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2010
Annual reportAcer Incorporated
Published Date: April 30, 2011 www.acer-group.com
Printed on eco-friendly paper with soy ink, and compliant with FSC requirements.

Table of contents

  • Page 1
    Acer Incorporated Annual report Published Date: April 30, 2011 www.acer-group.com 01

  • Page 2
    ... This is a translation of the 2010 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...

  • Page 3
    ...BUSINESS REPORT ...5 1.1 Acer's Core Values ...8 1.2 2010 Operating Report ...10 1.3 2011 Business Plan ...11 02 COMPANY IN GENERAL ...13 2.1 Brief Account of the Company ...14 03 CORPORATE GOVERNANCE PRINCIPLES ...17 3.1 Organization of the Company ...18 3.2 Information Regarding Board of Directors...

  • Page 4
    4 ACER INCORPORATED 2010 ANNUAL REPORT 5 1 Business Report

  • Page 5
    ... to new usage models, user requirements, form factors, and by the sharp rise in popularity of smartphones and tablet PCs. Similarly, acceptance of open operating systems is altering the environment. To conclude, the solution that offers quick access to internet, easy connection and media sharing...

  • Page 6
    ... 2010 ANNUAL REPORT BUSINESS REPORT 9 1.1 Acer's Core Values Core Value Value-creating Acer's Core Value Emotional Meaning ． Value for shareholders (good dividends and shares value) ． Value for customers (good products, services, easy to do business) ． Value for employees (good company...

  • Page 7
    ... operating income. Enhance our position as a world-leading notebook PC vendor. Enter the tablet PC space and quickly build up market share. Make significant progress in the smartphone business. 1.3.3 Partner Strategy A. Reinforce our cooperation with first-tier suppliers and channel partners...

  • Page 8
    12 ACER INCORPORATED 2010 ANNUAL REPORT 13 2 Company in General

  • Page 9
    ... America Operations. • ICONIA - Acer's dual-screen, multi-touch tablet won the "Last Gadget Standing" competition at Consumer Electronics Show in Las Vegas. • Acer tablet PCs entered markets. • CEO and President Gianfranco Lanci resigned and Chairman Wang resumed dual position as company CEO...

  • Page 10
    16 ACER INCORPORATED 2010 ANNUAL REPORT 17 3 Corporate Governance Principles

  • Page 11
    ..., system operation services, value-added business solutions, and Internet data center services Eten Business ． Development, sales, marketing and customer service of Finance PDA products Finance ． Corporate finance, investment, treasury, credit and risk control and accounting services management...

  • Page 12
    20 ACER INCORPORATED 2010 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES 21 3.2 Information Regarding Board of Directors, Supervisors and Key Managers (1) Board of Directors and Supervisors (April 17, 2011) Shares Held by Spouse & Minors Number 206,771 Percentage 0.01 Bachelor (Note) • Director ...

  • Page 13
    ... & PA President (Note2) Corp. VP & AP President Corp. VP & ACCN President Corp. VP, Marketing & Branding Corp. VP & Taiwan Operations President Corp. VP & Channel BG President Corp. VP & Touch BG Deputy President e-Enabling Services BG President CFO PC Global Operations President Chief Technology Of...

  • Page 14
    24 ACER INCORPORATED 2010 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES 25 Title Name Date of Accession Shares Held Directly Number Percentage 0.02 0.01 0.00 0.00 0.00 0.00 0.01 Shares Held by Spouse & Minors Number 78,387 0 8,987 0 0 0 0 Percentage 0.00 0 0.00 0 0 0 0 Shares Held by the ...

  • Page 15
    ... Financial Information Transparency from Competent Authorities Numbers Name of Licenses Internal Auditor Certified Public Accountants (CPA) Certified Internal Auditor (CIA) BS7799/ISO 27001 Lead Auditor 0 1 1 0 Financial Officer 1 3 0 1 F. If the Company has implemented the corporate governance...

  • Page 16
    ... 2010 ANNUAL REPORT CORPORATE GOVERNANCE PRINCIPLES 29 3.3.8 Statement of Internal Control System Date: March 28, 2011 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 2010...

  • Page 17
    ...of Acer's board of directors To approve Acer's Statement of Internal Control System for 2010 To approve the appointment of the auditors of Acer incorporated To set up overseas subsidiaries To decide the effective date of the new issued shares for the execution of Acer and E-ten employee stock option...

  • Page 18
    32 ACER INCORPORATED 2010 ANNUAL REPORT 33 4 Capital and Shares

  • Page 19
    34 ACER INCORPORATED 2010 ANNUAL REPORT CAPITAL AND SHARES 35 4.1 Sources of Capital 4.1.1 Sources of Capital (April 17, 2011) Unit: Share/NT$ Thousand 4.1.4 List of Major Shareholders (April 17, 2011) Item Name JPMorgan Chase Bank N.A. Taipei Branch in custody for Capital World Growth and Income...

  • Page 20
    ... share. 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 a special reserve...

  • Page 21
    38 ACER INCORPORATED 2010 ANNUAL REPORT CAPITAL AND SHARES 39 4.2 Corporate Bonds: The 1st Overseas Unsecured Convertible Bonds August 10,2010 US$100,000 Expected to be on the Singapore Stock Exchange US$100.0000 US$300,000,000 0% 5 years from the Issuing Date None Citigroup International Limited ...

  • Page 22
    ... in cash Each unit stands for Acer's 5 common shares Same as Acer's common shareholders None Citicorp Citibank Taipei Branch Overseas Unsecured Convertible Bonds Period Item Highest Market Price Lowest Average Conversion Price Conversion Price in Issuing Date Conversion Target 2010 US$113.0330 US...

  • Page 23
    ... 2010 ANNUAL REPORT CAPITAL AND SHARES 43 4.5 Employee Stock Options (March 31, 2011) Employee Stock Option Granted Approval Date by the Authority Grant Date Number of Options Granted Percentage of Shares Exercisable to Outstanding Common Shares (%) Option Duration Source of Option Shares 2nd Year...

  • Page 24
    44 ACER INCORPORATED 2010 ANNUAL REPORT 45 5 Acer's Winning Formula

  • Page 25
    ... computer, liquid crystal display, projector, smartphone, tablet PC, and information communication devices (ICT). Starting from R&D, marketing and sales to services, our business strategy involves multiple brands and operations around the globe. In 2010, notebook PCs - including netbooks - accounted...

  • Page 26
    ... 3. The Sales Value in the Last Two Years: Unit: NT$ Thousand Year Major production Domestic Sales 2009 Foreign Sales Domestic Sales 2010 Foreign Sales Sales & Product Marketing Customer Service Research & Development Sales Support Administration Total 409,993,432 85,772,687 495,766,119 Computer...

  • Page 27
    ...loss from employee conï¬,ict. Taking Taiwan for example, Acer offers multiple channels for interaction in order to improve two-way communication: ． 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...

  • Page 28
    ... 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...

  • Page 29
    54 ACER INCORPORATED 2010 ANNUAL REPORT 55 6 Corporate Social Responsibility

  • Page 30
    ... 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. 3. Office Carbon Reduction From 2010, we started to replace office illuminating system in the Acer headquarter main building by using energy...

  • Page 31
    ... in our supply chain. plan. Customers can find detailed information at "Alerts and Recall", "Support" section on our webpage and register model and serial number to obtain related technical support for impacted models. Acer does not have any safety concern events reported in 2010. 6.4 Community...

  • Page 32
    ...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...

  • Page 33
    ... 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...

  • Page 34
    64 ACER INCORPORATED 2010 ANNUAL REPORT 65 7 Financial Standing

  • Page 35
    ...ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 67 7.1 Five-Year Consolidated Financial Information 7.1.1 Five-Year Balance Sheet As of March 31, 2011 Unit: NT$ Thousand 7.1.2 Five-Year Consolidated Income Statement Unit: NT$ Thousand Period Item Operating revenue Gross profit Operating...

  • Page 36
    68 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 69 7.2 Five-Year Financial Analysis Period Item Financial Ratio (%) Total liabilities to total assets Long-term debts to fixed assets Current ratio(%) Ability to Payoff Debt Quick Ratio(%) Interest protection A/R turnover (times) A/R ...

  • Page 37
    ... ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 71 7.3 Supervisors' Review Report To: The 2011 General Shareholders' Meeting 7.4 Financial Statements Consolidated Subsidiaries Audited by CPAs of the Past Year The Board of Directors of the Company has prepared the 2010 financial report...

  • Page 38
    72 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 73 Independent Auditors' Report The Board of Directors Acer Incorporated: Assets ACER INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2009 and 2010 (Expressed in thousands of New Taiwan dollars and US dollars) 2009...

  • Page 39
    ... 2010 ANNUAL REPORT FINANCIAL STANDING 75 Liabilities and Stockholders' Equity 2009 NT$ 2010 NT$ US$ ACER INCORPORATED AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2009 and 2010 (Expressed in thousands of New Taiwan dollars and US dollars, except for per share...

  • Page 40
    ...ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 77 ACER INCORPORATED AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 2009 and 2010 (Expressed in thousands of New Taiwan dollars and US dollars) Retained earnings Common Common stock stock...

  • Page 41
    ... strategy. Additionally, on September 1, 2008, the Company entered the smart phone market following the acquisition of E-Ten Information Systems Co., Ltd. In October 2010, in order to expand into the market in China, the Company acquired the PC business, management team and employees, regional sales...

  • Page 42
    ... Services LLC ("ARU", Russia) ．Acer Hellas Limited Liability Company of Marketing and Sales Services ("AGR", Greece) ．Acer Computer Norway AS ("ACN", Norway) ．Acer Computer Finland Oy ("AFN", Finland) ．Acer Computer Sweden AB ("ACW", Sweden) ．Acer Denmark A/S ("ACD", Denmark) ．PB Holding...

  • Page 43
    ... supply or processing service, data storage and processing: Percentage of Ownership At December 31, (3) Investing, holding and financial companies: Percentage of Ownership At December 31, Investor 2009 2010 (a) Acer Cyber Center Services Ltd. ("ACCSI", Taiwan) (b) Lottery Technology Service Corp...

  • Page 44
    ... using the weighted-average method. Net realizable value is determined based on the estimated selling price in the ordinary course of business, less all estimated costs of completion and selling expenses at the balance sheet date. (8) Financial instruments The Consolidated Companies adopted trade...

  • Page 45
    ... not used in operation over the estimated useful life using the straight-line method. The range of the estimated useful lives of the respective classes of assets is as follows: buildings and improvements - 30 to 50 years; computer equipment and machinery - 3 to 10 years; and other equipment - 3 to...

  • Page 46
    ... No. 25 "Accounting for Business Combinations", goodwill is not amortized but is tested for impairment annually. Other intangible assets, including patents, trademarks and trade names, customer relationships, developed technology, sales and marketing channels and purchased software, are initially...

  • Page 47
    90 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 91 in the fair value recognized in profit or loss of the period. Fair value of share-based award is measured using the Black-Scholes option-pricing model or the binomial option pricing-model, taking into account management's best estimate ...

  • Page 48
    ... at fair value through profit or loss－current December 31, 2009 NT$ NT$ December 31, 2010 US$ December 31, 2010 Underwriting bank Factoring credit limit NT$ Amount sold NT$ Amount advanced (derecognized) NT$ Interest rate Collateral Financial assets at fair value through profit or loss－current...

  • Page 49
    94 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 95 value of these derivative contracts amounted to NT$652,108 and NT$(255,223), respectively. The Consolidated Companies entered into derivative contracts to manage foreign currency exchange risk arising from operating activities. As of ...

  • Page 50
    ... 2010 ANNUAL REPORT FINANCIAL STANDING 97 The Consolidated Companies entered into derivative contracts to hedge foreign currency exchange risk associated with a recognized asset or liability or with a highly probable forecast transaction. As of December 31, 2009 and 2010, hedged items designated...

  • Page 51
    ... shares were publicly listed on the Taiwan Stock Exchange. For the year ended December 31, 2009, the Consolidated Companies recognized impairment losses of NT$231,934 on the investments in New Century Infocomm Tech Co., Ltd. and other investees. (10) Long-term equity investments accounted for using...

  • Page 52
    ...(63,413) 80,862 Investment in publicly traded equity securities: Qisda Corporation Silicon Storage Technology Inc. ("Silicon Storage") Yosun Industrial Corp. ("Yosun") WPG Holdings Limited ("WPG") RoyalTek Co., Ltd. ("RoyalTek") Quanta Computer Inc. ("Quanta") Apacer Technology Inc. 1,606,215 8,938...

  • Page 53
    ...; (2) Founder PC business and IT systems, trade names, copyrights, and domain names of Founder's products; (3) Intangible assets such as customer lists and distribution channel resources of Founder Technology Group's PC business; (c) Adjustment to goodwill In 2009, the Consolidated Companies made...

  • Page 54
    ...CGU was determined based on the value in use, and the related key assumptions were as follows: (i) The cash flow projections based on historical operating performance, future financial budgets approved by management covering a 5-year period. On August 10, 2010, the Company issued US$300,000 of zero...

  • Page 55
    106 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 107 A. At any time on or after August 10, 2013 and prior to the maturity date, the closing price (translated into US dollars at the prevailing rate) of its common shares on the Taiwan Stock Exchange is at least 130% of the 2015 Early ...

  • Page 56
    108 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 109 agreed days. As of December 31, 2009 and 2010, the Company was in compliance with all such financial covenants. (19) Retirement plans The following table sets forth the actuarial information related to the Consolidated Companies' ...

  • Page 57
    110 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 111 2009 NT$ NT$ 2010 US$ 2009 NT$ December 31, 2010 NT$ US$ Expected income tax Effect of different tax rates applied to the Company's subsidiaries Tax-exempt investment income from domestic investees and unremitted earnings of ...

  • Page 58
    ... implementation of an overseas employee stock option plan) held by AWI and the common stock held by the Company's subsidiaries namely CCI and E-Ten were as follows (expressed in thousands of shares and New Taiwan dollars): (f) Information about the integrated income tax system Beginning in 1998, an...

  • Page 59
    114 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 115 December 31, 2009 Number of Shares Book Value NT$ Market Price NT$ Number of Shares December 31, 2010 Book Value NT$ Market Price NT$ (d) Legal reserve, unappropriated earnings, and dividend policy The Company's articles of ...

  • Page 60
    ... operating expenses. As of December 31, 2010, information of outstanding ESOPs was as follows: Weightedaverage remaining contractual life (in years) Exercise price (NT$) Expected remaining contractual life (in years) Fair market value for underlying securities－Acer common shares (NT$) Fair value...

  • Page 61
    ... and loss in the accompanying statements of income. These restructuring charges were associated with severance payments to employees and integration of the information technology system. (24) Earnings per common share ("EPS") 2009 Weightedaverage number of outstanding shares of common stock (in...

  • Page 62
    ... risks (i) Market risk Open-end mutual funds and publicly traded stocks held by the Consolidated Companies classified as "available-for-sale financial assets" are valued at fair value. Therefore, the Consolidated Companies were exposed to the risk of price fluctuation in the securities market. The...

  • Page 63
    ...2009 NT$ NT$ 2010 US$ Wistron Corporation ("Wistron") Cowin Worldwide Corporation ("COWIN") Bluechip Infotech Pty Ltd. ("SAL") E-Life Mall Corp. ("E-Life") iDSoftCapital Inc. Directors, supervisors, chief executive officers and vice presidents Investee of the Company accounted for by equity method...

  • Page 64
    124 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 125 (d) Management service fee The Consolidated Companies paid iDSoftCapital Inc. management service fees amounting to NT$49,333 and NT$31,542 for the years ended December 31, 2009 and 2010, respectively. (e) Advances to/from related ...

  • Page 65
    ... NT$ Operating expense NT$ 2010 Cost of sales NT$ Total NT$ The main business of the Consolidated Companies is to sell brand-name computers and other related IT products, which represents a single reportable operating segment. (2) Geographic information 2009 Taiwan NT$ North America NT$ Europe NT...

  • Page 66
    128 ACER INCORPORATED 2010 ANNUAL REPORT FINANCIAL STANDING 129 2010 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 ...

  • Page 67
    130 ACER INCORPORATED 2010 ANNUAL REPORT 131 8 Risk Management

  • Page 68
    ... Plan for Improvement Investment Plan for Next Year 8.2 Important Notices for Risk Management and Evaluation Risk Management Organization Business Type Board of Directors Chairman & CEO 30,466,509 Sales and Maintenance of "Acer" brandname information technology products Sales and Maintenance of...

  • Page 69
    ... 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...

  • Page 70
    ...and Agnes Yang at KPMG 68F, Taipei 101 Tower, 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 Group Website: www.acer-group.com

  • Page 71
    Printed on eco-friendly paper with soy ink, and compliant with FSC requirements.