URE - Capital/Financing Update 2013

INFORMATION MEMORANDUM

==> picture [103 x 49] intentionally omitted <==

Neo Solar Power Corp.

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

U.S.$50,000,000 2% Convertible Bonds due 2011

Issue Price: 100%

The 2% Convertible Bonds due 2011 in an aggregate amount of U.S.$50,000,000 (the “ Bonds ”) will be issued in registered form by Neo Solar Power Corp. (“ we ” or the “ Company ”) in reliance on Regulation S under the U.S. Securities Act of 1933, as amended (the “ Securities Act ”).

The Bonds will be our direct, unconditional, unsecured and unsubordinated general obligations and rank at least pari passu in right of payment with all of our other outstanding and future unsecured and unsubordinated general obligations. Holders of the Bonds (the “ Bondholders ”) may convert the Bonds into our common shares, par value NT$10 per share (the “ Shares ”) at any time (subject to certain restrictions) on or after August 14, 2008 or the date on which the Shares are listed on the Taiwan Stock Exchange (the “ TSE ”), whichever is later, and prior to the close of business (at the place the Bond is deposited for conversion) on July 5, 2011. The initial conversion price will be NT$107.0 per Share, which is equivalent to U.S.$3.52 per Share, based on a fixed exchange rate of NT$30.397 = U.S.$l.00 (the “ Fixed Exchange Rate ”), subject to adjustment in certain events. In addition, the Conversion Price (as defined herein) 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. Application has been made for the Shares to be listed on the TSE. If the Shares are listed on the TSE, application will be made for the Shares to be issued upon conversion of the Bonds to be listed on the TSE.

Interest will be payable semi-annually on January 15 and July 15 each year. Transferors of Bonds before an interest payment date will not be entitled to interest between previous interest payment date and the date of transfer.

We will redeem the Bonds at their principal amount at maturity on July 15, 2011.

For a discussion of certain factors that should be considered in connection with an investment in the Bonds, see “Risk Factors” on page 4 herein.

No application has been or will be made to list the Bonds on any stock exchange. It is expected that delivery of the Bonds will be made in book entry form through the facilities of Euroclear and Clearstream, Luxembourg on July 15, 2008.

The Bonds, and the Shares deliverable upon conversion of the Bonds, have not been, and will not be registered under the Securities Act.

This Information Memorandum has been prepared by the Company for reference purposes only. Persons intending to purchase the Bonds shall make their investment decisions based on their own independent research and information, and not in reliance on this Information Memorandum.

This Information Memorandum is dated July 14, 2008

TABLE OF	TABLE OF	CONTENTS	CONTENTS
PAGE		PAGE
The Offering . . . . . . . . . . . . . . . . . . . . . . .	1	Management and Employees . . . . . . . . . . .	16
Risk Factors . . . . . . . . . . . . . . . . . . . . . . .	4	Terms and Conditions of the Bonds . . . . .	19
Use of Proceeds . . . . . . . . . . . . . . . . . . . .	8	Index to Financial Statements . . . . . . . . . .	F-1
Business . . . . . . . . . . . . . . . . . . . . . . . . . .	9

			THE OFFERING
	Issuer .........................................		Neo Solar Power Corp.
	Bonds .........................................		U.S.$50,000,000 2% Convertible Bonds due 2011 convertible
			into fully-paid common shares with a par value of NT$10
			each of the Company (the “Shares”).
	Issue Price ..................................		100%
	The Offering ...............................		The Bonds will not be offered or sold in the ROC or in the
			United States, or to the residents of the ROC or the United
			States. The Bonds will be offered only in offshore
			transactions in reliance on Regulation S under the Securities
			Act.
	Closing Date ...............................		July 15, 2008
	Maturity Date .............................		July 15, 2011
	Status .........................................		The Bonds will be our direct, unconditional, unsecured and
			unsubordinated obligations and will rank at least pari passu
			without any preference or priority among themselves and
			shall at all times rank at least equally with all our other
			present and future direct, unsecured and unsubordinated
			obligations except as may be required by mandatory
			provisions of the laws.
	Interest .......................................		The coupon rate will be 2% per annum. Interest will be
			payable semi-annually on January 15 and July 15 each year,
			but transferors of the Bonds before an interest payment date
			will not be entitled to interest between the previous interest
			payment date and the date of transfer.
	Withholding Tax .........................		Premium (if any) and interest payable on the Bonds to
			non-residents of the ROC is subject to the deduction of a
			withholding tax in the ROC equal to 20% of the gross amount
			of such premium (if any) and interest. See Condition 9 of
			“Terms and Conditions of the Bonds”
	Conversion .................................		The Bonds are convertible at any time on or after August 14,
			2008 or the date on which the Shares are listed on the Taiwan
			Stock Exchange (the “TSE”), whichever is later 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 July 5,
			2011, except during any Closed Period (as defined herein),
			into Shares at a conversion price (subject to adjustment in
			certain circumstances) (the “Conversion Price”) of
			NT$107.0 per Share, which is equivalent to U.S.$3.52 per
			Share, determined on the basis of the Fixed Exchange Rate of
			NT$30.397 = 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 dilutive events.
			Fractional Shares will not be issued or paid in cash, or by any
			other means. See Condition 6 of “Terms and Conditions of the
			Bonds”.

We 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 from the Principal Agent (as defined herein) is received by us or our domestic stock transfer agent, deliver the relevant Shares, to the extent permitted by laws and at our election to the local agent appointed by the converting Bondholder, through book-entry transfer to the account registered in the name of the converting Bondholder or its designee at the Taiwan Depositary & Clearing Corporation. Conversion Price Reset ............... The Conversion Price shall be adjusted downward 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 herein) for (i) each of any 20 consecutive Trading Days is less than 80% of the initial Conversion Price (after anti-dilution adjustments, if any) or (ii) each of the 20 consecutive Trading Days immediately prior to July 1 each year is less than 90% of the initial Conversion Price (after anti-dilution adjustments, if any), provided that the Conversion Price as adjusted shall not be less than 80% of the initial Conversion Price (after anti-dilution adjustments, if any). No Conversion Price Reset shall be allowed before January 15, 2009 and after July 5, 2011 and not more than one Conversion Price Reset is permissible for each calendar year before the Maturity Date. See Condition 6(D) of “Terms and Conditions of the Bonds”. Redemption.................................. The Bonds will be redeemed at 100% of their principal amount in U.S. Dollars on July 15, 2011. See Condition 8 of “Terms and Conditions of the Bonds”. Strategic Investor ........................ Of the Bonds to be issued, 95% will be subscribed by the designated subscriber, Daiwa Securities SMBC Hong Kong Limited (“ Daiwa ”). We have entered into a strategic alliance agreement with Daiwa in June 2008. For more details, see “Business”. Placing Agent .............................. Yuanta Securities (Hong Kong) Company Limited Form and Registration of the The Bonds will be issued in registered form in the Bonds ...................................... denomination of U.S.$1,000 each. The Bonds will be offered and sold in principal amounts of U.S.$1,000 or an integral multiple thereof. The Bonds will be represented by a 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, société anonyme (“ 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 the Bonds will not be issued in exchange for beneficial interests in the Global Certificate. Governing Law ........................... The laws of England. Trustee ....................................... The Bank of New York Mellon, London Branch

	Listing ........................................	Listing ........................................	No application has been made or will be made to list the
			Bonds on any stock exchange.
			Application has been made for the Shares to be listed on the
			TSE and, if the Shares are listed on the TSE, application will
			be made for the Shares issuable upon conversion of the Bonds
			to be listed on the TSE.
	Use of Proceeds ..........................		The proceeds from the offering of the Bonds, after deducting
			management and underwriting fees and other estimated
			offering expenses, will be used to acquire fixed assets,
			including the construction of plants and manufacturing
			facilities and purchase of machinery and equipments.

RISK FACTORS

Risks Related to Our Company and Our Industry

Our limited operating history may not serve as adequate indication of our future prospects.

Being established on August 2005, we have limited operating history. Our first photovoltaic (“ PV ”) cell manufacturing line was installed in September 2006 and reached full production volume by November 2006. We have experienced a high growth rate since the commencement of our volume production. We cannot guarantee that we will achieve a similar growth rate in the future. In addition, we expect that the PV cell industry, where we operate, may experience a change in the near future. As the supply for polysilicon may gradually increase in the next few years, we believe that the production volume for PV cells will increase which will in turn intensify the market competition for PV cell makers. Consequently, you should not rely on our results of operations for any prior periods as adequate indicator of our future performance.

Failure to obtain sufficient silicon wafers could prevent us from timely fulfilling our customers’ order and as a result decrease our revenue.

Our ability to meet the demand of our customers’ orders depends on our suppliers’ timely delivery of silicon wafers in sufficient quantities and acceptable prices. Failure by our suppliers to deliver wafers in satisfactory quantity and quality may be caused by a variety of reasons, such as their failure to obtain sufficient polysilicon, their own financial conditions or other reasons. Despite that we have entered into various long-term and short-term supply contracts with our suppliers, many of these reasons that led to our suppliers’ inability to satisfy their contractual obligations with us are beyond our control. Moreover, due to the present high demand for silicon wafers, it is not economical feasible for us to maintain a large quantity of inventory of raw materials for our future production. Therefore if our suppliers fail to deliver silicon wafers contracted for on a timely basis, we may be unable to deliver our PV cells to our customers at the required timeframe. Such failure could result in order cancellations and may negatively affect our results of operations and customer relationships.

The reduction or elimination of existing government subsidies and economic incentives for on-grid solar energy applications could cause a reduction in demand for our products and lead to decreases in our revenues.

We believe that the growth of PV industry depends in part on the availability and amounts of government subsidies and economic incentives as solar electricity rates have not reached grid parity with traditional electricity rates in most regions of the world. The popularity of solar energy application in a given region is mainly based on the degree of solar irradiance and retail cost of electrical rates. However, since the cost of producing solar electricity currently substantially exceeds the retail price of traditional electricity even in more sunny regions, such as Italy, Australia and Hawaii, many countries have adopted favourable governmental subsidies and economic incentives in order to attract higher solar PV demand. Government subsidies and economic incentives are usually in the form of cost reductions, tax write-offs and other incentives to end users, distributors, systems integrators and PV products manufactures. The reduction or elimination of these subsidies and economic incentives due to policy changes, fiscal tightening or other reasons will have a detrimental impact on the competitiveness of solar energy and may materially adversely affect the demand for our PV cells and thus cause our revenue to decline.

We face intense competition in the PV cell market and also competition with other alternative renewable energy sources.

The PV market is intensely competitive and rapidly evolving. There are a growing number of new companies plan to manufacture PV cells due to the growing demand in PV industry and the relatively low barriers to enter the PV cell market. Other than the increasing new competitors, many of our existing competitors have established prominent market positions, and they have greater financial,

technical, manufacturing and other resources than we do. The greater size of our competitors may enable them to lower manufacturing cost because of their economies of scales. Our failure to compete successfully with these existing or new competitors may materially and adversely affect our financial condition and results of operations.

Other than the internal competitions within the PV industry, the entire PV industry also faces competitions from other solar technologies, as well as many other alternative reviewable energy sources such as hydro, biomass and wind. Some of these technologies receive similar incentives as PV industry and may be cheaper to apply. The adoption of any of these technologies by the market could result in the decline of PV industry’s market position.

We may not be able to manage our growth effectively.

Our Company was established in August 2005 and we have significantly expanded our business since the commencement of our operations. We expect to aggressively increase our production capacity in the next two years. In order to manage our growth more effectively, we will be required to upgrade our existing operational and financial systems, manufacturing procedures, and as well as to expand our employee base. We cannot assure you that our current operations, personnel, systems and internal procedures will be adequate to support the potential growth of our business. Moreover, to the extent we strategically enhance our growth through vertical integration with upstream polysilicon production or downstream module manufacturing or system integration, we could be subject to a number of risks to which we have not been subject to before and may experience losses in relation to our investments which may adversely affect our financial condition.

Our cost of production is affected by fixed-price and prepaid arrangements with our suppliers.

To secure our wafer supplies during the period of wafer shortage, we have entered into several long-term, fixed-price and prepaid arrangements with our suppliers. The duration of these arrangements vary from three to ten years. Since some of these arrangements require pre-payment of certain amount of the contract price, we may not be able to recover such prepayment if our suppliers fail to fulfil their delivery obligation under the terms of our contracts. Another risk is that if the prices of silicon wafers were to decrease in the future, our fixed-price, prepaid arrangements will prevent us from adjusting our material cost and thus our cost of production will remain high while market prices for our products decline. Furthermore, if demand for our PV cells decreases, we may incur expenses associated with carrying excessive inventory, which may increase our working capital needs. To the extent we are not able to pass these increased costs and expense to our customers, our results of operations and financial condition may be materially and adversely affected.

We currently require all our customers to prepay for their orders, but this business model may not be sustainable.

We currently require all our customers to make down payment. This practice allows us, to a certain extent, to prepay our suppliers without increasing our working capital expenses. However, this business model may not be sustainable if the PV industry were to change to a purchaser-oriented market. Should this occur, our cash flows and business operations may be adversely impacted as we would be required to obtain more working capital, carry accounts receivable for longer periods and provide larger allowance for doubtful accounts.

Fluctuations in exchange rate could have a negative impact on our revenue.

As majority of our sales and costs are currently denominated in United State dollars with a small remainder in New Taiwan dollars and Euros, and our accounts are stated in New Taiwan Dollars, fluctuations in currency exchange rates may materially affect our gross and net profit margin. We have experienced foreign exchange losses in the past and we can not predict whether such losses will occur again in the future. If such losses occur, our results of operations and financial condition will be adversely affected.

Our lack of intellectual property rights may expose us to infringement or misappropriate claims by third parties.

Although we are in the process of applying for several new patent rights, we only hold a limited number of patents and trademarks at present. Our success depends largely on our ability to develop and modify our manufacturing process technologies and other unpatented intellectual property rights. Nonetheless, as the validity and scope of claims relating to PV technology patents involve complex scientific analysis and may be highly uncertain, we may be subject to disputes or litigations involving patent infringement or misappropriate claims. Such infringement or claims may have a material adverse effect on our results of operations, business and financial condition because the defense and prosecution of intellectual property litigations can be both costly and time consuming and could cause interruption to our production. An adverse determination in such litigations or proceedings that we are named as a party could subject us to significant liability to third parties, require us to pay ongoing royalties to third parties, to redesign our PV cells, or subject us in injunctions prohibiting the manufacture and sale of our PV cells or the use of our technologies.

We reply on a limited number of suppliers and customers, and a loss of any one of these suppliers or customers would affect our results of operations.

Our Company is dependent on a limited number of suppliers and customers for a substantial portion of our business. In 2006, 2007 and the three months ended March 31, 2008, approximately 40%, 34% and 68% of our total raw material supplies, respectively, came from our top two suppliers. In 2006, 2007, and the three months ended March 31, 2008, approximately 65%, 46% and 30% of our net sales, respectively, were derived from the products provided to our top two customers. We expect that we will continue to depend on a relatively limited number of suppliers and customers in near future. If any of our significant suppliers or customers reduces, delays or cancels its orders, our results of operations would be seriously harmed because each one of them accounts for a significant part of our business.

We are currently applying for the listing of our Shares on the Taiwan Stock Exchange (the “TSE”) and we can not guarantee the outcome of this application.

We are currently applying for the listing of our Shares on the TSE. Companies interested in listing on the TSE must comply with all the specific requirements and procedures for listing issued by the TSE. Given the burdensome nature of the listing procedures, we may not meet all the listing criteria. Even if we meet all the listing criteria, our listing application is not automatically approved. The listing approval of a given company is at the discretion of TSE. No assurance can be given when the TSE will approve our application or at all.

Risks Related to ROC

We are subject to generally accepted accounting principles in Taiwan (“ROC GAAP”), which differs from generally accepted accounting principles in other jurisdictions.

We are subject to financial reporting requirements in Taiwan that may differ from those requirements applicable to companies in certain other jurisdictions, including the United States and the United Kingdom. In addition, our financial statements are prepared in accordance with ROC GAAP, which differs in certain material aspect from generally accepted accounting principles in the United States (“ US GAAP ”). We have not quantified or identified the impact of the differences between ROC GAAP or US GAAP in this Information Memorandum.

Implementation of the Alternative Minimum Tax (“AMT”) Act may affect our tax exemptions.

According to the newly implemented ROC AMT Act effective from January 1, 2006, a company will be subject to a 10% AMT if its annual adjusted taxable income exceeds NT$2 million, and an individual will be subject to a 20% AMT if his or her annual adjusted taxable income exceeds NT$6 million. The imposition of the AMT is designed to remedy the current excessive tax incentives for individuals and businesses. For businesses, the income which previously enjoyed tax-exemption privileges under relevant tax regulations, such as the Statute for the Establishment and Administration

of the Science Based Industrial Park, now known as the Hsinchu Science Park, and Statute for Upgrading Industries will be subject to the new AMT system for the calculation of business taxpayers’ aggregate taxable incomes. While we are unable to determine the future impact of the new AMT systems on our business operations, any of such impact may be adverse to our financial condition.

Taiwan is susceptible to earthquakes, typhoons and other natural disasters that could disrupt the normal operation of our business and have a material effect on our results of operations.

Taiwan is susceptible to earthquakes, typhoon and other natural disasters. Taiwan has experienced severed earthquakes and typhoons that caused significant property damage and loss of life in the past. These natural disasters had caused damages to production facilities and adversely affected the operations of many companies.

There can be no assurance that those natural disasters will not occur in the future which could disrupt our business and have a material adverse affect on our financial condition and results of operations.

An outbreak of severe acute respiratory syndrome or avian flu in Asia, or similar adverse public health developments, may severely disrupt our business and operations.

Several Asian countries experienced an outbreak of a new and highly contagious form of atypical pneumonia now known as sever acute respiratory syndromes, or SARS, between December 2002 to June 2003. During that period, many businesses in Asia were closed to prevent transmission of SARS. The world Health Organization declared that the SARS outbreak had been contained on July 5, 2003, however, a number of isolated new cases of SARS have been reported since then. In addition to SARS, certain Asian countries have recently encountered incidents of the H5N1 strain of bird flu, or avian flu. This disease, which is normally spread through poultry populations, is capable in certain circumstances of being transmitted to humans and is often fatal. A new outbreak of SARS or avian flu or similar pandemic may result in health or other government authorities requiring the closure of businesses, including our Company, which could severely disrupt our business and operations.

Disruptions in Taiwan’s political environment could seriously harm the our business

Our Company’s office and assets are located in Taiwan. Our net operating revenues are also derived from our operations in Taiwan. Accordingly, our financial condition and results of operations 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 our control. Taiwan 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 could negatively affect our business and results of operations.

USE OF PROCEEDS

The net proceeds from the offering of the Bonds, after deduction of management and underwriting fee and other estimated offering expenses, will be used to acquire fixed assets, including the construction of plants and manufacturing facilities, and the purchase of machineries and equipments.

BUSINESS

Overview

We are a fast growing manufacturer and vendor of quality PV cells based in Taiwan. We design, develop, manufacture and sell a variety of multicrystalline and monocrystalline PV cells to module manufacturers who in turn sell PV modules to system integrators and installers. PV cells are the primary component of PV systems that convert sunlight into electricity. PV systems are used in a diverse market including residential, commercial, industrial and public utility applications. We believe that we have been rated by our customers as one of the first-tier PV cell manufacturers in terms of low power loss rates, consistent performance and low breakage rates of our PV cells and our after-sale service.

We were founded in August 2005. In September 2006, we installed our first PV cell manufacturing line which quickly reached its full production capacity of 30 megawatts (“ MW ”) by November 2006. Since the commencement of our manufacturing operations, we have quickly accumulated market reputation. As at April 30, 2008, our three PV cell manufacturing lines in our fab 1 were in full production with an aggregate annual capacity of 90 MW. We are currently constructing four new PV cell manufacturing lines in our new fab 2 at Hsinchu Science Park. We sold approximately 3.3 MW, 36 MW and 16.6 MW of our products in 2006, 2007 and for the three months ended March 31, 2008, respectively.

We generated profit since the first quarter of our volume production. For the financial year ended December 31, 2006 and 2007, our net revenue was NT$380.2 million and NT$3,662.1 million, respectively. Over the same periods, our net profit was NT$9.3 million and NT$548.4 million, respectively. For the three months ended March 31, 2008, our net revenue was NT$1,945.1 million and we generated net profit of NT$91.8 million.

Our Competitive Strengths

We believe that our competitive strengths, as listed below, enable us to set up a cutting-edge structure that delivers greater efficiency in this rapidly evolving global PV market:

Close relationships with reputable suppliers and customers

We have established close relationships with some of the world’s leading players in the PV industry. Currently, a majority of our silicon wafers is obtained through long-term contracts with our major suppliers, such as LDK Solar Co. A minority of our silicon wafers and other raw materials are currently obtained from our regular suppliers through short-term contracts or purchase orders.

Our products are sold to customers in domestic and overseas markets, such as Europe, Asia and North America. Our customers include Scheuten Solar and Canadian Solar, and we have entered into long term supply contracts with these two customers in 2007 and 2008, respectively. These contracts indicate our strength in providing trust-worthy quality cells and our customer’s willingness in forming long-term relationship with us.

High conversion efficiencies and low breakage rate

Through our strong research and development capabilities, we have developed significant expertise, knowledge and know-how to produce quality PV cells with high efficiency and low breakage rate. The average conversion efficiency rates of our main product, multicrystalline PV cells, increased from 15.5% in 2006 to 15.8% in 2007. Our PV cells have low breakage rate in addition to high conversion efficiencies. Our manufacturing process technologies have addressed manufacturing challenges associated with reducing wafer thickness and breakage rate. The high conversion efficiencies and low breakage rate have allowed us to lower our manufacturing costs to effectively compete with other PV cell manufacturers in the market.

Quality customer services

We are capable to offer comprehensive technical support and service to cater to various parties along the supply chain in the PV industry. Our prompt technical support and service are not only provided to our wafer suppliers and module customers, but also to the system integrators upon our customers’ request although the system integrators do not purchase directly from us. We work with our suppliers to enhance their product quality and assist our customers to identify and solve issues during their assembly process. If a problem is reported, our technical teams are dispatched in a timely fashion to determine the cause and to ensure that proper procedures are effectively applied. Furthermore, we provide on-site and off-site pre-selling technical consulting services to our potential customers to assess the compatibilities of their existing equipment with our products.

Experienced management team with superior operational record

Our experienced management team consists of inter-disciplinary experts in semiconductors, electronic systems, silicon raw materials, PV cell processing and PV energy system engineering. Our team has successfully led our operations and increased our capacity, revenues and profits through rapid growth. Dr. Quincy Lin, one of our founders and the chairman of our board of directors and our chief executive officer, and Mr. Andy Shen, our vice president of worldwide sales and marketing, each has more than 20 years of experience with a leading company in the semiconductor industry in Taiwan. Our chief operating officer and another founder of our Company, Dr. Sam Hong, has over 25 years of experience in PV cell development. Mr. Keisuke Namba, our chief processing engineer, has over 35 years of experience in PV cell material industry and was a technical advisor of a leading wafer company based in Norway. We believe that the industry expertise and field operating experiences of our management have provided us with significant completive advantages in the fast growing PV industry.

Business Strategies

Expand manufacturing capacity

Since the establishment of our business in August 2005, we have continuously expanded our manufacturing capacity to meet the rapidly increasing demand for PV products. In September 2006, we completed our first PV cell manufacturing line and this line reached an annual manufacturing capacity of 30 MW in a two-month period. As at March 31, 2008, we had three PV cell manufacturing lines with an annual aggregate capacity of 90 MW. We are currently constructing four additional manufacturing lines in our fab 2 which are expected to reach their full production capacity of 120 MW by the end of 2008. We believe that the expanded manufacturing capacity will enable us to meet the growing demand.

Secure additional high-quality wafer supplies

We plan to continue working with our existing suppliers to extend their contractual commitments to supply us with silicon wafers and expanding our sources of supplies by entering into new supply agreements with other suppliers. Prior to 2008, all our wafers were supplied on a rolling basis by our regular suppliers. In 2007 and 2008, we have entered into various long-term agreements to secure wafer supplies. As the fierce demand for silicon wafers continues to escalate, we expect that we will continue to rely on long-term contracts for wafer supply to a certain extent. We will continue to explore new suppliers from time to time, and at the same time, strengthen our relationships with the existing suppliers. Currently, only a portion of our wafer supplies are obtained through short-term contracts and purchase orders. We, however, plan to increase this proportion by taking advantage of the lower market price of wafer when the worldwide wafer supply shortage relieves in order to lower our manufacturing costs. We believe that the combination of both short-term and long-term supply contracts will enable us to secure wafer supplies at a more favourable price.

In addition, we will continue to evaluate opportunities in relation to vertical integration within the PV product supply chain, particularly with upstream wafer supplies in response to the global

shortage of silicon feedstock. In the third quarter of 2008, we expect to acquire 10% equity interest in Universal Semiconductor Corporation (“ USC ”), a subsidiary of USI Far East Corporation, which will be engaging in the manufacturing of polysilicon. We believe that this strategic integration will further secure the supply of wafers for our production.

Diversify our products lines

While our current focus is on producing crystalline-based PV cells, we have been developing new products, such as thin film PV cells, in order to expose to a wider variety of raw materials on the market and to better cope with the market trends. Thin film PV cells require diminous amounts of polysilicon and have been considered as an alternative to crystalline technologies that require polysilicon. However, thin film PV cells have not yet gained substantial popularity in the overall PV market because of their lower efficiency rates compare to crystalline-based PV cells. We believe that we possess the thin film PV cell manufacturing technology and we are ready to enter this market as soon as the demand for thin film increases.

Our Products

Product types and manufacturing process

We offer a variety of multicrystalline and monocrystalline PV cells. Our current focus is on producing multicrystalline PV cells, which have lower costs and higher profit margins than monocrystalline PV cells. A PV cell is a device made from a silicon wafer that converts sunlight into electricity by a process known as the photovoltaic effect. Our PV cells are to be interconnected and packaged into PV modules which protect the PV cells and collect the electricity generated. Multiple PV modules produced by module manufacturers are then integrated into PV systems with related power electronics and components for the use of both on-grid generation, in which electricity generated is fed into an electricity transmission grid for sale, and off-grid generation for locations where access to the electricity transmission is not physically available or economically feasible.

One of the key technical efficiency measurements of PV cells is the conversion efficiency rate. Higher conversion rate means that more power can be converted from sunlight and generated by a given size of PV cells. While all PV cells operate essentially on the same principal, the efficiency levels may vary significantly depending on the way they are made. We believe that our PV cells demonstrate superior efficiency rate as a result of our advanced process control. The following table sets forth a sample of the types of PV cells we offer with the specifications indicated:

Product Type Multicrystalline PV cell ........................................... Monocrystalline PV cell1 .........................................	Dimensions (mm x mm) 156x156 156x156 125x125	Conversion Efficiency (%) 14.6~16.2 15.0~17.2 15.0~17.2	Maximum Power (W) 3.6~4.0 3.6~4.1 2.2~2.6	Optimum Operating Current (A)
				7.1~7.9 7.3~8.1 4.6~5.1

1 By acid texturing treatment

We believe that our PV cells have the following characteristics:

low power loss after module lamination;
low breakage rate;
our multicrystalline PV cells have mono-like appearance; and
great soldering ability.

We also believe that our PV cells are environmentally friendly and are in compliance with the Restriction of Hazardous Substances (RoHS) standard.

The diagram below illustrates the production of our PV cells:

==> picture [355 x 95] intentionally omitted <==

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

Surface damage
Phosphorous
Wafer inspection removal and Diffusion
glass removal
texturing treatment
Screen printing and
Testing and Anti-reflection
Laser isolation sintering of
sorting coating
electrodes
----- End of picture text -----

The production of PV cells requires multiple stages. The first stage is to conduct wafer inspection. The next step is to apply chemical etching to cleanse and remove the damaged wafer surface resulted from slicing process, and at the same time, undergo texturing treatment. Monocrystalline PV cells are made from wafers cut directly from cylindrical ingots. Cylindrical ingots are made of very pure monocrystalline silicon. Multicrystalline PV cell, on the other hand, are made from molten silicon cast into multicrystalline silicon ingots. These ingots are then cut into very thin wafers for the assembly into PV cells. As multicrystalline silicon comprised numerous grains of monocrystalline silicon aligned in different angles, it results higher surface reflection levels than those of monocrystalline PV cells. We have developed manufacturing process that allows our monocrystalline and multicrystalline PV cell to form similar surface structure. After the texturing treatment, the products are loaded into diffusion furnace to create p-n junction. Once the p-n junction is created, we use oxide etching to remove phosphorous glass formed during the diffusion process. Following the oxide etching process, an anti-reflection coating is applied to reduce the reflection level. Without the anti-reflection process, the cell surface would reflect about 20%~35% of sunlight. Thick film metal coating using the screen printing process is then applied. The metallic paste contains organic binder which determines viscosity, and flux, also known as sintered glass. Sintering process is used to achieve good contact and film properties. A laser beam scribing process is then used to remove edge shunting from the diffusion process. The last step of the PV cell production is electrical property measurements. Solar simulation equipment is used to collect PV current-voltage data. Each cell is illuminated and its efficiency and output power can be gained while passing the I-V tester. According to the measurement result, each cell is sorted to the corresponding bin for packaging.

The properly conducted manufacturing process enables the PV cells to generate power more effectively by capturing more sunlight. We believe that our process enable us to achieve high conversion efficiencies at low manufacturing costs.

Manufacturing facilities and expansion

We currently lease and operate one manufacturing facility in Taiwan which comprises three PV cell manufacturing lines with an aggregate production capacity of approximately 90 MW per year. Our manufacturing facility has class 100,000 cleanroom. A cleanroom is an environmental condition with low level of pollutants such as dust, chemical vapors and aerosol particles. As cleanroom protocols improve the performance of operators working in there, we have adopted the cleanroom standard to ensure high quality of our products.

We are currently constructing our new manufacturing facility located in Hsinchu Science Park, Taiwan. The estimated total investment amount for this new facility and new production lines is approximately NT$2.9 billion. The new facility will comprise four additional PV cell manufacturing lines and is expected to reach its full production capacity by the end of 2008. Each of these new manufacturing lines will have a capacity of 30 MW per year adding a total of 120 MW manufacturing capacity to our exciting capacity. All of our existing and new manufacturing lines are capable of producing cells of a flexible mix between multicrystalline and monocrystalline PV cells. We plan to continue focusing on the production of multicrystalline cells.

Raw Materials

Raw materials required in our manufacturing process include silicon wafers and metallic conductive paste. Silicon wafers are the most important raw materials for making our products.

We purchase our wafers from multiple wafer suppliers who have demonstrated reliability and quality control. As the silicon wafer supplies are extremely tight and the demand for silicon remains high at the moment, we have attempted to ease the current supply shortages by entering into long-term contracts with certain suppliers. Currently, we acquire a majority of our silicon wafers mainly through long-term supply contracts. The duration of these contracts vary from three to ten years. Under the terms of these contracts, prices and quantities of wafers are fixed at certain rates and the price tend to gradually decrease. We also secure a portion of our silicon wafers through various short-term supply contracts and purchase orders at negotiated prices from time to time. In respect of those short-term purchases, as our procurement policy requires us to obtain raw materials through regular suppliers, we believe we are generally not subject to market price volatility.

Sales and Marketing

Main markets and marketing

We sell our PV cells directly to local and overseas module producers. The following table sets forth our total net sales by region for the periods indicated:

Region Taiwan ........................................................... Asia (other than Taiwan)................................ Europe ........................................................... North America ............................................... Total ..............................................................	Year ended December 31, 2007 (NT$ thousands) % 397,325 11 2,136,161 58 1,122,844 31 5,758 0 3,662,088 100	Three months ended March 31, 2008	Three months ended March 31, 2008
	(NT$ thousands) 397,325 2,136,161 1,122,844 5,758 3,662,088	(NT$ thousands) 390,015 693,395 797,765 63,919 1,945,094	% 20 36 41 3
			100

Our products are primarily sold pursuant to specific customer purchase orders as well as long-term contractual commitments from our customers. We generally request our customers to make prepayments to increase our liquidity and reduce our inventory risks. We operate on cash upon delivery basis. Our customers are generally invoiced at the time of delivery of our products and the main payment methods are either telegraphic transfer in advance or letter of credit. Our pricing policy takes into account of a number of factors, including product specification, costs of production and transportation, market conditions and size of order. As the majority of our customers are located overseas, our products are shipped by air to ensure timely delivery across the globe.

Our marketing strategy is to develop a more diverse customer base in terms of geographic coverage in order to manage our exposure to each market segment. We target to build up stronger relationships with established customers in each geographic region. With such aim, we have engaged in varied marketing campaigns, including participation in a variety of regional and international technology seminars, trade shows and sales conferences to promote our products.

Customer support and services

We staff teams comprising sales managers and customer service persons to provide on-site and off-site customer support and services for our customers to meet their production goals. We have strong technical and supply chain expertise to deliver effective customer services. With our skilled and knowledgeable engineering teams, we provide technical supports in a full range of process optimization to match customer product characteristics. Our teams constantly work with our customers

to ensure that the most efficient process is used in the development of their products. We are confident that our teams enable us to provide superior customer supports and services to assist our customers to reduce module power loss, to achieve lower breakage rate and to improve their production yield.

Research and Development

Our research and development activities are primarily focused on the improvement of our manufacturing process, as well as development of new technologies for PV cell products, such as the thin film PV cells.

In order to strengthen our research and development capabilities, we have established cooperative relationships with a number of universities and research institutions. Our collaborative efforts with those organizations not only give us access to more advance testing facilities and equipment, but also enable us to keep up-to-date with the latest industry developments and trends. We will continue to develop equipment and tools in-house and redesign our manufacturing processes to improve and streamline our operations, lower costs and realize economies of scales.

As at March 31, 2008, our research and development team consisted of 18 members. Among those, over 30% of them have Ph.D. designation and the rest all have master designation. Most of our team members have over 10 years of experience in PV cell production, PV technology development or semiconductor industry. We believe that the continual improvement of our technology is vital in maintaining our long-term competitiveness. Consequently, we plan to expand our research and development team and increase our funding for the research and development activities.

In the year ended December 31, 2006, the first year in which we commenced commercial production, we spent approximately NT$21.0 million in research and development activities, representing approximately 5.5% of our revenue. During the year ended December 31, 2007 and the three months ended March 31, 2008, our research and development expenditure was approximately NT$21.3 million and NT$9.8 million, respectively.

Competition

The PV market is intensely competitive and rapidly evolving. The leading PV cell manufactures worldwide include Kyocera, Mitsubishi Electrics, Q-cells, Sanyo, Schott Solar and Sharp. In Taiwan, we are mainly competing against E-Ton Solar, Gintech Energy Corporation and Motech. Unlike most of the global competitors, which operate their PV division within large conglomerates, we dedicate all of our management efforts and financial, technical research and human resources to the design, development, manufacturing and marketing of PV products. We believe that our dedication and focus on the PV industry enable us to better cope with the market changes.

In addition, we believe that the threshold to enter the PV cell markets has risen in recent years. The current PV industry requires intensive capital because PV cell manufacturers are requested by their suppliers to pay a substantial amount of down payment in order to secure long-term supply contracts. We believe when wafer supply shortage relieves in the future, we will compete with our competitors on other factors such as economic of scale, low manufacturing costs and experience of the management.

Strategic Alliance

On June 16, 2008, we entered into a strategic alliance agreement with Daiwa Securities SMBC Principal Investments Co. Ltd. (“ Daiwa ”). Pursuant to the terms of the agreement, Daiwa agrees to purchase at least 95% of the Bonds and to be one of our strategic shareholders. Subject to the completion of Daiwa’s purchase of at least 95% of the Bonds, we and Daiwa both agree that (1) each party at its own full discretion, to provide the other its expertise, knowledge, connection and other resources for the benefit of one another, (2) our board of directors’ meeting may be attended by a representative of Daiwa acting as an observer, and (3) we will indemnify and hold harmless Daiwa against any losses incurred as a result of our breach of the representations, warranties, undertakings or agreements under the agreement.

Litigations

We are not currently a party to any material legal, arbitration or administrative proceedings which may have a significant effect on our financial position, and we are not aware of any such material legal, arbitration, or administration proceeding pending or threatened against us. We may, however, from time to time become a party to various legal, arbitration or administrative proceedings arising in the ordinary course of our business.

One of our major shareholders, Powerchip Semiconductor Corp. (“ Powerchip ”), is currently involved in three litigations. In March 2006, Texas Instrument initiated a lawsuit against Powerchip in a New York State district court for breach of contract. In July 2006, Powerchip was named as a defendant in a complaint filed with a trial court in eastern Texas by a Canadian company for infringement of its patent rights. In December 2007, an American company started a legal proceeding in a trial court in eastern Texas against Powerchip alleging violation of the company’s IC packing related technologies. It is not possible at this time to reasonably assess the final outcome of these lawsuits. We believe that these proceedings will not have a materially adverse effect on our financial position and results of operations.

MANAGEMENT AND EMPLOYEES

Directors

Our board of directors are responsible for the management of our business. Our directors are elected by the shareholders in a general meeting. Our chairman is elected by the board of directors. The term for our current directors ends on December 25, 2010. Directors may serve consecutive terms and may be removed from the office at any time according to ROC laws. The following table shows the name of each of our current directors, his position at our Company, the percentage of shares held, his qualifications and his previous significant positions:

Name	Position	Percent of Shares held as at May 31, 2008	Qualifications	Previous significant positions
Quincy Lin..................... Sam Hong ..................... Brian Shieh1 ................. Jackson Lin2 ................. Don Chang3 .................. Chin Lung Fang4 ........... Paul Chien .................... Jia Dong Shea ............... Simon Lin ......................	Chairman Director Director Director Director Director Independent director Independent director Independent director	0.72% 0.57% 11.11% 0.23% 1.54% 3.98% — — —	Doctor of Philosophy in Business Administration, Kentucky University; Master in Business Administration and Bachelor in Electronic Engineering, NCTU Doctor of Philosophy in Electrical Engineering, National Tsing Hua University Doctor of Philosophy in Electrical Engineering, The University of Cincinnati, Ohio Bachelor, NCTU Doctor of Philosophy in Computer Science, University of Illinois Master, National Taiwan University Master and Bachelor in Engineering, MIT Doctor of Philosophy in Economic, Stanford University Bachelor, National Chiaotung University	Senior vice president, TSMC Chairman, Fortune Investment Group IC Fund Director, Photovoltaic solar energy division, Industry Technology Research Institute Vice president and plant director, Sinonar Amorphous Silicon Solar Cell Co. Director and chief operating officer, Powerchip Semiconductor Corp. Supervisor, Powerchip Semiconductor Corp. President, Vivichip Electronic Corp. President assistant, Wafer Works Corp. President, KISmart President, Global Testing Corporation Professor, Department of Economics, National Taiwan University Minister of National Treasury Chairman and chief executive officer, Wistron Corporation

1 Legal representative of Powerchip Semiconductor Corp.

2 Legal representative of Teknowledge Development Corp.

3 Legal representative of Quantum Vision Corporation.

4 Legal representative of Heli-Vantech Corp.

Audit Committee

The following table shows information relating to the members of our audit committee who were appointed on June 30, 2008:

Name	Position	Percent of Shares held as at May 31, 2008	Qualifications	Other significant positions
Paul Chien ....................... Jia Dong Shea................... Simon Lin.........................	Member of audit committee Member of audit committee Member of audit committee	— — —	Master and Bachelor in Engineering, MIT Doctor in Philosophy in Economic, Stanford University Bachelor, National Chiaotung University	Chairman, KISmart Chairman, Vanguard International Semiconductor Corporation Professor, Department of Economics, National Taiwan University Minister of National Treasury Chairman and chief executive officer, Wistron Corporation

Executive Officers

The following table shows information relating to our executive officers:

Name Quincy Lin ............ Sam Hong .............. Gary Yang..............	Position Chief executive officer President and chief operating officer Vice president and chief financial officer	Qualifications Doctor in Philosophy in Business Administration, Kentucky University; Master in Business Administration and Bachelor in Electronic Engineering, NCTU Doctor in Philosophy in Electrical Engineering, National Tsing Hua University Master in Finance, Houston University Master in Nuclear Science, National Tsing Hua University	Previous significant positions
			Senior vice president, TSMC Chairman, Fortune Investment Group IC Fund Director, Photovoltaic solar energy division, Industry Technology Research Institute Vice president and plant director, Sinonar Amorphous Silicon Solar Cell Co. Vice president, Sino-Century Venture Capital and PowerWorld Capital Management

Name Keisuke Namba ...... Alex Wen............... Andy Shen ............. Simon Lee ............. KC HSU ................	Position Chief processing engineer Executive vice president of Strategic development Vice president of Worldwide sales and marketing Vice president of Sales development Vice president of Technology development	Qualifications Master in Industrial Chemistry, Kobe University Doctor in Philosophy, Power Mechanical Engineering, National Tsing-Hua University Master in Electrical Engineering, Case Western Reserve University Master in Business Administration, Santa Clara University Doctor in Philosophy, Leeds University Doctor in Philosophy, Electrical Engineering, National Tsing-Hua University	Previous significant positions
			Mitsubishi Electric Corporation in PV material research and development, device physics, and process engineering Technical advisor to REC on PV cell research and development and process improvement Manager of Material research laboratories, Industry Technology Research Institute Senior director, TSMC Regional sales manager of Greater China, Ferro Taiwan, Ltd. Research and development manager, Holystone Enterprise Co., Ltd. Project manager, Material research laboratories, Industry Technology Research Institute

Employees

As at March 31, 2008, we had 286 employees, all of whom were employed in Taiwan. We plan to hire additional employees as we expand. The table below sets forth the number of employees in each department as at the dates indicated:

Manufacturing................................................................................... Research and development ................................................................ Sales and marketing .......................................................................... Administrative .................................................................................. Total.................................................................................................	As at December 31, 2006 2007 100 186 9 9 3 6 11 32 123 233	As at March 31, 2008
	2006 100 9 3 11 123	216 18 6 46
		286

Although substantially all of our employees work on a full-time basis, we employ part-time employees and independent contractors from time to time. None of our employees is represented by unions or subject to any collective bargaining agreements. We have not experienced any material labour disputes in the past two years.

Employee remunerations are based on competitive industry standards in similar geographical regions. Our employees may enjoy annual profit distributions. We have three stock option plans in place under which our employees are entitled to subscribe up to 13,800,000 Shares in aggregate at prescribed prices.

TERMS AND CONDITIONS OF THE BONDS

The following terms and conditions (except for the sentences in italics) will be endorsed on the Global Certificate and the Definitive Certificates (if any) issued in respect of the Bonds.

The issue of U.S.$50,000,000 2% Convertible Bonds Due 2011 (the “ Bonds ”) of Neo Solar Power Corp. (the “ Company ”) was authorized by a resolution of the board of directors of the Company adopted on May 15, 2008. The Bonds are constituted by a trust deed (the “ Trust Deed ”) to be dated as at July 15, 2008 to be made between the Company and The Bank of New York Mellon, London branch (the “ Trustee ”), which term includes any successor trustee under the Trust Deed 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 at July 15, 2008 with the Trustee, The Bank of New York Mellon, London branch as the principal agent, paying, transfer and conversion agent (the “ Principal Agent ”, “ Paying Agent ”, “ Transfer Agent ” and “ Conversion Agent ”) and The Bank of New York Mellon, as the registrar (the “ Registrar ”). 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 (the “ Conditions ”) include summaries of, and are subject to, the detailed provisions of the Trust Deed. Copies of the Trust Deed and the Agency Agreement are available for inspection by the Bondholders during normal business hours at the principal office of the Trustee, being at the date hereof at One Canada Square, 40th Floor, London E14 5AL, England, and at the specified offices of each of the Agents. The Bondholders are entitled to the benefit of the Trust Deed and are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the Agency Agreement.

1. Status

Subject to Condition 3, the Bonds constitute direct, unconditional, unsubordinated and unsecured general obligations of the Company and rank at least equally among themselves and 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, Title and Register

(A) Form and Denomination

The Bonds will be issued in registered form in denominations of U.S.$1,000 or integral multiples 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 to be held by a common depositary for Euroclear Bank S.A./N.V., the operator of the Euroclear System (“ Euroclear ”) and Clearstream Banking, société 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 the Definitive 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 (“ Register ”) which the Company will procure to be kept by the Registrar as specified in Condition 2(C) below.

(B) Title

The Bonds will be registered instruments, title to which will pass only by transfer and registration in the Register. 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 and none of the Trustee or any Agent shall be affected by any notice to the contrary. In these Conditions, “ Bondholder ” and (in relation to a Bond) “ holder ” mean the person in whose name a Bond is registered.

(C) Register

The Company shall at all times keep or cause to be kept at the specified office of the Registrar, the Register showing the nominal amount of the Bonds, the date of issue and all subsequent transfers and changes of ownership thereof and the names and addresses of the Bondholders.

3. Negative Pledge

So long as any of the Bonds remain outstanding (as defined in the Trust Deed) or any amount is due under or in respect of any Bond or otherwise under the Trust Deed, the Company shall not, and shall ensure that none of its Consolidated 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 Consolidated 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, at the option of the Company either (i) granting the same security as is granted to or is outstanding in respect of such International Investment Securities, guarantee, indemnity or other like obligation or (ii) granting such other security as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.

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 NT Dollars, or (b) are denominated or payable in NT 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.

“ 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.

“ Consolidated Subsidiary ” means any subsidiary in which the Company directly or indirectly has more than 50% of its voting stock or over which it can exercise control and pursuant to the ROC Statement of Financial Accounting Standards whose operating results and financial statements shall be consolidated into the Company’s financial statements.

4. Interest

The Bonds bear interest from July 15, 2008 (the “ Closing Date ”) at the rate of 2% per annum of the principal amount of the Bonds. Interest is payable semi-annually in arrears on January 15 and July 15 in each year (each an “ Interest Payment Date ”) (or, if such day is not a Business Day, the next day that is a Business Day). Each Bond will cease to bear interest (a) from (and including) the Interest Payment Date last preceding its Conversion Date (as defined below) (or if such Conversion Date falls on or before the first Interest Payment Date, from (and including) the Closing Date) subject to conversion of the relevant Bond in accordance with the provisions of Condition 6, or (b) from (and including) the due date for redemption at maturity thereof unless payment of the full amount due is improperly withheld or refused or default is otherwise made in respect of any such payment.

If interest is required to be calculated for any period which is not an Interest Period, it will be calculated on the basis of a 360-day year of twelve 30-day months and in the case of an incomplete month, the number of days elapsed.

“ Interest Period ” means the period beginning on (and including) the Closing Date and ending on (but excluding) January 15, 2009 (being the first Interest Payment Date) and each successive period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date.

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 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.

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 seven (7) 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.

(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, premium (if any) and interest on the Bond; or (ii) 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.

(E) Regulations

All transfers of Bonds and entries on the Register 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 Agents.

6. Conversion

On exercise of the Conversion Right (as defined below), the converting Bondholders pursuant to the election made by such Bondholder shall receive Shares in Taiwan

The Company shall, within five (5) Trading Days (as defined in Condition 6(D)) 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 Trust Deed and in these terms and conditions being satisfied.

The Trust Deed 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 Trust Deed which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation or winding-up of the Company.

(A) Conversion Right

(i) Conversion Period: Each Bondholder has the right during the Conversion Period (as defined below) to convert any Bond into Shares, credited as fully paid, 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 August 14, 2008 or the date on which the Shares and listed on the Taiwan Stock Exchange (the “ TSE ”), whichever is later 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 July 5, 2011 (or if such date shall not be a Business Day, on the immediately preceding Business Day at such place) (but not thereafter) (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) 60 days prior to the date of the annual general meeting of shareholders (“ AGM ”), (b) 30 days prior to an extraordinary shareholders’ meeting, (c) five (5) days prior to the date of distribution of any rights or benefits to shareholders, (d) the period from the third Trading Day (as defined in Condition 6(D)) prior to the Company’s notification to the Taiwan Stock Exchange (the “ TSE ”) in respect of a record date (and the relevant closure of the shareholders’ register) for the determination of shareholders entitled to the receipt of dividends, subscription of new Shares or other benefits and bonus to such record

date, and (e) 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 10 days’ nor more than 60 days’ prior notice of any Closed Period in accordance with Condition 15.

Under current ROC law, regulations 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 (the “ PRC ”), a resident of any area of China under the effective control or jurisdiction of the PRC (but not including a special administrative region of the PRC such as Hong Kong or Macau, if so excluded by applicable laws of the ROC), any agency or instrumentality of the PRC and any corporation, partnership 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, when exercising Conversion Right to convert the Bonds into Shares, a non-ROC converting Bondholder is required to register with the TSE, if the Shares are subsequently listed on TSE, appoint a local agent in the ROC with such qualifications are set by the Securities and Futures Bureau of the ROC, Financial Supervisory Commission (the “ ROC SFB ”), open a securities trading account with a local brokerage firm and a NT Dollar bank account, 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). In addition, such non-ROC converting Bondholder must also appoint a local bank to act as 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 on opening such accounts, an investor in the Bonds would not be able to hold, sell or otherwise transfer the Shares into which the Bonds may have been converted on the TSE or otherwise. For the avoidance of doubt, the Trustee and the Agents shall have no duty to verify the nationality of the Bondholders.

(ii) Number of Shares 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 exchange rate of NT$30.397 = U.S.$1.00 (the “ Fixed Exchange Rate ”)) by the Conversion Price (as defined in Condition 6(A)(iii)) in effect on the Conversion Date (as defined in Condition 6(B)(ii)). Fractional Shares will not be issued or paid in cash, or in any other means and cash adjustments will not be made in respect thereof by the Company.

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 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. Notwithstanding the foregoing, in the event of a consolidation or reclassification of Shares by operation of law or otherwise occurring after the Closing Date, 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 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 NT107.0 per Share, which is equivalent to U.S.$3.52 per Share based on the Fixed Exchange Rate of NT$30.397 = U.S.$1.00 but will be subject to adjustment in the manner provided in Conditions 6(C) and 6(D).

The Trustee and the Agents shall be under no duty to calculate, determine or verify the number of Shares to be issued upon conversion of the Bonds or verify the Company’s determination of such number of Shares or method used or to be used in such determination and neither the Trustee nor the Agents shall be responsible to the Bondholders or any other person for any loss arising from any failure to do so or for any delay of the Company in making such determination or any erroneous determination by the Company.

(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 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 laws and regulations of the ROC or the jurisdiction in which such Conversion Agent is located. 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 such 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.

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

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 Agent, 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.

“ Business Day ” means a day (other than a Saturday or Sunday) on which commercial banks are open for general business in London, New York City, Taipei, Hong Kong, the city where the office of each relevant Agent is located and in the case of surrender of Certificates, the place where such Certificates are surrendered.

(ii) Taxes and Expenses; Deposit Date and Conversion Date: As conditions precedent to conversion, together with the Conversion Notice, the Bondholder must (A) pay 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 or any other property or cash upon conversion to or to the order of a person other than the converting Bondholder and (B) provide the Conversion Agent with confirmation of such payment to the relevant tax authorities as set out in the Conversion Notice. For the avoidance of doubt, neither the Trustee nor the Conversion Agent is under any obligation to determine whether a Bondholder is liable to pay any stamp, issue, registration or similar taxes or duties or the amounts payable (if any) arising on conversion in the country in which Bonds are deposited as aforesaid or payable in any jurisdiction consequent upon the issue or delivery of Shares or any property or cash. Except as aforesaid, the Company will pay the expenses arising in the ROC on the issue of Shares on conversion of Bonds and all charges of the Conversion Agent in connection therewith as provided in the Trust Deed 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 ”. Subject to

Condition 6(B)(i), the “ Conversion Date ” applicable to a Bond shall mean the next day following the Deposit Date. The Conversion Date shall be a Business Day and occur during the Conversion Period. Bondholders who deposit a Conversion Notice during a Closed Period will not be permitted to convert their Bonds until the Business 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)).

(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 (5) Trading Days (as defined in Condition 6(D)) 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: On the Conversion Date, the Company will register the converting Bondholder (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 (5) Trading Days (as defined in Condition 6(D)) from the date the notification of the Conversion Notice is received by the Company or its domestic stock transfer agent, whichever is earlier, from the Principal Agent, deliver to the local agent appointed by the converting Bondholder, a certificate or certificates for the relevant Shares, by electronic credit to the account established by the relevant local agent for the conversion of the Bonds, through the facilities of the Taiwan Depositary and Clearing Corporation, registered in the name specified for that purpose in the relevant Conversion Notice, 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.

(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), 6(D) and the Trust Deed and the relevant Conversion Date falls on a date when the relevant adjustment has not been reflected in the Conversion Price, the Company will, within 20 days after the effective date of such adjustment of the Conversion Price, issue and deliver (to the local agent appointed by the converting Bondholder) 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 third Trading Day (as defined in Condition 6(D)) before the Company’s notification to the TSE in respect of a record date (and the relevant closure of shareholders’ register) for determining the identity of shareholders who are entitled to such dividend distributions.

(viii) Conversion Agent: The Company reserves the right, subject to the provisions of the Agency Agreement, at any time to vary or terminate the appointment of the 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. Notice of any such termination or appointment and of any changes in the specified offices of the Conversion Agent will be given promptly by the Company to the Principal Agent, Trustee and the Bondholders in accordance with Condition 15.

(C) Adjustments to Conversion Price

The Conversion Price shall be subject to adjustments as follows:

(i) Free Distribution, Bonus Issue and Declaration of Dividend in Shares:

If the Company shall declare a dividend in Shares or make a free distribution or bonus issue of Shares which is treated as a capitalization issue for accounting purposes (including but not limited to capitalization of retained earnings and capital reserves), then the Conversion Price in effect on the date when such dividend and/or distribution is declared (or, if the Company has fixed a prior record date for the determination of Shareholders entitled to receive such dividend and/or distribution, on such record date) shall be adjusted in accordance with the following formula:

==> picture [98 x 20] intentionally omitted <==

where:

NCP = the Conversion Price after such adjustment.
OCP = the Conversion Price before such adjustment. N = the number of Shares outstanding (having regard to Clause 8.18 in the Trust Deed) at the time of declaration of such dividend and/or distribution (or at the close of business in Taipei on such record date as the case may be).
n = the number of Shares to be distributed to the Shareholders as a dividend and/or free distribution and/or bonus issue.

No account is to be taken of, or credit given for, the par value of Shares issued in a such dividend, distribution or bonus issue in calculating the appropriate Conversion Price adjustment, so that the full dilutive effect is provided for.

An adjustment made pursuant to this subsection (i) shall become effective on the record date for determination of Shareholders entitled to receive such dividend, distribution and/or bonus issue; provided that in the case of such dividend, distribution and/or bonus issue which must, under applicable law of the ROC, be submitted for approval to a general meeting of Shareholders before being legally paid or made, and which is so approved after the record date fixed for the determination of Shareholders entitled to receive such distribution or issue, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date.

(ii) Distribution of Cash Dividend on Shares:

If the Company shall declare cash dividend on Shares which exceeds 1.5% of the Market Price (as defined below) of the Shares, then the Conversion Price in effect on the date when such cash dividend is declared shall be adjusted in accordance with the following formula:

==> picture [125 x 23] intentionally omitted <==

where:

NCP = Conversion Price per Share after such adjustment.
OCP
C
= Conversion Price per Share before such adjustment. = The amount of the dividend in cash per Share.
MP = The market price of the Share (the “ Market Price ”), determined on the arithmetic average of the Share determined based on the Shares’ closing prices for the one, three or five Trading Days (to be determined by the Company at its sole discretion at the time of adjustment) immediately before the announcement of the record date for distribution.

An adjustment made pursuant to this subsection (ii) shall become effective on the record date for determination of Shareholders entitled to receive such dividend; provided that in the case of such dividend which must, under applicable law of the ROC, be submitted for approval to a general meeting of Shareholders before being legally paid or made, and which is so approved after the record date fixed for the determination of Shareholders entitled to receive such distribution, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date.

In the case that the Company distributes cash dividend and stock dividend on Shares at the same time, the Conversion Price shall be adjusted in accordance with the formula provided by Condition 6(C)(ii) first and then be adjusted in accordance with the formula provided by Condition 6(C)(i).

In the case that the Company distributes cash dividend on a record date which is also:

(a) the record date for the issue of any rights or warrants which requires an adjustment of the Conversion Price pursuant to subsection (v), (vi) or (vii) below;
(b) the day immediately before the date of issue of any securities convertible into or exchangeable for Shares or exercise of warrants other than to shareholders which requires an adjustment of the Conversion Price pursuant to subsection (ix) below;
(c) the day immediately before the date of issue of any Shares which requires an adjustment of the Conversion Price pursuant to subsection (x) below;
(d) the day immediately before the date of issue of any rights, options or warrants which requires an adjustment of the Conversion Price pursuant to subsection (xi) below; or
(e) determined by the Company to be the relevant date for an event or circumstance which requires an adjustment to the Conversion Price pursuant to subsection (xii) below;

then, the Conversion Price shall be adjusted in accordance with the formula provided by Condition 6(C)(ii) first.

(iii) Division, Consolidation and Re-classification of Shares:

If the Company shall (a) sub-divide its outstanding Shares, (b) consolidate its outstanding Shares into a smaller number of Shares, or (c) re-classify any of its Shares into other securities of the Company, then the Conversion Price shall be appropriately adjusted so that the holder of any Bond, the Conversion Date in respect of which occurs after the coming into effect of the adjustment described in this subsection, shall be entitled to receive the number of Shares and/or other securities of the Company which he would have held or have been entitled to receive after the date of such event had such Bond been converted immediately prior to the happening of such event (or, if the Company has fixed a prior record date for the determination of Shareholders entitled to receive such securities upon such sub-division, consolidation or re-classification, immediately prior to such record date), but without prejudice to the effect of any other adjustment to the Conversion Price made with effect from the date of the happening of such event (or such record date) or any time thereafter.

An adjustment made pursuant to this subsection (iii) shall become effective immediately upon the relevant event referred to above becoming effective or, if a record date is fixed therefor, immediately after such record date; provided that in the case of such sub-division, consolidation or re-classification which may, under applicable law of the ROC, be required to be submitted for approval to a general meeting of the Shareholders and the approval of the ROC SFB (if applicable) before being legally effective, and which is so approved after the record date fixed for the determination of Shareholders entitled to receive such Shares, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date.

In the case that the Company subdivide, consolidate or reclassify its outstanding Shares on a record date which is also:

(a) the record date for the issue of any rights or warrants which requires an adjustment of the Conversion Price pursuant to subsection (v), (vi) or (vii) below;
(b) the day immediately before the date of issue of any securities convertible into or exchangeable for Shares or exercise of warrants other than to shareholders which requires an adjustment of the Conversion Price pursuant to subsection (ix) below;
(c) the day immediately before the date of issue of any Shares which requires an adjustment of the Conversion Price pursuant to subsection (x) below;
(d) the day immediately before the date of issue of any rights, options or warrants which requires an adjustment of the Conversion Price pursuant to subsection (xi) below; or
(e) determined by the Company to be the relevant date for an event or circumstance which requires an adjustment to the Conversion Price pursuant to subsection (xii) below;

then, the Conversion Price shall be adjusted in accordance with the formula provided by Condition 6(c)(iii) first.

(iv) Concurrent Adjustment Events:

If the Company shall declare a share dividend on, or make a free distribution or bonus issue of, Shares which dividend, issue or distribution is to be paid or made to Shareholders as at a record date which is also:

(a) the record date for the issue of any rights or warrants which requires an adjustment of the Conversion Price pursuant to subsection (v), (vi) or (vii) below;
(b) the day immediately before the date of issue of any securities convertible into or exchangeable for Shares or exercise of warrants other than to shareholders which requires an adjustment of the Conversion Price pursuant to subsection (ix) below;
(c) the day immediately before the date of issue of any Shares which requires an adjustment of the Conversion Price pursuant to subsection (x) below;
(d) the day immediately before the date of issue of any rights, options or warrants which requires an adjustment of the Conversion Price pursuant to subsection (xi) below; or
(e) determined by the Company to be the relevant date for an event or circumstance which requires an adjustment to the Conversion Price pursuant to subsection (xii);

then (except where such dividend, bonus issue or free distribution gives rise to a retroactive adjustment of the Conversion Price under subsection (i) or (iii) above) no adjustment of the Conversion Price in respect of such dividend, bonus issue or free distribution shall be made under subsection (i), but in lieu thereof an adjustment shall be made under subsection (v), (vi), (vii), (ix), (x) or (xi) below (as the case may require) by including in the denominator of the fraction described therein the aggregate number of Shares to be issued pursuant to such dividend, bonus issue or free distribution and, in the case of such dividend, including in the numerator of the fraction described therein the number of Shares which the aggregate par value of Shares to be so distributed would purchase at the Current Market Price (as defined below) per Share.

(v) Rights Issues to Shareholders:

If the Company shall grant, issue or offer to the Shareholders rights entitling them to subscribe for or purchase Shares:

(a) at a consideration per Share receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) which is fixed on or prior to the record date mentioned below and is less than the Current Market Price per Share at such record date, or
(b) at a consideration per Share receivable by the Company which is fixed after the record date mentioned below and is less than the Current Market Price per Share on the date the Company fixes the said consideration,

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

==> picture [98 x 20] intentionally omitted <==

where:

NCP and OCP have the meanings assigned thereto in Condition 6(C)(i) above.

N = the number of Shares outstanding (having regard to Clause 8.18 in the Trust Deed) at the close of business in the ROC (in a case within (a) above) on such record date or (in a case within (b) above) on the date the Company fixes the said consideration.
n = the number of Shares initially to be issued upon exercise of such rights at the said consideration.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) would purchase at such Current Market Price per Share specified in (a) or, as the case may be, (b) above.

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

(vi) Warrants Issued to Shareholders:

If the Company shall grant, issue or offer to the holders of Shares warrants entitling them to subscribe for or purchase Shares:

(a) at a consideration per Share receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) which is fixed on or prior to the record date for the determination of Shareholders entitled to receive such warrants and is less than the Current Market Price per Share at such record date; or
(b) at a consideration per Share receivable by the Company which is fixed after the record date mentioned above and is less than the Current Market Price per Share on the date the Company fixes the said consideration.

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

==> picture [98 x 20] intentionally omitted <==

where:

NCP and OCP have the meanings assigned thereto in Condition 6(C)(i) above.

N = the number of Shares outstanding (having regard to Clause 8.18 in the Trust Deed) at the close of business in the ROC in a case falling within (a) above, on such record date, or in a case falling within (b) above on the date the Company fixes the said consideration.
n = the number of Shares to be issued upon exercise of such warrants at the said consideration which, where no applications by Shareholders entitled to such warrants are required, shall be based on the number of warrants issued. Where applications by Shareholders entitled to such warrants are required, the number of such Shares shall be calculated based upon (i) the number of warrants which underwriters have agreed to underwrite as referred to below or, as the case may be, (ii) the number of warrants for which applications are received from Shareholders as referred to below save to the extent already adjusted for under (i).
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) would purchase at such Current Market Price per Share specified in (a) or, as the case may be, (b) above.

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

(vii) Issues of Rights or Warrants to Subscribe for Equity related Securities to Shareholders:

If the Company shall grant, issue or offer to the Shareholders rights or warrants entitling them to subscribe for or purchase any securities convertible into or exchangeable for Shares:

(a) at a consideration per Share receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) which is fixed on or prior to the record date mentioned below and at a price less than the Current Market Price per Share at such record date; or
(b) at a consideration per Share receivable by the Company (determined as aforesaid) which is fixed after the record date mentioned below and at a price less than the Current Market Price per Share on the date the Company fixes the said consideration, then the Conversion Price in effect (in a case falling within (a) above) on the record date for the determination of Shareholders entitled to receive such rights or warrants or (in a case falling within (b) above) on the date the Company fixes the said consideration shall be adjusted in accordance with the following formula:

[+][v] NCP = OCP x[N] N + n

where:

NCP and OCP have the meanings assigned thereto in Condition 6(C)(i) above.

N = the number of Shares outstanding (having regard to Clause 8.18 in the Trust Deed) at the close of business in the ROC (in a case within (a) above) on such record date or (in a case falling within (b) above) on the date the Company fixes the said consideration.
n = the number of Shares initially to be issued upon exercise of such rights or warrants and conversion or exchange of such convertible or exchangeable securities at the said consideration being, in the case of warrants, where no applications by Shareholders entitled to such warrants are required, shall be based on the number of warrants issued. Where applications by Shareholders entitled to such warrants are required, the number of such Shares shall be calculated based upon (i) the number of warrants which underwriters have agreed to underwrite as referred to below or, as the case may be, (ii) the number of warrants for which applications are received from Shareholders as referred to below save to the extent already adjusted for under (i).
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) would purchase at such Current Market Price per Share specified in (a) or, as the case may be, (b) above.

Subject as provided below, such adjustment shall become effective (A) where no applications for such warrants are required from Shareholders entitled to the same, upon their issue and (B) where applications by Shareholders entitled to the warrants are required as aforesaid and in the case of convertible or exchangeable securities by Shareholders entitled to the same pursuant to such rights, immediately after the latest date for the submission of such applications or (if later) immediately after the Company fixes the said consideration but in all cases applied retroactively to a date immediately after the record date mentioned above.

(viii) Other Distributions to Shareholders

No adjustment will be made following other distributions to Shareholders.

(ix) Issues of Convertible or Exchangeable Securities other than to Shareholders or on Exercise of Warrants:

If the Company shall issue any securities convertible into or exchangeable for Shares (other than the Bonds, or in any of the circumstances described in subsection (x) below) or grant such rights in respect of any existing securities (other than as described in subsections (v), (vi) and (vii) above) and the consideration per Share receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) shall be less than the Current Market Price per Share on the date in the ROC on which the Company fixes the said consideration (or, if the issue of such securities is subject to approval by a general meeting of Shareholders, on the date on which the board of directors of the Company fixes the consideration to be recommended at such meeting), then the Conversion Price in effect immediately prior to the date of issue of such convertible or exchangeable securities shall be adjusted in accordance with the following formula:

==> picture [98 x 20] intentionally omitted <==

where:

NCP and OCP have the meanings assigned thereto in Condition 6(C)(i) above.

N = the number of Shares outstanding (having regard to Clause 8.18 in the Trust Deed) at the close of business in the ROC on the day immediately prior to the date of such issue.
n = the number of Shares to be issued upon conversion or exchange of such convertible or exchangeable securities at the initial conversion or exchange price or rate.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) would purchase at such Current Market Price per Share.

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

(x) Other Issues of Shares:

If the Company shall issue any Shares (other than (a) Shares issued to the shareholders of a company which is merged into the Company as consideration for the merger or upon conversion or in exchange for any convertible or exchangeable securities (including the Bonds) issued by the Company or upon exercise of any rights or warrants granted, offered or issued by the Company or in any of the circumstances described in subsections (i) and (iii) above, or (b) Shares issued pursuant to any employee bonus or profit-sharing arrangements) for a consideration per Share receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) less than the Current Market Price per Share on the date in the ROC on which the Company fixes the said consideration (or, if the issue of such Shares is subject to approval by a general meeting of Shareholders, on the date on which the board of directors of the Company fixes the consideration to be recommended at such meeting), then the Conversion Price in effect immediately prior to the issue of such additional Shares shall be adjusted in accordance with the following formula:

==> picture [98 x 19] intentionally omitted <==

where:

NCP and OCP have the meanings assigned thereto in Condition 6(C)(i) above.

N = the number of Shares outstanding (having regard to Clause 8.18 in the Trust Deed) at the close of business in the ROC on the day immediately prior to the date of issue of such additional Shares.
n = the number of additional Shares issued as aforesaid.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) would purchase at such Current Market Price per Share.

It being understood, for the avoidance of doubt, that in the case of adjustments required as a result of Shares issued pursuant to employee bonus or profit-sharing arrangements, “v” shall be equal to 0 with the effect that no account is taken of, or credit given for, the par value of the Shares so issued in calculating the appropriate Conversion Price adjustment, so that the full dilutive effect is provided for.

Such adjustment shall become effective as at the calendar day in the ROC of the issue of such additional Shares, or, in the case of an issue to employees under any employee bonus or profit sharing arrangements which is announced at the same time as a stock dividend, such adjustment shall become effective as at the record date for that stock dividend.

(xi) Issues of Equity Related Securities:

If the Company shall grant, issue or offer options, warrants or rights (other than as described in subsections (v), (vi) and (vii) above or pursuant to any employee share option plan existing as at the Closing Date) to subscribe for or purchase Shares or securities convertible into or exchangeable for Shares and the consideration per Share receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) shall be less than the Current Market Price per Share on the date in the ROC on which the Company fixes the said consideration (or, if the offer, grant or issue of such rights, options or warrants is subject to approval by a general meeting of Shareholders, on the date on which the board of directors of the Company fixes the consideration to be recommended at such meeting), then the Conversion Price in effect immediately prior to the date of the offer, grant or issue of such rights, options or warrants shall be adjusted in accordance with the following formula:

==> picture [98 x 20] intentionally omitted <==

where:

NCP and OCP have the meanings assigned thereto in Condition 6(C)(i) above.

N = the number of Shares outstanding (having regard to Clause 8.18 in the Trust Deed) at the close of business in the ROC on the day immediately prior to the date of such issue.
n = the number of Shares to be issued on exercise of such rights or warrants and (if applicable) upon conversion or exchange of such convertible or exchangeable securities at the said consideration.
v = the number of Shares which the aggregate consideration receivable by the Company (determined as provided in Clause 8.17 in the Trust Deed) would purchase at such Current Market Price per Share.

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

(xii) Analogous Events and Modifications:

If (a) the rights of conversion or exchange, purchase or subscription attaching to any options, rights or warrants to subscribe for or purchase Shares or any securities convertible into or exchangeable for, or which carry rights to subscribe for or purchase Shares are modified (other than pursuant to and as provided in the terms and conditions of such options, rights, warrants or securities) or (b) the Company determines that any other event or circumstance has occurred which has or would have an adverse effect on the position of the Bondholders as a class compared with the position of the holders of all the securities (and options and rights relating thereto) of the Company, taken as a class which is analogous to any of the events referred to in subsections (i) to (xi), then, in any such case, the Company shall notify the Trustee thereof and the Company shall consult with an Independent Financial Institution as to what adjustment, if any, should be made to the Conversion Price to preserve the value of the Conversion Right of Bondholders and shall make any such adjustment.

(xiii) Simultaneous issues of different classes of Shares:

In the event of simultaneous issues of two or more classes of share capital comprising Shares or rights or warrants in respect of, or securities convertible into or exchangeable for, two or more classes of share capital comprising Shares, then, for the purposes of this Section, the formula:

==> picture [98 x 20] intentionally omitted <==

shall be restated as

==> picture [153 x 20] intentionally omitted <==

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

(xiv) Reduction of Paid-in Capital Other Than Cancellation of Treasury Shares:

Adjustment: If the Company shall reduce its paid-in capital (except for the cancellation of its treasury shares), the Conversion Price in effect on the record date of the reduction shall be adjusted in accordance with the following formula:

==> picture [78 x 19] intentionally omitted <==

where:

NCP and OCP have the meanings ascribed thereto in Condition 6(C)(i) above.

N = the number of Shares issued before the capital reduction.

n = the number of Shares issued after the capital reduction.

Such adjustment shall become effective on the record date of such capital reduction.

For the purposes of this Condition 6(C), the “ Current Market Price ” per Share on any date means the Average Closing Price (as defined in Condition 6(D)) of the relevant Shares for the 20 consecutive Trading Days (as defined in Condition 6(D)) before such date. 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.

No adjustment shall be made to the Conversion Price for the issuance of any Shares by the Company to the shareholders of a company which is to be merged into the Company as consideration for the merger; no adjustment shall be made to the Conversion Price for the cancellation of any treasury Shares by the Company.

No adjustment shall 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 shall be carried forward and taken into account in determining any subsequent adjustment. Any adjustment shall be notified promptly by the Company to the Bondholders in accordance with Condition 15.

The Trust Deed provides that the Conversion Price may be reduced, as a result of any adjustment required by this Condition 6(C), below the par value of the Shares for the time being to the extent permitted by ROC law, provided that any Shares issued on conversion of Bonds at such reduced Conversion Price would be legally issued, fully paid and non-assessable Shares.

The Trustee shall not be obliged to monitor whether any event has occurred which might fall within Condition 6(C)(i) to (xiv) or Condition 3 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 no such event has occurred.

Neither the Trustee nor the Agents shall be responsible or liable to the Bondholders or any person for:

(i) any failure of the Company to make cash payment or to issue, transfer or deliver any Shares or other securities or property upon the surrender of any Bond for the purposes of Conversion; or
(ii) any failure of the Company to comply with any of its covenants set out in Condition 6.

If any Bondholder shall have any doubts as to the appropriate adjustment to the Conversion Price, the Company shall at its expense and at the request of the Trustee (acting on the instructions of such Bondholder) and as soon as practicable, provide the Trustee with a certificate signed by two of its authorised officers setting out the method by which the adjustment is calculated and a certificate of an Independent Financial Institution, certifying the appropriate adjustment to the Conversion Price and such a certificate shall be conclusive and binding on all concerned.

If the Company fails to select an Independent Financial Institution when required under Clause 8 of the Trust Deed or this Condition 8, the Trustee shall be entitled (but not obliged) to do so at the Company’s expense.

(D) Conversion Price Reset

In the event that the Closing Price (as defined below) of the Shares on the Emerging Market or TSE, if the Shares are subsequently listed on the TSE, translated into U.S. Dollars at the then Prevailing Rate (as defined below) for (a) each of any 20 consecutive Trading Days (as defined below) is less than 80% of the initial Conversion Price (as adjusted to reflect any adjustments required under Condition 6(C) above) or (b) each of the 20 consecutive Trading Days (as defined below) immediately prior to July 1 each year is less than 90% of the initial Conversion Price (as adjusted to reflect any adjustments required under Condition 6(C) above), the Conversion Price shall be adjusted on the relevant Reset Date (as defined below) or July Reset Date (as defined below), as the case may be, in accordance with the following formula:

[Exchan][g][e][Rate] Adjusted Conversion Price =[Fixed] x Average Closing Price x 101.23% Prevailing Rate

Provided that:

(i) No price reset under this Condition shall be allowed before January 15, 2009. Only one price reset under this Condition is allowed in each of the following periods: (a) January 15, 2009 to December 31, 2009; (b) January 1, 2010 to December 31, 2010; and (c) January 1, 2011 to July 5, 2011.
(ii) The Adjusted Conversion Price shall be rounded to the nearest NT$0.1, with NT$0.05 rounded to NT$0.1;

(iii) 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 (save for Condition 6(C)(ii)) which may have occurred prior to the relevant Reset Date and July Reset Date);
(iv) 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 any 20 Trading Days period described in this Condition 6(D);
(v) the Conversion Price shall not be reduced below the par value of the Shares (currently NT$10 per share) unless, under the applicable laws and regulations then in effect, the Bonds could be converted at such reduced Conversion Price into legally issued, fully-paid and non-assessable Shares; and
(vi) 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 or July Reset Date notwithstanding that an adjustment may have been made in respect of a preceding Reset Date or July Reset Date, if any.

The “ Closing Price ” of the Shares for each Trading Day shall be the last reported transaction price of the Shares on the Emerging Market or TSE, if the Shares are then listed 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 Emerging Market or TSE, if the Shares are then listed 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 any of such exchanges, the average of the closing bid and offered prices of Shares for such day as furnished by an independent securities firm selected by the Company for the purpose.

The “ July Reset Date ” shall be the Trading Date immediately following 1 July. All July Reset Dates under this Condition shall fall between January 15, 2009 and July 5, 2011.

The “ Reset Date ” shall be the Trading Date immediately following the last of any 20 consecutive Trading Days that triggers the Conversion Price reset. All Reset Dates under this Condition shall fall between January 15, 2009 and July 5, 2011.

The “ Average Closing Price ” shall be the arithmetic average of Closing Prices of Shares during the 20 consecutive Trading Days period before and including the July Reset Date or the Reset Date (as applicable).

The “ Prevailing Rate ” for the translation of the Closing Prices shall be the arithmetic average of the closing rates 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 (as defined below) preceding the relevant July Reset Date or Reset Date (as applicable). 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$30.397 = U.S.$1.00.

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

Any such adjustment shall become effective as at the relevant July Reset Date or Reset Date. Any adjustment of the Conversion Price will be notified promptly by the Company to the Bondholders in accordance with Condition 15 and to the Trustee.

The Trustee shall not be obliged to monitor whether any event has occurred which might fall within this Condition 6(D) 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 no such event has occurred.

All calculations under these Conditions, the Trust Deed and the Agency Agreement shall be performed by the Company or any other person so nominated or authorised by the Company. Neither the Trustee nor the Agents shall be liable in any respect for the accuracy or inaccuracy in any mathematical calculation or formula under these Conditions, the Agency Agreement or the Trust Deed, whether by the Company or any other person so nominated or authorised by the Company for the purposes of these Conditions, the Agency Agreement or the Trust Deed.

(E) 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 a Trust Deed supplemental to the Trust Deed in form and substance satisfactory to the Trustee providing that such corporation, entity or person shall assume the obligations of the Company under the Bonds, the Trust Deed 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 Trust Deed. Such supplemental Trust Deed will provide for adjustments which will be as nearly equivalent as may be practicable to the adjustments provided for in the foregoing provisions to this Condition. The above provisions of this Condition 6(E) will apply in the same way to any subsequent or further consolidations, amalgamations, mergers, sales or transfers.

(F) Conversion Undertakings

The Company undertakes to the Trustee and the Bondholders that any Closed Period is as short a period as is reasonably practicable having regard to applicable ROC laws and regulations and practices.

7. Payments

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

Payment of principal and premium (if any) will be made by transfer to the registered account of the Bondholder or by U.S. Dollar cheque drawn on a bank in the City of New York, U.S.A. mailed 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.

Interest on the Bonds due on an Interest Payment Date will be paid on the due date for the payment of interest to the holders shown on the Register at the close of business on the 15th day before the Interest Payment Date. Payments of interest on each Bond will be made by transfer to the registered account of the Bondholder or by U.S. Dollar cheque drawn on a bank in the City of New York, U.S.A. mailed to the registered address of the Bondholder if it does not have a registered account.

(B) Registered Accounts

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 in the Register at the close of business on the second Business Day before the due date for payment and a Bondholder’s registered address means its address appearing on the Register 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 Delay

Bondholders shall 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 cheque mailed in accordance with this Condition arrives after the due date for payment.

(E) Partial Payments

If the amount of principal and premium which is due on the Bonds is not paid in full, the Registrar shall annotate the Register 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 shall be made to the holders holding through participants of Euroclear or Clearstream, Luxembourg, as the case may be, and shall, subject as provided in Condition 6(A)(iii), be credited by Euroclear and 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 at Maturity

Unless previously converted or repurchased and cancelled, the Bonds shall be redeemed in full at 100% of their principal amount in U.S. Dollars on July 15, 2011.

9. Taxation

All payments of principal, premium (if any) and interest by the Company shall be made subject to 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.

10. Events of Default

The Trustee at its discretion may (but shall not be obliged to), 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) failure to make the payment of any principal, premium (if any) or interest on any of the Bonds or failure to deliver the Shares as and when such Shares are required to be delivered following conversion of a Bond, in each case 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 those obligations in (i)) set out in the Bonds or the Trust Deed which default is incapable of remedy or, if in the opinion of the Trustee such default is capable of remedy, such default is not in the opinion of the Trustee remedied within 30 days 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 Consolidated 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 Consolidated 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 Consolidated 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 other legal enforcement process is levied 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 Consolidated Subsidiaries and in any such case is not discharged or stayed within 60 days of having been so levied, commenced or issued, unless the Company or such Consolidated 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 Consolidated 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 Consolidated Subsidiary is contesting such proceedings in accordance with relevant laws and regulations; or
(vi) the Company or any of its Consolidated Subsidiaries 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 any of its Consolidated Subsidiaries or in respect of the whole or any substantial part of the undertakings, property, assets or revenues of the Company or any of its Consolidated Subsidiaries or the Company or any of its Consolidated Subsidiaries 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 and the Company and such corporation, entity or person shall have executed an Trust Deed supplemental to the Trust Deed 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 Trust Deed 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 Trust Deed; provided that such agreement by such other person shall not be required if such assumption shall be effective by operation of law; or
(ix) 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 Consolidated Subsidiaries under any applicable bankruptcy, insolvency or reorganization law and such proceedings shall not have been discharged or stayed within a period of 60 days, unless the Company or such Consolidated 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 Trust Deed, 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.

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 plus the accrued interest (the “ Due Amount ”). The overdue interest on the Due Amount shall be accrued from the date on which the Due Amount first become due and payable, to the extent permitted by law, at the rate of 5% per annum.

Neither the Trustee nor the Agents is responsible for monitoring or ascertaining whether any Event of Default has occurred or is continuing and will not be responsible to the Bondholders or any other person for any loss arising from any failure by it to do so, and, unless and until the Trustee or the relevant Agent otherwise has written notice to the contract the Trustee or such Agent may assume that no such event has occurred and that the Company is performing all its obligation under these conditions the Trust Deed and the Agency Agreement.

The Trustee and the Agents need not do anything to ascertain whether any Event of Default or Potential Event of Default has occurred or is continuing and will not be responsible to the Bondholders or any other person for any loss arising from any failure by it to do so, and, unless and until the Trustee or the Agent otherwise has notice in writing to the contrary, the Trustee or the Agent may assume that no such event has occurred and that the Company is performing all its obligations under the Trust Deed and the Bonds.

11. Prescription

Claims in respect of principal, interest and other sums payable in respect of the Bonds will become prescribed unless made within 10 years (in the case of principal and premium) and five years (in the case of interest and other sums from the date upon which such payments become due). Neither the Trustee nor any of the Agents shall have any responsibility, obligation or liability with respect of any Bondholder for any amounts so prescribed.

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 with respect thereto and to enforce the provisions of the Trust Deed, but it will not be bound to take any such proceedings unless (a) it shall have been so requested in writing by the holders of at least 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 Trust Deed 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 Trust Deed. The quorum for a meeting to pass 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 (if any) or interest 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 or to modify the redemption rights at maturity or to shorten the Conversion Period, except in accordance with Conditions 13(B) and 13(C), (v) to modify the provisions relating to the resetting of the Conversion Price and (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 quorum required at any such meeting will be two or more persons holding or representing 100% in principal amount of the Bonds for the time being outstanding or, at any such meeting which has been adjourned, two or more persons holding or representing over one third in principal amount of the Bonds for the time being outstanding. 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 Trust Deed 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 these Terms and Conditions of the Bonds and notify the Bondholders 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 the Company and all the Bondholders. The Company shall prepare a supplement to these Terms and Conditions of the Bonds and notify the Bondholders of such modification in accordance with Condition 15 as soon as practicable.

(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 Trust Deed which is not, in the opinion of the Trustee, materially prejudicial to the interests of the Bondholders or (ii) any modification of the Bonds, the Agency Agreement or the Trust Deed which, in the Trustee’s opinion, is of a formal, minor or technical nature or to correct a manifest error or to comply with mandatory provisions of law. 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 as soon as practicable thereafter.

(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 Bondholder 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$30.397 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. Any such notice shall be deemed to have been given on the seventh day after being so mailed.

16. Indemnification

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

17. Agents

The names of the initial Agents and Registrar and their specified offices are set out at the end of the Information Memorandum. 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, 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 and the Trustee. Subject to the terms of the Agency Agreement, in acting hereunder and in connection with the Bonds, the Agents shall act solely as agents of the Company and will not assume any obligations towards or relationship of trust and agency for any of the Bondholders.

18. Contracts (Rights of Third Parties) Act 1999

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

19. Governing Law and Jurisdiction

(A) Governing Law

The Trust Deed and the Bonds and these Conditions are governed by, and shall be construed in accordance with, the laws of England.

(B) Jurisdiction

The courts of England have jurisdiction to settle any disputes which may arise out of or in connection with the Trust Deed, these Conditions or the Bonds and accordingly any legal action or proceedings arising out of or in connection with the Trust Deed, these Conditions or the Bonds may be brought in such courts.

(C) Agent for Service of Process

The Company has irrevocably appointed Law Debenture Corporate Services Limited of Fifth Floor, 100 Wood Street, London, EC2V 7EX, United Kingdom as its authorized agent to receive service of process in England in any proceedings. Such service shall be deemed to be completed on delivery to such process agent (whether or not it is forwarded to and received by the Company). The Company will procure that, so long as any of the Bonds are outstanding, there shall be in force an appointment of such a person with an office in England with authority to accept service as aforesaid on behalf of the Company and, falling such appointment within 15 days after demand by or on behalf of the Trustee, the Trustee shall be entitled by notice to the Company to appoint such person. Nothing herein shall affect the right to serve process in any other manner permitted by law.

INDEX TO FINANCIAL STATEMENTS

Financial Statements as at and for the three months ended March 31, 2008 (information for the three months ended March 31, 2007 is unreviewed and is for reference only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements as at and for the years ended December 31, 2006 and 2007 . .	Page
	F-2 F-28

F-1

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders Neo Solar Power Corp.

We have reviewed the accompanying balance sheets of Neo Solar Power Corp. (the “Corporation”) as of March 31 2008, and the related statements of income and cash flows for the three months then ended. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to issue a report on these financial statements based on our reviews.

We conducted our reviews in accordance with the Statement of Auditing Standards No. 36, “Review of Financial Statements” issued by the Auditing Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, 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.

Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and accounting principles generally accepted in the Republic of China.

As disclosed in Note 3 to the accompanying financial statements, effective January 1, 2008, the Corporation adopted Interpretation 2007-052,“Accounting for Bonuses to Employees, Directors and Supervisors”issued by the Accounting Research and Development Foundation of the Republic of China, which requires corporations to record bonuses paid to employees, directors and supervisors as an expense rather than as an appropriation of earnings. The adoption of this interpretation resulted in a decrease in net income and earnings per share (after income tax) of NT$18,434 thousand (US$606 thousand) and NT$0.19 (US$0.0063), respectively for the three months ended March 31, 2008.

Deloitte & Touche Taipei, Taiwan Republic of China

May 2, 2008

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the accountants’ review report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language accountants’ review report and financial statements shall prevail.

F-2

NEO SOLAR POWER CORP.

BALANCE SHEETS

MARCH 31, 2008

(Information of March 31, 2007 Is For Reference Only) (In Thousands, Except Par Value) (Reviewed, Not Audited)

ASSETS CURRENT ASSETS Cash (Notes 2 and 5) ..................................................................... Accounts receivable, net (Note 2) .................................................. Other receivables ........................................................................... Inventories, net (Notes 2 and 6) ..................................................... Prepaid expenses - current (Notes 19 and 21) ................................ Pledged time deposits (Notes 5 and 20) ......................................... Deferred income tax assets - current (Notes 2 and 15) ................... Other current assets ....................................................................... Total current assets ................................................................ PROPERTIES (Notes 2, 7 and 20) Cost Machinery and equipment .......................................................... Research and development equipment ........................................ Office equipment ....................................................................... Leasehold improvement ............................................................. Miscellaneous equipment ........................................................... Accumulated depreciation .......................................................... Construction in progress and advance payments ......................... Net properties ........................................................................ OTHER ASSETS Refundable deposits ....................................................................... Deferred charges, net (Notes 2 and 8) ............................................ Deferred income tax assets - noncurrent (Notes 2 and 15) .............. Prepaid expenses - noncurrent (Note 21) ........................................ Total other assets ................................................................... TOTAL ...............................................................................................	2007 NT$ (Unreviewed) $1,057,677 173,867 121 365,291 361,458 35,208 — 23,719 2,017,341 419,396 1,052 1,569 9,117 2,300 433,434 (34,958) 398,476 58 398,534 2,316 2,067 17,449 — 21,832 $2,437,707	2008	2008
		NT$ $651,134 224,642 69,507 636,167 1,056,816 191,699 15,873 51,491 2,897,329 797,995 1,052 2,045 11,327 4,699 817,118 (123,329) 693,789 740,549 1,434,338 6,601 24,741 35,262 1,011,936 1,078,540 $5,410,207	US$
			(Note 4) $21,419 7,389 2,286 20,927 34,764 6,306 522 1,694
			95,307
			26,250 35 67 373 154
			26,879 (4,057)
			22,822 24,360
			47,182
			217 814 1,160 33,287
			35,478
			$177,967

F-3

	2007	2008
	NT$	NT$	US$
	(Unreviewed)		(Note 4)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term bank loans (Notes 9 and 20) .........................................	$213,814	$737,896	$24,273
Notes and accouts payable .............................................................	8,864	81,473	2,680
Income tax payable (Notes 2 and 15) .............................................	9,434	42,817	1,408
Accrued bonuses to employees and directors (Notes 3 and 12) .......	—	18,434	606
Payables on equipment ...................................................................	37,412	241,552	7,946
Receipts in advance (Note 19) .......................................................	14	447,987	14,736
Deferred income tax liabilities - current (Notes 2 and 15) ..............	1,844	—	—
Accrued expenses and other current liabilities
(Notes 2, 10 and 19) ..................................................................	13,635	48,628	1,600
Total current liabilities ..........................................................	285,017	1,618,787	53,249
LONG-TERM LIABILITIES, NET OF CURRENT PORTION
Long-term bank loans (Note 11) .....................................................	—	1,060,000	34,868
OTHER LIABILITIES
Guarantee deposits received ...........................................................	—	233	8
Total liabilities ......................................................................	285,017	2,679,020	88,125
SHAREHOLDERS’ EQUITY (Notes 2, 12 and 13)
Capital stock, NT$10 par value
Authorized - 100,000 thousand shares in 2007 and 200,000
thousand shares in 2008 .........................................................
Issued - 96,375 thousand shares in 2007 and 98,503 thousand
shares in 2008 .......................................................................	963,750	985,025	32,402
Advance receipts for common stock ...............................................	—	1,420	47
Additional paid-in capital ...............................................................	1,100,000	1,100,000	36,184
Unappropriated earnings .................................................................	88,940	644,742	21,209
Total shareholders’ equity ......................................................	2,152,690	2,731,187	89,842
TOTAL ...............................................................................................	$2,437,707	$5,410,207	$177,967

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche review report dated May 2, 2008)

F-4

NEO SOLAR POWER CORP.

STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 2008

(Information For The Three Months Ended March 31, 2007 Is For Reference Only) (In Thousands, Except Earnings Per Share) (Reviewed, Not Audited)

GROSS SALES .................................................................................. SALES RETURNS AND ALLOWANCES ........................................... NET SALES (Note 2) ......................................................................... COST OF SALES (Notes 16 and 19) .................................................. GROSS PROFIT ................................................................................. OPERATING EXPENSES (Note 16) Selling ........................................................................................... General and administrative ............................................................. Research and development ............................................................. Total operating expenses ........................................................ OPERATING INCOME ...................................................................... NONOPERATING INCOME AND GAINS Interest income (Note 18) .............................................................. Foreign exchange gain, net (Note 2) .............................................. Others ............................................................................................ Total nonoperating income and gains ..................................... NONOPERATING EXPENSES AND LOSSES Foreign exchange loss, net (Note 2) ............................................... Interest expense (Note 18) ............................................................. Others ............................................................................................ Total nonoperating expenses and losses ................................. INCOME BEFORE INCOME TAX ..................................................... INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 15) ..................... NET INCOME ....................................................................................	2007 NT$ (Unreviewed) $396,319 3 396,316 314,053 82,263 1,183 6,551 1,246 8,980 73,283 170 4,871 5 5,046 — 678 — 678 77,651 6,687 $84,338	2008	2008
		NT$ $1,945,118 24 1,945,094 1,747,512 197,582 3,545 26,405 9,753 39,703 157,879 4,983 - 2,126 7,109 49,084 15,155 51 64,290 100,698 (8,912) $91,786	US$
			(Note 4) $63,985 1
			63,984 57,484
			6,500
			117 868 321
			1,306
			5,194
			164 - 70
			234
			1,615 498 2
			2,115
			3,313 (293)
			$3,020

F-5


	Before	After
	Income	Income		Before			After
	Tax	Tax	Income		Tax	Income Tax
	NT$	NT$	NT$		US$	NT$		US$
					(Note 4)			(Note 4)
EARNINGS PER SHARE (Note 24)
Basic .........................................	$1.01	$1.10	$1.02		$0.0336	$0.93		$0.0306
Diluted ......................................	$0.97	$1.06	$0.98		$0.0322	$0.90		$0.0296

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche review report dated May 2, 2008)

(Concluded)

F-6

NEO SOLAR POWER CORP.

STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2008

(Information For The Three Months Ended March 31, 2007 Is For Reference Only) (In Thousands) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Net income .................................................................................... Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation .......................................................................... Amortization .......................................................................... (Reversal of allowance) allowance for losses on inventories .. Deferred income tax .............................................................. Net changes in operating assets and liabilities Accounts receivable ........................................................... Other receivables ............................................................... Inventories ........................................................................ Prepaid expenses ............................................................... Other current assets ........................................................... Notes and accounts payable ............................................... Income tax payable ............................................................ Accrued bonuses to employees and directors ..................... Receipts in advance ........................................................... Accrued expenses and other current liabilities ................... Net cash (used in) provided by operating activities ........... CASH FLOWS FROM INVESTING ACTIVITIES Increase in pledged time deposits ................................................... Acquisition of: Properties .................................................................................. Deferred charges ........................................................................ Net cash used in investing activities ...................................... CASH FLOWS FROM FINANCING ACTIVITIES Increase in guarantee deposits ........................................................ Increase (decrease) in short-term bank loans .................................. Proceeds of: Long-term bank loans ................................................................ Issuance of capital stock ............................................................ Exercise of employee stock options ........................................... Net cash provided by financing activities ..............................	2007 NT$ (Unreviewed) $84,338 17,633 125 (3,681) (15,605) (80,122) 15,128 (212,137) (248,816) (16,815) (70,687) 8,918 — 14 (6,971) (528,678) (1,475) (10,915) (978) (13,368) — 45,914 — 1,450,000 — 1,495,914	2008	2008
		NT$ $91,786 33,472 1,497 17,293 (19,616) (53,511) (30,813) (227,478) (53,948) (49,490) 57,710 28,039 18,434 331,679 (11,165) 133,889 (182,210) (458,883) (10,961) (652,054) 166 (493,849) 1,060,000 1,420 5,625 573,362	US$
			(Note 4) $3,020 1,101 49 569 (645) (1,760) (1,013) (7,483) (1,775) (1,628) 1,898 922 606 10,910 (367)
			4,404
			(5,994) (15,095) (360)
			(21,449)
			6 (16,245) 34,868 47 185
			18,861

(Continued)

F-7

NET INCREASE IN CASH AND CASH EQUIVALENTS ................... CASH, BEGINNING OF PERIOD ...................................................... CASH, END OF PERIOD ................................................................... SUPPLEMENTAL CASH FLOW INFORMATION Interest paid ................................................................................... Income tax paid ............................................................................. INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS Acquisition of properties ................................................................ Decrease (increase) in payables on equipment ................................ Cash paid ...................................................................................	2007 NT$ (Unreviewed) 953,868 103,809 $1,057,677 $611 $— $4,369 6,546 $10,915	2008	2008
		NT$ 55,197 595,937 $651,134 $12,065 $489 $692,748 (233,865) $458,883	US$
			(Note 4) 1,816 19,603
			$21,419
			$397
			$17
			$22,788 (7,693)
			$15,095

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche review report dated May 2, 2008)

(Concluded)

F-8

NEO SOLAR POWER CORP.

NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND 2008

(Information For The Three Months Ended March 31, 2007 Is For Reference Only, Unreviewed)

(In Thousands, Unless Stated Otherwise) (Reviewed, Not Audited)

1. ORGANIZATION AND OPERATION

Neo Solar Power Corp. (the “Corporation”) was incorporated on August 26, 2005. Its common shares have been traded on the Emerging Stock Market of the GreTai Securities Market since October 2007.

The Corporation’s business activities mainly include manufacturing and selling solar cells and other related business.

As of March 31, 2007 and 2008, the Corporation had 114 and 286 employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the Republic of China (“ROC”). Under these guidelines, law and principles, certain estimates and assumptions have been used for the allowance for doubtful accounts, allowance for loss on inventories, depreciation of properties, amortization of deferred charges, pension expenses and bonuses to employees, directors and supervisors. Actual results may differ from these estimates.

For readers’ convenience, the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the ROC. If inconsistencies arise between the English version and the Chinese version or if differences arise in the interpretations between the two versions, the Chinese version of the financial statements shall prevail.

Significant accounting policies are summarized as follows:

Current and Noncurrent Assets and Liabilities

Current assets include cash (unrestricted), and those assets to be realized, sold or consumed within one year from the balance sheet date. All other assets such as properties and deferred charges are classified as noncurrent. Current liabilities are obligations to be settled within one year from the balance sheet date. All other liabilities are classified as noncurrent.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is provided on the basis of the aging of receivables and periodic review of the collectibility of receivables.

Inventories

Inventories are stated at the lower of aggregate costs or market value. Inventories are recorded at weighted-average cost. Market value means replacement cost for raw materials and net realizable value for finished goods and work-in-process. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.

Properties

Properties are stated at cost less accumulated depreciation. Borrowing costs directly attributable to the acquisition or construction of properties are capitalized as part of the cost of those assets. Major additions and improvements to properties are capitalized, while costs of repairs and maintenance are expensed currently.

When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized.

F-9

Depreciation is provided on a straight-line basis over estimated useful lives as follows: machinery and equipment - 3 to 15 years; research and development equipment - 3 years; office equipment - 3 years; leasehold improvements - 3 to 10 years; and miscellaneous equipment - 3 to 5 years. Properties still in use beyond their original estimated useful lives are further depreciated over their newly estimated useful lives.

The related cost and accumulated depreciation of an item of properties are derecognized from the balance sheet upon its disposal. Any gain or loss on disposal of the asset is included in nonoperating gains or losses in the year of disposal.

Deferred Charges

Expenditures related to research activities are charged to expense when incurred. Expenditures related to development activities that meet the criteria for capitalization should be recognized as intangible asset and amortized over its estimated useful lives, otherwise, it should be charged to expense when incurred.

Deferred charges are amortized using the straight-line method over the following periods: Computer software system, subsidy of electric lines and others - 3 years; fees of syndicated loan - 5 years.

When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.

Capitalized and Other Expenditures

Expenditures that will benefit periods in the future are capitalized. Other expenditures are recorded as expenses or losses.

Employee Stock Option

Employee stock options that were modified or granted in the period from January 1, 2004 to December 31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Corporation adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with the Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment.” Compensation cost determined using fair value method is also recognized in earnings over the employees’ requisite service period.

Revenue Recognition

Revenue from sales of goods is recognized when the Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods, primarily upon shipment, because the earnings process has been completed and the economic benefits associated with the transaction have been realized or are realizable. The Corporation does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

Revenue is measured at the fair value of the consideration received or receivable and represents amounts agreed between the Corporation and the customers for goods sold in the normal course of business, net of sales discounts and volume rebates. For trade receivables due within one year from the balance sheet date, as the nominal value of the consideration to be received approximates its fair value and transactions are frequent, fair value of the consideration is not determined by discounting all future receipts using an imputed rate of interest.

Pension Costs

Contributions made under a defined contribution plan are recognized as pension cost during the year in which employees render services.

Income Tax

The Corporation applies inter-year allocations for its income tax, whereby deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, unused loss carryforward and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.

Tax credits for purchases of machinery, equipment and technology, research and development expenditures, and personnel training expenditures are recognized using the flow-through method.

F-10

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Foreign-currency Transactions

Nonderivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange differences arising from settlement of foreign-currency transactions or monetary assets and liabilities are recognized in profit or loss.

At the balance sheet date, foreign-currency monetary assets and liabilities are revalued using prevailing exchange rates and the exchange differences are recognized in profit or loss.

3. EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES

Accounting for Bonuses to Employees, Directors and Supervisors

In March 2007, the ARDF issued Interpretation 2007-052 that requires companies to recognize as compensation expenses bonuses paid to employees, directors and supervisors beginning January 1, 2008. These bonuses were previously recorded as appropriations from earnings. The adoption of this interpretation resulted in a decrease in net income and earnings per share (after income tax) of NT$18,434 thousand (US$606 thousand) and NT0.19 (US$0.0063), respectively, for the three months ended March 31, 2008.

Share-Based Payment

Effective January 1, 2008, the Corporation adopted Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment,” which requires companies to record share-based payment transactions in the financial statements at fair value. Such a change in accounting principle did not have any effect on the Corporation’s financial statements as of and for the three months ended March 31, 2008.

4. U.S. DOLLAR AMOUNTS

The Corporation maintains its accounts and expresses its financial statements in New Taiwan dollars. For convenience only, U.S. dollar amounts presented in the accompanying financial statements have been translated from New Taiwan dollars, using the middle rate of the Bank of Taiwan of NT$30.40 to US$1 on March 31, 2008. The convenience translation should not be construed as representations that the New Taiwan dollar amounts have been, could have been or could in the future be, converted into U.S. dollars at this or any other exchange rate.

5. CASH

	March 31	March 31
2007 NT$ (Unreviewed) $1,056,900 35,208 678 99 1,092,885 (35,208) $1,057,677	2008
	NT$ $451,552 390,141 988 152 842,833 (191,699) $651,134	US$
		(Note 4) $14,854 12,834 32 5
		27,725 (6,306)
		$21,419

As of March 31, 2008, time deposits with maturities of over one year amounted NT$3,000 thousand (US$99 thousand).

F-11

6. INVENTORIES, NET

Finished goods ......................................................................... Work in process ....................................................................... Raw materials .......................................................................... Allowance for losses ................................................................	2007 NT$ (Unreviewed) $164,037 31,602 170,613 366,252 (961) $365,291	March 31	March 31
		2008
		NT$ $161,304 61,433 465,116 687,853 (51,686) $636,167	US$
			(Note 4) $5,306 2,021 15,300
			22,627
			(1,700)
			$20,927

7. PROPERTIES

Three Months Ended March 31, 2007 (Unreviewed)
	Total
	NT$ $429,123 4,369 —
	433,492
	17,325 17,633
	34,958

F-12

			US$	(Note 4)		$28,451	22,788	—	51,239		2,956	1,101	4,057	$47,182
		Total	NT$			$864,919	692,748	—	1,557,667		89,857	33,472	123,329	$1,434,338
Construction in	process and Advance	Payments	NT$ US$	(Note 4)		$403,363 $13,268	679,340 22,347	(342,154) (11,255)	740,549 24,360		— —	— —	— —	$740,549 $24,360
	Leasehold Miscellaneous	Office Equipment Improvement Equipment	NT$ US$ NT$ US$ NT$ US$	(Note 4) (Note 4) (Note 4)		$1,957 $64 $11,327 $373 $3,474 $114	88 3 — — 830 27	— — — — 395 13	2,045 67 11,327 373 4,699 154		667 22 1,073 35 597 19	126 4 287 9 220 8	793 26 1,360 44 817 27	$1,252 $41 $9,967 $329 $3,882 $127
Research and	Development	Equipment	NT$ US$	(Note 4)		$1,052 $35	— —	— —	1,052 35		263 9	66 2	329 11	$723 $24
	Machinery and	Equipment	NT$ US$	(Note 4)		$443,746 $14,597	12,490 411	341,759 11,242	797,995 26,250		87,257 2,871	32,773 1,078	120,030 3,949	$677,965 $22,301
					Cost	Balance, beginning of period ....	Additions .................................	Reclassification ........................	Balance, end of period .............	Accumulated depreciation	Balance, beginning of period ....	Additions .................................	Balance, end of period .............	Balance, end of period, net ......

F-13

8. DEFERRED CHARGES

Three Months Ended March 31, 2007 (Unreviewed)	Three Months Ended March 31, 2007 (Unreviewed)	Three Months Ended March 31, 2007 (Unreviewed)
Subsidy of Electric Lines NT$ $1,507 — 1,507 293 125 418 $1,089	Computer Software System NT$ $— 978 978 — — — $978	Total
		NT$ $1,507 978
		2,485
		293 125
		418
		$2,067

	Three Months Ended March 31,	2008
			Total
				US$
				(Note 4) $569 360
				929
				66 49
				115

F-14

9. SHORT-TERM BANK LOANS

		March 31
	2007		2008
	NT$	NT$		US$
	(Unreviewed)			(Note 4)
Working capital loans - interest at 2.17% in 2007;
2.59%-2.98% in 2008 ...........................................................	$50,000	$380,000		$12,500
Purchasing materials loans - 2.10%-5.68% in 2007;
1.76%-2.78% in 2008 ...........................................................	163,814	357,896		11,773
	$213,814	$737,896		$24,273

10. ACCRUED EXPENSES

2007 NT$ (Unreviewed) Salaries .................................................................................... $5,559 Bonus ....................................................................................... 2,935 Others ...................................................................................... 5,141 $13,635 Salaries NT$ US$ (Note 4) January 1, 2007 ............................................ $5,909 Add：Accrued .............................................. 17,754 Less：Paid .................................................... (18,104) March 31, 2007 ............................................ $5,559 January 1, 2008 ............................................ $11,402 $375 Add：Accrued .............................................. 38,476 1,266 Less：Paid .................................................... (36,575) (1,203) March 31, 2008 ............................................ $13,303 $438 11. LONG-TERM BANK LOANS First Bank Syndicate Loan Repayable quarterly from January 2011 to April 2014; with annual floating interest at 2.78%-3.07% ..............................................................................		March 31	March 31
		2008
		NT$ US$ (Note 4) $13,303 $438 9,862 324 25,463 838 $48,628 $1,600 Bonus	US$
			(Note 4) $438 324 838
			$1,600
		NT$ US$ (Note 4) $6,986 4,118 (8,169) $2,935 $26,774 $881 744 24 (17,656) (581) $9,862 $324 March 31, 2008	US$
			(Note 4) $881 24 (581)
			$324
		NT$ $1,060,000	US$
			(Note 4) $34,868

The current ratio, debt ratio, tangible net asset ratio and interest coverage ratio of the Corporation calculated based on semiannually and annually financial statements are subject to certain restrictions in accordance with the loan agreements. In accordance with the loan agreement, the Corporation’s plant and machinery equipment shall be pledged as collateral upon the draw-down of the NT$2,800 million (US$92.11 million) syndicate loan.

F-15

12. SHAREHOLDERS’ EQUITY

Under the ROC Company Law, capital surplus can only be used to offset a deficit. However, the capital surplus from share issued in excess of par may be capitalized, which however is limited to a certain percentage of the Corporation’s paid-in capital and once a year.

Under the Corporation’s Articles of Incorporation, upon closing of accounts, if there is surplus profit, the Corporation shall first pay the corporate income tax in accordance with law, make up for the losses of the preceding years and then set aside a legal reserve of 10% of the net profit, unless the accumulated legal reserve equals the total capital of the Corporation, and retain special reserve(s) pursuant to applicable laws. The board of directors shall make a proposal concerning appropriation of net profits or making up for losses in accordance with the following percentage to be approved in the meeting of the shareholders:

a. Remuneration of directors and supervisors: 2%.
b. Employees’ bonus: As the Corporation starts to make a profit, sustained for 3 years at least, and with earnings per share no less than NT$0.5, after making up for the losses of the preceding years, setting a legal reserve and special reserve and then making up 20% as employee bonus. The calculation of the stock price is according to the related rule of the government when stock bonus is being paid. Furthermore, employee bonus will be 3% at least when the Corporation starts to make profit with EPS less than NT$0.5 or at the percentage approved in the meeting of directors and resolved in the meeting of the shareholders. The Corporation may issue stock bonus to employees of affiliated companies if these employees meet the conditions set by the board of directors or by the board’s duly authorized designee;
c. Any balance left over plus unappropriated earnings of preceding years will be the amount available for distributing to shareholders. Bonus to shareholders should be more than 20% of the preceding amount which can be paid by either cash or stocks. Cash bonus shall be more than 10% of the total bonus to shareholders. The appropriation should be made in accordance with the resolution in the meeting of shareholders.

For the three months ended March 31, 2008, the Corporation has recorded bonuses to employees and directors with a charge to earnings of approximately 20% and 2%, respectively, of net income. Material differences between such estimated amounts and the amounts proposed by the Board of Directors subsequently are retroactively adjusted in the current year. If the actual amounts subsequently resolved by the shareholders differ from the proposed amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate.

The ROC Company Law provides that the appropriation for legal capital reserve shall be made until the reserve equals the Corporation’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if the Corporation has no unappropriated earnings and the reserve balance has exceeded 50% of the Corporation’s paid-in capital. Also, when the reserve has reached 50% of the Corporation’s paid-in capital, up to 50% of the reserve may be transferred to capital.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

The shareholders of the Corporation resolved on May 17, 2007 to offset the Corporation’s accumulated deficit of NT$4,706 thousand against the gains of NT$9,308 thousand in 2006. The appropriations of earnings for 2007 had been approved in the Board of Directors’ meeting held on May 2, 2008. The appropriations and dividends per share were as follows:

Appropriation of Earnings For Fiscal Year 2007 NT$ US$ (Note 4) $55,296 $1,819 23,727 781 213,543 7,024 34,836 1,146 64,696 2,128 9,953 327 $402,051 $13,225	Dividend Per Share	Dividend Per Share
	For Fiscal Year 2007
NT$ $55,296 23,727 213,543 34,836 64,696 9,953 $402,051	NT$ $0.2 1.8	US$
		(Note 4) $0.0066 0.0592

F-16

The amounts of the appropriations of earnings for 2007 and the stock dividends to be distributed out of capital surplus have not yet been resolved by the meeting of shareholders which will be hold on June 30, 2008. The appropriation of stock dividend and stock bonus to employees contributes a total amounts of NT$248,379 thousand (US$8,170 thousand) in the form of capital stock. As the result of the appropriation of earnings, the aggregate issued capital stock will amount to NT$1,233,404 thousand (US$40,573 thousand). The dividend per share will be adjusted by the meeting of the directors’ as the exercise of the employees’ stock options plan

The information about the appropriations of bonuses to employees, directors and supervisors is available at the Market Observation Post System website.

On February 25, 2008, the Board of Directors approved the issuance of capital stock of 20,000 thousand shares at the price of NT$105 (US$3.45) per share. The record date of the issuance of capital stock is April 30, 2008. As of March 31, 2008, NT$1,420 thousand (US$47 thousand) had been received and been recorded under “advance receipts for capital stock.”

13. EMPLOYEE STOCK OPTION

On December 30, 2005 and July 28, 2006, the Corporation’s Board of Directors approved the employee stock option plans hereinafter referred to as “2005 Plan” and “2006 Plan,” respectively. Also, on November 22, 2007 the Financial Supervisory Commission, Executive Yuan approved the Corporation’ employee stock option plans, hereinafter referred to as “2007 Plan”. The 2005 Plan, 2006 Plan and 2007 Plan have reserved 6,000 thousand, 3,000 thousand and 4,800 thousand option units, respectively, with each unit representing 1 shares of common stock. The 2005 Plan and the 2006 Plan granted are valid 10 years and exercisable at certain percentages from 1 year after the date of grant, when the 2007 plan granted are valid 6 years and exercisable at certain percentages from 2 years after the date of grant.

Other information on the stock option rights plan is as follows:

	2005	Plan		2006	Plan		2007	2007	Plan
		Weighted			Weighted				Weighted
	Number of	Average		Number of	Average		Number	of	Average
	Outstanding	Exercise		Outstanding	Exercise		Outstanding		Exercise
	Stock	Prices		Stock	Prices		Stock		Prices
	Option	(NT$/	Per	Option	(NT$/	Per	Option		(NT$/	Per
	Rights	Share)		Rights	Share)		Rights		Share)
For the three months ended
March 31, 2007
Beginning balance ...............	4,625		$10	3,000		$10
Options exercised ................	—		—	—		—
Options cancelled ................	—		—	—		—
Ending balance ....................	4625		10	3,000		10
For the three months ended
March 31, 2008
Beginning balance ...............	3,665		$10	2,395		$10	4,800			$26
Options exercised ................	(502)		10	(60)		10		—			—
Options cancelled ................	—		—	—		—	(24)				26
Ending balance ....................	3,163		10	2,335		10	4,776				26

F-17

As of March 31, 2008, the outstanding stock options are as follows:

Options Outstanding Options Exercisable Exercise Price Per Share) Number Outstanding (Per Option) Weighted Average Remaining Contractual Life (in Years) Weighted Average Exercise Price Per Share) Number Exercisable (Per Option) Weighted Average Exercise Price Per Share) NT$ US$ NT$ US$ NT$ US$ (Note 4) (Note 4) (Note 4) $10 $0.33 3,163 7.75 $10 $0.33 1,581 $10 $0.33 10 0.33 2,335 8.33 10 0.33 584 10 0.33 26 0.86 4,776 5.74 26 0.86 — — — 10,274 2,165 In accordance with the interpretations issued by the Accounting Research and Development Foundation of the Republic ina, the Corporation uses the intrinsic value method to evaluate compensation cost for employee stock options. The nsation cost recognized for the three months ended March 31, 2007 and 2008 was zero since the stock options were d at an exercise price higher than the equity per share of common shares on the measurement dates. Had the Corporation d the fair value based method to evaluate compensation cost for the employee stock options granted, the assumptions and rma results of the Corporation for the three months ended March 31, 2007 and 2008 would be as follows: Method: Black-Scholes model Three Months Ended March 31 2007 2008 (Unreviewed) Assumptions: Risk-free interest rate ................................................................................. 2.09%-2.33% 2.08%-2.33% Expected life (in years) .............................................................................. 10 years 6-10 years Expected stock price volatility .................................................................... 0.46%-1.05% 0.46%-33.63% Expected dividend yield ............................................................................. — — Fair value per option (NT$/Per shares) ........................................................... $1.89-2.08 $1.89-9.43 Three Months Ended March 31 2007 2008 NT$ NT$ US$ (Unreviewed) (Note 4) Net income: Net income as reported ................................................. $84,338 $91,786 $3,020 Pro forma net income ................................................... $82,924 $86,553 $2,847 Earnings per share(EPS): Basic EPS as reported .................................................. $1.10 $0.93 $0.0306 Pro forma basic EPS ..................................................... $1.08 $0.88 $0.0289 Diluted EPS as reported ............................................... $1.06 $0.90 $0.0296 Pro forma diluted EPS .................................................. $1.04 $0.85 $0.0280	Options Exercisable	Options Exercisable	Options Exercisable	Options Exercisable
		Weighted Average Exercise Price Per Share)
				US$
2007 NT$ (Unreviewed) $84,338 $82,924 $1.10 $1.08 $1.06 $1.04	2008
	NT$ $91,786 $86,553 $0.93 $0.88 $0.90 $0.85		US$
			(Note 4) $3,020
			$2,847
			$0.0306
			$0.0289
			$0.0296
			$0.0280

In accordance with the interpretations issued by the Accounting Research and Development Foundation of the Republic of China, the Corporation uses the intrinsic value method to evaluate compensation cost for employee stock options. The compensation cost recognized for the three months ended March 31, 2007 and 2008 was zero since the stock options were granted at an exercise price higher than the equity per share of common shares on the measurement dates. Had the Corporation applied the fair value based method to evaluate compensation cost for the employee stock options granted, the assumptions and pro forma results of the Corporation for the three months ended March 31, 2007 and 2008 would be as follows:

F-18

14. PENSION PLAN

The Corporation makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages in accordance with the Labor Pension Act and these contributions are recognized as pension costs. Thus, the pension costs based on the Act for the three months ended March 31, 2007 and 2008 were NT$730 thousand and NT$1,925 thousand (US$63 thousand), respectively.

15. INCOME TAX

a. The alternative minimum tax (AMT) imposed under the ‘Alternative Minimum Tax Act (the “AMT Act”), is a supplemental tax levied at a rate of 10% which is payable if the income tax payable determined pursuant to the Income Tax Law is below the minimum amount prescribed under the Act. The taxable income for calculating the AMT Act includes most of the income that is exempted from income tax under various laws and statutes. The Corporation has considered the impact of the AMT Act in the determination of its tax liabilities.
b. A reconciliation of income tax currently payable for the three months ended March 31, 2007 and 2008 is as follows:

Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
2007 NT$ (Unreviewed) $19,403 — 56 (1,623) $17,836	2008
	NT$ $25,165 (15,358) 72 7,873 $17,752	US$
		(Note 4) $828 (505) 2 259
		$584

c. Income tax benefit (expense) for the three months ended March 31, 2007 and 2008 consisted of:

Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
2007 NT$ (Unreviewed) $(17,836) 8,918 (9,150) (1,672) 26,427 — — $6,687	2008
	NT$ $(17,752) 8,876 10,862 8,754 — (19,602) (50) $(8,912)	US$
		(Note 4) $(584) 292 358 287 — (645) (1)
		$(293)

F-19

d. Deferred income tax assets and liabilities were as follows:

			March 31
		2007	2008
		NT$	NT$	US$
		(Unreviewed)		(Note	4)
Current
Temporary	differences ................................................	$(1,844)	$15,873		$522
Noncurrent
Investment	tax credits ................................................	$14,696	$31,177	$1,026
Temporary	differences ................................................	2,753	4,085		134
		$17,449	$35,262	$1,160

The effective tax rate for deferred income taxes as of March 31, 2007 and 2008 was 25%.

e. The movement of income tax payable is as follows:

Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
2007 NT$ (Unreviewed) $516 8,918 — — $9,434	2008
	NT$ $14,778 8,876 (439) 19,602 $42,817	US$
		(Note 4) $486 292 (15) 645
		$1,408

f. The related information under the Integrated Income Tax System is as follows:

	March 31	March 31
2007 NT$ (Unreviewed) $908	2008
	NT$ $1,659	US$
		(Note 4) $55

The expected creditable ratio for 2007 was 0.30%. For 2006, there was no appropriation of the earnings.

The imputation credits allocated to the shareholders are based on the balance of the imputation credit account (ICA) as of the date of dividend distribution. The expected creditable ratio for 2007 may be adjusted depending on the ICA balance on the date of dividend distribution.

F-20

g. As of March 31, 2008, the tax credits and loss carryforwards were as follows:

Regulatory Basis		Total Creditable	Total Creditable		Remaining	Creditable	Expiry
of Tax Credits	Items	Amounts			Amounts		Year
		NT$	US$		NT$	US$
			(Note	4)		(Note 4)
Statute for Upgrading	Personnel training
Industries ..............	expenditures	$62		$2	$62	$2	2012
Statute for Upgrading	Purchase of
Industries ..............	machinery and	$23,091	$760		$14,215	$468	2011
	equipment	16,900	556		16,900	556	2012
		$39,991	$1,316		$31,115	$1,024

h. Income from the following projects is exempt from income tax:

Tax-Exemption Period

Statute for Upgrading Industries Initial Investment ..............................................

March 30, 2007 - March 29, 2012

i. Income tax returns through 2005 had been examined by the tax authorities.

16. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSE

Three Months Ended March 31

		2007					2008
		Classified
	Classified	as
	as Cost	Operating		Classified as	Cost	of	Classified as
	of Sales	Expenses	Total	Sales			Operating Expenses			Total
	NT$	NT$	NT$	NT$	US$		NT$	US$		NT$	US$
				(Note		4)		(Note	4)		(Note	4)
Labor cost
Salary ..........	$15,494	$5,734	$21,228	$32,028	$1,054		$20,619	$678		$52,647	$1,732
Labor/health
insurance	587	115	702	2,002		66	831		27	2,833		93
Pension ........	525	205	730	1,337		44	588		19	1,925		63
Others .........	595	328	923	2,232		73	902		30	3,134	103
	$17,201	$6,382	$23,583	$37,599	$1,237		$22,940	$754		$60,539	$1,991
Depreciation .....	$17,179	$454	$17,633	$32,400	$1,066		$1,072	$35		$33,472	$1,101
Amortization ....	$—	$125	$125	$106		$3	$1,391	$46		$1,497	$49

F-21

17. EARNINGS PER SHARE (EPS)

The numerators and denominators used in calculating basic and diluted EPS were as follows:

					Weighted
					Average
					Number of
					Shares
					Outstanding
		Amounts	(Numerator)		(Denominator)		EPS (Dollars)
	Before Income Tax		After Income Tax		(Thousands)	Before Income Tax		After Income Tax
	NT$	US$	NT$	US$		NT$	US$	NT$	US$
		(Note 4)		(Note 4)			(Note 4)		(Note 4)
Three months ended
March 31, 2007
Net income ..............	$77,651		$84,338
Basic EPS
Income of
common
shareholders ...	$77,651		$84,338		76,986	$1.01		$1.10
Effect of dilutive
securities Stock
options ................	—		—		2,787
Diluted EPS
Income of
common and
potential
common
shareholders ...	$77,651		$84,338		79,773	$0.97		$1.06
Three months ended
March 31, 2008
Net income ..............	$100,698	$3,313	$91,786	$3,020
Basic EPS
Income of
common
shareholders ...	$100,698	$3,313	$91,786	$3,020	98,410	$1.02	$0.0336	$0.93	$0.0306
Effect of dilutive
securities Stock
options ................	—	—	—	—	3,848
Diluted EPS
Income of
common and
potential
common
shareholders ...	$100,698	$3,313	$91,780	$3,020	102,258	$0.98	$0.0322	$0.90	$0.0296

F-22

18. DISCLOSURES FOR FINANCIAL INSTRUMENTS

a. As of March 31, 2008 and 2007, the Corporation had no derivative instruments.
b. Fair values of financial instruments were as follows:

March 31

2008	2008	2008
Carrying Value NT$ US$ (Note 4) $651,134 $21,419 224,642 7,389 191,699 6,306 737,896 24,273 81,473 2,680 241,552 7,946 1,060,000 34,868	Fair Value
NT$ $651,134 224,642 191,699 737,896 81,473 241,552 1,060,000	NT$ $651,134 224,642 191,699 737,896 81,473 241,552 1,060,000	US$
		(Note 4) $21,419 7,389 6,306 24,273 2,680 7,946 34,868

c. Methods and assumptions used in determining fair values of financial instruments

The carrying amounts of the following short-term financial instruments approximate their fair values because of their short maturities: cash, accounts receivable, pledged time deposits, short-term bank loans; notes and accounts payable and payable on equipment.

Fair value of long-term bank loans is estimated using discounted cash flow analysis, based on the Corporation’s current incremental borrowing rates for similar borrowings (similar maturity date). The fair value of long-term bank loans with floating interest rates is equivalent to their carrying value.

F-23

d. Fair values of financial assets and liabilities based on quoted market prices or valuation techniques were as follows:

Quoted Market Prices Valuation Techniques March 31 March 31 2007 2008 2007 2008 NT$ NT$ US$ NT$ NT$ US$ (Unreviewed) (Note 4) (Unreviewed) (Note 4) Nonderivative instruments................ Assets Cash ........................ $1,057,677 $651,134 $21,419 $— $— $— Accounts receivable . — — — 173,867 224,642 7,389 Pledged time deposits 35,208 191,699 6,306 — — — Liabilities Short-term bank loans .................... — — — 213,814 737,896 24,273 Notes and accounts payable ................ — — — 8,864 81,473 2,680 Payables on equipment ............ — — — 37,412 241,552 7,946 Long-term bank loans — — — — 1,060,000 34,868	Valuation Techniques	Valuation Techniques	Valuation Techniques
		March 31
		2008
		NT$ $— 224,642 — 737,896 81,473 241,552 1,060,000	US$
			(Note 4) $— 7,389 — 24,273 2,680 7,946 34,868

e. As of March 31, 2007 and 2008, financial assets (liabilities), which were exposed to fair value interest rate risk and cash flow interest rate risk, were as follows:

	March 31	March 31
2007 NT$ (Unreviewed) $35,208 1,056,900 (213,814)	2008
	NT$ $390,141 451,552 (1,797,896)	US$
		(Note 4) $12,834 14,854 (59,141)

f. As of March 31, 2007 and 2008, interest income (expenses) arising from the financial assets (liabilities), excluding those at fair value through profit and loss, were as follows:

Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
2007 NT$ (Unreviewed) $170 (678)	2008
	NT$ $4,983 (15,155)	US$
		(Note 4) $164 (498)

g. Financial risks
1) Market risk. The Corporation had no financial assets (liabilities) held for trading. Thus the market risk is insignificant.
2) Credit risk. The Corporation will incur a loss if the counter-parties or third-parties breach the contracts, which are affected by such factors as the concentrations of counter parties, components of financial instruments, contract amounts, and the receivables on the contracts. Thus, contracts with positive fair values on the balance sheet date are evaluated for credit risk.

F-24

3) Liquidity risk. The Corporation has sufficient operating capital to meet the cash demand upon settlement of financial instruments. Therefore liquidity risk is not considered to be significant.
4) Cash flow interest rate risk. Short-term bank loans and long-term bank loans mainly bear floating interest rates. Thus, the fluctuations of market interest rates will result in changes in the Corporation’s future cash flows.

19. RELATED PARTY TRANSACTIONS

a. Related parties

Related Party Relationship with the Corporation Powerchip Semiconductor Corporation Director of the Corporation (“Powerchip”) ............................................................... Wafer Works Corp. (“Wafer Works”) ................................. Parent company of Heli-Vantech Corp., which is the supervisor of the Corporation eBsuccess Solutions Inc. (eBsuccess”) .............................. Supervisor of the Corporation

b. Related-party transactions:

	Three	Three	Months Ended March	Months Ended March	31
	2007			2008
	NT$		NT$		US$
	(Unreviewed)				(Note	4)
For the period
Purchase
Powerchip ..................................................................	$28,583		$21,932			$721
Wafer Works ..............................................................	116,307			—		—
	$144,890		$21,932			$721
At end of period
Prepaid expense
Wafer Works ..............................................................	$1,414			$—		$—
Receipts in advance
Wafer Works ..............................................................		$—	$21,008			$691
Accrued expenses
eBsuccess ...................................................................		$—		$95		$3
Other prepaid expense
eBsuccess ...................................................................		$—		$540		$18

All transactions between the Corporation and the related parties were made at normal commercial prices and terms.

F-25

20. PLEDGED OR MORTGAGED ASSETS

The following assets had been pledged or mortgaged as collateral for short-term bank loans, import duties, letters of credit and sales agreements:

	March 31	March 31
2007 NT$ (Unreviewed) $318,040 35,208 $353,248	2008
	NT$ $260,356 191,699 $452,055	US$
		(Note 4) $8,564 6,306
		$14,870

21. COMMITMENTS AND CONTINGENCIES

In addition to those disclosed in other notes, significant commitments and contingencies of the Corporation as of March 31, 2008 were as follows:

a. Long-term purchase contracts:
(1) In December 2006, the Corporation entered into a long-term material supply agreement with Company A. Under the agreement, the Corporation should make the non-refundable payment from January 1, 2007 to December 31, 2015. In return, an agreed quantity of raw material shall be provided by Company A. As of March 31, 2008, an amount of US$10,031 thousand was recorded under prepaid expense.
(2) In May 2007, the Corporation entered into a long-term material supply agreement with Company B. Under the agreement, the Corporation should make the non-refundable payment from January 1, 2010 to December 31, 2017. In return, an agreed quantity of raw material shall be provided by Company B. As of March 31, 2008, an amount of EUR$4,800 thousand was under prepaid expense.
(3) In August 2007 and January 2008, the Corporation entered into the long-term material supply agreements with Company C, respectively. Under the agreements, the Corporation should make the non-refundable payment from January 1, 2008 to December 31, 2010 and from January 1, 2009 to December 31, 2018, respectively. In return, an agreed quantity of raw material shall be provided by Company C. As of March 31, 2008, an amount of US$34,265 thousand was recorded under prepaid expense.
(4) In February 2008, the Corporation entered into the long-term material supply agreements with Company D. Under the agreements, the Corporation should make the non-refundable payment from July 2009 to December 31, 2114. In return, an agreed quantity of raw material shall be provided by Company D. As of March 31, 2008, no payment has been made.
b. Long-term sales contracts:

Under several long-term sales contracts with customers, the Corporation should deliver its products at an agreed price from 2008 to 2012. A guarantee deposit shall be received in several contracts which could be in the form of cash payment, stand-by letter of credit, a bank guarantee or a warranty provided by the parent company of the buyer. Aforementioned deposit will be deducted as the products are delivered or transferred under the new contracts.

c. Unused letters of credit amounted to approximately EUR$19,859 thousand and US$510 thousand as of March 31, 2008.
d. In December 2007, the Corporation signed a construction contract in a total amount of NT$925,000 thousand with Fu Tsu Construction Co., Ltd., which shall be completed on October 26, 2008. As of March 31, 2008, construction cost accumulated to NT$9,400 thousand (US$309 thousand).
e. Also, the Corporation leased lands from the Science-Based Industrial Park Administration and Zinwell Company under renewable agreements expiring in March 2016 and December 2026, respectively. Recently, the annual rents are NT$9,600 thousand (US$316 thousand) and NT$17,147 thousand (US$564 thousand), respectively.

F-26

As of March 31, 2008, future lease payments were as follows:

Year 2008 (2nd to 4th quarter) ........................................................................... 2009 .......................................................................................................... 2010 .......................................................................................................... 2011 .......................................................................................................... 2012 .......................................................................................................... 2013 .......................................................................................................... 2014 and thereafter ....................................................................................	Amount	Amount
	NT$ $20,960 27,947 28,297 28,547 28,547 28,547 248,562 $411,407	US$
		(Note 4) $690 919 931 939 939 939 8,176
		$13,533

22. ADDITIONAL DISCLOSURES

Except for the following, the Corporation had no other significant transactions, investees and investments in Mainland China, for which disclosure is required by the Securities and Futures Bureau:

a. Financings provided: No
b. Endorsements/guarantees provided: No
c. Marketable securities held: No
d. Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: No
e. Acquisition of individual real estate at costs of at least NT$100 million or 20% of the paid-in capital: No
f. Disposal of individual real estate at prices of at least NT$100 million or 20% of the paid-in capital: No
g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: No
h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: No
i. Names, locations, and related information of investees over which the Company exercises significant influence: No
j. Financial instrument’s information: Please see note 18
k. Investments in Mainland China: No

F-27

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Neo Solar Power Corp.

We have audited the accompanying balance sheets of Neo Solar Power Corp. (the “Corporation”) as of December 31, 2006 and 2007, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Neo Solar Power Corp. as of December 31, 2006 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting standards, and accounting principles generally accepted in the Republic of China.

Deloitte & Touche Taipei, Taiwan Republic of China

January 28, 2008 (except as to Note 3 which is as of March 31, 2008)

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

F-28

NEO SOLAR POWER CORP.

BALANCE SHEETS December 31, 2006 and 2007

(In Thousands, Except Par Value)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 2 and 4) ........................................ Accounts receivable (Note 2) ............................................................. Other receivables ............................................................................... Inventories, net (Notes 2 and 5) ......................................................... Prepaid expense - current (Notes 17 and 19) ...................................... Pledged time deposits - current (Notes 4 and 18) ............................... Deferred income tax asset - current (Notes 2 and 13) ........................ Other current assets ........................................................................... Total current assets .................................................................... PROPERTIES (Notes 2, 6 and 18) Cost Machinery and equipment .............................................................. Research and development equipment ............................................ Office equipment ........................................................................... Leasehold improvement ................................................................. Miscellaneous equipment ............................................................... Accumulated depreciation .................................................................. Construction in process and advance payments .................................. Net properties ............................................................................ OTHER ASSETS Refundable deposits ........................................................................... Deferred charges, net (Notes 2, 7 and 17) .......................................... Deferred income tax assets - noncurrent (Notes 2 and 13) ................. Prepaid expense - noncurrent (Note 19) ............................................. Total other assets ...................................................................... TOTAL ..................................................................................................	2006 NT$ $103,809 93,745 15,249 149,473 112,642 33,733 — 6,904 515,555 406,391 1,052 1,505 8,577 2,142 419,667 (17,325) 402,342 9,456 411,798 2,316 1,214 — — 3,530 $930,883	2007	2007
		NT$ $595,937 171,131 38,694 425,982 988,902 9,489 7,633 2,001 2,239,769 443,746 1,052 1,957 11,327 3,474 461,556 (89,857) 371,699 403,363 775,062 6,601 15,277 23,886 1,025,902 1,071,666 $4,086,497	US$
			(Note 3) $19,603 5,629 1,273 14,013 32,530 312 251 66
			73,677
			14,597 35 64 373 114
			15,183 (2,956)
			12,227 13,268
			25,495
			217 503 786 33,746
			35,252
			$134,424

F-29

	2006	2007
	NT$	NT$	US$
			(Note 3)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term bank loans (Notes 8 and 18) .............................................	$167,900	$1,231,745	$40,518
Notes and accounts payable ...............................................................	79,551	23,763	782
Income tax payable (Notes 2 and 13) .................................................	516	14,778	486
Payables on equipment ......................................................................	43,958	7,687	253
Receipts in advance (Notes 17 and 19) ..............................................	—	116,308	3,826
Accrued expenses and other current liabilities (Notes 2, 9 and 17) ....	20,606	59,793	1,967
Total current liabilities ..............................................................	312,531	1,454,074	47,832
OTHER LIABILITIES
Guarantee deposits received ...............................................................	—	67	2
Total liabilities ..........................................................................	312,531	1,454,141	47,834
SHAREHOLDERS’ EQUITY (Note 10)
Capital stock, NT$10 par value
Authorized -100,000 thousand shares in 2006 and 200,000
thousand shares in 2007
Issued - 61,375 thousand shares in 2006 and 97,940 thousand
shares in 2007 ...........................................................................	613,750	979,400	32,217
Additional paid-in capital ..................................................................	—	1,100,000	36,184
Unappropriated earnings ....................................................................	4,602	552,956	18,189
Total shareholders’ equity ..........................................................	618,352	2,632,356	86,590
TOTAL ..................................................................................................	$930,883	$4,086,497	$134,424

The accompanying notes are an integral part of the financial statements.

F-30

NEO SOLAR POWER CORP.

STATEMENTS OF INCOME

Years Ended December 31, 2006 and 2007

(Period from January 1, 2006 to September 30, 2006 was in Development Stage) (In Thousands, Except Earnings per Share)

GROSS SALES .................................................................................. SALES RETURNS AND ALLOWANCES ........................................... NET SALES (Notes 2 and 21) ............................................................ COST OF SALES (Notes 14 and 17) .................................................. GROSS PROFIT ................................................................................. OPERATING EXPENSES (Note 14) Selling ........................................................................................... General and administrative ............................................................. Research and development ............................................................. Total operating expenses ........................................................ OPERATING (LOSS) INCOME .......................................................... NONOPERATING INCOME AND GAINS Interest income (Note 16) .............................................................. Foreign exchange gain, net (Note 2) .............................................. Gain on disposal of properties (Note 2) ......................................... Others ............................................................................................ Total nonoperating income and gains ..................................... NONOPERATING EXPENSES AND LOSSES Interest expense (Note 16) ............................................................. Others ............................................................................................ Total nonoperating expenses and losses ................................. INCOME BEFORE INCOME TAX ..................................................... INCOME TAX (EXPENSE) BENEFIT (Notes 2 and 13) ..................... NET INCOME ....................................................................................	2006 NT$ $380,534 329 380,205 350,021 30,184 2,892 22,688 20,990 46,570 (16,386) 9,382 17,253 31 898 27,564 443 4 447 10,731 (1,423) $9,308	2007	2007
		NT$ $3,714,250 52,162 3,662,088 3,075,578 586,510 12,008 49,388 21,336 82,732 503,778 17,466 14,186 — 6,264 37,916 7,523 824 8,347 533,347 15,007 $548,354	US$
			(Note 3) $122,179 1,716
			120,463 101,170
			19,293
			395 1,625 702
			2,722
			16,571
			574 467 — 206
			1,247
			247 27
			274
			17,544 494
			$18,038

F-31

2006 Before Income Tax After Income Tax NT$ NT$ $0.18 $0.16 $0.18 $0.16	2007	2007	2007
Before Income Tax NT$ $0.18 $0.18	Before Income Tax NT$ US$ (Note 3) $5.81 $0.1911 $5.59 $0.1839	After Income Tax
	NT$ $5.81 $5.59	NT$ $5.98 $5.74	US$
			(Note 3) $0.1967
			$0.1888

The accompanying notes are an integral part of the financial statements.

(Concluded)

F-32

NEO SOLAR POWER CORP.

Statements of Changes on Shareholders’ Equity Years Ended December 31, 2006 and 2007 (Period from January 1, 2006 to September 30, 2006 was in Development Stage) (In Thousands of New Taiwan Dollars)

	Capital	Stock		Accumulated	Accumulated
				Deficit	in	Additional			Total
	Shares			Development		Paid-in		Unappropriated	Shareholders’
	(Thousands)	Amount		Stage		Capital		Earnings	Equity
BALANCE,
JANUARY 1, 2006 .......	60,000	$600,000		$(4,706)		$—		$—	$595,294
Net loss for the period
from January 1, 2006 to
September 30, 2006 ......	—		—	(4,591)			—	—	(4,591)
Carry-over accumulated
deficit in development
stage ............................	—		—	9,297			—	(9,297)	—
Issuance of shares upon
exercise of employee
stock options ................	1,375		13,750		—		—	—	13,750
Net income for the period
from October 1, 2006 to
December 31, 2006 ......	—		—		—		—	13,899	13,899
BALANCE,
DECEMBER 31, 2006 ..	61,375	613,750			—		—	4,602	618,352
Issuance of capital stock -
January 23, 2007 ..........	20,000	200,000			—	200,000		—	400,000
Issuance of capital stock -
March 29, 2007 ............	15,000	150,000			—	900,000		—	1,050,000
Issuance of shares upon
exercise of employee
stock options ................	1,565		15,650		—		—	—	15,650
Net income in 2007 ..........	—		—		—		—	548,354	548,354
BALANCE,
DECEMBER 31, 2007 ..	97,940	$979,400			$—	$1,100,000		$552,956	$2,632,356

The accompanying notes are an integral part of the financial statements.

F-33

NEO SOLAR POWER CORP.

STATEMENTS OF CASH FLOWS

Years Ended December 31, 2006 and 2007 (Period From January 1, 2006 to September 30, 2006 was in Development Stage) (In Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES Net income .................................................................................... Adjustments to reconcile net income to net cash used in operating activities: ............................................................... Depreciation .............................................................................. Amortization .............................................................................. Gain on disposal of properties ................................................... Deferred income tax .................................................................. Net changes in operating assets and liabilities Accounts receivable ............................................................... Other receivable .................................................................... Inventories ............................................................................. Prepaid expenses ................................................................... Other current assets ............................................................... Notes and accounts payable ................................................... Income tax payable ................................................................ Receipts in advance ............................................................... Accrued expenses and other current liabilities ....................... Net cash used in operating activities ...................................... CASH FLOWS FROM INVESTING ACTIVITIES Increase (decrease) in pledged time deposits .................................. Acquisition of: Properties .................................................................................. Deferred charges ........................................................................ Proceeds of the disposal of properties ............................................ Increase in refundable deposits ...................................................... Net cash used in investing activities ...................................... CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term bank loans ................................................... Increase in guarantee deposits ........................................................ Proceeds of: Exercise of employee stock option ............................................. Issuance of capital stock ............................................................ Net cash provided by financing activities ..............................	2006 NT$ $9,308 17,300 293 (31) — (93,745) (15,249) (149,473) (112,582) (6,828) 79,513 516 — 18,945 (252,033) (33,733) (384,628) (1,507) 83 (2,118) (421,903) 167,900 — 13,750 — 181,650	2007	2007
		NT$ $548,354 72,532 1,687 — (31,519) (77,386) (23,445) (276,509) (1,902,162) 4,903 (55,788) 14,262 116,308 39,187 (1,569,576) 24,244 (472,067) (15,750) — (4,285) (467,858) 1,063,845 67 15,650 1,450,000 2,529,562	US$
			(Note 3) $18,038 2,386 56 — (1,037) (2,545) (771) (9,096) (62,571) 161 (1,835) 469 3,826 1,289
			(51,630)
			797 (15,528) (519) — (141)
			(15,391)
			34,995 2 515 47,697
			83,209

F-34

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ............................................................................. CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............ CASH AND CASH EQUIVALENTS, END OF YEAR ........................ SUPPLEMENTAL CASH FLOW INFORMATION Income tax paid ............................................................................. Interest paid ................................................................................... INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS Acquisition of properties ................................................................ Increase (decrease) in payables on equipment ................................ Cash paid .......................................................................................	2006 NT$ (492,286) 596,095 $103,809 $907 $386 $428,586 (43,958) $384,628	2007	2007
		NT$ 492,128 103,809 $595,937 $2,250 $6,037 $435,796 36,271 $472,067	US$
			(Note 3) 16,188 3,415
			$19,603
			$74
			$199
			$14,335 1,193
			$15,528

The accompanying notes are an integral part of the financial statements.

(Concluded)

F-35

NEO SOLAR POWER CORP.

NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2006 and 2007

(Period from January 1, 2006 to September 30, 2006 was in Development Stage) (In Thousands, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATION

Neo Solar Power Corp. (the “Corporation”) was incorporated on August 26, 2005. As of September 30, 2006, the Corporation was in development stage. The Corporation commenced its planned principal operations and made significant revenue since October 1, 2006. Its common shares have been traded on the Emerging Stock Market of the GreTai Securities Market since October 2007.

The Corporation’s business activities mainly include manufacturing and selling solar cells and other related business.

As of December 31, 2006 and 2007, the Corporation had 123 and 233 employees, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the Republic of China (“ROC”). Under these guidelines, law and principles, certain estimates and assumptions have been used for the allowance for doubtful accounts, allowance for loss on inventories, depreciation of properties, amortization of deferred charges and pension expenses. Actual results may differ from these estimates.

Significant accounting policies are summarized as follows:

Current and Noncurrent Assets and Liabilities

Current assets include cash (unrestricted) and cash equivalents, and those assets to be realized, sold or consumed within one year from the balance sheet date. All other assets such as properties and deferred charges are classified as noncurrent. Current liabilities are obligations to be settled within one year from the balance sheet date. All other liabilities are classified as noncurrent.

Cash Equivalents

Repurchase agreements collateralized by bonds with maturities of three months or less are classified as cash equivalents. Their carrying amount approximates fair value.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is provided on the basis of the aging of receivables and periodic review of the collectibility of receivables.

Inventories

F-36

Properties

Deferred Charges

Deferred charges are amortized using the straight-line method over the following periods: Computer software system, subsidy of electric lines and others - 3 years; fees of syndicated loan - 5 years.

When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.

Effective January 1, 2007, the Corporation adopted the newly released Statement of Financial Accounting Standards No. 37, “Accounting for Intangible Assets”. The Corporation had reassessed the useful lives and the amortization method of its recognized intangible assets at the effective date. Expenditures related to research activities are charged to expense when incurred. Expenditures related to development activities that meet the criteria for capitalization should be recognized as intangible asset and amortized over its estimated useful lives, otherwise, it should be charged to expense when incurred.

Capitalized and Other Expenditures

Expenditures that will benefit periods in the future are capitalized. Other expenditures are recorded as expenses or losses.

Employee Stock Option

Compensatory employee stock option plans that are granted or amended on or after January 1, 2004 must be accounted for in accordance with the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Corporation uses the intrinsic value method to evaluate the compensation cost of employee stock options and charges any compensation cost to expense over the employee vesting period specified in the stock option plans.

Revenue Recognition

F-37

Pension Costs

Contributions made under a defined contribution plan are recognized as pension cost during the year in which employees render services.

Income Tax

Tax credits for purchases of machinery, equipment and technology, research and development expenditures, and personnel training expenditures are recognized using the flow-through method.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Foreign-currency Transactions

At the balance sheet date, foreign-currency monetary assets and liabilities are revalued using prevailing exchange rates and the exchange differences are recognized in profit or loss.

Effects of Changes In Accounting Principles

On January 1, 2007, the Corporation adopted the newly released SFAS No. 37, “Accounting for Intangible Assets” and reassessed the useful lives of and the amortization method for its recognized intangible assets as of the same date. The adoption of the newly released statement had no impact on net income for the year ended December 31, 2007.

On January 1, 2006, the Corporation adopted the newly released SFAS No. 34, “Financial Instrument: Recognition and Measurement” and SFAS No. 36, “Financial Instrument: Disclosure and Presentation” and related revisions of previously released Statements. The adoption of these revised Statements had no impact on net income for the year ended December 31, 2006.

Reclassifications

Certain accounts in the financial statements as of and for the year ended December 31, 2006 have been reclassified to conform to the financial statements as of and for the year ended December 31, 2007.

F-38

3. U.S. DOLLAR AMOUNTS

4. CASH AND CASH EQUIVALENTS

	December 31	December 31
2006 NT$ $33,733 102,994 — 678 137 137,542 (33,733) $103,809	2007
	NT$ $365,486 209,727 30,000 — 213 605,426 (9,489) $595,937	US$
		(Note 3) $12,022 6,899 987 — 7
		19,915 (312)
		$19,603

As of December 31, 2007, time deposits with maturities of over one year amounted NT$3,000 thousand (US$99 thousand).

5. INVENTORIES, NET

	December 31	December 31
2006 NT$ $28,668 27,293 98,155 154,116 $(4,643) $149,473	2007
	NT$ $118,297 121,894 220,184 460,375 $(34,393) $425,982	US$
		(Note 3) $3,891 4,010 7,243
		15,144 $(1,131)
		$14,013

F-39

6. PROPERTIES

		Year Ended December 31, 2006	Year Ended December 31, 2006	Year Ended December 31, 2006
Machinery and Equipment NT$ $— 404,501 — 1,890 406,391 — 16,892 — 16,892 $389,499	Research and Development Equipment NT$ $— 1,052 — — 1,052 — — — — $1,052	Office Equipment NT$ $592 968 (55) — 1,505 28 211 (3) 236 $1,269	Leasehold Improvement NT$ $— 8,577 — — 8,577 — 152 — 152 $8,425	Miscellaneous Equipment NT$ $— 4,032 — (1,890) 2,142 — 45 — 45 $2,097	Construction in process and Advance Payments NT$ $— 9,456 — — 9,456 — — — — $9,456	Total
						NT$
						$592 428,586 (55) —
						429,123
						28 17,300 (3)
						17,325
						$411,798

F-40

		Total	NT$ US$	(Note 3)			$429,123 $14,116	435,796 14,335	— —	864,919 28,451			17,325 570	72,532 2,386	89,857 2,956	$775,062 $25,495
Construction in	Process and	Advance Payments	NT$ US$	(Note 3)			$9,456 $311	414,684 13,641	(20,777) (684)	403,363 13,268			— —	— —	— —	$403,363 $13,268
Research and	Development Leasehold Miscellaneous	Equipment Office Equipment Improvement Equipment	NT$ US$ NT$ US$ NT$ US$ NT$ US$	(Note 3) (Note 3) (Note 3) (Note 3)			$1,052 $35 $1,505 $50 $8,577 $282 $2,142 $70	— — 452 14 1,274 42 1,024 34	— — — — 1,476 49 308 10	1,052 35 1,957 64 11,327 373 3,474 114			— — 236 8 152 5 45 1	263 9 431 14 921 30 552 18	263 9 667 22 1,073 35 597 19	$789 $26 $1,290 $42 $10,254 $338 $2,877 $95	The details of properties pledged as collateral are shown in Note 18.
	Machinery and	Equipment	NT$ US$	(Note 3)			$406,391 $13,368	18,362 604	18,993 625	443,746 14,597			16,892 556	70,365 2,315	87,257 2,871	$356,489 $11,726
					Cost	Balance, beginning of	year .............................	Additions .........................	Reclassification ...............	Balance, end of year ........	Accumulated depreciation	Balance, beginning of	year .............................	Additions .........................	Balance, end of year ........	Balance, end of year, net .

F-41

7. DEFERRED CHARGES, NET

Cost Balance, beginning of year ............................................................................................. Additions ........................................................................................................................ Balance, end of year ....................................................................................................... Accumulated amortization Balance, beginning of year ............................................................................................. Additions ........................................................................................................................ Balance, end of year ....................................................................................................... Balance, end of year, net ................................................................................................	Year Ended December 31, 2006
	Subsidy of Electric Lines
	NT$
	$— 1,507
	1,507
	$— 293
	293
	$1,214

F-42

		US$	(Note 3)		$50	519	569		10	56	66	$503
	Total	NT$			$1,507	15,750	17,257		293	1,687	1,980	$15,277
	Others	NT$ US$	(Note 3)		$— $—	941 31	941 31		— —	79 3	79 3	$862 $28
Computer Software	System Subsidy of Electric Lines	NT$ US$ NT$ US$	(Note 3) (Note 3)		$— $— $1,507 $50	4,609 152 — —	4,609 152 1,507 50		— — 293 10	923 30 502 17	923 30 795 27	$3,686 $122 $712 $23
	Fee of Syndicated Loan	NT$ US$	(Note 3)		$— $—	10,200 336	10,200 336		— —	183 6	183 6	$10,017 $330
				Cost	Balance, beginning of year ..................	Additions .............................................	Balance, end of year ............................	Accumulated amortization	Balance, beginning of year ..................	Additions .............................................	Balance, end of year ............................	Balance, end of year, net .....................

F-43

8. SHORT-TERM BANK LOANS

	December 31	December 31
2006 NT$ $92,900 75,000 — $167,900	2007
	NT$ $290,000 742,043 199,702 $1,231,745	US$
		(Note 3) $9,540 24,409 6,569
		$40,518

9. ACCRUED EXPENSES

2006 NT$ ........................ $5,909 ........................ 6,986 ........................ 7,711 $20,606 Salaries NT$ US$ (Note 3) $— 33,327 (27,418) $5,909 $5,909 $194 89,736 2,952 (84,243) (2,771) $11,402 $375	December 31	December 31
	2007
	NT$ US$ (Note 3) $11,402 $375 26,774 881 21,617 711 $59,793 $1,967 Bonus	US$
		(Note 3) $375 881 711
		$1,967
NT$ $— 33,327 (27,418) $5,909 $5,909 89,736 (84,243) $11,402	NT$ $1,172 6,986 (1,172) $6,986 $6,986 43,228 (23,440) $26,774	US$
		(Note 3) $230 1,422 (771)
		$881

F-44

10. SHAREHOLDERS’ EQUITY

Under the Corporation’s Articles of Incorporation, upon closing of accounts, if there is surplus profit, the Corporation shall first pay the corporate income tax in accordance with law, make up the losses for the preceding years and then set aside a legal reserve of 10% of the net profit, unless the accumulated legal reserve equals to the total capital of the Corporation, and retain special reserve(s) pursuant to applicable laws. The board of directors shall make a proposal concerning appropriation of net profits or making up losses in accordance with the following percentage to be approved in the meeting of the shareholders:

a. Remuneration of directors and supervisors: 2%.
b. Employees’ bonus: As the Corporation starts to make a profit, sustained for 3 years at least, and with earnings per share no less than NT$0.5, after making up for the losses of the preceding years, setting a legal reserve and special reserve and then making up 20% as employee bonus. The calculation of the stock price is according to the related rule of the government when stock bonus is being paid. Furthermore, employee bonus will be 3% at least when the Corporation starts to make profit with EPS less than NT$0.5 or at the percentage approved in the meeting of directors and resolved in the meeting of the shareholders. The Corporation may issue stock bonus to employees of affiliated companies if these employees meet the conditions set by the board of directors or by the board’s duly authorized designee;
c. Any balance left over plus unappropriated earnings of preceding years will be the amount available for distributing to shareholders. Bonus to shareholders should be more than 20% of the preceding amount which can be paid by either cash or stocks. Cash bonus shall be more than 10% of the total bonus to shareholders. The appropriation should be made in accordance with the resolution of the meeting of shareholders.

Any appropriations of earnings are recorded in the year of shareholders’ approval.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

There was no earnings appropriation for 2005 because of the Corporation’s accumulated deficit. The information associated with such information is available at Market Observation System website.

The shareholders of the Corporation resolved on May 17, 2007 to offset the Corporation’s accumulated deficit of NT$4,706 thousand against the gains of NT$9,308 thousand in 2006. As of the date of the accompanying auditors’ report, the Corporation’s Board of Directors had not resolved the appropriation of 2007 earnings. Related information on appropriation can be accessed online through the Market Observation Post System of the Taiwan Stock Exchange Corporation.

F-45

11. EMPLOYEE STOCK OPTION

On December 30, 2005 and July 28, 2006, the Corporation’s Board of Directors approved the employee stock option plans, hereinafter referred to as “2005 Plan” and “2006 Plan,” respectively. Also, on November 22, 2007 the Financial Supervisory Commission, Executive Yuan approved the Corporation’ employee stock option plans, hereinafter referred to as “2007 Plan”. The 2005 Plan, 2006 Plan and 2007 Plan have reserved 6,000 thousand, 3,000 thousand and 4,800 thousand option units, respectively, with each unit representing 1 share of common stock. The 2005 Plan and the 2006 Plan granted are valid for 10 years and exercisable at certain percentages from 1 year after the date of grant, while the 2007 plan granted is valid for 6 years and exercisable at certain percentages from 2 years after the date of grant.

Other information on the stock option rights plan is as follows:

For the year ended December 31, 2006 Beginning balance ...... Options granted .......... Options exercised ....... Ending balance ........... For the year ended December 31, 2007 Beginning balance ...... Options granted .......... Options exercised ....... Ending balance ...........	2005	Plan Weighted Average Exercise Prices (NT$/ Per Share) $10 — 10 10 $10 — 10 10	2006	Plan Weighted Average Exercise Price (NT$/ Per Share) $— 10 — 10 $10 — 10 10	2007	Plan
	Number of Outstanding Stock Option Rights 6,000 — (1,375) 4,625 4,625 — (960) 3,665		Number of Outstanding Stock Option Rights — 3,000 — 3,000 3,000 — (605) 2,395		Number of Outstanding Stock Option Rights — 4,800 — 4,800	Weighted Average Exercise Prices (NT$/ Per Share)
						$— 26 — 26

As of December 31, 2007, the information about the outstanding stock options is as follows:

Exercise Price NT$ US$ (Note 3) $10 $0.33 10 0.33 26 0.86		Options Outstanding Weighted Average Remaining Contractual Life (in Years) Weighted Average Exercise Price (Per Share) NT$ US$ (Note 3) 8.00 $10 $0.33 8.58 10 0.33 5.99 26 0.86	Options Outstanding Weighted Average Remaining Contractual Life (in Years) Weighted Average Exercise Price (Per Share) NT$ US$ (Note 3) 8.00 $10 $0.33 8.58 10 0.33 5.99 26 0.86	Options Exercisable	Options Exercisable	Options Exercisable
	Number Outstanding (Per Option) 3,665 2,395 4,800 10,860	Weighted Average Remaining Contractual Life (in Years) 8.00 8.58 5.99		Number Exercisable (Per Option) 1,832 599 — 2,431	Weighted Average Exercise Price (Per Share)
NT$ $10 10 26			NT$ $10 10 26		NT$ $10 10 —	US$
						(Note 3) $0.33 0.33 —

F-46

In accordance with the interpretations issued by Accounting Research and Development Foundation of the Republic of China, the Corporation uses the intrinsic value method to evaluate compensation cost for employee stock options. The compensation cost recognized for the years ended December 31, 2006 and 2007 was zero since the stock options were granted at an exercise price higher than the equity per share of common shares on the measurement dates. Had the Corporation applied the fair value based method to evaluate compensation cost for the employee stock options granted, the assumptions and pro forma results of the Corporation for the years ended December 31, 2006 and 2007 would be as follows:

Method: Black-Scholes model Assumptions: Risk-free interest rate ...................................................................................... Expected life (in years) ................................................................................... Expected stock price volatility ......................................................................... Expected dividend yield Fair value per option (NT$/per share) ..............................................................	Years Ended December 31	Years Ended December 31
	2006 2.09%-2.33% 10 years 0.46%-1.05% $1.89-$2.08	2007
		2.08%-2.33% 6-10 years 0.46%-33.63% $1.89-$9.43

		Years	Ended December 31
	2006		2007
	NT$		NT$	US$
				(Note 3)
Net income:
Net income as reported ........................................................	$9,308		$548,354	$18,038
Pro forma net income ...........................................................	$2,080		$541,206	$17,803
Earnings per share (EPS):
Basic EPS as reported ..........................................................	$	0.16	$5.98	$0.1967
Pro forma basic EPS ............................................................	$	0.03	$5.90	$0.1940
Diluted EPS as reported .......................................................	$	0.16	$5.74	$0.1888
Pro forma diluted EPS .........................................................	$	0.03	$5.67	$0.1865

12. PENSION PLAN

The Corporation makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages in accordance with the Labor Pension Act and these contributions are recognized as pension costs. Thus, the pension costs for the years ended December 31, 2006 and 2007 were NT$1,430 thousand and NT$4,501 thousand (US$148 thousand), respectively.

F-47

13. INCOME TAX (EXPENSE) BENEFIT

a. The Income Basic Tax Act (the Act) took effect on January 1, 2006. The alternative minimum tax (AMT) imposed under the Act is a supplemental tax levied at a rate of 10% which is payable if the income tax payable determined pursuant to the Income Tax Law is below the minimum amount prescribed under the Act. The taxable income for calculating the AMT includes most of the income that is exempted from income tax under various laws and statutes. The Corporation has considered the impact of the Act in the determination of its tax liabilities.
b. A reconciliation of income tax currently payable for the years ended December 31, 2006 and 2007 are as follows:

Years	Ended December 31	Ended December 31
2006 NT$ $2,673 — 1,281 42 $3,996	2007
	NT$ $133,327 (110,150) 8,890 212 $32,279	US$
		(Note 3) $4,386 (3,623) 292 7
		$1,062

c. Income tax (expense) benefit for the years ended December 31, 2006 and 2007 consisted of:

Years	Ended December 31	Ended December 31
2006 NT$ $(3,996) — 1,423 1,150 23,846 (1,150) 2,561 (25,257) — — $(1,423)	2007
	NT$ $(32,279) (460) 16,370 — (3,531) — 8,623 26,427 (131) (12) $15,007	US$
		(Note 3) $(1,062) (15) 538 — (116) — 284 869 (4) —
		$494

F-48

d. Deferred income tax assets and liabilities were as follows:

	December 31	December 31
2006 NT$ $65 (65) $— $23,846 2,516 26,362 (26,362) $—	2007
	NT$ $7,633 — $7,633 $20,315 3,571 23,886 — $23,886	US$
		(Note 3) $251 —
		$251
		$668 118
		786 —
		$786

The effective tax rate for deferred income taxes as of December 31, 2006 and 2007 was 25%.

e. The movement of income tax payable are as follows:

Years	Ended December 31	Ended December 31
2006 NT$ $— 1,423 (907) — $516	2007
	NT$ $516 16,369 (2,238) 131 $14,778	US$
		(Note 3) $17 539 (74) 4
		$486

f. The related information under the Integrated Income Tax System is as follows:

	December 31	December 31
2006 NT$ $—	2007
	NT$ $1,584	US$
		(Note 3) $52

The expected creditable ratio for 2007 was 0.29%. As of December 31, 2006 there was no appropriation of the earnings.

F-49

g. As of December 31, 2007, the tax credits were as follows:

Regulatory Basis		Total Creditable	Total Creditable	Total Creditable	Remaining	Remaining	Expiry
of Tax Credits	Items	Amounts			Creditable	Amounts	Year
		NT$	US$		NT$	US$
			(Note 3)			(Note 3)
Statute for Upgrading	Personnel training	$27		$1	$—	$—	2010
Industries	expenditures	42		1	42	1	2011
		$69		$2	$42	$1
Statute for Upgrading	Research and	$1,043		$34	$—	$—	2010
Industries	development	2,725		90	2,725	90	2011
		$3,768		$124	$2,725	$90
Statute for Upgrading	Purchase of machinery	$22,335		$734	$7,035	$231	2010
Industries	and equipment	10,513		346	10,513	346	2011
		$32,848	$1,080		$17,548	$577

h. Income from the following projects is exempt from income tax:

Tax-Exemption Period Statute for Upgrading Industries Initial Investment ................ January 1, 2007- November 30, 2010

i. Income tax returns through 2005 had been examined by the tax authorities.

F-50

				US$	(Note 3)		$4,260	204	148	254	$4,866	$2,386	$56
			Total	NT$			$129,484	6,175	4,501	7,713	$147,873	$72,532	$1,687
2007		Classified as Operating	Expenses	NT$ US$	(Note 3)		$44,924 $1,478	1,751 58	1,468 48	3,127 103	$51,270 $1,687	$1,946 $64	$1,627 $54
			Classified as Cost of Sales	NT$ US$	(Note 3)		$84,560 $2,782	4,424 146	3,033 100	4,586 151	$96,603 $3,179	$70,586 $2,322	$60 $2
			Total	NT$			$39,393	1,772	1,430	1,215	$43,810	$17,300	$293
2006	Classified as	Operating	Expenses	NT$			$25,250	1,338	809	601	$27,998	$367	$293
		Classified as	Cost of Sales	NT$			$14,143	434	621	614	$15,812	$16,933	$—
						Labor cost	Salary ...........................	Labor/health insurance ..	Pension .........................	Others ...........................		Depreciation ......................	Amortization .....................

F-51

The numerators and denominators used in calculating basic and diluted earnings per share (EPS) were as follows:	EPS (Dollars)	Amount (Numerator) Share	(Denominator)	(Thousand) Before Income Tax After Income Tax Before Income Tax After Income Tax	NT$ US$ NT$ US$ NT$ US$ NT$ US$	(Note 3) (Note 3) (Note 3) (Note 3)	For the year ended December 31, 2006	Net Income ..................................... $10,731 $9,308	Basic and Diluted EPS	Income of common and potential	common shareholders ............. $10,731 $9,308 60,008 $0.18 $0.16	For the year ended December 31, 2007	Net income ..................................... $533,347 $17,544 $548,354 $18,038	Basic EPS	Income of common shareholders . $533,347 $17,544 $548,354 $18,038 91,765 $5.81 $0.1911 $5.98 $0.1967	Effect of dilutive securities	Stock options ............................. — — — — 3,710	Diluted EPS	Income of common and potential	common shareholders ................. $533,347 $17,544 $548,354 $18,038 95,475 $5.59 $0.1839 $5.74 $0.1888	The Corporation’s employee stock option plans (Please see Note 11) were potential common shares. Under SFAS No. 24, “Earnings Per Share,” the Corporation tested the potential common share	by the treasury stock method. As the employee stock option plans have no dilution effects in 2006; it had not been included in the calculation of diluted earnings per share.

F-52

16. DISCLOSURES FOR FINANCIAL INSTRUMENTS

a. As of December 31, 2006 and 2007, the Corporation had no derivative instruments.
b. Fair values of financial instruments were as follows:

December 31

2006 Carrying Value Fair Value NT$ NT$ $103,809 $103,809 93,745 93,745 33,733 33,733 167,900 167,900 79,551 79,551 43,958 43,958	2007	2007	2007
Carrying Value NT$ $103,809 93,745 33,733 167,900 79,551 43,958	Carrying Value NT$ US$ (Note 3) $595,937 $19,603 171,131 5,629 9,489 312 1,231,745 40,518 23,763 782 7,687 253	Fair Value
	NT$ $595,937 171,131 9,489 1,231,745 23,763 7,687	NT$ $595,937 171,131 9,489 1,231,745 23,763 7,687	US$
			(Note 3) $19,603 5,629 312 40,518 782 253

c. Methods and assumptions used in determining fair values of financial instruments

The carrying amounts of the following short-term financial instruments approximate their fair values because of their short maturities: cash and cash equivalents, account receivables, pledged time deposits, short-term bank loans; notes and accounts payable and payable on equipment.

d. Fair values of financial assets and liabilities based on quoted market prices or valuation techniques were as follows:

Quoted Market Prices December 31 2006 2007 NT$ NT$ US$ (Note 3) $103,809 $595,937 $19,603 — — — 33,733 9,489 312 — — — — — — — — —	Quoted Market Prices December 31 2006 2007 NT$ NT$ US$ (Note 3) $103,809 $595,937 $19,603 — — — 33,733 9,489 312 — — — — — — — — —	Valuation Techniques	Valuation Techniques	Valuation Techniques
		December 31
2006 NT$ $103,809 — 33,733 — — —		2006 NT$ $— 93,745 — 167,900 79,551 43,958	2007
	NT$ $595,937 — 9,489 — — —		NT$ $— 171,131 — 1,231,745 23,763 7,687	US$
				(Note 3) $— 5,629 — 40,518 782 253

F-53

e. As of December 31, 2006 and 2007, financial assets (liabilities), which were exposed to fair value interest rate risk and cash flow interest rate risk, were as follows:

	December 31	December 31
2006 NT$ $33,733 102,994 (167,900)	2007
	NT$ $395,486 209,727 (1,231,745)	US$
		(Note 3) $13,009 6,899 40,518

f. As of December 31, 2006 and 2007, interest income (expenses) arising from the financial assets (liabilities), excluding those at fair value through profit and loss, were as follows:

Years Ended December 31

Total interest income ...................................................... Total interest expenses ...................................................	2006 NT$ $9,382 443	2007	2007
		NT$ $17,466 7,523	US$
			(Note 3) $574 247

g. Financial risks
1) Market risk. The Corporation had no financial assets (liabilities) held for trading. Thus the market risk is insignificant.
2) Credit risk. The Corporation will incur a loss if the counter-parties or third-parties breach the contracts, which are affected by such factors as the concentrations of counter parties, components of financial instruments, contract amounts, and the receivables on the contracts. Thus, contracts with positive fair values on the balance sheet date are evaluated for credit risk.
3) Liquidity risk. The Corporation has sufficient operating capital to meet the cash demand upon settlement of financial instruments. Therefore liquidity risk is not considered to be significant.
4) Cash flow interest rate risk. Short-term bank loans mainly bear floating interest rates. Thus, the fluctuations of market interest rates will result in changes in the Corporation’s future cash flows.

17. RELATED-PARTY TRANSACTIONS

a. Related parties

Related Party

Relationship

Powerchip Semiconductor Corporation (“Powerchip”)

Same chairman

Wafer Works Corp. (“Wafer Works”)

Parent company of Heli-Vantech Corp., which is the supervisor of the Corporation

eBsuccess Solutions Inc. (“eBsuccess”)

Same chairman

F-54

b. Related-party transactions:

	2006		2007
	NT$		NT$	US$
				(Note	3)
For the year
Purchase
Wafer Works ..........................................................	$127,638		$298,536	$9,820
Powerchip ..............................................................	25,974		59,205	1,948
	$153,612		$357,741	$11,768
Purchase of the deferred expenses
eBsuccess ..............................................................		$—	$190		$6
At end of year
Prepaid expense
Wafer Works ..........................................................	$1,060		$—		$—
Advanced receive
Wafer Works ..........................................................		$—	$13,077		$430
Accrued expenses
eBsuccess ..............................................................		$—	$95		$3

All transactions between the Corporation and the related parties were made at normal commercial prices and terms.

18. PLEDGED OR MORTGAGED ASSETS

The following assets had been pledged or mortgaged as collateral for short-term bank loans, import duties, letters of credit and sales agreements:

	December 31	December 31
2006 NT$ $332,496 33,733 $366,229	2007
	NT$ $269,797 9,489 $279,286	US$
		(Note 3) $8,875 312
		$9,187

F-55

19. COMMITMENTS AND CONTINGENCIES

In addition to those disclosed in other notes, significant commitments and contingencies of the Corporation as of December 31, 2007 were as follows:

a. Long-term purchase contracts:
(1) In December 2006, the Corporation entered into a long-term material supply agreement with Company A. Under the agreement, the Corporation should make the non-refundable payment from January 1, 2007 to December 31, 2015. In return, an agreed quantity of raw material shall be provided by Company A. As of December 31, 2007, an amount of US$6,125 thousand was recorded under prepaid expense.
(2) In May 2007, the Corporation entered into a long-term material supply agreement with Company B. Under the agreement, the Corporation should make the non-refundable payment from January 1, 2010 to December 31, 2017. In return, an agreed quantity of raw material shall be provided by Company B. As of December 31, 2007, an amount of EUR$4,800 thousand was recorded under prepaid expense.
(3) In August 2007, the Corporation entered into a long-term material supply agreement with Company C. Under the agreement, the Corporation should make the non-refundable payment from January 1, 2008 to December 31, 2010. In return, an agreed quantity of raw material shall be provided by Company C. As of December 31, 2007, an amount of US$30,000 thousand was recorded under prepaid expense. Also, in January 2008, the Corporation entered into a long-term material supply agreement with Company C. Under the agreement, the Corporation should make the non-refundable payment from January 1, 2009 to December 31, 2018. In return, an agreed quantity of raw material shall be provided by Company C. As of January 28, 2008, no payment has been made by the Corporation to Company C.

b. Long-term sales contracts:

c. Unused letters of credit amounted to approximately EUR$7,801 thousand.
d. In December 2007, the Corporation signed a construction contract in a total amount of NT$925,000 thousand with Fu Tsu Construction Co., Ltd., which shall be completed on October 26, 2008. As of December 31, 2007, construction cost accumulated to NT$9,400 thousand (US$309 thousand) has been recognized.
e. Also, the Corporation leased lands from both the Science-Based Industrial Park Administration and Zinwell Company under renewable agreements expiring in March 2016 and December 2026, respectively. Recently, the annual rents are NT$9,600 thousand (US$316 thousand) and NT$17,147 thousand (US$564 thousand), respectively.

As of December 31, 2007, future lease payments were as follows:

Year 2008 .......................................................................................................... 2009 .......................................................................................................... 2010 .......................................................................................................... 2011 .......................................................................................................... 2012 .......................................................................................................... 2013 and thereafter ....................................................................................	Amount	Amount
	NT$ $27,647 27,947 28,297 28,547 28,547 277,109 $418,094	US$
		(Note 3) $909 919 931 939 939 9,116
		$13,753

F-56

20. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the SFB for the Corporation:

a. Financings provided: No
b. Endorsements/guarantees provided: No
c. Marketable securities held: No
d. Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: No
e. Acquisition of individual real estate at costs of at least NT$100 million or 20% of the paid-in capital: Table 1.
f. Disposal of individual real estate at prices of at least NT$100 million or 20% of the paid-in capital: No
g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Table 2.
h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: No
i. Names, locations, and related information of investees over which the Corporation exercises significant influence: No
j. Financial instrument’s information: Please see Note 16.
k. Investments in Mainland China: No

21. SEGMENT FINANCIAL INFORMATION

a. Industry: The Corporation’s business activities mainly included manufacturing and selling solar cells.
b. Geographic information: The Corporation operates only in the Republic of China.
c. Export sales: The export sales details as follows:

Years	Ended December 31	Ended December 31
2006 NT$ $262,859 32,342 $295,201	2007
	NT$ $2,136,161 1,122,844 $3,259,005	US$
		(Note 3) $70,268 36,936
		$107,204

d. Customers accounting for more than 10% of net sales:

Years	Ended December 31	Ended December 31
2006 NT$ $142,143 — 106,575	2007
	NT$ $1,157,967 499,172 —	US$
		(Note 3) $38,091 16,420 —

F-57

					—
			Other	Terms
Year Ended December 31, 2007	(Amounts in Thousands of New Taiwan Dollars)	Prior Transaction of Related Counter-party	Company Transaction Transaction Payment Counter- Nature of Price Purpose of Transfer	Name Property Date Amount Status Party Relationship Reference Acquisition Owner Relationship Date Amount	Neo Solar Construction- December $925,000 $9,400 Fu Tsu — — — — $— According Factory	Power in-progress 28, 2007 Construction to the construction	Corp. ..... Co., Ltd. contracts

F-58

							—
Year Ended December 31, 2007	(Amounts in Thousands of New Taiwan Dollars)	Notes/Accounts	Abnormal Payable	Transaction Details Transaction or Receivable	Purchase/ % To Payment Unit Payment Ending % of	Company Name Related Party Nature of Relationship Note Sale Amount Total Terms Price Terms Balance Total	Neo Solar Power Corp. ......... Wafer Works Parent company of Heli-Vantech Purchase $298,536 10% Prepaid — Prepaid — —	Corp. Corp., which is the supervisor of expense expense	the Corporation

F-59

==> picture [137 x 65] intentionally omitted <==

Printed by IFN Financial Press Limited

28474

AI assistant

URE — Capital/Financing Update 2013

52346_rns_2013-10-15_39e008e7-c1b7-45d6-bc65-728e8d619ce5.pdf

Neo Solar Power Corp.

U.S.$50,000,000 2% Convertible Bonds due 2011

Issue Price: 100%

For a discussion of certain factors that should be considered in connection with an investment in the Bonds, see “Risk Factors” on page 4 herein.

TABLE OF CONTENTS

Risks Related to Our Company and Our Industry

Our limited operating history may not serve as adequate indication of our future prospects.

Failure to obtain sufficient silicon wafers could prevent us from timely fulfilling our customers’ order and as a result decrease our revenue.

The reduction or elimination of existing government subsidies and economic incentives for on-grid solar energy applications could cause a reduction in demand for our products and lead to decreases in our revenues.

We face intense competition in the PV cell market and also competition with other alternative renewable energy sources.

We may not be able to manage our growth effectively.

Our cost of production is affected by fixed-price and prepaid arrangements with our suppliers.

We currently require all our customers to prepay for their orders, but this business model may not be sustainable.

Fluctuations in exchange rate could have a negative impact on our revenue.

Our lack of intellectual property rights may expose us to infringement or misappropriate claims by third parties.

We are currently applying for the listing of our Shares on the Taiwan Stock Exchange (the “TSE”) and we can not guarantee the outcome of this application.

Risks Related to ROC

Implementation of the Alternative Minimum Tax (“AMT”) Act may affect our tax exemptions.

Taiwan is susceptible to earthquakes, typhoons and other natural disasters that could disrupt the normal operation of our business and have a material effect on our results of operations.

An outbreak of severe acute respiratory syndrome or avian flu in Asia, or similar adverse public health developments, may severely disrupt our business and operations.

Disruptions in Taiwan’s political environment could seriously harm the our business

USE OF PROCEEDS

BUSINESS

Overview

Our Competitive Strengths

Close relationships with reputable suppliers and customers

High conversion efficiencies and low breakage rate

Quality customer services

Experienced management team with superior operational record

Business Strategies

Expand manufacturing capacity

Secure additional high-quality wafer supplies

Diversify our products lines

Our Products

Product types and manufacturing process

Manufacturing facilities and expansion

Raw Materials

Sales and Marketing

Main markets and marketing

Customer support and services

Research and Development

Competition

Strategic Alliance

Litigations

MANAGEMENT AND EMPLOYEES

Directors

Audit Committee

Executive Officers

Employees

TERMS AND CONDITIONS OF THE BONDS

1. Status

2. Form, Denomination, Title and Register

(A) Form and Denomination

(C) Register

3. Negative Pledge

4. Interest

5. Transfers of Bonds; Issue of Definitive Certificates

(A) Transfers

(B) Delivery of New Definitive Certificates

(C) Formalities Free of Charge

(D) Restricted Transfer Periods

(E) Regulations

6. Conversion

(A) Conversion Right

(B) Conversion Procedure

(C) Adjustments to Conversion Price

(iii) Division, Consolidation and Re-classification of Shares:

(viii) Other Distributions to Shareholders

(x) Other Issues of Shares:

(xi) Issues of Equity Related Securities:

(xii) Analogous Events and Modifications:

(D) Conversion Price Reset

(E) Mergers; Disposals

(F) Conversion Undertakings

7. Payments

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

(B) Registered Accounts

URE Capital/Financing Update 2013