www.acer-group.com Published Date: April 23, 2017 APPENDIX 1. Name, Title and Contact Details of Company’s Spokespersons: Principal Nancy Hu CFO +886-2-2696-1234 Nancy.Hu @acer.com Deputy Claire Yang Manager +886-2-2696-1234 [email protected] Deputy Wayne Chang Manager +886-2-2719-5000 [email protected] 2. Address and Telephone Numbers of Company’s Headquarter and Branches Office Address Tel Acer Inc. 7F.-5, No.369, Fuxing N. Rd., Songshan Dist., +886-2-2719-5000 Registered Address Taipei City 105, Taiwan Acer Inc. 8F., No.88, Sec. 1, Xintai 5th Rd., Xizhi Dist., +886-2-2696-1234 (Xizhi Office) New Taipei City 221, Taiwan Acer Inc. 3F., No.139, Minzu Rd., East Dist., Hsinchu City +886-3-533-9141 (Hsinchu Branch) 300, Taiwan Acer Inc. 3F., No.371, Sec. 1, Wenxin Rd., Nantun Dist., +886-4-2250-3355 (Taichung Branch) Taichung City 408, Taiwan Acer Inc. 4F.-6, No.38, Xinguang Rd., Lingya Dist., +886-7-338-8386 (Kaohsiung Branch) Kaohsiung City 802, Taiwan Acer Inc. No.28, Neixin Rd., Luzhu Dist., Taoyuan City (Shipping & Warehouse +886-3-324-5100 338, Taiwan Management Center) 3. Address and Contact Details of Acer Shareholders’ Services Address: 7F.-5, No.369, Fuxing N. Rd., Songshan Dist., Taipei City 105, Taiwan Tel: +886-2-2719-5000 E-mail: [email protected] 4. Address and Contact Details of Auditing CPAs in the Most Recent Year Name: Huei-Chen Chang and Tzu-Chieh Tang at KPMG Address: 68F., No.7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City 110, Taiwan Tel: +886-2-8101-6666 Website: www.kpmg.com.tw 5. Overseas Securities Exchange Listed Market for GDRs: London Stock Exchange Market For further information, please refer to Website: www.Londonstockexchange.com 6. Acer Group Website: www.acer-group.com DISCLAIMER This is a translation of the 2016 Annual Report of Acer Incorporated (the “Company”). The translation is intended for reference only and nothing else, the Company hereby disclaims any and all liabilities whatsoever for the translation. The Chinese text of the Annual Report shall govern any and all matters related to the interpretation of the subject matter stated herein. Acer Incorporated 2016 Annual Report Acer Incorporated 2016 Annual Report Index Index 6 Corporate Social Responsibility 64 INDE 6.1 Environment, Safety and Health Management 65 6.2 Supply Chain Management 68 6.3 Communication 69 1 Business Report 4 6.4 Community Involvement 69 1.1 Acer’s Core Values 6 6.5 Enforcement of Corporate Social Responsibility by the Company 70 1.2 2016 Operating Report 7 1.3 2017 Business Plan 9 7 Financial Standing 76 7.1 Five-year Consolidated Financial Information 77 2 Company In General 10 7.2 Five-year Financial Analysis 81 2.1 Brief Account of the Company 11 7.3 Audit Committee's Review Report 85 7.4 Financial Statements Consolidated Subsidiaries Audited by CPAs of the Past Year 85 7.5 Disclosure of the Impact on Company’s Financial Status Due to Financial Difficulties 85 3 Corporate Governance Principles 17 7.6 Financial Prediction and Achievements 86 3.1 Organization of the Company 18 3.2 Information Regarding Board of Directors and Key Managers 20 Risk Management 87 3.3 Corporate Governance Status 30 8 8.1 Recent Annual Investment Policy and Main Reasons of Gain or Loss and Improvement Plan 88 8.2 Important Notices for Risk Management and Evaluation 90 4 Capital and Shares 46 4.1 Sources of Capital 47 Appendix 96 4.2 Corporate Bonds 52 4.3 Special Shares 52 2016 Consolidated Financial Statements 97 4.4 Global Depository Receipts (GDRs) Issuance 52 4.5 Employee Stock Options 53 4.6 Restricted Stock Awards 53 4.7 Issuance of New Shares Due to Company’s Mergers and Acquisitions 53 4.8 Issuance of New Shares for Capital Increase by Cash 53 5 Acer’s Business Formula 54 5.1 Business Scope 55 5.2 Market Highlights 56 5.3 Keys to a Sustainable Future 56 5.4 Employees 58 5.5 Important Contracts 63 2 3 Acer Incorporated 2016 Annual Report Acer Incorporated 2016 Annual Report Business Report Business Report artificial intelligence, smart cities, healthcare, education and Business Report to automotive to name a few. While this will influence profitabil- ity, these investments are crucial in setting the foundations Shareholders for our future success in the era of the Internet of Things. While the PC industry continues to slow down, Acer’s PC busi- In 2016 Acer celebrated its 40th anniversary and four de- ness is stable; this is in part to its strong product mix and of- cades ago, with our passion to change the world, we intro- fering to address various regional customer needs, as well as duced microprocessor technology to Taiwan and thus helped its innovations in the areas of gaming PCs, and ultra-thin and to establish and progress the island’s high-tech industry. With 2-in-1 notebooks. Along with other factors, we have gradually our innovations, such as Micro-Professor I, the Dragon Chi- realized a double-digit annual gross profit margin and con- nese Input Method and Aspire PCs, we have played a key role tinue to maintain momentum. In addition, Acer is also invest- in transforming Taiwan into a technology powerhouse, with ing resources into the fast-growing area of Virtual Reality (VR), thriving PC and semiconductor industries, and establishing it working with key partners from various industries to bring new as a major player on the world stage. But more than being a VR technologies and experiences to the market, and other ar- leader in the industry, Acer takes pride in being a catalyst of eas such Artificial Intelligence and Deep Learning. change and progress. For Acer’s core IT products business, beyond its continued With the evolution of technology and the emergence of mo- commitment to innovate in products and technologies, it is bile computing, the established model of PC usage in the last focusing on niche product categories with higher margins as a 30 years is being subverted and we are now entering the era 1 basis for profit, such as gaming, while also enhancing its brand of the Internet of Things. Acer has prevailed throughout its image to drive the momentum of its transformation. journey and will leverage its unique experience to transform in the ICT industry that holds new challenges as well as op- Regarding our new businesses, which encompass BYOC™ Business Report to portunities. At the same time, Acer remains firmly committed (Build Your Own Cloud) and cloud-related businesses, they to corporate social responsibly and sustainable development. will continue to strengthen cooperation with partners, all the In 2016, for the third year running, Acer was included in both while continuing to offer diversified and integrated services to Shareholders the Dow Jones Sustainability Indices (DJSI) and the MSCI Global expand Acer’s business scope, such as abPBX for unified com- Sustainability Indexes. What’s more, Acer was also included on munications, grandPad for senior care, Pawbo for pet care, the new FTSE4Good Emerging Index. Xplova for bicycle computing, and MPS in the area of mobile electric power systems for cars and other applications. Acer reported 2016 consolidated revenue of NT$232.72 bil- lion (US$7.21billion), loss of share of NT$1.62, net loss (or loss Acer is indebted to you the shareholder, as you have cheered after tax) of NT$4.90 billion (US$151.81million) and net asset us on during the last 40 years. Three years after we began our value per share of NT$19.01. However, excluding the impair- transformation, we are beginning to see the light at the end of ment charge of NT$6.36 billion (US$197.16 million) that was the tunnel, signally that we are walking in the right direction. approved in December, pro-forma net income (or profits after Thank you once again for your support and confidence in us as tax) would be NT$1.46 billion (US$ 45.35 million) with EPS of we journey into the future. NT$0.48. The impairment charge did not impact the Com- pany’s operations and is expected to result in amortization expense reduction of approximately NT$230 million (US$7.13 million) in 2017. These results show Acer is healthy and stable overall. Whether the core IT products business or new businesses, all are working, facing challenges, restructuring and transform- ing together and have their sights set on achieving opera- George Huang tional excellence, continued profitability and a stronger Acer brand. Acer Chairman In the past three years, we have invested NT$30 billion into new business initiatives in line with the direction of our cor- porate transformation. These initiatives include areas such as 4 5 Acer Incorporated 2016 Annual Report Acer Incorporated 2016 Annual Report Business Report Business Report 1.1 Acer's Core Values Core Value Rational Meaning Emotional Meaning Abide by corporate Under the Build Your Own Cloud (BYOC™) vision, Acer is transforming itself to a “hardware + software + services” company. Based governance, Follow the codes of conduct or social norms when performing duties and regulations and on the Wangdao philosophy, Acer is working with partners to create value, and build an ecosystem that balances all stakeholders’ always serve as a role model for others. standards of business Integrity Never appropriate public resources for private use. interests. In the process of transition, new core values have been added to the original ones, with new elements and goals to conduct not because Never reveal or leak confidential information when inappropriate.