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Richtek Technology Corporation

Financial Statements for the Years Ended December 31, 2009 and 2008 and Independent Auditors’ Report

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Richtek Technology Corporation We have audited the accompanying balance sheets of Richtek Technology Corporation as of December 31, 2009 and 2008, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Richtek Technology Corporation as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting standards and accounting principles generally accepted in the Republic of China. As stated in Note 3 to the financial statements, effective January 1, 2009, the Company adopted the newly released statement of Financial Accounting Standards No. 10 “Accounting for Inventories.” In addition, effective January 1, 2008, the Company adopted the Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors” issued by the Accounting Research and Development Foundation of the Republic of China which requires companies to record bonuses paid to employees, directors and supervisors as an expense rather than an appropriation of earnings.

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We have also audited the consolidated financial statements of Richtek Technology Corporation and subsidiaries as of and for the years ended December 31, 2009 and 2008 and have expressed in our report dated March 5, 2010 (not presented herewith) an unqualified opinion with explanatory paragraph on the consolidated financial statements. March 5, 2010

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results

of operations and cash flows in accordance with accounting principles and practices generally

accepted in the Republic of China and not those of any other jurisdictions. The standards,

procedures and practices to audit such financial statements are those generally accepted and

applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying financial statements

have been translated into English from the original Chinese version prepared and used in the

Republic of China. If there is any conflict between the English version and the original Chinese

version or any difference in the interpretation of the two versions, the Chinese-language auditors’

report and financial statements shall prevail.

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RICHTEK TECHNOLOGY CORPORATION

BALANCE SHEETS

DECEMBER 31, 2009 AND 2008

(In Thousands of New Taiwan Dollars, Except Par Value)

2009 2008 2009 2008

ASSETS Amount % Amount % LIABILITIES AND SHAREHOLDERS’ EQUITY Amount % Amount %

CURRENT ASSETS CURRENT LIABILITIES

Cash (Note 4) $ 1,212,623 18 $ 1,429,928 27 Notes and accounts payable (Note 20) $ 1,026,261 15 $ 540,658 10 Financial assets at fair value through profit or loss Income tax payable (Notes 2 and 16) 150,667 2 121,550 2 (Notes 2 and 5) 1,406 - - - Accrued payroll and bonus 106,512 2 84,567 2 Available-for-sale financial assets (Notes 2 and 6) 990,092 14 457,053 9 Bonuses payable to employees, directors and supervisors Notes and accounts receivable, net (Notes 2, 7 and 20) 1,624,642 24 977,874 18 (Notes 2, 3 and 15) 365,147 5 318,610 6 Other financial assets (Note 20) 501 - 1,528 - Accrued expenses and other current liabilities (Notes 13 Inventories (Notes 2, 3 and 8) 1,376,594 20 1,028,104 19 and 20) 133,855 2 111,298 2 Deferred income tax assets - current (Notes 2 and 16) 29,669 - 103,830 2 Prepaid expenses and other current assets (Note 20) 58,368 1 56,923 1 Total current liabilities 1,782,442 26 1,176,683 22

Total current assets 5,293,895 77 4,055,240 76 OTHER LIABILITIES

Accrued pension cost (Notes 2 and 14) - - 3,394 - LONG-TERM INVESTMENTS (Notes 2, 9 and 10) Guarantee deposits 28,473 - 19,200 1

Investments accounted for using equity method 615,631 9 451,004 9 Deferred credits - intercompany profits (Note 2) 299 - 427 - Financial assets carried at cost 15,185 - 16,185 -

Total other liabilities 28,772 - 23,021 1 Total long-term investments 630,816 9 467,189 9

Total liabilities 1,811,214 26 1,199,704 23 PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 11)

Cost SHAREHOLDERS' EQUITY (Notes 2 and 15) Land 88,959 1 88,959 2 Capital stock Buildings 188,685 3 192,320 4 Capital stock - NT$10 par value Machinery and equipment 173,775 3 193,087 4 Authorized: 150,000 thousand shares - - Research and development 65,814 1 65,810 1 Issued: 142,397 thousand shares in 2009 and 133,796 Office equipment 48,803 1 53,975 1 thousand shares in 2008 1,423,975 21 1,337,958 25 Leasehold improvements 5,239 - 6,249 - To be issued - - 570 - Other equipment 31,578 - 28,613 - Capital surplus

602,853 9 629,013 12 Paid-in capital in excess of par value 388,610 6 112,095 2 Accumulated depreciation (168,833) (2) (161,400) (3) Long term investment 24,052 - 3,870 - Prepayments for business facilities 9,801 - 15,998 - Retained earnings

Legal reserve 611,908 9 477,574 9 Net property, plant and equipment 443,821 7 483,611 9 Unappropriated earnings 2,586,571 38 2,181,900 41

Cumulative translation adjustments (10,003) - 7,756 - OTHER ASSETS Unrealized valuation gains on financial assets 209 - 1,801 -

Refundable deposits 20,511 - 15,070 - Deferred charges, net (Notes 2 and 12) 264,765 4 193,484 4 Total shareholders' equity 5,025,322 74 4,123,524 77 Deferred income tax assets - noncurrent (Notes 2 and 16) 174,883 3 102,386 2 Prepaid pension cost (Notes 2 and 14) 1,612 - - - Pledged bank deposits (Note 21) 6,233 - 6,248 -

Total other assets 468,004 7 317,188 6

TOTAL $ 6,836,536 100 $ 5,323,228 100 TOTAL $ 6,836,536 100 $ 5,323,228 100 The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 5, 2010)

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STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2009 AND 2008

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2009 2008

Amount % Amount %

GROSS SALES $ 8,101,584 $ 6,868,747 SALES RETURNS AND ALLOWANCES 97,144 59,980 NET SALES (Notes 2, 20 and 24) 8,004,440 100 6,808,767 100 COST OF SALES (Notes 2, 3, 8, 17 and 20) 4,866,210 61 4,170,157 61 GROSS PROFIT BEFORE REALIZED

INTERCOMPANY PROFIT 3,138,230 39 2,638,610 39

REALIZED INTERCOMPANY PROFIT (Note 2) 42 - 1,376 - GROSS PROFIT 3,138,272 39 2,639,986 39 OPERATING EXPENSES (Notes 17, 20 and 22)

Marketing 293,574 4 265,547 4 General and administrative 262,005 3 237,005 3 Research and development 842,087 10 651,865 10

Total operating expenses 1,397,666 17 1,154,417 17

OPERATING INCOME 1,740,606 22 1,485,569 22 NONOPERATING INCOME AND GAINS

Interest income (Note 19) 14,472 - 16,716 - Valuation gain on financial assets, net (Notes 2 and 5)

11,677 - - -

Gains on disposal of financial assets, net (Note 2) 3,670 - 27,556 1 Rental income (Note 20) 120 - 151 - Foreign exchange gain, net (Note 2) 31 - 9,656 - Gain on disposal of property, plant and equipment (Note 2)

28 - - -

Subsidiary income (Note 2) - - 11,627 - Others (Note 20) 6,610 - 9,553 -

Total nonoperating income and gains 36,608 - 75,259 1

(Continued)

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STATEMENTS OF INCOME


(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2009 2008

Amount % Amount %

NONOPERATING EXPENSES AND LOSSES

Equity in losses of equity-method investees, net (Notes 2 and 9)

$ 98,908 1 $ 102,536 2

Impairment loss (Notes 2 and 10) 1,000 - - - Interest expenses 163 - 13 - Loss on disposal of property, plant and equipment (Note 2)

87 - 323 -

Others 3,055 - 6,877 -

Total nonoperating expenses and losses 103,213 1 109,749 2 INCOME BEFORE INCOME TAX 1,674,001 21 1,451,079 21 INCOME TAX (Notes 2 and 16) (129,218) (2) (107,737) (1) NET INCOME $ 1,544,783 19 $ 1,343,342 20 2009 2008

Before

Income

Tax

After

Income

Tax

Before

Income

Tax

After

Income

Tax

EARNINGS PER SHARE (Note 18)

Basic $ 11.84 $ 10.93 $ 10.34 $ 9.57 Diluted $ 11.66 $ 10.76 $ 10.11 $ 9.36

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 5, 2010) (Concluded)

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STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


(In Thousands of New Taiwan Dollars)

Common Stock Capital Surplus (Note 15) Others (Notes 2 and 15)

Issued Paid-in Capital Retained Earnings (Note 15) Cumulative Unrealized Total

Shares (In

Thousands) Amount

To Be Issued

(Note 15)

in Excess of

Par Value

Long Term

Investments Legal Reserve Special Reserve

Unappropriated

Earnings Total

Translation

Adjustments

Gains on

Financial Assets

Shareholders'

Equity

BALANCE, JANUARY 1, 2008 118,787 $ 1,187,872 $ - $ 112,095 $ - $ 300,456 $ 885 $ 2,315,174 $ 2,616,515 $ 2,207 $ 9,316 $ 3,928,005 Appropriation of prior year's earnings

Legal reserve - - - - - 177,118 - (177,118) - - - - Special reserve - - - - - - (885) 885 - - - - Cash dividends - NT$8.5 - - - - - - - (1,011,485) (1,011,485) - - (1,011,485) Stock dividends - NT$1.0 11,900 118,998 - - - - - (118,998) (118,998) - - - Bonus to employees - cash - - - - - - - (121,200) (121,200) - - (121,200) Bonus to employees - stock 2,870 28,700 - - - - - (28,700) (28,700) - - - Remuneration to directors and supervisors - - - - - - - (20,000) (20,000) - - (20,000)

Issuance of stock due to the exercise of employee stock options 239 2,388 570 - - - - - - - - 2,958 Translation adjustment on investments accounted for using equity

method - - - - - - - - - 5,549 - 5,549

Adjustment arising from changes in percentage of ownership of

investees - - - - 3,870 - - - - - - 3,870

Valuation changes on available-for-sale financial assets - - - - - - - - - - (7,291) (7,291) Equity in the valuation changes on available-for-sale financial

assets held by equity method investees - - - - - - - - - - (224) (224)

Net income in 2008 - - - - - - - 1,343,342 1,343,342 - - 1,343,342 BALANCE, DECEMBER 31, 2008 133,796 1,337,958 570 112,095 3,870 477,574 - 2,181,900 2,659,474 7,756 1,801 4,123,524 Appropriation of prior year's earnings (Note 3)

Legal reserve - - - - - 134,334 - (134,334) - - - - Cash dividends - NT$7.0 - - - - - - - (938,726) (938,726) - - (938,726) Stock dividends - NT$0.5 6,705 67,052 - - - - - (67,052) (67,052) - - -

Issuance of stock due to the exercise of employee stock options 348 3,480 (570) - - - - - - - - 2,910 Profit sharing to employees - in stock 1,548 15,485 - 276,515 - - - - - - - 292,000 Translation adjustment on investments accounted for using equity

method - - - - - - - - - (17,759) - (17,759)

Adjustment arising from changes in percentage of ownership of

investees - - - - 20,182 - - - - - - 20,182

Valuation changes on available-for-sale financial assets - - - - - - - - - - (1,513) (1,513) Equity in the valuation changes on available-for-sale financial

assets held by equity method investees - - - - - - - - - - (79) (79)

Net income in 2009 - - - - - - - 1,544,783 1,544,783 - - 1,544,783 BALANCE, DECEMBER 31, 2009 142,397 $ 1,423,975 $ - $ 388,610 $ 24,052 $ 611,908 $ - $ 2,586,571 $ 3,198,479 $ (10,003) $ 209 $ 5,025,322 The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 5, 2010)

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STATEMENTS OF CASH FLOWS



2009 2008

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 1,544,783 $ 1,343,342 Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 85,750 84,201 Amortization 124,922 83,455 Gains on disposal of financial assets, net (3,670) (27,556) Equity in losses of equity method investees, net 98,908 102,536 Impairment loss of financial assets 1,000 - Loss on disposal of property, plant and equipment, net 59 323 Deferred credits - intercompany profits (128) (991) Deferred income tax assets 1,664 (5,003) Net changes in operating assets and liabilities

Financial assets at fair value through profit or loss (1,406) - Notes and accounts receivable, net (646,768) (72,909) Other financial assets 1,027 1,993 Inventories (348,490) (360,357) Prepaid expenses and other current assets (1,445) (8,613) Notes and accounts payable 485,603 (71,615) Income tax payable 29,117 12,050 Accrued payroll and bonus 21,945 13,506 Bonuses payable to employees, directors and supervisors 338,537 318,610 Accrued expenses and other current liabilities 25,697 35,402 Accrued pension cost (5,006) (2,756)

Net cash provided by operating activities 1,752,099 1,445,618

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of: Available-for-sale financial assets (5,935,024) (2,172,000) Investments accounted for using the equity method (261,191) (142,106) Financial assets carried at cost - (16,185) Property, plant and equipment (57,412) (271,566)

Proceeds from the disposal of: Available-for-sale financial assets 5,404,142 3,079,429 Property, plant and equipment 1,151 2,466 Deferred charges - 103

Increase in deferred charges (189,101) (150,995) Decrease (increase) in refundable deposits (5,441) 2,720 Increase in pledged bank deposits 15 (3,189)

Net cash provided by (used in) investing activities (1,042,861) 328,677

(Continued)

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STATEMENTS OF CASH FLOWS



2009 2008

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in guarantee deposits $ 9,273 $ (30,573) Remuneration to directors and supervisors - (20,000) Cash dividends (938,726) (1,011,485) Employees' profit sharing in cash - (121,200) Proceeds from the exercise of employee stock options 2,910 2,958

Net cash used in financing activities (926,543) (1,180,300)

NET INCREASE (DECREASE) CASH (217,305) 593,995 CASH, BEGINNING OF YEAR 1,429,928 835,933 CASH, END OF YEAR $ 1,212,623 $ 1,429,928 SUPPLEMENTAL CASH FLOW INFORMATION

Income tax paid $ 98,437 $ 100,690 Interest paid $ 163 $ 13

CASH PAID FOR ACQUISITION OF PROPERTIES

Acquisition of property, plant, and equipment $ 54,272 $ 252,390 Decrease (increase) in payables to equipment suppliers (under accrued expenses and other current liabilities)

3,140 19,176

$ 57,412 $ 271,566 The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 5, 2010) (Concluded)

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NOTES TO FINANCIAL STATEMENTS


(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

Richtek Technology Corporation (the “Corporation” or “Richtek”) was incorporated on September 18, 1998 and started operations on September 28, 1998. The Corporation’s shares have been listed on the Taiwan Stock Exchange since October 21, 2003. The Corporation designs, tests and sells integrated circuits (ICs) and information software. As of December 31, 2009 and 2008, the Corporation had 455 and 454 employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the Republic of China (ROC). Under these guidelines, law and principles, certain estimates and assumptions have been used for the allowance for sales returns and discounts, allowance for doubtful accounts, allowance for loss on inventories, depreciation of properties, plant and equipment, pension cost, amortization of deferred charges and bonuses to employees, directors and supervisors, etc. Actual results may differ from these estimates. For readers’ convenience, the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the ROC. If inconsistencies arise between the English version and the Chinese version or if differences arise in the interpretations between the two versions, the Chinese version of the financial statements shall prevail. Significant accounting policies are summarized as follows:

Current and Noncurrent Assets and Liabilities

Current assets include cash and those assets expected to be realized, sold or consumed within one year from the balance sheet date. All other assets such as property, plant and equipment and intangible assets are classified as noncurrent. Current liabilities are those to be settled within one year from the balance sheet date. All other liabilities are classified as noncurrent.

Financial Assets/Liabilities at Fair Value through Profit or Loss

Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with changes in fair value recognized in earnings. On derecognition of a financial asset or a financial liability, the difference between its carrying amount and the sum of the consideration received and receivable or consideration paid and payable is recognized in profit or loss. A regular way purchase or sale of financial assets is accounted for using settlement date accounting. Fair value is estimated using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.

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Available-for-sale Financial Assets

Available-for-sale financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are remeasured at fair value, with changes in fair value recognized in equity until the financial assets are disposed of, at which time, the cumulative gain or loss previously recognized in equity is included in profit or loss for the year. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

The fair values of open-end mutual funds are based on their net asset value as of the balance sheet date. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity. Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts

The Corporation recognizes revenue when product shipment is made, price is fixed or determinable, and collectability is reasonably assured. When products are outsourced for additional processing, the rewards of ownership and significant risks associated with the products have not been transferred; therefore, revenue is not recognized for such products. Allowances for sales returns and discounts are generally made on the basis of historical experience, management’s judgment, and related factors. Sales are determined at fair value, taking into account related sales discounts agreed to by the Company and its customers. Since the receivables from sales are collectible within one year and sales transactions are frequent, the fair value of receivables is equivalent to the nominal amount of cash to be received. An allowance for doubtful accounts is provided on the basis of a review of the collectability and of as well as an examination of customers’ creditworthiness and the Corporation’s internal credit policies.

Inventories

Inventories consist of raw materials, finished goods and work-in-process. Before January 1, 2009, inventories were stated at the lower of cost or market value (replacement cost or net realizable value). Any write-down was made on a total-inventory basis. Market value meant replacement cost for raw materials and supplies and net realizable value for finished goods and work in process. As stated in note 3, effective January 1, 2009, inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made item by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost. Investments Accounted for Using Equity Method

Stock investments in which the Corporation holds more than 20% common shares with voting rights or exercises significant influence on investees’ operating and financial decisions are accounted for using the equity method. The acquisition cost is allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, and the excess of the acquisition cost over the fair value of the identifiable net assets acquired is recognized as goodwill. Goodwill is not being amortized. In addition, goodwill should be assessed for impairment annually or whenever an event or circumstances would result in the goodwill reduction.

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When the Corporation subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Corporation’s share of the investee’s equity. The Corporation records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus. If the amount of such adjustment made to debit capital surplus is more than the balance of capital surplus arising from long-term equity investment, then the resulting difference is debited to retained earnings. If an investment is identified as significantly impaired, the carrying amount of the investment in excess of its recoverable amount is recognized as impairment loss. The assessment for impairment is based on carrying value. For those investees over which the Corporation holds a controlling interest, the assessment of impairment is based on an estimation of the value in use of the cash-generating units of the consolidated investees. Profits from downstream transaction with an equity-method investees that are not majority owned are eliminated in proportion to the Corporation’s percentage of ownership in the investees; if the Company has control over the investee, all the profits are eliminated. Profits from upstream transactions with an equity-method investee are eliminated in proportion to the Company’s percentage of ownership in the investee. All of the above deferred gains are realized upon the sale of the related products to third parties.

Financial Assets Carried at Cost

Investments in equity instruments without a quoted market price in an active market and without fair value can be reliably measured are carried at their original cost. Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are declared on the earnings of the investee attributable to the period prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Major additions and improvements to property, plant and equipment are capitalized, while costs of repairs and maintenance are expensed currently. If significant asset impairment is determined on the balance sheet date, the carrying amount of an asset in excess of its recoverable amount is recognized as a loss. If the recoverable amount increases, the impairment loss reversal is recognized as a gain. However, the increased carrying amount of an asset due to impairment loss reversal should not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognized for the asset in prior years. Depreciation is calculated using the straight-line method over useful lives, which are initially estimated as follows: land and buildings, 3 to 50 years; machinery and equipment, 3 years; research and development equipment, 3 years; and office equipment, 3 to 5 years; lease improvements are amortized over the rental period and miscellaneous equipment, 3 to 5 years. Property, plant and equipment still in use beyond their initially estimated useful lives are further depreciated over the newly estimated useful lives. Upon sale or disposal of property, plant and equipment, the related cost and accumulated depreciation are removed from the corresponding accounts, with any gain or loss credited or charged to nonoperating income in the year of sale or disposal.

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Deferred Charges

Deferred charges primarily include photo masks, software and telephone devices. Amortization is calculated using the straight-line method over 3 to 5 years. If significant asset impairment is determined on the balance sheet date, the carrying amount of an asset in excess of its recoverable amount is recognized as a loss. If the recoverable amount increases, the impairment loss reversal is recognized as a gain. However, the increased carrying amount of an asset due to impairment loss reversal should not exceed the carrying amount that would have been determined (net of amortization) had no impairment loss been recognized for the asset in prior years. Expenditure on research activities is recognized as an expense when incurred. An internally-generated intangible asset arising from development activities is capitalized and then amortized on a straight-line basis over years if the recognition criteria for intangible asset have been met; otherwise, the development expenditure is recognized as an expense when incurred. Capitalized and Other Expenditures

Expenditures of a certain amount that will benefit periods of more than 2 years are capitalized. Other expenditures are recorded as expenses or losses. Pension Costs

Pension cost under a defined benefit plan is determined by actuarial valuations. Contributions made under a defined contribution plan are recognized as pension cost during the year in which employees render services.

Subsidiary Income

Financing received by the Corporation from the government of certain products is recognized as subsidiary income when realized.

Income Tax

The Corporation uses the inter-period tax allocation method for income tax. Deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of the related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as current or noncurrent on the basis of the expected length of the realization or settlement period. Tax credits for certain purchases of machinery, equipment and technology, research and development expenditures and personnel training in important technology-based enterprises are recognized using the flow-through method. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax expense. According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Foreign Currencies

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

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At the balance sheet date, foreign-currency monetary assets and liabilities are revalued using prevailing exchange rates and the exchange differences are recognized in profit or loss. If the functional currency of an equity-method investee is a foreign currency, translation adjustments will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported as a separate component of shareholders’ equity. Reclassification

Certain accounts in the financial statements as of and for the year ended December 31, 2008 have been reclassified to be consistent with the financial statements as of and for the year ended December 31, 2009.

3. EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES

Accounting for Bonuses to Employees, Directors and Supervisors

In March 2007, the ARDF issued Interpretation 2007-052 that requires companies to recognize as compensation expenses bonuses paid to employees, directors and supervisors beginning January 1, 2008. These bonuses were previously recorded as appropriations from earnings. The adoption of this interpretation resulted in a decrease in net income and after income basic earnings per share of NT$291,462 thousand and NT$2.18, respectively, for the year ended December 31, 2008.

Accounting for Employee Stock Options

On January 1, 2008, the Company adopted the newly released SFAS No. 39, “Accounting for Share-based Payment” to account for employee stock options. Such a change in accounting principle did not have any effect on the Company’s financial statements as of and for the year ended December 31, 2008. Accounting for Inventories

On January 1, 2009, the Company adopted the newly revised SFAS No. 10, “Accounting for Inventories”. The main revisions are (1) inventories are stated at the lower of cost or net realizable value, and inventories are written down to net realizable value item-by-item except when the grouping of similar or related items is appropriate; (2) unallocated overheads are recognized as expenses in the period in which they are incurred; and (3) abnormal costs, write-downs of inventories and any reversal of write-downs are recorded as cost of goods sold for the period. The adoption resulted in a decrease of NT$10,592 thousand in net income and a decrease of NT$0.07 in after income tax basic earnings per share for the year ended December 31, 2009. For comparison purposes, the Company also reclassified nonoperating losses of NT$23,858 thousand (loss on obsolete inventories), NT$7,776 thousand (loss on disposal of inventories) and nonoperating gains of NT$1,504 thousand (income from scrap sales) to cost of goods sold for the year ended December 31, 2008.

4. CASH

December 31

2009 2008

Cash on hand and petty cash $ 941 $ 1,298 Checking accounts and deposits in banks 563,482 368,861 Time deposits 648,200 1,059,769 $ 1,212,623 $ 1,429,928

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5. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31,

2009

Trading financial assets

Forward exchange contracts $ 1,406

The Corporation entered into derivative contracts during the year ended December 31, 2009 to manage exposures due to fluctuations of foreign exchange rates. The Corporation did not have any derivatives during the year ended December 31, 2008. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for its derivative contracts. Outstanding forward exchange contracts as of December 31 2009 were as follows:

Contract Amount

Currency Maturity Date (In Thousands)

December 31, 2009 Sell US$/NT$ 99/01/08-99/01/15 USD6,000/NTD193,573 For the year ended December 31, 2009, changes in fair value related to derivative financial instruments recognized in earnings was a net gain of NT$10,271 thousand.

6. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31

2009 2008

Open-end mutual funds $ 990,092 $ 457,053

7. NOTES AND ACCOUNTS RECEIVABLE, NET

December 31

2009 2008

Related parties

RichTek USA, Inc. $ 363 $ 516 Third parties 1,642,934 996,013 Allowance for sales returns and discounts (16,456) (16,456) Allowance for doubtful accounts (2,199) (2,199) $ 1,624,642 $ 977,874

- 15 -

8. INVENTORIES, NET

December 31

2009 2008

Finished goods $ 837,733 $ 503,553 Work in process 276,869 189,120 Raw materials 261,992 335,431 $ 1,376,594 $ 1,028,104 As of December 31, 2009 and 2008, the allowance for inventory devaluation was NT$131,750 thousand and NT$68,882 thousand, respectively. The cost of inventories recognized as cost of goods sold in the years ended December 31, 2009 and 2008 was NT$4,866,210 thousand and NT$4,170,157 thousand, respectively, which included NT$62,868 thousand and NT$23,858 thousand, respectively, due to write-downs of inventories.

9. INVESTMENTS ACCOUNTED USING THE EQUITY METHOD

December 31

2009 2008

% of % of

Owner- Owner-

Amount ship Amount ship

Non-publicly traded stocks

Li-Yuh Investment Ltd. $ 225,415 100 $ 176,564 100 Ironman Overseas Co., Ltd. 121,991 100 106,744 100 Richipower Microelectronics Corporation

(Cayman) 110,138

51

-

-

Richstar Group Co., Ltd. 91,997 100 97,044 100 Richnex Microelectronics Corporation 34,875 67 49,381 80 Richtek Europe Holding B.V. 25,852 100 14,144 100 Richtek Holding International Limited 5,363 100 7,127 100

$ 615,631 $ 451,004 During 2009, the Corporation increased its investment in Li-Yuh Investment Ltd. by NT$50,000 thousand; in Ironman Overseas Co., Ltd. by US$1,000 thousand; in Richstar Group Co. Ltd. by US$1,000 thousand; and in Richtek Europe Holding B.V. by EUR500 thousand. As of December 31, 2009, the total investment of the Corporation in Richstar Group Co., Ltd. was US$7,015 thousand and that in Richtek Europe Holding B.V. was EUR1,000 thousand and of which RichTek USA, Inc. and Richtek Europe B.V. were indirectly invested through Richstar Group Co., Ltd. and Richtek Europe Holding B.V., respectively. In addition, as of December 31, 2009, the total investment of the Corporation in Ironman was US$6,680 thousand, of which US$5,530 thousand was indirectly invested in mainland China through the incorporation of two subsidiaries, Richpower Microelectronics Co., Ltd. and Li-We Technology Corp., through Cosmic-Ray Technology Limited. The two subsidiaries sell the Corporation’s products and provide consulting services to expand the Corporation’s market on the mainland. All of these overseas investments had been approved by the Investment Commission under the Ministry of Economic Affairs. The Corporation invested in Richnex Microelectronics Corporation and held 67%, which designs and tests integrated circuits (ICs).

- 16 -

In January 2008, the Corporation invested US$500 thousand to establish Richtek Holding International Limited which engages in investment activities, and its branch in Japan which engages in selling of the Corporation’s products and providing consulting services. Further, the Corporation increased its investment by US$500 thousand in Mar 2009. On July 17, 2008, the Corporation’s subsidiary, Li-Yuh Investment Ltd., and Delta Electronics, Inc. jointly invested in and established NeoEnergy Microelectronics, Inc. Li-Yuh Investment Ltd. invested NT$42,500 thousand and held 42.5% of ownership in NeoEnergy Microelectronics, Inc., which engages in the design and selling of integrated circuits (ICs), and information and software services. Further, the Corporation sale it’s all ownership to Delta Electronics, Inc. on September 1, 2009. In April 2009, the Corporation invested US$3,000 thousand to acquire 55% of ownership in Richpower Microelectronics Corporation and its subsidiaries, Richpower Microelectronics Corporation, which engages in designs, tests and sells integrated circuits (ICs), information software and providing consulting services. Further, the Corporation subscribes for additional shares with the investments of US$187 thousand at a percentage different from its existing ownership in July 2008. As a result, the Corporation’s percentage of ownership decreased from 55% to 51%. In May 2009, the Corporation sold Richpower Microelectronics Co., Ltd. which is Cosmic-Ray Technology Limited subsidiaries to Richpower Microelectronics Corporation for the adjustment investment construction. The investment gains/(losses) in 2009 and 2008, which were calculated based on the investees’ financial statements for the same reporting years as those of the Corporation and audited by the Corporation’s auditors, were as follows:

2009 2008

Li-Yuh Investment Ltd. $ (1,070) $ 4,131 Ironman Overseas Co., Ltd. (12,159) (30,295) Richpower Microelectronics Corporation (Cayman) 7,977 - Richstar Group Co., Ltd. (35,778) (25,637) Richnex Microelectronics Corporation (28,440) (34,325) Richtek Europe Holding B.V. (11,277) (7,496) Richtek Holding International Limited (18,161) (8,914) $ (98,908) $ (102,536) The net assets of the equity-method investees were as follows:

2009 2008

Total assets of the investees $ 794,441 $ 488,007 Total liabilities of the investees (116,350) (24,660) Total net assets of the investees $ 678,091 $ 463,347 Total net assets at the Corporation’s proportionate interest in the

investees $ 584,627

$ 451,004

The consolidated financial statements as of and for the years ended December 31, 2009 and 2008 included all subsidiaries.

- 17 -

10. FINANCIAL ASSETS CARRIED AT COST

2009 2008

% of % of

Owner- Owner-

Amount ship Amount ship

Non-publicly traded common stocks

Nexcera Corporation Limited $ 15,185 6 $ 16,185 6 In October 2008, the Corporation acquired the aforementioned stocks, which did not have a quoted market price in an active market and whose fair value cannot be reliably measured, and therefore was measured at cost. During the year ended December 31, 2009, the Corporation assessed the recoverable amount of Nexcera Corporation Limited and recorded an impairment loss of NT$1,000.

11. PROPERTY, PLANT AND EQUIPMENT, NET

Year Ended December 31, 2009

Item

Balance,

Beginning of

Year

Additions

Disposals

Reclassification

Balance,

End of Year

Cost Land $ 88,959 $ - $ - $ - $ 88,959 Buildings 192,320 265 3,900 - 188,685 Machinery and equipment 193,087 36,399 55,711 - 173,775 Research and development 65,810 9,302 5,817 (3,481) 65,814 Office equipment 53,975 9,308 3,545 (10,935) 48,803 Lease improvements 6,249 - 1,010 - 5,239 Other equipment 28,613 5,195 2,230 - 31,578 Prepayments for business facilities 15,998 (6,197) - - 9,801 645,011 $ 54,272 $ 72,213 $ (14,416) 612,654 Accumulated depreciation Buildings 15,063 $ 8,158 $ 3,900 $ - 19,321 Machinery and equipment 89,868 46,947 55,711 - 81,104 Research and development 29,598 15,537 5,613 (2,434) 37,088 Office equipment 18,069 7,416 2,540 (4,880) 18,065 Lease improvements 2,523 1,859 1,009 - 3,373 Other equipment 6,279 5,833 2,230 - 9,882 161,400 $ 85,750 $ 71,003 $ (7,314) 168,833 $ 483,611 $ 443,821


Item

Balance,

Beginning of

Year

Additions

Disposals

Reclassification

Balance,

End of Year

Cost Land $ 45,072 $ 43,887 $ - $ - $ 88,959 Buildings 90,379 92,851 448 9,538 192,320 Machinery and equipment 170,591 57,412 34,916 - 193,087 Research and development 84,613 15,029 33,832 - 65,810 Office equipment 50,206 20,223 16,454 - 53,975 Lease improvements 12,245 3,929 387 (9,538) 6,249 Other equipment 12,198 19,275 2,860 - 28,613 Prepayments for business facilities 16,214 (216) - - 15,998 481,518 $ 252,390 $ 88,897 $ - 645,011

(Continued)

- 18 -


Item

Balance,

Beginning of

Year

Additions

Disposals

Reclassification

Balance,

End of Year

Accumulated depreciation Buildings $ 7,142 $ 4,785 $ 447 $ 3,583 $ 15,063 Machinery and equipment 82,339 42,445 34,916 - 89,868 Research and development 42,748 19,936 33,086 - 29,598 Office equipment 22,064 10,819 14,814 - 18,069 Lease improvements 3,692 2,414 - (3,583) 2,523 Other equipment 5,322 3,802 2,845 - 6,279 163,307 $ 84,201 $ 86,108 $ - 161,400 $ 318,211 $ 483,611

(Concluded)

12. DEFERRED CHARGES, NET


Item

Balance,

Beginning of

Year

Additions

Disposals

Reclassification

Balance,

End of Year

Amortization Cost Photo masks $ 261,008 $ 172,634 $ 54,418 $ - $ 379,224 3 years Software 65,323 16,467 16,515 14,416 79,691 3 years Telephone devices 805 - - - 805 5 years 327,136 $ 189,101 $ 70,933 $ 14,416 459,720 Accumulated amortization Photo masks 98,745 $ 99,975 $ 54,418 $ - 144,302 Software 34,366 24,803 16,515 7,314 49,968 Telephone devices 541 144 - - 685 133,652 $ 124,922 $ 70,933 $ 7,314 194,955 $ 193,484 $ 264,765


Item

Balance,

Beginning of

Year

Additions

Disposals

Balance,

End of Year

Amortization

Cost Photo masks $ 157,435 $ 130,254 $ 26,681 $ 261,008 3 years Software 44,714 20,741 132 65,323 3 years Telephone devices 805 - - 805 5 years 202,954 $ 150,995 $ 26,813 327,136 Accumulated amortization Photo masks 61,049 $ 64,377 $ 26,681 98,745 Software 15,478 18,917 29 34,366 Telephone devices 380 161 - 541 76,907 $ 83,455 $ 26,710 133,652 $ 126,047 $ 193,484

- 19 -

13. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

December 31

2009 2008

Payables on engineering experiment and products research $ 53,458 $ 25,966 Payables on commission and marketing promotion 23,767 19,464 Payables on customs and transportation 12,760 3,971 Payables on service fee 6,907 6,921 Receipts under custody 5,793 8,979 Payables on insurance 5,644 5,302 Payables on software maintenance 2,183 6,360 Others 23,343 34,335 $ 133,855 $ 111,298

14. PENSION PLANS

The pension plan under the Labor Pension Act (the “LPA”) is a defined contribution plan. Based on the LPA, the Company makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. Such pension costs were NT$20,046 thousand and NT$18,390 thousand for the years ended December 31, 2009 and 2008, respectively. The Corporation has a defined benefit plan under the Labor Standards Law, which provides benefits based on an employee’s length of service and average monthly gross salary of the six months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. The pension fund is deposited in the Bank of Taiwan in the committee’s name. Information about the defined benefit plan was summarized as follows: a. Components of net periodic pension cost:

2009 2008

Service cost $ 192 $ 119 Interest cost 1,280 2,245 Projected return on plan assets (690) (521) Amortization 692 1,420 $ 1,474 $ 3,263

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b. Reconciliation of the funded status of the plan and accrued pension cost (Prepaid pension cost):

December 31

2009 2008

Benefit obligation

Vested benefit obligation $ - $ - Non-vested benefit obligation 26,636 24,789 Accumulated benefit obligation 26,636 24,789 Additional benefit based on future salaries 26,855 26,391 Projected benefit obligation 53,491 51,180

Fair value on plan assets (32,964) (26,289) Funded status 20,527 24,891 Unrecognized net transitional obligation (1,527) (1,628) Unrecognized net loss (20,612) (19,869) Accrued pension cost (prepaid pension cost) $ (1,612) $ 3,394 Vested benefit $ - $ -

c. Actuarial assumptions

December 31

2009 2008

Discount rate used in determining present values 2.50% 2.50% Future salary increase rate 3.50% 3.50% Expected rate of return on plan assets 2.00% 2.50%

d. Contribution and payment status

2009 2008

Contributions to the fund $ 6,479 $ 6,019 Payments from the fund $ - $ -

15. SHAREHOLDERS’ EQUITY

Capital to be Issued

Stock options exercised by employees resulted in additional issuance shares, which are not registered.

Capital Surplus

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

- 21 -

Appropriation of Earnings and Dividend Policy

The Corporation’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, the Corporation should first offset its deficits in previous years, appropriate 10% of profits as legal reserve, and retain special reserve(s) pursuant to applicable laws. The remainder, combined with unappropriated earnings in previous years, should be appropriated as follows under a resolution passed at the shareholders’ meeting: a. Bonus to employees of no less than 5%, which may include bonus in stock to subsidiaries’ employees

under certain conditions; b. Remuneration to directors and supervisors of up to 3%; and c. Remainder, as dividends, which are allocated according to share percentage. Earnings appropriation is approved by the shareholders in, and given effect to in the financial statements of, the year following the year of earnings generation. Profits of the Corporation may be distributed as cash dividend or stock dividend, of which at least 20% should be in the form of cash in consideration of the Corporation’s future working capital demand. This distribution should be based on a board of directors’ proposal approved at a shareholders’ meeting. For the year ended December 31, 2009 and 2008, the bonus to employees was NT$348,647 thousand and NT$302,110 thousand, respectively, and the remuneration to directors and supervisors each was NT$16,500 thousand. The bonus to employees and remuneration to directors and supervisors represented 25% of net income after legal and special reserve. Material differences between such estimated amounts and the amounts proposed by the Board of Directors in the following year are adjusted for in the current year. If the actual amounts subsequently resolved by the shareholders differ from the proposed amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If a share bonus is resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonuses by the closing price of the shares on the day preceding the shareholders’ meeting after considering the effect of cash and stock dividends. Based on a directive issued by the Securities and Futures Bureau, an amount equal to the net debit balance of certain shareholders’ equity accounts (for example, cumulative translation adjustments and unrealized gain or loss on financial instruments, but excluding treasury stocks) shall be transferred from unappropriated earnings to a special reserve. Distribution of earnings should only be made after the special reserve is appropriated. Any special reserve appropriated may be reversed to the extent of the reversal of the net debit balance. Pursuant to the Company Law, legal reserve should be appropriated until the reserve equals the Corporation’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if the Corporation has no unappropriated earnings and the reserve balance has exceeded 50% of the Corporation’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of the Corporation’s paid-in capital, up to 50% of the reserve may be transferred to capital. Under the Integrated Income Tax System, resident shareholders (including corporate shareholders) are allowed tax credits for the income tax paid by the Corporation on earnings generated. An imputation credit account (ICA) is maintained by the Corporation to monitor the balances of the income tax paid and the tax credit allocated to each shareholder.

- 22 -

The appropriation of earnings for 2008 and 2007 was approved in the shareholders’ meetings held on June 10, 2009 and June 13, 2008, respectively. The appropriations, including that of dividends per share, were as follows:

Dividends Per Share

Appropriation of Earnings (NT$)

For Fiscal For Fiscal For Fiscal For Fiscal

Year 2008 Year 2007 Year 2008 Year 2007

Legal reserve $ 134,334 $ 177,118 Reversal of the special reserve - (885) Cash dividends 938,726 1,011,485 $ 7.0 $ 8.5 Stock dividends 67,052 118,998 0.5 1.0 Bonus to Employees - cash - 121,200 Bonus to Employees - stock - 28,700 Remuneration to directors and supervisors - 20,000 $ 1,140,112 $ 1,476,616 The bonus to employees of NT$302,110 thousand and the remuneration to directors and supervisors of NT$16,500 thousand for 2008 were approved in the shareholders’ meeting on June 10, 2009. The bonus to employees included a cash bonus of NT$10,110 thousand and a share bonus of NT$292,000 thousand. The number of shares of 1,548 thousand was determined by dividing the amount of share bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day immediately preceding the shareholders’ meeting, which was NT$188.57. The approved amounts of the bonus to employees and the remuneration to directors and supervisors were consistent with the resolution of the meeting of Board of Directors held on March 19, 2009. The above appropriation of stock dividends and employees stock bonus was approved by the Securities and Futures Bureau of Financial Supervisory Commission, Executive Yuan on July 29, 2009. As of March 5, 2010, the date of the accompanying auditors’ report, the Board of Directors had not resolved the appropriation of earnings for 2009. Information on appropriations of bonus to employees, directors and supervisors proposed at the Board of Directors’ meetings and resolved in shareholders meetings can be accessed online through the Market Observation Post System on the website of the Taiwan Stock Exchange.

Employee Stock Option Plans

The Corporation’s Employee Stock Option Plans were approved by the Securities and Futures Supervisory Commission (now Securities and Futures Bureau, or SFB) on August 27, 2002 and May 8, 2003, with 2,600 and 1,900, respectively, as the maximum number of options authorized to be granted. Each option entitles the holder to subscribe for 1,000 common shares. If all options are exercised, there would be 4,500 thousand common shares are expected to be issued. The options under the plans are valid for six years and exercisable at certain percentages after the second anniversary of the grant date. The options are granted at a price stipulated in the plans and should be revised if there is any change in the outstanding shares. Issuance of stock dividends and other influential factors were considered in deciding the exercise prices.

- 23 -

Information about outstanding stock options in 2009 and 2008 were as follows:

2009 2008

Number of

Options

Weighted-

average

Exercise

Price (NT$)

Number of

Options

Weighted-

average

Exercise

Price (NT$)

Balance, beginning of year 399 $10 774 $10 Options exercised (291) 10 (296) 10 Options canceled (108) 10 (79) 10 Balance, end of year - 399

Cumulative Translation Adjustments

For the years ended December 31, 2009 and 2008, movements of cumulative translation adjustments were as follows:

2009 2008

Exchange differences arising from the translation of the financial statements of foreign operations

Balance, beginning of year $ 7,756 $ 2,207 Recognized in shareholders’ equity (17,759) 5,549 Balance, end of year $ (10,003) $ 7,756

Unrealized Gain or Loss on Financial Instruments

For the years ended December 31, 2009 and 2008, movements of unrealized gain or loss on financial instruments were as follows:

Available-

for-sale

Financial Assets

Recognized

through

Equity-method

Investments

Total

Year ended December 31, 2009 Balance, beginning of year $ 1,477 $ 324 $ 1,801 Recognized in shareholders’ equity (1,513) (79) (1,592) Removed from shareholders’ equity and

recognized in earnings -

-

-

Balance, end of year $ (36) $ 245 $ 209 Year ended December 31, 2008 Balance, beginning of year $ 8,768 $ 548 $ 9,316 Recognized in shareholders’ equity 20,265 (224) 20,041 Removed from shareholders’ equity and

recognized in earnings (27,556)

-

(27,556)

Balance, end of year $ 1,477 $ 324 $ 1,801

- 24 -

16. INCOME TAX

a. A reconciliation of income tax expense based on “income before income tax” at the statutory rate of 25% and income tax expense was as follows:

2009 2008

Income tax expense based on “income before income tax” at the

statutory rate of 25% $ 418,490

$ 362,760

Tax effect of the adjusting items: Permanent differences Tax-exempt income (347,005) (255,168) Others 6,460 659

Temporary differences 32,153 23,671 Investment tax credits used (20,323) (64,079)

Additional 10% income tax on unappropriated earnings 20,323 29,456 Additional income tax under the Alternative Minimum Tax Act 15,947 - Income tax currently payable 126,045 97,299 Net changes in deferred income tax assets

Investment tax credits (180,470) (19,468) Temporary differences (7,866) (5,464) Valuation allowance 190,000 19,929

Adjustments for prior years’ income tax 1,509 15,441 Income tax expense $ 129,218 $ 107,737 In May 2009, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which reduces a profit-seeking enterprise’s income tax rate from 25% to 20%, effective 2010. The Company recalculated its deferred tax assets and liabilities in accordance with the amended Article and recorded the resulting difference as a deferred income tax benefit or expense.

b. Movements of income tax payable were as follows:

2009 2008

Balance, beginning of year $ 121,550 $ 109,500 Current income tax expense 126,045 97,299 Income tax paid (98,437) (100,690) Adjustments for prior years’ income tax 1,509 15,441 Balance, end of year $ 150,667 $ 121,550

c. Net deferred income tax assets were as follows:

December 31

2009 2008

Current Investment tax credits $ - $ 82,027 Temporary differences 29,669 21,803

$ 29,669 $ 103,830 Noncurrent

Investment tax credits $ 400,815 $ 138,318 Valuation allowances (225,932) (35,932)

$ 174,883 $ 102,386

- 25 -

d. Movements of deferred income tax assets were as follows:

2009 2008

Balance,

Beginning of

Year

Recognized in

Statement of

Income

Balance, End

of Year

Balance,

Beginning of

Year

Recognized in

Statement of

Income

Balance, End

of Year

Temporary differences

Unrealized sales allowance $ 4,114 $ (823 ) $ 3,291 $ 4,114 $ - $ 4,114 Unrealized loss on

inventories 17,221

9,129

26,350

11,256

5,965

17,221

Others 468 (440 ) 28 969 (501 ) 468 $ 21,803 $ 7,866 $ 29,669 $ 16,339 $ 5,464 $ 21,803 Unused tax credits Investment tax credits $ 220,345 $ 180,470 $ 400,815 $ 200,877 $ 19,468 $ 220,345

e. Integrated income tax information was as follows:

December 31

2009 2008

Balance imputation credit account (ICA) $ 69,128 $ 44,683 The expected and actual creditable ratios for the distribution of the earnings of 2009 and 2008 were 2.67% and 6.49%, respectively. The imputation credits allocated to the shareholders are based on the balance of the imputation credit account (ICA) as of the date of dividend distribution. The expected creditable ratio for 2008 may be adjusted depending on the ICA balance on the date of dividend distribution.

f. As of December 31, 2009, investment tax credits were as follows:

Regulatory Basis of

Tax Credits Item

Total

Creditable

Amounts

Remaining

Creditable

Amounts

Expiry

Year

Statute for Upgrading Purchase of machinery and equipment $ 4,600 $ - 2009 Industries 2,798 2,798 2011 4,113 4,113 2012 1,834 1,834 2013 $ 13,345 $ 8,745 Research and development expenditures $ 15,723 $ - 2009 18,032 18,032 2010 48,601 48,601 2011 109,311 109,311 2012 216,126 216,126 2013 $ 407,793 $ 392,070

- 26 -

g. As of December 31, 2009, the profits generated from the following expansion and construction projects are exempt from income tax for a five-year period:

Expansion of Construction Project Tax-Exemption Period

Third expansion of the first manufacturing plant January 1, 2005 to December 31, 2009 Fourth expansion of the first manufacturing plant June 1, 2006 to May 31, 2010 Fifth expansion of the first manufacturing plant January 1, 2007 to December 31, 2011 Sixth expansion of the first manufacturing plant January 1, 2008 to December 31, 2012 Seventh expansion of the first manufacturing plant February 1, 2009 to January 31, 2014

h. The tax returns through 2007 had been assessed by the tax authorities.

17. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSES

2009 2008

Classified

as Cost of

Sales

Classified

as

Operating

Expenses

Total

Classified

as Cost of

Sales

Classified

as

Operating

Expenses

Total

Labor cost Wage and salary $ 151,641 $ 664,446 $ 816,087 $ 101,999 $ 557,975 $ 659,974 Pension 6,407 15,113 21,520 5,590 16,063 21,653 Meal 2,832 6,721 9,553 2,503 6,479 8,982 Welfare 3,278 6,193 9,471 2,372 5,479 7,851 Employee

insurance 7,346

21,138

28,484

6,168

20,228

26,396

Others 416 1,869 2,285 398 1,919 2,317 $ 171,920 $ 715,480 $ 887,400 $ 119,030 $ 608,143 $ 727,173 Depreciation $ 54,131 $ 31,619 $ 85,750 $ 49,378 $ 34,823 $ 84,201 Amortization $ 1,303 $ 123,619 $ 124,922 $ 42 $ 83,413 $ 83,455

18. EARNINGS PER SHARE

Earnings per share (EPS) was computed as follows: Number of EPS (NT$)

Amounts (Numerator) Shares Before After

Before After Denominator Income Income

Income Tax Income Tax (In Thousands) Tax Tax

2009 Basic EPS Income attributable to common shareholders

$ 1,674,001 $ 1,544,783 141,356 $ 11.84 $ 10.93

Effect of dilutive potential common stocks

Bonus to employees - - 2,057 Employee stock options - - 184

Diluted EPS Income available to common shareholders (including effect of dilutive potential common stock)

$ 1,674,001 $ 1,544,783 143,597 $ 11.66 $ 10.76

(Continued)

- 27 -

Number of EPS (NT$)

Amounts (Numerator) Shares Before After

Before After Denominator Income Income

Income Tax Income Tax (In Thousands) Tax Tax

2008 Basic EPS Income attributable to common shareholders

$ 1,451,079 $ 1,343,342 140,356 $ 10.34 $ 9.57

Effect of dilutive potential common stocks

Bonus to employees - - 2,554 Employee stock options - - 632

Diluted EPS Income available to common shareholders (including effect of dilutive potential common stock)

$ 1,451,079 $ 1,343,342 143,542 $ 10.11 $ 9.36

(Concluded) The Corporation should presume that the entire amount of the bonus to employee will be settled in shares and the resulting potential shares should be included in the weighted average number of shares outstanding used in the calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of bonus to employees by the closing price of the common stocks on the balance sheet date. Such effect of dilutive potential common stocks needs to be included in the calculation of diluted EPS until the shares of employee bonus are resolved in the shareholders’ meeting in the following year. The average number of shares outstanding for EPS calculation was adjusted retroactively for the issuance of stock dividends and stock bonuses (Note 15). The retroactive adjustment caused the basic and diluted EPS after income tax in 2008 to decrease from NT$10.05 to NT$9.57 and NT$9.82 to NT$9.36, respectively.

19. FINANCIAL INSTRUMENTS

a. Fair values of financial instruments were as follows (there were no derivative transactions in 2009 and

2008):

December 31

2009 2008

Carrying Carrying

Amount Fair Value Amount Fair Value

Assets Financial assets at fair value through profit or loss

$ 1,406

$ 1,406

$ -

$ -

Available -for-sale financial assets - current

990,092

990,092

457,053

457,053

Financial assets carried at cost - non-current

15,185

-

16,185

-

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

1) The aforementioned financial assets do not include cash, receivables, other financial assets, refundable deposits, pledged bank deposits, payables and guarantee deposits. Such assets are expected to be converted to cash, sold or consumed in very short term, and therefore their carrying amounts approximate their fair values.

- 28 -

2) Fair values of financial instruments designated as at Fair Value through Profit or Loss with no

quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants to price financial instruments.

3) Fair values of available-for-sale financial assets were based on their quoted prices in active markets. 4) Financial assets carried at cost are investments in non-publicly traded stocks, which do not have

quoted market prices in an active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore, no fair value is presented.

c. Valuation gains (losses) arising from changes in fair value of financial instruments determined using

valuation techniques were NT$1,406 thousand for the year ended December 31, 2010. The Corporation did not have any derivatives during the year ended December 31, 2008.

d. As of December 31, 2009 and 2008, financial assets exposed to fair value interest rate risk and cash

flow interest rate risks were as follows:

December 31

2009 2008

Fair value interest rate risk

Financial assets $ 990,092 $ 1,105,212 Cash flow interest rate risk

Financial assets $ 1,188,621 $ 741,658

e. Interest income from financial assets that were not measured at fair values and of which changes in fair values were not recognized in earnings were NT$14,472 thousand and NT$16,716 thousand in 2009 and 2008, respectively. Interest expense from financial assets that were not measured at fair values and of which changes in fair values were not recognized in earnings were NT$163 thousand and NT$13 thousand in 2009 and 2008, respectively.

f. Financial risks

1) Market risk. The available-for-sale open-end mutual funds held by the Corporation are exposed to risks on changes in interest rates and market prices.

2) Credit risk. The Corporation will incur a loss if the counter-parties or third-parties breach the

related contracts, which are affected by such factors as the concentrations of credit risk, components of financial instruments, contract amounts, and other receivables on the contracts. Thus, contracts with positive fair values on the balance sheet date are evaluated for credit risk. Since the counter-parties to the asset transactions are reputable financial institutions, management believes its exposure to default by those parties is low.

3) Liquidity risk. The Corporation has sufficient operating capital to meet the cash demand upon

settlement of contract obligations. Thus, the cash flow risk is low. 4) Cash flow interest rate risk. The Corporation doesn’t have any assets and liabilities related to the

changes of interest rate in the long-term period. Thus, the Corporation expected no significant cash flow interest rate risk exits.

- 29 -

20. RELATED PARTY TRANSACTIONS

Related-party transactions, in addition to those disclosed in other notes, are summarized as follows: a. Related parties:

Related Party Relationship with the Corporation

Ironman Overseas Co., Ltd. (“Ironman”) Subsidiary Richnex Microelectronics Corporation (“Richnex”) Subsidiary Richtek Europe Holding B.V. (“Richtek Europe”) Subsidiary Richstar Group Co., Ltd. (“Richstar”) Subsidiary Richpower Microelectronics Corporation

(“Richpower Cayman”) Subsidiary

RichTek USA, Inc. (“RichTek USA”) Indirect subsidiary Richpower Microelectronics Co., Ltd. (Richpower

Shanghai) Indirect subsidiary

Li-We Technology Corp. (“Li-We”) Indirect subsidiary Richpower Microelectronics Corporation

(Richpower Taiwan) Indirect subsidiary

NeoEnergy Microelectronics, Inc. (“NeoEnergy”) Indirect investee accounted for using equity method (disposal on September 2009)

b. Related-party transactions:

2009 2008

Amount % Amount %

For the year Net sales

Richpower Cayman $ 2,194 - $ - - RichTek USA 2,075 - 1,624 - Richstar 534 - - - Richpower Shanghai - - 12,649 -

$ 4,803 - $ 14,273 - Purchases

Richstar $ 13,318 1 $ 516 - Richpower Cayman 5,168 - - -

$ 18,486 1 $ 516 - Rental expense

Richnex $ 347 - $ - - Commissions

Ironman $ 62,396 21 $ 40,046 15 Li-We 9,464 3 12,301 5 RichTek Europe 1,416 - 163 - RichTek USA - - 3,939 1

$ 73,276 24 $ 56,449 21

- 30 -

2009 2008

Amount % Amount %

Rental income

Richnex $ 120 100 $ 144 95 NeoEnergy - - 7 5

$ 120 100 $ 151 100 Proceed from disposal of property, plant and

equipment

Richpower Taiwan $ 1,068 93 $ - - Richnex 58 5 1,680 68 NeoEnergy 28 2 767 31

$ 1,154 100 $ 2,447 99 Service income

Richpower Cayman $ 1,151 17 $ - - Richstar 409 6 723 7 Richpower Shanghai - - 611 5

$ 1,560 23 $ 1,334 12 Other income

Richnex $ 649 10 $ - - At end of year Accounts receivable

RichTek USA $ 363 - $ 516 - Other receivable

Richpower Taiwan $ 34 7 $ - - Accounts payable

Richpower Cayman $ 1,627 - $ - - Accrued expense

Ironman $ 5,013 4 $ 2,567 3 Richtek Europe 281 - 77 - Richnex 33 - - - RichTek USA - - 19 -

$ 5,327 4 $ 2,663 3 Payment terms and transaction terms for the commissions, rental income and rental expense with related parties are determined in accordance with mutual agreement. Other receivable is payment on behalf of others. Terms of transactions between the Corporation and its related parties were made at normal commercial prices and terms with reference to the costs and market prices.

- 31 -

As of December 31, 2009, the endorsements provided by the Corporation to related parties were as follows:

Amount

Richnex $ 30,000 Richpower Cayman 50,000 $ 80,000

c. Compensation of directors, supervisors and management personnel:

2009 2008

Salaries $ 40,568 $ 49,587 Incentives 2,620 5,720 Bonus 80,967 55,340 $ 124,155 $ 110,647 Information about the compensation for the year ended December 31, 2008 includes bonuses to directors, supervisors and management personnel for which the appropriation of earnings was resolved in the annual shareholders meeting in 2009.

21. PLEDGED OR MORTGAGED ASSETS

The following asset had been pledged or mortgaged as collaterals in line with certain customs requirements:

December 31

2009 2008

Pledged bank deposits $ 6,233 $ 6,248

22. COMMITMENTS AND CONTINGENCIES

As of December 31, 2009, the Corporation was leasing factory buildings, a marketing office and vehicles from third parties under renewable operating lease agreements expiring in July 2013. Rent is paid monthly, subject to any adjustments made in the agreements. Future lease minimal payments were as follows:

Year Amount

2010 $ 34,530

2011 12,240

2012 4,173

2013 87

$ 51,030

- 32 -

23. ADDITIONAL DISCLOSURES

Except for the following, the Corporation had no other significant transactions, investees and investments for which disclosure is required by the Securities and Futures Bureau: a. Endorsement/guarantee provided: Table 1 (attached) b. Marketable securities held: Table 2 (attached) c. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of

the paid-in capital: Table 3 (attached) d. Acquisition of investment or individual real estate at costs of at least NT$100 million or 20% of the

paid-in capital: Table 4 (attached) e. Names, locations, and related information of investees on which the Corporation exercises significant

influence: Table 5 (attached) f. Information about derivatives of investees over which the Corporation has a controlling interest:

None. g. Information on investment in Mainland China

1) The name of the investee in mainland China, the main businesses and products, its issued capital,

method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance and the limitation on investment: Table 6 (attached)

2) Significant direct or indirect transactions with the investee, its prices and terms of payment and

unrealized gain or loss: Please see Notes 9 and 20.

24. SEGMENT INFORMATION

a. Industry

The Corporation mainly designs and sells integrated circuits, which does not involve multiple industries, and therefore segment information does not apply.

b. Department financial information: Not applicable c. Area financial information: The Corporation does not have operations in foreign countries. d. Export sales

The Corporation exports mainly to other Asian countries. The export sales for the years ended December 31, 2009 and 2008 were NT$3,650,735 thousand and NT$2,965,883 thousand, respectively.

- 33 -

e. Major customers representing at least 10% of total net sales were as follows:

2009 2008

Amount % Amount %

Client A $ 1,958,789 24 $ 1,302,603 19 B 1,253,291 16 801,824 12 C 981,839 12 698,019 10 D 863,759 11 668,612 10

- 34 -

TABLE 1


ENDORSEMENT/GUARANTEE PROVIDED YEAR ENDED DECEMBER 31, 2009


Endorsee

Number Name of Endorsor Name Relationship

Upper Limit of

Endorsement to a

Single Entity

(Notes 1 and 2)

Upper Limit of

Endorsement Balance

During the year

Ending Balance of

Endorsement

Amount of

Endorsement

Collateralized by

Assets

Cumulative Amount of

Endorsement as a

Percentage of Net Asset

Value in the Most

Recent Financial

Statement

Upper Limit of

Endorsement

(Note 3)

1 Richtek Technology Richnex Microelectronics Corporation 67% owned subsidiary $1,005,064 $30,000 $30,000 $ - 1% $5,025,322

Corporation Richpower Microelectronics Corporation 51% owned subsidiary 1,005,064 50,000 50,000 - 1%

Note 1: The amount endorsed to a single entity by the Corporation shall not exceed 20% of the net asset value at the end of the year. Note 2: The aforementioned limit does not apply to 50% owned subsidiaries. Note 3: The total amount endorsed by the Corporation shall of net asset at the end of the year.

- 35 -

TABLE 2


MARKETABLE SECURITIES HELD

DECEMBER 31, 2009


December 31, 2009

Holding Company Name Marketable Securities Type and

Name/Issuer

Relationship

with the

Holding

Company

Financial Statement Account Shares

(Thousands/

Units)

Carrying Value Percentage of

Ownership (%)

Market Value or

Net Asset Value

Note

Richtek Technology Corporation ING Taiwan Bond Fund - Available-for-sale financial assets 10,951 $ 170,809 - $ 170,809 Note 1 ING Taiwan Select Fund - Available-for-sale financial assets 17,052 200,012 - 200,012 Note 1 ING Investment Grade USD Credit-Acc - Available-for-sale financial assets 300 2,964 - 2,964 Note 1 President James Bond - Available-for-sale financial assets 2,506 40,056 - 40,056 Note 1 Fubon Chi-Hsiang Fund - Available-for-sale financial assets 4,006 60,105 - 60,105 Note 1 Yuanta Wan Tai Bond Fund - Available-for-sale financial assets 6,913 100,021 - 100,021 Note 1 ShinKong Chi Shin - Available-for-sale financial assets 338 5,002 - 5,002 Note 1 TLAM Solomon Bond Fd - Available-for-sale financial assets 415 5,002 - 5,002 Note 1 Dresdner Bond DAM Fund - Available-for-sale financial assets 16,713 200,327 - 200,327 Note 1 PCA Well Pool Bond Fund - Available-for-sale financial assets 11,482 149,080 - 149,080 Note 1 Capital Safe Fund - Available-for-sale financial assets 3,679 56,714 - 56,714 Note 1 Li-Yuh Investment Ltd. - common stock Subsidiary Investments accounted for using equity method 24,000 225,415 100 225,415 Note 3 Ironman Overseas Co., Ltd. - common stock Subsidiary Investments accounted for using equity method 6,680 121,991 100 121,991 Note 3 Richpower Microelectronics Corporation - common

stock Subsidiary Investments accounted for using equity method 6,375 110,138 51 79,134 Note 3

Richstar Group Co., Ltd. - common stock Subsidiary Investments accounted for using equity method 7,015 91,997 100 91,997 Note 3 Richnex Microelectronics Corporation - common

stock Subsidiary Investments accounted for using equity method 8,000 34,875 67 34,875 Note 3

Richtek Europe Holding B.V. - common stock Subsidiary Investments accounted for using equity method 1,000 25,852 100 25,852 Note 3 Richtek Holding International Limited - common

stock Subsidiary Investments accounted for using equity method 10 5,363 100 5,363 Note 3

Nexcera Corporation Limited - common stock Investee Financial assets carried at cost 500 15,185 6 15,185 Note 2 Li-Yuh Investment Ltd. ING Taiwan Income Fund - Available-for-sale financial assets - current 2,278 37,341 - 37,341 Note 1 MassMutual Mercuries Life- Preferred stock Investee Financial assets carried at cost 2,000 22,000 - 22,000 Note 2 ENE Technology Inc. - common stock Investee Financial assets carried at cost 1,659 75,000 2 121,091 Note 4 RichWave Technology Corp. - common stock Investee Financial assets carried at cost 3,973 30,747 11 30,747 Note 2 Lirlink Technology Corp. - common stock Investee Financial assets carried at cost 500 - 10 - Note 2 Taiwan Electrets Electronics Corporation Limited -

common stock Investee Financial assets carried at cost 1,000 10,000 6 10,000 Note 2

Asia Global Venture Capital II Investee Financial assets carried at cost 1,000 32,296 10 32,296 Note 2 Ironman Overseas Co., Ltd. Cosmic-Ray Technology Limited Subsidiary Investments accounted for using equity method 5,530 83,405 100 83,405 Note 3 Richstar Group Co., Ltd. RichTek USA, Inc. Subsidiary Investments accounted for using equity method 1,000 34,542 100 34,542 Note 3 Richtek Europe Holding B.V. Richtek Europe B.V. Subsidiary Investments accounted for using equity method 750 14,061 100 14,061 Note 3

(Continued)

- 36 -

December 31, 2009

Holding Company Name Marketable Securities Type and

Name/Issuer

Relationship

with the

Holding

Company

Financial Statement Account Shares

(Thousands/

Units)

Carrying Value Percentage of

Ownership (%)

Market Value or

Net Asset Value

Note

Richpower Microelectronics Richpower Microelectronics Co., Ltd. Subsidiary Investments accounted for using equity method - $ 16,732 100 $ 16,732 Note 3 Corporation Richpower Microelectronics Corporation Subsidiary Investments accounted for using equity method 5,000 21,195 100 21,195 Note 3 Cosmic-Ray Technology Limited Li-We Technology Corp. Subsidiary Investments accounted for using equity method - 48,325 100 48,325 Note 3

Note 1: Based on the net asset value as of December 31, 2009. Note 2: Based on carrying value of investment as of December 31, 2009. Note 3: Based on audited financial data as of December 31, 2009. Note 4: The market value was based on the closing price as of December 31, 2009. Note 5: As of December 31, 2009, the above marketable securities had not been pledged or mortgaged.

(Concluded)

- 37 -

TABLE 3


MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

YEAR ENDED DECEMBER 31, 2009


Beginning Balance Acquisition Disposal Ending Balance

Company Name Marketable Securities Type and

Name/Issuer Financial Statement Account

Counter-

party

Nature of

Relationship Shares

(Thousands)

Amount

(Note)

Shares

(Thousands) Amount

Shares

(Thousands) Amount

Carrying

Value

Gain on

Disposal

Shares

(Thousands)

Amount

(Note)

Richtek Technology Corporation Capital Safe Fund Available-for-sale financial assets - - 1,401 $ 21,258 32,575 $ 501,696 30,297 $ 466,696 $ 466,240 $ 456 3,679 $ 56,714 PCA Well Pool Bond Fund Available-for-sale financial assets - - 4,440 56,843 105,838 1,372,758 98,796 1,281,758 1,028,521 1,238 11,482 149,080 President James Bond Available-for-sale financial assets - - - - 10,024 160,123 7,518 120,123 120,067 56 2,506 40,056 ING Taiwan Select Fund Available-for-sale financial assets - - - - 49,777 583,599 32,725 383,679 383,587 93 17,052 200,012 Fubon Chi-Hsiang Fund Available-for-sale financial assets - - - - 26,693 400,240 22,687 340,240 340,135 105 4,006 60,105 ING Taiwan Bond Fund Available-for-sale financial assets - - 17,864 277,476 117,598 1,832,636 124,511 1,940,637 1,939,303 1,333 10,951 170,809 Dresdner Bond DAM Fund Available-for-sale financial assets - - 8,368 100,000 50,161 600,944 41,816 500,944 500,617 327 16,713 200,327 Yuanta Wan Tai Bond Fund Available-for-sale financial assets - - - - 24,892 360,023 17,979 260,047 260,002 45 6,913 100,021

Note: Including unrealized valuation gain of financial instruments.

- 38 -

TABLE 4


NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE

DECEMBER 31, 2009


Investment Amount Balance as of December 31, 2009

Investor Company Investee Company Location Main Businesses and Products Dec. 31, 2009 Dec. 31, 2008

Shares

(Thousands)

% of

Ownership

Carrying

Value

Net Income

(Loss) of the

Investee

Investment

Gain (Loss) Note

Richtek Technology Corporation Li-Yuh Investment Ltd. Hsin-chu, Taiwan Investment $ 240,000 $ 190,000 24,000 100 $ 225,415 $ (1,070) $ (1,070) Subsidiary Richpower Microelectronics Corporation Cayman Investment 103,213 - 6,375 51 110,138 4,690 7,977 Subsidiary Ironman Overseas Co., Ltd. British Virgin Islands, Tortola Investment 222,034 189,184 6,680 100 121,991 (12,159) (12,159) Subsidiary Richstar Group Co., Ltd. British Virgin Islands, Tortola Investment 229,259 195,444 7,015 100 91,997 (35,778) (35,778) Subsidiary Richnex Microelectronics Corporation Hsin-chu, Taiwan Product design 80,000 80,000 8,000 67 34,875 (39,416) (28,440) Subsidiary Richtek Europe Holding B.V. Netherlands Investment 47,224 23,114 1,000 100 25,852 (11,277) (11,277) Subsidiary Richtek Holding International Limited B.V.I. Investment 33,344 16,141 10 100 5,363 (18,161) (18,161) Subsidiary Ironman Overseas Co., Ltd. Cosmic-Ray Technology Limited SAMOA Investment 184,098 151,248 5,530 100 83,405 (19,161) (19,161) Subsidiary Richstar Group Co., Ltd. RichTek USA, Inc. USA California Selling ICs and providing related

consulting 149,398 132,490 1,000 100 34,542 5,310 5,310 Subsidiary

Richtek Europe Holding B.V. Richtek Europe B.V. Netherlands Selling ICs and providing related

consulting 35,169 13,869 750 100 14,061 (11,327) (11,327) Subsidiary

Cosmic-Ray Technology Limited Richpower Microelectronics Co., Ltd. Shanghai, China Selling ICs and providing related

consulting - 100,001 - 100 - (30,037) (3,719) Subsidiary

Li-We Technology Corp. Guangdong, China Selling ICs and providing related consulting

83,080 50,230 - 100 48,325 (15,496) (15,496) Subsidiary

Richpower Microelectronics Corporation

Richpower Microelectronics Co., Ltd. Shanghai, China Selling ICs and providing related consulting

41,178 - - 100 16,732 (30,037) (26,318) Subsidiary

Richpower Microelectronics Corporation Hsin-chu, Taiwan Designs and tests circuits (ICs) 50,000 30,000 5,000 100 21,195 (28,697) (28,697) Subsidiary

- 39 -

TABLE 5


INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THE YEAR ENDED DECEMBER 31, 2009


Investment Flows

Investee Company Main Businesses and

Products

Total Amount

of Paid-in

Capital

(US$ and RMB

in Thousands)

Investment

Type

Accumulated

Outflow of

Investment

from Taiwan as

of

January 1, 2009

(US$ in

Thousands)

Outflow

(US$ in

Thousands)

Inflow

Accumulated

Outflow of

Investment

from Taiwan as

of December 31,

2009 (US$ in

Thousands)

Percentage of

Ownership in

Investment

Investment

Loss

(Note 2)

Carrying Value

as of

December 31,

2009

Accumulated

Inward

Remittance of

Earnings as of

December 31,

2009

RichPower Microelectronics Corp.

(Shanghai) Selling integrated circuits (ICs)

and providing related consulting

$ 106,669 (US$ 3,200)

Note 1 $ 100,001 (US$ 3,000)

$ 6,668 (US$ 200)

$ - $ 106,669 (US$ 3,200)

100% $ (30,037) $ 16,732 $ -

Li-We Technology Corp.

(Guangdong) Selling ICs and providing

related consulting 83,080 (US$ 2,500)

Note 1 50,230 (US$ 1,500)

32,850 (US$ 1,000)

- 83,080 (US$ 2,500)

100% (15,496) 48,325 -

Con Dien (Xi’an) Hi-Tech

Ceramics Corporation Manufacturing and selling fine

ceramics 71,825 (RMB 15,001)

Note 1 16,185 (US$ 500)

- - 16,185 (US$ 500)

6% - 15,185 -

Accumulated Investment in Mainland

China as of December 31, 2009

(US$ in Thousands)

Investment Amount Authorized by

the Investment Commission, MOEA

(US$ in Thousands)

Upper Limit on Investment

(US$ in Thousands)

$205,934 (US$6,200)

$215,626 (US$6,500)

$3,015,193 (Note 3)

Note 1: The investments were made through a company in a third region. Note 2: The amount recognized was based on audited financial statements. Note 3: This limit was 60% of net asset value, based on the “Guidelines Governing the Approval of Investments or Technical Cooperation in Mainland China,” which were amended by the Investment Commission under the Ministry of Economic

Affairs on August 22, 2008.

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