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2012 Annual Report

25 Jun 2013 11:16

RNS Number : 7963H
Acer Incorporated
25 June 2013
 



APPENDIX

 

1. Name, Title and Contact Details of Company's Spokespersons:

Principal

Eva Ho

CFO

+886-2-2696-1234

Eva.Ho@acer.com

Deputy

Henry Wang

Director

+886-2-2696-1234

Henry.Wang@acer.com

 

2. Address and Telephone Numbers of Company's Headquarter and Branches

Office

Address

Tel

 

 

Acer Inc.

Registered Address

7F.-5, No.369, Fuxing N. Rd., Songshan Dist., Taipei City 105, Taiwan

+886-2-2719-5000

Acer Inc.

(Xizhi Office)

8F., No.88, Sec. 1, Xintai 5th Rd., Xizhi Dist., New Taipei City 221, Taiwan

+886-2-2696-1234

 

 

Acer Inc.

(Hsinchu Branch)

3F., No.139, Minzu Rd., East Dist., Hsinchu City 300, Taiwan

+886-3-533-9141

 

Acer Inc.

(Taichung Branch)

3F., No.371, Sec. 1, Wenxin Rd., Nantun Dist., Taichung City 408, Taiwan

+886-4-2250-3355

 

Acer Inc.

(Kaohsiung Branch)

4F.-2, No.38, Xinguang Rd., Lingya Dist., Kaohsiung City 802, Taiwan

+886-7-338-8386

 

Acer Inc.

(Shipping & Warehouse Management Center)

No.138, Nangong Rd., Luzhu Township, Taoyuan County 338, Taiwan

+886-3-322-2421

 

3. Address and Contact Details of Acer Shareholders' Services

Address:

7F.-5, No.369, Fuxing N. Rd., Songshan Dist., Taipei City 105, Taiwan

 

 

Tel:

+886-2-2719-5000

 

E-mail:

 

stock.affairs@acer.com

 

4. Address and Contact Details of Auditing CPAs in the Most Recent Year

Name:

Sonia Chang and Steven Shih at KPMG

 

 

Address:

68F., No.7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City 110, Taiwan

Tel:

+886-2-8101-6666

 

 

Website:

www.kpmg.com.tw

 

5. Listed Market for GDRs: London Stock Exchange Market

For further information, please refer to Website: www.Londonstockexchange.com

 

6. Acer Group Website: www.acer-group.com

 

 

 

 

 

 

 

DISCLAIMER

This is a translation of the 2012 Annual Report of Acer Incorporated (the "Company"). The translation is intended for reference only and nothing else, the Company hereby disclaims any and all liabilities whatsoever for the translation. The Chinese text of the Annual Report shall govern any and all matters related to the interpretation of the subject matter stated herein.

 

INDEX

 

1. Business Report

1.1 Acer's Core Values

1.2 2011 Operating Report

1.3 2012 Business Plan

2. Company In General

2.1 Brief Account of the Company

3. Corporate Governance Principles

3.1 Organization of the Company

3.2 Information Regarding Board of Directors, Supervisors and Key Managers

3.3 Corporate Governance Status

4. Capital and Shares

4.1 Sources of Capital

4.2 Corporate Bonds

4.3 Special Shares

4.4 Global Depository Receipts (GDRs) Issuance

4.5 Employee Stock Options

4.6 Issuance of New Shares Due to Company's Mergers and Acquisitions

5. Acer's Business Formula

5.1 Business Scope

5.2 Market Highlights

5.3 Keys to a Sustainable Future

5.4 Employees

5.5 Important Contracts

6. Corporate Social Responsibility

6.1 Environment, Safety and Health Management

6.2 Supply Chain Management

6.3 Communication

6.4 Community Involvement

6.5 Enforcement of Corporate Social Responsibility by the Company

7. Financial Standing

7.1 Five-year Consolidated Financial Information

7.2 Five-year Financial Analysis

7.3 Supervisors' Review Report

7.4 Financial Statements Consolidated Subsidiaries Audited by CPAs of the Past Year

7.5 Disclosure of the Impact on Company's Financial Status Due to Financial Difficulties

7.6 Financial Prediction and Achievements

8. Risk Management

8.1 Recent Annual Investment Policy and Main Reasons of Gain or Loss and Improvement Plan

8.2 Important Notices for Risk Management and Evaluation

 

Appendix

2012 Consolidated Financial Statements

 

1. Business Report to Shareholders

In fiscal year 2012, Acer's business suffered from the impacts of company transformation, sluggish European and US economies, key component supply issues, and less than anticipated sales of Windows 8 devices. Our consolidated revenue of NT$429.5B (US$14.7B) was down 9.6% year-on-year, and operating income was NT$1.03B (US$35.2M). Besides, in compliance with the GAAP we recognized NT$3.5B (US$120M) for the impairment of intangible assets in trademark rights, which resulted in profits after tax (PAT) losses of -NT$2.91B (-US$100M), and earnings per share (EPS) of -NT$1.07.

The intangible asset impairment comes from the revaluation of the Gateway, Packard Bell, eMachines, and Eten brands. It is part of an accounting procedure separate from cash expenses, and does not affect the company's business operation and working capital. The revaluation required exhaustive calculations along with rational estimations that take into full account of feasibility and appropriateness.

In terms of shipments, Acer ranked No. 4 for total PCs and No. 3 for notebooks worldwide in 2012 according to market research firm, IDC. In the last year, the whole ICT industry experienced a profound paradigm shift, with changing criteria on customer purchase, and the market sell-through becoming harder to forecast. To minimize our risks, we are no longer focused on maximizing volume growth only. Instead, Acer's main priorities now are to develop innovative products with differentiation, establish a clear brand positioning, and create value for our customers before pursuing for shipment growth.

In today's ICT industry, personal computers and the Wintel architecture no longer serve their former dominant roles. In place are the three ecosystems - iOS, Android and Windows - which shall co-exist and compete with each other. Without a single operating platform, industry players now have more opportunities for innovation but the keys to success still lie in providing the ultimate user experience, and creating product differentiation and customer value. Hence, Acer already began implementing its new strategy in the second half of 2012 to strengthen our marketing and R&D capabilities, invest more resources, and importantly, engrain marketing in the daily process of R&D and design.

The ICT industry faced many uncertainties last year, such as the weak demand for Windows 8 devices due to several unfavorable factors. However, so far this year we have seen the U.S. economy showing signs of recovery, the European economy stabilizing, fewer factors of uncertainty, rising demand for touch and type "duality" products, and maturity of the tablet PC market ready for higher growth. Based on these observations I expect the overall industry condition to be better than last year.

As for our product offering, we can no longer focus on traditional notebooks and netbooks. The growing momentum for the future comes from tablets, Ultrabooks, and touch notebooks. This year, Acer will strive to gain the leading position for touch devices, increase the sales of tablet PCs, and expand our smartphone business step by step. Today, there are more and more categories in the PC industry than before and the emergence of many cross-category devices. Acer will embrace these new opportunities for our onward growth.

In terms of cloud services, AcerCloud supports cross platforms for the three major operating systems: Windows, Android, and iOS. The most important feature of AcerCloud is that it allows users to easily manage their personal multimedia and data files on a variety of digital devices, regardless of which operating system they are running. Through AcerCloud, we expect to highlight our brand differentiation and build customer loyalty.

Following the company transition Acer now has a stronger organization and management team with a clear set of strategies. And as the overall external conditions start to look more promising we are confident of a turnaround and back on the right track for steady growth and profitability. With the determination to create product innovation and differentiation in the long term, we will gradually build Acer into a valuable global brand.

Lastly, please continue to support Acer as we will strive to create more benefits for all our shareholders. Thank you.

 

Sincerely,

J.T. Wang

Chairman & CEO

 

 

 

1.1 Acer's Core Values

Core Value

Rational Meaning

Emotional Meaning

Value-creating

 

·; Generating profit for shareholders

·; Growing the business by achieving the challenging financial and strategic objectives

·; Leveraging our key assets: Brands, People, Customers and Channel

·; Value for shareholders (good dividends and shares value)

·; Value for customers (good products, services, easy to do business)

·; Value for employees (good company, environment, opportunities)

Customer-centric

·; Recognizing that customers are the essence of our business

·; Placing first priority on listening to and satisfying customer needs

·; Delivering first-class products and services

·; Love and respect for our customers

·; Listen, learn and improve

·; Walk the talk (delivering on our promises)

Ethical

·; Being a good corporate citizen by playing a role in social growth

·; Caring for the environment all across the business value chain

·; Building on trust and honesty internally and externally by respecting people, diversities and cultures

·; Trust, respect and honesty

·; Care for the environment

·; An example to others

Caring

·; Creating an attractive workplace and ensuring a proper work-life balance

·; Providing employees with development and professional growth opportunities

·; Fostering teamwork and collaboration

·; Energetic and inspiring workplace

·; Growth potential

·; Teamwork

Innovative

·; Challenging the way of doing things and adopting new ideas

·; Supporting continuous improvement in processes and products

·; Creating impact through original thinking

·; Think big

·; Think smart

·; Think outside of the box (innovatively)

Fast

·; Putting speed in execution at the heart of our operations

·; Being proactive in making decisions

·; Anticipating changes ahead of competition as key to success

·; Think fast

·; Act quickly

·; Get there first

Effective

·; Doing the right things right

·; Creating an empowered environment with clear responsibilities and targets

·; Recognizing the power of being simple and attentive to basics

·; Clear objectives

·; Clear responsibilities

·; Keep it simple

 

Acer's Core Value

The challenge for all businesses is to be unique. Whether you're a customer, an employee or a shareholder, the only way any business will attract you is if it stands out from the crowd.

 

Being unique, however, isn't a quality you can simply switch on and off.

 

At Acer, we have built our reputation on creating value in every aspect of the company throughout our history. We create value for our:

customers by offering a continuous stream of innovative and empowering solutions that anticipate and satisfy their needs.

investors by consistently providing positive returns year after year.

employees, allowing us to realize our full potential and achieve our goals.

business partners with win-win solutions with our vendors and our valuable channel partners.

 

Creating value through brand recognition is the way forward rather than competitive pricing. There's no other way to win tomorrow's business than to believe in the power of our brands right now.

 

To be a successful global brand company, it is critical that employees have a consistent set of core values as a solid basis. The defined core values will bring to the Company both short-term benefits and long-term advantages.

 

The approaches that we must base our actions: Value-creating, Customer-centric, Ethical and Caring.

The way we must act: Innovative, Fast and Effective.

 

We encourage all employees to understand, practice and emphasize the core values in our respective roles.

 

 1.2 2012 Operating Report

1.2.1 Consolidated Operating Results

Unit: NT$ Thousand

Period

Item

Most Recent 5-Year Financial Information

2008

2009

2010

2011

2012

Operating revenue

546,274,115

573,982,544

629,058,973

475,258,118

429,510,913

Gross profit

57,285,660

58,327,860

64,481,268

38,522,725

43,195,744

Operating (loss) income

14,072,302

15,339,466

18,203,913

(6,480,072)

1,024,706

Non-operating income and gain

5,353,038

1,719,037

4,321,397

1,566,430

1,984,494

Non-operating expense and loss

4,618,613

2,075,520

3,195,923

2,510,688

5,642,904

Continuing operating income before tax

14,806,728

14,982,983

19,329,387

(7,424,330)

(2,633,704)

Income(loss) from discontinuned segment

99,843

0

0

0

0

Extraordiniary items

0

0

0

0

0

Cumulative effect of changes in accounting principle

0

0

0

0

0

Income after income taxes

11,742,135

11,353,374

15,117,997

(6,601,968)

(2,910,326)

EPS

4.67

4.31

5.71

(2.52)

(1.07)

 

 

1.2.2 Budget Expenditure in 2012

Not applicable.

 

1.2.3 Financial Income and Earning Abilities

Unit: NT$ Thousand

Item

2012

 Operating revenue

429,510,913

Financial Income

 Gross profit

43,195,744

 Income after tax

(2,910,326)

 Return on assets()

(0.94)

Earning Abilities

 Return on equity()

(3.86)

 Net income ratio ()

(0.68)

 EPSNTD

(1.07)

 

1.3 2013 Business Plan

 

1.3.1 Business Direction

A. Strengthen marketing and R&D capabilities, invest more resources and engrain marketing in the daily process of R&D and design.

B. Develop innovative products with differentiation, establish a clear brand positioning, and create value for our customers before pursuing for shipment growth.

C. Strengthen the tablet, Ultrabook and touch device business, and expand smartphone operations step by step.

D. Maintain fast and efficient logistics capability.

E. Carry out corporate social responsibilities.

 

1.3.2 Goals

A.Increase the shipments of tablets, Ultrabooks, touch devices, and smartphones.

B. Gradually increase proportion of revenues for commercial products.

C. Pursue for better operating income.

 

 

1.3.3 Partner Policy

A. Reinforce our cooperation with first-tier suppliers and channel partners.

B. Fully capitalize on partners' resources.

C. Share the success by rewarding our partners.

 

1.3.4 Future Strategy

A. Create value for customers and enhance our brand positioning.

B. Highlight our brand differentiation and build customer loyalty through "AcerCloud" service.

C. Implement sustainable development in order to accumulate long-term value for the company.

 

1.3.5 Impact on Company Due to Competition, Governmental Regulations and Overall Macro Market

A. The ICT industry experienced a profound paradigm shift, with changing criteria on customer purchase, and the market sell-through harder to forecast.

B. The ICT industry transformed from having a single to multiple operating system platforms. However the keys to success still lie in creating product differentiation and customer value, and providing the ultimate user experience.

C. Rising demand for touch and type "duality" products and the maturing of tablet PC market and supply chain shall bring higher growth.

D. Based on the observations that the U.S. economy is showing signs of recovery, the European economy is stabilizing, and fewer factors of uncertainty, the overall industry condition for 2013 shall be better than last year.

 

2. Company In General

2.1 Brief Account of the Company

2.1.1 Founded: August 1, 1976

1976 - 1986

·; Commercialized microprocessor technology

1987 - 2000

·; Created the Acer brand name and went global

2001 - 2007

·; Transformed from manufacturing to a marketing and sales company

2008 - beyond

·; Enhancing worldwide presence with a new multi-brand strategy

1976

·; Acer was founded under the name Multitech, focusing on trade and product design.

1978

·; Established the Microprocessor Training Centre, training 3,000 engineers for Taiwan's information industry.

1979

·; Designed Taiwan's first mass-produced computer for export.

1981

·; Acer manufacturing operations were established in the Hsinchu Science-based Industrial Park, Taiwan.

·; MicroProfessor-I debuted as Acer's first branded product.

1982

·; MicroProfessor-II was unveiled as Taiwan's first 8-bit home computer.

1983

·; First company to promote 16-bit PC products in Taiwan.

1984

·; Acer Peripherals, Inc. (now BenQ Corp.) and Multiventure Investments, Inc. were established.

1985

·; AcerLand, Taiwan's first and largest franchised computer retail chain was founded.

1986

·; Beat IBM with 32-bit PCs.

1987

·; The Acer name was created.

1988

·; Acer Inc. launched IPO.

1989

·; TI-Acer DRAM joint venture with Texas Instruments was formed.

1991

·; Introduced ChipUpä technology - world's first 386-to-486 single-chip CPU upgrade solution.

1992

·; Created the world's first 386SX-33 chipset.

·; Stan Shih introduced the Smiling Curve concept.

1993

·; Developed a 64-bit performance-enhanced I/O and CPU architecture to link MIPS RISC CPUs with Microsoftâ Windowsâ NT.

1994

·; Introduced the world's first dual Intelâ Pentiumâ PC.

1995

·; The popular Aspire multimedia PC brought Acer closer to the consumer electronics market.

1996

·; Announced its commitment to providing fresh technology to be enjoyed by everyone, everywhere.

1998

·; As official IT Sponsor of the 13th Asian Games in Bangkok, Acer introduced the world's first PC-based management system for a major international sporting event.

1999

·; Aspire Academy was set up in Aspire Park to help managers of Asian firms and MNCs with offices in Asia to improve their organizational and leadership effectiveness.

2000

·; As part of Acer's latest re-engineering, Acer split off its OEM business unit to create Wistron Corp., an independent design and IT manufacturing company.

2001

·; Adopted a new corporate identity to reflect the company's commitment to enhancing people's lives through technology.

2002

·; The Product Value Labs were inaugurated to enhance Acer's customer-centric focus, and integrated technologies that add value to customers' lives.

·; TravelMate C100 was the first convertible Tablet PC available in the worldwide market.

2004

·; Launched a new Folio design for notebooks, featuring pure functional simplicity, smooth curves and subtle elegance.

·; BusinessWeek selected Stan Shih as one of the "25 Stars of Asia."

·; Acer Founder Stan Shih retired from the Group.

2005

·; J.T. Wang assumed the position of Chairman and Chief Executive Officer, while Gianfranco Lanci stepped into the role of President of Acer Inc.

·; Launched Ferrari 4000, the first carbon-fiber notebook available in the worldwide market.

·; A series of Empowering Technology products were unveiled.

·; Became the worldwide No. 4 vendor for Total PCs and notebooks.

·; Became the No. 1 brand in EMEA and Western Europe for notebooks.

2006

·; First-to-market with a full line of Intel® Centrino® Duo mobile technology notebooks.

·; Became a Sponsor of Scuderia Ferrari.

·; Celebrated its 30th anniversary.

·; Acer AT3705-MGW LCD TV became the world's first digital TV to pass Intel® Viiv™ technology verification.

·; Became the No. 3 notebook and No. 4 desktop brand worldwide.

2007

·; Acer readies for Windows Vista™ with full range of Vista-certified LCD monitors.

·; Set the trend in product design with new Aspire Gemstone-design consumer notebooks.

·; Completed the merger of Gateway, Inc.

·; Announced its joining as an Olympic Worldwide Partner for the Winter Olympics in Vancouver 2010 and Summer Olympics in London 2012.

·; Became the No. 2 notebook and No. 3 desktop PC vendor worldwide.

2008

·; Announced the acquisition of E-ten and plan to enter the smart handheld market.

·; Launched the new Aspire Gemstone Blue notebooks, the first to feature full HD widescreen 18.4" and 16" LCDs, Blue-Ray Disc™ drive, and latest generation Dolby® Surround sound.

·; Aspire One was launched as Acer's first mobile internet device, and won the Japan Good Design award for quality design.

·; Ranked No. 3 for Total PCs and No. 2 for notebooks worldwide.

2009

·; Launched the Aspire Timeline notebooks - thin and light with all-day battery life.

·; BusinessWeek named Acer among the "10 Hottest Tech Company of 2009."

·; Voted Reader's Digest gold-medal Computer TrustedBrand in Asia for the 11th consecutive year.

·; Announced its first netbook based on the Android operating system.

·; Taiwan's Ministry of Economic Affairs presented Gianfranco Lanci with an Economic Medal for outstanding leadership, and building the Acer brand name worldwide.

·; Launched the high-end and stylish Liquid smartphones.

·; Became the world No. 2 company in Total PCs.

2010

·; Launched the green Aspire Timeline notebook - free from PVC and BFR materials

·; Provided and managed computing facilities to ensure the smooth running of sports events at the Vancouver 2010 Olympic Winter Games.

·; Chairman J.T. Wang named in TIME magazine's annual list of 100 most influential people in the world.

·; Acer launched clear.fi, a new entertainment experience allowing real-time sharing and playing of multi-format content over multi-platform devices.

·; Integrated Founder Tech's PC sales team and channels in the China market.

·; Successfully issued US$500 million in convertible bonds.

·; Announced expansion to Chongqing in western China, creating a new global IT manufacturing center and Acer's second China base.

·; Hosted the third annual CSR Forum with the ultimate goal of building a sustainable supply chain.

 

2011

·; Acer products began to ship from China's Chongqing production base.

·; Acer EMEA cleared its high channel inventory with a one-time US$150 million write-off.

·; Sir Julian Horn-Smith and Dr. F.C. Tseng were elected as independent board directors.

·; Debuted first Ultrabook™: Aspire S3.

·; Announced key management reshuffle - Scott Lin to concurrently head China operations, and Oliver Ahrens to front EMEA operations.

 

2012

·; Acquired US-based iGware with US$320 million for mid- to long-term investment in cloud technology.

·; Unveiled world's thinnest Ultrabook™: Aspire S5.

·; Presented Aspire Timeline Ultra Series, extending mainstream notebook features with Ultrabook™ trend.

·; Announced AcerCloud application results.

·; Recruited Eva Ho as the new CFO.

·; Introduced new Full HD tablet, the ICONIA TAB A700.

·; Strengthened executives' remuneration management system in order to enhance corporate governance and maintain shareholders' long-term interests.

·; Supplied all computing equipment for the London 2012 Olympic Games; successfully completed the mission and earned high appraisals from the assembly.

·; Appointed Michael Birkin as Chief Marketing Officer to strengthen Acer as a marketing-oriented company.

·; Launched a full range of Windows 8 touch products for the most complete user experience.

·; Revitalized the global website - Acer.com - to provide web surfers with a highly intuitive and excellent user experience.

·; Aspire S7 was named as CES Innovations 2013 Design and Engineering Award Honoree.

·; Appointed Tiffany Huang as president of Personal Computer Global Operations.

 

 

2013

·; Extended AcerCloud to support top three operating systems, making it easy to share files and media among Windows, iOS and Android devices.

·; Recognized a total of NT$3.5B (US$120.1M) intangible asset impairment based on the Generally Accepted Accounting Principle (GAAP) and thorough assessment.

·; Launched B6 and V6 series commercial LED-backlit monitors made with post-consumer recycled plastic and complied with EPEAT standards for environmental protection.

·; Held the fifth annual Corporate Social Responsibility Forum to continue exploring and leading the global trend of sustainable management.

 

3. Corporate Governance Principles

3.1 Organization of the Company

3.1.1 Department Functions

 

 

Corporate Functions

Marketing Committee

Integrating brand positioning and marketing strategies

Auditor

Evaluation, planning and improvement of Acer's internal operations

Corp. Sustainability Office

Strategic planning and management in corporate sustainability, with the aim of fulfilling corporate social responsibilities.

Public Relations

Managing external public relations

CFO & Spokesperson

Managing long-term finance, investments and corporate spokesperson

Commercial Business Global Operations Preparatory Office

Business development, product solution management, R&D, presales & technical support of commercial business of global accounts.

CTO Office

Managing mid-to long-term technology development planning, technology integration and collaboration

Operation Analysis Office

Planning, analysis and improvement of business model and business management

PC Global Operations

Product marketing and supply chain management of Acer's PC products and services

Asia Pacific Operations

Sales, marketing and after-sales service of Acer's IT products in Asia Pacific

Greater China Operations

Sales, marketing and after-sales service of Acer's IT products in Greater China

EMEA Operations

Sales, marketing and after-sales service of Acer's IT products in Europe, Middle East and Africa

Pan America Operations

Sales, marketing and after-sales service of Acer's IT products in Pan America

Cloue Technology Business

Establishing Acer Cloud infrastructure and providing value-added cloud service to customer.

Smartphone Business

Product marketing and supply chain management of Acer's smartphone products and services

Design Center

Research and development, design and patent of Acer's product.

Global Information Technology

Corporate information infrastructure and information systems management

Global Customer Service

Global services strategy and global service center management

Marketing & Branding

Corporate brand management, consolidation and implementation of global marketing strategies

Channel Business

Channel distribution of non-Acer branded 3C products in Taiwan

e-Enabling Services Business

ICT solutions and services provider, including information security management, mobility applications, software systems development, systems integration, system operation services, value-added business solutions, and Internet data center services

Global Finance

Corporate finance, investment, treasury, credit and risk control and accounting services management

Global Human Resources

Human resources and organizational strategy

Global Legal

Corporate and legal affairs, intellectual property

General Affairs

General affairs, transportation service, office facilities management

 

 3.2 Information Regarding Board of Directors, Supervisors and Key Managers

(1) Board of Directors and Supervisors (April 21, 2013) 

Title

Name

Date of Election

Term

Shares Held When Elected

Shares Held at Present

Shares Held by Spouse & Minors

Education

Current Position(s) in Other Companies

Spouse or Immediate Family Holding Managerial Position

Number

Percentage

Number

Percentage

Number

Percentage

Title

Name

Relation-

ship

Chairman

J.T. Wang

06/15/2011

3

15,142,159

0.53

15,142,159

0.53

206,771

0.01

Bachelor

(Note 1)

None

-

-

Director

Stan Shih

06/15/2011

3

74,806,719

2.64

74,733,499

2.64

17,634,157

0.62

Master

1. Director of Qisda Corp.

2. Director of Wistron Corp.

3. Independent director of TSMC Co, Ltd.

4. Director of Dragon Investment Co., Ltd.

5.Director of Acer SoftCapital

Supervisor

Carolyn Yeh

Wife

Director

Hsin-I Lin

06/15/2011

3

0

0

0

0

0

0

Bachelor

1. Director of Yulon Motor Co, Ltd.

2.Director of China Motor Corp. Co

3. Independent director of E.Sun Financial Holdings Co Ltd.

4.Independent director of Sinyi Realty Inc.

None

-

-

Director

Hung Rouan Investment Corp.

06/15/2011

3

67,799,202

2.39

67,799,202

2.39

0

0

-

-

None

-

-

Director

Smart Capital Corp.

06/15/2011

3

11,260

0

11,260

0

0

0

-

-

None

-

-

Legal Representative of Director

Philip Peng

(Representative of Smart Capital Corp.)

06/15/2011

3

1,003,469

0.04

1,003,469

0.04

258,007

0.01

Master

1. Director of Wistron Corp.

2. Director of iDSoftCapital Inc.

3. Supervisor of Dragon

4. Investment Co., Ltd.

5. Others (Note 1)

None

-

-

Independent Director

Julian Michael Horn-Smith

06/15/2011

3

0

0

0

0

0

0

Bachelor

-

None

-

-

Independent Director

F.C. Tseng

06/15/2011

3

0

0

0

0

0

0

Ph. D.

1.Vice Chairman of TSMC Limited

2. Chairman of Global Unichip Corp.

3. Chairman of TSMC China Company Limited

4. Director of Digimax, Inc.

5. Director of Vanguard International Semiconductor Corp.

None

-

-

Supervisor

Carolyn Yeh

06/15/2011

3

17,707,377

0.62

17,634,157

0.62

74,733,499

2.64

Bachelor

1. Chairman of iDSoftCapital Inc.

2.Others (Note 1)

Director

Stan Shih

Husband

Supervisor

George Huang

06/15/2011

3

6,261,844

0.22

6,261,844

0.22

1,386,315

0.05

Bachelor

1. Supervisor of Apacer Technology Inc.

2. Supervisor of Les Enphants Co., Ltd.

3. Supervisor of Motech Industries Inc

4.Independent director of PChome Online Inc

5. Independent director of Bio Net Corp.

6. Independent Supervisor of InterServ International Inc.

7. Independent director of Taiwan Taxi Corp.

None

-

-

Note1: Appointed by Company to be Director and/or President of certain subsidiaries.

 

 

Major Institutional Shareholders (April 21, 2013)

Name of Acer's Institutional Shareholders

Major Shareholders of Acer's Institutional Shareholders

Percentage of Shares

Smart Capital Corp.

Philip Peng

66.67%

Jill Ho

33.33%

Hung Rouan Investment Corp.

Carolyn Yeh

20.13%

Shih Hsuen Rouan Charity Foundation

1.60%

Shih Hsuen Rouan

17.25%

Shih Hsuen Huei

26.09%

Shih Hsuen Lin

17.16%

Shih Fang Cheng

8.93%

Yeh Ting Yu

8.84%

 

 

Professional qualifications and independence analysis of directors and supervisors

 

Criteria

 

 

 

 

 

 

Name

Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience

Independence Criteria(Note)

Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director

An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University

A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company

Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company

1

2

3

4

5

6

7

8

9

10

J.T. Wang

P

P

P

P

P

P

P

0

Stan Shih

P

P

P

P

P

1

Hsin-I Lin

P

P

P

P

P

P

P

P

P

P

P

2

Hung Rouan Investment Corp.

Not applicable.

Smart Capital Corp.

Philip Peng

(Representative of Smart Capital Corp.)

Not applicable.

Julian Michael Horn-Smith

P

P

P

P

P

P

P

P

P

P

P

0

F.C. Tseng

P

P

P

P

P

P

P

P

P

P

P

0

Carolyn Yeh

P

P

P

P

0

George Huang

P

P

P

P

P

P

P

P

3

Note: Please tick the corresponding boxes if directors or supervisors have been any of the following during the two years prior to being elected or during the term of office.

1. Not an employee of the Company or any of its affiliates.

2. Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.

3. Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any of the persons in the preceding three subparagraphs.

5. Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five in holdings.

6. Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the Company.

7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof.

8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.

9. Not been a person of any conditions defined in Article 30 of the Company Law.

10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

(2) Key Managers (April 21, 2013)

 

Title

 

 

Name

 

Date of Accession

Shares Held Directly

Shares Held by Spouse & Minors

Shares Held by the Other's

Education

Current Position(s) in Other Companies

Spouse or Immediate Family Holding Position as President or Vice President

 

Number

Percentage

Number

Percentage

Number

Percentage

Title

Name

Relationship

 

Chairman & CEO

J.T. Wang

04/20/2011

15,142,159

0.53

206,771

0.01

0

0

Bachelor

(Note3)

None

-

-

 

 

Corp. President

Jim Wong

11/01/2001

4,301,026

0.15

0

0

0

0

Master

(Note3)

None

-

-

Sr. Corp.VP & Chairman of Marketing Committee

Walter Deppeler

09/29/2007

0

0

0

0

0

0

Bachelor

(Note3)

None

-

-

 

 

Sr. Corp.VP & President of GC

Scott Lin

11/01/2001

1,155,001

0.04

7,593

0

0

0

Bachelor

(Note3)

None

-

-

 

Sr. Corp.VP & President of AAP

Steve Lin

11/01/2001

2,080,822

0.07

0

0

0

0

Bachelor

-

None

-

-

 

Sr. Corp.VP & President of EMEA

Oliver Ahrens

04/01/2009

0

0

0

0

0

0

Bachelor

(Note3)

None

-

-

 

Corp.VP & President of PA

Emmanuel Fromont

01/01/2011

0

0

0

0

0

0

Bachelor

(Note3)

None

-

-

 

Corp.VP & President of CBG

James Chiang

01/01/2003

1,207,457

0.04

5,168

0

0

0

Bachelor

(Note3)

None

-

-

 

Corp.VP & President of ETBG

(Note 1)

Simon Hwang

09/01/2008

0

0

0

0

0

0

Bachelor

(Note3)

None

-

-

 

President of EBBG

Ben Wan

05/16/2002

0

0

0

0

0

0

Master

(Note3)

None

-

-

 

President of PCGO

(Note 1)

Campbell Kan

03/28/2007

0

0

0

0

0

0

Master

-

None

-

-

 

President of PCGO

(Note 2)

Tiffany Huang

01/01/2013

163

0

83

0

0

0

Bachelor

-

None

-

-

 

CTO and President of Design Center

Jackson Lin

02/16/2004

320,083

0.01

7,329

0

0

0

Master

-

None

-

-

 

President of SPBG

ST Liew

01/01/2012

0

0

0

0

0

0

Bachelor

-

None

-

-

 

GM of SPBG

Dave Chan

01/01/2012

0

0

0

0

0

0

Master

-

None

-

-

 

VP of SPBG (Note 2)

Wayne Ma

11/01/2008

0

0

0

0

0

0

Bachelor

-

None

-

-

 

VP of GCRO

Peter Shieh

11/01/2001

507,737

0.02

78,387

0

0

0

Bachelor

-

None

-

-

 

VP of GCRO

Jafa Lin

07/01/1996

181,228

0.01

0

0

0

0

Bachelor

-

None

-

-

 

VP of EBBG

Michael Wang

11/01/2008

7,261

0

0

0

0

0

Bachelor

-

None

-

-

 

CFO

Eva Ho

03/01/2012

0

0

0

0

0

0

Master

-

None

-

-

 

CFO(acting)

(Note 1)

Lilia Wang

09/21/2011

0

0

0

0

0

0

Bachelor

(Note3)

None

-

-

 

Director of Branch Office

PH Wu

01/12/2006

20,457

0

0

0

0

0

Bachelor

-

None

-

-

 

Director of Branch Office

TC Yang

01/12/2006

107,561

0

0

0

0

0

Bachelor

-

None

-

-

 

Director of Branch Office

YS Shiau

01/12/2006

272,358

0.01

0

0

0

0

Bachelor

-

None

-

-

Note 1: Lilia Wang released on 2012.03.01

Simon Hwang released on 2012.03.29

Campbell Kan released on 2013.01.01

Note 2: Wayne Ma assumed position on 2012.10.24

Tiffany Huang assumed position on 2013.01.01

Note 3: Appointed by Company to be Director and/or President of certain subsidiaries.

 

3.3 Corporate Governance Status

3.3.1 Meetings Held by the Board of Directors

The Board of Directors held nine meetings. The record of the Directors' attendances is shown below:

Title

Name

No. of Meetings Attended

No. of Meetings Attended by Proxy

Meeting Attendance Rate(%)

Note

Chairman

J.T. Wang

9

0

100%

Director

Stan Shih

9

0

100%

Director

Hsin-I Lin

6

3

67%

Director

Hung Rouan Investment Corp.

9

0

100%

Director

Philip Peng

(Representative of Smart Capital Corp.)

9

0

100%

Director

Julian Michael Horn-Smith

7

1

78%

Director

F.C. Tseng

9

0

100%

 

3.3.2 Operational Situation of the Audit Committee: Not applicable.

 

3.3.3 Supervisor's Participation of Meetings Held by the Board

The Board of Directors held nine meetings. The record of the supervisors' attendances is shown below:

 

Title

Name

No. of Meetings Attended

Meeting Attendance Rate (%)

Note

Supervisor

Carolyn Yeh

9

100%

Supervisor

George Huang

7

78%

 

3.3.4 Enforcement of Corporate Governance Implemented by the Company and Reasons for Discrepancy

 

Items

Enforcement Status

Discrepancy between the corporate governance principles implemented by the Company and the Principles, and the reason for the discrepancy

A. The ownership structure and

shareholders' rights

a. The handling of the shareholders'

proposals and disputes

The Company has designated the Office of Shareholders' Affairs to handle the shareholders' proposals and disputes.

No discrepancy

b. Information held on the identities of major shareholders and their ultimate controlling persons

The Company holds information on the identities of major shareholders and their ultimate controlling persons.

No discrepancy

c. The establishment of risk control mechanism and firewalls with affiliates

The Company has established the appropriate risk control mechanism and firewalls according to internal rules such as rules of supervision over subsidiaries, rules governing endorsement and guarantee, and the rules governing acquisitions and dispositions of assets etc.

No discrepancy

B. The composition and duties of Board of Directors

a. The election of independent directors

The Company elected two independent directors in 2011 AGM.

No discrepancy.

b. The regular evaluation of the independence of CPA

The evaluation of the CPA is one of the main duties of the Financial Statement and Internal Control Review Committee

No discrepancy

C. The establishment of communication channels with stakeholders

The Company has established the appropriate communication channels with suppliers, buyers, banks, investors and other stakeholders.

No discrepancy

 

D. The disclosure of information

a. The utilization of website to disclose the information on finance, operations and corporate governance

The Company has set up Acer Group website (http://www.acer-group.com) containing the information regarding its finance and operations. The Company also discloses the enforcement of corporate governance in the shareholders' meeting and other institutional investor meetings.

No discrepancy

b. Others means of disclosing information

The Company has one chief speaker, one acting speakers and designated team to be responsible for gathering and disclosing the information.

No discrepancy

E. The establishment and enforcement of Nomination and Compensation Committee or any other Functional Committees

Following the enactment of "Regulations Governing the Establishment of and Exercise of Powers by Remuneration Committee" by Financial Supervisory Commission on March 18, 2011, the Company adjusted the establishment of Remuneration Committee, which approved by the BOD on August 31, 2011, and the initial meeting was convened on September 1, 2011. The duty of Remuneration Committee is to determine and regularly review the performance evaluation and remuneration strategies, policies, standard, structures of Board directors, supervisors, and Company officers, and determine and review their remuneration.

No discrepancy

F. If the Company has implemented the corporate governance principles according to TSE Corporate Governance Best-Practice Principles, please identify the discrepancy between your principles and their implementation:

The Company follows the spirit inside of TSE Corporate Governance Best-Practice Principles even though Company did not enact the corporate governance principles.

G. Other important information that may facilitate better understanding of the status of corporate governance (e.g. human rights, employee rights, investors relationships, supplier relationships, interested parties' rights, D&O liabilities insurance, etc.):

l The Company has actively participated in community or charitable activities, the details please refer to"6. Corporate Social Responsibility."

l The Company has set up an exclusive web site for the new labor pension system containing information for employees regarding the laws and regulations, and to offer assistance.

l In additional to the training courses required by authorities, the Company also held related training courses for members of the Board.

l The Company has clearly set forth in the rules for the proceedings of Board meetings, that a director shall voluntarily abstain from voting on a proposal involved with his/her own interests.

l The Chairman of the Company does not act as the President, and both of them are not spouses or relatives within one degree of kinship.

l The Company has purchased liability insurance for directors and officers.

 

 

3.3.5 The Establishment and Enforcement of Remuneration Committee

 

The Acer Inc. "Board of Directors and Supervisors Remuneration Guidelines" and "Executive Remuneration Guideline" are proposed by Remuneration Committee and effective after the approval of Acer Inc. Board of Directors. The compensation of Board Directors is defined in "Acer's Articles of Incorporation". Where this Company has earnings at the end of the fiscal year, after paying all relevant taxes, making up losses of previous year, this Company shall first set aside ten percent (10%) of said earnings as legal reserve, except that such legal reserve amounts to the total authorized capital. Thereafter, this Company shall set aside or reverse a special reserve in accordance with the applicable laws and regulations. Then, if still any balance left over, not more than one percent (1%) shall be distributed as profit sharing for Board of directors and supervisors according to Acer Inc. "Board of Directors and Supervisors Remuneration Guidelines". Employee Director shall receive no Director profit sharing.

 

The remuneration of Acer executive is governed under Acer Group "Executive remuneration guideline". The short-term incentive links to both individual and company overall team performance, while the long-term incentive links to long-term shareholders' value. The annual KPIs, which includes a portion of strategic KPIs assigned by the top management whether financial or non-financial, ensures the executive team move on the same direction to reach the strategic goal of the company. Standards of Business Conduct (SBC) is reminded and confirmed by each executive on the compensation sign back letter each year.

 

Remuneration Committee held five meetings from Jan.1, 2012 to Dec. 31, 2012. The record of their attendances is shown below:

Title

Name

No. of Meetings Attended

No. of Meetings Attended by Proxy

Meeting Attendance Rate(%)

Note

Independent Director

Julian Michael

Horn-Smith

5

0

100%

Chair

Independent Director

F.C. Tseng

5

0

100%

Director

Hsin-I Lin

5

0

100%

 

 

 

3.3.6 Status and Measures of Ethical Practice

As good corporate citizens Acer Group respect human rights, local communities and compliance with laws, environment, ethics, safety standards, regulations and social norms. Based on our core values of "Serve with honor and work with pride", we have formulated a Standards of Business Conduct (SBC) document to guide us on how we interact with each other, our customers, our business partners, our shareholders and the communities where the Acer Group does business. This is done every day in every decision and every action by each one of us. We continue to build on our reputation for trust, integrity and honesty, both internally and externally, by appreciating people, their diversities and cultures.

You are welcome to visit Acer Group website (http://www.acer-group.com) for the details of our "Standards of Business Conduct."

 

3.3.7 Statement of Personnel Having Licenses Associated with Financial Information Transparency from Competent Authorities

Name of Licenses

Numbers

Internal Auditor

Financial Officer

Certified Public Accountants (CPA)

0

3

US Certified Public Accountants (US CPA)

0

1

Certified Internal Auditor (CIA)

1

3

BS7799/ISO 27001 Lead Auditor

1

0

Certificated Business Valuator

0

1

 

3.3.8 Statement of Internal Control System

 

Date: March 28, 2013

 

Based on the findings of a self-assessment, Acer Incorporated (hereinafter, the "Company") states the following with regard to its internal control system during year 2012:

 

1. The Company is fully aware that establishing, operating, and maintaining an internal control system are the responsibility of its Board of Directors and managers. The Company has established such a system aimed at providing reasonable assurance regarding the achievement of objectives in the following categories: (1) effectiveness and efficiency of operations (including profitability, performance, and safe-guarding of assets), (2) reliability of financial reporting, and (3) compliance with applicable laws and regulations.

2. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing the three objectives mentioned above. Moreover, the effectiveness of an internal control system may be subject to changes of environment or circumstances. Nevertheless, the internal control system of the Company contains self-monitoring mechanisms, and the Company promptly takes corrective actions whenever a deficiency is identified.

3. The Company evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Taiwanese "Regulations Governing Establishment of Internal Control Systems by Public Companies" promulgated by the Securities and Futures Bureau of the Financial Supervisory Commission (hereinafter, the "Regulations"). The criteria adopted by the Regulations identify five constituent elements of internal control based on the process of management control: (1) control environment, (2) risk assessment and response, (3) control activities, (4) information and communication, and (5) monitoring. Each constituent element further contains several items. Please refer to the Regulations for details.

4. The Company has evaluated the design and operating effectiveness of its internal control system according to the aforesaid criteria. While performing the internal control audit, the Company found a sales employee who convicted crime by deceiving supervisor during the shipping process. Total loss caused by this case is about NTD 15M which has no significant impact to the Company. The Company has taken quick actions to review and adjust the whole Sales and AR processes, to enhance the control over customer order management, shipping address management and AR reconciliation. In the meantime, the Company has restated the importance of Code of Conduct and urged employees to comply with it and act for the best of The Company.

5. Based on the findings of the evaluation mentioned in the preceding paragraph, the Company believes that, as of December 31, 2012, its internal control system (including its supervision of subsidiaries), as well as its internal controls to monitor the achievement of its objectives concerning operational effectiveness and efficiency, reliability of financial reporting, and compliance with applicable laws and regulations, were effective in design and operation, and reasonably assured the achievement of the achievement of the above-stated objectives.

6. This Statement will be an essential content of the Company's Annual Report for the year 2012 and Prospectus, and will be publicly disclosed. Any false-hood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Taiwan Securities and Exchanged Act.

7. This Statement has been passed by the Board of Directors in their meeting held on March 28, 2013, with 0 of the 7 attending directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.

 

Acer Incorporated

 

------------------------------------------ --------------------------------------------

Chairman of the Board of Directors CEO of Acer Inc. & Corp. President

 

3.3.9 Resolutions of the Board of Directors' Meeting and the General Shareholders' Meeting

 

Resolutions of the Board of Directors' Meeting

Date

Meeting

Major Resolutions

January 12,2012

First 2012 Special BOD Meeting

I. To Agree the "Application of Taiwan Bonus Guidelines" and "Bonus

Payment Amount" for CEO, Corp. President, and TWN Employed 1ST Tier

Executives and Officers.

II. To Agree the 2012 Remuneration Proposal for CEO, Corp. President, and

1st Tier Executives and Officers.

III. To Release Ms. Angelina Hwang From Acer Management Team

IV. To Appoint Mr.S.T.Liew and Mr.Dave Chan as the Co-President of Smart Phone BG

V. To Agree on The New Appointment and Remuneration Proposal of 1ST Tier Executive of The Company.

March 29,2012

First 2012 BOD Meeting

I. To Approve the 2011 Financial Statements and Business Report

II. To Approve Acer's Statement of Internal Control System for 2011

III. To Approve the Appointment CPAs of KPMG as the Auditors of Acer Incorporated

IV. To Approve the Agenda and Logistics of 2012 General Shareholder's Meetings

V. To Approve Amendments to Acer's Articles of Incorporation,

VI. To Approve Amendments to Acer Incorporated Regulations for the Conduct of Shareholders'Meeting.

VII. To Approve Buying Back the Year 2010 First Issuance of Unsecured Overseas Convertible Corporate Bonds.

VIII. To Approve the "Board of Directors and Supervisors Remuneration Guidelines"

IX. To Propose the Name and Amount of Fixed Compensation for Board of Directors and Supervisors.

X. To Agree on 2011 Bonus Result of Company 1st Tier Executives

XI. To Release Mr. Wayne Ma and Mr. Simon Hwang from Acer Management Team

XII. To Approve Amendments to Acer's "Procedures of Acquiring or Disposing of Assets"

XIII. To Approve The Internal Control Procedure of "Management of the Adoption of International Financial Reporting Standards" and "Management of Accounting Professional Judgment Procedures, Accounting Policies and Changes in Accounting Estimates"

XIV. To Approve the Amendment of Acer's Internal Control Policies and 2012

Annual Audit Plan

XV. To Decide the Effective Date of the New Issued Shares for the Execution

of Acer and E-ten Employee Stock Option

XVI .To Approve Acer's Corporate Guarantees Related Issues

April 25,2012

Second 2012 BOD Meeting

I. To Approve the First Quarter of 2012 Financial Statements

II. To Approve the Related Items of Adoption IFRSs

III. To Approve the Proposal for Loss off-setting of 2011 Retained Earnings

IV. To Approve Buying Back the Year 2010 First Issuance of Unsecured Overseas Convertible Corporate Bonds

V. To Decide the Effective Date of the New Issued Shares for the Execution of Acer Employee Stock Option

VI. The Corporate Guarantees of Acer Incorporated and its Subsidiaries.

July 2,2012

Second 2012 Special BOD Meeting

I. TO repurchase the Company's shares as Treasury Stock for the purpose of retaining the key employees

August 30,2012

Third 2012 BOD Meeting

I. To Approve the First Half of FY2012 Financial Statements

II. To Approve the Addition of the ECB Opening Entries Related to IFRS Adoption

III. To approve Acer Global Marketing Organization Plan

IV. To Approve The Existing Executive Quarterly Incentive (2011Q3~2012Q2) and Related Incentive Payout Proposal

V. To Implement "Acer Executive 2012 Remuneration Target Amount" Approved On Apr.2012 Until Jan.1,2013

VI. To Approve The 2012 KPI Items And Target Amount For 1st Tier Executive's Individual MBO Following Current Existing MIBO Scheme.

VII. To Agree On The Proposal Of Title Change For Selective 1ST Tier Executives

VIII. To Approve the Actual and Estimated Increase or Decrease of Acer's Corporate Guarantees

October 24,2012

Fourth 2012 BOD Meeting

I. To Amend the Regulations Governing Procedure for Board of Directors Meeting

II. To Amend the Accrual of Employee Bonus for 212

III. To Approve the Third Quarter of FY2012 Financial Statements

IV. Global Operation Model Proposal

V. To Establish Three 100% owned Entities for Business Requirements

VI. To Approve Buying Back the Year 2010 First Issuance of Unsecured Overseas Convertible Corporate Bonds

VII. To Execute Capital Injection in Brazil for USD40,000,000

VIII. To Proposed to Dispose E-TEN Tai-Shan Building

IX. To Entrust The HIB Portfolio and M&A Cases To iD SoftCapital Inc.

X. Review the proposed Acer's 1st tier organization and personnel Adjustments

XI. Propose to appoint Mr. Wayne Ma, current Special Assistant of Corp.

President Office as VP of Smart Phone Business Group

XII. To Approve Acer's 2013 Annual Audit Plan

XIII. To Amend the "Internal Control Procedure of Stock Affairs"

XIV. The Renewal of The Bank Facilities

XV. To Approve the Actual and Estimated Increase or Decrease of Acer's

Corporate Guarantees

December 4,2012

Third 2012 Special BOD

 Meeting

I. To Approve to dispose North Sioux City Buildings (NSC Buildings) of Gateway

II. To Approve the proposed Acer's 1st tier organization and personnel Adjustments

March 28,2013

First 2013 BOD Meeting

I. To Approve the Non-Financial Assets Impairment Test Result

II. To Approve the 2012 Financial Statements and Business Report

III. To Approve Acer's Statement of Internal Control System for 2012

IV. To Approve the Appointment CPAs of KPMG as the Auditors of Acer Incorporated

V. To Approve the Impact Amounts of Retained Earnings and Special Reserve from First-Time Adoption of IFRS

VI. To Approve the Agenda and Logistics of 2013 General Shareholder's Meeting

VII. To Approve the second Issuance of Unsecured Convertible Corporate Bonds

VIII. To Approve the Issuance of Acer's Performance Guarantee for Acer India(Private)Limited Acquiring Government Tender

IX. To Approve the Compensation Proposal of New Appointed 1ST Tier Executives

X. To Approve the Proposal of 2013 STI/LPI KPI Target Setting of CEO, Corp. President and Company 1st Tier Executives

XI. To Approve the Proposal of 2013 LTI Incentive Tools

XII. To Approve the Personnel Appointment of Company 1st Tier Organization

XIII. To Approve the Acer's Corporate Guarantees

May 7,2013

Second 2013 BOD Meeting

I. To Approve the First Quarter of 2013 Financial Statements

II. To Approve the appropriation of retained earnings for 2012 losses

III. To Amend Acer's Articles of Incorporation

IV. To Propose to Amend the Convene Issue of the Company's 2013 General Shareholder's Meeting

V. To Restructure the Investment Framework of Acer Operations in Mainland China

VI. Proposal of the Contingency Plan for 2011 Deferred Incentive for Selective 1st Tier Executives

VII. Proposal of the 2012 MBO Bonus Result for CEO, Corp. President and 1st Tier

Executive

VIII. Propose to Approve the Charter, Suggested Chairman and Members and Follow Up Plan for "Key Position Recruiting Committee"

IX. Proposal to Modify Partial Articles In Acer Group "Executive Remuneration Guidelines"

X. The Corporate Guarantees of Acer Incorporated and its Subsidiaries

XI. Reports of the Procedures Governing Lending of Capital to other for Acer subsidiaries and related items

 

Implementation of Resolutions in 2012 General Shareholders' Meeting

 

Major Resolutions

Carries out the situation

1.To approve Amendments to Acer Incorporated Regulations for the Conduct of Shareholders' Meetings

The shareholder meeting resolution passes according to the document

2.To accept 2011 Financial Statements and Business Report

The shareholder meeting resolution passes according to the document

3.To approve the Proposal for 2011 Profit & Loss Appropriation

The shareholder meeting resolution passes according to the document

4.To approve Amendments to Acer's Articles of Incorporation

The shareholder meeting resolution passes according to the document

5.To approve Amendments to Acer's "Procedures of Acquiring or Disposing of Assets"

The shareholder meeting resolution passes according to the document

6.To approve Amendments to Acer's "Procedures Governing Lending of Capital to Others"

The shareholder meeting resolution passes according to the document

 

4. Capital and Shares

4.1 Sources of Capital

4.1.1 Sources of Capital (April 21, 2013)

Unit: Share/NT$ Thousand

Date

Price of Issuance

Authorized Common stock

Paid-in Common stock

Notes

Shares

Value

Shares

Value

June, 2012

Share/NT$10

3,500,000,000

35,000,000

2,834,726,828

28,347,268

-

 

Unit: Share

Shares

Category

Authorized capital

Notes

Issued shares

Non-issued

Total

Common shares

2,834,726,828

665,273,172

3,500,000,000

-

 

4.1.2 Shareholding Structure(April 21, 2013)

Unit: Share

Category/Number

Government Institution

Financial Institution

Other Institution

Individual

FINI and Foreign Investors

Total

No. of Shareholders

14

42

504

357,065

972

358,597

Shares

9,868,451

21,293,287

269,495,181

1,818,138,698

715,931,211

2,834,726,828

Percentage

0.35%

0.75%

9.50%

64.14%

25.26%

100.00%

 

4.1.3 Distribution of Shareholdings (April 21, 2013)

 

Category

The Number of Shareholders

Shares

Percentage

1999

128,066

37,290,838

1.32%

1,0005,000

164,943

371,820,690

13.12%

5,00110,000

34,712

264,335,414

9.32%

10,00115,000

10,918

135,412,802

4.78%

15,00120,000

6,582

120,290,859

4.24%

20,00130,000

5,311

133,650,411

4.71%

30,00150,000

3,969

156,182,471

5.51%

50,001100,000

2,432

174,707,956

6.16%

100,001200,000

900

126,446,189

4.46%

200,001400,000

362

101,051,263

3.56%

400,001600,000

119

58,282,237

2.06%

600,001800,000

74

51,633,617

1.82%

800,0011,000,000

49

44,387,751

1.57%

1,000,001 and above

160

1,059,234,330

37.37%

Total

358,597

2,834,726,828

100.00%

 

4.1.4 List of Major Shareholders (April 21, 2013)

Item

Name

Shares

Percentage

Stan Shih

74,733,499

2.64%

Yen, Wei

74,687,775

2.63%

Hung Rouan Investment Corp.

67,799,202

2.39%

VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF VANGUARD INTERNATIONAL EQUITY INDEX FUNDS

54,392,905

1.92%

Government of Singapore

36,139,150

1.27%

Management Board of Public Service Pension Fund

34,988,175

1.23%

Acer GDR

34,569,790

1.22%

JPMorgan Chase Bank N.A. Taipei Branch in custody for ABU DHABI Investment Authority

27,324,037

0.96%

MSCI Equity Index Fund B - Taiwan

19,368,472

0.68%

Carolyn Yeh

17,634,157

0.62%

 

4.1.5 Market Price Per Share, Net Value, Earning& Dividend For Last Two Years

Unit: NT$

Period

Item

2011

2012

Until Mar. 31st, 2013

Market Price Per Share

Highest

91.00

46.15

28.20

Lowest

27.30

22.30

23.90

Average

49.01

31.58

25.83

Net Value Per Share

Before Distribution

28.44

27.56

28.17

After Distribution

Un-appropriated

Un-appropriated

Un-appropriated

Earning Per Share

Weighted Average Share Numbers

2,624,535

2,722,601

2,722,361

Thousand shares

Thousand shares

Thousand shares

Earning Per Share

Current

-2.52

0.19

0.19

Adjusted

5.71

Un-appropriated

Un-appropriated

Dividend Per Share

Cash Dividend (NT$)

0

0

Un-appropriated

Stock Dividend

Retained Earning (%)

- 

Capital Surplus (%)

-

Accumulated unpaid dividends

-

-

-

Return on Investment Analysis

P/E Ratio

-19.45

-29.51

135.94

P/D Ratio

-

-

-

Cash Dividend Yield

0.00%

-

-

 

 

4.1.6 Dividend Distribution Plan Proposed To General Shareholders' Meeting

As the industry prosperity and the trends rapidly changed, the dividends strategy of the Company depends on yearly earnings and external environments, therefore, cash dividends of this Company shall be distributed at least ten percent of yearly dividends for complying with related regulations, which was approved at the Shareholder's Meeting on June 17, 2004.

The proposed dividend distribution plan, agreed by the Company's Board of Directors, will be submitted to the Shareholders' Meeting on June 15, 2012 for approval:

FY2012 beginning balance of the un-appropriated retained earnings of the Company is NT$314,561,453 in 2012. After plus the net loss after tax of 2012, NT$2,910,326,078 for FY2012, the deficit to be compensated is 2,595,764,625. It is proposed to compensate the deficit by the legal reserve of 2,595,764,625. After Subject to the appropriation, the ending balance of the un-appropriated retained earnings is 0.

4.1.7 Analysis on Impact of Proposed Stock Dividends Appropriation in Terms of Operating Results, Earnings Per Share and Rate of Return of Shareholders' Investment

None

4.1.8 Employees' Bonuses and Remunerations to Directors, Supervisors

1.Where this Company has earnings at the end of the business operational year, after paying all relevant taxes, making up losses of previous year, setting aside a legal reserve of ten percent (10%) and setting aside or reversing a special reserve as required by laws or competent authorities, the balance of the earnings shall be distributed as follows:

(1)Over five percent (5%) as employee bonuses; Employees may include subsidiaries that that meet certain criteria set by the board of directors.

(2)Not more than one percent (1%) as remuneration of directors and supervisors; and

(3)The remainder may be allocated to shareholders as bonuses. The Company shall not pay dividends or bonuses when there is no profit.

 

2.The Board of Directors proposed a dividend distribution plan of year 2012 as follows: NT$0 as cash bonuses to employees, NT$0 as remuneration to directors and supervisors.

 

3. The Bonuses to Employees and Remunerations to Directors, Supervisors in 2012:

2012

Dividend Distribution Approved by the Shareholders' Meeting

Dividend Distribution Proposed by the BOD

Different Value

Different Reason

The Dividend Distribution:

-

-

1. Cash Bonuses to Employees (Unit: NT$ Thousand)

NT$0

NT$0

2. Stock Bonuses to Employees

(1)Number of Shares

0 shares

0 shares

(2)Value

(Unit: NT$ Thousand)

0

0

(3)Circulation Rate of Shares in Stock Market on Ex-right Day

0%

0%

3. Remunerations to Directors, Supervisors

(Unit: NT$ Thousand)

NT$0

NT$0

Earning Per Share (EPS):

Original EPS

Reset EPS

 

NT$-2.52

NT$-2.52

 

NT$-2.52

NT$-2.52

-

-

 

4.1.9 Buyback of Treasury Stock: (March 31, 2013)

Term of Buyback

The First Buyback in Year 2011

The Second Buyback in Year 2011

The Buyback in Year 2012

Purpose of Buyback

Shares Transferred to Employees

Shares Transferred to Employees

Shares Transferred to Employees

Period of Buyback

March 31, 2011 to May 30, 2011

June 2, 2011 to August 1, 2011

July 3, 2012 to September 2, 2012

Price Range of Buyback

NT$55 to NT$100

NT$55 to NT$80

NT$28 to NT$35

Class and Quality of Bought back

Common Shares: 28,619,000 shares

Common Shares: 27,000,000 shares

Common Shares: 10,000,000 shares

Amount of Shares Bought back

NT$1,526,797,373

NT$ 1,341,450,925

NT$ 271,182,250

Number of Shares having been written off and Transferred

-

-

-

Number of the Company Shares Held in accumulation

28,619,000 shares

55,619,000 shares

65,619,000 shares

Number of the Company Shares Held in accumulation out of the Total Number Shares issued (%)

1.011%

1.964%

2.314%

 

4.2 Corporate Bonds:

Corporate Bonds

The 1st Overseas Unsecured Convertible Bonds

The 2nd Overseas Unsecured Convertible Bonds

Issuing Date

August 10,2010

August 10,2010

Denomination

US$100,000

US$100,000

Listing

Expected to be on the Singapore Stock Exchange

Expected to be on the Singapore Stock Exchange

Issue Price

US$100.0000

US$100.0000

Issue Size

US$300,000,000

US$200,000,000

Coupon Rate

0%

0%

Maturity Date

5 years from the Issuing Date

7 years from the Issuing Date

Cuarantor

None

None

Trustee

Citigroup International Limited

Citigroup International Limited

Underwriters

Lead Underwriters:

J. P. Morgan Securities Ltd.

Citigroup Global Markets Limited

Local Lead Underwriter:

Grand Cathay Securities Corporation

Lead Underwriters:

J. P. Morgan Securities Ltd.

Citigroup Global Markets Limited

Local Lead Underwriter:

Grand Cathay Securities Corporation

Legal Counsel

None

None

Auditor

Sonia Chang and Agnes Yang

Sonia Chang and Agnes Yang

Repayment

Unless previously redeemed, repurchased and cancelled or converted, the Bonds will be redeemed by the Issuer on the Maturity Date at the amount which represents for the holder of the Bonds the par value of the Bonds plus a gross yield of 0.43% per annum, calculated on a semi-annual basis.

The actual gross yield shall be jointly determined by the Issuer and the Lead Underwriters based on the market conditions on the pricing date.

Unless previously redeemed, repurchased and cancelled or converted, the Bonds will be redeemed by the Issuer on the Maturity Date at the amount which represents for the holder of the Bonds the par value of the Bonds plus a gross yield of 2.5% per annum, calculated on a semi-annual basis.

The actual gross yield shall be jointly determined by the Issuer and the Lead Underwriters based on the market conditions on the pricing date.

Outstanding

US$173,400,000

US$148,800,000

Redemption or Early Repayment Clause

A.The Issuer may early redeem the Bonds in whole or in part at any time after 3 years following the Issuing Date at the Bonds'applicable Early Redemption Amount, if the Closing Price of the common shares of Acer traded on TSE (using the price after conversion of such price into U.S. dollars at the then prevailing exchange rate on the relevant dates) reaches 130% or above of the applicable Early Redemption Amount divided by the Conversion Ratio, defined to be the principal amount of Bonds divided by the Conversion Price at that time (translated into U.S. dollars at a fixed exchange rate determined on the pricing date) for 20 consecutive trading days. The actual date from which the Issuer may early redeem the Bonds will be jointly determined by the Issuer and the Lead Underwriters based on the market conditions on the pricing date.

B. The Issuer may redeem all outstanding Bonds at the Bonds' applicable Early Redemption Amount, in the event that more than 90% of the Bonds have been redeemed, repurchased and cancelled or converted.

C. If as a result of changes to the relevant tax laws and regulations in the ROC, the Issuer becomes obligated to pay any additional costs, the Issuer may redeem all Bonds at the Bonds' applicable Early Redemption Amount. Bondholders may elect not to have their bonds redeemed but with no entitlement to any additional amounts or reimbursement of additional tax.

A.The Issuer may early redeem the Bonds in whole or in part at any time after 3 years following the Issuing Date at the Bonds'applicable Early Redemption Amount, if the Closing Price of the common shares of Acer traded on TSE (using the price after conversion of such price into U.S. dollars at the then prevailing exchange rate on the relevant dates) reaches 130% or above of the applicable Early Redemption Amount divided by the Conversion Ratio, defined to be the principal amount of Bonds divided by the Conversion Price at that time (translated into U.S. dollars at a fixed exchange rate determined on the pricing date) for 20 consecutive trading days. The actual date from which the Issuer may early redeem the Bonds will be jointly determined by the Issuer and the Lead Underwriters based on the market conditions on the pricing date.

B. The Issuer may redeem all outstanding Bonds at the Bonds' applicable Early Redemption Amount, in the event that more than 90% of the Bonds have been redeemed, repurchased and cancelled or converted.

C. If as a result of changes to the relevant tax laws and regulations in the ROC, the Issuer becomes obligated to pay any additional costs, the Issuer may redeem all Bonds at the Bonds' applicable Early Redemption Amount. Bondholders may elect not to have their bonds redeemed but with no entitlement to any additional amounts or reimbursement of additional tax

Covenants

None

None

Credit Rating

None

None

Other rights of Bondholders

Amount of Converted or Exchanged Common Shares,GDRs or Other Securities

US$126,600,000

US$51,200,000

Conversion Right

In accordance with indicative Offering Plan for an Issue of Overseas Unsecured Convertible Bonds

In accordance with indicative Offering Plan for an Issue of Overseas Unsecured Convertible Bonds

Diluyion Effect and Other Adverse Effects on Existing Shareholders

When all The 1st and 2nd Overseas Unsecured Convertible Bonds convert into common shares, the maximum share dilution will be 6.14%. And this CB is issued at premium; therefore, it will not be a material adverse effect on the shareholders equity.

Paying & Conversion Agent

Citibank N.A. London Branch

Citibank N.A. London Branch

 

4.2.1 The Data ofConvertible Bonds

1. The 1st Overseas Unsecured Convertible Bonds:

 

Overseas Unsecured Convertible Bonds

The 1st Overseas Unsecured Convertible Bonds

Period

Item

2012

As of March 31, 2013

Market Price

Highest

US$99.837

US$ 100.382

Lowest

US$93.594

US$ 99.298

Average

US$98.005

US$ 99.770

Conversion Price

NTD$102.01

NTD$102.01

Conversion Price in

Issuing Date

August 10,2010

NTD$110.76

August 10,2010

NTD$110.76

Conversion Target

Common Shares of Acer

Common Shares of Acer

 

2. The 2nd Overseas Unsecured Convertible Bonds

 

Overseas Unsecured Convertible Bonds

The 2nd Overseas Unsecured Convertible Bonds

Period

 Item

2012

As of March 31, 2013

Market Price

Highest

US$103.201

US$ 103.758

Lowest

US$86.959

US$ 102.918

Average

US$98.833

US$ 103.370

Conversion Price

NTD$104.96

NTD$104.96

Conversion Price in

Issuing Date

August 10,2010

NTD$113.96

August 10,2010

NTD$113.96

Conversion Target

Common Shares of Acer

Common Shares of Acer

 

4.3 Special Shares:

Not applicable.

 

4.4 Global Depository Receipts (GDRs) Issuance (March 31, 2013)

Date of issuance

 

Description

November 1,1995

July 23, 1997

Date of issuance

November 1,1995

July 23, 1997

Location of issuance and transaction

London

London

Total amount of issuance

US$220,830,000

US$160,600,000

Unit price of issuance

US$32.475

US$40.15

Total number of units issued

6,800,000units

4,000,000units

Sources of valuable securities demonstrated

Capital increased in cash

Capital increased in cash

Number of valuable securities demonstrated

Each unit stands for Acer's 5 common shares

Each unit stands for Acer's 5 common shares

Rights and obligations of GDR holders

Same as Acer's common shareholders

Same as Acer's common shareholders

Consignee

None

None

Depository organization

Citicorp

Citicorp

Custodian organization

Citibank Taipei Branch

Citibank Taipei Branch

Balance not retrieved

6,913,939 units of Global Deposit Receipt as representing 34,569,695 shares of common stocks

Method to allocate fees incurred during the period of issuance and existence

The expenses incurred by issuance being taken to offset premium reserve. Expenses incurred during existence being taken as expenses of the current term.

The expenses incurred by issuance being taken to offset premium reserve. Expenses incurred during existence being taken as expenses of the current term.

Any key issue for the depository and custodian agreements

None

None

Market Price Per Share

 

2012

 

Highest

US$ 7.46

Lowest

US$ 3.66

Average

US$ 5.30

Until March 31, 2013

 

Highest

US$ 4.61

Lowest

US$ 4.06

Average

US$ 4.29

 

4.5 Employee Stock Options (March 31, 2013) 

Employee Stock Option Granted

E-ten

First Grant of 2007

First Grant of 2009

First Grant of 2010

Second Grant of 2010

Approval Date by the Authority

June 06, 2007

July 27, 2009

July 20, 2010

July 20, 2010

Grant Date

August 22, 2007

Octorber 30, 2009

Octorber 29, 2010

June 15, 2011

Number of Options Granted

9,345,794 units(Note1)

14,000 units(Note2)

4,000 units(Note2)

10,000 units(Note2)

Percentage of Shares Exercisable to Outstanding Common Shares (%)

0.329

0.494

0.141

0.353

Option Duration

6 years

3 years

3 years

3 years

Source of Option Shares

New common stocks

Vesting Schedule

2nd Year: up to 50%

3rd Year: up to 75%

4th Year: up to 100%

From the second anniversary of the grant date, except that all or partial options revoked by the company, 100% vested options can be exercised without conditions

Shares Exercised

 4,931,599 shares

1,927,000 shares

0 shares

0 shares

Value of Shares Exercised

NT$ 206,246,673

NT$ 72,917,680

NT$ 0

NT$ 0

Invalid Shares

2,546,347 shares

120,000 shares

-

-

Shares Unexercised

 1,867,848 shares

 11,953,000 shares

 4,000,000 shares

 10,000,000 shares

Adjusted Exercise Price Per Share

NT$ 38.30

NT$ 37.84

NT$ 45.04

NT$ 25.99

Percentage of Shares Unexercised

to Outstanding Common Shares (%)

 0.066%

0.422%

0.141%

0.353%

Impact on Shareholders' Equity

Dilution to Shareholders' Equity is limited.

Note 1.One unit shall purchase one Acer common share

Note 2.One unit shall purchase one thousand Acer common shares

 

4.6 Mergers, Acquisitions, and Issuance of New Shares Due to Company Acquisitions: 

 

4.6.1 Underwriter's Opinion for the Mergers and Acquisitions.

1. Underwriter's Opinion of the Impact of Acer's Operating Business, Financial Aspect and Stock Holders' Equity

Acer Incorporated (thereafter "Acer") completed a capital raise by issuing 122,178,242 shares of common stock on 12nd January, 2012, then acquired 28,791,209 shares of iGware common stock by share-swap, and then completed the registration process of aforementioned transaction by 9th March, 2012. In accordance to Item 8, Paragraph 1, Article 9 of "Regulations Governing the Offering and Issuance of Securities by Securities Issuers", we, as the lead underwriter, provide evaluation regarding the impact of the aforementioned share-swap to Acer's business, financial performance and shareholders' equity in the first quarter of 2012:

(1)Impact to Corporate Business

Acer is an international hi-tech company. Its main business is development, design, marketing and service of Acer-brand desktop computer, laptop computer, server, LCD screen, digital family and related products. Through the share-swap, Acer would acquire and utilize the cloud core technology and capacity of iGware in creation of Acer Cloud, in order to serve vast Acer product user at an open platform. Acer Cloud would enable users to consolidate all their Acer products, including personal computer, tablet computer and smart-phone; the users would be able to enjoy and effectively manage all individually-owned Acer information and communication equipment as well as contents under superior safety mechanism of Acer Cloud. As Acer and iGware shares R&D source and achievement, Acer launched Acer Cloud service at 2012; the beta version of Acer Cloud has been available at North America and Greater China region since second quarter of 2012, and then has been subsequently available at France, Germany, Italy and United Kingdom by 31st August of 2012. Consumers may download Acer Cloud at Google Play. The "IT Month" of December 2012 focus on cloud service, smartphone, 4k high-resolution large-size television, wireless communication and human-face identification, and Acer utilized the marketing opportunity of IT Month by exhibiting the first Acer cloud smartphone at Acer's showroom "Unlimited Exploration Hall", displaying how smartphone and home cloud server are connected and the consequence of smart life created by this new technology. Acer also offered actual experience to audiences of Unlimited Exploration Hall, promoting the efficiency of Acer cloud service that is not limited by location and free of charge. With the open platform beyond Android and Windows, a user may transfer a picture taken by smartphone to home computer immediately, and may open music or office documents in home computer with his smart phone. Acer cloud service is expected to be able to support iOS, Android and Windows. The launch of Acer Cloud is a strong evidence that share-swap is beneficial to business of Acer.

(2)Impact to Financial Performance

As cloud technology development becomes the industrial major trend, the acquisition of iGware is a part of Acer's long-term development strategy, and has nothing to do with short-term performance. It is expected that in the future 10 years, Acer Cloud will be one of the major differentiation of all Acer products. Acer Cloud hopefully upgrade Acer brand, create brand equity, and becomes a positive factor of Acer's EPS and Book Value per Share in the long run.

(3)Impact to Shareholders' Equity

Acer expands its business segments through the share-swap, and the launch of Acer Cloud would generate revenue and profit, which consequently improves shareholders' equity. It is a proof that share-swap is beneficial to shareholders' equity.

(4)Synergy after Share-Swap

The share-swap reference date is 12nd January, 2012, and registration process of aforementioned transaction was completed by 9th March, 2012. Both Acer and iGware does its best effort on post-merger consolidation and cooperation in sales, back-up support, finance and other functions since completion of share-swap. It is expected that synergy of the consolidation will appear gradually.

2. Execution Update and Impact of Acer's Stock Holders' Equity of the Unachieved Goals: Not applicable.

 

4.6.2 Resolutions of Mergers and Acquisitions in the Meeting of the Board of Directors in the Previous Year:

To Report the Shares Acquirement of iGware Inc. by Receiving Assignment of Shares and Cash Investment

(1) In order to develop mid to long-term layout and build up unique Acer Cloud system to obviously promote Acer brand positioning and brand value. The Company acquired iGware Inc.("iGware") by receiving assignment of shares and cash investment with the result that iGware has become and been merged into Acer Cloud Technology Inc., a 100% owned subsidiary of the Company, which approved by the BOD on July 21, 2011 and with the approval of the Investment Commission, Ministry of Economic Affairs("MOEA"), and January 3, 2012 Order No. Financial-Supervisory-Securities- Issue 1000062734 of the Financial Supervisory Commission ("FSC"), Executive Yuan.

(2) According to the executed Agreements, the exchange ratio goes to 1 iGware common share for around every 4.24 existing Acer shares. Fractional share shall be substituted with cash, except the combination of shares by some iGware shareholders.

(3) The share exchange date was set on January 12, 2012, and the Company totally issued 122,178,242 new shares and USD 150 million to acquire 100% shares of iGware. The shares conversion and capital amendment registration were approved by March 9 2012 per Order No. Economic-Authorization-Commerce 10101035580 of the Department of Commerce, MOEA.

5. Acer's Business

5.1 Business Scope

5.1.1 Business Portfolio

Acer's core business comprises of the marketing, R&D, design, sales, to services of our brand name products that include the personal computer, LCD monitor, server, projector, tablet PC, smartphone, and ICT devices. Currently, we are also actively developing AcerCloud applications and services.

PC remains the core of Acer's business. In 2012, notebook PCs accounted for 66% of the total revenues from ICT product lines, while desktops contributed 16%, and displays took 8%.

5.1.2 Industry Highlights

The ICT industry has entered the era of three ecosystems - iOS, Android and Windows - which shall co-exist and compete with each other. No single operating platform can serve the dominant role. In the past, the winning factors were associated with cost, speed, and scale. Now, the keys to success lie in the ability to providing the ultimate user experience, and creating product differentiation and customer value.

In addition, as the whole ICT industry is experiencing a profound paradigm shift, there are more and more categories in the PC industry than before, along with the emergence of many cross-category devices. With changing criteria on customer purchase, the market sell-through has become harder to forecast.

In terms of mobile devices, we can no longer focus on traditional notebooks. The growing momentum for the future comes from tablets, Ultrabooks, and touch notebooks. Due to the rising demand for touch and type "duality" products and maturity of the tablet PC market ready for higher growth, we expect an accelerated growth in 2013.

5.1.3 Technology and R&D

In 2012, Acer spent NT$1.5 billion on R&D, which accounted for 0.42% of our total revenue and focused on the user interface, industrial design, ICT related hardware and software, and cloud technology. After a year of intense research and development, AcerCloud achieved visible result, and has extended its support across three major operating systems: Windows, Android and iOS. Users can easily manage their personal multimedia and data files on a variety of digital devices regardless of which operating system they are running.

Acer has spent a lot of effort in developing green products as well. For example, we launched the eco-friendly S235HL monitor featuring mercury-free LED technology and conserves up to 68% power. This model won both the coveted iF product design award of Germany and Computex design & innovation award of Taipei in 2012. In addition, the Aspire S7 Ultrabook uses 94% less aluminum alloy than other unibody designs, therefore saves more energy. Recently we also introduced the B6 and V6 series commercial LED-backlit monitors made with post-consumer recycled plastic and are EPEAT gold registered for environmental protection in Europe and USA.

5.1.4 Long and Short Term Business Plan

In the short term, Acer will develop innovative products with differentiation, establish a clear brand positioning, and create value for our customers. Moreover, we will strengthen the tablet, Ultrabook and touch device business, and expand smartphone operations step by step.

In the long run, we will strive to enhance our brand positioning, increase operating margin, and continue to develop AcerCloud services as well as commercial products.

5.2 Market Highlights

5.2.1 Market Study

Acer's key market is EMEA (Europe, Middle East, Africa), followed by Pan America, Asia Pacific, and Greater China. Last year, the revenue from EMEA accounted for 38% of Acer's total revenue, Pan America region held 28%, Asia-Pacific took 18%, and Greater China contributed 16%.

In terms of shipments, according to market research firm, IDC, Acer ranked No. 4 worldwide for total PCs with a market share of 9.6%, No.3 for notebooks worldwide and held 12.8% of the share in 2012. Acer also ranked No.2 for total PCs and notebooks in both EMEA and Asia Pacific.

In addition, many of Acer's OEMs are based in Chongqing, which has steadily improved its local infrastructure, supply chains and overall production environment. Hence, we have significantly increased our notebook manufacturing and shipments from Chongqing.

5.3 Keys to a Sustainable Future

5.3.1 Sustainable and Mutually Beneficial Business Model

Acer adheres to a channel business model that involves collaboration with first-class suppliers and distributors, leveraging their resources and ultimately, sharing the fruits of success among all partners. In addition, our low capital and operating expense policy has been beneficial to the steady growth of our business operations.

5.3.2 Simplify to Win

Focusing on our own brand as the core business, Acer operates on mainstream products. We streamline our multi-brands and models, and simplify operating procedures in order to avoid back-end and front-end operation complications. By placing the main resources on innovation, design, and quality, we can bring more values for the consumers.

5.3.3 Fast and Efficient Global Operations

Having a single global top management team, Acer makes decisions quickly on major issues, matched with good executions. Also, with a flexible and efficient global logistics capability, we can respond to market demand in a timely manner.

5.3.4 End-to-End Marketing Strengths

Thinking from the consumers' perspectives, Acer understands and develops innovative products to meet their real needs. We rapidly bring these products to market for consumers and achieve high performance sales.

 

Appendix

1. Key Buyers and Suppliers Accounting Over 10% of Total Net Sales and Purchase:

(1) Key Buyers for Acer Inc. (Parent Company)

 

Unit: NT$ Thousand

Item

Year 2011

Year 2012

Current Year as of Mar.31,2013

From

Amount

Percentage of total net sales (%)

Relationship with Acer Inc.

From

Amount

Percentage of total net sales (%)

Relationship with Acer Inc.

From

Amount

Percentage of total net sales (%)

Relationship with Acer Inc.

1

AEG

116,322,012

28.67

(Note 1)

AEG

125,448,158

34.84

(Note 1)

AEG

27,796,198

36.78

(Note 1)

2

AAC

104,884,601

25.85

(Note 1)

AAC

81,802,342

22.72

(Note 1)

AAC

16,419,034

21.73

(Note 1)

3

AAPH

68,122,014

16.79

(Note 1)

AAPH

59,444,642

16.51

(Note 1)

AAPH

13,739,154

18.18

(Note 1)

4

ACCN

40,231,472

11.17

ACCN

8,257,607

10.93

(Note 1)

Note 1: Subsidiary of the Company.

 

(2) Key Suppliers for Acer Inc. (Parent Company)

Unit: NT$ Thousand

Item

Year 2011

Year 2012

Current year as of Mar. 31 ,2013

From

Amount

Percentage of total net purchase (%)

Relationship with Acer Inc.

From

Amount

Percentage of total net purchase (%)

Relationship with Acer Inc.

From

Amount

Percentage of total net purchase (%)

Relationship with Acer Inc.

1

Supplier A

96,100,604

27.05

none

Supplier A

67,043,187

21.12

none

Supplier A

 13,695,517

22.57

none

2

Supplier B

45,847,328

12.91

none

Supplier B

 38,573,549

12.15

none

Supplier B

9,858,116

16.25

none

Supplier D

37,246,411

10.48

none

Supplier C

37,230,425

11.73

none

Supplier D

6,282,182

10.35

none

Supplier D

31,917,676

10.05

none

Others

176,068,530

49.56

Others

142,695,628

44.95

Others

 30,840,713

50.83

Total

355,262,873

100.00

Total

317,460,465

100.00

Total

60,676,528

100.00

 

2. Production Value in the Last Two Years:

Not applicable.

3. The Sales Value in the Last Two Years:

Unit: NT$ Thousand

Year

 

Major production

2011

2012

Domestic Sales

Foreign Sales

Domestic Sales

Foreign Sales

Computer

10,778,052

314,562,452

8,869,823

292,620,511

Peripherals & Others

7,330,797

73,042,567

6,673,833

51,780,417

Total

18,108,849

387,605,019

15,543,656

344,400,928

 

 

 

 

5.4 Employees

5.4.1 Global Human Asset Management

Employees are the Company's key assets and the main driver of business growth. Acer has fostered a work environment that empowers employees by entrusting them with the tasks matched to their skill or qualification. There are clear objectives and reward for achievement, extensive communication and interaction among coworkers, constant encouragement for innovations, and an effective decision making process. On-the-job training provides the ideal platform for learning and development.

 

As a result of employees' joint effort, Acer has received numerous industry and media recognition. For example, Acer has been voted by Reader's Digest readers as a "Trusted Brand" in Asia for consecutive years since 1999; in 2007 Forbes selected Acer as one of the "Fabulous 50" - a list of the best of Asia-Pacific's biggest listed companies. In 2011, Forbes selected Acer as one of "Most Popularity in 100 Global Companies".Summary of Acer's Workforce:

-By Manpower, Age and Years of Service

Date

Category

December 2011

December 2012

March 2013

Manpower

7,894

7,967

7,956

Average Age

37.2

36.0

36.2

Average Years of Employment

 5.4

 6.2

6.3

Male (%)

 66.1%

66.8%

66.7%

Female (%)

 33.9%

33.2%

33.3%

.

 

-By Job Function

Date

Job Function

December 2011

December 2012

March 2013

General Management

220

192

192

Sales & Product Marketing

2,841

2,483

2,481

Customer Service

2,239

2,382

2,355

Research & Development

922

1,416

1,424

Sales Support

1,015

861

872

Administration

657

633

632

Total

7,894

7,967

7,956

- By Education Level

Date

Education Level

December 2011

December 2012

March 2013

Doctor of Philosophy

0.3%

0.4%

0.4%

Master's Degree

23.3%

24.1%

24.1%

Bachelor's Degree

43.7%

43.8%

43.8%

Vocational Study

28.7%

28.0%

28.0%

Senior High School or below

4.0%

3.7%

3.7%

Total

100%

100%

100%

5.4.2 Recruitment

The Company abides to each country's labor laws and customs. We are committed to providing equal opportunities and prohibiting discrimination against candidates in regards to their ethnic origin, gender, age, religion or nationality, and we are sticking to the principle of putting the right people at the right position. Acer seeks high-potential candidates with multi-disciplinary backgrounds in order to build a strong global workforce.

5.4.3 Training and Development

In facilitating Acer's strategy transformation, the focused areas of our training in 2012 covered promotion of Acer's Brand Values, Creating Value for Customers through Innovation, Streamlining Process Management for Enhancing Efficiency, Enhancing Product and Service Quality, Conducting Effective Internal and External Marketing, and strengthening core competencies of staff and managerial competencies at each level, in pursuit of highly effective implementation of strategy.

The training were conducted through new-hire training, general training, professional training, managerial competency training, and online learning. To assure training quality and effectiveness, all trainings are carried out in compliance with the "Management Procedures for Internal and External Training." Training in Taiwan area in 2012 included the offering of 176 training courses which attracted 4,256 personnel for a total of 14,721 person-hours of training. There have been 6,338 personnel who undertook a total of 32,959 person-hours of training worldwide.

Training Scheme and Implementation

l New Employee Training: Orientate the new employees by shaping essential mindset and providing essential knowledge, covering the overview of Acer's organization, culture, core values and standards of business conduct, policies and systems, Welfare Committee and Employee Representative Meeting, IP sense, etc. In 2012, 374 new employees have attended the training.

l General Skill Training: The training covers essential common knowledge and skills, e.g., Electrostatic Discharge protection, Tools for Systematic Innovation- AIM (Aachener Innovation Model), Problem Analysis and Improvement-DMAIC approach, Mind Mapping, negotiation skill, etc. In 2012, we have 1,816 Taiwan employees who received the General Skill training.

l Professional Training: The training is provided for advancing the professional knowledge and skills. For example, Tablet Devices Product Trend and Application, Touch Device Tech Development Analysis, App marketing, ICT consumer needs etc.

l Managerial Training: In the course of Acer's transition efforts, the training focus at each managerial level will be leading changes, boosting morale, selecting and retaining talents. The typical managerial training for senior level is Dynamic Competitive Strategy, Leading Changes. Communication and Coaching, and High-Performance Team-working are held primarily for intermediate mangers. For supervisory level of mangers, the emphasis will be on the fundamental managerial competencies- plan, do, check, action and basic coordination and communication skills.

l By abiding by the regulations of OHSAS 18001 requirements, we have General Safety, Health, and Hygiene Training for our staff. In 2012, there have been 7 sessions held, with 841 people receiving the training

Multiple Ways of Learning and Development

Each employee is provided with multiple development paths to enhance the profession--- for example, from company within, such opportunities can be found as on-the-job training, coaching, job rotation, speech, online learning and reading seminar, etc. For the company outside, they include profession club seminars, short-term intensive training hosted by the prestigious universities or training institutions. For enhancing staff professional skills, we have the 'Regulations of Acquiring Professional Certificates', regulating the subsidiary for test-taking fees, and further, the dedicated incentives for the staff who successfully get the essential professional certificates. 

5.4.4 Compensation

Acer provides a competitive salary package to attract and retain high-potential human assets. The Company surveys global IT companies' salary levels annually, to ensure that our salary packages are adjusted accordingly and reasonably to reflect market conditions. On top of the monthly salary, the Company offers the bonuses that are differentiated from the performance of business unit and each individual. Taking Taiwan for example, in addition to the fixed monthly salary and festival bonuses, Acer offers incentives that reward new innovations, intellectual property rights, sales achievements, performance bonus and profit sharing.

5.4.5 Welfare

The Company abides to each country's labor laws and customs, and strives to provide a comfortable working environment, attractive welfare programs, candid communication ways to enhance productivity and creativity. Taking Taiwan for example, Acer has established a welfare committee that initiates activities for employees' welfare. For example: Acer provides group insurance, educational grants, Acer Family Days, internal social clubs, speeches on topics of arts appreciation, domestic and overseas holiday breaks, gift money for wedding or funeral, and emergency relief measures, etc. Besides, we have recreation and leisure facilities installed in office area to release employees' pressure from work, and provide health-promotion programs to keep the body and mind well-balanced.

 

5.4.6 Pension

The Company abides to each country's labor laws and customs. Taking Taiwan for example, Acer conforms to the Labor Standards Act and Labor Pension Act by contributing a portion of employees' salaries toward a pension scheme. Besides, employees who have served for 15 years and have reached 50 years of age can apply for early retirement.

5.4.7 Employee Relations

Acer respects employees' opinions and is dedicated to maintaining a harmonious relation between managers and their team members. In the past two years, Acer has not suffered any financial loss from employee conflict.

 

Taking Taiwan for example, Acer offers multiple channels for interaction in order to improve two-way communication:

 

l A Dedicated Hotline: A hotline for each supporting function has been set up for employees to call, in confidence, to express concerns or issues. Acer will provide counsel and/or resolve the issues in the most efficient way.

l Open and Candid Communication Channels: Employees can report areas of concern to their immediate supervisor or choose to convey to higher authorities for resolution. Meanwhile, the Company Chairman & CEO meets face-to-face with employee representatives from each office area on a quarterly basis, to discuss areas of improvement and respond to issues. The Chairman & CEO also assigns the relevant member(s) to aggressively follow up on change or improvement, and to report on progress at the next quarterly meeting to ensure the resolution effectiveness. The meeting minutes are published on the Company Intranet for all employees' attention.

l Employee Opinion Survey and People Management Effectiveness Survey: Both surveys aim to explore the various aspects of the experience working at Acer, and pinpoint where the attention is addressed, and thus guide to make some essential improvements for the overall Company and immediate managers' people management skills, respectively.

5.4.8 Acer Employee Management

To ensure business growth on a healthy and comprehensive management system, the mutual rights and obligations between the Company and employees are explicitly specified as follows:

 

l Authority Management

According to the levels of management responsibilities, "The Table of Authority Approval", "Regulations on Delegated Deputy", and the "Scheme of Job Categories and Titles" are regulated to assure well-functioned in all layers of directive operations, and furthermore, to provide staff with a sound roadmap for career development paths.

 

l Standards of Business Conduct

For enhancing the overall corporate competitiveness and playing a responsible role in the social, economic, and environmental conduct of our operations, the Standards of Business Conduct of Acer are thus updated. By the guidance of the Standards of Business Conduct, we strengthen our corporate culture aiming to protect Acer's legitimate business interests around the world, and further assure the service quality of our customers, suppliers, and other business partners as well as the communities in which we operate.

Following are the essences of the Acer's Standards of Business Conduct.

1. Create work environment with care, respect, and fairness.

2. Continue to promote technological innovation and provide high quality-assured products and service.

3. Comply with the laws for maintaining free and fair competition.

4. Promote research and development of advanced technologies and products that will benefit the environment.

5. Comply with all intellectual property rights laws and regulations.

6. Prohibit any employees from engaging in any activities that lead to illegal or improper business interactions.

7. Employ a fair and objective evaluation process for selecting the business partners.

8. Conduct corporate communication based on integrity and objective facts.

9. Ensure the advertisements are truthful and accurate.

10. Comply in full with all accounting laws and regulations

11. Obey the laws regarding with lenders and export credit.

12. Refrain employees from receiving improper personal benefits

13. Forbid illegal or improper payments unaccepted by local business laws or sound business practices.

14. Prohibit employees from accepting inappropriate value of gifts or customary business amenities beyond a reasonable level.

15. Protect company assets (including physical assets, intellectual property rights, and information assets).

16. Safeguard the confidential and proprietary information and avoid using such information for pursuing personal interests.

17. Ban the use, sale, or possession of illegal drugs

18. Undertake all activities in harmony with the community and provide voluntary services.

19. No political contributions shall be made unless permitted by the applicable laws in locals

l Sexual Harassment Prevention Measures

The Company is dedicated to ensuring gender equality and human dignity in workplace, securing work environment free from sexual harassment and discrimination. With the promise, the Prevention Measures and Disciplinary Actions on Sexual Harassment is enacted, which specifies the reporting channels, dealing procedures, and disciplines.

 

l Declaration of Secrecy and Intellectual Property Rights

The Company places extreme importance on the protection of intellectual properties rights. All staff are required to have the Declaration on Non-Disclosure Agreement signed when onboard, which declares the obligations to protect confidential information and the restrictions on use of the confidential information during the employment period and employment termination.

 

 

5.5 Important Contracts

Nature of Contracts

Contracting Parties

Beginning and Ending Dates of Contracts

Major Content

Restrictive Clauses

Software License Agreement

Microsoft Inc.

Aug 1, 2011~Jul 31, 2014

Obtain license from Microsoft for using certain software

Confidential

Non-assignable

Patent License Agreement

IBM Corporation

From Oct. 29, 2003 ~

Cross license arrangements for certain patents

Confidential

Non-assignable

Nov 22, 2006 until the end of related patents period

Lucent Technologies GRL, LLC

Jul 31, 2010~Jul 30, 2013

Cross license arrangements for certain patents

Confidential

Non-assignable

MPEG LA, LLC

Jun 1, 1994 until the expiration of all MPEG-2 Patent Portfolio

Obtain license for MPEG-2 encoding/decoding patents

Confidential

Non-assignable

Hewlett-Packard Development L.P.

Jun 13, 2008~Jun 12 2014

Cross license arrangements for certain patents

Confidential

Non-assignable

Microsoft Corp.

Sep 1, 2011~Aug 31, 2014

Cross license arrangements for certain patents

Confidential

Non-assignable

Syndicated Loan Agreement

A bank group led by the arrangers, Citibank Taiwan(management), Taipei Fubon, Bank of Taiwan,

Chinatrust, Taishin, Taiwan Cooperative, DBS, Landbank,

Taiwan Business, Megabank, Chang Hwa and ANZ.

Nov 17, 2011-Nov 16, 2016

A maximum syndicated financing amount of NT$15 billion

Confidential, Non-assignable, Certain financial ratio covenants

Sale Agreement

National Center for High-performance Computing

Oct 28,2010~

Mar 27, 2014

construct a high-performance computing system and provide competent after-service

Confidential, Non-assignable

 

6. Corporate Social Responsibility

Acer aims to actively meet our Corporate Social Responsibility (CSR) within the context of stable profit and sustainable growth. Above all, we are dedicated to seeing the world grow as a whole by pursuing global economic growth, environmental protection and social progress. The vision of a sustainable Acer can be achieved through corporate responsibility, innovation, increasing profitability, operational efficiency and sustainability. We embedded Acer spirit of "Innovative Caring," in our business operation and dedicated to enhancing corporate performance, ensuring benefits for employees and shareholders, and providing consumers with state-of-the-art technology. To visualize Acer vision and spirit for a sustainable development, our CSR agendas have encompassed several important topics including environment, safety and health management, supply chain management, stakeholders communication and community involvement.

In spring 2008, the Board of Directors highlighted the milestones for embedding CSR within Acer, and designated Acer Inc. CEO as the Corporate Sustainability Officer of the Corporate Sustainability Office (CSO), which was set up to respond to challenges from the organizational level. We spent almost one year to complete an integrated strategy and set the 2008-2010 CSR action plans for a sustainable Acer. Next phase, with Acer's CSR policy as foundation, we will take into account stakeholders' suggestions to establish longer-term CSR targets and strategies to internalize CSR programs throughout the whole global organization and suppliers. In 2012, we established GCSRC (Global Corporate Social Responsibility Committee) to include the heads of the most critical departments to create the CSR and sustainability practice strategy, to come out the annual implementation plan, and to examine the implementation performance.

In 2012, our concrete works in the environment, safety and health management aspects, we get the third party verification for the GHGs emissions data of Acer Group global operation sites in 2009 and 2011, implementation of office carbon reduction program, enhance suppliers' capacity to greenhouse gases management, and launch of several projects to improve the health and safety of our employees. For supply chain management, we expanded suppliers' Social and Environmental Responsibility (SER) on-site audits, investigated smelters in our supply chain for conflict minerals issue. Acer has taken multiple actions to comply with California Transparency in Supply Chains Act of 2010 (SB 657).

 

6.1. Environment, safety and health management

6.1.1 The Environmental Protection

1. Energy and Climate Change

We continue to implement the Acer Integrated Energy and Climate Change Policy and get the third party verification for the GHGs emissions data of Acer Group global operation sites in 2009 and 2011.We also increase green and renewable electricity in our major operation in Europe like German and Italy to reduce our carbon emission.

Regarding the cooperation with suppliers, we have continually encouraged our major suppliers to respond to CDP supply chain questionnaires on GHG emissions and response measures to climate change, and make this information openly available or disclose it to other members of the Supply Chain Program. Besides, we also encourage our suppliers to set reduction target to reduce the emission through the whole value chain. And we provide training courses for some of our suppliers and consultant to improve their capacity to respond to the questionnaire and assisted suppliers to gradually enhance their overall capacity to the climate change, carbon reduction and energy efficiency. Acer has also enhance the carbon reduction target is to reduce absolute GHG emissions by 30% below 2009 levels by 2015 and 60% below 2009 by 2020, we will fulfill the goal by implement internal energy efficiency program and procure more renewable energy and green electricity.

2. Green Product Management

Acer is fully aware of the potential impact our products may have on the environment during its whole life cycle. Hence, our product design takes into consideration the ways to reduce environmental loading from the product development stage, in addition to the emphasis on the user needs, functionality and added value. For example, we evaluated the use of post-consumer recycled plastics in our products.

For legal compliance, we meet RoHS and WEEE directives and green related legislation requirements for green in every country while at the same time we fulfill other international requirments such as REACH and ErP. In the future, we will keep watching the development of Substance of Very High Concern (SVHC) of REACH and the ECO design requirements listed down in the implementing measures to ErP Directive.

For voluntary environmental requirement, several of our products meet the ENERGY STAR® specifications, receive Taiwan Green Mark and Sweden TCO certification and are EPEAT Gold or Sliver registered.

In 2012, we continually to introduce also some lunched PVC and BFRs free laptop and desktop computers products. Acer has been striving in a proactive way to move towards Halogenated-free products with constant efforts.

Acer continually launched thin and light based products, like Ultrabook, to meet consumer demand as well as reduce the consumption of product materials. The idea of thin and light products emerged from the concept to conserve the natural resources on Earth, such as metals and oil.

Acer always commits to offer energy-saving products. The design of Desktop, Notebook computer and Monitors are aimed to meet or exceed the criteria for the Energy Star award.

Furthermore, Acer supports the sustainable approach to forestry practices and stop the business relationship with the manufacturers that are involved in deforestation and illegal logging." And we start to apply the sustainable forest certification paper into packaging of product. Acer evaluates packaging design and material use from life cycle perspective including reduce energy consumption by less packaging and use eco-friendly materials, including recyclable, reusable and renewable, to lower the environmental impact caused by packaging.

3. Office Carbon Reduction

Acer's primary facilities are offices, and thus the electricity we consume is used for typical air conditioning and lighting. We study measures to lower the usage of electricity every year. In 2012, we adopted energy-saving lighting, replaced cooling tower with equipment that use less water and the operating time of the ventilator, equipped the pump of the cooling tower with frequency conversion, and added timers for the lighting of the restrooms. With these measures, Acer further saves electricity and reduce greenhouse gases emissions.

6.1.2 Safety and Health

1. Environmental Safety and Health Management

Acer introduced the ISO 14001 (Environmental Management System) and OHSAS 18001 (Occupational Safety and Health Management System) in the Taiwan headquarter and gradually broadens the scope. We believe these systems can help the Company to further minimize any negative impacts to the environment from its business operations while at the same time fostering the jobsite safety and health management.

2. Working Environment and Employee Safety

Acer cares the working environment where employee's safety and health would largely depend on. In 2012, we reduced the coldness of the meeting rooms on the top floor, lowered the noise of the cooling tower on the rooftop, enhanced the ventilation of the office, and prevented the fire protection coatings on the office ceilings from falling off. Acer also implemented environment, health and safety management system and conducted office sites hazards identification. We then improved items with significant risks to lower the hazards.

3. Emergency Accident Operation

Acer has established its own emergency operation procedures in the events of fire, earthquake, typhoon, power failure, water supply failure, contagious disease and other major accidents. In the fire safety aspect, we have organized a self-protection fire fighting team by the employees and their main duties are to extinguish the fire at the initial stage, evacuate the rest of the employees when necessary and reduce possible damage from the accidents.

4. Employee Health

For Labor Safety and Health education program, we keep on giving the training and a total of 841 staff received the training in 2012. Acer also cooperated with Xizhi Cathay General Hospital to provide medical services, first aid training, health lecturers, and quit smoking class.

Employees are the most important assets to Acer. In addition to a series of physical and mental health seminars, an employee leisure zone has been set up at its Taiwan headquarter along with some other recreational facilities such as basketball courts, table tennis, shooting machine, video games, and electric massage chairs. Since 2008, we have introduced visually impaired masseurs to provide massage service for employees. These various activities help Acer's employees to enrich their leisure time and better balance their professional and personal lives.

In 2012, Acer organized several movie appreciation events, arts and cultural activities, lectures about physical, mental and spiritual, outings, Acer family day, and more. A total of 34,153 colleagues and their families participated in these activities.

 

6.2 Supply Chain Management

Acer understands the impact that a brand company can make onto the society and environment from the supply chain perspective. To tackle the challenge for a sustainable environment, Acer has demanded all its suppliers to comply with the local regulations where they have business presence, additionally, Acer requires its suppliers to follow the various requirement and guidance put forward by the Company to embed the environmental protection philosophy in the supply chain management. We aim to boost the supply chain as a whole regarding as the worldwide leaders in Social and Environmental Responsibility (SER).

Acer applied to the Electronic Industry Citizenship Coalition (EICC) in May 2008 basing on which developed Acer Supplier Code of Conduct. We believe the EICC Code of Conduct can unify the rules of compliances across the industry-wise, enhance suppliers' capacity of human rights, health, safety, environment, ethics, and social responsibility in the supply chain. Acer first tier suppliers had been requested to sign Acer Supplier Code of Conduct Declaration. Moreover, we collaborated with third-party auditors and "Validated Audit Process" of EICC to launch on-site auditing.

We expanded supplier audit in social and environmental responsibility. We conducted 77 audits of our supply chain - a 93 percent increase over 2011 -covering more than one 100 thousand workers made Acer products. On the issue of conflict minerals, we requested suppliers to identify the smelters in their supply chain that supply tantalum, tin, tungsten or gold. Acer suppliers must conduct their operations in a socially and environmentally responsible way. We also join the "Implementation Programme of the Supplement on Gold to OECD Due Diligence Guidance for Responsible Supply Chains." To comply with California Transparency in Supply Chains Act of 2010 (SB 657), Acer has taken multiple actions to verify the absence of forced labor, slavery and human trafficking in supply chain, including supplier risk assessment, declaration, on-site audit and training etc.

6.3. Communication

6.3.1. Communication with Stakeholders

Acer is positioned to be a trustworthy and respectable company in the ICT industry among its stakeholders. With that in mind, we endeavor to understand stakeholder's opinions and recommendations, and build a good communication channel with them to ensure mutual understandings and respects. Stakeholders are defined as consumers, investors, suppliers, media, Non-governmental Organizations (NGOs), government, community, academia, trade organizations and others. In addition to CSR performance disclosure for stakeholders on all fronts via Acer's designated Acer Sustainability webpage, we also respond to concerns raised by stakeholders via cr@acer.com and fill out questionnaires formulated by academia, analysts, investors, customers and the NGOs.

6.3.2. Acer CSR Forum

Acer understands that to practice CSR fully requires the cooperation among all stakeholders. Acer has held annual CSR Forum since 2008. Using the forum as a dialogue platform, Acer invited stakeholders to communicate their expectations and suggestions with the its suppliers and the Taiwan ICT industry in the hopes of improving the sustainability of Taiwan's ICT industry.

6.3.3. Consumer Relation

Customers are the reason for our existence. Acer designs and conducts regular customer satisfaction surveys tailored to each region to get customer feedback and work on the area that need improvement to enhance the quality of customer service.

In addition to the regular customer satisfaction survey, we also establish a complete globalized service structure in all major localized service sites and design different service programs for variety of customers and retailers. Consumers and corporate customers can communicate with us through multiple channels including,

 

(1) Global web site download and actively update service

(2) Call center support center / technical support

(3) Direct service center

(4) Authorized service center and professional system repair company

(5) International Traveler Warranty service center

 

As number of computer and internet users increases, the data confidentiality becomes customers major concern; we are committed to the protection of customers confidential information and strictly follow Acer's privacy policies to request all Acer employee must protect customers' confidential information and private data with cautious; we also implement data protection and security related tool to protect customers personal data in the products. In the same time, a dedicate mail account is set up to handle all escalation of privacy protection related case. All of our service engineers have signed a non-disclosure agreement and prior to any actual repair, our service staff will provide the customer with a maintenance service list to the customer to decide if any private information need to be deleted or removed and store in another hard drive or memory drive to prevent confidential information from being compromised.

6.4 Community Involvement

6.4.1. Acer Volunteer Team

The Acer Volunteer Team was established in October 2004 for the purpose of giving employees a channel to contribute their spare time and energy to public welfare service. Apart from providing opportunities for interaction and friendship between employees from different departments and backgrounds, the volunteer service also bring Acer employees new life experiences and personal growth through the activities. At initial stage, the volunteer activities mainly revolved around Acer core business. In 2012, The Volunteer Team organizes a variety of charity activities including money donations, blood donations, carbon emission reductions, overseas volunteering service, after-class guidance for the children from the disadvantaged families in the Xizhi District.

6.4.2 Acer Foundation

Acer Foundation is committed to promote digital opportunity since its establishment. In 2012, Acer Foundation continued to participate in "Digital Feast-A Dream Come True" charity event by the Department of Social Welfare, Taipei City Government. This project sponsors the youths from underprivileged families, to buy quality computer facilities at an incredibly affordable price, so that they are given a digital opportunity to learn. The two Acer Digital Mobile Vans also continue to enhance digital competitiveness of the underprivileged in Hualien; in 2012, Acer sponsored two more Acer Digital Mobile Vans in the Yilan county. The mobiles were equipped with the notebooks and ICT technology and can go to the communities to deliver computer classes upon application. By this way, people can have more opportunities to learn computer and thus increase their digital competiveness which can better their lives.

Acer held "Acer Incredible Green Contest" to encourage the utilization of ICT related technologies to create environmental friendly solution. Students at all levels are encouraged to create green-centric applications to generate innovative and sustainable solutions embracing energy saving, carbon reduction, ecological conversation, and other environmental issues.

6.5 Enforcement of Corporate Social Responsibility by the Company

Item

Implementation Status

Deviations from "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies" and reasons

1. Exercising Corporate Governance

(1) The company declares its corporate social responsibility policy and examines the results of the implementation.

 

Since 2008, Acer's social responsibility agenda has focused on the following five areas: energy and climate, green product, recycling, supply chain management, and reporting. Implementation result is shown on Acer Annual CR report.

No discrepancy

(2) The company establishes exclusively (or concurrently) dedicated units to be in charge of proposing and enforcing the corporate social responsibility policies.

In the spring of 2008, to materialize the implementation of our social responsibility, a various functions and positions had been set up across the Company, including the Executive Committee of CSR in the Board, Corporate Sustainability Officer and the Corporate Sustainability Office (CSO), the CSR Working Group and the regional headquarters of the CSR Executive Committee, etc. and we established Global CSR Committee in 2012. Their major roles and responsibilities are to carry out Acer CSR agendas and achieve our CSR promises in a systematic, feasible and organized way in accordance with Acer's core value.

From the organizational level, we focus on the implementation and development of sustainability and CSR governance, the operation of the working group, the communication with stakeholders and the establishment of a smooth communication channel. We regularly update CSR information via our designated Acer Sustainability webpage and incorporate higher level communication with our suppliers and business partners in the CSR agendas.

No discrepancy

(3)The company organizes regular training on business ethics and promotion of matters prescribed in the preceding Article for directors, supervisors and employees, and should incorporate the foregoing into its employee performance appraisal system to establish a clear and effective reward and discipline system.

Acer promulgated the 'Standards of Business Conduct' (SBC) as the guidelines for all employees to follow in conducting the business operation and activities. It is every employee's responsibility to abide by the SBC. An appropriate training of SBC shall be arranged upon a new employee joining in the Company, which stresses the importance of sticking to the rules. The SBC is also built in the performance appraisal system with reward and punishment. For any staff violating the norms, the necessary disciplinary actions will be taken or even dismissal.

No discrepancy

2. Fostering a Sustainable Environment

(1) The company endeavors to utilize all resources more efficiently and uses renewable materials which have a low impact on the environment.

 

We launch the new generation of thin and light based products, Ultrabook Aspire S7, to reduce the consumption of product materials as well as lower the packaging volume to reduce the GHG emission. The Aspire S7-391 features an Acer-patented structural design wherein the cover, made of

white Gorilla® Glass 2, also forms part of the Ultrabook's framework. This design enables the S7-391 to be built super thin. This unique structural design requires minimal aluminum and uses 94% less raw material than conventional unibody designs. The Aspire S7 Series benchmark for power consumption is higher than the industry standard. It consumes 64% less power than is mandated by the ENERGY STAR® 5.2 specification. Regarding the material of product, we have introduced display products which contain 65% Post-consumer recycled plastics and keep evaluate to use in other major product line to reduce the limit resource consumption. We also use the recycled materials as major sources of our packaging to lower the use of virgin tree fiber.

No discrepancy

(2)The company establishes proper environmental management systems based on the characteristics of their industries.

 

Basing on ISO 14001 (Environmental Management System) standards, we develop Acer environmental management systems, aiming to promote pollution prevention and management and minimize any negative impacts to the environment from our business operations for the purpose of a sustainable development of the Company.

We assessed impacts on the environments from our business operations by adopting ISO 14001 standards, which cover the full product life cycle ranging from design and development, manufacturing, suppliers management, sales and marketing and after-sales services. Besides, Acer demands that its first-tier suppliers establish an environmental management system. Currently, all first tier suppliers to Acer are ISO 14001 Certified. In order to enhance the supplier's environmental management , we also request second or upstream tier's key components and assign parts suppliersto get ISO 14001 Certificated.

No discrepancy

(3) The company establishes dedicated units or assigns dedicated personnel for environment management to maintain the environment.

 

Acer organizes ISO 14001 Executive Committee to plan, implement and manage environment relating issues. The major responsibilities of the Committee are to ensure the compliance of environmental legislation through constant studies on the product and environment related laws and regulations, and timely control of the latest global movements on environmental protection issues. Both internal and external audits and management review have been implemented to ensure that ISO 14001 can be executed properly and the improvement over environment can continue in effect.

Acer broadens the ISO 14001 scope to cover Xizhi head office all business units, function units and stocks office. All units assign a dedicated person to participate in the ISO 14001 Executive Committee activities which includes relative training and operation , continue to improve the environment of the office and facilities.

 

No discrepancy

(4) The company monitors the impact of climate change on its operations and should establish company strategies for energy conservation and carbon and greenhouse gas reduction.

 

Acer identifies and assesses the risk and opportunities coming along with the climate change through hosting Acer CSR Forum annually,and joining international organization like Carbon Disclosure Project Supply Chain Program and Electronic Industry Citizenship Coalition directly. We assisted suppliers to gradually enhance their overall capacity to the climate change, carbon reduction and energy efficiency and to reach our mid-term and long-term carbon reduction target.

 

No discrepancy

3. Preserving Public Welfare

(1) The company complies with relevant labor laws and regulations,respect international labor rights principles, protects the legal rights and interests of employees,maintain no discrimination of the hiring policy, and has in place appropriate management methods and procedures.

 

Acer promulgated the "Standards of Business Conduct" (SBC) as the guidelines for all employees to follow in conducting business operation and activities. The SBC complies with local regulations, such as labor law where Acer has business presence. It embraces the diversity and culture of all employees and provides a work environment free from discrimination (based on race, color, age, gender, ethnicity, region, or nationality) in area such as employment, promotion, etc. Child labor is strictly prohibited. HR system such as employment contract, work rule, HR policy and regulations are in place to protect the legitimate interests of employees.

No discrepancy

(2) The company provides safe and healthy work environments for its employees, and organizes training on safety and health for its employees on a regular basis.

 

Environmental Safety management

At the Acer headquarters in Taiwan, a security guard is stationed at the main entrance checking the credentials of all guests and authorizing permission of entry. Employees and guests must use an access card to enter the general office areas in normal office hours. Entry into laboratories and information management system facilities requires an additionally authorized access card. During holidays and evening, entry into the office area requires an additional personal identity number. In the interest of safety for female employees, entry into women's restrooms also requires card access; inside these restrooms emergency alarms and telephones have been installed to provide a double measure of protection.

No discrepancy

Emergency ResponseAcer has organized its own firefighting unit set up for the initial line of self-defense in an emergency. The team's primary mission is to carry out initial fire extinguishing efforts and evacuate employees in the case of a fire emergency, thus reducing the impact of disaster. Acer coordinates with the Building Management Committee to conduct biannual fire safety drills and cooperates with the Fire Department to conduct updated training. Representatives are chosen from each department to set up a first-aid personnel team, fire prevention supervisor and labor safety and health management. The personnel also receive updated training and examinations to ensure they are kept well informed of the reaction procedures to lower the damages when accidents happen.

Employee Safety and Health

Acer has organized its own firefighting unit set up for the initial line of self-defense in an emergency. The team's primary mission is to carry out initial fire extinguishing efforts and evacuate employees in the case of a fire emergency, thus reducing the impact of disaster. Acer coordinates with the Building Management Committee to conduct biannual fire safety drills and cooperates with the Fire Department to conduct updated training. Representatives are chosen from each department to set up a first-aid personnel team, fire prevention supervisor and labor safety and health management. The personnel also receive updated training and examinations to ensure they are kept well informed of the reaction procedures to lower the damages when accidents happen.

 

Acer cooperates with professional medical institutions to perform health checkup for all employees on biannual basis. Based on the results of health examination, for any employee having significantly abnormal health condition, their health status will be monitored and tracked with the assistance of the medical entities. Besides, a series of physical and mental health seminars were organized for the employee.

An employee leisure zone has been set up at its Taiwan headquarter along with some other recreational facilities such as basketball courts, table tennis, shooting machine, video games, and electric massage chairs. Since 2008, we have introduced visually impaired masseurs to provide massage service for employees.

 

In Y2012, several sessions of movie theater appreciation, arts and cultural activities, lectures about physical, mental and spiritual, outings, Acer family day, have been organized. It has been 34,153 colleagues with their families participating in these various programs.

Others In addition to these jobsite safety measures, Acer conducts drinking water quality inspection, CO2 level inspections, legionnaire's disease inspection and one electromagnetic wave inspection of the office area annually. These checks go to ensure a healthy and safe office environment and to provide employees with a peace-of-mind.

(3)The company establishes the communication mechanisam with employees regularly and inform the employees about significant operation change in a reasonably way.

Acer values its employee opinions and sets up an array of communication channels including internal announcement, supporting service helpline, cross level communication, employee opinion survey, employee grievance channel, etc. Besides, the Acer Gardeners' Meeting is held quarterly and chaired by CEO. Employee representatives can take full advantage of this channel, propose their suggestions on the company's business management, working environment, and labor rights. CEO communicates with them face to face, makes resolutions and assigns the relevant department for implementation.

(4) The company establishes and discloses policies on consumer rights and interests and provides a clear and effective procedure for accepting consumer complaints.

 

Acer is a celebrated multinational brand company with business presence around the world. Service centers are established in our major operating countries, featuring a variety of service programs according

to the nature of different customer groups and sales channels in hopes of building a robust global service network. Acer's private and corporate customers can conveniently contact Acer via multiple conduits for communication:

(1) Acer Global Download

(2) Call Center/Help Center and Technical Support(3) Depot/Repair Center(4) Acer Service Partner and the Third Party Maintainer:(5) International Traveler Warranty (ITW) Repair Center:

No discrepancy

(5) The company cooperates with its suppliers to jointly foster a stronger sense of corporate social responsibility.

 

Acer regards our suppliers as part of our greater corporate family. We give clear directives to our suppliers regarding social and environmental issues such as green manufacturing and labor rights to keep them on the cutting edge, and hold regular audits and meetings to support their capacity building and ensure that our directives are being followed. In the future we expect to work even more closely together with our suppliers to solve social and environmental problems and create a sustainable supply chain.

No discrepancy

(6) The company, through commercial activities, non-cash property endowments, volunteer service or other free professional services, participates in community development and charities events.

The Acer Volunteer Team was established in October 2004 for the purpose of giving employees a channel to contribute their spare time and energy to public welfare service. The Volunteer Team organizes a variety of charity activities including blood donation, monetary donation, carbon reduction, overseas volunteering services, and after-class guidance for the children from the disadvantaged families of XiZhi District.

No discrepancy

4. Enhancing Information Disclosure

(1) The measures of disclosing relevant and reliable information relating to their corporate social responsibility.

We disclose our CSR information and CR report on the below website:

Chinese

http://www.acer-group.com/public/Sustainability/chinese/index.htmEnglish

http://www.acer-group.com/public/Sustainability/index.htm

No discrepancy

(2) The company produces corporate social responsibility reports disclosing the status of their implementation of the corporate social responsibility policy.

5. If the Company has established corporate social responsibility principles based on "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies", please describe any discrepancy between the principles and their implementation:

To boost Acer's overall competitiveness, fulfill its corporate responsibility in the social, economical and environmental aspects, and make Acer a leading brand-name in the history, the Standards of Business Conduct (SBC) were revised and promulgated in 2009 that serve as behavioral guidelines to Acer global employees providing them principles of conducting business at worldwide These guidelines no only protect Acer's global business interest in a legitimate manner but also help to enhance its service quality for customers, partners, and the communities.

 

 

6. Other important information to facilitate better understanding of the Company's corporate social responsibility practices (e.g., systems and measures that the company has adopted with respect to environmental protection, community participation, contribution to society, service to society, social and public interests, consumer rights and interests, human rights, safety and health, other corporate social responsibilities and activities, and the status of implementation.):

More information can be found at:

1. Acer Sustainability website

http://www.acer-group.com/public/Sustainability/index.htm

2. Acer Foundation website

http://www.acerfoundation.org.tw/english/index.php

7. If the products or corporate social responsibility reports have received assurance from external institutions, they should state so below:

2011 Acer Corporate Responsibility Report has been validated by SGS. The contents of the report meet the requirements of Global Reporting Initiative G3.1 Application Level B+.

 

7. Financial Standing

7.1 Five-Year Consolidated Financial Information

7.1.1 Five-Year Balance Sheet under International Financial Reporting Standards ("IFRS")

Consolidated Balance Sheet under International Financial Reporting Standards ("IFRS")

 

Unit: NT$ Thousand

  Period

Item 

Current year

as of Mar. 31, 2013

Current assets

162,471,338

Net property, plant and equipment

6,583,798

Intangible assets

39,535,035

Other assets

10,850,093

Total assets

219,440,264

Current Liabilities

Before Distribution

124,142,561

After Distribution

Un-appropriated

Long-term liabilities

18,602,094

Total Liabilities

Before Distribution

142,744,655

After Distribution

Un-appropriated

Equity attributable to owners of the Company

 

Common stock

28,347,268

Capital surplus

43,435,754

Retained Earnings

Before Distribution

12,554,154

After Distribution

Un-appropriated

Other reserves

(1,589,599)

Treasury Stock

(6,054,286)

Non-controlling interests

2,318

Total equity

Before Distribution

76,695,609

After Distribution

Un-appropriated

 

Five-Year Balance Sheet under Statements of Financial Accounting Standards ("SFAS")

 

Unit: NT$ Thousand

Period

Item

Most Recent 5-Year Financial Information

2008

2009

2010

2011

2012

Current assets

186,390,592

232,107,877

225,760,825

195,729,745

170,840,056

Fund and Long-term equity investments

6,773,547

8,872,750

6,233,280

3,795,462

3,449,711

Net property, plant and equipment

9,336,221

8,676,173

5,818,230

6,938,898

6,572,348

Intangible assets

34,746,765

35,444,068

36,392,935

35,404,199

39,316,838

Other assets

6,195,100

5,923,820

6,293,260

6,439,424

6,480,040

Total assets

243,442,225

291,024,688

280,498,530

248,307,728

226,658,994

Current Liabilities

Before Distribution

149,315,158

179,846,517

162,558,924

146,039,649

143,018,437

After Distribution

154,601,124

188,183,352

172,076,142

146,039,649

Un-appropriated

Long-term liabilities

4,134,920

12,371,856

20,666,296

24,404,677

4,755,200

Other liabilities

7,114,532

5,928,652

3,164,937

2,111,787

3,853,206

Total Liabilities

Before Distribution

160,564,610

198,147,026

186,390,156

172,556,113

151,626,843

After Distribution

165,850,575

206,483,861

195,907,374

172,556,113

Un-appropriated

Common stock

26,428,560

26,882,283

27,023,449

27,098,915

28,347,268

Capital surplus

37,129,952

38,494,118

39,578,915

40,219,518

44,096,498

Retained Earnings

Before Distribution

22,771,901

28,575,011

35,329,280

19,049,268

16,138,942

After Distribution

17,485,935

20,238,176

25,812,062

19,049,268

Un-appropriated

Unrealized Gain (loss) on Financial assets

(1,729,631)

1,014,317

460,600

(630,621)

(904,177)

Translation adjustments

1,241,058

959,621

(5,095,919)

(3,580,136)

(5,655,033)

Minimum Pension Liability adjustment

(283)

(7,908)

(23,957)

(16,993)

(331,753)

Treasury Stock

(3,522,598)

(3,522,598)

(3,522,598)

(6,390,846)

(6,662,028)

Minority Interest

558,656

482,818

358,604

2,510

2,434

Stockholders' Equity

Before Distribution

82,877,615

92,877,662

94,108,374

75,751,615

75,032,151

After Distribution

77,591,648

84,540,827

84,591,156

75,751,615

Un-appropriated

7.1.2 Five-Year Consolidated Income Statement under International Financial Reporting Standards ("IFRS")

Consolidated Income Statement under International Financial Reporting Standards ("IFRS")

Unit: NT$ Thousand

Period

Item

Current year

as of Mar. 31, 2013

Revenue

91,972,997

Gross profit

7,832,337

Operating (loss) income

28,713

Non-operating Income and Loss

421,284

Earnings before taxes

449,997

Income(Loss) from Continuned segment

514,570

Income(Loss) from Discontinuned segment

0

Net earningsIncome after income taxes

514,570

Other comprehensive income (loss) for the period, net of tax

1,944,798

Total comprehensive income (loss) for the period

2,459,368

Earnings attributable to Shareholders of the Company

514,551

Earnings attributable to Non-controlling interests

19

Total comprehensive income (loss) attributable to Shareholders of the Company

2,459,384

Total comprehensive income (loss) attributable to Non-controlling interests

(16)

EPS

0.19

 

Five-Year Consolidated Income Statement under Statements of Financial Accounting Standards ("SFAS")

Unit: NT$ Thousand

Period

Item

Most Recent 5-Year Financial Information

2008

2009

2010

2011

2012

Operating revenue

546,274,115

573,982,544

629,058,973

475,341,991

429,510,913

Gross profit

57,285,660

58,327,860

64,481,268

38,606,598

43,195,744

Operating (loss) income

14,072,302

15,339,466

18,203,913

(6,396,199)

1,024,706

Non-operating Income and Gain

5,353,038

1,719,037

4,321,397

1,482,557

1,984,494

Non-operating Expense and Loss

4,618,613

2,075,520

3,195,923

2,510,688

5,642,904

Continuing operating income before tax

14,806,728

14,982,983

19,329,387

(7,424,330)

(2,633,704)

Income(Loss) from Discontinuned segment

99,843

0

0

0

0

Extraordiniary Items

0

0

0

0

0

Cumulative Effect of changes in accounting principle

0

0

0

0

0

Income after income taxes

11,742,135

11,353,374

15,117,997

(6,601,968)

(2,910,326)

EPS

4.67

4.31

5.71

(2.52)

(1.07)

 

7.1.3 CPAs' and Auditors' Opinions:

Year

Name of CPA(s)

Auditors' Opinion

2008

Sonia Chang, Agnes Yang

Modified unreserved

2009

Sonia Chang, Agnes Yang

Unreserved

2010

Sonia Chang, Agnes Yang

Unreserved

2011

Sonia Chang, Steven Shih

Unreserved

2012

Sonia Chang, Steven Shih

Unreserved

 

7.2 Five-Year Financial Analysis under International Financial Reporting Standards ("IFRS")

 

Financial Analysis under International Financial Reporting Standards ("IFRS")

Period

Item

Current year

as of Mar. 31, 2013

Financial Ratio

Total liabilities to total assets(%)

65.05

Long-term debts to fixed assets(%)

1,447.46

Ability to payoff debt

Current ratio()

130.87

Quick Ratio()

96.58

Interest protection

333

Ability to operate

A/R turnover (times)

5.43

A/R turnover days

67

Inventory turnover (times)

8.09

A/P turnover (times)

5

Inventory turnover days

45

Fixed assets turnover (times)

56.90

Total assets turnover (times)

1.65

Earning ability

Return on assets()

1.21

Return on equity()

2.73

To pay-in capital

Operating income

0.41

PBT

6.35

Net income ratio ()

0.56

EPSNTD

0.19

Cash flow(%)

Cash flow ratio

(4.58)

Cash flow adequacy ratio

N.A.

Cash reinvestment ratio

(0.10)

Leverage

Operating leverage

261.30

Financial leverage

(0.18)

1. Financial Ratio

(1)Total liabilities to total assets=Total liabilities/Total assets

(2)Long-term funds to Net property, plant and equipment=(Net equity+Long term debts)/Net property, plant and equipment

2. Ability to Pay off debt

(1)Current ratio=Current Assets/Current liability

(2)Quick ratio=(Current assets-Inventory-Prepaid expenses)/Current liability

(3)Interest protection=Net income before income tax and interest expense/Interest expense

3. Ability to Operate

(1)Account receivable (including account receivable and notes receivable from operation) turnover=Net sales/the average of ac- count receivable (including account receivable and notes receivable from operation) balance

(2)A/R turnover day=365/account receivable turnover

(3)Inventory turnover=Cost of goods sold/the average of inventory

(4)Account payable (including account payable and notes payable from operation)turnover=Cost of goods sold/the average of account payable(including account payable and notes payable from operation)balance

(5)Inventory turnover day=365/Inventory turnover

(6)Net property, plant and equipment turnover=Net sales/Average Net property, plant and equipment

(7)Total assets turnover=Net sales/Average Total assets

4. Earning Ability

(1)Return on assets=[PAT+Interest expense×(1-Tax rate)]/the average of total assets

(2)Return on equity=PAT/the average of total equity

(3)Net income ratio=PAT/Net sales

(4)EPS =(Earning attributable to shareholders of the Company -Dividend from prefer stock)/weighted average outstanding shares

5. Cash Flow

(1)Cash flow ratio=Cash flow from operating activities/Current liability

(2)Cash flow adequacy ratio=Most recent 5-year Cash flow from operating activities=Most recent 5-year (Capital expenditure+the increase of inventory+cash dividend)

(3)Cash reinvestment ratio=(Cash flow from operating activities-cash dividend)/(Gross property, plant and equipment+long- term investment+other non-current assets+working capital)

6. Leverage

(1)Operating leverage=(Net revenue-variable cost of goods sold and operating expense)/operating income

(2)Financial leverage=Operating income/(Operating income-interest expenses)

Five-Year Financial Analysis under Statements of Financial Accounting Standards ("SFAS")

Period

Item

Most Recent 5-Year Financial Information

2008

2009

2010

2011

2012

Financial Ratio

Total liabilities to total assets (%)

65.96

68.09

66.45

69.49

66.90

Long-term debts to fixed assets(%)

1,008.19

1,281.42

2,207.07

1,473.84

1,272.61

Ability to Payoff Debt

Current ratio()

124.83

129.06

138.88

134.03

119.45

Quick Ratio()

95.47

98.43

110.22

102.13

86.52

Interest protection

12

25

20

(6)

(2)

Ability to Operate

A/R turnover (times)

5.18

5.19

5.85

5.11

5.65

A/R turnover days

70

70

62

71

65

Inventory turnover (times)

13.24

11.31

12.22

10.75

9.27

Inventory turnover days

28

32

30

34

39

A/P turnover (times)

6.39

5.79

5.70

4.95

4.95

Fixed assets turnover (times)

58.51

66.16

108.12

70.28

65.35

Total assets turnover (times)

2.24

1.97

2.24

1.91

1.89

Earning Ability

Return on assets()

5.23

4.42

5.59

(2.18)

(0.94)

Return on equity()

14.65

12.92

16.17

(7.77)

(3.86)

To Pay-in Capital

Operating income

53.25

57.06

67.36

(23.60)

3.61

PBT

56.03

55.74

71.53

(27.40)

(9.29)

Net income ratio ()

2.15

1.98

2.40

(1.39)

(0.68)

EPSNTD

4.67

4.31

5.71

(2.52)

(1.07)

Cash Flow (%)

Cash flow ratio

(3.46)

21.24

8.14

4.14

0.41

Cash flow adequacy ratio

17.55

47.06

63.82

59.10

78.63

Cash reinvestment ratio

(21.40)

40.47

5.60

(4.81)

1.17

Leverage

Operating leverage

3.14

3.12

2.99

(4.95)

33.22

Financial leverage

1.10

1.04

1.06

0.87

5.05

 

1. Financial Ratio

(1) Total liabilities to total assetsTotal liabilitiesTotal assets

(2) Long-term funds to fixed assets=(Net equityLong term debts)/Net fixed assets

2. Ability to Pay off debt

(1) Current ratioCurrent AssetsCurrent liability

(2) Quick ratio=(Current assetsInventoryPrepaid expenses)/Current liability

(3) Interest protectionNet income before income tax and interest expenseInterest expense

3. Ability to Operate

(1) Account receivable (including account receivable and notes receivable from operation) turnoverNet salesthe average of account receivable (including account receivable and notes receivable from operation) balance

(2) A/R turnover day365account receivable turnover

(3) Inventory turnoverCost of goods soldthe average of inventory

(4) Account payable (including account payable and notes payable from operation)turnoverCost of goods soldthe average of account payableincluding account payable and notes payable from operationbalance

(5) Inventory turnover day365Inventory turnover

(6) Fixed assets turnoverNet salesNet Fixed Assets

(7) Total assets turnoverNet salesTotal assets

4. Earning Ability

(1) Return on assetsPATInterest expense×(1Tax rate)the average of total assets

(2) Return on equityPATthe average of net equity

(3) Operating income on pay-in capital ratioOperating incomepay-in capital

(4) PBT on pay-in capital ratioPBTpay-in capital

(5) Net income ratioPATNet sales 

(6) EPS =(PATDividend from prefer stock)/weighted average outstanding shares

5. Cash Flow

(1) Cash flow ratioCash flow from operating activitiesCurrent liability

(2) Cash flow adequacy ratioMost recent 5-year Cash flow from operating activitiesMost recent 5-year (Capital expenditurethe increase of inventorycash dividend) 

(3) Cash reinvestment ratio=(Cash flow from operating activitiescash dividend (Gross fixed assetslong-term investmentother assetsworking capital)

6. Leverage

(1) Operating leverage(Net revenuevariable cost of goods sold and operating expense)operating income

(2) Financial leverageOperating income(Operating incomeinterest expenses)

 

7.3 Supervisors' Review Report

 

To: The 2013 General Shareholders' Meeting

 

 

The Board of Directors of the Company has prepared the 2012 financial report, including balance sheet, statement of income, statements of changes in stockholders' equity, and statement of cash flows. Sonia Chang and Steven Shih at KPMG have been retained by the Board of Directors of the Company to issue an audit report. The undersigned supervisors have reviewed the audit report and the aforesaid documents, which were made by the Board of Directors in compliance with Article 228 of the Company Law, and did not find any incompliance. In accordance with Article 219 of the Company Law, it is hereby submitted for your review and perusal.

 

 

 

 

Supervisor: George Huang

 

 

 

Supervisor: Carolyn Yeh

 

 

 

 

 

 

 

Dated: March 28, 2013

 

7.4 Financial Statements Consolidated Subsidiaries Audited by CPAs of the Past Year

Please refer to Appendix

7.5 Disclosure of the Impact on Company's Financial Status Due to Financial Difficulties

Not applicable.

7.6 Financial Prediction and Achievements

7.6.1 Financial Forecast of Year 2012:

Not applicable.

 

 

8. Risk Management

8.1 Recent Annual Investment Policy and Main Reasons of Gain or Loss and Improvement Plan

Unit: NT$ Thousand

Description

Item

Amount (Note)

Business Type

Year 2012 P&L

Main reason of Gain or Loss

The Plan for Improvement

Investment Plan for Next Year

Acer European Holdings B.V.

19,651,271

Sales and Maintenance of "Acer" brand-name information technology products

10,552

Due to the operating profit for the market of EMEA

NA

No material investment plan for next year

Acer Holdings International, Incorporated

12,945,379

Sales and Maintenance of "Acer" brand-name information technology products

(9,591)

Due to the operating loss for the market of AAP

Enhance the management for the loss subsidiaries and manage the operating expenses

Boardwalk Capital Holding Limited

30,082,795

Sales and Maintenance of "Acer" brand-name information technology products

(1,426,995)

Due to the operating loss for the market of PA

Capital injection to the Brasil subsidiary

Acer Worldwide Incorporated

2,816,911

Investing and Holding company

515

Increasing of Investment Gain

NA

E-TEN INFORMATION SYSTEMS CO., LTD.

6,486,948

PDA manufacturing and sale

277,309

Gain on Operating activities

NA

Cross Century Investment Limited

1,133,044

Investing and Holding company

1,086

Increasing of Investment Gain

NA

Acer CyberCenter Services Ltd.

1,923,118

Data storage and processing company

177,913

Gain on Operating activities

NA

Acer Greater China (B.V.I.) Corp.

7,318,915

Sales and Maintenance of "Acer" brand-name information technology products

297,003

Due to the operating profit for the market of GC

NA

Acer Softcapital Incorporated

888,688

Investing and Holding company

(62,050)

Increasing of Investment Loss

No plan for writing-off investment for 2013

Wistron Corporation

1,369,229

Investing on industry of manufacturing computer and information technology products

86,219

Gain on Operating activities

NA

Acer Digital Service Co.,

930,469

Investing and holding companies

68,378

Gain on Investment activities

NA

Bluechip

89,694

Sales of software

4,810

Gain on Operating activities

NA

Weblink International Inc.

1,288,454

Sales and distribution of computer products and electronic communication products

69,254

Gain on Operating activities

NA

Aegis Semiconductor Technology Inc.

27,908

Semi-conductor test service

0

NA

NA

 

8.2 Important Notices for Risk Management and Evaluation

Risk Management Organization

 

l Board of Directors - review and approve the risk management policy and the authority for decision

l The head and top management of Business Units - oversee risk management activities with periodic monitoring and evaluation

l Auditors - provide annual auditing plan; review the Company's internal execution and control of risk management

l Operation Analysis Office - take responsibility of planning, analysis and improvement of business model and business management

l Global Legal - review legal contracts and agreements; manage lawsuit and litigation affairs

l Treasury - manage financial hedging and deals

l Accounting - oversee monetary transactions, ensure consistency with booking keeping and accuracy of financial reporting

8.2.1 Impact of Interest Rate, Exchange Rate and Inflation on Company's P&L and Future Strategy

1.Interest Rate Fluctuation

Notwithstanding U.S. employment and housing market shown some recovery but the financial cliff and economic growth are still the issue. FED continued to keep USD interest rate at a low level this year. Economy in Eurozone shown a slight recovery but for each country the situation is not the same. To support overall economic growth, ECB has no intention to hike interest rate at this moment. Currently the quantitative easing monetary policy adopted among major economy entities, the R.O.C. central bank is following and expect to maintain interest rates at a low level. Our funding cost of liability will not increase due to the low interest rate. We usually use the New Taiwan Dollar (NTD) and short-term foreign currency deposits to optimize return at low risk level.

2.Exchange Rate

The economy in Eurozone is becoming stable but the measure of expenditure curtail will impact the recovery. We expected that EUR might range trend in this year. RMB long-term trends show slightly appreciation, but will have wide fluctuation in short-term period. NTD has been influenced by some currencies depreciation. Expected the trend will back to normal in second half year and continue to appreciate steadily. Consistent execution of a conservative hedging strategy will continue to be maintained in order to minimize the impact of foreign exchange rate fluctuation on the Company's earnings.

3.Inflation

Even though the quantitative easing monetary policy adopted among major economy entities, the recovery of worldwide economy is still slow. The inflation issue might not be very serious this year. However, if the rise in commodity prices causes an increase in production cost, appropriate measures will be taken accordingly to avoid loss.

 

8.2.2 How Corporate Image Change Affects Company's Risk Management Mechanism

The Company split off its manufacturing division at the end of year 2000 in order to focus on the design and marketing of IT products and services. The potential crises within manufacturing and marketing companies are very different, and the Company's crisis management now focuses on our global supply-chain and logistics. By outsourcing our manufacturing sector to multiple vendors and suppliers, the Company gained greater flexibility in inventory control and lowered risks compared to a single-vendor policy. With the ever-changing global economy, it is essential to be prepared for risks and challenges at all times. The Company's risk management team has a clear sense of crisis management and has taken the precautions where necessary. We have set up a crisis mechanism that will minimize potential damages to ensure the Company's sustainable management.

 

8.2.3 Predicted Benefits and Potential Risk to Company with Factory/Office Expansion

Not applicable.

8.2.4 Potential Risks to Company from the Consentration of Procurement and Sales

None

8.2.5 Affect on Company from Shares Transfers by Directors, Supervisors or Shareholders Holding More Than 10% Shares

Not applicable.

8.2.6 Impact and Potential Risks to Company Management Team Change

Not applicable.

8.2.7 The major litigious, non-litigious or administrative disputes that: (1) involve Acer and/or any Acer director, any Acer supervisor, the general manager, any person with actual responsibility for the firm, any major shareholder holding a stake of greater than 10 %, and/or any company or companies controlled by Acer; and (2) have been concluded by means of a final and unappealable judgment, or are still under litigation. Where such a dispute could materially affect shareholders' equity or the prices of the company's securities, the facts of the dispute, amount of money at stake in the dispute, the date of litigation commencement, the main parties to the dispute, and the status of the dispute as of the date of printing of this annual report shall be disclosed as follows:

 

1. (1) Similar to other IT companies, Acer receives notices from third parties asserting that Acer has infringed certain patents or demands Acer obtain certain patents licenses. Acer takes these matters seriously and may take appropriate counter actions.

(2) Ericsson Inc. and Telefonaktiebolaget LM Ericsson filed patent infringement lawsuits against Acer Inc. and its US subsidiaries, Acer America Corporation and Gateway Inc., which pending before the United States District Court for the Eastern District of Texas; and in August 2011, Telefonaktiebolaget LM Ericsson filed patent infringement lawsuits against Acer's subsidiary, Acer Computer GmbH, which pending before the German Regional Court of Mannheim. US and German law firms have been retained to consult for and represent Acer on those matter; and both US and Germany lawsuits have been supported by the relevant components suppliers. Up to date there foresee no immediately material adverse effect toward Acer's business operations and finance.

(3) In February 2012, AcerInc. and its Italian subsidiary, Acer Europe Services S.r.l. filed petition before the Court of Milan, Italy, for the ascertainment of Mr. Gianfranco Lanci's violation of non-compete covenant under the Separation Agreement executed between Acer Inc. and him. It is estimated that the progress and result of this case will not materially affect Acer's finance and business.

(4)In May and August 2012, the U.S. International Trade Commission (ITC) launched its investigations on alleged infringement of U.S. patents (US patent No. 5809336 is involved in the latest case in August) by numerous companies, including Acer. Technology Properties Limited LLC (TPL) alone filed a Complaint with the US ITC for the first case and with the other two companies, Patriot Scientific Corporation (PTSC) and Phoenix Digital Solutions LLC (PDS) for the latter one. While filing a Complaint with the US ITC in 2012, TPL also filed a Complaint with the US District Court for the Eastern District of Texas at the same time for the related patents. The alleged claim of infringement goes back to as early as 2007, when Acer filed lawsuit against TPL on grounds that TPL's patents (i.e. including the alleged patent in the investigation in August) are invalid. Subsequently, TPL counter-filed against Acer on patent infringement and reported the dispute. ITC's investigation is the continuation of the same patent dispute. These disputes are handled carefully and the appropriate corresponding is taken. Up to date there foresee no immediately material adverse effect toward Acer's business operations and finance.

(5) A former employee of Acer's Taiwan business group was involved in fraudulent order placing in collaboration with external parties and selling company goods for own profit. Acer has investigated, discharged the employee and filed both civil lawsuits and criminal complaints against the suspects. The preliminary estimate for loss is around NT$15 million in deductibles from Acer's risk insurance cover. The loss has no impact on business operations. The Company has view of internal control and audit measures, and is constantly improving related processes.

 

 

2. In year 2011 and as of the date of printing of this annual report, any Acer director, supervisor, the general manager, any person with actual responsibility for the firm, any major shareholder holding a stake of greater than 10% were not involved in any material litigious, non-litigious or administrative disputes.

3. In year 2011 and as of the date of printing of this annual report, any company or companies controlled by Acer were not involved in any material litigious, non-litigious or administrative disputes.

 

 

8.2.8 Other Risks: 

None

 

 

 

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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