ACER INCORPORTED 2018 ANNUAL REPORT Publication Date : April 16, 2019 APPENDIX 1. Name, Title and Contact Details of Company's Spokespersons: Principal Meggy Chen CFO +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., New +886-2-2696-1234 (Xizhi Office) Taipei City 221, Taiwan Acer Inc. 3F., No.139, Minzu Rd., East Dist., Hsinchu City +886-3-534-9490 (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 338, (Shipping & Warehouse +886-3-324-5100 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 2018 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 2018 Annual Report Acer Incorporated 2018 Annual Report 2 Index Index 3 INDEX 1 Business Report to Shareholders 05 6 Corporate Social Responsibility 88 1.1 Acer's Core Values 07 6.1 Environment, Safety and Health Management 90 1.2 2018 Operating Report 08 6.2 Supply Chain Management 92 1.3 2019 Business Plan 09 6.3 Communication 93 6.4 Community Involvement 94 6.5 Enforcement of Corporate Social Responsibility by the Company 96 2 Company In General 11 2.1 Founded Date 12 Financial Standing 102 2.2 Brief Account of the Company 12 7 7.1 Five-year Consolidated Financial Information 103 7.2 Five-year Financial Analysis 107 3 Corporate Governance Report 17 7.3 Audit Committee's Review Report 110 7.4 Consolidated Financial Statements Audited by CPAs of the Past Year 110 3.1 Organization of the Company 18 3.2 Information Regarding Board of Directors and Key Managers 20 7.5 Parent-Company-Only Financial Statements Audited by CPAs of the Past Year 110 3.3 Corporate Governance Status 36 7.6 Disclosure of the Impact on Company's Financial Status Due to Financial Difficulties 110 3.4 Information Regarding the Company's Audit Fee and Independence 58 3.5 Information on replacement of certified public accountant 58 Review of Financial Position, Management Performance and 111 3.6 The company's chairperson, general manager, or any managerial officer in charge of finance 8 Risk Management or accounting matters has in the most recent year held a position at the accounting firm of its 59 8.1 Financial position (Consolidated Financial Statements) 112 certified public accountant or at an affiliated enterprise of such accounting firm 8.2 Financial performance (Consolidated Financial Statements) 113 3.7 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders 59 8.3 Cash flows (Consolidated Financial Statements) 114 3.8 Relationship among the Top Ten Shareholders 61 8.4 Major capital expenditures and impact on financial and business in recent years 115 3.9 Ownership of Shares in Affiliated Enterprises 62 8.5 Long-term investment policy and results 115 8.6 Risk Management 115 4 Capital and Shares 63 8.7 Other Necessary Supplement 123 4.1 Sources of Capital 64 4.2 Corporate Bonds 68 Special Notes 124 4.3 Special Shares 68 1. Information related to the company's affiliates 124 4.4 Global Depository Receipts (GDRs) Issuance 68 2. Private Placement Securities in the Most Recent Years 150 4.5 Employee Stock Options 69 3. Status of Acer common shares and GDRs acquired, disposed of, and held by subsidiaries 151 4.6 Restricted Stock Awards 69 4. Other matters that require additional description 151 4.7 Issuance of New Shares Due to Company's Mergers and Acquisitions 73 4.8 Issuance of New Shares for Capital Increase by Cash 73 Appendix 152 Appendix I 2018 Consolidated Financial Statements 152 5 Acer's Business Formula 74 Appendix II 2018 Parent-Company-Only Financial Statements 285 5.1 Business Content 75 5.2 Keys to a Sustainable Future 80 5.3 Employees 81 5.4 Important Contracts 87 Acer Incorporated 2018 Annual Report Acer Incorporated 2018 Annual Report 4 Business Report Business Report 5 Business Report to Shareholders It has been another fruitful year filled with opportunities and ing its presence in the Chrome for Enterprise space with our challenges as Acer engages in dual transformation with our merger of AOPEN that has created great synergy. We now offer core business and new initiatives. I am pleased to share that commercial grade Chrome OS products which are more rug- our efforts and achievements in 2018 concluded with growth gedized in design and built very differently from consumer in both revenue and profitability. Acer's 2018 consolidated devices. revenues reached NT$242.27 billion with 2.1 percent growth Acer's participation in esports games has been action-packed. year-over-year; Net income reached NT$3.06 billion, up 8.7 We were the official monitor provider of the 2018 League of percent year-over-year; and earnings per share (EPS) were Legends World Championships. In the third quarter, we kicked NT$1.01, the highest in eight years. off our second Asia Pacific Predator league tournament where While Acer's gaming business achieved substantial revenue 3,530 teams competed over five months and battled for the growth, in the latter part of the year, our operations were im- league championship. Through such events, Acer will engage pacted by global CPU supply shortages for PCs. Meanwhile, new audiences while continuing to bring technologies, inno- we are excited to see other products and businesses show- vations and game-changing designs first to market. ing growth, such as AOPEN, Weblink International, Acer Cyber For AI-based technology, servers by our subsidiary, Altos Security, digital displays and gadgets. We will continue the Computing, which integrate other software and services to pursuit of technological innovation and leading-edge design, provide a variety of solutions have won a dozen major high- broaden our business boundaries from PCs to new markets, performance computing (HPC) tenders globally in 2018. In the Business Report and create multiple growth engines. realm of smart cities, Acer ITS successfully initiated Taiwan's to Shareholders Underscoring the importance we place on research and de- first roadside Smart Parking Meter BOT project in collabora- velopment, in 2018 Acer ranked among the top three in the tion with the Tainan city government, with parking meters number of Taiwan patent applications with 476 filings, up implemented along a total of 2,000 spaces across the city. 25 percent from the previous year. Among these patents, we Venturing into technology for the future, Acer's Value Lab has have innovative and breakthrough technologies such as our collaborated with one of Taiwan's top automakers, Luxgen, advanced thermal solutions that enable Acer products to run to showcase the vision of artificial intelligence (AI) and au- at peak performance without overheating; these include our tonomous driving technology with a level 4-ready self-driving AeroBlade 3D metal fans applied in gaming notebooks, and concept car. Acer is stepping up the development further by IceTunnel cooling system for gaming desktops. Acer's thin- cooperating with the National Yang-Ming University School and-light notebooks, gaming and education lines all captured of Medicine to improve the passenger experience, where the attention with multiple industry and media awards. Further- physiological state of passengers during the technology de- more, we are innovating in other aspects of designs that com- velopment stage is monitored to improve comfortability of plete the total user experience, such as software and pack- the ride even during unexpected situations. On top of these, aging, which were recognized and awarded by the iF Design 1 there are many other exciting initiatives being developed. Awards of Germany. For long-term business sustainability, Acer's pursuit to make In the Chrome OS segment, Acer ranked No. 1 for Chrome- a positive impact to our society and environment has made books worldwide in Q4 2018 with 31 percent market share. significant headway in 2018. In addition to the on-going en- We offer the most complete selection of screen sizes and form gagement with our partners and suppliers to act responsibly, factors for a variety of usage needs. Acer is also strengthen- 50 percent of electricity consumption from Acer's global op- Acer Incorporated 2018 Annual Report Acer Incorporated 2018 Annual Report 6 Business Report Business Report 7 erations comes from green energy.