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Quanta Computer Inc. Annual Report 2011

Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

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Page 1: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

Quanta Computer Inc.

Annual Report 2011

Page 2: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

Report to Shareholders

Looking back at the past year, the global PC industry was challenging due to several

unfortunate incidents that led to the global economic slowdown. The series of impactful events

happened in FY2011 include the earthquake in Japan that caused component shortages, followed by

the European debt crisis that impacted the demand of end consumers, then the slow recovery of the

global economy in Europe and in the United States. Lastly, the flood in Thailand that lasted for

almost two months in 4Q of FY2011 also led to HDD supply constraint. However, despite the

challenging global environment, Quanta Computer continues to deliver steady growth momentum.

Through endeavors of our employees, Quanta Computer delivered an outstanding performance in

FY2011. The Company continues to deliver solid business growth as a valuable return to our long-

term investors. Quanta’s performance for FY2011 and outlook for FY2012 are as follow:

I. Revenue and Income

Net revenue in year 2011 sustained at approximately NT$1.06TN, the sustaining revenue was

coupled with improved product mix that led to margin improvement and better profitability. Net

income after tax reached historical high of NT$23.1BN, an impressive increase of NT$4.5BN from

NT$18.6BN in 2010. EPS in 2011 was NT$6.02. Non-operating income and expenses were

NT$13.5BN and NT$1BN respectively.

II. Research and Development (R&D)

The core business of Quanta Computer lies in notebook PCs, the area where we constantly

demonstrate expertise and excellence in notebook manufacturing and innovative product design. In

addition to our core business in notebook manufacturing, we anticipate revenue contribution from

other non-NB business to accelerate gradually in the coming years.

Quanta Computer leverages the “New 3C” ideology to define new product development and

business model. The Company identifies itself as a “System Solution Provider” in Cloud Computing

business through integrating “Cloud Computing”, “Connectivity Technology”, and “Client Device”.

Specifically, Quanta would provide optimized products and value-added services to customers

leveraging the core concept of “defining the basic needs of human being and create value in bringing

such services”. We aim for leveraging business strength in cloud computing, connectivity, and client

devices to provide superior integrated solutions. The ultimate goal is to achieve “3A Coverage” that

enables cloud services to be available at “Anytime”, “Anywhere”, and to “Anyone”. Quanta is

enabling its cloud computing services to reach balanced sharing that is mutually beneficial in order to

deliver a brilliant outcome. Moreover, Quanta is taking the role of a corporate citizen in the society

by utilizing technology to advance the next civilization in human race.

Page 3: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

III. Operations and Management

Upon the company’s strategy on product diversification and vertical integration, Quanta

Computer continues to focus on building the fundamentals. In order to optimize resources and to

maximize operation efficiency, the organization is divided into three core business groups, including

notebook business group, cloud computing business group, and manufacturing business group.

Acting on the ideology of an achiever, the management team at Quanta Computer carries out

the new 3C concept in innovative research and product development. To sustain market leadership

and to strengthen competitiveness, the Company focuses its operations on the following areas:

i.Business Expansion:

Destructive Innovation, Start from the “Heart” – spark creativity and seek innovative

solutions to improve current operation. Explore new models and product design.

Expand Revenue Growth – explore new business opportunities and potential customer

base.

ii.Cost Reduction:

Optimize Production – through endeavors of our employees, the Company focuses on

improving operations efficiency through every step in the process.

Control Spending – optimize resources and evaluate alternative solutions at lower

costs. Aside from controlling unnecessary spending, the Company aims to reduce

inventory level, improve yield rate, leverage waste management control to achieve

overall costs control target.

IV. Outlook in 2012

Quanta Computer leverages innovation, creativity, and new service model to satisfy the ever

changing need of the “Generation C”. The company adopts the “3R” concept as ways to successfully

transform its business model from a hardware manufacturer to a cloud computing solution provider.

The Company further advances its understanding of customers’ needs by listening to customers and

re-engineering its business in the following areas:

Re-think: Tap into 3C – Cloud Computing, Connectivity, and Client Device –

And capture emerging business opportunities in 3C

Re-educate: Replicate the success story of Quanta Research Institute to build Quanta

Elite School to further spark creative thinking and to embrace new

challenges

Re-invent: Adjust corporate culture, vision, and core competence

Page 4: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

Despite the increasing challenges in the future, Quanta strives to improve and to sustain its

leadership position in the industry. The Company continues to devote more resources in cultivating

new talents and to strengthen our overall competitive edge. The core value of Quanta Computer is

VPA – Vision, Passion, and Action. The value of VPA is the driving force to sustain growth through

visualizing your dreams, having passion in the work you do, and putting everything in action. Quanta

Computer will act on the VPA value to lead the Company in the new 3C era and to head towards the

generation of Cloud Computing in order to deliver long-term value growth to our shareholders.

Chairman: Barry Lam

President: C.C. Leung

Chief Financial Officer: Elton Yang

Page 5: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

* Note: ownership is 100% unless otherwise specified

99.90%

24.81%

75.19%

0.43%

29.07%

37%

9%

%

9%

Quanta Computer Inc.

Quanta Int’l Ltd. (QIL)

99.99%

36.76%

Quanta Storage

Inc.

0.81%

Quanta Venture Capital

Co., Ltd.

Gem-Tech Precision Mold Co.,

Ltd.

FaceVsion

(HK)

Technology

Ltd

Puzzle

Logic

USA, Inc.

Puzzle

Logic

Asia, Ltd

Puzzle Logic (ShenZhen)

Ltd.

FaceVsion

Technology

USA LLC

Quanta

Cloud

Tech-

nology

Inc.

Puzzle Logic

Inc.

FaceVsion (Changshu)

Trading Co., Ltd.

QCJ

FaceVsion Technology,

Inc.

RoyalTek Company

Ltd.

QCTI Ltd.

Royaltek

Trading (Changshu)

Co., Ltd.

TWDT Precision Co., Ltd.

Quanta

Micro-

Systems

Inc.

Fly Dragon

International

Ltd.

Dragon City

Metallic

(ChangShu)

Co., Ltd.

DTG

(BVI) Ltd

CloudCast

Tech-

nology Inc.

QMJ

RoyalTek Int’l Enterprises

Ltd.

(Ref. to Chart 2)

(Ref. to Chart 1)

Page 6: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

Quanta Computer Inc.

60%

19%

95%

Chart 1

50%

Tech-

Wave

(Shang-

hai)

Warehous-

ing Co.,

Ltd.

(TWW)

QCT

LLC

(QCTU)

Tech-

Wave

(Chong-

qing)

Warehous

-ing Co.,

Ltd.

(TWW)

Tech-

Full

(Chang-

shu)

Computer

Co., Ltd.

(TNC)

Quanta Int’l Ltd.

(QIL)

Kenseisha

Shanghai

P.M.P.

Co., Ltd.

(KSH)

Cloudex

(Shang

-hai)

Tech-

nology

Co., Ltd.

QCE

Computer BV

(QCE)

Quanta Asia

Ltd.

(QAL)

Quanta Capital

Management

Ltd. (QCML)

Access

Int’l Co.

(AIC)

Quanta

Research

Int’l Inc. (QRII)

QCG

Computer

GMBH

QCH

Inc.

(QCH)

Q_Bus

Int’l

Ltd.,

Quanta

Manufac-

turing Inc.

(QMI)

Exmore

Services

Holding

Limited,

Zhan Yun

(Changshu)

Electronics

Co., Ltd.

Quanta Int’l

Technology

Ltd.

(QIT)

Exmore Services

Holding

(Hong Kong) LD

Quanta

Development

Ltd.

(QDL)

Tech

Chain

Ltd.

Tech Chain

(Hong Kong)

LTD

THINKTECH

IND. E COM. DE

INFORMATICA

SA

Quanta

Service

Inc.

(QSI)

Quanta

Computer

USA, Inc

(QCA)

Quanta

Development

(Hong Kong) LTD

Quanta

Research

Cambridge

Inc.

(QRC)

Tech-

Front

(Shang-

hai)

Computer

Co., Ltd.

(TFC)

Tech-

Com

(Shang-hai)

Computer

Co., Ltd. (TCC)

Tech-

Trend

(Shang-

hai)

Computer

Co., Ltd.

(TTC)

Tech-

Lead

(Shang-

hai)

Computer

Co., Ltd.

(TLC)

Tech-

Giant

(Shang-

hai)

Computer

Co., Ltd.

(TGC)

Zhan Yun

(Chongqing)

Electronics

Co., Ltd.

QMN

LLC

QCHN,

LLC.,

QSN,

LLC.,

QCN,

LLC Standard

(Shanghai) Energy

Co., Ltd.

Tech-

Front

(Chong-

qing)

Computer

Co., Ltd.

(TFQ)

Cloudex

(Bei-

jing)

Tech-

nology

Co., Ltd.

Gem-Tech

(Shanghai)

Precision

Mold Co.,

Ltd.

Zhan Yun

(Shanghai)

Electronics Co., Ltd.

* Note: ownership is 100% unless otherwise specified

Page 7: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

* Note: ownership is 100% unless otherwise specified

Quanta Storage Inc.

Quanta Storage

International Lt.

(CAYMAN)

Quanta Storage

(BVI)Ltd.

Quanta Storage (Shanghai) Ltd.

Quanta Storage

Holding Ltd.

E-Forward

Technology Ltd.

Quanta Storage

Asia Ltd.

Quanta Storage

America, Inc.

Quanta Storage

Investment Ltd.

Techman Electronics

(Changshu) Co., Ltd.

Quanta Storage

Holding (HK)

Ltd.

Quanta Storage Investments (HK) Ltd.

Quanta Storage (Changshu)

Ltd.

Chart 2

Page 8: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

(English Translation of Financial Report Originally Issued In Chinese)

Independent Auditors’ Report

To the Board of Directors and Shareholders of

Quanta Computer Inc.:

We have audited the accompanying consolidated balance sheets of Quanta Computer Inc. and its

subsidiaries (the Consolidated Company) as of December 31, 2011 and 2010, and the related

consolidated statements of income, changes in stockholders’ equity, and cash flows for the years then

ended. These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with “Rules Governing Auditing and Certification of

Financial Statements by Certified Public Accountants” and auditing standards generally accepted in

the Republic of China. Those regulations and standards require that we plan and perform the audit to

obtain reasonable assurance about whether the consolidated financial statements are free of material

misstatements. An audit includes examining, on a test basis, evidences supporting the amounts and

disclosures in the consolidated 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 consolidated financial statements referred to above present fairly, in all material

respects, the financial position of Quanta Computer Inc. and its subsidiaries as of December 31, 2011

and 2010, and the results of its operations and its consolidated cash flows for the years then ended in

conformity with Guidelines Governing the Preparation of Financial Reports by Securities Issuers,

and accounting principles generally accepted in the Republic of China

KPMG

CPA: Lin, Wan Wan

Chiang, Chung Yi

March 29, 2012

Page 9: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

Amount % Amount %

ASSETS

Current Asset:

Cash and cash equivalents $ 263,884,423 40 137,043,179 27

Financial assets reported at fair value through profit or loss - current 355,316 - 500,021 -

Available-for-sale financial assets - current 19,807,504 3 34,097,722 7

Held-to-maturity financial assets - current 734,138 - - -

Financial assets carried at cost - current - - 841 -

Notes receivable, net 20,964 - 8,325 -

Accounts receivable, net

- Related parties 239,571 - 319,057 -

- Other customers 187,367,040 28 181,192,894 36

Other receivables, net

- Related parties 802 - 266,942 -

- Other customers 2,069,338 - 1,370,895 -

Other financial asset - current 13,404,752 2 8,065,518 2

Inventories 113,906,740 17 81,374,457 16

Prepayments 1,165,239 - 1,474,625 -

Deferred income tax assets - current 2,413,474 - 1,931,477 -

Other current assets 826,112 - 675,111 -

606,195,413 90 448,321,064 88

Investments:

Available-for-sale financial assets - noncurrent 204,011 - 2,782,747 1

Held-to-maturity financial assets - noncurrent - - 137,568 -

Financial assets carried at cost - noncurrent 7,385,277 1 7,833,013 2

Long-term investments at equity 683,703 - 1,016,412 -

Other financial assets - noncurrent 297,081 - 332,449 -

8,570,072 1 12,102,189 3

Property, Plant and Equipment at Cost:

Land 2,999,883 1 2,999,883 1

Buildings 28,250,508 4 24,546,582 5

Machinery and equipment 39,550,107 6 32,225,214 6

Molds and tools 583,793 - 431,772 -

Transportation equipment 163,789 - 142,086 -

Furniture and office facilities 1,726,343 - 1,489,541 -

Leasehold improvements 1,638,937 - 1,485,233 -

Miscellaneous equipments 3,602,445 1 2,905,317 1

78,515,805 12 66,225,628 13

Less: Accumulated depreciation (25,487,715) (3) (19,114,473) (4)

Less: Accumulated impairment - - (84,000) -

Construction in progress 169,466 - 1,112,411 -

Prepayments for equipments 125,157 - 93,522 -

53,322,713 9 48,233,088 9

Intangible Assets 1,724,178 - 1,639,057 -

Other Assets

Rental assets 183,839 - 261,307 -

Idle assets 74,177 - - -

Deferred income tax assets -noncurrent 88,418 - 788,477 -

Other assets 749,912 - 638,799 -

1,096,346 - 1,688,583 -

TOTAL ASSETS $ 670,908,722 100 511,983,981 100

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

December 31, 2011 December 31, 2010

(English Translation of Financial Report Originally Issued in Chinese)

QUANTA COMPUTER INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2011 AND 2010

(All Amounts Expressed in Thousands of New Taiwan Dollars, Except for Share Data)

Page 10: Quanta Computer Inc. Annual Report 2011ww1.quantatw.com/News_Core/program/news/UploadedFiles/NEWS… · Quanta Computer Inc. Annual Report 2011. Report to Shareholders Looking back

Amount % Amount %

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Short-term debt $ 268,713,067 40 131,127,619 26

Financial liabilities reported at fair value through profit or loss - current - - 16,445 -

Notes payable 21,515 - 20,064 -

Accounts payable

- Related parties 329,384 - 389,346 -

- Vendors 197,546,768 29 192,010,502 37

Income tax payable 8,726,279 1 4,323,148 1

Accrued expenses 12,332,556 2 10,970,529 2

Other payables 3,671,891 1 4,322,660 1

Other financial liabilities - current 6,076,501 1 3,500,936 1

Current portion of long-term debt - - 48,826 -

Warranty reserve 11,238,049 2 11,445,915 2

Other current liabilities 5,481,598 1 4,464,618 1

514,137,608 77 362,640,608 71

Long-Term Liabilities:

Long-term debt 32,679,957 5 29,784,149 6

Other financial liabilities - noncurrent 56,142 - 62,892 -

32,736,099 5 29,847,041 6

Other Liabilities:

Accrued pension cost 1,603 - - -

Other liabilities 271,658 - 372,492 -

273,261 - 372,492 -

Total Liabilities 547,146,968 82 392,860,141 77

Stockholders' Equity::

Common stock - authorized 4,200,000 thousand shares, 3,841,059 thousand

shares issued and outstanding in 2011; 3,833,873 thousand

shares issued and outstanding in 2010

38,410,594 6 38,338,734 8

Advance receipts for common stock 6,243 - 21,388 -

Capital Surplus:

Premium on stock issuance 13,356,022 2 13,178,421 3

Treasury stock 183,953 - 141,322 -

Donated surplus 44 - 44 -

Long-term investments at equity 520,167 - 507,473 -

14,060,186 2 13,827,260 3

Retained Earnings:

Legal reserve 18,606,648 3 16,747,441 3

Retained earnings - unappropriated 49,620,745 7 42,249,265 8

68,227,393 10 58,996,706 11

Other Adjustments to Stockholders' Equity:

  Cumulative translation adjustments 2,552,491 - 731,137 -

    Net loss not recognized as pension cost (76) - - -

    Unrealized gain on financial instruments (6,579,593) (1) 163,394 -

    Treasury Stock (333,094) - (475,840) -

(4,360,272) (1) 418,691 -

Total Parent Company's Equity 116,344,144 17 111,602,779 22

Minority interest 7,417,610 1 7,521,061 1

TOTAL Stockholders' Equity 123,761,754 18 119,123,840 23

Commitments and contingencies Liabilities

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 670,908,722 100 511,983,981 100

December 31, 2011 December 31, 2010

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

(English Translation of Financial Report Originally Issued in Chinese)

QUANTA COMPUTER INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONT'D)

DECEMBER 31, 2011 AND 2010

(All Amounts Expressed in Thousands of New Taiwan Dollars, Except for Share Data)

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Amount % Amount %

Operating Revenues

Sales Revenue $ 1,119,323,317 101 1,130,040,119 100

Less: Sales returns (5,583,319) (1) (4,477,166) -

Sales allowances (4,012,137) - (835,399) -

Net sales 1,109,727,861 100 1,124,727,554 100

Cost of goods sold (1,067,204,135) (96) (1,085,917,347) (97)

Gross margin 42,523,726 4 38,810,207 3

Unrealized gross profit- end of the period (1,215) - (302) -

Realized gains profit-beginning of the period 302 - 321 -

42,522,813 4 38,810,226 3

Operating expenses

Selling expenses (10,380,695) (1) (7,852,052) (1)

General and administrative expenses (7,086,025) (1) (5,899,405) -

Research and development expenses (9,171,294) (1) (9,082,567) (1)

(26,638,014) (3) (22,834,024) (2)

Income from operations 15,884,799 1 15,976,202 1

Non-operating income

Interest income 7,336,340 1 1,548,279 -

Investment income recognized under equity method 26,348 - 69,606 -

Dividend income 690,403 - 451,847 -

Gain on disposal of investments 2,023,279 - 760,488 -

Foreign exchange gains, net 8,886,909 1 4,587,487 -

Gain on valuation of financial assets 62,299 - 87,888 -

Gain on valuation of financial liabilities - - 1,489 -

Miscellaneous income 4,151,970 - 5,351,077 1

23,177,548 2 12,858,161 1

Non-operating expenses

Interest expense (5,422,722) - (1,495,768) -

Impairment loss (344,463) - (113,491) -

Loss on valuation of financial liabilities (30,787) - - -

Miscellaneous disbursements (722,924) - (516,362) -

(6,520,896) - (2,125,621) -

Income before income tax 32,541,451 3 26,708,742 2

Income tax expense (9,042,722) (1) (7,377,771) -

Consolidated net income $ 23,498,729 2 19,330,971 2

Income attributable to :

Shareholders of parent company $ 23,052,536 2 18,592,075 2

Minority interest income 446,193 - 738,896 -

$ 23,498,729 2 19,330,971 2

Before Tax After Tax Before Tax After Tax

Earnings per share attributable to parent company

Primary earnings per share $ 7.16 6.02 6.11 4.89

Diluted earnings per share $ 7.06 5.93 6.00 4.80

Assuming that company shares held by its subsidiaries are not

regarded as treasury stock:

Pro-forma primary earnings per share $ 7.15 6.01 6.10 4.87

Pro-forma diluted earnings per share $ 7.05 5.92 5.98 4.78

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

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(English Translation of Financial Report Originally Issued in Chinese)

(All Amounts Expressed in Thousands of New Taiwan Dollars, Except for Share Data)

2010

For The Years Ended December 31

2011

QUANTA COMPUTER INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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2011 2010

Amount Amount

Cash flows from operating activities:

Consolidated net income 23,498,729$ 19,330,971

Adjustments to reconcile consolidated net income to net cash provided by (used in) operating activities:

Depreciation 5,873,618 5,019,432

Amortization 613,389 536,835

Provision for doubtful accounts 96,715 195,757

Provision (reversal) for sales return and allowances 2,100,951 (1,041,439)

Reversal for warranty reserve (308,936) (1,194,014)

Amortization of premium on financial assets 16 19

Foreign exchange rate effect convertible corporate on bonds payable - (16,498)

Amortization of corporate bonds issue cost - 1,374

Provision for inventory market price decline and obsolescene 674,556 1,635,875

Investments income recognized under equtiy method (26,348) (69,606)

Cash dividends received from long-term investment at equity 89,351 11,659

Loss on disposal and retirement of property, plant and equipment 113,071 62,493

Expense reclassified from property, plant and equipment 4,127 2,473

Gain on disposal of intangible assets (14) -

(Gain) loss on disposal and retirement of idle assets (19,570) 17,524

Loss on disposal of other assets - 42

Gain on disposal of investements (2,209,653) (760,186)

Gain on disposal of long-term investment at equity (4,019) -

Unrealized valuattion gain of financial assets and liabilities (3,432) -

Loss on permanent market decline on financial assets 344,463 113,491

Reversal for impairment loss of non-financial assets (79) (23,313)

Unrealized (gain) loss of foreign-exchange (3,240) 9,015

Effects of exchange rate change on long-term debt 686,263 (1,375,350)

Others 74,593 755,322

Change in operating assets and liabilities:

Decrease in financial assets held for trading 148,704 383,520

Increase in notes receivable (12,640) (1,423)

Decrease (increase) in accounts receivable 2,306,963 (36,522,095)

Increase in other receivables (211,800) (375,821)

Increase in inventories (28,992,820) (32,044,702)

Decrease ( increase) in prepayments 427,208 (683,528)

( Increase) decrease in other current assets (167,161) 80,255

Increase in other financial assets (1,173,165) (496,777)

( Increase) decrease in deferred income tax assets (66,224) 135,763

(Decrease) increase in financial liabilities held for trading (16,445) 16,445

Increase in notes payable 1,436 8,158

(Decrease) increase in accounts payable (9,530,534) 42,796,294

Increase in income tax payable 4,199,714 2,129,646

Increase in accrued expense 762,688 639,037

(Decrease) increase in other payable (395,862) 118,805

Increase in other financial liabilities 2,474,631 173,978

Increase in other current liabilities 1,027,138 2,127,689

Decrease in other operating liabilities (120,625) (125,692)

Net cash provided by operating activities 2,255,757 1,571,428

(English Translation of Financial Report Originally Issued in Chinese)

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

QUANTA COMPUTER INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended December 31

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(All Amounts Expressed in Thousands of New Taiwan Dollars, Except for Share Data)

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2011 2010

Amount Amount

Cash flows from investing activities:

Acquisitions of available-for-sale financial assets (116,169,492) (138,483,832)

Proceeds from disposal of available-for-sale financial assets 129,535,974 136,701,077

Acquisitions of held-to-maturity financial assets (545,919) -

Proceeds from disposal of held-to-muturity financial investment - 2,097,782

Acquisitions of financial assets carried at cost (1,206,872) (271,927)

Proceeds from disposal of financial assets carried at cost 147,175 521,779

Proceeds from return of capital by financial assets carried at cost 542,955 349,955

Increase in long-term investments at equity - (59,969)

Proceeds from disposal of long-term investments at equity 34,908 10,573

Acquision of subsidiray (440,559) (40,770)

Proceeds from return of capital by long-term investment at equity 40,324 13,198

Purchase of property, plant and equipment (7,165,545) (10,563,353)

Proceeds from disposal of property, plant and equipment 486,632 99,213

Purchase of rental assets (188) (43,272)

Proceeds from disposal of idle assets - 248

Purchase of intangible assets (129,947) (140,551)

Proceeds from disposal of intangible assets 29,707 -

Increase in other financial assets (2,974,237) (3,483,190)

Increase in other assets (540,379) (593,281)

Net cash provided by (used in) investing activities 1,644,537 (13,886,320)

Cash flows from financing activities:

Increase in short-term debts 123,418,211 72,107,046

Redemption of convertible corporate bonds - (3,240)

Increase in long-term debts 1,720,800 33,558,807

Repayment of long-term debts (63,486) (1,807,128)

(Decrease) increase in other financial liabilities (10,356) 16,165

Distribution of cash dividends (14,168,728) (14,640,845)

Issuance of capital by cash 204,260 234,000

Capital return (138,734) -

Conversion of employee stock options 234,316 433,736

Cost of treasury stocks bought back (138,960) -

Changes in minority interest - (173,250)

Net cash provided by financing activities 111,057,323 89,725,291

Foreign exchange rate effects 11,883,627 (5,164,459)

Net increase in cash and cash equivalents 126,841,244 72,245,940

Cash and cash equivalents, beginning of the period 137,043,179 64,797,239

Cash and cash equivalents, end of the period 263,884,423$ 137,043,179

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest 4,922,691$ 1,290,299

Income tax 4,719,627$ 5,197,748

Non-cash investing and financing activities:

Current portion of long-term debt -$ 48,825

Cash dividends payable 735,744$ 209,109

Financial assets carried at cost transferred to available-for-sale financial assets 218,743$ 783,681

Financial assets carried at cost transferred to long-term investments at equity -$ 144,987

Purchase of property and equipment with cash and other payables:

Property, plant and equipment 6,865,261$ 11,179,914

Decrease (increase) in payables on equipment 300,284 (616,561)

Cash paid 7,165,545$ 10,563,353

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

(English Translation of Financial Report Originally Issued in Chinese)

QUANTA COMPUTER INC. AND ITS SUBSIDIARIES

For The Years Ended December 31

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(All Amounts Expressed in Thousands of New Taiwan Dollars, Except for Share Data)

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QUANTA COMPUTER INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(All Amounts Expressed in Thousands of New Taiwan Dollars, Except for Share Data)

2011 2010

Amount Amount

Acquisition of assets and liabilities of fair value of subsidiaries

Cash 84,011$ 321,764

Notes receivable and accounts receivable 345,362 1,396,563

Other receivables 8,811 2,971

Other financial assets - current 101,799 -

Inventories 68,510 239,957

Prepayments 3,621 -

Other current assets 2,378 167

Property, plant and equipment 1,272,888 258,564

Intangible assets 29,848 -

Other assets 1,901 6,829

Goodwill 214,669 114,997

Minority interest - (276,997)

Short-term debts (1,336,228) (339,644)

Notes payable and accounts payable (202,981) (1,287,819)

Accrued expenses (24,350) (563)

Income tax payable - (1,383)

Other payables (45,228) (27,596)

Other current liabilities (441) (45,276)

Purchase price on acquisition of subsidiaires 524,570 362,534

Cash balance of subsidiaries at the acquisition date (84,011) (321,764)

Cash paid on acquisition of subsidiaries 440,559$ 40,770

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

(English Translation of Financial Report Originally Issued in Chinese)

For The Years Ended December 31,

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Common Certificates of Bond- Advance Receipts Capital Legal Special

Unappropriated

Retained

Cumulative

Translation

Net loss

not recognized

Unrealized Gain or

Loss on Financial Minority Total

Stock to-Stock Conversion for Common Stock Surplus Reserve reserve Earnings Adjustments as pension cost Instruments Treasury Stock Interest

Balance as of January 1, 2010 37,819,761$ 148,936 47,283 12,143,990 14,516,146 1,731,257 38,275,607 1,722,026 - 689,997 (475,840) 7,389,706 114,008,869

Reversal of special reserve - - - - - (1,731,257) 1,731,257 - - - - - -

Conversion of empleyee stock options 121,690 - (25,895) 328,511 - - - - - - - - 424,306

Convertible bonds payable converted into common stock 397,283 (148,936) - 1,397,247 - - - - - - - - 1,645,594

Dividends distributed to subsidiaries as an adjustment of capital surplus - - - 15,686 - - - - - - - - 15,686

Consolidated net income for the year ended December 31, 2010 - - - - - - 18,592,075 - - - - 738,896 19,330,971

2009 earnings distribution: (Note 1)

Legal reserve - - - - 2,231,295 - (2,231,295) - - - - - -

Cash dividends - - - - - - (14,118,379) - - - - - (14,118,379)

Effects of change in percentage of ownership in long-term equity investments - - - (22,616) - - - - - - - - (22,616)

Unrealized loss on available-for-sale financial assets - - - - - - - - - (451,543) - - (451,543)

Changes in minority interests - - - - - - - - - - - (607,541) (607,541)

Changes in equities of investee company under the equity method recognized according to ownership - - - (35,558) - - - (990,889) - (75,060) - - (1,101,507)

Balance as of December 31, 2010 38,338,734 - 21,388 13,827,260 16,747,441 - 42,249,265 731,137 - 163,394 (475,840) 7,521,061 119,123,840

Conversion of empleyee stock options 71,860 - (15,145) 177,601 - - - - - - - - 234,316

Disposal of company shares held by subsidiaries regarded as treasury stock transactions - - - 31,902 - - - - - - 142,746 - 174,648

Convertible bonds payable converted to common stock - - - 10,729 - - - - - - - - 10,729

Consolidated net income for the year ended December 31, 2011 - - - - - - 23,052,536 - - - - 446,193 23,498,729

2010 earnings distribution: (Note 2)

Legal reserve - - - - 1,859,207 - (1,859,207) - - - - - -

Cash dividends - - - - - - (13,821,849) - - - - - (13,821,849)

Effects of change in percentage of ownership in long-term equity investments - - - 276 - - - - - - - - 276

Unrealized loss on available-for-sale financial assets - - - - - - - - - (6,405,505) - - (6,405,505)

Changes in minority interests - - - - - - - - - - - (549,644) (549,644)

Changes in equities of investee company under the equity method recognized according to ownership - - - 12,418 - - - 1,821,354 (76) (337,482) - - 1,496,214

Balance as of December 31, 2011 38,410,594$ - 6,243 14,060,186 18,606,648 - 49,620,745 2,552,491 (76) (6,579,593) (333,094) 7,417,610 123,761,754

Note 1: Bonuses to employees amounted to 1,985,000 and emoluments to directors amounted to 42,000 had been charged against earnings.

Note 2: Bonuses to employees amounted to 1,655,000 and emoluments to directors amounted to 42,000 had been charged against earnings.

Retained Earnings Other adjustment item

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

(English Translation of Financial Report Originally Issued in Chinese)

QUANTA COMPUTER INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(All Amounts Expressed of New Taiwan Dollars in Thousands, Except for Share Data)

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