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Table of Contents

DELTA ELECTRONICS, INC. ANNUAL REPORT 2005

A Letter to Our Shareholders

Power Management

Visual Displays

Components

Industrial Automation

Automotive Products

Networking

Renewable Energy

Corporate Governance

Consolidated Financial Highlights

Financial Report

Balance Sheets

Statements of Income

Statements of Changes in Stockholders Equity

Statements of Cash Flows

Notes to Financial Statements

Dear Shareholders:

Delta Electronics, Inc. experienced an exceptional year in 2005. Not

only did we achieve record breaking revenues and earnings while re-

maining in a dominant position in the power supply industry, we also

successfully launched high-demand new products such as solar cells

and cold cathode fluorescent lamps (CCFL) into the marketplace. I am

pleased to brief you on these achievements.

Delta generated revenues of NT$ 80.83 billion on a consolidated ba-

sis in 2005, an increase of 43% compared to 2004. Gross profit was

NT$ 16.07 billion, a 31% increase from 2004; net operating profit was

NT$ 7.44 billion for a 39% increase; and, net income after tax was

NT$ 7.55 billion for an increase of 13% compared to 2004. EPS for

the year 2005 was NT$ 4.26.

For our power supply business, Delta continued to strengthen its dom-

inant position in the global switching power supply market. We suc-

cessfully assured our competitive advantage through new product de-

velopment and a strategic alliance with a major U.S. telecom power

service provider to offer customers a full product range and services.

In view of potential explosive opportunities in the digital display mar-

ket, we constantly monitor market trends to guide our development ef-

forts so that Delta is a first mover in meeting customer needs. As for

the components business, Delta maintained strong growth while suc-

cessfully bringing a new product, CCFL, into mass production. Our

CCFL was well accepted by the market and has been certified by

most major TFT players. Aggressive expansion plans for CCFL were

also executed to meet strong demand. Our networking business was

another area of excellent performance. Delta Networks, Inc. elevated

its revenues and profits through business with several first-tier global

networking customers, while improving quality and manufacturing effi-

ciency. In light of its competitiveness and market growth potential,

Delta Networks is expected to maintain similar high growth rates over

the next few years.

As a global leader in power management, Delta is vigorously pursuing

energy efficiency and environmental protection. Besides continuously

increasing power conversion efficiency, Delta is taking the lead in de-

veloping environmentally-friendly, energy efficient electronics prod-

ucts, such as electronic ballasts, mercury-free displays, AC motor

drives, inverters for renewable energies, and fuel cell components.

Bruce CH ChengChairman


2 3


Furthermore, Delta has established a subsidiary, DelSolar, to focus on the development of solar cells. Although still

a start-up, DelSolar has brought together a team of highly experienced professionals who have worked in this field

for the previous 10 years. As a result, DelSolar's progress in the past year has exceeded our expectations. For ex-

ample, DelSolar has already achieved an industry high for conversion efficiency and first-time throughput rate in

manufacturing. Given the increasing market demand for solar cells, we believe DelSolar will be an important contrib-

utor to Delta's business growth as well as to energy conservation and environmental sustainability.

Delta's commitment to the environment is fully integrated into our product development as well as our daily opera-

tions. For instance, we have installed PV arrays and set up energy recycling systems in all of our major manufactur-

ing facilities worldwide to reduce energy consumption. Waste management, material recycling and reuse are also

enforced to meet the highest standards. Our "green" factory in Tainan, the first of its kind in Taiwan, was put into

operation last year. It not only announces Delta's efforts to achieve a balance between industrial development and

the ecosystem, but it also contributes to our recruiting high caliber employees with a similar sense of mission. Delta

was the first electronics manufacturer in Taiwan to roll out lead-free soldering for production systems. We believe

the adoption of RoHS and WEEE in mid-2006, although challenges remain, will further Delta's competitive advant-

age on the global stage.

Our committed employees and loyal customers have contributed to Delta's high growth. Named "Supplier of the

Year" by both Microsoft and Cisco in 2004, Delta was then recognized by Siemens Communications as Best Suppli-

er in 2005. Aside from long-term partnerships with major customers, Delta considers employees as its most valuable

asset and we are investing heavily in all aspects of employee development. In preparation for future demand of

large numbers of general managers with international perspectives and capabilities, we not only develop from within

but also attract external talent to join Delta. We believe with Delta's reputation, track record, and abundant opportu-

nities in the future, we are a first choice for international talent.

Delta is fully aware of our social responsibility and we are striving to maximize value while striking a balance for our

shareholders, employees, and society as a whole. Delta published its first Corporate Social Responsibility Report in

2005 that shares with society our views and actions in fulfilling our social responsibilities. Through this effort, we

hope to make a profound and positive impact towards a better society in the future.

With a 20% compound annual growth rate, Delta has increased its revenues and profits by almost five times in the

past ten years. I would like to thank the Board of Directors and Supervisors, our shareholders, customers, suppliers

and employees for your continued support and contribution to Delta's success. Looking forward, we will continue to

do our absolute best to achieve our busi-ness goals and bring Delta to the next

level of success.

Dear Shareholders:

Delta Electronics, Inc. experienced an exceptional year in 2005. Not

only did we achieve record breaking revenues and earnings while re-

maining in a dominant position in the power supply industry, we also

successfully launched high-demand new products such as solar cells

and cold cathode fluorescent lamps (CCFL) into the marketplace. I am

pleased to brief you on these achievements.

Delta generated revenues of NT$ 80.83 billion on a consolidated ba-

sis in 2005, an increase of 43% compared to 2004. Gross profit was

NT$ 16.07 billion, a 31% increase from 2004; net operating profit was

NT$ 7.44 billion for a 39% increase; and, net income after tax was

NT$ 7.55 billion for an increase of 13% compared to 2004. EPS for

the year 2005 was NT$ 4.26.

For our power supply business, Delta continued to strengthen its dom-

inant position in the global switching power supply market. We suc-

cessfully assured our competitive advantage through new product de-

velopment and a strategic alliance with a major U.S. telecom power

service provider to offer customers a full product range and services.

In view of potential explosive opportunities in the digital display mar-

ket, we constantly monitor market trends to guide our development ef-

forts so that Delta is a first mover in meeting customer needs. As for

the components business, Delta maintained strong growth while suc-

cessfully bringing a new product, CCFL, into mass production. Our

CCFL was well accepted by the market and has been certified by

most major TFT players. Aggressive expansion plans for CCFL were

also executed to meet strong demand. Our networking business was

another area of excellent performance. Delta Networks, Inc. elevated

its revenues and profits through business with several first-tier global

networking customers, while improving quality and manufacturing effi-

ciency. In light of its competitiveness and market growth potential,

Delta Networks is expected to maintain similar high growth rates over

the next few years.

As a global leader in power management, Delta is vigorously pursuing

energy efficiency and environmental protection. Besides continuously

increasing power conversion efficiency, Delta is taking the lead in de-

veloping environmentally-friendly, energy efficient electronics prod-

ucts, such as electronic ballasts, mercury-free displays, AC motor

drives, inverters for renewable energies, and fuel cell components.

Bruce CH ChengChairman


2 3


Furthermore, Delta has established a subsidiary, DelSolar, to focus on the development of solar cells. Although still

a start-up, DelSolar has brought together a team of highly experienced professionals who have worked in this field

for the previous 10 years. As a result, DelSolar's progress in the past year has exceeded our expectations. For ex-

ample, DelSolar has already achieved an industry high for conversion efficiency and first-time throughput rate in

manufacturing. Given the increasing market demand for solar cells, we believe DelSolar will be an important contrib-

utor to Delta's business growth as well as to energy conservation and environmental sustainability.

Delta's commitment to the environment is fully integrated into our product development as well as our daily opera-

tions. For instance, we have installed PV arrays and set up energy recycling systems in all of our major manufactur-

ing facilities worldwide to reduce energy consumption. Waste management, material recycling and reuse are also

enforced to meet the highest standards. Our "green" factory in Tainan, the first of its kind in Taiwan, was put into

operation last year. It not only announces Delta's efforts to achieve a balance between industrial development and

the ecosystem, but it also contributes to our recruiting high caliber employees with a similar sense of mission. Delta

was the first electronics manufacturer in Taiwan to roll out lead-free soldering for production systems. We believe

the adoption of RoHS and WEEE in mid-2006, although challenges remain, will further Delta's competitive advant-

age on the global stage.

Our committed employees and loyal customers have contributed to Delta's high growth. Named "Supplier of the

Year" by both Microsoft and Cisco in 2004, Delta was then recognized by Siemens Communications as Best Suppli-

er in 2005. Aside from long-term partnerships with major customers, Delta considers employees as its most valuable

asset and we are investing heavily in all aspects of employee development. In preparation for future demand of

large numbers of general managers with international perspectives and capabilities, we not only develop from within

but also attract external talent to join Delta. We believe with Delta's reputation, track record, and abundant opportu-

nities in the future, we are a first choice for international talent.

Delta is fully aware of our social responsibility and we are striving to maximize value while striking a balance for our

shareholders, employees, and society as a whole. Delta published its first Corporate Social Responsibility Report in

2005 that shares with society our views and actions in fulfilling our social responsibilities. Through this effort, we

hope to make a profound and positive impact towards a better society in the future.

With a 20% compound annual growth rate, Delta has increased its revenues and profits by almost five times in the

past ten years. I would like to thank the Board of Directors and Supervisors, our shareholders, customers, suppliers

and employees for your continued support and contribution to Delta's success. Looking forward, we will continue to

do our absolute best to achieve our busi-ness goals and bring Delta to the next

level of success.

Delta Group holds the world's number one position in switching power

supplies. The company shipped its first switching power supply in 1980,

and by 2002 Delta had become the world's largest provider of merchant

switching power supplies with market shares of over 50% in the server

power market and 35% in the notebook market. Delta's switching power

supplies use state-of-the-art circuits and advanced packaging technolo-

gies such as ASIC, hybrid circuits, and thin film to achieve high efficien-

cies and power densities.

As a result of technological advances, Delta has steadily increased the

efficiency of power supply products and has introduced products with en-

ergy-saving features such as electronic ballasts, AC motor drives, renew-

able energy inverters, and fuel cell components. The 97.5% efficiency of

Delta's photovoltaic inverters, for example, is the highest achieved in its

class so far. Delta offers custom design and high volume manufacturing

capability of power supplies for PCs, servers, workstations, networking,

peripherals and office equipment.

Delta's high power density DC/DC converter product line covers

commercial, industrial and military grade applications. Delta also of-

fers high efficiency Voltage Regulator Modules (VRMs) for low volt-

age microprocessors.

Uninterruptible Power Systems (UPS) provide uninterrupted and reliable

protection against power disturbances. Available in Rack-mount, tower

and slim types, Delta UPSs include Off-Line, Line-Interactive and On-

Line topologies. All units are UL/cUL and/or TUV/CE approved.

Delta is a leading provider of telecom power systems for the telecommuni-

cations industry. These systems are widely used in wireless and fixed line

environments and are applicable to Network Equipment, xDSL, Broad-

band Wireless (WLL and LMDS), Cellular/PCS, and Fiber applications.

Delta is one of the world's largest producers of AC/DC adapters, DC/AC

inverters and DC/DC converters for portable computer/peripheral, com-

munication and other external power source applications. This product

line was the first to comply with lead-free production standards begin-

ning in 2000 and it has been approved for RoHS and certified by major

safety agencies.

Delta develops and produces energy-saving electronic ballasts for fluo-

rescent lamps, metal halide lamps and LEDs. Delta is now developing

LED backlight drivers for LCD displays with world-class display makers,

as well as LED headlights with key automotive lighting manufacturers.

Power Management

4 5

Uninterruptible Power

Systems (UPS)

Energy Recycling Systems

Networking Switching

Power Supplies

Desktop Switching

Power Supplies

Server / Workstation

Switching Power Supplies

Telecom Power Systems

Energy-saving Ballasts /

Ballasts for HID Lamps /

LED Drivers

DC/DC Converters /

Voltage Regulation Modules

Display Power Supplies


AC/DC Adapters

Delta Group holds the world's number one position in switching power

supplies. The company shipped its first switching power supply in 1980,

and by 2002 Delta had become the world's largest provider of merchant

switching power supplies with market shares of over 50% in the server

power market and 35% in the notebook market. Delta's switching power

supplies use state-of-the-art circuits and advanced packaging technolo-

gies such as ASIC, hybrid circuits, and thin film to achieve high efficien-

cies and power densities.

As a result of technological advances, Delta has steadily increased the

efficiency of power supply products and has introduced products with en-

ergy-saving features such as electronic ballasts, AC motor drives, renew-

able energy inverters, and fuel cell components. The 97.5% efficiency of

Delta's photovoltaic inverters, for example, is the highest achieved in its

class so far. Delta offers custom design and high volume manufacturing

capability of power supplies for PCs, servers, workstations, networking,

peripherals and office equipment.

Delta's high power density DC/DC converter product line covers

commercial, industrial and military grade applications. Delta also of-

fers high efficiency Voltage Regulator Modules (VRMs) for low volt-

age microprocessors.

Uninterruptible Power Systems (UPS) provide uninterrupted and reliable

protection against power disturbances. Available in Rack-mount, tower

and slim types, Delta UPSs include Off-Line, Line-Interactive and On-

Line topologies. All units are UL/cUL and/or TUV/CE approved.

Delta is a leading provider of telecom power systems for the telecommuni-

cations industry. These systems are widely used in wireless and fixed line

environments and are applicable to Network Equipment, xDSL, Broad-

band Wireless (WLL and LMDS), Cellular/PCS, and Fiber applications.

Delta is one of the world's largest producers of AC/DC adapters, DC/AC

inverters and DC/DC converters for portable computer/peripheral, com-

munication and other external power source applications. This product

line was the first to comply with lead-free production standards begin-

ning in 2000 and it has been approved for RoHS and certified by major

safety agencies.

Delta develops and produces energy-saving electronic ballasts for fluo-

rescent lamps, metal halide lamps and LEDs. Delta is now developing

LED backlight drivers for LCD displays with world-class display makers,

as well as LED headlights with key automotive lighting manufacturers.

Power Management

4 5

Uninterruptible Power

Systems (UPS)

Energy Recycling Systems

Networking Switching

Power Supplies

Desktop Switching

Power Supplies

Server / Workstation

Switching Power Supplies

Telecom Power Systems

Energy-saving Ballasts /

Ballasts for HID Lamps /

LED Drivers

DC/DC Converters /

Voltage Regulation Modules

Display Power Supplies


AC/DC Adapters

DLP™ Rear Projection Video Walls

Delta provides a wide range of visual displays for a variety of appli-

cations. For the business presentation market, we supply digital front

projectors. For home entertainment, Delta offers TFT-LCD TVs, home

cinema projectors, and Digltal Light Processing (DLP*) TVs. For con-

trol rooms and public information systems, Delta offers DLP™ rear pro-

jection video walls. For auditoriums and exhibition halls, Delta has de-

veloped high performance large venue projectors with ultra-high

brightness of up to 5,000 lumens. Delta strives to develop visual dis-

play technologies that meet people's ever expanding visual needs.

Delta develops and manufactures digital projectors based on DLP™

True Vision™ Image Processing, which produces the highest image

quality and allows for the most compact designs. Delta's digital projec-

tors are rich in features for business users. Delta continues to develop

new products to meet specific needs for a growing market.

Delta offers LCD televisions in a range of screen sizes. These state-

of-the-art LCD televisions feature an integrated digital TV tuner, rich

audio and video input and output connections, and dynamic sound

quality. A slim and stylish design, small footprint, and wall-mounting

capability enhance flexibility and room compatibility. An environmen-

tally-friendly product, Delta's LCD televisions provide low power con-

sumption and are EPA Energy Star compliant.

Delta's DLP™ televisions utilize Texas Instruments' DLP™ technology

for outstanding high-definition picture quality and color reproduction.

Our DLP™ televisions are currently available in a range of screen

sizes, and all have wide-screen 16:9 aspect ratios to enable full-

screen viewing of HDTV broadcasts and DVD videos. Compared with

other technologies, DLP™ televisions are affordable, energy-saving,

and free of harmful radiation.

Delta's high performance projectors are suitable for large venues such

as auditoriums or theatres. Delivering ultra-high brightness up to

5,000 lumens, these projectors offer both 4:3 and 16:9 aspect ratios

and are compatible with a wide range of video formats including

HDTV. Lenses include features such as power zoom, power focus,

and vertical keystone correction. Delta's high performance projectors

offer excellent image quality and high reliability.

*DLP is a trademark of Texas lnstruments

Visual Displays

6 7


Large Venue

Business Projectors

Home Theater Projectors

DLP™ TVs

LCD TVs

DLP™ Rear Projection Video Walls

Delta provides a wide range of visual displays for a variety of appli-

cations. For the business presentation market, we supply digital front

projectors. For home entertainment, Delta offers TFT-LCD TVs, home

cinema projectors, and Digltal Light Processing (DLP*) TVs. For con-

trol rooms and public information systems, Delta offers DLP™ rear pro-

jection video walls. For auditoriums and exhibition halls, Delta has de-

veloped high performance large venue projectors with ultra-high

brightness of up to 5,000 lumens. Delta strives to develop visual dis-

play technologies that meet people's ever expanding visual needs.

Delta develops and manufactures digital projectors based on DLP™

True Vision™ Image Processing, which produces the highest image

quality and allows for the most compact designs. Delta's digital projec-

tors are rich in features for business users. Delta continues to develop

new products to meet specific needs for a growing market.

Delta offers LCD televisions in a range of screen sizes. These state-

of-the-art LCD televisions feature an integrated digital TV tuner, rich

audio and video input and output connections, and dynamic sound

quality. A slim and stylish design, small footprint, and wall-mounting

capability enhance flexibility and room compatibility. An environmen-

tally-friendly product, Delta's LCD televisions provide low power con-

sumption and are EPA Energy Star compliant.

Delta's DLP™ televisions utilize Texas Instruments' DLP™ technology

for outstanding high-definition picture quality and color reproduction.

Our DLP™ televisions are currently available in a range of screen

sizes, and all have wide-screen 16:9 aspect ratios to enable full-

screen viewing of HDTV broadcasts and DVD videos. Compared with

other technologies, DLP™ televisions are affordable, energy-saving,

and free of harmful radiation.

Delta's high performance projectors are suitable for large venues such

as auditoriums or theatres. Delivering ultra-high brightness up to

5,000 lumens, these projectors offer both 4:3 and 16:9 aspect ratios

and are compatible with a wide range of video formats including

HDTV. Lenses include features such as power zoom, power focus,

and vertical keystone correction. Delta's high performance projectors

offer excellent image quality and high reliability.

*DLP is a trademark of Texas lnstruments

Visual Displays

6 7


Large Venue

Business Projectors

Home Theater Projectors

DLP™ TVs

LCD TVs

Delta's global components business covers industries such as IT, home appli-

ances, consumer electronics, telecommunications, and automobile electronics.

Many of our components are market leaders in their own categories. Delta's

component products are becoming increasingly competitive due to IP-based in-

novations and continuously improving cost structures.

Delta is a primary source for supplying the world with magnetic components.

We offer a wide range of permanent and soft magnetic products and assem-

blies to markets such as: computers, consumer electronics, telecom and net-

work systems, wireless communications, industrial products, medical, auto-

motive, and more. Delta is a leader in low-profile high-current magnetics for

power applications. Our RF components include the world's smallest mod-

ules for handheld devices.

Delta is a world-leading provider of cooling fans and devices for microproces-

sors, PCs, servers and industrial equipment. Our DC brushless fans are low-

noise and energy efficient. Delta's energy-saving DC brushless motor products

consist of spindle motors, stepping motors, and DLP motors. Applications in-

clude CD/DVD/RW-ROM drives, color wheels for projectors, and many more.

Delta's thermal management products (coolers) provide thermal solutions for

desktops, servers, game boxes, telecom devices, household appliances and

VGA cards. Delta's coolers offer quality, reliability, and superior performance for

many diverse applications.

Delta fiber optical transceiver modules are traditional bi-directional and PLC-

based products for fiber-to-the-home (FTTH) EPON and GPON applications,

and feature small form-factor pluggable (SFP) and Gigabit interface converters

(GBIC). Applications include Optical Access and Medium Converter, Ethernet

Hub/Switching, Fiber Channel, as well as ATM and SDH/SONET.

Delta designs, manufactures and markets optical components such as color

wheels, light integrators, prisms, UV-IR filters, reflecting mirrors and SP&DB

actuators. We offer total solutions for Digital Light Processing (DLP*) TVs

and front projectors including SmoothPicture* and DynamicBlack* technolo-

gy. A leading color wheel supplier, Delta provides total solutions with advan-

tages such as patents and unique processes, key component access, and

mass production capabilities.

Delta's cold cathode fluorescent lamps (CCFL) and inverters are used for LCD

backlighting and include straight lamps, L-lamps, and U-lamps with different

phosphor recipes and electrode combinations. Providing stable color, brightness

control, reliability, high efficiency, and long life performance, Delta CCFLs are

used in monitors and TVs. Delta's DC/AC inverters are low noise, high frequen-

cy tube triggers for LCD backlights of notebooks, sub-notebooks and monitors.

*DLP, SmoothPicture and DynamicBlack are trademarks of Texas Instruments

Components

8 9

Fiber Optical Transceivers

(PON / P2P) Thermal Management

Products

Solenoids &

Magnetics

EMI Filters

Optical Components

& Modules

DC/AC Backlight

lnverters

Stepping Motors &

Spindle Motors

RF / Microwave

Components

Networking Components

CCFLs for LCD Displays

Flat Fluorescent Lamps

(Mercury-free Backlights)


DC Brushless Fans

Delta's global components business covers industries such as IT, home appli-

ances, consumer electronics, telecommunications, and automobile electronics.

Many of our components are market leaders in their own categories. Delta's

component products are becoming increasingly competitive due to IP-based in-

novations and continuously improving cost structures.

Delta is a primary source for supplying the world with magnetic components.

We offer a wide range of permanent and soft magnetic products and assem-

blies to markets such as: computers, consumer electronics, telecom and net-

work systems, wireless communications, industrial products, medical, auto-

motive, and more. Delta is a leader in low-profile high-current magnetics for

power applications. Our RF components include the world's smallest mod-

ules for handheld devices.

Delta is a world-leading provider of cooling fans and devices for microproces-

sors, PCs, servers and industrial equipment. Our DC brushless fans are low-

noise and energy efficient. Delta's energy-saving DC brushless motor products

consist of spindle motors, stepping motors, and DLP motors. Applications in-

clude CD/DVD/RW-ROM drives, color wheels for projectors, and many more.

Delta's thermal management products (coolers) provide thermal solutions for

desktops, servers, game boxes, telecom devices, household appliances and

VGA cards. Delta's coolers offer quality, reliability, and superior performance for

many diverse applications.

Delta fiber optical transceiver modules are traditional bi-directional and PLC-

based products for fiber-to-the-home (FTTH) EPON and GPON applications,

and feature small form-factor pluggable (SFP) and Gigabit interface converters

(GBIC). Applications include Optical Access and Medium Converter, Ethernet

Hub/Switching, Fiber Channel, as well as ATM and SDH/SONET.

Delta designs, manufactures and markets optical components such as color

wheels, light integrators, prisms, UV-IR filters, reflecting mirrors and SP&DB

actuators. We offer total solutions for Digital Light Processing (DLP*) TVs

and front projectors including SmoothPicture* and DynamicBlack* technolo-

gy. A leading color wheel supplier, Delta provides total solutions with advan-

tages such as patents and unique processes, key component access, and

mass production capabilities.

Delta's cold cathode fluorescent lamps (CCFL) and inverters are used for LCD

backlighting and include straight lamps, L-lamps, and U-lamps with different

phosphor recipes and electrode combinations. Providing stable color, brightness

control, reliability, high efficiency, and long life performance, Delta CCFLs are

used in monitors and TVs. Delta's DC/AC inverters are low noise, high frequen-

cy tube triggers for LCD backlights of notebooks, sub-notebooks and monitors.

*DLP, SmoothPicture and DynamicBlack are trademarks of Texas Instruments

Components

8 9

Fiber Optical Transceivers

(PON / P2P) Thermal Management

Products

Solenoids &

Magnetics

EMI Filters

Optical Components

& Modules

DC/AC Backlight

lnverters

Stepping Motors &

Spindle Motors

RF / Microwave

Components

Networking Components

CCFLs for LCD Displays

Flat Fluorescent Lamps

(Mercury-free Backlights)


DC Brushless Fans

Delta's strength in power electronics and control technology has

made us a leader in the industrial automation marketplace. The focus

of our product line is on drive, motion, and control (DMC) to offer a

complete solution for OEMs and end-users. Delta began to design

and manufacture variable speed AC motor drives in 1995 and today

provides a full range of industrial automation products.

Delta's AC motor drives offer superior microprocessor-based digital

control and high frequency pulse width modulation for smooth motor

operation. Our wide range of AC motor drive products employs

sensorless vector, space-vector PWM and other technologies. All

offer high torque and smooth operation with low harmonic distortion.

Servo drives and motors provide high-speed and high-precision

motion control for a wide range of industrial applications. Delta's new

servo drives use optical encoders for superior resolution and robust

control technology to maximize performance and minimize setup time.

Delta's Servo products deliver complete functionality, excellent

performance, and energy-savings.

For industrial processes that require precise heating or cooling,

Delta's temperature controllers come in various sizes, and feature

auto-tuning. An optional or built-in RS-485 interface allows easy and

stable Modbus ASCII and RTU communications among various

external devices. Delta's programmable logic controllers (PLC) deliver

superior functionality and are available in both nano- and micro-class

products. Advantages include built-in commands for ease of program-

ming and reduced maintenance costs, easy-to-operate communication

functions, high processing speed, and high reliability. Delta's PLCs

are among the most flexible in the industry.

Delta's human machine interface (HMI) products offer fast and

convenient control of manufacturing automation through a user-

friendly graphical interface, and support many well-known brands.

Delta HMIs feature touch screen control, Windows-based editor

software, a powerful ARM-based CPU, and flexible user-defined

graphics libraries and protocols. Delta's optical incremental encoders

include both shaft and hollow shaft models. These compact encoders

are rugged and reliable, and offer high resolutions for use in a variety

of applications.

Delta's RS-422 / 485 communication modules include an RS-232

isolated converter and a RS-486 / RS-422 isolated repeater. Flexible

for use in various applications and easy to install, these modules

isolate and maintain proper data transmission, and are equipped with


10 11

RS-455 / RS-422

Communication Modules

AC Motor Drives (AMD)

Programmable Logic Controllers (PLC)

Human Machine Interfaces (HMI)

AC Servo Drives & Motors

Optical Incremental

Encoders

Temperature Controllers


Delta's strength in power electronics and control technology has

made us a leader in the industrial automation marketplace. The focus

of our product line is on drive, motion, and control (DMC) to offer a

complete solution for OEMs and end-users. Delta began to design

and manufacture variable speed AC motor drives in 1995 and today

provides a full range of industrial automation products.

Delta's AC motor drives offer superior microprocessor-based digital

control and high frequency pulse width modulation for smooth motor

operation. Our wide range of AC motor drive products employs

sensorless vector, space-vector PWM and other technologies. All

offer high torque and smooth operation with low harmonic distortion.

Servo drives and motors provide high-speed and high-precision

motion control for a wide range of industrial applications. Delta's new

servo drives use optical encoders for superior resolution and robust

control technology to maximize performance and minimize setup time.

Delta's Servo products deliver complete functionality, excellent

performance, and energy-savings.

For industrial processes that require precise heating or cooling,

Delta's temperature controllers come in various sizes, and feature

auto-tuning. An optional or built-in RS-485 interface allows easy and

stable Modbus ASCII and RTU communications among various

external devices. Delta's programmable logic controllers (PLC) deliver

superior functionality and are available in both nano- and micro-class

products. Advantages include built-in commands for ease of program-

ming and reduced maintenance costs, easy-to-operate communication

functions, high processing speed, and high reliability. Delta's PLCs

are among the most flexible in the industry.

Delta's human machine interface (HMI) products offer fast and

convenient control of manufacturing automation through a user-

friendly graphical interface, and support many well-known brands.

Delta HMIs feature touch screen control, Windows-based editor

software, a powerful ARM-based CPU, and flexible user-defined

graphics libraries and protocols. Delta's optical incremental encoders

include both shaft and hollow shaft models. These compact encoders

are rugged and reliable, and offer high resolutions for use in a variety

of applications.

Delta's RS-422 / 485 communication modules include an RS-232

isolated converter and a RS-486 / RS-422 isolated repeater. Flexible

for use in various applications and easy to install, these modules

isolate and maintain proper data transmission, and are equipped with


10 11

RS-455 / RS-422

Communication Modules

AC Motor Drives (AMD)

Programmable Logic Controllers (PLC)

Human Machine Interfaces (HMI)

AC Servo Drives & Motors

Optical Incremental

Encoders

Temperature Controllers


Delta Electronics is a leading design, manufacturing and service/sol-

ution (DMS) provider of automotive systems, sub-systems, and com-

ponents. Our vision is to become a world leader in the vehicle elec-

tronics industry and to leverage our superior engineering and service

capabilities to satisfy market demand for diverse automotive products.

Delta's international experience and its close-knit network of regional

sales offices, service centers, and logistical hubs in Europe, North

America, and Asia allows us to provide first class service in all major

automotive markets.

Delta offers a wide range of BCDT products for automotive applications

based on modular design. Our core products include power memory

seat electronic control units (ECU) and power window ECUs (Anti-

pinch). Other core products under development are exterior lighting

(CHMSL, headlamp and turn light) and tire pressure monitoring sys-

tems (TPMS). Delta's BCDT products use state-of-the-art modular de-

sign technology based on "sensorless" and "MOSFET" control to pro-

vide customers with flexibility, high reliability and excellent quality.

Delta specializes in components for many types of automotive appli-

cations. Among the vehicle components Delta offers are climate sen-

sor fans, seat cooling blowers, spindle motors for car audio and navi-

gation, audio cooling blowers, and cooling fans for E-Box. Our DC

fans/blowers feature innovative designs that greatly increase cooling

performance and reduce system noise. For automotive applications

Delta offers high power density DC/DC converters that allow parallel

operation for easy expansion and maximum reliability.

With over 10 years experience in display technology, Delta offers au-

tomotive display products such as high quality rearview displays and

headrest displays in a variety of configurations. Our core infotainment

products include In-Car Media/DVD Players, In-car Multi-media Enter-

tainment Centers, and Vehicle Data Recorders (VDR). With state-of-

the-art design and system integration capabilities, Delta provides the

most advanced in-car wired and wireless entertainment products.

Automotive Products

12 13

Infotainment Displays

Power Memory Seat Control Units

Rear Window Sunshade Controllers

Tire Pressure Monitoring Systems (TPMS)

Engine Control Modules

Vehicle Data Recorders


Delta Electronics is a leading design, manufacturing and service/sol-

ution (DMS) provider of automotive systems, sub-systems, and com-

ponents. Our vision is to become a world leader in the vehicle elec-

tronics industry and to leverage our superior engineering and service

capabilities to satisfy market demand for diverse automotive products.

Delta's international experience and its close-knit network of regional

sales offices, service centers, and logistical hubs in Europe, North

America, and Asia allows us to provide first class service in all major

automotive markets.

Delta offers a wide range of BCDT products for automotive applications

based on modular design. Our core products include power memory

seat electronic control units (ECU) and power window ECUs (Anti-

pinch). Other core products under development are exterior lighting

(CHMSL, headlamp and turn light) and tire pressure monitoring sys-

tems (TPMS). Delta's BCDT products use state-of-the-art modular de-

sign technology based on "sensorless" and "MOSFET" control to pro-

vide customers with flexibility, high reliability and excellent quality.

Delta specializes in components for many types of automotive appli-

cations. Among the vehicle components Delta offers are climate sen-

sor fans, seat cooling blowers, spindle motors for car audio and navi-

gation, audio cooling blowers, and cooling fans for E-Box. Our DC

fans/blowers feature innovative designs that greatly increase cooling

performance and reduce system noise. For automotive applications

Delta offers high power density DC/DC converters that allow parallel

operation for easy expansion and maximum reliability.

With over 10 years experience in display technology, Delta offers au-

tomotive display products such as high quality rearview displays and

headrest displays in a variety of configurations. Our core infotainment

products include In-Car Media/DVD Players, In-car Multi-media Enter-

tainment Centers, and Vehicle Data Recorders (VDR). With state-of-

the-art design and system integration capabilities, Delta provides the

most advanced in-car wired and wireless entertainment products.

Automotive Products

12 13

Infotainment Displays

Power Memory Seat Control Units

Rear Window Sunshade Controllers

Tire Pressure Monitoring Systems (TPMS)

Engine Control Modules

Vehicle Data Recorders


Delta Networks, Inc. (DNI) was established in 1989 as a business

unit of Delta Electronics and became an independent company in

1999. DNI has since become one of Taiwan's largest network equip-

ment companies. Principle products made by DNI include enterprise

switching equipment, broadband access products, and wireless net-

working devices. DNI's engineers continue to develop products for the

newest technologies, such as MIMO, WiMAX, VDSL, and IPv6 Layer

3 Switches.

DNI produces a range of enterprise switching products including tele-

com-grade linecards and server switch cards, gigabit & fast Ethernet

L2-L3 switches, and chassis switches. Switches are available in a rich

variety of configurations and features to meet any and all enterprise

switching requirements. DNI's products feature standard and the lat-

est network protocols, stack mounting, rack mounting, friendly config-

uration interface and support via web or CLI.

DNI offers wireless networking products for both 802.11g and 802.11a/g

standards. Products include a USB 2.0 wireless adapter, Cardbus wire-

less adapters, Mini-PCI wireless adapters, and wireless access points.

DNI's wireless products are backward compatible with 802.11b and sup-

ports security protocols such as WPA, 802.1x and others.

DNI's broadband access products include broadband routers and ADSL

gateways. DSL/Cable routers with 4-port switches are available in both

wired and wireless models. ADSL gateways offered range include an

upgradeable 1-port ADSL modem as well as a 4-port ADSL II+ gateway

router. Cost-effective and versatile, DNI's broadband products are ide-

ally suited for the home or small enterprise office environment.

Networking

14 15

WiMAX Subscriber Stations

L2 / L3 Stackable Switches

Gigabit Ethernet Solutions

24 Port Server Blades

Managed / Unmanaged

Switches with PoE Options

Powerline Adapters

Wireless Client Adapters /

Wireless USB Solutions

ADSL / VDSL /

VoIP Solutions


Chassis Switch Systems

AP / Wireless Router

with PoE Solutions /

Broadband Router &

FTTH Solutions

Delta Networks, Inc. (DNI) was established in 1989 as a business

unit of Delta Electronics and became an independent company in

1999. DNI has since become one of Taiwan's largest network equip-

ment companies. Principle products made by DNI include enterprise

switching equipment, broadband access products, and wireless net-

working devices. DNI's engineers continue to develop products for the

newest technologies, such as MIMO, WiMAX, VDSL, and IPv6 Layer

3 Switches.

DNI produces a range of enterprise switching products including tele-

com-grade linecards and server switch cards, gigabit & fast Ethernet

L2-L3 switches, and chassis switches. Switches are available in a rich

variety of configurations and features to meet any and all enterprise

switching requirements. DNI's products feature standard and the lat-

est network protocols, stack mounting, rack mounting, friendly config-

uration interface and support via web or CLI.

DNI offers wireless networking products for both 802.11g and 802.11a/g

standards. Products include a USB 2.0 wireless adapter, Cardbus wire-

less adapters, Mini-PCI wireless adapters, and wireless access points.

DNI's wireless products are backward compatible with 802.11b and sup-

ports security protocols such as WPA, 802.1x and others.

DNI's broadband access products include broadband routers and ADSL

gateways. DSL/Cable routers with 4-port switches are available in both

wired and wireless models. ADSL gateways offered range include an

upgradeable 1-port ADSL modem as well as a 4-port ADSL II+ gateway

router. Cost-effective and versatile, DNI's broadband products are ide-

ally suited for the home or small enterprise office environment.

Networking

14 15

WiMAX Subscriber Stations

L2 / L3 Stackable Switches

Gigabit Ethernet Solutions

24 Port Server Blades

Managed / Unmanaged

Switches with PoE Options

Powerline Adapters

Wireless Client Adapters /

Wireless USB Solutions

ADSL / VDSL /

VoIP Solutions


Chassis Switch Systems

AP / Wireless Router

with PoE Solutions /

Broadband Router &

FTTH Solutions

Solar Cells

Fuel Cell Inverters

Fuel Cells

Solar lnverters

Delta Electronics established DelSolar Co., Ltd. in 2004 to develop

solar energy technology and products such as solar cells and photo-

voltaic (PV) systems. The company has the most advanced and expe-

rienced solar cell technology team in Taiwan through strategic cooper-

ation with the Industrial Technology Research Institute (ITRI) and is

focused on bringing to market low-cost, high-efficiency solar cells.

DelSolar's major products include 5-inch and 6-inch single crystalline

silicon solar cells, and 6-inch poly crystalline silicon solar cells. With

certified high capacity production equipment and the automation ex-

pertise of Delta Electronics, DelSolar is developing high yield produc-

tion capabilities. Solar energy is our most abundant renewable energy

source, and DelSolar is committed to developing solar energy prod-

ucts to enhance our quality of life.

Delta Electronics is continuously exploring new technologies for the

environment. Our R&D is currently developing fuel cells, another

promising renewable energy source. Fuel cells use innovative technol-

ogy that is highly energy efficient, minimally polluting, and provides a

multi-use energy source. Like solar energy, fuel cells are a new tech-

nology that offers a clean and efficient way of producing energy.

Renewable Energy

16 17


Solar Cells

Fuel Cell Inverters

Fuel Cells

Solar lnverters

Delta Electronics established DelSolar Co., Ltd. in 2004 to develop

solar energy technology and products such as solar cells and photo-

voltaic (PV) systems. The company has the most advanced and expe-

rienced solar cell technology team in Taiwan through strategic cooper-

ation with the Industrial Technology Research Institute (ITRI) and is

focused on bringing to market low-cost, high-efficiency solar cells.

DelSolar's major products include 5-inch and 6-inch single crystalline

silicon solar cells, and 6-inch poly crystalline silicon solar cells. With

certified high capacity production equipment and the automation ex-

pertise of Delta Electronics, DelSolar is developing high yield produc-

tion capabilities. Solar energy is our most abundant renewable energy

source, and DelSolar is committed to developing solar energy prod-

ucts to enhance our quality of life.

Delta Electronics is continuously exploring new technologies for the

environment. Our R&D is currently developing fuel cells, another

promising renewable energy source. Fuel cells use innovative technol-

ogy that is highly energy efficient, minimally polluting, and provides a

multi-use energy source. Like solar energy, fuel cells are a new tech-

nology that offers a clean and efficient way of producing energy.

Renewable Energy

16 17


Although corporate governance is a widely accepted term today, its

precise definition has yet to be determined. To Delta, quality corpo-

rate governance is our primary responsibility to ensure the Company

is operating in the best and balanced interest of all stakeholders.

We believe that stakeholders' rights can be best protected through not

only an independent and accountable board but also through timely

disclosure of accurate information. As a result, Delta has reconfigured

its board composition and separated the roles of Chairman and CEO

to enhance the functioning of the board.

In addition, we have initiated the disclosure of consolidated financial in-

formation and have institutionalized periodic analyst meetings to ensure

information is accurate and delivered to all investors in a timely manner.

Introduction of Independent Directors and Supervisors

Delta reorganized its board composition in 2003 by introducing two

new independent directors, Mr. Lo, Y.C. and Dr. Fred Lee, and one

new independent supervisor, Professor Huang, Chung-Hsing. Mr. Lo

served on the board of Philips for several years and has extensive ex-

perience and insight into international business management. Dr. Lee

is president of Delta Power Electronics Center (DPEC) in Shanghai. A

widely respected expert in power electronics with extensive knowl-

edge of the power industry, Dr. Lee is also a distinguished professor

at Virginia Polytechnic Institute and State University and director of

the Center for Power Electronics Systems in the U.S. Professor

Huang, now with the College of Management at National Taiwan Uni-

versity, has both industry experience and excellent academic achieve-

ments in business and operational management.

Delta's board now consists of nine directors and two supervisors. To

enhance responsibility and accountability of the board, board meet-

ings are held at least once every quarter to review business perform-

ance as well as address major strategic issues.

Separation of Chairman and CEO Roles

With the appointment of the new CEO, Yancey Hai, on January 1,

2004, Delta officially separated the role of CEO from the Chairmanship

to empower the board with sufficient independence to oversee man-

agement on a structural basis. As the tasks of the chairman and the

CEO are different and potentially conflicting, we believe by separating

these two roles the function of the board is significantly enhanced and

the management of the Company is more objectively supervised.

Timely and Transparent Information Disclosure

Besides complying with all reporting requirements ordered by the Taiwan Stock Exchange, Delta is the first and so

far the only listed company in Taiwan to publish semi-annual consolidated financial statements to give investors a

complete and accurate picture of the Company's operational results. In addition, analyst meetings are held quarterly

to discuss business performance and exchange information with institutional investors to ensure accurate informa-

tion is delivered to all shareholders in a timely manner.

Our efforts in realizing quality corporate governance are widely recognized. Delta was rated as one of the compa-

nies having the best corporate governance in the Asia Pacific region by Asset Benchmark Research in December

2003. Going forward, Delta will continue to enhance our practice in corporate governance to sustain our commit-

ment of efficient and transparent operations to all stakeholders.


18 19


Corporate Governance Award for 2003from Asset magazine

Although corporate governance is a widely accepted term today, its

precise definition has yet to be determined. To Delta, quality corpo-

rate governance is our primary responsibility to ensure the Company

is operating in the best and balanced interest of all stakeholders.

We believe that stakeholders' rights can be best protected through not

only an independent and accountable board but also through timely

disclosure of accurate information. As a result, Delta has reconfigured

its board composition and separated the roles of Chairman and CEO

to enhance the functioning of the board.

In addition, we have initiated the disclosure of consolidated financial in-

formation and have institutionalized periodic analyst meetings to ensure

information is accurate and delivered to all investors in a timely manner.

Introduction of Independent Directors and Supervisors

Delta reorganized its board composition in 2003 by introducing two

new independent directors, Mr. Lo, Y.C. and Dr. Fred Lee, and one

new independent supervisor, Professor Huang, Chung-Hsing. Mr. Lo

served on the board of Philips for several years and has extensive ex-

perience and insight into international business management. Dr. Lee

is president of Delta Power Electronics Center (DPEC) in Shanghai. A

widely respected expert in power electronics with extensive knowl-

edge of the power industry, Dr. Lee is also a distinguished professor

at Virginia Polytechnic Institute and State University and director of

the Center for Power Electronics Systems in the U.S. Professor

Huang, now with the College of Management at National Taiwan Uni-

versity, has both industry experience and excellent academic achieve-

ments in business and operational management.

Delta's board now consists of nine directors and two supervisors. To

enhance responsibility and accountability of the board, board meet-

ings are held at least once every quarter to review business perform-

ance as well as address major strategic issues.

Separation of Chairman and CEO Roles

With the appointment of the new CEO, Yancey Hai, on January 1,

2004, Delta officially separated the role of CEO from the Chairmanship

to empower the board with sufficient independence to oversee man-

agement on a structural basis. As the tasks of the chairman and the

CEO are different and potentially conflicting, we believe by separating

these two roles the function of the board is significantly enhanced and

the management of the Company is more objectively supervised.

Timely and Transparent Information Disclosure

Besides complying with all reporting requirements ordered by the Taiwan Stock Exchange, Delta is the first and so

far the only listed company in Taiwan to publish semi-annual consolidated financial statements to give investors a

complete and accurate picture of the Company's operational results. In addition, analyst meetings are held quarterly

to discuss business performance and exchange information with institutional investors to ensure accurate informa-

tion is delivered to all shareholders in a timely manner.

Our efforts in realizing quality corporate governance are widely recognized. Delta was rated as one of the compa-

nies having the best corporate governance in the Asia Pacific region by Asset Benchmark Research in December

2003. Going forward, Delta will continue to enhance our practice in corporate governance to sustain our commit-

ment of efficient and transparent operations to all stakeholders.


18 19


Corporate Governance Award for 2003from Asset magazine

22

26

28

29

31

33

22

26

28

29

31

33

24 2524 25

DELTA ELECTRONICS, INC.

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS

DECEMBER 31, 2004 AND 2005

The English consolidated financial statements were translated from the consolidated financial statements originally prepared in Chinese language.

24 2524 25

(05) D24P.R05000016

Report of Independent Accountants

To Delta Electronics, Inc.

We have audited the accompanying consolidated balance sheets of Delta Electronics, Inc. and its subsidiaries as of December 31, 2004 and 2005, and the related consolidated statements of income, of changes in stockholders' equity and of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. As explained in Note 1(2), we did not audit the financial statements of certain directly and indirectly owned consolidated subsidiaries for the years ended December 31, 2004 and 2005, which statements reflected total assets of $383,637,000 and $397,284,000 constituting 0.6% and 0.5%, respectively, of the Company’s consolidated total assets as of December 31, 2004 and 2005, respectively, and total operating revenue of $723,481,000 and $1,174,009,000 constituting 1.3% and 1.5% of the Company’s consolidated operating revenue for the years then ended, respectively. Those statements were audited by other auditors whose reports thereon have been furnished to us. In addition, as explained in Note 4(5), the financial statements of certain investee companies for the years ended December 31, 2004 and 2005, accounted for under the equity method, were audited by other auditors whose reports thereon have been furnished to us. The total amount of long-term investments in these investee companies were $4,251,481,000 and $4,381,646,000 constituting 6.6% and 5.35%, respectively, of the Company’s consolidated total assets as of December 31, 2004 and 2005, respectively, and the related investment income were $83,791,000 and $217,237,000 constituting 1.4% and 2.6%, respectively, of the Company’s consolidated income before income tax and minority interest for the years then ended, respectively. Our opinion expressed herein, insofar as it relates to the amounts included in the consolidated financial statements in respect of the above mentioned directly and indirectly owned consolidated subsidiaries and investee companies are based solely on the reports of the other auditors.

26 2726 27

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

In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Delta Electronics, Inc. and its consolidated subsidiaries as of December 31, 2004 and 2005, and the results of their operations and their cash flows for the years then ended in conformity with the ''Rules Governing the Preparation of the Financial Statements of Securities Issuers" and generally accepted accounting principles in the Republic of China.

As described in Notes 1 and 3, effective January 1, 2005, the Company adopted the newly amended Statements of Financial Accounting Standards No. 7 “Consolidated Financial Statements”, which require consolidation of all majority owned subsidiaries.

26 2726 27

The consolidated financial statements of the Company as of and for the year ended December 31, 2005, expressed in US dollars are presented solely for the convenience of the reader and were translated from the New Taiwan dollars financial statements using the exchange rate of NT$32.85 to US$1.00 at December 31, 2005. This basis of translation is not in accordance with generally accepted accounting principles in the Republic of China.

February 14, 2006

______________________________________________________________________

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

28 2928 29

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28 2928 29

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er

Tota

l oth

er li

abili

ties

Tota

l lia

bilit

ies

Stoc

khol

ders

' Equ

ity C

omm

on st

ock

(Not

es 1

, 4(9

) and

4(1

1))

Cap

ital r

eser

ves (

Not

es 4

(9) a

nd 4

(12)

)

Con

vers

ion

of c

onve

rtibl

e bo

nds

O

ther

R

etai

ned

earn

ings

Lega

l res

erve

(Not

e 4(

13))

Spec

ial r

eser

ve

U

ndis

tribu

ted

earn

ings

(Not

e 4(

14))

O

ther

adj

ustm

ents

to st

ockh

olde

rs' e

quity

Unr

ealiz

ed lo

ss o

n m

arke

t val

ue d

eclin

e of

long

-term

equ

ity in

vest

men

ts

C

umul

ativ

e tra

nsla

tion

adju

stm

ents

Min

ority

inte

rest

To

tal s

tock

hold

ers'

equi

ty

Com

mitm

ents

and

con

tinge

nt li

abili

ties (

Not

es 5

, 7 a

nd 1

0(3)

)

TOTA

L LI

AB

ILIT

IES

AN

D S

TOC

KH

OLD

ERS'

EQ

UIT

Y

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

se c

onso

lidat

ed fi

nanc

ial s

tate

men

ts.

See

repo

rt of

inde

pend

ent a

ccou

ntan

ts d

ated

Feb

ruar

y 14

, 200

6.

30 3130 31

DE

LT

A E

LE

CT

RO

NIC

S, IN

C.

CO

NSO

LID

AT

ED

ST

AT

EM

EN

TS

OF

INC

OM

EY

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1,

(EX

PRE

SSE

D IN

TH

OU

SAN

DS

OF

DO

LL

AR

S, E

XC

EPT

EA

RN

ING

S PE

R S

HA

RE

DA

TA

)

New

Tai

wan

Dol

lars

U

S D

olla

rs

O

pera

ting

Rev

enue

s (N

ote

5)

(Una

udite

d - N

ote

2)

Sal

es re

venu

e S

ales

retu

rns

Sal

es d

isco

unts

N

et S

ales

S

ervi

ces i

ncom

e N

et O

pera

ting

Rev

enue

s O

pera

ting

cost

s (N

otes

4 (1

7) a

nd 5

) C

ost o

f goo

ds so

ld

Gro

ss p

rofit

U

nrea

lized

gai

n fr

om in

terc

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ny tr

ansa

ctio

ns

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lized

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rom

inte

rcom

pany

tran

sact

ions

G

ross

pro

fit, n

et

Ope

ratin

g Ex

pens

es (N

ote

4(17

))

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es a

nd m

arke

ting

expe

nses

G

ener

al a

nd a

dmin

istra

tive

expe

nses

R

esea

rch

and

deve

lopm

ent e

xpen

ses

Tota

l Ope

ratin

g Ex

pens

es

Ope

ratin

g in

com

e N

on-o

pera

ting

Inco

me

and

Gai

ns

Int

eres

t inc

ome

Inv

estm

ent i

ncom

e ac

coun

ted

for u

nder

the

equi

ty m

etho

d (N

ote

4(5)

) D

ivid

end

inco

me

Gai

n on

dis

posa

l of i

nves

tmen

ts

For

eign

exc

hang

e ga

in, n

et

Oth

er n

on-o

pera

ting

inco

me

Non

-ope

ratin

g In

com

e an

d G

ains

N

on-o

pera

ting

Expe

nses

and

Los

ses

Int

eres

t exp

ense

I

nves

tmen

t los

s acc

ount

ed fo

r und

er th

e eq

uity

met

hod

(Not

e 4(

5))

Oth

er in

vest

men

t los

s (N

ote

4(5)

) L

oss o

n di

spos

al o

f pro

perty

, pla

nt a

nd e

quip

men

t L

oss o

n ph

ysic

al c

ount

of i

nven

torie

s P

rovi

sion

for l

oss o

n in

vent

ory

obso

lesc

ence

and

mar

ket p

rice

decl

ines

O

ther

non

-ope

ratin

g lo

sses

N

on-o

pera

ting

Expe

nses

and

Los

ses

Inco

me

befo

re in

com

e ta

x In

com

e ta

x (e

xpen

se) b

enef

it (N

ote

4(15

) N

et in

com

e A

ttrib

utab

le to

: S

hare

hold

ers o

f the

Par

ent

Min

ority

inte

rest

Inco

me

befo

re

inc

ome

tax

Net

inc

ome

Inco

me

befo

re

inc

ome

tax

Net

inc

ome

Inco

me

befo

re

inc

ome

tax

Net

inc

ome

Ea

rnin

gs P

er S

hare

(In

Dol

lars

) (N

ote

4(16

))

Bas

ic E

arni

ngs P

er S

hare

E

quity

hol

der o

f the

Com

pany

M

inor

ity in

tere

st

Net

inco

me

Dilu

ted

earn

ings

per

shar

e E

quity

hol

der o

f the

Com

pany

M

inor

ity in

tere

st

Net

inco

me

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

se c

onso

lidat

ed fi

nanc

ial s

tate

men

ts.

See

repo

rt of

inde

pend

ent a

ccou

ntan

ts d

ated

Feb

ruar

y 14

, 200

6.

30 3130 31

DE

LT

A E

LE

CT

RO

NIC

S, IN

C.

CO

NSO

LID

AT

ED

ST

AT

EM

EN

TS

OF

CH

AN

GE

S IN

ST

OC

KH

OL

DE

RS'

EQ

UIT

Y(E

XPR

ESS

ED

IN T

HO

USA

ND

S O

F D

OL

LA

RS)

Ret

aine

d ea

rnin

gs

C

omm

on st

ock

Cap

ital

r

eser

ves

Le

gal

r

eser

ve

Sp

ecia

l

re

serv

e

U

ndis

tribu

ted

earn

ings

Unr

ealiz

ed lo

ss o

n m

arke

t val

ue d

eclin

eof

long

-term

equ

ity

inv

estm

ents

Cum

ulat

ive

trans

latio

n

ad

just

men

t

Min

ority

in

tere

st

T

otal

20

04 N

ew T

aiw

an D

olla

rs

B

alan

ce a

t Jan

uary

1, 2

004

Dis

tribu

tion

of 2

003

earn

ings

:

App

ropr

iatio

n of

lega

l res

erve

Dire

ctor

s' an

d su

perv

isor

s' re

mun

erat

ion

Em

ploy

ees'

bonu

s

Issu

ance

of s

tock

div

iden

ds

C

ash

divi

dend

s C

onve

rtibl

e bo

nds c

onve

rted

into

com

mon

stoc

k A

djus

tmen

ts d

ue to

cha

nge

in lo

ng-te

rm in

vest

men

t

owne

rshi

p pe

rcen

tage

A

djus

tmen

t on

inv

este

es’

unre

aliz

ed l

oss

on m

arke

t va

lue

decl

ine

of lo

nt-te

rm in

vest

men

ts

Cum

ulat

ive

trans

latio

n ad

just

men

t N

et in

com

e fo

r the

yea

r C

hang

es in

min

ority

inte

rest

B

alan

ce a

t Dec

embe

r 31,

200

4

2005

New

Tai

wan

Dol

lars

Bal

ance

at J

anua

ry 1

, 200

5 D

istri

butio

n of

200

4 ea

rnin

gs:

A

ppro

pria

tion

of le

gal r

eser

ve

A

ppro

pria

tion

of sp

ecia

l res

erve

Dire

ctor

s' an

d su

perv

isor

s' re

mun

erat

ion

Em

ploy

ees'

bonu

s

Issu

ance

of s

tock

div

iden

ds

C

ash

divi

dend

s C

onve

rtibl

e bo

nds c

onve

rted

into

com

mon

stoc

k A

djus

tmen

ts d

ue to

cha

nge

in lo

ng-te

rm in

vest

men

t

owne

rshi

p pe

rcen

tage

A

djus

tmen

t on

inve

stee

s’ u

nrea

lized

loss

on

mar

ket v

alue

de

clin

e of

long

-term

inve

stm

ents

C

umul

ativ

e tra

nsla

tion

adju

stm

ent

Adj

ustm

ent o

f res

erve

for l

and

valu

e in

crem

enta

l tax

N

et in

com

e fo

r the

yea

r C

hang

es in

min

ority

inte

rest

B

alan

ce a

t Dec

embe

r 31,

200

5

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

se c

onso

lidat

ed fi

nanc

ial s

tate

men

ts.

See

repo

rt of

inde

pend

ent a

ccou

ntan

ts d

ated

Feb

ruar

y 14

, 200

6.

32 3332 33

DE

LT

A E

LE

CT

RO

NIC

S, IN

C.

CO

NSO

LID

AT

ED

ST

AT

EM

EN

TS

OF

CH

AN

GE

S IN

ST

OC

KH

OL

DE

RS'

EQ

UIT

Y

(EX

PRE

SSE

D IN

TH

OU

SAN

DS

OF

DO

LL

AR

S)

Ret

aine

d ea

rnin

gs

Com

mon

stoc

k

C

apita

l

r

eser

ve

Lega

l

rese

rve

S

peci

al

res

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U

ndis

tribu

ted

earn

ings

U

nrea

lized

loss

o

n m

arke

t val

ue

d

eclin

e of

equ

ity

lon

g-te

rm in

vest

men

t

C

umul

ativ

e

trans

latio

n

adju

stm

ent

M

inor

ity

int

eres

t

Tot

al

2

005

US

Dol

lars

(Una

udite

d-N

ote

2)

Bal

ance

at J

anua

ry 1

, 200

5

Dis

tribu

tion

of 2

004

earn

ings

:

A

ppro

pria

tion

of le

gal r

eser

ve

A

ppro

pria

tion

of sp

ecia

l res

erve

D

irect

ors’

and

supe

rvis

ors’

rem

uner

atio

n

Em

ploy

ees’

bon

us

Is

suan

ce o

f sto

ck d

ivid

ends

C

ash

divi

dend

s

Con

verti

ble

bond

s con

verte

d in

to c

omm

on st

ock

Adj

ustm

ents

due

to c

hang

e in

long

-term

inve

stm

ent o

wne

rshi

p

perc

enta

ge

Adj

ustm

ent o

n in

vest

ees’

unr

ealiz

ed lo

ss o

n m

arke

t

valu

e de

clin

e of

long

-term

inve

stm

ents

Cum

ulat

ive

trans

latio

n ad

just

men

t

Adj

ustm

ent o

f res

erve

for l

and

valu

e in

crem

enta

l tax

Net

inco

me

for t

he y

ear

Cha

nges

in m

inor

ity in

tere

st

Bal

ance

at D

ecem

ber 3

1, 2

005

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

se c

onso

lidat

ed fi

nanc

ial s

tate

men

ts.

See

repo

rt of

inde

pend

ent a

ccou

ntan

ts d

ated

Feb

ruar

y 14

, 200

6.

32 3332 33


CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,

(EXPRESSED IN THOUSANDS OF DOLLARS)

New Taiwan Dollars US Dollars

Cash flows from operating activities (Unaudited - Note 2) Net income attributable to shareholders of the Parent Adjustments to reconcile net income to net cash provided by operating activities: Net income attributable to minority interest

(Reversion of) allowance for doubtful account Depreciation and amortization Cash dividends from investees accounted for under the equity

methodInvestment income or loss recognized under equity method,

net of other investment loss Gain on disposal of long-term investments Loss on disposal of property, plant and equipment, net Provision for inventory Exchange gain on revaluation of foreign currency denominated convertible bonds Changes in assets and liabilities: (Increase) decrease in : Notes and accounts receivable, net

Accounts receivable - related parties Other receivables Other receivables - related parties Inventories Prepayments Other current assets - other Deferred pension costs Increase (decrease) in : Notes and accounts payable

Accounts payable - related parties Income tax payable Accrued expenses, other payables and received in advance Other current liabilities Deferred income tax Accrued pension liabilities Other liabilities - others Net cash provided by operating activities

(Continued)

34 3534 35

DELTA ELECTRONICS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, (EXPRESSED IN THOUSANDS OF DOLLARS)


Cash flows from investing activities (Unaudited - Note 2) Decrease in short-term investments, net Increase in other financial assets, net of current and non-current Increase in long-term investments Increase in cash surrender value of life insurance Net cash received from the acquisition of subsidiary Proceeds from the disposal of long-term investments Acquisition of property, plant and equipment and deferred expenses Increase in other intangible assets Proceeds from disposal of property, plant and equipment Increase in refundable deposits, net Increase in other assets - other Net cash used in investing activities Cash flows from financing activities Increase in short-term loans, net Decrease in long-term liabilities - current portion Decrease in notes and bills payable Increase (decrease) in guarantee deposits received Increase (decrease) in minority interest Payment of directors' and supervisors' remuneration Payment of cash dividends Net cash provided (used in) by financing activities Foreign exchange difference Effect on changes of consolidated subsidiaries Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Supplemental disclosures of cash flow informationCash paid during the year for: Interest Income taxes Non-cash flows from investing and financing activities: Employees’ stock bonus Convertible bonds (par value) converted into common stock The fair market value of assets and liabilities of the acquired

subsidiary was as follows: Cash and cash equivalents Accounts receivable Inventories Other current assets Property, plant and equipment Other assets Short-term loans Accounts payable Accrued expenses Other current liabilities Minority interest Less: Long-term investments in the subsidiary before the acquisition

Cash and cash equivalents of the acquired subsidiary Less: Acquisition price Net cash received from the acquisition of subsidiary

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated February 14, 2006.

34 3534 35

DELTA ELECTRONICS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, (EXPRESSED IN THOUSANDS OF DOLLARS)


Cash flows from investing activities (Unaudited - Note 2) Decrease in short-term investments, net Increase in other financial assets, net of current and non-current Increase in long-term investments Increase in cash surrender value of life insurance Net cash received from the acquisition of subsidiary Proceeds from the disposal of long-term investments Acquisition of property, plant and equipment and deferred expenses Increase in other intangible assets Proceeds from disposal of property, plant and equipment Increase in refundable deposits, net Increase in other assets - other Net cash used in investing activities Cash flows from financing activities Increase in short-term loans, net Decrease in long-term liabilities - current portion Decrease in notes and bills payable Increase (decrease) in guarantee deposits received Increase (decrease) in minority interest Payment of directors' and supervisors' remuneration Payment of cash dividends Net cash provided (used in) by financing activities Foreign exchange difference Effect on changes of consolidated subsidiaries Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Supplemental disclosures of cash flow informationCash paid during the year for: Interest Income taxes Non-cash flows from investing and financing activities: Employees’ stock bonus Convertible bonds (par value) converted into common stock The fair market value of assets and liabilities of the acquired

subsidiary was as follows: Cash and cash equivalents Accounts receivable Inventories Other current assets Property, plant and equipment Other assets Short-term loans Accounts payable Accrued expenses Other current liabilities Minority interest Less: Long-term investments in the subsidiary before the acquisition

Cash and cash equivalents of the acquired subsidiary Less: Acquisition price Net cash received from the acquisition of subsidiary

The accompanying notes are an integral part of these consolidated financial statements. See report of independent accountants dated February 14, 2006.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2004 AND 2005

(EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT AS INDICATED)

1. HISTORY AND ORGANIZATION

1) Delta Electronics, Inc.

The Company was incorporated in April 1971 under the provisions of the Company Law of the Republic of China (R.O.C.) as a company limited by shares. The authorized capital of the Company amounted to $20,000,000 and the issued and outstanding capital was $18,303,815 as of December 31, 2005. The main activities of the Company are installation of electronic control systems and manufacturing of communication products and components, computer information system and power supply. The Company had approximately 4,450 employees as of December 31, 2005.

2) Consolidated subsidiaries

% of shares held as of December 31, Name of company Relationship Main activities

1. Delta International Holding Ltd. (DIH)

Note A Equity investments

(1) Delta Electronics (H.K) Ltd. (DHK)

Note B Operations management and engineering services

(2) Delta Electronics Agent Ltd. (DAL)


(3) Delta Electronics International Ltd. (DEIL)

Note B Sales of electronic products

(4) Delta Electronics International Ltd. (Labuan) (DEIL-Labuan)


(5) Delta Electronics Trading Ltd. (DTL)


(6) Delta Power Sharp Ltd. (DPS)


36 3736 37


(7) DEI Logistics (USA) Corp. (ALI)

Note B Warehousing and logistics services

(8) Delta Electronics (Dong Guan) Co., Ltd. (DDG)

Note B Manufacturing of power supplies

(9) Delta Electronics Components (Dong Guan) Co., Ltd. (DEC)

Note B Manufacturing of transformers

(10) Delta Electronics Power (Dong Guan) Co., Ltd. (DEP)


(11) Delta Electronics (Shanghai) Co., Ltd. (DPEC)

Note B Product design

(12) Delta Electronics (Jiang Su) Co., Ltd. (DWJ)


(13) Delta Electronics Components (Wu Jiang) Co., Ltd. (DWC)

Note B Manufacturing of transformers

(14) Delta Electro-optics (Wu Jiang) Ltd. (DWO)

Note B Manufacturing of peripherals and electronic control equipments

(15) Delta Video Display System (Wu Jiang) Co., Ltd. (DWV)

Note B Manufacturing of monitors

(16) Delta Electronics (Japan) Inc. (DEJ)


A. Addtron Technology (Japan) Co., Ltd. (AT Japan)

Note C Trading of networking system and peripherals

B. Delta Electronics (Korea) Inc. (Delta Korea)

Note C Sales of electronic products

(17) DAC Holding Ltd. (DAC)

Note B Equity investments

36 3736 37


A. Delta Electronics Mexico S.A. DE C.V. (DEM)

Note D Manufacturing of electronic products

B. Delta Video Technology Ltd. (DVT)

Note D Sales of electronic products

2. Delta Networks Holding Ltd. (DNH)

Note A Equity investments

(1) Delta Networks Inc. (DNI Cayman)

Note E Equity investments

A. Delta Electronics Industrial (Dong Guan) Co., Ltd. (DII)

Note F Manufacturing of electronic ballast for energy saving lighting and interface cards

B. Delta Networks, Inc. (DNIT) (registered in Taiwan)

Note F Manufacturing of networking system and peripherals.

C. Delta Networks International Ltd. (DNIL)

Note F Trading of networking system and peripherals

D. DNI Logistics (USA) Corp. (ALN)

Note F Warehousing and logistics services

E. Delta Networks International Ltd. (Labuan) (DNIL-Labuan)

Note F Trading of networking system and peripherals

3. Pyramis corporation (Pyramis) (registered in Taiwan)

Note A Design and sales of electronic products

Pyramis Holding Ltd. (Pyramis Holding)

Note G Equity investments

Pyramis Corporation (Pyramis US)

Note H Development of electronic products

4. Deltronics (Netherlands) B.V. (DEN)

Note A Trading of equipment, components and material of telecom and computer system

(Note I)

38 3938 39


5. Delta Optoelectronics Inc. (Delta Optoelectronics)

Note A Manufacturing of displays with polymer light emission display (PLED) and carbon nano-tube electronic emitter (ENT) technology

(Note I)

6. Delsolar Co., Ltd. (Delsolar)

Note A Manufacturing of solar batteries and related systems (Note I)

Note A: Majority owned subsidiary.

Note B: A subsidiary of Delta International Holding Ltd. (DIH), an indirectly majority owned subsidiary.

Note C: A subsidiary of Delta Electronics (Japan) Inc. (DEJ), an indirectly majority owned subsidiary.

Note D: A subsidiary of DAC Holding Ltd. (DAC), an indirectly majority owned subsidiary.

Note E: A subsidiary of Delta Networks Holding Ltd. (DNH), an indirectly majority owned subsidiary.

Note F: A subsidiary of Delta Networks Inc. (DNI Cayman), an indirectly majority owned subsidiary.

Note G: A subsidiary of Pyramis Corporation (Pyramis), an indirectly majority owned subsidiary.

Note H: An indirectly majority owned subsidiary. Originally a subsidiary of Delta International Holding Ltd. (DIH), in 2004, the shares were sold to Pyramis Holding Ltd. (Pyramis Holding). As a result, Pyramis US became a consolidated subsidiary of Pyramis Holding. The Company owns total voting rights over 50% indirectly.

Note I: A new consolidated subsidiary under the newly amended Statements of Financial Accounting Standards No. 7 “Consolidated Financial Statements”.

38 3938 39

The financial statements of DEN, Pyramis US and ALN for the years ended December 31, 2004 and 2005 were audited by other independent accountants. The total assets of these subsidiaries at December 31, 2004 and 2005 were $383,637 and $397,284, constituting 0.6% and 0.5% of the Compay’s consolidated total assets, respectively, and the related total operating revenues were $723,481 and $1,174,009, constituting 1.3% and 1.5% of the Company’s consolidated operating revenues for the years ended December 31, 2004 and 2005, respectively.

3) Changes in the consolidated subsidiaries A. The following subsidiaries are new additions to the consolidated financial

statements: % of shares held as of

December 31, Name of Company Relationship Main activities Note

(1) Deltronics (Netherlands) B.V. (DEN)

Note A Please refer to Note 1 2)

(2) Delta Optoelectronics Inc. (Delta Optoelectronics)

Note A

(3) Delsolar Co., Ltd. (Delsolar)

Note A


Note B Note D

(5) Delta Networks International Ltd. (Labuan) (DNIL-Labuan)

Note C Note D


Note B: A subsidiary of DIH, an indirectly majority owned subsidiary.

Note C: A subsidiary of DNI Cayman, an indirectly majority owned subsidiary.

Note D: Established in the third quarter of 2005.

40 4140 41








Note A


Note A


Note B Note D


Note C Note D





40 4140 41








Note A


Note A


Note B Note D


Note C Note D





42 4342 43

Translation of foreign currency transactions

The accounts of the Company are maintained in New Taiwan dollars. Receivables, other monetary assets and liabilities denominated in foreign currencies are translated into New Taiwan dollars at the rates of exchange prevailing at the balance sheet date. Transactions denominated in foreign currency are translated into New Taiwan dollars at the exchange rates prevailing at the transaction dates. Foreign currency gains or losses are included in current net income.

Cash equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and with maturity dates that do not present significant risk of change in value because of change in interest rates.

Forward currency option contracts

Premiums or discounts on option contracts are recorded as liabilities or assets at cost and are amortized over the contract period on a straight line basis and are included in current net income.

Prior to fourth quarter of 2004, the settled option contracts are recorded as current gain/loss and disclose fair value of outstanding option contracts at balance sheet date. Effective the fourth quarter of 2004, outstanding put options at balance sheet date are accounted for at their fair values with the differences included in the current net income.

Forward exchange contracts

Forward exchange contracts entered into for hedging purposes are recorded using the spot rate on the contract date. Discounts or premiums on forward contracts are amortized over the periods of the contract. Gains or losses on forward contracts are determined by the difference between the spot rate at the balance sheet date and the spot rate at the date of inception of the contract. Exchange gains or losses are included in current net income.

42 4342 43

Cross currency swap contracts

Cross currency swap contracts entered into for hedging purposes are recorded using the contract rate on the contract date and recorded as accrued receivable and accrued payable, respectively. Interest receivable and interest payable are accrued in accordance with the contract rate. Gains or losses on cross currency swap contracts are determined by the difference between the spot rate at the balance sheet date and the spot rate at the date of inception of the contract. Exchange gains or losses are included in current net income.

Short-term investments

Short-term investments are stated at the lower of cost or market value. Cost is determined by the weighted-average method. The market value of open-end fund is based on the net asset value at the balance sheet date. The market values of listed securities are determined based on the average closing prices of the last month of the period.

Allowance for doubtful accounts

Allowance for doubtful accounts is provided based on an evaluation of the collectibility and aging of ending balances of notes receivable, accounts receivable and other receivables.

Inventories

Inventories are stated at the lower of cost or market value; cost is determined using the average method. When comparing with market value, current replacement price is used as market value for materials; net realizable value is used as market value for work in process and finished goods. Provision is made for obsolete and slow-moving inventories at balance sheet date.

Funds and long-term investments

1) Long-term investments

A. Long-term investments in which the Company owns less than 20% of the voting rights of the investee company and has no significant influence on the investee company's operational decisions are stated under the lower of cost or market value method if the investee company is listed, and under the cost method if the investee company is not listed. When it becomes evident that there has been a permanent impairment in value and the chance of recovery is minimal, loss is recognized in the current year’s income.

44 4544 45

If the Company owns at least 20% of the voting rights of the investee company, the investment is accounted for by the equity method, unless there is evidence that the Company has no ability to exercise significant influence over the investee company. The unrealized gains or losses arising from transactions between the Company and investee companies accounted for under the equity method are eliminated.

B. The translation difference from foreign investments are included in a cumulative translation adjustments account in the stockholders' equity.

C. The capital reserve and long-term investment amounts are adjusted by the variance between the investment cost and the net asset of the investee company due to the disproportionate acquisition of shares in connection with the capital increase by the investee company accounted for under the equity method. If the capital reserve arising from long-term investment is not sufficient, then retained earnings is debited.

D. The Company recognizes its proportionate share in the changes to the unrealized loss on market value decline of long-term investments accounted for under the equity method by its consolidated subsidiaries and includes it in the stockholder’s equity.

E. Under the equity method, and at the date of changing to use equity method from cost method is not retroactive, the excess of investment cost over the underlying equity in net assets of the investee companies at the date of investment is amortized over 5~20 years.

F. Long-term investment in which the Company intends to dispose should be reclassified to short-term investment which will be stated at the lower of cost or market value. Any loss is recognized in current operation.

G. Prior to 2005, the use of the equity method is discontinued if losses on investment reduce the balance of the investment to zero, unless the Company has a commitment to provide financial support to the investee company or acts as guarantor for loans made to the investee company. The credit balances of the investments should reduce the receivables from the investee company and the remaining balances are reported in the balance sheet as other liabilities.

44 4544 45

Effective January 1, 2005, for investee company accounted for under the equity method, if the Company has the ability to exercise significant influence but does not have control over the investee company, the use of the equity method is discontinued if losses on investment reduce the balance of the investment to zero, unless the Company has a commitment to provide financial support to the investee company or acts as guarantor for loans made to the investee company. However, if the Company has control over the investee company, losses of the investee company is fully recognized, unless other stockholders of the investee company have the duty and are able to provide additional capital to assume the loss. Any subsequent profit of the investee company is recognized as recovery of prior years losses until the loss recognized by the Company is fully recovered.

H. The Company recognizes dividend income or credits long-term investment under the cost method or equity method, respectively, on ex-dividend date of the investee companies.

2) Cash surrender value of life insurance

The cash surrender value of life insurance is recorded as an asset and classified as long-term investment. The increase in cash surrender value during the period is accounted for as an adjustment to insurance premiums paid.

Other financial assets - non-current

Structured product - time deposits(shown as other financial assets) are stated at cost at balance sheet date. When there is objective evidence indicating that the future cash flow of the financial assets may decrease, the Company should recognize the impairment loss of the financial assets. An impairment loss is recognized for the amount by which the carrying amount of the other financial assets exceeds the recoverable amount.

Property, plant and equipment

1) Property, plant and equipment are stated at cost except for land which is stated at appraised value.

2) Depreciation of the fixed assets is provided on a straight-line method over the estimated economic lives of the assets. Leasehold improvements are amortized over the life of the leases.

The estimated useful lives of fixed assets are 2 to 8 years, excepts for buildings which are 5 to 55 years.

46 4746 47

3) Major renewals and improvements are capitalized and depreciated accordingly. Maintenance and repairs are charged to expense as incurred. When an asset is disposed, the cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is included in current non-operating results.

4) Rental assets are classified under other assets at book value. Depreciation expenses of the rental assets are included in the non-operating expenses and losses.

Other intangible assets

1) Land use rights are stated at cost and amortized over the lease term.

2) Intangible assets acquired by technology investment are amortized over the estimated useful period.

Deferred charges

Deferred charges are recorded at actual cost and amortized over the estimated useful lives based on the straight-line method, except for the issuance costs for convertible bonds which are amortized over the life of the bonds. The unamortized bonds issuance costs relating to the bonds converted or redeemed before the maturity date are transferred to expense at the date of redemption or conversion.

Retirement plan

1) Pension benefits under the defined benefit pension plan are calculated based on the independent actuarial valuation. Under the defined benefit pension plan, the Company recognizes net periodic pension cost, which includes services cost, interest cost, expected return on plan assets, amortization of unrecognized transition obligation and pension losses.

2) For defined contribution pension plan, the Company recognizes the monthly pension expense based on certain percentage of the employees monthly salaries and wages and deposits the pension amount into each employee’s personal pension account with the Bureau of Labor Insurance.

46 4746 47

Convertible bonds

1) The excess of estimated redemption price below the par value is treated as a contingent gain; no gain is recognized on bond redemption. When bonds are redeemed, the difference between the redemption price and book value is recognized in current operation.

2) When bonds are converted, the book value of bonds is credited to common stock at an amount equal to the par value of the stock and the excess is credited to capital reserve. No gain or loss is recognized on bond conversion.

Income tax

1) The Company, Pyramis, Delsolar, Delta Optoelectronics and DNIT adopted R.O.C. SFAS No. 22, “Accounting for Income Taxes”. Income tax is provided based on accounting income after adjusting for permanent differences. The provision for income tax includes deferred income tax resulting from items reported in different periods for tax and financial reporting purposes. Deferred income tax assets or liabilities are further classified into current and non-current items based on the classifications of the related assets or liabilities or on the expected reversal date of the temporary differences and are presented on the financial statements as net balance. Valuation allowance for deferred income tax assets is recognized if it is more likely than not that the tax benefits will not be realized. Tax credits resulting from equipment purchase, technology acquisition, research and development expenditure, training expense and long-term equity investment, etc. are recognized as current income tax benefit when incurred.

2) The Company’s overseas subsidiaries adopted liability method.

3) Over or under provision of prior years' income tax liabilities are included in the current year's income tax expense.

4) According to the Taiwan imputation tax system, undistributed current earnings of a company derived on or after January 1, 1998 is subject to an additional 10% corporate income tax if the earnings are not distributed in the following year. This 10% additional corporate income tax is recorded as income tax expense in the period the stockholders approved a resolution to retain the earnings.

Earnings per share

1) In accordance with R.O.C. SFAS No. 24 "Earnings Per Common Share" as revised in November 1, 2001, the basic earnings and diluted earnings per share

48 4948 49

are disclosed in income statements. The computation of earnings per share is as follows:

A. Basic earnings per share: net income is divided by the weighted average number of shares outstanding during the period.

B. Diluted earnings per share: the computation is the same as basic earnings per share, except that potential common shares are assumed to have been converted to common stock at the beginning of the period and net income is adjusted by the amount associated with the conversion.

2) The potentially dilutive securities consist of Euro convertible bonds. The Company adopted the "if converted method" in computing the dilutive effect of the Euro convertible bonds.

Revenue, costs and expenses recognition

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

Accounting estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the Republic of China requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those assumptions and estimates.

Impairment of assets

Effective in 2005, the Company adopted Statements of Financial Accounting Standards No. 35 “Accounting for Impairment of Asset”. Assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. Net selling price is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

When there is any indication that an impairment loss recognized in prior periods for an asset may no longer exist or may have decreased, the Company should reverse

48 4948 49

the impairment loss within the extent of impairment loss recognized in the prior period.

Convenience translation into US dollars

The Company maintains its accounting records and prepares its financial statements in New Taiwan dollars. The United States dollar amounts disclosed in the 2005 financial statements are presented solely for the convenience of the reader and were translated to US dollar using the exchange rate of NT$32.85=US$1.00, the average of buying and selling exchange rate published by Hua Nan Bank on December 31, 2005. Such translation amounts are unaudited and should not be construed as representations that the New Taiwan dollar amounts represent, or have been or could be converted into United States dollars at the or any other rate.

3. CHANGES IN ACCOUNTING PRINCIPLES

1) Effective the fourth quarter of 2004, the Company adopted No. 32 interpretation issued by Accounting Research and Development Foundation in 2005, “The Accounting Treatment of Foreign Exchange Option Contract Before the Implementation of Statements of Financial Accounting Standards No. 34”. Outstanding put options at balance sheet date is accounted for at fair value and any difference is charged to current operations. As a result of this change in accounting principle, the net income attributable to parent for the year ended December 31, 2005 was increased by $3,476, and total consolidated liabilities and stockholder’s equity as of December 31, 2005 were increased and decreased, respectively, by $3,476.

2) Effective January 1, 2005, the Company adopted Statements of Financial Accounting Standards No. 35 “Accounting for Impairments of Asset” and the newly amended Statements of Financial Accounting Standards No. 5 “Accounting for Long-term Equity Investments” which require losses of the controlled entities be fully recognized. The adoption of these accounting principles had no significant impact on the consolidated financial statements for the year ended December 31, 2005.

50 5150 51

3) Effective January 1, 2005, in accordance with the newly amended Statements of Financial Accounting Standards No. 7 “Consolidated Financial Statements”, all majority owned subsidiaries are consolidated. As a result, consolidated assets and consolidated liabilities were increased by $1,494,082 and $453,997, constituting 1.8% and 1.3% of the respective consolidated total assets and liabilities as of December 31, 2005, respectively and the consolidated operating revenue was increased by $389,806, constituting 0.5% of the consolidated operating revenues for the year ended December 31, 2005.

4. DESCRIPTION OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

December 31,

Cash on hand

Checking and demand deposits

Time deposit

Cash equivalent-commercial paper and government bond

As of December 31, 2004 and 2005, the Company’s and its subsidiaries’ overseas checking and demand deposits were $314,248 (USD$9,277 thousand HKD$1,914 thousand KRW$28,700 thousand JPY$1,484thousand THB$16 thousand and $20) and $2,172,706 (USD$65,746 thousand HKD$3,328 thousand KRW$89,573 thousand JPY$17,052thousand THB$16 thousand and $20). The overseas time deposits were $229,950 (USD$7,000 thousand) and $144,540 (USD$4,400 thousand).

50 5150 51

(2) Short-term investments December 31,

Open-end fund Foreign bond with resale agreements

Market value

(3) Accounts receivable and overdue receivable December 31,

Accounts receivable Less: Allowance for doubtful accounts

Overdue receivable (shown as other assets) Less: Allowance for doubtful accounts

(4) Inventories December 31,

Raw materials Work in process Finished goods Inventory in transit

Less: Allowance for inventory obsolescence and

market price declines

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(5) Long-term investmentsA.List of long-term investments: December 31, 2004 December 31, 2005

Investee company % (Note B) Book value

% (Note B) Book value

Equity method: Delta Electronics (Thailand) Public Co., Ltd. (DET) (Note A) Cyntec Co., Ltd (Cyntec) Grand Advance Technology Ltd. (Grand Advance)

Delta Optoelectronics Inc. (Delta Optoelectronics) (Note C)

Delsolar Co., Ltd. (Delsolar) (Note C) Others (individual amount less than

$100,000)

The lower of cost or market value method: D-Link Co., Ltd. Macronix International Co., Ltd. Others (individual amount less than $100,000)

Less: Allowance for loss on market value decline of long-term investments

Cost method: Union Optronics Corp. Primarion Inc. Preferred

shares WK Technology Fund Delta American Ltd. Preferred

sharesPreferred

shares Deltron-Cimic Electric and Electronics Co., Ltd. Others (individual amount less than $100,000)

(Note A) The combined ownership percentage of DET's common share held by the

Company and DIH was more than 20%. Accordingly, the investment was

accounted for under the equity method.

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(Note B) The percentage of long-term investments was combined with the percentages of common shares held by the Company and its subsidiaries.

(Note C) Due to the adoption of newly amended Statements of Financial Accounting Standards No.7 ”Consolidated Financial Statements”, these subsidiaries are included in the consolidated financial statement for the year ended December 31, 2005 and the book value of long-term investment had been eliminated.

B. Details of investment (loss) income under the equity method are as follows:

For the years ended December 31, Name of investee company DETCyntecDelta Optoelectronics (Note) Grand Advance Others

Note: In 2005, Delta Optoelectronics was consolidated under Statements of Financial Accounting Standards No. 7.

C. Certain investee companies accounted for under the equity method for the years ended December 31, 2004 and 2005 were audited by other auditors. The investment income recognized in these investee companies under equity method was $83,791 and $217,237 for the years ended December 31, 2004 and 2005, respectively, and the related balance of long-term investment was $4,251,481 and $4,381,646 as of December 31, 2004 and 2005, respectively.

D. The Company recognized impairment loss of $66,126 and $328,211 on certain investees, accounted for under the cost method, for the years ended December 31, 2004 and 2005, respectively.

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(6) Other financial assets - non-current

December 31,

Structured product - time deposits

The interest rates of structured product are based on the contract.

54 5554 55

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(8) Short-term loans

December 31,

Unsecured bank loans Secured bank loans

Credit lines Interest rate per annum

(9) Convertible bonds

A. As of December 31, 2004 and 2005 the details of the fourth foreign currency Euro convertible bonds (ECB IV) are as follows:

December 31, 2004 December 31, 2005Issuance amount Converted amount Outstanding amount Less: foreign currency revaluation Book value Less: long-term liabilities- current portion

B. The issuance of ECB IV was approved by SFB (Securities and Futures Bureau). The issuance and condition of ECB IV are summarized as follows:

ECB IV (A) Trustee The Bank of New York (B) Amount of issuance US$200,000 (C) Nominal interest rate (net of tax) 0% (D) Period of issuance 5 years (July 30, 2003 ~July 30, 2008) (E) Place of issuance Luxembourg (F) Period of conversion August 30, 2003 ~ June 30, 2008 (G) Exchange rate of conversion Fixed exchange rate of NT$34.35

to US$1.00

56 5756 57

ECB IV (H) Redemption price and adjustment (in NT dollars)

The initial conversion price was NT$55,and it may be adjusted for change in the number of common shares outstanding. The conversion price as of December 31, 2005 was NT$45.91

(I) Redemption of bonds a. Redemption at principal amount on due date. b. Early redemption

(a) Redemption price: 94.63% of outstanding principal amount.

(b) Redemption date: At any time on or after July 30, 2006.

(c) The condition of early redemption:

1. the closing price of the common shares of the Company on each of 20 consecutive trading days is at least 125% of the conversion price,

2. at least 90% in principal amount of the bonds have been converted, redeemed or purchased and cancelled.

(J) Purchase of bonds a. Purchase date: July 30, 2005 b. Purchase price: 97.82% of outstanding principal amount

C. As of December 31, 2005, US$186,580 of ECB IV had been converted into 132,375,000 shares of common stock with the premium recognized as capital reserve amounting $4,579,741.

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(10) Accrued pension liabilities

A. The Company, Pyramis, Delsolar, Delta Optoelectronics and DNIT have a non-contributory and funded defined benefit plan in accordance with the Labor Standards Law, covering all regular employees before the implementation of the Labor Pension Act on July 1, 2005. The defined benefit plan will continue to cover the employees who chose to remain with the defined benefit plan. Upon retirement, pension payments are calculated based on total years of service and average salary of the six months prior to retirement. Two base units are earned for the first 15 years of service and one unit for each year thereafter, with a maximum number of 45 units. The Company contributes 2% of the employees’ monthly salaries and wages to an independent retirement trust fund, with the Central Trust of China, the trustee. As of December 31, 2004 and 2005, the net periodic pension cost of the Company was $176,015 and $161,582, respectively, and the retirement trust fund of the Central Trust of China was $395,891 and $441,957, respectively. The fund balances are not reflected in the consolidated financial statements.

The subsidiaries, DIH and DNH, do not maintain an employee retirement plan. However, certain subsidiaries of DIH and DNH, located in Mainland China maintain a defined contribution retirement plan covering all employees. Under the plan, the employees of DIH and DNH subsidiary contribute to a separate fund an amount based on certain percentage of the monthly basic salary of employees. And each DIH's and DNH’s subsidiary also provide pension reserves for its employees for amounts depending on employee’s positions.

The subsidiaries, DIH, DNH and Pyramis located in United States have defined contribution plans in accordance with the local regulations.

B. Effective July 1, 2005, the Company, Pyramis, Delta Optoelectronics, Delsolar and DNIT have established a defined contribution pension plan under the Labor Pension Act (the “New Plan”) for eligible employees holding Republic of China citizenship. The Company, Pyramis, Delta Optoelectronics, Delsolar and DNIT deposit the pension amount based on 6% of the employees monthly salaries and wages into each employee’s personal pension account with the Bureau of Labor Insurance. As of December 31, 2005, the pension cost of the Company and the subsidiaries was $59,144.

58 5958 59

C. The reconciliation of the funded status to accrued pension liability of the Company, Pyramis, Delta Optoelectronics, Delsolar and DNIT as of December 31, 2004 and 2005, the respective measurement dates, are as follows:

December 31,

Vested benefit obligation Non-vested benefit obligation Accumulated benefit obligation Additional benefits based on future salary increases Projected benefit obligation Fair value of plan assets Funded status Unrecognized transition obligation Unrecognized net pension loss Additional pension liability Accrued pension liability

The related assumptions used for the actuarial valuation were as follows:

2004 2005

Discount rate 3.50% 3.50%

Expected return rate on plan assets 2.50% 2.50%

The average rate of salary increase 4.00% 3.00%

60 6160 61

D. In 2004 and 2005, the details of net periodic pension cost are as follows:

December 31,

2004 2005

Service cost

Interest cost

Expected return on plan assets

Amortization of unrecognized transition obligation

Unrecognized pension loss

Net pension cost

E. As of December 31, 2004 and 2005, the total balance of the reserve for retirement plan of DIH's and DNH’s subsidiaries located in Mainland China was $176,843 and $254,322, respectively.

60 6160 61

(11) Common stock

A. In accordance with the Company’s Articles of Incorporation, the total shares of authorized common stock were 2,000,000,000 shares (including 60,000,000 shares for warrant bonds conversion). As of December 31, 2005, the total issued and outstanding common stock was 1,830,382,000 shares with par value of $10 (in dollars).

B. As of December 31, 2005, 132,375,000 shares of common stock were issued for convertion of ECB IV.

C. On December 20, 2004, the board of directors of the Company adopted a resolution that allow certain stockholders to issue 16,000,000 units of global depository receipts (GDRs), represented by 80,000,000 shares of common stock (Deposited Shares). After obtaining approval from SFB, these GDRs were listed on the Securities Exchange of Luxembourg, with total proceeds of US$134,666. The issurance of GDRs were based on the outstanding shares, accordingly, there is no diluted effect on the common shares. The main terms and conditions of the GDRs are as follows:

a) Voting rights

GDR holders may, pursuant to the Depositary Agreement and the relevant laws and regulations of the R.O.C., exercise the voting rights pertaining to the underlying the Company common shares represented by the GDRs.

b) Sales and redemption of the underlying common shares represented by the GDRs

When the holders of the GDRs request the Depositary to redeem the GDRs in accordance with the relevant R.O.C. regulations and the provisions in the Depositary Agreement, the Depositary may (i) deliver the underlying common shares represented by the GDRs to the GDR holders, or (ii) sell the underlying common shares represented by the GDRs in the R.O.C. stock market on behalf of the GDR holder. The payment of proceeds from such sale shall be made subject to the relevant R.O.C. laws and regulations and the provisions in the Depositary Agreement.

62 6362 63

c) Distribution of dividends, preemptive rights and other rights and interests

GDR units bear the same rights as common shares.

(12) Capital reserve

The R.O.C. Company Law requires that the capital reserve shall be exclusively used to offset against accumulated deficit or increase capital and shall not be used for any other purpose. The capital reserve can be used to offset against accumulated deficit only when legal reserve and special reserve are insufficient. Only capital reserve from paid-in capital in excess of par value and donated surplus can be used to increase capital and the total amount shall be limited to 10% of outstanding capital each year.

(13) Legal reserve

The R.O.C. Company Law requires that the Company shall set aside 10% of its net income as the legal reserve after offsetting against prior years’ losses until the legal reserve equals the Company’s capital. The legal reserve can be used only to offset against accumulated deficit or increase capital. The legal reserve can be used to increase capital only when the reserve exceeds 50% of the Company’s capitals, and shall be limited to 50% of the excess portion of the reserve.

(14) Undistributed earnings

A.Under the Company's Articles of Incorporation, the current year's earnings, if any, shall be distributed in the following order:

a) Payment of all taxes and dues.

b) Offset against prior years' operating losses, if any.

c) Set aside 10% of the remaining amount as legal reserve.

d) Set aside a certain amount as special reserve, if necessary.

e) The amount of distributable earnings after deducting items (a), (b), (c) and (d), plus beginning undistributed earnings (the earnings), shall be distributed in the following percentage according to the resolution of the meeting of stockholders:

(i) Directors' and supervisors' remuneration: up to 1% of the earnings.

62 6362 63

(ii) Employees' bonus: at least 3% of the earnings. In addition, under the shareholders resolution at their annual meeting on May 19, 2005, the Company can issue the employee stock bonus to qualified employees of subsidiaries.

(iii) Stockholders' bonus: balance of the earnings after deducting (i) and (ii).

Under the Company’s Articles of Incorporations, at least 50% of the distributable retained earnings shall be distributed as dividends to stockholders, of which at least 5% is in cash dividends.

B. In addition to the legal reserve, the Company may, under its Articles of Incorporation or by a resolution adopted at the meeting of stockholders, set aside an additional special reserve to cover other accounts under stockholders’ equity negative balance. Subsequently, the special reserves can be available for distribution under approvals of the stockholders after the negative balance in these accounts has been fully recovered.

C. As of February 14, 2006, the distribution of 2005 earnings had not been approved by the Company’s board of directors. The subsequent resolutions of board of directors’ and stockholders’ meeting on the 2005 earnings will be disclosed in the Market Observation Post System ofthe Taiwan Stock Exchange Corporation. The distribution of 2004 earnings was approved by the shareholders’ meeting on May 19, 2005, which included the employees’ bonuses of $320,775, stock dividends of $803,693 and cash dividends of $4,018,467. The distribution of 2004 earnings had been approved by SFB and the Company set June 30, 2005 as the ex-rights/dividend date.

In accordance with the resolutions adopted at the shareholders’ meeting, the Company paid cash dividends of $2.25 (in dollars) and $2.41194 (in dollars) per share, and stock dividends of $0.5 (in dollars) and $0.48238 (in dollars) per share in 2004 and 2005, respectively.

For the distribution of 2003 and 2004 earnings, details on employees’ bonus are as follows:

a) The distribution of employees’ bonus and directors’ and supervisors’ remuneration set forth in the Articles of Incorporation: Please refer to Note 4(14) A.(e)

64 6564 65

b) The actual payment of employees’ bonus and directors’ and supervisors’ remuneration from the distribution of 2003 and 2004 earnings were $312,734 $320,775 and $13,000 $16,700, respectively. The Company issued 31,273,000 and 32,078,000 shares of common stock as employees’ bonus, which accounted for 2.11% and 2.02% of the outstanding common shares as December 31, 2003 and 2004, respectively.

The effect on the 2003 and 2004 earnings per share (EPS) is as follows:

2003 EPS (Note) 2004 EPS (Note)

Basic Diluted Basic Diluted

Original EPS in the financial statements of current year

Effect of employees’ bonus and directors’ and supervisors’ remuneration

Pro forma EPS

Note: The EPS was calculated based on net income excluding minority interest.

c) The distribution of 2003 earnings approved at the stockholders’ meeting was the same as that proposed at the board of directors’ meeting.

D. The Taiwan imputation tax system requires that any undistributed current earnings, on tax basis, be subject to an additional 10% corporate income tax if the earnings are not distributed in the following year. This 10% additional tax on undistributed earnings paid by the company may be used as tax credit by the stockholders, including foreign stockholders, against the withholding tax on dividends. In addition, the domestic stockholders can claim a proportionate share in the company's corporate income tax as tax credit against their individual income tax liability.

64 6564 65

E. As of December 31, 2004 and 2005, details on tax credits are as follows:

December 31,

Imputation tax credit account balance

2004 (Actual) 2005 (Estimated)Creditable tax ratio

The actual creditable tax ratio will be adjusted based on the imputation tax credit account balance as of the distribution date. The earnings of 2003 have been distributed, and June 30, 2005 was the effective date for distribution of stock dividends and cash dividends.

F. As of December 31, 2004 and 2005, the undistributed earnings balances are as follows:

December 31,

Before January 1, 1998 On and after January 1, 1998 -10% additional tax assessed

-10% additional tax unassessed

(15) Income tax

A. Deferred income tax assets and liabilities as of December 31, 2004 and 2005 are as follows:

December 31,

(A) Total deferred income tax assets (B) Allowance for deferred income tax assets (C) Total deferred income tax liabilities

66 6766 67

B. The components of deferred income tax assets and liabilities are as follows:

December 31, 2004 December 31, 2005

Original amount Tax effects

Original amount Tax effects

Current:

Allowance for inventory obsolescence

Unrealized exchange (gain) loss

Others

Investment tax credits

Less: allowance for deferred income tax assets-current

Net deferred income tax assets-current

Non-current:

Investment income accounted for under the equity method, net

Unfunded pension

Loss carryforwards

Others

Investment tax credits

Less: allowance for deferred income tax assets-non current

Net deferred income tax liabilities-non current

66 6766 67

C. As of December 31, 2004 and 2005, income tax payable (refund) is arrived at as follows:

For the years ended December 31,

Current year's income tax (benefit) expense

Effect of deferred income tax

Interest income subject to separate tax

Over provision of income tax in prior years, net

Prepaid income tax

Others

Income tax payable-net

Income tax refund

Income tax payable

D. As of December 31, 2005, according to “Income Tax Law” and “Statute for Upgrading Industries”, investments tax credits are as follows:

Sources of

investments tax credits Total credits Unused credits Year of expiration

R&D expenditure Between 2006 and 2009

Training expenditure Between 2006 and 2009

Expenditure for procurement of machinery and equipment

Between 2006 and 2009

Investment in important technology based enterprise

Between 2006 and 2008

68 6968 69

E. DEC, DEP, DWC, DWO, DWV and DII are subject to tax laws applicable to foreign investment enterprises in the P.R.C. and are fully exempt from PRC income tax for two years starting from the first profit-making year followed by a 50% reduction for the next three years. The current enterprise income tax rate is 24%.

DDG is a export oriented company (i.e. export sales constituting 70% of total sales) and a high-investment, low-return company (i.e. minimum capital of US$30 million). According to the related regulations, the enterprise income tax rate is 10%.

DWJ is a export oriented company. According to related regulations, after the maturity of income tax exempt period, DWJ can apply the tax preference of 50% discount of enterprise tax rate of 24%, when the company’s export sales exceed 70% of total sales in current year.

F. The Company and its subsidiaries’ assessed and approved conditions of income tax returns are as follows:

Year Assessed by Tax Authority

The Company 2003

Delta Optoelectronics and DNIT 2002

Delsolar and Pyramis Not assessed yet

68 6968 69

(16) Earnings per share(Note a) For the year ended December 31, 2004

Amount Earnings per share (in dollars)

Income before income tax Net income

Weighted average outstanding common shares (in thousands)


(Note b) Basic EPS

Effect of potential

common shares with

dilutive effect:

0% Euro convertible

bonds

Diluted EPS

For the year ended December 31, 2004

Amount Earnings per share (in dollars)


Weighted average outstanding common shares (in thousands)


Basic EPS

Effect of potential

common shares with

dilutive effect:

0% Euro convertible

bonds

Diluted EPS

Note a: Income before income tax and net income amounts are based on amounts exclusive of minority interest.

Note b: The weighted average outstanding common shares were retroactively adjusted for stock dividends and employee bonuses distributed in 2005.

70 7170 71

(17)

Per

sonn

el e

xpen

se, d

epre

ciat

ion

and

amor

tizat

ion

expe

nse

For t

he y

ears

end

ed D

ecem

ber 3

1,

O

pera

ting

cost

O

pera

ting

expe

nse

Tot

al

Ope

ratin

g co

st

Ope

ratin

g ex

pens

e

T

otal

Pers

onne

l exp

ense

Sal

arie

s

Lab

or a

nd h

ealth

insu

ranc

es

Pen

sion

Oth

ers

Dep

reci

atio

n ex

pens

e

Am

ortiz

atio

n ex

pens

e

70 7170 71

5. RELATED PARTY TRANSACTIONS

(1) Name and relationship of related parties

Names of related parties Relationship with the Company

Cyntec Co., Ltd. (Cyntec) Investee accounted for under the equity method

Grand Advance Technology Inc. (Grand Advance)

Delta Electronics (Thailand) Public Co., Ltd. (DET)

Delta Products Corporation (DPC) Affiliated enterprise

Deltron-Cimic Electric and Electronics Co., Ltd (Deltron-Cimic)

Delta Energy Systems (Switzerland) AG. (DES Switzerland)

A subsidiary of DET

Delta Electronics Europe Ltd. (DEU) A subsidiary of DES Switzerland

Delta Energy Systems (Germany) Gmbh

Delta Energy Systems (India) PVT (DES India)

Delta Energy Systems (Brasil) S.A.

Delta Video Technology Ltd (DVT) Indirectly held investee, accounted for under the equity method by DIH (Note)

Delta Green (Tianjin) Industries Company Limited (Delta Green (Tianjin))

Indirectly held investee, accounted for under the equity method by DET

Note: DAC Holding was acquired during the third quarter of 2004 by DIH. As the results, all significant intercompany transactions between the DVT and consolidated entities were eliminated after July 31, 2004.

72 7372 73

(2) Significant transactions with related parties

A. Sales


Delta-Cimic

DPC

DET

DEU

DES India

DVT

Others

The sales terms, including prices and collections, were negotiated based on cost, market, competitors and other factors.

B. Purchases


DET

Delta Green (Tianjin)

DVT

Others

The purchases terms, including prices and payments, were negotiated based on cost, market, competitors and other factors.

72 7372 73

C. Accounts receivable


Delta-Cimic

DPC

DEU

DES India

DET

Others

D. Other receivables

December 31,

DET

Others

Less: Allowance for doubtful accounts

Other receivables are mainly prepayment on behalf of related parties.

E. Accounts payable

December 31,

DET

Delta Green (Tianjin)

Others

74 7574 75

F. Endorsements and guarantees

The amount of endorsements and guarantees provided by the Company on behalf of related party as of December 31, 2004 and 2005 are listed below:

December 31,

DPC

6. DETAILS OF PLEDGED ASSETS

As of December 31, 2004 and 2005, the details of pledged assets are as follows:

December 31,

Assets Purpose

Time deposit (shown as other financial assets-current)

Collaterals for patent suit

Time deposits (shown as other financial assets-current)

Performance bonds

Time deposits (shown as other financial assets-current)

Collateral for bank loans

74 7574 75

7. COMMITMENTS AND CONTINGENT LIABILITIES

Except for Note 5, the Company’s commitments in relation to the leases was as follows:

1) Effective May, 2004, the Company has a 20-year land and building lease in Tainan Science-Based Industrial Park. As of December 31, 2005, the future lease payments and the net present value discounted at 2.015%, one-year time deposit interest rate given by the Chunghwa Post Co., Ltd., as of December 31, 2005, are as follows:

Year Amount

2006

2007

2008

2009

2010

2011~2015 (the net present value is $12,496)

2016~2020 (the net present value is $11,310)

2021~2023 (the net present value is $ 6,264)

2) As of December 31, 2005, unused letter of credits amount was $146,960.

3) Minimum future payments for land lease of DDG were approximately $91,675.

8. MAJOR CATASTROPHE

None.

76 7776 77

9. SUBSEQUENT EVENTS

None.

10. OTHER

(1) Certain accounts in the consolidated financial statements for the year ended December 31, 2004 have been reclassified to conform with the presentation adopted for the year ended December 31, 2005.

(2) Fair value of non-derivative assets and liabilities

December 31, 2004 December 31, 2005 Book value Fair value Book value Fair value ASSETS Non-derivative assets with fair values equal to book values Short-term investments Long-term investments LIABILITIES Non-derivative liabilities with fair values equal to book values Accrued pension liabilities

The related assumptions on the fair value of non-derivative assets and liabilities are as follows:

A. Non-derivative assets and liabilities with fair values equal to book values.

(A) The carrying amounts of short-term non-derivative assets and liabilities including cash and cash equivalents, notes and accounts receivable, other receivables, other financial assets-current, cash surrender value of life insurance, refundable deposits, short-term loans, notes and bills payable, notes and accounts payable, income tax payable, accrued expenses, other payables, other current liabilities and guarantee deposits received approximate their fair values because of their short-term maturities.

76 7776 77

(B) The fair value of cash surrender value of life insurance is based on the book value at balance sheet date.

(C) The fair values of refundable deposits and guarantee deposits received are based on book values, which approximate present value.

(D) The fair value of convertible bonds is based on the book value at balance sheet date. According to the terms and condition of convertible bonds, the interest rate is zero and the redemption price is lower than the face value. The discounted value was not easily determinable due to uncertain redemption or conversion dates and the amount denominated in foreign currency was translated into New Taiwan dollars using the exchange rate at the balance sheet date.

B. The short-term investments are open-ended funds, the fair values are based on the net assets of the open-ended funds at the balance sheet date. If market values is not available, then the fair values are based on book values.

C. The fair values of long-term investments are based on their market values at the balance sheet date or the underlying equity in net assets if market value is not available.

D. The fair value of accrued pension liabilities is the funded status based on the retirement actuarial report as of December 31, 2004 and 2005. The fair value of reserve for retirement plan was not based on an actuarial repot is based on book value.

(3) Financial instruments with credit risk:

December 31,

Loan guarantees for related party

Loan guarantees provided by the Company are in compliance with the Company “Procedures for Provision of Endorsements and Guarantees” and are only provided affiliated companies of which the Company owns directly or indirectly more than 50% ownership or a company which trades with the Company. As the Company is fully aware of the credit conditions of these related parties, it has not asked for collateral for the loan guarantees provide. In these events that these related parties fail to comply with loan agreements with banks, the maximum loss to the Company is the total amount of loan guarantees as listed above.

78 7978 79

(4) Information on derivative transactions

A. General information disclosure:

(A) The Company and its subsidiaries entered into certain foreign currency option contracts, forward foreign currency contracts, credit-linked notes and cross currency swap contracts, which are not held to sale, but to hedge foreign exchange and interest risks in foreign currency denominated accounts receivable and payable. The purpose of the Company and its subsidiaries is to hedge the most of foreign exchange risks and evaluate periodically.

(B) Accounting policy: See Note 2.

(C) Credit risk:

The banks, which the Company and its subsidiaries deal with, are all in good credit standing and the Company and its subsidiaries deal with several banks to disperse the credit risk, therefore, the possibility is low for the banks not to comply with the terms of the contracts.

(D) Market risk:

The Company and its subsidiaries entered into these contracts in order to hedge foreign exchange losses. The exchange gain or loss from exchange rate fluctuation of hedge item will be offset by these transactions. Accordingly, no material market risk is expected.

(E) The information on derivative transactions of the Company and its subsidiaries for the years ended December 31, 2004 and 2005 are as follows (unit: thousands of dollars):

78 7978 79

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80 8180 81

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1.D

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80 8180 81

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td. (

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82 8382 83

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82 8382 83

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war

d fo

reig

n cu

rren

cy c

ontra

cts

(Not

e c)

(Not

e c)

Tota

l

84 8584 85

T

rans

actio

n te

rms

R

elat

ed c

ash

flow

s

Der

ivat

ive

trans

actio

ns

Par

val

ue, c

ontra

ct

am

ount

or n

omin

al

prin

cipa

l

Exe

rcis

e da

tes

Exer

cise

pric

es/

Ex

erci

se ra

tes

Rea

lized

gai

n (o

r los

s)

C

ash

inflo

w

Cas

h ou

tflow

4.D

elta

Ele

ctro

nics

Com

pone

nts (

Don

g

Gua

n) C

o., L

td. (

the

subs

idia

ry o

f

DIH

)

For

war

d fo

reig

n cu

rren

cy c

ontra

cts

Tota

l

5.D

elta

Ele

ctro

nics

(Jap

an) I

nc. (

the

su

bsid

iary

of D

IH)

For

war

d fo

reig

n cu

rren

cy c

ontra

cts

Tota

l

6.D

elta

Ele

ctro

nics

Indu

stria

l (D

ong

Gua

n)

C

o., L

td. (

the

subs

idia

ry o

f DN

I Cay

man

)

Forw

ard

fore

ign

curr

ency

con

tract

s

7. D

elta

Net

wor

ks, I

nc. (

regi

ster

ed in

Taiw

an, t

he su

bsid

iary

of D

NI C

aym

an)

B

uy o

ptio

n (U

SD P

UT/

TWD

CA

LL)

B

uy o

ptio

n (U

SD C

ALL

/TW

D P

UT)

Sell

optio

n (U

SD C

ALL

/TW

D P

UT)

Sell

optio

n (U

SD P

UT/

TWD

CA

LL)

Se

ll op

tion

(USD

CA

LL/J

PY P

UT)

Buy

opt

ion

(USD

PU

T/JP

Y C

ALL

) To

tal

8.D

elta

Net

wor

ks In

tern

atio

nal L

td.

(th

e su

bsid

iary

of D

NI C

aym

an)

For

war

d fo

reig

n cu

rren

cy c

ontra

cts

(Not

e a)

: The

exe

rcis

e ra

te is

det

erm

ined

by

the

exch

ange

rate

of e

xerc

ise

date

. The

refo

re, t

he e

xerc

ise

rate

can

not b

e es

timat

ed re

ason

ably

. (N

ote

b): T

he C

ompa

ny w

ill p

ay o

r rec

eive

pre

dete

rmin

ed n

omin

al p

rinci

pal b

y th

e ex

erci

se ra

te o

f con

tract

, so

futu

re c

ash

flow

can

’t be

est

imat

ed re

ason

ably

. (N

ote

c): T

he tr

ansa

ctio

n ha

d be

clo

sed.

84 8584 85

(F) The Company and its subsidiaries combined the buy and sell option contracts to form the range forward contracts. The premiums expense and income from buy and sell options are to be offset and the net premium income of the Company and its subsidiaries was $41,517 and $0 for the years ended December 31, 2004 and 2005, respectively.

(G) Fair value: December 31,

2004 2005

Nominal principal Fair value

Nominal principal Fair value

Foreign currency option contracts

Interest Rate Swap

Forward foreign currency contract

Multiple-Stage Inflating Forward

(H) The book value for related derivative transactions of the Company and its subsidiaries are as follows:

December 31, Foreign currency options and forward foreign currency contracts 2004 2005 Other receivables

Other payables

Other receivables (payables)-net

(I) As of December 31, 2004 and 2005, the Company and its subsidiaries entered into derivatives contracts with overseas institution (including the foreign institutions operate in local territory) and the relevant nominal principal were $1,000,000 USD$154,000 and USD$239,000, respectively. The fair value of derivatives at December 31, 2004 and 2005 were ($11,477) and $56,263, respectively. The book value at December 31, 2004 and 2005 were $279 and $233,373, respectively.

86 8786 87

B. Additional disclosure information

Pursuant to the terms of the contracts, the premiums are delivered or paid on the trade date. There was no any collateral as of December 31, 2004 and 2005.

86 8786 87

(5) S

igni

fican

t int

erco

mpa

ny tr

ansa

ction

s betw

een

the C

ompa

ny, D

IH, D

NH, P

yram

is, D

EN, D

elta O

ptoe

lectro

nics

, Dels

olar

and

the c

onso

lidate

d su

bsid

iaries

are e

limin

ated

when

pre

parin

g th

e co

nsol

idate

d fin

ancia

l stat

emen

ts.

The d

etails

are a

s fol

lows

:

200

4

Tran

sact

ions

The

Com

pany

D

IH

DNH

Pyr

amis

D

EN

D

elta

O

ptoe

lectro

nics

Del

sola

r

1.El

imin

ation

of l

ong-

term

inve

stmen

ts 2.

Elim

inati

on o

f int

erco

man

y re

ceiv

able

(AR)

and

paya

ble (

AP) a

ccou

nts

3.El

imin

ation

of p

rofit

and

loss

acco

unts

(1)

Sale

and

purc

hase

tran

sacti

ons

A

. Dow

nstre

am tr

ansa

ction

s

B. U

pstre

am tr

ansa

ction

s

C. S

ides

tream

tran

sacti

ons

(2)

Serv

ices r

even

ue, s

ellin

g ex

pens

es, m

anag

emen

t and

adm

inist

rativ

e

ex

pens

es

(3)

Unre

alize

d (re

alize

d) in

terco

mpa

ny p

rofit

from

dow

nstre

am tr

ansa

ction

s4.

Elim

inati

on o

f min

ority

inter

est

5.El

imin

ation

of o

ther

tran

sacti

ons

(1) R

efun

dabl

e dep

osits

and

guar

antee

dep

osits

rece

ived

(2

) Ren

tal re

venu

e and

rent

al ex

pens

e

2

005

Tran

sact

ions

The

Com

pany

D

IH

DNH

Pyr

amis

D

EN

D

elta

O

ptoe

lectro

nics

Del

sola

r

1.El

imin

ation

of l

ong-

term

inve

stmen

ts 2.

Elim

inati

on o

f int

erco

mpa

ny re

ceiv

able

(AR)

and

paya

ble (

AP) a

ccou

nts

3.El

imin

ation

of p

rofit

and

loss

acco

unts

(1)

Sale

and

purc

hase

tran

sacti

ons

A

. Dow

nstre

am tr

ansa

ction

s

B. U

pstre

am tr

ansa

ction

s

C. S

ides

tream

tran

sacti

ons

(2)

Serv

ices r

even

ue, s

ellin

g ex

pens

es, m

anag

emen

t and

adm

inist

rativ

e

ex

pens

es

4.El

imin

ation

of m

inor

ity in

teres

t 5.

Elim

inati

on o

f oth

er tr

ansa

ction

s (1

) Ref

unda

ble d

epos

its an

d gu

aran

tee d

epos

its re

ceiv

ed

(2) R

ental

reve

nue a

nd re

ntal

expe

nse

88 8988 89

11.

Disc

losu

re in

form

atio

n of

the C

ompa

ny a

nd it

s sub

sidia

ries

(1)

Rela

ted

info

rmat

ion

of si

gnifi

cant

tran

sact

ions

Th

e di

sclo

sure

info

rmat

ion

of th

e in

veste

e co

mpa

nies

was

bas

ed o

n th

eir a

udite

d fin

anci

al st

atem

ents

and

the

trans

actio

ns w

ith su

bsid

iarie

s disc

lose

d be

low

had

bee

n el

imin

ated

whe

n pr

epar

ing

cons

olid

ated

fina

ncia

l sta

tem

ents.

A

ll th

e disc

losu

re in

form

atio

n is

for r

efer

ence

onl

y.

A. F

inan

cing

activ

ities

to an

y co

mpa

ny o

r per

son:

Non

e. B.

Gua

rant

ee in

form

atio

n:

Nam

e of t

he co

mpa

ny

Par

ties b

eing

gua

rant

eed

Lim

it on

M

axim

um

O

utsta

ndin

g

Am

ount

of

Ra

tio o

f ac

cum

ulat

ed g

uara

ntee

Ceili

ng o

n

prov

idin

g gu

aran

tee

Rela

tions

hip

with

gu

aran

tee

outst

andi

ng g

uara

ntee

gua

rant

ee am

ount

gua

rant

ee w

ith

amou

nt to

net

val

ue

outst

andi

ng g

uara

ntee

N

umbe

r

Nam

e

Nam

e

th

e Com

pany

f

or su

ch p

arty

am

ount

in 2

005

at 1

2/31

/200

5

colla

tera

l pla

ced

o

f the

Com

pany

to th

e res

pect

ive p

arty

(Not

e a)

(Not

e b)

(Not

e c)

(Not

e e)

0 D

elta

Ele

ctro

nics

, Inc

. D

elta

Pro

duct

s Cor

p.

(

Not

e d)

0

Del

ta N

etw

orks

I

nter

natio

nal L

td.

(

Not

e d)

0

Del

ta O

ptoe

lect

roni

cs In

c.

(N

ote d

) 0

D

elso

lar C

o., L

td.

(

Not

e d)

(Not

e a):

Num

ber 0

repr

esen

ts th

e Com

pany

. (N

ote b

): N

umbe

r 1 m

eans

the C

ompa

ny h

as b

usin

ess t

rans

actio

ns w

ith th

e par

ty.

Num

ber 2

mea

ns th

e sub

sidia

ries o

f the

Com

pany

.(N

ote c

): Th

e lim

it w

as d

eter

min

ed b

y th

e Boa

rd o

f Dire

ctor

s. (N

ote d

): In

acco

rdan

ce w

ith th

e gua

rant

ee p

roce

dure

of t

he C

ompa

ny, t

he C

ompa

ny's

guar

ante

e to

othe

rs sh

ould

not

be i

n ex

cess

of 8

0% o

f the

Com

pany

's ne

t ass

ets.

A

s of D

ecem

ber 3

1, 2

005,

the m

axim

um am

ount

of g

uara

ntee

that

the C

ompa

ny ca

n pr

ovid

e was

$34

,719

,641

. (N

ote e

): Th

e hig

hest

outst

andi

ng g

uara

ntee

amou

nt in

200

5 w

ere t

rans

late

d us

ing

the e

xcha

nge r

ate w

hen

the C

ompa

ny d

ecla

red

to S

FB.

C.

Mar

keta

ble s

ecur

ities

hel

d by

the C

ompa

ny at

Dec

embe

r 31,

200

5: (C

ombi

ne th

e am

ount

less

than

100

,000

on

Dec

embe

r 31,

200

5)

N

ame a

nd k

ind

of m

arke

table

secu

ritie

s

Dec

embe

r 31,

200

5

N

ame o

f inv

esto

r

Ty

pe o

f

mar

keta

ble s

ecur

ities

Nam

e of

m

arke

table

secu

rities

R

elat

ions

hip

of th

e iss

uers

with

the C

ompa

ny

Gen

eral

le

dger

acco

unts

Num

ber o

f sha

res

(In

thou

sand

)

Bo

ok v

alue

Pe

rcen

tage

owne

rshi

p M

arke

t val

ue

N

ote

D

elta

Ele

ctro

nics

, Inc

Com

mon

Sto

ck

Delta

Inter

natio

nal H

oldi

ng L

td.A

subs

idia

ry o

f the

Co

mpa

ny

Long

-term

inve

stmen

tsDe

lta N

etwor

ks H

oldi

ng L

td.

Delta

Elec

troni

cs (T

haila

nd)

Publ

ic Co

., Ltd

. In

veste

e com

pany

ac

coun

ted

for u

nder

the

equi

ty m

etho

d Cy

ntec

Co.,

Ltd

. D-

Link

Co.,

Ltd

. N

one

Delso

lar C

o., L

td.

A su

bsid

iary

of t

he

Com

pany

De

lta O

ptoe

lectro

nics

Inc.

Pr

efer

red

Shar

es

Delta

Am

erica

Ltd

. N

one

Pref

erre

dsh

ares

Co

mm

on S

tock

Ot

hers

To

tal

88 8988 89

D.

Mar

ketab

le se

curit

ies ac

quire

d or s

old d

urin

g 200

5 in e

xces

s yea

r of $

100,0

00 or

over

20%

of ca

pital

:

Note

a: Th

e in

vestm

ent i

n M

acro

nix

Inter

natio

nal C

o., L

td. w

as a

long

-term

inve

stmen

t bef

ore

first

quar

ter o

f 200

5. A

fter f

irst q

uarte

r of 2

005,

the

Com

pany

held

the

inve

stmen

t for

shor

t-ter

m

purp

ose,

ther

efor

e, th

e rela

ted in

vestm

ent w

as tr

ansfe

rred t

o sho

rt-ter

m in

vestm

ent.

Note

b: D

elta I

nter

natio

nal H

oldi

ng L

td, (

“DIH

”) is

sued

new

shar

es an

d th

e Com

pany

subs

crib

ed sh

ares

total

ing

$4,49

6,581

. The

net

amou

nt o

f inv

estm

ent i

ncom

e, cu

mul

ative

tran

slatio

n ad

justm

ent

and d

educ

ted th

e div

iden

d dec

larati

on w

as $2

9,391

. The

net i

ncre

ased

amou

nt fo

r 200

5 was

$4,46

7,190

.

E.

Acqu

isitio

n of r

eal e

state

in ex

cess

of $1

00,00

0 or o

ver 2

0% of

capi

tal:

Prev

ious

tran

sfer i

nfor

mati

on

(as t

he tr

ansa

ction

parti

es w

ere r

elated

parti

es)

Prop

erty

ac

quire

d by

Prop

erty

ac

quire

d Da

te of

tra

nsac

tion

Tran

sacti

onam

ount

St

atus o

f pa

ymen

t Co

unter

party

Relat

ions

hip

with

the C

ompa

ny

Orig

inal

owne

r wh

o sol

d the

pr

oper

ty to

co

unter

party

Relat

ions

hip o

fth

e own

er w

ithth

e Com

pany

Date

of th

e or

igin

al tra

nsfe

rAm

ount

Basis

or

refe

renc

e us

ed in

setti

ng

the p

rice

Reas

on fo

r ac

quisi

tion o

f pr

oper

ties a

nd

statu

s of t

he

prop

ertie

s Ot

her

com

mitm

ent

Delta

Elec

troni

cs

Inc.

Build

ings

Cash

Li

jin

Engi

neer

ing

Co

., Ltd

.

Ac

tual

paym

ent

of co

nstru

ction

co

st

Built

facto

ry

build

ing i

n

Taiw

an

Scien

ce-B

ased

Indu

strial

Par

k

None

F.

Disp

osal

of re

al es

tate i

n ex

cess

of $

100,

000

or o

ver 2

0% o

f cap

ital:

None

. G.

Re

lated

party

purc

hase

s or s

ales t

rans

actio

ns in

exce

ss of

$100

,000 o

r ove

r 20%

of ca

pital

: Plea

se re

fer t

o Not

e 5 (2

) A an

d C.

Ja

nuar

y 1, 2

005

A

dditi

on

Disp

osal

Dec

embe

r 31,

2005

Acq

uire

r / se

ller

Nam

e of

mar

ketab

le

se

curit

y

Gene

ral

ledge

r a

ccou

nts

Nam

e of

trans

actio

n

pa

rties

Relat

ions

hip

Num

ber o

f

sha

res

(in th

ousa

nds)

A

mou

nt

Nu

mbe

r of

shar

es

(in th

ousa

nds)

Amou

nt

Nu

mbe

r of

shar

es

(in th

ousa

nds)

Sell

ing p

rice

Bo

ok va

lue

Disp

osal

gain

Num

ber o

f

sha

res

(in th

ousa

nds)

A

mou

nt

De

lta E

lectro

nics

, I

nc.

NITC

Bon

d Fu

ndSh

ort-t

erm

in

vestm

ents

-

-

- $

-

Pr

uden

tial

Fina

ncial

Bon

d Fu

nd

-

- -

-

TL

AM

Solo

mon

Bon

d Fu

nd

-

- -

-

M

acro

nix

Inter

natio

nal

Co., L

td.

Long

-term

in

vestm

ents

(Not

e a)

Cent

raliz

edse

curit

iesex

chan

gem

arke

t

--

-

De

lta

Inter

natio

nal

Hold

ing L

td.

Long

-term

in

vestm

ents

Delta

Inter

natio

nal

Hold

ing L

td.

A su

bsid

iary

of th

e Co

mpa

ny

90 9190 91

H.

Rece

ivab

les f

rom

relat

ed p

artie

s in

exce

ss o

f $10

0,00

0 or

ove

r 20%

of c

apita

l:

Ov

erdu

e rec

eivab

le

Sub

sequ

ent

A

llowa

nce

Balan

ce o

f rec

eivab

le

Acti

on ad

opted

for

col

lectio

ns

f

or d

oubt

ful

Na

me o

f cre

dito

r

Tran

sacti

on p

artie

s

Re

latio

nshi

p

f

rom

relat

ed p

artie

s

Tur

nove

r rate

Amou

nt

ove

rdue

acco

unts

(No

te)

ac

coun

ts pr

ovid

edDe

lta E

lectro

nics

, Inc

. De

lta In

terna

tiona

l Ho

ldin

g Lt

d.

A su

bsid

iary

of th

e Co

mpa

ny

Acco

unts

rece

ivab

leOt

her r

eceiv

ables

DE

I Log

istics

(USA

) Co

rp.

A su

bsid

iary

of D

IH

Acco

unts

rece

ivab

leOt

her r

eceiv

ables

Cont

inue

d co

llecti

on

expe

cted

in 2

006

De

lta P

rodu

cts

Corp

orati

on

Affil

iated

enter

prise

Ac

coun

ts re

ceiv

able

Othe

r rec

eivab

les

Delta

Vid

eo D

isplay

Sy

stem

(Wu

Jiang

) Co

., Lt

d. (D

WV)

A su

bsid

iary

of D

IH

Acco

unts

rece

ivab

leOt

her r

eceiv

ables

De

lta E

lectro

nics

In

terna

tiona

l Ltd

. A

subs

idiar

y of

DIH

Ac

coun

ts re

ceiv

able

Othe

r rec

eivab

les

Delta

Vid

eo

Tech

nolo

gy L

td.

A su

bsid

iary

of D

AC

Acco

unts

rece

ivab

leOt

her r

eceiv

ables

De

lta E

nerg

y Sy

stem

s (In

dia)

PVT

Ltd

. A

subs

idiar

y of

the i

nves

teeco

mpa

ny ac

coun

ted fo

r un

der t

he eq

uity

meth

od

Acco

unts

rece

ivab

leOt

her r

eceiv

ables

De

lta E

lectro

nics

Eu

rope

Ltd

.

Acco

unts

rece

ivab

leOt

her r

eceiv

ables

(Not

e): T

he am

ount

s col

lected

subs

eque

ntly

by

Febr

uary

14,

200

6.

I. In

form

ation

on

deriv

ative

tran

sacti

ons:

Plea

se re

fer t

o No

te 10

(3).

90 9190 91

(2) D

isclo

sure

info

rmati

on of

inve

stee c

ompa

nyIn

form

ation

relat

ed to

inve

stee c

ompa

nies

’ inv

estm

ent i

ncom

e or l

oss w

as tr

ansla

ted at

the a

vera

ge ex

chan

ge ra

te of

200

5 wh

ile o

ther

s wer

e tra

nslat

ed at

the r

ate o

f exc

hang

e pre

vaili

ng at

the b

alanc

e she

et da

te.

A.

Info

rmati

on of

inve

stee c

ompa

ny: (

Comb

ine t

he in

divid

ual b

ook v

alue l

ess t

han $

100,0

00 on

Dec

embe

r 31,

2005

)

Orig

inal

inve

stmen

t (No

te g)

Held

as of

Dec

embe

r 31,

2005

Na

me

of i

nves

tor

Name

of in

veste

e

co

mpan

y

Add

ress

Main

activ

ities

Ba

lance

as of

De

cemb

er 31

,

2

005

Bala

nce a

s of

Dec

embe

r 31,

2004

Nu

mber

of sh

ares

(in

thou

sand

s) P

erce

ntag

eof

owne

rship

Bo

ok va

lue

In

come

(loss)

of th

e i

nves

tee co

mpan

y

In

vestm

ent i

ncom

e

(lo

ss) r

ecog

nize

d

by

the C

ompa

ny

No

te

De

lta E

lectro

nics

, I

nc.

Delta

Inter

natio

nal

Hold

ing L

td.

Caym

an Is

lands

Eq

uity

inve

stmen

t (N

ote e

)

De

lta N

etwor

ks

Hold

ing L

td.

Caym

an Is

lands

Eq

uity

Inve

stmen

t -

De

lta E

lectro

nics

(T

haila

nd) P

ublic

Co

., Ltd

.

Thail

and

Man

ufac

turin

g and

sales

of

electr

onic

prod

ucts

(Not

e f)

Cy

ntec

Co.,

Ltd

. Sc

ience

-Bas

ed

Indu

strial

Par

k, Hs

inch

u City

, Taiw

an Re

sear

ch, d

evelo

pmen

t, ma

nufa

cturin

g and

sales

of

vario

us th

in fi

lm

comp

onen

ts

-

De

lsolar

Co.,

Ltd

.

Man

ufac

turin

g of s

olar

ba

tterie

s and

relat

ed

syste

ms

-

De

lta

Opto

electr

onics

,In

c.

M

anuf

actu

ring o

f disp

lays

with

poly

mer l

ight

em

issio

n disp

lay (P

LED)

an

d car

bon n

ano-

tube

ele

ctron

ic em

itter

(CNT

) tec

hnol

ogy

-

Ot

hers

-

92 9392 93

Or

igin

al in

vestm

ent (

Note

g)

H

eld as

of D

ecem

ber 3

1, 20

05

Na

me

of in

vesto

r

Name

of in

veste

e

com

pany

Addr

ess

Main

activ

ities

Ba

lance

as of

Dece

mber

31,

200

5

Bala

nce a

s of

Dec

embe

r 31,

2004

Numb

er

of

shar

es

(in th

ousa

nds)

Perc

entag

eof

owne

rship

Bo

ok va

lue

Incom

e (los

s) of

the

in

veste

e com

pany

Inv

estm

ent i

ncom

e

(loss

) rec

ogni

zed

by th

e Com

pany

N

ote

Delta Inter

natio

nal

Hold

ing

Ltd.

Delta

Elec

troni

cs

Inter

natio

nal L

td.Br

itish

Virg

in Is

lands

Sa

les of

elec

troni

c pro

ducts

(N

ote a

)

De

lta E

lectro

nics

(D

ong G

uan)

Co

., Ltd

.

Dong

guan

City

, Gu

angd

ong,

Prov

ince

, P.

R.C.

Man

ufac

turin

g of p

ower

su

pplie

s

De

lta E

lectro

nics

Po

wer (

Dong

Gu

an) C

o., L

td.

Dong

guan

City

, Gu

angd

ong P

rovi

nce,

P.R.

C.

Man

ufac

turin

g of p

ower

su

pplie

s

De

lta E

lectro

nics

Co

mpon

ents

(Don

g Gua

n)

Co., L

td.

Dong

guan

City

, Gu

angd

ong P

rovi

nce,

P.R.

C.

Man

ufac

turin

g of

trans

form

ers

De

lta E

lectro

nics

(S

hang

hai)

Co.,

Ltd.

Pudo

ng ne

w di

strict

,Sha

ngha

i City

, P.

R.C.

Prod

uct d

esig

n

DA

C Ho

ldin

g Ltd

.Ca

yman

Islan

ds

Equi

ty in

vestm

ent

De

lta E

lectro

nics

(Ji

ang S

u) C

o.,

Ltd.

Wuj

iang C

ity, J

iang S

u Pr

ovin

ce, P

.R.C

. M

anuf

actu

ring o

f pow

er

supp

lies

De

lta E

lectro

nics

Co

mpon

ents

(Wu J

iang)

Co.,

Lt

d.

Wuj

iang C

ity, J

iang S

u Pr

ovin

ce, P

.R.C

. M

anuf

actu

ring o

f tra

nsfo

rmer

s and

perip

hera

ls

De

lta

Elec

tro-o

ptics

(Wu J

iang )

Co.,

Lt

d.

Wuj

iang C

ity, J

iang S

u Pr

ovin

ce, P

.R.C

. M

anuf

actu

ring o

f per

iphe

rals

and e

lectro

nic c

ontro

l eq

uipm

ents

De

lta V

ideo

Di

splay

Sys

tem

(Wu J

iang)

Co.,

Lt

d.

Wuj

iang C

ity, J

iang S

u Pr

ovin

ce, P

.R.C

. M

anuf

actu

ring o

f mon

itors

Ot

hers

92 9392 93

Orig

inal

inve

stmen

t (No

te h)

Held

as o

f Dec

embe

r 31,

200

5

Na

me

of in

vesto

r

Nam

e of i

nves

tee

com

pany

Addr

ess

Main

activ

ities

B

alanc

e as o

f

De

cem

ber 3

1,

2

005

Ba

lance

as of

Dece

mbe

r 31,

20

04

Nu

mbe

r

of sh

ares

(in

thou

sand

s)Pe

rcen

tage

of ow

nersh

ip B

ook v

alue

In

come

(loss)

of th

e i

nves

tee co

mpa

ny

Inve

stmen

t inc

ome

(lo

ss) r

ecog

nize

d

b

y the

Com

pany

Note

Delta

Netw

orks

Ho

ldin

g Lt

d.

Delta

Netw

orks

In

c.

Caym

an Is

lands

Eq

uity

Inve

stmen

t (N

ote b

)

Delta

Netw

orks

In

c.(Ca

yman

) De

lta N

etwor

ks

Inc.

Gueis

han T

owns

hip,

Ta

oyua

n Co

unty

M

anuf

actu

ring

of ne

twor

king

sy

stem

and

perip

hera

ls.

(Not

e c)

Delta

Netw

orks

In

terna

tiona

l Ltd

.Br

itish

Vig

in Is

lands

Tr

adin

g of n

etwor

king

sy

stem

and

perip

hera

ls De

lta E

lectro

nics

In

dustr

ial (D

ong

Guan

) Co.

, Ltd

.

Dong

guan

City

, Gu

angd

ong

Prov

ince

, P.R

.C.

Man

ufac

turin

g an

d of

electr

onic

balla

st fo

r ene

rgy

savi

ng li

ghtin

g and

in

terfa

ce ca

rds

Othe

rs

Py

ram

is Co

rpor

ation

Py

ram

is Ho

ldin

g Lt

d.

Caym

an Is

lands

Eq

uity

Inve

stmen

t (N

ote d

)

Note

a: In

vestm

ent i

ncom

e/los

s rec

ogni

zed

by D

elta I

nter

natio

nal H

oldi

ng L

td.

Note

b: In

vestm

ent i

ncom

e/los

s rec

ogni

zed b

y Delt

a Netw

orks

Hol

ding

Ltd

. No

te c:

Inve

stmen

t inc

ome/l

oss r

ecog

nize

d by D

elta N

etwor

ks In

c. No

te d:

Inve

stmen

t inc

ome/l

oss r

ecog

nize

d by P

yram

is Co

rpor

ation

. No

te e:

The i

nves

tmen

t inc

ome i

s net

of th

e elim

inati

on o

f int

erco

mpa

ny tr

ansa

ction

s. No

te f:

The w

eight

ed av

erag

e sha

reho

ldin

g ra

tio w

as 20

.14%

, and

the i

nves

tmen

t inc

ome i

nclu

ded t

he am

ortiz

ation

of th

e exc

ess o

f inv

estm

ent c

ost o

ver t

he ne

t ass

ets o

f the

inve

stee a

s well

as th

e elim

inati

on of

inter

com

pany

tran

sacti

ons.

Note

g: T

he or

igin

al in

vestm

ent r

epre

sent

ed th

e cap

ital c

ertif

ied.

94 9594 95

B.

Fina

ncin

g ac

tiviti

es to

any

com

pany

or p

erso

n: N

one.

C.

G

uara

ntee

info

rmat

ion:

Non

e.

D.

Mar

keta

ble

secu

ritie

s hel

d by

the

com

pany

at D

ecem

ber 3

1, 2

005:

(Com

bine

the

indi

vidu

al a

mou

nt le

ss th

an 1

00,0

00 o

n D

ecem

ber 3

1, 2

005)

N

ame

and

kind

of m

arke

tabl

e se

curit

ies

Dec

embe

r 31,

200

5

N

ame

of in

vesto

r

T

ype

of

mar

keta

ble

secu

ritie

s

N

ame o

f

m

arke

tabl

e sec

uriti

es

Re

latio

nshi

p of

the

iss

uers

with

the

Com

pany

G

ener

al

l

edge

r acc

ount

s

N

umbe

r

of sh

ares

(in

thou

sand

s)

Boo

k va

lue

P

erce

ntag

e

Mar

ket v

alue

D

elta

Inte

rnat

iona

l Hol

ding

Ltd

.

(D

IH)

Com

mon

stoc

k D

elta

Ele

ctro

nics

In

tern

atio

nal L

td.

A su

bsid

iary

of D

IH

Long

-term

inve

stmen

ts

Ce

rtific

ate

of a

mou

nt

cont

ribut

ed

Del

ta E

lect

roni

cs (D

ong

Gua

n) C

o., L

td.

D

elta

Ele

ctro

nics

Pow

er

(Don

g G

uan)

Co.

, Ltd

.

D

elta

Ele

ctro

nics

Co

mpo

nent

s (D

ong

Gua

n) C

o., L

td.

D

elta

Ele

ctro

nics

(S

hang

hai)

Co.,

Ltd.

Del

ta E

lect

roni

cs (J

iang

Su

) Co.

, Ltd

.

Del

ta E

lect

roni

cs

Com

pone

nts (

Wu

Jiang

) Co.

, Ltd

.

Del

ta E

lect

ro-o

ptic

s (W

u Jia

ng) L

td.

Co

mm

on st

ock

DA

C H

oldi

ng L

td.

D

elta

Ele

ctro

nics

(T

haila

nd) P

ublic

Co.

, Lt

d.

Inve

stee

com

pany

acc

ount

ed

for

und

er e

quity

met

hod

Pr

efer

red

shar

es

Prim

ario

n In

c.

Non

e Pr

efer

red

shar

es

Certi

ficat

e of

am

ount

co

ntrib

uted

D

elta

Vid

eo S

yste

m (W

u Jia

ng) C

o., L

td.

A S

ubsid

iary

of D

IH

D

eltro

n-Ci

mic

Ele

ctro

nic

ad E

lect

roni

cs C

o., L

td.

Affi

liate

d en

terp

rise

Oth

ers

D

elta

Net

wor

ks H

oldi

ng L

td.(D

NH

) Co

mm

on st

ock

Del

ta N

etw

orks

Inc.

A

subs

idia

ry o

f DN

H

Del

ta N

etw

orks

Inc.

(Cay

man

) (D

NI

Caym

an)

D

elta

Net

wor

ks In

c.

A su

bsid

iary

of D

NI

Caym

an

Ce

rtific

ate

of a

mou

nt

cont

ribut

ed

Del

ta E

lect

roni

cs

Indu

stria

l (D

ong

Gua

n)

Co.,

Ltd.

94 9594 95

N

ame a

nd ki

nd of

mar

ketab

le se

curit

ies

Dece

mbe

r 31,

2005

Na

me of

inve

stor

Typ

e of

m

arke

table

secu

rities

Na

me of

mark

etable

secu

rities

Relat

ions

hip o

f the

iss

uers

with

the C

ompa

ny

Gene

ral

ledg

er ac

coun

ts

Nu

mber

of sh

ares

(in

thou

sand

s)

Boo

k valu

e

Per

cent

age

M

arke

t valu

e De

lta N

etwor

ks In

c. Co

mmo

n sto

ck

Delta

Netw

orks

In

terna

tiona

l Ltd

. A

subs

idiar

y of D

NI

Caym

an

Long

-term

inve

stmen

ts

Othe

rs

Pyra

mis C

orpo

ratio

n Py

rami

s Hol

ding

Ltd

. A

subs

idiar

y of P

yram

is Co

rpor

ation

E. M

arke

table

secu

rities

acqu

ired o

r sol

d in e

xces

s of N

T$10

0,000

or ov

er 20

% ca

pital

:

Jan

uary

1, 20

05

Add

ition

Disp

osal

Dece

mber

31, 2

005

Acqu

irer/

selle

r

N

ame o

f

mark

etabl

e

sec

urity

Ge

nera

l

led

ger

ac

coun

ts

Nam

e of

trans

actio

n par

ties

Relat

ions

hip

N

umbe

r

o

f sha

res

(in

thou

sand

s)

Amo

unt

N

umbe

r

o

f sha

res

(in

thou

sand

s)

Amou

nt

N

umbe

r

o

f sha

res

(in

thou

sand

s) S

ellin

g pric

e B

ook v

alue

Disp

osal

gain

/(los

s)

Numb

er

of

shar

es

(in th

ousa

nds)

Amou

nt

Delta

Int

erna

tiona

l H

oldi

ng L

td.

(DIH

)

Prim

ario

n Inc

. Lo

ng-te

rm

inve

stmen

ts No

ne

Ne

tgea

r Inc

.

Delta

Vid

eo

Disp

laySy

stem

(Wu

Jiang

) Co.,

Lt

d.

De

lta V

ideo

Di

splay

Sys

tem

(Wu J

iang)

Co.,

Lt

d.

A su

bsid

iary

of D

IH

Delso

lar

Co.,

Ltd.

JF (T

aiwan

) Bo

nd F

und

Shor

t-ter

m

inve

stmen

ts

UBS

Taiw

an

Bond

Fun

d De

lta N

etwor

ks

Inc.

NITC

Taiw

an

Bond

Fun

d

Note:

De

lta V

ideo

Disp

lay S

ystem

(Wu J

iang)

Co.,

Ltd

. iss

ued n

ew sh

ares

and D

IH su

bscr

ibed

shar

es to

talin

g $28

9,080

. DIH

reco

gnize

d inv

estm

ent i

ncom

e and

cumu

lativ

e tra

nslat

ion

adju

stmen

t in t

he am

ount

of $7

1,314

unde

r the

equi

ty m

ethod

. As a

resu

lt, th

e net

incr

ease

d amo

unt w

as $3

60,39

4 for

2005

.

F. A

cqui

sitio

n of r

eal e

state

in ex

cess

of N

T$10

0,000

or ov

er 20

% of

Cap

ital:

None

. G.

Disp

osal

of re

al es

tate i

n exc

ess o

f NT$

100,0

00 or

over

20%

of C

apita

l: No

ne.

96 9796 97

H.

Rela

ted

party

pur

chas

es o

r sal

es tr

ansa

ctio

ns in

exce

ss o

f NT$

100,

000

or o

ver 2

0% o

f Cap

ital:

The t

rans

actio

n of

the C

ompa

ny an

d its

cons

olid

ated

subs

idia

ries:

Plea

se se

e not

e 5(2

) A. a

nd C

.

Tra

nsac

tion

term

s

Des

crip

tion

of an

d re

ason

s for

di

ffere

nce i

n tra

nsac

tion

term

s co

mpa

red

to n

on-re

late

d pa

rty

trans

actio

ns

Acc

ount

s or n

otes

rece

ivab

le (p

ayab

le)

Nam

e of t

he co

unte

rpar

ty

Nam

e of

trans

actio

n

pa

rties

Rela

tions

hip

Purc

hase

s

(sa

les)

Am

ount

% o

f tot

al

purc

hase

s (sa

les)

Cre

dit t

erm

s

Uni

t pric

e

Cr

edit

perio

d

Bal

ance

(N

ote)

% o

f tot

al ac

coun

ts or

no

tes r

ecei

vabl

e (pa

yabl

e)

Del

ta E

lect

roni

cs In

tern

atio

nal L

td.

Del

ta E

lect

roni

cs

(D

ong

Gua

n)

Co.,

Ltd.

Affi

liate

den

terp

rise

P

urch

ase

75 d

ays

Acc

ordi

ng to

th

e con

tract

D

elta

Ele

ctro

nics

C

ompo

nent

s

(D

ong

Gua

n)

Co.

, Ltd

.

Del

ta E

lect

roni

cs

Pow

er (D

ong

Gua

n) C

o, L

td.

D

elta

Ele

ctro

nic

(J

apan

), In

c.

Del

ta E

lect

roni

cs

(Th

aila

nd) P

ublic

C

o., L

td.

D

elta

Gre

en

(Tia

njin

)In

dustr

ies C

o.,

Ltd.

D

elta

Ele

ctro

nics

Indu

stria

l (D

ong

Gua

n) C

o., L

td.

Dle

ta E

lect

roni

cs

(Don

g G

uan)

Co

., Lt

d.

A

ccor

ding

to

the c

ontra

ct

D

leta

Ele

ctro

nics

Po

wer

(Don

g G

uan)

Co.

, Ltd

. D

elta

Ele

cton

ics (

Japa

n), I

nc.

Del

ta V

ideo

D

ispla

y Sy

stem

(W

u Jia

ng) C

o.,

Ltd.

Sa

les

Del

ta N

etw

orks

Inc.

Del

ta N

etw

orks

In

tern

atio

nal L

td.

A

ccor

ding

to

the c

ontra

ctD

elta

Ele

ctro

nics

Inte

rnat

iona

l Ltd

.D

elta

Ele

ctro

nics

(

Don

g G

uan)

Co

., L

td.

D

elta

Ele

ctro

nics

P

ower

(Don

g G

uan)

Co.

, Ltd

.

Del

ta E

lect

roni

cs

Com

pone

nts

(Don

g G

uan)

Co.

, Ltd

.

Del

ta E

lect

roni

cs

Inc.

The u

ltim

ate

pare

nt co

mpa

ny

96 9796 97

Tra

nsac

tion

term

s

Des

crip

tion

of an

d re

ason

s for

di

ffere

nce i

n tra

nsac

tion

term

s co

mpa

red

to n

on-re

late

d pa

rty

trans

actio

ns

Acc

ount

s or n

otes

rece

ivab

le (p

ayab

le)

Nam

e of t

he co

unte

rpar

ty

Nam

e of

trans

actio

n

pa

rties

Rela

tions

hip

Purc

hase

s

(sa

les)

Am

ount

% o

f tot

al

purc

hase

s (sa

les)

Cre

dit t

erm

s

Uni

t pric

e

Cr

edit

perio

d

Bal

ance

(N

ote)

% o

f tot

al ac

coun

ts or

no

tes r

ecei

vabl

e (pa

yabl

e)

Del

ta N

etw

orks

Inte

rnat

iona

l Ltd

. D

NI L

ogist

ic

(USA

) C

orp.

Affi

liate

den

terp

rise

Sale

s75

day

s

D

elta

Ele

ctro

nics

In

dustr

ial (

Don

g G

uan)

Co.

, Ltd

.

A

ccor

ding

to

the c

ontra

ct

Del

ta E

lect

roni

cs C

ompo

nent

s (D

ong

Gua

n) C

o., L

td.

Del

ta E

lect

roni

cs

Pow

er (D

ong

Gua

n) C

o., L

td.

Del

ta E

lect

roni

cs C

ompo

nent

s (W

u Jia

ng) C

o., L

td.

Del

ta E

lect

roni

cs

(Jia

ng S

u) C

o.,

Ltd.

Del

ta V

ideo

D

ispla

y Sy

stem

(W

u Jia

ng) C

o.,

Ltd.

Del

ta E

lect

roni

cs

Inte

rnat

iona

l Ltd

. D

elta

Ele

ctro

nics

(Jia

ng S

u) C

o.,

Ltd.

D

eltro

n-Ci

mic

El

ectri

c and

El

ectro

nics

Co.

, Lt

d.

Rela

ted

party

D

elta

Ele

ctro

nics

In

tern

atio

nal L

td.

Affi

liate

den

terp

rise

Del

ta E

lect

ro-o

ptic

s (W

u Jia

ng) L

td.D

eltro

n-Ci

mic

El

ectri

c and

El

ectro

nics

Co.

, Lt

d.

Rela

ted

party

D

elta

Ele

ctro

nics

In

tern

atio

nal L

td.

Affi

liate

den

terp

rise

Del

ta V

ideo

Disp

lay

Syste

m (W

u Jia

ng) C

o., L

td.

Del

ta E

lect

roni

cs

Inte

rnat

iona

l Ltd

. D

elta

Vid

eo T

echn

olog

y Li

mite

d D

elta

Ele

ctro

nics

(T

haila

nd) P

ublic

Co

., Lt

d.

(N

ote)

: Acc

ordi

ng to

the a

gree

men

ts be

twee

n D

elta

Ele

ctro

nics

Inte

rnat

iona

l Ltd

., D

elta

Net

wor

ks In

tern

atio

nal L

td. a

nd th

e com

pani

es in

Don

g G

uan,

the a

ccou

nts r

ecei

vabl

e (pa

yabl

e) fr

om th

e sal

es

(pur

chas

es) a

mon

g th

ese c

ompa

nies

are s

ettle

d in

net

, the

refo

re, t

hey

wer

e pre

sent

ed o

n ba

lanc

e she

ets i

n ne

t am

ount

.

98 9998 99

I. R

ecei

vabl

e fr

om re

late

d pa

rties

in e

xces

s of N

T$10

0,00

0 or

ove

r 20%

cap

ital:

(Not

e a)

: Acc

ordi

ng to

the

agre

emen

t bet

wee

n D

elta

Ele

ctro

nics

Inte

rnat

iona

l Ltd

., D

elta

Net

wor

ks In

tern

atio

nal L

td. a

nd th

e co

mpa

nies

in D

ong

Gua

n, th

e ac

coun

ts re

ceiv

able

(pay

able

) fro

m th

e sa

les (

purc

hase

s) a

mou

nt th

ese

com

pani

es a

re se

ttled

in n

et, t

here

fore

they

wer

e pr

esen

ted

on b

alan

ce sh

eet i

n ne

t am

ount

. (N

ote

b): T

he a

mou

nt c

olle

cted

subs

eque

ntly

by

Febr

uary

14,

200

6.

O

verd

ue re

ceiv

able

Subs

eque

nt

A

llow

ance

B

alan

ce o

f rec

eiva

ble

A

ctio

n ad

opte

d fo

r

colle

ctio

ns

fo

r dou

btfu

l

N

ame

of c

redi

tor

Tran

sact

ion

parti

es

Rel

atio

nshi

p

f

rom

rela

ted

parti

es (N

ote

a)

Turn

over

rate

Am

ount

ove

rdue

acc

ount

s

(N

ote

b)

ac

coun

ts p

rovi

ded

Del

ta E

lect

roni

cs,

Inte

rnat

iona

l Ltd

. D

elta

Ele

ctro

nics

(D

ong

Gua

n) C

o.,

Ltd.

Aff

iliat

ed e

nter

pris

e

D

elta

Ele

ctro

nics

Po

wer

(Don

g G

uan)

C

o., L

td.

D

elta

Ele

ctro

nics

Inc.

Th

e ul

timat

e pa

rent

com

pany

Del

ta E

lect

roni

cs

Com

pone

nt (D

ong

G

uan)

Co.

, Ltd

.

Del

ta E

lect

roni

cs

Inte

rnat

iona

l Ltd

. A

ffili

ated

ent

erpr

ise

D

elta

Ele

ctro

nics

Po

wer

(Don

g G

uan)

C

o., L

td.

Del

ta V

ideo

Dis

play

Sy

stem

(Wu

Jian

g)

Co.

, Ltd

.

Del

ta E

lect

roni

cs

Inte

rnat

iona

l Ltd

.

Del

ta E

lect

roni

cs

Com

pone

nts (

Wu

Jian

g) C

o., L

td.

Del

ta E

lect

ro-o

ptic

s (W

u Ji

ang)

Ltd

. D

eltro

n-C

imic

El

ectri

c an

d El

ectro

nics

Co.

, Ltd

.

Rel

ated

par

ty

Con

tinue

d co

llect

ion

expe

cted

in 2

006.

Del

ta E

lect

roni

cs (J

iang

Su

) Co.

, Ltd

. D

elta

Ele

ctro

nics

In

tern

atio

nal L

td.

Aff

iliat

ed e

nter

pris

e

Del

ta N

etw

orks

In

tern

atio

nal L

td.

Del

ta E

lect

roni

cs

Indu

stria

l (D

ong

Gua

n) C

o., L

td.

D

NI L

ogis

tics (

USA

) C

orp.

Del

ta E

lect

roni

cs

(Jap

an) I

nc.

Del

ta V

ideo

Dis

play

Sy

stem

(Wu

Jian

g)

Co.

, Ltd

.

98 9998 99

(4) Information on derivative transactions

A. General information disclosure:

(A) The investee companies entered into certain foreign currency option contracts and forward foreign currency contracts, to hedge foreign exchange risks in foreign currency denominated accounts receivable and payable.

(B) Accounting policy: See Note 2.

(C) Credit risk:

The banks, which the investee companies and its subsidiaries deal with, are all in good credit standing and the investee companies will deal with several banks to disperse the credit risk, therefore, the possibility is low for the banks not to comply with the terms of the contracts.

(D) Market risk:

The investee companies entered into these contracts in order to hedge foreign exchange losses. The exchange gain or loss from exchange rate fluctuation of hedge item will be offset by these transactions. Accordingly, no material market risk is expected.

(E) The information on derivative transactions of investee companies for the year ended December 31, 2005 are as follows (unit: thousands of dollars):

100 101100 101

T

rans

actio

n te

rms

R

elat

ed c

ash

flow

s

Der

ivat

ive

trans

actio

ns o

f the

su

bsid

iarie

s dur

ing

2005

Par

val

ue, c

ontra

ct

am

ount

or n

omin

al

pr

inci

pal (

Not

e a)

E

xerc

ise

date

s

Ex

erci

se p

rices

/

Exer

cise

rate

s

R

ealiz

ed g

ain

(or l

oss)

C

ash

inflo

w

Cas

h ou

tflow

1.D

elta

Ele

ctro

nics

Inte

rnat

iona

l Ltd

. (

the

subs

idia

ry o

f DIH

)

For

war

d fo

reig

n cu

rren

cy c

ontra

cts

(Not

e)

(Not

e)

Tota

l

2.D

elta

Ele

ctro

nics

(Don

g G

uan)

Co.

,

Ltd

. (th

e su

bsid

iary

of D

IH)

For

war

d fo

reig

n cu

rren

cy c

ontra

cts

Tota

l

3.D

elta

Ele

ctro

nics

Pow

er (D

ong

Gua

n)

Co.

, Ltd

. (th

e su

bsid

iary

of D

IH)

For

war

d fo

reig

n cu

rren

cy c

ontra

cts

Tota

l

4.D

elta

Ele

ctro

nics

Com

pone

nts (

Don

g

Gua

n) C

o., L

td. (

the

subs

idia

ry o

f

DIH

) F

orw

ard

fore

ign

curr

ency

con

tract

s

Tota

l

100 101100 101

Tran

sact

ion

term

s

Rel

ated

cas

h flo

ws

Der

ivat

ive

trans

actio

ns

Par

val

ue, c

ontra

ct

am

ount

or n

omin

al

pr

inci

pal

Exe

rcis

e da

tes

Exer

cise

pric

es/

Ex

erci

se ra

tes

Rea

lized

gai

n (o

r los

s)

C

ash

inflo

w

Cas

h ou

tflow

5.D

elta

Ele

ctro

nics

(Jap

an) I

nc. (

the

subs

idia

ry o

f DIH

)

Forw

ard

fore

ign

curr

ency

con

tract

s

USD

USD

USD

Tota

l

6.D

elta

Ele

ctro

nics

Indu

stria

l (D

ong

Gua

n)

Co.

, Ltd

. (th

e su

bsid

iary

of D

NI C

aym

an)

For

war

d fo

reig

n cu

rren

cy c

ontra

cts

7. D

elta

Net

wor

ks, I

nc. (

regi

ster

ed in

Taiw

an, t

he su

bsid

iary

of D

NI C

aym

an)

B

uy o

ptio

n (U

SD P

UT/

TWD

CA

LL)

B

uy o

ptio

n (U

SD C

ALL

/TW

D P

UT)

Se

ll op

tion

(USD

CA

LL/T

WD

PU

T)

Se

ll op

tion

(USD

PU

T/TW

D C

ALL

)

Se

ll op

tion

(USD

CA

LL/J

PY P

UT)

B

uy o

ptio

n (U

SD P

UT/

JPY

CA

LL)

Tota

l

8.D

elta

Net

wor

ks In

tern

atio

nal L

td.

(th

e su

bsid

iary

of D

NI C

aym

an)

For

war

d fo

reig

n cu

rren

cy c

ontra

cts

Not

e: D

elta

Ele

ctro

nics

Inte

rnat

iona

l Ltd

. will

pay

or r

ecei

ve th

e di

ffer

ence

net

of a

ll tra

nsac

tions

, so

futu

re c

ash

flow

can

not b

e es

timat

ed re

ason

ably

.

102 103102 103

f. The information of book value on derivative transactions of investee company as of December 31, 2005 are as follows

Book Value

Other receivable Other payable Other receivable (payable)-net

Delta Electronics International Ltd.

Delta Electronics (Dong Guan) Co., Ltd.

Delta Electronics Power (Dong Guan) Co., Ltd.

Delta Electronics Components (Dong Guan) Co., Ltd.

Delta Electronics Industrial (Dong Guan) Co., Ltd.

Delta Networks Inc.

Delta Networks International Ltd.

(B) Additional disclosure

Pursuant to the terms of the contracts. The investee companies does not provide any pledged assets.

102 103102 103

(3) D

isclo

sure

of in

form

ation

on in

dire

ct in

vestm

ents

in M

ainlan

d Chi

na (U

nits:

In th

ousa

nds)

A. B

asic

info

rmati

on

Inve

stmen

t inc

ome o

r los

s rec

ogni

zed a

re tr

ansla

ted at

the a

vera

ge ra

te fo

r the

year

ende

d Dec

embe

r 31,

2005

, oth

ers a

re tr

ansla

ted at

the r

ate of

exch

ange

prev

ailin

g at t

he ba

lance

shee

t date

. Re

mitt

ed or

colle

cted t

his

per

iod

Na

me o

f in

veste

e in

M

ainlan

d

Chi

na

M

ain ac

tiviti

es of

inve

stee

Capi

tal

(No

te a a

nd g)

Inve

stmen

t

meth

od

Ac

cum

ulate

d re

mitt

ance

as of

Ja

nuar

y 1, 2

005

Re

mitt

ed ou

t

C

ollec

ted

Ac

cum

ulate

d

rem

ittan

ce as

of

Dec

embe

r 31,

2005

Owne

rship

held

by

Com

pany

(dire

ct an

d

ind

irect)

In

vestm

ent i

ncom

e (

loss

) rec

ogni

zed b

y the

Co

mpa

ny du

ring t

he ye

ar En

ding

balan

ce

of i

nves

tmen

t

Th

e inv

estm

ent

inco

me (

loss

)

rem

itted

back

as o

f

Dec

embe

r 31,

2005

De

lta Elec

troni

cs(D

ong

Guan

) Co.,

Lt

d.

Man

ufac

turin

g of p

ower

su

pplie

s$

1

,238,4

45

(US$

3

7,700

) (R

MB$

304,2

77)

Inve

sted b

y De

ltaIn

terna

tiona

lHo

ldin

g Ltd

.

Deltr

on-C

imic

Elec

tric a

nd

Elec

troni

csCo

., Ltd

.

Man

ufac

turin

g and

sales

of

unin

terru

ptib

le po

wer

syste

ms

$

1,33

5,002

(U

S$

40,6

39)

(RM

B$32

8,000

)

Delta El

ectro

nics

Indu

strial

(D

ong G

uan)

Co

., Ltd

.

Man

ufac

turin

g of e

lectro

nic

balla

st fo

r ene

rgy s

avin

g lig

htin

g and

inter

face

card

s

$

73

5,840

(U

S$

22,4

00)

(RM

B$18

0,790

)

Inve

sted b

y De

lta N

etwor

ks In

c. (

Caym

an)

Delta El

ectro

nics

Com

pone

nts

(Don

g Gu

an) C

o.,

Ltd.

Man

ufac

turin

g of

trans

form

ers

$

1,05

1,200

(U

S$

32,0

00)

(RM

B$25

8,272

)

Inve

sted b

y De

lta I

nter

natio

nal

Hol

ding

Ltd

.

Delta El

ectro

nics

Powe

r(D

ong

Guan

) Co.,

Lt

d.

Man

ufac

turin

g of p

ower

su

pplie

s$

886,9

50

(US$

2

7,000

) (R

MB$

217,9

17)

Delta El

ectro

nics

Com

pone

nts

(Wu J

iang)

Co

., Ltd

.

Man

ufac

turin

g of

trans

form

ers a

nd p

erip

hera

ls $

1

,348,1

00

(US$

4

1,038

) (R

MB$

331,2

18)

Delta El

ectro

nics

(Jian

g Su)

Co

., Ltd

.

Man

ufac

turin

g of p

ower

su

pplie

s$

1

,348,7

10

(US$

4

1,057

) (R

MB$

331,3

68)

Delta

Elec

tro-

optic

s (W

u Jia

ng) L

td.

Man

ufac

turin

g and

of

perip

hera

ls an

d elec

troni

c co

ntro

l equ

ipm

ents

$

84

2,671

(U

S$

25,6

52)

(RM

B$20

7,038

)

104 105104 105

Rem

itted

or co

llecte

d thi

s

p

erio

d

Nam

e of

inve

stee i

n

Main

land

C

hina

Main

activ

ities

of in

veste

e

Ca

pital

(

Note

a and

g)

In

vestm

ent

m

ethod

Ac

cum

ulate

d re

mitt

ance

as of

Ja

nuar

y 1, 2

005

Re

mitt

ed ou

t

C

ollec

ted

Ac

cum

ulate

d

rem

ittan

ce as

of

Dec

embe

r 31,

200

5

Owne

rship

held

by

Com

pany

(dire

ct an

d

ind

irect)

In

vestm

ent i

ncom

e (

loss

) rec

ogni

zed b

y the

Co

mpa

ny du

ring t

he ye

ar En

ding

balan

ce

of i

nves

tmen

t

Th

e inv

estm

ent

inco

me (

loss

)

rem

itted

back

as o

f

Dec

embe

r 31,

200

5 De

lta V

ideo

Di

splay

Syste

m (W

u Jia

ng) C

o.,

Ltd.

Man

ufac

turin

g of m

onito

rs $

966,4

80

(US$

2

9,421

) (R

MB$

237,

457)

Delta El

ectro

nics

(Sha

ngha

i) Co

., Ltd

.

Prod

uct d

esig

n $

328,5

00

(US$

1

0,000

) (R

MB$

80,

710)

Note

a: Th

e cap

ital w

as tr

ansla

ted fr

om th

e fun

ction

al cu

rrenc

ies of

the i

nves

tee co

mpa

nies

into

New

Taiw

an D

ollar

s at t

he ev

erag

e exc

hang

e rate

of R

MB

8.07

1 to U

S$1.

Note

b: E

xcep

t for

the f

acili

ty of

US$

37,1

07 pe

rmitt

ed b

y Inv

estm

ent C

omm

issio

n, th

e cap

italiz

ation

of e

arni

ngs o

f US$

3,00

8 per

mitt

ed by

Inve

stmen

t Com

miss

ion o

n Dec

embe

r 24,

2004

and

Dece

mbe

r 7, 2

005,

resp

ectiv

ely, t

here

fore

, the

capi

taliza

tion o

f ear

ning

s is e

xclu

ded f

rom

the C

ompa

ny’s

amou

nt of

inve

stmen

t in

Main

land C

hina

. No

te c:

Exce

pt fo

r the

facil

ity of

US$

3,03

4 per

mitt

ed by

Inve

stmen

t Com

miss

ion,

the c

apita

lizati

on of

earn

ings

of U

S$98

0 per

mitt

ed by

Inve

stmen

t Com

miss

ion o

n Sep

tembe

r 13,

2001

is ex

clude

d fro

m th

e Com

pany

’s am

ount

of in

vestm

ent i

n M

ainlan

d Chi

na.

Note

d: E

xcep

t for

the f

acili

ty of

US$

17,1

04 pe

rmitt

ed b

y Inv

estm

ent C

omm

issio

n, th

e cap

italiz

ation

of e

arni

ngs o

f US$

8,46

0 per

mitt

ed by

Inve

stmen

t Com

miss

ion o

n Sep

tembe

r 29,

2004

is

exclu

ded f

rom

the C

ompa

ny’s

amou

nt of

inve

stmen

t in

Main

land C

hina

. No

te e:

Exce

pt fo

r the

facil

ity of

US$

6,72

1 per

mitt

ed by

Inve

stmen

t Com

miss

ion,

the c

apita

lizati

on of

earn

ings

of U

S$8,

272 p

erm

itted

by In

vestm

ent C

omm

issio

n on M

ay 19

, 200

5 is e

xclu

ded

from

the C

ompa

ny’s

amou

nt of

inve

stmen

t in

Main

land C

hina

. No

te f:

The C

ompa

ny is

perm

itted

by In

vestm

ent C

omm

issio

n on

Dec

embe

r 1, 2

003 a

nd S

eptem

ber 2

, 200

4, re

spec

tively

, to u

se D

elta E

lectro

nics

(Don

g Gua

n) C

o, Lt

d’s e

arni

ng di

strib

utio

n of

US$ 9

,400 a

nd pa

id vi

a Delt

a Elec

troni

cs (D

ong G

uan)

Co.,

Ltd

. to i

ncre

ase c

apita

l of D

elta E

lectro

nics

(Sha

ngha

i) Co

., Lt

d. T

his c

apita

lizati

on ea

rnin

gs of

US$

9,400

is ex

clude

d fro

m th

e Co

mpa

ny’s

amou

nt of

inve

stmen

t in

Main

land C

hina

. No

te g:

Cap

ital r

epre

sent

ed th

e cap

ital c

ertif

ied.

Note

h: Th

e inv

estm

ent i

ncom

e of U

S$14

,351

was

rem

itted

bac

k on

Dec

embe

r 29,

200

5 fro

m th

e inv

estee

com

pani

es in

Main

land

Chin

a and

was

per

mitt

ed b

y In

vestm

ent C

omm

issio

n on

Janu

ary

6, 20

06 w

hich

is de

ducti

ble f

rom

the C

ompa

ny’s

accu

mul

ated a

mou

nt re

mitt

ed ou

t of T

aiwan

to M

ainlan

d Chi

na.

104 105104 105

A

ccum

ulat

ed a

mou

nt

rem

itted

out

of T

aiw

an

t

o M

ainl

and

Chin

a

(Not

e h)

Inv

estm

ent a

mou

nt a

ppro

ved

by

t

he In

vestm

ent C

omm

issio

n

(Not

e h)

Ceili

ng o

f inv

estm

ent

am

ount

of t

he C

ompa

ny

B. T

he si

gnifi

cant

dire

ct a

nd in

dire

ct tr

ansa

ctio

ns o

f the

Com

pany

with

the

inve

stee

com

pani

es in

Mai

nlan

d Ch

ina:

Th

e sig

nific

ant p

urch

ases

, sal

es, a

ccou

nts

paya

ble

and

acco

unts

rece

ivab

le o

f the

Com

pany

indi

rect

ly c

ondu

cted

with

inve

stee

com

pani

es in

Mai

nlan

d Ch

ina

thro

ugh

the

DIH

's su

bsid

iary

, Del

ta E

lect

roni

cs In

tern

atio

nal L

td. (

DEI

L),a

nd D

NI C

aym

an's

subs

idia

ry, D

elta

Net

wor

ks In

tern

atio

nal L

td. (

DN

IL) a

nd D

elta

El

ectro

nics

(Jap

an) I

nc. f

or th

e ye

ar e

nded

Dec

embe

r 31,

200

5 : P

leas

e re

fer t

o N

ote

11(2

)H.

(4) T

he re

latio

nshi

p an

d sig

nific

ant t

rans

actio

ns b

etw

een

the

Com

pany

and

its s

ubsid

iarie

s A

. 200

4

T

rans

actio

n te

rms

Num

ber

(N

ote

a)

Nam

e of

cou

nter

party

N

ame

of tr

ansa

ctio

n pa

rties

Re

latio

nshi

p

(Not

e b)

Su

bjec

t

A

mou

nt

(Not

e e)

Tran

sact

ion

t

erm

s

The

perc

enta

ge o

f tot

al

com

bine

d re

venu

e or

tota

l ass

ets (

Not

e c)

D

elta

Ele

ctro

nics

Inc.

D

elta

Inte

rnat

iona

l Hol

ding

Ltd

. Se

rvic

es re

venu

e(N

ote

d)

D

elta

Ele

ctro

nics

(Jap

an) I

nc.

Sale

s

DEI

Log

istic

s (U

SA) C

orp.

Del

ta N

etw

orks

Inte

rnat

iona

l Ltd

.

Del

ta V

ideo

Tec

hnol

ogy

Ltd.

D

elta

Ele

ctro

nics

Inte

rnat

iona

l L

td.

Del

ta E

lect

roni

cs In

c.

Del

ta E

lect

roni

cs (D

ong

Gua

n)

Co.

, Ltd

. D

elta

Ele

ctro

nics

Pow

er (D

ong

Gua

n) C

o., L

td.

Del

ta E

lect

roni

cs C

ompo

nent

s (

Don

g G

uan)

Co.

, Ltd

. D

elta

Ele

ctro

nics

Com

pone

nts

(Don

g G

uan)

Co.

, Ltd

. D

elta

Ele

ctro

nics

Pow

er (D

ong

Gua

n) C

o., L

td.

Del

ta E

lect

roni

cs (J

iang

Su)

Co

., Lt

d.

Del

ta E

lect

roni

cs In

tern

atio

nal

Ltd

. D

elta

Ele

ctro

nics

Com

pone

nts

(W

u Jia

ng) C

o., L

td.

Del

ta E

lect

roni

cs (J

iang

Su)

Co.

, L

td.

106 107106 107

Tra

nsac

tion

term

s

Num

ber

(N

ote

a)

Nam

e of

cou

nter

party

N

ame

of tr

ansa

ctio

n pa

rties

Rela

tions

hip

(N

ote

b)

Subj

ect

Am

ount

(N

ote

e)

Tr

ansa

ctio

n

ter

ms

The

perc

enta

ge o

f tot

al

com

bine

d re

venu

e or

tota

l ass

ets (

Not

e c)

D

elta

Ele

ctro

nics

Com

pone

nts

(W

u Jia

ng) C

o., L

td.

Del

ta E

lect

roni

cs In

tern

atio

nal

Ltd

. Sa

les

(Not

e d)

Del

ta E

lect

ro-o

ptic

s (W

u Jia

ng)

Co.

, Ltd

. D

elta

Vid

eo D

ispla

y Sy

stem

(

Wu

Jiang

) Co.

, Ltd

. D

elta

Ele

ctro

nics

(Don

g G

uan)

Co.

, Ltd

. D

elta

Ele

ctro

nics

Pow

er (D

ong

Gua

n) C

o., L

td.

Del

ta E

lect

roni

cs In

tern

atio

nal L

td.

Del

ta E

lect

roni

cs In

dustr

ial

(Don

g G

uan)

Co.

, Ltd

. D

elta

Net

wor

ks In

tern

atio

nal L

td.

Del

ta E

lect

roni

cs C

ompo

nent

s (D

ong

Gua

n) C

o., L

td.

Del

ta E

lect

roni

cs In

tern

atio

nal L

td.

Del

ta E

lect

roni

cs P

ower

(

Don

g G

uan)

Co.

, Ltd

. D

elta

Net

wor

ks In

tern

atio

nal

Ltd

. D

elta

Ele

ctro

nics

Indu

stria

l (D

ong

Gua

n) C

o., L

td.

DN

I Log

istic

s (U

SA) C

orp.

Del

ta N

etw

orks

Inc.

D

elta

Net

wor

ks In

tern

atio

nal L

td.

Del

ta E

lect

roni

cs In

c.

Del

ta e

lect

roni

cs (J

apan

) Inc

. D

elta

Vid

eo D

ispla

y Sy

stem

(Wu

Jiang

) Co.

, Ltd

. D

elta

Ele

ctro

nics

Inte

rnat

iona

l Ltd

.

106 107106 107

Tra

nsac

tion

term

s

Num

ber

(N

ote

a)

Nam

e of

cou

nter

party

N

ame

of tr

ansa

ctio

n pa

rties

Re

latio

nshi

p

(Not

e b)

Su

bjec

t

A

mou

nt

(Not

e e)

Tran

sact

ion

t

erm

s

The

perc

enta

ge o

f tot

al

com

bine

d re

venu

e or

tota

l ass

ets (

Not

e c)

D

elta

Ele

ctro

nics

Inc.

D

elta

Inte

rnat

iona

l Hol

ding

Ltd

. A

ccou

nts

rec

eiva

ble

(Not

e d)

Del

ta V

ideo

Disp

lay

Syste

m (W

u J

iang

) Co.

, Ltd

. D

EI L

ogist

ics (

USA

) Cor

p.

Del

ta E

lect

roni

cs In

tern

atio

nal L

td.

Oth

er re

ceiv

able

sD

elta

Inte

rnat

iona

l Hol

ding

Ltd

. D

elta

Ele

ctro

nics

Inte

rnat

iona

l L

td.

Del

ta E

lect

roni

cs In

c.

Acc

ount

s r

ecei

vabl

e D

elta

Net

wor

ks In

c.

Del

ta N

etw

orks

Inte

rnat

iona

l Ltd

.D

elta

Ele

ctro

nics

(Don

g G

uan)

C

o., L

td.

Del

ta E

lect

roni

cs (J

ing

Su) C

o.,

Ltd

. D

elta

Ele

ctro

nics

Inte

rnat

iona

l Ltd

.

Del

ta E

lect

roni

cs C

ompo

nent

s (

Wu

Jiang

) Co.

, Ltd

. D

elta

Ele

ctro

nics

(Jin

g Su

) Co.

, Lt

d.D

elta

Vid

eo D

ispla

y Sy

stem

(

Wu

Jiang

) Co.

, Ltd

. D

elta

Ele

ctro

nics

Inte

rnat

iona

l Ltd

.

Del

ta E

lect

roni

cs P

ower

(Don

g G

uan)

Co.

, Ltd

. D

elta

Ele

ctro

nics

Com

pone

nts

(D

ong

Gua

n) C

o., L

td.

Del

ta E

lect

roni

cs P

ower

(Don

g G

uan)

Co.

, Ltd

. D

elta

Ele

ctro

nics

(Don

g G

uan)

Co

., Lt

d.

108 109108 109

Tra

nsac

tion

term

s

Num

ber

(N

ote

a)

Nam

e of

coun

terp

arty

N

ame

of tr

ansa

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n pa

rties

Re

latio

nshi

p

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e b)

Su

bjec

t

A

mou

nt

(Not

e e)

Tran

sact

ion

t

erm

s

The p

erce

ntag

e of t

otal

c

ombi

ned

reve

nue o

r

to

tal a

sset

s (N

ote

c)

Del

ta E

lect

roni

cs (D

ong

Gua

n)

Co.,

Ltd.

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elta

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nics

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pone

nts

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g G

uan)

Co.

, Ltd

. A

ccou

nts

rec

eiva

ble

(Not

e d)

Del

ta N

etw

orks

Inte

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iona

l L

td.

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ta N

etw

orks

Inc.

DN

I Log

istic

s (U

SA) C

orp.

D

elta

Net

wor

ks In

c.

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ta N

etw

orks

Inte

rnat

iona

l Ltd

.

Del

ta E

lect

roni

cs (J

apan

) Inc

. D

elta

Vid

eo D

ispla

y Sy

stem

(Wu

Jia

ng) C

o., L

td.

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ta E

lect

roni

cs In

c.

Del

ta N

etw

orks

Inc.

Le

ased

asse

ts (N

ote

f)

108 109108 109

B. 2

005

Tra

nsac

tion

term

s

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ote

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N

ame

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s

The

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com

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tota

l ass

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Not

e c)

0

Del

ta E

lect

roni

cs In

c.

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ta In

tern

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nal H

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ng L

td.

Serv

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e d)

0

D

elta

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Del

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1

Del

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ong

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elta

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ong

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s (

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g G

uan)

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, Ltd

. 2

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ta E

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cs (J

iang

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Co

., Lt

d.

Del

ta E

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cs In

tern

atio

nal

Ltd

. 3

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ta E

lect

roni

cs C

ompo

nent

s (

Wu

Jiang

) Co.

, Ltd

. D

elta

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(Jia

ng S

u) C

o.,

Ltd

. 3

D

elta

Vid

eo D

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Sys

tem

(Wu

Jiang

) Co.

, Ltd

. 3

D

elta

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ctro

nics

Inte

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iona

l L

td.

110 111110 111

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term

s

Num

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ote

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elta

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ics (

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Jiang

) C

o., L

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ta E

lect

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cs In

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. Sa

les

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ideo

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elta

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elta

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ong

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ong

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ta E

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cs (J

apan

) Inc

. D

elta

Vid

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ispla

y Sy

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o., L

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ta E

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NI L

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) Cor

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ta N

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elta

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wor

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110 111110 111

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ame

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ote

e)

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ter

ms

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l ass

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elta

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elta

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l Hol

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. A

ccou

nts

rec

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e d)

Del

ta V

ideo

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lay

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m (W

u J

iang

) Co.

, Ltd

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EI L

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) Cor

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ta V

ideo

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elta

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nics

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rnat

iona

l Ltd

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ther

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ivab

les

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ta In

tern

atio

nal H

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ng L

td.

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ta E

lect

roni

cs In

tern

atio

nal

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. D

elta

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nics

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ccou

nts

rec

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ta E

lect

roni

cs P

ower

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g G

uan)

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, Ltd

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elta

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o., L

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lect

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cs (J

ing

Su) C

o.,

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. D

elta

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nics

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rnat

iona

l Ltd

.

Del

ta E

lect

roni

cs C

ompo

nent

s (

Wu

Jiang

) Co.

, Ltd

. D

elta

Vid

eo D

ispla

y Sy

stem

(

Wu

Jiang

) Co.

, Ltd

. D

elta

Ele

ctro

nics

Com

pone

nts

(D

ong

Gua

n) C

o., L

td.

Del

ta E

lect

roni

cs P

ower

(Don

g G

uan)

Co.

, Ltd

. D

elta

Net

wor

ks In

tern

atio

nal

Ltd

. D

elta

Ele

ctro

nics

Indu

stria

l (D

ong

Gua

n) C

o., L

td.

DN

I Log

istic

s (U

SA) C

orp.

112 113112 113

Tra

nsac

tion

term

s

Num

ber

(N

ote

a)

Nam

e of

cou

nter

party

N

ame

of tr

ansa

ctio

n pa

rties

Re

latio

nshi

p

(Not

e b)

Su

bjec

t

A

mou

nt

(Not

e e)

Tran

sact

ion

t

erm

s

The

perc

enta

ge o

f tot

al

com

bine

d re

venu

e or

tota

l ass

ets (

Not

e c)

D

elta

Ele

ctro

nics

(Jap

an) I

nc.

Del

ta V

ideo

Disp

lay

Syste

m (W

u J

iang

) Co.

, Ltd

. A

ccou

nts

rec

eiva

ble

(Not

e d)

Del

ta E

lect

roni

cs In

c.

Del

ta N

etw

orks

Inc.

Le

ased

ass

ets

(Not

e f)

Not

e a:

The

tran

sact

ion

info

rmat

ions

of t

he C

ompa

ny a

nd th

e co

nsol

idat

ed su

bsid

iarie

s sho

uld

be n

oted

in c

olum

n “N

umbe

r”.

The

num

ber m

eans

: 1.

Num

ber 0

pre

sent

s the

Com

pany

. 2.

The

con

solid

ated

subs

idia

ries a

re in

ord

er fr

om n

umbe

r 1.

Not

e b:

The

rela

tions

hips

with

the

trans

actio

n pa

rties

are

as f

ollo

ws:

1. T

he C

ompa

ny to

the

cons

olid

ated

subs

idia

ry.

2. T

he c

onso

lidat

ed su

bsid

iary

to th

e Co

mpa

ny.

3. T

he c

onso

lidat

ed su

bsid

iary

to a

noth

er c

onso

lidat

ed su

bsid

iary

. N

ote

c: R

atio

s of a

sset

/liab

ility

are

div

ided

by

cons

olid

ated

tota

l ass

ets,

and

ratio

ns o

f gai

n/lo

ss a

ccou

nts a

re d

ivid

ed b

y co

nsol

idat

ed sa

les r

even

ue.

Not

e d:

The

re is

no

simila

r tra

nsac

tion

to c

ompa

re.

It w

ill fo

llow

the

prom

ised

pric

e an

d tra

nsac

tion

term

s and

all

the

cred

it te

rms a

re 7

5 da

ys.

Not

e e:

Acc

ordi

ng to

the

agre

emen

t bet

wee

n D

elta

Ele

ctro

nics

Int

erna

tiona

l Ltd

., D

elta

Net

wor

ks I

nter

natio

nal L

td. a

nd th

e co

mpa

nies

in D

ong

Gua

n, th

e ac

coun

ts re

ceiv

able

(pay

able

) fro

m th

e sa

les (

purc

hase

s) a

mon

g th

ese

com

pani

es a

re se

ttled

in n

et, t

here

fore

they

wer

e pr

esen

ted

on b

alan

ce sh

eet i

n ne

t am

ount

. N

ote

f: Th

ere

is no

sim

ilar t

rans

actio

n to

com

pare

. I

t will

follo

w th

e pr

omise

d pr

ice

and

trans

actio

n te

rms a

nd c

harg

e th

e re

ntal

mon

thly

.

12.

SEG

MEN

T FI

NA

NCI

AL

INFO

RMA

TIO

N

A.

Fina

ncia

l inf

orm

atio

n by

indu

stry

The

Com

pany

and

its c

onso

lidat

ed su

bsid

iarie

s ope

rate

in o

ne si

ngle

indu

stry-

the

elec

troni

cs in

dustr

y.

Acc

ordi

ngly

, no

diffe

rent

indu

stry

info

rmat

ion

is pr

esen

ted

in 2

004

and

2005

.

112 113112 113

B.

Fina

ncia

l inf

orm

atio

n by

geo

grap

hic

area

G

eogr

aphi

c ar

ea in

form

atio

n in

200

4 an

d 20

05 w

ere

as fo

llow

s:

200

4

A

sia

Oth

ers

Dom

estic

E

limin

atio

n

C

onso

lidat

ed

Ope

ratin

g re

venu

es fr

om u

naff

iliat

ed c

usto

mer

s O

pera

ting

reve

nues

from

the

Com

pany

and

its

cons

olid

ated

subs

idia

ries

Tota

l ope

ratin

g re

venu

es

Segm

ent p

rofit

s

Inve

stm

ent l

oss u

nder

equ

ity m

etho

d G

ener

al e

xpen

se

Inte

rest

exp

ense

N

et in

com

e be

fore

inco

me

tax

and

min

ority

inte

rest

Id

entif

iabl

e as

sets

Lo

ng-te

rm in

vest

men

ts

Gen

eral

ass

ets

Tota

l ass

ets

Dep

reci

atio

n ex

pens

e C

apita

l exp

endi

ture

114 115114 115

200

5

Asi

a

Oth

ers

Dom

estic

E

limin

atio

n

C

onso

lidat

ed

Ope

ratin

g re

venu

es fr

om u

naff

iliat

ed c

usto

mer

s

Ope

ratin

g re

venu

es fr

om th

e C

ompa

ny a

nd it

s co

nsol

idat

ed su

bsid

iarie

s

Tota

l ope

ratin

g re

venu

es

Segm

ent p

rofit

s

Inve

stm

ent i

ncom

e un

der e

quity

met

hod

Gen

eral

exp

ense

Inte

rest

exp

ense

Net

inco

me

befo

re in

com

e ta

x an

d m

inor

ity in

tere

st

Iden

tifia

ble

asse

ts

Long

-term

inve

stm

ents

Gen

eral

ass

ets

Tota

l ass

ets

Dep

reci

atio

n ex

pens

e

Cap

ital e

xpen

ditu

re

114 115114 115

C. Information about export sales

The export sales of the Company and its consolidated subsidiaries in 2004 and 2005 were as follows:

Destination 2004 2005 Southeast Asia U.S.A.EuropeNortheast Asia Americas Others

D. Major customer information

The customer accounting for more than 10% of the Company’s operating revenues for the years ended December 31, 2004 and 2005 is set forth below:

2004 2005

Amount

% of total operatingrevenues Amount

% of total operatingrevenues

Customer A

Documents

Table of Contents - Delta Electronics · 02 04 06 08 10 12 14 16 18 20 22 26 28 29 31 33 Table of Contents DELTA ELECTRONICS, INC. ANNUAL REPORT 2005 A Letter to Our Shareholders