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o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report |
Kee Wong, Corporate Secretary | ||||
Gushu Industrial Estate, | Tele: (852) 2341 0273; Fax (852) 2263 1001(1); | |||
Xixiang, | E-mail: lkwong@namtai.com.hk | |||
Baoan, Shenzhen, | Unit 1201, 12th Floor, Tower 1, Lippo Centre, | |||
British Virgin Islands | Peoples Republic of China | 89 Queensway, Admiralty, Hong Kong(1) | ||
(Jurisdiction of incorporation or organization) | (Address of principal executive offices) | (Name, Telephone, E-mail and/or Facsimile number | ||
and Address of Company Contact Person) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o |
(1) | Fax and address effective April 1, 2011. Until April 1, 2011, registrants address is Units 5811-12, 58/F, The Center, 99 Queens Road Central, Central, Hong Kong and its fax number is (852) 2263 1223 | |
(2) | Interactive data filings are not required of registrant until its Annual Report on Form 20-F for its year ending December 31, 2011. |
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Certification required by Rule 13a-14(a) and 18 U.S.C. Section 1350 |
Exhibit 12.1 | |||||||
Certification required by Rule 13a-14(a) and 18 U.S.C. Section 1350 |
Exhibit 12.2 | |||||||
Certification Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350 |
Exhibit 13.1 | |||||||
Consent of
Independent Registered Public Accounting Firm-Moore Stephens |
Exhibit 15.1 | |||||||
Consent of
Independent Registered Public Accounting Firm-Deloitte Touche Tohmatsu |
Exhibit 15.2 | |||||||
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EX-15.2 |
2
| we, us, our company, our, the Company and Nam Tai refer to Nam Tai Electronics, Inc. and, in the context of describing our operations, also include our PRC operating companies; | ||
| shares refer to our common shares, $0.01 par value; | ||
| China or PRC refers to the Peoples Republic of China, excluding Taiwan, Hong Kong and Macao; | ||
| Hong Kong refers to the Hong Kong Special Administrative Region of the Peoples Republic of China and HK$ refers to the legal currency of Hong Kong; | ||
| Macao refers to the Macao Special Administrative Region of the Peoples Republic of China, and | ||
| all references to Renminbi, RMB or yuan are to the legal currency of China; all references to U.S. dollars, dollars, $ or US$ are to the legal currency of the United States. |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
3
Year ended December 31, | ||||||||||||||||||||
Consolidated statements of income data: | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Net sales |
$ | 870,174 | $ | 780,822 | $ | 622,852 | $ | 408,137 | $ | 534,420 | ||||||||||
Cost of sales |
(783,953 | ) | (693,804 | ) | (552,174 | ) | (367,817 | ) | (483,126 | ) | ||||||||||
Gross profit |
86,221 | 87,018 | 70,678 | 40,320 | 51,294 | |||||||||||||||
Gain on disposal of asset held for sale |
9,258 | | | | | |||||||||||||||
Operating expenses: |
||||||||||||||||||||
General and administrative expenses (1)(2) |
(26,203 | ) | (29,986 | ) | (29,112 | ) | (28,393 | ) | (25,232 | ) | ||||||||||
Selling expenses (1) |
(4,465 | ) | (6,564 | ) | (6,945 | ) | (5,266 | ) | (5,504 | ) | ||||||||||
Research and development expenses |
(7,866 | ) | (9,798 | ) | (10,890 | ) | (6,273 | ) | (5,757 | ) | ||||||||||
Impairment loss on goodwill |
| | (17,345 | ) | | | ||||||||||||||
Losses arising from the judgment to reinstate redeemed shares |
(14,465 | ) | | | | | ||||||||||||||
Total operating expenses |
(52,999 | ) | (46,348 | ) | (64,292 | ) | (39,932 | ) | (36,493 | ) | ||||||||||
Income from operations |
42,480 | 40,670 | 6,386 | 388 | 14,801 | |||||||||||||||
Other (expenses) income net |
(1,265 | ) | 2,219 | 6,428 | (256 | ) | 3,972 | |||||||||||||
Gain on sale of subsidiaries shares |
| 390 | 20,206 | | | |||||||||||||||
Gain on disposal of marketable securities |
| 43,815 | | | | |||||||||||||||
Loss on marketable securities arising from split share
structure reform |
(1,869 | ) | | | | | ||||||||||||||
Interest income |
8,542 | 9,163 | 6,282 | 818 | 1,484 | |||||||||||||||
Interest expense |
(602 | ) | (452 | ) | (356 | ) | (202 | ) | | |||||||||||
Income before income tax |
47,286 | 95,805 | 38,946 | 748 | 20,257 | |||||||||||||||
Income tax expenses(3) |
(377 | ) | (4,030 | ) | (2,877 | ) | (1,283 | ) | (5,251 | ) | ||||||||||
Consolidated net income (loss) |
46,909 | 91,775 | 36,069 | (535 | ) | 15,006 | ||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(6,153 | ) | (22,272 | ) | (5,434 | ) | 2,187 | | ||||||||||||
Net income attributable to Nam Tai shareholders |
40,756 | 69,503 | 30,635 | 1,652 | 15,006 | |||||||||||||||
Earnings per share: |
||||||||||||||||||||
Basic |
$ | 0.93 | $ | 1.56 | $ | 0.68 | $ | 0.04 | $ | 0.33 | ||||||||||
Diluted |
$ | 0.93 | $ | 1.55 | $ | 0.68 | $ | 0.04 | $ | 0.33 |
Consolidated balance sheet data: | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Cash and cash equivalents |
$ | 221,084 | $ | 272,459 | $ | 237,017 | $ | 182,722 | $ | 228,067 | ||||||||||
Fixed deposits maturing over three months |
| | | 12,903 | | |||||||||||||||
Working capital (4) |
238,105 | 266,306 | 239,037 | 197,718 | 222,234 | |||||||||||||||
Land use rights and property, plant and equipment, net |
105,394 | 98,599 | 121,660 | 121,406 | 101,159 | |||||||||||||||
Total assets |
529,235 | 544,818 | 514,061 | 403,924 | 450,780 | |||||||||||||||
Short-term debt, including current portion of long-term debt |
6,266 | 6,570 | 8,199 | | | |||||||||||||||
Long-term debt, less current portion |
1,100 | 1,558 | | | | |||||||||||||||
Total debt |
7,366 | 8,128 | 8,199 | | | |||||||||||||||
Total Nam Tai shareholders equity (5) |
317,094 | 330,181 | 322,261 | 326,410 | 334,134 | |||||||||||||||
Common shares |
438 | 448 | 448 | 448 | 448 | |||||||||||||||
Total dividend per share(6) |
1.52 | 0.84 | 0.88 | | 0.20 | |||||||||||||||
Total number of common shares issued |
43,787 | 44,804 | 44,804 | 44,804 | 44,804 | |||||||||||||||
Total number of common shares to be issued |
1,017 | | | | |
(1) | The Companys consolidated statements of income for years prior to 2009, as originally published, combined general and administrative expenses and selling expenses as a single line items labeled Selling, general and administrative expenses. In the above presentation of Selected Financial Data and in the Companys consolidated financial statements included in this Report, such expenses have been presented separately to conform to the 2009 and 2010 presentation. | |
(2) | General and administrative expenses for the years ended December 31, 2009 and 2010 included employee severance benefits of $5.1 million and $656,000, respectively. General and administrative expenses for the years ended December 31, 2009 and 2010 also included accruals of $833,333 and $750,000, respectively, for a compensation obligation payable to the Companys CFO at the end of three years continuous service. In October 2010, the Companys compensation obligation payable at the end of three years to its CFO was terminated. In accordance with Staff Accounting Bulletin (SAB) Topics 1B.1 and 5T, Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) 718-10-15-4, the aggregate of approximately $1.6 million previously accrued on this obligation during the periods from March 1, 2009 through December 31, 2009 and from January 1, 2010 to September 30, 2010 was reclassified and added to additional paid-in capital on the Companys Balance Sheet as at December 31, 2010. | |
(3) | Income tax expenses for the year ended December 31, 2010 included a deferred tax credit of $2.6 million arising from tax losses of the Companys flexible printed circuit, or FPC, business in Wuxi. However, the actual utilization of such deferred tax asset depends on future profit streams of that business. | |
(4) | Working Capital represents the excess of current assets over current liabilities. | |
(5) | In November 2009, Nam Tai successfully completed the privatization of Nam Tai Electronic & Electrical Products Limited, or NTEEP, by tendering for and acquiring the 25.12 percent of NTEEP that it did not previously own, i.e., NTEEPs noncontrolling shares, resulting in NTEEP becoming the Companys wholly-owned subsidiary. Beginning with its consolidated financial statements for the year ended December 31, 2009, Nam Tai reclassified noncontrolling interests for years prior to 2009 as equity in accordance with FASB ASC 810-10-45-16 Consolidated-Overall-Other Presentation Matter Noncontrolling Interest in a Subsidiary. The presentation in the table above includes such reclassification for 2006, 2007 and 2008. Total Nam Tai shareholders equity at December 31, 2010 also included approximately $1.6 million previously accrued on a compensation obligation payable to the Companys CFO, which was terminated in October 2010. See footnote (2) above. | |
(6) | For 2010, the Company declared a dividend payable quarterly in 2011. See the table entitled Dividends declared for 2011 in Item 8 Financial Information Dividends on page 61 of this Report for the schedule of dividend payments for 2011. |
4
| the demand for our customers products, | ||
| the amount, timing and stability of their orders to us, | ||
| the financial strength of our customers and suppliers, | ||
| our customers and suppliers ability or willingness to do business with us, | ||
| our willingness to do business with them, | ||
| our suppliers and customers ability to fulfill their obligations to us, | ||
| the ability of our customers, our suppliers or us to obtain credit, secure funds or raise capital, and | ||
| the prices at which we can sell our products and services. |
5
| the timing, cancellation or deferral of orders; | ||
| adverse changes in global economic conditions, particularly those affecting the electronics industry; | ||
| the level of capacity utilization of our manufacturing facilities and associated fixed costs; | ||
| the composition of the costs of revenue between materials, labor and manufacturing overhead; | ||
| changes in demand for our products or services; | ||
| changes in demand in our customers end markets, which affect the type of product and related margins; | ||
| our customers announcement and introduction of new products or new generations of products; | ||
| the efficiencies we achieve in managing inventories and fixed assets; | ||
| the degree to which we are able to utilize our available manufacturing capacity; | ||
| long, national official, seasonal breaks in the PRC, such as the Chinese New Year holidays in our first quarter and the National Day Golden week in our fourth quarter, during which our ability to manufacture products, obtain components and materials from suppliers and receive and process orders from customers are adversely affected; | ||
| fluctuations in materials costs and availability of materials; | ||
| the life cycles of our customers products; | ||
| variability in our manufacturing yields; | ||
| long lead times and advance financial commitments for our factories and equipment expenditures; | ||
| long lead times and advance financial commitments for components required to complete anticipated customer orders; | ||
| our effectiveness in managing manufacturing processes, including, interruptions or slowdowns in production and changes in cost and availability of components; | ||
| changes in the specific products or quantities our customers order; | ||
| extended payment terms demanded by our major customers which, for competitive reasons, we choose to accommodate and result in longer periods for us to receive payment and increase our accounts receivable; | ||
| customer insolvencies resulting in bad debt or inventory exposures that are in excess of our reserves; | ||
| charges to our operating results because of impairments to the values of long-lived assets or goodwill carried on our balance sheet; and | ||
| price reductions caused by competitive pressure. |
6
7
Product/Service | Competitor | |||
EMS
|
| Celestica, Inc. | ||
| Flextronics International Ltd. | |||
| Hon Hai Precision Industry Co., Ltd. | |||
| Jabil Circuit, Inc | |||
| Sanmina-SCI Corporation | |||
Image capturing devices and their modules
|
| Altus Technology Inc (controlled by Foxconn) | ||
| Lite-on Technology Corporation | |||
| Logitech International S.A. | |||
| The Primax Group | |||
Mobile phone accessories
|
| Balda-Thong Fook Solutions Sdn., Bhd. | ||
| Celestica, Inc. | |||
| Elcoteq Network Corp. | |||
| Flextronics International Ltd. | |||
| Foster Corporation | |||
| Foxlink Group | |||
| Merry Electronics Co. Ltd. | |||
| WKK International (Holdings) Ltd. | |||
Liquid crystal display, or LCD panels
|
| Tianma Microelectronics Co., Ltd | ||
| Truly International Holdings Ltd. | |||
| Varitronix International Ltd. | |||
| Yeebo (International) Holdings Ltd. | |||
Telecommunication subassemblies and components
|
| Flextronics International Ltd. | ||
| LG. Philips LCD Co., Ltd. | |||
| Samsung Electronics | |||
| Varitronix International Ltd. | |||
Consumer electronic products (calculators, personal organizers and linguistic products)
|
|
Computime Limited Inventec Co. Ltd. |
||
| Kinpo Electronics, Inc. | |||
| VTech Holdings Limited | |||
FPC boards/FPC subassemblies
|
| Ichia Technologies Inc. | ||
| Nitto Denko (HK) Ltd. | |||
| NOK Corporation |
8
| The inability of our customers to adapt to rapidly changing technology and evolving industry standards, which result in short product life cycles. | ||
| The inability of our customers to develop and market their products, some of which are new and untested, the potential that our customers products may become obsolete or the failure of our customers products to gain widespread commercial acceptance. | ||
| Recessionary periods in our customers markets. | ||
| Increased competition among our customers and their respective competitors which may result in a loss of business, or a reduction in pricing power, for our customers. | ||
| New product offerings by our customers competitors may prove to be more successful than our customers product offerings. |
| utilization of advances in technology; | ||
| development of new or improved manufacturing processes for our customers products; | ||
| delivery of efficient and cost-effective services; and | ||
| timely completion of the manufacture of new products. |
9
| the development of raw land in the Guangming Hi-Tech Industrial Park Shenzhen, China that we acquired in 2007 into new manufacturing and support facilities to supplement manufacturing that we conduct at our principal manufacturing facilities in Shenzhen, China, and | ||
| the acquisition and development of raw land adjacent to our recently operational manufacturing facility in Wuxi, China in order to construct structures, such as dormitories, canteen, labor activity center, research laboratory and testing and training centers, to support operations at our Wuxi manufacturing facility. |
10
11
| changes in economic and political conditions and in governmental policies; | ||
| changes in international and domestic customs regulations; | ||
| wars, civil unrest, acts of terrorism and other conflicts; | ||
| changes in tariffs, trade restrictions, trade agreements and taxation; | ||
| limitations on the repatriation of funds because of foreign exchange controls; | ||
| exposure to political and financial instability; | ||
| currency exchange fluctuations, collection difficulties or other country-specific losses; | ||
| exposure to fluctuations in the value of local currencies; | ||
| changes in value-added tax reimbursement; | ||
| imposition of currency exchange controls; and | ||
| delays from customs brokers or government agencies. |
12
13
14
15
(1) | RMB (yuan) to US dollar data presented in this chart were derived from the historical currency converter available at http://forex-history.net. | |
(2) | If the end of a year fell on a Saturday or Sunday, datum is provided as of the previous Friday. |
RMB Exchange Rate to US$1.00 at December 31(1) | ||||||||||
2008 | 2009 | 2010 | ||||||||
Exchange Rate | Percent | Exchange Rate | Percent | Exchange Rate | Percent | |||||
to US$1.00 | change(2) | to US$1.00 | change(2) | to US$1.00 | change(2) | |||||
6.823 | 6.59% | 6.827 | -0.06% | 6.602 | 3.30% |
(1) | RMB to US dollar data presented in this table were derived from the historical currency converter available at http://forex-history.net. | |
(2) | From exchange rate at preceding December 31. |
16
Yen Exchange Rate to US$1.00 at December 31(1) | ||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||
Exchange Rate | Percent | Exchange Rate | Percent | Exchange Rate | Percent | |||||||||||||||
to US$1.00 | change(2) | to US$1.00 | change(2) | to US$1.00 | change(2) | |||||||||||||||
90.637 |
19.10% | 92.434 | -1.98% | 81.313 | 12.03% |
1) | Yen to US dollar data presented in this table were derived from the historical currency converter available at http://forex-history.net. | |
2) | From exchange rate at preceding December 31. |
17
18
| the judgment is for a liquidated amount in a civil matter; | ||
| the judgment is final and conclusive; | ||
| the judgment is not, directly or indirectly, for the payment of foreign taxes, penalties, fines or charges of a like nature (in this regard, a Hong Kong court is unlikely to accept a judgment for an amount obtained by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained by the person in whose favor the judgment was given); | ||
| the judgment was not obtained by actual or constructive fraud or duress; | ||
| the foreign court has taken jurisdiction on grounds that are recognized by the common law rules as to conflict of laws in Hong Kong or the British Virgin Islands; | ||
| the proceedings in which the judgment was obtained were not contrary to natural justice (i.e. the concept of fair adjudication); |
19
| the proceedings in which the judgment was obtained, the judgment itself and the enforcement of the judgment are not contrary to the public policy of Hong Kong or the British Virgin Islands; | ||
| the person against whom the judgment is given is subject to the jurisdiction of the Hong Kong or the British Virgin Islands court; and | ||
| the judgment is not on a claim for contribution in respect of damages awarded by a judgment, which does not satisfy the criteria stated previously. |
| the rules under the Securities Exchange Act of 1934 requiring the filing with the SEC of quarterly reports on Form 10-Q, current reports on Form 8-K or annual reports on Form 10-K; | ||
| the sections of the Securities Exchange Act of 1934 regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Securities Exchange Act of 1934 or disclosures required in a proxy statement in accordance with rules therefor promulgated under the Securities Exchange Act of 1934; | ||
| the provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; and | ||
| the sections of the Securities Exchange Act of 1934 requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any short-swing trading transaction (i.e. a purchase and sale, or sale and purchase, of the issuers equity securities within less than six months). |
20
ITEM 4. | INFORMATION ON THE COMPANY |
| We began production of FPC boards and FPC subassemblies at our Wuxi factory that we completed in 2009. During all of 2010, our Wuxi operations focused on developing manufacturing processes, on evaluations and qualifications by our customers and on resources planning in preparation for ramping up manufacturing at these facilities during 2011. | ||
| We merged our wholly-owned dormant subsidiary, Wuxi Zastron Precision Tech Co. Ltd., into our wholly owned subsidiary, Wuxi Zastron Precision Flex Co. Ltd., which is now conducting all of our manufacturing of FPC boards and FPC subassemblies in Wuxi. | ||
| To simplify our organization and structure further, and in view of the similarity of our Shenzhen operations and the products we manufacture there, we have consolidated the operations and businesses of the three reporting units into a single wholly-owned subsidiary: |
o | First merging our wholly-owned subsidiary, Jetup Electronic (Shenzhen) Co. Ltd. with and into Zastron Electronic (Shenzhen) Co. Ltd. (Zastron Shenzhen) in April 2010; and | ||
o | Then transferring the businesses and operations of our wholly owned subsidiary, Namtai Electronic (Shenzhen) Co. Ltd. (Namtai Shenzhen) to Zastron Shenzhen in October 2010. |
21
22
Nam Tai Electronic & Electrical Products Limited, or NTEEP, was
incorporated in June 2003 and is a holding company for the subsidiaries shown
in the chart above and discussed below. Shares of NTEEP were listed on the Hong
Kong Stock Exchange from April 28, 2004 until November 12, 2009, when Nam Tai
completed the privatization of NTEEP by tendering for, and acquiring, the 25.12
percent of NTEEP that Nam Tai did not previously own. At December 31, 2009 and
2010, NTEEP was a wholly-owned subsidiary of Nam Tai Electronics,
Inc. |
|||||
100%
|
100% | ||||
Namtai Electronic (Shenzhen) Co., Ltd. (Namtai Shenzhen) was originally established as Baoan (Nam Tai) Electronic Co. Ltd. in June 1989 as a contractual joint venture company with limited liability pursuant to the laws of China. Through September 2010, it engaged in the manufacture and sale of consumer electronics and telecommunications products. With effect from October 1, 2010, the businesses and operations of Namtai Shenzhen were transferred to Zastron Shenzhen. Namtai Shenzhen is in the process of transforming into an investment holding company. |
Nam tai Holdings Limited
(formerly known as First Rich
Holdings Limited) (Nam Tai Holdings)
was incorporated on November 2, 2007
in the British Virgin Islands. It is
a holding company. |
||||
100% | |||||
Nam Tai Investment limited (formerly known as Top Eastern Investment Limited) (Nam Tai Investment) was incorporated on November 6, 2007 in Hong Kong. It is a holding company. |
|||||
100%
|
100% | ||||
Zastron Electronic (Shenzhen) Co. Ltd. (Zastron Shenzhen) was established in the PRC in 1992 as a company with limited liability. It manufacturers telecommunication components and assemblies such as LCD modules and FPC assemblies. Zastron Shenzhens sister company, Jetup Electronic (Shenzhen) Co. Ltd. (Jetup), also wholly owned by Nam Tai Shenzhen and engaged in the manufacture of LCD panels and LCD modules, was merged into Zastron Shenzhen effective on April 1, 2010. Upon completion of that merger, Jetup ceased to exist, and its assets, liabilities and operations were transferred to Zastron Shenzhen. In October 2010, the businesses and operations of Namtai Shenzhen were transferred to Zastron Shenzhen. |
Wuxi Zastron Precision-Flex Co. Ltd. (formerly known as Zastron Precision- Flex (Wuxi) Co. Ltd.) (Wuxi Zastron Flex) was established in November 2006 as a wholly owned foreign investment enterprise with limited liability and pursuant to the relevant laws of the PRC. This company began manufacturing and selling FPC boards and FPC subassemblies during 2010. Wuxi Zastron Flexs sister company, Wuxi Zastron Precision-Tech Co. Ltd. (Wuxi Zastron Tech), also wholly owned by Nam Tai Investment, was merged into Wuxi Zastron Flex effective in April 2010. Upon completion of that merger, Wuxi Zastron Tech ceased to exist, and its assets, liabilities and operations were transferred to Wuxi Zastron Flex. |
23
| $24 million for TFT mid-size 13 LCD module assembly line; | ||
| $10 million for machinery and leasehold improvement for LCD panel and module assembly; | ||
| $9 million for machinery used for FPC boards and assemblies; and | ||
| $13.5 million for construction of a dormitory, labor union facilities and a R&D center. |
| $3.2 million for machinery used mainly for production of LCD and FPC Modules; | ||
| $0.9 million for leasehold improvement regarding merge of two subsidiaries; and | ||
| $0.5 million for other capital equipment. |
| $23.7 million for new factory construction in Wuxi; | ||
| $0.5 million for machinery mainly used for production of LCD modules; and | ||
| $0.8 million for other capital equipment. |
| $18.5 million for new factory construction in Wuxi; | ||
| $3.6 million for machinery and system improvements for our LCD factory; | ||
| $1.4 million for a new enterprise resource planning system; and | ||
| $3.9 million for other capital equipment. |
24
Year ended December 31 | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Hikari Alphax Co., Ltd. |
* | 12.2 | % | 24.7 | % | |||||||
Sony Computer Entertainment Europe Ltd. |
15.4 | % | 10.2 | % | 17.7 | % | ||||||
Sony Mobile Display Corporation |
* | * | 16.7 | % | ||||||||
Sharp Corporation |
15.3 | % | 17.9 | % | 11.9 | % | ||||||
Epson Imaging Devices Corporation |
16.5 | % | 23.0 | % | * | |||||||
Sony Ericsson Mobile Communication International A B |
10.5 | % | * | * |
* | Less than 10% of our total net sales during the year indicated. |
Customer | Products | |
Epson Imaging Devices Corporation
|
LCD modules for cellular phones and FPC subassemblies | |
Hikari Alphax Co., Ltd.
|
LCD modules | |
Ryoyo Electro Hong Kong Limited
|
LCD modules and panels | |
Sharp Corporation
|
FPC subassemblies, calculators, PDAs and dictionaries | |
Sony Computer Entertainment Europe Ltd.
|
Home entertainment products | |
Sony Ericsson Mobile Communications International AB
|
Mobile phone digital camera accessories, headset accessory containing Bluetooth wireless technology and flashlights for mobile phones | |
Sony Mobile Display Corporation
|
LCD modules | |
Stanley Electric (Asia Pacific) Ltd.
|
LCD Panels for equipment and instruments | |
Texas Instruments
|
Calculators | |
Vtech Communications Ltd.
|
LCD modules |
25
Year ended December 31, | ||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||
Dollars | Percent | Dollars | Percent | Dollars | Percent | |||||||||||||||||||
TCA |
351,487 | 56 | % | 292,074 | 72 | % | 401,259 | 75 | % | |||||||||||||||
CECP |
271,365 | 44 | % | 116,063 | 28 | % | 133,161 | 25 | % | |||||||||||||||
Total |
622,852 | 100 | % | 408,137 | 100 | % | 534,420 | 100 | % | |||||||||||||||
| Mobile phone accessories such as headsets containing Bluetooth wireless technology, snap-on portable music speaker, phone cradle, snap-on FM radio adaptors, and snap-on GPS adaptors; | ||
| Entertainment devices such as USB web cam for interactive games, USB microphone and converter box Karaoke, and a buzzer device for quiz games both in wire, and wireless design with an infrared solution; | ||
| Educational products such as digital pens, calculators and electronic dictionaries; and | ||
| Optical devices such as CMOS imaging sensor modules for notebook computers, portable media players and recording cameras for the automotive industry. |
| Color and monochrome LCD modules to display information as part of telecommunication products such as PDA phone, smart phone and traditional mobile phones and telephone systems. These modules are also used in most other hand-held consumer electronic devices, such as electronic games, MP3, Automotive products and digital cameras; | ||
| RF modules for integration into mobile phones. RF modules are partially finished circuits that can be incorporated into larger products or components. Each module includes receivers, transmitters, and transceivers, and can be manufactured for use in most other hand-held consumer electronic products, such as PDAs, laptop computers and other products with wireless connectivity; | ||
| DAB modules are digital audio broadcasting components that are used in digital radio products such as home tuners, kitchen radios, in-car receivers, CD players, clock radios, boom boxes, midi-systems and handheld portable devices; | ||
| FPC subassemblies for integration into various LCD modules and electronic devices; | ||
| FPC board manufacturing for vertical integration to FPC subassembly business, this could be used for mobile phone, PDAs, office automation, laptop computers and other products which require a portable product design; | ||
| Front light panels for handheld video game devices; | ||
| Back light panels for handheld video game devices; | ||
| 1.9 high-frequency cordless telephones and home feature phones; | ||
| Super thin (0.3-0.5mm glass substrates) LCD panels for application in watches and medical instruments; | ||
| Irregular shaped LCD panels for telecommunications, automotive, white-good (major household appliances) and industrial applications; | ||
| Super high contrast monochrome vertical aligned Twisted Nematic LCD for applications in automotive parts and major appliances; | ||
| Black masked color LCD for applications in car audio systems; | ||
| Wide temperature monochrome dye doped enhanced Super-Twisted Nematic (STN) LCD for application in major appliances; |
26
| 1.5² Color and monochrome STN LCD modules for application of hand held products, such as cordless phones; | ||
| 5²-7² monochrome high resolution STN LCD modules with touch screens for applications of VoIP phones, medical instruments and major appliances such as white goods; and | ||
| 8.5² TFT color LCD modules for office automation applications, i.e. varied computer machinery used to digitally create, collect, store, manipulate, and relay office information needed for accomplishing basic tasks and goals. |
Chip on Film, or COF
|
is an assembly method for bonding integrated circuit chips and other components onto a flexible printed circuit. This process allows for greater compression of the size of a product when assembled enabling the production and miniaturization of small form factor devices like cellular phones, PDAs, digital cameras and notebook PCs. As of December 31, 2010, we had 16 COF machines. These machines connect the bump of large scale integrated, or LSI, driver onto FPC pattern with anisotropic conductive film, or ACF. These COF machines have the ability to pitch fine to 38 micrometers and a total production capacity of up to 4,400,000 chips per month. | |
Chip on Glass, or COG
|
is a process that connects integrated circuits directly to LCD panels without the need for wire bonding. We apply this technology to produce advanced LCD modules for high-end electronic products, such as cellular phones and PDAs. As of. These machines provide an LCD of dimension of up to 200 millimeters (length)x 150 (width)x 2.2 (height), a process time of five seconds per chip, a pin pitch fine to 38 micrometers. During 2005, our subsidiary, Jetup Electronic (Shenzhen) Co. Ltd. (Jetup) also started manufacturing COG LCD modules. During 2010, Jetup was merged into Zastron Electronic (Shenzhen) Co. Ltd. (Zastron Shenzhen). As of December 31, 2010, Zastron Shenzhen had a total of 48 COG lines and is capable of bonding 8.8 million units of COG LCD modules a month and is able to bond LCD panels up to sizes of 200 millimeters x 200 millimeters x 2.2 millimeters thick, with an accuracy of five microns tolerance, in a cycle time of 12-15 seconds per piece. | |
Chip on Board, or COB
|
is a technology that utilizes wire bonding to connect large-scale integrated circuits directly to printed circuit boards. As of December 31, 2010, we had 53 COB aluminum bonding machines which provide a high speed chip bonding time of 0.25 second per 2 millimeters wire, a bond pad fine to 75 micrometers and a total production capacity of up to 3,829,000 (150 wires/board) per month . We use COB aluminum bonding in the assembly of consumer products such as digital pen, calculators, electronic dictionaries, audio products. We also had three COB gold ball bonding machines which provide a high speed chip bonding time of 0.072 second per 2 millimeters wire, a bond pad fine to 50 micrometers and a total production capacity of up to 500,000 (150 wires/board) per month. We use COB gold ball bonding in the CMOS camera module, which are incorporated into USB cameras, notebook computers, mobile phones and digital pens. | |
Outer Lead Bonding, or OLB
|
is an advanced technology used to connect PCBs and large-scale integrated circuits with a large number of connectors. We use this technology to manufacture complex miniaturized products, such as high-memory PDAs. As of December 31, 2010, we had three OLB machines. The machines include multi-pinned tape carrier packaged large scale integrated circuit, or TCP LSIC, bonding which is up to 280 pins, which also provide ultra-thin assembly with module thickness to around one millimeter and high accuracy bonding with pin pitch to 100 micrometers. The total production capacity is 12,000 units per month. |
27
Tape Automated Bonding With Anisotropic
Conductive Film, or TAB With ACF
|
is an advanced heat sealing technology that connects a liquid crystal display component with an integrated circuit in very small LCD modules, such as those used in cellular phones and pagers. As of December 31, 2010, Zastron had 32 systems of TAB with ACF machines. The machines provide process time of 10 to 25 seconds per component, a pin pitch fine up to 150 micrometers and a total production capacity of up to 5,876,000 components per month. Zastron Shenzhen is able to bond LCD panels up to sizes of 120 millimeters x 120 millimeters x 2.2 millimeters thick, with an accuracy of 10 microns tolerance in a cycle time of 20-25 seconds per piece. | |
Fine Pitch Heat Seal Technology, or FPHS
Technology
|
allows us to connect LCD displays to PCBs produced by COB and outer lead bonding that enables very thin connections. This method is highly specialized and is used in the production of finished products such as PDAs. As of December 31, 2010, we had eight machines utilizing FPHS technology. The machines provide a pin pitch fine to 260 micrometers and a total production capacity of up to 268,000 units per month. | |
Surface Mount Technology, or SMT
|
is a process by which electronic components are mounted directly on both sides of a printed circuit board, increasing board capacity, facilitating product miniaturization and enabling advanced automation of production. We use SMT for products such as mobile display module and electronic linguistic devices. As of December 31, 2010, we had 37 SMT productions lines. The production time per chip ranges from 0.055 second per chip to 0.8 second per chip and high precision ranging from +/-0.05 millimeter to +/-0.1 millimeter. The components size ranges from 0.4 millimeter (length)x 0.2 millimeter (width) to 55 millimeters (length)x 55 millimeters (width). Ball grid array, or BGA, ball pitch is 0.4 millimeter and ball diameter is 0.2 millimeter. Flip Chip, our smallest lead/bump pitch, is 250/240UM and our smallest components spacing is 0.15 micrometers. The total production capacity is over 1 billion resistor capacitor chips per month. | |
Super-Twisted Nematic, or STN, Displays
|
is a type of monochrome passive matrix LCD capable of providing higher information content to display systems and are typically found in applications such as cordless phones, mobile phones, MP3 players, pocket games and PDAs. Our Zastron Shenzhen, through its predecessor, Jetup, began producing STN LCDs in 2002. Since 2005, our two existing twisted nematic, or TN type, LCD lines to STN LCD lines have been upgraded. TN displays rotate the director of the liquid crystal by 90°, but STN LCD displays employ up to a 270°rotation. This extra rotation gives the crystal a much steeper voltage-brightness response curve and also widens the angle at which the display can be viewed before losing much contrast. As of December 31, 2010, Zastron Shenzhen was using three automated STN lines capable of producing both TN and STN type LCDs with capacity of 150,000 pairs of glass (each sheet of glass of 360 millimeters x 400 millimeters in size) panels per month. | |
LCD Back-End
|
is a main manufacturing process for LCD panels, and is regarded as part of the process for its finished product LCD modules. It includes the precise pure water cleaning process, scribing of LCD glass, liquid crystal insertion, sealing process and breaking process, then turns the LCD mother glass into LCD panels. Our machines can cope with 0.2 millimeters + 0.2 millimeters LCD mother glass up to dimension 550 millimeters x 670 millimeters, with cutting tolerance +/-0.1 millimeters. |
28
| ISO 9001:2008 | Basic Quality Management System | ||||
| ISO 14001:2004 | Environmental Management System | ||||
| QC080000:2005 | Hazardous Substance Process Management System | ||||
| OHASA18001:2007 | Occupational Health & Safety Management System |
29
| TS16949:2009 | Quality Management System specific for Automotive products | ||||
| ISO13485:2003 | Quality Management System specific for Medical products |
| Integrated circuits or chips, most of which we purchase presently from Cambridge Silicon Radio Plc Ltd., Qualcomm CDMA Technologies Asia Pacific Pte. Ltd., Toshiba Electronics (Asia) Ltd., Ricoh Company Ltd, ATI Technologies Ltd, Rohm Electronics (HK) Co., Ltd., Samsung Electronics., Ltd., Sharp Electronics (M) SDN.BHD and certain of their affiliates; | ||
| LCD panels, which are available from many manufacturers. Since 2007, we have purchased LCD panels from Suzhou Epson Co. Ltd., Safaring Technology Co. Ltd., Toshiba Matsushita Display Co. Ltd., Shantou Goworld Display (Plant II) Co. Ltd., and VBest Electronics Ltd.; | ||
| FPC boards, which consist of copper conductive patterns that have been etched or printed while affixed to flexible substrate materials such as polyimide or polyester, are mainly used to provide connections for electronic components and as a substrate to support these electronic devices. Since 2007, we have purchased FPC boards mainly from Sony Chemical Co., Ltd., Nitto Denko (HK) Co. Ltd. and NOK Mektec Corp. Ltd.; | ||
| Light-emitting diodes, or LEDs, are semiconductor devices that emit incoherent narrow-spectrum light when electrically biased in the forward direction. This effect is a form of electroluminescence. LEDs are small extended sources with extra optics added to the chip, which emit a complex intensity spatial distribution. We purchase LEDs primarily from Nichia Corporation, Everlight Electronics Co., Ltd.; and | ||
| CMOS imaging sensors, which we purchase mainly from Omnivision Technologies Inc., Micron Technology Inc. and Magnachip Semiconductor Ltd. Solar cells and batteries, which are standard off-the-shelf items that we generally purchase in Hong Kong from agents of Japanese manufacturers or directly from companies in China; various mechanical components such as plastic parts, cables, rubber keypads, PCBs, indium tin oxide, or ITO, glass used in the production of LCD panels, and packaging materials from various local suppliers in China; and various acoustic components, which we mainly sourced from Wanstonic Electronics Ltd, Yinpin Electronics (SZ) Co. Ltd., Goertek Technology Co. Ltd., Shandong Gettop Acoustic Co. Ltd., Vansonic Enterprise co. Ltd., where the manufacturing base is principally in China. |
30
31
Product/Service | Competitor | |
EMS
|
Celestica, Inc. | |
Flextronics International Ltd. | ||
Hon Hai Precision Industry Co., Ltd. | ||
Jabil Circuit, Inc | ||
Sanmina-SCI Corporation | ||
Image capturing devices and their modules
|
Altus Technology Inc (controlled by Foxconn) | |
Lite-on Technology Corporation | ||
Logitech International S.A. | ||
The Primax Group | ||
Mobile phone accessories
|
Balda-Thong Fook Solutions Sdn., Bhd. | |
Celestica, Inc. | ||
Elcoteq Network Corp. | ||
Flextronics International Ltd. | ||
Foster Corporation | ||
Foxlink Group | ||
Merry Electronics Co. Ltd. | ||
WKK International (Holdings) Ltd. |
32
Product/Service | Competitor | |
Liquid crystal display, or LCD, panels
|
Tianma Microelectronics Co., Ltd | |
Truly International Holdings Ltd. | ||
Varitronix International Ltd. | ||
Yeebo (International) Holdings Ltd. | ||
Telecommunication subassemblies and components
|
Flextronics International Ltd. | |
LG. Philips LCD Co., Ltd. | ||
Samsung Electronics | ||
Varitronix International Ltd. | ||
Consumer electronic products (calculators,
personal organizers and linguistic products)
|
Computime Limited | |
Inventec Co. Ltd. | ||
Kinpo Electronics, Inc. | ||
VTech Holdings Limited | ||
FPC boards/FPC Subassemblies
|
Ichia Technologies Inc | |
Nitto Denko (HK) Ltd. | ||
NOK Corporation |
33
Approximate | ||||||||||
Square | Owned(1) or lease | |||||||||
Location | Footage | Principal or Presently Contemplated Use | expiration date | |||||||
Hong Kong |
3,760 | Administration | 2011 | |||||||
Shenzhen, China |
557,835 | Principal manufacturing facilities | 2043/2049 | (2) | ||||||
87,460 | Administration | 2043/2049 | (2) | |||||||
350,585 | Dormitories | 2043/2049 | (2) | |||||||
41,530 | Cafeteria | 2043 | ||||||||
33,825 | Recreational | 2049 | ||||||||
Other existing facilities |
||||||||||
Shenzhen, China |
383,550 | Manufacturing LCD panels and modules | 2012 | |||||||
32,000 | Administration | |||||||||
231,260 | Dormitories | |||||||||
22,260 | Cafeteria | |||||||||
14,550 | Recreational | |||||||||
Wuxi, Jiangsu Province, China |
470,360 | FPC boards and FPC subassemblies, LCD modules and other products | 2056 | (3) | ||||||
Other property |
||||||||||
Guangming, Shenzhen, China |
1,270,160 | LCD modules and other products | 2057 | (4) |
(1) | Only the PRC government and peasant collectives may own land in China. Our principal manufacturing facilities are located on land in which we have entered into a land lease agreement with the PRC government that gives us the right to use the land for 50 years. Similarly, the lands which we have acquired in Wuxi and Guangming Shenzhen will be by 50-year land leases. Our understanding of the practice as it exists today; at the expiration of the land lease, we may be given the right to renew the lease. For our other facilities, we have entered into factory building lease agreements with peasant collectives or other companies for 10 years or less. | |
(2) | Our principal manufacturing facilities occupy two parcels of land with 50-year land leases that we acquired in 1993 and 1999, respectively. | |
(3) | Construction was completed in 2009 and mass production at this factory began in 2010. | |
(4) | Raw land. |
| a five-story factory with approximately 138,000 square feet of production facilities, including one floor for assembling, one floor of office space, one floor for warehouse use and two floors of class thousand clean room facilities, totaling approximately 626,000 square feet of manufacturing space, when construction was completed in October 2002; | ||
| an additional factory, consisting of approximately 265,000 square feet of space, completing construction in December 2004 on vacant land of approximately 280,000 square feet (approximately 6.5 acres) bordering on our existing facilities that we purchased in July 1999, and |
34
| two additional blocks of dormitories , which we completed during 2005. |
35
36
Rate under EIT | Rate under EIT | |||
for enterprises previously | for enterprises previously | |||
Tax Year | subject to 15% tax rate | subject to 24% tax rate | ||
2008 | 18% | 25% | ||
2009 | 20% | 25% | ||
2010 | 22% | 25% | ||
2011 | 24% | 25% | ||
2012 | 25% | 25% |
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Applicable statutory tax rates |
18 | % | 20 | % | 22 | % | ||||||
Effect of difference between Hong Kong and PRC tax rates applied to Hong Kong income |
| 65 | 1 | |||||||||
Effect of change in tax law |
(1 | ) | (49 | ) | (1 | ) | ||||||
Change in valuation allowance |
3 | (37 | ) | (4 | ) | |||||||
Deferred tax liability on withholding tax on undistributed profits of PRC subsidiaries |
2 | 49 | 2 | |||||||||
Effect of loss/income for which no income tax benefit/expense is receivable/payable |
(19 | ) | 102 | 4 | ||||||||
Other items |
4 | 22 | 2 | |||||||||
Effective tax rates |
7 | % | 172 | % | 26 | % | ||||||
37
38
39
Year Ended December 31, | % increase/(decrease) | |||||||||||||||||||
2008 | 2009 | 2010 | 2009 vs 2008 | 2010 vs 2009 | ||||||||||||||||
Net sales |
$ | 622,852 | $ | 408,137 | $ | 534,420 | (34.5 | )% | 30.9 | % | ||||||||||
Gross profit |
70,678 | 40,320 | 51,294 | (43.0 | ) | 27.2 | ||||||||||||||
Operating income |
6,386 | 388 | 14,801 | (93.9 | ) | 3,714.7 | ||||||||||||||
Net income attributable to Nam Tai shareholders |
30,635 | 1,652 | 15,006 | (94.6 | ) | 808.4 | ||||||||||||||
Basic earnings per share |
$ | 0.68 | $ | 0.04 | $ | 0.33 | (94.1 | ) | 725.0 | |||||||||||
Diluted earnings per share |
$ | 0.68 | $ | 0.04 | $ | 0.33 | (94.1 | ) | 725.0 |
2009 | 2010 | |||||||||||||||||||||||||||||||
Days in: | Mar. 31 | Jun. 30 | Sept. 30 | Dec. 31 | Mar. 31 | Jun. 30 | Sept. 30 | Dec. 31 | ||||||||||||||||||||||||
Sales cycle (1) |
15 | 13 | 15 | 9 | 15 | 11 | 9 | 9 | ||||||||||||||||||||||||
Inventory
turnover (2) |
16 | 16 | 14 | 16 | 18 | 24 | 24 | 22 | ||||||||||||||||||||||||
Accounts
receivable (3) |
52 | 59 | 63 | 52 | 58 | 73 | 67 | 51 | ||||||||||||||||||||||||
Accounts
payable (4) |
53 | 62 | 62 | 59 | 61 | 86 | 82 | 64 |
March 31 | June 30 | September 30 | December 31 | |||||||||||||||||||||||||||||
Days in: | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | ||||||||||||||||||||||||
Sales cycle (1)
|
15 | 15 | 13 | 11 | 15 | 9 | 9 | 9 | ||||||||||||||||||||||||
Inventory turnover (2)
|
16 | 18 | 16 | 24 | 14 | 24 | 16 | 22 | ||||||||||||||||||||||||
Accounts receivable (3)
|
52 | 58 | 59 | 73 | 63 | 67 | 52 | 51 | ||||||||||||||||||||||||
Accounts payable (4)
|
53 | 61 | 62 | 86 | 62 | 82 | 59 | 64 |
(1) | Sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable. | |
(2) | Inventory turnover is calculated as the ratio of inventory, net, at period end divided by cumulative year to date average daily net cost of sales and multiplied by the cumulative number of days. | |
(3) | Days in accounts receivable is calculated as the ratio of accounts receivable, net, at period end divided by cumulative year to date average daily net sales and multiplied by the cumulative number of days. | |
(4) | Days in accounts payable is calculated as the ratio of accounts payable, net, at period end divided by cumulative year to date average daily net cost of sales and multiplied by the cumulative number of days. |
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net Sales |
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of sales |
(88.7 | ) | (90.1 | ) | (90.4 | ) | ||||||
Gross profit |
11.3 | 9.9 | 9.6 | |||||||||
General and administrative expenses |
(4.7 | ) | (6.9 | ) | (4.7 | ) | ||||||
Selling expenses |
(1.1 | ) | (1.3 | ) | (1.0 | ) | ||||||
Research and development expenses |
(1.7 | ) | (1.6 | ) | (1.1 | ) | ||||||
Impairment loss on goodwill |
(2.8 | ) | | | ||||||||
Operating income |
1.0 | 0.1 | 2.8 | |||||||||
Other income (expense), net |
1.1 | (0.1 | ) | 0.7 | ||||||||
Gain on sale of subsidiaries shares |
3.2 | | | |||||||||
Interest income |
1.1 | 0.2 | 0.3 | |||||||||
Interest expense |
(0.1 | ) | | | ||||||||
Income before income taxes |
6.3 | 0.2 | 3.8 | |||||||||
Income taxes |
(0.5 | ) | (0.3 | ) | (1.0 | ) | ||||||
Consolidated net income (loss) |
5.8 | (0.1 | ) | 2.8 | ||||||||
Net (income) loss attributable to noncontrolling interests |
(0.9 | ) | 0.5 | | ||||||||
Net income attributable to Nam Tai shareholders |
4.9 | % | 0.4 | % | 2.8 | % | ||||||
40
Year ended December 31, | ||||||||||||||||||||
2010 | ||||||||||||||||||||
2009 | 2010 | vs. 2009 | ||||||||||||||||||
Dollars | Dollars | |||||||||||||||||||
(in thousands) | Percent | (in thousands) | Percent | Percent | ||||||||||||||||
TCA |
$ | 292,074 | 72 | % | $ | 401,259 | 75 | % | 37.4 | % | ||||||||||
CECP |
116,063 | 28 | 133,161 | 25 | 14.7 | |||||||||||||||
Total net sales |
$ | 408,137 | 100 | % | $ | 534,420 | 100 | % | 30.9 | % | ||||||||||
41
Year ended December 31, | ||||||||||||||||||||||||
2010 | ||||||||||||||||||||||||
2009 | 2010 | vs. 2009 | ||||||||||||||||||||||
Dollars | Dollars | |||||||||||||||||||||||
(in thousands) | Percent | (in thousands) | Percent | Percent(1) | ||||||||||||||||||||
TCA |
$ | (573 | ) | (34.7 | )% | $ | 6,617 | 44.1 | % | n/a | % | |||||||||||||
CECP |
6,710 | 406.2 | 13,969 | 93.1 | 108.2 | |||||||||||||||||||
Corporate |
(4,485 | ) | (271.5 | ) | (5,580 | ) | (37.2 | ) | n/a | |||||||||||||||
Net income
attributable to Nam
Tai shareholders |
$ | 1,652 | 100.0 | % | $ | 15,006 | 100.0 | % | 808.4 | % | ||||||||||||||
42
Year ended December 31, | ||||||||||||||||||||
2008 | 2009 | 2009 vs. 2008 | ||||||||||||||||||
Dollars | Dollars | |||||||||||||||||||
(in thousands) | Percent | (in thousands) | Percent | Percent | ||||||||||||||||
TCA |
$ | 351,487 | 56 | % | $ | 292,074 | 72 | % | (16.9 | )% | ||||||||||
CECP |
271,365 | 44 | 116,063 | 28 | (57.2 | ) | ||||||||||||||
Total net sales |
$ | 622,852 | 100 | % | $ | 408,137 | 100 | % | (34.5 | )% | ||||||||||
43
Year ended December 31, | 2009 vs. | |||||||||||||||||||
2008 | 2009 | 2008 | ||||||||||||||||||
Dollars | Dollars | |||||||||||||||||||
(in thousands) | Percent | (in thousands) | Percent | Percent(1) | ||||||||||||||||
TCA |
$ | (17,064 | ) | (55.7 | )% | $ | (573 | ) | (34.7 | )% | n/a | % | ||||||||
CECP |
27,359 | 89.3 | 6,710 | 406.2 | (75.5 | ) | ||||||||||||||
Corporate |
20,340 | 66.4 | (4,485 | ) | (271.5 | ) | n/a | |||||||||||||
Total net income attributable to Nam Tai shareholders |
$ | 30,635 | 100.0 | % | $ | 1,652 | 100.0 | % | (94.6) | % | ||||||||||
| cash and cash equivalents resulted primarily from the increase in sales in 2010; | ||
| the $43.4 million used in the acquisition of shares in privatization of NTEEP in 2009; and | ||
| the decrease in purchase of property, plant and equipment in 2010. |
44
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net cash provided by operating activities |
$ | 36,791 | $ | 38,503 | $ | 34,893 | ||||||
Net cash (used in) provided by investing activities |
(34,723 | ) | (74,781 | ) | 8,217 | |||||||
Net cash used in financing activities |
(42,267 | ) | (18,056 | ) | | |||||||
Net (decrease) increase in cash and cash equivalents |
$ | (40,199 | ) | $ | (54,334 | ) | $ | 43,110 | ||||
45
Payments (in thousands) due by period | ||||||||||||||||||||
Contractual Obligations | Total | 2011 | 2012 to 2013 | 2014 to 2015 | After 2015 | |||||||||||||||
Long-term debt obligations |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Capital (finance) lease obligations |
| | | | | |||||||||||||||
Operating lease obligations |
1,016 | 1,016 | | | | |||||||||||||||
Purchase obligations: |
||||||||||||||||||||
Capital commitments |
4,923 | 4,923 | | | | |||||||||||||||
Other purchase obligations |
67,965 | 67,965 | | | | |||||||||||||||
Other long-term liabilities reflected
on the Companys balance sheet
under US GAAP |
| | | | | |||||||||||||||
Total |
$ | 73,904 | $ | 73,904 | $ | | $ | | $ | | ||||||||||
46
47
48
Name | Age | Position with Nam Tai or its Subsidiaries | ||||
M. K. Koo
|
66 | Nam Tais Executive Chairman and Chief Financial Officer; NTEEPs President and a director | ||||
Colin Yeoh
|
46 | Chief Executive Officer of Nam Tai and a director of NTEEP | ||||
Ivan Chui
|
52 | Chief Marketing Officer of Nam Tai | ||||
Tohru Odashima
|
60 | President of Wuxi Manufacturing | ||||
Peter R. Kellogg
|
68 | Member of the Board of Directors | ||||
Dr. Wing Yan (William) Lo
|
50 | Member of the Board of Directors | ||||
Charles Chu
|
54 | Member of the Board of Directors | ||||
Mark Waslen
|
50 | Member of the Board of Directors |
49
50
Fees Earned or | Option | All Other | Total | |||||||||||||
Name | Paid in Cash ($)(1) | Awards ($)(2) | Compensation ($) | ($) | ||||||||||||
Peter R. Kellogg |
46,100 | 23,700 | | 69,800 | ||||||||||||
Charles Chu |
52,950 | 23,700 | | 76,650 | ||||||||||||
Dr. Wing Yan (William) Lo |
50,800 | 23,700 | | 74,500 | ||||||||||||
Mark Waslen |
49,000 | 23,700 | | 72,700 |
(1) | Consists of the aggregate dollar amount of all fees earned or paid in cash for services as a director, including annual retainer fees and meeting fees. Cash paid to directors were in HK$ and for purposes of the presentation in the above table have been converted into US$ at a conversion rate $1.00:HK$7.75. | |
(2) | Consists of the US$ amount of option grants that Nam Tai recognized for financial statement reporting purposes in accordance with FASB ASC 718. |
* | Under the rules of the SEC, foreign private issuers like us are not required to disclose compensation paid to our directors or senior managers on an individual basis unless individual disclosure is required in the foreign private issuers home country and is not otherwise publicly disclosed by the company. Although we are not required by our home country (the British Virgin Islands, the jurisdiction in which we are organized), we are voluntarily providing disclosure of compensation we paid to our directors and senior managers on an individual basis in this Report and plan to do so in our proxy statement for our 2011 Annual Meeting of Shareholders (even though we are not subject to the sections of the Securities Exchange Act of 1934 regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Securities Exchange Act of 1934 or disclosures required in a proxy statement in accordance with rules therefor promulgated under the Securities Exchange Act of 1934). See Item 3. Key Information of this Report under the heading Risk Factors Our status as a foreign private issuer in the United States exempts us from certain of the reporting requirements under the Securities Exchange Act of 1934 and corporate governance standards of the New York Stock Exchange, or NYSE, limiting the protections and information afforded to investors. By providing disclosures of compensation we pay to our directors and senior managers on an individual basis in this Report or in our proxy statement, we are not undertaking any duty, and investors and others reviewing this Report should not expect, that we will continue to make such disclosures in any future Reports or in our proxy statements as long as we are exempt from doing so under the Securities Exchange Act of 1934. We reserve the right to discontinue doing so at any time without prior notice. Further, although the disclosures of compensation we paid to our directors and senior managers on an individual basis that we have provided in this Report may, in certain respects, appear comparable to similar disclosures made by companies organized in the U.S. that are required to file Annual Reports on Form 10-K or proxy statements under Regulation 14A under the Securities Exchange Act of 1934, such disclosures that we have made in this Report do not necessarily comply with the applicable requirements therefor under Form 10-K or Regulation 14A and this Report does not contain all disclosures required Item 11 of Form 10-K or Item 8 of Schedule 14A of Regulation 14A. |
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Other | ||||||||||||||||
Salary | comp. and | |||||||||||||||
Name and Principal Position | Year | ($)(1) | benefits ($)(2) | Total ($) | ||||||||||||
Koo Ming Kown |
2010 | 212,915 | (3) | 236,079 | (4) | 448,994 | ||||||||||
Chief Financial Officer and |
2009 | 10 | (3) | 199,720 | (4) | 199,730 | ||||||||||
Chairman of the Board of Nam Tai; |
2008 | | 68,931 | (4) | 68,931 | |||||||||||
President of NTEEP |
||||||||||||||||
Colin Yeoh (5) |
2010 | 213,523 | 829,411 | 1,042,934 | ||||||||||||
Chief Executive Officer |
2009 | 171,304 | 4,191 | 175,495 | ||||||||||||
of Nam Tai |
2008 | 201,184 | 1,587 | 202,771 | ||||||||||||
Ivan Chui (6) Chief Marketing Officer |
2010 | 219,691 | 551,757 | 771,448 | ||||||||||||
of Zastron Shenzhen |
2009 | | 129,032 | 129,032 | ||||||||||||
2008 | 176,282 | | 176,282 | |||||||||||||
Patinda Lei (7) |
2010 | 180,492 | 4,166 | 184,658 | ||||||||||||
Marketing Director of Zastron Shenzhen |
2009 | 181,993 | 3,457 | 185,450 | ||||||||||||
2008 | 358,974 | 9,637 | 368,611 |
(1) | Consists of the basic salary earned by the named executive officers during the year indicated. All cash compensation included in the table was paid to Nam Tais senior executives in HK$ and for purposes of the presentation in the above table have been converted into US$ at a conversion rate $1.00:HK$7.75 for 2010 and 2009, and $1.00:HK$7.80 for 2008. | |
(2) | To the extent applicable to the named individual, consists of amounts paid for housing, golf club membership fees, mandatory provident fund, life, medical, travel, social security, unemployment compensation, welfare and accident insurance premiums, bonus and fees for annual physical examination. The value of stock options is not included. | |
(3) | Mr. Koo was appointed as Nam Tais Chief Financial Officer effective March 1, 2009. Prior to March 1, 2009, Mr. Koo served on Nam Tais Board of Directors as Non-executive Chairman of the Board and since March 1, 2009 has served as Executive Chairman of the Board. Mr. Koos salary for serving as Nam Tais Chief Financial Officer during 2009 and 2010 was $1.00 per month. Effective on October 1, 2010, in addition to his duties as Nam Tais Chief Financial Officer, Mr. Koo was appointed as President of NTEEP, his salary for serving as Nam Tais Chief Financial Officer was confirmed at $1.00 per month and his salary for serving as President of NTEEP was fixed at approximately $850,000 annually and an annual bonus of 1.5 months of his monthly salary of approximately $106,000. See Item 7. Major Shareholders and Related Party Transactions Certain Relationships and Related Party Transactions. | |
(4) | All other compensation and benefits for 2010 includes insurance premiums and fees for annual physical examination, $147,049 in rental charges paid for housing provided for Mr. Koo and $26,613 which Nam Tai has accrued as a bonus to Mr. Koo for services in 2010, but is payable to Mr. Koo in March 2011. All other compensation and benefits for 2009 included insurance premiums, golf membership expenses and $136,649 in rental charges paid for housing provided for Mr. Koo. Amounts of $833,333 and $750,000 previously accrued by the Company during 2009 and 2010 respectively for payment to Mr. Koo if he remained as Nam Tais CFO from March 1, 2009 through and after February 29, 2012 have not been included in the table since the Companys obligation therefore was terminated in October 2010 and Mr. Koo has never received payment of those amounts during 2009 or 2010. See Item 7. Major Shareholders and Related Party Transactions Certain Relationships and Related Party Transactions for a discussion of the compensation payable and previously payable to Mr. Koo as Nam Tais CFO. All other compensation and benefits in 2010, 2009 and 2008 also includes directors fees of $37,250, $42,750 and $42,000, respectively. All other compensation and benefits in 2008 includes $13,650 actually paid to Mr. Koo when his outstanding stock options were repurchased at the same time that all other director options were repurchased in 2008. Because (a) options to purchase 15,000 shares granted in 2009 to Mr. Koo were surrendered and cancelled within a few months thereafter, and (b) options to purchase 15,000 shares granted in 2008 to Mr. Koo as a then independent director of Nam Tai were among the options repurchased by Nam Tai a few months thereafter, in order to avoid the appearance that Mr. Koo received duplicate compensation, all other compensation and benefits in 2009 and 2008 do not include $13,350 and $27,900, respectively, which were the dollar amounts for the options granted to Mr. Koo in 2009 and 2008, respectively, that Nam Tai recognized for financial statement reporting purposes in accordance with FASB ASC 718. | |
(5) | Appointed as CEO of Nam Tai effective December 1, 2009. Compensation for 2008 through November 30, 2009 was paid to Dr. Yeoh in other executive capacities. Other compensation and benefits for 2010 includes an incentive bonus of $825,000, which the Company accrued for 2010, but is payable by the end of March 2011. | |
(6) | Appointed as Business Development President of Zastron Shenzhen in December 2009 and as Nam Tais Chief Marketing Officer in April 1, 2010. Compensation for 2008 through November 2009 was paid to Mr. Chui in other executive capacities. Other compensation and benefits for 2010 includes an incentive bonus of $551,000, which the Company accrued for 2010, but is payable by the end of March 2011. | |
(7) | Appointed as Vice CEO of the Zastron Shenzhen in November 2008. She was appointed as Marketing Director of Zastron Shenzhen in April 1, 2010. |
52
Number | Value at | Company | ||||||||||
of years | December 31, 2010 of | Payments | ||||||||||
of credited | Accumulated | During | ||||||||||
Name | Service | Benefits ($) | 2010 ($) | |||||||||
Koo Ming Kown |
36.0 | (1) | N/A | N/A | ||||||||
Colin Yeoh |
7.3 | 3,865 | 1,548 | |||||||||
Ivan Chui |
10.2 | 12,308 | N/A | |||||||||
Patinda Lei |
10.0 | 12,308 | N/A |
(1) | Prior to October 2010, Mr. Koos services as our employee were for Nam Tai Electronics, Inc., the ultimate parent, and as such he is not eligible under Hong Kongs Mandatory Provident Retirement Fund or Macaos retirement benefit scheme. Accordingly, no contributions have been made for Mr. Koo. Although he was appointed President of our subsidiary, NTEEP, effective October 1, 2010, contributions are not required for Mr. Koo under Hong Kongs Mandatory Provident Retirement Fund because he is over 65 years old. |
Effective on April 1, 2011 | Effective before April 1, 2011 | |
Unit 1201, 12th Floor, Tower 1, Lippo Centre,
|
Units 5811-12, 58/F, The Center, | |
89 Queensway, Admiralty, Hong Kong Facsimile: (852) 2263 1001 |
99 Queens Road Central, Central, Hong Kong Facsimile: (852) 2263 1223 |
53
| who has no material relationship with the Company as affirmatively determined by the Board; | ||
| who is not nor has been within the last 3 years immediately prior to the date of his appointment as the INED an employee of the Company, provided, however, employment as an interim Chairman of the Board or Chief Executive Officer or other executive officer of the Company shall not disqualify a director from being considered independent following that employment; | ||
| whose immediate family members(1) are not, nor have been within the last 3 years immediately prior to the date of his appointment as the INED, an executive officer of the Company; | ||
| who, or whose immediate family member(1), have not received greater than US$120,000 in direct compensation from the Company, other than directors and committees fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continuous service), during any twelve-month period within the last 3 years immediately prior to the date of his appointment as the INED; | ||
| who is neither a partner nor an employee of the internal or external audit firm of the Company and within the last 3 years immediately prior to the date of his appointment as the INED was neither a partner nor an employee of such firm and personally worked on the Companys audit during that time; | ||
| none of whose immediate family members (1) is (a) a current partner of the internal or external audit firm of the Company or (b) a current employee of the internal or external audit firm of the Company and personally works on the Companys audit; | ||
| none of whose immediate family members (1) have been, within the last 3 years immediately prior to the date of his appointment as the INED, partners or employees of the internal or external audit firm and personally worked on the Companys audit during that time; and | ||
| who, or whose immediate family members (1), are not, nor within the last 3 years immediately prior to the date of his appointment as the INED, employed as an executive officer of another company in which any of the Companys present executives at the same time serves or served on that companys compensation committee; and | ||
| who is not an employee of, or whose immediate family members (1) are not executive officers of, a company that has made payments to, or received payments from, the Company for property or services in an amount which in any of the 3 fiscal years prior to his appointment as the INED, exceeds the greater $1 million or 2% of such other companys consolidated gross revenues. |
(1) | An immediate family member includes a persons spouse, parents, children, siblings, mothers- and father-in-law, sons-and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such persons home. |
54
55
At December 31, | ||||||||||||||
Geographic Location | Main Activity | 2008 | 2009 | 2010 | ||||||||||
Shenzhen, PRC | Manufacturing |
5,225 | 3,734 | 4,153 | ||||||||||
Research and development |
310 | 156 | 96 | |||||||||||
Quality control |
484 | 274 | 297 | |||||||||||
Engineering |
277 | 168 | 158 | |||||||||||
Administration |
403 | 302 | 289 | |||||||||||
Marketing |
105 | 64 | 57 | |||||||||||
Support(1) |
238 | 160 | 155 | |||||||||||
Total Shenzhen |
7,042 | 4,858 | 5,205 | |||||||||||
Wuxi, PRC | Manufacturing |
5 | 153 | 366 | ||||||||||
Research and development |
3 | 15 | 21 | |||||||||||
Quality control |
5 | 41 | 70 | |||||||||||
Engineering |
7 | 35 | 43 | |||||||||||
Administration |
15 | 76 | 81 | |||||||||||
Marketing |
4 | 7 | 11 | |||||||||||
Support(1) |
7 | 13 | 21 | |||||||||||
Total Wuxi |
46 | 340 | 613 | |||||||||||
Hong Kong | Administration |
8 | 5 | 6 | ||||||||||
Total Hong Kong |
8 | 5 | 6 | |||||||||||
Macao | Administration |
5 | | | ||||||||||
Total Macao |
5 | | | |||||||||||
Japan | Administration |
2 | | | ||||||||||
Marketing |
1 | | | |||||||||||
Research & Development |
| | | |||||||||||
Total Japan |
3 | | | |||||||||||
Total employees |
7,104 | 5,203 | 5,824 |
(1) | Employees categorized in support include personnel engaged in procurement, customs, shipping and warehouse services. |
56
Shares beneficially owned(1) | ||||||||
Name | Number | Percent | ||||||
Peter R. Kellogg |
5,826,180 | (2) | 13.0 | % | ||||
M. K. Koo |
5,242,786 | (3) | 11.7 | % | ||||
I.A.T. Reinsurance Syndicate Ltd. |
5,224,800 | (2) | 11.7 | % | ||||
Kahn Brothers LLC |
2,481,289 | (4) | 5.5 | % | ||||
Ivan Chui |
295,870 | * | ||||||
Colin Yeoh |
10,000 | * | ||||||
Charles Chu |
32,500 | (5) | * | |||||
Wing Yan (William) Lo |
30,000 | (6) | * | |||||
Mark Waslen |
40,000 | (5) | * |
* | Less than 1%. | |
(1) | Percentage of ownership is based on 44,803,735 common shares outstanding as of February 28, 2011. In accordance with Rule 13d-3(d) (1) under the Securities Exchange Act of 1934, shares not outstanding but which are the subject of options exercisable within 60 days of February 28, 2011 have been considered outstanding for the purpose of computing the percentage of Nam Tais outstanding shares owned by the listed person holding such options, but are not considered outstanding for the purpose of computing the percentage of shares owned by any of the other listed persons. | |
(2) | Mr. Kellogg directly holds 571,380 common shares and indirectly, through I.A.T. Reinsurance Syndicate Ltd., holds 5,224,800 common shares. I.A.T. Reinsurance Syndicate Ltd. is a Bermuda corporation of which Mr. Kellogg is the sole holder of its voting stock. Mr. Kellogg disclaims beneficial ownership of those shares. Mr. Kellogg also holds options to purchase 30,000 shares, which he received in 2009 and 2010 as a director of Nam Tai. | |
(3) | Mr. Koo beneficially owned 5,242,786 common shares jointly with Ms. Cho Sui Sin, Mr. Koos wife. | |
(4) | Based on a Schedule 13G filed with the SEC by the beneficial holder on February 7, 2011. | |
(5) | Includes options to purchase 30,000 shares. | |
(6) | Consists of options to purchase 30,000 shares. |
Percentage Ownership (1) at February 28, | ||||||||||||
2009 | 2010 | 2011 | ||||||||||
Peter R. Kellogg (2) |
12.9 | % | 13.0 | % | 13.0 | % | ||||||
M. K. Koo |
11.7 | % | 11.7 | % | 11.7 | % | ||||||
I.A.T. Reinsurance Syndicate Ltd. |
11.7 | % | 11.7 | % | 11.7 | % | ||||||
Kahn Brothers LLC |
(3) | (3) | 5.5 | %(4) | ||||||||
Royce & Associates, LLC |
5.1 | % (5) | 5.2 | % (6) | 4.6 | %(7) | ||||||
Renaissance Technologies LLC and James H. Simons |
5.5 | % (8) | 4.0 | % (9) | (10) |
(1) | Based on 44,803,735 common shares outstanding on February 28, 2009, 2010 and 2011. In accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, shares not outstanding but which are the subject of options exercisable within 60 days of February 28, 2011 |
57
have been considered outstanding for the purpose of computing the percentage of Nam Tais outstanding shares owned by the listed person holding such options, but are not considered outstanding for the purpose of computing the percentage of shares owned by any of the other listed persons. | ||
(2) | Includes shares registered in the name of I.A.T. Reinsurance Syndicate Ltd., of which Mr. Kellogg disclaims beneficial ownership. Mr. Kellogg also holds options to purchase 30,000 shares, which he received in 2009 and 2010 as a director of Nam Tai. | |
(3) | The holder did not make a filing with the SEC under Rule 13d-1 or 13d-2 of the Securities Exchange Act of 1934 for its holdings in 2009 and 2010 and Nam Tai has no information regarding the holders beneficial ownership of its shares for these years. | |
(4) | Based on a Schedule 13G filed with the SEC by the beneficial holder on February 7, 2011. | |
(5) | Based on Schedule 13G filed with the SEC by the beneficial holder on January 27, 2009. | |
(6) | Based on Amendment No. 1 to Schedule 13G filed with the SEC by the beneficial holder on January 26, 2010. | |
(7) | Based on Amendment No. 2 to Schedule 13G filed with the SEC by the beneficial holder on February 4, 2011. | |
(8) | Based on a Schedule 13G filed with the SEC by the beneficial holders on February 13, 2009. | |
(9) | Based on Amendment No. 1 to Schedule 13G filed with the SEC by the beneficial holders on February 12, 2010. | |
(10) | The holder did not make a filing with the SEC under Rule 13d-1 or 13d-2 of the Securities Exchange Act of 1934 after the filing referred to in footnote (9) to this table and Nam Tai has no information regarding the holders beneficial ownership of its shares since the filing referred to in footnote (9). |
| Nam Tais terminates Mr. Koo for any reason other than for his commission of a criminal act, Nam Tai has agreed to pay Mr. Koo an amount which is equal to 36 months of his basic monthly salary, all bonuses and allowances and so on that he is entitled at the time of termination; and | ||
| Mr. Koo wishes to terminate his employment with Nam Tai, except in cases of illness or other health conditions that prevent him from working, he must provide Nam Tai with one years prior written Notice. |
58
(1) | NTTC |
(2) | NTGM |
(3) | NTT |
59
(4) | Expected Dispositions of Tax Disputes with Inactive or Dormant Subsidiaries |
(5) | Notices of Alleged Personal Liability for Additional Taxes Against Former Directors and Officers for Signing NTTCs Tax Returns |
Year Ended December 31, | ||||||||||||
Geographic Areas | 2008 | 2009 | 2010 | |||||||||
Japan |
2 | % | 35 | % | 55 | % | ||||||
Hong Kong |
36 | 28 | 19 | |||||||||
Europe |
22 | 12 | 12 | |||||||||
United States |
17 | 10 | 10 | |||||||||
China (excluding Hong Kong) |
14 | 11 | 3 | |||||||||
North America (excluding United States) |
3 | | | |||||||||
Korea |
2 | | | |||||||||
Others |
4 | 4 | 1 | |||||||||
100 | % | 100 | % | 100 | % | |||||||
60
Dividends declared for 2011 | ||||||||
Dividend per | ||||||||
Quarterly Payment | Record Date | Period Scheduled | share | |||||
Q1 2011 | December 31, 2010 | January 20 - 31, 2011 |
$ | 0.05 | ||||
Q2 2011 | March 31, 2011 | April 20 - 30, 2011 |
0.05 | |||||
Q3 2011 | June 30, 2011 | July 20 - 31, 2011 |
0.05 | |||||
Q4 2011 | September 30, 2011 | October 20 - 31, 2011 |
0.05 | |||||
Total for full year 2011 |
$ | 0.20 | ||||||
Year ended December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010(1) | ||||||||||||||||
Total dividends declared (in thousands) |
$ | 66,497 | $ | 37,635 | $ | 39,427 | $ | | $ | 8,961 | ||||||||||
Regular dividends per share |
$ | 1.44 | $ | 0.84 | $ | 0.88 | $ | | $ | 0.20 | ||||||||||
Special dividends(2) |
$ | 0.08 | $ | | $ | | $ | | $ | | ||||||||||
Total dividends per share |
$ | 1.52 | $ | 0.84 | $ | 0.88 | $ | | $ | 0.20 |
(1) | Consists of dividend declared in 2010 payable quarterly in 2011. See the table above setting forth the schedule for Nam Tais dividends declared in 2010 payable in and for 2011. | |
(2) | We declared special dividends in 2006 in celebration of thirtieth anniversary of Nam Tais founding and its fifth consecutive quarter of record-breaking sales. |
61
2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||||||||||||||
Daily | Daily | Daily | ||||||||||||||||||||||||||||||||||
Trading | Trading | Trading | ||||||||||||||||||||||||||||||||||
High | Low | Volume(1) | High | Low | Volume(1) | High | Low | Volume(1) | ||||||||||||||||||||||||||||
1st Quarter |
$ | 11.92 | $ | 8.37 | 326,052 | $ | 6.16 | $ | 2.83 | 271,989 | $ | 5.30 | $ | 4.33 | 131,361 | |||||||||||||||||||||
2nd Quarter |
13.31 | 9.62 | 197,453 | 4.71 | 3.80 | 189,192 | 5.04 | 4.12 | 81,622 | |||||||||||||||||||||||||||
3rd Quarter |
12.99 | 8.02 | 198,363 | 6.03 | 4.05 | 141,355 | 4.95 | 4.07 | 78,016 | |||||||||||||||||||||||||||
4th Quarter |
8.16 | 4.79 | 248,775 | 5.96 | 5.10 | 99,584 | 6.82 | 4.61 | 164,645 |
(1) | Determined by dividing the sum of the reported daily volume for the quarter by the number of trading days in the quarter. |
Average Daily | ||||||
Year ended December 31, | High | Low | Trading Volume(1) | |||
2010
|
$6.82 | $4.07 | 113,831 | |||
2009 | 6.16 | 2.83 | 174,327 | |||
2008 | 13.31 | 4.79 | 241,672 | |||
2007 | 15.28 | 11.02 | 238,018 | |||
2006 | 24.27 | 11.43 | 305,468 |
(1) | Determined by dividing the sum of the reported daily volume for the year by the number of trading days in the year. |
Average Daily | ||||||||||||
Month ended | High | Low | Trading Volume(1) | |||||||||
February 28, 2011 |
$ | 7.84 | $ | 6.45 | 148,121 | |||||||
January 31, 2011 |
6.61 | 6.28 | 79,730 | |||||||||
December 31, 2010 |
6.82 | 6.15 | 137,709 | |||||||||
November 30, 2010 |
6.49 | 5.96 | 302,738 | |||||||||
October 31, 2010 |
4.89 | 4.61 | 54,771 | |||||||||
September 30, 2010 |
4.88 | 4.62 | 53,267 |
(1) | Determined by dividing the sum of the reported daily volume for the month by the number of trading days in the month. |
62
| are entitled to one vote for each whole share on all matters to be voted upon by shareholders, including the election of directors; | ||
| do not have cumulative voting rights in the election of directors; | ||
| are entitled to receive dividends if and when declared by our board of directors out of funds legally available under British Virgin Islands law; and | ||
| do not have preemptive rights to purchase any additional, unissued common shares. |
| all of common shares are equal to each other with respect to voting and dividend rights; and | ||
| in the event of our liquidation, all assets available for distribution to the holders of our common shares are distributable among them according to their respective holdings; or |
| to restrict the rights or powers of our shareholders to amend the Memorandum or the Articles; | ||
| to change the percentage of shareholders required to pass a resolution of shareholders to amend our Charter; or | ||
| in circumstances where our Charter cannot be amended by the Shareholders; or | ||
| to authorize the Company to issue, or authorize the issuance of, bearer shares of capital stock. |
| Regulation 53 provides that a director may be counted as one of a quorum in respect of any contract or arrangement in which the director is materially interested or makes with the Company. | ||
| Regulation 46 allows the directors to vote compensation to themselves in respect of services rendered to us. | ||
| Regulation 62 provides that the directors may by resolution exercise all the powers on our behalf to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever we borrow money or as security for any of our debts, liabilities or obligations or those of any third party. These borrowing powers can be altered by an amendment to the Articles. |
63
| Regulation 78 of the Articles allows us to deduct from any shareholders dividends amounts owing to us by that shareholder. | ||
| Regulation 8(b) provides that we can redeem shares at fair market value from any shareholder against whom we have a judgment debt. | ||
| Regulation 5(a) of the Articles provides that the Companys registered shares may be certificated or uncertificated and shall be entered in the register of members of the Company and registered as they are issued. | ||
| Regulation 7 provides that without prejudice to any special rights previously conferred on the holders of any existing shares, any of our shares may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividends, voting, return of capital or otherwise as the directors may from time to time determine. | ||
| Regulation 9 provides that if at any time the capital stock is divided into different classes or series of shares, the rights attached to any class or series may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of any other class or series of shares which may be affected by such variation. | ||
| Regulations 22 to 26 of our Articles of Association and under applicable BVI law provide that directors may convene meetings of our shareholders at such times and in such manner and places as the directors consider necessary or desirable, and they shall convene such a meeting upon the written request of shareholders holding more than 30% of the votes of our outstanding voting shares. Other than providing, if requested, reasonable proof of a holders status as a holder of our shares as of the applicable record date, there is no condition to the admission of a shareholder or his or her proxy holder to our meetings of shareholders. |
64
| a dealer in securities or currencies; | ||
| a trader in securities that elects to use a market-to-market method of accounting for its securities holdings; | ||
| a financial institution or a bank; | ||
| an insurance company; | ||
| a tax-exempt organization; | ||
| a person that holds our common shares in a hedging transaction or as part of a straddle or a conversion transaction; | ||
| a person whose functional currency for United States federal income tax purposes is not the U.S. dollar; | ||
| a person liable for alternative minimum tax; | ||
| a person that owns, or is treated as owning, 10% or more, by voting power or value, of our common shares; | ||
| certain former U.S. citizens and residents who have expatriated; or | ||
| a person who receives our shares pursuant to the exercise of employee stock options or otherwise as compensation. |
65
| an individual United States citizen or resident alien of the United States (as specifically defined for United States federal income tax purposes); | ||
| a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any State or the District of Columbia; | ||
| an estate whose income is subject to United States federal income tax regardless of its source; or | ||
| a trust (x) if a United States court can exercise primary supervision over the trusts administration and one or more United States persons are authorized to control all substantial decisions of the trust or (y) if it was in existence on August 20, 1996, was treated as a United States person prior to that date and has a valid election in effect under applicable Treasury regulations to be treated as a United States person. |
| you will recognize capital gain or loss equal to the difference (if any) between: | ||
| the amount realized on such sale, exchange or other taxable disposition and | ||
| your adjusted tax basis in such common shares (your adjusted tax basis in the shares you hold generally will equal your U.S. dollar cost of such shares); | ||
| such gain or loss will be long-term capital gain or loss if your holding period for our common shares is more than one year at the time of such sale or other disposition; | ||
| such gain or loss will generally be treated as United States source for United States foreign tax credit purposes; and |
66
| your ability to deduct capital losses is subject to limitations. |
67
| you conduct a trade or business in the United States and | ||
| the distributions are effectively connected with the conduct of that trade or business (and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax on a net income basis in respect of income from our common shares, such distributions are attributable to a permanent establishment that you maintain in the United States). | ||
| If you meet the two tests above, you generally will be subject to tax in respect of such dividends in the same manner as a U.S. Holder, as described above. In addition, any effectively connected dividends received by a non-U.S. corporation may also, under certain circumstances, be subject to an additional branch profits tax at a 30 percent rate or such lower rate as may be specified by an applicable income tax treaty. |
| your gain is effectively connected with a trade or business that you conduct in the United States (and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax on a net income basis in respect of gain from the sale or other disposition of our common shares, such gain is attributable to a permanent establishment maintained by you in the United States), or | ||
| you are an individual Non-U.S. Holder and are present in the United States for at least 183 days in the taxable year of the sale or other disposition, and certain other conditions exist. |
| you are a corporation or other exempt recipient, or | ||
| you provide your correct United States federal taxpayer identification number and certify, under penalties of perjury, that you are not subject to backup withholding. |
68
69
Year ended December 31 | ||||||||
2009 | 2010 | |||||||
Currencies included in cash and cash equivalents and fixed deposits maturing over three months | (In thousands) | |||||||
United States dollars |
$ | 71,891 | $ | 74,392 | ||||
Chinese renminbi |
55,691 | 92,731 | ||||||
Japanese yen |
2,557 | 1,695 | ||||||
Hong Kong dollars |
65,486 | 59,249 | ||||||
Total US$ equivalent |
$ | 195,625 | $ | 228,067 | ||||
70
A. Debt Securities B. Warrants and Rights C. Other Securities D. American Depositary Shares (1)
(2) |
} | Disclosures under Items 12A to 12D(2) of Form 20-F are not required when Form 20-F is used as an annual report and, in any event, are not applicable to Nam Tai. |
(3) (4) |
} | Disclosures under Items 12D(3) and 12D(4) of form 20-F are required even when Form 20-F is used as an annual report. However, registrant has no Amercian Depositary Recepts deposited or outstanding. |
71
72
73
Effective on April 1, 2011
|
Effective before April 1, 2011 | |
Unit 1201, 12th Floor, Tower 1, Lippo Centre,
|
Units 5811-12, 58/F, The Center, | |
89 Queensway, Admiralty, Hong Kong Facsimile (852) 2263 1001 |
99 Queens Road Central, Central, Hong Kong Facsimile: (852) 2263 1223 |
Year ended December 31 | ||||||||
2009 | 2010 | |||||||
Audit Fees (1) |
$ | 329 | $ | 371 | ||||
Audit-related Fees (2) |
8 | | ||||||
Tax Fees (3) |
4 | 3 | ||||||
Total |
$ | 341 | $ | 374 | ||||
(1) | Audit Fees consist of fees billed for the annual audit of our consolidated financial statements and the statutory financial statements of our subsidiaries. They also include fees billed for other audit services, which are those services that only the independent registered public accounting firm reasonably can provide, and include the provision of attestation services relating to the review of documents filed with the SEC. |
74
(2) | Audit-related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements. | |
(3) | Tax Fees include fees billed for tax compliance services, including the preparation of original and amended tax returns. |
75
F-1 | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-8 | ||||
F-30 | ||||
F-31 | ||||
F-32 | ||||
F-33 | ||||
F-34 |
76
F-1
F-2
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Net sales third parties |
$ | 622,852 | $ | 408,137 | $ | 534,420 | ||||||
Cost of sales |
(552,174 | ) | (367,817 | ) | (483,126 | ) | ||||||
Gross profit |
70,678 | 40,320 | 51,294 | |||||||||
General and administrative expenses(1)(2) |
(29,112 | ) | (28,393 | ) | (25,232 | ) | ||||||
Selling expenses(1) |
(6,945 | ) | (5,266 | ) | (5,504 | ) | ||||||
Research and development expenses |
(10,890 | ) | (6,273 | ) | (5,757 | ) | ||||||
Impairment loss on goodwill |
(17,345 | ) | | | ||||||||
Total operating expenses |
(64,292 | ) | (39,932 | ) | (36,493 | ) | ||||||
Income from operations |
6,386 | 388 | 14,801 | |||||||||
Other income (expenses), net |
6,428 | (256 | ) | 3,972 | ||||||||
Gain on sales of subsidiaries shares |
20,206 | | | |||||||||
Interest income |
6,282 | 818 | 1,484 | |||||||||
Interest expense |
(356 | ) | (202 | ) | | |||||||
Income before income taxes |
38,946 | 748 | 20,257 | |||||||||
Income taxes(3) |
(2,877 | ) | (1,283 | ) | (5,251 | ) | ||||||
Consolidated net income (loss) |
36,069 | (535 | ) | 15,006 | ||||||||
Net (income) loss attributable to noncontrolling interests |
(5,434 | ) | 2,187 | | ||||||||
Net income attributable to Nam Tai(4) shareholders |
$ | 30,635 | $ | 1,652 | $ | 15,006 | ||||||
Basic earnings per share |
$ | 0.68 | $ | 0.04 | $ | 0.33 | ||||||
Diluted earnings per share |
$ | 0.68 | $ | 0.04 | $ | 0.33 | ||||||
(1) | The 2009 and 2010 presentations show general and administrative expenses and selling expenses as separate line items, whereas the Companys consolidated statement of income for 2008, as originally published, combined general and administrative expenses and selling expenses as a single line item labeled Selling, general and administrative expenses. Selling, general and administrative expenses for 2008 have been presented separately to conform to the 2009 and 2010 presentations. | |
(2) | General and administrative expenses include employee severance benefits of $5,058 and $656 for the years ended December 31, 2009 and 2010 respectively. | |
(3) | Income tax expenses for the year ended December 31, 2010 included a deferred tax credit of $2,600 arising from tax losses of Wuxi FPC business, whereas the actual utilization of such deferred tax asset depends on future profit streams of that business. | |
(4) | Nam Tai refers to Nam Tai Electronics, Inc. |
F-3
December 31, | ||||||||
2009 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 182,722 | $ | 228,067 | ||||
Fixed deposits maturing over three months |
12,903 | | ||||||
Accounts and
notes receivable, less allowance for doubtful accounts of $59 and $13 at December 31, 2009 and 2010,
respectively |
57,911 | 74,176 | ||||||
Inventories |
16,054 | 29,058 | ||||||
Prepaid expenses and other receivables |
3,079 | 5,719 | ||||||
Deferred tax assets current |
1,460 | 376 | ||||||
Income tax recoverable |
| 105 | ||||||
Total current assets |
274,129 | 337,501 | ||||||
Property, plant and equipment, net |
108,110 | 88,895 | ||||||
Land use rights |
13,296 | 12,264 | ||||||
Deposits for property, plant and equipment |
32 | 477 | ||||||
Goodwill |
2,951 | 2,951 | ||||||
Deferred tax assets non-current |
4,486 | 8,423 | ||||||
Other assets |
920 | 269 | ||||||
Total assets |
$ | 403,924 | $ | 450,780 | ||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Notes payable |
$ | 691 | $ | | ||||
Accounts payable |
58,667 | 84,590 | ||||||
Accrued expenses and other payables |
16,397 | 17,484 | ||||||
Dividend payable |
| 8,961 | ||||||
Income taxes payable |
656 | 4,232 | ||||||
Total current liabilities |
76,411 | 115,267 | ||||||
Deferred tax liability non-current |
1,103 | 1,379 | ||||||
Total liabilities |
77,514 | 116,646 | ||||||
Equity: |
||||||||
Common shares ($0.01 par value authorized 200,000,000 shares,
issued and outstanding 44,803,735 shares as at
December 31, 2009 and 2010 |
448 | 448 | ||||||
Additional paid-in capital (1) |
285,264 | 286,943 | ||||||
Retained earnings |
40,706 | 46,751 | ||||||
Accumulated other comprehensive loss |
(8 | ) | (8 | ) | ||||
Total Nam Tai shareholders equity |
326,410 | 334,134 | ||||||
Total equity |
326,410 | 334,134 | ||||||
Total liabilities and equity |
$ | 403,924 | $ | 450,780 | ||||
(1) | Additional paid-in capital includes a $1,584 compensation obligation payable by the Company at the end of three years continuous services to its CFO, which obligation was terminated in October 2010. The amount so accrued was reclassified to additional paid-in capital in accordance with the guidance under Staff Accounting Bulletin (SAB) Topics 1B.1 and 5T, Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) 718-10-15-4. |
F-4
Accumulated | ||||||||||||||||||||||||||||||||||||
Common | Common | Additional | Other | Consolidated | ||||||||||||||||||||||||||||||||
Shares | Shares | Paid-in | Retained | Comprehensive | Nam Tai | Noncontrolling | Comprehensive Income | |||||||||||||||||||||||||||||
Outstanding | Amount | Capital | Earnings | Loss | Shareholders Equity | Interests | Total Equity | (Loss) | ||||||||||||||||||||||||||||
Balance at January 1, 2008 |
44,803,735 | $ | 448 | $ | 281,895 | $ | 47,846 | $ | (8 | ) | $ | 330,181 | $ | 67,428 | $ | 397,609 | ||||||||||||||||||||
Equity-settled share-based payment |
| | 955 | | | 955 | 246 | 1,201 | ||||||||||||||||||||||||||||
Repurchase of share options |
| | (83 | ) | | | (83 | ) | | (83 | ) | |||||||||||||||||||||||||
Dividend for noncontrolling
interests of subsidiaries |
| | | | | | (8,902 | ) | (8,902 | ) | ||||||||||||||||||||||||||
Disposal of subsidiaries |
| | | | | | (12,843 | ) | (12,843 | ) | ||||||||||||||||||||||||||
Purchase of subsidiary shares
from noncontrolling interest |
| | | | | | (3,312 | ) | (3,312 | ) | ||||||||||||||||||||||||||
Consolidated net income |
| | | 30,635 | | 30,635 | 5,434 | 36,069 | $ | 36,069 | ||||||||||||||||||||||||||
Consolidated comprehensive income |
$ | 36,069 | ||||||||||||||||||||||||||||||||||
Cash dividends ($0.88 per share) |
| | | (39,427 | ) | | (39,427 | ) | | (39,427 | ) | |||||||||||||||||||||||||
Balance at December 31, 2008 |
44,803,735 | $ | 448 | $ | 282,767 | $ | 39,054 | $ | (8 | ) | $ | 322,261 | $ | 48,051 | $ | 370,312 | ||||||||||||||||||||
Equity-settled share-based payment |
| | 67 | | | 67 | | 67 | ||||||||||||||||||||||||||||
Purchases of a Subsidiarys
shares from noncontrolling
interests |
| | 2,430 | | | 2,430 | (45,864 | ) | (43,434 | ) | ||||||||||||||||||||||||||
Consolidated net income (loss) |
| | | 1,652 | | 1,652 | (2,187 | ) | (535 | ) | $ | (535 | ) | |||||||||||||||||||||||
Consolidated comprehensive loss |
$ | (535 | ) | |||||||||||||||||||||||||||||||||
Balance at December 31, 2009 |
44,803,735 | $ | 448 | $ | 285,264 | $ | 40,706 | $ | (8 | ) | $ | 326,410 | $ | | $ | 326,410 | ||||||||||||||||||||
Equity-settled share-based payment |
| | 95 | | | 95 | | 95 | ||||||||||||||||||||||||||||
Deemed contribution of services |
| | 1,584 | | | 1,584 | | 1,584 | ||||||||||||||||||||||||||||
Consolidated net income |
| | | 15,006 | | 15,006 | | 15,006 | $ | 15,006 | ||||||||||||||||||||||||||
Consolidated comprehensive income |
$ | 15,006 | ||||||||||||||||||||||||||||||||||
Cash dividends ($0.20 per share) |
| | | (8,961 | ) | | (8,961 | ) | | (8,961 | ) | |||||||||||||||||||||||||
Balance at December 31, 2010 |
44,803,735 | $ | 448 | $ | 286,943 | $ | 46,751 | $ | (8 | ) | $ | 334,134 | $ | | $ | 334,134 | ||||||||||||||||||||
F-5
Year ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Consolidated net income (loss) |
$ | 36,069 | $ | (535 | ) | $ | 15,006 | |||||
Adjustments to reconcile consolidated net income (loss) to net cash provided by
operating activities: |
||||||||||||
Depreciation and amortization |
22,208 | 23,116 | 24,468 | |||||||||
Impairment loss on goodwill |
17,345 | | | |||||||||
(Gain) loss on disposal of property, plant and equipment and land use rights |
(13 | ) | 1,248 | (1,218 | ) | |||||||
Gain on sale of a subsidiarys shares
- J.I.C. Technology Company Limited (JIC Technology) |
(20,206 | ) | | | ||||||||
Share-based compensation expenses |
1,228 | 67 | 95 | |||||||||
Dividend withheld |
(305 | ) | | | ||||||||
Unrealized exchange gain |
(4,757 | ) | (39 | ) | (2,235 | ) | ||||||
Deferred income taxes |
(793 | ) | (804 | ) | (2,577 | ) | ||||||
Changes in current assets and liabilities: |
||||||||||||
(Increase) decrease in accounts and notes receivable |
(8,499 | ) | 46,239 | (16,265 | ) | |||||||
Decrease (increase) in inventories |
5,056 | 11,246 | (13,004 | ) | ||||||||
Decrease (increase) in prepaid expenses and other receivables |
1,574 | 1,069 | (2,434 | ) | ||||||||
Decrease (increase) in income taxes recoverable |
5,439 | | (105 | ) | ||||||||
(Decrease) increase in notes payable |
(4,580 | ) | 691 | (691 | ) | |||||||
(Decrease) increase in accounts payable |
(9,201 | ) | (39,458 | ) | 25,923 | |||||||
(Decrease) increase in accrued expenses and other payables |
(4,233 | ) | (4,132 | ) | 4,354 | |||||||
Increase (decrease) in income taxes payable |
459 | (205 | ) | 3,576 | ||||||||
Total adjustments |
722 | 39,038 | 19,887 | |||||||||
Net cash provided by operating activities |
$ | 36,791 | $ | 38,503 | $ | 34,893 | ||||||
F-6
Year ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Cash flows from investing activities: |
||||||||||||
Purchase of property, plant and equipment |
$ | (27,407 | ) | $ | (30,420 | ) | $ | (6,295 | ) | |||
(Increase) decrease in deposits for property, plant and equipment |
(2,606 | ) | 2,905 | (445 | ) | |||||||
(Increase) decrease in entrusted loan receivable |
(8,166 | ) | 8,199 | | ||||||||
Increase in prepayment for land use rights |
(663 | ) | | | ||||||||
Decrease in other assets |
299 | | | |||||||||
Net cash inflow from disposal of a subsidiary JIC Technology |
6,671 | | | |||||||||
Acquisition of additional shares in subsidiaries |
(2,906 | ) | (43,434 | ) | | |||||||
Proceeds from disposal of property, plant and equipment |
55 | 872 | 2,054 | |||||||||
(Increase) decrease in fixed deposits maturing over three months |
| (12,903 | ) | 12,903 | ||||||||
Net cash (used in) provided by investing activities |
$ | (34,723 | ) | $ | (74,781 | ) | $ | 8,217 | ||||
Cash flows from financing activities: |
||||||||||||
Cash dividends paid |
$ | (47,675 | ) | $ | (9,857 | ) | $ | | ||||
Repayment of bank loans |
(2,648 | ) | | | ||||||||
Payment on repurchase of share options |
(110 | ) | | | ||||||||
Proceeds from (repayment of) entrusted loan |
8,166 | (8,199 | ) | | ||||||||
Net cash used in financing activities |
$ | (42,267 | ) | $ | (18,056 | ) | $ | | ||||
Net (decrease) increase in cash and cash equivalents |
(40,199 | ) | (54,334 | ) | 43,110 | |||||||
Cash and cash equivalents at beginning of year |
272,459 | 237,017 | 182,722 | |||||||||
Effect of exchange rate changes on cash and cash equivalents |
4,757 | 39 | 2,235 | |||||||||
Cash and cash equivalents at end of year |
$ | 237,017 | $ | 182,722 | $ | 228,067 | ||||||
Supplemental schedule of cash flow information: |
||||||||||||
Interest paid |
$ | 356 | $ | 202 | $ | | ||||||
Income taxes (received) paid, net |
(2,497 | ) | 2,290 | 4,428 | ||||||||
Non-cash investing activities: |
||||||||||||
Increase (decrease) in construction cost funded through
accrued expenses and other payables |
$ | 8,547 | $ | (5,438 | ) | $ | (1,683 | ) | ||||
Non-cash financing activities: |
||||||||||||
Additional paid-in capital on compensation for loss of office |
$ | | $ | | $ | 1,584 |
F-7
1. | Company Information |
Nam Tai Electronics, Inc. and subsidiaries (the Company or Nam Tai) is an electronics manufacturing and design services provider to a selected group of the worlds leading original equipment manufacturers, or OEMs, of telecommunication and consumer electronic products. Through its electronics manufacturing services operations, the Company manufactures electronic components and sub-assemblies, including flexible printed circuit (FPC) board, FPC board subassemblies, liquid crystal display (LCD) modules, LCD panels, thin film transistor display modules, radio frequency modules, digital audio broadcast modules, internet radio subassemblies, image sensors modules and printed circuit board assemblies. These components, modules and subassemblies are used in numerous electronic products including mobile phones, Internet Protocol phones, notebook computers, digital cameras, electronic toys, handheld video game devices and learning devices. The Company also manufactures finished products, including mobile phone accessories, home entertainment products and educational products. | |||
The Company was founded in 1975 and moved its manufacturing facilities to the Peoples Republic of China (the PRC) in 1980 to take advantage of lower overhead costs, lower material costs and competitive labor rates available and subsequently relocated to Shenzhen, the PRC in order to capitalize on opportunities offered in Southern PRC. The Company was reincorporated as a limited liability International Business Company under the laws of the British Virgin Islands (BVI) in August 1987 (which was amended in 2004 as The British Virgin Islands Business Companies Act, 2004). The Companys principal manufacturing and design operations are based in Shenzhen, approximately 30 miles from the Hong Kong Special Administrative Region (Hong Kong). Its PRC headquarters are located in Shenzhen. Some of the subsidiaries offices are located in Hong Kong, which provide them access to Hong Kongs infrastructure of communication and banking facilities. The Companys principal manufacturing operations are conducted in the PRC. The PRC resumed sovereignty over Hong Kong effective July 1, 1997, and politically, Hong Kong is an integral part of the PRC. However, for simplicity and as a matter of definition only, our references to PRC in these consolidated financial statements mean the PRC and all of its territories excluding Hong Kong. |
During 2008 and 2009, the Company operated primarily in three reportable segments consisting of telecommunication components assembly (TCA), consumer electronics and communication products (CECP), and LCD products (LCDP). In 2010, pursuant to the merging of the Companys two PRC subsidiaries represented by LCDP and TCA segments into one Shenzhen subsidiary in 2010, the chief operating decision maker reviews the segment results by two business segments (TCA and CECP) when making decisions about allocating resources and assessing performance. The change in presentation of segment reporting was due to the following: |
| Most of the LCDP business has been mainly LCD modules assembling for telecommunication products in 2010, which is similar to the business operated by TCA. In view of the similarity of the products, we have merged the LCDP segment into the TCA segment; | ||
| After the merger, all the TCA business is ran by one management team; | ||
| We discontinued our CECP production for bluetooth headsets and calculators with two major box-built customers in the fourth quarter 2010, and that quarter will be the last quarter for the camera products made for the remaining major customer be classified under CECP as management has decided to reclassify this business to TCA to reflect its component assembly nature in 2011; | ||
| In 2010, the Flexible Printed Circuit Board (FPCB) business was too insignificant to be classified as one business segment. In addition, FPCB is regarded as WIP (work in progress) for internal use by the Company, i.e. it is manufactured for a more value-adding process, FPC assembling. |
The segment information in 2008 and 2009 have been restated in order to conform with the change in presentation of segment reporting in 2010 in accordance with FASB ASC 280-10-50-34. The results of the former LCDP segment were included in the TCA segment in 2008 and 2009. |
2. | Summary of Significant Accounting Policies |
(a) | Principles of consolidation | ||
The consolidated financial statements include the financial statements of the Company and all of its subsidiaries. The Company consolidates companies in which it has controlling interest of over 50%. All significant intercompany accounts, transactions and cash flows have been eliminated on consolidation. | |||
(b) | Cash and cash equivalents | ||
Cash and cash equivalents include all cash balances and certificates of deposit having a maturity date of three months or less upon acquisition. |
F-8
2. | Summary of Significant Accounting Policies continued |
(c) | Allowance for doubtful accounts | ||
Accounts and notes receivable balance is recorded net of allowances for amounts not expected to be collected from customers. Because the accounts and notes receivable are typically unsecured, the Company periodically evaluates the collectibility of accounts based on a combination of factors, including a particular customers ability to pay as well as the age of the receivables. To evaluate a specific customers ability to pay, the Company analyzes financial statements, payment history, third-party credit analysis reports and various information or disclosures by the customer or other publicly available information. In cases where the evidence suggests a customer may not be able to satisfy its obligation to the Company, a specific allowance would be set up for the perceived risk. If the financial condition of customers deteriorates, resulting in an impairment of their ability to make payments, additional allowances may be required. | |||
(d) | Inventories | ||
Inventories are stated at the lower of cost or market value. Cost is determined on the first-in, first-out basis. The standard cost of work-in-progress and finished goods comprises direct materials, labor and manufacturing overheads. Write downs of potentially obsolete or slow-moving inventory are recorded based on managements analysis of inventory levels. | |||
For the Companys CECP and TCA (excluding LCDP production) reporting units, the Company orders inventory from its suppliers based on firm customer orders for products that are unique to each customer. The inventory is utilized in production as soon as all the necessary components are received. The only reason that inventory would not be utilized within six months is if a specific customer deferred or canceled an order. As the inventory is typically unique to each customers products, it is unusual for the Company to be able to utilize the inventory for other customers products. Therefore, the Companys policy is to negotiate with the customer for the disposal of such inventory that remains unused for six months. The Company does not generally write down its inventories as usually, the customers are held to their purchase commitments. However, there are cases where customers are contractually obligated to purchase the unused inventory from the Company, but the Company may elect not to immediately enforce such contractual right for business reasons. In this connection, the Company will consider writing down these inventory items which remained unused for over six months at the Companys own cost. Prior to writing down, management would determine if the inventory can be utilized in other products. | |||
For the Companys LCDP production, due to the nature of the business, the customers do not always place orders enough in advance to enable the Company to order inventory from suppliers based on firm customer orders. Nonetheless, management reviews its inventory balance on a regular basis and writes down all inventory over six months old if it is determined that the relevant inventory cannot be utilized in the foreseeable future. | |||
(e) | Property, plant and equipment and land use rights | ||
Property, plant and equipment and land use rights are recorded at cost and include interest on funds borrowed to finance construction, if applicable. No interest was capitalized for the years ended December 31, 2008, 2009 and 2010. The cost of major improvements and betterments is capitalized whereas the cost of maintenance and repairs is expensed in the year incurred. Assets under construction are not depreciated until construction is completed and the assets are ready for their intended use. Gains and losses for the disposal of property, plant and equipment and land use rights are included in the consolidated statement of income. | |||
The majority of the land in Hong Kong is owned by the government of Hong Kong which leases the land at public auction to non-governmental entities. All of the Companys leasehold land in Hong Kong have leases of not more than 50 years from the respective balance sheet dates. The cost of such leasehold land is amortized on a straight-line basis over the respective terms of the leases. | |||
All land in other regions of the PRC is owned by the PRC government. The government in the PRC, according to PRC law, may sell the right to use the land for a specified period of time. Thus, all of the Companys land purchases in the PRC are considered to be leasehold land and classified as land use rights in the consolidated balance sheet. They are amortized on a straight-line basis over the respective term of the right to use the land. | |||
Since August 1, 2009, in order to reflect a more reasonable estimation on the useful lives of the property, plant and equipment, the Company computed depreciation expenses using the straight-line method at the following depreciation rates: |
F-9
2. | Summary of Significant Accounting Policies continued |
(e) | Property, plant and equipment and land use rights - continued |
Classification | Prior to August 1, 2009 | After August 1, 2009 | ||
Land use rights
|
50 years | 50 years | ||
Buildings
|
20 to 50 years | 20 years | ||
Machinery and equipment
|
4 to12 years | 4 years | ||
Leasehold improvements
|
shorter of lease term or 7 years | shorter of lease term or 4 years | ||
Furniture and fixtures
|
4 to 8 years | 4 years | ||
Automobiles
|
4 to 6 years | 4 years | ||
Tools and molds
|
4 to 6 years | 2 years |
The above change in depreciation rates decreased operating income, net income, basic and diluted earnings per share in 2009 by $2,308, $1,643, $0.04 and $0.04, respectively. | |||
(f) | Goodwill | ||
The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill. | |||
Goodwill is not amortized, but is tested for impairment at the reporting unit level at least on an annual basis at the balance sheet date or more frequently if certain indicators arise. For the years 2008 and 2009, the Company operated in three reporting units, which are its reportable segments of CECP, TCA and LCDP. For the year 2010, the Company operated in two reporting units, which are its reportable segments of TCA and CECP. If business conditions or other factors cause the profitability and cash flows to decline, the Company may be required to record impairment charges for goodwill at that time. The goodwill impairment review is a two-step process in accordance with the FASB ASC 350-20 Goodwill. First step consists of a comparison of the fair value of a reporting unit with its carrying value. An impairment loss may be recognized if the review indicates that the carrying value of a reporting unit exceeds its fair value. Estimates of fair value are primarily determined by using discounted cash flows method. If the carrying amount of a reporting unit exceeds its fair value, second step requires the fair value of the reporting unit to be allocated to all of the assets and liabilities (including any unrecognized intangible assets) of that reporting unit, resulting in an implied fair value of goodwill. If the carrying amount of the goodwill of the reporting unit exceeds the implied fair value, an impairment charge is recorded which is equal to the excess of the carrying amount over the fair value. | |||
The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Discounted cash flow methodology is based on a number of estimates and assumptions, including the projected future operating results of the reporting unit, discount rate, long-term growth rate and appropriate market comparables. | |||
Impairment loss on goodwill on the former LCDP reporting unit of $17,345, as fully described in note 5 was identified and recognized in 2008. No impairment loss on goodwill was recognized in 2009 and 2010. | |||
(g) | Impairment or disposal of long-lived assets | ||
Long-lived assets are included in impairment evaluations when events and circumstances exist that indicate the carrying value of these assets may not be recoverable. In accordance with FASB ASC 360 Property, Plant and Equipment the Company assesses the recoverability of the carrying value of long-lived assets by first grouping its long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the asset group) and, secondly, estimating the undiscounted future cash flows that are directly associated with and expected to arise from the use of and eventual disposition of such asset group. The Company estimates the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the carrying value of the asset group exceeds the estimated undiscounted cash flows, the Company records an impairment charge to the extent the carrying value of the long-lived asset exceeds its fair value. The Company determines fair value through quoted market prices in active markets or, if quotations of market prices are unavailable, through the performance of internal analysis using a discounted cash flow methodology or obtains external appraisals from independent valuation firms. The undiscounted and discounted cash flow analyses based on a number of estimates and assumptions, including the expected period over which the asset will be utilized, projected future operating results of the asset group, discount rate and long-term growth rate. |
F-10
2. | Summary of Significant Accounting Policies continued |
(g) | Impairment or disposal of long-lived assets continued |
Long-lived assets to be disposed of are stated at the lower of fair value or carrying value. Expected future operating losses from discontinued operations are recorded in the periods in which the losses are incurred. During the fourth quarter of 2008, the market price of our shares first dropped to a level where, based on the daily closing price of our shares from October 22, 2008 to December 31, 2008, our market capitalization was less than our book value at December 31, 2008. Accordingly, and despite, the lack of a substantial history at the time that would indicate whether the effect of prevailing market and economic conditions on our stock price reflected an aberration or a sustained decline, in accordance with FASB ASC 360 Property, Plant and Equipment, we reviewed the Companys long-lived assets of property, plant and equipment and land use rights for potential impairment as at December 31, 2008. | |||
In view of the sustained level of the Companys stock price during 2009 and our resulting market capitalization throughout 2009 at a level below our recorded book value at December 31, 2009, the Company conducted a similar review of Nam Tais long-lived assets for potential impairment. | |||
In 2010, although the Companys stock price remained below the aggregate book value of its assets, the continuous improvement of the Companys results closed the gap on the difference. Management assessed and determined that there were no events or changes in circumstances to indicate that the carrying amounts of long-lived assets in Nam Tais Shenzhen facilities were not recoverable and there were no impairment tests conducted with respect to those assets. In view of the continuous operating losses and negative cash flows in Nam Tais Wuxi facilities, the Company assessed the impairment of its long-lived assets used in the Wuxi facilities, by comparing the undiscounted cash flows with the carrying amounts of the assets. The results indicated that the carrying amounts of the Companys long-lived assets at December 31, 2010 were less than the undiscounted cash flows. |
(h) | Accruals and provisions for loss contingencies |
The Company makes provisions for all loss contingencies when information available prior to the issuance of the consolidated financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the consolidated financial statements and the amount of loss can be reasonably estimated. | |||
For provisions or accruals related to litigation, the Company makes provisions based on information from legal counsels and the best estimation of management. The Company assesses the potential liability for the significant legal proceedings in accordance with FASB ASC 450 Contingencies. FASB ASC 450 requires a liability to be recorded if the contingency loss is probable and the amount of loss can be reasonably estimated. The actual resolution of the contingency may differ from the Companys estimates. If the contingency was settled for an amount greater than the estimate, a future charge to income would result. Likewise, if the contingency was settled for an amount that is less than our estimate, a future credit to income would result. |
(i) | Revenue recognition |
The Company recognizes revenue when all of the following conditions are met: |
| Persuasive evidence of an arrangement exists, | ||
| Delivery has occurred or services have been rendered, | ||
| Price to the customer is fixed or determinable, and | ||
| Collectability is reasonably assured. |
Revenue from sales of products is recognized when the title is passed to customers upon shipment and when collectability is reasonably assured. The Company does not provide its customers with the right of return (except for quality), price protection, rebates or discounts. There are no customer acceptance provisions associated with the Companys products, except for quality. All sales are based on firm customer orders with fixed terms and conditions, which generally cannot be modified. | |||
Certain of the Companys subsidiaries are subject to value-added tax of 17% on the revenue earned for goods and services sold in the PRC. The Company presents revenue net of such value-added tax which amounted to $1,357, $369 and $73 for the years ended December 31, 2008, 2009 and 2010, respectively. |
(j) | Shipping and handling costs |
Shipping and handling costs are classified as cost of sales for materials purchased and selling expenses for those costs incurred in the delivery of finished products. During the years ended December 31, 2008, 2009 and 2010, shipping and handling costs classified as costs of sales were $503, $363 and $323, respectively. During the years ended December 31, 2008, 2009 and 2010, shipping and handing costs classified as selling expenses were $840, $669 and $940, respectively. |
F-11
2. | Summary of Significant Accounting Policies continued |
(k) | Research and development costs | ||
Research and development costs are incurred in the development of new products and processes, including significant improvements and refinements to existing products and are expensed as incurred. | |||
(l) | Advertising expenses | ||
The Company expenses advertising costs as incurred. Advertising expenses were $132, $36 and nil for the years ended December 31, 2008, 2009 and 2010, respectively. | |||
(m) | Staff retirement plan costs | ||
The Companys costs related to the staff retirement plans (see Note 11) are charged to the consolidated statement of income as incurred. | |||
(n) | Income taxes | ||
Deferred income taxes are provided using the asset and liability method in accordance with FASB ASC 740 Income taxes. Under this method, deferred income taxes are recognized for all significant temporary differences at enacted rates and classified as current or non-current based upon the classification of the related asset or liability in the consolidated financial statements. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all, the deferred tax asset will not be realized. | |||
FASB ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements, and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides accounting guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interest and penalties from tax assessments, if any, are included in income taxes in the consolidated statement of income. | |||
(o) | Foreign currency transactions and translations | ||
All transactions in currencies other than functional currencies during the year are translated at the exchange rates prevailing on the respective transaction dates. Monetary assets and liabilities existing at the balance sheet date denominated in currencies other than functional currencies are remeasured at the exchange rates existing on that date. Exchange differences are recorded in the consolidated statement of income. | |||
The functional currency of the Company and its subsidiaries include the U.S. dollar or the Hong Kong dollar. The financial statements of all subsidiaries are translated in accordance with FASB ASC 830 foreign Currency Matters". All assets and liabilities are translated at the rates of exchange ruling at the balance sheet date and all income and expense items are translated at the average rates of exchange over the year. All exchange differences arising from the translation of subsidiaries financial statements are recorded as a component of comprehensive income. | |||
(p) | Earnings per share | ||
Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the year. | |||
Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the year. The weighted average number of common shares outstanding is adjusted to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. | |||
(q) | Stock options | ||
The Company has a stock-based employee compensation plan, as more fully described in Note 9(b). The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service, the requisite service period (usually the vesting period), in exchange for the award. The grant-date fair value of employee share options and similar instruments are estimated using option-pricing models. If the award is modified after the grant date, incremental compensation cost is recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. |
F-12
2. | Summary of Significant Accounting Policies continued |
(r) | Use of estimates | ||
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||
(s) | Comprehensive income (loss) | ||
Accumulated other comprehensive loss represents principally foreign currency translation adjustments and is included in the consolidated statement of changes in equity. | |||
(t) | Fair value of financial instruments | ||
The Company adopted FASB ASC 820 Fair Value Measurements and Disclosures to measure its assets and liabilities. The carrying amounts of cash and cash equivalents, fixed deposits maturing over three months, accounts and notes receivable, other receivables, notes payable, accrued expenses and accounts payable, other payables, and dividend payable approximate their fair values due to the short term nature of these instruments. The carrying amount of long term debt also approximates fair value due to the variable nature of the interest calculations. | |||
As of December 31, 2009 and 2010, the Company did not have any nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements, at least annually, on a recurring basis. | |||
(u) | Recent changes in accounting standards | ||
In September 2009, the FASB issued ASU No. 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update applies to all entities that hold an investment that is required to be measured or disclosed at fair value on a recurring or nonrecurring basis. These amendments permit, as a practical expedient, a reporting entity to measure the fair value of investment on the basis of the net asset value per share of the investment and require disclosures by major category of investment within the scope of this update. ASU No. 2009-12 is effective for interim and annual periods ending after December 15, 2009 and the adoption did not have a material impact on the Companys financial position, results of operations and cash flows. | |||
In December 2009, the FASB issued ASU No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. The amendments in this update are the result of FASB Statement No. 167 Amendments to FASB Interpretation No. 46 (R), which is now codified as FASB ASC 810-10-50-2A Consolidation Overall Disclosure Variable Interest Entities and is effective for the interim and annual periods ending after December 15, 2009. The adoption of ASU No. 2009-17 did not have a material impact on the Companys financial position, results of operations and cash flows. | |||
In January 2010, the FASB issued ASU No. 2010-02, Consolidation (Topic 810), in which it clarifies that the scope of the decrease in ownership provision of the Subtopic and related guidance applies to a subsidiary or group of assets that is a business or nonprofit activity, but does not apply to sales of substance real estate & conveyances of oil and gas mineral rights. ASU No. 2010-02 is effective for the interim and annual periods ending after December 15, 2009. The adoption of ASU No. 2010-02 did not have a material impact on the Companys financial position, results of operations and cash flows. | |||
In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855), which requires an SEC filer to evaluate subsequent events through the date that the financial statements are issued, and removes the requirement to disclose a date in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of US GAAP. It also clarifies that if the financial statements have been revised, then an entity that is not an SEC filer should disclose both the date the financial statements were issued or available to be issued and the date the revised financial statements were issued or available to be issued. ASU No. 2010-09 is effective for the interim and annual periods ending after June 15, 2010 and no material impact on Namtais reporting is considered. |
F-13
2. | Summary of Significant Accounting Policies continued |
(u) | Recent changes in accounting standards continued | ||
In April 2010, the FASB issued ASU No. 2010-13, CompensationStock Compensation (Topic 718), which provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entitys equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. ASU No. 2010-13 is effective for fiscal years, and interim period within those fiscal years, beginning on or after December 15, 2010. The adoption of ASU No. 2010-13 is not expected to have any impact on the Companys financial position, results of operations and cash flows. | |||
In December 2010, the FASB issued ASU No. 2010-28, IntangiblesGoodwill and Other (Topic 350), which modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. ASU No. 2010-28 is effective for fiscal years, and interim period within those fiscal years, beginning on or after December 15, 2010. The adoption of ASU No. 2010-28 is not expected to have any impact on the Companys financial position, results of operations and cash flows. | |||
In December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic 805), which specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this Update also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. ASU No. 2010-29 is effective for business combinations for which the acquisition date is after the annual periods ending after December 15, 2010 and which early adoption is permitted. The Company believes that the adoption of ASU No. 2010-29 may impact future business combinations. | |||
(v) | Noncontrolling interests | ||
The Company adopted FASB ASC 810-10-45-16Consolidation Overall Other Presentation Matter Noncontrolling Interest in a Subsidiary, which is effective as of the beginning of an entitys first fiscal year that begins after December 15, 2008. Accordingly, in 2009, minority interests have been renamed noncontrolling interests, consolidated net income (loss) is reported at amounts that include the amounts attributable to both noncontrolling interests and Nam Tais shareholders for all periods presented. In addition, noncontrolling interests have been reported as a component of equity in the consolidated balance sheets and consolidated statements of changes in equity and comprehensive income for all periods presented. The Company has retrospectively applied the presentation to balances in the consolidated financial statements for the year ended December 31, 2008. |
3. | Inventories |
Inventories consist of the following: |
At December 31, | 2009 | 2010 | ||||||
Raw materials |
$ | 11,401 | $ | 19,372 | ||||
Work-in-progress |
1,879 | 4,022 | ||||||
Finished goods |
2,774 | 5,664 | ||||||
$ | 16,054 | $ | 29,058 | |||||
F-14
4. | Property, Plant and Equipment, net |
Property, plant and equipment, net consist of the following: |
At December 31, | 2009 | 2010 | ||||||
At cost: |
||||||||
Buildings |
$ | 89,335 | $ | 89,361 | ||||
Machinery and equipment |
127,369 | 128,647 | ||||||
Leasehold improvements |
29,239 | 30,586 | ||||||
Furniture and fixtures |
2,771 | 4,469 | ||||||
Automobiles |
1,107 | 1,397 | ||||||
Tools and molds |
235 | 283 | ||||||
Total |
250,056 | 254,743 | ||||||
Less: accumulated depreciation |
(146,751 | ) | (166,642 | ) | ||||
103,305 | 88,101 | |||||||
Construction in progress |
4,805 | 794 | ||||||
Net book value |
$ | 108,110 | $ | 88,895 | ||||
Depreciation expenses were $21,901, $22,819 and $23,734 for the years ended December 31, 2008, 2009 and 2010 respectively. |
5. | Goodwill |
A summary of the changes in the carrying value of goodwill, by reporting unit, is as follows: |
CECP | ||||
reporting unit | ||||
Balance at December 31, 2009 and 2010 |
$ | 2,951 | ||
In 2008, the Company performed the first step of its goodwill impairment test for each of its reporting units and determined that the carrying value of the former LCDP reporting unit exceeded its fair value in 2008 due to a combination of factors, including the deteriorating macro-economic environment which resulted in a significant decline in customer demand, intense pricing pressure and increasing competition of former LCDP reporting unit. The fair value of the former LCDP reporting unit was estimated using a discounted cash flow methodology. Having determined that the goodwill of the former LCDP reporting unit was potentially impaired, the Company began performing the second step of the goodwill impairment analysis which involves calculating the implied fair value of its goodwill by allocating the fair value of the reporting unit to all of its assets and liabilities other than goodwill and comparing the residual amount to the carrying value of goodwill. Accordingly, the Company recorded a goodwill impairment loss of $17,345 on the former LCDP reporting unit for the year ended December 31, 2008. | ||
In 2009, the fair value of the CECP reporting unit was determined using a discounted cash flow methodology, based on a discount rate of 9.8% and expected future cash flows. The expected future cash flows were based on a five-year plan (after taking into account of the impact of the current financial crisis) provided by management and with a reasonable growth rate covering the five-year period as well as the period beyond. The Company completed its annual impairment analysis for 2009 and concluded that the fair value of the CECP reporting unit exceeded its carrying value as of December 31, 2009. Therefore, no impairment loss was recognized in 2009. | ||
In 2010, the fair value of the CECP reporting unit was determined using a discounted cash flow methodology, based on a discount rate of 8.6% and expected future cash flows. The expected future cash flows were based on a five-year plan provided by management and with a reasonable growth rate covering the five-year period as well as the period beyond. The Company completed its annual impairment analysis for 2010 and concluded that the fair value of the CECP reporting unit exceeded its carrying value as of December 31, 2010. Therefore, no impairment loss was recognized in 2010. |
F-15
6. | Investments in Subsidiaries |
Percentage of Ownership as | ||||||||||||
Place of | Principal | at December 31, | ||||||||||
Subsidiaries | Incorporation | activity | 2009 | 2010 | ||||||||
Consolidated principal subsidiaries: |
||||||||||||
NTEEP |
Cayman Islands | Investment holding | 100 | % | 100 | % | ||||||
Nam Tai Holdings Limited |
BVI | Investment holding | 100 | % | 100 | % | ||||||
Nam Tai Investment Limited |
Hong Kong | Investment holding | 100 | % | 100 | % | ||||||
Nam Tai Group Management Limited (NTGM) |
Hong Kong | Inactive | 100 | % | 100 | % | ||||||
Nam Tai Telecom (Hong Kong) Company Limited |
Hong Kong | Inactive | 100 | % | 100 | % | ||||||
Nam Tai Trading Company Limited (NTTC) |
Hong Kong | Inactive | 100 | % | 100 | % | ||||||
Nam Tai Investments Consultant (Macao Commercial Offshore) Company Ltd. |
Macao | Inactive | 100 | % | | (1) | ||||||
Zastron (Macao Commercial Offshore) Company Limited |
Macao | Inactive | 100 | % | | (1) | ||||||
Namtai Electronic (Shenzhen) Co., Ltd. (Namtai Shenzhen) |
PRC | Manufacturing and trading | 100 | % | 100 | % | ||||||
Jetup Electronic (Shenzhen) Co., Ltd. (Jetup) |
PRC | Manufacturing and trading | 100 | % | | (2) | ||||||
Zastron Electronic (Shenzhen) Co. Ltd. (Zastron Shenzhen) |
PRC | Manufacturing and trading | 100 | % | 100 | % | ||||||
Wuxi Zastron Precision-Flex Co., Ltd. (Wuxi Zastron Flex) |
PRC | Manufacturing and trading | 100 | % | 100 | % | ||||||
Wuxi Zastron Precision-Tech Co., Ltd. (Wuxi Zastron Tech) |
PRC | Manufacturing and trading | 100 | % | | (3) | ||||||
Namtai Japan Company Limited |
Japan | Provision of sales co-ordination and marketing services | 100 | % | | (1) |
(1) | De-registered during the year ended December 31, 2010. | |
(2) | Merged with Zastron Shenzhen during the year ended December 31, 2010. | |
(3) | Merged with Wuxi Zastron Flex during the year ended December 31, 2010. |
(i) | In February 2008, the Company entered into a share purchase agreement with an independent third party, pursuant to which the Company agreed to sell its entire interest in JIC Technology and its subsidiaries to this independent third party for a cash consideration of approximately $51,100. The disposal was completed in March 2008 and resulted in a net gain of approximately $20,206. Upon the completion of the disposal, the Company no longer has any equity interest in JIC Technology and its subsidiaries, including the Namtek group. | ||
(ii) | In May, June and July 2008, the Company further acquired a total of 14,986,000 ordinary shares of NTEEP for cash consideration of $2,906 resulting in 74.88% equity interest held in NTEEP as of December 31, 2008. | ||
(iii) | In 2009, the Company acquired all of the outstanding 221,455,118 ordinary shares of NTEEP it did not own for a cash consideration of $43,434 and completed the privatization of NTEEP. As a result of the privatization, the additional paid-in capital increased by $2,430 in 2009. |
The Companys retained earnings are not restricted as to the payment of dividends except to the extent dictated by prudent business practices. The Company believes that there are no material restrictions, including foreign exchange controls, on the ability of its non-PRC subsidiaries to transfer surplus funds to the Company in the form of cash dividends, loans, advances or purchases. With respect to the Companys PRC subsidiaries, there are restrictions on the payment of dividends and the distribution of dividends from the PRC. on March 16, 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax (the New Law) by Order No. 63 of the President of the PRC. Please refer to Note 12 for further details of the New Law. The New Law became effective from January 1, 2008. Prior to the enactment of the New Law, when dividends are paid by the Companys PRC subsidiaries, such dividends would reduce the amount of reinvested profits and accordingly, the refund of taxes paid might be reduced to the extent of tax applicable to profits not reinvested. Subsequent to the enactment of the New Law, due to the removal of tax benefit related to reinvestment of capital in PRC subsidiaries, the Company may not reinvest the profits made by the PRC subsidiaries. Payment of dividends by PRC subsidiaries to foreign investors on profits earned subsequent to January 1, 2008 will also be subject to withholding tax under the New Law. In addition, pursuant to the relevant PRC regulations, a certain portion of the profits made by these subsidiaries must be set aside for future capital investment and are not distributable, and the registered capital of the Companys PRC subsidiaries are also restricted. These reserves and registered capital of the PRC subsidiaries amounted to $270,548 and $294,691 as of December 31, 2009 and 2010, respectively. However, the Company believes that such restrictions will not have a material effect on the Companys liquidity or cash flows. |
F-16
7. | Accrued Expenses and Other Payables |
Accrued expenses and other payables consisted of the following: |
At December 31, | 2009 | 2010 | ||||||
Accrued salaries |
$ | 3,258 | $ | 4,744 | ||||
Accrued bonus |
844 | 4,561 | ||||||
Accrued tooling and equipment charges |
2,112 | 553 | ||||||
Accrued professional fees |
1,826 | 1,709 | ||||||
Construction payable |
2,785 | 1,102 | ||||||
Others |
5,572 | 4,815 | ||||||
$ | 16,397 | $ | 17,484 | |||||
8. | Bank Loans and Banking Facilities |
The subsidiaries of the Company have credit facilities with various banks representing notes payable, trade acceptances, import facilities, revolving loans and overdrafts. At December 31, 2009 and 2010, these facilities totaled $5,129 and $14,130, of which $4,144 and $14,130 were unused at December 31, 2009 and 2010, respectively. The maturity of these facilities is generally up to 90 days. Interest rates are generally based on the banks usual lending rates in Hong Kong or the PRC and the credit lines are normally subject to annual review. The banking facilities are secured by guarantee given by Nam Tai and Namtai Shenzhen. | ||
Total banking facilities utilized which are usance bills pending maturity may not agree to notes payable due to bank having not yet received the bills of goods from vendors as of the balance sheet date. |
At December 31, | 2009 | 2010 | ||||||
Usance bills pending maturity |
$ | 985 | $ | | ||||
Total banking facilities utilized |
985 | | ||||||
Less: Outstanding letters of credit |
(294 | ) | | |||||
Notes payable |
$ | 691 | $ | | ||||
The notes payable carried no interest during 2009. |
9. | Equity |
(a) | The Company has only one class of common shares authorized, issued and outstanding. | ||
(b) | Stock Options | ||
In May 2001 (and amended in July 2004 and in November 2006), the Board of Directors approved a stock option plan which would grant 15,000 options to each non-employee director of the Company elected at each annual general meeting of shareholders, and might grant options to key employees, consultants or advisors of the Company or any of its subsidiaries to subscribe for its shares in accordance with the terms of this stock option plan based on past performance and/or expected contributions to the Company. The maximum number of shares to be issued pursuant to the exercise of options granted was 3,300,000 shares. The options granted under this plan generally have a term of two to three years, subject to the discretion of the Board of Directors, but cannot exceed ten years. |
F-17
9. | Equity continued |
(b) | Stock Options continued | ||
In February 2006, the Board of Directors approved another stock option plan, which was subsequently approved by the shareholders at the 2006 annual general meeting of shareholders, with the same terms and conditions. However, the maximum number of shares to be issued pursuant to exercise of options granted was 2,000,000 shares. | |||
A summary of stock option activity during the three years ended December 31, 2010 is as follows: |
Weighted | Weighted | |||||||||||
average | average fair | |||||||||||
Number of | exercise | value per | ||||||||||
options | price | option | ||||||||||
Outstanding and exercisable at January 1, 2008 |
295,000 | $ | 18.19 | $ | 5.24 | |||||||
Granted |
175,000 | $ | 10.79 | $ | 1.34 | |||||||
Expired |
(90,000 | ) | $ | 21.62 | $ | 6.95 | ||||||
Canceled |
(140,000 | ) | $ | 10.51 | $ | 1.71 | ||||||
Repurchased |
(225,000 | ) | $ | 15.57 | $ | 3.62 | ||||||
Outstanding and exercisable at December 31, 2008 |
15,000 | $ | 22.25 | $ | 6.64 | |||||||
Granted |
75,000 | $ | 4.41 | $ | 0.89 | |||||||
Expired |
(15,000 | ) | $ | 22.25 | $ | 6.64 | ||||||
Outstanding and exercisable at December 31, 2009 |
75,000 | $ | 4.41 | $ | 0.89 | |||||||
Granted |
60,000 | $ | 4.45 | $ | 1.58 | |||||||
Surrendered |
(15,000 | ) | $ | 4.41 | $ | 0.89 | ||||||
Outstanding and exercisable at December 31, 2010 |
120,000 | $ | 4.43 | $ | 1.24 | |||||||
In October 2008, 225,000 stock options were repurchased and canceled by the Company. The repurchase prices of these options were the same as the fair values of these options calculated on the date of repurchase and the amounts paid for the repurchases were charged to equity. | |||
Details of the options granted by the Company in 2008, 2009 and 2010 are as follows: |
Number of | Exercise | |||||||
options granted | Vesting period | price | Exercisable period | |||||
In 2008 |
||||||||
50,000
|
100% vested at date of grant | $ | 9.86 | February 5, 2008 to February 4, 2011 (note 2) | ||||
75,000
|
100% vested at date of grant | $ | 12.03 | June 6, 2008 to June 5, 2011 (note 1) | ||||
50,000
|
100% vested at date of grant | $ | 9.86 | September 24, 2008 to September 24, 2011 (note 2) | ||||
In 2009 |
||||||||
75,000
|
100% vested at date of grant | $ | 4.41 | June 5, 2009 to June 4, 2012 (note 3) | ||||
In 2010 |
||||||||
60,000
|
100% vested at date of grant | $ | 4.45 | June 3, 2010 to June 2, 2013 |
Notes: | ||
1. | These options were repurchased during 2008. | |
2. | These options were canceled during 2008. | |
3. | 15,000 of these stock options were surrendered during 2010. |
F-18
9. | Equity continued |
(b) | Stock Options continued | ||
As of December 31, 2010, there were no non-vested stock options. The total amount of recognized compensation expense in 2008, 2009 and 2010 was $955, $67 and $95, respectively. | |||
The following summarizes information about stock options outstanding at December 31, 2010. 120,000 stock options are exercisable as of December 31, 2010. |
Weighted average | ||||||||
Number | remaining contractual | |||||||
Weighted average exercise price | of options | life in months | ||||||
$4.43
|
120,000 | 23.1 | ||||||
The weighted average remaining contractual life of the stock options outstanding at December 31, 2008, 2009 and 2010 was approximately 5, 29 and 23 months, respectively. The weighted average fair value of options granted during 2008, 2009 and 2010 was $1.34, $0.89 and $1.58, respectively, using the Black-Scholes option-pricing model based on the following assumptions: |
Year ended December 31, | 2008 | 2009 | 2010 | |||||||||
Risk-free interest rate |
2.08% to 2.73% | 1.50 | % | 1.25 | % | |||||||
Expected life |
3 years | 3 years | 3 years | |||||||||
Expected volatility |
35.49% to 38.00% | 52.34 | % | 51.23 | % | |||||||
Expected dividend yield |
8.16% | 9.98 | % | |
(c) | Share Buy back | ||
No shares were repurchased during the years ended December 31, 2008, 2009 and 2010. | |||
(d) | Share Redemptions and Reinstatement of Redeemed Shares | ||
On January 22, 1999, pursuant to its Articles of Association, the Company redeemed and canceled 415,500 shares of the Company registered in the name of Tele-Art Inc. (Tele-Art) at a price of $3.73 per share for $1,549. | |||
On August 12, 2002, pursuant to its Articles of Association, the Company redeemed and canceled an additional 509,181 shares of the Company beneficially owned by Tele-Art at a price of $6.14 per share for $3,125. | |||
No shares have been redeemed since August 12, 2002. | |||
On November 20, 2006, judgment was rendered by the Lords of the Judicial Committee of the Privy Council of the United Kingdom (the Privy Council), declaring that the redemptions by the Company of its common shares beneficially owned by Tele-Art on January 22, 1999 and August 12, 2002 were nullities and that the register of members of the Company (i.e. the Companys shareholders register) should be rectified to reinstate the redeemed shares together with any other shares which have since accrued by way of exchange or dividend. | |||
Following the November 20, 2006 judgment, the Company received the order from the Privy Council on January 9, 2007 to rectify the share register of Nam Tai by registering such 1,017,149 (after adjustment of the 1 for 10 stock dividend on November 7, 2003) shares (the Redeemed Shares) in the name of Bank of China (Hong Kong) Limited (Bank of China). In March 2007, the Company issued the 1,017,149 common shares. However, as the court judgment was determined in 2006, the Company accounted for the obligation to reinstate the Redeemed Shares at their fair value (i.e. market closing price) on November 20, 2006, the date of the judgment. |
F-19
Weighted | ||||||||||||
average number | Per share | |||||||||||
Year ended December 31, 2008 | Income | of shares | amount | |||||||||
Basic earnings per share |
$ | 30,635 | 44,803,735 | $ | 0.68 | |||||||
Effect of dilutive securities Stock options |
| 2,046 | | |||||||||
Diluted earnings per share |
$ | 30,635 | 44,805,781 | $ | 0.68 | |||||||
Weighted | ||||||||||||
average number | Per share | |||||||||||
Year ended December 31, 2009 | Income | of shares | amount | |||||||||
Basic earnings per share |
$ | 1,652 | 44,803,735 | $ | 0.04 | |||||||
Effect of dilutive securities Stock options |
| 6,063 | | |||||||||
Diluted earnings per share |
$ | 1,652 | 44,809,798 | $ | 0.04 | |||||||
Weighted | ||||||||||||
average number | Per share | |||||||||||
Year ended December 31, 2010 | Income | of shares | amount | |||||||||
Basic earnings per share |
$ | 15,006 | 44,803,735 | $ | 0.33 | |||||||
Effect of dilutive securities Stock options |
| 18,025 | | |||||||||
Diluted earnings per share |
$ | 15,006 | 44,821,760 | $ | 0.33 | |||||||
F-20
Year ended December 31, | 2008 | 2009 | 2010 | |||||||||
PRC, excluding Hong Kong and Macao |
$ | 3,055 | $ | 4,629 | $ | 25,405 | ||||||
Hong Kong, Macao and other jurisdictions |
35,891 | (3,881 | ) | (5,148 | ) | |||||||
$ | 38,946 | $ | 748 | $ | 20,257 | |||||||
F-21
F-22
(4) | Expected Dispositions of Tax Disputes with Inactive or Dormant Subsidiaries |
(5) | Notices of Alleged Personal Liability for Additional Taxes Against Former Directors and Officers for Signing NTTCs Tax Returns |
Year ended December 31, | 2008 | 2009 | 2010 | |||||||||
Current tax |
$ | (3,670 | ) | $ | (2,087 | ) | $ | (7,828 | ) | |||
Deferred tax |
793 | 804 | 2,577 | |||||||||
$ | (2,877 | ) | $ | (1,283 | ) | $ | (5,251 | ) | ||||
F-23
December 31, | 2009 | 2010 | ||||||
Net operating losses |
$ | 2,634 | $ | 3,585 | ||||
Obsolete inventories |
171 | 23 | ||||||
Allowance for doubtful accounts |
47 | 3 | ||||||
Property, plant and equipment |
4,486 | 5,832 | ||||||
Pre-operating expenses |
| 272 | ||||||
Employee severance benefits |
196 | | ||||||
Total deferred tax assets |
7,534 | 9,715 | ||||||
Less: valuation allowance |
(1,588 | ) | (916 | ) | ||||
Deferred tax assets |
5,946 | 8,799 | ||||||
Deferred tax liability arising from withholding tax
on undistributed earnings
of PRC subsidiaries |
(1,103 | ) | (1,379 | ) | ||||
Net deferred tax |
$ | 4,843 | $ | 7,420 | ||||
December 31, | 2008 | 2009 | 2010 | |||||||||
At beginning of the year |
$ | 1,040 | $ | 1,831 | $ | 1,588 | ||||||
Current year addition (reduction) |
1,227 | (276 | ) | (672 | ) | |||||||
Disposal of a subsidiary |
(399 | ) | | | ||||||||
Change in tax law |
(37 | ) | 33 | | ||||||||
At end of the year |
$ | 1,831 | $ | 1,588 | $ | 916 | ||||||
Year ended December 31, | 2008 | 2009 | 2010 | |||||||||
Income before income taxes |
$ | 38,946 | $ | 748 | $ | 20,257 | ||||||
PRC tax rate |
18 | % | 20 | % | 22 | % | ||||||
Income tax expense at PRC tax rate on income before income tax |
$ | (7,010 | ) | $ | (150 | ) | $ | (4,457 | ) | |||
Effect of difference between Hong Kong and PRC tax rates applied to Hong Kong income |
(71 | ) | (485 | ) | (134 | ) | ||||||
Effect of change in tax law |
330 | 364 | 134 | |||||||||
Change in valuation allowance |
(1,227 | ) | 276 | 672 | ||||||||
Deferred tax liability on withholding tax on undistributed profits of PRC subsidiaries |
(740 | ) | (363 | ) | (276 | ) | ||||||
Effect of income not taxable for tax purpose |
7,307 | | | |||||||||
Tax benefit (expense) arising from items which are not assessable (deductible) for tax purposes: |
||||||||||||
Exempted interest income |
57 | | | |||||||||
Exempted exchange gain |
1,000 | | | |||||||||
Non-deductible legal and professional fees |
(146 | ) | | | ||||||||
Non-deductible impairment loss on goodwill |
(3,122 | ) | | | ||||||||
Non-deductible and non-taxable items |
655 | (766 | ) | (777 | ) | |||||||
Under-provision of income tax expense in prior years |
| (46 | ) | (69 | ) | |||||||
Others |
90 | (113 | ) | (344 | ) | |||||||
Income tax expense |
$ | (2,877 | ) | $ | (1,283 | ) | $ | (5,251 | ) | |||
F-24
Payments (in thousands) due by period | ||||||||||||||||
Contractual Obligation | Total | 2011 | 2012 | 2013 | ||||||||||||
Operating
leases(1) |
$ | 1,016 | $ | 1,016 | $ | | (2) | $ | | |||||||
Capital
commitments(3) |
4,923 | 4,923 | | | ||||||||||||
Total |
$ | 5,939 | $ | 5,939 | $ | | $ | | ||||||||
| Most of the LCDP business has been mainly LCD modules assembling for telecommunication products in 2010, which is similar to the business operated by TCA. In view of the similarity of the products, we have merged the LCDP segment into the TCA segment; | |
| After the merger, all the TCA business is ran by one management team; | |
| We discontinued our CECP production for bluetooth headsets and calculators with two major box-built customers in the fourth quarter 2010, and that quarter will be the last quarter for the camera products made for the remaining major customer be classified under CECP as management has decided to reclassify this business to TCA to reflect its component assembly nature in 2011; | |
| In 2010, the Flexible Printed Circuit Board (FPCB) business was too insignificant to be classified as one business segment. In addition, FPCB is regarded as WIP (work-in-progress) for internal use by the Company, i.e. it is manufactured for a more value-adding process, FPC assembling. |
F-25
TCA | CECP | Corporate | Total | |||||||||||||
Net sales third parties |
$ | 351,487 | $ | 271,365 | $ | | $ | 622,852 | ||||||||
Cost of sales |
(330,772 | ) | (221,402 | ) | | (552,174 | ) | |||||||||
Gross profit |
20,715 | 49,963 | | 70,678 | ||||||||||||
General and administrative expenses * |
(14,583 | ) | (10,813 | ) | (3,716 | ) | (29,112 | ) | ||||||||
Selling expenses * |
(3,210 | ) | (3,735 | ) | | (6,945 | ) | |||||||||
Research and development expenses |
(5,394 | ) | (5,496 | ) | | (10,890 | ) | |||||||||
Impairment loss on goodwill |
(17,345 | ) | | | (17,345 | ) | ||||||||||
Other income, net |
666 | 4,429 | 1,333 | 6,428 | ||||||||||||
Gain on sales of subsidiaries shares |
| | 20,206 | 20,206 | ||||||||||||
Interest income |
964 | 2,801 | 2,517 | 6,282 | ||||||||||||
Interest expense |
(356 | ) | | | (356 | ) | ||||||||||
(Loss) income before income taxes |
(18,543 | ) | 37,149 | 20,340 | 38,946 | |||||||||||
Income taxes |
1,401 | (4,278 | ) | | (2,877 | ) | ||||||||||
Consolidated net (loss) income |
(17,142 | ) | 32,871 | 20,340 | 36,069 | |||||||||||
Net loss (income) attributable to
noncontrolling interests |
78 | (5,512 | ) | | (5,434 | ) | ||||||||||
Net (loss) income attributable to
Nam Tai shareholders |
$ | (17,064 | ) | $ | 27,359 | $ | 20,340 | $ | 30,635 | |||||||
Year
ended December 31, 2009
| ||||||||||||||||
TCA | CECP | Corporate | Total | |||||||||||||
Net sales third parties |
$ | 292,074 | $ | 116,063 | $ | | $ | 408,137 | ||||||||
Cost of sales |
(273,011 | ) | (94,806 | ) | | (367,817 | ) | |||||||||
Gross profit |
19,063 | 21,257 | | 40,320 | ||||||||||||
General and administrative expenses |
(17,085 | ) | (7,155 | ) | (4,153 | ) | (28,393 | ) | ||||||||
Selling expenses |
(3,248 | ) | (2,018 | ) | | (5,266 | ) | |||||||||
Research and development expenses |
(2,987 | ) | (3,286 | ) | | (6,273 | ) | |||||||||
Other income (expenses), net |
262 | 78 | (596 | ) | (256 | ) | ||||||||||
Interest income |
78 | 476 | 264 | 818 | ||||||||||||
Interest expense |
(202 | ) | | | (202 | ) | ||||||||||
(Loss) income before income taxes |
(4,119 | ) | 9,352 | (4,485 | ) | 748 | ||||||||||
Income taxes |
1,400 | (2,683 | ) | | (1,283 | ) | ||||||||||
Consolidated net (loss) income |
(2,719 | ) | 6,669 | (4,485 | ) | (535 | ) | |||||||||
Net loss attributable to noncontrolling interests |
2,146 | 41 | | 2,187 | ||||||||||||
Net (loss) income attributable to Nam Tai
shareholders |
$ | (573 | ) | $ | 6,710 | $ | (4,485 | ) | $ | 1,652 | ||||||
F-26
TCA | CECP | Corporate | Total | |||||||||||||
Net sales third parties |
$ | 401,259 | $ | 133,161 | $ | | $ | 534,420 | ||||||||
Cost of sales |
(375,250 | ) | (107,876 | ) | | (483,126 | ) | |||||||||
Gross profit |
26,009 | 25,285 | | 51,294 | ||||||||||||
General and administrative expenses |
(12,143 | ) | (6,074 | ) | (7,015 | ) | (25,232 | ) | ||||||||
Selling expenses |
(4,346 | ) | (1,158 | ) | | (5,504 | ) | |||||||||
Research and development expenses |
(3,558 | ) | (2,199 | ) | | (5,757 | ) | |||||||||
Other income, net |
2,080 | 1,064 | 828 | 3,972 | ||||||||||||
Interest income |
303 | 574 | 607 | 1,484 | ||||||||||||
Income (loss) before income taxes |
8,345 | 17,492 | (5,580 | ) | 20,257 | |||||||||||
Income taxes |
(1,728 | ) | (3,523 | ) | | (5,251 | ) | |||||||||
Consolidated net income (loss) |
6,617 | 13,969 | (5,580 | ) | 15,006 | |||||||||||
Net income (loss) attributable to
Nam Tai shareholders |
$ | 6,617 | $ | 13,969 | $ | (5,580 | ) | $ | 15,006 | |||||||
* | The 2009 and 2010 presentations show general and administrative expenses and selling expenses as separate line items, whereas the Companys consolidated statement of income for 2008, as originally published, combined general and administrative expenses and selling expenses as a single line item labeled Selling, general and administrative expenses. Selling, general and administrative expenses for 2008 have been presented separately in the segment information to conform to the 2009 and 2010 presentations. |
TCA | CECP | Corporate | Total | |||||||||||||
Depreciation and amortization |
$ | 15,358 | $ | 6,846 | $ | 4 | $ | 22,208 | ||||||||
Capital expenditures |
$ | 43,541 | $ | 1,894 | $ | | $ | 45,435 | ||||||||
Total assets |
$ | 207,493 | $ | 189,889 | $ | 116,679 | $ | 514,061 |
TCA | CECP | Corporate | Total | |||||||||||||
Depreciation and amortization |
$ | 16,597 | $ | 6,516 | $ | 3 | $ | 23,116 | ||||||||
Capital expenditures |
$ | 24,806 | $ | 176 | $ | | $ | 24,982 | ||||||||
Total assets |
$ | 183,887 | $ | 112,058 | $ | 107,979 | $ | 403,924 |
TCA | CECP | Corporate | Total | |||||||||||||
Depreciation and amortization |
$ | 18,134 | $ | 5,839 | $ | 495 | $ | 24,468 | ||||||||
Capital expenditures |
$ | 4,409 | $ | 123 | $ | 80 | $ | 4,612 | ||||||||
Total assets |
$ | 197,083 | $ | 55,569 | $ | 198,128 | $ | 450,780 |
F-27
Year ended December 31, | 2008 | 2009 | 2010 | |||||||||
Product line |
||||||||||||
TCA |
56 | % | 72 | % | 75 | % | ||||||
CECP |
44 | % | 28 | % | 25 | % | ||||||
100 | % | 100 | % | 100 | % | |||||||
Year ended December 31, | 2008 | 2009 | 2010 | |||||||||
Net sales from operations within: |
||||||||||||
- PRC, excluding Hong Kong and Macao: |
||||||||||||
Unaffiliated customers |
$ | 622,852 | $ | 408,137 | $ | 534,420 | ||||||
Intercompany sales |
141 | 19 | 1,222 | |||||||||
$ | 622,993 | $ | 408,156 | $ | 535,642 | |||||||
- Intercompany eliminations |
(141 | ) | (19 | ) | (1,222 | ) | ||||||
Total net sales |
$ | 622,852 | $ | 408,137 | $ | 534,420 | ||||||
Net income (loss) attributable to Nam Tai shareholders within: |
||||||||||||
- PRC, excluding Hong Kong and Macao |
$ | (4,542 | ) | $ | 5,533 | $ | 20,154 | |||||
- Hong Kong and Macao |
35,177 | (3,881 | ) | (5,148 | ) | |||||||
Total net income attributable to Nam Tai shareholders |
$ | 30,635 | $ | 1,652 | $ | 15,006 | ||||||
Year ended December 31, | 2008 | 2009 | 2010 | |||||||||
Net sales to customers by geographical area: |
||||||||||||
- Hong Kong |
$ | 226,020 | $ | 116,254 | $ | 103,337 | ||||||
- Europe |
136,888 | 47,577 | 64,587 | |||||||||
- United States |
108,150 | 41,147 | 51,963 | |||||||||
- PRC (excluding Hong Kong) |
86,968 | 43,300 | 16,578 | |||||||||
- Japan |
11,623 | 140,923 | 291,883 | |||||||||
- North America (excluding United States) |
15,775 | 762 | 914 | |||||||||
- Korea |
9,411 | 1,503 | 277 | |||||||||
- Others |
28,017 | 16,671 | 4,881 | |||||||||
Total net sales |
$ | 622,852 | $ | 408,137 | $ | 534,420 | ||||||
F-28
As of December 31, | 2008 | 2009 | 2010 | |||||||||
Long-lived assets by geographical area: |
||||||||||||
- PRC, excluding Hong Kong and Macao |
$ | 121,475 | $ | 121,286 | $ | 101,014 | ||||||
- Hong Kong and Macao |
185 | 120 | 145 | |||||||||
Total long-lived assets |
$ | 121,660 | $ | 121,406 | $ | 101,159 | ||||||
Year ended December 31, | 2008 | 2009 | 2010 | |||||||||
A |
$ | 102,894 | $ | 94,015 | N/A | |||||||
B |
95,911 | 41,559 | 94,644 | |||||||||
C |
95,508 | 72,922 | 63,803 | |||||||||
D |
65,269 | N/A | N/A | |||||||||
E |
N/A | 49,770 | 131,873 | |||||||||
F |
N/A | N/A | 88,952 | |||||||||
$ | 359,582 | $ | 258,266 | $ | 379,272 | |||||||
2009 | 2010 | |||||||
Expenses incurred by segment: |
||||||||
TCA |
$ | 3,360 | $ | | ||||
CECP |
1,698 | 656 | ||||||
$ | 5,058 | $ | 656 | |||||
2009 | 2010 | |||||||
Provision for employee severance benefits: |
||||||||
Balance at January 1 |
$ | | $ | 979 | ||||
Provision for the year |
5,058 | 656 | ||||||
Payments during the year |
(4,079 | ) | (1,560 | ) | ||||
Balance at December 31 |
$ | 979 | $ | 75 | ||||
F-29
Year ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
General and administrative expenses* |
$ | (2,834 | ) | $ | (2,936 | ) | $ | (2,763 | ) | |||
Other income (expense), net |
1,328 | (626 | ) | 23 | ||||||||
Gain on sales of subsidiaries shares |
20,206 | | | |||||||||
Interest income on loan to a subsidiary |
12,146 | 11,134 | 11,568 | |||||||||
Interest income |
2,517 | 263 | 233 | |||||||||
Income before income taxes |
33,363 | 7,835 | 9,061 | |||||||||
Income taxes |
| | | |||||||||
Income before share of net (losses) profits of subsidiaries, net of taxes |
33,363 | 7,835 | 9,061 | |||||||||
Share of net (losses) profits of subsidiaries, net of taxes |
(2,728 | ) | (6,183 | ) | 5,945 | |||||||
Net income attributable to Nam Tai shareholders |
$ | 30,635 | $ | 1,652 | $ | 15,006 | ||||||
* Amount of share-based compensation expense included in general and
administrative expenses |
$ | 290 | $ | 67 | $ | 95 |
F-30
December 31, | ||||||||
2009 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 91,398 | $ | 88,333 | ||||
Fixed deposits maturing over three months |
12,903 | | ||||||
Prepaid expenses and other receivables |
| 133 | ||||||
Loan to a subsidiary current |
51,906 | 77,857 | ||||||
Amounts due from subsidiaries |
11,134 | 32,863 | ||||||
Total current assets |
167,341 | 199,186 | ||||||
Equipments, net |
1 | | ||||||
Deposits for property, plant and equipment |
| 433 | ||||||
Loan to a subsidiary non-current |
233,573 | 207,622 | ||||||
Investments in subsidiaries |
(57,247 | ) | (51,302 | ) | ||||
Total assets |
$ | 343,668 | $ | 355,939 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accrued expenses and other payables |
$ | 2,576 | $ | 1,650 | ||||
Dividend payable |
| 8,961 | ||||||
Amounts due to subsidiaries |
14,682 | 11,194 | ||||||
Total liabilities |
17,258 | 21,805 | ||||||
Shareholders equity: |
||||||||
Common shares ($0.01 par value authorized 200,000,000 shares,
issued and outstanding 44,803,735 shares as at December 31, 2009 and 2010) |
448 | 448 | ||||||
Additional paid-in capital |
285,264 | 286,943 | ||||||
Retained earnings |
40,706 | 46,751 | ||||||
Accumulated other comprehensive loss |
(8 | ) | (8 | ) | ||||
Total shareholders equity |
326,410 | 334,134 | ||||||
Total liabilities and shareholders equity |
$ | 343,668 | $ | 355,939 | ||||
F-31
Accumulated | ||||||||||||||||||||||||||||
Common | Additional | Other | Total | |||||||||||||||||||||||||
Common Shares | Shares | Paid-in | Retained | Comprehensive | Shareholders | Comprehensive | ||||||||||||||||||||||
Outstanding | Amount | Capital | Earnings | Loss | Equity | Income | ||||||||||||||||||||||
Balance at January 1, 2008 |
44,803,735 | $ | 448 | $ | 281,895 | $ | 47,846 | $ | (8 | ) | $ | 330,181 | ||||||||||||||||
Equity-settled share-based payment |
| | 290 | | | 290 | ||||||||||||||||||||||
Repurchase of share options |
| | (68 | ) | | | (68 | ) | ||||||||||||||||||||
Net income |
| | | 30,635 | | 30,635 | $ | 30,635 | ||||||||||||||||||||
Share of subsidiaries equity
transactions: |
||||||||||||||||||||||||||||
Equity-settled share-based payment |
| | 650 | | | 650 | ||||||||||||||||||||||
Comprehensive income |
| | | | | $ | 30,635 | |||||||||||||||||||||
Cash dividends ($0.88 per share) |
| | | (39,427 | ) | | (39,427 | ) | ||||||||||||||||||||
Balance at December 31, 2008 |
44,803,735 | $ | 448 | $ | 282,767 | $ | 39,054 | $ | (8 | ) | $ | 322,261 | ||||||||||||||||
Equity-settled share-based payment |
| | 67 | | | 67 | ||||||||||||||||||||||
Acquisition of subsidiaries share |
| | 2,430 | | | 2,430 | ||||||||||||||||||||||
Net income |
| | | 1,652 | | 1,652 | $ | 1,652 | ||||||||||||||||||||
Comprehensive income |
$ | 1,652 | ||||||||||||||||||||||||||
Balance at December 31, 2009 |
44,803,735 | $ | 448 | $ | 285,264 | $ | 40,706 | $ | (8 | ) | $ | 326,410 | ||||||||||||||||
Equity-settled share-based payment |
| | 95 | | | 95 | ||||||||||||||||||||||
Deemed contribution of services |
| | 1,584 | | | 1,584 | ||||||||||||||||||||||
Net income |
| | | 15,006 | | 15,006 | $ | 15,006 | ||||||||||||||||||||
Comprehensive income |
$ | 15,006 | ||||||||||||||||||||||||||
Cash dividends ($0.20 per share) |
| | | (8,961 | ) | | (8,961 | ) | ||||||||||||||||||||
Balance at December 31, 2010 |
44,803,735 | $ | 448 | $ | 286,943 | $ | 46,751 | $ | (8 | ) | $ | 334,134 | ||||||||||||||||
F-32
Year ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net income attributable to Nam Tai shareholders |
$ | 30,635 | $ | 1,652 | $ | 15,006 | ||||||
Adjustments to reconcile net income attributable to Nam Tai shareholers to net cash provided
by operating activities: |
||||||||||||
Share of net losses (profits) of subsidiaries, net of taxes |
2,728 | 6,183 | (5,945 | ) | ||||||||
Dividend income from subsidiaries |
26,446 | | | |||||||||
Gain on disposal of subsidiaries |
(20,206 | ) | | | ||||||||
Depreciation |
1 | 2 | | |||||||||
Loss on disposal of property, plant and equipment |
| | 1 | |||||||||
Dividend withheld |
(305 | ) | | | ||||||||
Share-based compensation expenses |
290 | 67 | 95 | |||||||||
Changes in current assets and liabilities: |
||||||||||||
(Increase) decrease in prepaid expenses and other receivables |
(298 | ) | 309 | (133 | ) | |||||||
Increase (decrease) in accrued expenses and other payables |
173 | (779 | ) | 658 | ||||||||
Net cash provided by operating activities |
$ | 39,464 | $ | 7,434 | $ | 9,682 | ||||||
Cash flows from investing activities: |
||||||||||||
Proceeds on disposal of subsidiaries shares |
50,024 | | | |||||||||
Increase in deposit for purchase of property, plant and equipment |
| | (433 | ) | ||||||||
(Increase) decrease in fixed deposits maturing over three months |
| (12,903 | ) | 12,903 | ||||||||
Acquisition of subsidiaries shares |
(2,906 | ) | (43,434 | ) | | |||||||
(Increase) decrease in amounts due from subsidiaries |
(12,946 | ) | 1,856 | (21,729 | ) | |||||||
Decrease in other assets |
264 | | | |||||||||
Net cash provided by (used in) investing activities |
$ | 34,436 | $ | (54,481 | ) | $ | (9,259 | ) | ||||
Cash flows from financing activities: |
||||||||||||
(Decrease) increase in amounts due to subsidiaries |
(1,439 | ) | 14,682 | (3,488 | ) | |||||||
Proceeds from loan to a subsidiary |
| 25,952 | | |||||||||
Payment for repurchase of share options |
(68 | ) | | | ||||||||
Dividend paid |
(38,774 | ) | (9,857 | ) | | |||||||
Net cash (used in) provided by financing activities |
$ | (40,281 | ) | $ | 30,777 | $ | (3,488 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
33,619 | (16,270 | ) | (3,065 | ) | |||||||
Cash and cash equivalents at beginning of year |
74,049 | 107,668 | 91,398 | |||||||||
Cash and cash equivalents at end of year |
$ | 107,668 | $ | 91,398 | $ | 88,333 | ||||||
F-33
F-34
Exhibit No. | Exhibit | |
1.1
|
Memorandum and Articles of Association, as amended on June 26, 2003 (incorporated by reference to Exhibit 1.1 to the registrants Form 8-A/A filed with the SEC on December 13, 2007). | |
4.1
|
2006 Stock Option Plan of Nam Tai Electronics, Inc adopted February 10, 2006 and approved on June 9, 2006 (incorporated by reference to Exhibit A attached to Exhibit 99.1 of the Form 6-K furnished to the SEC on May 15, 2006). | |
4.2
|
Amendment to 2006 Stock Option Plan (incorporated by reference to Exhibit 4.1.1 to the Companys Registration Statement on Form S-8 File No. 333-136653 included with the Company Form 6-K furnished to the SEC on November 13, 2006). | |
4.3
|
Amended 2001 Option Plan dated July 30, 2004 (incorporated by reference to Exhibit 4.18 to the Companys Form 20-F for the year ended December 31, 2004 filed with the SEC on March 15, 2005). | |
4.4
|
Amendment to 2001 Stock Option Plan (incorporated by reference to Exhibit 4.1.1 to the Companys Registration Statement on Form S-8 File No. File No. 333-76940 included with Companys Form 6-K furnished to the SEC on November 13, 2006). | |
4.5
|
Supplemental Rental Agreement dated May 1, 2007 between Nam Tais subsidiary, Jetup Electronic (Shenzhen) Co., Ltd and a local collective committee of Shenzhen Baoan District (incorporated by reference to Exhibit 4.16 to the Companys Form 20-F for the year ended December 31, 2007 filed with the SEC on March 17, 2008).* | |
4.6
|
Banking Facilities Letter dated August 11, 2008 to Nam Tais subsidiary, Namtai Electronic (Shenzhen) Co. Ltd. from HSBC Bank (China) Company Limited for Namtai Electronic (Shenzhen) Co., Ltd. (incorporated by reference to Exhibit 4.59 to the Companys Form 20-F for the year ended December 31, 2008 filed with the SEC on March 13, 2009). | |
4.7
|
Supplemental plant construction contractors agreement (electrical engineering) dated July 10, 2009 between Nam Tai Subsidiary, Wuxi Zastron Precision-Flex Company Limited, and Yixing Building Engineering & Installation Co. Ltd. (incorporated by reference to Exhibit 4.17 to the Companys Form 20-F for the year ended December 31, 2009 filed with the SEC on March 16, 2010)* | |
4.8
|
Banking Facilities Letter Nam Tais subsidiary, Namtai Electronic (Shenzhen) Co., Ltd. and China Construction Bank Corporation, Shenzhen Branch dated June 29, 2010 for Namtai Electronic (Shenzhen) Co., Ltd. to receive import facilities of up to $6,000,000.* | |
4.9
|
Banking Facilities Letter dated August 6, 2009, between Nam Tais subsidiary, Namtai Electronic (Shenzhen) Company Ltd and HSBC Bank (China) Company (renewing the Bank Facilities letter included as Exhibit 4.6 above) (incorporated by reference to Exhibit 4.18 to the Companys Form 20-F for the year ended December 31, 2009 filed with the SEC on March 16, 2010). | |
4.10
|
Banking Facilities Letter between Nam Tai subsidiary, Zastron Electronic (Shenzhen) Co. Ltd., and HSBC Bank (China) Company Limited dated October 28, 2010 for Zastron Electronic (Shenzhen) Co. Ltd. to receive import facilities of up to $5,000,000. | |
4.11
|
Guaranty of Nam Tai subsidiary Namtai Electronic (Shenzhen) Co. Ltd., in favour of HSBC Bank (China) Company Limited with maximum liability of approximately $6 million for the banking facilities of Zastron Electronic (Shenzhen) Co. Ltd. | |
4.12
|
Employment (Letter) Agreement dated November 25, 2010 between Nam and M. K. Koo, effective on October 1, 2010, for Mr. Koos services as Nam Tais CFO. | |
4.13
|
Employment (Letter) Agreement dated November 25, 2010 between Nam Tais subsidiary, Nam Tai Electronic & Electrical Products Limited, or NTEEP, and M. K. Koo, effective on October 1, 2010, for Mr. Koos services as NTEEPs President. | |
8.1
|
Diagram of Companys subsidiaries at December 31, 2010. See the diagram following page 21 of this Report. | |
11.1
|
Code of Ethics (incorporated by reference to Exhibit 14.1 to the Companys Form 20-F for the year ended December 31, 2004 filed with the SEC on March 15, 2005). | |
12.1
|
Certification required by Rule 13a-14(a) and 18 U.S.C. Section 1350. | |
12.2
|
Certification required by Rule 13a-14(a) and 18 U.S.C. Section 1350. | |
13.1
|
Certification pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350. | |
15.1
|
Consent of Independent Registered Public Accounting Firm Moore Stephens | |
15.2
|
Consent of Independent Registered Public Accounting Firm Deloitte Touche Tohmatsu |
77
Exhibit No. | Exhibit | |
15.3
|
Letter of Deloitte Touche Tohmatsu, registrants former independent registered public accounting firm, dated April 20, 2009 filed pursuant to Item 16F(a)(3) of Form 20-F (incorporated by reference to Exhibit 2 of the Companys Form 6-K for the month of April 2009 furnished to the SEC on April 20, 2009). |
* | The agreement is written in Chinese and an English Translation is provided in accordance with Form 20-F Instructions to Exhibits and Rule 12b-12(d) under the Exchange Act). |
78
NAM TAI ELECTRONICS, INC. |
||||
By: | /s/ Koo Ming Kown | |||
Koo Ming Kown | ||||
Chief Financial Officer | ||||
79
Party A:
|
Namtai Electronic (Shenzhen) Co., Ltd. | |
Address:
|
Namtai Industrial Estate, 2 Namtai Road, Gushu, Xixiang, Baoan, Shenzhen |
Party B:
|
China Construction Bank Corporation, Shenzhen Branch | |
Address:
|
Block A, Rongchao Business Centre, 6003 Yitian Road, Futian District, Shenzhen |
1. | the beneficiary of the L/C should not be a related company; | ||
2. | the credit rating of Party A by Party B should not be lower than AA; | ||
3. | the debt over assets ratio of Party A should not be over 50%. |
Borrower
|
: | Zastron Electronic (Shenzhen) Company Limited![]() |
||
Lender
|
: | HSBC Bank (China) Company Limited, Shenzhen Branch | ||
Facility/Amount
|
: | For avoidance of doubt, each and all the facilities set out below are of the revolving nature, i.e. any utilised but repaid amount under any such facility is available for re-utilisation, subject to the terms and conditions of this Facility Letter. | ||
Import Facilities up to USD5,000,000.- Documentary Credit to your suppliers and Import Loan Facilities for up to 90 days, less any usance / credit periods granted by your suppliers / approved beneficiaries. |
Incorporated in the Peoples Republic of China with limited liability![]() |
Page![]() |
Within which Goods under your control and/or Trust Receipts up to USD5,000,000.- |
||||
We may, at our sole and absolute discretion, refuse to allow drawings under the facilities if the transaction in question does not meet our operational requirements in respect of these facilities. | ||||
Facility(ies) will only be made available subject to availability of funding. | ||||
Purpose
|
: | To finance the Borrowers working capital requirement | ||
The Borrower shall apply the loan proceeds for the purpose as set out above and shall comply with the requirements of the relevant PRC laws and regulations. The Borrower shall not apply the loan proceeds for any other purpose, including but not limited to, applying the loan proceeds for equity investments, applying the loan proceeds for speculation in the stock market, the futures market, the real estate market or other similar market speculation, or applying the loan proceeds in other prohibited investment or business areas or purposes. | ||||
Term
|
: | The Term here refers to the term during which this facility is available for drawing. The Term of this facility is up to (and including) 31 July 2011, subject to review and renewal at the Lenders sole discretion and as unilaterally advised by the Lender from time to time. |
Market Disruption/Increased
Costs :
|
Without prejudice to our overriding right of suspension, withdrawal and repayment on demand, we would reserve our right to renegotiate any of the interest margins, fees and the applicable period of PBOC base rate detailed herein (in case there is any Loan denominated in RMB) in the event of any change occurring in any applicable law or regulation (or its interpretation) or in PRCs financial markets or the need to comply with any requirement of any regulatory/governmental authority (whether or not having the force of law), which resulted, in our opinion, in an increase of the cost of advancing, maintaining or funding any facilities, a change on the basis to calculate the interest margins, deviation from the RMB interest rate regime permitted by PRC laws or regulations (or its interpretation), and/or a reduction in the net return to us from the facilities outlined herein. Before the renegotiated interest margins, fees or applicable base rate is agreed, the Bank has the sole discretion to charge the Borrower the revised interest and fees with a notice to the Borrower. However, if such change in applicable laws and regulations or the requirements of relevant regulatory/governmental authorities have retrospective effect, the Customer shall indemnify the Bank against the increase of cost and/or the reduction in the net return suffered by the Bank in respect of relevant period affected by such retrospective effect within 5 Business |
2
Days upon receipt of written notice from the Bank. The Banks written notice setting out its claim for such indemnity shall be the conclusive evidence for the indemnity amount payable to the Bank by the Customer, unless the Banks claim conflicts with relevant laws, regulations, regulatory/governmental requirements in the PRC. |
Interest/Commission
:
|
Import Loans The Applicable Interest Rate for Import Facility hereunder shall be a margin to be agreed by both parties in writing on the loan drawdown date above the Singapore Interbank Money Market Offer Rate (SIBOR) / London Interbank Money Market Offer Rate (LIBOR) /Hongkong Interbank Money Market Offer Rate (HIBOR) of Foreign Currency for 1, 2 or 3 months or any other interest period as may be determined by the Lender, and such Applicable Interest Rate agreed by both parties for each drawdown shall be specified in a separate written confirmation. The interest shall be payable at the end of each interest period. |
|
LIBOR: LIBOR shall be determined as the United States Dollar interest rates quoted on the Reuters Screen page LIBOR as of 11:00 a.m. (London Time), two London business days prior to the first day of each Interest Period. | ||
SIBOR: SIBOR shall be determined as the United States Dollar interest rates quoted on the Reuters Screen page SIBOR= as of 11:30 a.m. (Singapore Time), two Singapore business days prior to the first day of each Interest Period. | ||
HIBOR: HIBOR shall be determined as the United States Dollar interest rates quoted on the Reuters Screen page HIBOR= as of 11:30 a.m. (Hong Kong Time), two Hong Kong business days prior to the first day of each Interest Period. | ||
ALL the above provisions shall not be read as excluding both parties entering into any agreement in writing on any other applicable interest rates and/or other interest rate modification mechanism in respect of all or any part of the above mentioned facilities in whatever currencies. Such otherwise agreed Applicable Interest Rate shall be specified in the relevant drawdown request of the Borrower. | ||
Documentary Credits opening commission For each validity of 90 days or part thereof to be charged as below with minimum charge of USD24.- and payable in full at the time of issuance of all Documentary Credits: |
| For DC amount below USD100,000.- or its equivalent: 0.10% | ||
| For DC amount between USD100,000.- (USD100,000.- inclusive) and USD250,000.- or its equivalent: 0.08% |
||
| For DC amount between USD250,000.- (USD250,000.- inclusive) and USD400,000.- or its equivalent: 0.06% |
3
| For DC amount above USD400,000.- (USD250,000.- inclusive): 0.04% | |||||
Export Documentary Credits/Non- Documentary Credits Bill Handling Commission | ||||||
| First USD75,000.- (USD75,000.- inclusive) or equivalent: 0.125% | |||||
| Between USD75,000.- and USD300,000.- (USD300,000.- inclusive): 0.0625% | |||||
| Balance in excess of USD300,000.-: 0.03125% | |||||
| Minimum amount: USD35.-. | |||||
Commission in lieu of
exchange Waived |
Default
Interest
|
: | Please note Default Interest will be payable on sums which are overdue or overlimit (as well as amounts demanded and not paid) or (in respect of loan amount) used for purposes other than the purpose of loan stated in this letter in respect of all or any of the facility and such interest will be charged by the Lender as follows: | ||
Foreign Currency Facilities Default Interest Rate shall be 3% per annum over the Applicable Interest Rate for respective foreign currency facilities, subject to fluctuation at the Lenders discretion. |
||||
For avoidance of doubt, the impost of Default Interest as mentioned above shall not be deemed as the Lenders acknowledgement or acceptance of any such default event as mentioned above and shall be without prejudice to any rights of the Lender as described in the first paragraph of this facility letter. | ||||
Prepayment
|
: | With the Lenders prior approval (which will not be withheld, provided that the Lender is satisfied that the funds utilized are generated from Borrowers internal resources out of cash flow rather than from external refinancing), during an interest period the total amount of a drawing may, with 5 working days advance notice to the Lender, be repaid subject to the usual penalties (i.e. Break Funding Cost: the differential between the return the Lender would have received had the loan run to maturity and the return the Lender is able to obtain by the placing of the funds repaid for the remainder of the period in the market). Each prepayment should be in a minimum of USD400,000.- (or, if the relevant drawing is made in any other currency, the equivalent amount in such other currency) and in an integral multiple of USD200,000.- (or, if the relevant drawing is made in any other currency, the equivalent amount in such other currency). | ||
Security
|
: | As security, we require to hold: | ||
A Corporate Guarantee for RMB40,000,000.- from Nam Tai Electronic (Shenzhen) Co Ltd (the Guarantor). |
4
Without prejudice to our overriding right of suspension, withdrawal and repayment on demand at any time, including the right to call for cash cover security on demand for prospective and contingent liabilities, if as a matter of fact or in the opinion of the Bank, the value of the security provided by the Borrower or other security provider for the facilities hereunder has depreciated, the Bank has the right to ask the Borrower to provide additional security in form and substance satisfactory to the Bank. | ||||
The term security referred to herein include both tangible security and guarantee by a third party. The depreciation of security value includes, but is not limited to, decrease of the absolute value of the collateral due to drop in market price, adverse change in the guarantors credit standing, and depreciation of the guaranteed credit limit or any form of cash cover security or evaluated value of the collateral when converted into the currency in which the facility hereunder is denominated as a result of fluctuation of foreign exchange rate. |
Conditions Precedent
:
|
1 | ) | The Borrower shall present to the Lender a valid Borrowing Card issued by the Peoples Bank of China. | |||||
2 | ) | Certified true copies of all government approvals and certificates in relation to the establishment of the Borrower shall be submitted to the Lender. | ||||||
3 | ) | The Borrower has provided its internal authorization document (such as shareholders resolution, board resolution) approving (or authorizing others to approve) the facilities hereunder and authorizing representative(s) to accept and sign the terms, conditions and documents in connection with the facilities hereunder in strict compliance with its articles of association and the PRC Company Law (or equivalent or similar law if the Borrower is a foreign entity). | ||||||
4 | ) | In the event that the Lenders making available any facility hereunder is subject to regulatory approval or the completion of other procedures with the regulator(s), the acquisition of such regulatory approval and the completion of such procedures with regulator(s). | ||||||
5 | ) | The Lender is satisfied that all the security(ies) stated in the Security item above (if any) has/have been established and is/are valid and enforceable. The security providers internal authorization document (such as shareholders resolution, board resolution) approving (or authorizing others to approve) the provision of the Security and authorizing representative(s) to accept and sign the terms, conditions and documents in connection with the Security in |
5
strict compliance with its articles of association and the PRC Company Law (or equivalent or similar law if the security provider is a foreign entity) has been duly made and submitted to the Lender. |
Undertaking / Covenants
|
: | You/the Guarantor will be required for so long as this facility is available to you to comply with the following covenants/undertakings. Your/the Guarantors compliance or otherwise with the following covenant(s)/undertakings will not in any way prejudice or affect our right to suspend, withdraw or make demand in respect of the whole or any part of the facilities made available to you at any time. By signing this letter, you expressly acknowledge that we may suspend, withdraw or make demand for repayment of the whole or any part of the facilities at any time notwithstanding the fact that the following covenants/undertakings are included in this letter and whether or not you/the Guarantor is in breach of any such covenants/undertakings. |
1 | ) | The Borrower agrees that all borrowers undertakings set out in Article 21 of the Interim Measures on Regulation of Working Capital Loans issued by China Banking Regulatory Commission on 12 February 2010 apply to this facility letter; | ||||||
2 | ) | The Borrower shall open an operating account with the Lender or shall upon request provide to the Lender evidence showing its fund flow situation if those operating accounts are opened with a bank other than the Lender. | ||||||
3 | ) | The Borrower shall promptly inform the Lender of any of the Borrowers connected transactions which amounts to in aggregate over 10% of its net assets with the details to the satisfaction of the Lender. |
Other
Conditions
|
: | 1 | ) | Without prejudice to any security or other priority right to which the Lender is entitled (if any), this facility shall rank at least pari-passu with all present and future borrowings of the Borrower. The Borrower undertakes to advise the Lender in advance of any future borrowings. | ||||
2 | ) | The Borrower should not create or attempt to create or permit to subsist any mortgage, debenture, charge, pledge, lien or other encumbrance upon, or permit any lien or other encumbrance (save a lien arising by operation of law in the ordinary course of trading) on the whole or any part of present or future assets of the Borrower without Lenders prior written consent. | ||||||
3 | ) | Half-yearly and audited yearly financial statements of the Borrower and the Guarantor to be prepared by qualified accountants shall be provided to the Lender whenever available but in any event no later than 90 days and 120 days from the financial |
6
half-year-ends and year-ends respectively. | ||||||||
4 | ) | Other financial or operational information of the Borrower as from time to time reasonably requested by the Lender. |
Expenses
|
: | All out-of-pocket expenses including but not limited to the PRC stamp duty and the legal fees in relation to the preparation, negotiation, execution and enforcement of this facility shall be borne by the Borrower. | ||
Taxation and
Deduction
|
: | All payments of principal, interest, fees and other expenses shall be made by the Borrower free and clear of taxes, levies, imposts, duties, charges or withholding of whatsoever nature. | ||
Assignment
|
: | Without prejudice to any right of assignment enjoyed by the Lender pursuant to law or any contract, the Lender may, without any partys consent, assign any and/or all of its rights and obligations hereunder to any HSBC Group member(s) that are/is more than 50% owned or controlled by HSBC Group or any of the Lenders branch(es) (if any). | ||
Governing Law
|
: | This letter shall be governed by and construed in accordance with the laws of the Peoples Republic of China. | ||
Jurisdiction
|
: | The Borrower submits to the non-exclusive jurisdiction of the PRC court at the principal office of the Lender. Nothing in this Clause limits the right of the Lender to bring proceedings against the Borrower in connection with this facility in any other court of any competent jurisdiction. |
7
For and on behalf of HSBC Bank (China) Company Limited Shenzhen Branch |
Accepted by Zastron Electronic (Shenzhen) Company Limited ![]() |
(SEAL) | ||
/s/ Frank Chau
Vice President Commercial Banking |
/s/ Illegible
Company Chop Date: 17 Nov 2010 |
|||
/s/ Dick Wong
Regional Manager Southern & Western China Commercial Banking |
8
To: | HSBC Bank (China) Company Limited, SZN Branch |
1. | Definitions | |
Bank means HSBC Bank (China) Company Limited, SZN Branch and its successors and assignees; | ||
Banking Facilities means such facilities as the Bank may make or continue to make available to the Customer; | ||
Customer means the person whose name and address are specified in the Schedule; | ||
Default Interest means interest at such rate as the Bank may specify, compounded monthly if not paid on the dates specified by the Bank; | ||
Exchange Rate means the rate for converting one currency into another currency which the Bank determines to be prevailing in the relevant foreign exchange market at the relevant time, such determination to be conclusive and binding on the Guarantor; | ||
Guaranteed Moneys means (i) all principal in any currency owing by the Customer to the Bank at any time during the Guaranteed Period, actually or contingently, in any capacity, alone or jointly with any other person, (ii) interest on such principal (both before and after any demand or judgment), to the date on which the Bank receives payment, at the rates payable by the Customer or which would have been payable but for any circumstance which restricts payment, (iii) other amount owing by the Customer to the Bank under or in relation to the Banking Facilities and (iv) expenses of the Bank in enforcing this Guarantee on a full indemnity basis; | ||
Guaranteed Period means the period commencing from the date of this Guarantee and ending on the date falling one calendar month after receipt by the Bank of the termination notice referred to in Clause 3.1; | ||
Guarantor means the person whose name and address are specified in the Schedule; | ||
Maximum Liability means the sum specified in the Schedule plus Default Interest on that sum or part thereof (to the extent that it is not paid by the Guarantor on demand by the Bank) and expenses of the Bank in enforcing this Guarantee on a full indemnity basis; where a liability for Guaranteed Moneys is incurred in a currency different from the currency in which the Maximum Liability is stated and the equivalent of that liability in the currency in which the Maximum Liability is stated, calculated at the then applicable Exchange Rate upon determination of the liability, has increased since it was incurred, that increase shall be added to the Maximum Liability; | ||
person includes an individual, firm, company, corporation and an unincorporated body of persons; and | ||
PRC means the Peoples Republic of China, for the purpose of this Guarantee, excluding the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan. | ||
2. | Guarantee |
2.1 | In consideration of the Banking Facilities, the Guarantor guarantees to pay the Guaranteed Moneys to the Bank on demand provided that the aggregate amount paid by the Guarantor under this Guarantee shall in no case exceed the Maximum Liability. | ||
2.2 | The Guarantor shall pay Default Interest (to the extent that it is not paid by the Customer) on the Guaranteed Moneys from the date of demand by the Bank on the Guarantor until the Bank receives payment of the whole of the Guaranteed Moneys (both before and after any demand or judgment or any circumstance which restricts payment by the Customer). | ||
2.3 | A certificate of balance signed by any duly authorised officer of the Bank shall be conclusive evidence against the Guarantor of the amount of the Guaranteed Moneys owing at any time. | ||
2.4 | The Bank shall be entitled to retain the benefit of this Guarantee as against the Guarantor and any security it has in respect of the Guaranteed Moneys for such period as the Bank may certify to the Guarantor to be appropriate in order to protect the interests of the Bank in respect of the Guaranteed Moneys. |
3. | Continuing and Additional Security |
3.1 | This Guarantee is a continuing security and shall secure the whole of the Guaranteed Moneys until one calendar month after receipt by the Bank of notice in writing by the Guarantor or a liquidator or receiver of the Guarantor to terminate it. Nevertheless and despite the giving of such notice, this Guarantee shall continue to apply to the Guaranteed Moneys in respect of which the Customer is or becomes actually or contingently liable up to such termination (together with the interest and other amount payable in relation to such Guaranteed Moneys after the termination) and the Guarantor guarantees to pay such Guaranteed Moneys (together with the interest and other amount payable in relation to such Guaranteed Moneys after the termination) to the Bank on demand whether that demand is made before, at the time of or after such termination. | ||
3.2 | The termination notice referred to in Clause 3.1 above shall not be served within the Minimum Guaranteed Term set out in the Schedule hereof. | ||
3.3 | This Guarantee is in addition to any other guarantee, mortgage, pledge or other security held by the Bank and shall not be affected by and may be enforced despite the existence of or any waiver by the Bank regarding any such guarantee, mortgage, pledge or |
1
other security. The Bank shall not be obliged to enforce any other security before enforcing the guarantee hereunder. |
4. | Customers Account | |
The Bank may, at any time and despite the termination of this Guarantee, continue any existing account and open any new account in the name of the Customer and no subsequent transactions, receipts or payments involving such new accounts shall affect the liability of the Guarantor. | ||
5. | Payments |
5.1 | Payments by the Guarantor shall be made to the Bank as specified by the Bank without any set-off, counterclaim, withholding or condition of any kind except that, if the Guarantor is compelled by law to make such withholding, the sum payable by the Guarantor shall be increased so that the amount actually received by the Bank is the amount it would have received if there had been no withholding. | ||
5.2 | Payment by the Guarantor to the Bank shall be in the currency of the relevant liability or, if the Bank so agrees in writing, in a different currency, in which case the conversion to that different currency shall be made at the Exchange Rate. | ||
5.3 | No payment to the Bank under this Guarantee pursuant to any judgment, court order or otherwise shall discharge the obligation of the Guarantor in respect of which it was made unless and until payment in full has been received in the currency in which it is payable under this Guarantee and, to the extent that the amount of any such payment shall, on actual conversion into such currency, at the Exchange Rate, fall short of the amount of the obligation, expressed in that currency, the Guarantor shall be liable for the shortfall. | ||
5.4 | Any moneys paid to the Bank in respect of the Guaranteed Moneys may be applied in or towards satisfaction of the same or placed to the credit of such account as the Bank may determine with a view to preserving its rights to prove for the whole of the Guaranteed Moneys. | ||
5.5 | If any moneys paid to the Bank in respect of the Guaranteed Moneys are required to be repaid by virtue of any law relating to insolvency, bankruptcy or liquidation or for any other reason, the Bank shall be entitled to enforce this Guarantee as if such moneys had not been paid. |
6. | Set-off | |
The Bank may, at any time and without notice, apply any credit balance to which the Guarantor is entitled on any account with the Bank in or towards satisfaction of the Guaranteed Moneys. For this purpose, the Bank is authorised to purchase, at the Exchange Rate, such other currencies as may be necessary to effect such application with the moneys standing to the credit of such account. | ||
7. | Waiver of Defense | |
The Guarantor hereby consents and agrees to each of the following, and agrees that its obligations under this Guarantee shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any statutory or other rights (including without limitation rights to notice) which it might otherwise have as a result of or in connection with any of the following: |
(a) | any amendment to or variation of the terms of the Banking Facilities; | ||
(b) | any adjustment, indulgence, forbearance or compromise that might be granted or given by the Bank to the Customer, the Guarantor or any other party liable for payment of any or all of the Guaranteed Moneys; | ||
(c) | any release, exchange, subordination or loss of any guarantee or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Moneys; | ||
(d) | the failure of the Bank or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling of all or any part of any security; | ||
(e) | the reorganization, merger or consolidation of the Customer into or with any other person; or | ||
(f) | any other action or omission to act which but for this provision would discharge the Guarantor from any part of its liability under this Guarantee. |
8. | Guarantor as Principal Debtor | |
The liability of the Guarantor under this Guarantee shall not be discharged or otherwise affected by reason of the Bank entering into any agreement or arrangement with the Customer or any other person or by reason of any legal limitation, disability or incapacity or any other act, omission or circumstance which, but for this provision, would discharge the Guarantor to any extent. Any Guaranteed Moneys which may not be recoverable from the Customer for any such reason shall be recoverable by the Bank from the Guarantor as principal debtor by way of indemnity, on demand, together with Default Interest thereon in accordance with Clause 2.2. | ||
9. | Subordination |
9.1 | The Guarantor shall not, until the whole of the Guaranteed Moneys have been received by the Bank, exercise its rights of subrogation, indemnity, set-off or counterclaim against the Customer or its rights to participate in any security the Bank has in |
2
respect of the Guaranteed Moneys or, unless required by the Bank to do so, to prove in the bankruptcy or liquidation of the Customer. The Guarantor shall hold any amount recovered, as a result of the exercise of any of such rights, on trust for the Bank and shall pay the same to the Bank immediately on receipt. | |||
9.2 | The Guarantor has not taken any security from the Customer and agrees not to do so until the Bank has received the whole of the Guaranteed Moneys. Any security taken by the Guarantor in breach of this provision shall be held in trust for the Bank as security for the Guaranteed Moneys and all moneys at any time received in respect thereof shall be paid to the Bank immediately on receipt. |
10. | No Waiver | |
No failure to exercise, nor any delay in exercising, any of the rights or remedies under this Guarantee shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. | ||
11. | Consent | |
The Guarantor agrees that the Bank may, for such purposes as the Bank may consider reasonably appropriate, disclose and/or obtain information concerning the Guarantor (including details of and relating to all or any transactions or dealings between the Guarantor and the Bank) to or from: |
(a) | any agent, contractor or third party service provider (whether situated within or outside the PRC) which provides administrative, telecommunication, computer, payment, processing or other services to the Bank in connection with the operation of its business; | ||
(b) | credit reference agencies; | ||
(c) | any person to whom the Bank is under an obligation to make disclosure under the requirements of any applicable laws regulations or judicial process; and | ||
(d) | any actual or proposed participant or sub-participant of the Banking Facilities (or any part thereof). |
In the event that such information includes the personal or other data of any third party or individual, the Guarantor confirms and warrants that it has obtained the consent of such third party or individual to the provision of such data to the Bank for such purposes and for disclosure to such persons as referred to in this Clause. The Guarantor will indemnify and hold the Bank harmless from all costs, penalties, damages and other losses incurred as the result of any breach of the terms of this Clause. |
12. | Assignment |
12.1 | The Guarantor may not assign or transfer any of its rights or obligations hereunder. The Bank may assign any of its rights hereunder to a person in whose favour it has made an assignment of all or any of the Banking Facilities. | ||
12.2 | Without prejudice to the foregoing and any right of assignment enjoyed by the Bank under any applicable law or any other document, the Bank may, without the Guarantors consent, assign any and/or all of its rights and obligations hereunder to any HSBC Group member(s) that are/is more than 50% owned or controlled by HSBC Group or to any branch or sub-branch of the Bank. |
13. | Communications | |
Any notice, demand or other communication under this Guarantee shall be in writing addressed to the Guarantor at its registered office address or at the last address registered with the Bank and addressed to the Bank at its office specified in the Schedule or such other address as the Bank may notify to the Guarantor for this purpose and may be delivered personally, by leaving it at such address, by post, facsimile transmission or telex and shall be deemed to have been delivered to the Guarantor at the time of personal delivery or on leaving it at such address or on the second day following the day of posting or on the day of dispatch, if sent by facsimile transmission or telex, and to the Bank on the day of actual receipt. | ||
14. | Severability | |
Each of the provisions of this Guarantee is severable and distinct from the others and, if one or more of such provisions is or becomes illegal, invalid or unenforceable, the remaining provisions shall not be affected in any way. | ||
15. | Governing Law and Jurisdiction |
15.1 | The Guarantee is governed by and shall be construed in accordance with the laws of the PRC. | ||
15.2 | The Guarantor submits to the jurisdiction of the court at the place of the principal office of the Bank. Nothing in this Clause 15.2 limits the right of the Bank to bring proceedings against the Guarantor in connection with this Guarantee in any other court of any competent jurisdiction. |
16. | Execution | |
This Guarantee has been entered into by the Guarantor on 15 November 2010. |
3
Address of Banks Office (for the purpose of Clause 13 only) |
Details of Customer |
||
Name
|
Address | |
Zastron Electronic (Shenzhen) Co. Ltd.
|
Gushu Industrial Estate Xixiang, Baoan, Shenzhen | |
Details of Guarantor |
||
Name
|
Address | |
Namtai Electronic (Shenzhen) Co., Ltd.
|
Namtai Industrial Estate, 2 Namtai Road Gushu Xixiang, Baoan, Shenzhen |
Signature of Authorized Signatory
|
Signature of Authorized Signatory | |||
Company | ||||
Signature of Mr. Koo |
||||
(SEAL) | ||||
Name:
|
Name: | company chop of NTSZ affixed | ||
Office:
|
Office: | |||
Identification Document Type and Number
|
Identification Document Type and Number | |||
* | The Maximum Liabilities shall at least include the principal, any expected interest, default interest, fees and other charges. | |
** | The Minimum Guaranteed Term shall cover at least the last repayment date under any existing and proposed facility. |
4
Title
|
: | Chairman of the Board and Chief Financial Officer | ||
By entering into this Employment Contract, you hereby agree to perform diligently and faithfully all the job duties assigned to you from time to time by the board of directors of the Company and to be ultimately responsible to the Company. | ||||
Job Description
|
: | You shall carry out your duties as Chairman and Chief Financial Officer; as all our business activities are handled by our subsidiary companies located in Wuxi and Shenzhen of the Peoples Republic of China (PRC), so you are only responsible for all matters of the Board and mainly handling investor relations for the Company. You shall only make commitments or incur liabilities on behalf of the Company as duly authorized. | ||
You will be assigned by the Company to work as President of our wholly owned subsidiary, Nam Tai Electronic & Electrical Products Limited (the Secondment Company) and as such you are required to enter into a Secondment Employment Contract with the Secondment Company, and to be in charge of finance and administration matters located in Wuxi and Shenzhen of PRC. | ||||
In consideration of your service to the Company, the Company shall indemnify you against any costs, expenses and other liabilities to which you may become subject by reason of your service to the |
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Company. | ||||
Commencement Date
|
: | October 1, 2010 (i.e. commencement date of this Employment Contract). | ||
Basic Annual Salary
|
: | US$12.00 (i.e. US$1.00 x 12 months) without any incentive bonus. | ||
As all your work is now mainly in Namtai Electronic (Shenzhen) Co., Ltd., a wholly owned subsidiary of the Secondment Company in Shenzhen, PRC, you will be on the payroll of the Secondment Company. As such, directors fees and grant of share options of the Company to you which you would otherwise be entitled in the capacity as a director of the Company have already all been cancelled. | ||||
Benefits
|
: | You shall be entitled to the same benefits as other members of the senior management enjoy as provided in the Employment Handbook of the Company (the Employment Handbook) or in accordance with the policies of the Company. The Company shall also reimburse you for any reasonable miscellaneous expenses, i.e. entertainment expenses. | ||
The Company also agrees to reimburse you for the actual amount that you have paid for the rental charges of your residential apartment in the amount around US$15,000, and all utilities bills, such as water, electricity, telephone bills and so on upon submission of valid receipts. | ||||
Annual Leave
|
: | You will be entitled to 20 working days of annual leave or the number of days according to the relevant provisions set out in the Employment Handbook. All annual leave which has not been taken will be forfeited and no payment in lieu thereof will be made to you. | ||
Office/Secondment
|
: | Your office shall be in Hong Kong, PRC but actually you are required to work mainly in Namtai Electronic (Shenzhen) Co., Ltd., a wholly owned subsidiary of the Secondment Company in Shenzhen, PRC or maybe in different secondment companies situated in different cities as the Company may direct from time to time and you shall not without reasonable excuse object to such directions given by the Company or such secondment Companies. | ||
Confidentiality
|
: | You shall protect and keep confidential all the Companys business information and technical information and rights, whether written or non-written, |
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and shall not (except as authorized by the Company) during or after the termination of employment for whatever reason disclose to any person, firm or company whatsoever or otherwise make use of any of the confidential or secret information, trade secrets or operations, processes, dealings with customers or suppliers, inventions, designs, copyrights, know-how or any other information concerning the organization, business, finance, transactions, trade connections, suppliers, agents, distributors or customers or affairs of the Company which may come to your knowledge and shall use your best endeavours to prevent the unauthorized publication or disclosure of any such confidential or secret information. | ||||
You shall keep in complete secrecy all confidential information entrusted to you in the course of employment and shall not use or attempt to use any such information in any manner whether for your own benefit or otherwise or which may or may likely injure or cause loss either directly or indirectly to the Company or their customers and clients or their business. | ||||
You shall keep the Company fully indemnified of all the losses and damages of the Company arising from your default of the confidentiality obligation. | ||||
Personal Income Tax
|
: | You shall be wholly responsible for your own personal income tax in accordance with the applicable tax laws in the country where you are assigned to work and in whatever jurisdictions. Neither the Company shall be responsible for any of your personal income tax matters. We hereby reserve the right to withhold any part or whole of your salary if the relevant local tax authority imposes on the Company the liability to pay your income tax. | ||
Intellectual Property
|
: | In consideration of the Basic Annual Salary and any other benefits to which you are entitled under this Employment Contract, you agree with the Company that :- |
(i) | any design, trade name, trade mark, service mark, copyright, invention or improvement that you may conceive, make, invent, discover or suggest at any time during the period of your employment under this Employment Contract, whether during or outside business hours, whether alone or in conjunction with any employees of the Company, which may be |
3/6
connected in any way with your employment or with knowledge or information acquired by you in your employment or with work or tests carried out by the Company or with goods of a type made or sold or with services provided by the Company, and whether such design, trade name, trade mark, service mark, copyright, invention or improvement are registrable, patentable or afforded other similar protection or not, shall fully and freely and immediately be communicated by you to the Company and shall belong to and be the Companys absolute property, and, save as is necessary to comply with any of the Companys requirements under the following paragraph, you shall not at any time, whether during your employment hereunder or after its cessation, apply for any letters patent, registration, copyright or other form of protection whatsoever in any jurisdiction for any such design, trade name, trade mark, service mark, copyright, invention or improvement; | ||||||
(ii) | you shall assign to the Company any right you may have to a grant of letters patent, registration, copyright or any other form of protection whatsoever in any jurisdiction in respect of such design, trade name, trade mark, service mark, copyright, invention or improvement and you shall at any time, whether during your employment or after its cessation, at the request of the Company, execute all documents and do all acts and things at the cost of the Company as the Company may request in connection with the obtaining of letters patent, registration, copyright or any other form of protection in any jurisdiction for such design, trade name, trade mark, service mark, copyright, invention or improvement as aforesaid and the vesting of same in the Company or in such other persons as the Company may specify for its exclusive benefit, or in connection with any litigation or controversy relating to the same. |
Termination
|
: | Except for the situation that you have committed a criminal act, should the Company terminate your employment or this Employment Contract under any circumstance, the Company shall compensate you with an amount which is equal to 36 months of your basic monthly salary, all bonuses and allowances and so on that you are entitled at the time of termination. |
4/6
Should you personally wish to terminate your employment with the Company or this Employment Contract, you may do so by giving the Company 1 years (i.e. 12 months) prior notice in writing of such termination. However, should you suffer from illness or other health conditions which results in loss of working capacity, you may at any time terminate your employment with the Company or this Employment Contract immediately. | ||||
Agreement Voluntary Equitable |
: | You and the Company acknowledge and declare that in executing this Employment Contract both parties are relying wholly on their own judgment and knowledge and have not been influenced to any extent whatsoever by any representations or statements made by or on behalf of the other party regarding any matters dealt with herein or incidental thereto. | ||
You and the Company further acknowledge and declare that both parties have carefully considered and understand the terms of employment contained in this Employment Contract including, but without limiting the generality of the foregoing, your rights upon termination and the restrictions after termination, and acknowledge and agree that the said terms of employment and restrictions upon termination are mutually fair and equitable, and that both parties executed this Employment Contract voluntarily and of own free will. | ||||
Independent Advice
|
: | You are entitled to obtain independent legal advice before signing this Employment Contract and you represent, by signing this Employment Contract, that you have either obtained such advice or declined the opportunity to do so. | ||
Severability
|
: | If at any time any provision of this Employment Contract is or becomes illegal, invalid or unenforceable in any respect, the legality, validity and enforceability of the remaining provisions of this Employment Contract shall not be affected or impaired thereby and the remaining provisions shall continue in full force and effect. This Employment Contract should also supersede all prior written and/or verbal agreements of the parties with respect to the employment terms and conditions set forth herein except as otherwise expressly provided herein. | ||
Governing Law
|
: | The provision of this Employment Contract shall be governed by and interpreted in accordance with the laws |
5/6
of Hong Kong, PRC and each of the parties hereto by the execution of this Employment Contract irrevocably submits to the exclusive jurisdiction of the courts of Hong Kong, PRC. |
Yours sincerely, |
||
For and on behalf of |
||
the board of directors of
|
Agreed and accepted by:- | |
Nam Tai Electronics, Inc. |
/s/ Charles Chu
|
/s/ Koo Ming Kown | |
Charles Chu
|
Koo Ming Kown | |
Chairman of Compensation Committee
|
Canadian Passport No.: BA672809 |
6/6
Title
|
: | President | ||
By entering into this Employment Contract, you hereby agree to perform diligently and faithfully all the job duties assigned to you from time to time by the board of directors of the Company and to be ultimately responsible to the Company. | ||||
Job Description
|
: | You shall carry out your duties as President of the Company and are responsible for minor job duties such as time deposits, insurance, health care program and golf club membership arrangement for the whole Group. Your jobs should be carried out mainly in the Peoples Republic of China (PRC) on site, to be in charge of all internal control, direct management of all Financial Controllers, handling all finance and administration matters, including in Wuxi and Shenzhen. Due to your age and health, so the Company will also maintain an office in Hong Kong for you. You shall only make commitments or incur liabilities on behalf of the Company as duly authorized. | ||
In consideration of your service to the Company, the Company shall indemnify you against any costs, expenses and other liabilities to which you may become subject by reason of your service to the Company. | ||||
Commencement Date
|
: | October 1, 2010 (i.e. commencement date of this Employment Contract). | ||
Basic Annual Salary
|
: | HK$6,600,000 (i.e. HK$550,000 x 12 months) |
1/6
Annual Bonus
|
: | You will be entitled to an annual bonus being 1.5 months of your monthly salary. This bonus shall be paid only if you remain as an employee of the Company, normally in February of the following financial year and is subject to the final decision of the Company. Furthermore, it shall be paid only on a pro rata basis if you work less than a full year of service. | ||
Benefits
|
: | You shall be entitled to the same benefits as other members of the senior management enjoy as provided in the Employment Handbook of the Company (the Employment Handbook) or in accordance with the policies of the Company. The Company shall also reimburse you for any reasonable miscellaneous expenses, i.e. entertainment expenses. | ||
Annual Leave
|
: | You will be entitled to 20 working days of annual leave or the number of days according to the relevant provisions set out in the Employment Handbook of the Company. All annual leave which has not been taken will be forfeited and no payment in lieu thereof will be made to you. | ||
Office/Secondment
|
: | Your office shall be in Hong Kong, PRC but actually you are required to work mainly in Namtai Electronic (Shenzhen) Co., Ltd., a wholly owned subsidiary of the Company in Shenzhen, PRC or maybe in different secondment companies situated in different cities as the Company may direct from time to time and you shall not without reasonable excuse object to such directions given by the Company or such secondment Companies. | ||
Confidentiality
|
: | You shall protect and keep confidential all the Companys business information and technical information and rights, whether written or non-written, and shall not (except as authorized by the Company) during or after the termination of employment for whatever reason disclose to any person, firm or company whatsoever or otherwise make use of any of the confidential or secret information, trade secrets or operations, processes, dealings with customers or suppliers, inventions, designs, copyrights, know-how or any other information concerning the organization, business, finance, transactions, trade connections, suppliers, agents, distributors or customers or affairs of the Company which may come to your knowledge and shall use your best endeavours to prevent the unauthorized publication or disclosure of any such confidential or secret information. |
2/6
You shall keep in complete secrecy all confidential information entrusted to you in the course of employment and shall not use or attempt to use any such information in any manner whether for your own benefit or otherwise or which may or may likely injure or cause loss either directly or indirectly to the Company or their customers and clients or their business. | ||||
You shall keep the Company fully indemnified of all the losses and damages of the Company arising from your default of the confidentiality obligation. | ||||
Personal Income Tax
|
: | You shall be wholly responsible for your own personal income tax in accordance with the applicable tax laws in the country where you are assigned to work and in whatever jurisdictions. Neither the Company shall be responsible for any of your personal income tax matters. We hereby reserve the right to withhold any part or whole of your salary if the relevant local tax authority imposes on the Company the liability to pay your income tax. | ||
Intellectual Property
|
: | In consideration of the Basic Annual Salary and any other benefits to which you are entitled under this Employment Contract, you agree with the Company that :- |
(i) | any design, trade name, trade mark, service mark, copyright, invention or improvement that you may conceive, make, invent, discover or suggest at any time during the period of your employment under this Employment Contract, whether during or outside business hours, whether alone or in conjunction with any employees of the Company, which may be connected in any way with your employment or with knowledge or information acquired by you in your employment or with work or tests carried out by the Company or with goods of a type made or sold or with services provided by the Company, and whether such design, trade name, trade mark, service mark, copyright, invention or improvement are registrable, patentable or afforded other similar protection or not, shall fully and freely and immediately be communicated by you to the Company and shall belong to and be the Companys absolute property, and, save as is necessary to comply with any of the Companys requirements under the following paragraph, you shall not at any |
3/6
time, whether during your employment hereunder or after its cessation, apply for any letters patent, registration, copyright or other form of protection whatsoever in any jurisdiction for any such design, trade name, trade mark, service mark, copyright, invention or improvement; | ||||||
(ii) | you shall assign to the Company any right you may have to a grant of letters patent, registration, copyright or any other form of protection whatsoever in any jurisdiction in respect of such design, trade name, trade mark, service mark, copyright, invention or improvement and you shall at any time, whether during your employment or after its cessation, at the request of the Company, execute all documents and do all acts and things at the cost of the Company as the Company may request in connection with the obtaining of letters patent, registration, copyright or any other form of protection in any jurisdiction for such design, trade name, trade mark, service mark, copyright, invention or improvement as aforesaid and the vesting of same in the Company or in such other persons as the Company may specify for its exclusive benefit, or in connection with any litigation or controversy relating to the same. |
Termination
|
: | Except for the situation that you have committed a criminal act, should the Company terminate your employment or this Employment Contract under any circumstance, the Company shall compensate you with an amount which is equal to 36 months of your basic monthly salary, all bonuses and allowances and so on that you are entitled at the time of termination. | ||
Should you personally wish to terminate your employment with the Company or this Employment Contract, you may do so by giving the Company 1 years (i.e. 12 months) prior notice in writing of such termination. However, should you suffer from illness or other health conditions which results in loss of working capacity, you may at any time terminate your employment with the Company or this Employment Contract immediately. | ||||
Agreement Voluntary Equitable |
: | You and the Company acknowledge and declare that in executing this Employment Contract both parties are relying wholly on their own judgment and knowledge and have not been influenced to any extent whatsoever |
4/6
by any representations or statements made by or on behalf of the other party regarding any matters dealt with herein or incidental thereto. | ||||
You and the Company further acknowledge and declare that both parties have carefully considered and understand the terms of employment contained in this Employment Contract including, but without limiting the generality of the foregoing, your rights upon termination and the restrictions after termination, and acknowledge and agree that the said terms of employment and restrictions upon termination are mutually fair and equitable, and that both parties executed this Employment Contract voluntarily and of own free will. | ||||
Independent Advice
|
: | You are entitled to obtain independent legal advice before signing this Employment Contract and you represent, by signing this Employment Contract, that you have either obtained such advice or declined the opportunity to do so. | ||
Severability
|
: | If at any time any provision of this Employment Contract is or becomes illegal, invalid or unenforceable in any respect, the legality, validity and enforceability of the remaining provisions of this Employment Contract shall not be affected or impaired thereby and the remaining provisions shall continue in full force and effect. This Employment Contract should also supersede all prior written and/or verbal agreements of the parties with respect to the employment terms and conditions set forth herein except as otherwise expressly provided herein. | ||
Governing Law
|
: | The provision of this Employment Contract shall be governed by and interpreted in accordance with the laws of Hong Kong, PRC and each of the parties hereto by the execution of this Employment Contract irrevocably submits to the exclusive jurisdiction of the courts of Hong Kong, PRC. |
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Yours sincerely, |
||
For and on behalf of |
||
the board of directors of
|
Agreed and accepted by:- | |
Nam Tai Electronic & |
||
Electrical Products Limited |
/s/ Colin Yeoh
|
/s/ Koo Ming Kown | ||
Colin Yeoh
|
Koo Ming Kown | ||
Director
|
Canadian Passport No.: BA672809 |
6/6
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