ICHIA — Capital/Financing Update 2014

Aug 25, 2014

OFFERING CIRCULAR

==> picture [145 x 44] intentionally omitted <==

ICHIA TECHNOLOGIES, INC.

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

U.S.$40,000,000

Zero Coupon Convertible Bonds due 2008

Issue Price: 101[1] ⁄2%

The Bonds will be direct, unconditional, unsecured and unsubordinated general obligations of Ichia Technologies, Inc. (“ ICHIA ” or the “ Company ”) and will rank at least equally with all other outstanding and future unsecured and unsubordinated general obligations of the Company. The Bonds will not bear interest except in limited circumstances. Bondholders may convert the Bonds into the Company’s common shares, par value NT$10 per share (the “ Shares ”) or depositary receipts (“ DRs ”) (if available) on or after September 22, 2003 and prior to the close of business on August 12, 2008 (subject to certain restrictions). The Conversion Price will initially be NT$58.0 per Share, which is equivalent to U.S.$1.68 per Share, based on a fixed rate of exchange of NT$34.435 = U.S.$l.00, subject to adjustment in certain events. In addition, the Conversion Price will be adjusted from time to time in certain circumstances relating to the then prevailing closing price of the Shares relative to the Conversion Price. The Shares are listed on the Taiwan Stock Exchange (the “ TSE ”) and application will be made to list the Shares issued upon conversion of the Bonds on the TSE. On August 14, 2003, the closing price of the Shares on the TSE was NT$51.5 per Share.

Bondholders have the option to require the Company to redeem all, or part only, of the Bonds held by that Bondholder on August 22, 2005 at their principal amount. The Company has the option to redeem all, or part only, of the Bonds on or at any time after August 22, 2005 at their principal amount in the event that the closing price of the Shares on the TSE in U.S. Dollars, calculated at the prevailing exchange rate, for each of the 20 consecutive Trading Days (as defined herein), 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 130% of the Conversion Price in effect on each such Trading Day translated into U.S. Dollars at the fixed exchange rate of NT$34.435 = U.S.$1.00. The Company may, at any time, redeem all, but not part of, the Bonds, upon not less than 30 days’ nor more than 60 days’ notice to the Bondholders, at their principal amount if at least 90% in principal amount of the Bonds have already been redeemed, converted, or purchased and cancelled. The Company may also redeem the Bonds in whole, but not in part, at their principal amount in the event that certain changes relating to Republic of China taxation are implemented that would result in additional costs to the Company. The Company will redeem the Bonds at their principal amount at maturity on August 22, 2008, unless the Bonds have been previously redeemed, purchased and cancelled or converted.

For a discussion of certain factors that should be considered in connection with an investment in the Bonds, see “Risk Factors” on page 9 herein.

Application has been made to list the Bonds on the Luxembourg Stock Exchange. Delivery of the Bonds will be made in book entry form through the facilities of Euroclear and Clearstream, Luxembourg (each as defined herein) on August 22, 2003 (the “ Closing Date ”).

The Bonds, and the Shares deliverable upon conversion of the Bonds, have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “ Securities Act ”), and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons. The Bonds will be offered and sold outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act. The Bonds may not be offered in the Republic of China.

Sole Bookrunner and Lead Manager

Barits Securities (Hong Kong) Limited

This Offering Circular is dated August 21, 2003

ICHIA, having made all reasonable inquiries, confirms that this Offering Circular contains all information with respect to ICHIA, ICHIA and its consolidated subsidiaries as a whole, the Bonds, and the Shares which is material in the context of the issue and offering of the Bonds (including all information required by applicable laws of the ROC), that the information contained herein (save as set out below) 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 Bonds, 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, that all reasonable inquiries have been made by the Company to verify the accuracy of such information, and that this Offering Circular does not contain any 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 ROC, its political status and economy, has been derived from government and other public sources, including GTSM Monthly Review and Status of Securities Listed on 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 Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by ICHIA 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 Bonds 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 ICHIA or the Managers to subscribe for or purchase, any of the Bonds in any jurisdiction in which such offer or invitation would be unlawful. No action is being taken to permit a public offering of the Bonds or Shares issuable upon conversion of the Bonds or the distribution of this Offering Circular in any jurisdiction where action would be required for such purpose.

No person is authorized in connection with the issue, offering or sale of the Bonds 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 ICHIA or the Managers. Neither the delivery of this Offering Circular nor any sale or allotment made in connection with the issue of the Bonds 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.

The Bonds will be represented by beneficial interests in a permanent global certificate (the “ Global Certificate ”) in registered form, which will be registered in the name of a nominee of, and shall be deposited on or about August 22, 2003 with a common depositary for, Euroclear Bank S.A./N.V. as operator of the Euroclear System (“ Euroclear ”) and Clearstream Banking, socie´te´ anonyme (“ Clearstream, Luxembourg ”).

In making an investment decision, investors must rely on their own examination of the Company and the terms of this offering, including the merit and risks involved. See “Risk Factors” for a discussion of certain factors to be considered with an investment in the Bonds.

The Company has prepared the audited consolidated and non-consolidated financial statements as at and for the years ended December 31, 2000, 2001 and 2002 and unaudited non-consolidated financial statements as at and for the three month periods ended March 31, 2002 and 2003, contained herein in accordance with accounting principles generally accepted in the ROC. ROC GAAP differs from generally accepted accounting principles in the United States. For more information, please see “Summary of Significant Differences between ROC GAAP and U.S. GAAP”.

i

NOTICE TO INVESTORS

The Bonds may not be offered or sold directly or indirectly in the ROC. The Bonds and the Shares issuable upon conversion of the Bonds have not been and will not be registered under the Securities Act. The Bonds and the Shares issuable upon conversion of the Bonds may not be offered or sold to any person in the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. In addition, no transfer of any interest in the Global Certificate may be made to any U.S. person outside the United States or any person in the United States for a period of 40 days after the later of the commencement of this offering and the latest closing date of this offering. Terms that are defined in Regulation S under the Securities Act and used in this section have the meanings assigned in Regulation S.

Each purchaser of Bonds will be deemed to have represented and agreed as follows:

• (1) it is purchasing the Bonds for its own account or for an account with respect to which it exercises sole investment discretion, and it and any such account is outside the United States and is not a U.S. person;

• (2) it acknowledges that neither the Bonds nor the Shares issued upon conversion of the Bonds have been or will be registered under the Securities Act or with any securities regulatory authority of any jurisdiction and may not be offered or sold within the United States except as set forth below;

• (3) it understands and agrees that if in the future it decides to resell, pledge or otherwise transfer any Bond or beneficial interest therein, or any Shares issued upon conversion of the Bonds, it may do so only (i) in an offshore transaction meeting the requirements of Rule 903 or Rule 904 of Regulation S, (ii) pursuant to an exemption from registration under the Securities Act, if available, or (iii) pursuant to an effective registration statement under the Securities Act, and in each of cases (ii) and (iii), in accordance with applicable securities laws of the states of the United States;

• (4) if it is purchasing Bonds prior to the expiration of 40 days after the later of the commencement of the offering and the latest closing date (the “ distribution compliance period ”), it is purchasing the Bonds in an offshore transaction meeting the requirements of Rule 903 or 904 of Regulation S and the Bonds will not be sold, pledged or otherwise transferred to, or for the account or benefit of, any U.S. person outside the United States or any person in the United States during the distribution compliance period;

• (5) it agrees to, and each subsequent holder is required to, notify any purchaser from it of a Bond or beneficial interest therein of the resale restrictions referred to in sections (3) and (4) above, if then applicable;

• (6) it understands that, except in the circumstances referred to under the heading “The Form of the Bonds”, the Bonds, and beneficial interests therein, will be represented by the Global Certificate (as defined herein);

• (7) it understands that the Global Certificate will bear a legend to the following effect (unless otherwise agreed by the Company):

“THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY JURISDICTION AND, ACCORDINGLY, MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED TO A U.S. PERSON OR WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT.

ii

THIS LEGEND MAY BE REMOVED AFTER THE EXPIRATION OF 40 DAYS FROM THE ORIGINAL ISSUANCE OF THE ZERO COUPON CONVERTIBLE BONDS DUE 2008 OF ICHIA TECHNOLOGIES, INC.” ; and

• (8) it acknowledges that the Company and the Managers and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements; and if it is acquiring the Bonds as a fiduciary or agent for one or more accounts, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account.

For further information about the requirements under the Indenture to effect exchanges or transfers of interests in the Global Certificate and of Bonds in certificated form, see “The Form of the Bonds”.

iii

ENFORCEABILITY OF FOREIGN JUDGMENT IN THE ROC

The Company is a company limited by shares incorporated under the ROC Company Law. All of the Company’s directors, executive officers, and supervisors, 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 the ROC, or to enforce against any of the judgments obtained in courts outside the ROC.

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 Bonds 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:

• the court rendering the judgment has jurisdiction over the subject matter according to the laws of the ROC;

• the judgment is not contrary to the public order or good morals of the ROC;

• the judgment is a final judgment for which the period for appeal has expired or from which no appeal can be made;

• if the judgment was rendered by default by the court rendering the judgment, the Company or such persons were served within the jurisdiction of such court, or process was served on the Company or such persons with judicial assistance of the ROC; and

• judgments of the courts of the ROC are recognized and enforceable in the court rendering the judgment on a reciprocal basis.

Judgment obtained in certain United States courts has been confirmed to be recognized and enforceable in the court of the ROC on a reciprocal basis.

A party seeking to enforce a foreign judgment in the ROC would be required to obtain foreign exchange approval from CBC for the payment out of the ROC of any amounts recovered in connection with the judgment denominated in a currency other than NT Dollars. See “Appendix A — Foreign Investment and Exchange Controls in the ROC”.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Offering Circular contains forward-looking statements that involve risks and uncertainties. Forward-looking terminology include “may”, “will”, “expect”, “anticipate”, “estimate”, “continue”, “believe”, “forecast”, “project” and other similar words. Statements that include such terminology are forward-looking statements. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of the risks and uncertainties faced by the Company described elsewhere in this Offering Circular. The Company undertakes no obligation after the date of this Offering Circular to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future which may affect information contained herein.

iv

TABLE OF CONTENTS

		TABL	**E OF **	CONTENTS
			Page			Page
Summary . . . . . . . . . .	.	. . . . . . . . . . . . . .	1	Description of the Shares . . . . . . . . . . .	. .	77
Risk Factors . . . . . . . .	.	. . . . . . . . . . . . . .	9	Taxation . . . . . . . . . . . . . . . . . . . . . . . .	. .	83
Use of Proceeds . . . . .	.	. . . . . . . . . . . . . .	18	Underwriting . . . . . . . . . . . . . . . . . . . .	. .	85
Market Price Information . . . . . . . . . . . . . Dividends and Dividend Policy . . . . . . . . . Exchange Rates . . . . . . . . . . . . . . . . . . . . Capitalization . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . .			19 20 22 23 25	Legal Matters . . . . . . . . . . . . . . . . . . . . Independent Auditors . . . . . . . . . . . . . . General Information . . . . . . . . . . . . . . . Summary of Significant Differences	. . . . . .	88 88 89
Business . . . . . . . . . . .	.	. . . . . . . . . . . . . .	27	between ROC GAAP and U.S. GAAP	. .	91
Management and Employees . . . . . . . . . . .			46	Index to Financial Statements . . . . . . . .	. .	F-1
Principal Shareholders	.	. . . . . . . . . . . . . .	50	Appendix A — Foreign Investment and
Changes in Issued Share		Capital . . . . . . . .	51	Exchange Controls in the ROC . . . . .	. .	A-1
Terms and Conditions of		the Bonds . . . . .	52	Appendix B — The Securities Market of
The Form of the Bonds	.	. . . . . . . . . . . . . .	74	The ROC . . . . . . . . . . . . . . . . . . . . . .	. .	B-1

CERTAIN DEFINED TERMS, CONVENTIONS AND CURRENCY OF PRESENTATION

Except where the context otherwise requires, all references herein to “ ICHIA ” are to Ichia Technologies, Inc. and all references to the “ Company ” are to ICHIA or ICHIA and its consolidated subsidiaries, as the context requires. All references herein to “ affiliate ” are to a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified, as these terms are defined in Rule 405 under the Securities Act. All references herein to “ Taiwan ” or the “ ROC ” are to the island of Taiwan and other areas under the effective control of the Republic of China. All references herein to the “ ROC Government ” or the “ ROC Company Law ” are references to the government of the Republic of China and the Company Law of the Republic of China, respectively. All references herein to “ ROC GAAP ” are to the “ Rules Governing Preparation of the Financial Statements of Securities Issuers ” and accounting principles generally accepted in the ROC and all references herein to “ U.S. GAAP ” are to accounting principles generally accepted in the United States. All references herein to the “ PRC ” or “ mainland China ” are to the People’s Republic of China and do not include Hong Kong, Macau or Taiwan. All references to the “ ROC SFC ” are to the Securities and Futures Commission of the ROC. All references to the “ CBC ” are to the Central Bank of China of the ROC. All references herein to the “ TSE ” are references to the Taiwan Stock Exchange. All references herein to the “ GTSM ” are references to The GreTai Securities Market (previously known as the ROC Over-the-Counter Securities Exchange).

The Company’s financial statements are prepared using ROC GAAP, and 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, including the United States, other than those in the ROC. The material differences between ROC GAAP and U.S. GAAP, as applicable to the Company are discussed under “Summary of Significant Differences Between ROC GAAP and U.S. GAAP”. Certain financial amounts presented herein may not correspond directly to the Company’s financial statements included elsewhere herein or may not add up due to rounding.

Except as otherwise indicated, all financial information set forth herein with respect to various members of the Company has been presented in New Taiwan Dollars.

The Company publishes its financial statements in New Taiwan Dollars, the lawful currency of the ROC. All references herein to “ New Taiwan Dollars ”, “ NT Dollars ” and “ NT$ ” are to New Taiwan Dollars; all references herein to “ United States Dollars ”, “ U.S. Dollars ” and “ U.S.$ ” are to United States Dollars; all references herein to “ C= ” are to Euros; all references herein to “ HK$ ” are to Hong Kong Dollars; all references to “ MYR ” are to Malaysia Ringgit; all references herein to “ RMB ” are to Renminbi; and all references herein to “ JP¥ ” are to Japanese Yen. All translations from New Taiwan Dollars to United States Dollars were made on the basis of the average of buying and

v

selling exchange rates in Taipei for cable transfers in NT Dollars per U.S. Dollar as certified by the Bank of Taiwan of NT$34.750 = U.S.$1.00 as of December 31, 2002, and of NT$34.745 = U.S.$1.00 as of March 31, 2003, with respect to information for the three months ended March 31, 2003. All amounts translated into United States Dollars as described above are unaudited and are provided solely for the convenience of the reader, 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, the above rates or at all. See “Exchange Rates”. The closing rate between the NT Dollar and the U.S. Dollar on August 14, 2003 was NT$34.435 = U.S.$1.00.

vi

SUMMARY

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

The Company

The Company is engaged in the manufacture and sale of conductive plastic and rubber keypads for electronic devices such as mobile phones, home and business telephones, pagers, remote controllers, calculators, game consoles, and personal digital assistants (“ PDAs ”). The Company also develops and manufactures metal dome and poly dome that are also critical components of mobile phones and many electronic devices. The Company believes that it is one of the major manufacturers of keypads and other critical components for mobile phones and other electronic devices in the world. The Company is positioning itself as a key supplier for a wide range of high-quality components and parts that are essentially required by manufacturers of mobile phones and other electronic devices.

The Company also designs and fabricates flexible printed circuits (“ FPC ”) with high density, lightweight, redundant circuitry for end use applications in the LCD panels of mobile phones, notebook computers, hard disc drives, and other compact electronic consumer goods such as camcorders, cameras, and car stereos. An FPC is built to bend, fold, twist, and wrap in extremely tight areas, which may benefit designers who face space restrictions.

The Company supplies its products on an OEM or ODM basis. “ OEM ” refers to an original equipment manufacturer who manufactures and sells equipment to its customers for re-branding and re-packaging; “ ODM ” refers to an original design manufacturer who not only manufactures but also designs the products. On both OEM and ODM basis, the products are manufactured without marking the Company’s name or trademark. The Company’s OEM/ODM customers consist of some of the most reputable and leading names in the industry, such as Alcatel, BenQ, Flextronics, Hyundai, Lucent, Motorola, Nokia, Nortel, Samsung SDI, Selectron, Sharp, Sony Ericcson, and TCL.

The Company’s strong expertise and extensive know-how in industrial and mechanical engineering place the Company at the technological forefront in its product markets. The in-house tooling fabrication capability gives the Company the ability to produce a range of products wider than those produced by its competitors. The Company’s strength in mechanical engineering and tooling fabrication also allows it to produce precision prototypes for new products according to customers’ accelerated schedules and market needs, making it possible for customers to meet their time-to-market requirements, and to ramp up production rapidly to commercial volumes. The Company believes that its ability to provide time-to-market system solutions by leveraging strong research and development capability and reliable product quality, together with technical know-how applied to large-scale production give it competitive advantages in an industry that is capital- and technology-intensive.

The Company currently owns six manufacturing facilities in Taiwan, Malaysia, Mexico and the PRC to produce keypad related products and FPC products. The plant in Taiwan carries the Company’s complete product line. One of the plants in the PRC is also capable of producing both keypad related products and FPC products. The other PRC plant, the Malaysia and Mexico plants are only designated to produce keypad related products.

Net sales of the Company have grown at a compound annual growth rate of 28.1% from NT$1,321.9 million in 2000 to NT$2,170.4 million (U.S.$62.5 million) in 2002. For the three months ended March 31, 2003, ICHIA recorded non-consolidated net sales of NT$529.2 million (U.S.$15.2 million) and net income of NT$81.7 million (U.S.$2.4 million), compared to NT$288.7 million and NT$72.4 million for the same period in 2002.

1

Competitive Strengths

The Company believes that the following strengths contribute to its competitive position in the relevant markets:

Strong industrial and manufacturing expertise

• Close relationships with key industry leaders

• Highly vertically-integrated production process

• Strong research and development programs

Experienced management team

Strategy

The Company’s principal business objective is to continue to increase its sales, cash flow, profitability and market share by pursuing the following key strategic initiatives:

Shift from OEM to ODM

• Continue research and development for higher value-added mobile phone parts and components

• Capitalize on superior manufacturing capabilities to extend scope of operations to offer module assembly solutions for mobile phone manufacturers

• Focus on high-growth markets

Expand production capacity and invest in new technology

Corporate and Other Information

ICHIA’s corporate headquarters and principal place of business are located at No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan, ROC. Its telephone number is 886-3-397-3345. Its web-site is www.ichia.com.tw. The information on its web-site is not part of this Offering Circular. The Trustee for the Bonds is J.P. Morgan Corporate Trustee Services Limited, whose office is located at Trinity Tower, 9 Thomas More Street, London E1W 1YT, England.

2

			The Offering
	Issuer.......................................................		Ichia Technologies, Inc.
	Bonds ......................................................		U.S.$40,000,000 Zero Coupon Convertible Bonds due
			2008 convertible into fully-paid common shares with a
			par value of NT$10 each of the Company.
	Issue Price ...............................................		1011⁄2%
	The Offering ............................................		The Bonds will not be offered or sold in the United
			States. The Bonds will be offered only in offshore
			transactions in reliance on Regulation S under the
			Securities Act. The Bonds may not be offered in the
			ROC.
	Closing Date ............................................		August 22, 2003
	Maturity Date ..........................................		August 22, 2008
	Status.......................................................		The Bonds will constitute direct, unconditional,
			unsecured and unsubordinated general obligations of the
			Company and will rank at least equally with all other
			outstanding and future unsecured	and unsubordinated
			general obligations of the Company.
	Interest ....................................................		No interest will be payable on the Bonds, except in
			certain circumstances where an event of default has
			occurred. See “Terms and Conditions of the Bonds —
			Events of Default”.
	Withholding Tax ......................................		Premium and interest (if any) payable on the Bonds to
			non-residents of the ROC is subject to a withholding tax
			in the ROC equal to 20% of the gross amount of such
			premium and interest (if any). The Company will gross
			up such amounts as will result in the receipt by the
			Bondholders of the net amounts after such withholding
			or deduction equal to the amounts which would
			otherwise have been receivable by them had no such
			withholding or deduction been required.
	Tax Redemption .......................................		The Company may redeem all, but not part, of the Bonds
			at their principal amount in the event of changes in ROC
			taxation which will result in additional costs to the
			Company. See “Terms and Conditions of the Bonds —
			Redemption, Purchase and Cancellation”.
	Negative Pledge .......................................		The Company will not create or permit to subsist
			security for the benefit of holders of any International
			Investment Securities (as defined herein) or for any
			guarantee thereof without granting equivalent security
			in respect of the Bonds. See “Terms and Conditions of
			the Bonds — Negative Pledge”.

3

Conversion............................................... Subject to prior redemption and as otherwise provided herein, the Bonds are convertible at any time on or after September 22, 2003 and prior to the close of business (at the place at which the Bond is deposited for conversion) on August 12, 2008, except during any Closed Period (as defined herein), into Shares or depositary receipts (“ DRs ”) (if available) at a conversion price (subject to adjustment in certain circumstances) (the “ Conversion Price ”) of NT$58.0 per Share, which is equivalent to U.S.$1.68 per Share, determined on the basis of a fixed exchange rate of NT$34.435 = U.S.$1.00. The Conversion Price will be subject to adjustment for, among other things, subdivision or consolidation of Shares, bonus issues of Shares, rights issues, distributions of stock dividends and other dilution events. Fractional Shares will not be issued or paid in cash, or by any other means. For a fuller description, see “Terms and Conditions of the Bonds — Conversion”. The Company shall as soon as practicable, and in any event within five Trading Days (as defined herein) from the date the notification of the Conversion Notice (as defined herein) is received by the Company or its domestic stock transfer agent from the Principal Agent (as defined herein), deliver to the local agent appointed by the converting Bondholder, and/or to the relevant custodian, as agent for the relevant DR Depositary (as defined herein) (if the converting Bondholder has the option under the Terms and Conditions of the Bonds to elect, and elects, to receive DRs), the relevant Shares, through book entry transfer to the account registered in the name of the converting Bondholder and established by the relevant local agent for the conversion of the Bonds, at the Taiwan Securities Central Depositary Co., Ltd. or physical delivery. Conversion Price Reset ............................ The Conversion Price shall be adjusted downward on February 28, 2004, February 28, 2005, February 28, 2006, February 28, 2007, and February 28, 2008 (the “ Reset Dates ” and each a “ Reset Date ”) in the event that the average closing price of the Shares on the TSE translated into U.S. Dollars at the then prevailing exchange rate for 30 consecutive Trading Days immediately prior to the relevant Reset Date is lower than the Conversion Price, converted into U.S. Dollars at the fixed exchange rate of NT$34.435 = U.S.$1.00; provided that the Reset Price (as defined herein) (on a cumulative basis, if applicable) shall not be less than 80% of the initial Conversion Price after anti-dilution adjustments, if any. See “Terms and Conditions of the Bonds — Conversion”.

4

	Alternative Conversion Price Reset ..........	Alternative Conversion Price Reset ..........	The Company may (but shall not be obliged to) grant the
			Bondholders the option, within a seven Trading-Day
			period starting from the date to be determined by the
			Company after July 22, 2005 and July 22, 2008, to
			convert the Bonds into Shares based on an Alternative
			Conversion Price equal to 90.9% and 90.9%,
			respectively, of the then Market Price (defined in
			Condition 6(E)), respectively. See “Terms and
			Conditions of the Bonds — Conversion — Alternative
			Conversion Price Reset”.
	Final Redemption.....................................		Unless previously redeemed, converted or repurchased
			and cancelled in the circumstances referred to in “Terms
			and Conditions of the Bonds”, the Bonds will be
			redeemed at their principal amount in U.S. Dollars on
			August 22, 2008. See “Terms and Conditions of the
			Bonds — Redemption, Purchase and Cancellation”.
	Redemption at the Option of the
	Company ..............................................		The Company may, having given not less than 30 days’
			nor more than 60 days’ notice to the Bondholders, call
			all, or part only, of the Bonds on or at any time after
			August 22, 2005 at their principal amount in the event
			that the closing price (as defined in Condition 8(B)) of
			the Shares on the TSE in U.S. Dollars, calculated at the
			prevailing exchange rate, for each of the 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 130% of the
			Conversion Price in effect on each such Trading Day
			translated into U.S. Dollars at the fixed exchange rate of
			NT$34.435 = U.S.$1.00. The Company may, at any time,
			redeem all of the Bonds, upon not less than 30 days’ nor
			more than 60 days’ notice to the Bondholders, at their
			principal amount if at least 90% in principal amount of
			the Bonds have already been redeemed, converted, or
			purchased and cancelled. See “Terms and Conditions of
			the Bonds — Redemption, Purchase and Cancellation —
			Redemption at the Option of the Company”.
	Redemption at the Option of
	Bondholders .........................................		Until and unless previously redeemed, converted or
			repurchased and cancelled, the Company will, at the
			Bondholder’s option, redeem all or part of the
			Bondholder’s Bonds at their principal amount on August
			22, 2005. See “Terms and Conditions of the Bonds —
			Redemption, Purchase and Cancellation — Redemption
			at the Option of Bondholders”.

5

	Form and Registration of the Bonds.........	Form and Registration of the Bonds.........	The Bonds will be issued in registered form, without
			coupons, in denominations of U.S.$1,000 or integral
			multiples thereof. The Bonds will initially be
			represented by a permanent global certificate (the
			“Global Certificate”) deposited with, and registered in
			the name of a nominee for, a common depositary for
			Euroclear and Clearstream Luxembourg. Beneficial
			interests in the Global Certificate will be shown on, and
			transfers thereof will be effected only through, records
			maintained by Euroclear and Clearstream, Luxembourg
			and their participants. Except as described herein,
			certificates for Bonds will not be issued in exchange for
			beneficial interests in the Global Certificate. See “The
			Form of the Bonds — Registration of Title”.
	Governing Law ........................................		The laws of the State of New York, the United States of
			America.
	Trustee.....................................................		J.P. Morgan Corporate Trustee Services Limited.
	Listing .....................................................		Application has been made to list the Bonds on the
			Luxembourg Stock Exchange. The Shares are listed on
			the TSE and application will be made for the Shares
			issuable upon conversion of the Bonds to be listed on the
			TSE.
	Use of Proceeds .......................................		The Company will use the net proceeds to purchase raw
			material outside Taiwan, purchase machines and
			equipment and for investment. See “Use of Proceeds”.

6

Summary Financial Information

The following table presents summary financial information for the Company. The summary consolidated financial information for the years ended December 31, 2000, 2001 and 2002 presented in this table are derived from the Company’s audited consolidated financial statements and notes thereto that are included elsewhere in this Offering Circular. The summary non-consolidated financial information for the three months ended March 31, 2002 and 2003 have been derived from the Company’s unaudited non-consolidated financial statements and notes thereto that are included elsewhere in this Offering Circular. The Company’s financial statements were prepared using ROC GAAP and 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 other countries and jurisdictions, including the United States and the United Kingdom. ROC GAAP differs in many material respects from U.S. GAAP. For a discussion of these differences, see “Summary of Significant Differences between ROC GAAP and U.S. GAAP” included elsewhere in this Offering Circular. The summary financial information set forth below should be read in conjunction with the Company’s financial statements and the notes to those statements included elsewhere in this Offering Circular.

		**Year ended **	**Year ended **	December 31,	December 31,		Three months ended March 31,	Three months ended March 31,	Three months ended March 31,	Three months ended March 31,
		2000	2001		2002	2002	2002		2003	2003
		NT$	NT$		NT$	U.S.$(1)	NT$		NT$	U.S.$(1)
			(consolidated, audited)				(non-consolidated, unaudited)
				**(in thousands, **		**except per **	Share data)
Statement of Income Data:
ROC GAAP
Net sales....................................		1,321,884	1,460,221		2,170,382	62,457	288,694		529,241	15,232
Cost of goods sold .....................		(721,177)	(918,127)		(1,402,579)	(40,362)	(209,052)		(394,000)	(11,340)
Gross profit ..............................		600,707	542,094		767,803	22,095	79,642		135,241	3,892
Total operating expenses ............		(251,798)	(260,204)		(288,202)	(8,294)	(46,165)		(61,270)	(1,763)
Operating income.......................		348,909	281,890		479,601	13,801	33,477		73,971	2,129
Non-operating income ................		63,388	75,576		41,133	1,184	75,303		44,684	1,286
Non-operating expenses .............		(30,949)	(61,985)		(90,506)	(2,604)	(15,370)		(16,917)	(486)
Income before tax ......................		381,348	295,481		430,228	12,381	93,410		101,738	2,929
Income tax ................................		(41,764)	(64,874)		(89,709)	(2,582)	(21,000)		(20,000)	(576)
Net income ................................		339,584	230,607		340,519	9,799	72,410		81,738	2,353
Consolidated net income ............		339,584	230,607		340,519	9,799	72,410		81,738	2,353
Per Share Data:
Earnings per Share — net
income (in dollars) ................		2.11(2)	1.37(2)		2.02(2)	0.06(2)	0.43(2)		0.48(2)	0.02(2)

7

			As of December 31,	As of December 31,		**As **	**As **	of March 31,
		2000	2001	2002	2002	2002		2003	2003
		NT$	NT$	NT$	U.S.$(1)	NT$		NT$	U.S.$(1)
			(consolidated, audited)			(non-consolidated, unaudited)
					(in thousands)
Balance Sheet Data:
ROC GAAP
Cash and cash equivalents..........		508,426	301,404	268,626	7,730	46,780		125,888	3,623
Current assets ............................		1,114,587	1,523,664	1,779,081	51,197	1,210,376		1,297,819	37,353
Working capital(3) ......................		524,341	1,075,569	964,295	27,750	796,297		531,200	15,289
Long-term investments ...............		130,254	268,844	360,040	10,361	948,453		1,450,310	41,742
Net property, plant and
equipment ..............................		1,268,321	1,489,539	1,830,365	52,672	1,198,559		1,321,207	38,025
Other assets ...............................		17,507	80,222	118,482	3,409	66,292		69,780	2,008
Total assets ................................		2,530,669	3,362,269	4,087,968	117,639	3,423,680		4,139,116	119,128
Current liabilities.......................		590,246	448,095	814,786	23,447	414,079		766,619	22,064
Long-term liabilities ..................		15,000	675,663	709,262	20,410	681,281		717,049	20,637
Other liabilities..........................		35,862	84,027	131,847	3,794	100,656		141,512	4,073
Total liabilities...........................		641,108	1,207,785	1,655,895	47,651	1,196,016		1,625,180	46,774
Stockholders’ equity ..................		1,889,561	2,154,484	2,432,073	69,988	2,227,664		2,513,936	72,354

• (1) Translated into United States Dollars using the average of buying and selling rates published by the Bank of Taiwan at December 31, 2002 of NT$34.750 = U.S.$1.00, and at March 31, 2003 of NT$34.745 = U.S.$1.00. Such translation amounts are unaudited and should not be construed as representations that the NT Dollar amounts were, or have been, or could be, converted into U.S. Dollars at that or any other rate.

• (2) Earnings per Share are calculated by dividing net income by the weighted average number of Shares outstanding during each year and each three-month period after adjusting retroactively for the effect of stock dividends of 27,540,000 shares and employees’ bonuses of 2,760,000 shares in 2003.

• (3) Working capital is equal to current assets less current liabilities.

8

RISK FACTORS

Prior to making an investment decision, prospective investors should carefully consider the following risk factors, along with the other matters set out in this Offering Circular. The following risk factors could affect the Company’s actual results and could cause them to differ materially from estimates in any forward-looking statements given by or on behalf of the Company. ROC laws and regulations may differ from the laws and regulations in other countries.

Risks Relating to the Company’s Business

The Company’s business is highly dependent on the mobile phone businesses.

The majority of the Company’s sales are made to customers in the mobile phone industry. Therefore, the Company’s financial performance depends on its customers’ continued growth, viability and financial stability. These customers in turn depend on the growth and viability of the mobile phone industry, which can be subject to pronounced cyclicality. This industry is characterized by rapidly changing technologies and short product life cycles. The factors affecting the mobile phone industry in general, or any of the Company’s major customers or competitors in particular, could have a material adverse effect on the Company’s results of operations. The Company’s success depends to a significant extent on the success achieved by its customers in developing and marketing their products, some of which may be new and untested. If customers’ products become obsolete or fail to gain widespread commercial acceptance, the Company’s business could be materially adversely affected.

The Company’s business depends on a limited number of customers.

For 2002, the Company’s largest customer and second largest customer accounted for approximately 13.1% and 3.6%, respectively, of consolidated net operating revenues, and for 2001 the Company’s largest customer accounted for approximately 16.9% of consolidated net operating revenues. For 2001 and 2002, no other customers accounted for 10% or more of consolidated net operating revenues. The Company estimates that for each of 2001 and 2002, its five largest customers accounted for approximately 30% of consolidated net operating revenues. The loss of one or more of the Company’s customers, or reduced orders by its key customers, could adversely affect the Company’s results of operations. See “— The Company does not usually enter into long-term supply contracts with its OEM customers and therefore some of its customers may cancel, reduce or postpone their orders”.

The Company may not be able to develop new products or keep pace with technological change.

The Company’s future success will depend in part on its ability to develop and market products and manufacturing processes which meet changing customer needs and to successfully anticipate or respond to technological changes in manufacturing processes in cost-effective and timely ways. Many of the Company’s products have short product life cycles due to frequent product introductions, rapidly changing technology and evolving industry standards. There can be no assurance that the Company will be successful in developing new products as a result of its research and development efforts or its cooperation with industry leaders or that it will keep pace with technological changes taking place in the market. Failure to do so or delay in reacting to the technological changes could have a material adverse effect on the Company’s business, or results of operations.

The mobile phone and consumer electronics components manufacturing industries are highly competitive.

The mobile phone and consumer electronics components manufacturing industry in which the Company operates is highly competitive and includes hundreds of companies with widely varying levels of engineering expertise and sophistication, some of which have achieved substantial market shares. General competition in the computers, communications and consumer electronics components manufacturing industry is characterized by price erosion and rapid technological change. The Company competes with different companies, depending upon the type of product and geographic area. The Company also faces competition from the manufacturing operations of its current and prospective customers, which continually evaluate the merits of manufacturing products internally. A

9

number of the Company’s competitors are much larger and have greater manufacturing, financial, research and development and marketing resources than the Company. Some of these competitors also carry product lines that the Company does not carry and provide services that the Company does not provide. No assurance can be given that the Company will be able to continue to compete successfully in its relevant markets.

The Company’s performance depends in part on its ability to maintain cost leadership in mobile phone and electronic device components production.

The Company currently aims to reduce the per unit costs of its keypads, dome and FPCs by maintaining a high sales volume, manufacturing in the PRC and managing the sourcing of raw material components. The Company believes that its current cost structure is very competitive compared with those of its competitors, and that it is therefore able to offer its products at competitive prices while generating satisfactory margins to sustain its operations. However, there can be no assurance that the Company will continue to be able to produce products at lower or even comparable prices as compared to its competitors in the future while maintaining its margins. Should the Company be unable for any reason to maintain its cost leadership in the future, the Company’s results of operations and financial condition would likely be materially and adversely affected.

The Company does not usually enter into long-term supply contracts with its OEM customers and therefore some of its customers may cancel, reduce or postpone their orders.

The Company does not generally enter into firm, long-term supply contract with its customers and it continues to experience reduced lead-times in customer orders. Customers may cancel their orders or change the size or timing of their orders for a number of reasons. Cancellations, reductions or postponements of purchase orders by a significant customer or by a group of customers could seriously adversely affect the Company’s results of operations.

In addition, the Company makes significant decisions, including determining the levels of business that it will seek and accept, production schedules, components and raw material procurement commitments, personnel needs and other resource requirements, based on its estimates of customer requirements. The short-term nature of the Company’s customers’ commitments and the possibility of rapid changes in demand for their products reduce the Company’s ability to estimate accurately future customer requirements. On occasion, customers may require rapid increases in production, which can stress the Company’s resources. Although the Company has increased its manufacturing capacity and plans further capacity increases, it may not have sufficient capacity at any given time to meet its customers’ demands. In addition, because many of the Company’s costs and operating expenses are relatively fixed, a reduction in customer demand could impact the Company’s gross margins and operating income.

The Company’s operating results vary significantly.

The Company experiences significant fluctuations in its results of operations. The factors which contribute to fluctuations include:

• the timing of customer orders;

• the volume of these orders relative to the Company’s capacity;

• market acceptance of customers’ new products;

• changes in demand for customers’ products and product obsolescence;

• the timing of the Company’s expenditure in anticipation of future orders;

• the Company’s effectiveness in managing manufacturing processes;

• changes in the cost and availability of labor and components;

• changes in the Company’s product mix;

10

changes in economic conditions; and

• local factors and events that may affect the Company’s production volume, such as local holidays.

The markets for the Company’s customers’ products are subject to a certain degree of seasonality. These markets exhibit particular strength toward the end of each year in connection with holiday season sales. Accordingly, the Company’s third- and fourth-quarter revenues are ordinarily higher, and its first- and second-quarter sales are ordinarily lower, than average.

The Company may experience shortages of raw materials and components.

The Company currently purchases certain of its key components and raw materials from a limited number of suppliers. These suppliers’ capacity may be insufficient should the Company’s requirements increase. In addition, the Company is, in certain circumstances, required to source certain key components from suppliers who have been qualified by its customers and the Company may not be able to obtain alternative satisfactory sources of supply should such qualified suppliers be unable to supply it in the future. Accordingly, there can be no assurance that shortages of supply will not occur in the future and that, if such shortages occur, the Company will be able to obtain an adequate alternative supply of components and raw materials to meet production demand. If the Company is unable to obtain sufficient components and raw materials on a timely basis, the Company could experience manufacturing and shipping delays, which could adversely affect customer relationships and reduce sales. In addition, there can be no assurance that the Company would be able to pass on increased costs of components and raw materials to its customers. See “Business — Raw Materials”.

The Company is subject to operational risks and its insurance may not be adequate.

The operation of manufacturing facilities involves many risks and hazards, including the breakdown, failure or substandard performance of equipment, delay in delivery of equipment or improper installation or operation of equipment, difficulties in upgrading or expanding existing facilities in changing manufacturing line technologies, capacity constraints, labor disturbances, fire, natural disasters such as earthquakes or typhoons, environmental hazards and industrial accidents. The occurrence of material operational problems, including but not limited to the above events, could adversely affect the Company’s manufacturing plants. These problems could cause delivery delays and reduced output.

The Company maintains insurance typical in the electronics manufacturing industry in Taiwan and the PRC and in amounts that the Company believes to be adequate. Such insurance, however, may not provide adequate coverage in certain circumstances. In particular, in accordance with industry practice in the PRC, the Company does not currently carry any third party liability insurance to cover claims in respect of bodily injury or property or environmental damage resulting from accidents on the Company’s property or relating to Company operations. Nor does the Company carry business interruption insurance. No assurance can be given that uninsured losses and liabilities incurred by the Company will not have a material adverse effect on the Company’s results of operations.

The Company may be unable to manage its growth effectively.

The Company has grown rapidly. The Company’s ability to manage growth effectively will require it to continue to implement and improve its operational, financial and management systems; continue to develop the management skills of its managers; and continue to train, motivate and manage its employees. If the Company fails to manage growth effectively, the Company’s results of operations could be adversely affected.

The Company is dependent on its ability to attract and retain qualified employees.

The Company’s success depends to a significant extent on the skills and efforts of key managerial and technical and other employees and upon its ability to continue to attract, retain and motivate qualified personnel. The Company competes with other electronics manufacturers as well as other manufacturing companies for technical and other employees, and the competition for such

11

employees is intense. There can be no assurance that the Company will be able to continue to attract and retain the services of qualified employees essential for the Company’s growth. The loss of the services of certain of these employees or an inability to attract or retain qualified employees could have a material adverse effect on the Company.

The Company may not be able to protect its intellectual property.

The Company has proprietary intellectual property rights and information with respect to certain of its products and manufacturing processes. Accordingly, the Company has taken appropriate steps to protect this proprietary information and actively seeks to protect its intellectual property rights. Notwithstanding these steps, the Company’s protective measures may not be sufficient to prevent the misappropriation or unauthorized disclosure of the Company’s property or information. There can be no assurance that the Company will be successful in its intellectual property enforcement actions. Even if the Company is successful, it may have to incur significant costs and time to litigate its claims.

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 advantage to the Company. Moreover, there can be no assurance that any patent rights will be upheld in the future.

Certain existing shareholders have a significant influence on the Company, and the interests of these shareholders may be inconsistent with the interests of the other shareholders.

As of July 31, 2003, ICHIA’s directors and supervisors owned approximately 22.5% of ICHIA’s outstanding Shares. While no person, so far as is known to the Company, directly or indirectly, jointly or severally, exercises or could exercise control over the Company, the Company’s directors and supervisors have and will continue to have the ability to exercise a significant influence over the Company’s business and policy, including the matters relating to the management and policies, the timing and distribution of dividends and the election of the directors and supervisors of the Company. This influence may be exercised in a way that may not be consistent with the interests of other shareholders.

The Company’s historical sales growth and historical margins may not be sustainable.

The Company recorded sales growth of 34.6%, 10.5% and 48.6% for the years 2000, 2001 and 2002, respectively. This level of sales growth may not be sustained in future periods. As the Company continues to develop and expand its operations and production capacity, its operating costs and expenses will continue to increase, putting pressure on gross margins and operating margins. Gross margins decreased to 35.4% in 2002, compared to 37.1% in 2001. In addition, competition could result in price pressure, lower sales, reduced margins and lower market share, any of which could materially and adversely affect the Company’s results of operations. Therefore, period-to-period comparisons of operating results may not be meaningful and investors should not rely on the results of any period as an indication of future performance.

The Company’s failure to comply with environmental regulations could expose it to liability.

The FPC manufacturing process requires the use of a variety of materials, including metals and chemicals. Water used in the FPC manufacturing process must be treated to remove metal particles and other contaminants before it can be discharged into the environment. As a result, the Company is required to comply with environmental regulations in Taiwan regarding environmental protection, including those governing the storage, use, discharge and disposal of hazardous substances in the ordinary course of the Company’s manufacturing processes. Environmental claims or the failure to comply with any environmental regulations could result in damages or fines against the Company or suspension of production. The Company may be required by new regulations to acquire costly equipment or to incur other significant expenses. If the Company fails to control the use of hazardous substances, it could incur future liabilities, including clean up costs.

12

The Company is exposed to the risks of currency exchange rate fluctuations.

Historically, a majority of the operating costs and expenses of the Company have been denominated in U.S. Dollars and NT Dollars and the Company’s revenue has been denominated primarily in NT Dollars and U.S. Dollars. Accordingly, a portion of the Company’s consolidated costs of sales, operating expenses and revenues are exposed to fluctuations between the U.S. Dollar and NT Dollar. Therefore, fluctuations in exchange rates may have an adverse impact on the Company’s future gross and operating margins and results of operations. See “Exchange Rates”.

The Company may be subject to changes in tax benefits and increased taxes.

The Company has structured its operations in a manner designed to maximize income in countries where tax incentives have been extended to encourage foreign investment, such as the PRC or where income tax rates are low. If the tax rates and policies applicable to the Company are rescinded or changed or if tax authorities were to challenge successfully the manner in which profits are recognized among the members of the Company, the Company’s taxes could increase and its results of operations and cash flow could be adversely affected.

Risks Relating to the Offering

The Bondholders’ ability to exercise their conversion rights may be limited.

The Bonds are convertible into Shares at the option of the converting Bondholders pursuant to the terms of the Bonds. Purchasers of the Bonds will not be able to exercise their conversion right during the Closed Periods, as defined in the terms and conditions of the Bonds. Under current ROC law, regulations and policy, PRC persons are not permitted to hold or convert the Bonds or to register as shareholders of the Company.

The Company has not, at the date of this Offering Circular, established or authorized the establishment of any depositary receipt (“ DR ”) facility. Accordingly, conversion into DRs is not currently available. If in the future a DR facility is established or authorized (in either case to be listed on a recognizable stock exchange), the Company may, to the extent permitted by applicable laws and regulations, make arrangements satisfactory to the Trustee for the Shares issued on conversion of Bonds to be accepted for deposit (at the option of the converting Bondholder) into such DR 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 the Shares issued on conversion of Bonds. There can be no assurance that the Company will in the future establish or authorize any DRs or that any arrangements for the deposit of Shares into such DRs would be available to all Bondholders.

Transfers of the Bonds and Shares are restricted.

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

An active trading market for the Bonds may not develop.

The Bonds 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 Bonds will develop or be sustained. If an active trading market were to develop, the Bonds could trade at prices that may be lower than the initial offering price. Whether or not the Bonds could trade at lower prices depends on many factors, including:

prevailing interest rates and the markets for similar securities;

the price of the Company’s Shares;

13

general economic conditions; and

the Company’s financial condition, historic financial performance and future prospects.

If an active market for the Bonds fails to develop or be sustained, the trading price of such Bonds could be materially adversely affected. Application has been made to have the Bonds 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 Company does not intend to apply for listing of the Bonds on any securities exchange other than the Luxembourg Stock Exchange. The Bonds may not be publicly offered, sold, pledged or otherwise transferred in any jurisdiction where registration may be required.

Shares eligible for future sale by the current shareholders may adversely affect the market price of the Shares.

While the Company is not aware of any plans by any major shareholders to dispose of a significant amount of Shares, it cannot assure that one or more of the shareholders will not dispose of the Shares in the future. The Company also cannot predict the effect, if any, that future sales of the Shares, or the availability of the Shares for future sale, will have on the market price of the Shares prevailing from time to time. Sales of substantial amounts of common shares in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of the Shares.

A Bondholder or its designee requesting the conversion of the Bonds into the Shares may be required to provide certain information to the Company, and failure to provide such information may result in a delay of the conversion.

A Bondholder or its designee requesting the conversion of the Bonds into Shares may be required to provide certain information to the Company or the Conversion Agent, including the names and nationality of the person to be registered as the shareholder and the number of Shares to be acquired by such person and the number of Shares acquired by such person in the past through the date of conversion of the Bonds. Under applicable ROC laws, the Company is required to report to the ROC SFC if the person to be registered as a shareholder (1) is a “related party” of the Company as defined in the ROC Statement of Financial Accounting Standard No. 6, or (2) will hold, immediately following such conversion, more than 10% of the total number of our Shares outstanding. Failure to provide such information may result in a delay of the conversion of the Bonds.

Holders of the Bonds will be required to appoint several local agents in Taiwan if they convert the Bonds into Shares, which may make ownership burdensome.

Non-ROC Bondholders wishing to convert the Bonds into Shares are required under current ROC laws and regulations to appoint an agent, called 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 Bondholders’ ROC tax obligations. Bondholders wishing to repatriate profits derived from the sale of Shares received upon conversion or cash dividends or interest derived from any such 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. There is no assurance that Bondholders will be able to appoint and obtain approval for a tax guarantor in a timely manner.

In addition, under current ROC law, non-ROC Bondholders who exercise their conversion rights to receive 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 and declaration of information. Without a local agent, a custodian and the opening of a trading account, the Bondholders will not be able to hold, sell or otherwise transfer Shares.

14

Holders of the Bonds will bear the risk of fluctuations in the price of the Company’s Shares.

The market price of the Bonds at any time will be affected by fluctuations in the price of the Company’s Shares. It is impossible to predict whether the price of the Company’s Shares will rise or fall. Trading prices of the Company’s 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 Shares are traded and the financial services market in Taiwan. Any decline in the price of the Company’s Shares would adversely affect the secondary market price of the Bonds.

Holders of the Bonds will have no rights as shareholders until they acquire the Shares upon conversion of the Bonds.

Unless and until the Bondholders acquire the Shares upon conversion of the Bonds, the Bondholders will have no rights with respect to the Company’s Shares, including any voting rights or rights to receive any regular dividends or other distributions with respect to the Shares. Bondholders who acquire the Company’s Shares upon exercise of a Conversion Right (as defined in the terms and conditions of the Bond) will be entitled to exercise the rights of shareholders only as to actions for which the applicable record date occurs after the Conversion Date (as defined in the terms and conditions of the Bond).

Fluctuations in the exchange rate between the NT Dollar and the U.S. Dollar may have a material adverse effect on the value of the Bonds in U.S. Dollar terms.

Although the principal amount of the Bonds is denominated in U.S. Dollars, the Company’s Shares are listed on the TSE, which quotes and trades the Company’s 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 Bonds and the U.S. Dollar equivalent of the Company’s Shares received upon conversion of the Bonds.

Risk Relating to Shares

Sales of a significant portion of the Company’s Shares may adversely affect the price of the Bonds and the Shares.

The market price of the Bonds and the Shares could decline as a result of the sale of large number of the Shares after this offering or the perception that such sales could occur. If the major shareholders of the Company sell a large number of the Company’s Shares after this offering, the market price of the Bonds and the Shares may be depressed and the value of the investment could be substantially decreased.

Further issuance of Shares, including pursuant to stock dividends, employee stock bonuses and employee stock options, could dilute the holdings and associated rights with respect to the Shares.

The Articles of Incorporation of the Company provide that, if and when it distributes the dividends and employee bonuses, the Company may distribute dividends in form of stock and the Shares as employee bonuses. In addition, the Company has implemented an employee stock option plan pursuant to which the Company’s employees may exercise options to purchase up to 9,710,000 Shares starting from March 2004. Such distribution to the Company’ shareholders and employees or further issuance of new Shares will effectively dilute the holdings and associated rights of the Bondholders who convert the Bonds into Shares.

Risks Relating to the ROC

Disruptions in the ROC’s political environment could seriously harm the Company’s business.

The Company’s principal executive office and a substantial portion of its assets are located in Taiwan and most of its net operating revenues are derived from the operations in the ROC.

15

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 ROC which are outside of the Company’s control.

The ROC has a unique international political status. The PRC asserts sovereignty over mainland China and Taiwan and does not recognize the legitimacy of the ROC government. The ROC government resists sovereignty of the PRC and holds the ROC as a state with full sovereign power equal to the PRC’s. Although significant economic and cultural relations have been established in recent years between the ROC and the PRC, the government in the PRC has refused to renounce the possibility that it may at some point use force to gain control over the ROC. Relations between the ROC and the PRC and aspects of the ROC’s political environment could negatively affect the Company’s business and the market price of the Shares.

The imposition of foreign exchange restrictions may have an adverse effect on foreign investors’ ability to acquire ROC securities, including the Bonds 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 restrictions may require foreign investors to obtain the ROC government’s approval before acquiring ROC securities or repatriating the interest or dividends from 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 Bonds.

The value of the Bonds and the Company’s Shares may be adversely affected by the volatility of the Taiwan securities market.

The Taiwan securities market is smaller and more volatile than the securities markets in the United States and in certain European and other countries. The TSE and the GTSM have experienced substantial fluctuations in the prices and trading volumes of listed securities, and there are currently limits on the range of daily price movements on the TSE and the GTSM. From time to time, the ROC regulatory agencies have intervened in the Taiwan stock market during periods of extreme volatility. In the past decade, the TSE Index peaked at 10,393.59 in February 2000, and reached a low of 3,411.68 in September 2001. During 2002, the TSE Index peaked at 6,462.3 on April 19, 2002, and reached a low of 3,850.0 on October 11, 2002. In addition, the TSE and the GTSM have experienced problems such a market manipulation, insider trading and payment defaults. The recurrence of these or similar problems could adversely affect the market price and liquidity of the securities of Taiwan companies, including our Common Shares. For more information, please see “Appendix B — The Securities Markets of the ROC”.

Foreign exchange approvals may be required.

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 from NT Dollars into foreign currencies in connection with the proceeds from the sale of subscription rights for newly issued Shares if the proceeds are in excess of U.S.$100,000 per remittance. Although such approvals have been routinely granted in the past, there can be no assurance that in the future any such approvals will be obtained in a timely manner or at all. 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 “Appendix B — Foreign Investment and Exchange Controls in the ROC — Overseas Corporate Bonds”.

16

Financial reporting and accounting standards in the ROC differ from other countries.

The Company is subject to financial reporting requirements in the ROC that differ in significant respects from those applicable to companies in certain other countries including the United States. In addition, the Company’s financial statements are prepared in accordance with the ROC GAAP, which differ in certain material respects from U.S. GAAP. See “Summary of Significant 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 contained herein.

Risks relating to the PRC

The Company is subject to the political and economic situation and legal developments in the PRC.

Currently a substantial part of the Company’s operations and assets are located in the PRC and the Company expects to make further investments in the PRC in the future. The Company is also selling and marketing its products in the PRC. Accordingly, financial condition, results of operations and future prospects of the Company are subject, to a significant degree, to the political and economic situation and legal developments in the PRC. Prior to 1978, the PRC had adopted a central economic planning system. All production and economic activities in the country were governed by the economic goals set out in the five-year plans and annual plans adopted by central authorities. Since 1978, the PRC government has permitted foreign investment and implemented economic reforms, gradually changing from a planned economy towards a market-oriented 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 substantial business in the PRC, including the Company.

The Company is subject to risks associated with the PRC legal system.

Since 1979, many laws and regulations dealing with general economic matters or particular economic activities have been promulgated in the PRC. However, enforcement of existing laws and regulations may be uncertain and sporadic and implementation and interpretation thereof may be inconsistent. The PRC judiciary is relatively inexperienced in enforcing the laws and regulations that currently exist, leading to a degree of uncertainty as to the outcome of any litigation. Further, it may be difficult to obtain swift and equitable enforcement or to obtain enforcement of a judgment by a court of another jurisdiction. The PRC’s legal system is based on written statutes and, therefore, decided legal cases do not have binding legal effect, although they are often followed by judges as guidance. The introduction of new PRC laws and regulations and the interpretation of existing laws and regulations may be subject to policy changes reflecting domestic political or social changes. As the PRC legal system develops, there can be no assurance that changes in such legislation or interpretation thereof will not have a material adverse effect on the business, financial condition, results of operations and future prospects of the Company.

17

USE OF PROCEEDS

The net proceeds from the offering are approximately U.S.$39,718,000. The Company will use the net proceeds to purchase raw material outside Taiwan, purchase machines and equipment and for investment.

18

MARKET PRICE INFORMATION

The Shares have been listed on the TSE since 2000. The table below sets forth, for the periods indicated, the high and low closing prices and the average daily volume of trading activity on the TSE for the Shares (adjusted for the effects of rights issues, employee bonus issues and stock dividends) and the high and low of the daily closing values of the TSE Index.

2000 (listed on January 14) ................. 2001 January............................................ February.......................................... March.............................................. April ............................................... May ................................................ June ................................................ July ................................................. August ............................................ September ....................................... October ........................................... November........................................ December ........................................ 2002 January............................................ February.......................................... March.............................................. April ............................................... May ................................................ June ................................................ July ................................................. August ............................................ September ....................................... October ........................................... November........................................ December ........................................ 2003 January............................................ February.......................................... March.............................................. April ............................................... May ................................................ June ................................................ July ................................................. August (through 14). .......................	Closing Price per Share	Closing Price per Share	Average Daily Trading Volume	TSE Index	TSE Index
	High	Low	(inthousands	High	Low
	(NT$) 143.17 35 52.50 42.42 57.53 46.93 55.41 44.01 63.37 50.37 62.31 36.32 46.13 35.34 37.82 30.96 38.52 24.46 25.09 17.32 24.39 19.58 34.85 25.45 40.65 34.78 42.41 33.58 36.96 30.96 41.35 32.87 48.77 40.65 37.46 44.18 41.00 31.95 40.55 31.81 42.97 33.80 41.95 37.26 38.98 34.30 42.36 34.38 44.41 34.54 37.83 34.13 36.67 34.30 35.28 31.25 34.21 29.28 34.71 29.61 44.82 33.89 51.00 43.18 52.50 47.50		of Shares) 1,352 1,990 4,115 1,954 2,442 2,472 1,831 4,153 3,527 5,674 6,374 10,301 8,723 7,996 4,135 6,010 5,495 2,752 2,219 5,056 4,621 4,367 5,661 6,838 3,556 2,165 1,442 1,520 2,960 1,773 5,844 4,643 3,523	10,202.20 5,936.20 6,104.24 5,896.32 5,608.50 5,405.54 5,271.30 4,886.86 4,687.33 4,493.53 4,065.10 4,608.32 5,551.24 6,007.33 5,968.61 6,242.64 6,462.30 5,710.69 5,599.42 5,416.50 4,968.55 4,668.01 4,601.37 4,813.53 4,823.67 5,078.80 4,833.58 4,599.25 4,658.30 4,555.90 5,048.71 5,451.80 5,442.27	4,614.63 4,894.79 5,674.69 5,499.54 5,353.50 4,958.61 4,768.55 4,040.77 4,310.32 7,493.78 3,446.26 3,929.67 4,646.61 5,488.33 5,499.79 5,680.78 6,059.21 5,443.18 5,071.76 4,855.34 4,592.35 4,185.95 3,150.04 4,500.55 4,452.45 4,524.87 4,432.46 4,260.45 4,139.50 4,187.82 4,678.08 5,017.78 5,214.60

Sources: TSE

On August 14, 2003, the reported closing price of the Shares was NT$51.5 per Share and the TSE Index closed at 5,436.75.

19

DIVIDENDS AND DIVIDEND POLICY

The Company has paid cash and stock dividends on the Shares since 1995. In fiscal year 2003, a stock dividend of NT$2.0 per Share for fiscal year 2002 were approved at the Company’s annual meeting of shareholders held on April 15, 2003.

The following table sets forth the aggregate number of outstanding Shares entitled to dividends, as well as the stock dividends paid during each of the years indicated. The stock dividends per Share represent dividends paid in the fiscal year for the Shares outstanding on the record date applicable to the payment of these dividends.

Year 1997 ...................................................................................... 1998 ...................................................................................... 1999 ...................................................................................... 2000 ...................................................................................... 2001 ...................................................................................... 2002 ...................................................................................... 2003 ......................................................................................	Stock dividends per Share(1) (NT$) 2.20 3.25 3.50 2.50 3.10 1.50 2.00	Total Shares issued as stock dividends (in thousands) 3,652 9,750 15,400 17,500 27,326 17,700 27,540	Outstanding Shares at year end
			(in thousands) 30,000 44,000 60,000 88,150 118,000 137,700 168,000

• (1) Holders of Shares received as a stock dividend the number of Shares equal to the NT Dollar value per Share of the dividend declared multiplied by the number of Shares owned and divided by the par value of NT$10 per Share. Fractional Shares are not issued but are paid in cash.

The Company has historically paid stock dividends on the Shares with respect to the preceding year after approval by the shareholders at the annual general meeting of shareholders. The form, frequency and amount of future cash or stock dividends on the Shares will depend upon the Company’s capital expenditure in the future, long term financial plan, the shareholders’ intent, internal and external environments and other factors.

Under the ROC Company Law, except under certain limited circumstances, an ROC company is not permitted to distribute dividends or make any other distributions to shareholders in any year in which the Company has no earnings.

The ROC Company Law also requires that 10% of the Company’s annual earnings, less prior years’ losses, if any, and outstanding tax, should be set aside as a legal reserve until the accumulated legal reserve equals the paid-in capital. The Company may set aside a special reserve in accordance with applicable laws and regulations. The Articles of Incorporation of the Company provide that the Company may, after paying all taxes, making up prior years’ losses, setting aside 10% of the remaining earnings as a legal reserve and setting aside a special reserve in accordance with Article 41 of the ROC Securities and Exchange Law, upon approval of the shareholders’ meeting, distribute the remaining portion of the earnings as follows:

• 5% to 10% as employee bonuses;

• not more than 3% as remuneration for directors and supervisors; and

• shareholders’ dividends.

20

The Articles of Incorporation of the Company also provide that the shareholders’ dividends shall be no less than 60% of the distributable earnings of that year, of which distribution of stock dividends will be prioritized and not more than 50% of distributable earnings of that year shall be distributed in the form of cash in principle. Furthermore, employee bonuses in the form of Shares may be distributed to the employees of the Company or certain employees of the Company’s subsidiaries who are qualified under the conditions set forth by the board of directors of the Company.

21

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 Shares on the TSE and, as a result, may affect the market price of the Bonds.

The following table shows the exchange rates for New Taiwan Dollars expressed in New Taiwan Dollars per U.S.$1.00.

1999 ............................................................. 2000 ............................................................. 2001 ............................................................. 2002 January ..................................................... February ................................................... March ....................................................... April ........................................................ May .......................................................... June ......................................................... July .......................................................... August ...................................................... September ................................................ October .................................................... November ................................................. December ................................................. 2003 January ..................................................... February ................................................... March ....................................................... April ........................................................ May .......................................................... June ......................................................... July .......................................................... August (through August 12).......................	Average 32.27 31.23 33.80 35.02 35.06 35.01 34.90 34.44 33.96 33.39 33.96 34.56 34.95 34.70 34.85 34.60 34.78 34.71 34.82 34.71 34.62 34.40 34.43	High 33.24 33.20 35.16 35.10 35.13 35.09 35.00 34.60 34.16 33.87 34.24 34.99 35.17 34.86 34.95 34.81 34.85 34.79 34.94 34.80 34.70 34.58 34.47	Low 31.46 30.28 32.27 34.89 34.96 34.92 34.72 34.02 33.53 32.94 33.66 34.11 34.76 34.41 34.75 34.46 34.74 34.60 34.76 34.62 34.52 34.25 34.38	At period-end
				31.46 33.08 34.95 34.96 35.11 35.00 34.72 34.13 33.53 33.75 34.24 34.92 34.76 34.81 34.75 34.69 34.75 34.745 34.85 34.71 34.61 34.41 34.38

Source: the Bank of Taiwan

On August 14, 2003, the closing rate between the NT Dollar and the U.S. Dollar was NT$34.435 = U.S.$1.00.

22

CAPITALIZATION

The following table sets forth the short-term and long-term debt and the capitalization of the Company as at December 31, 2002 on a consolidated basis, as adjusted to reflect the issuance of the Bonds as determined under ROC GAAP. This table should be read in conjunction with the Company’s consolidated financial statements for the year ended and as at December 31, 2002 included elsewhere in this Offering Circular, which were prepared in accordance with ROC GAAP and which may differ in material respects from U.S. GAAP or the generally accepted accounting principles of certain other countries. See “Summary of Significant Differences between ROC GAAP and U.S. GAAP”.

Short-term debt: (including current portion of long-term debt) Short-term loans ................................................................ Current portion of long-term loans..................................... Total short-term debt.......................................................... Long-term debt: Long-term loans, less current portion ................................. Bonds payable ................................................................... Total long-term debt .......................................................... The Bonds now being issued............................................ Stockholders’ equity: Common stock .................................................................. Capital surplus .................................................................. Legal reserve .................................................................... Special reserve ................................................................. Unappropriated earnings .................................................... Cumulative translation adjustments .................................... Total Stockholders’ equity ................................................ Total consolidated capitalization .......................................	As at December 31, 2002	As at December 31, 2002	As at December 31, 2002	As at December 31, 2002
	Actual As adjusted NT$ U.S.$(1) NT$ U.S.$(1) (in thousands) 190,423 5,480 190,423 5,480 1,592 46 1,592 46		As adjusted
	NT$ 190,423 1,592			U.S.$(1) 5,480 46
	192,015	5,526	192,015	5,526
	1,192 708,070	34 20,376	1,192 708,070	34 20,376
	709,262 —	20,410 —	709,262 1,390,000	20,410
				40,000
	1,377,000 571,016 100,380 359 349,191 34,127	39,626 16,432 2,889 10 10,049 982	1,377,000 571,016 100,380 359 349,191 34,127	39,626 16,432 2,889 10 10,049 982
	2,432,073 1,377,000	69,988 39,626	2,432,073 1,377,000	69,988
				39,626

(1) New Taiwan Dollar amounts have been translated into U.S. Dollars (and the principal amount of the Bonds, being U.S.$40,000,000) using the average of buying and selling exchange rates published by the Bank of Taiwan at December 31, 2002 of NT$34.750 = U.S.$1.00 solely for the convenience of the reader.

23

The following table sets forth the non-consolidated short-term and long-term debt and the capitalization of the Company as at March 31, 2003 and as adjusted to reflect the issuance of the Bonds.

Short-term debt: Short-term loans ................................................................ Total short-term debt.......................................................... Long-term debt: Bonds payable ................................................................... Total long-term debt .......................................................... The Bonds now being issued............................................ Stockholders’ equity: Common stock .................................................................. Capital surplus .................................................................. Legal reserve .................................................................... Special reserve ................................................................. Unappropriated earnings .................................................... Cumulative translation adjustments .................................... Total Stockholders’ equity ................................................ Total consolidated capitalization .......................................	As at March 31, 2003	As at March 31, 2003	As at March 31, 2003	As at March 31, 2003
	Actual As adjusted NT$ U.S.$(1) NT$ U.S.$(1) (in thousands) 112,374 3,234 112,374 3,234 112,374 3,234 112,374 3,234		As adjusted
	NT$ 112,374 112,374			U.S.$(1) 3,234
				3,234
	717,049	20,637	717,049	20,637
	717,049 —	20,637 —	717,049 1,389,800	20,637
				40,000
	1,377,000 571,016 100,380 359 430,929 34,252	39,632 16,434 2,889 10 12,403 986	1,377,000 571,016 100,380 359 430,929 34,252	39,632 16,434 2,889 10 12,403 986
	2,513,936 1,377,000	72,354 39,632	2,513,936 1,377,000	72,354
				39,632

(1) New Taiwan Dollar amounts have been translated into U.S. Dollars (and the principal amount of the Bonds, being U.S.$40,000,000) using the average of buying and selling exchange rates published by the Bank of Taiwan at March 31, 2003 of NT$34.745 = U.S.$1.00 solely for the convenience of the reader.

Except as set forth above, there has been no material change in consolidated capitalization of the Company since December 31, 2002, nor has there been any material changes in non-consolidated capitalisation of ICHIA since March 31, 2003.

24

SELECTED FINANCIAL DATA

The following table presents selected financial data for the Company. The selected consolidated financial data for the years ended December 31, 2000, 2001 and 2002 presented in this table are derived from the Company’s audited consolidated financial statements and notes thereto that are included elsewhere in this Offering Circular. The selected non-consolidated financial information for the three months ended March 31, 2002 and 2003 have been derived from the Company’s unaudited non-consolidated financial statements and notes thereto that are included elsewhere in this Offering Circular. The Company’s financial statements were prepared using ROC GAAP and 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 other countries and jurisdictions, including the United States and the United Kingdom. ROC GAAP differs in many material respects from U.S. GAAP. For a discussion of these differences, see “Summary of Significant Differences between ROC GAAP and U.S. GAAP” included elsewhere in this Offering Circular. The selected financial data set forth below should be read in conjunction with the Company’s financial statements and the notes to those statements included elsewhere in this Offering Circular.

	**Year ended **	**Year ended **	December 31,	December 31,		Three months ended March 31,	Three months ended March 31,	Three months ended March 31,
	2000	2001		2002	2002	2002	2003	2003
	NT$	NT$		NT$	U.S.$(1)	NT$	NT$	U.S.$(1)
		(consolidated, audited)				(non-consolidated, unaudited)
			**(in thousands, **		**except per **	Share data)
Statement of Income Data:
ROC GAAP
Net sales....................................	1,321,884	1,460,221		2,170,382	62,457	288,694	529,241	15,232
Cost of goods sold .....................	(721,177)	(918,127)		(1,402,579)	(40,362)	(209,052)	(394,000)	(11,340)
Gross profit ..............................	600,707	542,094		767,803	22,095	79,642	135,241	3,892
Total operating expenses ............	(251,798)	(260,204)		(288,202)	(8,294)	(46,165)	(61,270)	(1,763)
Operating income.......................	348,909	281,890		479,601	13,801	33,477	73,971	2,129
Non-operating income ................	63,388	75,576		41,133	1,184	75,303	44,684	1,286
Non-operating expenses .............	(30,949)	(61,985)		(90,506)	(2,604)	(15,370)	(16,917)	(486)
Income before tax ......................	381,348	295,481		430,228	12,381	93,410	101,738	2,929
Income tax ................................	(41,764)	(64,874)		(89,709)	(2,582)	(21,000)	(20,000)	(576)
Net income ................................	339,584	230,607		340,519	9,799	72,410	81,738	2,353
Consolidated net income ............	339,584	230,607		340,519	9,799	72,410	81,738	2,353
Per Share Data:
Earnings per Share — net
income (in dollars) ................	2.11(2)	1.37(2)		2.02(2)	0.06(2)	0.43(2)	0.48(2)	0.02(2)

25

		As of December 31,	As of December 31,		**As **	of March 31,
	2000	2001	2002	2002	2002	2003	2003
	NT$	NT$	NT$	U.S.$(1)	NT$	NT$	U.S.$(1)
		(consolidated, audited)			(non-consolidated, unaudited)
				(in thousands)
Balance Sheet Data:
ROC GAAP
Cash and cash equivalents..........	508,426	301,404	268,626	7,730	46,780	125,888	3,623
Current assets ............................	1,114,587	1,523,664	1,779,081	51,197	1,210,376	1,297,819	37,353
Working capital(3) ......................	524,341	1,075,569	964,295	27,750	796,297	531,200	15,289
Long-term investments ...............	130,254	268,844	360,040	10,361	948,453	1,450,310	41,742
Net property, plant and
equipment. .............................	1,268,321	1,489,539	1,830,365	52,672	1,198,559	1,321,207	38,025
Other assets ...............................	17,507	80,222	118,482	3,409	66,292	69,780	2,008
Total assets ................................	2,530,669	3,362,269	4,087,968	117,639	3,423,680	4,139,116	119,128
Current liabilities.......................	590,246	448,095	814,786	23,447	414,079	766,619	22,064
Long-term Liabilities .................	15,000	675,663	709,262	20,410	681,281	717,049	20,637
Other Liabilities.........................	35,862	84,027	131,847	3,794	100,656	141,512	4,073
Total liabilities...........................	641,108	1,207,785	1,655,895	47,651	1,196,016	1,625,180	46,774
Stockholders’ equity...................	1,889,561	2,154,484	2,432,073	69,988	2,227,664	2,513,936	72,354

• (1) Translated into United States Dollars using the average of buying and selling rates published by the Bank of Taiwan at December 31, 2002 of NT$34.750 = U.S.$1.00, and at March 31, 2003 of NT$34.745 = U.S.$1.00. Such translation amounts are unaudited and should not be construed as representations that the NT Dollar amounts were, or have been, or could be, converted into U.S. Dollars at that or any other rate.

• (2) Earnings per Share are calculated by dividing net income by the weighted average number of Shares outstanding during each year after and each three-month period adjusting retroactively for the effect of stock dividends of 27,540,000 shares and employees’ bonuses of 2,760,000 shares in 2003.

• (3) Working capital is equal to current assets less current liabilities.

26

BUSINESS

This Offering Circular contains certain forward-looking statements. When used in this Offering Circular, the words “believes”, “intends”, “anticipates”, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include the timing and acceptance of new product introductions, the actions of the Company’s competitors and business partners, and those discussed above under “Risk Factors”.

Overview

The Company is engaged in the manufacture and sale of conductive plastic and rubber keypads for electronic devices such as mobile phones, home and business telephones, pagers, remote controllers, calculators, game consoles, and personal digital assistants (“ PDAs ”). The Company also develops and manufactures metal dome and poly dome that are also critical components of mobile phones and many electronic devices. The Company believes that it is one of the major manufacturers of keypads and other critical components for mobile phones and other electronic devices in the world. The Company is positioning itself as a key supplier for a wide range of high-quality components and parts that are essentially required by manufacturers of mobile phones and other electronic devices.

The Company also designs and fabricates flexible printed circuits (“ FPC ”) with high density, lightweight, redundant circuitry for end use applications in the LCD panels of mobile phones, notebook computers, hard disc drives, and other compact electronic consumer goods such as camcorders, cameras, and car stereos. An FPC is built to bend, fold, twist, and wrap in extremely tight areas, which may benefit designers who face space restrictions.

The Company supplies its products on an OEM or ODM basis. “ OEM ” refers to an original equipment manufacturer who manufactures and sells equipment to its customers for re-branding and re-packaging; “ ODM ” refers to an original design manufacturer who not only manufactures but also designs the products. The Company’s OEM/ODM customers consist of some of the most reputable and leading names in the industry, such as Alcatel, BenQ, Flextronics, Hyundai, Lucent, Motorola, Nokia, Nortel, Samsung SDI, Selectron, Sharp, Sony Ericcson, and TCL.

The Company’s strong expertise and extensive know-how in industrial and mechanical engineering place the Company at the technological forefront in its product markets. The in-house tooling fabrication capability gives the Company the ability to produce a range of products wider than those produced by its competitors. The Company’s strength in mechanical engineering and tooling fabrication also allows it to produce precision prototypes for new products according to customers’ accelerated schedules and market needs, making it possible for customers to meet their time-to-market requirements, and to ramp up production rapidly to commercial volumes. The Company believes that its ability to provide time-to-market system solutions by leveraging strong research and development capability and reliable product quality, together with technical know-how applied to large-scale production give it competitive advantages in an industry that is capital- and technology-intensive.

The Company currently owns six manufacturing facilities in Taiwan, Malaysia, Mexico and the PRC to produce keypad related products and FPC products. The plant in Taiwan carries the Company’s complete product line. One of the plants in the PRC is also capable of producing both keypad related products and FPC products. The other PRC plant, the Malaysia and Mexico plants are only designated to produce keypad related products.

Net sales of the Company have grown at a compound annual growth rate of 28.1% from NT$1,321.9 million in 2000 to NT$2,170.4 million (U.S.$62.5 million) in 2002. For the three months ended March 31, 2003, ICHIA recorded non-consolidated net sales of NT$529.2 million (U.S.$15.2 million) and net income of NT$81.7 million (U.S.$2.4 million), compared to NT$288.7 million and NT$72.4 million for the same period in 2002.

27

Competitive Strengths

The Company believes that the following strengths contribute to its competitive position in the relevant markets:

Strong industrial and manufacturing expertise

The Company’s strong expertise and extensive know-how in industrial and mobile telephone related products manufacturing built up over 15 years place the Company at the technological forefront in its product markets. The Company believes that it is one of the few producers in Taiwan and the mainland China to have mastered and commercialized precision manufacturing processes and proprietary technologies in the production of a wide range of plastic and rubber keypad products for the applications on mobile phones, home and business phones, PDAs, remote controllers and other electronic devices. In addition, the Company is able to utilize its manufacturing expertise and know-how to produce other key components and parts for compact electronic devices, such as FPC and plastic housings. The Company’s industrial and manufacturing expertise enables it to produce large quantity of high-quality keypads on a timely basis to meet its customers’ increasing time-to-market requirement, to ramp up production capacity rapidly to commercial volumes, and to provide production flexibility to optimize capacity utilization.

Close relationships with key industry leaders

The Company has established close supplier-customer relationships with some of the world’s leading manufacturers of mobile phones, and other electronic goods. Such leading names as Alcatel, BenQ, Flextronics, Hyundai, Lucent, Motorola, Nokia, Nortel, Samsung SDI, Selectron, Sharp, Sony Ericcson, and TCL have placed the Company on their approved vendor lists in recognition of the consistently high product quality and quick response time of the Company. The Company believes that it has become a key supplier of keypad and FPC products for its key customers. The Company believes that these close relationships will enable the Company to maintain a high market share and will constitute a barrier that would make it difficult for the Company’s potential competitors to enter into its business.

Highly vertically-integrated production process

The Company endeavors to ensure that it controls all of the technologies and manufacturing processes that are critical to its production. Accordingly, the Company’s manufacturing processes are highly vertically integrated, and most of the critical materials and components used in the production of keypads and FPCs are produced in-house. This gives the Company control over quality, costs and supply chain management, as well as flexibility necessary to customize components to match its customers’ specifications, and to roll out and ramp up production of new products.

Strong research and development programs

The Company invests significant resources in research and development, through in-house research and development activities, joint development with major customers, and technology transfer from leading mobile phone and electronic goods manufacturers. The Company’s research and development activities focus on developing new products, materials, manufacturing processes and equipment, and improving production efficiency. For example, the Company developed internally metal dome and poly dome as key components for mobile phones in 1999 by leveraging its strong engineering expertise. The Company is able to leverage its manufacturing expertise to develop more reliable, more innovated and safer packaging products, which usually entitle the Company to higher margins.

Experienced management team

The senior management of the Company is led by a core team of professionals in the fields of management, finance and engineering, with an average experience of over 20 years of management

28

experience in electronics industry. As a result, the Company is able to capture the market opportunities by directing its research and development and sales and marketing efforts to high growth areas. The Company believes that it has the leadership it needs to continue to leverage its core strengths in the future.

Strategy

Shift from OEM to ODM

A substantial portion of the Company’s net sales revenues are derived from the keypads and FPC products manufactured on an OEM basis and the remaining portion is from sales of the products on an ODM basis. ODM sales generally generate higher profit margins than OEM sales. However, ODM manufacturing requires stronger research and development capability. The Company plans to increase its profit margin by increasing ODM sales by utilizing its core technologies through strong research and development teams.

Continue research and development for higher value-added mobile phone parts and components

The Company believes that the current trend to wireless communications will continue to be one of the primary directions of the evolution of electronic devices. To meet current and anticipated future demands, the Company has committed significant resources to the research and development of keypads for use in wireless communication devices, including next-generation mobile phones and PDAs. Among the Company’s achievements in this area is the development of plastic plus rubber keypads and dual plastic injection technology, and the production of its own automation equipment for precision keypads and FPC manufacturing.

Capitalize on superior manufacturing capabilities to extend scope of operations and to offer module assembly solutions for mobile phone manufacturers

By capitalizing on its superior component manufacturing capabilities and vertically integrated production processes, the Company will extend the scope of its manufacturing services to include the provision of module assembly services that combine its precision keypads and FPC products for customers to which the Company currently supplies components.

Focus on high-growth markets

The Company will focus its product development efforts on high-growth markets. These include Magnesium Alloys and plastic housing products, and home automation equipment. The Company believes that the rate of turnover in these areas will increase rapidly with the evolution of new technologies, the increasing functionality of each successive generation and increasing rates of penetration. The Company will keep exploring new products that it believes with market potentials and produce such products by leveraging its engineering expertise.

Expand production capacity and invest in new technology

The Company believes that global demand for mobile phone components and parts will continue to grow, driven by increasing demand for mobile communication products. The Company will continue to expand its manufacturing production facilities in the PRC and elsewhere in addition to the current six plants in order to increase its production capacity. In addition, the Company keeps developing new technology for producing sophisticated and modulated components for mobile products. For example, the Company has been gradually increasing the percentage of its module products consisting of keypads, domes and FPCs. The Company believes that its customers may benefit from these module products as they provide them with one-stop shopping convenience while retaining consistent quality.

History and Organization of the Company

ICHIA was founded on November 7, 1989, and it started producing rubber keypads for home and business telephones and electronic goods in leased manufacturing facilities. In 1992, ICHIA established its first manufacturing plant in Hsinchu Hsien, Taiwan. To efficiently supply the demands of the North American market, in 1993, ICHIA incorporated Ichia USA, Inc. in the United States as

29

its sales office in the area. Currently, Ichia USA, Inc. owns Ichia Rubber De (Mexico) S.A. DE C.V., which has operated the Company’s North American manufacturing facilities in Mexico since 1994. In 1996, ICHIA acquired and owned 80% of the equity interests of Ichia Rubber Industry (Malaysia) SDN BHD in Malaysia to manufacture rubber keypads in Malaysia. Ichia Rubber Industry (Malaysia) SDN BHD is currently owned by Ichia Holding (BVI) Limited, the Company’s primary investment holding subsidiary. In 1996, the Company incorporated Ichia Electronics (Zhongshan) Co., Ltd., which operates the Company’s Zhongshan Plant in southern China. In order to sell its keypad products domestically in the PRC and overseas, the Company further incorporated Ihwa Electronics (Zhongshan) Co., Ltd. in 2000. In 2001, the Company decided to expand its operation in the PRC and established Ichia (Suzhou) Technologies, Inc., which has operated the Company’s Suzhou Plant to supply PRC and overseas customers. As a result of the investments and acquisitions, the Company currently operates six manufacturing facilities located in Taoyuan, Taiwan; Penang, Malaysia; Tijuana, Mexico; and Zhongshan City, Guangdong Province, and Suzhou City, Jiangsu Province, the PRC. See “— Manufacturing Facilities” and “— Principal Subsidiaries”.

In 2000, the Company’s headquarters were moved from Taipei City to Hwa-Ya Technology Park, Taoyuan Hsien, Taiwan, where all corporate functions, such as general administration, sales and marketing, research and development and manufacturing are performed. After moving into its new corporate headquarters, the Company started manufacturing FPC products. The Company’s manufacturing technology became one of the most advanced among its competitors.

ICHIA’s Shares have been listed on the Taiwan Stock Exchange under trade code of 2402 since January 14, 2000.

The Company’s headquarters and all manufacturing facilities around the world except the newly established Suzhou Plant have been accredited with ISO9002, QS9000 and ISO14001 quality standards.

The following diagram shows the structure of ICHIA and its principal subsidiaries, as of June 30, 2003, together with details of the Company’s direct and indirect equity interests in its subsidiaries and affiliate(s). See “— Principal Subsidiaries”.

==> picture [457 x 158] intentionally omitted <==

----- Start of picture text -----

ICHIA TECHNOLOGIES, INC.
100% 100% 100% 100%
ICHIA USA, INC.(1) ICHIA INTERNATIONALTRADING LTD (BVI) ICHIA HOLDING(BVI) LIMITED(1) ICHIA (H.K.) LIMITED
100% 100% 100% 100% 100%
ICHIA RUBBER DE IHWA ELECTRONICS ICHIA ELECTRONICS ICHIA RUBBER ICHIA (SUZHOU)
(MEXICO) (ZHONGSHAN) (ZHONGSHAN) INDUSTRY (MALAYSIA) TECHNOLOGIES,
S.A. DE C.V.(1) CO., LTD.(1) CO., LTD.(1) SDN BHD(1) INC.(1)
----- End of picture text -----

• (1) The financial statements of these companies have been consolidated with those of ICHIA. For more information, please see “Notes to Consolidated Financial Statements for the years ended December 31, 2000, 2001 and 2002”.

• (2) There have been no materials changes in ICHIA’s direct and indirect equity interests in each of its principal subsidiaries since June 30, 2003.

ICHIA’s corporate headquarters and principal place of business are located at No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan, ROC. Its telephone number is 886-3-397-3345. Its web-site is www.ichia.com.tw. The information on its web-site is not part of this Offering Circular.

30

Products

The Company capitalizes on its industrial engineering expertise, its vertically integrated production process and its expertise in low cost, high quality mass production to offer quality products to its customers. The products manufactured by the Company are:

• Keypads and domes for mobile phones and other electronic goods made from rubber, plastic or the combination of the two; and

Flexible printed circuits.

The Company supplies its products on an OEM/ODM basis to manufacturers of mobile phones and home and business phones and other electronic goods, such as pagers, remote controllers, calculators, and PDAs.

The table below sets out the Company’s total sales by product category for the periods indicated.

Year ended December 31, (consolidated)	Year ended December 31, (consolidated)	Year ended December 31, (consolidated)	Three months ended March 31, (non-consolidated)	Three months ended March 31, (non-consolidated)
2000 NT$’000 1,360,770 — 1,360,770 (38,886)	2001 NT$’000 1,372,591 117,186 1,489,777 (29,556)	2002 NT$’000 1,712,072 505,550 2,217,622 (47,240)	2002 NT$’000 201,387 90,315 291,702 (3,008)	2003
				NT$’000 438,671 100,092
				538,763 (9,522)

Keypad products

Modern telephone instruments, including mobile phones and home and business telephone sets are largely electronic. A revolutionary change from traditional telephone sets to the modern ones is the introduction of keypads. Keypads replaced the traditional telephone dials, which can usually be switched to generate either pulses similar to those of the dial mechanism or dual-tone signals as in the touch-tone system.

The Company manufactures and sells keypads, which are key components of mobile phones, home and business phones, PDAs, remote controllers, pagers, calculators, game consoles and other electronic goods. Although keypads can be installed on a wide variety of electronic products, most of the Company’s keypad products are applied to telephone systems, including mobile phones and home and business telephone sets.

The Company utilizes its patented porous, or screen printing, technology to mass produce keypads in different languages and designs in accordance with customers’ requests. The keypads manufactured by the Company for the application on mobile phones and other telephone handsets primarily consist of:

• Plastic on rubber keypads;

• Laser-etched keypads;

• Film-in plastic keypads;

• Film-on rubber keypads;

31

• Epoxy-coated hardtop keypads;

• Polycarbonate hardtop keypads; and

• Conductive silicon rubber keypads.

A portion of the Company’s keypads products are shipped in the form of sub-assemblies, which consist of keypads, dome switches and other parts manufactured by the Company.

For the years ended December 31, 2000, 2001 and 2002, sales of keypad products accounted for 100.0%, 92.1% and 77.2% of the Company’s total sales, respectively. For the three months ended March 31, 2002 and 2003, on a non-consolidated basis, sales of keypad products accounted for 69.0% and 81.4% of ICHIA’s total sales, respectively.

Flexible printed circuit products

Flexible printed circuit, or FPC, is a relatively new product of the Company. An FPC, like an ordinary printed circuit board, consists of patterns of electrical circuitry etched from copper that has been laminated on a board of insulating material. They are the basic platforms used to interconnect microprocessors, integrated circuits and other components that are essential to the operation of electronic products and systems. FPCs are customized for specific electronic applications and are sold to original equipment manufacturers, or OEMs, and contract manufacturers.

FPCs are thin, lightweight, flexible, and durable. They can be designed to meet a wide range of temperature and environmental extremes. FPCs are excellent for designs with fine line traces and high-density circuitry, and are more suited for dynamic applications and vibration conditions than are conventional printed wiring boards. The Company engages in the production of FPC by leveraging its precision production technology for manufacturing parts and components for mobile phones and other electronic devices.

The Company has designed and fabricated FPCs with high density, lightweight, redundant circuitry for LCD displays, mobile phones, camcorders, radios, car stereos and other compact-size electronic devices. The Company currently offers single-sided and double-sided FPCs, as well as chips on FPC (“ COF ”).

Single-sided FPCs. Single-sided FPCs are generally applied to dynamic flexing applications, unusual folding and forming applications or where there are limitations on space and thickness. The Company’s single-sided FPC products have the following characteristics:

• Highly vertically integration that substantially all key materials are produced in-house. The Company therefore may control the quality and delivery time in accordance with the customers’ requirements in a timely and cost efficient way;

• Automatic reel-to-reel production is suitable for the fabrication of huge volume, stable quality and thinner FPC production;

• Highly-automatic production saves labor cost and prevents neglects or mistakes caused by manual handling thus the total yield rate can be improved effectively; and

• Fine-pitch FPC manufacturing capability of line-width/spacing 25�m/25�m is available.

Double-sided FPCs. Double-sided FPCs are generally adopted when circuit density and layout cannot be routed on a single layer, ground and power plane applications are required, or shielding applications are used. The Company’s double-sided FPC products carry the following characteristics:

• Fine-pitch FPC manufacturing capability of line-width/spacing 60�m/60�m is available;

• Thinner copper material processing capability is available. Selective electro-plating as an option adds higher flexibility to the products made by the Company;

32

• One side treated with immersion gold for IC bonding; and the other side treated with gold plating to protect the gold finger; and

The finished hole can be as small as 0.25mm in diameter.

COF. The Company also offers COF products integrated circuits and other electronic parts affixed on FPCs before shipping. The COF products have the following characteristics:

• Fine-pitch FPC manufacturing capability of line-width/spacing 60�m/60�m us available;

• Turn-key solution including COF film, IC bonding, and SMT is available upon customers’ request; and

Double-access type of COF is also available.

For the years ended December 31, 2000, 2001 and 2002, sales of FPC products accounted for 0%, 7.9% and 22.8% of the Company’s total sales, respectively. For the three months ended March 31, 2002 and 2003, on a non-consolidated basis, sales of FPC products accounted for 31.0% and 18.6% of ICHIA’s total sales, respectively.

Production Process

Keypad products

As part of its overall vertical integration strategy, the Company produces a substantial portion of the materials and components required for the manufacturing of its final products. This allows the Company to achieve cost savings and ensures a steady supply of components that meet the Company’s quality specifications. The in-house manufacturing of components also provides the Company with greater flexibility in customizing components to match customers’ specifications.

The quality of most of the Company’s products depends, to a significant extent, on the quality and precision of the dies and molds used for the production of the components. The Company focuses on developing its molding and tooling resources and capabilities as it believes this enables it to manage its production process effectively and alleviate any significant bottlenecks in the production cycle. The Company believes this expertise has positioned the Company to compete effectively with its competitors as significant capital and internal know-how are required to develop precision molding and tooling expertise. The Company’s manufacturing capacity has also been enhanced by the use of CAD/CAM tools to customize and automate molding and tooling equipment and to design prototypes of new products.

Quality control procedures and tests are conducted at each manufacturing and assembly stage. The Company also arranges for certain of its customers to conduct periodic on-site quality inspections. See “— Quality Control”.

Although the Company has installed computerized equipment to increase the automation of its production process, it believes that manual assembly will continue to be one of the important elements in the production of certain of its products.

FPC products

The increasing complexity of compact electronic products in increasingly smaller sizes has resulted in rapid technological improvements in FPCs, which has forced equal technological improvements in the manufacturing process. The Company has invested in production technology to manufacture single-sided, double-sided and COF FPCs utilizing advanced fabrication processes in volume production. The Company employs numerous advanced manufacturing techniques and systems, including dry-film imaging, automated optical inspection, computer controlled lamination, computer controlled laser drilling and routing, double-access electrical testing, and surface coating. The Company believes it is able to achieve a high manufacturing yield rate and produce high-quality FPCs on a timely basis as a result of the Company’s advanced manufacturing techniques, design efficiencies and general manufacturing expertise.

33

The Company receives circuit designs in electronic form directly from customers. The Company uses separate codes for these designs to ensure security. The Company reviews these circuit designs to ensure that the designs can be successfully and cost effectively manufactured. The Company then generates images of the circuit patterns that it develops on individual layers. Through a variety of plating and etching processes, the Company selectively adds and removes conductive materials forming horizontal layers of thin traces or circuits, which are separated by insulating material. Because of the tolerances involved in complex multilayer printed circuit boards, the Company uses clean rooms in certain manufacturing processes where tiny particles might otherwise create defects on the circuit patterns, and uses automated optical inspection systems to ensure consistent quality.

Raw Materials

The Company continues to pursue strategies that enable it to source its raw materials with increasing effectiveness. Raw materials used to produce the Company’s keypad products are primarily silicon, plastic resins, metallic plates and printing inks. Raw materials used to produce the Company’s FPC products are generally integrated circuits, copper plates and chemicals. These materials are generally available from multiple sources. However, there can be no assurance that sufficient quantities of raw materials will always be available in the future. In addition, the Company may be subject to adverse price fluctuations when purchasing such raw materials. Therefore, as a key component of the Company’s development strategy, the Company has in recent years focused on improving raw materials cost management for key raw materials.

Some of the Company’s customers require the Company to purchase designated raw materials from vendors approved by the customers. As a result, the Company may not be able to negotiate the best purchase prices for the raw materials and may be subject to inventory risks in case of cancelled orders by the customers.

The Company has implemented various inventory and resource management systems to enable it to plan the allocation of resources to ensure a steady and timely supply of principal raw materials and components. The Company’s materials supply force is responsible for the procurement of raw materials and components, based on the requirements provided by each production division from time to time. By centralizing procurement, the Company believes that it can increase its bargaining power to achieve competitive pricing, payment, delivery, quality and other terms of supply. The Company’s quality control department performs a series of incoming quality checks to assure compliance with standards of all incoming materials and components.

The Company has not experienced any significant delay or constraint in production due to disruption of supply of materials.

Sales and Marketing

The Company has a global sales network, consisting of a direct sales force and customer service representatives. To conduct its sales and marketing activities, the Company has sales offices located in Taipei, Taiwan; Penang, Malaysia; London, the United Kingdom; San Diego, California, U.S.A.; Zhongshan City, Guangdong Province, Suzhou City, Jiangsu Province, Beijing City and Hong Kong Special Administrative Region, the PRC. Each sales office is located close to its customers and responsible for the provision of sales and customer support and maintaining existing customer relationships. The primary sales and marketing efforts for the Company are conducted by the Company’s product divisions, each of which is responsible for developing the sales and marketing strategies of new and existing products produced by the division. As of June 30, 2003, the Company and its subsidiaries had 63 sales staff worldwide. The Company also uses independent sales agents in Denmark, Spain, Italy for its European customers and in the United States and Brazil for its North and South American customers, respectively. Sales agents operate on a commission basis.

The Company sells its products on an OEM/ODM basis primarily pursuant to specific customer purchase orders with limited exceptions that are pursuant to longer-term contractual commitments. The customers may cancel the purchase orders subject to a penalty, which is charged based on the timing of such cancellation. Generally, the sales and marketing process involves a customer first designating the Company as an approved vendor or supplier. This process typically involves exchanges of information through written surveys, presentations, site visits, formal audits, sample

34

quotations and first piece builds. The Company is an approved vendor for all of the major mobile telephone manufacturers, including Alcatel, BenQ, Flextronics, Hyundai, Lucent, Motorola, Nokia, Nortel, Samsung SDI, Selectron, Sharp, Sony Ericcson, TCL and other electronic goods manufacturers. The Company also conducts a direct and active marketing strategy, including advertising in trade publications and attending trade shows and exhibitions.

The Company’s customers are generally invoiced either at the time of delivery of the products or upon receipt of the products, with varying credit terms, depending, in part, on where the customer is located and the product type. The Company’s pricing policy takes account of a number of factors, including customer relations, product specification, cost of production, mode of transportation and size of order.

The following table sets out a breakdown of the Company’s and ICHIA’s total sales by geographical region for the periods indicated:

America. ...................................... Europe... ...................................... Asia (except Taiwan) ................... Taiwan.... ..................................... Total. ...........................................	**Year **	**Year **	ended December 31,	ended December 31,	ended December 31,	ended December 31,	Three months ended March 31,	Three months ended March 31,	Three months ended March 31,	Three months ended March 31,
	2000 % 480.0 36.3 439.9 33.3 380.4 28.8 21.6 1.6		2001 2002 2002 2003 (Consolidated) (Non-consolidated) (NT$ millions, except percentages) % % % % 291.1 19.9 183.5 8.5 54.9 19.0 68.8 13.0 546.3 37.4 216.4 10.0 121.3 42.0 89.9 17.0 572.5 39.3 1,263.6 58.2 95.3 33.0 158.8 30.0 50.3 3.4 506.9 23.3 17.2 6.0 211.7 40.0						2003
	480.0 439.9 380.4 21.6
	1,321.9	100.0	1,460.2	100.0	2,170.4	100.0	288.7	100.0	529.2	100.0

Customers

The Company emphasizes customer relations as a key to its growth and profitability. A key aspect of the Company’s customer development strategy is to locate the sales and marketing and in certain instances the production facilities near the customers in order to provide better and more efficient services. The Company also supplies the products to OEMs and sub-contractors, who in turn supply these products to global telecommunications and electronics companies.

The Company supplies keypads and FPCs to key customers in the mobile phone and consumer electronics industries. Some of the Company’s key customers are Alcatel, BenQ, Flextronics, Lucent, Motorola, Nokia, Nortel, Selectron, Sony Ericcson, and TCL. For 2002, the Company’s largest customer and second largest customer accounted for approximately 13.1% and 3.6%, respectively, of consolidated net operating revenues, and for 2001 the Company’s largest customer accounted for approximately 16.9% of consolidated net operating revenues. For 2001 and 2002, no other customers accounted for 10.0% or more of consolidated net operating revenues.

35

Quality Control

The Company has instituted a comprehensive quality assurance program to ensure the quality of its products. In order to implement the quality assurance program comprehensively, the Company has established quality assurance divisions in both of its keypads and FPC business units, as well as dedicated quality control teams in all of its manufacturing facilities, which are responsible for quality assurance and quality control. The missions in connection with quality assurance include:

• quality goal planning and follow-up,

• establishing and auditing the operation of the quality system,

• certification programs, including QS and ISO,

quality education and training,

• customer complaint follow-up and improvement,

• quality documentation control, and

obtaining customer feedback through after-sales service.

The tasks in connection with quality control involve a series of rigorous quality checks at all stages of product development and production, including:

• participation in each step of new product plan, design, prototyping, pilot production and new product release,

conducting vendor quality assessments,

• incoming quality control,

• process control and periodic test of reliability, and

final inspection and shipping control.

All manufacturing facilities of the Company except the newly established Suzhou Plant are accredited with QS9000, ISO9002 and ISO14001. QS9000 is a quality assurance model which is developed by and for the automotive industry. To be accredited as meeting QS9000 standards, a company must have been accredited for ISO9001 and ISO14001. ISO9002 is a quality assurance model which is made up of 20 sets of quality system requirements, and applies to organizations that design, develop, produce, install and service products. ISO14001 is an environmental management system accreditation. The ISO certification process involves subjecting the Company’s production and research and development processes and the quality management systems at its production facilities to review and surveillance at fixed intervals. The Company believes that through rigorous implementation of the quality assurance program, it has been able to achieve a reputation for consistently high product quality, and that this reputation is an important competitive advantage for retaining existing customers and attracting new customers among industry leaders in the mobile phones and consumer electronics industries.

36

Production Facilities

The following map indicates the worldwide locations of the Company’s production facilities, technical support centers and sales and marketing forces:

==> picture [388 x 230] intentionally omitted <==

----- Start of picture text -----

San Diego, USA
Suzhou
Tijuana, Mexico Zhong Shan Taiwan
Penang,
Malaysia
Headquarter
Factory
----- End of picture text -----

ICHIA and its subsidiaries operate six production facilities in Taiwan, Malaysia, Mexico, and the PRC. The Company’s production facilities are located near the Company’s customers for the prompt delivery of products. The following table sets out the location and primary use of the production facilities of ICHIA and its subsidiaries as of June 30, 2003:

Facilities Taiwan Taoyuan Plant ....................... The PRC Ichia Zhongshan Plant........... Ihwa Zhongshan Plant ..........	Principal products Keypads and FPCs Keypads Keypads	Address No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan, ROC Yaotiao Management District, Zhong Shan High Tech. Industry Development District, Zhongshan, Guangdong Province, the PRC Zhangjibian, the First Industry District, Zhongshan, Guangdong Province, the PRC	Space(1) m2 22,310 10,811 16,055	Owned or leased
				Owned Leased Leased

37

Facilities Suzhou Plant......................... Malaysia Plant ...................... Mexico Plant.........................	Principal products Keypads and FPCs Keypads Keypads	Address 199, Jin Feng Road, New District, Suzhou, Jiangsu Province, the PRC No. 977A, Solok Perusahaan 3, Prai Industry Estate, 13600 Prai, Penang, West Malaysia Privada Valle de Las Palmas, Lote 4, Manzana 102, Parque Industrial Valle del Sur. Tijuana, B.C., Mexico	Space(1) m2 75,000 4,745 3,738	Owned or leased
				Owned Owned Owned

(1) Includes manufacturing, staff dormitory and other administrative areas.

Taoyuan Plant

The Company has one production plant in Taiwan, which is co-located with the corporate headquarters in Hwa-Ya Technology Park. This plant produces all product lines that the Company currently carries. Taoyuan Plant is located at No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan, in a five-story building owned by ICHIA. Currently approximately 800 persons are employed to work in the Taoyuan Plant. The total floor area of the Taoyuan Plant and the headquarters is approximately 22,310 square meters. The Company currently utilizes the Taoyuan Plant and the adjacent corporate headquarters to provide firmwide sales and marketing, research and development, testing and administrative services. The Company’s tooling center is also located in the headquarters building.

PRC Plants

The Company has three production facilities in the PRC. Two plants are located in Zhongshan City, Guangdong Province; one is at Suzhou City, Jiangsu Province. Each plant has its own tooling center to provide tooling fabrication services in-house.

Ichia Zhongshan Plant. The Ichia Zhongshan Plant is the Company’s first manufacturing facility in mainland China that currently provides keypad products to the OEM and sub-contractor mobile phone and electronic manufacturers outside the PRC. The Ichia Zhongshan Plant is located at Yaotiao Management District, Zhong Shan High Tech. Industry Development District, Zhongshan, Guangdong Province, the PRC. The total floor area of the Ichia Zhongshan Plant is 10,811 square meters. As of June 30, 2003, 1,021 direct labors were employed by the Ichia Zhongshan Plant. All products made in Ichia Zhongshan Plant are for export sales only. The factory complex has dormitory facilities to accommodate factory workers.

Ihwa Zhongshan Plant. The Ihwa Zhongshan Plant manufactures keypad products to the OEM and sub-contractor mobile phone and electronic manufacturers located in the PRC for domestic sales. The Ihwa Zhongshan Plant is located at Zhangjibian, the First Industry District, Zhongshan, Guangdong Province, the PRC. The total floor area of the Ihwa Zhongshan Plant is 16,055 square meters. As of June 30, 2003, 503 direct labors were employed by the Ihwa Zhongshan Plant. The factory complex also has dormitory facilities to accommodate factory workers.

38

Suzhou Plant. The Suzhou Plant is the Company’s newest manufacturing facility that currently provides keypad and will provide FPC products to PRC and overseas OEM and sub-contractor mobile phone manufacturers. The Company started operating the Suzhou Plant in 2003. The Suzhou Plant is located at 199, Jin Feng Road, New District, Suzhou City, Jiangsu Province, the PRC. The total floor area of the Suzhou Plant is 75,000 square meters. As of June 30, 2003, 200 direct labors were employed by the Suzhou Plant. The factory complex also has dormitory facilities to accommodate factory workers.

Malaysia Plant

The Company establishes and maintains one production plant in Malaysia, operated through Ichia Rubber Industry (Malaysia) SDN BHD. The Malaysia Plant is located at No. 977A, Solok Perusahaan 3, Prai Industry Estate, 13600 Prai, Penang, West Malaysia, in a two-story building owned by Ichia Rubber Industry (Malaysia) SDN BHD. The total floor area of the Malaysia Plant is 4,745 square meters. As of June 30, 2003, 224 direct labors were employed by the Malaysia Plant. The Malaysia Plant is also equipped with a tooling center that provides tooling fabrication services to the Malaysia Plant exclusively.

Mexico Plant

The Mexico Plant is located at Privada Valle de Las Palmas, Lote 4, Manzana 102, Parque Industrial Valle del Sur. Tijuana, B.C., Mexico. The Mexico Plant is currently operated by Ichia Rubber De (Mexico) S.A. DE C.V. under Maquila doras Plan to manufacture keypads for the mobile phone and electronic goods manufacturers in the North America. As of June 30, 2003, 143 persons are employed to work in the Mexico Plant. The total floor area of the Mexico Plant is 3,738 square meters.

The total floor area of the Company’s facilities is 132,659 square meters.

The Company has not experienced any significant interruptions in production at any of its production facilities due to equipment failure or breakdown, raw materials shortages, power interruptions, fire, labor disputes or other causes.

Research and Development

To meet its customers’ needs and to contribute to its continued success, the Company continually engages in research and development activities. Research and development activities consist of:

designing and developing new products, including in collaboration with key customers;

• developing new materials, manufacturing processes and equipment;

• tooling design and fabrication; and

• designing and developing new manufacturing techniques which take advantage of the latest technologies and product designs and packaging to improve production efficiency and reduce costs.

In conducting its research and development activities, the Company works closely with its customers at each stage of the design and development process. This close cooperative relationship positions the Company at the leading edge of technological innovation in the manufacturing of mobile phones and other electronic goods.

The research and development improvements have helped the Company to manufacture its products in a cost-effective and reliable manner. The Company’s recent research and development achievements include:

• Year 2000: Film-in-Plastic Keypads, Film-in-Rubber Keypads, Soft Touch Film-in-Plastic Keypads, Painted Housings, Single Sided FPC and Chip on Glass FPC

39

Year 2001: Print Lens, In-Mold-Labeling Housings, In-Mold Foil Housings, In-MoldDecoration Lens, Two-Component Molded Housings, Keyboard Module, Chip on Print Circuit FPC, Single Sided FPC (fine pitch), Double Sided FPC (fine pitch)

Year 2002: P+R 1 (2nd Surface Decorated Plastic on Rubber Keypad), P+R 2 (1st Surface Decorated Plastic on Rubber Keypads), P+R 3 (1st Surface Decorated Plastic on Rubber Keypad), P+R 4 (Film-in-Plastic on Rubber Keypad), P+R 5 (Plastic on Film Keypad), P+R 6 (Film-in Plastic with Rubber Actuator Keypad), IC Bonding in FPC, SMT in FPC, fine pitch FPC

Year 2003: P+R 7, Keypad Sub-Assembly, Integrated Keypad Module, Navigator Key, Cluster Keypad, Highly Decorative Keypad, Multi-Layer FPC, Rigid and Flexible PCB, fine pitch FPC

As of June 30, 2003, the Company had approximately 150 personnel engaged in research and development activities. Research and development activities are conducted separately for each division of the Company.

For fiscal years 2000, 2001 and 2002, the Company expended NT$59.1 million, NT$33.1 million and NT$36.6 million (U.S.$1.1 million), respectively, on research and development activities, which accounted for 4.5%, 2.3% and 1.7% of the Company’s total consolidated sales.

Intellectual Property

A number of elements of the Company’s products and technological processes are proprietary in nature, and are owned by the Company or utilized under license from third parties. In addition, the Company licenses certain of its designs, technological processes and know-how to its affiliated companies in connection with the products sold by such affiliated companies.

As of June 30, 2003, ICHIA held a total of 33 patents registered in Taiwan and the PRC for products and technologies developed through its own efforts as well as joint research and development efforts with other companies. Most of the Company’s current patents will expire between 2005 and 2020. In addition, as of June 30, 2003, the Company also had approximately 20 patents either pending or under review in various jurisdictions, including Taiwan, Japan, and the PRC. The Company intends generally to continue to seek patent protection on any new inventions in design or process technology.

The Company has registered as its trademark in the ROC. The trademark is designated for use on the Company’s products, including keypads and FPCs.

Competition

The Company operates in an international market characterized by intense competition among companies that engage in mobile phone and electronic components and parts manufacturing. The Company competes with different companies worldwide, depending on the type of product or geographic area. While these companies are largely fragmented throughout different sectors of the industry, a number of companies are much larger and have greater manufacturing, financial, research and development and marketing resources than the Company. Some of these competitors also carry product lines that the Company does not carry and provide services that the Company does not provide. The Company also faces competition from the manufacturing operations of its OEM customers, who are continually evaluating the merits of manufacturing products internally versus outsourcing to contract manufacturers.

The Company believes that the primary basis of competition is a combination of manufacturing capability, services, manufacturing quality, price, production capacity, manufacturing technology, design expertise, breadth of product line, time to production and reliability of delivery. The Company believes it currently competes favorably with respect to these factors. However, to remain competitive, the Company must continue to provide technologically advanced manufacturing services, maintain quality levels, offer flexible and reliable delivery and provide competitive pricing.

40

Environmental Matters

The Company’s manufacturing processes use various chemicals and materials, including heavy metals, toxic fluids, solvents and others that may be toxic or hazardous if they are released into the environment without treatment. These processes generate solid and liquid waste, as well as discharge of waste water and gaseous emissions.

The Company is subject to environmental regulations in Taiwan, the PRC, Malaysia and Mexico relating to the use, storage, discharge and disposal of chemical and other materials used during its manufacturing process.

The Company has adopted comprehensive environmental compliance and abatement programs for all its industrial processes. Under the Company’s guidelines, solid waste is either recycled, as in the case of plastic material, or is removed under contract by waste management services that have been certified by the applicable environment authorities in the handling of the relevant materials. Waste water from industrial processes is treated before being discharged. Emissions are filtered before being discharged.

Under applicable PRC law and regulations, the feasibility study for new facilities must contain an environmental impact assessment, as well as a comprehensive compliance and abatement plan. The Company’s facilities in the PRC, which employ environmentally sensitive manufacturing processes, have passed the feasibility studies and received all governmental approval and certificates as required by PRC environmental regulations. In addition, the Company meets all environment protection regulations and inspections in Malaysia and Mexico, where it operates manufacturing facilities.

All of the Company’s production facilities except the newly established Suzhou Plant have received ISO14001 accreditation, which certifies that its production facilities conform to the prescribed environmental management system standards. The Company believes it is in substantial compliance with all material environmental regulations. In addition, the Company has not been subject to any fines or legal action involving non-compliance with any relevant environmental regulations, nor is it aware of any threatened or pending action by any environmental regulatory authority in Taiwan, the PRC, Malaysia, Mexico, or the U.S. However, any failure to comply with present and future regulations could subject the Company to future liabilities or the suspension of production. In addition, any such regulations could restrict the Company’s ability to expand its facilities or could require it to acquire costly equipment or to incur other significant expense to comply with environmental regulations.

Legal Proceedings

Neither ICHIA nor any of its subsidiaries is involved in any litigation or other proceedings the outcome of which the Company believes might, individually or taken as a whole, materially affect the financial results or operations of ICHIA or the Company as a whole.

Insurance

The Company maintains insurance policies with independent third parties in respect of buildings, goods in transit equipment and certain inventories covering loss due to fire, explosion, earthquake, typhoon, flood and certain other risks. While the Company believes its insurance policies to be adequate and in line with industry norms in Taiwan, significant damage to any of the Company’s production facilities, whether as a result of fire or other causes, could have a material adverse effect on the Company. Insurance coverage on property, plant, equipment and inventories amounted to approximately NT$1,621 million, NT$1,463 million and NT$1,583 million (U.S.$46 million) as of December 31, 2000, 2001 and 2002, respectively. The Company does not carry business interruption insurance or key-personnel insurance or any policy of a similar nature.

41

Principal Subsidiaries

Most of the business and assets of the Company in the ROC are held through ICHIA. ICHIA’s subsidiaries hold the Company’s operation facilities outside of Taiwan. See “— History and Organization of the Company” and “— Production Facilities”. The information set forth below reflects ICHIA’s direct and indirect equity interests in these subsidiaries as of June 30, 2003.

Company Principal Investment Holding Subsidiary Ichia Holding (BVI) Limited(1) Principal Operating Subsidiaries Ichia Technologies (H.K.) Limited Ichia International Trading Ltd. Ichia USA, Inc.(1) Ichia Rubber De (Mexico) S.A. DE C.V.(1) Ichia Rubber Industry (Malaysia) SDN BHD(1) Ichia Electronics (Zhongshan) Co., Ltd.(1) Ihwa Electronics (Zhongshan) Co., Ltd.(1) Ichia (Suzhou) Technology Inc.(1) Affiliate Landsfair Technology Corporation	Main business Investment holding of the Company’s manufacturing subsidiaries Sales of keypads Sales of keypads Sales of keypads and FPCs Production of keypads Production and sale of keypads Production and export sale of keypads Domestic sale of keypads Production and export sale of keypads and FPCs Manufacturing and sales of Magnesium Alloys housing products	Place of incorporation British Virgin Islands Hong Kong British Virgin Islands U.S.A. Mexico Malaysia PRC PRC PRC ROC	Total paid-in capital NT$167,810,170(2) HK$80,100 U.S.$50,000 U.S.$4,106,060 U.S.$240,042 MYR9,000,000 RMB30,864,551 RMB8,278,305 RMB71,896,662 NT$800,000,000	The Company’s direct and indirect equity interest(2)
				100% 100% 100% 100% 100% 100% 100% 100% 100% 30%

(1) Consolidated subsidiaries.

(2) Does not include advance receipts for common stock totaling NT$379,630,495.

42

There has been no materials change in ICHIA’s direct and indirect equity interests in each of its principal subsidiaries since June 30, 2003.

Principal Investment Holding Subsidiary

Ichia Holding (BVI) Limited (“ Ichia BVI ”) was established in the British Virgin Islands in 1997. Its registered office is at Wickhams Cay I, P.O. Box 362, Roadtown, Tortola, British Virgin Islands. Ichia BVI is an investment holding company. The companies currently owned by the Company through Ichia BVI include Ichia Zhongshan, Ihwa Zhongshan, Ichia Malaysia and Ichia Suzhou.

As of and for the year ended December 31, 2002, Ichia BVI had audited net assets, operating revenues and net profits of NT$808.9 million (U.S.$23.3 million), NT$194.5 million (U.S.$5.6 million) and NT$194.5 million (U.S.$5.6 million), respectively. As of December 31, 2002, Ichia BVI had paid-in capital and reserves of NT$98.3 million (U.S.$8.7 million) and NT$0 (U.S.$0), respectively.

Principal Operating Subsidiaries

Ichia Technologies (H.K.) Limited (“ Ichia Hong Kong ”) was established in Hong Kong Special Administrative Region of the PRC in 1998. Its registered office is at Unit A13, Block A, 2/F, Proficient Industrial Centre, 6 Wang Kwun Road, Kowloon Bay, Kowloon, Hong Kong SAR. Ichia Hong Kong is a trading company that sells the Company’s keypad products in the PRC.

As of and for the year ended December 31, 2002, Ichia Hong Kong had audited net assets, operating revenues and net profits of HK$(83,056.5), HK$0 and HK$3,443.5, respectively. As of December 31, 2002, Ichia Hong Kong had paid-in capital and reserves of HK$80,100.3 and HK$0, respectively.

Ichia International Trading Ltd. (“ Ichia International ”) was established in the British Virgin Islands in 2001. Its registered office is at P.O. Box 3152, Road Town, Tortola, British Virgin Islands. Ichia International is a trading company.

As of and for the year ended December 31, 2002, Ichia International had audited net assets, operating revenues and net loss of U.S.$(4,163.7), U.S.$138,765 and U.S.$(135,231.6), respectively. As of December 31, 2002, Ichia International had paid-in capital and reserves of U.S.$50,000 million and U.S.$0, respectively.

Ichia USA Inc. (“ Ichia USA ”) was established in the State of California of the Untied States in 1993. Its registered office is at 1057 Tierra Del Rey Suite G Chula Vista, CA91910, U.S.A. Ichia USA currently wholly owns Ichia Mexico, who operates the Company’s Mexico Plant to manufacture keypads in Mexico to supply mobile phone and electronic manufacturers who have factories in North America. See “— Production Facilities”.

As of and for the year ended December 31, 2002, Ichia USA had audited net assets, operating revenues and net profits of U.S.$3.9 million, U.S.$3.4 million and U.S.$0.3 million, respectively. As of December 31, 2002, Ichia USA had paid-in capital and reserves of U.S.$4.1 million and U.S.$ 0, respectively.

Ichia Rubber De (Mexico) S.A. DE C.V. (“ Ichia Mexico ”) was established in Mexico in 1994. Its registered office is at Privada Valle de Las Palmas, Lote 4, Manzana 102, Parque Industrial Valle del Sur. Tijuana, B.C., Mexico. Ichia Mexico currently operates the Company’s Mexico Plant to manufacture keypads in Mexico to supply mobile phone and electronic manufacturers who have factories in North America. See “— Production Facilities”.

As of and for the year ended December 31, 2002, Ichia Mexico had audited net assets, operating revenues and net profits of U.S.$0.6 million, U.S.$1.3 million and U.S.$55,483.0, respectively. As of December 31, 2002, Ichia Mexico had paid-in capital and reserves of U.S.$0.2 million and U.S.$0, respectively.

43

Ichia Rubber Industry (Malaysia) SDN BHD (“ Ichia Malaysia ”) was acquired by the Company as its principal manufacturing base in the Southeast Asia region in 1996. Its registered office is at No. 977A, Solok Perusahaan 3, Prai Industry Estate, 13600 Prai, Penang, West Malaysia. Ichia Malaysia currently operates the Company’s Malaysia Plant to manufacture keypads. See “— Production Facilities”.

As of and for the year ended December 31, 2002, Ichia Malaysia had audited net assets, operating revenues and net profits of MYR9.6 million, MYR16.1 million and MYR0.6 million, respectively. As of December 31, 2002, Ichia Malaysia had paid-in capital and reserves of MYR9.0 million and MYR0, respectively.

Ichia Electronics (Zhongshan) Co., Ltd. (“ Ichia Zhongshan ”) was established in the PRC in 1996. Its registered office is at Yaotiao Management District, Zhong Shan High Tech. Industry Development District, Zhongshan, Guangdong Province, the PRC. Ichia Zhongshan currently operates the Company’s Ichia Zhongshan Plant to manufacture keypads in Guangdong Province, the PRC to supply mobile phone and electronic manufacturers outside the PRC. The finished products equipped with Ichia Zhongshan’s products are for export sales only. See “— Production Facilities”.

As of and for the year ended December 31, 2002, Ichia Zhongshan had audited net assets, operating revenues and net profits of RMB94.9 million, RMB89.5 million and RMB13.7 million, respectively. As of December 31, 2002, Ichia Zhongshan had paid-in capital and reserves of RMB30.9 million and RMB0, respectively.

Ihwa Electronics (Zhongshan) Co., Ltd. (“ Ihwa Zhongshan ”) was established in the PRC in 2001. Its registered office is at Yaotiao Management District, Zhong Shan High Tech. Industry Development District, Zhongshan, Guangdong Province, the PRC. Ihwa Zhongshan currently operates the Company’s Ihwa Zhongshan Plant to manufacture keypads in Gangdong Province, the PRC to supply mobile phone and electronic manufacturers who have factories in southern China. The finished products equipped with Ihwa Zhongshan’s products are supplied to the end users domestically. See “— Production Facilities”.

As of and for the year ended December 31, 2002, Ihwa Zhongshan had audited net assets, operating revenues and net profits of RMB40.8 million, RMB116.8 million, and RMB31.0 million, respectively. As of December 31, 2002, Ihwa Zhongshan had paid-in capital and reserves of RMB8.3 million and RMB0, respectively.

Ichia (Suzhou) Technologies, Inc. (“ Ichia Suzhou ”) was established in the PRC in 2000. Its registered office is at 199, Jin Feng Road, New District, Suzhou, Jiangsu Province, the PRC. Ichia Suzhou currently operates the Company’s Suzhou Plant to manufacture keypads and FPCs in Jiangsu Province, the PRC to supply PRC and overseas mobile phone and electronic manufacturers. See “— Production Facilities”.

Affiliate

Landsfair Technology Corporation (“ Landsfair ”) was established in the ROC in 1998 to manufacture and sell Magnesium Alloys housing products. Landsfair is located at No. 528 Fu-shing Third Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan, ROC. The Company invested in Landsfair and acquired 30% of the equity interests of Landsfair in 2001. The Company believes that Magnesium Alloys housing products have market potentials and relevant to it core business.

Investment Policy

The Company makes short-term and long-term investments. The Company’s short-term investments may from time to time consist of credit-linked notes, corporate bonds, and funds. The Company’s primary goals in relation to its short-term investments are low risk profile and liquidity. Short-term investments are funded with cash, and the balance of short-term investments may vary from time to time depending on the Company’s cash requirements. For details of the Company’s

44

short-term investments as of December 31, 2000, 2001 and 2002, see Note 4 to the “Non-consolidated Financial Statements as of and for the years ended December 31, 2000, 2001 and 2002” and Note 4 to the “Consolidated Financial Statements as of and for the years ended December 31, 2000, 2001 and 2002.

ICHIA makes long-term equity investments for strategic reasons. As of December 31, 2002, ICHIA directly and indirectly invested in Ichia International, Ichia BVI, Ichia USA, Ichia Malaysia, Ichia Hong Kong, Ichia International, Ichia Zhongshan, Ichia Suzhou, and Ihwa Zhongshan. ICHIA also invests in Landsfair Technologies Corp., whose business includes development and manufacturing of Magnesium Alloy housing for mobile electronic products, such as PDAs. ICHIA believes that through the investment, it is able to gather market information in efficient ways. The Company expects that its investments in these companies will allow it to benefit from investments in promoting its global sales. For details of the Company’s long-term equity investments, see Note 7 to the “Non-consolidated Financial Statements as of and for the years ended December 31, 2000, 2001 and 2002” and Note 7 to the “Consolidated Financial Statements as of and for the years ended December 31, 2000, 2001 and 2002”.

Related Party Transactions

ICHIA, its subsidiaries and certain of its affiliates, in the ordinary course of business or from time to time, enter into transactions with each other. ICHIA believes that all such transactions were based on general commercial practice, where the prices and payment terms made from and to ICHIA may depend upon the overall financial status of ICHIA and such affiliates. See Note 17 to the “Non-consolidated Financial Statements as at and for the three months ended March 31, 2002 and 2003”, and Note 18 to the “Consolidated Financial Statements as at and for the years ended December 31, 2000, 2001 and 2002”.

45

MANAGEMENT AND EMPLOYEES

Directors

The Company’s board of directors is elected by the shareholders in a general meeting at which a quorum, consisting of a majority of all issued and outstanding common shares, is present. The Chairman is elected by the board from among the directors. The Company’s five-member board of directors is responsible for the management of the Company’s business.

The term of office for the Company’s directors is three years from the date of election. Directors may serve any number of consecutive terms and may be removed from office at any time for a valid reason 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. The Company’s current board of directors is elected by the Shareholders in the general meeting held on May 20, 2002.

The following table sets forth the name of each of the Company’s current directors, his position in the Company, the percentage of Shares held, and other significant positions in the Company or in unrelated companies held by them.

Name Benny Huang .......... Jennifer Huang ....... Mei-na Juan............ Jacob Kuo ............. Chien-ping Chen .....	Position Chairman and Director Deputy Chairman and Director Director Director Director	Percent of Shares held(1) 12.64% 3.62% 1.56% 1.80% 0%	Business address No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan ROC No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan ROC No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan ROC No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan ROC No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan ROC	Other significant positions held
				Chairman and general manager of Landsfair Chairman of Home Solution, Inc. Director of Phihong Enterprise Co., Ltd. Director of Landsfair — Director of San Wu Rubber Mfg. Co., Ltd. Director and CEO of TC Bank Co., Ltd.

(1) As of July 26, 2003

Supervisors

The Company currently has three supervisors, each serving a three-year term. Supervisors are typically elected at the time when directors are elected. The supervisors’ duties and powers include investigation of the Company’s business condition, inspection of the Company’s corporate records, verification and review of financial statements presented by the Company’s board of directors at shareholders’ meetings, convening of shareholders’ meetings, representing the Company in negotiations with the Company’s directors and notification, when appropriate, to the board of directors

46

to cease acting in contravention of any applicable law or regulation the Company’s Articles of Incorporation or any resolution made at a shareholders’ meeting. Each supervisor is elected by the Company’s shareholders and cannot concurrently serve as a director, management officer or other staff member. The Company’s current supervisors are elected by the Shareholders in the general meeting held on May 20, 2002.

The following table sets forth the name of each of the Company’s current supervisors, his or her position in the Company, the percentage of Shares and other significant positions held by him or her.

Name Pi-yu Wang ............ Xian-xi Chen ......... Tien-kuei Chen .......	Position Supervisor Supervisor Supervisor	Percent of Shares held(1) 0.91% 1.48% 0.53%	Business address No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan ROC No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan ROC No. 268 Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan ROC	Other significant positions held
				— — Chairman of Gloria Prince Hotel

(1) As of July 26, 2003

In accordance with ROC law, each of the Company’s directors and supervisors owes fiduciary duties to all shareholders. Of the current directors and supervisors, all directors and supervisors were elected in their capacity as individual shareholders. Currently, the Company has one independent director.

Executive Officers

The following table sets forth information relating to the Company’s executive officers.

Name Benny Huang .............. Jennifer Huang............ Simon Yu .................... Tom Chen ................... Mortimer Wei.............. Howard Chen .............	Position Chairman and Chief Executive Officer Deputy Chairperson and Vice President of General Administration President of MMI Division President of FPC Division Chief Financial Officer Chief Information Officer	Years with the Company(1) 13 13 13 13 3 3	Age
			47 46 45 47 38 48

(1) As of July 26, 2003

As of July 26, 2003, the Company’s directors, supervisors and executive officers owned a total of 40,749,765 Shares of the Company’s interests. In addition, 2,950,000 Shares have already been granted to the Company’s executive officers in the form of stock options.

47

Biographies of Directors, Supervisors and Executive Officers

Benny Huang has served as the Chairman of the Company and General Manger since 1989. Before founding the Company, Mr. Huang served as a Research and Development Engineer at Kinpo Electronic Inc. He received a Diploma in Mechanical Engineering from Lung Hwa College of Science and Technology in Taiwan. Mr. Huang also attended an EMBA program offered by Tamkang University in Taiwan.

Jennifer Huang has served as the Vice President of General Administration Department of the Company since 1999. She is also a Deputy Chairperson of ICHIA. Ms. Huang is one of the founders of ICHIA. Ms. Huang received a Bachelor’s degree in economics from Fu-Jen Catholic University in Taiwan. Ms. Huang also attended an EMBA program offered by National Taipei University in Taiwan.

M.N. Juan has served as a Director of the Company since 2002. Ms. Juan received a Diploma in Secretarial Business from Shih Chien College of Home Economic in Taiwan.

Jacob Kuo has served as a Director of the Company since 2002. Mr. Kuo also serves as a Director of San Wu Rubber Mfg. Co., Ltd. Mr. Kuo received a Diploma in National Chunghua Senior High School.

C.P. Chen has served as a Director of the Company since 2002. Mr. Chen also serves as the Executive Director and CEO of Ta Chong Commercial Bank. He holds a Master’s degree of business administration from California State Polytechnic University in U.S.A.

P.Y. Wang has served as a Supervisor of the Company since 2000. Ms. Wang received a Vocational Diploma from Ten Ren Commercial Senior High School.

X.X. Chen has served as a Supervisor of the Company since 2000. He holds a Bachelor’s degree in economics from Soochow University in Taiwan.

T.K. Chen has served as a Supervisor of the Company since 2002. Currently, Mr. Chen serves as the Chinaman of Gloria Prince Hotel Taipei. He received a Diploma in business administration from Tamsui Institute of English.

Simon Yu has served as the President of MMI (Keypad Product) Business Unit of the Company since 2000. Before being the Head of this Business Unit, Mr. Yu was the General Manger of Ichia USA and Ichia Mexico. Before joining the Company, Mr. Yu served as a Plant Manager in Raychem Technologies, Inc. Mr. Yu graduated from Department of Mechanical Engineering of National Taipei Institute of Technology in Taiwan.

Tom Chen has served as the President of FPC Business Unit of the Company since 2000. Before he set up this division, Mr. Chen was the General Manger of Ichia Malaysia. Before joining the Company, Mr. Chen served as a procurement manager in Kinpo Electronic Ltd. Mr. Chen graduated from Department of Mechanical Engineering of Min-Hsin College of Science and Technology in Taiwan.

Mortimer Wei has served as the Director of Finance and Accounting of the Company since 2000. Before joining the Company, Mr. Wei served as the Chief Financial Officer in Evertop Wire Cable Corporation. Mr. Wei holds a Master’s degree of business administration from National Taipei University in Taiwan and a Bachelor’s degree in accounting from Tamkang University in Taiwan.

Howard Chen has served as the Chief Information Officer of Information Technologies of the Company since 2002. Before joining the Company, Mr. Chen served as a Director of department of advance banking system in Unisys Taiwan Ltd. Mr. Chen holds a Bachelor’s degree in physics from National Taiwan University in Taiwan.

48

Compensation of Directors, Supervisor and Executive Officers

In 2002, the Company paid to its directors, supervisors and executive officers approximately NT$4.0 million in aggregate cash remuneration.

Interests of Management in Certain Transactions

The Company does business with several of its affiliates. The Company conducts these transactions on an arms-length basis. See Note 18 to the “Consolidated Financial Statements as of and for the year ended December 31, 2002” and Note 17 to the “Non-consolidated Financial Statements as of and for the years ended December 31, 2000, 2001 and 2002”.

Employees

Overview

The Company had the following number of employees as of the period indicated:

			**As **	of December 31,			As of June 30,
	2000			2001	2002		2003
Administrative ....................................		178		150		212	415
Research and development ..................		40		69		101	135
Manufacturing ....................................		1,575		1,355		2,357	2,825
Sales and marketing............................		36		39		51	58
Total...................................................		1,829		1,613		2,721	3,433

As of June 30, 2003, all of the Company’s employees worked on a full-time basis, of which 3.9% were engaged in research and product development, 13.8% in sales, marketing, general and administration and 82.4% in manufacturing. The average age of the employees is 27 years old. None of the Company’s employees is represented by collective bargaining organization, such as a union, or subject to any bargaining agreements.

As of June 30, 2003, 40.0% of the Company’s research and development personnel held a bachelor’s degree or higher educational qualification and 58.0% of the Company’s senior to mid-ranking management and administration personnel held a bachelor’s degree or higher educational qualification. The Company places considerable importance on the recruitment, training and retention of a team of qualified and experienced engineers to improve the Company’s competitive ability.

The Company’s employees in the ROC are not unionized and neither the Company nor any of its subsidiaries has experienced any significant labor disputes in the past five years.

49

PRINCIPAL SHAREHOLDERS

In so far as known to the Company, as of July 26, 2003, there is no person other than the Company’s directors who, directly or indirectly, is interested in 10% or more of the Company’s Shares capital.

50

CHANGES IN ISSUED SHARE CAPITAL

The following table shows the increases in the Company’s issued share capital since incorporation:

Date of issue November 1989........... October 1990 .............. August 1992 ............... October 1995 .............. December 1995 ........... June 1996 ................... November 1997........... August 1998 ............... November1998 ............ August 1999 ............... February 2000............. August 2000 ............... August 2001 ............... August 2002 ............... August 2003 ...............	Type of issue Incorporation Rights issue Rights issue Rights issue and capitalization of stock dividends and employees’ bonus Rights issue Rights issue Capitalization of stock dividends and capital reserve and rights issue Capitalization of stock dividends, capital reserve and employees’ bonuses Rights issues Capitalization of stock dividends, capital reserve and employees’ bonuses Rights issue Capitalization of stock dividends and capital reserve and rights issue Capitalization of stock dividends and employees’ bonuses Capitalization of stock dividends, capital reserve and employees’ bonuses Capitalization of stock dividends and employees’ bonuses	Number of issued Shares(1) 1,200,000 3,300,000 3,518,000 3,982,000 600,000 4,000,000 13,400,000 10,000,000 4,000,000 16,000,000 10,000,000 18,150,000 29,850,000 19,700,000 30,300,000	Number of Shares outstanding after issue
			1,200,000 4,500,000 8,018,000 12,000,000 12,600,000 16,600,000 30,000,000 40,000,000 44,000,000 60,000,000 70,000,000 88,150,000 118,000,000 137,700,000 168,000,000

51

TERMS AND CONDITIONS OF THE BONDS

The following terms and conditions (except for the sentences in italics) will be endorsed on the Definitive Certificates issued in respect of the Bonds. The Global Certificate contains provisions which apply to the Bonds when they are represented by the Global Certificate, some of which modify the effect of the terms and conditions set out below. See “The Form of the Bonds”.

The issue of U.S.$40,000,000 Zero Coupon Convertible Bonds Due 2008 (the “ Bonds ”) of Ichia Technologies, Inc. (the “ Company ”) was authorized by resolutions of the board of directors of the Company adopted on July 8, 2003. The Bonds are constituted by an indenture (the “ Indenture ”) to be dated as of August 22, 2003 and to be made between the Company and J.P. Morgan Corporate Trustee Services Limited (the “ Trustee ”), which term includes any successor trustee under the Indenture for the holders of the Bonds (the “ Bondholders ”). The Company will enter into a paying and conversion agency agreement (the “ Agency Agreement ”) to be dated as of August 22, 2003 with the Trustee, JPMorgan Chase Bank, as the principal paying, transfer and conversion agent (the “ Principal Agent ”) and J.P. Morgan Bank Luxembourg S.A., as the registrar (the “ Registrar ”), paying, transfer and conversion agent, appointed thereunder (the “ Paying Agent ”, the “ Conversion Agent ” and the “ Transfer Agent ” and such expression shall include the Principal Agent) in relation to the Bonds. The Registrar, the Principal Agent, the Paying Agent, the Conversion Agent and the Transfer Agent together are referred to as the “ Agents ”. The statements in these Terms and Conditions (“ Conditions ”) include summaries of, and are subject to, the detailed provisions of the Indenture. Copies of the Indenture and the Agency Agreement are available for inspection during normal business hours at the principal office of the Trustee, being at the date hereof at Trinity Tower, 9 Thomas More Street, London E1W 1YT, England, and at the specified offices of each of the Agents. The Bondholders are entitled to the benefit of the Indenture and are bound by, and are deemed to have notice of, all the provisions of the Indenture and the Agency Agreement.

1. Status

The Bonds constitute direct, unconditional, unsubordinated and (subject to the provisions of Condition 3) unsecured general obligations of the Company and rank at least equally among themselves and (subject to Condition 3) with all other present and future direct, unconditional, unsubordinated and unsecured obligations of the Company, except as may be required by mandatory provisions of law.

2. Form, Denomination and Title

(A) Form and Denomination

The Bonds will be issued in registered form, without coupons, in denominations of U.S.$1,000 and integral multiples thereof. The Bonds 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 Bonds are not issuable in bearer form. The Bonds will initially be represented by a global certificate (the “ Global Certificate ”) deposited with, and registered in the name of a nominee for, a common depositary for Euroclear Bank S.A./N.V., as operator of the Euroclear System (“ Euroclear ”) and Clearstream Banking, socie´te´ anonyme (“ Clearstream, Luxembourg ”).

Owners of interests in the Bonds will not be entitled to receive definitive physical certificates (the “ Definitive Certificates ”) in respect of their Bonds except in the limited circumstances described in the Global Certificate. In the event that certificates do become issuable, a Definitive Certificate will be issued to each Bondholder in respect of its registered holding of Bonds. Each Bond and each Definitive Certificate will be serially numbered with an identifying number which will be recorded on the relevant Definitive Certificate and in the register of Bondholders which the Company will procure to be kept by the Registrar.

52

(B) Title

The Bonds will be registered instruments, title to which will pass only by transfer and registration in the register of Bondholders. The registered holder of any Bond 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 Definitive Certificates issued in respect of it) and no person will be liable for so treating the holder. In these Conditions, “ Bondholder ” and (in relation to a Bond) “ holder ” mean the person in whose name a Bond is registered.

3. Negative Pledge

So long as any of the Bonds remain outstanding (as defined in the Indenture) or any amount is due under or in respect of any Bond or otherwise under the Indenture, the Company shall not, and shall ensure that none of its Principal Subsidiaries (as defined below), if any, will, create or permit to be outstanding any mortgage, charge, pledge, lien or other form of encumbrance (each an “ Encumbrance ”) upon the whole or any part of its, or, as the case may be, any such Principal Subsidiary’s, if any, undertaking, property, assets or revenues, present or future, to secure for the benefit of the holders of any International Investment Securities (as defined below) (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 Bonds, 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 Indenture) of the Bondholders; provided, that the foregoing restriction shall not apply to any Encumbrance on the property or assets of the Company or any of its Principal Subsidiaries for the benefit of the holders of International Investment Securities in aggregate principal amount no greater than U.S.$5,000,000 issued by and of any of the Company’s Principal Subsidiaries to be designated in writing by the Company to the Trustee.

As used herein, the term “ International Investment Securities ” means bonds, debentures, notes or investment securities of the Company or any other person evidencing indebtedness with a maturity of not less than one year from the date thereof which (i) either (a) are by their terms payable, or confer a right to receive payment, in any currency other than New Taiwan Dollars or (b) are denominated or payable in New Taiwan Dollars and more than 50% of the aggregate principal amount thereof is initially distributed outside Taiwan, the Republic of China (the “ ROC ”) by or with the authorization of the issuer thereof and (ii) 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 ROC.

“ Principal Subsidiary ” means any Subsidiary which engages in manufacturing, production and distribution businesses, (i) whose net operating revenues, as shown by the latest audited accounts (consolidated in the case of a company which itself has subsidiaries) of such Subsidiary, are at least 10% of the net operating revenues of the Company and its consolidated Subsidiaries as shown by the latest audited consolidated accounts of the Company or (ii) whose total assets, as shown by the latest audited accounts (consolidated in the case of a company which itself has subsidiaries) of such Subsidiary are at least 10% of the total assets of the Company and its consolidated Subsidiaries as shown by the latest audited consolidated accounts of the Company, which may be acquired or formed by the Company from time to time during the term of the Bonds.

“ Subsidiary ” means any corporation or other business entity more than 50% of the outstanding voting stock of which is for the time being owned directly or indirectly by the Company.

4. No Interest

No interest will be payable on the Bonds, except as provided in Condition 10.

53

5. Transfers of Bonds; Issue of Definitive Certificates

(A) Transfers

Subject to Condition 5(D) below, a Bond may be transferred by delivering the individual Definitive Certificate(s) evidencing that Bond duly endorsed and accompanied by a form of transfer, duly completed and signed, at the specified office of any Transfer Agent (if a Definitive Certificate has been issued) or, in the case of a Bond represented by the Global Certificate, delivery at such office of a form of transfer obtainable from any of the Transfer Agents (the “ Form of Transfer ”), duly completed and executed and any other evidence that such Transfer Agent may reasonably require. In the case of a transfer of only part of a holding of Bonds in respect of which a Definitive Certificate is issued, a new Definitive Certificate shall be issued to the transferee in respect of the part transferred and a further new Definitive Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. The Form of Transfer is available at the specified office of the Transfer Agent (including the Transfer Agent in Luxembourg).

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

(B) Delivery of New Definitive Certificates

Each new Definitive Certificate to be issued upon a transfer of Bonds shall be available for delivery upon receipt by the Transfer Agent at its specified office of the relevant Definitive Certificate and the Form of Transfer. Delivery of the new Definitive Certificates shall be made at the specified office of such Transfer Agent to whom the relevant Definitive Certificate and the Form of Transfer shall have been surrendered or delivered or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant Form of Transfer or otherwise in writing, be mailed within five Business Days of receipt by the Transfer Agent of the relevant Definitive Certificates and the Form of Transfer by uninsured post at the risk of the holder(s) entitled to the new Definitive Certificates to such address as may be so specified, unless such holder(s) request(s) otherwise and pay(s) in advance to the relevant Transfer Agent the costs of such other method of delivery and/or such insurance as it may specify.

Except in the limited circumstances described in the Global Certificate, owners of interests in the Bonds represented by the Global Certificate will not be entitled to receive Definitive Certificates (if issued) in respect of their individual holdings of the Bonds.

For the purposes of this Condition 5, “ Business Day ” means a day (other than a Saturday or Sunday) on which banks are open for business in the ROC, Luxembourg and the city in which the specified office of the relevant Transfer Agent with whom a Definitive Certificate is deposited or surrendered in connection with a transfer, conversion or redemption is located.

(C) Formalities Free of Charge

Transfers of the Bonds will be effected without charge by or on behalf of the Company or any Transfer Agent, but only upon prior payment (or the giving of such indemnity as such Transfer Agent may require in respect) of any tax or other governmental charges which may be imposed in relation thereto.

(D) Restricted Transfer Periods

No Bondholder may require the transfer of a Bond to be registered (i) during the period of 15 days ending on the due date for any payment of principal and premium (if any) on the Bond; (ii) after such Bond has been called for redemption pursuant to Condition 8(B) or 8(D); (iii) after the Conversion Notice (as defined in Condition 6(B)(i)) and the individual Definitive Certificates in respect of such Bond (if issued) have been deposited for conversion pursuant to Condition 6; or (iv) following exercise of the Bondholder’s put option pursuant to Condition 8(C).

54

(E) Regulations

All transfers of Bonds and entries on the register of Bondholders will be made subject to the detailed regulations concerning transfer of Bonds (the “ Regulations ”) 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 Regulations will be mailed (at the Company’s expense) by the Registrar to any Bondholder who asks for one and will also be available at the office of the Paying, Conversion and Transfer Agent in Luxembourg and the Principal Agent.

6. Conversion

On exercise of the Conversion Right (as defined in Condition 6(A)(i)), each converting Bondholder pursuant to the election made by such Bondholder may: (i) elect to receive Shares in Taiwan, or (ii) in the event the Company establishes a depositary receipt facility following the closing and subject to compliance with the terms and conditions of the deposit agreement established with such depositary receipt facility and the relevant laws and regulations, elect to receive depositary shares representing the interests in the Shares and the Bondholder may direct the Company to procure that Shares transferred and delivered upon conversion of the Bonds are deposited with the custodian for the DR Depositary (as defined in Condition 6(A)(i)) for the issuance and delivery of the DRs (as defined in Condition 6(A)(i)) by the DR Depositary; provided that the DRs must be listed on recognizable stock exchange. Detail information in connection with the DRs, if available, will be made available to the Bondholders pursuant to Condition 15 and to the Luxembourg Stock Exchange.

In the event that the Company establishes a depositary receipt facility, it may procure additional Shares for deposit with the custodian for the DR Depositary subject to compliance with the terms and conditions of the deposit agreement and applicable laws and regulations. Such Shares could be procured by issuing new Shares, subject to compliance with applicable ROC laws and regulations and the Company’s Articles of Incorporation.

In the event the Company does establish a depositary receipt facility, the procedure for Bondholders to convert the Bonds into DRs will be substantially similar to the conversion procedure for Bondholders to convert the Bonds into Shares. In each case, the Bondholder will deposit the individual Definitive Certificate (if issued) in respect of a Bond and the Conversion Notice (as defined in Condition 6(B)(i)) with the Conversion Agent. However, in the case of conversion into DRs, the Bondholder will direct that all or some only of the Shares issuable upon conversion be deposited with the relevant DR Depositary for issuance of DRs.

The Company shall, within five Trading Days (as defined in Condition 8(B)) from the date the notification of the Conversion Notice is received by the Company or its domestic stock transfer agent from the Principal Agent, issue and deliver the Shares converted from the Bonds to the converting Bondholder or its designee, subject to the requirements relating to the conversion in the Indenture and in these terms and conditions being satisfied.

The Indenture provides, in summary, that the term “Shares” means, when used to refer to the class or classes of the Company’s capital stock into which the Bonds 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 6(C), such term also includes shares of any other class or classes of the share capital of the Company authorized after the date of the Indenture 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: Each Bondholder has the right during the Conversion Period (as defined below) to convert any Bond into Shares, credited as fully paid, and may, if a depositary receipt facility has been established and depositary receipts representing the Shares (“ DRs ”) have been issued, and subject to compliance with the terms and conditions of the relevant deposit agreement, direct in the Conversion Notice (as defined in Condition 6(B)(i)) that all or some only

55

of the Shares issuable upon conversion be deposited with the relevant DR depositary (the “ DR Depositary ”) for issuance of DRs on and subject to the terms set forth herein (the “ Conversion Right ”). Subject to and upon compliance with the provisions of this Condition, the Conversion Right attaching to any Bond may be exercised, at the option of the holder thereof and as and to the extent provided herein, at any time on or after September 22, 2003 and prior to the close of business (at the place where the Conversion Notice and the individual Definitive Certificate (if issued) in respect of such Bond are deposited for conversion) on August 12, 2008 (or if such date shall not be a business day, on the immediately preceding business day at such place) (but in no event thereafter), or, if such Bond shall have been called for redemption prior to that date, then up to the close of business (at the place aforesaid) on the seventh day prior to the date fixed for redemption thereof (or if such day 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 any period during which, under the laws of the ROC or otherwise, the Company shall close its shareholders register, which period includes (a) the 60-day period prior to the date of the annual general meeting of shareholders (“ AGM ”), (b) the 30-day period prior to an extraordinary shareholders’ meeting, (c) the period from the date following the third Trading Day (as defined in Condition 6(B)(v)) prior to the date of the Company’s notification to the Taiwan Stock Exchange (the “ TSE ”) of the record date for the determination of shareholders entitled to receipt of dividends, subscription of new Shares due to capital increase or other benefit and bonuses to such record date, or (d) such other periods determined by ROC law applicable from time to time that the Company is required to close its shareholders’ register. The Company shall procure that the Bondholders and the Trustee are given not less than seven days’ nor more than 60 days’ prior notice of any Closed Period in accordance with Condition 15.

Under current ROC law, regulation and policy, PRC persons are not permitted to hold or convert the Bonds or to register as a shareholder of the Company. Under current ROC law, a PRC person means an individual holding a passport issued by the People’s Republic of China (“ 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 and other entity organized 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 Bondholder when exercising his Conversion Right to convert the Bonds into Shares (unless the Bondholder has the option under these Conditions to elect, and elects to receive DRs with respect to the Bonds to be converted. In such case, the Shares will be delivered to and deposited with a custodian appointed by the relevant DR Depositary), unless having been a qualified foreign institutional investor (“ QFII ”) or a non-ROC resident foreign investor (“ General Foreign Investor ”) and having obtained the relevant governmental approval, will be required to first obtain such approval as a QFII or a General Foreign Investor (as appropriate), and then to appoint a local agent in the ROC with such qualifications as are set by the Securities and Futures Commission of the ROC (the “ ROC SFC ”), to open a securities trading account with a local brokerage firm, pay ROC withholding taxes, remit funds, exercise shareholders’ rights and perform such other matters as may be designated by such converting Bondholder (or its designee), on behalf of and as agent for such converting Bondholder (or its designee). Further, such non-ROC converting Bondholder must also appoint a custodian bank to hold the securities for safekeeping, make confirmation and settlement, and report all relevant information. Under existing ROC laws and regulations, without first obtaining the approval of the TSE and opening such accounts, an investor in the Bonds would not be able to receive, hold, sell or otherwise transfer the Shares into which the Bonds may have been converted on the TSE or otherwise. See “Foreign Investment and Exchange Controls in the ROC” and “Description of the Shares”.

(ii) Number of Shares and/or DRs Issuable on Conversion: The number of Shares to be issued upon conversion of any Bond will be determined by dividing the principal amount of the Bond (translated into NT Dollars at the fixed rate of NT$34.435 = U.S.$1.00) by the Conversion Price (as defined below) in effect on the Conversion Date as defined in Condition 6(B)(ii) (translated into NT Dollars at the fixed rate of NT$34.435 = U.S.$1.00). Fractional Shares will

56

not be issued or paid in cash, or in any other means. The number of DRs to be issued upon conversion of any Bond (if applicable) will be determined by dividing the principal amount of the Bond by the Conversion Price (as defined in Condition 6(A)(iii)) in effect on the Conversion Date, and multiplying or dividing, as the case may be, the Conversion Price by the number of Shares represented by each DR on the Conversion Date.

If a Definitive Certificate or Definitive Certificates in respect of more than one Bond shall be deposited for conversion at any one time by the same Bondholder, the number of Shares (and/or DRs, if applicable) to be issued upon conversion thereof will be calculated on the basis of the aggregate principal amount of the Bonds in respect of which the Definitive Certificate(s) were so deposited. Fractions of Shares (and/or DRs, if applicable) 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 (and DRs, if applicable) by operation of law or otherwise occurring after August 22, 2003, the Company will upon conversion of the Bonds pay in U.S. Dollars a sum equal to such portion of the principal amount of the Bond or Bonds converted as corresponds to any fraction of a Share (and/or DR, if applicable) not issued as aforesaid if such sum exceeds U.S.$10. For the purpose of calculating the amount of such payment, the Company shall use the exchange rate referred to in this Condition 6(A)(ii).

(iii) Initial Conversion Price: The price at which Shares will be issued upon conversion (the “ Conversion Price ”) will initially be NT$58.0 per Share, which is equivalent to U.S.$1.68 per Share based on the fixed exchange rate of NT$34.435 = U.S.$1.00 but will be subject to adjustment in the manner provided in Conditions 6(C), 6(D) and 6(E). The price at which DRs will be issued upon conversion, in the event that the Company establishes a depositary receipt facility, will be determined by multiplying, or dividing, as the case may be, the Conversion Price by the number of Shares represented by each DR on the Conversion Date and will be subject to adjustment in the manner provided in Conditions 6(C), 6(D) and 6(E). In the event that a depositary receipt facility is established and DRs may be issued upon conversion, the term “ Conversion Price ” shall be understood to mean the price at which DRs will be issued or the price at which Shares will be issued, as the situation dictates.

(iv) Revival on Default: Notwithstanding the provisions of Condition 6(A)(i), if there shall be default in making payment in full in respect of any Bond which shall have been called for redemption prior to August 22, 2008 on the date fixed for redemption thereof, the Conversion Right attaching to such Bond will continue to be exercisable up to and including the close of business (at the place where the relevant individual Definitive Certificate (if issued) in respect of such Bond and the Conversion Notice (as defined in Condition 6(B)(i)) are deposited for conversion) on the date upon which the full amount of the monies payable in respect of such Bond has been duly received by the Trustee or the Principal Agent and notice of such receipt has been duly given to the Bondholders.

(B) Conversion Procedure

(i) Exercise Procedure: To exercise the Conversion Right attaching to any Bond, the holder thereof must complete, execute and deposit at its own expense between 9:00 a.m. and 3:00 p.m. (local time at the specified office referred to below) on any business day (as defined below) during the Conversion Period at the specified office of a Conversion Agent outside of the ROC, 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 relevant individual Definitive Certificate (if issued) and any certificates and other documents as may be required under the law of the ROC or the jurisdiction in which such Conversion Agent is located and any amount to be paid by the Bondholder. A Conversion Notice, or the relevant individual Definitive Certificate (if issued), deposited outside the hours specified above or on a day which is not a business day at the place of the specified office of the relevant Conversion Agent shall for all purposes be deemed to have been deposited with the Conversion Agent between 9:00 a.m. to 3:00 p.m. on the next business day.

57

Bondholders who deposit a Conversion Notice during a Closed Period will not be permitted to convert their Bonds until the Trading Day (as defined in Condition 8(B)) 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 Bonds. Such Bondholders or the relevant DR Depositary, as applicable, will not be registered as holders of Shares until the Conversion Date.

If a DR facility has been established and DRs have been issued, the Conversion Notice shall contain an option for the Bondholder to elect to receive Shares and/or DRs upon such conversion. The Conversion Notice shall contain, inter alia , an appointment of a local agent by such converting Bondholder and an irrevocable instruction to exchange for Shares issued pursuant to Condition 6(B)(iii), as soon as Shares are available. A Conversion Notice once deposited may not be withdrawn without the consent in writing of the Company. The Company shall immediately notify in writing the Conversion Agents, Principal Agent and Trustee of such written consent of the Company accompanied by the relevant Conversion Notice. The price at which such Bonds will be converted will be the Conversion Price in effect on the Conversion Date.

In this Condition, “ business day ” means a day on which commercial banks are open for business in London, and in the place where the Conversion Agent with whom the relevant individual Definitive Certificate (if issued) and the Conversion Notice are deposited is open for business.

The Company may have certain disclosure obligations and reporting obligations under ROC laws and regulations if;

• (a) the person to be registered as a shareholder is a “related party” of the Company under Statements of Financial Accounting Standard No. 6 of the ROC and such person beneficially owns the Shares issued upon the conversion of Bonds; or

• (b) the person to be registered as a shareholder owns the Shares issued upon the conversion of Bonds and such Shares exceed 10% of the total number of Shares expected to be issued upon conversion of all the Bonds at the initial Conversion Price.

As a result of such disclosure obligations, the Conversion Agents may, at the request of the Company, require the converting Bondholders to disclose the name of the person to be registered as the shareholder and to provide proof of identity and genuineness of any signature and other documents as a condition precedent to the conversion of the Bonds. The conversion of Bonds may be delayed until the relevant Conversion Agent receives the requested information and satisfactory evidence of the compliance with all laws and regulations by the Bondholders. The information the Bondholder is required to provide may include the name and nationality of the person to be registered as shareholder and the total number of Shares which such person has or will receive in connection with the Bonds such person is converting or has converted in the past.

For the avoidance of doubt, any additional information which the Company may request the Conversion Agent to obtain from the converting Bondholders so as to comply with its disclosure and reporting obligations under this Condition (other than that which is required to be provided by the Bondholders under the Conversion Notice as set out in Exhibit A to the Agency Agreement as applicable at the time when such request is made by the Company) shall not be considered as any certificate or other documents as may be required under applicable law or otherwise pursuant to this Condition 6 or a relevant deposit agreement for the purposes of the determination of the “ Conversion Date ” by the Principal Agent or the Converting Agent under section 6(d)(iii) of the Agency Agreement.

(ii) Taxes and Expenses; Deposit Date and Conversion Date: As conditions precedent to conversion, together with the Conversion Notice, the Bondholder must pay to the relevant Conversion Agent all stamp, issue, registration, excise and similar taxes or duties or transfer costs (if any) arising on conversion in the country in which the Bond is deposited for conversion, or payable in any jurisdiction consequent upon the issue or delivery of Shares (and/or DRs, if

58

applicable) or any other property or cash upon conversion to or to the order of a person other than the converting Bondholder. Except as aforesaid, the Company will pay the expenses arising in the ROC on the issue of Shares (and/or DRs, if applicable) on conversion of Bonds and all charges of the Conversion Agents (and the relevant DR Depositary, if applicable) in connection therewith as provided in the Indenture and Agency Agreement. The date on which any Definitive Certificate and the Conversion Notice (in duplicate) relating thereto, together with any certificates and other documents as may be required under applicable law or otherwise pursuant to this Condition 6 or a relevant deposit agreement (if applicable), are deposited with a Conversion Agent and the payments, if any, required to be paid by the Bondholder are made is hereinafter referred to as the “ Deposit Date ”. The “ Conversion Date ” applicable to a Bond shall mean the next day following the Deposit Date, which day both is a Trading Day as defined in Condition 8(B) and occurs during the Conversion Period. Bondholders who deposit a Conversion Notice during a Closed Period will not be permitted to convert their Bonds until the Trading Day following the last day of that Closed 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 Bondholder (or its designee) as indicated in the Conversion Notice to have become the holder of record of the number of Shares to be issued upon such conversion to such holder (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 6(B)(v), the rights of such converting Bondholder as a Bondholder with respect to such Bonds converted shall cease (except rights arising under Condition 6(B)(iv) and 6(B)(vi)).

In the event that a converting Bondholder has the option under these Conditions to elect, and elects, to receive DRs, with effect from the opening of business in the ROC on the Conversion Date, the Company will deem the relevant DR Depositary to have become the holder of record of the number of Shares represented by such DRs 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 upon delivery by the relevant DR Depositary to the Bondholder of the number of DRs into which the Bonds are convertible, subject to Condition 6(B)(v), the rights of such converting Bondholder as a Bondholder with respect to such Bonds converted shall cease (except rights arising under Condition 6(B)(iv) and 6(B)(vi)).

(iv) Availability of Shares: The Company shall, for the benefit of Bondholders, ensure that sufficient Shares are available as soon as possible, but in any event within five Trading Days (as defined in Condition 6(B)(v)) from the date the notification of the Conversion Notice is received by the Company or its domestic stock transfer agent from the Principal Agent.

(v) Delivery of Shares and/or DRs: On the Conversion Date, the Company will register the converting Bondholder (or its designee) or the relevant DR Depositary (or its designee), as applicable, in the Company’s register of shareholders as the owner of the number of Shares to be issued pursuant to Condition 6(B)(iii) upon conversion of such Bonds and, subject to any applicable limitations then imposed by ROC laws and regulations, according to the request made in the relevant Conversion Notice, procure that, as soon as practicable, and in any event within five Trading Days from the date the notification of the Conversion Notice is received by the Company or its domestic stock transfer agent from the Principal Agent, deliver to the local agent appointed by the converting Bondholder, and/or to the relevant custodian, as agent for the relevant DR Depositary (if the converting Bondholder has the option under these Conditions to elect, and elects, to receive DRs), the relevant Shares, through book-entry transfer to the account registered in the name of the converting Bondholder or the name specified for that purpose in the relevant Conversion Notice and established by the relevant local agent for the conversion of the Bonds, at the Taiwan Securities Central Depositary Co., Ltd. or by physical delivery, together with any other property or cash (including, without limitation, cash payable pursuant to Condition 6(A)(ii)) required to be delivered upon conversion and such assignments and other documents (if any) as may be required by law to effect the delivery thereof. If the converting Bondholder has not created the required account, the Company will deliver the Shares after such account has been set up. For the purpose of this Condition 6(B)(v), the term “ Trading Day ” means a day on which the TSE is open for business.

59

In the event that a converting Bondholder has the option under these Conditions to elect, and elects, to receive DRs on exercise of its Conversion Right, the Company agrees to deliver to and deposit with the relevant custodian, as agent for the relevant DR Depositary, a sufficient number of Shares to represent the DRs such Bondholder is entitled to receive upon conversion. Such Shares will be registered in the name of the relevant DR Depositary or its nominee and deposited in accordance with the terms of the relevant deposit agreement.

(vi) Retroactive Adjustment of Conversion Price: If the Conversion Date in relation to any Bond 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 6(C) and the Indenture and the relevant Conversion Date falls on a date when the relevant adjustment has not been reflected in the Conversion Price, the Company will, within 20 days after the effective date of such adjustment of the Conversion Price, issue and deliver by book-entry transfer or physical delivery to the local agent appointed by the converting Bondholder and/or, if applicable, to the relevant custodian, as agent for the relevant DR Depositary such number of Shares as is equal to the excess of the number of Shares that would have been required to be issued upon conversion of such Bond 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 6(B)(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 and regulations of the ROC, the converting Bondholders will be entitled to the annual dividend distributions or other benefits if the Conversion Date falls prior to the relevant record date (and the relevant closure of shareholders’ register) for determining the identity of shareholders who are entitled to such dividend distributions.

(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 a Conversion Agent having specified offices in London, the United Kingdom and, so long as the Bonds are listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, in Luxembourg. 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 Bondholders in accordance with Condition 15 and to the Luxembourg Stock Exchange.

(C) Adjustments to Conversion Price

The Conversion Price will be subject to adjustment in the manner set forth in the Indenture upon the occurrence of certain events set out in the Indenture, including:

• (i) the making of a free distribution or bonus issue of Shares including distribution from retained earnings or capital reserve;

• (ii) subdivisions, consolidations or reclassifications of Shares;

• (iii) the declaration of a dividend in Shares;

• (iv) the grant, issue or offer to the holders of Shares of rights or warrants to subscribe for or purchase Shares at less than the then Current Market Price (as defined below) or to subscribe for or purchase any securities convertible into or exchangeable for Shares at less than the then Current Market Price;

• (v) the distribution to the holders of Shares of evidences of indebtedness of the Company or of shares of capital stock of the Company (other than Shares) or of assets (other than regular periodic dividends in cash) or of rights or warrants to subscribe for or purchase shares or securities (other than those mentioned in (iv) above);

60

• (vi) the issue of securities (other than the Bonds and those mentioned in (iv) above) convertible into or exchangeable for Shares at less than the then Current Market Price or of rights or warrants (other than those mentioned in (iv) above) to subscribe for or purchase Shares at less than the then Current Market Price or to subscribe for or purchase securities convertible into or exchangeable for Shares at less than the then Current Market Price;

• (vii) the issue of Shares (other than Shares issued upon conversion of convertible bonds, including the Bonds, or in any of the circumstances described above but including Shares issued under any employee bonus or profit-sharing arrangements) at less than the then Current Market Price; and

• (viii)any other event or circumstance which would have in the determination of the Company or the Trustee an analogous effect to any of the events in (i) to (vii) above including, but not limited to, issues of receipts or certificates entitling holders to receive securities

For the purposes of this Condition 6(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 on the TSE translated into U.S. Dollars at the Prevailing Rate for the 20 consecutive Trading Days (as defined in Section 8(m) of the Indenture) before such day. 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. For purposes of this Condition 6(C), the “ closing price ” of the Shares for each Trading Day 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 last available reported transaction price of the Shares on the TSE in effect on the Trading Day immediately preceding such day or, if the Shares are not listed or admitted to trading on such exchange, 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.

No adjustment will be made where such adjustment would be less than 1% of the Conversion Price then in effect; provided, however, that any adjustment that would otherwise be required to be made will be carried forward and taken into account in determining any subsequent adjustment. Any adjustment will be notified promptly by the Company to the Bondholders in accordance with Condition 15 and to the Luxembourg Stock Exchange.

The Indenture provides that 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 required by this Condition 6(C) unless under applicable law then in effect Bonds may be converted at such reduced Conversion Price into legally issued, fully paid and non-assessable Shares.

The Trustee will not be obliged to monitor whether any event has occurred which might fall within Condition 6(C)(i) to (viii) above and until it has actual knowledge by way of express notice in writing from the Company to the contrary, shall be entitled to assume that none has.

(D) Conversion Price Reset

The Conversion Price shall be adjusted downward on the 45th day prior to February 28, 2004, February 28, 2005, February 28, 2006, February 28, 2007 and February 28, 2008 (the “ Reset Dates ” and each a “ Reset Date ”), in the event that the average closing price of the Shares on the TSE translated into U.S. Dollars at the then Prevailing Rate (as defined below) for 30 consecutive Trading Days immediately prior to a Reset Date (the “ Average Closing Price ”) is less than the Conversion Prices then in effect on the relevant Reset Date, in accordance with the following formula:

[Exchan][g][e][Rate] Adjusted Conversion Price =[Fixed] x Average Closing Price Prevailing Rate

61

Such Adjusted Conversion Price shall be rounded upwards, if necessary, to the nearest NT$0.01, provided that:

• (i) any adjustment to the Conversion Price pursuant to this Condition 6(D) shall be limited so that the Conversion Price adjusted in accordance with this Condition 6(D) shall not be less than 80% of the initial Conversion Price (as adjusted to reflect any adjustments required under Condition 6(C) above which may have occurred prior to the relevant Reset Date);

• (ii) the provisions of Condition 6(C) shall apply mutatis mutandis to this Condition 6(D) to ensure that appropriate adjustments shall be made to any Closing Price to reflect any adjustments made to the Conversion Price in accordance with Condition 6(C) during the period of calculation of the Average Closing Price; and

• (iii) for the avoidance of doubt (x) any adjustments to the Conversion Price made pursuant to this Condition 6(D) shall only be downward adjustments and (y) an adjustment may be made in respect of a Reset Date notwithstanding that an adjustment may have been made in respect of a preceding Reset Date, if any.

The “ Prevailing Rate ” for the translation of the Closing Prices shall be the arithmetic average of the closing rate for the purchase of U.S. Dollars with NT Dollars quoted by Taipei Forex Inc. at the close of business on each day of the 20 consecutive Trading Days preceding the relevant Reset Date. For the purpose of the formula in this Condition, the Prevailing Rate shall be expressed as the number of NT Dollars per U.S.$1.00. The “Fixed Exchange Rate” is NT$34.435 = U.S.$1.00.

Any such adjustment shall become effective as of the relevant Reset Date. Any adjustment will be notified promptly by the Company to the Bondholders in accordance with Condition 15 and to the Luxembourg Stock Exchange.

(E) Alternative Conversion Price Reset

To stimulate Bondholders’ interest to exercise their Conversion Right, Condition 6(E) provides an alternative. This is set in accordance with the regulations for underwriters’ assistance for public companies in the issuance of securities, which were amended by the Chinese Securities Association and were then filed for recordation with the ROC SFC. The alternative Conversion Price (the “ Alternative Conversion Price ”) and the period of exercise (i.e. seven Trading Days) are set based on that regulations.

The Company may (but shall not be obliged to) grant the Bondholders options, within a seven Trading-Day period (the “ Alternative Conversion Period ”) starting from the date to be determined by the Company after July 22, 2005 and July 22, 2008 (each an “ Alternative Reset Date ”) and before the relevant Put Date (as defined in Condition 8(C)) or the Maturity Date (as defined in Condition 8(A)), to convert the Bonds into Shares based on an Alternative Conversion Price equal to 90.9% of the then Market Price.

For the purpose of this Condition 6(E), “ Market Price ” is the lowest among the average closing prices of the Shares on the TSE translated into U.S. Dollars at the Prevailing Rate for 10, 15 and 20 Trading Days immediately preceding the Alternative Reset Date before the applicable Put Date or the Maturity Date.

The Company shall give Bondholders and the Luxembourg Stock Exchange an Alternative Conversion Price reset notice (“ Alternative Reset Notice ”) as soon as practicable after the applicable Alternative Reset Date in accordance with Condition 15 and shall, inter alia , state:

• (i) that the Alternative Conversion Price is only in effect during the Alternative Conversion Period;

• (ii) the Market Price;

62

(iii) the Alternative Conversion Price; and

• (iv) the Alternative Conversion Period.

The Alternative Conversion Prices will only be applicable within the relevant seven Trading-Day Alternative Conversion Period described in this Condition 6(E). The Conversion Price will be applicable to any conversion before or after such Alternative Conversion Period.

(F) Mergers; Disposals

The Company will not merge, amalgamate or consolidate with or into any other corporation or entity where the Company is not 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 Bondholders of such event in accordance with Condition 15 and the Company and such corporation, entity or person shall have executed an indenture supplemental to the Indenture in form and substance satisfactory to the Trustee providing that such corporation, entity or person shall assume the obligations of the Company under the Bonds, the Indenture and the Agency Agreement and providing that each Bond 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 (and/or DRs, if applicable) into which such Bond would have been convertible immediately prior to such consolidation, amalgamation, merger, sale or transfer (assuming for such purpose that the Bonds 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 Indenture. Such supplemental indenture 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 6(F) will apply in the same way to any subsequent or further consolidations, amalgamations, mergers, sales or transfers.

(G) Conversion Undertakings

(i) Depositary receipts: Subject to the ROC SFC’s separate approval, if required, the Company may, at its option, but is not required to, make arrangements satisfactory to the Trustee for the Bonds to be converted into depositary receipts or other scrip evidencing Shares. Any such arrangements shall be in addition to the provisions of these Conditions relating to conversion into Shares.

The Company has not at the date of this Offering Circular established or authorized the establishment of any depositary receipt facility. Accordingly, conversion into DRs is not currently available. If in the future a depositary receipt facility is established or authorized by the Company, the Company will, to the extent permitted by applicable laws and regulations, make arrangements satisfactory to the Trustee for Shares issued upon conversion of Bonds to be accepted for deposit (at the option of the converting Bondholder) into such depositary receipt facility, subject always to the terms of such depositary receipt facility, which terms may include certification or other requirements as conditions to the acceptance for deposit of Shares issued upon conversion of Bonds. There can be no assurance that the Company will in the future establish or authorize any depositary receipt facility or that any arrangements for the deposit of Shares into such depositary receipt facility would be available to all Bondholders.

The Company shall give notice to the Conversion Agents, the Principal Agent, the Trustee and the Bondholders in accordance with Condition 15 and to the Luxembourg Stock Exchange within 14 days of the establishment of any depositary receipt facility.

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

63

7. Payments

(A) Principal, Premium and Interest (if any)

Payment of principal, premium and interest (if any) will be made against surrender of the relevant certificate at the specified office of any Agent by transfer to the registered account of the Bondholder or by U.S. Dollar check drawn on a bank in The City of New York, U.S.A., mailed (provided that the Principal Agent shall have received the relevant funds in full from the Company in accordance with the Agency Agreement) to the registered address of the Bondholder if it does not have a registered account. Payments of principal and premium will only be made after surrender of the relevant individual Definitive Certificate (if issued) at the specified office of any Agent.

(B) Registered Accounts

A Bondholder’s registered account means the U.S. Dollar account maintained by or on behalf of it with a bank in The City of New York, U.S.A., details of which appear on the register of Bondholders at the close of business on the second business day (as defined in Condition 7(F)) before the due date for payment and a Bondholder’s registered address means its address appearing on the register of Bondholders 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 9. No commissions or expenses shall be charged to the Bondholders 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 date is not a business day, for value the next following business day) will be initiated and, where payment is to be made by check, the check will be mailed (provided that the Principal Agent shall have received the relevant funds in full from the Company in accordance with the Agency Agreement), on the later of the due date for payment and the business day on which the relevant Definitive Certificate is surrendered (if applicable) at the specified office of an Agent.

(E) Payment Delay

Bondholders 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 Bondholder is late in surrendering its Definitive Certificate (if applicable) or if a check mailed in accordance with this Condition arrives after the due date for payment.

(F) Business Days

In this Condition, “ business day ” means a day on which commercial banks are open for business in The City of New York, U.S.A. and London, United Kingdom and, in the case of the surrender of a Definitive Certificate, in the place where the Definitive Certificate is surrendered.

(G) Partial Payments

If the amount of principal and premium which is due on the Bonds is not paid in full, the Registrar will annotate the register of Bondholders with a record of the amount of principal and/or premium, in fact paid.

Distribution of payments with respect to the Global Certificates held through Euroclear or Clearstream, Luxembourg will be made to the holders holding through participants of Euroclear

64

or Clearstream, Luxembourg, as the case may be, and will be credited by Euroclear or Clearstream, Luxembourg, as the case may be, to the cash accounts of the participants of Euroclear or Clearstream, Luxembourg, in accordance with the relevant system’s rules and procedures, to the extent received by the Principal Agent.

8. Redemption, Purchase and Cancellation

(A) Redemption at Maturity

Unless previously redeemed, converted or repurchased and cancelled as herein provided, the Company will redeem the Bonds at their principal amount in U.S. Dollars on August 22, 2008 (the “ Maturity Date ”). The Bonds may be redeemed in whole or in part prior to that date only as provided in Condition 8(B), (C) and (D) below (but without prejudice to Condition 10).

(B) Redemption at the Option of the Company

On or at any time after August 22, 2005, the Company may, having given not less than 30 days’ nor more than 60 days’ notice to the Bondholders in accordance with Conditions 8(H) and 15 (which notice will be irrevocable), redeem all or part of the Bonds at their principal amount if the closing price of the Shares translated into U.S. Dollars at the Prevailing Exchange Rate for each of the 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 130% of the Conversion Price then in effect, translated into U.S. Dollars at the fixed exchange rate of NT$34.435 = U.S.$1.00, on each such Trading Day. If there shall occur an event giving rise to a change in the Conversion Price during any such 20 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 Trading Day period.

Notwithstanding the foregoing paragraph, the Company may, at any time, redeem all or some of the Bonds, upon not less than 30 nor more than 60 days’ notice to the Bondholders, at their principal amount if at least 90% in principal amount of the Bonds has already been redeemed, converted, or purchased and cancelled.

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

The term “ Trading Day ” means a day on which the TSE is open for business but does not include a day when (a) no last transaction price or closing bid and offered prices (as referred to below) are reported and (b) (if the Shares are not listed or admitted to trading on such exchange) no closing bid and offered prices (as referred to below) are furnished as aforesaid. The “ closing price ” of the Shares for each Trading Day 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 last available reported transaction price of the Shares on the TSE in effect on the Trading Day immediately preceding such day or, if the Shares are not listed or admitted to trading on such exchange, 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 by the Company for the purpose. The term “ Prevailing Exchange Rate ” in this Condition 8(B) means the closing rate of U.S. Dollars to NT Dollars quoted by Taipei Forex Inc. at the close of business on any relevant Trading Day.

(C) Redemption at the Option of Bondholders

Unless previously redeemed, converted or repurchased and cancelled as herein provided, the Company will, at the option of the holder of any Bond, redeem all or part of the Bonds held by that Bondholder on August 22, 2005 (“ Put Dates ” and each a “ Put Date ”) at the principal amount.

65

To exercise such option the holder must deposit the individual Definitive Certificate in respect of such Bond (if issued) with any Agent and a duly completed redemption notice in the form obtainable from any of the Agents not more than 60 nor less than 30 days prior to the relevant Put Date. No Bond so deposited may be withdrawn (except as provided in the Agency Agreement) without the prior written consent of the Company and such written consent must be notified by the Company to the Principal Agent no later than seven days prior to the relevant Put Date or the Delisting Put Date. The Company shall give the Bondholders not more than 60 nor less than 30 days’ notice of the commencement of the period for the deposit of individual Definitive Certificates (if issued) for redemption and the redemption notice in accordance with Condition 15.

For the purpose of this Condition 8(C), “ business day ” shall mean a day on which commercial banks are open for business in London, New York City and Taipei.

(D) Redemption for Taxation Reasons

At any time, the Company may, having given not less than 30 nor more than 60 days’ notice to the Bondholders in accordance with Conditions 8(H) and 15 (which notice shall be irrevocable) redeem all but not some of the Bonds at their principal amount, if (i) the Company determines 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 9 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 August 22, 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 60 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 Bonds then due. Prior to the giving of any notice of redemption pursuant to this paragraph, the Company shall deliver to the Trustee a certificate signed by a director 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 conditions precedent set out in (ii) above, in which event it shall be conclusive and binding on the Bondholders. Bonds in respect of which a notice of redemption has been given under Condition 8(B) and Condition 8(C) shall not be affected by any notice given subsequently under this Condition 8(D).

(E) Purchase

The Company may at any time and from time to time repurchase Bonds in the open market or otherwise. Bonds so repurchased will be surrendered and deemed cancelled and may not be reissued or resold.

(F) Selection of Bonds

In the case of redemption of some only of the Bonds pursuant to Condition 8(B), where individual Definitive Certificates have been issued, the Bonds to be redeemed will be selected individually by lot by the Principal Agent, in such place as the Trustee shall approve and in such manner as the Trustee shall deem to be appropriate and fair not more than 60 days and not less than 30 days prior to the date fixed for redemption or, where the Bonds are represented by a Global Certificate, in accordance with the relevant rules of the relevant clearing system.

(G) Cancellation

All Bonds which are redeemed or converted or purchased and surrendered to any Agent will forthwith be cancelled in accordance with the provisions of the Agency Agreement. Definitive Certificates in respect of all Bonds cancelled will be forwarded to or to the order of the Principal Agent and such Bonds may not be reissued or resold.

66

(H) Redemption Notices

All notices to Bondholders given by or on behalf of the Company pursuant to this Condition 8 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 Bonds 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 Bonds called for redemption.

9. Taxation

• (A) All payments of principal, premium and interest (if any) by the Company will 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 premium or interest payments at the rate of up to and including 20%, the Company will increase the amount of premium or interest (if any) paid by it to the extent required so that the net amount of premium or interest (if any) received by Bondholders (without prejudice to Condition 7) would be equal to the amounts which would have been receivable in the absence of any such withholding or deduction.

• (C) In the event that any such withholding or deduction in respect of principal or any additional withholding or deduction in excess of 20% in respect of interest (if any) or premium is required, the Company will pay such additional amounts by way of principal, premium and interest (if any), as will result in the receipt by the Bondholders 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 Bond:

• (i) to, or on behalf of, a holder who is subject to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of his being connected with the ROC otherwise than merely by holding such Bond or by the receipt of principal in respect of the Bond;

• (ii) to or on behalf of a Bondholder or its beneficial owner to the extent that such Bondholder or beneficial owner would not be liable for or subject to such deduction or withholding by making a declaration of non-residence or other claims for exemption or deduction to the relevant tax authorities if such Bondholder or beneficial owner is eligible to make such declaration or claim and, such Bondholder or beneficial owner fails to timely do so; or

• (iii) if the individual Definitive Certificate in respect of such Bond (if issued) 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 Definitive Certificate for payment on the last day of such 30 day period. For this purpose, the “ relevant date ” in relation to any Bond 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 by the Trustee or the Principal Agent on or prior to such due date) the date on which notice is duly given to the Bondholders that such monies have been so received.

The Company will not pay any additional amount if the registered Bondholder is a fiduciary, partnership or other than the sole beneficial owner of any payment to the extent that a beneficiary or settlor with respect to a fiduciary, a member of a partnership or the beneficial owner of that payment would not have been entitled to such additional amount if it had been the registered Bondholders.

67

• (D) References in these Conditions to principal, premium or interest shall be deemed also to refer to any increased or additional amounts which may be payable in respect thereof under this Condition or any undertaking given in addition to or substitution for it under the Indenture.

10. Events of Default

The Trustee at its discretion may, and if so requested in writing by the holders of not less than 25% in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall (but subject to it first being indemnified or secured by the holders to its satisfaction), give notice in writing to the Company that the Bonds are immediately due and payable, if any of the following events (an “ Event of Default ”) shall have occurred and be continuing:

• (i) there is failure to pay the principal of or any premium on any of the Bonds within 15 business days after the same shall become due and payable in accordance with these Conditions; or

• (ii) the Company defaults in performance or observance of or compliance with any of its other obligations (other than the covenant to pay the principal, premium or interest (if any) in respect of the Bonds) set out in the Bonds or the Indenture 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 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 Principal Subsidiaries, 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 an event of default (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 Principal 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 Condition 10(iii) have occurred and is continuing equals or exceeds U.S.$5,000,000 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 Principal Subsidiaries are/is 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) an execution by a court having jurisdiction is levied or enforced or sued out, or other legal 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 Principal Subsidiaries and in any such case is not discharged or stayed within 60 days of having been so levied, sued out, commenced or issued, unless the Company or such Principal Subsidiary is contesting such proceedings in accordance with relevant laws and regulations; or

• (v) any person entitled to the benefit thereof shall institute appropriate legal proceedings to enforce any Encumbrance upon the whole or any substantial part of the assets or revenues of the Company or any Principal Subsidiary and the same is not stayed, discharged, released or satisfied (as the case may be) within 60 days of such proceedings, unless the Company or such Principal Subsidiary is contesting such proceedings in accordance with relevant laws and regulations; or

68

• (vi) the Company becomes bankrupt or insolvent, or consents to or suffers the appointment of an administrator, liquidator (except for the purpose of and followed by a voluntary solvent reorganization, merger, consolidation, amalgamation or other similar arrangement the terms of which have previously been approved by the Trustee or an Extraordinary Resolution of the Bondholders) or receiver (or other similar official) in bankruptcy or insolvency of the Company or in respect of the whole or any substantial part of the undertakings, property, assets or revenues of the Company or the Company stops, suspends or threatens to stop or suspend payment of all or a material part of (or of a particular type of) its debts; or

• (vii) an order issued by a court with competent jurisdiction is made or an effective resolution passed by the Company for the winding-up or dissolution of the Company (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 the Trustee or an Extraordinary Resolution of the Bondholders); or

• (viii) the Company shall merge, amalgamate or consolidate with any other corporation or entity (with the Company not being the continuing entity) or 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, unless the Company shall have notified the Bondholders of such event in accordance with Condition 15 (with a copy of such notice sent to the Luxembourg Stock Exchange) and the Company and such corporation, entity or person shall have executed an indenture supplemental to the Indenture in form and substance satisfactory to the Trustee and the Agents providing that such corporation, entity or person shall assume the obligations of the Company under the Bonds, the Indenture and the Agency Agreement and providing that each Bond 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 Bond would have been convertible immediately prior to such consolidation, amalgamation, merger, sale or transfer (assuming for such purpose that the Bonds 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 Indenture; provided that such agreement by such other person shall not be required if such assumption shall be effective by operation of law; or

• (ix) 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

• (x) proceedings shall have been initiated against the Company or any of its Principal Subsidiaries under any applicable bankruptcy, insolvency or reorganization law and such proceedings shall not have been discharged or stayed within a period of 90 days (or such longer period as the Trustee may consider appropriate on the advice of its counsel), unless the Company or such Principal Subsidiary is contesting such proceedings in accordance with relevant laws and regulations; or

• (xi) any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorization, exemption, filing, license, 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 Bonds and the Indenture, and (ii) ensure that those obligations are legally binding and enforceable (subject to the qualifications set out in the legal opinion issued in connection therewith), and such case is incapable of remedy or is not in the opinion of the Trustee remedied within such period (being not less than 30 days) as the Trustee may consider reasonable; or

• (xii) any event occurs which under the laws of the ROC has an analogous effect to any of the events referred to in the foregoing paragraphs.

69

For the purposes of Condition 10(iii) above, any indebtedness which is in a currency other than U.S. Dollars shall be translated into U.S Dollars at the spot rate for the sale of U.S. 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 U.S. Dollars and relevant currencies.

Upon any such notice being given to the Company by the Trustee, the Bonds will immediately become due and payable at 100% of their principal amount, and overdue interest on the amounts due, from the date on which such amounts first become due, shall be payable, to the extent permitted by law, at the rate of 6.0% per annum.

The term “ business day ” for the purpose of this Condition 10 means a day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets are open for business in Taipei, Taiwan, ROC.

11. Prescription

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

Under the ROC law, claims in respect of (a) principal and (to the extent not deemed as interest) premium (if any) 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.

12. Enforcement

At any time after the Bonds 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 Bonds together with premium (if any) with respect thereto and to enforce the provisions of the Indenture, 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 25% in principal amount of the Bonds then outstanding or so directed by an Extraordinary Resolution and (b) it shall first have been indemnified and/or secured to its satisfaction. No Bondholder 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 Bonds.

13. Meetings of Bondholders, Modification and Waiver

(A) Meetings

The Indenture contains provisions for convening meetings of Bondholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Bonds or the provisions of the Indenture. The quorum for passing an Extraordinary Resolution will be two or more persons holding or representing over 50% in principal amount of the Bonds for the time being outstanding or, at any such meeting which has been adjourned, two or more persons being or representing Bondholders whatever the principal amount of the Bonds so held or represented unless the business of such meeting includes consideration of proposals, inter alia , (i) to modify the maturity date of the Bonds, (ii) to reduce or cancel the amount of principal, premium or interest (if any) payable in respect of the Bonds, (iii) to change the currency of payment of the Bonds, (iv) to modify or cancel the right to convert the Bonds into Shares (except in accordance with Condition 6(B) and 13(B)) or to modify the circumstances in which the Bonds may be redeemed or converted at the option of the Company

70

or to shorten the Conversion Period, (v) to modify the provisions relating to the resetting of the Conversion Price, (vi) to modify the provisions concerning the quorum required at any meeting of the Bondholders or the majority required to pass an Extraordinary Resolution or sign a resolution in writing, in which case the consent of each Bondholder is required. An Extraordinary Resolution passed at any meeting of Bondholders will be binding on all Bondholders, whether or not they are present at the meeting, and will be conclusive and binding upon all future Bondholders.

The Indenture provides that a written resolution signed by or on behalf of the holders of not less than 90% of the aggregate principal amount of Bonds outstanding shall be as valid and effective as a duly passed Extraordinary Resolution.

The Company shall prepare a supplement to this Offering Circular and notify the Bondholders (and the Luxembourg Stock Exchange) in accordance with Condition 15 in respect of any proposed Extraordinary Resolution relating to items (i) to (vi) above in this Condition 13(A).

(B) Modification of Conversion Right

Notwithstanding Condition 13(A)(iv) above, the Trustee may agree, without the consent of the Bondholders, to any modification to or variation of the Conversion Rights (including modification of and additions to the declarations and statements to be made by Bondholders 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 its opinion, materially prejudicial to the interests of the Bondholders. The Trustee’s agreement may be subject to any condition which the Trustee requires including, but not limited to, obtaining, at the sole expense of the Company, an opinion of a merchant or investment bank or legal or other expert. Any such modification shall be binding on all the Bondholders. The Company shall prepare a supplement to this Offering Circular and notify the Bondholders of such modification in accordance with Condition 15 and to the Luxembourg Stock Exchange.

(C) Other Modifications and Waivers

The Trustee may (but shall not be in any way be obligated to) agree, without the consent of the Bondholders, to (i) any modification (except as mentioned above) of, or the waiver or authorization of any breach or proposed breach of, the Bonds or the Indenture which is not, in the opinion of the Trustee, materially prejudicial to the interests of the Bondholders or (ii) any modification of the Bonds or the Indenture 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. In connection with such modification, waiver or authorization, the Trustee may require (at the sole expense of the Company) a certificate from the Company certifying, and a legal opinion advising the Trustee, that the modification, waiver or authorization 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 authorization will be binding on the Bondholders and, unless the Trustee agrees otherwise, any such modification will be notified by the Company to the Bondholders in accordance with Condition 15 and to the Luxembourg Stock Exchange.

71

(D) Exercise of Trustee’s Functions

In connection with the exercise of its functions, powers, trusts, authorities and discretions (including but not limited to those in relation to any proposed modification, authorization or waiver) the Trustee shall have regard to the interests of the Bondholders as a class and shall not have regard to the consequences of such exercise for individual Bondholders. No Bondholders shall be entitled to require, nor shall any Bondholder be entitled to claim, from the Company or the Trustee, any indemnification or payment in respect of any tax or other consequences of any such exercise upon individual Bondholders.

14. Replacement of Definitive Certificates

If any Definitive Certificate is mutilated, defaced, destroyed, stolen or lost, it may be replaced at the specified office of the Registrar 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 or the Registrar may reasonably require (which terms will require, inter alia , that if such Definitive Certificate is subsequently deposited for conversion into Shares there shall be paid to the Company on demand such costs at the fixed exchange rate of NT$34.435 for each U.S.$1.00 of the principal amount of such Bond). Mutilated or defaced Definitive Certificates must be surrendered before replacements will be issued.

15. Notices

In addition to the provisions set forth in the Global Certificate, if applicable, all notices to Bondholders shall be validly given if in writing in English and mailed to them at their respective addresses in the register of Bondholders maintained by the Registrar, and, so long as the Bonds 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.

16. Indemnification

The Indenture 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.

17. Agents

The names of the initial Agents and Registrar and their specified offices are set out at the end of this Offering Circular. 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 Bonds are listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, an agent in Luxembourg, a Registrar and a Principal Agent. 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 the Registrar or the Principal Agent will be given promptly in accordance with Condition 15 by the Company to the Bondholders, the Trustee and the Luxembourg Stock Exchange.

72

18. Governing Law and Jurisdiction

(A) Governing Law

The Indenture and the Bonds are governed by and shall be construed in accordance with the laws of the State of New York, U.S.A.

(B) Jurisdiction

The courts of the State of New York sitting in the Borough of Manhattan, The City of New York, and the federal courts of the United States sitting in the Borough of Manhattan, The City of New York, have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Indenture or the Bonds and accordingly any legal action or proceedings arising out of or in connection with the Indenture or the Bonds (“ Proceedings ”) may be brought in such courts. The Company has in the Indenture irrevocably, for the benefits of the Trustee and the Bondholders submitted to the jurisdiction of such courts.

(C) Agent for Service of Process

The Company has irrevocably appointed Law Debenture Corporate Services Inc. at 767 Third Avenue, New York, New York 10017 as its authorized agent for service of process in New York in any Proceedings.

73

THE FORM OF THE BONDS

The Bonds will be issued in registered form, without coupons, in denominations of U.S.$1,000 and integral multiples thereof. The Bonds are not issuable in bearer form.

The Bonds will be represented by a global certificate (the “ Global Certificate ”) which will be deposited with, and registered in the name of a nominee for, a common depositary for Euroclear and Clearstream, Luxembourg. Upon the issuance of the Global Certificate, Euroclear and Clearstream, Luxembourg will credit, on their internal systems, the respective principal amounts of the individual beneficial interests in the Bonds represented by the Global Certificate to the accounts of persons who have accounts with Euroclear and Clearstream, Luxembourg (“ participants ”). These accounts will initially be designated by or on behalf of the Managers. Ownership of beneficial interests in the Global Certificate will be limited to participants and persons who hold interests through participants. Beneficial interests in the Global Certificates will be shown on, and transfers thereof will be effective only through, records maintained by Euroclear and Clearstream, Luxembourg and their participants.

The Company expects that Euroclear and Clearstream, Luxembourg, or their nominees, upon receipt of any payment of principal, premium or interest (if any) in respect of the Bonds represented by the Global Certificate will credit the accounts of the participants with payments of principal, premium or interest (if any) on the date payable in amounts proportionate to their respective interests in such Bonds as shown on the records of Euroclear and Clearstream, Luxembourg or their nominees. The Company also expects that payments by such participants to owners of beneficial interests in the Bonds held through such participants will be governed by standing instructions and customary practices. Such payments will be the responsibility of the participants.

Payments, transfers, exchanges and other matters relating to interests in the Bonds may be subject to various policies and procedures adopted by Euroclear and Clearstream, Luxembourg from time to time. Transfers between participants in Euroclear and Clearstream, Luxembourg, and conversions through participants in Euroclear and Clearstream, Luxembourg, will be effected in the ordinary way in accordance with the rules and operating procedures of Euroclear and Clearstream, Luxembourg. None of the Company, the Trustee, the Agents (as defined in the terms and conditions of the Bonds) or any of their respective agents will have any responsibility or liability for the performance by Euroclear and Clearstream, Luxembourg or their participants of their respective obligations under the rules and procedures governing their operations, or for payments made on account of, or records relating to, interests in the Bonds held through Euroclear and Clearstream, Luxembourg and their participants.

Owners of interests in the Bonds will not be entitled to receive definitive physical certificates in respect of their interests in the Bonds except in the limited circumstances described below under “— The Global Certificate — Registration of Title”.

The holder of a registered Bond in definitive certificated form may transfer or exchange such Bond by surrendering it at the office or agency maintained by the Company for such purpose in London and, for so long as the Bonds are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, in Luxembourg, which offices will initially be the offices of the Paying, Conversion and Transfer Agents maintained in London or such other offices as may be notified by the Trustee from time to time and the offices of the Paying, Conversion and Transfer Agent in Luxembourg, respectively.

Any such Bond in physical certificated form issued prior to the 41st day following the original issuance of the Bonds shall bear the legend set out under “Notice to Investors”.

74

The Global Certificate

The Global Certificate contains provisions which apply to the Bonds that are represented by the Global Certificate, some of which modify the effect of the terms and conditions of the Bonds (the “ Conditions ”) set out in this Offering Circular. Terms defined in the Conditions have the same meaning in the paragraphs below. The following is a summary of those provisions:

Meetings

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

Cancellation

Cancellation of any Bond following its redemption, conversion or purchase by the Company will be effected by a reduction in the principal amount of the Bonds in the register of Bondholders.

Trustee’s powers

In considering the interests of Bondholders 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 Bonds and may consider such interests as if such accountholders were the holders of the Bonds.

Conversion

Subject to the requirements of Euroclear and Clearstream, Luxembourg, the Conversion Right attaching to a Bond 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 the Bond. 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 holder of the Global Certificate.

Payment

Payments of principal, premium and interest (if any) in respect of Bonds represented by the Global Certificate will be made without presentation or if no further payment is to be made in respect of the Bonds, against presentation and surrender of the Global Certificate to or to the order of the Principal Agent or such other Paying Agent as shall have been notified to the Bondholders for such purpose.

Notices

So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on behalf of Euroclear and Clearstream, Luxembourg or the Alternative Clearing System (as defined below), notices to Bondholders may be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg, for communication by it to entitled accountholders in substitution for notification as required by the Conditions except that so long as the Bonds 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 ).

75

Redemption at the option of the Company

Any drawing of Bonds required under Condition 8(F) in the event that the Company exercises its call option pursuant to Condition 8(B) in respect of less than the aggregate principal amount of Bonds in respect of which the Global Certificate is issued shall be made in accordance with the relevant rules of the clearing system. Notices will be made by the Company in accordance with the previous paragraph and the Luxembourg Stock Exchange will be informed should the Company exercise the call option.

Redemption at the option of bondholders

The Bondholders’ put option in Condition 8(C) may be exercised by the holders of the Global Certificate giving notice to the Principal Agent of the principal amount of Bonds 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(C).

Registration of title

Definitive Certificates in definitive form for individual holdings of Bonds will not be issued in exchange for interests in Bonds in respect of which the Global Certificate is issued, except in case that (a) either Euroclear or Clearstream, Luxembourg (or any clearing system designated by the Company and approved in writing by the Trustee (the “ Alternative Clearing System ”) on behalf of which the Bonds evidenced by the Global Certificate may be held) 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, or (b) the Bonds become immediately due and payable in accordance with the provisions of Condition 10 or if in connection with judicial proceedings brought by the Trustee, the Trustee has been advised that it is necessary or appropriate for Definitive Certificates to be executed and delivered.

Transfers

Transfers of interests in the Bonds with respect to which the Global Certificate is issued shall be effected through the records of the relevant clearing system and its participants in accordance with the Conditions, the Agency Agreement and the rules and procedures of the relevant clearing system.

Enforcement

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

76

DESCRIPTION OF THE SHARES

The following is a summary of information relating to the share capital of the Company, including 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 ROC Company Law, all as currently in effect.

General

The Company was incorporated on November 7, 1989 pursuant to the ROC Company Law as a company limited by shares.

As of July 31, 2003, the authorized share capital of the Company was NT$2,500,000,000 divided into 250,000,000 common shares (the “ Shares ”) with a par value of NT$10 per Share. As of July 31, 2003, the paid-in capital was NT$1,680,000,000, representing 168,000,000 Shares, all of which are issued and outstanding and in registered form.

Under the ROC Company Law, any change in the Company’s authorized share capital requires an amendment to the Articles, which in turn requires approval at the shareholders’ meeting. According to the ROC laws, the authorized but unissued Shares may be issued upon terms determined by the Company’s board of directors. There is no duration limit imposed on such issuance. Under the ROC Company Law, when the Company issues new Shares for cash, existing shareholders and employees of the Company have preemptive rights to subscribe for the new issue. For more details, please see “— Preemptive Rights”.

The Company has in place two stock option plans for its employees. As of July 31, 2003, all options available for granting under the first and second stock option plan, representing 7,910,000 and 1,800,000 Shares, were granted at a per share exercise price of NT$34.8 and NT$34.4, respectively, subject to anti-dilution adjustments in accordance with the terms and conditions of the stock option plan. These options are exercisable from March, 2004 and December, 2004, respectively.

As of August 18, 2003, except for the unconverted portion of the NT$494,300,000 domestic convertible bonds due 2006 issued on May 5, 2001, the Company does not have any outstanding warrants, any convertible debt securities, exchangeable securities or debt securities with warrants attached.

The Articles of Incorporation

Article Two of the Articles sets out the objects for which the Company was organized. These include the following:

• Manufacture, process, purchase and sale of the electrical parts and components of various home-use electrical appliances, electrical engineering, electrical devices, telecommunication computers (conductive silicone rubber), plastic keypads, keyboards, keyboard combos, input devices and the material thereof;

• Surface processing;

• Manufacture of data-storage and data-processing equipment;

• Manufacture of fixed-line communication machines and equipment;

• Manufacture of wireless telecommunication machines and equipment;

• Manufacture of electrical parts and components;

• Manufacture of tooling;

• Manufacture and export trade;

77

Import and export and acting as distributor, agent in bidding and quoting offers of the above goods;

Other business not prohibited or restricted by laws and regulations.

Dividends and Distribution

Under the ROC Company Law, except under certain limited circumstances, a ROC company is not permitted to distribute dividends or make any other distributions to shareholders in any year in which the Company has no earnings.

The ROC Company Law also requires that 10% of the Company’s annual earnings, less prior years’ losses, if any, and outstanding tax, be set aside as a legal reserve until the accumulated legal reserve equals the paid-in capital. The Company may set aside a special reserve in accordance with applicable laws and regulations. The Articles of the Company provide that the Company may, after paying all taxes, making up prior years’ losses, setting aside 10% of the remaining earnings as a legal reserve and setting aside a special reserve in accordance with Article 41 of the ROC Securities and Exchange Law, upon approval at a shareholders’ meeting, distribute the remaining portion of the earnings as follows:

• 5% to 10% as employee bonuses;

not more than 3% as remuneration for the directors and supervisors; and

shareholders’ dividends.

The Articles of the Company also provide that the shareholders’ dividends shall be no less than 60% of the distributable earnings of that year, of which distribution of stock dividends will be prioritized and not more than 50% of distributable earnings of that year shall be distributed in the form of cash in principle. Furthermore, employee bonuses in the form of Shares may be distributed to the employees of the Company and certain employees of the Company’s subsidiaries who are qualified under the conditions set forth by the board of directors of the Company.

At each annual ordinary shareholders’ meeting, the board of directors of the Company submits to the shareholders for their approval any proposal for the distribution of a dividend or the making of any other distribution to shareholders from the Company’s earnings (subject to compliance with the requirements mentioned above) for the preceding fiscal year. All Shares outstanding and fully paid as of the relevant record date are entitled to share equally in any dividend or other distribution so approved. Dividends may be distributed in cash, in the form of Shares or a combination of the two, as determined by the shareholders at the meeting. These preemptive rights do not apply to this offering.

In addition, if the Company does not have losses, the Company is also permitted to make distributions to its shareholders of additional Shares by capitalizing reserves (including the legal reserve and capital surplus of premium from issuing stock and earnings from gifts received). However, amounts payable by capitalizing the legal reserve are limited to 50% of the total accumulated legal reserve and this capitalization can only be effected when the accumulated legal reserve exceeds 50% of the paid-in capital of the Company. The Company will pay the dividends to the shareholders whose names are listed on the shareholders’ register maintained by the Company’s share registrar on the record date.

Preemptive Rights

Under the ROC Company Law, when the Company issues new Shares for cash, existing shareholders who are listed on the shareholders’ register as of the record date have preemptive rights to subscribe for the new issue in proportion to their existing shareholdings, while the Company’s employees, whether or not they are existing shareholders, have a similar right to subscribe for 10% to 15% of the new issue. Any new Shares that remain unsubscribed at the expiration of the subscription period may be offered to the public or specified persons at the discretion of the board of directors of the Company.

78

In addition, in accordance with the Securities and Exchange Law, a public company listed on the TSE or whose shares are traded on the GTSM that intends to offer new shares for cash must conduct a public offering of at least 10% of the shares to be sold, except under certain circumstances or when exempted by the ROC SFC. This percentage can be increased by a resolution passed at shareholders’ meeting, which would diminish the number of new shares subject to the preemptive rights of existing shareholders. According to the amended Securities and Exchange Law which became effective on June 12, 2002, the preemptive right provisions will not apply to offerings of new shares through a private placement approved in a shareholders’ meeting.

Meetings of Shareholders

The ordinary meeting of shareholders of the Company is usually held in Taoyuan, Taiwan, as determined by the board of directors, within six months after the end of each calendar year. Extraordinary meetings of shareholders may be convened by resolution of the board of directors whenever they consider it necessary, and they must do so if requested in writing by shareholders holding not less than 3% of the paid-in capital who have held these shares for more than a year. Extraordinary meetings of shareholders may also be convened by a supervisor of the Company under certain circumstances. Notice in writing of ordinary and extraordinary shareholders’ meetings stating the place, time and purpose thereof must be dispatched to each shareholder of record of the Company at least 30 days and 15 days, respectively, prior to the date set for the meeting.

Voting Rights

Under the ROC Company Law, a shareholder has one vote for each common share.

Except as otherwise provided by law, a resolution can be adopted by the holders of at least a majority of the Shares represented at a shareholders’ meeting at which the holders of a majority of all issued and outstanding Shares are present. The election of directors and supervisors at a shareholders’ meeting is by means of cumulative voting unless the articles of incorporation of a company provide otherwise. Ballots for the election of directors are cast separately from those for the election of supervisors. Candidates for the offices of directors and supervisors may be nominated at the shareholders’ meeting at which ballots for the election are cast. Under the ROC Company Law, the approval by at least a majority of the Shares represented at a shareholders’ meeting in which a quorum of at least two-thirds of all issued and outstanding Shares are represented is required for major corporate actions, including:

• amendment to the Articles;

• transfer of the whole or a substantial part of the Company’s business or assets;

• executing, amending or terminating any contract that leases the Company’s whole business, mandates the Company’s operation to other persons, or operates frequently the business for the joint interest of the Company and other persons;

• taking over of the whole of the business or assets of any other company which would have a significant impact on the Company’s operations;

• distribution of any stock dividend;

• dissolution or amalgamation of a company;

• merger or spin-off; and

removal of directors or supervisors.

Alternatively, the ROC Company Law provides that in the case of a public company, such as the Company, a resolution may be adopted by the holders of at least two-thirds of the Shares represented

79

at a meeting of shareholders at which holders of at least a majority of issued and outstanding Shares are present. However, if a controlling company holds not less than 90% of its subordinate company’s outstanding shares, the controlling company’s merger with the subordinate company can be approved by board resolution adopted by majority consent at a meeting with two-thirds of directors present.

A shareholder may be represented at an ordinary or extraordinary meeting by proxy if a valid proxy form is delivered to the Company five days before the commencement of the ordinary or extraordinary shareholders’ meeting. Voting rights attached to the Shares that are exercised by the shareholders’ proxy are subject to ROC proxy regulations. Any shareholder who has a personal interest in a matter to be discussed at the Company’s shareholders’ meeting, the outcome at which may impair the Company’s interests, is not permitted to vote or exercise voting rights on behalf of another shareholders on such matter. Except for trust enterprises or stock affair agents approved by the ROC SFC, where one person is appointed as proxy by two or more shareholders who together hold more than 3% of the total issued common shares, the votes of those shareholders in excess of 3% of the outstanding Shares shall not be counted.

Under the ROC Company Law, the Company may, by giving advance public notice, set a record date and close the register of shareholders for a specified period in order to determine the shareholders and pledgees that are entitled to rights pertaining to the Shares. The specified period required is as follows:

• ordinary shareholders’ meeting — 60 days

• extraordinary shareholders’ meeting — 30 days

• relevant record date for distribution of dividends, bonuses or other interests — five days

Other Rights of Shareholders

Under the ROC Company Law, dissenting shareholders of the Company are entitled to appraisal rights in the event of amalgamation, spin-off and various other major corporate actions within 20 days of the resolution approving the event. A dissenting shareholder may request the Company to redeem all of the Shares owned by such shareholder at a fair price to be determined by mutual agreement. If an agreement cannot be reached, the valuation will be determined by a court order. For amalgamation or spin off, a dissenting shareholder may exercise its appraisal right by serving written notice on the Company before or during the related shareholders’ meeting or by raising and registering its objection in the shareholders’ meeting. For other major corporate actions, a dissenting shareholder may exercise its appraisal right by serving written notice on the Company before the related shareholders’ meeting and by raising and registering its objection in the shareholders’ meeting.

In addition to appraisal rights, within 30 days after the date of the shareholders’ meeting, any shareholder has the right to annul any resolution adopted at a shareholders’ meeting where the procedures or the method of resolution were legally defective. However, if the court is of the opinion that such violation is not material and does not affect the result of the resolution, the court may reject or dismiss the shareholder’s lawsuit. If the substance of a resolution adopted at a shareholders’ meeting contradicts any applicable law or regulation or the Articles, a shareholder may bring a suit to determine the validity of such resolution.

Shareholders may bring suit against directors and supervisors under the following circumstances:

• Shareholders who have continuously held 3% or more of the total number of issued and outstanding Shares for a period of one year or longer may request in writing that a supervisor institute an action against a director on the Company’s behalf. In case the supervisor fails to institute an action within 30 days after receiving such request, the shareholders may institute an action on the Company’s behalf. In the event that shareholders institute an action, a court may, upon application of the defendant, order such shareholders to furnish appropriate security.

• In the event that any director, supervisor, officer or shareholder holds more than 10% of the issued and outstanding Shares and their respective spouse and minor children and/or

80

nominees sells Shares within six months after the acquisition of such Shares, or repurchases the Shares within six months after the sale, the Company may make a claim for recovery of any profits realized from the sale and purchase. If the board of directors or the supervisors fail to make a claim for recovery, any shareholder may request that the board of directors or the supervisors to make such claim within 30 days. After such 30-day period, the requesting shareholder will have the right to make a claim for such recovery and the Company’s directors and supervisors will be jointly and severally liable for damages suffered by the Company as a result of their failure to exercise the right of claim.

In addition, one or more shareholders who have held more than 3% of the issued and outstanding Shares of the Company for over a year may require the board of directors of the Company to convene an extraordinary shareholders’ meeting by sending a written request to the board of directors.

Annual Financial Statements

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

Transfers of Common Shares

Under the ROC Company Law, the transfer of Shares (in registered form) is effected by endorsement and delivery of share certificates. In order to assert shareholders’ rights against the Company, the transferee must have his name and address registered on the Company’s register of shareholders. Shareholders 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.

Acquisition by the Company of its own Common Shares

Under the ROC Company Law, with minor exceptions, the Company cannot acquire its own Shares, and any Share acquired by the Company must be sold by the Company at the current market price within six months after its acquisition, otherwise they will be cancelled.

In addition, under the Securities and Exchange Law, a company whose shares are listed on the TSE or traded on the GTSM may, pursuant to a board resolution adopted by a majority consent at a meeting attended by more than two-thirds of the directors and pursuant to the procedures prescribed by the ROC SFC, purchase its shares on the TSE or GTSM or by a tender offer for the following purposes:

for transfer of shares to its employees;

• for conversion into shares from bonds with warrants, preferred shares with warrants, convertible bonds, convertible preferred shares or certificates of warrants issued by the company; or

• for maintaining its credit and its shareholders’ equity; provided that the shares so purchased shall be cancelled thereafter.

Shares purchased by the Company for the purposes set out in the first two items of the preceding paragraph shall be deemed cancelled if not transferred to the intended transferees within three years of the relevant purchase. Shares purchased by the Company for the purpose set out in the last item of the preceding paragraph shall be cancelled, and the Company is required to amend the registration of its issued paid-in capital to reflect such cancellation within six months of such a purchase.

The total Shares purchased by the Company shall not exceed 10% of its total issued and outstanding Shares. In addition, the total amount for purchase of the Shares shall not exceed the aggregate amount of the retained earnings, the premium from stock issues and the realized portion of the capital reserve.

81

The Shares purchased by the Company shall not be pledged or hypothecated. In addition, the Company may not exercise any shareholders’ rights attaching to such 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/or nominees are prohibited from selling the Shares of the Company held by them during the period in which the Company purchases its own Shares on the TSE.

Liquidation Rights

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

Significant Shareholders and Transfer Restrictions

The ROC Securities and Exchange Law currently requires (1) each director, supervisor, manager or significant shareholder (i.e., a shareholder who, together with his or her spouse, minor children or nominees, holds more than 10% of the shares of a public company) to report any change in that person’s shareholding to the issuer of the shares, and (2) each director, supervisor, manager or significant shareholder to report his or her intent to transfer any shares traded on the TSE or GTSM to the ROC SFC at least three days before the intended transfer, unless the number of shares to be transferred is less than 10,000.

Limitation on Shareholdings in the Company and Reporting Obligations

The Securities and Exchange law requires each director, supervisor, manager or significant shareholder (i.e., a shareholder who, together with his or her spouse, minor children or nominees, holds more than 10% of the Company’s issued and outstanding Shares) to report any change in that person’s shareholding to the Company before each fifth day of each month and the Company shall report the same to the ROC SFC before the 15th day of each month. Such persons are also required to report to the Company immediately the pledge of their Shares in the Company and the Company shall report the same to the ROC SFC within five days from the pledge date. A person or a person along with other persons (as defined under the ROC SFC regulations) acquires more than 10% of the issued and outstanding Shares of the Company shall report to the ROC SFC, within ten days from the acquisition date, the acquisition purpose, funding sources and other information required by the ROC SFC.

Register of Shareholders

Taiwan International Securities Corporation acts as the Company’s Share registrar and maintains the register of shareholders of the Company at its offices in Taipei, Taiwan, and enters transfers of Shares in such register upon presentation of, among other documents, certificates in respect of the transferred Shares.

The ROC Company Law permits the Company to set a record date and close its shareholder register for a specified period in order for the Company to determine the shareholders or pledgees that are entitled to certain rights pertaining to the Company’s Shares by giving advance public notice. Pursuant to the ROC Company Law and the Articles, the Company’s register is closed for a period of 60 and 30 days before each ordinary or extraordinary meeting of shareholders and a period of five days before each record date.

Employee Stock Options

Under the ROC Company Law and relevant regulations promulgated by the ROC SFC, a company may issue employee stock-purchase options by a resolution adopted by at least a majority of the directors represented at the board of directors’ meeting in which a quorum of at least two-thirds of all directors are represented. The options so subscribed by the employees may not be transferred except in the case of inheritance. Subject to the conditions set forth by the company, the company may issue new shares or, in the case that the company’s shares are listed on the TSE or traded on the GTSM, purchase its own shares for the options holders to subscribe.

82

TAXATION

The Bonds may be deemed by taxing authorities in various jurisdictions to be issued with original issue discount. Prospective investors should consult their own adviser concerning the tax consequences of an investment in Bonds or Shares.

ROC Taxation of Non-Residents

The following is a summary under present law of the principal ROC tax consequences of the ownership and disposition of Bonds and Shares to a Non-ROC Resident Individual or Non-ROC Resident Entity that holds Bonds or Shares (each a “ Non-ROC Holder ”). A “ Non-ROC Resident Individual ” is a foreign national individual who owns Bonds or Shares and is not physically present in the ROC for 183 days or more during any calendar year, and a “ Non-ROC Resident Entity ” is a profit seeking corporation or a non-corporate body that owns Bonds or Shares and is organized under the laws of a jurisdiction other than the ROC and has no fixed place of business or other permanent establishment in the ROC.

Conversion of Bonds into Shares

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

Dividends on the Shares

Dividends (whether in cash or Shares) declared by the Company out of retained earnings and paid out to Non-ROC Holders of Shares are normally subject to ROC income tax collected by way of withholding at the time of distribution. The current rate of withholding for Non-ROC Holder is 20% of the amount of the distribution in the case of cash dividends or the par value of the Shares distributed in the case of stock dividends. Distributions of stock dividends declared by the Company out of capital reserves are not subject to withholding tax. In accordance with the ROC Income Tax Law, a 10% retained earnings tax will be imposed on the Company for its after-tax earnings generated after January 1, 1998 which are not distributed in the following year. The retained earnings tax so paid will further deduct the retained earnings available for future distribution. When the Company declares dividends out of those retained earnings, a maximum amount of up to 10% of the declared dividends will be credited against the 20% withholding tax imposed on the Non-ROC Holder.

Capital Gains

Under current ROC law, gain realized upon the sale or other disposition of securities is exempt from ROC income tax. This exemption will apply to a sale or other disposition of Bonds or Shares.

ROC law currently provides no specific provisions regarding the ROC income tax consequences of a conversion of Bonds into Shares. Without further clarification from the ROC tax authorities, it is impossible to conclude definitively that gain on the conversion of Bonds into Shares will not be deemed as taxable gain, additional interest income (subject to the 20% withholding tax) or otherwise subject to other ROC taxes. Transfers of Bonds by Non-ROC Holders are regarded as transactions outside the ROC and thus any gains derived therefrom are not subject to ROC income tax.

Securities Transaction Tax

The ROC Government imposes a securities transaction tax that will apply to sales of Shares. The transaction tax, which is payable by the seller, is generally levied on sales of Shares at the rate of 0.3% of the transaction price. However, according to the amended Statue of Upgrading Industries effective on February 1, 2002, no transaction tax will be imposed on the transfer of corporate bonds and financial debentures, including Bonds, until December 31, 2009.

83

There is no ROC stamp, issue or registration tax imposed on the issuance of Shares upon conversion of the Bonds. However, securities transaction tax, gift tax and/or income tax may be imposed in relation to the converting Bondholder’s designation of other persons to be the holder of the Shares upon the conversion of the Bonds.

Inheritance Tax and Gift Tax

ROC inheritance tax is payable on any property within the ROC of a deceased Non-ROC Resident Individual, and ROC gift tax is payable on any property within the ROC donated by a Non-ROC Resident Individual. Inheritance tax is currently imposed at rates ranging from 2% of the first NT$600,000 to 50% of amounts in excess of NT$100,000,000. Gift tax is imposed at rates ranging from 4% of the first NT$600,000 donated to 50% of amounts donated in excess of NT$45,000,000. Under ROC inheritance and gift tax laws, the Bonds and Shares will be deemed to be located in the ROC without regard to the location of the owner.

Tax Treaty

At present, the ROC has income tax treaties with, among other countries, Indonesia, Singapore, New Zealand, Australia, South Africa, Gambia, Swaziland, Malaysia, Macedonia, The Netherlands, United Kingdom and Vietnam. It is unclear whether a Non-ROC Holder will be considered to own Bonds or Shares for the purposes of such treaties. Accordingly, a holder of Bonds or Shares who is otherwise entitled to the benefit of a treaty should consult its own tax advisers concerning eligibility for benefit under the treaty with respect to Bonds or Shares.

Withholding Tax on Payments of Premium

Premium and interest (if any) payable on the Bonds to the Non-ROC Holders is subject to a withholding tax in the ROC currently equal to 20% of the gross amount of such premium and interest (if any) at the time of payment.

Subscription Rights

Distributions of statutory subscription rights for the 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 amount received. Proceeds derived from sales of statutory subscription rights that are not evidenced by securities are subject to capital gains tax at the rate of (i) 25% of the gains realized for Non-ROC Resident Entities, and (ii) 35% of the gains realized for Non-ROC Resident Individuals. Subject to compliance with ROC law, the Company has the sole discretion to determine whether statutory subscription rights are evidenced by securities or not.

84

UNDERWRITING

Barits Securities (Hong Kong) Limited (the “ Lead Manager ”) has, pursuant to a Subscription Agreement dated August 14, 2003 (the “ Subscription Agreement ”), agreed with the Company to subscribe for and purchase the Bonds at the issue price of 101.5% of their principal amount less the combined management and underwriting commission and selling fee of 2.205% and subject to relevant reimbursements on the aggregate principal amount of the Bonds.

The Company has agreed in the Subscription Agreement to indemnify the Lead Manager against certain liabilities, including the liabilities under the Securities Act, in connection with the offering of the Bonds.

The Company has agreed in the Subscription Agreement that, for a period of 120 days from the date of the Subscription Agreement, neither it nor any person acting on its behalf will issue, offer, pledge, sell, contract to sell, grant any option to purchase or otherwise dispose of, any equity securities, or any securities convertible or exchangeable for equity securities, or any rights, warrants or options to subscribe for equity securities of the Company, or announce any of such offering or sale during such 120-day period, in any case outside of Taiwan or denominated in a currency other than NT Dollars, other than pursuant to employee benefit plans or employee stock option plans or distributions of dividends or employee bonuses in the form of Shares and conversion of the Bonds, or the issue of Shares to sponsor any DR facility, in any such case without the prior written consent of the Lead Manager, such consent may not be unreasonably withheld.

The Bondholders who purchase the Bonds from the Lead Manager may be required to pay stamp taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the issue price of the Bonds.

Selling Restrictions

No action has been or will be taken in any jurisdiction that would permit a public offering of the Bonds or the Shares issuable upon conversion of the Bonds, or the possession, circulation or distribution of this Offering Circular or any other material relating to the Company, the Bonds or the Shares issuable upon conversion of the Bonds, in any jurisdiction where action for the purpose is required. Accordingly, neither the Bonds nor any Shares issuable upon conversion of the Bonds may be offered or sold, directly or indirectly, and neither this Offering Circular nor any other offering material or advertisements in connection with the Bonds or the Shares issuable upon conversion of the Bonds may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction.

United States

The Lead Manager has acknowledged and agreed that the Bonds and the Shares to be issued upon conversion of the Bonds have not been and will not be registered under the Securities Act, and may not (i) as part of their distribution at any time or (ii) prior to the 40th day after the closing of the offering of the Bonds be offered or sold within the United States or to, or for the account or benefit of, U.S. persons. The Bonds are being offered and sold outside the United States to non-U.S. persons in reliance on Regulation S.

In addition, until 40 days after the closing of the offering of the Bonds, an offer or sale of the Bonds or the Shares to be issued upon conversion of the Bonds within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.

85

United Kingdom

The Lead Manager has represented and agreed that:

• (1) it has not offered or sold and prior to the date six months after the issue of the Bonds and will not offer or sell any Bonds to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes 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 Offer of Securities Regulations 1995;

• (2) it has complied and will comply with all applicable provisions of the Financial Services and Markets Act 2000 with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom; and

• (3) it has only issued or passed onto any person in the United Kingdom any document received by it in connection with the issue of the Bonds, if that person is of a kind described in Articles 19, 47 or 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (as amended) or is a person to whom such document may otherwise lawfully be issued or passed on.

The ROC

The Lead Manager has acknowledged and agreed that the Bonds may not be offered, sold or delivered in the ROC, as part of the distribution of the Bonds.

Hong Kong

The Lead Manager has represented and agreed that:

• (1) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Bonds other than (i) to persons whose ordinary business is to buy or sell shares or debentures (whether as principal or agent) or (ii) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong; and

• (2) it has not issued or had in its possession for the purposes of issue and will not issue or have in its possession for the purposes of issue any advertisement, invitation or document relating to the Bonds, 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 Bonds 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) and any rules made thereunder.

Japan

The Bonds and Shares have not been and will not be registered under the Securities and Exchange Law of Japan. Accordingly, the Lead Manager has represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Bonds or Shares in Japan or to, or for the benefit of, any resident of Japan, except that the Lead Manager may offer and sell such Bonds or Shares pursuant to an exemption from the registration requirements of, and otherwise in compliance with the Securities and Exchange Law of Japan and other applicable laws and regulations of Japan. As used in this paragraph, “ resident of Japan ” means any person resides in Japan, including any corporation or other entity organized under the laws of Japan.

86

Singapore

The Lead Manager has acknowledged and agreed that this Offering Circular has not been and will not be registered as a prospectus with the Registrar of Companies in Singapore. Accordingly, the Lead Manager has represented and agreed that it has not offered or sold and will not offer or sell any Bonds nor has it circulated or distributed nor will it circulate or distribute this Offering Circular or any other offering document or material relating to the Bonds, directly or indirectly, (i) to persons in Singapore other than under circumstances in which such offer or sale does not constitute an offer or sale of the Bonds to the public in Singapore or (ii) to the public or any member of the public in Singapore other than pursuant to, and in accordance with the conditions of, an exemption invoked under Division 5A of Part IV of the Companies Act, Chapter 50 of Singapore and to persons to whom the Bonds may be offered or sold under such exemption.

87

LEGAL MATTERS

Certain legal matters with respect to the Bonds will be passed upon for the Company by Lee and Li, Attorneys-at-Law, and for the Managers by Baker & McKenzie. Baker & McKenzie will rely upon Lee and Li, Attorneys-at-Law with respect to certain matters of ROC law. Lee and Li, Attorneys-atLaw will rely upon Baker & McKenzie with respect to certain matters of United States federal and New York law.

INDEPENDENT AUDITORS

The consolidated and non-consolidated financial statements of the Company, prepared in accordance with ROC GAAP as of December 31, 2000, 2001 and 2002 and for the three years ended December 31, 2000, 2001 and 2002 included in this Offering Circular, have been audited by Deloitte & Touche as stated in their audit reports appearing herein.

With respect to the unaudited interim financial statements for the three month periods ended March 31, 2002 and 2003 prepared in accordance with ROC GAAP included in this Offering Circular, the independent accountants have reported that they applied limited procedures in accordance with professional standards for a review of such information in accordance with ROC Statement on Auditing Standards No. 36, “Review of Financial Statements”. However, their separate review report included in this Offering Circular states that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied.

88

GENERAL INFORMATION

Registered Office and Principal Place of Business

The Company is registered with the Ministry of Economic Affairs of the ROC under a uniform registration number of 23588039. The Company’s registered office is located at No. 268, Hwa-Ya Second Road, Hwa-Ya Technology Park, Gueishan, Taoyuan Hsien, Taiwan, ROC.

Company Confirmation

The Company, having made all reasonable inquiries, confirms that this Offering Circular contains all information with respect to the Company, the Company and its subsidiaries as a whole, the Bonds, and the Shares which is material in the context of the issue and offering of the Bonds (including all information required by applicable laws of the ROC); that the information contained herein (save as set out below) 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 Bonds, 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 respects; that all reasonable inquiries 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 ROC, its political status and economy, has been derived from government and other public sources, and the Company accepts responsibility only for accurately extracting information from such sources.

Authorizations

The offering of the Bonds was authorized and approved by the Company’s board of directors on July 8, 2003 and by the ROC SFC on August 14, 2003.

Listing and Trading

Application has been made to list the Bonds on the Luxembourg Stock Exchange. The legal notice relating to the issue of the Bonds and the Company’s Articles will be registered prior to the listing with the Registre de Commerce et des Socie´te´s a` Luxembourg , where such documents will be available for inspection and where copies thereof can be obtained upon request.

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

Documents Available

Copies (and certified English translations where the documents are not in English) of the following documents may be inspected and freely obtainable during normal business hours at the specified office of the Paying Agent in Luxembourg for as long as the Bonds are listed on the Luxembourg Stock Exchange:

• the Company’s Articles of Incorporation;

• a copy of the annual reports of the independent accountants, containing the audited financial statements of the Company as at and for the years ended December 31, 2000, 2001 and 2002 and the unaudited financial statements of the Company as at and for the periods ended March 31, 2002 and 2003;

89

the Subscription Agreement relating to the Bonds; and

the Indenture constituting the Bonds (which includes the form of the Global Certificate) and the Paying and Conversion Agency Agreement (which includes the Regulations concerning transfer of Bonds).

In addition, copies of this Offering Circular and the most recent audited consolidated and audited non-consolidated annual financial statements of the Company and the Company’s unaudited non-consolidated quarterly and semi-annual financial statements (in each case in English), will be available during normal business hours at the specified office of the Paying Agent in Luxembourg free of charge for as long as the Bonds are listed on the Luxembourg Stock Exchange. The Company does not publish consolidated intermediary financial statements. All notices, including all financial notices concerning the Company and notices of the Company’s general meetings, to holders of the Bonds will be published in a daily newspaper of general circulation (which is expected to be the Luxemburger Wort ).

Financial Statements

The Company has prepared the audited consolidated and non-consolidated financial statements as at and for the years ended December 31, 2000, 2001 and 2002 and unaudited non-consolidated financial statements as at and for the three month periods ended March 31, 2002 and 2003, contained herein in accordance with accounting principles generally accepted in the ROC. As of the date of this Offering Circular, there are not semi-annual financial statements as at and for the six months ended June 30, 2003 available to the public. The audited semi-annual financial statements will not be available to the public and Bondholders until August 31, 2003.

Paying and Conversion Agents

The Company will at all times maintain paying and conversion agents having specified offices in London and so long as the Bonds are listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, an agent in Luxembourg. The names of the initial agents and their specified offices are set out at the end of this Offering Circular.

No Material Adverse Change

Except as disclosed herein, there has been no material adverse change in the financial position of the Company and its subsidiaries since December 31, 2002, the date of the latest audited consolidated financial statements contained herein.

Governing Law

The Subscription Agreement, the Paying and Conversion Agency Agreement and the Indenture in connection with the offering are governed by the laws of the State of New York, the United States of America.

Clearance

The Bonds have been accepted for clearance by Euroclear and Clearstream, Luxembourg. Relevant clearance and settlement information for the Bonds is set forth below:

Common Code ................................................ 017517139 ISIN ............................................................... XS0175171395

90

Litigation

The Company is not involved in any legal or arbitration proceedings which may have, or have had in the past twelve months, a significant adverse effect on the consolidated financial position of the Company and the Company’s subsidiaries taken as a whole, nor is the Company aware that any such proceedings are pending or threatened. See “Business — Legal Proceedings”.

Depositary Receipt Facility

The Company has not at the date of this Offering Circular established or authorized the establishment of any depositary receipt facility. Accordingly, conversion into DRs is not currently available.

91

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ROC GAAP AND U.S. 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 U.S. GAAP. The following is a summary of the principal differences between ROC GAAP and ROC SFC requirements, as applicable to the Company, and U.S. GAAP. The summary below should not be considered to be exhaustive as the Company has not prepared a complete reconciliation of our financial statements and related footnote disclosures included in this Offering Circular from ROC GAAP to U.S. GAAP and have not quantified such differences. If the Company had prepared a complete reconciliation between ROC GAAP and U.S. GAAP, additional accounting and disclosure differences might have been included in the summary below.

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 U.S. GAAP, which are applicable to the Company. Finally, no attempt has been made to identify all future differences between ROC GAAP and U.S. GAAP that may affect the financial statements as a result of transactions or events that may occur in the future.

ROC GAAP

U.S. GAAP

1. Bonuses to employees, directors and supervisors

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. 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.

Under U.S. GAAP, employee bonuses and remuneration issued to directors and supervisors are charged to income as compensation expense in the year the services are rendered, 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 in accordance with U.S. SFAS 123 or APB Opinion No. 25, respectively.

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

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

2. 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 U.S. 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 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.

92

U.S. GAAP

ROC GAAP

3. Capital stock issued to employees

In connection with a number of new shares issued to shareholders, the Company also issue 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 U.S. 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 or the intrinsic value, during the period when such issues were made.

4. 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 directly-owned subsidiaries (i) with total assets and operating revenues which are less than 10% of the Company’s non-consolidated total assets and operating revenues, or (ii) which are in a negative equity position, the Company has the option of whether or not to consolidate such subsidiaries. For purposes of applying the above test, the amounts are determined based on the respective subsidiary’s non-consolidated financial statements. Irrespective of the above test, if the combined revenues and total assets of all such non-consolidated subsidiaries exceeds 30% of the Company’s nonconsolidated total assets and 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.

Goodwill being the excess of the investment cost over the net asset value of the consolidated subsidiary is capitalized as an intangible asset and amortized to the income statement over five to twenty years.

Under ROC GAAP, a company is not required to prepare interim financial statements on 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 or loss on investee companies in which the company has, directly or indirectly, 20% to 50% ownership interest. Investment income or loss in these investee companies is required only to be recognized in the semi-annual and annual financial statements.

Under U.S. GAAP, the parent company’s consolidated financial statements generally include the financial statements of majority-owned subsidiaries, unless (i) control is considered temporary or (ii) control does not rest with the majority owner. Further, U.S. GAAP requires that the accounting principles and practices used by an enterprise in the preparation of its interim statements should 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 U.S. GAAP, goodwill shall not be amortized. Goodwill shall be tested for impairment at a level of reporting unit in accordance with U.S. SFAS 142, which is required to be applied starting with fiscal years beginning after December 15, 2001. Impairment losses for goodwill that arise due to the initial application of this Statement (resulting from a transitional impairment test) are to be reported as resulting from a change in accounting principles. Goodwill acquired after June 30, 2001 will be subject to the non-amortization provision of this standard. Prior to the issuance of this standard, goodwill was amortized over its estimated useful life but not exceeding 40 years.

U.S. GAAP requires that the accounting principles and practices used by an enterprise in the preparation of its interim statements should 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 consolidated basis, except as discussed above.

93

U.S. GAAP

ROC GAAP

5. Elimination of intercompany profit under equity method

With respect to intercompany transactions between an investor company and a non-consolidated investee company, ROC GAAP provides that, any resulting profit on such transactions be eliminated in the investor company’s financial statements. In general, net intercompany profit on such transactions is deferred and offset against the long term investment account, with the deferred net intercompany profit amortized to income over future periods based on the nature of the transaction which give rise to the deferred intercompany profit.

Under U.S. GAAP, the gross amount of the related accounts of the intercompany profit arising from intercompany transactions between an investor company and a nonconsolidated investee affiliate are generally eliminated in the investor company’s financial statements by charging cost of sales and crediting the investment account. This elimination is either complete or partial to the extent of the investor company’s interest in the investee company.

6. 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 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 investment value and the chance of recovery is minimal, loss is recognized in the current year.

Effective for financial statements for the year ended December 31, 1999, significant influence criteria have been expanded to include investment with the highest voting rights.

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

Short-term investments are stated at the lower of cost or market value.

7. 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 surplus or retained earnings. Upon subsequent disposal of the investment, amounts previously recorded to capital surplus or retained earnings relating to the respective investment will be reversed and recorded as part of the gain or loss on disposal.

Under U.S. 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 (i) to gains or losses to record the deemed disposal of shares or (ii) to paid-in-capital. If an adjustment has been made to paid-in-capital to recognize investee capital transactions, U.S. GAAP would not permit the adjustment of such amounts on the subsequent disposal of all or a part of the investment.

94

U.S. GAAP

ROC GAAP

8. Impairment of long-lived assets or long-lived assets to be disposed

No specific standards address impairment of long-lived assets; normally such assets would be carried at cost less accumulated depreciation. 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.

U.S. SFAS 144 requires that long-lived assets held for use 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. If the sum of the expected 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 based on discounted cash flow.

9. Prepayment of fixed assets

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

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

10. 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.

11. Comprehensive income

Under ROC GAAP, there are no standards for accounting and reporting of comprehensive income.

U.S. SFAS 130, establishes standards for reporting and display of comprehensive income and its components in a financial statements that is 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 under U.S. SFAS 52, minimum pension liabilities under U.S. SFAS 87 and unrealized gains and losses on available-for-sale securities under U.S. SFAS 115, and the effective portion of the change in the fair value of cash flow and net investment hedges under U.S. SFAS 133).

95

U.S. GAAP

ROC GAAP

12. Accounting for derivative instruments

There are no specific accounting standards under ROC GAAP which address measurement for derivative instruments such as options, swap arrangements, and interest rate swap contracts, except for foreign currency forward contracts. Such contracts are classified as either hedge or speculative contracts.

Under U.S. GAAP, accounting for derivative instruments is covered under U.S. SFAS 133, as amended by U.S. SFAS 138, which requires that all entities recognize derivative instruments as assets and liabilities in the statement of financial position and subsequently measure them at fair value. If certain conditions are met, entities may elect to designate a derivative instrument as one of the following:

Premiums paid or received for foreign-currency options are recorded as assets or liabilities, respectively, and are recognized as revenue or expense upon each settlement. Gain or loss on the exercise of the options is credited or changed to current income of the item being hedged.

Forward exchange contracts in the form of hedges are recorded and translated using the exchange rates prevailing on the contract date. The discount or premium on the forward exchange contracts is amortized over the contract period. The balance at period-end is translated into New Taiwan Dollars at the exchange rates prevailing at the balance sheet date, and any translation difference is recognized in the current year’s net income.

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 foreign-currency 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.

U.S. SFAS 133 originally was effective for all fiscal quarter of all fiscal years beginning after June 15, 1999 but was deferred to all fiscal quarters of all fiscal year beginning after June 15, 2000 by U.S. SFAS 137.

13. Cost of sales

There are no specific accounting standards under ROC GAAP which address the presentation of financial statement for normal inventory scrap and obsolescence. Provisions of the Company for normal inventory scrap and obsolescence are recorded as non-operating expenses.

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

14. Deferred charges

Under ROC GAAP, test-run costs are deferred and Under U.S. GAAP, test-run costs for installation of amortized over the life of the machinery and equipment. machinery and equipment are charged to expense when incurred.

Under the ROC Company Law, expenses of obtaining new Under U.S. GAAP, expenses of issuing common or capital by issuing common or preferred stock can be preferred stock should be charged directly to the capital in capitalized as deferred charges and then amortized over excess of par or capital in excess of stated value. Retained three years under the straight-line method. earnings may be charged when legal regulations prohibit charging stock issue costs to capital accounts.

15. Concentration of risk

ROC GAAP has no specific disclosure requirements Disclose concentration of risk on one or more parties, as concerning concentration of risk. appropriate, including such parties as major customers, suppliers, franchisers, distributors, general agents, borrowers or lenders is required.

96

U.S. GAAP

ROC GAAP

16. 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 U.S. SFAS 131, 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 the company’s chief operating decision-makers that are used internally for evaluating segment performance and deciding how to allocate resources to segments.

17. 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 U.S. 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 perspectives.

18. 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

U.S. GAAP requires disclosure of the impact that recently issued accounting standards will have on the financial statements of the Company when adopted in the future.

19. Employee Stock Options

Under ROC Company Law and relevant regulations promulgated by the ROC SFC, a company may issue employee stock — purchase options by a resolution adopted by at least a majority of the directors represented at the board of directors’ meeting in which a quorum of at least two-thirds of all directors is present. The options so subscribed by the employees may not be transferred except in the case of inheritance. Subject to the conditions set forth by the Company, the Company may issue new shares or, in the case that the Company’s shares are listed on the TSE or traded in the GTSM, purchase its own shares for the options holders to subscribe.

U.S. SFAS No. 123 encourages a fair value based method of accounting for employee stock options and similar equity instruments, which generally would result in the recording of additional compensation expense in the Company’s financial statements. The Statement also allows the Company to continue to account for stock-based employee compensation using the intrinsic value for equity instruments using APB Opinion No. 25. The Company has adopted the disclosure-only provisions of U.S. SFAS No. 123. Accordingly, no compensation cost has been recognized for the stock option plans in the accompanying financial statements.

97

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	F-1
Consolidated Balance Sheets as of December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . .	F-2
Consolidated Statements of Income for the years ended
December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	F-4
Consolidated Statements of Changes in Stockholders’ Equity
for the years ended December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . .	F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	F-7
Notes to Consolidated Financial Statements for the years ended
December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	F-10
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	N-1
Non-Consolidated Balance Sheets as of December 31, 2000, 2001 and 2002 . . . . . . . . . . . . .	N-2
Non-Consolidated Statements of Income for the years ended
December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	N-4
Non-Consolidated Statements of Changes in Stockholders’ Equity
for the years ended December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . .	N-5
Non-Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	N-7
Notes to Non-Consolidated Financial Statements for the years ended
December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	N-10
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Q-1
Non-Consolidated Balance Sheets as of March 31, 2002 and 2003 . . . . . . . . . . . . . . . . . . . .	Q-2
Non-Consolidated Statements of Income for the three months ended
March 31, 2002 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Q-4
Non-Consolidated Statements of Cash Flows for the three months ended
March 31, 2002 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Q-5
Notes to Non-Consolidated Financial Statements for the three months ended
March 31, 2002 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Q-8

These English financial statements expressed in thousands of New Taiwan Dollars were translated from the financial statements prepared originally in the Chinese language.

98

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Ichia Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Ichia Technologies, Inc. and subsidiaries (collectively, the “Company”) as of December 31, 2000, 2001 and 2002, and the related consolidated statements of operations, changes in stockholders’ equity and 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 financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2000, 2001 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with the “Regulations Governing the Preparation of Financial Statements of Public Companies” and accounting principles generally accepted in the Republic of China.

As described in Note 2, the financial statements of the Company as of and for the year ended December 31, 2002 expressed in US Dollars were translated from the New Taiwan Dollars using the exchange rate of NT$34.75 to U.S.$1.00 at December 31, 2002, solely for the convenience of readers.

Deloitte & Touche (T N Soong & Co and Deloitte & Touche Taiwan Combined to Establish a New Deloitte & Touche Effective June 1, 2003) Taipei, Taiwan The Republic of China February 21, 2003

The above auditors’ report and the following consolidated financial statements are English translations of the Chinese auditors’ report and consolidated financial statements prepared for and used in the Republic of China. The accompanying consolidated financial statements were prepared using accounting principles, procedures and reporting practices generally accepted in the Republic of China and 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 those in the Republic of China. The standards, procedures and practices utilized to audit such consolidated financial statements are those generally accepted and applied in the Republic of China. Readers are advised that these financial statements have been prepared originally in Chinese. This English translation is for convenience of the readers and may present financial statements for periods not previously presented in a single document. Additionally, these financial statements do not include additional supplementary disclosures as in conformity with the Guidelines for Securities Issuers’ Financial Reporting in accordance with SFC regulations included in the original Chinese language version. In the event of conflict between these financial statements and the original Chinese versions or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

F-1

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands)

ASSETS CURRENT ASSETS: Cash and cash equivalents (Notes 2 and 3) ................................. Short-term investments (Notes 2 and 4) ...................................... Notes receivable, net (Notes 2, 5 and 18) ................................... Accounts receivable, net (Notes 2 and 5).................................... Other receivables ........................................................................ Inventories (Notes 2 and 6) ........................................................ Prepayments ............................................................................... Other current assets (Notes 2, 18 and 19) ................................... Total current assets................................................................. LONG-TERM INVESTMENTS (Notes 2 and 7).......................... PROPERTY, PLANT AND EQUIPMENT, Net (Notes 2, 8, 18 and 19): Cost: Land....................................................................................... Buildings and structures ......................................................... Machinery and equipment ....................................................... Other facilities ....................................................................... Subtotal.................................................................................. Less accumulated depreciation .............................................. Prepayments for land .............................................................. Unfinished construction and prepayments for business facilities ............................................................................. Property, plant and equipment, net ..................................... OTHER ASSETS (Notes 2, 5 and 19) ......................................... TOTAL ......................................................................................	2000	2001	2002	2002
	NT$ $508,426 71,122 1,491 305,259 14,492 171,420 12,338 30,039 1,114,587 130,254 39,039 445,545 517,913 218,778 1,221,275 (225,769) 144,562 128,253 1,268,321 17,507	NT$ $301,404 541,611 10,601 283,328 61,532 243,265 9,130 72,793 1,523,664 268,844 298,016 447,738 782,729 292,768 1,821,251 (358,052) — 26,340 1,489,539 80,222	NT$ $268,626 181,953 119,495 609,867 33,578 420,775 21,822 122,965 1,779,081 360,040 297,962 460,991 975,334 359,488 2,093,775 (499,820) — 236,410 1,830,365 118,482	U.S.$ $7,730 5,236 3,439 17,550 966 12,109 628 3,539
				51,197
				10,361
				8,574 13,266 28,067 10,345
				60,252 (14,383) — 6,803
				52,672 3,409
	$2,530,669	$3,362,269	$4,087,968	$117,639

See notes to consolidated financial statements.

F-2

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS — (Continued) December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands)

	2000	2001		2002
	NT$	NT$	NT$		U.S.$
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term bank loans (Notes 2, 9 and 19)..................................	$105,107	$24,647	$190,423		$5,480
Notes payable .............................................................................	83,699	9,420	71,954		2,071
Accounts payable........................................................................	72,792	129,258	340,922		9,811
Accrued expenses .......................................................................	61,799	65,330	103,381		2,975
Advance receipts ........................................................................	14,026	22,787	14,500		417
Balance payable - machinery and equipment ...............................	209,474	165,816	38,936		1,120
Long-term bank loans - current portion (Note 11).......................	5,400	1,477	1,592		46
Other current liabilities .............................................................	37,949	29,360	53,078		1,527
Total current liabilities ..........................................................	590,246	448,095	814,786		23,447
LONG-TERM LIABILITIES:
Long-term bank loans (Note 11) .................................................	15,000	2,913	1,192		34
Bonds payable (Notes 2 and 10) .................................................	—	672,750	708,070		20,376
Total long-term liabilities .......................................................	15,000	675,663	709,262		20,410
OTHER LIABILITIES:
Accrued pension liability (Notes 2 and 12) .................................	17,939	21,835	24,304		699
Guarantee deposits received........................................................	—	2,100	14,023		404
Deferred income tax liability (Notes 2 and 16) ...........................	8,216	56,138	92,866		2,672
Deferred credits ..........................................................................	9,707	3,954	654		19
Total other liabilities ..............................................................	35,862	84,027	131,847		3,794
Total liabilities ......................................................................	641,108	1,207,785	1,655,895		47,651
STOCKHOLDERS’ EQUITY:
Capital stock (Note 13) - Common stock ....................................	881,500	1,180,000	1,377,000		39,626
Capital surplus (Note 14):
Additional paid-in capital .......................................................	613,348	613,348	560,248		16,122
Gain on sale of property, plant and equipment........................	2,642	2,642	—		—
Long-term equity investments .................................................	—	10,768	10,768		310
Retained earnings (Note 15):
Legal reserve..........................................................................	43,167	77,055	100,380		2,889
Special reserve .......................................................................	359	359	359		10
Retained earnings - unappropriated ........................................	344,036	236,255	349,191		10,049
Cumulative translation adjustments .............................................	4,509	34,057	34,127		982
Total stockholders’ equity.......................................................	1,889,561	2,154,484	2,432,073		69,988
TOTAL ......................................................................................	$2,530,669	$3,362,269	$4,087,968		$117,639

See notes to consolidated financial statements.

F-3

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands, Except Earnings Per Share)

SALES ....................................................................................... COST OF GOODS SOLD ........................................................... GROSS PROFIT ......................................................................... OPERATING EXPENSES ........................................................... INCOME FROM OPERATIONS ................................................ NON-OPERATING INCOME: Interest income ........................................................................... Gain on sale of property, plant and equipment ............................ Gain on sale of investments........................................................ Gain on exchange ....................................................................... Rent income .............................................................................. Gain on market price recovery of short-term investments ........... Gain on bad debt recoveries ....................................................... Gain on inventory value recoveries............................................. Other .......................................................................................... Total non-operating income .................................................... NON-OPERATING EXPENSES: Interest expense .......................................................................... Investment loss........................................................................... Unrealized valuation losses on short-term investments ................ Loss on sale of property, plant and equipment ............................ Loss on physical inventory ......................................................... Loss on exchange ....................................................................... Loss on inventory valuation loss and obsolescence ..................... Inventory retirement losses ......................................................... Miscellaneous disbursements ...................................................... Total non-operating expenses.................................................. INCOME BEFORE INCOME TAX ............................................. INCOME TAX EXPENSE (Notes 2 and 16)................................ NET INCOME ............................................................................ EARNINGS PER SHARE (Notes 2 and 17): Primary: Before tax .............................................................................. After tax................................................................................. Fully diluted: Before tax .............................................................................. After tax.................................................................................	2000	2001	2002	2002
	NT$ $1,321,884 (721,177) 600,707 (251,798) 348,909 13,329 108 8,940 31,322 — — — — 9,689 63,388 6,586 13,170 — 635 1,030 — 2,412 7,060 56 30,949 381,348 (41,764)	NT$ $1,460,221 (918,127) 542,094 (260,204) 281,890 15,556 770 7,278 15,265 5,244 5,351 1,363 3,421 21,328 75,576 26,636 23,294 — 911 517 — — 10,530 97 61,985 295,481 (64,874)	NT$ $2,170,382 (1,402,579) 767,803 (288,202) 479,601 7,650 678 8,728 — 8,786 — — — 15,291 41,133 35,253 21,839 2,147 1,643 305 9,514 9,113 10,631 61 90,506 430,228 (89,709)	U.S.$ $62,457 (40,362)
				22,095 (8,294)
				13,801
				220 20 251 — 253 — — — 440
				1,184
				1,014 628 62 47 9 274 262 306 2
				2,604
				12,381 (2,582)
	$339,584 $2.89 $2.57	$230,607 $2.15 $1.67 $2.15 $1.67	$340,519 $3.12 $2.47 $3.05 $2.40	$9,799
				$0.09
				$0.07
				$0.09
				$0.07

See notes to consolidated financial statements.

F-4

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Years Ended December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

NT$ BALANCE, JANUARY 1, 2000 ........... Distribution of 1999 earnings: Appropriation of legal reserve ......... Appropriation of special reserve ...... Stock dividends ............................... Bonuses to employees...................... Transfer of bonuses to employees to capital stock .................................... Capital surplus transferred to capital stock ............................................... Issuance of common stock for cash ...... Net income for 2000 ............................ Transfer of gain on disposal of property, plant and equipment.......... Cumulative translation adjustments ...... BALANCE, DECEMBER 31, 2000 ...... Distribution of 2000 earnings: Appropriation of legal reserve ......... Stock dividends ............................... Transfer of bonuses to employees to capital stock................................ Bonuses to directors and supervisors.................................. Effect on change of ownership percentage in investee ..................... Net income for 2001 ............................ Cumulative translation adjustments ...... BALANCE, DECEMBER 31, 2001 ...... Distribution of 2001 earnings: Appropriation of legal reserve ......... Cash dividends ................................ Stock dividends ............................... Transfer of bonuses to employees to capital stock................................ Bonuses to directors and supervisors.................................. Stock dividends distributed from capital surplus ................................. Net income for 2002 ............................ Cumulative translation adjustments ...... Transfer of gain on disposal of property, plant and equipment ........ BALANCE, DECEMBER 31, 2002 ......	Common Stock $600,000 124,600 6,500 50,400 100,000 881,500 273,265 25,235 1,180,000 123,900 20,000 53,100	Common Stock $600,000 124,600 6,500 50,400 100,000 881,500 273,265 25,235 1,180,000 123,900 20,000 53,100		Retained Earnings	Retained Earnings	Retained Earnings	Cumulative
			Capital Surplus $55,687 (50,400) 610,000 703 615,990 10,768 626,758 (53,100) (2,642)	Legal Reserve $28,022 15,145 43,167 33,888 77,055 23,325	Special Reserve $— 359 359 359	Unappropriated Earnings $151,817 (15,145) (359) (124,600) (58) (6,500) 339,584 (703) 344,036 (33,888) (273,265) (25,235) (6,000) 230,607 236,255 (23,325) (59,000) (123,900) (20,000) (4,000) 340,519 2,642	Translation Adjustment $(10,899) 15,408 4,509 29,548 34,057 70	Total
	$600,000 124,600 6,500 50,400 100,000							$824,627 — — — (58) — — 710,000 339,584 — 15,408
	881,500 273,265 25,235							1,889,561 — — — (6,000) 10,768 230,607 29,548
	1,180,000 123,900 20,000 53,100							2,154,484 — (59,000) — — (4,000) — 340,519 70 —
	$1,377,000		$571,016	$100,380	$359	$349,191	$34,127	$2,432,073

F-5

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY — (Continued) Years Ended December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

U.S.$ BALANCE, JANUARY 1, 2002......... Distribution of 2001 earnings: Appropriation of legal reserve ...... Cash dividends ............................. Stock dividends ............................ Transfer of bonuses to employees to capital stock......................... Bonuses to directors and supervisors ............................... Stock dividends distributed from capital surplus .............................. Net income for 2002 ......................... Cumulative translation adjustments.... Transfer of gain on disposal of property, plant and equipment ....... BALANCE, DECEMBER 31, 2002....	Common Stock $33,957 3,565 576 1,528 $39,626	Capital Surplus $18,036 (1,528) (76) $16,432	Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $2,218 $10 $6,799 671 (671) (1,698) (3,565) (576) (115) 9,799 76 $2,889 $10 $10,049	Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $2,218 $10 $6,799 671 (671) (1,698) (3,565) (576) (115) 9,799 76 $2,889 $10 $10,049	Cumulative Translation Adjustment $980 2 $982	Total
			Legal Reserve $2,218 671 $2,889	Special Reserve $10 $10
						$62,000 — (1,698) — — (115) — 9,799 2 —
						$69,988

See notes to consolidated financial statements.

F-6

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES: Net income .............................................................. Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.............................. Unrealized gains on exchange .............................. Losses (gains) on sale of property, plant and equipment........................................................ Bad debt losses.................................................... Gains on bad debt recoveries ............................... Investment losses on equity-method investees ...... Investment losses................................................. Unrealized valuation losses on short-term investments...................................................... Gains on market price recovery of short-term investments...................................................... Gains on sale of short-term investments, net........ Losses on sale of long-term investments, net ....... Losses on inventory valuation loss and obsolescence.................................................... Gains on inventory value recoveries .................... Inventory retirement losses .................................. Changes in assets and liabilities provided (used) cash: Notes receivable .............................................. Accounts receivable......................................... Inventories ...................................................... Prepayments .................................................... Other receivables............................................. Other current assets ......................................... Deferred income tax assets .............................. Notes payable .................................................. Accounts payable............................................. Accrued expenses ............................................ Advance receipts ............................................. Deferred income tax liabilities......................... Other current liabilities ................................... Accrued interest compensation......................... Accrued pension liability ................................. Subtotal adjustments ........................................ Net cash provided by operating activities ........	2000	2001	2002	2002
	NT$ $339,584 66,632 (12,015) 527 3,891 — 5,694 — 8,283 — (9,178) 238 2,412 — 7,060 (455) (124,572) (51,355) 3,547 (9,402) (21,056) 847 26,465 (10,542) 23,343 5,414 — 20,720 — 4,703 (58,799) 280,785	NT$ $230,607 131,010 (2,499) 141 — (1,363) 17,982 6,300 — (5,351) (7,278) — — (3,421) 10,530 (9,204) 27,146 (81,044) 3,208 (46,728) 20,402 (605) (74,279) 52,303 3,531 8,761 47,444 (5,618) 22,750 3,896 118,014 348,621	NT$ $340,519 163,120 — (965) 2,753 — 21,551 288 2,147 — (8,728) — 9,113 — 10,631 (109,744) (328,444) (222,329) (12,692) 27,954 (32,358) (2,735) 62,534 211,664 38,051 (8,287) 36,705 23,718 35,320 2,469 (78,264) 262,255	U.S.$ $9,799
				4,694 — (27) 79 — 620 8 62 — (251) — 262 — 306 (3,158) (9,452) (6,398) (365) 804 (931) (79) 1,800 6,091 1,095 (238) 1,056 683 1,016 71
				(2,253)
				7,546

(Continued)

F-7

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued) Years Ended December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in restricted deposits ................. Acquisition of long-term investments ....................... Acquisition of short-term investments ...................... Proceeds from disposal of short-term investments .... Proceeds from disposal of long-term investments ..... Acquisition of property, plant and equipment ........... Proceeds from disposal of property, plant and equipment ............................................................ Decrease (increase) of other assets........................... Decrease (increase) in guarantee deposits paid ......... Net cash used in investing activities .................... CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in short-term bank loans ............ Increase (decrease) in other payable-related parties.. Decrease in long-term bank loans ............................ Increase in corporate bonds...................................... Bonuses to directors and supervisors paid ................ Increase (decrease) in receipts under custody ........... Decrease in guarantee deposits received................... Issuance of common stock for cash .......................... Cash dividends paid ................................................. Net cash provided by financing activities............. ADJUSTMENT FOR FOREIGN CURRENCY TRANSLATION................................................... NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................................ CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR....................................... CASH AND CASH EQUIVALENTS, END OF YEAR ...................................................	2000	2001	2002	2002
	NT$ $4,963 (55,125) (1,557,818) 1,631,209 2,428 (630,566) 12,525 183 854 (591,347) 69,252 2,312 (58,414) — (58) 318 — 710,000 — 723,410 20,544 433,392 75,034	NT$ $(61,882) (151,896) (1,863,647) 1,407,958 — (477,828) 15,693 (2,333) 508 (1,133,427) (80,460) (2,313) (16,010) 650,000 (6,000) (180) 2,100 — — 547,137 30,647 (207,022) 508,426	NT$ $(15,079) (112,942) (634,036) 1,000,275 — (660,267) 23,854 (8,457) (1,569) (408,221) 165,776 — (1,606) — (4,000) — 11,923 — (59,000) 113,093 95 (32,778) 301,404	U.S.$ $(434) (3,250) (18,246) 28,785 — (19,000) 686 (243) (45)
				(11,747)
				4,771 — (46) — (115) — 343 — (1,698)
				3,255
				3
				(943) 8,673
	$508,426	$301,404	$268,626	$7,730

(Continued)

F-8

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued) Years Ended December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest............................................... Income taxes paid .................................................... ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT PAID BY CASH: Acquisition of property, plant and equipment ........... Increase in payable for purchase of equipment ......... Cash paid................................................................. SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES - Long-term loans-current portion...........................	2000 NT$ $5,931 $25,162 $827,418 (196,852) $630,566 $5,400	2001 NT$ $4,419 $58,262 $434,170 43,658 $477,828 $1,477	2002	2002
			NT$ $2,171 $19,063 $533,387 126,880 $660,267 $1,592	U.S.$ $62
				$549
				$15,349 3,651
				$19,000
				$46

(Concluded)

See notes to consolidated financial statements.

F-9

ICHIA TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands, Except Earnings Per Share and Par Value Data)

1. ORGANISATION, OPERATIONS AND PRINCIPLES OF CONSOLIDATION

Consolidation Parties

Ichia Technologies, Inc. (the “Parent Company” or “Ichia”) was incorporated in the Republic of China (the “ROC”) in November, 1989. The company is engaged mainly in manufacturing of conductive rubber keypads and flexible PCB (“FPC’).The stock of the Company was listed on the ROC Taiwan Stock Exchange in January 2000.

Ichia U.S.A, Inc. (“USA-Ichia”) was incorporated in the United States of America (the “USA”) in 1993. The company is engaged mainly in the design and fabrication of rubber keypads. As of December 31, 2000, 2001 and 2002, the Parent Company’s holding in USA-Ichia was 100%.

Ichia Rubber De (Mexico) S.A. DE C.V. (“Mexico-Ichia”) was incorporated in Mexico in 1994. The company is engaged mainly in the design and fabrication of rubber keypads. As of December 31, 2000, 2001 and 2002, the Parent Company’s holding in Mexico-Ichia was 100%.

Ichia Holdings (B.V.I) Limited (“BVI-Ichia”) was incorporated in the British Virgin Islands in 1997. The company is an investment holding company. As of December 31, 2000, 2001 and 2002, the Parent Company’s holding in BVI-Ichia was 100%.

Ichia Rubber Industry (Malaysia) Sdn. Bhd. (“Malaysia-Ichia”), was incorporated in Malaysia in 1993. The company is engaged mainly in the design and fabrication of rubber keypads. As of December 31, 2000, 2001 and 2002, the Parent Company’s holding in Malaysia-Ichia was 100%.

Ichia Electronics (Zhongshan) Co., Ltd. (“Zhongshan-Ichia”), was incorporated in Mainland China in 1996. The company is engaged mainly in the design and fabrication of rubber keypads. As of December 31, 2000, 2001 and 2002, the Parent Company’s holding in Zhongshan-Ichia was 100%.

Ihwa Electronics (Zhongshan) Co., Ltd. (“Ihwa-Ichia”), was incorporated in Mainland China in 2000. The company is engaged mainly in the design and fabrication of rubber keypads. As of December 31, 2000, 2001 and 2002, the Parent Company’s holding in Ihwa-Ichia was 100%.

Ichia (Suzhou) Technologies, Inc. (“Suzhou-Ichia”), was incorporated in Mainland China in 2002. The company is engaged mainly in the design and fabrication of rubber keypads and FPC’s. As of December 31, 2002, the Parent Company’s holding in Suzhou-Ichia was 100%.

Principles of Consolidation

The consolidated financial statements include the accounts of Ichia Technologies, Inc. USA-Ichia, Mexico-Ichia, BVI-Ichia, Malaysia-Ichia, Zhongshan-Ichia, Ihwa-Ichia, and Suzhou-Ichia.

All significant inter-company balances and transactions have been eliminated in the consolidation. Consolidation debits/credits are amortized on the straight-line method according to the ROC GAAP.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash includes unrestricted currency and bank deposits. Cash equivalents are short-term bills or debt securities that are both readily convertible to known amount of cash, and so near their maturity that there is little influence on their value by changes in the interest rates.

Short-Term Investments

Marketable securities are initially stated at their acquisition cost. Stock dividends received from invested companies are not recognized as investment income but are merely noted as an increase in the number of shares invested. The cost of stocks and mutual fund certificates sold is determined on the weighted-average method. At the year-end, all short-term investments held are evaluated at the lower of cost or market value. Gain on value recovery or loss on value decline at the year-end is recorded currently. When employing the lower of cost or market value method, both equity and

F-10

non-equity securities are treated as in the same portfolio and the cost or market value are aggregately compared. The market value for investments in listed closed-end funds, listed stocks, and OTC stocks is their respective average closing price of the last month of the year. The market value for investments in open-end funds is the year-end net asset value of the funds.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided for notes and accounts receivable based on management’s evaluation of the collectibility of accounts, past loss experience, aging of accounts, notes, overdue and other receivables and other pertinent factors.

Inventories

Inventories are initially stated at the acquisition cost under the perpetual inventory system. Cost of inventories sold is determined by the weight-average method. At the year end, inventories are re-evaluated at the lower of cost or market value. When employing the lower of cost or market value method, cost or market value of inventories is compared aggregately, with market value being determined by the replacement cost.

Inventories that are defective, damaged or obsolete, and which values are significantly depreciated, are restated at their net realizable value.

Long-Term Equity Investments

The Company uses the lower-of-cost-or-market method to account for investments in stocks of listed companies in which the Company’s ownership interest is less than 20% on the balance sheet date. Unrealized losses on long-term equity investments resulting from declines in market value is reflected as a separate component of stockholders’ equity. Investments in stocks of non-publicly-traded companies in which the Company’s ownership interest is less than 20% and over which the Company is unable to exercise significant influence are accounted for by the cost method. Other than temporary declines, any loss in value of an investment is reflected in income. Stock dividends received are recorded only as an increase in the number of shares, not as an investment income. The cost of long-term equity investments is determined on the weighted-average method.

Investments in corporations in which the Company’s ownership interest is 20% or more, except where the Company cannot exercise significant influence, are accounted for by use of the equity method of accounting.

Property, Plant and Equipment

Pr Property, plant and equipment are stated at cost. Expenditures that would increase the value or extend the useful lives of the property, plant and equipment are capitalized. Interest is capitalized in connection with the construction of major facilities.

Depreciation is provided on the straight-line basis using the economic service live of the assets less any salvage value.

Convertible bonds

The convertible bonds are issued at par. The monthly interest expense is determined by applying the stated interest rate to the face value of the bonds issued. Redemption price in excess of the face value of the bonds is accrued over the period from the issue date up to the redemption date using the effective interest rate method.

The interest-premium of puttable convertible bonds, which is the difference between the specified put price and the par value, is amortized by using the interest method and is recognized as a liability over the period from the issuance date of the bonds to the expiry date of the put option.

The difference between the specified conversion price and the par value, and the payback interest from the holder, are credited to appropriate capital surplus accounts upon conversion of the bonds.

Retirement Plan

The Company’s accounting for pensions is in accordance with the accounting standards for pension and related regulations. Net pension cost and related asset or liabilities are determined based on actuarial calculations.

F-11

Foreign Currency Transactions

Transactions negotiated in foreign currencies are recorded in New Taiwan Dollars at the exchange rates prevailing on the transaction dates. Gains or losses, caused by different foreign exchange rates applied when foreign currency receivables and payables are settled, are credited to or charged against current income. Balance sheet date balances of assets and liabilities denominated in foreign currencies are at the balance sheet date exchange rates, and any resulting gains or losses are credited to or charged against current income.

The financial statements of foreign subsidiaries accounted for based on the equity method are translated from local currency into New Taiwan as follows:

• All assets and liabilities should be translated at the current rate as at the balance sheet date. Stockholders’ equity accounts should be translated at the historical rate except for the beginning balance of the retained earnings, which is carried by the translated amount of the last period.

• Income statement accounts are translated at the weighted-average rate of the current period.

• Exchange gains or losses resulting from the translation process as described above should be recorded as Translation adjustments which is included as a separate component of stockholders’ equity.

Income Tax

The Company adopted the provision of SFAS No. 22, “Accounting for Income Tax,” which requires an asset and liability approach to financial accounting and reporting for income tax. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable for the period plus or minus the change during the period in deferred income tax assets and liabilities. Investment tax credits are accounted for under the flow-through method, for which any investment tax credits obtained should be recognized as an actual reduction in income tax payable as the reduction of income tax expense or other income of the year. Unused income tax credits are recognized as deferred tax assets to the extent they are expected to be realized, if any.

The distributable unappropriated earnings may be reserved at the discretion of the Board of Directors. Starting from January 1, 1998, the unappropriated earnings may subject to one-time additional 10% tax rate if they are not appropriated within a certain period according to the modified Tax Law of the ROC.

Non-Derivative Financial Instruments

The Company applies the above-described accounting polices and generally accepted accounting principles to account for assets and liabilities derived from non-derivative financial instruments and to recognize related revenues and expenses.

Derivative Financial Instruments

The Company uses derivative financial instruments for hedging purposes, as follows:

Foreign-currency options: Premiums paid or received for options are recorded as assets or liabilities, respectively, and are recognized as revenue or expense upon each settlement. Gain or loss on the exercise of the options is credited or changed to current income of the item being hedged.

Translation of New Taiwan Dollars to United States Dollars

The 2002 United States Dollar amounts were translated from the New Taiwan Dollars at NT$34.75 to U.S.$1.00, the exchange rate at December 31, 2002, solely for the convenience of readers. Such translation should not be construed as a representation that the amounts could be, or have been, converted at that or any other rate.

F-12

3. CASH AND CASH EQUIVALENTS

		2000	2001	2002
		NT$	NT$	NT$	U.S.$
Cash	..............................................................	$910	$1,336	$3,124	$90
Cash	in banks ................................................	507,516	99,021	258,261	7,432
Cash	equivalents ............................................	—	201,047	7,241	208
Total	..............................................................	$508,426	$301,404	$268,626	$7,730

4. SHORT-TERM INVESTMENTS, NET 2000 NT$ Beneficiary’s certificates................................ $79,405 Corporate bonds............................................. — Less: allowance for valuation loss on short-term investments ...................... (8,283) Net ................................................................ $71,122 Market value, end of year .............................. $71,122 5. NOTES, ACCOUNTS AND OVERDUE RECEIVABLE 2000 NT$ Notes receivable ............................................ $1,504 Less allowance for doubtful accounts............. (13) Total .............................................................. $1,491 Accounts receivable ....................................... $309,410 Less allowance for doubtful accounts............. (4,151) Total .............................................................. $305,259 Overdue receivable ........................................ $3,359 Less allowance for doubtful accounts............. (3,359) Total .............................................................. $—	2000	2001	2002	2002
	NT$ $79,405 — (8,283)	NT$ $526,731 17,812 (2,932)	NT$ $155,491 31,541 (5,079)	U.S.$ $4,474 908 (146
		$541,611 $541,611 2001	$181,953 $5,236 $181,953 $5,236 2002	$5,236
				$5,236
	NT$ $1,504 (13)	NT$ $10,708 (107)	NT$ $120,452 (957)	U.S.$ $3,466 (27
	$1,491	$10,601	$119,495	$3,439
	$309,410 (4,151)	$286,498 (3,170)	$614,805 (4,938)	$17,692 (142
	$305,259	$283,328	$609,867	$17,550
	$3,359 (3,359)	$582 (582)	$1,066 (1,066)	$31 (31
	$—	$—	$—	$—

F-13

6. INVENTORIES

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Raw materials ................................................	$58,399	$64,898	$103,841	$2,988
Work in process .............................................	60,996	103,668	221,406	6,371
Finished goods...............................................	51,518	73,726	87,241	2,511
Merchandise inventories.................................	158	—	52	2
Materials and supplies in transit ....................	3,652	1,352	11,549	332
Subtotal .........................................................	174,723	243,644	424,089	12,204
Less allowance for inventory valuation and
obsolescence losses....................................	(3,303)	(379)	(3,314)	(95)
Total ..............................................................	$171,420	$243,265	$420,775	$12,109

At December 31, 2000, 2001 and 2002, insurance coverages for inventories amounted to NT$142,706, NT$219,094 and NT$268,696, respectively.

7. LONG-TERM INVESTMENTS

Long-term investments in stocks .................... Long-term investments in bonds..................... Other long-term investments .......................... Total ..............................................................	2000	2001	2002	2002
	NT$ $122,796 — 7,458	NT$ $261,386 — 7,458	NT$ $342,582 10,000 7,458	U.S.$ $9,858 288 215
	$130,254	$268,844	$360,040	$10,361

Long-Term Investments in Stocks

Equity method ............................................... Cost method................................................... Less allowance for valuation losses in long- term investments........................................ Total ..............................................................	2000	2001	2002	2002
	NT$ $38,179 84,617 —	NT$ $183,069 84,617 (6,300)	NT$ $264,553 84,329 (6,300)	U.S.$ $7,613 2,426 (181
	$122,796	$261,386	$342,582	$9,858

Equities in Earnings (Losses) of Affiliates

Ichia International Trading Ltd. (BVI) ........... H.K.-Ichia...................................................... Homesolutin, Inc............................................ Landsfair Technology Corp ............................ Total ..............................................................	2000	2001	2002	2002
	NT$ $— (580) (5,114) —	NT$ $2,662 (185) (16,210) (4,249)	NT$ $(4,689) 15 (13,163) (3,714)	U.S.$ $(135 — (378 (107
	$(5,694)	$(17,982)	$(21,551)	$(620

F-14

Major Changes in the Long-term Investments

In 2001, the Company’s investment in Shiang-Cheng Technology Corp. was evaluated and resulted in a permanent loss. Such loss on the decline in value at the year-end is recorded currently.

In May 2001, the Company invested in Landsfair Technology Corp. The purchase price discount of NT$29,148 is amortized on a straight-line basis for five years.

In September 2001, Landsfair Technology Corp. issued new shares, and since the Company did not purchase new shares proportionately, the equity in net assets for the original investment increased by NT$10,768. The difference is used to adjust the additional paid in capital and the long-term investments accounts. The purchase price premium of NT$21,536 is amortized on a straight-line basis for five years.

In 2002, BCOM Electronics Inc. decreased its outstanding capital stock to offset its accumulated deficit. Accordingly, the Company recognized a loss of NT$288 which was accounted for as an investment loss.

As of December 31, 2000, 2001 and 2002, due to a negative equity position, the investments in H.K.-Ichia and Ichia International Trading Ltd. (BVI) were accounted for as deferred credits under the equity method in the amounts of NT$180, NT$388 and NT$515, respectively.

Unconsolidated Subsidiary

An investee company is considered as a subsidiary when the Company holds more than 50% of its outstanding voting stocks. Consolidated financial statements are prepared for all subsidiaries, except H.K.-Ichia and Ichia International Trading Ltd. (BVI) since their total assets and operating income are less than 10% of the corresponding amounts of the Company.

8. PROPERTY, PLANT AND EQUIPMENT

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Cost:
Land ..........................................................	$39,039	$298,016	$297,962	$8,574
Buildings and structures.............................	445,545	447,738	460,991	13,266
Machinery and equipment ..........................	517,913	782,729	975,334	28,067
Other facilities...........................................	218,778	292,768	359,488	10,345
Prepayments for land .................................	144,562	—	—	—
Unfinished construction and prepayments
for business facilities.............................	128,253	26,340	236,410	6,803
Subtotal .....................................................	1,494,090	1,847,591	2,330,185	67,055
Accumulated depreciation
Buildings and structures.............................	23,077	35,689	37,180	1,070
Machinery and equipment ..........................	114,474	198,543	299,253	8,611
Other facilities...........................................	88,218	123,820	163,387	4,702
Subtotal .....................................................	225,769	358,052	499,820	14,383
Total ..........................................................	$1,268,321	$1,489,539	$1,830,365	$52,672

At December 31, 2000, 2001 and 2002 insurance coverages for property, plant and equipment amount to NT$1,477,971, NT$1,243,763 and NT$1,313,852, respectively. For disclosure of pledged assets provided for long-term loans, please refer to Note 19.

Interest capitalization for the years ended December 31, 2000, 2001 and 2002 amounted to NT$335, NT$0 and NT$2,701, respectively.

For disclosure of significant commitments for the future acquisition of fixed assets, please refer to Note 20.

F-15

9. SHORT-TERM BANK LOANS

Short-term borrowings at December 31, 2000, 2001 and 2002 were comprised of the following:

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Material procurements loans ..........................	$105,107	$24,647	$64,472	$1,855
Unsecured loans.............................................	—	—	125,951	3,625
Total ..............................................................	$105,107	$24,647	$190,423	$5,480

At December 31, 2000, 2001 and 2002, the interest rates on such borrowings ranged from 1.25% to 7.6%, 1.25% to 2% and 1.25% to 4.779%, respectively.

As of December 31, 2000, 2001 and 2002, the Company has issued promissory notes amounting to NT$365,500, NT$488,500 and NT$163,500, respectively, to various banks as commitments for short-term and long-term loans. Assets pledged as collateral for short-term loans are disclosed in Note 19.

10. BONDS PAYABLE

	2000		2001	2002
	NT$		NT$	NT$	U.S.$
1st Domestic unsecured convertible corporate
bonds.........................................................		$—	$650,000	$650,000	$18,705
Add accrued interest compensation ................		—	22,750	58,070	1,671
Total ..............................................................		$—	$672,750	$708,070	$20,376

On April 3, 2001, the Company had been approved by the Securities and Futures Commission of the Ministry of Finance ROC (“SFC”) to issue its first domestic unsecured convertible corporate bonds. The bonds were issued for the purpose of acquisition of buildings and structures. Details of the bonds issuance are summarized as follows:

• (a) Total Principal: NT$650,000

• (b) Denomination: NT$100, issued at par

• (c) Period: 5 years, maturity period from May 5, 2001 to May 4, 2006.

• (d) Nominal interest rate: 0%, per annum

• (e) Repayment: Redeemed by cash at maturity except those converted to common stocks or redeemed by the Company.

• (f) Underlying security: Common stocks of the Company.

• (g) Conversion price and adjustments:

• i) The original conversion price is NT$90.79 (dollars).

• ii) The conversion price is subject to adjustment based on the following formula if there are changes of outstanding shares, execution of conversions below market price, additional issuance of common stock subscription rights, issuance of any securities with subscription rights, or any subscription rights except a capital increase by cash subscription.

• Changes of outstanding shares — The conversion price after adjustment = Conversion price before adjustments x A

Payment amount per share x Number of new shares Number of existing shares + Market value per share A =

Number of existing shares + Number of new shares

F-16

• Execution of conversion below market price, additional issuance of common stocks subscription rights — The conversion price after adjustment = Conversion price before adjustments x A

Subscription price of new issuance x Number of new shares Number of existing shares + Market value per share A = Number of existing shares + Number of new shares

• (h) The Company’s call option:

• i) The closing price of the share is at or above 50% of the conversion price for each of 30 consecutive Taiwan Stock Exchange trading days in the period beginning from 1 year after issuance to 40 days before maturity, the Company holds the option to redeem the bonds by the price compute based on the following redemption return-rate.

• ii) When the total value of outstanding convertible bonds is less than 10% of the total principal in the period beginning from 3 months after issuance to 40 days before maturity, the Company holds the option to redeem the bonds by the price compute based on the following redemption return-rate.

• iii) Redemption return-rate:

Date of Request to Redeem the Bonds May 6, 2002 through May 5, 2004 .......................................................................... May 6, 2004 through May 5, 2005 .......................................................................... May 6, 2005 through 40 days prior to the bonds maturity date based .....................	Redemption return-rate
	4.75% 5.25% On the face value

• iv) On the redemption date, the 4th and 5th anniversary of the issuance date, bonds are redeemable at a redemption price determined based on 114.94% and 122.71% of face value plus accrued interest, respectively (i.e. yield rate 4.75% and 5.25% annually). At the bonds maturity date, bonds will be redeemed at face value.

11. LONG-TERM BANK LOANS

		2000	2001	2002	2002
g Hwa Bank ............................ Bank Berhad .......................... Leasing Sdn. Bhd. .................. current portion of long-term bt ............................................	Terms 5-years secured loan with line of credit amounting to NT$25,000 with principal repaid every six months since July 2000. The interest rate is 7.6% and paid every month. 5-years secured loan. The interest is paid every month. 4-years secured loan. The interest rate is 5% and paid every month.	NT$ $20,000 — 400 (5,400)	NT$ $— 4,390 — (1,477)	NT$ $— 2,784 — (1,592)	U.S.$ $— 80 — (46

For pledged assets provided for long-term loans at December 31, 2000, 2001 and 2003, please refer to Note 19.

F-17

12. PENSION PLAN

USA-Ichia, Mexico-Ichia, BVI-Ichia, Malaysia-Ichia, Zhongshan-Ichia, Ihwa-Ichia, Suzhou-Ichia do not have defined benefit pension plans.

The Parent Company has a defined benefit pension plan (the “Plan”) covering all employees. The Plan’s definition of retirement benefits provides that payments are to be based upon an employee’s years of service and the average compensation for the six-month period before retirement. According to the Labor Standard Laws of the ROC, the Company provides and funds retirement benefits monthly at 2% of salaries paid to the employees’ which was deposited in the Central Trust of China by the Employees Retirement Reserve Supervisory Committee.

The Company adopted the provisions of “Accounting for Pensions” in SFAS No. 18. The following tables set forth the plan’s status at December 31, 2000, 2001 and 2002:

The net periodic pension costs for the years ended December 31, 2000, 2001 and 2002 are summarized as follows:

Service cost .................................................. Interest cost ................................................... Expected return on plan assets ....................... Amortization of net transition obligation........ Amortization of net pension benefit .............. Net periodic pension cost .............................	2000	2001	2002	2002
	NT$ $4,403 2,257 (626) 751 —	NT$ $4,277 2,539 (715) 751 —	NT$ $4,534 1,685 (614) 751 (187)	U.S.$ $131 48 (18 22 (5
	$6,785	$6,852	$6,169	$178

The funded status of the Plan as of December 31, 2000, 2001 and 2002 are as follows:

Benefit obligation: Vested benefit obligation ........................... Non-vested benefit obligation ................... Accumulated benefit obligation ...................... Additional benefits based on future salaries .. Projected benefit obligation ........................... Fair value of plan assets ................................ Funded status................................................. Unamortized net transition obligation............. Unrecognized net gain or loss ........................ Additional liability......................................... Accrued pension cost .....................................	2000	2001	2002	2002
	NT$ $— (20,711) (20,711) (23,450) (44,161) 11,115 (33,046) 12,020 3,087 —	NT$ $— (20,763) (20,763) (16,692) (37,455) 12,226 (25,229) 11,268 (7,874) —	NT$ $— (29,077) (29,077) (16,166) (45,243) 14,331 (30,912) 10,517 (3,909) —	U.S.$ $— (837
				(837 (465
				(1,302 412
				(890 303 (112 —
	$(17,939)	$(21,835)	$(24,304)	$(699

As of December 31, 2000, 2001 and 2002, the Company did not have vested obligation.

Actuarial assumptions are as follows:

Discount rate ............................................................................. Assumed rate of increase in future compensation levels ............ Expected long-term rate of returns on plan assets......................	2000 5.75% 5.00% 5.75%	2001 4.50% 4.50% 4.00%	2002
			3.50% 3.00% 3.50%

F-18

Contributions to the fund .............................. Payments of retirement benefits ....................	2000 NT$ $2,082 $1,446	2001 NT$ $2,956 $2,293	2002	2002
			NT$ $3,700 $1,907	U.S.$ $106
				$55

13. CAPITAL STOCK

The Company’s outstanding capital stock at December 31, 2002 was NT$1,377,000 thousand dollars divided into 137,700,000 common shares at NT $10 par value each. Capital stock at December 31, 2002 consists of the following:

Initial cash subscription ........................................................................................ Issuance of common stock for cash ....................................................................... Appropriated from retained earnings ..................................................................... Appropriated from capital surplus ......................................................................... Appropriated from bonuses to employees .............................................................. Total .....................................................................................................................	2002	2002
	NT$ $12,000 377,226 755,356 171,560 60,858	U.S.$ $345 10,856 21,737 4,937 1,751
	$1,377,000	$39,626

14. CAPITAL SURPLUS

Additional paid-in capital............................... Transfer of gain on disposal of property, plant and equipment................................... Transfer of capital surplus to capital stock..... Effect on change of ownership percentage in subsidiary ................................................. Total .............................................................	2000	2001	2002	2002
	NT$ $731,488 2,962 (118,460) —	NT$ $731,488 2,962 (118,460) 10,768	NT$ $731,488 320 (171,560) 10,768	U.S.$ $21,050 9 (4,937 310
	$615,990	$626,758	$571,016	$16,432

Capital surplus shall be used only for making up for accumulated deficits or increasing capital stocks. Effect on change of ownership percentage in subsidiary cannot be used for increasing capital stocks.

15. RETAINED EARNINGS

According to the Parent Company’s Articles of Incorporation, the Parent Company’s annual earnings, after paying income tax and offsetting any deficit, and appropriating 10% there of as legal reserve, if any, should be appropriated and distributed in the following order after approval by annual shareholders’ meeting:

• (a) 5% to 10% as bonuses to employees.

• (b) A maximum of 3% as bonuses to directors and supervisors.

• (c) Dividends and bonuses to common stockholders.

The stock bonuses are provided to employees including subsidiary employees who meet established terms that are determined by the board of directors.

The policy of dividend distributions is made by the board of directors. Cause of the Company is in the stage of growth at present, has plans for expanding production capacity, so it needs it’s retained earnings to be the funding resource. The Company will adjust dividend distributions based on profit and consideration of the following factors.

• (a) Strengthen market competition status.

F-19

• (b) Future fund demand.

• (c) Long-term financial planning of persistently expanding capital scale.

• (d) Keep earnings per share grow steadily.

The amount of dividends to shareholders should not be less than 60% of the amount available for distribution, and the amount of cash dividends should not be more than 50% of the amount available for distribution for the same year.

Until the date of independent auditors’ report, the proposal of earnings distribution of 2002 was not yet resolved by the Board of Directors. Please check the information about the proposals resolved by the Board of Directors and earnings distribution resolved by the Stockholders in Market Observation Post System of TSE.

The Board of Directors and the Stockholders resolved the proposals related to the transfer of bonuses to employees to capital stock which amounted to NT$20,000 and compensation to directors and supervisors which amounted to NT$4,000 in 2001. The basic after-tax earnings per share of 2001 was NT$1.95, and the basic after-tax earnings per share was NT$1.75 based on the proforma data if bonuses to employees and compensation to directors and supervisors were treated as period expenses.

In accordance with the “Income Tax Law of Foreign Investment of the People’s Republic of China” (“the Law”), Zhongshan-Ichia, Ihwa-Ichia and Suzhou-Ichia. raised enterprise development funds, reserve funds, and reward and welfare funds after income tax payment, and they followed the Boards’ decisions to arrange the percentages which aforementioned funds to be raised. The Companies’ profit after income tax payments, according to the Law, and funds raising were confirmed by the Boards.

In accordance with the local law, USA-Ichia distributed 10% of profit as employees’ benefits before income tax payment, and ignored the effects of current inflation and loss carry-forwards.

The Board of Malaysia-Ichia has the right to distribute the Company’s profit after the income tax payment. The retained profit is recorded as retained earnings before distributed.

16. INCOME TAX

Current income tax expense for the years ended December 31, 2000, 2001 and 2002 and income tax payable as of December 31, 2000, 2001 and 2002 are as follows:

Income tax expense: The Parent Company.................................. USA-Ichia ................................................ BVI-Ichia ................................................. Total income tax expense .............................. Income tax payable: The Parent Company ................................ USA-Ichia ................................................ BVI-Ichia ................................................. Total income tax payable ..............................	2000	2001	2002	2002
	NT$ $41,000 — 764	NT$ $61,000 3,606 268	NT$ $70,000 3,300 16,409	U.S.$ $2,015 95 472
	$41,764 2000	$64,874 2001	$89,709 $2,582 2002	$2,582
	NT$ $18,384 190 —	NT$ $(11,714) 279 —	NT$ $19,816 892 15,940	U.S.$ $570 26 459
	$18,574	$(11,435)	$36,648	$1,055

F-20

Income tax assets (liabilities), net: The Parent Company.................................. USA-Ichia ................................................ BVI-Ichia ................................................. Total income tax assets (liabilities), net ........ Deferred income tax assets: Unrealized pension cost ............................ Unrealized interest compensation ............... Net operating loss carry-forward................ Investment tax credit ................................. Others........................................................ Total ............................................................. Deferred income tax liabilities: Unrealized gains on foreign exchange ........ Unrealized investment income on equity method investees ................................... Taxable temporary difference from recognition of depreciation .................... Cumulative translation adjustment ............ Total .............................................................	2000	2001	2002	2002
	NT$ $(12,540) 5,229 (1,383)	NT$ $(56,335) 2,576 (1,774)	NT$ $(90,812) 1,350 (64)	U.S.$ $(2,613 39 (2
	$(8,694) 2000	$(55,533) 2001	$(89,526) $(2,576 2002	$(2,576
	NT$ $4,460 — 5,229 17,133 2,269	NT$ $5,433 5,687 2,927 5,131 3,908	NT$ $6,051 14,517 253 7,034 8,014	U.S.$ $174 418 7 202 231
	$29,091 2000	$23,086 2001	$35,869 $1,032 2002	$1,032
	NT$ $3,004 31,893 1,385 1,503	NT$ $625 64,517 2,125 11,352	NT$ $— 113,956 64 11,375	U.S.$ $— 3,279 2 327
	$37,785	$78,619	$125,395	$3,608

The deferred income tax assets and liabilities are summarized as follows:

Deferred income tax assets - current ............. Deferred income liabilities - current ............. Total ............................................................. Deferred income tax assets - noncurrent ....... Deferred income liabilities - noncurrent ........	2000	2001	2002	2002
	NT$ $2,526 (3,004)	NT$ $1,230 (625)	NT$ $3,340 —	U.S.$ $96 —
	$(478) 2000	$605 2001	$3,340 $96 2002	$96
	NT$ $26,565 (34,781)	NT$ $21,856 (7,994)	NT$ $32,520 (125,395)	U.S.$ $936 (3,608
	$(8,216)	$(56,138)	$(92,866)	$(2,672

F-21

The Company’s investment tax credit and loss carry-forwards at December 31, 2002 for income tax purposes are as follows:

Year expired 2002 NT$ U.S.$ Investment tax credit .......... 2006 $7,034 $203 Loss carry-forwards............ 2008 — — Other information about integrated income tax system: 2000 2001 NT$ NT$ Imputation credit account............................... $19,686 $27,013 Imputation credit ratio ................................... 11.30% 11.43% 2000 2001 NT$ NT$ Retained earnings: 1997 and before......................................... $360 $— 1998 and after ........................................... 343,676 236,255 Total ......................................................... $344,036 $236,255	Year expired 2002 NT$ U.S.$ Investment tax credit .......... 2006 $7,034 $203 Loss carry-forwards............ 2008 — — Other information about integrated income tax system: 2000 2001 NT$ NT$ Imputation credit account............................... $19,686 $27,013 Imputation credit ratio ................................... 11.30% 11.43% 2000 2001 NT$ NT$ Retained earnings: 1997 and before......................................... $360 $— 1998 and after ........................................... 343,676 236,255 Total ......................................................... $344,036 $236,255	Year expired 2002 NT$ U.S.$ Investment tax credit .......... 2006 $7,034 $203 Loss carry-forwards............ 2008 — — Other information about integrated income tax system: 2000 2001 NT$ NT$ Imputation credit account............................... $19,686 $27,013 Imputation credit ratio ................................... 11.30% 11.43% 2000 2001 NT$ NT$ Retained earnings: 1997 and before......................................... $360 $— 1998 and after ........................................... 343,676 236,255 Total ......................................................... $344,036 $236,255	2002	2002
			NT$ U.S.$ $— $— 253 7 2002
			NT$ U.S.$ $17,104 $492 10.57% 10.57% 2002	U.S.$ $492
	NT$ $360 343,676	NT$ $— 236,255	NT$ $— 349,191	U.S.$ $— 10,049
	$344,036	$236,255	$349,191	$10,049

Zhong-Shan Electronic Co. and Yi-Hua Electronic Co are subject to “The Tax Law of Foreign Investment of the People’s Republic of China”, and in accordance with the law, the first two years which they begin to have profit, they do not have to pay the income tax, and the next three years which they begin to have profit, they are subject to half of the current income tax rate of the current year.

17. EARNINGS PER SHARE

NT$ Net income belongs to shareholders of common stock ............................. Primary earning per share...			2000
	Amount (Numerator) Before Tax After Tax		Shares (’000) (Denominator)	Earnings per Share
	Before Tax			Before Tax	After Tax
	$381,348	$339,584	131,962	$2.89	$2.57

F-22

NT$ Net income......................... Primary earning per share... Net income belongs to shareholders of common stock ............................. Effect of potentially dilutive securities - Convertible corporate bond .......................... Diluted earnings per share - Net income plus potentially diluted securities .................. NT$ Net income......................... Primary earning per share... Net income belongs to shareholders of common stock .............................. Effect of potentially dilutive securities: Convertible corporate bond .......................... Employee stock option ... Diluted earnings per share - Net income plus potentially diluted securities ..................				2001
	Amount (Numerator) Before Tax After Tax $295,481 $230,607 295,481 230,607 22,750 17,063 $318,231 $247,670			Shares (’000) (Denominator) 137,700 10,484 148,184 2002	Earnings per Share
	Before Tax $295,481 295,481 22,750 $318,231				Before Tax $2.15 $2.15	After Tax
						$1.67
						$1.67
	Amount (Numerator) Before Tax After Tax $430,228 $340,519 430,228 340,519 35,320 26,490 — —			Shares (’000) (Denominator)	Earnings per Share
	Before Tax $430,228 430,228 35,320 —				Before Tax $3.12	After Tax
						$2.47
			340,519 26,490 —	137,700 13,978 1,043
	$465,548		$367,009	152,721	$3.05	$2.40

F-23

U.S.$ Net income......................... Primary earning per share... Net income belongs to shareholders of common stock .............................. Effect of potentially dilutive securities: Convertible corporate bond .......................... Employee stock option ... Diluted earnings per share - Net income plus potentially diluted securities ..................				2002
	Amount (Numerator) Before Tax After Tax			Shares (’000) (Denominator)	Earnings per
	Before Tax				Before Tax	After Tax
	$12,381 12,381 1,016 —		$9,799		$0.09	$0.07
			9,799 762 —	137,700 13,978 1,043
	$13,397		$10,561	152,721	$0.09	$0.07

18. RELATED PARTY TRANSACTIONS

Name of Related Party Homesolutin, Inc. ............................................................ Landsfair Technology Corp.............................................. Huang Qiu Yong..............................................................	Relationship with the Company
	Investee accounted for by equity method Investee accounted for by equity method The Company’s president

Major transactions with related parties are summarized below:

Sales

Landsfair Technology Corp. .................	2000 NT$ $—	2001 NT$ $—	2002
			NT$ U.S.$ $1,710 $49

Sales to related parties are made on credit and at prices similar to those given to third parties. The collection period of sales to Landsfair Technology Corp. is 6 months after shipment.

Service revenue

Landsfair Technology Corp. .................	2000 NT$ $—	2001 NT$ $1,050	2002
			NT$ U.S.$ $750 $22

Acquisition of Equipment

In 2000 Acquisitions of equipment are summarized as follows:

Homesolutin, Inc. ............................................................	Proceeds NT$ $1,430	Book Value NT$ $1,430	Loss
			NT$ $—

F-24

In 2001, acquisition of equipment is summarized as follows:

Landsfair Technology Corp.............................................. Receivable Notes receivable ........... Landsfair Technology Corp. Other current assets ...... Ichia International Trading Ltd. (BVI) Landsfair Technology Corp. Homesolutin, Inc.	Proceeds Book Value Loss NT$ NT$ NT$ $137 $152 $(15 2000 2001 2002 NT$ NT$ NT$ U.S.$ $— $158 $— $— — — 13,577 391 — 473 315 9 — 40 — —	Proceeds Book Value Loss NT$ NT$ NT$ $137 $152 $(15 2000 2001 2002 NT$ NT$ NT$ U.S.$ $— $158 $— $— — — 13,577 391 — 473 315 9 — 40 — —	Loss
			NT$ $(15 2002
		NT$ U.S.$ $— $— 13,577 391 315 9 — —

Other payable-related parties

For the period ended December 31, 2000: Huang Qiu Yong .............................. For the period ended December 31, 2001: Huang Qiu Yong ..............................	Maximum Balance for the Period NT$ $2,312 $2,312	Ending Balance NT$ $— $2,312	Interest Rate — —	Interest Expense
				NT$ $— $—

Guarantee

As of December 31, 2000, 2001, and 2002, Ichia Tech. Co. had outstanding guarantees for bank loans of Landsfair Technology Corp. of NT$50,000, NT$50,000 and NT$65,000, respectively.

19. ASSETS PLEDGED

The carrying value of assets pledged as collateral for bank borrowings for the years ended December 31, 2000, 2001 and 2002 are as follows:

Property, plant and equipment: Land .......................................................... Buildings and structures............................. Machinery and equipment .......................... Other current assets - Restricted deposits....... Other assets - Restricted deposits................... Other assets - Rental assets: Land .......................................................... Buildings and structures............................. Total ..............................................................	2000	2001	2002	2002
	NT$ $30,105 51,732 23,638 8,642 3,669 — —	NT$ $— — 19,911 71,193 3,000 30,105 30,860	NT$ $— — 14,535 86,272 3,000 30,105 28,313	U.S.$ $— — 418 2,483 86 866 815
	$117,786	$155,069	$162,225	$4,668

F-25

20. COMMITMENTS AND CONTINGENCIES

As of December 31, 2002, the Parent Company has issued guarantees for related companies as disclosed in Note 18.

The Parent Company has issued stock warrants for employees as described in Note 21.

The Parent Company has agreements with suppliers to buy equipment. The total price in the contracts is NT$23,577 thousand, and as of December 31, 2002, Ichia Tech. Co. had paid NT$6,934 thousand and recorded such to prepaid equipment. The balance of NT$16,643 thousand was unpaid.

There is a construction contract between Suzhou-Ichia and Juang-Su Su-Zhou Second Construction Group Co., and the total price of the contract is NT$315,634 thousand. As of December 31, 2002, Ichia Su-Zhou had paid NT$187,789 thousand and recorded such payment to construction in process. The balance of NT$127,845 thousand was unpaid.

Suzhou-Ichia leases land from Su-Zhou High-Tech. Industry Co. to build a future plant. The term of the lease contract is from November 23, 2001 to November 22, 2051, and the total price is NT$26,505 thousand which was recorded to other assets. As of December 31, 2001, Suzhou-Ichia had paid NT$7,952 thousand, and the balance is NT$18,553 thousand which was unpaid and recorded to accounts payable - equipment.

21. EMPLOYEE STOCK OPTIONS

Time of Issue

Employee stock options shall be issued in installments over a year from the date approval is received from the Securities and Futures Commission, Ministry of Finance, R.O.C. (hereinafter referred to as the regulatory agency). The Chairman shall have the power to determine the actual issue dates.

Stock Option Eligibility Requirements

Only employees of the Parent Company and its subsidiaries on the day of the grant are eligible to receive the options. The grant date is determined by the Chairman. The employees who qualify to receive the options and actual number of shares granted is determined by the president based on their years of service, position, work performance, past and expected overall or special contributions to the Company, passed to the Chairman for review and then to the Board of Directors for approval. No single employee may be granted over 10% of the total shares granted under each option issuance and the granted over 1% of the Company’s issued and outstanding common stock.

Amount of Shares Issued

In July 2001 and January 2001, the employee stock options were approved for 8,000 and 2,000 units, respectively, by the Taiwan Securities and Futures Commission (“SFC”). A total of 10,000 units of options may be issued under the option plan and each unit of options entitles the option holder to receive 1,000 shares, and therefore a total of 10,000,000 new shares of common stock must be issued when the options are exercised. As of March 31, 2003, the outstanding options were 9,710,000 shares, and 290,000 shares were not issued within a year from the date approved was received from the regulatory agency.

Term

Exercise Price (or strike price)

The closing price of the Parent Company’s common shares on the day the options are issued. If the closing price of the stock on that day is lower than its face value then the exercise price of the options shall be the face value of the common stock.

Validity

• a) Stock options shall have a term of 6 years. Stock options may not be transferred by the option holder except to his/her heirs in the event of death.

• b) Options issued to employees under the stock option plan may be exercised after a period of two years after employee stock option certificates are granted.

• c) If the employee who is granted stock options by the Company violates his or her labor contract, commits a major infraction of work regulations or whose work performance is substantially lower than expectations, the Company has the right to take back and cancel any unexercised stock options granted to that employee.

• d) The Board of Directors may adjust the time and allocation of above-mentioned stock options depending on the prevailing conditions at the time of the issue.

F-26

Type of shares issued under the stock option plan: The Company’s common stock.

Implementation

Paid for by the Company through the issue of new shares.

If the Exercise Price is Lower than the Stock’s Face Value

If the exercise price of the stock options issued by the Company is lower than the face value of the common stock, the face value of the common stock shall serve as the exercise price.

Rights and Obligations after Exercising Stock Options

The rights and obligations for Stock Option Payment Certificates is the same as the Company’s common stock except that they may not participate in the Company’s stock and cash dividends and new stock subscriptions.

Outstanding Shares

As of December 31, 2002, the outstanding stock option amount to 9,710 units, per unit is 1,000 shares.

Exercise Price

As of December 31, 2002, the outstanding stock option amount to 9,710 unit, the exercise price of 7,910 and 1,800 unit is NT$42.40 and NT$42.00, respectively.

Exercisable Option

As of December 31, 2002, there was no exercisable stock option.

Compensation Cost

The detail of compensation cost is as follow:

(Market price of stock on the measurement date - exercise price) x exercise shares = ($42.40-$42.40) x 7,910,000 (shares) + ($42.00 - $42.00) x 1,800,000 (shares) = 0

22. FINANCIAL INSTRUMENTS

As of December 31, 2002, the Company has following foreign currency options. Such financial instruments are designated as hedges against foreign exchange rate risk of net assets and net liabilities.

European Option

Buy/Sell Buy .................................... Sell .................................... Sell .................................... Sell .................................... Sell .................................... Sell .................................... Sell .................................... Sell ....................................	Call/Put U.S.$/NT$ NT$/U.S.$ U.S.$/NT$ U.S.$/NT$ U.S.$/NT$ U.S.$/NT$ U.S.$/NT$ U.S.$/NT$	Contract Amount U.S.$1,000 U.S.$2,000 U.S.$1,000 U.S.$1,000 U.S.$1,000 U.S.$1,000 U.S.$1,000 U.S.$1,000	Strike Rate 33.50 33.30 33.45 34.20 34.25 34.25 34.30 34.20	Expiry Date 92.01.17 92.01.17 92.01.28 92.01.14 92.02.14 92.02.14 92.03.13 92.01.14	Strike Rate above Limit
					33.50 33.30 33.45 34.20 34.25 34.25 34.30 34.20

Risks in Terms of Credit, Market and Liquidity Risks

The Company only deals with banks with good credit, which is according to banks’ reputation and the Company’s past experience with them. Moreover, the Company has established a series of control procedures transactions of derivative financial instruments. No credit risks are expected.

Market price risk : Because the Company’s forward exchange contract are for hedging purpose, the effects of changes in exchange rate are offset between the hedging instrument and hedged item. Therefore, market price risk is not significant.

F-27

Liquidity risk : The Company engages in option contracts. There is no funding or cash flow risk.

Type of derivative financial instrument, purpose, and strategy to achieve objective; the Company’s transactions are mainly in United States Dollars. Foreign currency borrowings are settled in United States Dollars. Therefore, there is a matching of foreign exchange fluctuation. To avoid foreign exchange fluctuation risk, the Company uses forward foreign exchange contract and option contract with average period of one year.

Fair Value of Financial Instruments

Fair value of non-derivative financial instruments is equal to the balances of the Company at December 31, 2000, 2001 and 2002.

The Company’s market assumptions and estimation methodologies of the above financial instruments are as follows:

• a) Short-term financial instruments such as cash and cash equivalents, receivables, payables and short-term debts are reasonably estimated from their carrying amounts due to their short-term nature.

• b) Short-term investments are reasonably estimated from their quoted market price as at balance sheet date.

• c) Long-term equity investments are reasonably estimated from their quoted market prices as at balance sheet date for listed or over-the-counter investments. For those investments without quoted market prices, estimations of fair value are from their carrying value.

• d) Long-term loans are reasonably estimated from expected cash flows discounted at the long-term loan interest rates.

23. SEGMENTAL FINANCIAL INFORMATION

Financial Information by Industry Types

The Company’s major operations are manufacturing and sale of conductive rubber keypads and flexible PCB (“FPC”). Accordingly, there is no industry segment information to disclose under SFAS No. 20 of the ROC GAAP.

F-28

A summarized financial information by regional Segment

Sales to customers of non- consolidated companies .. Sales to customers of consolidated companies . Other income of non- consolidated companies . Other income of consolidated companies . Total income (loss)............. Segment gain (loss) ............ Investment losses on equity- method investees ............ Interest expense.................. Continuing operations’ income (loss) before tax . Recognizable assets ............ Long-term investment on equity-method investees . Total assets ........................			2000
	USA-Ichia $147,915 2,809 1,961 — $152,685 $4,913 $143,977	BVI-Ichia $228,534 266,142 6,359 — $501,035 $77,859 $421,947	Taiwan-Ichia $945,435 100,171 55,068 33,654 $1,134,328 $332,499 $1,999,445	Adjustment and Offset $— (369,122) — (33,654) $(402,776) $(21,643) $(72,879)	Total
					$1,321,884 — 63,388 —
					$1,385,272
					$393,628 (5,694) (6,586)
					$381,348
					$2,492,490
					38,179
					$2,530,669

F-29

Sales to customers of non- consolidated companies .. Sales to customers of consolidated companies . Other income of non- consolidated companies . Other income of consolidated companies . Total income (loss)............. Segment gain (loss) ............ Investment losses on equity- method investees ............ Interest expense.................. Continuing operations’ income (loss) before tax . Recognizable assets ............ Rental assets ...................... Long-term investment on equity-method investees . Total assets ........................			2001
	USA-Ichia $91,669 3,566 789 — $96,024 $(7,922) $136,426	BVI-Ichia $463,200 209,775 9,185 — $682,160 $139,102 $614,032	Taiwan-Ichia $905,352 88,127 65,602 21,889 $1,080,970 $209,576 $2,558,126	Adjustment and Offset $— (301,468) — (21,889) $(323,357) $(657) $(190,349)	Total
					$1,460,221 — 75,576 —
					$1,535,797
					$340,099 (17,982) (26,636)
					$295,481
					$3,118,235 60,965 183,069
					$3,362,269

F-30

Sales to customers of non- consolidated companies .. Sales to customers of consolidated companies . Other income of non- consolidated companies . Other income of consolidated companies . Total income (loss)............. Segment gain (loss) ............ Investment losses on equity- method investees ............ Interest expense.................. Continuing operations’ income (loss) before tax . Recognizable assets ............ Rental assets ...................... Long-term investment on equity-method investees . Total assets ........................			2002
	USA-Ichia $114,950 4,290 590 — $119,830 $14,240 $143,965	BVI-Ichia $719,576 108,996 3,403 — $831,975 $212,228 $1,195,636	Taiwan-Ichia $1,335,856 103,359 37,140 43,729 $1,520,084 $263,562 $2,607,741	Adjustment and Offset $— (216,645) — (43,729) $(260,374) $(2,998) $(182,345)	Total
					$2,170,382 — 41,133 —
					$2,211,515
					$487,032 (21,551) (35,253)
					$430,228
					$3,764,997 58,418 264,553
					$4,087,968

F-31

Sales to customers of non- consolidated companies .. Sales to customers of consolidated companies . Other income of non- consolidated companies . Other income of consolidated companies . Total income (loss)............. Segment gain (loss) ............ Investment losses on equity-method investees . Interest expense.................. Continuing operations’ income (loss) before tax . Recognizable assets ............ Rental assets ...................... Long-term investment on equity-method investees . Total assets ........................			2002
	USA-Ichia (U.S.$000) $3,308 123 17 —	BVI-Ichia (U.S.$000) $20,707 3,137 98 —	Taiwan-Ichia (U.S.$000) $38,442 2,974 1,069 1,258	Adjustment and Offset (U.S.$000) $— (6,234) — (1,258)	Total
					(U.S.$000) $62,457 — 1,184 —
	$3,448 $410 $4,143	$23,942 $6,107 $34,407	$43,743 $7,585 $75,043	$(7,492) $(86)	$63,641
					$14,014
					(620 (1,014
				$(5,248)	$12,381
					$108,345
					1,681 7,613
					$117,639

In order to reconcile the figures shown on the segment information with the financial statements, the revenues from other segments were listed in the “Adjustments and Offset” column.

Export Sales

Export sales for the years ended December 31, 2000, 2001 and 2002 are as follows:

Area	2000	2001	2002	2002
America ............................................... Europe ................................................. Asia .....................................................	NT$ $281,880 439,900 178,316	NT$ 182,305 546,344 105,677	NT$ 51,778 216,366 457,482	U.S.$ 1,490 6,226 13,165

Dominant Customers Information

Sales to major customer for the years ended December 31, 2000, 2001 and 2002 are as follows:

Customer A ......................................................... B .........................................................	2000 U.S.$ $77,563 303,193	2001 U.S.$ $48,416 247,143	2002
			U.S.$ U.S.$ $284,166 $8,177 79,174 2,278

F-32

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of Ichia Technologies, Inc.:

We have audited the accompanying balance sheets of Ichia Technologies, Inc. (the “Company”) as of December 31, 2000, 2001 and 2002, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2000, 2001 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with the “Regulations Governing the Preparation of Financial Statements of Public Companies” and accounting principles generally accepted in the Republic of China.

As described in Note 2, the financial statements of the Company as of and for the year ended December 31, 2002 expressed in US Dollars were translated from the New Taiwan Dollars using the exchange rate of NT$34.75 to U.S.$1.00 at December 31, 2002, solely for the convenience of readers.

Deloitte & Touche (T N Soong & Co and Deloitte & Touche Taiwan Combined to Establish a New Deloitte & Touche Effective June 1, 2003) Taipei, Taiwan The Republic of China February 21, 2003

The above auditors’ report and the following financial statements are English translations of the Chinese auditors’ report and financial statements prepared for and used in the Republic of China. The accompanying financial statements were prepared using accounting principles, procedures and reporting practices generally accepted in the Republic of China and 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 those in the Republic of China. The standards, procedures and practices utilized to audit such financial statements are those generally accepted and applied in the Republic of China. Readers are advised that these financial statements have been prepared originally in Chinese. This English translation is for convenience of the readers and may present financial statements for periods not previously presented in a single document. Additionally, these financial statements do not include additional supplementary disclosures as in conformity with the Guidelines for Securities Issuers’ Financial Reporting in accordance with SFC regulations included in the original Chinese language version. In the event of conflict between these financial statements and the original Chinese versions or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

N-1

ICHIA TECHNOLOGIES, INC.

BALANCE SHEETS December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands)

ASSETS CURRENT ASSETS: Cash and cash equivalents (Notes 2 and 3) ................................. Short-term investments (Notes 2 and 4) ...................................... Notes receivable, net (Notes 2, 5 and 17) ................................... Accounts receivable, net (Notes 2 and 5).................................... Accounts receivable-related parties (Notes 2, 5 and 17).............. Inventories (Notes 2 and 6) ........................................................ Prepayments ............................................................................... Other current assets (Notes 2, 15 and 17) ................................... Restricted deposits (Notes 2 and 18)........................................... Total current assets................................................................. LONG-TERM INVESTMENTS (Notes 2 and 7).......................... PROPERTY, PLANT AND EQUIPMENT, Net (Notes 2, 8, 17,18 and 19): Cost: Land....................................................................................... Buildings and structures ......................................................... Machinery and equipment ....................................................... Other facilities ....................................................................... Subtotal.................................................................................. Less accumulated depreciation .............................................. Prepayments for land .............................................................. Unfinished construction and prepayments for business facilities ............................................................................. Property, plant and equipment, net ..................................... OTHER ASSETS (Notes 2, 5 and 18) ......................................... TOTAL ......................................................................................	2000	2001	2002	2002
	NT$ $461,113 71,122 1,491 221,867 26,301 75,254 7,278 36,966 8,642 910,034 534,690 30,105 412,916 245,390 103,684 792,095 (66,796) 144,562 125,169 995,030 7,112	NT$ $252,856 541,611 10,601 186,982 40,994 150,284 4,305 25,921 71,193 1,284,747 883,123 288,562 413,212 468,904 143,334 1,314,012 (136,915) — 26,340 1,203,437 66,900	NT$ $72,092 181,953 94,757 312,919 71,158 333,519 6,291 50,988 86,272 1,209,949 1,280,864 288,562 426,663 623,568 200,751 1,539,544 (239,836) — 11,413 1,311,121 70,588	U.S.$ $2,075 5,236 2,727 9,005 2,048 9,597 181 1,467 2,483
				34,819
				36,859 8,304 12,278 17,945 5,777
				44,304 (6,902) — 328
				37,730
				2,031
	$2,446,866	$3,438,207	$3,872,522	$111,439

N-2

ICHIA TECHNOLOGIES, INC.

BALANCE SHEETS — (Continued) December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Short-term bank loans (Notes 2, 9 and 18).................................. Notes payable ............................................................................. Accounts payable........................................................................ Accounts payable - related parties (Notes 2 and 17) ................... Accrued expenses ....................................................................... Advance receipts ........................................................................ Balance payable-machinery and equipment ................................. Long-term bank loans-current portion (Note 11) ......................... Other current liabilities (Notes 2 and 17) .................................. Total current liabilities .......................................................... LONG-TERM LIABILITIES: ...................................................... Long-term bank loans ................................................................ Bonds payable (Notes 2 and 10) ................................................. Total long-term liabilities ....................................................... OTHER LIABILITIES: Accrued pension liability (Notes 2 and 11) ................................. Guarantee deposits received........................................................ Deferred income tax liability (Notes 2 and 15) ........................... Deferred credits .......................................................................... Total other liabilities .............................................................. Total liabilities ...................................................................... STOCKHOLDERS’ EQUITY: Capital stock (Note 12) - Common stock .................................... Capital surplus (Notes 7 and 13): Additional paid-in capital ....................................................... Gain on sale of property, plant and equipment........................ Long-term equity investments ................................................. Retained earnings (Note 14): Legal reserve.......................................................................... Special reserve ....................................................................... Retained earnings - unappropriated ........................................ Cumulative translation adjustments ............................................. Total stockholders’ equity....................................................... TOTAL ......................................................................................	2000	2001	2002	2002
	NT$ $80,798 83,699 50,266 — 46,466 13,958 208,904 5,000 22,776 511,867 15,000 — 15,000 17,939 — 11,636 863 30,438 557,305 881,500 613,348 2,642 — 43,167 359 344,036 4,509 1,889,561	NT$ $20,737 9,420 108,370 142,069 55,744 25,905 165,115 — 642 528,002 — 672,750 672,750 21,835 2,100 56,940 2,096 82,971 1,283,723 1,180,000 613,348 2,642 10,768 77,055 359 236,255 34,057 2,154,484	NT$ $53,099 71,954 241,940 94,700 88,151 12,674 20,383 — 21,253 604,154 — 708,070 708,070 24,304 2,100 94,152 7,669 128,225 1,440,449 1,377,000 560,248 — 10,768 100,380 359 349,191 34,127 2,432,073	U.S.$ $1,528 2,071 6,962 2,725 2,537 365 586 — 611
				17,385
				— 20,376
				20,376
				699 60 2,710 221
				3,690
				41,451
				39,626 16,122 — 310 2,889 10 10,049 982
				69,988
	$2,446,866	$3,438,207	$3,872,522	$111,439

See notes to financial statements.

N-3

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS Years Ended December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands, Except Earnings Per Share)

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
SALES (Note 17) .......................................................................	$1,045,606	$993,479	$1,439,215	$41,416
COST OF GOODS SOLD (Note 17) ...........................................	(632,962)	(679,511)	(1,024,563)	(29,484)
GROSS PROFIT .........................................................................	412,644	313,968	414,652	11,932
OPERATING EXPENSES ...........................................................	(172,406)	(180,874)	(204,823)	(5,894)
INCOME FROM OPERATIONS ................................................	240,238	133,094	209,829	6,038
NON-OPERATING INCOME:
Interest income ...........................................................................	12,114	14,746	6,592	189
Investments income (Note 7) ......................................................	70,694	111,026	180,876	5,205
Gain on sale of property, plant and equipment (Note 17) ............	937	1,569	1,691	49
Gain on sale of investments........................................................	8,940	7,278	8,728	251
Gain on exchange .......................................................................	31,517	14,206	—	—
Rent income ..............................................................................	36	5,244	8,786	253
Gain on market price recovery of short-term investments ...........	—	5,351	—	—
Gain on bad debt recoveries .......................................................	—	1,148	—	—
Gain on inventory value recoveries.............................................	—	2,641	—	—
Commission income (Note 17) ....................................................	32,825	21,090	42,715	1,229
Other (Note 17) ..........................................................................	2,549	14,168	13,692	394
Total non-operating income ....................................................	159,612	198,467	263,080	7,570
NON-OPERATING EXPENSES:
Interest expense (Note 8)............................................................	3,035	24,438	33,920	976
Investment loss (Note 7).............................................................	8,283	6,300	288	8
Unrealized valuation losses on short-term investments ................	—	—	2,147	62
Loss on sale of property, plant and equipment (Note 17) ............	443	770	1,321	38
Loss on physical inventory .........................................................	202	517	354	10
Loss on exchange .......................................................................	—	—	9,861	284
Loss on inventory valuation loss and obsolescence .....................	243	—	5,608	161
Inventory retirement losses .........................................................	7,060	7,929	8,891	256
Total non-operating expenses..................................................	19,266	39,954	62,390	1,795
INCOME BEFORE INCOME TAX .............................................	380,584	291,607	410,519	11,813
INCOME TAX EXPENSE (Notes 2 and 15)................................	(41,000)	(61,000)	(70,000)	(2,014)
NET INCOME ............................................................................	$339,584	$230,607	$340,519	$9,799
EARNINGS PER SHARE (Notes 2 and 16):
Primary:
Before tax ..............................................................................	$2.88	$2.12	$2.98	$0.09
After tax.................................................................................	$2.57	$1.67	$2.47	$0.07
Fully diluted:
Before tax ..............................................................................		$2.12	$2.92	$0.08
After tax.................................................................................		$1.67	$2.40	$0.07

See notes to financial statements.

N-4

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Years Ended December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

NT$ BALANCE, JANUARY 1, 2000 ........... Distribution of 1999 earnings: Appropriation of legal reserve ......... Appropriation of special reserve ...... Stock dividends ............................... Bonuses to employees...................... Transfer of bonuses to employees to capital stock................................ Capital surplus transferred to capital stock ............................................... Issuance of common stock for cash ...... Net income for 2000 ............................ Transfer of gain on disposal of property, plant and equipment.......... Cumulative translation adjustments ...... BALANCE, DECEMBER 31, 2000 ...... Distribution of 2000 earnings: Appropriation of legal reserve ......... Stock dividends ............................... Transfer of bonuses to employees to capital stock................................ Bonuses to directors and supervisors.................................. Effect on change of ownership percentage in investee ..................... Net income for 2001 ............................ Cumulative translation adjustments ...... BALANCE, DECEMBER 31, 2001 ...... Distribution of 2001 earnings: Appropriation of legal reserve ......... Cash dividends ................................ Stock dividends ............................... Transfer of bonuses to employees to capital stock................................ Bonuses to directors and supervisors.................................. Stock dividends distributed from capital surplus ................................. Net income for 2002 ............................ Cumulative translation adjustments ...... Transfer of gain on disposal of property, plant and equipment.......... BALANCE, DECEMBER 31, 2002 ......	Common Stock $600,000 124,600 6,500 50,400 100,000 881,500 273,265 25,235 1,180,000 123,900 20,000 53,100	Common Stock $600,000 124,600 6,500 50,400 100,000 881,500 273,265 25,235 1,180,000 123,900 20,000 53,100		Retained Earnings	Retained Earnings	Retained Earnings	Cumulative
			Capital Surplus $55,687 (50,400) 610,000 703 615,990 10,768 626,758 (53,100) (2,642)	Legal Reserve $28,022 15,145 43,167 33,888 77,055 23,325	Special Reserve $— 359 359 359	Unappropriated Earnings $151,817 (15,145) (359) (124,600) (58) (6,500) 339,584 (703) 344,036 (33,888) (273,265) (25,235) (6,000) 230,607 236,255 (23,325) (59,000) (123,900) (20,000) (4,000) 340,519 2,642	Translation Adjustment $(10,899) 15,408 4,509 29,548 34,057 70	Total
	$600,000 124,600 6,500 50,400 100,000							$824,627 — — — (58) — — 710,000 339,584 — 15,408
	881,500 273,265 25,235							1,889,561 — — — (6,000) 10,768 230,607 29,548
	1,180,000 123,900 20,000 53,100							2,154,484 — (59,000) — — (4,000) — 340,519 70 —
	$1,377,000		$571,016	$100,380	$359	$349,191	$34,127	$2,432,073

N-5

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY — (Continued) Years Ended December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

U.S.$ BALANCE, JANUARY 1, 2002......... Distribution of 2001 earnings: Appropriation of legal reserve ...... Cash dividends ............................. Stock dividends ............................ Transfer of bonuses to employees to capital stock......................... Bonuses to directors and supervisors ............................... Stock dividends distributed from capital surplus .............................. Net income for 2002 ......................... Cumulative translation adjustments.... Transfer of gain on disposal of property, plant and equipment ....... BALANCE, DECEMBER 31, 2002....	Common Stock $33,957 3,565 576 1,528 $39,626	Capital Surplus $18,036 (1,528) (76) $16,432	Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $2,218 $10 $6,799 671 (671) (1,698) (3,565) (576) (115) 9,799 2 76 $2,889 $10 $10,049	Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $2,218 $10 $6,799 671 (671) (1,698) (3,565) (576) (115) 9,799 2 76 $2,889 $10 $10,049	Cumulative Translation Adjustment $980 $982	Total
			Legal Reserve $2,218 671 $2,889	Special Reserve $10 $10
						$62,000 — (1,698) — — (115) — 9,799 2 —
						$69,988

See notes to financial statements.

N-6

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS Years Ended December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES: Net income ........................................................................ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................................ Unrealized gains on exchange ........................................ Gains on sale of property, plant and equipment.............. Bad debt losses (gains) .................................................. Gains on bad debt recoveries ......................................... Investment gains on equity-method investees, net .......... Investment losses........................................................... Unrealized valuation losses on short-term investments ... Gains on market price recovery of short-term investments................................................................ Gains on sale of short-term investments, net.................. Losses on sale of long-term investments, net ................. Losses on inventory valuation loss and obsolescence ..... Gains on inventory value recoveries .............................. Inventory retirement losses ............................................ Changes in assets and liabilities provided (used) cash: Notes receivable ........................................................ Accounts receivable................................................... Inventories ................................................................ Prepayments .............................................................. Other current assets ................................................... Deferred income tax assets ........................................ Notes payable ............................................................ Accounts payable....................................................... Accrued expenses ...................................................... Advance receipts ....................................................... Deferred income tax liabilities................................... Other current liabilities ............................................. Accrued interest compensation................................... Accrued pension liability ........................................... Subtotal adjustments .................................................. Net cash provided by operating activities ..................	2000	2001	2002	2002
	NT$ $339,584 29,650 (12,015) (494) 1,749 — (69,887) — 8,283 — (9,178) 238 243 — 7,060 (455) (97,432) (26,472) 6,316 (2,472) — 26,465 (22,545) 15,503 6,416 2,700 12,047 — 4,703 (119,577) 220,007	NT$ $230,607 86,320 (2,499) (799) — (1,148) (110,038) 6,300 — (5,351) (7,278) — — (2,641) 7,929 (9,204) 25,613 (80,318) 2,973 11,962 (605) (74,279) 196,010 9,278 11,947 34,551 (21,050) 22,750 3,896 104,319 334,926	NT$ $340,519 118,547 — (370) 1,542 — (180,876) 288 2,147 — (8,728) — 5,608 — 8,891 (85,006) (156,793) (222,809) (1,986) (22,332) (2,735) 62,534 86,201 32,407 (13,231) 37,189 20,611 35,320 2,469 (281,112) 59,407	U.S.$ $9,799
				3,412 — (11) 44 — (5,205) 8 62 — (251) — 161 — 256 (2,446) (4,512) (6,412) (57) (642) (79) 1,800 2,481 933 (381) 1,070 593 1,016 71
				(8,089)
				1,710

(Continued)

N-7

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS — (Continued) Years Ended December 31, 2000, 2001 and 2002 (Amounts are Expressed in Thousands)

CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in restricted deposits ........................... Acquisition of long-term investments ................................. Acquisition of short-term investments ................................ Proceeds from disposal of short-term investments .............. Proceeds from disposal of long-term investments ............... Acquisition of property, plant and equipment ..................... Proceeds from disposal of property, plant and equipment ... Decrease (increase) in guarantee deposits paid ................... Net cash used in investing activities .............................. CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in short-term bank loans ...................... Decrease in long-term bank loans ...................................... Increase in corporate bonds................................................ Bonuses to directors and supervisors paid .......................... Increase (decrease) in receipts under custody ..................... Decrease in guarantee deposits received............................. Issuance of common stock for cash .................................... Cash dividends paid ........................................................... Net cash provided by financing activities....................... NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................................................. CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................................................................ CASH AND CASH EQUIVALENTS, END OF YEAR ........	2000	2001	2002	2002
	NT$ 1,466 (148,321) (1,557,818) 1,631,209 2,428 (501,964) 12,465 854 (559,681) 66,885 (30,803) — (58) 318 — 710,000 — 746,342 406,668 54,445	NT$ (61,882) (194,321) (1,863,647) 1,407,958 — (412,349) 14,691 508 (1,109,042) (60,061) (20,000) 650,000 (6,000) (180) 2,100 — — 565,859 (208,257) 461,113	NT$ (15,079) (216,933) (634,036) 1,000,275 — (364,945) 22,754 (1,569) (209,533) 32,362 — — (4,000) — — — (59,000) (30,638) (180,764) 252,856	U.S.$ (434) (6,243) (18,246) 28,785 — (10,502) 655 (45)
				(6,030)
				931 — — (115) — — (1,698)
				(882)
				(5,202) 7,277
	$461,113	$252,856	$72,092	$2,075

(Continued)

N-8

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS — (Continued) Years Ended December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest......................................................... Income taxes paid .............................................................. ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT PAID BY CASH: Acquisition of property, plant and equipment ..................... Decrease (increase) in payable for purchase of equipment.. Cash paid........................................................................... SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES - Long-term loans-current portion.........................................	2000 NT$ $2,380 $24,795 $698,246 (196,282) $501,964 $5,000	2001 NT$ $2,452 $57,152 $368,560 43,789 $412,349 $—	2002	2002
			NT$ $837 $16,120 $220,213 144,732 $364,945 $—	U.S.$ $24
				$464
				$6,337 4,165
				$10,502
				$—

(Concluded)

See notes to financial statements.

N-9

ICHIA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2000, 2001 and 2002

(Amounts are Expressed in Thousands, Except Earnings Per Share and Par Value Data)

1. ORGANISATION AND OPERATIONS

Ichia Technologies, Inc. (the “Company” or “Ichia”) was incorporated in Republic of China (the “ROC”) in November 1989. The Company is engaged mainly in manufacturing of conductive rubber keypads and flexible PCB (“FPC”). The stock of the Company has been listed on the ROC Taiwan Stock Exchange in January 2000.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash includes unrestricted currency and bank deposits. Cash equivalents are short-term bills or debt securities that are both readily convertible to known amount of cash, and so near their maturity that there is little influence on their value by changes in the interest rates.

Short-Term Investments

Marketable securities are initially stated at their acquisition cost. Stock dividends received from invested companies are not recognized as investment income but are merely noted as an increase in the number of shares invested. The cost of stocks and mutual fund certificates sold is determined on the weighted-average method. At the year-end, all short-term investments held are evaluated at the lower of cost or market value. Gain on value recovery or loss on value decline at the year-end is recorded currently. When employing the lower of cost or market value method, both equity and non-equity securities are treated as in the same portfolio and the cost or market value are aggregately compared. The market value for investments in listed closed-end funds, listed stocks, and OTC stocks is their respective average closing price of the last month of the year. The market value for investments in open-end funds is the year-end net asset value of the funds.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided for notes and accounts receivable based on management’s evaluation of the collectibility of accounts, past loss experience, aging of accounts, notes, overdue and other receivables and other pertinent factors.

Inventories

Inventories are initially stated at the acquisition cost under the perpetual inventory system. Cost of inventories sold is determined by the weight-average method. At the year end, inventories are re-evaluated at the lower of cost or market value. When employing the lower of cost or market value method, cost or market value of inventories is compared aggregately, with market value being determined by the replacement cost.

Inventories that are defective, damaged or obsolete, and which values are significantly depreciated, are restated at their net realizable value.

Long-Term Equity Investments

The Company uses the lower-of-cost-or-market method to account for investments in stocks of listed companies in which the Company’s ownership interest is less than 20% on the balance sheet date. Unrealized losses on long-term equity investments resulting from declines in market value is reflected as a separate component of stockholders’ equity. Investments in stocks of non-publicly-traded companies in which the Company’s ownership interest is less than 20% and over which the Company is unable to exercise significant influence are accounted for by the cost method. Other than temporary declines, any loss in value of an investment is reflected in income. Stock dividends received are recorded only as an increase in the number of shares, not as an investment income. The cost of long-term equity investments is determined on the weighted-average method.

Investments in corporations in which the Company’s ownership interest is 20% or more, except where the Company cannot exercise significant influence, are accounted for by use of the equity method of accounting.

The equity method is not required when first and third quarter interim financial statements are prepared for a holding interest of between 20% and 50% (considered significant influence) on a consistent basis. In addition, it is required to disclose its nature in the footnotes to the financial statements. However, the equity method must be applied for a holding interest over 50% (considered controlling interest).

N-10

Property, Plant and Equipment

Pr Property, plant and equipment are stated at cost. Expenditures that would increase the value or extend the useful lives of the property, plant and equipment are capitalized. Interest is capitalized in connection with the construction of major facilities.

Depreciation is provided on the straight-line basis using the economic service live of the assets less any salvage value.

Convertible bonds

The convertible bonds are issued at par. The monthly interest expense is determined by applying the stated interest rate to the face value of the bonds issued. Redemption price in excess of the face value of the bonds is accrued over the period from the issue date up to the redemption date using the effective interest rate method.

The interest-premium of puttable convertible bonds, which is the difference between the specified put price and the par value, is amortized by using the interest method and is recognized as a liability over the period from the issuance date of the bonds to the expiry date of the put option.

The difference between the specified conversion price and the par value, and the payback interest from the holder, are credited to appropriate capital surplus accounts upon conversion of the bonds.

Retirement Plan

The Company’s accounting for pensions is in accordance with the accounting standards for pension and related regulations. Net pension cost and related asset or liabilities are determined based on actuarial calculations.

Foreign Currency Transactions

Transactions negotiated in foreign currencies are recorded in New Taiwan Dollars at the exchange rates prevailing on the transaction dates. Gains or losses, caused by different foreign exchange rates applied when foreign currency receivables and payables are settled, are credited to or charged against current income. Balance sheet date balances of assets and liabilities denominated in foreign currencies are at the balance sheet date exchange rates, and any resulting gains or losses are credited to or charged against current income.

The financial statements of foreign subsidiaries accounted for based on the equity method are translated from local currency into New Taiwan as follows:

• All assets and liabilities should be translated at the current rate as at the balance sheet date. Stockholders’ equity accounts should be translated at the historical rate except for the beginning balance of the retained earnings, which is carried by the translated amount of the last period.

• Income statement accounts are translated at the weighted-average rate of the current period.

• Exchange gains or losses resulting from the translation process as described above should be recorded as Translation adjustments which is included as a separate component of stockholders’ equity.

Income Tax

The Company adopted the provision of SFAS No. 22, “Accounting for Income Tax,” which requires an asset and liability approach to financial accounting and reporting for income tax. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable for the period plus or minus the change during the period in deferred income tax assets and liabilities. Investment tax credits are accounted for under the flow-through method, for which any investment tax credits obtained should be recognized as an actual reduction in income tax payable as the reduction of income tax expense or other income of the year. Unused income tax credits are recognized as deferred tax assets to the extent they are expected to be realized, if any.

N-11

The distributable unappropriated earnings may be reserved at the discretion of the Board of Directors. Starting from January 1, 1998, the unappropriated earnings may subject to one-time additional 10% tax rate if they are not appropriated within a certain period according to the modified Tax Law of the ROC.

Non-Derivative Financial Instruments

The Company applies the above-described accounting polices and generally accepted accounting principles to account for assets and liabilities derived from non-derivative financial instruments and to recognize related revenues and expenses.

Derivative Financial Instruments

The Company uses derivative financial instruments for hedging purposes, as follows:

Foreign-currency options: Premiums paid or received for options are recorded as assets or liabilities, respectively, and are recognized as revenue or expense upon each settlement. Gain or loss on the exercise of the options is credited or changed to current income of the item being hedged.

Translation of New Taiwan Dollars to United States Dollars

The 2002 United States Dollar amounts were translated from the New Taiwan Dollars at NT$34.75 to U.S.$1.00, the exchange rate at December 31, 2002, solely for the convenience of readers. Such translation should not be construed as a representation that the amounts could be, or have been, converted at that or any other rate.

3. CASH AND CASH EQUIVALENTS

Cash .............................................................. Cash in banks ................................................ Cash equivalents ............................................ Total ..............................................................	2000	2001	2002	2002
	NT$ $127 460,986 —	NT$ $199 51,610 201,047	NT$ $174 64,677 7,241	U.S.$ $5 1,862 208
	$461,113	$252,856	$72,092	$2,075

4. SHORT-TERM INVESTMENTS, NET

Beneficiary’s certificates................................ Corporate bonds............................................. Less: allowance for valuation loss on short-term investments ...................... Net ................................................................ Market value, end of year ..............................	2000	2001	2002	2002
	NT$ $79,405 — (8,283)	NT$ $526,731 17,812 (2,932)	NT$ $155,491 31,541 (5,079)	U.S.$ $4,474 908 (146
	$71,122 $71,122	$541,611 $541,611	$181,953 $181,953	$5,236
				$5,236

N-12

5. NOTES, ACCOUNTS AND OVERDUE RECEIVABLE

Notes receivable ............................................ Notes receivable - Related parties .................. Less allowance for doubtful accounts............. Total .............................................................. Accounts receivable ....................................... Accounts receivable - Related parties............. Less allowance for doubtful accounts............. Total .............................................................. Overdue receivable ........................................ Less allowance for doubtful accounts............. Total ..............................................................	2000 NT$ $1,504 — (13) $1,491	2001 NT$ $10,550 158 (107) $10,601	2002	2002
			NT$ $95,714 — (957) $94,757	U.S.$ $2,754 — (27
				$2,727
	$225,404 26,301 (3,537)	$189,922 40,994 (2,940)	$316,067 71,158 (3,148)	$9,096 2,048 (91
	$248,168	$227,976	$384,077	$11,053
	$1,574 (1,574)	$582 (582)	$1,066 (1,066)	$31 (31
	$—	$—	$—	$—

6. INVENTORIES

Raw materials ................................................ Work in process ............................................. Finished goods............................................... Merchandise inventories................................. Materials and supplies in transit .................... Total ..............................................................	2000	2001	2002	2002
	NT$ $13,136 45,079 16,953 86 —	NT$ $29,453 82,437 37,282 — 1,112	NT$ $66,066 203,245 59,031 52 5,125	U.S.$ $1,901 5,849 1,699 1 147
	$75,254	$150,284	$333,519	$9,597

At December 31, 2000, 2001 and 2002, insurance coverages for inventories amounted to NT$90,000, NT$150,000 and NT$200,000, respectively.

7. LONG-TERM INVESTMENTS

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Long-term investments in stocks ....................	$527,232	$875,665	$1,263,406	$36,356
Long-term investments in bonds.....................	—	—	10,000	288
Other long-term investments ..........................	7,458	7,458	7,458	215
Total ..............................................................	$534,690	$883,123	$1,280,864	$36,859

N-13

Long-Term Investments in Stocks

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Equity method ...............................................	$442,615	$797,348	$1,185,377	$34,111
Cost method...................................................	84,617	84,617	84,329	2,426
Less allowance for valuation losses in
long-term investments................................	—	(6,300)	(6,300)	(181)
Total ..............................................................	$527,232	$875,665	$1,263,406	$36,356

Equities in Earnings (Losses) of Affiliates

Ichia holding Ltd. (BVI) ................................ USA-Ichia...................................................... Ichia International Trading Ltd. (BVI) ........... H.K.-Ichia...................................................... Homesolutin, Inc............................................ Landsfair Technology Corp. ........................... Total ..............................................................	2000	2001	2002	2002
	NT$ $68,427 7,154 — (580) (5,114) —	NT$ $138,377 (10,357) 2,662 (185) (16,210) (4,249)	NT$ $190,703 11,724 (4,689) 15 (13,163) (3,714)	U.S.$ $5,488 337 (135) — (378) (107)
	$69,887	$110,038	$180,876	$5,205

Major Changes in the Long-term Investments

In 2001, the Company’s investment in Shiang-Cheng Technology Corp. was evaluated and resulted in a permanent loss. Such loss on the decline in value at the year-end is recorded currently.

In May 2001, the Company invested in Landsfair Technology Corp. The purchase price discount of NT$29,148 is amortized on a straight-line basis for five years.

In September 2001, Landsfair Technology Corp. issued new shares, and since the Company did not purchase new shares proportionately, the equity in net assets for the original investment increased by NT$10,768. The difference is used to adjust the additional paid in capital and the long-term investments accounts. The purchase price premium of NT$21,536 is amortized on a straight-line basis for five years.

In 2002, BCOM Electronics Inc. decreased its outstanding capital stock to offset its accumulated deficit. Accordingly, the Company recognized a loss of NT$288 which was accounted for as an investment loss.

An investee company is considered as a subsidiary when the Company holds more than 50% of its outstanding voting stocks. Consolidated financial statements are prepared for all subsidiaries, except H.K.-Ichia and Ichia International Trading Ltd. (BVI) since their total assets and operating income are less than 10% of the corresponding amounts of the Company.

As of December 31, 2000, 2001 and 2002, due to a negative equity position, the investments in H.K.-Ichia and Ichia International Trading Ltd. (BVI) were accounted for as deferred credits under the equity method in the amounts of NT$180, NT$388 and NT$515, respectively.

N-14

8. PROPERTY, PLANT AND EQUIPMENT

Cost: Land .......................................................... Buildings and structures............................. Machinery and equipment .......................... Other facilities........................................... Prepayments for land and business facilities .................................. Subtotal ..................................................... Accumulated depreciation Buildings and structures............................. Machinery and equipment .......................... Other facilities........................................... Subtotal ..................................................... Total ..........................................................	2000	2001	2002	2002
	NT$ $30,105 412,916 245,390 103,684 269,731 1,061,826 9,508 30,084 27,204 66,796	NT$ $288,562 413,212 468,904 143,334 26,340 1,340,352 17,829 74,151 44,935 136,915	NT$ $288,562 426,663 623,568 200,751 11,413 1,550,957 36,440 132,768 70,628 239,836	U.S.$ $8,304 12,278 17,945 5,777 328
				44,632
				1,049 3,821 2,032
				6,902
	$995,030	$1,203,437	$1,311,121	$37,730

At December 31, 2000, 2001 and 2002 insurance coverages for property, plant and equipment amount to NT$1,234,875, NT$1,039,139 and NT$1,177,236, respectively.

Interest capitalization for the years ended December 31, 2000, 2001 and 2002 amounted to NT$335, NT$0 and NT$2,227, respectively.

For disclosure of significant commitments for the future acquisition of fixed assets, please refer to Note 19.

9. SHORT-TERM BANK LOANS

Short-term borrowings at December 31, 2000, 2001 and 2002 were comprised of the following:

Material procurements loans ..........................	2000 NT$ $80,798	2001 NT$ $20,737	2002
			NT$ U.S.$ $53,099 $1,528

At December 31, 2000, 2001 and 2002, the interest rates on such borrowings ranged from 2.5% to 7.6%, 1.5% and 1.5% to 1.99%, respectively.

As of December 31, 2000, 2001 and 2002, the Company has issued promissory notes amounting to NT$365,500, NT$488,500 and NT$163,500, respectively, to various banks as commitments for short-term and long-term loans. Assets pledged as collateral for short-term loans are disclosed in Note 18.

N-15

10. BONDS PAYABLE

1st Domestic unsecured convertible corporate bonds ......................................... Add accrued interest compensation ................ Total ..............................................................	2000	2001	2002	2002
	NT$ $— —	NT$ $650,000 22,750	NT$ $650,000 58,070	U.S.$ $18,705 1,671
	$—	$672,750	$708,070	$20,376

On April 3, 2001, the Company had been approved by the Securities and Futures Commission of the Ministry of Finance ROC (“SFC”) to issue its first domestic unsecured convertible corporate bonds. The bonds were issued for the purpose of acquisition of buildings and structures. Details of the bonds issuance are summarized as follows:

• (a) Total Principal: NT$650,000

• (b) Denomination: NT$100 issued at par

• (c) Period: 5 years, maturity period from May 5, 2001 to May 4, 2006.

• (d) Nominal interest rate: 0%, per annum

• (e) Repayment: Redeemed by cash at maturity except those converted to common stocks or redeemed by the Company.

• (f) Underlying security: Common stocks of the Company.

• (g) Conversion price and adjustments:

• i) The original conversion price is NT$90.79 (dollars).

• ii) The conversion price is subject to adjustment based on the following formula if there are changes of outstanding shares, execution of conversions below market price, additional issuance of common stock subscription rights, issuance of any securities with subscription rights, or any subscription rights except a capital increase by cash subscription.

• Changes of outstanding shares —

The conversion price after adjustment = Conversion price before adjustments x A

A =	Number of existing shares +	Payment amount per share x Number of new shares
		Market value per share
	Number of existing shares + Number of new shares

• Execution of conversion below market price, additional issuance of common stocks subscription rights — The conversion price after adjustment = Conversion price before adjustments x A

Subscription price of new issuance x Number of new shares Number of existing shares + Market value per share A =

Number of existing shares + Number of new shares

• (h) The Company’s call option:

• i) The closing price of the share is at or above 50% of the conversion price for each of 30 consecutive Taiwan Stock Exchange trading days in the period beginning from 1 year after issuance to 40 days before maturity, the Company holds the option to redeem the bonds by the price compute based on the following redemption return-rate.

• ii) When the total value of outstanding convertible bonds is less than 10% of the total principal in the period beginning from 3 months after issuance to 40 days before maturity, the Company holds the option to redeem the bonds by the price compute based on the following redemption return-rate.

N-16

iii) Redemption return-rate:

Date of Request to Redeem the Bonds May 6, 2002 through May 5, 2004 .......................................................................... May 6, 2004 through May 5, 2005 .......................................................................... May 6, 2005 through 40 days prior to the bonds maturity date based .....................	Redemption return-rate
	4.75% 5.25% On the face value

• (iv) On the redemption date, the 4th and 5th anniversary of the issuance date, bonds are redeemable at a redemption price determined based on 114.94% and 122.71% of face value plus accrued interest, respectively (i.e. yield rate 4.75% and 5.25% annually). At the bonds maturity date, bonds will be redeemed at face value.

11. PENSION PLAN

The Company has a defined benefit pension plan (the “Plan”) covering all employees. The Plan’s definition of retirement benefits provides that payments are to be based upon an employee’s years of service and the average compensation for the six-month period before retirement. According to the Labor Standard Laws of the ROC, the Company provides and funds retirement benefits monthly at 2% of salaries paid to the employees’ which was deposited in the Central Trust of China by the Employees Retirement Reserve Supervisory Committee.

The Company adopted the provisions of “Accounting for Pensions” in SFAS No. 18. The following tables set forth the plan’s status at December 31, 2000, 2001 and 2002:

The net periodic pension costs for the years ended December 31, 2000, 2001 and 2002 are summarized as follows:

Service cost .................................................. Interest cost ................................................... Expected return on plan assets ....................... Amortization of net transition obligation........ Amortization of net pension benefit ............... Net periodic pension cost .............................	2000	2001	2002	2002
	NT$ $4,403 2,257 (626) 751 —	NT$ $4,277 2,539 (715) 751 —	NT$ $4,534 1,685 (614) 751 (187)	U.S.$ $131 48 (18 22 (5
	$6,785	$6,852	$6,169	$178

N-17

The funded status of the Plan as of December 31, 2000, 2001 and 2002 are as follows:

Benefit obligation: Vested benefit obligation ........................... Non-vested benefit obligation .................... Accumulated benefit obligation ...................... Additional benefits based on future salaries ... Projected benefit obligation ........................... Fair value of plan assets ................................ Funded status................................................. Unamortized net transition obligation............. Unrecognized net gain or loss ........................ Additional liability......................................... Accrued pension cost .....................................	2000	2001	2002	2002
	NT$ $— (20,711) (20,711) (23,450) (44,161) 11,115 (33,046) 12,020 3,087 —	NT$ $— (20,763) (20,763) (16,692) (37,455) 12,226 (25,229) 11,268 (7,874) —	NT$ $— (29,077) (29,077) (16,166) (45,243) 14,331 (30,912) 10,517 (3,909) —	U.S.$ $— (837
				(837 (465
				(1,302 412
				(890 303 (112 —
	$(17,939)	$(21,835)	$(24,304)	$(699

As of December 31, 2000, 2001 and 2002, the Company did not have vested obligation.

Actuarial assumptions are as follows:

Discount rate ............................................................................. Assumed rate of increase in future compensation levels ............ Expected long-term rate of returns on plan assets...................... 2000 NT$ Contributions to the fund ............................... $2,082 Payments of retirement benefits ..................... $1,446	2000 5.75% 5.00% 5.75% 2001 NT$ $2,956 $2,293	2001 2002 4.50% 3.50% 4.50% 3.00% 4.00% 3.50% 2002	2002
		NT$ $3,700 $1,907	U.S.$ $106
			$55

12. CAPITAL STOCK

The Company’s outstanding capital stock at December 31, 2002 was NT$1,377,000 thousand dollars divided into 137,700,000 common shares at NT$10 par value each. Capital stock at December 31, 2002 consists of the following:

Initial cash subscription ........................................................................................ Issuance of common stock for cash ....................................................................... Appropriated from retained earnings ..................................................................... Appropriated from capital surplus ......................................................................... Appropriated from bonuses to employees .............................................................. Total .....................................................................................................................	2002	2002
	NT$ $12,000 377,226 755,356 171,560 60,858	U.S.$ $345 10,856 21,737 4,937 1,751
	$1,377,000	$39,626

N-18

13. CAPITAL SURPLUS

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Additional paid-in capital...............................	$731,488	$731,488	$731,488	$21,050
Transfer of gain on disposal of property,
plant and equipment...................................	2,962	2,962	320	9
Transfer of capital surplus to capital stock.....	(118,460)	(118,460)	(171,560)	(4,937)
Effect on change of ownership percentage
in subsidiary ..............................................	—	10,768	10,768	310
Total ..............................................................	$615,990	$626,758	$571,016	$16,432

Capital surplus shall be used only for making up for accumulated deficits or increasing capital stocks. Effect on change of ownership percentage in subsidiary cannot be used for increasing capital stocks.

14. RETAINED EARNINGS

According to the Company’s Articles of Incorporation, the Company’s annual earnings, after paying income tax and offsetting any deficit, and appropriating 10% there of as legal reserve, if any, should be appropriated and distributed in the following order after approval by annual shareholders’ meeting:

• (a) 5% to 10% as bonuses to employees.

• (b) A maximum of 3% as bonuses to directors and supervisors.

• (c) Dividends and bonuses to common stockholders.

The stock bonuses are provided to employees including subsidiary employees who meet established terms that are determined by the board of directors.

The policy of dividend distributions is made by the board of directors. Cause of the Company is in the stage of growth at present, has plans for expanding production capacity, so it needs it’s retained earnings to be the funding resource. The Company will adjust dividend distributions based on profit and consideration of the following factors.

• (a) Strengthen market competition status.

• (b) Future fund demand.

• (c) Long-term financial planning of persistently expanding capital scale.

• (d) Keep earnings per share grow steadily.

The amount of dividends to shareholders should not be less than 60% of the amount available for distribution, and the amount of cash dividends should not be more than 50% of the amount available for distribution for the same year.

Until the date of independent auditors’ report, the proposal of earnings distribution of 2002 was not yet resolved by the Board of Directors. Please check the information about the proposals resolved by the Board of Directors and earnings distribution resolved by the Stockholders in Market Observation Post System of TSE.

The Board of Directors and the Stockholders resolved the proposals related to the transfer of bonuses to employees to capital stock which amounted to NT$20,000 and compensation to directors and supervisors which amounted to NT$4,000 in 2001. The basic after-tax earnings per share of 2001 was NT$1.95, and the basic after-tax earnings per share was NT$1.75 based on the proforma data if bonuses to employees and compensation to directors and supervisors were treated as period expenses.

N-19

15. INCOME TAX

Current income tax expense for the years ended December 31, 2000, 2001 and 2002 and income tax payable as of December 31, 2000, 2001 and 2002 are as follows:

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Income before income tax ..............................	$380,584	$291,607	$410,519	$11,813
Permanent differences ....................................	(6,263)	6,838	16,319	470
Temporary differences:
Investment gains under equity method .......	(69,887)	(130,497)	(197,753)	(5,690)
Losses (gains) on exchange........................	(13,536)	9,516	5,768	166
Gains on inventory value recoveries ..........	243	(2,641)	5,608	161
Accrued interest compensation...................	—	22,750	35,320	1,016
Other .........................................................	3,847	13,103	5,623	162
Taxable income ..............................................	294,988	210,676	281,404	8,098
Estimated income tax provision
(x25% tax rate)..........................................	25%	25%	25%	25%
Subtotal .........................................................	73,747	52,669	70,351	2,024
Less investment, research and development
tax credits..................................................	(36,874)	(26,335)	(35,176)	(1,012)
Tax expense at statutory rate..........................	36,873	26,334	35,175	1,012
Deferred income tax expense .........................	2,700	33,946	34,454	991
Adjustment of prior years’ tax expense ..........	1,052	502	(390)	(11)
Income tax expense........................................	41,000	61,000	70,000	2,014
Deferred income tax expense .........................	(2,700)	(33,946)	(34,454)	(991)
Less prepaid and withheld tax ......................	(18,864)	(38,266)	(16,120)	(464)
Adjustment of prior years’ tax expense ..........	(1,052)	(502)	390	11
Income tax receivable (payable).....................	$18,384	$(11,714)	$19,816	$570
	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Deferred income tax assets - current:
Losses on inventory value recoveries .........	$1,166	$505	$1,907	$55
Others........................................................	934	725	1,433	41
Total ..............................................................	2,100	1,230	3,340	96
Deferred income tax liabilities - current:
Unrealized gains on exchange ....................	(3,004)	(625)	—	—
Deferred income tax assets (liabilities)
— current, net ...........................................	$(904)	$605	$3,340	$96

N-20

Deferred income tax assets - uncurrent: Timing difference for pension expense....... Accrued interest compensation................... Others........................................................ Investment Tax Credit................................ Total .............................................................. Deferred income tax liabilities - uncurrent: Unrealized investments income .................. Cumulative translation adjustments ............ Deferred income tax liabilities - uncurrent, net ............................................	2000 NT$ $4,460 — 167 17,133 21,760 (31,893) (1,503) $(11,636)	2001 NT$ $5,433 5,687 2,678 5,131 18,929 (64,517) (11,352) $(56,940)	2002	2002
			NT$ $6,051 14,517 3,577 7,034 31,179 (113,956) (11,375) $(94,152)	U.S.$ $174 418 103 202
				897 (3,279 (328
				$(2,710

Other information about integrated income tax system:

	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Imputation credit account...............................	$19,686	$27,013	$17,104	$492
Imputation credit ...........................................	11.30%	11.43%	10.57%	10.57%
	2000	2001	2002
	NT$	NT$	NT$	U.S.$
Retained earnings:
1997 and before.........................................	$360	$—	$—	$—
1998 and after ...........................................	343,676	236,255	349,191	10,049
Total .............................................................	$344,036	$236,255	$349,191	$10,049

16. EARNINGS PER SHARE

NT$ Net income belongs to shareholders of common stock .............................. Primary earning per share...			2000
	Amount (Numerator) Before Tax After Tax		Shares (’000) (Denominator)	Earnings per Share
	Before Tax			Before Tax	After Tax
	$380,584	$339,584	131,962	$2.88	$2.57

N-21

NT$ Net income......................... Primary earning per share... Net income belongs to shareholders of common stock .............................. Effect of potentially dilutive securities: Convertible corporate bond. Diluted earnings per share - Net income plus potentially diluted securities.................... NT$ Net income......................... Primary earning per share... Net income belongs to shareholders of common stock .............................. Effect of potentially dilutive securities: Convertible corporate bond. Employee stock option ....... Diluted earnings per share - Net income plus potentially diluted securities.................... U.S.$ Net income......................... Primary earning per share... Net income belongs to shareholders of common stock .............................. Effect of potentially dilutive securities: Convertible corporate bond. Employee stock option ....... Diluted earnings per share - Net income plus potentially diluted securities....................				2001
	Amount (Numerator) Before Tax After Tax $291,607 $230,607 291,607 230,607 22,750 17,063			Shares (’000) (Denominator)	Earnings per Share
	Before Tax $291,607 291,607 22,750				Before Tax $2.12	After Tax
						$1.67
			230,607 17,063	137,700 10,484
	$314,357		$247,670	148,184 2002	$2.12	$1.67
	Amount (Numerator) Before Tax After Tax			Shares (’000) (Denominator)	Earnings per Share
	Before Tax				Before Tax	After Tax
	$410,519 410,519 35,320 —		$340,519		$2.98	$2.47
			340,519 26,490 —	137,700 13,978 1,043
	$445,839		$367,009	152,721 2002	$2.92	$2.40
	Amount (Numerator) Before Tax After Tax			Shares (’000) (Denominator)	Earnings per
	Before Tax				Before Tax	After Tax
	$11,813 11,813 1,016 —		$9,799		$0.09	$0.07
			9,799 762 —	137,700 13,978 1,043
	$12,829		$10,561	152,721	$0.08	$0.07

N-22

17. RELATED PARTY TRANSACTIONS

==> picture [457 x 218] intentionally omitted <==

----- Start of picture text -----

Ichia Technologies, Inc.
Capital: NT$1,377,000
30% 100% 100% 100% 50% 100%
Landsfair Technology H.K.-Ichia Ichia Holdings (B.V.I) Ichia U.S.A, Inc. Homesolutin, Inc. Ichia International
Corp. Limited Trading Ltd. (BVI)
Capital: U.S.$10 Capital: U.S.$4,106 Capital: NT$90,000
Capital: NT$800,000 Capital: U.S.$9,383 Capital: U.S.$50
100% 100% 100% 100%
Ichia (Suzhou)
Technologies, Inc.
Ichia Electronics Ihwa Electronics
Ichia Rubber Industry Capital: RMB33,106
(Zhongshan) Co., Ltd. (Zhongshan) Co., Ltd.
(Malaysia) Sdn. Bhd. (U.S.$4,000)
Capital: RMB30,865 Capital: RMB8,278
Capital: MYR9,000 Advance receipts for
(U.S.$3,728) (U.S.$1,000)
common stock:
RMB5,748 (U.S.$696)
----- End of picture text -----

Name of Related Party

Relationship with the Company

Ichia Rubber Industry (Malaysia) Sdn. Bhd. (“Malaysia-Ichia”) ............ Ichia U.S.A, Inc. (“USA-Ichia”) ........................................................... Ichia Electronics (Zhongshan) Co., Ltd. (“Zhongshan-Ichia”) ................ Ihwa Electronics (Zhongshan) Co., Ltd. (“Ihwa-Ichia”) ......................... Ichia (Suzhou) Technologies, Inc. (“Suzhou-Ichia”) .............................. Ichia Holdings (B.V.I) Limited (“BVI-Ichia”) ....................................... Homesolutin, Inc. ................................................................................. Landsfair Technology Corp. .................................................................. Ichia International Trading Ltd. (BVI) (“Ichia-International”) ...............

Associated Company Associated Company Associated Company Associated Company Associated Company Associated Company

Investee accounted for by equity method Investee accounted for by equity method Associated Company

Major transactions with related parties are summarized below:

Purchases

Malaysia-Ichia ..................................... USA-Ichia............................................ Zhongshan-Ichia................................... Ihwa-Ichia and others...........................	2000 NT$ $393 911 265,749 —	2001 NT$ $— — 209,663 112	2002
			NT$ U.S.$ $— $— — — 108,967 3,136 1,103 32

Purchases from related parties are made on credit and at prices similar to those given to third parties. The payment period from both Zhongshan-Ichia and Ihwa-Ichia, the company’s affiliates depends on their funding requirement.

N-23

Sales

Malaysia-Ichia ..................................... USA-Ichia............................................ Ihwa-Ichia............................................ Suzhou-Ichia and others .......................	2000 NT$ $51,163 38,235 2,953 7,820	2001 NT$ $50,108 17,197 20,459 363	2002
			NT$ U.S.$ $38,417 $1,106 16,774 483 46,499 1,338 3,179 91

Sales to USA-Ichia are made on credit and at prices of 140% of cost. The collection period of sales to USA-Ichia is 3 months after shipment.

Sales to Malaysia-Ichia are made on credit and at prices of 140%~170% of cost. The collection period of sales to Malaysia-Ichia is 6 months after shipment.

Sales to Ihwa-Ichia and Suzhou-Ichia are made on credit and at prices similar to those given to third parties. The collection period of sales to Ihwa-Ichia and Suzhou-Ichia depends on their funding requirement.

Commission Expenses

USA-Ichia............................................	2000 NT$ $1,898	2001 NT$ $3,565	2002
			NT$ U.S.$ $3,216 $93

Commission Income

Zhongshan-Ichia................................... Ihwa-Ichia and others...........................	2000 NT$ $32,101 724	2001 NT$ $20,439 651	2002
			NT$ U.S.$ $41,833 $1,204 882 25

Service Revenue

Landsfair Technology Corp. .................	2000 NT$ $—	2001 NT$ $1,050	2002
			NT$ U.S.$ $750 $22

Disposal of Equipment

In 2000, sales of equipment are summarized as follows:

Zhongshan-Ichia .............................................................. Malaysia-Ichia................................................................. Homesolutin, Inc. ............................................................	Proceeds NT$ $5,545 1,663 1,430	Book Value NT$ $5,207 1,472 1,430	Gain
			NT$ $338 191 —

N-24

In 2001, sales of equipment are summarized as follows:

Zhongshan-Ichia .............................................................. Malaysia-Ichia and others................................................ In 2002, sales of equipment are summarized as follows: Zhongshan-Ichia .............................................................. BVI-Ichia and others ....................................................... Zhongshan-Ichia .............................................................. BVI-Ichai and others ......................................................	Proceeds NT$ $7,958 6,167 Proceeds NT$ $16,052 4,999 Proceeds U.S.$ $462 144	Book Value NT$ $6,192 6,123 Book Value NT$ $9,740 4,851 Book Value U.S.$ $280 140	Gain
			NT$ $1,766 44 Gain
			NT$ $6,312 148 Gain
			U.S.$ $182 4

Receivable and Payable

Notes receivable ....... Landsfair Technology Corp. Accounts receivable.. Malaysia-Ichia Suzhou-Ichia USA-Ichia Zhongshan-Ichia Ihwa-Ichia Other current assets.. Malaysia-Ichia and others Ichia-International Accounts payable ..... Zhongshan-Ichia Other payable ........... USA-Ichia	2000 NT$ $— 21,992 24,252 1,804 245 2,260 — — — —	2001 NT$ $158 21,507 — 111 — 19,376 6,747 — 142,069 —	2002
			NT$ U.S.$ $— $— 18,775 540 — — — — — — 52,403 1,508 5,910 170 13,577 391 94,700 2,725 740 21

Guarantee

As of December 31, 2000, 2001 and 2002, Ichia had outstanding guarantees for bank loans to its subsidiaries as follows:

USA-Ichia............................................ Zhongshan-Ichia................................... Landsfair Technology Corp. .................	2000 US$800 US$1,000 —	2001 US$800 US$320 NT$50,000	2002
			NT$ U.S.$ $10,224 $300 — — 65,000 1,871

N-25

18. ASSETS PLEDGED

The carrying value of assets pledged as collateral for bank borrowings for the years ended December 31, 2000, 2001 and 2002 are as follows:

Property, plant and equipment: Land .......................................................... Buildings and structures............................. Machinery and equipment .......................... Other current assets - Restricted deposits....... Other assets - Restricted deposits................... Other assets - Rental assets: Land .......................................................... Buildings and structures............................. Total ..............................................................	2000	2001	2002	2002
	NT$ $30,105 33,528 23,638 8,642 3,669 — —	NT$ $— — 19,911 71,193 3,000 30,105 30,860	NT$ $— — 14,535 86,272 3,000 30,105 28,313	U.S.$ $— — 418 2,483 86 866 815
	$99,582	$155,069	$162,225	$4,668

19. COMMITMENTS AND CONTINGENCIES

As of December 31, 2002, the Company has issued guarantees for related companies as disclosed in Note 17.

The Company has issued stock warrants for employees as described in Note 21.

The Company has agreements with suppliers to buy equipment. The total price in the contracts is NT$23,577 thousand, and as of December 31, 2002, Ichia Tech. Co. had paid NT$6,934 thousand and recorded such to prepaid equipment. The balance of NT$16,643 thousand was unpaid.

20. EMPLOYEE STOCK OPTIONS

Time of Issue

Employee stock options shall be issued in installments over a year from the date approval is received from the Securities and Futures Commission, Ministry of Finance, R.O.C. (hereinafter referred to as the regulatory agency). The Chairman shall have the power to determine the actual issue dates.

Stock Option Eligibility Requirements

Only employees of the Parent Company and its subsidiaries on the day of the grant are eligible to receive the options. The grant date is determined by the Chairman. The employees who qualify to receive the options and actual number of shares granted is determined by the president based on their years of service, position, work performance, past and expected overall or special contributions to the Company, passed to the Chairman for review and then to the Board of Directors for approval. No single employee may be granted over 10% of the total shares granted under each option issuance and the granted over 1% of the Company’s issued and outstanding common stock.

Amount of Shares Issued

In July 2001 and January 2001, the employee stock options were approved for 8,000 and 2,000 units, respectively, by the Taiwan Securities and Futures Commission (“SFC”). A total of 10,000 units of options may be issued under the option plan and each unit of options entitles the option holder to receive 1,000 shares, and therefore a total of 10,000,000 new shares of common stock must be issued when the options are exercised. As of March 31, 2003, the outstanding options were 9,710,000 shares, and 290,000 shares were not issued within a year from the date approved was received from the regulatory agency.

Term

Exercise Price (or strike price)

The closing price of the Parent Company’s common shares on the day the options are issued. If the closing price of the stock on that day is lower than its face value then the exercise price of the options shall be the face value of the common stock.

N-26

Validity

• a) Stock options shall have a term of 6 years. Stock options may not be transferred by the option holder except to his/her heirs in the event of death.

• b) Options issued to employees under the stock option plan may be exercised after a period of two years after employee stock option certificates are granted.

• c) If the employee who is granted stock options by the Company violates his or her labor contract, commits a major infraction of work regulations or whose work performance is substantially lower than expectations, the Company has the right to take back and cancel any unexercised stock options granted to that employee.

• d) The Board of Directors may adjust the time and allocation of above-mentioned stock options depending on the prevailing conditions at the time of the issue.

Type of shares issued under the stock option plan: The Company’s common stock.

Implementation

Paid for by the Company through the issue of new shares.

If the Exercise Price is Lower than the Stock’s Face Value

If the exercise price of the stock options issued by the Company is lower than the face value of the common stock, the face value of the common stock shall serve as the exercise price.

Rights and Obligations after Exercising Stock Options

The rights and obligations for Stock Option Payment Certificates is the same as the Company’s common stock except that they may not participate in the Company’s stock and cash dividends and new stock subscriptions.

Outstanding Shares

As of December 31, 2002, the outstanding stock option amount to 9,710 units, per unit is 1,000 shares.

Exercise Price

As of December 31, 2002, the outstanding stock option amount to 9,710 unit, the exercise price of 7,910 and 1,800 unit is NT$42.40 and NT$42.00, respectively.

Exercisable Option

As of December 31, 2002, there was no exercisable stock option.

Compensation Cost

The detail of compensation cost is as follow:

(Market price of stock on the measurement date - exercise price) x exercise shares = ($42.40-$42.40)x7,910,000 (shares)+($42.00-$42.00)x1,800,000 (shares) = 0

N-27

21. FINANCIAL INSTRUMENTS

As of December 31, 2002, the Company has following foreign currency options. Such financial instruments are designated as hedges against foreign exchange rate risk of net assets and net liabilities.

European Option

Buy/Sell Buy .................................... Sell .................................... Sell .................................... Sell .................................... Sell .................................... Sell .................................... Sell .................................... Sell ....................................	Call/Put U.S.$/NT$ NT$/U.S.$ U.S.$/NT$ U.S.$/NT$ U.S.$/NT$ U.S.$/NT$ U.S.$/NT$ U.S.$/NT$	Contract Amount U.S.$1,000 U.S.$2,000 U.S.$1,000 U.S.$1,000 U.S.$1,000 U.S.$1,000 U.S.$1,000 U.S.$1,000	Strike Rate 33.50 33.30 33.45 34.20 34.25 34.25 34.30 34.20	Expiry Date 92.01.17 92.01.17 92.01.28 92.01.14 92.02.14 92.02.14 92.03.13 92.01.14	Strike Rate above Limit
					33.50 33.30 33.45 34.20 34.25 34.25 34.30 34.20

Risks in Terms of Credit, Market and Liquidity Risks

The Company only deals with banks with good credit, which is according to banks’ reputation and the Company’s past experience with them. Moreover, the Company has established a series of control procedures transactions of derivative financial instruments. No credit risks are expected.

Market price risk : Because the Company’s forward exchange contract are for hedging purpose, the effects of changes in exchange rate are offset between the hedging instrument and hedged item. Therefore, market price risk is not significant.

Liquidity risk : The Company engages in option contracts. There is no funding or cash flow risk.

Type of derivative financial instrument, purpose, and strategy to achieve objective; the Company’s transactions are mainly in United States Dollars. Foreign currency borrowings are settled in United States Dollars. Therefore, there is a matching of foreign exchange fluctuation. To avoid foreign exchange fluctuation risk, the Company uses forward foreign exchange contract and option contract with average period of one year.

Fair Value of Financial Instruments

Fair value of non-derivative financial instruments is equal to the balances of the Company at December 31, 2000, 2001 and 2002.

The Company’s market assumptions and estimation methodologies of the above financial instruments are as follows:

• a) Short-term financial instruments such as cash and cash equivalents, receivables, payables and short-term debts are reasonably estimated from their carrying amounts due to their short-term nature.

• b) Short-term investments are reasonably estimated from their quoted market price as at balance sheet date.

• c) Long-term equity investments are reasonably estimated from their quoted market prices as at balance sheet date for listed or over-the-counter investments. For those investments without quoted market prices, estimations of fair value are from their carrying value.

• d) Long-term loans are reasonably estimated from expected cash flows discounted at the long-term loan interest rates.

N-28

22. SEGMENTAL FINANCIAL INFORMATION

Financial Information by Industry Types

The Company’s major operations are manufacturing and sale of conductive rubber keypads and flexible PCB (“FPC”). Accordingly, there is no industry segment information to disclose under SFAS No. 20 of the ROC GAAP.

A summarized financial information by regional Segment

No regional segment information.

Export Sales

Export sales for the years ended December 31, 2000, 2001 and 2002 are as follows:

Area America ............................................... Europe ................................................. Asia ..................................................... Total ....................................................	2000 NT$ $320,115 439,900 240,252 $1,000,267	2001 NT$ $199,502 546,344 176,607 $922,453	2002	2002
			NT$ $68,552 216,366 544,067 $828,985	U.S.$ $1,973 6,226 15,657
				$23,856

Dominant Customers Information

Sales to major customer for the years ended December 31, 2000, 2001 and 2002 are as follows:

Customer A ......................................................... B .........................................................	2000 U.S.$ $77,563 303,193	2001 U.S.$ $48,416 247,143	2002
			U.S.$ U.S.$ $284,166 $8,177 79,174 2,278

N-29

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Board of Directors of Ichia Technologies, Inc.:

We have reviewed the accompanying balance sheets of Ichia Technologies, Inc. (the “Company”) as of March 31, 2003 and 2002, and the related statements of operations, changes in stockholders’ equity and cash flows for the three-month periods then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to report on these financial statements based on our reviews.

Except as described in the following paragraph, we conducted our reviews in accordance with the Republic of China’s Statement of Auditing Standards No. 36 “Review of Financial Statements”, except that described in the next paragraph. A review consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. 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 7, as of March 31, 2003 and 2002, the Company’s long-term investments in more than 50% -owned subsidiaries accounted for using the equity method were NT$1,099,076 and NT$706,159, and investment gains accounted for by the equity method were NT$27,135 and NT$52,887, respectively. Such long-term investments in, and investment gains of such equity-method investees for the three-month periods ended and as of March 31, 2003 and 2002 were based on the investees’ unreviewed financial statements.

Based on our reviews, except for such adjustments, if any, as might have been determined to be necessary had the abovementioned long-term investments in equity-method investees and the related investment gains been based on reviewed financial statements, we are not aware of any material modifications that should be made to the accompanying financial statements, as of March 31, 2003 and 2002, and for the three-month periods then ended, for them to be in conformity with accounting principles generally accepted in the Republic of China.

As described in Note 2, the financial statements of the Company as of and for the three-month periods ended March 31, 2003 expressed in US Dollars were translated from the New Taiwan Dollars using the exchange rate of NT$34.745 to U.S.$1.00 at March 31, 2003, solely for the convenience of readers.

Deloitte & Touche (T N Soong & Co and Deloitte & Touche Taiwan Combined to Establish a New Deloitte & Touche Effective June 1, 2003) Taipei, Taiwan The Republic of China April 23, 2003

The above independent accountants’ review report and the following financial statements are English translations of the Chinese independent accountants’ review report and financial statements prepared for and used in the Republic of China. The accompanying financial statements were prepared using accounting principles, procedures and reporting practices generally accepted in the Republic of China and 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 those in the Republic of China. The standards, procedures and practices utilized to review such financial statements are those generally accepted and applied in the Republic of China. Readers are advised that these financial statements have been prepared originally in Chinese. This English translation is for convenience of the readers. In the event of conflict between these financial statements and the original Chinese versions or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

Q-1

ICHIA TECHNOLOGIES, INC.

BALANCE SHEETS

March 31, 2003 and 2002

(Amounts are Expressed in Thousands)

ASSETS CURRENT ASSETS: Cash and cash equivalents (Notes 2 and 3).......................................... Short-term investments (Notes 2, 4, 21 and 22) ................................... Notes receivable, net (Notes 2,5 and 17) ............................................. Accounts receivable, net (Notes 2 and 5) ............................................ Accounts receivable - related parties (Notes 2, 5 and 17) .................... Other receivables (Note 17)................................................................. Other current financial assets .............................................................. Inventories (Notes 2 and 6) ................................................................. Prepayments ........................................................................................ Restricted deposits (Note 18)............................................................... Other current assets (Notes 2 and 15).................................................. Total current assets ......................................................................... LONG-TERM INVESTMENTS (Notes 2, 7, 17 and 22): Long-term investments in stocks Equity method................................................................................. Cost method .................................................................................... Long-term investments in bonds .......................................................... Other long-term investments................................................................ Total long-term investments ............................................................ PROPERTY, PLANT AND EQUIPMENT (Notes 2, 8 17 and 18): Cost: Land ............................................................................................... Buildings and structures .................................................................. Machinery and equipment................................................................ Other facilities ................................................................................ Total cost .................................................................................... Less accumulated depreciation......................................................... Prepayments for business facilities .................................................. Property, plant and equipment, net .............................................. OTHER ASSETS (Note 18): Rental assets ....................................................................................... Other assets - other ............................................................................. Total other assets ............................................................................ TOTAL................................................................................................		UNAUDITED	UNAUDITED
	2002 NT$ $46,780 519,670 9,637 222,609 58,104 8,968 14,854 192,255 4,233 121,254 12,012 1,210,376 862,678 78,317 — 7,458 948,453 288,562 413,883 481,250 148,172 1,331,867 (158,672) 25,364 1,198,559 60,357 5,935 66,292	2003
		NT$ $125,888 107,085 46,735 477,115 61,345 38,712 19,039 373,180 12,199 21,276 15,245 1,297,819 1,354,823 78,029 10,000 7,458 1,450,310 288,562 426,663 632,069 217,136 1,564,430 (268,007) 24,784 1,321,207 57,843 11,937 69,780	U.S.$ $3,623 3,082 1,345 13,732 1,765 1,114 548 10,741 351 613 439
			37,353
			38,993 2,246 288 215
			41,742
			8,305 12,280 18,192 6,249
			45,026 (7,714) 713
			38,025
			1,665 343
			2,008
	$3,423,680	$4,139,116	$119,128

See notes to financial statements.

Q-2

ICHIA TECHNOLOGIES, INC.

BALANCE SHEETS — (Continued) March 31, 2003 and 2002

(Amounts are Expressed in Thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Short-term bank loans (Notes 2, 9 and 18) .......................................... Notes payable...................................................................................... Accounts payable ................................................................................ Accounts payable - related parties (Note 17) ....................................... Income tax payable (Notes 2 and 15) .................................................. Accrued expenses (Note 17) ................................................................ Advance receipts ................................................................................. Balance payable - machinery and equipment........................................ Other current liabilities (Note 17) ....................................................... Total current liabilities .................................................................... LONG-TERM LIABILITIES - Bonds payable (Notes 2 and 10)........... OTHER LIABILITIES Accrued pension liability (Note 2)....................................................... Guarantee deposits received................................................................. Deferred income tax liability (Notes 2 and 15).................................... Deferred credits (Note 7)..................................................................... Total other liabilities ....................................................................... Total liabilities................................................................................ STOCKHOLDERS’ EQUITY: Common stock (Note 11)..................................................................... Capital surplus (Note 12) Additional paid-in capital ................................................................ Gain on sale of property, plant and equipment ................................ Long-term equity investments (Note 7)............................................ Retained earnings (Note 13) Legal reserve .................................................................................. Special reserve ................................................................................ Retained earnings-unappropriated .................................................... Cumulative translation adjustment (Note 2) ......................................... Total stockholders’ equity................................................................ TOTAL ...............................................................................................		UNAUDITED	UNAUDITED
	2002 NT$ $4,992 20,556 130,644 154,231 5,955 46,543 26,060 24,737 361 414,079 681,281 22,591 2,100 72,085 3,880 100,656 1,196016 1,180,000 613,348 2,642 10,768 77,055 359 308,665 34,827 2,227,664	2003
		NT$ $112,374 90,843 300,287 106,577 28,649 87,407 15,740 24,151 591 766,619 717,049 25,158 2,100 105,334 8,920 141,512 1,625,180 1,377,000 560,248 — 10,768 100,380 359 430,929 34,252 2,513,936	U.S.$ $3,234 2,615 8,643 3,067 825 2,515 453 695 17
			22,064
			20,637
			724 60 3,032 257
			4,073
			46,774
			39,632 16,124 — 310 2,889 10 12,403 986
			72,354
	$3,423,680	$4,139,116	$119,128

See notes to financial statements.

Q-3

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS Three-month Periods Ended March 31, 2003 and 2002 (Amounts are Expressed in Thousands, Except Earnings Per Share)

SALES ................................................................................................ SALES DISCOUNTS AND RETURNS ................................................ NET SALES (Note 17) ........................................................................ COST OF GOODS SOLD (Notes 14 and 17) ....................................... GROSS PROFIT.................................................................................. OPERATING EXPENSES (Notes 14 and 17) ....................................... INCOME FROM OPERATIONS .......................................................... NON-OPERATING INCOME: Interest income.................................................................................... Investments income (Note 7) ............................................................... Gain on sale of property, plant and equipment (Note 17)..................... Gain on sale of investments................................................................. Gain on market price recovery of short-term investments .................... Gain on inventory value recoveries...................................................... Others (Note 17) ................................................................................. Total non-operating income ............................................................. NON-OPERATING EXPENSES: Interest expense................................................................................... Unrealized valuation losses on short-term investments......................... Loss on sale of property, plant and equipment (Note 17) ..................... Loss on exchange ................................................................................ Loss on inventory valuation loss and obsolescence .............................. Inventory retirement losses.................................................................. Miscellaneous disbursements ............................................................... Total non-operating expenses........................................................... INCOME BEFORE INCOME TAX ...................................................... INCOME TAX EXPENSE (Notes 2 and 15)......................................... NET INCOME..................................................................................... EARNINGS PER SHARE: Primary: Before tax (Note 16) ....................................................................... After tax (Note 16) ......................................................................... Fully diluted: Before tax (Note 16) ....................................................................... After tax (Note 16) .........................................................................		UNAUDITED	UNAUDITED
	2002 NT$ $291,702 (3,008) 288,694 (209,052) 79,642 (46,165) 33,477 2,327 52,887 443 1,426 2,932 2,021 13,267 75,303 8,585 — — — — 6,785 — 15,370 93,410 (21,000)	2003
		NT$ $538,763 (9,522) 529,241 (394,000) 135,241 (61,270) 73,971 251 27,135 2,444 2,265 — — 12,589 44,684 9,333 186 219 2,122 3,211 1,789 57 16,917 101,738 (20,000)	U.S.$ $15,506 (274)
			15,232 (11,340)
			3,892 (1,763)
			2,129
			7 781 71 65 — — 362
			1,286
			269 5 6 61 92 51 2
			486
			2,929 (576)
	$72,410 $0.68 $0.53 $0.67 $0.52	$81,738 $0.74 $0.59 $0.73 $0.58	$2,353
			$0.02
			$0.02
			$0.02
			$0.02

See notes to financial statements.

Q-4

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Three-month Periods Ended March 31, 2003 and 2002 (Amounts are Expressed in Thousands)

NT$ BALANCE, JANUARY 1, 2002 ........... Net income for 2002 ............................ Cumulative translation adjustments ...... BALANCE, MARCH 31, 2002 ............. BALANCE, JANUARY 1, 2003 ........... Net income for 2003 ............................ Cumulative translation adjustments ...... BALANCE, MARCH 31, 2003 ............. U.S.$ BALANCE, JANUARY 1, 2003......... Net income for 2003 ......................... Cumulative translation adjustments.... BALANCE, MARCH 31, 2003 ..........			UNAUDITED	UNAUDITED	UNAUDITED
	Common Stock $1,180,000 — — $1,180,000	Capital Surplus $626,758 — — $626,758	Retained Earnings Legal Reserve Special reserve Unappropriated Earnings $77,055 $359 $236,255 — — 72,410 — — — $77,055 $359 $308,665			Cumulative Translation Adjustment $34,057 — 770 $34,827		Total
			Legal Reserve $77,055 — — $77,055	Special reserve $359 — — $359
								$2,154,484 72,410 770
								$2,227,664
	$1,377,000 — —	$571,016 — —	$100,380 — —	$359 — —	$349,191 81,738 —		$34,127 — 125	$2,432,073 81,738 125
	$1,377,000	$571,016	$100,380	$359 UNAUDITED	$430,929		$34,252	$2,513,936
	Common Stock $39,632 — —	Capital Surplus $16,434 — —	Retained Earnings Legal Reserve Special reserve Unappropriated Earnings $2,889 $10 $10,050 — — 2,353 — — —				Cumulative Translation Adjustment $982 — 4		Total
			Legal Reserve $2,889 — —	Special reserve $10 — —
									$69,997 2,353 4
	$39,632	$16,434	$2,889	$10	$12,403		$986		$72,354

See notes to financial statements.

Q-5

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS Three-month Periods Ended March 31, 2003 and 2002 (Amounts are Expressed in Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES: Net income: Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ......................................................... Gains on sale of property, plant and equipment, net ........................ Bad debt losses ............................................................................... Losses on property, plant and equipment obsolescence .................... Investments income ......................................................................... Gains on market price recovery of short-term investments............... Losses on market price recovery of short-term investments ............. Gains on sale of short-term investments .......................................... Losses on inventory valuation loss and obsolescence....................... Gains on inventory value recoveries ................................................ Inventory retirement losses.............................................................. Changes in assets and liabilities provided (used) cash: Notes receivable.......................................................................... Accounts receivable .................................................................... Inventories .................................................................................. Prepayments................................................................................ Other current assets .................................................................... Deferred income tax asset ........................................................... Notes payable ............................................................................. Accounts payable ........................................................................ Accrued expenses........................................................................ Advance receipts......................................................................... Income tax payable ..................................................................... Accrued interest compensation .................................................... Deferred income tax liabilities .................................................... Other current liabilities ............................................................... Accrued pension liability ............................................................ Subtotal ..................................................................................... Net cash provided by operating activities ...................................		UNAUDITED	UNAUDITED
	2002 NT$ $72,410 25,809 (443) — — (52,887) (2,932) — (1,426) — (2,021) 6,785 974 (52,747) (46,735) 72 (10,025) 112 11,136 34,436 (9,201) 155 5,955 8,531 14,890 — 756 (68,806) 3,604	2003
		NT$ $81,738 35,090 (2,225) 1,500 57 (27,135) — 186 (2,265) 3,211 — 1,789 48,473 (156,334) (50,018) (5,908) (22,031) 23 18,889 70,224 (744) 3,066 8,833 8,979 11,139 (898) 854 (55,245) 26,493	U.S.$ $2,353
			1,010 (65) 43 2 (781) — 5 (65) 92 — 51 1,395 (4,499) (1,440) (170) (634) 1 544 2,021 (21) 88 254 258 321 (26) 25
			(1,589)
			762

(Continued)

Q-6

ICHIA TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS — (Continued) Three-month Periods Ended March 31, 2003 and 2002 (Amounts are Expressed in Thousands)

CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in restricted deposits ............................................ Acquisition of long-term investments .................................................. Acquisition of short-term investments.................................................. Proceeds from disposal of short-term investments................................ Acquisition of property, plant and equipment ...................................... Proceeds from disposal of property, plant and equipment..................... Decrease (increase) in Guarantee deposits paid.................................... Net cash used in investing activities .............................................. CASH FLOWS FROM FINANCING ACTIVITIES: Decrease (increase) in short-term bank loans ...................................... Decrease(increase) in receipts under custody ...................................... Net cash (used in) provided by financing activities ......................... NET DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS.................................................................... CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........ CASH AND CASH EQUIVALENTS, END OF PERIOD ..................... SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest .......................................................................... Income taxes paid................................................................................ ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT PAID BY CASH: Acquisition of property, plant and equipment ...................................... Long-term investment by machinery and equipment transfer................ Increase (decrease) in payable for purchase of equipment .................. Cash paid ............................................................................................		UNAUDITED	UNAUDITED
	2002 NT$ $(50,061) (11,424) (132,335) 342,231 (164,346) 5,879 — (10,056) (15,745) (282) (16,027) (22,479) 69,259	2003
		NT$ $64,996 (138,850) (132,353) 209,300 (47,228) 12,071 40 (32,024) 59,275 52 59,327 53,796 72,092	U.S.$ $1,871 (3,996 (3,809 6,024 (1,359 347 1
			(921
			1,706 1
			1,707
			1,548 2,075
	$46,780 $54 $43	$125,888 $282 $5	$3,623
			$8
			$—
	$23,968 — 140,378	$52,738 (1,742) (3,768)	$1,518 (50 (109
	$164,346	$47,228	$1,359

(Concluded)

See notes to financial statements.

Q-7

ICHIA TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS Three-month Periods Ended March 31, 2003 and 2002 (Amounts are Expressed in Thousands, Except Earnings Per Share and Par Value Data)

1. ORGANISATION AND OPERATIONS

Ichia Technologies, Inc. (the “Company” or “Ichia”) was incorporated in Republic of China (the “ROC”) in November 1989. The company is engaged mainly in manufacturing of conductive rubber keypads and flexible PCB (“FPC”). The stock of the Company has been listed on the ROC Taiwan Stock Exchange in January 2000.

At March 31, 2003, the Company has 906 employees.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash includes unrestricted currency and bank deposits. Cash equivalents are short-term bills or debt securities that are both readily convertible to known amount of cash, and so near their maturity that there is little influence on their value by changes in the interest rates.

Short-Term Investments

Marketable securities are initially stated at their acquisition cost. Stock dividends received from invested companies are not recognized as investment income but are merely noted as an increase in the number of shares invested. The cost of stocks and mutual fund certificates sold is determined on the weighted-average method. At the year-end, all short-term investments held are evaluated at the lower of cost or market value. Gain on value recovery or loss on value decline at the year-end is recorded currently. When employing the lower of cost or market value method, both equity and non-equity securities are treated as in the same portfolio and the cost or market value are aggregately compared. The market value for investments in listed closed-end funds, listed stocks, and OTC stocks is their respective average closing price of the last month of the year. The market value for investments in open-end funds is the year-end net asset value of the funds.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided for notes and accounts receivable based on management’s evaluation of the collectibility of accounts, past loss experience, aging of accounts, notes, overdue and other receivables and other pertinent factors.

Inventories

Inventories are initially stated at the acquisition cost under the perpetual inventory system. Cost of inventories sold is determined by the weight-average method. At the year end, inventories are re-evaluated at the lower of cost or market value. When employing the lower of cost or market value method, cost or market value of inventories is compared aggregately, with market value being determined by the replacement cost.

Inventories that are defective, damaged or obsolete, and which values are significantly depreciated, are restated at their net realizable value.

Long-Term Equity Investments

The Company uses the lower-of-cost-or-market method to account for investments in stocks of listed companies in which the Company’s ownership interest is less than 20% on the balance sheet date. Unrealized loss on long-term equity investments resulting from decline in market value is reflected as a separate component of stockholders’ equity. Investments in stocks of non-publicly-traded companies in which the Company’s ownership interest is less than 20% and over which the Company is unable to exercise significant influence are accounted for by the cost method. Other than temporary declines, any loss in value of an investment is reflected in income. Stock dividends received are recorded only as an increase in the number of shares, not as an investment income. The cost of long-term equity investments is determined on the weighted-average method.

Investments in corporations in which the Company’s ownership interest is 20% or more, except where the Company cannot exercise significant influence, are accounted for by use of the equity method of accounting.

Q-8

The equity method is not required when first and third quarter interim financial statements are prepared for a holding interest of between 20% and 50% (considered significant influence) on a consistent basis. In addition, it is required to disclose its nature in the footnotes to the financial statements. However, the equity method must be applied for a holding interest over 50% (considered controlling interest).

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures that would increase the value or extend the useful lives of the property, plant and equipment are capitalized. Interest is capitalized in connection with the construction of major facilities.

Depreciation is provided on the straight-line basis using the economic service live of the assets less any salvage value.

Convertible bonds

The convertible bonds are issued at par. The monthly interest expense is determined by applying stated interest rate to the face value of the bonds issued. Redemption price in excess of the face value of the bonds is accrued over the period from the issue date up to the redemption date using the effective interest rate method.

The interest-premium of puttable convertible bonds, which is the difference between the specified put price and the par value, is amortized by using the interest method and is recognized as a liability over the period from the issuance date of the bonds to the expiry date of the put option.

The difference between the specified conversion price and the par value, and the payback interest from the holder, are credited to appropriate capital surplus account upon conversion of the bonds.

Retirement Plan

The Company’s accounting for pension is in accordance with the accounting standards for pension and related regulations. Net pension cost and related asset or liabilities are determined based on actuarial calculations.

Foreign Currency Transactions

Transactions negotiated in foreign currencies are recorded in New Taiwan Dollars at the exchange rates prevailing on the transaction dates. Gains or losses, caused by different foreign exchange rates applied when foreign currency receivables and payables are settled, are credited to or charged against current income. Balance sheet date balances of assets and liabilities denominated in foreign currencies are at the balance sheet date exchange rates, and any resulting gains or losses are credited to or charged against current income.

The financial statements of foreign subsidiaries accounted for based on the equity method are translated from local currency into New Taiwan as follows:

• All assets and liabilities should be translated at the current rate as at the balance sheet date. Stockholders’ equity accounts should be translated at the historical rate except for the beginning balance of the retained earnings, which is carried by the translated amount of the last period.

• Income statement accounts are translated at the weighted-average rate of the current period.

• Exchange gains or losses resulting from the translation process as described above should be recorded as Translation adjustments which is included as a separate component of stockholders’ equity.

Income Tax

The Company adopted the provision of SFAS No. 22, “Accounting for Income Tax,” which requires an asset and liability approach to financial accounting and reporting for income tax. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable for the period plus or minus the change during the period in deferred income tax assets and liabilities. Investment tax credits are accounted for under the flow-through method, for which any investment tax credits obtained should be recognized as an actual reduction in income tax payable as the reduction of income tax expense or other income of the year. Unused income tax credits are recognized as deferred tax assets to the extent they are expected to be realized, if any.

Q-9

The distributable unappropriated earnings may be reserved at the discretion of the Board of Directors. Starting from January 1, 1998, the unappropriated earnings may subject to one-time additional 10% tax rate if they are not appropriated within a certain period according to the modified Tax Law of the ROC.

Non-Derivative Financial Instruments

The Company applies the above-described accounting policies and generally accepted accounting principles to account for assets and liabilities derived from non-derivative financial instruments and to recognize related revenues and expenses.

Translation of New Taiwan Dollars to United States Dollars

The 2003 United States Dollar amounts were translated from the New Taiwan Dollars at NT$34.745 to U.S.$1.00, the exchange rate at March 31, 2003, solely for the convenience of readers. Such translation should not be construed as a representation that the amounts could be, or have been, converted at that or any other rate.

3. CASH AND CASH EQUIVALENTS

Cash.......................................................................................... Cash in banks............................................................................ Total..........................................................................................	2002	2003	2003
	NT$ $177 46,603	NT$ $194 125,694	U.S.$ $6 3,617
	$46,780	$125,888	$3,623

4. SHORT-TERM INVESTMENTS, NET

Beneficiary’s certificates ........................................................... Corporate bonds ........................................................................ Less allowance for valuation loss on short-term investments ..... Net............................................................................................ Market value, end of year..........................................................	2002	2003	2003
	NT$ $501,844 17,826 —	NT$ $94,900 17,450 (5,265)	U.S.$ $2,731 502 (151
	$519,670 $521,620	$107,085 $107,085	$3,082
			$3,082

Q-10

5. NOTES, ACCOUNTS AND OVERDUE RECEIVABLE

Notes receivable ........................................................................ Notes receivable - Related parties ............................................. Less allowance for doubtful accounts ........................................ Total.......................................................................................... Accounts receivable................................................................... Accounts receivable - Related parties ........................................ Less allowance for doubtful accounts ........................................ Total.......................................................................................... Overdue receivable .................................................................... Less allowance for doubtful accounts ........................................ Total..........................................................................................	2002 NT$ $9,565 169 (97) $9,637	2003	2003
		NT$ $47,241 — (506) $46,735	U.S.$ $1,360 — (15
			$1,345
	$225,559 58,104 (2,950)	$481,564 61,345 (4,449)	$13,860 1,765 (128
	$280,713	$538,460	$15,497
	$582 (582)	$1,135 (1,135)	$33 (33
	$—	$—	$—

6. INVENTORIES Raw materials............................................................................ Work in process......................................................................... Finished goods .......................................................................... Merchandise inventories ............................................................ Total..........................................................................................	2002	2003	2003
	NT$ $35,688 125,900 30,667 —	NT$ $101,027 203,437 68,700 16	U.S.$ $2,908 5,855 1,977 1
	$192,255	$373,180	$10,741

At March 31, 2002 and 2003, insurance coverage for inventories amounted to NT$150,000 and NT$200,000, respectively.

7. LONG-TERM INVESTMENTS

Long-term investments in stocks................................................ Long-term investments in bonds ................................................ Other long-term investments...................................................... Total..........................................................................................	2002	2003	2003
	NT$ $940,995 — 7,458	NT$ $1,432,852 10,000 7,458	U.S.$ $41,239 288 215
	$948,453	$1,450,310	$41,742

Q-11

Long-Term Investments in Stocks

Equity method ........................................................................... Cost method .............................................................................. Less allowance for valuation losses in long-term investments .... Total..........................................................................................	2002 NT$ $862,678 84,617 (6,300) $940,995	2003	2003
		NT$ $1,354,823 84,329 (6,300) $1,432,852	U.S.$ $38,993 2,427 (181)
			$41,239

Equities in Earnings (Losses) of Affiliates

	2002	2003
	NT$	NT$	U.S.$
Ichia Holding Ltd. (BVI)...........................................................	$53,082	$27,857	$802
U.S.A-Ichia ...............................................................................	3,352	2,256	65
H.K.-Ichia .................................................................................	7	2	—
Ichia International Trading Ltd. (BVI) .......................................	—	(1,551)	(45)
Homesolutin, Inc. ......................................................................	(3,554)	(1,429)	(41)
Total..........................................................................................	$52,887	$27,135	$781

Major Changes in Long-Term Investments

In 2001, the Company’s investment in Shiang-Cheng Technology Corp. was evaluated that resulted in permanent loss. Loss on value decline at the year-end is recorded currently.

In May 2001, the company invested in Landsfair Technology Corp. The purchase price discount of NT$29,148 is amortized on a straight-line basis for five years.

In September 2001, Landsfair Technology Corp. issued new shares, and since the Company did not purchase new shares proportionately, the equity in net assets for the original investment increased by NT$10,768. The difference is used to adjust the additional paid in capital and the long-term investments accounts. The purchase price premium of NT$21,536 is amortized on a straight-line basis for five years.

In 2002, BCOM Electronics Inc. decreased its outstanding capital stock to offset its accumulated deficit. Accordingly, the Company recognized a loss of NT$288 which was accounted for as an investment loss.

As of March 31, 2002 and 2003, due to a negative equity position, H.K.-Ichia and Ichia International Trading Ltd. (BVI) were accounted for as deferred credits under the equity method in the amounts of NT$381 and NT$2,066, respectively.

Q-12

8. PROPERTY, PLANT AND EQUIPMENT

Cost: Land ..................................................................................... Buildings and structures ........................................................ Machinery and equipment...................................................... Other facilities ...................................................................... Prepayments for business facilities ........................................ Subtotal................................................................................. Accumulated depreciation: Buildings and structures ........................................................ Machinery and equipment...................................................... Other facilities ...................................................................... Subtotal................................................................................. Total..........................................................................................	2002	2003	2003
	NT$ $288,562 413,883 481,250 148,172 25,364 1,357,231 22,421 88,552 47,699 158,672	NT$ $288,562 426,663 632,069 217,136 24,784 1,589,214 41,380 145,999 80,628 268,007	U.S.$ $8,305 12,280 18,192 6,249 713
			45,739
			1,191 4,202 2,321
			7,714
	$1,198,559	$1,321,207	$38,025

As of March 31, 2002 and 2003, insurance coverage for property, plant and equipment amounted to NT$1,041,561 and NT$1,177,236, respectively. For disclosure of pledged assets provided for long-term loans, please refer to Note 18.

For the three-month periods ended March 31, 2003 and 2002, no interest is capitalized.

9. SHORT-TERM BANK LOANS

	2002		2003
	NT$		NT$	U.S.$
Material procurements loans ......................................................	$4,992		$2,374	$69
Secured loans ............................................................................		—	30,000	863
Unsecured loans ........................................................................		—	80,000	2,302
Total..........................................................................................	$4,992		$112,374	$3,234

At March 31, 2002 and 2003, the interest rates on such borrowing ranged from 1.16% to 1.5% and 1.16285% to 2.2%, respectively.

As of March 31, 2002 and 2003, the Company has issued promissory notes amounting to NT$488,500 and NT$393,500 respectively, to various banks as commitments for short-term and long-term loans. Assets pledged as collateral for short-term loans are disclosed in Note 18.

10. BONDS PAYABLE

1st Domestic unsecured convertible corporate bonds.................. Add accrued interest compensation ............................................ Total ........................................................................................	2002	2003	2003
	NT$ $650,000 31,281	NT$ $650,000 67,049	U.S.$ $18,708 1,929
	$681,281	$717,049	$20,637

Q-13

On April 3, 2001, the Company had been approved by the Securities and Futures Commission of the Ministry of Finance ROC (“SFC”) to issue its first domestic unsecured convertible corporate bonds. The bonds were issued for the purpose of acquisition of buildings and structures. Details of the bonds issuance are summarized as follows:

• (a) Total Principal: NT$650,000

• (b) Denomination: NT$100, issued at par

• (c) Period: 5 years, maturity period from May 5, 2001 to May 4, 2006.

• (d) Nominal interest rate: 0%, per annum

• (e) Repayment: Redeemed by cash at maturity except those converted to common stocks or redeemed by the Company.

• (f) Underlying security: Common stocks of the Company.

• (g) Conversion price and adjustments:

• i) The original conversion price is NT$90.79 (dollars).

• ii) The conversion price is subject to adjustment based on the following formula if there are changes of outstanding shares, execution of conversions below market price, additional issuance of common stock subscription rights, issuance of any securities with subscription rights, or any subscription rights except a capital increase by cash subscription.

• Changes of outstanding shares —

The conversion price after adjustment = Conversion price before adjustments x A

								Payment amount per share x Number of new shares
A=	Number	of	existing	shares	+			Market value per share
				Number		of	existing	shares + Number of new shares

• Execution of conversion below market price, additional issuance of common stocks subscription rights — The conversion price after adjustment = Conversion price before adjustments x A

							Subscription price of new issuance x Number of new shares
A=	Number	of	existing	shares	+		Market value per share
				Number		of	existing shares + Number of new shares

• (h) The Company’s call option:

• i) The closing price of the share is at or above 50% of the conversion price for each of 30 consecutive Taiwan Stock Exchange trading days in the period beginning from 1 year after issuance to 40 days before maturity, the Company holds the option to redeem the bonds by the price compute based on the following redemption return-rate.

• ii) When the total value of outstanding convertible bonds is less than 10% of the total principal in the period beginning from 3 months after issuance to 40 days before maturity, the Company holds the option to redeem the bonds by the price compute based on the following redemption return-rate.

• iii) Redemption return-rate:

Date of Request to Redeem the Bonds May 6, 2002 through May 5, 2004 ............................................................................... May 6, 2004 through May 5, 2005 ............................................................................... May 6, 2005 through 40 days prior to the bonds maturity date based on the face value	Redemption Return-Rate
	4.75% 5.25%

• iv) On the redemption date, the 4th and 5th anniversary of the issuance date, bonds are redeemable at a redemption price determined based on 114.94% and 122.71% of face value plus accrued interest, respectively (i.e. yield rate 4.75% and 5.25% annually). At the bonds maturity date, bonds will be redeemed at face value.

Q-14

11. CAPITAL STOCK

The Company’s outstanding capital stock at March 31, 2003 was NT$1,377,000 divided into 137,700,000 common shares at NT$10 par value each. Capital stock at March 31, 2003 consists of the following:

Initial cash subscription ........................................................................................ Issuance of common stock for cash ....................................................................... Appropriated from retained earnings ..................................................................... Appropriated from capital surplus ......................................................................... Appropriated from bonuses to employees .............................................................. Total .....................................................................................................................	NT$ $12,000 377,226 755,356 171,560 60,858 $1,377,000	U.S.$ $345 10,857 21,740 4,938 1,752
		$39,632

12. CAPITAL SURPLUS

Additional paid-in capital .......................................................... Transfer of gain on disposal of property, plant and equipment... Transfer of capital surplus to capital stock ................................ Effect on change of ownership percentage in subsidiary ............ Total..........................................................................................	2002 NT$ $731,488 2,962 (118,460) 10,768 $626,758	2003	2003
		NT$ $731,488 320 (171,560) 10,768 $571,016	U.S.$ $21,053 9 (4,938) 310
			$16,434

Capital surplus shall be used only for making up accumulated deficit or increasing capital stock. Effect on change of ownership percentage in subsidiary cannot be used for increasing capital stock.

13. EARNINGS DISTRIBUTION AND DIVIDEND POLICY

According to the Company’s Articles of Incorporation, the Company’s annual earnings, after paying income tax and offsetting any deficit, and appropriating 10% thereof as legal reserve, if any, should be appropriated and distributed in the following order after approval by annual shareholders’ meeting:

• a. 5% to 10% as bonuses to employees

• b. a maximum of 3% as bonuses to directors and supervisors

• c. Dividends and bonuses to common stockholders

The stock bonuses are provided to employees including subsidiary employees who meet established terms that are determined by the board of directors.

The policy of dividend distributions is made by the board of directors. Cause of the Company is in the stage of growth at present, has plans for expanding production capacity, so it needs it’s retained earnings to be the funding resource. The Company will adjust dividend distributions based on profit and consideration of the following factors.

• a. strengthen market competition status

• b. future fund demand

• c. long-term financial planning of persistently expanding capital scale

• d. keep earnings per share grow steadily

The amount of dividends to shareholders should not be less than 60% of the amount available for distribution, and the amount of cash dividends should not be more than 50% of the amount available for distribution for the same year.

Q-15

The Board of Directors and the Stockholders resolved the proposals related to the transfer of bonuses to employees to capital stock which amounted to NT$27,600 and compensation to director and supervisors which amounted to NT$6,000 in 2002. The basic after-tax earnings per share of 2002 was NT$2.47, and the basic after-tax earnings per share was NT$2.23 based on the proforma data if bonuses to employees and compensation to directors and supervisors were treated as period expenses.

The Board of Directors and the Stockholders resolved the proposals about transfer of bonuses to employees to capital stock which amounted NT$20,000 and compensation to directors and supervisors which amounted NT$4,000 in 2001. The basic after-tax earnings per share of 2001 was NT$1.95, and the basic after-tax earnings per share was NT$1.75 based on the proforma data if bonuses to employees and compensation to directors and supervisors were treated as period expenses.

14. PERSONNEL EXPENSE, DEPRECIATION, DEPLETION, AND AMORTIZATION

Personnel expense depreciation, depletion and amortization for the three-month periods ended March 31, 2002 and 2003 are summarized as follows:

2002 Character Operating Cost Operating Expense	2002 Character Operating Cost Operating Expense				Function	Function
	2002 Operating Cost Operating Expense	2002		2003 Total Operating Cost Operating Expense	2003		2003 Total Operating Cost Operating Expense	2003
										Total
Personnel expense: Salary expenses ......... Labor insurance and health insurance expense ................. Pension expense ........ Other personnel expenses ............... Depreciation expenses ... Depletion expense ......... Amortization expense ....		33,823 1,787 1,016 1,453 20,523 — —	(NT$) 18,612 1,202 533 306 5,286 — —	52,435 2,989 1,549 1,759 25,809 — —	72,991 4,841 1,470 3,394 29,012 — —	(NT$) 23,629 1,482 613 604 5,885 — 193	96,620 6,323 2,083 3,998 34,897 — 193	2,100 139 42 98 835 — —	(U.S.$) 680 43 18 17 169 — 6	2,780 182 60 115 1,004 — 6

15. INCOME TAX

The income tax rate is 25% for the three-month periods ended March 31, 2002 and 2003, respectively. Income tax expense is computed as follows:

Income before income tax ......................................................... Permanent differences................................................................ Temporary differences: Investment gains under equity method................................... Losses (gains) on exchange ................................................... Gains on inventory value recoveries ...................................... Accrued interest compensation .............................................. Other..................................................................................... Taxable income ......................................................................... Estimated income tax provision (x25% tax rate -10).................. Subtotal ................................................................................... Less investment, research and development tax credits .............. Tax expense at statutory rate ..................................................... Deferred income tax expense .................................................... Income tax expense ................................................................... Deferred income tax expense ..................................................... Less prepaid and withheld tax ................................................... Prior year’s income tax payable................................................. Income tax payable ...................................................................	2002	2003	2003
	NT$ $93,410 (4,215) (52,887) 1,904 (2,021) 8,531 1,735 46,457 25%-10 11,604 (5,807) 5,797 15,002 21,000 (15,002) (43) —	NT$ $101,738 (689) (28,564) (3,053) 3,211 8,979 53 81,675 25%-10 20,409 (10,209) 10,200 11,162 20,000 (11,162) (5) 19,816	U.S.$ $2,929 (20 (822 (88 92 258 2
			2,351 25%-0.3
			587 (294
			293 321
			576 (321 — 570
	$5,955	$28,649	$825

Q-16

Deferred income tax assets - current: Losses on inventory value recoveries .................................... Others ................................................................................... Total ..................................................................................... Deferred income tax liabilities - current: .................................. Unrealized gains on exchange ............................................... Deferred income tax assets (liabilities) - current, net................. Deferred income tax assets - uncurrent: Unrealized valuation losses on long-term investments ........... Timing difference for pension expense .................................. Accrued interest compensation .............................................. Others ................................................................................... Investment Tax Credit ........................................................... Total ..................................................................................... Deferred income tax liabilities - uncurrent: Unrealized investments income.............................................. Cumulative translation adjustments........................................ Deferred income tax liabilities - uncurrent, net..........................	2002 NT$ $— 642 642 (149) $493 2002 NT$ $1,575 5,622 7,820 1,432 812 17,261 (77,739) (11,609) $(72,087)	2003	2003
		NT$ U.S.$ $2,710 $78 607 17 3,317 95 — — $3,317 $95 2003	U.S.$ $78 17
			95 —
			$95
		NT$ $1,575 6,264 16,762 1,865 713 27,179 (121,097) (11,416) $(105,334)	U.S.$ $45 180 482 54 21
			782 (3,485) (329)
			$(3,032)

Q-17

Other information about integrated income tax system:

Imputation credit account .......................................................... Imputation credit ratio............................................................... Retained earnings: 1997 and before .................................................................... 1998 and after ....................................................................... Total ....................................................................................	2002 NT$ $27,013 11.40% — 308,665 $308,665	2003	2003
		NT$ $17,104 10.57% — 430,929 $430,929	U.S.$ $492
			10.57% — 12,403
			$12,403

The Company’s income tax returns through 2000 have been examined and approved by the tax authority.

The Company’s investment tax credit at March 31, 2003 for income tax purposes are as follows:

Investment tax credit .................................................................	Year expired 2006	2003
		NT$ U.S.$ $713 $21

16. EARNINGS PER SHARE

NT$ Net income......................... Primary earning per share... Net income belongs to shareholders of common stock ................ Effect of potentially dilutive securities: Convertible corporate bond .......................... Employee stock option ... Diluted earnings per share - Net income plus potentially diluted securities....................				2002
	Amount (Numerator) Before Tax After Tax			Shares (’000) (Denominator)	Earnings per Share
	Before Tax				Before Tax	After Tax
	$93,410 $93,410 8,531 —		$72,410		$0.68	$0.53
			$72,410 6,398 —	137,700 13,978 53
	$101,941		$78,808	151,731	$0.67	$0.52

Q-18

			2003
Amount (Numerator) Before Tax After Tax $101,738 $81,738 $101,738 $81,738 8,979 6,734 — — $110,717 $88,472			Shares(’000) (Denominator) 137,700 13,978 62 151,740 2003	Earnings per Share
Before Tax $101,738 $101,738 8,979 — $110,717				Before Tax $0.74 $0.73	After Tax
					$0.59
					$0.58
Amount (Numerator) Before Tax After Tax $2,929 $2,353 $2,929 $2,353 258 194 — —			Shares(’000) (Denominator)	Earnings per Share
Before Tax $2,929 $2,929 258 —				Before Tax $0.02	After Tax
					$0.02
		$2,353 194 —	137,700 13,978 62

The 2002 earnings per share had been adjusted for the retroactive effect of the stock dividends in 2002 of 14,390,000 shares.

Q-19

17. RELATED PARTY TRANSACTIONS

==> picture [457 x 196] intentionally omitted <==

----- Start of picture text -----

Ichia Technologies, Inc.
Capital: NT$1,377,000
30% 100% 100% 100% 50% 100%
Landsfair Technology H.K.-Ichia Ichia Holdings (B.V.I) Ichia U.S.A, Inc. Homesolutin, Inc. Ichia International
Corp. Limited Trading Ltd. (BVI)
Capital: U.S.$10 Capital: U.S.$4,106 Capital: NT$90,000
Capital: NT$800,000 Capital: U.S.$13,434 Capital: U.S.$50
100% 100% 100% 100%
Ichia (Suzhou)
Technologies, Inc.
Ichia Electronics Ihwa Electronics Capital: RMB33,106
Ichia Rubber Industry
(Zhongshan) Co., Ltd. (Zhongshan) Co., Ltd. (U.S.$4,000)
(Malaysia) Sdn. Bhd.
Capital: RMB30,865 Capital: RMB8,278 Advance receipts for
Capital: MYR9,000
(U.S.$3,728) (U.S.$1,000) common stock:
RMB39,513
(U.S.$4,775)
----- End of picture text -----

Name of Related Party

Relationship with the Company

Ichia Rubber Industry (Malaysia) Sdn. Bhd.
(“Malaysia-Ichia”).......................................................	Associated Company
Ichia U.S.A, Inc. (“USA-Ichia”) ......................................	Associated Company
Ichia Electronics (Zhongshan) Co., Ltd.
(“Zhongshan-Ichia”) ....................................................	Associated Company
Ihwa Electronics (Zhongshan) Co., Ltd.
(“Ihwa-Ichia”) .............................................................	Associated Company
Ichia (Suzhou) Technologies, Inc. (“Suzhou-Ichia”) .........	Associated Company
Ichia Holdings (B.V.I) Limited (“BVI-Ichia”) ..................	Associated Company
Homesolutin, Inc. ............................................................	Investee accounted for by equity method
Landsfair Technology Corp..............................................	Investee accounted for by equity method
Ichia International Trading Ltd. (BVI)
(“Ichia-International”) .................................................	Associated Company

Major transactions with related parties are summarized below:

Purchases

Zhongshan-Ichia ............................................................. Ihwa-Ichia ......................................................................	2002 NT$ $49,240 6	2003
		NT$ U.S.$ $20,922 $602 1 —

Purchases from related parties are made on credit and at prices similar to those given to third parties. The payment period from both Zhongshan-Ichia and Ihwa-Ichia, the company’s affiliates depends on their funding requirement.

Sales

Malaysia-Ichia................................................................. USA-Ichia ....................................................................... Ihwa-Ichia .......................................................................	2002 NT$ $12,074 2,405 4,133	2003
		NT$ U.S.$ $10,612 $305 8,162 235 8,517 245

Sales to USA- Ichia are made on credit and at prices of 140% of cost. The collection period of sales to USA-Ichia is 3 months after shipment. Sales to Malaysia-Ichia are made on credit and at prices of 140%-170% of cost The collection period of sales to Malaysia-Ichia is 6 months after shipment. Sales to Ihwa-Ichia are made on credit and at prices similar to those given to third parties. The collection period of sales to Ihwa-Ichia depends on their funding requirement.

Q-20

Commission Expenses

USA-Ichia ....................................................................... Other Expenses Landsfair Technology Corp.............................................. Commission Revenue Zhongshan-Ichia .............................................................. Malaysia-Ichia................................................................. USA-Ichia ....................................................................... Service Revenue Landsfair Technology Corp.............................................. Disposal of Equipment In 2002, sales of equipment are summarized as follows: Zhongshan-Ichia .............................................................. Ihwa-Ichia ....................................................................... In 2003, sales of equipment are summarized as follows: Suzhou-Ichia ................................................................... Suzhou-Ichia ...................................................................	2002 NT$ $243 2002 NT$ $— 2002 NT$ $7,233 27 7 2002 NT$ $450 Proceeds NT$ $4,442 161 Proceeds NT$ $13,676 Proceeds U.S.$ $394	2003	2003
		NT$ U.S.$ $467 $13 2003
		NT$ U.S.$ $6 $— 2003
		NT$ U.S.$ $9,799 $282 64 2 21 1 2003
		NT$ $— Book Value NT$ $2,504 63 Book Value NT$ $11,694 Book Value U.S.$ $337	U.S.$ $— Gain
			NT$ $1,938 98 Gain
			NT$ $1,982 Gain
			U.S.$ $57

Q-21

Receivable and Payable

Notes receivable ............ Landsfair Technology Corp. Accounts receivable....... Malaysia-Ichia USA-Ichia Ihwa-Ichia Other current assets....... Malaysia-Ichia USA-Ichia IHWA-Ichia Landsfair Technology Corp. Homesolutin, Inc. Suzhou-Ichia BVI-Ichia Ichia-International Accounts payable .......... Zhongshan-Ichia Other payable ................ Landsfair Technology Corp. Other current assets....... Landsfair Technology Corp.	2002 NT$ $169 32,687 1,908 23,509 5,518 2,286 7 305 190 662 — — 154,231 — —	2003
		NT$ U.S.$ $— $— 29,574 851 438 12 31,333 902 704 20 2,319 67 — — — — 40 1 9,121 263 9,987 287 16,541 476 106,577 3,067 75 2 6 —

Guarantee

As of March 31, 2002 and 2003, Ichia had outstanding guarantees for bank loans to its subsidiaries as follows:

USA-Ichia ....................................................................... Suzhou-Ichia ................................................................... Landsfair Technology Corp..............................................	2002 NT$ $27,996 11,198 100,000	2003
		NT$ U.S.$ $10,409 $300 — — — —

18. ASSETS PLEDGED

The carrying value of assets pledged as collateral for bank borrowings for the three-month periods ended March 31, 2002 and 2003 are as follows:

Property, plant and equipment: Machinery and equipment...................................................... Other current assets - Restricted deposits .................................. Other assets - Restricted deposits .............................................. Other assets - Rental assets: Land ..................................................................................... Buildings and structures ........................................................ Total..........................................................................................	NT$ $18,969 121,254 3,000 30,105 27,727 $201,055	NT$ $13,176 21,276 3,000 30,105 27,738 $95,295	U.S.$ $379 612 86 867 798
			$2,742

19. COMMITMENTS AND CONTINGENCIES

As of March 31, 2002, the Company has issued guarantees for related companies as disclosed in Note 17.

Ichia has agreements with suppliers to buy equipment. The total price in the contracts is NT$40,586, and as of March 31, 2003, the Company, had paid $19,558 and recorded such to prepaid equipment. The balance NT$21,028 was unpaid.

Q-22

In April 15, 2003, the Stockholders resolved the retained earnings appropriated were as follows:

Retained earnings in the beginning ....................................................................... Add: net income for 2002 ..................................................................................... Subtotal ................................................................................................................ Appropriation and distribution of 2002 earnings: Legal reserve ................................................................................................... Stock dividends ................................................................................................ Transfer of bonuses to employees to capital stock ............................................ Bonuses to directors and supervisors ............................................................... Total .....................................................................................................................	NT$ $8,672 340,519	U.S.$ $250 9,799
	349,191 (34,052) (275,400) (27,600) (6,000)	10,049 (980) (7,925) (794) (173)
	$6,139	$177

The Parent Company has issued stock warrants for employees as described in Note 20.

20. EMPLOYEE STOCK OPTION

Time of Issue

Employee stock options shall be issued in installments over a year from the date approval is received from the Securities and Future Commission, Ministry of Finance, R.O.C. (hereinafter referred to as the regulatory agency). The Chairman shall have the power to determine the actual issue dates.

Stock Option Eligibility Requirements

Only employees of the Company and its subsidiaries on the day of the grant are eligible to receive the options. The employees who qualify to receive the options and actual number of shares granted is determined by the president based on their years of service, position, work performance, past and expected overall or special contributions to the company, passed to the Chairman for review and then to the Board of Directors for approval. No single employee may be granted over 10% of the total shares granted under each option issuance and the granted over 1% of the Company’s issued and outstanding common stock.

Amount of Shares Issued

In July 2001 and January 2001, the employee stock options were approved for 8,000 and 2,000 units, respectively, by the Taiwan Securities and Futures Commission (“SFC”). A total of 10,000 units of options may be issued under the option plan and each unit of options entitles the option holder to receive 1,000 shares, and therefore a total of 10,000,000 new shares of common stock must be issued when the options are exercised. As of March 31, 2003, the outstanding options were 9,710,00 shares, and 290,000,000 shares were not issued within a year from the date approved was received from the regulatory agency.

Term

Exercise price (or strike price)

The closing price of the company’s common shares on the day the options are issued. If the closing price of the stock on that day is lower than its face value then the exercise price of the options shall be the face value of the common stock.

Validity

• a) Stock options shall have a term of 6 years. Stock options may not be transferred by the option holder except to his/her heirs in the event of death.

• b) Options issued to employees under the stock option plan may be exercised after a period of two years after employee stock option certificates are granted.

• c) If the employee who is granted stock options by the company violates his or her labor contract, commits a major infraction of work regulations or whose work performance is substantially lower than expectations, the company has the right to take back and cancel any unexercised stock options granted to that employee.

Q-23

• d) The Board of Directors may adjust the time and allocation of above-mentioned stock options depending on the prevailing conditions at the time of the issue.

Type of shares issued under the stock option plan: The Company’s common stock.

Implementation

Paid for by the company through the issue of new shares.

If the Exercise Price is Lower than the Stock’s Face Value

If the exercise price of the stock options issued by the Company is lower than the face value of the common stock, the face value of the common stock shall serve as the exercise price.

Rights and Obligations after Exercising Stock Options

The rights and obligations for Stock Option Payment Certificates is the same as the company’s common stock except that they may not participate in the company’s stock and cash dividends and new stock subscriptions.

Outstanding Shares

As of March 31, 2003, the outstanding stock option amount to 9,710 unit, per unit is 1,000 shares.

Exercise Price

As of March 31, 2003, the outstanding stock option amount to 9,710 unit, the exercise price of 7,910 and 1,800 unit is NT$42.40 and NT$42.00, respectively.

Exercisable Option

As of March 31, 2003, there was no exercisable stock option.

Compensation Cost

The detail of compensation cost is as follow:

(Market price of stock on the measurement date - exercise price) x exercise shares = ($42.40 - $42.40) x 7,910,000 (shares) + ($42.00 - $42.00) x 1,800,000 (shares) = 0

21. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

Fair value of non-derivative financial instruments is equal to the balances of the Company at March 31, 2002 and

The Company’s market assumptions and estimation methodologies of the above financial instruments are as follows:

• a. Short-term financial instruments such as cash and cash equivalents, receivables, payables and short-term debts are reasonably estimated from their carrying amounts due to their short-term nature.

• b. Short-term investments are reasonably estimated from their quoted market price as at balance sheet date.

• c. Long-term equity investments are reasonably estimated from their quoted market prices as at balance sheet date for listed or over-the-counter investments. For those investments without quoted market prices, estimations of fair value are from their carrying value.

• d. Long-term loans are reasonably estimated from expected cash flows discounted at the long-term loan interest rates.

Q-24

APPENDIX A — FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN THE ROC

The information presented in this appendix has been extracted from publicly available documents which have not been prepared or independently verified by the Company, the Managers, the Trustee or any of their respective affiliates or advisors in connection with the offering.

Foreign Investment

Historically, foreign investment in the ROC securities market has been restricted. From 1983 onwards, however, the ROC Government has from time to time enacted legislation and adopted regulations to permit foreign investment in the ROC securities market.

Overseas Corporate Bonds

Since 1989, the ROC SFC has approved a series of overseas corporate bond issues (“ OCBs ”) by ROC companies listed on the TSE in offerings directed outside the ROC. Since December 1994, the ROC SFC has also permitted ROC companies whose shares are traded on the GTSM to issue and offer OCBs. In 2002, the ROC SFC further permitted public-issue companies to issue OCBs on a private placement basis.

Under the current ROC laws and policies, OCBs can be converted by bondholders (other than PRC persons) into shares of the relevant ROC companies or (subject to the ROC SFC approval) may be converted into depositary receipts issued under the sponsorship of the same ROC company or the shares of other companies, in case of exchangeable bonds. Public issuing companies may issue corporate debt in offerings outside the ROC. Proceeds from sales of the shares converted from OCBs may be used for re-investment in securities listed on the TSE or traded on the GTSM. These reinvestments will need to comply with the limitations and restrictions which apply to qualified foreign institutional investors or general foreign investors discussed below.

Under current ROC law, a converting bondholder when exercising the conversion right to convert the bonds into shares of an ROC company, unless having been a QFII or a General Foreign Investor and having obtained the relevant governmental approval, will be required to first obtain such approval as a QFII or a General Foreign Investor (as appropriate), and then to appoint a local agent (with such qualifications as are set by the ROC SFC) to open a securities trading account with a local brokerage firm, remit funds, exercise shareholders’ rights and perform such other actions as may be designated by such converting bondholder, on behalf of and as agent for such converting bondholder. In addition, the converting bondholder is 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 and such converting bondholder is also required to appoint a tax guarantor for filing tax returns and making tax payments.

Unless otherwise limited by the CBC, an ROC Company may, without obtaining further approvals from the CBC or any other government authority of the ROC, convert NT Dollars to other currencies, including U.S. Dollars, in respect of the proceeds of the redemption of the Bonds or payment of interest on, or the repayment of principal upon maturity of, the Bonds. However, a converting bondholder must obtain prior approval from the Central Bank of China on a payment-bypayment basis for conversion from NT Dollars into other currencies in respect of the proceeds from the sale of subscription rights for newly issued shares if the proceeds is in excess of U.S.$100,000 per remittance.

In addition, a non-ROC converting bondholder may, through its local agent and without obtaining prior approval from the CBC, convert NT Dollars into foreign currencies of net proceeds realized from the sale of the converted shares or any stock dividends relating to such shares, or any cash dividend or other cash distribution in respect of such shares, as well as for inward remittances of subscription payments in connection with a rights offering and tax payment.

A-1

Any such cash received by the converting bondholder (qualified as a QFII or General Foreign Investor) may be used for further investment in ROC securities subject to the requirements and restrictions generally applicable to QFIIs and General Foreign Investors (as applicable). Such further investment will be used in calculating the applicable investment quota.

Depositary Receipts

In April 1992, the ROC SFC promulgated regulations permitting ROC companies with securities listed on the TSE, with the prior approval of the ROC SFC, to sponsor the issuance and sale to foreign investors of depositary receipts. Depositary receipts evidence depositary shares representing deposited shares of ROC companies. In December 1994, a series of new regulations was promulgated by the ROC Ministry of Finance allowing companies whose shares are traded on the GTSM or listed on the TSE to sponsor, upon approval by the ROC SFC, the issuance and sale of depositary receipts. In 2002, the ROC SFC further permitted public companies to participate the issuance of depository receipts on a private placement basis.

The Regulations, as amended, provide that any depositary receipt holder may, after the issue date of the depositary receipts (in the case that the deposited shares are new shares) or immediately (in the case that the deposited shares are existing shares), request the depositary bank either to cause the underlying shares to be sold in the ROC and distribute the proceeds of such sale to the depositary receipt holder or to withdraw the underlying shares from the depositary receipt facility and deliver such shares to such holder. A citizen of the PRC or an entity organized under the laws of the PRC is not permitted to withdraw and hold the Shares.

Under existing ROC laws and regulations, a depositary may, without obtaining further approvals from the CBC or any other government authority or agency of the ROC, convert NT Dollars into other currencies, including U.S. Dollars, in respect of the proceeds of the sale of shares represented by depositary receipts or received as stock dividends in respect of such shares and deposited into the depositary receipt facility and any cash dividends or distributions received in respect of such shares. In addition, a depositary may convert inward remittances of payments into NT Dollars for purchases of underlying shares for deposit in the depositary receipt facility against the creation of additional depositary receipts. With respect to conversion from NT Dollars into foreign currencies in respect of the proceeds from the sale of subscription rights for new shares, proceeds in excess of U.S.$100,000 per remittance may not be remitted overseas unless CBC approval is obtained. In addition, a depositary receipt holder may, after becoming a holder of shares, convert NT Dollars into other currencies for proceeds from the sale of any underlying shares withdrawn from the depositary receipt facility and delivered to the depositary receipt holder and for conversion from foreign currencies into NT Dollars for subscription payments in respect of rights offering. A depositary must obtain foreign exchange approval from the CBC on a payment-by-payment basis for conversion from NT Dollars into foreign currencies in respect of the proceeds from the sale of subscription rights for new shares. It is expected that the CBC will grant such foreign exchange approval as a routine matter.

A depository receipt holder wishing to withdraw shares represented by depository receipts in order to hold the shares, unless having been a QFII or a General Foreign Investor and having obtained the relevant governmental approval, will be required to first obtain such approval as a QFII or a General Foreign Investor (as appropriate), and then to appoint a qualified local agent to, amongst other things, open a securities account with a local securities brokerage firm, remit funds and exercise shareholders’ rights. In addition, the withdrawing holder is also required to appoint a custodian bank to hold the securities and any cash proceeds in safekeeping, to make confirmations, to settle trades and to report all relevant information. Without making these appointments and opening these accounts, the withdrawing holder would be unable to hold or subsequently sell shares withdrawn from a depository receipt facility on the TSE or otherwise. Furthermore, the withdrawing holder is required to appoint a tax guarantor in the ROC for filing tax returns and making tax payments.

In addition, any such cash received by the depositary receipt holder (qualified as a QFII or a General Foreign Investor) may be used for further investment in ROC securities, subject to the requirements and restrictions generally applicable to QFIIs and General Foreign Investors (as applicable). Such further investment will be calculated towards the applicable investment quota.

A-2

Direct Share Offerings

The ROC Government has permitted ROC companies listed on the TSE, or the GTSM to issue shares directly (not through depositary receipt facilities) overseas. In addition, public-issue companies may issue shares directly overseas on a private placement basis.

Qualified Foreign Institutional Investors

The Executive Yuan has approved guidelines for direct investment in ROC securities listed on the TSE, GTSM or emerging stocks approved by the ROC SFC by certain QFIIs that applied for and received, ROC SFC and, if applicable, CBC approval, including:

• (i) banks;

• (ii) insurance companies;

• (iii) fund management institutions;

• (iv) offshore fund management companies which are more than 50% owned by a ROC securities investment trust enterprise provided that the funds to be invested do not come from sources in the ROC or PRC and are not owned by such offshore fund management companies;

• (v) general securities firms;

• (vi) offshore subsidiary securities firms which are more than 50% owned by a ROC securities firm, or other offshore securities firms which are wholly owned by such offshore subsidiary securities firms;

• (vii) offshore subsidiary securities firms which are wholly-owned by a ROC securities firms, or other offshore securities firms which are more than 51% owned by such offshore subsidiary securities firms;

• (viii)foreign government-owned investment institutions provided that all the funds to be invested shall be owned by the foreign government;

• (ix) pension funds;

• (x) mutual funds, unit trusts or investment, provided that the investment application shall be made under the name of their trustees with notes stating their names;

• (xi) trust companies;

• (xii) academic or charitable institutions that, according to their articles of incorporation, may invest their funds, provided those investments are managed externally by a third party; and

• (xiii)any other professional institutional investors.

Each QFII who wishes to invest directly in the ROC securities market is required to apply for an investment permit from the ROC SFC, provided that any application for investment exceeding U.S.$50 million will require approvals from the CBC. QFIIs who receive the permit(s) may invest without any ceiling and, unless limited by certain laws and regulations, remit the amount into the ROC at any time and from time to time after receiving the investment permit. Except for some restrictions imposed by specific law and regulation, the individual and aggregate foreign ownership of the issued share capital in a TSE listed company or a GTSM quoted company is not restricted. ROC custodians for QFIIs are required to submit to the CBC and the ROC SFC a report of trading activities and status of assets under custody and other matters every month. Capital remitted to the ROC under these guidelines may be remitted out of the ROC at any time after the date such capital is remitted to the

A-3

ROC. Capital remitted out of the ROC may be returned to the ROC at any time without ROC SFC approval. Capital gains and income on investments may be remitted out of the ROC at any time. The lifting of the investment period limitations and investment ceilings also applies to the QFIIs whose approvals have already expired.

General Foreign Investors

Except for QFIIs, General Foreign Investors may currently invest in ROC securities up to U.S.$5 million (in the case of individual investors) and U.S.$50 million (in the case of institutional investors) after obtaining approval issued by the TSE. General Foreign Investors are also subject to the foreign ownership limitations on certain specified industries as described in “Prohibited and Restricted Industries”.

Foreign Investment Approval

With the exception of QFIIs, General Foreign Investors and investors in OCBs and depositary receipts, under existing ROC laws and regulations relating to foreign investment, investors (both institutional and individual) who are not ROC persons and wish to make direct investment in the shares of ROC companies are required to submit a Foreign Investment Approval (“ FIA ”) application to the Investment Commission of the MOEA or other government authority. The Investment Commission or such other government authority reviews each FIA application and approves or disapproves each application after consultation with other government agencies (such as the CBC and the ROC SFC). Under current law, any non-ROC person possessing an FIA may remit capital for the approved investment and is entitled to repatriate annual net profits, interest and cash dividends attributable to such investment. Stock dividends, investment capital and capital gains attributable to such investment may be repatriated after approvals of the Investment Commission or other government authorities have been obtained.

Prohibited and Restricted Industries

In addition to the general restriction against direct investment by non-ROC persons in shares of ROC companies, non-ROC persons are currently prohibited from investing in certain industries in the ROC pursuant to the Negative List as amended by the Executive Yuan from time to time. The prohibition on foreign investment in the prohibited industries specified in the Negative List is absolute and provides no specific exemption from its application. Pursuant to the Negative List, certain other industries are restricted so that non-ROC persons may invest in such industries only up to a specified level and with the specific approval of the relevant competent authority which is responsible for enforcing the relevant legislation which the Negative List is intended to implement. The business of the Company is not in a prohibited or restricted industry under the Negative List.

Exchange Controls

The ROC’s Foreign Exchange Control Statute and regulations thereunder provide that all foreign exchange transactions must be executed by banks designated to handle such business by the ROC Ministry of Finance (the “ ROC MOF ”) and by the CBC. 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, and all foreign currency needed for the import of merchandise and services may be purchased freely from the designated banks for conducting foreign exchange.

For non-trade related foreign exchange transactions, ROC companies and resident individuals may also, without foreign exchange approval, remit into and out of the ROC foreign currencies of up to U.S.$50 million (or its equivalent) and U.S.$5 million (or its equivalent), respectively, in each calendar year. The above limits apply to remittances involving a conversion between NT Dollars and U.S. Dollars or other foreign currencies. Furthermore, any remittance of foreign currency into the ROC by an ROC company or resident individual in a year will be offset by the amount remitted out of the ROC by the company or individual (as applicable) within its annual quota and will not use up

A-4

its annual inward remittance quota to the extent of such offset. The above limits apply to remittance involving a conversion between NT Dollars and U.S. Dollars or other foreign currencies. A requirement is also imposed on all enterprises to register medium-and-long-term foreign debt with the CBC.

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. The above limit applies only to remittances involving a conversion between NT Dollars and U.S. Dollars or other foreign currencies.

A-5

APPENDIX B — THE SECURITIES MARKET OF THE ROC

The information presented in this appendix has been extracted from publicly available documents which have not been prepared or independently verified by the Company, the Managers, the Trustee or any of their respective affiliates or advisors in connection with the offering.

In 1960, the ROC Government established the Securities and Exchange Commission to supervise and control all aspects of the securities market. The Securities and Exchange Commission of the ROC was restructured in early 1997 and renamed as the ROC SFC. In the 1970’s and the early 1980’s, the ROC Government implemented a number of steps designed to upgrade the quality and importance of the ROC securities market, such as encouraging listing on the TSE and establishing an over-thecounter market. In the mid-1980’s, the ROC Government began to revise its laws and regulations in a manner designed to facilitate the gradual internationalization of the ROC securities market.

The Taiwan Stock Exchange

In 1961, the ROC SFC established the TSE to provide a marketplace for securities trading. The TSE is a corporation owned by government-controlled entities 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 TSE.

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 by July 31, 2003. As of July 31, 2003, the market capitalization of companies listed on the TSE was NT$10,654 billion.

Historically, Taiwan companies have listed only shares and bonds on the TSE. However, the ROC SFC has encouraged companies to list other types of securities. In 1988, the ROC SFC permitted the issuance of the 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 GTSM. 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 stockholders, 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.

B-1

The GreTai Securities Market

To complement the TSE, the GTSM 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 TSE. As of July 31, 2003, 432 companies have listed equity securities on the GTSM and the total market capitalization of those companies was NT$651.8 billion.

In addition, the Emerging Market was established on January 2, 2002 on the initiative of the ROC SFC to encourage trading of securities of companies that do not qualify for listing on the TSE or the GTSM. The price of shares is decided by negotiation between securities firms and investors. As of July 31, 2003, 266 companies have registered equity securities on the Emerging Market.

The following table sets forth, for the periods indicated, certain information relating to the GTSM Index:

Period ended 1995 ............................................... 1996 ............................................... 1997 ............................................... 1998 ............................................... 1999 ............................................... 2000 ............................................... 2001 ............................................... 2002 ............................................... 2003 (through July 31)....................	Number of listed companies at period end 41 79 114 176 264 300 333 384 42.5	Trading value (in millions of NT Dollars) 2,796 453,509 2,310,659 1,198,158 1,899,925 4,479,663 2,326,889 2,794,724 1,059,338	Index high 101.96 234.83 343.99 281.41 207.18 329.47 136.23 163.00 113.47	Index low 94.02 99.92 210.22 163.89 138.99 99.86 106.74 89.71 79.56	Index at period end
					101.96 233.09 245.05 165.80 207.18 104.93 136.23 94.38 110.89

Sources: GTSM Monthly Review; GTSM Data Base

Taiwan Stock Exchange 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.

B-2

The following table shows for the periods indicated information relating to the TSE Index.

Period ended 1990 .............................................................. 1991 .............................................................. 1992 .............................................................. 1993 .............................................................. 1994 .............................................................. 1995 .............................................................. 1996 .............................................................. 1997 .............................................................. 1998 .............................................................. 1999 .............................................................. 2000 .............................................................. 2001 .............................................................. 2002 .............................................................. 2003 (through August 14) ..............................	Number of listed companies at period end 199 221 56 285 313 347 375 404 437 462 474 584 638 639	Index high 12,495.34 4,305.22 5,391.63 6,070.56 7,183.75 7,051.49 6,982.81 10,116.84 9,277.09 8,608.91 10,202.20 6,104.24 6,462.30 5,451.80	Index low 2,560.47 3,316.26 3,327.67 3,135.56 5,194.63 4,503.37 4,690.22 6,820.35 6,251.38 5,475.00 8,349.91 3,446.26 3,850.04 4,139.50	Index at period end
				4,530.16 3,377.06 4,600.67 6,070.56 7,124.66 5,173.73 6,933.94 8,187.27 6,418.43 8,448.84 8,842.63 5,551.24 4,452.45 5,436.75

Source: Status of Securities Listed on Taiwan Stock Exchange.

As indicated above, the performance of the Taiwan Stock Exchange 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. Transactions that involve 500 trading lots or more must be registered and executed pursuant to certain TSE guidelines. Fluctuations in the price of stock traded on the TSE are currently subject to a restriction of 7% above and below the previous day’s closing price (or reference price set by the TSE if the previous day’s closing price is not available because of lack of trading activity) in the case of equity securities, and 5% in the case of debt securities. Brokerage commissions are proposed by the TSE and approved by the ROC SFC. The current approved maximum brokerage commission is 0.1425% of the transaction price for equity securities; however, a lower rate may be charged to clients by securities firms at their sole discretion, provided that they must report such rate to the TSE. A securities transaction tax, currently levied at the rate of 0.3% of the transaction price, is payable by the seller of equity securities and a tax at the rate of 0.1% of the transaction price is payable by the seller of debt securities other than government bonds. Such securities transaction taxes are withheld at the time of the transaction giving rise to such taxes. According to the amended Statute for Upgrading Industries effective as of February 1, 2002, no securities transaction tax will be imposed on the sale of the Bonds from February 1, 2002 to December 31, 2009. Sales of shares of companies listed on the TSE are currently sold in lots of 1,000 shares. Odd lot trading, or the purchase or sale of less than 1,000 shares, can be conducted in after-hours trading. Investors who desire to sell odd lots of shares of a listed company occasionally experience delays in effecting such sales.

Regulation and Supervision

The ROC SFC has been under the jurisdiction of the ROC MOF since 1981. The ROC SFC has extensive regulatory authority over companies listed on the TSE, companies whose shares are traded on the GTSM and unlisted public-issue companies. Such companies are generally required to obtain approval from, or registration with, the ROC SFC for all securities offerings. The ROC SFC has promulgated regulations requiring, unless otherwise exempted, periodic reporting of financial and operating information by all public-issue companies. In addition, the ROC SFC is responsible for the establishment of standards for financial reporting and carries out licensing and supervision with

B-3

respect to the other participants in the ROC securities markets. The ROC SFC has responsibility for implementation of the ROC Securities and Exchange Law and for overall administration of governmental policies in the ROC securities markets. It has extensive regulatory authority over the offering, issuing and trading of securities. In addition, the ROC Securities and Exchange Law specifically empowers the ROC SFC to promulgate rules under certain circumstances.

The ROC Securities and Exchange Law prohibits market manipulation. It permits a company to recover certain short swing trading profits made through purchases and sales within six months by directors, managerial personnel, supervisors and shareholders, together with their spouses, minor children and nominees, holding 10% or more of the shares of the company, as well as spouses, minor children and nominees of these parties. The ROC Securities and Exchange Law prohibits trading by “insiders” based on non-public information that materially affects share price movement. Pursuant to the ROC Securities and Exchange Law, the term “insiders” includes directors, supervisors, managers and shareholders (together with their spouses, minor children and nominees) having 10% or more shareholding, as well as spouses, minor children and nominees of the parties, or any person who has learned such information due to an occupational or controlling relationship with the issuing company and any person who has learned such information from any of the foregoing. Sanctions can include prison terms. 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 a company’s contracts, reports and other evidentiary documents that are related to securities transactions. 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.

The ROC Securities and Exchange Law also provides for, among other things, regulations relating to public offerings of securities; measures to strengthen the capital structure of issuers; civil liability for material misstatements or omissions made by issuers; more stringent regulation of the securities activities of officers, supervisors, directors and major shareholders of issuers; regulations regarding tender offers; and a significant expansion of the prohibitions against insider trading, including the imposition of treble civil damages and criminal sanctions.

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 prosecutors. Under ROC law, civil actions may only be brought by plaintiffs who assert that they have suffered damages. The ROC SFC is directly empowered to curb abuses and violations of applicable laws and regulations only through administrative measures.

In addition to providing a market for securities trading, the TSE has primary responsibility for reviewing applications by issuers to list securities on the TSE and the GTSM has primary responsibility for reviewing applications by issuers to list securities on the GTSM. The ROC SFC reviews all securities offerings by listed companies. If issuers of listed securities violate relevant laws and regulations or encounter significant difficulties, the TSE and the GTSM may, with the approval of the ROC SFC, delist securities of such issuers.

B-4

REGISTERED OFFICE OF THE COMPANY

Ichia Technologies, Inc. 268, Hwa-Ya Second Road Hwa-Ya Technology Park Gueishan, Taoyuan Taiwan, ROC

TRUSTEE

J.P. Morgan Corporate Trustee Services Limited Trinity Tower, 9 Thomas More Street London E1W 1YT England

REGISTRAR

J.P. Morgan Bank Luxembourg S.A. 5 rue Plaetis L-2338 Luxembourg Grund

PRINCIPAL PAYING, TRANSFER AND CONVERSION AGENT

JPMorgan Chase Bank Trinity Tower, 9 Thomas More Street London E1W 1YT England

AUDITORS TO THE COMPANY

Deloitte & Touche TN Soong & Co. and Deloitte & Touche (Taiwan) Established Deloitte & Touche Effective June 1, 2003 12th Floor, 156, Min Sheng E. Road Sec.3, Taipei, Taiwan ROC

ROC LEGAL ADVISORS LEGAL ADVISORS LEGAL ADVISORS TO THE COMPANY TO THE MANAGERS TO THE TRUSTEE Lee and Li, Attorneys-at-Law Baker & McKenzie Baker & McKenzie 7th Floor, 201 Tun-Hwa N. Road 14/F, Hutchison House 14/F, Hutchison House Taipei, Taiwan 10 Harcourt Road 10 Harcourt Road ROC Hong Kong Hong Kong

LUXEMBOURG PAYING, TRANSFER AND CONVERSION AGENT

J.P. Morgan Bank Luxembourg S.A. 5 rue Plaetis L-2338 Luxembourg Grund

LUXEMBOURG LISTING AGENT

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

==> picture [56 x 65] intentionally omitted <==

Printed by IFN Financial Press Limited 23490