Alliance Fiber Optic Products DEF 14A Definitive proxy

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO.___)

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Alliance Fiber Optic Products, Inc.

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ALLIANCE FIBER OPTIC PRODUCTS, INC.
275 GIBRALTAR DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 736-6900

April 20, 2012

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of Alliance Fiber Optic Products, Inc. that will be held on Friday, May 18, 2012, at 2:00 p.m., Pacific Daylight Time, at the Company’s principal executive office, 275 Gibraltar Drive, Sunnyvale, California 94089.

The formal notice of the Annual Meeting and the Proxy Statement has been made a part of this invitation.

After reading the Proxy Statement, please mark, date, sign and return, at your earliest convenience, the enclosed proxy in the enclosed prepaid envelope, to ensure that your shares will be represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY, VOTE YOUR SHARES AS DIRECTED BY YOUR BROKER OR ATTEND THE ANNUAL MEETING IN PERSON. Your vote is important, so please vote promptly.

A copy of our 2011 Annual Report to Stockholders is also enclosed.

We look forward to seeing you at the meeting.

	Sincerely yours,


	/s/ Peter C. Chang


	Peter C. Chang
	Chairman, President and
	Chief Executive Officer

ALLIANCE FIBER OPTIC PRODUCTS, INC.
__________________

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 18, 2012
__________________

To the Stockholders of Alliance Fiber Optic Products, Inc.:

The Annual Meeting of Stockholders of Alliance Fiber Optic Products, Inc., a Delaware corporation (the “Company”), will be held at the Company’s principal executive office, 275 Gibraltar Drive, Sunnyvale, California 94089, on Friday, May 18, 2012, at 2:00 p.m., Pacific Daylight Time, for the following purposes:

	1.		To elect two Class III directors to serve until the 2015 Annual Meeting of Stockholders or until their successors are duly elected and qualified;

	2.		To ratify the appointment of Marcum LLP, as the Company’s independent registered public accountant for 2012; and

	3.		To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement of the Annual Meeting.

Stockholders of record as of the close of business on March 26, 2012 are entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. A complete list of stockholders entitled to vote at the Annual Meeting will be available at the Secretary’s office, 275 Gibraltar Drive, Sunnyvale, California 94089, for ten days before the meeting.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be held on May 18, 2012.

The Proxy Statement and Annual Report are available at
http://www.afop.com/investors

It is important that your shares are represented at the Annual Meeting. Even if you plan to attend the meeting, we hope that you will promptly vote.

	By Order of the Board of Directors

	/s/ Peter C. Chang

	Peter C. Chang
	Secretary

April 20, 2012

ALLIANCE FIBER OPTIC PRODUCTS, INC.
275 Gibraltar Drive
Sunnyvale, California 94089
(408) 736-6900
__________________

PROXY STATEMENT
__________________

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of Alliance Fiber Optic Products, Inc., a Delaware corporation (the “Company”), of proxies in the accompanying form to be used at the Annual Meeting of Stockholders of the Company to be held at the Company’s principal executive office, 275 Gibraltar Drive, Sunnyvale, California, 94089, on Friday, May 18, 2012, at 2:00 p.m., Pacific Daylight Time, and any postponement or adjournment thereof (the “Annual Meeting”).

Revocation of Proxies

The shares represented by the proxies received in response to this solicitation and not properly revoked will be voted at the Annual Meeting in accordance with the instructions therein. A stockholder who has given a proxy may revoke it at any time before it is exercised by filing with the Secretary of the Company a written revocation, by submitting a duly executed proxy bearing a later date, or by voting in person at the Annual Meeting. If your shares are held by a broker, bank or other stockholder of record, in nominee name or otherwise, exercising fiduciary powers (typically referred to as being held in “street name”), and you wish to vote at the Annual Meeting, you must obtain and bring to the Annual Meeting a proxy card issued in your name from the broker, bank or other nominee. On the matters coming before the Annual Meeting for which a choice has been specified by a stockholder, the shares will be voted accordingly. If no choice is specified, the shares will be voted“FOR” the election of the nominees for director listed in this Proxy Statement, and “FOR” the approval of the ratification of the Company’s independent registered public accountant.

Who Can Vote

Stockholders of record at the close of business on March 26, 2012 (the “Record Date”), are entitled to vote at the Annual Meeting. As of the Record Date, there were 8,809,990 shares of common stock, $0.001 par value (the “Common Stock”), outstanding. The presence in person or by proxy of the holders of a majority of the outstanding Common Stock constitutes a quorum for the transaction of business at the Annual Meeting. Each holder of Common Stock is entitled to one vote for each share held as of the Record Date.

Required Vote

Directors are elected by a plurality vote. The nominees for director who receive the most votes cast in their favor will be elected to serve as a director. The other proposals submitted for stockholder approval at the Annual Meeting will be decided by the affirmative vote of the majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposals. Abstentions with respect to any proposal are treated as shares present or represented and entitled to vote on that proposal and thus have the same effect as negative votes. If a broker which is the record holder of shares indicates on a proxy that it does not have discretionary authority to vote on a particular proposal as to such shares, or if shares are not voted in other circumstances in which proxy authority is defective or has been withheld with respect to a particular proposal, these non-voted shares will be counted for quorum purposes, but are not deemed to be present or represented for purposes of determining whether stockholder approval of that proposal has been obtained. Under the rules that govern brokers, brokers do not have discretionary authority to vote on the election of directors. Brokers do have discretionary authority to vote on the ratification of our auditors.

How to Vote

If you are a stockholder with shares registered in your name, you may vote by one of the following methods:

Vote via the Internet.Go to the web addresswww.Proxyvote.com.and follow the instructions for Internet voting shown on the proxy card mailed to you. If you vote via the Internet, you should be aware that there may be incidental costs associated with electronic access, such as your usage charges from your Internet access providers and telephone companies, for which you will be responsible.
Vote by proxy card mailed to you.If you do not wish to vote by the Internet, please complete, sign, date and mail the proxy in the envelope provided. If you vote via the Internet, please do not mail your proxy.

If your shares are held in street name, you may receive a separate voting instruction form with this Proxy Statement, or you may need to contact your broker, bank or other stockholder of record to determine whether you will be able to vote electronically via the Internet or by telephone.

This Proxy Statement and the accompanying form of proxy are being mailed to stockholders on or about April 20, 2012.

IMPORTANT

Please vote electronically or mark, sign and date the enclosed proxy and return it at your earliest convenience in the enclosed postage-prepaid return envelope so that, whether you intend to be present at the Annual Meeting or not, your shares can be voted.

PROPOSAL 1

ELECTION OF DIRECTORS

Directors and Nominee

Pursuant to Article VI of the Company’s Amended and Restated Certificate of Incorporation, the Board of Directors is divided into three classes, with each class elected for a 3-year term. The number of directors is currently set at five. Class I and Class III consist of two directors each, and Class II consists of one director. Two Class III directors will be elected at the Annual Meeting and will serve until the 2015 Annual Meeting. The Class I directors will continue to serve until the 2013 Annual Meeting and the Class II director will continue to serve until the 2014 Annual Meeting.

The Nominating and Corporate Governance Committee of the Board of Directors has recommended, and the Board of Directors has designated, Mr. Gwong-Yih Lee and Mr. James C. Yeh as the nominees to fill the Class III director seats to serve until the 2015 Annual Meeting. If either nominee is unable or declines to serve as a director at the time of the Annual Meeting, an event not now anticipated, proxies will be voted for any nominees designated by the Board of Directors, taking into account any recommendations of the Nominating and Corporate Governance Committee, to fill the vacancies.

Biographical information concerning the nominees is set forth below.

CLASS III

Gwong-Yih Lee, 57, has served as a director since August 2000. Since August 2006, Mr. Lee has served as Chairman and Chief Executive Officer of CyberTAN Technology, Inc., a networking company listed on the Taiwan Stock Market. In addition, since September 2005, Mr. Lee has served as the Founder and President and Chief Executive Officer of ApaceWave Technologies, Inc., a broadband wireless company. From September 1999 to January 2004, Mr. Lee served as Senior Director and General Manager at Cisco Systems, Inc. In March 1998, Mr. Lee established TransMedia Communications, a communication equipment company, and served as its President and Chief Executive Officer until September 1999, when TransMedia Communications was acquired by Cisco. Mr. Lee received a B.S. in Control Engineering from National Chiao-Tung University in Taiwan and an M.S. in Electrical Engineering from New York University. We believe Mr. Lee’s qualifications to serve on our Board include his experience running private technology companies and his managerial experience at Cisco and CyberTan Technology, Inc.

James C. Yeh, 55, has served as a director since our formation in December 1995. Since April 2005, Mr. Yeh has served as Managing Director of Blazee International, an imaging processing applications company. In addition, since January 1991, Mr. Yeh has served as President of Matics Computer Systems, Inc., a personal computer systems and peripherals company. Mr. Yeh holds a B.S. in Mathematics from Tamkang University and an M.S. in Systems Science and Mathematics from Washington University in Saint Louis, Missouri. We believe Mr. Yeh’s qualifications to serve on our Board include his operational and management experience with technology companies.

Biographical information concerning the remaining members of the Board of Directors is set forth below.

CLASS I

Peter C. Chang, 54, has served as our Chairman of the Board, Chief Executive Officer and President since our formation in December 1995. From 1990 to 1995, Mr. Chang was Division Manager at Hon Hai Holding, a fiber optics company, and from 1988 to 1990 was a member of the technology staff at Lucent Bell Labs. Mr. Chang received a B.S. in Mechanical Engineering from National Taiwan University and an M.S. in Mechanical Engineering from Notre Dame University. We believe Mr. Chang’s qualifications to serve on our Board include his extensive industry expertise and his experience as our Chief Executive Officer and President.

Richard Black, 78, has served as a director since April 2003. Since March 2002, Mr. Black has served as the President, Chief Executive Officer, director and majority owner of ECRM, Inc., a worldwide supplier of electronic laser imaging devices for the publishing and graphic arts industries. From August 1983 to March 2002, Mr. Black served as the Chairman and director of ECRM, Inc. He served as President of Oak Technology Inc., a semiconductor company, from January 1998 to March 1999, as Vice Chairman from March 1999 to August 2003 and as a director from 1988 to 2003. Until July 2010, Mr. Black served as the Chairman of the board of directors of GSI Group Inc., a manufacturer of laser systems and precision motion components, and he served on the GSI Board since 1999. Mr. Black also serves on the boards of several private companies. In addition, from 2002 to 2007, Mr. Black served on the board of directors of Altigen Communications, Inc., a manufacturer of VoIP telephone systems and unified communications systems. Mr. Black holds a B.S. in Engineering from Texas A&M University and an M.B.A. from Harvard University. We believe Mr. Black’s qualifications to serve on our Board include his operational and management expertise, his experience as both a director and chairman of the board of other public companies, and his finance skills.

CLASS II

Ray Sun, 60, has served as a director since November 2003. Mr. Sun served as Managing Director, Business Development and Venture Investment (greater China) of Applied Materials China, a semiconductor equipment company, from November 2001 to February 2009. He has been retired since February 2009. Mr. Sun served as a representative of the Silicon Valley office for a Taiwanese venture firm, Global Investment Management Co. LTD. from October 1999 to November 2001. Mr. Sun has more than 20 years of executive management experience in the software, hardware and telecommunications industries. Mr. Sun received a B.S. in Industrial Engineering from Chung Yuan Christian University in Taiwan, and an M.S. in Industrial Engineering from Kansas State University. We believe Mr. Sun’s qualifications to serve on our Board include his business development and investment expertise and his experience in executive management for a broad array of technology-based businesses.

The Board of Directors recommends a vote “FOR” the election of Mr. Gwong-Yih Lee and Mr. James C. Yeh as the Class III Directors of the Company.

Board Structure, Independence, Meetings and Committees

Our Board believes that having a combined Chairman of the Board and Chief Executive Officer is the most effective leadership structure for our company at this time. The Board believes that Mr. Chang is the director best situated to identify strategic opportunities and focus the activities of the Board due to his full-time commitment to the business and his company-specific experience. The Board also believes that the combined role of Chairman and Chief Executive Officer promotes effective execution of strategic imperatives and facilitates information flow between management and the Board.

The Board of Directors held four meetings during 2011. All directors attended at least 75% of the aggregate number of meetings of the Board of Directors and of the committees on which each such director serves. The independent directors meet in regularly scheduled executive sessions at in-person meetings of the Board without the participation of the Chief Executive Officer or the other members of management. In 2011, one director attended the annual meeting. We do not have a policy requiring directors to attend our annual meetings.

The Board of Directors has determined that, except for Mr. Chang, all of the members of the Board are “independent directors” within the meaning of Rule 4200 of The NASDAQ Stock Market. Mr. Chang is not considered independent because he is employed by the Company as its President and Chief Executive Officer. All of the nominees are members of the Board standing for reelection. For all of the non-employee directors, the Board considered their relationship and transactions with the Company as directors and as security holders of the Company.

The Board of Directors has appointed an Executive Compensation Committee, an AuditCommittee and a Nominating and Corporate Governance Committee. The Board has approved a charter for each of these committees. Copies of the charters of the Audit Committee, Nominating and Corporate Governance Committee and Executive Compensation Committee are available through our website atwww.afop.com. The Board has also appointed a Non-Executive Compensation Committee.

The Board is actively involved in the oversight of risks that could affect our business and operations, while management is responsible for day-to-day risk management. The Board administers this oversight function directly through the Board as a whole, as well as through Audit and Nominating and Corporate Governance committees of the Board, as disclosed in the descriptions of each below and in their respective committee charters.

Executive Compensation
Committee

Number of Members:		Three

Members:		Mr. Sun (Chairman) Mr. Black Mr. Lee

Number of Meetings:		One

Functions:		The Executive Compensation Committee’s primary functions are to assist the Board in meeting its responsibilities with regard to oversight and determination of executive compensation and to review and make recommendations to the Board with respect to major compensation plans, policies and programs of the Company. Other specific duties and responsibilities of the Executive Compensation Committee are to review, and make recommendations for approval by the independent members of the Board regarding, the compensation for the Chief Executive Officer and other executive officers of the Company, establish and modify the terms and conditions of employment of the Chief Executive Officer and other executive officers of the Company and administer the Company’s stock plans and other compensation plans.

*Audit Committee*

Number of Members:		Three

Members:		Mr. Black (Chairman) Mr. Sun Mr. Yeh

Number of Meetings:		Four

Functions:		The Audit Committee’s primary functions are to assist the Board of Directors in fulfilling its oversight responsibilities relating to the Company’s financial statements, system of internal controls, and auditing, accounting and financial reporting processes. Other specific duties and responsibilities of the Audit Committee are to appoint, compensate, evaluate and, when appropriate, replace the Company’s independent auditors; review and pre-approve audit and permissible non-audit services; review the scope of the annual audit; monitor the independent auditors’ relationship with the Company; and meet with the independent auditors and management to discuss and review the Company’s financial statements, internal controls, and auditing, accounting and financial reporting processes. Mr. Black is the Audit Committee financial expert.

Nominating and Corporate Governance Committee

Number of Members:		Three

Members:		Mr. Black (Chairman) Mr. Sun Mr. Yeh

Number of Meetings:		One

Functions:		The Nominating and Corporate Governance Committee’s primary functions are to identify qualified individuals to become members of the Board of Directors and determine the composition of the Board and its committees. Other specific duties and responsibilities are to recommend nominees to fill vacancies on the Board, investigate suggestions for candidates for membership on the Board, and monitor compliance with Board and Board committee membership criteria.

Non-Executive Compensation Committee

Mr. Chang currently serves as the sole member of the Non-Executive Compensation Committee. The Non-Executive Compensation Committee is a secondary committee responsible for granting and issuing awards under the 2000 Stock Incentive Plan, as amended and restated, to eligible employees, other than to members of the Board of Directors, to individuals designated by the Board of Directors as “Section 16 officers,” and to employees who hold the title of Vice President or above.

Director Nominations

The Board of Directors nominates a class of directors for election at each annual meeting of stockholders and elects new directors to fill vacancies when they arise. The Nominating and Corporate Governance Committee has the responsibility to identify, evaluate, recruit and recommend qualified candidates to the Board of Directors for nomination or election.

The Board of Directors has an objective that its membership is composed of experienced and dedicated individuals with diversity of backgrounds, perspectives and skills. The Nominating and Corporate Governance Committee will select candidates for director based on their character, judgment, and diversity of experience, business acumen, and ability to act on behalf of all stockholders. The Nominating and Corporate Governance Committee believes that nominees for director should have experience, such as experience in management or accounting and finance, or industry and technology knowledge, that may be useful to the Company and the Board, high personal and professional ethics, and the willingness and ability to devote sufficient time to effectively carry out his or her duties as a director. While diversity is among the qualifications that may be considered, the Committee does not have a formal diversity policy. The Nominating and Corporate Governance Committee believes it is appropriate for at least one, and, preferably, multiple, members of the Board to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and for a majority of the members of the Board to meet the definition of “independent director” under the rules of The NASDAQ Stock Market. The Nominating and Corporate Governance Committee also believes it is appropriate for certain key members of the Company’s management to participate as members of the Board.

Prior to each annual meeting of stockholders, the Nominating and Corporate Governance Committee identifies nominees first by evaluating the current directors whose term will expire at the annual meeting and who are willing to continue in service. These candidates are evaluated based on the criteria described above, including as demonstrated by the candidate’s prior service as a director, and the needs of the Board with respect to the particular talents and experience of its directors. In the event that a director does not wish to continue in service, the Nominating and Corporate Governance Committee determines not to re-nominate the director, or a vacancy is created on the Board as a result of a resignation, an increase in the size of the board or other event, the Committee will consider various candidates for Board membership, including those suggested by the Committee members, by other Board members, by any executive search firm engaged by the Committee and by stockholders. A stockholder who wishes to suggest a prospective nominee for the Board should notify the Secretary of the Company or any member of the Committee in writing with any supporting material the stockholder considers appropriate.

In addition, the Company’s Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the Board of Directors at the Company’s Annual Meeting of Stockholders. In order to nominate a candidate for director, a stockholder must give timely notice in writing to the Secretary of the Company and otherwise comply with the provisions of the Company’s Bylaws. To be timely, the Company’s Bylaws provide that the Company must have received the stockholder’s notice no less than 60 days nor more than 90 days prior to the scheduled date of the meeting. However, if notice or prior public disclosure of the date of the annual meeting is given or made to stockholders less than 75 days prior to the meeting date, the Company must receive the stockholder’s notice by the earlier of (i) the close of business on the 15th day after the earlier of the day the Company mailed notice of the annual meeting date or provided public disclosure of the meeting date and (ii) two days prior to the scheduled date of the annual meeting. Information required by the Bylaws to be in the notice include the name and contact information for the candidate and the person making the nomination and other information about the nominee that must be disclosed in proxy solicitations under Section 14 of the Securities Exchange Act of 1934 and the related rules and regulations under that Section.

Stockholder nominations must be made in accordance with the procedures outlined in, and include the information required by, the Company’s Bylaws and must be addressed to: Secretary, Alliance Fiber Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale, California 94089. You can obtain a copy of the Company’s Bylaws by writing to the Secretary at this address.

Stockholder Communications with the Board of Directors

If you wish to communicate with the Board of Directors, you may send your communication in writing to: Secretary, Alliance Fiber Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale, California 94089. You must include your name and address in the written communication and indicate whether you are a stockholder of the Company. The Secretary will review any communication received from a stockholder, and all material communications from stockholders will be forwarded to the appropriate director or directors or committee of the Board based on the subject matter.

2011 Director Compensation

The following table set forth cash amounts and the value of other compensation for the Company’s non-employee directors during 2011:

	Fees Earned or	Option Awards
Name	Paid in Cash ($)	($)(1)(2)	Total ($)
Richard Black	16,000	-	16,000
Gwong-Yih Lee	6,000	-	6,000
Ray Sun	13,200	-	13,200
James Yeh	13,200	-	13,200

	(1)		Represents the aggregate fair value of options to purchase our Common Stock computed as of the grant date of each option in accordance with the Financial Accounting Standards Board Accounting Codification Topic 718, or ASC 718, rather than amounts paid to or realized by the named individual. There can be no assurance that options will be exercised (in which case no value will be realized by the individual) or that the value on exercise will approximate the fair value as computed in accordance with ASC 718.

	(2)		The following table sets forth the aggregate number of shares of Common Stock underlying option awards outstanding at December 31, 2011:

Name		Number of Shares
Richard Black		12,000
Gwong-Yih Lee		18,000
Ray Sun		18,000
James Yeh		11,000

The Company’s non-employee directors received $4,000 cash compensation for each Board meeting attended (or $2,000 cash compensation for attending telephonically), $2,600 cash compensation for each Audit Committee meeting attended (or $1,300 cash compensation for attending telephonically), $4,000 cash compensation for the Chairman of Audit Committee for each Audit Committee meeting attended (or $2,000 cash compensation for attending telephonically), and are reimbursed for reasonable expenses in connection with attendance at meetings of the Board of Directors and committee meetings. Directors who are our employees do not receive any fees for their service on our Board.

Directors who are not employees receive an initial grant of an option to purchase 6,000 shares of Common Stock at the fair market value of the Common Stock on the date of grant, which vests ratably over 36 months. This initial grant is made on the first business day following election to the Board. On the first business day following the third anniversary of the date of grant of the initial option, each non-employee director is entitled to receive an option to purchase 6,000 shares of Common Stock at the fair market value of the Common Stock on the date of grant, which option vests ratably over 36 months. The options granted to our outside directors have a per share exercise price equal to 100% of the fair market value of the underlying shares on the date of grant, have a term of 10 years and automatically become fully vested in the event of a change in control. In 2011, no options were granted to our outside directors.

Certain Relationships and Related Transactions

It is our policy that all employees, officers and directors must avoid any activity that is or has the appearance of conflicting with the interests of the Company. This policy is included in our Code of Conduct and Business Ethics.We conduct a review of all related party transactions for potential conflict of interest situations on an ongoing basis and all such transactions relating to executive officers and directors must be approved by the independent and disinterested members of our Board of Directors or an independent and disinterested committee of the Board.

According to share ownership numbers contained in a Schedule 13G filed in 2002 and not subsequently amended, Foxconn Holding Limited (“Foxconn”) was a holder of 18.2% of our Common Stock. In the normal course of business, we sell products to and purchase raw materials from Hon Hai Precision Industry Co., Ltd. (“Hon Hai”), who is the parent company of Foxconn. These transactions were made at prices and terms consistent with transactions with unrelated third parties. For fiscal 2011, sales of products to Hon Hai were $0.02 million, purchases of raw materials from Hon Hai were $1.3 million and no amounts were due from Hon Hai. As of December 31, 2011, amounts due to Hon Hai were $0.4 million. For fiscal 2010, sales of products to Hon Hai were $0.004 million, purchases of raw materials from Hon Hai were $2.3 million and the amount due from Hon Hai was not material. As of December 31, 2010, amounts due to Hon Hai were $0.5 million.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 26, 2012, as to shares of the Common Stock beneficially owned by: (1) each person who is known by the Company to own beneficially more than 5% of its Common Stock, (2) each of our directors, (3) each of our executive officers named in the Summary Compensation Table, and (4) all of our directors and executive officers as a group. Ownership information is based upon information furnished by the respective individuals or entities, as the case may be. Unless otherwise noted below, the address of each beneficial owner is c/o Alliance Fiber Optic Products, Inc., 275 Gibraltar Drive, Sunnyvale, California 94089. The percentage of Common Stock beneficially owned is based on 8,809,990 shares of Common Stock outstanding as of March 26, 2012. In addition, shares issuable pursuant to options which may be exercised and restricted stock units, or RSUs, which vest within 60 days of March 26, 2012 are deemed to be issued and outstanding and have been treated as outstanding in calculating the percentage ownership of those individuals possessing such interest, but not for any other individuals. Thus, the number of shares considered to be outstanding for the purposes of this table may vary depending on the individual’s particular circumstances.

		Number of Shares	Percentage of
		of Common Stock	Common Stock
Name and Address of Beneficial Owner		Beneficially Owned (1)	Beneficially Owned
Directors and Named Executive Officers:
	Peter C. Chang (2)	1,281,320	14.1	%
	Richard Black (3)	18,000	*
	Gwong-Yih Lee (4)	21,166	*
	Ray Sun (5)	17,166	*
	James C. Yeh (6)	167,166	1.9
	David A. Hubbard (7)	144,347	1.6
	Wei-Shin Tsay (8)	137,037	1.5
	Anita K. Ho (9)	55,150	*
5%	Stockholder:
	Foxconn Holding Limited (10)	1,600,000	18.2
All Directors and Executive Officers as a group (8 persons) (11)		1,841,352	19.6

* Represents less than 1%.

(1)		To the Company’s knowledge, except as otherwise disclosed, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the notes to this table.

(2)		Includes 8,000 shares held in the name of Mr. Chang’s minor children and 779,320 shares held in the name of the Chang Family LLC, of which Mr. Chang and his wife, Mary C. Chen, are the Managing Members. Also includes options to purchase 250,000 shares exercisable within 60 days of March 26, 2012 and 40,000 shares underlying RSUs that vest on May 1, 2012.

(3)		Includes options to purchase 12,000 shares exercisable within 60 days of March 26, 2012.

(4)		Includes 4,000 shares held in the name of the Lee Trust. Mr. Lee and his wife, Angela Lee, as trustees, have dispositive and voting power for the shares held by the Lee Trust. Also includes options to purchase 17,166 shares exercisable within 60 days of March 26, 2012.

(5)		Represents options exercisable within 60 days of March 26, 2012.

(6)		Includes 160,000 shares held in the name of Matics Computer Systems, Inc., over which Mr. Yeh has voting power. Also includes options to purchase 7,166 shares exercisable within 60 days of March 26, 2012.

(7)		Includes options to purchase 84,000 shares exercisable within 60 days of March 26, 2012 and 15,000 shares underlying RSUs that vest on May 1, 2012.

(8)		Includes options to purchase 130,000 shares exercisable within 60 days of March 26, 2012.

(9)		Includes options to purchase 35,000 shares exercisable within 60 days of March 26, 2012 and 2,000 shares underlying RSUs that vest on May 1, 2012.

(10)		According to a Schedule 13G filed jointly on January 4, 2002 for the year ended December 31, 2000 by Hon Hai and Foxconn, each entity has shared voting and dispositive power over the 1,600,000 shares. As of the Record Date, no amendment to the Schedule 13G has been filed, and the information concerning the number of shares held and the ownership of the shares is as disclosed in the Schedule 13G. Foxconn is a subsidiary of Hon Hai. Hon Hai disclaims beneficial ownership of these shares. The principal business address for Hon Hai and Foxconn is 2 Tsu Yu Street, Tu Cheng City, Taipei Hsien, Taiwan, R.O.C. According to information provided by Hon Hai, the board of directors of Foxconn has dispositive power for the shares and has delegated voting power to Ms. Chiu-Lian Huang.

(11)		Includes 552,498 shares subject to options exercisable within 60 days of March 26, 2012 and 57,000 shares underlying RSUs that vest on May 1, 2012.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth compensation information for the cash amounts and the value of other compensation paid to our Chief Executive Officer and our three other most highly compensated executive officers for the years indicated.

						Non-Equity
				Stock	Option	Incentive Plan	All Other
				Awards	Awards	Compensation	Compensation
Name and Principal Position	Year	Salary ($)		($) (1)	($) (2)	($) (3)	($) (4)	Total ($)
Peter C. Chang	2011	259,731		247,658	90,620	33,000	1,690	632,699
Chief Executive Officer and President	2010	245,446		—	27,737	100,000	1,690	374,873

David A. Hubbard	2011	174,788		93,230	27,186	10,000	8,890	314,094
Executive Vice President,	2010	163,877		—	8,321	33,000	8,890	214,088
Sales and Marketing

Wei-shin Tsay	2011	74,595	(5)	—	—	—	1,990	76,585
Senior Vice President,	2010	165,908		—	—	24,000	2,290	192,198
Product Development

Anita K. Ho	2011	138,362		12,431	9,062	3,000	4,502	167,357
Acting Chief Financial Officer	2010	117,473		—	2,774	12,000	2,637	134,884

	(1)		Amount represents grant date fair value computed in accordance with ASC 718. The actual value that may be recognized by the individual will depend on the market value of our Common Stock on the dates that the RSUs vest.

	(2)		Amount represents grant date fair value computed in accordance with ASC 718. There can be no assurance that options will be exercised (in which case no value will be realized by the individual) or that the value on exercise will approximate the fair value as computed in accordance with ASC 718.

	(3)		Consisted of amounts earned during the 2011 and 2010 fiscal years and paid in the respective subsequent fiscal year.

	(4)		Consisted of Company contributions to the 401(k) of each individual, a monthly automobile allowance for Mr. Hubbard, and the value of insurance premiums paid by the Company.

	(5)		Dr. Tsay was on unpaid leave for a portion of the year.

We do not enter into employment or severance agreements with our executive officers as we do not believe these types of arrangements facilitate our compensation goals and objectives. Executive officers may participate in our employee stock purchase plan and purchase shares of our Common Stock at a discount to market prices. In addition, we match 50% of the first $2,000 of an employee's contribution to our 401(k) plan. Company contributions vest 25% per year from the date of employment.

Section 162(m) of the Internal Revenue Code provides that public companies cannot deduct non-performance based compensation paid to certain named executive officers in excess of $1 million per year. These officers include any employee who, as of the close of the taxable year, is the principal executive officer, and any employee whose total compensation for the taxable year is required to be reported to stockholders under the Securities Exchange Act of 1934 by reason of such employee being among the two highest compensated officers for that taxable year, other than the principal executive officer. We do not believe any of the non-exempt compensation we paid to any of our executive officers for fiscal 2011 exceeded the $1 million limit.

Bonus

In January 2001, the Executive Compensation Committee adopted an executive bonus plan. The Executive Compensation Committee reviews bonuses recommended by the Chief Executive Officer for executive officers other than the Chief Executive Officer. The Executive Compensation Committee’s philosophy is that a certain portion of executive officer compensation should be contingent upon the Company’s performance and an individual’s contribution to our success in meeting critical objectives. The Executive Compensation Committee sets the bonus potential of each executive officer on a case-by-case basis. Final decisions on bonuses for executives other than the Chief Executive Officer are made with the Chief Executive Officer’s involvement.

Stock Incentive Plan

We provide incentive compensation to our executive officers and employees through the grant of stock options and RSUs. The 2000 Stock Incentive Plan was adopted by the Board on September 7, 2000. The plan was amended and restated in 2010 to, among other things, extend the term under which awards may be granted under the plan until March 17, 2020, eliminate a 10 million share ceiling on the aggregate number of shares of Common Stock that be issued under the plan, and to include certain qualifying performance criteria and annual award limits so that awards granted under the plan qualify as “performance-based compensation” under the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended. The 2000 Stock Incentive Plan, as amended and restated, was approved by the stockholders on May 14, 2010. The Executive Compensation Committee is responsible for administering our 2000 Stock Incentive Plan for executive officers, under which it grants options to purchase our Common Stock with an exercise price equal to the closing price of our common stock on the date of grant, as well as RSUs. The Executive Compensation Committee believes that stock ownership by our executive officers aligns their interests with those of our stockholders and provides its executive officers with substantial motivation to manage the Company in accordance with those interests. Accordingly, a considerable portion of our executive officers’ compensation may consist of stock options and RSUs. When determining the size of an option or RSU grant to an executive officer, the Executive Compensation Committee, after consulting with the Chief Executive Officer, considers the executive officer’s and the Company’s performance, the executive officer’s level and responsibilities within the Company, the executive officer’s base salary and the size of option and RSU grants to executive officers in similar positions throughout the industry. Each executive officer is initially provided with an option grant when they join our Company based upon their position with us. These initial grants generally vest over four years and no shares vest before the one year anniversary of the option grant.

The option and RSU grants to the Chief Executive Officer are determined using the same criteria as for the other executive officers. In May 2011, the Executive Compensation Committee granted Mr. Chang 200,000 RSUs which vest annually over the next five years. In July 2010, the Executive Compensation Committee granted Mr. Chang an option to purchase 80,000 shares of the Company’s Common Stock, which vests annually over the next four years.

Outstanding Equity Awards at Fiscal Year-End

		Option Awards				Stock Awards
		Number of	Number of
		Securities	Securities			Number of		Market Value
		Underlying	Underlying			Shares or		of Shares or
		Unexercised	Unexercised	Option	Option	Units that		Units that
	Grant	Options	Options	Exercise	Expiration	have not		have not
Name	Date	Exercisable (#)	Unexercisable (#)	Price ($) (1)	Date	Vested (#)		Vested ($)(2)
Peter C. Chang	12/29/03	64,000	—	7.80	12/29/13
	12/02/04	40,000	—	4.80	12/02/14
	11/07/05	60,000	—	4.50	11/07/15
	11/27/06	56,000	—	10.10	11/27/16
	01/28/08	10,000	—	9.15	01/28/18
	07/23/10	20,000	60,000	7.95	07/23/20
	05/06/11	—	—			200,000	(3)	1,888,000

David A. Hubbard	12/29/03	20,000	—	7.80	12/29/13
	12/02/04	20,000	—	4.80	12/02/14
	11/07/05	20,000	—	4.50	11/07/15
	11/27/06	20,000	—	10.10	11/27/16
	01/28/08	4,000	—	9.15	01/28/18
	07/23/10	6,000	18,000	7.95	07/23/20
	05/06/11	—	—			30,000	(4)	283,200

Wei-shin Tsay	12/29/03	20,000	—	7.80	12/29/13
	11/12/04	60,000	—	4.55	11/12/14
	11/07/05	32,000	—	4.50	11/07/15
	11/27/06	24,000	—	10.10	11/27/16
	01/28/08	4,000	—	9.15	01/28/18

Anita K. Ho	12/02/04	8,000	—	4.80	12/02/14
	11/07/05	16,000	—	4.50	11/07/15
	11/27/06	8,000	—	10.10	11/27/16
	01/28/08	1,000	—	9.15	01/28/18
	07/23/10	2,000	6,000	7.95	07/23/20
	05/06/11	—	—			4,000	(4)	37,760

	(1)		The option exercise price is equal to the closing price of our Common Stock on the date of grant.

	(2)		Market value is equal to the closing price of our Common Stock on the date of grant.

	(3)		The RSUs vest over five years at a rate of 20 percent per year beginning May 1, 2012 and vest in full in the event of a change of control or termination due to death or involuntary discharge.

	(4)		The RSUs vest over two years at a rate of 50 percent per year beginning May 1, 2012.

Share amounts and exercise prices in the above table reflect a 1-for-5 reverse split of the common stock effected on August 27, 2010. All of the options in the above table have a term of ten years, subject to earlier termination in certain events related to termination of employment. Unvested options vest at a rate of 25% per year.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee operates under a written charter adopted by the Board of Directors on September 7, 2000, adopted by the Audit Committee on January 30, 2001 and amended by the Board of Directors on October 24, 2005. All members of the Audit Committee meet the independence standards established by The NASDAQ Stock Market.

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors and is responsible for providing independent, objective oversight of the Company’s accounting functions and internal control over financial reporting. The Audit Committee reviewed and discussed the audited financial statements contained in the 2011 Annual Report on Form 10-K with the Company’s management and its independent registered public accountants. Management is responsible for the financial statements and the reporting process, including the system of internal control over financial reporting. The independent registered public accountants are responsible for expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States.

The Audit Committee met privately with the independent registered public accountants, and has discussed issues deemed significant by them, including those required by AICPA, Professional Standards, Vol. 1. AU Section 380, as adopted by the Public Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee has received the written disclosure and the letter from the independent registered public accountants required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm such firm’s independence.

In reliance on the reviews and discussions outlined above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for filing with the Securities and Exchange Commission. The Audit Committee has appointed Marcum LLP to serve as our company’s independent registered public accounting firm for the 2012 fiscal year.

Audit Committee

Richard Black, Chairman
Ray Sun
James C. Yeh

PROPOSAL 2

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT

The Audit Committee has appointed the firm of Marcum LLP as the Company’s independent registered public accountant for the fiscal year ending December 31, 2012. On October 1, 2010, the Company’s independent registered public accounting firm, Stonefield Josephson, Inc., combined its practice with Marcum LLP. Stonefield Josephson, Inc. had audited the Company’s financial statements since April 2005. Representatives of Marcum LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions. Although stockholder ratification of the Company’s independent registered public accountants is not required by the Company’s Bylaws or otherwise, the Company is submitting the selection of Marcum LLP to its stockholders for ratification to permit stockholders to participate in this important corporate decision.

Principal Accountant Fees and Services

The following table presents fees for professional audit services rendered by Marcum LLP for the audit of our financial statements for 2011 and 2010. No fees were billed for other services.

	Year Ended December 31,
	2011	2010
Audit Fees	$254,519	$259,605
Audit-Related Fees	—	—
Tax Fees	—	—
All Other Fees	—	—
Total	$254,519	$259,605

Pre-Approval Policies and Procedures

It is the Company’s policy that all audit and non-audit services to be performed by the Company’s registered public accountants be approved in advance by the Audit Committee. The Audit Committee pre-approved all audit fees incurred in the year ended December 31, 2011.

Required Vote

Ratification will require the affirmative vote of a majority of the shares present and voting at the Annual Meeting in person or by proxy. In the event ratification is not obtained, the Audit Committee will review its future selection of the Company’s independent registered public accountant but will not be required to select different independent registered public accountants for the Company. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of our company and our stockholders.

The Board of Directors recommends a vote “FOR” ratification of Marcum LLP. as the Company’s independent registered public accountants.

STOCKHOLDER PROPOSALS FOR THE 2013 ANNUAL MEETING

Proposals of stockholders of the Company that are intended to be presented at the Company’s 2013 Annual Meeting must be received by the Secretary of the Company no later than December 21, 2012 in order that they may be included in the Company’s proxy statement and form of proxy relating to that meeting.

A stockholder proposal not included in the Company’s proxy statement for the 2013 Annual Meeting will be ineligible for presentation at the meeting unless the stockholder gives timely notice of the proposal in writing to the Secretary of the Company at the principal executive offices of the Company and otherwise complies with the provisions of the Company’s Bylaws. To be timely, the Bylaws provide that the Company must have received the stockholder’s notice not less than 60 days nor more than 90 days prior to the scheduled date of the meeting. However, if notice or prior public disclosure of the date of the annual meeting is given or made to stockholders less than 75 days prior to the meeting date, the Company must receive the stockholder’s notice by the earlier of (i) the close of business on the 15th day after the earlier of the day the Company mailed notice of the annual meeting date or provided public disclosure of the meeting date and (ii) two days prior to the scheduled date of the annual meeting.

PAYMENT OF COSTS

The expense of printing, mailing proxy materials and solicitation of proxies will be borne by the Company. In addition to the solicitation of proxies by mail, solicitation may be made by directors, officers and other employees of the Company by personal interview, telephone or facsimile. No additional compensation will be paid to such persons for such solicitation. The Company will reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation materials to beneficial owners of the Common Stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under the securities laws of the United States, the Company’s directors, executive officers and any persons holding more than 10% of the Company’s Common Stock are required to report their initial ownership of the Company’s Common Stock and any subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates for these reports have been established and the Company is required to identify in this Proxy Statement those persons who failed to timely file these reports. To the Company’s knowledge, based solely on a review of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 2011, all Section 16(a) filing requirements applicable to its officers and directors were met in a timely manner during fiscal year 2011 except that one Form 4 filed on May 6, 2011, by each of Peter C. Chang, David A. Hubbard and Anita K. Ho to report RSU grants were subsequently amended on February 10, 2012 to reflect that the RSUs are subject to vesting. The Company has no information with respect Section 16(a) compliance by Foxconn.

OTHER MATTERS

The Company knows of no other business that will be presented at the Annual Meeting. If any other business is properly brought before the Annual Meeting, it is intended that proxies in the enclosed form will be voted in accordance with the judgment of the persons voting the proxies.

Whether you intend to be present at the Annual Meeting or not, we urge you to return your signed proxy promptly.

By order of the Board of Directors

/s/Peter C. Chang

Peter C. Chang

Secretary

April 20, 2012

The Company’s 2011 Annual Report on Form 10-K has been mailed with this Proxy Statement. The Company will provide copies of exhibits to the Annual Report on Form 10-K, but will charge a reasonable fee per page to any requesting stockholder. Any such request should be addressed to the Company at 275 Gibraltar Drive, Sunnyvale, California 94089, Attention: Investor Relations Department. The request must include a representation by the stockholder that as of March 26, 2012, the stockholder was entitled to vote at the Annual Meeting.

PROXY

ALLIANCE FIBER OPTIC PRODUCTS, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby authorizes PETER C. CHANG and ANITA K. HO, as Proxies with full power in each to act without the other and with the full power of substitution in each, to represent and to vote all the shares of common stock the undersigned is entitled to vote at the Annual Meeting of Stockholders of Alliance Fiber Optic Products, Inc. (the “Company”) to be held at the Company’s headquarters, 275 Gibraltar Drive, Sunnyvale, California, 94089 on May 18, 2012 at 2 p.m., or at any postponement or adjournment thereof, and instructs said Proxies to vote as follows:

Shares represented by this proxy will be voted as directed by the stockholder.If no such directions are indicated, the Proxies intend to vote FOR the election of all nominees for director, FOR Proposal 2, and in accordance with the discretion of the Proxies on any other matters as may properly come before the Annual Meeting.

SEE REVERSE
SIDE

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

SEE REVERSE
SIDE

Please mark
votes as in
this example.

The Board of Directors recommends a vote FOR the election of the directors and FOR Proposal 2.

This proxy when property executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is given, this proxy will be voted “FOR ALL NOMINEES” for the election of directors and “FOR” Proposal 2.

1. To elect Mr. Gwong-Yih Lee and Mr. James C. Yeh as Class III directors to serve until the 2015 Annual Meeting of Stockholders or until their successors are duly elected and qualified.

FOR
ALL
NOMINEES

WITHHOLD
AUTHORITY
to vote for all
nominees

WITHHOLD
AUTHORITY
to vote for a
nominee

Instruction: To withhold authority to vote for any individual nominee, write that nominee’s name in the space provided below:

			MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW		c
	For all nominees excepted as noted above

2. To ratify the appointment of Marcum LLP as the Company’s independent registered public accountant for 2012.

FOR

c

AGAINST

c

ABSTAIN

c

3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any postponement or adjournment thereof.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.

Please sign where indicated below. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by an authorized officer. If a partnership, please sign in full partnership name by an authorized person.

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Alliance Fiber Optic Products (AFOP) Inactive DEF 14ADefinitive proxy