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E-TON SOLAR TECH. CO., LTD.

FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

WITH

REVIEW REPORT OF INDEPENDENT AUDITORS

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Review Report of Independent Auditors English Translation of a Report Originally Issued in Chinese

The Board of Directors and Shareholders E-TON SOLAR TECH. CO., LTD.

We have reviewed the accompanying balance sheets of E-TON SOLAR TECH. CO., LTD. as of September 30, 2007 and 2006, and the related statements of income, changes in shareholders’ equity and cash flows for the nine months ended September 30, 2007 and 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a review report on these financial statements based on our review.

Except as described in the following paragraph, we conducted our review in accordance

with Statements of Auditing Standards No.36 “Review of Financial Statements” A review consists principally of inquiries, comparison and analytical procedures. A review was substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

As described in Note IV. 5 to the financial statements, certain long-term investments

accounted for under the equity method, were based on unreviewed financial statements of the investee companies. Our review report insofar as it related to the investment loss amounted to NT$1,826 thousand for the nine months ended September 30, 2007, and the period-end balances of the related long-term investment accounted for under the equity method amounted to NT$185,777 thousand as of September 30, 2007, was based on unreviewed financial statements of the investee companies.

Based on our review, except for the circumstances mentioned in the third paragraph, we are

not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with "Business Accounting Law", "Regulation on Business Entity Accounting Handling", "Regulation Governing the Preparation of Financial Statements of Security Issuers" and accounting principles generally accepted in the Republic of China on Taiwan.

As described in Note to the financial statements, Ⅲ commencing January 1, 2007, the Company adopted Statement of Financial Accounting Standards No. 37“Intangible Assets”. 黃崇輝 黃世杰 Ernst & Young Tainan, Taiwan, R.O.C. October 12, 2007 Notice to Readers The accompanying financial statements are intended only to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China on Taiwan and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China on Taiwan.

ASSETS NOTES September 30, 2007 September 30, 2006 LIABILITIES AND SHAREHOLDERS EQUITY NOTES September 30, 2007 September 30, 2006CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents II/IV.1 $1,677,220 $201,867 Short-term borrowings IV.10 $1,219,749 - Accounts receivable-Net II/IV.2 893,483 276,099 Short-term notes and bills payable-Net IV.11 - $29,975 Accounts receivable - related parties - Net II/V 71,770 - Notes payable 31,912 14,399 Other financial assests-Current II/V 34,954 32,217 Accounts payable 111,300 103,518 Inventories-Net II/IV.3 1,182,004 490,073 Income tax payable II/IV.21 22,256 40,040 Prepayments to suppliers VII 565,104 150,596 Accrued expenses V 52,739 23,243 Deferred income tax assets-Current-Net II/IV.21 5,411 3,260 Financial liabilities measured at fair value through profit or loss - Current II/IV.12 58,004 - Other current assets 128,049 30,327 Advance sales receipts 5,090 81 Financial assets measured at fair value through profit or loss - Current II/IV.4 3,892 - Bonds payable - current portion II/IV.13 2,619,828 -

Other current liabilities 16,308 9,340 Total Current Assets 4,561,887 1,184,439

Total Current Liabilities 4,137,186 220,596FUNDS AND LONG-TERM INVESTMENTS II/IV.5 Equity investments under equity method 185,777 35,684 LONG-TERM LIABILITES-EXCLUDING Financial assets carried at cost - Noncurrent 58,258 - CURRENT PORTION

Long-term borrowings IV.14 2,722,962 - Total Funds and Long-term Investments 244,035 35,684

OTHER LIABILITIESPROPERTY, PLANT AND EQUIPMENT II/IV.6 Accrued pension liabilities II/IV.9 - 845 Buildings and structure 202,742 93,904 Machinery and equipment 672,310 334,588 TOTAL LIABILITIES 6,860,148 221,441 Office equipment 124 62 Miscellaneous equipment 13,990 10,207

Total cost 889,166 438,761 Less: Accumulated depreciation (174,772) (97,695) Add: Construction in progress 477,712 150,811 SHAREHOLDERS' EQUITY Prepayments for business fancilities 643,660 186,171 Common stock IV.15 606,550 402,600

Capital surplus IV.16 Property, Plant and Equipment-Net 1,835,766 678,048 Additional paid-in capital-common stock 1,318,920 1,318,920

Long-term equity investment under equity method 139,637 - INTANGIBLE ASSETS Stock option-convertible bond II/IV.13 425,142 - Computer software cost II/IV.7 4,054 - Legal reserve IV.17 105,423 32,273 Deferred pension cost II/IV.9 878 895 Retained earnings IV.18 711,370 499,436

Total Intangible Assets 4,932 895 Total Shareholders' Equity $3,307,042 $2,253,229

OTHER ASSETS Guarantee deposits paid 12,344 12,344 Deferred charges II 18,637 1,388 Deferred income tax assets-Noncurrent-Net II/IV.21 367 449 Other assets-Other IV.8 3,489,222 561,423

Total Other Assets 3,520,570 575,604

TOTAL ASSETS $10,167,190 $2,474,670 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,167,190 $2,474,670

(The accompanying notes are an integral part of the financial statements)

(Unaudited but Reviewed)(Expressed in New Taiwan Thousand Dollars)

English Translation of Financial Statements Originally Issued in ChineseE-TON SOLAR TECH. CO., LTD.

BALANCE SHEETSSeptember 30, 2007 and 2006

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ITEMS NOTES Jan. 1, 2007~Sep. 30, 2007 Jan. 1, 2006~Sep. 30, 2006

SALES $3,943,742 $2,203,033SALES RETURNS AND ALLOWANCE (106,374) (5,689)

NET SALES Ⅱ/Ⅳ.19/V 3,837,368 2,197,344COST OF GOOD SOLD Ⅳ.20 (3,314,179) (1,640,558)

GROSS PROFIT 523,189 556,786 Unrealized losses on intercompany transactions 2,734 - Realized gains on intercompany transactions 413 -

Total gross profit 526,336 556,786

OPERATING EXPENSES Sellnig expenses (12,246) (5,601) General and administrtive expenses (31,117) (11,576) Research and development expenses (83,492) (11,421)

Total operating expenses Ⅱ/Ⅳ.20/V (126,855) (28,598)

OPERATING INCOME 399,481 528,188

NON-OPERATING INCOME Interest income 82,320 4,517 Gain on physical inventory-Net Ⅱ 7 33 Foreign exchange gains-Net Ⅱ 42,624 14,973 Income from sale of scrap and waste 14,708 8,025 Revaluation gain on financial assets Ⅱ/IV.4 6,967 2,065 Revaluation gain on financial liabilities 245,251 - Others 490 877

Total non-operating income 392,367 30,490

NON-OPERATING EXPENSES AND LOSSES Interest expenses (130,438) (83) Losses from long-term equity investments under the equity method II/IV.5 (1,826) (110) Loss on inventory valuation and obsolescence II (9,900) - Financial expense (1,062) - Others (180) (1,006)

Total non-operating expenses and losses (143,406) (1,199)

INCOME BEFORE INCOME TAX 648,442 557,479INCOME TAX EXPENSE Ⅱ/Ⅳ.21 (14,330) (60,351)

NET INCOME $634,112 $497,128

EARNINGS PER SHARE (in NT Dollar) Ⅱ/Ⅳ.22 $10.45 $8.31

(The accompanying notes are an integral part of the financial statements)

(Unaudited but Reviewed)(Expressed in New Taiwan Thousand Dollars Except for Earning Per Share)

English Translation of Financial Statements Originally Issued in ChineseE-TON SOLAR TECH. CO., LTD.

STATEMENTS OF INCOMEFor the Nine Months Ended September 30, 2007 and 2006

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Balance at January 1, 2006 $221,580 $241,420 $180,000 $4,806 $274,685 $922,491 Issuing new common shares by injecting cash 61,150 (241,420) 1,138,920 958,650 Appropriations and distributions of 2005 earnings: Legal reserve 27,467 (27,467) - Stock dividends from retained earnings 118,747 (118,747) - Employees' stock bonus 1,123 (1,123) - Employees' cash bonus (6,293) (6,293) Cash dividend (118,747) (118,747) Net income for the nine months ended September 30, 2006 497,128 497,128

Balance at September 30, 2006 $402,600 - $1,318,920 $32,273 $499,436 $2,253,229

Balance at January 1, 2007 $402,600 - $1,744,062 $32,273 $733,815 $2,912,750 Appropriations and distributions of 2006 earnings: Legal reserve 73,150 (73,150) - Stock dividend from retained earnings 201,300 (201,300) - Employees' stock bonus 2,650 (2,650) - Employees' cash bonus (17,117) (17,117) Cash dividend (362,340) (362,340) Capital surplus arising from long-term equity investments under equity method 139,637 139,637 Net income for the nine months ended September 30, 2007 634,112 634,112

Balance at September 30, 2007 $606,550 - $1,883,699 $105,423 $711,370 $3,307,042

(The accompanying notes are an integral part of the financial statements)

Advance receiptsfor common

stock

(Expressed in New Taiwan Thousand Dollars)(Unaudited but Reviewed)

English Translation of Financial Statements Originally Issued in Chinese

Description CommonStock

Capitalsurplus

E-TON SOLAR TECH. CO., LTD.STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

TotalLegal Reserve RetainedEarnings

For the Nine Months Ended September 30, 2007 and 2006

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English Translation of Financial Statements Originally Issued in Chinese

ITEMS Jan. 1, 2007~Sep. 30, 2007 Jan. 1, 2006~Sep. 30, 2006 ITEMS Jan. 1, 2007~Sep. 30, 2007 Jan. 1, 2006~Sep. 30, 2006

CASH FLOW FROM OPERATING ACTIVITIES: CASH FLOW FROM FINANCING ACTIVITIES:

Net income $634,112 $497,128 Increase in short-term borrowings 1,219,749 - Adjustments to reconcile net income to net cash provided by operating activities: Increase in short-term notes and bills payable - Net - 9,990 Depreciation expenses 62,134 33,512 Increase in long-term borrowings 2,722,962 - Amortization expenses 3,823 459 Issuing new common shares by injecting cash - 958,650 Losses from long-term equity investments under the equity method 1,826 110 Payment of employee's bonus (17,117) (6,293) Gain on valuation of liability components of convertible bonds-put option (245,251) - Cash dividend (362,340) (118,747) Amortization of discount on bonds payable 104,060 - Adverse effect on convertible bonds exchange rate (601) - Net cash provided by financing activities 3,563,254 843,600 Changes in operating assets and liabilities:

Accounts receivable-Net (492,853) (263,812) Accounts receivables - related parties-Net (53,668) - NET DECREASE IN CASH AND CASH EQUIVALENTS (1,002,955) (186,600) Other financial assets-Current 5,214 (16,397) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,680,175 388,467 Inventories-Net (642,160) (216,357) Prepayments to suppliers (2,765,080) (691,134) CASH AND CASH EQUIVALENTS AT END OF SEPTEMBER 30, 2007 AND 2006 $1,677,220 $201,867

Financial assets measured at fair value through profit or loss-Current (3,934) - Other current assets (80,412) (23,484) Deferred income tax assets-Net 64 19,945 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Notes payable 18,026 2,806 Cash paid during the year for:

Accounts payable (68,871) 15,478 (1)Interest $44,069 $83 Income tax payable (33,572) 28,666 Less: capitalized interest (22,280) - Accrued expenses 12,591 8,759 Deferred debits - losses on intercompany transactions (2,380) - Interest (excluding capitalized interest) $21,789 $83

Deferred credits - gains on intercompany transactions (767) - Advance sales receipts 5,009 (627) Other current liabilities 15,254 269 (2)Income tax $47,837 $11,741

Accrued pension liabilities (526) (484)

Net cash used in operating activities (3,527,962) (605,163) (3)Additions to property, plant and equipment $902,722 $378,973 Add: Blance Other notes payable at beginning of year 52,772 11,025

CASH FLOW FROM INVESTING ACTIVITIES: Balance payable-machinery and equipment (Listing in Other payables) at beginning of year 147 5,828 Additions to long-term equity investments - (35,794) Less: Balance other notes payable (Listing in Notes payables) at the end of September 30, 2007 and 2006 - (3,814) Additions to financial assets carried at cost-Noncurrent (58,258) - Balance payable-machinery and equipment (Listing in Other payables) at the end of September 30, 2007 and 2006 - (3,209) Additions to property, plant and equipment (955,641) (388,803) Increase in intangible assets-Computer software cost (4,277) - Additions to property, plant and equipment $955,641 $388,803

Increase in deferred charges (20,071) (440)SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Net cash used in investing activities (1,038,247) (425,037) (4) Current portion of Bonds payable $2,619,828 -

(The accompanying notes are an integral part of the financial statements)

E-TON SOLAR TECH. CO., LTD.

STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2007 and 2006

(Expressed in New Taiwan Thousand Dollars)

(Unaudited but Reviewed)

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E-TON SOLAR TECH. CO., LTD. NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2007 and 2006 (Unaudited but Reviewed)

(Expressed in thousand dollars unless otherwise stated) Ⅰ. ORGANIZATION AND OPERATIONS

1. E-TON SOLAR TECH. CO., LTD. (the Company) was incorporated in December 26, 2001 as a company limited by shares under the Company Law Republic of China on Taiwan, and its registered and operating address is 3 F., No. 498, Sec.2, Bentian Rd., Tainan City, R.O.C. The Company’s major business activity is to manufacture and sell solar cells.

2. On October 9, 2002, the Company acquired the assets and liabilities of photoelectric department of JI EE INDUSTRY CO., LTD. (JI EE) by issuing the new shares to JI EE, which was approved by the resolution of the board of directors of the Company made on August 30, 2002. After spin-off, the Company’s shares were 100% owned by JI EE. However, JI EE has transferred 51.56% of the Company’s shares to the shareholders of JI EE. Therefore, JI EE’s interest in the Company was reduced below 50%.

3. The Company became a listed company in Gre Tai Securities Market (Over-the- Counter Market) on March 8, 2006.

4. The number of employees of the Company on September 30, 2007 and 2006 were 526 and 238, respectively.

Ⅱ. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of E-TON SOLAR TECH. CO., LTD. on September 30, 2007 and 2006 were prepared in conformity with “Business Entity Accounting Law”, “Regulation on Business Entity Accounting Handling”, “Regulation Governing the Preparation of Financial Statements of Security Issuers” and accounting principles generally accepted in the Republic of China on Taiwan. 1. Cash and cash equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash. Cash and short-term deposits on the balance sheet comprise cash at bank and cash in hand and short-term deposits with an original maturity of three months or less.

2. Allowances for doubtful debts

Account receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. Provisions are made based on objective evidence that the Company will not be able to collect the debts and the past experience of occurrences of bad debts. Bad debts are written off when identified.

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3. Inventories Inventories are initially recognized at cost and valued at the lower of cost or market at the balance sheet date. Costs of the products sold are calculated via the weighted average method. Market value of inventories will be determined by net realizable value, except for raw materials and supplies which are determined by replacement cost. Provision is made for the obsolescence of the inventories.

4. Financial assets and financial liabilities

Financial assets in the scope of SFAS No.34 “Accounting for Financial Instruments” and “Regulation Governing the Preparation of Financial Statements of Security Issuers” are classified as either financial assets measured at fair value through profit and loss, held-to-maturity financial assets, hedging derivative assets, debt investments without active market or available-for-sale financial assets. When financial assets are recognized initially, they are measured at fair value with changes in fair value going through the profit and loss statement, including any directly attributable transaction costs. In the case of investments not recognized at fair value, the cost is recognized including any directly attributable transaction costs. Likewise, financial liabilities are classified as either financial liabilities measured at fair value through profit and loss, hedging derivative liabilities or financial liabilities carried at cost.

All regular way purchases and sales of financial assets are recognized on the trade date.(i.e. the date that the Company commits to purchase or sell the assets.) Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

(1) Financial assets / liabilities measured at fair value through profit or loss Financial assets / liabilities classified as held for trading are included in the category “financial assets / liabilities measured at fair value through profit or loss”. financial assets / liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated and effective hedging instruments. Gains or losses on investments held for trading are recognized in income. Fair value of investments in equity shares or depository receipts in the open stock market is the closing price at the reporting date. Fair value of investments in opening mutual funds is the net asset per unit at the reporting date.

(2) Financial assets carried at cost Financial assets classified in the category “financial assets carried at cost” are stated at cost at date of acquisition. If an unquoted equity instrument that is fair value cannot be reliably measured.

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(3) Derecognition of financial assets and liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized where: ．the rights to receive cash flows from the asset have expired; ．the Company retains the right to receive cash flows from the assets, but has

assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

．the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Where the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognizing of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.

(4) Impairment of financial assets

The company evaluates whether or not there are indications that financial assets carried at cost may be impaired on the balance sheet date. If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. And such loss cannot be reversed in the subsequent period.

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5. Long-term investments accounted for under equity method (1) Long-term investments are classified as “Long-term equity investments under the

equity method” when an investor company holds 20% or more of an investee company’s stock with voting rights, such long-term investments should be valued in equity method, when an investee company has net income or loss for the year, an investor company shall recognize investment gains or losses in proportion to its equivalent stock ownership. If an investee company issues new shares and original shareholders do not purchase new shares proportionately, then the investment percentage, and therefore the equity in net assets for the investment, will be changed. Such difference shall be used to adjust the Additional paid-in capital and the Long-term investments accounts. If the adjustment stated above is to debit the Additional paid-in capital account and the book balance of additional paid-in capital from long-term investments is not enough to be offset, then the difference shall be debited to the Retained earnings account.

(2) The Elimination of intercompany unrealized gains or losses are as followed: Unrealized intercompany profits and losses arising from downstream transactions

between the Company and investee company shall be eliminated in proportion to the Company’s ownership percentage; while those from transactions with majority-owned (above 50%) subsidiaries shall be eliminated entirely. Such eliminations shall be credited to the account of deferred charges-intercompany transaction and debited to the account of unrealized profits or losses- intercompany transaction.

Unrealized intercompany profits or losses arising from upstream transactions between the investee company and the Company shall be eliminated in proportion to the Company’s ownership percentage, regardless the capability of control over the investee Company. Unrealized intercompany profits or losses arising from transactions among investee companies shall be eliminated in proportion to the Company’s equivalent ownership percentages. Such eliminations shall be adjusted to the account of long-term investment and the investment profit or loss as well.

If the transaction profits or losses come from depreciated, depleted, or amortized fixed assets, the recognition of such profits and losses shall be spread over the useful lives of such assets; otherwise, the recognition shall be made in the year when profits or losses are realized.

6. Property, plant and equipment

(1) Property, plant and equipment are stated at cost less accumulated depreciation. Major additions, renewals and betterment are capitalized, while minor renewals, repairs and maintenance are expensed currently. When assets are retired or disposed of, their cost and related accumulated depreciation are removed from the fixed assets account. Gain or loss on asset disposal are deemed as non-operating activity and are contributed to current income.

(2) Borrowing costs, which incurred during the period of purchasing and constructing of property, plant and equipment are capitalized and added to the cost of such assets.

(3) Depreciation of property, plant and equipment is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Buildings and structures 8～15 years Machinery and equipment 3～8 years Office equipment 5 years Miscellaneous equipment 3～10 years

Property, plant and equipment, which are still in use after their estimated useful lives are depreciated over their remaining estimated service lives on their undepreciated book values. (i.e. salvage value)

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7. Assets impairment Pursuant to SFAS No. 35, the Company assesses indicators for impairment for all its assets within the scope of SFAS No. 35 at each balance sheet date. If impairment indicators exist, the Company shall then compare the carrying amount with the recoverable amount of the assets or the cash-generating unit (“CGU”) and write down the carrying amount to the recoverable amount where applicable. Recoverable amount is defined as the higher of fair values less costs to sell and the values in use. For previously recognized losses, the Company shall assess, at each balance sheet date, whether there is any indication that the impairment loss may no longer exist or may have decreased. If there is any such indication, the Company has to recalculate the recoverable amount of the asset. If the recoverable amount increases as a result of the increase in the estimated service potential of the assets, the Company shall reverse the impairment loss to the extent that the carrying amount after the reversal would not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the assets in prior years. Impairment loss (reversal) is classified as non-operating losses/ (income).

8. Intangible assets

Commencing January 1, 2007, the Company had adopted the R.O.C. SFAS No. 37 “Accounting for the Recognition of Intangible Assets” to account for the intangible assets. Intangible assets acquired separately are initially recognized at cost, but intangible assets acquired from government are initially recognized at fair value. Following initial recognition, intangible assets are carried at cost, plus regulatory revaluation, less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be finite. (Computer software costs are amortized via the straight-line method over 2~5 years.) Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at the end of each fiscal year. Changes in the expected useful life or are treated as changes in accounting estimates.

9. Deferred charges

Deferred charges, principally consisting of cost for the electric power infrastructure and energy-saving computer imitating expense, are stated at cost and amortized via the straight-line method over 3~5 years.

10. Employee retirement benefit

(1) The Company has established a deferred benefit pension fund for its employees. Pursuant to the Labor Standard Law in Taiwan, the Company makes contributions to the pension fund monthly at 2% of the total monthly salaries and wages paid. The pension fund is administrated by the Employees’ Retirement Fund Committee and is deposited with the Central Trust of China, a government entity, in the name of the Committee. Payments of retirement benefits are made from the fund directly, so that, it is not reflected in the accompanying financial statements.

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(2) The Company adopted, on a prospective basis, R.O.C. Statement of Financial Accounting Standards No.18 "Accounting for Pensions". The Statement requires that the pension plan assets and the benefit obligation be determined on an actuarial basis. Net transition asset or obligation prior service cost, and gains or losses from the plan assets are amortized on the straight-line basis over the employees’ average remaining service period.

(3) The Labor Pension Act of R.O.C. (“the Act”), which adopts a defined contribution scheme, takes effect from July 1, 2005. In accordance with the Act, employees of the Company may elect to be subject to either the Act and maintain their seniority before the enforcement of the Act, or the pension mechanism of the Labor Standard Law. For employees subject to the Act, the Company shall make monthly contributions to the employees’ individual pension accounts on a basis no less than 6% of the employees’ monthly wages.

11. Convertible bonds

For convertible bonds issued after January 1, 2006, the components compounded of financial instruments with an embedded derivatives which comprise a conversion option and redemption right, and their characteristics, in terms of economic and risk, are not closely related to the host contract, are separately recognized by the Company initially. The fair value of derivative financial instruments are measured in the beginning, and after that is liability components. The proceeds of the bond issued, net of the fair value of the derivative financial instruments and liability are accounted for as the equity component (conversion option with a fixed exchange rate feature). The fair value of the liability component is determined using the market rate for an equivalent non-convertible bond and this amount is carried as a long-term liability on the amortized cost basis until extinguished on conversion or redemption. Changes in fair value of the equity component are not recognized; while changes in fair value of derivative financial instruments and amortized costs of liability are charged to the profit or loss. When the conversion option is exercised before maturity, the adjusted carrying value of the liability components (bonds and embedded derivatives are included) is credited to a capital stock accounts. Bond issuance costs (transaction costs) are apportioned between the equity, derivative financial instruments and liability components.

12. Revenues recognition

The Company adopted R.O.C. Statement of Financial Accounting Standards No.32 “Accounting for the Recognition of Revenue”. Sales are recognized when products are shipped and all significant risks of ownership have been transferred.

13. Income tax

(1) Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized.

(2) Undistributed earnings generated after 1998 would be subject to a 10% tax in compliance with R.O.C. income tax law.

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(3) The Company adopted R.O.C. Statement of Financial Accounting Standards No. 12 “Accounting for the Deduction of Income Tax”. The tax credit obtained from expenditure incurred in purchase of equipment and technology, research and development, staff training, and equity investment is credited to current income.

(4) Commencing January 1, 2006, the Company calculated the minimum income tax in pursuant to the Income Basic Tax Act. The Company should be subject to a higher income tax than the minimum income tax. Additionally, in consideration of realization of deferred income tax assets, the minimum income tax in the succeeding years has been taken into account by the Company.

14. Foreign currency transactions

The functional and presentation currency of the Company is New Taiwan Dollars (“NT Dollars” or “$”). Transactions in foreign currencies are initially recorded in functional currency rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Gains or losses are charged to current income.

15. Earnings per common share (1) In accordance with R.O.C. Statement of Financial Accounting Standards No.24,

“Earnings Per Share”, the Company presents basic earnings per share if a simple capital structure is applied; or both basic earnings per share and diluted earning per share if a complex capital structure exists. Basic earnings per share are equal to the net income (loss) attributable to common stock divided by the weighted average number of common shares. When calculating diluted earnings per share, the numerator should include or add back potential common stock dividends, interest and other conversion revenues (expenses). The denominator should include all diluted potential common share.

(2) Earnings per share are calculated based on the weighted average common shares outstanding. If there is capital increasing from cash injection, the weighted average share is computed based on the period of share issued. Earnings per share of prior years are retrospectively adjusted when there is capitalization from retained earnings or capital surplus.

Ⅲ. REASONS AND EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES

1. Commencing January 1, 2006, the Company adopted SFAS No.34 “Accounting for Financial Instruments” and No.36 “Presentation and Disclosure of Financial Instruments”. Having adopted the new statements in the first time, the financial assets and financial liabilities at fair value are classified appropriately and remeasured at fair value. Adjustments made for the difference between initially carrying value and fair value of the financial instruments at fair value through profit or loss, are recognized in the income statements as “Cumulative effect of changes in accounting principle”. Whereas, this change does not have any impact on the financial statement for the nine months ended September 30, 2006.

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2. Commencing January 1, 2006, the Company calculated income tax in pursuant to the Income Basic Tax Act and the amended Income Tax Law with respect to undistributed earnings subject to a 10% tax. Whereas, this change does not have any impact on the financial statement for the nine months ended September 30, 2006.

3. Commencing January 1, 2007, the Company has adopted SFAS No. 37, “accounting for the Recognition of Intangible Assets”. There was no impact on net income and earnings per share for the nine months ended September 30, 2007.

Ⅳ. CONTENT OF SIGNIFICANT ACCOUNTS

1. Cash and cash equivalents

September 30, 2007 September 30, 2006Cash on hand $305 $231Checking and saving accounts 143,414 201,636Cash in banks-time deposits 947,169 －

Cash equivalents 586,332 －

Total $1,677,220 $201,867 2. Accounts receivable-Net

September 30, 2007 September 30, 2006Accounts receivable $901,220 $276,099Less: Allowance for doubtful accounts (7,737) －

Net $893,483 $276,099

3. Inventories-Net (1) Details were as follows:

September 30, 2007 September 30, 2006Merchandise inventories $175 － Raw materials 143,518 $238,579Supplies 29,971 23,178 Work in process 459,930 167,836 Finished goods 565,310 63,180 Sub-Total 1,198,904 492,773 Less: Allowance for loss on obsolescence

and decline in market value (16,900) (2,700)Net $1,182,004 $490,073 (2) As of September 30, 2007 and 2006, the amount of insurance coverage for the

above inventories were NT$1,800,000 and NT$235,032 respectively.

15

4. Financial assets measured at fair value through profit or loss – Current (1) Details were as follows:

September 30, 2007 September 30, 2006

Item Book valueContract amount

(Nominal Principle) Book value Contract amount

(Nominal Principle)Financial assets held for trading- derivative instrument

Cross currency swap contract - portion of interest rate swap $3,892 USD100,000 － －

(2) Gain on revaluation of cross currency swap contract for the nine months ended

September 30, 2007 and 2006 were NT$6,967 and NT$0 respectively.

5. Funds and long-term investments (1) Details were as follows:

September 30, 2007

September 30, 2006

Long-term equity investments under equity method $185,777 $35,684 Financial assets carried at cost – Noncurrent 58,258 － Total $244,035 $35,684

(2) Long-term equity investments under equity method:

Details were as follows: September 30, 2007 September 30, 2006

Investee Amount Percentage of

ownership Amount Percentage

of ownershipGLORIA SOLAR CO., LTD. $154,676 8.89% $35,248 17.65%ZHI YAO INVESTMENT LTD. 31,101 100.00% 436 100.00%Total $185,777 $35,684

① Investment incomes were recognized under equity method based on unreviewed

financial statement of the investee companies. For the nine months ended September 30, 2007 and 2006, the details were as follows:

Investee Companies Jan. 1 ~ Sep. 30, 2007 Jan. 1 ~ Sep. 30, 2006GLORIA SOLAR CO., LTD. $(1,460) $(46) ZHI YAO INVESTMENT LTD. (366) (64) Total $(1,826) $(110) ② As of July 17, 2007, GLORIA SOLAR CO., LTD. increased its capital by

raising the money from its shareholders and other investors. After that, the Company’s interest in GLORIA SOLAR CO., LTD. was down to 8.89%; meanwhile the interest held by the Company’s.

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③ Subsidiary – ZHI YAO INVESTMENT LTD. was also down to 2.22%. ④ Although the Company’s and its subsidiary’s holding the shares of GLORIA

SOLAR CO., LTD. in total is not more than 20% of total issued commons shares, the Company still has a significant influence but no control over GLORIA SOLAR CO., LTD. due to the fact that the president of the Company is also the president of GLORIA SOLAR CO., LTD.

(3) Financial assets carried at cost – Noncurrent: September 30, 2007 September 30, 2006

Investee Amount Percentage

of ownership Amount Percentage

of ownershipHUA-CHUANG AUTOMOBILE

INFORMATION TECHNICAL CENTER

CO., LTD. $50,000 1.00%

－

－

SOLAR POWER, INC. 8,258 0.76% － －

Total $58,258 －

6. Property, plant and equipment (1) Total detail of accumulated depreciation on September 30, 2007 and 2006 were as

follows: September 30, 2007 September 30, 2006Buildings and structures $26,614 $14,535 Machinery and equipment 144,800 81,405 Office equipment 35 21 Miscellaneous equipment 3,323 1,734 Total $174,772 $97,695

(2) The insurance coverage for property, plant and equipment as of September 30, 2007

and 2006 amounted to NT$1,200,000 and NT$558,950 respectively. (3) Total capitalized interests were NT$22,280 and NT$0 for the nine months ended

September 30, 2007 and 2006. Total interest expenses incurred before reducing the capitalized amount were NT$152,718 and NT$83 respectively.

17

7. Intangible assets Computer Software Cost

Initial Costs Amount as of January 1, 2006 － Acquisition by the company － Amount as of September 30, 2006 － Amount as of January 1, 2007 － Acquisition by the company $4,277 Amount as of September 30, 2007 $4,277 Accumulated Amortizations Amount as of January 1, 2006 － Amortizations for the nine months ended September 30, 2006 － Amount as of September 30, 2006 － Amount as of January 1, 2007 － Amortizations for the nine months ended September 30, 2007 $223 Amount as of September 30, 2007 $223 Book Value As of January 1, 2006 － As of September 30, 2006 － As of January 1, 2007 － As of September 30, 2007 $4,054

8. Other assets

(1) Details were as follows: Nature September 30, 2007 September 30, 2006

Long-term prepayments to suppliers $3,489,222 $561,423

(2) Based on the term of payment in the purchase contract, the Company should made

an advanced payment to suppliers. Due to the fact that the nature of such advanced payment is considered as a promising purchase, and such prepayment will be used to deduct part of payment for each time delivery, such prepayments will be existing until the purchase contract is fulfilled, accordingly, they were considered as a long-term prepayment.

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9. Pension benefits (1) The Company has recognized net pension cost NT$509 and NT$516 for the nine

months ended September 30, 2007 and 2006, respectively. As of September 30, 2007 and 2006, the balances of pension assets deposited in Central Trust of China were NT$4,900 and NT$2,232, respectively.

(2) Commencing July 1, 2005, the “Labor Pension Act” (“the Act”) was taken effect, and the Company made the contribution of NT$5,925 and NT$2,810 as pension cost for the nine months ended September 30, 2007 and 2006, respectively.

(3) As of September 30, 2007 and 2006, the amount of prepaid pension (classified as other current assets) and accrued pension liability were NT$1,109 and NT$845, respectively.

10. Short-term borrowings

(1) The detail of short-term borrowings as of September 30, 2007 and 2006 were as follows:

September 30, 2007 September 30, 2006 Nature of loans Interest Rate Range Amount Interest Rate Range Amount

Unsecured loans for the purchase of raw material

－ $29,749 － －

Unsecured loans 2.303%~2.41% 1,190,000 － －

Total $1,219,749 －

11. Short-term notes and bills payable

(1) Guarantor September 30, 2007 September 30, 2006 Union Bills Finance Co., － $30,000 Less: Discount on short-term notes － (25) Net － $29,975

(2) The interest rate of above debts in the range of 0% and 1.102 % as of September 30,

2007 and 2006, respectively. 12. Financial liabilities measured at fair value through profit or loss – Current

(1) The detail of hedging derivative liabilities: September 30, 2007

Item Contract amount

(Nominal Principle) Book value

Derivative Financial Instruments Put option - Convertible bonds USD1,776 thousand $58,004

September 30, 2006: None.

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13. Bonds payable (1) The detail of bonds payable:

Item September 30, 2007 September 30, 2006Pure carrying amount of Bonds(USD80,224 thousand) $2,619,828 － Financial liabilities measured at fair value through profit or loss – current

Put option (USD1,776 thousand) $58,004 － Call option (redemption right) － － Total $58,004 －

The pure carrying amount of above bonds was determined by discounting the total issued amount with a presumed effective interest rate of 5.48722%. This amount was carried as long-term liability on the amortized cost basis. The other liability components were measured at fair value which was determined by using the Two Dimension Binomial Tree Model. Considering that the possibility of redemption is remote, the fair value of the above call option was recognized as zero.

(2) Issuance of convertible bonds overseas:

Trustee Place of

listed

Issued Period Principal Amount

Interest rate Security

Bank of New York

Singapore (SGX-ST)

2006.11.16～2011.11.16

USD100,000 thousand

0% None

(3) Conditions of conversion:

Conversion Period Conversion Price Accounting Method for Bonds’

Conversion Rights 2006.12.16～2011.11.6 NT$486.36 dollars/per

common share Book Value method

Pursuant to SFAS NO.36, the equity component was recognized as capital reserve - stock option in amount of NT$425,142.

(4) Redemption at the Option of the Issuer

A. The Issuer may redeem the Bonds in whole or in part at any day on or after 18 months of the Issue Date at 100% of the principal amount if the closing price (translated into US dollar at the prevailing exchange rate) of the Issuer’s Common Shares on the GTSM for twenty (20) out of the thirty (30) consecutive trading days, the last of which occurs not more than five (5) trading days prior to the date upon which notice of such redemption is given, is 130% or above of the prevailing Conversion Price converted into US dollars at the Fixed Exchange Rate as determined on the Pricing Date or at 100% of the principal amount when more than 90% in principal amount of the Bonds originally outstanding have been redeemed, converted purchased or cancelled.

20

B. The Issuer may redeem all, but not part, of the Bonds at any time at 100% of the principal amount if the Issuer has or will become obliged to pay additional tax due to any change in, or amendment to, the laws or regulations, on or after Issue Date.

(5) Put option of the Bondholders

Unless previously redeemed, converted, purchased or cancelled, the Company will, at the option of the Bondholders, redeem all or part of the bondholder’s Bonds at any days on or after 18 months ("Put Option Date") after the Issue Date at 100% of the principal amount, as specified in the Trust Deed. Each Bondholder shall have the right to require the Issuer to redeem all of its Bonds in the event that the Issuer’s Common Shares cease to be listed on the GTSM on the 20th business day following the date on which the Company notifies the Trustee of the delisting, or if there is a change of control, on the date set by the Company for such redemption (which shall be not less than 30 nor more than 60 days following the date on which the Company notifies the Trustee of the change of control), at a price equal to 100% of the principal amount.

(6) Redemption on the Maturity Date Unless previously redeemed, converted, purchased or cancelled, the Bonds will be redeemed at 100% of the principal amount on the Maturity Date.

(7) Conversion Price Reset:

In addition to the Conversion Price adjustments customary to the similar type of issues from the R.O.C., the Conversion Price shall be subject to a Conversion Price Reset at each anniversary from the Issue Date (the "Reset Dates") adjusted in the event that the average closing price for the 20 consecutive trading days immediately prior to the Reset Dates, converted into US dollars at the then prevailing exchange rates is lower than the Conversion Prices (converted into US dollars at the Fixed Exchange Rate as determined on the Pricing Date)on Reset Dates converted into US dollars at the fixed exchange rates established on the pricing date.

Any adjustment to the Conversion Price pursuant to the Conversion Price Reset shall be limited so that the adjusted Conversion Price shall not be less than 80% of the Initial Conversion Price (which may be adjusted if the Common Shares of the Issuer changes). Adjusted Conversion Price=Average Market Price× (1+Conversion Premium) × (Fixed Exchange Rate/Prevailing Exchange Rate) Note1: The “Conversion Premium” is at least 1%. Note2: The trading day as indicated above shall mean the day on which the securities

market of the R.O.C. opened for trading.

21

14. Long-term borrowings (1) The detail of long-term borrowings as of September 30, 2007 and 2006 was as

follows: September 30, 2007 September 30, 2006

Creditors Loan PeriodInterest

rate range Amount Interest

rate range Amount Hua Nan Bank 2007.02.15 ~

2012.02.14 3.0159% ~ 3.0412%

$2,730,000 － －

Less: Unamortized charges for the loan fee

(7,038) －

Net $2,722,962 －

(2) The Company has signed a five years loan agreement with 14 banks (including Hua

Nan Bank, etc.) on Feb. 14, 2007. Under this loan agreement, the facility in aggregate granted by the banks amounted to NT$4,000,000 thousand dollars. The major covenant in this loan agreement are summarized as follows: Financial Ratio requirements (Per annual and semiannual audited consolidated financial statements): A. Current ratio: no lower than 100%. B. Debt ratio: Total liabilities to tangible net assets, no higher than 250% in 2007;

200% in 2008 and 2009; 150% in 2010 and after. C. Interest protection ratio: no lower than 500%. (excluding the amortized interest

generated from Conversion Bond) D. Tangible net assets no less than NT$2.3 billion in 2007; NT$ 3 billion in 2008

and 2009; NT$ 3.5 billion in 2010 and after. 15. Common stock/ Stock dividend to be distributed

(1) As of January 1, 2006, the Company had an authorized common stock of NT$221,580 thousand dollars with a par value of NT$10 per share, divided into 22,158 thousand shares, and outstanding common stocks of 22,158 thousand shares. On October 18, 2005, the board of directors resolved to issue common stock of 3,000 thousand shares with a par value of NT$10 dollars per share at issuance price of NT$175 dollars per share. The date of issuing new stock was set on January 10, 2006; accordingly, they have been registered in the Government Authority. On December 28, 2005, the Company declared to issue new common stock of 3,115 thousand shares at the issuance price of NT$218 dollars per share, meanwhile, the issuance costs of NT$4,000 thousand dollars were deducted from account of ‘Capital in excess of par value’. The date of issuing new stock was set on March 6, 2006; accordingly, they have been registered in the Government Authority. On June 15, 2006, the meeting of shareholders resolved to increase the Company’s authorized capital to NT$600,000 thousand dollars, declare shareholders’ stock dividends and employees’ stock bonuses of NT$119,870 thousand dollars by using retained earnings and to issue Global Depositary Shares in cash. Date of issuing new shares for shareholders’ stock dividends and employee’s bonuses was approved by Financial Supervisory Commission, Executive Yuan. As of September 30, 2006, the Company had an authorized common stock of NT$402,600 thousand dollars with a par value of NT$10 per share, divided into 40,620 thousand shares.

22

(2) As of January 1, 2007, the Company had an authorized common stock of NT$600,000 thousand dollars with a par value of NT$10 per share, divided into 60,000 thousand shares, and outstanding common stocks of 40,260 thousand shares. On June 13, 2007, the meeting of shareholders resolved to increase the Company’s authorized capital to NT$1,000,000 thousand dollars and to declare shareholders’ stock dividends and employees’ stock bonuses of NT$203,950 thousand dollars by using retained earnings. Date of issuing new shares for shareholders’ stock dividends and employee’s bonuses was set on August 11, 2007 and was approved by Financial Supervisory Commission, Executive Yuan. As of September 30, 2007, the Company had an authorized common stock of NT$606,550 thousand dollars with a par value of NT$10 per share, divided into 60,655 thousand shares.

16. Capital surplus

According to the R.O.C. Company Law, the capital surplus arising from equity investment under equity method can not be used. The capital surplus arising from other transaction can only be used to offset deficits or declare stock dividends. The Company shall not use the capital surplus to offset its deficits unless the legal reserve is insufficient for covering those deficits.

17. Legal reserve

According to R.O.C. Company Law, 10% of the Company’s net income, after deducting previous years’ losses, if any, is appropriated as legal reserve prior to any distribution until such reserve is equal to the Company’s paid-in capital. When the legal reserve is equal to 50% of the paid-in capital, 50% of such reserve may be distributed to the Company’s shareholders through the issuance of additional common stock.

18. Income distributions

(1) The Company’s articles of incorporation provide that net income, after deducting the previous years’ losses, may be appropriated or distributed proportionally as follows: (a) To appropriate 10% as legal reserve; (b) Appropriate special reserve according to the company laws of R.O.C.; After (a) ~ (b), the balance is added up with the accumulated retained earnings in the previous year, and it will be determined to retain or distribute by shareholders. If a distribution is determined, it will be distributed in the following ways: (c) After (a) and (b), at most 5% is paid as remuneration to directors and

supervisors; (d) After (a) and (b), at least 1% is paid as bonuses to employees. (e) The balance, added the accumulated retained earnings in the previous year will

be determined to retain or distribute by the shareholders.

23

(2) On June 13, 2007 and June 15, 2006, the shareholder’s meeting approved the dividend distribution plan, which was proposed by the board of directors. The earning distribution plans for 2006 and 2005 were as follows:

2006 2005

Cash dividend $9.0/per share (in NT dollar)

$4.2/per share (in NT dollar)

Stock dividend $5.0/per share (in NT dollar)

$4.2/per share (in NT dollar)

Employees' bonuses －cash bonuses $17,117 $6,293 －stock bonuses $2,650

(265 thousand shares)$1,123

(112 thousand shares)Directors' and supervisors' remuneration

－ －

With regards to 2006 earnings distribution plan, all of directors and supervisors of the Company have resolved to give up their remunerations.

In consideration of charging the employee cash bonuses and directors’ and supervisors’ remuneration to net income of 2006, the modified earning per share for 2006 was NT$17.96 dollars.

(3) To comply with the SEC’s regulation, the Company has circulated the above

information about the dividend distribution plan, including the information about the dividends to shareholders, employees’ bonuses and remuneration for directors and supervisors in the Market Observation Post System(MOPS) .

19. Net sales

Jan. 1, 2007~

Sep. 30, 2007 Jan. 1, 2006~

Sep. 30, 2006Sales－Finished goods $3,713,725 $2,038,957 Sales－Merchandise 229,020 89,047 Sales－Others 997 75,029 Sub-total 3,943,742 2,203,033 Less: Sales return and allowance (106,374) (5,689)Net $3,837,368 $2,197,344

24

20. Cost of sales

For the nine months ended September 30, 2007 and 2006, the expenses according to their nature and functions were summarized as follows:

Jan. 1, 2007~Sep. 30, 2007 Jan. 1, 2006~ Sep. 30, 2006 Function

Nature

Classified as

cost of sales

Classified as

operating

expenses

Total Classified as

cost of sales

Classified as

operating

expenses

Total

Salaries $128,081 $21,729 $149,810 $59,526 $10,795 $70,321

Insurances 8,229 1,559 9,788 3,945 808 4,753

Pensions 5,478 956 6,434 2,860 466 3,326

Subsidy 5,757 595 6,352 2,903 323 3,226

Depreciation 61,613 521 62,134 33,308 204 33,512

Amortization 695 3,128 3,823 310 149 459

21. Income taxes

Deferred tax assets and liabilities as September 30, 2007 and 2006 were as follows: (1) September 30, 2007 ①Total deferred tax assets $10,192②Total deferred tax liabilities $(4,414)③Valuation allowance for deferred tax assets －

④Deferred income taxes as of September 30, 2007 consist of deferred income tax liabilities as follows:

Item Temporary differences Tax effect

Unrealized inventory loss on decline in market value $16,900 $4,225 Allowance for bad debts 7,737 1,934 Employee pension plan (352) (88)Provision for employee welfare 2,792 698 Unrealized foreign exchange gain (13,506) (3,376)Unrealized revaluation gain on financial assets (1,420) (355)Unrealized loss on intercompany transactions (2,380) (595)Tax deductible for investing in automatic equipments and R&D

3,335

⑤Deferred tax assets-Current $9,737

Valuation allowance for deferred tax assets-Current － Net deferred tax assets-Current 9,737 Net deferred tax liabilities-Current (4,326)Net deferred tax assets and liabilities-Current $5,411

25

⑥Deferred tax assets-Noncurrent $455

Valuation allowance for deferred tax assets-Noncurrent － Net deferred tax assets-Noncurrent 455 Net deferred tax liabilities-Noncurrent (88)Net deferred tax assets and liabilities-Noncurrent $367

⑦Income tax expense

Income tax payable $14,761 10% income tax on undistributed earnings 7,495 Total 22,256 Prepaid income tax 6,859 Deferred tax benefit 64 Over estimation of prior year income tax (14,849)Income tax expense $14,330

(2) September 30, 2006 ①Total deferred tax assets $4,187

②Total deferred tax liabilities $(478)

③Valuation allowance for deferred tax assets －

④Deferred income taxes as of September 30, 2006 consist of deferred income tax liabilities as follows:

Item Temporary differences Tax effect

Unrealized inventory loss on decline in market value $2,700 $675 Employee pension plan 18 4 Provision for employee welfare 2,440 610 Unrealized foreign exchange gain (1,914) (478)Tax deductible for investing in automatic equipments and R&D

2,898

⑤Deferred tax assets-Current $3,738

Valuation allowance for deferred tax assets-Current － Net deferred tax assets-Current 3,738 Net deferred tax liabilities-Current (478)Net deferred tax assets and liabilities-Current $3,260

26

⑥Deferred tax assets-Noncurrent $449 Valuation allowance for deferred tax assets-Noncurrent － Net deferred tax assets-Noncurrent, 449 Net deferred tax liabilities-Noncurrent － Net deferred tax assets and liabilities-Noncurrent $449 ⑦Income tax expense

Income tax payable $39,811 10% income tax on undistributed earnings 229 Total 40,040 Prepaid income tax 452 Deferred tax benefit 19,945 Over estimation of prior year income tax (86)Income tax expense $60,351

(3) As of September 30, 2007 and 2006, the balance of shareholders’ Imputation Credit

Account (ICA) amounted to NT$4,543 and NT$106, respectively.

(4) The information of retained earning: Jan. 1, 2007~

Sep. 30, 2007 Jan. 1, 2006~ Sep. 30, 2006

Earning before 1997 － － Earning after 1998 $711,370 $499,436 Total $711,370 $499,436

(5) The Company’s corporate income tax return through 2004 has been reviewed and

determined by the Tax Administration.

22. Earning per share (Unit: thousand shares) (1) The weighted average numbers of common stocks outstanding were computed as

follows: (Unit: in thousand shares)

Jan. 1, 2007~ Sep. 30, 2007

Jan. 1, 2006~Sep. 30, 2006

Outstanding shares, beginning of year 40,260 22,158 Add: The weighted average number of new

common shares issued for cash － 5,263

Stock dividends 20,130 11,875 New common shares issued to Employees as

bonus 265 112

Retroactively adjusted by stock dividend and employees’ stock bonuses

－

20,395

Weighted average number of thousand shares adjusted retroactively 60,655 59,803

27

Jan. 1, 2007~ Sep. 30, 2007

Jan. 1, 2006~Sep. 30, 2006

Potential common shares: Assuming that the convertible bonds were

converted into common stock at the inception 6,734 － Weighted average number of thousand shares

for diluted earnings per share 67,389 39,408

(2) Income before income tax $648,442 $557,479 Income tax expense (14,330) (60,351)Net income $634,112 $497,128

(3) Basic earnings per share: (in NT dollar) Income before income tax $10.69 $9.32 Income tax expense (0.24) (1.01)Net income $10.45 $8.31 Diluted earnings per share: (in NT dollar) Note

Note: Anti-dilution Ⅴ. RELATED-PARTY TRANSACTIONS

(Ⅰ) Name and Relationship of Related Parties: Name of Related Parties Relationships with the Company

JI EE INDUSTRY CO., LTD. (JI EE) Shareholder of the Company with significant influenceover the Company

GLORIA SOLAR CO., LTD. (GLORIA SOLAR)

Investee company, controlled by the Company and accounted for under equity method (the Company has significant influence but no control anymore since July 17, 2007.)

E-TON POWER TECH CO. ,LTD. (E-TON POWER)

Its president is the same person as the Company (E-TON POWER spinned off from JI EE since July 10, 2007)

(Ⅱ) Significant related party transactions:

1. Sales September 30, 2007 September 30, 2006

Related Parties Amount % Amount % GLORIA SOLAR $233,501 6.08% － －

Sale price: The above sales were dealt with in the ordinary course of

business. Terms of collection Unrelated parties:

In T/T 30~90 days; or received in advance.

Related Parties: In T/T 30~150 days.

28

2. Accounts receivable-related parties September 30, 2007 September 30, 2006

Related Parties Amount % Amount % GLORIA SOLAR $71,770 7.38% － －

3. Other receivables-related parties

September 30, 2007 September 30, 2006 Related Parties Amount % Amount %

GLORIA SOLAR $333 0.95% － － JI EE 197 0.56% － － E-TON POWER 267 0.76% － － Total $797 2.27% － － The above accrued revenues consisted of sale of scrap, repairs of transformers, security service and other revenues.

4. Accrued expenses to related parties

September 30, 2007 September 30, 2006 Related Parties Amount % Amount %

JI EE $6,332 12.01% $3,770 13.16% E-TON POWER 742 1.41% - - $7,074 13.42% $3,770 13.16% The above accrued expenses consisted of utilities, rent and other expenses.

5. Operating Lease (1) The rent paid to related parties for leasing the building for September 30, 2007 and

2006 were as follows: Related Parties Lease Period

Jan. 1 ~ Sep. 30, 2007

Jan. 1 ~ Sep. 30, 2006

Term of payment

JI EE 2006.11.1~2008.10.31 $7,534 $3,074

Paid monthly

The plant and office leased to the Company are located at 3F and 4F, No.498, Sec. 2, Bentian Rd. Tainan City.

(2) Per annum rents paid during the leasing period were as follows: Year Rent amount

2007.10.1 ~ 2007.12.31 $2,511 2008.1.1 ~ 2008.10.31 8,371

29

6. Others (1) Other disbursements paid to related parties:

Item Jan. 1, 2007~Sep. 30, 2007

Jan. 1, 2006~Sep. 30,2006

Utilities fee $35,273 $15,046Wastewater managing fee 6,073 3,469Others 1,522 264

Ⅵ. ASSETS PLEDGED AS COLLATERAL：None. Ⅶ. COMMITMENTS AND CONTINGENCIES

As of September 30, 2007, the Company consisted of the following events that were not shown in the financial statements: 1. Unused letters of credit

Currency Amount (in thousands) USD $94 EUR 2,760 JPY 464,575

2.(1) As of September 30, 2007, the aggregated amount of contracts pertaining to the purchase of machinery equipments and construction of new plant were summarized as follows:

Currency Amount (in thousands)

USD $1,870 EUR 62,543 JPY 747,800 NTD 1,034,793

(2) As of September 30, 2007, the sum of amount paid by the Company for the above contracts were as follows: (reported as an account of ‘construction in progress’ and ‘prepayment for equipments’ respectively in the balance sheet)

Currency Amount

(in thousands)

USD $1,281 EUR 9,469 JPY 373,960 NTD 519,193

3. The Company had entered into two leasing agreements with Ministry of Economic Affairs, R.O.C. for leasing two piece of industrial land No.455 and No.455-1, located at Tainan Technical Industrial Park, Eastern 3 area for 20 years, starting September 30, 2005. The area of this two leasing land is approximately 15,369.36 and 11,990.12 square meters, respectively. Pursuant to this two agreement, the Company shall totally pay NT$12,344 thousand dollars as a rent deposit, and rent shall be paid in accordance with the leasing terms.

30

4. As of September 30, 2007, the Company has signed a letter of intent with Solar-Fabrik

AG for its supply of 140MW Solar Cell for 5 years, starting 2007.

5. As of September 30, 2007, the Company has signed a letter of intent with

Romag-Holdings for its supply of 4MW Solar Cell for 1 year, starting October, 2006.

6. As of September 30, 2007, the Company has signed a letter of intent with SOLARIA for

its supply of 130MW~180MW Solar Cell for 5 years, starting January, 2007.

7. As of September 30, 2007, the Company has entered into an agreement with BP

SOLAR ESPANA for its supply of 10MW Solar Cell within 2007.

8. As of September 30, 2007, the Company has entered into an agreement with LDK

SOLAR HI-TECH CO., LTD. for its supply of 200MW ‘Monocrystalline Silicon

Wafer’ to the Company for 4 years, starting 2007.

9. As of September 30, 2007, the Company has entered into an agreement with expediter

for its supply for 9 years, staring January, 2007. As of September 30, 2007, the

Company has paid USD$11,578 thousand to expediter as a down payment, and the

unused down payment is amounted to USD$11,366 thousand.

10. The Company has signed a collaborative research agreement with NewSouth

Innovations Pty Limited at February, 2007. The Company has paid USD$400 thousand

for upfront license fee. And the Company paid USD$300 thousand per year for services

fee for 3 year. The contract effective date was April 2, 2007.

11. As of September 30, 2007, the Company have entered into an agreement with manufacturer of American for its supply of 100MW Solar Cell for 5 years, staring

January, 2007.

12. In 2006, the Company has entered into an agreement with M.SETEK CO., LTD. for its

supply of 400MW, 700MW and 350MW ‘Monocrystalline Silicon Wafer’ to the

Company for 10 years. According to this agreement, the Company shall make a certain

amount of down payment to M.SETEK CO., LTD. As of September 30, 2007, the

unused down payment paid to M.SETEK CO., LTD. is amounted to USD$103,864

thousand.

13. The Company had entered into an agreement with the Department of Industrial

Technology of Ministry of Economic Affairs, R.O.C. for its product development for

two years, starting as September 1, 2007. The total plan fund is NT$51,000, the

contribution belong with government is NT$18,000, and the Company shall pay

NT$33,000. As of September 30, 2007, the contribution has not been paid.

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Ⅷ. SIGNIFICANT DISASTER LOSS：None. Ⅸ. SIGNIFICANT SUBSEQUENT EVENTS

On October 18, 2007, second shareholder temporary meeting resolved to acquire 95% of total shares of ADEMA TECHNOLOGIES, INC. (ADEMA), one of the American silicon ingots expediter, by issuing new common stock and cash. The conditions are as follow: (1) The company will acquire 716 thousand shares of common stock, with value of

USD$55,000 thousand, of ADEMA by issuing new common stock of 5,008 thousand shares. The stock-swap ratio is set as 1: 0.14292.

(2) The company will acquire 1,184 thousand shares of common stock, with value of USD$91,013 thousand, of ADEMA by cash payment.

Ⅹ. OTHER 1. Related information of financial instruments

A. Policy and Strategy of risk control As far as the Solar Cell industry concerned, the Company is now at its stage of growth. In the event that significant purchases of machinery equipments and raw materials from the suppliers and venders, and sales of the Company’s products to the customers, are mostly dealt with by means of paying cash or giving a short-term credit line, the Company is undertaking a low level of credit risk but high level of liquidity in its business. Accordingly, the allocation of the Company’s financial instruments is mainly on ‘cash and cash equivalents’ and ‘financial assets held for trading’. Safety, liquidity and profitability are the major factors that influence the Company’s policy of holding financial assets. As for the aspect of foreign currency risk, the Company’s policy is to have sufficient cash inflow in foreign currency provided from the sales of the Company’s products, so as to afford the payment in foreign currency made for importing equipments and materials. In case it is needed, the Company will purchase the derivative financial instruments, such as foreign currency forward exchange contract, to hedge its risk associated with foreign currency fluctuations. To be in accordance with regulations of Central Bank of R.O.C., the Company had to enter into cross currency swap contract simultaneously at the inception of the issuance of foreign convertible bond in order to hedge against foreign currency and interest rate fluctuations of foreign convertible bond.

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B. Fair value of financial instruments September 30, 2007 Carrying value Fair value Non-derivative Financial Instruments Assets Cash and cash equivalents $1,677,220 $1,677,220 Accounts receivable-Net 965,253 965,253 Other financial assets – Current 34,954 34,954 Long-term equity investments under equity method 185,777 Note: 3 Financial assets carried at cost-Noncurrent 58,258 Note: 3 Liabilities Short-term borrowings 1,219,749 1,219,749 Payable accounts 218,207 218,207 Bonds payable (Including current portion) 2,619,828 2,619,828 Long-term borrowings 2,722,962 2,722,962 Derivative financial instruments Financial assets measured at fair value through profit or loss – Interest rate swap 3,892 3,892 Financial liabilities measured at fair value through profit or loss – put option for convertible bonds 58,004 58,004

September 30, 2006 Carrying value Fair value Non-derivative Financial Instruments Assets Cash and cash equivalents $201,867 $201,867 Accounts receivable-Net 276,099 276,099 Other financial assets-Current 32,217 32,217 Long-term equity investments under equity method 35,684 Note: 3 Liabilities Short-term note and bills payable 29,975 29,975 Payable accounts 181,201 181,201

Note: The methods and assumptions used to estimate the fair value of non-derivative

financial instruments are as follows: 1. The fair value of the Company’s short-term financial instruments is based on the

book value of those instruments at reporting date due to the short maturity of those instruments. The method applied to cash and cash equivalents, receivable, payable, other finance assets-current, short-term borrowings and short-term notes and bills payable – net.

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2. The fair value of the Company’s financial assets measured at fair value through

profit and loss is based on market prices at reporting date.

3. Due to cost and restriction of acquiring information, it is impractical to estimate the

fair value of these financial instruments.

4. The fair value of derivative financial instruments is determined by the amount of which the Company should get or pay based on an assumption that the instruments current is terminated at the balance sheet date. Usually, unrealized loss or gain for current undue contract is also included. The fair value of above transactions is calculated by the financial institution based on a present value of future cash inflow.

C. Financial assets and liabilities which fair value was measured based on quoted price in

active market and appraised based on evaluation method were as follows, respectively: September 30, 2007

Quoted price in active market

Appraised price based on evaluation method

Non-derivative financial instruments Assets

Cash and cash equivalents $1,677,220 －

Accounts receivable-Net － $965,253 (Note1) Other financial assets- Current － 34,954 (Note1) Long-term equity investments underequity method

－ 185,777 (Note2)

Financial assets carried at cost – Noncurrent

－ 58,258 (Note2)

Liabilities Short-term borrowings － 1,219,749 (Note2)

Payable accounts － 218,207 (Note1) Bonds payable (Including current portion)

－ 2,619,828 (Note2)

Long-term borrowings － 2,722,962 1(Note2) Derivative financial instruments

Financial assets measured at fair value through profit or loss–Interest rate swap

－ 3,892

Financial liabilities measured at fair value through profit or loss – Put option for convertible bonds

－ 58,004

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September 30, 2006

Non-derivative financial instruments Quoted price in active market Appraised price based on

evaluation method Assets

Cash and cash equivalents $201,867 －Accounts receivable-Net － 276,099 (Note1) Other financial assets- Current － 32,217 (Note1) Long-term equity investments under equity method

－ 35,684 (Note2)

Liabilities Short-term note and bills payable － 29,975 Payable accounts － 181,201 (Note1)

(Note 1) The fair value of the Company’s short-term financial instruments is based on the book value of those instruments at reporting date due to the short maturity of those instruments.

(Note 2) Due to cost and restriction of acquiring information, it is impractical to estimate the fair value of these financial instruments.

D. For the nine months ended September 30, 2007 and September 30, 2006, interest

incomes and interest expenses generated from financial assets and liabilities not measured at fair value through profit or loss were as follows:

Jan. 1 ~ Sep. 30, 2007 Jan. 1 ~ Sep. 30, 2006 Interest income $82,320 $4,517 Interest expenses 130,438 83

E. Gains or losses recognized from the change in fair value which is measured based

on an appraisal method were NT$246,671 and NT$0 for the nine months ended September 30, 2007 and September 30, 2006 respectively.

F. Financial risk information

a. Market Value Risk There was no significant market value risk for the Company’s financial instruments.

b. Credit risk The major credit risk of the Company was from the collectibility of accounts receivables. The Company had adequate amounts of allowance for doubtful accounts; therefore, the credit risk of the Company was low.

c. Liquidity Risk There were sufficient working capitals in the Company; therefore, the Company had no liquidity risk of being not capable of financing.

d. Cash flow risk influenced by interest rate fluctuation Due to the short maturity of financial assets and liabilities associated with cash flow risk influenced by interest rate fluctuation, cash flow risk influenced by interest rate fluctuation was low.

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2. Other:

For analytical and comparative purpose, the financial statements for the nine months ended September 30, 2006 has been reclassified.