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Acer Incorporated 2008 Annual Report
Published Date: April 30, 2009 www.acer-group.com

Table of contents

  • Page 1
    Acer Incorporated 2008 Annual Report Published Date: April 30, 2009 www.acer-group.com

  • Page 2
    ... the Company 3.2 Information Regarding Board of Directors, Supervisors and Key Managers 3.3 Corporate Governance Status 6.1 Environmental, Safety and Health Management 6.2 Stakeholders Communication and Management 6.3 Social Welfare 7.Financial Standing 54 56 58 59 117 117 4.Capital and Shares 32...

  • Page 3
    1.Business Report to Shareholders 2 Acer Incorporated 2008 Annual Report Acer Incorporated 2008 Annual Report 3

  • Page 4
    ...-brand strategy - a key factor of our success that encompasses global brand management and differentiated product line design. We will continue to minimize operational costs, improve our customer order fulfillment to meet the fast-changing demands of the PC market. Opportunities lie ahead, we've set...

  • Page 5
    ...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...

  • Page 6
    ... 2008 546,274,115 57,285,660 14,072,302 5,353,038 1.3 2009 Business Plan 1.3.1 Business Direction A. Implement the multi-brand strategy worldwide, with differentiated multi-brand products to satisfy diverse customer and market segments. B. Expand Acer Group's global PC market share. C. Improve time...

  • Page 7
    2.Company In General 10 Acer Incorporated 2008 Annual Report Acer Incorporated 2008 Annual Report 11

  • Page 8
    ...: • 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 multibrand strategy 1976 • Acer was founded under the name Multitech , focusing on trade and product design...

  • Page 9
    ...sound. • The Aspire One launched as the Company's first mobile internet device, and won the coveted Japan Good Design award - an internationally-recognized mark of design quality. • Acer ranked No. 3 for Total PCs and No. 2 for notebooks worldwide. 14 Acer Incorporated 2008 Annual Report Acer...

  • Page 10
    3.Corporate Governance Principles 16 Acer Incorporated 2008 Annual Report Acer Incorporated 2008 Annual Report 17

  • Page 11
    ... y management, mobilit y applications, software systems development, systems integration, system operation services, value-added business solutions, and Internet data center services 3C Channel Business ‧ Channel distribution of non-Acer branded 3C products in Taiwan Finance ‧ Corporate finance...

  • Page 12
    ... Corp. Director of Acer Investment Inc. Independent director of TSMC Co, Ltd. Director of Acer SoftCapital Director of Acer Worldwide Inc. Spouse or Immediate Family Holding Managerial Position Title Name Relationship Shares Held When Elected Title Name Date of Election Term Number Percentage...

  • Page 13
    ... of TOPTEK Investment Co., Ltd. • Director of Acer Cyber Center Services Inc. • Director of ARC Consultants Ltd. • Chairman of Acer Investment Inc. • Director of Lottery Technology Services Corp. • Director of Cross Century Investment Name Relationship - Title Name Date of Accession 01...

  • Page 14
    ...,534 0 8,891 0 0 0 0 0 Percentage 0 0 0.03 0 0 0 0 0 0 0 0 Shares Held by the Other's Number 0 0 0 0 0 0 0 0 0 0 0 Percentage 0 0 0 0 0 0 0 0 0 0 0 Education Main Curriculum Vitae Spouse or Immediate Family Holding Position as President or Vice President Title Name Relationship - VP of ITGO VP...

  • Page 15
    ... of IT products in remote districts. 3. organizing the Acer Volunteer Team to take good care of disadvantaged children. ‧ 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...

  • Page 16
    ...ten Information Systems Co. Ltd. (E-ten ) II. The New Issuance of Common Shares Through Capital Increases for the Share Exchange III. To Purchase the Common Shares of E-ten from the Stock Market I. The FY2007 Financial Statements and Business Report II. The Election of Acer's Board of Directors and...

  • Page 17
    4.Capital and Shares 30 Acer Incorporated 2008 Annual Report Acer Incorporated 2008 Annual Report 31

  • Page 18
    ...2009) Unit: Share/NT$ Thousand 4.1.4 The List of Major Shareholders (April 21, 2009) Paid-in Common stock Shares 2,642,982,993 Value 26,429,830 Notes Source of the capital Name National Financial Stabilization Fund Stan Shih Hong Rong Investment Corp. Unit: Share Date April,2009 Price of Issuance...

  • Page 19
    ... Increase (decrease) of operating profit compared with preceding year Change in Business Increase (decrease) of net profit after tax compared with preceding year Performance Earning per share (EPS) (NT$) Increase (decrease) of EPS compared with preceding year Annual average return rate of investment...

  • Page 20
    ... and reflect the savings in our product competitiveness. On the balance sheet, Acer issued 168,158,878 new shares for this acquisition, and increased long term investments by NT$8.7 billion. Growth in the Q4 2008 sales again shows the acquisition has increased Acer's profitability. (3) Influence on...

  • Page 21
    5.Acer's Winning Formula 38 Acer Incorporated 2008 Annual Report Acer Incorporated 2008 Annual Report 39

  • Page 22
    ... on research and development, marketing, sales and after-services of IT and communications devices, Acer's range of product offering includes notebooks, desktop PCs, LCD monitors, projectors, servers, and smartphones. Under the Acer Group umbrella consists of four brands - Acer, Gateway, Packard...

  • Page 23
    ... Job Function General Management Sales & Product Marketing Customer Service Research & Development Sales Support Administrations Total December 2007 136 1,423 2,287 198 707 500 5,251 December 2008 157 1,857 2,710 510 872 621 6,727 February 2009 157 1,927 2,761 527 883 622 6,877 ‧ Acer Employee...

  • Page 24
    ... 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: ‧ A hotline for each supporting function has been set up for employees to...

  • Page 25
    6.Corporate Social Responsibility 46 Acer Incorporated 2008 Annual Report Acer Incorporated 2008 Annual Report 47

  • Page 26
    ... Sustainability Office (CSO). We spent almost one year to complete an integrated strategy and set the 2008-2010 CSR action plans for a sustainable Acer. In spring 2008, our board of directors highlighted the milestones for embedding CSR within Acer, and designated Acer Inc. CEO & Corporate President...

  • Page 27
    ...: research and develop technology and management; cultivate talents; and reward and promote service. In mid 2008, Acer CEO J.T. Wang was elected as the CEO of Acer Foundation and took the foundation to a new phase by becoming involved in the Company's resolution to promote CSR. Acer Foundation...

  • Page 28
    7.Financial Standing 52 Acer Incorporated 2008 Annual Report Acer Incorporated 2008 Annual Report 53

  • Page 29
    Financial Standing 7.1 Five-Year Consolidated Financial Information 7.1.1 Five-Year Balance Sheet As of March 31, 2009 Unit: NT$ Thousand 7.1.2 Five-Year Consolidated Income Statement Unit: NT$ Thousand Period Item Operating Revenue Gross Profit Operating (loss) Income Non-operating Income and ...

  • Page 30
    ... activities â€' cash dividend) / (Gross fixed assets + longterm investment + other assets + working capital) 6. Leverage (1) Operating leverage = (Net revenue â€' variable cost of goods sold and operating expense) / operating income (2) Financial leverage = Operating income / (Operating income...

  • Page 31
    ... Board of Directors of the Company has prepared the 2008 financial report, including balance sheet, statement of income, statements of changes in stockholders' equity, and statement of cash flows. Sonia Chang and Agnes Yang at KPMG have been retained by the Board of Directors of the Company to issue...

  • Page 32
    Financial Standing Independent Auditors' Report The Board of Directors Acer Incorporated: ACER INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2007 and 2008 (Expressed in thousands of New Taiwan dollars and US dollars) We have audited the consolidated balance sheets of ...

  • Page 33
    ... Balance Sheets December 31, 2007 and 2008 (Expressed in thousands of New Taiwan dollars and US dollars) ACER INCORPORATED AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2007 and 2008 (Expressed in thousands of New Taiwan dollars and US dollars, except for per share...

  • Page 34
    Financial Standing ACER INCORPORATED AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 2007 and 2008 (Expressed in thousands of New Taiwan dollars and US dollars) Retained earning Common stock NT$ Balance at January 1, 2007 2007 net income Foreign...

  • Page 35
    .... (1) Sale of "Acer", "Gateway", "eMachine", and "Packard Bell" brand-name information technology products: Percentage of Ownership by the Company Investor (a) Acer Incorporated (b) Acer Greater China (B.V.I.) Corp. ("AGC", British Virgin Islands) and its subsidiaries ‧Acer Market Services Limited...

  • Page 36
    .... ("PBCN", China) (d) Boardwalk Capital Holding Limited ("Boardwalk", British Virgin Islands) and its subsidiaries ‧Acer Service Corporation ("ASC", U.S.A.) ‧Acer Computer Mexico, S.A. de C.V. ("AMEX", Mexico) ‧Acer Latin America, Inc. ("ALA", U.S.A.) ‧Acer American Holding Corp. ("AAH", USA...

  • Page 37
    ... ("TWP", Taiwan) (b) Acer TWP Innovation Information Co. Ltd. (ATIM, Taiwan) (c) TWP International Inc. ("TWP BVI", British Virgin Islands) (d) Acer Third Wave Software (Beijing) Co., Ltd. ("TWPBJ", China) The Company TWP ACCSI TWPBVI Investor (7) Software research, development, design, trading and...

  • Page 38
    ...and accounts receivable. (7) Inventories Inventories for the Acer brand information technology business group are stated at the lower of cost or market value. Market value represents net realizable value. Costs of inventory are determined using the weightedaverage method. For channel business, costs...

  • Page 39
    ... as held for sale shall continue to be recognized. An impairment loss is recognized for any initial or subsequent write-down of the assets (or disposal groups) to fair value less costs to sell in the consolidated statements of income. A gain from any subsequent increase in fair value less costs to...

  • Page 40
    ... end of each year. Changes in the estimated useful lives, depreciation method and residual value are accounted for as changes in accounting estimates. Depreciation is provided for property, plant and equipment, property leased to others, and property not in use over the estimated useful life using...

  • Page 41
    ... be taken into account. For cash-settled share-based payments, a liability equal to the portion of the services received is recognized at its current fair value determined at each balance sheet date and at the date of settlement, with any changes in the fair value recognized in profit or loss of the...

  • Page 42
    ... Company can choose to distribute employee bonuses by issuing stock shares, the computation of diluted earnings per share is based on the assumption that all employee bonuses are distributed in stock shares as of the balance sheet date. (25) Business combination Business combinations are accounted...

  • Page 43
    ...,810 Buy USD USD USD December 31, 2007 NT$ Financial liability at fair value through profit or loss â€' current: Foreign currency forward contracts Foreign currency options (1,394,549) (593) (1,395,142) (1,011,739) (1,011,739) (30,829) (30,829) NT$ December 31, 2008 US$ USD USD USD USD USD USD Sell...

  • Page 44
    Financial Standing December 31,2008 Notional amount (in thousand) Buy USD USD EUR USD USD USD USD USD USD USD USD Sell SGD CAD CHF ... and 2008, the Consolidated Company recognized the realized remeasurement gain from the derivative financial assets and liabilities designated as fair value hedges in...

  • Page 45
    ... process Finished goods Spare parts Inventories in transit Less: provision for inventory obsolescence and net realizable value 12,452,588 27,322 13,809,255 3,982,372 7,630,204 (4,086,044) 33,815,697 (8) Noncurrent assets held for sale In December 2007, the Company's subsidiary ACI planned to sell...

  • Page 46
    ...% Book value NT$ 2008 Investment income (loss) NT$ Less: Allocation of corporate expense Book value NT$ 2007 Investment income (loss) NT$ Privately held stock: National Securities Corp. Prosperity Venture Capital Corp. Sheng-Hua Venture Capital Corp. Legend Technology W.I. Harper International Corp...

  • Page 47
    ... The price included cash consideration and stock consideration amounting to 27,000,000 shares of Yosun Industrial Corp. Through the acquisition of E-Ten Information System Co., Ltd. in September 2008, the Consolidated Companies increased their investment in RoyalTek Co., Ltd. and Quanta Computer Inc...

  • Page 48
    ...Purchase Price: Fair value of common shares issued Fair value of outstanding employee stock options assumed The identifiable assets acquired and liabilities assumed: Current assets Equity method investment Property, plant, and equipment Intangible assets - ETEN trademark Intangible assets - customer...

  • Page 49
    ... of Gateway Inc., Packard Bell B.V., and E-Ten Information Systems Co., Ltd. had occurred as of the beginning of each of the fiscal years presented: 2007 NT$ NT$ 2008 US$ Acer Pan-America business group (i) dgets approved by management covering a 5-year period, and a stable growth rate of...

  • Page 50
    ... installments starting from April 2009. An advance repayment of $4,300,000 was made in the first quarter of 2008. 16,500,000 12,200,000 (2) Revolving tranche of NT$3.3 billion; threeyear limit Less: current installment (2) One-time repayment in full in October 2010. - - 2008 Plan assets...

  • Page 51
    ...balance sheets. The components of the net periodic pension cost for 2007 and 2008 were as follows: 2007 NT$ 2008 NT$ US$ Expected income tax expense Effect of different tax rates applied to the Company's subsidiaries Tax-exempt investment income from domestic investees Prior-year adjustments Service...

  • Page 52
    ... loss Investment tax credits Software development cost Unrealized investment loss Other Valuation allowance (3,101,316) (2,697,304) 14,028,055 939,410 293,190 241,569 147,919 9,851,523 (14,970,897) (5,119,374) December 31, 2008 NT$ US$ (g) Information about the integrated income tax system...

  • Page 53
    ...of global depository receipts (GDRs). The GDRs were listed on the London Stock Exchange, and each GDR represents five shares of common stock. As of September 1, 2008, the Company issued 168,159 thousand common shares for acquiring 100% ownership of E-Ten Information Systems Co., Ltd. The increase in...

  • Page 54
    ..., and the main inputs to the valuation models are described below. 2008 Employee stock option plan 1 Employee stock option plan 2 Employee stock option plan 3 Exercise price ($) Expected remaining contractual life (in years) Fair market value for underlying securities - Acer shares (NT$) Expected...

  • Page 55
    ... Company obtained the contingent consideration in cash amounting to NT$99,843 in 2008. (24) Earnings per common share ("EPS") 2007 Weightedaverage number of outstanding shares of common stock (in thousands) Non-derivative financial instruments Financial assets: Available-for-sale financial assets...

  • Page 56
    ... were used to estimate the fair value of each class of financial instruments: (i) Available-for-sale financial assets - current and noncurrent The fair value of publicly traded stocks is the closing quotation price at the balance sheet date. The fair value of open-end mutual funds is based on the...

  • Page 57
    ... parties are not comparable to the trading terms with third parties as the specifications of products are different. In 2007 and 2008, the Consolidated Companies sold raw material to Wistron and purchased back the finished goods after manufacture. To avoid overstating the revenues, sales of raw...

  • Page 58
    ...2008. 7. Commitments and Contingencies (1) Royalties (a) The Company has entered into a patent cross license agreement with IBM. The agreement mainly states that both parties have the right to make use of either party's global technological patents to manufacture and sell personal computer products...

  • Page 59
    ... credit facilities from financial institutions. 11. Segment Information (1) Industry segment The main business of the Consolidated Companies is to sell "Acer" brand-name desktop PCs, notebook PCs, and other related IT products, which represents a single industry. 8. Significant Loss from Casualty...

  • Page 60
    ... Standing 2008 Taiwan NT$ North America NT$ Europe NT$ Asia NT$ Eliminations NT$ Consolidated NT$ 7.5 Disclosure of the Impact on Company's Financial Status Due to Financial Difficulties Not applicable. Area income: Customers Inter-company 25,879,015 341,107,152 366,986,167 Area profit (loss...

  • Page 61
    8.Risk Management 118 Acer Incorporated 2008 Annual Report Acer Incorporated 2008 Annual Report 119

  • Page 62
    ... "Acer" brand-name 22,281,994 information technology products Investing and holding company CEO & Corporate President Growth Stably in Asia Pacific Legal Recognized the (1,578,360) restructuring provision for Gateway Recognized Debt (649,954) forgiveness loss for ADSBH Not applicable Not applicable...

  • Page 63
    ...8.2.2 How Change Corporate Image 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...

  • Page 64
    ...and Agnes Yang at KPMG 68F, Taipei, 101 Tower, No.7, Sec.5, Xinyi Road, Taipei, 11049, Taiwan +886-2-8101-6666 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's Website: www.acer-group.com

  • Page 65
    Acer Group