong and the ROC)
Principal Agent .........................................	The Bank of New York
R&D ..........................................................	Research and development
RAS ..........................................................	Remote access server
Registrar ...................................................	The Bank of New York
RF IC ........................................................	Radio frequency integrated circuit
ROC .........................................................	The island of Taiwan and other areas under the effective
	control of the Republic of China
ROC GAAP ..............................................	Generally accepted accounting principles in the ROC
ROC MOEA ..............................................	The ROC Ministry of Economic Affairs
ROC SFC .................................................	The ROC Securities and Futures Commission
ROM .........................................................	Read-only-memory. Memory that is programmed by the
	manufacturer and cannot be changed
ROSA ........................................................	Rotorcraft open systems avionics
rpm ...........................................................	revolutions per minute
SAN ...........................................................	Storage area network
SAP ..........................................................	Systems applications and procedures in data process
Servo drivers .............................................	A device which uses a single IC to simulate the output
	signal of a receiver to drive servos and electronic speed
	controls (ESCs)
SMD .........................................................	Surface mounting device
SMT ..........................................................	Surface mount technology
SPS ...........................................................	Switching power supplies
TCP ..........................................................	Total Certification Program
Terms and Conditions ...............................	The terms and conditions of the Notes
TIR Prism ..................................................	A device used for changing the direction of the light path in
	digital projection systems. It is commonly used in systems
	employing DLP technology
TOSA.........................................................	SC and LC transmitter optical subassemblies
TP .............................................................	Twisted pair
Trading Day ..............................................	A day on which the TSE is open for business
Transceivers .............................................	A combination of transmitter/receiver in a single package
Transformer ..............................................	Wire-wound components used for voltage/current
	increasing/ decreasing or impedance matching
Trustee .....................................................	The Bank of New York
Trust Deed ................................................	The trust deed to be dated July 30, 2003 between the
	Company and the Trustee which constitutes the Notes
TSE ..........................................................	The Taiwan Stock Exchange

The trust deed to be dated July 30, 2003 between the Company and the Trustee which constitutes the Notes The Taiwan Stock Exchange

TUV ..........................................................	Technischer Uberwachungs -- Verein,	a civil, technical	a civil, technical
	and consulting institute authorized	by the German
	government to issue TUV marks
UL .............................................................	Underwriters Laboratories Inc., an organization		evaluating
	equipment submitted to them by	the	equipment
	manufacturer using standards which UL	has written for the
	equipment category
UPS ..........................................................	Uninterruptible power system
US GAAP .................................................	U.S. generally accepted accounting principles
U.S. Dollar or U.S.$ ..................................	United States dollars
VA .............................................................	Voltage ampere
VAC ..........................................................	Volts alternate current
VDE ..........................................................	Verband der Elektrotechnik
VDSL ........................................................	Very high speed digital subscriber line
VGA cards ................................................	Video graphics array cards
VRLA ........................................................	Value regulated lead acid
xDSL .........................................................	x-digital subscriber line
YDT ...........................................................	Yuasa Delta Technology Inc. (previously Delta Green
	Energy Co., Ltd.)

Summary

The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere herein.

The Delta Group is a worldwide leading manufacturer of quality switching power supplies (“SPS”) and a significant supplier of video displays and electronic components. SPS and electronic components are manufactured by the Delta Group for use in the consumer electronics, computer and telecommunications industries, and networking and electromechanical products for use in the networking industries. Other principal products manufactured by the Delta Group include AC/DC adapters, DC/DC converters, EMI filters, optical media converters and electronic ballasts. The major customers of the Delta Group include companies such as Dell, Hewlett-Packard/Compaq, IBM, Microsoft, NEC and Sony. For the year ended 31 December 2002, the Company’s consolidated operating revenues were NT$48,515 million (US$1,396 million) and its consolidated net income was NT$4,276 million (US$123 million).

The Delta Group produces a substantial portion of its products on an ODM or OEM basis, that is, it designs and manufactures products based on its customers’ requirements and specifications, often in consultation with its customers. The markets in which the Delta Group operates are highly competitive and its strategy is to focus on the development of innovative new products using advanced process technologies, maintaining high quality standards and improving production efficiency. Each of the Delta Group’s manufacturing plants is equipped with wholly- or partly-automated production lines and has engineering staff responsible for monitoring manufacturing automation and process improvement. The Delta Group also builds much of its automated equipment and systems in-house, which enables it to tailor the systems to its own needs to establish more effective and economical production processes.

In respect of quality maintenance, the Delta Group implements strict quality control programmes and undertakes substantial on-the-job training for its employees. Each of its manufacturing plants with substantial commercial production volumes is ISO-9001 and ISO-14001 certified. The Delta Group implements quality control at both the product design and commercial production stages to ensure that its products meet customers’ satisfaction. See “The Delta Group – Service Awards”.

The Delta Group’s products have become more advanced and sophisticated over time, and many of its customers’ product development cycles have shortened in response to technological innovations and rapidly changing market demands. The Company believes that continuous investment and efforts to reinforce its research and development capabilities are key to maintaining its competitiveness in the markets for its existing products whilst building its market share and customer base for its new products. To this end, the Delta Group has design groups, engineering teams and research and development laboratories in the ROC, Hong Kong, the PRC, the United States and Europe.

As a result of its research and development efforts, the Delta Group has in the past successfully developed products such as telecom power systems, uninterrupted power supplies (UPSs), digital visual display systems, LCD flat panel displays, projectors, radio frequency/microwave components, variable speed AC motor drives, rear projection displays, optical transceivers and broadband equipment. Recently, new products developed by the Delta Group include advanced power management systems, components such as cooler modules for P-4, RF IC and front-end modules for telecommunications, CCFL for LCD backlighting, low noise and wide rated fans and solenoid for auto ABS systems, video displays such as new models of light weight and high lumen front projectors, DLP optical engine for rear projection TVs and monitors and real projection systems of high resolution, networking products such as management switches utilizing higher end gigabit LAN technology, layer three switches and wireless LAN solutions and AC motor drive products for industrial applications and brushless DC and AC servo drivers for consumer applications. The Delta Group has also developed PLC (programmable logic

controllers) with embedded communication interface, human machine interface (HMI), temperature controllers and a variety of encoders with an aim to provide a comprehensive automation solution.

The Delta Group owns four manufacturing facilities and leases one in the ROC to produce its products. It also owns six production plants in the PRC. In addition, certain products are manufactured in factories owned by the Company’s affiliates located in Tianjin, the PRC, in Bangkok, Thailand and in Tijuana, Mexico. In all, the Company and its subsidiaries own a total of approximately 4.3 million square feet of manufacturing space and have access to additional manufacturing space through its affiliates in the PRC, Thailand and Mexico. The Delta Group has substantially increased its production outside of the ROC in recent years, primarily in plants located in the PRC where average production costs are lower than in the ROC. The Delta Group and its affiliates have a global network of sales and logistic offices in the United States, Japan, Europe, the ROC, the PRC, Thailand, Singapore and Hong Kong to provide fast and convenient distribution services to its customers throughout the world.

The Offering

Company...............................................	Delta Electronics, Inc.
The Offering..........................................	The U.S.$185,000,000 Zero Coupon Convertible Notes due
	2008 are being offered outside the United States in reliance
	on Regulation S under the Securities Act. The Notes are not
	being offered in the Republic of China.
Issue Price............................................	100%
Closing Date.........................................	July 30, 2003
Status....................................................	The Notes will be direct, unconditional, unsecured and
	unsubordinated obligations of the Company and will rank
	_pari passu_without any preference or priority among
	themselves and shall at all times rank at least equally with all
	other present and future direct, unconditional, unsecured
	and unsubordinated obligations of the Company, except as
	may be preferred by mandatory provisions of law.
Optional Notes......................................	The Company has granted to Goldman Sachs International
	an option exercisable within 30 days from July 30, 2003 to
	purchase up to an additional U.S.$15,000,000 aggregate
	principal amount of Notes. See “Underwriting”. In the event
	that Goldman Sachs International exercise the option, the
	Company will promptly inform the Luxembourg Stock
	Exchange.
Interest..................................................	The Notes will not bear interest except in the limited
	circumstances set forth under “Terms and Conditions of the
	Notes — Default Interest and Payment Delay”.
Conversion Rights...............................	Subject to certain conditions, each holder of the Notes (a
	“Noteholder”) will have the right during the Conversion
	Period (as defined herein) to convert its Notes (or any
	portion thereof being U.S.$1,000 in principal amount or an
	integral multiple thereof) into Common Shares, provided,
	however, that the Conversion Right (as defined herein)
	during any Closed Period (as defined herein) shall be
	suspended and the Conversion Period shall not include any
	such Closed Period.
	The Company shall as soon as practicable but in no event
	more than five Trading Days (as defined herein) from the
	Conversion Date (as defined herein) deliver Common
	Shares to the converting Noteholders. See “Terms and
	Conditions of the Notes — Conversion”
Redemption at the Option of	Unless the Notes have been previously converted,
Noteholders..........................................	redeemed, purchased and cancelled, each Noteholder shall
	have the right, at such Noteholder’s option, to require the
	Company to redeem all or some of the Notes held by such
	Noteholder on July 30, 2005 at 97.82% of their principal
	amount. See “Terms and Conditions of the Notes —
	Redemption, purchase and cancellation — Redemption at

	the Option of Noteholders”.
Redemption at the Option of the	The Company may redeem the Notes, in whole but not in
Company...............................................	part, (i) at any time on or after July 30, 2006, at their Early
	Redemption Amount (as defined herein), if the Closing Price
	of the Common Shares on the TSE translated into U.S.
	dollars at the Prevailing Rate for a period of 20 consecutive
	Trading Days (as defined herein), the last of which occurs
	not more than ten days prior to the date on which notice of
	such redemption is given, is at least 125% of the Conversion
	Price then in effect translated into U.S. dollars at the rate of
	NT$34.35 = U.S.$1.00; or (ii) at any time prior to July 30,
	2008, if at least 90% in principal amount of the Notes has
	already been redeemed, converted or purchased and
	cancelled. See “Terms and Conditions of the Notes —
	Redemption, purchase and cancellation — Redemption at
	the Option of the Company”.
Redemption upon Delisting or	A Noteholder shall have the right, at such Noteholder’s
Material Asset Transfer .......................	option, to require the Company to redeem all or some only of
	such Noteholder’s Notes at their Early Redemption Amount,
	upon (i) the Shares ceasing to be listed or admitted to
	trading on the TSE; or (ii) the occurrence of a Material Asset
	Transfer (as defined herein) with respect to the Company.
	See “Terms and Conditions of the Notes – Redemption for
	delisting or material asset transfer”.
Tax redemption....................................	The Company may redeem all, but not in part, of the Notes
	at any time at their Early Redemption Amount (as defined
	herein), in the event of certain changes in taxation in the
	ROC which would require the Company to gross up for
	payments of principal, premium or interest. See “Terms and
	Conditions of the Notes — Redemption, purchase and
	cancellation — Redemption for taxation reasons”.
Redemption Amount at Maturity.........	Unless previously redeemed, converted or purchased and
	cancelled, the Notes will be redeemed at a price equal to
	94.63% of their principal amount in U.S. dollars on July 30,
	2008. See “Terms and Conditions of the Notes —
	Redemption, purchase and cancellation”.
Negative pledge....................................	The Company will not create or permit to remain
	outstanding, and will not permit its Subsidiaries (as defined
	in the “Terms and Conditions of the Notes”) to create or
	permit to remain outstanding, security for the benefit of
	holders of any International Investment Securities or for any
	guarantee or indemnity in respect thereof without granting
	equivalent security for the Notes. See “Terms and
	Conditions of the Notes — Negative pledge”.
Form and denomination of the Notes	The Notes will be issued in registered form in the
	denomination of U.S.$1,000 each. The Notes will be offered
	and sold in principal amounts of U.S.$1,000 or an integral
	multiple thereof and will be transferable in principal amounts
	of U.S.$1,000 or an integral multiple thereof. The Notes will

be represented by beneficial interests in the Global Certificate, deposited on or before the Closing Date with a common depositary for, and registered in the name of a nominee of, Euroclear and Clearstream, Luxembourg. Except as described herein, certificates for Notes will not be issued in exchange for beneficial interests in the Global Certificate.

The securities codes for the Notes are as follows:

ISIN Common Code XS0172610536 017261053

Further Issues ......................................

Governing law .....................................

Trustee .................................................. Listing ..................................................

Trading Market for the Common Shares ...................................................

Use of proceeds ..................................

The Company may from time to time without the consent of the holders of the Notes create and issue further securities having the same terms and conditions as the Notes in all respects so that such further issue shall be consolidated and form a single series with the respective Notes.

English law

The Bank of New York

Application has been made to list the Notes on the Luxembourg Stock Exchange. The Common Shares are listed on the TSE and application will be made for the Common Shares issuable upon conversion of the Notes to be listed on the TSE.

The only trading market for the Common Shares is the TSE. The Common Shares have been listed on the TSE since December 19, 1988.

The net proceeds from the offering of the Notes are estimated to amount to approximately U.S.$183 million. The Company will use the net proceeds available to it to purchase raw materials.

Selected Financial Information

The following financial data have been derived from the audited consolidated financial statements for the years ended December 31, 2000, 2001 and 2002 and the unaudited non-consolidated financial statements for the three-month periods ended March 31, 2002 and 2003 of the Company appearing elsewhere herein. The Company’s financial statements are prepared in accordance with ROC GAAP which differs in certain material respects from U.S. GAAP - See “Summary of principal differences between ROC GAAP and US GAAP”. The Company is not required under ROC laws and regulations to produce, and does not publish, any interim consolidated financial statements. The non-consolidated financial statements for the three-month periods ended March 31, 2002 and 2003 of the Company have been reviewed by the independent accountants of the Company in accordance with review standards generally accepted in the ROC. The following data should be read in conjunction with the financial statements, related notes and other financial information contained herein:

Statement of income Sales revenue ........................... Net sales revenue ..................... Services revenue....................... Total operating revenue ............ Cost of goods sold..................... Gross profit................................ Unrealized intercompany profit.. Realized intercompany profit..... Net gross profit.......................... Total operating expenses.......... Operating income...................... Total non-operating income....... Total non-operating expenses... Income before income tax......... Income tax ................................ Minority interest in consolidated subsidiaries ............................... Net income................................ Basic Earnings per share (In dollars) ................................. Diluted Earings per share (in dollars) .................................	Consolidated Year ended December 31,	Consolidated Year ended December 31,	Consolidated Year ended December 31,	Consolidated Year ended December 31,
	2000 NT$51,701,632 50,741,077 279,648 51,020,725 (40,499,038 ) 10,521,687 (11,562 ) - 10,510,125 (5,983,082 ) 4,527,043 2,281,516 (517,454 ) 6,291,105 (785,597 ) (292,038 ) NT$5,213,470 NT$3.76 NT$3.65	2001 NT$43,106,768 42,273,363 428,858 42,702,221 (34,332,921) 8,369,300 (1,746) 11,561 8,379,115 (5,884,417) 2,494,698 2,941,028 (1,180,044) 4,255,682 (526,201) (144,917) NT$3,584,564 NT$2.58 NT$2.53	2002 2002 2002 (in thousands, except per share data) NT$48,616,947 US$1,399,049 NT$5,100,222 47,976,261 1,380,612 5,043,558 538,461 15,495 682,771 48,514,722 1,396,107 5,726,329 (38,571,831) (1,109,981) (4,952,868 ) 9,942,891 286,126 773,461 (815) (23) (634 ) 1,066 31 1,841 9,943,142 286,134 774,668 (6,147,262) (176,900) (766,215 ) 3,795,880 109,234 8,453 1,961,198 56,437 1,145,148 (914,211) (26,308) (67,239 ) 4,842,867 139,363 1,086,362 (370,257) (10,655) (305,897 ) (196,939) (5,667) - NT$4,275,671 US$123,041 NT$780,465 NT$3.08 US$0.09 NT$0.56 NT$3.08 US$0.09 NT$0.56	2003 NT$9,472.587 9,388,835 831,839 10,220,674 (9,358,143 ) 862,531 - (3,014 ) 859,517 (834,752 ) 24,765 1,069,968 (33,162 ) 1,061,571 21,777 - NT$1,083,348 NT$0.78 NT$0.78

As	Consolidated at December 31,	Consolidated at December 31,	Non-consolidated (Unaudited) As at March 31,	Non-consolidated (Unaudited) As at March 31,	Non-consolidated (Unaudited) As at March 31,
2000 NT$29,517,571 9,373,543 8,967,592 162,529 446,539 NT$48,467,774 NT$15,133,920 3,831,465 97,283 4,390,581 23,453,249 25,014,525 NT$48,467,774	2001 NT$32,281,174 10,688,412 9,528,229 137,594 355,383 NT$52,990,792 NT$20,433,559 58,198 97,283 4,838,396 25,427,436 27,563,356 NT$52,990,792	2002 2002 (thousands) NT$33,390,257 US$960,871 9,134,286 262,857 11,574,468 333,078 225,399 6,486 724,792 20,858 NT$55,049,202 US$1,584,150 NT$17,860,386 US$513,968 29,290 843 80,945 2,329 6,944,499 199,842 24,915,120 716,982 30,134,082 867,168 NT$55,049,202 US$1,584,150	2002 NT$10,922,622 27,739,529 3,143,521 - 1,464,302 NT$43,269,974 NT$11,153,259 30,798 97,283 3,682,367 14,963,707 28,306,267 NT$43,269,974	2003 NT$13,364,110 31,306,078 3,139,063 - 1,036,426 NT$48,845,677 NT$14,008,430 - 80,945 3,513,882 17,603,257 31,242,420 NT$48,845,677	2003
					US$384,579 900,894 90,333 - 29,825
					US$1,405,631
					US$403,120 - 2,330 101,119
					506,569 899,062
					US$1,405,631

Risk Factors

Prior to making any investment decision, prospective investors should carefully consider all of the information contained in this Offering Circular, including the following information:

RISKS RELATED TO THE DELTA GROUP AND ITS BUSINESS

Dependence on global information technology (computer products and networking products) and telecommunications industries

The business of the Delta Group is dependent on continuing demand for computer products, networking products, telecommunications products and their accessories. The computer and telecommunications industries have been volatile and subject to intense competition and significant shifts in demand. From time to time, the computer and telecommunications industries in particular have experienced significant downturns, characterized by diminished product demand, overcapacity and accelerated erosion of average sales prices. There can be no assurance that any future downturn in the computer, networking products or telecommunications industries will not be severe or that the Delta Group’s results of operations or financial condition will not be materially and adversely affected by such downturns or other unfavorable developments.

Product cycle, new products and technological changes

Many of the Delta Group’s products, including power supply products, networking products and video display products, have relatively short product cycles due to rapidly changing technology and evolving industry standards. The Delta Group’s success is highly dependent upon its ability to develop and deliver high quality and cost effective products on a timely basis in line with the latest technology. To date, the Company believes that the Delta Group has been successful in its efforts to introduce new products to meet the competitive requirements of the market place; however, there can be no assurance that the Delta Group will be able to continue to introduce new products as a result of its research and development activities or that it will be able to keep pace with the latest technological development in the market. Delays in introducing new products with anticipated technological advances may have an adverse effect on the Delta Group’s business. There can be no assurance that any new products introduced by the Delta Group will be made on a timely basis and gain market acceptance or will not be adversely affected by technology changes or new product developments by competitors.

Competition

The markets for the Delta Group’s products are highly competitive and the Delta Group has experienced downward pressure on its product prices and margins. For each of the Delta Group’s products, the Delta Group competes with major international electronic companies, some of which have greater financial, technical, marketing and other resources than the Delta Group. The Delta Group competes in different product lines to various degrees on the basis of price, product quality and technical performance, product features, product system compatibility, customized design and sales and technical support. The Delta Group’s ability to compete successfully also depends on other elements both within and outside of its control, including successful and timely introduction of new products, efficient manufacturing of products which meet required quality standards, pricing, as well as larger industry supply and demand trends and general economic trends. In the event the Delta Group fails to compete successfully as required in the various markets in which it participates, there is likely to be a material adverse effect on the Delta Group’s results of operations.

Reliance on key customers

The markets for the Delta Group’s products tend to be concentrated, with a large percentage of orders coming from a group of top-tier customers in the 3C industries. All of the Delta Group’s key

customers operate in the cyclical technology businesses and have in the past, and may in the future, vary order levels significantly from period to period. In addition, there can be no assurance that such customers or any other customers will continue to place orders with the Delta Group in the future at the same levels as in prior periods. The loss of one or more of the Delta Group’s customers or distributors, or reduced orders by its key customers or distributors, could adversely affect the Delta Group’s results of operations. Furthermore, the Delta Group has in the past, and may in the future, be requested to reduce prices to limit the level of order cancellations and, in an industry downturn, order cancellations may be expected.

Inter-relationships among the Company and its subsidiaries and affiliates

The Company’s chairman and CEO Mr. Bruce Cheng effectively exercises significant influence over the Delta Group. Although the day to day operations of the Company are managed by a team of experienced professionals, Mr. Cheng is, and is expected to remain, in a position to influence the operations and management of the Company. Further, many of the Company’s subsidiaries and affiliates have common directors and supervisors, and many of such companies engage in significant transactions (which, the Company believes, take place on terms similar to those which would prevail in transactions among unrelated parties) with other members of the Delta Group, including sharing technologies, design engineering and research and development resources and providing the Company with sales and marketing channels. While the Company believes that its operations are independent of its subsidiaries and affiliates, there can be no assurance that corporate opportunities and resources will not be allocated within such companies in certain instances based on considerations other than the best interest of the Company and its securityholders. Furthermore, there can be no assurance that the relationships among the Company and its subsidiaries and affiliates will not change, and any adverse change in or termination of the Company’s relationships with those other companies could have a material adverse effect on the Company.

Reliance on certain sources of key components

The Delta Group’s production depends on obtaining adequate supplies of raw materials and components on a timely basis. The Delta Group purchases its raw materials and components principally from a group of leading suppliers of high quality materials which the Company believes can satisfy the quality standards and volume requirements of the Delta Group. A number of the main components necessary for the production of certain of the Delta Group’s products are available from a limited number of suppliers. The Company believes that the potential sources of the Delta Group for raw material supplies are more numerous and that it could shift to other suppliers should difficulties with any one or more arise in the future; though shifts in suppliers could result in a temporary interruption of production which could have an adverse effect on the Delta Group’s financial position and results of operations. In addition, although the Company believes that the Delta Group would be able to pass on a portion of higher component and raw material costs to its customers, there can be no assurance that the Delta Group would be able to pass on all of the increased costs of components and raw materials to its customers.

Dependence on qualified personnel

The Delta Group’s success depends to a significant extent upon, among other factors, its ability to continue to attract, retain and motivate qualified personnel, including key senior executives and research and development, engineering, marketing, sales, manufacturing, support and other personnel. There is intense competition for qualified executive officers, administrators, engineers and technicians in Taiwan. The loss of the services of key personnel without adequate replacements or the inability to attract new qualified personnel could have a material adverse effect on the Delta Group. In order to attract and retain its employees, the Delta Group has devoted significant resources to the training and professional development of its employees and to providing comprehensive employee benefits, including employee bonuses which customarily involve distributions in the form of Common Shares.

Intellectual property protection

The Delta Group owns certain patents in the United States, ROC, Japan, Germany, the PRC and elsewhere relating to certain aspects of its products and processes and has a number of additional patent applications pending. There can be no assurance that pending patent applications will be granted, or that any patent protection rights will provide the Delta Group with meaningful protection from competition. Infringement by third parties of the Delta Group’s patented products and processes could have a material adverse effect on the Delta Group’s operating results and enforcement of the Delta Group’s intellectual property rights could be difficult and costly.

As is the case with many companies in the electronic component and devices industry, the Delta Group from time to time receives communications from third parties asserting patent rights to the Delta Group’s products and enters into discussions with such third parties as to their respective positions and the terms of any possible licenses in respect of such patent rights. Irrespective of the validity or the successful assertion of such claims, the Delta Group could incur significant costs with respect to the defence thereof which could have a material adverse effect on the Delta Group’s results of operations or financial condition.

Joint venture risks

The Company has, and expects to have, certain minority interests in a number of affiliates and joint venture entities established in the United States and Thailand and elsewhere in connection with its manufacturing operations. Such investments may involve special risks associated with the possibility that the other shareholders or joint venture partners may (i) have economic or business interests or goals that are inconsistent with those of the Company; (ii) take actions contrary to the instructions or requests of the Company or contrary to the Company’s policies or objectives; (iii) be unable or unwilling to fulfill their obligations under the relevant joint venture or shareholders’ agreements; or (iv) have financial difficulties. In addition, there is no assurance that the laws and regulations in these countries relating to foreign investment will not be altered in such a manner as to result in a material adverse effect on the business and operating results of the Delta Group. Although the Company has not to date experienced any significant problems with respect to its joint venture or investment partners, there can be no assurance that it will not experience problems in the future. The occurrence of such problems may have an adverse effect on the business and prospects of the Delta Group.

RISKS RELATING TO THE ROC

Political risks associated with doing business in Taiwan

The Company is incorporated in Taiwan, ROC, and a substantial portion of the Company’s assets are located in, and a substantial portion of the Company’s revenue is derived from, its production operations in the ROC. Accordingly, the financial condition and results of operations of the Company and the market price of the Shares may be affected by changes in ROC governmental policies, taxation, inflation, interest rates, social instability and other political, economic, diplomatic or social developments in or affecting the ROC which are outside of the Company's control. The ROC has a unique international political status. The PRC asserts sovereignty over all of China (being Taiwan, certain other islands and all of mainland China). The ROC government does not recognize the legitimacy of the PRC government and the PRC government does not recognize the legitimacy of the ROC government. Although significant economic and cultural relations have been established in recent years between the ROC and the PRC, from time to time, there has been significantly increased tension between the ROC and the PRC. In certain past incidents, the heightened tension between the ROC and the PRC have affected the prices of securities listed on the TSE and the Taiwan Weighted Index adversely. Relations between the ROC and the PRC may also affect the Company’s financial condition and results of operations and the market price and liquidity of the Notes and the Common Shares. No assurance can be given that the relations

between the ROC and the PRC will improve, or that future military or economic activities may not be undertaken by either government to the detriment of the other.

Natural or man-made disasters

A significant portion of the Delta Group’s assets, customers and suppliers are located in Taiwan. As a result, the Delta Group is dependent on the infrastructure supporting Taiwan and its ability to avoid damage from earthquakes, floods, power losses and similar events that affect the island.

Taiwan is susceptible to earthquakes. In recent years, Taiwan experienced severe earthquakes that caused significant property damage and loss of life, particularly in the central part of Taiwan. These earthquakes caused damage to production facilities and adversely affected the operations of many companies. Although the Delta Group has not experienced any major structural damage to its facilities from earthquakes, there can be no assurance that future earthquakes will not occur and result in major damage to its facilities, which would have a material adverse effect on its results of operations.

Whilst the Delta Group maintains several insurance policies relating to its business, there is no assurance that it has sufficient insurance coverage should there occurs any natural or man-made disaster which exposes the Delta Group to any substantial risks.

Severe Acute Respiratory Syndrome

The recent outbreak of Severe Acute Respiratory Syndrome, or SARS, which began in the PRC and Hong Kong, and which has since spread to the ROC, may have a negative impact on the Delta Group operations of the Delta Group. The operations of the Delta Group may be impacted by a number of SARS-related factors, including, but not limited to:

disruptions of its Taiwan operations;
disruptions at its production facilities in the PRC;
disruptions at third-party purchasers, distributors and raw material and component suppliers and manufacturers that are primarily located in Taiwan and China with whom it conducts business;
reduced sales in its international distribution channels; and
increased supply chain costs.

So far the operations of the Delta Group have not been materially and adversely affected by SARS. However, if SARS reappears in the ROC or the PRC or spreads to other areas, its sales and operations could be harmed.

ROC securities market

The ROC securities market is smaller and more volatile than the securities markets in the United States, Europe and certain other countries. The TSE has experienced substantial fluctuations in the prices of listed securities and has shown particular volatility following certain political events, market events and scandals. There are currently limits on the range of daily price movements on the TSE. The TSE Index peaked at 12,495.34 points in February 1990, then subsequently fell to a low of 2,560 points in October 1990. For the period from January 1, 2002 to December 31, 2002, the TSE Index peaked at 6,462 points on April 22, 2002 and reached a low of 3,850 points on October 11, 2002. The daily closing prices of the Common Shares ranged from NT$37.14 per Share to NT$55.90 per Share over the same period. On July 10, 2003, the TSE Index closed at 5,282.38. See “The Securities Market of the ROC”. The TSE has experienced problems such as market manipulation, insider trading and payment defaults. The recurrence of these or similar problems and restrictions on price movements could adversely affect the market price and liquidity of the securities of ROC companies, including the Notes and the Common Shares, in both domestic and international markets.

Financial reporting and accounting standards in the ROC

The Company is subject to financial reporting requirements in the ROC that differ in certain respects from those applicable to companies in certain other countries, including the United States and the United Kingdom. In addition, the Company’s financial statements are prepared in accordance with ROC GAAP which differ in certain respects from U.S. GAAP. See “Summary of certain differences between ROC GAAP and U.S. GAAP”. Potential investors should consult their own professional advisers for an understanding of such differences and how they might affect the financial information included herein.

Foreign exchange control

Under existing ROC law, foreign exchange approvals must be obtained from the Central Bank of China (the "CBC") on a payment-by-payment basis for the conversion into foreign currencies in connection with the proceeds from the sale of subscription rights for newly issued shares. In addition, foreign persons may, subject to certain required documents, but without foreign exchange approval of the CBC, remit outside and into the ROC foreign currencies of up to U.S.$100,000 (or its equivalent) for each remittance. There can be no assurance that any such approval will be obtained in a timely manner or at all. See "Foreign Investment and Exchange Control in the ROC – Overseas Corporate Bonds".

The imposition of foreign exchange restrictions may have an adverse effect on foreign investors' ability to acquire ROC securities, including the Notes and the Company's Shares, or repatriate the interest, dividends or sale proceeds from those securities.

The ROC government may impose foreign exchange restrictions in certain emergency situations, including situations where there are sudden fluctuations in interest rates or exchange rates, where the ROC government experiences extreme difficulty in stabilizing the balance of payments or where there are substantial disturbances in the financial and capital markets in Taiwan. These resections may require foreign investors to obtain the ROC government's approval before acquiring ROC securities or repatriating the interest or dividends form those securities or the proceeds from the sale of those securities. No assurance can be given that these restrictions will not adversely affect, among other things, the secondary market price of the Notes.

RISKS RELATING TO THE PRC

Political and economic situation and legal developments in the PRC

The Company, through its subsidiary, Delta International Holding Ltd., operates several facilities in the PRC from which the majority of the production for the Company takes place. A significant portion of the Company’s revenues are also generated from products manufactured in the PRC. Any changes in the political, social and economic environment of the PRC will have a direct impact on the growth of the PRC economy and hence the business and future prospects of the Company. There can be no assurance that the Delta Group’s investment in the PRC and its production operations in the PRC will not be adversely affected if relations between the PRC and the ROC are further strained.

The PRC government has pursued economic reforms with the commencement of its open door policy in 1978 and has expressed its commitment to move further towards a “socialist market economy”. However, many of the reforms and economic policies adopted, or to be adopted, by the PRC government are unprecedented or experimental in nature and may have unforeseen results, which may have an adverse effect on enterprises with business in the PRC, including the Delta Group.

In addition, there are currency exchange risks associated with doing business in the PRC. Although PRC governmental policies were introduced in 1996 to allow greater convertibility of the renminbi, the currency of the PRC, significant restrictions, including those relating to the repatriation of

foreign currency denominated investments, still remain. No assurances can be made that the PRC regulatory authorities will not impose greater restrictions on the convertibility of the renminbi.

PRC legal system

The Company has established a number of production facilities in the PRC and a substantial portion of the total revenue of its manufacturing activities is conducted in the PRC. Its operations and assets (including land use rights) in the PRC are governed by the legal system of the PRC. The legal system of the PRC is based on written laws and regulations and in which prior court decisions may be cited as authority but do not have effect as binding precedent. The PRC government is in the process of establishing a comprehensive system of laws and regulations. The existing body of laws and regulations in areas such as foreign investment, corporate organization and governance, securities and taxation has significantly enhanced the protection afforded to foreign investors. However, the legal system of the PRC is relatively undeveloped and experience with respect to the implementation, interpretation and enforcement of laws and regulations is limited. Therefore, the outcome of dispute resolution is not as predictable as in more developed legal jurisdictions.

RISKS RELATED TO THE NOTES AND THE COMMON SHARES

Considerations related to conversion

Noteholders will not be permitted to convert their Notes during any Closed Period. See “Information relating to the Conversion Right” and “Terms and Conditions of the Notes -- Conversion”. Under current ROC Laws and regulations, PRC persons are not permitted to hold or convert the Notes or to register as shareholders of the Company.

Non-ROC persons wishing to convert the Notes into Common Shares, unless having previously become a qualified foreign institutional investor or a general foreign investor and having obtained the relevant governmental approval, will be required to first obtain such approval as a qualified foreign institutional investor or a general foreign investor (as appropriate), and are required under current ROC laws and regulations to appoint a tax guarantor in Taiwan for filing tax returns and making tax payments on their behalf. A tax guarantor must meet certain qualifications set by the Ministry of Finance of the ROC and, upon appointment, becomes a guarantor of the holder's ROC tax obligations. Holders wishing to repatriate profits derived from the sale of Common Shares received upon conversion, or cash dividends or interest derived from any such Common Shares, will generally be required to submit evidence of appointment of a tax guarantor and the approval of the appointment by the ROC tax authorities. No assurance that the approval for the appointment of a tax guarantor will be obtained in a timely manner.

In addition, under current ROC law, holders of the Notes who exercise their conversion rights to receive Common Shares will be required to appoint a local agent in Taiwan to, among other things, open a securities trading account with a local securities brokerage firm, remit funds and exercise shareholders' rights. They must also appoint a local bank to act as custodian for handling confirmation and settlement of trades, safekeeping of securities and cash proceeds and reporting of information. Without the relevant governmental approval, appointment of the local agent and custodian, and the opening of the trading account, such persons will not be able to hold, sell or otherwise transfer our Common Shares on the TSE. See "Foreign Investment and Exchange Control in the ROC".

Potential liquidity of Notes and Common Shares

Neither the Notes nor the Common Shares have been, nor will they be, registered under the securities laws of the United States or elsewhere and neither the Notes nor the Common Shares may be publicly offered, sold, pledged or otherwise transferred in any jurisdiction where such registration may be required. The Notes may not be publicly offered or sold, directly or indirectly, in the ROC. See "Underwriting".

The Notes are a new issue of securities for which there is currently no trading market. The Company cannot predict whether an active trading market for the Notes will develop or be sustained. If an active trading market were to develop, the Notes could trade at prices that may be lower than the initial offering price. Whether or not the Notes could trade at lower prices depends on many factors including:

prevailing interest rates and the markets for similar securities;
general economic conditions; and
the Company's financial condition, historic financial performance and future prospects.

If an active market for the Notes fails to develop or be sustained, the trading price of such Notes could be materially adversely affected. Application has been made to have the Notes listed on the Luxembourg Stock Exchange. However, there can be no assurance that the Company will be able to obtain or be able to maintain such a listing or that, if listed, a trading market will develop on the Luxembourg Stock Exchange. The Notes may not be publicly offered, sold, pledged or otherwise transferred in any jurisdiction where registration may be required.

Disclosure obligations

A Noteholder or its designee requesting the conversion of its Notes into Common Shares may be required to provide certain information to the Company or the conversion agent, including the name and nationality of the person to be registered as the shareholder and the number of Common Shares such person is acquiring and has acquired in the past through conversion of Notes held by it, and supporting documents, before such conversion will be effected. Under applicable ROC laws, the Company is required to report to the ROC SFC if the person to be registered as a shareholder: (i) is a "related party" of the Company as defined in Statement of Financial Accounting Standards No. 6 of the ROC or (ii) will hold, immediately following such conversion, more than 10% of the total number of Common Shares deliverable upon the conversion of the aggregate principal amount of all Notes at the time of issue. The conversion of the Notes may be delayed if such information is not provided.

Fluctuations in share price

The market price of the Notes at any time will be affected by fluctuations in the price of the Company's Common Shares. It is impossible to predict whether the price of the Company's Common Shares will rise or fall. Trading prices of the Company's Common Shares will be influenced by, among other things, the Company's results of operations and political, economic, financial and other factors that can affect the capital markets on which the Company's Common Shares are traded and the financial services market in Taiwan. Any decline in the price of the Company's Common Shares would adversely affect the secondary market price of the Notes.

Fluctuations in exchange rate

Although the principal amount of the Notes is denominated in U.S. dollars, the Company's Common Shares are listed on the TSE, which quotes and trades the Company's Common Shares in NT dollars. As a result, fluctuations in the exchange rate between the NT dollar and the U.S. dollar will affect, among other things, the secondary market price of the Notes and the U.S. dollar equivalent of the Company's Common Shares received upon conversion of the Notes.

Use of proceeds

The net proceeds of the issue of the Notes are estimated to be approximately U.S.$183 million. The Company will use the net proceeds available to it to purchase raw materials.

Market Price Information

The Common Shares are listed on the TSE, which is located in Taipei, ROC, and is the only stock exchange in the ROC. The Common Shares were listed on the TSE on December 19, 1988. The table below shows, for the periods indicated, the high and low closing prices and the average daily volume of trading activity on the TSE for the Common Shares and the highest and lowest of the daily closing values of the Taiwan Weighted Index.

	Price	per Share (1)	Average	Taiwan Weighted Index	Taiwan Weighted Index
			daily
			trading
			volume in
			Common
	High	Low	Shares	High	Low
			(in
		(NT$)	thousands)
1996
First quarter.........................................	10.72	8.32	5,694	5,146.04	4,690.22
Second quarter ...................................	16.56	9.57	12,345	6,560.41	5,127.49
Third quarter .......................................	18.47	14.61	6,730	6,535.59	5,955.50
Fourth quarter .....................................	24.57	18.78	13,385	6,982.81	6,359.67
1997..............................................................
First quarter.........................................	39.28	22.53	21,368	8,526.20	6,820.35
Second quarter ...................................	58.84	38.18	33,921	9,030.28	7,952.12
Third quarter .......................................	83.75	51.33	34,595	10,116.84	8,708.83
Fourth quarter .....................................	69.11	36.99	43,181	8,695.02	7,089.56
1998
First quarter.........................................	68.36	40.38	36,528	9,277.09	7,375.14
Second quarter ...................................	55.59	40.19	29,323	9,266.68	7,117.11
Third quarter .......................................	59.49	40.34	25,311	8,047.67	6,251.38
Fourth quarter .....................................	50.93	35.38	27,254	7,435.84	6,418.43
1999
First quarter.........................................	46.20	32.68	14,440	7,043.23	5,474.79
Second quarter ...................................	80.67	39.89	40,832	8,608.91	7,018.68
Third quarter .......................................	90.14	64.09	35,647	8,593.35	6,823.52
Fourth quarter .....................................	78.69	61.11	24,631	8,448.84	7,362.69
2000
First quarter.........................................	93.02	74.37	31,669	10,202.20	8,536.05
Second quarter ...................................	94.11	71.93	14,406	10,186.17	8,120.89
Third quarter .......................................	88.22	70.31	15,978	8,585.52	6,185.14
Fourth quarter .....................................	81.46	60.51	14,504	6,353.67	4,614.63
2001
First quarter.........................................	84.51	71.32	14,371	6,104.24	4,894.79
Second quarter ...................................	76.73	50.70	6,613	5,608.50	4,768.55
Third quarter .......................................	59.21	27.08	9,258	4,886.86	3,493.78

		Price	per Share (1)	Average	Taiwan Weighted Index	Taiwan Weighted Index
				daily
				trading
				volume in
				Common
		High	Low	Shares	High	Low
				(in
			(NT$)	thousands)
	Fourth quarter .....................................	55.49	29.07	24,257	5,551.24	3,446.26
2002
	First quarter.........................................	55.90	42.65	14,133	6,242.64	5,488.33
	Second quarter ...................................	55.83	38.10	7,019	6,462.30	5,071.76
	Third quarter .......................................	50.00	40.38	6,495	5,416.50	4,185.95
	Fourth quarter .....................................	46.38	37.14	5,642	4,823.67	3,850.04
2003
	January ...............................................	42.95	38.67	5,855	5,078.80	4,524.87
	February..............................................	37.52	34.67	4,170	4,833.58	4,432.46
	March..................................................	39.24	32.10	5,744	4,599.25	4,260.45
	April.....................................................	42.67	34.76	5,762	4,658.30	4,139.50
	May .....................................................	44.76	37.81	4,390	4,555.90	4,187.82
	June ....................................................	46.67	41.10	6,995	5,048.91	4,678.08
	July (to July 10, 2003).........................	46.3	42.5	6,667	5,017.78	5,367.97

(1) Stock prices have been retroactively adjusted for stock dividends paid by the Company.

On July 10, 2003, the reported closing price of the Common Shares was NT$44 per Share and the Taiwan Weighted Index closed at 5,282.38.

Dividends

The Company has distributed cash and stock dividends on its Common Shares since 1989. The following table sets forth the aggregate number of outstanding Common Shares entitled to dividends, as well as the cash paid and stock dividends distributed during each of the years indicated. Figures represent dividends in respect of the prior fiscal year paid in the current fiscal year.

1989 ............................................................................................. 1990 ............................................................................................. 1991 ............................................................................................. 1992 ............................................................................................. 1993 ............................................................................................. 1994 ............................................................................................. 1995 ............................................................................................. 1996 ............................................................................................. 1997 ............................................................................................. 1998 ............................................................................................. 1999 ............................................................................................. 2000 ............................................................................................. 2001 ............................................................................................. 2002 ............................................................................................. 2003 .............................................................................................	Aggregate number of Common Shares entitled to dividends 100,000,000 125,000,000 138,600,000 152,460,000 170,620,786 203,301,496 246,360,671 298,010,250 362,522,704 457,457,125 561,908,458 748,424,552 954,615,430 1,189,460,000 1,387,879,000	Dividend paid in cash per Common Share (NT$) 1.00 — — — — — — 0.50 0.50 1.50 2.00 2.00 2.25 1.25 2.00	Dividend paid in stock per Common Share (1)
			(NT$) 2.50 1.00 1.00 1.00 1.24 2.00 2.00 2.00 2.00 2.00 2.00 2.50 2.25 1.50 0.50

(1) Holders of Common Shares receive as a stock dividend the number of Common Shares equal to the NT dollar value per Share of the declared dividend, multiplied by the number of Common Shares owned, divided by the par value of NT$10 per Share. Fractions of Common Shares are not issued. Any differences are paid in cash.

The Company’s dividend policy is to capitalize a portion of its earnings each year in the form of a stock dividend. The Company historically has paid an annual dividend on its Common Shares with respect to the preceding year after approval by the Company’s stockholders at the annual stockholders’ meeting. The form, frequency and amount of future dividends on the Common Shares will depend upon the Company’s earnings, cash flow, financial condition and other factors.

The ROC Company Law requires that 10% of annual net income (less prior year losses), after payment of taxes and duties, be set aside as a legal reserve until the accumulated legal reserve equals the Company’s total capital. The Company’s Articles of Incorporation require that at least 3% of annual net earnings (after deducting the legal reserve and providing for losses incurred in prior years) be distributed as a bonus to employees at the time annual dividends are declared. See “Description of the Common Shares”. In each of 2001, 2002 and 2003, the Company paid some employee bonuses in the form of stock. The amount of Common Shares issued as bonus is obtained by dividing the cash value of

the bonus by the par value of the Common Shares, which is NT$10. Because the market value of the Common Shares has been generally well in excess of the par value, the actual cash value of a stock bonus has also been in excess of the amount such an employee would have received had the bonus been paid exclusively in cash. See “Description of the Common Shares”.

Exchange Rates

Fluctuations in the exchange rate between NT dollars and U.S. dollars will affect the U.S. dollar equivalent of the NT dollar price of the Common Shares on the TSE and, as a result, are likely to affect the market price of the Notes.

Set forth below are the period-end approximate closing rates in effect between the NT dollar and the U.S. dollar, expressed in NT dollars per U.S. dollar, for the periods indicated.

1993 ................................................................................................................................
1994 ................................................................................................................................
1995 ................................................................................................................................
1996 ................................................................................................................................
1997 ................................................................................................................................
1998 ................................................................................................................................
1999 ................................................................................................................................
2000 ................................................................................................................................
2001 ................................................................................................................................
2002 ................................................................................................................................
2003 (to July 10, 2003) ...................................................................................................

Period-end
26.67
26.29
27.29
27.49
32.64
32.22
31.40
30.77
34.99
34.75
34.29

Capitalization

The following table sets forth the unaudited non-consolidated short-term debt and capitalization of the Company as of March 31, 2003 and the capitalization as at such date adjusted for the issue of the Notes:

Short-term debt....................................................................
Long-term debt ....................................................................
The Notes (now being issued) .............................................
Stockholders’ equity:
Common Shares(3)...............................................................
Capital reserve.....................................................................
Legal reserve .......................................................................
Undistributed earnings.........................................................
Unrealized loss on market value decline of long-term
investments …………………………………………………….
Translation adjustment.........................................................
Total stockholders’ equity ....................................................
Total Capitalization ..............................................................

As of March 31, 2003(1)
Actual
As adjusted
(in millions)
NT$88
US$3
(2)
NT$88
US$3
(2)
–
–
–
–
–
–
NT$6,429
US$185
NT$13,879
US$399
NT$13,879
US$399
NT$6,837
US$197
NT$6,837
US$197
NT$2,288
US$66
NT$2,288
US$66
NT$6,022
US$173
NT$6,022
US$173
(NT$76)
(US$2)
(NT$76)
(US$2)
NT$2,292
US$66
NT$2,292
US$66
NT$31,242
US$899
NT$31,242
US$899
NT$31,242
US$899
NT$37,671
US$1,084

(1) Save as disclosed in note (3) below, there has been no material change in the capitalization of the Company since March 31, 2003.

(2) NT$ amounts have been translated into U.S.$ amounts, or vice versa, at the exchange rate of NT$34.75=U.S.$1.00.

(3) The Company distributed stock dividends and employee bonus shares on June 28, 2003, as a result of which the Company’s common shares amounted to NT$14,803 million as of June 28, 2003.

Recent Development and Outlook

The Company has filed its audited consolidated financial statements as at and for the three years ended December 31, 2000 , 2001 and 2002 and its unaudited non-consolidated financial statements as at and for the three-month periods ended March 31, 2002 and 2003 with the ROC SFC.

The financial statements as at and for the years ended December 31, 2000, 2001 and 2002 have been audited by PricewaterhouseCoopers, the independent accountants of the Company, who conducted the audit of such financial statements in conformity with auditing standards generally accepted in the ROC. The financial statements were prepared in accordance with ROC GAAP. ROC GAAP differs in certain material respects from US GAAP. See “Summary of principal differences between ROC GAAP and US GAAP”.

PricewaterhouseCoopers has also reviewed the non-consolidated financial statements of the Company as at and for the three-month periods ended March 31, 2002 and 2003 in accordance with review standards generally accepted in the ROC. The review of such interim financial statements is substantially less in scope than an audit.

The Company is not required by the laws and regulations of the ROC to prepare, and does not publish, any interim consolidated financial statements. The consolidated financial data for the threemonth periods ended March 31, 2002 and 2003 contained herein are extracted from management accounts prepared by the Company and have not been reviewed by PricewaterhouseCoopers.

The following discussion and analysis has been made on the basis of the Company’s audited consolidated financial statements as at and for the years ended December 31, 2000, 2001 and 2002 and the Company’s unaudited non-consolidated financial statements as at and for the three-month periods ended March 31, 2002 and 2003 and certain consolidated financial data as at and for the three-month periods ended March 31, 2002 and 2003 extracted from management accounts prepared by the Company.

Result of Consolidated Operations in 2001 and 2002

Consolidated operating revenues of the Company increased by 13.61 per cent. to NT$48,514,722 thousand (US$1,396,107 thousand) in 2002 from NT$42,702,221 thousand in 2001. The increase in operating revenues was primarily attributable to the increase in unit sales of power-related products and video display products, in particular the sales of high-end LCD monitors, and to a lesser extent, to the fact that the Company began to consolidate sales by its indirect subsidiaries in Wujiang, the PRC in the second half of 2002 in the consolidated financial statement of the Group by the Company. Consolidated gross profit was NT$9,942,891 thousand (US$286,126 thousand) (or 20.49 per cent. of consolidated operating revenues) in 2002, a NT$1,573,591 thousand (or 18.80 per cent.) increase over the NT$8,369,300 thousand consolidated gross profit (or 19.60 per cent. of consolidated operating revenues) in 2001. The increase in gross profit was due principally to the maintenance of strong margins on the Company’s power-related products and LCD monitors.

Consolidated operating income increased by 52.15 per cent. to NT$3,795,800 thousand (US$109,234 thousand) in 2002 as compared with NT$2,494,698 thousand in 2001. This was primarily due to the increase in consolidated net sales in 2002 as compared with 2001. Consolidated operating expenses increased slightly by 4.47 per cent. to NT$6,147,262 thousand (US$176,900 thousand) in 2002 as compared with NT$5,884,417 thousand in 2001. Sales and marketing expenses declined slightly in 2002 as compared with 2001, despite significantly increased unit sales, due primarily to the further migration of sales, services and logistics operations of the Company to the PRC where labour and other overhead costs are relatively low.

Consolidated non-operating income decreased by 33.32 per cent. from NT$2,941,028 thousand in 2001 to NT$1,961,198 thousand (US$56,437 thousand) in 2002. This was primarily due to the

combined effect of a decrease in gain on disposal of investment as the Company did not make any significant disposal in 2002 (whereas the Company recorded a significant gain as a result of its disposal of part of its shareholding in Cyntec Co., Ltd. and Macronix International Co., Ltd. in 2001) and a decrease in investment income and interest income. Consolidated non-operating expenses decreased by 22.53 per cent. from NT$1,180,044 thousand in 2001 to NT$914,211 thousand (US$26,308 thousand) in 2002. This was primarily due to a significant decrease in provision for inventory obsolescence and inventory revaluation loss in 2002 (whereas the Company incurred significant inventory loss in 2001 as it wrote off a significant amount of inventories for certain products that it ceased to produce in that year).

Primarily as a result of these factors, consolidated net income of the Company increased by 19.28 per cent. to NT$4,275,671 thousand (US$123,041 thousand) in 2002 from NT$3,584,564 thousand in 2001.

Result of Non-Consolidated Operations for the first three months of 2002 and 2003

For the three months ended March 31, 2003, the Company recorded non-consolidated operating revenues of NT$10,220,674 thousand (US$294,120 thousand), an increase of 78.49 per cent. from the NT$5,726,329 thousand recorded for the corresponding period in 2002, due primarily to the fact that the Company now directly records sales derived from its indirect subsidiaries in the PRC as sales by the Company. Previously, part of the revenues from the PRC operations were accounted for as direct sales by those indirect subsidiaries. Non-consolidated gross profit was NT$862,531 thousand (US$24,821 thousand) (or 8.44 per cent. of non-consolidated operating revenues) for the three months ended March 31, 2003, a NT$89,070 thousand (or 11.52 per cent.) increase over the NT$773,461 thousand gross profit (or 13.51 per cent. of non-consolidated operating revenues) recorded for the corresponding period in 2002. The increase in gross profit was due principally to increase in commission revenues.

For the three months ended March 31, 2003, non-consolidated operating income increased by 192.97 per cent. to NT$24,765 thousand (US$712 thousand) from NT$8,453 thousand recorded in the corresponding period in 2002. This was primarily due to increase in net sales. Non-consolidated operating expenses for the three months ended March 31, 2003 slightly increased by 8.94 per cent. to NT$834,752 thousand (US$24,022 thousand) as compared with NT$766,215 thousand for the corresponding period in 2002. This increase was primarily due to increased selling expenses, and increased research and development expenses, incurred towards the development of new projector video display products.

For the three months ended March 31, 2003, non-consolidated non-operating income decreased by 6.57 per cent. to NT$1,069,968 thousand (US$30,790 thousand) as compared with NT$1,145,148 thousand for the corresponding period in 2002. This was primarily due to a reversal of bad debt reserve in the three months ended March 31, 2002. For the three months ended March 31, 2003, nonconsolidated non-operating expenses decreased by 50.68 per cent. to NT$33,162 thousand (US$954 thousand) from NT$67,239 for the corresponding period in 2002. This was primarily due to decreased interest expenses.

Primarily as a result of these factors, non-consolidated net income of the Company for the three months ended March 31, 2003 increased by 38.81 per cent. to NT$1,083,348 thousand (US$31,175 thousand) from NT$780,465 thousand for the corresponding period in 2002.

Result of Consolidated Operations for the first three months of 2002 and 2003

For the three months ended March 31, 2003, the Company recorded consolidated operating revenues of NT$12,447 million (US$358.2 million), an increase of 22.4 per cent. from the NT$10,165 million recorded for the corresponding period in 2002, due primarily to (i) the continued increase in unit sales of LCD monitors as well as component products and (ii) the fact that Company consolidated sales derived from its indirect subsidiaries in the PRC for the three months ended March 31, 2003, whereas it did not in the corresponding period in 2002. Consolidated gross profit was NT$2,728 million (US$78.5

million) (or 21.9 per cent. of consolidated operating revenues) for the three months ended March 31, 2003, a NT$378 thousand (or 16.1 per cent.) increase over the NT$2,350 million gross profit (or 23.1 per cent. of consolidated operating revenues) recorded for the corresponding period in 2002. The increase in gross profit was due principally to the continued increase in sales of LCD monitors, which typically carry a higher profit margin .

For the three months ended March 31, 2003, consolidated operating income increased by 25.8 per cent. to NT$1,181 million (US$33.99 million) from NT$939 million recorded in the corresponding period in 2002. This was primarily due to the increase in net sales.

Consolidated net income of the Company for the three months ended March 31, 2003 increased by 38.3 per cent. to NT$1,083 million (US$31.17 million) from NT$780 million for the corresponding period in 2002.

Liquidity and Capital Resources

The Delta Group’s principal uses of funds are as working capital to purchase raw materials and components for its products and to finance its capital expenditure and investment requirements. The Delta Group’s principal sources of funds are principally internally generated cash and, to a lesser extent external borrowings.

The Delta Group’s net cash provided by (used in) operating activities and financing activities, respectively, for the three years ended December 31, 2000, 2001 and 2002 were as follows:

		Year ended December	31,
	2000	2001	2002
		(in millions of NT$)
Net cash provided by operating activities .....................	5,609	9,298	7,103
Net cash provided by (used in) financing activities .......	4,894	1,644	(6,768)

The Delta Group’s capital expenditure and long-tem investments for the three years ended December 31, 2000, 2001 and 2002 were as follows:

		Year ended December 31,
	2000	2001	2002
		(in millions of NT$)
Capital expenditure on production facilities and
operational facilities ......................................................	2,109	2,350	2,050
Investment in long-term investments ............................	4,635	1,403	486

See “Consolidated Financial Statements of Delta Electronics, Inc. ― Audited Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002”.

From time to time, the Company reviews investment opportunities and may, if a suitable opportunity arises, make an investment. For detailed information on investments made by the Company, see “Note 11 (Disclosure Information of Investee Company) – Consolidated Financial Statements of the Company for the years ended December 31, 2000, 2001 and 2002 and Non-consolidated Financial Statements of the Company for the three-month periods ended March 31, 2002 and 2003”.

The Delta Group

THE COMPANY

Delta Electronics, Inc. (the “Company”) was founded by Chairman and CEO Mr Bruce Cheng in 1971 to manufacture and sell television coils and other electronic components. In the 1980s, the Company expanded its production levels and broadened its product lines. The Company started commercial production of switching power supplies in 1983 and of LAN components and brushless DC fans in 1988. In the 1990s, the Company further expanded its range of products to include video displays, networking products and optical information products. The Company further spearheaded into projection and system level products in the early 2000s. Today the Company, together with its subsidiaries and affiliates taken as a whole, is a leading manufacturer of switching power supplies, electronic components, video displays and networking products for the computer, consumer and communication industries (the “3C industries”) on an ODM basis.

The Company was incorporated on August 20, 1975 (uniform number: 34051920) under the ROC Company Law. The Company’s executive offices are currently located at 186 Ruey Kuang Road, Neihu, Taipei, Taiwan, ROC, and its telephone number is (886)(2) 8797-2088. The Company’s registered offices are located at No 31-1 Sing Bang Road, Guei Shan Industrial Zone, Taoyuan County, Taiwan, ROC.

CORPORATE CULTURE

The corporate culture of the Delta Group is based around five principles:

Innovation. Lead trends and develop competitive new products.
Customer Satisfaction. Fully understand the needs of customers in order to meet their requirements.
Agility. Be sensitive to rapidly changing business environments and react quickly.
Teamwork. Effective communication and team collaboration.
Quality. Do things right the first time.

Through continuous innovation, the Delta Group is committed to providing environmentally friendly and energy efficient products to improve quality of life.

SERVICE AWARDS

Over the years, the Delta Group has been the recipient of various customer awards which recognise the quality of its products and the assistance rendered to its customers. Some of the more prominent awards from 2001 to 2003 are set out below:

For 2003:

Taiwan Gold Panel Award, Samsung Appreciation Award, Intel Vendor Award, Rockwell Appreciation Award and LG Vendor Award.

For 2002:

Microsoft Recognition Award, LG Business Award, Intel Appreciation Award, IBM Vendor Award, Fujitsu Siemens Appreciation Award, SONY Vendor Award, SONY Appreciation Award and Black & Decker Vendor Award.

For 2001:

Gateway Vendor Award, Fujitsu Vendor Award, NEC Appreciation Award and Hitachi Appreciation Award.

SUBSIDIARIES OF THE COMPANY

The following chart shows the group structure of the Company and its subsidiaries as of

, :	% Delta Networks (Cayman) Inc.	Delta Networks (Cayman) Inc.		87.39%	Delta Networks, Inc. (Taiwan)
				88.36%	DNI Logistics (USA) Corp.
					Delta Networks International Ltd.

				94 %
	100%	Delta Electronics (Japan) Inc	.


Delta Electronics, Inc.	~~100%~~ 94%	DNT Holding Ltd.


	100%	Delta Electronics (Dongguan) Co., Ltd.

	100% Delta Electronics Components (Dongguan) Co., Ltd.


	100% Delta Electronics Power (Dongguan) Co., Ltd.
		Delta Electronics Power (Dongguan) Co., Ltd.


	100% Delta Power Sharp Ltd.
		Delta Power Sharp Ltd.

	100%	Delta Electronics (HK) Ltd.


	100% 100% Delta Electronics International Ltd. Delta Electronics Trading Ltd.
	100% Deltec Co., Ltd.

	100% Delta Electronics Agent Ltd.
	100%	DEI Logistics (USA) Corp.
		Delta ElectroOptics (Wujiang) Co., Ltd.

June 30, 2003:

The Company’s subsidiaries and affiliates as of 30 June 2003 were as follows:

			Percentage	Percentage	Accounting
			ownership		method for
			by the		Company	Place of	Registered
Company	Main business	Issued capital	Company		accounts	Incorporation	Office
Delta Networks Holding	Investment	US$28,400,000	100.00		Consolidated	Cayman	Scotia Center,
Ltd.	company					Islands	4th Floor, P.O.
							Box 2804,
							George Town,
							Grand Cayman,
							Cayman Islands
Delta Networks	Investment	US$27,400,000	100.00	(1)	Consolidated	Cayman	Scotia Center,
(Cayman) Inc.	company					Islands	4th Floor, P.O.
							Box 2804,
							George Town,
							Grand Cayman,
							Cayman Islands
Delta Networks, Inc.	Developing,	NT$100,000,000	87.39	(1)	Consolidated	ROC	No. 252 Shan
(Taiwan)	designing,						Ying Road, Guei
	manufacturing						Shan Town,
	and selling						Taoyuan
	networking						County, Taiwan,
	products						ROC
Delta International	Investment	US$55,000,000	94.00		Consolidated	Cayman	Scotia Center,
Holding Ltd.	company					Islands	4th Floor, P.O.
							Box 2804,
							George Town,
							Grand Cayman,
							Cayman Islands
Delta Optoelectronics,	Developing,	NT$450,000,000	86.11		Non-	ROC	4F, No.2, R&D
Inc.	designing,				consolidated,		Road II,
	manufacturing				equity method		Science-Based
	and selling						Industrial Park,
	displays with						Hsinchu,
	PLED and CNT						Taiwan, ROC
	technologies
Delta Electronics Agent	Operations	US$10,000	94% (2)		Consolidated	BVI	P.O. Box 438,
Ltd.	management						Road Town,
	and engineering						Tortola, British
	services						Virgin Island
Delta Electronics (HK)	Operations	HK$10,000,000	94%	(2)	Consolidated	Hong Kong	21F, Prosperity
Ltd.	management						Centre, No. 25
	and engineering						Chong Yip St.
	services						Kwun Tong,
							Kowloon, Hong
							Kong
Delta Electronics	Manufacturing	US$900,000	94%	(2)	Consolidated	BVI	P.O. Box 438,
International Ltd.	and selling						Road Town,
	electronic						Tortola, British
	products						Virgin Island

			Percentage	Percentage	Accounting
			ownership		method for
			by the		Company	Place of	Registered
Company	Main business	Issued capital	Company		accounts	Incorporation	Office
Delta Electronics	Selling	US$10,000	94%	~~(2)~~	Consolidated	BVI	P.O. Box 438,
Trading Ltd.	electronics						Road Town,
	product sales						Tortola, British
							Virgin Island
Delta Power Sharp Ltd.	Operations	HK$10,000,000	94%	(2)	Consolidated	Hong Kong	21F., Prosperity
	management						Centre, No.25
	and engineering						Chong Yip St.
	services						Kwun Tong,
							Kowloon, Hong
							Kong
Delta Electronics	Manufacturing	US$33,810,568	94%	(2)	Consolidated	China	Xinan District
(Dongguan) Co.,	and selling SPS						Shijie Town,
Ltd.	and other						Dongguan,
	power-related						Guangdong,
	products and						P.R.C.
	video-display
	products.
Delta Electronics	Manufacturing	US$19,788,296	94%	(1)	Consolidated	China	Xinan District
Industrial	and selling						Shijie Town,
(Dongguan) Co.,	networking						Dongguan,
Ltd.	products						Guangdong,
							P.R.C.
Delta Electronics	Manufacturing	US$29,479,108	94%	(2)	Consolidated	China	Xinan District
Components	and selling						Shijie Town,
(Dongguan) Co.,	transformers						Dongguan,
Ltd.	interface cards,						Guangdong,
	diode, resistors,						P.R.C.
	battery and its
	parts
Delta Electronics	Manufacturing	US$14,878,175	94%	(2)	Consolidated	China	Xinan District
Power (Dongguan)	and selling SPS,						Shijie Town,
Co., Ltd.	UPS, telecom						Dongguan,
	power system						Guangdong,
	and other power						P.R.C.
	related products
DEI Logistics (USA)	Warehousing	US$500,000	94%	(2)	Consolidated	USA	4405 Cushing
Corp.	and logistics						Parkway,
	services						Fremont, CA
							94538, U.S.A.
Delta Electronics	Trading and	JPY190,000,000	94% (2)		Consolidated	Japan	2-1-14 Shiba
(Japan) Inc.	import-export of						Daimon, Minato-
	telecom						Ku, Tokyo, 105-
	components						0012, Japan
	and computer
	system and
	instruments

			Percentage	Percentage	Accounting
			ownership		method for
			by the		Company	Place of	Registered
Company	Main business	Issued capital	Company		accounts	Incorporation	Office
Deltec Co., Ltd.	Import/export of	NT$5,000,000	94% ~~(2)~~		Consolidated	ROC	14F, No. 266,
	computer and						Wen Hua
	electrical						Avenue II, Sec 1
	equipment						Linkou, Taiwan,
							R.O.C.
DNT Holding Ltd.	Investment	US$8,407,919	88.36%	(2)	Consolidated	Cayman	Scotia Center,
	Company					Islands	4 thFloor, P.O.
							Box 2804
							George Town,
							Grand Cayman,
							Cayman Islands
Delta Electronics	Manufacturing	THB100,000,000	84.59% (2)		Consolidated	Thailand	699 Moo 4
Components	and selling						Bangpoo
(Thailand) Co., Ltd.	electronic						Industrial Est.
	components						Suhkumvit Rd.,
							Parksar, Mung
							Samutprakam
							10280, Thailand
Pyramis Corporation	Selling	US$9,000	62.67%	(2)	Consolidated	USA	2271 West
	electronic						205th Street,
	products						Suite 103,
							Torrance, CA
							90521, USA
Delta Video Display	Manufacturing	US$13,000,000	51.7%	(2)	Consolidated	China	No. 18
System (Wujiang)	and selling color						Jiangxing East
Co., Ltd.	monitor and						Road Yun Dong
	other video						Development
	display products						Zone Song Ling
							Town Wujiang
							City, Jiang Su
							Province,
							P.R.C.
Delta Electronics	Manufacturing	US$40,000,000	51.7%	(2)	Consolidated	China	No.6 Wutong
(Jiangsu) Co., Ltd	and selling SPS,						New Road
	UPS and other						Wujiang
	power related						Economic
	products, color						Development
	monitor, and						Zone, Song Ling
	electronic						Town, Wujiang
	components						City, Jiang Su
							Province,
							P.R.C.

			Percentage	Percentage	Accounting
			ownership		method for
			by the		Company	Place of	Registered
Company	Main business	Issued capital	Company		accounts	Incorporation	Office
Delta Electronics	Manufacturing	US$40,000,000	51.7%	~~(2)~~	Consolidated	China	No.6 Wutong
Components	and selling						New Road
(Wujiang) Co., Ltd.	electronic						Wujiang
	components						Economic
							Development
							Zone, Song Ling
							Town, Wujiang
							City, Jiang Su
							Province,
							P.R.C.
Delta Electro-optics	Manufacturing	US$25,000,000	51.7%	(2)	Consolidated	China	No. 18
(Wujiang) Co., Ltd.	and selling						Jiangxing East
	electronic						Road Yun Dong
	equipment and						Development
	components						Zone Song Ling
							Town Wujirang
							City, Jiang Su
							Province,
							P.R.C.
Addtron Technology	Electronic	JPY36,000,000	94% (3)		Consolidated	Japan	2-1-4
(Japan) Co., Ltd.	products sales						Shibadaimon,
							Minato-Ku
							Tokyo 105-
							0012, Japan
DNI Logistics (USA)	Warehousing	US$500,000	88.36%	(1)	Consolidated	USA	4425 Cushing
Corp.	and logistics						Parkway,
	service						Fremont, CA
							94538, USA
Delta Networks	Trading and	US$10,000	88.36%	(1)	Consolidated	BVI	21st Floor of
International Ltd.	import/export of						Prosperity
	networking						Centre, No.25
	system						Chang Yip
							Street, Kowloon
							Hong Kong

(1) Held by Delta Networks Holding Ltd. The Company owns over 50% voting rights indirectly.
(2) Held by DIH. The Company owns over 50% voting rights indirectly.
(3) Held by Delta Electronics (Japan), Inc. The Company owns over 50% voting rights indirectly.

Significant Subsidiaries

The book value of the shareholding of the Company in each of the following subsidiaries represents for more than 10% of the net assets or the net profits of the Delta Group as of December 31, 2003.

Delta International Holding Ltd. (“DIH”)

DIH is an investment holding company. Its portfolio is made up of the shares of the Delta Group’s operating subsidiaries in the PRC and sales subsidiaries in British Virgin Island (“BVI”). As at June 30, 2003, the Company beneficially owned 94% of the issued share capital of DIH. As at June 30, 2003, DIH had a capital of US$55 million. As at December 31, 2002, DIH had net assets of US$794

million and retained earnings of US$638 million. For the year ended December 31, 2002, DIH recorded a net profit of US$138 million.

As at December 31, 2002, the Company held the shares of DIH at a value of NT$24,814 million. The shares of DIH held by the Company are fully paid-up. For the year ended December 31, 2002, the Company did not receive any dividends on the shares of DIH. For the year ended December 31, 2002 there are no inter-company loans between the Company and DIH.

Delta Networks, Inc. (Taiwan) (“DNI”)

DNI is a networking product manufacturing company. As at June 30, 2003, the Company beneficially owned 87.39% of the issued share capital of DNI. As at June 30, 2003, DNI had a capital of NT$100 million. As at December 31, 2002, DNI had net assets of (NT$15) million and accumulated deficits of NT$100 million. For the year ended December 31, 2002, DNI recorded a net loss of NT$632.

As at December 31, 2002, the Company indirectly held the shares of DNI at a value of (NT$13) million. The shares of DNI indirectly held by the Company are fully paid-up. For the year ended December 31, 2002, the Company did not receive any dividends on the shares of DNI. For the year ended December 31, 2002 there are no inter-company loans between the Company and DNI.

Delta Electronics Components (Dongguan) Co., Ltd. (“DEC”)

DEC is an electronic component manufacturing company. As at June 30, 2003, the Company beneficially owned 94% of the issued share capital of DEC. As at June 30, 2003, DEC had a capital of US$29 million. As at December 31, 2002, DEC had net assets of US$24 million and accumulated deficits of US$5 million. For the year ended December 31, 2002, DEC recorded a net profit of US$14 million.

As at December 31, 2002, the Company indirectly held the shares of DEC at a value of NT$779 million. The shares of DEC indirectly held by the Company are fully paid-up. For the year ended December 31, 2002, the Company did not receive any dividends on the shares of DEC. For the year ended December 31, 2002 there are no inter-company loans between the Company and DEC.

Delta Electronics International Ltd. (“DIL”)

DIL is an electronics product selling company. As at June 30, 2003, the Company beneficially owned 94% of the issued share capital of DIL. As at March 31, 2003, DIL had a capital of US$0.9 million. As at December 31, 2002, DIL had net assets of US$397 million and retained earnings of US$396 million. For the year ended December 31, 2002, DIL recorded a net profit of US$181 million.

As at December 31, 2002, the Company indirectly held the shares of DIL at a value of NT$12,956 million. The shares of DIL indirectly held by the Company are fully paid-up. For the year ended December 31, 2002, the Company’s subsidiary DIH received NT$120 million dividends on the shares of DIL. For the year ended December 31, 2002 there are no inter-company loans between the Company and DIL.

DNT Holding Limited (“DNTH”)

DNTH is an investment holding company. As at June 30, 2003, the Company beneficially owned 88.36% of the issued share capital of DNTH. As at March 31, 2003, DNTH had a capital of US$8 million. As at December 31, 2002, DNTH had net assets of US$10 million and retained earnings of US$2 million. For the year ended December 31, 2002, DNTH recorded a net profit of US$19 million.

As at December 31, 2002, the Company indirectly held the shares of DNTH at a value of NT$301 million. The shares of DNTH indirectly held by the Company are fully paid-up. For the year ended December 31, 2002, the Company’s subsidiary DIH received US$15 million dividends on the shares of DNTH. For the year ended December 31, 2002 there are no inter-company loans between the Company and DNTH.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information, as of 30 June 2003, with respect to the Shares owned by each person who, according to the records of the Company’s stock transfer agent, owns five per cent or more of the Common Shares.

		Percentage
	Number of	of total
	Common	outstanding
Name of shareholder	Shares	Common Shares
Deico International Ltd. .............................................................................	201,353,882	13.60%
Bruce CH Cheng .............................................................................................................................................	165,629,817	11.18%
Deltron Holding Limited ............................................................................	154,887,605	10.46%

RELATED PARTY TRANSACTIONS

Set forth below is a summary of the material transactions between the Company and other companies in the Delta Group.

For the year ended 31 December 2002, purchases from related parties amounted to approximately NT$2,315 million and accounted for approximately 6 per cent. of total consolidated purchases for that period while sales to related parties amounted to approximately NT$2,069 million and accounted for approximately 4% of total consolidated operating revenue for that year. For the first three months of 2003, purchases from related parties amounted to NT$9,114 million and accounted for approximately 98 per cent. of the total non-consolidated purchases for the same period while sales to related parties amounted to approximately NT$1,288 million and accounted for approximately 13 per cent. of the non-consolidated operating revenue for that period. The Company believes that such transactions are carried out on normal commercial terms.

Within the Delta Group, there also exist certain intercompany technology sharing, production, licensing and other service arrangements in connection with which commissions, design fees and service fees may be payable by one group company to another group company. The Company believes that such transactions are carried out on normal commercial terms.

For additional and more detailed information on related party transactions, see Note 5(2) of the “Audited consolidated financial statements of the Company as of and for the three years ended 31 December 2000, 2001 and 2002” and Note 5(2) of the “Unaudited non-consolidated financial statements of the Company for the three-month periods ended 31 March 2002 and 2003” included elsewhere in this Offering Circular.

Business

Unless the context otherwise indicates, all annual data relating to operating results in this section are prepared on a consolidated basis and all first quarter data are prepared on a nonconsolidated basis. Under ROC GAAP and the rules and regulations of the ROC Securities and Futures Commission, the Company is not required to prepare interim financial statements on a consolidated basis.

INTRODUCTION

The Delta Group is a worldwide leading manufacturer of quality switching power supplies (“SPS”) and a significant supplier of video displays and electronic components. SPS and electronic components are manufactured by the Delta Group for use in the consumer electronics, computer and telecommunications industries, and networking and electromechanical products for use in the networking industries. Other principal products manufactured by the Delta Group include AC/DC adapters, DC/DC converters, EMI filters, optical media converters and electronic ballasts. The major customers of the Delta Group include companies such as Dell, Hewlett-Packard/Compaq, IBM, Microsoft, NEC and Sony. For the year ended 31 December 2002, the Company’s consolidated operating revenue was NT$48,515 million (US$1,396 million) and its consolidated net income was NT$4,276 million (US$123 million).

projection TVs and monitors and real projection systems of high resolution, networking products such as management switches utilizing higher end gigabit LAN technology, layer three switches and wireless LAN solutions and AC motor drive products for industrial applications and brushless DC and AC servo drivers for consumer applications. The Delta Group has also developed PLC (programmable logic controllers) with embedded communication interface, human machine interface (HMI), temperature controllers and a variety of encoders with an aim to provide a comprehensive automation solution.

The Delta Group owns four manufacturing facilities and leases one in the ROC to produce its products. It also owns six production plants in the PRC. In addition, certain products are manufactured in factories owned by the Company’s affiliates located in Tianjin, the PRC, in Bangkok, Thailand and in Tijuana, Mexico. In all, the Company and its subsidiaries own a total of approximately 4.3 million square feet of manufacturing space and have access to an additional manufacturing space through its affiliates in the PRC, Thailand and Mexico. The Delta Group has substantially increased its production outside of the ROC in recent years, primarily in plants located in the PRC where average production costs are lower than in the ROC. The Delta Group and its affiliates have a global network of sales and logistic offices in the United States, Japan, Europe, the ROC, the PRC, Thailand, Singapore and Hong Kong to provide fast and convenient distribution services to its customers throughout the world.

STRATEGY

The Delta Group’s overall objectives are (i) to improve its competitiveness through technological innovation and continuous emphasis on research and development efforts, (ii) to maintain its position as a leading ODM partner to its major first tier customers in the 3C industries, (iii) to continue producing and supplying high quality, reliable products in a cost effective manner, (iv) to enhance production efficiency and (v) to expand its product lines related to its current businesses. The key elements of the Delta Group’s strategy are as follows:

Focus on technological innovation and research and development

The markets in which the Delta Group competes are characterised by rapid changes in technology, resulting sometimes in the rapid obsolescence of recently introduced products. The Company believes that effective research and development and technological innovation are key to the success of the Delta Group’s business, with an emphasis on developing innovative and market-oriented products capable of sustaining their profit margins. The Delta Group’s research and development efforts are principally directed toward upgrading and integrating its manufacturing technologies and processes, as well as developing new technologies for the introduction of more advanced and new products.

The Delta Group has developed a particular expertise in power supply technologies. It has also utilised its R&D capabilities to expand its product range from electronic components to system-level products such as high-end video displays, telecom power systems and networking systems. It is committed, and has devoted significant resource, to enhance its in-house technology, engineering and design capabilities on a continuing basis. The Delta Group and its affiliates have established a total of 15 research & development centers in Europe, the United States, the ROC and the PRC, including Delta Power Electronics Center which was established in Shanghai in 1999 to capture PRC talents and leverage on significant local R&D resources for advanced power systems and Delta’s Corporate R&D Center in Taipei in 2002 to focus on spoken language systems, MEMs and optoelectonics which are important technologies for future growth of the Group. To keep abreast of evolving industry standards and market developments, the Delta Group works closely with customers to develop products tailored to customers’ desired specifications and features. In addition, it has for many years maintained research collaborations with leading universities such as MIT and Virginia Polytechnic University in the United States, National Tsing Hua University and National Central University in the ROC and Xian Chiaotung University and Zhejiang University in the PRC to keep abreast of technology innovations and future trends.

Maintain position as a leading manufacturer of power supplies and electronic components and the leading ODM partner to its major first tier customers in the 3C industries

The Company believes that the Delta Group’s position as a leading ODM manufacturer and supplier of power supplies, video displays, electronic components and networking products for key players in the 3C industries has provided it with significant competitive advantages. The Company believes that the Delta Group’s established reputation as a reliable supplier of quality products provides it with the opportunity to sell a broader range of products to its existing customers who are interested in vertical integrated solutions and to increase its sales of power supplies and other products in industries such as telecommunications and data communications where markets are still relatively undeveloped.

The Delta Group aims to become the leading ODM partner to its first tier customers in the 3C industries and continue to focus its efforts on establishing long-term relationships with those key players. Where possible, it works with its customers early in the design stage in order to design products which meet the customers’ specific requirements. It has formed close working relationships with its customers such as IBM, HPQ, Dell, Microsoft, NEC, Sony and Texas Instrucments. For instance, the Delta Group is a core member of Texas Instrucments’ strategic alliance pursuant to which it provides technical support in utilising 3-piece DLP technology in the production of projectors with maximum video performance on an exclusive basis and the strategic supplier of transceivers to NEC’s “Fiber To The Home” project in Japan. This practice enables the Delta Group to stay ahead of other competitors in offering new products as soon as a new system architecture or a new technological model is implemented.

Continue producing and delivering high quality, reliable products in a cost effective manner

The Company believes that the Delta Group’s expertise as a cost effective manufacturer and supplier of quality power supply and other electronic products in large volumes is essential to the success of its business. The Company believes that the manufacturing capacities of the Delta Group have provided it with a competitive advantage in securing orders from existing customers while expanding its customer base and give the Delta Group the ability to remain competitive even as market prices for its products decline. The Company intends to continue to focus on producing high quality products and on minimising its production costs by improving its production planning, sourcing and cost and inventory controls since the markets in which it competes are extremely competitive.

In order to provide high quality services to its customers, the Delta Group intends to continue to improve the efficiency and cost-effectiveness of its order-to-delivery process and the quality of its postsale technical support and maintenance services. The Company also believes that its use of the SAP systems, which link its production facilities with its global network of sales offices and logistics hubs, provides it with the necessary capacity and flexibility to fulfil the product demands of its global clients in an efficient manner and a competitive edge over its competitors. Dedicated teams of engineers have also been stationed close to major customer sites to provide timely technical support.

Enhance manufacturing efficiency

The Delta Group has demonstrated itself as an efficient manufacturer as it possesses integrated design, engineering, manufacturing and quality control capabilities. To further enhance its production efficiency, reduce cost and mitigate pressure on margins, the Company has in recent years been shifting an increasing portion of its production to the Group’s facilities in the PRC and its affiliates’ facilities in Thailand and Mexico, where readily available labour supply and lower overhead costs result in lower unit manufacturing costs. The Delta Group has been relocating the production of high-volume products to those plants and, in the longer term, will gradually manufacture and even design more technologically sophisticated products in such lower cost regions. The Delta Group and its affiliates intend to further increase the production capacity of their existing production facilities in Wujiang, the PRC and in Tijuana, Mexico, respectively.

Expand product lines related to its current businesses

A key objective of the Delta Group’s growth strategy is to focus on organic growth and expand the scope of its business by broadening its product lines and developing more advanced products. The Company has made a number of successful efforts to capitalise on its position as a computer industry leader in switching power supplies, including acting on a computer industry panel to develop standard server infrastructure models and working with a leading key technology manufacturer to develop power supply products for future generations of key technology products. The Delta Group has also capitalised on its capabilities as an efficient manufacturer of electronic components and equipment by successfully applying such expertise in expanding into the production of high-end system-level products such as video displays, networking and telecommunications equipment. This will not only allow the Delta Group to take advantage of economies of scale but also increase opportunities to cross-sell products to existing clients.

MARKET ENVIRONMENT AND COMPETITION

The principal markets in which the Delta Group competes are those for power supply products, video displays, electronic components, networking products and electromechanical products. Each of the markets is global, with industry leaders principally in the United States and Japan, but with production sites and ultimate customers located throughout the world. The Delta Group sells a substantial portion of its products on an ODM basis, and therefore the Delta Group competes for orders not just with other ODM and OEM manufacturers but also directly with its customers, which may choose to produce a particular product internally instead of outsourcing it from external suppliers. Many of the Delta Group’s products have relatively short product cycles due to rapidly changing technology and evolving industry standards. There also tend to be consistent downward trends in product prices, as advancement in technological knowhow and sustained competition compels producers to lower prices in order to retain market shares.

The markets for the Delta Group’s products are highly competitive and somewhat concentrated, with a large percentage of orders coming from a relatively small number of companies. The Delta Group competes for orders with major international companies, some of which have greater financial, technical, marketing and other resources than the Delta Group. The Delta Group has found that product markets are also often segmented by industry. For example, in the market for power supply products, competitors of the Delta Group include Emerson/Astec, Artesyn and Lite On in the computer industry whereas the Delta Group competes for sales of such products in the telecommunications industry with companies such as Tyco and Ericsson. In the market for video display products, the Company believes that the most significant competitors of the Delta Group are in fact its customers, which may choose not to outsource the production of certain products.

The Delta Group competes in different product lines to various degrees on the basis of price, product quality and reliability, product features, product system compatibility, customised design and sales and technical support. The Company believes that most of the Delta Group’s customers prefer to source products from a relatively small number of outside vendors, and therefore consistent high quality execution of orders received is necessary to foster customer loyalty, earn repeat orders and increase market share. The Delta Group’s ability to compete successfully is also subject to other factors both within and outside of its control, including successful and timely development of new products, design innovation, efficient manufacturing of products which meet required quality standards, pricing, as well as industry supply and demand trends and general economic conditions. The business of the Delta Group is particularly dependent on demand for computer products, telecommunications products and their respective accessories.

PRINCIPAL PRODUCTS

The Delta Group’s principal products are power-related products, video display products, electronic components, networking products and electromechanical products. The following table sets out consolidated operating revenue for the Company’s principal products for the years ended 31 December 2000, 2001 and 2002.

	2000 Operating revenue Percentage of operating revenue	2000 Operating revenue Percentage of operating revenue	Year ended 31 December 2001 Operating revenue Percentage of operating revenue (in NT$ millions)	Year ended 31 December 2001 Operating revenue Percentage of operating revenue (in NT$ millions)	2002 Operating revenue Percentage of operating revenue	2002 Operating revenue Percentage of operating revenue
Principal products Power-related products: Switching power supplies ............. Adapters ....................................... DC/CD & DC/AC............................ Uninterruptible power systems ..... Telecom power systems ............... Ballasts ......................................... Total power related products.... Video display products: CRT monitors ............................... LCD monitors ................................ Projectors ..................................... Total video display products..... Components: Brushless DC fans ........................ Networking Components ............... Magnetics/Transformers ............... Spindle motors .............................. Telecom Components ................... Others Total components....................... Networking products ......................... Electromechanical products ............. Other products and services ............. Total..................................................	NT$11,186 6,349 1,619 769 716 686 21,325 7,841 1,154 583 9,578 4,220 1,522 894 473 726 366 8,201 5,696 5,136 1,086 51,021	22% 12 3 2 1 1 42 15 2 1 19 8 3 2 1 1 1 16 11 10 2 100	NT$10,184 6,868 857 866 641 1,045 20,460 4,339 334 596 5,269 3,535 1,260 728 367 343 547 6,779 6,304 1,410 2,480 42,702	24% 16 2 2 2 2 48 10 1 1 12 8 3 2 1 1 1 16 15 3 6 100	NT$12,507 5,876 922 1,102 1,053 903 22,363 3,077 4,020 2,128 9,225 3,056 1,216 810 661 402 859 7,004 7,106 1,363 1,454 48,515	26% 12 2 2 2 2
						46
						6 8 4
						19
						6 3 2 1 1 2
						14
						15 3 3
						100

The following table sets out the sales revenue of the Company by geographical area of shipment destination on a consolidated basis for the years ended 31 December 2000, 2001 and 2002.

	2000 Sales revenue Percentage of sales NT$19,116 37% 12,849 25 8,971 17 6,910 13 2,436 5 842 2 578 1	2000 Sales revenue Percentage of sales NT$19,116 37% 12,849 25 8,971 17 6,910 13 2,436 5 842 2 578 1	Year ended 31 December 2001 Sales revenue Percentage of sales (in NT$ millions) NT$14,999 35% 10,752 25 9,471 22 4,214 10 2,963 7 222 - 486 1 43,107 100	Year ended 31 December 2001 Sales revenue Percentage of sales (in NT$ millions) NT$14,999 35% 10,752 25 9,471 22 4,214 10 2,963 7 222 - 486 1 43,107 100	2002 Sales revenue Percentage of sales NT$15,871 33% 13,248 27 11,034 23 4,129 8 3,430 7 293 1 612 1 48,617 100	2002 Sales revenue Percentage of sales NT$15,871 33% 13,248 27 11,034 23 4,129 8 3,430 7 293 1 612 1 48,617 100
Geographical area United States ......................................... ROC........................................................ Southeast Asia ....................................... Europe ................................................... Northeast Asia (excluding the ROC)....... Americas (excluding the United States) . Others .................................................... Total(1) ...................................................
	51,702	100		100		100

(1) Figures include revenues from incidental sales of raw materials and finished goods not manufactured by the Company.

The above table is not necessarily representative of the actual allocation of the Company’s marketing efforts because, for example, the Company’s Japanese customers may request the Company to ship products to North America while the Company’s North American customers may request the Company to transport products to its assembly lines in Asia.

Set out below is a more detailed description of the principal products of the Company and its subsidiaries and affiliates.

Power-related products

The Company is a worldwide leading manufacturer of switching power supplies and other power related products for the computer industry. It also manufactures such products for the consumer, computer and communication industries. Switching power supplies and power related products accounted for approximately 46% of the Company’s total consolidated operating revenue in 2002. The Delta Group devotes substantial resources to both refining existing technology and developing new technologies in order to maintain its leading position in the market. It also frequently works closely with its major customers to develop products customised to their needs.

The Company remains competitive by providing a comprehensive range of products (from the high-end to the middle-range) and by maintaining its large production capacity - allowing economies of scale to be brought to bear on production and overheads (e.g. logistics). The excellent relationships which the Company maintains with suppliers has ensured that production has not significantly been affected by fluctuations in parts supplies.

The principal types of power-related products currently produced by the Company and its subsidiaries and affiliates are set out below.

Switching Power Supplies

The Company has over 20 years of experience in switching power supply production. Switching power supplies convert AC into DC and are used in workstations, desktop computers, servers, computer networks, computer peripherals (including printers, LCD monitors, digital cameras and game consoles), modems, fax machines, photo-copying machines, interactive televisions and satellite receivers in order to provide stable DC voltage and protection against voltage variation, unstable current, short-circuits and power line disturbance. These switching power supply products usually come with four current output levels (+12 Volts, -12 Volts, +5 Volts, -5 Volts) to support a machine’s operation and include a wide range of models. The switching power supplies produced by the Company and its subsidiaries and

affiliates provide up to 56,000 watts in power range. The Company and its subsidiaries and affiliates also produce models with advanced features such as power factor correction (“PFC”), current sharing, hot swap, battery backup and green energy function. All of the switching power supplies produced by the Company and its subsidiaries and affiliates are in compliance with international safety standards. All these companies possess safety self-test and certification capabilities recognised by major international safety certification agencies.

Although the Company has traditionally focused on customised switching power supplies and adapters, it began selling standardised products in 1997, in order to capitalise on its research and development strengths and its low-cost production facilities in the PRC. The current standardised products are mainly used in desktop computers, scanners and servers.

AC/DC Adapters and DC/DC Converters

The Delta Group produces AC/DC adapters, DC/AC inverters and DC/DC converters for notebook computers, palmtop computers, battery chargers and portable printers, utilising hybrid circuits, thin film, system monitoring circuitries and self-designed ASICs (application specific ICs) technology to increase power density and reliability at reduced cost. These products feature PFC and power management functions for energy saving. DC/DC converters convert a DC voltage into another higher or lower voltage. They are used in computer, networking, telecommunications, industrial, military and aerospace sectors to generate multiple outputs from one DC source. The Delta Group also produces high density converters for CPUs. AC/DC adapters also convert AC to DC, but, unlike switching power supplies, only produce one set of current output for portable electronic appliances such as notebook computers. Many models of the Delta Group’s AC/DC adapters are designed to receive full-range input from 90 volts to 270 volts, a feature which enables electronic devices to gain adequate power supplies worldwide by a simple plug-in procedure. All of the Delta Group’s adapters, converters and inverters also provide stabilisation protection against voltage variations and short circuits and can produce stable voltage, current and power output to meet customer-specific applications.

Telecom Power Systems

The Delta Group’s telecom rack power systems are designed to provide uninterrupted power supplies for both wireline and wireless telecommunications networks. Each module of the Delta Group’s systems utilises high frequency switching mode rectifiers in combination with DC/DC converters and a control and supervisory unit to increase efficiency and reduce size for easy expansion. When using the Delta Group’s telecom rack power systems, a telecommunications network operator can use a remote control system to operate and monitor battery voltage, power supply and environmental conditions of the network under a window environment through a RS-232 interface. In addition, the Delta Group provides immediate on-line technical support to telecommunication network operators. The various product series offer a wide range of capacity up to 10000A to fulfill customers’ requirements. The compact, modular design with current sharing and hot-swap function allows the paralleling of Switching Mode Rectifiers (“SMR”), which leads to easy system expansion and maintenance. The CPU based Control and Supervisory Unit (“CSU”) ensures superior system function and protection. Temperature compensation for the VRLA battery is also available. In addition, system distribution unit is designed and configured to adopt different types of circuit breakers and dead front fuses.

Uninterruptible Power Systems

The Delta Group produces off-line UPSs, line interactive UPSs and on-line UPSs, all of which are designed to provide emergency power supplies for information technology applications, electronic devices and telecommunications equipment that require uninterrupted and reliable power sources. Offline UPSs provide emergency power backup for up to seven minutes in the event of power stoppages. They are cheaper and normally have lower power ratings. Line interactive UPSs supply higher performance power such as pure sinewave and maintain regulative output during power disturbances. On-line UPSs function as power filters and regulators, as well as power sources during any power

conditions. On-line UPSs are generally more expensive and in greater demand in developing countries where power supply is unstable. The Delta Group’s UPSs are equipped with circuit breakers which protect the UPSs and the output wiring from extremely large current variations such as short circuits. The Delta Group’s UPS products have a wide range of output capacities from 0.25KVA to 200KVA. Advanced features like PFC, galvanic isolation, parallel technology, battery replacement, lightning and surge protection (RJ-45/RJ-11) for Ethernet card/telephone line are integrated into the units. The Delta Group’s UPSs also comes with built-in CPU control, self-diagnosis and USB/RS-232C/dry contact/AS-400 communication ports. The Delta Group has developed UPS entry smart 2000 power management software to provide users with optimised protection. All units of the Delta Group are UL and TUV/CE approved.

Electronic Ballasts

The Delta Group manufactures electronic ballasts, which are used in energy saving lighting devices. The incorporation of electronic ballast permits the saving of between 20% and 75% of the energy used by standard products which do not incorporate electronic ballast and allows the useful life of such devices to be extended by up to 10 times the life of an ordinary light bulb. Electronic ballasts are used in compact fluorescent lamps, linear fluorescent lamps and metal halide lamps. These products utilise technology and manufacturing processes developed by the Company together with an unrelated third party partner. The Company anticipates an expanded demand in the retail market for products which incorporate electronic ballasts in the future.

Video display products

The Delta Group manufactures a wide range of video display products, focusing on projection display and computer display products. In recent years, the Delta Group has focused its efforts on projection systems and scaled down its previous focus on the production of CRT and LCD computer displays in light of the increasing commoditisation of, and declining profit margins for CRT and LCD products. Projection systems are regarded as the display solution of choice for high definition TV, the infrastructure for which is expected to become established by 2007. Video displays accounted for approximately 19% of the Company’s total consolidated operating revenue in 2002.

Front Projectors

Focusing on all available microdisplay technologies, the Delta Group continues to develop front projectors as the key product in its video display range. More than six new models of front projectors were introduced in the first quarter of 2003. To meet requirements from different market segments, front projectors with brightness ranging from the entry level of 1200 lumens up to 2400 lumens, and weight factors varying from 1.5kg to 3kg, are available. More economic models for the retail market are under development.

Rear Projection TVs

The Delta Group has gained a significant market position in the supply of Digital Light Processing (DLP) optical engines for rear projection TV/monitors. The Company believes that digital broadcasting will eventually replace analog broadcasting of TV programmes and that digital broadcasting will favour the larger displays made possible by rear projection technology. Pilot runs of digital broadcasting have already taken place in the United States, Europe and Japan and digital broadcasting is expected to replace analog broadcasting entirely in 2006, 2015 and 2010, respectively, in these locations. The Delta Group currently offers several rear projection system solutions for 42-inch, 56-inch and over 60-inch displays, in 4:3 and 16:9 aspect ratios. Sales of rear projection TV sets made an important contribution to the Company’s total consolidated operating revenue from video displays in 2002.

Apart from DLP, the Delta Group is maintaining its lead in LCD and LCoS technology to provide further rear projection TV solutions as market demand for their technologies increases.

Digital Visual Display Systems

To satisfy niche demand for digital cubes for control room applications, and public information systems, the Delta Group currently provides video cube solutions with 38-inch, 50-inch and 60-inch displays.

Large Venue Projection Systems

Delta has co-developed with a strategic technology partner a high-end product using a 3-piece DLP with minimum 5000 lumens brightness and large scale video performance projector. This product is scheduled to be made available in second quarter of 2003, targeting large staging and event applications.

CRT & LCD Monitors

Together with its subsidiaries and affiliates, the Company provides a broad range of high resolution, colour CRT monitors and LCD flat panel displays. All models produced by the Company are approved by product review bodies including UL and CSA. The Delta Group also offers low radiation models and models with on screen display, display data channels and built in stereo audio to meet the demands of its customers. The Company, through its subsidiary Vivitek, has also developed LCCS (liquid crystal colour shutter) displays which use proprietary monochrome CRT together with LCCS to generate very soft and clear display quality images. LCCS colour displays have applications in electronic games, instruments and ATMs, in sizes ranging from 1 to 10 inches.

Electronic components

The Delta Group manufactures a range of electronic components both for internal use and external sales. Electronic components accounted for approximately 14% of the Company’s total consolidated operating revenue in 2002. The Electronic Components Business Group also provides the Delta Group’s principal products with a steady supply of components and helps to extend the Delta Group’s relationships with its customers and potential customers of other products lines. The components include power and telecom and networking components, EMI filters, brushless DC fans, crossflow fans and blowers, DC spindle and stepping motors, thermal management products, DC-AC inverters, radio frequency/microwave components, fiber optical transceivers and optical electronics components. The Delta Group’s component products are generally manufactured in large quantities. All of the component products are manufactured either at the Delta Group’s plants in the PRC or at the facilities of the Delta Group’s affiliates in Thailand. The Delta Group divides its components business group into the following smaller business units to achieve production, sales and management efficiencies.

Magnetic Components

EMI filters . The Delta Group offers a wide range of standard and customised EMI filters to reduce conductive noise. The Delta Group’s EMI filters help computing devices, including peripherals, and other industrial, scientific and medical equipment using digital technology to meet the applicable interference control and emission standards for Japan, US and European markets. Its present products include IEC inlet filters with a maximum capacity of 20A, chassis mounting filters with a maximum capacity of 60A and three-phase filters with a maximum capacity of 600A/520 VAC. Its mass produced three-phase filters are extensively used in AC motor drives and machine applications. The Delta Group provides components which are UL recognised, CSA certified, VDE approved and CE compliant.
Power magnetics . The Company has more than 31 years of experience in the design and manufacture of standard and customer-specific magnetics. Its magnetic products include switching power transformers, line filters, inverter transformers, SMT power inductors, current sensing transformers and high voltage transformers for use in switching power supplies, PC peripherals, lighting products, televisions, monitors, videos, AC/DC converters and office and

home electrical appliances. The Delta Group’s design engineers are capable of developing products customised to specific applications of its customers.

Telecom components . The Delta Group produces POTS/ISDN splitters which enable ADSL service to share a telephone line with existing POTS, ISDN, or Smart Phone services. The splitters can separate the high-frequency traffic to DSLAM and the low-frequency telephone services to a private branch exchange (PSTN/PBX) switch. These products are designed to eliminate interference to POTS equipment by blocking high frequency energy (20KHz ~10MHz). The Delta Group also produces ADSL filters for use in blocking any noise generated by other phones, fax, answering machines and analog modems. It also produces VDSL POTS splitters which allow up to 48 POTs to share the same cable.
Networking components . With respect to networking components, the Delta Group produces a full range of ODM networking components, including filter modules for 10 Base-T Ethernet, token ring and ATM and transformer modules for 10/100 switching hubs. The Delta Group also manufactures Ethernet DC/DC converters, Ethernet (AVI) isolation transformers, PCMCIA filtered modules and space saving RJ-45 10/100 Base-TX filtered connectors. The Delta Group has also developed SMD transfer device, a new product with enhanced reliability.

Fans & Precision Motors

Brushless DC fans, crossflow fans and blowers . The Delta Group produces brushless DC fans from 25mm to 170mm, blowers from 45mm to 160mm, crossflow fans and slim blowers for use in cooling down the power supply systems of personal computers, office equipment and other electronic devices. Certain models of the Delta Group’s brushless DC fans are designed with variable speeds using thermal sensors to better preserve energy. The Delta Group’s blade shape design features extra low noise, high air flow and air pressure. Fans with hot-swap construction, fan trays and modules with strong pan and first-rate efficiency are also produced. The Delta Group has built a number of computer integrated automated production lines in-house for the assembly and testing of its brushless DC fans. These products are UL recognised, CSA certified, VDE approved and CE compliant.
DC brushless spindle motors/stepping motors . The Delta Group produces DC brushless spindle motors of slim design and small sizes. These products are designed for high speed application (7,000 — 10,500 rpm). The Delta Group’s brushless spindle and stepping motors feature high torque and low inertia to produce quick response at low current consumption, and include low cogging torque in order to minimise running vibrations and noise. The major applications for these products are CD-ROM drives, CD-RW drives, DVD-ROM drives and DVD players.

Thermal Management Products

The Delta Group also produces thermal management products (coolers) which provide thermal solutions for desktop computers, servers, game consoles, telecommunication equipment, household appliances and VGA cards. Advanced engineering equipment such as thermal evaluation software, thermal wind tunnels, thermal resistance testers, computerized CNC machines, anechoic chambers and wind tunnels are used to develop such thermal coolers.

Inverters

The Delta Group's DC-AC inverters provide low noise and high frequency tube triggers for use in use in notebook computers, sub-notebooks, LCD monitors and LCD TVs for driving the backlight of LCD screens.

Wireless Communication Components

Radio frequency/microwave components . In 1998, the Delta Group introduced miniature radio frequency components with a frequency range up to 20GHZ for application in telecommunication products such as cellular phones, wireless local loops and base stations. These products include a high performance and small-size voltage controlled oscillator family and advanced active antenna for Global Positioning System (“GPS”). The Delta Group currently sells these products to ODM customers.
Fiber optical transceivers . The Delta Group introduced optical transceivers for data communication applications in 1999. It currently designs, assembles, and manufactures a wide range of TOSA/ROSAs as well as optical transceivers and offers transceivers covering data rates of 155 Mbps, 622 Mbps, 1.25 Gbps and 2.5 Gbps in MSA standardized multiple form factors. The main applications of optical transceivers include telecom, datacom hubs/switches, SANs, Access and FTTxs. In particular, the Delta Group is a leading player in Japan FTTH market for bidirectional optical transceiver.

Optical Electronics Components

Optical components . The Delta Group introduced optical components required for projection display applications in 2003. It currently produces optical components including most of the components required for DLP projectors such as color wheels, light tunnels, TIR prism for single panel and Philips prism for 3 panels. .
Fiber optics passive components . The Delta Group also introduced fiber optics passive components for telecommunication applications in 2003, including tunable devices such as tunable filters and tunable laser for used by next generation fiber optics telecommunications. Such tunable devices are applied in Metro links and Access links.

Networking products

Networking products accounted for approximately 15% of the Company’s total consolidated operating revenue in 2002.

Through its subsidiary DNI, the Company produces and offers a full range of networking products including high speed Ethernet products such as unmanaged LAN switches, intelligent stackable and chassis switches, broadband access products such as SOHO routers, wireless LAN adapter cards, 802.11 a/g router and ADSL routers, integrated voice and data products such as VolP gateway, IAD etc., and finally the 1U or 2U servers. DNI has introduced products which allow users to upgrade or expand their network systems at lower costs with higher value added. The objective is to establish a network infrastructure with enhanced reliability, broader bandwidth and larger capacity. In addition to basic switches, DNI produces higher speed models such as gigabit switches and 1000 Base TP interfaces and intelligent switches such as layer three switches and chassis based switches. A RAS combines basic components such as an internet IP sharing device, printer port, hub, switch and internal modem, and virtual private network (“VPN”) technology, in a single device to provide users with easier internet assess at lower average cost. DNI also developed ADSL routers for use in broadband networks. These routers use the VPN technology developed by DNI to create a protection wall against data loss. Wireless LAN is one of the most popular product of DNI. DNI is a major supplier of a variety of wireless LANs for high speed internet applications and Hot Spot applications through mobile phones. VolP is a new product line of DNI. DNI currently offers VolP products such as internet telephone gateway systems and screen phones. DNI also produces slim mail servers, web servers, proxy servers and storage servers.

DNI’s networking products are tested by Microsoft and Novell’s laboratories. Delta US’s R&D laboratory for networking products at Research Triangle Park in North Carolina, U.S.A., provides technical service close to customers in the United States.

The Delta Group’s networking products are mainly for ODM customers, who generally incorporate the Delta Group’s networking products into their computers and networks to promote efficiency in data sharing and transmission among multiple work stations.

While the market for network interface cards is expected to continue to expand in terms of volume, stiff price competition is anticipated in this product segment. The Issuer also saw significant price declines and related volume increases in the market for port switches in 2003.

The Delta Group also manufactures a wide range of broadband equipment, including xDSL modems, VPN, and firewalls. The Issuer has developed products such as wireless adaptors, access points, and wireless routers for use in wireless LAN solutions.

As the Delta Group has moved into new and more technology driven areas of the networking products market, it has increased the resources devoted to software applications for its products. The Company estimates that in the networking products area approximately 17% of the engineering personnel and 12% (based on R&D expenses) of the research and development resources of DNI were devoted to software applications in 2003.

Electromechanical products

Electromechanical products accounted for approximately 3% of the Company’s total consolidated operating revenue in 2002.

The Delta Group began production of motor drives (a type of inverter used to control the running speed of various machines and pieces of equipment) in 1995. By inputting programs, users of motor drives can control the running speed of their machinery and equipment to achieve the required mechanical function and optimise the use of energy. The Delta Group currently focuses on general purpose AC motor drives (0.2 Kw to 50 Kw) for use in industrial machines. The Delta Group’s motor drives use technology similar to that used in producing power supply products and make use of electronic components produced by the Delta Group. The Delta Group also plans to develop server drives and DC brushless motor drives.

In addition to traditional industrial applications, the Delta Group has also entered the consumer field with products for use in home appliances, which it believes will play an increasingly important role in the electronic motor drive market of the future, by developing brushless DC and AC servo motors and Drives. Furthermore, the Delta Group also offers programmable logic controllers (PLCs) with embedded communication interface, human machine interface (HMI), temperature controllers and a variety of encoders for use as discrete devices in the home appliance automation field.

Other products

Through its subsidiary Cyntec, the Company manufactures thin film products (eg, thin film platinum resistance temperature detectors and thin film chip resistors) which are critical for minimisation of electronic products. Sales of products produced by these subsidiaries have not reached significant amounts, and are not included as operating revenue in the financial information included in this Offering Circular.

CUSTOMERS

The Company sells more than 90% of its products on an ODM or OEM basis. As one of the leading manufacturers of switching power supplies and a significant supplier of video displays, electronic components and networking equipment to the consumer, computer and communications industries, the Company has major customers located throughout the world. The Company places emphasis on customer relations and providing high quality service. A key aspect of the Company’s customer development strategy has been to procure high volume orders on an OEM basis from major global computing and electronics companies. The following table sets forth the major customers for the Company’s products in alphabetical order and the type of products purchased by each:

Customers Principal products purchased
Alcatel .................................................... Telecom magnetics, power magnetics, DC fans
Apple ...................................................... DC fans, EMI filter
AT&T Wireless........................................ Telecom power
Asustek................................................... SPS, adapters, fans, networking components
Black & Decker ...................................... Adapters
Belkin...................................................... UPS
Canon ..................................................... EMI filters, DC fans, power magnetics
Celestica................................................. DC fans, EMI filters, power magnetics
CISCO ................................................... SPS, adapters, DC fans, UPS, networking components, EMI filters, Telecom rack
power systems
Chung-Hwa Telecom.............................. UPS
China Telecom........................................ UPS
Dell ......................................................... SPS, adapters, DC fans, networking components, power magnetics
First International Computer ................... SPS, adapters, DC fans, power magnetics, inverter
Fujitsu .................................................... Monitors, DC fans, motors, fiber optical transceivers, EMI filters
Gateway ................................................. DC fans, Projectors, LCD TV
GE........................................................... Electronic ballasts
Hewlett-Packard/Compaq ...................... SPS, adapters, DC fans, networking products, DC/DC converters, power
magnetics, projectors, UPS
Hitachi .................................................... SPS, adapters, monitors, power magnetics, DC fans
IBM ........................................................ SPS, adapters, inverters, DC fans, EMI filters
Inventec .................................................. DC fans, power magnetics, networking components
JVC ........................................................ Power magnetics, monitors, EMI filters, DC fans
Legend.................................................... SPS
Liebert Telecom power
LG........................................................... Adapters, EMI filters, DC fans
Matsushita ............................................. power magnetics, EMI filters, DC fans
MGE........................................................ Telecom power
Microsoft ................................................. SPS
Mitsubishi ............................................... Monitors, EMI filters, DC fans
Motorola ................................................. SPS, adapters, DC fans, EMI filters
NEC ....................................................... SPS, networking products, power magnetics, UPS, CD-ROM drives, EMI filters,
DC fans
Nortel Networks ..................................... Telecom components, DC fans
Philips .................................................... monitors, power magnetics, inverters, EMI filters, DC fans
Quanta ................................................... SPS, adapters, DC/DC converters, inverters, DC fans, power magnetics, EMI filters
Samsung................................................. Adapters, EMI filters, DC fans
Sharp ...................................................... Adapters, EMI filters, DC fans
Siemens ................................................. SPS, UPS, telecom components, DC fans, EMI filters
Solectron ................................................ DC fans, networking components, EMI filters, power magnetics
SONY ..................................................... SPS, power magnetics, adapters, DC fans, EMI filters
Sun Microsystems .................................. DC fans
Thomson ................................................ Power and telecom magnetics, networking components, DC fans
Tripp Life................................................. Telecom powers
Toshiba .................................................. SPS, adapters, power magnetics, DC fans
Verizon Wireless..................................... UPS
Viewsonic ............................................... Monitors, LCD monitors, projectors
Wistron.................................................... SPS, adapters, networking components, DC fans, DC/DC converters, EMI filters

Over the years, the Delta Group has received various service awards from its customers in recognition of the quality of its products and services. See “The Delta Group – Service Awards”. The top 10 customers by net sales of the Delta Group for the year ended 2002 were Sony, Dell, Hewlett-Packard, Viewsonic, Netgear, Gateway, IBM, Microsoft, NEC and Fujitsu.

SALES AND MARKETING

ODM and OEM sales accounted for a substantial portion of the Company’s consolidated net sales. The Company typically sells its products based on specific customer purchase orders rather than longer-term (2 years or more) contractual commitments, although in some cases the Company does have agreements with customers to set the customers’ estimated demand for the Company’s products for a given year or a period of time. The Company also sells its component products under its own brand names, either directly to the ultimate customer or through distributors. The percentage of direct sales varies by product line and is typically small. The product lines with the highest relative percentage of direct sales are telecom power systems sold to customers in the telecommunications industry and certain networking products and electronic components.

Due to the characteristics of its business, the Delta Group’s sales and marketing efforts are very much customer-centered because knowledge of customers’ requirements and preferences is essential for securing OEM and ODM business. This is particularly true in the largest product line of power supply products, where historically manufacturers have been required to modify their products to meet the specific needs of each customer. The Company believes that a large majority of the Delta Group’s customers prefer to source products from a relatively small number of outside vendors, and therefore consistent high quality execution of orders received is necessary to foster customer loyalty, earn repeat orders and increase market share. Good customer service and after sales support are also important in meeting the needs and expectations of customers.

The Delta Group and its affiliates maintain a total of 31 sales offices in the ROC, Japan, the PRC, Hong Kong, Singapore, Thailand, Europe and the United States, and employ a sales and marketing staff of approximately 500 employees worldwide. To better respond to customers, every business group maintains a dedicated sales and marketing team, though in some circumstances sales people are shared by two or more business units.

The Company also believes that its commitment to research and development is directly related to its marketing efforts. In order to compete for and secure the most desirable and profitable business of new product development and design, the Delta Group has found that it must make significant investments in research and development of current technologies so that its personnel are fully conversant with the requirements of its customers. The Company believes that its investments in research and development will enhance the ability of the Delta Group to compete for new business and attract new customers. In addition to independent investments in new technologies, the Delta Group also devotes substantial resources to cooperating with industry leaders in developing new products. These efforts are, to the extent that they become publicised to customers and other industry players, a form of passive marketing. See “Business ― Strategy”.

ORDER PROCESS

The Delta Group has established long-term supply relationships with many of its major customers, which are subject to periodic review for estimated requirements and pricing. Information from such estimated requirements, as well as each production unit’s quarterly sales forecasts for all products, is factored into the relevant Delta Group company’s production plan reflecting all current and anticipated orders. Once an order is confirmed, adjustments are made to the production plan as necessary. If a customer cancels pending purchase orders or terminates or reduces purchase orders in progress, such customer is liable for cancellation charges which, depending on the timing of such cancellation, are equal to the relevant Delta Group company’s actual costs for raw materials and components or the value of the

semi-finished or finished products, net of any recovery from resales of such materials, components or products.

PRODUCTION

The Delta Group currently has five production plants in Chungli, Taoyuan and Tainan in the ROC, five production plants in Dongguan, Guangdong Province in the PRC and one production zone in Wujiang Municipality in the PRC, and through its affiliates has access to one production plant in Tianjin, the PRC, three production plants in Thailand and one production plant in Mexico. In general, other than some high-cost equipment or production lines such as surface-mounting equipment, the Delta Group’s production plants operate on a two-shift basis. The Company believes that the production plants of the Delta Group have flexible capacity. However, in light of the needs of future growth, the Delta Group intends to continue to increase the production capacity of its production facilities in Wujiang, the PRC and in Mexico.

The basic production processes for the Delta Group’s products consist of surface mounting, automatic insertion, manual insertion, PC board inspection, wave soldering, final assembly, in-circuit tests, burn-in tests and inspection, function testing, final testing and packaging. The Delta Group maintains a team of quality control staff whose duty is to monitor design and production processes in order to ensure high quality. These employees include line inspectors who work with members of the production staff to conduct examination and testing during the production process.

Each of the companies within the Delta Group has set up its quality engineering department to conduct quality review at the design stage. The Delta Group’s quality engineers and manufacturing engineers are highly involved during the product design stage to evaluate the quality, reliability and manufacturing feasibility of the products. Before mass production, reliability tests are conducted to ensure satisfactory performance during the designed useful life spans of such products.

Most of the Delta Group’s products are approved for self-test and certification by UL under TCP and CSA and are tested by the Delta Group’s automatic testing system to help ensuring their effectiveness and reliability. The Delta Group’s plants in the ROC and the production plants in Dongguan and Wujiang in the PRC are all ISO-9001 and ISO-14001 certified. The ISO is an organisation formed by delegates from member countries to establish international quality assurance standards for engineering and manufacturing processes. The ISO standards have been adopted by more than 60 countries. The certification process involves subjecting the production processes and the quality management systems at the relevant Delta Group company’s factories to review and surveillance for various periods. The ISO certifications also provide independent verification to customers as to the quality standards in the relevant Delta Group company’s manufacturing processes.

DISTRIBUTION

The Delta Group controls and manages its global logistics network (comprising 16 production facilities and 69 logistic hubs around the globe) through one of the world’s most advanced SAP business management systems. The SAP systems enable the Delta Group to integrate its production, inventory, order fulfilment and warehouse facilities to respond to the needs of its global customer in a timely and cost effective manner.

The Delta Group generally distributes its ODM and OEM products directly to customers from its manufacturing facilities. The Delta Group uses third party commercial freight delivery services or other delivery methods selected in consultation with its customers. The Delta Group has not experienced difficulties in meeting its customers’ needs in the past. To better serve certain customers, the Delta Group produces particular ODM or OEM products at factories which are located near those customers’ own production facilities. The Delta Group considers its customers’ and potential customers’ requirements when selecting sites for its factories.

In recent years, the Delta Group has established “just-in-time” warehouse facilities (“hubs”) near the customers’ own production facilities. It has been the Delta Group’s practice to lease space in commercial warehouse facilities rather than to establish its own warehouses. To date, the Delta Group has established 69 logistic hubs worldwide to support the needs of its global customers.

A portion of the Delta Group’s sales consists of its own branded products. Such products are mostly sold to customers through third party distributors. A small percentage of the Delta Group’s ownbranded products are also distributed to its sales and service centers throughout the world, in order to have immediately available supplies of certain products to better serve its customers’ needs.

INTELLECTUAL PROPERTY

A number of elements of the Delta Group’s products and technological processes are proprietary in nature, and are owned by the Delta Group or utilised under licence from third parties. As of June 30, 2003, the Company held a total of 764 patent registrations. Patents for various products and technologies have been approved in countries which include one or more of the ROC, Japan, the PRC, Germany and the United States. Most of the Company’s current patents expire between 2003 and 2021.

Seeking patent protection can be expensive and time consuming. There can be no assurance that patents will be issued from pending or future applications or that, if patents are issued, they will provide meaningful protection or other commercial advantages to the Company. Moreover, there can be no assurance that any patent rights will be upheld in the future or that the Company will be able to preserve any of its other intellectual property rights. Nonetheless, the Company generally seeks patent protection on any new inventions, product improvements or technology developed by its employees. In recent years the number of patents sought and obtained by the Company has increased, reflecting its increased investment in research and development of new technology. As of June 30, 2003, the Company also had over 1344 patent applications pending in various jurisdictions, including but not limited to the ROC, Japan, the PRC and the United States.

The Company has registered 10 trademarks and has one pending trademark applications in the ROC. In addition, the Company has registered seven trademarks in a number of North American, European and Asian countries. The trademarks are designated for use on the Delta Group’s products, including power-related products, video display products and electronic components.

RESEARCH AND DEVELOPMENT

The Company believes that research and development is critical to the future success of the Delta Group and it is committed to devoting increasing efforts in research and development. The Company believes that 90% of the technology currently owned by the Delta Group was developed inhouse. Aggregate annual research and development expenditures by the Company and its consolidated subsidiaries increased from approximately NT$2,326 million in 2001 to approximately NT$2,764 million in 2002. For the three months ended 31 March 2003, expenditures by the Company on research and development totalled NT$513 million on a non-consolidated basis. The Company expects that its R&D expenditures for 2003 will remain at similar level as in 2002.

The Delta Group carries out its research and development activities at three levels:

Corporate Level

The Delta Group and its affiliates have 15 research and development laboratories worldwide (ten in Asia, four in the United States and one in Europe). At the corporate level, these R&D laboratories focus on long term research projects which are of strategic importance to the future growth of the Delta Group. For instance, Delta Power Electronics Center in Shanghai concentrates on research and development of advanced power systems whilst Delta Communication Laboratory in Raleigh, North Carolina focuses on research and development of wireless communications and the Corporate Research & Development Center of the Company in Taipei, Taiwan focuses on research and development of

MEMs, speech technology and optoelectronics. This research capacity is augmented by the Delta Group’s participation in various campus research programmes and fellowship and scholarship endowments. The Delta Group has for many years maintained research collaborations with leading universities such as MIT and Virginia Polytechnic University in the United States, National Tsing Hua University and National Central University in the ROC and Xian Chiaotung University and Zhejiang University in the PRC. These programmes enables the Delta Group to keep abreast of latest technology development trends and leverage on existing research resources of these research institutions.

Business Unit Level

Each of the business units within the Delta Group has its own group of engineers who focus on product development for each individual business unit in the premises of the Delta Group in the ROC, the PRC, Hong Kong, the United States and Europe. Each of the business units within the Delta Group also has a special automation engineering department responsible for manufacturing automation and process improvement. Each business unit conducts a five-step development procedure for each new product before it commences commercial production. First, based on the market survey and specific requirements of customers, the research and development department conducts product planning. Second, based on the product plans, the relevant company’s engineers develop design and manufacturing concepts and an estimated schedule for the product development. Third, the design engineers create engineering samples, which involves design and simulation, component selection, sample building and testing, design review, reliability testing and manufacturability review. Fourth, the production unit starts a pilot run of the new product, during which the products are subject to continuous review and testing. Finally, the relevant company’s production personnel complete their pre-production preparation and the product is then ready for commercial production.

Consumer Level

For those products custom-made to meet client specifications, such as telecom power systems, the Delta Group has dedicated teams of engineers located close to major customer sites who work closely with those customers in refining product specifications and developing new products. The Delta Group has more than 1500 engineers engaged in product design, automation and quality assurance.

Presently, the Delta Group focuses on developing high value-added new products, such as optical components, advanced power systems, magnetic, IC, thermal control, wireless communication equipment and video displays, as well as remodelling and upgrading existing products. Two challenging new fields are MEMs and speech technology which the Delta Group believes will complement the products which it presently offers to customers.

SUPPLY OF COMPONENTS, RAW MATERIALS AND ENERGY

Components and raw materials

Certain of the Delta Group’s products, such as power-related products, video display products, networking products and components, AC motor drives and other electromechanical products, utilise electronic components produced by the Delta Group, such as magnetics, transformers and brushless DC fans and spindle motors. This vertical integration reduces the Delta Group’s reliance on external components and raw materials suppliers.

The Company purchases approximately 80% of its components and raw materials from external suppliers. Principal components and raw materials include semiconductors, PC boards, cores, ICs, capacitors, wires, metal and plastic casing, CRTs, LCD flat panels and batteries. In general, the Delta Group purchases these components and raw materials from multiple suppliers pursuant to purchase orders. However, the Delta Group purchases certain specific types of semiconductors from single sources because such sources are currently the only ones available. The Delta Group is also particularly

dependent on outside suppliers of LCD and other flat panel displays used in certain of its video display products under development. The Company believes that the Delta Group’s relations with its principal suppliers are good.

The Delta Group generally keeps 7 to 15 days supply of components and raw materials in stock so that its production will not be interrupted by temporary shortages. In the event any of the single source suppliers continues to fail to provide adequate supply, the Company believes that its design engineers will at times be able to redesign the specific product, or work with other producers to assist them to produce the same components, so as to mitigate reliance on the single source suppliers involved. In addition, the Company believes that to the extent that the Delta Group continues to gain greater market share, its suppliers will desire to maintain a close business relationship with the Delta Group in order to gain their own substantial market shares in component supply. For certain components such as power semiconductors and cores, the Company believes that the Delta Group is one of the largest customers to its suppliers and therefore has certain advantages in terms of bargaining power. The Company believes that as a result of these factors, it was able to control its material costs and achieved overall cost reduction in 2002, notwithstanding the increase in the prices of electronic components and raw materials worldwide.

EMPLOYEES

As of 30 June 2003, the Company and its principal subsidiaries had in aggregate approximately 30000 employees, of whom approximately 5000 were executive officers and administrators, approximately 7000 were engineers and technicians and approximately 18000 were operators of machinery and equipment.

The future success of the Delta Group will depend, in part, on its ability to continue to attract and retain highly qualified technical, marketing, engineering and management personnel. See “Risk factors — Factors related to the Delta Group and its business — Dependence on qualified personnel”. The Company has established a development strategy to transfer the most labour intensive production lines to areas outside the ROC such as the PRC. The Company has not experienced any strikes or significant work stoppages and believes that its employee relations are very good.

The Company believes that its management policies, working environment and the employee development opportunities and benefits it extends to employees have contributed to good employee relations and employee retention. Employee benefits include subsidised meals and housing, health insurance, life insurance, safety insurance education/training subsidies and employee bonuses, which customarily involve distributions in the form of Shares. See “Dividends”.

The Company maintains a defined benefit employee retirement plan (the “Plan”) covering all of its regular employees. Benefits under the Plan are generally determined based upon years of credited service, age at retirement and average compensation. The Company has been contributing to an independent retirement trust fund since 1986. As approved by the ROC government, the Company suspended contributions to the independent retirement trust fund in November 1990. The Company resumed contributing to the fund at a fixed rate equal to 2% of monthly salaries and wages from July 1999. Neither DNH nor DIH maintains an employee retirement plan. The subsidiary of DNI Cayman, DNI, has contributed 2% of monthly salaries and wages of its employees to its employee retirement plan since January 1999. Each of DIH’s subsidiaries located in the PRC maintains a defined benefit employee retirement plan covering all of its employees, under which its employees contribute to a separate fund an amount based on a certain percentage of their monthly basic salary, while the relevant subsidiary also contributes the same amount as pension reserve. The trust fund assets and the contribution from employees (if any) are not reflected in the Company’s consolidated financial statements. The provision for pension cost is determined by actuarial valuation. Based on a recent actuarial report, the Company believes that the current fund assets are adequate.

PROPERTIES

The following table sets forth the location, size and primary use of the material properties of the Delta Group as of 30 June 2003 and whether such facilities are owned or leased by the Delta Group:

	Floor		Owned or	Owned or
Location	space	Primary use	leased
(in square metres)
ROC
Chungli, Taoyuan	24,804.37	Manufacturing of SPS, monitors, projectors,	Owned	(1)
(Plant No.1) ............................................		radio frequency/microwave components
Chungli, Taoyuan	22,324.80	Manufacturing of networking products and	Owned
(Plant No. 2) ...........................................		electronics components
Guishan, Taoyuan	14,600.64	Manufacturing of AC motor drives, chip	Owned	(1)
(Plant No. 1) ...........................................		inductors, battery packs
Guishan, Taoyuan	69,507.06	Manufacturing of components and	Owned	(1)
(Plant No. 2) ...........................................		networking products
Tainan ........................................................	3,305.79	Manufacturing of UPSs	Leased	(1)
Neihu, Taipei ..............................................	16,999.75	Head executive office and research and	Owned
		development center
PRC
Shijie Town, Dongguan ..............................	124,122	Dormitory	Owned	(2)
Shijie Town, Dongguan	16,750	Manufacturing of magnetic components	Owned	(2)
(Plant No. 1)............................................		and DC/AC inverters
Shijie Town, Dongguan	35,550	Manufacturing of power supplies, adapters,	Owned	(3)
(Plant No. 2) ...........................................		DC/DC converters and electronic ballasts
Shijie Town, Dongguan	47,850	Manufacturing of monitors, DC fans and	Owned	(4)
(Plant No. 3 and Plant No. 4) .................		motors
Shijie Town, Dongguan	26,550	Manufacturing of networking components	Owned	(5)
(Plant No. 5) ...........................................		and ODM products
Wujiang .......................................................	121,316	Manufacturing of power related products,	Owned	(6)
		projection displays and electronic and
		networking components

(1) The Company has full title to the five owned manufacturing facilities, except one plant in Tainan, the renewable lease for which is due to expire on October 9, 2003.

(2) The land use rights to these parcels of land owned by Delta Electronics (Dongguan) Co., Ltd. will expire in 2045.

(3) The land use rights to these parcels of land owned by Delta Electronics Component (Dongguan) Co., Ltd. will expire in 2045.

(4) The land use rights to these parcels of land owned by Delta Electronics Industrial (Dongguan) Co., Ltd. will expire in 2048.

(5) The land use rights to these parcels of land owned by Delta Electronic Power (Dongguan) Co., Ltd. will expire in 2048.

(6) The land use rights to these parcels of land owned by Delta Video Display System (Wujiang) Co., Ltd., Delta Electronics (Jiangsu) Co., Ltd., Delta Electronics Components (Wujiang) Co., Ltd., and Delta Electro-optics (Wujiang) Co., Ltd. will expire in 2050.

ENVIRONMENTAL MATTERS

All industrial waste produced by the Company is treated in compliance with local government regulations before discharge. The Company has not been subject to any, nor is it aware of any pending or threatened, material fines or action against the Company involving non-compliance with any environmental regulation of the ROC, the PRC or any other jurisdictions.

LITIGATION

As is the case with many companies in the electronic component and devices industry, the Company from time to time receives communications from third parties asserting patent rights to the Company’s products and enters into discussions with such third parties as to their respective positions and the terms of any possible licenses in respect of such patent rights. Irrespective of the validity or the successful assertion of such claims, the Company could incur significant costs with respect to the defense thereof. Currently, the Company is involved in, or is aware of several threatened or pending legal proceedings against the Company or its Chairman but none of these is considered by it to be material.

INSURANCE

The Delta Group’s ROC and PRC facilities maintain property damage and business interruption insurance policies with insurance carriers in respect of buildings, equipment and certain inventories covering losses due to any accidental destruction or damage (subject to certain specific exclusions). The Company considers such insurance coverage to be adequate and in accordance with customary industry practice in the relevant locations.

Board of Directors and Management

The Board of Directors has ultimate responsibility for the management of the business and affairs of the Company. Members of the Board of Directors of the Company are elected by the stockholders of the Company. As of June 30, 2003, the Company’s Board of Directors is composed of nine directors. In addition, the Company two supervisors. The directors of the Company are serving three-year terms. Directors may serve consecutive terms and may be removed from office at any time by a resolution adopted at a general meeting of shareholders. Normally, all board members are elected at the same time, except where the posts of one-third or more of the directors are vacant, at which time a special meeting of shareholders will be convened to elect directors to fill the vacancies.

In accordance with ROC Company Law, supervisors are elected by the shareholders of the Company and cannot concurrently serve as directors, executive officers or other staff members of the Company. The Company currently has two supervisors, each of whom serves a three-year term. The supervisors’ duties and powers include, but are not limited to, investigation of the condition of the Company’s business, inspection of the Company’s corporate records, verification and review of financial statements presented by the Board of Directors, calling of shareholders’ meetings, representation of the Company in negotiations with its directors and giving notification, when appropriate, to the Board of Directors to cease acting in contravention of applicable law or regulation or in contravention of the Company’s Articles of Incorporation or the resolution of shareholders’ meeting.

The particulars of each director, supervisor and executive officer of the Company are as follows:

		Date of initial
Name	Position with the Company	appointment	Age
Directors
Bruce C H Cheng...................	Director, Chairman and Chief
	Executive Officer	April 1971	67
James K M Ng .......................	Director and President	May 2001	56
Raymond R Y Hsu .................	Director and Head of
	Components Business Group	May 2001	50
Mark Ko..................................	Director and Head of Power
	Systems Business Group	May 2001	55
	Director and President of
Ping Cheng ............................	Dongguan District	May 2001	41
Yenshan Chuang ...................	Director and Head of R&D	May 2003	68
Yancey Hai.............................	Director and Head of Global
	Strategic Planning	May 2003	54
Fred Chai Yan Lee.................	Director	May 2003	57
Yi Chiang Lo ..........................	Director	May 2003	64
Supervisor
E-Ying Hsieh ..........................	Supervisor	April 1987	68
Chung-Hsing Huang ..............	Supervisor	May 2003	49
Executive Officers
James K M Ng .......................	President	January 2000	56

Mr Bruce C H Cheng has been the Chairman, Chief Executive Officer and a director of the Company since April 1971. He also serves on the board of directors of various companies in Taiwan including DIH, DNI and DOI. Mr Cheng received a Bachelor of Science degree in Electrical Engineering from National Cheng-Kung University in Taiwan.

Mr James K M Ng joined the Company as President in January 2000. He has been the President of Delta Thailand since 1990. Mr Ng also serves on the board of directors of, amongst others, DIH and is the Chairman of Delta Thailand. Mr Ng received a Master of Electronics Engineering degree from the University of Southampton in the United Kingdom.

Mr Raymond R Y Hsu joined the Company in August 1972. He also serves on the board of directors of, amongst others, DIH. Mr Hsu received a Bachelor of Arts degree in Human Resources from Friends University in the United States.

Mr Mark Ko joined the Company in December 1988. He is also a director of, amongst others, DIH. Mr Ko received a Bachelor of Science degree in Control Engineering from National Chiao-Tung University in Taiwan.

Mr Ping Cheng joined the Company in 1992. He is also a director of, amongst others, DIH. Mr Cheng received a Bachelor of Business Administration degree from the California State University, Hayward in the United States.

Mr Yenshan Chuang joined the Company in 2002. He also serves on the board of directors of DOI. Mr Chuang received a Master of Science in Electrical Engineering degree from the University of Texas in the United States.

Mr Yancey Hai joined the Company in 1999. He also serves on the board of directors of, amongst others, DNI. Mr Hai received a Bachelor of Social Science degree in Sociology from the National Taiwan University in Taiwan.

Mr Fred Chai Yan Lee serves as the independent director of the Company in 2003. Mr Lee received a Ph.D from the Duke University, Durham, North Carolina in the United States.

Mr Yi Chiang Lo serves as the independent director of the Company in 2003. Mr Lo received a Bachelor of Science degree in Physics from the National Cheng-Kung University in Taiwan.

Mrs E-Ying Hsieh has been a supervisor of the Company since April 1987. She received a Bachelor of Arts degree in Accounting & Statistics from National Chung-Hsing University in Taiwan.

Mr Chung-Hsing Huang serves as a supervisor of the Company in 2003. Mr Huang received a Ph.D in Management from the University of Texas, Austin, in the United States.

Description of the Common Shares

The following is a summary of certain provisions of the Company’s Articles of Incorporation (the “Articles”), the ROC Securities and Exchange Law (the “Securities and Exchange Law”) and regulations promulgated thereunder, and the Company Law, all as currently in effect.

GENERAL

The Company’s authorized share capital is 1,680,000,000 Common Shares with a par value of NT$10 per Share of which 60,000,000 Common Shares have been reserved for exercise of warrants, preferred shares with warrants and bonds with warrants. The Company has capital of NT$14,802,730,000, representing common shares of 1,480,273,000 in registered form issued and outstanding as of July 8, 2003. Save as disclosed in this Offering Circular, no person has been granted any preferential right to subscribe for common shares in the Company.

The Company Law and the Securities and Exchange Law provide that any change in the issued share capital of a public company, such as the Company, requires approval of the Board of Directors, an amendment to its articles of incorporation (if it also involves a change in the authorized share capital of the public company which requires stockholder approval), and, in general, the approvals of the ROC SFC and the MOEA.

DIVIDENDS

Under the Company Law, except under certain limited circumstances, a ROC company is not permitted to distribute dividends or make any other distributions to stockholders at any time other than when it is generating net profits (“Earnings”). Before distributing a dividend or making any other distribution to stockholders from Earnings, a company must first apply such Earnings to its losses suffered in previous years, if any, pay all outstanding taxes and set aside the legal reserve referred to below.

Following approval of the financial statements, for the preceding fiscal year by the stockholders in an annual stockholders’ meeting, dividends are, unless otherwise stipulated under that company’s articles of incorporation, distributed in proportion to the number of shares owned by each stockholder as listed on the register of stockholders as at the relevant record date determined by the Board of Directors (“Annual Dividends”). Annual Dividends may be distributed either in cash or in the form of common shares or a combination thereof. The ratio between any cash dividend and stock dividend is proposed by the Board of Directors and is determined by the stockholders at a stockholders’ meeting. The practice of the Company during the past years with respect to the payment of cash dividends and stock dividends is referred to above in the section headed “Dividends”

The Company Law provides that a company is required to set aside a legal reserve in an amount equal to 10% of its Earnings (less losses, if any, suffered in previous years and applicable income taxes) until such time as its legal reserve equals its capital. The Articles further provide that, after paying all income taxes in accordance with ROC law, recovering any past losses, deducting the legal reserve and special reserve, if necessary, the remaining portion of Earnings together with the undistributed retained earning of the previous fiscal years may be allocated (subject to proposal by the Board of Directors and approval by stockholders) as follows:

(i) no more than 1% for remuneration to directors and supervisors;
(ii) at least 3% for employee bonuses; and

(iii) the balance thereof will be allocated for bonuses to stockholders, however, the bonuses distributed to stockholders above shall be in the amount at least 50% of the remaining Earnings, among which at least 5% shall be represented in the form of cash dividend.

DISTRIBUTION OF ADDITIONAL SHARES

In addition to dividends paid out of Earnings of a company, the Company Law also permits a company to make distributions to stockholders in the form of additional shares from reserves (including its legal reserve referred to above, any special reserve and capital reserve). However, in the case of distributions out of its legal reserve, the amount payable is limited to 50% of the total accumulated legal reserve and only if the accumulated legal reserve exceeds 50% of the capital of the company. (For information as to ROC taxes on cash and stock dividends, see “Taxation – ROC Taxation of NonResidents”.)

PRE-EMPTIVE RIGHTS AND ISSUE OF ADDITIONAL COMMON STOCK

The Company Law provides that between 10% and 15% of any new issue of shares of capital stock sold for cash must be offered first to the issuing company’s employees. In addition, the Securities and Exchange Law and the relevant securities regulations require that, if a public company listed on the TSE or whose shares are traded on the Gre Tai Securities Market intends to offer new shares for cash, at least 10% of such issue must be offered to the public except under certain circumstances or when exempted by the ROC SFC. This percentage can be increased by a resolution passed at a stockholders’ meeting, thereby reducing the number of new shares subject to the pre-emptive rights of existing stockholders. Unless the percentage of shares to be offered to the public is increased by stockholders, existing stockholders who are listed on the stockholders’ register as of the record date have a preemptive right to acquire the remaining 75% to 80% of the issue. The shares not subscribed for by the employees and stockholders at the expiration of the period for the exercise of their rights may be sold at the discretion of the Board of Director of the Company (subject to ROC law) to the public or specific persons. The pre-emptive rights provisions will not apply to offering of new shares through a private placement approved at a shareholders’ meeting.

MEETINGS OF STOCKHOLDERS

The ordinary meeting of stockholders of the Company is usually held in Taoyuan, Taiwan, ROC, as determined by the Board of Directors, within the six months of the end of previous fiscal years. Extraordinary meetings of stockholders may be convened by resolution of the Board of Directors whenever they consider it necessary or by stockholders under certain circumstances. Extraordinary meetings of stockholders may also be convened by Supervisor of the Company. Notice in writing of ordinary and extraordinary stockholders’ meetings stating the place, time and purpose thereof must be dispatched to each stockholder of the Company at least 30 days and 15 days, respectively, prior to the date set for the meeting.

VOTING RIGHTS

A holder of common shares has one vote for each share of common stock. Except as otherwise provided by law, a stockholders’ resolution is passed or adopted if voted in favor by the majority present at a stockholders’ meeting at which a quorum is present (being holders of more than 50% of the issued and outstanding common stock present in person or by proxy). Election of Directors and Supervisors by stockholders is carried out on a cumulative voting basis.

When one company and another company hold more than one-third of the total outstanding shares in each other, the votes cast by one company in the shareholders’ meeting of the other company

shall not exceed one-third of the total number of the voting shares (or one third of the total amount of the equity capital of the other company), in case that both companies are aware of the fact of such relationship, provided, however, that such limitation will not apply to the votes of new shares issued by way of the capitalization of the retained earnings or the legal reserves.

Notwithstanding the above, in order to approve certain major corporate actions, including any amendment to the Articles (which is required for, inter alia, any increase in authorized share capital), the dissolution or amalgamation of a company, the transfer of all or an important part of its business or its properties, the taking over of the whole of the business or properties of any other company which would have a significant impact on the acquiring company’s operations, or the distribution of any stock dividend, the Company Law provides that a resolution has to be passed at a meeting of the stockholders with a quorum of holders of at least two-thirds of all issued and outstanding common stock at which the majority present vote in favor thereof. Alternatively, in the case of a public company, such as the Company, such a resolution may be approved by the holders of at least two-thirds of the common stock represented at a meeting of stockholders with a quorum of holders of at least a majority of issued and outstanding common stock.

A stockholder may be represented at an ordinary or extraordinary meeting by proxy. A valid proxy form must be delivered to the Company at least five days prior to the date fixed for the ordinary or extraordinary meeting.

REGISTRATION OF STOCKHOLDERS AND RECORD DATES

The Company maintains the register of stockholders of the Company at its office in Taipei, Taiwan, ROC, and enters transfers of Common Shares in the register of stockholders upon presentation of the certificates in respect of the Common Shares transferred accompanied by other required documents.

As mentioned above, the record date for an Annual Dividend will be determined and announced by the Company. For the purpose of determining the holders of common shares entitled to Annual Dividends and other rights pertaining to the common shares, the Company shall, by giving advance public notice, set a record date and close the register of stockholders for a specified period (sixty days, thirty days and five days immediately before the date of the ordinary stockholders’ meeting, each extraordinary stockholders’ meeting and the record date, respectively).

ANNUAL FINANCIAL STATEMENTS

Under the Company Law, ten days before the ordinary stockholders’ meeting, the Company’s annual audited financial statements must be available at the principal office of the Company in Taipei for inspection by the stockholders.

TRANSFERS OF COMMON STOCK

Under the Company Law, the transfer of common stock (in registered form) is effected by endorsement of the transferor’s seal or chop on the back of the relevant share certificate and delivery of such share certificate to the transferee. In order to assert stockholders’ rights against the Company, the transferee must have his name and address registered on the Company’s register of stockholders. Stockholders are required to register their respective specimen seal or chop with the Company. The settlement of trading of the common stock is normally carried out on the book-entry system maintained by Taiwan Securities Central Depository Co., Ltd.

TRANSFER RESTRICTIONS

The Company’s directors, supervisors, managers and shareholders holding more than 10% of the Company’s shares are required to report any changes in their shareholding to the Company on a monthly basis. In addition, the number of shares that they can sell or transfer on the Taiwan Stock Exchange on a daily basis is limited by ROC law. Further, they may sell or transfer the Company’s shares on the Taiwan Stock Exchange only after reporting to the ROC SFC at least three days before the transfer, provided that such reporting is not required if the number of shares transferred does not exceed 10,000.

ACQUISITION BY THE COMPANY OF ITS OWN COMMON STOCK

With minor exceptions, the Company cannot acquire its own common stock. Under the ROC Company Law, any shares purchased by the company must be sold at the current market price within 6 months from the purchase.

Under the ROC Securities and Exchange Law, the Company may, by resolution adopted by a majority of the Company’s Board of Directors at a meeting where more than two-thirds of the directors are present, repurchase the Company’s shares on the Taiwan Stock Exchange or by a tender offer in accordance with the Securities and Futures Commission procedures for the following purposes:

for delivery upon conversion of bonds with warrants, preferred shares with warrants, convertible bonds and convertible preferred shares or certificates of warrants issued by the Company into capital stock;
to transfer to the Company’s employees; or
if necessary, to maintain the Company’s credit and the Company shareholders’ equity, provided that the shares so repurchased shall be cancelled thereafter.

The total shares repurchased by the Company may not exceed 10% of the Company’s total issued and outstanding shares. In addition, the total cost of the purchased shares may not exceed the aggregate amount of the Company’s retained earnings, any premium from share issuance and the realized portion of its capital reserve. Common Shares repurchased in the first two instances mentioned above are to be transferred to the intended transferees within three years from the repurchase, failing which they will be cancelled and the Company is required to complete an amended registration for the cancellation. In the third instance mentioned above, the shares repurchased by the Company must be cancelled within six months after the repurchase. The shares repurchased by the Company may not be pledged or hypothecated. In addition, the Company may not exercise any of the shareholder’s rights attached to these shares. The Company’s affiliates, as defined in Article 369-1 of the ROC Company Law, directors, supervisors, managers and their respective spouses and minor children and nominees, are prohibited from selling the Company’s shares until the Company’s repurchase period has lapsed.

LIQUIDATION RIGHTS

In the event of the liquidation of the Company, the assets remaining after payment of all debts, liquidation expenses, taxes and distributions to holders of preference shares, if any, will be distributed pro rata to the stockholders in accordance with the Company Law.

Changes In Issued Share Capital

The following table sets out the changes in the issued share capital of the Company since January 1,1994:

Date of issue August 14, 1994 ................................ December 28, 1994(1)........................ July 16, 1995 ..................................... December 28, 1995(1)........................ July 28, 1996 ..................................... December 28, 1996(1)......................... July 28, 1997 ..................................... July 28, 1997(1).................................. January 8, 1998(1).............................. July 8, 1998 ....................................... July 8, 1998(1).................................... December 30, 1998(1)........................ July 20, 1999 ..................................... July 20, 1999(1).................................. December 29, 1999 ........................... February 29, 2000 ............................. July 22, 2000...................................... July 22, 2000...................................... December 29, 2000............................ July 9, 2001........................................ July 2, 2002........................................ June 28, 2003	Number of Common Shares issued 42,298,504 760,671 51,439,329 210,250 63,989,750 522,704 78,477,296 5,702,490 10,754,635 100,542,875 2,685,771 1,222,687 123,391,542 49,234,144 13,065,175 825,233 204,575,448 1,446,384 169,046 234,844,570 198,419,000 92,394,000	Type of issue Stock dividend, employee bonus Issuance upon conversion of convertible bonds Stock dividend, employee bonus Issuance upon conversion of convertible bonds Stock dividend, employee bonus Issuance upon conversion of convertible bonds Stock dividend, employee bonus Issuance upon conversion of convertible bonds Issuance upon conversion of convertible bonds Stock dividend, employee bonus Issuance upon conversion of convertible bonds Issuance upon conversion of convertible bonds Stock dividend, employee bonus Issuance upon conversion of convertible bonds Issuance upon conversion of convertible bonds Issuance upon conversion of convertible bonds Stock dividend, employee bonus Issuance upon conversion of convertible bonds Issuance upon conversion of convertible bonds Stock dividend, employee bonus Stock dividend, employee bonus Stock dividend, employee bonus	Total number of issued Common Shares after the issue 245,600,000 246,360,671 297,800,000 298,010,250 362,000,000 362,522,704 441,000,000 446,702,490 457,457,125 558,000,000 560,685,771 561,908,458 685,300,000 734,534,144 747,599,319 748,424,552 953,000,000 954,446,384 954,615,430 1,189,460,000 1,387,879,000 1,480,273,000

(1) Date on which Common Shares are issued against entitlement certificates.

The net income for Earnings per Share is set out elsewhere in this Offering Circular in respect of both the audited consolidated financial statements for the three years ended December 31, 2000, 2001 and 2002 and the unaudited non-consolidated financial statements for the three-month periods ended March 31, 2002 and 2003.

Terms and Conditions of the Notes

The following terms and conditions (except for the sentences in italics) will be endorsed on the Certificates issued in respect of the Notes:

The issue of US$185,000,000 Zero Coupon Convertible Notes Due 2008 (the ‘‘Notes’’, which shall include any additional Notes issued pursuant to the option to increase the principal amount of the Notes described in the Trust Deed (as defined below)) of Delta Electronics, Inc. (the ‘‘Company’’) was authorised by a resolution of the Board of Directors of the Company adopted on 25 June 2003. The Notes are constituted by a trust deed (the ‘‘Trust Deed’’) dated 30 July 2003, and made between the Company and The Bank of New York (the ‘‘Trustee’’, which term shall include all persons for the time being trustee or trustees under the Trust Deed) for the holders of the Notes. The Company has entered into a paying and conversion agency agreement (the ‘‘Agency Agreement’’) dated 30 July 2003 with the Trustee, The Bank of New York as registrar and principal paying, conversion and transfer agent and the other paying, conversion and transfer agents appointed thereunder (together the “Agents’’ in relation to the Notes). The registrar, principal paying and conversion agent, paying agents, conversion agents and transfer agents and replacement agent for the time being are referred to below as the ‘‘Registrar’’, the ‘‘Principal Agent’’, the ‘‘Paying Agents’’ (which expression shall include the Principal Agent), the ‘‘Conversion Agents’’ (which expression shall include the Principal Agent), the ‘‘Transfer Agents’’ (which expression shall include the Registrar) and the ‘‘Replacement Agent’’, respectively. The statements in these Terms and Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. Unless otherwise defined, terms used in these Conditions have the meaning specified in the Trust Deed. Copies of the Trust Deed and the Agency Agreement are available for inspection during normal business hours at the registered office of the Trustee being at the date hereof at One Canada Square, 48[th] Floor, London E14 5AL, England and at the specified offices of each of the Agents. The holders of the Notes are entitled to the benefit of the Trust Deed and are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the Agency Agreement.

1 Status

The Notes constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 3) unsecured obligations of the Company and rank pari passu without any preference or priority among themselves and (subject as aforesaid) shall at all times rank at least equally with all other present and future direct, unconditional, unsubordinated and unsecured obligations of the Company (other than any obligation preferred by mandatory provisions of law).

2 Form, denomination and title

(A) Form and denomination

The Notes are issued in registered form in the denominations of US$1,000 each. A note certificate (each a ‘‘Certificate’’) will be issued to each holder of the Notes in respect of its registered holding of the Notes. Each Note and each Certificate will be serially numbered with an identifying number which will be recorded on the relevant Certificate and in the register of holders of the Notes which the Company will procure to be kept by the Registrar.

The Notes will be represented by a Global Certificate which will be deposited with a common depositary for, and registered in the name of a nominee of, Euroclear and Clearstream, Luxembourg.

Except in the limited circumstances described in the Global Certificate, owners of interests in the Notes represented by the Global Certificate will not be entitled to receive definitive Certificates in respect of their individual holdings of the Notes. The Notes are not issuable in bearer form.

(B) Title

Title to the Notes passes only by transfer and registration in the register of holders of the Notes. The holder of any Note will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, or the theft or loss of, the Certificate issued in respect of it) and no person will be liable for so treating the holder. In these Terms and Conditions, ‘‘holder of the Notes’’, ‘‘Noteholder’’ and (in relation to a Note) ‘‘holder’’, all mean the person in whose name a Note is registered.

3 Negative pledge

So long as any of the Notes remains outstanding (as defined in the Trust Deed), the Company shall not and shall not permit any of its Subsidiaries (as hereinafter defined) to create or permit to be outstanding any mortgage, charge, pledge, lien or other form of encumbrance or security interest (an ‘‘Encumbrance’’) upon the whole or any part of its undertaking, property, assets or revenues, present or future, to secure for the benefit of the holders of any International Investment Securities (as hereinafter defined) (i) payment of any sum due in respect of any such International Investment Securities; (ii) any payment under any guarantee of any such International Investment Securities; or (iii) any payment under any indemnity or other like obligation relating to any such International Investment Securities without, in any such case, at the same time according to the Notes either the same security as is granted to or is outstanding in respect of such International Investment Securities, guarantee, indemnity or other like obligation or such other security as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the holders of the Notes.

For this purpose, the term ‘‘International Investment Securities’’ means bonds, debentures, notes, or other similar investment securities of the Company or any other person evidencing indebtedness with a maturity of not less than one year which (a) either (i) are by their terms payable, or confer a right to receive payment, in any currency other than the currency of the country of incorporation of the issuer or (ii) are denominated or payable in the currency of the country of incorporation of the issuer and more than 50 per cent. of the aggregate principal amount thereof is initially distributed outside the country of incorporation of the issuer by or with the authorisation of the issuer thereof, and (b) are for the time being, or are capable of being, quoted, listed, ordinarily dealt in or traded on any stock exchange, quotation system or over-the-counter or other similar securities market outside the country of incorporation of the issuer.

“Subsidiary” means any corporation or other business entity (i) 50 per cent. or more of the common shares or other equity of which is owned, directly or indirectly, by the Company and (ii) either (a) the net sales of which, as shown by the accounts (consolidated in the case of an entity which itself has subsidiaries) of such entity upon which the latest audited consolidated accounts of the Company have been based, are at least 10 per cent. of the net sales of the Company and its subsidiaries, if any, as shown by such audited consolidated accounts or (b) the gross assets of which, as shown by the aforementioned accounts, are at least 10 per cent. of the gross assets of the Company and its subsidiaries, if any, as shown by such latest audited consolidated accounts.

4 Transfers of Notes; Issue of certificates

(A) Transfers

A Note may be transferred by depositing the Certificate issued in respect of that Note, with the form of transfer on the back duly completed and signed, at the specified office of the Registrar or any of the other Agents.

Transfers of interests in the Notes evidenced by the Global Certificate will be effected in accordance with the rules of the relevant clearing systems.

(B) Delivery of new certificates

Each new Certificate to be issued upon transfer of the Notes will, within three business days of receipt by the relevant Agent of the form of transfer, be mailed by uninsured mail at the risk of the holder entitled to the Notes to the address specified in the form of transfer. For the purposes of this Condition 4, ‘‘business day’’ shall mean a day (other than a Saturday or Sunday) on which banks are open for business in the city in which the specified office of the Agent with whom a Certificate is deposited in connection with a transfer is located.

Owners of interests in the Notes represented by the Global Certificate will not be entitled to receive definitive Certificates in respect of their individual holdings of the Notes except in the limited circumstances described in the Global Certificate.

Where some but not all the Notes in respect of which a Certificate is issued are to be transferred, converted or redeemed, a new Certificate in respect of the Notes not so transferred, converted or redeemed will, within three business days of deposit or surrender of the original Certificate with or to the relevant Agent, be mailed by uninsured mail at the risk of the holder of the Notes not so transferred, converted or redeemed to the address of such holder appearing on the register of holders of the Notes.

(C) Formalities free of charge

Registration of transfer of the Notes will be effected without charge by or on behalf of the Company or any of the Agents, subject to payment (or the giving of such indemnity as the Company or any of the Agents may require) in respect of any tax or other governmental charges which may be imposed in relation to it.

(D) No transfer periods

No holder of the Notes may require the transfer of a Note to be registered (i) during the period of 15 days ending on the due date for any payment of principal on the Note, (ii) after such Note has been selected for redemption pursuant to Condition 7(B), (iii) after the Certificate in respect of such Note has been deposited for conversion pursuant to Condition 5, or (iv) on exercise of the put option of the holder of the Notes pursuant to Condition 7(D) or 7(E).

(E) Regulations

All transfers of the Notes and entries on the register of holders of the Notes will be made subject to the detailed regulations concerning transfer of the Notes set forth in the Agency Agreement. The regulations may be changed by the Company, with the prior written approval of the Trustee and the Registrar. A copy of the current regulations will be mailed (at the Company’s expense) by the Registrar to any holder of the Notes who asks for one.

5 Conversion

The Company shall, within five Trading Days after the Conversion Date, issue and deliver the Shares converted from the Notes to the converting Noteholder or its designee.

The Trust Deed provides, in summary, that the term ‘‘Shares’’ or ‘‘Common Shares’’ means, when used to refer to the class or classes of the Company’s capital stock into which the Notes are convertible and when used in certain other instances, only the Company’s common shares, NT$10 par value per share, but that when used elsewhere, including in Condition 5(C), such term also includes shares of any other class or classes of the share capital of the Company authorised after the date of the Trust Deed which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation or winding-up of the Company.

(A) Conversion Right

(i) Conversion Period : The right of a Noteholder to convert any Note into Shares (as defined in the Trust Deed) is called the ‘‘Conversion Right’’. Subject to and upon compliance with the provisions of this Condition, the Conversion Right attaching to any Note may be exercised, at the option of the holder thereof, so that the Conversion Date (as defined in Condition 5(B)) in respect of such exercise occurs at any time on or after 29 August 2003 and prior to the close of business (at the place where such Note is deposited for conversion) on 30 June 2008 or if such date shall not be a business day at such place, on the immediately preceding business day at such place (but in no event thereafter), or, if such Note shall have been called for redemption prior to 30 June 2008, then up to the close of business (at the place aforesaid) on the date five business days (as defined in Condition 5(B)) prior to the date fixed for redemption thereof or if such date shall not be a business day at such place, on the immediately preceding business day at such place (the ‘‘Conversion Period’’); provided however, that the Conversion Right during any Closed Period shall be suspended and the Conversion Period shall not include any such Closed Period. ‘‘Closed Period’’ shall mean (i) any period during which under the laws of the ROC (as defined in the Trust Deed) the Company shall close its shareholders’ register, which period includes 60 days prior to the date of the annual general meeting of shareholders, 30 days prior to a special shareholders’ meeting, five days prior to a record date or such other periods determined by ROC law applicable from time to time; (ii) the period from the date six (6) Trading Days (as defined in Condition 7(B)) following the Company’s annual general meeting in which annual dividends distribution is approved and declared to the record date (and the relevant closure of the shareholders’ register) for determining the identity of shareholders entitled to receive annual dividend distribution or other rights or benefits in any one year to the date of such record date for that year; (iii) the period from (x) the 15[th] Trading Day before the closure of the Company’s shareholders’ register for the purpose of determining the entitlement of shareholders to subscribe new shares in a rights offering by the Company to (y) the relevant record date for such determination and (iv) such other closed period as may be required by ROC law. The Company shall procure that holders of the Notes are given timely (and if practicable timely prior) notice in accordance with Condition 14, of any Closed Period.

Under current ROC law, regulation and policy, PRC persons are not permitted to hold or convert the Notes or to register as a shareholder of the Company. Under current ROC law, ‘‘PRC person’’ means an individual holding a passport issued by the PRC, a resident of any area of China under the effective control or jurisdiction of the PRC (but not including a special administrative region of the PRC such as Hong Kong or Macau, if so excluded by applicable laws of the ROC), any agency or instrumentality of the PRC and any corporation, partnership or other entity organised under the laws of any such area or controlled or beneficially owned by any such person, resident, agency or instrumentality.

Under current ROC law, a non-ROC converting holder of the Notes when exercising his conversion right to convert the Notes into Shares is required to appoint a local agent also referred to as a Tax Guarantor, in the ROC to file tax returns and make tax payments on its behalf. A non-ROC converting holder is also required to appoint a local agent in the ROC with such qualifications as are set by the ROC SFC, to open a securities trading account with a local brokerage firm and a New Taiwan dollar bank account, pay ROC withholding taxes, remit funds, exercise shareholders’ rights and perform such other matters as may be designated by such converting holder of the Notes on behalf of and as agent for such person. In addition, such non-ROC converting holder of the Notes must also appoint a custodian bank to hold the securities and cash proceeds for safekeeping, to make confirmation and settlement, and report all relevant information. Under existing ROC laws and regulations, without such accounts, such converting holder of the Notes would not be able to hold or to sell or otherwise transfer the Shares into which the Notes may have been converted, on the TSE or otherwise.

(ii) Number of Shares issuable on conversion : The number of Shares to be issued upon conversion of any Note will be determined by dividing the principal amount of the Note (translated into New Taiwan dollars at the fixed rate of NT$34.35 = US$1.00) by the Conversion Price (as hereinafter

defined) in effect on the Conversion Date. If more than one Note shall be deposited for conversion at any one time by the same holder of the Notes, the number of Shares to be issued upon conversion thereof will be calculated on the basis of the aggregate principal amount of the Notes so deposited. Fractions of Shares will not be issued on conversion, and cash adjustments will not be made in respect thereof by the Company. Notwithstanding the foregoing, in the event of a consolidation or reclassification of Shares by operation of law or otherwise occurring after 10 July 2003, the Company will upon conversion of the Notes pay in US dollars a sum equal to such portion of the principal amount of the Notes deposited for conversion as corresponds to any fraction of a Share not issued as aforesaid if such sum exceeds US$10. For the purpose of calculating the amount of such payment, the Company shall use the exchange rate referred to above in this Condition 5(A)(ii).

(iii) Initial Conversion Price : The price at which Shares will be issued upon conversion (the ‘‘Conversion Price’’) will initially be NT$55 per Share, but will be subject to adjustment in the manner provided in Conditions 5(C) and 5(D).

(iv) Revival on default : Notwithstanding the provisions of Condition 5(A)(i), if the Company shall default in making payment in full in respect of any Note which shall have been called for redemption prior to 30 June 2008 or the date fixed for redemption thereof, the Conversion Right attaching to such Note will continue to be exercisable up to and including the close of business (at the place where the Note is deposited for conversion) on the date upon which the full amount of the monies payable in respect of such Note has been duly received by the Trustee or the Principal Agent and notice of such receipt has been duly given to the holders of the Note.

(B) Conversion Procedure

(i) Exercise Procedure : To exercise the Conversion Right attaching to any Note, the holder thereof must complete, execute and deposit at his own expense between 9:00 am and 3:00 pm on any business day during the Conversion Period at the specified office of a Conversion Agent outside the ROC at which the Note is presented for conversion a notice of conversion (a ‘‘Conversion Notice’’) in duplicate, duly completed and signed, in the then current form obtainable from the specified office of any Conversion Agent, together with the Certificate relating to the relevant Notes and any certificates and other documents as may be required under the law of the ROC or the jurisdiction in which such Conversion Agent shall be located. The Conversion Notice shall contain, inter alia , an appointment of a local agent. A Conversion Notice once deposited may not be withdrawn without the consent in writing of the Company. The price at which such Note will be converted will be the Conversion Price in effect on the Conversion Date.

Noteholders who deposit a Conversion Notice during a Closed Period will not be permitted to convert their Notes until the Trading Day following the last day of the Closed Period which (if all other conditions to convert have been fulfilled) will be the Conversion Date for such Notes. Such Noteholders will not be registered as holders of Shares until the Conversion Date.

For the purposes of this Condition 5, ‘‘business day’’ shall mean a day (other than a Saturday or Sunday) on which commercial banks are open for business in London and the city in which the specified office of the Conversion Agent with whom a Conversion Notice is deposited in connection with the conversion is located.

(ii) Taxes and Expenses; Deposit Date and Conversion Date : Together with the Conversion Notice, the holder of the Note must pay to the relevant Conversion Agent all stamp, issue, registration and similar taxes and duties (if any) arising on conversion in the country in which the Note is deposited for conversion, or payable in any jurisdiction consequent upon the issue or delivery of Shares or any other property or cash upon conversion to or to the order of a person other than the converting holder of the Note. Except as aforesaid, the Company will pay the expenses arising in the ROC on the issue of Shares on conversion of the Note and all charges of the Conversion Agents in connection therewith as

provided in the Agency Agreement. The date on which any Note and the Conversion Notice (in duplicate) relating thereto are deposited with a Conversion Agent and the payments, if any, required to be paid by the holder of the Note are made is hereinafter referred to as the ‘‘Deposit Date’’. The ‘‘Conversion Date’’ applicable to a Note shall mean the next day following the Deposit Date, which day both is a Trading Day (as defined in Condition 7(B)) and occurs during the Conversion Period.

(iii) Holder of record : With effect from the opening of business in the ROC on the Conversion Date, the Company will deem the converting holder of the Notes as indicated in the Conversion Notice to have become the holder of record of the number of Shares to be issued upon such conversion (disregarding any retroactive adjustment of the Conversion Price referred to below prior to the time such retroactive adjustment shall have become effective) and at such time, subject to Condition 5(B)(v), the rights of such converting holder of the Notes as a holder of the Notes with respect to the Notes deposited for conversion shall cease (except rights arising under Conditions 5(B)(iv) and 5(B)(vi)).

(iv) Availability of Shares : The Company shall, for the benefit of holders of the Notes, ensure that sufficient Shares, which are listed on the Taiwan Stock Exchange (“TSE”), are available as soon as possible and in any event within five Trading Days (or such number of Trading Days as stipulated by the relevant laws and regulations applicable from time to time) after the applicable Conversion Date.

(v) Delivery of Shares : On the Conversion Date the Company will register the converting holder of the Notes in the Company’s register of shareholders as the owner of the number of Shares to be issued pursuant to Condition 5(B)(iii) upon conversion of such Notes and, subject to any applicable limitations then imposed by ROC laws and regulations, the Company shall deliver in accordance with the Trust Deed and a request made in the relevant Conversion Notice as soon as practicable, and in any event within five Trading Days (subject to applicable law) following the Conversion Date, for the benefit of the converting holder, the following:

(a) the relevant Shares, through book-entry transfer to an account registered in the name of the converting holder or its designee at Taiwan Securities Central Depositary Co., Ltd.; and
(b) any other property or cash (including, without limitation, cash payable pursuant to Condition 5(A)(ii)) required to be delivered upon conversion; and
(c) such assignments and other documents (if any) as may be required by law to effect the delivery thereof.

(vi) Retroactive adjustment of Conversion Price : If the Conversion Date in relation to any Note shall be on or after a date with effect from which an adjustment to the Conversion Price takes retroactive effect pursuant to any of the provisions referred to in Condition 5(C) and the Trust Deed and the relevant Conversion Date falls on a date when the relevant adjustment has not been reflected in the Conversion Price, Clause 5(B)(v) shall be applied mutatis mutandis to such number of Shares as is equal to the excess of the number of Shares that would have been required to be issued on conversion of such Note if the relevant retroactive adjustment had been made as at the said Conversion Date over the number of Shares previously issued pursuant to such conversion, and in such event and in respect of such number of Shares references in Condition 5(B)(iii) and (v) to the Conversion Date shall be deemed to refer to the date upon which such retroactive adjustment becomes effective (disregarding the fact that it becomes effective retroactively). Fractions of Shares will not be issued and no cash adjustment will be made in respect thereof.

(vii) Dividends and other entitlements : To the extent permitted under the laws of the ROC, Shares received by the converting Noteholders will be entitled to the annual dividend distributions or other benefits accruing to such Shares and approved by the immediately preceding annual general meeting of shareholders if the Conversion Date in respect of the conversion of such Notes is on a day which is at least three Trading Days prior to the Company’s notification to the TSE in respect of a record

date (and the relevant closure of the shareholders’ register) for determining the identity of shareholders who are entitled to such distributions in that year, and if any of those three Trading Days falls within a Closed Period, such Conversion Date is on or before the Trading Day immediately preceding the commencement of the relevant Closed Period. The Company shall give the Noteholders not less than 14 days’ prior notice of its intention to make such notification to the TSE, which notice shall indicate the proposed date of such notification to the TSE.

(viii) Conversion Agents : The Company reserves the right, subject to the provisions of the Agency Agreement, at any time to vary or terminate the appointment of any Conversion Agent and to appoint further or other Conversion Agents, provided that the Company will at all times maintain Conversion Agents having specified offices in London and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of the exchange so require, in Luxembourg also. Notice of any such termination or appointment and of any changes in the specified offices of the Conversion Agents will be given promptly by the Company to the holders of the Notes in accordance with Condition 14.

(C) Adjustments to Conversion Price

The Conversion Price shall be subject to adjustment as follows:

(i) Free distribution, bonus issue, division, consolidation and reclassification of Shares : If the Company shall (a) make a free distribution of Shares, (b) make a bonus issue of its Shares, (c) divide its outstanding Shares, (d) consolidate its outstanding Shares into a smaller number of Shares, or (e) reclassify any of its Shares into other securities of the Company, then the Conversion Price shall be appropriately adjusted so that the holder of any Note, the Conversion Date in respect of which occurs after the coming into effect of the adjustment described in this Condition 5(C)(i), shall be entitled to receive on exercise of the Conversion Right the number of Shares and/or other securities of the Company which he would have held or have been entitled to receive after the happening of any of the events described above had such Note been converted immediately prior to the happening of such event (or, if the Company has fixed a prior record date for the determination of shareholders entitled to receive any such free distribution or bonus issue of Shares or other securities issued upon any such division, consolidation or reclassification, immediately prior to such record date), but without prejudice to the effect of any other adjustment to the Conversion Price made with effect from the date of the happening of such event (or such record date) or any time thereafter.

Effective date of adjustment : An adjustment made pursuant to this Condition 5(C)(i) shall become effective immediately on the relevant event referred to in this Condition 5(C)(i) becoming effective or, if a record date is fixed therefor, immediately after such record date; provided that in the case of a free distribution or bonus issue of Shares which must, under applicable laws of the ROC, be submitted for approval to a general meeting of shareholders or be approved by a meeting of the Board of Directors of the Company before being legally paid or made, and which is so approved after the record date fixed for the determination of shareholders entitled to receive such distribution or issue, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date.

(ii) Declaration of dividend in Shares : If the Company shall declare a dividend in Shares then the Conversion Price in effect on the date when such dividend is declared (or, if the Company has fixed a prior record date for the determination of shareholders entitled to receive such dividend, on such record date), shall be adjusted in accordance with the following formula:

N NCP = OCP × (N + n)

where:

NCP = the Conversion Price after such adjustment.

OCP = the Conversion Price before such adjustment.

N = the number of Common Shares outstanding, at the time of issuance of such dividend and/or distribution (or at the close of business in Taipei on such record date as the case may be).
n = the number of Common Shares to be distributed to the shareholders as a dividend and/or distribution.

Effective date of adjustment : An adjustment made pursuant to this Condition 5(C)(ii) shall become effective immediately on the relevant event referred to in this Condition 5(C)(ii) becoming effective or, if a record date is fixed therefor, immediately after such record date; provided that in the case of a dividend in Shares which must, under applicable laws of the ROC, be submitted for approval to a general meeting of shareholders of the Company before being legally paid or made, and which is so approved after the record date fixed for the determination of shareholders entitled to receive such dividend, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date.

(iii) Concurrent adjustment events : If the Company shall declare a dividend in, or make a free distribution or bonus issue of, Shares, which dividend, issue or distribution is to be paid or made to shareholders as of a record date which is also: (a) the record date for the issue of any rights or warrants which requires an adjustment of the Conversion Price pursuant to Condition 5(C)(iv) or 5(C)(v);

(b) the day immediately before the date of issue of any securities convertible into or exchangeable for Shares which requires an adjustment of the Conversion Price pursuant to Condition 5(C)(vii);
(c) the day immediately before the date of issue of any Shares which requires an adjustment of the Conversion Price pursuant to Condition 5(C)(viii) or (if applicable) the record date for the determination of stock dividend entitlement as referred to in Condition 5(C)(viii);
(d) the day immediately before the date of issue of any rights, options or warrants which requires an adjustment of the Conversion Price pursuant to Condition 5(C)(ix); or
(e) determined by the Company and notified by the Company to the Trustee in writing to be the relevant date for an event or circumstance which requires an adjustment to the Conversion Price pursuant to Condition 5(C)(x),

then (except where such dividend, bonus issue or free distribution gives rise to a retroactive adjustment of the Conversion Price under Condition 5(C)(i) or 5(C)(ii)) no adjustment of the Conversion Price in respect of such dividend, bonus issue or free distribution shall be made under this Condition 5(C)(iii), but in lieu thereof an adjustment shall be made under Condition 5(C)(iv), 5(C)(v), 5(C)(vii), 5(C)(viii) or 5(C)(ix) (as the case may require) by including in the denominator of the fraction described therein the aggregate number of Shares to be issued pursuant to such dividend, bonus issue or free distribution.

(iv) Rights issues to shareholders : If the Company shall grant, issue or offer to the holders of Shares rights entitling them to subscribe for or purchase Shares:

(a) at a consideration per Share receivable by the Company (determined as provided in Condition 5(C)(xiii)) which is fixed on or prior to the record date mentioned below and is

less than the Current Market Price (as defined in Condition 5(C)(xii)) per Share at such record date; or

(b) at a consideration per Share receivable by the Company which is fixed after the record date mentioned below and is less than the Current Market Price per Share on the date the Company fixes the said consideration,

then the Conversion Price in effect (in a case within (a) above) on the record date for the determination of shareholders entitled to receive such rights or (in a case within (b) above) on the date the Company fixes the said consideration shall be adjusted in accordance with the following formula:

N + v NCP = OCP × N + n

where:

NCP and OCP have the meanings ascribed thereto in Condition 5(C)(ii).

N = the number of Shares outstanding (having regard to Condition 5(C)(xiv)) at the close of business in the ROC (in a case within (a) above) on such record date or (in a case within (b) above) on the date the Company fixes the said consideration.
n = the number of Shares initially to be issued upon exercise of such rights at the said consideration being (aa) the number of Shares which underwriters have agreed to underwrite as referred to below or, as the case may be, (bb) the number of Shares for which applications are received from shareholders as referred to below save to the extent already adjusted for under (aa).
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Condition 5(C)(xiii)) would purchase at such Current Market Price per Share specified in (a) or, as the case may be, (b) above.

Effective date of adjustment: Subject as provided below, such adjustment shall become effective immediately after the latest date for the submission of applications for such Shares by shareholders entitled to the same pursuant to such rights or (if later) immediately after the Company fixes the said consideration but retroactively to immediately after the record date mentioned above.

Rights not taken up by shareholders: If, in connection with a grant, issue or offer to the holders of Shares of rights entitling them to subscribe for or purchase Shares, any Shares which are not subscribed for or purchased by the persons entitled thereto are underwritten by other persons prior to the latest date for the submission of applications for such Shares, an adjustment shall be made to the Conversion Price in accordance with the above provisions which shall become effective immediately after the date the underwriters agree to underwrite the same or (if later) immediately after the Company fixes the said consideration but retroactively to immediately after the record date mentioned above.

If, in connection with a grant, issue or offer to the holders of Shares of rights entitling them to subscribe for or purchase Shares, any such Shares which are not subscribed for or purchased by the underwriters who have agreed to underwrite as referred to above or by the shareholders entitled thereto (or persons to whom shareholders have transferred such rights) who have submitted applications for such Shares as referred to above are offered to and/or subscribed by others, no further adjustment shall be made to the Conversion Price by reason of such offer and/or subscription.

(v) Warrants issued to shareholders : If the Company shall grant, issue or offer to the holders
of Shares warrants entitling them to subscribe for or purchase Shares:
(a) at a consideration per Share receivable by the Company (determined as provided in Condition 5(C)(xiii)) which is fixed on or prior to the record date for the determination of

shareholders entitled to receive such warrants and is less than the Current Market Price per Share at such record date; or

(b) at a consideration per Share receivable by the Company which is fixed after the record date mentioned above and is less than the Current Market Price per Share on the date the Company fixes the said consideration,

then the Conversion Price in effect (in a case within (a) above) on the record date for the determination of shareholders entitled to receive such warrants or (in a case within (b) above) on the date the Company fixes the said consideration shall be adjusted in accordance with the following formula:

N + v NCP = OCP × N + n

where:

NCP and OCP have the meanings ascribed thereto in Condition 5(C)(ii) above.

N = the number of Shares outstanding (having regard to Condition 5(C)(xiv)) at the close of business in the ROC (in a case within (a) above) on such record date or (in a case within (b) above) on the date the Company fixes the said consideration.
n = the number of Shares to be issued upon exercise of such warrants at the said consideration which, where no applications by shareholders entitled to such warrants are required, shall be based on the number of warrants issued. Where applications by shareholders entitled to such warrants are required, the number of such Shares shall be calculated based upon (aa) the number of warrants which underwriters have agreed to underwrite as referred to below or, as the case may be, (bb) the number of warrants for which applications are received from shareholders as referred to below save to the extent already adjusted for under (aa).
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Condition 5(C)(xiii)) would purchase at such Current Market Price per Share specified in (a) or, as the case may be, (b) above.

Effective date of adjustment: Subject as provided below, such adjustment shall become effective (i) where no applications for such warrants are required from shareholders entitled to the same, upon their issue and (ii) where applications by shareholders entitled to the same are required as aforesaid, immediately after the latest date for the submission of such applications or (if later) immediately after the Company fixes the said consideration but in all cases retroactively to immediately after the record date mentioned above.

Warrants not subscribed for by shareholders: If, in connection with a grant, issue or offer to the holders of Shares of warrants entitling them to subscribe for or purchase Shares in the circumstances described in (a) and (b) of this Condition 5(C)(v), any warrants which are not subscribed for or purchased by the shareholders entitled thereto are underwritten by others prior to the latest date for the submission of applications for such warrants, an adjustment shall be made to the Conversion Price in accordance with the above provisions which shall become effective immediately after the date the underwriters agree to underwrite the same or (if later) immediately after the Company fixes the said consideration but retroactively to immediately after the record date mentioned above.

If, in connection with a grant, issue or offer to the holders of Shares of warrants entitling them to subscribe for or purchase Shares, any warrants which are not subscribed for or purchased by the underwriters who have agreed to underwrite as referred to above or by the shareholders entitled thereto (or persons to whom shareholders have transferred the right to purchase such warrants) who have submitted applications for such warrants as referred to above are offered to and/or subscribed by others, no further adjustment shall be made to the Conversion Price by reason of such offer and/or subscription.

(vi) Capital Distribution : If the Company shall pay or make any Capital Distribution (as defined below) to its shareholders, then the Conversion Price shall be adjusted in accordance with the following formula:

==> picture [108 x 25] intentionally omitted <==

where:

NCP and OCP have the meanings ascribed thereto in Condition 5(C)(ii).

CMP = the Current Market Price per Share on the last Trading Day preceding the date on which the Capital Distribution is publicly announced.
fmv = the aggregate fair market value on the date of such announcement, as determined in good faith by two leading independent investment banks of international repute selected by the Company and approved by the Trustee and acting as experts, of the portion of the Capital Distribution attributable to one Share.

Effective date of adjustment: Such adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such Capital Distribution. Provided that (a) in the case of such a Capital Distribution which must, under applicable law of the ROC, be submitted for approval to a general meeting of shareholders or be approved by a meeting of the Board of Directors of the Company before such Capital Distribution may legally be made and is so approved after the record date fixed for the determination of shareholders entitled to receive such Capital Distribution, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date and (b) if the fair market value of such Capital Distribution cannot be determined until the record date fixed for the determination of shareholders entitled to receive such Capital Distribution, such adjustment shall, immediately upon such fair market value being determined, become effective retroactively to immediately after such record date.

If the Company shall pay or make any Capital Distribution in cash only then, in such case, the Conversion Price shall be adjusted (with such adjustment to be effective on the record date for the determination of shareholders entitled to receive such Capital Distribution in cash) in accordance with the following formula:

==> picture [83 x 25] intentionally omitted <==

where:

NCP and OCP shall have the meanings ascribed thereto in Condition 5(C)(ii).

M = the Current Market Price per Share on such record date.
C = the amount of cash so distributed applicable to one Share to the extent such cash amount exceeds 2.5 per cent. of the closing Share price on the Trading Day immediately prior to the exdividend date associated with such distribution, which ex-dividend date is at the date of issue of the Notes the second Trading Day prior to the commencement of the applicable Closed Period.

For the purposes of this Condition 5(C)(vi):

“Capital Distribution” means any dividend or distribution, whether of cash, assets or other property, and whenever paid or made and however described (and for these purposes a distribution of assets includes, without limitation, an issue of shares or other Securities (as defined below) credited as fully or partly paid up) provided that:

(a) where a cash Capital Distribution is announced which is to be, or may at the election of a holder or holders of Shares be, satisfied by the issue or delivery of Shares or other property or assets, then for the purposes of the above formula the Capital Distribution in question shall be treated as a Capital Distribution of (1) the cash Capital Distribution so announced or (2) the fair market value on the date of announcement of such Capital Distribution, of such Shares or other property or assets to be issued or delivered in satisfaction of such Capital Distribution (or which would be issued if all holders of Shares elected therefor, regardless of whether any such election is made) if the fair market value of such Shares or other property or assets is greater than the cash Capital Distribution so announced;
(b) any issue of Shares falling within Condition 5(C)(ii) shall be disregarded;
(c) a purchase or redemption of share capital by or on behalf of the Company (or a purchase of Shares by or on behalf of a Subsidiary) (whether by tender or exchange offer or otherwise) shall not constitute a Capital Distribution unless in the case of purchase of Shares by or on behalf of the Company or by or on behalf of a Subsidiary, the weighted average price (before expenses) on any one day in respect of such purchase exceeds the closing price of the Shares published by the TSE either (1) on that date, or (2) where an announcement has been made of the intention to purchase Shares at some future date at a specified price, on the Trading Day immediately preceding the date of such announcement and, if in the case of either (1) or (2), the relevant day is not a Trading Day, the immediately preceding Trading Day, in which case such purchase shall be deemed to constitute a Capital Distribution in the amount of such excess.

“Securities” includes, without limitation, shares in the capital of the Company or options, warrants or other rights to subscribe for or purchase shares in the capital of the Company or evidences of its indebtedness.

(vii) Issue of convertible or exchangeable securities other than to shareholders or on exercise of warrants : If the Company shall issue any securities convertible into or exchangeable for Shares (other than the Notes, or in any of the circumstances described in Condition 5(C)(ix)) and the consideration per Share receivable by the Company (determined as provided in Condition 5(C)(xiii)) shall be less than the Current Market Price per Share on the date in the ROC on which the Company fixes the said consideration (or, if the issue of such securities is subject to approval by a general meeting of shareholders, on the date on which the Board of Directors of the Company fixes the consideration to be recommended at such meeting), then the Conversion Price in effect immediately prior to the date of issue of such convertible or exchangeable securities shall be adjusted in accordance with the following formula:

==> picture [83 x 25] intentionally omitted <==

where:

NCP and OCP have the meanings ascribed thereto in Condition 5(C)(ii).

N = the number of Shares outstanding (having regard to Condition 5(C)(xiv)) at the close of business in the ROC on the day immediately prior to the date of such issue.
n = the number of Shares to be issued upon conversion or exchange of such convertible or exchangeable securities at the initial conversion or exchange price or rate.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Condition 5(C)(xiii)) would purchase at such Current Market Price per Share.

Effective date of adjustment: Such adjustment shall become effective as of the calendar day in the ROC corresponding to the calendar day at the place of issue on which such convertible or exchangeable securities are issued.

(viii) Other issues of shares : If the Company shall issue any Shares (other than Shares issued (a) upon conversion or exchange of any convertible or exchangeable securities (including the Notes) issued by the Company or (b) upon exercise of any rights or warrants granted, offered or issued by the Company or (c) in any of the circumstances described in Conditions 5(C)(i) and 5(C)(ii) but including (d) Shares issued pursuant to any employee dividend or profit-sharing arrangements) for a consideration per Share receivable by the Company (determined as provided in Condition 5(C)(xiii)) less than the Current Market Price per Share on the date in the ROC on which the Company fixes the said consideration (or, if the issue of such Shares is subject to approval by a general meeting of shareholders, on the date on which the Board of Directors of the Company fixes the consideration to be recommended at such meeting), then the Conversion Price in effect immediately prior to the issue of such additional Shares shall be adjusted in accordance with the following formula:

==> picture [83 x 25] intentionally omitted <==

where:

NCP and OCP have the meanings ascribed thereto in Condition 5(C)(ii) above.

N = the number of Shares outstanding (having regard to Condition 5(C)(xiv)) at the close of business in the ROC on the day immediately prior to the date of issue of such additional Shares.
n = the number of additional Shares issued as aforesaid.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Condition 5(C)(xiii)) would purchase at such Current Market Price per Share.

Effective date of adjustment: Such adjustment shall become effective as of the calendar day in the ROC of the issue of such additional Shares or, in the case of an issue to employees under any employee dividend or profit sharing arrangements, where such an issue is announced at the same time as a stock dividend, such adjustment shall become effective as of the record date for determination of the identity of the shareholders entitled to receive any such dividend.

(ix) Issue of equity related securities : If the Company shall grant, issue or offer options, warrants or rights (excluding those rights and warrants referred to in Conditions 5(C)(iv), 5(C)(v), and 5(C)(vi)) to subscribe for or purchase Shares or securities convertible into or exchangeable for Shares and the consideration per Share receivable by the Company (determined as provided in Condition 5(C)(xiii)) shall be less than the Current Market Price per Share on the date in the ROC on which the Company fixes the said consideration (or, if the offer, grant or issue of such rights, options or warrants is subject to approval by a general meeting of shareholders, on the date on which the Board of Directors of the Company fixes the consideration to be recommended at such meeting), then the Conversion Price in effect immediately prior to the date of the offer, grant or issue of such rights, options or warrants shall be adjusted in accordance with the following formula:

==> picture [84 x 25] intentionally omitted <==

where:

NCP and OCP have the meanings ascribed thereto in Condition 5(C)(ii) above.

N = the number of Shares outstanding (having regard to Condition 5(C)(xiv)) at the close of business in the ROC on the day immediately prior to the date of such issue.
n = the number of Shares to be issued on exercise of such rights or warrants and (if applicable) conversion or exchange of such convertible or exchangeable securities at the said consideration.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Condition 5(C)(xiii)) would purchase at such Current Market Price per Share.

Effective date of adjustment: Such adjustment shall become effective as of the calendar day in the ROC corresponding to the calendar day at the place of issue on which such rights or warrants are issued.

(x) Modifications : If the rights of conversion or exchange, purchase or subscription attaching to any options, rights or warrants to subscribe for or purchase Shares or any securities convertible into or exchangeable for, or which carry rights to subscribe for or purchase Shares are modified (other than pursuant to and as provided in the terms and conditions of such options, rights, warrants or securities) the Company shall notify the Trustee thereof and the Company shall consult with two leading independent investment banks of international repute selected by the Company and approved by the Trustee as to what adjustment, if any, should be made to the Conversion Price (and the timing of any such adjustment) to preserve the value of the Conversion Right and will make any such adjustment.

(xi) Simultaneous issues of different classes of shares : In the event of simultaneous issues of two or more classes of share capital comprising Shares or rights or warrants in respect of, or securities convertible into or exchangeable for, two or more classes of share capital comprising Shares, then, for the purposes of this Clause, the formula:

==> picture [84 x 25] intentionally omitted <==

shall be restated as:

==> picture [129 x 26] intentionally omitted <==

where v1 and n1 shall have the same meanings as “v” and “n” but by reference to one class of Shares, v2 and n2 shall have the same meanings as “v” and “n” but by reference to a second class of Shares, v3 and n3 shall have the same meanings as “v” and “n” but by reference to a third class of Shares and so on.

(xii) Current market price per share : For the purposes of this Condition 5(C), the “Current Market Price” per Share on any date means the average of the daily closing prices (as defined below) of the relevant Shares for the 30 consecutive Trading Days (as defined below) commencing 45 Trading Days before the date of any relevant adjustment. If the Company has more than one class of share capital comprising Shares, then the relevant Current Market Price for Shares shall be the price for that class of Shares the issue of which (or of rights or warrants in respect of, or securities convertible into or exchangeable for, that class of Shares) gives rise to the adjustment in question.

If during the said 45 Trading Days or any period thereafter up to but excluding the date as of which the adjustment of the Conversion Price in question shall be effected, any event (other than the event which requires the adjustment in question) shall occur which gives rise to a separate adjustment to the Conversion Price under this Condition 5(C), then the Current Market Price as determined above shall be adjusted in such manner and to such extent as two leading independent investment banks of

international repute, selected by the Company and approved by the Trustee, shall in its absolute discretion deem appropriate and fair to compensate for the effect thereof.

For the purposes of this Condition 5(C)(xii):

the “closing price” of the Shares for each Trading Day (as defined below) shall be the last reported transaction price of the Shares on the TSE for such day or, if no transaction takes place on such day, the average of the closing bid and offered prices of Shares on the TSE in effect on the Trading Day immediately preceding such day as furnished by a leading independent securities firm licensed to trade on the TSE selected from time to time by the Company for the purpose; and

“Trading Day” means a day when the TSE is open for business, but does not include a day when (a) no such last transaction price or closing bid and offered prices is/are reported and (b) (if the Shares are not listed or admitted to trading on such exchange) no such closing bid and offered prices are furnished as aforesaid.

(xiii) Consideration receivable by the Company : For the purposes of any calculation of the consideration receivable by the Company pursuant to Conditions 5(C)(iv), 5(C)(v), 5(C)(vii), 5(C)(viii) and 5(C)(ix), the following provisions shall be applicable:

(a) in the case of the issue of Shares for cash, the consideration shall be the amount of such cash, provided that in no such case shall any deduction be made for any commissions or any expenses paid or incurred by the Company for any underwriting of the issue or otherwise in connection therewith;
(b) in the case of the issue of Shares for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined by the Company (and in making such determination the Company shall consult two leading independent investment banks of international repute, selected by the Company and approved by the Trustee and shall take fully into account the advice received from such banks) or, if pursuant to applicable law of the ROC such determination is to be made by application to a court of competent jurisdiction, as determined by such court or an appraiser appointed by such court, irrespective of the accounting treatment thereof;
(c) in the case of the issue (whether initially or upon the exercise of rights or warrants) of securities convertible into or exchangeable for Shares, the aggregate consideration receivable by the Company shall be deemed to be the consideration received by the Company for such securities and (if applicable) rights or warrants plus the additional consideration (if any) to be received by the Company upon (and assuming) the conversion or exchange of such securities at the initial conversion or exchange price or rate and (if applicable) the exercise of such rights or warrants at the initial subscription or purchase price (the consideration in each case to be determined in the same manner as provided in (a) and (b) above) and the consideration per Share receivable by the Company shall be such aggregate consideration divided by the number of Shares to be issued upon (and assuming) such conversion or exchange at the initial conversion or exchange price or rate and (if applicable) the exercise of such rights or warrants at the initial subscription or purchase price;
(d) in the case of the issue of rights or warrants to subscribe for or purchase Shares, the aggregate consideration receivable by the Company shall be deemed to be the consideration received by the Company for any such rights or warrants plus the additional consideration to be received by the Company upon (and assuming) the exercise of such rights or warrants at the initial subscription or purchase price (the consideration in each case to be determined in the same manner as provided in (a) and

(b) above) and the consideration per Share receivable by the Company shall be such aggregate consideration divided by the number of Shares to be issued upon (and assuming) the exercise of such rights or warrants at the initial subscription or purchase price;

(e) if any of the consideration referred to in any of the preceding paragraphs of this Condition 5(C)(xiii) is receivable in a currency other than NT dollars, such consideration shall (in any case where there is a fixed rate of exchange between the NT dollar and the relevant currency for the purposes of the issue of the Shares, the conversion or exchange of such securities or the exercise of such rights or warrants) be translated into NT dollars for the purposes of this Condition 5(C)(xiii) at such fixed rate of exchange and shall (in all other cases) be translated into NT dollars at the mean of the exchange rate quotations (being quotations for the cross rate through US dollars if no direct rate is quoted) by a leading bank in the ROC for buying and selling spot units of the relevant currency by telegraphic transfer against NT dollars on the date as of which the said consideration is required to be calculated as aforesaid; and
(f) in the case of the issue of Shares (including, without limitation, to employees under any employee dividend or profit sharing arrangements) credited as fully paid out of retained earnings or capitalisation of reserves at their par value, the aggregate consideration receivable by the Company shall be deemed to be zero (and accordingly the number of Shares which such aggregate consideration receivable by the Company could purchase at the relevant Current Market Price per Share shall also be deemed to be zero).

(xiv) Cumulative adjustments : If, at the time of computing an adjustment (the “later adjustment”) of the Conversion Price pursuant to any of Conditions 5(C)(ii), 5(C)(iv), 5(C)(v), 5(C)(vii), 5(C)(viii) and 5(C)(ix), the Conversion Price already incorporates an adjustment made (or taken or to be taken into account pursuant to the proviso to Condition 5(C)(xv)) to reflect an issue of Shares or of securities convertible into or exchangeable for Shares or of rights or warrants to subscribe for or purchase Shares or securities, to the extent that the number of such Shares or securities taken into account for the purposes of calculating such adjustment exceeds the number of such Shares in issue at the time relevant for ascertaining the number of outstanding Shares for the purposes of computing the later adjustment, such excess Shares shall be deemed to be outstanding for the purposes of making such computation.

(xv) Minor adjustments : No adjustment of the Conversion Price shall be required if the adjustment would be less than 1 per cent. of the Conversion Price prior to the adjustment; provided that any adjustment which by reason of this Condition 5(C)(xv) is not required to be made shall be carried forward and taken into account (as if such adjustment had been made at the time when it would have been made but for the provisions of this Condition 5(C)(xv)) in any subsequent adjustment. All calculations under this Condition 5(C) shall be made to the nearest NT$0.01 with NT$0.005 being rounded up to the next NT$0.01.

(xvi) Minimum conversion price : Notwithstanding the provisions of this Condition 5(C), the Conversion Price shall not be reduced below the par value of the Shares (NT$10 at the date hereof) as a result of any adjustment made hereunder unless under applicable law then in effect Notes may be converted at such reduced Conversion Price into legally issued, fully-paid and non-assessable Shares.

(xvii) Reference to “fixed” : Any references in this Condition 5(C) to the date on which a consideration is “fixed” shall, where the consideration is originally expressed by reference to a formula which cannot be expressed as an actual cash amount until a later date, be construed as a reference to the first day on which such actual cash amount can be ascertained.

(xviii) Trustee not obliged to monitor : The Trustee shall not be under any duty to monitor whether any event or circumstance has happened or exists within Condition 5(C)(x) and will not be responsible to Noteholders for any loss arising from any failure by it to do so.

(xix) Calculations : All calculations relating to adjustment of the Conversion Price shall be performed by the Auditors (as defined in the Trust Deed), or such other person as shall be nominated by the Company, before notice of any such adjustment is given to Noteholders.

(D) Mergers and disposals

The Company will not merge, amalgamate or consolidate with or into any other corporation or entity (the Company not being the continuing entity) or sell or transfer all, or substantially all, of the assets of the Company, whether as a single transaction or a number of transactions, related or not, to any corporation, entity or person or to one or more members of any group under the common control of any corporation, entity or person unless the Company shall have notified the holders of the Notes of such event in accordance with Condition 14 and the Company and such corporation, entity or person shall have executed a trust deed supplemental to the Trust Deed in form and substance satisfactory to the Trustee providing that such corporation, entity or person shall assume the obligations of the Company under the Notes, the Trust Deed and the Agency Agreement and providing that each Note then outstanding shall be convertible into the class and amount of shares and other securities, cash and other property receivable upon such consolidation, amalgamation, merger, sale or transfer by a holder of the number of Shares into which such Notes would have been convertible immediately prior to such consolidation, amalgamation, merger, sale or transfer (assuming for such purpose that the Notes were convertible at the time of such consolidation, amalgamation, merger, sale or transfer) at the Conversion Price as adjusted from time to time pursuant to the Trust Deed. Such supplemental trust deed will provide for adjustments which will be as nearly equivalent as may be practicable to the adjustments provided for in the foregoing provisions to this Condition. The above provisions of this Condition 5(D) will apply in the same way to any subsequent consolidations, amalgamations, mergers, sales or transfers.

(E) Conversion undertakings

(i) Depositary receipts : Subject to the ROC SFCs (as defined in the Trust Deed) separate approval, if required, the Company may, at its option, but is not required to, make arrangements satisfactory to the Trustee for the Notes to be converted into depositary receipts or other scrip evidencing Shares and, subject to the provisions of the Trust Deed, will use its best endeavours to ensure that such arrangements are made in the event that it establishes a depositary receipt facility. Any such arrangements shall be in addition to the provisions of these Conditions relating to conversion into Shares. Any such depositary receipts issuable on conversion of Notes shall, when issued, be listed. As long as the Notes are listed on the Luxembourg Stock Exchange, the Notes can only be converted into such depositary receipts if the depositary receipts themselves are listed.

The Company has not at the date of this Offering Circular established or authorised the establishment of any depositary receipt facility. Accordingly, conversion into depositary receipts is not currently available. If in the future a depositary receipt facility is established or authorised by the Company, the Company will, to the extent permitted by applicable laws and regulations, make arrangements satisfactory to the Trustee for Shares issued on conversion of Notes to be accepted for deposit (at the option of the converting Noteholder) into such depositary receipt facility, subject always to the terms of such depositary facility, which terms may include certification or other requirements as conditions to the acceptance for deposit of Shares issued on conversion of Notes. The Company will give notice of any such arrangements to Noteholders in accordance with Condition 14. There can be no assurance that the Company will in the future establish or authorise any depositary receipt facility or that any arrangements for the deposit of Shares into such depositary receipt facility would be available to all Noteholders.

(ii) Closed Periods : The Company undertakes to ensure that any Closed Period is for as short a period as is reasonably practicable having regard to applicable laws, regulations and practices.

6 Payments

(A) Principal and other sums

Payment of principal and premium (if any) will be made by transfer to the registered account of the holder of the Notes or by US dollar cheque drawn on a bank in New York City mailed to the registered address of the holder of the Notes if it does not have a registered account. Payments of principal and premium (if any) will only be made after surrender of the relevant Certificate at the specified office of any Agent.

References in these Conditions and the Agency Agreement to principal in respect of a Note shall, where the context so permits, be deemed to include a reference to any premium payable thereon.

(B) Registered accounts

The registered account of a holder of the Notes means the US dollar account maintained by or on behalf of it with a bank in New York City details of which appear on the register of holders of the Notes at the close of business on the second business day (as defined below) before the due date for payment and the registered address of a holder of the Notes means its address appearing on the register of holders of the Notes at that time.

(C) Fiscal laws

All payments are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 8. No commissions or expenses shall be charged to the holders of the Notes in respect of such payments.

(D) Payment initiation

Where payment is to be made by transfer to a registered account, payment instructions (for value the due date or, if that is not a business day, for value the first following day which is a business day) will be initiated and, where payment is to be made by cheque, the cheque will be mailed on the business day preceding the due date for payment or, in the case of a payment of principal, if later, on the business day on which the relevant Certificate is surrendered at the specified office of an Agent.

(E) Default interest and payment delay

If the Company fails to pay any sum in respect of the Notes when the same becomes due and payable under these Conditions, interest shall accrue on the overdue sum at the Default Interest Rate from the due date (the “ Due Date ”).

Holders of the Notes will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due if the Due Date is not a business day, if the holder of the Notes is late in surrendering its Certificate (if required to do so) or if a cheque mailed in accordance with this Condition arrives after the Due Date for payment.

The “ Default Interest Rate ” shall be the aggregate of 3 per cent per annum and LIBOR as determined by the Principal Agent in accordance with the provisions of the Agency Agreement and the Trust Deed.

(F) Business days

In this Condition, ‘‘ business day ’’ means a day on which commercial banks are open for business in New York City and London and, in the case of the surrender of a Certificate, in the place where the Certificate is surrendered and, for the purposes of Condition 6(E), a day upon which U.S. dollar deposits may be dealt in on the London inter-bank market also.

(G) Partial payments

If the amount of principal is not paid in full, the Registrar will annotate the register of holders of the Notes with a record of the amount of principal in fact paid.

7 Redemption, purchase and cancellation

(A) Redemption at maturity

Unless previously redeemed or converted or purchased and cancelled as herein provided, the Company will redeem the Notes at 94.63 per cent. of their principal amount in US dollars on 30 July 2008 (the ‘‘Maturity Date’’). The Notes may be redeemed prior to that date only as provided in paragraphs (B), (C) and (D) below (but without prejudice to Condition 9).

(B) Redemption at the option of the Company

The Notes may be redeemed in whole but not in part at their Early Redemption Amount, in US dollars, at the option of the Company, upon not less than 30 nor more than 60 days’ notice to the holders of the Notes (which notice shall be irrevocable and published in accordance with Condition 14), (i) at any time after 30 July 2006 and prior to 30 July 2008, provided that the Closing Price of the Shares on the TSE (translated into US dollars at the Prevailing Rate), for a period of 20 consecutive Trading Days, the last of which occurs not more than 10 days prior to the date upon which notice of such redemption is published, is at least 125 per cent. of the Conversion Price of the Notes then in effect (translated into US dollars at a fixed exchange rate of NT$34.35 = US$1.00 (the “Fixed Exchange Rate”)) on each such Trading Day; or (ii) at any time prior to 30 July 2008, if at least 90 per cent. in principal amount of the Notes has already been converted, redeemed or purchased and cancelled. If there shall occur an event giving rise to a change in the Conversion Price during any such 20 consecutive Trading Day period, appropriate adjustments for the relevant days shall be made for the purpose of calculating the Closing Price for such days. If the Closing Price cannot be determined for one or more consecutive Trading Days, such day or days will be disregarded in the relevant calculation and will be deemed not to have existed when ascertaining such 20 consecutive Trading Day period. The ‘‘Prevailing Rate’’ for the translation of the Closing Prices shall be the closing rate for the purchase of US dollars with NT dollars quoted by Taipei Forex Inc. at the close of business on each day of the relevant 20 consecutive Trading Day period.

Provided that the date fixed for redemption under this Condition may not fall within a Closed Period or the period of 15 business days (as defined in Condition 5(B)) following a Closed Period.

The ‘‘Early Redemption Amount’’ of each Note means an amount rounded up to the nearest US cent, determined in accordance with the following formula:

Early Days Outstanding Redemption = US$1,000 + US$1,000 x (redemption price (94.63%) less issue price (100%)) x 1800 Amount

where

‘‘Days Outstanding’’ means the number of days from, and including, 30 July 2003 to, but excluding the date for redemption and/or purchase, calculated on the basis of a year of 360 days consisting of 12 months of 30 days each.

The term ‘‘Trading Day’’ means a day on which the TSE is open for business. For the purposes of this Condition 7(B), the term ‘‘Closing Price’’ for any Trading Day means the last reported transaction price or, if no transaction takes place on such day, the average of the closing bid and offered prices of Shares for such day as furnished by a leading independent securities firm licensed to trade on the TSE selected from time to time by the Company for the purpose.

Upon the expiry of any such notice, the Company will be bound to redeem the Notes to which such notice relates at the date fixed for redemption.

(C) Redemption for taxation reasons

At any time (but not if notice of redemption under Condition 7(B) has already been given to holders of the Notes), the Company may, having given not less than 30 nor more than 60 days’ notice to the holders of the Notes (which notice shall be irrevocable and given to holders of the Notes in accordance with Condition 14) redeem all but not some only of the Notes at their Early Redemption Amount if (i) the Company satisfies the Trustee immediately prior to the giving of such notice that it has or will become obliged to pay additional amounts as provided or referred to in Condition 8(C) as a result of any change in, or amendment to, the laws or regulations of the ROC or any political subdivision or any authority thereof or therein having power to tax, or any change in the general application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after 10 July 2003 and (ii) such obligation cannot be avoided by the Company taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Company shall deliver to the Trustee a certificate signed by two authorised officers of the Company stating that the obligation referred to in (i) above cannot be avoided by the Company taking reasonable measures available to it and the Trustee shall be entitled to accept such certificate as sufficient evidence of the satisfaction of the condition precedent set out in (ii) above in which event it shall be conclusive and binding on the holders of the Notes. The Notes in respect of which a notice of redemption has been given under Condition 7(B) or 7(D) shall not be affected by any notice given subsequently under this Condition 7(C).

(D) Redemption at the option of holders of the Notes

The Company will, at the option of the holder of any Note, redeem all or some of that holder’s Notes on 30 July 2005 (the ‘‘Put Date’’), at 97.82 per cent. of their principal amount. To exercise such option the holder must deposit the Certificate issued in respect of such Notes with any Agent together with a duly completed redemption notice in the form obtainable from any of the Agents, not more than 60 nor less than 10 days prior to such date. No Notes so deposited may be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Company. Not less than 10 nor more than 60 days’ notice of the commencement of the period for the deposit of Certificates for redemption pursuant to this Condition 7(D) shall be given to the holders of the Notes by the Company in accordance with Condition 14.

(E) Redemption for delisting or material asset transfer

Following the occurrence of a Relevant Event (as defined below), the holder of each Note will have the right at such holder’s option, to require the Company to redeem all or some only of that holder’s Notes on the Relevant Event Redemption Date (as defined below) at their Early Redemption Amount. To exercise such right, the holder of the relevant Note must complete, sign and deposit at the specified office of any Paying Agent a duly completed and signed notice of redemption, in the form for the time being current, obtainable from the specified office of any Paying Agent (the “Relevant Event Redemption Notice”) together with the Certificate evidencing the Notes to be redeemed by not later than 60 days following a Relevant Event, or, if later, 60 days following the date upon which notice thereof is given to Noteholders by the Company in accordance with Condition 14. The “Relevant Event Redemption Date” shall be the 14[th] day after the expiry of such period of 60 days as referred to above.

A Relevant Event Redemption Notice, once delivered, shall be irrevocable and the Company shall redeem the Notes the subject of Relevant Event Redemption Notices delivered as aforesaid on the Relevant Event Redemption Notice delivered as aforesaid on the Relevant Event Redemption Date.

The Trustee shall not be required to take any steps to ascertain whether a Relevant Event or any event which could lead to the occurrence of a Relevant Event has occurred.

The Company shall give notice to Noteholders in accordance with Condition 14 by not later than 14 days following the first day on which it becomes aware of the occurrence of a Relevant Event, which notice shall specify the procedure for exercise by holders of their rights to require redemption of the Notes pursuant to this Condition 7(E) and shall give brief details of the Relevant Event.

A “Relevant Event” occurs:
(i) when the Shares cease to be listed or admitted to trading on the TSE; or
(ii) when there is a Material Asset Transfer (as defined below) with respect to the Company;

“Material Asset Transfer” occurs when the Company or any of its Subsidiaries (whether by a single transaction or a number of related or unrelated transactions and whether at one time or over a period of time) sells, transfers, leases out, lends or otherwise disposes of (whether outright, by a sale-and-purchase or sale-and-leaseback arrangement, or otherwise) any part of its assets to any other person (including (in the case of the Company) to any of its Subsidiaries, but excluding (in the case of a Subsidiary) to the Company or another Subsidiary) which, either alone or when aggregated with all other disposals required to be taken into account under this Condition 7(E), could have a Material Adverse Effect (as defined herein) on the Company.

‘Material Adverse Effect” means a material adverse effect on or material adverse change in:

(a) the condition (financial or otherwise), assets, operations, prospects or business of the Company or the consolidated condition (financial or otherwise), assets, operations, prospects or business of the Company and its Subsidiaries taken as a whole;
(b) the ability of the Company to perform and comply with its obligations under the Notes or the Trust Deed; or
(c) the validity, legality or enforceability of, or the rights or remedies of the Company under, the Notes or the Trust Deed.

a “person” includes any individual, company, corporation, firm, partnership, joint venture, undertaking, association, organisation, trust, state or agency of a state (in each case whether or not being a separate legal entity) but does not include the Company’s directors or any other governing board and does not include the Company’s majority-owned direct or indirect Subsidiaries.

(F) Purchase

The Company may at any time and from time to time purchase the Notes in the open market or otherwise. The Notes so purchased shall be surrendered to the Principal Agent for cancellation and may not be held and reissued or resold.

(G) Cancellation

All Notes which have been redeemed or converted, or purchased by the Company, shall forthwith be cancelled. Certificates in respect of all Notes cancelled will be forwarded to or to the order of the Principal Agent and such Notes may not be reissued or resold.

(H) Redemption notices; Precedence of notices

All notices to holders of the Notes given by or on behalf of the Company pursuant to this Condition will specify the date fixed for redemption, the redemption price, the Conversion Price as at the date of the relevant notice, the Closing Price of the Shares and the aggregate principal amount of the Notes

outstanding as at the latest practicable date prior to the publication of the notice and, in the case of a partial redemption, a list of the Notes called for redemption (when applicable).

No notice of redemption pursuant to Condition 7(C) shall be effective if it specifies a due date for redemption falling during the period commencing 60 days and ending 30 days (both inclusive) prior to any Put Date (and if given shall not be effective). Any notice of redemption given under Condition 7(C) before any Put Date and specifying a due date for redemption after the 30th day prior to any Put Date shall be without prejudice to the rights of holders of the Notes under Condition 7(D) and shall not apply in respect of any Notes in respect of which the option under Condition 7(D) shall be or has been exercised.

8 Taxation

(A) All payments in respect of the Notes shall be made free and clear of and without any deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the government of the ROC or any authority thereof or therein having power to tax, unless deduction or withholding of such taxes, duties, assessments or governmental charges is compelled by law.
(B) Where such withholding or deduction is in respect of ROC withholding tax on payments of premium at the rate of up to and including 20 per cent., the Company will increase the amount of premium paid by it to the extent required so that the net amount of premium received by the holders of the Notes (without prejudice to Condition 6) amounts to the relevant amount of the premium payable pursuant to Condition 7, in the case of premium (if any).
(C) In the event that any such withholding or deductions in respect of principal or any additional withholding or deduction in excess of 20 per cent. in respect of premium (if any) is required, the Company will pay such additional amounts by way of principal and premium (if any) as will result in the receipt by the holders of the Notes of the amounts which would have been receivable in the absence of any such withholding or deduction, except that no such additional amounts shall be payable in respect of any Notes:
(i) to, or on behalf of, a holder who is subject to such taxes, duties, assessments or governmental charges in respect of such Notes by reason of his being connected with the ROC otherwise than merely by holding such Notes or by the receipt of principal or premium (if any), in respect of the Notes; or
(ii) if the Certificate in respect of such Notes is surrendered more than 30 days after the relevant date except to the extent that the holder would have been entitled to such additional amount on surrendering the relevant Certificate for payment on the last day of such 30-day period.

For this purpose the ‘‘relevant date’’ in relation to any Notes means (a) the due date for payment in respect thereof, or (b) (if the full amount of the monies payable on such due date has not been received in New York City by the Trustee or the Principal Agent on or prior to such due date) the date on which notice is duly given to the holders of the Notes that such monies have been so received.

(D) References in these Terms and Conditions to principal and premium shall be deemed also to refer to any increased or additional amounts which may be payable in respect thereof under this Condition.

9 Events of default

The Trustee at its discretion may, and if so requested in writing by the holders of not less than 20 per cent. in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (but subject to being indemnified and/or secured by the holders to its satisfaction), give

notice to the Company that the Notes are immediately due and payable, if any of the following events (an ‘‘Event of Default’’) shall have occurred and be continuing:

(i) the Company fails to pay any sums due on any of the Notes within seven days after the same shall become due and payable in accordance with the Conditions; or

(ii) the Company defaults in performance or observance of or compliance with any one or more of its other obligations set out in the Notes or the Trust Deed which default is incapable of remedy or, if in the opinion of the Trustee such default is capable of remedy, such default is not in the opinion of the Trustee remedied within 30 days (or such longer time as the Trustee may consider appropriate in relation to the jurisdiction concerned) after written notice of such default shall have been given to the Company by the Trustee; or

(iii) any other present or future indebtedness of the Company or any of its Subsidiaries (as defined in Condition 3) for or in respect of monies borrowed or raised becomes (or becomes capable of being declared) due and payable prior to its stated maturity by reason of any potential default, event of default or the like (howsoever described), or any such indebtedness is not paid when due or, as the case may be, within any applicable grace period originally provided for, or the Company or any of its Subsidiaries fails to pay when due any amount payable by it under any present or future guarantee or indemnity or arrangement or obligation having a like or similar effect (howsoever described) for any monies borrowed or raised by any person provided that the aggregate amount of the relevant indebtedness and guarantees in respect of which one or more events mentioned above in this paragraph (iii) have occurred equals or exceeds US$10,000,000 or its equivalent in any other currency (determined as provided below, and provided further that where two or more of the Company and/or its Subsidiaries are liable for the payment of the same relevant indebtedness or guarantee (whether liable jointly and severally, by way of guarantee, surety or otherwise), any such amount shall be counted once only; or

(iv) a distress or execution is levied or enforced or sued out, or other enforcement process is levied or sued out upon, commenced or issued upon, against or in respect of the whole or any substantial part of the undertaking, property, assets or revenues of the Company or any of its Subsidiaries and in any such case is not discharged or stayed within 30 days of having been so levied, sued out, commenced or issued; or

(v) an encumbrancer takes possession or a receiver, manager or other similar officer is appointed, or a distress, execution or seizure before judgment is levied, enforced or sued out upon, against or in respect of the whole or any substantial part of the undertaking, property, assets or revenues of the Company or any of its Subsidiaries and the same is not stayed, discharged, released or satisfied (as the case may be) within 30 days of such appointment or the issue of such order (as the case may be); or

(vi) the Company or any of its Subsidiaries becomes bankrupt or insolvent or is unable to pay its debts as they mature or applies for or consents to or suffers the appointment of an administrator, liquidator (except for the purpose of and followed by a voluntary solvent reorganisation, merger, consolidation, amalgamation or other similar arrangement the terms of which have previously been approved by an Extraordinary Resolution of the Noteholders) or receiver (or other similar official) of the Company or any of its Subsidiaries or in respect of the whole or any substantial part of the undertakings, property, assets or revenues of the Company or any of its Subsidiaries or the Company or any of its Subsidiaries takes any proceedings under any applicable law for a readjustment or an arrangement or composition with or for the benefit of its creditors or (except as provided below) stops or threatens to cease to carry on its business or a substantial part of its business; or

(vii) an order is made or an effective resolution passed for the winding-up or dissolution of the Company or any of its Subsidiaries or the Company or any of its Subsidiaries becomes capable of being dissolved under ROC or other applicable laws (except for the purpose of and followed by a solvent

reconstruction, merger, consolidation, amalgamation or other similar arrangement the terms of which are approved by an Extraordinary Resolution of the Noteholders); or

(viii) the Company shall merge, amalgamate or consolidate with any other corporation or entity (with the Company not being the continuing entity), shall sell or dispose of substantially all its business or assets whether as a single transaction or a number of transactions, related or not, to any person without (where so required by the Trustee) obtaining the prior approval by Extraordinary Resolution of the Noteholders and of such person to assume the obligations of the Company under and in respect of the Notes and the Trust Deed; provided that such agreement by such other person shall not be required if such assumption shall be effective by operation of law; or

(ix) a moratorium is agreed or declared in respect of any indebtedness of the Company or any of its Subsidiaries or any governmental authority or agency condemns, seizes, compulsorily purchases or expropriates all or a substantial part of the assets or shares of the Company or any of its Subsidiaries; or

(x) proceedings shall have been initiated against the Company or any of its Subsidiaries under any applicable bankruptcy, insolvency or reorganisation law and such proceedings shall not have been discharged or stayed within a period of 30 days; or

(xi) any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order to (i) enable the Company lawfully to enter into, exercise its rights and perform and comply with its obligations under the Notes and the Trust Deed, (ii) ensure that those obligations are legally binding and enforceable and (iii) make the Notes and the Trust Deed admissible in evidence in the courts of the ROC, is not taken, fulfilled or done if incapable of remedy or, if capable of remedy, is not remedied within 30 days; or

(xii) any event occurs which, under applicable laws, has an analogous effect to any of the events referred to in the foregoing paragraphs, subject to the timing and other requirements of the relevant paragraph above.

Upon any such notice being given to the Company, the Notes will immediately become due and payable at their Early Redemption Amount (as defined in Condition 7(B)).

For the purposes of clause (iii) above, any indebtedness which is in a currency other than US dollars shall be translated into US dollars at the spot rate for the sale of US dollars against the purchase of the relevant currency quoted by any leading bank in the relevant market selected by the Trustee on any day when the Trustee requests such a quotation for such purposes. If no direct spot rate is available, a rate shall be calculated by reference to the cross-rates through US dollars of the relevant currencies.

10 Prescription

Claims in respect of principal and premium (if any) and default interest will become unenforceable after 10 years (in the case of principal and premium (if any)) and 5 years (in the case of default interest), respectively, from the relevant date for payment in respect thereof.

Under ROC law, claims in respect of (a) principal and (b) premium (if any and deemed as interest) and default interest will become unenforceable after 15 years and 5 years, respectively, from the relevant date for payment in respect thereof.

For the purposes of this Condition 10, ‘‘default interest’’ means interest that will accrue on any unpaid amount of the Notes which are due and payable, in accordance with the Condition 6(E).

11 Enforcement

At any time after the Notes shall have become due and payable, the Trustee may, at its discretion and without further notice, take such proceedings against the Company as it may think fit to enforce payment of the Notes together with premium (if any) and to enforce the provisions of the Trust Deed, but it will not be bound to take any such proceedings unless (a) it shall have been so requested in writing by the holders of at least 20 per cent. in principal amount of the Notes then outstanding or so directed by an Extraordinary Resolution and (b) it shall have been indemnified and/or secured to its satisfaction. No holder of the Notes will be entitled to proceed directly against the Company, unless the Trustee, having become bound to do so, fails to do so and such failure shall have continued for a period of 60 days and no direction inconsistent with such written request or Extraordinary Resolution has been given to the Trustee during such 60-day period by the holders of a majority in principal amount of the outstanding Notes.

12 Meetings of Noteholders, modification and waiver

(A) Meetings

The Trust Deed contains provisions for convening meetings of holders of the Notes to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes or the provisions of the Trust Deed. The quorum at any such meeting for passing an Extraordinary Resolution will be two or more persons holding or representing over 50 per cent. in principal amount of the Notes for the time being outstanding or, at any adjourned such meeting, two or more persons being or representing holders of the Notes whatever the principal amount of the Notes so held or represented unless the business of such meeting includes consideration of proposals, inter alia , (i) to modify the maturity date of the Notes or the date for redemption at the option of holders of the Notes, (ii) to reduce or cancel the amount of principal, premium (if any) and/or default interest (if any) payable in respect of the Notes, (iii) to change the currency of payment of the Notes, (iv) to modify or cancel the Conversion Right (except in accordance with Conditions 5(B) and 12(B)) or (v) to modify the provisions concerning the quorum required at any meeting of the holders of the Notes or the majority required to pass an Extraordinary Resolution, in which case the necessary quorum for passing an Extraordinary Resolution will be two or more persons holding or representing in aggregate over two thirds, or at any adjourned such meeting in aggregate over one third, in principal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of holders of the Notes will be binding on all holders of the Notes, whether or not they are present at the meeting.

The Trust Deed provides that a written resolution signed by or on behalf of the holders of not less than 90 per cent. of the aggregate principal amount of the Notes outstanding shall be as valid and effective as a duly passed Extraordinary Resolution. If any meetings are convened in accordance with this Condition 12(A), the Company shall inform the Luxembourg Stock Exchange as soon as possible.

(B) Modification of Conversion Right

Notwithstanding Condition 12(A)(iv) and (v) above, the Trustee may agree, without the consent of the holders of the Notes, any modification to or variation of the Conversion Rights (including modification of and additions to the declarations and statements to be made by holders of the Notes in a Conversion Notice) which is in its opinion necessary or desirable to effect or facilitate conversion as contemplated in these Conditions and which is not, in the Trustee’s opinion, materially prejudicial to the interests of the holders of the Notes. The Trustee’s agreement may be subject to any condition which the Trustee requires.

If there is any modification in accordance with this Condition 12(B), the Company shall inform the Luxembourg Stock Exchange as soon as possible.

(C) Other modifications and waivers

The Trustee may agree, without the consent of the holders of the Notes, to (i) any modification (except as mentioned above) of, or the waiver or authorisation of any breach or proposed breach of, the Notes or the Trust Deed which is not, in the opinion of the Trustee, materially prejudicial to the interests of the holders of the Notes or (ii) any modification of the Notes or the Trust Deed which, in the Trustee’s opinion, is of a formal, minor or technical nature or to correct a manifest error or to comply with mandatory provisions of law. Any such modification, waiver or authorisation will be binding on the holders of the Notes and, unless the Trustee agrees otherwise, any such modification will be notified by the Company to the holders of the Notes as soon as practicable thereafter.

If there is any modification or waiver in accordance with this Condition 12(C), the Company shall notify the Luxembourg Stock Exchange as soon as possible.

(D) Exercise of Trustee’s functions

In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, authorisation or waiver), the Trustee shall have regard to the interests of the holders of the Notes as a class and shall not have regard to the consequences of such exercise for individual holders of the Notes and the Trustee shall not be entitled to require, nor shall any holder of the Notes be entitled to claim, from the Company or the Trustee any indemnification or payment in respect of any tax consequences of any such exercise upon individual holders of the Notes.

13 Replacement of certificates

If any Certificate is mutilated, defaced, destroyed, stolen or lost, it may be replaced at the specified office of the Registrar or at the office of the Replacement Agent upon payment by the claimant of such costs as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Company may reasonably require (which terms will require, inter alia , that if such Certificate is subsequently deposited for conversion into Shares there shall be paid to the Company on demand NT$34.35 for each US$1.00 of the principal amount of such Notes). Mutilated or defaced Certificates must be surrendered before replacements will be issued.

14 Notices

All notices to holders of the Notes shall be validly given if published in a leading newspaper having general circulation in London (which is expected to be the Financial Times (London Edition)) and mailed to them at their respective addresses in the register of holders of the Notes maintained by the Registrar and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, published in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort ).

Any such notice shall be deemed to have been given on the later of the date of such publication and the seventh day after being so mailed.

15 Indemnification

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking proceedings to enforce payment unless indemnified to its satisfaction.

16 Agents

The names of the initial Agents and Registrar and their specified offices are set out at the end of these Conditions. The Company reserves the right, subject to the provisions of the Agency Agreement, at any time to vary or terminate the appointment of further or other Agents, provided that the Company

will at all times maintain Agents having specified offices in London and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, a Paying, Transfer and Conversion Agent in Luxembourg. Notice of any such termination or appointment, of any changes in the specified offices of the Agents or of any change in the identity or specified office of any Conversion Agent, Paying Agent or Transfer Agent will be given promptly by the Company to the holders of the Notes and the Trustee and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, will be published in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort ).

17 Further Issues

The Company may from time to time, without the consent of the Noteholders create and issue further securities having the same terms and conditions as the Notes in all respects so that such further issue shall be consolidated and form a single series with the outstanding Notes.

18 Governing Law and jurisdiction; third party rights

(A) Governing law

The Trust Deed, the Agency Agreement and the Notes are governed by and shall be construed in accordance with English law.

(B) Jurisdiction

The courts of England, and of the State of New York and federal courts of the United States sitting in the City of New York, are to have jurisdiction to settle any disputes which may arise out of or in connection with the Notes and accordingly any legal action or proceedings arising out of or in connection with the Notes (‘‘Proceedings’’) may be brought in such courts. The Company has in the Trust Deed irrevocably submitted to the jurisdiction of such courts.

(C) Agent for service of process

The Company has irrevocably appointed Law Debenture Corporate Services Limited at its registered office for the time being (currently at Princes House, 95 Gresham Street, London EC2Y 7LY) as its agent in England to receive service of process in any Proceedings in England based on any of the Notes. The Company has irrevocably appointed CT Corporation System, 111 Eighth Avenue, New York, NY 10011, United States of America as its agent in New York to receive service of process in any Proceedings in New York based on any of the Notes.

(D) Third party rights

No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.

The Global Certificate

Except in a certain limited circumstance, interests in the Notes may only be held through interests in the Global Certificate. Such interests in the Global Certificate will be shown on, and transfer thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants.

The Global Certificate contain provisions which apply to the Notes in respect of which the Global Certificate is issued, some of which modify the Terms and Conditions set out in this Offering Circular. Terms defined in the Terms and Conditions have the same meaning in the paragraphs below. The following is a summary of those provisions:

GENERAL

The Notes will be represented by interests in the Global Certificate which will be deposited with a common depositary for, and registered in the name of a nominee of, Euroclear and/or Clearstream, Luxembourg (the “Relevant Nominee”) and interests therein will be credited to the securities clearance accounts of the relevant Noteholders with Euroclear and/or Clearstream, Luxembourg. A beneficial interest in the Global Certificate may at all times be held only through Euroclear and Clearstream, Luxembourg.

The respective nominees Euroclear and Clearstream, Luxembourg are referred to as the “Relevant Nominee”.

ACCOUNTHOLDERS

For so long as any of the Notes is represented by the Global Certificate, each person who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg (as the case may be) as the holder of a particular principal amount of such Notes (each an “Accountholder”) (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg (as the case may be) as to the principal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes) shall be treated as the holder of such principal amount of such Notes (and the expression “Noteholders” and references to “holding of Notes” and to “holder of Notes” shall be construed accordingly) for all purposes other than with respect to the payment of principal, premium (if any) and interest on such Notes, the right to which shall be vested, as against the Company, solely in the Relevant Nominee in accordance with and subject to the terms of the Global Certificate and the terms of the Trust Deed. Each Accountholder must look solely to Euroclear or Clearstream, Luxembourg (as the case may be) for its share of each payment made to the Relevant Nominee.

DEFINITIVE CERTIFICATES (“CERTIFICATES”)

Registration of title to Notes initially represented by the Global Certificate in a name other than the nominee for Euroclear and Clearstream, Luxembourg will not be permitted unless Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so.

In such circumstances, the Company at its own expense will cause sufficient definitive Certificates to be executed and delivered to the Registrar for completion and dispatch to all Noteholders. A person having an interest in a Global Certificate must provide the Registrar with a written order containing instructions and such other information as the Company and the Registrar may require to complete, execute and deliver such definitive Certificates.

The Registrar will not register the exchange of interests in a Global Certificate for definitive Certificates for a period of 15 calendar days preceding the due date for any payment of principal in respect of the Notes.

PAYMENTS

Distributions of principal of interest with respect to book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Principal Agent to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures.

A record of each payment made will be endorsed on the appropriate schedule to the Global Certificate by or on behalf of the Company and shall be prima facie evidence that payment has been made.

MEETINGS

The registered holder (as defined in the Terms and Conditions) of the Global Certificate will be treated as being two persons for the purposes of any quorum requirements of a meeting of Noteholders and, at any such meeting, as having one vote in respect of each U.S.$1,000 in principal amount of Notes for which the Global Certificate are issued. The Trustee may allow a person with an interest in Notes in respect of which the Global Certificate has been issued to attend and speak at a meeting of Noteholders on appropriate proof of his identity and interest.

CANCELLATION

Cancellation of any Note following its redemption, conversion or purchase by the Company will be effected by reduction in the principal amount of the Notes in the register of Noteholders.

TRUSTEE’S POWERS

In considering the interests of Noteholders while the Global Certificate is registered in the name of a nominee for a clearing system, the Trustee may, without being obliged to do so, have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to Notes and may consider such interests as if such accountholders were the holders of the Notes.

CONVERSION

Subject to the requirements of Euroclear and Clearstream, Luxembourg, the Conversion Right attaching to a Note in respect of which the Global Certificate is issued may be exercised by the presentation to or to the order of the Principal Agent of one or more Conversion Notices duly completed by or on behalf of a holder of a book-entry interest in such Note. Deposit of the Global Certificate with the Principal Agent together with the relevant Conversion Notice shall not be required. The exercise of the Conversion Right shall be notified by the Principal Agent to the Registrar and the holders of the Global Certificate.

NOTICES

So long as the Notes are represented by the Global Certificate and the Global Certificate is held on behalf of Euroclear or Clearstream, Luxembourg, notices to Noteholders may be given by delivery of the relevant notice to Euroclear or Clearstream, Luxembourg for communication by it to entitled

accountholders in substitution for notification as required by the Terms and Conditions except that so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, notices shall also be published in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort ).

PUT OPTION

The Noteholders’ put option in Condition 8(D) may be exercised by the holder of the Global Certificate giving notice to the Principal Agent of the principal amount of Notes in respect of which the option is exercised and presenting the Global Certificate for endorsement or exercise within the time limits specified in Condition 8(D).

TRANSFERS

Transfers of interests in the Notes will be effected through the records of Euroclear and Clearstream, Luxembourg and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants.

ENFORCEMENT

For the purposes of enforcement of the provisions of the Trust Deed, the persons named in a certificate of the holder of the Notes in respect of which a Global Certificate is issued shall be recognized as the beneficiaries of the trusts set out in the Trust Deed, to the extent of the principal amount of their interest in the Notes set out in the certificate of the holder, as if they were themselves the holders of Notes in such principal amounts.

REFERENCES TO EUROCLEAR, CLEARSTREAM AND LUXEMBOURG

Any references to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system approved by the Company and the Trustee.

Taxation

The following discussion is a summary of the material ROC income tax considerations relevant to an investment decision by certain non-ROC holders.

ROC TAXATION

The following summary addresses the principal ROC tax consequences of the ownership and disposition of the Notes or the Common Shares to a non-resident individual or non-resident entity that holds such Notes or Common Shares (a "Non-ROC Holder"). "Non-resident individual" (a "Non-ROC Individual Holder") is a foreign national individual who is not physically present in the ROC for 183 days or more during any calendar year in which he or she owns the Notes or the Common Shares and a "nonresident entity" (a "Non-ROC Entity Holder") is a corporation or a non-corporate body that is organized under the laws of a jurisdiction other than the ROC for profit-making purposes and does not have a fixed place of business or other permanent establishment in the ROC.

NOTES

Interest

Payments of stated interest or premium (if any) on a Note to a Non-ROC Holder are subject to ROC withholding tax at the rate of 20% at the time of payment..

Sale

Securities transaction tax will be imposed on the transfer of equity securities issued by ROC companies at the rate of 0.3%, which is payable by the seller. However, according to the amended Statute of Upgrading Industries effective on 1 February 2002, no securities transaction tax will be imposed on the transfer of corporate bonds and financial debentures, including the Notes, until 31 December 2009.

However, securities transaction tax, gift tax and/or income tax may be imposed in relation to the converting holder's designation of other persons to be the holder of Common Shares upon conversion of the Notes.

Under current ROC laws, capital gains on transactions of securities issued by ROC companies are exempt from income tax. This exemption applies to capital gains derived from the sale of Notes.

Conversion into Common Shares

ROC law currently provides no specific provisions regarding the ROC income tax consequences of a conversion of Notes into Common Shares or cash. Without further clarification from the ROC tax authorities, it is impossible to conclude with certainty that gain on the conversion of Notes into Common Shares or cash will not be deemed a taxable gain, additional interest income (subject to the 20% withholding tax) or otherwise be subject to other ROC tax.

Transfer of Notes by Non-ROC Holders are regarded as transactions outside the ROC and thus any gains derived therefrom are not subject to ROC income.

Stamp Duty

There is no ROC stamp, issue or registration tax imposed on the delivery of Common Shares upon conversion of the Notes.

Common Shares

Dividends

Dividends (whether in cash or shares) declared by the Company out of retained earnings and distributed to a Non-ROC Holder in respect of Common Shares are subject to ROC withholdings tax, currently at the rate of 20%, on the amount of the distribution (in the case of cash dividends) or on the par value of the Common Shares (in the case of stock dividends).

Distributions of Common Shares declared by the Company out of capital reserves are not subject to ROC withholding tax.

Sale

Securities transaction tax will be withheld at the rate of 0.3% of the transaction price upon a sale of Common Shares.

Under current ROC laws, capital gains on transactions in securities issued by ROC companies are exempt from income tax. This exemption applies to capital gains derived from the sale of Common Shares.

Pre-emptive Rights

Distributions of statutory subscription rights for the Common Shares in compliance with the ROC Company Law are not subject to ROC tax. Proceeds derived from sales of statutory subscription rights evidenced by securities are currently exempted from income tax but are subject to securities transaction tax, currently at the rate of 0.3% of the gross sales amount. Proceeds derived from sales of statutory subscription rights which are not evidenced by securities are subject to capital gains tax at the rate of (1) 25% of the gains realized by Non-ROC Entity Holders and (2) 35% of gains realized by Non-ROC Individual Holders. Subject to compliance with ROC laws, the Company has the sole discretion to determine whether statutory subscription rights shall be evidenced by the issuance of securities.

Inheritance Tax and Gift Tax

ROC inheritance tax is payable on any property located within ROC of a deceased Non-ROC individual, and ROC gift tax is payable on any property located within ROC donated by such person. Inheritance tax is payable at rates ranging from 2% of the first NT$0.6 million to 50% of amounts over NT$100 million. Gift tax is payable at rates ranging from 4% of the first NT$0.6 million to 50% of amounts over NT$45 million. Under ROC inheritance and gift tax law, bonds and shares issued by ROC companies are deemed located within the ROC regardless of the location of the owner.

Tax Treaties

The United States does not have an income tax treaty with the ROC. At present, the ROC has income tax treaties with Australia, Gambia, Indonesia, Malaysia, Macedonia, the United Kingdom, the Netherlands, New Zealand, Singapore, South Africa, Swaziland and Vietnam, which limit the rate of withholding tax on dividends or interest paid with respect to shares or notes in ROC companies. It is unclear whether a Non-ROC Holder will be considered to own Notes or Common Shares for the purposes of such income tax treaties. Accordingly, holders of Notes or Common Shares who are otherwise entitled to the benefits of a relevant income tax treaty should consult their own tax advisors concerning their eligibility for benefits under the treaty with respect to the Notes or Common Shares.

Tax Reform

In order to increase ROC's competitiveness, an amendment to the ROC Income Tax Law (the "Amendment") was enacted on January 1, 1998 to integrate corporate income tax with shareholder dividend tax with the aim of eliminating the double taxation effect for resident shareholders of ROC companies. According to the Amendment, a 10% retained earnings tax is imposed on a company for its

100

after-tax earnings generated after 1 January 1998 which are not distributed in the following year. The retained earnings tax so paid will further reduce the retained earnings available for further distribution. When the Company declares dividends out of the Company's retained earnings, a maximum amount of 10% of the declared dividends will be credited against the ROC 20% withholding tax, so that the actual withholding tax imposed on the Non-ROC Holders may be less than 20%.

101

Underwriting

The Company has entered into a subscription agreement with Goldman Sachs International and other managers named therein (collectively, the “Managers”), dated July 10, 2003 (the “Subscription Agreement”), pursuant to which and subject to certain conditions contained in the Subscription Agreement, the Company agreed to sell to the Managers and the Managers agreed, severally but not jointly, to subscribe for, the aggregate principal amount of the Notes set forth opposite their names below:

Managers Goldman Sachs International ......................................................................................... Barits Securities (Hong Kong) Limited ............................................................................ Total ................................................................................................................................	Aggregate Principal Amount of Notes (U.S.$) 170,000,000 15,000,000 185,000,000

Under the terms and conditions of the subscription agreement, if the Managers take any of the Notes, then the Managers are obligated to take and pay for all of the Notes.

The Managers initially propose to subscribe for the Notes at a purchase price equals to the offer price indicated on the cover page less the underwriting commission, management commission and selling commission in aggregate of 1% of the principal amount of the Notes subscribed, and offer to resell the Notes to the purchasers at the offer price indicated on the cover page. After the initial offering of the Notes, the Managers may from time to time vary the offering price and other selling terms.

The Company has granted Goldman Sachs International an option which can be exercised, in whole or in part, on one or more occasions, to subscribe for up to a further U.S.$15,000,000 aggregate principal amount of the Notes at any time up to and including the thirtieth day following the Closing Date.

The Company has agreed in the Subscription Agreement that for a period of 90 days from July 10, 2003, it will not, and it will procure that none of Mr. Bruce CH Cheng, Mrs. E-Ying H Cheng, Deico International Limited and Deltron Holding Limited will, directly or indirectly, issue, offer for sale, sell or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any Common Shares or securities of the same class as the Notes or Common Shares (other than pursuant to employee benefits plans or distributions of dividends or employee dividends in the form of Common Shares and other than Common Shares issued upon conversion of the Notes and the Company’s convertible bonds issued prior to the date of this Agreement) or in any securities convertible into, exchangeable for or which carry rights to subscribe or purchase the Notes, Common Shares or securities of the same class as the Notes, Common Shares or other instruments representing interests in the Notes, Common Shares or other securities of the same class as them, or announce or otherwise make public an intention to do any of the foregoing, in any such case without the prior written consent of Goldman Sachs International; provided however, that this undertaking shall not apply to the sale by Mr Bruce CH Cheng and/or Mrs E-Ying H Cheng of up to a total of 40,000,000 Common Shares in the form of global depositary receipts.

The Managers have agreed to reimburse the Company, or pay on behalf of the Company, some of the fees and expenses of the Company in connection with this offering.

102

The Subscription Agreement provides that the Company will indemnify the Managers against certain liabilities, including liabilities under the Securities Act. The Subscription Agreement provides that the obligations of the Managers are subject to certain conditions precedent, and entitles the Managers to terminate it in certain circumstances prior to payment being made to the Company. The Company has agreed to indemnify the Managers against certain liabilities in connection with the offer and sale of the Notes.

In connection with the offering, Goldman Sachs International, on behalf of the Managers, is permitted to engage in certain transactions that stabilize, maintain or otherwise affect the price of the Notes and the Common Shares. Such transactions may consist of sales, bids or purchases for the purpose of pegging, fixing or maintaining the price of the Notes and the Common Shares.

The Managers or their affiliates may purchase the Notes for their own account and enter into transactions, including (i) credit derivatives including asset swaps, repackaging and credit default swaps relating to the Notes and/or our company’s securities or (ii) equity derivatives and stock loan transactions relating to the Common Shares at the same time as the offer and sale of the Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of the Notes to which this offering circular relates (notwithstanding that such selected counter-parties may also be purchasers of the Notes). Certain of the Managers or their affiliates have purchased and been allocated Notes for asset management and/or proprietary purposes and not with a view to distribution. Such purchases in aggregate accounted for less than 15% of the overall offering size.

The Managers may create a short position in the Notes in connection with this offering. If the Managers create a short position in the Notes in connection with this offering (i.e., if they sell a greater principal amount of Notes than the principal amount of Notes set forth on the cover page of the offering memorandum), the Managers may reduce that short position by purchasing Notes in the open market. The Managers also may elect to reduce any short position by exercising all or part of their option to increase the size of the Offering described herein.

The Managers also may impose a penalty bid on certain Managers and selling group members. This means that if the Managers purchases Notes in the open market to reduce the Managers’ short position or to stabilize the price of the Notes or the Common Shares, they may reclaim the amount of the selling concession from the Managers and selling group members who sold such Notes as part of this offering.

In general, purchases of a security for the purpose of stabilization or to reduce a syndicate short position could cause the price of the security to be higher than it might otherwise be in the absence of such purchases. The imposition of a penalty bid might have an effect on the price of a security to the extent that it were to discourage resales of the security by purchasers in an offering. If these activities are commenced, they may be discontinued by the Managers at any time. These transactions may be effected in the over-the-counter market or otherwise.

Neither the Company nor any of the Managers makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes or the Common Shares. In addition, none of the parties nor any of the Managers makes any representation that the Managers will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice.

The Notes are a new issue of securities with no established trading market. Application has been made to list the Notes on the LSE. However, no assurance can be given as to the liquidity of any trading market for the Notes. Moreover, the Company does not intend to list the Notes on any U.S. national securities exchange. The Managers have advised the Company that they intend to make a market for the Notes, but they have no obligation to do so and may discontinue market-making at any

103

time without providing any notice. The Common Shares are traded on the TSE under the number of “2308”.

The Notes and the Common Shares issuable upon exchange of the Notes have not been and will not be registered under the Securities Act or any state securities laws and the Notes are subject to U.S. tax law requirements. Unless so registered, the Notes and the Common Shares issuable upon exchange of the Notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons unless such securities are registered under the Securities Act and such state securities laws or an exemption from the registration requirements of the Securities Act and such state securities laws is available.

Each Manager may only resell the Notes outside the United States in offshore transactions in reliance on Regulation S under the Securities Act and in accordance with applicable law. Terms used above have the meanings assigned to them in Regulation S under the Securities Act.

In addition, until 40 days after the later of the commencement of the offering and the completion of the distribution of the Notes, any offer or sale of Notes within the United States by any dealer not participating in the offering may violate the Securities Act.

No Notes may be offered or sold to persons in the United Kingdom prior to the expiry of the period of six months from the Closing Date except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purpose of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995. Anything done by any person in relation to the Notes in, from or otherwise involving the United Kingdom must comply with all applicable provisions of the Financial Services and Markets Act 2000 (the “FSMA”). In addition, no person may communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Company.

The Notes acquired by the Managers as part of the distribution of the Notes may not be offered, sold or delivered, directly or indirectly, in the ROC.

The Notes may not be offered or sold in Hong Kong, by means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong. In addition, no person may issue or have in its possession for the purposes of issue any advertisement, invitation or document relating to the Notes, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) and any rules made thereunder.

This Offering Circular has not been and will not be registered as a prospectus with the Monetary Authority of Singapore (the “MAS”) under the Securities and Futures Act, Chapter 289 of Singapore (the “Securities and Futures Act”). Accordingly the Notes may not be offered or sold or be made the subject of an invitation for subscription or purchase nor may this Offering Circular or any other document or material in connection with the offer or sale, or invitation for subscription or purchase of the Notes be circulated or distributed, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor or other person specified in Section 274 of the Securities and Futures Act, (ii) to a sophisticated investor, and in accordance with the conditions,

104

specified in Section 275 of the Securities and Futures Act, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures Act.

The Notes may not be offered, sold, transferred or delivered, directly or indirectly, in or from the Netherlands, as part of their initial distribution or as part of any re-offering, and neither this Offering Circular nor any other document in respect of the offering may be distributed in the Netherlands, other than to individuals or legal entities which include, but are not limited to banks, brokers, dealers, institutional investors and undertakings with a treasury department, who or which trade or invest in securities in the conduct of a business or profession.

105

Legal Matters

The Company is being represented by Lee & Li regarding matters of ROC law. The Managers are being represented by Linklaters regarding matters of English law.

Independent Auditors

Our audited consolidated financial statements as of and for the years ended December 31, 2000, 2001 and 2002, all of which are included in this offering circular, have been audited by PricewaterhouseCoopers as indicated in its audit reports included herein. PricewaterhouseCoopers is located at 27th Floor, International Trade Building, 333 Keelung Road, Section 1, Taipei, Taiwan, ROC. They are a member of the Taiwan CPA Association.

106

General information

The Notes have been accepted for clearing through Euroclear and Clearstream, Luxembourg under Common Code number 017261053. The International Securities Identification Number for the Notes is XS0172610536.

Application has been made to list the Notes on the Luxembourg Stock Exchange. The legal notice relating to the issue of the Notes and the Articles of Incorporation of the Company will be deposited with a Registre de Commerce et des Sociétés , where such documents are available for inspection and where copies thereof can be obtained upon request. As long as the Notes are listed on the Luxembourg Stock Exchange, an agent for making payments on, conversions and transfers of, Notes will be maintained in Luxembourg.

The Company has obtained all necessary consents, approvals and authorizations in connection with the issue of the Notes. The issue of the Notes was authorized by resolutions of the Board of Directors of the Company passed on June 25, 2003.

Except as disclosed in this Offering Circular, there has been no significant change in the financial or trading position of the Company and its subsidiaries since December 31, 2002 and no material adverse change in the financial position or prospects of the Company and its subsidiaries since December 31, 2002.

Neither the Company nor any of its subsidiaries is involved in any litigation or arbitration proceedings which may have, or have had during the 12 months preceding the date of this Offering Circular, a material adverse effect on the financial position of the Company and its subsidiaries, nor, so far as any of them is aware, is any such proceeding pending or threatened.

The consolidated accounts of the Company and its consolidated subsidiaries for the years ended December 31, 2000, 2001 and 2002 have been audited by PricewaterhouseCoopers in accordance with ROC auditing standards. The Company is not required by ROC law and regulation to produce, and does not publish, any interim consolidated financial statements. The non-consolidated financial statements of the Company for the three-month periods ended March 31, 2002 and 2003 have been reviewed by PricewaterhouseCoopers. The review of such interim financial statements is substantially less in scope than an audit and is conducted in accordance with the review standards generally accepted in the ROC.

Copies (and certified English translations where the documents are not in English) of the following documents may be inspected and, in the case of the copies of the Company’s financial statements, obtained at the specified office of the Paying, Conversion and Transfer Agent in Luxembourg for as long as the Notes are listed on the Luxembourg Stock Exchange:

Articles of Incorporation of Delta Electronics, Inc.;
a copy of the report of the independent accountants and the audited consolidated financial statements of the Company for the three years ended December 31, 2000, 2001 and 2002;
a copy of the review report of the independent accountants and the unaudited nonconsolidated financial statements of the Company for the three-month periods ended March 31, 2002 and 2003;
the Subscription Agreement relating to the Notes; and
the Trust Deed to constitute the Notes (which includes the form of the Global Certificate and the definitive Certificates) and of the Agency Agreement.

107

In addition, copies of all future consolidated annual financial statements of the Company and any future quarterly non-consolidated interim financial statements of the Company, will be available at the specified office of the Paying, Conversion and Transfer Agent in Luxembourg for as long as the Notes are listed on the Luxembourg Stock Exchange.

According to Chapter VI, Article 3, Point A/ll/2 of the Rules and Regulations of the Luxembourg Stock Exchange, the Notes shall be freely transferable and therefore no transaction made on the Luxembourg Stock Exchange shall be cancelled.

108

Summary of Certain Differences Between ROC GAAP and US GAAP

Financial statements prepared in accordance with “Rules Governing Preparation of Financial Statements of Securities Issuers” and generally accepted accounting principles in the Republic of China (collectively referred herein as “ROC GAAP”) differ in certain respects from US GAAP. The following is a summary of the principal differences between ROC GAAP and ROC SFC requirements, as applicable to the Company, and US GAAP. The summary below should not be considered to be exhaustive. Additionally, it may exclude certain differences that may affect the disclosure, presentation or classification of transactions or events in the Company’s financial statements. Further, this summary does not take into account numerous projects currently being undertaken by standard setting bodies in the United States and ROC which could have an impact on the comparison between ROC GAAP and US GAAP, which are applicable to the Company. Finally, no attempt has been made to identify all future differences between ROC GAAP and US GAAP that may affect the financial statements as a result of transactions or events that may occur in the future.

ROC GAAP

US GAAP

1 Presentation of non-consolidated financial statements

Under ROC GAAP, non-consolidated financial statements of a company are presented as the primary financial statements and consolidated financial statements as supplemental financial statements.

Under US GAAP, parent-company-only nonconsolidated financial statements are not allowed to be presented as the primary financial statements for any period.

2 Employee stock bonus

It is a statutory requirement that bonuses paid to employees and remuneration paid to directors and supervisors out of retained earnings are not regarded as expenses, but instead are reported as a distribution from retained earnings in the year the shareholders approve the distribution of earnings. Under certain circumstances, employee bonuses may be paid in the form of newly issued stocks, in which case the stock issuance is recorded at par value and is reported as a distribution of retained earnings.

The stock bonus to employees is given retroactive effect in the computation of earnings per share.

Under US GAAP, employee bonuses and remuneration issued to directors and supervisors are charged to income as compensation expenses in the year when related services are provided, irrespective of whether the bonuses are paid in the form of cash or stock. For bonuses paid in stock, the shares are valued using the fair value or the intrinsic value method.

Under US GAAP, stock bonus to employees is given only prospective effect in the computation of earnings per share.

3 Stock dividends

Under ROC GAAP, the issuance of stock dividends is recorded based on the par value of the shares, multiplied by the number of shares issued.

Under US GAAP, when the ratio of distribution is less than 25% of shares of the same class outstanding, stock dividends are generally recorded based on the fair value method, with the par value recorded in the capital stock accounts

109

ROC GAAP

US GAAP

and the excess of fair value over the par value being recorded as additional paid-in capital. Distribution in excess of 25% is generally considered as stock split.

4 Employee share purchase

In connection with a number of new shares issued to shareholders, the company also issues shares to employees at the same issue price, which usually represented a discount to the quoted market price. Under ROC GAAP, such issues are recorded as capital contribution for the cash amount received from the employees.

Under US GAAP, such issues would be recorded as capital contribution for the cash amount received from the employees. In addition, compensation expense would be recorded, for the difference between the shares issue price and the fair market value, during the period when such issues were made.

5 Treasury stock/earnings per share

Under the ROC Company Law, a company’s subsidiaries are permitted to purchase the parent company’s shares, hold the shares for trading purpose and recognize the related investment income or loss.

When preparing the consolidated financial statements, the shares of the parent company held by its subsidiaries are treated as treasury stock. However, these shares are still treated as outstanding shares when computing earnings per share as the gain or loss generated from the treasury stock transactions is included in the consolidated net income.

Under US GAAP, the purchases and sales of a company’s shares by its subsidiaries are treated as treasury stock transactions of the company. Accordingly, no gain or loss on the disposal of the treasury stock is recognized as investment income or loss by the company and the proceeds from the sales are allocated between capital stock and capital reserve. Any shares of the company held by its subsidiaries at year-end are reported as treasury stock and are deducted in the calculation of earnings per share.

Commencing from January 1, 2002, the company’s shares owned by its subsidiaries are treated as treasury stock and similar accounting treatments as U.S. GAAP are adopted to account for such transactions.

6 Consolidation

Under ROC GAAP, a company is required to include in its annual consolidated financial statements only those subsidiaries, which are directly or indirectly over 50% owned. For subsidiaries (i) with total assets and operating revenues which are less than 10% of the company‘s non-consolidated total assets and operating revenues, respectively, or (ii) which are in a negative equity position, the company has the option of whether or not to consolidate such subsidiaries. Irrespective of

Under US GAAP, the parent company’s consolidated financial statements generally include the financial statements of majority-owned subsidiaries, unless control does not rest with the majority owner.

110

ROC GAAP

US GAAP

the above test, if the combined revenues or total assets of all such non-consolidated subsidiaries exceeds 30% of the company‘s non-consolidated total assets or operating revenues, then each individual subsidiary with total assets or operating revenues greater than 3% of the company’s respective non-consolidated amounts shall be consolidated. In addition, under the Company Law in the Republic of China, the company is required to include in its consolidated financial statements the financial statements of its less than majority owned investee companies if the company has the ability to control the human resources, finance or operations of the investee companies.

Under ROC GAAP, a company is not required to prepare interim financial statements on a consolidated basis. Instead, the company is only required to recognize investment income/loss in majority owned subsidiaries under the equity method. Under ROC GAAP, a company is not required to recognize in its three months and nine months interim financial statements investment income/loss on investee companies in which the company has, directly or indirectly, 20% to 50% ownership interest. Investment income/loss in these investee companies is required only to be recognized in the semi-annual and annual financial statements.

ROC GAAP provides that when a company‘s interest in a subsidiary changes from a majority interest to a minority interest, the investment in the subsidiary should be accounted for under the equity basis in the consolidated financial statements in the current year. In addition, ROC GAAP construes such change to be a change in the reporting entity which requires that in order to maintain consistency in the application of accounting standards, the prior year(s) comparative consolidated financial statements should be retroactively restated.

Under ROC GAAP, the minority interest in consolidated subsidiaries can be presented either as part of liabilities, in between

US GAAP requires that the accounting principles and practices used by an enterprise in the preparation of its interim statements be based on those used in its latest annual financial statements unless a change of accounting practice or policy has been adopted in the current year. Thus, if the enterprise’s latest annual financial statements were prepared on a consolidated basis, accordingly the interim financial statements shall also be prepared on a consolidated basis, except as discussed above.

Under US GAAP, for purposes of application of the consistency standard, a change in the reporting entity is not deemed to result from the creation, cessation, purchase, or disposition of a subsidiary or other business. Accordingly, when a company‘s interest in a specific subsidiary or investee affiliate changes during the year, that change is generally accounted for prospectively and retroactive restatement is not required.

Under US GAAP, the minority interest in consolidated subsidiaries is presented as a separate item between liabilities and stockholders’

111

ROC GAAP

liabilities and stockholders’ equity or in stockholders’ equity in the consolidated financial statements.

US GAAP

equity in the consolidated financial statements.

7 Business combination

Under ROC GAAP, business combinations are generally accounted for under purchase method, but pooling of interest method is still allowed if certain criteria are met. When business combinations are accounted for under purchase method and the consideration given up by the acquirer is in the form of shares, the cost to the acquirer is generally determined based on the fair value of the assets acquired and liabilities assumed. When business combinations are accounted for under pooling of interest method, the acquired company’s income and loss accounts before the merger are included in the acquirer company’s income, and then transferred to capital reserve pursuant to the Company Law and the related regulations in the ROC.

Under ROC GAAP, goodwill is the excess of the investment cost over the fair value of acquired net assets. Goodwill is capitalized as an intangible asset and amortized to the income statement over five to twenty years. Negative goodwill is accounted for similarly.

Under ROC GAAP, the company’s individual profit and loss account may include the results of operations of the acquired company for the period prior to the acquisition in the year of acquisition, then adjusted through minority interest income/loss account for the same amount.

Under US GAAP, all business combinations initiated after June 30, 2001 are accounted for under purchase method. The cost to the acquirer in a purchase business combination is the fair value of the consideration given or the fair value of the assets acquired, whichever is more clearly evident and more reliably measurable. When the consideration is the publicly traded equity securities issued by the acquirer, fair value is generally based on the market price of the equity securities issued. The market price is determined based on a reasonable period before and after the date of the terms of the acquisition are agreed to and announced. The cost of an acquired company should be allocated to the assets (both tangible and intangible) acquired and liabilities assumed on the basis of their estimated fair values at the date of acquisition.

Under US GAAP, goodwill acquired after June 30, 2001 shall not be amortized. Instead, it shall be tested for impairment at reporting unit level at least annually. Goodwill acquired before June 30, 2001 should continue be amortized through December 31, 2001 over its estimated useful life but not exceeding 40 years. Effective January 1, 2002, all goodwill are subject non-amortization provision as described above. Negative goodwill being the excess of fair value of acquired net assets over cost, after certain adjustments, is an extraordinary gain.

Under US GAAP, the company’s profit and loss accounts only include the results of operations of the acquired company after acquisition.

8 Equity investments of at least 20%

Under ROC GAAP, equity investments where the company has voting rights of at least 20% are generally required to be accounted for under the equity method; however, when the

Under US GAAP, the equity method of accounting is generally required for investments with an ownership percentage of at least 20% but less than 50%, unless (i) the investment is considered

112

ROC GAAP

company has not received the audited financial statements of the equity-method investee company in time to recognize its equity in the investee company‘s income (loss), the company may delay the recognition of its equity in the investee company’s income (loss) until the subsequent year, unless the company meets the following criteria, in which case no delay in recognition is possible: (i) the beginning balance of the company‘s long-term investment balance exceeds NT$50 million and 5% of the investor company’s paid-in-capital; (ii) direct ownership of the investee company exceeds 30%, or direct ownership plus indirect ownership through directors, supervisors, and management exceeds 50%; and (iii) the investor company is one of the top three shareholders of the investee company or the investee company‘s chairperson or general manager was appointed by the investor company. If the company is required to prepare interim financial statements, such investment income (loss), which is calculated based on the proportionate share in the prior year’s annual income (loss) of the investee company, has to be recognized in the semiannual financial statements of the company in the subsequent year at the latest. In addition, such delay in recognition is not possible when the company has a direct or indirect control over the management of the personnel, financial or business operation of the investee company.

When the accounting treatment for a longterm equity investment is changed from cost method to equity method, the difference between the cost of investment and the company’s share of the investee company’s equity at the time of the change is deferred and amortized over 5 years.

US GAAP

temporary or (ii) the investor does not possess the ability to exercise significant influence over the investee. There are no provisions, which allow the investor company to delay recognition of its equity in the investee company‘s income (loss).

Under US GAAP, when the accounting treatment for a long-term equity investment is changed from cost method to equity method, retroactive restatement is required. If the company is unable to relate the difference between the carrying amount of the investment and the company’s share of the investee company’s equity to specific accounts of the investee, the difference should be considered to be goodwill and tested for impairment at least annually.

9 Equity investments of less than 20% or debt investments/short-term investment

Long-term investments of less than 20% of a company‘s shares are accounted for at the

Equity investments of less than 20% that have readily determinable fair value and debt

113

ROC GAAP

lower of cost or market value for listed investee companies and at cost for unlisted investee companies and if the company has no ability to exercise significant influence in the management of the investee company. Valuation allowance under this lower of cost or market value method is shown under stockholders’ equity. When it becomes evidently clear that there has been a permanent impairment in investments value and the chance of recovery is minimal, loss is recognized in current year earnings.

Under ROC GAAP, investments in foreign investee companies, denominated in foreign currencies, accounted for at cost method are converted to New Taiwan dollars using the exchange rate prevailing at balance sheet date and the resulting exchange loss but not gain is recorded in stockholders’ equity under the cumulative translation adjustment account.

Short-term investments are stated at the lower of cost or market value. In the subsequent period, recoveries of market value are recognized as other income to the extent of the original cost of the investments.

US GAAP

investments are classified in three categories and accounted as follows:

(a) Debt and equity securities classified as trading securities are marked to market at the end of the accounting period with unrealized gains or losses taken to current earnings.
(b) Debt securities classified as held to maturity are reported at amortized cost, with any premium or discount amortized over the period of the investment.
(c) Debt and equity securities classified as available for sale are marked to market at the end of the accounting period with unrealized gains or losses taken to a separate component of shareholders’ equity, unless there is a permanent decline in the value of such investment in which case it is recorded against income.

Investments that have no readily determinable fair value are accounted for at historical cost subject to impairment test.

10 Accounting for changes in ownership interest in investee companies

Under ROC GAAP, when an investee company issues additional shares and the investor’s ownership interest changes as a result, any resulting difference between the investor’s investment balance and its proportionate share of the investee company’s net equity is adjusted to its investment account with an offsetting entry to the investor’s capital reserve or retained earnings if the related capital reserve balance is insufficient. Upon subsequent disposition of the investment, amounts previously recorded to capital reserve or retained earnings relating to the respective investment will be reversed and recorded as part of the gain or loss on disposal.

Under US GAAP, when an investee company issues additional shares at an amount over/under the carrying value of the shares held by the investor and the investor’s ownership interest decreases as a result of not fully subscribing to the issue, the resulting difference between the investor’s investment balance and its proportionate share of investee company’s net equity is adjusted to its investment account with an offsetting entry either to (i) gain or loss to record the deemed disposition of shares or (ii) to paid-incapital. If an adjustment has been made to paid-incapital to recognize investee capital transactions, US GAAP would not permit the adjustment of such amounts on the subsequent disposition of all or a part of the investments.

114

ROC GAAP

US GAAP

11 Revaluation of fixed assets

ROC GAAP permits property, plant and equipment to be recorded at cost or at cost plus appreciation in respect of assets revalued in accordance with ROC government regulations.

Upward revaluation of assets is not permitted under US GAAP.

12 Impairment of long-lived assets or longlived assets to be disposed

No specific standards address impairment of long-lived assets; normally such assets would be carried at cost less accumulated depreciation. However, when events or changes in circumstance indicate that a significant impairment occurs, an impairment loss should be recorded in the current period.

US GAAP requires that long-lived assets held for years and used by an entity be reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. For assets held for use, if the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized for the difference between the carrying value and the fair value which is generally determined based on discounted cash flow.

Assets purchased for use in the business but not subsequently used for that purpose are generally recorded as idle assets and reclassified from fixed assets to other assets, in which case there is a requirement to assess the net realizable value such that idle assets are not recorded at an amount in excess of net realizable value.

13 Prepayment of fixed assets

Under ROC GAAP, prepayment of fixed assets is presented as part of fixed assets

Under US GAAP, prepayment of fixed assets should be presented as other assets.

14 Depreciation of fixed assets

Depreciation is generally provided using the guideline service lives as prescribed by the ROC Tax Authorities plus one additional year as salvage value.

Depreciation is provided over the asset’s estimated economic useful life. Salvage value, if any, is based on the estimated net realizable value of the asset at the end of its estimated economic useful life.

15 Convertible preferred stock and debt securities

When convertible bonds are issued, ROC GAAP does not recognize or account for any beneficial conversion feature embedded in the securities.

Under US GAAP, such beneficial conversion feature should be recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. That amount should be calculated at the commitment date as the difference between the

115

ROC GAAP

US GAAP

conversion price and the fair value of the common stock, multiplied by the number of shares into which the security is convertible.

16 Accounting for derivative instruments

There are no specific accounting standards under ROC GAAP which address measurement for derivative instruments except for foreign currency forward contracts. Such contracts are classified as hedge or speculative in nature. The classification is generally based on the management’s intention. Derivative instruments are generally recognized as assets and/or liabilities in the balance sheet. The valuation for hedging contracts or hedging instruments corresponds to the method of valuation of the hedged item. For example, if the hedged item is market-valued, then the hedging instrument is also market-valued. If the hedged item is valued at the lower of cost or market, then the hedging instrument is also valued at the lower of cost or market. Speculative contracts are measured at fair value and the difference between the book value and the fair value is recorded in the current period’s operating results.

Under US GAAP requires that all entities recognize derivative instruments as assets and liabilities in the statement of financial position and subsequently measure them at fair value. Generally, a derivative is classified as a hedge instrument if, (1) at inception of the hedge, there is formal documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge, including identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the hedging instrument’s effectiveness is offsetting the exposure to changes in the hedged item’s fair value or variability in cash flows attributable to the hedged risk will be assessed, and (2) the hedging relationship is expected to be highly effective. If a derivative is qualified as a hedge, entities may elect to designate the derivative instrument as one of the following:

Fair value hedge – a hedge of the exposures to changes (that are attributable to a particular risk) in the fair value of (1) a recognized asset or liability or (2) an unrecognized firm commitment;

Cash-flow hedge – a hedge of the exposure to variability (that is attributable to a particular risk) in the cash flows of a forecasted transaction; and

Foreign-currency hedge – a hedge of the foreigncurrency exposure of (1) an unrecognized firm commitment, (2) an available-for-sale security, (3) a forecasted transaction, or (4) a net investment in a foreign operation.

17 Compensated absences

ROC GAAP has no specific accounting practice regarding compensated absences.

Compensated absences must be accrued based on the liability for employees‘ rights to receive compensation for future absences when certain conditions are met.

116

ROC GAAP

US GAAP

18 Cost of sales

Under ROC GAAP, provisions for normal inventory scrap and obsolescence are recorded as non-operating expenses.

Under ROC GAAP, the unrealized gross profit generated from downstream intercompany transactions is eliminated and presented as a reconciling item of gross profit in the statement of income. A corresponding liability is recorded for the amount of the unrealized gross profit in the balance sheet.

Under US GAAP, provisions for normal inventory scrap and obsolescence are generally charged to cost of sales.

Under US GAAP, the unrealized gross profit generated from downstream transactions is generally charged against cost of sales and credited the investment account.

19 Concentration of risk

ROC GAAP has no specific disclosure requirements for concentration of risk.

Disclose concentration of risk on one or more parties, as appropriate, including such parties as sole/major customer, supplier, franchiser, distributor, general agent, borrower or lender is required.

20 Segment information

ROC GAAP requires disclosure of segment information in the footnotes information to the financial statements according to industry and geographic information, which need not necessarily be the same as the management's internal report to company decision-makers.

Under US GAAP, public business enterprise is required to present segment information based on operating segments. Several operating segments may, provided aggregation criteria are met, be aggregated to reportable segments for which the required information is disclosed. Disclosure is based on the management's approach for reporting segments information to Company chief operating decision makers that are used internally for evaluating segment performance and deciding resources allocation to segments.

21 Statement of cash flows

Under ROC GAAP, certificates of time deposits with original maturities of greater than three months are classified as cash.

Under US GAAP, certificates of time deposits with original maturities of over three months are classified as trading securities.

22 Pension

Under ROC GAAP, the amortization of unrecognized net gain/loss cannot exceed the excess of unrecognized net gain/loss and unrecognized net transition obligation.

With respect to the pension plan disclosure, under ROC GAAP, disclosure of changes in plan assets and benefit obligations is not required.

Under US GAAP, no such limitation on the amortization of unrecognized net gain/loss is required.

With respect to the pension plan disclosure, under US GAAP, changes in plan assets and benefit obligations are required to be disclosed.

117

ROC GAAP

US GAAP

23 Revenue recognition

Under ROC GAAP, revenue is recognized when realized or realizable.

According to ROC SFAS No. 32 issued in June 2002 in relation to revenue recognition, similar criteria for revenue recognition are adopted. This Statement is effective for financial statements issued for fiscal year ending after December 31, 2003 and early adoption is encouraged.

Under ROC GAAP, sales to subsidiaries are generally recognized upon delivery but unrealized profits/losses would be eliminated.

Under US GAAP, revenue recognition is usually prescriptive and revenue is generally recognized when it is realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectibility is reasonably assured.

Under US GAAP, sales to subsidiaries are not recognized until the subsidiaries sell through to the third parties.

24 10% additional income tax on undistributed earnings

Under the current tax regulations, current year’s earnings, on tax basis, not distributed in the following year are subject to 10% additional income tax. This 10% additional income tax is recognized as a tax expense in the following year when the amount is determined. In addition, the effect of the 10% tax on temporary differences is not recognized.

Under US GAAP, this 10% additional income tax is recognized in the period during which the related income is generated and the impact of the 10% tax is measured for both current and deferred tax.

25 Disclosure of new accounting pronouncements

Under ROC GAAP, disclosure of recently issued accounting standards but not yet effective as of the balance sheet date is not required.

US GAAP requires disclosure of the impact that recently issued accounting standards will have on the financial statement of the company when adopted in the future.

26 Comprehensive income

Under ROC GAAP, there is no standard for accounting and reporting of comprehensive income.

US GAAP requires that comprehensive income be displayed with the same prominence as other financial statements. Comprehensive income is composed of two subsets – “net income” and “other comprehensive income”. Comprehensive income includes charges or credits to equity that are not the result of transactions with owners. (e.g. cumulative translation adjustments, minimum pension liabilities, unrealized gains or losses on available-for-sales securities and the effective portion of the change in the fair value of cash flow and net investment hedges)

118

ROC GAAP

US GAAP

27 Interim financial statements

Under ROC GAAP, the Company is not required to present statement of changes in stockholders’ equity in the three months and nine-months interim non-consolidated financial statements

Under US GAAP, the interim financial statements are prepared on the same basis as the latest annual financial statements, which requires the inclusion of the statement of changes in stockholders’ equity

119

Index To Financial Statements

Consolidated Financial Statements of Delta Electronics, Inc. Audit Report of Independent Auditors PricewaterhouseCoopers ..................................... Audited Consolidated Balance Sheets as of December 31, 2000, 2001 and 2002 .......... Audited Consolidated Statements of Income for the years ended December 31, 2000, 2001 and 2002 ........................................................................................................................... Audited Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2000, 2001 and 2002 ................................................................................ Audited Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002 .................................................................................................................. Notes to Audited Consolidated Financial Statements ....................................................... Unaudited Interim Non-consolidated Financial Statements of Delta Electronics, Inc. Review Report of Independent Auditors PricewaterhouseCoopers................................... Unaudited Non-consolidated Balance Sheets as of March 31, 2002 and 2003 ................ Unaudited Non-consolidated Statements of Income for the three months ended March 31, 2002 and 2003 .................................................................................................................. Unaudited Non-consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2003 ............................................................................................................ Notes to Unaudited Non-consolidated Financial Statements ............................................	Page
	F-1 F-3 F-5 F-6 F-8 F-10 F-84 F-86 F-87 F-88 F-90

Consolidated Financial Statements of Delta Electronics, Inc.
Audit Report of Independent Auditors PricewaterhouseCoopers .....................................
Audited Consolidated Balance Sheets as of December 31, 2000, 2001 and 2002 ..........
Audited Consolidated Statements of Income for the years ended December 31, 2000, 2001
and 2002 ...........................................................................................................................
Audited Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 2000, 2001 and 2002 ................................................................................
Audited Consolidated Statements of Cash Flows for the years ended December 31, 2000,
2001 and 2002 ..................................................................................................................
Notes to Audited Consolidated Financial Statements .......................................................
Unaudited Interim Non-consolidated Financial Statements of Delta Electronics, Inc.
Review Report of Independent Auditors PricewaterhouseCoopers...................................
Unaudited Non-consolidated Balance Sheets as of March 31, 2002 and 2003 ................
Unaudited Non-consolidated Statements of Income for the three months ended March 31,
2002 and 2003 ..................................................................................................................
Unaudited Non-consolidated Statements of Cash Flows for the three months ended March
31, 2002 and 2003 ............................................................................................................
Notes to Unaudited Non-consolidated Financial Statements ............................................

Page

F-1
F-3
F-5
F-6
F-8
F-10
F-84
F-86
F-87
F-88
F-90

120

Appendix A - Foreign Investment and Exchange Controls in the ROC

Foreign Investment and Exchange Controls in the ROC

The information presented in this section has been extracted from publicly available documents, such as statistical data and information published by the ROC SFC and the TSE, which have not been prepared or independently verified by the Company, the Managers or any of their respective affiliates or advisors in connection with this Offering. The Company only accepts responsibility for correctly reproducing such information.

General

Historically, foreign investments in the securities market of Taiwan were restricted. However, commencing in 1983, the ROC government has from time to time enacted legislation and adopted regulations to make foreign investment in the Taiwan securities market possible. Initially, only overseas investment trust funds of authorized securities investment trust enterprises established in Taiwan were permitted to invest in the Taiwan securities market. Since January 1, 1991, qualified foreign institutional investors have been allowed to make investments in the Taiwan securities market. Since March 1, 1996, overseas Chinese, foreign institutional and foreign individual investors (other than qualified foreign institutional investors), called "general foreign investors", have been permitted to make direct investments in the Taiwan securities market. Since July 9, 2003 the Securities and Futures Commission (“ROC SFC”) has adopted various new rules which have the effect of removing the restrictions on investment amount, the qualification requirements in terms of asset size and the inward and outward remittance period limits previously applicable to qualified foreign institutional investors. In addition, the ROC SFC has announced its intention to implement two new measures which will further liberalize the Taiwan securities market by (i) classifying foreign investors into two categories, i.e. individual investors and institutional investors, and (ii) streamlining the application process involving foreign investments. The above measures are expected to become effective by the end of 2003. There is no assurance that such proposed reforms will be implemented.

Qualified Foreign Institutional Investors

The Executive Yuan has approved guidelines for direct investment in securities listed on the TSE or the GreTai Securities Market in Taiwan by qualified foreign institutional investors. Qualified foreign institutional investors include:

banks;
insurance companies;
fund management institutions;
offshore fund management companies more than 50% of the capital of which is owned by a Taiwan securities investment trust enterprise, provided that the funds to be invested are not derived from sources in Taiwan or mainland China or owned by these offshore fund management companies;
general securities firms;
offshore subsidiary securities firms that are more than 50% owned by a Taiwan securities firm, or other securities firms that are wholly owned by these offshore subsidiary securities firms;

A-1

offshore subsidiary securities firms that are wholly owned by a Taiwan securities firm, or other securities firms that are more than 51% owned by these offshore subsidiary securities firms;
foreign government-owned investment institutions, provided that all of the funds to be invested are owned by the foreign government;
pension funds;
mutual funds, unit trusts or investment trusts, provided that the application shall be made under the name of fund trustees with a note stating the title of such fund;
trust companies;
academic or charitable institutions that, according to their articles of incorporation, may invest their funds, provided that those investments are managed externally by a thirdparty manager; and
any other professional institutional investors.

Each qualified foreign institutional investor wishing to invest directly in the Taiwan securities market is required to apply for an investment permit from the ROC SFC. If the investment amount exceeds U.S.$50 million, an approval from the Central Bank of China is also required. The application to the ROC SFC and the Central Bank of China (if applicable) requires, among other things:

the appointment of a local agent and custodian;
proof of qualification;
a copy of the custodian contract; and
an affidavit certifying that the foreign institutional investor will not enter into any quotasharing arrangement with other foreign investors.

Qualified foreign institutional investors who receive a permit may apply to invest and, unless otherwise limited by applicable laws and regulations, remit -an unlimited investment amount into Taiwan at any time receiving the investment. Capital remitted into Taiwan for investments in the Taiwan securities market may be repatriated at any time. The repatriated capital may be returned to Taiwan at any time. Capital gains and income on investments may also be repatriated at any time. The lifting of the investment period limitations and investment ceilings also applies to qualified foreign institutional investors whose approvals have already expired.

General Foreign Investors

General foreign investors may generally invest in TSE listed securities or securities traded on the Gre Tai Securities Market up to a limit of U.S.$50 million if they are institutional investors and U.S.$5 million if they are individual investors, after obtaining the necessary approvals from the TSE.

Foreign Ownership Limitations

Except for certain limits imposed by specific laws and regulations, there are generally no limits on the foreign ownership of the issued share capital in a TSE listed company or a Gre Tai Securities Market traded company.

A-2

Foreign Investment Approval

Other than qualified foreign institutional investors, general foreign investors, and investors in overseas convertible bonds and depositary receipts, foreign investors who wish to make direct investments in the shares of ROC companies may submit a "foreign investment approval" application to the Investment Commission of the ROC Ministry of Economic Affairs or other governmental authority. Foreign investors who obtain this approval will be subject to the ROC Law Governing Investments by Foreigners. The Investment Commission or other governmental authority reviews each foreign investment approval application and approves or disapproves the application after consultation with other governmental agencies. Any non-ROC person possessing a foreign investment approval may repatriate annual net profits, interests and cash dividends attributable to an approved investment. Stock dividends, investment capital and capital gains attributable to the investment may be repatriated with approval of the Investment Commission or other governmental authority.

In addition to the general restrictions against direct investment by non-ROC persons in Taiwan companies, non-ROC persons are currently prohibited from investing in prohibited industries in Taiwan which are listed under the Negative List, as amended. The prohibition on direct foreign investment in the prohibited industries in the Negative List is absolute and provides no specific exemption from its application. Under the Negative List, some industries are restricted so that non-ROC persons may directly invest only up to a specified level and with the specific approval of the relevant governmental authority. We are not in a restricted industry under the Negative List.

Depositary Receipts

In April 1992, the ROC SFC began allowing Taiwan companies listed on the TSE to sponsor the issuance and sale of depositary receipts evidencing depositary shares. In December 1994, MOF began allowing companies whose shares are traded on the Gre Tai Securities Market also to sponsor the issuance and sale of depositary receipts evidencing depositary shares. Approvals for these issuances are still required.

No deposits of shares may be made in a depositary receipt facility and no depositary receipts may be issued against deposits without specific Securities and Futures Commission approval, unless they are:

stock dividends;
free distributions of shares;
due to the exercise by depositary receipt holders of their preemptive rights in the event of capital increases for cash; or
if permitted in the deposit agreement and the custody agreement, due to the purchase by depositary receipt holders, directly or through the depositary, of shares on the TSE or the Gre Tai Securities Market or the delivery of shares held by such depositary receipt holders for deposit in the depositary receipt facility. In this event, the total number of depositary receipts outstanding after an issuance cannot exceed the aggregate number of:
(1) the number of issued depositary receipts previously approved by the Securities and Futures Commission; and
(2) the number of depositary shares created from stock dividends, free distributions of shares and rights offerings.

A-3

These issuances of depositary receipts may only be made to the extent that previously issued depositary receipts have been cancelled and the shares have been sold on the TSE or the Gre Tai Securities Market.

For depositary shares that represent new shares issued for cash or previously existing shares, immediately after the issuance of depositary receipts, a holder may request the depositary to cause the underlying shares to be sold in Taiwan or to withdraw the shares and deliver the shares to the holder.

Any depositary receipt holder (who has not registered as a qualified foreign institutional investor or a general foreign investor) wishing to withdraw shares represented by depositary receipts in order to hold the shares is required to first obtain an approval from the appropriate government agency for registration as a qualified foreign institutional investor or a general foreign investor (as appropriate) and then appoint a qualified local agent to, among other things, open a general securities account with a local securities brokerage firm, remit funds, exercise shareholders' rights, and perform such other actions as may be designated by such depositary receipt holder. If a depository receipt holder has already registered as a qualified foreign institutional investor or a general foreign investor, the shares held in the special securities trading account opened by the depository receipt holder for withdrawing the shares represented by the GDRs can be transferred into the general securities trading account upon filing an application with the appropriate government agency. In addition, the withdrawing holder is also required to appoint a custodian bank to hold the securities and cash proceeds in safekeeping, make confirmations, settle trades and report all relevant information. Without making this appointment, opening these accounts and obtaining prior approval of the TSE, the withdrawing holder would be unable to subsequently hold or sell the shares withdrawn from a depositary receipt facility on the TSE or otherwise. The withdrawing holder is also required to appoint a tax guarantor for filing tax returns and making tax payments. A citizen of the PRC or an entity organized under the laws of the PRC is not permitted to withdraw and hold the Common Shares.

A depositary may, without obtaining further approvals from the Central Bank of China or any other governmental authority or agency of Taiwan, convert NT dollars into other currencies, including U.S. dollars, in respect of the following: (1) the proceeds of the sale of shares represented by depositary receipts; (2) the proceeds of the sale of shares received as stock dividends on the shares and deposited into the depositary receipt facility; or (3) any cash dividends or cash distributions received. In addition, a depositary may convert into NT dollars inward remittances of payments for purchases of underlying shares for deposit in the depositary facility against the creation of depositary shares. A depositary must obtain foreign exchange approval from the Central Bank of China on a payment-by-payment basis for conversion into foreign currencies from the proceeds from the sale of subscription rights for new shares. It is expected that the Central Bank of China will grant this approval as a routine matter. A depositary receipt holder may, after becoming a holder of shares, convert NT dollars into other currencies from proceeds from the sale of any underlying shares withdrawn from the depositary receipt facility. Proceeds from the sale of the underlying shares withdrawn from the depositary receipt facility may be used for reinvestment in securities listed on the TSE or traded on the Gre Tai Securities Market. These reinvestments will need to comply with the limitations and restrictions which apply to qualified foreign institutional investors or general foreign investors discussed above.

Overseas Corporate Bonds

Since 1989, the Securities and Futures Commission has approved a series of overseas corporate bond issues by ROC companies listed on the TSE and traded on the Gre Tai Securities Market. Under current ROC laws, these overseas corporate bonds (if their terms so provide), with Securities and Futures Commission approval, may be converted by non-ROC persons, other than mainland Chinese persons, into shares of ROC companies or may be converted into depositary receipts

A-4

issued under the sponsorship of the same ROC company or the shares of other companies, in the case of exchangeable bonds. Public issuing companies may issue corporate debt in offerings outside Taiwan.

A non-ROC converting bondholder, when exercising the conversion right to convert the bonds into shares of a ROC company, is required to appoint a local agent to with qualification set by ROC Securities :

open a securities trading account with a local brokerage firm;
remit funds;
exercise shareholders' rights; and
perform other actions as may be designed by such converting bondholder.

In addition, the converting bondholder is also required to appoint a custodian bank to hold the securities and cash proceeds in safekeeping, make confirmations and settle trades and report all relevant information. Without making this appointment and opening these accounts, the converting bondholder would be unable to subsequently hold or sell the shares converted from the bonds on the TSE or otherwise. The converting bondholder is also required to appoint a tax guarantor for filing tax returns and making tax payments. Without obtaining further approvals from the Central Bank of China or any other governmental authority or agency of Taiwan, the issuing company may convert NT dollars into other currencies for redemption of the bonds or the repayment of the principal or interest on the bonds. In addition, a converting bondholder may through its local agent convert NT dollars into other currencies for net proceeds realized from the sale of shares or any stock dividends on the shares. In addition, a bondholder may also convert through its local agent any cash distributions relating to the shares and, after becoming a shareholder, inward remittances of subscription payments in connection with a rights offering. The issuing company is required to obtain the approvals from the Central Bank of China on a payment-by-payment basis for conversion of NT dollars into other currencies for payment of the cash (instead of delivery of shares) upon conversion of the bonds.

In addition, any funds received by the converting bondholder may be used for reinvestment in Taiwan securities listed on the TSE or traded on the Gre Tai Securities Market. These reinvestments will need to comply with the limitations and restrictions which apply to qualified foreign institutional investors or general foreign investors discussed above.

Exchange Controls

The ROC Foreign Exchange Control Statute and regulations provide that all foreign exchange transactions must be executed by banks designated by MOF and the Central Bank of China to handle foreign exchange transactions. Current regulations favor trade-related foreign exchange transactions. Consequently, foreign currency earned from exports of merchandise and services may now be retained and used freely by exporters. All foreign currency needed for the importation of merchandise and services may be purchased freely from the designated foreign exchange banks.

Aside from trade-related foreign exchange transactions, ROC companies and residents may, without foreign exchange approval, remit to and from Taiwan foreign currencies of up to U.S.$50 million, or its equivalent, and U.S.$5 million, or its equivalent, respectively, each calendar year. These limits apply to remittances involving a conversion between NT dollars and U.S. dollars or other foreign currencies. In addition, all private enterprises are required to register all medium and long-term foreign debt with the Central Bank of China.

In addition, a foreign person may, subject to certain requirements but without foreign exchange approval, remit to and from Taiwan foreign currencies of up to U.S.$100,000 per remittance if the

A-5

required documentation is provided to the ROC authorities. This limit applies only to remittances involving a conversion between NT dollars and U.S. dollars or other foreign currencies.

A-6

Appendix B - The Securities Market in ROC

The Securities Market of the ROC

The Taiwan Stock Exchange

In 1961, the ROC SFO established the TSE to provide a marketplace for securities trading. The TSE is a corporation owned by government controlled and private banks and enterprises. The TSE is independent of entities transacting business through it, each of which pays a user's fee. Generally, all transactions in listed securities by brokers, traders and integrated securities firms must be made through the Taiwan Stock Exchange.

The TSE commenced operations in 1962. During the early 1980s, the ROC SFC actively encouraged new listings on the TSE and the number of listed companies grew from 119 in 1983 to 639 as of May 31, 2003. As of May 31, 2003, the market capitalization of companies listed on the TSE was approximately NT$9.3 trillion.

Historically, ROC companies have listed only shares and bonds on the Taiwan Stock Exchange. However, the ROC SFC has encouraged companies to list other types of securities. In 1988, the ROC SFC permitted the issuance of Taiwan's first convertible bonds. Since 1989, there have been offerings of domestic convertible bonds and convertible preferred shares. In addition, beneficiary units evidencing beneficiary interests in closed end investment funds and Dragon Bonds issued by Asian Development Bank are also listed on the TSE or traded on the Gre Tai Securities Market. The ROC SFC also has regulations which permit foreign issuers to list their equity securities directly on the TSE or through the use of depositary receipts. To date, four foreign issuers have listed their equity securities on the TSE through the use of depositary receipts in accordance with these regulations.

The TSE requirements for listing are based on the following company attributes:

the number and distribution of shareholders, including the diversification of such shareholders;
length of time in business;
amount of paid-in capital; and
profitability.

However, special listing criteria apply to technology companies and key businesses engaging in national economic development.

The ROC Gre Tai Securities Market

To complement the Taiwan Stock Exchange, the Gre Tai Securities Market was established in September 1982 on the initiative of the ROC SFC to encourage the trading of securities of companies who do not qualify for listing on the Taiwan Stock Exchange. As of May 31, 2003, 423 companies had listed equity securities on the Gre Tai Securities Market and the total market capitalization of those companies was approximately NT$0.89 trillion.

B-1

TSE Index

The TSE Index is calculated on the basis of a wide selection of listed shares weighted according to the number of shares outstanding. This weighted average method is also used for the Standard and Poor's Index in the United States and the Nikkei Stock Average in Japan. The TSE Index is compiled by dividing the market value by the base day's total market value for the index shares. The TSE Index is the oldest and most widely quoted market index in Taiwan.

The weighting of shares in the index is fixed as long as the number of shares outstanding remains constant. When the total number of shares outstanding changes, the weight of each stock is adjusted. Stock splits and stock dividends are adjusted automatically. Cash dividends are not included in the calculation.

The following table sets forth, for the periods indicated, information relating to the TSE Index.

	Number of		Trading	Index at
	Listed
	Companies
	at the	Stock
Period Ended December 31,	Period End	Values	Index High	Index Low	Period End
		NT$
		(in billions)
1990...............................................................	199	19,031.3	12,495.34	2,560.47	4,530.16
1991...............................................................	221	9,682.7	6,305.22	3,316.26	4,600.67
1992...............................................................	256	5,917.1	5,391.63	3,327.67	3,377.06
1993...............................................................	285	9,056.7	6,070.56	3,135.56	6,070.56
1994...............................................................	313	18,812.1	7,183.75	5,194.63	7,124.66
1995...............................................................	347	10,151.5	7,051.49	4,503.37	5,173.73
1996...............................................................	382	12,907.6	6,982.81	4,690.22	6,933.94
1997...............................................................	404	37,241.1	10,116.84	6,820.35	8,187.27
1998...............................................................	437	29,619.0	9,277.09	6,251.38	6,418.43
1999...............................................................	462	29,291.5	8,608.91	5,474.79	8,448.84
2000...............................................................	531	30,526.6	10,202.20	4,614.63	4,739.09
2001...............................................................	584	18,354.9	6,104.24	3,446.26	5,551.24
2002...............................................................	638	21,874.0	6,462.30	3,850.04	4,452.45
2003 (until May 31, 2003) ..............................	639	6,214.9	5,078.80	4,139.50	4,555.90

Source: Taiwan Stock Exchange.

As indicated above, the performance of the TSE has in recent years been characterized by extreme price volatility.

Price Limits, Commissions, Transaction Tax and Other Matters

The TSE has placed limits on block trading and on the range of daily price movements. Fluctuations in the price of securities traded on the TSE is restricted to 7% above and below the previous day's closing price in the case of equity securities, and 5% in the case of debt securities. The price limit for movements below the previous day's closing price has been modified from time to time by MOF based on market conditions.

B-2

Effective July 1, 2000, brokerage commission can be set at any rate not exceeding 0.1425% of the transaction price subject to reporting to the TSE.

A securities transaction tax of 0.3% of the transaction price is payable by the seller of equity securities. These securities transaction taxes are withheld at the time of the transaction. According to the amended ROC Statute of Upgrading Industries, which became effective on February 1, 2002, no securities transaction tax will be imposed on the transfer of corporate bonds and financial debentures (including the Notes) until December 31, 2009.

Sales of shares of listed companies on the TSE are generally sold in "round lots" of 1,000 shares. Investors who desire to sell less than 1,000 shares of a listed company occasionally experience delays in making these sales. Transactions that involve 500 trading lots (500,000 shares) or more must be registered and executed in accordance with TSE guidelines.

Regulation and Supervision

The ROC SFC has extensive regulatory authority over public companies. Public companies are generally required to obtain approval from, or registration with, the ROC SFC for all securities offerings. The ROC SFC requires periodic reporting of financial and operating information by all public companies. In addition, the ROC SFC establishes standards for financial reporting and carries out licensing and supervision of participants in the Taiwan securities market.

The Securities and Futures Commission has responsibility for implementing the ROC Securities and Exchange Law and for overall administration of governmental policies in the Taiwan securities market. It has extensive regulatory authority over the offering, issuance and trading of securities. In addition, the ROC Securities and Exchange Law specifically empowers the Securities and Futures Commission to promulgate necessary rules. The ROC Securities and Exchange Law prohibits market manipulation. For example, it permits an issuer to recover short-term trading profits made through purchases and sales within six months by directors, managerial personnel, supervisors, as well as the spouses, minor children and nominees of these parties, and shareholders who (together with their spouses, minor children and nominees) hold 10% or more of the shares of the issuer. The ROC Securities and Exchange Law prohibits trading by "insiders" based on non-public information that materially affects share price movement. "Insiders" include:

directors, supervisors, managers, as well as the spouses, minor children and nominees of these parties, and shareholders (together with their spouses, minor children and nominees) who hold 10% or more of the issuing company's shares;
any person who has learned material, non public information due to an occupational or controlling relationship with the issuing company; and
any person who has learned material, non-public information from any of the above.
Sanctions include imprisonment. In addition, damages may be awarded to persons injured by the transaction.

The ROC Securities and Exchange Law also imposes criminal liability on certified public accountants and lawyers who make false certifications in their examination and audit of an issuer's contracts, reports and other documents related to securities transactions. The ROC SFC regulations require that financial reports of listed companies be audited by accounting firms consisting of at least three certified public accountants and be signed by at least two certified public accountants.

In addition, the ROC Securities and Exchange Law provides for civil liability for material misstatements or omissions made by issuers and regulation of tender offers.

B-3

The ROC SFC does not have criminal or civil enforcement powers under the ROC Securities and Exchange Law. Criminal actions may be pursued only by the government prosecutors. Civil actions may only be brought by plaintiffs who assert that they have suffered damages. The ROC SFC is empowered to curb abuses and violations of laws and regulations only through administrative measures including:

issuance of warnings;
temporary suspension of operation;
imposition of administrative fines; and
revocation of licenses.

In addition to providing a market for securities trading, the TSE reviews applications by Taiwan issuers to list securities on the TSE. If issuers of listed securities violate laws and regulations or encounter extended or severe negative results of operations, the TSE may, with the approval of the ROC SFC, delist securities of these issuers.

B-4

EXECUTIVE OFFICES OF THE COMPANY

Delta Electronics, Inc.

186 Ruey Kuang Road, Neihu Taipei 114 Taiwan, Republic of China

INDEPENDENT ACCOUNTANTS OF THE COMPANY

PricewaterhouseCoopers

27th Floor, International Trade Building 333 Keelung Road, Section 1 Taipei Taiwan, Republic of China

TRUSTEE

The Bank of New York One Canada Square, 48th Floor London E14 5AL United Kingdom

REGISTRAR

The Bank of New York 101 Barclay Street, Floor 21W New York, N.Y. 10286 United States

PRINCIPAL PAYING, TRANSFER AND CONVERSION AGENT

The Bank of New York One Canada Square, 48th Floor London E14 5AL United Kingdom

LUXEMBOURG LISTING, PAYING, CONVERSION AND TRANSFER AGENT

The Bank of New York (Luxembourg) S.A. Aerogolf Center 1A, Hoehenhof L-1736 Senningerberg Luxembourg

LEGAL ADVISERS

To the Company

as to ROC law

Lee and Li 7th Floor, 201 Tun Hua North Road Taipei 105 Taiwan, Republic of China

To the Managers

as to English law

Linklaters 10th Floor Alexandra House Chater Road Hong Kong

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this Offering Circular. You must not rely on any unauthorized information or representations. This Offering Circular is an offer to sell only the Notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this Offering Circular is current only as of its date.

Page

Certain Defined Terms, Conventions And Currency........................................................... 4 Summary.................................................................... 9 The Offering............................................................. 11 Selected Financial Information ................................ 14 Risk Factors............................................................. 16 Use of proceeds....................................................... 23 Market Price Information.......................................... 24 Dividends ................................................................. 26 Exchange Rates ...................................................... 28 Capitalization ........................................................... 29 Recent Development and Outlook........................... 30 The Delta Group ...................................................... 33 Business .................................................................. 41 Board of Directors and Management....................... 61 Description of the Common Shares......................... 63 Changes In Issued Share Capital............................ 67 Terms and Conditions of the Notes ......................... 69 The Global Certificate .............................................. 96 Taxation ................................................................... 99 Underwriting........................................................... 102 Legal Matters ......................................................... 106 Independent Auditors............................................. 106 General information ............................................... 107 Summary of Certain Differences Between ROC GAAP and US GAAP ................................... 109 Index To Financial Statements .............................. 120 Appendix A - Foreign Investment and Exchange Controls in the ROC......................................A-1 Appendix B - The Securities Market in ROC ..........B-1

U.S.$ 185,000,000

Delta Electronics, Inc.

Zero Coupon Convertible Notes Due 2008

==> picture [151 x 48] intentionally omitted <==

Goldman Sachs International

Report of Independent Accountants

To Delta Electronics, Inc.

We have audited the accompanying consolidated balance sheet of Delta Electronics, Inc. and its subsidiaries as of December 31, 2000, 2001 and 2002, and the related consolidated statements of income, of changes in stockholders' equity and of cash flows for the years 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. We did not audit the 2000 and 2001 consolidated financial statements of Delta International Holding Ltd., a consolidated subsidiary, which statements reflect consolidated total assets of NT$29,630,552,000 and NT$31,590,545,000, constituting 61% and 60%, respectively, of the Company’s consolidated total assets as of December 31, 2000 and 2001, and consolidated operating revenues of NT$43,516,595,000 and NT$36,592,672,000, constituting 85% and 86%, respectively, of the Company’s consolidated operating revenues for the years ended December 31, 2000 and 2001. The subsidiary's consolidated financial statements were audited by other auditors whose reports thereon have been furnished to us. In addition, as explained in Note 4(5), the financial statements of certain investee companies for the years ended December 31, 2000, 2001 and 2002, accounted for under the equity method, were audited by other auditors whose reports thereon have been furnished to us. The total amount of long-term investments and other liabilities - others in these investee companies at December 31, 2000, 2001 and 2002 were NT$5,480,566,000, NT$9,541,000, NT$6,529,606,000, NT$2,759,000, and NT$5,457,426,000, NT$2,950,000, respectively, and the related investment income was NT$443,108,000, NT$442,006,000 and NT$331,030,000 for the years then ended, respectively. Our opinion expressed herein, insofar as it relates to the amounts included in the consolidated financial statements in respect of the above mentioned consolidated subsidiary and the long-term investments, is based solely on the reports of the other auditors.

F-1

We conducted our audits in accordance with the "Rules Governing Examinations of Financial Statements by Certified Public Accountants" and generally accepted auditing standards in the Republic of China. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statements presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Delta Electronics, Inc. and its consolidated subsidiaries as of December 31, 2000, 2001 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with the ''Rules Governing Preparation of the Financial Statements of Securities Issuers" and generally accepted accounting principles in the Republic of China.

The consolidated financial statements of the Company as of and for the year ended December 31, 2002 expressed in US dollars are presented solely for the convenience of the reader and were translated from the New Taiwan dollars financial statements using the exchange rate of NT$34.75 to US$1.00 at December 31, 2002. This basis of translation is not in accordance with generally accepted accounting principles in the Republic of China.

PricewaterhouseCoopers Taipei, Taiwan Republic of China January 27, 2003

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 and practices 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 consolidated 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.

F-2

DELTA ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET DECEMBER 31,

(EXPRESSED IN THOUSANDS OF DOLLARS)

			New Taiwan Dollars		US Dollars
		2000	2001	2002	2002
ASSETS					(Unaudited - Note 2)
Current Assets Cash and cash equivalents (Note 4(1)) �� �� �� ��
Short-term investments (Note	4(2))	�	��	��	��
Notes receivable – net		��	��	��	��
Accounts receivable – third parties (Note 4(3))		��	��	��	��
Accounts receivable – related	parties (Note 5)	��	��	��	��
Other receivables (Notes 4(15))		��	��	��	��
Other receivables – related parties		��	��	��	��
Inventories (Notes 4(4))		��	��	��	��
Prepaid expenses		��	��	��	��
Prepayments		��	��	��	��
Other current assets (Note 4(15))		��	��	��	��
		��	��	��	��
Funds and Long-term Investments Long-term investments (Note 4(5)) �� �� �� ��
Cash surrender value of life insurance		��	��	��	��
Prepayment for long-term investments		��	�	�	�
		��	��	��	��
Property, Plant and Equipment (Notes 4(6) and 6) Cost Land �� �� �� ��
Buildings		��	��	��	��
Machinery and equipment		��	��	��	��
Molds		��	��	��	��
Computer and communication equipment		��	��	��	��
Test equipment		��	��	��	��
Motor vehicles		��	��	��	��
Furniture and fixtures		��	��	��	��
Leasehold improvements		��	��	��	��
Land value appraisal increment		��	��	��	��
Cost and appraisal increment		��	��	��	��
Less: Accumulated depreciation		��	��	��	��
Prepayments for equipment and construction in progress		��	��	��	��
		��	��	��	��
Intangible Assets Patent �� � � �
Deferred pension cost (Note 4 (10))		��	�	�	�
Other intangible assets		��	��	��	��
		��	��	��	��
Other Assets Deposits – out �� �� �� ��
Deferred charges		��	��	��	��
		��	��	��	��
TOTAL ASSETS		��	��	��	��

Please refer to the accompanying notes and report of independent accountants dated January 27, 2003.

F-3

DELTA ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET

DECEMBER 31,

(EXPRESSED IN THOUSANDS OF DOLLARS)

		New Taiwan Dollars		US Dollars
	2000	2001	2002	2002
LIABILITIES AND STOCKHOLDERS'EQUITY				(Unaudited - Note 2)
Current Liabilities Short-term loans (Notes 4(7)) �� �� �� ��
Commercial paper (Note 4(8))	��	��	��	��
Notes payable	�	�	��	��
Accounts payable	��	��	��	��
Accounts payable – related parties (Note 5)	��	��	��	��
Income tax payable (Note 4(15))	��	��	��	��
Accrued expenses	��	��	��	��
Other payables	��	��	��	��
Received in advance	��	��	��	��
Current portion of long-term loans (Note 4(9))	��	��	��	��
Other current liabilities	��	��	��	��
	��	��	��	��
Long-term Liabilities Convertible bonds (Note 4(9)) �� �� � �
Long-term loans	�	��	��	��
	��	��	��	��
Reserve Reserve for land value incremental tax (Note 4(6)) �� �� �� ��
Other Liabilities Reserve for retirement plan (Notes 4(10)) �� �� �� ��
Deposits – in	��	��	��	��
Deferred tax liabilities (Note 4(15))	��	��	��	��
Other liabilities – others	��	��	��	��
	��	��	��	��
Total Liabilities	��	��	��	��
Stockholders'Equity Common stock (Notes 1 and 4(11)) �� �� �� ��
Capital reserve (Note 4(12)) Premium �� �� �� ��
Others	��	��	��	��
Retained earnings Legal reserve (Note 4(13)) �� �� �� ��
Undistributed earnings (Note 4(14))	��	��	��	��
Other adjusted items in stockholders’ equity Unrealized loss on market value decline of long-term investments �� �� �� ��
Cumulative translation adjustments	��	��	��	��
Total stockholders' equity	��	��	��	��
Commitments and Contingent Liabilities (Note 5) TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY �� �� �� ��

Please refer to the accompanying notes and report of independent accountants dated January 27 2003.

F-4

DELTA ELECTRONICS, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31,

(EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE DATA)

	New Taiwan Dollars	New Taiwan Dollars		US Dollars
	2000	2001	2002	2002
Operating revenue (Note 5)				(Unaudited - Note 2)
Sales revenue	��	��	��	��
Sales returns	��	��	��	��
Sales allowance	�� �	�� �	�� �	�� �
Net sales revenue	��	��	��	��
Services revenue	��	��	��	��
Total operating revenue	��	��	��	��
Operating costs (Note 5) Cost of goods sold �� � �� � �� � �� �
Gross profit	��	��	��	��
Unrealized intercompany profit	��	��	��	��
Realized intercompany profit	�	��	��	��
Net gross profit	��	��	��	��
Operating expenses Selling �� �� �� ��
General and administrative	��	��	��	��
Research and development	�� �	�� �	�� �	�� �
Total operating expenses	�� �	�� �	�� �	�� �
Operating income	��	��	��	��
Non-operating income Interest income �� �� �� ��
Investment income-net (Note 4(5))	��	��	��	��
Gain on disposal of property, plant and equipment	��	��	��	��
Gain on disposal of investment	��	��	��	��
Exchange gain – net	��	��	��	��
Other income (Note 5)	��	��	��	��
Total non-operating income	��	��	��	��
Non-operating expenses Interest expense �� �� �� ��
Loss on physical count of inventories	��	�	�	�
Loss on disposal of property, plant and equipment	��	��	��	��
Provision for decline in market value and obsolescence of
inventories	��	��	��	��
Other losses	�� �	�� �	�� �	�� �
Total non-operating expenses	�� �	�� �	�� �	�� �
Income before income tax	��	��	��	��
Income tax (Note 4(17))	�� �	�� �	�� �	�� �
Income before minority interest	��	��	��	��
Minority interest in consolidated subsidiaries	�� �	�� �	�� �	�� �
Net income	��	��	��	��
Earnings per share (In dollars) (Note 4(16))
	Income	Income	Income	Income
	before Net	before Net	before Net	before Net
Basic earnings per share	income tax income	income tax income	income tax income	income tax income
Income before minority interest	��	��	��	��
Minority interest in consolidated subsidiaries	�� �� �� �� �� �� �� �� �
Net income	�� ��	�� ��	�� ��	�� ��
Diluted earnings per share Income before minority interest �� �� ��
Minority interest in consolidated subsidiaries	�� �� �� �� �� �� �� �� �
Net income	�� ��	�� ��	�� ��	�� ��

Please refer to the accompanying notes and report of independent accountants dated January 27, 2003.

F-5

DELTA ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,

(EXPRESSED IN THOUSANDS OF DOLLARS)

	Capital	stock	Retained earnings Unrealized loss
		New share	on market value Cumulative
		entitlement	Capital Legal Undistributed decline of translation
	Common stock	certificates	reserve reserve earnings long-term investment adjustments Total
2000 New Taiwan Dollars Balance at January 1, 2000 �� ��
Distribution of 1999 earnings: Appropriation for legal reserve � � ��
Directors' and supervisors' remuneration	�	�� ��
Employees' bonus	��		��
Issuance of stock dividends	��		��
Cash dividends	�	�	��
Unpaid dividends on convertible bonds	�	�	��
Common stock issued for conversion of entitlement certificates	��
Convertible bonds converted into new share entitlement certificates	�	��
Premium from conversion of convertible bonds	�	�	��
Unpaid interest payable of convertible bonds	�	�	��
Gain on disposal of property, plant and equipment transferred to capital reserve	�	�	��
Unrealized loss on market value decline of long-term investments	�	�	��
Long-term investments adjustment for change in investment ownership percentage	�	�	��
Transfer of gain on disposal of property, plant and equipment to capital reserve
by the investee companies	�	�	��
Cumulative translation adjustments on foreign long-term investments	�	�	��
Net income for the year	� � � � �� � � ��
Balance at December 31, 2000	��		��
2001 New Taiwan Dollars
Distribution of 2000 earnings:
Appropriation for legal reserve	�	�	��
Directors' and supervisors' remuneration	�	�	��
Employees' bonus	��		��
Issuance of stock dividends	��		��
Cash dividends	�	�	��
Gain on disposal of property, plant and equipment transferred to capital reserve	�	�	�� �
Cumulative translation adjustments on foreign long-term investments	�	�	��
Unrealized loss on market value decline of long-term investments	�	�	��
Long-term investments adjustment for change in investment ownership percentage	�	�	��
Net income for the year	� � � � �� � � ��
Balance at December 31,2001	�� �� �� �� �� �� �� ��

Please refer to the accompanying notes and report of independent accountants dated January 27, 2003.

F-6

DELTA ELECTRONICS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,

(EXPRESSED IN THOUSANDS OF DOLLARS)

		Retained earnings Unrealized loss
		on market value	Cumulative
	Capital	Legal Undistributed decline of	translation
	Common stock reserve	reserve earnings long-term investment	adjustments Total
2002 New Taiwan Dollars
Balance at January 1, 2002	��	��
Distribution of 2001 earnings:
Appropriation for legal reserve	��	��	��
Directors' and supervisors' remuneration	��	��	��
Employees' bonus	��	��	��
Issuance of stock dividends	��	��	��
Cash dividends	��	��	��
Unrealized loss on market value decline of long-term investments	��	��
Cumulative translation adjustments on foreign long-term investments	��	��	��
Long-term investment adjustment for change in investment ownership percentage��		��	��
Net income for the year	� �	� �� �	� ��
Balance at December 31,2002	�� ��	�� �� �� �� ��
2002 US Dollars (Unaudited-Note 2)
Balance at January 1, 2002	��	��
Distribution of 2001 earnings:
Appropriation for legal reserve	��	��	��
Directors' and supervisors' remuneration	��	��	��
Employees' bonus	��	��	��
Issuance of stock dividends	��	��	��
Cash dividends	��	��	��
Unrealized loss on market value decline of long-term investments	��	��
Cumulative translation adjustments on foreign long-term investments	��	��	��
Long-term investment adjustment for change in investment ownership percentage��		��	��
Net income for the year	� �	� �� �	� ��
Balance at December 31,2002	�� ��	�� �� �� �� ��

Please refer to the accompanying notes and report of independent accountants dated January 27, 2003.

F-7

DELTA ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,

(EXPRESSED IN THOUSANDS OF DOLLARS)

		New Taiwan Dollars		US Dollars
	2000	2001	2002	2002
Cash flows from operating activities				(Unaudited - Note 2)
Net income	��	��	��	��
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest income in consolidated subsidiaries	��	��	��	��
Bad debts expense	��	��	�	�
Depreciation and amortization	��	��	��	��
Reversal of allowance for doubtful accounts	�		��	��
Investment income, net of gain on disposal of investment	��	��	��	��
Cash dividend received from investee companies accounted
for under the equity method	��	��	��	��
Loss on disposal of property, plant and equipment, net	��	��	��	��
Loss on decline in market value and inventory obsolescence	��	��	��	��
Gain on convertible bonds redemption	��	�	�	�
Exchange loss on revaluation of foreign currency denominated convertible bonds �� �� �� ��
Provision for interest payable on bonds redemption	��	�	�	�
Accrued interest on convertible bonds transferred to
capital reserve	��	�	�	�
Changes in assets and liabilities: Decrease (increase) in notes receivable �� �� �� ��
(Increase) decrease in accounts receivable	��	��	��	��
(Increase) decrease in accounts receivable - related parties	��	��	��	��
Decrease (increase) in other receivables	��	��	��	��
Decrease (increase) in other receivables - related parties	��	��	��	��
(Increase) decrease in inventories	��	��	��	��
(Increase) decrease in prepaid expenses	��	��	��	��
Increase in prepayments	��	��	��	��
Decrease (increase) in other current assets	��	��	��	��
Increase in notes payable	�	�	��	��
Increase (decrease) in accounts payable	��	��	��	��
Increase (decrease) in accounts payable - related parties	��	��	��	��
Increase (decrease) in income tax payable	��	��	��	��
Increase (decrease)in accrued expenses	��	��	��	��
Increase (decrease) in other payables	��	��	��	��
Increase (decrease) in received in advance	��	��	��	��
(Decrease) increase in other current liabilities	��	��	��	��
Increase (decrease) in reserve for retirement plan	��	��	��	��
Increase in deferred income tax liabilities	��	��	��	��
Increase (decrease) in other liabilities – others	��	�� �	��	��
Net cash provided by operating activities	��	��	��	��

(Continued)

F-8

DELTA ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,

(EXPRESSED IN THOUSANDS OF DOLLARS)

		New Taiwan Dollars		US Dollars
	2000	2001	2002	2002
Cash flows from investing activities	(Unaudited - Note 2)
(Increase) decrease in short-term investment, net	��	��	��	��
Proceeds from disposal of long-term investments	��	��	��	��
Increase in long-term investments	��	��	��	��
Proceeds from investee company’s capital reduction
or liquidation	�	��	��	�
Increase in prepayment for long-term investment	��	�	�	��
(Increase) decrease in cash surrender value of life insurance	��	��	��	��
Proceeds from disposal of property, plant and equipment	��	��	��	��
Acquisition of property, plant and equipment	��	��	��	��
Increase in intangible assets	��	��	�	�
Increase in deposits – out	��	��	��	��
Increase in deferred charges	�� �	�� �	�� �	�� �
Net cash used in investing activities	�� �	�� �	�� �	�� �
Cash flows from financing activities (Decrease) increase in short-term loans, net �� �� �� ��
Increase (decrease) in commercial paper payable	��	��	��	��
(Decrease) increase in long-term loans, net	��	��	��	��
Increase in convertible bonds	��	�	�	�
Payment for redemption of convertible bonds	��	��	��	��
Increase (decrease) in deposits – in	��	��	��	��
Payment of directors' and supervisors' remuneration	��	��	��	��
Payment of cash dividends	�� �	�� �	�� �	�� �
Net cash provided by (used in) financing activities	��	��	�� �	�� �
Foreign exchange difference	��	��	�� �	�� �
Long-term investments (increase) decrease due to change in
reporting entities	�	��	��	��
Fixed assets decrease (increase) due to change in reporting
entities	�	��	�� �	�� �
Net increase (decrease) in cash and cash equivalents	��	��	��	��
Cash and cash equivalents at beginning of year	��	��	��	��
Cash and cash equivalents at end of year	��	��	��	��
Supplemental disclosure of cash flow information Cash paid during the year for: Interest �� �� �� ��
Income taxes	��	��	��	��
Non-cash investing and financing activities: Current portion of convertible bonds reclassified to current
liabilities	��	��	��	��
Convertible bonds converted to common stock (including related premium) �� �� �� ��
Declared employees' stock bonus	��	��	��	��

Please refer to the accompanying notes and report of independent accountants dated January 27, 2003.

F-9

DELTA ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000, 2001 AND 2002

(EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT AS INDICATED)

1. HISTORY AND ORGANIZATION

(1) Delta Electronics, Inc.

The Company was incorporated in April 1971 under the provisions of the Company Law of the Republic of China (R.O.C.) as a company limited by shares. The total outstanding capital was NT$13,878,790 (US$399,390) as of December 31, 2002. The main activities of the Company are installation of electronic control systems and developing, designing, manufacturing and selling of communication products and components, computer information system and power supply.

(2) Consolidated subsidiary

Name of company Delta International Holding Ltd. (DIH) Delta Networks, Inc. (DNI) Delta Networks, Holding Ltd. (DNH)	Relationship Note Note Note	% of shares held as of December 31, Main activities 2000 2001 2002 Equity investment in Mainland China, Hong Kong and other areas. �� Developing, designing, manufacturing and sales of computer networks and accessories. �� � � Equity investment � � ��

Note: The company’s total voting rights in the consolidated subsidiaries is over 50%.

F-10

(3) Changes in consolidated subsidiaries

The changes were as follows:

The changes were as	follows:
Name of company Delta Electronics (Jiang Su) Co., Delta Electronics Components (Wu Jiang) Co., Ltd. Delta Video Display System (WU Jiang) Co., Ltd. Delta Electro-optics (Wu Jiang) Co., Ltd Delta Networks Holding Ltd. (DNH) Delta Networks (Cayman) Inc. (DNI Cayman) Delta Networks Inc. (DNI)	Relationship Note a Note a Note a Note a Note b Note c Note c	% of shares held as of December 31, Main activities 2000 2001 2002 Manufacturing and sales of power supplies. �� �� Manufacturing and sales of computer related components. �� �� Manufacturing and sales of color monitors. �� � Manufacturing and sales of projectors. �� � Equity investment. �� � � Equity investment. �� � � Developing, designing, manufacturing and sales of networking system and peripherals. �� ��	% of shares held as of December 31,
				2002 �� �� � � � � ��

Note a: A subsidiary of Delta International Holding Ltd. (DIH), the Company owns total voting rights over 50% indirectly.
Note b: The Company’s total voting rights in the consolidated subsidiaries is over 50%.
Note c: A subsidiary of DNH, the Company owns total voting right over 50% indirectly.

Note d: A new consolidated subsidiaries in 2002.

F-11

Note e: DNI was the Company's subsidiary with 87.39% direct shareholding in 2001. DNI Group was undergoing a restructuring in 2002 under which the Company established two new subsidiaries-DNH and DNI Cayman (a subsidiary of DNH) and disposed all of its investment in DNI to DNI Cayman. As a result of the group restructuring, the Company's shareholding in DNI changed from direct ownership to indirect ownership, but the overall shareholding percentage in DNI remained unchanged.
(4) Subsidiaries in which the Company’s voting rights exceeded 50% but were not included in the preparation of consolidated financial statements were as follows:

Name of company % of shares held Remarks Volink Integrated System, inc. �� Delta Optoelectronics, Inc. ��

  - (Note):a. Total assets and operating revenues are less than 10% of the Company’s respective non-consolidated total assets and operating revenues.

     - b. Total combined assets and operating revenues of all such non-consolidated subsidiaries constitute less than 30% of the Company’s non-consolidated total assets and operating revenues.

(5) Difference in accounting period of the Company and the subsidiaries: None.
(6) Difference in the accounting policies of the Company and the subsidiaries: No significant differences.
(7) Special operating risk of foreign subsidiaries: No significant special operating risks which have material impact on the Company.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

F-12

(1) Principles of consolidation

A. The consolidated financial statements include the accounts of the Company and the consolidated financial statements of Delta International Holding Ltd. And Delta Networks Holding Ltd., after eliminating all significant intercompany accounts and transactions.
B. For long-term investments in which the Company owns more than 50% of the voting rights of the subsidiary, consolidated financial statements are prepared.

Where the total assets and total operating revenue of a subsidiary constitute less than 10% of the Company’s respective unconsolidated total assets and operating revenues, the subsidiary's financial statements are not consolidated but are accounted for using the equity method. Irrespective of the above test, when the combined total assets or operating revenues of all such unconsolidated subsidiaries exceed 30% of the Company’s unconsolidated total assets or operating revenues, then each individual subsidiary whose total assets or operating revenues are greater than 3% of the Company’s unconsolidated total assets or operating revenues is consolidated .

(2) Translation of financial statements of foreign subsidiaries

Assets and liabilities of the foreign subsidiaries are translated into New Taiwan dollars using the exchange rate at the balance sheet date; equity accounts are translated at historical rates, except for beginning retained earnings which are transferred from prior year's ending retained earnings; profit and loss accounts are translated using the weighted average rate of the year. Exchange differences are recorded as translation adjustments and are included as a component of the stockholders' equity.

(3) Translation of foreign currency transactions

The accounts of the Company and its subsidiaries are maintained in their functional currencies. Receivables, other monetary assets and liabilities denominated in foreign currencies are translated into their functional currencies at the rates of exchange prevailing at the balance sheet date. Transactions denominated in foreign currency, except forward exchange contracts, are translated into their functional currencies at the exchange rates prevailing at the transaction dates. Foreign currency gains or losses are included in current net income.

F-13

(4) Foreign currency option contracts

Premiums or discounts on option contracts are recorded at cost. Premiums or discounts and unrealized gains or losses on option contracts entered into for hedging purposes are deferred and amortized over the contract period on a straight line basis.

(5) Forward exchange contracts

Forward exchange contracts entered into for hedging purposes are recorded using the spot rate on the contract date. Discounts or premiums on forward contracts are amortized over the periods of the contract. Gains or losses on forward contracts are determined by the difference between applying the spot rate at the balance sheet date and the spot rate at the date of inception of the contract to the outstanding contracts at the balance sheet date. Exchange gains or losses are included in current net income.

(6) Cross currency swap contracts

Cross currency swap contracts entered into for hedging purposes are recorded using the contract rate on the contract date and recorded as accrued receivable and accrued payable, respectively. Interest receivable and interest payable are accrued in accordance with the contract rate. Gains or losses on cross currency swap contracts are determined by the difference between applying the spot rate at the balance sheet date and the spot rate at the date of inception of the contract to the accrued receivables and payables and interest receivable and payable of outstanding contracts at the balance sheet date. Exchange gains or losses are included in current net income.

(7) Short-term investments

Short-term investments are stated at the lower of cost or market value. Cost is calculated by the weighted-average method.

(8) Allowance for doubtful accounts

Allowance for doubtful accounts is provided based on an evaluation of the collectibility of ending balances of notes receivable, accounts receivable and other receivables.

(9) Inventories

Inventories are stated at the lower of cost or market value; cost is determined by the standard cost. Variances from standard cost are allocated to ending inventories and cost of goods sold at the end of each period. When comparing

F-14

with market value, current replacement price is used for materials. Net realizable value is used as market value for work in process and finished goods. Provision is made for obsolete inventories at balance sheet date.

(10) Funds and long-term investments

A. Long-term investments

(A) Long-term investments in which the Company owns less than 20% of the voting rights of the investee company and has no significant influence on the investee company's operational decisions are accounted for by the lower of cost or market value method if the investee company is listed, and by the cost method if the investee company is not listed.

If the Company owns at least 20% of the voting rights of the investee company, the investment is accounted for by the equity method, unless there is evidence that the Company cannot exercise significant influence over the investee company. The unrealized gains or losses arising from transactions between the Company and investee companies are eliminated in preparing the consolidated financial statements.

(B) Foreign investments in which the Company owns less than 20% of the voting rights of the investee company are accounted for by the cost method. The original cost is accounted for based on actual remittance amount. Investments in foreign currency are translated into New Taiwan dollars at the rates of exchange prevailing at the balance sheet date; unrealized exchange loss (and subsequent recoveries to the extent they do not exceed original cost) is treated as translation adjustment of long-term investments under stockholders' equity.

Under the equity method, the foreign investee's financial statements are translated into New Taiwan dollars and the Company recognizes its proportionate share of the exchange gains or losses resulting from the translation process of the foreign investee and includes in the cumulative translation adjustment account in the stockholders' equity.

(C) Capital reserve and long-term investment amounts are adjusted by the variance between the investment cost and the net asset of the investee company due to the disproportionate acquisition of shares in connection with the capital increase by the investee company accounted for under the equity method or disposal of shares. If the capital reserve arising from long-term investment is not sufficient, then retained earnings is debited.

F-15

(D) The Company recognizes its proportionate share of the unrealized loss on market value decline of long-term investments of the investee company accounted for under the equity method and is shown under the stockholders' equity.
(E) Under the equity method, the excess of the investment cost over the underlying equity in net assets of the investee companies at the date of investment is amortized over 5 years. The excess of the investment cost over the underlying equity in net assets of the investee companies at the date of changing from cost method to equity method is not retroactively adjusted but is amortized over 20 years prospectively.
(F) The use of the equity method is discontinued if the cumulative losses on investment reduce the balance of the investment to zero, unless the Company has sufficient evidence to indicate that the investee company's losses are temporary or where the Company has a commitment to provide financial support to the investee company or acts as guarantor for loans made to the investee company. The credit balances of the individual investments are reported in the balance sheet as other liabilities.

B. Cash surrender value of life insurance

The cash surrender value of life insurance is recorded as an asset and classified as long-term investment. The increase in cash surrender value during the period is accounted for as an adjustment to insurance premiums paid.

(11) Property, plant and equipment

A. With the exception of land, which is carried at appraised value, property, plant and equipment are carried at cost.
B. Depreciation of the Company and DNI, a subsidiary of DNI (Cayman) are provided on a straight-line basis over the estimated useful lives of the assets plus one year as salvage value except for leasehold improvements which is based on the period of the contract. Salvage values of fixed assets, which are still in use after the end of their estimated useful lives, are depreciated over the newly estimated remaining useful lives of the assets.
Commencing from 2001, depreciation of new assets purchased by the Company and DNI is provided on a straight-line method over the estimated useful lives of the assets, with a nominal salvage value of $1.00 (in dollar).

F-16

Depreciation of DIH’s subsidiaries are provided on cost less salvage value on a straight-line basis over the estimated useful lives of the assets. The salvage value is calculated at 10% of cost. Salvage values of fixed assets, which are still in use after the end of their estimated useful lives, are not depreciated.

Commencing from 2002, the salvage value of DIH’s subsidiaries in Mainland China is changed from 10% of cost to $1.00 (in dollar of reporting currency). Depreciation are provided on cost less salvage value on a straight-line basis over the estimated useful lives of the assets. The salvage value is calculated at 10% of cost.

The estimated useful lives of fixed assets are 2 to 8 years, except for buildings which are 5 to 55 years.

C. Renewals and improvements are treated as capital expenditure and are depreciated accordingly. Maintenance and repairs are charged to expense as incurred. When an asset is sold or retired, the cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is included in current non-operating results. Prior to January 1, 2002, gains on disposal of property, plant and equipment, net of applicable income tax, of the Company was transferred to capital reserve in the current year.

(12) Other intangible assets

Land usage rights are recorded at actual cost and amortized over the lease term.

(13) Deferred charges

Deferred charges are recorded at actual cost and amortized over the estimated useful lives based on the straight-line method, except for the issuance costs for convertible bonds which are amortized over the outstanding period of the bonds. The unamortized bonds issuance costs relating to the bonds converted or redeemed before the maturity date are transferred to expense at the date of redemption or conversion.

(14) Retirement plan

A. The Company maintains a defined benefit employee retirement plan (the Plan) covering all regular employees. Benefits under the Plan are generally determined based upon years of credited service, age at retirement and average compensation. The Company has been contributing to an independent retirement trust fund since 1986.

F-17

As approved by the government, in November 1990, the Company suspended contributions to the independent retirement trust fund. The Company resumed contributing to the fund at a fixed rate equal to 2% of monthly salaries and wages since July 1999.

The Company’s subsidiary, DNH, does not maintain an employee retirement plan. The subsidiary of DNI Cayman, DNI contributes 2% of monthly salaries and wages from January, 1999.

The Company’s subsidiary, DIH, does not maintain an employee retirement plan. DIH’s subsidiaries located in Mainland China individually maintain a defined benefit employee retirement plan covering all employees. Under the plan, the employees of the DIH's subsidiaries contribute to a separate fund, an amount based on a certain percentage of the monthly basic salary of employees, and the DIH's subsidiaries also provide the same amount as pension reserve.

The trust fund assets and the contribution from employees are not reflected in the Company's consolidated financial statements.

B. Pension cost, which includes service cost, interest cost, expected return on plan assets and amortization of net obligation at transition, is recognized based on an actuarial valuation. The pension fund is managed by an independently administered pension fund association.
C. When an early retirement program is adopted resulting in a significant reduction in the number of employees, the accrued pension shall be revaluated to calculate the effect of the curtailment. The curtailment gains/losses are recorded as net pension cost of current year.
D. Except for the subsidiaries in Mainland China, other foreign subsidiaries do not maintain any pension plan.

(15) Convertible bonds

A. When a bondholder exercises his/her conversion rights, the book value of bonds is credited to common stock at an amount equal to the par value of the stock and the excess is credited to capital reserve; no gain or loss is recognized on bond conversion.
B. The related issuance costs for convertible bonds are recorded as deferred charges, and are amortized over the life of the bonds. The unamortized bonds issuance costs related to the bonds converted or redeemed before the maturity date are transferred to expense upon conversion or redemption.

F-18

(16) Income tax

A. The Company and DNI adopted R.O.C. FAS No.22, "Accounting for Income Tax" and FAS No.12 "Accounting for Income Tax Credit". Income tax credit was recognized in current year.
B. The income tax of the foreign subsidiary and its subsidiaries are calculated based on the local tax laws and regulations in the country they operate, which is principally consistent with R.O.C. GAAP.
C. Over or under provision of prior years' income tax liabilities is included in the current year's income tax expense.

(17) Earnings per share

A. In accordance with R.O.C. FAS No. 24 “Earnings Per Common Share” as revised in November 1, 2001, the basic and diluted earnings per share are disclosed in income statements. The computation of earnings per share is as follows:
(A) Basic earnings per share: net income is divided by the weighted average number of shares outstanding during the period.
(B) Diluted earnings per share: the computation is the same as basic earnings per share, except for the potentially dilutive securities were assumed to have been converted to common stock at the beginning of the period and net income is adjusted by amount associated with the conversion.
B. The potentially dilutive securities of the Company consisted of Euro convertible bonds. The Company adopted the "if converted method" in computing the dilutive effect of the Euro convertible bonds.

(18) Revenue, costs and expenses recognition

Revenue is recognized when the earning process is completed and realized or realizable. Costs and expenses are recorded as incurred. Research and development costs are expensed as incurred, except for costs of machinery used in R & D which are capitalized.

(19) Accounting estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those assumptions and estimates.

F-19

(20) Convenience translation into US dollars

The Company maintains its accounting records and prepares its financial statements in New Taiwan dollars. The United States dollar amounts disclosed in the 2002 financial statements are presented solely for the convenience of the reader and were translated to US dollar using the exchange rate of NT$34.75=US$1.00, the average of buying and selling exchange rate published by Hua Nan Bank on December 31, 2002. Such translation amounts are unaudited and should not be construed as representations that the New Taiwan dollar amounts represent, or have been or could be converted into United States dollars at the or any other rate.

3. CHANGES IN ACCOUNTING PRINCIPLES

Effective January 2002, the Company adopted R.O.C. FAS No. 24 "Earnings Per Common Share" to comply with the computation and presentation of the earnings per share requirement and retroactively recomputed the earnings per share for the period ended December 31, 2000 and 2001. This change in accounting principle had no significant effect on the earnings per share amount for the periods ended December 31, 2000, 2001 and 2002.

4. DESCRIPTION OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

		New Taiwan Dollars	New Taiwan Dollars	US Dollars
		December 31,		December 31,
	2000	2001	2002	2002
	(Unaudited)
				(Note 2)
Cash on hand	��	��	��	��
Checking and demand	��	��	��	��
deposits
Time deposits	��	��	��	��
Cash equivalents
– commercial paper	��	��	�	�
	��	��	��	��

F-20

(2) Short-term investments

(2)	Short-term investments
(3)	New Taiwan Dollars US Dollars December 31, December 31, 2000 2001 2002 2002 (Unaudited) (Note 2) Beneficiary certificates �� �� �� �� Market value �� �� �� �� Accounts receivable New Taiwan Dollars US Dollars December 31, December 31, 2000 2001 2002 2002 (Unaudited) (Note 2) Accounts receivable �� �� �� Less: Allowance for doubtful accounts �� � �� �� � �� � �� �� �� �� Overdue receivable (shown as other assets) �� �� �� Less: allowance for doubtful accounts �� � �� �� � �� � � � � � �� �� �� ��	US Dollars
		December 31,
		2002

F-21

(4) Inventories

Inventories
		New Taiwan Dollars		US Dollars
		December 31,		December 31,
	2000	2001	2002	2002
	(Unaudited)
				(Note 2)
Raw materials	��	��	��	��
Work in process	��	��	��	��
Finished goods	��	��	��	��
Inventory in transit	��	��	��	��
	��	��	��	��
Less: Allowance for
decline in market value
and inventory obsolescence	�� �	�� �	�� �	��	�
	��	��	��	��
Market value	��	��	��	��

F-22

(5) Long-term investments

A. List of long-term investments:

(5)Long-term investments . List of long-term investments:
				New Taiwan Dollars						US Dollars
	December	31, 2000		December 31, 2001			December	31, 2002		December	31, 2002
	Shares Book value	%	Market value	Shares Book value	%	Market value	Shares Book value	%	Market value	Book value	Market value
Investee Company	(Unaudited-Note 2)
Equity method :
Delta Electronics (Thailand)	��	��	��	��	��	��	��	��	��	��	��
Public Co., Ltd. (DET) (Notes a and e)
Cyntec Co., Ltd.	��	��	��	��	��	��	��	��	��	��	��
Union Optronics Corp (Union) (Note b)	��	��	��	��	��	��	��	��	��	��	��
Grand Advance Technology Ltd.	��	��	��	��	��	��	��	��	��	��	��
Delta Optoelectronics, Inc.	��	��	��	��	��	��	��	��	��	��	��
Volink Integrated System, Inc. (Volink)	��	��	��	��	��	��	��	��	��	��	��
Yuasa Delta Technology Inc. (YDT)	��	��	��	��	��	��	�	�	�	�	�
Vivitek Co., Ltd.	��	��	��	��	��	��	�	�	�	�	�
	��	��		��	��		��	��		��	��
Equity method by DIH
Delta Electronics (Jiang Su) Co., Ltd.	� ��	��	��	� ��	��	��	� �	�	�	�	�
Delta Electronics Components	� ��	��	��	� ��	��	��	� �	�	�	�	�
(Wu Jiang) Co., Ltd.
Delta Electro-optics (Wu Jiang) Ltd.	� �	�	�	� ��	��	��	� �	�	�	�	�
DAC Holding Ltd.	� �	�	�	��	��	��	��	��	��	��	��
YDI International Holding Ltd.	� �	�	�	� �	�	�	��	��	��	��	��
Delcom Electronics Company Ltd.	��	��	��	��	��	��	��	��	��	��	��
	��	��		��	��		��	��		��	��
Others	��	��		��	��		��	��		��	��

F-23

New Taiwan Dollars US Dollars December 31, 2000 December 31, 2001 December 31, 2002 December 31, 2002 Shares Book value % Market value Shares Book value % Market value Shares Book value % Market value Book value Market value Investee Company (Unaudited-Note 2) Cost method by the Company D-Link Co., Ltd �� �� �� �� �� �� �� �� Marcronix International Co., Ltd �� �� �� �� �� �� �� �� Wk Technology Fund �� �� �� �� �� �� �� �� Delta American Ltd. �� �� �� �� �� Loyalty Founder Enterprises Co., Ltd. �� �� �� �� �� �� �� �� Acute Applied Technology Inc. �� �� �� �� �� � � �� � Wk Technology Fund IV �� �� �� �� �� �� �� �� Wk Technology Fund V �� �� �� �� �� �� �� �� Prominent Communications, Inc. �� �� �� �� �� Analog and Power Electronics Corp (Note c) �� �� �� �� �� �� �� �� Betacera Inc. �� �� �� �� �� �� �� �� Sheng Hua Venture Capital Corp. �� �� �� �� �� �� �� �� Wistron Nexus Inc. �� � � �� � � �� �� �� �� �� �� �� �� �� �� �� �� �� Cost method by DIH Delta Electronics (Thailand) Public Co., Ltd (Note a) �� �� �� �� �� �� �� �� Deltron-Cimic Electric and Electronics Co., Ltd. �� �� �� �� �� �� �� �� �� SyQor, LLC. �� �� �� � � �� � Ambicom, Inc. �� �� �� �� �� Netgear Inc. �� �� �� �� �� Lightech Fiberoptics, Inc. � � � �� �� �� �� �� �� �� �� �� �� �� �� �� �� Others �� �� �� �� �� �� �� �� Total �� �� �� �� �� �� �� �� Less: Allowance for loss on market value decline of long-term investments �� � �� � �� � �� � �� �� �� ��	US Dollars	US Dollars
	December	31, 2002

(Note a): The combined percentage of DET’s share held by DEI and DIH was more than 20%, accordingly the investment was accounted for under the equity method.

(Note b): The investment was accounted for under the cost method in 2000 due to the Company’s shareholding ratio less than 20%. In 2001, the cost method was still used although the Company’s shareholding ratio increased to more than 20% at the end of December 2001 because the effect on investment gain/losses in 2001 was considered not material.

(Note c): The investment was accounted for under the cost method since 2001 due to the Company’s shareholding ratio decreased to less than 20%.

(Note d): Preferred stock.

(Note e): Based on the resolution of DET’s stockholders’ meeting, par value was adjusted from THB10 to THB1, and accordingly, the number of shares increased ten times in 2001.

(Note f): Convertible bonds.

F-24

B. Except for DIH, DNH and DNI, which were included in the consolidation, other majority-owned investments are accounted for under the equity method because they do not meet the criteria for consolidation as described in Note 2.
C. In 2001, the Company disposed a portion and all of its investments in ELTA Technology Co., Ltd. (ELTA) and E.COM Community Networks Ltd. (E.COM), respectively. In 2001, the total investment loss in the investments in ELTA and E.COM, which were accounted for under the equity method prior to the disposal of the investments as discussed above, amounted to NT$15,388, which was recognized based on the unaudited financial statements of these investee companies due to their immateriality.
D. The investee company, Vivitek Co., Ltd. (Vivitek,) was liquidated in November 2002. The investment income recognized by the Company based on the financial statements prepared for liquidation purposes was NT$134,971 (US$3,884). According to the distribution statements of liquidation, NT$217,987 should be remitted to the Company. As of December 31, 2002 the Company has received NT$217,807 (US$6,268).
E. The financial statements of DET, Delta Electronics Europe Ltd. (DEU) Volink, ELTA and E.com in 2000, the financial statements of DET, DEU and Volink in 2001 and the financial statements of DET, Union, DEU and Volink in 2002 were audited by other auditors. In 2000, 2001 and 2002, the net investment income recognized by the Company under the equity method was NT$484,360, NT$433,244 and NT$361,069 (US$10,390), respectively. Due to the Company has committed to provide endorsements and guarantees to DEU, the Company continues to account for its investment in DEU under equity method and recognized investment loss in excess of the original investment cost by NT$2,759 and NT$2,950 as of December 31, 2001 and 2002, respectively. These negative balance were reclassified and presented in other liabilities-others.
F. DNI Group and YDT Group was restructured in 2002. The Company disposed all of its investments in DNI and YDT to Delta Networks, Inc. Cayman (DNI Cayman, the subsidiary of DNH) and YDT International Holding Ltd. (YDT Holding, DIH’s investee company under equity method), respectively. The change resulting from this restructuring is that the shareholding has been changed from indirect ownership to direct ownership, but the overall shareholding remains unchanged.

F-25

G. The 2002 financial statements of Delcom Electronics Company Ltd. and Netpower Technologies Inc., the investee companies of DIH under the equity method was audited by other auditors. In 2002, the investment loss recognized by DIH was NT$24,791(US$713). The 2001 and 2000 consolidated financial statements of DIH, which were audited by other auditors, included investment loss amounted to NT$11,829, NT$3,777, respectively, which were recognized based on the investee companies′ audited financial statements.
H. In 2000, 2001 and 2002, the investment (loss) gain in Addtron Technology Co., Ltd. (AT), an investee company of DNI, amounted to NT($29,423), $12,539 and NT($5,248) (US($151)), respectively, which were recognized based on the investee company's financial statements, which were audited by other auditors. Due to DNI has committed to provide endorsements and guarantees to AT, DNI continues to account for its investment in AT under equity method and recognized investment loss in excess of the original investment cost by $9,541 as of December 31, 2000. This negative balance was reclassified and presented in other liabilities-others.
I. In 2000, 2001 and 2002, the Company and its consolidated subsidiaries received cash dividends from investee companies accounted for under the cost method amounting to NT$85,688, NT$115,196 and NT$77,908 (US$2,242), respectively.

F-26

(6) Property, plant and equipment

December 31, 2000 (New Taiwan Dollars) Original cost Appraisal increment Total Accumulated depreciation Net book value Land �� �� �� �� Buildings �� � �� Machinery and equipment �� � �� Molds �� � �� Computer and communication equipment �� � �� Test equipment �� � �� Motor vehicles �� � �� Furniture and fixtures �� � �� Leasehold improvements �� � �� Prepayments for equipment and construction in progress�� � �� � �� �� �� �� �� ��		December 31, 2000 (New Taiwan Dollars)	Net book value

		December	31, 2001 (New Taiwan Dollars)
		Appraisal	Accumulated Net
	Original cost	increment	Total depreciation book value
Land	��	��	�� ��
Buildings	��	�	��
Machinery and equipment	��	�	��
Molds	��	�	��
Computer and communication equipment	��	�	��
Test equipment	��	�	��
Motor vehicles	��	�	��
Furniture and fixtures	��	�	��
Leasehold improvements	��	�	��
Prepayments for equipment and construction in progress��		�	�� � ��
	��	��	�� �� ��

F-27

December 31, 2002 (New Taiwan Dollars) Original cost Appraisal increment Total Accumulated depreciation Net book value Land �� �� �� �� Buildings �� � �� Machinery and equipment �� � �� Molds �� � �� Computer and communication equipment �� � �� Test equipment �� � �� Motor vehicles �� � �� Furniture and fixtures �� � �� Leasehold improvements �� � �� Prepayments for equipment and construction in progress�� � �� � �� �� �� �� �� ��		December 31, 2002 (New Taiwan Dollars)
			Net book value

December 31, 2002 (US Dollars) (Unaudited-Note 2) Original cost Appraisal increment Total Accumulated depreciation Net book value Land �� �� �� �� Buildings �� � �� Machinery and equipment �� � �� Molds �� � �� Computer and communication equipment �� � �� Test equipment �� � �� Motor vehicles �� � �� Furniture and fixtures �� � �� Leasehold improvements �� � �� Prepayments for equipment and construction in progress�� � �� � �� �� �� �� �� ��		December 31, 2002 (US Dollars) (Unaudited-Note 2)

A. As of December 31, 2002, the accumulated balance in the appraisal increment of land amounted to NT$168,738 (US$4,856).
As of December 31, 2002, the reserve for land value incremental tax amounted to NT$80,945 (US$2,329) and the capital reserve resulting from the appreciation on revaluation of land amounted to NT$114,714 (US$3,301).
B. To simplify the accounting procedures of depreciation, commencing 2002, the depreciation of DIH’s subsidiaries in Mainland China is provided on a straight-line basis over the estimated useful lives of the assets, with a nominal value of $1.00 (in dollar of reporting currency) as salvage value. As a result of the change in accounting estimate, depreciation expense for the year ended December 31, 2002 increased by NT$242,558 (US$6,980).

F-28

(7) Short-term loans

(8)

New Taiwan Dollars
US Dollars
December 31,
December 31,
2000
2001
2002
2002
(Unaudited)
(Note 2)
Unsecured bank loans
��
��
��
Secured bank loans
��
��
��
��
��
��
��
��
Credit lines
��
��
��
��
Interest rate per annum
��
��
��
��
Commercial paper payable
New Taiwan Dollars
US Dollars
December 31,
December 31,
2000
2001
2002
2002
(Unaudited)
(Note 2)
Commercial paper payable
��
��
Less: Unamortized discount
�
��
��
��
�
��
��
��
��
Interest rates
��
��
��
��

F-29

9) Convertible bonds

A. The first and second foreign currency Euro convertible bonds were redeemed or converted in the second quarter and third quarter of 2000, respectively. As of December 31, 2000, 2001 and 2002, the details of the third foreign currency Euro Convertible bonds (ECB III) were as follows:

follows:
		New Taiwan Dollars		US Dollars
		December 31,		December 31,
	2000	2001	2002	2002
	(Unaudited)
				(Note 2)
Issued amount	��	��	��	��
Redeemed amount	�	�� �	�� �	��	�
Ending balance	��	��	��	��
Add: Foreign currency
revaluation	��	��	��	��
Book value	��	��	��	��
Current portion-for
redemption next year	�� �� �		�� �	��	�
Non-current portion	��	��	��	��
Amount redeemed (in
thousands of US dollars)	��	��	��

B The issuance of ECB III was approved by SFC on January 29, 2000. The issuance and condition of ECB III are summarized as follows:
Descriptions
(A) Trustee The Bank of New York (B) Amount of issuance (Thousand dollars) US $200,000 (C) Nominal interest rate (net of tax) 0% (D) Period of issuance 5 years (Feb. 15, 2000~Feb. 15, 2005) (E) Area of issuance Luxembourg (F) Period of conversion Mar. 15, 2000~Jan.15, 2005 (G) Date of exercise of redemption and At Feb.15, 2001, 2002, 2003 and 2004 redemption price based on face value (the investor should notify the Company not more than 60 nor less than 30 days prior to redemption date)

F-30

C. In accordance with the terms and conditions of the bonds, the initial conversion price will be adjusted for increase in common shares outstanding. The conversion price at issuance date and as of December 31, 2002 for ECB III was NT$182 (in dollars) and $98.3 (in dollars), respectively.

(10) Reserve for retirement plan

A. The Company has an employee retirement plan covering all regular employees. Under the plan, the pension benefits payable to employees are determined as follows:
a. 2 months of average salary will be paid for each year of service for the first fifteen years.
b. For service period over 15 years, one month of average salary will be paid for each additional year of service.
c. There is a limitation of 45 months of average salary.
d. A half year of service is credited for service period shorter than a half year. For service period over 6 months, a whole year of service is credited.

The employee retirement plan of DNI was also in accordance with to the Labor Standard Law and related rules.

B. As of December 31, 2000, 2001 and 2002, the balance of the pension fund which is deposited with the Central Trust of China by the Company and DNI, was NT$249,634, NT$261,201 and NT$309,043 (US$8,893), respectively.
C. The related assumptions used to calculate the net periodic pension cost and the reconciliation of the funding status to accrued pension liability of the Company and DNI as of December 31, 2000, 2001 and 2002 were as follows:

F-31

		New Taiwan Dollars	New Taiwan Dollars	US Dollars
		December 31,		December 31,
	2000	2001	2002	2002
	(Unaudited)
				(Note 2)
Vested benefit obligation	��			��
Non-vested benefit
obligation	�� �� �� �			�� �
Accumulated benefit
obligation	��			��
Additional benefits based
on future salary increases	�� �� �� �			�� �
Projected benefit obligation	��			��
Fair value of plan assets	�� ��		��	��
Funded status	��			��
Unrecognized transition	�� ��		��	��
obligation
Unrecognized net gain
or loss	��		��	��
Additional liabilities	�� ��		�	�
Accrued pension	�� �� �� �			�� �
The related assumptions	were as follows:
		2000	2001	2002
Discount rate		��	��	��
Expected return rate on plan assets		��	��	��
The average ratio of salary increase		��	��	��

F-32

D. The details of net pension cost for 2000, 2001 and 2002 were as follows:

		New Taiwan Dollars	US Dollars
	2000	2001 2002	2002
	(Unaudited)
			(Note 2)
Service cost	��
Interest cost	��
Expected return on plan	��
assets
Amortization of	��
unrecognized transition
obligation
Curtailment gain	��
Unrecognized pension
(gain) loss	�� �� �� ��
Net pension cost	�� �� �� ��

E. In 2001, the Company adopted an early termination benefit program and approximately 1,000 employees opted for this program. The total pension paid under the program was NT$387,288 and the curtailment gain recorded was NT$302,983.
F. As of December 31, 2000, 2001 and 2002, the total balance of the reserve for retirement plan of DIH’S subsidiaries located in Mainland China were NT$92,368, NT$145,021 and NT$123,433 (US$3,552), respectively.

(11) Common stock

The outstanding capital of the Company amounted to NT$9,546,154 as of December 31, 2000. Based on the resolution adopted at the shareholders' meeting on May 16, 2001 and May 16, 2002, the Company issued 234,844,570 and 198,419,000 shares of common stock as stock dividends and employees' bonus by capitalizing retained earnings in the amount of NT$2,348,446 and NT$1,984,190 in 2001 and 2002, respectively. As of December 31, 2002, the issued and outstanding common stocks were 1,387,879,000 shares at NT$10 (dollars) par value per share.

F-33

(12) Capital reserve

The R.O.C. Company Law requires that the capital reserve shall be exclusively used to offset against accumulated deficit or increase in capital and shall not be used for any other purpose. The capital preserve can be used to offset against accumulated deficit only when legal reserve and special reserve are insufficient. Only capital reserve from paid-in capital in excess of par value and donated surplus can be used to increase capital and the total amount shall be limited to 10% of outstanding capital each year.

(13) Legal reserve

The R.O.C. Company Law requires that the Company shall set aside 10% of its net income as the legal reserve after covering prior years' losses until the legal reserve equals the capital stock balance. The legal reserve can be used only to cover an accumulated deficit or increase capital. The legal reserve can be used to increase capital only when the reserve exceeds 50% of capital stock, and shall be limited to 50% of the excess portion of the reserve.

(14) Undistributed earnings

A Based on the Company's Articles of Incorporation, the current year's earnings, if any, shall be distributed in the following order:
a) Payment of all taxes and dues.
b) Offset against prior years' operating losses, if any.
c) Set aside 10% of the remaining amount as legal reserve.
d) Set aside certain amount as special reserve, if necessary.
e) The amount of distributable earnings after deducting items (a), (b), (c) and (d), plus beginning undistributed earnings (the earnings), shall be distributed in the following percentage according to the resolution of the meeting of stockholders:
- (i)Directors' and supervisors' remuneration: up to 1% of the earnings.
- (ii) Employees' bonus: at least 3% of the earnings.
- (iii) Stockholders' bonus: balance of the earnings after deducting (i) and (ii).

F-34

According to the Company's Articles of Incorporation at least 50% of the distributable retained earnings shall be distributed as stockholders' bonus, of which at least 5% is payable by cash.

According to the resolution adopted at the shareholders’ meeting on May 16, 2002, the Company issued 178,419,000 and 20,000,000 shares of common stock at par value as stock dividends and employees’ bonus respectively, by capitalizing retained earnings in the amount of NT$1,984,190 (US$57,099) and cash dividend in the amount of NT$1,486,825 (US$42,786). The earnings distribution was approved by SFC with July 2, 2002 as the distribution date.

B. According to the requirement of SFC, the employees' bonus information of the distribution of 2001 earnings are as follows:
a) The information of employees' bonus and directors' and supervisors' remuneration: Please refer to Note 4 (14) A.
b) The actual payment of employees' bonus and directors’ and supervisors' remuneration in the distribution of 2001 earnings were NT$200,000 and NT$2,100, respectively. The Company issued 20,000 thousand shares of common stock to pay for employees' bonus, which presented 1.68% of the outstanding common shares on December 31, 2001.
c) The distribution of 2001 earnings was the same with the resolution of the directors' meeting and the stockholders' meeting.

The effect on the 2001 earnings per share (EPS) of the payment of employees' bonus and directors' and supervisors' remuneration in the distribution of 2001 earnings was as follows (In NT dollars):

	Primary EPS	Fully diluted EPS	Fully diluted EPS
Original EPS in 2001 financial	��
Statements
Effect of employees’ bonus and
directors’ and supervisors’
remuneration	�� �� �
Pro forma EPS	�� ��

As of the reporting date, the distribution of 2002 earnings had not been approved by the Company’s board of directors.

However, the information will be disclosed in the "Market Observation Post System" of the Taiwan Stock Exchange Corporation.

F-35

C. The Taiwan imputation tax system requires that any undistributed current earnings, on tax basis, 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 the 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 as tax credit against their individual income tax liability.
D. As of December 31, 2000, 2001 and 2002, the information on tax credit of the Company are as follows:

Imputation tax credit account balance Creditable tax ratio	New Taiwan Dollars US Dollars December 31, December 31, 2000 2001 2002 2002 (Unaudited-Note 2) �� �� �� �� 2000 (Actual) 2001 (Actual) 2002 (Estimated) �� �� ��	US Dollars
		December 31,
		2002

The actual creditable tax ratio will be adjusted based on the imputation tax credit account balance as of the distribution date. The 2001 earnings have been distributed, and the 2001 creditable tax ratio was calculated based on the balance of imputation tax credit account on July 2, 2002.

E. As of December 31, 2000, 2001 and 2002, the information on undistributed earnings of the Company are as follows:

Before January 1, 1998 On and after January 1, 1998 - Not yet imposed the 10% additional tax	New	Taiwan Dollars	US Dollars December 31, 2002 2002 (Unaudited-Note 2) �� �� �� �� �� ��
		December 31,
	2002 �� �� ��	2001 �� �� ��

F-36

15) Income tax

A. Deferred income tax assets and liabilities as of December 31, 2000, 2001 and 2002 are as follows:

(A) Total deferred income tax assets (B) Allowance for deferred income tax assets (C) Total deferred income tax liabilities	New Taiwan Dollars December 31, 2000 2001 2002 $1,102,510 $1,810,304 $1,662,296 $ 23,833 $ 132,041 $ 953,544 $3,396,080 $4,504,717 $3,912,166	New Taiwan Dollars December 31, 2000 2001 2002 $1,102,510 $1,810,304 $1,662,296 $ 23,833 $ 132,041 $ 953,544 $3,396,080 $4,504,717 $3,912,166	US Dollars December 31,
		December 31,
	2000 $1,102,510 $ 23,833 $3,396,080	2001 $1,810,304 $ 132,041 $4,504,717	2002 (Unaudited) (Note 2) $ 47,836 $ 27,440 $ 112,580

F-37

(D) The components of deferred income tax assets and liabilities are as follows:

				New Taiwan	Dollars	Dollars			US Dollars	US Dollars
	December 31, 2000			December 31,		2001		December 31, 2002	December	31, 2002
	Original			Original				Original	Original
	amount	Tax effects		amount		Tax effects		amount Tax effects	amount	Tax effects
									(Unaudited	- Note 2)
Unfunded pension	��	��		��	��		�� ��		��	��
Unrealized foreign exchange gain
(loss)	��	��		��	��		��		��	��
Reserve for decline in market value and inventory obsolescence	��	��		��	��		�� ��		��	��
Others, net	��	��		��	��		�� ��		��	��
Investment tax credit	��			��			��		��
Investment income accounted for under the equity method	��	�� �		��	�� �		�� �� �		��	�� �
	�� �			�� �			�� �		�� �
Net deferred tax assets - current
			New Taiwan Dollars					US Dollars
				December 31,				December 31,
		2000		2001		2002		2002
		(Unaudited - Note 2)
Deferred tax assets - current		��		��		��		��
Allowance for deferred tax assets - current		�� �		�� �		�� �		�� �
Net deferred tax assets - current		��		��		��		��
Deferred tax liabilities - current		�� �		�� �		�� �		�� �
Net deferred tax assets - current (shown as other current assets in the balance sheet) �� �� �� � �� �
Net deferred tax liabilities – non-current
			New Taiwan Dollars					US Dollars
				December 31,				December 31,
		2000		2001		2002		2002
		(Unaudited - Note 2)
Deferred tax assets – non-current		��		��		��		��
Allowance for deferred tax assets – non-current		�� �		�� �		�� �		�� �
Net deferred tax assets – non-current		��		��		��		��
Deferred tax liabilities – non-current		�� �		�� �		�� �		�� �
Net deferred tax liabilities – non-current		�� �		�� �		�� �		�� �

B. Net deferred tax assets - current

C. Net deferred tax liabilities – non-current

F-38

D. Income taxes payable for the years ended December 31, 2000, 2001 and 2002 are calculated as follows:

	New Taiwan Dollars	New Taiwan Dollars		US Dollars
	2000	2001	2002	2002
	(Unaudited)
				(Note 2)
Current year’s income tax
(benefit) expense	��	��	��	��
Deferred income tax
(benefit) expense	�	��	��	��
Increase in allowance for
deferred income tax assets	�	��	��	��
Income tax expense	��	��	��	��
Effect of deferred
income tax	��	��	��	��
Over provision of income
tax in prior years	��	��	��	��
Income subject to separate tax	��	��	��	��
Prepaid income tax	��	��	��	��
Others	��	��	�� �	�� �
Income tax payable, net	��	��	��	��
Income tax refundable	�	��	��	��
Income tax payable	��	��	��	��

E. As of December 31, 2002, according to "Income Tax Law" and "Statute for

Upgrading Industries", the income tax credits are as follow:

The item of	Total income	Unused income	Unused income
income tax credits	tax credits	tax credits	Year of expiration
R&D expenditure	��Between 2003 and 2006
Training expenditure	��Between 2003 and 2006
Procurement of
machinery and
equipment expenditure	��Between 2003 and 2005
Investment in important
technology based
enterprise and venture
capital investment
enterprise	�� Between 2002 and 2006
	��

F-39

The Company and DNI provided a valuation allowance for deferred income tax assets related to unused investment credit in the amount of NT$930,943 (US$26,790) as of December 31, 2002. Due to the uncertainty in the operating results, DNI recognized additional valuation allowance for other deferred income tax assets in the amount of NT$22,601 (US$650).

F. The Company's income tax returns have been assessed and approved by the Tax Authority through 1999. The income tax returns of 1997 was assessed for additional income tax payable amounting to NT$69,415 (US$1,998), which was not accrued as of December 31, 2002 due to its immateriality. As of December 31, 2002, the Company has filed an appeal for reassessment to the Tax Authority. The reassessment is still in process by the Tax Authority.

The income tax return of DNI has been assessed and approved by the Tax Authority through 1998.

F-40

(16) Earnings per share

16)Earnings per share	re	re	re	re
New Taiwan Dollars For the period ended December 31, 2000 Amount Earnings per share (in NT dollars) Income before income tax Net income Weighted average outstanding common shares (in thousands) Income before income tax Net income Basic EPS (Note) Net income �� �� �� �� Effect of potential common shares with dilutive effect: 0% foreign currency Euro convertible bonds � � �� Diluted EPS Net income �� �� �� �� �� New Taiwan Dollars For the period ended December 31, 2001 Amount Earnings per share (in NT dollars) Income before income tax Net income Weighted average outstanding common shares (in thousands) Income before income tax Net income Basic EPS (Note) Net income �� �� �� �� Effect of potential common shares with dilutive effect: 0% foreign currency Euro convertible Bonds � � �� Diluted EPS Net income �� �� �� �� ��	New Taiwan Dollars
	For the period ended December 31, 2000
		Weighted average outstanding common shares (in thousands)	Earnings per share (in NT dollars)
				Net income

F-41

New Taiwan Dollars For the period ended December 31, 2002 Amount Earnings per share (in NT dollars) Income before income tax Net income Weighted average outstanding common shares (in thousands) Income before income tax Net income Basic EPS (Note) Net income �� �� �� �� Effect of potential common shares with dilutive effect: 0% foreign currency Euro convertible Bonds � � �� Diluted EPS Net income �� �� �� �� �� US Dollars For the period ended December 31, 2003 (Unaudited-Note 2) Amount Earnings per share (in US dollars) Income before income tax Net income Weighted average outstanding common shares (in thousands) Income before income tax Net income Basic EPS Net income �� �� �� �� Effect of potential common shares with dilutive effect: 0% foreign currency Euro convertible bonds � � �� Diluted EPS Net income �� �� �� �� ��	New Taiwan Dollars	New Taiwan Dollars
	For the period
		Weighted average outstanding common shares (in thousands)

Note: The weighted average outstanding common shares was retroactively adjusted for stock dividends distributed in 2002.

F-42

5. RELATED PARTY TRANSACTIONS

(1) Name and relationship of related parties

Names of related parties Relationship with the Company Vivitek Co., Ltd. (Vivitek) A subsidiary of the Company Volink Integrated System, Inc. A subsidiary of the Company Delta Optoelectronics, Inc A subsidiary of the Company Cyntec Co., Ltd. Investee company accounted for under the equity method Yuasa Delta Technology Inc. Investee company accounted for under the equity method Grand Advance Technology Ltd. Investee company accounted for under the equity method Green Energy (Tianjin) Technology Ltd. Investee company accounted for under the equity method Addtron Technology Co., Ltd. (AT) Investee company accounted for under the equity method Newton Power Ltd. (Newton) Investee company accounted for under the equity method Delta Electronics Europe Ltd. (DEU) Investee company accounted for under the equity method Delta Electronics (Thailand) Public Co., Investee company accounted for under Ltd. (DET) the equity method Delta Electronics Components Investee company accounted for under (Thailand) Co., Ltd. (DECT) the equity method YDT International Holding Ltd. Investee company accounted for under the equity method Delta Products Corporation (DPC) Affiliated enterprise Delta Electronics (Jiang Su) Co., Ltd. Investee company accounted for under (Delta – Jiang Su) the equity method (Note a) Delta Electronics Components (Wu Investee company accounted for under Jiang) Co., Ltd. (Delta – Wu the equity method (Note a) Jiang) Delta-Cimic Electric and Electronics Affiliated enterprise. (Note b) Co., Ltd.

(Note a): Delta-Jiang Su and Delta-Wu Jiang was the investee company of

DIH and accounted under the equity method in 2001. Due to the increase in the shareholding over 50%, Delta-Jiang Su and Delta-Wu Jiang became DIH’s consolidated subsidiaries in 2002.

F-43

(Note b): In accordance with the regulations of SFC, when a party is deemed a related party, the information shall be disclosed in conformity with R.O.C. FAS No. 6, "Disclosure of Related Party Transaction". In 2002, Delta-Cimic became a new related party of DIH, and is disclosed as such in the 2002 financial statements. To present comparable data, certain amounts in 2001 and 2000 are presented for information purposes only.

(2) Significant transactions with related parties

A. Sales

Sales
	New Taiwan Dollars US Dollars
	2000	2001	2002 2002
			(Unaudited)
			(Note 2)
DPC	��	��	��
DET	��	��	��
AT	��	��	��
DEU	��	��	��
Delta-Cimic	��	��	��
Others	��	��	�� ��
	��	��	�� ��

Sales to related parties are made at the same terms and conditions as those for sales to third parties.

B. Service revenue

Service revenue
DET	New Taiwan Dollars 2000 2001 2002 �� �� ��		US Dollars 2002 (Unaudited) (Note 2) ��
	2000 ��	2001 ��

F-44

C. Purchases

Purchases
	New Taiwan Dollars US Dollars
	2000	2001	2002 2002
			(Unaudited)
			(Note 2)
DET	��	��	��
DPC	��	��	��
Delta-Jiang Su	�	��	��
Delta-Wu Jiang	�	��	��
Others	��	��	�� ��
	��	��	�� ��

Purchases from related parties are made at the same terms and conditions as those for purchase from third parties

D. Accounts receivable

Accounts receivable
	New Taiwan Dollars			US Dollars
		December 31,		December 31,
	2000	2001	2002	2002
				(Unaudited)
				(Note 2)
DET	��	��	��	��
Delta-Cimic	�	��	��	��
DPC	��	��	��	��
Others	��	��	��	��
	��	��	��	��
Less: Allowance for
doubtful accounts	�� ��		�� �� �
	�� ��		��	��

F-45

E. Other receivables

	New Taiwan Dollars	New Taiwan Dollars	New Taiwan Dollars	US Dollars
		December 31,		December 31,
	2000	2001	2002	2002
				(Unaudited)
				(Note 2)
DET	��	��	��	��
Others	��	��	��	��
	��	��	��	��

F. Accounts payable

	New Taiwan Dollars	New Taiwan Dollars	New Taiwan Dollars	US Dollars
		December 31,		December 31,
	2000	2001	2002	2002
				(Unaudited)
				(Note 2)
DET	��	��	��	��
Delta-Jiang Su	��	��	�	�
Others	��	��	��	��
	��	��	��	��

G. Property transactions

(A) The Company acquired the patent for development of projectors and liquid crystal color shutter owned by Vivitek. The contract price was NT$42,503, and the unpaid amount was NT$40,731 and NT$0 as of December 31, 2000 and 2001, respectively.
(B) Under a contract with Vivitek, the Company would pay royalty to Vivitek based on certain percentage of net revenues derived from projectors and liquid crystal color shutters through December 31, 2003. The Company has reached an agreement with Vivitek in June 2002 to pay a fixed amount of royalty of NT$174,000 to substitute the original royalty scheme. The royalty was paid in full on June 30, 2002.

F-46

(C) YDT was restructured in 2002. The Company disposed all of its investment in YDT to YDT International Holding Ltd. (YDT Holding, DIH’s investee company accounted for under the equity method.) There was no gain on disposal of investment.

H. Endorsements and guarantees

Endorsements	and guarantees	and guarantees	and guarantees
	New Taiwan Dollars			US Dollars
	2000	2001	2002	2002
				(Unaudited)
				(Note 2)
DET	��	��	��	��
DEU	��	��	��	��
AT	��	�	�	�
	��	��	��	��

DETAILS OF PLEDGED ASSETS

No significant assets were pledged.

COMMITMENTS AND CONTINGENT LIABILITIES

None.

MAJOR CATASTROPHE

No significant event has occurred which would impact the Company ' s and the consolidated subsidiary’s operations.

9. SUBSEQUENT EVENTS

None.

10. OTHER

(1) Certain accounts in the 2000 and 2001 consolidated financial statements have been reclassified to conform with the presentation adopted for 2002.

F-47

(2) Fair value of non-derivative assets and liabilities

ive assets and liabilities
	New Taiwan Dollars	2002 Book value Fair value	US Dollars December 31, 2002
	December 31,
2000 Book value Fair value	2001 Book value Fair value		December
Book value	Book value	Book value	Book value	Fair value

ASSETS

Non-derivative assets with fair values equal to book values �� Short-term investments �� Long-term investments �� (Including prepayments for long-term investments) LIABILITIES Non-derivative liabilities with fair values equal to book values �� Reserve for retirement plan �� The related assumptions on the fair value of non-derivative assets and liabilities are as follows:

A. Non-derivative assets and liabilities with fair values equal to book values.

(A) The carrying amounts of short-term non-derivative assets and liabilities including cash and cash equivalents, notes receivable and accounts receivable, other receivables, short-term loans, commercial paper payable, notes payable, accounts payable, income tax payable, accrued expenses, other payables and other current liabilities (excluding deferred income tax liabilities-current) are equal to their fair values because of their short-term maturities.
(B) The fair value of cash surrender value of life insurance is based on the book value at balance sheet date.
(C) The fair values of deposits-out and deposits-in are based on book value, which approximate the present value.

F-48

  - (D) The fair value of convertible bonds, including current portion of long-term loans, is based on book value at balance sheet date. According to the terms and condition of ECB III, the interest rate is zero, and the redemption price is equal to the face value.  The discounted value was not easily determinable and the foreign amount was translated into New Taiwan dollars using the exchange rate at the balance sheet date.

  - (E) The fair value of long-term loans is based on book value because there is no significant difference in the discounted value of future cash flows and the carrying amount of long-term loans.

B. The fair values of short-term investments are based on the market values at the balance sheet date.
C. The fair values of long-term investments are based on their market values at the balance sheet date or the underlying equity in net assets if market value is not available.
D. The fair value of reserve for retirement plan is the funded status based on the retirement actuarial report as of December 31, 2000, 2001 and 2002. The reserve for retirement plan which was not based on an actuarial report is based on book value.
(3) Information on derivative transactions
A. General information disclosure:
- (A) The Company and its consolidated subsidiaries, entered into certain foreign currency option contracts, premium currency deposit, forward foreign currency contracts and cross currency swap contracts to hedge foreign exchange risks in foreign currency denominated accounts receivable and payable.
- (B) Accounting policy: See Note 2.
- (C) Credit risk:

The banks, which the Company and its consolidated subsidiaries deal with, are all in good credit standing and, therefore, the possibility is low for the banks not to comply with the terms of the contracts. In the event that the banks fail to comply with the contracts, these will not cause any major loss to the Company and its consolidated subsidiaries.

F-49

(D) Market risk:

The Company and its consolidated subsidiaries, entered into these contracts in order to hedge foreign exchange losses. Due to the nature, there is no material market risk.

(E) The information on derivative transactions of the Company and its consolidated subsidiaries for the years ended December 31, 2000, 2001 and 2002 are as follows (unit: thousand of dollars):

F-50

Derivative transactions 2000 Derivative transactions of the Company Cross currency swap contracts Buy option (USD PUT/TWD CALL) Sell option (USD CALL/TWD PUT) Buy option (TWD PUT/USD CALL) Sell option (TWD CALL/USD PUT) Sell option (JPY PUT/USD CALL) Buy option (USD CALL/TWD PUT) Sell option (USD PUT/JPY CALL) Foreign currency deposit contracts Forward foreign currency contracts Total Derivative transactions of the consolidated subsidiary, DNI Buy option (USD PUT/TWD CALL) Sell option (USD CALL/TWD PUT) Total	Transaction terms Related future cash flows Par value, contracts amount or nominal principal contract dates Exercise dates Exercise prices/ Exercise rates Recognized Gain (or loss) New Taiwan Dollar Cash inflow Cash outflow �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � � �� �� �� � �� �� �� �� �� � � � �� �� �� � �� �� �� �� �� �� � � �� �� �� � �� �� � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �	Related future cash flows	Related future cash flows
			Cash outflow

F-51

			Transaction terms		Recognized	Related future cash flows	Related future cash flows	Related future cash flows	Related future cash flows
	Par value, contracts				Gain (loss)
	amount	or nominal		Exercise prices/	New Taiwan
Derivative transactions	principal contract dates		Exercise dates	Exercise rates	Dollars	Cash	inflow	Cash outflow
2001 Derivative transactions of the Company Buy option (TWD PUT/USD CALL) �� �� �� �� �� �� �� ��
Sell option (USD CALL/TWD PUT)	��	�� �� ��			��	��			��
Buy option (USD PUT/TWD CALL)	��	�� �� ��			��	��	��		��
Sell option (TWD CALL/USD PUT)	��	�� �� ��			�	��	��		��
Buy option (JPY PUT/USD CALL)	��	�� ��		��	��	� �
Sell option (USD CALL/JPY PUT)	��	�� �� ��			��	��	��		��
Dual currency deposit	��	�� ��		��	��	� �
				��
Forward foreign currency contracts	��	�� �� ��			�	��			��
Knock-out option	��	��	��	��	�	�� ��
Variable quantity option	��	�� �� �� ��			��	� �
		��
	�� ��		��	��	��	� �
		��
Accumulation disappearing option	��	�� ��	��	��	�	��			��
		��
Average rate option	��	�� ��	��	��	��	� �
		��
Interest rate swap	��	�� ��	��	��	�	�� ��
		��
Callable range accrual swap	��	�� ��	��	��	�	�� ��
		��
	��	�� ��	��	��	�	�� ��
		��
Swaption	��	�� ��	��	��	�	�� ��
		��
Total				��

F-52

(Note a): The trade will terminate if the spot rate reaches the knock-out level during each knock-out period of the trade. The trade is fully terminated before the expiration date due to the spot rate has hit the knock-out level. Thus, future cash flow is zero.

(Note b): The notional amount of this trade varies depend on future exchange rate. The base amount is multiplied by an index. If future spot rate is lower than the minimum rate, the index is 100%. On the other hand, if future spot rate is above the maximum rate, the index is 0~50%.

(Note c): There are a total of 372 fixing dates in the life of this contract. If spot rate is above 35.5NTD/USD on each fixing date, the notional amount shall be reduced by USD26.9 thousand. The remaining notional amount will be settled based on the exercise rates on the exercise date.

(Note d): If the rate (average weighted daily spot for each fixing date of the contact) is higher than the contract rate, the Company will receive the difference between average rate and contract rate from bank.

(Note e): The Company will pay or receive the difference between the floating and fixed interest rate multiplied by the notional amount.

(Note f): If LIBOR is between contract range, the Company will receive the difference between fixed rate and floating rate multiplied by the notional amount from bank. However, when LIBOR falls outside the contract range, the Company will pay floating rate multiplied by the notional amount to bank.

(Note g): If the 2-year swap rate is above the contract rate, the Company will enter into the interest rate swap contract.

(Note h): Due to the uncertainty of the transaction, future cash flow can not be calculated to a meaningful figure.

F-53

Transaction terms Derivative transactions Par value, contracts amount or nominal principal contract dates Exercise dates Exercise prices/ Exercise rates Derivative transactions of the consolidated subsidiary-DNI Foreign cross currency swap �� �� �� �� �� �� Buy option (USD PUT/TWD CALL) (USD PUT/JPY CALL) �� �� �� �� Sell option (USD CALL/TWD PUT) (USD CALL/JPY PUT) �� �� �� �� Forward foreign currency contracts �� �� �� Swaption �� �� �� �� �� �� Callable range accrual swap �� �� �� �� �� �� Total		Recognized Gain (loss) New Taiwan Dollar

Note a: If the 2-year swap rate is above the contract rate, DNI will enter into the interest rate swap contract.

Note b: If LIBOR is between contract range, DNI will receive the difference between the fixed rate and floating rate multiplied by the notional amount from bank. However, when LIBOR falls outside the contract range, DNI will pay the floating rate multiplied by the notional amount to bank.

Note c: Due to the uncertainty of the transaction, future cash flow can not be calculated to a meaningful figure.

F-54

Derivative transactions 2002 Derivative transactions of the Company Buy option (TWD PUT/USD CALL) Buy option (USD PUT/TWD CALL) Sell option (TWD CALL/USD PUT) Sell option (USD CALL/JPY PUT) Sell option (EUR CALL/USD PUT) Dual currency deposit Forward foreign currency contracts	Transaction terms Related future cash flows Par value, contracts amount or nominal principal Contract dates Exercise dates Exercise prices/ Exercise rates Recognized Gain (loss) Cash inflow Cash outflow New Taiwan Dollar US Dollars (Unaudited) (Note 2) �� �� �� �� �� � � �� �� �� �� �� � � �� � � �� �� �� �� � � �� �� �� �� �� �� � � � � �� �� �� �� �� � � �� �� � � �� �� �� �� �� � � �� �� �� � � �� �� �� �� � � �� �� �� �� � ��	Related future cash flows
		Cash inflow

F-55

Derivative transactions Accumulation disappearing option Interest rate swap Callable range accrual swap Inflating reverse strangle USD NTD selling strategy Limited average strike forward Enhanced premium range trade Total	Transaction terms Par value, contracts amount or nominal principal Contract dates Exercise dates Exercise prices/ Exercise rates �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� ��	Related future cash flows Recognized Gain (loss) Cash inflow Cash outflow New Taiwan Dollar US Dollars (Unaudited) (Note 2) �� �� � � �� �� �� �� �� �� �� �� � � �� �� �� �� �� �� � � �� �� �� �� �� ��

(Note a): There are a total of 372 fixing dates in the life of this contract. If spot rate is above 35.5 NTD/USD on each fixing date, the notional amount shall be reduced by USD26.9 thousand. The remaining notional amount will be settled based on the exercise rates on the exercise dates.

(Note b): The Company will pay or receive the difference between the floating and fixed interest rate multiplied by the notional amount.

(Note c): If LIBOR is between contract range, the Company will receive the difference between fixed rate and floating rate multiplied by the notional amount from bank. However, when LIBOR falls outside the contract range, the Company will pay floating rate multiplied by the notional amount to the bank.

(Note d): Due to the uncertainty of the transaction, future cash flow cannot be calculated to a meaningful figure.

(Note e): The exercise prices varies depending on the spot rate on the exercise date. The spot rate is between JPY127~JPY141.

(Note f): The notional amount of this trade varies depending on the exchange rate of exercise date and spot rate.

(Note g): The notional amount of this trade varies depending on the accumulated average rate during the contract period.

(Note h): The notional amount of this trade varies depending on the spot rate on the exercise date.

F-56

		Transaction terms			Related future cash flows	Related future cash flows
	Par value, contracts amount or nominal		Exercise prices/	Recognized
Derivative transactions	principal Contract dates	Exercise dates	Exercise rates	Gain (loss)	Cash inflow	Cash outflow
				New Taiwan
				Dollar US Dollars
				(Unaudited)
Derivative transactions of the consolidated subsidiary (Note 2) 1.Delta International Holding Ltd. Forward foreign currency contracts �� �� �� �� ��
	��	��	�� ��		��
Total �� �� 2.Delta Electronics International Ltd.
(Subsidiary of DIH)
Buy option (USD CALL/EUR PUT)	��	��	��	��	� �
Sell option (USD PUT/EUR CALL)	��	��	��	��	��
Buy option (USD CALL/JPY PUT)	��	��	��		� �
Buy option (USD PUT/JPY CALL)	��	��	��	��	� �
Sell option (USD PUT/JPY CALL)	��	��	��		� �
Dual currency deposit	��	��	��	� �	�� �
			��
Forward foreign currency contracts	��	��	��		� �
	��	��	��	��	� �
Inflating Reverse Strangle	��	��	��	��	� �
USD Buying Strategy	�� �� ��	�� ��		��	� �
Callable Range Accrual Swap	��	��	��	��	�� ��
Callable Range Accrual Notes	�� ��	��	��	�� ��	�� ��
	��
Total				�� ��

Note a: The exercise prices varies depending on the spot rate on the exercise date. The spot rate is between JPY127~JPY141. Note b: The notional amount of this trade varies depending on the exchange rate of exercise date and spot rate.

Note c: The notional amount of this trade varies depend on the spot rate in the exercise date.

Note d: Due to the uncertainty of the transaction, future cash flows cannot be calculated to a meaningful figure.

Note e If LIBOR is between a contract range, the Company will receive the difference between fixed rate and floating rate multiplied by the notional amount from the bank. However, when LIBOR falls outside the contract range, the Company will pay floating rate multiplied by the notional amount to bank.

F-57

			Transaction terms			Related future cash flows	Related future cash flows
	Par value, contracts amount or nominal			Exercise prices/	Recognized
Derivative transactions	principal	contract dates	Exercise dates	Exercise rates	Gain (loss)	Cash inflow	Cash outflow
					New Taiwan
					Dollar US Dollars
					(Unaudited)
Derivative transactions of the consolidated subsidiary (Note 2) 3.Delta Networks Inc. Buy option (TWD PUT/USD CALL) �� � �
Sell option (USD CALL/TWD PUT)	��	��	��	��	��	� �
Buy option (USD PUT/TWD CALL)	��	��	��	��	��	� �
Sell option (TWD CALL/USD PUT)	��	��				� �
Buy option (USD PUT/JPY CALL)	��	��	��	��	��	� �
Sell option (USD PUT/JPY CALL)	��	��			��	��
Sell option (USD CALL/JPY PUT)	��	��	��	��	��	� �
Sell option (USD CALL/EUR PUT)	��	��			��	� �
Sell option (USD PUT/EUR CALL)	��	��			��	��
Interest rate swap	��	��	�� ��		��	�� ��
	��
Callable range accrual swap	��	��	��	��	��	�� ��
	��
USD NTD selling strategy	��	�� ��			��	�� ��
	��
USD JPY selling strategy	��	��	�� ��		��	�� ��
	��
USD EUR selling strategy	��	��	��	��	��	�� ��
	��
Limited average strike forward	��	�� ��			�� ��
	��
Total					�� ��

Note a: The Company will pay or receive the difference between the floating and fixed interest rate multiplied by the notional amount. Note b: Due to the uncertainty of the transation, future cash flow can not be calculated to a meaningful figure. Note c: The notional amount of this trade varies depend on exchange rate of exercise date and spot rate. Note d: The notional amount of this trade varies depend on accoumulated average rate during the contract period.

F-58

(F) The premiums of both options are to be offset and the net premium revenue were US$51.9 thousand, US$126.2 thousand and US$539.5 thousand of the Company and its consolidated subsidiaries for the years ended December 31, 2000, 2001 and 2002, respectively.
(G) The interest income (expense) of the cross currency swap contracts were NT$39,265, (NT$55,550) and NT$31,033, (NT$15,510) and NT$0, (NT$1,038) of the Company and its consolidated subsidiaries for the years ended December 31, 2000, 2001 and 2002, respectively.

(H) Fair value and book value

Fair value and book
Foreign currency option contracts Forward foreign currency contract Fx receivable Fx payable	New Taiwan Dollars
	December 31,
		2002

B. Additional disclosure

Pursuant to the terms of the contracts, the premiums are delivered or paid on the trade date. The Company provided time deposit amounting to US$1,000 thousand as collateral in 2002. The consolidated subsidiaries, DNI provided time deposit amounting to US$120 thousand as collateral in 2000.

F-59

4) Elimination of intercompany transactions:

Name Abbreviated name

Delta International Holding Ltd. and its subsidiaries (Note a) DIH Delta Networks Holding Ltd. and its subsidiaries (Note b) DNH Delta Network Inc. and its subsidiaries (Note c) DNI (Note d)

(Note a): The significant intercompany transactions between the Company and the consolidated subsidiaries of DIH mainly included:
1.Delta Electronics International Ltd.
2.Delta Electronics (Japan) Inc.
3.Delta Logistics (USA) Corp.
4.Delta Electronics Component (Thailand) Co., Ltd.
5.DNI Logistics (USA) Corp.
6.DNT Holding Ltd.
7.Delta Networks International Ltd.
8.Delta Electronics (Dong Guan) Co., Ltd.
9.Delta Electronics Industrial (Dong Guan) Co., Ltd.
10.Delta Electronics Components (Dong Guan) Co., Ltd.
11.Delta Electronics Power (Dong Guan) Co., Ltd.
12.Delta Electronics Components (Wu Jiang) Co., Ltd.
13.Delta Electronics (Wu Jiang) Co., Ltd.
14.Delta Electro- optics (Wu Jiang) Co., Ltd.
15.Delta Video Display System (Wu Jiang) Co., Ltd.
(Note b): The significant intercompany transaction between the Company and the consolidated subsidiary of DNH was Delta Networks Inc.
(Note c): The consolidated subsidiary was Delta Networks International Limited.
(Note d): Delta Networks Inc. (DNI) was a subsidiary owns by the Company directly in 2001. In 2002, DNI was restructured, the Company disposed all of its investment in DNI to DNI Cayman (the subsidiary of DNH). DNI was indirectly owns by the Company after restructuring.

F-60

Significant intercompany transactions between the Company, DIH, DNH and the consolidated subsidiaries are eliminated when preparing consolidated financial statements.	Significant intercompany transactions between the Company, DIH, DNH and the consolidated subsidiaries are eliminated when preparing consolidated financial statements.	Significant intercompany transactions between the Company, DIH, DNH and the consolidated subsidiaries are eliminated when preparing consolidated financial statements.
The details are as follows:
		New Taiwan Dollars			US Dollars
		2000 2001	2002		2002
Transactions	The Company	DIH DNI The Company DIH DNI The Company	DIH	DNH	The Company DIH DNH
					(Unaudited-Note 2)
1.Elimination of long-term investments
(1)Long-term investments, stockholders′equity and minority interest	��	��	��	��	��
(2)Elimination of investment income or loss recognized (including	��	��	��	��
unrealized gain or loss from upstream and sidestream transactions)
(3)Elimination of realized gain or loss from upstream transactions	��	�� �� ��	��	��	��
(4)Elimination of realized gain or loss from sidestream transactions	�	� � �� ��	��	�	��
2.Elimination of intercompany receivable (AR) and payable (AP) accounts (1)A/R and A/P of downstream transactions �� �� �� ��
(2)A/R and A/P of upstream transactions	��	��	��	��	��
(3)A/R and A/P of sidestream transactions	�	�� ��	��	�� ��
3.Elimination of profit and loss accounts (1)Sale and purchase transactions A. Downstream transactions a. Elimination of sales and purchase transactions �� �� ��
b. Elimination of unrealized gain of beginning inventories	��	�� �� ��	��	�	��
c. Elimination of unrealized gain of ending inventories	��	�� �� ��	��	�	��
B. Upstream transactions Elimination of sales and purchases �� �� �� ��
C. Sidestream transactions Elimination of sales and purchases � �� �� �� �� ��
(2)Services revenue, selling expenses, management and administrative	��	��	��	��	��
expenses
(3)Elimination of disposal of long-term investments/realized gain or loss
from downstream transaction
A Downstream transactions	��	�� �� ��	��	�	��
B. Upstream transactions	��	�� � � � �	�	�	� � �
4.Elimination of minority interest	��	��	��	��	��
5.Elimination of other transactions	� � � �		�	�	� � �
(1) Leased asset transferred to property, plant and equipment	��	� �� ��	�	�� ��
(2) Depreciation expense of leases asset	��	� �� � � �	�	�	� � �
(2) Deposits-in and deposits-out	��	� �� ��	�	�� ��
(3) Rental revenue and rental expense	��	� �� ��	�	�� ��

F-61

11. Disclosure information of investee company

(1) Related information of significant transactions
A. Financing activities to any company or person: None.
B. Guarantee information:

Disclosure information of investee company
) Related information of significant transactions
A. Financing activities to any company or person: None.
B. Guarantee information:

Parties being guaranteed
The limit
The outstanding The amount of
The ratio of
accumulated guarantee
Name of the company providing guarantee
Relationship with
of guarantee
The highest outstanding
guarantee amount guarantee with
amount to net value
Number
Name
Name
the Company
for such party
guarantee amount in 2002
at 12/31/2002
collateral placed
of the Company
(Note a)
(Note b)
(Note c)
0
Delta Electronics, Inc.
Delta Electronics
Europe Ltd.
�
��
��
��
��
��
��
�
��
0
�
Delta Products Corp.
�
��
��
��
��
��
��
�
��

The ceiling of the
outstanding guarantee
to the respective party

��
��

(Note a): Number 0 represents the Company.

(Note b): Number 1 means the Company has business transactions with the party.

Number 3 means the Company and its subsidiaries directly own over 50% of the shares.

(Note c): The limit was determined by the Board of Directors.

(Note d): In accordance with the guarantee procedure of the Company, the Company's guarantee to others should not be in excess of 80% of the Company's net assets. As of December 31, 2002, the maximum amount of guarantee that the Company can provide was NT$24,107,266 (US$693,734).

C. Marketable securities held by the Company at December 31, 2002: Long-term investments please refer to note 4(5) and short-term investments are as follows:

C. Marketable securities held by the Company at December 31, 2002: Long-term investments please refer to note 4(5) and short-term investments are as follows:
Name and kind of marketable securities December 31, 2002 Name of investor Kind of marketable securities Name of marketable securities The relationship of the issuers with the Company General ledger accounts Number of shares (In thousand) Book value Percentage ownership Market value Note Delta Electronics, Inc. Beneficiary certificates UBS Taiwan Bond Fund None Short-term investments �� �� � �� �� � Delta Electronics, Inc. Beneficiary certificates Core Pacific Well Pool Bond Fund None � �� �� � �� �� � Delta Electronics, Inc. Beneficiary certificates NITC Bond Fund None � �� �� � �� �� � D. Marketable securities acquired or sold during 2002 in excess of $100,000 or over 20% of capital: Name of General January 1, 2002 Addition Disposal marketable ledger Name of Number of Number of Number of Disposal gain Acquirer / seller security accounts transaction parties Relationship shares Amount shares Amount shares Sales amount Cost (loss) Delta Electronics, Inc. UBS Taiwan Bond Fund Short-term investments � � �� �� �� �� �� �� �� �� �� �� � Wanpao Securities Investment Trust Fund � � � � � �� �� �� �� �� �� �� �� � Capital Safe Income Fund � � � �� �� �� �� �� �� �� �� �� ��	December 31, 2002
	Number of shares
Delta Electronics, Inc. � �

D. Marketable securities acquired or sold during 2002 in excess of $100,000 or over 20% of capital:

F-62

Acquirer / seller

Delta Electronics,
Inc.
�
�
�
�
�
�
�
�
�

Name of
General
January 1, 2002
Addition
Disposal
December 31, 2002
marketable
ledger
Name of
Number of
Number of
Number of
Disposal gain
Number of
security
accounts
transaction parties
Relationship
Shares
Amount
shares
Amount
shares
Amount
Cost
(loss)
shares
Amount
Core Pacific Well
Pool Bond Fund
Short-term
investments
�
�
��
��
��
��
��
��
��
��
��
��
��
��
HSBC NTD
Money
Management
Fund
�
�
�
�
�
��
��
��
��
��
��
��
��
�
�
NITC Bond
Fund
�
�
�
��
��
��
��
��
��
��
��
��
��
��
��
Dresdner Taiwan
DAM Fund
�
�
�
�
�
��
��
��
��
��
��
��
��
�
�
Capital
Investment Cash
Reserves Fund
�
�
�
�
�
��
��
��
��
��
��
��
��
�
�
Pruidential
Financial Bond
Fund
�
�
�
�
�
��
��
��
��
��
��
��
��
�
�
Acute Applied
Technologies,
Inc.
Long-term
investments
(Note a)
�
��
��
��
��
��
��
��
��
��
��
��
�
�
Delta
Optoelectronics
Inc.
�
Delta
Optoelectronics
Inc.
A subsidiary of
the Company
��
��
��
��
��
��
�
�
��
��
��
�
��
��
Yuasa Delta
Technology Inc.
�
YDT International
Holding Ltd.
DIH’s investee
company
accounted for
under the
equity method
��
��
��
��
��
��
��
��
��
��
��
��
�
�
Delta Networks
Holding Ltd.
�
Delta Networks
Holding Ltd.
A subsidiary of
the Company
��
��
�
�
��
��
��
�
��
��

(Note a): Transaction Parties included Investel Inc. and WK Technology Fund.

(Note b): Including the proportionate share of adjustment to subsidiaries capital reserve. (Note c): Including investment loss.

(Note d): Including the cumulative translation adjustments on this investment. The cumulative translation adjustments were cleared when they were sold.

(Note e): Including investment income accounted for under the equity method and the cumulative translation adjustments on foreign long-term investment.

E. Acquired real estate in excess of $100,000 or over 20% of capital: None.
F. Disposal of real estate in excess of $100,000 or over 20% of capital: None.
G. Related party purchases or sales transactions in excess of $100,000 or over 20% of capital: Please refer to Note 5 (2) A and C.
H. Receivable from related parties in excess of $100,000 or over 20% of capital:

F-63

Name of creditor	Transaction parties Delta International Holding Ltd. (DIH) DEI Logistics (USA) Corp. Delta Electronics (Thailand) Public Co., Ltd. Delta Products Corporation	Relationship A subsidiary of the Company A subsidiary of DIH Investee company accounted for under equity method Affiliated enterprise	Balance of receivable from related parties Turnover rate Accounts receivable Other receivables �� �� �� �� �� � Accounts receivable Other receivables �� �� �� �� �� � Accounts receivable Other receivables �� �� �� �� �� � Accounts receivable Other receivables �� �� �� �� �� �	Overdue receivable Subsequent Allowance Action adopted for collections for doubtful Amount overdue accounts (Note) accounts provided �� � � �� � �� � �� �� �� �� �� �� � � �� �� � �� �� �� �� � � �� �� �� �� � � � �
				Amount �� � �� �� �� �� � �� ��
Delta Electronics, Inc. � � �

(Note): The amounts collected as of January 27, 2003.

F-64

I. Information on derivative transactions: Please refer to Note 10 (3).

(2) Disclosure information of investee company

Information relating to investee companies and the marketable securities of Volink Integrated System, Inc. was based on the reports of other auditors. Investment income or loss was translated at the average exchange rate in 2002 while others were translated at the rate of exchange prevailing at the balance sheet date.

A. Information of investee company:

Name of investor	Name of investee company	Address	Main activities	Original investment Held Balance as of December 31, 2002 Balance as of December 31, 2001 Number of shares �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� ��	Held	as of December 31, 2002
						Percentage of ownership �� �� �� �� �� ��
Delta Electronics, Inc. � � � � �	Volink Integrated System, Inc. Delta Networks Holding Ltd. Delta International Holding Ltd. Delta Optoelectronics, Inc. Delta Electronics Europe Ltd. Grand Advance Technology Ltd.	3F 101 Feenliau Road, Neihu Taipei, Taiwan Scotia Center, 4th Floor P.O. Box 2804 George Town, Grand Cayman, Cayman Islands Scotia Center, 4th Floor P.O. Box 2804 George Town, Grand Cayman, Cayman Islands 4F,No.2,R&D Rd. ��, Science-Based Industrial Park, Hsinchu, Taiwan 2 Young Place, Kelvin Industrial Estast, East Kilbride, Glasgow G75 OTD, UK No.11, Hsin-Hua Rd, Tao-Yuan, Taiwan	Software, information management, application service provider, enterprise resource management, management consulting, equipment leasing, etc. Equity investment in Mainland China, Hong Kong, etc. Development, design, manufacturing and sales of networking system and peripherals Development, design, manufacturing and sales of displays with polymer light emission display (PLED) and carbon nano-tube electronic emitter (CNT) technologies Development, manufacturing, marketing and sales, and technical service of electronic/electrical components and products Manufacturing and sales of CD, CDR, VCD and DVD

F-65

Name of investor	Name of investee company	Address	Main activities	Original investment Held Balance as of December 31, 2002 Balance as of December 31, 2001 Number of shares �� �� �� �� �� �� �� �� �� � �� � �� � �� �� �� �� �� �� �� �� �� �� ��	Held	as of December 31, 2002	as of December 31, 2002	Income (loss) of the investee company Investment income (loss) recognized by the Company Note �� �� �� �� The weighted average shareholding ratio was 38.01%, and the investment income included the adjustment of the directors’ and supervisors’ remuneration. �� �� �� �� The investment loss included the amortization of the excess of investment cost over the net assets of the investee. �� �� �� �� The weighted average shareholding ratio was 20.14% and the investment income included the amortization of the excess of investment cost over the net assets. �� �� �� �� The weighted average shareholding ratio was 20.14% and the investment income included the amortization of the excess of investment cost over the net assets. �� �� �� �� � �� �� �� � �� �� � � �� �� � �
						Percentage of ownership �� �� �� � � �� �� ��	Book value �� �� �� �� �� �� � � �� �� �� �� �� ��
Delta Electronics, Inc. � � � � Delta International Holding Ltd. � �	Cyntec Co., Ltd. Union Optronics Corp. Delta Electronics (Thailand) Public Co., Ltd. Delta Networks, Inc. Vivitek Co., Ltd. Delta Electronics (H.K.) Ltd. Delta Electronics Agent Ltd. Delta Electronics International Ltd.	No.2,R&D Rd.��, Science-Based Industrial Park, Hsinchu, Taiwan 156 Kao-shy Rd. Yang-Mei, Tao-Yuan, Taiwan Bangpoo Industrial Estate KM. 37, Sukhumvit Road Samutprakarn 10280, Thailand 252, Shan-Ying Rd. Gueishan, Tao-Yuan Taiwan 14F, No.266, Wen Hua Avenue II, Sec.l Linkou Taipei, Taiwan 21F., Prosperity Centre, No.25 Chong Yip st., Kwun Tong, Kowloon, Hong Kong P.O. Box 438, Road Town, Tortola, British Virgin Island �	Research, development, manufacturing and sales of various thin film components, such as thermal printer head, temperature sensor and its application modules, chip resistors and hybrid circuits Development, design, manufacturing and sales of optoelectronics semiconductors and semiconductor components Manufacturing and sales of electronic products Development, design, manufacturing and sales of networking system and peripherals. Development, design, manufacturing and sales of optoelectronics displays & components Operations management and engineering services Operations management and engineering services Sales of electronic products

F-66


				Original investment		Held	as of December	31, 2002
				Balance as of	Balance as of					Investment income
Name	Name of investee			December 31,	December 31,	Number	Percentage		Income (loss) of the	(loss) recognized
of investor	company	Address	Main activities	2002	2001	of shares	of ownership	Book value	investee company	by the Company	Note
Delta	Delta Electronics	P.O. Box 438,	Electronics product sales	��	��	��	��	��	��	(Note a)	�
International	Trading Ltd.	Road Town,		��				��	��
Holding		Tortola, British
Ltd.		Virgin Island
Delta Power Sharp		21F., Prosperity	Operations management and	��	��	��	��	��	��	�	�
	Ltd.	Centre, No. 25	engineering services	��				��	��
		Chong Yip St.,
		Kwun Tong,
		Kowloon, Hong
		Kong
�	Delta Electronics (Dong Guan) Co., Ltd.	Xinan District Shijie Town, Dongguan,	Manufacturing and sales of transformers (capacity not exceeding 1000 VA),	�� ��	��	�	��	�� ��	�� ��	�	�
		Guangdong,	switching power supplies,
		P.R.C.	adapters, and color
			monitors, inductors under
			100VA (coil only), resistors
			for applications under 2w
			(except chip resistors,
			resistor array), electronic
			thermometers of accuracy
			less than 0.1%, cashier,
			CD-ROMs, barebones, UPS
			and its modules, telecom
			power system and its
			modules
�	Delta Electronics	Xinan District	Manufacturing and sales of	��	��	�	��	��	��	�	�
	Industrial (Dong	Shijie Town,	electronic ballast for energy	��				��	��
	Guan) Co., Ltd.	Dongguan,	saving lighting and interface
		Guangdong,	cards
		P.R.C.
�	Delta Electronics	Xinan District	Manufacturing and sales of	��	��	�	��	��	��	�	�
	Components (Dong Guan) Co.,	Shijie Town, Dongguan,	transformers (capacity not exceeding 1000 VA),	��				��	��
	Ltd.	Guangdong,	interface cards, diode,
		P.R.C.	resistors, battery and its
			parts

F-67


Name of investor Name of investee company Address Main activities Delta International Holding Ltd. Delta Electronics Power (Dong Guan) Co., Ltd. Xinan District Shijie Town, Dongguan, Guangdong, P.R.C. Manufacturing and sales of other power supplies, switching power supplies, adapters, inductors under 100VA (coil only), barebones, DC/DC converters, UPS and its modules , telecom power system and its modules � DEI Logistics (USA) Corp. 4405 Cushing Parkway, Fremont, CA 94538, U.S.A. Warehousing and logistics services � Delta Electronics (Japan) Inc. 2-1-14 Shiba Daimon, Minato-Ku, Tokyo, 105-0012, Japan Trading and import-export of the related equipment, components and materials telecom system, computer system and instruments � Deltec Co., Ltd. 14F, No.266, Wen Hua Avenue II, Sec.1 Linkou Taipei Import/export of computer and electrical equipment and its components � DNT Holding Ltd. Scotia Center, 4th Floor P.O.Box 2804 George Town, Grand Cayman, Cayman Islands Equity investment � Delta Electronics Components (Thailand) Co., Ltd. 699 Moo 4 Bangpoo Industrial Est., Suhkumvit Rd., Parksar, Mung Samutprakam 10280, Thailand Manufacturing and sales of electronic components � Pyramis Corporation 2271 West 205th Street Suite 103, Torrance, CA 90521, USA Electronic products sales	Original investment Balance as of December 31, 2002 Balance as of December 31, 2001 �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� ��	Held as of December 31, 2002 Number of shares Percentage of ownership Book value Income (loss) of the investee company Investment income (loss) recognized by the Company � �� �� �� �� �� (Note a) �� �� �� �� �� � �� �� �� �� �� � �� �� �� �� �� � �� �� �� �� �� �� � �� �� �� �� �� �� � �� �� �� �� �� �� �	Note
			� � � � � � �

F-68

Original investment Held as of December 31, 2002 Balance as of Balance as of Investment income Name Name of investee December 31, December 31, Number Percentage Income (loss) of the (loss) recognized of investor company Address Main activities 2002 2001 of shares of ownership Book value investee company by the Company Note Delta Delta. Video No. 18 Jiangxing East Manufacturing and sales of �� (Note a) � International Display System Road Yun Dong color monitor (17” and �� Holding (Wu Jiang ) Co., Derelement Zone below), ballast for discharge Ltd. Ltd. Song Ling Town and fluorescent lighting Wujirang City, Jiang Su Province, P.R.C. � Delta Electronics No. 6 Wutong New Manufacturing, sales and �� (Jiang Su) Co., Road Wujiang management of computer �� Ltd. Economic enclosures, interface cards, Development Zone, ballast for discharge and Song Ling Town fluorescent lighting, Wujiang City, Jiang transformer under 1KVA, Su Province, P.R.C. switching power supplies (except high power density, high frequency power supplies), uninterruptible power supplies (UPS) (except high power density, high frequency power supplies), other power supplies (except high power density, high frequency power supplies), coils inductors, base boards for UPS, storage batteries and related components, color monitors, resistors for applications under 20W, electronic thermometers of accuracy less than 0.1%, motors under 37.5W (except precision miniature motors) � Delta Electronics � Manufacturing and sales of �� Components (Wu transformer under 1KVA, �� Jiang) Co., Ltd. inductors, interface cards, resistors for applications under 20W, other storage batteries and related components, motors under 37.5w (except precision miniature motors), electronic control devices for machinery (voltage under 1000V and excluding numeric control)

F-69


Address	Main activities	Original investment		Held	as of December 31, 2002 Percentage of ownership Book value	Income (loss) of the investee company	Investment income (loss) recognized by the Company	Note
		Balance as of December 31, 2002 �� �� �� �� �� �� �� �� �� �� �� ��	Balance as of December 31, 2001 �� �� �� �� �� ��	Number of shares	Percentage of ownership
No. 18 Jiangxing East Road Yun Dong Derelement Zone Song Ling Town Wujirang City, Jiang Su Province, P.R.C. Scotia Center, 4th Floor P.O. Box 2804 George town,Grand Cayman,Cayman Islands 1209 Orange St., in the City of Wilmington, Country of New Castle, Delaware 19801, U.S.A. Scotia Center, 4th Floor P.O. Box 2804 George town,Grand Cayman,Cayman Islands 1100 Jupiter road, Suite 130 Plano, TX 75074, U.S.A. 908 Moo 4, Tambon Prakasa, Amphur Muang Samutprakarn, Samutprakarn Province 10280, Thailand	Manufacturing and sales of electronic equipment enclosures, transformers, magnetic components, electronic control devices for machinery (voltage under 1000 V and excluding numeric control), boards, panel, consoles and other bases for electronic control devices, camera components, hard disk drives (excluding micro disk drives and optical disk drives) Equity investment Equity investment Equity investment Produce DC/DC/Power /Module, product design, sample production , and marketing & sales Manufacturing and sales of electronic components			�� �� �� �� �� �� �� ��				� � � � � �

F-70

					Original Investment	Original Investment	Held	as of December	as of December	31, 2002
		Name of			Balance as of	Balance as of						Investment income
Name		investee			December 31,	December 31,	Number	Percentage			Income (loss) of the	(loss) recognized
of investor		company	Address	Main activities	2002	2001	of shares	of ownership		Book value	investee company	by the Company	Note
Delta	Networks	Delta	Scotia Center, 4th	Equity Investment	��	��	��		��	�� ��		(Note b)	�
Holding Ltd.		Networks	Floor P.O. Box		��					�� ��
		(Cayman) Inc.	2804 George
			Iown, Grand
			Gayman, Cayman
			Islands.
Delta	Networks	Delta Networks	252, Shan-Ying	Development design	��	�	��		��	��	��	(Note c)	�
(Cayman) Inc.		Inc.	Road, Gueishan,	manufacturing and	��					�� ��
			Tao-Yan Taiwan	sales of networking
				system and
				peripherals.
Delta Electronics Addtron 2-1-4 Shibadaimon, Electronic products �� �� �� �� �� (Note d) �
(Japan) Ltd.		Technology	Minato-Ku Tokyo	sales	��					�� ��
		(Japan) Co.,	105-0012, Japan
		Ltd.
DNT Holding DNI Logistics 4425 Cushing Warehousing and �� �� �� �� �� (Note e) �
Ltd.		(USA) Corp.	Parkway, Fremont,	logistics service	��					�� ��
			CA 94538, USA
	�	Delta Networks	21th Floors of	Trading and	��	�	��		��	��	��	(Note e)	�
		International	Prosperity Centre,	import/export of	��					�� ��
		Ltd.	No.25 Chang Yip	networking system
			Street, Kowloon
			HongKong
Volink Volink Holding Offshore Chambers, Equity investment �� �� �� �� �� (Note f) �
integrated		Ltd.	P.O. Box 217,		��					�� ��
system, Inc.			Asia, Samoa
Volink Holding Volink Dongguan Software development, �� � �� �� �� (Note g) �
Ltd.		Integrated	Guangdong P.R.C	design and sales,	��					�� ��
		systems (Dong		other value added
		Guan) Co.,		work on software;
		Ltd.		software maintenance,
				technical service,
				system integration
				and consulting service

(Note a): Investment income/loss recognized by Delta International Holding Ltd. (Note b): Investment income/loss recognized by Delta Networks Holding Ltd. (Note c): Investment income/loss recognized by Delta Networks (Cayman) Inc. (Note d): Investment income/loss recognized by Delta Electronics (Japan) Inc. (Note e): Investment income/loss recognized by DNT Holding Ltd. (Note f): Investment income/loss recognized by Volink Integrated System, Inc. (Note g): Investment income/loss recognized by Volink Holding Ltd.

F-71

B. Financing activities to any company or person: None.

C. Guarantee information: None.

D. Marketable securities held by the company at December 31, 2002:

Name of investor	Name and kind of marketable securities Kind of marketable securities Name of marketable securities The relationship of the issuers with the Company Common stock Delta Electronics (H.K.) Ltd. A subsidiary of DIH � Delta Electronics Agent Ltd. � � Delta Electronics International Ltd. � � Delta Electronics Trading Ltd. � � Delta Power Sharp Ltd. � � DEI Logistics (USA) Corp. � � Delta Electronics (Japan) Inc. � Certificate of amount contributed Delta Electronics (Dong Guan) Co., Ltd. � � Delta Electronics Industrial (Dong Guan) Co., Ltd. � � Delta Electronics Components (Dong Guan) Co., Ltd. � � Delta Electronics Power (Dong Guan) Co., Ltd. � Common stock Deltec Co., Ltd. � � DNT Holding Ltd. � � Delta Electronics Components (Thailand) Co., Ltd. � � Pyramis Corporation � Certificate of amount contributed Delta Electronics (Jiang Su) Co., Ltd. � � Delta Electronics Components (Wu Jiang) Co., Ltd. � � Delta Electro-optics (Wu Jiang) Ltd. �	General ledger accounts Long-term investments � � � � � � � � � � � � � � � � �	December 31, 2002 Number of shares Book value Percentage Market value �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� � �� �� �� �� � �� �� �� ��
	Kind of marketable securities
Delta International Holding Ltd. (DIH) � � � � � � � � � � � � � � � � �	Common stock � � � � � � Certificate of amount contributed � � � Common stock � � � Certificate of amount contributed � �

F-72

Name of investor	Name and kind of marketable securities Kind of marketable securities Name of marketable securities The relationship of the issuers with the Company Certificate of amount contributed Delta Video Display System (Wu Jiang) Co., Ltd. A subsidiary of DIH Common stock DAC Holding Ltd. Investee company of DIH accounted for under equity method � DAT Holding Ltd. � � YDT International Holding Ltd. � � Delcom Electronics Co., Ltd. � Preferred stock Netpower Technologies, Inc. � Common stock Delta Electronics (Thailand) Public Co., Ltd. Investee company of the Company � Deltron-Cimic Electric and Electronics Co., Ltd. Affiliated enterprise � NY3D Inc. � � Asante Technologies, Inc. � � MRV Communications Inc. � Preferred stock Ambicom, Inc. � � Quintum Technologies, Inc. � � Ezonics Corporation � � Lightech Fiberoptics, Inc. � � Netgear Inc. � Convertible bond VPT, Inc. � Certificate of amount contributed Mizubo Capital Co., Ltd. MHCC IT Fund 2000 � Common stock Volink Holding Ltd. A subsidiary of Volink Beneficiary certificates UBS Taiwan Bond Fund. � Common stock Delta Networks Inc.(Cayman) A subsidiary DNH	General ledger accounts Long-term investments � � � � � � � � � � � � � � � � � � Short-term investment Long term investment	December 31, 2002 Number of shares Book value Percentage Market value � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� � �� �� �� �� � �� �� �� �� � �� �� �� �� � �� �� � �� �� � �� �� � �� �� � �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� ��
	Kind of marketable securities
Delta International Holding Ltd.(DIH) � � � � � � � � � � � � � � � � Volink Integrated System, Inc (Volink) � Delta Networks Holding Ltd.(DNH)	Certificate of amount contributed Common stock � � � Preferred stock Common stock � � � � Preferred stock � � � � Convertible bond Certificate of amount contributed Common stock Beneficiary certificates Common stock

F-73

E. Marketable securities acquired or sold	E. Marketable securities acquired or sold	E. Marketable securities acquired or sold	in 2002 in excess of NT$100,000 or over	in 2002 in excess of NT$100,000 or over	in 2002 in excess of NT$100,000 or over	20% capital:	20% capital:
	Name of	General			January	1, 2002	Addition .				Disposal		December 31, 2002
	marketable	ledger	Name of		Number of		Number of		Number of			Disposal gain/
Acquirer/ seller	security	accounts	transaction parties	Relationship	shares	Amount	Shares	Amount	shares	Sales amount	Cost	(loss)	Number of shares	Amount
Delta	DNT Holding	Long-term	DNT Holding Ltd.	A subsidiary of	��		��		�	��	��	��	��	��
International	Ltd.	investments		the Company		��		��						��
Holding Ltd.								(Note a)
�	Delta Electronics	�	Delta Electronics	�	�	��	�	��	�	�	��	�	�	��
	Components		Components Co.,			��		��			��			��
	Co., Ltd.		Ltd.								(Note b)
�	Delta Electronics	�	Delta Electronics	�	�	��	�	��	�	�	��	�	�	��
	(Jiang Su) Co.,		(Jiang Su) Co.,			��		��			��			��
	Ltd.		Ltd.								(Note b)
�	Delta Video	�	Delta Video	�	�	��	�	��	�	�	�	�	�	��
	Display System		Display System			��		��						��
	(Wu Jiang) Co.,		(Wu Jiang) Co.,					(Note a)
	Ltd.		Ltd.
�	Delta	�	Delta	�	�	��	�	��	�	�	�	�	�	��
	Electro-optics		Electro-optics			��		��						��
	(Wu Jiang) Ltd.		(Wu Jiang) Ltd.					(Note a)
�	Delta Electronics	�	Delta Electronics	��			�	��	��
	Industrial (Dong		Industrial (Dong			��		��						��
	Guan) Co., Ltd.		Guan) Co., Ltd.					(Note a)
�	YDT	�	(Note c)	Investee	�	�	��		�	�	�	�	��	��
	International			company of				��						��
	Holding Ltd. (YDT Holding)			YDT Holding accounted for				(Note a)
				under equity
				method
Delta Networks	Delta Networks	Long-term	Delta Networks	A subsidiary of	�	�	��		�	�	�	�	��	��
Holding Ltd.	Inc.	investments	Inc.	the Company				��						��
								(Note a)

(Note a): Including investment income accounted for under the equity method and the cumulative translation adjustments on foreign long-term investment.

(Note b): Including investment loss accounted for under the equity method.

(Note c): Transaction parties included Yuasa Delta Technology Inc. and YDT International Holding Ltd.

F. Acquired real estate in excess of NT$100,000 or over 20% of Capital: None.
G. Disposal real estate in excess of NT$100,000 or over 20% of Capital: None.
H. Related party purchases or sales transactions in excess of NT$100,000 or over 20% of Capital: None.
I. Receivable from related parties in excess of NT$100,000 or over 20% Capital: None.

F-74

J. Information on derivative transactions:

Delta International Holding Ltd. (DIH):

(A) General information disclosure (unit in thousand):
(a) Purpose:

DIH entered into certain forward foreign currency contracts to hedge foreign exchange risk in foreign currency denominated accounts receivable.

(b)Accounting policies:

See Note 2.

(c) Credit risk:

The banks, which DIH deals with, are all in good credit standing, and therefore, the possibility is low for the banks not to comply with the terms of the contracts. In the event that the banks do fail to comply with the contracts, it will not cause any major loss to DIH.

(d) Market risk:

DIH entered into the forward foreign currency contracts in order to hedge foreign exchange losses. Due to the nature, there is no material market risk.

(e) As of December 31, 2002, the outstanding forward foreign currency purchase and sales (THB/USD) contracts was THB 2,900,000. The cash inflow and outflow was THB 2,900,000/US$66,831 and US$66,864/THB2,900,000, respectively.
(f) In 2002, total gains on the forward foreign currency contracts was NT$372 (US$11).
(B) Additional disclosure

Pursuant to the terms of the contracts, DIH does not provide any mortgage assets.

F-75

(3) Disclosure of information on indirect investments in Mainland China (Units: In thousands)

A. Basic information

Investment Income or loss recognized are translated at the rate of annual average, others are translated at the rate of exchange prevailing at the balance sheet date.

					Remitted or	collected this					The investment
Name of investee				Accumulated	period		Accumulated	Ownership held by	Investment income		income (loss)
in Mainland			Investment	remittance as of			remittance as of	the Company (direct	(loss) recognized by the	Ending balance	remitted back as of
China	Main activities of investee	Capital	method	January 1, 2002	Remitted out	Collected	December 31, 2002	and indirect)	Company during the year	of investment	December 31, 2002
Delta Electronics	Manufacturing and sales of	��	Invested by Delta	��	��	�	��	��	��	��	�
(Dong Guan)	transformers (capacity not	�Equivalent to	International	�Equivalent to	�Equivalent to		�Equivalent to		��	��
Co., Ltd.	exceeding 1000 VA), switching	��	Holding Ltd.	��	��		��
	power supplies, adapters, and color	��
	monitors, inductors under 100VA
	(coil only), resistors for
	applications under 2w (except chip
	resistors, resistor array), electronic
	thermometers of accuracy less than
	0.1%, cashier, CD-ROMs,
	barebones, UPS and its modules,
	telecom power system and its
	modules
Deltron-Cimic	Manufacturing and sales of	��	�	��	�	�	��	��	�	��	�
Electric and Electronics Co., Ltd.	electronic ballasts for energy saving lighting, color monitors (size: 17'' and below), CD-ROMs,	�Equivalent to ��		�Equivalent to ��			�Equivalent to ��			��
	inductors under 100 VA (coil	��
	only), spare parts for products
	listed under code 8504, other
	DC-DC converters, uninterruptible
	power systems, and transformers
	(capacity not exceeding 1000 VA)
Delta Electronics	Manufacturing and sales of	��	Invested by Delta	��	��	�	��	��	��	��	�
Industrial (Dong Guan)	electronic ballast for energy saving lighting and interface cards	�Equivalent to ��	Networks (Cayman) Inc.	�Equivalent to �� �Equivalent to ��			�Equivalent to ��		��	��
Co., Ltd.		��
Delta Electronics Manufacturing and sales of �� Invested by Delta �� �� � �� �� �� �� �
Components (Dong Guan) Co., Ltd.	transformers (capacity not exceeding 1000 VA), interface cards, battery and other related products	�Equivalent to �� ��	International Holding Ltd.	�Equivalent to ��	�Equivalent to ��		�Equivalent to ��		��	��
Delta Electronics	Manufacturing and sales of other	��	�	��	��	�	��	��	��	��	�
Power (Dong Guan) Co., Ltd.	power supplies, switching power supplies, adapters, inductors under 100VA (coil only), barebones, DC/DC converters, UPS and its	�Equivalent to �� ��		�Equivalent to ��	�Equivalent to ��		�Equivalent to ��		��	��
	modules , telecom power system
	and its modules

F-76

Name of investee in Mainland China Delta Electronics Components (Wu Jiang) Co., Ltd. Delta Electronics (Jiang Su) Co., Ltd. Delta Electro- optics (Wu Jiang) Ltd. Delta Video Display System (Wu Jiang) Co., Ltd.	Main activities of investee Capital Investment method Accumulated remittance as of January 1, 2002 Manufacturing and sales of transformer under 1KVA, inductors, interface cards, resistors for applications under 20W, other storage batteries and related components, motors under 37.5w (except precision miniature motors), electronic control devices for machinery (voltage under 1000V and excluding numeric control) �� �Equivalent to �� �� Invested by Delta International Holding Ltd. �� �Equivalent to �� Manufacturing, sales and management of computer enclosures, interface cards, ballast for discharge and fluorescent lighting, transformer under 1KVA, switching power supplies (except high power density, high frequency power supplies), uninterruptible power supplies (UPS) (except high power density, high frequency power supplies), other power supplies (except high power density, high frequency power supplies), coils inductors, base boards for UPS, storage batteries and related components, color monitors, resistors for applications under 20W, electronic thermometers of accuracy less than 0.1%, motors under 37.5W (except precision miniature motors) �� �Equivalent to �� �� � �� �Equivalent to �� Manufacturing and sales of electronic equipment enclosures transformers, magnetic components, electronic control devices for machinery (voltage under 1000 V and excluding numeric control), boards, panel, consoles and other bases for electronic control devices, camera components, hard disk drives (excluding micro disk drives and optical disk drives). �� �Equivalent to �� �� � �� �Equivalent to �� Manufacturing and sales of color monitor (17” and below), ballast for discharge and fluorescent lighting �� �Equivalent to �� �� � �� �Equivalent to ��	Remitted or collected this period Remitted out Collected �� �Equivalent to �� � �� �Equivalent to �� � �� �Equivalent to �� - �� �Equivalent to �� �	Remitted or collected this period Remitted out Collected �� �Equivalent to �� � �� �Equivalent to �� � �� �Equivalent to �� - �� �Equivalent to �� �	Accumulated remittance as of December 31, 2002	Ownership held by the Company (direct and indirect) �� �� �� ��	Investment income (loss) recognized by the Company during the year
		Remitted out �� �Equivalent to �� �� �Equivalent to �� �� �Equivalent to �� �� �Equivalent to ��
			� � - �	�� �Equivalent to �� �� �Equivalent to �� �� �Equivalent to �� �� �Equivalent to ��

Accumulated amount Ceiling of investment remitted out of Taiwan Investment amount approved by to Mainland China the Investment Commission amount of the Company ��

F-77

A) Purchase amount and percentage and related accounts payable at December 31, 2002:	Description of and reasons for	difference in transaction terms	compared to non-related party	Transaction terms transactions Accounts or notes receivable (payable)	Relationship with % of total % of total accounts or	Name of the counterparty DEIL Purchases (sales) Amount purchases (sales) Credit terms Unit price Credit period Balance notes receivable (payable)	Delta Electronics (Dong Guan) Co., Ltd. Affiliated enterprise Purchases �� �� By the term of contracts � � �� �	��	Delta Electronics Components (Dong Guan) � � �� �� � � � �� ��	Co., Ltd. �� ��	Delta Electronics Power (Dong Guan) Co., � � �� �� � � � ��	Ltd. ��	Delta Electronics Industrial (Dong Guan) � � �� �� � � � � �	Co., Ltd. ��	Delta Electronics (Jiang Su) Co., Ltd. � � �� �� � � � �� ��	�� ��	Delta Electronics Components (Wu Jiang) � � �� �� � � � �� ��	Co., Ltd. �� ��	Delta Electro-optics (Wu Jiang) Ltd. � � �� �� � � � �� ��	�� ��	Delta Video Display System (Wu Jiang) Co., � � �� �� � � � �� ��	Ltd. �� ��	B) Sales amount, percentage and related accounts receivable at December 31, 2002�	Description of and reasons for	difference in transaction terms	compared to non-related party	Transaction terms transactions Accounts or notes receivable (payable)	Relationship with % of total % of total accounts or	Name of the counterparty DEIL Purchases (sales) Amount Purchases (sales) Credit terms Unit price Credit period Balance notes receivable (payable)	Delta Electronics (Dong Guan) Co., Ltd. Affiliated enterprise Sales �� �� By the term of Contracts � � �� ��	�� ��	Delta Electronics Industrial (Dong Guan) � � �� �� � � � �� ��	Co., Ltd. �� ��	Delta Electronics Power (Dong Guan) Co., � � �� �� � � � �� ��	Ltd. �� ��	Delta Electronics Components (Dong Guan) � � �� �� � � � ��	Co., Ltd. ��

12. SEGMENT FINANCIAL IN FORMATION

A. Financial information by industry

The Company and its consolidated subsidiaries operate in a single industry, the electronics industry. Accordingly, no different industry information is presented in 2000, 2001 and 2002.

B. Financial information by geographic area

Geographic area information in 2000, 2001 and 2002 were as follows:

			New Taiwan	Dollars
			2000
	Asia	Others	Domestic	Elimination	Consolidated
Operating revenues from unaffiliated customers	��				��
Operating revenues from the Company and its consolidated subsidiaries	�� � �� �� � �
Total operating revenues	�� �� �� �� ��
Segment profits	�� �� �� �� ��
Investment loss under equity method	��
General income	��
Interest expense	�� �
Net income before income tax and minority interest	��
Identifiable assets	�� �� �� �� ��
Long-term investments	��
General assets	�
Total assets	��
Depreciation expense	�� �� �� �� ��
Capital expenditures	�� �� �� ��

F-79

			New Taiwan	Dollars
			2001
	Asia	Others	Domestic	Elimination	Consolidated
Operating revenues from unaffiliated customers	��				��
Operating revenues from the Company and its
consolidated subsidiaries	�� � �� �� � �
Total operating revenues	�� �� �� �� ��
Segment profits	�� �� �� �� ��
Investment loss under equity method	��
General income	��
Interest expense	�� �
Net income before income tax and minority interest	��
Identifiable assets	�� �� �� �� ��
Long-term investments	��
General assets	�
Total assets	��
Depreciation expense	�� �� �� �� ��
Capital expenditures	�� �� �� ��

F-80

				New Taiwan	Dollars
				2002
	Asia		Others	Domestic	Elimination	Consolidated
Operating revenues from unaffiliated customers	��			��		��
Operating revenues from the Company and its
consolidated subsidiaries	�� �			�� �� � �
Total operating revenues	�� ��			�� �� ��

Segment profits	�� ��			�� �� ��

Investment income under equity method		��
General expense		��
Interest expense		�� �
Net income before income tax and minority interest		��
Identifiable assets	�� ��			�� �� ��
Long-term investments			��
General assets	�
Total assets	��
Depreciation expense	�� ��			�� �� ��

Capital expenditures	�� ��			�� ��

F-81

				US Dollars (Unaudited-Note 2)	US Dollars (Unaudited-Note 2)
				2002
	Asia		Others	Domestic	Elimination	Consolidated
Operating revenues from unaffiliated customers	��			��		��
Operating revenues from the Company and its
consolidated subsidiaries	�� �			�� �� � �
Total operating revenues	�� ��			�� �� ��

Segment profits	�� ��			�� �� ��

Investment income under equity method		��
General expense		��
Interest expense		�� �
Net income before income tax and minority interest		��
Identifiable assets	�� ��			�� �� ��
Long-term investments			��
General assets	�
Total assets	��
Depreciation expense	�� ��			�� �� ��

Capital expenditures	�� ��			�� ��

F-82

C. Information about export sales

The export sales of the Company and its consolidated subsidiaries in 2000, 2001 and 2002 were as follows:

Destination U.S.A. Southeast Asia Europe Northeast Asia Americas Others	New Taiwan Dollars US Dollars 2000 2001 2002 2002 (Unauditer-Note 2) �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� ��	US Dollars 2002	US Dollars 2002
			��

D. Major customer information

The Company and its consolidated subsidiaries had no sales to any single customer in excess of 10% of net consolidated operating revenue in 2000, 2001 and 2002.

F-83

Review report of Independent Accountants

To Delta Electronics, Inc.

We have reviewed the accompanying non-consolidated balance sheets of Delta Electronics, Inc. as of March 31, 2002 and 2003, and the related non-consolidated statements of income, and of cash flows for the three-month periods then ended. These non-consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to report on these non-consolidated financial statements based on our reviews.

Expect as explained in the third paragraph, we conducted our reviews in accordance with the R.O.C. SAS No.36 "Review of Financial Statements" in the Republic of China. A review consists principally of inquires of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

As described in Note 4(5), the non-consolidated financial statements included long-term investments and other liabilities-others in certain investee companies as of March 31, 2002 and 2003 amounting to NT$25,829,505,000, NT$29,422,384,000, and NT$5,989,000, NT$1,899,000, respectively, and the related investment income were NT$922,151,000 and NT$992,480,000, for the three-month periods then ended, respectively, which were accounted for under the equity method based on the financial statements of the investee companies as of those dates. These financial statements were not reviewed by independent auditors. Information of certain investee companies disclosed in Note 11(2) was based on their financial statements that were not reviewed by independent auditors.

F-84

Based on our reviews, except for the effects on the non-consolidated financial statements and disclosure information of investee companies of such adjustments, if any, as might have been determined to be necessary had the financial statements of the investee companies been reviewed as explained in the preceding paragraph, we are not aware of any material modifications that should be made to the non-consolidated financial statements referred to in the first paragraph in order for them to be in conformity with the "Rules Governing Preparation of the Financial Statements of Securities Issuers" and generally accepted accounting principles in the Republic of China.

The non-consolidated financial statements of the Company as of and for the three-month periods ended March 31, 2003 expressed in US dollars are presented solely for the convenience of the reader and were translated from the New Taiwan dollars financial statements using the exchange rate of NT$34.75 to US$1.00 at March 31, 2003. This basis of translation is not in accordance with generally accepted accounting principles in the Republic of China.

PricewaterhouseCoopers Taipei, Taiwan Republic of China April 17, 2003

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

F-85

DELTA ELECTRONICS, INC. NON-CONSOLIDATED BALANCE SHEET MARCH 31, (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED)

	New Taiwan Dollars	New Taiwan Dollars	US Dollars		New Taiwan	Dollars	US Dollars
	2002	2003	2003		2002	2003	2003
ASSETS		(Note 2 )		LIABILITIES AND STOCKHOLDERS'EQUITY			(Note 2 )
Current Assets Current Liabilities Cash and cash equivalents (Note 4(1)) �� �� ��Short-term loans (Note 4(8)) �� �� ��
Short-term investments(Note 4(2))	��	��	��	Commerical paper payable (Note 4(9))	��	��	��
Notes receivable - net	��	��	��	Accounts payable	��	��	��
Accounts receivable - net (Note 4(3))	��	��	��	Accounts payable - related parties (Note 5)	��	��	��
Accounts receivable - related parties (Note 5)	��	��	��	Income tax payable (Note 4(15))	��	�	�
Other receivables (Note4 (15))	��	��	��	Accrued expenses	��	��	��
Other receivables - related parties (Note 5)	��	��	��	Other payables	��	��	��
Inventories (Note 4(4))	��	��	��	Received in advance	��	��	��
Prepaid expenses	��	��	��	Deferred income tax liabilities-current (Note 4(15))	�	��	��
Prepayments	��	��	��	Other current liabilities	��	��	��
Deferred income tax assets-current (Note 4 (15))	��	�	�		��	��	��
Other current assets	�� �� �� Long-term Liabilities �� �� �� Convertible bonds (Note 4(10)) �� � �
Funds and Long-term Investments Long-term investments under equity method (Note 4 (5)) �� �� ��Reserve Long-term investments under cost method (Note 4(5)) �� �� ��Reserve for land value incremental tax (Note 4(6)) �� �� ��
Cash surrender value of life insurance �� �� �� �� �� �� Other Liabilities Property, Plant and Equipment Reserve for retirement plan (Notes 4(11)) �� �� ��
Cost (Note 4 (6))	Deposits-in (Note 5)				��	��	��
Land	��	��	��	Deferred income tax liabilities (Note 4(15))	��	��	��
Buildings	��	��	��	Other liabilities – others (Note 4(5))	��	��	��
Machinery and equipment	��	��	��		��	��	��
Molds	��	��	��Total Liabilities		��	��	��
Computer and communication equipment �� �� �� Test equipment �� �� ��Stockholders'Equity Motor vehicles �� �� ��Common stock (Note 1) �� �� ��
Furniture and fixtures �� �� ��Capital reserve (Note 4(12)) Land value appraisal increment �� �� �� Premium �� �� ��
Cost and appraisal increment	��	��	��	Others	��	��	��
Less: Accumulated depreciation ��Retained earnings Prepayments for equipment and construction Legal reserve (Note 4(13)) �� �� ��
in progress	��	��	��	Undistributed earnings (Note 4(14))	��	��	��
�� �� �� Other adjusted items in stockholders’ equity Other Assets Unrealized loss on market value decline of long-term �� ��
				investments
Leased assets (Notes 4(7) and 5)	��	��	��	Cumulative translation adjustments	��	��	��
Deposits-out	��	��	��Total Stockholders' Equity		��	��	��
Deferred charges �� �� �� �� �� �� Commitments and Contingent Liabilities (Note 5) TOTAL ASSETS �� �� �� TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY �� �� ��

Please refer to the accompanying notes and review report of independent accountants dated April 17, 2003.

F-86

DELTA ELECTRONICS, INC.

NON-CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTH PERIODS ENDED MARCH 31,

(EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE DATA) (UNAUDITED)

	New Taiwan Dollars	New Taiwan Dollars	US Dollars
	2002	2003	2003
Operating revenue (Notes 5)	(Note 2)
Sales revenue	��	��	��
Sales returns	��	��	��
Sales allowance	�� �	�� �	�� �
Net sales revenue	��	��	��
Services revenue	��	��	��
Total operating revenue	��	��	��
Operating costs (Notes 5) Cost of goods sold �� � �� � �� �
Gross profit	��	��	��
Unrealized intercompany profit	��	�	�
Realized intercompany profit	��	�� �	�� �
Net gross profit	��	��	��
Operating expenses Selling �� �� ��
General and administrative	��	��	��
Research and development	�� �	�� �	�� �
Total operating expenses	�� �	�� �	�� �
Operating income	��	��	��
Non-operating income Interest income �� �� ��
Investment income	��	��	��
Gain on disposal of property, plant and equipment	��	��	��
Gain on disposal of investment	��	��	��
Foreign exchange gain, net	��	��	��
Rental income (Note5)	��	��	��
Other income	��	��	��
Total non-operating income	��	��	��
Non-operating expenses Interest expense �� �� ��
Loss on disposal of property, plant and equipment	��	��	��
Provision for decline in market value and
obsolescence of inventories	��	��	��
Other losses	�� �	�� �	�� �
Total non-operating expenses	�� �	�� �	�� �
Income before income tax	��	��	��
Income tax (expense) benefit (Note 4(15))	�� �	��	��
Net income	��	��	��
	Income	Income	Income
	before Net	before Net	before Net
Earnings per share (In dollars) (Note 4(16))	income tax income	income tax income	income tax income
Basic earnings per share	�� ��	�� ��	�� ��
Diluted earnings per share	�� ��	�� ��	�� ��

Please refer to the accompanying notes and review report of

independent accountants dated April 17, 2003.

F-87

DELTA ELECTRONICS, INC.

NON-CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTH PERIODS ENDED MARCH 31,

(EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED)

	New Taiwan Dollars US Dollars
	2002 2003 2003
Cash flows from operating activities	(Note 2)
Net income	�� �� ��
Adjustments to reconcile net income to net cash provided by operating activities: Bad debts expense � �� ��
Depreciation (including leased assets) and
Amortization	�� �� ��
Gain on disposal of property, plant and equipment, net ��
Investment income, net of gain on disposal of Investments ��
Reversal of allowance for doubtful accounts	�� �
Loss on inventory market value decline
and obsolescence	�� �� ��
Exchange gain on revaluation of foreign currency denominated convertible bonds ��
Change in assets and liabilities: Increase in notes receivable ��
Decrease in accounts receivable	�� �� ��
Decrease in accounts receivable - related
parties	�� �� ��
(Increase) decrease in other receivables	�� �� ��
Decrease in other receivables - related parties �� �� ��
Increase in inventories	��
Increase in prepaid expenses	��
Increase in prepayments	��
Increase in deferred income tax assets-current	�� � �
Decrease in other current assets	�� �� ��
Increase (decrease) in accounts payable	��
Decrease in accounts payable - related parties	��
Decrease in accrued expenses	��
(Decrease) increase in other payables	�� �� ��
(Decrease) increase in received in advance	�� �� ��
Increase in deferred income tax liabilities-current � �� ��
(Decrease) increase in other current liabilities	�� �� ��
Increase in reserve for retirement plan	�� �� ��
Increase (decrease) in deferred income tax
liabilities-noncurrent	��
Decrease in other liabilities - others	�� �� �� �
Net cash used by operating activities	�� �� �� �

(Continued)

F-88

DELTA ELECTRONICS, INC.

NON-CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) FOR THE THREE MONTH PERIODS ENDED MARCH 31,

(EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED)

	New Taiwan Dollars	New Taiwan Dollars	US Dollars
	2002	2003	2003
Cash flows from investing activities	(Note 2)
Increase (decrease) in short-term investments, net	��	��	��
Proceeds from disposal of long-term investments under
cost method	��	�	�
Increase in long-term investments under equity method	�	��	��
Increase in long-term investments under cost method	��	�	�
Proceeds from disposal of property, plant and equipment �� �� ��
Acquisition of property, plant and equipment	��	��	��
Decrease (increase) in deposits - out, net	��	��	��
Increase in deferred charges	�� �	�� �	�� �
Net cash (used in) provided by investing activities	�� �	��	��
Cash flows from financing activities Decrease in short-term loans, net �� ��
Increase in commercial paper payable	��	��	��
Payment for redemption of convertible bonds	�� �	�� �	�� �
Net cash used in financing activities	�� �	�� �	�� �
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 disclosure of cash flow information Cash paid during the period for: Interest �� �� ��
Income taxes	��	��	��
Non-cash investing and financing activities: Leased assets transferred from fixed assets to other
assets	��	��	��
Fixed assets transferred from leased assets	��	��	��

Please refer to the accompanying notes and review report of

independent accountants dated April 17, 2003.

F-89

DELTA ELECTRONICS, INC.

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 AND 2003

(EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT AS INDICATED) (UNAUDITED)

1. HISTORY AND ORGANIZATION

The Company was incorporated in April 1971 under the provisions of the Company Law of the Republic of China (R.O.C.) as a company limited by shares. The total outstanding capital was NT$13,878,790 (US$399,390) as of March 31, 2003. The main activities of the Company are installation of electronic control systems and developing, designing, manufacturing and selling of communication products and components, computer information system and power supply. The total employee of the Company were 3,118 as of March 31, 2003.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying non-consolidated financial statements were prepared in conformity with the "Rules Governing Preparation of the Financial Statements of Securities Issuers" and generally accepted accounting principles in the Republic of China. Significant accounting policies were summarized as follows:

(1) Translation of foreign currency transactions

The accounts of the Company are maintained in New Taiwan dollars. Receivables, other monetary assets and liabilities denominated in foreign currencies are translated into New Taiwan dollars at the rates of exchange prevailing at the balance sheet date. Transactions denominated in foreign currencies, except forward exchange contracts, are translated into New Taiwan dollars at the exchange rates prevailing on the transaction dates. Foreign currency gains or losses are included in current net income.

(2) Foreign currency option contracts

Premiums or discounts on option contracts are stated at cost less amortization. Premiums or discounts or unrealized gains or losses on option contracts entered into for hedging purposes are deferred and amortized over the contract period on a straight-line basis.

F-90

(3) Forward exchange contracts

(4) Cross currency swap contracts

Cross currency swap contracts entered into for hedging purposes are recorded using the contract rate on the contract date and recorded as accrued receivable and accrued payable, respectively. Interest receivable and interest payable are accrued in accordance with the contract rate. Gains or losses on cross currency swap contracts are determined by the difference between applying the spot rate at the balance sheet date and the spot rate at the date of inception of the contract to the accrued receivables and payables and interest receivables and payables of outstanding contracts at the balance sheet date. Exchange gains or losses are included in current net income.

(5) Short-term investments

Short-term investments are stated at the lower of cost or market value. Cost is calculated by the weight-average method.

(6) Allowance for doubtful accounts

Allowance for doubtful accounts is provided based on an evaluation of the collectibility of ending balances of notes receivable, accounts receivable and other receivables.

(7) Inventories

Inventories are stated at the lower of cost or market value; cost is determined by the standard cost. Variance from standard cost are allocated to ending inventory and cost of goods sold at the end of each period. When determining market value, the current replacement price is used for materials while net realizable value is used as market value for work in process and finished goods. Provision is made for obsolete inventories at balance sheet date.

F-91

(8) Funds and Long-term investments

A. Long-term investments
(A) Long-term investments in which the Company owns less than 20% of the voting rights of the investee company and has no significant influence on the investee company's operational decisions are accounted for by the lower of cost or market value method, if the investee company is listed, and by the cost method if the investee company is not listed.

If the Company owns at least 20% of the voting rights of the investee company, the investment is accounted for by the equity method, unless there is evidence that the Company has no ability to exercise significant influence over the investee company. The significant unrealized gains or losses arising from transactions between the Company and investee companies are eliminated in preparing the non-consolidated financial statements.

(B) Foreign investments in which the Company owns less than 20% of the voting rights of the investee company are accounted for by the cost method. The original cost is accounted for based on actual remittance amount. Investments in foreign currency are translated into New Taiwan dollars at the rates of exchange prevailing at the balance sheet date; unrealized exchange loss (and subsequent recoveries to the extent they do not exceed original cost) is treated as translation adjustment of long-term investments under stockholders' equity.

Under the equity method, the foreign investee company's financial statements are translated into New Taiwan dollars and the Company recognizes its proportionate share of the exchange gains or losses resulting from the translation process of the foreign investee and includes in a cumulative translation adjustment account in the stockholders' equity.

(C) Capital reserve and long-term investment amounts are adjusted by the variance between the investment cost and the net asset of the investee company due to the disproportionate acquisition of shares in connection with the capital increase by the investee company accounted for under the equity method or disposal of shares. If the

F-92

capital reserve arising from long-term investment is not sufficient, then retained earnings is debited.

(D) The Company recognizes its proportionate share of the unrealized loss on market value decline of long-term investments of the investee company accounted for under the equity method and is shown under the stockholders' equity.
(E) Under the equity method, the excess of the investment cost over the underlying equity in net assets of the investee companies at the date of investment is amortized over 5 years. The excess of the investment cost over the underlying equity in net assets of the investee companies at the date of changing from cost method to equity method is not retroactively adjusted but is amortized over 20 years prospectively.
(F) The use of the equity method is discontinued if accumulative losses on investment reduce the balance of the investment to zero, unless the Company has sufficient evidence to indicate that the investee company’s losses are temporary or where the Company has a commitment to provide financial support to the investee company or acts as guarantor for loans made to the investee company. The credit balances of the individual investments are reported in the balance sheet as other liabilities.
B. Cash surrender value of life insurance

(9) Property, plant and equipment

A. With the exception of land, which is carried at appraised value, property, plant and equipment are carried at cost.
B. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets plus one year as salvage value except for leasehold improvements which is based on the period of the contract. Salvage values of fixed assets, which are still in use after the end of their estimated useful lives, are depreciated over the newly estimated remaining useful lives of the assets.

Commencing from 2001, depreciation of new assets purchased is provided on a straight-line basis over the estimated useful lives of the assets, with a nominal salvage value of NT$1.00 (in dollar).

F-93

The estimated useful lives of fixed assets are 2 to 8 years, except for buildings which are 5 to 55 years.

C. Major renewals and improvements are treated as capital expenditures and are depreciated accordingly. Maintenance and repairs are charged to expense as incurred. When an asset is sold or retired, the cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is included in current non-operating income or loss.
D. Leased assets are transferred to other assets at book value and the related depreciations are recorded as non-operating expenses.

(10) Deferred charges

Deferred charges are amortized over the estimated useful lives based on the straight-line method, except for the issuance costs for convertible bonds which are amortized over the outstanding period of the bonds. The unamortized bonds issuance costs relating to the bonds converted or redeemed before the maturity date are transferred to expense at the date of redemption or conversion.

(11) Retirement plan

A. The Company maintains a defined benefit employee retirement plan (the Plan) covering all regular employees. Benefits under the Plan are generally determined based upon years of credited service, age at retirement and average compensation. The Company has been contributing to an independent retirement trust fund since 1986. As approved by the government in November 1990, the Company suspended contributing to an independent retirement trust fund. The Company resumed contributing to the fund at a fixed rate equal to 2% of monthly salaries and wages since July 1999.

The trust fund assets are not reflected in the Company's financial statements.

B. The Company recognized minimum pension liability for the excess of accumulated benefit obligation over the fair value of plan assets and pension costs based on actuarial valuation. In preparing interim financial statements, the minimum pension liability is adjusted by current net pension cost and fund contribution.

F-94

(12) Convertible bonds

A. When a bondholder exercises his/her conversion rights, the book value of the bond is credited to common stock at an amount equal to the par value of the stock and the excess is credited to capital reserve; no gain or loss is recognized on the conversion.
B. The related issuance costs for convertible bonds are recorded as deferred charges, and are amortized over the life of the bonds. The unamortized bonds issuance costs related to the bonds converted or redeemed before the maturity date are charged to expenses upon conversion or redemption.

(13) Income tax

A. The Company adopted R.O.C. FAS No.22 "Accounting for Income Tax" and FAS No.12 "Accounting for Income Tax Credit". Income tax credit was recognized in current year.
B. Over or under provision of prior years' income tax liabilities is included in the current year's income tax expense.

(14) Earnings per share

A. In accordance with R.O.C. FAS No. 24 "Earnings Per Common Share" as revised in November 1, 2001, the basic and diluted earnings per share are disclosed in income statements. The computation of earnings per share is as follows:
(A) Basic earnings per share: net income is divided by the weighted average number of shares outstanding during the period.
(B) Diluted earnings per share: the computation is the same as basic earnings per share, except for the potentially dilutive securities were assumed to have been converted to common stock at the beginning of the period and net income is adjusted by amount associated with the conversion.
B. The potentially dilutive securities consisted of Euro convertible bonds. The Company adopted the "if converted method" in computing the dilutive effect of the Euro convertible bonds.

F-95

(15) Revenue, cost and expense recognition

(16) 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 reported amounts of assets and liabilities and the disclosures of contingencies at the date of the financial statements, and the reported amounts of revenue, costs and expenses during the reporting period. Actual results could differ from those assumptions and estimates.

(17) Convenience translation into US dollars

The Company maintains its accounting records and prepares its financial the statements in New Taiwan dollars. The United States dollar amounts disclosed in the 2003 financial statements are presented solely for the convenience of the reader and were translated to US dollar using the exchange rate of NT$34.75=US$1.00, the average of the buying and selling rates published by the Hua Nan Bank on December 31, 2002. Such translation amounts are unaudited and should not be construed as representations that the New Taiwan dollar amounts represent, or have been or could be converted into United States dollars at the or any other rate.

3. CHANGES IN ACCOUNTING PRINCIPLES

None.

4. DESCRIPTION OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

	New Taiwan Dollars	US Dollars
	March 31,	March 31,
	2002 2003	2003
	(Note 2)
Cash on hand	��
Checking and demand deposits ��
Time deposits	�� �� ��
	�� �� ��

F-96

(2) Short-term investments

(2)Short-term investments
	New Taiwan Dollars		US Dollars
	March 31,		March 31,
	2002	2003	2003
	(Note 2)
Beneficiary certificates - cost	�� �� ��
Market value	�� �� ��
(3)Accounts receivable
	New Taiwan Dollars		US Dollars
	March 31,		March 31,
	2002	2003	2003
	(Note 2)
Accounts receivable	��
Less: Allowance for doubtful
Accounts	�� �� �� �
	�� �� ��
Overdue receivable (shown as
other assets)	��
Less: Allowance for doubtful
accounts	�� �� �� �
	� � �
	�� �� ��

F-97

(4) Inventories

Inventories
	New Taiwan Dollars		US Dollars
	March 31,		March 31,
	2002	2003	2003
	(Note 2)
Raw materials	��	��
Work in process	��	��
Finished goods	��	��
Inventory in transit	��	�� ��
	��	��
Less: Reserve for decline in
market value and
inventory obsolescence	�� �	�� �� �
	��	�� ��

F-98

(5) Long-term investments

A. List of long-term investments:

Long-term investments A. List of long-term investments:
				New Taiwan Dollars					US Dollars
		March 31,	2002			March 31,	2003		March 31, 2003 (Note 2)
Investee company	Shares	Book value	%	Market value	Shares	Book value	%	Market value	Book value Market value
Equity method : Delta International Holding Ltd. (DIH) �� �� �� �� �� ��
Delta Electronics (Thailand) Public
Co., Ltd. (DET) (Note a)	��	��	��	��	��	��	��	��	��		��
Delta Networks Holding Inc.	�	�	�	�	��	��	��	��	��		��
Cyntec Co., Ltd.	��	��	��	��	��	��	��	��	��		��
Union Optronics Corp.	��	��	��	��	��	��	��	��	��		��
Grand Advance Technology Ltd.	��	��	��	��	��	��	��	��	��		��
Delta Optoelectronics, Inc.	��	��	��	��	��	��	��	��	��		��
Volink Integrated System, Inc.	��	��	��	��	��	��	��	��	��		��
Yuasa Delta Technology Inc.	��	��	��	��	�	�	�	�	�		�
Delta Networks, Inc.	��	��	��	��	�	�	�	�	�		�
Vivitek Co., Ltd.	��	��	��	��	�	�	�	�	�	�
	��		��		��		��		��	��
Cost method : D-Link Corp. �� �� �� �� �� �� �� �� �� ��
Macronix International Co., Ltd.	��	��	��	��	��	��	��	��	��		��
WK Technology Fund	��	��	��	��	��	��	��	��	��		��
Delta America Ltd.	��	��	(Note b)	��	��	��	(Note b)	��	��		��
Loyalty Founder Enterprise Co., Ltd.	��	��	��	��	��	��	��	��	��		��
Acute Applied Technologies, Inc.	��	��	��	��	�	�	�	�	�		�
WK Technology Fund IV	��	��	��	��	��	��	��	��	��		��
WK Technology Fund V	��	��	��	��	��	��	��	��	��		��
Prominent Communications, Inc.	��	��	(Note b)	��	��	��	(Note b)	��	��		��
Analog and Power Electronics Corp.	��	��	��	��	��	��	��	��	��		��
Betacera Inc.	��	��	��	��	��	��	��	��	��		��
Sheng Hua Venture Capital Corp.	��	��	��	��	��	��	��	��	��		��
Wistron Nexus Inc.	�	�	�	�	��	��	��	��	��		��
Others	��		��		��		�	��	��	��
	��		��		��		��		��	��
	��		��		��		��		��	��

(Note a): The combined percentage of DET’s common shares held by DEI and DIH was more than 20%, and accordingly the investment was accounted for under the equity method. (Note b): Preferred stock.

F-99

B. The investment income in long-term investments under the equity method for the three-month periods ended March 31, 2002 and 2003 amounted to NT$922,151 and NT$992,480 (US $28,561), respectively, which was recognized based on the financial statements of these investee companies of the same period. These financial statements were not reviewed by independent auditors.
C. As the Company has committed to provide endorsements and guarantees to Delta Electronics Europe Ltd. (DEU), the Company continues to account for its investment in DEU under the equity method and recognized investment loss in excess of the original investment cost by NT$5,989 and NT$1,899 (US $55) as of March 31, 2002 and 2003, respectively. These negative balances were reclassified and presented in other liabilities-others.
D. The Company has a 94% ownership investment in Delta International Holding Ltd. (DIH), a company incorporated in the Cayman Islands. DIH is mainly engaged in investments in Mainland China, Hong Kong and other areas. The total outstanding capitals of DIH at March 31, 2002 and 2003 were both US$55 million.
E. The Company has a 100% ownership investment in Delta Networks Holding Inc. (DNH), a company incorporated in November 2002 in the Cayman Islands. DNH is mainly engaged in investments in Taiwan, Mainland China, and other areas. The total outstanding capital of DNH at Marchr 31, 2003 was US$28.4 million.

F-100

(6) Property, plant and equipment

			March 30, 2002 (New Taiwan Dollars)	March 30, 2002 (New Taiwan Dollars)
			Appraisal		Accumulated	Net
	Item	Original cost	increment	Total	depreciation	book value
Land		��	��	��	��	��
Buildings		��	�	��	��	��
Machinery and	equipment	��	�	��	��	��
Molds		��	�	��	��	��
Computer and communication equipment		��	�	��	��	��
Test equipment		��	�	��	��	��
Motor vehicles		��	�	��	��	��
Furniture and fixtures		��	�	��	��	��
Prepayments for equipment and construction in progress		��	�	��	�	��
		��	��	��	�� �	��
		March 30, 2003 (New Taiwan Dollars)
			Appraisal		Accumulated	Net
	Item	Original cost	increment	Total	depreciation	book value
Land		��	��	��	��	��
Buildings		��	�	��	��	��
Machinery and	equipment	��	�	��	��	��
Molds		��	�	��	��	��
Computer and communication equipment		��	�	��	��	��
Test equipment		��	�	��	��	��
Motor vehicles		��	�	��	��	��
Furniture and fixtures		��	�	��	��	��
Prepayments for equipment and construction in progress		��	�	��	�	��
		��	��	��	�� �	��
		March 30, 2003 (US Dollars) (Note 2)
			Appraisal		Accumulated	Net
	Item	Original cost	increment	Total	depreciation	book value
Land		��	��	��	��	��
Buildings		��	�	��	��	��
Machinery and	equipment	��	�	��	��	��
Molds		��	�	��	��	��
Computer and communication equipment		��	�	��	��	��
Test equipment		��	�	��	��	��
Motor vehicles		��	�	��	��	��
Furniture and fixtures		��	�	��	��	��
Prepayments for equipment and construction in progress		��	�	��	�	��
		��	��	��	�� �	��

A. The appraisal increment of land in property, plant and equipment and leased assets amounted to NT$168,738 (US $4,856), the reserve for land value incremental tax amounted to NT$80,945 (US $2,329) and the capital reserve resulting from the appreciation on revaluation of land amounted to NT$114,714 (US $3,301) as of March 31,2003.

F-101

(7) Leased assets

Land
Building
Land
Building
Land
Building
Short-term loans
Unsecured bank loans
Credit lines
Interest rate per annum

New Taiwan Dollars
March 31, 2002
Accumulated
Cost
depreciation
Book value
��
��
��
��
��
�
��
��
��
�
��
New Taiwan Dollars
March 31, 2003
Accumulated
Cost
depreciation
Book value
��
��
��
��
��
�
��
��
��
�
��
US Dollars (Note 2)
March 31, 2003
Accumulated
Cost
depreciation
Book value
��
��
��
��
��
��
��
��
��
New Taiwan Dollars
US Dollars
March 31,
March 31,
2002
2003
2003
(Note 2)
��
��
��
��
��
��

��
��
��

(8) Short-term loans

F-102

(9) Commercial paper payable

Commercial paper payable
	New Taiwan Dollars	US Dollars
	March 31,	March 31,
	2002 2003	2003
		(Note 2)
Commercial paper payable	��	��
Less: Unamortized discounts	�� �� �	��	�
	�� ��	��
Interest Rate	�� ��	��

(10) Convertible bonds

A. As of March 31, 2002 and 2003, th detail of the third foreign currency Europe convertible bonds (ECB III) were as follows

	New Taiwan Dollars	New Taiwan Dollars	US Dollars
	March 31,		March 31,
	2002	2003	2003
	(Note 2)
Issued amount	��		��
Redeemed amount	�� �� �		��	�
Ending balance	��
Add: Foreign currency
revaluation	�� �		�
Book value	�� ��		��
Amount redeemed
(in thousands of US
dollars)	�� ��		��

Note�The ECB III were redeemed completely as of March 31,2003.

F-103

B The issuance of ECB III was approved by SFC on January 29, 2000. The issuance and condition of ECB III are summarized as follows:

Descriptions

	Descriptions
(A) Trustee	The Bank of New York
(B) Amount of issuance (Thousand dollars)	US $200,000
(C) Nominal interest rate (net of tax)	0%
(D) Period of issuance	5 years (Feb. 15, 2000~Feb. 15, 2005)
(E) Area of issuance	Luxembourg
(F) Period of conversion	Mar. 15, 2000~Jan.15, 2005
(G) Date of exercise of redemption and	At Feb.15, 2001, 2002, 2003 and 2004
redemption price	based on face value (the investor should
	notify the Company not more than 60 nor
	less than 30 days prior to redemption date)

C. In accordance with the terms and conditions of the bonds, the initial conversion price will be adjusted for increase in common shares outstanding. The conversion price at issuance date and as of March 31, 2002 for ECB III was NT$182 (in dollars) and NT$114.7 (in dollars), respectively.

(11) Reserve for retirement plan

The balance of the pension fund, which is deposited with the Central Trust of China, was NT$263,206 and NT$299,725 (US $8,625) as of March 31, 2002 and 2003, respectively.

Based on the actuarial valuation measured at December 31, 2001 and 2002, the pension expense amounted to NT$22,986 and NT$27,122 (US $780) for the three-month periods ended March 31, 2002 and 2003, respectively.

(12) Capital reserve

The R.O.C Company Law requires that the capital reserve shall be exclusively used to offset against accumulated deficit or increase capital and shall not be used for any other purposes. The capital reserve can be used to offset against accumulated deficit only when legal reverse and special reserve are insufficient. Only capital reserve from paid-in capital in excess of par value and donation surplus can be used to increase capital and total amount shall be limited to 10% of outstanding capital each year.

F-104

(13) Legal reserve

The R.O.C. Company Law requires that the Company shall set aside 10% of its net income as the legal reserve after offsetting against prior years’ losses until the legal reserve equals the Company’s capital. The legal reserve can be used only to offset against an accumulated deficit or increase capital. The legal reserve can be used to increase capital only when the reserve exceeds 50% of the Company’s capitals, and shall be limited to 50% of the excess portion of the reserve.

(14) Undistributed earnings

A. Under the Company's Articles of Incorporation, the current year's earnings, if any, shall be distributed in the following order:
a) Payment of all taxes and dues.
b) Offset against prior years' operating losses, if any.
c) Set aside 10% of the remaining amount as legal reserve.
d) Set aside certain amount as special reserve, if necessary.
e) The amount of distributable earnings after deducting items (a), (b), (c) and (d) and, plus beginning undistributed earnings (the earnings), shall be distributed in the following percentage according to the resolution of the meeting of stockholders:
- i) Directors' and supervisors' remuneration: up to 1% of the earnings.
- ii) Employees' bonus: at least 3% of the earnings.
- iii) Stockholders' bonus: balance of the earnings after deducting (i) and (ii).

According to the Company’s Articles of Incorporations, at least 50% of the distributable retained earnings shall be distributed as stockholders' bonus, of which at least 5% is payable by cash.

F-105

According to the resolution adopted at the directors’ meeting on February 13, 2003, the Company will issued 69,394,000 and 23,000,000 shares of common stock at par value as stock dividends and employees’ bonus respectively, by capitalizing retained earnings in the amount of NT$923,940 (US$26,588) and cash dividend in the amount of NT$1,486,825 (US$42,786). The earnings distribution had not been approved by stockholders’ meeting as of March 31, 2003. The information will be disclosed in the "Market Observation Post System" of the Taiwan Stock Exchange Corporation.

B. The Taiwan imputation tax system requires that any undistributed current earnings, on tax basis, 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 the 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 as tax credit against their individual income tax liability.
C. As of March 31, 2002 and 2003, the information on tax credit of the Company are as follows:

			New Taiwan Dollars	US Dollars
			March 31,	March 31,
			2002 2003	2003
				(Note 2)
Imputation	tax	credit	�� ��	��
account balance
			2001 (Actual) 2002(Estimated)	2002(Estimated)
Creditable	tax ratio		�� ��	��

F-106

D. As of March 31 2002 and 2003 the undistributed earnings balances are as follows:

Before January 1, 1998 On and after January 1, 1998 - not imposed the 10% additional tax	New Taiwan Dollars US Dollars March 31, March 31, 2002 2003 2003 (Note 2) �� �� �� �� �� �� ��

(15) Income tax

A. Deferred income tax assets and liabilities as of March 31, 2002 and 2003 are as follows:

2003 are as follows:
	New	Taiwan Dollars		US Dollars
		March	31,	March 31,
	2002		2003	2003
	(Note 2)
(A) Total deferred income
tax assets	��		��	��
(B) Allowance for deferred
income tax assets	��		��	��
(C) Total deferred income
tax liabilities	��		��	��

F-107

(D) The components of deferred income tax assets and liabilities are as follows:

		New Taiwan Dollars		US Dollars
	March	31, 2002 March	31, 2003	March 31, 2003
	Original	Original		Original
	Amount	Tax effects amount	Tax effects	amount Tax effects
	(Note 2)
Unfunded pension	��
Reserve for decline in market value and inventory obsolescence ��
Others	��
Loss carry forward	�� �			�
Investment tax credit	�� �� ��
Investment income accounted for
under the equity method	��
Unrealized foreign exchange gain	�� �� �� �
	�� �		�� � �� �

B. Net deferred tax assets - current

Net deferred tax assets - current
	New Taiwan Dollars			US Dollars
		March 31,		March 30,
	2002		2003	2003
	��
Deferred income tax assets - current	��		��	��
Allowance for deferred income tax assets - current	�� �		�� �	�� �
Net deferred income tax assets - current	��		��	��
Deferred income tax liabilities - current	�� �		�� �	�� �
Net deferred income tax assets - current-net	��		�� �	�� �

C. Net deferred tax liabilities - noncurrent

Net deferred tax liabilities - noncurrent
	New Taiwan Dollars		US Dollars
	March	30,	March 30,
	2002	2003	2003
	(Note 2)
Deferred income tax assets - noncurrent	��	��	��
Allowance for deferred income tax assets - noncurrent	�� �	�� �	�� �
Net deferred income tax assets - noncurrent	��	��	��
Deferred income tax liabilities - noncurrent	�� �	�� �	�� �
Net deferred income tax liabilities
- noncurrent-net	�� �	�� �	�� �

F-108

D. Income tax refundable March 31, 2002 and 2003 were arrived at as follows:

follows:
	New Taiwan Dollars US Dollars
	March 31, March 31	,
	2002 2003 2003
	(Note 2)
Current year's income tax
Expense	��
Deferred income tax expense	��
Allowance for deferred income tax assets	�� �� � �� �
Income tax expense (benefit)	��
Effect of deferred income tax	��
Less: Prepaid income tax	�� �� �� �
Income tax refundable	�� �� �� �
Income tax payable at December 31 of last year	�� �� ��

E. As of March 31, 2003, according to "Income Tax Law" and "Statute for Upgrading Industries", the income tax credits are as follow

		New Taiwan
		Dollars	US Dollars
The item of	Total income	Unused income	Unused income
income tax credits	tax credits	tax credits	tax credits	Year of expiration
	(Note 2)
R&D expenditure	��	��	��	Between 2003 and 2007
	��
Training expenditure	��	��	��	Between 2003 and 2007
	��
Procurement of	��	��	��	Between 2003 and 2005
machinery and	��
equipment expenditure
Investment in important	��	��	��	Between 2002 and 2006
technology based enterprise and venture capital investment enterprise	��
	��		��

F-109

The Company provided a valuation allowance for deferred income tax assets related to unused investment credits in the amount of NT$551,883 (US $15,882) as of March 31, 2003.

F. The Company's income tax returns have been assessed and approved by the Tax Authority through 1999. The income tax returns of 1997 was assessed for additional income tax payable amounting to $69,415 (US $1,998) which was not accrued as of March 31, 2003 due to its immateriality. As of March 31, 2003, the Company has filed an appeal for reassessment to the Tax Authority. The reassessment is still in process by the Tax Authority.

F-110

(16) Earnings per share

(16)Earnings per share	hare	hare	hare	hare
New Taiwan Dollars For the three-month periods ended March 31, 2002 Amount Earnings per share (in NT dollars) Income before income tax Net income Weighted average outstanding common shares (in thousands) Income before income tax Net income Basic EPS Net income �� �� �� �� Effect of potential common shares with dilutive effect: 0% foreign currency Euro convertible bonds � � �� Diluted EPS Net income �� �� �� �� �� New Taiwan Dollars For the three-month periods ended March 31, 2003 Amount Earnings per share (in NT dollars) Income before income tax Net income Weighted average outstanding common shares (in thousands) Income before income tax Net income Basic EPS (Note) Net income �� �� �� �� Effect of potential common shares with dilutive effect: 0% foreign currency Euro convertible Bonds � � Diluted EPS Net income �� �� �� �� ��	New Taiwan Dollars
	For the three-month periods ended March 31, 2002
		Weighted average outstanding common shares (in thousands)	Earnings per share (in NT dollars)
				Net income

Note: The weighted average outstanding common shares was retroactively adjusted for stock dividends distributed in 2002.

F-111

US Dollars For the three-month periods ended March 31, 2003 Amount Earnings per share (in US dollars) Income before income tax Net income Weighted average outstanding common shares (in thousands) Income before income tax Net income Basic EPS (Note 2) Net income �� �� �� �� Effect of potential common shares with dilutive effect: 0% foreign currency Euro convertible bonds � � � Diluted EPS Net income �� �� �� �� ��	US Dollars For the three-month periods ended March 31, 2003	US Dollars For the three-month periods ended March 31, 2003	US Dollars For the three-month periods ended March 31, 2003	US Dollars For the three-month periods ended March 31, 2003
		Weighted average outstanding common shares (in thousands)	Earnings per share (in US dollars)
				Net income

F-112

(17) Personnel expense, depreciation and amortization expense

Personnel expense, depreciation and amortization expense
New Taiwan Dollars US Dollars For the three-month periods ended March 31, For the three-month periods ended Mrach 31, 2002 2003 2003 Operating cost Operating expense Total Operating cost Operating expense Total Operating cost Operating expense Total (Note 2) Personnel expense �� Salary expense �� Labor and health insurance�� Pension expense �� �� �� �� �� �� �� �� �� Other �� �� �� �� �� �� �� �� �� Depreciation expense �� �� �� �� �� �� �� �� �� Amortization expense �� �� �� �� �� �� �� �� ��	US Dollars
	For the three-month periods ended		Mrach 31,
		2003

Depreciation expense included the depreciation of leased assets, which are recorded as non-operating expenses.

F-113

5. RELATED PARTY TRANSACTIONS

(1) Name and relationship of related parties

Names of related parties Relationship with the Company Volink Integrated System, Inc. A subsidiary of the Company Delta International Holding Ltd. A subsidiary of the Company (DIH) Delta Optoelectronics Inc. A subsidiary of the Company Delta Networks Holding Ltd. A subsidiary of the Company (DNH) Delta Networks (Cayman) Inc., A subsidiary of DNH (DNI Cayman) Delta Networks, Inc. (DNI) A subsidiary of DNI Cayman (Note) Cyntec Co., Ltd. (Cyntec) Investee accounted for under the equity method Grand Advance Technology Inc. Investee accounted for under the equity method Delta Electronics Europe Ltd. Investee accounted for under the equity (DEU) method Delta Electronics (Thailand) Investee accounted for under the equity Public Co., Ltd. (DET) method DEI Logistics (USA) Corp. A subsidiary of DIH (ALI) Delta Electronics International A subsidiary of DIH Ltd. (DEIL) Delta Electronics (Japan) Inc. A subsidiary of DIH (DEJ) Delta Electronics (Jiang Su) Co., A subsidiary of DIH Ltd. Delta Electronics Components A subsidiary of DIH (Wu Jiang) Co., Ltd. Delta. Video Display System (Wu A subsidiary of DIH Jiang ) Co., Ltd. Delta Eelectro-optics (Wu Jiang ) A subsidiary of DIH Co., Ltd. Yuasa Delta Technology Inc. Investee accounted for under the equity (YDT) method of DIH (Note) Delta Electronics Components A subsidiary of DIH (Thailand) Co., Ltd. (DECT) Delta Products Corporation Affiliated enterprise (DPC)

F-114

(Note ): DNI Group and YDT Group were restructured in 2002. The Company disposed all of its investments in DNI and YDT to DNI Cayman, the subsidiary of DNH, and YDT International Holding Ltd., DIH’s investee company accounted for under the equity method, respectively. As a result of this group restructuring, the Company’s shareholding in DNI and YDT changed from direct ownership to indirect ownership, but the overall shareholding percentage remains unchanged.
(2) Significant transactions with related parties

A. Sales

Sales
New Taiwan Dollars For the three month periods ended March 31, 2002 2003 ALI �� �� DPC �� �� DEJ �� �� Others �� �� �� ��	US Dollars
	For the three-month period ended March 31 2003 (Note 2) �� �� �� �� ��

Sales terms and conditions to related parties are at arms length.

F-115

B. Services revenue

	New Taiwan Dollars	New Taiwan Dollars	US Dollars
			For the three month
	For the three	month periods	period ended
	ended March 31,		March 31,
	2002	2003	2003
	(Note 2)
DIH	��	��
DET	��	� �
	��	�� ��

C. Purchases

Purchases
	New Taiwan Dollars		US Dollars
			For the three-month
	For the three-month periods		period ended
	ended March 31,		March 31,
	2002	2003	2003
			(Note 2)
DEIL	��	��
DET	��	��
Others	��	�� ��
	��	�� ��

Purchases terms and conditions to related parties are at arms length.

F-116

D. Accounts receivable

Accounts receivable
	New Taiwan Dollars		US Dollars
	March 31,		March 31,
	2002	2003	2003
			(Note 2)
ALI	��	��	��
DET	��	��	��
DIH	��	��	��
DPC	��	��	��
Delta-Wu Jiang	�	��	��
Others	��	��	��
	��	��	��

E. Other receivables

Other receivables
	New Taiwan Dollars			US Dollars
		March 31,		March 31,
	2002		2003	2003
	��
DET	��		��	��
DEIL	�		��	��
Others	��		��	��
	��		��	��

F. Accounts payable

Accounts payable
	New Taiwan Dollars		US Dollars
	March 31,		March 31,
	2002	2003	2003
			(Note 2)
DEIL	��	��	��
DET	��	��	��
Others	��	��	��
	��	��	��

F-117

G. Lease and property transaction

During the three-month periods ended March 31, of 2002 and 2003, lease transactions with DNI are listed below:

Target 5thFloor, 186 Ruey Kuong Road, Neihu, Taipei, Taiwan 3thFloor, B, 186 Ruey Kuany Road, Neihu, Taipei., Taiwan 7thFloor, B, 186 Ruey Kuany Road, Neihu, Taipei., Taiwan 8thFloor, B, 186 Ruey Kuany Road, Neihu, Taipei., Taiwan 252 Shanying Rd., Tayuan, Taiwan	New Taiwan Dollars US Dollars For the three-month periods ended March 31, For the three-month periods ended March 31, Term Deposit-in 2002 2003 2003 (Note2) 2003.1.1~ 2002.12.31 (2002.7.1~ 2002.12.31 renewed) �� �� 2003.1.1~ 2003.12.31 (2002.5.1~ 2002.12.31 renewed) � �� �� 2003.1.1~ 2003.12.31 (2002.11.1~ 2002.12.31 renewed) � �� �� 2003.1.1~ 2003.12.31 (2002.7.1~ 2002.12.31 renewed) � �� �� 2003.1.1~ 2003.12.31 (2002.11.1~ 2002.12.31 renewed) �� �� �� �� �� �� �� ��	US Dollars
		For the three-month periods ended March 31, 2003 (Note2)

F-118

H. Endorsements and guarantees

The amount of endorsements and guarantees provided by the Company on behalf of related parties as of March 31 2002 and 2003 are listed below:

below:
	New Taiwan Dollars		US Dollars
	March 31,		March 31,
	2002	2003	2003
	(Note 2)
DPC	��	��	��
DEU	��	��	��
	��	��	��

DETAILS OF PLEDGED ASSETS

No significant assets were pledged.

COMMITMENTS AND CONTINGENT LIABILITIES

None.

MAJOR CATASTROPHE

None.

9. SUBSEQUENT EVENTS

None.

10. OTHER

(1) Certain accounts in the 2002 financial statements have been reclassified to conform with the presentation adopted for 2003.

F-119

(2) Fair value of non-derivative assets and liabilities

ASSETS Non-derivative assets with fair values equal to book values Short-term investments Long-term investments LIABILITIES Non-derivative liabilities with fair values equal to book values Reserve for retirement plan		New Taiwan Dollars	New Taiwan Dollars	New Taiwan Dollars		US Dollars
		March 31, 2002		March 31, 2003		March 31, 2003

F-120

The related assumptions on the fair value of non-derivative assets and liabilities are as follows:

D. Non-derivative assets and liabilities with fair values equal to book values.
(A) The carrying amounts of short-term non-derivative assets and liabilities including cash and cash equivalents, notes receivable and accounts receivable, other receivables, short-term loans, commercial paper payable, accounts payable, income tax payable, accrued expenses, other payables and other current liabilities are equal to their fair values because of their short-term maturities.
(B) The fair value of cash surrender value of life insurance is based on the book value at balance sheet date.
(C) The fair values of deposits-out and deposits-in are based on book value, which approximate the present value.
(D) The fair value of convertible bonds, including current portion of long-term loans, is based on book value at balance sheet date. According to the terms and condition of ECB III, the interest rate is zero, and the redemption price is equal to the face value. The discounted value was not easily determinable and the foreign amount was translated into New Taiwan dollars using the exchange rate at the balance sheet date.
(E) The fair value of long-term loans is based on book value because there is no significant difference in the discounted value of future cash flows and the carrying amount of long-term loans.
E. The fair values of short-term investments are based on the market values at the balance sheet date.
F. The fair values of long-term investments are based on their market values at the balance sheet date or the underlying equity in net assets if market value is not available.
G. The fair value of reserve for retirement plan is the funded status based on the retirement actuarial report as of December 31, 2001 and 2002, adjusted by the pension costs recognized and contributions to pension fund for the three-month periods ended March 31, 2002 and 2003.

F-121

(3) Information on derivative transactions
A. General information disclosure:
- (A) The Company entered into certain foreign currency option contracts, premium currency deposit, forward foreign currency contracts and cross currency swap contracts to hedge foreign exchange risks in foreign currency denominated accounts receivable and payable.
- (B) Accounting policy: See Note 2.

(C) Credit risk:

The banks which the Company deal with are all in good credit standing and, therefore, the possibility is low for the banks not to comply with the terms of the contracts. In the event that the banks fail to comply with the contracts, it will not cause any major loss to the Company.

(D) Market risk:

The Company entered into these contracts in order to hedge foreign exchange losses. Due to the nature, there is no material market risk.

(E) The information on derivative transactions of the Company for the three-month periods ended March 31, 2002 and 2003 are as follows (unit: thousand of dollars):

F-122

Derivative transactions
During the three-month period
ended March, 31 2002
Sell option (USD CALL/TWD PUT)
Buy option (USD PUT/TWD CALL)
Buy option (TWD PUT/USD CALL)
Sell option (TWD CALL/USD PUT)
Buy option (JPY PUT/USD CALL)
Sell option (USD CALL/JPY PUT)
Sell option (USD PUT/JPY CALL)
Sell option (USD CALL/EUR PUT)
Sell option (USD PUT/EUR CALL)
Foreign currency deposit contracts
Forward foreign currency contracts

Transaction terms
Recognized gain (or loss)
Related cash flows
Par value, contract
amount or nominal
principal
Contract dates
Exercise dates
Exercise prices
Exercise rates
New Taiwan
Dollars
US Dollars
Cash inflow
Cash outflow
(Note 2)
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
�
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
�
�
�
��
��
��
��
��
�
�
�
��
��
��
��
��
��
��
��

F-123

Derivative transactions
During the three-month period
Ended March, 31 2002
Cross currency swap contracts
Knock-out option
Accumulation disappearing option
Interest rate swap
Callable range accrual swap
Swaption
Inflating revrese strangle

Transaction terms
Recognized gain (or loss)
Related cash flows
Par value, contract
amount or nominal
principal
Contract dates
Exercise dates
Exercise prices
Exercise rates
New Taiwan
Dollars
US Dollars
Cash inflow
Cash outflow
(Note 2)
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
��
�
��
�
��
��
��
��
��

F-124

(Note b): There are a total of 372 fixing dates in the life of this contract. If spot rate is above 35.5NTD/USD on each fixing date, the notional amount shall be reduced by USD26.9 thousand. The remaining notional amount will be settled based on the exercise rates on the exercise date.

(Note c): The Company will pay or receive the difference between the floating and fixed interest rate multiplied by the notional amount.

(Note d): If LIBOR is between contract range, the Company will receive the difference between fixed rate and floating rate multiplied by the notional amount from bank. However, when LIBOR falls outside the contract range, the Company will pay floating rate multiplied by the notional amount to bank.

(Note e): If the 2-year swap rate is above the contract rate, the Company will enter into the interest rate swap contract.

(Note f): Due to the uncertainty of the transaction, future cash flow can not be calculated to a meaningful figure.

(Note g): The exercise prices varies depending on the spot rate on the exercise date. The spot rate is between JPY127~JPY141.

F-125

Derivative transactions	Transaction terms Recognized gain (or loss) Related cash flows Par value, contract amount or nominal principal Contract dates Exercise dates Exercise prices Exercise rates New Taiwan Dollars US Dollars Cash inflow Cash outflow (Note 2) �� �� �� �� �� �� �� � � �� �� �� � �� �� �� �� � � �� �� �� �� � � �� �� �� � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� ��	Related cash flows
During the three-month period ended March, 31 2003
Buy option (USD PUT/TWD CALL) Sell option (USD CALL/TWD PUT) Sell option (USD PUT/JPY CALL) Sell option (EUR CALL/USD PUT) Forward foreign currency contracts Interest Rate Swap Callable Range Accrual Swap

Note a: The Company will pay or receive the difference between the floating and fixed interest rate multiplied by the notional amount. Note b: If LIBOR is between the contract range, the Company will receive the difference between fixed rate and floating rate multiplied by the notional amount from bank. However, when LIBOR falls outside the contract range, the Company will pay floating rate multiplied by the notional amount to bank.

Note c: Due to the uncertainty of the transaction, future cash flow cannot be calculated to a meaningful figure.

F-126

(F) The Company combined the buy and sell option contracts to form the range forward contract. The premiums income and expense from buy and sell options are to be offset and the net premium income was NT$2,224 and NT$74,150 (US$2,134) for the three-month periods ended March 31, 2002 and 2003, respectively.

(G) Fair value and book value:

Foreign currency option contracts Forward foreign currency contract FX receivable FX payable	New Taiwan Dollars	New Taiwan Dollars
	March 31,
		2003

B. Additional disclosure information

Pursuant to the terms of the contracts, the premiums are delivered or paid on the trade date. The Company provided time deposit amounting to US$1,000,000 as collateral in 2002.

F-127

11. Disclosure information of investee company

(1) Related information of significant transactions
A. Financing activities to any company or person: None.
B. Guarantee information:

Name of the company providing guarantee Parties being guaranteed

Relationship with
The limit
of guarantee
The outstanding
guarantee amount
The amount of
guarantee with
The ratio of
accumulated guarantee
amount to net value
Number
Name
Name
the Company
for such party
The highest outstanding guarantee
amount for the three-month periods
ended March 31, 2003
at March 31, 2003
collateral placed
of the Company
(Note a)
(Note b)
(Note c)
0
Delta Electronics, Inc.
Delta Electronics
Europe Ltd.
�
��
��
��
��
��
��
�
��
0
�
Delta Products
Corp.
�
��
��
��
��
��
��
�
��

The ceiling of the
outstanding guarantee
to the respective party
��
��

(Note a): Number 0 represents the Company.

(Note b): Number 1 means the Company has business transactions with the party.

Number 3 means the Company and its subsidiaries directly own over 50% of the shares.

(Note c): The limit was determined by the Board of Directors.

(Note d): In accordance with the guarantee procedure of the Company, the Company's guarantee to others should not be in excess of 80% of the Company's net assets. As of March 31, 2003, the maximum amount of guarantee that the Company can provide was NT$24,993,936 (US $719,250).

C. Marketable securities held by the Company at March 31, 2003: Long-term investments please refer to note 4(5) and short-term investments are as follows:

Name of investor Delta Electronics, Inc. � �	Name and kind of marketable securities Kind of marketable securities Name of marketable securities Beneficiary certificates UBS Taiwan Bond Fund Beneficiary certificates Core Pacific Well Pool Bond Fund Beneficiary certificates NITC Bond Fund	The relationship of the issuers with the Company None None None	General ledger accounts Short-term investments � �	Number of shares (In thousand)
	Kind of marketable securities Beneficiary certificates Beneficiary certificates Beneficiary certificates

D. Marketable securities acquired or sold during 2003 in excess of $100,000 or over 20% of capital:

Acquirer / seller	Name of marketable security UBS Taiwan Bond Fund	General ledger accounts Short-term investments	Name of transaction parties �	Relationship �	January 1, 2003 Addition Number of Number of shares Amount shares Amount �� �� �� ��		Disposal	Disposal	March 31, 2003 Disposal gain Number of (loss) shares Amount �� �� �� ��
						Number of shares Sales amount �� ��		Cost �� ��
Delta Electronics, Inc.

F-128

	Name of	General			January 1, 2003	January 1, 2003		Addition		Disposal	Disposal		March	31, 2003
	marketable	ledger	Name of		Number of		Number	of	Number of			Disposal gain	Number of
Acquirer / seller	security	accounts	transaction parties	Relationship	shares	Amount	shares	Amount	shares	Sales amount	Cost	(loss)	shares	Amount
Delta Electronics,	Core Pacific	Short-term	�	�	��		��		��	��	��	��	��
Inc.	Well Pool	investments				��		��		��	��	��		��
	Bond Fund
�	NITC Bond	�	�	�	��		��		��	��	��	��	��
	Fund					��		��		��	��	��		��
�	Delta	Long-term	Delta Networks	A subsidiary	��		��		�	�	�	�	��
	Networks	investments	Holding Ltd.	of the		��		��						��
	Holding			Company				��
	Ltd.

(Note 1): Including investment income accounted for under the equity method and the cumulative translation adjustments on foreign long-term investment.

F-129

E. Acquired real estate in excess of $100,000 or over 20% of capital: None.
F. Disposal of real estate in excess of $100,000 or over 20% of capital: None.
G. Related party purchases or sales transactions in excess of $100,000 or over 20% of capital: Please refer to Note 5 (2) A and C.
H. Receivable from related parties in excess of $100,000 or over 20% of capital:

Name of creditor	Transaction parties Delta International Holding Ltd. (DIH) DEI Logistics (USA) Corp. Delta Electronics (Thailand) Public Co., Ltd. Delta Products Corporation Delta Video Display System (Wu Jiang) Co., Ltd.	Relationship A subsidiary of the Company A subsidiary of DIH Investee company of the Company accounted for under equity method Affiliated enterprise A subsidiary of DIH	Balance of receivable from related parties Turnover rate Accounts receivable Other receivables �� �� �� �� �� � Accounts receivable Other receivables �� �� �� �� �� � Accounts receivable Other receivables �� �� �� �� �� � Accounts receivable Other receivables �� �� �� �� �� � Accounts receivable Other receivables �� �� �� �� �� �	Overdue receivable Action adopted for Amount overdue accounts � � � � � � Continued collection expected in 2003 �� �� � Continued collection expected in 2003 � � Continued collection expected in 2003 �� �� � Continued collection expected in 2003	Subsequent Allowance collections for doubtful (Note) accounts provided � � �� � �� �� � � � � � � � �� �� � � � � � � �
				Amount � � � � �� �� � � � �� �� �
Delta Electronics, Inc. � � � �

(Note): The amounts collected as of January 27, 2003.

I. Information on derivative transactions: Please refer to Note 10 (3).

(2) Disclosure information of investee company

Investment income or loss was translated at the average exchange rate for the three-month period ended March 31, 2003 while others were translated at the rate of exchange prevailing at the balance sheet date. C. Information of investee company:

				Original investment	Original investment	Held as of March	Held as of March	31, 2003
Name	Name of investee			Balance as of March 31,	Balance as of March 31,	Number	Percentage		Income (loss) of the	Investment income (loss) recognized
of investor	company	Address	Main activities	2003	2002	of shares	of ownership	Book value	investee company	by the Company	Note
Delta	Volink Integrated	3F 101 Feenliau	Software, information	��	��		��	��	��	��	-
Electronics,	System, Inc.	Road, Neihu	management, application	��				��	��	��
Inc.		Taipei, Taiwan	service provider, enterprise
			resource management,
			management consulting,
			equipment leasing, etc.
�	Delta Networks	Scotia Center, 4th	Equity investment in	��	��		��	��	��	��	-
	Holding Ltd.	Floor P.O. Box	Mainland China, Hong	��				��	��	��
		2804 George	Kong, etc.
		Town, Grand
		Cayman, Cayman
		Islands

F-130

				Original investment	Original investment		Held as of March	Held as of March	31, 2003
Name	Name of investee			Balance as of March 31,	Balance as of March 31,		Number	Percentage		Income (loss) of the	Investment income (loss) recognized
of investor	company	Address	Main activities	2003	2002		of shares	of ownership	Book value	investee company	by the Company	Note
Delta	Delta	Scotia Center, 4th	Development, design,	��	��			��	��	��	��	The investment income is net of the
Electronics	International	Floor P.O. Box	manufacturing and sales	��					��	��	��	elimination of intercompany transactions.
Inc	Holding Ltd.	2804 George	of networking system and
		Town, Grand	peripherals
		Cayman, Cayman
		Islands
�	Delta	4F,No.2,R&D Rd.	Development, design,	��	��			��	��	��	��	-
	Optoelectronics,	��, Science-Based	manufacturing and sales of	��					��	��	��
	Inc.	Industrial Park,	displays with polymer light
		Hsinchu, Taiwan	emission display (PLED)
			and carbon nano-tube
			electronic emitter (CNT)
			technologies
�	Delta Electronics	2 Young Place,	Development,	��	��		��	��	��	��	��	The credit balance was reclassified to other
	Europe Ltd.	Kelvin Industrial	manufacturing,	��					��	��	��	liabilities-others.
		Estast, East	marketing and sales, and
		Kilbride, Glasgow	technical service of
		G75 OTD, UK	electronic/electrical
			components and products
�	Grand Advance	No.11, Hsin-Hua	Manufacturing and sales	��	��			��	��	��	��	The investment loss included the amortization
	Technology Ltd.	Rd, Tao-Yuan,	of CD, CDR, VCD and	��					��	��	��	of the excess of investment cost over the net
		Taiwan	DVD									assets of the investee company.
�	Cyntec Co., Ltd.	No.2,R&D Rd.��,	Research, development,	��	��	��		��	��	��	��	-
		Science-Based	manufacturing and sales	��					��	��	��
		Industrial Park,	of various thin film
		Hsinchu, Taiwan	components, such as
			thermal printer head,
			temperature sensor and
			its application modules,
			chip resistors and hybrid
			circuits
�	Union Optronics	156 Kao-shy Rd.	Development, design,	��	��			��	��	��	��	The investment loss included the amortization
	Corp.	Yang-Mei,	manufacturing and sales	��					��	��	��	of the excess of investment cost over the net
		Tao-Yuan, Taiwan	of optoelectronics									assets of the investee.
			semiconductors and
			semiconductor
			components
�	Delta Electronics	Bangpoo Industrial	Manufacturing and sales	��	��			��	��	��	��	The weighted average shareholding ratio was
	(Thailand)	Estate KM. 37,	of electronic products	��					��	��	��	20.14% and the investment income included
	Public Co., Ltd.	Sukhumvit Road										the amortization of the excess of investment
		Samutprakarn										cost over the net assets.
		10280, Thailand

F-131

				Original investment	Original investment	Held as of March	Held as of March	31, 2003
Name	Name of investee			Balance as of March 31,	Balance as of March 31,	Number	Percentage		Income (loss) of the	Investment income (loss) recognized
of investor	company	Address	Main activities	2003	2002	of shares	of ownership	Book value	investee company	by the Company	Note
Delta	Delta Electronics	21F., Prosperity	Operations management	��	��		��	��	��	��	�
International	(H.K.) Ltd.	Centre, No.25	and engineering services	��				��	��
Holding		Chong Yip st.,
Ltd.		Kwun Tong,
		Kowloon, Hong
		Kong
�	Delta Electronics	P.O. Box 438, Road	Operations management	��	��	��	��	��	��	�	�
	Agent Ltd.	Town, Tortola,	and engineering services	��				��	��
		British Virgin
		Island
�	Delta Electronics	�	Sales of electronic	��	��	��	��	��	��	�	�
	International		products	��				��	��
	Ltd.
�	Delta Electronics	P.O. Box 438, Road	Electronics product sales	��	��		��	��	��	�	�
	Trading Ltd.	Town, Tortola,		��				��	��
		British Virgin
		Island
�	Delta Power	21F., Prosperity	Operations management	��	��		��	��	��	�	�
	Sharp Ltd.	Centre, No. 25	and engineering services	��				��	��
		Chong Yip St.,
		Kwun Tong,
		Kowloon, Hong
		Kong
�	Delta Electronics	Xinan District Shijie	Manufacturing and sales	��	��		��	��	��	�	�
	(Dong Guan) Co., Ltd.	Town, Dongguan, Guangdong,	of transformers (capacity not exceeding 1000 VA),	��				��	��
		P.R.C.	switching power
			supplies, adapters, and
			color monitors, inductors
			under 100VA (coil only),
			resistors for applications
			under 2w (except chip
			resistors, resistor array),
			electronic thermometers
			of accuracy less than
			0.1%, cashier,
			CD-ROMs, barebones,
			UPS and its modules,
			telecom power system
			and its modules

F-132

Name of investor Delta International Holding Ltd. � � � � � �	Name of investee company Delta Electronics Industrial (Dong Guan) Co., Ltd. Delta Electronics Components (Dong Guan) Co., Ltd. Delta Electronics Power (Dong Guan) Co., Ltd. DEI Logistics (USA) Corp. Delta Electronics (Japan) Inc. Deltec Co., Ltd. DNT Holding Ltd.	Address	Main activities Manufacturing and sales of electronic ballast for energy saving lighting and interface cards Manufacturing and sales of transformers (capacity not exceeding 1000 VA), interface cards, diode, resistors, battery and its parts Manufacturing and sales of other power supplies, switching power supplies, adapters, inductors under 100VA (coil only), barebones, DC/DC converters, UPS and its modules , telecom power system and its modules Warehousing and logistics services Trading and import-export of the related equipment, components and materials telecom system, computer system and instruments Import/export of computer and electrical equipment and its components Equity investment	Original investment Held as of March 31, 2003 Balance as of March 31, 2003 Balance as of March 31, 2002 Number of shares Percentage of ownership Book value Income (loss) of the investee company Investment income (loss) recognized by the Company �� �� � � �� �� � �� �� �� �� �� �� �� �� � �� �� �� � �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� �� �	Note
		Xinan District Shijie Town, Dongguan, Guangdong, P.R.C. Xinan District Shijie Town, Dongguan, Guangdong, P.R.C. Xinan District Shijie Town, Dongguan, Guangdong, P.R.C. 4405 Cushing Parkway, Fremont, CA 94538, U.S.A. 2-1-14 Shiba Daimon, Minato-Ku, Tokyo, 105-0012, Japan 14F, No.266, Wen Hua Avenue II, Sec.1 Linkou Taipei Scotia Center, 4th Floor P.O.Box 2804 George Town, Grand Cayman, Cayman Islands			� � � � � � �

F-133

Name of investor � � Delta International Holding Ltd. �	Name of investee company Delta. Video Display System (Wu Jiang ) Co., Ltd. Delta Electronics (Jiang Su) Co., Ltd. Delta Electronics Components (Thailand) Co., Ltd. Pyramis Corporation	Address	Main activities Manufacturing and sales of color monitor (17” and below), ballast for discharge and fluorescent lighting Manufacturing, sales and management of computer enclosures, interface cards, ballast for discharge and fluorescent lighting, transformer under 1KVA, switching power supplies (except high power density, high frequency power supplies), uninterruptible power supplies (UPS) (except high power density, high frequency power supplies), other power supplies (except high power density, high frequency power supplies), coils inductors, base boards for UPS, storage batteries and related components, color monitors, resistors for applications under 20W, electronic thermometersof accuracy less than 0.1%, motors under 37.5W (except precision miniature motors) Manufacturing and sales of electronic components Electronic products sales	Original investment Balance as of March 31, 2003 Balance as of March 31, 2002 �� �� �� �� �� �� �� �� �� �� �� ��	Held as of March 31, 2003 Number of shares Percentage of ownership Book value Income (loss) of the investee company Investment income (loss) recognized by the Company � �� �� �� �� �� � � �� �� �� �� �� � �� �� �� �� �� �� �� �� �� �� �� �� �� �	Note
		No. 18 Jiangxing East Road Yun Dong Derelement Zone Song Ling Town Wujirang City, Jiang Su Province, P.R.C. No. 6 Wutong New Road Wujiang Economic Development Zone, Song Ling Town Wujiang City, Jiang Su Province, P.R.C. 699 Moo 4 Bangpoo Industrial Est., Suhkumvit Rd., Parksar, Mung Samutprakam 10280, Thailand 2271 West 205th Street Suite 103, Torrance, CA 90521, USA				� � � �

F-134

Name of investor Delta International Holding Ltd. Delta International Holding Ltd. � � � �	Name of investee company Delta Electronics Components (Wu Jiang) Co., Ltd. Delta Electro-optics (Wu Jiang ) Co., Ltd. DAC Holding Ltd. DAT Holding Ltd. YDT International Holding Ltd. Netpower Technologies, Inc.	Address Main activities No. 6 Wutong New Road Wujiang Economic Development Zone, Song Ling Town Wujiang City, Jiang Su Province, P.R.C. Manufacturing and sales of transformer under 1KVA, inductors, interface cards, resistors for applications under 20W, other storage batteries and related components, motors under 37.5w (except precision miniature motors), electronic control devices for machinery (voltage under 1000V and excluding numeric control) No. 18 Jiangxing East Road Yun Dong Derelement Zone Song Ling Town Wujirang City, Jiang Su Province, P.R.C. Manufacturing and sales of electronic equipment enclosures, transformers, magnetic components, electronic control devices for machinery (voltage under 1000 V and excluding numeric control), boards, panel, consoles and other bases for electronic control devices, camera components, hard disk drives (excluding micro disk drives and optical disk drives) Scotia Center, 4th Floor P.O. Box 2804 George town,Grand Cayman,Cayman Islands Equity investment 1209 Orange St., in the City of Wilmington, Country of New Castle, Delaware 19801, U.S.A. Equity investment Scotia Center, 4th Floor P.O. Box 2804 George town,Grand Cayman,Cayman Islands Equity investment 1100 Jupiter road, Suite 130 Plano, TX 75074, U.S.A. Produce DC/DC/Power /Module, product design, sample production , and marketing & sales	Original investment Held as of March 31, 2003 Balance as of March 31, 2003 Balance as of March 31, 2002 Number of shares Percentage of ownership Book value Income (loss) of the investee company Investment income (loss) recognized by the Company �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� �� �	Investment income (loss) recognized by the Company	Note
					� � � � � �

F-135

Name of investor	Name of investee company Delcom Electronic Co. Ltd. Delta Networks Inc. Delta Networks Inc. DNI Logistics (USA) Corp. Delta Networks International Ltd. Delta Electronics Industrial (Dong Guan) Co., Ltd. Addtron Technology (Japan) Co.,Ltd DNI Logistics (USA) Corp. Delta Networks International Ltd. Volink Holding Ltd.	Address Main activities 908 Moo 4, Tambon Prakasa, Amphur Muang Samutprakarn, Samutprakarn Province 10280, Thailand Manufacturing and sales of electronic components Scotia Center, 4th Floor P.O. Box 2804 George Iown, Grand Gayman, Cayman Islands. Equity Investment 252, Shan-Ying Road, Gueishan, Tao-Yuan Taiwan Development design manufacturing and sales of networking system and peripherals. 4425 Cushing Parkway, Fremont, CA 94538, USA Warehousing and logistics service 21th Floors of Prosperity Centre, No.25 Chang Yip Street, Kowloon Hong Kong Trading and import/export of networking system Xinan District Shijie Town, Dongguan, Guangdong P.R.O. Manufacturing and sales of electronic ballast for energy saving lighting and interface cards 2-1-4 Shibadaimon, Minato-Ku Tokyo 105-0012,Japan Electronic products sales 4425 Cushing Parkway, Fremont, CA 94538, USA Warehousing and logistics service 21th Floors of Prosperity Centre, No.25 Chang Yip Street, Kowloon Hongkong Trading and import/export of networking system Offshore Chambers, P.O. Box 217, Asia, Samoa Equity investment	Original investment Held as of March 31, 2003 Balance as of March 31, 2003 Balance as of March 31, 2002 Number of shares Percentage of ownership Book value Income (loss) of the investee company Investment income (loss) recognized by the Company �� �� � � � � � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� � � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� � � � � � �� � � � � �� �� �� �� �� �� �� �� �� ��	Investment income (loss) recognized by the Company	Note
Delta International Holding Ltd. Delta Networks Holding Ltd. Delta Networks (Cayman) Inc. � � � Delta Electronics (Japan)Ltd. DNT Holding Ltd. � Volink integrated system, Inc.					� � � � � � � � � �

F-136


Name of investor	Name of investee company Volink Integrated systems (Dong Guan) Co., Ltd.	Address Main activities Dongguan Guangdong P.R.C Software development, design and sales, other value added work on software; software maintenance, technical service, system integration and consulting service	��	�� Number of shares Percentage of ownership Book value Income (loss) of the investee company Investment income (loss) recognized by the Company � �� �� �� �� �� ��	Investment income (loss) recognized by the Company	Note
			Balance as of March 31, 2003 Balance as of March 31, 2002 �� �� ��
Volink Holding Ltd.						�

(Note a): Investment income/loss recognized by Delta International Holding Ltd. (Note b): Investment income/loss recognized by Delta Networks Holding Ltd. (Note c): Investment income/loss recognized by Delta Networks (Cayman) Inc. (Note d): Investment income/loss recognized by Delta Electronics (Japan) Inc. (Note e): Investment income/loss recognized by Volink Integrated System, Inc. (Note f): Investment income/loss recognized by Volink Holding Ltd.

F-137

B. Financing activities to any company or person: None.

C. Guarantee information: None.

D. Marketable securities held by the company at March 31, 2003:

Name of investor	Name and kind of marketable securities Kind of marketable securities Name of marketable securities Common stock Delta Electronics (H.K.) Ltd. � Delta Electronics Agent Ltd. � Delta Electronics International Ltd. � Delta Electronics Trading Ltd. � Delta Power Sharp Ltd. � DEI Logistics (USA) Corp. � Delta Electronics (Japan) Inc. Certificate of amount contributed Delta Electronics (Dong Guan) Co., Ltd. � Delta Electronics Components (Dong Guan) Co., Ltd. � Delta Electronics Power (Dong Guan) Co., Ltd. Common stock Deltec Co., Ltd. � DNT Holding Ltd. � Delta Electronics Components (Thailand) Co., Ltd. � Pyramis Corporation Certificate of amount contributed Delta Electronics (Jiang Su) Co., Ltd. � Delta Electronics Components (Wu Jiang) Co., Ltd. � Delta Electro-optics (Wu Jiang) Ltd.	The relationship of the issuers with the Company A subsidiary of DIH � � � � � � � � � � � � � � � �	General ledger accounts Long-term investments � � � � � � � � � � � � � � � �	March 31, 2003 Number of shares Book value Percentage Market value �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� � �� �� �� �� � �� �� �� ��
	Kind of marketable securities
Delta International Holding Ltd. (DIH) � � � � � � � � � � � � � � � �	Common stock � � � � � � Certificate of amount contributed � � Common stock � � � Certificate of amount contributed � �

F-138

Name of investor	Name and kind of marketable securities Kind of marketable securities Name of marketable securities Certificate of amount contributed Delta Video Display System (Wu Jiang) Co., Ltd. Common stock DAC Holding Ltd. � DAT Holding Ltd. � YDT International Holding Ltd. Preferred stock Netpower Technologies, Inc. Common stock Delta Electronics (Thailand) Public Co., Ltd. � Deltron-Cimic Electric and Electronics Co., Ltd. � NY3D Inc. � Asante Technologies, Inc. � MRV Communications Inc. Preferred stock Ambicom, Inc. � Quintum Technologies, Inc. � Ezonics Corporation � Lightech Fiberoptics, Inc. � Netgear Inc. Convertible bond VPT, Inc. Certificate of amount contributed Mizubo Capital Co., Ltd. MHCC IT Fund 2000 Common stock Volink Holding Ltd. Beneficiary certificates UBS Taiwan Bond Fund. Common stock Delta Networks Inc.	The relationship of the issuers with the Company A subsidiary of DIH Investee company of DIH accounted for under equity method � � � Investee company of the Company accounted for under equity method Affiliated enterprise � � � � � � � � � � A subsidiary of Volink � A subsidiary of DNH	General ledger accounts Long-term investments � � � � � � � � � � � � � � � � � Short-term investment Long term investment	March 31, 2003 Number of shares Book value Percentage Market value � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� � �� �� �� �� � �� �� �� �� � �� �� �� �� � �� �� � �� �� � �� �� � �� �� � �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� ��
	Kind of marketable securities
Delta International Holding Ltd.(DIH) � � � � � � � � � � � � � � � � Volink Integrated System, Inc (Volink) � Delta Networks Holding Ltd.(DNH)	Certificate of amount contributed Common stock � � Preferred stock Common stock � � � � Preferred stock � � � � Convertible bond Certificate of amount contributed Common stock Beneficiary certificates Common stock

F-139

E. Marketable securities acquired or sold during the first half year of 2003 in excess of $100,000 or over 20% of capital:

	Name of	General			January	1, 2003		Addition .			Disposal		March 31, 2003	March 31, 2003
	marketable	ledger	Name of		Number of		Number of		Number of			Disposal gain/
Acquirer/ seller	security	accounts	transaction parties	Relationship	shares	Amount	Shares	Amount	shares	Sales amount	Cost	(loss)	Number of shares	Amount
Delta	Delta Electronics	Long-term	Delta Networks	Affiliated	�	��	��		�	��	��	�	�	�
International	Industrial (Dong	investments	Inc. (Cayman)	enterprise		��				��	��
Holding Ltd.	Guan) Co., Ltd.
Delta Networks	Delta Networks	Long-term	Delta Networks	A subsidiary of	�� ��				� � � � �� ��
Holding Ltd.	Inc.	investments	Inc. (Cayman)	the Company		��		��						��
								(Note 1)

(Note 1): Including investment income accounted for under the equity method and the cumulative translation adjustments on foreign long-term investment.

F. Acquired real estate in excess of $100,000 or over 20% of Capital: None.
G. Disposal real estate in excess of $100,000 or over 20% of Capital: None.
H. Related party purchases or sales transactions in excess of $100,000 or over 20% of Capital: None.
I. Receivable from related parties in excess of $100,000 or over 20% Capital: None.

F-140

J. Information on derivative transactions:

Delta International Holding Ltd. (DIH):

(A) General information disclosure (unit in thousand):

(a) Purpose:

DIH entered into certain forward foreign currency contracts to hedge foreign exchange risk in foreign currency denominated accounts receivable and payable.

(b)Accounting policies:

See Note 2.

(c) Credit risk:

The banks which DIH deals with are all in good credit standing, and therefore, the possibility is low for the banks not to comply with the terms of the contracts. In the event that the banks do fail to comply with the contracts, it will not cause any major loss to DIH.

(d) Mark risk:

DIH entered into the forward foreign currency contracts in order to hedge foreign exchange losses. Due to the nature, there is no material market risk.

(e) As of March 31, 2003, the outstanding forward foreign currency purchase and sales (THB/USD) contracts was THB 3,800,000. The cash inflow and outflow was THB 3,800,000/US$88,702 and US$88,738/THB3,800,000, respectively.
(e) For the three-month period ended March 31, 2003, total gains on the forward foreign currency contracts was US$33 .
(B) Additional disclosure

Pursuant to the terms of the contracts, DIH does not provide any mortgage assets.

F-141

(3) Disclosure of information on indirect investments in Mainland China (Units: In thousands)

B. Basic information

Investment Income or loss recognized are translated at the average exchange rate for the three-month period March 31, 2003 while others are translated at the rate of exchange prevailing at the balance sheet date.

Name of investee in Mainland China Delta Electronics (Dong Guan) Co., Ltd. Deltron-Cimic Electric and Electronics Co., Ltd. Delta Electronics Industrial (Dong Guan) Co., Ltd. Delta Electronics Components (Dong Guan) Co., Ltd. Delta Electronics Power (Dong Guan) Co., Ltd.	Main activities of investee	Capital Investment method Accumulated remittance as of January 1, 2003 �� �Equivalent to �� �� Invested by Delta International Holding Ltd. �� �Equivalent to �� �� �Equivalent to �� �� � �� �Equivalent to �� �� �Equivalent to �� �� Invested by Delta Notworks (Cayman) Inc. �� �Equivalent to �� �� �Equivalent to �� �� Invested by Delta International Holding Ltd. �� �Equivalent to �� �� �Equivalent to �� �� � �� �Equivalent to ��	Remitted or collected this period Remitted out Collected � � � � � � � � � �	Remitted or collected this period Remitted out Collected � � � � � � � � � �	Accumulated remittance as of March 31, 2003 �� �Equivalent to �� �� �Equivalent to �� �� �Equivalent to �� �� �Equivalent to �� �� �Equivalent to ��	Ownership held by the Company (direct and indirect) �� �� �� �� ��	Investment income (loss) recognized by the Company during the first quarter of the year �� �� � �� �� �� �� �� ��	Ending balance of investment The investment income (loss) remitted back as of March 31, 2003 �� �� � �� �� � �� �� � �� �� � �� �� �
			Remitted out � � � � �
	Manufacturing and sales of transformers (capacity not exceeding 1000 VA), switching power supplies, adapters, and color monitors, inductors under 100VA (coil only), resistors for applications under 2w (except chip resistors, resistor array), electronic thermometers of accuracy less than 0.1%, cashier, CD-ROMs, barebones, UPS and its modules, telecom power system and its modules Manufacturing and sales of electronic ballasts for energy saving lighting, color monitors (size: 17'' and below), CD-ROMs, inductors under 100 VA (coil only), spare parts for products listed under code 8504, other DC-DC converters, uninterruptible power systems, and transformers (capacity not exceeding 1000 VA) Manufacturing and sales of electronic ballast for energy saving lighting and interface cards Manufacturing and sales of transformers (capacity not exceeding 1000 VA), interface cards, battery and other related products Manufacturing and sales of other power supplies, switching power supplies, adapters, inductors under 100VA (coil only), barebones, DC/DC converters, UPS and its modules , telecom power system and its modules			� � � � �

F-142

					Remitted	or collected this			Investment income		The investment
Name of investee				Accumulated		period	Accumulated	Ownership held by	(loss) recognized by the		Income (loss)
in Mainland			Investment	remittance as of			remittance as of	the Company (direct	Company during the first	Ending balance	remitted back as of
China	Main activities of investee	Capital	method	January 1, 2003	Remitted out	Collected	March 31, 2003	and indirect)	quarter of the year	of investment	March 31, 2003
Delta Electronics	Manufacturing and sales of transformer	��	Invested by Delta	��	�	�	��	��	��	��	�
Components (Wu Jiang) Co., Ltd.	under 1KVA, inductors, interface cards, resistors for applications under 20W, other storage batteries and related components, motors under	�Equivalent to �� ��	International Holding Ltd.	�Equivalent to ��			�Equivalent to ��		��	��
	37.5w (except precision miniature
	motors), electronic control devices for
	machinery (voltage under 1000V and
	excluding numeric control)
Delta Electronics	Manufacturing, sales and management	��	�	��	�	�	��	��	��	��	�
(Jiang Su) Co., Ltd.	of computer enclosures, interface cards, ballast for discharge and fluorescent lighting, transformer under	�Equivalent to ��		�Equivalent to ��			�Equivalent to ��		��	��
	1KVA, switching power supplies	��
	(except high power density, high
	frequency power supplies),
	uninterruptible power supplies (UPS)
	(except high power density, high
	frequency power supplies), other
	power supplies (except high power
	density, high frequency power
	supplies), coils inductors, base boards
	for UPS, storage batteries and related
	components, color monitors, resistors
	for applications under 20W, electronic
	thermometers of accuracy less than
	0.1%, motors under 37.5W (except
	precision miniature motors)
Delta Electro-	Manufacturing and sales of electronic	��	�	��	�	�	��	��	��	��	�
optics (Wu Jiang) Ltd.	equipment enclosures transformers, magnetic components, electronic control devices for machinery (voltage under 1000 V and excluding numeric	�Equivalent to �� ��		�Equivalent to ��			�Equivalent to ��		��	��
	control), boards, panel, consoles and
	other bases for electronic control
	devices, camera components, hard disk
	drives (excluding micro disk drives
	and optical disk drives).
Delta Video	Manufacturing and sales of color	��	�	��	�	�	��	��	��	��	�
Display System (Wu Jiang) Co., Ltd.	monitor (17” and below), ballast for discharge and fluorescent lighting	�Equivalent to ��		�Equivalent to ��			�Equivalent to ��		��	��
		��
Green Energy	Manufacturing and sales of battery and	��	�	��	�	�	��	��	��	��	�
(Tianjin) Technology Ltd.	related produets	�Equivalent to ��		�Equivalent to ��			�Equivalent to ��		��	��
		��

Accumulated amount remitted out of Taiwan Investment amount approved by Ceiling of investment to Mainland China the Investment Commission amount of the Company ��

F-143

D. The significant direct or indirect transactions of the Company with the investee companies in Mainland China.

The significant purchases, sales, accounts payable and accounts receivable of the Company indirectly conducted through the DIH's subsidiary, Delta Electronics International Ltd. (DEIL) and DNI Cayman’s subsidiary, Delta Networks International Ltd. (DNIL) for the three-month period ended March 31, 2003 were as follows:

A) Purchase amount and percentage and related accounts payable at March 31, 2003:

Name of the counterparty Delta Electronics (Dong Guan) Co., Ltd. Delta Electronics Components (Dong Guan) Co., Ltd. Delta Electronics Power (Dong Guan) Co., Ltd. Delta Electronics (Jiang Su) Co., Ltd. Delta Electronics Components (Wu Jiang) Co., Ltd. Delta Video Display System (Wu Jiang) Co., Ltd. Delta Electronics Industrial (Dong Guan) Co., Ltd.	Name of transaction parties DEIL � � � � � DNIL	Relationship with DEIL Affiliated enterprise � � � � � �	Transaction terms	Credit terms By the term of contracts � � � � � �	Description of and reasons for difference in transaction terms compared to non-related party transactions Unit price Credit period � � � � � � � � � � � � � �	Accounts or notes receivable (payable)
			Purchases (sales) Amount % of total purchases (sales) Purchases �� �� �� � �� �� �� � �� �� �� � �� �� �� � �� �� �� � �� �� �� � �� �� ��			Balance % of total accounts or notes receivable (payable) �� � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� ��

B) Sales amount, percentage and related accounts receivable at March 31, 2003�

Sales amount, percentage and related accounts receivable at March 31, 2003�
Name of the counterparty Name of transaction parties Relationship with DEIL Delta Electronics (Dong Guan) Co., Ltd. DEIL Affiliated enterprise Delta Electronics Power (Dong Guan) Co., Ltd. � � Delta Electronics Components (Dong Guan) Co., Ltd. � � Delta Electronics Industrial (Dong Guan) Co., Ltd. DNIL �	Transaction terms	Credit terms By the term of Contracts � � �	Description of and reasons for difference in transaction terms compared to non-related party transactions Unit price Credit period � � � � � � � �	Accounts or notes receivable (payable)
	Purchases (sales) Amount % of total Purchases (sales) Sales �� �� �� � �� �� �� � �� �� �� � �� �� ��			Balance	% of total accounts or notes receivable (payable)

Except for the above transactions, there were no other significant transactions between the Company, directly or indirectly, and the companies in Mainland China.

F-144

AI assistant

DELTA — Capital/Financing Update 2015

52000_rns_2015-12-14_cf899586-8c48-4cf3-96f3-e0821fdfd8fc.pdf

U.S.$185,000,000

Delta Electronics, Inc.

Zero Coupon Convertible Notes Due 2008

See “Risk Factors” on page 17 for a discussion of certain factors to be considered in connection with an investment in the Notes.

Offering Price: 100%

Global Coordinator and Sole Bookrunner

Goldman Sachs International

Co-Lead Managers

Barits Securities (Hong Kong) Limited

MasterLink Securities Corporation

The Managers make no representations or warranties as to the accuracy or completeness of the information contained herein.

ENFORCEABILITY OF FOREIGN JUDGMENTS IN THE ROC

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

Certain Defined Terms, Conventions And Currency

and manufacturing processes

Unit of power capacity

Summary

The Offering

Selected Financial Information

Risk Factors

RISKS RELATED TO THE DELTA GROUP AND ITS BUSINESS

Dependence on global information technology (computer products and networking products) and telecommunications industries

Product cycle, new products and technological changes

Competition

Reliance on key customers

Inter-relationships among the Company and its subsidiaries and affiliates

Reliance on certain sources of key components

Dependence on qualified personnel

Intellectual property protection

Joint venture risks

RISKS RELATING TO THE ROC

Political risks associated with doing business in Taiwan

Natural or man-made disasters

Severe Acute Respiratory Syndrome

ROC securities market

Financial reporting and accounting standards in the ROC

Foreign exchange control

RISKS RELATING TO THE PRC

Political and economic situation and legal developments in the PRC

PRC legal system

RISKS RELATED TO THE NOTES AND THE COMMON SHARES

Considerations related to conversion

Potential liquidity of Notes and Common Shares

Disclosure obligations

Fluctuations in share price

Fluctuations in exchange rate

Use of proceeds

Market Price Information

Dividends

Exchange Rates

Capitalization

Recent Development and Outlook

Result of Consolidated Operations in 2001 and 2002

Result of Non-Consolidated Operations for the first three months of 2002 and 2003

Result of Consolidated Operations for the first three months of 2002 and 2003

Liquidity and Capital Resources

The Delta Group

THE COMPANY

CORPORATE CULTURE

SERVICE AWARDS

SUBSIDIARIES OF THE COMPANY

Significant Subsidiaries

Delta International Holding Ltd. (“DIH”)

Delta Networks, Inc. (Taiwan) (“DNI”)

Delta Electronics Components (Dongguan) Co., Ltd. (“DEC”)

Delta Electronics International Ltd. (“DIL”)

DNT Holding Limited (“DNTH”)

PRINCIPAL SHAREHOLDERS

RELATED PARTY TRANSACTIONS

Business

INTRODUCTION

STRATEGY

Focus on technological innovation and research and development

Maintain position as a leading manufacturer of power supplies and electronic components and the leading ODM partner to its major first tier customers in the 3C industries

Continue producing and delivering high quality, reliable products in a cost effective manner

Enhance manufacturing efficiency

Expand product lines related to its current businesses

DELTA Capital/Financing Update 2015