Long Term Investment Risk Management VIS by alicejenny


									5. Long Term Investment
None of 2007 investments and the current year investments exceeded 5% of the Company’s paid-in Capital.

6. Risk Management
6.1 Interest Rates Fluctuation, Foreign Exchange Rate Volatility and Inflation
Interest rate:
VIS’ exposure to interest rate fluctuation relates primarily to long-term liabilities for capital expenditures. Due to small scale of li-
abilities, no major impact is expected from interest rate fluctuation
Foreign exchange:
Most of VIS’ revenues are denominated in US dollar. VIS mainly utilizes spot and forward foreign exchange trading to adjust its
foreign exchange position as per the foreign exchange market conditions for the purpose of reducing the impact of exchange rate
fluctuation on the company. In addition, VIS’ materials and equipments payments are made in US Dollars, Japanese Yens and Eu-
ros, among which a substantial portion is in US Dollars. Henceforth, VIS enjoys a certain degree of natural hedge as a result of set-
off between account payables and account receivables.
Inflation in Taiwan was 1.8% in 2007. VIS did not regard the inflation rate would have significant impact on its operation and prof-
its. We consider the impact will remain insignificant in future if the inflation rate is similar to those in the past.

6.2 High risk, high leveraged investment, lending, endorsement and guarantee for other parties and financial de-
    rivatives transactions
VIS focuses on its foundry manufacturing operations and IC wafer production. Accordingly, the company does not engage in high
risk/high leveraged investments. In order to control and monitor certain types of transactions, VIS has established internal control
policies and procedures conforming to the relevant laws and regulations promulgated by the authorities concerned. These policies
and procedures include “Policies and Procedures for Financial Derivative Transactions”, “Procedures for Lending Funds to Other
Parties” and “Procedures for Endorsement and Guarantee”. Until now, the company and affiliates have neither lent funds to oth-
ers, nor provided endorsement or guarantee for others. Financial derivatives transactions that VIS enters into are strictly for hedg-
ing purpose and not for trading and speculative purposes.

6.3 R&D Plan and Progress
In 2007, VIS capital expenditure is about NT$10.8 billion, while in 2008 capital expenditure is planned for about NT$6 billion. Other
than equipment and facility maintaining expense, capital expenditure covers the product and process R&D to provide complete
IC manufacturing service for customers and to enhance our competitiveness in global market. VIS will continue to build on the
existing foundation and strengthen the specialty process technologies. VIS will continue to develop BCD process technology sup-
porting various voltage and applications to provide higher performance devices and to attract more specialty process customers.
In high voltage process, VIS will continue to provide active support for the cost control in shrink process and voltage requirement
in various applications. VIS will continue to raise the R&D budget in 2008, estimated higher than 4.1% of total sales. (Please refer
to”Technology and R&D Status”)

6.4 Changes in Domestic and International Policies and Regulations
Management team closely monitors political and regulatory developments that could have a material impact on business and op-
erations. Political and regulatory developments did not have any material adverse effect on VIS during 2007.

6.5 Changes in Technology

6.6 Changes in Company’s Image
VIS is dedicated to maintaining the highest integrity and ethics in managing its operations and to the promotion of the company’s
overall competitiveness as well as sustainable development. VIS will not tolerate any conduct that compromises the company’s in-
tegrity or core values.

      VIS has deployed detailed measures to monitor the industry environment, company operation and management systems for pre-
      venting any emergent condition that might jeopardize the company’s reputation and reducing management uncertainty to the
      lowest level. VIS is committed to maintaining the company’s operations and protecting the interests of shareholders, customers
      and employees.

      VIS has implemented the principle of corporate governance into its day-to-day management since its finding. We have hold inves-
      tor conferences regularly to maintain a high-level of financial transparency. In order to become a perpetual enterprise and serve
      as a model corporate citizen, each VIS employee actively participates in the operation of the safety, health, and environmental
      system, to reach the company’s goals. VIS has received ISO 14001 and OHSAS 18001 certifications. For intensifying the response
      capability of property insurance/risk control and intant recovery procedures from severe disaster, VIS has established Tri-A property
      loss control audit system and the business continuity plan (BCP) for guidance. To demonstrate its dedication to corporate social
      responsibility, VIS has also participated in a wide range of public activities that benefit the community and society. No emergent
      event occurred from 2007 to the publishing date of this annual report.

      6.7 Risks from Merge, Acquisition and Plant Expansion
      No merge and acquisition event occurred from 2007 to the date of publishing this annual report.

      6.8 Risks from Plant Expansion
      VIS has increased its production capacity to meet consumer demand. In 2007, VIS purchased, from Winbond Electronics Corp., a
      facility and building for producing 8-inch wafers in Hsinchu Science Park, with the transaction formalized on January 1, 2008. It is
      estimated that this new facility will increase VIS’s monthly production by 40,000 8-inch wafers, meeting customer demand and in-
      creasing VIS market share. At press time, other industry leaders had no plans to increase their production capacity.

      6.9 Risks from Concentration of Stock and Sales
      To avoid overly concentrated risk and to protect raw materials supply for the manufacturing process at all time, VIS has maintained
      multiple suppliers for the major materials to spread the risk. In 2007, the top ten customers have made over 86% of company an-
      nual sales. The concentration of sales is the industry nature of our business as focused specialty foundry.

      6.10 Transfer of Shareholdings of Directors, Supervisors or Large Shareholders
      VIS corporate board members, overseen by its corporate supervisor, the National Development Fund of the Executive Yuan, trans-
      ferred 169,600,000 stock shares to TSMC in 2007. After discussion among major stockholders, this large transaction was complet-
      ed after the market close. This has not affected the rights of shareholders, and since the amount is less than 50% of shares, does
      not affect board members’ supervisory function or VIS operations.

      6.11 Change of Management

      6.12 Litigation or non-litigation proceedings
      No litigation or non-litigation proceedings occurred from 2007 to the publishing date of this annual report.

      6.13 Other Material Risks
      Measures responding to events that seriously impact on the company’s operations
      VIS regularly conducts drills and trainings for managing natural or man-made damage, such as typhoon, earthquake, fire, gas and
      chemicals leak, and establish broad and detailed prevention measures as well as contingent plans. VIS is capable of maintaining
      the company’s operations and protecting the interests of shareholders, customers and employees. No emergency event occurred
      from 20067to the publishing date of this annual report.

The Policy of the risk management
VIS improves the risk management consistently by taking the professional technology and the concept of the risk evaluation from
national and international sources, by executing the prevention of risk and loss control aggressively and by affecting the assurance
of safety of engineer technology, the system of risk management and by mandating the participation of education training pro-
gram of all employees in order to achieve the final goal of zero risk and zero loss.

The organization chart of the risk management
To promote the risk management effectively VIS founds a top committee, which operates and reviews the operation of the risk
management. Three subcommittees are established based on the duties of every department.
Each department analyzes its own operations by utilizing the hazard categories and risk evaluation and then submits the recom-
mendation of the improvement along with the method of the risk control; target setting and standard of improvement for those
unacceptable risks. After initial investigation by the subcommittee, the proposal is resubmitted to the top committee. The pro-
posal will be managed and the top committee will monitor the progress periodically.
Duties for the responsible departments are:
Finance: Responsible for financial coordination and implementation, establish the hedge process to lower our financial risk;
Marketing & Sales: Responsible for sales strategies, product promotion, and trend monitoring to our lower marketing and sales risk;
Legal: Responsible for managing the legal risks with accordance of laws from government and authorities, handling contract and
       law suit dispute to lower our legal risk;
Information & eCommerce: Responsible for Net planning, strategies, operations and quality control, to lower the risk of our Net
Internal Auditing: Responsible for regulating and educating of the internal control system to establish and enhance effective inter-
       nal control.

7. Other important matters


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