OFFERING CIRCULAR

Acer Incorporated
(incorporated as a company limited by shares in Taiwan, the Republic of China)

US$300,000,000 Zero Coupon Convertible Bonds Due 2015

US$200,000,000 Zero Coupon Convertible Bonds Due 2017
The US$300,000,000 Zero Coupon Convertible Bonds due 2015 (the “2015 Bonds”) and the US$200,000,000 Zero Coupon Convertible Bonds due
2017 (the “2017 Bonds”) (the 2015 Bonds and the 2017 Bonds, collectively the “Bonds”, will be issued by Acer Incorporated (“Acer Inc.”, the “Company”,
“we”, “us” or “our”). Unless the Bonds have been previously redeemed, repurchased and canceled or converted, the Company will redeem the 2015 Bonds
at 102.171% of their principal amount at maturity and the 2017 Bonds at 118.995% of their principal amount at maturity. The Bonds may be redeemed,
in whole or in part (in the principal amount of US$100,000 or any integral multiple thereof), at the option of the Company at any time on or after August
10, 2013 at the 2015 Early Redemption Amount (as defined herein) in the case of the 2015 Bonds or the 2017 Early Redemption Amount (as defined herein)
in the case of the 2017 Bonds, in each case, under the circumstances described in this Offering Circular. Each series of Bonds may also be redeemed in
whole but not in part at the option of the Company at any time at the relevant Early Redemption Amount if more than 90% in principal amount of such
series of Bonds has already been redeemed, repurchased and cancelled, or converted. In addition, the Bonds may be redeemed in whole but not in part at
any time at the option of the Company at the relevant Early Redemption Amount in the event of certain changes relating to taxation in the Republic of China
(the “ROC”).
Unless previously redeemed, repurchased and cancelled, or converted, (i) each holder of the 2015 Bonds shall have the right, at such holder’s
option, to require the Company to redeem, in whole or in part, the 2015 Bonds held by such holder on August 10, 2013 at the 2015 Early Redemption
Amount and each holder of the 2017 Bonds shall have the right, at such holder’s option, to require the Company to redeem, in whole or in part, the 2017
Bonds held by such holder on August 10, 2015 at the 2017 Early Redemption Amount and (ii) each holder of the Bonds shall have the right, at such holder’s
option, to require the Company to redeem, in whole or in part, the Bonds held by such holder at the relevant Early Redemption Amount if the Common
Shares are officially delisted from the Taiwan Stock Exchange or upon the occurrence of a Change of Control of the Company.
The Bonds will be direct and unconditional obligations of the Company, and will rank at least pari passu in right of payment with all other unsecured
and unsubordinated debt of the Company, except as otherwise provided herein. The Bonds will not bear interest. Holders of the Bonds (the “Holders”) may
convert the Bonds into common shares, par value of NT$10 per share, of the Company (the “Common Shares”) at any time, unless the Bonds have been
previously redeemed, repurchased and canceled, or converted and except during a Closed Period (as defined herein) on or after September 20, 2010 and
up to (and including) July 31, 2015 in the case of the 2015 Bonds or up to (and including) July 31, 2017, in the case of the 2017 Bonds. The conversion
price will initially be NT$110.760 per Common Share for the 2015 Bonds and NT$113.955 per Common Share for the 2017 Bonds (in each case, subject
to the adjustment as described herein), with a fixed exchange rate of NT$31.83= US$1.00 (“Fixed Exchange Rate”). The outstanding Common Shares are
listed on the Taiwan Stock Exchange (“TSE”) and application will be made to list the Common Shares issued on conversion of the Bonds on the TSE. The
closing price per Common Share on the TSE on August 5, 2010 was NT$85.2.
See “Risk Factors” on page 12 for a discussion of certain factors to be considered in connection with an investment in the Bonds.
The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and are being offered
and sold to non-U.S. persons in offshore transactions outside the United States in reliance on Regulation S under the Securities Act (“Regulation S”). For
a further description of certain restrictions on the offering and sale of the Bonds, see “Description of the Bonds”, “Transfer Restrictions” and “Plan of
Distribution”.
Each series of Bonds will be evidenced by a single Global Certificate (as defined herein), and will be fully issued in registered book-entry form
and registered in the name of a nominee of Citibank Europe PLC, as common depositary (the “Common Depositary”) for Euroclear Bank S.A./N.V.
(“Euroclear”) and Clearstream Banking, société anonyme, Luxembourg (“Clearstream, Luxembourg”). Except as described herein, beneficial interests in
the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg
and their direct or indirect participants.
Approval in-principle has been received for the listing of the Bonds on the Singapore Exchange Securities Trading Limited (“SGX-ST”). The
SGX-ST assumes no responsibility for the correctness of any statements made, opinions expressed or reports contained in this Offering Circular. Admission
of the Bonds to the Official List of the SGX-ST and quotation of the Bonds on the SGX-ST are not to be taken as an indication of the merits of the Bonds,
Acer Inc. and its subsidiaries or associated companies (if any). Delivery of the Bonds in book-entry form will be made on or about August 10, 2010.

Offering Price: 100%

Sole Global Coordinator

J.P. Morgan

Joint Bookrunners
J.P. Morgan Citi

Offering Circular dated August 5, 2010

 TABLE OF CONTENTS

Page

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Certain Defined Terms, Conventions and Currency of Presentation . . . . . . . . . . . . . . . . . . . . . . . v
Enforceability of Foreign Judgments in the ROC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Summary Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Selected Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . 27
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Market Price of the Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Exchange Rate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Dividends and Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Changes in Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Description of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
The Global Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Description of the Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Summary of Certain Significant Differences Between ROC GAAP and US GAAP . . . . . . . . . . . . 114
Appendix A — Foreign Investment and Exchange Controls in the ROC . . . . . . . . . . . . . . . . . . . A-1
Appendix B — The Securities Markets of the ROC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

i
 You should review carefully this entire Offering Circular before making an investment decision.
This Offering Circular has been prepared by us solely for use in connection with the proposed offering
of the Bonds (the “Offering”). We reserve the right to reject any offer to purchase, in whole or in part, for
any reason, or to sell less than all of the Bonds offered by this Offering Circular. J.P. Morgan Securities Ltd.
and Citigroup Global Markets Limited (the “Initial Purchasers”) will act as initial purchasers with respect to
the offering of the Bonds. This Offering Circular does not constitute an offer to the public generally to
subscribe for or otherwise acquire securities.
This Offering Circular is intended solely for the purpose of soliciting expressions of interest in the
Bonds from qualified investors and does not purport to summarize all of the terms, conditions, covenants and
other provisions contained in the indenture, the Bonds and other transaction documents. The information
provided is not all-inclusive and may not contain all the information that may be relevant to you. This
Offering Circular may only be used for the purposes for which it has been published.
The Initial Purchasers, the Trustee (as defined in the section “Description of the Bonds”) and the Agents
(as defined in the section “Description of the Bonds”) make no representation or warranty, express or
implied, as to the accuracy or completeness of the information contained in this Offering Circular. Nothing
contained in this Offering Circular is, or shall be relied upon as, a promise or representation by the Initial
Purchasers, the Trustee or the Agents as to the past or future. We have furnished the information contained
in this Offering Circular. The Initial Purchasers, the Trustee and the Agents assume no responsibility for the
accuracy or completeness of any such information.
This Offering Circular contains summaries intended to be accurate with respect to certain terms of
certain documents, but reference is made to the actual documents, all of which will be made available to you
upon request to us when available, for complete information with respect thereto, and all such summaries are
qualified in their entirety by such reference.
Neither we nor the Initial Purchasers have authorized anyone to provide you with any information other
than that contained or incorporated by reference in this Offering Circular. We take no responsibility for, and
can provide no assurance as to the reliability of, any other information that others may give you. The
information contained in this Offering Circular or in any document attached hereto is accurate only as of the
date of this Offering Circular or the date of such document, regardless of the time of delivery of this Offering
Circular or of any sale of the Bonds. Neither the delivery of this Offering Circular nor any sale made
hereunder shall under any circumstances imply that there has been no change in our affairs, or that the
information set forth herein or in any document attached hereto is correct as of any date subsequent to the
date hereof or thereof, as the case may be.
In making an investment decision, you must rely on your own examination of our business and the
terms of this Offering, including the merits and risks involved. The Bonds and the Common Shares to
be issued upon conversion of the Bonds have not been approved or disapproved by the U.S. Securities
and Exchange Commission (the “SEC”), any state securities commission in the U.S. or any other U.S.
regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of
the offering of the Bonds or the accuracy or adequacy of this Offering Circular. Any representation to
the contrary is a criminal offence in the U.S.
This Offering Circular does not constitute an offer to sell, or a solicitation of an offer to buy, any of
the Bonds offered hereby by any person in any jurisdiction in which it is unlawful for such person to make
an offer or solicitation.
The Bonds are subject to restrictions on transferability and resale and may not be transferred or resold
except as permitted under the Securities Act and the applicable state securities laws pursuant to registration
or exemption therefrom. As a prospective purchaser, you should be aware that you may be required to bear
the financial risks of this investment for an indefinite period of time. Please refer to the sections in this
Offering Circular entitled “Transfer Restrictions” and “Plan of Distribution.”
Payment on the Bonds and all deliveries of Common Shares made on conversion of the Bonds will be
made without withholding for or on account of certain taxes of the ROC or such jurisdiction in which we or
any successor is then organized and we will pay additional amounts in respect of such withholding to the
extent set forth under “Description of the Bonds”.

ii
 In connection with the Offering of the Bonds, the Initial Purchasers or any of their affiliates may
purchase the Bonds for their own account and enter into transactions, including (i) credit derivatives
(including convertible asset swaps, repackaging transactions and credit default swaps) relating to the Bonds
and/or our securities, and (ii) equity derivatives and stock loan transactions relating to our Common Shares.
Such transactions may occur either at the same time as the offer and sale of the Bonds, or in secondary market
transactions. Such transactions would be carried out as bilateral transactions with selected counter-parties and
separately from any existing sale or resale of the Bonds to which this Offering Circular relates
(notwithstanding that such selected counter-parties may also be purchasers of the Bonds). In connection with
the Offering of the Bonds, we may enter into a derivative transaction with the Initial Purchasers (or an
affiliated entity designated by them) to hedge our foreign currency risk.

See “Risk Factors” in this Offering Circular for a description of certain factors relating to an investment
in the Bonds. Neither we, the Initial Purchasers nor any of our or their respective representatives is making
any representation to you regarding the legality of an investment by you under applicable legal investment
or similar laws. You should consult with your own advisors as to legal, tax, business, financial and related
aspects of a purchase of the Bonds.

iii
 FORWARD-LOOKING STATEMENTS

This Offering Circular contains “forward-looking statements”. Although these forward-looking

statements, which may include statements regarding our future results of operations, financial condition or
business prospects, are based on our own information and information from other sources we believe to be
reliable, you should not place undue reliance on these forward-looking statements, which apply only as of
the date of this Offering Circular. The words “anticipate,” “believe,” “expect,” “intend,” “seek,” “plan,”
“estimate” and similar expressions, as they relate to us, are intended to identify a number of these
forward-looking statements. Our actual results of operations, financial condition or business prospects may
differ materially from those expressed or implied in these forward-looking statements for a variety of reasons,
including, among other things and not limited to:

• the impact of the global economic and financial crisis and the resulting slowdown in the global
economy;
• the cyclical nature of our industry;

• further declines in average selling prices;

• our dependence on introducing new products which will gain market acceptance on a timely basis;

• our dependence on growth in the demand for our products;

• changes in technology and competing products;

• our ability to ensure product quality, reliability and to control cost;

• our ability to acquire sufficient raw materials and key components;

• our ability to compete effectively;

• our ability to expand into new businesses or industries;

• our ability to undertake mergers and acquisitions or investments;

• our dependence on key personnel;

• general political and economic conditions;

• litigation and regulatory investigations against us;

• possible disruptions in commercial activities caused by natural and human-induced disasters,

including terrorist activity and armed conflict;

• fluctuations in foreign currency exchange rates; and

• other factors in the section entitled “Risk Factors” beginning on page 12 of this Offering Circular.

iv
 CERTAIN DEFINED TERMS, CONVENTIONS AND CURRENCY OF PRESENTATION

All references to “Taiwan” or the “ROC” are to the island of Taiwan and other areas under the effective
control of the Republic of China. All references herein to the “ROC Government” or the “ROC Company
Law” are references to the government of the Republic of China and the Company Law of the Republic of
China, respectively. All references to the “PRC” are to the People’s Republic of China, and “RMB” are to
Renminbi, the legal currency of PRC.

We have prepared the audited consolidated financial statements as of and for the years ended December
31, 2007, 2008 and 2009, and the unaudited consolidated financial statements as of and for the three months
ended March 31, 2009 and 2010 herein. These financial statements were prepared in conformity with the
“Rules Governing Preparation of Financial Statements of Securities Issuers” and generally accepted
accounting principles in the ROC (together referred to herein as “ROC GAAP”), which differ in certain
material respects from generally accepted accounting principles in the U.S. (“US GAAP”). See “Summary
of Principal Differences Between ROC GAAP and US GAAP.”

We publish our financial statements in New Taiwan Dollars, the lawful currency of the ROC. All
references herein to “United States Dollars”, “U.S. dollars” and “US$” are to United States dollars,
references to “New Taiwan Dollars”, “NT dollars” and “NT$” are to New Taiwan dollars. Unless otherwise
specified, where financial information in relation to the Company has been translated into US dollars, it has
been so translated, for convenience only, at the exchange rate of NT$31.819 = US$1.00 (the exchange rate
used in the financial statements for convenience translation) which exchange rate is sourced from the Central
Bank of the Republic of China, Taiwan (“CBC”) on March 31, 2010. All amounts translated into US dollars
as described above are provided solely for the convenience of the reader and no representation is made that
the NT dollar or US dollar amounts referred to herein could have been or could be converted into US dollars
or NT dollars, as the case may be, at any particular rate or at all. For further information relating to exchange
rates, see “Exchange Rate Information.”

v
 ENFORCEABILITY OF FOREIGN JUDGMENTS IN THE ROC

We are a company limited by shares and incorporated under the Company Law of the ROC (the
“Company Law”). Most of our directors and executive officers, supervisors and certain other parties named
herein are residents of the ROC and such persons are located in the ROC. As a result, it may not be possible
for investors to effect service of process upon us or such persons outside the ROC, or to enforce against any
of them judgments obtained in courts outside the ROC including those predicated upon the civil liability
provisions of the securities laws of the U.S. or any state or territory within the U.S.

We have been advised by Tsar & Tsai Law Firm, our legal adviser in the ROC, that any final judgment
obtained against us or such persons in any court other than the courts of the ROC in respect of any legal suit
or proceeding arising out of or relating to the Bonds or the Common Shares, will be enforced by the courts
of the ROC without further review of the merits only if the court of the ROC in which enforcement is sought
is satisfied that: (i) the court rendering the judgment has jurisdiction over the subject matter according to the
laws of the ROC; (ii) the judgment and the court procedures based on which such judgment was rendered are
not contrary to the public order or good morals of the ROC; (iii) the judgment is a final judgment for which
the period for appeal has expired or from which no appeal can be taken; (iv) if the judgment was rendered
by default by the court rendering the judgment and (x) we or such persons were duly served during a
reasonable time within the jurisdiction of such court in accordance with the procedural rules under such
jurisdiction, provided that such service of process has provided sufficient protection to us or such persons to
defend the claim/proceeding brought by the plaintiff or (y) process was served on us or such persons with
the judicial assistance of the ROC; and (v) judgments of the courts of the ROC are recognized and
enforceable in the jurisdiction of the court rendering the judgment on a reciprocal basis. Moreover, a party
seeking to enforce a foreign judgment in the ROC would, except under limited circumstances, be required
to obtain foreign exchange approval from the CBC for the remittance out of the ROC of any amounts
recovered in respect of such judgment denominated in a currency other than NT dollars.

vi
 SUMMARY

This summary highlights information presented in greater detail elsewhere in this Offering Circular.
This summary is not complete and does not contain all the information you should consider before investing
in the Bonds. You should carefully read this entire Offering Circular before investing, including the section
of this Offering Circular entitled “Risk Factors”.

Overview

We are one of the largest PC vendors in the world with no. 2 global market share in total PC and mobile
PC shipments in the first quarter of 2010*, according to Gartner, Inc. (“Gartner”). Our product offering
encompasses a broad range of product categories, including desktop and mobile PCs, LCD monitors,
projectors, servers and smartphones. We have a global customer base spread across Europe, Middle East and
Africa (“EMEA”), the Americas, Asia Pacific, China and Taiwan.

Over the past few years, we have demonstrated strong growth momentum in our PC shipments.
According to 2009 PC shipment data by Gartner, we maintained steady annual growth of 29.0%, securing our
position as the world’s no. 2 total PC vendor. According to Gartner, for the first quarter of 2010 in EMEA,
we were one of the top vendors in the total PC and the top vendor in mobile PC markets in shipments, with
20.3% and 25.8% market share, respectively. In the US, we were among the top three vendors in the total
PC and mobile PC markets in shipments, with 13.6% and 16.8% market share, respectively. Likewise, in the
Asia Pacific region, we were among the top four vendors in the total PC market and the top three vendors
in the mobile PC market in shipments, with 8.1% and 13.1% market share, respectively.*
Since our inception in 1976, we have grown from a single Acer brand to a diversified portfolio of four
brands — Acer, Gateway, Packard Bell and eMachines. The mergers of Gateway in 2007 and Packard Bell
in 2008 completed our global footprint by strengthening our presence in the U.S. and giving us a deeper
penetration into the European and Asian markets and allowed us to launch a multi-brand strategy to target
different geographic and consumer segments. Our multi-brand strategy allows each brand to offer a
differentiated set of product characteristics to effectively target each of the major market segments of the
global PC market. In 2009, we were voted Reader’s Digest gold-medal Computer TrustedBrand in Asia for
the 11th consecutive year, which is a reflection of the strength of our brand. We were also one of the sponsors
of the Winter Olympic Games in Vancouver in 2010 and are one of the sponsors of the forthcoming Summer
Olympic Games to be held in London in 2012. In 2008, we acquired E-Ten, a decision that reflects our
anticipation of the accelerating convergence between PC and handheld communication devices in the next
few years. In response to the market’s increasing demand for more portable and powerful mobile devices, we
are continuously developing and introducing innovative products, including e-readers, smartphones and
tablets equipped with Google’s latest Android operating system.
Our channel business model (“CBM”) has been instrumental to our success by encouraging first-class
suppliers and channel partners to collaborate in a winning formula of supply chain management. Our CBM
prevents duplicative efforts by us and our suppliers, leverages our channel partners’ expertise and resources
to effectively manage our global logistics and minimizes our overall operating expenses.
Our consolidated net sales was NT$462.1 billion, NT$546.3 billion and NT$574.0 billion (US$18.0
billion) for the year ended December 31, 2007, 2008 and 2009, respectively. Our net sales for the three
months ended March 31, 2010 was NT$162.1 billion (US$5.1 billion). As of March 31, 2010, we had a global
workforce of approximately 6,612 employees.
On August 5, 2010, our market capitalization was NT$229,118.3 million (US$7,200.7 million) based
on the closing price of our Common Shares on the TSE.

* Gartner, Inc. Personal Computer Quarterly Statistics Worldwide By Region: Final Database, C.G. Lee Mikako Kitagawa, 27 May
2010

1
Competitive Strengths
Our strengths are as follows:
• Global and geographically diversified scale. We are one of the largest PC vendors in the world,
with no. 2 global market share in total PC and mobile PC shipments in the first quarter of 2010*.
Through the successful mergers of Gateway in 2007 and Packard Bell in 2008, we have completed
our global footprint by fortifying our position in the U.S. and enhancing our already strong
positions in Europe and Asia. Our global scale and geographic diversity has allowed us to
maximize regional growth opportunities and to benefit from growing worldwide demand.
• Multi-brand strategy. The successful acquisitions of Gateway in 2007 and Packard Bell in 2008
together marked the beginnings of a new era for us by helping us to create a multi-brand strategy
that targets different geographic and consumer segments. As one of the first PC vendors to adopt
a multi-brand approach, we have been able to penetrate major segments of the Information
Technology and Communications market through the launch of products with differentiated
product designs. Each of our brands enjoys strong brand recognition within their respective target
markets, and the combined brand portfolio is highly complementary and provides optimal
positioning within the fast-changing PC market.
• Sustainable and profitable business model. We adhere to a CBM that involves collaboration with
first-class suppliers and distributors, leveraging their resources and ultimately, sharing the success
among all our partners. Consistent with this approach, we have avoided using a direct sales model
in order to avoid competition with our channel partners. Cooperation with channel distributors
lessens our operating expenses, helps us to maintain a lean organization and allows us to better
control inventories.
• Strong innovation capability and customer-centric business model. Our business model is
centered on delivering products designed around customer needs. To ensure our products meet the
needs of our customers, we have cultivated a strong culture of innovation and product design.
This means understanding exactly what our customers want and where consumer preferences will
trend, and then using our knowledge and skills to exceed their expectations by making our
products simple to use, stylish to own and accessible to everyone.
• Proven management with solid delivery track record. Led by an experienced management team,
we have performed strongly and have grown into one of the largest PC and smart handheld
vendors in the world. Our leadership team was one of the first to focus on notebook PC platforms,
before desktop-to-notebook PC substitution trends were widely anticipated, which has resulted in
our significant global market share in notebook PC shipments. Our management also had the
foresight to develop the Aspire One netbook PC series, which created a new industry paradigm
in netbook PC design and functionality and better met the preferences of consumers than
competing products available in the market at the time.

Business Strategies
Our strategies are as follows:
• Continue to invest in our leading brands. We plan to continue pursuing our multi-brand strategy
to more effectively target a broader range of geographic and customer segments. We will continue
to invest in our brands — Acer, Gateway, Packard Bell and eMachines — to further raise their
market recognition and acceptance, and increase consumer understanding of their individual
value propositions. We plan to continue marketing our brands across a wide variety of media,
ranging from traditional channels such as print and television media, to promotional events,
exhibitions, and various sponsorships.

*
Gartner, Inc. Personal Computer Quarterly Statistics Worldwide By Region: Final Database, C.G. Lee Mikako Kitagawa, 27 May
2010

2
 • Continue to grow global market share with focus on profitability. We believe that the PC and
smart handheld device markets will continue to grow, with increasing global penetration and
expansion into new market segments. We plan to continue to be a part of this growth and capture
an increasing share of global PC and smart handheld device shipment volume, with a particular
focus on large emerging markets such as Brazil, Russia, India, Indonesia and China. In China in
particular, we have recently launched several initiatives to develop dedicated products, expand
distribution channels and market our brand in order to capture a higher share of this increasingly
significant market.
• Invest and capitalize on proliferation of mobile and cloud computing. In order to capitalize on
the proliferation of mobile and cloud computing trends, we have put particular focus on
introducing new mobility solutions with a variety of form factors. Upcoming product launches
include the release of the new Timeline X, which we expect will satisfy customer demand for a
thin and light notebook PC with a long battery life that does not compromise on CPU
performance. In addition, the acquisition of E-ten in 2008 has helped us penetrate the smart
handheld device market successfully, and we will soon be introducing new Internet-enabled
devices with high levels of interactivity and connectivity.
• Enhance partnerships and business operations. We plan to continue to enhance our operations
to maximize efficiency and competitiveness while reducing costs. Of particular focus is the
continued refinement of our order fulfillment and global logistics network to meet the demands
of the global PC and smart handheld device markets and ensure timely delivery, while minimizing
unnecessary processes and overhead costs. We also intend to continue to seek out new
partnerships which complement our business strategies, while ensuring that we are achieving full
synergies from our existing relationships.

Recent Developments

Preliminary financial results

On August 4, 2010, we announced certain unaudited preliminary financial results for the second quarter
and first half of 2010.
Our net sales increased by 26.1% from NT$119.1 billion for the three months ended June 30, 2009 to
NT$150.2 billion for the three months ended June 30, 2010. Operating income increased by 35.8% from
NT$3.0 billion for the three months ended June 30, 2009 to NT$4.1 billion for the three months ended June
30, 2010. Net income increased by 53.5% from NT$2.3 billion for the three months ended June 30, 2009 to
NT$3.6 billion for the three months ended June 30, 2010. Earnings per share increased by 53.4% from
NT$0.88 for the three months ended June 30, 2009 to NT$1.35 for the three months ended June 30, 2010.
Our net sales increased by 31.1% from NT$238.2 billion for the six months ended June 30, 2009 to
NT$312.4 billion for the six months ended June 30, 2010. Operating income increased by 51.7% from
NT$5.6 billion for the six months ended June 30, 2009 to NT$8.5 billion for the six months ended June 30,
2010. Net income increased 57.8% from NT$4.4 billion for the six months ended June 30, 2009 to NT$6.9
billion for the six months ended June 30, 2010. Earnings per share increased by 56.6% from NT$1.66 for the
six months ended June 30, 2009 to NT$2.60 for the six months ended June 30, 2010.

Strengthening of relationship with PKU Founder Group Ltd.(“PKU Founder Group”), Founder
Technology Group Corp. (“Founder Tech”) and its subsidiaries (collectively, herein after “Founder”)
On August 4, 2010, we announced that following a memorandum of mutual understanding we signed
with Founder in late May 2010, PKU Founder Group granted us a license to use the“Founder” brand in the
mutually agreed PC business and we have agreed to work with Founder Tech on the development of products
for the China market. We will also utilize Founder’s comprehensive channel network to target our products
at different cities, rural markets and commercial markets in China. We believe that our relationship with
Founder will help us widen our service network coverage and allow us to provide faster services to our
customers at lower costs.

3
Corporate Information

Our registered office is located at 7F, No.137, Sec.2, Chien Kuo N. Road, Taipei, Taiwan, ROC and our
telephone number is +886-2-2509-2368.
Our Common Shares have been listed on the TSE since September 18, 1996 under the number “2353.”
Our Global Depositary Receipts have been listed on the London Stock Exchange under the symbol “ACID”
since November 1, 1995.

4

The following is only a summary and is qualified in its entirety by reference to the sections entitled
“Description of the Bonds”. Capitalized terms used herein and not defined have the meaning given to them
in “Description of the Bonds”.
Issuer ................................................
The Offering .....................................
Initial Purchasers ..............................
Issue Price ........................................
Original Issue Date...........................
Maturity Dates..................................
Interest..............................................
Ranking ............................................
Conversion........................................
THE OFFERING
Acer Incorporated
US$300,000,000 aggregate principal amount of zero coupon
convertible bonds due 2015 (the “2015 Bonds”) and
US$200,000,000 aggregate principal amount of zero coupon
convertible bonds due 2017 (the “2017 Bonds,” together with the
2015 Bonds, the “Bonds”) are being offered to non-U.S. persons
outside the United States in reliance on Regulation S.
J.P. Morgan Securities Ltd. and Citigroup Global Markets Limited
100% of principal amount.
August 10, 2010
August 10, 2015 for the 2015 Bonds, August 10, 2017 for the
2017 Bonds
The Bonds will not bear interest except under the limited
circumstances set forth under “Description of the Bonds —
Default Interest”.
The Bonds will (i) be our direct, unsecured, unsubordinated and
unconditional obligations, (ii) rank pari passu in right of payment
with all our other unsecured and unsubordinated debt and (iii) be
senior in right of payment to all our debt that is expressed to be
subordinated in right of payment to the Bonds.
Each Holder will have the Conversion Right during the relevant
Conversion Period to convert all its Bonds (or any portion in the
principal amount of US$100,000 or any integral multiple thereof)
into our newly issued Common Shares, provided, however, that
the Conversion Right during any Closed Period (as defined
herein) shall be suspended and the Conversion Period shall not
include any such Closed Period. We will neither issue fractions of
Common Shares.
5

Conversion Price ..............................
Redemption Amount at Maturity ......
Redemption at the Option of the
Holders .........................................
“Closed Period” means: (i) the 60-day period prior to the date of
any annual general shareholders’ meeting of the Company; (ii) the
30-day period prior to the date of any special shareholders’
meeting of the Company; (iii) the period beginning on the 15th
Trading Day prior to the five-day period before a record date for
distribution of rights, dividends or other benefits to the date of
such record date; (iv) in the event of a capital decrease of the
Company, the period beginning on the record date for the capital
decrease up to one day prior to the Trading Day of the Common
Shares reissued after the capital decrease; and (v) such other
periods during which the Company may be required to close its
shareholders’ register or to suspend conversion under ROC laws
and regulations applicable from time to time.
The conversion price for the 2015 Bonds will initially be
NT$110.760 per Common Share and the conversion price for the
2017 Bonds will initially be NT$113.955 per Common Share, in
each case, with a fixed exchange rate of NT$31.83 = US$1.00,
subject to adjustment in the manner provided in “Description of
the Bonds — Conversion — Adjustments”.
Unless previously redeemed, repurchased and cancelled, or
converted, the 2015 Bonds will be redeemed on the 2015 Maturity
Date at a redemption price equal to 102.171% of the unpaid
principal amount thereof.
Unless previously redeemed, repurchased and cancelled, or
converted, the 2017 Bonds will be redeemed on the 2017 Maturity
Date at a redemption price equal to 118.995% of the unpaid
principal amount thereof.
See “Description of the Bonds — Redemption, repurchase and
cancellation — Redemption at Maturity”.
Unless previously redeemed, repurchased and cancelled, or
converted, each holder of the 2015 Bonds shall have the right, at
such holder’s option, to require the Company to redeem, in whole
or in part, the 2015 Bonds held by such holder on August 10, 2013
at the 2015 Early Redemption Amount.
Unless previously redeemed, repurchased and cancelled, or
converted, each holder of the 2017 Bonds shall have the right, at
such holder’s option, to require the Company to redeem, in whole
or in part, the 2017 Bonds held by such holder on August 10, 2015
at the 2017 Early Redemption Amount.
See “Description of the Bonds — Redemption, repurchase and
cancellation — Redemption at the Option of the Holders”.
6
Redemption at the Option of the
Company.......................................
Redemption upon Delisting or
Change of Control ........................
Tax Redemption ...............................
At any time on or after August 10, 2013 and prior to the relevant
Maturity Date, the Company may, redeem (i) the 2015 Bonds, in
whole or in part, at the 2015 Early Redemption Amount on the
relevant date of redemption or (ii) the 2017 Bonds, in whole or in
part, at the 2017 Early Redemption Amount on the relevant date
of redemption; provided, however, that in each case, no such
redemption may be made unless the Closing Price of the Common
Shares, translated into US Dollars at the Prevailing Rate, on any
20 consecutive Trading Days, the last of which occurs not more
than five Trading Days prior to the date upon which notice of such
redemption is given, is at least 130% of the 2015 Early
Redemption Amount, in the case of a redemption of the 2015
Bonds, or the 2017 Early Redemption Amount, in the case of a
redemption of the 2017 Bonds, in each case, divided by the
prevailing Conversion Ratio.
Notwithstanding the foregoing, at any time, the Company may,
redeem either series of Bonds, in whole but not in part, at the
relevant Early Redemption Amount if more than 90% in principal
amount of the relevant series of Bonds has already been
redeemed, repurchased and cancelled, or converted as herein
provided.
A Bondholder shall have the right, at such Bondholder’s option, to
require us to redeem in whole or in part, such Bondholder’s Bonds
at the relevant Early Redemption Amount, (i) if the Common
Shares are officially delisted from the TSE; or (ii) upon the
occurrence of a Change of Control of the Company. See
“Description of the Bonds — Redemption, repurchase and
cancellation — Redemption in the Event of Delisting” and
“Description of the Bonds — Redemption, repurchase and
cancellation — Redemption in the Event of a Change of Control”.
The Bonds may be redeemed, in whole but not in part, at our
option, at any time, at the relevant Early Redemption Amount if,
as a result of certain changes relating to the tax laws in the ROC
or such other jurisdiction in which we or any successor is then
organized, we are required to pay Additional Amounts.
Bondholders may elect not to have their Bonds redeemed but with
no entitlement to any Additional Amounts or reimbursement of
Additional Amounts.
7
Delivery and Form of Bonds............
Negative Pledge................................
Events of Default .............................
Use of Proceeds................................
Listing ..............................................
Governing Law.................................
Each series of Bonds will be represented by a single Global
Certificate, which will be deposited with, and registered in the
name of the Common Depositary. Euroclear and Clearstream,
Luxembourg will credit their respective accountholders with the
respective principal amounts of the individual interests
represented by such Global Certificate. Such accounts will be
designated initially by or on behalf of the Initial Purchasers.
Ownership of beneficial interests in the Global Certificate will be
limited to persons who have accounts with Euroclear or
Clearstream, Luxembourg or persons who hold interests through
such accountholders. Ownership of beneficial interests in each
Global Certificate will be shown on, and the transfer of that
ownership will be effected only through, the records maintained
by Euroclear and Clearstream, Luxembourg (with respect to
interests of their respective accountholders) and the records of
such accountholders (with respect to interests of persons other
than such accountholders).
The securities codes for the 2015 Bonds and 2017 Bonds are as
follows:
ISIN Common Code
2015 Bonds.............................. XS0528416232 052841623
2017 Bonds.............................. XS0528416315 052841631
We will not create or permit to remain outstanding, and will not
permit our Principal Subsidiaries to create or permit to remain
outstanding, security for the benefit of holders of any
International Investment Securities or for any guarantee or
indemnity in respect thereof without granting equivalent security
for the Bonds. See “Description of the Bonds — Certain
covenants — Negative Pledge”.
Certain events will permit acceleration of payment of the sum of
the principal amount and interest (if any) of the Bonds. See
“Description of the Bonds — Events of Default”.
We estimate that the net proceeds from the sale of the Bonds will
be approximately US$497,500,000 after deducting estimated
Initial Purchasers’ discounts and offering expenses. We intend to
use the net proceeds to procure raw materials overseas to support
our business growth.
Approval in-principle has been received for the listing of the
Bonds on the SGX-ST. The Bonds will be traded on the SGX-ST
in a minimum board lot size of US$200,000 for so long as the
Bonds are listed on the SGX-ST and the rules of the SGX-ST so
require. The Common Shares are listed on the TSE and
application will be made for the Common Shares issuable upon
conversion of the Bonds to be listed on the TSE.
Each of the Bonds and the Indenture is governed by, and
construed in accordance with, the laws of the State of New York.
8
Lock-up ............................................ We have agreed that for a period of 90 days after the date of this
Offering Circular, we will not, without the Initial Purchasers’
prior written consent, offer, sell, contract to sell or otherwise
dispose of any of our securities that are substantially similar to the
Bonds or Common Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Common Shares or any such
substantially similar securities (other than the sale of the Bonds,
the issuance of our Common Shares upon conversion of the Bonds
offered hereunder and any shares of our common stock issued
upon the exercise of options granted under our existing employee
stock option incentive plans).

Trustee .............................................. Citicorp International Limited

Registrar ........................................... Citigroup Global Markets Deutschland AG

Principal Paying, Transfer and

Conversion Agent ......................... Citibank, N.A., London Branch

9
 SUMMARY FINANCIAL INFORMATION
The following tables set out summary financial information derived from our (i) audited consolidated
financial statements as of and for the years ended December 31, 2007, 2008 and 2009, and (ii) unaudited
consolidated financial statements as of and for the three months ended March 31, 2009 and 2010, each
included in this Offering Circular. Our financial statements are prepared in conformity with ROC GAAP,
which differs in certain material aspects from US GAAP. See “Summary of Principal Differences Between
ROC GAAP and US GAAP.” The amounts expressed in US dollars do not form part of any of our consolidated
and unconsolidated financial statements and are provided solely for the convenience of the reader.
The table below sets forth certain financial data under ROC GAAP for the periods and as of the dates
indicated.

Three Months Ended and

Year Ended and As of December 31, As of March 31,

2007 2008 2009 2009 2010

NT$ NT$ NT$ US$ NT$ NT$ US$

(audited) (unaudited)
(in millions, except per share data)
Consolidated Statement of Income:
Net sales....................................................... 462,066.1 546,274.1 573,982.5 18,039.0 119,086.4 162,129.9 5,095.4
Cost of sales................................................. (414,647.8) (488,988.4) (515,654.6) (16,205.9) (107,168.0) (146,416.1) (4,601.6)
Gross profit .................................................. 47,418.3 57,285.7 58,327.9 1,833.1 11,918.4 15,713.8 493.8
Operating expenses....................................... (37,233.2) (43,213.4) (42,988.4) (1,351.0) (9,347.8) (11,328.4) (356.0)
Operating income ........................................ 10,185.1 14,072.3 15,339.5 482.1 2,570.6 4,385.4 137.8
Non-operating income and gains.................. 6,699.7 5,353.0 1,719.0 54.0 467.7 360.5 11.3
Non-operating expenses and losses .............. (1,776.2) (4,618.6) (2,075.5) (65.2) (282.9) (587.2) (18.4)
Income from continuing operations before
income tax ............................................... 15,108.6 14,806.7 14,983.0 470.9 2,755.4 4,158.7 130.7
Income tax expense ...................................... (2,665.6) (3,169.4) (3,630.1) (114.1) (729.7) (864.2) (27.2)
Income from discontinued operations .......... 517.9 99.8 — — — — —
Net income ................................................... 12,960.9 11,737.1 11,352.9 356.8 2,025.7 3,294.5 103.5
Earnings (loss) per share—Basic(1) .............. 5.27 4.67 4.31 0.14 0.77 1.25 0.04
Earnings (loss) per share—Diluted .............. 5.27 4.60 4.26 0.13 0.76 1.23 0.04

Consolidated Balance Sheet Data:

Current assets ............................................... 191,626.2 186,390.6 232,107.9 7,294.6 199,892.4 222,417.2 6,990.1
Long-term investment .................................. 11,202.7 6,773.5 8,872.8 278.8 7,445.6 8,698.7 273.4
Net property, plant and equipment ............... 8,636.4 9,336.2 8,676.2 272.7 9,262.1 8,567.4 269.3
Intangible assets ........................................... 25,926.5 34,746.8 35,444.1 1,113.9 37,656.4 34,823.6 1,094.4
Property not used in operation ..................... 3,806.1 2,996.7 2,971.5 93.4 2,990.5 2,938.3 92.3
Other financial assets ................................... 961.4 868.8 789.7 24.8 796.0 904.4 28.4
Deferred charges and other assets ................ 1,124.0 2,329.6 2,162.5 68.0 2,586.9 2,418.6 76.0
Total assets ................................................... 243,283.3 243,442.2 291,024.7 9,146.2 260,629.9 280,768.2 8,823.9
Current liabilities.......................................... 142,842.5 149,315.1 179,846.5 5,652.2 162,839.5 167,693.2 5,270.3
Long-term liabilities..................................... 23,031.8 11,249.5 18,300.5 575.1 11,548.3 18,208.0 572.2
Total liabilities ............................................. 165,874.3 160,564.6 198,147.0 6,227.3 174,387.8 185,901.2 5,842.5
Total shareholders’ equity and minority
interest ..................................................... 77,409.0 82,877.6 92,877.7 2,918.9 86,242.1 94,867.0 2,981.4

10
 Three Months Ended and
Year Ended and As of December 31, As of March 31,

2007 2008 2009 2009 2010

NT$ NT$ NT$ US$ NT$ NT$ US$

(audited) (unaudited)
(in millions, except per share data)

Consolidated Statement of Cash Flows:

Cash flow from operating activities ............. (6,560.8) (5,166.4) 38,192.1 1,200.3 31,465.4 (16,854.2) (529.7)
Cash flow from investment activities........... 2,741.2 8,747.1 (1,788.3) (56.2) (287.0) 80.8 2.5
Cash flow from financing activities ............. (3,899.4) (17,955.1) (5,725.1) (179.9) 975.4 1,307.7 41.1
Net increase (decrease) in cash and cash
equivalents .............................................. (7,719.0) (14,374.4) 30,678.7 964.2 32,153.8 (15,465.7) (486.1)
Effects of exchange rate changes ................. 979.1 (1,429.2) 795.7 24.9 (381.9) (1,511.8) (47.4)
Cash and cash equivalents at beginning of
year/period ............................................... 44,685.2 37,945.3 22,141.7 695.9 22,141.7 53,616.1 1,685.0
Cash and cash equivalents at end of
year/period ............................................... 37,945.3 22,141.7 53,616.1 1,685.0 53,913.6 36,638.6 1,151.5

(1) Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding during the year.
The weighted average outstanding shares are retroactively adjusted for the effects of stock dividends transferred from retained
earnings and capital surplus to common stock, and employee stock bonuses issued prior to January 1, 2009. Effective January
1, 2009, EPS are not retroactively adjusted for employee stock bonuses.

11
 RISK FACTORS
You should carefully consider the risks described below before making an investment decision. Before
making an investment decision, you should carefully consider all of the information contained in this Offering
Circular, including the following risk factors.

RISKS RELATING TO OPERATIONS

Our operating results are dependent on a variety of factors in the industry in which we operate, any of
which could materially affect our net sales and/or profitability or lead to higher variability of our
quarterly or annual operating results.
Our operating results are affected by a wide variety of factors that could materially affect our net sales
and/or profitability or lead to higher variability of quarterly or annual operating results. These factors include,
among others: economic and market conditions in the PC industry; seasonality; customer demand and market
acceptance of our products; new product introductions, the production capabilities of our original equipment
manufacturers (“OEM”)/original design manufacturers (“ODM”) suppliers to produce new products; product
obsolescence; component price fluctuation and availability; product mix and design cycle duration; our
ability to manage product transitions, inventory levels and manufacturing processes; our ability to distribute
products quickly and efficiently to meet customer demands; our expansion plans; capital requirements and
the availability of funding; technological changes and changes in testing processes; timing of orders and
delays in shipments to customers; volume of orders relative to our suppliers’ production capacity; our ability
to obtain adequate testing equipment on a timely basis; the availability of key personnel and skilled
employees; international political or economic events or developments; and currency fluctuations.
Unfavorable changes in these or other factors could materially and adversely affect our results of operations
or financial condition.

We experience intense competition and pricing pressure which could have a material and adverse
impact on our net sales, profitability and growth prospects.
The industry in which we operate is highly competitive and is characterized by a large number of
competitors, rapidly changing customer demand patterns, the frequent introduction of new products, short
product life cycles, continuous improvement in performance characteristics, reductions in product pricing
and high price sensitivity on the part of customers. As a result, we have experienced constant and intense
pressure on our selling prices.
The industry has also experienced rapid technological advances in software functionality and hardware
performance and features based on existing or emerging industry standards. For example, manufacturers of
PCs that adhere to industry standards, including us, generally have access to and make use of many of the
same components, often from the same group of suppliers. At times, the industry has experienced shortages
in the supply of certain components, such as the current shortages in LCD panels and Double Data Rate
Dynamic Random Access Memory (“DDR DRAM”), which have led to higher component prices and in turn
have affected our operating margins and results of operations. Over time, however, the prices of many
components have declined periodically and the general practice of PC manufacturers, including us, is to
reduce the prices of PC products to reflect these component price declines.
We have also experienced, and may experience in the future, gross margin declines in certain
businesses, reflecting factors such as competitive pricing pressures, inventory write downs and increases in
component and manufacturing costs due to higher labor and material costs borne by our suppliers that, as a
result of the competitive nature of our industry, we are unable to pass on to our customers.
We may take additional initiatives to maintain the profitability of our products and mitigate the effects
of price reductions, including improving our product mix, putting greater emphasis on different markets,
reducing component costs, reducing inventory carrying costs, lowering operating costs, improving inventory
management, increasing product differentiation, and diversifying our product supply sources to decrease
supply cost and procurement risk. However, there can be no assurance that these initiatives will be effective
in stimulating higher levels of sales, will reduce costs to offset the adverse effects of pricing pressure on our
gross margins or will not have a material adverse effect on our results of operations or financial condition.

12
 Failure to enhance or expand our product offerings or the inability to manage our product transitions
may adversely affect our net sales.
We may not be able to develop the right kind of products that reflect rapid technological advances or
rapidly changing customer preferences. To maintain our competitive position, we must continue to enhance
our existing products while developing new products. To do so, we must develop and incorporate into our
product line new hardware, software, communications and peripheral technologies. We must develop or
obtain the necessary intellectual property and invest in significant resources. Our product strategy focuses in
part on marketing products that comply with evolving industry performance standards, meet customer quality
expectations while being priced affordably to appeal to a broad customer base. Because of the pace of
technological advances in the PC industry, we must introduce on a timely basis new products that offer
customers the latest competitive technologies, but at the same time, we must prudently manage the marketing
cycles of our existing product portfolio. There can be no assurance that we will be able to deliver commercial
quantities of new products in a timely manner or that new products introduced by us will achieve market
acceptance.
The risks associated with transitioning to new products include but are not limited to: costs associated
with introducing new products or upgrading existing products, potential defects in new products, the
reduction in the price of existing products, existing products becoming obsolete; the failure to align our
supply chain and inventory with customer demands; and our competitors introducing the right type and
volume of products before we do. Any of these risks could adversely and materially affect our financial
condition and results of operations.

Our net sales mix by product, customer, and geographic sales mix and seasonal sales trends may
adversely affect our business.
Our net sales, gross margin and profit vary among our products, customer groups and geographic
markets and therefore may be different in future periods than our current results. In addition, our business
is subject to certain seasonal sales trends. For example, sales are typically stronger in the third and fourth
fiscal quarters, but often weaker in the first and second fiscal quarters. As a result of these factors, our overall
profitability for any particular period may be adversely affected by the mix of products, customers, and
geographic markets for that period, as well as by seasonal trends.

Uncertain or weak economic conditions or financial instability could have a material and adverse
impact on our net sales, growth and profitability.
Our net sales, growth and profitability may be materially and adversely affected by uncertain or weak
economic conditions or financial instability, the insolvency of our key suppliers, the inability of our
customers to obtain financing or credit, and reduced corporate capital expenditure budgets, all of which may
lead to weak or fluctuating demand for PCs and other products in the markets in which we compete and
operate. Unfavorable economic conditions may also cause us to incur restructuring costs and cause our
income and expenses to vary materially from expectations depending on changes in interest rates, borrowing
costs, currency exchange rates, hedging expenses and the fair value of derivative instruments.

If we are unable to control or manage our costs and expenses, our profitability may suffer and we may
become less competitive.
While we are focused on managing our costs, we may not be successful in managing or controlling
costs such as our operating expenses, total procurement costs and product design costs. As a result, we may
not achieve our expected cost savings in the time anticipated, or at all. Consequently, we may become less
competitive and our results of operations and profitability may be materially and adversely affected.

Our reliance on third party suppliers for products and components could harm our business by
adversely affecting product quality, specification, delivery, reliability and cost.
Our business relies heavily upon outsourced manufacturers such as OEMs and ODMs to manufacture
our products and is therefore dependent upon the continuing operations of those outsourced manufacturers
to fulfill demand for our products, including PCs. While we will attempt to ensure the quality and reliability

13
of our outsourcing suppliers, there can be no assurance that (i) potential or existing outsourcing suppliers will
qualify or continue to qualify for our certification of suppliers and outsourced products, (ii) our outsourcing
suppliers will be able to modify and manufacture products to meet our specifications or (iii) our outsourced
products will be free of defects. Defective parts and products from outsourcing suppliers could reduce our
product reliability and harm our reputation and brands.
There can be no assurance that the delivery of outsourced products will not incur delays or that our
outsourcing suppliers will have sufficient logistic capabilities to make deliveries directly from their
manufacturing facilities to our customers. If our outsourcing suppliers are unable to quickly adjust their
operation or financial condition in response to changes to the nature or volume of orders, there may be
shortages or delays in their delivery of our outsourced products. If shortages or delays persist, the price of
these components may increase and we may be exposed to quality issues or the components may not be
available at all. We may not be able to secure enough components at reasonable prices or of acceptable
quality to produce products or provide services in a timely manner in the quantities or according to the
specifications needed. Accordingly, our net sales and gross margin could suffer as we could lose
time-sensitive sales, incur additional freight costs or be unable to pass on price increases to our customers.
If we cannot adequately address supply issues, we might have to reengineer some products or service
offerings, resulting in further costs and delays and potentially loss in market share.

Failure to procure components and products in a timely and reliable manner from single-source or
limited-source suppliers could have an adverse and material impact on our business operations.
Our production process requires certain software and quality components that are licensed and procured
from single-source or limited-source suppliers. Reliance on single-source or limited-source suppliers
generally involves several risks, including the possibility of defective parts, component shortages, increases
in component costs and reduced control over delivery schedules, any or all of which could adversely affect
our financial results. The lack of timely availability and reliable supply of components from these suppliers
could adversely affect our business. Where alternative sources are available, qualification of the alternative
suppliers and establishment of reliable supply schedules from such sources may result in delays and could
adversely affect our results of operations.
We occasionally experience delays in receiving certain components, which can cause delays in the
shipment of some products to our customers. In addition, we occasionally experience quality problems with
certain defective components, which can affect the reliability and reputation of our products and brands.
There can be no assurance that we will be able to continue to obtain additional supplies of reliable
components in a timely or cost-effective manner.

Our international sales and operations depend on factors that are beyond our control, each of which
could have a material or adverse impact on our financial condition and results of operation.
We have significant operations overseas and sales outside the ROC represented approximately 95.3%
of our consolidated net sales for the year ended December 31, 2009. Thus, our future growth and success are
highly dependent on the continued growth of our business outside of the ROC, including EMEA, the
Americas and Asia Pacific. The success and profitability of our international activities depend on factors
including but not limited to business and trade requirements, procedures and regulations that will affect the
marketing, development, pricing, transportation and procurement of our products; changes in consumers’
preferences, requirements or financial capacity; adverse or material developments in financial, legal, trade,
tax, regulatory, labor, economic, political, military or social conditions of a country or region; unpredictable
accounts receivable days; ability to manage a geographically dispersed workforce; and ability to repatriate
cash generated abroad.

We are exposed to the risks of currency exchange rate fluctuations.

Approximately 59.4% of our consolidated net sales was denominated in Euros and US dollars for the
year ended December 31, 2009, while the majority of our costs are denominated in US dollars. Given that
our financial statements are expressed in NT dollars, changes in the rate of exchange between these
currencies and the NT dollar will affect our gross profits and operating margins and could result in exchange

14
losses. Depreciation of the NT dollar against the Euro and US dollar generally results in foreign exchange
gains for us because a large portion of our net sales is denominated in Euros and US dollars. The impact of
future exchange rate fluctuations on our results of operations cannot be accurately predicted. From time to
time, we have engaged in, and may continue to engage in, certain exchange rate hedging activities. The
effectiveness of our hedges depends on our ability to accurately forecast future cash flows, which is
particularly difficult during periods of uncertain demand for our products and services and high exchange rate
volatility. As a result, we could incur significant losses from our hedging activities if our forecasts are
incorrect. In addition, our hedging activities may be ineffective or may not offset any adverse financial
impact resulting from currency variations. Gains or losses associated with hedging activities may also impact
our net sales and to a lesser extent our cost of sales and financial condition.

If we fail to manage the distribution of our products properly, our net sales, gross margin and
profitability could suffer.
We rely on our CBM, an indirect sales method, to distribute our products to our customers. Successfully
managing our CBM partners to reach various potential end market customer segments for our products and
services is a challenging process. Since each distribution method, whether indirect sales like the CBM or
direct sales, has distinct risks and financial impact, our failure to implement the most advantageous balance
in the delivery model for our products and services could adversely affect our net sales and gross margins
and therefore our profitability.

We may undertake mergers, acquisitions or investments to expand our business that may pose risks to
our business.
We have sought and may continue to seek non-organic growth through mergers and acquisitions when
opportunities arise. Mergers, acquisitions or investments that we have entered in, and may enter into in the
future entail a number of risks that could materially and adversely affect our business, operating and financial
results, including, among others: problems integrating the acquired operations, technologies or products into
our existing business and products; diversion of management’s time and attention from our core business;
conflicts with management at acquired companies or joint venture partners; adverse effects on our existing
business relationships with customers; need for financial resources above our planned investment levels;
failures in realizing anticipated synergies; difficulties in retaining business relationships with suppliers and
customers of the acquired company; risks associated with entering markets in which we lack experience;
potential loss of key employees of the acquired company; and potential write-offs of acquired assets. Our
failure to address these risks successfully may have a material adverse effect on our financial condition and
results of operations.

Volatility in the debt and equity capital markets could affect our ability to access capital.
While we use cash flows generated from operations to support our business and future expansion, we
may need external funding from time to time. Our ability to obtain sufficient external funding in a timely
manner depends on many factors, including conditions in the securities and credit markets and economic
conditions generally, our future operational and financial performance, tightening lending standards, changes
in financial services regulations. Our failure to access the capital markets could unfavorably affect our net
sales, profitability, and cash flows.

Our stock price has historically fluctuated and may continue to fluctuate, which may make future prices
of our stock difficult to predict.
Our stock price, like that of other technology companies, can be volatile. Some of the factors that could
affect our stock price include but are not limited to:
• speculation in the press or investment community about, or actual changes in, our business,
strategic position, market share, organizational structure, operations, financial condition,
financial reporting and results, effectiveness of cost cutting efforts, value or liquidity of our
investments, exposure to market volatility, prospects, business combination or investment
transactions, or executive team;

15
 • the announcement of new products, services, technological innovations or acquisitions by us or
our competitors;
• quarterly increases or decreases in net sales, gross margin, earnings or cash flow from operations,
changes in estimates by the investment community or guidance provided by us, and variations
between actual and estimated financial results;
• announcements of actual and anticipated financial results by our competitors and other companies
in the Information Technology and Communication industry; and
• the timing and amount of share repurchases by us.
General or industry specific market conditions or stock market performance or domestic or
international macroeconomic and geopolitical factors unrelated to our performance also may affect the price
of our common stock. For these reasons, investors should not rely on recent trends to predict future stock
prices, financial condition, results of operations or cash flows. In addition, following periods of volatility in
a company’s securities, securities class action litigation against a company is sometimes instituted. If
instituted against us, this type of litigation could result in substantial costs and the diversion of management
time and resources.

We are dependent on our ability to attract and retain qualified personnel.

As is common in the technology industry, our success depends to a significant extent upon, among other
factors, the continued service of our key senior executives and research and development, engineering,
marketing, sales, production, support and other personnel and on our ability to continue to attract, retain and
motivate qualified personnel. The competition for such employees is intense and the loss of the services of
any of these key personnel without adequate replacement or the inability to attract new qualified personnel
could have a material adverse effect on our results of operations or financial condition. We are attempting
to minimize the risk and magnitude of problems associated with shortages of qualified management
personnel by training and developing a number of qualified general managers. In addition, equity-based
employee incentive plans were established in 2008 and 2009 for our employees. However, there can be no
assurance that such measure will prevent the loss of our key personnel in the future. See “Business —
Employees”.

Our net sales, cost of sales, and expenses may suffer if we cannot continue to license or enforce the
intellectual property rights on which our businesses depend or if third parties assert that we violate their
intellectual property rights.
From time to time, companies and individuals assert patent, copyright, trademark and other intellectual
property rights to technologies that are important to the industry in which we operate our business. We
evaluate each claim relating to our products and, if appropriate, seek a license to use the protected
technology. There can be no assurance, however, that we will be able to obtain or renew our existing licenses
to the intellectual property of third parties on commercially reasonable terms, or at all. In addition, we could
be at a disadvantage if our competitors obtain licenses for protected technologies on more favorable terms
than us. If we or our suppliers are unable to license protected technology used in our products, we could be
prohibited from marketing those products or may have to market products without desirable features. We
could also incur substantial costs to redesign our products or to defend any legal action taken against us. If
our products should be found to infringe protected technology, we could be enjoined from further
infringement and may be required to pay damages to the owner of the infringed intellectual property rights.
Any of the foregoing could have a material adverse effect on our results of operations or financial condition.

An adverse outcome in legal proceedings could have a material and adverse impact on our results of
operations and financial condition.
We are parties to various claims, suits, investigations, and legal proceedings that arise from time to time
in the ordinary course of our business and that are not yet resolved. Additional legal claims or regulatory
matters may arise in the future. The unpredictable and time-consuming nature of litigation is disruptive to
our business and an adverse outcome in legal proceedings could affect our business and cash flows. In

16
addition, our business, operating results and financial condition could be adversely affected if any
infringement or other intellectual property claim made against us by any third party is successful, or if we
fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms
and conditions.

Certain existing shareholders have significant influence over us.

Mr. Stan Shih, our founder and former Chairman, and his immediate family will continue to have the
power to exercise significant influence over our management and policies. Mr. Stan Shih and his family own
or control approximately 3.44% of our outstanding Common Shares as of April 20, 2010. Under the ROC
Securities Exchange law, if a person along with his family or nominees holds more than 10% of a company’s
shares, then such a person will be deemed as a major shareholder (see “Principal Shareholders”). To our best
knowledge, there are no persons who, directly or indirectly, jointly or severally, exercise or could exercise
control over us.

Business disruptions could seriously harm our future net sales and financial condition and increase our
costs and expenses.
Our operations could be subject to earthquakes, power shortages, telecommunications failures, breaches
of data security, infrastructure disruptions, water shortages, tsunamis, floods, hurricanes, typhoons, fires,
extreme weather conditions, military actions, economic volatility, business uncertainties, labor disruptions,
environmental changes, political disruptions, public health concerns (including epidemics such as Severe
Acute Respiratory Syndrome, the H1N1 influenza or avian influenza) or pandemics and other natural or
manmade disasters or business interruptions. The occurrence of any of these business disruptions could
seriously harm our net sales and financial condition and increase our costs and expenses. The ultimate impact
on us and our significant suppliers, particularly given the geographic concentration of certain operations and
our general infrastructure of being concentrated in certain geographical areas is unknown.

Our business may be adversely affected by changes in environmental and safety laws.
Our businesses are regulated by environmental and safety rules and regulations. Our product design and
procurement operations must comply with new and future requirements relating to the materials composition,
energy efficiency and collection, recycling, treatment, transportation and disposal of our electronics products,
including restrictions on mercury, lead, cadmium, lithium metal, lithium ion and other substances. If we fail
to comply with applicable rules and regulations regarding the transportation, use and sale of such regulated
substances, we could be subject to liability. The costs and timing of costs under environmental and safety
laws are difficult to predict, but could have an unfavorable impact on our business.

RISKS RELATING TO THE ROC

The value of our Common Shares may be adversely affected by the volatility of the ROC securities
market.
The ROC securities markets are smaller and more volatile than the securities markets in the U.S.,
Europe and certain other countries. The TSE has had substantial fluctuations in the prices and volumes of
listed securities and there are currently limits on the range of daily price movement on the Taiwan Stock
Exchange. The TSE Index peaked at 8,356.89 points in January 15, 2010 and subsequently fell to a low of
7,071.67 points in June 9, 2010. The TSE is particularly volatile during times of political instability including
when relations on certain occasions between Taiwan and the PRC are strained. Moreover, the TSE has
experienced problems such as market manipulation, insider trading and payment defaults. The recurrence of
these or similar problems could adversely affect the market price and liquidity of securities of ROC
companies, including our Common Shares, in both domestic and international markets.

17
 Shareholders may have more difficulty protecting their interests under ROC law than they would under
U.S. law.
Our corporate affairs are governed by our Articles of Incorporation and by the laws governing
corporations incorporated in the ROC. The rights of shareholders and the responsibilities of management and
the members of the board of directors of ROC companies are different from those applicable to a corporation
incorporated in the U.S. Holders of our securities may have more difficulty in protecting their interests in
connection with actions taken by our management or the members of our board of directors than they would
as public shareholders of a U.S. corporation.

The imposition of foreign exchange restrictions may have an adverse effect on foreign investors’
abilities to acquire ROC securities, including the Bonds and the Common Shares, or to repatriate the
interest, dividends or sale proceeds from those securities.
The ROC government may impose foreign exchange restrictions in certain emergency situations,
including situations where there are sudden fluctuations in interest rates or exchange rates, where the ROC
government experiences extreme difficulty in stabilizing the balance of payments or where there are
substantial disturbances in the financial and capital markets in Taiwan. These restrictions may require foreign
investors to obtain the ROC government’s approval before acquiring ROC securities, repatriating the interest
or dividends from those securities or repatriating the proceeds from the sale of those securities. No assurance
can be given that these restrictions, if imposed, will not adversely affect, among other things, the secondary
market price of the Bonds.

Foreign exchange approvals may be required.

Under existing ROC law, foreign exchange transactions must be reported to the CBC on a
payment-by-payment basis, including but not limited to the conversion into foreign currencies of either: (i)
the net proceeds realized from sale of the Common Shares issued on conversion of the Bonds or (ii) any cash
dividends or other cash distributions in respect of such Common Shares or (iii) any inward remittances of
subscription payments in connection with a rights issue. There can be no assurance that ROC law will
continue to permit such transactions without regulatory approval. See “Appendix A — Foreign Investment
and Exchange Controls in the ROC”.

Holders of our securities may have difficulty enforcing any judgment obtained in the U.S. against us
or our directors, supervisors or executive officers.
We are incorporated under ROC law. Many of our directors, supervisors and executive officers reside
in Taiwan. In addition, a significant portion of our assets and the assets of those persons are located in
Taiwan. As a result, it may not be possible for holders of our securities to effect service of process upon us
or those persons within the U.S., or it may be difficult to enforce against us or them judgments obtained in
the U.S. courts, including those based upon the civil liability provisions of the federal securities laws of the
U.S. In addition, we have been advised that there is doubt as to whether ROC courts will enter judgments
in original actions brought in ROC courts based solely upon the civil liability provisions of the federal
securities laws of the U.S.

The political state of relations between the ROC and the PRC may affect us.
The ROC has a unique international political status. Both the ROC and the PRC assert sovereignty over
all of China (i.e., Taiwan, certain other islands and all of mainland China). The PRC Government does not
recognize the legitimacy of the ROC Government. Although significant economic and cultural relations have
been established during recent years between the ROC and the PRC, the PRC has refused to renounce the
possibility that it may at some point use force to gain control over Taiwan. Certain past developments in
relations between the ROC and the PRC have on occasion adversely affected the value of the Taiwan Stock
Exchange Weighted Stock Index (the “TSE Index”). Specifically, the PRC has in the past threatened military
intervention in response to positions espoused by political groups in the ROC that the ROC be formally

18
declared independent of the PRC. The state of the relations between the ROC and the PRC in general, may
materially and adversely affect our results of operations, the market price and liquidity of our Common
Shares, the availability of the PRC as an export market for our products, and our ability to implement present
and future plans for our expansion in the PRC.

We are subject to ROC GAAP, which differs from US GAAP.

We are subject to financial reporting requirements in the ROC that differ in significant respects from
those applicable to companies in certain other countries, including European countries. In addition, our
financial statements are prepared in accordance with ROC GAAP, which differ in certain material respects
from US GAAP.
We have not quantified or identified the impact of the differences between ROC GAAP and US GAAP.
See “Summary of Certain Significant Differences between ROC GAAP and US GAAP”. Potential investors
should consult their own professional advisors for an understanding of the differences between ROC GAAP
and US GAAP and how they might affect the financial information contained herein.

RISKS RELATING TO THE PRC

We are subject to the political and economic situation and legal developments in the PRC.
We have increased, and will continue to increase over time, the scope of our business activities in the
PRC. There are economic and political risks associated with doing business in the PRC. The PRC economy
has experienced significant growth in the past decade, but such growth has been uneven across geographic
and economic sectors and has recently been slowing. There can be no assurance that such growth will not
continue to decrease or that any slowdown will not have a negative effect on our business.
The PRC economy differs from the economies of most developed countries in many respects, including
the structure, level of government involvement, level of development, foreign exchange control and
allocation of resources. The PRC economy has been transitioning from a planned economy to a more
market-oriented economy and is growing rapidly. For the past two decades, the PRC government has
implemented economic reform measures emphasizing utilization of market forces in the development of the
PRC economy and also adjusted its macroeconomic control policies from time to time. These policies have
led and may continue to lead to changes in market conditions. For example, as a result of the global financial
crisis, the PRC government announced a RMB4 trillion economic stimulus package in 2009 which included
some measures favorable to our business, such as subsidies for purchases of televisions in rural areas in
China. Although we believe these reforms will have a positive effect on our overall operations in the PRC,
we cannot predict whether changes in the PRC’s political, economic and social conditions, laws, regulations
and policies will have any adverse effect on our current or future operations in the PRC.
The PRC has only recently permitted greater provincial and local economic autonomy and private
economic activities, and the Government of the PRC continues to exercise substantial control over virtually
every sector of the PRC economy through regulation and state ownership. There can be no assurance that our
business in the PRC will not be adversely affected by changes in political, economic and social conditions
in the PRC, including changes in political leadership.
In addition, there are currency exchange risks associated with doing business in the PRC. Although
PRC governmental policies were introduced in 1996 to allow greater convertibility of the RMB, the currency
of the PRC, significant restrictions, including those relating to the repatriation of foreign currency
denominated investments, still remain. No assurances can be made that the PRC regulatory authorities will
not impose greater restrictions on the convertibility of the RMB.

We are subject to risks associated with the PRC legal system.

Since 1979, many laws and regulations dealing with general economic matters or particular economic
activities have been promulgated in the PRC. However, enforcement of existing laws and regulations may be
uncertain and sporadic, and implementation and interpretation thereof may be inconsistent. The outcome of
litigation in PRC courts may be uncertain. Further, it may be difficult to obtain swift and equitable
enforcement or to obtain enforcement of a judgment by a court of another jurisdiction. The introduction of

19
new PRC laws and regulations and the interpretation of existing ones may be subject to policy changes
reflecting domestic political or social changes. As the PRC legal system develops, there can be no assurance
that changes in such regulation or interpretation will not have a material adverse effect on our business,
financial condition, results of operations and future prospects.

RISKS RELATING TO THE BONDS AND THE COMMON SHARES

An active trading market for the Bonds may not develop.

The Bonds constitute a new issue of securities for which there is no existing market. Approval
in-principle has been received for the listing of the Bonds on the SGX-ST. There can be no assurance that
such listing (which is not a condition of issuance) will provide liquidity for the Bonds. Although the Initial
Purchasers have advised us that they currently intend to make a market in the Bonds, they are not obligated
to do so and any market-making activity with respect to the Bonds, if commenced, may be discontinued at
any time.
There can be no assurance that a trading market for the Bonds will develop in the future. If such a
market were to develop, the Bonds could trade at prices that may be higher or lower than the price you
originally paid for them depending on many factors, including but not limited to:
• prevailing interest rates;
• our financial position;
• the price of the Common Shares;
• the financial condition and stability of Taiwan and other Asian financial sectors;
• political, legal and economic developments in the United States, Taiwan and elsewhere in the
world; and
• the market conditions for similar securities.

There are limitations on the ability of Holders to exercise Conversion Rights.

The Bonds are convertible into Common Shares at the option of the Holders pursuant to the terms of
the Bonds. Purchasers of the Bonds will not be able to exercise their Conversion Right during (i) the 60-day
period prior to the date of any of our annual general shareholders’ meeting; (ii) the 30-day period prior to
the date of any of our special shareholders’ meeting; (iii) the period beginning on the 15th Trading Day prior
to the five-day period before a record date for distribution of rights, dividends or other benefits to the date
of such record date; (iv) in the event of a capital decrease, the period beginning on the record date for the
capital decrease up to one day prior to the trading day of the shares reissued after the capital decrease; and
(v) such other periods during which we may be required to close our shareholders’ register or to suspend
conversion under ROC laws and regulations applicable from time to time.
Under current ROC laws, regulations and policies, with respect to PRC Bondholders, except for
Qualified Domestic Institutional Investors (the “QDIIs”), PRC persons are not permitted to convert the Bonds
or to register as our shareholders.

Holders of the Bonds will bear the risk of fluctuations in the price of the Common Shares.
The market price of the Bonds at any time will be affected by fluctuations in the price of the Common
Shares. It is impossible to predict how the price of the Common Shares will change. Trading prices of the
Common Shares will be influenced by, among other things, our results of operations and political, economic,
financial and other factors that affect capital markets generally. Any decline in the price of the Common
Shares would adversely affect the market price of the Bonds.

20
 Fluctuations in the exchange rate between the NT dollar and the U.S. dollar may have a material
adverse effect on the value of the Bonds in U.S. dollar terms.

Although the principal amount of the Bonds is denominated in U.S. dollars, the Common Shares are
listed on the TSE, which quotes and trades the Common Shares in NT dollars. As a result, fluctuations in the
exchange rate between the NT dollar and the U.S. dollar will affect, among other things, the market price of
the Bonds and the U.S. dollar equivalent of the Common Shares received upon conversion of the Bonds.

Holders of the Bonds will have no rights as shareholders until they acquire the Common Shares upon
conversion of the Bonds.

Unless and until the holders of the Bonds acquire the Common Shares upon conversion of the Bonds,
the holders of the Bonds will have no rights as shareholders, including any voting rights or rights to receive
any dividends or other distributions with respect to the Common Shares. Subject to the indenture and other
applicable ROC laws, holders of the Bonds who acquire the Common Shares upon the exercise of their
Conversion Rights will be entitled to exercise the rights of shareholders only as to actions for which the
applicable record date occurs after the Conversion Date.

An account number of Taiwan Depository & Clearing Corporation (“TDCC”) must be specified in any
conversion notice.
Delivery of our Common Shares into which the Bonds may be converted will only be made through the
book entry system maintained by the TDCC. No physical share certificates will be delivered to the converting
Holder (or its designee) upon conversion. Thus, a book entry account number of TDCC maintained by the
converting Holder or its designee must be specified in the conversion notice. The Paying Agent (as defined
herein) will deem any conversion notice that does not include an account number of TDCC incomplete and
will reject such conversion notice in accordance with the terms of the Indenture and will have no liability to
any Holder or any other person for so doing. If the non-ROC converting Holder (or its designee) does not
have a TDCC book entry account, the conversion notice executed by such converting Holder will not become
valid unless and until such Holder (or its designee) registers with the TSE as an offshore foreign institutional
or individual investor, obtains a foreign investor investment I.D. (“Foreign Investor Investment I.D.”) and
opens a TDCC account. We will deliver our Common Shares through the book entry system maintained by
the TDCC within five trading days after such account being opened.

Non-ROC Bondholders who exercise their conversion rights with respect to the Bonds will be required
to register with the TSE and appoint a local agent, a tax guarantor and a custodian in the ROC as well
as when applicable obtain the relevant regulatory approval.

Under current ROC law, if a non-ROC person (other than a PRC person) wishes to convert the Bonds
and hold the Common Shares, such non-ROC person will be required to register with the TSE to obtain the
Foreign Investor Investment I.D. for making investments in the ROC securities market prior to withdrawing
shares or converting the Bonds into Common Shares. In addition, a non-ROC person (other than a PRC
person) will be required to appoint an eligible agent in the ROC to open a securities trading account with a
local brokerage firm and a TDCC book entry account and a bank account, to pay ROC taxes, remit funds,
exercise shareholders’ rights and perform such other functions as such person may designate upon withdrawal
or conversion. In addition, a non-ROC person (other than a PRC person) will be required to appoint a
custodian bank in the ROC to hold the securities in safekeeping, make confirmation, settle trades and report
all relevant information. Without obtaining the Foreign Investor Investment I.D. and opening such accounts,
a non-ROC person would be unable to hold or subsequently sell the Common Shares converted from the
Bonds on the TSE or otherwise. In addition, these regulations may change from time to time. There can be
no assurance that a non-ROC person (other than a PRC person) will be able to register with the TSE and open
the requisite accounts in a timely manner.

21
 When a non-ROC Bondholder exercises its conversion right with respect to the Bonds in order to
receive Common Shares, that holder will be required to appoint an agent (a “Tax Guarantor”) in the ROC.
Such Tax Guarantor will be required to meet the qualifications set by the ROC Ministry of Finance and will
act as the guarantor of such holder’s tax payment obligations. Generally, evidence of the appointment of a
Tax Guarantor and the approval of such appointment may be required as a condition to such holder’s
repatriation of profits. There can be no assurance that non-ROC holders of Bonds will be able to appoint and
obtain approval for a Tax Guarantor in a timely manner.

Pursuant to the Regulations Governing Securities Investment and Futures Trading in Taiwan by
Mainland Area Investors, or the Mainland Investors Regulations, only the Mainland area qualified domestic
institutional investors (“QDIIs”) approved by the China Securities Regulatory Commission and registered
with the TSE or Taiwan Futures Exchange, are permitted to convert the Bonds and hold our Common Shares,
and similar to other non-ROC person, in order to hold our Common Shares, such QDIIs are required to
appoint the agent, custodian and tax guarantor as required by the Mainland Investors Regulations. If the
aggregate amount of our Common Shares to be held by any QDII or our Common Shares to be received by
any QDII upon single conversion will result in 10% or more of our total issued and outstanding shares, such
QDII must obtain the prior approval from the Investment Commission of the ROC Ministry of Economic
Affairs.

Further issues of our Common Shares, including pursuant to employee stock bonuses or options, could
dilute your holdings and associated rights with respect to the Common Shares.

Companies in the ROC generally pay bonuses (in the form of cash or stock) to their employees. Our
Articles of Incorporation provide that, after deducting accumulated deficit, payment of taxes and duties and
setting aside legal reserves and special reserves, no less than 5% of the remaining balance of our annual net
income (if any) can be distributed as employee bonuses. We paid employees’ bonuses in stock of NT$330.0
million from 2007 earnings, NT$162.3 million from 2008 earnings and NT$26.5 million (US$0.8 million)
from 2009 earnings. As of the 2008 earnings distribution, the number of Common Shares issuable was being
calculated by reference to the market price of our Common Shares the day prior to our shareholders’ meeting.
Such distributions in the form of new Common Shares or further issuances of new Common Shares will dilute
the holdings and associated rights of holders of the Bonds who convert the Bonds to Common Shares. From
time to time, we may also grant stock options to our employees. Pursuant to employee stock option plans,
we granted stock options exercisable for 23.8 million and 14.0 million Common Shares in 2008 and 2009,
respectively. Under our 2010 employee stock option plan, which was approved at the Annual Shareholders’
Meeting held on June 18, 2010, the total number of options to be issued under this plan is 14,000 options,
where each option gives employee the right to purchase 1,000 Common Shares. The issuance of new
Common Shares upon exercise of such employee stock options will effectively dilute the holdings and
associated rights of holders of the Bonds who convert the Bonds to Common Shares.

22
 USE OF PROCEEDS

We estimate that the net proceeds from the sale of the Bonds will be approximately US$497,500,000
after deducting estimated Initial Purchasers’ discounts and offering expenses.
We intend to use the net proceeds to procure raw materials overseas to support our business growth.

23
 CAPITALIZATION

The following table sets forth our total consolidated long-term debt and stockholders’ equity as of
March 31, 2010 on an actual basis and on an as adjusted basis under ROC GAAP to give effect to the net
proceeds received by us from the sale of the Bonds, after deducting underwriting discounts and commissions
and estimated offering expenses. The following table should be read in conjunction with our unaudited
consolidated financial statements as of and for the three months ended March 31, 2010 included elsewhere
in this Offering Circular. The amounts in US dollars do not form part of any of our financial statements and
are provided solely for the convenience of the reader.

As of March 31, 2010

Pro forma as adjusted for the

issuance of Convertible Bonds
Unaudited in this offering*

NT$ US$ NT$ US$

(in millions)
ROC GAAP
Long-term debt:
Bonds payable ................................................... — — 15,228.8 478.6
Long-term debt excluding current portion .......... 12,361.5 388.5 12,361.5 388.5
Total long-term debt ............................................... 12,361.5 388.5 27,590.3 867.1
Stockholders’ equity:
Common stock: NT$10 par value; Authorized:
3,500.0 million shares; issued and
outstanding: 2,688.2 million shares................. 26,882.3 844.9 26,882.3 844.9
Capital surplus .................................................... 38,616.5 1,213.5 39,297.6 1,234.9
Retained earnings................................................ 31,869.5 1,001.6 31,869.5 1,001.6
Foreign currency translation adjustment ............. (305.1) (9.6) (305.1) (9.6)
Minimum pension liability adjustment ............... (4.4) (0.1) (4.4) (0.1)
Unrealized gain (loss) on financial instruments . 861.0 27.1 861.0 27.1
Treasury stock..................................................... (3,522.6) (110.7) (3,522.6) (110.7)
Total stockholders’ equity ............................... 94,397.2 2,966.7 95,078.3 2,988.1
Total capitalization .......................................... 106,758.7 3,355.2 122,668.6 3,855.2

* The related pro forma adjustments for the offering of the Bonds were based on the measurement made by the Company as of June
10, 2010 of the equity and liability components of the Bonds payable.

24
 SELECTED FINANCIAL INFORMATION
The following tables set out selected financial information derived from our (i) audited consolidated
financial statements as of and for the years ended December 31, 2007, 2008 and 2009, and (ii) unaudited
consolidated financial statements as of and for the three months ended March 31, 2009 and 2010, each
included in this Offering Circular. Our financial statements are prepared in conformity with ROC GAAP,
which differs in certain material aspects from US GAAP. See “Summary of Principal Differences Between
ROC GAAP and US GAAP.” The amounts expressed in US dollars do not form part of any of our consolidated
financial statements and are provided solely for the convenience of the reader.
The table below sets forth certain financial data under ROC GAAP for the periods and as of the dates
indicated.

Year Ended and As of December 31, Three Months Ended March 31,

2007 2008 2009 2009 2010

NT$ NT$ NT$ US$ NT$ NT$ US$

(audited) (unaudited)
(in millions, except per share data)
Consolidated Statement of Income:
Net sales....................................................... 462,066.1 546,274.1 573,982.5 18,039.0 119,086.4 162,129.9 5,095.4
Cost of sales................................................. (414,647.8) (488,988.4) (515,654.6) (16,205.9) (107,168.0) (146,416.1) (4,601.6)
Gross profit .................................................. 47,418.3 57,285.7 58,327.9 1,833.1 11,918.4 15,713.8 493.8
Operating expenses....................................... (37,233.2) (43,213.4) (42,988.4) (1,351.0) (9,347.8) (11,328.4) (356.0)
Operating income ........................................ 10,185.1 14,072.3 15,339.5 482.1 2,570.6 4,385.4 137.8
Non-operating income and gains.................. 6,699.7 5,353.0 1,719.0 54.0 467.7 360.5 11.3
Non-operating expenses and losses .............. (1,776.2) (4,618.6) (2,075.5) (65.2) (282.9) (587.2) (18.4)
Income from continuing operations before
income tax ............................................... 15,108.6 14,806.7 14,983.0 470.9 2,755.4 4,158.7 130.7
Income tax expense ...................................... (2,665.6) (3,169.4) (3,630.1) (114.1) (729.7) (864.2) (27.2)
Income from discontinued operations .......... 517.9 99.8 — — — — —
Net income ................................................... 12,960.9 11,737.1 11,352.9 356.8 2,025.7 3,294.5 103.5
Earnings (loss) per share—Basic(1) .............. 5.27 4.67 4.31 0.14 0.77 1.25 0.04
Earnings (loss) per share—Diluted .............. 5.27 4.60 4.26 0.13 0.76 1.23 0.04

Consolidated Balance Sheet Data:

Current assets ............................................... 191,626.2 186,390.6 232,107.9 7,294.6 199,892.4 222,417.2 6,990.1
Long-term investment .................................. 11,202.7 6,773.5 8,872.8 278.8 7,445.6 8,698.7 273.4
Net property, plant and equipment ............... 8,636.4 9,336.2 8,676.2 272.7 9,262.1 8,567.4 269.3
Intangible assets ........................................... 25,926.5 34,746.8 35,444.1 1,113.9 37,656.4 34,823.6 1,094.4
Property not used in operation ..................... 3,806.1 2,996.7 2,971.5 93.4 2,990.5 2,938.3 92.3
Other financial assets ................................... 961.4 868.8 789.7 24.8 796.0 904.4 28.4
Deferred charges and other assets ................ 1,124.0 2,329.6 2,162.5 68.0 2,586.9 2,418.6 76.0
Total assets ................................................... 243,283.3 243,442.2 291,024.7 9,146.2 260,629.9 280,768.2 8,823.9
Current liabilities.......................................... 142,842.5 149,315.1 179,846.5 5,652.2 162,839.5 167,693.2 5,270.3
Long-term liabilities..................................... 23,031.8 11,249.5 18,300.5 575.1 11,548.3 18,208.0 572.2
Total liabilities ............................................. 165,874.3 160,564.6 198,147.0 6,227.3 174,387.8 185,901.2 5,842.5
Total shareholders’ equity and minority
interest ..................................................... 77,409.0 82,877.6 92,877.7 2,918.9 86,242.1 94,867.0 2,981.4

25
 Year Ended and As of December 31, Three Months Ended March 31,

2007 2008 2009 2009 2010

NT$ NT$ NT$ US$ NT$ NT$ US$

(audited) (unaudited)
(in millions, except per share data)
Consolidated Statement of Cash Flows:
Cash flow from operating activities ............. (6,560.8) (5,166.4) 38,192.1 1,200.3 31,465.4 (16,854.2) (529.7)
Cash flow from investment activities........... 2,741.2 8,747.1 (1,788.3) (56.2) (287.0) 80.8 2.5
Cash flow from financing activities ............. (3,899.4) (17,955.1) (5,725.1) (179.9) 975.4 1,307.7 41.1
Net increase (decrease) in cash and cash
equivalents .............................................. (7,7190.0) (14,374.4) 30,678.7 964.2 32,153.8 (15,465.7) (486.1)
Effects of exchange rate changes ................. 979.1 (1,429.2) 795.7 24.9 (381.9) (1,511.8) (47.4)
Cash and cash equivalents at beginning of
year/period ............................................... 44,685.2 37,945.3 22,141.7 695.9 22,141.7 53,616.1 1,685.0
Cash and cash equivalents at end of
year/period ............................................... 37,945.3 22,141.7 53,616.1 1,685.0 53,913.6 36,638.6 1,151.5

(1) Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding during the year.
The weighted average outstanding shares are retroactively adjusted for the effects of stock dividends transferred from retained
earnings and capital surplus to common stock, and employee stock bonuses issued prior to January 1, 2009. Effective January
1, 2009, EPS are not retroactively adjusted for employee stock bonuses.

26
 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations together
with the audited consolidated financial statements and the notes to such statements as of and for the years
ended December 31, 2007, 2008 and 2009, and the unaudited consolidated financial statements and the notes
to such statements as of and for the three months ended March 31, 2009 and 2010 included in this Offering
Circular. Our audited consolidated financial statements and unaudited consolidated financial statements are
prepared in accordance with ROC GAAP, which differ in many material respects from US GAAP. For a
discussion of these differences, see “Summary of Certain Significant Differences between ROC GAAP and US
GAAP.” The amounts expressed in US dollars do not form part of any of our audited consolidated financial
statements and unaudited consolidated financial statements and are provided solely for the convenience of
the readers.

Overview
We are one of the largest PC vendors in the world with no. 2 global market share in total PC and mobile
PC shipments in the first quarter of 2010*, according to Gartner. Our product offering encompasses a broad
range of product categories, including desktop and mobile PCs, LCD monitors, projectors, servers and
smartphones. We have a global customer base spread across EMEA, the Americas, Asia Pacific, China and
Taiwan.

Over the past few years, we have demonstrated strong growth momentum in our PC shipments.
According to 2009 PC shipment data by Gartner, we maintained steady annual growth of 29.0 %, securing
our position as the world’s no. 2 total PC vendor. According to Gartner, for the first quarter of 2010 in EMEA,
we were one of the top vendors in the total PC and the top vendor in mobile PC markets in shipments, with
20.3% and 25.8% market share, respectively. In the US, we were among the top three vendors in the total
PC and mobile PC markets in shipments, with 13.6% and 16.8% market share, respectively. Likewise, in the
Asia Pacific region, we were among the top four vendors in the total PC market and the top three vendors
in the mobile PC market in shipments, with 8.1% and 13.1% market share, respectively.*
Since our inception in 1976, we have grown from a single Acer brand to a diversified portfolio of four
brands — Acer, Gateway, Packard Bell and eMachines. The mergers of Gateway in 2007 and Packard Bell
in 2008 completed our global footprint by strengthening our presence in the U.S. and giving us a deeper
penetration into the European and Asian markets and allowed us to launch a multi-brand strategy to target
different geographic and consumer segments. Our multi-brand strategy allows each brand to offer a
differentiated set of product characteristics to effectively target each of the major market segments of the
global PC market. In 2009, we were voted Reader’s Digest gold-medal Computer TrustedBrand in Asia for
the 11th consecutive year, which is a reflection of the strength of our brand. We were also one of the sponsors
of the Winter Olympic Games in Vancouver in 2010 and are one of the sponsors of the forthcoming Summer
Olympic Games to be held in London in 2012. In 2008, we acquired E-Ten, a decision that reflects our
anticipation of the accelerating convergence between PC and handheld communication devices in the next
few years. In response to the market’s increasing demand for more portable and powerful mobile devices, we
are continuously developing and introducing innovative products, including e-readers, smartphones and
tablets equipped with Google’s latest Android operating system.
Our CBM has been instrumental to our success by encouraging first-class suppliers and channel
partners to collaborate in a winning formula of supply chain management. Our CBM prevents duplicative
efforts by us and our suppliers, leverages our channels’ expertise and resources to effectively manage our
global logistics and minimizes our overall operating expenses.

* Gartner, Inc. Personal Computer Quarterly Statistics Worldwide By Region: Final Database, C.G. Lee Mikako Kitagawa, 27 May
2010

27
 Our consolidated net sales was NT$462.1 billion, NT$546.3 billion and NT$574.0 billion (US$18.0
billion) for the year ended December 31, 2007, 2008 and 2009, respectively. Our net sales for the three
months ended March 31, 2010 was NT$162.1 billion (US$5.1 billion). Our consolidated net income was
NT$13.0 billion, NT$11.7 billion and NT$11.4 billion (US$356.8 million) in 2007, 2008 and 2009,
respectively. Our consolidated net income for the three months ended March 31, 2010 was NT$3.3 billion
(US$103.5 million). As of March 31, 2010, we had total stockholders’ equity of NT$94.4 billion (US$3.0
billion), net of NT$3.5 billion (US$110.7 million) of treasury stock. As of March 31, 2010, we had a global
workforce of approximately 6,612 employees.
On August 5, 2010, our market capitalization was NT$229,118.3 million (US$7,200.7 million) based
on the closing price of our Common Shares on the TSE.

Consolidated Results of Operations

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2010

Net Sales
Net sales increased by 36.1% from NT$119.1 billion for the three months ended March 31, 2009 to
NT$162.1 billion (US$5.1 billion) for the three months ended March 31, 2010, primarily as a result of an
increase in shipments of notebook PCs reflecting a recovery in demand following the financial crisis. This
demand trend also influenced our netbook PC, desktop PC and display businesses and led to increases in net
sales in each group.
Net sales for our notebook and netbook PC business increased by 38.5% from NT$78.6 billion for the
three months ended March 31, 2009 to NT$108.8 billion (US$3.4 billion) for the three months ended March
31, 2010. Net sales for our desktop PC business increased by 48.5% from NT$19.5 billion for the three
months ended March 31, 2009 to NT$29.0 billion (US$911.2 million) for the three months ended March 31,
2010. Net sales for our display business increased by 4.3% from NT$13.6 billion for the three months ended
March 31, 2009 to NT$14.2 billion (US$445.5 million) for the three months ended March 31, 2010.

Cost of Sales
Cost of sales increased by 36.6% from NT$107.2 billion for the three months ended March 31, 2009
to NT$146.4 billion (US$4.6 billion) for the three months ended March 31, 2010. The increase in cost of sales
was due primarily to the aforementioned increase in shipments in each of our product lines, especially
notebook PCs.
Cost of sales for our notebook and netbook PC business increased by 38.3% from NT$70.9 billion for
the three months ended March 31, 2009 to NT$98.0 billion (US$3.1 billion) for the three months ended
March 31, 2010. Cost of sales for our desktop PC business increased by 47.4% from NT$18.2 billion for the
three months ended March 31, 2009 to NT$26.8 billion (US$843.1 million) for the three months ended March
31, 2010. Cost of sales for our display business increased by 6.7% from NT$12.6 billion for the three months
ended March 31, 2009 to NT$13.4 billion (US$421.4 million) for the three months ended March 31, 2010.

Gross Profit
Gross profit increased by 31.8% from NT$11.9 billion for the three months ended March 31, 2009 to
NT$15.7 billion (US$493.8 million) for the three months ended March 31, 2010. Gross margin was 10.0%
for the three months ended March 31, 2009 as compared to 9.7% for the three months ended March 31, 2010.

Operating Expenses
Operating expenses increased by 21.2% from NT$9.3 billion for the three months ended March 31,
2009 to NT$11.3 billion (US$356.0 million) for the three months ended March 31, 2010. Operating expenses
consist of research and development, administrative and selling expenses.

28
 Research and development expenses increased by 47.1% from NT$191.4 million for the three months
ended March 31, 2009 to NT$281.5 million (US$8.8 million) for the three months ended March 31, 2010,
primarily due to an increase in research and development personnel hired to support the development of our
smartphone business.
Administrative expenses increased by 29.5% from NT$1.5 billion for the three months ended March 31,
2009 to NT$2.0 billion (US$61.5 million) for the three months ended March 31, 2010, mainly due to an
increase in employee bonuses.
Selling expenses increased by 18.9% from NT$7.6 billion for the three months ended March 31, 2009
to NT$9.1 billion (US$285.7 million) for the three months ended March 31, 2010, primarily due to an
increase in warranty accrual as a result of revenue growth.

Operating Income
As a result of the foregoing factors, operating income increased by 70.6% from NT$2.6 billion for the
three months ended March 31, 2009 to NT$4.4 billion (US$137.8 million) for the three months ended March
31, 2010.

Non-operating Income and Gains

Non-operating income and gains decreased by 22.9% from NT$467.7 million for the three months
ended March 31, 2009 to NT$360.5 million (US$11.3 million) for the three months ended March 31, 2010.
The decrease of non-operating income and gains was primarily due to net foreign currency exchange gain and
valuation gain on financial instruments decreasing from NT$204.1 million for the three months ended March
31, 2009 to nil for the three months ended March 31, 2010, principally due to the depreciation of the Euro
against the NT dollar. This decrease was partially offset by net gain on disposal of investments increasing
from nil for the three months ended March 31, 2009 to NT$97.6 million (US$3.1 million) for the three
months ended March 31, 2010. The increase in net gain on disposal of investments was primarily because
of unfavorable market conditions in the first quarter of 2009, resulting in no disposal activities except for one
liquidation during the three-month period.

Non-operating Expenses and Losses

Non-operating expenses and losses increased by 107.6% from NT$282.9 million for the three months
ended March 31, 2009 to NT$587.2 million (US$18.5 million) for the three months ended March 31, 2010,
principally due to net foreign currency exchange loss and valuation loss on financial instruments of
NT$296.7 million (US$9.3 million) in the three months ended March 31, 2010 as a result of the depreciation
of the Euro against the NT dollar.

Net Income
Net income increased by 62.6% from NT$2.0 billion for the three months ended March 31, 2009 to
NT$3.3 billion (US$103.5 million) for the three months ended March 31, 2010 as a result of the foregoing
factors.

Consolidated Results of Operations

Year Ended December 31, 2008 Compared to Year Ended December 31, 2009

Net Sales
Net sales increased by 5.1% from NT$546.3 billion in 2008 to NT$574.0 billion (US$18.0 billion) in
2009 primarily as a result of an increase in shipments of notebook and netbook PCs.

29
 Net sales for our notebook and netbook PC business increased by 11.8% from NT$352.8 billion in 2008
to NT$394.3 billion (US$12.4 billion) in 2009, primarily as a result of an increase in shipments. Net sales
for our desktop PC business increased by 0.9% from NT$87.9 billion in 2008 to NT$88.6 billion (US$2.8
billion) in 2009, primarily as a result of an increase in shipments. Net sales for our display business decreased
by 20.2% from NT$70.4 billion in 2008 to NT$56.2 billion (US$1.8 billion) in 2009, primarily as a result
of a decrease in average selling price of displays.

Cost of Sales
Cost of sales increased by 5.5% from NT$489.0 billion in 2008 to NT$515.7 billion (US$16.2 billion)
in 2009. The increase in cost of sales was due primarily to an increase in the shipment of notebook, netbook
and desktop PCs.
Cost of sales for our notebook and netbook PC business increased by 11.8% from NT$317.9 billion in
2008 to NT$355.3 billion (US$11.2 billion) in 2009. Cost of sales for our desktop PC business increased by
3.5% from NT$79.4 billion in 2008 to NT$82.1 billion (US$2.6 billion) in 2009. The foregoing increases
were partially offset by the decrease of the cost of sales of our display business. Cost of sales for our display
business decreased by 19.8% from NT$65.4 billion in 2008 to NT$52.5 billion (US$1.6 billion) in 2009,
primarily as a result of our efforts to control cost.

Gross Profit
As a result of the factors discussed above, gross profit increased by 1.8% from NT$57.3 billion in 2008
to NT$58.3 billion (US$1.8 billion) in 2009. Gross margin was 10.5% in 2008 as compared to 10.2% in 2009.

Operating Expenses
Operating expenses decreased by 0.5% from NT$43.2 billion in 2008 to NT$43.0 billion (US$1.4
billion) in 2009. The decrease in operating expenses was attributable principally to the decrease in
administrative expenses as part of our efforts to control costs during the financial crisis.
Research and development expenses increased by 61.2% from NT$550.0 million in 2008 to NT$886.5
million (US$27.9 million) in 2009 primarily due to our acquisition of E-Ten, which was an acquisition
primarily to expand our research and development efforts in the smartphone business.
Administrative expenses decreased by 7.6% from NT$6.9 billion in 2008 to NT$6.4 billion (US$200.3
million) in 2009 mainly due to a decrease in employee bonuses as part of our efforts to control costs during
the financial crisis.
Selling expenses remained stable over the period decreasing by 0.1% from NT$35.8 billion in 2008 to
NT$35.7 billion (US$1.1 billion) in 2009.

Operating Income
As a result of the foregoing factors, operating income increased 9.0% from NT$14.1 billion in 2008 to
NT$15.3 billion (US$482.1 million) in 2009.

Non-operating Income and Gains

Non-operating income and gains decreased by 67.9% from NT$5.4 billion in 2008 to NT$1.7 billion
(US$54.0 million) in 2009 primarily as a result of the following factors.
Interest income decreased by 70.1% from NT$1.2 billion in 2008 to NT$361.7 million (US$11.4
million) in 2009, primarily because of a decrease in overall interest rates. Net gain on disposal of investments
decreased by 97.1% from NT$2.7 billion in 2008 to NT$79.2 million (US$2.5 million) in 2009, primarily
because of reduced disposals of our equity investments due to unfavorable market conditions in 2009. Net
gain on disposal of property and equipment decreased from NT$515.3 million in 2008 to nil in 2009 primarily
due to the sale of an office building in Singapore during the first quarter of 2008. Other income decreased
by 21.6% from NT$516.2 million in 2008 to NT$404.5 million (US$12.7 million) in 2009 primarily because

30
of a one-time earn out of NT$174.0 million paid to us in connection with the sale of an investee company
in 2008. The foregoing decreases were partially offset by an increase in net foreign currency exchange gain
and valuation gain on financial instruments from nil in 2008 to NT$473.6 million (US$14.9 million) in 2009,
primarily because of the appreciation of the Euro against the NT dollar.

Non-operating Expenses and Losses

Non-operating expenses and losses decreased by 55.1% from NT$4.6 billion in 2008 to NT$2.1 billion
(US$65.2 million) in 2009, principally due to NT$1.6 billion of restructuring costs incurred as a result of
merging Gateway into our Pan America operations in 2008. Interest expense decreased from NT$1.3 billion
in 2008 to NT$622.1 million (US$19.6 million) in 2009 primarily because of a decrease in overall interest
rates. Net foreign currency exchange loss and valuation loss on financial instruments decreased from
NT$866.3 million in 2008 to nil in 2009 primarily because of the appreciation of the Euro against the NT
dollar.

Net Income
Consolidated net income decreased by 3.3% from NT$11.7 billion in 2008 to NT$11.4 billion
(US$356.8 million) in 2009 as a result of the foregoing factors.

Year Ended December 31, 2007 and Year Ended December 31, 2008

Net Sales
Net sales increased by 18.2% from NT$462.1 billion in 2007 to NT$546.3 billion in 2008 primarily as
a result of the increase in shipment of notebook and netbook PCs. The net sales for our desktop PC and
display business also increased as a result of the increase in shipments.
Net sales for our notebook and netbook PC business increased by 27.2% from NT$277.5 billion in 2007
to NT$352.8 billion in 2008. Net sales for our desktop PC business increased by 25.4% from NT$70.1 billion
in 2007 to NT$87.9 billion in 2008. Net sales for our display business increased 1.0% from NT$69.7 billion
in 2007 to NT$70.4 billion in 2008.

Cost of Sales
Cost of sales increased by 17.9% from NT$414.6 billion in 2007 to NT$489.0 billion in 2008. The
increase in cost of sales was due primarily to the aforementioned increase in shipments in each of our product
lines, especially notebook and netbook PCs.
Cost of sales for our notebook and netbook PC business increased by 29.0% from NT$246.4 billion in
2007 to NT$317.9 billion in 2008. Cost of sales for our desktop PC business increased by 25.0% from
NT$63.5 billion in 2007 to NT$79.4 billion in 2008.

Gross Profit
As a result of the factors discussed above, gross profit increased by 20.8% from NT$47.4 billion in
2007 to NT$57.3 billion in 2008. Gross margin was 10.3% in 2007 as compared to 10.5% in 2008.

Operating Expenses
Operating expenses increased by 16.1% from NT$37.2 billion in 2007 to NT$43.2 billion in 2008. The
increase in operating expenses was attributable principally to an increase in personnel expenses following the
acquisitions of Gateway and Packard Bell and the adoption of Interpretation (2007) 052 issued by the
Accounting Research and Development Foundation of the Republic of China effective in 2008 which requires
employee bonus and remunerations to directors and supervisors to be expensed.
Research and development expenses increased by 57.3% from NT$349.7 million in 2007 to NT$550.0
million in 2008 primarily due to the expansion of our research and development efforts and the acquisition
of E-Ten in 2008.

31
 Administrative expenses increased by 66.0% from NT$4.2 billion in 2007 to NT$6.9 billion in 2008
mainly due to an increase in personnel expenses following the acquisitions of Gateway and Packard Bell and
the adoption of Interpretation (2007) 052 issued by the Accounting Research and Development Foundation
of the Republic of China effective in 2008 which requires employee bonus and remunerations to directors and
supervisors to be expensed and recognized on the income statement.
Selling expenses increased by 9.3% from NT$32.7 billion in 2007 to NT$35.8 billion in 2008, primarily
due to an increase in promotion expenses as a result of the increase in sales following the acquisitions of
Gateway and Packard Bell.

Operating Income
As a result of the foregoing factors, operating income increased by 38.2% from NT$10.2 billion in 2007
to NT$14.1 billion in 2008.

Non-operating Income and Gains

Non-operating income and gains decreased by 20.1% from NT$6.7 billion in 2007 to NT$5.4 billion
in 2008, primarily due to a decrease in the net gain on disposal of investments. Net gain on disposal of
investments decreased by 33.0% from NT$4.0 billion in 2007 to NT$2.7 billion in 2008 as a result of a
decrease in the disposal of our equity investments. Net investment gain recognized using equity method also
decreased by 41.9% from NT$695.7 million in 2007 to NT$404.2 million in 2008, primarily because of a
decrease in the holding ratio of our stake in several investee companies. The foregoing decreases were
partially offset by an increase in net gain on disposal of property and equipment by 324.4% from NT$121.4
million in 2007 to NT$515.3 million in 2008 primarily because of a disposal gain of NT$788.9 million
generated from the sale of our office building in Singapore in 2008.

Non-operating Expenses and Losses

Non-operating expenses and losses increased by 160.0% from NT$1.8 billion in 2007 to NT$4.6 billion
in 2008, principally due to the interest expenses incurred in connection with the loan facility we entered into
with Citibank, N.A. to fund the acquisition of Gateway and NT$1.6 billion of restructuring costs incurred as
a result of merging Gateway into our Pan America operations in 2008. Other investment loss increased from
nil in 2007 to NT$416.4 million in 2008 primarily because of the write down of several long-term
investments.

Net Income
Consolidated net income decreased by 9.4% from NT$13.0 billion in 2007 to NT$11.7 billion in 2008
as a result of the foregoing factors.

Liquidity and Capital Resources

Our principal sources of cash have been net cash provided by operating activities and bank borrowings.
Our primary use of cash has been funding working capital requirements related to our sales growth and
expansion.
Accounts receivable and inventories are significant components of our current assets and require
significant working capital. Notes and accounts receivable from third parties and related parties, net of
allowance for doubtful accounts, were NT$102.3 billion, NT$108.7 billion and NT$112.5 billion (US$3.5
billion) as of December 31, 2007, 2008 and 2009, respectively. Notes and accounts receivable from third
parties and related parties, net of allowance for doubtful account were NT$117.6 billion (US$3.7 billion) as
of March 31, 2010. Notes and accounts receivable turnover days were 68 days, 70 days and 70 days in 2007,
2008 and 2009, respectively. Notes and accounts receivable turnover days were 65 days for the three months
ended March 31, 2010.

32
 Inventories were NT$33.8 billion, NT$40.0 billion and NT$51.2 billion (US$1.6 billion) as of
December 31, 2007, 2008 and 2009, respectively. Inventories were NT$51.7 billion (US$1.6 billion) as of
March 31, 2010. Inventories turnover days were 26 days, 28 days and 32 days in 2007, 2008 and 2009,
respectively. Inventories turnover days were 32 days for the three months ended March 31, 2010.
Notes and accounts payable from third parties and related parties were NT$80.8 billion, NT$72.1
billion and NT$106.1 billion (US$3.3 billion) as of December 31, 2007, 2008 and 2009, respectively. Notes
and accounts payable from third parties and related parties were NT$93.9 billion (US$3.0 billion) as of
March 31, 2010. Notes and accounts payable days were 64 days, 57 days and 63 days in 2007, 2008 and 2009,
respectively. Notes and accounts payable days were 62 days for the three months ended March 31, 2010.

Operating Activities
For the three months ended March 31, 2010, our net cash used in operating activities was NT$16.9
billion (US$529.7 million). Cash used for the three months ended March 31, 2010 primarily reflected a
decrease in notes and accounts payable of NT$12.6 billion (US$394.5 million), an increase in notes and
accounts receivable of NT$4.9 billion (US$154.0 million) and an increase in other financial assets,
prepayments and other current assets of NT$2.0 billion (US$63.4 million), partially offset by consolidated
net income of NT$3.3 billion (US$103.5 million).
In 2009, our net cash provided by operating activities was NT$38.2 billion (US$1.2 billion). Cash
provided by operating activities for the year ended December 31, 2009 primarily reflected the consolidated
net income of NT$11.4 billion (US$356.8 million), an increase in notes and accounts payable of NT$31.5
billion (US$988.9 million), and an increase in royalties payable, accrued expenses and other current
liabilities of NT$6.6 billion (US$206.3 million), partially offset by an increase in inventories of NT$11.2
billion (US$351.2 million) and an increase in notes and accounts receivable of NT$4.0 billion (US$126.7
million).
In 2008, our net cash used in operating activities was NT$5.2 billion. Cash used in operating activities
for the year ended December 31, 2008 primarily reflected a decrease in notes and accounts payables of
NT$16.1 billion and an increase in inventories of NT$4.9 billion, partially offset by consolidated net income
of NT$11.7 billion and an increase in payables to related parties of NT$2.4 billion.
In 2007, our net cash used in operating activities was NT$6.6 billion. Cash used in operating activities
for the year ended December 31, 2007, primarily reflected an increase in notes and accounts receivable of
NT$20.3 billion and an increase in inventory of NT$6.9 billion, partially offset by the consolidated net
income of NT$13.0 billion, the increase of royalties payable, accrued expenses and other current liabilities
of NT$12.0 billion.

Investing Activities
For the three months ended March 31, 2010, our net cash provided by investing activities was NT$80.8
million (US$2.5 million). Cash provided by investing activities for the three months ended March 31, 2010
primarily reflected the proceeds from disposal of available-for-sale financial assets of NT$212.9 million
(US$6.7 million) and proceeds from capital return and liquidation of investees of NT$131.7 million (US$4.1
million), partially offset by the increase in long-term investments of NT$149.8 million (US$4.7 million).
In 2009, our net cash used in investing activities was NT$1.8 billion (US$56.2 million). Cash used in
investing activities for the year ended December 31, 2009 primarily reflected the increase of intangible assets
and other assets of NT$3.1 billion (US$96.7 million), partially offset by the decrease in restricted deposits
of NT$922.8 million (US$29.0 million).
In 2008, our net cash provided by investing activities was NT$8.7 billion. Cash provided by investing
activities for the year ended December 31, 2008 primarily reflected the proceeds from disposal of long-term
investments of NT$3.4 billion, proceeds from disposal of available-for-sale financial assets of NT$2.9
billion, proceeds from disposal of property, plant and equipment and property not used in operation of
NT$2.1 billion and a decrease in restricted deposits of NT$1.8 billion, partially offset by the consideration
of NT$719.0 million for the acquisition of subsidiaries and the additions to property, plant and equipments
and property not used in operation of NT$597.5 million.

33
 In 2007, our net cash provided by investing activities was NT$2.7 billion. Cash provided by investing
activities for the year ended December 31, 2007 primarily reflected proceeds from disposal of available-
for-sale financial assets of NT$12.3 billion and proceeds from disposal of long-term investments of NT$7.0
billion, partially offset by consideration of NT$15.1 billion for the acquisition of subsidiaries.

Financing Activities
For the three months ended March 31, 2010, our net cash provided by financing activities was NT$1.3
billion (US$41.1 million), which primarily reflected the increase in short-term borrowings of NT$1.3 billion
(US$41.4 million).
In 2009, our net cash used in financing activities was NT$5.7 billion (US$179.9 million). Cash used
in financing activities for the year ended December 31, 2009 primarily reflected the distribution of cash
dividends of NT$5.2 billion (US$163.9 million).
In 2008, our net cash used in financing activities was NT$18.0 billion. Cash used in financing activities
for the year ended December 31, 2008 primarily reflected the distribution of cash dividends of NT$8.5
billion, the decrease in short-term borrowings of NT$4.3 billion and the repayment of long-term debt of
NT$4.4 billion.
In 2007, our net cash used in financing activities was NT$3.9 billion. Cash used in financing activities
for the year ended December 31, 2007 primarily reflected the repayment of long-term debt of NT$9.7 billion
and distribution of cash dividends of NT$8.9 billion, partially offset by an increase in long-term debt of
NT$16.5 billion.
In 2007, we entered into a NT$16.5 billion syndicated credit facility, for which Citibank acted as the
agent bank, for the purpose of funding the acquisition of Gateway. An advance repayment of NT$4.3 billion
was made in the first quarter of 2008. The syndication agreement for this facility contains covenants that
require us to maintain certain financial ratios. As of March 31, 2010, NT$12.2 billion (US$383.4 million) was
outstanding under this credit facility.

Foreign Currency Exposure

In 2007, 2008 and 2009, our net sales outside the ROC was, NT$423.8 billion (or 91.7% of our net
sales), NT$521.0 billion (or 95.4% of our net sales) and NT$547.0 billion (US$17.2 billion) (or 95.3% of our
net sales), respectively. For the three months ended March 31, 2010, our net sales outside the ROC was
NT$155.0 billion (US$4.9 billion) (or 95.6% of our net sales). Such sales were settled mainly in Euros and
US dollars. Consequently, a portion of our net income is affected by fluctuations in the exchange rates among
US dollars, Euros and NT dollars. The effects of such fluctuations are partially mitigated by our hedging of
foreign currency exposure through foreign currency options and exchange rate forward contracts.

Income Tax
We have operations in Taiwan as well as in other countries including Asia Pacific, EMEA and the US.
Accordingly, we are subject to the statutory tax rate applicable to us despite our enjoyment of certain
preferential tax treatments in certain aspects. For a discussion of the income tax rate applicable to us in the
ROC as well as the tax credit granted to us, please see Note 19 to the Notes to the Audited Financial
Statements as of and for the years ended December 31, 2007, 2008 and 2009.
Income tax expense increased 18.4% from NT$729.7 million for the three months ended March 31,
2009 to NT$864.2 million (US$27.2 million) for the three months ended March 31, 2010, primarily due to
the 50.9% increase in profit before tax. Income tax expense increased 14.5% from NT$3.2 billion in 2008
to NT$3.6 billion (US$114.1 million) in 2009, primarily due to the increase in profit before tax of our
operations in ROC which attracted a higher income tax rate as compared to the profit generated from
operations outside the ROC. Income tax expense increased 18.9% from NT$2.7 billion in 2007 to NT$3.2
billion in 2008, primarily due to the increase in profit before tax of our operations in ROC which attracted
a higher income tax rate as compared to the profit generated from operations outside the ROC.

34
 BUSINESS

Overview
We are one of the largest PC vendors in the world with no. 2 global market share in total PC and mobile
PC shipments in the first quarter of 2010*, according to Gartner. Our product offering encompasses a broad
range of product categories, including desktop and mobile PCs, LCD monitors, projectors, servers and
smartphones. We have a global customer base spread across EMEA, the Americas, Asia Pacific, China and
Taiwan.
Over the past few years, we have demonstrated strong growth momentum in our PC shipments.
According to 2009 PC shipment data by Gartner, we maintained steady annual growth of 29.0 %, securing
our position as the world’s no. 2 total PC vendor. According to Gartner, for the first quarter of 2010 in EMEA,
we were one of the top vendors in the total PC and the top vendor in mobile PC markets in shipments, with
20.3% and 25.8% market share, respectively. In the US, we were among the top three vendors in the total
PC and mobile PC markets in shipments, with 13.6% and 16.8% market share, respectively. Likewise, in the
Asia Pacific region, we were among the top four vendors in the total PC market and the top three vendors
in the mobile PC market in shipments, with 8.1% and 13.1% market share, respectively.*
Since our inception in 1976, we have grown from a single Acer brand to a diversified portfolio of four
brands — Acer, Gateway, Packard Bell and eMachines. The mergers of Gateway in 2007 and Packard Bell
in 2008 completed our global footprint by strengthening our presence in the U.S. and giving us a deeper
penetration into the European and Asian markets and allowed us to launch a multi-brand strategy to target
different geographic and consumer segments. Our multi-brand strategy allows each brand to offer a
differentiated set of product characteristics to effectively target each of the major market segments of the
global PC market. In 2009, we were voted Reader’s Digest gold-medal Computer TrustedBrand in Asia for
the 11th consecutive year, which is a reflection of the strength of our brand. We were also one of the sponsors
of the Winter Olympic Games in Vancouver in 2010 and are one of the sponsors of the forthcoming Summer
Olympic Games to be held in London in 2012. In 2008, we acquired E-Ten, a decision that reflects our
anticipation of the accelerating convergence between PC and handheld communication devices in the next
few years. In response to the market’s increasing demand for more portable and powerful mobile devices, we
are continuously developing and introducing innovative products, including e-readers, smartphones and
tablets equipped with Google’s latest Android operating system.
Our CBM has been instrumental to our success by encouraging first-class suppliers and channel
partners to collaborate in a winning formula of supply chain management. Our CBM prevents duplicative
efforts by us and our suppliers, leverages our channel expertise and resources to effectively manage our
global logistics and minimizes our overall operating expenses.
Our consolidated net sales was NT$462.1 billion, NT$546.3 billion and NT$574.0 billion (US$18.0
billion) for the years ended December 31, 2007, 2008 and 2009, respectively. Our net sales for the three
months ended March 31, 2010 was NT$162.1 billion (US$5.1 billion). As of March 31, 2010, we had a global
workforce of approximately 6,612 employees.
On August 5, 2010, our market capitalization was NT$229,118.3 million (US$7,200.7 million) based
on the closing price of our Common Shares on the TSE.

Competitive Strengths
We believe the following strengths have successfully differentiated us from our competitors, and
positioned us to capture the enormous business opportunities in the fast growing global Information
Technology and Communications market.

* Gartner, Inc. Personal Computer Quarterly Statistics Worldwide By Region: Final Database, C.G. Lee Mikako Kitagawa, 27 May
2010

35
 Global and geographically diversified scale
We are one of the largest PC vendors in the world, with no. 2 global market share in total PC and mobile
PC shipments in the first quarter of 2010†. Through the successful mergers of Gateway in 2007 and Packard
Bell in 2008, we have completed our global footprint by fortifying our position in the U.S. and enhancing
our already strong positions in Europe and Asia. Our global scale and geographic diversity has allowed us
to maximize regional growth opportunities and to benefit from growing worldwide demand. Moreover, our
globally diversified revenue base provides resilience against local market conditions.
Our market leadership position has also increased our relevance within the PC supply chain and allowed
us to realize significant economies of scale and cost advantages through availability of volume-based
discounts from key component suppliers. In addition to strengthening our cost advantages, this preferential
positioning with suppliers results in enhanced business stability given the potentially higher availability of
key components to us even during supply shortages.

Multi-brand strategy
The successful acquisitions of Gateway in 2007 and Packard Bell in 2008 together marked the
beginnings of a new era for us by helping us to create a multi-brand strategy that targets different geographic
and consumer segments. As one of the first PC vendors to adopt a multi-brand approach, we have been able
to penetrate major segments of the Information Technology and Communications market through the launch
of products with differentiated product designs. Each of our brands enjoys strong brand recognition within
their respective target markets, and the combined brand portfolio is highly complementary and provides
optimal positioning within the fast-changing PC market.
Through leveraging our different brands, we are able to take advantage of all available growth
opportunities in the markets in which we operate. In the past several years, we have demonstrated strong
growth momentum, increasing our market share of global PC shipments from 4.6% in 2005 to 13.1% in the
first quarter of 2010*. In addition to PC market share gains, we successfully launched smart handheld devices
in 2009.

Sustainable and profitable business model

We adhere to a CBM that involves collaboration with first-class suppliers and distributors, leveraging
their resources and ultimately, sharing the success among all our partners. Consistent with this approach, we
have avoided using a direct sales model in order to avoid competition with our channel partners. Cooperation
with channel distributors lessens our operating expenses, helps us to maintain a lean organization and allows
us to better control inventories.
Our policy of maintaining low capital and operating expenses has been beneficial to the steady growth
of our business operations. We have developed a flexible and efficient global logistics management system
to reduce inventory pressure, and we benefit from just-in-time delivery of products from our suppliers.
Combined with an approach to product design centered on improving technology features and design rather
than customization, we are able to offer our customers high performance-to-price products.
We have increased our profitability through our focus on being first to market with the latest in new
technology and innovative designs. To ensure we consistently develop new products that meet consumer
preferences rapidly, we have built up leading-edge research and development capabilities and developed
long-standing relationships with the local supply chain. We benefit from our proximity to and position within
the local electronics supply chain, and through collaboration with our suppliers, we can quickly develop and
roll out new products and respond to any anticipated changes in market trends. For example, our strong ODM
relationships have allowed us to quickly introduce new netbook PC products, which have achieved
significant sales and have set new standards in netbook PC design and functionality.

†
Gartner, Inc. Personal Computer Quarterly Statistics Worldwide By Region: Final Database, C.G. Lee Mikako Kitagawa, 27 May
2010

36
 Strong innovation capability and customer-centric business model
Our business model is centered on delivering products designed around customer needs. To ensure our
products meet the needs of our customers, we have cultivated a strong culture of innovation and product
design. This means understanding exactly what our customers want and where consumer preferences will
trend, and then using our knowledge and skills to exceed their expectations by making our products simple
to use, stylish to own and accessible to everyone.
Throughout our operating history, we have consistently been a first mover with new technology
launches, including the first dual Intel Pentium PC in 1994, the first full line of Intel Centrino notebook PCs
in 2006, the launch of the first Convertible Tablet PC in 2002, the first notebook PCs equipped with Dolby
surround sound in 2008, and the first notebook PCs with long 8+ hour battery life. Most importantly, our
early recognition of the emerging trend towards mobile computing has resulted in our current leadership
position in the global notebook PC market. We continue to innovate in the mobile computing space by
focusing on the key customer requirements of longer battery life, stylish design, new features and a variety
of form factors.

Proven management with solid delivery track record

Led by an experienced management team, we have performed strongly and have grown into one of the
largest PC and smart handheld vendors in the world. Our leadership team was one of the first to focus on
notebook PC platforms, before desktop-to-notebook PC substitution trends were widely anticipated, which
has resulted in our significant global market share in notebook PC shipments. Our management also had the
foresight to develop the Aspire One netbook PC series, which created a new industry paradigm in netbook
PC design and functionality and better met the preferences of consumers than competing products available
in the market at the time.
Across the organization, management has instilled a culture of smooth internal communication, quick
response times and fast decision making. Through the execution of several transformational acquisitions and
our demonstrated ability to integrate our acquisitions and create synergies, management has positioned the
company for long-term success with a complete mobility platform and multi-brand portfolio.
Above all, management has helped the company maintain strong growth and margin performance
despite market conditions and intense competition. With a healthy balance sheet and well-managed financial
operations, we will be able to continue to promptly respond to the fast-changing global economic climate and
evolving PC market.

Business Strategies

Continue to invest in our leading brands

We plan to continue pursuing our multi-brand strategy to more effectively target a broader range of
geographic and customer segments. We will continue to invest in our brands — Acer, Gateway, Packard Bell
and eMachines — to further raise their market recognition and acceptance, and increase consumer
understanding of their individual value propositions. We plan to continue marketing our brands across a wide
variety of media, ranging from traditional channels such as print and television media, to promotional events,
exhibitions, and various sponsorships. Our flagship brand, “Acer”, will continue to sponsor teams and events
such as the Scuderia Ferrari Formula One team and the Olympics. We were one of the sponsors of the Winter
Olympic Games in Vancouver in 2010 and we are one of the sponsors of the forthcoming Summer Olympic
Games to be held in London in 2012.

Continue to grow global market share with focus on profitability

We believe that the PC and smart handheld device markets will continue to grow, with increasing global
penetration and expansion into new market segments. We plan to continue to be a part of this growth and
capture an increasing share of global PC and smart handheld device shipment volume, with a particular focus
on large emerging markets such as Brazil, Russia, India, Indonesia and China. In China in particular, we have
recently launched several initiatives to develop dedicated products, expand distribution channels and market
our brand in order to capture a higher share of this increasingly significant market.

37
 As we continue to expand our global market share, we will further benefit from scale economies and
revenue diversification, and we remain focused on the markets in which we can extract the most profit.
Therefore, we will pay particular attention to certain emerging markets where we benefit from relatively
higher margins and lower costs, while maintaining a steady growth policy for more mature markets.

Invest and capitalize on proliferation of mobile and cloud computing

In order to capitalize on the proliferation of mobile and cloud computing trends, we have put particular
focus on introducing new mobility solutions with a variety of form factors. Upcoming product launches
include the release of the new Timeline X, which we expect will satisfy customer demand for a thin and light
notebook PC with a long battery life that does not compromise on CPU performance. In addition, the
acquisition of E-Ten in 2008 has helped us penetrate the smart handheld device market successfully, and we
will soon be introducing new Internet-enabled devices with high levels of interactivity and connectivity.
Furthermore, in anticipation of the accelerating convergence trend between PC and handheld communication
devices, we have also introduced a consistent Acer user interface across notebook and netbook PCs, internet
devices and smart handheld devices to improve user experience and customer loyalty for Acer-branded
devices.

Enhance partnerships and business operations

We plan to continue to enhance our operations to maximize efficiency and competitiveness while
reducing costs. Of particular focus is the continued refinement of our order fulfillment and global logistics
network to meet the demands of the global PC and smart handheld device markets and ensure timely delivery,
while minimizing unnecessary processes and overhead costs.
We also intend to continue to seek out new partnerships which complement our business strategies,
while ensuring that we are achieving full synergies from our existing relationships. For example, we recently
announced an alliance with Founder Group in China to leverage their broad distribution channel to sell Acer
products in key Chinese growth cities and improve our market share in these regions. Going forward, we will
continue to actively seek partnerships that enable us to strengthen and improve our position in the global
Information Technology and Communications market.

Our Brands
We design and market a range of desktop PCs, notebook and netbook PCs, displays, servers and mobile
devices under our four brands, Acer, Gateway, Packard Bell and eMachines. Having a selection of brands
allows us to cater to a variety of consumer preferences at a wide range of price points. This multi-brand
strategy allows each brand to offer a differentiated set of product characteristics to effectively target each of
the major market segments of the global PC market.

Acer
The Acer brand appeals to users who want the latest technologies that are timely and help them better
control and simplify their lives. Acer’s notebooks PCs are targeted at customers who use PCs for everyday
tasks and home entertainment as well for business. Acer’s desktop PCs are targeted at customers who use PCs
for home entertainment, gaming, everyday tasks, photo organization and home video editing as well as for
commercial purposes. In addition to the desktop and notebook PC models, Acer’s Aspire One netbook PCs
focus on portability and productivity, featuring 3G connectivity and built-in webcam while weighing less
than 3 pounds. In response to the market’s increasing demand for more portable and powerful mobile devices,
Acer is continuously developing and introducing innovative products, including e-readers, smartphones and
tablets equipped with Google’s latest Android operating system.

Gateway
The Gateway brand appeals to users who like cutting edge design and social recognition. For example,
in 2009, Gateway introduced the FHD series monitors with sizes ranging from 21.5-inch to 24-inch wide. On
every FHD monitor, an edge-to-edge screen is framed by a black bezel with metallic-silver highlights and is
supported by a sturdy L-shaped stand with a brushed-aluminum finish. Fitted with premium features such as

38
a USB hub, built-in digital speakers and an HDMI interface, the FHD series focuses on providing a
comprehensive entertainment experience. For power gamers, Gateway introduced FX series desktop PCs in
February 2010 with a high-end quad core processor, pro media creation and vast ports and storage features.

Packard Bell
Packard Bell focuses on products that combine design and usability for high performance computing.
For example, Packard Bell’s EasyNote series notebook PCs provide a wide range of smart notebook PC
solutions and styles to target the diverse needs and tastes of each user, while combining easy usability and
a comprehensive feature set for all-around digital enjoyment. Packard Bell desktop PCs are popular for
end-users who want expandability for storing large amounts of multimedia files and maximum power for
working with graphic intensive applications. The desktop PC experience offers viewing comfort on a
widescreen monitor. In addition, Packard Bell monitors have been designed to deliver high-quality
performance and style as well as sharing a unique thin and sleek design to match its range of desktop and
notebook PCs. For example, the Maestro range of monitors is designed with seamless edge-to-edge glass
enclosure, dynamic contrast ratios, true 16:9 widescreen aspect ratio and clear viewing for games, movies and
graphic-intensive applications.

eMachines
The eMachines brand is targeted at users with a pragmatic approach toward technology and who expect
PCs to be efficient, convenient and, most importantly, affordable. eMachines markets a wide range of budget
desktop PCs for energy-efficient computing, everyday multitasking and media management. Its all-in-one EZ
series addresses a family’s basic computing needs in an easy to use, affordable, elegant and space-saving
design.

Products

The following table sets forth, for the periods indicated, the percentage breakdown of our net sales in
terms of the total net sales generated by the sales of our notebook and netbook PCs, desktop PC, displays
and others (collectively the “IT Business Group”). The IT Business Group accounts for more than 90% of
our total operating net sales. The Non-IT Business Group consists of projectors, LCD televisions, digital
cameras, e-business solutions and automotive navigation systems.

IT Business Group Net Sales Breakdown

Year Ended December 31,

2007 2008 2009

% of net % of net % of net

sales of sales of sales of
IT IT IT
Business Business Business
NT$ Group NT$ Group NT$ US$ Group
(expressed in billions of NT$ and US$)
IT Business Group
Notebook and Netbook PC............. 277.5 64% 352.8 66% 394.3 12.4 70%
Desktop PC..................................... 70.1 16% 87.9 17% 88.6 2.8 16%
Display ........................................... 69.7 16% 70.4 13% 56.2 1.8 10%
Others ............................................. 18.0 4% 20.3 4% 19.8 0.6 4%

39
 Three months ended March 31,

2009 2010

% of net % of net
sales of IT sales of IT
Business Business
NT$ Group NT$ US$ Group

(expressed in billions of NT$ and US$)

IT Business Group
Notebook and Netbook PC ........................... 78.6 68% 108.8 3.4 69%
Desktop PC ................................................... 19.5 17% 29.0 0.9 18%
Display.......................................................... 13.6 12% 14.2 0.4 9%
Others ........................................................... 4.0 3% 6.2 0.2 4%

Notebook and Netbook PCs

We design, produce and market a wide range of smart notebook PC solutions and styles to target diverse
user needs and tastes, while combining usability and comprehensive feature set for all-around digital
enjoyment. Our 14-inch notebook PC series emphasizes portability, while our 15.6-inch notebook PCs better
suit users who only go mobile occasionally, and the 17.3-inch series is designed as a desktop replacement and
is suitable for home entertainment.
Weighing less than 3 pounds, our netbook PC series emphasizes portability and efficiency and is
equipped with the latest Intel Atom processor and Windows 7 operating system, featuring 10.1- and 11.6-inch
screens. We plan to introduce a new series of netbook PCs running Google’s Chrome operating system.
Moreover, we market a special high-end product series designed to target business users, featuring an
Intel Core2 Duo, Intel Celeron, AMD Turion II Dual-Core Mobile, or AMD Athlon X2 Dual-Core processor.
We are also focusing on developing a new series of notebook PCs with cutting-edge innovation such as a
touch keyboard, all-day battery, frameless ultra-thin design, and the capacity for gaming and 3D technology.
For example, the Ferrari series is an ultra-thin lightweight netbook PC featuring 1.6-inch high definition LCD
screen and exclusive Ferrari-engraved touchpad with multi-gesture functionality for ultrafast navigation. The
Ferrari series also comes with our Grid Vista, which can simultaneously show eight windows on a dual
display.

Desktop PCs
Each series and model is differentiated by various features such as the CPU type and clock speed, the
standard size and expandability of RAM memory, cache memory and ROM, the availability and extent of
expansion bus, the nature of the graphics accelerator, the qualities of the I/O connectivity, the storage space,
dimensions, security features and the capacity to support various monitors. They are also substantially
differentiated by available features, price points within market category and, in certain cases, geographic
location.
Many of our models are equipped with our own eDataSecurity Management, eLock Management,
ePerformance Management, eRecovery Management and eSetting Management technologies for advanced
manageability features, solid reliability and ease of upgrading. We have also developed Acer TouchPortal, the
next-generation touch-screen technology, to offer high performance in a space-saving, all-in-one PC design.
Our TouchPortal technology is an intuitive interface that lies on top of Windows 7 to serve as the starting
point for managing Acer TouchGadgets, a suite of one-touch “gadgets”, and Microsoft touch applications.
Acer TouchGadgets provides quick access to music, videos, photos and social media networks, and includes:
TouchMusic, Touch Photo, TouchMediaShare, TouchFriends and Touch Media. In addition, the TouchPortal
includes several third party applications optimized for Windows 7 multi-touch, including Cyberlink YouCam
3.0, a program that provides extra features for webchats, and WildTangent games, a suite of touch-based
games.

40
 The newest addition to our desktop PC range is the iMedia XS. The iMedia XS is a new space-saving
product called nettop that can be attached on the rear of any monitor, or placed on its foot stand and
connected to a TV set for an all-in-one multimedia solution. This product emphasizes enhanced web
browsing, social networking, entertainment and casual gaming.
We focus on developing products that combine design and usability with high performance computing.
For instance, media ports and shortcut buttons are placed on the top front of the chassis for easy access, a
storage deck offers space for plugging in external devices and storing personal items, such as MP3 players,
digital cameras or video cameras, and a smart cable management system hides USB cables.

Displays

We design, produce and market a range of LCD monitors to complement our desktop and notebook PCs
and mobile devices. We offer a wide selection of LCD monitors for a range of viewing requirements, from
basic e-mail and word processing, to complex spreadsheets and intricate graphics design. Monitor sizes range
up to 27-inches and offer wide screens with flicker-free viewing and low response times. In February 2010,
we introduced a new Acer GD235HZ display that can also perform as a full HD 3D display when combined
with NVIDIA 3D Vision active-shutter glasses to enable users to view high-definition 3D games, Blu-ray
movies and other multimedia. We expect sales of 3D-enabled monitors to increase in the future.

In addition to our wide range of LCD displays, we offer four series of projectors to target the different
needs of diverse user groups. Each series offers different feature sets to target users’ needs for affordability,
commercial solutions, portability, as well as a comprehensive entertainment experience. For example, Acer’s
new H5360 projector is equipped with DLP 3D viewing option to meet the increasing demands for 3D home
entertainment.

Others - Server

The server market continues to shift towards standards-based architectures as proprietary hardware and
operating systems are replaced by industry standard server platforms that typically offer compelling price and
performance advantages by leveraging standards-based operating systems and microprocessor designs. At the
same time, critical business functions continue to demand scalability and reliability. We aim to optimize the
combined product solutions required by different customers and provide solutions for a wide range of
operating environments. The key features of our server products are their hassle-free installation and
configuration, high scalability, and comprehensive range of tools and utilities.

Others - Mobile Devices

In response to the increasing consumer demand for portability and data accessibility, we provide a wide
range of mobile devices, including e-readers, smartphones and mobile storage solutions. In May 2010, we
announced our first e-reader device. We offer books on a 6-inch E Ink display via wireless and 3G
connectivity options. We currently market a range of smartphones based on Google’s Android or Windows
Mobile operating system and are in the process of developing a 7-inch tablet featuring Google’s Android
operating system.
In 2008, we acquired E-Ten, a company that had demonstrated a long-history of successful operations
in Taiwan based on its strong research and development ability, including designing smart phones that
featured combinations of GPRS, Wi-Fi, Bluetooth, GPS, and 3.5G GSM functionality with its exclusive
in-house developed software applications. With the acquisition we have been able to focus on expanding our
mobile device businesses, especially on enhancing our research and development capacity and
competitiveness in the worldwide smartphone market.

41
Sales, Marketing and Distribution

Our products are designed around customer needs and we have the capability to deliver products in a
timely manner. In response to the market’s increasing demand for more portable and powerful mobile
devices, we are continuously developing and introducing innovative products, including e-readers,
smartphones and tablets equipped with Google’s latest Android operating system. In 2006, we led the global
industry trend with the first generation of Aspire Gemstone notebook PCs by incorporating Dolby威 Surround
sound into the full consumer product line; the trend was followed six months later by other major notebook
PC companies.

Our global marketing and branding structure consists of sales in our major geographic areas (EMEA,
the Americas, Asia Pacific and China), brand management (Acer, Packard Bell, Gateway and eMachines),
product marketing (stationary and mobile products), market insight and sponsorships.

An integral aspect of our marketing strategy is our multi-brand approach. Based on our understanding
of key factors of the purchasing process, we engage in geographic brand positioning strategy in which we
place multiple brands strategically in different geographical areas. For example, we target the Acer, Gateway
and eMachines brands in the Americas and Asia Pacific and we target the Acer, Packard Bell and eMachines
brands in EMEA. This positioning also encompasses product differentiation. For instance, Packard Bell
appeals to those who seek trendy, simple and easy-to-use PCs, while eMachines is targeted at users with a
predominantly pragmatic approach toward technology and who expect PCs to be efficient, convenient and,
most importantly, affordable.
We continuously invest in our brands to further raise brand recognition and acceptance. One of our
significant marketing initiatives is our sponsorship of the Olympic Games. We were one of the sponsors of
the Winter Olympic Games in Vancouver in 2010 and we are one of the sponsors of the forthcoming Summer
Olympic Games to be held in London in 2012.
Another integral aspect of our marketing strategy lies in our CBM, a mechanism that not only
efficiently distributes our products but also enables us to better understand our customers and potential
buyers through our CBM partners. Our CBM partners include retailers that sell our products to the public
through their own physical or Internet stores and independent distributors that sell our products into
geographies or customer groups in which we have little or no presence. These CBM partners are highly
invaluable as they provide us with market intelligence on consumer preferences and demands which allow
us to anticipate and produce the right type and volume of products. From our CBM partners, we learn how
to tailor sales, marketing and distribution to match the buying patterns of different customers in different
regional markets. We are focused on driving the depth and breadth of our coverage in addition to efficiency
and productivity gains. Our distribution is also primarily based on CBM. Our CBM clearly defines the
retailer’s responsibility, provides strong incentives to those retailers and distributors by allowing them to
share in the revenues generated from the sale of our products, reduces cost and promotes efficiency, and
encourages retailers to be highly attuned to consumer needs. In addition, since our CBM partners’ retail sales
personnel drive a significant portion of our sales in stores, we have invested heavily in training those
personnel. The model prevents duplicative efforts by us and our distributors, leverages our channel expertise
and resources, effectively manages our global logistics, and minimizes overall operating and capital
expenditures. This high-efficiency win-win collaboration rewards us and our long-term channel partners.

42
 The following table sets forth for the periods indicated the percentage breakdown of our total IT
Business Group net sales, categorized by geographic areas.

Year Ended December 31,

2007 2008 2009

% of net % of net % of net

sales of sales of sales of
IT IT IT
Business Business Business
NT$ Group NT$ Group NT$ US$ Group

(expressed in billions of NT$ and US$)

EMEA ........................................... 236.4 54% 280.5 53% 287.9 9.0 52%
Pan America .................................. 106.3 24% 150.5 28% 151.7 4.8 27%
Asia Pacific (excluding China and
Taiwan) ...................................... 59.6 14% 67.6 13% 79.4 2.5 14%
China ............................................. 21.5 5% 22.0 4% 26.2 0.8 5%
Taiwan ........................................... 11.4 3% 10.7 2% 13.8 0.4 2%
Total .............................................. 435.2 100% 531.4 100% 559.0 17.6 100%

Three months ended March 31,

2009 2010

% of net % of net
sales of IT sales of IT
Business Business
NT$ Group NT$ US$ Group

(expressed in billions of NT$ and US$)

IT Business Group
EMEA .......................................................... 56.3 49% 77.8 2.4 49%
Pan America ................................................ 34.9 30% 42.9 1.3 27%
Asia Pacific (excluding China and Taiwan) 16.5 14% 25.5 0.8 16%
China ........................................................... 5.2 5% 7.8 0.2 5%
Taiwan ......................................................... 2.8 2% 4.0 0.1 3%
Total ............................................................ 115.7 100% 158.2 5.0 100%

Supply and Procurement

We leverage our ODM capabilities to jointly develop, design and assemble products that are tailored
towards our marketing strategy and production priority. Our supply chain operations are tailored towards
meeting customer demands through a seamless demand planning process. Our demand planning enables us
to coordinate with CBM and ODM partners to reach out to our potential customers in a more direct way,
receive instant feedback, and precisely anticipate the type and volume of products that our customers need.
Based on such demand planning, we are able to plan and execute for the necessary supplies to meet customer
demands seamlessly in a cost effective way. For our key components, such as panel, memory, CPU, we
manage and then consign them to our ODM partners.
Competition
The industry in which we operate is characterized by intense competition on the basis of brand,
technology, price, quality, distribution, customer training, and service and support. Our primary competitors
for branded PCs are Hewlett-Packard, Dell Inc., Lenovo, Toshiba Corporation and other PC vendors. We will
continue to leverage our competitive advantages, such as our global and geographically diversified scale, our
multi-brand strategy, our sustainable and profitable CBM, strong innovation capability and customer-centric
business model to compete with our key competitors in every aspect.

43
Manufacturing and Materials
We are a pioneer in spinning off our manufacturing operations. We divided our company into two units
several years ago, using the Acer name for our branded PC business, while spinning off our main contract
manufacturing arm into a separate company. Spinning off our manufacturing operations not only allowed us
to concentrate all our resources on building our brand name business, but also enabled us to achieve our goals
of generating cost efficiencies, delivering products faster, improving our customer service in certain groups
and geographic areas, and establishing a world-class supply chain.

Research and Development

Developing and designing products that reflect technology trends and meet our customers’ needs are
central to our research and development strategy. We are committed to developing and providing innovative
products to maintain our competitive position. Our acquisition of E-Ten in 2008 enhanced our research and
development capabilities pertaining to mobile devices. Our research and development expenses were
NT$886.5 million (US$27.9 million) in fiscal 2009, NT$550.0 million in fiscal 2008 and NT$349.7 million
in fiscal 2007. Our research and development expenses were NT$281.5 million (US$8.8 million) for the first
quarter of 2010.

Patents, Trademarks, and Licenses

As of June 2010, we held a worldwide portfolio of more than a thousand patents with hundreds of
additional patent applications pending. We also hold licenses to use numerous third-party patents. The
inventions claimed in our patents and patent applications cover aspects of our current and possible future
computer system products and related technologies. While we utilize our patented portfolio and also license
patents to others, we are not substantially dependent on any single patent or group of related patents. In
addition, we have also entered into a variety of intellectual property licensing and cross-licensing agreements
with other companies.
We have obtained trademark registrations for the ACER, Gateway, Packard Bell, and eMachines word
marks and logo marks in various countries. We have also obtained work mark registration for various
sub-brands. In addition to the registration, we also had pending applications in certain countries, as we
believe that the establishment of the corporate word mark and logo mark worldwide is material to our
operations.
From time to time, other companies and individuals assert exclusive patent, copyright, trademark, or
other intellectual property rights to technologies or marks that are important to the technology industry or our
business. We evaluate each claim relating to our products and, if appropriate, seek a license to use the
protected technology. The licensing agreements generally do not require the licensor to assist us in
duplicating its patented technology, nor do these agreements protect us from trade secret, copyright, or other
violations by us or our suppliers in developing or selling these products.

Employees
As of March 31, 2010, we had approximately 6,612 total employees worldwide, 22.6% of whom held
advanced degrees, compared to approximately 6,624 total employees as of December 2009 and
approximately 6,727 total employees as of December 2008. We have employee stock option plans which
eligible employees may participate in. 23.8 million and 14.0 million stock options were granted in 2008 and
2009, respectively. As of March 31, 2010, there were 32.4 million stock options outstanding with 1.0 million
stock options exercisable. See Note 4(20) of Notes to the Audited Consolidated Financial Statements as of
and for the years ended December 31, 2007, 2008 and 2009 and Note 4(17) of Notes to the Unaudited
Consolidated Financial Statements as of and for the three months ended March 31, 2009 and 2010. Under our
2010 employee stock option plan, which was approved at the Annual Shareholders’ Meeting held on June 18,
2010, the total number of options to be issued under this plan is 14,000 options, where each option gives
employee the right to purchase 1,000 Common Shares. We also established individual noncontributory
defined benefit retirement plans pursuant to ROC Labor Standards Law which provide for lump-sum
retirement benefits to retiring employees based on length of service, age, and certain other factors. In
addition, under the ROC Labor Pension Act, which was promulgated and became effective on July 1, 2005,

44
we established contribution retirement plans in which we and our subsidiaries located in the ROC contribute
monthly an amount equal to 6% of each participating employee’s monthly salary to the employee’s individual
pension fund account. For our retirement plans, see Note 2(22) of Notes to the Audited Consolidated
Financial Statements as of and for the years ended December 31, 2007, 2008 and 2009. Most of our foreign
subsidiaries adopt defined contribution retirement plans. These plans are funded in accordance with the
regulations of their respective countries.

Legal Proceedings

From time to time, we may be a party to various legal proceedings. We are not currently a party to any
pending legal proceedings, the outcome of which, we believe will have a material and adverse effect, either
individually or in the aggregate, on our business, financial condition or results of operations.

Our evaluation of the materiality of a proceeding may include various factors, for example, whether
such proceeding may lead to suspension, restriction or prohibition (whether or not it is a temporary one) of
our products to enter into any major markets, the importance of such intellectual property rights in relation
to our products, components, or parts used therein, and/or the legality and reasonableness of the claimed
amount, etc.
Similar to many companies in our industry, we, including some of our subsidiaries, investee companies
and affiliates, have from time to time received letters from third parties alleging infringement of intellectual
property rights. Most of these letters have requested royalty payments based on the sales of our products. We
evaluate each claim related to our products and, if appropriate, seek a license to use the protected technology.
If we enter into such license agreements and are required to pay royalties, there can be no assurance that the
payment of such royalties would not have a material adverse effect on our business, results of operations or
financial condition.

Principal Subsidiaries and Investees

The following table sets forth certain information as of March 31, 2010 regarding our principal
subsidiaries and investee companies of which total assets or net sales accounted for more than 5% of our
consolidated total assets or net sales as of or for the year ended December 31, 2009.

The
Company’s
Registered share consolidated
Place of capital as of equity
Company Main business incorporation March 31, 2010 interest

(%)
Acer America Corporation ..... Sale of computer and California, NT$7,374,191,472 99.92
related products U.S.A
Acer Computer GmbH ........... Sale of computer and Germany NT$625,923,341 100
related products
Gateway, Inc. ......................... Sale of computer and U.S.A. NT$32 100
related products
Acer Europe SA ..................... Sale of computer and Switzerland NT$47,197,748 100
related products

45
 MANAGEMENT

Directors and Supervisors

The ROC Company Law and our Articles of Incorporation provide that our directors are to be elected
by the shareholders for three-year terms in a shareholders’ meeting at which a quorum, consisting of a
majority of all issued and outstanding Common Shares, is present. The chairman is a director elected from
and among the directors.
The term of office of the directors and the supervisors is three years. They may serve any number of
consecutive terms and may be removed from office at any time by a resolution adopted at a meeting of
shareholders. Normally, all members of the board of directors are elected at the same time, except where the
posts of one-third or more of the directors are vacant, at which time a special meeting of shareholders shall
be convened to elect directors to fill the vacancies. The board of directors has ultimate responsibility for the
management of our business and affairs.
Under ROC Company Law, the supervisors are responsible for overseeing the activities of the board of
directors and have the power to investigate our business and financial condition, examine books, records and
documents and request the board of directors to submit reports. The supervisors may engage independent
experts to carry out any investigations or examinations at our cost. Any of our supervisors can also convene
a meeting of shareholders when the board of directors do not or cannot convene a meeting of shareholders
and/or when such a meeting is necessary for our benefit. In accordance with the laws of the ROC relating
to corporations, each supervisor is elected by shareholders and cannot concurrently serve as a director,
managerial officer or other staff member. For a public company, such as us, the ROC Company Law requires
at least two supervisors be appointed at all times and that a supervisor’s term of office be up to three years.
At present, there are seven directors and two supervisors who are elected by our shareholders at the
general shareholders’ meeting. The chairman is our legal representative under the ROC Company Law.
Pursuant to our Articles of Incorporation, we expect to elect two independent directors (out of a total of seven
seats of the directors) when the term of our current Board expires in 2011.
The following table sets forth information regarding the present board of directors and the supervisors
as elected by the meeting of shareholders on June 13, 2008 for three-year terms expiring on June 13, 2011:

Percentage
of issued and
Number of outstanding
Name Title Shares held Shares held Current Position(s) in Other Companies

J.T. Wang ................................ Chairman 14,617,542 0.54 Chairman of Hitrust.com Inc.

Stan Shih ................................
Director 74,761,958 2.78 Director of Dragon Investment Co.,
Ltd., Director of Qisda Corp.,
Director of Wistron Corp., Director
of Acer Investment Inc.,
Independent director of TSMC Co,
Ltd., Director of Acer SoftCapital

Gianfranco Lanci .................... Director 551,200 0.02 —

Walter Deppeler ..................... Director 0 0 —

46
 Percentage
of issued and
Number of outstanding
Name Title Shares held Shares held Current Position(s) in Other Companies

Hsin-I Lin ................................ Director 0 0 Independent director of Sinyi

Realty Inc., Independent director of
Nan Ya Plastics Co., Director of
Yulon Motor Co, Ltd., Director of
China Motor Corp. Co.,
Independent director of E.Sun
Financial Holdings Co. Ltd.

Philip Peng (Representative of

Smart Capital Corp.)............

Director 11,249 0 Director of Cross Century

Investment, Director of
Multiventure Investment Inc.,
Supervisor of Acer Laboratories
Inc., Supervisor of Aspire
Incubation Venture Capital, Director
of Wistron Corp., Supervisor of
Apacer Technology Inc., Director of
iDSoftCapital Inc., Supervisor of
Dragon Investment Co., Ltd.,
Chairman of Acer Capital Corp.

Hung Rouan Investment

Corp. .................................... Director 67,731,471 2.52 —

George Huang.......................... Supervisor 6,255,589 0.23 Director of Apacer Technology Inc.,

Independent Supervisor of Les
Enphants Ltd., Independent
Supervisor of Mtech Industries Inc.,
Independent Supervisor of PChome
Online Inc., Director of China
Productivity Center, Independent
Director of Golden Harvest Corp.

Carolyn Yeh(1) ......................... Supervisor 17,689,688 0.66 Director of Aspire Incubation

Venture Capital, Chairman of
iDSoftCapital Inc., Supervisor of
Acer Capital Corp.

Total......................................... 181,618,697 6.75

(1) Carolyn Yeh is wife of Stan Shih.

As of April 20, 2010, the directors and the supervisors had a registered holding of 6.75% of our issued
shares. The aggregate remuneration paid to our directors and supervisors in their capacities as such, in
accordance with the resolution in the shareholders’ meeting, in 2007, 2008 and 2009, was approximately
NT$94.8 million, NT$116.6 million and NT$85.8 million (US$2.7 million), respectively. The aggregate
remuneration paid to our executive officers in 2007, 2008 and 2009 was NT$614.2 million, NT$436.4
million, and NT$587.9 million (US$18.5 million), respectively. At the Annual Shareholders’ Meeting held on
June 18, 2010, NT$122.1 million was approved as remuneration to directors and supervisors.

47
Key Managers
The following table sets forth information regarding our key managers as of March 31, 2010:

Name Position Current position since

Gianfranco Lanci ............... CEO of Acer Inc. & Corporate President January 1, 2005
Walter Deppeler ................. Senior Corporate Vice President & EMEA Deputy September 29, 2007
President
Aymar de Lencqueaing ...... Senior Corporate Vice President & SHBG President January 1, 2009
Jim Wong........................... Senior Corporate Vice President & ITGO President November 1, 2001
Rudi Schmidleithner .......... Corporate Vice President & PA President September 29, 2007
Steve Lin ........................... Corporate Vice President & AP President November 1, 2001
Oliver Ahrens .................... Corporate Vice President & ACCN President April 1, 2009
Gianpiero Morbello ........... Corporate Vice President, Marketing & Branding May 1, 2008
Scott Lin ............................ Corporate Vice President, TWN Operation President November 1, 2001
James Chiang..................... Corporate Vice President & CBG President January 1, 2002
Simon Hwang .................... Corporate Vice President & ETBG President September 1, 2008
Ben Wan ............................ EBG President May 16, 2002
Che-Min Tu ....................... CFO December 1, 2009
Campbell Kan .................... Vice President of ITGO March 28, 2007
Jackson Lin........................ Vice President of ITGO February 16, 2004
Towny Huang .................... Vice President of ITGO January 1, 2008
Wayne Ma.......................... Vice President of ITGO November 1, 2008
Peter Shieh ........................ Vice President of TWN Operation November 1, 2001
Jafa Lin.............................. Vice President of TWN Operation July 1, 1996
Angelina Hwang ................ Vice President of EBG September 1, 2002
Michael Wang .................... Vice President of EBG November 1, 2008
PH Wu ............................... Head of Branch Office January 12, 2006
TC Yang............................. Head of Branch Office January 12, 2006
YS Shiau............................ Head of Branch Office January 12, 2006

Biographies of Directors, Supervisors and Executive Officers

J.T. Wang has served as our Chairman since 2005 and Chief Executive Officer of Acer Group since
2008. Prior to his present position, he was President of Acer Inc. Mr. Wang has been with Acer for more than
25 years and served in many managerial roles. Mr. Wang is also the Chairman of Hitrust.com Inc. He holds
a Bachelor’s degree in Electrical Engineering from National Taiwan University and an Executive MBA from
Taiwan’s National Cheng-Chi University.
Stan Shih is the founder of Acer Group and is currently one of our directors. Prior to his present
position, he was our Chairman. Mr. Shih is also a Director of Dragon Investment Co., Ltd, Qisda Corp,
Wistron Corp, Acer Investment Inc. and Acer SoftCapital and an Independent Director of TSMC Co., Ltd.
He holds a Master’s degree in Electronical Engineering from National Chiao Tung University, Taiwan. He
is the husband of Carolyn Yeh, who is one of our Supervisors.
Gianfranco Lanci has served as our Chief Executive Officer since June 2008. He is also our Corporate
President and one of our directors since 2005. Mr. Lanci has been with Acer for more than 10 years and
served in many managerial roles in Acer Group, including as President of our International Operations
Business Group and President of Acer EMEA. He holds a Bachelor’s degree in Civil Engineering from the
University of Turin, Italy.
Walter Deppeler has served as our Senior Corporate Vice President, EMEA Deputy President and is one
of our directors. Prior to joining us, he was the Manager in charge of the Central & Eastern Europe Division
of Texas Instruments. He received his MBA from Ockreal Zurich.

48
 Hsin-I Lin is one of our directors. Prior to joining us, he was Chairman of Industrial technology
Research Institute. He is also an Independent Director of Sinyi Realty Inc., Nan Ya Plastics Co and E.Sun
Financial Holdings Co., Ltd and he is also a Director of Yulon Motor Co., Ltd and China Motor Corp. Co.
He holds a Master’s degree in Business Administration from Oklahoma City University, America.
Philip Peng is currently one of our directors. Prior to his present position, he was our Chief Financial
Officer. He is also a Director of Cross Century Investment, Multiventure Investment Inc., Wistron Corp,
iDSoftCapital Inc. and Acer Capital Corp and a supervisor of Acer Laboratories Inc., Aspire Incubation
Venture Capital, Apacer Technologies Inc. and Dragon Investment Co., Ltd. He holds a Master’s degree in
Business Administration from National Cheng Chi University, Taiwan.
George Huang is one of our supervisors. Prior to his present position, he was one of our directors. He
is also a Director of Apacer Technology Inc. and China Productivity Center and an Independent Supervisor
of Les Enphants Ltd, Mtech Industries Inc., PChome Online Inc., and Golden Harvest Corp. He holds a
Bachelor’s degree in Communications Engineering from National Chiao Tung University, Taiwan.
Carolyn Yeh is one of our supervisors. Prior to her present position, she was our administrative officer.
She is also a Director of Aspire Incubation Venture Capital, Chairman of iDSoftCapital Inc., and a Supervisor
of Acer Capital Corp. She is the wife of Stan Shih, who is our founder and currently serves as our director.
She holds a Bachelor’s degree in Business Administration from Fu Jen Catholic University, Taiwan.
Aymar de Lencqueaing has served as our Senior Corporate Vice President and SHBG President since
January 1, 2009. Prior to joining us, Mr. de Lencqueaing was the President and CEO of Packard Bell.
Jim Wong has served as our Senior Corporate Vice President and ITGO President since November 1,
2001. Prior to his present position, Mr. Wong was the General Manager of our Information Products Group.
He is also the Director of E-Ten. Mr. Wong received his Master’s degree in Information Engineering from
Emory University, U.S.A.
Rudi Schmidleithner has served as our Corporate Vice President and PA President since September 29,
2007. Prior to joining us, Mr. Schmidleithner was the General Manager of Texas Instruments.
Steven Lin has served as our Corporate Vice President and AP President since November 1, 2001. Prior
to his present position, he was the General Manager in charge of our Asia-Pacific Regional Operations
Division. Mr. Lin received his Bachelor’s degree in Computer Science from Tamkang University, Taiwan.
Oliver Ahrens has served as our Corporate Vice President and ACCN President since April 1, 2009.
Prior to his present position, Mr. Ahrens was the Product Business Director in charge of Peripheral Business
Unit, Acer EMEA.
Gianpiero Morbello has served as our Corporate Vice President of Marketing and Branding since May
1, 2008. Prior to his present position, Mr. Morbello was Marcom & Channel Marketing Director of Acer
EMEA.
Scott Lin has served as our Corporate Vice President and TWN Operation President since November 1,
2001. Prior to his present position, Mr. Lin was the General Manager in charge of our Information Division.
He is also the Chairman of Minly Corp. Mr. Lin received his Bachelor’s degree in Business Administration
from National Chengchi University, Taiwan.
James Chiang has served as our Corporate Vice President and CBG President since January 1, 2002.
Prior to his present position, he was our General Manager. Mr. Chiang is also the Chairman of Weblink
International Inc. and a Director of Lottery Technology Service Corp. and Minly Corp. Mr. Chiang received
his Bachelor’s degree in Electrical Engineering from National Cheng Kung University, Taiwan.
Simon Hwang has served as our Corporate Vice President and ETBG President since September 1,
2008. Mr. Hwang is also the Chairman of E-Ten. Mr. Hwang received his Bachelor’s degree in Electrical
Engineering from National Taiwan University.
Ben Wan has served as our EBG President since May 16, 2002. Prior to joining us, Mr. Wan was the
Director and General Manager of ARC. He is also the Director of Acer Cyber Center Services Ltd. Mr. Wan
obtained his MBA from the University of Southern California, U.S.A.

49
 Che-Min Tu has served as our Chief Financial Officer since December 1, 2009. Prior to his present
position, Mr. Tu was the Chief Financial Officer in charge of our EMEA Division. Mr. Tu is also the Director
of Lottery Technology Service Corp., Multiventure Investment Inc., Acer Digital Service Co., Cross Century
Investment Limited and Acer Worldwide Inc. Mr. Tu obtained his MBA from University of Manchester, U.K.
He was also part of the MBA Exchange Program of Leonard N. Stern School of Business, New York
University, U.S.A.

The business address of each of our directors, supervisors and key managers is our registered office.

50
 MARKET PRICE OF THE COMMON SHARES

Our Common Shares have been listed on the TSE since September 18, 1996. Our Global Depositary
Receipts have been listed on the London Stock Exchange since November 1, 1995.
The following table sets out the high and low closing prices of the Common Shares on the TSE,
adjusted for the effects of rights issues and stock dividends, and the high and low closing values of the TSE
Index, for the periods indicated:

Price per Share TSE Index

High Low High Low

2005 First Quarter................... NT$34.87 NT$32.68 6259.69 5771.48

Second Quarter............... 42.70 32.87 6373.86 5693.01
Third Quarter ................. 48.23 39.78 6455.57 5925.54
Fourth Quarter................ 62.41 48.60 6575.53 5632.97
2006 First Quarter................... 61.75 43.63 6742.39 6364.60
Second Quarter............... 46.19 37.12 7474.05 6299.59
Third Quarter ................. 45.85 32.93 6946.27 6257.80
Fourth Quarter................ 56.30 44.34 7823.72 6874.98
2007 First Quarter................... 54.70 48.24 7935.54 7344.56
Second Quarter............... 53.83 48.64 8939.19 7875.42
Third Quarter ................. 59.49 47.27 9744.06 8090.29
Fourth Quarter................ 67.01 49.08 9809.88 7807.39
2008 First Quarter................... 52.76 41.27 8865.35 7408.40
Second Quarter............... 60.23 47.19 9295.20 7523.54
Third Quarter ................. 61.87 47.98 7407.98 5641.95
Fourth Quarter................ 49.64 36.82 5764.01 4089.93
2009 First Quarter................... 47.24 36.72 5390.70 4242.61
Second Quarter............... 62.70 49.09 6954.10 5314.45
Third Quarter ................. 78.92 52.89 7526.55 6530.82
Fourth Quarter................ 92.58 73.43 8188.11 7322.93
2010 First Quarter................... 99.13 81.32 8356.89 7212.87
Second Quarter............... 89.98 70.74 8171.94 7071.67
Through August 5 ......... 89.00 71.31 7972.66 7254.06

Source: Bloomberg.

On August 5, 2010, the reported closing price of the Common Shares was NT$85.2 per Common Share
and the TSE Index closed at 7,936.85.

There is no public market outside Taiwan for the Common Shares. The TSE has experienced
fluctuations in the prices of listed securities and there are currently limits on the range of daily price
movements.

51
 EXCHANGE RATE INFORMATION

Fluctuations in the exchange rate between NT dollars and US dollars will affect the US dollar
equivalent of the NT dollar price of our Common Shares on the TSE and, as a result, are likely to affect the
market price of the Bonds. In certain parts of this Offering Circular, we have translated NT dollar amounts
into US dollars. The rate we used for the translation, unless otherwise noted, was NT31.819=US$1.00, which
was the exchange rate used in the financial statements for convenience translation.

The following table sets forth the average, high, low and period-end Interbank Spot Market Closing
Rates announced by the Central Bank of the Republic of China, Taiwan for the periods indicated. No
representation is made that the NT dollar amounts actually represent such US dollar amounts or could have
been, or could be, converted into US dollars at the rate indicated, any other rate or at all. The Interbank Spot
Market Closing Rates on August 5, 2010 was NT$31.85=US$1.00.

Interbank Spot Market Rate (in NT dollars per US dollar)

Year Ended December 31, Average High Low At Period End

2003 ........................................................................ 34.41 34.94 33.71 33.98

2004 ........................................................................ 33.41 35.16 31.92 31.92
2005 ........................................................................ 32.19 33.77 30.79 32.85
2006 ........................................................................ 32.54 33.32 31.34 32.60
2007 ........................................................................ 32.84 33.40 32.27 32.44
2008 ........................................................................ 31.54 33.55 30.01 32.86
2009 ........................................................................ 33.04 35.17 32.03 32.03
November ............................................................... 32.34 32.58 32.12 32.19
December................................................................ 32.28 32.38 32.03 32.03
2010
January.................................................................... 31.90 32.08 31.76 31.99
February.................................................................. 32.09 32.20 32.00 32.09
March...................................................................... 31.88 32.05 31.75 31.82
April ....................................................................... 31.52 31.79 31.36 31.42
May......................................................................... 31.96 32.39 31.46 32.23
June ....................................................................... 32.31 32.53 32.00 32.28
July ......................................................................... 32.17 32.30 32.05 32.05
August (through August 5) ..................................... 31.86 31.87 31.85 31.85

Source: Central Bank of the Republic of China, Taiwan.

52
 DIVIDENDS AND DIVIDEND POLICY
Pursuant to the ROC Company Law and our Articles of Incorporation, payment of any dividend by us
is subject to approval by our shareholders and in the case of stock dividends, approval by the relevant
government authorities in the ROC. No assurance can be given that we will pay any dividends to our
shareholders in the future.
All dividend payments are subject to a legally required minimum reserve. Dividends may be distributed
either in cash, Common Shares or a combination of cash and Common Shares. The ratio between any cash
dividend and shares dividend is proposed by the board of directors and approved by the shareholders at a
shareholders’ meeting. Under our Articles of Incorporation, not less than 10% of the dividends to be
distributed shall be in the form of cash, if the distribution plan as approved by the shareholders includes a
distribution of cash dividend.
The dividends paid by us from 2007 through 2009 are set out in the following table.

Aggregate Number Cash Dividends Stock Dividends Per

Year of Shares(1) Per Share Share

2007.................................................................. 2,405,490,426 3.60 0.15

2008.................................................................. 2,642,855,993 2.00 0.10
2009.................................................................. 2,688,228,278 3.10 0.01

(1) Aggregate number of Common Shares outstanding on the record date for the dividend payment.

We have devised a long-term capital policy to ensure continuous development and steady growth; we
have adopted the remainder appropriation method as our dividend policy, which was approved at the
shareholders’ meeting on May 23, 2000. The proposed dividend distribution plan, agreed by the board of
directors, was effected upon the approval of shareholders at the Annual Shareholders’ Meeting on June 18,
2010 in which we proposed to appropriate NT$8,336,834,532 from 2009 retained earnings for shareholders’
dividend and bonus as cash dividend. Under such proposal, the cash dividend of NT$3.1 per share will be
distributed to our listed shareholders based on their holdings. Another NT$26,893,010 from 2009 retained
earnings will be distributed to shareholders through issuance of shares. The stock dividend will be distributed
to our listed shareholders at the ratio of one shares for every one thousand shares held. Both cash and stock
dividend are subject to adjustment if the number of our total issued and outstanding shares increases or
decreases before the dividend record dates. The cash value of employee bonus (either in cash or in stock) will
be booked as an expense of the Company in the year in which the profits were generated.
Our Articles of Incorporation require that our net income, after paying taxes due, deducting previous
years’ losses and setting aside any legal and special reserve, may be distributed as dividends to holders of
Common Shares and as employee bonuses after approval at a shareholders’ meeting in the following manner:
(i) no less than 5% as bonus for employees (including employees of our affiliates meeting certain
criteria set by our board of directors, if such bonus is distributed in the form of Common Shares.);
(ii) 1% as cash remuneration for our directors and supervisors; and
(iii) the remainder may (after retaining a certain portion for business considerations) be distributed as
a dividend (in the form of cash, Common Shares or both) to all shareholders.
The ROC Company Law requires that 10% of annual net income (less prior year losses), after payment
of taxes and duties, be set aside as a legal reserve until the accumulated legal reserve equals our total paid-in
capital. Our Articles of Incorporation require that no less than 5% of net income, after (a) covering prior
years’ operating losses, if any, (b) paying any taxes due, (c) setting aside 10% of the remaining amount as
a legal reserve after deduction (a) and (b), and (d) setting aside a special reserve if required under the laws
or by the government authorities, must be allocated as a bonus to employees.

53
 PRINCIPAL SHAREHOLDERS

Our principal shareholders as of April 20, 2010 are as follows:

Held Percentage of
Name Number of Shares Share Capital

JPMorgan Chase Bank N.A. Taipei Branch in custody for Capital

World Growth and Income Fund Inc................................................ 127,236,451 4.73%
Acer GDR ............................................................................................ 82,947,962 3.08%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Capital
Income Builder, Inc. ......................................................................... 76,420,444 2.84%
Stan Shih(1) ........................................................................................... 74,761,958 2.78%
Hung Rouan Investment Corp. ............................................................. 67,731,471 2.52%
JPMorgan Chase Bank N.A. Taipei Branch in custody for
EuroPacific Growth Fund ................................................................. 60,547,830 2.25%
JPMorgan Chase Bank N.A., Taipei Branch in custody for Saudi
Arabian Monetary Agency - Credit Agricole Asset Management as
external fund manager ...................................................................... 54,450,241 2.02%
JPMorgan Securities Ltd. ..................................................................... 43,368,893 1.61%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Emerging
Markets Growth Fund, Inc. .............................................................. 33,953,950 1.26%
Fidelity Funds ...................................................................................... 33,056,400 1.23%

(1) Stan Shih is our director.

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 RELATED PARTY TRANSACTIONS

We from time to time have engaged in a variety of transactions with related parties. For additional
information relating to such transactions, see Note 5 of Notes to the Audited Consolidated Financial
Statements as of and for the years ended December 31, 2007, 2008 and 2009 and Note 5 of Notes to the
Unaudited Consolidated Financial Statements as of and for the three months ended March 31, 2009 and
2010.

Our policy on transactions with related parties is that such transactions shall be conducted on terms
substantially as favorable to us as would be obtainable at the time in a comparable arm’s length transaction
with a person other than a related party.

The following table sets forth names and relationships of our related parties:

Name Relationships with Us

Wistron Corporation (“Wistron”)................................................ Investee accounted for by equity method

Cowin Worldwide Corporation (“COWIN”)............................... Subsidiary of Wistron
Bluechip Infotech Pty Ltd. (“SAL”)........................................... Investee accounted for by equity method
e-Life Mall Corp (“eLIFE”) ....................................................... Investee accounted for by equity method
iDSoftCapital Inc. ....................................................................... Its chairman is one of our supervisors

Net Sales Net sales to our related parties amounted to NT$1,536.7 million (US$48.3 million) in 2009.
This amount consisted of NT$768.4 million (US$24.1 million) to SAL, NT$690.7 million (US$21.7 million)
to eLIFE and NT$77.6 million (US$2.4 million) to others. The sales prices and payment terms to related
parties were not significantly different from those of sales to non-related parties.

Notes and Accounts Receivable As of December 31, 2009, we had notes and accounts receivable of
NT$600.3 million (US$18.9 million) from our related parties. This amount consisted of NT$315.9 million
(US$9.9 million) from COWIN, NT$116.2 million (US$3.7 million) from SAL, NT$109.1 million (US$3.4
million) from eLIFE, NT$43.3 million (US$1.4 million) from Wistron and NT$15.8 million (US$0.5 million)
from others.
Purchases In 2009, purchases from our related parties amounted to NT$32.4 billion (US$1.0 billion),
the bulk of which was from Wistron. The trading terms with related parties are not comparable to the trading
terms with third parties as the specifications of products are different. We sold raw material to Wistron and
its subsidiaries and purchased back the finished goods after being manufactured.

Notes and Accounts Payable As of December 31, 2009, we had NT$10.2 billion (US$321.6 million) of
notes and accounts payable to related parties, the bulk of which came from Wistron.

Spin-off of Assets On February 28, 2002, we spun off our design, manufacturing and services business
from our brand business and transferred the related operating assets and liabilities to Wistron. We agreed with
Wistron that Wistron is obligated to pay for the deferred income tax assets being transferred only when they
are actually utilized. In 2006, the ROC income tax authorities examined and rejected Wistron’s claim of
investment credits transferred from the spin-off in the income tax returns for the years from 2002 to 2004.
Wistron disagreed with the assessment and filed a recheck with the tax authorities for a reexamination of the
aforementioned income tax returns. We recognized income tax expense of NT$875.8 million based on the tax
exposure estimated in 2006 and provided a valuation allowance against the receivables from Wistron.

In 2008 and 2009, the tax authorities subsequently concluded that Wistron could utilize portions of the
aforementioned deferred tax assets resulting from the spin-off. Based on the tax authorities’ conclusion, we
collected the outstanding receivables from Wistron in 2009. Additionally, the valuation allowance was
reversed to current income tax benefit in the amount of NT$511.4 million and NT$72.4 million for the years
ended December 31, 2008 and 2009, respectively.

55
 Other Expense We paid iDSoftCapital Inc. management service fees amounting to NT$49.3 million for
the year ended December 31, 2009.

Advances to/from Related Parties We paid certain expenses on behalf of related parties. Additionally,
related parties paid certain expenses and accounts payable on behalf of us. As of December 31, 2009, we had
aggregate receivables from related parties of NT$21.5 million and payables to related parties of NT$92.2
million resulting from these transactions.

56
 CHANGES IN SHARE CAPITAL

The following table shows the changes in our issued share capital since August 2006:

Number of Shares
Number of Shares Outstanding After
Record-Date Issued Type of Issue Issue

August 2006 ......... 82,544,976 From retained earnings 2,337,063,681

August 2007 ......... 68,427,345 From retained earnings 2,405,490,426
July 2008.............. 69,082,344 From retained earnings 2,474,572,770
September 2008.... 168,158,878 Share exchange with E-Ten 2,642,731,648
November 2008 .... 124,345 Exercise of stock options by E-Ten employees 2,642,855,993
April 2009 ............ 127,000 Exercise of stock options by E-Ten employees 2,642,982,993
August 2009 ......... 42,663,596 Retained earnings 2,685,646,589
November 2009 .... 2,581,689 Exercise of stock options by E-Ten employees 2,688,228,278
April 2010 ............ 953,801 Exercise of stock options by E-Ten employees 2,689,182,079

57
 DESCRIPTION OF THE BONDS
The following are the terms and conditions (subject to amendment and except for the sentences in
italics) of the Bonds (the “Conditions”), which are a part of, and are subject to, the more detailed provisions
of the Indentures referred to below. Holders of the Bonds should read the Indentures in their entirety as they
define the rights and obligations of the Holders of the Bonds. Attention of the holders of the Bonds is also
drawn to the section entitled “Global Certificates” to understand their rights with respect to the Bonds in
global form. Capitalized terms used in these conditions without definition are used as defined in the
Indentures.
The issue of US$300,000,000 Zero Coupon Convertible Bonds due 2015 (the “2015 Bonds”) and
US$200,000,000 Zero Coupon Convertible Bonds due 2017 (the “2017 Bonds” and together with the 2015
Bonds, the “Bonds”) was authorized by a resolution of the Board of Directors of Acer Incorporated (the
“Company”) adopted on May 31, 2010. Each series of Bonds will be issued pursuant to an indenture (each
an “Indenture” and together, the “Indentures”) to be dated August 10, 2010 (the “Issue Date”) between
the Company and Citicorp International Limited, as trustee (the “Trustee”, which term shall include all
persons for the time being appointed as trustee or trustees under the Indentures) for the holders of the Bonds.
The Company will also enter into a paying and conversion agency agreement for each series of Bonds (the
“Agency Agreements”) to be dated the Issue Date with the Trustee and Citibank, N.A., London Branch, as
the registrar, principal paying, conversion and transfer agent appointed thereunder (collectively, the
“Agents” in relation to the Bonds). The registrar, principal paying agent, paying agents, conversion agents
and transfer agents for the time being are referred to below as the “Registrar”, the “Principal Paying
Agent”, the “Paying Agents” (which expression shall include the Principal Paying Agent), the “Conversion
Agents” (which expression shall include the Principal Paying Agent) and the “Transfer Agents” (which
expression shall include the Registrar), respectively. The statements of these Conditions include summaries
of, and are subject to, the detailed provisions of the Indentures. In the event of any inconsistency between the
terms of the Indentures and these Conditions or between the terms of the Indentures and the Agency
Agreements, the terms of the Indentures shall govern. Copies of the Indentures and the Agency Agreements
will be available after the Issue Date for inspection by holders of the Bonds during normal business hours
at the principal office of the Trustee being at the date hereof at 39/F, ICBC Tower, Citibank Plaza, 3 Garden
Road, Central, Hong Kong, and at the specified offices of each of the Agents. The holders of the Bonds should
read the Indentures and the Agency Agreements in their entirety, as they are bound by, and are deemed to
have notice of, all the provisions of the Indentures and the Agency Agreements.

1. STATUS
The Bonds constitute direct, unconditional, unsubordinated and, subject to the provisions of Condition
3(A), unsecured obligations of the Company and shall at all times rank pari passu and without any preference
or priority among themselves and, subject to the provisions of Condition 3(A), with all other present and
future direct, unconditional, unsubordinated and unsecured obligations of the Company, except any
obligation preferred by mandatory provisions of law.
The Bonds shall not be entitled to the benefit of a sinking fund.

2. FORM, DENOMINATION AND TITLE

(A) Form and Denomination

The Bonds shall be issued in registered form, without coupons, in the denomination of US$100,000 or
an integral multiple in excess thereof. The Bonds shall be offered, sold and transferred in the principal
amount of US$100,000 or an integral multiple in excess thereof. Each series of Bonds shall initially be
represented by a single global registered certificate (each a “Global Certificate”, collectively the “Global
Certificates”), and only under the limited circumstances described in the Global Certificate and the
Indentures shall definitive bond certificates (each a “Definitive Certificate”) be issued to holders of the

58
Bonds in respect of their individual registered holdings. Each Definitive Certificate, if issued, shall be
serially numbered and shall have an identifying number which shall be recorded on the relevant Certificate
and in the register of holders of the relevant series of Bonds (each, a “Bond Register”), which the Company
shall procure to be kept by the Registrar.
For the purposes of these Conditions, a “Certificate” means a Definitive Certificate or the Global
Certificate.
Each series of Bonds shall initially be represented by a Global Certificate and deposited with, and
registered in the name of a nominee of, Citibank Europe PLC, as common depositary for Euroclear and
Clearstream. Each Global Certificate shall contain or incorporate by reference the Conditions.
Except in the limited circumstances described under “Global Certificates — Individual Definitive
Certificates,”, the Bonds will only be issued in book-entry form and owners of interests in the Bonds
represented by the Global Certificates will not be entitled to receive Definitive Certificates in respect of their
individual registered holdings of the Bonds. The Bonds are not issuable in bearer form.

(B) Title
The Bonds shall be registered instruments, and title to the Bonds shall pass only by transfer and
registration of title in the relevant Bond Register. The holder of any Bond shall, except as otherwise required
by law, be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any
notice of ownership, trust or any interest in it or any writing on, or the theft or loss of, the Definitive
Certificate issued in respect of it), and no person shall be liable for so treating the holder. In these Conditions,
“holder of the Bonds”, “holder” and “Bondholder” in relation to a Bond shall mean the person in whose name
a Bond is registered in the relevant Bond Register.

(C) Interest
The Bonds do not bear interest other than relevant Redemption Premium as defined in Condition 7(B),
and in the limited circumstances set forth in Condition 6(E).

(D) Further Issues

The Company may from time to time without the consent of the holders of the Bonds, to the extent
permitted under the laws of the ROC, create and issue further securities having the same terms and conditions
as the Bonds in all respects (except for the issue date, issue price and to the extent necessary, certain
temporary securities law transfer restrictions) so that such further issues shall be consolidated and form a
single series with the outstanding Bonds.

3. CERTAIN COVENANTS

(A) Negative Pledge

So long as any of the Bonds remains outstanding, the Company shall not, and shall not permit any of
its Principal Subsidiaries (as defined below) to, create or permit to subsist any mortgage, charge, pledge, lien
or other form of encumbrance or security interest (“Security”) upon the whole or any part of the property,
assets or revenues of the Company or such Principal Subsidiary, as the case may be, present or future, to
secure for the benefit of the holders of any International Investment Securities (as defined below) any
payment of any sum due in respect of or under any guarantee of or payment under any indemnity or other
like obligation relating to any such International Investment Securities, unless, in any such case, at the same
time or prior thereto, either (i) the same Security is granted to the holders of the Bonds equally and ratably
or (ii) effective provision is made to secure the Bonds with a guarantee, indemnity or other like obligation
or such other security as shall be approved by holders of not less than a majority of the principal amount of
the Bonds then outstanding.
For the purposes of these Conditions:
“International Investment Securities” means bonds, debentures, notes or other similar investment
securities of the Company or any of its Principal Subsidiaries evidencing indebtedness with a maturity of not

59
less than one year that (a) either (i) are by their terms payable, or confer a right to receive payment, in any
currency other than NT Dollars or (ii) are denominated or payable in NT Dollars and more than 50% of the
aggregate principal amount thereof is initially distributed outside the ROC by or with the authorization of the
issuer; and (b) are for the time being, or are capable of being, quoted, listed, ordinarily dealt in or traded on
any stock exchange, quotation system or over-the-counter or other similar securities market outside the ROC.

“Principal Subsidiary” in relation to the Company means any corporation or other business entity 50%
or more of the outstanding voting stock of which is for the time being owned directly or indirectly by the
Company and either (a) the operating revenues of which, as shown by the accounts (consolidated in the case
of an entity which itself has subsidiaries) of such entity upon which the most recent audited consolidated
accounts of the Company have been based, are at least 5% of the consolidated operating revenues of the
Company as shown by such audited consolidated accounts; or (b) the total assets of which, as shown by the
aforementioned accounts, are at least 5% of the consolidated total assets of the Company, as shown by such
audited consolidated accounts.

(B) Merger, Amalgamation or Consolidation

So long as any of the Bonds remains outstanding, the Company shall not merge, amalgamate or
consolidate with or into any other corporation or entity (if the Company is not the continuing entity) or sell
or transfer all, or substantially all, of its assets, whether as a single transaction or a number of transactions,
related or not, to any corporation, entity or person or to one or more members of any group under the common
control of any corporation, entity or person (the consummation of any such event, a “Merger”) unless:

(i) the Company has notified the holders of the Bonds of such event in accordance with Condition
14;
(ii) the Company and the corporation, entity or person resulting from such merger, amalgamation or
consolidation or the corporation or the entity which has acquired such assets (the “Successor
Company”), as the case may be, have executed an indenture supplemental to the relevant
Indenture, in form and substance satisfactory to the Trustee, and the supplemental indenture
includes the following: (a) the express assumption by the Successor Company of the Company’s
obligations under the Bonds, the relevant Indenture and the relevant Agency Agreement,
including the covenants contained in this Condition 3(B) relating to any subsequent Mergers; (b)
provisions for the convertibility of each Bond then outstanding (during the period in which such
Bond shall be convertible) into the class and amount of shares and other securities, cash and other
property receivable upon such Merger by a holder of the number of Common Shares into which
such Bonds would have been convertible immediately prior to such Merger (assuming for such
purpose that the Bonds were convertible at the time of such Merger) at the relevant Conversion
Price as adjusted from time to time pursuant to the relevant Indenture; and (c) provisions for
adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided
for in Condition 5(C); and

(iii) immediately after giving effect to such Merger, no Event of Default (as defined in Condition 9)
shall have occurred and be continuing or would result therefrom.
In the event of any such Merger, the provisions described under Conditions 7(C) and 8 shall be
applicable to the Successor Company and jurisdiction of incorporation or tax residence of the Successor
Company (the “Successor Jurisdiction”) as if the Successor Company were the Company, the Successor
Jurisdiction were the ROC and, for purposes of Condition 7(C), the issue date were the date of assumption
by the Successor Company of the Company’s obligations under the relevant Indenture, and the above
provisions of this Condition 3(B) shall apply in the same way to any subsequent Mergers.

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4. TRANSFERS OF BONDS; ISSUE OF CERTIFICATES

(A) Transfers
Subject to Condition 4(D), a Bond may be transferred as follows: (i) in the case of a Bond represented
by a Definitive Certificate, by depositing such certificate at the specified office of any Transfer Agent, with
the form of transfer on the back of such certificate duly completed and signed, and (ii) in the case of a Bond
represented by the Global Certificate, by depositing a form of transfer obtainable from any Transfer Agent,
duly completed and executed, at such office. In each case, such deposit shall be accompanied by any other
evidence that such Transfer Agent may reasonably require.
The form of transfer referred to in clause (ii) above will be available after the Issue Date at the specified
offices of the Transfer Agents during normal business hours. Transfers of interests in the Bonds evidenced
by a Global Certificate will be effected in accordance with the rules of the relevant clearing systems. The
transfer, exchange or replacement of the Bonds represented by Definitive Certificates will be effected in
accordance with the terms and conditions set forth in “Global Certificates — Individual Definitive
Certificates.”

(B) Delivery of New Definitive Certificates

Each new Definitive Certificate to be issued upon transfer of the Bonds shall, within five Transfer
Business Days (as defined below) of receipt by the relevant Transfer Agent of the duly completed and signed
form of transfer, be mailed by uninsured mail at the risk of the holder entitled to the Bonds to the address
specified in the form of transfer.
Where some but not all the Bonds in respect of which a Definitive Certificate is issued are to be
transferred, converted or redeemed, a new Definitive Certificate in respect of the Bonds not so transferred,
converted or redeemed shall, within five Transfer Business Days of deposit or surrender of the original
certificate with or to the relevant Agent, be mailed by uninsured mail at the risk of the holder of the Bonds
not so transferred, converted or redeemed to the address of such holder appearing on the Bond Register.
For the purposes of this Condition 4:
“Transfer Business Day” means a day (other than a Saturday or Sunday) on which banks are open for
business in the city in which the specified offices of the relevant Transfer Agent with whom a Definitive
Certificate is deposited in connection with a transfer and the Registrar are located.
Except in the limited circumstances described in the Global Certificate, owners of interests in the Bonds
represented by the Global Certificate will not be entitled to receive Definitive Certificates in respect of their
individual holdings in the Bonds. Issues of Definitive Certificates upon transfer of the Bonds are subject to
compliance by the transferor and transferee with the certification procedures described in the Agency
Agreements.

(C) Formalities Free of Charge

Registration of transfer of the Bonds shall be effected without charge to holders of the Bonds by or on
behalf of the Company or any of the Agents, subject to payment (or the giving of such indemnity as the
Company or any of the Agents may require) in respect of any tax or other governmental charges which may
be imposed in relation to it.

(D) Restricted Transfer Period

No holder of the Bonds may require the transfer of a Bond to be registered (i) during the period of 15
days ending on the due date for any payment in respect of the Bond pursuant to Condition 7(A), (ii) after such
Bond has been selected for redemption pursuant to Condition 7(B) or 7(C), (iii) following exercise by the
holder of its option to require the Company to redeem the Bonds pursuant to Conditions 7(D), 7(E) or 7(F)
or (iv) following exercise by the holder of its option to convert its Bonds pursuant to Condition 5(A).

61
 (E) Provisions on Transfer
All transfers of the Bonds and entries on the Bond Register shall be made subject to the detailed
provisions concerning transfer of the Bonds (the “Regulations”) set forth in the Agency Agreements. The
Regulations may be changed by the Company, with the prior written approval of the Trustee and the
Registrar. A copy of the current Regulations shall be mailed at the Company’s expense by the Registrar to
any holder of the Bonds upon written request.

5. CONVERSION
The Company will, within five Trading Days (as defined in Condition 5(A)(i)) from each Conversion
Date (as defined in Condition 5(B)(i)), issue and deliver the Common Shares, through book-entry to the
converting holder or its designee, subject to applicable law and the provisions of the Indentures and the
Agency Agreements relating to the conversion.
The Indentures provide, in summary, that the term “Common Share” or “Common Shares” means,
when used to refer to the class or classes of the Company’s capital stock into which the Bonds are convertible
and when used in certain other instances, only the Company’s common shares, NT$10 par value per share,
and does not include the Company’s global depositary shares representing the Company’s common shares,
but that when used elsewhere, including in Condition 5(C), such term also includes shares of any other class
or classes of the Company’s share capital authorized after the Issue Date that have no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary liquidation or winding-up
of the Company.

(A) Conversion Right

(i) Conversion Period

Subject to the terms set forth herein and in the Indentures, each holder of the Bonds has the right
(the “Conversion Right”) under the Indentures to convert any Bond into Common Shares. Holders of
the Bonds do not have the right to convert any Bond into the Company’s global depositary shares
representing the Common Shares. Subject to and upon compliance with the provisions of this Condition
5, the Conversion Right attaching to any Bond may be exercised, at the option of the holder of the
Bonds and to the extent provided herein, at any time (a) on or after September 20, 2010 and prior to
the close of business (at the place where such Bond is deposited for conversion) on July 31, 2015, in
the case of the 2015 Bonds, or July 31, 2017, in the case of the 2017 Bonds (or, in each case, if such
day shall not be a Conversion Business Day (as defined below) at such place, on the immediately
preceding Conversion Business Day at such place) (but in no event thereafter) or (b) if such Bond shall
have been called for redemption prior to July 31, 2015, in the case of the 2015 Bonds, or July 31, 2017,
in the case of the 2017 Bonds, then up to the close of business (at the place aforesaid) on the fifth
Conversion Business Day prior to the date fixed for redemption thereof (the “Conversion Period”);
provided, however, that the Conversion Right during any Closed Period (as defined below) shall be
suspended and the Conversion Period shall not include any such Closed Period.
The Company shall give no less than 14 days notice of the commencement of any Closed Period
to holders of the Bonds in accordance with Condition 14 and to the Trustee and all Conversion Agents
in accordance with the provisions of the relevant Indenture and the relevant Agency Agreement.
For the purposes of these Conditions:
“Closed Period” means: (i) the 60-day period prior to the date of any annual general
shareholders’ meeting of the Company; (ii) the 30-day period prior to the date of any special
shareholders’ meeting of the Company; (iii) the period beginning on the 15th Trading Day prior to the
five-day period before a record date for distribution of rights, dividends or other benefits to the date
of such record date; (iv) in the event of a capital decrease of the Company, the period beginning on the

62
record date for the capital decrease up to one day prior to the Trading Day of the shares reissued after
the capital decrease; and (v) such other periods during which the Company may be required to close
its shareholders’ register or to suspend conversion under ROC laws and regulations applicable from
time to time.
“Trading Day” means a day when the Taiwan Stock Exchange (the “TSE”) is open for trading
of securities.
For the purposes of this Condition 5:
“Conversion Business Day” means a day (other than a Saturday or Sunday) on which
commercial banks are open for business in the city in which the specified office of the relevant
Conversion Agent is located.
Pursuant to the Regulations Governing Securities Investment and Futures Trading in Taiwan by
Mainland Area Investors, or the Mainland Investors Regulations, only the Mainland area qualified
domestic institutional investors (“QDIIs”) approved by the China Securities Regulatory Commission
and registered with the TSE or Taiwan Futures Exchange, are permitted to convert the Bonds and hold
our Common Shares, and in order to hold our Shares, such QDIIs are required to appoint the agent and
custodian as required by the Mainland Investors Regulations. If the aggregate amount of our Common
Shares to be held by any QDII or our Common Shares to be received by any QDII upon single
conversion will be 10% or more of our total issued and outstanding shares, such QDII must obtain the
prior approval from the Investment Commission of the Ministry of Economic Affairs.
Under current ROC law, a non-ROC converting holder of the Bonds, before exercising his
conversion right to convert the Bonds into Common Shares, is required to register with the TSE. Under
current ROC law, a non-ROC converting holder of any Bond, when exercising its conversion right to
convert its Bond into Common Shares, is also required to obtain and appoint an agent, referred to as
a tax guarantor, in the ROC. The tax guarantor will be required to meet the qualifications set by the
ROC Ministry of Finance and will act as the guarantor of the holder’s tax payment requirements. In
addition, the holder must also appoint a local agent in the ROC with such qualifications as are set by
the ROC Financial Supervisory Commission (“FSC”). The local agent has the power to take the
following actions on behalf of and as agent for the converting holder: open a securities trading account
with a local brokerage firm and an NT Dollar bank account, pay ROC withholding taxes, make
confirmation or settlement, remit funds, exercise shareholders’ rights, and perform such other matters
as may be designated by the converting holder. In addition, such non-ROC converting Bondholder must
also appoint a custodian bank to hold the securities and any cash proceeds in safekeeping, confirm and
settle trades and report all relevant information. Without meeting these requirements, the converting
holder would not be able to receive, hold, sell or otherwise transfer the Common Shares into which the
Bonds may have been converted on the TSE or otherwise. See “Appendix B — Foreign Investment and
Exchange Controls in the ROC” and “Description of the Common Shares”.

(ii) Number of Common Shares Issuable on Conversion

The number of Common Shares issuable upon conversion of any Bond shall be determined by
dividing the principal amount of the Bond (translated into NT Dollars at a fixed exchange rate of
NT$31.83 = US$1.00, the “Fixed Exchange Rate”) by the relevant Conversion Price (as defined in
Condition 5(A)(iii)) in effect on the Conversion Date (as defined in Condition 5(B)(i)). If more than
one Bond shall be deposited for conversion at any one time by the same holder of the Bonds, the
number of Common Shares to be issued upon conversion thereof shall be calculated on the basis of the
aggregate principal amount of the Bonds so deposited. Fractions of Common Shares shall not be issued
on conversion, but cash adjustments calculated to the nearest NT Dollar shall be made in respect thereof
by the Company. Notwithstanding the foregoing, in the event of a consolidation or reclassification of
Common Shares by operation of law or otherwise that occurs after the Issue Date, the Company shall
upon conversion of the Bonds pay in US Dollars a sum equal to such portion of the principal amount
of the Bonds deposited for conversion as corresponds to any fraction of a Common Share not issued
as aforesaid if such sum exceeds US$10. For the purpose of calculating the amount of such payment,
the Company shall use the Fixed Exchange Rate.

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(iii) Initial Conversion Price
The price at which Common Shares shall be issued upon conversion of the 2015 Bonds (as
adjusted from time to time, the “2015 Conversion Price”) shall initially be NT$110.760 per Common
Share, but shall be subject to adjustment in the manner provided in Conditions 5(C) and 5(D).
The price at which Common Shares shall be issued upon conversion of the 2017 Bonds (as
adjusted from time to time, the “2017 Conversion Price”) shall initially be NT$113.955 per Common
Share, but shall be subject to adjustment in the manner provided in Conditions 5(C) and 5(D).
“Conversion Price” as used in this “Description of the Bonds” and the Indentures shall refer to
the 2015 Conversion Price or the 2017 Conversion Price, as the context requires.

(iv) Survival on Default

Notwithstanding the provisions of Condition 5(A)(i), if an Event of Default (as defined in
Condition 9) occurs, the Conversion Right attaching to a Bond shall continue to be exercisable up to
and including the close of business (at the place where the relevant Conversion Notice (as defined in
Condition 5(B)(i)) is deposited for conversion) on the date upon which (a) the full amount of the monies
payable in respect of such Bond has been duly received by the Trustee or the Principal Paying Agent
and (b) notice of such receipt has been duly given to the holders of the Bonds in accordance with
Condition 14.

(B) Conversion Procedures

(i) Exercise Procedures; Conversion Notice; Deposit Date; Conversion Date

To exercise the Conversion Right attaching to any Bond, a holder of the Bond shall deposit the
following at its own expense between 9:00 a.m. and 3:00 p.m. (local time at the specified office referred
to below) on any Conversion Business Day during the Conversion Period at the specified office of a
Conversion Agent outside the ROC:
(a) a notice of conversion (a “Conversion Notice”) in duplicate, duly completed and signed, in
the then current form obtainable from the specified office of any Conversion Agent, together
with the relevant Definitive Certificate, if issued, in respect of the relevant Bond;
(b) any certificates and other documents as may be required under the law of the ROC or the
jurisdiction in which such Conversion Agent shall be located; and
(c) any amount required to be paid by the holder of the Bond referred to in Condition 5(B)(ii)
below.
Any of the above items deposited after 3:00 p.m. as specified above or on a day that is not a
Conversion Business Day shall for all purposes be deemed to have been deposited with that Agent on
the immediately succeeding Conversion Business Day. Any of the above items deposited on the day
immediately prior to a Closed Period or during the Closed Period shall for all purposes be deemed to
have been deposited with that Agent on the first Conversion Business Day immediately after the end
of the Closed Period. The Conversion Notice shall contain, among other things: (1) contact information
of the local agent appointed by the converting holder; (2) an irrevocable instruction to convert the
Bonds into Common Shares; and (3) other information required by ROC laws and regulations. Once
deposited, the Conversion Notice may not be withdrawn without the Company’s written consent. The
price at which such Bond shall be converted shall be the relevant Conversion Price in effect on the
Conversion Date (as defined below).
The Company, or a Conversion Agent on its behalf, may reject any incomplete or incorrect
Conversion Notice or any Conversion Notice that is not accompanied by any amount payable under
Condition 5(B)(ii). All costs and expenses incurred or caused by an incomplete or incorrect Conversion
Notice shall be for the account of the relevant holder.

64
 For the purposes of these Conditions:
“Deposit Date” means the date on which (i) any Definitive Certificate, if issued, in respect of a
Bond, (ii) the duly signed and completed Conversion Notice, in duplicate, relating thereto, (iii) any
certificates or other documents, as may be required, and (iv) the payments referred to in Condition
5(B)(ii) below, as may be required, have all been deposited with a Conversion Agent.
“Conversion Date” means the first Trading Day following the Deposit Date that is not within a
Closed Period.

(ii) Taxes and Expenses

As conditions precedent to the exercise of the Conversion Right attaching to any Bond, together
with the delivery of the documents referred to in Condition 5(B)(i) above, the holder of the Bond must
pay directly to the authorities all stamp, issue, registration and similar taxes and duties, if any, arising
on conversion in the country in which the Bond is deposited for conversion or payable in any
jurisdiction upon the issue or delivery of Common Shares or any other property or cash upon
conversion to or to the order of a person other than the converting holder of the Bond. Except as
aforesaid, the Company shall pay the expenses arising in the ROC on the issue of Common Shares upon
conversion of the Bond and all charges of the Conversion Agents in connection therewith as provided
in the Agency Agreements.

(iii) Transfer of Common Shares

Subject to the Conditions and subject further to any applicable limitations then imposed by ROC
laws and regulations and the obtaining of TSE approval, if required, the Company shall procure that the
Common Shares, which are or will be listed on the TSE, shall be transferred to the local agent appointed
by the holder of Bonds or any person designated by the holder of Bonds, as soon as practicable and in
any event on a date not later than five Trading Days (or such number of Trading Days as stipulated by
relevant laws and regulations applicable from time to time) after the relevant Conversion Date, together
with any other property required to be delivered upon exchange and such assignments and other
documents (if any) as may be required by law to effect the delivery thereof.

(iv) Holder of Record

With effect from the opening of business in the ROC on the Conversion Date, the Company shall
deem the converting holder of a Bond as indicated in the Conversion Notice, or its designee, to have
become the holder of record of the number of Common Shares to be issued upon such conversion
(disregarding any retroactive adjustment of the relevant Conversion Price referred to below prior to the
time such retroactive adjustment shall have become effective). At such time, subject to Condition
5(B)(v), the rights of such converting holder with respect to the Bond deposited for conversion shall
cease, except rights arising under Condition 5(B)(vi).

(v) Delivery of Common Shares

On the Conversion Date, the Company shall register the converting holder of a Bond or its
designee, in the Company’s register of shareholders as the owner of the number of Common Shares to
be issued pursuant to Condition 5(B)(iv) upon conversion of the Bonds deposited by such holder.
Subject as set forth below and subject further to any applicable limitations then imposed by ROC laws
and regulations (including any limitation on foreign ownership of Common Shares) and the obtaining
of TSE approval, if any, in accordance with the request made in the relevant Conversion Notice, the
Company shall deliver as soon as practicable, and in any event within five Trading Days after the
Conversion Date, for the benefit of the converting holder, the following:
(a) the relevant Common Shares, through book-entry transfer to an account registered in the
name of the converting holder or its designee at Taiwan Depository & Clearing Corporation
(“TDCC”) or its successor, or, if the converting holder does not have an account with the
TDCC, the Company will settle with the converting holder after such an account has been
set up;

65
 (b) any other property or cash (including, without limitation, cash payable pursuant to
Condition 5(A)(ii)) required to be delivered upon conversion to the local agent appointed
by the converting holder; and
(c) such documents as may be required by law to effect the delivery thereof to the local agent
appointed by the converting holder.

(vi) Retroactive Adjustment of the Relevant Conversion Price

If (a) the Conversion Date in relation to any Bond falls on or after a date with effect from which
an adjustment to the relevant Conversion Price takes retroactive effect pursuant to any of the provisions
referred to in Condition 5(C) and the Indentures and (b) the relevant Conversion Date falls on a date
when the relevant adjustment has not been reflected in the relevant Conversion Price, the Company
shall, within 20 days after the date of such adjustment of the relevant Conversion Price, issue and
deliver to the local agent appointed by the converting holder of the Bond such number of Common
Shares as is equal to the excess of (1) the number of Common Shares that would have been required
to be issued on conversion of such Bond if the relevant retroactive adjustment had been made as of the
said Conversion Date over (2) the number of Common Shares previously issued pursuant to such
conversion; and in such event and in respect of such number of Common Shares, references in
Conditions 5(B)(iv) and 5(B)(v) to the Conversion Date shall be deemed to refer to the date upon which
such retroactive adjustment becomes effective, disregarding the fact that the adjustment becomes
effective retroactively. Fractions of Common Shares shall not be issued but cash adjustment to the
nearest NT Dollar shall be made in respect thereof.

(vii) Dividend and Other Entitlement

Common Shares issued on conversion of Bonds (if applicable) will in all respects rank pari passu
with the Common Shares in issue on the relevant Conversion Date (except for any right the record date
for which precedes such Conversion Date and except for any other right excluded by mandatory
provisions of applicable law).
The converting holder shall be entitled to the Company’s annual dividends on the Common Shares
issuable upon conversion of the Bonds deposited by such holder if the Conversion Date falls prior to
the 15th Trading Day before the record date for determining the identity of shareholders who are
entitled to such dividend distributions.

(viii) Conversion Agents

The Company reserves the right, subject to the provisions of the Agency Agreements, at any time,
to vary or terminate the appointment of any Conversion Agent and to appoint other Conversion Agents;
provided that the Company shall at all times maintain Conversion Agents having specified offices in
London. Notice of any such termination or appointment and of any changes in the specified offices of
the Conversion Agents shall be given promptly by the Company to the holders of the Bonds in
accordance with Condition 14 and to the Trustee in accordance with the Indentures.

(ix) Satisfaction of the Company’s Obligations

The Company’s delivery to the converting Bondholder of the number of Common Shares into
which such converting Bondholder’s Bonds are convertible will be deemed to satisfy the Company’s
obligation to pay the principal and premium (if any) of the Bonds at maturity, upon redemption or
acceleration in accordance with the Indentures.
The Company has certain disclosure obligations and reporting obligations under ROC law and
regulation if
(a) the person to be registered as a shareholder is a “related party” of the Company under
Statements of Financial Accounting Standard No. 6 of the ROC and such person beneficially
owns Common Shares converted from the Bonds; or

66
 (b) the person to be registered as shareholder will hold, immediately following such conversion,
more than 10% of the total number of the Common Shares issuable upon the conversion of
the aggregate principal amount of the 2015 Bonds or 2017 Bonds, as the case may be, at
the time of issue.
The information that the holders of the Bonds are required to provide includes the name and
nationality of the person to be registered as shareholder and the total number of Common Shares such
person has or will receive in connection with the Bonds such person is converting or has converted in
the past.

(C) Adjustments to Conversion Price

Each of the 2015 Conversion Price and the 2017 Conversion Price shall be subject to adjustment as
follows (each such adjustment, an “Anti-dilution Adjustment”):

(i) Free Distribution and Bonus Issue of Common Shares and Declaration of Dividend in Common
Shares:
If the Company shall (a) make a free distribution of Common Shares, (b) make a bonus issue of
its Common Shares (excluding Common Shares issued pursuant to any employee stock bonus or
profit-sharing arrangements described in Condition 5(C)(ix)) or (c) declare a dividend in Common
Shares, then the Conversion Price shall be adjusted in accordance with the following formula:
NCP = OCP x [N/(N+n)]
where:
NCP = the Conversion Price after such adjustment.
OCP = the Conversion Price in effect (1) on the date when such distribution, bonus issue or
dividend is declared or (2) on the relevant record date (if the Company has fixed a
prior record date for the determination of shareholders entitled to receive any such
distribution, bonus issue or dividend).
N = the number of Common Shares outstanding (having regard to Condition 5(C)(xvi)) (1)
at the time of issuance of such dividend or bonus issue or distribution or (2) at the
close of business in the ROC on the relevant record date, as the case may be.
n = the number of Common Shares to be distributed to shareholders as a dividend, bonus
issue or distribution.
No account is to be taken of, or credit given for, the par value of Common Shares issued in a
dividend in Common Shares in calculating the appropriate conversion price adjustment, so that the full
dilutive effect is provided for.
Effective date of adjustment: An adjustment made pursuant to this Condition 5(C)(i) shall become
effective immediately on the relevant event referred to in this Condition 5(C)(i) becoming effective or,
if a record date is fixed therefor, immediately after such record date; provided that in the case of a free
distribution or bonus issue of Common Shares or dividend in Common Shares which must, under
applicable laws of the ROC, be submitted for approval to a general meeting of shareholders or be
approved by a meeting of the board of directors of the Company before being legally paid or made, and
which is so approved after the record date fixed for the determination of shareholders entitled to receive
such distribution, bonus issue or dividend, such adjustment shall, immediately upon such approval
being given by such meeting, become effective retroactively to immediately after such record date.

(ii) Division, Consolidation and Reclassification of Common Shares:

If the Company shall (a) divide its outstanding Common Shares, (b) consolidate its outstanding
Common Shares into a smaller number of Common Shares, or (c) re-classify any of its Common Shares
into other securities of the Company, then each Conversion Price shall be appropriately adjusted so that
the holder of any Bond, the Conversion Date in respect of which occurs after the coming into effect of
the adjustment described in this Condition 5(C)(ii), shall be entitled to receive on exercise of the

67
Conversion Right the number of Common Shares and/or other securities of the Company which he
would have held or have been entitled to receive after the happening of any of the events described
above had such Bond been converted immediately prior to the happening of such event (or, if the
Company has fixed a prior record date for the determination of shareholders entitled to receive any such
free distribution or bonus issue of Common Shares or other securities issued upon any such division,
consolidation or reclassification, immediately prior to such record date), but without prejudice to the
effect of any other adjustment to the Conversion Price made with effect from the date of the happening
of such event (or such record date) or any time thereafter.
For the avoidance of doubt, in the event the Company shall divide its outstanding Common
Shares, the Conversion Price shall be adjusted in accordance with the following formula:
NCP = OCP x [N/(N+n)]
where:
NCP = the Conversion Price after such adjustment.
OCP = the Conversion Price in effect (1) at the time such division occurs or (2) on the
relevant record date for determining the Common Shares subject to such division.
N = the number of Common Shares outstanding (having regard to Condition 5(C)(xvi)) (1)
at the time of such division or (2) at the close of business in the ROC on the relevant
record date, as the case may be.
n = the number of Common Shares outstanding after such division.
Effective date of adjustment: An adjustment made pursuant to this Condition 5(C)(ii) shall become
effective immediately on the relevant event referred to in this Condition 5(C)(ii) becoming effective or,
if a record date is fixed therefor, immediately after such record date; provided that in the case of a
division, consolidation or reclassification of Common Shares which must, under applicable laws of the
ROC, be submitted for approval to a general meeting of shareholders or be approved by a meeting of
the board of directors of the Company before being legally paid or made, and which is so approved after
the record date fixed for the determination of shareholders entitled to receive such distribution or bonus
issue of Common Shares or other securities issued upon such consolidation or reclassification, such
adjustment shall, immediately upon such approval being given by such meeting, become effective
retroactively to immediately after such record date.

(iii) Concurrent Adjustment Events:

If the Company shall declare a dividend in, or make a free distribution or bonus issue of, Common
Shares, which dividend, distribution or issue is to be paid or made to shareholders as of a record date
which is also:
(a) the record date for the issue of any rights or warrants which requires an adjustment of the
Conversion Price pursuant to Condition 5(C)(iv), 5(C)(v) or 5(C)(vi);
(b) the day immediately before the date of issue of any securities convertible into or
exchangeable for Common Shares which requires an adjustment of the Conversion Price
pursuant to Condition 5(C)(viii);
(c) the day immediately before the date of issue of any Common Shares which requires an
adjustment of the Conversion Price pursuant to Condition 5(C)(ix) or (if applicable) the
record date for the determination of stock dividend entitlement as referred to in Condition
5(C)(ix);
(d) the day immediately before the date of issue of any rights, options or warrants which
requires an adjustment of the Conversion Price pursuant to Condition 5(C)(x); or
(e) determined by the Company and notified by the Company to the Trustee in writing to be the
relevant date for an event or circumstance which requires an adjustment to the Conversion
Price pursuant to Condition 5(C)(xii),

68
then (except where such dividend, free distribution or bonus issue gives rise to a retroactive adjustment
of the Conversion Price under Condition 5(C)(i)) no adjustment of the Conversion Price in respect of
such dividend, free distribution or bonus issue shall be made under Condition 5(C)(i), but in lieu thereof
an adjustment shall be made under Condition 5(C)(iv), 5(C)(v), 5(C)(vi), 5(C)(viii), 5(C)(ix) or 5(C)(x)
(as the case may require) by including in the denominator of the fraction described therein the aggregate
number of Common Shares to be issued pursuant to such dividend, free distribution or bonus issue.

(iv) Rights Issues to Shareholders:

If the Company shall grant, issue or offer to the holders of Common Shares rights entitling them
to subscribe for or purchase Common Shares (a “Rights Issue”, which expression shall include those
Common Shares which are required to be offered to employees and persons other than shareholders in
connection with such grant, issue or offer):
(a) at a consideration per Common Share receivable by the Company (determined as provided
in Condition 5(C)(xv)) which is fixed on or prior to the record date mentioned below and
is less than the Current Market Price (as defined in Condition 5(C)(xiv)) per Common Share
at such record date; or
(b) at a consideration per Common Share receivable by the Company which is fixed after the
record date mentioned below and is less than the Current Market Price per Common Share
on the date the Company fixes the said consideration,
then the Conversion Price in effect (in a case within (a) above) on the record date for the determination
of shareholders entitled to receive such rights or (in a case within (b) above) on the date the Company
fixes the said consideration shall be adjusted in accordance with the following formula:
NCP = OCP x [(N+v)/(N+n)]
where:
NCP = the Conversion Price after such adjustment.
OCP = the Conversion Price before such adjustment.
N = the number of Common Shares outstanding (having regard to Condition 5(C)(xvi)) at
the close of business in the ROC (in a case within (a) above) on such record date or
(in a case within (b) above) on the date the Company fixes the said consideration.
n = the number of Common Shares issued pursuant to the Rights Issue at the said
consideration.
v = the number of Common Shares which the aggregate consideration receivable by the
Company (determined as provided in Condition 5(C)(xv)) would purchase at such
Current Market Price per Common Share specified in (a) or, as the case may be, (b)
above.
Effective date of adjustment: Subject as provided below, such adjustment shall become effective
immediately upon the issue of Common Shares pursuant to the Rights Issue but retroactively to
immediately after the record date mentioned above.

(v) Warrants Issued to Shareholders:

If the Company shall grant, issue or offer to the holders of Common Shares warrants entitling
them to subscribe for or purchase Common Shares:
(a) at a consideration per Common Share receivable by the Company (determined as provided
in Condition 5(C)(xv)) which is fixed on or prior to the record date for the determination
of shareholders entitled to receive such warrants and is less than the Current Market Price
per Common Share at such record date; or

69
 (b) at a consideration per Common Share receivable by the Company which is fixed after the
record date mentioned above and is less than the Current Market Price per Common Share
on the date the Company fixes the said consideration,
then the Conversion Price in effect (in a case within (a) above) on the record date for the determination
of shareholders entitled to receive such warrants or (in a case within (b) above) on the date the
Company fixes the said consideration shall be adjusted in accordance with the following formula:

NCP = OCP x [(N+v)/(N+n)]

where:

NCP and OCP have the meanings ascribed thereto in Condition 5(C)(iv) above.
N = the number of Common Shares outstanding (having regard to Condition 5(C)(xvi)) at
the close of business in the ROC (in a case within (a) above) on such record date or
(in a case within (b) above) on the date the Company fixes the said consideration.

n = the number of Common Shares to be issued upon exercise of such warrants at the said
consideration which, where no applications by shareholders entitled to such warrants
are required, shall be based on the number of warrants issued. Where applications by
shareholders entitled to such warrants are required, the number of such Common
Shares shall be calculated based upon (aa) the number of warrants which underwriters
have agreed to underwrite as referred to below or, as the case may be, (bb) the number
of warrants for which applications are received from shareholders as referred to below
save to the extent already adjusted for under (aa).
v = the number of Common Shares which the aggregate consideration receivable by the
Company (determined as provided in Condition 5(C)(xv)) would purchase at such
Current Market Price per Common Share specified in (a) or, as the case may be, (b)
above.

Effective date of adjustment: Subject as provided below, such adjustment shall become effective
(i) where no applications for such warrants are required from shareholders entitled to the same, upon
their issue and (ii) where applications by shareholders entitled to the same are required as aforesaid,
immediately after the latest date for the submission of such applications or (if later) immediately after
the Company fixes the said consideration but in all cases retroactively to immediately after the record
date mentioned above.
Warrants not subscribed for by shareholders: If, in connection with a grant, issue or offer to the
holders of Common Shares of warrants entitling them to subscribe for or purchase Common Shares in
the circumstances described in (a) and (b) of this Condition 5(C)(v), any warrants which are not
subscribed for or purchased by the shareholders entitled thereto are underwritten by others prior to the
latest date for the submission of applications for such warrants, an adjustment shall be made to the
Conversion Price in accordance with the above provisions which shall become effective immediately
after the date the underwriters agree to underwrite the same or (if later) immediately after the Company
fixes the said consideration but retroactively to immediately after the record date mentioned above.

If, in connection with a grant, issue or offer to the holders of Common Shares of warrants entitling
them to subscribe for or purchase Common Shares, any warrants which are not subscribed for or
purchased by the underwriters who have agreed to underwrite as referred to above or by the
shareholders entitled thereto (or persons to whom shareholders have transferred the right to purchase
such warrants) who have submitted applications for such warrants as referred to above are offered to
and/or subscribed by others, no further adjustment shall be made to the Conversion Price by reason of
such offer and/or subscription.

70
(vi) Issues of Rights or Warrants for Equity-Related Securities to Shareholders:
If the Company shall grant, issue or offer to the holders of Common Shares rights or warrants
entitling them to subscribe for or purchase any securities convertible into or exchangeable for Common
Shares:
(a) at a consideration per Common Share receivable by the Company (determined as provided
in Condition 5(C)(xv)) which is fixed on or prior to the record date mentioned below and
is less than the Current Market Price per Common Share at such record date; or
(b) at a consideration per Common Share receivable by the Company (determined as aforesaid)
which is fixed after the record date mentioned below and is less than the Current Market
Price per Common Share on the date the Company fixes the said consideration,
then the Conversion Price in effect (in a case within (a) above) on the record date for the determination
of shareholders entitled to receive such rights or warrants or (in a case within (b) above) on the date
the Company fixes the said consideration shall be adjusted in accordance with the following formula:
NCP = OCP x [(N+v)/(N+n)]
where:
NCP and OCP have the meanings ascribed thereto in Condition 5(C)(iv) above.
N = the number of Common Shares outstanding (having regard to Condition 5(C)(xvi)) at
the close of business in the ROC (in a case within (a) above) on such record date or
(in a case within (b) above) on the date the Company fixes the said consideration.
n = the number of Common Shares initially to be issued upon exercise of such rights or
warrants and conversion or exchange of such convertible or exchangeable securities
at the said consideration being, in the case of rights, (aa) the number of Common
Shares initially to be issued upon conversion or exchange of the number of such
convertible or exchangeable securities which the underwriters have agreed to
underwrite as referred to below or, as the case may be, (bb) the number of Common
Shares initially to be issued upon conversion or exchange of the number of such
convertible or exchangeable securities for which applications are received from
shareholders as referred to below save to the extent already adjusted for under (aa) and
which, in the case of warrants, where no applications by shareholders entitled to such
warrants are required, shall be based on the number of warrants issued. Where
applications by shareholders entitled to such warrants are required, the number of such
Common Shares shall be calculated based upon (x) the number of warrants which
underwriters have agreed to underwrite as referred to below or, as the case may be, (y)
the number of warrants for which applications are received from shareholders as
referred to below save to the extent already adjusted for under (x).
v = the number of Common Shares which the aggregate consideration receivable by the
Company (determined as provided in Condition 5(C)(xv)) would purchase at such
Current Market Price per Common Share specified in (a) or, as the case may be, (b)
above.
Effective date of adjustment: Subject as provided below, such adjustment shall become effective
(a) where no applications for such warrants are required from shareholders entitled to the same, upon
their issue and (b) where applications by shareholders entitled to the warrants are required as aforesaid
and in the case of convertible or exchangeable securities by shareholders entitled to the same pursuant
to such rights, immediately after the latest date for the submission of such applications or (if later)
immediately after the Company fixes the said consideration; but in all cases retroactively to
immediately after the record date mentioned above.

71
 Rights or warrants not taken up by shareholders: If, in connection with a grant, issue or offer to
the holders of Common Shares of rights or warrants entitling them to subscribe for or purchase
securities convertible into or exchangeable for Common Shares in the circumstances described in this
Condition 5(C)(vi), any convertible or exchangeable securities or warrants which are not subscribed for
or purchased by the shareholders entitled thereto are underwritten by others prior to the latest date for
the submission of applications for such convertible or exchangeable securities or warrants, an
adjustment shall be made to the Conversion Price in accordance with the above provisions which shall
become effective immediately after the date the underwriters agree to underwrite the same or (if later)
immediately after the Company fixes the said consideration but retroactively to immediately after the
record date mentioned above.
If, in connection with a grant, issue or offer to the holders of Common Shares or of rights or
warrants entitling them to subscribe for or purchase securities convertible into or exchangeable for
Common Shares, any convertible or exchangeable securities or warrants which are not subscribed for
or purchased by the underwriters who have agreed to underwrite as referred to above or by the
shareholders entitled thereto (or persons to whom shareholders have transferred such rights or the right
to purchase such warrants) who have submitted applications for such convertible or exchangeable
securities or warrants as referred to above are offered to and/or subscribed by others, no further
adjustment shall be made to the Conversion Price by reason of such offer and/ or subscription.

(vii) Capital Distribution:

If the Company shall pay or make to its shareholders any Capital Distribution (as defined below)
consisting in whole or in part of assets other than cash, then the Conversion Price shall be adjusted in
accordance with the following formula:
NCP = OCP x [(CMP-fmv)/CMP]
where:
NCP and OCP have the meanings ascribed thereto in Condition 5(C)(iv).
CMP = the Current Market Price per Common Share on the record date for the determination
of shareholders entitled to receive the Capital Distribution.
fmv = the aggregate fair market value on the date of such announcement, as determined in
good faith by a leading independent investment bank of international repute selected
by the Company and acting as an expert, of the portion of the Capital Distribution
attributable to one Common Share.
If the Company shall pay or make to its shareholders any Capital Distribution in cash only then,
in such case, the Conversion Price shall be adjusted in accordance with the following formula:
NCP = OCP x [(M-C)/M]
where:
NCP and OCP shall have the meanings ascribed thereto in Condition 5(C)(iv).
M = the Current Market Price per Common Share on such record date.
C = the amount of Capital Distribution in cash so distributed, applicable to one Common
Share, provided that with respect to any purchases of Capital Stock by the Company,
C shall be equal to the excess of the price per Common Share paid by the Company
over the then current trading price per Common Share on the TSE on the applicable
Trading Day.
Effective date of adjustment: Any adjustment required by a Capital Distribution shall become
effective immediately after the record date for the determination of shareholders entitled to receive such
Capital Distribution; provided that (a) in the case of such a Capital Distribution which must, under
applicable law of the ROC, be submitted for approval to a general meeting of shareholders or be
approved by a meeting of the Board of Directors of the Company before such Capital Distribution may
legally be made and is so approved after the record date fixed for the determination of shareholders

72
entitled to receive such Capital Distribution, such adjustment shall, immediately upon such approval
being given by such meeting, become effective retroactively to immediately after such record date and
(b) if the fair market value of such Capital Distribution cannot be determined until the record date fixed
for the determination of shareholders entitled to receive such Capital Distribution, such adjustment
shall, immediately upon such fair market value being determined, become effective retroactively to
immediately after such record date.
For the purposes of this Condition 5(C)(vii):
“Capital Distribution” means any cash dividend, distribution of cash, distribution of assets in
specie or other property (whenever paid or made and however described) or payment on redemption,
or for the purchase of, Capital Stock of the Company made by the Company for any fiscal year,
provided that with respect to any purchases of Capital Stock by the Company, it shall not be a Capital
Distribution where the price per Common Share paid by the Company does not exceed the then current
trading price per Common Share on the TSE on the applicable Trading Day.
“Capital Stock” means, with respect to the Company, any and all shares, interests, participation
or other equivalents (however designated), including all common stock and all preferred stock of the
Company.

(viii) Issue of Convertible or Exchangeable Securities Other than to Shareholders or on Exercise of

Warrants:
If the Company shall issue any securities initially convertible into or exchangeable for Common
Shares (other than the Bonds, or in any of the circumstances described in Condition 5(C)(vi) and
Condition 5(C)(x)), and the consideration per Common Share receivable by the Company (determined
as provided in Condition 5(C)(xv)) shall be less than the Current Market Price per Common Share on
the date in the ROC on which the Company fixes the said consideration (or, if the issue of such
securities is subject to approval by a general meeting of shareholders, on the date on which the Board
of Directors of the Company fixes the consideration to be recommended at such meeting), then the
Conversion Price in effect immediately prior to the date of issue of such convertible or exchangeable
securities shall be adjusted in accordance with the following formula:
NCP = OCP x [(N+v)/(N+n)]
where:
NCP and OCP have the meanings ascribed thereto in Condition 5(C)(iv).
N = the number of Common Shares outstanding (having regard to Condition 5(C)(xvi)) at
the close of business in the ROC on the day immediately prior to the date of such
issue.
n = the number of Common Shares to be issued upon conversion or exchange of such
convertible or exchangeable securities at the initial conversion or exchange price or
rate.
v = the number of Common Shares which the aggregate consideration receivable by the
Company (determined as provided in Condition 5(C)(xv)) would purchase at such
Current Market Price per Common Share.
Effective date of adjustment: Such adjustment shall become effective as of the calendar day in the
ROC corresponding to the calendar day at the place of issue on which such convertible or exchangeable
securities are issued.

(ix) Other Issues of Common Shares:

If the Company shall issue any Common Shares, including, without limitation, in exchange for
shares of another company, as consideration for a merger or pursuant to any employee stock bonus or
profit sharing arrangements (but other than Common Shares issued upon conversion or exchange of any
convertible or exchangeable securities (including the Bonds) issued by the Company or upon exercise
of any rights or warrants granted, offered or issued by the Company or in any of the circumstances

73
described in Conditions 5(C)(i) and 5(C)(ii)) for a consideration per Common Share receivable by the
Company (determined as provided in Condition 5(C)(xv)) less than the Current Market Price per
Common Share on the date in the ROC on which the Company fixes the said consideration (or, if the
issue of such Common Shares is subject to approval by a general meeting of shareholders, on the date
on which the Board of Directors of the Company fixes the consideration to be recommended at such
meeting), then the Conversion Price in effect immediately prior to the issue of such additional Common
Shares shall be adjusted in accordance with the following formula:
NCP = OCP x [(N+v)/(N+n)]
where:
NCP and OCP have the meanings ascribed thereto in Condition 5(C)(iv) above.
N = the number of Common Shares outstanding (having regard to Condition 5(C)(xvi)) at
the close of business in the ROC on the day immediately prior to the date of issue of
such additional Common Shares.
n = the number of additional Common Shares issued as aforesaid.
v = the number of Common Shares which the aggregate consideration receivable by the
Company (determined as provided in Condition 5(C)(xv)) would purchase at such
Current Market Price per Common Share.
Effective date of adjustment: Such adjustment shall become effective as of the calendar day in the
ROC of the issue of such additional Common Shares or, in the case of (i) an issue to employees under
any employee stock bonus or profit sharing arrangements, where such an issue is announced at the same
time as a stock dividend, such adjustment shall become effective as of the record date for determination
of the identity of the shareholders entitled to receive any such dividend, (ii) a merger, such adjustment
shall become effect as of the record date of such merger, or (iii) a share exchange, such adjustment shall
become effect as of the record date of such share exchange.

(x) Issue of Equity-Related Securities:

If the Company shall grant, issue or offer options, warrants or rights (excluding those rights and
warrants referred to in Conditions 5(C)(iv), 5(C)(v) and 5(C)(vi) to subscribe for or purchase Common
Shares or securities convertible into or exchangeable for Common Shares and the consideration per
Common Share receivable by the Company (determined as provided in Condition 5(C)(xv)) shall be
less than the Current Market Price per Common Share on the date in the ROC on which the Company
fixes the said consideration (or, if the offer, grant or issue of such rights, options or warrants is subject
to approval by a general meeting of shareholders, on the date on which the Board of Directors of the
Company fixes the consideration to be recommended at such meeting), then the Conversion Price in
effect immediately prior to the date of the offer, grant or issue of such rights, options or warrants shall
be adjusted in accordance with the following formula:
NCP = OCP x [(N+v)/(N+n)]
where:
NCP and OCP have the meanings ascribed thereto in Condition 5(C)(iv) above.
N = the number of Common Shares outstanding (having regard to Condition 5(C)(xvi)) at
the close of business in the ROC on the day immediately prior to the date of such
issue.
n = the number of Common Shares to be issued on exercise of such rights or warrants and
(if applicable) conversion or exchange of such convertible or exchangeable securities
at the said consideration.
v = the number of Common Shares which the aggregate consideration receivable by the
Company (determined as provided in Condition 5(C)(xv)) would purchase at such
Current Market Price per Common Share.

74
 Effective date of adjustment: Such adjustment shall become effective as of the calendar day in the
ROC corresponding to the calendar day at the place of issue on which such rights or warrants are issued.

(xi) Capital Reduction

Upon a capital reduction by the Company (other than by means of cancelling any Common Shares
repurchased by us as treasury shares or by means of cancelling any Common Shares and returning
capital in cash to shareholders) then the Conversion Price shall be adjusted in accordance with the
following formula:
NCP = OCP x [N/n]
where:
NCP and OCP have the meanings ascribed thereto in Condition 5(C)(iv) above.
N = the number of Common Shares outstanding immediately prior to the record date for
such capital reduction
n = the number of Common Shares outstanding immediately after the record date for such
capital reduction
For the avoidance of doubt, no adjustment to the Conversion Price under this Condition 5(C)(xi)
will be required if we cancel any Common Shares repurchased by us as treasury shares or if we
repurchase any Common Shares for the purposes of transferring to the employees or for conversion by
holders of the convertible bonds issued by us.
Such adjustment shall become effective on the record date of such capital reduction.

(xii) Analogous Events and Modifications:

If (a) the rights of conversion or exchange, purchase or subscription attaching to any options,
rights or warrants to subscribe for or purchase Common Shares or any securities convertible into or
exchangeable for, or which carry rights to subscribe for or purchase Common Shares, are modified
(other than pursuant to and as provided in the terms and conditions of such options, rights, warrants or
securities) or (b) the Company determines or written notice has been given to the Trustee that any other
event or circumstance has occurred which has or would have an effect on the position of the holders
of the Bonds as a class compared with the position of the holders of all the securities (and options and
rights relating thereto) of the Company, taken as a class which is analogous to any of the events referred
to in Conditions 5(C)(i) to 5(C)(xi), then, in any such case, the Company shall notify the Trustee thereof
or if the Trustee has been notified under (b), the Trustee shall notify the Company thereof and the
Company shall consult with a leading independent investment bank of international repute selected by
the Company as to what adjustment, if any, should be made to the Conversion Price (and the timing of
any such adjustment) to preserve the value of the Conversion Right and will make any such adjustment.

(xiii) Simultaneous Issues of Different Classes of Common Shares:

In the event of simultaneous issues of two or more classes of share capital comprising Common
Shares or rights or warrants in respect of, or securities convertible into or exchangeable for, two or more
classes of share capital comprising Common Shares, then, for the purposes of this Condition 5(C)(xiii),
the formula:
NCP = OCP x ((N+v)/(N+n))
shall be restated as:
NCP = OCP x [(N+v1+v2+v3)/(N+n1+n2+n3)]

where v1 and n1 shall have the same meanings as “v” and “n” but by reference to one class of Common
Shares, v2 and n2 shall have the same meanings as “v” and “n” but by reference to a second class of
Common Shares, v3 and n3 shall have the same meanings as “v” and “n” but by reference to a third
class of Common Shares and so on.

75
(xiv) Current Market Price Per Common Share:
For the purpose of these Conditions, the “Current Market Price”, in relation to the Common
Shares, for any date means the arithmetic average of the Closing Prices (as defined below) of the
relevant Common Shares for the 30 consecutive Trading Days commencing 45 Trading Days before
such date; provided, however, if no Closing Price is available for one or more Trading Days, such day
or days shall be disregarded in any relevant calculation and shall be deemed not to have existed when
ascertaining any period of consecutive Trading Days.
If the Company has more than one class of share capital comprising Common Shares, then the
relevant Current Market Price for Common Shares shall be the price for that class of Common Shares
the issue of which (or of rights or warrants in respect of, or securities convertible into or exchangeable
for, that class of Common Shares) gives rise to the adjustment in question.
If during the said 45 Trading Days or any period thereafter up to but excluding the date as of
which the adjustment of the Conversion Price in question shall be effected, any event (other than the
event which requires the adjustment in question) shall occur which gives rise to a separate adjustment
to the Conversion Price under the provisions of these Conditions, then the Current Market Price as
determined above shall be adjusted in such manner and to such extent as a leading independent
investment bank of international repute selected by the Company shall deem appropriate and fair to
compensate for the effect thereof.
For the purpose of these Conditions, “Closing Price”, in relation to the Common Shares, for each
Trading Day means the last reported transaction price or, if no transaction takes place on such day, the
last available reported transaction price of the Common Shares on the TSE in effect on the Trading Day
immediately preceding such day or, if the Common Shares are not at that time listed or admitted to
trading on the TSE, the average of the closing bid and offered prices of the Common Shares for such
day as furnished by a leading independent securities firm licensed to trade on the TSE selected by the
Company for that purpose.

(xv) Consideration Receivable by the Company:

For the purposes of any calculation of the consideration receivable by the Company pursuant to
Condition 5(C), the following provisions shall be applicable:
(a) in the case of the issue of Common Shares for cash, the consideration shall be the amount
of such cash, provided that in no such case shall any deduction be made for any
commissions or any expenses paid or incurred by the Company for any underwriting of the
issue or otherwise in connection therewith;
(b) in the case of the issue of Common Shares for a consideration in whole or in part other than
cash, the consideration other than cash shall be the net value per share calculated based on
the latest audited or reviewed financial statements prior to the record date of merger or share
exchange, as the case may be, times share exchange ratio or, if pursuant to applicable law
of the ROC such determination is to be made by application to a court of competent
jurisdiction, as determined by such court or an appraiser appointed by such court,
irrespective of the accounting treatment thereof;
(c) in the case of the issue (whether initially or upon the exercise of rights or warrants) of
securities convertible into or exchangeable for Common Shares, the aggregate consideration
receivable by the Company shall be deemed to be the consideration received by the
Company for such securities and (if applicable) rights or warrants plus the additional
consideration (if any) to be received by the Company upon (and assuming) the conversion
or exchange of such securities at the initial conversion or exchange price or rate and (if
applicable) the exercise of such rights or warrants at the initial subscription or purchase
price (the consideration in each case to be determined in the same manner as provided in
(a) and (b) above) and the consideration per Common Share receivable by the Company

76
 shall be such aggregate consideration divided by the number of Common Shares to be issued
upon (and assuming) such conversion or exchange at the initial conversion or exchange
price or rate and (if applicable) the exercise of such rights or warrants at the initial
subscription or purchase price;
(d) in the case of the issue of rights or warrants to subscribe for or purchase Common Shares,
the aggregate consideration receivable by the Company shall be deemed to be the
consideration received by the Company for any such rights or warrants plus the additional
consideration to be received by the Company upon (and assuming) the exercise of such
rights or warrants at the initial subscription or purchase price (the consideration in each case
to be determined in the same manner as provided in (a) and (b) above) and the consideration
per Common Share receivable by the Company shall be such aggregate consideration
divided by the number of Common Shares to be issued upon (and assuming) the exercise
of such rights or warrants at the initial subscription or purchase price;
(e) if any of the consideration referred to in any of the preceding paragraphs of this Condition
5(C)(xv) is receivable in a currency other than NT Dollars, such consideration shall (in any
case where there is a fixed rate of exchange between the NT Dollar and the relevant
currency for the purposes of the issue of the Common Shares, the conversion or exchange
of such securities or the exercise of such rights or warrants) be translated into NT Dollars
for the purposes of this Condition 5(C)(xv) at such fixed rate of exchange and shall (in all
other cases) be translated into NT Dollars at the mean of the exchange rate quotations (being
quotations for the cross rate through US Dollars if no direct rate is quoted) by a leading bank
in the ROC for buying and selling spot units of the relevant currency by telegraphic transfer
against NT Dollars on the date as of which the said consideration is required to be calculated
as aforesaid;
(f) in the case of the issue of Common Shares (other than to employees under any employee
stock bonus or profit sharing arrangements) credited as fully paid out of retained earnings
or capitalization or reserves at their par value, the aggregate consideration receivable by the
Company shall be deemed to be zero (and accordingly the number of Common Shares which
such aggregate consideration receivable by the Company could purchase at the relevant
Current Market Price per Common Share shall also be deemed to be zero) and in the event
of a free distribution of shares or stock splits, the aggregate consideration receivable by the
Company shall be deemed to be zero; and
(g) in the case of the issue of Common Shares to employees under any employee stock bonus
or profit sharing arrangements, the aggregate consideration receivable by the Company shall
be deemed to be the number of Common Shares issued multiplied by the closing price of
the Common Shares on the TSE on the date immediately prior to the date of the
shareholders’ meeting approving such issuance.

(xvi) Cumulative Adjustments:

If, at the time of computing an adjustment (the “later adjustment”) of the Conversion Price
pursuant to any of Conditions 5(C)(i), 5(C)(iv), 5(C)(v), 5(C)(viii), 5(C)(ix) and 5(C)(x), the
Conversion Price already incorporates an adjustment made (or taken or to be taken into account
pursuant to the proviso to Condition 5(C)(xvii)) to reflect an issue of Common Shares or of securities
convertible into or exchangeable for Common Shares or of rights or warrants to subscribe for or
purchase Common Shares or securities, to the extent that the number of such Common Shares or
securities taken into account for the purposes of calculating such adjustment exceeds the number of
such Common Shares in issue at the time relevant for ascertaining the number of outstanding Common
Shares for the purposes of computing the later adjustment, such excess Common Shares shall be
deemed to be outstanding for the purposes of making such computation.

77
(xvii) Minor Adjustments:
No adjustment of any Conversion Price will be made where such adjustment would be less than
1% of the relevant Conversion Price then in effect; provided, however, that any adjustment that by
reason of this Condition 5(C)(xvii) is not required to be made will be carried forward and taken into
account (as if such adjustment had been made at the time when it would have been made but for the
provision of this Condition 5(C)(xvii)) in determining any subsequent adjustment. Except as otherwise
described below, each Conversion Price may at any time be reduced by the Company.

(xviii) Minimum Conversion Price:

Notwithstanding the provisions of this Condition 5(C), each Conversion Price shall not be
reduced below the par value of the Common Shares (NT$10 at the date hereof) as a result of any
adjustment made hereunder, unless, under applicable law then in effect, the Bonds could be converted
at such reduced Conversion Price into legally issued, fully paid and non-assessable Common Shares.

(xix) Reference to “Fixed”:

Any references in this Condition 5(C) to the date on which a consideration is “fixed” shall, where
the consideration is originally expressed by reference to a formula which cannot be expressed as an
actual cash amount until a later date, be construed as a reference to the first day on which such actual
cash amount can be ascertained.

(xx) Trustee and Agents not Obliged to Monitor:

The Trustee and the Agents shall not be under any duty to monitor whether any event or
circumstance has occurred or exists that might fall within this Condition 5(c) and shall not be
responsible to the Bondholders for any loss arising from any failure by them to do so.

(xxi) Calculations:
All calculations relating to adjustment of the relevant Conversion Price shall be performed by the
Company. All calculations under this Condition 5(C) shall be made to the nearest .001 of a share of
securities or other property or nearest cent of a dollar, as the case may be. If any doubt shall arise as
to the appropriate adjustment to the Conversion Price, a certificate from a leading independent
investment bank of international repute selected by the Company shall be conclusive and binding on
all concerned save in the case of manifest error.

(xxii) Certification to Trustee:

The Company shall send to the Trustee a certificate setting out the particulars relating to each
adjustment of the Conversion Price in accordance with the Indentures. The Company shall also cause
a notice containing the same information to be given to Holders.

(xxiii) Treasury Shares:

In determining the number of Common Shares outstanding under this Condition 5(C), any
treasury share purchased by the Company, which has not been cancelled, shall be excluded in such
determination. No adjustment shall be made to the Conversion Price under this Condition 5(C) upon
the cancellation of any treasury shares held by it in accordance with ROC laws and regulations.

(D) Conversion Undertakings

(i) Listing of the Common Shares:

The Company will use its best efforts to ensure that it maintains a listing for all Common Shares,
including the Common Shares issued upon conversion of the Bonds, on the TSE.

78
 (ii) Closed Periods:
The Company undertakes to ensure (to the extent of any discretion it has in respect of the length
of any Closed Period) that any Closed Period is for as short a period as is reasonably practicable having
regard to applicable laws, regulations and practices.

(iii) Notice:
In the event of an adjustment to either Conversion Price in accordance with this Condition 5, the
holders of the relevant series of Bonds will be notified in accordance with Condition 14.

(iv) Protection of Conversion Rights:

The Company has also given certain other undertakings in the Indentures for the protection of the
Conversion Rights.

6. PAYMENTS

(A) Manner of Payment

Payment in respect of a Bond shall be made (i) by transfer to the registered account of the holder of
the Bond or (ii) if such holder does not have a registered account, by a US Dollar check drawn on a bank
in New York City mailed to its registered address. Payments of principal, interest (if any) and premium (if
any), however, under a Bond represented by a Definitive Certificate shall only be made after surrender of the
relevant certificate at the specified office of an Agent.
References in these Conditions, the Indentures and the Agency Agreements to payment in respect of a
Bond shall, where the context so permits, be deemed to include not only a reference to the principal but also
to any premium, interest, Additional Amounts (as defined in Condition 8) and other amounts payable thereon.

(B) Registered Account and Address

The registered account and address of a holder of the Bonds means its US Dollar account maintained
by or on behalf of it with a bank in New York City and address appearing on the Bond Register at the close
of business on the second Payment Business Day (as defined below) before the due date for payment.

(C) Fiscal Laws

All payments are subject in all cases to any applicable fiscal or other laws and regulations, but without
prejudice to the provisions of Condition 8. No commissions or expenses shall be charged to the holders of
the Bonds in respect of such payments.

(D) Date of Payment

Where payment is to be made by transfer to a registered account, payment instructions for value on the
due date (or, if that date is not a Payment Business Day (as defined below), for value on the next Payment
Business Day) shall be initiated. Where payment is to be made by check, the check shall be mailed on the
Payment Business Day preceding the due date for payment. Notwithstanding the above, payment of principal
of a Bond represented by a Definitive Certificate shall not be made earlier than the Payment Business Day
on which the relevant Definitive Certificate is surrendered at the specified office of an Agent.
For the purposes of this Condition 6 and Condition 7:
“Payment Business Day” means a day (other than a Saturday or Sunday) on which commercial banks
are open for business in New York City, London and Taipei and, in the case of the surrender of a Definitive
Certificate, in New York City and in the place where the Definitive Certificate is surrendered.

(E) Default Interest and Payment Delay

If the Company fails to pay any sum in respect of the Bonds when the same becomes due and payable
under these Conditions, interest shall accrue on the overdue sum at the rate of 5.50% per annum from the due
date and ending on the date on which payment is made to the holders of the Bonds in respect thereof (both
dates inclusive). Such default interest shall accrue on the basis of the actual number of days elapsed and a
360-day year consisting of 12 months of 30 days each.

79
 A holder of the Bonds shall not be entitled to any interest or other payment for any delay in receiving
the amount due if (i) the due date is not a Payment Business Day, (ii) the Bonds are represented by a
Definitive Certificate and the holder is late in surrendering its Definitive Certificate (if required to do so) or
(iii) a check mailed in accordance with this Condition 6 arrives after the due date for payment.

(F) Partial Payments

If the amount of principal and premium (if any) which is due on the Bonds is not paid in full, the
Registrar will annotate the Bond Register with a record of the amount of principal and/or premium, in fact
paid.

7. REDEMPTION, REPURCHASE AND CANCELLATION

(A) Redemption at Maturity

Unless previously redeemed, repurchased and cancelled, or converted as herein provided, the Company
shall redeem (i) the 2015 Bonds at a redemption price of 102.171% of their principal amount in US Dollars
on August 10, 2015 (the “2015 Maturity Date”) and (ii) the 2017 Bonds at a redemption price of 118.995%
of their principal amount in US Dollars on August 10, 2017 (the “2017 Maturity Date”), or if the 2015
Maturity Date or the 2017 Maturity Date (each, a “Maturity Date”) is not a Payment Business Day, on the
immediately preceding Payment Business Day. The Bonds may be redeemed prior to the relevant Maturity
Date only as provided in Conditions 7(B), 7(C), 7(D), 7(E) and 7(F) below, but without prejudice to
Condition 9.

(B) Redemption at the Option of the Company

At any time on or after August 10, 2013 and prior to the relevant Maturity Date, the Company may,
having given not less than 30 nor more than 60 days’ notice to the holders of the relevant series of Bonds
(which notice shall be irrevocable and delivered in accordance with Condition 7(I) and Condition 14), redeem
(i) the 2015 Bonds, in whole or in part (being US$100,000 in principal amount or an integral multiple
thereof), at the 2015 Early Redemption Amount (as defined below) on the relevant date of redemption or (ii)
the 2017 Bonds, in whole or in part (being US$100,000 in principal amount or an integral multiple thereof),
at the 2017 Early Redemption Amount (as defined below) on the relevant date of redemption; provided,
however, that in each case, no such redemption may be made unless the Closing Price (as defined in
Condition 5(C)) of the Common Shares, translated into US Dollars at the Prevailing Rate, on any 20
consecutive Trading Days, the last of which occurs not more than five Trading Days prior to the date upon
which notice of such redemption is given, is at least 130% of the 2015 Early Redemption Amount, in the case
of a redemption of the 2015 Bonds, or the 2017 Early Redemption Amount, in the case of a redemption of
the 2017 Bonds, in each case, divided by the prevailing Conversion Ratio.
“Prevailing Rate” means the fixing rate at 11 a.m. for the purchase of US Dollars with NT Dollars
quoted by Taipei Forex Inc. on each Trading Day.
“2015 Early Redemption Amount” of a 2015 Bond as of any date means an amount equal to 100%
of the principal amount of the 2015 Bond plus the 2015 Redemption Premium at the relevant date. “2015
Redemption Premium” as of any date means an amount that is determined so that such 2015 Redemption
Premium represents for each 2015 Bondholder a gross yield of 0.43% per annum (which is identical to the
gross yield for the 2015 Bonds in the case of redemption at maturity), calculated on a semi-annual basis. The
2015 Early Redemption Amount for each US$100,000 principal amount of 2015 Bonds is calculated in
accordance with the following formula, rounded (if necessary) to two decimal places with 0.005 being
rounded upwards (provided that if the date fixed for redemption is a Semi-Annual Date (as set out below),
such 2015 Early Redemption Amount shall be as set out in the table below in respect of such Semi-Annual
Date):
2015 Early Redemption Amount = Previous 2015 Early Redemption Amount x (1+r/2)d/180

80
 where:

Previous 2015 Redemption = the 2015 Early Redemption Amount for each US$100,000
Amount principal amount on the Semi-Annual Date immediately
preceding the date fixed for redemption as set out below
(or if the 2015 Bonds are to be redeemed prior to February
10, 2011 (the first Semi-Annual Date), US$100,000):

2015 Early
Semi-Annual Date Redemption Amount

US$
February 10 2011 ........................................................................................................ 100,215.00
August 10 2011 .......................................................................................................... 100,430.46
February 10 2012 ........................................................................................................ 100,646.39
August 10 2012 .......................................................................................................... 100,862.78
February 10 2013 ........................................................................................................ 101,079.63
August 10 2013 .......................................................................................................... 101,296.95
February 10 2014 ........................................................................................................ 101,514.74
August 10 2014 .......................................................................................................... 101,733.00
February 10 2015 ........................................................................................................ 101,951.72

r = 0.43% expressed as a decimal

d = number of days from and including the immediately preceding Semi-Annual Date (or if the
2015 Bonds are to be redeemed prior to the first Semi-Annual Date, from and including the
Issue Date) to, but excluding, the date fixed for redemption, calculated on the basis of a
360-day year consisting of 12 months of 30 days each and, in the case of an incomplete
month, the number of days elapsed.

“2017 Early Redemption Amount” of a 2017 Bond as of any date means an amount equal to 100%
of the principal amount of the 2017 Bond plus the 2017 Redemption Premium at the relevant date. “2017
Redemption Premium” as of any date means an amount that is determined so that such 2017 Redemption
Premium represents for each 2017 Bondholder a gross yield of 2.50% per annum (which is identical to the
gross yield for the 2017 Bonds in the case of redemption at maturity), calculated on a semi-annual basis. The
2017 Early Redemption Amount for each US$100,000 principal amount of 2017 Bonds is calculated in
accordance with the following formula, rounded (if necessary) to two decimal places with 0.005 being
rounded upwards (provided that if the date fixed for redemption is a Semi-Annual Date (as set out below),
such 2017 Early Redemption Amount shall be as set out in the table below in respect of such Semi-Annual
Date):
2017 Early Redemption Amount = Previous 2017 Early Redemption Amount x (1+r/2)d/180

81
 where:

Previous 2017 Redemption = the 2017 Early Redemption Amount for each US$100,000
Amount principal amount on the Semi-Annual Date immediately
preceding the date fixed for redemption as set out below (or if
the 2017 Bonds are to be redeemed prior to February 10, 2011
(the first Semi-Annual Date), US$100,000):

2017 Early
Semi-Annual Date Redemption Amount

US$
February 10 2011 ........................................................................................................ 101,250.00
August 10 2011 .......................................................................................................... 102,515.63
February 10 2012 ........................................................................................................ 103,797.07
August 10 2012 .......................................................................................................... 105,094.53
February 10 2013 ........................................................................................................ 106,408.22
August 10 2013 .......................................................................................................... 107,738.32
February 10 2014 ........................................................................................................ 109,085.05
August 10 2014 .......................................................................................................... 110,448.61
February 10 2015 ........................................................................................................ 111,829.22
August 10 2015 .......................................................................................................... 113,227.08
February 10 2016 ........................................................................................................ 114,642.42
August 10 2016 .......................................................................................................... 116,075.45
February 10 2017 ........................................................................................................ 117,526.39

r = 2.50% expressed as a decimal

d = number of days from and including the immediately preceding Semi-annual Date (or if the
2017 Bonds are to be redeemed prior to the first Semi-annual Date, from and including the
Issue Date) to, but excluding, the date fixed for redemption, calculated on the basis of a
360-day year consisting of 12 months of 30 days each and, in the case of an incomplete
month, the number of days elapsed.

“Early Redemption Amount” shall refer to the 2015 Early Redemption Amount or the 2017 Early
Redemption Amount, as the context requires and “Redemption Premium” shall refer to the 2015
Redemption Premium or the 2017 Redemption Premium, as the context requires.

“Conversion Ratio” means the principal amount of each Bond translated into NT dollars at the Fixed
Exchange Rate divided by the applicable Conversion Price.
Notwithstanding the conditions to the Company’s right to redeem the Bonds set forth in the
immediately preceding paragraph, at any time, the Company may, having given not less than 30 nor more
than 60 days’ notice to the holders (which notice shall be irrevocable and delivered in accordance with
Condition 7(I) and Condition 14), redeem either series of Bonds, in whole but not in part, at the relevant
Early Redemption Amount if more than 90% in principal amount of the relevant series of Bonds has already
been redeemed, repurchased and cancelled, or converted as herein provided.
No notice of redemption given under this Condition 7(B) shall be effective if it specifies a date for
redemption which falls during a Closed Period (as defined in Condition 5(A)). Upon the expiry of any
effective notice of redemption, the Company will be bound to redeem the Bonds to which such notice relates
at the date fixed for redemption.

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 (C) Redemption for Taxation Reasons
At any time, the Company may, having given not less than 30 nor more than 60 days’ notice (a “Tax
Redemption Notice”) to the holders of each series of the Bonds (which notice shall be irrevocable and
delivered in accordance with Condition 7(I) and Condition 14), subject to the provisions of the last paragraph
of this Condition 7(C), redeem each series of the Bonds, in whole but not in part, at the relevant Early
Redemption Amount, on the date fixed for redemption in the Tax Redemption Notice (the “Tax Redemption
Date”), provided that the Company satisfies the Trustee that, immediately prior to the giving of such notice:
(i) the Company has or shall become obliged to pay Additional Amounts (as defined in Condition 8)
in respect of taxes at a rate in excess of 15%, as a result of any change in, or amendment to, the
laws or regulations of the ROC or any political subdivision or any authority thereof or therein
having power to tax, or any change in the general application or official interpretation of such
laws or regulations, which change or amendment becomes effective after the Issue Date; and
(ii) such obligation cannot be avoided by the Company taking reasonable measures available to it.
Notwithstanding the foregoing, no such Tax Redemption Notice shall be given earlier than 30
days prior to the earliest date on which the Company would be obliged to pay such Additional
Amounts, were a payment on the Bonds then due.
Prior to the delivery of any Tax Redemption Notice pursuant to this Condition 7(C), the Company shall
deliver to the Trustee (1) a certificate signed by two Authorized Officers stating that the obligation referred
to in clause (i) above cannot be avoided by taking reasonable measures available to it, and (2) an opinion
addressed to the Trustee by an independent law firm of recognized standing admitted to practice in the ROC
or written advice of a qualified tax adviser of recognized standing in the ROC to the effect that the Company
has or will become obligated to pay such Additional Amounts as a result of such change or amendment, and
the Trustee shall be entitled to accept without further enquiry such certificate and opinion or advice as
sufficient and conclusive evidence of the fulfillment of the conditions precedent referred to in this Condition
7(C), in which event it shall be conclusive and binding on the holders of the Bonds. The Bonds in respect
of which a notice of redemption has been given under Condition 7(B), 7(D), 7(E) or 7(F) shall not be affected
by any notice given subsequently under this Condition 7(C).
If the Company gives a Tax Redemption Notice under this Condition 7(C), each holder of the Bonds
shall have the right (the “Non-Redemption Option”) to elect that all or a portion (being US$100,000 in
principal amount or an integral multiple thereof) of its Bonds not be redeemed. Upon the exercise of the
Non-Redemption Option with respect to such Bonds, no Additional Amounts referred to in Condition 8 shall
be payable on the payments due after the relevant Tax Redemption Date and, subject to Condition 8, such
payments shall be made subject to the deduction or withholding required under the laws or regulations of the
ROC. For the avoidance of doubt, any Additional Amount that had been payable in respect of the Bonds under
Condition 8 as a result of the laws or regulations of the ROC in effect on the Issue Date shall continue to
be payable to such holders of the Bonds.
To exercise the Non-Redemption Option pursuant to this Condition 7(C), the holder of the relevant
Bond must complete, sign and deposit at the specified office of any Paying Agent a duly completed and
signed current notice of exercise, obtainable from the specified office of any Paying Agent, together with the
Definitive Certificate, if one has been issued, on or before the day falling 10 days prior to the Tax Redemption
Date.

(D) Redemption at the Option of the Holders

Unless previously redeemed, repurchased and cancelled, or converted as herein provided, each holder
of the 2015 Bonds shall have the right (“2015 Holders’ Put Right”), at such holder’s option, to require the
Company to redeem, in whole or in part (being US$100,000 in principal amount or an integral multiple
thereof), the 2015 Bonds held by such holder on August 10, 2013 (“2015 Holders’ Put Date”) at the 2015
Early Redemption Amount.

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 Unless previously redeemed, repurchased and cancelled, or converted as herein provided, each holder
of the 2017 Bonds shall have the right (“2017 Holders’ Put Right” and together with the 2015 Holders’ Put
Right, the “Holders’ Put Rights”, and each a “Holder Put Right”), at such holder’s option, to require the
Company to redeem, in whole or in part (being US$100,000 in principal amount or an integral multiple
thereof), the 2017 Bonds held by such holder on August 10, 2015 (“2017 Holders’ Put Date” and the 2015
Holders’ Put Date, each a “Holders’ Put Date”) at the 2017 Early Redemption Amount.

(E) Redemption in the Event of Delisting

Unless previously redeemed, repurchased and cancelled, or converted as herein provided, in the event
that the Common Shares are officially delisted from the TSE (a “Delisting”), each holder shall have the right
(a “Delisting Put Right”), at such holder’s option, to require the Company to redeem such holder’s Bonds,
in whole or in part, at the 2015 Early Redemption Amount, in the case of the 2015 Bonds, or at the 2017 Early
Redemption Amount, in the case of the 2017 Bonds, on the 20th Payment Business Day following the date
on which the Company provides written notice to the Trustee of the Delisting in accordance with Condition
7(I)(ii).
The Trustee shall not be required to take any steps to ascertain whether a Delisting or any event which
could lead to the occurrence of a Delisting has occurred and will not be responsible or liable to Holders for
any loss arising from any failure to do so.

(F) Redemption in the Event of a Change of Control

Unless previously redeemed, repurchased and cancelled, or converted as herein provided, if a Change
of Control (as defined below) occurs, each holder shall have the right (a “Change-of-Control Put Right”),
at such holder’s option, to require the Company to redeem such holder’s Bonds, in whole or in part, at the
2015 Early Redemption Amount, in the case of the 2015 Bonds, or at the 2017 Early Redemption Amount,
in the case of the 2017 Bonds, on the 20th Payment Business Day following the date on which the Company
provides written notice to the Trustee of the Change of Control in accordance with Condition 7(I)(ii).
For the purposes of this Condition 7(F):
“Control” means the right to appoint and/or remove all or a majority of the members of the board of
directors or other governing body of the Company, whether such right is obtained directly or indirectly by
ownership of share capital, the possession of voting rights, contract or otherwise.
A “Change of Control” occurs when:
(a) any person or persons, whether individually or acting in concert as a group, acquires Control
of the Company and such person or persons does not or do not have, and would not be
deemed to have, Control of the Company on the Issue Date;
(b) the Company consolidates with or merges into or sells or transfers all or substantially all of
the Company’s assets to any other person, unless the consolidation, merger, sale or transfer
shall not result in the other person or persons acquiring Control over the Company or the
successor entity; or
(c) one or more other persons acquires the legal or beneficial ownership of all or substantially
all of the Company’s capital stock;

except that a Change of Control shall not be deemed to have occurred if the Closing Price per Common Share
for any five Trading Days within the period of 10 consecutive Trading Days beginning immediately following
the later of the Change of Control or the public announcement of the Change of Control equals or exceeds
110% of both Conversion Prices in effect on each of those five Trading Days.
A “person” includes any individual, company, corporation, firm, partnership, joint venture,
undertaking, association, organization, trust, state or agency of a state (in each case whether or not being a
separate legal entity) but does not include the Company’s directors or any other governing board and does
not include the Company’s majority-owned direct or indirect Subsidiaries.

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 “Subsidiary” in relation to the Company means any corporation or other business entity of which the
Company owns or controls (either directly or indirectly) more than 50% of the issued share capital or other
ownership interest having ordinary voting power to elect directors, managers or trustees of such company or
other business entity (whether or not capital stock or other ownership interest of any other class or classes
shall or might have a voting power upon the occurrence of any contingency) or any company or other
business entity which at the relevant time has its accounts consolidated with those of such Person as a
subsidiary company, or which, under ROC law or generally accepted accounting principles of the ROC from
time to time in effect, should have its accounts consolidated with those of the Company as a subsidiary
company.

(G) Repurchase and Cancellation

The Company may at any time and from time to time repurchase the Bonds in the open market or
otherwise at any price. The Company shall promptly surrender any Bonds so purchased to the Principal
Paying Agent for cancellation.

(H) Cancellation
All Bonds that are redeemed, repurchased or converted and surrendered to any Agent shall forthwith
be cancelled. In the case of Bonds represented by Definitive Certificates, certificates in respect of all Bonds
cancelled shall be forwarded to or to the order of the Principal Paying Agent. Bonds cancelled may not be
reissued or resold.

(I) Redemption Procedures

(i) Notice of Exercise of the Company’s Option to Redeem

To exercise its right to redeem the Bonds in accordance with Condition 7(B) or 7(C), the
Company shall provide the notice required to be given pursuant to Condition 7(B) or 7(C) to the Trustee
with sufficient time in advance to enable the Trustee to comply with Condition 7(I)(vi) in the case of
a partial redemption pursuant to Condition 7(B) and to enable the Trustee to provide such notice to each
holder of one or both series of Bonds, as the case may be, not less than 30 nor more than 60 days prior
to the redemption date. Such notice shall be irrevocable upon its dispatch by the Trustee to the holders.
Such notice shall be provided in accordance with Condition 14.

(ii) Notice of Put Rights

The Company shall provide a notice containing the relevant information to the Trustee with
sufficient time in advance (or, in the case of a Delisting or Change of Control, promptly after the
Company’s becoming aware, but in any event within seven days, of such an event) to enable the Trustee
to provide such notice to each holder of one or both series of Bonds, as the case may be (a) in the case
of a redemption in accordance with Condition 7(D), not less than 30 or more than 60 days prior to the
relevant Holders’ Put Date or (b) in the case of a redemption in accordance with Condition 7(E) or 7(F),
20 Payment Business Days prior to the Bondholder’s redemption date thereunder. Any such notice shall
be provided in accordance with Condition 14.

(iii) Form of Notice

The notice mentioned in clauses (i) and (ii) above shall state, as appropriate:
(a) the redemption date;
(b) in the case of a Delisting, the date of such Delisting and, briefly, the events causing such
Delisting;
(c) in the case of a Change of Control, the date of such Change of Control and, briefly, the
events causing such Change of Control;
(d) the date by which the Put Notice (as defined in Condition 7(I)(iv)), if applicable, must be
given by the holder;

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 (e) the Closing Price of the Common Shares on the most recent practicable Trading Day for
which such Closing Price can be provided;
(f) the redemption price and the method by which such amount shall be paid;
(g) the names and addresses of all Paying Agents;
(h) briefly, the Conversion Rights of the holders of the Bonds and the Conversion Price then in
effect for the relevant series of Bonds;
(i) the procedures that a holder must follow and the requirements that such holder must satisfy
in order to exercise any of the Holders’ Put Rights, Delisting Put Rights or Change-of-
Control Put Rights, if applicable, and the Conversion Rights attached to its Bonds;
(j) the procedures that a holder who has delivered a Put Notice must follow in order to
withdraw such notice;
(k) the principal amount of the Bonds outstanding as of the latest practicable date prior to the
delivery of the notice;
(l) any identifying numbers of the Bonds and/or Definitive Certificates to be redeemed;
(m) the place or places of payment; and
(n) that payment will be made upon presentation and surrender of the Bonds to be redeemed.

(iv) Exercise of Put Rights

To exercise a Holders’ Put Right, Delisting Put Right or Change-of-Control Put Right, as the case
may be, a holder must deliver a written notice of the exercise of such right in the form obtainable from
any of the Agents (a “Put Notice”), together with the Definitive Certificate, if any, in respect of the
relevant Bond, to any Paying Agent on any Payment Business Day that is not fewer than 10 Payment
Business Days prior to the relevant redemption date. Once deposited, a Put Notice may not be
withdrawn without the consent of the Company.

(v) Payment for Bonds Represented by Definitive Certificates

Payment of the relevant redemption price upon exercise of a Holders’ Put Right, Delisting Put
Right or Change-of-Control Put Right attaching to any Bond represented by a Definitive Certificate for
which a Put Notice has been delivered is conditioned upon the delivery of such Definitive Certificate
(together with any necessary endorsements) to any Paying Agent. Payment shall be made promptly
following the later of the relevant redemption date and the time of delivery of such Definitive
Certificate. If the Paying Agent holds on the relevant redemption date money sufficient to pay the
redemption price for a Bond for which a Put Notice has been delivered, then, whether or not the
Definitive Certificate representing such Bond is delivered to the Paying Agent, on and after the relevant
redemption date, (a) such Bond shall cease to be outstanding; (b) the interest, if any, on such Bond shall
cease to accrue; (c) such Bond shall be deemed paid; and (d) all other rights of the holder shall
terminate, other than the right to receive the redemption price.

(vi) Partial Redemption

In the case of a redemption of less than all of the Bonds then outstanding pursuant to Condition
7(B), the Bonds shall be redeemed pro rata or selected individually by lot by the Principal Paying
Agent, in such place as the Trustee shall approve and in such manner as the Trustee shall deem to be
appropriate and fair, not more than 70 days nor less than 40 days prior to the date fixed for redemption.

(vii) Precedence of Notices

If more than one notice is given pursuant to this Condition 7 pursuant to which a series of Bonds
is or are to be redeemed, the first of such notices to be given shall prevail.

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8. TAXATION
Unless otherwise exempted under any applicable tax treaty, interest (if any) and premium (if any)
payable on the Bonds to non-residents of the ROC is currently subject to a withholding tax in the ROC equal
to 15% of the gross amount of such interest (if any) and premium (if any). A securities transaction tax of 0.3%
levied on proceeds from the sale of common shares will be payable by the seller of the common shares.
All payments in respect of the Bonds by the Company shall be made free and clear of, and without any
deduction or withholding for or on account of, any present or future taxes, duties, assessments or
governmental charges of whatever nature (“Taxes”) imposed, levied, collected, withheld or assessed by or
on behalf of the government of the ROC or any authority thereof or therein having power to tax unless such
withholding or deduction is required by law. If such deduction or withholding from any such payment is
required by law, the Company shall pay such additional amounts (“Additional Amounts”) as will result in
the receipt by the holders of the Bonds of the amounts that would have been receivable in the absence of any
such deduction or withholding, except that no Additional Amounts shall be payable in respect of any Bond:
(i) to, or on behalf of, a holder of the Bond or its beneficial owner who is subject to such taxes,
duties, assessments or governmental charges in respect of such Bond by reason of its being
connected with the ROC otherwise than merely by holding such Bond or by the receipt of
payments in respect of the Bond;
(ii) to or on behalf of a holder of the Bond or its beneficial owner to the extent that such holder or
beneficial owner would not be liable for or subject to such deduction or withholding by making
a declaration of non-residence or other claim for exemption to the relevant tax authorities if such
holder or beneficial owner is eligible to make such declaration or claim and, such holder or
beneficial owner fails to timely do so;
(iii) if the Definitive Certificate, if issued, in respect of the Bond is presented for payment (where
presentation is required) more than 30 days after the relevant date (as defined below) except to
the extent that the holder would have been entitled to such Additional Amounts on surrendering
the relevant certificate for payment on the last day of such 30-day period;
(iv) where such withholding or deduction is imposed on a payment to an individual and is required
to be made pursuant to European Council Directive 2003/48/EC or any other European Union
Directive implementing the conclusions of the ECOFIN Council meeting of November 26—27,
2000 on the taxation of savings income or any other law implementing or complying with, or
introduced in order to conform to, such Directive or other Directive;
(v) to or on behalf of a holder who would have been able to avoid such withholding or deduction by
presenting (where presentation is required) the relevant Bond to another Paying Agent; or
(vi) any estate, inheritance, gift, sale, transfer, stamp, personal property or similar tax, assessment or
other governmental charge.
In addition, the Company shall not be obligated to pay Additional Amounts if the holder of the Bond
is a fiduciary, partnership or other than the sole beneficial owner of any payment to the extent that a
beneficiary or settler with respect to a fiduciary, a member of a partnership or the beneficial owner of that
payment would not have been entitled to the Additional Amounts if it had been the holder of the Bond.
For the purposes of this Condition 8:
“Relevant date” in relation to any Bond means (a) the due date for payment in respect thereof, or (b)
if the full amount of the monies payable on such due date has not been received by the Trustee or the Principal
Paying Agent on or prior to such due date, the date on which notice is duly given to the holders of the Bonds
that such monies have been so received.
References in these Conditions to principal, redemption price, premium, interest and any other amounts
payable in respect of the Bonds shall be deemed also to refer to any Additional Amounts that may be payable
in respect thereof under this Condition 8.

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9. EVENTS OF DEFAULT

(A) Definition
An “Event of Default” occurs if:
(i) the Company fails to make any payment in respect of Bonds within five days after the same shall
become due and payable;
(ii) the Company fails to deliver Common Shares as and when such Common Shares are required to
be delivered upon the conversion of a Bond and such failure is not remedied within five Trading
Days;
(iii) the Company defaults in performance or observance of or compliance with any of its other
obligations set out in the Bonds or the Indentures, which default is incapable of remedy or is not
remedied within 30 days after written notice of such default shall have been given to the Company
by the Trustee or the holders of at least 25% in aggregate principal amount of either series of
Bonds then outstanding;
(iv) there shall have been entered against the Company or any of its Principal Subsidiaries (as defined
in Condition 3) a final judgment, decree or order by a court of competent jurisdiction for the
payment of money in excess of US$10,000,000 with respect to the Company or any of its
Principal Subsidiaries (or its equivalent in any other currency or currencies) and 60 days shall
have passed since the entry of the order without it being bonded, satisfied, discharged or stayed;
(v) (a) any other present or future indebtedness of the Company or any of its Principal Subsidiaries
(as defined in Condition 3) for or in respect of monies borrowed or raised becomes due and
payable prior to its stated maturity by reason of any actual or potential default or event of default,
howsoever described, or any such indebtedness is not paid when due or, as the case may be, within
any applicable grace period originally provided for or (b) the Company or any of its Principal
Subsidiaries fails to pay when due any amount payable by the Company or such Principal
Subsidiary, as the case may be, under any present or future guarantee or indemnity or arrangement
or obligation having a like or similar effect, howsoever described, for any monies borrowed;
provided that the aggregate amount of the relevant indebtedness or amount payable in respect of
which one or more events mentioned above in this paragraph (v) have occurred equals or exceeds
US$10,000,000 or its equivalent in any other currency (determined as provided below), and
provided further that where two or more of the Company and/or its Principal Subsidiaries are
liable for the payment of the same relevant indebtedness or guarantee (whether liable jointly and
severally, by way of guarantee, surety or otherwise), any such amount shall be counted once only;
(vi) an encumbrancer takes possession or a receiver, manager or other similar officer is appointed, or
a distress, execution or seizure before judgment is levied, enforced or sued out upon, against or
in respect of the whole or any substantial part of the undertaking, property, assets or revenues of
the Company or any of its Principal Subsidiaries and the same is not stayed, discharged, released
or satisfied (as the case may be) within 60 days of such taking of possession, appointment,
levying, enforcement or suing out (as the case may be);
(vii) a decree or order by a court having jurisdiction shall have been entered adjudging the Company
or any of its Principal Subsidiaries bankrupt or insolvent, or approving a petition seeking the
Company’s reorganization or that of any of its Principal Subsidiaries under any applicable
bankruptcy, insolvency or reorganization law, or for the appointment of an administrator or a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of, or all or a substantial
part of the business or assets of, or for the winding-up or liquidation of the affairs of, the
Company or any of its Principal Subsidiaries and in any such case such decree or order shall have
continued undischarged and unstayed for a period of 60 days;

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 (viii) an order is made or an effective resolution shall be passed for the winding-up, dissolution or
liquidation of the Company or that of any of its Principal Subsidiaries, or the Company or any
of its Principal Subsidiaries becomes capable of being dissolved under the laws of its place of
incorporation (except for the purpose of and followed by a solvent reconstruction, merger,
consolidation, amalgamation or other similar arrangement the terms of which are approved by
holders of not less than 75% in principal amount of each series of the Bonds outstanding), or the
Company or any of its Principal Subsidiaries shall institute proceedings to be adjudicated as a
voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall
file a petition or answer or consent seeking reorganization or arrangement under any applicable
bankruptcy, insolvency or reorganization law, or shall consent to the filing of any such petition,
or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy
or insolvency of it or of all or a substantial part of its business or assets, or shall make a general
assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or the Company or any of its Principal Subsidiaries becomes
bankrupt, insolvent or is unable to pay its debts as they mature, or the Company or any of its
Principal Subsidiaries stops or threatens to cease to carry on its business or a substantial part of
its business, or corporate action shall be taken by the Company or any of its Principal Subsidiaries
in furtherance of any of the aforesaid purposes;
(ix) proceedings shall have been initiated against the Company or any of its Principal Subsidiaries
under any applicable bankruptcy, insolvency, or reorganization law and such proceedings shall
not have been discharged or stayed within a period of 60 days;
(x) a moratorium is agreed or declared in respect of any indebtedness of the Company or any of its
Principal Subsidiaries or any governmental authority or agency condemns, seizes, compulsorily
purchases or expropriates all or a substantial part of the assets or shares of the Company or any
of its Principal Subsidiaries; or
(xii) any action, condition or thing (including the obtaining or effecting of any necessary consent,
approval, authorization, exemption, filing, license, order, recording or registration) at any time
required to be taken, fulfilled or done in order to (i) enable the Company lawfully to enter into,
exercise its rights and perform and comply with its obligations under the Bonds and the relevant
Indenture, (ii) ensure that those obligations are legally binding and enforceable and (iii) make the
Bonds and the relevant Indenture admissible in evidence in the courts of the ROC is not taken,
fulfilled or done, and such case is incapable of remedy or, if capable of remedy, is not remedied
within 30 days.
For the purposes of clauses (iv) and (v) above, any indebtedness which is in a currency other than US
Dollars shall be translated into US Dollars at the spot rate for the sale of US Dollars against the purchase
of the relevant currency quoted by any leading bank in the relevant market selected by the Trustee on any
day when the Trustee requests such a quotation for such purposes. If no direct spot rate is available, a rate
shall be calculated by reference to the cross-rates through US Dollars of the relevant currency.

(B) Duties and Powers of Trustee

The Trustee shall notify all holders of the Bonds in accordance with Condition 14 of the occurrence of
any Default or Event of Default as soon as reasonably practicable after, but in any event within 30 days of,
the date on which the Trustee shall have received written notice of such Default or Event of Default, unless
the Trustee shall determine in its absolute discretion that failure to give such notice is in the best interests
of the holders of the Bonds or such Default has been cured or waived and the Trustee shall have been so
notified in writing before the giving of such notice. If an Event of Default occurs and is continuing, then and
in every such case, the Trustee in its sole discretion may, and if so requested in writing by the holders of not
less than 25% in principal amount of either series of the Bonds then outstanding shall, subject to the Trustee’s
right to be indemnified and/or secured by the holders of the Bonds to the Trustee’s satisfaction, declare all
the Bonds of such series then outstanding to be due and payable immediately by a notice in writing to the
Company (and to the Trustee if such notice is given by the Holders). The Trustee shall also give notice of
such acceleration to holders of the Bonds of such series in accordance with Condition 14. Notwithstanding

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the foregoing, if any of the events specified in clauses (vii), (viii) and (ix) above shall have occurred, the
Bonds shall forthwith become immediately due and payable at the Early Redemption Amount, plus any
overdue interest payable in accordance with Condition 6(E), without regard to the giving of any such notice.
For purposes of these Conditions:
“Default” means any event, condition or act has occurred that, which the giving of notice and/or the
passage of time, would constitute an Event of Default.

(C) Obligations of Company

The Company shall furnish to the Trustee annually, and otherwise at the request of the Trustee within
14 days of such request, a statement concerning the performance and observance of its obligations under the
Bonds or the Indentures. In addition, the Company shall be required to file with the Trustee written notice
upon the occurrence of any Default or Event of Default.

(D) Bondholder Searches

In relation to the Bonds, the Trustee may, without the prior consent of the Holders, request disclosure
from any clearing system through which the Bonds are being held (Euroclear, Clearstream Luxembourg, and
the Depository Trust Company) as to the identity of the accountholder(s) at such clearing system holding any
interest in such Bonds.

10. PRESCRIPTION
Claims against any payment in respect of the Bonds shall be prescribed unless made within six years
from the relevant date of payment in respect thereof.
Under ROC law, claims in respect of the (i) payment of principal would become unenforceable after 15
years and (ii) payment of interest (if any) and premium (if any) would become unenforceable after five years,
each measured from the relevant date for payment in respect thereof.

11. ENFORCEMENT
At any time after the Bonds shall have become due and payable, the Trustee may, at its discretion and
without further notice, take such proceedings against the Company as it may think fit to enforce payment in
respect of the Bonds, including any premium and interest, and to enforce the provisions of the Indentures;
provided, however, that the Trustee shall not be bound to take any such actions unless (a) it shall have been
so requested in writing by the holders of at least 25% in principal amount of either series of Bonds then
outstanding or by a resolution of a duly called meeting of the holders by persons entitled to vote a majority
in principal amount of the outstanding Bonds of either series; and (b) it shall have been indemnified and/or
secured to its satisfaction. No holder of the Bonds shall be entitled to proceed directly against the Company,
unless (a) the Trustee, having become bound to take proceedings against the Company (as described in the
Indentures), fails to do so and such failure shall have continued for a period of 60 days and (b) no direction
inconsistent with the Trustee taking such proceedings has been given to the Trustee during such 60-day
period by the holders of at least 50% in principal amount of the relevant series of Bonds then outstanding.

12. MEETINGS OF BONDHOLDERS, MODIFICATION AND WAIVER

(A) Quorums for Meetings

The Indentures contain provisions for convening meetings of the holders to consider any matter
affecting their interests, including the approval of certain amendments or modifications of the terms of either
series of Bonds or the provisions of the relevant Indenture, upon either the written consent of the holders of
a majority in principal amount of the outstanding Bonds of such series or the approval at a duly called
meeting of the holders by persons entitled to vote a majority in principal amount of the outstanding Bonds
of such series. The quorum at any such meeting shall be one or more persons entitled to vote a majority in
principal amount of the outstanding Bonds of such series.

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 (B) Modification with Consent of Holders
Modifications and amendments of the relevant Indenture or either series of Bonds may be made by the
Company and the Trustee with the written consent of the holders of not less than a majority in principal
amount of the outstanding Bonds of such series; provided that no such modification or amendment may,
without the consent of less than 75% in principal amount of the outstanding Bonds of such series:
(i) modify the relevant Maturity Date;
(ii) reduce the principal amount or the rate of interest, if any, on, any Bond or increase the relevant
Conversion Price (as adjusted in accordance with Condition 5(C));
(iii) change the place or currency of payment of principal amount, or premium, if any, or interest, if
any, on, any Bond or the method of calculating any such payment;
(iv) impair the right to institute suit for the enforcement of any payment on any Bond;
(v) alter the Company’s obligations relating to negative pledge, Mergers or the payment of Additional
Amounts as described in Conditions 3(A), 3(B) and 8, respectively;
(vi) except to the extent permitted by Condition 12(C) or 12(D) below, modify, cancel or adversely
affect the Conversion Right, the relevant Holders’ Put Right, Delisting Put Right, Change-of-
Control Put Right or Non-Redemption Option;
(vii) reduce the above-stated percentage of outstanding Bonds the consent of whose holders is
necessary to modify or amend the relevant Indenture;
(viii) reduce the percentage or aggregate principal amount of outstanding Bonds the consent of whose
holders is necessary for waiver of compliance with provisions of the relevant Indenture or for
waiver of an Event of Default under the relevant Indenture;
(ix) modify any of the voting or quorum requirements under the relevant Indenture for meetings of
holders of Bonds; or
(x) release the Company from any obligation under the relevant Indenture other than in accordance
with the provisions of the relevant Indenture, or amend or modify any provision relating to such
release.
The Trustee shall provide, at the Company’s expense, any notice of convocation for a meeting of
holders of either series of Bonds in accordance with Condition 14.
With respect to each series of Bonds, the Indentures provide that, in determining whether the holders
of the Bonds representing the requisite principal amount of Bonds then outstanding are present at a meeting
of holders of the Bonds for quorum purposes or have given any request, demand, authorization, direction,
notice, consent or waiver under the Indentures, Bonds owned by the Company or any other obligor upon the
Bonds or any affiliate of the Company or such other obligor shall be disregarded and deemed not to be
outstanding; provided that in the making of any such determination, the Trustee shall be fully protected if it
disregards only such Bonds as to which the Trustee has received actual notice that such Bonds are owned by
the Company or such other obligor or any affiliate of the Company or such other obligor.

(C) Modification of Conversion Right

Notwithstanding Condition 12(B) above, the Trustee may agree to, without the consent of the holders
of either series of Bonds, any modification to the Conversion Right that (i) is necessary or desirable to effect
or facilitate conversion as contemplated in these Conditions and (ii) is not materially prejudicial to the
interests of the holders of the Bonds. The Trustee’s agreement may be subject to any condition which the
Trustee requires, including but not limited to the delivery of an opinion of a financial or legal or other expert
of recognized standing in the applicable jurisdiction, and shall be binding on the holders of the Bonds. Any
such modification shall be notified by the Company to the holders of the Bonds as soon as practicable
thereafter in accordance with Condition 14.

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 (D) Other Modifications and Waivers
The Trustee may also agree to, without the consent of the holders of the Bonds, among other things,
(i) any modification of, or the waiver or authorization of any breach or proposed breach of, the Bonds, the
Indentures or the Agency Agreements that is not, in the Trustee’s opinion, materially prejudicial to the
interests of the holders of the Bonds or (ii) any modification of the Bonds, the Indentures or the Agency
Agreements that, in the Trustee’s opinion, is of a formal, minor or technical nature or to correct a manifest
error or to comply with mandatory provisions of law.
In connection with such modification, waiver or authorization, the Trustee may require a certificate
from the Company signed by two Authorized Officers certifying, and a legal opinion from a legal adviser of
recognized international standing stating, that the modification, waiver or authorization is of a formal, minor
or technical nature or to correct a manifest error or to comply with mandatory provision of law. Any such
modification, waiver or authorization shall be binding on the holders of the Bonds, and shall be notified by
the Company to the holders of the Bonds as soon as practicable thereafter in accordance with Condition 14.

(E) Waiver of Default

The holders of the Bonds, through the written consent of not less than a majority in principal amount
the Bonds then outstanding of a series (or such lesser principal amount of the Bonds then outstanding as shall
have acted at a meeting pursuant to the provisions of the relevant Indenture and shall have made the initial
request for the acceleration, provided that such lesser amount, which shall not be less than 25% of the
principal amount of the Bonds then outstanding, is more than the principal amount of the Bonds held by
holders who had made such request), may, on behalf of the holders of all the Bonds of such series, waive any
existing Default and its consequences, except for (i) any Default in any payment on the Bonds of such series,
(ii) any Default with respect to the Conversion Rights or (iii) any Default with respect to certain covenants
or provisions in the relevant Indenture that may not be modified without the consent of the holders of 75%
in principal amount of the outstanding Bonds of such series as described in Condition 12(B) above. When
a Default is waived, it is deemed cured and shall cease to exist, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
The right of a holder (i) to receive payment in respect of its Bonds, (ii) to receive Common Shares on
or after any Conversion Date, (iii) to exercise its Conversion Right or (iv) to bring suit for the enforcement
of any such right, shall not be impaired or adversely affected without such holder’s consent.

(F) Exercise of Trustee’s Functions

Where the Trustee is required in connection with the exercise of its powers, trusts, authorities, duties
and discretions to have regard to the interests of the holders of the Bonds, it shall have regard to the interests
of the holders of the Bonds as a class and, in particular but without prejudice to the generality of the
foregoing, the Trustee shall not have regard to, or be in any way liable for, the consequences of such exercise
for any individual holders of Bonds. In connection with any such exercise, the Trustee shall not be entitled
to require, and no holder of Bonds shall be entitled to claim, from the Company, the Trustee or any other
person any indemnification or payment in respect of any tax consequences of any such exercise upon
individual holders of the Bonds.

13. REPLACEMENT OF CERTIFICATES

Any replacement of mutilated, defaced, destroyed, stolen or lost Definitive Certificates shall take place
at the specified offices of the Registrar and Paying Agents in accordance with the provisions of the
Indentures, which provisions include the following:
(i) replacement certificates shall only be issued upon payment by the claimant of such costs as may
be incurred in connection therewith and on such terms as to evidence and indemnity as the
Company and the Registrar may reasonably require;
(ii) mutilated or defaced certificates must be surrendered before replacements will be issued; and

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 (iii) in the event any Bonds represented by a mutilated, destroyed, lost or stolen Definitive Certificate
has become or is about to become due and payable, the Company in its discretion may, instead
of issuing a new Definitive Certificate representing such Bonds, make payment as consideration
for the cancellation of the Bonds represented thereby in accordance with the Indentures.

14. NOTICES
All notices to holders of the Bonds shall be validly given if (i) made in writing in English and mailed
to them at their respective addresses in the Bond Register; and (ii) published in the Wall Street Journal Asia.
In addition, for so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require,
notices to holders of the Bonds will be valid if published in a leading newspaper having general circulation
in Singapore (which is expected to be The Business Times, Singapore edition).
Any such notice shall be deemed to have been given on the later of the date of such publication and
the seventh day after being so mailed.
So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on
behalf of Euroclear or Clearstream or a successor clearing system, notices to holders of the Bonds may be
given by delivery of the relevant notice to Euroclear or Clearstream or the successor clearing system, for
communication by it to entitled accountholders in substitution for notification as required by the Conditions,
provided (i) that such notice is also delivered to the SGX-ST; and (ii) so long as the Bonds are listed on the
SGX-ST and the rules of the SGX-ST so require, publication will also be made in a leading daily newspaper
having general circulation in Singapore (which is expected to be The Business Times, Singapore edition) or
on the website of the SGX-ST.

15. INDEMNIFICATION
The Indentures contain provisions for the indemnification of the Trustee and for its relief from
responsibility, including provisions relieving it from taking proceedings to enforce any provisions of the
Bonds or the Indentures unless indemnified and/or secured to its satisfaction. The Trustee is entitled to enter
into business transactions with the Company and any entity related to the Company without accounting for
any profit.

16. AGENTS
The Company reserves the right, subject to the provisions of the Agency Agreements, at any time to
vary or terminate the appointment of Agents; provided that it shall at all times maintain a Registrar who will
maintain the Bond Register at a specified office in New York City and an Agent having a specified office in
London. Notice of any such termination or appointment, of any changes in the specified offices of the Agents,
or of any change in the identity or specified office of any Conversion Agent, Paying Agent or Transfer Agent
shall be given promptly by the Company to the holders of the Bonds in accordance with Condition 14 and
to the Trustee in accordance with the provisions of the Indentures.

17. GOVERNING LAW AND JURISDICTION; THIRD PARTY RIGHTS

(A) Governing Law

The Indentures, the Agency Agreements and the Bonds are governed by and shall be construed in
accordance with the laws of the State of New York.

(B) Jurisdiction
The courts of the State of New York sitting in the Borough of Manhattan, The City of New York, and
the federal courts of the United States sitting in the Borough of Manhattan, The City of New York are to have
non-exclusive jurisdiction to settle any disputes that may arise out of or in connection with the Bonds and
accordingly any legal action or proceedings arising out of or in connection with the Bonds (“Proceedings”)
may be brought in any such court. The Company has in the Indentures irrevocably submitted to the
non-exclusive jurisdiction of such courts.

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 (C) Agent for Service of Process

The Company has irrevocably appointed National Corporate Research, Ltd., whose offices are currently
located at 10E. 40th Street, 10th Floor, New York, NY10016, as its authorized agent for receipt of process
in any Proceedings based on any of the Bonds.

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 THE GLOBAL CERTIFICATE
Capitalized terms used in this section and not otherwise defined shall have the meanings given to them
in “Description of the Bonds” and the Indenture.

The Global Certificate

Each Global Certificate will be deposited with, and registered in the name of the Common Depositary
and Euroclear and Clearstream, Luxembourg will credit their respective accountholders with the respective
principal amounts of the individual interests represented by such Global Certificate. Such accounts will be
designated initially by or on behalf of the Initial Purchasers. Ownership of beneficial interests in the Global
Certificate will be limited to persons who have accounts with Euroclear or Clearstream, Luxembourg or
persons who hold interests through such accountholders. Ownership of beneficial interests in the Global
Certificate will be shown on, and the transfer of that ownership will be effected only through, the records
maintained by Euroclear and Clearstream, Luxembourg (with respect to interests of their respective
accountholders) and the records of such accountholders (with respect to interests of persons other than such
accountholders).
Payments of the principal of the Global Certificate will be made to the Common Depositary or its
respective nominees as the registered owners thereof. Payments of principal, interest and premium (if any)
in respect of Bonds represented by the Global Certificate will be made without presentation or if no further
payment falls to be made in respect of the Bonds, against presentation and surrender of the Global Certificate
to or to the order of the Principal Paying, Transfer and Conversion Agent or such other Paying Agent as shall
have been notified to the holders of the Bonds for such purpose. Neither we, the Trustee, the Common
Depositary, the Registrar, the Principal Paying Agent, the Paying Agents, any custodian, any transfer agent
nor any other agent of us will have any responsibility or liability for the accuracy of any of the records
relating to, or payments made on account of, ownership interests in the Global Certificate or for any notice
permitted or required to be given to holders of the Bonds or any consent given or actions taken by such
registered holders of the Bonds. We expect that upon receipt of any payment of principal in respect of a
Global Certificate representing any Bonds held by it or its nominee or the Common Depositary, as the case
may be, will promptly credit Euroclear and Clearstream, Luxembourg, in the case of the Common Depositary,
with payments in amounts proportionate to their respective interests in the principal amount of the Global
Certificate as shown on their respective records.
Transfers of interests in the Bonds will be effected through the records of Euroclear and Clearstream,
Luxembourg and their respective participants in accordance with the rules and procedures of Euroclear and
Clearstream, Luxembourg and their respective direct and indirect participants.
The laws of certain jurisdictions require that certain purchasers of securities take physical delivery of
such securities in definitive form. Accordingly, the ability of beneficial owners to own, transfer or pledge
beneficial interests in the Global Certificate may be limited by such laws.
Conversion of the Bonds will be effected through the respective direct and indirect participants in
Euroclear and Clearstream, Luxembourg in accordance with their respective rules and operating procedures.
Neither we, the Trustee, the Common Depositary, the Registrar, the Principal Paying, Transfer and
Conversion Agent, the Paying Agents, any custodian, any transfer agent, any registrar nor any other agent of
ours will have any responsibility for the performance of Euroclear or Clearstream, Luxembourg or their
respective direct participants, indirect participants or accountholders of their respective obligations under the
rules and procedures governing their operations.
So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on
behalf of Euroclear and Clearstream, Luxembourg, notices required to be given to the holders of the Bonds
may be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg for
communication by it to the entitled account holders in substitution for notification as required by the
Indenture or as described in the section entitled “Description of the Bonds.”

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 No selection of the Bonds will be required in the event of a redemption in the manner described in
“Description of the Bonds” in respect of less than the aggregate principal amount of the Bonds in respect of
which the Global Certificate is issued. Instead, there will be a pro rata allocation of the Bonds to be redeemed
among the accounts in Euroclear and Clearstream, Luxembourg in accordance with the rules and procedures
of the clearing systems.

Cancellation of any Bond following its redemption, conversion or purchase by us will be effected by
a reduction in the principal amount of the Bonds in the register of holders of Bonds.

In considering the interests of the holders of Bonds while the Global Certificate is registered in the
name of a nominee for a clearing system, the Trustee may, without being obliged to do so, have regard to
any information provided to it by such clearing system or its operator as to the identity (either individually
or by category) of its accountholders with entitlements to Bonds and may consider such interests as if such
accountholders were the holders of the Bonds.
For so long as the Bonds are evidenced by the Global Certificate, beneficial owners of the Bonds shall
be recognized as the beneficiaries of the trusts set out in the Indenture, to the extent of the principal amount
of their interest in the Bonds set out in a certificate executed and delivered by the registered holder, as if they
were themselves the holders of Bonds in such principal amounts.

The registered holder of the Global Certificate will be treated as two persons for the purposes of any
quorum requirements of a meeting of holders of the Bonds and, at any such meeting, as having one vote in
respect of each US$100,000 in principal amount of Bonds for which the Global Certificate is issued.
For so long as the Bonds are evidenced by the Global Certificate, notices required to be delivered by
holders of the Bonds may be given by facsimile rather than by depositing such notices at the specified office
of the Principal Paying, Transfer and Conversion Agent as required by the Indenture.

Individual Definitive Certificates

If either Euroclear or Clearstream, Luxembourg or a successor clearing system is closed for business
for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces
an intention permanently to cease business or does in fact do so, we will issue individual certificates in
registered form in exchange for the Global Certificate. We will use our best efforts to make arrangements for
the exchange of interests in the Global Certificate for individual definitive certificates and cause the
requested individual definitive certificates to be executed and delivered to the Registrar in sufficient
quantities and authenticated by the Registrar for delivery to holders. Persons exchanging interests in the
Global Certificate for individual definitive certificates will be required to provide to the Registrar, through
the relevant clearing system, written instructions and other information required by us and the Registrar to
complete, execute, authenticate and deliver such individual definitive certificates. Individual definitive
certificates delivered in exchange for the Global Certificate or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by the relevant clearing system.

In the case of individual definitive certificates issued in exchange for the Global Certificate, such
individual definitive certificates will bear, and be subject to, such legends as we require in order to assure
compliance with any applicable law. The holder of a restricted individual definitive certificate may transfer
the Bonds represented by such certificate, subject to compliance with the provisions of such legend. Upon
the transfer, exchange or replacement of certificates bearing the legend, or upon specific request for removal
of the legend on a certificate, we will deliver only certificates that bear such legend, or will refuse to remove
such legend, as the case may be, unless there is delivered to us such satisfactory evidence, which may include
an opinion of counsel, as may reasonably be required by us that neither the legend nor the restrictions on
transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.

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 For so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, we shall
appoint and maintain a Paying Agent in Singapore, where the Bonds may be presented or surrendered for
payment or redemption, in the event that a Global Certificate is exchanged for individual definitive
certificates. In addition, in the event that a Global Certificate is exchanged for individual definitive
certificates, an announcement of such exchange shall be made by or on behalf of us through the SGX-ST and
such announcement will include all material information with respect to the delivery of the individual
definitive certificates, including details of the Paying Agent in Singapore, so long as the Bonds are listed on
the SGX-ST and the rules of the SGX-ST so require.

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 TRANSFER RESTRICTIONS
Because of the following restrictions, purchasers are advised to consult legal counsel prior to making
any offer, resale, pledge or other transfer of Bonds or the Common Shares issuable upon conversion of the
Bonds.
The Bonds may not be offered or sold directly or indirectly in the ROC. The Bonds and the Common
Shares issuable upon conversion of the Bonds have not been registered under the Securities Act and the
Bonds may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons
except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the
Securities Act. Therefore, the Bonds are being offered and sold outside the United States in accordance with
Rule 903 or Rule 904 of Regulation S under the Securities Act.
Except in certain limited circumstances, interests in the Bonds may only be held through interests in
the Global Certificate. Such interests in the Global Certificate will be shown on, and transfers thereof will
be effected only through, records maintained by Euroclear and Clearstream, Luxembourg and their respective
direct and indirect participants.

Transfer Restrictions on the Bonds

Each purchaser of the Bonds, by accepting delivery of such Bonds, will be deemed to have
acknowledged and represented to and agreed as follows (terms used herein that are defined in Regulation S
are used as defined therein):
1. The Bonds and the Common Shares issuable upon conversion of the Bonds have not been and are
not expected to be registered under the Securities Act or with any securities regulatory authority
of any state of the United States and are subject to significant restrictions on transfer.
2. Each owner purchasing during the Distribution Compliance Period (as defined below) is
purchasing the Bonds in an offshore transaction meeting the requirements of Rule 903 or 904 of
Regulation S.
3. The Bonds and the Common Shares issuable upon conversion of the Bonds may not be sold,
pledged or transferred to, or for the account or benefit of, any U.S. person during the Distribution
Compliance Period (as defined below).
4. Such owner will not offer, sell, pledge or otherwise transfer any interest in the Bonds or the
Common Shares issuable upon conversion of the Bonds except as permitted by the applicable
legend set forth in paragraph (5) below.
5. The Bonds will bear legends to the following effect, unless we determine otherwise in compliance
with applicable law, and that it will observe the restrictions contained therein:
THE BONDS (“BONDS”) EVIDENCED HEREBY AND THE COMMON SHARES OF
ACER INCORPORATED (THE “COMPANY”) ISSUABLE UPON CONVERSION OF
THE BONDS HAVE NOT BEEN AND ARE NOT EXPECTED TO BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND PRIOR TO THE EXPIRATION OF 40 DAYS AFTER THE
LATER OF THE COMMENCEMENT OF THE OFFERING OF BONDS AND THE LAST
RELATED CLOSING DATE (THE “DISTRIBUTION COMPLIANCE PERIOD”), SUCH
BONDS MAY NOT BE CONVERTED INTO COMMON SHARES OF THE COMPANY
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO
ANY U.S. PERSON. EACH HOLDER AND BENEFICIAL OWNER, BY ITS
ACCEPTANCE OF THE BONDS EVIDENCED HEREBY, REPRESENTS THAT IT
UNDERSTANDS AND AGREES TO THE FOREGOING AND FOLLOWING
RESTRICTIONS.
UPON THE EXPIRATION OF THE DISTRIBUTION COMPLIANCE PERIOD, THIS
LEGEND SHOULD BE REMOVED AND THE BONDS EVIDENCED HEREBY AND THE
COMMON SHARES OF THE COMPANY ISSUABLE UPON CONVERSION OF THE
BONDS SHALL NO LONGER BE SUBJECT TO THE RESTRICTIONS PROVIDED IN

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 THIS LEGEND, PROVIDED THAT AT SUCH TIME AND THEREAFTER THE OFFER
OR SALE OF THE BONDS EVIDENCED HEREBY AND THE COMMON SHARES OF
THE COMPANY ISSUABLE UPON CONVERSION OF THE BONDS WOULD NOT BE
RESTRICTED UNDER ANY APPLICABLE SECURITIES LAWS OF THE UNITED
STATES OR OF THE STATES OR TERRITORIES OF THE UNITED STATES.

6. Except in certain limited circumstances, interests in the Bonds may only be held through interests
in the Global Certificate. Such interests in the Bond will be shown on, and transfers thereof will
be effected only through, records maintained by Euroclear and Clearstream, Luxembourg and
their respective direct and indirect participants. See “Description of the Bonds.”

7. Any resale or other transfer, or attempted resale or other transfer, of the Bonds represented
thereby made other than in compliance with the above-stated restrictions shall not be recognized
by us.

Other Provisions Regarding Transfer of the Bonds

The provisions of the Indenture, including those set forth in the above legend, prohibit or restrict certain
transfers of the Bonds. Interests in the Bonds evidenced by the Global Certificate will be freely transferable
within Euroclear and Clearstream, Luxembourg, subject to the regulations thereof.

Except in the limited circumstances described in the Indenture, no person will be entitled to receive
physical delivery of definitive Bonds. The Bonds are not issuable in bearer form.

Any resale or other transfer, or attempted resale or other transfer, made other than in compliance with
the above-stated restrictions shall not be recognized by us.

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 DESCRIPTION OF THE COMMON SHARES
Set forth below is certain information relating to our share capital, including brief summaries of certain
provisions of the Articles of Incorporation, the ROC Securities and Exchange Law and the regulations
promulgated thereunder and the ROC Company Law as at the date of this Offering Circular.

1. General
As of April 20, 2010, our authorized share capital is NT$35,000,000,000 divided into 3,500,000,000
shares, of which 250,000,000 shares have been reserved for issuance in connection with the employee stock
options, and our paid-in share capital was NT$26,891,820,790, divided into 2,689,182,079 shares, all of
which were in registered form and were issued and outstanding. Under our 2010 employee stock option plan,
which was approved at the Annual Shareholders’ Meeting on June 18, 2010, the total number of options to
be issued under this plan is 14,000 options, where each option gives employees the right to purchase 1,000
Common Shares. In our Annual Shareholders’ Meeting held on June 18, 2010, a proposal presented to our
shareholders to distribute NT$26,893,010 from retained earnings to shareholders through issuance of new
shares was approved by our shareholders. However, we are required to obtain the approval from the relevant
governmental authority in the ROC before issuing such new such shares. As a general principle, the new
Common Shares issued as a result of conversion of the Bonds, if any, will be reflected in our filing and
registration with the Ministry of Economic Affairs (“MOEA”) on a quarterly basis.

2. Dividends and Distributions

Except in limited circumstances under the ROC Company Law, we are not permitted to distribute
dividends or make other distributions to shareholders in respect of any year in which it did not record current
or retained earnings. The ROC Company Law also requires that 10% of annual net income (less prior years’
losses and any gains on the disposal of properties), after payment of taxes and duties, be set aside as a legal
reserve until the accumulated legal reserve equals our paid-in capital. In addition, our Articles of
Incorporation require that before a dividend is paid out of our annual net income (balance of annual income
less taxes, previous years’ losses and 10% legal reserve), no less than 5% of such net income should be paid
to our employees as bonuses, and 1% of its annual net income should be paid to our directors and supervisors
as remuneration.
At the annual general meeting of shareholders, the board of directors submits to the shareholders for
their approval our financial statements for the preceding fiscal year and any proposal for the distribution of
a dividend or the making of any other distribution to shareholders from our net income (subject to compliance
with the requirements mentioned above) for the preceding fiscal year. All Common Shares outstanding and
fully paid as of the relevant record date are entitled to share equally in any dividend or other distribution so
approved. Dividends may be distributed in cash, in the form of common shares or a combination thereof, as
determined by the shareholders at such meeting. In addition to the approval by our shareholders, approval
from the relevant government authorities in the ROC and compliance with applicable ROC laws are required
before we can issue any new shares as stock dividend or employee stock bonus.
In addition to permitting dividends to be paid out of net income, the ROC Company Law permits us
to make distributions to our shareholders of additional Common Shares by capitalizing reserves (including
the legal reserve and capital reserve), if we incur no loss. However, the capitalized portion payable out of our
legal reserve is limited to 50% of the total accumulated legal reserve and such capitalization can only be
effected when the accumulated legal reserve exceeds 50% of our paid-in capital.
For information on the dividends paid by us in recent years, see “Dividends and Dividend Policy”. For
information as to ROC taxes on dividends and distributions, see “Taxation”.

3. Changes in Share Capital and Preemptive Rights

The ROC Company Law and the ROC Securities and Exchange Law provide that any change in the
authorized share capital of a company limited by shares, such as us, requires an amendment to its Articles
of Incorporation (which requires approval at a shareholders’ meeting) and, in the case of a public company

100
such as us, the approval of the FSC is required (if a capital increase is effected at the same time). Authorized
but unissued Common Shares may be issued at such time and, subject to the provisions of the ROC Company
Law and the ROC Securities and Exchange Law mentioned below, upon such terms as our board of directors
may determine.
Under the ROC Company Law, when an ROC company issues new shares for cash, our employees,
whether or not they are shareholders, have rights to subscribe for 10% to 15% of the new issue as determined
by our board of directors, and, subject to certain exceptions, our existing shareholders who are listed on the
shareholders’ register as of the record date have preemptive rights to subscribe for the remaining portion of
new issue in proportion to their existing shareholdings. Any new shares that remain unsubscribed at the
expiration of the subscription period may be offered to the persons selected by the board of directors. The
preemptive rights provisions, however, do not apply to shares issued upon conversion of convertible bonds
or exercise of warrants or stock option.
In addition, in accordance with the ROC Securities and Exchange Law, a public company, such as us,
whose securities are listed on the TSE or traded in the over-the-counter market, that intends to offer new
shares for cash must offer to the public at least 10% of the shares to be sold. This percentage can be increased
by a resolution passed at a shareholders’ meeting, thereby diminishing the number of new shares subject to
the preemptive rights of existing shareholders.

4. Transfer of Shares
Under the ROC Company Law, Common Shares in registered form are transferred by endorsement and
delivery of the related share certificates. In order to assert shareholders’ rights against us, transferees must
have their names and addresses registered on the company’s register. Shareholders are required to file their
respective specimen seals with our share registrar. The settlement of trading of our Common Shares on the
TSE is carried out on the book-entry system maintained by Taiwan Depository & Clearing Corporation.

5. Acquisition of its own Shares by the Company

With limited exceptions, we may not acquire our Common Shares under the ROC Company Law.
However, under an amendment to the Securities and Exchange Law, which took effect on July 21, 2000, we
may, by a board resolution adopted by majority consent at a meeting with two-thirds of our directors present,
purchase our Common Shares on the TSE or by a tender offer, in accordance with the procedures prescribed
by the ROC FSC, for the following purposes:
(1) to transfer Common Shares so purchased to our employees;
(2) to transfer Common Shares so purchased upon conversion of bonds with warrants, preferred
shares with warrants, convertible bonds, convertible preferred shares or certificates of warrants
(collectively, the “Convertible Securities”) issued by us; and
(3) if necessary, to maintain our credit and our shareholders’ equity; provided that the Common
Shares so purchased shall be cancelled thereafter.
Common Shares purchased pursuant to items 1 and 2 above shall be transferred to our employees or
holders of Convertible Securities, as the case may be, within three years after the date of such purchase.
Common Shares purchased pursuant to item 3 above shall be cancelled within six months after the date of
such purchase.
We are not allowed to purchase more than 10% of our total issued and outstanding Common Shares.
In addition, we may not spend more than the aggregate amount of the retained earnings, the premium from
issuing stock and the realized portion of the capital reserve to purchase our Common Shares.
We may not pledge or hypothecate any purchased Common Shares. In addition, we may not exercise
any shareholders’ rights attaching to such Common Shares. In the event that we purchase our Common Shares
on the TSE, our affiliates, directors, supervisors, managers and their respective spouses and minor children
and/or nominees are prohibited from selling any of our Common Shares during the period in which we
purchase our Common Shares.

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 According to the ROC Company Law, as amended and effective from November 14, 2001, an entity,
referred to as a controlled entity, in which we directly or indirectly own more than 50% of the voting shares
or paid-in capital, may not purchase our Common Shares. Also, if we and a controlled entity jointly own,
directly or indirectly, more than 50% of the voting shares or paid-in capital of another entity, referred to as
a third party, the third party may not purchase shares in either us or a controlled entity. This restriction does
not, however, affect any of our Common Shares acquired by a controlled entity or a third-party entity prior
to November 14, 2001.

6. Transfer Restrictions
There are certain transfer restrictions imposed upon shares issued by a public company through private
placement, and upon certain shareholders of a public company under the ROC Securities and Exchange Law
and related securities regulations depending on their shareholding and/or other factors, including, without
limitation, transfer restrictions on our Insiders (as defined below). The ROC Securities and Exchange Law
requires (i) each director, supervisor, manager or shareholder holding 10% or more of the outstanding shares
(including the shareholding of the spouse, minor children and nominees) of a public company (collectively
as the “Insiders” or individually as the “Insider”) to report any changes in that person’s shareholding and any
share pledge to the company and (ii) that person, subject to limited exemptions, may only transfer his/her
shares in one of the following methods: (x) to offer to the public following the approval from or an effective
filing with the ROC FSC; (y) after expiration of the 6-month period commencing on the date of obtaining
the Insider status, to transfer shares, at least three days after the filing with the ROC FSC but within the one
month period as reported, on TSE pursuant to the limitation on the transferable amount per exchange day
promulgated by ROC FSC, provided however a transfer of less than 10,000 shares per exchange day is
exempted from this limitation; and (z) to transfer, within three days after the filing with the ROC FSC, to
designated persons satisfying the qualifications prescribed by the ROC FSC. The current limitation described
in the item (y) above are: (i) for a company with no more than 30 million outstanding common shares, 0.2%
of the outstanding common shares of the company; for a company with more than 30 million outstanding
common shares, the aggregate amount of 0.2% of the 30 million common shares plus 0.1% of the outstanding
shares exceeding 30 million common shares, or (ii) 5.0% of the average trading volume (number of common
shares) on the TSE for the 10 consecutive trading days preceding the reporting day on which any Insider
reports the intended share transfer to the SFC.

7. Meetings of Shareholders
General meetings of shareholders may be ordinary or extraordinary. Ordinary meetings of our
shareholders are generally held in Taipei, Taiwan, within six months following the end of each fiscal year.
Extraordinary meetings may be convened by the board of directors by resolution or by the board of directors
upon the written request of any shareholder or shareholders who have held 3% or more of the outstanding
Common Shares for more than one year. Extraordinary meetings of shareholders may also be convened by
a supervisor. Notice in writing of general meetings of shareholders, stating the place, time and purpose
thereof, must be dispatched to each shareholder of record at least 30 days (in the case of ordinary meetings)
and 15 days (in the case of extraordinary meetings) prior to the date set for each such meeting.

8. Voting Rights
Subject to certain exceptions, the ROC Company Act provides that a holder of Common Shares has one
vote for each Common Share. There is cumulative voting for the election of directors and supervisors. Ballots
for the election of directors are cast separately from those for the election of supervisors. Candidates for the
election of directors and supervisors are nominated by our shareholders at the shareholders’ meeting at which
ballots for such election are cast. Except as otherwise provided by law, a resolution can be adopted by the
holders of at least a majority of the Common Shares represented at a shareholders’ meeting at which the
holders of a majority of all issued and outstanding Common Shares are present. Under the ROC Company
Law, however, in order to approve certain major corporate actions, including any amendment to the Articles
of Incorporation (which is required, inter alia, for any increase in authorized share capital), the dissolution
or amalgamation of a company, the transfer of the whole or an important part of its business, the taking over
of the whole of the business of any other company, the merger or division (spin-off), or the distribution of

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any stock dividend, a meeting of the shareholders must be convened with a quorum of holders of at least
two-thirds of all issued and outstanding Common Shares at which the holders of at least a majority of the
Common Shares represented at the meeting vote in favor thereof. Alternatively, the ROC Company Law
provides that in the case of a public company, such as us, such a resolution may be adopted by the holders
of at least two-thirds of the Common Shares represented at a meeting of shareholders at which holders of at
least a majority of issued and outstanding Common Shares are present.

A shareholder may be represented at an ordinary or extraordinary meeting by proxy if a valid proxy

form is delivered to us at least five days prior to the commencement of the ordinary or extraordinary meeting.
Voting rights attached to our Common Shares that are exercised by our shareholders’ proxy shall be subject
to ROC proxy regulations.

Any shareholder who has a personal interest in a matter to be distributed at our shareholders’ meeting,
the outcome of which may impair our interest, shall not vote or exercise voting rights nor vote or exercise
voting rights on behalf of another shareholder on such matter.

9. Register of Shareholders and Record Dates

We act as our own share registrar and maintain the register of our shareholders at our offices in Taipei,
Taiwan, and enter transfers of Common Shares in such register upon presentation of, among other documents,
certificates in respect of the Common Shares transferred.

Under the ROC Company Law and our Articles of Incorporation, we may, by giving advance public
notice, set a record date and/or close the register of shareholders for a specified period (60 days, 30 days and
5 days respectively, immediately before each ordinary meeting of shareholders, extraordinary meeting of
shareholders and the relevant record date) in order for us to determine the shareholders that are entitled to
certain rights pertaining to the Common Shares.

10. Annual Financial Statements

For a period of at least 10 days prior to the annual ordinary meeting of shareholders, our annual
consolidated and non-consolidated financial statements must be available at its principal office in Taipei for
inspection by the shareholders.

11. Liquidation Rights

In the event of liquidation, the assets remaining after payment of all debts, liquidation expenses and
taxes will be distributed pro rata to the shareholders in accordance with the ROC Company Law and our
Articles of Incorporation.

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 TAXATION

ROC Tax Considerations

The following summarizes the principal ROC tax consequences of owning and disposing of shares if
you are not a resident of Taiwan. You will be considered a non-resident of Taiwan for the purposes of this
section if:
• you are an individual and you are not physically present in Taiwan for 183 days or more during
any calendar year; or
• you are an entity and you are organized under the laws of a jurisdiction other than Taiwan and
have no fixed place of business or other permanent establishment in Taiwan.
You should consult your own tax advisors concerning the tax consequences of owning bonds or shares
in Taiwan and any other relevant taxing jurisdiction to which you are subject.

Bonds
Premium and Possible Interest Payment. Payments of premium or interest, if any, on the Bonds to a
Non-ROC Holder are subject to ROC withholding tax, currently at a rate of 15%, at the time of payment. We
have agreed to pay additional amounts in respect of such withholding tax on the payments of interest or
premium, if any. See “Description of the Bonds.”
Sale. There is no securities transaction tax imposed on the sale of the Bonds. Gains on sale of property
in the ROC are generally subject to ROC income tax. Under current ROC law, however, capital gains from
the sale of securities issued by ROC companies and received by non-residents of the ROC are exempt from
income tax. This exemption applies to capital gains derived from the sale of the Bonds. The reintroduction
of a capital gains tax requires the Legislative Yuan to engage in the full legislative process for the amendment
of the ROC Income Tax Law.
Conversion. ROC law currently provides no specific provisions regarding the ROC income tax
consequences of a conversion of the Bonds into our Common Shares. Without clarification from the ROC tax
authorities, it is impossible to conclude definitively that gains on conversion of the Bonds into our shares will
not be deemed as taxable gains, additional interest income — which is subject to the withholding tax at a rate
up to 20% — or otherwise subject to other ROC taxes. There is no ROC stamp, issue or registration tax
imposed on the issuance of our shares upon conversion of the Bonds.

Shares
Dividends. Dividends, whether in cash or stock, declared by us out of retained earnings and distributed
to a Non-ROC Holder in respect of our Common Shares are subject to ROC withholding tax, currently at a
rate of 20% on the amount of the distribution, in the case of cash dividends, or on the par value of the
distributed shares, in the case of stock dividends. Currently, distributions of stock dividends out of capital
reserves are not subject to ROC withholding tax.
Sale. Securities transaction tax is payable and withheld by the seller at the rate of 0.3% of the
transaction price upon a sale of our shares. Under current ROC law, capital gains on transactions in shares
issued by ROC companies are exempt from income tax. This exemption applies to capital gains derived from
the sale of our shares.

Estate and Gift Tax

Subject to allowable exclusions, deductions and exemptions, ROC estate tax is payable on any property
within the ROC of a deceased individual, and ROC gift tax is payable on any property within the ROC
donated by any individual. Estate tax and gift tax are currently payable at a fixed rate of 10%. Under ROC
estate and gift tax laws, shares issued by ROC companies, such as our shares, are deemed located in the ROC
regardless of the location of the holder.

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Preemptive Rights
Distributions of statutory preemptive rights for shares in compliance with the ROC Company Law are
not subject to ROC tax. Proceeds derived from sales of statutory preemptive rights evidenced by securities
by a non-resident are currently exempt from income tax, but may be subject to an ROC securities transaction
tax, discussed above. Proceeds derived from sales of statutory preemptive rights that are not evidenced by
securities are subject to income tax at the rate of:
• 20% of the gains realized by non-Taiwan entities; and
• 20% of the gains realized by non-Taiwan individuals.
Subject to compliance with ROC law, we have the sole discretion to determine whether statutory
preemptive rights are evidenced by securities or not.

Retained Earnings Tax

Under the ROC Income Tax Laws, we are subject to a 10% retained earnings tax on our after-tax
earnings generated after January 1, 1998 that are not distributed in the following year. Any retained earnings
tax so paid will further reduce the retained earnings available for future distribution. When we declare
dividends out of those retained earnings, the retained earnings tax we are subject to may be credited against
the withholding tax imposed on the non-resident holders of our shares.

Tax Treaty
Taiwan does not have an income tax treaty with the United States. Taiwan has tax treaties for the
avoidance of double taxation with Indonesia, Singapore, South Africa, Australia, Netherlands, Belgium,
Denmark, Vietnam, New Zealand, Malaysia, Macedonia, Swaziland, Gambia, United Kingdom, Senegal,
Sweden, and Israel, which may limit the rate of ROC withholding tax on dividends paid with respect to our
shares.

EU Directive on the Taxation of Savings Income

Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is
required to provide to the tax authorities of another Member State details of payments of interest or other
similar income paid by a person within its jurisdiction to, or collected by such a person for, an individual
resident or certain limited types of entity established in that other Member State; however, for a transitional
period, Austria, Belgium and Luxembourg may instead apply a withholding system in relation to such
payments, deducting tax at rates rising over time to 35%. The transitional period is to terminate at the end
of the first full fiscal year following agreement by certain non-EU countries to the exchange of information
relating to such payments.
A number of non-EU countries, and certain dependent or associated territories of certain Member
States, have adopted similar measures (either provision of information or transitional withholding) in relation
to payments made by a person within its jurisdiction to, or collected by such a person for, an individual
resident or certain limited types of entity established in a Member State. In addition, the Member States have
entered into provision of information or transitional withholding arrangements with certain of those
dependent or associated territories in relation to payments made by a person in a Member State to, or
collected by such a person for, an individual resident or certain limited types of entity established in one of
those territories.
On 13 November, 2008 the European Commission published a proposal for amendments to the
Directive, which included a number of suggested changes which, if implemented, would broaden the scope
of the requirements described above. Investors who are in any doubt as to their position should consult their
professional advisors.

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 PLAN OF DISTRIBUTION
We are offering the Bonds described in this Offering Circular through a number of Initial Purchasers.
J.P. Morgan Securities Ltd. and Citigroup Global Markets Limited are acting as joint book-running managers
of the offering and as representatives of the Initial Purchasers. We have entered into a purchase agreement
with the Initial Purchasers. Subject to the terms and conditions of the purchase agreement, we have agreed
to sell to the Initial Purchasers, and each Initial Purchaser has severally agreed to purchase, at the public
offering price less the underwriting discounts and commissions set forth on the cover page of this Offering
Circular, the amount of 2015 Bonds and 2017 Bonds listed next to its name in the following tables:

2015 Bonds

Name Principal Amount

J.P. Morgan Securities Ltd ........................................................................................... $150,000,000

Citigroup Global Markets Limited............................................................................... $150,000,000
Total ............................................................................................................................ $300,000,000

2017 Bonds

Name Principal Amount

J.P. Morgan Securities Ltd. .......................................................................................... $100,000,000

Citigroup Global Markets Limited............................................................................... $100,000,000
Total ............................................................................................................................ $200,000,000

The Initial Purchasers are committed to purchase all the Bonds offered by us if they purchase any
Bonds. The purchase agreement also provides that if an Initial Purchaser defaults, the purchase commitments
of non-defaulting Initial Purchasers may also be increased or the offering may be terminated.
The purchase price of the Bonds will be the initial offering price set forth on the cover of this Offering
Circular, less underwriting discounts and commissions.
The Bonds have not been and will not be registered under the Securities Act for offer or sale as part
of their distribution and may not be offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities
Act.
We have been advised by the Initial Purchasers that each of the Initial Purchasers proposes to resell the
Bonds outside the United States in offshore transactions in reliance on Regulation S and in accordance with
applicable law. Terms used above have the meanings given to them by Regulation S under the Securities Act.
An Offering Circular in electronic format may be made available on the web sites maintained by one
or more Initial Purchasers, or selling group members, if any, participating in the offering. The Initial
Purchasers may agree to allocate Bonds to Initial Purchasers and selling group members for sale to their
online brokerage account holders. Internet distributions will be allocated by the representatives to Initial
Purchasers and selling group members that may make Internet distributions on the same basis as other
allocations.
For a period of 90 days after the date of this Offering Circular, we will not (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or file with the
SEC a registration statement under the Securities Act relating to, any Common Shares or any securities
convertible into or exercisable or exchangeable for Common Shares, or publicly disclose the intention to
make any offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership of the Common Shares or any such other
securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of
Common Shares or such other securities, in cash or otherwise, without the prior written consent of J.P.
Morgan Securities Ltd. and Citigroup Global Markets Limited, other than the Bonds to be sold hereunder and

106
provided that (A) we may issue employee bonus shares and stock dividends consistent with past practice, (B)
we may implement stock splits and employee stock option plans or employee share purchase plans, (C) we
may issue common stock issuable upon the conversion of securities or the exercise of warrants outstanding
as of the date of this Offering Circular and as described in this Offering Circular, and (iv) we may make any
application or filing with any applicable regulatory authority for issuance and offering of new common shares
approved by the shareholders prior to the date of this Offering Circular. Notwithstanding the foregoing, if (A)
during the last 17 days of the 90-day restricted period, we issue an earnings release or material news or a
material event relating us occurs; or (B) prior to the expiration of the 90-day restricted period, we announce
that we will release earnings results during the 16-day period beginning on the last day of the 90-day period,
the restrictions described above shall continue to apply until the expiration of the 18-day period beginning
on the issuance of the earnings release or the occurrence of the material news or material event.
The Bonds and the Common Shares issuable upon conversion thereof have not been registered under
the Securities Act and may not be offered or sold within the U.S. or to, or for the account or benefit of, U.S.
persons (as defined in Regulation S under the Securities Act) except in transactions exempt from, or not
subject to, the registration requirements of the Securities Act. For a description of restrictions on transfers
or hedging of the Bonds and Common Shares issuable upon conversion thereof see “Transfer restrictions.”
The Bonds are a new issue of securities, and there is currently no established trading market for the
Bonds. In addition, the Bonds are subject to certain restrictions on resale and transfer as described in this
Offering Circular under “Transfer restrictions.” The Initial Purchasers have advised us that they intend to
make a market in the Bonds, but they are not obligated to do so. The Initial Purchasers may discontinue any
market making in the Bonds at any time in their sole discretion. Accordingly, we cannot assure you that a
liquid trading market will develop for the Bonds, that you will be able to sell your Bonds at a particular time
or that the prices that you receive when you sell will be favorable.
You should be aware that the laws and practices of certain countries require investors to pay stamp taxes
and other charges in connection with purchases of securities.

United Kingdom
This document is only being distributed to and is only directed at (i) persons who are outside the United
Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth entities, and other persons
to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons
together being referred to as “relevant persons”). The Bonds are only available to, and any invitation, offer
or agreement to subscribe, purchase or otherwise acquire such Bonds will be engaged in only with, relevant
persons. Any person who is not a relevant person should not act or rely on this document or any of its
contents.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a “Relevant Member State”), from and including the date on which the European
Union Prospectus Directive (the “EU Prospectus Directive”) is implemented in that Relevant Member State
(the “Relevant Implementation Date”) an offer of securities described in this Offering Circular may not be
made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the
Bonds which has been approved by the competent authority in that Relevant Member State or, where
appropriate, approved in another Relevant Member State and notified to the competent authority in that
Relevant Member State, all in accordance with the EU Prospectus Directive, except that it may, with effect
from and including the Relevant Implementation Date, make an offer of Bonds to the public in that Relevant
Member State at any time:
• to legal entities which are authorized or regulated to operate in the financial markets or, if not so
authorized or regulated, whose corporate purpose is solely to invest in securities;
• to any legal entity which has two or more of (1) an average of at least 250 employees during the
last financial year; (2) a total balance sheet of more than =C 43,000,000 and (3) an annual net
turnover of more than = C 50,000,000, as shown in its last annual or consolidated accounts;

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 • to fewer than 100 natural or legal persons (other than qualified investors as defined in the EU
Prospectus Directive) subject to obtaining the prior consent of J.P. Morgan Securities Ltd. and
Citigroup Global Markets Limited for any such offer; or
• in any other circumstances which do not require the publication by us of a prospectus pursuant
to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression “an offer of securities to the public” in relation to any
securities in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the securities to be offered so as to enable an investor
to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any
measure implementing the EU Prospectus Directive in that Member State and the expression “EU Prospectus
Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant
Member State.

United States
The Bonds have not been and will not be registered under the Securities Act and may not be offered
or sold in the United States except pursuant to an effective registration statement or in accordance with an
applicable exemption from the registration requirements of the Securities Act. Accordingly, the Bonds are
being offered and sold by the Initial Purchasers only outside the United States in reliance upon Regulation
S.
Each Initial Purchaser has agreed that, except as permitted by the Purchase Agreement, it will not offer,
sell or deliver any Bonds as part of its distribution at any time or otherwise until 40 days after the later of
the commencement of the offering and the Closing Date, except in either case in accordance with Regulation
S under the Securities Act, within the United States or to, or for the account or benefit of, U.S. persons.
Accordingly, neither the Initial Purchasers, their affiliates nor any persons acting on their behalf have
engaged or will engage in any directed selling efforts (within the meaning of Regulations S) with respect to
the Bonds, and the Initial Purchasers, their affiliates and any such persons have complied and will comply
with the offering restrictions requirement of Regulations S. Each Initial Purchaser has severally agreed that,
at or prior to confirmation of a sale of Bonds, it will have sent to each distributor, dealer or person receiving
a selling concession, fee or other remuneration that purchases Bonds from or through it during the restricted
period a confirmation or other notice setting forth the restrictions on offers and sales of the Bonds within the
United States or to, or for the account or benefit of, U.S. persons.
As used in the immediately preceding paragraph, the term “United States” has the meaning given to it
by Regulation S under the Securities Act.

Switzerland
This document, as well as any other material relating to the Bonds which are the subject of the offering
contemplated by this Offering Circular, do not constitute an issue prospectus pursuant to Article 652a and/or
1156 of the Swiss Code of Obligations. The Bonds will not be listed on the SIX Swiss Exchange and,
therefore, the documents relating to the Bonds, including, but not limited to, this document, do not claim to
comply with the disclosure standards of the listing rules of SIX Swiss Exchange and corresponding
prospectus schemes annexed to the listing rules of the SIX Swiss Exchange. The Bonds are being offered in
Switzerland by way of a private placement, i.e., to a small number of selected investors only, without any
public offer and only to investors who do not purchase the Bonds with the intention to distribute them to the
public. The investors will be individually approached by us from time to time. This document, as well as any
other material relating to the Bonds, is personal and confidential and does not constitute an offer to any other
person. This document may only be used by those investors to whom it has been handed out in connection
with the offering described herein and may neither directly nor indirectly be distributed or made available
to other persons without our express consent. It may not be used in connection with any other offer and shall
in particular not be copied and/or distributed to the public in (or from) Switzerland.

Hong Kong
The Bonds may not be offered or sold by means of any document other than (i) in circumstances which
do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of

108
Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance
(Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not
result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws
of Hong Kong), and no advertisement, invitation or document relating to the Bonds may be issued or may
be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere),
which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong
(except if permitted to do so under the laws of Hong Kong) other than with respect to Bonds which are or
are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within
the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder.

Japan
The Bonds have not been and will not be registered under the Financial Instruments and Exchange Law
of Japan, as amended (the “Financial Instruments and Exchange Law”), and the Bonds will not be offered
or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used
herein means any person resident in Japan, including any corporation or other entity organized under the laws
of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except
pursuant to any exemption from the registration requirements of, and otherwise in compliance with, the
Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial
guidelines of Japan.

PRC
This Offering Circular does not constitute a public offer of the Bonds, whether by sale or by
subscription, in the PRC. The Bonds will not be offered or sold within the PRC by means of this Offering
Circular or any other document.

ROC
Each of the Initial Purchasers has severally represented and agreed that it has not offered, sold or
delivered, and will not offer, sell or deliver, at any time, directly or indirectly, any Bonds acquired by it as
part of the offering in the ROC or to, or for the account or benefit of, any resident of the ROC.

Singapore
Each of the Initial Purchasers has acknowledged that this Offering Circular has not been registered as
a prospectus with the Monetary Authority of Singapore. Accordingly, each of the Initial Purchasers has
represented, warranted and agreed that it has not offered or sold any Bonds or caused such Bonds to be made
the subject of an invitation for subscription or purchase and will not offer or sell the Bonds or cause the
Bonds to be made the subject of an invitation for subscription or purchase, and has not circulated or
distributed, nor will it circulate or distribute, this Offering Circular or any other document or material in
connection with the offer or sale, or invitation for subscription or purchase, of the Bonds, whether directly
or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the
Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to
Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified
in Section 275, of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other
applicable provision of the SFA.

Note:
This Offering Circular has not been registered as a prospectus with the Monetary Authority of
Singapore. Accordingly, this Offering Circular and any other document or material in connection with the
offer or sale, or invitation for subscription or purchase, of the Bonds and/or the Shares may not be circulated
or distributed, nor may the Bonds and/or the Shares be offered or sold, or be made the subject of an invitation
for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an

109
institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or
any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of
the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable
provision of the SFA.
Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which
is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole
business of which is to hold investments and the entire share capital of which is owned by one
or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments
and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest
(howsoever described) in that trust shall not be transferred within six months after that corporation or that
trust has acquired the Bonds pursuant to an offer made under Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any
person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law; or

(4) as specified in Section 276(7) of the SFA.

Certain of the Initial Purchasers and their affiliates have provided in the past to us and our affiliates and
may provide from time to time in the future certain commercial banking, financial advisory, investment
banking and other services for us and such affiliates in the ordinary course of their business, for which they
have received and may continue to receive customary fees and commissions. In addition, from time to time,
certain of the Initial Purchasers and their affiliates may effect transactions for their own account or the
account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt
or equity securities or loans, and may do so in the future.

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 GENERAL INFORMATION

Listing

Approval in-principle has been received for the listing of the Bonds on the SGX-ST. The Bonds will
be traded on the SGX-ST in a minimum board lot size of US$200,000 for so long as the Bonds are listed on
the SGX-ST and the rules of the SGX-ST so require. The SGX-ST assumes no responsibility for the
correctness of any statements made, opinions expressed or reports contained in this Offering Circular.
Admission of the Bonds to the Official List of the SGX-ST and quotation of the Bonds on the SGX-ST are
not to be taken as an indication of the merits of the Bonds, Acer Inc. and its subsidiaries or associated
companies (if any). Our Common Shares have been listed on the TSE since September 18, 1996 under the
number “2353”. The GDRs have been listed on the LSE under the symbol “ACID” since November 1, 1995.

Authorizations

This Offering and the issue of the Bonds were authorized and approved by our board of directors on
May 31, 2010 and by the ROC FSC on June 29, 2010.

Clearing Systems

The Bonds have been accepted for clearance through the facilities of Euroclear and Clearstream. The
ISIN for the 2015 Bonds and 2017 Bonds is XS0528416232 and XS0528416315, respectively and the
Common Code number for the 2015 Bonds and 2017 Bonds is 052841623 and 052841631, respectively.

Action by the Trustee

The Bonds provide that the Trustee will take action on behalf of the holders thereof in certain
circumstances, but only if the Trustee is indemnified and/or secured to its satisfaction. It may not be possible
for the Trustee to take certain actions and, accordingly, in such circumstances the Trustee will be unable to
take such actions, notwithstanding the provision of an indemnity and/or security satisfactory to it, and it will
be for holders of the Bonds to take such actions directly.

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 LEGAL MATTERS

Certain legal matters in connection with the offered Bonds will be passed upon for us by Tsar & Tsai
Law Firm, ROC counsel to the company, and for the Initial Purchasers by Davis Polk & Wardwell LLP, U.S.
counsel for the Initial Purchasers.

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 INDEPENDENT AUDITORS

Our consolidated financial statements as of and for the years December 31, 2007, 2008 and 2009
included in this Offering Circular have been audited by KPMG, whose audit report included herein contains
an explanatory paragraph relating to the adoption of new accounting principle in 2008.

Our unaudited condensed consolidated interim financial statements as of March 31, 2010 and for the
three-month periods ended March 31, 2010 and 2009 included in this Offering Circular have been reviewed
in accordance with Republic of China Statement of Auditing Standards No. 36, “Engagements to Review
Financial Statements” by KPMG, whose report is included herein.

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 SUMMARY OF CERTAIN SIGNIFICANT DIFFERENCES BETWEEN
ROC GAAP AND US GAAP

Our consolidated financial statements have been prepared in conformity with ROC GAAP, which differ
in certain significant respects from US GAAP. A brief description of certain significant differences between
ROC GAAP and US GAAP is set out below. The regulatory organizations that promulgate ROC GAAP and
US GAAP have projects ongoing that could have a significant impact on future comparisons such as the
comparison below.

The summary is not intended to provide a comprehensive listing of all existing or future differences
between ROC GAAP and US GAAP, including those specifically related to us and our subsidiaries or to the
industries in which we operate. No attempt has been made to identify (a) future differences between ROC
GAAP and US GAAP that may arise as a result of prescribed changes in accounting standards, or (b)
disclosure, presentation or classification differences that would affect the manner in which transactions and
events are reflected in our financial statements, or the financial statements of any of our subsidiaries, or the
respective notes thereto. Further, had we undertaken to identify the differences specifically affecting the
financial statements presented in this Offering Circular, other potentially significant differences may have
come to our attention which are not provided in the following summary. Accordingly, this summary is not
intended to provide a complete description of all differences which may have a significant impact on our
financial statements. US GAAP is generally more restrictive and comprehensive than ROC GAAP regarding
the recognition and measurement of transactions, account classification and disclosure requirements.

The following discussion refers to our historical practices in preparing our financial statements in
accordance with ROC GAAP. We expect that we will follow comparable practices when preparing our
financial statements in the future.

In making an investment decision, investors must rely upon their own examination of us, the terms of
the offering and the financial information. Potential investors shall consult their own professional advisors
for an understanding of the differences between ROC GAAP and US GAAP and how these differences might
affect the financial information included herein.

Management has not quantified the effects of the differences between ROC GAAP and US GAAP on
our financial results or the financial results of any of our subsidiaries.

ROC GAAP US GAAP

Bonuses to Employees, Directors and Supervisors

Under the ROC regulations and the company’s Bonuses and remuneration are generally estimated
Articles of Incorporation, a portion of distributable and expensed as services are rendered. Shares issued
earnings should be set aside as bonuses to employees, as part of these bonuses are recorded at fair market
directors and supervisors. Bonuses to directors and value. There is no “true-up” to the actual outcome.
supervisors are always paid in cash. However,
bonuses to employees may be granted in cash or
shares or both. Shares issued as part of these bonuses
are not necessarily recorded at fair value as they are
normally determined based on a fixed amount
determined and approved by the Board of Directors
and Shareholders and the number of shares thereof
are determined by simply dividing such fixed amount
by the par value per share of NT$10. All of these
appropriations are charged against retained earnings
after such appropriations are formally approved by
the shareholders in the following year.

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 ROC GAAP US GAAP

Effective January 1, 2008, the directors’ and

supervisors’ remunerations and employee bonuses are
estimated and expensed in the period when services
are rendered under ROC GAAP. This change in
accounting principle is accounted for prospectively in
accordance with ARDF Interpretation No. 2007-052.

However, a “true-up” (prior year) adjustment is made

if the estimated amounts of employee bonus and
directors’ and supervisors’ remuneration and actual
outcomes resolved by the board of directors thereof
differ.

Stock dividends

Under ROC GAAP, stock dividends are recorded as a
reduction to retained earnings using the par value of
the stock issued, and the same amount is recorded to
the common stock account. Unlike US GAAP, there is
no such de minimis test for recording stock dividends
using fair value method and for determining stock
split.
Under US GAAP, when the ratio of distribution is less
than 20% or 25% of shares of the same class
outstanding, stock dividends are generally recorded
based on the fair value method, with the par value
recorded in the capital stock accounts and the excess
of fair value over the par value being recorded as
additional paid-in capital. Distribution in excess of
20% or 25% is generally considered as stock split.

Equity-method investments and other-than-

temporary impairment

Under ROC GAAP, in accordance with ROC SFAS
No. 35, an equity-method investment is considered to
be impaired if there is objective evidence of
impairment as a result of one or more events that had
occurred as of the balance sheet date indicating that
the recoverable amount is below the carrying amount
of the investment. Impairment is assessed at the
individual security level. The recoverable amount is
determined based on one of the two following
approaches: (1) the discounted expected future net
cash flows from the investee company; or (2) the
combination of expected cash dividends from the
investee company and the discounted cash flows from
the ultimate disposal of the investment. The
impairment loss is recorded in profit or loss. If the
recoverable amount increases in the future period, the
amount previously recognized as impairment loss
could be reversed and recognized as a gain in profit or
loss.
Under US GAAP, an equity-method investment is
considered to be impaired if such impairment is other
than temporary. The amount of the impairment loss is
calculated by reference to the excess of the carrying
value of the equity-method investment over its fair
value. In determining whether a decline in value is
other than temporary, the duration and severity of the
decline in value, the financial condition of the
investee, the extent of recovery in market value
subsequent to the reporting date, and reports of
external market analysts for the investee and/or the
industry that the investee operates in were considered.
Unlike ROC GAAP, an impairment loss recognized
cannot be reversed subsequently.

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 ROC GAAP US GAAP

Accounting for changes in ownership interest in

investee companies

Under ROC GAAP, when an investee company issues
additional shares and the investor’s ownership
interest changes as a result, any resulting difference
between the investor’s investment balance and its
proportionate share of the investee company’s net
equity is adjusted to the investor’s investment account
against the investor’s capital reserve or retained
earnings if the related capital reserve balance is
insufficient. Upon subsequent disposition of the
investment, amounts previously recorded to capital
reserve or retained earnings relating to the respective
investment will be reversed and recorded as part of
the gain or loss on disposal.
Under US GAAP, if the reduction in the investor’s
equity interest occurs due to a public offering by the
investee company to external investors, gain
recognition is permitted provided the transaction is
not ‘a part of a broader corporate reorganization’
planned by the investor company. Gains and losses
arising from issuances by an investee company of its
own stock should be presented as a separate line item
in the consolidated income statement and clearly be
designated as non-operating income.
Examples of situations where gain recognition would
not be appropriate are:

(a) where subsequent capital transactions are

contemplated that raise concerns about the
investor realizing the gain that arises; or

(b) where the investee company is a start-up

company, a research and development company
or an entity with going concern problems.

In such cases, realization is not assured and so the

change in the investor’s proportionate share of an
investee’s equity should be accounted as an equity
transaction, i.e. through reserves.

Impairment of long-lived assets and long-lived

assets to be disposed of

Reversal of losses is permitted in certain Reversals of impairment losses are prohibited.

circumstances, but no reversal is permitted for
impairment of goodwill.

Accounting for financial instruments

ROC GAAP allows classification of any financial There is no such provision under US GAAP.
asset or financial liability with an available public
market price as financial assets/liabilities at fair value
through profit or loss.

Reversals of impairment losses for held-to-maturity Reversals of impairment losses are prohibited for
are permitted in certain circumstances. held-to-maturity.

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 ROC GAAP
Cost of sales
Under ROC GAAP, the unrealized gross profit
generated from downstream intercompany
transactions for equity method investees is eliminated
and presented as a reconciling item of realized gross
profit in the statement of income. A corresponding
liability is recorded for the amount of the unrealized
gross profit in the balance sheet.
Segment information
ROC GAAP requires disclosure of segmental
information in the footnotes to the financial
statements according to industry and geographic
information, which need not necessarily be the same
as the management’s approach for reporting
segmental information to the company’s chief
operating decision makers that are used internally for
evaluating segmental performance and deciding
resource allocation to segments.
Statement of cash flows
Under ROC GAAP, certificates of time deposits with Under US GAAP, certificates of time deposits with
original maturities of greater than three months and original maturities of over three months are classified
within one year are classified as cash and cash as available-for-sale securities.
equivalents.
Under ROC GAAP, prior to January 1, 2008,
remuneration to directors and supervisors and
employee bonuses are presented under financing
activities in the consolidated statement of cash flows.
Effective January 1, 2008, such remuneration or
bonuses are presented under operating activities in
the consolidated statement of cash flows.
Under ROC GAAP, cash flows from the derivative
financial instrument transactions are presented under
operating activities in the consolidated statement of
cash flows.
117
US GAAP
Under US GAAP, the unrealized gross profit
generated from downstream transactions is generally
charged against cost of sales and credited to the
investment account.
Under US GAAP, a public business enterprise is
required to present segmental information based on
operating segments. Several operating segments may,
provided aggregation criteria are met, be aggregated
to reportable segments for which the required
information is disclosed. Disclosure is based on the
management’s approach for reporting segmental
information to the company’s chief operating decision
makers that are used internally for evaluating
segmental performance and deciding resource
allocation to segments.
Under US GAAP, remuneration to directors and
supervisors and employee bonuses are presented
under operating activities in the consolidated
statement of cash flows.
Under US GAAP, cash flows from the derivative
financial instrument transactions are presented under
investing activities in the consolidated statement of
cash flows.
 ROC GAAP US GAAP

Comprehensive income

Under ROC GAAP, there is currently no specific Comprehensive income and its components
standard for accounting and reporting of (revenues, expenses, gains and losses) must be
comprehensive income. presented in a full set of financial statements under
US GAAP. Comprehensive income includes all
changes in stockholders’ equity during a period
except for those resulting from investments by or
distributions to owners, including certain items not
included in the current results of operations.

Valuation of inventory

Prior to January 1, 2009, inventory is valued at the
lower of cost or market. Market is determined on the
basis of replacement cost or net realizable value. Any
write-down of inventory that is no longer required
must be reversed.
Inventory is valued at the lower of cost or market,
with market limited to an amount that is not more
than net realizable value nor less than net realizable
value less a normal profit margin. Any write-down of
inventory that is no longer required must not be
reversed.

Effective January 1, 2009, under the amended ROC

SFAS No. 10, “Inventory”, market is determined on
the basis of net realizable value.

Employee stock options

Prior to January 1, 2008, the employee stock options Before the revised U.S. SFAS 123 became effective in
were accounted for based on Interpretations (92) 070, 2006, US GAAP offered a choice of two methods to
071 and 072 issued by the Accounting Research and account for share based compensation (including
Development Foundation, under which, the intrinsic stock options): either the intrinsic value method or the
value method is adopted to recognize the fair value method; under the intrinsic value method
compensation cost, which is the difference between compensation cost is measured as the excess, if any,
the market price of the stock and the exercise price of
of the quoted price of the stock at the measurement
the employee stock option on the measurement date. date over the amount paid by the employee. Under the
Any compensation cost is charged to expense over the fair value method, compensation cost is measured at
employee vesting period and increases the the fair value of the award on the applicable
stockholders’ equity accordingly. measurement date. U.S. SFAS 123 (R), which is
effective for the annual reporting beginning after
Effective from January 1, 2008, under ROC SFAS No. December 15, 2005, establishes fair value as the
39, “Accounting for Share-based Payment,” share- measurement objectives in accounting for share-
based payment transactions are measured at fair value based payment arrangements (including employee
and charged against profit and loss. stock options) and requires all entities to apply a
fair-value based measurement method in accounting
for share-based transactions with employees, except
for equity instruments held by employee share
ownership plans. However, it provides certain
exceptions to that measurement method if it is not
possible to reasonably estimate the fair value of an
award at the grant date.

Treasury stock

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 ROC GAAP
When a company acquires its outstanding shares as
treasury stock, the acquisition cost is debited to the
treasury stock account if the shares are purchased.
The carrying value of treasury stock is calculated by
using the weighted average approach according to the
same class of treasury stock (common stock or
preferred stock).
Only cost method is allowed under ROC GAAP.
Under ROC GAAP, for a stock purchase plan that is
effective prior to January 1, 2008, the difference, if
any, between the cost paid by the company for the
treasury stock and the cash received from employees
is charged to a shareholders’ equity account.
However, the ARDF Interpretation No. 96-266,
“Accounting for treasury stock purchased by
employees” issued in 2008, requires recognition of
compensation expenses on treasury stock sold to
employees from the stock purchase plan that is
effective from January 1, 2008.
Income tax
ROC SFAS No. 22 “Accounting for Income Taxes”
which was issued in June 1994, is substantially
similar to US GAAP. However, under ROC GAAP,
the criteria for determining whether a valuation
allowance is required are less stringent as compared
to US GAAP.
Under ROC GAAP, in accordance with ROC SFAS
22, there are no differences in the calculation of
income tax provision and the same corporate income
tax rate of 25% is adopted for both periods between
annual financial statements and interim quarterly
financial statements.
119
US GAAP
Two general methods of handling treasury stock in the
accounts are the cost method and the par value
method. Both methods are generally acceptable. The
cost method is debiting the Treasury Stock account
for the reacquisition cost and reporting this account as
a deduction from the total paid-in capital and retained
earnings on the balance sheet. The par value method
records all transactions in treasury shares at their par
value and reports the treasury stock as a deduction
from capital stock only. An excess of purchase price
over par value may be allocated between capital
surplus and retained earnings. Alternatively, the
excess may be charged entirely to retained earnings.
An excess of par value over purchase price should be
credited to capital surplus.
Under US GAAP, current tax liabilities are
recognized for estimated taxes payable for the current
period. U.S. SFAS No. 109 requires that all temporary
differences between the carrying amounts of assets
and liabilities and their respective tax bases be
recognized as deferred tax liabilities or assets. A
valuation allowance is not provided on tax assets to
the extent that it is not “more likely than not” that
such deferred tax assets will be realized. Under US
GAAP, if a company has experienced cumulative
losses in recent years, it is not generally able to
consider projections of future operating profits for the
purpose of determining the valuation allowance for
deferred income tax assets. A change in tax rate or law
requires an adjustment to such deferred tax assets and
liabilities in the period of enactment and is reported
as part of the results of operations.
Under US GAAP, tax provisions in interim quarterly
financial statements are provided based on an
estimated effective tax rate expected to be applicable
to the full fiscal year. Such estimated effective tax
rate takes into account all anticipated tax attributes
for the full fiscal year.
 ROC GAAP US GAAP

Companies in the ROC are subject to a 10% tax on
profits retained and earned after December 31, 1997.
If the retained profits are distributed to the
shareholders in the following fiscal year, no 10%
surtax is due. Under ROC GAAP, income tax expense
is recorded in the statement of operations in the
following fiscal year if the earnings are not
distributed to the shareholders.
Under US GAAP, income tax expense related to the
10% retained profit tax is recorded in the statement of
income in the year that the profits were earned based
on management’s estimate of the amount of profits to
be retained. The income tax expense, including the
tax effects of temporary differences, is measured by
using the rate that includes the estimated tax on
undistributed earnings.

Earnings per share

Under ROC GAAP, basic earnings per share are Under US GAAP, when a simple capital structure
calculated by dividing net income attributable to exists, basic earnings per share is based on the
common shareholders by the weighted average weighted average number of shares outstanding.
number of shares outstanding during the year. The When a complex capital structure exists, diluted
shares distributed for employee bonus are treated as earnings per share is based on the weighted average
outstanding at the beginning of each period. Diluted number of shares outstanding plus the number of
earnings per share are calculated by taking basic additional shares that would have been outstanding if
earnings per share into consideration plus additional dilutive potential common shares had been issued,
common shares that would have been outstanding if with appropriate adjustments to income or loss that
the dilutive share equivalents had been issued. Net would result from the assumed conversions of those
income is also adjusted for the interest and other potential common shares. The materiality of the
income or expenses derived from any underlying dilutive effect is not considered.
dilutive share equivalents. The weighted average
shares outstanding are adjusted retroactively for stock
dividends issued, capitalization of additional paid-in
capital and employee bonus. Anti-dilutive effects are
not included in the dilutive EPS calculation. Under
the ARDF Interpretation No. 97-169 “Impacts of
Employee Stock Bonuses on Earnings Per Share”
which took effect in 2008, the shares distributed for
employee bonus are treated as outstanding as of their
grant date in the calculation of basic earnings per
share after 2008. For employee bonus that may be
distributed in shares, the number of shares to be
distributed is taken into consideration assuming the
distribution will be made entirely in shares when
calculating for diluted earnings per share in and after
2008. Commencing from 2009, distribution of
employees’ bonus in the form of shares is not adjusted
retroactively.

Disclosure of new accounting pronouncements

Under ROC GAAP, disclosure of recently issued US GAAP requires disclosure of the impact that
accounting standards but not yet effective as of the recently issued accounting standards will have on the
balance sheet date is not required. financial statement of the company when adopted in
the future

120
 APPENDIX A — FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN THE ROC
The information provided in this appendix has been extracted from various government and other
publicly available publications that have not been prepared or independently verified by us, the Initial
Purchasers or any of their respective affiliates or advisers in connection with the offering of the Bonds.
References to the ROC Financial Supervisory Commission (“ROC FSC”) in this section include the ROC
Securities and Futures Bureau and its two predecessors, the ROC Securities and Exchange Commission and
ROC Securities and Futures Commission.

Foreign Investment
Besides the general restriction against direct investment by non-ROC persons (excluding a PRC person
which is subject to separate investment restrictions as mentioned below) in ROC companies, non-ROC
persons (except in certain limited cases) are currently prohibited from investing in certain industries in the
ROC pursuant to a Negative List, as amended by the Executive Yuan. The prohibition on foreign investment
in the prohibited industries specified in the Negative List is absolute in the absence of specific exemption
from the application of the Negative List. Pursuant to the Negative List, certain other industries are restricted
so that non-ROC persons (except in certain limited cases) may invest in any company of such industries only
up to a specified level and with the specific approval of the relevant competent authority which is responsible
for enforcing the relevant legislation which the Negative List is intended to implement.

Foreign Investment in ROC Securities Market

Historically, foreign investment in the ROC securities markets has been restricted. Since 1983, the ROC
government has periodically enacted legislation and adopted regulations to permit foreign investment in the
ROC securities market.
Regulations Governing Investment in Securities By Overseas Chinese and Foreign Nationals (the
“Regulations”), which was approved by the Executive Yuan on May 26, 1983 and has been amended from
time to time, is one of the major regulations governing foreign investment in Taiwan securities market.
Under the Regulations, foreign investors are classified as either “onshore foreign investors” and
“offshore foreign investors” according to their respective geographical location. Both onshore and offshore
foreign investors are allowed to invest in ROC securities after they register with the TSE. The Regulations
further classify foreign investors into foreign institutional investors and foreign individual investors.
“Foreign institutional investors” refer to those investors incorporated and registered in accordance with
foreign laws outside of the ROC (i.e., offshore foreign institutional investors) or their branches set up and
recognized within the ROC (i.e., onshore foreign institutional investors). Offshore foreign institutional
investors were previously required to apply for an approval from the CBC, in addition to the registration with
the TSE. However, the amendment to the Regulations, which took effect on July 15, 2004, abolished such
requirement. Offshore overseas Chinese and foreign individual investors are subject to a maximum
investment ceiling that will be separately determined by the ROC FSC after consultation with the CBC. On
the other hand, foreign institutional investors are not subject to any ceiling for investment in the ROC
securities market.
On April 30, 2009, the ROC FSC promulgated regulations allowing PRC institutional investors that
meet the qualifications imposed by PRC financial regulators for Qualified Domestic Institutional Investors
(“QDII”) and certain other PRC persons (together with the ODII, “Qualified PRC Person”) to invest in
securities of ROC companies. However, Qualified PRC Persons are currently prohibited from investing in
certain industries in the ROC pursuant to a PRC Investors Negative List promulgated by the ROC FSC.
Pursuant to the PRC Investors Negative List, certain other industries are restricted so that Qualified PRC
Persons may invest in any company of such industries only up to a specified level and/or with the specific
approval of the relevant competent authority which is responsible for enforcing the relevant legislation which
the PRC Investors Negative List is intended to implement. In addition, if the aggregated amount or any single
investment of a Qualified PRC Person in a listed company will be 10% or more of the issued and outstanding
shares of such listed company, prior approval from the Investment Commission of the ROC Ministry of
Economic Affairs (“ROC MOEA”) is required.

A-1
Overseas Corporate Bonds
Since 1989, the ROC FSC has approved a series of overseas bonds issued by ROC companies listed on
the TSE in offerings outside the ROC. Under current ROC law, subject to and certain special restrictions in
relation to person of the PRC, such overseas corporate bonds can be (i) converted by bondholders, into shares
of ROC companies or (ii) subject to ROC FSC approval and other applicable laws, may be converted into
depositary receipts issued by the same ROC company or by the issuing company of the exchange shares, in
the case of exchangeable bonds, depending on the issuer’s plan of issuance as approved by the ROC FSC.
The relevant regulations also permit public issuing companies to issue corporate debt in offerings outside the
ROC. Proceeds from the sale of the shares converted from overseas convertible bonds may be used for
reinvestment in securities listed on the TSE or traded on the GTSM, subject to registration with the TSE.
Under current ROC law, a non-ROC converting bondholder, when exercising his conversion right to
convert bonds into common shares, is required to register with the TSE and appoint a local agent (with such
qualifications as are set by the ROC FSC) to open a securities trading account with a local brokerage firm,
pay ROC taxes, make confirmations and settlement, remit funds, exercise rights relating to the securities and
perform such other matters as may be designated by such converting bondholder on behalf of and as agent
for such converting bondholder. Also, any such converting bondholder is also required to appoint a custodian
bank to hold the securities and any cash proceeds in safekeeping, to make confirmations, to settle trades and
to report all relevant information. In addition, such converting bondholder is required to appoint a tax
guarantor for filing tax returns and making tax payments.
Subject to ROC FSC and CBC approval on the issuance of the bonds, an ROC company may, without
obtaining further approvals from the CBC or any other government authority of the ROC, convert NT dollars
to other non-ROC currencies, including US dollars, for making payments in respect of redemption of the
bonds or repayment of principal of and interest on the bonds. A non-ROC converting bondholder may,
through its local agent and without obtaining prior approval from the CBC, convert into foreign currencies
net proceeds realized from the sale of converted entitlement certificates, common shares or any stock
dividends relating to such shares, or any cash dividend or other cash distribution in respect of such common
shares.
Pursuant to the Regulations Governing Securities Investment and Futures Trading in Taiwan by
Mainland Area Investors, or the Mainland Investors Regulations, only the Mainland area QDIIs approved by
the China Securities Regulatory Commission and registered with the TSE or Taiwan Futures Exchange, are
permitted to convert the Bonds and hold our Common Shares, and, similar to other non-ROC person, in order
to hold our Common Shares, such QDIIs are required to appoint the agent, custodian and tax guarantor as
required by the Mainland Investors Regulations. If the aggregate amount of our Common Shares to be held
by any QDII or our Common Shares to be received by any QDII upon single conversion will be 10% or more
of our total issued and outstanding shares, such QDII must obtain the prior approval from the Investment
Commission of the ROC MOEA.

Other Foreign Investment

Foreign investors who wish to make direct investments in the shares of ROC listed companies for 10%
or more of its share capital or in any ROC non-listed companies are required to submit a Foreign Investment
Approval application to the Investment Commission of the ROC MOEA. In addition, depending on the type
of industries of the invested company, and/or percentage of the proposed shareholding in the invested
company, separate applications may be required to be submitted to other government authorities for their
prior approvals. The Investment Commission or such other government authority reviews each application
and approves or disapproves each application after consultation with other governmental agencies (such as
the CBC and the ROC FSC).
Historically, PRC investors were banned from making direct investment in ROC companies. Taiwan
authorities have recently announced a separate set of laws and regulations governing the direct investments
permitted for PRC investors (other than the permitted investment in the ROC securities market under the
Regulations Governing Securities Investment and Futures Trading in Taiwan by Mainland Area Investors).
According to current laws, the PRC persons are current prohibited from making direct investment in
industries in the ROC unless for those which have been specifically specified in a Positive List, as amended

A-2
by the Executive Yuan. The prohibition on PRC investment in the industries in the ROC other than those
specified in the Positive List is absolute in the absence of specific exemption from the application of the
Positive List. Limited to those industries specified in the Positive List, for investment in the share of a ROC
listed company for 10% or more of its share capital or in any ROC non-listed companies, a PRC investor must
obtain a PRC Investment Approval from the Investment Commission of the ROC MOEA.

Under current law, any non-ROC person possessing a Foreign Investment Approval or a PRC
Investment Approval may remit capital for the approved investment and is entitled to repatriate annual net
profits, interest and/or cash dividends attributable to such investment, provided that such non-ROC person
shall submit certain required documents, including a declaration to CBC, to the remitting bank, and
investment capital and capital gains attributable to such investment may be repatriated after approvals of the
Investment Commission or other authorities have been obtained.

Exchange Controls

The Foreign Exchange Control Statute and regulations provide that all foreign exchange transactions
must be executed by banks designated to handle such business, by the Ministry of Finance and by the CBC.
Current regulations favor trade-related foreign exchange transactions and Foreign Investment Approval
investments. Consequently, foreign currency earned from exports of merchandise and services may now be
retained and used freely by exporters, and all foreign currency needed for the importation of merchandise and
services may be purchased freely from the designated foreign exchange banks.

Trade aside, ROC companies and resident individuals may, without foreign exchange approval, remit
outside the ROC foreign currency of up to US$50,000,000 (or its equivalent) and US$5,000,000 (or its
equivalent) respectively in each calendar year. In addition, ROC companies and resident individuals may,
without foreign exchange approval, remit into the ROC foreign currency of up to US$50,000,000 (or its
equivalent) and US$5,000,000 (or its equivalent) respectively in each calendar year. Furthermore, any
remittance of foreign currency into the ROC by a ROC company or resident individual in a year will be offset
by the amount remitted out of the ROC by the company or individual (as applicable) within its annual quota
and will not use up its annual inward remittance quota to the extent of such offset. The above limits apply
to remittances involving a conversion of NT dollars to a foreign currency and vice versa. A requirement is
also imposed on all enterprises to register medium-and long-term foreign debt with the CBC.

In addition, foreign persons may, subject to certain requirements, but without foreign exchange
approval of the CBC, remit outside and into the ROC foreign currencies of up to US$100,000 (or its
equivalent) for each remittance. The above limit applies to remittances involving a conversion of NT dollars
to a foreign currency and vice versa.

A-3
 APPENDIX B — THE SECURITIES MARKETS OF THE ROC
The information provided in this appendix has been extracted from various government and other
publicly available publications that have not been prepared or independently verified by us, the Initial
Purchasers or any of their respective affiliates or advisers in connection with the offering of the Bonds.
References to the ROC Financial Supervisory Commission (“ROC FSC”) in this section include the ROC
Securities and Futures Bureau and its two predecessors, the ROC Securities and Exchange Commission and
the ROC Securities and Futures Commission.
In September 1960, the ROC government established the ROC Securities and Exchange Commission
to supervise and control all aspects of the existing domestic securities market and the TSE began to take
shape soon thereafter. In the 1970s and the early 1980s, the ROC government implemented a number of steps
designed to upgrade the quality and importance of the ROC securities markets, such as encouraging listing
on the TSE and establishing an over-the-counter securities exchange. In the mid-1980s, the ROC government
began to revise its laws and regulations in a manner designed to facilitate the gradual internationalization of
the ROC securities markets. In 1997, the ROC Securities and Exchange Commission was renamed the ROC
Securities and Futures Commission. Effective from July 1, 2004, the ROC Securities and Futures
Commission was further renamed the ROC Securities and Futures Bureau, under the Financial Supervisory
Commission.

The Taiwan Stock Exchange

In 1961, the ROC FSC, working together with private interests, established the TSE to provide a
marketplace for securities trading. The TSE is a corporation owned by government-controlled and private
banks and enterprises. The TSE is independent of entities transacting business through it, each of which pays
a user’s fee. Subject to limited exceptions, all transactions in listed securities by brokers, traders and
integrated securities firms (firms which are permitted to combine the activities of brokerage, dealing and
underwriting) must be made through the TSE.
The TSE commenced operations in 1962 and during the remainder of the 1960’s grew at a slow pace,
largely due to lack of experience among issuers and investors and an unwillingness on the part of ROC
businesses to offer their shares to the public. During the early 1980’s, the ROC FSC more actively
encouraged new listings on the TSE and the number of listed companies grew from 119 in 1983 to 741 by
the end of 2009. As of the end of 2009, the total market value of shares listed on the TSE was approximately
NT$21 trillion.
The TSE requirements for listing are primarily based on the following company attributes:
• the number and distribution of shareholders, including the diversification of such shareholders;
• length of time in business;
• amount of paid-in capital;
• profitability; and
• certain negative criteria.
However, special listing criteria apply to technology companies and key businesses engaging in
national economic development and foreign issuers.
Under certain circumstances, TSE may place its listing securities under an altered trading method,
including, among others, suspension of margin purchase, short sales, and stock lending/borrowing, or
suspend trading, which may affect shareholders’ right of transfer or the ability to borrow shares.

The GreTai Securities Market

To complement the TSE, an over-the-counter securities market was established in September 1982 on
the initiative of the ROC FSC. In early 1988, the ROC FSC promulgated regulations designed to encourage
trading of unlisted securities of companies whose securities do not qualify for listing on the TSE. As of the
end of 2009, the total market value of shares listed on the GTSM was around NT$1.9 trillion.

B-1
Taiwan Stock Exchange Index
The Taiwan Stock Exchange Index is calculated on the basis of a wide selection of listed shares
weighted according to the number of shares outstanding. This weighted average method is also used for the
Standard and Poor’s Index in the United States and the Nikkei Stock Average in Japan. The Taiwan Stock
Exchange Index is compiled by dividing the market value by the base day’s total market value for the index
shares. The Taiwan Stock Exchange Index is the oldest and most widely quoted market index in Taiwan.
The weighting of each stock in the index is fixed as long as the number of shares outstanding remains
constant. When the total number of shares outstanding changes, the weight of each stock is adjusted.
Automatic adjustment is made for stock splits and stock dividends. Cash dividends are not included in the
calculation.
The following table sets forth, for the periods indicated, information relating to the Taiwan Stock
Exchange Index:

No. of Listed
Companies
at Period Trading Index at
Period Ended December 31, End Values Index High Index Low Period End

(in NT$
billions)
1999 .............................................................. 462 29,291.50 8,608.91 5,474.79 8,448.84
2000 .............................................................. 531 30,526.60 10,202.20 4,614.63 4,739.09
2001 .............................................................. 584 18,354.90 6,104.24 3,446.26 5,551.24
2002 .............................................................. 638 21,874.00 6,462.30 3,850.04 4,452.45
2003 .............................................................. 669 20,332.20 6,142.32 4,139.50 5,890.09
2004 .............................................................. 697 23,875.37 7,304.10 5,316.87 6,139.69
2005 .............................................................. 691 18,818.90 6,575.53 5,632.97 6,548.34
2006 .............................................................. 688 23,900.36 7,823.72 6,257.80 7,823.72
2007 .............................................................. 698 33,043.85 9,809.88 7,344.56 8,506.28
2008 .............................................................. 718 26,115.40 9,259.20 4,089.53 4,591.22
2009 .............................................................. 741 29,680.47 8,188.11 4,242.61 8,188.11

Source: Taiwan Stock Exchange.

As indicated above, the performance of securities traded on the Taiwan Stock Exchange has in recent years
been characterized by extreme price volatility. On August 5, 2010, the Taiwan Stock Exchange Index closed
at 7,936.85.

Price Limits, Commissions, Transaction Tax and Other Matters

Fluctuations in the price of securities traded on the Taiwan Stock Exchange are currently subject to a
restriction of 7% above and below the previous day’s closing price (or a reference price set by the Taiwan
Stock Exchange if the previous day’s closing price is not available because of lack of trading activity) in the
case of equity securities and 5% in the case of debt securities. The ROC FSC has announced that limitations
on price fluctuations will be relaxed with a view towards eventually abolishing all share price fluctuation
controls. Brokerage commissions are set by the TSE. The current approved maximum brokerage commission
is 0.1425% of the transaction price for equity securities and between 0.05% and 0.1% of the transaction price
for debt securities. A securities transaction tax, currently levied at the rate of 0.3% of the transaction price,
is payable by the seller of equity securities. Such securities transaction taxes are withheld at the time of the
transaction giving rise to such taxes. Sales of shares of companies listed on the TSE are currently sold in
‘‘round lots’’ of 1,000 shares. Investors who desire to sell less than 1,000 shares of a listed company
occasionally experience delays in effecting such sales. Transactions that include 500 trading lots (500,000
shares) or more must be registered and executed pursuant to certain TSE guidelines.

B-2
Regulation and Supervision

The ROC FSC has extensive regulatory authority over companies listed on the TSE, companies listed
on the GTSM and unlisted public issuing companies generally. Such companies are generally required to
obtain approval from, or register with, the ROC FSC for all securities offerings. The ROC FSC has
promulgated regulations requiring, unless otherwise exempted, periodic reporting of financial and operating
information by all public companies. In addition, the ROC FSC is responsible for the establishment of
standards for financial reporting and carries out licensing and supervision with respect to the other
participants in the ROC securities market.

The ROC FSC has responsibility for implementation of the Securities and Exchange Law and for
overall administration of governmental policies in the ROC securities market. It has extensive regulatory
authority over the offering, issue and trading of securities. In addition, the Securities and Exchange Law
specifically empowers the ROC FSC to promulgate rules under certain circumstances.
The Securities and Exchange Law prohibits market manipulation. It permits an issuer to recover certain
short-swing trading profits made through purchases and sales (or sales and purchases) within six months by
directors, managerial personnel, supervisors and shareholders holding more than 10% of the outstanding
shares of the issuer. The Securities and Exchange Law prohibits trading by “insiders” based on non-public
information that materially affects share price movements. The Securities and Exchange Law also prohibits
trading by “insiders” based on such material information within 18 hours after such information is made
public. Pursuant to the Securities and Exchange Law, the term “insiders” includes directors, supervisors,
managers and shareholders holding more than 10% of the outstanding shares of the issuing company and their
spouses, minor children and nominees, (the prohibition also applies to above person(s) within 6 months after
he/she has lost such “insider” status) any person who has learned such information due to an occupational
or controlling relationship with the issuing company and any person who has learned such information from
any of the foregoing. Sanctions include prison terms. In addition, damages may be awarded to persons injured
by the transaction. Notwithstanding these regulatory requirements, there have been recurring press reports on
insider trading and manipulation of stock prices in the ROC.
The Securities and Exchange Law also imposes criminal liability on certified public accountants and
lawyers who make false certifications in their examination and audit of an issuer’s contracts, reports and
other evidentiary documents that are related to securities transactions. ROC FSC regulations require that
financial reports of listed companies be audited by qualified accounting firms as approved by the ROC FSC
and be signed by at least two certified public accountants.

The Securities and Exchange Law was amended in January 1988 to provide for, among other things,
new regulations relating to public offerings of securities; measures to strengthen the capital structure of
issuers; civil liability for material misstatements or omissions made by issuers; more stringent regulation of
the securities activities of officers, directors and major shareholders of issuers; regulations regarding tender
offers; and a significant expansion of the prohibitions against insider trading, including the imposition of
treble civil damages and criminal sanctions.
The Securities and Exchange Law was further amended on July 19, 2000. Such amendments included,
among other provisions, allowing companies to hold treasury stock under certain situations and to provide
for criminal liabilities on certain personnel of a company for directly or indirectly causing the company to
conduct trading not in the ordinary business operation of the company and against the company’s interest.
The ROC FSC does not have criminal or civil enforcement powers under the Securities and Exchange
Law. Criminal actions may be pursued by the district prosecutors upon the complaint of the ROC FSC. Under
ROC law, subject to limited exception, civil actions may only be brought by plaintiffs who assert that they
have suffered damage. The ROC FSC is directly empowered to curb abuses and violations of applicable laws
and regulations only through administrative measures such as the issuance of warnings, temporary
suspension of operation, imposition of administrative fines and revocation of licenses.

B-3
 In addition to providing a market for securities trading, the TSE has the primary responsibility for
reviewing applications by ROC issuers to list securities on the Taiwan Stock Exchange. In addition, the ROC
Securities and Futures Bureau reviews all securities offerings by listed companies. The TSE may, with the
approval of the ROC FSC, delist securities of these issuers that violate relevant laws and regulations or
encounter significant difficulties.

B-4
 INDEX TO FINANCIAL STATEMENTS

Page
Audited Consolidated Financial Statements as of December 31, 2007, 2008 and 2009

Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Balance Sheets as of December 31, 2007, 2008 and 2009 . . . . . . . . . . . . . . . . . . . . F-3

Consolidated Statements of Income for the years ended December 31, 2007, 2008 and 2009 . . . . . F-6

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2007,
2008 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2008 and 2009 . . F-11

Notes to Consolidated Financial Statements as of and for the years ended December 31, 2007,
2008 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14

Unaudited Consolidated Financial Statements as of March 31, 2009 and 2010

Independent Auditors’ Review Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-61

Consolidated Balance Sheets as of March 31, 2009 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-62

Consolidated Statements of Income for the three-month periods ended March 31, 2009 and 2010 . F-65

Consolidated Statements of Changes in Stockholders’ Equity for the three-month periods

ended March 31, 2009 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-66

Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2009 and 2010 . F-67

Notes to Consolidated Financial Statements as of March 31, 2009 and 2010 . . . . . . . . . . . . . . . . F-69

F-1
 INDEPENDENT AUDITORS’ REPORT

The Board of Directors

Acer Incorporated:

We have audited the accompanying consolidated balance sheets of Acer Incorporated (the “Company”)
and subsidiaries as of December 31, 2007, 2008 and 2009, and the related consolidated statements of income,
changes in stockholders’ equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with the “Regulations Governing Auditing and Certification of
Financial Statements by Certified Public Accountants” and auditing standards generally accepted in the
Republic of China. Those regulations and standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to in the first paragraph present fairly, in
all material respects, the financial position of Acer Incorporated and subsidiaries as of December 31, 2007,
2008 and 2009, and the results of their consolidated operations and their consolidated cash flows for the years
then ended, in conformity with accounting principles generally accepted in the Republic of China.

As discussed in note 3 to the consolidated financial statements, effective January 1, 2008, Acer
Incorporated and subsidiaries recognized, measured and disclosed employee bonuses and directors’ and
supervisors’ remunerations according to Interpretation (2007) 052 issued by the Accounting Research and
Development Foundation of the Republic of China. The adoption of this new accounting principle decreased
the consolidated net income and basic earnings per share for the year ended December 31, 2008, by
NT$1,483,776 thousand and NT$0.59, respectively.

The consolidated financial statements as of and for the year ended December 31, 2009, have been
translated into United States dollars solely for the convenience of the readers. We have audited the
translation, and in our opinion, the consolidated financial statements expressed in New Taiwan dollars have
been translated into United States dollars on the basis set forth in note 2(26) to the consolidated financial
statements.

KPMG
Taipei, Taiwan (the Republic of China)
March 19, 2010, except for note 2(26) of the notes to the consolidated financial statements,
which is dated March 31, 2010.

Note to Readers

The accompanying consolidated financial statements are intended only to present the financial position, results of operations and cash
flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other
jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and
applied in the Republic of China.

F-2
 ACER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007, 2008 AND 2009
(Expressed in thousands of New Taiwan dollars and US dollars)

2007 2008 2009

NT$ NT$ NT$ US$

Assets
Current assets:
Cash and cash equivalents (note 4(1)) .............. 37,945,339 22,141,725 53,616,067 1,685,033
Notes and accounts receivable, net of
allowance for doubtful accounts of
NT$898,972, NT$2,356,672 and
NT$1,681,844 as of December 31, 2007,
2008 and 2009, respectively (note 4(2)) ......... 101,898,281 107,826,311 111,858,366 3,515,458
Notes and accounts receivable from related
parties (note 5) ................................................ 448,481 841,465 600,306 18,866
Other receivable from related parties (note 5).... 59,403 45,173 21,507 676
Other receivables (note 4(3)) .............................. 7,375,569 8,807,454 9,263,152 291,120
Financial assets at fair value through profit or
loss—current (notes 4(5) and 4(25)) ............... 19,982 354,751 157,659 4,955
Available-for-sale financial assets—current
(notes 4(4) and 4(25)) ..................................... 2,852,061 591,444 223,437 7,022
Hedging purpose derivative financial
assets—current (notes 4(6) and 4(25)) ............ 235,198 1,022,782 1,275,157 40,075
Inventories (note 4(7)) ........................................ 33,815,697 40,028,195 51,184,953 1,608,629
Prepayments and other current assets
(note 4(8)) ....................................................... 2,828,601 1,525,555 1,694,058 53,240
Deferred income tax assets—current
(note 4(19)) ..................................................... 1,914,006 2,282,943 2,213,215 69,556
Restricted deposits (note 6) ................................ 2,233,583 922,794 — —
Total current assets ....................................... 191,626,201 186,390,592 232,107,877 7,294,630

Long-term investments:
Investments accounted for using equity method
(note 4(10)) ..................................................... 4,689,684 2,928,790 3,314,950 104,181
Available-for-sale financial assets—noncurrent
(notes 4(11) and 4(25)) ................................... 3,370,847 1,160,487 3,306,742 103,924
Financial assets carried at cost
(notes 4(9) and 4(25)) ..................................... 3,142,121 2,684,270 2,251,058 70,746
Total long-term investments ......................... 11,202,652 6,773,547 8,872,750 278,851

F-3
 2007 2008 2009

NT$ NT$ NT$ US$

Property, plant and equipment
(notes 4(12) and 6):
Land ................................................................... 1,560,568 2,678,408 2,509,029 78,853
Buildings and improvements............................... 3,627,214 5,294,056 5,386,921 169,299
Computer equipment and machinery .................. 4,367,924 3,348,086 3,059,222 96,145
Transportation equipment.................................... 114,923 120,069 110,866 3,484
Office equipment ................................................ 985,679 1,128,167 977,582 30,723
Leasehold improvements..................................... 487,647 816,904 959,257 30,147
Other equipment ................................................. 723,029 1,136,428 1,171,560 36,820
Construction in progress and advance payments
for purchases of property and equipment........ 490,749 30,692 83,680 2,630
12,357,733 14,552,810 14,258,117 448,101
Less: accumulated depreciation .......................... (3,446,629) (4,922,662) (4,904,235) (154,129)
accumulated impairment............................ (274,663) (293,927) (677,709) (21,299)
Net property, plant and equipment........ 8,636,441 9,336,221 8,676,173 272,673
Intangible assets (note 4(14)) ............................... 25,926,493 34,746,765 35,444,068 1,113,928
Property not used in operation (note 4(13)) ....... 3,806,103 2,996,721 2,971,542 93,389
Other financial assets (notes 4(15), 4(25)
and 6) ................................................................. 961,393 868,760 789,711 24,819
Deferred charges and other assets (notes 4(18)
and 4(19))........................................................... 1,124,059 2,329,619 2,162,567 67,965
Total assets ..................................................... 243,283,342 243,442,225 291,024,688 9,146,255

F-4
 2007 2008 2009

NT$ NT$ NT$ US$

Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings (notes 4(16) and 6) ........ 5,372,109 1,086,851 548,059 17,224
Current portion of long-term debt
(notes 4(17) and 6).......................................... 17,366 8,250,000 — —
Notes and accounts payable .............................. 76,259,412 64,365,616 95,831,720 3,011,777
Notes and accounts payables to related parties
(note 5)............................................................ 4,583,615 7,750,220 10,232,364 321,580
Financial liabilities at fair value through profit
or loss—current (notes 4(5) and 4(25)) .......... 1,395,142 1,011,739 162,539 5,108
Other payables to related parties (note 5) .......... 609,717 189,964 92,187 2,898
Hedging purpose derivative financial
liabilities—current (notes 4(6) and 4(25)) ...... 66,786 872,038 196,714 6,182
Royalties payable ................................................ 11,670,600 13,228,769 16,337,817 513,461
Accrued expenses and other current liabilities
(note 4(13)) ..................................................... 42,158,130 51,903,351 55,764,403 1,752,551
Deferred income tax liabilities—current
(note 4(19)) ..................................................... 709,697 656,610 680,714 21,393
Total current liabilities.................................. 142,842,574 149,315,158 179,846,517 5,652,174

Long-term liabilities:
Long-term debt, excluding current portion
(notes 4(17), 4(25) and 6) ............................... 16,790,876 4,134,920 12,371,856 388,820
Other liabilities (note 4(18)) ............................... 1,121,524 840,433 384,706 12,090
Deferred income tax liabilities—noncurrent
(note 4(19)) ..................................................... 5,119,374 6,274,099 5,543,947 174,234
Total long-term liabilities.............................. 23,031,774 11,249,452 18,300,509 575,144
Total liabilities ............................................... 165,874,348 160,564,610 198,147,026 6,227,318

Stockholders’ equity and minority interest:

Common stock (notes 4(20) and 4(21)).............. 24,054,904 26,428,560 26,882,283 844,850
Capital surplus (notes 4(10) and 4(20)).............. 29,898,983 37,129,952 38,494,118 1,209,784
Retained earnings
Legal reserve ................................................... 7,490,689 8,786,583 9,960,796 313,045
Special reserve ................................................ — — 1,991,615 62,592
Unappropriated earnings (note 3).................... 13,551,024 13,985,318 16,622,600 522,411
Other equity components
Foreign currency translation adjustment ............. 2,733,899 1,241,058 959,621 30,159
Minimum pension liability adjustment............ (173,364) (283) (7,908) (249)
Unrealized gain (loss) on financial
instruments (notes 4(6) and 4(11)) .............. 2,524,499 (1,729,631) 1,014,317 31,878
Treasury stock (note 4(20)) ................................ (3,270,920) (3,522,598) (3,522,598) (110,707)
Total stockholders’ equity ............................. 76,809,714 82,318,959 92,394,844 2,903,763
Minority interest ................................................ 599,280 558,656 482,818 15,174
Total stockholders’ equity and minority
interest ........................................................ 77,408,994 82,877,615 92,877,662 2,918,937
Commitments and contingencies (note 7)
Total liabilities and stockholders’ equity ..... 243,283,342 243,442,225 291,024,688 9,146,255

F-5
 ACER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(Expressed in thousands of New Taiwan dollars and US dollars, except for per share data)

2007 2008 2009

NT$ NT$ NT$ US$

Net sales (note 5)................................................ 462,066,080 546,274,115 573,982,544 18,038,988
Cost of sales (notes 4(7) and 5) ........................ (414,647,770) (488,988,455) (515,654,684) (16,205,874)
Gross profit ....................................................... 47,418,310 57,285,660 58,327,860 1,833,114

Operating expenses
(notes 4(14), 4(18), 4(21), 5 and 10)
Selling ............................................................. (32,727,126) (35,764,261) (35,729,296) (1,122,892)
Administrative ................................................ (4,156,402) (6,899,059) (6,372,585) (200,276)
Research and development ............................. (349,659) (550,038) (886,513) (27,861)
Total operating expenses ............................ (37,233,187) (43,213,358) (42,988,394) (1,351,029)
Operating income ...................................... 10,185,123 14,072,302 15,339,466 482,085

Non-operating income and gains:

Interest income ............................................... 1,343,523 1,207,826 361,656 11,366
Investment gain recognized using equity
method, net (note 4(10)) .............................. 695,660 404,184 400,098 12,574
Gain on disposal of property and equipment,
net (note 4(12)) ............................................ 121,418 515,272 — —
Gain on disposal of investments, net
(notes 4(4), 4(9), 4(10) and 4(11))............... 4,045,981 2,709,524 79,162 2,488
Foreign currency exchange gain and valuation
gain on financial instruments, net (notes
4(5) and 4(6)) ............................................... — — 473,648 14,886
Other income (note 4(10)) ............................... 493,089 516,232 404,473 12,712
6,699,671 5,353,038 1,719,037 54,026

Non-operating expenses and losses:

Interest expense ............................................... (759,907) (1,305,746) (622,080) (19,551)
Other investment loss (notes 4(9) and 4(10)) .. — (416,404) (231,934) (7,289)
Loss on disposal of property and equipment,
net (note 4(12)) ............................................ — — (103,055) (3,239)
Restructuring cost (note 4(22)) ........................ — (1,582,408) (164,595) (5,173)
Foreign currency exchange loss and valuation
loss on financial instruments, net (notes
4(5) and 4(6)) ............................................... (455,385) (866,315) — —
Impairment of non-financial assets
(notes 4(12) and 4(13)) ................................ — (221,931) (395,109) (12,417)
Other loss (note 4(10)) .................................... (560,865) (225,809) (558,747) (17,560)
(1,776,157) (4,618,613) (2,075,520) (65,229)

F-6
 2007 2008 2009

NT$ NT$ NT$ US$

Income from continuing operations before
income taxes ................................................... 15,108,637 14,806,727 14,982,983 470,882
Income tax expense (note 4(19)) ....................... (2,665,578) (3,169,446) (3,630,123) (114,087)
Income from continuing operations ................. 12,443,059 11,637,281 11,352,860 356,795
Income from discontinued operations (net of
income taxes of NT$23,120 in 2007 and
NT$0 in both 2008 and 2009) (note 4(23)) ... 517,866 99,843 — —
Consolidated net income .................................. 12,960,925 11,737,124 11,352,860 356,795

Net income attributable to:

Shareholders of parent company .................... 12,958,933 11,742,135 11,353,374 356,811
Minority shareholders ...................................... 1,992 (5,011) (514) (16)
12,960,925 11,737,124 11,352,860 356,795

NT$ NT$ NT$ US$

Earnings per common share

(in New Taiwan dollars) (note 4(24)):
Basic earnings per common
share—retroactively adjusted .................... 5.27 4.67 4.31 0.14
Diluted earnings per common share............. 5.27 4.60 4.26 0.13

F-7
 ACER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(Expressed in thousands of New Taiwan dollars and US dollars)

Retained earnings
Foreign Minimum Unrealized
currency pension gain (loss) on Total
Common Capital Legal Special Unappropriated translation liability financial Treasury Minority stockholders’
Stock surplus reserve reserve earnings adjustment adjustment instruments stock interest equity
NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$
Balance at January 1, 2007 ... 23,370,637 29,947,020 6,468,865 283,921 11,531,479 1,335,500 — 4,361,608 (3,270,920) 1,527,673 75,555,783
2007 net income....................... — — — — 12,958,933 — — — — 1,992 12,960,925
Appropriation approved by the
stockholders (note 4(20)):
Legal reserve ..................... — — 1,021,824 — (1,021,824) — — — — — —
Stock dividends and
employee bonuses in
stock............................ 684,267 — — — (684,267) — — — — — —
Special reserve................... — — — (283,921) 283,921 — — — — — —
Cash dividends .................. — — — — (8,997,695) — — — — — (8,997,695)
Directors’ and supervisors’
remuneration ............... — — — — (94,804) — — — — — (94,804)
Employee bonuses in cash. — — — — (424,719) — — — — — (424,719)
Foreign currency translation
adjustment.......................... — — — — — 1,398,399 — — — — 1,398,399
Unrealized gain on qualifying
cash flow hedge................. — — — — — — — 28,616 — — 28,616
Decrease in capital surplus
resulting from long-term
equity investments
accounted for using the
equity method (note
4(10))................................. — (169,810) — — — — — — — — (169,810)
Cash dividends distributed to
subsidiaries ........................ — 121,773 — — — — — — — — 121,773
Unrealized loss on available-
for sale financial assets ..... — — — — — — — (1,865,725) — — (1,865,725)
Minimum pension liability
adjustment.......................... — — — — — — (173,364) — — — (173,364)
Decrease in minority interest ... — — — — — — — — — (930,385) (930,385)

F-8
 Retained earnings
Foreign Minimum Unrealized
currency pension gain (loss) on Total
Common Capital Legal Special Unappropriated translation liability financial Treasury Minority stockholders’
Stock surplus reserve reserve earnings adjustment adjustment instruments stock interest equity
NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$
Balance at December 31,
2007................................... 24,054,904 29,898,983 7,490,689 — 13,551,024 2,733,899 (173,364) 2,524,449 (3,270,920) 599,280 77,408,994
2008 net income....................... — — — — 11,742,135 — — — — (5,011) 11,737,124
Appropriation approved by the
stockholders (note 4(20)):
Legal reserve ..................... — — 1,295,894 — (1,295,894) — — — — — —
Stock dividends and
employees’ bonuses in
stock............................ 690,823 — — — (690,823) — — — — — —
Cash dividends .................. — — — — (8,659,766) — — — — — (8,659,766)
Directors’ and supervisors’
remuneration ............... — — — — (116,630) — — — — — (116,630)
Employees’ bonuses in
cash ............................. — — — — (544,728) — — — — — (544,728)
Foreign currency translation
adjustment.......................... — — — — — (1,492,841) — — — — (1,492,841)
Unrealized loss on qualifying
cash flow hedge................. — — — — — — — (289,401) — — (289,401)
Cash dividends distributed to
subsidiaries ........................ — 114,832 — — — — — — — — 114,832
Decrease in capital surplus
resulting from long-term
investments accounted for
using the equity method
(note 4(10))........................ — (78,255) — — — — — — — — (78,255)
Unrealized valuation loss on
available-for-sale financial
assets ................................. — — — — — — — (3,964,729) — — (3,964,729)
Minimum pension liability
adjustment.......................... — — — — — — 173,081 — — — 173,081
Issuance of stock for
acquisitions (note 4(20)).... 1,681,589 7,155,678 — — — — — — — — 8,837,267
Issuance of stock from
exercising stock options
(note 4(20))........................ 1,244 858 — — — — — — — — 2,102
Stock-based compensation cost
(note 4(21))........................ — 37,856 — — — — — — — — 37,856
Treasury stock held by
subsidiaries ........................ — — — — — — — — (251,678) — (251,678)
Decrease in minority interest ... — — — — — — — — — (35,613) (35,613)

F-9
 Retained earnings
Foreign Minimum Unrealized
currency pension gain (loss) on Total
Common Capital Legal Special Unappropriated translation liability financial Treasury Minority stockholders’
Stock surplus reserve reserve earnings adjustment adjustment instruments stock interest equity
NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$
Balance at December 31,
2008................................... 26,428,560 37,129,952 8,786,583 — 13,985,318 1,241,058 (283) (1,729,631) (3,522,598) 558,656 82,877,615
2009 net income....................... — — — — 11,353,374 — — — — (514) 11,352,860
Appropriation approved by the
stockholders (note 4(20)):
Legal reserve ..................... — — 1,174,213 — (1,174,213) — — — — — —
Special reserve................... — — — 1,991,615 (1,991,615) — — — — — —
Stock dividends to
shareholders ................ 264,298 — — — (264,298) — — — — — —
Cash dividends .................. — — — — (5,285,966) — — — — — (5,285,966)
Employees’ bonuses in stock ... 162,338 737,662 — — — — — — — — 900,000
Foreign currency translation
adjustment.......................... — — — — — (281,437) — — — — (281,437)
Unrealized gain on qualifying
cash flow hedge................. — — — — — — — 285,963 — — 285,963
Cash dividends distributed to
subsidiaries ........................ — 70,510 — — — — — — — — 70,510
Increase in capital surplus
resulting from long-term
investments accounted for
using the equity method
(note 4(10))........................ — 180,899 — — — — — — — — 180,899
Unrealized valuation gain on
available-for-sale financial
assets ................................. — — — — — — — 2,457,985 — — 2,457,985
Minimum pension liability
adjustment.......................... — — — — — — (7,625) — — — (7,625)
Issuance of stock from
exercising stock options
(note 4(20))........................ 27,087 76,503 — — — — — — — — 103,590
Stock-based compensation cost
(note 4(21))........................ — 298,592 — — — — — — — — 298,592
Decrease in minority interest ... — — — — — — — — — (75,324) (75,324)
Balance at December 31,
2009................................... 26,882,283 38,494,118 9,960,796 1,991,615 16,622,600 959,621 (7,908) 1,014,317 (3,522,598) 482,818 92,877,662

Balance at December 31,

2009 (in US$).................... 844,850 1,209,784 313,045 62,592 522,411 30,159 (249) 31,878 (110,707) 15,174 2,918,937

F-10
 ACER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(Expressed in thousands of New Taiwan dollars and US dollars)

2007 2008 2009

NT$ NT$ NT$ US$

Cash flows from operating activities:
Consolidated net income ........................................ 12,960,925 11,737,124 11,352,860 356,795
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation ........................................................ 591,189 955,880 846,303 26,597
Amortization ....................................................... 551,280 1,245,561 1,860,284 58,465
Loss (gain) on disposal of property and
equipment, net ................................................. (121,418) (515,272) 103,055 3,239
Property and equipment reclassified to
expenses .......................................................... 4,369 — — —
Liquidation of investments ................................. — — (4,236) (133)
Gain on disposal of investments, net.................. (4,476,991) (2,709,524) (79,162) (2,488)
Net investment gain on equity method
investments, net of cash dividends received ... (875,415) (146,392) (320,773) (10,081)
Other investment loss ......................................... — 416,404 231,934 7,289
Gain on disposal of intangible assets ................. — — (46,037) (1,447)
Impairment of non-financial assets ..................... — 221,931 395,109 12,417
Restructuring cost ............................................... — 1,582,408 164,595 5,173
Stock-based compensation cost........................... — 37,856 298,592 9,384
Deferred income tax expense (benefit) ............... (61,297) 786,086 (951,327) (29,898)
Changes in operating assets and liabilities:
Notes and accounts receivable ........................ (20,253,180) 452,252 (4,032,056) (126,719)
Receivables from related parties ..................... (335,002) (327,579) 241,158 7,579
Inventories....................................................... (6,921,700) (4,882,424) (11,173,624) (351,162)
Other financial assets, prepayments and other
current assets ............................................... (1,055,734) (2,070,311) (720,480) (22,643)
Other financial assets—noncurrent.................. 224,925 186,604 69,926 2,198
Notes and accounts payable ............................ (1,826,219) (16,097,164) 31,466,106 988,909
Payables to related parties .............................. 3,409,436 2,447,835 2,384,367 74,935
Royalties payable, accrued expenses and
other current liabilities ................................ 12,015,179 1,831,291 6,563,601 206,279
Other liabilities ............................................... (391,122) (319,014) (458,091) (14,397)
Cash provided by (used in) operating
activities .................................................. (6,560,775) (5,166,448) 38,192,104 1,200,291

F-11
 2007 2008 2009

NT$ NT$ NT$ US$

Cash flows from investing activities:
Proceeds from disposal of available-for-sale
financial assets—current ................................. 12,332,596 2,891,868 480,068 15,087
Proceeds from disposal of long-term
investments .................................................... 7,018,429 3,449,388 562,612 17,682
Proceeds from sale of discontinued operations... 868,222 — — —
Increase in long-term investments ...................... (217,140) (171,717) (259,905) (8,168)
Proceeds from capital return and liquidation of
investees .......................................................... 495,253 462,551 231,897 7,288
Proceeds from disposal of property, plant and
equipment and property not used in
operation.......................................................... 1,220,389 2,068,099 75,067 2,359
Additions to property, plant and equipments
and property not used in operation ................. (534,626) (597,526) (771,575) (24,249)
Increase in intangible assets and other assets ..... (1,427,547) (435,746) (3,077,879) (96,731)
Proceeds from disposal of intangible assets ....... — — 25,000 786
Decrease (increase) in advances to related
parties .............................................................. 14,771 (14,230) 23,666 744
Decrease (increase) in restricted deposits ........... (1,958,585) 1,813,448 922,794 29,001
Acquisition of subsidiaries, net of cash
acquired ........................................................... (15,070,542) (719,026) — —
Cash provided by (used in) investing
activities .................................................. 2,741,220 8,747,109 (1,788,255) (56,201)
Cash flows from financing activities:
Decrease in short-term borrowings ..................... (968,414) (4,285,258) (538,792) (16,933)
Increase in long-term debt .................................. 16,500,000 — — —
Repayment of long-term debt ............................. (9,739,562) (4,423,321) (10,702) (336)
Distribution of cash dividends ............................ (8,875,922) (8,544,934) (5,215,456) (163,910)
Distribution of employees’ bonus ...................... (424,719) (544,728) — —
Distribution of directors’ and supervisors’
remuneration.................................................... (94,804) (116,630) — —
Proceeds from exercise of employee stock
option .............................................................. — 2,102 103,590 3,256
Decrease in minority interests ............................ (296,018) (42,354) (63,768) (2,004)
Cash used in financing activities .............. (3,899,439) (17,955,123) (5,725,128) (179,927)
Net increase (decrease) in cash and cash
equivalents ........................................................ (7,718,994) (14,374,462) 30,678,721 964,163
Effects of exchange rate changes......................... 979,122 (1,429,152) 795,621 25,005
Cash and cash equivalents at beginning of
year..................................................................... 44,685,211 37,945,339 22,141,725 695,865
Cash and cash equivalents at end of year .......... 37,945,339 22,141,725 53,616,067 1,685,033
Supplemental disclosures of cash flow
information
Interest paid ........................................................ 1,052,609 1,275,330 444,067 13,956
Income taxes paid ............................................... 1,395,005 1,977,802 3,196,014 100,444

F-12
 2007 2008 2009

NT$ NT$ NT$ US$

Supplemental disclosures of non-cash investing
and financing activities:
Change in unrealized valuation gain (loss) on
available-for-sale financial assets.................... (1,865,725) (3,964,729) 2,457,985 77,249
Current portion of long-term debt ...................... 17,366 8,250,000 — —
Supplemental disclosures of partial cash inflow
from investing activities:
Proceeds from disposal of intangible assets ....... — — 75,000 2,357
Less: other receivables ...................................... — — (50,000) (1,571)
Cash received...................................................... — — 25,000 786

Packard Bell
Gateway Inc. B.V.

Cash acquired from acquisition of

subsidiaries.:
Cash consideration .............................................. 23,507,016 3,172,080
Non-cash assets acquired .................................... (35,589,573) (10,560,058)
Liabilities assumed ............................................. 37,173,295 10,704,787
Goodwill ............................................................. (16,654,264) (1,774,172)
Cash acquired from acquisition ................... 8,436,474 1,542,637

E-Ten
Information
Systems
Co., Ltd.

Issuance of shares for acquisitions ..................... 8,837,267

Non-cash assets acquired .................................... (7,288,921)
Liabilities assumed ............................................. 1,263,892
Goodwill ............................................................. (1,901,821)
Cash acquired from acquisition ................... 910,417

F-13
 ACER INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2007, 2008 and 2009
(amounts expressed in thousands of New Taiwan dollars and US dollars,
except for earnings per share information and unless otherwise noted)

1. Reporting Entities of the Consolidated Financial Statements and Their Business Scopes

Acer Sertek Inc. (the “Company”) was incorporated on August 1, 1976, as a company limited by shares under the laws of the
Republic of China (“ROC”). The Company merged with Acer Incorporated (“AI”) on March 27, 2002, with the Company as the
surviving entity from the merger but renaming itself Acer Incorporated. After the merger, the principal activities of the Company focus
on globally marketing its brand-name IT products, and promoting E-commerce solutions to clients.

The Company completed the acquisition of 100% ownership of Gateway, Inc. (including eMachines brand), a personal computer
company in the U.S., through its indirectly wholly owned subsidiary on October 15, 2007. The Company also acquired the 100%
ownership of Packard Bell B.V., a personal computer company in Europe, through its indirectly wholly owned subsidiary on March 14,
2008 and June 30, 2008. Post the acquisitions of Gateway and Packard Bell, the Company has defined a clear path for its multi-brand
strategy. Additionally, as of September 1, 2008, the Company then entered the market for smart phones following the acquisition of
E-Ten Information Systems Co., Ltd.

The reporting entities of the consolidated financial statements include the Company and its subsidiaries (hereinafter referred to
collectively as the “Consolidated Companies”). As of December 31, 2007, 2008 and 2009, the Consolidated Companies had 6,271, 6,727
and 6,624 employees, respectively. The Consolidated Companies are summarized below according to their primary business activity.

(1) Sale of “Acer”, “Gateway”, “eMachines”, and “Packard Bell” brand-name information technology products:

Percentage of Ownership
at December 31,
Investor 2007 2008 2009
(a) Acer Incorporated
(b) Acer Greater China (B.V.I.) Corp. (“AGC”, British Virgin
Islands) and subsidiaries............................................................. The Company 100.00 100.00 100.00
• Acer Market Services Limited (“AMS”, Hong Kong) .... AGC 100.00 100.00 100.00
• Acer Computer (Far East) Limited
(“AFE”, Hong Kong)....................................................... AGC 100.00 100.00 100.00
• Acer Information (Zhong Shan) Co., Ltd.
(“AIZS”, China) .............................................................. AMS 100.00 100.00 100.00
• Beijing Acer Information Co., Ltd. (“BJAI”, China) ...... AMS 100.00 100.00 100.00
• Acer Computer (Shanghai) Ltd. (“ACCN”, China) ......... AMS 100.00 100.00 100.00
(c) Acer European Holding B.V. (“AEH”, Netherlands Antilles )
and subsidiaries .......................................................................... The Company 100.00 100.00 100.00
• Acer Europe B.V. (“AHN”, the Netherlands).................. AEH 100.00 100.00 100.00
• Acer Computer B.V. (“ACH”, the Netherlands).............. AEH 100.00 100.00 100.00
• Acer CIS Incorporated (“ACR”, British Virgin Islands) . AEH 100.00 100.00 100.00
• Acer BSEC Inc. (“AUA”, British Virgin Islands) ........... AEH — 100.00 100.00
• Acer Computer (M.E.) Limited (“AME”, British Virgin
Islands) ........................................................................... AEH 100.00 100.00 100.00
• Acer Africa (Proprietary) Limited
(“AAF”, South Africa) ................................................... AEH 100.00 100.00 100.00
• Acer Computer France S.A.S.U. (“ACF”, France).......... AHN 100.00 100.00 100.00
• Acer U.K. Limited (“AUK”, the United Kingdom) ........ AHN 100.00 100.00 100.00
• Acer Italy S.R.L. (“AIT”, Italy) ...................................... AHN 100.00 100.00 100.00
• Acer Computer GmbH (“ACG”, Germany)..................... AHN 100.00 100.00 100.00
• Acer Austria GmbH (“ACV”, Austria) ............................ AHN 100.00 100.00 100.00
• Acer Europe Services S.R.L. (“AES”, Italy)................... AHN 100.00 100.00 100.00
• Acer Europe AG (“AEG”, Switzerland) .......................... AHN 100.00 100.00 100.00
• Acer Czech Republic S.R.O. (“ACZ”, Czech Republic) . AHN 100.00 100.00 100.00
• Esplex Limited (“AEX”, the United Kingdom)............... AHN 100.00 100.00 100.00
• Acer Computer Iberica, S.A. (“AIB”, Spain) .................. AHN 100.00 100.00 100.00

F-14
 Percentage of Ownership
at December 31,
Investor 2007 2008 2009
• Acer Computer (Switzerland) AG
(“ASZ”, Switzerland) ...................................................... AHN 100.00 100.00 100.00
• Acer Slovakia s.r.o. (“ASK”, Slovakia) .......................... AHN 100.00 100.00 100.00
• Acer International Services GmbH
(“AIS”, Switzerland) ....................................................... AHN 100.00 100.00 100.00
• Asplex Sp. z.o.o. (“APX”, Poland) ................................. AHN — — 100.00
• Acer Marketing Services LLC (“ARU”, Russia) ........... AHN — — 100.00
• PB Holding Company S.A.R.L.
(“PBLU”, Luxembourg)................................................... AHN — 100.00 100.00
• Acer Computer Norway AS (“ACN”, Norway)............... ACH 100.00 100.00 100.00
• Acer Computer Finland Oy (“AFN”, Finland) ................ ACH 100.00 100.00 100.00
• Acer Computer Sweden AB (“ACW”, Sweden).............. ACH 100.00 100.00 100.00
• Acer Denmark A/S (“ACD”, Denmark) .......................... ACH 100.00 100.00 100.00
• Packard Bell B.V. (“PBHO”, the Netherlands)................ PBLU — 100.00 100.00
• Packard Bell Finance B.V. (“PBFN”, the Netherlands)... PBHO — 100.00 100.00
• Packard Bell Netherland B.V.
(“PBNL”, the Netherlands).............................................. PBHO — 100.00 100.00
• Packard Bell Services s.a.r.l (“PBSV”, France) .............. PBHO — 100.00 100.00
• Packard Bell Angers s.a.r.l (“PBAN”, France) ................ PBHO — 100.00 100.00
• Packard Bell France s.a.s (“PBFR”, France) ................... PBHO — 100.00 100.00
• Packard Bell (UK) Ltd. (“PBUK”, the United
Kingdom)......................................................................... PBHO — 100.00 100.00
• Packard Bell Scotland Ltd. (“PBSC”, the United
Kingdom)......................................................................... PBHO — 100.00 100.00
• Packard Bell Italia s.r.l (“PBIT”, Italy)........................... PBHO — 100.00 100.00
• Packard Bell Deutschland GmbH (“PBDE”, Germany) .. PBHO — 100.00 100.00
• Packard Bell Belgium BVBA (“PBBE”, Belgium) ......... PBHO — 100.00 100.00
• Packard Bell Sverige AB (“PBSE”, Sweden).................. PBHO — 100.00 —
• Packard Bell Norden AS (“PBNO”, Norway) ................. PBHO — 100.00 100.00
• Packard Bell Schweiz GmbH (“PBCH”, Switzerland) .... PBHO — 100.00 100.00
• ZDS Europe s.a.r.l (“PBFE”, France).............................. PBHO — 100.00 —
• NEC Computers South Africa (Pty) Ltd. (“PBZA”,
South Africa) ................................................................... PBHO — 50.81 50.81
• Packard Bell Electronic Technical Services (Shanghai)
Co., Ltd. (“PBCN”, China).............................................. PBHO — 100.00 —
• Packard Bell Iberica s.l (“PBES”, Spain)........................ AIB — 100.00 100.00
(d) Boardwalk Capital Holding Limited (“Boardwalk”, British
Virgin Islands) and subsidiaries.................................................. The Company 100.00 100.00 100.00
• Acer Computer Mexico, S.A. de C.V. (“AMEX”,
Mexico) ........................................................................... Boardwalk 99.89 99.92 99.92
• Acer Latin America, Inc. (“ALA”, U.S.A.)..................... Boardwalk 99.89 100.00 100.00
• Acer American Holding Corp. (“AAH”, USA) ............... Boardwalk 100.00 100.00 100.00
• AGP Tecnologia em Informatica do Brasil Ltda.
(“ATB”, Brazil) ............................................................... Boardwalk — — 100.00
• Aurion Tecnologia, S.A. de C.V. (“Aurion”, Mexico)..... AMEX 100.00 99.92 99.92
• Gateway, Inc. (“GWI”, U.S.A.) ...................................... AAH 100.00 100.00 100.00
• Acer America Corporation. (“AAC”, U.S.A.) ................. GWI 100.00 99.92 99.92
• Acer Service Corporation (“ASC”, U.S.A.) .................... GWI 100.00 100.00 100.00
• Gateway US Retail, Inc. (“GRA”, U.S.A.) ..................... GWI 100.00 100.00 100.00
• Gateway Diect, Inc. (“GDA”, U.S.A.) ............................ GWI 100.00 100.00 100.00
• Gateway Manufacturing LLC (“GMA”, U.S.A.) ............. GWI 100.00 100.00 100.00
• Gateway International Holdings, Inc. (“GIH”, U.S.A.)... GWI 100.00 100.00 100.00
• Gateway de Mexico S. de R.L. de C.V.
(“GMX”, Mexico)............................................................ GWI 100.00 100.00 100.00

F-15
 Percentage of Ownership
at December 31,
Investor 2007 2008 2009
• Gateway Hong Kong Ltd. (“GHK”, Hong Kong) ........... GWI 100.00 100.00 100.00
• Gateway Bermuda LP (“GBM”, Bermuda) ..................... GWI 100.00 100.00 —
• Gateway Asia, Inc. (“GAI”, U.S.A.) ............................... GWI 100.00 100.00 100.00
• Gateway KK (“GJP”, Japan) ........................................... GRA 100.00 100.00 100.00
• Gateway Ltd. (“GUK”, the United Kingdom) ................. GRA 100.00 100.00 100.00
• Gateway France SAS (“GFR”, France) ........................... GRA 100.00 100.00 —
• eMachines Internet Group (“EMA”, U.S.A.) .................. GRA 100.00 100.00 100.00
• Gateway Europe B.V. (“GEBV”, U.S.A.)........................ GRA 100.00 100.00 100.00
• Gateway Computers Ireland Ltd. (“GCI”, the United
Kingdom)......................................................................... GRA 100.00 100.00 100.00
• Gateway International Computers Limited (“GIC”, the
United Kingdom) ............................................................. GIH 100.00 100.00 100.00
• Gateway Canada Corporation (“GCA”, Canada)............. GIC 100.00 100.00 100.00
• Servicio Profesionales de Aceso S. de R.L.
(“GSMX”, Mexico) ........................................................ EMA 100.00 100.00 100.00
(e) Acer Holding International, Incorporated (“AHI”, British
Virgin Islands) and subsidiaries.................................................. The Company 100.00 100.00 100.00
• Acer Computer Co., Ltd. (“ATH”, Thailand) .................. AHI 100.00 100.00 100.00
• Acer Japan Corp. (“AJC”, Japan).................................... AHI 100.00 100.00 100.00
• Acer Computer Australia Pty. Limited (“ACA”,
Australia) ......................................................................... AHI 100.00 100.00 100.00
• Acer Sales and Service Sdn Bhd (“ASSB”, Malaysia) ... AHI 100.00 100.00 100.00
• Acer Asia Pacific Sdn Bhd (“AAPH, Malaysia”)............ AHI 100.00 100.00 100.00
• Acer Computer (Singapore) Pte. Ltd. (“ACS”,
Singapore)........................................................................ AHI 100.00 100.00 100.00
• Acer Computer New Zealand Ltd. (“ACNZ”, New
Zealand)........................................................................... AHI 100.00 100.00 100.00
• PT Acer Indonesia (“AIN”, Indonesia)............................ AHI 100.00 100.00 100.00
• Acer India Private Limited (“AIL”, India) ...................... AHI 100.00 100.00 100.00
• Acer Vietnam Co., Ltd. (“AVN”, Vietnam) ..................... AHI 100.00 100.00 100.00
• Acer Philippines, Inc. (“APHI”, Philippines) .................. AHI 100.00 100.00 100.00
• Acer Finance Australia Pty. Ltd. (“AFA”, Australia) ...... ACA 100.00 100.00 —
• Highpoint Australia Pty. Ltd. (“HPA”, Australia)............ ACA 100.00 100.00 100.00
• Highpoint Service Network Sdn Bhd (“HSN”,
Malaysia) ......................................................................... ASSB 100.00 100.00 100.00
• Logistron Service Pte Ltd. (LGS, Singapore) ................ ACS 100.00 100.00 100.00
(f) Acer Computer International Ltd. (“ACI”, Singapore)............... The Company 100.00 100.00 100.00
(g) Acer Sales & Distribution Ltd. (“ASD”, Hong Kong) ............... The Company 100.00 100.00 100.00

(2) Sale and distribution of computer products and electronic communication products:

Percentage of Ownership
at December 31,
Investor 2007 2008 2009
(a) Weblink International Inc. (“WII”, Taiwan) ............................... The Company 99.79 99.79 99.79
(b) Weblink (H.K.) International Ltd. (“WHI”, Hong Kong)........... WII 99.79 99.79 99.79
(c) Weblink Shanghai International Limited (“WSHI”, China)........ WHI 99.79 99.79 —
(d) Servex (Malaysia) Sdn Bhd (“SMA”, Malaysia) ...................... ASSB 100.00 100.00 100.00
(e) Servex International (Thailand) Co., Ltd. (“STH”, Thailand) .... ATH 100.00 100.00 100.00
(f) Megabuy Sdn Bhd (“MGB”, Malaysia)...................................... ASSB 100.00 100.00 100.00

F-16
 (3) Investing and holding companies:

ADSC and
(a) Multiventure Investment Inc. (“MVI”, Taiwan) ......................... The Company 100.00 100.00 100.00
(b) Acer Digital Service Co. (“ADSC”, Taiwan) ............................. The Company 100.00 100.00 100.00
(c) Acer Worldwide Incorporated (“AWI”, British Virgin Islands).. The Company 100.00 100.00 100.00
(d) Cross Century Investment Limited (“CCI”, Taiwan).................. The Company 100.00 100.00 100.00
(e) Acer SoftCapital Incorporated (“ASCBVI”, British Virgin
Islands) ....................................................................................... The Company 100.00 100.00 100.00
(f) Acer Capital Corporation (“ACT”, Taiwan) ............................... The Company 100.00 100.00 100.00
(g) Aspire Incubation Venture Capital (“AIVC”, Taiwan) ............... The Company 100.00 100.00 100.00
(h) Acer Digital Services (B.V.I.) Holding Corp. (“ADSBH”,
British Virgin Islands) ................................................................ The Company 100.00 100.00 100.00
(i) Acer Digital Services (Cayman Islands) Corp. (“ADSCC”,
Cayman Islands) ......................................................................... ADSBH 100.00 100.00 100.00
(j) Nicholas Insurance Company Ltd. (“NIC”, Bermuda) ............... GWI 100.00 100.00 100.00
(k) Acer Capital Australia Pty Ltd. (“ACAP”, Australia) ................ ACBVI 100.00 100.00 —
(l) Acer Venture Associates (“AVA”, Cayman islands) ................... ASCBVI 100.00 — —
(m) Acer Capital Limited (“ACBVI”, British Virgin Islands) .......... ASCBVI 100.00 100.00 —
(n) ASC Cayman, Limited (“ASCCAM”, Cayman Islands)............. ASCBVI 100.00 100.00 100.00
(o) Acer Technology Venture Asia Pacific Ltd. (“ATVAP”,
Cayman Islands) ......................................................................... ASCBVI 100.00 100.00 100.00
(p) AGP Insurance (Guernsey) Limited. (“AGU”, British
Guernsey Island) ....................................................................... AHN — — 100.00
(q) Acer EMEA Holdings B.V. (AHB, the Netherlands) ................ The Company — — 100.00
(r) Eten International Holdings Ltd. (“EIH”, British Virgin
Islands) ....................................................................................... ETEN — 100.00 100.00
(s) Eten Investment Co., Ltd. (“ETO”, Taiwan) .............................. ETEN — 100.00 —
(t) Protek Investment Co., Ltd. (“PTO”, Taiwan)............................ ETEN — 100.00 —
(u) Toptek Investment Co., Ltd. (“DTO”, Taiwan) .......................... ETEN — 100.00 —

(4) Research, design, and sale of smart handheld products:

Percentage of Ownership
at December 31,
Investor 2007 2008 2009
(a) E-ten Information System Co., Ltd. (“ETEN”, Taiwan)............. The Company 100.00 100.00 100.00
(b) Eten China Information System Co., Ltd. (“CETEN”, China) ... EIH 100.00 100.00 100.00
(c) AGP Technology AG (“AGP”, Switzerland) .............................. AHN — 100.00 100.00
(d) Acer Information Technology R&D (Shanghai) Co., Ltd.
(“ARD”, China) .......................................................................... AGC — — 100.00

(5) Property development:

(a) Acer Property Development Inc. (“APDI”, Taiwan) .................. ADSC 100.00 100.00 100.00
(b) Aspire Service & Development Inc. (“ASDI”, Taiwan) ............. ADSC 100.00 100.00 100.00

(6) Electronic data supply or processing service, data storage and processing:

(a) EB Easy Business Services Limited (“AGES”, Hong Kong) ..... ADSCC 85.00 85.00 —
(b) EB Easy (TWN) Corp. (“AGEST”, Taiwan) .............................. AGES 85.00 — —
(c) Acer Cyber Center Services Ltd. (“ACCSI”, Taiwan) ............... The Company 100.00 100.00 100.00
(d) Lottery Technology Service Corp. (“LTS”, Taiwan) .................. The Company 100.00 100.00 100.00
(e) Minly Corp. (“MINLY”, Taiwan) ............................................... The Company 100.00 100.00 100.00

F-17
 (7) Software research, development, design, trading and consultation:

(a) TWP Corporation (“TWP”, Taiwan)........................................... The Company 100.00 — —

(b) Acer TWP Invocation Information Co., Ltd. (“ATIM”,
Taiwan) ....................................................................................... TWP 100.00 — —
(c) TWP International Inc. (“TWP BVI”, British Virgin Islands).... ACCSI 100.00 100.00 100.00
(d) Acer Third Wave Software (Beijing) Co., Ltd.
(“TWPBJ”, China) ...................................................................... TWPBVI 100.00 100.00 100.00

In 2009, the subsidiaries namely PBSE, PBFE, PBCN, GBM, GFR, AFA, WSHI, ACAP, ACBVI, and AGES were liquidated and
were excluded from consolidation since the Company ceased control thereof. Additionally, the Company established new subsidiaries
namely APX, ARU, ATB, AGU, ARD, and AHB in 2009.
In June 2008, the Company completed its acquisition of 100% equity ownership of PB Holding Company S.A.R.L and its
subsidiaries. In September 2008, the Company completed its acquisition of 100% equity ownership of E-ten Information System Co.,
Ltd. and its subsidiaries. The results of operations of these acquired entities were included in the consolidated financial statements as
of the date of each acquisition. Additionally, the Company established a new subsidiary namely AGP in 2008.
On October 15, 2007, the Company completed its acquisition of 100% of equity ownership of Gateway, Inc. The results of
operations of Gateway, Inc. and its subsidiaries were included in the consolidated financial statements from the date of acquisition.
Additionally, the Company established a new subsidiary namely AAPH in 2007.
In July 2007 and September 2007, the Company sold all its ownership interest in Sertek Incorporated (“SNX”) and Digital
Computer System Co. (“DCS”), respectively. As a result, SNX and DCS were excluded from the consolidated financial statements
effective from the respective date of sale.
In October 2007, the Company reduced its investment in AMT to an ownership interest of less than 50% and no longer held a
controlling interest in AMT. Therefore, AMT was excluded from the consolidated financial statements from the date of sale.

2. Summary of Significant Accounting Policies

(1) Accounting principles and consolidation policy

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the Republic
of China. These consolidated financial statements are not intended to present the financial position and the related results of operations
and cash flows of the Consolidated Companies based on accounting principles and practices generally accepted in countries and
jurisdictions other than the ROC.
The consolidated financial statements include the accounts of the Company and subsidiaries in which the Company is able to
exercise control over the subsidiary’s operations and financial policies. The operating activity of the subsidiary is included in the
consolidated statements of income from the date that control commences until the date that control ceases. All significant inter-company
balances and transactions are eliminated in consolidation.

(2) Use of estimates

The preparation of the accompanying consolidated financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated
financial statements and reported amounts of revenues and expenses during the reporting periods. Economic conditions and events could
cause actual results to differ significantly from such estimates.

(3) Foreign currency transactions and translations

The Company’s reporting currency is the New Taiwan dollar. The Consolidated Companies record transactions in their respective
local currencies of the primary economic environment in which these entities operate. Non-derivative foreign currency transactions are
recorded at the exchange rates prevailing at the transaction date. At the balance sheet date, monetary assets and liabilities denominated
in foreign currencies are translated into New Taiwan dollars using the exchange rates on that date. The resulting unrealized exchange
gains or losses from such translations are reflected in the accompanying statements of income. Non-monetary assets and liabilities
denominated in foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign currency that are measured at fair value are reported at the rate
that was in effect when the fair values were determined. Subsequent adjustments to carrying values of such non-monetary assets and
liabilities, including the effects of changes in exchange rates, are reported in profit or loss for the period, except that if movement in
fair value of a non-monetary item is recognized directly in equity, any foreign exchange component of that adjustment is also recognized
directly in equity.
In preparing the consolidated financial statements, the foreign subsidiaries’ financial statements are initially remeasured into the
functional currency and the remeasuring differences are accounted for as exchange gains or losses in the accompanying statements of
income. Translation adjustments resulting from the translation of foreign currency financial statements into the Company’s reporting
currency and a monetary item that forms part of the Company’s net investment in a foreign operation are accounted for as cumulative
translation adjustment, a separate component of stockholders’ equity.

F-18
 (4) Classification of current and non-current assets and liabilities

Cash or cash equivalents, and assets that are held primarily for the purpose of being traded or are expected to be realized within
12 months after the balance sheet date are classified as current assets; all other assets are classified as non-current assets.

Liabilities that are held primarily for the purpose of being traded or are expected to be settled within 12 months after the balance
sheet date are classified as current liabilities; all other liabilities are classified as non-current liabilities.

(5) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash in banks, miscellaneous petty cash, and other highly liquid investments
which do not have a significant level of market or credit risk from potential interest rate changes.

(6) Allowance for doubtful accounts

Allowance for doubtful accounts is provided based on the collectibility, aging and quality analysis of notes and accounts
receivable.

(7) Inventories

Effective January 1, 2009, the Consolidated Companies adopted the newly revised Republic of China Statement of Financial
Accounting Standards (SFAS) No. 10 “Accounting for Inventories”. Under this revised accounting principle, the cost of inventories
comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Inventories
are measured individually at the lower of cost and net realizable value. 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. Cost of inventory is determined
using the weighted-average method.

Prior to January 1, 2009, inventories were stated at the lower of weighted-average cost or market value. Market value represents
net realizable value. Any write-down was made based on the aggregate amounts of inventories.

(8) Financial instruments

The Consolidated Companies adopted transaction-date accounting for financial instrument transactions. At initial recognition,
financial instruments are evaluated at fair value plus, in the case of a financial instrument not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Subsequent to initial recognition,
financial instruments are classified into the following categories in accordance with the purpose of holding or issuing of such financial
instruments:

(a) Financial assets/liabilities at fair value through profit or loss

An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial
recognition. Derivatives that do not meet the criteria for hedge accounting are classified as financial assets or liabilities at fair value
through profit or loss. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are
recognized in profit or loss.

(b) Hedging purpose derivative financial assets / liabilities

Hedging purpose derivative financial assets / liabilities represent derivatives that are intended to hedge the risk of changes in
exchange rates resulting from operating activities denominated in foreign currency and meet the criteria for hedge accounting.

(c) Available-for-sale financial assets

Available-for-sale financial assets are measured at fair value and changes therein, other than impairment losses and foreign
exchange gains and losses on available-for-sale monetary items, are recognized in a separate line item in stockholders’ equity. When
an investment is derecognized, the cumulative unrealized gain or loss recognized in equity is transferred to profit or loss. If there is
objective evidence which indicates that a financial asset is impaired, a loss is recognized in profit or loss. If, in a subsequent period,
events or changes in circumstances indicate that the amount of impairment loss decreases, reversal of a previously recognized
impairment loss for equity securities is charged to equity; while for debt securities, the reversal is allowed through profit or loss provided
that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.

(d) Financial assets carried at cost

Equity investments whose fair value cannot be reliably measured are carried at original cost. If there is objective evidence which
indicates that an equity investment is impaired, a loss is recognized. A subsequent reversal of such impairment loss is prohibited.

F-19
 (9) Hedging activities and hedge accounting

Hedge accounting recognizes the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and
the hedged item. The designated hedging instruments that conform to the criteria for hedge accounting are accounted for as follows:

(a) Fair value hedges

Changes in the fair value of a hedging instrument designated as a fair value hedge are recognized in profit or loss. The hedged
item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in profit or loss.

(b) Cash flow hedges

Changes in the fair value of a hedging instrument designated as a cash flow hedge are recognized directly in equity. If a hedge
of a forecasted transaction subsequently results in the recognition of an asset or a liability, then the amount recognized in equity is
reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss.

(10) Noncurrent assets held for sale and discontinued operation

Noncurrent assets and groups of assets and liabilities which comprise disposal groups are classified as held for sale when the
assets are available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such
assets (or disposal groups), and their sale within one year is highly probable. Noncurrent assets or disposal groups classified as held for
sale are measured at the lower of their book value or fair value less costs to sell, and ceased to be depreciated or amortized. Noncurrent
assets or disposal groups classified as held for sale are shown separately and excluded from the individual line items of the consolidated
balance sheets. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are continued 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 sell of an asset
(or a disposal group) is recognized, but not in excess of the cumulative impairment loss that has been recognized.

A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale. A component
of an entity comprises operations and cash flows that can be distinguished clearly, both operationally and for financial reporting
purposes, from the rest of the entity. A component that previously was held for use will have been one or more cash-generating units.

(11) Equity method investments

Long-term equity investments in which the Consolidated Companies, directly or indirectly, own 20% or more of the investee’s
voting shares, or less than 20% of the investee’s voting shares but are able to exercise significant influence over the investee’s operating
and financial policies, are accounted for using the equity method. Prior to January 1, 2006, differences between the acquisition cost and
net equity of the investee that could not be attributed to any reason were amortized over five years as investment income or losses.

Effective January 1, 2006, the Consolidated Companies adopted amended SFAS No. 5 “Accounting for Long-term Investments
under Equity Method”, under which, the investment cost in excess of fair values of identifiable net assets is recorded as investor-level
goodwill. Investor-level goodwill is no longer amortized but tested for impairment. Differences between investment cost and net equity
of the investee in the previous investments that cannot be attributed to any reason and were originally amortized over five years are no
longer amortized starting from January 1, 2006.

When an equity-method investment is disposed of, the difference between the selling price and the book value of the
equity-method investment is recognized as disposal gain or loss in the accompanying consolidated statements of income. If there are
capital surplus and separate components of shareholders’ equity resulting from such equity investments, they are charged as a reduction
to disposal gain/loss based on the disposal ratio of investments.

If an investee company issues new shares and the Company does not acquire new shares in proportion to its original ownership
percentage, the Company’s equity in the investee’s net assets will be changed. The change in the equity interest is used to adjust the
capital surplus and long-term investment accounts. If the Company’s capital surplus is insufficient to offset the adjustment to long-term
investment, the difference is charged as a reduction of retained earnings.

Unrealized gains and losses resulting from transactions between the Consolidated Companies and investees accounted for under
the equity method are deferred to the extent of the Company’s ownership. The gains and losses resulting from depreciable or amortizable
assets are recognized over the estimated useful lives of such assets. Gains and losses from other assets are recognized when realized.

(12) Capital leases

For capital leases, where the Consolidated Companies act as the lessor, the Consolidated Companies account for all periodic
rental payments plus bargain purchase price or estimated residual value as lease payment receivables. The present value of all lease
payment receivables, discounted at the implicit interest rate, is recorded as revenue. The difference between the lease payment
receivables and the revenue is the unearned interest revenue, which is recognized over the lease term using the effective interest method.

F-20
 (13) Property, plant and equipment, property leased to others, and property not in use
Property, plant and equipment are stated at acquisition cost. Interest expense related to the purchase and construction of property,
plant and equipment is capitalized and included in the cost of the related asset. Significant renewals, improvements and replacements
are capitalized. Maintenance and repair costs are charged to expense as incurred. Gains and losses on the disposal of property, plant and
equipment are recorded in the non-operating section in the accompanying consolidated statements of income.
Commencing from November 20, 2008, the Company capitalizes retirement or recovery obligation for newly acquired property
and equipment in accordance with Interpretation (2008) 340 issued by the Accounting Research and Development Foundation. A
component which is significant in relation to the total cost of the property and equipment and for which a different depreciation method
or rate is appropriate is depreciated separately. The estimated useful lives, depreciation method and residual value are evaluated at the
end of each year and any changes thereof are accounted for as changes in accounting estimates.
Depreciation is provided for property, plant and equipment, property leased to others, and property not used in operation over
the estimated useful life using the straight-line method. The estimated useful lives of the respective classes of assets are as follows:
buildings and improvements: 30 to 50 years; computer equipment and machinery: 3 to 5 years; transportation equipment: 3 to 5 years;
office and other equipment: 3 to 10 years; and leasehold improvement: 1 to 10 years.
Property leased to others and property not used in operation are classified to other assets and continue to be depreciated and are
subject to an impairment test.

(14) Intangible assets

Goodwill is recognized when the Purchase price exceeds the fair value of identifiable net assets acquired in a business
combination. In accordance with the SFAS No. 25 “Accounting for Business Combinations”, goodwill is no longer amortized but is
tested for impairment annually.
Other intangible assets, including patents, trademarks and trade names, customer relationships, developed technology and
purchased software, are initially stated at cost. Intangible assets with finite useful lives are amortized over the following estimated useful
lives using the straight-line method from the date that the asset is available for use: patents: 4 to 16 years; acquired software: 1 to 3
years; customer relationships: 7 to 10 years; developed technology: 10 years; and trademarks and trade names: 20 years.
The Gateway, Packard Bell and Eten trademarks and trade names are intangible assets with indefinite useful lives. Such
intangible assets are not amortized, but are tested for impairment annually. The useful life of an intangible asset not subject to
amortization shall be reviewed annually at each fiscal year-end to determine whether events and circumstances continue to support an
indefinite useful life assessment for that asset. Any change in the useful life assessment from indefinite to finite is accounted for as a
change in accounting estimate.

(15) Non-financial asset impairment

The Consolidated Companies assess at each balance sheet date whether there is any indication that an asset may have been
impaired. If any such indication exists, the Consolidated Companies estimate the recoverable amount of the assets. An impairment loss
is recognized for an asset whose carrying amount is higher than the recoverable amount. If there is any evidence that the impairment
loss no longer exists or has decreased, the amount previously recognized as impairment is reversed and the carrying amount of the asset
is increased to the recoverable amount. The increase in the carrying amount shall not exceed the depreciated or amortized balance of
the assets had no impairment loss been recognized in prior periods.
Goodwill and assets that have an indefinite useful life are tested annually for impairment. An impairment loss is recognized for
the amount by which the asset’s carrying amount exceeds its recoverable amount. A subsequent reversal of the impairment loss is
prohibited.

(16) Deferred charges

Deferred charges are stated at cost and primarily consist of improvements to office buildings and other deferred charges. These
costs are amortized using the straight-line method over their estimated useful lives.

(17) Treasury stock

Common stock repurchased by the Company is accounted for at acquisition cost. Upon disposal of the treasury stock, the sale
proceeds in excess of cost are accounted for as capital surplus—treasury stock. If the sale proceeds are less than cost, the deficiency
is accounted for as a reduction of the remaining balance of capital surplus—treasury stock. If the remaining balance of capital
surplus—treasury stock is insufficient to cover the deficiency, the remainder is recorded as a reduction of retained earnings. The cost
of treasury stock is computed using the weighted-average method.
If treasury stock is retired, the weighted-average cost of the retired treasury stock is written off to offset the par value and the
capital surplus premium, if any, of the stock retired on a pro rata basis. If the weighted-average cost written off exceeds the sum of the
par value and the capital surplus, the difference is accounted for as a reduction of capital surplus—treasury stock, or a reduction of
retained earnings for any deficiency where capital surplus—treasury stock is insufficient to cover the difference. If the weighted-average
cost written off is less than the sum of the par value and capital surplus, if any, of the stock retired, the difference is accounted for as
an increase in capital surplus—treasury stock.

F-21
 The Company’s common stock held by its subsidiaries is accounted for as treasury stock. Cash dividends paid by the Company
to its consolidated subsidiaries that hold the treasury stock are accounted for as capital surplus—treasury stock.

(18) Revenue recognition

Revenue from sales of products is recognized at the time products are delivered and the significant risks and rewards of
ownership are transferred to customers. Revenue generated from service is recognized when the service is provided and the amount
becomes billable.

(19) Employee bonuses and directors’ and supervisors’ remuneration

Employee bonuses and directors’ and supervisors’ remuneration appropriated after January 1, 2008, are accounted for according
to Interpretation (2007) 052 issued by the Accounting Research and Development Foundation. According to this Interpretation, the
Company estimates the amount of employee bonuses and directors’ and supervisors’ remuneration and recognizes it as operating
expense. Differences between the amount approved in the shareholders’ meeting and recognized in the financial statements, if any, are
accounted for as changes in accounting estimates and recognized in profit or loss.

(20) Share-based payment transactions

Effective January 1, 2008, the Consolidated Companies adopted SFAS No. 39 “Accounting for Share-based Payment” for its
share-based payments granted on or after January 1, 2008.
Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed over the vesting period, with a corresponding increase in equity. The vesting
period is the period during which all the specified vesting conditions of the share-based payment arrangement are to be satisfied. Vesting
conditions include service conditions and performance conditions (including market conditions). When estimating the fair value of an
equity-settled share-based award, only the effect of market conditions is 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 period.
Fair value of share-based award is measured using the Black-Scholes or the binomial option pricing model, taking into account
management’s best estimate of the exercise price, expected term, underlying share price, expected volatility, expected dividends,
risk-free interest rate, and any other inputs to the model.

(21) Administrative expenses

The Company’s administrative expenses include direct expenses incurred for the business unit within the Consolidated
Companies and expenses incurred for managing the investee companies. To reflect the operating income of the Consolidated Companies,
administrative expenses are divided into two parts. The first part, representing the direct expenses incurred for the Consolidated
Companies, is included as administrative expenses in the accompanying consolidated statements of income. The second part,
representing expenses incurred for managing the investee companies, is presented as a reduction of net investment income (loss) in the
consolidated statements of income.

(22) Retirement plans

(a) Defined benefit retirement plans

Pursuant to the ROC Labor Standards Law, the Company and subsidiaries located in the Republic of China established individual
noncontributory defined benefit retirement plans (the “Plans”) and retirement fund administration committees. The Plans provide for
lump-sum retirement benefits to retiring employees based on length of service, age, and certain other factors. The funding of retirement
plans by the Company and subsidiaries located in the Republic of China is based on a percentage of employees’ total salaries. The funds
are deposited with Bank of Taiwan or other banks.
For the defined benefit retirement plan, the Consolidated Companies recognize a minimum pension liability equal to the amount
by which the actuarial present value of the accumulated benefit obligation exceeds the fair value of the retirement plan’s assets. The
Consolidated Companies also recognize the net periodic pension cost based on an actuarial calculation.

(b) Defined contribution retirement plans

Starting from July 1, 2005, pursuant to the ROC Labor Pension Act (the “New System”), employees who elected to participate
in the New System or commenced working after July 1, 2005, are subject to a defined contribution plan under the New System. For
the defined contribution plan, the Company and subsidiaries located in the Republic of China contribute monthly an amount equal to
6% of each employee’s monthly salary to the employee’s individual pension fund account at the ROC Bureau of Labor Insurance.
Most of the Company’s foreign subsidiaries adopt defined contribution retirement plans. These plans are funded in accordance
with the regulations of their respective countries.
Contributions for the defined contribution retirement plans are expensed as incurred.

F-22
 (23) Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax is determined based on differences
between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect during the years in which the
differences are expected to reverse. The income tax effects resulting from taxable temporary differences are recognized as deferred
income tax liabilities. The income tax effects resulting from deductible temporary differences, net operating loss carryforwards, and
income tax credits are recognized as deferred income tax assets. The realization of the deferred income tax assets is evaluated, and if
it is considered more likely than not that the asset will not be realized, a valuation allowance is recognized accordingly. When the income
tax rate changes due to income tax law revision, the Company recalculates the deferred tax assets and liabilities using the new tax rate
and any resulting variances are recognized as income tax expense or benefit of continuing operating segment.

Classification of the deferred income tax assets or liabilities as current or noncurrent is based on the classification of the related
asset or liability. If the deferred income tax asset or liability is not directly related to a specific asset or liability, then the classification
is based on the asset’s or liability’s expected realization date.

The investment tax credits granted for purchases of equipment, research and development expenses, and training expenses are
recognized using the flow-through method.

According to the ROC Income Tax Act, undistributed earnings, if any, earned after June 30, 1997, are subject to an additional
10% retained earnings tax. The surtax is accounted for as income tax expense in the following year when the stockholders decide not
to distribute the earnings.

(24) Earnings per common share

Basic EPS are computed by dividing net income by the weighted-average number of common shares outstanding during the year.
The Company’s employee stock options and employee stock bonuses to be issued after January 1, 2010 are potential common stock.
In computing diluted EPS, net income and the weighted-average number of common shares outstanding during the year are adjusted for
the effects of dilutive potential common stock, assuming dilutive shares equivalents had been issued. The weighted average outstanding
shares are retroactively adjusted for the effects of stock dividends transferred from retained earnings and capital surplus to common
stock, and employee stock bonuses issued prior to January 1, 2009. Effective January 1, 2009, EPS are not retroactively adjusted for
employee stock bonuses.

(25) Business combination

Business combinations are accounted for in accordance with SFAS No. 25 “Business Combinations”. Acquisition costs represent
the amount of cash or cash equivalents paid and the fair value of the other purchase consideration given, plus any costs directly
attributable to the acquisition. The excess of acquisition cost over the fair value of the net identifiable tangible and intangible assets is
recognized as goodwill.

(26) Convenience translation into U.S. dollars

The consolidated financial statements are stated in New Taiwan dollars. Translation of the 2009 New Taiwan dollar amounts into
U.S. dollar amounts, using the spot rate of Central Bank of Taiwan on March 31, 2010, of NT$31.819 to US$1, is included solely for
the convenience of the readers. The convenience translations should not be construed as representations that the New Taiwan dollar
amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

3. Accounting Changes

Effective January 1, 2009, the Consolidated Companies adopted the newly revised SFAS No. 10, “Accounting for Inventories.”
The adoption of this new accounting principle did not have significant effect on the Company’s consolidated financial statements as of
and for the year ended December 31, 2009.

Effective January 1, 2008, the Consolidated Companies recognized and measured employee bonuses, and directors’ and
supervisors’ remuneration according to Interpretation (2007) 052 issued by the Accounting Research and Development Foundation. The
adoption of this interpretation, which resulted in recognition of employee bonus and directors’ and supervisors’ remuneration of
NT$1,586,563, decreased consolidated net income after tax and basic earnings per share by NT$1,483,776 and NT$0.59, respectively,
for the year ended December 31, 2008.

Effective January 1, 2008, the Consolidated Companies adopted SFAS No. 39, “Accounting for Share-based Payment,” which
requires the Consolidated companies to record share-based payment transactions in the financial statements at fair value. The adoption
of this new accounting principle did not have significant effect on the Company’s consolidated financial statements as of and for the
year ended December 31, 2008.

F-23
4. Significant Account Disclosures

(1) Cash and cash equivalents

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Cash on hand ......................................................................................... 55,207 878,683 8,217 258
Bank deposits......................................................................................... 14,908,552 13,690,489 34,278,393 1,077,293
Time deposits......................................................................................... 22,981,580 7,572,553 19,329,457 607,482
37,945,339 22,141,725 53,616,067 1,685,033

(2) Notes and accounts receivable

The Consolidated Companies entered into factoring contracts with several banks to sell part of accounts receivable without
recourse. As of December 31, 2007, 2008 and 2009, details of these contracts were as follows:

December 31, 2007

Advance
amount
Factored Factoring (Derecognized
Buyer amount credit limit amount) Interest rate Collateral
ABN AMRO Bank........................................................ $ 72,068 72,068 72,068 Nil
La Caixa Bank .............................................................. 4,415,967 6,577,855 4,415,967 Nil
Ifitalia Factor S.P.A. ..................................................... 4,598,145 12,183,229 — Nil
Standard Chartered Bank .............................................. 596,346 1,777,960 596,346 Nil
China Trust Bank.......................................................... 254,498 1,800,000 254,498 note 7(4)
Taipei Fubon Bank........................................................ 823,824 1,000,000 823,824 note 7(4)
$10,760,848 23,411,112 6,162,703 1.62%~6.00%

December 31, 2008

Advance
amount
Factored Factoring (Derecognized
Buyer amount credit limit amount) Interest rate Collateral
NT$ NT$ NT$
IFITALIA...................................................................... 10,018,176 11,226,373 2,866,914 Nil
ABN AMRO Bank........................................................ 2,292,296 7,314,804 2,292,296 Nil
Standard Chartered Bank .............................................. 2,213,795 6,563,600 2,213,795 Nil
Emirates Bank International ......................................... 415,867 1,082,994 415,867 Nil
China Trust Bank.......................................................... 281,695 1,965,000 190,972 note 7(4)
Taipei Fubon Bank........................................................ 514,716 1,000,000 514,716 note 7(4)
15,736,545 29,152,771 8,494,560 1.51%~5.9%

F-24
 December 31, 2009
Advance
amount
Factored Factoring (Derecognized
Buyer amount credit limit amount) Interest rate Collateral
NT$ NT$ NT$
IFITALIA...................................................................... 6,877,785 11,219,842 2,091,300 Nil
ABN AMRO Bank........................................................ 3,480,028 7,881,189 3,227,242 Nil
La Caixa Bank .............................................................. 3,200,041 3,724,657 3,200,041 Nil
Emirates Bank International ......................................... — 960,900 — Nil
China Trust Bank.......................................................... 218,706 1,750,000 218,706 note 7(4)
Taipei Fubon Bank........................................................ 442,145 968,500 442,145 note 7(4)
14,218,705 26,505,088 9,179,434 0.83%~5%

(3) Other receivable

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Refundable income tax and VAT receivable .......................................... 2,780,212 2,001,212 1,690,263 53,121
Receivables of patent royalty allocated to others .................................. 220,795 2,061,655 1,164,992 36,613
Other receivable..................................................................................... 4,374,562 4,744,587 6,407,897 201,386
7,375,569 8,807,454 9,263,152 291,120

(4) Available-for-sale financial assets—current

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Mutual funds.......................................................................................... 662,096 — — —
Publicly traded equity securities............................................................ 2,112,196 145,147 223,437 7,022
Money market funds and others ............................................................ 77,769 446,297 — —
2,852,061 591,444 223,437 7,022

In 2007, 2008 and 2009, the Consolidated Companies disposed of portions of these investments and recognized gains on disposal
thereof of NT$2,057,447, NT$1,187,156 and NT$24,022, respectively. The gains were recorded as “gain on disposal of investments”
in the accompanying consolidated statements of income.

(5) Financial assets and liabilities at fair value through profit or loss—current

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Financial assets at fair value through profit or loss—current:
Foreign currency forward contracts .................................................. 14,999 339,817 139,515 4,385
Foreign exchange swaps ................................................................... — 7,113 — —
Cross currency swaps........................................................................ — 7,821 — —
Foreign currency options .................................................................. 4,983 — 18,144 570
19,982 354,751 157,659 4,955

F-25
 December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Financial liability at fair value through profit or loss—current:
Foreign currency forward contracts .................................................. (1,394,549) (1,011,739) (157,848) (4,961)
Foreign currency options ................................................................. (593) — (4,691) (147)
(1,395,142) (1,011,739) (162,539) (5,108)

For the years ended December 31, 2007, 2008 and 2009, unrealized gains (losses) resulting from the changes in fair value of these
derivative contracts amounted to NT$(272,939), NT$718,172 and NT$652,108, respectively.

The Consolidated Companies entered into derivative contracts to manage foreign currency exchange risk resulting from operating
activities. As of December 31, 2007, 2008 and 2009, the derivative financial instruments that did not conform to the criteria for hedge
accounting and were classified as financial assets and liabilities at fair value through profit or loss consisted of the following:

(a) Foreign currency forward contracts

December 31, 2007

Contract
amount (in
Buy Sell thousands) Maturity period

USD/ZAR ............................................................................................................... USD24,222 2008/01/02~2008/02/29

USD/SGD ............................................................................................................... USD15,000 2008/01/16~2008/03/31
USD/EUR ............................................................................................................... EUR663,000 2008/01/16~2008/02/29
USD/INR ................................................................................................................ USD50,536 2008/01/16~2008/05/30
USD/JPY ................................................................................................................ USD16,500 2008/01/15~2008/05/16
USD/RMB .............................................................................................................. USD15,000 2008/01/30~2008/03/31
USD/THB ............................................................................................................... USD18,000 2008/01/15~2008/02/15
USD/MYR .............................................................................................................. USD21,865 2008/01/15~2008/03/17
USD/NTD ............................................................................................................... USD24,000 2008/01/09~2008/01/31

December 31, 2008

Contract
amount (in
Buy Sell thousands) Maturity period

USD/SGD ............................................................................................................... USD7,000 2009/01/14~2009/02/26

USD/CAD............................................................................................................... USD47,806 2009/01/28~2009/02/26
EUR/CHF ............................................................................................................... EUR19,000 2009/01/05~2009/03/30
USD/EUR ............................................................................................................... EUR720,000 2009/01/15~2009/02/27
USD/INR ................................................................................................................ USD61,600 2009/01/06~2009/05/29
USD/MYR .............................................................................................................. USD19,138 2009/01/14~2009/02/17
USD/PHP................................................................................................................ USD500 2009/01/15
USD/THB ............................................................................................................... USD28,700 2009/01/14~2009/05/29
USD/RMB .............................................................................................................. USD70,000 2009/02/02~2009/03/30
USD/JPY ................................................................................................................ USD5,000 2009/01/14
USD/NTD ............................................................................................................... USD5,000 2009/01/09~2009/01/22

F-26
 December 31, 2009
Contract
amount (in
Buy Sell thousands) Maturity period

USD/SGD ............................................................................................................... USD12,600 2010/01/19~2010/03/15

USD/MXN .............................................................................................................. USD96,100 2010/01/15~2010/03/26
USD/EUR ............................................................................................................... EUR47,000 2010/02/26
USD/INR ................................................................................................................ USD55,992 2010/01/15~2010/03/31
USD/MYR .............................................................................................................. USD15,400 2010/01/19~2010/03/31
USD/THB ............................................................................................................... USD20,670 2010/01/15~2010/02/19
USD/JPY ................................................................................................................ USD68,300 2010/01/15~2010/04/15
USD/RUB ............................................................................................................... USD124,000 2010/01/15~2010/04/15
USD/PHP................................................................................................................ USD100 2010/01/08
USD/ZAR ............................................................................................................... USD21,500 2010/01/15~2010/03/31
USD/NTD ............................................................................................................... USD5,000 2010/01/11~2010/02/10
EUR/NOK .............................................................................................................. EUR17,403 2010/01/15~2010/04/15
EUR/SEK ............................................................................................................... EUR48,400 2010/01/15~2010/04/15
EUR/PLN ............................................................................................................... EUR23,000 2010/01/15
RUB/USD ............................................................................................................... USD36,689 2010/01/15
MXN/USD .............................................................................................................. USD2,900 2010/01/29

(b) Foreign exchange swaps

December 31, 2008

Contract amount Maturity
(in thousands) period

Swap-in USD / Swap-out NTD ................................................................... USD 160,000 / NTD 5,243,200 2009/01/15

(c) Cross currency swaps

December 31, 2008

Maturity
Contract amount (in thousands) Date Interest Interest due date
Swap-in SGD35,000/.................................... 2009/01/23 Pay fixed rate in USD of 0.66% Principal and interest are
Swap-out USD 24,221 ................................. Receive fixed rate in SGD of paid in full when due
1.00%

(d) Foreign currency options

(i) Long position

December 31, 2007

Contract amount
(in thousands) Maturity period
EUR CALL/GBP PUT ..................................................................... EUR3,487 2008/02/27

F-27
 December 31, 2009
Contract amount
(in thousands) Maturity period
USD Call/EUR Put........................................................................... USD22,500 2010/01/27~2010/02/12
USD Call/RUB Put .......................................................................... USD5,000 2010/02/24

(ii) Short position

December 31, 2007

Contract amount
(in thousands) Maturity period
GBP CALL/EUR PUT ..................................................................... EUR3,835 2008/02/27

December 31, 2009

Contract amount
(in thousands) Maturity period
EUR Call/USD Put........................................................................... USD22,500 2010/01/27~2010/02/12
RUB Call/USD Put .......................................................................... USD7,500 2010/02/24

(6) Hedging purpose derivative financial assets and liabilities

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Hedging purpose derivative financial assets — current:
Foreign currency forward contracts .................................................. 235,198 962,268 1,275,157 40,075
Foreign currency options .................................................................. — 60,514 — —
235,198 1,022,782 1,275,157 40,075

Hedging purpose derivative financial liabilities — current:

Foreign currency forward contracts .................................................. (66,786) (848,726) (196,714) (6,182)
Foreign exchange swaps ................................................................... — (14) — —
Foreign currency options .................................................................. — (23,298) — —
(66,786) (872,038) (196,714) (6,182)

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, 2007, 2008 and 2009, hedged items designated as fair value hedges and fair value of their respective hedging
derivative financial instruments were as follows:

Fair value of hedging instruments

December 31,
Hedged Items Hedging instruments 2007 2008 2009
NT$ NT$ NT$
Foreign currency forward 152,576 386,420 1,066,045
Accounts receivable/payable denominated Foreign exchange swaps — (14) —
in foreign contracts currencies ............. Foreign currency options — 37,903 —
152,576 424,309 1,066,045

For the years ended December 31, 2007, 2008 and 2009, the unrealized gains (losses) resulting from the changes in fair value
of hedging instruments amounted to NT$394,271, NT$271,733 and NT$641,736, respectively.

F-28
 As of December 31, 2007, 2008 and 2009, hedged items designated as cash flow hedges and fair value of their respective hedging
derivative financial instruments were as follows:

December 31, 2007

Expected
Fair value of Expected period of
hedging period of recognition
Hedged items Hedging instruments instruments cash flow in earnings
NT$

Accounts receivable/payable denominated Jan. ~ Apr. Jan. ~ Apr.

in foreign currencies ............................ Foreign currency forward contracts 15,836 2008 2008

December 31, 2008

Expected
Fair value of Expected period of
hedging period of recognition
Hedged items Hedging instruments instruments cash flow in earnings
NT$

Jan. ~ May Jan. ~ May

Accounts receivable/payable denominated Foreign currency forward contracts (272,878) 2009 2009
in foreign currencies ............................. Foreign currency options (687) Feb.2009 Feb.2009
(273,565)

December 31, 2009

Expected
Fair value of Expected period of
hedging period of recognition
Hedged items Hedging instruments instruments cash flow in earnings
NT$

Accounts receivable/payable denominated Jan. ~ May. Jan. ~ May.

in foreign currencies ............................. Foreign currency forward contracts 12,398 2010 2010

As of December 31, 2007, 2008 and 2009, unrealized gains (losses) on derivative financial instruments effective as cash flow
hedges, amounted to NT$15,836, NT$(273,565) and NT$12,398, respectively, which were recognized in “unrealized gain (loss) on
financial instruments”, a separate component of stockholder’s equity.
Details of hedging derivative financial instruments described above that were outstanding as of December 31, 2007, 2008
and 2009 were as follows:

(a) Foreign currency forward contracts

December 31, 2007

Contract amount
Buy Sell (in thousands) Maturity period
EUR / NOK EUR9,000 2008/01/15
EUR / SEK EUR8,500 2008/01/15
EUR / GBP EUR170,577 2008/01/31~2008/04/16
USD / EUR USD77,666 2008/01/01~2008/03/31
USD / AUD USD50,268 2008/01/11~2008/02/28
USD / NZD USD5,940 2008/01/31~2008/03/31
AUD / NZD AUD3,531 2008/01/07~2008/02/05
USD / CAD USD4,094 2008/02/19~2008/02/28

F-29
 December 31, 2008
Contract amount
Buy Sell (in thousands) Maturity period
USD / AUD USD68,190 2009/01/30~2009/05/29
AUD / USD USD11,867 2009/01/30~2009/04/30
USD / CAD USD39,095 2009/02/26~2009/04/30
EUR / DKK EUR94 2009/01/15
USD / EUR EUR252,798 2009/01/30~2009/03/31
EUR / GBP EUR165,369 2009/01/15~2009/02/27
EUR / NOK EUR14,311 2009/01/13~2009/02/27
USD / NZD USD4,500 2009/01/30~2009/05/29
EUR / SEK EUR19,612 2009/01/13~2009/02/27
USD / JPY USD70,000 2009/01/15~2009/05/29
USD / ZAR USD17,300 2009/01/15~2009/03/31
USD / MXN USD90,000 2009/01/09~2009/04/17

December 31, 2009

Contract amount
Buy Sell (in thousands) Maturity period
USD / AUD USD51,000 2010/01/29~2010/02/26
USD / CAD USD58,265 2010/01/29~2010/02/25
USD / EUR EUR870,918 2010/01/15~2010/03/16
EUR / GBP EUR237,105 2010/01/15~2010/03/31
USD / NZD USD3,900 2010/01/29~2010/03/31
AUD / NZD AUD2,150 2010/01/29~2010/02/26
USD / RMB USD160,000 2010/01/18~2010/04/29
USD / NTD USD25,000 2010/01/19

(b) Foreign currency options

(i) Long position

December 31, 2008

Contract amount
(in thousands) Maturity period
USD Call/AUD Put ..................................................................................... USD6,445 2009/01/28~2009/02/25
EUR Call/GBP Put ...................................................................................... EUR43,257 2009/01/30~2009/03/31
USD Call/EUR Put...................................................................................... USD6,000 2009/01/30
NZD Call/USD Put ..................................................................................... USD1,000 2009/01/28~2009/02/25
EUR Call/NOK Put ..................................................................................... EUR4,200 2009/01/15
EUR Call/SEK Put ...................................................................................... EUR3,900 2009/01/15

(ii) Short position

December 31, 2008

Contract amount
(in thousands) Maturity period
AUD Call/USD Put ..................................................................................... USD6,445 2009/01/28~2009/02/25
GBP Call/EUR Put ...................................................................................... EUR55,984 2009/01/30~2009/03/31
EUR Call/USD Put...................................................................................... USD6,000 2009/01/30
USD Call/NZD Put ..................................................................................... USD1,000 2009/01/28~2009/02/25
NOK Call/EUR Put ..................................................................................... EUR4,200 2009/01/15
SEK Call/EUR Put ...................................................................................... EUR5,850 2009/01/15

F-30
 (c) Foreign exchange swap

December 31, 2008

Contract amount Maturity
(in thousands) date
Swap-in SEK/Swap-out EUR ...................................................................... SEK17,000/EUR1,554 2009/01/15

(7) Inventories

(a) Inventories (net of provision for obsolescence and slow-moving inventories) as of December 31, 2007, 2008 and 2009,
were as follows:

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Raw materials ........................................................................................ 12,452,588 14,528,727 18,489,941 581,098
Work in process ..................................................................................... 27,322 49,437 45,089 1,417
Finished goods and merchandise ........................................................... 9,723,211 14,122,367 15,471,217 486,226
Spare parts ............................................................................................. 3,982,372 2,093,862 2,477,522 77,863
Inventories in transit .............................................................................. 7,630,204 9,233,802 14,701,184 462,025
33,815,697 40,028,195 51,184,953 1,608,629

(b) The details of inventories write downs for the years ended December 31, 2008 and 2009 were as follows:

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Write-down of inventories to net realizable value................................. 4,527,940 7,781,927 3,278,468 103,035
Net loss on scrap and physical inventory ............................................. 64,177 101,224 128,506 4,039
4,592,117 7,883,151 3,406,974 107,074

(8) Noncurrent assets held for sale

In December 2007, the Company’s subsidiary ACI planned to sell its office building located in Singapore. As a result, such office
building, with carrying value of NT$764,718, was reclassified to noncurrent asset held for sale under “prepayments and other current
assets” in the accompanying consolidated balance sheet as of December 31, 2007. In March 2008, the sale of this office building was
completed.

F-31
 (9) Financial assets carried at cost—noncurrent

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Investment in non-publicly traded equity securities:
National Securities Corp. .................................................................. 12,188 — — —
Prosperity Venture Capital Corp. ..................................................... 28,000 21,000 21,000 660
Sheng-Hua Venture Capital Corp. ..................................................... 30,000 20,000 11,900 374
Legend Technology ........................................................................... 27,205 15,235 11,235 353
W.I. Harper International Corp. ........................................................ 20,650 15,050 14,359 451
InCOMM Technologies Co., Ltd....................................................... 2,360 2,360 2,360 74
IP Fund II.......................................................................................... 32,400 32,400 32,400 1,018
Dragon Investment Co. Ltd............................................................... 323,000 217,000 217,000 6,820
World Venture, Inc. ........................................................................... 300,000 262,000 262,000 8,234
iD Reengineering Inc. ....................................................................... 199,900 174,900 174,900 5,497
HiTRUST. COM Inc. ........................................................................ 90,818 — — —
DYNA Fund II .................................................................................. 23,459 23,736 23,166 728
IP Fund III ........................................................................................ 195,161 131,862 128,696 4,045
iD5 Fund LTP ................................................................................... 73,879 74,751 72,956 2,293
IP Cathay One, L.P. .......................................................................... 194,610 295,362 258,558 8,126
IP Fund One L.P................................................................................ 1,274,713 907,431 736,379 23,143
MPC Corporation .............................................................................. 231,100 — — —
Apacer Technology Inc. .................................................................... — 45,340 45,340 1,425
New Century Infocomm Tech Co., Ltd. .......................................... — 341,663 131,340 4,128
Trimode Technology Inc. .................................................................. — 12,264 11,038 347
Others................................................................................................ 82,678 91,916 96,431 3,030
3,142,121 2,684,270 2,251,058 70,746

In 2007 and 2008, the Consolidated Companies increased their equity investments in IP Cathay One, L.P. and other investees by
NT$217,140 and NT$97,876, respectively. The Consolidated Companies also invested NT$359,759 in New Century Infocomm Tech
Co., Ltd., Trimode Technology Inc., and other investees through the acquisition of E-Ten in 2008.

In 2009, IP Cathay One, L.P., IP Fund One, L.P., Legend Technology, W.I. Harper International, and Sheng-Hua Venture capital
and other investees returned capital of NT$170,716 to the Consolidated Companies. In 2008, IP Fund One, L.P., Legend Technology and
W.I. Harper International Corp. returned capital of NT$462,552 to the Consolidated Companies.

In 2007, the Consolidated Companies sold portion of their investments in Taiwan Fixed Network Corp., InCOMM Technologies
Co., Ltd. and other investees, which resulted in an aggregate disposal gain of NT$44,593. In 2008, the Consolidated Companies sold
portion of their investments in Apacer Technology Inc. and other investees, which also resulted in an aggregate disposal gain of
NT$80,462.

For the year ended December 31, 2009, the Consolidated Companies recognized impairment losses on the investments in New
Century Infocomm Tech Co., Ltd. and other investees in the amount of $231,934. For the year ended December 31, 2008, the
Consolidated Companies recognized impairment losses on the investments in Dragon Investment Co. Ltd., iD Reengineering Inc., MPC
Corp. and other investees in the amount of $409,141. The aforementioned impairment losses were recorded under “other investment
loss” in the accompanying consolidated statements of income.

F-32
 (10) Investments accounted for using equity method

December 31, 2007 2007

Percentage Carrying Investment
of ownership amount income (loss)
% NT$ NT$
Wistron Corporation (“Wistron”).................................................................................... 9.13 2,987,685 668,653
e-Life Mall Corp. .......................................................................................................... 21.82 682,475 116,160
The Eslite Bookstore ...................................................................................................... 18.62 395,411 34,465
Apacer Technology Inc. (“Apacer”) ............................................................................... 34.40 313,410 (141,642)
Aegis Semiconductor Technology Inc. .......................................................................... 44.03 165,235 —
ECOM Software Inc. ...................................................................................................... 33.93 50,830 10,798
Bluechip Infotech Pty Ltd. ............................................................................................. 33.41 77,811 11,698
HiTRUST.COM Inc. (“HiTRUST.COM”) ...................................................................... — — 122,012
Other ............................................................................................................................... 24,843 (22,892)
Deferred credits .............................................................................................................. (8,016) 27,009
4,689,684 826,261

Less: Allocation of corporate expense ............................................................................ (130,601)

695,660

December 31, 2008 2008

Percentage Carrying Investment
of ownership amount income (loss)
% NT$ NT$
Wistron Corporation ...................................................................................................... 4.92 1,814,166 471,792
E-Life Mall Corp. .......................................................................................................... 14.27 442,291 70,763
The Eslite Bookstore ...................................................................................................... 18.62 304,361 (72,508)
Apacer Technology Inc. .................................................................................................. — — (18,962)
Aegis Semiconductor Technology Inc. ........................................................................... 44.03 165,235 —
ECOM Software Inc. ...................................................................................................... 33.93 36,771 4,565
Bluechip Infotech Pty Ltd. ............................................................................................. 33.41 57,361 1,125
FuHu Inc......................................................................................................................... 9.00 72,518 (987)
Other ............................................................................................................................... — 36,087 1,994
Deferred credits .............................................................................................................. — 12,896
2,928,790 470,678

Less: Allocation of corporate expense ............................................................................ (66,494)

404,184

F-33
 December 31, 2009 2009
Percentage
of ownership Carrying amount Investment income (loss)
% NT$ US$ NT$ US$
Wistron Corporation .................................................... 4.40 2,334,164 73,358 424,441 13,339
E-Life Mall Corp. ........................................................ 14.27 434,174 13,645 55,976 1,759
Aegis Semiconductor Technology Inc. ......................... 44.03 165,235 5,193 — —
ECOM Software Inc. .................................................... 33.93 36,310 1,141 3,791 119
Bluechip Infotech Pty Ltd. ........................................... 33.41 72,303 2,272 4,605 145
FuHu Inc....................................................................... 25.00 172,982 5,436 (26,740) (840)
Olidata S.p.A ................................................................ 29.90 116,579 3,664 — —
Others ........................................................................... — (16,797) (528) 1,737 54
3,314,950 104,181 463,810 14,576

Less: Allocation of corporate expense .......................... (63,712) (2,002)

400,098 12,574

Deferred credits of long-term equity investments represent the unamortized balance of deferred gains and losses derived from
the sale of equity investment among the affiliated companies. Such deferred gains and losses are realized upon disposal of the
equity-method investments to non-consolidated entities.
In 2008, the Consolidated Companies invested NT$73,841 in FuHu Inc. In 2009, the Consolidated Companies invested in Olidata
S.p.A. and increased investment in FuHu Inc. for an aggregate amount of NT$244,702.
In October 2007, the Company reduced its investment in Apacer to an ownership interest of less than 50% and no longer held
a controlling interest in Apacer. Consequently, Apacer was excluded from the consolidated financial statements, and the investments in
Apacer were accounted for using the equity method. The Consolidated Companies continuously decreased their ownership in Apacer
in 2008, and commencing on August 1, 2008, the Consolidated Companies lost their ability to exercise significant influence over
Apacer’s operating and financial policies. Therefore, the investments in Apacer were reclassified as “financial assets carried at
cost—noncurrent”.
On December 31, 2007 and January 1, 2009, the Consolidated Companies decreased their ownership interest in HiTRUST.COM
and The Eslite Bookstore, respectively, and thus lost the ability to exercise significant influence over HiTRUST.COM and The Eslite
Bookstores’ operating and financial policies. Consequently, the equity investments in HiTRUST.COM and The Eslite Bookstore were
reclassified as “financial assets carried at cost—noncurrent”.
In 2007, the Consolidated Companies sold portion of their investments in Wistron, Apacer, HiTRUST. COM, and other investees,
and recognized an aggregate gain thereon of NT$1,834,450. In 2008, the Company sold portion of its investment in Wistron and
recognized a gain thereon of NT$1,441,906. In 2009, the Consolidated Companies sold all of their investments in The Eslite Bookstore
and recognized an aggregate loss thereon of NT$5,455.
The Consolidated Companies recognized an investment loss of NT$7,263 in 2008 and an investment gain of NT$4,236 in 2009
due to liquidation of EB EASY (TWN) Corp. and Hungtung Venture Capital, respectively. The loss was recorded under “other loss” and
the gain was recorded under “other gain” in the accompanying consolidated statements of income.
The Consolidated Companies’ capital surplus was increased (reduced) by NT$(169,810), NT$(78,255) and NT$180,899 in 2007,
2008 and 2009, respectively, as the Consolidated Companies did not make additional investments proportionally to the issuance of new
shares by the investee companies or the Consolidated Companies recognized changes in investees’ equity accounts in proportion to its
ownership percentage.

(11) Available-for-sale financial assets—noncurrent

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Investment in publicly traded equity securities:
Qisda Corporation (“Qisda”)............................................................. 2,655,514 520,718 1,606,215 50,480
Silicon Storage Technology Inc. (“Silicon”) ..................................... 10,571 8,192 8,938 281
Yosun Industrial Corp. ...................................................................... 704,762 386,660 844,416 26,538
RoyalTek Co., Ltd............................................................................. — 93,390 539,319 16,950
Quanta Computer Inc. ....................................................................... — 151,527 307,854 9,675
3,370,847 1,160,487 3,306,742 103,924

F-34
 On July 1, 2007, the Company sold all its ownership interest in a subsidiary, Sertek Inc. Refer to note 4(23) related to the
discussion of discontinued operations. The selling price was payable in cash and 27,000,000 shares of Yosun Industrial Corp.

In September 2008, the Consolidated Companies invested in RoyalTek Co., Ltd. and Quanta Computer Inc. through the
acquisition of E-Ten.

In 2007, the Consolidated Companies sold portion of their investments in Qisda, Silicon and other investees, and recognized an
aggregate gain thereon of NT$109,491. In 2008, no disposal activities occurred. In 2009, the Consolidated Companies sold portion of
their investments in Yosun Industrial and recognized a gain thereon of NT$57,894.

As of December 31, 2007, 2008 and 2009, the unrealized gain (losses) resulting from re-measuring available-for-sale financial
assets (including current and non-current) to fair value amounted to NT$2,508,663, NT$(1,456,066) and NT$1,001,919, respectively,
which were recognized as a separate component of stockholders’ equity.

(12) Property, plant and equipment

The Company’s subsidiary, ACI, sold its office building located in Singapore in March 2008, with a disposal gain of NT$788,944.
Additionally, the Company’s subsidiary, Gateway Inc., disposed of computer equipment and machinery in 2008 and 2009 with a disposal
loss of NT$269,057 and NT$102,532, respectively. The net gain (loss) was recorded under “gain/loss on disposal of property and
equipment, net” in the accompanying consolidated statements of income.

In 2009, the Consolidated Companies recognized an impairment loss of NT$395,109 for the buildings and improvements of the
E-Ten and Gateway Inc., as the recoverable amount was less than the carrying amount of such assets.

(13) Property not used in operation

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Leased assets—land ............................................................................... 818,630 807,538 807,538 25,379
Leased assets—buildings ...................................................................... 2,855,547 2,827,810 2,827,810 88,872
Damaged office premises....................................................................... 457,558 457,558 463,181 14,556
Property held for sale and development ................................................ 1,761,173 1,391,260 1,415,014 44,471
Others .................................................................................................... — 29,019 — —
Less: Accumulated depreciation ............................................................ (543,805) (570,088) (595,606) (18,718)
Accumulated impairment.............................................................. (1,543,000) (1,946,376) (1,946,395) (61,171)
3,806,103 2,996,721 2,971,542 93,389

Damaged office premises are office premises damaged by fire. As of December 31, 2008, the Consolidated Companies concluded
that the possibility for the damaged office premises to be fully repaired was remote; hence, the accrual for repair cost of NT$161,308,
recorded under “other current liabilities”, in the accompanying consolidated balance sheet as of December 31, 2007 was reclassified as
accumulated asset impairment, and an additional impairment loss of NT$221,931 was recognized in 2008.

For certain land acquired, the ownership registration has not been transferred to the land acquirer, APDI, a subsidiary of the
Company. To protect APDI’s interests, APDI has obtained signed contracts from the titleholders assigning all rights and obligations
related to the land to APDI. Additionally, the land title certificates are held by APDI, and APDI has registered its liens thereon.

F-35
 (14) Intangible assets

Trademarks
and trade Customer
Goodwill Patents names Relationships Others Total
NT$ NT$ NT$ NT$ NT$ NT$
Balance at January 1, 2007.................. 244,328 171 — — 152,183 396,682
Additions ............................................. — 415,701 — — 78,168 493,869
Acquisitions from business
combination..................................... 16,654,264 1,116,481 5,504,220 1,551,042 570,729 25,396,736
Disposals.............................................. — (120) — — (3,410) (3,530)
Effect of exchange rate changes .......... (7,876) 553 73 494 3,356 (3,400)
Amortization ....................................... — (59,074) (6,054) (40,457) (248,279) (353,864)
Balance at December 31, 2007 ............ 16,890,716 1,473,712 5,498,239 1,511,079 552,747 25,926,493
Additions ............................................. — 89,177 — — 80,147 169,324
Acquisitions from business
combination..................................... 3,675,993 — 2,634,244 151,100 1,871,300 8,332,637
Adjustments made subsequent to
business acquisition......................... 1,844,038 — — — — 1,844,038
Disposals.............................................. (32,532) — — — (4,339) (36,871)
Reclassification .................................... — (727,381) — — (453,200) (1,180,581)
Effect of exchange rate changes .......... 195,825 (20,326) (32,122) 11,722 (14,327) 140,772
Amortization ....................................... — (122,344) (32,805) (156,552) (137,346) (449,047)
Balance at December 31, 2008 ............ 22,574,040 692,838 8,067,556 1,517,349 1,894,982 34,746,765
Additions ............................................. — 369,000 — — 2,536,507 2,905,507
Adjustments made subsequent to
business acquisition......................... (138,067) — — — — (138,067)
Disposals.............................................. (9,624) (39,275) — — (9,759) (58,658)
Reclassification .................................... — — — — 16,867 16,867
Effect of exchange rate changes .......... (448,895) (3,073) (161,298) (28,110) (6,842) (648,218)
Amortization ....................................... — (217,701) (43,793) (178,933) (939,701) (1,380,128)
Balance at December 31, 2009 ............ 21,977,454 801,789 7,862,465 1,310,306 3,492,054 35,444,068

(a) Acquisitions

(i) Gateway, Inc.

On October 15, 2007, the Company completed the acquisition of 100% equity ownership of Gateway, Inc., a personal computer
company in the U.S., through its indirectly wholly owned subsidiary Acer American Holding, at a price of US$1.90 (dollars) per
share. The total purchase price amounted to US$711,420, which was inclusive of direct transaction costs.

The acquisition was accounted for in accordance with ROC SFAS No. 25 “Accounting for Business Combinations”, under which,
the excess of the purchase price and direct transaction costs over the fair value of the net identifiable assets was recognized as
goodwill.

F-36
 The following represents the allocation of the purchase price to the assets acquired, liabilities assumed, and goodwill at the date
of acquisition:

NT$ NT$
Purchase Price.......................................................................................................................................... 23,507,016
The identifiable assets acquired and liabilities assumed:
Current assets ...................................................................................................................................... 32,139,646
Investments carried at cost.................................................................................................................. 277,057
Property, plant and equipment ............................................................................................................ 2,808,517
Intangible assets-trademarks of Gateway and eMachines ................................................................... 5,504,220
Intangible assets-customer relationships ............................................................................................. 1,551,042
Intangible assets-others ....................................................................................................................... 1,687,210
Other assets ......................................................................................................................................... 58,355
Current liabilities ................................................................................................................................ (24,576,616)
Long-term liabilities............................................................................................................................ (9,673,377)
Other liabilities ................................................................................................................................... (2,923,302) 6,852,752
Goodwill .................................................................................................................................................. 16,654,264

Within one year from the acquisition date (the “allocation period”), the Company identified adjustments, after the initial
recognition, to certain property and equipment and pre-acquisition contingent liabilities. These adjustments decreased property,
plant and equipment by NT$77,564 and increased current liabilities by NT$1,766,474, which also increased goodwill by
NT$1,844,038.

The Gateway trademark has an indefinite useful life and, accordingly, is not subject to amortization. The eMachines trademark
is being amortized using the straight-line method over 20 years, the estimated period of its economic benefits. Customer
relationships are being amortized using the straight-line method over the estimated useful life of 10 years.

(ii) Packard Bell B.V.

In March and June of 2008, the Company completed the acquisition of 100% equity ownership of Packard Bell B.V., a personal
computer company in Europe, through its indirectly wholly owned subsidiary Acer Europe B.V., at a total purchase price of Euro
66,117, which was inclusive of direct transaction costs.

The acquisition was accounted for in accordance with ROC SFAS No. 25 “Accounting for Business Combinations”, under which,
the excess of the purchase price and direct transaction costs over the fair value of the net identifiable assets was recognized as
goodwill.

The following represents the allocation of the purchase price to the assets acquired, liabilities assumed, and goodwill at the date
of acquisition:

NT$ NT$
Purchase Price.......................................................................................................................................... 3,172,080
The identifiable assets acquired and liabilities assumed:
Current assets ...................................................................................................................................... 9,587,790
Property, plant and equipment ............................................................................................................ 351,162
Intangible assets — Packard Bell trademark ..................................................................................... 2,163,744
Current liabilities ................................................................................................................................ (10,665,179)
Other liabilities ................................................................................................................................... (39,609) 1,397,908
Goodwill .................................................................................................................................................. 1,774,172

The Packard Bell trademark has an indefinite useful life and, accordingly, is not subject to amortization.

Within the allocation period, the Company made adjustments to decrease deferred charges by NT$33,768 and to decrease current
liabilities by NT$174,307, which also decreased goodwill by NT$140,539.

(iii) E-Ten Information Systems Co., Ltd

On September 1, 2008, the Company completed its acquisition of 100% equity ownership of E-TEN, a handheld device company
in Taiwan. The Company offered to exchange one share of its stock for every 1.07 shares of outstanding E-Ten stock, and issued
a total of 168,158,878 common shares. E-Ten then became the Company’s direct wholly owned subsidiary.

F-37
 The acquisition was accounted for in accordance with ROC SFAS No. 25 “Accounting for Business Combinations”, under which,
the excess of the purchase price and direct transaction costs over the fair value of the net identifiable assets was recognized as
goodwill.
The following represents the allocation of the purchase price to the assets acquired, liabilities assumed, and goodwill at the date
of acquisition:

NT$ NT$
Purchase Price:
Fair value of common shares issued ................................................................................................... 8,700,751
Fair value of outstanding employee stock options ............................................................................
assumed .............................................................................................................................................. 136,516 8,837,267
The identifiable assets acquired and liabilities assumed:
Current assets ...................................................................................................................................... 2,574,588
Long-term investment ........................................................................................................................ 789,753
Property, plant and equipment ............................................................................................................ 1,856,836
Intangible assets — ETEN trademark ................................................................................................. 450,900
Intangible assets — customer relationship.......................................................................................... 151,100
Intangible assets — developed technology ......................................................................................... 1,802,500
Intangible assets — others .................................................................................................................. 88,400
Other assets ......................................................................................................................................... 485,261
Current liabilities ................................................................................................................................ (1,263,892) 6,935,446
Goodwill .................................................................................................................................................. 1,901,821

The ETEN trademark for Financial PDA has an indefinite useful life and, accordingly, is not subject to amortization. The
customer relationship is subject to amortization using the straight-line method over 7 years. The developed technology is subject
to amortization using the straight-line method over 10 years, the estimated period of its economic benefits.
Within the allocation period, the Company made adjustments to increase the fair value of outstanding employee stock options
assumed through the acquisition, which also increased goodwill by NT$2,472.

(b) Pro forma information

The following unaudited pro forma financial information of 2007 and 2008 presents the combined results of operations as if the
acquisitions of Gateway Inc., Packard Bell B.V., and E-Ten had occurred as of the beginning of each of the fiscal years presented:

2007 2008
NT$ NT$
Revenue ................................................................................................................................................... 574,749,174 550,172,239
Income from continuing operations before income tax ........................................................................... 17,498,019 14,676,395
Income from continuing operations after income tax .............................................................................. 14,343,978 11,521,166
Basic earnings per common share (in dollars) ........................................................................................ 5.66 4.43

(c) Impairment test

For the purpose of impairment testing, goodwill and trademarks and trade names with indefinite useful lives are allocated to the
Consolidated Companies’ cash-generating units (CGUs) that are expected to benefit from the synergies of the business combination. The
carrying amounts of significant goodwill and trademarks and trade names with indefinite useful lives and the respective CGUs to which
they are allocated as of December 31, 2007, 2008 and 2009, were as follows:

December 31, 2007

Acer Pan- Packard Bell E-Ten
America brand Information
business business System
group group group
NT$ NT$ NT$
Goodwill ......................................................................................................................... 16,654,264 — —
Trademarks & trade names ............................................................................................. 4,930,120 — —

F-38
 December 31, 2008
Acer Pan- Packard Bell E-Ten
America brand Information
business business System
group group group
NT$ NT$ NT$
Goodwill ......................................................................................................................... 18,768,929 1,699,593 1,901,821
Trademarks & trade names ............................................................................................. 4,988,336 2,067,836 450,900

December 31, 2009

ITRO-
EMEA ITRO-PA ITRO-AAP ITRO-China ITRO-TWN E-Ten SHBG
NT$ NT$ NT$ NT$ NT$ NT$ NT$
Goodwill ..................... 12,061,458 4,698,297 2,511,387 137,919 646,380 221,424 1,682,869
Trademarks & trade
names ..................... 3,328,857 2,308,646 1,149,623 45,180 62,867 450,900 —

Each CGU to which the goodwill is allocated represents the lowest level within the Consolidated Companies at which the
goodwill is monitored for internal management purposes. In 2009, the Company reorganized cash-generating units to which goodwill
and trademark and trade names with indefinite useful lives were allocated, as a result, the Company reallocated the aforementioned
intangible assets to the related cash-generating units. Based on the results of impairment tests conducted by the Company’s management,
there was no evidence of impairment of goodwill and trademarks and trade names as of December 31, 2007, 2008 and 2009. The
recoverable amount of a CGU is determined based on the value in use, and the related key assumptions were as follows:

Years 2007 and 2008:

(i) The cash flow projections were based on historical operating performance, future financial budgets approved by
management covering a 5-year period.

(ii) Discounted rates used to determine the value in use for each of the CGUs were as follows:

Acer Pan- Packard Bell E-Ten

America brand Information
business business System
group group group
2007 ................................................................................................................................ 12.0% — —
2008 ................................................................................................................................ 13.7% 11.8% 18.7%

Year 2009:

(i) The cash flow projections were based on historical operating performance, future financial budgets approved by
management covering a 5-year period.

(ii) Discounted rates used to determine the value in use for each of the CGUs were as follows:

ITRO-EMEA ITRO-PA ITRO-AAP ITRO-China ITRO-TWN E-Ten SHBG

12.9% 10.9% 16.9% 20.4% 15.7% 19.7% 16.0%

(d) On December 6, 2007, the Consolidated Companies entered into a Basic Term Agreement with the International Olympic
Committee regarding participation in the Olympic Partners Program (the “Top Programme”). Pursuant to such agreement,
the Consolidated Companies have agreed to pay a certain amount of money in cash, merchandise and service to obtain
marketing rights and become one of the partners in “Top Porgramme” across the period from January 1, 2009 to December
31, 2012. Such expenditure on sponsorship was capitalized as “intangible assets” in the accompanying consolidated
financial statements, and amortized using the straight-line method during the aforementioned four-year period.

F-39
 (15) Other financial assets—noncurrent

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Refundable deposits ............................................................................... 687,109 781,080 771,957 24,261
Noncurrent receivables .......................................................................... 274,284 87,680 17,754 558
961,393 868,760 789,711 24,819

(16) Short-term borrowings

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Bank loans ............................................................................................. 5,372,109 1,086,851 548,059 17,224

The Consolidated Companies pledged certain assets as collateral for these loans according to the bank loan contracts. Refer to
note 6 for a description of the pledged assets.

(17) Long-term debts

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Syndicated loan...................................................................................... 16,500,000 12,200,000 12,200,000 383,419
Other bank loans.................................................................................... 308,242 184,920 171,856 5,401
Less: current installments ...................................................................... (17,366) (8,250,000) — —
16,790,876 4,134,920 12,371,856 388,820

The Company entered into a syndicated loan agreement with Citibank, the managing bank of the syndicated loan, on October
11, 2007, and the terms of this loan agreement were as follows:

December 31,
2007 2008 2009
Type of Loan Creditor Credit Line Term NT$ NT$ NT$
Unsecured loan .............. Citibank and Term tranche of Repayable in 4
other banks NT$16.5 billion; semi-annual
fire-year limit installments starting
during which from April 2009. An
revolving credits advance repayment
disallowed of NT$4.3 billion
was made in the
first quarter of 2008.
In May 2009, an
amendment to the
agreement was
made, under which,
the loan is repayable
in 4 semi-annual
installments starting
from April 2011. 16,500,000 12,200,000 12,200,000
Revolving tranche of One-time repayment
NT$3.3 billion; in full in October
three-year limit 2010. — — —
Less: current
installment................. — (8,250,000) —
16,500,000 3,950,000 12,200,000

F-40
 The above syndicated loan bore interest at a rate of 3.02% in 2007, 3.06% in 2008 and 1.67% in 2009. According to the loan
agreement, the Company is required to maintain certain financial ratios calculated based on annual and semi-annual audited financial
statements. If the Company fails to meet any of the financial ratios, the managing bank will request the Company in writing to take action
to improve within agreed days. No assertion of breach of contract will be tenable if the financial ratios are met within agreed days. As
of December 31, 2009, the Company was in compliance with all such financial covenants.

(18) Retirement plans

The following table sets forth the actuarial information related to the Consolidated Companies’ defined benefit retirement plans:

(a) Reconciliation of funded status of the plans to prepaid pension cost (accrued pension liabilities):

2007
Plan assets Accumulated
in excess of benefit
accumulated obligation in
benefit excess of
obligation plan assets
NT$ NT$
Benefit obligation:
Vested benefit obligation..................................................................................................................... — (108,087)
Nonvested benefit obligation .............................................................................................................. — (491,318)
Accumulated benefit obligation .......................................................................................................... — (599,405)
Projected compensation increases ....................................................................................................... — (559,351)
Projected benefit obligation ................................................................................................................ — (1,158,756)
Plan assets at fair value ........................................................................................................................... — 507,358
Funded status ........................................................................................................................................... — (651,398)
Unrecognized prior service cost .............................................................................................................. — 558
Unrecognized pension loss ...................................................................................................................... — 730,346
Unrecognized transition (assets) obligation ............................................................................................. — 1,829
Minimum pension liability adjustment .................................................................................................... — (172,784)
Accrued pension liabilities ...................................................................................................................... — (91,449)

2008
Plan assets Accumulated
in excess of benefit
accumulated obligation in
benefit excess of
obligation plan assets
NT$ NT$
Benefit obligation:
Vested benefit obligation..................................................................................................................... (124,967) (33,041)
Nonvested benefit obligation .............................................................................................................. (469,607) (100,237)
Accumulated benefit obligation .......................................................................................................... (594,574) (133,278)
Projected compensation increases ....................................................................................................... (335,873) (52,666)
Projected benefit obligation ................................................................................................................ (930,447) (185,944)
Plan assets at fair value ........................................................................................................................... 643,793 59,610
Funded status ........................................................................................................................................... (286,654) (126,334)
Unrecognized prior service cost .............................................................................................................. — 6,596
Unrecognized pension loss ...................................................................................................................... 459,393 39,982
Unrecognized transition (assets) obligation ............................................................................................. (2,187) 25,426
Minimum pension liability adjustment .................................................................................................... — 659
Prepaid pension cost (accrued pension liabilities)................................................................................... 170,552 (53,671)

F-41
 2009
Plan assets in excess of Accumulated benefit
accumulated benefit obligation in excess of plan
obligation assets
NT$ US$ NT$ US$
Benefit obligation:
Vested benefit obligation................................................................... (180,819) (5,683) (22,077) (694)
Nonvested benefit obligation ............................................................ (385,033) (12,101) (45,676) (1,435)
Accumulated benefit obligation ........................................................ (565,852) (17,784) (67,753) (2,129)
Projected compensation increases ..................................................... (319,849) (10,052) (114,991) (3,614)
Projected benefit obligation .............................................................. (885,701) (27,836) (182,744) (5,743)
Plan assets at fair value ......................................................................... 664,033 20,869 60,408 1,898
Funded status ......................................................................................... (221,668) (6,967) (122,336) (3,845)
Unrecognized pension loss .................................................................... 434,772 13,664 43,661 1,372
Unrecognized transition (assets) obligation ........................................... (1,592) (50) 20,799 654
Minimum pension liability adjustment .................................................. — — (3,731) (117)
Prepaid pension cost (accrued pension liabilities)................................. 211,512 6,647 (61,607) (1,936)

Accrued pension liabilities are included in “other liabilities” in the accompanying consolidated balance sheets. Prepaid pension
cost is included in “deferred charges and other assets” in the accompanying consolidated balance sheets.
(b) The components of the net periodic pension cost were as follows:

2007 2008 2009

NT$ NT$ NT$ US$
Service cost............................................................................................ 32,894 49,808 51,634 1,623
Interest cost ........................................................................................... 20,671 34,453 26,954 847
Actual return on plan assets .................................................................. (12,147) (18,586) (6,087) (191)
Amortization and deferral ...................................................................... 17,133 31,937 7,222 227
Effect of pension plan curtailments ....................................................... — — 52,502 1,650
Net periodic pension cost ...................................................................... 58,551 97,612 132,225 4,156

(c) The principal actuarial assumptions used were as follows:

2007 2008 2009

Discount rate................................................................................................................... 2.75% 2.50% 2.25%
Rate of increase in future compensation ........................................................................ 3.00%-3.50% 3.00% 3.00%
Expected rate of return on plan assets............................................................................ 2.75% 2.50% 2.25%

In 2007, 2008 and 2009, pension cost under the defined contribution retirement plans amounted to NT$258,870, NT$367,626 and
NT$331,469, respectively.

(19) Income taxes

(a) The components of income tax expense from continuing operations were as follows:

2007 2008 2009

NT$ NT$ NT$ US$
Current income tax expense .................................................................. 2,726,875 2,383,360 4,581,450 143,985
Deferred income tax (benefit) expense.................................................. (61,297) 786,086 (951,327) (29,898)
2,665,578 3,169,446 3,630,123 114,087

(b) The statutory income tax rate applicable to the Company and its subsidiaries located in the ROC is 25%. Effective January
1, 2006, an alternative minimum tax (“AMT”) in accordance with the Income Basic Tax Act is calculated. Other foreign
subsidiary companies calculated income tax in accordance with local tax law and regulations. The amended Article 5 of
the ROC Income Tax Act announced on May 27, 2009, requires that the income tax rate of profit-seeking enterprises will

F-42
 be reduced from 25% to 20%, effective in 2010. The Company and its domestic subsidiaries which are subject to the ROC
Income Tax Act had recalculated their deferred tax assets in accordance with the amended Article and adjusted the
resulting difference to income tax expense. The income tax calculated on the pre-tax income from continuing operations
at the Company’s statutory income tax rate (25%) was reconciled with the income tax expense of continuing operations
reported in the accompanying consolidated statements of income as follows.

2007 2008 2009

NT$ NT$ NT$ US$

Expected income tax.............................................................................. 3,777,159 3,701,682 3,745,746 117,721

Effect of different tax rates applied to the Company’s subsidiaries...... 1,786,743 720,278 1,032,938 32,463
Tax-exempt investment income from domestic investees...................... (592,587) (154,526) (86,873) (2,730)
Prior-year adjustments ........................................................................... (53,756) 52,938 523,617 16,456
Loss (gain) on disposal of marketable securities not subject to
income tax......................................................................................... (1,226,553) (697,934) 124,873 3,924
Investment tax credits............................................................................ 30,696 295,939 198,804 6,248
Change in valuation allowance ............................................................. (699,088) 225,493 (350,794) (11,025)
Tax-exempt investment income from operational headquarters and
investment income from foreign investees not be distributed in the
foreseeable future .............................................................................. (1,132,967) (1,386,033) (2,556,360) (80,341)
Surtax on unappropriated retained earrings .......................................... — 165,109 17,646 555
Deferred tax assets resulting from spin off
adjustment (set note 5(2) (c)) ........................................................... — (511,425) (72,449) (2,277)
Gain on disposal of land not subject to income tax .............................. (29,476) — — —
Alternative minimum tax ....................................................................... 404,858 44,430 1,417 45
Effect of change in income tax rate ...................................................... — — 438,368 13,777
Others .................................................................................................... 400,549 713,495 613,190 19,271
Income tax expense ............................................................................... 2,665,578 3,169,446 3,630,123 114,087

F-43
 (c) The components of deferred income tax assets (liabilities) as of December 31, 2008 and 2009, were as follows:

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Deferred income tax assets — current:
Unrealized cost of sales .................................................................... 631,360 1,093,887 902,570 28,366
Inventory provisions ........................................................................ 394,505 620,737 1,058,032 33,252
Loss (gain) on valuation of financial instruments ............................ 338,995 156,932 (279,622) (8,788)
Accrued advertising expense............................................................. 293,552 181,323 87,747 2,758
Warranty provision ............................................................................ 345,131 980,400 778,287 24,460
Allowance for doubtful accounts ...................................................... 169,001 397,292 118,924 3,738
Accrued restructuring cost ................................................................ 149,637 89,865 64,102 2,014
Accrued non-recurring engineering cost ........................................... 102,485 111,826 58,825 1,849
Deferred revenue ............................................................................... 40,742 34,904 5,614 176
Accrued royalty................................................................................. 707,937 82,975 494 16
Net operating loss carryforwards ...................................................... — 77,977 143,674 4,515
Investment tax credits ....................................................................... — — 64,027 2,012
Unrealized foreign exchange (gains) ...............................................
losses ................................................................................................. (201,717) (386,944) 299,738 9,420
Others................................................................................................ 493,166 377,603 481,969 15,146
3,464,794 3,818,777 3,784,381 118,934
Valuation allowance .......................................................................... (1,550,788) (1,535,834) (1,571,166) (49,378)
1,914,006 2,282,943 2,213,215 69,556

December 31,
2007 2008 2009
NT$ NT$ NT$ US$

Deferred income tax liabilities — current:

Inventory provisions.......................................................................... (88,624) (125,802) (84,598) (2,659)
Allowance for doubtful accounts ...................................................... (473,449) (462,980) (559,274) (17,577)
Unrealized foreign exchange gains ................................................... (9,385) (58,994) (15,078) (473)
Others................................................................................................ (138,239) (8,834) (21,764) (684)
(709,697) (656,610) (680,714) (21,393)

F-44
 December 31,
2007 2008 2009
NT$ NT$ NT$ US$

Deferred income tax assets — non-current:

Investment loss under the equity method ......................................... 80,374 44,649 66,861 2,101
Difference in depreciation for tax and financial purposes ................ 12,042 20,638 16,462 517
Net operating loss carryforwards ...................................................... 624,286 773,919 410,104 12,889
Accumulated asset impairment ........................................................ 293,190 — — —
Investment tax credits ....................................................................... 686,658 — — —
Other ................................................................................................. (15,430) 117,235 101,897 3,203
1,681,120 956,441 595,324 18,710
Valuation allowance .......................................................................... (1,615,282) (826,526) (387,735) (12,186)
65,838 129,915 207,589 6,524

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Deferred income tax liabilities — non-current:
Difference in amortization of intangible assets for tax and
financial purposes......................................................................... (3,101,316) (2,705,258) (3,507,908) (110,246)
Investment income under the equity method .................................... (2,697,304) (3,804,043) (2,867,839) (90,130)
Net operating loss carryforwards ...................................................... 14,028,055 14,326,766 13,313,903 418,426
Difference in depreciation for tax and financial purposes ................ 939,410 1,026,013 811,822 25,514
Accumulated asset impairment ........................................................ 293,190 313,148 245,347 7,711
Investment tax credits ....................................................................... — 418,227 — —
Software development cost ............................................................... — 731,804 28,553 897
Unrealized investment loss ............................................................... 241,569 244,421 239,877 7,539
Foreign currency translation adjustment ........................................... — — (237,330) (7,459)
Other ................................................................................................. 147,919 463,409 316,950 9,961
9,851,523 11,014,487 8,343,375 262,213
Valuation allowance .......................................................................... (14,970,897) (17,288,586) (13,887,322) (436,447)
(5,119,374) (6,274,099) (5,543,947) (174,234)

(d) The domestic Consolidated Companies were granted investment tax credits for the purchase of automatic machinery and
equipment, for research and development expenditures, and for personnel training expenditures. These tax credits may be
applied over a period of five years. The amount of the credit that may be applied in any year is limited to 50% of the
income tax payable for that year, but there is no limitation on the amount of investment tax credit that may be applied
in the final year.

As of December 31, 2009, investment tax credits available to the Consolidated Companies were as follows:

Expiration date NT$ US$

December 31, 2012.................................................................................................................................. 1,646 52

December 31, 2013.................................................................................................................................. 49,412 1,553
December 31, 2014.................................................................................................................................. 12,969 407
64,027 2,012

F-45
 (e) The tax effects of net operating loss carryforwards available to the Consolidated Companies as of December 31, 2009,
were as follows:

Expiration date NT$ US$

December 31, 2010.................................................................................................................................. 845 26

December 31, 2011 .................................................................................................................................. 805,840 25,326
December 31, 2012.................................................................................................................................. 1,042,362 32,759
December 31, 2013.................................................................................................................................. 579,938 18,226
Thereafter................................................................................................................................................. 11,438,696 359,493
13,867,681 435,830

(f) Information about the integrated income tax system

Beginning in 1998, an integrated income tax system was implemented in the Republic of China. Under the new tax system,
the income tax paid at the corporate level can be used to offset Republic of China resident stockholders’ individual income tax.
The Company is required to establish an imputation credit account (ICA) to maintain a record of the corporate income taxes paid
and imputation credit that can be allocated to each stockholder. The credit available to Republic of China resident stockholders
is calculated by multiplying the dividend by the creditable ratio. The creditable ratio is calculated based on the balance of the
ICA divided by earnings retained by the Company since January 1, 1998.
Information related to the ICA is summarized below:

December 31,
2007 2008 2009
NT$ NT$ NT$ US$

Unappropriated earnings:
Earned before January 1, 1998 ......................................................... 6,776 6,776 6,776 213
Earned after January 1, 1998 ............................................................ 13,544,248 13,978,542 16,615,824 522,198
13,551,024 13,985,318 16,622,600 522,411

Balance of ICA ................................................................................ 165,036 198,401 611,323 19,212

The estimated creditable ratio for the 2009 earnings distribution to ROC resident stockholders is approximately 13.35%;
and the actual creditable ratio for the 2007 and 2008 earnings distribution was 4.01% and 5.01% respectively.
(g) The ROC income tax authorities have examined the income tax returns of the Company for all fiscal years through 2006.
However, the Company disagreed with the assessments of its income tax returns from fiscal 2004 to 2006 regarding the
adjustments of certain expenses and investment tax credits and has filed a request with the tax authorities for a
reexamination. The reexamination of income tax returns was still in process, and the Company has accrued an additional
tax liability related to the disallowed expenses and provided a valuation allowance on deferred tax assets based on the
amount of assessed investment tax credits.

(20) Stockholders’ equity

(a) Common stock

As of December 31, 2007, 2008 and 2009, the Company’s authorized common stock consisted of 2,800,000,000, 3,500,000,000
and 3,500,000,000 shares, respectively, of which 2,405,490,426 shares 2,642,855,993 shares and 2,688,228,278 shares, respectively,
were issued and outstanding. The par value of the Company’s common stock is NT$10 per share.
As of December 31, 2007, 2008 and 2009, the Company had issued 8,229 thousand units, 8,412 thousand units and 18,284
thousand units, respectively, of global depository receipts (GDRs). The GDRs were listed on the London Stock Exchange, and each GDR
represents five shares of common stock.
In 2008 and 2009, the Company issued 124 thousand and 2,709 thousand common shares, respectively, upon the exercise of
employee stock options. Additionally, on September 1, 2008, the Company issued 168,159 thousand common shares for acquiring 100%
equity ownership of E-Ten Information Systems Co., Ltd.
The Company’s shareholders in the meeting on June 14, 2007, resolved to distribute stock dividends of NT$350,559 and
NT$333,708 to shareholders and to employees, respectively. As a result, a total of 68,427 thousand new shares were issued. The stock
issuance was authorized by and registered with the governmental authorities.

F-46
 The Company’s shareholders in the meeting on June 13, 2008, resolved to distribute stock dividends of NT$360,823 and
NT$330,000 to shareholders and to employees, respectively. As a result, a total of 69,082 thousand new shares were issued. The stock
issuance was authorized by and registered with the governmental authorities.

The Company’s shareholders in the meeting on June 19, 2009, resolved to distribute stock dividends of NT$264,298 to
shareholders. Additionally, the shareholders approved the distribution of bonuses to employees in stock of NT $900,000 with an issuance
of 16,234 thousand new shares. The stock issuance was authorized by and registered with the governmental authorities.

(b) Treasury stock

As of December 31, 2007, 2008 and 2009, details of the GDRs (for the 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):

December 31, 2007 December 31, 2008 December 31, 2009

Number Book Market Number Book Market Number Book Market
of Shares Value Price of Shares Value Price of Shares Value Price
NT$ NT$ NT$ NT$ NT$ NT$

Common stock ........... 17,057 798,663 1,083,128 21,571 1,050,341 918,946 21,787 1,050,341 2,095,930
GDRs .......................... 4,860 2,472,257 1,655,241 4,933 2,472,257 1,100,893 4,982 2,472,257 2,393,831
3,270,920 2,738,369 3,522,598 2,019,839 3,522,598 4,489,761

Movements of the Company’s treasury stock were as follows (expressed in thousands of shares or units):

2007
Beginning Ending
Description Balance Additions Disposal Balance
Common Stock ...................................................................................... 16,805 252 — 17,057
GDRs ..................................................................................................... 4,788 72 — 4,860

2008
Beginning Ending
Description Balance Additions Disposal Balance
Common Stock ...................................................................................... 17,057 4,514 — 21,571
GDRs ..................................................................................................... 4,860 73 — 4,933

2009
Beginning Ending
Description Balance Additions Disposal Balance
Common Stock ...................................................................................... 21,571 216 — 21,787
GDRs ..................................................................................................... 4,933 49 — 4,982

Upon the acquisition of E-Ten in September 2008, the Company issued 4,259 thousand common shares to E-Ten’s subsidiaries
in exchange of E-Ten’s common shares owned by the subsidiaries. Such shares were accounted for as treasury stock.

F-47
 (c) Capital surplus

December 31,
2007 2008 2009
NT$ NT$ NT$ US$

Share premium:
Paid-in capital in excess of par value ............................................... 856,901 857,759 1,784,258 56,075
Surplus from merger ......................................................................... 22,781,719 29,800,881 29,800,881 936,575
Premium on common stock issued from conversion of
convertible bonds ......................................................................... 4,552,585 4,552,585 4,552,585 143,077
Forfeited interest from conversion of convertible bonds .................. 1,006,210 1,006,210 1,006,210 31,623
Surplus related to treasury stock transactions by subsidiary
companies ..................................................................................... 316,329 431,161 501,671 15,767
Employee stock options ................................................................... — 174,372 360,630 11,334
Other:
Surplus from equity-method investments ........................................ 385,239 306,984 487,883 15,333
29,898,983 37,129,952 38,494,118 1,209,784

According to the ROC Company Act, any realized capital surplus could be transferred to common stock as stock dividends after
deducting accumulated deficit, if any. Realized capital surplus includes share premium and donations from shareholders. Distribution
of stock dividends from realized capital surplus is subject to certain restrictions imposed by the governmental authorities.

(d) Legal reserve, unappropriated earnings, and dividend policy

The Company’s articles of incorporation stipulate that at least 10% of annual net income after deducting accumulated deficit, if
any, must be retained as legal reserve until such retention equals the amount of authorized common stock. In addition, a special reserve
in accordance with applicable laws and regulations shall be set aside. The remaining balance of annual net income, if any, can be
distributed as follows:

• at least 5% as employee bonuses; employees entitled to stock bonus may include subsidiaries’ employees that meet certain
criteria set by the board of directors;

• 1% as remuneration to directors and supervisors; and

• the remainder, after retaining a certain portion for business considerations, as dividends to stockholders.

Since the Company operates in an industry experiencing rapid change and development, distribution of earnings shall be made
in view of the year’s earnings, the overall economic environment, the related laws and decrees, and the Company’s long-term
development and steady financial position. The Company has adopted a steady dividend policy, in which a cash dividend comprises at
least 10% of the total dividend distributed.

According to the ROC Company Act, the legal reserve can be used to offset an accumulated deficit and may be distributed in
the following manner: (i) when it reaches an amount equal to one-half of the paid-in capital, it can be transferred to common stock at
the amount of one-half of legal reserve; and (ii) when it reaches an amount exceeding one-half of the authorized common stock,
dividends and bonuses can be distributed from the excess portion of the legal reserve.

Pursuant to regulations promulgated by the Financial Supervisory Commission, and effective from the distribution of earnings
for fiscal year 1999 onwards, a special reserve equivalent to the total amount of items that are accounted for as deductions to the
stockholders’ equity shall be set aside from current earnings, and not distributed. This special reserve shall be made available for
appropriation to the extent of reversal of deductions to stockholders’ equity in subsequent periods. As of December 31, 2009, the
Company appropriated a special reserve of NT$1,991,615 that is equal to the sum of the amount by which the market price of the
treasury stock was less than the book value thereof and other deduction items of shareholder’s equity.

F-48
 The appropriation of 2006, 2007 and 2008 earnings was approved by the shareholders at meetings on June 14, 2007, June 13,
2008, and June 19, 2009, respectively. The appropriations of employee bonus and remuneration to directors and supervisors and
dividends per share were as follows:

2006 2007 2008

NT$ NT$ NT$
Dividends per share:
Cash dividends ........................................................................................................... 3.85 3.60 2.00
Stock Dividends ......................................................................................................... 0.15 0.15 0.10
4.00 3.75 2.10

Employee bonus — stock .......................................................................................... 333,708 330,000 900,000

Employee bonus — cash............................................................................................ 424,719 544,728 600,000
Remuneration to directors and supervisors ............................................................... 94,803 116,630 85,763
853,230 991,358 1,585,763

The 2008 employee bonus in stock of 16,234 thousand common shares was determined by the closing price of the Company’s
common shares (after considering the effect of dividends) on the day preceding the shareholder’s meeting, which was NT$58 (dollars).
The above appropriations were consistent with the resolutions approved by the Company’s directors.

The Company estimated and accrued employee bonus of NT$1,000,000 and directors’ and supervisors’ remuneration of
NT$122,096 for the year ended December 31, 2009 based on the total amount of bonus expected to be distributed to employees and the
Company’s article of incorporation, under which, remuneration for directors and supervisors is distributed at 1% of the remainder of
annual net income. If the actual amounts subsequently resolved by the stockholders differ from the estimated amounts, the differences
are treated as a change in accounting estimate and are recorded as income or expense in the year of stockholder’s resolution. If bonus
to employees is resolved to be distributed in stock, the number of shares is determined by dividing the amount of stock bonus by the
closing price (after considering the effect of dividends) of the shares on the day preceding the shareholder’s meeting.

Distribution of 2009 earnings has not been proposed yet by the board of directors and is still subject to approval by the
stockholders. After the resolutions, related information can be obtained from the public information website.

(21) Stock-based compensation plans

As of December 31, 2009, details of the employee stock option plans (“ESOP”) were as follows:

Stock Options
Employee Employee Employee Employee
stock option stock option stock option stock option
plan 1 plan 2 plan 3 plan 4
Grant date .............................................................................................. 2008/11/31 2008/09/01 2008/09/01 2009/10/30
(note 1) (note 1)
Granted shares (in thousands)................................................................ 14,000 8,717 1,067 14,000
Contractual life (in years)...................................................................... 3 4.97 2 3
Vesting period ........................................................................................ 2 years of 1~3 years of 1 year of 2 years of
service service service service
subsequent to subsequent to subsequent to subsequent to
grant date grant date grant date grant date
Qualified employees .............................................................................. (note 2) (note 3) (note 3) (note 2)

Note 1: The Company assumed the employee stock option plans 2 and 3 through the acquisition of E-Ten on September 1,
2008.

Note 2: The options are granted to eligible employees of the Company and its domestic or foreign subsidiaries, in which the
Company directly or indirectly, owns 50% or more of the subsidiary’s voting shares.

Note 3: The options are granted to eligible employees of the Company’s subsidiaries, in which the Company directly or
indirectly owns 50% or more of equity interests.

F-49
 The Consolidated Company utilized the Black-Scholes or the binomial option pricing model to value the stock options granted,
and the fair value of the option and main inputs to the valuation models were as follows:

2008 2009
Employee Employee Employee Employee
stock option stock option stock option stock option
plan 1 plan 2 plan 3 plan 4
Exercise price (NT$) ............................................................................. 25.28 44.50 16.90 42.90
Expected remaining contractual life (in years) .................................... 3 4.26 0.56 3
Fair market value for underlying securities—Acer shares (NT$).......... 45.95 59.10 59.10 78.00
Fair value of options granted (NT$)...................................................... 25.124 25.47~26.11 42.20~42.58 40.356
Expected volatility ................................................................................. 45.01% 34.98 % 37.35 % 40.74%
Expected dividend yield ........................................................................ note 4 note 4 note 4 note 4
Risk-free interest rate ............................................................................ 2.50% 2.40 % 1.84 % 1.03%

Note 4: According to the employee stock option plan, the option prices are adjusted to take into account dividends paid on the
underlying security. As a result, the expected dividend yield is excluded from the calculation.
Movements in number of stock options outstanding:

2008
The Company’s employee E-Ten’s Employee stock
stock option plan option plan
Weighted- Weighted-
Number of average Number of average
options (in exercise options (in exercise
thousands) price (NT$) thousands) price (NT$)
Outstanding, beginning of year.............................................................. — — — —
Granted .................................................................................................. 14,000 25.28 9,784 41.49
Forfeited ................................................................................................ — — (518) —
Exercised ............................................................................................... — — (173) 16.90
Outstanding, end of year ....................................................................... 14,000 25.28 9,093 41.66

Exercisable, end of year ........................................................................ — 406

2009
The Company’s employee E-Ten’s Employee stock
stock option plan option plan
Weighted- Weighted-
Number of average Number of average
options (in exercise options (in exercise
thousands) price (NT$) thousands) price (NT$)
Outstanding, beginning of year.............................................................. 14,000 25.28 9,093 41.90
Granted .................................................................................................. 14,000 42.90 — —
Forfeited ................................................................................................ — — (890) —
Exercised ............................................................................................... — — (3,083) 38.12
Outstanding, end of year ....................................................................... 28,000 33.62 5,120 41.52

Exercisable, end of year ........................................................................ — 1,541

In 2008 and 2009, the Consolidated Companies recognized the compensation costs from the employee
stock option plans of NT$37,856 and NT$298,952, respectively, which were accounted for under operating
expenses.
(22) Restructuring charges
In 2008 and 2009, due to the acquisition of Gateway Inc. and Packard Bell B.V., the Consolidated
Companies recognized restructuring charges of NT$1,582,408 and NT$164,595, respectively, which were
accounted for under “restructuring cost” of non-operating expenses and losses in the accompanying
statements of income. These restructuring charges were associated with severance payments to employees
and integration of the information technology system.

F-50
 (23) Net income from discontinued operations

On July 1, 2007, the Company disposed of all its ownership interest in a subsidiary, Sertek Inc. Therefore, the operations of
Sertek Inc. were classified as discontinued operations. The relevant income (loss) and cash flows from this discontinued operations for
the year ended December 31, 2007 were as follows:

NT$

Net revenues ..................................................................................................................................................................... 9,398,700

Cost of revenues and operating expenses ......................................................................................................................... (9,224,222)
Non-operating income and expenses ................................................................................................................................ (64,502)
Income before income taxes ............................................................................................................................................. 109,976
Income tax expense .......................................................................................................................................................... (23,120)
Net income from discontinued operations ........................................................................................................................ 86,856
Gain from disposal of discontinued operations ................................................................................................................ 431,010
Total net income from discontinued operations................................................................................................................ 517,866

Discontinued operations’ cash flows:

Cash provided by (used in) operating activities .......................................................................................................... (69,408)
Cash used in investing activities.................................................................................................................................. (645)
Cash used in financing activities ................................................................................................................................. (118,307)

According to the sales agreement, if Sertek Inc. is able to achieve a stipulated profit in 2007, the Company would be entitled
to a contingent consideration. Therefore, the Company received a contingent consideration in cash of NT$99,843 in 2008.

(24) Earnings per common share (“EPS”)

2007
Weighted- average
number of outstanding
shares of common stock EPS (in
Amount (in thousands) dollars)
NT$ NT$

Basic EPS—after retroactive adjustments:

Net income attributable to common shareholders of parent company. 12,958,933 2,456,921 5.27

Diluted EPS—after retroactive adjustments:

Net income attributable to common shareholders of parent company. 12,958,933 2,456,921 5.27

F-51
 2008
Weighted-
average
number of
outstanding
shares of
common
stock (in EPS (in
Amount thousands) dollars)
NT$ NT$

Basic EPS—after retroactive adjustments

Net income attributable to common shareholders of parent company ....................... 11,742,135 2,512,122 4.67

Diluted EPS
Effect of dilutive potential common shares:
Employee bonus ........................................................................................................ — 39,042
Employee stock option plan ....................................................................................... — 1,286
Net income attributable to common shareholders of parent company............................ 11,742,135 2,552,450 4.60

2009
Weighted-
average
number of
outstanding
shares of
common
stock (in
Amount (in thousand) thousands) EPS (in dollars)
NT$ US$ NT$ US$

Basic EPS—after retroactive adjustments

Net income attributable to common shareholders
of parent company ............................................... 11,353,374 356,811 2,632,379 4.31 0.14

Diluted EPS
Effect of dilutive potential common shares:
Employee bonus ...................................................... — — 23,175
Employee stock option plan..................................... — — 10,953
Net income attributable to common shareholders of
parent company ........................................................ 11,353,374 356,811 2,666,507 4.26 0.13

(25) Disclosure of financial instruments

(a) Fair values of financial instruments

The book value of short-term financial instruments is considered to be the fair value because of the short-term maturity of these
instruments. Such method is applied to cash and cash equivalents, notes and accounts receivable (including receivables from related
parties), other receivables (including receivables from related parties), notes and accounts payables (including payables to related
parties), short-term borrowings, current installments of long-term debt, payables to related parties and royalties payable.

F-52
 The estimated fair values and carrying amounts of all other financial assets and liabilities as of December 31, 2007, 2008 and
2009 were as follows:

2007 2008 2009

Carrying Carrying Carrying
amount Fair value amount Fair value amount Fair value
NT$ NT$ NT$ NT$ NT$ NT$

Non-derivative financial
instruments
Financial assets:
Available-for-sale financial
assets—current............................ 2,852,061 2,852,061 591,444 591,444 223,437 223,437
Available-for-sale financial
assets—noncurrent ...................... 3,370,847 3,370,847 1,160,487 1,160,487 3,306,742 3,306,742
Financial assets carried at cost ....... 3,142,121 see below (b) 2,684,270 see below (b) 2,251,058 see below (b)
Refundable deposits (classified as
“other financial assets”) ............. 687,109 687,109 781,080 781,080 771,957 771,957
Noncurrent receivables (classified
as “other financial assets”) ......... 274,284 274,284 87,680 87,680 17,754 17,754
Financial liabilities:
Long-term debt................................ 16,790,876 16,790,876 4,134,920 4,134,920 12,371,856 12,371,856

Derivative financial instruments

Financial assets:
Foreign currency forward
contracts ..................................... 250,197 250,197 1,302,085 1,302,085 1,414,672 1,414,672
Foreign exchange swap ................... — — 7,113 7,113 — —
Cross currency swap ....................... — — 7,821 7,821 — —
Foreign currency options ................ 4,983 4,983 60,514 60,514 18,144 18,144
Financial liabilities:
Foreign currency forward
contracts ..................................... 1,461,335 1,461,335 1,860,465 1,860,465 354,562 354,562
Foreign currency options ................ 593 593 23,298 23,298 4,691 4,691
Foreign exchange swap ................... — — 14 14 — —

The fair values of financial instruments shown above were based on valuation techniques, except for available-for-sale financial
assets, which were based on public quoted prices.
(b) The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

(i) Available-for-sale financial assets—current and non-current

The fair value of publicly traded stocks is based on the closing quotation price at the balance sheet date. The fair
value of open-end mutual funds is based on the net asset value of the mutual funds at balance sheet date.

(ii) Financial assets carried at cost—non-current

Financial assets carried at cost represent privately held stock. It is not practicable to estimate the fair value of
privately held stock as it is not traded in an active public market.

(iii) Refundable deposits

The fair values are the book values as the date of expiry cannot be determined.

(iv) Non-current receivables

The fair values are their present value discounted at the market interest rate.

(v) Long-term debt

Long-term debt is obtained at floating interest rates. The carrying value of long-term debt approximates the market
value.

F-53
 (vi) Derivative financial instruments

The fair values of derivative financial instruments are estimated using a valuation technique, with estimates and
assumptions consistent with those used by market participants and are readily available to the Consolidated Companies.

(c) For the years ended December 31, 2007, 2008 and 2009, valuation gain on financial assets and liabilities using a valuation
technique amounted to NT$121,332, NT$989,905 and NT$1,293,844, respectively.

(d) Disclosure of financial 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 Consolidated Companies engaged in purchase and sale transactions which are denominated in US dollars and
Euros, respectively. Hence, the Consolidated Companies entered into foreign currency forward contracts, foreign currency
options, foreign exchange swap and cross currency swap for hedging purposes. The length and amounts of aforementioned
derivative transactions were in line with the settlement date of the Consolidated Companies’ recorded foreign currency
assets and liabilities and future cash flows. Gains or losses from these hedging derivatives are expected to substantially
offset those from the hedged assets or liabilities. Therefore, management believes that market risk related to the changes
in exchange rates is not significant.

(ii) Credit risk

The Consolidated Companies’ credit risk is mainly from potential breach of contract by the counter-party
associated with cash, equity investment, and derivative transactions. In order to control its exposure to the credit risk of
each financial institution, the Consolidated Companies maintain cash with various financial institutions and hold equity
investments in the form of mutual funds and stocks issued by companies with high credit quality. As a result, the
concentration of credit risks related to cash and equity investments is not significant. Furthermore, the banks undertaking
the derivative transactions are reputable financial institutions; therefore, the exposure related to the potential default by
those counter-parties is not considered significant.

The Consolidated Companies primarily sell and market the multi-branded IT products to a large number of
customers in different geographic areas. As a result, the Consolidated Companies have no significant concentrations of
credit risk, and in order to lower the credit risk, the Consolidated Companies continuously evaluate the credit quality of
their customers.

(iii) Liquidity risk

The Consolidated Companies’ capital and operating funds are sufficient to fulfill their contract payment
obligations. Therefore, management believes that there is no significant liquidity risk.

The available-for-sale financial assets held by the Consolidated Companies are equity securities and mutual funds,
which are publicly traded and can be liquidated quickly at a price close to the fair market value. In contrast, the financial
assets carried at cost are not publicly traded and are exposed to liquidity risk.

The Consolidated Companies’ derivative financial instruments are intended to hedge the exchange rate risk
resulting from assets and liabilities denominated in foreign currency and cash flows resulting from anticipated transactions
in foreign currency. The lengths of the contracts are in line with the payment date of the Consolidated Companies’ assets
and liabilities denominated in foreign currency and the anticipated cash flows. At the maturity date of the derivative
contract, the Consolidated Companies will settle these contracts using the foreign currencies arising from the hedged
assets and liabilities denominated in foreign currency, and therefore, the liquidity risk is not significant.

(iv) Cash flow risk related to the fluctuation of interest rates

The Consolidated Companies’ short-term borrowings and long-term debt carried floating interest rates. As a result,
the effective rate changes along with the fluctuation of the market interest rates and thereby influences the Consolidated
Companies’ future cash flow. As of December 31, 2009, if the market interest rate increases by 1%, cash outflows in
respect of these interest payments would increase by approximately NT$129,199 per annum.

F-54
5. Transactions with Related Parties

(1) Names and relationships of related parties with the Consolidated Companies

Name Relationship with the Company

Wistron Corporation (“Wistron”) ................................................................... Investee of the Company accounted for by equity
method
Cowin Worldwide Corporation (“COWIN”) .................................................. Subsidiary of Wistron
Wistron InfoComm (Kunshan) Co., Ltd. (“WKS”)........................................ Subsidiary of Wistron
Wistron InfoComm Technology (Kunshan) Co., Ltd. (“WIKS”) ................... Subsidiary of Wistron
Bluechip Infotech Pty Ltd. (“SAL”) .............................................................. Investee of the Consolidated Companies accounted for
by equity method
e-Life Mall Corp. (“eLIFE”).......................................................................... Investee of the Company accounted for by equity
method
iDSoftCapital Inc. .......................................................................................... Its chairman is one of the Company’s supervisors
Directors, supervisors, chief executive officers and vice presidents.............. The Consolidated Companies’ executive officers

(2) Significant transactions with related parties as of and for the years ended December 31, 2007, 2008 and 2009 were as
follows:

(a) Net sales and related notes and accounts receivable

(i) Net sales to:

2007 2008 2009

NT$ NT$ NT$ US$
SAL ........................................................... 1,088,886 758,797 768,379 24,149
eLIFE ........................................................ 992,647 885,662 690,738 21,708
COWIN ..................................................... 153,920 462,430 — —
WKS .......................................................... 358,247 — — —
WIKS......................................................... 185,804 — — —
Other (individually less than 5%) ............. 266,334 114,486 77,605 2,439
3,045,838 2,221,375 1,536,722 48,296

The sales prices and payment terms to related parties were not significantly different from those of sales
to non-related parties.

(ii) Notes and accounts receivable from:

December 31,
2007 2008 2009
NT$ NT$ NT$ US$

COWIN ..................................................... 86,676 329,848 315,929 9,929

SAL ........................................................... 82,230 64,529 116,156 3,651
eLIFE ........................................................ 190,277 159,182 109,090 3,428
Wistron ...................................................... — 248,930 43,305 1,361
Others (individually less than 5%)............ 89,298 38,976 15,826 497
448,481 841,465 600,306 18,866

F-55
 (b) Purchases and related notes and accounts payable

(i) Purchases from:

2007 2008 2009

NT$ NT$ NT$ US$
Wistron .................................................................................................. 14,788,985 25,228,683 32,351,566 1,016,737
Others .................................................................................................... 296,079 270 214 7
15,085,064 25,228,953 32,351,780 1,016,744

The trading terms with related parties are not comparable to the trading terms with third parties as the
specifications of products are different.

The Consolidated Companies sold raw material to Wistron and its subsidiaries and purchased back the finished
goods after being manufactured. To avoid double-counting, the revenues and sales of raw materials to Wistron and its
subsidiaries amounting to NT$58,666,096, NT$88,579,887 and NT$127,377,990 for the years ended December 31, 2007,
2008 and 2009, respectively, were excluded from the consolidated revenues and cost of goods sold. Having enforceable
rights, the Consolidated Companies offset the outstanding receivables and payables resulting from the above-mentioned
transactions. The offset resulted in a net payable balance.

(ii) Notes and accounts payable to:

December 31,
2007 2008 2009
NT$ NT$ NT$ US$
Wistron .................................................................................................. 4,510,376 7,681,059 10,172,553 319,700
Others .................................................................................................... 73,239 69,161 59,811 1,880
4,583,615 7,750,220 10,232,364 321,580

(c) Spin-off of assets

On February 28, 2002, the Company spun off its design, manufacturing and services business from its brand business and
transferred the related operating assets and liabilities to Wistron. The Company agreed with Wistron that Wistron is obligated to pay for
the deferred income tax assets being transferred only when they are actually utilized. In 2006, the ROC income tax authorities examined
and rejected Wistron’s claim of investment credits transferred from the spin-off in the income tax returns for the years from 2002 to
2004. Wistron disagreed with the assessment and filed a recheck with the tax authorities for a reexamination of the aforementioned
income tax returns. The Company recognized income tax expense of NT$875,802 based on the tax exposure estimated in 2006 and
provided a valuation allowance against the receivables from Wistron.

In 2008 and 2009, the tax authorities subsequently concluded that Wistron could utilize portions of the aforementioned deferred
tax assets resulting from the spin-off. Based on the tax authorities’ conclusion, the Company collected the outstanding receivables from
Wistron in 2009. Additionally, the valuation allowance was reversed to current income tax benefit in the amount of NT$511,425 and
$72,449, for the years ended December 31, 2008 and 2009, respectively.

(d) Other expenses

The Consolidated Companies paid iDSoftCapital Inc. management service fees amounting to NT$69,333, NT$61,633 and
NT$49,333 for the years ended December 31, 2007, 2008 and 2009, respectively.

(e) Advances to/from related parties

The Consolidated Companies paid certain expenses on behalf of related parties. Additionally, related parties paid certain expenses
and accounts payable on behalf of the Consolidated Companies. As of December 31, 2007, 2008 and 2009, the Consolidated Companies
had aggregate receivables from related parties of NT$59,403, NT$45,173 and NT$21,507, respectively, and payables to related parties
of NT$609,717, NT$189,964 and NT$92,187, respectively, resulting from these transactions.

F-56
 (3) Compensation to executive officers
For the years ended December 31, 2007, 2008 and 2009, compensation paid to the Consolidated Companies’ executive officers
including directors, supervisors, president and vice-presidents was as follows:

2007 2008 2009

Amount Amount Amount
NT$ NT$ NT$ US$
Salaries .................................................................................................. 178,334 249,243 339,997 10,685
Cash awards and special allowances ..................................................... 69,669 134,574 175,655 5,521
Business service charges........................................................................ 6,520 1,989 1,080 34
Employee bonuses ................................................................................. 482,825 360,581 443,855 13,949
737,348 746,387 960,587 30,189

The aforementioned compensation included the accruals for employee bonus and directors’ and supervisors’ remuneration as
discussed in note 4(20).

6. Pledged Assets

Carrying amount
at December 31,
Pledged assets Pledged to secure 2007 2008 2009
NT$ NT$ NT$ US$

Cash in bank and time deposits ........ Contract bidding, project

fulfillment and security for
letter of credit 398,459 1,032,380 61,939 1,947
Property, plant and equipment .......... Credit lines of bank loans 1,692,140 4,902 — —
2,090,599 1,037,282 61,939 1,947

As of December 31, 2007, 2008 and 2009, the above pledged cash in bank and time deposits were classified as “restricted
deposits” and “other financial assets” in the accompanying consolidated balance sheets.
In 2007, the Consolidated Companies intended to acquire Packard Bell B.V., a company in Europe, in cash. As of December 31,
2007, the Consolidated Companies had deposited NT$1,958,585 to an escrow account for the purpose of business acquisition. This
escrow deposit was recorded as “restricted assets — current” in the accompanying consolidated balance sheets. Refer to note 4(14) for
the details of acquisition of Packard Bell B.V. The business combination was completed on March 14, 2008.

7. Commitments and Contingencies

(1) Royalties
(a) The Company has entered into a patent cross license agreement with International Business Machines Corporation (IBM).
Under this agreement, both parties have the right to make use of either party’s global technological patents to manufacture
and sell personal computer products. The Company agrees to make fixed payments periodically to IBM, and the Company
will not have any additional obligation for the use of IBM patents other than the agreed upon fixed amounts of payments.
(b) The Company and Lucent Technologies Inc. (Lucent) entered into a Patent Cross License agreement. This license
agreement in essence authorizes both parties to use each other’s worldwide computer-related patents for manufacturing
and selling personal computer products. The Company agrees to make fixed payments periodically to Lucent, and the
Company will not have any additional obligation for the use of Lucent patents other than the agreed upon fixed amounts
of payments.
(c) On June 6, 2008, the Company entered into a Patent Cross License agreement with Hewlett Packard Development
Company (HP). The previous patent infringement was settled out of court, and the Company agreed to make fixed
payments periodically to HP. The Company will not have any additional obligation for the use of HP patents other than
the agreed upon fixed amounts of payments.
(d) The Company has entered into royalty license agreements with Microsoft Licensing, GP, MPEG LA, LLC, Dolby
Laboratories Licensing Corporation and Cyberlink Corp. The Company has complied with these agreements.
(2) As of December 31, 2007, 2008, and 2009, the Consolidated Companies had provided performance bonds totaling NT$133,085,
NT$133,304 and NT$269,957, respectively, for purposes of bids and contracts.

F-57
(3) The Consolidated Companies have entered into several operating lease agreements for warehouses, land and office buildings.
Future minimum lease payments were as follows:

Year NT$ US$

2010 ......................................................................................................................................................... 624,358 19,622
2011 ......................................................................................................................................................... 388,781 12,219
2012 ......................................................................................................................................................... 212,284 6,671
2013 ......................................................................................................................................................... 167,010 5,249
2014 and thereafter .................................................................................................................................. 169,701 5,333
1,562,134 49,094

(4) As of December 31, 2007, 2008 and 2009, the Consolidated Companies had provided promissory notes amounting to
NT$23,429,875, NT$29,150,262 and NT$28,552,820, respectively, as collateral for factored accounts receivable and for
obtaining credit facilities from financial institutions.

8. Significant Loss from Casualty:

None

9. Subsequent Events:

None

10. Labor cost, depreciation and amortization

2007 2008 2009

Operating Cost of Operating Cost of Operating Cost of
expense sales Total expense sales Total expense sales Total
NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$
Labor cost:
Salaries ....................... 7,499,729 1,479,738 8,979,467 11,363,684 1,559,145 12,922,829 10,691,422 2,203,906 12,895,328
Insurance..................... 776,209 94,721 870,930 1,259,823 149,681 1,409,504 1,103,299 202,810 1,306,109
Pension ....................... 260,829 56,592 317,421 448,196 17,042 465,238 438,401 25,293 463,694
Other........................... 569,843 74,330 644,173 10,464 131,997 142,461 927,649 104,031 1,031,680
Depreciation..................... 557,376 33,813 591,189 917,394 38,486 955,880 797,215 49,088 846,303
Amortization .................... 549,545 1,735 551,280 791,510 454,051 1,245,561 1,847,624 12,660 1,860,284

11. Segment Information

(1) Industry segment

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.

F-58
(2) Geographic information

2007
North
Taiwan America Europe Asia Eliminations Consolidated
NT$ NT$ NT$ NT$ NT$ NT$
Area income:
Customers........................................ 60,651,079 106,413,405 236,237,471 61,256,183 — 464,558,138
Inter-company ................................. 264,931,647 4,101 7,242,154 11,096 (272,188,998) —
325,582,726 106,417,506 243,479,625 61,267,279 (272,188,998) 464,558,138

Area profit (loss) before income taxes 264,812,614 926,347 15,381,028 2,194,840 (272,187,926) 11,126,903

Net investment income ........................ 695,660

Gain on disposal of investments, net... 4,045,981
Interest expense ................................... (759,907)
Consolidated income before income
taxes ................................................ 15,108,637

Area identifiable assets........................ 100,327,411 58,022,952 88,086,758 28,618,423 (53,352,602) 221,702,942

Equity method investments.................. 4,689,684

Goodwill .............................................. 16,890,716
Total assets ................................. 243,283,342

Depreciation and amortization ............. 1,008,239 32,112 11,239 10,879 — 1,142,469

Capital expenditures ............................ 665,555 59,128 140,593 185,388 — 1,050,664

2008
North
Taiwan America Europe Asia Eliminations Consolidated
NT$ NT$ NT$ NT$ NT$ NT$
Area income:
Customers........................................ 25,879,015 152,469,649 279,790,219 90,925,741 — 549,064,624
Inter-company ................................. 341,107,152 3,203 6,057,224 13,642 (347,181,221) —
366,986,167 152,472,852 285,847,443 90,939,383 (347,181,221) 549,064,624

Area profit (loss) before income taxes 342,361,748 (1,044,322) 15,501,048 3,361,512 (347,181,221) 12,998,765

Net investment income by the equity

method............................................. 404,184
Gain on disposal of investments, net... 2,709,524
Interest expense ................................... (1,305,746)
Consolidated income before income
taxes ................................................ 14,806,727

Area identifiable assets........................ 111,929,202 47,044,049 95,789,881 25,518,735 (62,342,472) 217,939,395

Equity method investments.................. 2,928,790

Goodwill .............................................. 22,574,040
Total assets ................................. 243,442,225

Depreciation and amortization ............. 685,120 1,090,051 290,210 136,060 — 2,201,441

Capital expenditures ............................ 171,677 220,011 154,207 205,397 — 751,292

F-59
 2009
North
Taiwan America Europe Asia Eliminations Consolidated
NT$ NT$ NT$ NT$ NT$ NT$
Area income:
Customers........................................ 32,527,383 153,258,163 294,783,234 107,213,050 — 587,781,830
Inter-company ................................. 404,809,061 187,495 6,404,956 7,297 (411,408,809) —
437,336,444 153,445,658 301,188,190 107,220,347 (411,408,809) 587,781,830

Area profit (loss) before income taxes 354,733,460 (3,051,275) 71,362,909 3,489,518 (411,408,809) 15,125,803

Net investment income by the equity

method............................................. 400,098
Gain on disposal of investments, net... 79,162
Interest expense ................................... (622,080)
Consolidated income before income
taxes ................................................ 14,982,983

Area identifiable assets........................ 154,584,475 68,774,280 106,947,852 32,809,119 (97,383,442) 265,732,284

Equity method investments.................. 3,314,950

Goodwill .............................................. 21,977,454
Total assets .......................................... 291,024,688

Depreciation and amortization ............. 1,064,578 667,269 847,796 126,944 — 2,706,587

Capital expenditures ............................ 413,968 30,381 243,081 84,145 — 771,575

(3) Export sales

Export sales of the domestic operating segments do not exceed 10% of the consolidated revenues, hence no disclosure is required.

(4) Major customers:

No sales to individual customers accounting for more than 10% of the consolidated revenues in 2007, 2008 and 2009.

F-60
 INDEPENDENT AUDITORS’REVIEW REPORT

The Board of Directors

Acer Incorporated:

We have reviewed the consolidated balance sheets of Acer Incorporated (the “Company”) and
subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of income, changes in
stockholders’ equity, and cash flows for the three-month periods then ended. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to issue a report on
these consolidated financial statements based on our reviews.

We conducted our reviews in accordance with Republic of China Statement of Auditing Standards No.
36 “Engagements to Review Financial Statements”. A review consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible for financial and accounting matters.
It is substantially less in scope than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding the financial statements taken as
a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modification that should be made to the
consolidated financial statements referred to in the first paragraph in order for them to be in conformity with
Order VI-0960064020 issued by the Financial Supervisory Commission under the Executive Yuan effective
November 15, 2007, and accounting principles generally accepted in the Republic of China.

The accompanying consolidated financial statements as of and for the three-month periods ended
March 31, 2010, have been translated into United States dollars solely for the convenience of the readers. We
have reviewed the translation, and based on our review we are not aware of any material modifications that
should be made to such translation for it to be inconformity with the basis set forth in note 2(1) to the
consolidated financial statements.

KPMG
Taipei, Taiwan (the Republic of China)
April 23, 2010

Note to Readers

The accompanying consolidated financial statements are intended only to present the financial position, results of operations and cash
flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other
jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and
applied in the Republic of China.

F-61
 REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH
GENERALLY ACCEPTED AUDITING STANDARDS
ACER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2009 AND 2010
(in thousands of New Taiwan dollars)

2009.3.31 2010.3.31

NT$ NT$ US$

Assets
Current assets:
Cash and cash equivalents (note 4(1)) ...................................... 53,913,648 36,638,645 1,151,471
Notes and accounts receivable, net of allowance for doubtful
accounts of NT$1,690,336 and NT$2,308,937 as of March
31, 2010 and 2009, respectively (note 4(2)) ......................... 97,280,340 116,759,611 3,669,493
Notes and accounts receivable from related parties (note 5) .... 717,081 869,628 27,330
Other receivable from related parties (note 5) .......................... 61,005 16,324 513
Other receivables (note 4(3)) .................................................... 8,983,357 11,009,651 346,009
Inventories (note 4(7)) .............................................................. 33,621,700 51,701,626 1,624,866
Financial assets at fair value through profit or loss—current
(notes 4(5) and 4(19)) ........................................................... 136,620 106,388 3,344
Available-for-sale financial assets—current
(notes 4(4) and 4(19)) ........................................................... 157,790 203,929 6,409
Hedging purpose derivative financial assets—current
(notes 4(6) and 4(19)) ........................................................... 327,360 545,773 17,152
Prepayments and other current assets ...................................... 1,966,872 2,765,076 86,900
Deferred income tax assets—current ........................................ 2,624,868 1,800,572 56,589
Restricted deposits (note 6)....................................................... 101,736 — —
Total current assets ............................................................. 199,892,377 222,417,223 6,990,076

Long-term investments:
Investments accounted for using equity method (note 4(9))..... 2,760,316 3,392,495 106,619
Prepayments for long-term investments (note 4(9)).................. — 137,560 4,323
Available-for-sale financial assets—noncurrent
(notes 4(10) and 4(19)) ......................................................... 1,643,267 2,999,947 94,282
Financial assets carried at cost—noncurrent
(notes 4(8) and 4(19)) ........................................................... 3,042,000 2,168,684 68,156
Total long-term investments................................................ 7,445,583 8,698,686 273,380

F-62
 2009.3.31 2010.3.31

NT$ NT$ US$

Property, plant and equipment:
Land ......................................................................................... 2,677,144 2,507,867 78,817
Buildings and improvements..................................................... 5,290,717 5,332,019 167,573
Computer equipment and machinery......................................... 3,386,992 3,085,472 96,969
Transportation equipment .......................................................... 122,659 119,180 3,746
Office equipment....................................................................... 1,049,994 926,331 29,113
Leasehold improvements ........................................................... 830,835 936,133 29,421
Other equipment........................................................................ 1,110,178 1,154,739 36,290
Construction in progress and advance payments for purchases
of property and equipment .................................................... 63,228 115,218 3,621
14,531,747 14,176,959 445,550
Less: accumulated depreciation ................................................ (4,993,427) (4,934,085) (155,067)
accumulated impairment .................................................. (276,253) (675,508) (21,230)
Net property, plant and equipment .............................. 9,262,067 8,567,366 269,253
Intangible assets (note 4(12)) ..................................................... 37,656,421 34,823,623 1,094,429
Property not used in operation (note 4(11)) ............................. 2,990,463 2,938,305 92,344
Other financial assets (notes 4(13), 4(19) and 6) ...................... 796,003 904,447 28,425
Deferred charges and other assets ............................................ 2,586,940 2,418,558 76,010
Total assets ..................................................................... 260,629,854 280,768,208 8,823,917

F-63
 2009.3.31 2010.3.31

NT$ NT$ US$

Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings (note 4(14)) .......................................... 2,080,970 1,866,051 58,646
Notes and accounts payable ..................................................... 73,264,679 83,279,473 2,617,288
Notes and accounts payables to related parties (note 5)........... 7,202,232 10,599,257 333,111
Financial liabilities at fair value through profit or
loss—current (notes 4(5) and 4(19)) ..................................... 911,987 536,311 16,855
Other payables to related parties (note 5)................................. 41,644 49,398 1,552
Hedging purpose derivative financial liabilities—current
(notes 4(6) and 4(19)) ........................................................... 442,374 187,624 5,897
Royalties payable ...................................................................... 13,975,650 15,007,307 471,646
Accrued expenses and other current liabilities ......................... 56,052,666 55,529,755 1,745,176
Current portion of long-term debt (note 4(15)) ........................ 8,250,000 — —
Deferred income tax liabilities—current ................................... 617,252 638,009 20,051
Total current liabilities........................................................ 162,839,454 167,693,185 5,270,222

Long-term liabilities:
Long-term debt, excluding current portion
(notes 4(15) and 4(19)) ......................................................... 4,116,219 12,361,548 388,496
Other liabilities ......................................................................... 975,039 332,417 10,447
Deferred income tax liabilities—noncurrent ............................. 6,457,060 5,514,026 173,293
Total long-term liabilities........................................................ 11,548,318 18,207,991 572,236
Total liabilities ..................................................................... 174,387,772 185,901,176 5,842,458

Stockholders’ equity and minority interest:

Common stock (notes 4(16) and 4(17)) .................................... 26,428,560 26,882,283 844,850
Capital surplus (notes 4(16) and 4(17)) .................................... 37,203,104 38,616,522 1,213,631
Retained earnings
Legal reserve ......................................................................... 8,786,583 9,960,796 313,046
Special reserve ...................................................................... — 1,991,615 62,592
Unappropriated earnings........................................................ 16,011,048 19,917,077 625,949
Other equity components
Foreign currency translation adjustment ............................... 1,844,113 (305,102) (9,588)
Minimum pension liability adjustment .................................. (283) (4,367) (138)
Unrealized gain (loss) on financial instruments
(notes 4(6) and 4(10))........................................................ (1,085,579) 860,955 27,058
Treasury stock (notes 4(16)) ................................................. (3,522,598) (3,522,598) (110,707)
Total stockholders’ equity ............................................... 85,664,948 94,397,181 2,966,693
Minority interest .......................................................................... 577,134 469,851 14,766
Total stockholders’ equity and minority interest .................. 86,242,082 94,867,032 2,981,459
Commitments and contingencies (note 7)
Total liabilities and stockholders’ equity ............................... 260,629,854 280,768,208 8,823,917

F-64
 REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH
GENERALLY ACCEPTED AUDITING STANDARDS
ACER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2009 AND 2010
(in thousands of New Taiwan dollars, except earnings per share data)

2009 2010
NT$ NT$ US$
Net sales (note 5)......................................................................... 119,086,448 162,129,895 5,095,380
Cost of sales (notes 4(7) and 5).................................................. (107,168,081)(146,416,109) (4,601,531)
Gross profit ................................................................................ 11,918,367 15,713,786 493,849
Operating expenses (notes 4(12), 4(17) and 5)
Selling ...................................................................................... (7,645,353) (9,090,068) (285,681)
Administrative .......................................................................... (1,511,076) (1,956,786) (61,497)
Research and development ....................................................... (191,364) (281,538) (8,848)
Total operating expenses ..................................................... (9,347,793) (11,328,392) (356,026)
Operating income ............................................................... 2,570,574 4,385,394 137,823
Non-operating income and gains:
Interest income ........................................................................ 123,621 95,335 2,996
Investment gain recognized using equity method, net
(note 4(9)) ............................................................................. 78,684 109,859 3,453
Gain on disposal of investments, net (notes 4(9) and 4(10)).... — 97,567 3,066
Foreign currency exchange gain and valuation gain on
financial instruments, net (notes 4(5) and 4(6)) .................... 204,068 — —
Other income............................................................................. 61,293 57,773 1,816
467,666 360,534 11,331
Non-operating expenses and loss:
Interest expense......................................................................... (206,759) (173,219) (5,444)
Loss on disposal of property and equipment ............................ (432) (2,007) (63)
Foreign currency exchange loss and valuation loss on
financial instruments, net (notes 4(5) and 4(6)) .................... — (296,665) (9,324)
Other loss ................................................................................. (75,712) (115,294) (3,623)
(282,903) (587,185) (18,454)
Income from continuing operations before income taxes ........ 2,755,337 4,158,743 130,700
Income tax expense .................................................................... (729,666) (864,189) (27,160)
Consolidated net income ........................................................... 2,025,671 3,294,554 103,540
Net income attributable to:
Shareholders of parent company .............................................. 2,025,730 3,294,477 103,538
Minority shareholders ............................................................... (59) 77 2
2,025,671 3,294,554 103,540

NT$ NT$ US$

Earnings per common share

(in New Taiwan dollars) (note 4(18)):
Basic earnings per common share—retroactively adjusted ....... 0.77 1.25 0.04
Diluted earnings per common share.......................................... 0.76 1.23 0.04

F-65
 REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH
GENERALLY ACCEPTED AUDITING STANDARDS
ACER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2009 AND 2010
(Expressed in thousands of New Taiwan dollars)

Retained earnings Other equity components

Total
Foreign Minimum Unrealized stockholders’
currency pension gain (loss) on equity of Total
Common Capital Legal Special Unappropriated translation liability financial Treasury parent Minority stockholders’
stock surplus reserve reserve earnings adjustment adjustment instruments stock company interest equity
NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$ NT$
Balance at January 1,
2009.............................. 26,428,560 37,129,952 8,786,583 — 13,985,318 1,241,058 (283) (1,729,631) (3,522,598) 82,318,959 558,656 82,877,615
Stock-based compensation
cost .............................. — 72,883 — — — — — — — 72,883 — 72,883
2009 net income .................. — — — — 2,025,730 — — — — 2,025,730 (59) 2,025,671
Unrealized valuation gain
on available-for-sale
financial assets ............. — — — — — — — 499,387 — 499,387 — 499,387
Unrealized gain on
qualifying cash flow
hedge ............................ — — — — — — — 144,665 — 144,665 — 144,665
Foreign currency translation
adjustment .................... — — — — — 603,055 — — — 603,055 — 603,055
Increase in minority
interest.......................... — — — — — — — — — — 18,537 18,537
Decrease in capital surplus
resulting from long-
term investments
accounted for using the
equity method............... — 269 — — — — — — — 269 — 269
Balance at March 31,
2009.............................. 26,428,560 37,203,104 8,786,583 — 16,011,048 1,844,113 (283) (1,085,579) (3,522,598) 85,664,948 577,134 86,242,082
Balance at January 1,
2010.............................. 26,882,283 38,494,118 9,960,796 1,991,615 16,622,600 959,621 (7,908) 1,014,317 (3,522,598) 92,394,844 482,818 92,877,662
Stock-based compensation
cost .............................. — 118,481 — — — — — — — 118,481 — 118,481
2010 net income .................. — — — — 3,294,477 — — — — 3,294,477 77 3,294,554
Unrealized valuation loss on
available-for-sale
financial assets ............. — — — — — — — (197,372) — (197,372) — (197,372)
Unrealized gain on
qualifying cash flow
hedge ............................ — — — — — — — 44,010 — 44,010 — 44,010
Minimum pension liability
adjustment .................... — — — — — — 3,541 — — 3,541 — 3,541
Foreign currency translation
adjustment .................... — — — — — (1,264,723) — — — (1,264,723) — (1,264,723)
Decrease in minority
interest.......................... — — — — — — — — — — (13,044) (13,044)
Increase in capital surplus
resulting from long-
term investments
accounted for using the
equity method............... — 3,923 — — — — — — — 3,923 — 3,923
Balance at March 31,
2010.............................. 26,882,283 38,616,522 9,960,796 1,991,615 19,917,077 (305,102) (4,367) 860,955 (3,522,598) 94,397,181 469,851 94,867,032
Balance at March 31, 2010
(in US$) ....................... 844,850 1,213,631 313,046 62,592 625,949 (9,588) (138) 27,058 (110,707) 2,966,693 14,766 2,981,459

F-66
 REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH
GENERALLY ACCEPTED AUDITING STANDARDS
ACER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2009 AND 2010
(in thousands of New Taiwan dollars)

2009 2010

NT$ NT$ US$

Cash flows from operating activities:
Consolidated net income ........................................................... 2,025,671 3,294,554 103,540
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation .......................................................................... 213,654 175,103 5,503
Amortization.......................................................................... 446,393 444,240 13,961
Stock-based compensation cost ............................................. 70,411 118,481 3,724
Net investment gain on equity method investments.............. (92,464) (119,916) (3,769)
Cash dividends received from equity method investees........ 3,663 — —
Loss on disposal of property and equipment, net ................. 432 2,007 63
Gain on disposal of investments, net .................................... — (97,567) (3,066)
Deferred income tax expense (benefit) ................................. (478,762) 293,282 9,217
Changes in operating assets and liabilities:
Notes and accounts receivable........................................... 10,545,971 (4,901,245) (154,035)
Receivables from related parties........................................ 124,384 (269,322) (8,464)
Inventories ......................................................................... 6,406,495 (516,673) (16,238)
Other financial assets, prepayments and other current
assets .............................................................................. (838,287) (2,018,879) (63,449)
Noncurrent receivable (under other financial
assets—noncurrent) ........................................................ 43,885 (100,969) (3,173)
Notes and accounts payable............................................... 8,899,063 (12,552,247) (394,489)
Payables to related parties ................................................. (696,308) 324,104 10,186
Other financial liabilities, accrued expenses and other
current liabilities ............................................................ 4,656,609 (876,837) (27,557)
Other liabilities .................................................................. 134,606 (52,289) (1,643)
Cash provided by (used in) operating activities ........ 31,465,416 (16,854,173) (529,689)
Cash flows from investing activities:
Proceeds from disposal of available-for-sale financial assets ... 446,297 212,859 6,690
Increase in long-term investments ............................................ (33,912) (149,797) (4,708)
Proceeds from disposal of long-term investments ................... 3,638 14,684 461
Proceeds from capital return and liquidation of investees ........ 17,277 131,666 4,138
Additions to property, plant and equipments and property not
used in operation ................................................................... (80,588) (87,584) (2,753)
Proceeds from disposal of property, plant and equipment and
property not used in operation .............................................. — 36,838 1,158
Decrease (increase) in advances to related parties.................... (15,832) 5,183 163
Decrease in restricted deposits.................................................. 1,813,448 — —
Increase in refundable deposit, deferred charges and other
assets ..................................................................................... (2,437,358) (83,079) (2,611)
Cash provided by (used in) investing activities................. (287,030) 80,770 2,538

F-67
 2009 2010

NT$ NT$ US$

Cash flows from financing activities:
Increase in short-term borrowings ............................................ 994,119 1,317,992 41,422
Repayment of long-term debt ................................................... (18,701) (10,308) (324)
Cash provided by financing activities ................................ 975,418 1,307,684 41,098
Net increase (decrease) in cash and cash equivalents ............. 32,153,804 (15,465,719) (486,053)
Effects of exchange rate changes ............................................... (381,881) (1,511,703) (47,509)
Cash and cash equivalents at beginning of period................... 22,141,725 53,616,067 1,685,033
Cash and cash equivalents at end of period ............................. 53,913,648 36,638,645 1,151,471

Supplemental disclosures of cash flow information

Interest paid .............................................................................. 220,700 156,990 4,934
Income taxes paid ..................................................................... 733,893 569,154 17,887
Supplemental disclosures of non-cash investing and
financing activities:
Change in unrealized gain (loss) on financial instruments ....... 644,052 (153,362) (4,820)
Current portion of long-term debt............................................. 8,250,000 — —

F-68
 ACER INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2009 AND 2010
(amounts expressed in thousands of New Taiwan dollars and US dollars,
except for earnings per share information and unless otherwise noted)

1. Reporting Entities of the Consolidated Financial Statements and Their Business Scopes
Acer Sertek Inc. (the “Company”) was incorporated on August 1, 1976, as a company limited by shares under the laws of the
Republic of China (“ROC”). The Company merged with Acer Incorporated (“AI”) on March 27, 2002, with the Company as the
surviving entity from the merger but renaming itself Acer Incorporated. After the merger, the principal activities of the Company focus
on globally marketing its brand-name IT products, and promoting E-commerce solutions to clients.
The Company completed the acquisition of 100% ownership of Gateway, Inc. (including eMachines brand), a personal computer
company in the U.S., through its indirectly wholly owned subsidiary on October 15, 2007. The Company also acquired the 100%
ownership of Packard Bell B.V., a personal computer company in Europe, through its indirectly wholly owned subsidiary on March 14,
2008. Post the acquisitions of Gateway and Packard Bell, the Company has defined a clear path for its multi-brand strategy. Additionally,
as of September 1, 2008, the Company then entered the market for smart phones following the acquisition of E-Ten Information Systems
Co., Ltd.

The reporting entities of the consolidated financial statements include the Company and its subsidiaries (hereinafter referred to
collectively as the “Consolidated Companies”). On March 31, 2009 and 2010, the number of employees of the Consolidated Companies
was 6,743 and 6,612, respectively. The Consolidated Companies are summarized below according to their primary business activity.

(1) Sale of “Acer”, “Gateway”, “eMachines”, and “Packard Bell” brand-name information technology products:

Percentage of Ownership
At March 31
Investor 2009 2010
(a) Acer Incorporated
(b) Acer Greater China (B.V.I.) Corp.
(“AGC”, British Virgin Islands) and subsidiaries .................... The Company 100.00 100.00
● Acer Market Services Limited (“AMS”, Hong Kong).. AGC 100.00 100.00
● Acer Computer (Far East) Limited (“AFE”, Hong
Kong) ............................................................................ AGC 100.00 100.00
● Acer Information (Zhong Shan) Co., Ltd. (“AIZS”,
China) ........................................................................... AMS 100.00 100.00
● Beijing Acer Information Co., Ltd. (“BJAI”, China) ... AMS 100.00 100.00
● Acer Computer (Shanghai) Ltd. (“ACCN”, China) ...... AMS 100.00 100.00
(c) Acer European Holding B.V. (“AEH”, Netherlands Antilles )
and subsidiaries........................................................................ The Company 100.00 100.00
● Acer Europe B.V. (“AHN”, the Netherlands) ............... AEH 100.00 100.00
● Acer Computer B.V. (“ACH”, the Netherlands) ........... AEH 100.00 100.00
● Acer CIS Incorporated (“ACR”, British Virgin Islands). AEH 100.00 100.00
● Acer BSEC Inc. (“AUA”, British Virgin Islands) ........ AEH 100.00 100.00
● Acer Computer (M.E.) Limited (“AME”, British Virgin
Islands) ........................................................................ AEH 100.00 100.00
● Acer Africa (Proprietary) Limited (“AAF”, South
Africa) ......................................................................... AEH 100.00 100.00
● Acer Computer France S.A.S.U. (“ACF”, France) ....... AHN 100.00 100.00
● Acer U.K. Limited (“AUK”, the United Kingdom)...... AHN 100.00 100.00
● Acer Italy S.R.L. (“AIT”, Italy) ................................... AHN 100.00 100.00
● Acer Computer GmbH (“ACG”, Germany) .................. AHN 100.00 100.00
● Acer Austria GmbH (“ACV”, Austria) ......................... AHN 100.00 100.00

F-69
 Percentage of Ownership
At March 31
Investor 2009 2010
● Acer Europe Services S.R.L. (“AES”, Italy) ................ AHN 100.00 100.00
● Acer Europe AG (“AEG”, Switzerland) ....................... AHN 100.00 100.00
● Acer Czech Republic S.R.O. (“ACZ”, Czech Republic). AHN 100.00 100.00
● Esplex Limited (“AEX”, the United Kingdom)............ AHN 100.00 100.00
● Acer Computer Iberica, S.A. (“AIB”, Spain) ............... AHN 100.00 100.00
● Acer Computer (Switzerland) AG (“ASZ”,
Switzerland) .................................................................. AHN 100.00 100.00
● Acer Slovakia s.r.o. (“ASK”, Slovakia)........................ AHN 100.00 100.00
● Acer International Services GmbH (“AIS”,
Switzerland) .................................................................. AHN 100.00 100.00
● Asplex Sp. z.o.o. (“APX”, Poland)............................... AHN — 100.00
● Acer Marketing Services LLC (“ARU”, Russia) ......... AHN — 100.00
● Acer Computer Norway AS (“ACN”, Norway)............ ACH 100.00 100.00
● Acer Computer Finland Oy (“AFN”, Finland) ............. ACH 100.00 100.00
● Acer Computer Sweden AB (“ACW”, Sweden) ........... ACH 100.00 100.00
● Acer Denmark A/S (“ACD”, Denmark)........................ ACH 100.00 100.00
● PB Holding Company S.A.R.L. (“PBLU”,
Luxembourg) ............................................................... AHN 100.00 100.00
● Packard Bell B.V. (“PBHO”, the Netherlands)............. PBLU 100.00 100.00
● Packard Bell Finance B.V. (“PBFN”, the Netherlands). PBHO 100.00 100.00
● Packard Bell Netherland B.V. (“PBNL”, the
Netherlands).................................................................. PBHO 100.00 100.00
● Packard Bell Services s.a.r.l (“PBSV”, France)............ PBHO 100.00 100.00
● Packard Bell Angers s.a.r.l (“PBAN”, France) ............. PBHO 100.00 100.00
● Packard Bell France s.a.s (“PBFR”, France) ................ PBHO 100.00 100.00
● Packard Bell (UK) Ltd.(“PBUK”, the United
Kingdom) ...................................................................... PBHO 100.00 100.00
● Packard Bell Scotland Ltd. (“PBSC”, the United
Kingdom) ...................................................................... PBHO 100.00 —
● Packard Bell Iberica s.l (“PBES”, Spain) ..................... AIB 100.00 100.00
● Packard Bell Italia s.r.l (“PBIT”, Italy) ........................ PBHO 100.00 100.00
● Packard Bell Deutschland GmbH (“PBDE”, Germany). PBHO 100.00 100.00
● Packard Bell Belgium BVBA (“PBBE”, Belgium)....... PBHO 100.00 100.00
● Packard Bell Sverige AB (“PBSE”, Sweden) ............... PBHO 100.00 —
● Packard Bell Norden AS (“PBNO”, Norway) .............. PBHO 100.00 100.00
● Packard Bell Schweiz GmbH (“PBCH”, Switzerland) . PBHO 100.00 100.00
● ZDS Europe s.a.r.l (“PBFE”, France) ........................... PBHO 100.00 —
● NEC Computers South Africa (Pty) Ltd. (“PBZA”,
South Africa) ................................................................ PBHO 50.81 50.81
● Packard Bell Electronic Technical Services (Shanghai)
Co., Ltd. (“PBCN”, China)........................................... PBHO 100.00 —

F-70
 Percentage of Ownership
At March 31
Investor 2009 2010
(d) Boardwalk Capital Holding Limited (“Boardwalk”, British
Virgin Islands) and subsidiaries ............................................... The Company 100.00 100.00
● Acer Computer Mexico, S.A. de C.V. (“AMEX”,
Mexico)......................................................................... Boardwalk 99.92 99.92
● Acer Latin America, Inc. (“ALA”, U.S.A.) .................. Boardwalk 100.00 100.00
● Acer American Holding Corp. (“AAH”, USA) ............ Boardwalk 100.00 100.00
● AGP Tecnologia em Informatica do Brasil Ltda.
(“ATB”, Brazil)............................................................. Boardwalk — 100.00
● Aurion Tecnologia, S.A. de C.V. (“Aurion”, Mexico).. AMEX 99.92 99.92
● Gateway, Inc. (“GWI”, U.S.A.) ................................... AAH 100.00 100.00
● Acer America Corporation. (“AAC”, U.S.A.)............... GWI 99.92 99.92
● Acer Service Corporation (“ASC”, U.S.A.).................. GWI 100.00 100.00
● Gateway US Retail, Inc. (“GRA”, U.S.A.)................... GWI 100.00 100.00
● Gateway Diect, Inc. (“GDA”, U.S.A.).......................... GWI 100.00 100.00
● Gateway Manufacturing LLC (“GMA”, U.S.A.) .......... GWI 100.00 100.00
● Gateway International Holdings, Inc. (“GIH”, U.S.A.). GWI 100.00 100.00
● Gateway de Mexico S. de R.L. de C.V. (“GMX”,
Mexico)......................................................................... GWI 100.00 100.00
● Gateway Hong Kong Ltd. (“GHK”, Hong Kong) ........ GWI 100.00 100.00
● Gateway Bermuda LP (“GBM”, Bermuda)................... GWI 100.00 —
● Gateway Asia, Inc. (“GAI”, U.S.A.)............................. GWI 100.00 100.00
● Gateway KK (“GJP”, Japan) ........................................ GRA 100.00 100.00
● Gateway Ltd. (“GUK”, the United Kingdom) .............. GRA 100.00 100.00
● Gateway France SAS (“GFR”, France) ........................ GRA 100.00 —
● eMachines Internet Group (“EMA”, U.S.A.)................ GRA 100.00 100.00
● Gateway Europe B.V. (“GEBV”, U.S.A.) ..................... GRA 100.00 100.00
● Gateway Computers Ireland Ltd. (“GCI”, the United
Kingdom) ...................................................................... GRA 100.00 100.00
● Gateway International Computers Limited (“GIC”, the
United Kingdom) .......................................................... GIH 100.00 100.00
● Gateway Canada Corporation (“GCA”, Canada) .......... GIC 100.00 100.00
● Servicio Profesionales de Aceso S. de R.L. (“GSMX”,
Mexico) ....................................................................... EMA 100.00 100.00
(e) Acer Holding International, Incorporated (“AHI”, British
Virgin Islands) and subsidiaries ............................................... The Company 100.00 100.00
● Acer Computer Co., Ltd. (“ATH”, Thailand) ............... AHI 100.00 100.00
● Acer Japan Corp. (“AJC”, Japan) ................................. AHI 100.00 100.00
● Acer Computer Australia Pty. Limited (“ACA”,
Australia) ...................................................................... AHI 100.00 100.00
● Acer Sales and Service Sdn Bhd (“ASSB”, Malaysia). AHI 100.00 100.00
● Acer Asia Pacific Sdn Bhd (“AAPH, Malaysia”)......... AHI 100.00 100.00

F-71
 Percentage of Ownership
At March 31
Investor 2009 2010
● Acer Computer (Singapore) Pte. Ltd. (“ACS”,
Singapore)..................................................................... AHI 100.00 100.00
● Acer Computer New Zealand Ltd. (“ACNZ”, New
Zealand) ........................................................................ AHI 100.00 100.00
● PT Acer Indonesia (“AIN”, Indonesia) ......................... AHI 100.00 100.00
● Acer India Private Limited (“AIL”, India) ................... AHI 100.00 100.00
● Acer Vietnam Co., Ltd. (“AVN”, Vietnam) .................. AHI 100.00 100.00
● Acer Philippines, Inc. (“APHI”, Philippines) ............... AHI 100.00 100.00
● Acer Finance Australia Pty. Ltd. (“AFA”, Australia) ... ACA 100.00 —
● Highpoint Australia Pty. Ltd. (“HPA”, Australia)......... ACA 100.00 100.00
● Highpoint Service Network Sdn Bhd (“HSN”,
Malaysia) ...................................................................... ASSB 100.00 100.00
● Logistron Service Pte Ltd. (LGS, Singapore) ............. ACS 100.00 100.00
(f) Acer Computer International Ltd. (“ACI”, Singapore) ............ The Company 100.00 100.00
(g) Acer Sales & Distribution Ltd. (“ASD”, Hong Kong) ............ The Company 100.00 100.00

(2) Sale and distribution of computer products and electronic communication products:

Percentage of Ownership
At March 31
Investor 2009 2010
(a) Weblink International Inc. (“WII”, Taiwan) ............................ The Company 99.79 99.79
(b) Weblink (H.K.) International Ltd. (“WHI”, Hong Kong) ........ WII 99.79 99.79
(c) Servex (Malaysia) Sdn Bhd (“SMA”, Malaysia) .................... ASSB 100.00 100.00
(d) Servex International (Thailand) Co., Ltd. (“STH”, Thailand) . ATH 100.00 100.00
(e) Megabuy Sdn Bhd (“MGB”, Malaysia) ................................... ASSB 100.00 100.00

(3) Investing and holding companies:

Percentage of Ownership
At March 31
Investor 2009 2010
(a) Multiventure Investment Inc. (“MVI”, Taiwan)....................... ADSC 100.00 100.00
(b) Acer Digital Service Co. (“ADSC”, Taiwan) .......................... The Company 100.00 100.00
(c) Acer Worldwide Incorporated (“AWI”, British Virgin Islands). The Company 100.00 100.00
(d) Cross Century Investment Limited (“CCI”, Taiwan) ............... The Company 100.00 100.00
(e) Acer SoftCapital Incorporated (“ASCBVI”, British Virgin
Islands)..................................................................................... The Company 100.00 100.00
(f) Acer Capital Corporation (“ACT”, Taiwan) ............................ The Company 100.00 100.00
(g) Aspire Incubation Venture Capital (“AIVC”, Taiwan)............. The Company 100.00 100.00
(h) Acer Digital Services (B.V.I.) Holding Corp. (“ADSBH”,
British Virgin Islands).............................................................. The Company 100.00 100.00

F-72
 Percentage of Ownership
At March 31
Investor 2009 2010
(i) Acer Digital Services (Cayman Islands) Corp.
(“ADSCC”, Cayman Islands)................................................... ADSBH 100.00 100.00
(j) Nicholas Insurance Company Ltd. (“NIC”, Bermuda) ............ GWI 100.00 100.00
(k) Acer Capital Australia Pty Ltd. (“ACAP”, Australia) ............. ACBVI 100.00 —
(l) Acer Capital Limited (“ACBVI”, British Virgin Islands)........ ASCBVI 100.00 —
(m) ASC Cayman, Limited (“ASCCAM”, Cayman Islands) .......... ASCBVI 100.00 100.00
(n) Acer Technology Venture Asia Pacific Ltd. (“ATVAP”,
Cayman Islands) ...................................................................... ASCBVI 100.00 100.00
(o) AGP Insurance (Guernsey) Limited. (“AGU”, British
Guernsey Island) ..................................................................... AHN — 100.00
(p) Acer EMEA Holdings B.V. (AHB, the Netherlands) .............. The Company — 100.00
(q) Eten International Holdings Ltd. (“EIH”, British Virgin
Islands)..................................................................................... ETEN 100.00 100.00
(r) Eten Investment Co., Ltd. (“ETO”, Taiwan)............................ ETEN 100.00 —
(s) Protek Investment Co., Ltd. (“PTO”, Taiwan)......................... ETEN 100.00 —
(t) Toptek Investment Co., Ltd. (“DTO”, Taiwan)........................ ETEN 100.00 —

(4) Research, design, and sale of smart handheld products:

Percentage of Ownership
At March 31
Investor 2009 2010
(a) E-ten Information System Co., Ltd. (“ETEN”, Taiwan) .......... The Company 100.00 100.00
(b) Eten China Information System Co., Ltd. (“CETEN”, China). EIH 100.00 100.00
(c) AGP Technology AG (“AGP”, Switzerland)............................ AHN 100.00 100.00
(d) Acer Information Technology R&D (Shanghai) Co., Ltd.
(“ARD”, China) ....................................................................... AGC — 100.00

(5) Property development:

Percentage of Ownership
At March 31
Investor 2009 2010
(a) Acer Property Development Inc. (“APDI”, Taiwan)................ ADSC 100.00 100.00
(b) Aspire Service & Development Inc. (“ASDI”, Taiwan) .......... ADSC 100.00 100.00

(6) Electronic data supply or processing service, data storage and processing:

Percentage of Ownership
At March 31
Investor 2009 2010
(a) EB Easy Business Services Limited (“AGES”, Hong Kong) .. ADSCC 85.00 —
(b) Acer Cyber Center Services Ltd. (“ACCSI”, Taiwan)............. The Company 100.00 100.00
(c) Lottery Technology Service Corp. (“LTS”, Taiwan)................ The Company 100.00 100.00
(d) Minly Corp. (“MINLY”, Taiwan) ............................................ The Company 100.00 100.00

F-73
 (7) Software research, development, design, trading and consultation:

Percentage of Ownership
At March 31
Investor 2009 2010
(a) TWP International Inc. (“TWPBVI”, British Virgin Islands) .. ACCSI 100.00 100.00
(b) Acer Third Wave Software (Beijing) Co., Ltd. (“TWPBJ”,
China) ...................................................................................... TWPBVI 100.00 100.00

For the three-month period ended March, 31 2010 or in 2009, the subsidiaries namely PBSC, PBSE, PBFE, PBCN, GBM, GFR,
AFA, ACBVI, WSHI, ACAP, AGES, ETO, PTO, and DTO were liquidated and were excluded from consolidation because the Company
ceased control thereof. Additionally, the Company established new subsidiaries namely APX, ARU, ATB, AGU, ARD, and AHB in 2009.

2. Summary of Significant Accounting Policies

The accompanying consolidated financial statements have been prepared in conformity with Order VI-0960064020 issued by the
Financial Supervisory Commission under the Executive Yuan effective November 15, 2007 (which allows Taiwan companies not to
disclose certain accounting policies and information in their consolidated financial statements for the first and third quarter of each year)
and accounting principles generally accepted in the Republic of China. Due to limited disclosures in the consolidated financial
statements for the first quarter and third quarter of each year, the consolidated financial position, consolidated results of operations and
consolidated cash flows in each of these quarters every year can be understood by reading them together with the Consolidated
Companies’ audited annual consolidated financial statements. The significant accounting policies are the same as those disclosed in its
2009 annual consolidated financial statements, except for the following:

(1) Convenience translation into U.S. dollars

The consolidated financial statements are stated in New Taiwan dollars. Translation of the March 31, 2010 New Taiwan dollar
amounts into U.S. dollar amounts, using the spot rate of Central Bank of Taiwan on March 31, 2010, of NT$31.819 to US$1, is included
solely for the convenience of the readers. The convenience translations should not be construed as representations that the New Taiwan
dollar amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

3. Accounting Changes

Effective January 1, 2009, the Consolidated Companies adopted the revised SFAS No. 10, “Accounting for Inventories.” The
adoption of this new accounting principle did not have significant effect on the Company’s consolidated financial statements as of and
for the three-month period ended March 31, 2009.

4. Significant Account Disclosures

(1) Cash and cash equivalents

March 31,
2009 March 31, 2010
NT$ NT$ US$
Cash on hand .................................................................................................................. 10,304 10,634 334
Bank deposits.................................................................................................................. 34,785,215 26,136,319 821,406
Time deposits.................................................................................................................. 19,118,129 10,491,692 329,731
53,913,648 36,638,645 1,151,471

F-74
 (2) Notes and accounts receivable

The Consolidated Companies entered into factoring contracts with several banks to sell part of accounts receivable without
recourse. As of March 31, 2009 and 2010, details of these contracts were as follows:

March 31, 2009

Advance
Factored Factoring (derecognized)
Buyer amount credit limit amount Interest rate Collateral
NT$ NT$ NT$
IFITALIA...................................................................... 8,507,023 10,721,109 2,499,195 Nil
ABN AMRO Bank........................................................ 1,197,005 5,804,789 1,197,005 Nil
Standard Chartered Bank .............................................. 132,911 3,391,200 132,911 Nil
Emirates Bank International ......................................... 180,148 1,119,096 180,148 Nil
China Trust Bank.......................................................... 259,442 1,965,000 155,328 note 7(4)
Taipei Fubon Bank........................................................ 264,985 1,000,000 264,985 note 7(4)
10,541,514 24,001,194 4,429,572 0.89%~6%

March 31, 2010

Advance
Factored Factoring (derecognized)
Buyer amount credit limit amount Interest rate Collateral
NT$ NT$ NT$
IFITALIA...................................................................... 6,723,603 9,199,325 1,944,297 Nil
China Trust Bank.......................................................... 278,202 1,750,000 278,202 note 7(4)
Taipei Fubon Bank........................................................ 500,119 968,500 500,119 note 7(4)
La Caixa Bank .............................................................. 4,301,785 5,008,044 3,875,320 Nil
11,803,709 16,925,869 6,597,938 0.84%~5%

(3) Other receivable

March 31,
2009 March 31, 2010
NT$ NT$ US$
Refundable income tax and sales tax ............................................................................. 1,525,300 2,376,869 74,700
Receivables of patent royalty allocated to others ........................................................... 1,781,346 1,034,581 32,515
Other receivable.............................................................................................................. 5,676,711 7,598,201 238,794
8,983,357 11,009,651 346,009

(4) Available-for-sale financial assets—current

March 31,
2009 March 31, 2010
NT$ NT$ US$
Publicly traded equity securities..................................................................................... 157,790 203,929 6,409

F-75
 (5) Financial assets and liabilities at fair value through profit or loss—current

March 31,
2009 March 31, 2010
NT$ NT$ US$
Financial assets at fair value through profit or loss—current:
Foreign currency forward contracts ........................................................................... 130,224 88,619 2,785
Foreign exchange swaps ............................................................................................ 6,396 — —
Foreign currency options ........................................................................................... — 17,769 559
136,620 106,388 3,344

March 31,
2009 March 31, 2010
NT$ NT$ US$
Financial liability at fair value through profit or loss—current:
Foreign currency forward contracts ........................................................................... (908,630) (514,102) (16,157)
Foreign exchange swaps ............................................................................................ (704) — —
Cross currency swaps................................................................................................. (2,653) — —
Foreign currency options .......................................................................................... — (22,209) (698)
(911,987) (536,311) (16,855)

For the three-month periods ended March 31, 2009 and 2010, unrealized losses resulting from the changes in fair value of these
derivative contracts amounted to NT$118,379 and NT$425,043, respectively.

The Consolidated Companies entered into derivative contracts to manage foreign currency exchange risk resulting from operating
activities. As of March 31, 2009 and 2010, the derivative financial instruments that did not conform to the criteria for hedge accounting
and were classified as financial assets and liabilities at fair value through profit or loss consisted of the followings:

(a) Foreign currency forward contracts

March 31, 2009

Contract
amount (in
Buy Sell thousand) Maturity period
USD/SGD ............................................................................................................... USD13,500 2009/04/15~2009/06/15
USD/CAD............................................................................................................... USD34,558 2009/04/15~2009/06/29
USD/EUR ............................................................................................................... EUR610,000 2009/04/16~2009/06/01
USD/MYR .............................................................................................................. USD25,000 2009/04/14~2009/05/29
USD/THB ............................................................................................................... USD42,000 2009/04/10~2009/06/29
USD/JPY ................................................................................................................ USD71,000 2009/04/15~2009/07/13
USD/NTD ............................................................................................................... USD2,000 2009/04/10~2009/04/24
USD/INR ................................................................................................................ USD41,924 2009/04/30~2009/07/31
USD/MXN .............................................................................................................. USD90,500 2009/04/08~2009/08/14

F-76
 March 31, 2010
Contract
amount (in
Buy Sell thousand) Maturity period
USD/SGD ............................................................................................................... USD16,500 2010/04/15~2010/06/17
USD/MXN .............................................................................................................. USD77,000 2010/04/16~2010/07/16
USD/EUR ............................................................................................................... EUR7,356 2010/04/15~2010/05/28
USD/INR ................................................................................................................ USD103,084 2010/04/15~2010/08/31
USD/MYR .............................................................................................................. USD50,295 2010/04/14~2010/05/27
USD/THB ............................................................................................................... USD20,000 2010/04/12~2010/05/14
USD/JPY ................................................................................................................ USD71,000 2010/04/13~2010/07/13
USD/RUB ............................................................................................................... USD186,910 2010/04/02~2010/07/15
USD/ZAR ............................................................................................................... USD29,080 2010/04/01~2010/06/30
USD/NTD ............................................................................................................... USD3,000 2010/04/09~2010/04/26
USD/BRL ............................................................................................................... USD70,000 2010/05/31
EUR/NOK .............................................................................................................. EUR9,500 2010/04/15~2010/06/15
EUR/SEK ............................................................................................................... EUR34,986 2010/04/15~2010/05/17
EUR/CHF ............................................................................................................... EUR30,000 2010/04/01~2010/07/30
RUB/USD ............................................................................................................... USD4,617 2010/04/02
NOK/EUR .............................................................................................................. EUR2,738 2010/04/15

(b) Foreign exchange swaps

March 31, 2009

Contract amount (in thousands) Maturity date
Swap-in USD / Swap-out NTD................... USD135,500/NTD4,588,747 2009/04/10

(c) Cross currency swaps

March 31, 2009

Contract amount (in thousands) Maturity Date Interest Interest due date
Swap-in SGD35,000/ ........................ 2009/04/30 Pay fixed rate in USD of 0.82% Principal and interest are
Swap-out USD 23,041 ...................... Receive fixed rate in SGD of 0.6% payable in full on maturity

(d) Foreign currency options

(i) Long position

March 31, 2010

Contract
amount
(in
thousands) Maturity period
USD Call/EUR Put ................................................................................................. USD49,188 2010/04/06~2010/06/11
USD Call/RUB Put................................................................................................. USD20,000 2010/04/13~2010/05/26
USD Call/BRL Put ................................................................................................. USD10,000 2010/05/31

F-77
(ii) Short position

March 31, 2010

Contract
amount
(in
thousands) Maturity period
EUR Call/USD Put ................................................................................................. USD65,076 2010/04/06~2010/06/11
RUB Call/USD Put................................................................................................. USD20,000 2010/04/13~2010/05/26
BRL Call/USD Put ................................................................................................. USD10,000 2010/05/31

(6) Hedging purpose derivative financial assets and liabilities

March 31,
2009 March 31, 2010
NT$ NT$ US$
Hedging purpose derivative financial assets — current:
Foreign currency forward contracts ........................................................................... 183,625 545,773 17,152
Foreign currency options ........................................................................................... 143,735 — —
327,360 545,773 17,152

Hedging purpose derivative financial liabilities — current

Foreign currency forward contracts ........................................................................... (285,450) (187,624) (5,897)
Foreign currency options ........................................................................................... (156,924) — —
(442,374) (187,624) (5,897)

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 March 31, 2009 and 2010, hedged items designated as fair value hedges and fair value of their respective hedging derivative
financial instruments were as follows:

Fair value of hedging

instruments
March 31, March 31,
Hedged Items Hedging instruments 2009 2010
NT$ NT$
Accounts receivable/payable denominated in foreign Foreign currency forward contracts (22,530) 301,741
currencies Foreign currency options 36,416 —
13,886 301,741

For the three-month periods ended March 31, 2009 and 2010, the unrealized losses resulting from the changes in fair value of
hedging instruments amounted to NT$410,423 and NT$764,304, respectively.

F-78
 As of March 31, 2009 and 2010, hedged items designated as cash flow hedges and fair value of their respective hedging derivative
financial instruments were as follows:

March 31, 2009

Expected
Fair value of Expected period of
hedging period of recognition
Hedged items Hedging instruments instruments cash flow in earnings
NT$
Accounts receivable/payable denominated in Foreign currency forward contracts (79,295) Apr.~Oct. Apr.~Oct.
foreign currencies 2009 2009
Foreign currency options (49,605) Apr.~Jul. Apr.~Jul.
2009 2009
(128,900)

March 31, 2010

Expected
Fair value of Expected period of
hedging period of recognition
Hedged items Hedging instruments instruments cash flow in earnings
NT$
Accounts receivable/payable denominated in Foreign currency forward contracts 56,408 Apr.~Jun. Apr.~Jun.
foreign currencies 2010 2010

As of March 31, 2009 and 2010, unrealized gains (losses) on derivative financial instruments effective as cash flow hedges,
amounted to NT$(128,900) and NT$56,408, respectively, which were recognized as “unrealized gain (loss) on financial instruments”,
a separate component of stockholder’s equity.

Details of hedging derivative financial instruments described above that were outstanding as of March 31, 2009 and 2010, were
as follows:

(a) Foreign currency forward contracts

March 31, 2009

Contract
amount
Buy Sell (in thousand) Maturity period
USD/CNY............................................................................................................... USD67,000 2009/04/29~2009/07/30
USD/AUD .............................................................................................................. USD61,675 2009/04/30~2009/08/31
USD/EUR ............................................................................................................... EUR147,410 2009/04/14~2009/06/30
USD/NZD ............................................................................................................... USD6,000 2009/04/30~2009/07/31
AUD/NZD .............................................................................................................. AUD2,000 2009/04/09~2009/07/31
AUD/USD .............................................................................................................. USD5,000 2009/04/30~2009/05/29
EUR/GBP ............................................................................................................... EUR134,241 2009/04/30~2009/07/25
EUR/CHF ............................................................................................................... EUR26,000 2009/04/03~2009/10/26
EUR/NOK .............................................................................................................. EUR14,364 2009/04/15~2009/06/15
EUR/PLN ............................................................................................................... EUR21,804 2009/04/15~2009/05/29
EUR/SEK ............................................................................................................... EUR19,167 2009/04/15~2009/06/15
EUR/USD ............................................................................................................... EUR23,493 2009/04/14
USD/ZAR ............................................................................................................... USD23,500 2009/04/15~2009/06/30

F-79
 March 31, 2010
Contract
amount
Buy Sell (in thousand) Maturity period
USD/CAD............................................................................................................... USD78,856 2010/04/30~2010/06/30
USD/EUR ............................................................................................................... EUR867,284 2010/04/01~2010/06/30
USD/NZD ............................................................................................................... USD5,300 2010/04/30~2010/06/30
USD/AUD .............................................................................................................. USD80,250 2010/04/30~2010/06/30
AUD/NZD .............................................................................................................. AUD1,250 2010/04/30~2010/05/28
USD/CNY............................................................................................................... USD200,000 2010/04/29~2010/07/29
EUR/GBP ............................................................................................................... EUR263,109 2010/04/15~2010/06/30
EUR/PLN ............................................................................................................... EUR33,200 2010/04/15~2010/07/15
PLN/EUR ............................................................................................................... EUR7,730 2010/04/15

(b) Foreign currency options

(i) Long position

March 31, 2009

Contract
amount
(in thousand) Maturity period
EUR Call/GBP Put ................................................................................................. EUR63,090 2009/04/28~2009/07/13
USD Call/EUR Put ................................................................................................. USD24,000 2009/04/28~2009/05/27
EUR Call/PLN Put ................................................................................................. EUR13,985 2009/04/28~2009/05/27
EUR Call/USD Put ................................................................................................. EUR53,214 2009/04/28~2009/06/26

(ii) Short position

March 31, 2009

Contract
amount
(in thousand) Maturity period
GBP Call/EUR Put ................................................................................................. EUR76,302 2009/04/28~2009/07/13
EUR Call/USD Put ................................................................................................. USD37,000 2009/04/28~2009/05/27
PLN Call/EUR Put ................................................................................................. EUR19,226 2009/04/28~2009/05/27
USD Call/EUR Put ................................................................................................. EUR71,048 2009/04/28~2009/06/26

(7) Inventories

(a) Inventories (net of provision for obsolescence and slow-moving inventories) as of March 31, 2009 and 2010, were as follows:

March 31,
2009 March 31, 2010
NT$ NT$ US$
Raw materials ................................................................................................................. 10,710,355 17,958,413 564,393
Work in process .............................................................................................................. 68,295 16,559 520
Finished goods and merchandise .................................................................................... 11,358,269 18,954,647 595,702
Spare parts ...................................................................................................................... 2,357,878 2,678,653 84,184
Inventories in transit ....................................................................................................... 9,126,903 12,093,354 380,067
33,621,700 51,701,626 1,624,866

F-80
(b) The details of inventories write downs for the years ended March 31, 2009 and 2010 were as follows:

March 31,
2009 March 31, 2010
NT$ NT$ US$
Write-down of inventories to net realizable value.......................................................... 588,599 432,214 13,583
Net gain (loss) on physical inventory ........................................................................... (24,831) 21,071 662
Scrap loss ...................................................................................................................... 22,560 19,621 617
586,328 472,906 14,862

(8) Financial assets carried at cost—noncurrent

March 31,
2009 March 31, 2010
NT$ NT$ US$
Investment in non-publicly traded equity securities:
Prosperity Venture Capital Corp. .............................................................................. 21,000 21,000 660
Sheng-Hua Venture Capital Corp. .............................................................................. 20,000 11,900 374
Legend Technology .................................................................................................... 15,235 11,235 353
W.I. Harper International Corp. ................................................................................. 15,050 14,359 451
InCOMM Technologies Co., Ltd................................................................................ 2,360 2,360 74
IP Fund II................................................................................................................... 32,400 32,400 1,018
Dragon Investment Co. Ltd........................................................................................ 217,000 217,000 6,820
World Venture, Inc. .................................................................................................... 262,000 262,000 8,234
iD Reengineering Inc. ................................................................................................ 174,900 174,900 5,497
DYNA Fund II ........................................................................................................... 24,527 23,013 723
IP Fund III ................................................................................................................. 136,258 127,848 4,018
iD5 Fund LTP ............................................................................................................ 77,243 72,476 2,278
IP Cathay One, L.P. ................................................................................................... 305,208 256,854 8,072
IP Fund One L.P......................................................................................................... 944,787 645,452 20,285
ID5 Annex I Fund ...................................................................................................... — 12,184 383
Apacer Technology Inc. ............................................................................................. 45,340 45,340 1,425
New Century Infocomm Tech Co., Ltd. ................................................................... 341,663 131,340 4,128
The Eslite Bookstore.................................................................................................. 304,555 — —
Trimode Technology Inc. ........................................................................................... 12,264 11,038 347
Others......................................................................................................................... 90,210 95,985 3,016
3,042,000 2,168,684 68,156

During the three-month period ended March 31, 2010, IP Fund One, L.P. returned capital of NT$85,036 to the Consolidated
Companies, and the Consolidated Companies invested NT$12,184 in ID5 Annex I Fund.

In the fourth quarter of 2009, the Consolidated Companies sold all of their investments in The Eslite Bookstore and recognized
an aggregate loss thereon of NT$5,455.

F-81
 (9) Investments accounted for using equity method

March 31, 2009

2009
Percentage Carrying Investment
of ownership amount income (loss)
% NT$ NT$
Wistron Corporation ...................................................................................................... 4.92 1,910,801 70,089
E-Life Mall Corp. .......................................................................................................... 14.27 465,404 23,113
Aegis Semiconductor Technology Inc. ........................................................................... 44.03 165,235 —
ECOM Software Inc. ...................................................................................................... 33.93 37,098 328
Bluechip Infotech Pty Ltd. ............................................................................................. 33.41 56,009 1,116
FuHu Inc......................................................................................................................... 13.00 106,787 (2,063)
Other ............................................................................................................................... — 18,982 (119)
2,760,316 92,464

Less: Allocation of corporate expense ............................................................................ (13,780)

78,684

March 31, 2010

2010
Percentage Carrying Investment
of ownership amount income (loss)
% NT$ NT$
Wistron Corporation ...................................................................................................... 4.38 2,455,414 118,975
E-Life Mall Corp. .......................................................................................................... 13.98 404,069 21,586
Aegis Semiconductor Technology Inc. ........................................................................... 44.03 165,235 —
ECOM Software Inc. ...................................................................................................... 33.93 38,225 1,847
Bluechip Infotech Pty Ltd. ............................................................................................. 33.41 74,674 1,341
FuHu Inc......................................................................................................................... 25.00 161,801 (10,058)
Olidata S.p.A .................................................................................................................. 29.90 109,252 —
Others ............................................................................................................................. — (16,175) (13,775)
3,392,495 119,916

Less: Allocation of corporate expense ............................................................................ (10,057)

109,859

Prepayments for long-term investments:

Fizzle Investment Limited.......................................................................................... 137,560 —

Deferred credits of long-term equity investments represent the unamortized balance of deferred gains and losses derived from
the sale of equity investment among the affiliated companies. Such deferred gains and losses are realized upon disposal of the
equity-method investments to non-consolidated entities.

On January 1, 2009, the Consolidated Companies lost the ability to exercise significant influence over The Eslite Bookstore’s
operating and financial policies. Therefore, the investments in The Eslite Bookstore were reclassified as “financial assets carried at
cost—noncurrent” as of January 1, 2009.

During the three-month period ended March 31, 2010, the Company sold portion of its investment in E-Life Mall Corp. and
recognized a disposal gain thereon of NT$7,559.

During the three-month period ended March 31, 2010, E-Life Mall Corp. returned capital of NT$46,630 to the Consolidated
Companies. During the three-month period ended March 31, 2009, Tai Yi Digital Broadcasting Co., Ltd. was liquidated and returned
capital of NT$17,277 to the Consolidated Companies.

During the three-month period ended March 31, 2009, the Consolidated Companies increased investment in FuHu Inc. by
NT$33,912. In the fourth quarter of 2009, the Consolidated Companies invested NT$109,252 in Olidata S.p.A.

The Consolidated Companies planned to firstly undertake to acquire a 20% interest in Fizzle Investment Limited and invested
NT$137,560 in this entity during the three-month period ended March 31, 2010. As of March 31, 2010, this investment was accounted
for under “prepayment for long-term investments” as the related registration processes were not completed.

F-82
 (10) Available-for-sale financial assets—noncurrent

March 31,
2009 March 31, 2010
NT$ NT$ US$
Investment in publicly traded equity securities:
Qisda Corporation (“Qisda”)...................................................................................... 797,099 1,433,978 45,067
Silicon Storage Technology Inc. (“Silicon”) .............................................................. 6,099 10,578 332
Yosun Industrial Corp. ............................................................................................... 537,367 1,056,235 33,195
RoyalTek Co., Ltd...................................................................................................... 115,045 258,905 8,137
Quanta Computer Inc. ................................................................................................ 187,657 240,251 7,551
1,643,267 2,999,947 94,282

During the three-month period ended March 31, 2010, the Consolidated Companies sold portions of their investments in Yosun
Industrial, RoyalTek and Quanta Computer and recognized a gain thereon of NT$90,008. No disposal activities occurred during the
three-month period ended March 31, 2009.

As of March 31, 2009 and 2010, the unrealized gain (losses) resulting from re-measuring available-for-sale financial assets
(including current and noncurrent) to fair value amounted to NT$(956,679) and NT$804,547, respectively, which were recognized as
a separate component of stockholders’ equity.

(11) Property not used in operation

March 31,
2009 March 31, 2010
NT$ NT$ US$
Leased assets—land ........................................................................................................ 807,538 805,001 25,299
Leased assets—buildings ............................................................................................... 2,827,810 2,830,347 88,951
Damaged office premises................................................................................................ 457,558 457,558 14,380
Property held for sale and development ......................................................................... 1,391,386 1,364,783 42,892
Others ............................................................................................................................. 29,019 29,019 912
Less: Accumulated depreciation.................................................................................... (576,471) (602,008) (18,920)
Accumulated impairment ..................................................................................... (1,946,377) (1,946,395) (61,170)
2,990,463 2,938,305 92,344

For certain land acquired, the ownership registration has not been transferred to the land acquirer, APDI, a subsidiary of the
Company. To protect APDI’s interests, APDI has obtained signed contracts from the titleholders assigning to APDI all rights and
obligations related to the land. Additionally, the land title certificates are held by APDI, and APDI has registered its liens thereon.

F-83
 (12) Intangible assets

Trademarks
and trade Customer
Goodwill Patents names Relationships Others Total
NT$ NT$ NT$ NT$ NT$ NT$
Balance at January 1, 2009.................. 22,574,040 692,838 8,067,556 1,517,349 1,894,982 34,746,765
Adjustment made subsequent to
business acquisition......................... 36,240 — — — — 36,240
Additions ............................................. — — — — 2,399,847 2,399,847
Disposals.............................................. (9,271) — — — — (9,271)
Reclassification .................................... — — — 5,680 5,680
Effect of exchange rate changes .......... 593,442 7,926 124,779 45,830 29,170 801,147
Amortization ....................................... — (33,069) (18,464) (45,827) (226,627) (323,987)
Balance at March 31, 2009.................. 23,194,451 667,695 8,173,871 1,517,352 4,103,052 37,656,421

Balance at January 1, 2010.................. 21,977,454 801,789 7,862,465 1,310,306 3,492,054 35,444,068

Additions ............................................. — — — — 2,897 2,897
Reclassification .................................... — — — — 2,569 2,569
Effect of exchange rate changes .......... (223,642) (894) 48,640 (7,660) (113,686) (297,242)
Amortization ....................................... — (56,928) (7,273) (43,432) (221,036) (328,669)
Balance at March 31, 2010.................. 21,753,812 743,967 7,903,832 1,259,214 3,162,798 34,823,623

(a) Acquisitions

(i) Packard Bell B.V.

In March and June of 2008, the Company completed the acquisition of 100% equity ownership of Packard Bell B.V., a personal
computer company in Europe, through its indirectly wholly owned subsidiary Acer Europe B.V., at a total purchase price of Euro 66,117,
which was inclusive of direct transaction costs.
The acquisition was accounted for in accordance with ROC SFAS No. 25 “Accounting for Business Combinations”, under which,
the excess of the purchase price and direct transaction costs over the fair value of the net identifiable assets was recognized as goodwill.
The following represents the allocation of the purchase price to the assets acquired, liabilities assumed, and goodwill at the date
of acquisition:

NT$ NT$
Purchase Price.......................................................................................................................................... 3,172,080
The identifiable assets acquired and liabilities assumed:
Current assets ...................................................................................................................................... 9,587,790
Property, plant and equipment ............................................................................................................ 351,162
Intangible assets — Packard Bell trademark ..................................................................................... 2,163,744
Current liabilities ................................................................................................................................ (10,665,179)
Other liabilities ................................................................................................................................... (39,608) 1,397,908
Goodwill .................................................................................................................................................. 1,774,172

The Packard Bell trademark has an indefinite useful life and, accordingly, is not subject to amortization.
Within the allocation period, the Company made adjustments to decrease deferred changes by NT$33,768, which also increased
goodwill by NT$33,768.

(ii) E-Ten Information Systems Co., Ltd

On September 1, 2008, the Company completed its acquisition of 100% equity ownership of E-TEN, a handheld device company
in Taiwan. The Company offered to exchange one share of its stock for every 1.07 shares of outstanding E-Ten stock, and issued a total
of 168,158,878 common shares. E-Ten then became the Company’s direct wholly owned subsidiary.
The acquisition was accounted for in accordance with ROC SFAS No. 25 “Accounting for Business Combinations”, under which,
the excess of the purchase price and direct transaction costs over the fair value of the net identifiable assets was recognized as goodwill.

F-84
 The following represents the allocation of the purchase price to the assets acquired, liabilities assumed, and goodwill at the date
of acquisition:

NT$ NT$
Purchase Price.......................................................................................................................................... 8,837,267
Fair value of common shares issued ................................................................................................... 8,700,751
Fair value of outstanding employee stock options assumed .............................................................. 136,516
The identifiable assets acquired and liabilities assumed:
Current assets ...................................................................................................................................... 2,574,588
Long-term investment ........................................................................................................................ 789,753
Property, plant and equipment ............................................................................................................ 1,856,836
Intangible assets — ETEN trademark ................................................................................................. 450,900
Intangible assets — customer relationship.......................................................................................... 151,100
Intangible assets — developed technology ......................................................................................... 1,802,500
Intangible assets — others .................................................................................................................. 88,400
Other assets ......................................................................................................................................... 485,261
Current liabilities ................................................................................................................................ (1,263,892) 6,935,446
Goodwill .................................................................................................................................................. 1,901,821

The ETEN trademark for the stock trading PDA product has an indefinite useful life and, accordingly, is not subject to
amortization. The customer relationship is subject to amortization using the straight-line method over 7 years. The developed technology
is subject to amortization using the straight-line method over 10 years, the estimated period of its economic benefits.

Within the allocation period, the Company made adjustments to increase the fair value of outstanding employee stock options
assumed through the acquisition, which also increased goodwill by NT$2,472.

(b) On December 6, 2007, the Consolidated Companies entered into a Basic Term Agreement with the International Olympic
Committee regarding participation in the Olympic Partners Program (the “Top Programme”). Pursuant to such agreement, the
Consolidated Companies have agreed to pay a certain amount of money in cash, merchandise and service to obtain marketing
rights and become one of the partners in “Top Porgramme” across the period from January 1, 2009 to December 31, 2012. Such
expenditure on sponsorship was capitalized as “Intangible assets” in the accompanying consolidated financial statements, and
amortized using the straight-line method during the aforementioned four-year period.

(13) Other financial assets—noncurrent

March 31,
2009 March 31, 2010
NT$ NT$ US$
Refundable deposits ........................................................................................................ 752,209 783,046 24,609
Noncurrent receivables ................................................................................................... 43,794 121,401 3,816
796,003 904,447 28,425

(14) Short-term borrowings

March 31,
2009 March 31, 2010
NT$ NT$ US$
Bank loans ...................................................................................................................... 2,080,970 1,866,051 58,646

For the three-month periods ended March 31, 2009 and 2010, the average annual interest rates on short-term borrowings ranged
from 0.9% to 1.33% and from 0.9% to 11.95%, respectively. As of March 31, 2009 and 2010, unused credit facilities amounted to
NT$2,136,420 and NT$2,097,317, respectively.

F-85
 (15) Long-term debts

March 31,
2009 March 31, 2010
NT$ NT$ US$
Citibank syndicated loan................................................................................................. 12,200,000 12,200,000 383,419
Other bank loans............................................................................................................. 166,219 161,548 5,077
Less: current installments ............................................................................................... (8,250,000) — —
4,116,219 12,361,548 388,496

The Company entered into a syndicated loan agreement with Citibank, the managing bank of the syndicated loan, on October
11, 2007, and the terms of this loan agreement were as follows:

March 31, March 31,

2009 2010
Type of Loan Creditor Credit Line Term NT$ NT$
Unsecured loan................. Citibank and Term tranche of NT$16.5 Repayable in 4 semi-annual 12,200,000 12,200,000
other banks billion; fire-year limit installments starting from
during which revolving April 2009. An advance
credits disallowed repayment of NT$4.3
billion was made in the
first quarter of 2008. In
May 2009, an amendment
to the agreement was made,
under which, the loan is
repayable in 4 semi-annual
installments starting from
April 2011.
Revolving tranche of One-time repayment in full — —
NT$3.3 billion; three-year in October 2010.
limit
Less: current installment .. (8,250,000) —
3,950,000 12,200,000

The above syndicated loan bore an average interest rate of 1.70% and 1.67% for the three-month periods ended March 31, 2009
and 2010, respectively. According to the loan agreement, the Company is required to maintain certain financial ratios calculated based
on annual and semi-annual audited financial statements. If the Company fails to meet any of the financial ratios, the managing bank will
request the Company in writing to take action to improve within agreed days. No assertion of breach of contract will be tenable if the
financial ratios are met within agreed days. As of December 31, 2009, the Company was in compliance with all such financial covenants.

(16) Stockholders’ equity

(a) Common stock

As of March 31, 2009 and 2010, the Company’s authorized common stock consisted of 3,500,000,000 shares, respectively, of
which 2,642,855,993 shares and 2,688,228,278 shares, respectively, were issued and outstanding. The par value of the Company’s
common stock is NT$10 per share.

As of March 31, 2009 and 2010, the Company had issued 9,928 thousand units and 16,872 thousand units, respectively, of global
depository receipts (GDRs). The GDRs were listed on the London Stock Exchange, and each GDR represents five shares of common
stock.

The Company‘s shareholders in a meeting on June 19, 2009, resolved to distribute stock dividends of NT$264,298 to
stockholders. Additionally, the shareholders approved the distribution of bonuses to employees in stock of NT $900,000 with an issuance
of 16,234 thousand new shares. The stock issuance was authorized by and registered with the governmental authorities.

F-86
 (b) Treasury stock

As of March 31, 2009 and 2010, details of the GDRs (for the 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):

March 31, 2009 March 31, 2010

Number of Number of
Shares Book Value Market Price Shares Book Value Market Price
NT$

NT$ NT$ NT$

Common stock .................................... 21,571 1,050,341 1,100,146 21,787 1,050,341 2,043,640
GDRs ................................................... 4,933 2,472,257 1,221,238 4,982 2,472,257 2,330,500
3,522,598 2,321,384 3,522,598 4,374,140

Movements of the Company’s treasury stock were as follows (expressed in thousands of shares or units):

2009
Beginning Ending
Description Balance Additions Disposal Balance
Common Stock ...................................................................................... 21,571 — — 21,571
GDRs ..................................................................................................... 4,933 — — 4,933

2010
Beginning Ending
Description Balance Additions Disposal Balance
Common Stock ...................................................................................... 21,787 — — 21,787
GDRs ..................................................................................................... 4,982 — — 4,982

(c) Capital surplus

March 31,
2009 March 31, 2010
NT$ NT$ US$
Share premium:
Paid-in capital in excess of par value ........................................................................ 878,765 1,804,408 56,709
Surplus from merger .................................................................................................. 29,800,881 29,800,881 936,575
Premium on common stock issued from conversion of convertible bonds................ 4,552,585 4,552,585 143,078
Forfeited interest from conversion of convertible bonds ........................................... 1,006,210 1,006,210 31,623
Surplus related to treasury stock transactions by subsidiary companies.................... 431,161 501,671 15,766
Employee stock options ............................................................................................ 226,249 458,961 14,424
Other:
Surplus from equity-method investments ................................................................. 307,253 491,806 15,456
37,203,104 38,616,522 1,213,631

According to the ROC Company Act, any realized capital surplus could be transferred to common stock as stock dividends after
deducting accumulated deficit, if any. Realized capital surplus includes share premium and donations from shareholders. Distribution
of stock dividends from realized capital surplus is subject to certain restrictions imposed by the governmental authorities.

F-87
 (d) Legal reserve, special reserve, unappropriated earnings, and dividend policy

The Company’s articles of incorporation stipulate that at least 10% of annual net income after deducting accumulated deficit, if
any, must be retained as legal reserve until such retention equals the amount of authorized common stock. In addition, a special reserve
in accordance with applicable laws and regulations shall be set aside. The remaining balance of annual net income, if any, can be
distributed as follows:

● at least 5% as employee bonuses; employees entitled to stock bonus may include subsidiaries’ employees that meet certain
criteria set by the board of directors;

● 1% as remuneration to directors and supervisors; and

● the remainder, after retaining a certain portion for business considerations, as dividends to stockholders.

Since the Company operates in an industry experiencing rapid change and development, distribution of earnings shall be made
in consideration of the year’s earnings, the overall economic environment, the related laws and decrees, and the Company’s long-term
development and steady financial position. The Company has adopted a steady dividend policy, in which a cash dividend comprises at
least 10% of the total dividend distribution.

According to the ROC Company Act, the legal reserve can be used to offset an accumulated deficit and may be distributed in
the following manner: (i) when it reaches an amount equal to one-half of the paid-in capital, it can be transferred to common stock at
the amount of one-half of legal reserve; and (ii) when it reaches an amount exceeding one-half of the authorized common stock,
dividends and bonuses can be distributed from the excess portion of the legal reserve.

Pursuant to regulations promulgated by the Financial Supervisory Commission, and effective from the distribution of earnings
for fiscal year 1999 onwards, a special reserve equivalent to the total amount of items that are accounted for as deductions to the
stockholders’ equity shall be set aside from current earnings, and not distributed. This special reserve shall be made available for
appropriation to the extent of reversal of deductions to stockholders’ equity in subsequent periods. As of March 31, 2010, the Company
appropriated a special reserve of NT$1,991,615 that is equal to the sum of the amount by which the market price of the treasury stock
was less than the book value thereof and other deduction items of shareholder’s’ equity.

The appropriation of 2008 earnings was approved by the shareholders at a meeting on June 19, 2009. The appropriations of
employee bonus and remuneration to directors and supervisors and dividends per share were as follows:

2008
NT$
Dividends per share (in New Taiwan dollars)
Cash dividends.................................................................................................................................................................. 2.00
Stock Dividends................................................................................................................................................................ 0.10
2.10

Employee bonus ⳮ stock ................................................................................................................................................. 900,000

Employee bonus ⳮ cash .................................................................................................................................................. 600,000
Remuneration to directors and supervisors ..................................................................................................................... 85,763
1,585,763

The 2008 employee bonus in stock of 16,234 thousand common shares was determined by the closing price of the Company’s
common shares (after considering the effect of dividends) on the day preceding the shareholder’s meeting, which was NT$58 (dollars).
The above appropriations were consistent with the resolutions approved by the Company’s directors.

Distribution of 2009 earnings has not been proposed yet by the board of directors and is still subject to approval of resolution
by the stockholders. After the said resolution, related information can be obtained from the public information website.

Based on the total amount of bonus expected to be distributed to employees and the Company’s article of incorporation, under
which, remuneration for directors and supervisors is distributed at 1% of the annual net income, the Company estimated and accrued
employee bonus of NT$250,000 and NT$375,000 and directors’ and supervisors’ remuneration of NT$18,263 and NT$29,337 for the
three-month periods ended March 31, 2009 and 2010, respectively. If the actual amounts subsequently resolved by the stockholders
differ from the estimated amounts, the differences are treated as a change in accounting estimate and are recorded as income or expense
in the year of stockholder’s resolution. If bonus to employees is resolved to be distributed in stock, the number of shares is determined
by dividing the amount of stock bonus by the closing price (after considering the effect of dividends) of the shares on the day preceding
the shareholder’s meeting.

F-88
 (17) Stock-based compensation plans

As of March 31, 2010, details of the employee stock option plans (“ESOP”) were as follows:

Employee stock Employee stock Employee stock Employee stock

option plan 1 option plan 2 option plan 3 option plan 4
Grant date............................................................... 2008/11/31 2008/09/01 2008/09/01 2009/10/30
(note 1) (note 1)
Granted shares (in thousands) ................................ 14,000 8,717 1,067 14,000
Contractual life (in years) ...................................... 3 4.97 2 3
Vesting period ........................................................ 2 years of service 1~3 years of 1 year of service 2 years of service
subsequent to service subsequent subsequent to subsequent to
grant date to grant date grant date grant date
Qualified employees............................................... (note 2) (note 3) (note 3) (note 2)

Note 1: The Company assumed the employee stock option plans 2 and 3 through the acquisition of E-Ten on September 1, 2008.
Note 2: The options are granted to eligible employees of the Company and its domestic or foreign subsidiaries, in which the Company
directly or indirectly, owns 50% or more of the subsidiary’s voting shares.
Note 3: The options are granted to eligible employees of the Company’s subsidiaries, in which the Company directly or indirectly owns
50% or more of equity interests.

The Consolidated Company utilized the Black-Scholes or the binomial option pricing model to value the stock options granted,
and the fair value of the option and main inputs to the valuation models were as follows:

Employee stock Employee stock Employee stock Employee stock

option plan 1 option plan 2 option plan 3 option plan 4

Exercise price (NT$) .............................................. 25.28 44.50 16.90 42.90

Expected remaining contractual life (in years) ..... 3 4.26 0.56 3
Fair market value for underlying securities —
Acer shares (NT$) ............................................. 45.95 59.10 59.10 78.00
Fair value of options granted (NT$) ...................... 25.124 25.47 ~ 26.11 42.20 ~ 42.58 40.356
Expected volatility ................................................. 45.01% 34.98% 37.35% 40.74%
Expected dividend yield ......................................... note 4 note 4 note 4 note 4
Risk-free interest rate ............................................. 2.50% 2.40% 1.84% 1.03%

Note 4: According to the employee stock option plan, the option prices are adjusted to take into account dividends paid on the
underlying security. As a result, the expected dividend yield is excluded from the calculation.

Movements in number of stock options outstanding:

For the three-month period ended March 31, 2009

The Company’s employee stock E-Ten’s Employee stock option
option plan plan
Number of Weighted- Number of Weighted-
options average exercise options average exercise
(in thousands) price (NT$) (in thousands) price (NT$)

Outstanding, beginning of year ....................................... 14,000 25.28 9,093 41.90

Granted ............................................................................ — — — —
Forfeited .......................................................................... — — (134) —
Exercised ......................................................................... — — (78) 16.90
Outstanding, end of year ................................................. 14,000 25.28 8,881 40.60

Exercisable, end of year .................................................. — 328

F-89
 For the three-month period ended March 31, 2010
The Company’s employee stock E-Ten’s Employee stock option
Option plan plan
Number of Weighted- Number of Weighted-
options average exercise options average exercise
(in thousands) price (NT$) (in thousands) price (NT$)

Outstanding, beginning of year ....................................... 28,000 33.62 5,120 41.52

Granted ............................................................................ — — — —
Forfeited .......................................................................... — — (224) —
Exercised ......................................................................... — — (530) 34.29
Outstanding, end of year ................................................. 28,000 33.62 4,366 42.33

Exercisable, end of year .................................................. — 1,009

For the three-month periods ended March 31, 2009 and 2010, the Consolidated Companies recognized the compensation costs
from the employee stock option plans of NT$72,883 and NT$118,481, respectively, which were accounted for under operating expenses.

(18) Earnings per common share (“EPS”)

For the three-month period ended March 31, 2009

Weighted-
average number
of outstanding
common shares
Amount (in thousands) EPS (in dollars)
NT$ NT$

Basic EPS—after retroactive adjustments

Net income attributable to common shareholders of parent company ...... 2,025,730 2,622,634 0.77

Diluted EPS
Effect of dilutive potential common shares:
Employee bonus .................................................................................. — 37,473
Employee stock option ......................................................................... — 6,843
Net income attributable to common shareholders of parent company ...... 2,025,730 2,666,950 0.76

F-90
 For the three-month period ended March 31, 2010
Weighted-
average number
of outstanding
common shares
Amount (in thousand) (in thousands) EPS (in dollars)
NT$ US$ NT$ US$

Basic EPS—after retroactive adjustments

Net income attributable to common
shareholders of parent company ........... 3,294,477 103,538 2,642,374 1.25 0.04

Diluted EPS
Effect of dilutive potential common
shares:
Employee bonus .................................. — — 15,128
Employee stock option ........................ — — 20,409
Net income attributable to common
shareholders of parent company ........... 3,294,477 103,538 2,677,911 1.23 0.04

(19) Disclosure of financial instruments

(a) Fair values of financial instruments

The book value of short-term financial instruments is considered to be the fair value because of the short-term maturity of these
instruments. Such method is applied to cash and cash equivalents, notes and accounts receivable (including receivables from related
parties), other receivables (including receivables from related parties), notes and accounts payables (including payables to related
parties), short-term borrowings, current installments of long-term debt, payables to related parties and royalties payable.

F-91
 The estimated fair values and carrying amounts of all other financial assets and liabilities as of March 31, 2009 and 2010 were
as follows:

2009.3.31 2010.3.31
Fair value Fair value
Carrying Public Valuation Carrying Public Valuation
amount quoted price amount amount quoted price amount
NT$ NT$ NT$ NT$ NT$ NT$
Non-derivative financial
instruments
Financial assets:
Available-for-sale financial
assets—current............................ 157,790 157,790 — 203,929 203,929 —
Available-for-sale financial
assets—noncurrent ...................... 1,643,267 1,643,267 — 2,999,947 2,999,947 —
Financial assets carried at cost ....... 3,042,000 — see below (b) 2,168,684 — see below (b)
Refundable deposits (classified as
“other financial assets”) ............. 752,208 — 752,208 783,046 — 783,046
Noncurrent receivables (classified
as “other financial assets”) ......... 43,795 — 43,795 121,401 — 121,401
Financial liabilities:
Long-term debt................................ 4,116,219 — 4,116,219 12,361,548 — 12,361,548

Derivative financial instruments

Financial assets:
Foreign currency forward
contracts ..................................... 313,849 — 313,849 634,392 — 634,392
Foreign exchange swap ................... 6,396 — 6,396 — — —
Foreign currency options ................ 143,735 — 143,735 17,769 — 17,769
Financial liabilities:
Foreign currency forward
contracts ..................................... 1,194,080 — 1,194,080 701,726 — 701,726
Foreign currency options ................ 156,924 — 156,924 22,209 — 22,209
Foreign exchange swap ................... 704 — 704 — — —
Cross currency swap ....................... 2,653 — 2,653 — — —

(b) The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

(i) Available-for-sale financial assets—current and non-current

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 net asset value of the mutual funds at balance sheet date.

(ii) Financial assets carried at cost — non-current

Financial assets carried at cost represent privately held stock. It is not practicable to estimate the fair value of privately held stock
as it is not traded in an active public market.

(iii) Refundable deposits

The fair values are the book values as the date of expiry cannot be determined.

(iv) Non-current receivables

The fair values are their present value discounted at the market interest rate.

(v) Long-term debt

Long-term debt is obtained at floating interest rates. The carrying value of long-term debt approximates the market value.

F-92
 (vi) Derivative financial instruments

The fair values of derivative financial instruments are estimated using a valuation technique, with estimates and assumptions
consistent with those made by market participants and are readily available to the Consolidated Companies.

(c) For the three-month periods ended March 31, 2009 and 2010, valuation loss on financial assets and liabilities using a
valuation technique amounted to NT$528,802 and NT$1,189,347, respectively.

(d) Disclosure of financial 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 by fair value. Therefore, the Consolidated Companies were exposed to the risk of price fluctuation in the securities
market.

The Consolidated Companies engaged in purchase transactions which are denominated in US dollars and sale transactions which
are denominated in Euros and other foreign currency. Hence, the Consolidated Companies entered into foreign currency forward
contracts and other derivative contracts for hedging purposes. The lengths and amounts of aforementioned derivative transactions were
in line with the settlement date of the Consolidated Companies’ recorded foreign currency assets and liabilities and future cash flows.
Gains or losses from these hedging derivatives are expected to substantially offset those from the hedged assets or liabilities. Therefore,
management believes that market risk related to the changes in exchange rates was not significant.

(ii) Credit risk

The Consolidated Companies’ credit risk is mainly from potential breach of contract by the counter-party associated with cash,
equity investment, and derivative transactions. In order to control its exposure to the credit risk of each financial institution, the
Consolidated Companies maintain cash with various financial institutions and hold equity investments in the form of mutual funds and
stocks issued by companies with high credit quality. As a result, the concentration of credit risks related to cash and equity investments
is not significant. Furthermore, the banks undertaking the derivative transactions are reputable financial institutions; therefore, the
exposure related to the potential default by those counter-parties is not considered significant.

The Consolidated Companies primarily sell and market the multi-branded IT products to a large number of customers in different
geographic areas. As a result, the Consolidated Companies have no significant concentrations of credit risk, and in order to lower the
credit risk, the Consolidated Companies continuously evaluate the credit quality of their customers.

(iii) Liquidity risk

The Consolidated Companies’ capital and operating funds are sufficient to fulfill their contract payment obligations. Therefore,
management believes that there is no significant liquidity risk.

The available-for-sale financial assets held by the Consolidated Companies are equity securities and mutual funds, which are
publicly traded and can be liquidated quickly at a price close to the fair market value. In contrast, the financial assets carried at cost
are not publicly traded and are exposed to liquidity risk.

The Consolidated Companies’ derivative financial instruments are intended to hedge the exchange rate risk resulting from assets
and liabilities denominated in foreign currency and cash flows resulting from anticipated transactions in foreign currency. The lengths
of the contracts are in line with the payment date of the Consolidated Companies’ assets and liabilities denominated in foreign currency
and the anticipated cash flows. At the maturity date of the derivative contract, the Consolidated Companies will settle these contracts
using the foreign currencies arising from the hedged assets and liabilities denominated in foreign currency, and therefore, the liquidity
risk is not significant.

(iv) Cash flow risk related to the fluctuation of interest rates

The Consolidated Companies’ short-term borrowings and long-term debt carried floating interest rates. As a result, the effective
rate changes along with the fluctuation of the market interest rates and thereby influences the Consolidated Companies’ future cash flow.
If the market interest rate increases by 1%, cash outflows in respect of these interest payments would increase by approximately
NT$142,276 per annum.

F-93
5. Transactions with Related Parties
(1) Names and relationships of related parties with the Consolidated Companies

Name Relationship with the Company

Wistron Corporation (“Wistron”) ...............................
Cowin Worldwide Corporation (“COWIN”) ..............
Bluechip Infotech Pty Ltd. (“SAL”) ..........................
e-Life Mall Corp. (“eLIFE”)......................................
iDSoftCapital Inc. ......................................................
Investee of the Company accounted for by equity method
Subsidiary of Wistron
Investee of the Consolidated Companies accounted for by equity method
Investee of the Company accounted for by equity method
Its chairman is one of the Company’s supervisors

(2) Significant transactions with related parties:

(a) Net sales and related notes and accounts receivable
(i) Net sales to:

For the three-month periods ended

March 31, March 31,
2009 2010
NT$ NT$ US$
SAL................................................................................................................................. 192,129 339,707 10,676
eLIFE .............................................................................................................................. 228,614 200,063 6,288
Wistron ........................................................................................................................... — 35,281 1,109
Other (individually less than 5%)................................................................................... 22,317 2,384 74
443,060 577,435 18,147

The sales prices and payment terms to related parties were not significantly different from those of sales
to non-related parties.
(ii) Notes and accounts receivable from:

March 31, March 31,

2009 2010
NT$ NT$ US$
COWIN ........................................................................................................................... 423,822 478,977 15,053
SAL................................................................................................................................. 125,832 124,472 3,912
eLIFE .............................................................................................................................. 141,262 143,003 4,494
Wistron ........................................................................................................................... 67 112,879 3,548
Others (individually less than 5%) ................................................................................. 26,098 10,297 323
717,081 869,628 27,330

(b) Purchases and related notes and accounts payable

(i) Purchases from:

For the three-month periods ended

March 31, March 31,
2009 2010
NT$ NT$ US$
Wistron ........................................................................................................................... 6,527,547 7,884,634 247,796
Others ............................................................................................................................. 14 — —
6,527,561 7,884,634 247,796

The trading terms with related parties are not comparable to the trading terms with third parties as the
specifications of products are different.

F-94
 The Consolidated Companies sold raw materials to Wistron and its subsidiaries and purchased back the
finished goods after being manufactured. To avoid double-counting, the sales of raw materials to Wistron and its
subsidiaries amounting to NT$17,809,365 and NT$37,518,878 for the three-month periods ended March 31, 2009
and 2010, respectively, were excluded from the consolidated revenues and cost of goods sold. Having enforceable
rights, the Consolidated Companies offset the outstanding receivables and payables resulting from the above-
mentioned transactions. The offset resulted in a net payable balance.
(ii) Notes and accounts payable to:

March 31, March 31,

2009 2010
NT$ NT$ US$
Wistron ........................................................................................................................... 7,038,790 10,592,885 332,911
Others ............................................................................................................................. 163,442 6,372 200
7,202,232 10,599,257 333,111

(c) Other expenses

The Consolidated Companies paid iDSoftCapital Inc. management service fees amounting to NT$12,958 and
NT$9,042 for the three-month periods ended March 31, 2009 and 2010, respectively.
(d) Advances to/from related parties
The Consolidated Companies paid certain expenses on behalf of related parties. Additionally, related parties paid
certain expenses and accounts payable on behalf of the Consolidated Companies. As of March 31, 2009 and 2010, the
Consolidated Companies had aggregate receivables from related parties of NT$61,005 and NT$16,324, respectively, and
payables to related parties of NT$41,644 and NT$49,398, respectively, resulting from these transactions.

6. Pledged Assets

Carrying amount at March 31,

Pledged assets Pledged to secure 2009 2010
NT$ NT$ US$
Other financial assets—certificate of time Contract bidding, project fulfillment and
deposit .................................................. security for letter of credit 67,000 82,966 2,607
Refundable deposits—Certificate of time
deposit .................................................. Contract bidding and project fulfillment 48,076 — —
115,076 82,966 2,607

As of March 31, 2009 and 2010, the above pledged cash in bank and time deposits were classified as “other financial assets”
and “restricted deposits” in the accompanying consolidated balance sheets.

7. Commitments and Contingencies

(1) Royalties
(a) The Company has entered into a patent cross license agreement with International Business Machines Corporation (IBM).
Under this agreement, both parties have the right to make use of either party’s global technological patents to manufacture
and sell personal computer products. The Company agrees to make fixed payments periodically to IBM, and the Company
will not have any additional obligation for the use of IBM patents other than the agreed upon fixed amounts of payments.
(b) The Company and Lucent Technologies Inc. (Lucent) entered into a Patent Cross License agreement. This license
agreement in essence authorizes both parties to use each other’s worldwide computer-related patents for manufacturing
and selling personal computer products. The Company agrees to make fixed payments periodically to Lucent, and the
Company will not have any additional obligation for the use of Lucent patents other than the agreed upon fixed amounts
of payments.
(c) On June 6, 2008, the Company entered into a Patent Cross License agreement with Hewlett Packard Development
Company (HP). The previous patent infringement was settled out of court, and the Company agreed to make fixed
payments periodically to HP. The Company will not have any additional obligation for the use of HP patents other than
the agreed upon fixed amounts of payments.
(d) The Company has entered into royalty license agreements with Microsoft Licensing, GP, MPEG LA, LLC, Dolby
Laboratories Licensing Corporation and Cyberlink Corp. The Company has complied with these agreements.

F-95
(2) As of March 31, 2009 and 2010, the Consolidated Companies had provided performance bonds totaling NT$122,858 and
NT$258,408, respectively, for purposes of bids and contracts.

(3) The Consolidated Companies have entered into several operating lease agreements for warehouses and office buildings. Future
minimum lease payments were as follows:

Periods NT$ US$

2010.4~2010.12 ....................................................................................................................................... 468,269 14,717
2011 ......................................................................................................................................................... 391,735 12,311
2012 ......................................................................................................................................................... 237,901 7,477
2013 ......................................................................................................................................................... 168,440 5,294
2014 ........................................................................................................................................................ 77,031 2,421
2015 and thereafter .................................................................................................................................. 93,087 2,925
1,436,463 45,145

(4) As of March 31, 2009 and 2010, the Consolidated Companies had provided promissory notes amounting to NT$30,761,808 and
NT$30,300,452, respectively, as collateral for factored accounts receivable and for obtaining credit facilities from financial
institutions.

8. Significant Loss from Casualty: None

9. Subsequent Events: None

10. Other

(1) In accordance with Order VI-0960064020 issued by the Financial Supervisory Commission under the Executive Yuan on
November 15, 2007, an enterprise is not required to disclose the related information about income taxes, accrued pension
liability and the total personnel, depreciation and amortization expenses in its first and third quarter consolidated financial
statements of each year.

(2) Certain accounts in the consolidated financial statements as of and for the three-month period ended March 31, 2009, have
been reclassified to conform to the 2010 financial statement presentation for comparison purposes. These reclassifications
do not have a significant impact on the consolidated financial statements.

11. Segment Information

In accordance with ROC SFAS No 23, “Interim Financial Reporting”, an enterprise is not required to comply with the disclosure
requirements prescribed under ROC SFAS No. 20, “Segment Reporting”, when preparing interim financial statements.

F-96
 REGISTERED OFFICE OF ACER INCORPORATED

Acer Incorporated
7F, No.137, Sec.2, Chien Kuo N. Road
Taipei, Taiwan, ROC

TRUSTEE REGISTRAR AND

PRINCIPAL PAYING, TRANSFER
Citicorp International Limited AND CONVERSION AGENT
Registered office: 50/F Citibank Tower,
Citibank Plaza, 3 Garden Road, Central, Citibank, N.A., London Branch
Hong Kong (as Principal Paying, Transfer and
Conversion Agent)
Correspondence office: 39/F ICBC c/o Citibank, N.A., Ireland
Tower, Citibank Plaza, 3 Garden Road, Ground Floor, 1 North Wall Quay,
Central, Hong Kong Dublin 1, Ireland

Citigroup Global Markets

Deutschland AG (as Registrar)
Reuterweg 16, 60323 Frankfurt,
Germany

INDEPENDENT AUDITORS

KPMG
68F, Taipei 101 Tower, No. 7, Sec. 5,
Xinyi Road, Taipei, 11049, Taiwan, ROC

LEGAL ADVISORS

ROC Legal Counsel to the Company US Legal Counsel to the Initial Purchasers

Tsar & Tsai Law Firm Davis Polk & Wardwell LLP
8/F, 245 DunHua S. Road, 18th Floor
Sec.1, Taipei 106, Taiwan, ROC The Hong Kong Club Building
3A Chater Road
Hong Kong

Counsel to the Trustee and

Principal Paying, Transfer and Conversion Agent

Clifford Chance
28th Floor
Jardine House
One Connaught Place, Central
Hong Kong