Viewsonic 1012G/A Registration of securities (amended)

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As filed with the Securities and Exchange Commission on June 25, 2004

File No. 000-50730

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

AMENDMENT NO. 1
TO
FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934

VIEWSONIC CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		95-4120606 (I.R.S. Employer Identification No.)
381 Brea Canyon Road Walnut, California (Address of Principal Executive Offices)		91789 (Zip Code)

Registrant's telephone number, including area code: (909) 444-8800

Securities to be registered pursuant to Section 12(b) of the Act:
None

Securities to be registered pursuant to Section 12(g) of the Act:
Stock options to purchase common stock, $.01 par value per share

VIEWSONIC CORPORATION

FORM 10

TABLE OF CONTENTS

		Page
Item 1.	Business	1
Item 2.	Financial Information	14
Item 3.	Properties	31
Item 4.	Security Ownership of Certain Beneficial Owners and Management	32
Item 5.	Directors and Executive Officers	33
Item 6.	Executive Compensation	36
Item 7.	Certain Relationships and Related Transactions	39
Item 8.	Legal Proceedings	40
Item 9.	Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters	40
Item 10.	Recent Sales of Unregistered Securities	41
Item 11.	Description of Registrant's Securities to be Registered	42
Item 12.	Indemnification of Directors and Officers	44
Item 13.	Financial Statements and Supplementary Data	44
Item 14.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
Item 15.	Financial Statement and Exhibits	45
	Signatures	71
	Exhibit Index	72

Item 1. Business

Overview

ViewSonic Corporation is a leading global provider of visual display technology products. We develop, market and support a broad range of award winning visual display technology products including liquid crystal displays, or LCD, monitors, cathode ray tube, or CRT, monitors, projectors, LCD TVs, plasma displays and the latest in mobile products, including tablet personal computers, or Tablet PCs, and wireless monitors. Our goal is to become one of the world's leading brands of visual display technology products.

According to an International Data Corporation, or IDC, December 2003 research report, we ranked sixth in worldwide LCD monitor shipments for the first three quarters of 2003.

Through a technology integration business model, we collaborate with a network of industry-leading software providers, key component suppliers and final product contract manufacturers. Rather than depending upon a single proprietary technology, our business model allows us to combine together industry leading technologies into products marketed under the ViewSonic brand. We believe our model shortens the time to market for our products by reducing the product development cycle. Our extensive product lines offer a wide array of display sizes, features and price/performance levels to meet customer needs.

Our products are sold through distributors, retailers and other resellers to commercial businesses, including Fortune 1000 companies, small and medium sized businesses, and consumer electronics markets. We sell our products globally and are managed geographically in three regions: the Americas, Europe and Asia Pacific.

We were incorporated in the State of California as a S corporation in July 1987 and reincorporated in the State of Delaware as a S corporation in August 1998. In April 1999, we elected to convert from a S corporation to a C corporation.

Industry Background

According to an IDC December 2003 research report, worldwide desktop monitor shipments are expected to increase from 104 million units in 2002 to 149 million units in 2007. IDC estimates that total LCD monitor shipments are expected to increase from 29.1 million units in 2002 to 118.5 million units in 2007, while total CRT monitor shipments are expected to decrease from 75.1 million units in 2002 to 30.6 million in 2007. IDC estimates that worldwide revenue from LCD monitors will increase from $16.0 billion in 2002 to $38.6 billion in 2007, while revenue from CRT monitors will decline from $17.1 billion in 2002 to $3.4 billion in 2007.

LCD Panel Development for Desktop Monitor Applications

The display industry is currently experiencing a shift from CRT technology to flat panel LCD technology in multiple applications, including desktop computing and TV products. A significant increase in LCD manufacturing capacity in various Asian countries has led to lower panel costs and larger panel sizes, enabling more affordable LCD products for both desktop monitors and TV systems. The rapid increase in the amount of LCD monitors bundled with PCs has also driven adoption.

CRT Monitor Trends

Although the demand for CRTs is projected to decrease, its price advantage over LCDs still makes it a dominant display choice in emerging markets such as China and Eastern Europe. In addition, in developed markets, CRTs are still favored in certain market segments such as education, which are subject to budget constraints, and high-end graphic design, due to the CRT's superior color

performance over LCDs. Furthermore, among the available CRT technologies, end users generally favor flat screen CRTs instead of the more traditional curved CRTs because flat CRTs reduce glare and are viewed as a cost effective alternative to higher priced flat LCDs.

LCD Panel Development for TV and Presentation Applications

The newer and larger LCD panel fabrications allow LCD technology to be applied to TV developments. As LCD panels become available in larger sizes, commercial applications for LCD TVs are expected to grow. The commercial information display market is expected to transition to large screen (30"+) LCD monitors and TVs.

TV Industry Trends and Opportunities

In addition to LCD TVs, other high growth TV technologies include plasma displays and rear projection televisions. These three types of TVs are often referred to as "Advanced Televisions" due to their unique form factors and growing adoption of high definition technology. Of these three key technologies, LCD TVs represent the highest growth opportunity for displays less than 40", while plasma displays and rear projection systems represent the most promising growth opportunity for screen sizes greater than 40".

Worldwide, governments are supporting the growth of digital systems through a series of mandates and deadlines to convert all analog transmission to digital. In the United States, all TV stations must transmit digitally by 2007, while worldwide deadlines for digital transmission range from 2007 to 2015. These regulatory changes are being implemented to promote more efficient use of transmission bandwidth than is currently provided by conventional analog TVs, freeing broadcast spectrum for other purposes.

Front Projector Trends and Opportunities

In addition to traditional desktop displays, front projection technology has shown rapid growth over the past several years, replacing traditional overhead projectors as the presentation display of choice. Projectors offer several distinct advantages that include portability and versatility. Today, multimedia projectors deliver PC and video content for business or consumer use. In the fourth quarter of 2003, retail prices for projectors broke the sub $1,000 barrier, making them more affordable for mainstream users.

Products

We offer a wide range of visual display technology products worldwide under the ViewSonic brand name. Our product categories include: desktop CRT and LCD monitors, LCD TVs, plasma displays, projectors, Tablet PCs, and peripherals such as TV/Video processors, keyboards, mice and speakers. Each product category is targeted at specific applications and offers a wide array of sizes and features over a broad range of price and performance levels.

Product Categories

We sell two principal product categories: the computer monitors and all other products, in all three of our business segments. Within the computer monitors, we sell and market both CRT and LCD monitors. Our other products include projectors, plasma displays, Tablet PCs, Pocket PCs and peripherals, as described in the table below. We believe that the market for CRTs is currently in the mature stage of its life cycle trending towards the decline stage. Our decrease in unit shipments of CRTs over the past three years is consistent with the overall trends in the worldwide CRT market. On the other hand, we believe that the market for LCDs is currently in the growth stage of its life cycle and is expected to replace CRTs as the technology of choice in the display market for the foreseeable

future. Our increase in LCD unit shipments over the past three years is in line with the overall trends in the worldwide LCD market. Many of our other products, specifically LCD TVs and plasma TVs, are currently in the introductory stage of their respective product life cycle. The demand for these products at this stage is primarily from early adopters, but is expected to grow. We believe that the LCD and plasma TV categories represent opportunities for future growth. The following table identifies our principal product categories as of December 31, 2003:

Product Type	Series	User Group	Size/ Additional Attributes
Liquid Crystal Displays	E2	Small Office/Home Office Budget User	15", 17"
	Graphics	Corporate & Advanced Graphic Gaming User	15" through 19"
	X	High Style/High Technology User	15", 17", 19"
	Pro	Professional User for use in Document Imaging, CAD and Desktop Publishing	17" through 23"
	A	Retail Consumer User	15", 17"
Liquid Crystal Display TVs	—	Home Entertainment User and Select Business Users	15", 17", 18", 20", 27"
Cathode Ray Tube Displays	E2	Small Office/Home Office Budget User	15", 17", 19"
	Graphics	Corporate & Advanced Graphic Gaming User	17", 21"
	Pro	Professional User for use in Document Imagining, CAD and Desktop Publishing	17", 19", 22"
	A	Retail Consumer User	17", 19"
	Optiquest	Small Office/Home Office Budget User	15", 17"
Projectors	—	Business and Home Entertainment Users	Under 3 Lbs. to 14+ Lbs.
Plasma Displays	—	Home Entertainment and Select Business User	42", 50"
Tablet PC & Pocket PC	Slate & Convertible Tablet PCs Pocket PCs	Mobile Professional User Business and Home Users	10" & 12" Tablet Screen Size Full Color Screen Pocket PCs
Wireless Monitor	Smart Display	Business and Home Entertainment Users	10" & 15" Screen Size
Peripherals & Accessories	—	All Users	TV/Video Processor, Keyboards, Mice, Speakers, Etc.

Desktop LCD and CRT Monitors

ViewSonic desktop monitors offer both LCD flat panel technology and CRT technology. We design our products to meet the demanding requirements of sophisticated and quality conscious end users. There are five series of products in each of our desktop LCD and CRT monitor portfolios. Each series incorporates price/performance characteristics targeted at key market segments.

As a percentage of our total unit shipments, LCD monitor shipments comprised 42.4%, 32.0% and 15.0% of our total unit shipments in 2003, 2002 and 2001, respectively. CRT monitor shipments comprised 48.5%, 66.1% and 84.6% of our total unit shipments in 2003, 2002 and 2001, respectively.

The market in which we compete is subject to technological advances with yearly new product releases and price competition. As a result, the price at which we can sell our product typically declines over the life of the product. The price at which a product may be sold is generally referred to as the

average selling price. For example, the average selling price of our CRT monitors declined approximately 23.0% from 2001 to 2003 and the average selling price of our LCD monitors declined approximately 27.2% from 2001 to 2003.

Other Products

Other products comprised 9.2%, 1.8% and 0.4% of our total unit shipments in 2003, 2002 and 2001, respectively.

TV Products

We offer both plasma and LCD TV products for the digital television market. Our LCD TV product offerings include 15", 17", 18", 20" and 27" products. Our plasma products represent large size offerings (42" and 50") to support home theater usage and commercial applications, including signage.

Projectors

We design our projectors to meet the various needs of the presentation market which include delivering clear images and ease-of-use at competitive prices. Our projector line offers a wide range of form factors in various weight categories. This segmentation helps end users select an appropriate model for usage on the road, in the office, or at home.

Tablet PC

Our Tablet PCs are designed to meet the expanding demands of today's mobile professional. Our products enable an end user to compute, collaborate, and communicate, anytime, anywhere. We offer both slate and convertible form factors to satisfy different user applications.

Peripheral Products

We offer peripherals, including TV/Video processors, keyboards, mice and speakers, which are designed to compliment the look and feel of ViewSonic display products.

Sales and Marketing

We sell our products through retail channels, distributors and through a variety of reseller arrangements. We have no minimum purchase commitments or long-term contracts with any of these third parties. As a result of our channel strategy, our sales are focused on a small number of distributors and national retailers. Sales to Ingram Micro Inc. and Tech Data Corporation, both of which are distributors, accounted for 12% and 11%, respectively, of our net sales in 2003, and 10% and 11%, respectively, of our net sales in 2002.

Distributors

We use distributors to ship our products to various resellers. We believe that with product proliferation and increasingly complex technologies, resellers are becoming more dependent on distributors to provide additional value-added services. As a result, distributors increasingly are expanding their core competencies beyond product distribution to include offerings such as configuration, channel assembly, financial services, training, marketing services, telemarketing and electronic commerce services. By providing these additional services, we believe that distributors are obtaining greater influence over the products selected by resellers.

Resellers

We use resellers to sell directly to end users, such as large corporate accounts, small to mid-sized businesses and home users. We categorize our resellers as follows:

•: Value-added Resellers, or VARs. VARs target businesses and add value by combining proprietary software and/or other integration support with off-the-shelf hardware and software.
•: Commercial or Enterprise Resellers. Commercial or enterprise resellers target and sell to Fortune 500 companies and provide worldwide, national and regional information technology configuration and support services.
•: Direct Marketing/e-Retailers. Direct marketing/e-Retailers target and sell to businesses and home users via direct mail catalogs, and telemarketing and online marketing/services. Our direct marketing/e-Retailers include CDW Logistics Inc., PC Connections, Inc., TigerDirect, Inc., Amazon.com, Inc., PCNation, and Multiple Zones International, Inc.
•: Retailers. Retailers, such as computer superstore chains, consumer electronic stores and mass merchants, target and sell to the walk-in retail market through an extensive network of retail store fronts. Our products are sold at CompUSA Inc., Best Buy Co., Inc., Fry's Electronics, Inc., Office Depot, Inc.
•: System Integrators. System integrators purchase individual components, including computer display products and assemble unbranded computer systems. Our system integrators' value proposition is to provide low-cost technology and services to a wide array of customers.
•: ViewSonic Online Sales. We leverage the Internet to market and drive demand for ViewSonic technology through our website and online stores. Our online store allows consumers to purchase many of our products directly from ViewSonic. Our store also allow end users to shop for ViewSonic products and buy them from our resellers through links on the ViewSonic website.

Our sales force supports sales opportunities through our worldwide network of channel partners, corporate accounts and online stores. Our sales department is based in Walnut, California with sales offices in the Americas, Europe and Asia Pacific.

Our marketing group generates demand, product sales and brand awareness throughout sales channels, to corporate enterprise end users, and to consumers. In each worldwide region, the marketing department works with the sales department to foster channel development and product penetration.

End User Support and Service

We offer comprehensive service options for all customers, distributors, resellers, retailers, system integrators, corporations, educators, governments and consumers. Various support and service programs are tailored to meet each region's demands. The ViewSonic support team is available to assist customers via phone, fax, email, and regular mail. In addition to a multi-language user guide packed with each product, self-support is also available via a user-friendly online interactive web tool on our website. Support is provided by professional customer service representatives, technicians, and engineers.

Various service options including repair, replacement, and advance replacement are offered for most products in most parts of the world. Services options such as extended warranty, express exchange, expedited repair and onsite repair are also available for most of our products in many countries.

Sourcing and Operations

Our component sourcing and product development staff researches, develops and tests the latest display technologies with our component suppliers and contract manufacturers, and is charged with designing and developing the highest quality display products at selected price points. We have established relationships with multiple sources of display components and multiple display manufacturers, and qualify additional component suppliers and contract manufacturers when advantageous to us. We currently obtain display components from multiple suppliers, including Hitachi America Ltd., Intel, LG-Philips, Samsung, Quanta and Chi-Mei.

Manufacturing and Logistics

We use the services of several contract manufacturers including Coretronic Corporation, Delta Electronics Inc., Hitachi America Ltd., Jean Company Ltd, Neso Technology Inc., Quanta, Sampo Technology Corporation, Tatung Company and Top Victory Technology. In some instances, the companies that develop and manufacture key technology components and the companies that take these components and manufacture the finished products are different divisions of large, integrated organizations, while, in other instances, they are independent entities. Our contract manufacturers design the electronic and mechanical systems of a display product around our choice of major components and our specific industrial design. Aside from these major specifications mandated by us, the contract manufacturers choose electronic and mechanical solutions of standard design to reduce the development time, engineering cost and procurement risk associated with more customized designs.

ViewSonic's global distribution centers are strategically located in the United States, Asia Pacific and Europe. From our distribution centers, we ship to our channel partners, which include the distribution, VAR and retail channels. Distribution centers are operated by ViewSonic and, where appropriate, in conjunction with third-party logistic partners.

Inventory and Working Capital

Our management focuses considerable attention on managing our inventories and other working-capital-related items. We manage inventories by communicating with our customers and then using our industry experience to forecast demand on a product-by-product basis. We then place manufacturing orders for our products that are based on this forecasted demand.

The quantity of products actually purchased by our customers as well as shipment schedules are subject to revisions that reflect changes in both the customers' requirements and in manufacturing availability. We maintain substantial inventories of our products because our industry is characterized by short lead time orders and quick delivery schedules.

Research and Product Development

Our product development efforts are focused on analyzing technology trends, designing and developing standards-based, competitively priced products that incorporate the technologies and features that we believe are most desired by customers today and into the future. In addition, we collaborate with the world's most advanced technology companies for research, development, and engineering to evaluate the latest display and visual solutions related technologies. Working with these companies, ViewSonic engineers integrate new technologies, design product and system architectures, and manage quality.

We believe our cooperative approach allows ViewSonic to determine the best method and timing for delivering new products and technologies to the market. Research and development expense was $8.2 million, $7.7 million, and $7.2 million for 2003, 2002 and 2001, respectively.

Competition

The market for our display products is highly competitive. Competitive factors include product features, price, product quality, breadth and reliability, price/performance characteristics, end user support, marketing and channel capability, as well as, corporate reputation. We believe that we compete favorably with respect to all of these factors in the monitor market. However, we are a new entrant to the home entertainment market, and, therefore, we are just beginning to establish our competitive position. Our competitors in our markets have significantly greater financial, technical, manufacturing and marketing resources than we have. We believe that competition will have the effect of continually reducing the average selling prices of our products over time. We expect price competition to increase in future periods and such price competition may substantially reduce our revenues and profits in such periods.

Our competitors include:

•: Established consumer electronic companies such as Mitsubishi, Matsushita Electric Industrial Co., Ltd., Royal Philips Electronics of the Netherlands, Samsung Electronics Co., Ltd., Sharp Corporation and Sony Corporation;
•: Personal computer manufacturers such as Dell Inc., Gateway and Hewlett-Packard Company; and
•: Asian manufacturers interested in building a U.S. brand presence for their goods, such as BenQ, Daewoo International Corporation, LG-Philips, Sampo Group and Chi-Mei.

Intellectual Property

We rely on a combination of copyright, trademark, service mark and trade secret laws and contractual restrictions to protect our proprietary rights in our products. We have no patented technology. We generally enter into confidentiality and invention assignment agreements with our employees and contractors, and nondisclosure agreements with our channel partners, suppliers and appropriate end users to limit access to and disclosure of our proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy and use our products or technology. Policing unauthorized use of our products is difficult. The steps we have taken may not prevent misappropriation of our technology, particularly in countries where the laws may not protect our proprietary rights as fully as in the United States.

Third parties have in the past claimed infringement with respect to our current products. We expect that more infringement claims will be made against display manufacturers as the market becomes more competitive. An infringement claim, whether meritorious or not, could be time consuming, result in costly litigation, cause delays in product availability or require us to utilize alternative technology, possibly of lower quality or higher cost, or to enter into royalty or licensing agreements with unfavorable terms.

Our registered trademarks, among others, include ViewSonic®, ViewSonic's distinctive three bird logo, product names such as Optiquest® and key phrases such as "See the Difference"®. Our registered trademarks expire between August 2004 and March 2014. We intend to continue to protect our trademarks against possible intellectual property infringement.

In the future, it may be necessary or desirable for us to seek additional licenses of intellectual property rights held by third parties. If the availability of these third party technology licenses ceases, we may have to obtain substitute technology of lower quality or performance standards or at a higher cost. There can be no assurance that such licenses will continue to be available on favorable terms.

Backlog

There is generally a short cycle between the order and shipment of our products and the majority of our orders are cancelable at our customers' discretion. Therefore, we do not believe that our backlog at any particular date is indicative of our future net sales.

Employees

As of December 31, 2003, we had 743 employees worldwide. None of our employees are represented by a labor union, and we believe that our employee relations are good.

Financial Information by Business Segment and Geographic Data

We operate in three segments: Americas, Europe and Asia Pacific. The information included in Note 13 of Notes to the Consolidated Financial Statements, is incorporated herein by reference from Item 15 hereof.

Factors that May Affect ViewSonic's Business and Financial Results

Our revenues and profitability can fluctuate from period to period and are often difficult to predict for particular periods due to factors beyond our control.

Our results of operations for any quarter or year are not necessarily indicative of results to be expected in future periods. Please see Item 3 "Financial Statements and Supplementary Data" for quarterly financial information for 2003 and 2002. Our operating results have historically been, and are expected to continue to be, subject to quarterly and yearly fluctuations as a result of a number of factors, including:

•: The introduction and market acceptance of new technologies, products, and services;
•: Variations in product costs and the mix of products sold;
•: The size and timing of customer orders, which, in turn, will often depend upon the success of our customers' business or specific products or services;
•: Adverse changes in the conditions in the markets for display products;
•: The size and timing of capital expenditures by our customers;
•: Inventory practices of our customers;
•: Conditions in the broader markets for information technology and communications;
•: Adverse changes in the credit quality of our customers and suppliers;
•: Adverse changes in the supply of components such as LCD panels; and
•: The impact of acquired businesses and technologies.

These trends and factors could harm our business, operating results and financial condition.

If we fail to maintain and/or expand our sales channels, our revenue may decline.

To maintain and grow our market share, net sales and brand, we must maintain and expand our sales channels. We currently sell our products through distributors, retailers, VARs, system integrators, commercial or enterprise resellers, direct marketing/e-retailers, and ViewSonic online stores. These entities purchase our products directly from us or through our distributors. We have no minimum purchase commitments or long-term contracts with any of these third parties. Our agreements are

generally non-exclusive and generally may be terminated by either party for any reason or no reason with 30 days notice.

Retailers have limited shelf space and promotional budgets, and competition is intense for these resources. A competitor with more extensive product lines and stronger brand identity may have greater bargaining power with these retailers. The competition for retail shelf space may increase, which would require us to increase our marketing expenditures to maintain current levels of retail shelf space.

We must also continuously monitor and evaluate emerging sales channels. If we fail to establish a presence in an important developing sales channel, our business could be harmed. If we are unable to establish relationships in emerging sales channels, our sales could decline and we would lose market share.

We rely on a limited number of wholesale distributors and national retailers for most of our sales, and changes in price or purchasing patterns could lower our revenue or gross margins.

We sell our products through wholesale distributors such as Ingram Micro, Tech Data Corporation and Synnex Corporation and national retailers such as Best Buy Co., Inc. and Comp USA, Inc. We expect that a majority of our net sales will continue to come from sales to a small number of wholesale distributors and national retailers for the foreseeable future. We have no minimum purchase commitments or long-term contracts with any of these customers. The wholesale distributors and retailers could decide at any time to discontinue, decrease or delay their purchases of our products. In addition, the prices that wholesale distributors and retailers pay for our products are subject to negotiation and could change frequently. If any of our major wholesale distributors or retailers change their purchasing patterns or refuse to pay the prices that we set for our products, our net sales and operating results could be negatively impacted. If our wholesale distributors and retailers increase the size of their product orders without sufficient lead-time for us to process the order, our ability to fulfill product demands would be compromised. In addition, because our accounts receivable are concentrated within a small group of wholesale distributors and retailers, the failure of any of them to pay on a timely basis, or at all, would reduce our cash flow.

If we do not effectively manage our sales channel inventory and product mix, we may incur costs associated with excess inventory or lose sales from having too few products or the wrong mix of products.

If we are unable to properly monitor, control and manage our sales channel inventory and maintain an appropriate level and mix of products with our customers and within our sales channels, we may incur increased and unexpected costs associated with this inventory. We generally allow wholesale distributors and retailers to return a limited amount of our products in exchange for other products. Under our price protection policy, subject to certain conditions, if we reduce the list price of a product, we issue a credit in an amount equal to the reduction for each of the products held in inventory by our wholesale distributors and retailers. If our wholesale distributors and retailers are unable to sell their inventory in a timely manner, we may under our policy lower the price of the products, or these parties may exchange the products for newer products. If we improperly forecast demand for our products we could end up with too many products and be unable to sell the excess inventory in a timely manner, if at all, or, alternatively we could end up with too few products and not be able to satisfy demand. If these events occur, we could incur increased expenses associated with writing off excessive or obsolete inventory or lose sales and therefore suffer declining gross margins.

The average selling price of our products typically decreases rapidly over the life of the product, which negatively affects our gross margins.

The market in which we compete is subject to technological advances with yearly new product releases and price competition. As a result, the price at which we can sell our products typically declines over the life of the product. The price at which a product may be sold is generally referred to as the average selling price. For example, the average selling price of our CRT monitors declined approximately 23.0% from 2001 to 2003 and the average selling price of our LCD monitors declined approximately 27.2% from 2001 to 2003. In order to sell products that have a declining average selling price and still maintain our gross margins, we need to continually reduce our product costs. To manage product sourcing costs, we must collaborate with our contract manufacturers to engineer the most cost-effective design for our products. In addition, we must carefully manage the price paid for components used in our products. We must also successfully manage our freight and inventory holding costs to reduce overall product costs. We also need to continually introduce new products with higher sales prices and gross margins in order to maintain our overall gross margins. If we are unable to manage the cost of older products or successfully introduce new products with higher gross margins, our net sales will decrease and our gross margins will decline.

We depend on third-party contract manufacturers to manufacture our products. If these contract manufacturers experience any delay, disruption or quality control problems in their operations, we could lose market share and revenues, and our reputation may be harmed.

All of our products are manufactured, assembled, tested and packaged by contract manufacturers. We rely on several contract manufacturers to procure components and, in some cases, subcontract engineering work. Some of our products are manufactured by a single contract manufacturer. Our contract manufacturers are primarily located in mainland China, Taiwan, Korea, Japan and Thailand and may be subject to disruption by earthquakes, typhoons and other natural disasters, as well as political, social or economic instability. We do not have any long-term contracts with any of our third-party contract manufacturers. All of our contracts with our contract manufacturers are terminable by either party with 90 days notice for any reason or no reason. Our four largest contract manufacturers in 2003 were Delta Electronics, Inc., Jean Company Ltd., Sampo Corporation and Tatung Corporation. The loss of the services of any of our primary contract manufacturers could cause a significant disruption in operations and delays in product shipments. Qualifying a new contract manufacturer and commencing volume production is expensive and time consuming.

Our reliance on contract manufacturers also exposes us to the following risks over which we have limited control:

•: Unexpected increases in manufacturing and repair costs;
•: Interruptions in shipments if one of our manufacturers is unable to complete production;
•: Inability to control the quality of finished products;
•: Inability to control delivery schedules;
•: Unpredictability of manufacturing yields; and
•: Potential lack of adequate capacity to manufacture all or a part of the products we require.

We rely upon third parties for technology that is critical to our products, and if we are unable to continue to license this technology and future technology, our ability to offer competitive products could be harmed and our costs of production could increase.

We rely on third parties to obtain non-exclusive software license rights to technologies that are incorporated into and necessary for the operation and functionality of our products. Because the

intellectual property we license is available from third parties, barriers to entry for our competitors may be lower than if we owned exclusive rights to the technology we license and use. On the other hand, if a competitor enters into an exclusive arrangement with any of our third-party technology providers, our ability to develop and sell products containing that technology could be severely limited. Our licenses often require royalty payments or other consideration to third parties. Our success will depend in part on our continued ability to have access to these technologies on commercially reasonable terms. If we are unable to license the necessary technology, we may be forced to acquire or develop alternative technology of lower quality or performance standards. This could limit and delay our ability to offer competitive products and increase our costs of production. As a result, our gross margins, market share, and operating results could be harmed.

If we are unable to provide our third-party contract manufacturers with an accurate forecast of our component and material requirements, we may experience delays in the manufacturing of our products and the costs of our products may increase.

We provide our third-party contract manufacturers with a rolling forecast of demand which they use to determine their material and component requirements. Lead times for ordering materials and components vary significantly and depend on various factors, such as the specific supplier, contract terms and demand and supply for a component at a given time. Some of our components have long lead times. If our forecasts are less than our actual requirements, our contract manufacturers may be unable to manufacture products in a timely manner. If our forecasts are too high, our contract manufacturers will be unable to use the components they have purchased. The cost of the components used in our products tends to drop rapidly as volumes increase and the technologies mature. Therefore, if our contract manufacturers are unable to promptly use components purchased on our behalf, our cost of producing products may be higher than our competitors due to an over-supply of higher-priced components. Moreover, if they are unable to use certain components, we may need to reimburse them for any losses they incur.

If disruptions in our transportation network occur or our shipping costs substantially increase, our operating expense could increase and our financial results could be negatively impacted.

We are highly dependent upon the transportation systems we use to ship our products, including surface, ocean and air freight. Our attempt to closely match our inventory levels to our product demand intensifies the need for our transportation systems to function effectively and without delay. The transportation network is subject to disruption from a variety of causes, including labor disputes or port strikes, acts of war or terrorism and natural disasters. If our delivery times increase unexpectedly for these or any other reasons, our ability to deliver products on time could result in delayed or lost revenue. In addition, if the recent increases in fuel prices were to continue, our transportation costs would likely increase. A prolonged transportation disruption or a significant increase in the cost of freight could severely disrupt our business and harm our operating results.

If we fail to continue to introduce new products that achieve broad market acceptance on a timely basis, we will not be able to compete effectively and we will be unable to increase or maintain net sales and gross margins.

We operate in a highly competitive, quickly changing environment, and our future success depends on our ability to develop and introduce new products and product enhancements that achieve broad market acceptance in the business and home markets. Our future success will depend in large part upon our ability to:

•: Identify demand trends in the business and home display markets and quickly develop, manufacture and sell products that satisfy these demands;

•: Manage our cost structure to enable us to bring new products to market at competitive prices;
•: Respond effectively to new product announcements by our competitors by designing, either internally or through third parties, competitive products; and
•: Provide compatibility and interoperability of our products with products offered by other vendors and new technologies as they emerge.

We depend on our officers, and if we are not able to retain them, our business will suffer.

We are highly dependent on James Chu, our Chairman of the Board and Chief Executive Officer and majority stockholder, and other officers. Due to the specialized knowledge each of our officers possesses with respect to our business and our operations, the loss of service of any of our officers could adversely affect our business. We do not carry key man life insurance on our officers.

We not have employment agreements with any of our officers. Each of our officers may terminate their employment without notice and without cause or good reason. We currently are not aware that any officer is planning to leave or retire.

If we do not succeed in executing our growth strategies within our markets, our revenues may not increase.

Our strategies include further expanding our business in markets in which we currently operate, including China, Russia, Eastern and Western Europe. In many of these markets, we face barriers in the form of long-standing relationships between our potential customers and their local suppliers, as well as protective regulations. In addition, pursuing international growth opportunities may require us to make significant investments long before we realize returns on the investments, if any. Increased investments may result in expenses growing at a faster rate than revenues. Our overseas investments could be adversely affected by:

•: Reversals or delays in the opening of foreign markets to new participants;
•: Exchange controls;
•: Restrictions on foreign investment or the repatriation of profits or invested capital;
•: Nationalization of local industry;
•: Changes in export or import restrictions;
•: Changes in the tax system or rate of taxation in the countries where we do business; and
•: Economic, social, and political risks.

In addition, difficulties in foreign financial markets, economies and foreign financial institutions, particularly in emerging markets, could adversely affect demand from customers in the affected countries. Because of these factors, we may not succeed in expanding our business in international markets. This could hurt our business growth prospects and results of operations.

Intellectual property litigation and infringement claims could cause us to incur significant expenses or prevent us from selling our products.

Many of our products are designed to include software or other intellectual property licenses from third parties. Competitors' protected technology may be unavailable to us or be made available to us only on unfavorable terms and conditions. While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, we believe that, based upon past experience and standard industry practice, these licenses generally can be obtained on commercially reasonable terms. There can be no assurances, however, that we will be able to obtain, on commercially reasonable terms or at all, from third parties the licenses that we will need. Due to the existence of a large number of

patents in our field and the rapid rate of issuance of new patents, it is not practical to determine in advance whether a product or any of its components infringe the patent rights of others.

We routinely receive claims regarding patent and other intellectual property matters. Pursuant to our agreements with our suppliers, we generally seek indemnification from our suppliers in connection with such claims. Whether or not these claims have merit, they may require significant resources to defend. To date, none of these claims have had a material impact on our business. We are currently involved in several such proceedings. None of which we believe are material to our business. If an infringement claim is successful and we are unable to obtain the license for the infringed technology or substitute similar non-infringing technology, our business could be harmed.

We may be subject to product liability claims that could result in significant direct or indirect costs to us.

There is a risk that defects may occur in our products and services. The occurrence of these defects could make us liable for damages caused by these defects, including consequential damages. To date, none of these claims have had a material impact on our business. Negative publicity concerning these problems could also make it more difficult to convince customers to buy our products and services. Both could hurt our business, operating results, and financial condition.

We rely on our contract manufacturers for assistance in new product development, and our new product introduction efforts could be harmed by any adverse change in these relationships.

We work with our contract manufacturers to develop and/or incorporate new technologies and products. Our contract manufacturers design the electronic and mechanical systems of a display product around our choice of major components and our specific industrial design. Aside from these major specifications mandated by us, the contract manufacturers choose electronic and mechanical solutions of standard design to reduce the development time, engineering cost and procurement risk associated with more customized designs. Our relationships with these contract manufacturers generally do not include long-term commitment on behalf of either party. If our contract manufacturers encounter financial or other business difficulties, if their strategic objectives change, or if they perceive us to no longer be an attractive customer, they may no longer assist us in our product development efforts. Our business could be harmed if we were unable to continue one or more of our contract manufacturing relationships.

Impairment of our investment portfolio could harm our net earnings.

We have an investment portfolio that includes a variety of investments. In most cases, we do not attempt to reduce or eliminate our market exposure on these investments. We could incur losses related to the impairment of these investments, which could result in charges to net earnings. Some of our investments are in public and privately-held companies that are still in the start-up or development stage, which have inherent risks because the technologies or products they have under development are typically in the early stages and may never become successful. Furthermore, the values of our investments in publicly-traded companies are subject to significant market price volatility. We often couple our investments in technology companies with a strategic commercial relationship. Our commercial agreements with these companies may not be sufficient to allow us to obtain and integrate such products and services into our offerings or otherwise benefit from the relationship, and third parties, including competitors, may subsequently acquire these companies. Economic weakness could further impact our investment portfolio. Our investments in privately-held companies were valued at $4.7 million as of December 31, 2003. For the years ended December 31, 2003, 2002 and 2001, we recorded impairments on our investments of $3.7 million, $0 and $50,000, respectively.

Item 2. Financial Information

Selected Financial Data

The following selected financial data should be read in conjunction with our financial statements and the notes thereto, and with "Management's Discussion and Analysis of Financial Condition and Results of Operations." The consolidated statement of operations data for the years ended December 31, 2003, December 31, 2002 and December 31, 2001 and the consolidated balance sheet data as of December 31, 2003 and December 31, 2002 have been derived from, and should be read in conjunction with, our audited consolidated financial statements and the notes thereto included herein. The consolidated statement of operations data for the years ended December 31, 2000 and December 31, 1999 is derived from audited consolidated financial statements and the notes thereto which are not included in this Form 10. The consolidated balance sheet data as of December 31, 2001, December 31, 2000 and December 31, 1999 is derived from audited consolidated financial statements and the notes thereto which are not included in this Form 10.

			Year Ended December 31,
			2003			2002			2001			2000			1999
			(in thousands, except per share data)
Statement of Operations Data:
Net sales			$	1,074,684		$	884,044		$	962,359		$	1,371,196		$	1,041,918
Cost of sales				931,013			746,992			863,800			1,216,749			905,164

Gross profit				143,671			137,052			98,559			154,447			136,754
Selling, general and administrative expenses				139,264			113,033			116,352			147,771			147,535

Income (loss) from operations				4,407			24,019			(17,793	)		6,676			(10,781	)

Other income (expense)—net:
	Interest expense			(2,386	)		(2,628	)		(8,076	)		(9,336	)		(5,094	)
	Other income—net			3,068			7,460			8,594			4,549			(751	)

		Other income (expense)—net		682			4,832			518			(4,787	)		(5,845	)

Minority interest in net loss of subsidiaries				1,726			1,840			—			—			—

Income (loss) before income taxes				6,815			30,691			(17,275	)		1,889			(16,626	)
Provision for income taxes				2,333			11,500			558			285			(10,796	)

Net income (loss)				4,482			19,191			(17,833	)		1,604			(5,830	)
Preferred stock accretion				(1,229	)		(1,078	)		(1,364	)		(865	)		—

Net income (loss) available to
	common stockholders		$	3,253		$	18,113		$	(19,197	)	$	739		$	(5,830	)

Basic earnings (loss) per share			$	0.01		$	0.05		$	(0.06	)	$	—		$	(0.02	)

Diluted earnings (loss) per share			$	0.01		$	0.05		$	(0.06	)	$	—		$	(0.02	)

Basic weighted average shares
	outstanding			353,891			353,322			342,799			323,977			316,863

Diluted weighted average shares
	outstanding			358,534			361,341			342,799			323,977			316,863

	Year Ended December 31,
	2003		2002		2001		2000		1999
	(in thousands)
Balance Sheet Data:
Working capital	$	81,742	$	60,061	$	31,962	$	53,763	$	18,590
Total assets	$	414,929	$	376,898	$	338,923	$	500,659	$	411,322
Short-term debt	$	6,342	$	—	$	14,752	$	51,658	$	61,944
Long-term liabilities	$	43,000	$	43,000	$	43,000	$	63,000	$	63,000
Convertible mandatorily redeemable preferred stock	$	12,056	$	10,828	$	11,242	$	9,878	$	—
Stockholder's equity	$	64,707	$	52,609	$	26,840	$	28,828	$	1,024	(1)

(1): In April 1999, ViewSonic elected to convert from a S corporation to a C corporation.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained in this Management's Discussion and Analysis including, without limitation, statements containing the words "anticipate," "believe," "may," "should," "will" and similar expressions constitute "forward-looking statements." Persons should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including risks described in Business—Factors that May Affect ViewSonic's Business and Financial Results and elsewhere in this Form 10. The following discussion should be read in conjunction with our financial statements and the related notes.

Overview

Our Company

ViewSonic Corporation is a leading global provider of visual display technology products. We develop, market and support a broad range of display technology products including liquid crystal displays, or LCD, monitors, cathode ray tube, or CRT, monitors, projectors, LCD TVs, plasma displays and the latest in mobile products including tablet personal computers, or Tablet PCs, and wireless monitors.

Our ViewSonic branded products are sold through distributors, retailers and other resellers to commercial businesses, including Fortune 1000 companies, small and medium sized businesses, and consumer electronics markets. We sell our products globally and are managed geographically in three regions: the Americas, Europe and Asia Pacific.

We were incorporated in the State of California as a S corporation in July 1987. We reincorporated in the State of Delaware as an S corporation in August 1998 and, in April 1999, we elected to convert from a S corporation to a C corporation.

Recent Trends in Our Business

In 2003, overall spending for display and related technologies improved as corporate spending started to show signs of recovery and consumer interest in display technology continued to increase. Our results of operations were principally driven by an increase in unit sales. Net sales increased to $1,074.1 million in 2003 from $884.0 million in 2002, as we sold approximately four million display products in 2003 compared to approximately three million display products in 2002.

Despite the positive growth in our industry during 2003, the industry was negatively impacted by shortages of LCD products in the later part of 2003. As a result of these component shortages, our costs increased which lowered our gross margins and negatively impacted our operating profit. While such shortages may continue to occur in the future, in general, we expect the cost of the components used in our products to typically decrease over time as volumes increase and the technologies mature.

Overall, we have observed the following trends relating to our business in 2003:

Product Shift. The display industry continues to experience a shift from older technologies, such as CRT, to newer technologies, such as LCDs and plasma displays, as well as a broadening of application from PC monitor to TV and other digital media applications. As a result, our product mix has been shifting from CRTs, where demand has been steadily declining, to LCDs, where demand has been growing. CRT unit shipments were 48.5% of our total units shipped in 2003 as compared to 66.1% in 2002, while LCD unit shipments were 42.4% of our total units shipped in 2003 as compared to 32.0% in 2002.

Other Products. We have taken steps to diversify our product portfolio by introducing products other than CRT and LCD computer monitors such as projectors, LCD TVs, plasma displays and the latest in mobile products including Tablet PCs and wireless monitors. In general, these products are

based on newer technologies and have higher selling prices and therefore, have higher gross margins. Our other product unit shipments were 9.2% of total units shipped in 2003 as compared to 1.8% in 2002.

Future Objectives and Challenges

There are several factors that management believes will drive and/or affect our future performance:

Maintain Gross Margins. In our business model, we rely on our relationships with our contract manufacturers to provide high quality display products at competitive prices. We do not have any long-term contracts with any of our contract manufacturers. Therefore, we need to continue to actively manage our relationships with our contract manufacturers in order to ensure product availability and to control our manufacturing costs. The average selling price of our products tends to decline from the date the product is introduced, due to technological advances in our industry and heavy price competition. From 2001 to 2003, the average price of our CRT monitors declined approximately 23.0% and the average price of our LCD monitors declined approximately 27.2%. In order to maintain our gross margins, we need to continually reduce our product costs. Although prices for our products typically trend down over time, our product mix is shifting to higher priced, larger size display products and newer technologies as we expand into both the TV and consumer electronic markets. We need to continually introduce new products with higher sales prices and gross margins in order to maintain our overall gross margins.

Expand Sales in Regional Markets. We need to continue to expand our presence in our existing regional markets, while exploring new geographic market opportunities, and continue to develop and market a broad range of display and related products which satisfy a wide range of consumer and commercial applications. In our existing regional markets, we need to continue to actively manage our relationships with our wholesale distributors and national retailers as the majority of our net sales is expected to continue to come from these sales channels. In our new regional markets such as China, Russia, Eastern and Western Europe, we may need to make significant investments before being able to realize returns on these investments. These overseas investments may result in expenses growing at a faster rate than revenues.

Expand Product Offerings. We have introduced several new products other than CRT and LCD computer monitors such as LCD TVs, plasma displays and the latest in mobile products including Tablet PCs and wireless monitors. We believe that these product categories will be areas of opportunity for growth as the products become more widely accepted in the marketplace. Our other product unit shipments represented 9.2% of total unit shipped in 2003 as compared to 1.8% in 2002. These other products typically have higher average selling prices and therefore have higher gross margins. We need to continue to introduce new products that achieve broad market acceptance on a timely basis, in order to increase or maintain our net sales and gross margins.

We believe our future success will depend in large part upon our ability to:

•: Identify demand trends in the business and home display markets and quickly develop, manufacture and sell products that satisfy these demands;
•: Manage our cost structure to enable us to bring new products to market at competitive prices;
•: Respond effectively to new product announcements by our competitors by designing, either internally or through third parties, competitive products; and
•: Provide compatibility and interoperability of our products with products offered by other vendors and new technologies as they emerge.

Manage Foreign Currency Fluctuations. We must manage the effect of foreign currency fluctuations on our operational results. We buy a majority of our products from our suppliers in U.S. Dollars and sell a significant amount of our products in other foreign currencies. Historically, sales of our products have benefited from effects of the weakness of the U.S. Dollar, which made our products more affordable in several markets. We therefore need to manage our account receivables and inventory balances in order to limit our foreign currency exposure to a strengthening U.S. Dollar.

Manage Relationships with Contract Manufacturers and Sales Channel Partners. Our ability to effectively manage our inventory levels depends on our ability to accurately anticipate demand from our sales channel partners and on our ability to secure sufficient finished products from our contract manufacturers at reasonable prices and in a timely manner to meet our customers' demand.

•: Distributors and national retailers may increase orders during periods of product shortages, cancel orders if their inventory is too high, delay orders in anticipation of new products or adjust orders in response to seasonal fluctuations in customer demand.
•: If we have excess inventory, we may have to reduce our prices and write down inventory, which in turn may result in a lower gross margin. In addition, if we provide our contract manufacturers with demand forecasts that are too low, we may not have enough finished products to ship to our customers and we may lose sales.

Results of Operations

Net Sales

We generate revenues primarily from the sale of our visual display technology products to our channel partners, including distributors, resellers and retailers, as well as to end users. We sell to a geographically diversified customer base with more than 38% of our revenue in 2003 generated outside of the Americas, primarily in Europe and in Asia Pacific. We extend price reductions and sales incentive offerings to our customers including price protection, promotions, other volume-based sales incentives and expected returns.

Our largest distributors are Ingram Micro Inc. and Tech Data Corporation, which accounted for 12% and 11%, respectively, of our net sales in 2003, and 10% and 11%, respectively, of our net sales in 2002.

Cost of Sales

Our cost of sales consists primarily of cost of inventory purchased from our contract manufacturers, manufacturing support costs, inventory provisions, warranty and shipping costs. We maintain relationships with third-party contract manufacturers, which we believe will be able to provide us with sufficient quantities of product during 2004. However, we expect to continue to face price fluctuations for our products. Fluctuations in gross profit as a percentage of revenue, or gross margin, primarily result from changes in product mix and geographic mix as well as general pricing dynamics.

Selling, General and Administrative

Our selling, general and administrative expenses consist primarily of salaries, commissions and bonuses, promotional tradeshow and advertising expenses, research and development, travel and entertainment expenses, and legal and accounting expenses. We expect selling, general and administrative expenses to increase significantly as we add sales staff and expand our promotional and branding efforts.

Other Income (Expense), Net

Other income (expense), net primarily includes interest income, interest expense, gains and losses on sales of investments and transaction related foreign currency gains and losses.

Minority Interest

The minority interest represents the portion of income/(loss) that we do not own in two consolidated subsidiaries.

Preferred Stock Accretion

Preferred stock accretion represents the accretion value of our Series B convertible mandatorily redeemable preferred stock from its initial value to the redemption price.

The following table sets forth, for the periods indicated, our consolidated statements of operations expressed as a percentage of net sales.

		Year Ended December 31,
		2003		2002		2001
Net sales		100.0	%	100.0	%	100.0	%
Cost of sales		86.6		84.5		89.8

Gross profit		13.4		15.5		10.2
Selling, general & administrative		13.0		12.8		12.1
Income (loss) from operations		0.4		2.7		(1.9	)
Other income (expense), net:
	Interest expense	(0.2	)	(0.2	)	(0.8	)
	Other Income	0.3		0.8		0.9

Other income (expense), net		0.1		0.6		0.1
Minority interest in net loss		0.1		0.2		—
Income (loss) before income taxes		0.6		3.5		(1.8	)
Provision for income taxes		0.2		1.3		0.1

Net income (loss)		0.4		2.2		(1.9	)
Preferred stock accretion		(0.1	)	(0.1	)	(0.1	)

Net Income (loss) available to common stockholders		0.3	%	2.1	%	(2.0	)%

Consolidated Results of Operations—December 31, 2003 Compared to December 31, 2002

Net Sales

Net sales increased $190.6 million, or 22%, to $1,074.7 million in 2003 from $884.0 million in 2002. The increase was primarily due to an increase in unit sales although we did experience a decline in the average selling price per unit by approximately 7.5%. The decline in average selling price per unit reflected the effects of competition, our pricing initiatives and reduced product costs associated with advances in display technology.

We sold approximately four million display products in 2003 compared to approximately three million display products during 2002. The increase in units sold was mainly due to continued expansion in China as well stronger unit sales in Europe. The display industry does experience shortages of key components and/or production capacity challenges from time to time. In 2003, there was a significant amount of demand for LCD products relative to supply among the display manufacturers. Due to this LCD product shortage, we reduced the number of sales allowance programs

offered which resulted in a reduced sales allowance from 2002. Of the display product units sold in 2003, CRT accounted for 48.5%, LCD accounted for 42.4%, and other products accounted for 9.2% as compared to 66.1%, 32.0%, and 1.8%, respectively, in 2002. Returns and sales incentive allowances charged against gross sales were $110.4 million and $104.2 million in 2003 and 2002, respectively.

Cost of Sales

As a percentage of net sales, cost of sales increased to 86.6% in 2003 from 84.5% in 2002 partially due to inventory write-downs of $9.5 million in 2003 as compared to $20,000 in 2002. These inventory write-downs were related to new products that experienced lower than expected sales during 2003. The write-downs that were recorded in 2003 and 2002 were either sold or abandoned within two or three months. In the subsequent periods after the write-downs, the average product margins were reduced only slightly due to little or no margin being earned on the inventories written down. In addition, we recorded a warranty expense of $1.2 million in 2003 as compared to a warranty benefit of $13.3 million in 2002. The warranty benefit realized in 2002 was primarily due to the implementation of our supplier managed repair program. Overall, gross margin declined to 13.4% in 2003 from 15.5% in 2002.

Selling, General and Administrative

Selling, general and administrative expenses increased $26.2 million, or 23.2%, to $139.3 million in 2003 from $113.0 million in 2002. The increase was primarily due to additional personnel costs of $8.8 million and advertising costs of $4.3 million incurred to support regional and product expansion and expenses related to the translation effects of the strengthening of the Euro against the U.S. dollar in the Europe region. In addition, in the fourth quarter of 2003 we incurred a charge of $9.8 million due to the transfer of nine million shares by James Chu, our Chairman of the Board and Chief Executive Officer and our majority stockholder, to certain other stockholders in connection with the settlement of a stockholder complaint.

Other Income (Expense), Net

Net other income was $682,000 for 2003 compared to $4.8 million in 2002. The primary reason for the decrease was due to investment losses of $3.7 million in 2003 as compared to investment gains of $5.7 million in 2002. The decrease in 2003 was partially offset by foreign currency option and forward contracts gains of $200,000 in 2003 compared to foreign currency option and forward contract losses of approximately $3.2 million in 2002. These contracts expired during 2003. In addition, the decrease was partially offset by foreign transaction gains of $5.9 million in 2003 compared to foreign transaction gains of approximately $3.2 million in 2002.

Minority Interest

The minority interest represents the portion of income/(loss) that we do not own in two consolidated subsidiaries. The two subsidiaries include one Taiwanese and one U.S. company with a minority interest of approximately 49% and 31%, respectively, as of December 31, 2003 and 2002.

Provision for Income Taxes

We recorded a provision for income taxes of $2.3 million, or 34.2% of income before income taxes, in 2003 as compared to $11.5 million, or 37.5% of income before income taxes, for 2002. During 2003, the Europe region contributed approximately $14.0 million of net income before income taxes and as a result, we were able to realize a significant portion of the net operating loss carryforward benefits previously generated by the Europe region, allowing us to reduce our valuation allowance related to such net operating losses in 2003.

Consolidated Results of Operations—December 31, 2002 Compared to December 31, 2001

Net Sales

Net sales decreased $78.3 million, or 8.1%, to $884.0 million in 2002 from $962.4 million in 2001. We sold approximately three million display products in 2002 compared to approximately four million display products during 2001. This decrease was largely due to a decrease in unit sales in 2002 as compared to 2001. The decrease was primarily attributable to slowing demand due to weakening economic conditions. While units sold decreased by 25.0%, net sales only decreased by 8.1% due to an increase in average selling price of approximately 18.0%. Although prices for our products typically trend down over time, the increase in average selling price in 2002 was due to our product mix shifting to higher priced LCD displays and other products. Of the display product units sold in 2002, 66.1% is attributable to CRT monitor sales, 32.0% is attributable to LCD monitor sales, and 1.8% is attributable to other products as compared to 84.6%, 15.0%, and 0.4% in 2001, respectively. Returns and sales incentive allowances charged against gross sales were $104.2 million and $110.1 million in 2002 and 2001, respectively.

In addition, we phased out the Nokia branded displays in 2002 which had $225,000 in net sales in 2002 compared to $40.0 million in net sales in 2001.

Cost of Sales

As a percentage of net sales, cost of sales decreased to 84.5% in 2002 from 89.8% in 2001 partially due to inventory write-downs of $20,000 in 2002 compared to $14.0 million in 2001. The inventory write-down in 2001 primarily related to the phase out of the Nokia branded displays. The write-downs that were recorded in 2002 and 2001 were either sold or abandoned within two or three months. In the subsequent periods after the write-downs, the average product margins were reduced only slightly due to little or no margin being earned on the inventories written down. In addition, we recorded a warranty benefit of $13.3 million in 2002 as compared to a warranty benefit of $4.9 million in 2001 due to the implementation of our supplier managed repair program. Overall, gross margin increased to 15.5% in 2002 from 10.2% in 2001.

Selling, General and Administrative

Selling, general and administrative expenses decreased $3.3 million, or 2.9%, to $113.0 million for 2002 from $116.4 million in 2001. The decrease was primarily due to a reduction in personnel costs of $3.4 million in 2002.

Other Income (Expense), Net

Net other income was $4.8 million in 2002 compared to $518,000 in 2001. The primary reason for the increase in other income was due to interest expenses of $2.6 million in 2002 compared to $8.0 million in 2001. The increase was also due to the foreign transaction gains recorded in Europe of $3.2 million in 2002 due to the strengthening of the Euro against the U.S. dollar in 2002 compared to foreign transaction losses of $2.2 million in 2001. However, the increase was partially offset by lower investment gains of $5.7 million in 2002 compared to approximately $11.2 million in 2001. The decrease was also due to foreign currency option and forward contract losses recorded in Asia Pacific of $3.2 million in 2002 compared to foreign currency option and forward contract losses of $400,000 in 2001.

Provision for Income Taxes

We recorded a provision for income taxes of $11.5 million, or 37.5% of income before income taxes, in 2002 as compared to $558,000 in 2001, or 3.2% of income before income taxes. The increase was primarily due to losses in all of our regions in 2001 for which no current tax benefit was recorded.

Segment Information

Our management evaluates and monitors segment performance primarily through net sales and income (loss) from operations. Management believes that this segment information provides useful information for analyzing the underlying business results.

					Year Ended December 31,
		2003			Percentage Increase/(Decrease)		2002			Percentage Increase/(Decrease)		2001
		(in thousands)
Net sales:
	Americas	$	667,638		8.5	%	$	614,905		(5.8	)%	$	653,342
	Europe		179,910		42.7	%		126,009		(17.6	)%		152,984
	Asia Pacific		227,136		58.6	%		143,130		(8.2	)%		156,033

		$	1,074,684		21.5	%	$	884,044		(8.1	)%	$	962,359

Income (loss) from operations:
	Americas	$	5,798		(75.2	)%	$	23,409		481.9	%	$	(6,129	)
	Europe		9,010		169.3	%		3,345		139.4	%		(8,477	)
	Asia Pacific		(591	)	78.3	%		(2,735	)	14.1	%		(3,187	)
	Stockholders' complaint settlement		(9,810	)	—			—		—			—

		$	4,407		(81.6	)%	$	24,019		234.9	%	$	(17,793	)

December 31, 2003 Compared to December 31, 2002

Americas

Net Sales

The increase in net sales was primarily due to higher unit sales primarily across the LCD and other product lines such as LCD TVs, plasma displays, wireless displays, Pocket PCs, high definition LCDs, and new products, which was partially offset by the decrease in sales of CRT products. Net sales also increased due to the shift in the product mix to higher priced products such as plasma displays and projectors and the shift in the ratio of sales from CRT to LCD products. From time to time, the display industry experiences shortages of key components and/or production capacity challenges. In 2003, there was a significant amount of demand for LCD products relative to supply among the display manufacturers. Due to the shortage of key LCD products during the later part of 2003, we reduced the number of sales allowance programs offered which resulted in a reduction of sales allowances from the prior year.

Income (loss) from Operations

The decrease in income from operations was partially due to additional warranty expense in 2003 compared to a benefit in 2002 and higher inventory write-downs related to other products in 2003. The decrease was also attributable to higher advertising and marketing expenses and higher personnel

related expenses due an increase in advertising efforts related to our new product categories and increased staffing to support our higher volumes.

Europe

Net Sales

The increase in net sales was primarily due to the region's continued expansion in Russia, Norway, France, the United Kingdom, certain Mediterranean countries and the Middle East. In addition, the strengthening of the Euro against the U.S. Dollar was a major contributor to the overall increase in net sales. In addition, net sales increased due to the shift in the product mix to larger screen sizes and higher priced products such as projectors and from the shift in the ratio of sales from CRT to LCD products.

Income (loss) from Operations

The increase in income from operations was partially due to the effects of the improvements in the Euro against the U.S. Dollar resulting in higher Euro list prices relative to cost of goods sold in the U.S., offset by higher inventory write-downs in 2003 compared to 2002. In addition, no warranty benefits were recorded in 2003 compared to a warranty benefit in 2002. Selling, general and administrative expenses increased in 2003 from 2002 primarily as a result of the strengthening of the Euro against the U.S. Dollar. In addition, the dollar increases came from higher advertising and marketing expenses and higher personnel related expenses to support increased marketing efforts in additional markets.

Asia Pacific

Net Sales

The primary reason for the increase in net sales was our continued expansion into the China market. Net sales also increased due to higher unit sales in Taiwan and emerging markets such as Australia, New Zealand and Southeast Asia. The increase in unit sales was a result of expanding our customer base as well as increasing unit sales of new product categories such as LCD TVs, plasma displays, wireless displays, Tablet PCs, Pocket PCs and other new products.

Income (loss) from Operations

The decrease in loss from operations was partially due to faster growth in the China market partially offset by higher advertising and marketing expenses and higher personnel related costs related to supporting the increasing marketing efforts in China and increased staffing levels.

December 31, 2002 Compared to December 31, 2001

Americas

Net Sales

The decrease in net sales was primarily due to our decision in late 2001 to scale down our business to focus on more profitable products in light of weak industry and economic conditions. Our decision to scale down operations primarily focused on eliminating unprofitable products such as the Nokia branded displays. The decline in sales was exacerbated by the shortage of key LCDs due to capacity challenges experienced by our contract manufacturers. The display industry experiences shortage cycles from time to time due to shortages of key components and/or production capacity challenges. In 2002, there was a significant amount of demand for monitors relative to production capacity among the

display manufacturers. There was a delay in receiving key products for a few months in the later part of 2002.

Income (loss) from Operations

The increase in income from operations was primarily due to lower inventory write-downs in 2002 as compared to 2001 as a result of the phase out of the Nokia branded displays. In addition, we recorded a higher warranty benefit in 2002 as compared to 2001 as a result of the implementation of our supplier managed repair program in late 2001. The increase was also due to lower personnel costs as a result of the region's cost reduction initiatives that began in 2001, partially offset by an increase in product development costs.

Europe

Net Sales

The decrease in net sales was primarily due to a decrease in units shipped. The primary reason for the decrease was due to the region scaling back its sales to the volatile Russian and Middle Eastern markets and the decision to focus on driving sales in targeted products, that had a higher profit opportunity. In addition, the region phased out the Nokia branded displays in 2002 which had minimal net sales in 2002 as compared to 2001. The decrease in net sales was partially offset by the strengthening of the Euro against the U.S. Dollar during 2002 as compared to 2001.

Income (loss) from Operations

The increase in income from operations was partially due to improved inventory management and lower inventory write-downs in 2002 as compared to 2001. In addition, we recorded a warranty benefit in 2002 due to the improved warranty repair processes compared to no benefit in 2001. We also experienced lower personnel costs in 2002 resulting from our cost reduction initiatives that began in 2001, as well as lower advertising expenses.

Asia Pacific

Net Sales

The decrease in net sales was primarily due to weak industry and economic conditions and a decline in the average selling price of our products as result of severe market competition in Japan, South Asia, Southeast Asia, Australia and New Zealand.

Income (loss) from Operations

The decrease in loss from operations was primarily due to higher sales volumes in China offset by increased expenses associated with our acquisition of VisionBank Corporation, a privately-held Taiwanese company, as well as increased advertising expenses in China.

Liquidity and Capital Resources

	Year Ended December 31,
	2003			2002			2001
	(in thousands)
Net cash provided by operating activities	$	17,870		$	40,039		$	54,663
Net cash provided by (used in) investing activities	$	(2,699	)	$	6,909		$	1,237
Net cash provided by (used in) financing activities	$	6,355		$	(11,888	)	$	(36,876	)
Net increase in cash and cash equivalents	$	21,526		$	35,060		$	19,024

Since our inception, we have financed our growth and cash needs largely through income from operations, issuance of stock and borrowings. As of December 31, 2003, we had cash, cash equivalents and short-term investments of $91.6 million. Our cash balances are held in numerous locations throughout the world. Most of the amounts held outside the United States could be repatriated to the United States, but, under current law, would be subject to United States federal income taxes, less applicable foreign tax credits. In certain countries, foreign exchange limitations limit the amount of cash that can be repatriated. We have provided for the United States federal tax liability on these amounts for financial statement purposes except for foreign earnings that are considered indefinitely reinvested outside the United States. Repatriation could result in additional United States federal income tax payments in future years. Where local restrictions prevent an efficient inter-company transfer of funds, our intent is that cash balances would remain in the foreign country and we would meet United States liquidity needs through ongoing cash flows from operations, external borrowings, or both. We utilize a variety of tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. We expect to meet expected and unexpected cashflow needs by accessing our credit lines in the Americas and Asia Pacific. See "Credit Facilities" below for a further discussion of our credit facilities.

Operating Activities

Cash flow provided by operating activities was $17.9 million in 2003, $40.0 million in 2002 and $54.7 million in 2001. The decrease in net cash provided by operations in 2003 compared to 2002 resulted primarily from lower earnings in 2003 compared to 2002 as well as an increase in accounts receivable and inventory partially offset by an increase in accounts payable. The decrease in net cash provided by operations in 2002 compared to 2001 resulted largely from the increase in inventory and accounts receivable partially offset by an increase in accounts payable.

Accounts receivable increased $22.3 million to $132.1 million at December 31, 2003 from $109.8 million at December 31, 2002 primarily due to a 22% increase in net sales over 2002. Days sales outstanding improved to 41 days at December 31, 2003 compared to 45 days at December 31, 2002. Accounts receivable increased $4.0 million to $109.8 million at December 31, 2002 from $105.8 million at December 31, 2001. Days sales outstanding improved to 45 days at December 31, 2002 compared to 51 days at December 31, 2001 largely due to the improvements in our credit and collection efforts. We currently do not factor our receivables, however, our Asia Pacific region had factored accounts receivable of $2.9 million and $6.6 million as of December 31, 2002 and 2001, respectively. As of December 31, 2003 we had no major collection or billing problems that had not already been accounted for in our allowance for doubtful accounts. Payment terms vary by geographic location and in some cases a cash discount option is offered in addition to the standard payment terms. We have not materially changed our payment terms or delinquency policies between 2001 and 2003.

Inventories increased $9.3 million to $128.7 million at December 31, 2003 compared to $119.4 million at December 31, 2002. The increase was primarily due to the build up of inventory to meet our higher level of sales in 2003 compared to 2002. Despite the increase in inventory levels, our inventory turns improved to eight times during 2003 from seven times during 2002. Inventories increased $11.5 million to $119.4 million at December 31, 2002 compared to $106.6 million at December 31, 2001 mainly due to the build up of our other products inventory and an inventory mix shift from lower cost CRT products to higher cost LCD products. Despite the increase in inventory levels, our inventory turns improved to seven times during 2002 from five times during 2001.

Accounts payable increased approximately $19.5 million to $237.4 million at December 31, 2003 compared to $217.9 million at December 31, 2002. The increase was largely due to the increase in inventory balances and timing of our payments to our suppliers. Accounts payable increased approximately $34.0 million to $217.9 million at December 31, 2002 compared to $181.4 million at

December 31, 2001 mainly due to the increase in inventory balances and timing of our payments to our suppliers.

Investing Activities

Cash flow used in investing activities was $2.7 million in 2003 compared to cash flow provided by investing activities of $6.9 million in 2002 and $1.2 million in 2001. The primary reason for the variance between periods was the timing of sales and purchases of investments, including the purchase of a business which resulted in intangibles of $5.7 million in 2001.

Financing Activities

Cash flow provided by financing activities was $6.4 million in 2003 compared to cash flow used in financing activities of $11.9 million in 2002 and $36.9 million in 2001. The primary reason for the variance between 2003 and 2002 was the net increase of bank borrowings in 2003 compared to a net decrease of bank borrowings in 2002 to fund operations in Asia Pacific. The variance was also due to the issuance of common stock, preferred stock and warrants in 2002 compared to 2003. The primary reason for the variance between 2002 and 2001 was the net decrease of bank borrowings in 2002 compared to 2001.

Contractual Obligations and Commitments

At December 31, 2003, we had contractual obligations and commercial commitments of $69.3 million as shown in the table below. The table below excludes obligations related to accounts payable and accrued liabilities incurred in the ordinary course of business.

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
			(in thousands)
Operating lease obligations	$	6,849	$	2,507	$	3,344	$	998	$	—
Materials and supplies—purchase commitments		3,364		3,364		—		—		—
Licensing agreements		1,051		1,051		—		—		—
Subordinated notes payable		43,000		—		—		43,000		—
Preferred stock mandatory redemption		15,000		—		15,000		—		—

Total	$	69,264	$	6,922	$	18,344	$	43,998	$	—

Credit Facilities

In December 2001, we negotiated a new $50.0 million line of credit with CIT Group/Business Credit, Inc. that expires in December 2004. Advances bear interest at the prime rate plus 0.75% (4.75% at December 31, 2003) with interest payable monthly. As of December 31, 2003 and 2002, there was no outstanding balance on the line of credit. All advances under the agreement are collateralized by substantially all of the assets of ViewSonic America. Certain of our international subsidiaries also have separate lines of credit which are secured by certain of their assets. As of December 31, 2003 and 2002, an aggregate of $6.3 million and $0 was outstanding under these credit facilities.

Off-Balance Sheet Arrangements

At December 31, 2003 and 2002, we did not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purposes entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Seasonality

The market for our products historically has experienced seasonal shifts in demand due to changes in buying patterns by our customers. Buying patterns vary geographically, and the impact on our operating results in a given period may vary depending on our actual or anticipated level of activity in the relevant region. We generally experience a decline in net sales from the first quarter to the second quarter of each year and we tend to experience the highest net sales in the fourth quarter of the year due to a strong buying season in the fourth quarter by large wholesale distribution partners and retailers due to the holiday season in the Americas. Our seasonality is moderated through slightly different seasonal variations in the three regions.

Operating Capital and Capital Expenditure Requirements

We believe that our existing cash balances, credit facility and anticipated cash flows from operations will be sufficient to meet our operating, acquisition and capital requirements for at least the next 12 months. However, there is no assurance that we will not need to raise additional equity or debt financing within this time frame. Additional financing may not be available on favorable terms or at all and may be dilutive to our then-current stockholders. We also may require additional capital for other purposes not presently contemplated. If we are unable to obtain sufficient capital, we could be required to curtail capital equipment purchases or research and development expenditures, which could harm our business. Factors that could affect our cash used or generated from operations and, as a result, our need to seek additional borrowings or capital include:

•: decreased demand and market acceptance for our products;
•: inability to successfully develop our next-generation products;
•: competitive pressures resulting in lower than expected average selling prices; and
•: new product announcements or product introductions by our competitors.

Quantitative and Qualitative Disclosures About Market Risk

Our financial market risk arises from fluctuations in foreign currencies. A majority of our net sales, expense and capital purchasing activities are transacted in U.S. Dollars. However, we do enter into these transactions in other currencies, primarily the Euro and certain other Asian currencies. Our net sales and purchasing transactions denominated in currencies other than the U.S. Dollar are subject to exchange rate fluctuations and could potentially negatively impact our financial results.

We have significant European net sales denominated in the Euro. Product shipping, and selling, general and administrative costs associated with a portion of these sales are U.S. Dollar-denominated. During 2003, the Euro-to-U.S. Dollar foreign currency exchange rate strengthened against the U.S. Dollar increasing 17% on an average annual basis compared to the average in 2002. The strengthening of the Euro positively impacted our 2003 net sales and income from operations by $13.0 million and $7.0 million, respectively, assuming all other factors remain constant. We currently estimate that a 10% change in value of the Euro-to-U.S. Dollar exchange rates could impact net sales by $8.0 million. The ultimate impact of future changes to these and other currency exchange rates on 2004 net sales, income from operations, net income, equity, and comprehensive income is not determinable at this time.

We have a portfolio of investments that includes marketable securities classified as available-for-sale long-term investments. To the extent that these investments continue to have strategic value, we typically do not attempt to reduce or eliminate our market exposure. For those securities that are no longer considered strategic, management will evaluate market and economic factors in its decision on the timing of disposal. Our investments are generally in companies in the high-technology industry.

Critical Accounting Policies and Estimates

General

Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of the consolidated financial statements.

Valuation of Goodwill

We review goodwill and purchased intangible assets with indefinite lives for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with the Statement of Financial Accounting Standards, or SFAS, No. 142, "Goodwill and Other Intangible Assets."

As of December 31, 2003, we had $7.5 million of goodwill recorded related to acquisitions of technology over the past several years. Our goodwill is recorded in the business segment in which the asset is located and as such we compare the fair value of the business segment to its carrying value. We determine the fair value of the business segment based in part upon our annual entity valuation performed by an independent appraiser. The annual valuation is dependent on a number of factors including estimates of future market growth and trends, forecasted revenue and costs, appropriate discount rates and other variables. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and uncertain. Actual future results may differ from those estimates.

Revenue Recognition and Promotional Expenses

Revenues are recognized when products are shipped and risk of loss is transferred, evidence of an arrangement exists, the price is fixed or readily determinable, and collectibility is probable. We extend rights of return to our customers, which are accrued for based on estimated future returns determined by using estimates and historical experience.

We record estimated reductions to revenue for customer and distributor programs and incentive offerings, including price protection, promotions, other volume-based incentives and expected returns. Future market conditions and product transitions may require us to take actions to increase customer incentive offerings, possibly resulting in an incremental reduction of revenue at the time the incentive is offered. Additionally, certain incentive programs require us to estimate, based on historical experience, the number of customers who will actually redeem the incentive.

We estimate our promotions and returns allowances based upon our historical experience. We monitor our various sales incentive programs by customer on a monthly basis and assess the adequacy of our accruals for such programs as necessary. Over the past three years, such programs have approximated 8.5% of net sales per year. Therefore if our estimates were understated by 1% for 2003, the negative impact to our net sales would approximate $11.9 million. With regard to returns, the primary factors affecting our estimates include the estimated return rate and the number of units shipped that still have a specified right of return as of the balance sheet date. During the last three years, our customer returns have approximated 2.6% of net sales.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts is determined using an analysis to determine whether the balance of the account sufficiently adjusts the accounts receivable balance to its net realizable value. The analysis consists of applying a historical write-off percentage against the accounts receivable aging balance to determine whether the allowance for doubtful accounts balance is sufficient to cover expected future write-offs. We maintain an allowance for all customers based on a variety of factors, including the length of time receivables are past due, trends in overall rating of the total portfolio, macroeconomic conditions, significant one-time events and historical experience. Also, we record additional allowance for individual accounts when we become aware of a customer's inability to meet its financial obligations to us, such as in the case of bankruptcy filings or deterioration in the customer's operating results or financial position. If circumstances related to customers change, our estimates of the recoverability of receivables would be further adjusted. If our estimates for future bad debts are higher than recorded, this could result in higher bad debt expenses.

Historically our allowance for doubtful accounts has represented less than 3.0% of our gross receivables and the only significant past losses or write-offs have resulted from customer bankruptcies. We monitor customer credit limits on a monthly basis and review historical payment history. As of December 31, 2003, we had recorded $132.1 million in net accounts receivable and our write-offs subsequent to that date have been in line with our historical experience.

Inventory Valuation

Our inventory is stated at the lower of cost or market. Adjustments to inventory are made via specific identification for estimated excess, obsolete or impaired balances, to reflect inventory at the lower of cost or market. Factors influencing these adjustments include: changes in demand, rapid technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues. Revisions to these adjustments would be required if any of these factors differ from our estimates.

If we are unable to properly monitor and manage our sales channel inventory and maintain an appropriate level and mix of products with our customers, we may experience inventory losses. On a monthly basis, we review the amount of inventory in the various sales channels, sales forecasts, and historical trends such as sell through activity as well as price trends and other relevant data. Based upon this market information, we adjust our related inventory values. Major changes in inventory values usually relate to technological changes and market acceptance of new products, which are difficult to predict. Our inventory write-downs as a percentage of cost of sales have been 1%, 0% and 2% for the years ended December 31, 2003, 2002 and 2001, respectively.

We have purchase commitments for materials and supplies as part of the normal course of business. These commitments are not at prices in excess of current fair market value. Commitments to purchase inventory at above-market prices have been reserved. The total amount reserved under these commitments was $3.4 million and $0 as of December 31, 2003 and 2002, respectively, and is included as part of other accrued expenses.

Warranty Provision

We provide product warranty programs on a worldwide basis that vary in term from 12 to 36 months. The length of the warranty period and the specific warranty coverage are based on the type of product. We accrue for estimated warranty costs at the time the product is sold, and such amounts are based upon historical experience. The historical data that determines the warranty accrual and the overall estimate of the warranty reserve includes the following key factors: net cost of repair (repair costs less reimbursements from suppliers), defective rates, and total number of products under warranty. If our estimates for net cost of repair and defective rates are higher than recorded, this could result in higher future warranty expenses.

Prior to late 2001, we internally managed our warranty program; however, our program costs were greater than the amount we were reimbursed by our contract manufacturers. In late 2001, we introduced the supplier managed repair program, or SMRP, under which we outsourced our repair process. The program has reduced our overall costs for warranty repair. In late 2001, we also increased our collection efforts with regard to reimbursements from our contract manufacturers, which decreased our warranty reserve. Under SMRP, warrantied units are repaired by third-party repair centers, who are able to utilize their operating efficiencies to perform our warranty repairs at a lower cost than we have historically been able. The repair centers are directly reimbursed by our contract manufacturers. As a result, our average cost of warranty repairs were lower in 2002 than in 2001 and were lower in 2003 than in 2002. Further, the SMRP was adopted retroactively and, therefore, we were able to reduce our warranty reserve in 2001 and 2002 and decrease our warranty expense accrual, resulting in a benefit of $4.9 million in 2001 and $13.3 million in 2002.

The total number of our products under warranty has declined by approximately 21.0% over the past two years. This decline is the result of a decline in our installed base due to primarily lower unit sales in 2002, a decline in our net cost of repair and lower defective rates. If our defective rates were to increase by 10.0%, then our estimates of warranty expense could increase by $1.3 million assuming all other factors remained constant. In the future, we expect warranty expense to be approximately 1.2% of net sales per year.

Long-Term Investments

Our long-term investments are classified as available for sale and include both publicly and privately-held companies. For our publicly-traded investments, we follow SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" and as such unrealized gains (losses) are recorded in other comprehensive income, net of tax. Any realized gains (losses) are recorded in other income (expense) and cost is determined by specific identification.

We account for our investments in privately-held companies under the cost method. When events dictate, we perform an impairment analysis to determine whether the loss, if any, is other than temporary. During 2003 we recorded impairment losses of $3.6 million related to two of our private investments. The impairments were triggered by a bankruptcy and a deterioration of financial operating results. Our investments in privately-held companies were valued at $4.7 million as of December 31, 2003. We are under no contractual obligation to provide additional funding to these privately-held companies and do not exercise significant influence over them.

Income Taxes

Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates to the differences between financial statement carrying amounts and the income tax basis of assets and liabilities. Income taxes, which would be due upon the repatriation of foreign subsidiary earnings, have not been provided where the undistributed earnings are considered indefinitely invested. We record a valuation allowance when it is more likely than not that the deferred income tax asset will not be realized.

In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that the net deferred tax assets would be realized, the previously provided valuation allowance would be reversed.

New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangibles Assets. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changed the accounting standard for goodwill and other intangible assets. The statement will continue to require recognition of goodwill as an asset but does not permit amortization of goodwill. Goodwill recognized after June 30, 2001 is not amortized, and goodwill on the books at June 30, 2001 is amortized until, but not after, January 1, 2002. The statement requires that goodwill be separately tested for impairment using a fair-value based approach at least annually or when events and circumstances occur indicating that an impairment might exist.

In June 2002, the FASB issue SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be initially measured at fair value and recognized when the liability is incurred. The provisions of SFAS No. 146 are required to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We adopted SFAS No. 146 on January 1, 2003. The adoption of SFAS No. 146 did not have a material effect on our consolidated financial statements.

In December 2003, the FASB issued FIN No. 46(R), Consolidation of Variable Interest Entities. FIN 46(R) requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the company that has controlling financial interest. It also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. We adopted FIN 46(R) effective January 1, 2003. The adoption of FIN No. 46(R) did not have a material effect on our consolidated financial statements.

as a liability if it embodies an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable date or upon an event certain to occur. Similarly, payments to holders of such instruments and related accruals shall be presented separately from payment to and interest due to other creditors in statements of cash flows and income. Convertible mandatorily redeemable financial instruments shall be initially measured at fair value. The statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We adopted this statement during the year ended December 31, 2003. Our convertible mandatorily redeemable preferred stock contains a conversion feature. Accordingly, SFAS No. 150 will not impact our consolidated financial statements until the conversion feature expires.

Item 3. Properties

We lease facilities in Walnut, California of approximately 300,000 usable square feet that serve our corporate headquarters as well as a warehouse, testing and after-sales service facility, under a lease that expires in June 2007. In addition, we have sales offices in Atlanta, Georgia, Miami, Florida and in Toronto, Canada.

In Europe, we lease facilities in Crawley, West Sussex, United Kingdom that serve as our European headquarters and provides space for northern Europe sales operations and after-sales service activity. This lease expires in 2012. In addition, we lease space in Denmark, Finland, France, German, Italy, Norway, Russia, Spain, Sweden, and United Arab Emirates for marketing, sales and after-sales service operations.

In Asia Pacific, we own a main office and repair facility in Taipei, Taiwan. We also lease two warehouses in Taoyuan, Taiwan and own an additional warehouse in Taipei, Taiwan. We lease sales offices in Beijing, Hong Kong, GuangZhou and Shanghai, China, in Kaoshiung, Taiwan, in Tokyo, Japan and Australia.

We believe that our existing facilities will be adequate to meet our needs for the foreseeable future and that additional space will be available as needed at commercially reasonable rates.

Item 4. Security Ownership of Certain Beneficial Owners and Management

The following table presents information regarding the ownership of our common stock and preferred stock as of April 30, 2004 by:

•: Each director;
•: Each of the executive officers named in the Summary Compensation Table;
•: All of our directors and executive officers as a group; and
•: All of those known by us to be beneficial owners of more than five percent of our common stock.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, or SEC, and generally includes voting or investment power with respect to securities. Beneficial ownership also includes shares of common stock subject to options exercisable within 60 days of April 30, 2004. These shares are not deemed outstanding for purposes of computing the percentage ownership of each other person. Percentage of beneficial ownership is based on 361,422,845 shares of our common stock and preferred stock outstanding as of April 30, 2004. Unless otherwise indicated, the address of each of the individuals and entities listed below is c/o ViewSonic Corporation, 381 Brea Canyon Road, Walnut, California, 91789.

	Shares Issuable Pursuant to Options Exercisable Within 60 days of April 30, 2004
		Shares Beneficially Owned
Name and Address of Beneficial Owner		Shares Beneficially Owned
Name and Address of Beneficial Owner		Number	Percent
Directors and Executive Officers
James Chu(1)	—	311,969,998	86.3	%
Matthew E. Massengill	62,500	62,500	*
William J. Miller	62,500	62,500	*
Bruce L. Stein	125,000	125,000	*
Luc H. Vanhal	125,000	125,000	*
James A. Morlan	1,050,000	1,050,000	*
Robert Moon	506,250	506,250	*
Christopher M. Franey	1,414,624	1,421,624	*
Robert J. Ranucci	203,528	203,528	*
Joseph Marc McConnaughey	1,251,950	1,258,950	*
All directors and executive officers as a group (12 persons)	5,315,286	317,299,284	86.5
5% Stockholders
Keypoint Investments, L.P.(2)	—	58,831,542	16.3	%

*: Represents beneficial ownership of less than 1% of the outstanding shares of our common stock.
(1): Includes 58,831,542 shares held by Keypoint Investments, L.P., a California limited partnership. Mr. Chu and his wife, Lily Chu, are general partners of Keypoint Investments, L.P.
(2): Mr. Chu and his wife, Lily Chu, are general partners of Keypoint Investment, L.P.

Item 5. Directors and Executive Officers

Executive Officers and Directors

The following table sets forth the name, age as of April 30, 2004 and position of each person who serves as a ViewSonic executive officer and/or director:

Name	Age	Position
Executive Officers:
James Chu	46	Chairman of the Board and Chief Executive Officer
James A. Morlan	56	Chief Financial Officer
Robert J. Ranucci	39	Vice President, General Counsel and Secretary
Robert Moon	54	Vice President, Information Services
Christopher M. Franey	48	President and Managing Director, ViewSonic Europe
Chung-Yung "Middle" Lin	45	President, ViewSonic Asia Pacific
Y.C. Wu(1)	50	Vice President, Visual Display Group
Michael Holstein	51	Vice President, Visual Solutions Group
Directors:
Matthew E. Massengill	43	Director
William J. Miller	55	Director
Bruce L. Stein	49	Director
Luc H. Vanhal	44	Director

(1): Mr. Wu joined ViewSonic in February 2004.

James Chu founded ViewSonic and has served as our Chairman of the Board and Chief Executive Officer since our inception in 1987. From September 1986 to June 1987, Mr. Chu served as President of U.S. Operations of Behavior Tech Computer Corporation, a Taiwanese keyboard manufacturer.

James A. Morlan has served as our Chief Financial Officer since June 2000. From January 1997 to June 2000, Mr. Morlan served as Vice President of Finance of Golden Valley Foods, an operating company of ConAgra Foods, Inc., a packaged food company. Mr. Morlan holds a B.S. in Electrical Engineering from the University of Iowa.

Robert J. Ranucci has served as our Vice President, General Counsel and Secretary since July 2003. From June 2000 to June 2003, Mr. Ranucci served as our General Counsel and Secretary. From June 1995 to May 2000, Mr. Ranucci was the managing partner of the law firm of Ranucci & Ranucci in Los Angeles, California. Mr. Ranucci holds a B.A in Economics from Claremont McKenna College, and an M.A. in Economics and a J.D. from the University of Southern California.

Robert Moon has served as our Vice President, Information Services since January 2001. From November 1999 to December 2000, Mr. Moon served as the Senior Vice President of Operations of Unibex, Inc., a provider of e-business solutions, and from February 1995 to November 1999, Mr. Moon served as Vice President and Chief Information Officer of MICROS Systems, Inc., an information technology company. Mr. Moon holds a B.S. in Technology Management from the United States Naval Academy.

Christopher M. Franey has been appointed President of ViewSonic Americas effective July 2004. From October 2003 to June 2004, Mr. Franey served as President and Managing Director of ViewSonic Europe. From February 2001 to October 2003, Mr. Franey served as Senior Vice President and Managing Director of ViewSonic Europe. Mr. Franey also served in various roles, including Senior Vice President of Global Sales, Vice President of Sales for the Americas, Director of Sales for Canada, Latin America and the U.S. and National Sales Manager of ViewSonic from November 1994 through February 2001. Mr. Franey holds a B.A. in Marketing and Economics from the University of Washington.

Chung-Yung "Middle" Lin has served as President of ViewSonic Asia Pacific since October 2003. From July 2002 to September 2003, Mr. Lin served as General Manager of ViewSonic China. Mr. Lin served as General Manager of the Imaging & Information Solution Business Group at Seiko Epson Corporation, a manufacturer of information-related equipment, from July 1998 to July 2002. Mr. Lin holds a B.S. in Marine Technology and Electronic Engineering from National Chiao-Tung University, Taiwan.

Y.C. Wu has served as our Vice President, Visual Display Group since February 2004. From May 2001 to January 2004, Mr. Wu served as Senior Vice President & General Manager of Operations of Ambit Microsystems Corporation, a Taiwanese supplier of communication products. Mr. Wu also served as OEM Director of Cisco Systems, Inc., an internet networking company, from August 1999 to April 2001 and as Assistant Vice President of Quanta Computer Inc., a manufacturer of notebook computers, from April 1997 to July 1999. Mr. Wu holds a B.S. in Telecommunication Engineering from National Chiao-Tung University, Taiwan, and an M.S. in Electrical Engineering from University of Texas at Arlington.

Michael Holstein has served as our Vice President, Visual Solutions Group since October 2003. From June 2002 to September 2003, Mr. Holstein served as our Director of Supply Base Management, and from October 2001 to May 2002, he served as our Director of Product Engineering, Mobile and Wireless. From November 2000 to September 2001, Mr. Holstein served as the Vice President of Development Technology for Gateway, Inc., a computer manufacturer, and from November 1996 to October 2000, he served as Gateway's Director of Consumer Products.

Matthew E. Massengill has served as a member of our Board of Directors since December 2003. Since January 2000, Mr. Massengill has been the Chief Executive Officer and a director of Western Digital Corporation, a disk drive manufacturer. In November 2001, Mr. Massengill was named Chairman of the Board of Directors of Western Digital. From October 1999 to January 2000, Mr. Massengill was Chief Operating Officer, and from August 1999 to October 1999, he was Co-Chief Operating Officer of Western Digital. He previously served for more than five years in various executive capacities within Western Digital. Mr. Massengill holds a B.S. in Engineering from Purdue University.

William J. Miller has served as a member of our Board of Directors since December 2003. Mr. Miller has acted as an independent consultant to several technology companies since October 1999. From April 1996 to October 1999, Mr. Miller was Chairman of the Board of Directors and Chief Executive Officer of Avid Technology, Inc., a provider of digital tools for multimedia. Mr. Miller also served as President of Avid Technology from September 1996 through October 1999. Mr. Miller serves as a director of NVIDIA Corporation, a visual computing technology company, and Waters Corporation, a scientific instrument manufacturing company. Mr. Miller holds a B.A. and a J.D. from the University of Minnesota.

Bruce L. Stein has served as a member of our Board of Directors since June 2003. From September 2001 to April 2003, Mr. Stein served as a consultant and director of Avalon Digital Systems, Inc. From October 1999 to September 2001, Mr. Stein served as a consultant and a director of Radical Communications, Inc., a messaging solution provider, which was acquired by Avalon Digital Systems,

Inc. Mr. Stein served in various positions at Mattel, Inc., a manufacturer of toy products, from August 1996 to March 1999, including President, Mattel Worldwide, Chief Operating Officer and as a director. From August 1995 to August 1996, Mr. Stein was Chief Executive Officer of Sony Interactive Entertainment Inc., a subsidiary of Sony Computer Entertainment America Inc. At various times between January 1995 to June 1998, Mr. Stein was a consultant to DreamWorks SKG, a motion picture company, Warner Bros. Entertainment, an entertainment company, and Mandalay Entertainment, a film production company. Mr. Stein holds a B.S. from Pitzer College in Claremont and an M.B.A. from the University of Chicago.

Luc H. Vanhal has served as a member of our Board of Directors since June 2003. From January 2001 to April 2004, Mr. Vanhal served as President and Chief Operating Officer of Vivendi Universal Games, Inc., a multi-platform interactive entertainment company, where he also served as Chief Financial Officer from February 1999 to January 2001. From June 1990 to February 1999, Mr. Vanhal held several positions at The Walt Disney Company, an entertainment company; from 1997 to 1999, Mr. Vanhal was Chief Financial Officer for the Worldwide Consumer Products Division. Mr. Vanhal holds a B.A. and an M.B.A. from the University of Leuven, Belgium.

Board of Directors and Committees

As of December 31, 2003, our Board of Directors was comprised of five members and had the following three committees: (1) Audit; (2) Compensation; and (3) Nominating and Corporate Governance. Each committee operates under a written charter adopted by the Board of Directors. The membership during 2003 was as follows:

Name of Director	Audit		Compensation		Nominating & Corporate Governance
James Chu	—		—		—
Matthew E. Massengill	—		X		X
William J. Miller	X		—		X	*
Bruce L. Stein	X		X	*	X
Luc H. Vanhal	X	*	X		X

*: Chairman of committee.

Director Compensation

Non-employee members of our Board of Directors receive a retainer fee of $30,000, $10,000 for the chairman of each committee and $3,000 for each committee member per year. During 2003, each of Messrs. Stein and Vanhal received $23,000 in retainer fees and computer equipment with an equivalent value of $2,872 each. The non-employee members are also reimbursed for travel, lodging and other reasonable expenses incurred in attending Board of Directors or committee meetings. In October 2003, Messrs. Stein and Vanhal, each a non-employee director, each received an option to purchase 250,000 shares of our common stock at an exercise price of $1.09 per share, the fair market value of our common stock as determined by our Board of Directors on the date of grant. In December 2003, Messrs. Massengill and Miller, each a non-employee director, each received an option to purchase 250,000 shares of our common stock at an exercise price of $1.09 per share. These options vest as to 25% on the grant date with the remaining shares vesting annually over three years, subject to the recipient's continued service as a director.

Item 6. Executive Compensation

Summary Compensation Table

The following table presents summary information for the year ended December 31, 2003 concerning the compensation earned by our Chief Executive Officer and four most highly compensated executive officers whose salary and bonus for 2003 were in excess of $100,000 plus one former executive officer.

	Annual Compensation						Long Term Compensation Awards
Name and Principal Position	Fiscal Year	Salary			Bonus		Securities Underlying Options	All Other Compensation
James Chu Chairman of the Board and Chief Executive Officer	2003	$	275,000		$	98,106	—	$	4,498	(1)
James A. Morlan Chief Financial Officer	2003		237,500			95,519	600,000		6,224	(2)
Robert Moon Vice President, Information Services	2003		190,000			40,757	225,000		5,008	(3)
Christopher M. Franey President and Managing Director, ViewSonic Europe	2003		421,250	(4)		168,768	600,450		4,741	(5)
Robert J. Ranucci Vice President, General Counsel and Secretary	2003		165,000			28,606	115,766		5,044	(6)
Joseph Marc McConnaughey(7) Former Senior Vice President, Advanced Technologies	2003		254,968			78,807	750,000		—

(1): Includes $4,294 discretionary contributions made to a 401(k) Savings Plan and $204 for insurance-related benefits.
(2): Includes $6,020 discretionary contributions made to a 401(k) Savings Plan and $204 for insurance-related benefits.
(3): Includes $4,804 discretionary contributions made to a 401(k) Savings Plan and $204 for insurance-related benefits.
(4): Includes salary of $263,750 and a car and housing allowance of $157,500.
(5): Includes $4,537 discretionary contributions made to a 401(k) Savings Plan and $204 for insurance-related benefits.
(6): Includes $4,840 discretionary contributions made to a 401(k) Savings Plan and $204 for insurance-related benefits.
(7): Mr. McConnaughey resigned as Senior Vice President, Advanced Technologies in October 2003. His salary includes $79,195 in accrued vacation and severance pay.

Stock Option Grants and Exercises

Option Grants in 2003

We grant options to our executive officers under our 1999 Stock Plan. The following table presents each stock option grant during 2003 to each of the executive officers named in the Summary Compensation Table. The exercise price of each option was equal to the fair market value of our common stock as determined by our Board of Directors on the date of grant.

The exercise price may be paid in cash or in shares of our common stock valued at fair market value on the exercise date.

The potential realizable value is calculated based on the ten-year term of the option at the time of grant. Stock price appreciation of 5% and 10% is assumed pursuant to rules promulgated by the SEC and does not represent our prediction of our stock price performance. The potential realizable values at 5% and 10% appreciation are calculated by:

•: multiplying the number of shares of common stock subject to a given option by the exercise price per share;
•: assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table until the expiration of the option; and
•: subtracting from that result the aggregate option exercise price.

The shares listed in the following table under "Number of Securities Underlying Options Granted" are subject to vesting. The shares subject to the options vest as to 25% on the grant date with the remaining shares vesting annually over three years. Each option has a ten-year term, subject to earlier termination if the optionholder's service with us ceases.

The vesting of such option grants may accelerate and become immediately exercisable upon a change in control of ViewSonic. Each participant who is not tendered, or does not accept, an option granted by the surviving corporation, which substantially preserves the economic rights and benefits of the participant's existing option, shall have seven days before the effective date of the change in control to exercise all or part of his or her option or options outstanding under the 1999 Stock Plan. A change in control, within the meaning of the 1999 Stock Plan, includes (a) the acquisition of 50% or more of our outstanding shares of common stock; (b) a sale or other disposition of all or substantially all of our assets; or (c) a merger or consolidation with any other entity in which our stockholders immediately preceding such merger or consolidation will not hold a majority of the outstanding capital stock or other equity interests in the surviving entity (whether or not ViewSonic is the surviving entity) immediately after such merger or consolidation.

Percentages shown under "Percent of Total Options Granted in 2003" are based on an aggregate of 12,080,206 options granted during 2003.

							Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term
	Individual Grants
	Number of Securities Underlying Options Granted	Percent of Total Options Granted in 2003
				Exercise Price Per Share
Name						Expiration Date
Name						Expiration Date	5%		10%
James Chu	—	—			—	—		—		—
James A. Morlan	600,000	5.0	%	$	1.09	05/01/13	$	411,298	$	1,042,308
Robert Moon	225,000	1.9			1.09	05/01/13		154,237		390,866
Christopher M. Franey	600,450	5.0			1.09	05/01/13		411,060		1,043,090
Robert J. Ranucci	115,766	*			1.09	05/01/13		79,357		201,106
Joseph Marc McConnaughey	750,000	6.2			1.09	05/01/13		514,122		1,302,885

*: Represents less than 1% of the total options granted in 2003.

Aggregated Option Exercises During 2003 and Option Values at December 31, 2003

The following table presents the number and value of securities underlying unexercised options that are held by, each of the individuals listed in the Summary Compensation Table as of December 31, 2003. No options were exercised during 2003 by such individuals.

Amounts shown under the column "Value of Unexercised In-the-Money Options at December 31, 2003" are based on a price of $1.09 per share, which was the fair market value of shares of our common stock on December 31, 2003, as determined by our Board of Directors without taking into account any taxes that may be payable in connection with the transaction, multiplied by the number of shares underlying the option, less the exercise price payable for these shares.

	Number of Securities Underlying Unexercised Options at December 31, 2003		Value of Unexercised In-the-Money Options at December 31, 2003
Name
Name	Exercisable	Unexercisable	Exercisable		Unexercisable
James Chu	—	—		—		—
James A. Morlan	806,250	543,750	$	59,063	$	8,438
Robert Moon	387,500	337,500		29,813		15,188
Christopher M. Franey	1,264,512	450,338		100,296		—
Robert J. Ranucci	156,381	105,031		11,470		1,639
Joseph Marc McConnaughey	1,251,950	—		95,801		—

Severance Agreement

We have entered into a severance agreement, dated October 18, 2003, with Joseph Marc McConnaughey, a former executive officer. Pursuant to the severance agreement we agreed to pay Mr. McConnaughey his base salary for nine months following the date of his resignation, agreed to continue his medical benefits for an equivalent period and extended his ability to exercise his vested options through December 31, 2004.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serve as members of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our Board of Directors or Compensation Committee. No interlocking relationship exists between our Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

Item 7. Certain Relationships and Related Transactions

Notes Payable

As of December 31, 2003, we have a subordinated note payables to James Chu, our Chairman of the Board and Chief Executive Officer, and Keypoint Investments, L.P., a California limited partnership, of which Mr. Chu and his wife, Lily Chu, are the general partners, in the aggregate principal amount of $43.0 million. In 2001, Mr. Chu purchased 10,000,000 shares of our common stock at $2.00 per share in exchange for a $20.0 million reduction of the original subordinated note. The subordinated notes are due on April 12, 2008 and no payments were made against the principal amount in 2003 or 2002. The interest rate on the subordinated notes was 3.97%, 3.97%, and 6.25% per annum for 2003, 2002 and 2001, respectively. Interest expense related to the subordinated notes was $1.7 million, $1.7 million and $3.7 million for 2003, 2002 and 2001, respectively.

Related Party Sales

We have entered into non-exclusive distribution agreements with ASI Corp., a privately-held company located in Fremont, California pursuant to which ASI Corp. distributes a full range of our products. The prices charged to ASI Corp. are consistent with the prices we charge to our other distribution customers. Mr. Chu's sister is the majority stockholder of ASI Corp. Net sales to ASI Corp. were $28.8 million, $27.2 million and $34.9 million for 2003, 2002 and 2001, respectively. We had an account receivable balance of $2.8 million and $2.9 million from ASI Corp. at December 31, 2003 and 2002, respectively, which are included in other receivables. We believe that the distribution agreements with ASI Corp. were in our best interests and on terms no less favorable to us than could be obtained from unaffiliated third parties.

Investor Rights Agreement

We, Mr. Chu and certain other preferred stockholders have entered into an agreement, pursuant to which these stockholders have registration rights with respect to their shares of common stock.

Severance Agreement

Please see Item 6. "Executive Officer Compensation—Severance Agreement" for a description of our severance agreement with Joseph Marc McConnaughey, a former executive officer.

We believe that the above transactions were in our best interests and on terms no less favorable to us than could be obtained from unaffiliated third parties.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers. The agreements require us to indemnify such individuals for certain liability to which they may be subject as a result of their affiliation with us, to the fullest extent permitted by Delaware law.

Item 8. Legal Proceedings

In the ordinary course of business, we are involved in lawsuits, claims, investigations, proceedings, and threats of litigation consisting of intellectual property, commercial, employment and other matters. In accordance with SFAS No. 5, "Accounting for Contingencies," we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us, as well as adequate provisions for any probable and estimable losses. While the outcome of these proceedings and claims cannot be predicted with certainty, management does not believe that the outcome of any pending legal matters will have a material adverse effect on our consolidated financial position, although results of operations or cash flows could be affected in a particular period.

Item 9. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters

Market Information

There is no public market for our common stock, preferred stock or stock options.

Holders

As of December 31, 2003, there were 64 holders of record of our common stock and there was one holder of record of our Series B preferred stock and warrants to purchase Series C preferred stock. As of December 31, 2003, we had 613 holders of stock options exercisable for shares of our common stock.

Dividends

There were no cash dividends declared or paid in 2003 or 2002 and we do not anticipate declaring cash dividends in the foreseeable future. ViewSonic America's credit facility with The CIT Group/Business Credit, Inc. prohibits the payment of dividends in excess of $250,000 per year without the consent of The CIT Group/Business Credit, Inc.

Equity Compensation Plan Information

We have one stockholder approved equity compensation plan, the 1999 Stock Plan. Under the terms of the 1999 Stock Plan, officers, directors, consultants and our employees may be granted options to purchase our common stock at the fair market value on the date the option is granted as determined by our Board of Directors. Options generally vest over three to four years and may be exercised for up to 10 years from the date of grant.

The following table provides certain information regarding our equity incentive plans as of December 31, 2003.

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a)	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding Securities Reflected in Column (a)) (c)
Equity compensation plans approved by security holders	32,263,003	$	1.08	10,935,013
Equity compensation plans not approved by security holders	—		—	—

Total	32,263,003	$	1.08	10,935,013

Item 10. Recent Sales of Unregistered Securities

Since January 1, 2001, we sold and issued the following unregistered securities:

(1): From January 1, 2001 through December 31, 2003, we granted stock options to purchase 22,941,438 shares of our common stock, at exercise prices ranging from $1.00 to $1.36 per share, to employees, consultants and directors pursuant to our 1999 Stock Plan. Of these, stock options to purchase 19,216,956 shares of our common stock were canceled without being exercised.
(2): From January 1, 2001 through December 31, 2003, we issued 44,625 shares of our common stock, at exercise prices ranging from $1.00 and $1.09 per share, to employees and consultants pursuant to outstanding stock options to purchase shares of our common stock.
(3): In December 2001, we issued 10,000,000 shares of our common stock, at $2.00 per share, to Mr. Chu in connection with the conversion of outstanding subordinated promissory notes in the principal amount of $20.0 million.
(4): In January 2002, we issued 7,500,000 shares of our Series B preferred stock, at $2.00 per share, and warrants to purchase an aggregate of 15,800,000 shares of our Series C preferred stock, to one investor, in exchange for 3,676,471 shares of our Series A preferred stock and a warrant to purchase up to 18,382,353 shares of our Series A preferred stock or common stock and $5.0 million. The Series B preferred stock and Series C preferred stock are convertible into shares of our common stock at the rate of one share of common stock for each share of Series B or Series C preferred stock owned. The warrants to purchase 3,300,000 shares and 12,500,000 shares of our Series C preferred stock have exercise prices of $0.01 and $2.00 per share, respectively. The warrant to purchase 3,300,000 shares of our Series C preferred stock shall vest on January 10, 2006 and shall terminate upon the earlier of six months following January 10, 2006 and 180 days following the effective date of a Qualified IPO, as such term is defined therein. The warrant to purchase 12,500,000 shares of our Series C preferred stock is vested with respect to 7,500,000 shares of our Series C preferred stock. The remaining 5,000,000 shares of this warrant shall not vest and become exercisable. This warrant shall terminate upon the earlier of (a) six months following January 10, 2006 (b) 180 days following the effective date of a Qualified IPO and (c) January 10, 2007.
(5): In April 2002, we issued 1,417,017 shares of our common stock to two investors, at $2.00 per share, for an aggregate purchase price of $2,834,034.
(6): In May 2002, we issued 500,000 shares of our common stock to one investor, at $2.00 per share, for an aggregate purchase price of $1.0 million.

Except as noted below, the issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving any public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends affixed to the share certificates and other instruments issued in such transactions. The sale of these securities were made without general solicitation or advertising.

The securities described in (1) and (2) above may not have been exempt from either registration under the Securities Act or qualification under state securities laws. Consequently, recipients of the options and purchasers of the shares for which registration or qualification may have been required may have the right under the Securities Act or state securities laws to rescind their grant of options and purchases of shares. We concluded a rescission offer, as permitted under California state law, to the holders of these options and shares on June 24, 2004. There are no assurances that we will not be subject to penalties or fines relating to these issuances. We believe our rescission offer could provide us with additional meritorious defenses against any future claims relating to these shares.

Item 11. Description of Registrant's Securities to be Registered

This summary of the terms and provisions of our 1999 Stock Plan, or the 1999 Plan, and capital stock is not complete, and you should read our certificate of incorporation, bylaws and the 1999 Plan, copies of which have been filed as exhibits to this registration statement.

Options to Purchase Our Common Stock

In 1999, our Board of Directors adopted the 1999 Plan and reserved 43,200,000 shares of common stock for issuance under the 1999 Plan. In 1999, our stockholders also approved the 1999 Plan. As of December 31, 2003, options to purchase 32,263,003 shares of our common stock were outstanding and held by approximately 613 optionholders. To date, we have only granted nonstatutory stock options. The Board adopted the 1999 Plan to extend the benefits of an equity incentive program to a broad-based group of our employees. All of our employees, officers and directors and employees, officers and directors of our affiliates and certain of our consultants and other independent advisors and of our affiliates, are eligible to participate in the 1999 Plan. For purposes of the foregoing, in accordance with Rule 701(c) under the Securities Act of 1933, as amended, or the Securities Act, "affiliates" include parent corporations and majority-owned subsidiaries. All holders of outstanding options are either (a) employees or directors of ViewSonic or our subsidiaries or (b) consultants to ViewSonic or our subsidiaries within the meaning of Rule 701 of the Securities Act.

Under the 1999 Plan, participants may be granted options or issued stock. Stock awards reflecting 63,000 shares have been issued under the 1999 Plan, which are held by 10 securityholders. The 1999 Plan does not permit the issuance of stock appreciation rights or other awards.

Below is a summary of the material terms of the 1999 Plan:

•: Each option represents the right to purchase the number of shares of common stock at an exercise price and at the times provided in the 1999 Plan or the individual notice of grant.
•: The exercise price for each share of common stock subject to an option is established by the Board, but can in no event be less than 85% of the fair market value of our common stock on the date of grant (or 110% of the fair market value of our common stock on the date of grant for any 10% stockholder). All options granted since the 1999 Plan's adoption were issued at fair market value at the time of grant.
•: The options expire ten years after the date of grant, subject to earlier termination in some circumstances.

•

A holder of an option granted under the 1999 Plan has no voting or other rights as a stockholder, by reason of such option, until the optionholder exercises the option and becomes a holder of record of the purchased shares.

•

Under the 1999 Plan, vesting provisions of individual options may vary. In general, options that have been granted either vest over 4 years or 3 years. The options may be exercised to the extent vested, subject to compliance with applicable law.

•

The options granted to date may not be exercised prior to vesting, but the Board of Directors has discretion to grant options which may be exercisable for unvested shares. In the event that the Board of Directors allowed early exercise of options, any unvested shares acquired pursuant to such exercise are subject to repurchase by us, at the original exercise price paid per share, during the 90-day period following the date the optionholder leaves our employ or service.

•

In the event of a change in control of ViewSonic, the options granted under the 1999 Plan may become fully exercisable. Each participant who is not tendered, or does not accept, an option granted by the surviving corporation which substantially preserves the economic rights and benefits of the participant's existing option shall have 7 days before the effective date of the change in control to exercise all or part of his or her option or options outstanding under the 1999 Plan. A change in control, within the meaning of the 1999 Plan, includes (a) the acquisition of 50% or more of our outstanding shares of common stock; (b) a sale or other disposition of all or substantially all of our assets; or (c) a merger or consolidation with any other entity in which our stockholders immediately preceding such merger or consolidation will not hold a majority of the outstanding capital stock or other equity interests in the surviving entity (whether or not ViewSonic is the surviving entity) immediately after such merger or consolidation.

•

Options may not be transferred, except by will or the laws of descent and distribution, and are exercisable only by the optionholder during the lifetime of the optionholder.

•

If an optionholder's service to us or one of our affiliates is terminated, the optionholder's unvested options terminate immediately and the optionholder is permitted to retain his or her vested options for the period set forth below:

•: If an optionholder's service to us is terminated, other than by death or disability or for misconduct, the optionholder may exercise the vested portion of any option until the earlier of three (3) months following the optionholder's termination and the scheduled expiration of the term of the option, after which time the option will terminate.
•: If an optionholder's service is terminated due to death or disability, the optionholder (or the optionholder's estate or designated heir or devisee) may exercise the vested portion of any option until the earlier of one year following termination and the scheduled expiration of the term of the option, after which time the option will terminate.

The Board of Directors has the authority to administer the 1999 Plan under the terms of the 1999 Plan. The Board of Directors has delegated its authority to administer the 1999 Plan, as permitted under the 1999 Plan, to our Compensation Committee, subject to any resolutions adopted by the Board of Directors. Our Compensation Committee has the discretion to determine which participants receive options, the type of stock awards granted, the provisions of each stock award granted and the number of shares of stock with respect to which a stock award is granted. Our Compensation Committee also has the power to interpret the 1999 Plan and the stock awards granted under it.

General

Under our certificate of incorporation, we are authorized to issue up to 600,000,000 shares of common stock, $.01 par value per share. Our common stock underlies the options issued pursuant to

the 1999 Plan. We are also authorized to issue up to 50,000,000 shares of preferred stock, $.001 par value per share, of which 12,500,000 shares are designated Series B preferred stock and 18,000,000 shares are designated Series C preferred stock. As of December 31, 2003, 353,897,749 shares of our common stock were issued and outstanding, 7,500,000 shares of our Series B preferred stock were issued and outstanding and no shares of our Series C preferred stock were issued and outstanding.

Item 12. Indemnification of Directors and Officers

Under Section 145 of the Delaware General Corporation Law, or the DGCL, we can indemnify our directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act. Our certificate of incorporation provides that we will indemnify our directors, officers, employees and other agents to the fullest extent permitted by law. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

We have entered into agreements to indemnify our directors and officers in addition to the indemnification provided for in our certificate of incorporation. These agreements, among other things, indemnify our directors and certain of our officers for certain expenses (including attorneys' fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including but not limited to any action by or in the right of ViewSonic, on account of services as a director or officer of ViewSonic, or as a director or officer of any other company or enterprise to which the person provides services at our request. We have also purchased liability insurance covering our director and officers.

In addition, our certificate of incorporation provides that our directors shall not be liable for monetary damages for breach of such director's fiduciary duty of care to us and our stockholders except for liability for breach of the director's duty of loyalty to us or our stockholders, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under the DGCL. This provision in the certificate of incorporation does not eliminate the duty of care and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available under the DGCL. The provision also does not affect a director's responsibilities under any other law, such as the federal or state securities or environmental laws.

There is no pending litigation or proceeding involving a director, officer, employee or other agent of ViewSonic as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director, officer, employee or other agent.

Item 13. Financial Statements and Supplementary Data

The following selected financial data should be read in conjunction with our consolidated financial statements. The information set forth below is not necessarily indicative of results of future operations, and should be read in conjunction with Item 2 "Financial Information," and the consolidated financial statements to understand fully factors that may affect the comparability of the financial data presented

below. The following table sets forth for the periods indicated selected unaudited quarterly financial information for 2003 and 2002.

	Quarter Ended
	2003										2002
	Mar. 31		Jun. 30			Sep. 30		Dec. 31			Mar. 31		Jun. 30			Sep. 30		Dec. 31
	(in thousands, except per share amounts)
Net sales	$	266,915	$	240,785		$	275,711	$	291,273		$	208,179	$	205,356		$	219,029	$	251,480
Cost of sales		225,413		209,463			241,226		254,911			173,333		169,838			184,339		219,482

Gross profit		41,502		31,322			34,485		36,362			34,846		35,518			34,690		31,998
Income (loss) from operations		7,966		741			3,179		(7,479	)		11,551		8,612			4,984		(1,128	)

Other income (expense)—net:		1,189		(55	)		1,278		(1,730	)		1,335		(2,624	)		4,510		1,611
Income (loss) before income taxes		9,490		1,067			5,185		(8,927	)		12,886		6,299			10,100		1,406
Provision (benefit) for income taxes		1,818		378			1,636		(1,499	)		4,138		3,540			3,480		342

Net income (loss)	$	7,672	$	689		$	3,549	$	(7,428	)	$	8,748	$	2,759		$	6,620	$	1,064
Preferred stock accretion	$	289	$	304		$	313	$	323		$	263	$	262		$	263	$	290

Net Income (loss) available to common stockholders	$	7,383	$	385		$	3,236	$	(7,751	)	$	8,485	$	2,497		$	6,357	$	774
Basic earnings (loss) per share	$	0.02	$	0.00		$	0.01	$	(0.02	)	$	0.02	$	0.01		$	0.02	$	0.00

Diluted earnings (loss) per share	$	0.02	$	0.00		$	0.01	$	(0.02	)	$	0.02	$	0.01		$	0.02	$	0.00

See note 2 of the notes to consolidated financial statements for a description of the method used to compute basic and diluted earnings (loss) per share.

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Not applicable.

Item 15. Financial Statement and Exhibits

(a): The following documents are filed as part of this Form 10:

		Page
1.	Financial Statements and Independent Auditors' Report	47
2.	Notes to Financial Statements	54
3.	Financial Statement Schedules	70
4.	Exhibits—See Exhibit Index

(b): Exhibits—See Item 15(a) above.

INDEX TO VIEWSONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm		47
Consolidated Balance Sheets as of December 31, 2003 and 2002		48
Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001		50
Consolidated Statements of Stockholders' Equity for the years ended December 2003, 2002 and 2001		51
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001		52
Notes to Consolidated Financial Statements for the years ended December 31, 2003, 2002 and 2001		54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders
ViewSonic Corporation
Walnut, California

We have audited the accompanying consolidated balance sheets of ViewSonic Corporation and subsidiaries (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in Index at Item 15. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2, in 2002, the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142.

/s/ Deloitte & Touche LLP

Los Angeles, California
March 23, 2004

VIEWSONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
(Amounts in thousands)

ASSETS			2003		2002
CURRENT ASSETS:
	Cash and cash equivalents		$	87,870	$	66,251
	Short-term investments			3,687
	Trade receivables—net			132,120		109,841
	Other receivables			5,765		7,927
	Inventories			128,718		119,395
	Deferred income taxes			11,592		10,858
	Prepaids and other current assets			5,002		7,094
	Income taxes receivable			123		4,598

		Total current assets		374,877		325,964
PROPERTY, PLANT AND EQUIPMENT—Net				16,015		16,612
LONG-TERM INVESTMENTS				13,704		23,668
GOODWILL				7,464		7,464
OTHER ASSETS—Net				2,869		3,190

TOTAL			$	414,929	$	376,898

(Continued)

VIEWSONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
(Amounts in thousands, except for share and par value information)

LIABILITIES AND STOCKHOLDERS' EQUITY			2003			2002
CURRENT LIABILITIES:
	Bank borrowings		$	6,342		$	—
	Accounts payable			237,363			217,900
	Accrued promotional expenses			15,779			20,930
	Accrued warranty expense			14,706			14,253
	Other accrued expenses			18,945			12,820

		Total current liabilities		293,135			265,903
SUBORDINATED NOTES PAYABLE—Related party				43,000			43,000
DEFERRED INCOME TAXES				590			1,391
CONVERTIBLE MANDATORILY REDEEMABLE PREFERRED STOCK				12,056			10,828
MINORITY INTEREST				1,441			3,167
STOCKHOLDERS' EQUITY:
	Common stock, $.01 par value:
		Authorized—600,000,000 shares at December 31, 2003 and 2002
		Outstanding—353,897,749 and 353,885,825 shares at December 31, 2003 and 2002, respectively		3,539			3,539
	Additional paid-in capital			92,105			82,282
	Accumulated deficit			(28,125	)		(31,378	)
	Accumulated other comprehensive loss			(2,812	)		(1,834	)

		Total stockholders' equity		64,707			52,609

TOTAL			$	414,929		$	376,898

The accompanying notes are an integral part of these consolidated financial statements.

(Concluded)

VIEWSONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(Amounts in thousands, except per share information)

			2003			2002			2001
NET SALES			$	1,074,684		$	884,044		$	962,359
COST OF SALES				931,013			746,992			863,800

GROSS PROFIT				143,671			137,052			98,559
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				139,264			113,033			116,352

INCOME (LOSS) FROM OPERATIONS				4,407			24,019			(17,793	)

OTHER INCOME (EXPENSE)—Net:
	Interest expense			(2,386	)		(2,628	)		(8,076	)
	Other income—net			3,068			7,460			8,594

		Other income—net		682			4,832			518

MINORITY INTEREST IN NET LOSS OF SUBSIDIARIES				1,726			1,840

INCOME (LOSS) BEFORE INCOME TAXES				6,815			30,691			(17,275	)
PROVISION FOR INCOME TAXES				2,333			11,500			558

NET INCOME (LOSS)				4,482			19,191			(17,833	)
PREFERRED STOCK ACCRETION				(1,229	)		(1,078	)		(1,364	)

NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS			$	3,253		$	18,113		$	(19,197	)

BASIC EARNINGS (LOSS) PER SHARE			$	0.01		$	0.05		$	(0.06	)

DILUTED EARNINGS (LOSS) PER SHARE			$	0.01		$	0.05		$	(0.06	)

BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING				353,891			353,322			342,799

DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING				358,534			361,341			342,799

VIEWSONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(Amounts in thousands, except for share information)

					Common Stock								Accumulated Other Comprehensive Income (Loss)
					Common Stock			Additional Paid-In Capital		Accumulated Deficit						Total Stockholders' Equity
					Shares	Amount		Additional Paid-In Capital		Accumulated Deficit						Total Stockholders' Equity
BALANCE—January 1, 2001					341,936,407	$	3,419	$	53,386	$	(30,294	)	$	2,317		$	28,828
	Comprehensive loss:
		Net loss									(17,833	)					(17,833	)
		Other comprehensive loss—net of tax:
			Foreign currency translation											(346	)		(346	)
Unrealized holding losses on marketable securities—less realized gains														(2,475	)		(2,475	)
				Comprehensive loss
	Preferred stock accretion										(1,364	)					(1,364	)
	Issuance of common stock				10,029,701		101		19,929								20,030
BALANCE—December 31, 2001					351,966,108		3,520		73,315		(49,491	)		(504	)		26,840
	Comprehensive income (loss):
		Net income									19,191						19,191
		Other comprehensive loss—net of tax:
			Foreign currency translation											(348	)		(348	)
Unrealized holding losses on marketable securities—less realized gains														(982	)		(982	)
				Comprehensive loss
	Preferred stock accretion										(1,078	)					(1,078	)
	Issuance of common stock and warrants				1,919,717		19		8,967								8,986
BALANCE—December 31, 2002					353,885,825		3,539		82,282		(31,378	)		(1,834	)		52,609
	Comprehensive income:
		Net income									4,482						4,482
		Other comprehensive income (loss)—net of tax:
			Foreign currency translation											223			223
Unrealized holding losses on marketable securities—less realized gains														(1,201	)		(1,201	)
				Comprehensive income
	Stockholders' complaint settlement (Note 10)								9,810								9,810
	Preferred stock accretion										(1,229	)					(1,229	)
	Issuance of common stock				11,924				13								13
BALANCE—December 31, 2003					353,897,749	$	3,539	$	92,105	$	(28,125	)	$	(2,812	)	$	64,707

The accompanying notes are an integral part of these consolidated financial statements.

VIEWSONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(Amounts in thousands)

					2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)				$	4,482		$	19,191		$	(17,833	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization				3,949			5,469			7,114
		Minority interest in net loss of subsidiaries				(1,726	)		(1,840	)
		Loss on disposal of property, plant and equipment				249			844			347
		Provision for doubtful accounts				1,228			618			1,028
		Loss (gain) on sale of long-term investments				3,666			(5,657	)		(11,172	)
		Deferred income taxes				(735	)		7,988			(7	)
		Stockholders' complaint settlement				9,810
		Other				68			(258	)		145
		Changes in operating assets and liabilities:
			Trade receivables—net			(23,505	)		(3,679	)		58,588
			Other receivables			2,162			9,252			731
			Inventories			(9,323	)		(11,453	)		123,417
			Prepaids and other current assets			2,412			215			752
			Accounts payable			19,463			34,082			(85,505	)
			Accrued promotional and other expenses			1,281			3,050			(19,687	)
			Accrued warranty expense			453			(15,285	)		(2,520	)
			Income taxes payable/receivable			3,936			(2,498	)		(735	)

				Net cash provided by operating activities		17,870			40,039			54,663

CASH FLOWS FROM INVESTING ACTIVITIES:
	Net purchase of property, plant and equipment					(3,302	)		(2,835	)		(10,838	)
	Purchases of long-term investments					(214	)		(4,584	)		(5,623	)
	Proceeds on sale of long-term investments					4,504			10,019			23,016
	(Purchases) sales of short-term investments					(3,687	)		2,076			376
	Purchase of businesses											(5,694	)
	Sale of minority interests								2,233

				Net cash (used in) provided by investing activities		(2,699	)		6,909			1,237

(Continued)

VIEWSONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(Amounts in thousands)

			2003			2002			2001
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from bank borrowings		$	41,565		$	29,752		$	256,091
	Payments on bank borrowings			(35,223	)		(46,642	)		(292,997	)
	Proceeds from issuance of common stock			13			2			30
	Proceeds from issuance of preferred stock and warrants						5,000

		Net cash provided by (used in) financing activities		6,355			(11,888	)		(36,876	)

NET INCREASE IN CASH AND CASH EQUIVALENTS				21,526			35,060			19,024
CASH AND CASH EQUIVALENTS—Beginning of year				66,251			31,319			12,342
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS				93			(128	)		(47	)

CASH AND CASH EQUIVALENTS—End of year			$	87,870		$	66,251		$	31,319

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION—Cash paid (refund) for:
	Interest		$	2,129		$	2,264		$	7,405

	Income taxes		$	(1,887	)	$	4,654		$	1,583

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY—Unrealized holding (losses) gains in 2003, 2002 and 2001 for investments available for sale, net of tax of $(801), $812 and $3,218, respectively			$	(623	)	$	1,027		$	4,827

	Acquisition of a long-term investment in 2002		$	—		$	1,000		$	—

The accompanying notes are an integral part of these consolidated financial statements.

(Concluded)

VIEWSONIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

1. Organization and Business

ViewSonic Corporation, a Delaware corporation, and subsidiaries (the "Company"), was incorporated in 1987. The Company is a leading global provider of visual display technology, including CRT monitors, LCD displays, projectors, plasma displays, HDTV technology and the latest in mobile products from Tablet PCs and PDAs to wireless monitors.

Headquartered in Walnut, California, the Company has subsidiaries with operations in the United States, Taiwan, China, Japan, Singapore, Hong Kong, Australia, the United Kingdom, France and Germany.

2. Summary of Significant Accounting Policies

Principles of Consolidation—The Company's consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and elimination of all significant intercompany accounts and transactions.

Use of Estimates—The preparation of the 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 the 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 periods. Actual results could differ from those estimates.

Cash, Cash Equivalents and Short-Term Investments—Cash and cash equivalents include currency on hand and time deposits with original maturities of less than three months.

Short-term investments represent time deposits with original maturities of more than three months but less than one year.

Trade Receivables—Net—Trade receivables, net include an allowance for doubtful accounts of approximately $4,192,000, $2,896,000 and $6,181,000 as of December 31, 2003, 2002 and 2001, respectively. The allowance amount is determined by specific review of the receivable aging balances.

Other Receivables—This balance includes related party receivables (see Note 9) and other receivables. A foreign subsidiary had entered into a factoring contract with a bank to sell its accounts receivables without recourse. The contracts outstanding were approximately $0 and $2,895,000 as of December 31, 2003 and 2002, respectively.

Inventories—Inventories consist primarily of finished goods and are stated at the lower of cost or market. Cost is determined using the first-in, first-out method of accounting. The Company writes down its inventory for estimated lower of cost or market, obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the net realizable value based upon assumptions about future demand and market conditions. Other factors influencing these write downs include: rapid technological changes, product life cycle, and product pricing. The Company evaluates its inventory on a monthly basis and makes necessary adjustments. Inventory write downs totaled, $9,500,000, $20,000, and $14,000,000 in 2003, 2002, and 2001, respectively.

Property, Plant and Equipment—Net—Depreciation is provided for on the straight-line method over the estimated useful lives of the assets, 3 to 30 years. Amortization of leasehold improvements is over the lesser of the lease term or useful life of the improvement.

The Company's property, plant and equipment are recorded at cost and include significant expenditures that increase the asset lives. Ordinary maintenance and repairs are charged to operations as incurred. When assets are sold or otherwise disposed of, the recorded cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is recognized.

Long-Term Investments—The Company's long-term investments are classified as available-for-sale and includes both publicly traded and privately-held companies. None of the Company's investments represent ownership of more than 20% in the various companies. For the Company's publicly traded investments, the Company follows SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" and as such unrealized holding gains/losses are recorded in other comprehensive income, net of tax. Any realized gains/losses are recorded in other income/expense and cost is determined by specific identification. The Company accounts for its privately-held company investments under the cost method. When events dictate, the Company performs an impairment analysis to determine whether the loss, if any, is other than temporary. During the year-ended December 31, 2003, the Company recorded an impairment loss of $3,631,000 related to two of its private investments. This impairment was triggered by a bankruptcy ($3,000,000) and deterioration of financial operating results ($631,000) of the investee. In determining if an impairment exists, the Company's impairment policy is to evaluate the latest actual financial operating results, review projections on a discounted cash flow model and perform an overall analysis of the Company's original cost. The actual amount of impairment is based on the difference between the discounted cash flows versus the recorded value.

License Agreements—The Company accounts for its license agreements in accordance with the guidelines in Statement of Financial Accounting Standards ("SFAS") No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. SFAS No. 86 requires capitalized software costs to be amortized using the greater of the ratio of current gross revenues to anticipated future gross revenues or the straight-line method over the remaining economic life. In addition, the Company monitors the capitalized license costs to ensure the costs are stated at their net realizable value. The capitalized software is purchased from the Company's vendors for inclusion in the Company's new products. The Company believes the software is incidental to its products.

Income Taxes—Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates to the differences between financial statement carrying amounts and the income tax basis of assets and liabilities. Income taxes, which would be due upon the repatriation of foreign subsidiary earnings, have not been provided where the undistributed earnings are considered indefinitely invested. The Company records a valuation allowance when it is more likely than not that the deferred income tax asset will not be realized.

Revenue Recognition, Warranty and Promotions—Revenues are recognized when products are shipped and risk of loss is transferred, evidence of an arrangement exists, the price is fixed or readily determinable, and collectibility is probable. The Company extends rights of return to its customers, which are accrued for based on estimated future returns determined by using estimates and historical experience.

The Company provides a variety of warranty programs worldwide, and each program is based on the specific products. Accruals are provided for such estimated future costs at the time the product is sold, and such amounts are based upon historical experience (see Note 14).

The Company offers promotions such as rebates, price protection and other incentives to customers in the normal course of business. Accruals for these promotions are provided for based on estimates and historical experience. The cost of these promotions is netted against sales.

The Company occasionally requests that its contract manufacturers ship finished goods directly to its customers. However, the Company's primary business practice is to have finished goods delivered

from its contract manufacturers directly to the Company's regional warehouses, where it is stored for eventual shipment to its customers. For vendor drop shipment sales, the Company retains title to the shipment from the time it leaves the contract manufacturer's port of choice, until the time title passes to the customer. For the years 2003 through 2001, the Company's vendor drop shipment revenue was $18,300,000, $19,800,000 and $40,500,000 respectively.

Advertising—Advertising costs, which include cooperative advertising, media advertising and production costs, are recorded as selling, general and administrative expenses in the period in which the advertising first takes place. Advertising costs were $27,944,000, $23,615,000 and $27,196,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

Research and Development—Research and development expenses were $8,158,000, $7,662,000 and $7,223,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

Other Income—Net—The other income, net account consists primarily of investment gains (losses), foreign currency transaction gains (losses) and other miscellaneous income. See Note 4 for investment gains (losses), and for transaction gains (losses), see below for more information.

Foreign Currency Translation and Transaction Gain (Loss)—The assets and liabilities of subsidiaries whose functional currency is other than the U.S. dollar are translated at the exchange rates applicable at the end of the reporting year. The statements of operations and cash flows of such subsidiaries are translated at the average exchange rates during the year. Translation gains or losses are accumulated as a separate component of stockholders' equity.

The Company's net transaction gains (losses) were $5,934,000, $3,177,000, and $(2,193,000) for the years ended December 31, 2003, 2002 and 2001, respectively.

Stock-Based Compensation—The Company accounts for employee stock options in accordance with Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Under APB Opinion No. 25, the Company does not recognize compensation expense related to employee stock options, since the options are not granted at a price below the estimated market price on the date of grant.

SFAS No. 123, Accounting for Stock-Based Compensation, encourages, but does not require, the recognition of compensation expense for employee stock-based compensation arrangements using the fair value method of accounting. The Company has elected the "disclosure only" alternative and has disclosed the pro forma net income (loss) per share amounts using the fair value method. In accordance with SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123, the following pro forma disclosure is required.

Had compensation expense for the Company's stock options been recognized based on the fair value on the grant date under the methodology prescribed by SFAS No. 123, the Company's net income

(loss) from continuing operations would have been impacted as shown in the following table for the years ended December 31:

		2003		2002		2001
Net income (loss):
	As reported	$	4,482	$	19,191	$	(17,833	)
	Pro forma	$	4,235	$	18,949	$	(18,074	)
Basic earnings (loss) per share:
	As reported	$	0.01	$	0.05	$	(0.06	)
	Pro forma	$	0.01	$	0.05	$	(0.06	)
Diluted earnings (loss) per share:
	As reported	$	0.01	$	0.05	$	(0.06	)
	Pro forma	$	0.01	$	0.05	$	(0.06	)

New Accounting Pronouncements—In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changed the accounting standard for goodwill and other intangible assets. The statement will continue to require recognition of goodwill as an asset but does not permit amortization of goodwill. Goodwill recognized after June 30, 2001 is not amortized, and goodwill on the books at June 30, 2001 is amortized until, but not after, January 1, 2002. The statement requires that goodwill be separately tested for impairment using a fair-value-based approach at least annually or when events and circumstances occur indicating that an impairment might exist.

In accordance with SFAS No. 142, the Company recognized no goodwill amortization for the years ended December 31, 2003 and 2002. Goodwill amortization was $1,524,000 for the year ended December 31, 2001.

In accordance with SFAS No. 142, the Company is making the following transitional disclosures for the years ended December 31 (amounts in thousands, except for per share information):

		2003		2002		2001
Reported net income (loss) available to common stockholders		$	3,253	$	18,113	$	(19,197	)
Add back goodwill amortization—net of tax							914

Adjusted net income (loss) available to common stockholders		$	3,253	$	18,113	$	(18,283	)

Basic earnings (loss) per share:
	Reported net income (loss) available to common stockholders	$	0.01	$	0.05	$	(0.06	)
	Goodwill amortization						0.01

Adjusted net income (loss) available to common stockholders		$	0.01	$	0.05	$	(0.05	)

Diluted earnings (loss) per share:
	Reported net income (loss) available to common stockholders	$	0.01	$	0.05	$	(0.06	)
	Goodwill amortization						0.01

Adjusted net income (loss) available to common stockholders		$	0.01	$	0.05	$	(0.05	)

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be initially measured at fair value and recognized when the liability is incurred. The provisions of SFAS No. 146 are required to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company adopted SFAS No. 146 on January 1, 2003. The adoption of SFAS No. 146 did not have a material effect on the Company's consolidated financial statements.

In December 2003, the FASB issued FIN No. 46(R), Consolidation of Variable Interest Entities. FIN 46(R) requires that the assets, liabilities and results of the activity of variable interest entities be consolidated into the financial statements of the company that has controlling financial interest. It also provides the framework for determining whether a variable interest entity should be consolidated based on voting interest or significant financial support provided to it. The Company adopted FIN 46(R) effective January 1, 2003. The adoption of FIN 46(R) did not have a material effect on the Company's consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Based on SFAS No. 150, a convertible mandatorily redeemable financial instrument shall be classified as a liability if it embodies an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable date or upon an event certain to occur. Similarly, payments to holders of such instruments and related accruals shall be presented separately from payment to and interest due to other creditors in statements of cash flows and income. Convertible mandatorily redeemable financial instruments shall be initially measured at fair value. The statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company adopted this statement during the year ended December 31, 2003. The Company's convertible mandatorily redeemable preferred stock contains a conversion feature (see Note 7). Accordingly, SFAS No. 150 will not impact the Company until the conversion feature expires.

Derivative Financial Instruments—The Company used foreign currency option contracts and forward contracts to manage the risk of foreign currency exchange. These contracts were not accounted for as hedges under SFAS No. 133, Accounting for Derivatives; therefore, the fair value of the derivative was recorded on the consolidated balance sheet and the change in fair value was recognized currently in income. As of December 31, 2003 and 2002, the fair values of the outstanding options and forward contracts were $0 and $(1,322,000), respectively, and are included in other accrued expenses.

Foreign Component Suppliers and Assemblers and Regulations—A significant number of products distributed by the Company are manufactured in China, Taiwan, Korea and Japan. The purchase of goods manufactured in foreign countries is subject to a number of risks, including economic disruptions, transportation delays and interruptions, foreign exchange rate fluctuations, imposition of tariffs, import and export controls, and changes in governmental policies, any of which could have a material effect on the Company's business, results of operations and financial condition. While the Company does not believe that any of these factors impact its business significantly at present, there can be no assurance that these factors will not have a material effect on the Company in the future. Any significant disruption in the delivery of merchandise from the Company's component suppliers, substantially all of whom are foreign, would also have a material impact on the Company's business, results of operations and financial condition. Currently, the majority of purchases are made in U.S. dollars.

Fair Value of Financial Instruments—The Company's financial instruments recorded on the consolidated balance sheets include cash and cash equivalents, short-term investments, trade receivables, net, other receivables, accounts payable, bank borrowings, subordinated notes payable and

preferred shares subject to mandatory redemption. Management believes that the recorded value of such financial instruments is a reasonable estimate of their fair value, except for the fair value of subordinated notes payable, which, due to its related party nature, is not determinable.

Concentration of Credit Risk and Major Customers/Suppliers—Trade receivables, net are unsecured, and the Company is at risk to the extent such amounts become uncollectible. The Company performs credit evaluations of each of its customers and maintains allowances for potential credit losses as needed. Such losses have been within management's expectations.

Two customers accounted for approximately 23%, 28% and 26% of total net sales for the years ended December 31, 2003, 2002 and 2001, respectively. These customers accounted for approximately 19% and 30% of trade receivables, net at December 31, 2003 and 2002, respectively.

Four suppliers accounted for approximately 57%, 73% and 67% of total purchases for the years ended December 31, 2003, 2002 and 2001, respectively. These suppliers accounted for approximately 52% and 68% of accounts payable at December 31, 2003 and 2002, respectively.

Earnings Per Share—The Company presents both basic and diluted earnings (loss) per share ("EPS") amounts. Basic EPS is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the year. Diluted EPS amounts are based upon the weighted-average number of common and potential common shares, including warrants outstanding during the year.

Potential common shares are excluded from the computation in periods in which they have an anti-dilutive effect. The Company uses the treasury stock method to calculate the impact of outstanding stock options. Stock options for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on EPS and, accordingly, are excluded from the calculation. For 2003, 2002 and 2001, options for 4,795,000, 2,724,000 and 25,204,000 shares, respectively, were excluded from the diluted earnings per common share calculation because they were anti-dilutive.

3. Property, Plant and Equipment

Property, plant and equipment, net consist of the following at December 31 (in thousands):

	Useful Lives	2003			2002
Land		$	4,288		$	4,201
Building	30 years		5,147			5,255
Office equipment	3-5 years		20,978			18,990
Furniture and fixtures	4-5 years		4,744			4,330
Leasehold improvements	5-15 years		5,756			5,170
Construction in progress			238			133

			41,151			38,079
Accumulated depreciation and amortization			(25,136	)		(21,467	)

		$	16,015		$	16,612

The total depreciation and amortization expense for the years ended December 31, 2003, 2002 and 2001 was approximately $3,949,000, $5,469,000 and $5,590,000, respectively.

4. Long-Term Investments

The investment activity in other comprehensive income, net of tax, is as follows at December 31 (in thousands):

	2003			2002			2001
Beginning balance—unrealized gain	$	2,011		$	2,993		$	5,468
Unrealized holding (losses) gains		(623	)		1,027			4,827
Reclassification for realized gains		(578	)		(2,009	)		(7,302	)

Ending balance—unrealized gain	$	810		$	2,011		$	2,993

The Company's long-term investments are summarized as follows at December 31 (in thousands):

	2003 Market/ Carrying Value		Realized Gain (Loss)			2002 Market/ Carrying Value		Realized Gain
Equity method securities	$	—	$	—		$		$	2,309
Private securities—at cost		4,685		(4,630	)		16,387		18
Available-for-sale equity securities—public		9,019		964			7,281		3,330

	$	13,704	$	(3,666	)	$	23,668	$	5,657

5. Bank Borrowings

In December 2001, a domestic subsidiary negotiated a new $50,000,000 line of credit with CIT Group/Business Credit, Inc. that expires in December 2004. Advances bear interest at the prime rate plus 0.75% (4.75% at December 31, 2003) with interest payable monthly. As of December 31, 2003 and 2002, there was no outstanding balance on the line of credit. All advances under the agreement are collateralized by substantially all of the assets in the domestic subsidiary.

Under the agreement, the domestic subsidiary is subject to various restrictive covenants which, among other things, limit dividends (not to exceed $250,000 per year without the consent of the CIT Group), capital expenditures and executive compensation and require the domestic subsidiary to maintain a minimum earnings before interest, taxes, depreciation and amortization amount.

A foreign subsidiary has line-of-credit facilities with various financial institutions that are secured by certain assets of that subsidiary. These credit facilities allow cash advances, letters of credit and bank guarantees. In 2003, the cash advances bear interest at rates ranging from 1.2% to 1.7%. At December 31, 2003 and 2002, there were outstanding cash advances of approximately $1,475,000 and $0, respectively. At December 31, 2003, the borrowing limit was approximately $29,000,000.

Another foreign subsidiary has line-of-credit facilities with various financial institutions that are secured by certain assets of that subsidiary. These credit facilities allow cash advances, letters of credit and bank guarantees. In 2003, the cash advances bear interest at rates ranging from 2.0% to 4.9%. At December 31, 2003 and 2002, there were outstanding cash advances of approximately $2,065,000 and $0, respectively. In addition, at December 31, 2003 and 2002, there were term loans of approximately $2,802,000 and $0, respectively. These loans are with various Taiwanese banks and bear interest from 1.95% to 4.88% at December 31, 2003. These loans, which have no financial covenants, will mature at various dates through September 2004. At December 31, 2003, the borrowing limit was approximately $7,227,000.

6. Income Taxes

The provision for income taxes consists of the following for the years ended December 31 (in thousands):

		2003			2002			2001
Current:
	Federal	$	921		$	—		$	245
	State		760			1,447			(454	)
	Foreign		1,010			848			774

Total current			2,691			2,295			565

Deferred:
	Federal		(1,237	)		9,816			(591	)
	State		102			123			232
	Foreign		777			(734	)		352

Total deferred			(358	)		9,205			(7	)

		$	2,333		$	11,500		$	558

The components of deferred tax assets (liabilities) are as follows at December 31 (in thousands):

		2003			2002
Deferred tax assets
Current:
	Reserves	$	7,747		$	6,901
	Accruals		2,955			682
	State taxes		277			256
	Unrealized foreign exchange gain (loss)		(87	)		515
	NOL carryforwards (federal and state)		1,824
	Other		700			680

Total current			11,592			10,858

Noncurrent:
	Net operating loss carryforwards (non-U.S. and state)		2,445			7,349
	Depreciation and amortization		1,619			1,499
	Foreign tax credit carryforwards		1,129			727
	Other					(81	)

Subtotal			5,193			9,494
Valuation allowance			(3,024	)		(7,313	)

Total noncurrent			2,169			2,181

Deferred tax liabilities
Noncurrent—unrealized gain on securities			(590	)		(1,391	)

Net deferred tax assets		$	13,171		$	11,648

The net deferred tax assets are reflected on the December 31, 2003 and 2002 consolidated balance sheets as a separately stated current asset of $11,592,000 and $10,858,000, respectively, and a noncurrent asset (included within other assets) of $2,169,000 and $2,181,000, respectively. The deferred tax liability is reflected on the aforementioned consolidated balance sheets as a separately stated noncurrent liability of $590,000 and $1,391,000 as of December 31, 2003 and 2002, respectively.

The valuation allowance of $3,024,000 and $7,313,000 as of December 31, 2003 and 2002, respectively, is primarily for the deferred tax assets generated from non-U.S. entities. These deferred tax assets may not be realizable due to the uncertainty of whether future taxable income will be generated from these non-U.S. entities. The decrease in the valuation allowance was largely due to the utilization of non-U.S. net operating loss carryforwards not previously benefited for tax purposes.

For state income tax purposes, the Company has a California net operating loss carryforward of $8,900,000 and a New Jersey net operating loss carryforward of $300,000 at December 31, 2003. These net operating loss carryforwards begin to expire in 2011.

In addition, the Company had approximately $6,200,000 of non-U.S. net operating loss carryforwards at December 31, 2003. The majority of the non-U.S. net operating loss carryforwards relate to operations of subsidiaries in countries permitting indefinite carryforward of losses. Generally, a valuation allowance is provided when it is more likely than not that the deferred income tax asset will not be realized.

Income (loss) before taxes attributable to foreign operations was $15,533,000, $5,109,000 and $(15,941,000) for the years ended December 31, 2003, 2002 and 2001, respectively.

A reconciliation of the Company's provision for income taxes to the U.S. federal statutory rate is as follows for the years ended December 31 (in thousands):

	2003 Amount			%		2002 Amount			%		2001 Amount			%
Provision (benefit) for income taxes at statutory rate	$	2,385		35.0		$	10,742		35.0		$	(6,046	)	35.0
Nondeductible items (Note 10)		3,434		50.4			72		0.3			166		(1.0	)
Change in valuation allowance		(4,289	)	(62.9	)		(639	)	(2.1	)		3,636		(21.0	)
State taxes—net of federal benefit		560		8.2			1,021		3.3			(144	)	0.8
Permanent and other items, including foreign income taxed at different rates		243		3.6			304		1.0			2,946		(17.0	)

	$	2,333		34.2		$	11,500		37.5		$	558		(3.2	)

7. Convertible Mandatorily Redeemable Preferred Stock

Series A Stock—On April 14, 2000, the Company entered into a Series A Preferred Stock and Warrant Purchase Agreement (the "Agreement") with a U.S.-based high-tech company (the "Investor") providing for an investment of up to $50,000,000 in the Company by the Investor in exchange for 18,382,353 shares of Series A convertible mandatorily redeemable convertible preferred stock and warrants. The $50,000,000 would be paid to the Company based on the achievement of certain milestones as defined in the Agreement.

On April 14, 2000, all conditions were met for the first closing and, in exchange for $10,000,000, the Company issued 3,676,471 shares of Series A convertible mandatorily redeemable convertible preferred stock, par value of $0.001 per share (the "Series A Stock"). Each share of Series A Stock could be converted into one share of common stock or redeemed for cash on the redemption dates. In connection with such issuance, the Company granted to the Investor warrants (collectively, the

"warrants") to purchase an additional 18,382,353 shares of Series A Stock with an exercise price of $2.72 per share. The warrants were immediately exercisable. The Company recorded these warrants at their estimated fair market value of $987,000.

The redemption price for each share of Series A Stock was an amount in cash equal to $3.81 (as adjusted for any stock splits, stock dividends, recapitalizations and similar transactions) plus all declared but unpaid dividends on the Series A Stock for a portion of the shares on March 31, 2003 and the remaining shares on March 31, 2004. Accordingly, the Company was accreting the value of the Series A Stock from its initial value of $9,013,000 to the redemption price $14,007,000. Such accretion totaled $1,364,000 for the year ended December 31, 2001. No dividends were declared for the year ended December 31, 2001.

As the milestones were not achieved, the Investor was not obligated to purchase additional shares of Series A Stock and, upon execution of the Series B Preferred Stock Exchange and Warrant Purchase Agreement, the obligations of the parties under the Agreement were extinguished.

Series B and C Stock—On January 10, 2002, the Company entered into a Series B Preferred Stock Exchange and Warrant Purchase Agreement (the "Exchange Agreement") with the Investor. Under the Exchange Agreement, the Investor contributed an additional $5,000,000, bringing the total cash contributed to $15,000,000. The exchange was made for the 3,676,471 shares of Series A Stock originally issued and the related warrants. As consideration for the exchange, the Company issued to the Investor 7,500,000 shares of Series B convertible mandatorily redeemable convertible preferred stock, par value of $.001 per share (the "Series B Stock"). Each share of Series B Stock is convertible into one share of common stock or redeemable for cash for $2.00 per share on January 10, 2006. In connection with such issuance, the Company granted to the Investor 3,300,000 Interest Warrants and 7,500,000 Valuation Warrants to purchase Series C non-redeemable convertible preferred stock (par value of $.001 per share). The Interest Warrants vest on January 10, 2006, or following the completion of a qualified initial public offering, and have an exercise price of $.01 per share. The Valuation Warrants were immediately vested and have an exercise price of $2.00 per share. As of December 31, 2003, a total of 18,000,000 shares of Series C preferred stock were authorized, and no shares were issued or outstanding.

In accordance with applicable accounting guidance, the exchange was accounted for as an extinguishment of the Series A Stock and related warrants. The exchange resulted in no gain or loss, as the fair value of the consideration provided to the Investor was equal to the carrying value of the extinguished instruments. The Series B Stock was recorded at its fair value of $9,750,000, and the Interest and Valuation Warrants were valued at $7,479,000. The Company is accreting the value of the Series B Stock from its initial value of $9,750,000 to the redemption price of $15,000,000. Such accretion totaled $1,229,000 and $1,078,000 for the years ended December 31, 2003 and 2002, respectively.

The Investor currently holds 100% of the outstanding shares of Series B Stock and, consequently, has a representative observing all meetings of the Board of Directors of the Company (the "Board") but has no voting rights.

The Investor is entitled to dividends payable when and if declared by the Board. The dividends would be cumulative and would be paid prior to payment of any dividend with respect to the common stock. No dividends were declared for the years ended December 31, 2003 and 2002.

The following is a summary of the Series B Stock as of December 31 (in thousands):

		2003		2002
Series B convertible preferred stock:
	Authorized—12,500,000 shares at December 31, 2003 and 2002
	Issued and outstanding—7,500,000 shares at December 31, 2003 (liquidation preference of $2.60 per share)	$	12,056	$	10,828

8. Stockholders' Equity

A portion of the Company's retained earnings is restricted based on certain regulations governing a subsidiary in Taiwan. The total amount of restricted retained earnings was approximately $2,640,000 and $2,082,000 at December 31, 2003 and 2002, respectively.

In 2002, the Company issued 1,917,017 shares of common stock in connection with the acquisition of a business and a long-term investment.

In 2001, the principal stockholder of the Company purchased an additional 10,000,000 shares of common stock at $2 per share in exchange for a $20,000,000 reduction in the subordinated notes payable (see Note 9).

9. Related Party Transactions

The Company sells inventory to several related parties, which include a company where an officer is related to the principal stockholder. Net sales to these related parties were approximately $28,808,000, $27,209,000 and $34,895,000 for the years ended December 31, 2003, 2002 and 2001, respectively. The Company had receivables of approximately $2,750,000 and $2,856,000 from these related parties at December 31, 2003 and 2002, respectively, which are included in other receivables, net.

At December 31, 2003, the Company had subordinated notes payable to its principal stockholder and related entities. In 2001, the principal stockholder purchased an additional 10,000,000 shares of the common stock at $2 per share of the Company in exchange for a $20,000,000 reduction of the original subordinated notes payable. The new subordinated notes payable is not callable until the expiration date, April 12, 2008. The amounts outstanding at December 31, 2003 and 2002 are $43,000,000. The interest rates on the subordinated notes payable was 3.97%, 3.97% and 6.25% for the years ended December 31, 2003, 2002 and 2001, respectively. Interest expense related to this amount totaled $1,707,000, $1,707,000 and $3,748,000 for the years ended December 31, 2003, 2002 and 2001, respectively.

10. Commitments and Contingencies

Lease Commitments—The Company leases certain facilities under lease agreements that expire at various dates through 2008. One lease provides for a five-year renewal option with accompanying cost-of-living rent increases. Commitments under the lease agreements also provide for the payment of

property taxes, insurance, utilities and maintenance costs. The following is a schedule of future minimum lease payments required under these operating leases (in thousands):

Year Ending December 31
2004	$	2,507
2005		1,888
2006		1,456
2007		770
2008		228

	$	6,849

Total rental expense for the years ended December 31, 2003, 2002 and 2001 was approximately $3,181,000, $2,800,000 and $2,678,000, respectively.

Litigation—The Company is involved in various legal matters in the normal course of its business. Management believes that the ultimate outcome of such matters will not have a material adverse effect on the accompanying consolidated financial statements.

During the fourth quarter of 2003, the Company in conjunction with the principal stockholder settled a complaint through the transfer of 9,000,000 shares from the principal stockholder to certain other stockholders. The value of the shares transferred was $9,810,000, and it has been reflected as a selling, general and administrative expense and a capital contribution by the principal stockholder.

Services Agreements—In 1999, the Company entered into a services agreement with a logistics supplier. The agreement provides for warehousing, shipping and freight services. The amount to be paid is based on the level of services provided as defined in the agreement. For the years ended 2003, 2002 and 2001, the expense was approximately $3,642,000, $3,494,000 and $4,407,000, respectively.

During 2000, the Company entered into a services agreement with a repair service provider. The amount to be paid is based on the level of services provided as defined in the agreement. For the years ended December 31, 2003, 2002 and 2001, the expense was approximately $767,000, $2,202,000 and $4,407,000, respectively.

Purchase Commitments—The Company has purchase commitments for materials and supplies as part of the normal course of business. These commitments are not at prices in excess of current fair market value. Commitments to purchase inventory at above-market prices have been reserved. The total amount reserved under these commitments is $3,364,000 as of December 31, 2003 and is included as part of other accrued expenses.

Other Agreements—The Company has a licensing agreement for embedded software with a U.S.-based high-tech company. The total outstanding commitment under this licensing agreement is $1,051,000 as of December 31, 2003. This agreement expires on September 30, 2004.

11. 401(k) Retirement Plan

The Company has a 401(k) plan (the "401(k) Plan") for its eligible domestic employees. Employer contributions made to the 401(k) Plan during the years ended December 31, 2003, 2002 and 2001 were $958,000, $646,000 and $615,000, respectively.

12. Stock Options

In April 1999, the Company established a stock option plan (the "Plan"). Under terms of the Company's Plan, officers, members of the Board and certain other employees may be granted options to purchase the Company's common stock at estimated market price on the date the option is granted.

Options granted through April 30, 2002 vest over four years. Options granted on or after May 1, 2002 vest over three years. All options may be exercised for up to 10 years from the date of grant. The fair market value was determined by the Company based on valuations performed by an independent appraiser in connection with the issuance of the options.

Presented below is a summary of the Plan's activity for the years shown:

		Options		Weighted- Average Price		Options Exercisable	Weighted- Average Exercise Price
Balance—December 31, 2000		30,078,698		$	1.04	8,258,431	$	1.04
	Granted	5,453,665		$	1.04
	Exercised	(29,701	)	$	1.00
	Canceled	(9,948,715	)	$	1.03

Balance—December 31, 2001		25,553,947		$	1.04	12,053,811	$	1.04
	Granted	4,099,714		$	1.22
	Exercised	(2,700	)	$	1.00
	Canceled	(5,206,460	)	$	1.04

Balance—December 31, 2002		24,444,501		$	1.07	14,323,614	$	1.07
	Granted	12,080,206		$	1.09
	Exercised	(11,924	)	$	1.03
	Canceled	(4,375,491	)	$	1.05

Balance—December 31, 2003		32,137,292		$	1.08	18,221,149	$	1.08

The following table summarizes information for options outstanding at December 31, 2003:

Range of Prices	Options Outstanding	Weighted- Average Remaining Life (Years)	Weighted- Average Exercise Price		Options Exercisable
$1.00	16,657,228	6.15	$	1.00	13,891,466
$1.09	10,744,027	9.43	$	1.09	2,001,810
$1.30	2,587,432	8.33	$	1.30	1,298,693
$1.36	2,148,605	6.44	$	1.36	1,019,219

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	2003			2002			2001
Dividend yield		0	%		0	%		0	%
Expected volatility		0	%		0	%		0	%
Risk-free interest rates		4.01	%		4.00	%		5.02	%
Expected lives		4 years			4 years			4 years
Weighted-average fair value of options granted	$	0.06		$	0.09		$	0.11

13. Business Segments

In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company has three reportable segments: Americas, Europe and Asia Pacific. The Company believes these segments do not meet the economically similar criteria requirements of SFAS No. 131, and, therefore, are separate reportable segments. The Company sells similar products in the

local markets, including CRT displays, LCD displays, projectors, plasma displays, HDTV technology and the latest in mobile products from Tablet PCs to wireless monitors. The types and class of customers, primarily distributors and retailers, are also similar across the product lines. The Company has two major products—visual displays (CRT and LCD computer monitors) and other products. Both products are sold to all of its markets. The Company's other products combined make-up 9.2% of units sold in 2003, 1.8% in 2002 and .4% in 2001.

The following segment financial information is for the years ended December 31 (in thousands):

		2003			2002			2001
Net sales:
	Americas	$	667,638		$	614,905		$	653,342
	Europe		179,910			126,009			152,984
	Asia Pacific		227,136			143,130			156,033

		$	1,074,684		$	884,044		$	962,359

Income (loss) from operations:
	Americas	$	5,798		$	23,409		$	(6,129	)
	Europe		9,010			3,345			(8,477	)
	Asia Pacific		(591	)		(2,735	)		(3,187	)
	Stockholders' complaint settlement (Note 10)		(9,810	)

		$	4,407		$	24,019		$	(17,793	)

Assets:
	Americas	$	259,820		$	277,744		$	212,289
	Europe		73,621			43,685			54,647
	Asia Pacific		81,488			55,469			71,987

		$	414,929		$	376,898		$	338,923

Depreciation and amortization:
	Americas	$	2,168		$	3,826		$	5,321
	Europe		351			500			1,178
	Asia Pacific		1,430			1,143			615

		$	3,949		$	5,469		$	7,114

Capital additions:
	Americas	$	1,985		$	2,056		$	3,190
	Europe		147			316			79
	Asia Pacific		1,727			804			7,569

		$	3,859		$	3,176		$	10,838

The Company's goodwill is recorded in the United States. The inter-geographical sales were immaterial for the years ended December 31, 2003, 2002 and 2001. The following table summarizes the

Company's net sales and long-lived assets in different geographical locations for the years ended December 31 (in thousands):

		2003		2002		2001
Net sales:
	United States	$	586,204	$	554,854	$	574,994
	Taiwan		91,237		85,505		78,787
	Others		397,243		243,685		308,578

		$	1,074,684	$	884,044	$	962,359

Long-lived assets:
	United States	$	10,536	$	10,821	$	13,322
	Taiwan		11,726		12,012		11,132
	Others		1,217		1,243		1,511

		$	23,479	$	24,076	$	25,965

14. Warranty

The Company provides product warranty programs on a worldwide basis that vary in term from 12 to 36 months. The length of the warranty period and the specific warranty coverage are based on the type of product. The Company accrues for estimated warranty costs at the time the product is sold, and such amounts are based upon historical experience. The historical data that determines the warranty accrual and the overall estimate of the warranty reserve includes the following key factors: net cost of repair (repair costs less reimbursements from suppliers), defective rates and total number of products under warranty. The following table summarizes the Company's activity in the warranty reserve for the years shown (in thousands):

	Beginning Accrued Warranty Reserve		Payments for Units Returned			Additional Warranty Expense for Units Sold		Warranty Reserve Adjustments			Ending Accrued Warranty Reserve
December 31, 2001	$	32,057	$	(21,531	)	$	23,950	$	(4,938	)	$	29,538
December 31, 2002	$	29,538	$	(15,036	)	$	13,019	$	(13,268	)	$	14,253
December 31, 2003	$	14,253	$	(11,363	)	$	10,596	$	1,220		$	14,706

The warranty reserve adjustments in 2002 and 2001 reflect a reduction in the reserve mainly due to lower net repair costs as a result of moving to a supplier managed repair program in late 2001. Prior to late 2001, ViewSonic internally managed its warranty program. In late 2001, ViewSonic introduced the supplier managed repair program, or SMRP, under which ViewSonic outsourced its repair process. The program has reduced ViewSonic's overall costs for warranty repair. Under SMRP, warrantied units are repaired by third-party repair centers. The repair centers are directly reimbursed by ViewSonic's contract manufacturers. The impact on earnings per share (basic and diluted) related to the warranty reserve adjustments totaled $0.00 and an increase of $0.04, $0.01 for the years ended December 31, 2003, 2002 and 2001, respectively. In addition, other contributing factors for the reduction include a lower number of total products under warranty due to lower sales and the Company's improved process in collecting its reimbursements for repairs from the suppliers.

15. Earnings Per Share

The Company presents both basic and diluted earnings (loss) per share (EPS) amounts. Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted number of common shares outstanding during the year. Diluted EPS amounts are based upon the weighted-average number of common and potential common shares outstanding during the year. Potential common shares are excluded from the computation in periods in which they have an anti-dilutive effect. Amounts are for the years ended December 31 (amounts in thousands, except per share information).

			2003		2002		2001
Basic EPS:
	Numerator—net income (loss) available to common stockholders		$	3,253	$	18,113	$	(19,197	)
	Denominator—weighted-average shares outstanding			353,891		353,322		342,799
Basic EPS			$	0.01	$	0.05	$	(0.06	)
Diluted EPS:
	Numerator:
		Net income (loss) available to common stockholders	$	3,253	$	18,113	$	(19,197	)
	Denominator:
		Weighted-average shares outstanding		353,891		353,322		(a	)
		Stock options		1,373		4,744
		Interest warrants		3,270		3,275

Total shares				358,534		361,341

Diluted EPS			$	0.01	$	0.05	$	(0.06	)

(a): Potential common shares are excluded from the computation in 2001, as they have an anti-dilutive effect.

ViewSonic Corporation and Subsidiaries

Schedule II—Valuation and Qualifying Accounts

The following table summarizes the Company's activity in the promotional allowances as of December 31 (in thousands):

		ViewSonic Consolidated
		2003			2002			2001
*Accrued Promotional Expenses*
	Balance, beginning of	$	20,930		$	20,635		$	33,863
	Additions to allowance(1)	$	81,650		$	79,575		$	88,909
	Deductions net of recoveries	$	(86,801	)	$	(79,280	)	$	(102,137	)

	Balance, end of period	$	15,779		$	20,930		$	20,635

(1)

The addition to the allowance consists of promotional expenses as described below:

a): Expected lost margin on product returns, a component of total returns, which is netted against gross sales to determine the net sales presented within the income statement
b): Account development funds presented in SG&A on the income statement
c): Freight allowance presented in cost of sales within the income statement
d): Excludes certain sales allowance expense net of off-invoice discounts, cash discounts and miscellaneous allowances which are recorded against accounts receivable.

The following table summarizes the Company's activity in the accounts receivable allowance as of December 31 (in thousands).

		ViewSonic Consolidated
		2003		2002			2001
*Allowance for Doubtful Accounts*
	Balance, beginning of	$	2,896	$	6,181		$	8,580
	Additions to allowance	$	1,228	$	618		$	1,028
	Deductions net of recoveries	$	68	$	(3,903	)	$	(3,427	)

Balance, end of period		$	4,192	$	2,896		$	6,181

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on June 25, 2004.

		VIEWSONIC CORPORATION
		By:	/s/ JAMES CHU James Chu Chairman of the Board of Directors and Chief Executive Officer

EXHIBIT INDEX

Exhibit Number		Description of Document
3.1	*	Amended and Restated Certificate of Incorporation.
3.2	*	Amended and Restated Bylaws.
4.1	*	Reference is made to Exhibits 3.1 and 3.2.
4.2	*	1999 Stock Plan.
4.3	*	Form of Non-Qualified Stock Option Agreement pursuant to the 1999 Stock Plan.
4.4	*	Specimen Stock Certificate.
10.1	*	Form of Indemnity Agreement.
10.2	*	Amended and Restated Investor Rights Agreement, dated December 5, 2003.
10.3	*	Subordinated Promissory Note, issued to James Chu, dated December 1, 2001.
10.4	*	Subordinated Promissory Note, issued to Keypoint Investments, L.P., dated December 1, 2001.
10.5	*	Severance Agreement between ViewSonic Corporation and Joseph Marc McConnaughey, dated October 10, 2003.
10.6	*	Financing Agreement between ViewSonic Corporation and The CIT Group/Business Credit Inc., dated December 18, 2001.
10.7	*	Build to Suit Industrial Lease between ViewSonic Corporation and Catellus Development Corporation, dated June 25, 1996.
10.8	*	First Amendment to Lease between ViewSonic Corporation and Catellus Development Corporation, dated December 18, 1998.
10.9	*	Second Amendment to Lease between ViewSonic Corporation and Catellus Development Corporation, dated March 6, 2002.
21.1	*	List of Registrant's Subsidiaries.