2009 ASUS Annual Report English

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ASUSTeK Computer Inc.

2009 ANNUAL REPORT

Taiwan Stock Exchange Market Observation Post System：http://newmops.twse.com.tw

ASUS annual report is available at http://taiwan.asus.com.tw/investor.aspx

Printed on March 22, 2010

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I. SPOKESPERSON & DEPUTY SPOKESPERSON Spokesperson: David Chang Title: Chairman Office - Chief Special Assistant Tel.: 886(2)2894-3447 EXT: 2330 E-mail: [email protected]

Deputy Spokesperson: Nick Wu Title: Management Headquarters - Finance Division - Deputy Director Tel.: 886(2) 2894-3447 EXT: 2343 E-mail: [email protected]

II. HEADQUARTERS AND PLANTS

Taipei Headquarters: 15, Li-Te Road, Beitou District, Taipei City Tel.: 886(2) 2894-3447 Address: 4F, 150, Li-Te Road, Beitou District, Taipei City

III.SECURITIES DEALING INSTITUTE

Name : Grand Cathy Securities Corporation, Registrar and Transfer Services Address : 5F, 2, Sec. 1, Chung-Chin S. Road, Taipei City Tel. : 886(2) 2389-2999 Website : http://www.toptrade.com.tw

IV. AUDITORS

Name : CPA: HSIN-FU YEN & JUI-LAN LO CPA Firm : KPMG Address : 68F, TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City Tel. : 886(2)8101-6666 E-mail : http://www.kpmg.com.tw

V. EXCHANGEABLE BOND EXCHANGE MARKETPLACE

Marketable security: GDR London Stock Exchange: http://www.londonstockexchange.com

VI. COMPANY WEBSITE

http://www.asus.com

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�� CONTENTS ��

Page

I. Letter to shareholders ……………………………………………………………………… 1

II. Introduction of the company ……………………………………………………………… 3

1. Establishment date ………………………...……………………………………………….. 3

2. Development history ……………………………………………………………………… 3

III. Corporate governance report ……………………………………………………………... 14

1. Organization of company ………………………………………………………………… 14

2. Directors, Supervisors, President, Vice President, Assistant V.P., and department heads.... 16

3. Corporate governance …………………………………………………………………….. 27

4. CPAs fees …………...…..………………………………………………………………….. 38

5. CPA’s information …………………………………………………………………………. 39

6. The chairman, president, and financial or accounting manager of the company who had worked for the independent auditor or the related party in the most recent years ………… 40

7. Information on Net Change in Shareholding and Net Change in Shares Pledged by Directors, Supervisors, Department Heads, and Shareholders of 10% shareholding or more ………………………………………………………………………………………..

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8. The relation of the top ten shareholders as the definition of Finance Standard Article 6 …. 41

9. Investment from Directors, Supervisors, Managers, and directly or indirectly controlled businesses ………………………………………………………………………………… 42

IV. Stock subscription …………………………………………………………………………. 50

1. Capital and shares …………………………………………………………………………. 50

2. Corporate bonds …………………………………………………………………………… 56

3. Preferred stock ……………………………………………………………………………. 58

4. Issuance of global depository receipts …………………………………………………….. 59

5. Employees stock option certificates ………………………………………………………. 60

6. Merger and acquisition (including merger, acquisition, and split) ……………………….. 60

7. Fund implementation plan ………………………………………………………………… 60

V. Overview of business operation………………………………..…………………………… 61

1. Principal activities ………………………………………………………………………… 61

2. Market analysis and the condition of sale and production ………………………………… 65

3. Status of employees ……………………………………………………………………….. 71

4. Expenditure on environmental protection ………………………………………………… 72

5. Employee / employer relation …………………………………………………………….. 75

6. Important agreements ……………………………………………………………………… 80

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VI. Financial information ………………………………………………………………. 81

1. Condensed balance sheet and income statement over the last five years …………………. 81

2. Financial analysis in the past five years …………………………………………………… 83

3. Supervisor’s report in the most recent years ………………………………………………. 87

4. Financial statements in the most recent years …………………………………………….. 90

5. Consolidated financial statements in the most recent years ………………………………. 90

6. Impact of financial difficulties of the Company and related party on the Company’s financial position ………………………………………………………………………….. 90

VII. Review of financial position, management performance and risk management ………. 197

1. Financial position ………………………………………………………………………….. 197

2. Management performance …………………………………………………………………. 197

3. Analysis of cash flows ……………………………………………………………………... 199

4. Impact of major capital expenditure on finance and business …………………………….. 199

5. Policies, reasons for gain or loss and action plan in regard to investment plans in current year and the next year…………………………………………………………………….. 199

6. Risk management …………………………………………………………………………. 200

7. Other important matters …………………………………………………………………… 203

VIII Special disclosures …………………………………………………………………………. 204

1. Related party ……………………………………………………………………………… 204

2. Subscription of marketable securities privately in the most recent years …………………. 204

3. The stock shares of the company held or disposed by the subsidiaries in the most recent years ……………………………………………………………………………………… 204

4. Supplementary disclosures ……………………………………………………………….. 204

5. Occurrence of events defined in Securities Transaction Law Article 36.2.2 that has great impact on shareholder’s equity or security price in the most recent years and up to the date of the report printed ………………………………………………………………….

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I. Letter to Shareholders First of all, I would like to thank you for your continuing support to ASUS. The global economy for the first half of last year continued to be unstable. Following the large scale proposals for saving the developed economy of Europe and U.S. etc., and the success of various currencies and treasury policies, the international economy slowly recovered from the financial crisis, and the global industrial production and trade rose again. From the second quarter of 2009, the global economic recession slowed down and the information industry gradually showed hope. Although the operating profit of ASUSTeK and shipment quantity increased significantly for the second half of last year compared to the first half of last year, the 2009 Brand consolidated revenue reached NTD 248.2 billion which is 7% less than 2008 due to the impact of the first half of last year. The 2009 standalone revenue of the parent company of ASUSTeK is NTD 232.6 billion; net profit before tax and net profit after tax were NTD 12,821 million and NTD 12,479 million respectively. The net profit after tax decreased by 24.2% from 2008. In 2009, the quality of the products of ASUSTeK were recognized by the professional service provider SquareTrade which conducted a survey of 30,000 laptops based on users' review of the reliability of notebook products, and ASUSTeK notebook is ranked No. 1 for reliability out of the global brands; and ASUSTek reliability of products with three years usage is 40% ahead of other first tier suppliers. In addition, the professional service provider, Rescuecom, ranked ASUSTeK as No. 1 for reliability. The website indicated that the reason that ASUS could surpass major brands with a high score is that ASUSTek is able to increase dramatically the shipment and the market share in U.S. while remain low maintenance ratio. At the same time, the well-known PC Magazine also appreciated ASUSTeK as No. 1 in quality. As for environmental friendliness, ASUSTeK continued to take lead in obtaining the EU Flower after 2008, and was even the first notebook supplier of the world to be awarded the Environmental Product Declaration last year. It was also the first notebook supplier worldwide to acquire the recognition of Product Carbon Footprint. Furthermore, many of its products were awarded environmental friendly marks, including EeePC, EeeBox PC, LCD Monitor, etc. In 2009, ASUSTeK was awarded a total of 3,268 domestically and internationally well-known awards, average 9 international awards every day. These honors were attributed to the result of the hardworking of ASUSTeK employees and are also the strongest evidence of ASUSTeK's outstanding product quality. Last year, ASUSTeK was awarded the Excellence in Corporate Social Responsibility by CommonWealth magazine due to ASUSTeK's performance in exercising its corporate social responsibility. Moreover, ASUS continued to remain in the top 3 international brands in Taiwan for seven years in the Top Ten Taiwan International Brands Value Review conducted by Interbrand, the internationally well-known research unit appointed by the Bureau of Trade of Ministry of Economic Affairs. In January 2010, ASUSTeK was also the biggest winner in the 18th Annual Taiwan Excellence Award where a total of 36 products received the Excellence Award due to its excellent technical development, in-depth humanity consideration, and continuous innovation. In January 2010, ASUSTeK once again attracted international attention at the CES in U.S. ASUSTeK displayed the fashionable notebooks ASUS NX90 and Eee PC designed with the worldwide known designers David Lewis and KarimRashid. ASUSTeK invited the chief designer of B&O, David Lewis, to design ASUS NX90 with polished aluminum finish and misty black keyboard, and equipped with B&O's dual-channel high audio amplifier using ICEpower sound technique, together with the exclusive Sonic Master sound adjustment technique to ensure the perfect reproduction of the original sound. Furthermore, Karmin Rashid whom is known as the head of the top ten designers in New York turned EeePC into a fashionable look using "waves" as inspiration. ASUSTeK also showed many new innovative products,

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including the gaming notebook ASUS ROG G73Jh which adopts the latest Intel Core i7 processor, ATI Radeon HD5870 display card, 8GB DDR3 memory and supports Direx 11, equipped with eight-channel stereo and EAX 4.0 surround sound effect. ASUSTeK also designed ASUS Bamboo U33Jt, a notebook using environmental friendly as inspiration, which combines environmental friendly bamboo materials and crystal pattern techniques. Each notebook has its own unique natural patterns, showing the distinctive taste and care for the environment of the user. Based on past experiences, we discovered that "hit rate" is most important after a new product is introduced. ASUSTeK's tactic for this year is clear, that is, concentrating on popular consumer computer market to seize the market share. The four new notebooks announced at CES are products used for battle and will be fully introduced before the second quarter of this year at the latest.

The global economy is anticipated to continue to recover in the following year, and we will continue to strive to implement the value of thoroughness, innovative and detail thoughts on each employee. We believe that with the efforts of all ASUSTeK employees, we are able to expand our market share with our excellent products. Based on the global economic outlook, industry conditions and forecast institutions, the goal is to sell 12 million units of NB (included Eee PC). We would like to thank you for your support. ASUS will sure work hard to achieve the sales target for the benefit of shareholders. Wish you a good health and good life!

Sincerely yours,

--------------------- Chairman

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II. Introduction of the Company I. Establishment date: April 2, 1990 II. Development history

April 1990 ASUS was incorporated at 2F, 14-2, Sec. 2, Chung-Young S. Road, Beitou District,

Taipei City and with a paid-in capital of NT$30 million collected. April 1990 Became a direct customer of Intel (U.S.A.)May 1990 Cache 386/33 and 486/25 personal computer motherboard was popular. 486/25 was

market launched with IBM and ALR synchronously and it was the milestone of computer development in Taiwan.

May 1990 Expanded the instrument and equipment of R&D department and recruited R&D talents progressively for the development of EISA 486 motherboard.

July 1990 ASUS completed the registration of the manufacturing facility and with production initiated. The in-house made quality products were popular.

October 1990 The head office and manufacturing facilities were relocated to 4F, 10, Alley 25, Lane 425, Sec. 4, Chung-Young N. Road (changed name to “Li-Te Road” by Taipei City Government in 1993) with an area of 602 pings due to business expansion.

November 1990 EISA 486 motherboard was market launched officially and became a market-leadingproduct while attending COMDEX exhibition in early November.

December 1990 Increased the paid-in capital to NT$80 million by cash capitalization for an amount of NT$50 million.

December 1990 Generated sales revenue of NT$230 million in the first year of the incorporation and 16.01% net income for an amount of NT$36.82 million.

January 1991 The 286 and 386SX were popular in 1990 while the 486-mother board technology

was difficult and expensive. ASUS was in control of advanced product technology and marketing. The market demand for advanced motherboard was growing this year.

March 1991 The profit of 486 in this month exceeded the profit of 386 for the first time that meant the 486 advanced products had become the major product of the company.

April 1991 Substantiated management team and reinforced marketing ability with multiple marketing and sales talents recruited by the company.

August 1991 The sales of high unit price EISA 486 product were satisfactory and the said product had helped the company generate millions of dollars of profit.

December 1991 INTEL (USA) provided the company with O/A credit quota for over five times.December 1991 Increased the paid-in capital to NT$150 million with retained earnings for an

amount of NT$30 million and with cash for an amount of NT$40 million. December 1991 The sales revenue of this year amounted to NT$1.399 billion and net income

amounted to NT$116 million.

January 1992 Monthly production exceeded 30,000 units.March 1992 Attended an exhibition in Hanover Germany to present the 32-bit SCSI interface

EISA-SC100. The said product was popular with the IC developed in-house by ASIC, the self-developed software, and driver software.

April 1992 Signed an agreement with AWARD for software authorization. April 1992 The business development of the company was reported in the electronic industry

section of Economic Daily News.

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June 1992 Sales had gone up dramatically in the year before and were ranked in the 372nd

place of the Top 500 Industries in Taiwan by China Credit Information Service Ltd., ranked in the 193rd place by manufacturing index, and ranked in the 92nd place of information electronics by Excellence Monthly.

June 1992 Management Magazine had the company’s Return of Net Worth ranked in the 6th

place, the company’s Return of Assets in the 2nd place, the Employee’s Average Earnings in the 19th place, and the Earnings per Dollar in the 10th place.

December 1992 Monthly production of motherboard and interface card exceeded 75,000pcs representing 132% growth from the same month of the prior year.

December 1992 Sales revenue of the year amounted to NT$2.18 billion representing 55.8% growth from the year before and the net income amounted to NT$205 million.

March 1993 Promoted PENTIUM (586) motherboard. ASIAN SOURCES Magazine had the

company recognized as one of the few manufacturers that was able to have this advanced mother board promoted.

April 1993 Increased the paid-in capital to NT$199 million with cash for an amount of NT$49 million.

May 1993 Invested to have SMT production line setup.May 1993 China Credit Information Service Ltd. had the company’s business performance

ranked in the 7th place of the TOP-500 Manufacturers in 1992 and the company’s sales revenue ranked in the 263rd place of the TOP-500 Manufacturers.

June 1993 Increased the paid-in capital to NT$308.45 million with retained earnings. Public offering was arranged accordingly.

June 1993 Bureau of Foreign Trade MOEA ranked the company’s importing/exporting business in the 168th place in 1992.

July 1993 The Ministry of Finance awarded the company as an honest taxpayer. October 1993 The mass production of PCI486 was initiated. PCI was the new generation bus

structure standard and it was a high-speed and high-tech product. November 1993 The company and the head engineer, Mr. Ted Hsu, were awarded with the “32-bit

personal computer milestone award” of “Taiwan personal computer ten-year milestone award” that was organized by Commonwealth Magazine, co-organized by the Institute for Information Industry, and sponsored by Intel for “having high-speed 486 advanced mother board developed successfully” and “the first Taiwanese information business to develop the fastest personal computer synchronized with the world that has helped Taiwan open up a path to the successes and helped define the competition of speed and flexibility in technology development.”

November 1993 Mass production of PCI486 and Pentium motherboard was initiated. Pentium was the new generation of CPU and was the PC compatible with the highest speed.

December 1993 The first SMT production line was completed with pilot run and put into service. Another set of SMT was acquired in response to the expansion of production.

December 1993 Sales revenue of the year amounted to NT$2.303 billion representing 5.6% growth from the year before and the net income amounted to NT$220.7 million.

January 1994 ASIAN SOURCES Magazine had the company’s technological innovation ranked

in the first place of The TOP-10 mother board manufacturers in Taiwan and the company’s quality ranked in the second place that was “second to ACER only” in 1993.

February 1994 C.T.Mag. (Germany) had the company’s PCI rated and with the capacity and memory of PCI Pentium and 486 awarded with an honorary rating.

March 1994 Attended Cebit Show in Hanover Germany and was the only motherboardmanufacturer at the show having Dual Pentium manufactured successfully and recognized by the industry and Intel.

May 1994 Bureau of Foreign Trade MOEA ranked the company’s importing/exporting business in the 161st place in 1993.

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July 1994 ASUS’s initial name was Hung-Shuo Computer Inc., in July gets up changes the name officially as ASUSTeK Computer Inc.

August 1994 Increased the paid-in capital to NT$450.337 million with retained earnings.August 1994 Setup subsidiary in the United States and Germany for marketing, service, and

repair and maintenance. October 1994 China Development Industrial Bank became the institute shareholder of the

company. November 1994 PCI Pentium and Dual Pentium were popular in market and with monthly sales

exceeding NT$300 million for the first time. December 1994 Taipei Factory was certified with ISO 9002.December 1994 Purchased Taoyuan Lu-Chu Plant with an area of 2,417 pings and a constructed

area of 1,200 pings that was put into service in mid-1995. December 1994 Sales revenue of the year amounted to NT$3.36 billion representing 45.9% growth

from the year before and the net income amounted to NT$756 million.

January 1995 ASIAN SOURCES Magazine had the company’s quality ranked in the first place

and the company’s technological innovation in the first place of the Top-10 mother board manufacturers in 1994 ahead of First International Computer Inc. and Acer.

May 1995 China Credit Information Service, Ltd. had the company’s business performance ranked in the 5th place of the TOP-500 Manufacturers in 1994.

May 1995 Taoyuan Lu-Chu Plant was put into service for production officially. June 1995 Increased the paid-in capital to NT$600 million with retained earnings. September 1995 CitiSelect Asia Tilt Growth Portfolio became the institute shareholder of the

company. October 1995 Monthly income exceeded NT$1 billion for the first time. November 1995 Presented Pentium Pro server, work station, and motherboard. December 1995 Sales revenue of the year amounted to NT$7.87 billion representing 134% growth

from the year before and the net income amounted to NT$1.95 billion.

January 1996 Purchased the head office on Li-Te Road and the building that was rented for

Taipei Plant with an area of 3,159 pings. April 1996 Chung-Hua Institution for Economic Research awarded the company with

“Product of the Year Award” and “Enterprise of the Year Award.” June 1996 China Credit Information Service Ltd. had the company’s business performance

ranked in the 1st place of The TOP-500 Manufacturers in 1995. August 1996 SEC had the company authorized as Class II stock listing company. August 1996 Increased the paid-in capital to NT$1.2 billion with retained earnings. November 1996 ASUS went public at Taiwan Stock Exchange Corporation officially. December 1996 Sales revenue of the year amounted to NT$13.327 billion representing 69% growth


January 1997 Taoyuan Lu-Chu Plant was certified with ISO-9002.February 1997 Leased Taoyuan Nan-Kan Plant with an area of 4,400 pings ready for production.February 1997 P/I-P65UP5 of the company was awarded with the “5th Symbol of Excellence”

award. April 1997 Setup Nan-Kan Plant with an area of 4,400 pings right next to Lu-Chu Plant for a

total monthly production of 800,000 motherboards. May 1997 Increased the paid-in capital to NT$3.23 billion with retained earnings and cash.

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May 1997 Collected funds for US$230 million with cash in the form of overseas depository receipt GDR.

September 1997 Acquired automation SMT for expanding automatic production scale over three times.

September 1997 Monthly income exceeded NT$2 billion for the first time. October 1997 Purchased Quay-Sun Plant with an area of 7,900 pings for the production of new

NB and CD-ROM. November 1997 Held new product presentation including NB and CD-ROM. December 1997 Sales revenue of the year amounted to NT$21.371 billion representing 60.4%

growth from the year before and the net income amounted to NT$7.038 billion.

February 1998 Asiamoney awarded the company as “Best Managed Companies in Taiwan.”April 1998 Finance Asia awarded the company as “Asia’s Strongest Companies.” June 1998 Increased the paid-in capital to NT$8.115 billion with retained earnings. June 1998 Monthly income exceeded NT$3 billion for the first time. October 1998 Increased the paid-in capital to NT$8.135 billion with cash for an amount NT$20

million and with NT$420 million collected. October 1998 Acquired automation SMT for expanding automatic production scale and with

over one million motherboards manufactured monthly. October 1998 Presented the lightest all-in-one NB.November 1998 The company was certified with ISO-14000.November 1998 Asia Week had the company ranked in the first place of The International Chinese

Enterprises 500 & Top-10 Manufacturer in 1998. November 1998 Asia Week had the company’s business performance in the first three quarters of

1998 ranked in the first place of The InfoTech 100. November 1998 Business Week (U.S.A.) had the company ranked in the 18th place worldwide and

the first place in Asia of The InfoTech 100. December 1998 Completed the construction of Lu-Chu Plant with an area of 3,600 pings ready for

use. December 1998 Sales revenue of the year amounted to NT$35.2 billion representing 64.7% growth


March 1999 Initiated the construction of Beitou II Plant for an area of 1,453 pings planned for

use. May 1999 Ranked in the 21st place of Top-1000 Manufacturers in the special issue of

Commonwealth Magazine. Ranked in the 2nd place of Top-50 Enterprises 50 for three consecutive years (2007~2009) in the special issue of Commonwealth Magazine. Ranked in the 6th place of Top-1000 Manufacturers as the most profitable operation in the special issue of Commonwealth Magazine (hit the mark of NT$10 billion and become the leader of information and telecommunication industry). Ranked as one of the National Top-20 Private Businesses in the special issue of Commonwealth Magazine.

June 1999 China Credit Information Service Ltd. awarded the company with the honorary citation of “1999 Taiwan TOP 500.” China Credit Information Service Ltd. ranked the company in the fourth place as the most profitable business of “1999 Taiwan TOP 500.” China Credit Information Service Ltd. ranked the company in the third place as the highest earnings business of “1999 Taiwan TOP 500.” China Credit Information Service Ltd. ranked the company in the third place as the best assets-management business of “1999 Taiwan TOP 500.” China Credit Information Service Ltd. ranked the company in the fourth place as the most productive employees of “1999 Taiwan TOP 500.” Increased the paid-in capital to NT$11.449 billion with retained earnings.

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July 1999 Presented ASUS super thin NB.October 1999 Increased the paid-in capital to NT$11.464 billion with cash for an amount NT$15

million and with NT$300 million collected. December 1999 Sales revenue of the year amounted to NT$49 billion representing 39.2% growth

from the year before.

January 2000 Purchased the eight pieces of land of the 4th lot, Fong-Nien Lot, Beitou District,

Taipei where adjacent to the head office on Li-Te road for business expansion with an area of 7,186 pings. Asiamoney ranked the company in the second place of “Best Managed Companies in Taiwan.”

February 2000 Presented new NB L8400.May 2000 Completed the construction of Beitou II Plant with an area of 1,453 pings for use.June 2000 Increased the paid-in capital to NT$15.671 billion with retained earnings.August 2000 Ranked in the first place of Tech 200 by Globalviews Magazine. September 2000 China Credit Information Service Ltd. ranked the company’s business performance

in the third place of Top-10 Manufacturers in 1990-1999. October 2000 Commonwealth Magazine ranked the company in the first place of Taiwan

Electronics and in the seventh place nationwide. November 2000 Business Week (U.S.A.) had the company ranked the 44th place worldwide of The

InfoTech 100. December 2000 Sales revenue of the year amounted to NT$70.7 billion representing 44.38%

growth from the year before.

March 2001 ODC (ODC is for the certification of environmental protection without using any

material that is dangerous to Ozone layer) was awarded to ASUS. June 2001 Increased the paid-in capital to NT$19.769 billion with retained earnings.June 2001 Business Weekly ranked ASUS in the 26th place of World Business 100.November 2001 Business Week ranked ASUS in the 28th place of The InfoTech 100. November 2001 Completed the construction of Taipei Plant with an area of 9,073 pings for use.December 2001 Readers of PC Magazine had awarded ASUS with the “Product of the Year

Award” for the motherboard, NB, CD-ROM, and VGA in 2001. December 2001 Far Eastern Economic Review ranked the quality service/product of ASUS in the

fourth place. December 2001 Sales revenue of the year amounted to NT$77.9 billion representing 10.16%

growth from the year before.

January 2002 Seventeen products of the company were awarded with the “Symbol of

Excellence” this year; therefore, the company was the biggest winner of the 10th national “Symbol of Excellence” award.

April 2002 Awarded as the excellent health and safe institute by Taipei City Government.April 2002 Ranked in the Top-10 of Manufacturers 1000 by Commonwealth Magazine, the

Top-3 of computer and elements, and the Top-3 of most profitable business. June 2002 Launched MyPal A600 that was the first PDA supporting Intel’s 400MHz

PXA250CPU; also, it was the most light weighted, thin, and functional pocket PC.July 2002 Increased the paid-in capital to NT$19.988 billion with retained earnings.October 2002 Awarded as the excellent health and safe institute nationwide. October 2002 Asia Week ranked ASUS in the Top-10 of Chinese Businessmen 500. December 2002 The company had 17 million mother boards shipped this year; therefore, one out of

six computers was built with ASUS mother board.

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December 2002 The consolidated income of the year amounted to NT$114.7 billion representing a substantial growth in sales.

January 2003 Constructed Quay-Sun Plant with 16,976.8 pings available for use. February 2003 The design of super-thin portable dual CD-R & CD-REW SCB-2408-D was

awarded with the Industrie Forum (iF) in Germany. March 2003 ASUS had based on the powerful R&D capability and the excellent cooperation

with Intel to have Centrino NB market launched with attention drawn upon. May 2003 After receiving the award of “Symbol of Excellence” with 20 citations that was

beyond the reach of competitors, ASUS was awarded with the “11th Branding Taiwan” with three citations that was beyond the reach of competitors. It evidenced the good quality and image of ASUS to compete in the world on behalf of Taiwan.

June 2003 Purchased the assets of Elite Group in Chungli Plant including land, manufacturing facilities and equipment, and specific raw material through the subsidiary, ASUSALPHA COMPUTER INCORPORATION

August 2003 Increased the paid-in capital to NT$22.817 billion with retained earnings.September 2003 Presented S200N Centrino NB that weighted 905g and was the most

light-weighted NB in the world. October 2003 Presented the first 3G foldable color phone J100.November 2003 DiGiMatrix was awarded with “Taiwan Outstanding Design Award” in 2003.December 2003 The consolidated income of the year amounted to NT$195.889 billion representing

a substantial growth in sales.

April 2004 Setup TPC product line (thermal conduction, power, and chassis) to provide

consumers with comprehensive system solution. May 2004 ASUS W1 NB with built-in TV card and powerful multimedia software was

market launched. The outstanding hair-like pattern design was awarded with multiple global awards.

June 2004 Presented the small and with big screen ASUS J101 phone. June 2004 The industrial design team received eleven G-Mark in Japan, five iF awards in

Germany and five Red Dot design awards. December 2004 Awarded with 1,048 global professional media and networking awards that were

second to none. December 2004 ASUS was the largest motherboard and VGA manufacturer; therefore, one out of

three computers was made with ASUS motherboard in the world. December 2004 The company had 42 million motherboards and 7.8 million VGA shipped in 2004.December 2004 ASUS became the Top-10 NB brands and the Top-5 NB manufacturers. December 2004 The consolidated income of the year amounted to NT$250.042 billion representing

a substantial growth of 26% from the year of 2003.

January 2005 ASUS was the biggest winner of “Symbol of Excellence” award for two

consecutive years and with all forty nominated products awarded. March 2005 ASUS W1 NB was awarded by iF (Germany) with industrial design award that

was known as Oscar Award in computer business. This was the first Chinese design awarded with iF. Invested in AzureWave Technologies, Inc., the subsidiary, to manufacture office machine, electronic components, and computer and peripheral equipment; also, to conduct the wholesales and retails of precision instrument and camera equipment.

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October 2005 ASUS had the first environment-friendly mother board developed successfully in Taiwan. Invested in AMA PRECISION INC., the subsidiary, to conduct computer elements R&D.

November 2005 ASUS was awarded with thirteen awards in 2005 “Channel Award” that was second to none.

Invested in Enertronix, Inc., the subsidiary, to conduct R&D and manufacture radio receiver and wireline communication equipment.

December 2005 The company issued 59,592,835 stock shares in exchange for 15% stock shares of Advantech Co., Ltd. to achieve the goal of stock exchange and strategic alliance; then, the company entered industrial computer field. ASUS entered CES exhibition for the first time to take advantage of the wave of digital family. W5A NB was awarded with CES Innovative Design & Technology Award. The consolidated income of the year amounted to NT$357.8 billion representing a substantial growth of 43.11% from the year of 2004.

January 2006 The company and Advantech Co., Ltd. each acquired 50% shareholding of

Advansus Corp. on January 3, 2006 with cash capitalization. January 2006 The company’s R&D was trusted by the industry. ASUS AS-D770 was crowned

as Top-50 Industrial Purchasers. March 2006 The company had stock exchanged with Askey Computer Corporation according

to Merger Law and with 73,662,961 shares issued for merger. Askey Computer Corporation had become a subsidiary of the company.

March 2006 The company had organizational structure adjusted in response to business development. Most of the BU was defined as the Business Division for the realization of process-oriented and customer-oriented service.

April 2006 ASUS W3A, W5A, and V600V were awarded with Red Dot Award for the outstanding function and fashionable and elegant design.

May 2006 ASUS NB W2, W3, and V6 were nominated for “iF China, Design award”Top-10. A great achievement of the company to share and it did evidence the leading position of ASUS in computer world.

June 2006 Business Weekly awarded ASUS with InfoTech 100 for eight consecutive years.October 2006 ASUS that was known for creating trust and sentiment was awarded with the

“2005 Top-10 Taiwan Brand Value.” December 2006 ASUS ATEC was awarded with the “7th Management of Technology Award” by

Chinese Society for Management of Technology. December 2006 The consolidated income of the year amounted to NT$560.235 billion representing

a substantial growth of 45.49% from the year of 2005.

January 2007 ASUS worked with Automobili Lamborghini to present ASUS Lamborghini VX

series NB high-speed version. January 2007 ASUS AS-D770 and NB were crowned for Top-50 Industrial Purchasers in 2005.

ASUS products were the first choice of industry, professionals, and networking users for consumption.

February 2007 ASUS was awarded with three citations in MIS Best Choice by Institute for Information Industry: Barebones and server were ranked in the first place and advanced NB was ranked in the second place.

March 2007 ASUS presented the first 3.5G NB in Taiwan that led consumers entering new mobile phone era.

June 2007 ASUS were awarded with 39 citations in the 15th “Symbol of Excellence” award for its excellent quality and innovation that was second to none.

June 2007 ASUS was recognized by Mercedes-Benz and with ASUS P526 “C-Class Mobile

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Phone” promoted.July 2007 AUSU announced to have brand name business and OEM/ODM business divided

at the press conference of SEC in July 2007. ASUS was dividend into three divisions, in which, brand name business was the responsibility of ASUS while OEM/ODM was the responsibility of Pegatron Corporation and Unihan Corporation on the baseline date of January 1, 2008.

July 2007 ASUS was crowned for the “2007 Top-10 Brands Taiwan” with a brand value of US$1.196 billion recognized representing a growth of 166% from the year of 2003.

October 2007 ASUS Eee PC was market launched in Taiwan for the satisfaction of consumers. ASUS Eee PC was popular worldwide and was sold at the rate of one Eee PC per five-second.

November 2007 Oekom, an international reputable institute for environmental protection valuation, ranked ASUS in the first place of “2007 Environmental Protection.” The environmental protection effort of ASUS was awarded for the first time; also, ASUS was the first Chinese IT industry received such honor in the last fifty years.

December 2007 ASUS was ranked in the first place of “Sustainability Award” by the Executive Yuan and with the award presented to the Chairman of ASUS by the Minister.

December 2007 President Republic of the Gambia, Dr. Jammeh, and his 32 officers visited the head office of ASUS and shown strong interest in Eee PC.

December 2007 Chunghwa Telecom and ASUS announced a strategic alliance to integrate the resources for the construction of a perfect digital center and to get involved in charity activity with 1,000 Eee PC donated to schools in the remote area of north, center, south, and east Taiwan for narrowing down Taiwan’s digital divide.

December 2007 ASUS entered optical field for the first time and with BrightCam AF-200 and MF-200 presented.

December 2007 The consolidated income of the year amounted to NT$755.361 billion representing a substantial growth of 34.83% from the year of 2006.

January 2008 ASUS had brand name business and OEM/ODM business divided officially. The

brand name business was the responsibility of ASUS while OEM/ODM was the responsibility of Pegatron Corporation and Unihan Corporation for value generation.

March 2008 The “Dual Hundred-Million-Plan” of ASUS was to have one hundred million NTD budgeted to win over the heart of one hundred million customers. The goal was to provide professional repair and maintenance and consulting service to more customers of ASUS.

April 2008 ASUS had the second-generation 8.9’ Eee PC 900 market launched. April 2008 Intel and ASUS held the “Recycling Computer, Project of Hope” press conference

to demonstrate the collaboration between businesses and the determination and action of enterprises in saving energy and recycling for the good of the earth.

April 2008 Setup ASUS Foundation to have resources integrated effectively to feedback society and to fulfill social responsibility.

May 2008 ASUS Computer was awarded with the 16th “Symbol of Excellence” this year and ASUS was the biggest winner. The excellent technology R&D, humanity technology, and innovation of ASUS have helped have fifty-one products of the company been awarded with the “Product of the year award” at the “Symbol of Excellence” this year, in which, EeePC and R700t navigator were awarded with the “gold medal” award. Six products of ASUS were awarded with the “silver medal” awards. ASUS is second to none in the industry in the sense of quality and quantity.

June 2008 10” Eee PC1000 was market launched officially with a great appreciation received from international and domestic media while attending Computex exhibition in Taipei.

July 2008 Enforced “Reverse Recycling Green Marketing Business Plan” August 2008 ASUS was the designated hardware brand for Advanced Overlocking

Championship (AOCC) in 2008 and with great response received to the products.

11

11

The combination of ASUS P5Q3 Deluxe, Striker II Extreme, and ENGTX280 had broken the record successfully at the extreme temperature of 100℃ below.

October 2008 ASUS has Eee PC market launched for one year. The sales of Eee PC are growing worldwide that has overturned the imagination of the world about mobile communication and has lead the minicomputer market successfully. EeePC is elected as the best seller of 3C product this year. ASUS has Eee PC S101, the stat-of-the-art; market launched this month targeting on global business commuters and fashion Yapese.

November 2008 ASUS Eee Family promoted new products, all-in-one touch-panel screen computer Eee Top ET16 series with 15.6” touch big screen. The computer can be operated with a screen touch for an effective interaction and operation with the computer that is different from convention table-top computer.

November 2008 The tough Japanese market was conquered by the easy-to-learn and easy-to-use Eee PC! According to the survey in November of the most creditable 3C survey company, Business Computer News (BCN), EeePC was the champion in sales of Notebook and the most popular product of the year by the Japanese lifestyle and fashion magazine DIME.

December 2008 ASUS Eee PC was named the product of the year by Forbes and Stuff Magazine in the U.K., the Japanese lifestyle and fashion magazine Dime gave the Eee PC top product honors. Sweeping from the west side to the east side of the Atlantic, America’s benchmark on-line retailer Amazon also selected the Eee PC as the most popular Christmas gift and recommended by 13 medias as the best gifts to give noted how consumers loved the high mobility of the Eee PC. Spanning Japan, Taiwan, Europe and the U.S., there is no place in the world that has not felt the effect of the Eee PC.

January 2009 According to the 24th “ideal brand in the mind of consumers” survey of

Management Magazine V. 451 and the “ideal brand in the mind of businessmen” of Today V. 626,

February 2009 ASUS Computer and the world leading GPS brand Garmin announced the establishment of a strategic alliance to launch a joint Garmin-ASUS brand smart phone that combines leading smart phone and GPS technology.

March 2009 Eee PC™ series had been the top-three models on the shopping list of the benchmark online mall “AMAZON” for more than once. The newly launched 1000HE model of Eee PC™ had taken up the top-two spots with successful pre-order. It had evidenced the popularity of Eee PC and ASUS had owned the heart of American consumers with Eee PC™.

March 2009 Global design prize “reddot” was awarded in Germany. ASUSTeK had been awarded with industrial design awards in recent years including “Product Design 2009 Winners” this year for the five products of Eee PC S101, Eee Keyboard PC innovative computer, S121 notebook, P30 notebook, and innovative “chocolate keyboard.”

April 2009 ASUSTeK was the biggest winner in the 3rd Annual Taiwan Excellence Award for three consecutive years where a total of 53 products received the Excellence Award, in which, Eee PC S101 was awarded with the “Gold Award” this year while ASUS Bamboo U6V and P552w smart phone were warded with “Silver Award.”

April 2009 ASUSTeK launched the energy-saving motherboards P5Q PRO Turbo and P5Q Turbo on the Earth Day. P5Q PRO Turbo and P5Q Turbo were designed with unique Xtreme Phase power design and ASUS 2nd generation EPU smart energy-saving chips to save power consumption; also, allow the system to monitor automatically, adjust power supply, reduce temperature, and increase power efficiency up to 96%.

April 2009 ASUSTeK was reckoned as the canon of green products to the world by CNN and TIME Magazine. Eee PC 1000HE was appraised by CNN in the program of ”Your Green World”. ASUS Bamboo U6V was awarded”Green Design 100” by TIME Magazine for the artistic design and environmental protection value.

12

12

May 2009 ASUSTeK introduced the thinnest mini notebook – Eee PC 1008HA seashell! Seamless Eee PC 1008HA seashell gave a sense of fashion, which was originated from the idea of seashell, weighted only 1.1kgs, sexy slim body with only 18mm in thickness, 92% Baby Touch keyboard, and power-saving 10.1” LED display.

May 2009 ASUSTeK was ranked No. 1 for “product and service quality” and “innovation” in the “Asian Business 200” by Wall Street Journal in Asia. ASUSTeK was ranked No. 2 for “domestic industry” in the “Asian Business 200,” which was the highest ranking in the 3C industry.

June 2009 ASUSTeK was the winner with three products including “Game Republic” ASUS G51 Notebook, digital Eee family member EeeNAS PC, and Garmin-Asus nüvifone G60 navigator mobile phone awarded in the “Best Choice of COMPUTEX.”

June 2009 ASUS motherboard was pioneering and was the first to pass Energy Star 5.0certification. ASUSTeK was certified for professional energy-saving for the second time since the first recognition as the canon of green products manufacturer by CNN and TIME Magazine.

September 2009 ASUSTeK introduced brand new ASUS UL Series demonstrating Turbo 33 duo-core effect, 12-hour long-lasting power, 1” super-thin notebook, broke the myth of permanence and efficiency conflict, and setup a brand new standard of mobile computation.

October 2009 ASUSTeK was awarded for innovation in energy-saving effort. ASUS computer was the first one in the world to receive the validation of “Environmental Product Declaration (EPD)” and “carbon footprint.” ASUSTeK was the first enterprise in Taiwan to receive gold environmental protection logo of EPEAT of the United States; also, first top-ten computer brand in the world to receive the “EU Flower” certification. ASUSTeK has dedicated itself to the efforts of green environment, carbon-reduction, and care for the Earth.

December 2009 The consolidated sales revenue for the ASUS Computer brand was NT$248.2 billion from the year of 2009.

January 2010 Five ASUS products were awarded with the innovation award of the CES in 2010

including ASUS Videophone Touch AiGuru SV1T Skype, ASUS MATRIX GTX285/HTDI/1GD3 video graphics array, Disney Netpal™ Eee PC MK90H notebook, ASUS MS238H super thin LED display, and ASUS RT-N16 flagship wireless router.

January 2010 ASUS P6X58D Premium was the first USB 3.0 motherboard in the world toreceive USB-IF (USB Implementers Forum) certification and to lead consumers entering USB3.0 high-speed transmission era.

February 2010 The Company held its extraordinary shareholders’ meeting on February 9, 2010, and passed a resolution for the spin-off of its ODM business. Such resolution requires the Company to spin off the ODM assets and business (the Company's 100%-owned long-term equity investment in Pegatron) to the Company's wholly owned existing subsidiary Pegatron International Investment Co., Ltd. Pegatron International Investment Co., Ltd. will issue new shares to the Company and the shareholders of the Company as consideration. The Company will have a capital reduction of $36,097,609 or a capital reduction of approximately 85%. It is expected that the Company will acquire approximately 25% of the equity in Pegatron International Investment Co., Ltd. and that the shareholders of the Company will in total acquire approximately 75% of the equity in Pegatron International Investment Co., Ltd. The spin-off date is expected to be June 1, 2010.

February 2010 ASUSTeK introduced the first Smart3 Garmin-Asua M10 perfect smart phone for navigation, daily life, superpower community function, and multi-functional Windows smart phone.

February 2010 ASUSTeK introduced the first USB 3.0 ASUS N series mobile video flagship notebook with built-in SonicMaster sound technology. It is the canon of mobile video and audio theater.

13

13

March 2010 ASUSTeK was awarded with industrial design prize again – the chocolate keyboard was awarded with the gold medal of iF design in Germany. ASUS EeePC™ seashell, excellent superlight US series and UX30 notebook, EddKeyboard PC, fashionable CG 5290, super thin blue burner SBC-04D1S-U, and professional and compact P30 notebook seven in total were awarded with the product design prize of iF award. ASUS quality in design is seen in the world again!

14

14

III. Corporate governance report I. Corporate Organization

(I) Organization Chart

15

15

(II) Department Function Description

Chairman Plan and control the vision of the company. Shape industrial culture and operating concept. CSO Integrate green environment, social charity, and international enterprise ongoing protocol to construct the core competence of an enterprise for long-lasting business operation. CEO & President Plan and manage the company’s strategies, draft up operating objectives, direct and supervise the operation of business units.

Lean Management Headquarters Establish and substantiate lean six-sigma management system.

Audit Office Audit the company’s system and enforcement of internal regulations, procedures, and authorization with corrective actions offered.

Management Headquarters Arrange the planning and enforcement of the company’s finance, accounting, regulatory, administration, and public works.

Human Resources Human Resources are responsible for the development and management of the company’s manpower planning, recruitment, training, personnel administration, career development, salary welfare, and employee’s public relation.

Investment Division Arrange planning and investment in accordance with the company’s vision and development.

MIS Take charge of information planning and integration of the company’s business, finance, bookkeeping, and raw materials; also, maintain and control global networking linking and safety control mechanism.

CSC Provide customers with comprehensive service and total solutions. Corporate Quality Assurance Center Establish, improve, and maintain ISO9000, GreenASUS (green products) and SERASUS (responsibility for social environment) system, procedure, and document control system; also, study GreenASUS regulatory supervision and GreenASUS technology.

R&D Center Develop the common R&D technology need by each business unit.

Handheld Business Handheld Business is responsible for the R&D and operation of handheld business.

Open Platform Business Open Platform Business is responsible for the R&D and operation of open platform business.

Systems Business System Business is responsible for the R&D and operation of the Systems.

16

16

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f TW

SE.

Not

e 8:

Inde

pend

ent D

irect

or o

f Wis

tron,

supe

rvis

or o

f Apa

cer T

aiw

an, D

irect

or o

f LO

TES,

and

supe

rvis

or o

f Cha

nt S

ince

re C

o., L

td.,

and

Kin

sus I

nter

conn

ect T

echn

olog

y C

orp.

Not

e 9:

The

shar

ehol

ding

s sta

ted

in th

e ta

ble

excl

ude

trust

shar

ehol

ding

s tha

t are

with

the

“rig

hts t

o us

e” re

serv

ed.

Not

e 10

: (*)

Sta

ndar

ds fo

r the

Eng

lish

trans

liter

atio

n of

com

pany

’s n

ame

or in

divi

dual

’s n

ame.

1818

2. Professional knowledge and independence of Directors and Supervisors

Condition

Name

With over five years of job experience and the following business qualification

Independence (Note)

Also an independent director of

other public company

Teachers of public or

private colleges for the subject of commerce, law, finance,

accounting, or business

Judge, prosecutor, attorney,

accountant, or business

salespersons passed national exam &

certified specialists or technicians

With job experience in commerce,

law, finance, accounting, or

business

1 2 3 4 5 6 7 8 9 10

Jonney Shih 0 Jonathan Tsang 0

Jerry Shen 0 H.C. Hung 0 Ivan Ho 0 Tony Chen 0 Eric Chen 0 Tze-Kaing

Yang 2

Chung-Jen Cheng 1

L.H. Yang 0

Note: Directors and supervisors who have qualified the following conditions two years before being elected and during the term are to tick the box (“”) of the corresponding condition.

（1）Not an employee of the company or any related party; （2）Not a director or supervisor of the company or any related party (except for being an independent director of

the company or any related party, or, the subsidiary that is with over 50% shareholding with voting rights held directly or indirectly by the company);

（3）Does not hold more than 1% of total stock issued directly or indirectly nor a natural shareholder on the top-ten shareholdings list;

（4）Not the spouse nor a relative within two degrees of lineal consanguinity of an individual falling in the first three categories;

（5）Not a Director, Supervisor, or employee of the legal shareholder that holds over 5% of total stock issued directly or indirectly; or on the top-five shareholdings list of the Company;

（6）Not a Director (executive), Supervisor, management, or a shareholder with over 5% shareholdings of a company or organization that is in business with the Company;

（7）Not an owner, partner, Director, Supervisor, management of a partnership or institution and his/her spouse that provides commerce, law, finance, accounting and consulting service to the Company or related party;

（8） Not the spouse nor a relative within two degrees of lineal consanguinity of an individual; （9）Free of any of the behaviors as defined in Article 30 of Company Act; （10）Not a governmental officer, juridical person or its representative as defined in Article 27 of Company Act.

1919

3. Education and training of directors and supervisors

Title Name Training date Sponsor Course Start End Chairman Jonney Shih Oct 28, 2009 Oct 28, 2009

Accounting Research and Development Foundation in

Taiwan

The legal obligation, responsive measures, and

practice analysis for “inside trade” of the public offering company’s staff

Vice Chairman Jonathan Tsang Oct 28, 2009 Oct 28, 2009

Director Jerry Shen Oct 28, 2009 Oct 28, 2009Director Ivan Ho Oct 28, 2009 Oct 28, 2009Director H.C. Hung Oct 28, 2009 Oct 28, 2009Director Tony Chen Oct 28, 2009 Oct 28, 2009

Supervisor Tze-Kaing Yang Oct 28, 2009 Oct 28, 2009 4. State the name and shareholdings ratio of the directors and supervisors who are an

institutional shareholder; also, the name and shareholding ratio of the top-ten shareholders: Not applicable since the company’s directors and supervisors are nature persons.

20

20

(II

) Inf

orm

atio

n of

the

man

agem

ent

F

ebru

ary

22, 2

010

Title

N

ame

Dat

e El

ecte

d Sh

areh

oldi

ng

Shar

ehol

ding

of

spou

se a

nd

min

or

Shar

es h

eld

by o

ther

pe

rson

s in

thei

r nam

eEx

perie

nce

(Edu

catio

n)

Cur

rent

po

sitio

n w

ith o

ther

co

mpa

nies

Exec

utiv

es w

ho a

re sp

ouse

s or

seco

nd c

onsa

ngui

nity

Shar

es

%Sh

ares

%Sh

ares

%Ti

tleN

ame

Rel

atio

n

Chi

ef

Bra

ndin

g O

ffic

er

Jonn

ey

Shih

04

.30.

1994

97

,230

,543

2.29

00

00

MB

A o

f Nat

iona

l Chi

ao T

ung

Uni

vers

ity

Bus

ines

s Div

isio

n’s P

resi

dent

of A

CER

N

ote

1

Dep

uty

Chi

ef

Bra

ndin

g O

ffic

er

Jona

than

Ts

ang

2nd

cons

angu

inity

Dep

uty

Chi

ef

Bra

ndin

g O

ffic

er

Jona

than

Ts

ang

01.1

2.19

99

6,50

9,80

30.

150

00

0M

BA

of H

oust

on U

nive

rsity

Pr

esid

ent o

f You

ngm

en C

ompu

ter C

o., L

td.

Not

e 2

Chi

ef

Bra

ndin

g O

ffic

er

Jonn

ey

Shih

2n

d co

nsan

guin

ity

Pres

iden

t Je

rry

Shen

04.1

2.20

02

6,64

7,70

50.

1683

8,33

20.

020

0El

ectri

cal E

ngin

eerin

g G

radu

ate

Inst

itute

, N

atio

nal T

aiw

an U

nive

rsity

M

anag

er o

f AC

ER

Not

e 3

Non

e N

one

Non

e

V.P

. H

.C. H

ung

04.1

2.20

02

2,08

4,16

30.

050

00

0

Dep

artm

ent o

f App

lied

Mat

hem

atic

s, N

atio

nal C

hiao

Tun

g U

nive

rsity

Ju

nior

V.P

. of R

&D

Dep

artm

ent o

f Lyc

er

Tech

nolo

gy

Not

e 4

Non

e N

one

Non

e

V.P

. To

ny C

hen

03.1

0.20

08

907,

894

0.02

00

00

Elec

troni

cs E

ngin

eerin

g G

radu

ate

Inst

itute

, Tu

fus U

nive

rsity

(USA

) Ju

nior

V.P

. of A

CER

N

one

Non

e N

one

Non

e

V.P

. S.

Y. S

hian

03.1

0.20

08

571,

830

0.01

49,9

950.

000

0D

epar

tmen

t of E

lect

roni

c En

gine

erin

g,

Taiw

an in

dust

rial I

nstit

ute

Col

lege

En

gine

er o

f Won

-Chu

an C

o. L

td.

Not

e 5

Non

e N

one

Non

e

V.P

. Jo

e H

sieh

03.1

0.20

08

464,

633

0.01

4,40

60.

000

0M

BA

of S

anta

Cla

rita

Uni

vers

ity (U

SA)

Engi

neer

of A

SUS

(USA

) N

one

Non

e N

one

Non

e

V.P

. PC

Wan

g09

.10.

2008

52

8,35

10.

010

00

0El

ectri

cal E

ngin

eerin

g G

radu

ate

Inst

itute

, N

atio

nal T

aiw

an U

nive

rsity

V

.P. o

f MiT

AC

N

one

Non

e N

one

Non

e

V.P

. H

enry

Yeh

09

.10.

2008

71

6,29

90.

0218

,655

0.00

00

Dep

artm

ent o

f Ele

ctric

al E

ngin

eerin

g,

Nat

iona

l Tai

wan

Uni

vers

ity

V.P

. of T

win

Hea

d

Non

e N

one

Non

e N

one

V.P

. Sa

mso

n H

u 09

.10.

2008

12

3,04

60.

000

00

0D

epar

tmen

t of C

ompu

ter S

cien

ce, N

atio

nal

Chi

ao T

ung

Uni

vers

ity

Juni

or V

.P. o

f Ace

r

Not

e 6

Non

e N

one

Non

e

V.P

. B

enso

n Li

n 06

.01.

2009

32

9,61

70.

0130

,000

0.00

00

EMB

A, N

atio

nal C

hiao

Tun

g U

nive

rsity

Juni

or V

.P. o

f IB

MN

ote

7 N

one

Non

e N

one

Fina

nce

&

Acc

ount

ing

Off

icer

Dav

id

Cha

ng

07.0

7.20

06

152,

329

0.00

246

0.00

00

Dep

artm

ent o

f Fin

ance

, Dre

xel U

nive

rsity

(P

hila

delp

hia

Penn

sylv

ania

)

Staf

fof E

rnst

& Y

oung

N

ote

8 N

one

Non

e N

one

21

21

Not

e 1:

Cha

irman

of

the

follo

win

g co

mpa

nies

: A

xus

Mic

rosy

stem

s In

c.,

Hua

-Che

ng V

entu

re C

apita

l C

orp.

, H

ua-M

in I

nves

tmen

t C

o.,

Ltd.

, G

REE

NA

SUS

REC

YC

LIN

G C

O.,

LTD（

be l

iqui

date

d),

, A

GA

iT

Tech

nolo

gy C

orp.

, Asu

stek

Hol

ding

s, A

sus

INTL

, Asu

s H

olla

nd B

.V.,

Asu

s C

ompu

ter C

orpo

ratio

n, C

entra

l Tec

, Sou

th T

ec, D

eep

Del

ight

, ASU

SCH

AN

NEL

, Cha

nnel

Pilo

t Lim

ited,

Mob

osta

r, an

d U

nim

ax

Hol

ding

s D

irect

or o

f th

e fo

llow

ing

com

pani

es:

ASK

EY,

SHIN

EWA

VE

INTE

RN

ATI

ON

AL

INC

., A

SUS

TEC

HN

OLO

GY

IN

CO

RPO

RA

TIO

N,

AC

I, SI

TI,,

You

ngm

en C

ompu

ter

Co.

, Lt

d.,

TeY

ang

Tech

Inc

., M

ing-

Chu

n C

ompu

ter(

*), A

siaP

acifi

c In

telle

ctua

l Pro

perty

Ass

ocia

tion,

SIN

OC

ON

Indu

stria

l Sta

ndar

ds F

ound

atio

n an

d A

SUS

EGY

PT L

.L.C

. N

ote

2: C

hairm

an o

f the

follo

win

g co

mpa

nies

: ASU

S TE

CH

NO

LOG

Y IN

CO

RPO

RA

TIO

N, U

NIM

AX

ELE

CTR

ON

ICS

INC

., A

SUS

TEC

HN

OLO

GY

PTE

LTD

., A

SUS

TEC

HN

OLO

GY

(HO

NG

KO

NG

) LIM

ITED

, A

SUS

Tech

nolo

gy H

olla

nd B

.V.,

ASU

S Te

chno

logy

(Vie

tnam

) Co.

, LTD

., A

SUS

Mid

dle

East

FZC

O, A

SUS

KO

REA

Co.

, Ltd

., A

SUS

TEC

HN

OLO

GY

PR

IVA

TE L

IMIT

ED a

nd A

SUS

EGY

PT L

.L.C

. D

irect

or o

f the

follo

win

g co

mpa

nies

: Axu

s Mic

rosy

stem

s Inc

., H

ua-C

heng

Ven

ture

Cap

ital C

orp.

and

Hua

-Min

Inve

stm

ent C

o., L

td.

Not

e 3:

Cha

irman

of

the

follo

win

g co

mpa

nies

: A

SMED

IA T

ECH

NO

LOG

Y I

NC

., En

ertro

nix,

Inc

., In

tern

atio

nal

Uni

ted

Tech

nolo

gy C

o., L

td.,

Inte

rnat

iona

l U

nite

d, E

nertr

onix

Hol

ding

,, En

ertro

nix

Inte

rnat

iona

l Li

mite

d, A

slin

k Pr

ecis

ion

Co.

, Ltd

., A

SLIN

K (H

.K.)

PREC

ISIO

N C

O.,

LIM

ITED

and

AG

AiT

ech

Hol

ding

Ltd

. D

irect

or o

f the

follo

win

g co

mpa

nies

: Axu

s Mic

rosy

stem

s Inc

., A

SUS

TEC

HN

OLO

GY

INC

OR

POR

ATI

ON

, Hua

-Che

ng V

entu

re C

apita

l Cor

p. a

nd H

ua-M

in In

vest

men

t Co.

, Ltd

Su

perv

isor

of t

he fo

llow

ing

com

pani

es: P

EGA

TRO

N C

OR

POR

ATI

ON

and

UN

IHA

N C

OR

POR

ATI

ON

N

ote

4: C

urre

nt p

ositi

on w

ith th

e fo

llow

ing

com

pani

es: C

hairm

an o

f SH

INEW

AV

E IN

TER

NA

TIO

NA

L IN

C.

Not

e 5:

Dire

ctor

of E

nertr

onix

Inc.

N

ote

6: D

irect

or o

f eC

arem

e Te

chno

logi

es, I

nc.

Not

e 7:

Dire

ctor

of t

he fo

llow

ing

com

pani

es: A

SUS

TEC

HN

OLO

GY

PTE

. LTD

., A

SUS

TEC

HN

OLO

GY

(HO

NG

KO

NG

) LIM

ITED

, ASU

S K

OR

EA C

O a

nd A

sus M

iddl

e Ea

st F

ZCO

. N

ote

8: S

uper

viso

r of t

he fo

llow

ing

com

pani

es: H

ua-M

in In

vest

men

t Co.

, Ltd

. and

Hua

-Che

ng V

entu

re C

apita

l Cor

p.

Not

e 9:

The

shar

ehol

ding

s sta

ted

in th

e ta

ble

excl

ude

trust

shar

ehol

ding

s tha

t are

with

the

“rig

hts t

o us

e” re

serv

ed.

Not

e 10

: The

com

pany

did

not

hav

e st

ock

optio

n is

sued

up

to th

e da

te o

f the

ann

ual r

epor

t iss

ued;

ther

efor

e, th

e co

mpa

ny’s

man

agem

ent d

id n

ot h

ave

stoc

k op

tion

shar

es.

Not

e 11

: (*)

Sta

ndar

ds fo

r the

Eng

lish

trans

liter

atio

n of

com

pany

’s n

ame

or in

divi

dual

’s n

ame.

22

22

Edu

cati

on a

nd t

rain

ing

of t

he m

anag

emen

t

Title

N

ame

Trai

ning

Dat

e Sp

onso

r C

ours

e St

art

End

Chi

ef B

rand

ing

Off

icer

Jonn

ey S

hih

Oct

28,

200

9O

ct 2

8, 2

009

Acc

ount

ing

Res

earc

h an

d D

evel

opm

ent

Foun

datio

n in

Tai

wan

The

lega

l ob

ligat

ion,

res

pons

ive

mea

sure

s, an

d pr

actic

e an

alys

is f

or “

insi

de t

rade

” of

the

pub

lic

offe

ring

com

pany

’s st

aff

Dep

uty

Chi

ef B

rand

ing

Off

icer

Jo

nath

an T

sang

O

ct 2

8, 2

009

Oct

28,

200

9

Pres

iden

t Je

rry

Shen

O

ct 2

8, 2

009

Oct

28,

200

9V

ice

Pres

iden

t H

.C. H

ung

Oct

28,

200

9O

ct 2

8, 2

009

Vic

e Pr

esid

ent

Tony

Che

n O

ct 2

8, 2

009

Oct

28,

200

9V

ice

Pres

iden

t S.

Y. S

hian

O

ct 2

8, 2

009

Oct

28,

200

9V

ice

Pres

iden

t Sa

mso

n H

u O

ct 2

8, 2

009

Oct

28,

200

9V

ice

Pres

iden

t Jo

e H

sieh

O

ct 2

8, 2

009

Oct

28,

200

9Fi

nanc

e &

Acc

ount

ing

Off

icer

D

avid

Cha

ng

Oct

28,

200

9O

ct 2

8, 2

009

Fina

nce

& A

ccou

ntin

g O

ffic

er

Dav

id C

hang

Oct

28,

200

9O

ct 2

8, 2

009

Acc

ount

ing

Res

earc

h an

d D

evel

opm

ent

Foun

datio

n in

Tai

wan

The

com

pete

nt a

utho

ritie

s en

forc

ed t

he “

IFR

S”

polic

y –

resp

onsi

ve

mea

sure

s of

di

rect

ors,

supe

rvis

ors,

and

adva

nced

man

agem

ent

and

IFR

S ad

vant

age

stud

y

Oct

28,

200

9O

ct 2

8, 2

009

Acc

ount

ing

Res

earc

h an

d D

evel

opm

ent

Foun

datio

n in

Tai

wan

The

impa

ct o

f min

imum

tax

polic

y on

bus

ines

s and

pe

rson

al w

ealth

& f

inan

cial

pla

nnin

g an

d pr

actic

e st

udy

23

23

(III

) R

emun

erat

ion

of D

irect

ors,

Supe

rvis

ors,

Pres

iden

t, an

d V

ice

Pres

iden

t 1.

Rem

uner

atio

n of

Dir

ecto

rs

Title

N

ame

(Not

e 1)

Rem

uner

atio

n of

Dire

ctor

s R

atio

of A

+B+C

+D

to N

et in

com

e (%

)

Rem

uner

atio

n of

par

t-tim

e em

ploy

ees

Rat

io o

f A

+B+C

+D+E

+F

+G to

Net

in

com

e (%

) R

emun

erat

ion

from

the

inve

sted

co

mpa

ny o

ther

th

an th

e co

mpa

ny’s

su

bsid

iary

Rem

uner

atio

n

(A)

Pens

ion

(B

) R

emun

erat

ion

from

re

tain

ed e

arni

ngs (

C)

Bus

ines

s exp

ense

(D

) Sa

lary

, bon

us, a

nd

com

pens

atio

n (E

)Pe

nsio

n (F

) Em

ploy

ees’

Cas

h B

onus

Der

ived

Fr

om D

istri

buta

ble

Earn

ings

(G)

(Est

imat

ed a

mou

nt)

Empl

oyee

Sto

ck

Opt

ion

Cer

tific

ates

(H)

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es in

the

cons

olid

ated

fin

anci

al

stat

emen

ts

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

C

ash

divi

dend

Stoc

k di

vide

ndC

ash

divi

dend

Stoc

k di

vide

nd

Cha

irman

Jo

nney

Shi

h

0 0

0 0

65,9

09

thou

sand

65,9

09th

ousa

nd0

0 0.

53%

0.53

%16

,745

th

ousa

nd

20,0

75

thou

sand

0 0

37,9

95th

ousa

nd0

42,9

03th

ousa

nd0

0 0

0.97

%

1.03

%

Non

e

Vic

e C

hairm

an

Jona

than

Tsa

ng

Dire

ctor

Jerr

y Sh

en

Dire

ctor

H.C

. Hun

g

Dire

ctor

Ivan

Ho

Dire

ctor

Tony

Che

n

Dire

ctor

Eric

Che

n

Rem

uner

atio

n B

rack

et

Rem

uner

atio

n to

dire

ctor

s

Nam

e of

Dire

ctor

s A

+B+C

+D

A+B

+C+D

+E+F

+G

The

com

pany

C

ompa

nies

in th

e co

nsol

idat

ed

finan

cial

stat

emen

ts(I

) Th

e co

mpa

ny

Com

pani

es in

the

cons

olid

ated

fin

anci

al st

atem

ents

(J)

Bel

ow 2

,000

,000

2,00

0,00

0～5,

000,

000

H.C

. Hun

g, T

ony

Che

n H

.C. H

ung,

Ton

y C

hen

5,00

0,00

0～10

,000

,000

Iv

an H

o, E

ric C

hen

Ivan

Ho,

Eric

Che

n Iv

an H

o, E

ric C

hen

Ivan

Ho

10,0

00,0

00～

15,0

00,0

00

Jona

than

Tsa

ng, J

erry

She

n Jo

nath

an T

sang

, Jer

ry S

hen

H.C

. Hun

g, T

ony

Che

n H

.C. H

ung,

Ton

y C

hen,

Eric

Che

n

15,0

00,0

00～

30,0

00,0

00

Jonn

ey S

hih

Jonn

ey S

hih

Jonn

ey S

hih,

Jona

than

Tsa

ng

Jonn

ey S

hih,

Jona

than

Tsa

ng

30,0

00,0

00～

50,0

00,0

00

Jerr

y Sh

enJe

rry

Shen

50

,000

,000～

100,

000,

000

Ove

r 100

,000

,000

To

tal

＊ T

he c

onte

nt o

f rem

uner

atio

n di

sclo

sed

in th

is ta

ble

is d

iffer

ent f

rom

the

inco

me

defin

ed b

y In

com

e Ta

x La

w; t

here

fore

, thi

s tab

le is

use

d fo

r the

pur

pose

of d

iscl

osur

e in

stea

d of

tax

levy

.

24

24

2. R

emun

erat

ion

of S

uper

viso

rs

Title

Nam

e

Rem

uner

atio

n of

Sup

ervi

sors

Rat

io o

f A+B

+C to

Net

in

com

e R

emun

erat

ion

from

the

inve

sted

co

mpa

ny o

ther

than

the

com

pany

’s

subs

idia

ry

Rem

uner

atio

n (A

) R

emun

erat

ion

from

re

tain

ed e

arni

ngs

(B)

Bus

ines

s exp

ense

(C)

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

Supe

rvis

or

Tze-

Kai

ng Y

ang

0 0

3,93

5 th

ousa

nd4,

253

thou

sand

0

0 0.

03%

0.

03%

N

one

Supe

rvis

or C

hung

-Jen

Che

ng

Supe

rvis

or

L.H

. Yan

g

R

emun

erat

ion

Bra

cket

Rem

uner

atio

n to

supe

rvis

ors

Nam

e of

Sup

ervi

sors

A

+B+C

Th

e C

ompa

ny

Com

pani

es in

the

cons

olid

ated

fina

ncia

l sta

tem

ents

(E)

Bel

ow 2

,000

,000

Tz

e-K

aing

Yan

g, C

hung

-Jen

Che

ng, L

.H. Y

ang

Tze-

Kai

ng Y

ang,

Chu

ng-J

en C

heng

, L.H

. Yan

g 2,

000,

000～

5,00

0,00

0

5,00

0,00

0～10

,000

,000

10

,000

,000

～15

,000

,000

15

,000

,000

～30

,000

,000

30

,000

,000

～50

,000

,000

50

,000

,000

～10

0,00

0,00

0

O

ver 1

00,0

00,0

00

Tota

l

＊

The

cont

ent o

f rem

uner

atio

n di

sclo

sed

in th

is ta

ble

is d

iffer

ent f

rom

the

inco

me

defin

ed b

y In

com

e Ta

x La

w; t

here

fore

, thi

s ta

ble

is u

sed

for t

he p

urpo

se o

f dis

clos

ure

inst

ead

of ta

x le

vy.

25

25

3. R

emun

erat

ion

of P

resi

dent

and

V.P

.

Title

N

ame

Rem

uner

atio

n

(A)

Pens

ion

(B

) B

onus

and

co

mpe

nsat

ion

(C)

Empl

oyee

s’ C

ash

Bon

us D

eriv

ed F

rom

D

istri

buta

ble

Earn

ings

(G) (

Estim

ated

am

ount

)R

atio

of A

+B+C

to

Net

inco

me

Empl

oyee

Sto

ck

Opt

ion

Cer

tific

ates

Rem

uner

atio

n fr

om th

e in

vest

ed

com

pany

oth

er

than

the

com

pany

’s

subs

idia

ry

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es in

the

cons

olid

ated

fin

anci

al st

atem

ents

The

com

pany

Com

pani

es in

th

e co

nsol

idat

ed

finan

cial

st

atem

ents

The

com

pany

Com

pani

es

in th

e co

nsol

idat

ed

finan

cial

st

atem

ents

Cas

h di

vide

nd

Stoc

k di

vide

ndC

ash

divi

dend

Stoc

k di

vide

nd

Chi

ef B

rand

ing

Off

icer

Jo

nney

Shi

h

26,5

51

thou

sand

27

,786

th

ousa

nd0

0 6,

373

thou

sand

6,49

8 th

ousa

nd69

,741

th

ousa

nd

0 69

,741

thou

sand

0 0.

82%

0.83

%

0 0

Non

e

Dep

uty

Chi

ef

Bra

ndin

g O

ffic

erJo

nath

an T

sang

Pres

iden

t Je

rry

Shen

V

.P.

H.C

. Hun

g V

.P.

Tony

Che

n V

.P.

S.Y

. Shi

an

V.P

. Jo

e H

sieh

V

.P.

PC W

ang

V.P

. H

enry

Yeh

V

.P.

Sam

son

Hu

V.P

. B

enso

n Li

n

Rem

uner

atio

n B

rack

et

Rem

uner

atio

n of

Pre

side

nt a

nd V

.P.

Nam

e of

Pre

side

nt a

nd V

.P.

The

Com

pany

C

ompa

nies

in th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts (D

)

Bel

ow 2

,000

,000

2,

000,

000～

5,00

0,00

0

5,00

0,00

0～10

,000

,000

Jo

nney

Shi

h, Jo

nath

an T

sang

, H.C

. Hun

g, T

ony

Che

n, S

.Y. S

hian

, Jo

e H

sieh

, PC

Wan

g, H

enry

Yeh

, Sam

son

Hu,

Ben

son

Lin

Jonn

ey S

hih,

Jona

than

Tsa

ng, H

.C. H

ung,

Ton

y C

hen,

S.Y

. Shi

an,

Jo

e H

sieh

, PC

Wan

g, H

enry

Yeh

, Sam

son

Hu,

Ben

son

Lin

10,0

00,0

00～

15,0

00,0

00

15,0

00,0

00～

30,0

00,0

00

Jerr

y Sh

en

Jerr

y Sh

en

30,0

00,0

00～

50,0

00,0

00

50,0

00,0

00～

100,

000,

000

Ove

r 100

,000

,000

To

tal

＊Th

e co

nten

t of r

emun

erat

ion

disc

lose

d in

this

tabl

e is

diff

eren

t fro

m th

e in

com

e de

fined

by

Inco

me

Tax

Law

; the

refo

re, t

his t

able

is u

sed

for t

he p

urpo

se o

f dis

clos

ure

inst

ead

of ta

x le

vy.

26

26

��

��

��

��

��

��

��

��

� ��

��

��

��

��

��

��

��

��

��

��

Ti

tle

Nam

e St

ock

Div

iden

d C

ash

Div

iden

d (

estim

ated

am

ount

)

Tota

l R

atio

of

tota

l am

ount

to

net

inco

me

(%)

Man

ager

s

Chi

ef B

rand

ing

Off

icer

Jo

nney

Shi

h

0 73

,096

thou

sand

73

,096

thou

sand

0.59

%

Dep

uty

Chi

ef B

rand

ing

Off

icer

Jo

nath

an T

sang

Pres

iden

t Je

rry

Shen

V

.P.

H.C

. Hun

g V

.P.

Tony

Che

n V

.P.

S.Y

. Shi

an

V.P

. Jo

e H

sieh

V

.P.

PC W

ang

V.P

. H

enry

Yeh

V

.P.

Sam

son

Hu

V.P

. B

enso

n Li

n Fi

nanc

e &

Acc

ount

ing

Off

icer

D

avid

Cha

ng

(I

V) C

ompa

re a

nd s

tate

the

ratio

of t

otal

rem

uner

atio

n pa

id to

the

com

pany

’s D

irect

ors,

Supe

rvis

ors,

Pres

iden

t, an

d V.

P. b

y th

e co

mpa

ny a

nd th

e co

mpa

nies

in

the

cons

olid

ated

fina

ncia

l sta

tem

ents

to n

et in

com

e in

the

last

two

year

s; a

lso,

des

crib

e th

e po

licy,

sta

ndar

d, a

nd c

ombi

natio

n of

rem

uner

atio

n pa

id;

mor

eove

r, th

e pr

oced

ure

of d

efin

ing

rem

uner

atio

n an

d its

rela

tion

to b

usin

ess p

erfo

rman

ce:

A.

Ana

lyze

the

ratio

of t

he to

tal r

emun

erat

ion

paid

to th

e co

mpa

ny’s

Dire

ctor

s, Su

perv

isor

s, Pr

esid

ent,

and

V.P.

in th

e la

st tw

o ye

ars t

o ne

t inc

ome:

Yea

r (N

ote

1)

Rat

io o

f the

tota

l rem

uner

atio

n pa

id to

the

com

pany

’s D

irect

ors,

Supe

rvis

ors,

Pres

iden

t, an

d V.

P. in

the

last

two

year

s to

net i

ncom

e 20

08

0.86％

2009

1.

38％

Not

e 1:

It m

eant

for t

he y

ear o

f the

inco

me

gene

rate

d.

B. I

n te

rms

of th

e co

mpa

ny’s

rem

uner

atio

n po

licy,

a re

ason

able

rem

uner

atio

n is

bas

ed o

n th

e sa

lary

leve

l of t

he in

dust

ry a

nd th

e re

spon

sibi

lity

and

cont

ribut

ion

of e

ach

empl

oyee

.

2727

III. Corporate governance (I) Board of Directors

Board of Directors

The attendance of Directors for the 8 (A) Board Meeting in 2009:

Title Name Attendance (B) Proxy

Frequency of attendance (%)

(B/A) Remarks

Chairman Jonney Shih 8 0 100.00 Vice

Chairman Jonathan

Tsang 7 1 87.50

Director Jerry Shen 8 0 100.00 Director H.C. Hung 7 1 87.50 Director Ivan Ho 4 2 50.00 Director Tony Chen 7 0 87.50 Director Eric Chen 3 2 37.50

Remarks: 1. For the events stated in SEC Article 14.3 and other opposing or qualified opinion of independent

directors that are recorded or declared in writing: Not applicable since the company does not have independent directors appointed.

2. Directors who have excused themselves from the meeting due to a conflict of interest: Not applicable since the company does not have directors who need to have themselves excluded from the meeting due to a conflict of interest.

3. The goal and the enforcement of reinforcing the function of the board of directors in the most recent years (for example, setup an Auditing Committee, upgrade information transparency, etc.): The board of directors had the “Rules Governing the Conduct of Board Meetings” amended and resolved on April 24, 2008.

(II) The operation of the Auditing Committee or the attendance of supervisors at the board

meeting:

1. Attendance of supervisors at the board meeting

Attendance of supervisors at the board meeting

The attendance of Supervisors for the 8 (A) Board Meeting in 2009:

Title Name Attendance (Times) (B)

Frequency of attendance (%)

(B/A) Remark

Supervisor Tze-Kaing Yang 8 100.00

Supervisor Chung-Jen

Cheng 7 87.50

Supervisor L.H. Yang 4 50.00

2828

Remarks: I. Composition and responsibility of Supervisors: (I) Communication between the company’s supervisors and employees and

shareholders: Supervisors may contact and communicate with employees and shareholders if it is necessary.

(II) Communication between the company’s supervisors and internal chief director and CPA: 1. Chief auditor is to have the auditing report submitted to the supervisors in the

following month upon the completion of the audit; also, the chief auditor is to report the audit at the board meeting.

2. Supervisors may communicate with the CPA if it is necessary.

II. For the opinions of the supervisors stated in the board meeting, the date, term, the content of the case, the resolution reached, and the company’s response to the supervisor’s opinion must be stated in details:

Time Term Subject Statement of supervisors

Resolution of the board of directors

Apr 22, 2009

9th board meeting of the 8th year

The 2008 “International Control System Declaration” proposal

Internal control evaluation was to establish a corrective action mechanism for the remedy of reoccurring events

Proposed corrective action was agreed upon unanimously by the presenting directors

Jul 8, 2009

10th board meeting of the 8th year

Discussed the bank’s “General financing agreement” renewal proposal

It was recommended in the meeting to have the loan interest rate disclosed

Proposed corrective action was agreed upon unanimously by the presenting directors

2. Operation of audit committee: Not applicable since the Company did not have an

audit committee setup.

29

29

(III

) C

orpo

rate

gov

erna

nce

and

the

devi

atio

n fr

om th

e R

ules

Gov

erni

ng L

iste

d &

OTC

cor

pora

te g

over

nanc

e an

d th

e ca

uses

Item

O

pera

tion

D

evia

tion

fro

m t

he R

ules

Gov

erni

ng L

iste

d &

OT

C c

orpo

rate

gov

erna

nce

and

the

caus

es

1. E

quity

stru

ctur

e an

d sh

areh

olde

rs’ e

quity

(1

) Th

e w

ay t

he

com

pany

pro

cess

es t

he

sugg

estio

n an

d di

sput

es o

f sha

reho

lder

s (2

) The

mai

n sh

areh

olde

rs o

f the

com

pany

and

the

resp

onsi

ble

pers

onne

l of t

he m

ain

shar

ehol

ders

(3

) Th

e co

mpa

ny

esta

blis

hes

the

busi

ness

ris

k co

ntro

l m

echa

nism

and

fire

wal

l with

the

rela

ted

party

1. T

he sp

okes

man

is d

esig

nate

d. S

tock

age

nt is

to p

roce

ss st

ock

affa

irs.

2. T

he m

ain

shar

ehol

ders

of t

he c

ompa

ny a

nd th

e re

spon

sibl

e pe

rson

nel

of t

he m

ain

shar

ehol

ders

are

in

the

shar

ehol

ders

’ ro

ster

and

the

co

mpa

ny is

to h

ave

a go

od re

latio

n ke

pt w

ith th

em.

3. T

he c

ompa

ny h

as e

stab

lishe

d ris

k co

ntro

l mec

hani

sm a

nd fi

rew

all i

n ac

cord

ance

with

the

“C

orpo

rate

Gov

erna

nce

Law

of

Subs

idia

ry,”

“Loa

ns a

nd E

ndor

sem

ent

and

Gua

rant

ee P

roce

dure

s,” a

nd “

Ass

ets

Acq

uisi

tion

and/

or D

ispo

sitio

n Pr

oced

ure.

”

No

devi

atio

n N

o de

viat

ion

No

devi

atio

n

2. T

he fo

rmat

ion

and

the

resp

onsi

bilit

y of

the

boar

d of

dire

ctor

s (

1) T

he in

depe

nden

t dire

ctor

s of t

he c

ompa

ny

(2)

Eva

luat

e th

e in

depe

nden

ce o

f th

e in

depe

nden

t au

dito

r pe

riodi

cally

1. N

ot y

et se

tup

2. T

he C

PA’s

ind

epen

denc

e m

ust

be e

valu

ated

per

iodi

cally

. Th

e co

mpa

ny’s

Boa

rd o

f Dire

ctor

s has

the

CPA

s con

tract

ed.

Und

er c

onsi

dera

tion

No

devi

atio

n

3. E

stab

lish

a co

mm

unic

atio

n ch

anne

l with

the

rela

ted

party

Th

ere

are

prop

er c

omm

unic

atio

n ch

anne

ls a

vaila

ble

by p

hone

and

e-

mai

l. N

o de

viat

ion

4. P

ublic

atio

n of

info

rmat

ion

(1)

The

com

pany

has

a w

ebsi

te s

etup

to

disc

lose

fin

anci

al

info

rmat

ion

and

busi

ness

man

agem

ent

(2)

The

com

pany

has

ado

pted

oth

er i

nfor

mat

ion

disc

losu

re

met

hods

(for

exa

mpl

e, s

etup

web

site

in E

nglis

h, d

esig

nate

pe

rson

nel

to

colle

ct

and

disc

lose

in

form

atio

n of

th

e co

mpa

ny, s

ubst

antia

te th

e sp

okes

man

sys

tem

, and

pub

lish

the

publ

ic o

ffer

ing

mee

ting

on th

e w

ebsi

te)

1. T

he c

ompa

ny h

as a

web

site

(http

://w

ww

.asu

s.com

) set

up to

dis

clos

e fin

anci

al i

nfor

mat

ion

and

busi

ness

man

agem

ent

(rel

atio

nshi

p w

ith

inve

stor

s) a

nd to

exp

lain

the

corp

orat

e go

vern

ance

of t

he c

ompa

ny

to t

he i

nves

tors

in

the

shar

ehol

ders

mee

ting

and

publ

ic o

ffer

ing

mee

ting.

2.

Des

igna

te p

erso

nnel

to

colle

ct a

nd d

iscl

ose

info

rmat

ion

of t

he

com

pany

; al

so,

subs

tant

iate

th

e sp

okes

pers

ons

syst

em

to

com

mun

icat

e to

the

publ

ic.

No

devi

atio

n N

o de

viat

ion

5. T

he o

pera

tion

of t

he c

ompa

ny’s

nom

inat

ion,

rem

uner

atio

n,

and

othe

r fun

ctio

nal c

omm

ittee

s Th

e co

mpa

ny h

as n

ot h

ad a

nom

inat

ion

or re

mun

erat

ion

com

mitt

ee

orga

nize

d.

Und

er c

onsi

dera

tion

30

30

Item

O

pera

tion

D

evia

tion

fro

m t

he R

ules

Gov

erni

ng L

iste

d &

OT

C c

orpo

rate

gov

erna

nce

and

the

caus

es

6. If

the

com

pany

has

cor

pora

te g

over

nanc

e ru

les

stip

ulat

ed a

ccor

ding

to th

e “R

ules

gov

erni

ng L

iste

d/O

TC c

orpo

rate

gov

erna

nce,

” pl

ease

sta

te th

e va

riatio

n of

the

busi

ness

ope

ratio

n fr

om th

e ru

les:

Th

e co

mpa

ny’s

cor

pora

te g

over

nanc

e ru

les

are

in p

lann

ing;

how

ever

, dire

ctor

s an

d su

perv

isor

s ha

ve e

xerc

ised

thei

r ob

ligat

ions

and

inte

rnal

con

trol s

yste

m in

acc

orda

nce

with

the

spiri

t and

regu

latio

n of

the

“Rul

es g

over

ning

Lis

ted/

OTC

cor

pora

te g

over

nanc

e.”

7. O

ther

inf

orm

atio

n th

at h

elps

und

erst

and

the

corp

orat

e go

vern

ance

(fo

r ex

ampl

e, a

dvan

ced

stud

y of

dire

ctor

s an

d su

perv

isor

s, at

tend

ance

of

dire

ctor

s an

d su

perv

isor

s fo

r bo

ard

mee

ting,

enf

orce

men

t of r

isk

man

agem

ent p

olic

y an

d ris

k m

easu

rem

ent s

tand

ards

, pro

tect

ion

for c

onsu

mer

s an

d cu

stom

ers,

dire

ctor

’s e

xcus

ing

him

self/

hers

elf f

rom

a c

ase

invo

lvin

g co

nflic

t of i

nter

est,

liabi

lity

insu

ranc

e ac

quire

d fo

r dire

ctor

s and

supe

rvis

ors,

and

corp

orat

e so

cial

resp

onsi

bilit

ies)

: 1.

Dire

ctor

s an

d su

perv

isor

s us

ually

atte

nd th

e bo

ard

mee

ting

for d

iscu

ssio

n un

less

ther

e is

a re

ason

not

to. D

irect

ors

mus

t be

excu

sed

from

a c

ase

invo

lvin

g co

nflic

t of i

nter

est

acco

rdin

g to

the

“Rul

es G

over

ning

the

Con

duct

of B

oard

Mee

tings

.” T

he re

solu

tions

of t

he B

oard

of D

irect

ors a

re d

iscl

osed

in th

e M

arke

t Obs

erva

tion

Post

Sys

tem

by

law

. 2.

Liab

ility

insu

ranc

e is

acq

uire

d fo

r dire

ctor

s and

supe

rvis

ors a

ccor

ding

to th

e A

rticl

es o

f Inc

orpo

ratio

n.

3.In

ord

er to

impr

ove

the

gove

rnan

ce o

f th

e B

oard

of

Dire

ctor

s, su

bsta

ntia

te th

e fu

nctio

n of

sup

ervi

sion

, and

rei

nfor

ce th

e m

echa

nism

of

gove

rnan

ce, t

he c

ompa

ny h

as th

e “R

egul

atio

ns G

over

ning

the

Con

duct

of

Boa

rd M

eetin

gs”

stip

ulat

ed i

n ac

cord

ance

with

“R

ules

Gov

erni

ng t

he C

ondu

ct o

f B

oard

Mee

ting

by P

ublic

Com

pany

” fo

r th

e re

fere

nce

of th

e co

mpe

tent

aut

horit

y.

4.Th

e co

mpa

ny h

as re

pair

and

mai

nten

ance

sta

tions

and

con

sum

er’s

hot

line

set

up n

atio

nwid

e fo

r pro

tect

ing

the

inte

rest

of c

onsu

mer

s. Th

e co

mpa

ny h

as a

n ag

reem

ent s

igne

d w

ith e

ach

cust

omer

b

efor

e pr

ovid

ing

serv

ices

and

pro

duct

s to

them

. 5.

The

com

pany

obe

ys l

aw,

mai

ntai

ns a

goo

d la

bor

rela

tion,

pro

vide

s jo

b op

portu

nity

, bu

ilds

up b

rand

nam

e, e

xpan

ds e

xpor

ting

busi

ness

, an

d fu

lfills

cor

pora

te s

ocia

l re

spon

sibi

lity.

6.

The

com

pany

is to

hav

e ot

her c

orpo

rate

gov

erna

nces

pro

mot

ed a

nd su

bsta

ntia

ted

grad

ually

in a

ccor

danc

e w

ith th

e cu

rren

t con

ditio

n an

d re

gula

tions

.

8. If

ther

e is

an

inte

rnal

eva

luat

ion

repo

rt or

an

inde

pend

ent a

ppra

isal

repo

rt fu

rnis

hed

on c

orpo

rate

gov

erna

nce,

the

inte

rnal

(ext

erna

l) pe

rfor

man

ce e

valu

atio

n re

port

mus

t be

furn

ishe

d w

ith th

e no

ncon

form

ities

(or s

ugge

stio

ns) a

nd c

orre

ctiv

e ac

tions

det

aile

d: N

/A

31

31

(IV) Operation of the remuneration committee: Not applicable since the company did not have a remuneration committee setup.

(V) Fulfillment of social responsibility

Since Corporate Social Responsibility (CSR) is becoming one of the indexes used for assessing enterprise’s perpetual development, ASUS’s responsibility for social environment, in addition to the original environmental management including air, sewage, waste, hazard substance, noise, and energy-saving measures and control includes labor safety and health risk evaluation and measures, labor’s interest promotion, balanced work and leisure, free of discrimination, free of sexual harassment and abuse, occupational safety and employee’s mental and physical health, obedience of business morale, intellectual property right, the protection of business secrets, and community watch. ASUS had SERASUS organized in July 2006 to promote corporate social responsibility with the international certification of ISO14001 Environmental Management System and OHSAS 18001 Occupational Safety and Health Management System. The scope of SERASUS is based on the spirit of EICC to integrate the standard requirements of environment, safety, and health, labor and business moral as the structure of management system and is in conformity with the company’s social responsibility policy: 1. Obeying environmental protection and labor safety and health regulations 2. Cherishing natural resources and enforcing pollution prevention aggressively 3. Minimizing environmental impact and safety and health risk 4. Satisfying customer’s demand and realizing green enterprises 5. Promote corporate social responsibility comprehensively 6. Full participation and continuing improvement

The company’s promoting corporate social responsibility: (1) Establish SERASUS organization and promote corporate social responsibility (2) Complete SERASUS regulations and enforce internal audit (3) Conduct supplier’s promotion, investigation, and consultation (4) Continuing improvement and perpetual operation In terms of human right, ASUS has strong belief in humanity and care for employees. ASUS has honored the requirement of age, local regulations, and EIC in recruitment and without discrimination of race, sex, age, political party, religion, and handicap. ASUS takes good care of and protect the work and living conditions of employees and with comprehensive training and self-development provided to employees. ASUS has declared the human right policy in accordance with the Declaration of Human Right of the United Nations: 1.No child labor: In conformity with the low and requirement of minimum age;

therefore, no child labor. 2.In conformity with the minimum wage: Provide employees with the minimum wage

or better than local minimum wage and welfare. 3.Working hours: Provide employees with the benefit of leave with pay periodically.

Labor will not be forced to work over the maximum working hours regulated by local law. In conformity with the requirement of overtime wages or necessary compensation.

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32

4.No discrimination: No discrimination of race, skin color, age, sex, sexual orientation, race, religion, disability, union, or political preference. All men and women are equal and are entitled to protection and free of discrimination.

5. Free of inhuman treatment: Harassment and/or physical abuse is prohibited. 6.No forced labor: ASUS products or service will not be provided by forced, restrained,

or involuntary prison workers. All employed workers for ASUS products and service work at their own free will.

7.Health and safety: Provide employees with a trustworthy, respectful, healthy, and safe working environment.

8.Employee’s training and self-development: Provide facility, training program, time, and grants to support employee’s occupational development.

ASUS has taken part of social charity activity from time to time to fulfill corporate social responsibility in addition to providing basic protection. ASUS has based its long-term orientation and goal on “shortening digital gap,” “upgrading innovative ability,” “incubating science and technology talents,” “promoting industry and academy collaboration,” and “promoting environmental protection and energy saving.” ASUS has ASUS Foundation setup in 2008 to have resources integrated effectively and to feedback the society with substantiated action for the fulfillment of corporate social responsibility. Activities promoted by ASUS and ASUS Foundation in 2009:

1. Sponsoring culture/art/music activities: (1) Sponsor Daai TV for the production and educational promotion of humanity

cleansing programs. (2) Cooperate with Public TV arranging the 2010 2nd 99 series national

documentary tournament with the theme of “Heart Touching – Taiwan’s Vitality.”

(3) Duplicating the successful sponsorship with the Museum of Contemporary Art Taipei in 2008, ASUS Foundation loans ASUS products free of charge to the artists and organizers of the Museum of Contemporary Art Taipei. ASUS Foundation had sponsored eleven domestic and international contemporary art exhibitions in 2009 with 270,000 visitors recorded including the most representatives of “Taipei Arts Festival – 4th” and “Between the Strait Visual Attack and Animation Team Exhibition.”

(4) Work with the Cowparada Taipei 2009 held by Council for Cultural Affairs / Department of Cultural Affairs Taipei City Government / Taichung City Government to promote public arts. ASUS Foundation offers financial sponsorship and the “three encierro” design by ASUS MID to the activities and children beauty and art promotion programs.

(5) Take part in “PayEasy taking care of farmers” activity continuously. ASUS Foundation adopted oranges in 2008; toxic-free 0.5-heacter rice field of Farmer L.B. Wang in 2009 that was scheduled for delivery on February 25, 2010.

2. Shortening digital divide: (1) Overseas

a. Work with ADOC Secretary General and local nonprofit organization to setup one digital learning center in Indonesia and two digital learning centers and two digital learning automobiles in Philippines to offer equal opportunities to minority and youth and children in remote area in order to shorten digital divide.

33

33

b. Sponsor ADOC private office producing documentary and publishing books to promote and share experience in shortening digital divide nationally and internationally.

(2) Domestic a. Work with ETMALL arranging “Infinite love, online tribe” activity to

donate 135 computers to 17 tribe elementary schools in order to help modernize and better computer teaching equipment of schools in remote area.

b. Work with National Tsing Hua University to arrange “2009 Indigene ASUS Science Teaching Award – Online Science Exhibition” in order to combine and promote indigene culture with science education.

c. Work with Microsoft to promote digital phoenix plan with 55 AUSU notebooks donated by ASUS Foundation, teaching materials provided by Microsoft, and teachers assigned by R.O.C. eCommerce Development Association. The digital phoenix plan was to help female inmates in the three jailhouse of Taoyuan, Taichung, and Kaohsiung learns computer skills so they could earn a living after returning to the society. The class was scheduled in February 2010.

d. The company had enforced the “Recycling Green Marketing Ongoing Development Plan” in July 2008 ~ December 2009 to provide consumers in Taiwan with B2C and state-run and private groups with B2B computer recycling service. The recycled computers were repaired and tested before donating them to elementary school and junior high school students in remote area in order to help upgrade information availability in remote areas and shorten digital divide. ASUSTeK promoted the “Computer Recycling Project of Hope” to combine environmental protection and social charity; also, to substantiate enterprises’ social responsibility. Please refer to the website at (http://recycling.asus.com) for the “Computer Recycling Project of Hope” in details.

3. Environmental conservation: (1) Sponsor Public TV with NT$500,000 to film a documentary “Eight Thousand

Miles Away From Home” on black-faced spoonbill for promoting green environment education.

(2) Work with Public TV to hold national environmental protection documentary tournament “Environmental Protection 99 for Beautiful Earth” to upgrade environmental awakening. There were close to one thousand contestants with 500 works submitted for competition in February and award ceremony in April. The awarded works were filmed in a DVD for free circulation to environmental protection and education institutes.

(3) Hold environmental protection and recycling, prize contests, environmental protection hand-made soap, and mercy donation… activities on 422 “Global Earth Day” every year.

(4) Work with Forestry Bureau on Arbor Day to hold plantation, green environment activities.

(5) Summon employees to join the “Clean Coastline and Beautiful Home” voluntary activity and work with the community to clean up the neighborhood and to care of the earth.

4. Cooperation between industry and academia (1)Offer scholarship and financial aid to Tsing Hua University and Zhejiang

University to help incubate science and technology talents for the nation.

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34

(2) Work with Public TV to host 2010 Campus Speech activities; also, upgrade and inspire young individual’s creativity and potential.

5. Care for employees: Arrange Employee Assistance Program (EAP) psychological counseling, free eyesight, muscle, and bones check up, arranging H1N1 vaccine injection onsite, and obeying the operating concept of “incubation, cherish, and care for employees.”

6. Care for minority: (1) “Children Are Us” Bakery stationed in the food court of the headquarters with

job opportunities for minority. ASUSTeK included “Children Are Us” on the payroll as a way to care for and feedback the society.

(2) Sponsor the Matthew Lien concert of HiNet for fund raising for children who need help. ASUS Foundation donated ASUS Bamboo Notebook for rummage sales.

(3) Take care of senior citizens in remote community. Work with Hondao Senior Citizen’s Welfare Foundation and Taiwan Cycling & Health R&D Center to host the “Community Digital Exercise Group, Senior Citizen eCommunity.” The first class was held in Taichung Sunchaio Community with the ASUS products provided by ASUS Foundation, health equipment developed by Taiwan Cycling & Health R&D Center, and exercise courses designed by volunteers and social workers of Hondao Senior Citizen’s Welfare Foundation to help senior citizens stretch out and stay healthy.

(4) For helping local enterprises fulfill social responsibility, invite social welfare and charity groups and minority to hold rummage sales at the company.

7. Offer aids: (1) ASUSTeK announced to join the “August 8 Flood Relief Program” on August

12, 2009. ASUS fellows initiated the “donating one-day income” activity voluntarily.

(2) Make an announcement with Acer, INTC-US Taiwan, and MSFT-US Taiwan to donate 4,500 computers and software to the schools and communities destructed by Typhoon Morakot in seven schools and communities. Assist with the education and community development of the disaster area after Typhoon Morakot through the assistance of The Red Cross Society of the Republic of China and Taiwan Association for Educational Communications and Technology.

ASUS’s fulfillment of corporate social responsibility: 1. ASUSTeK was awarded with the “Enterprise Health Excellence Award” of Taipei

City in 2009 and the “Health Promotion Logo” of Bureau of Health Promotion, Department of Health R.O.C. (Taiwan); also, was the first enterprise to receive the “Nutrition Health Award”.

2. ASUSTeK attended Taiwan’s enterprise ongoing report contest and was awarded with the “Award of Excellence.”

3. ASUSTeK published the 2008 ASUS Ongoing Report in accordance with Global Reporting Initiative G3, GRI G3 in 2009. GRI verified the 2008 ASUS Ongoing Report in conformity with GRI B Standard and it was affixed with the GRI-checked logo.

4. ASUS joined the “CSR Taiwanese Enterprises’ Social Responsibility” rating by Cheers for the first time in 2008 and it was awarded with the CSR Excellence

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35

Award in the category of technology; also, ASUS attended the “Enterprises Citizens” rating by Cheers and was ranked the TOP-50 Enterprises Citizen.

5. ASUS published the “2007 Enterprise Ongoing Report” for the first time in 2008 in accordance with GRI G3; also, online questionnaires were made available to inspire the stakeholders getting involved.

6. ASUS was invited to attend the Carbon Disclosure Project (CDP) in 2008 and with the CDP questionnaires replied for the first time disclosing ASUSTeK’s responsive measures to global warming issue.

7. ASUSTek was awarded with the “Enterprises Ongoing Business Development First Prize” by the Executive Yuan on December 3, 2007. Consumers’ faith in ASUSTeK’s products was reinforced with the said award. ASUSTeK’s quality is as sound as a rock and does meet environmental protection standards. It is the way ASUSTeK fulfilled its business commitment to consumers.

8. ASUSTeK was awarded with a “B+” of the “computer and computer peripherals” category in Oekom in 2007, which was the highest rank among the international brands in competition.

Please visit the website of ASUS at http://csr.asus.com/english/ for the updated information of corporate social responsibility.

Please refer to the following website for ASUS’s 2008 business operation report (Chinese) (English) http://csr.asus.com/english/file/ASUS_CSR_2008_CHN.pdf http://csr.asus.com/english/file/ASUS_CSR_2008_EN.pdf

(VI) The company does not have corporate governance rules and regulations defined; therefore, it is not applicable.

(VII) Other important information that helps understand corporate governance:

ASUSTeK has the “International Material Information Processing Procedure” stipulated for establishing excellence internal material data processing and disclosure mechanism, avoiding unauthorized information disclosure, and ensuring ASUSTeK’s information published in consistence and accurately. The “International Material Information Processing Procedure” was resolved by the directors of board on December 25, 2009. ASUSTeK informs directors, supervisors, managers, and employees at least once a year by the company’s internet, agreement and education and training courses notice regarding the education of the operating procedure and governing regulations. Please refer to the “internal rules” of “corporate governance” on the company’s homepage for the operating procedure in details: http://tw.asus.com/investor.aspx

(VIII) Enforcement of internal control

1. Declaration of Internal Control: Please refer to Page 234. 2. If the company is requested by the SEC to retain CPA’s service for examining internal

control system, the Independent Auditor’s Report must be disclosed: None

(IX) The punishment delivered to the company and the staff of the company, or, the punishment delivered by the company to the staff for a violation of internal control system, the major nonconformity, and the corrective action in the most recent years and up to the date of the annual report printed: None

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36

(X) Resolutions reached in the Shareholders’ Meeting or by the board of directors in the most recent years and up to the date of the annual report printed:

1. The important resolutions of the general shareholder meeting:

Time Subjects Enforcement

06.16.2009 1. The company’s 2008 financial statements were resolved in the board meeting and audited by the supervisors and CPAs. The proposal was passed in the meeting unanimously upon the inquiry of the presiding chairman.

2. The company’s 2008 distribution of retained earnings was presented for recognition. The proposal was passed in the meeting unanimously upon the inquiry of the presiding chairman.

3. The company’s 2008 issuance of stock shares for capitalization from employee’s bonus was presented for recognition. The proposal was passed in the meeting unanimously upon the inquiry of the presiding chairman.

4. Some provisions of the”Operating procedure for Loaning of Funds and Making of Endorsement” would be amended in accordance with the amendment of the governing regulations. The proposal was passed in the meeting unanimously upon the inquiry of the presiding chairman.

The base date for dividend distribution was scheduled on August 24, 2009 and with cash dividend distributed on September 30, 2009. The base date for dividend distribution was scheduled on August 24, 2009 and with stock certified listed on September 30, 2009 for the capitalization. It is operated in accordance with the amended operating procedure.

02.09.2010 1. The OEM business of the company that was held in the form of long-term equity investment was planned for business splitting. The proposal was passed in the meeting unanimously upon the inquiry of the presiding chairman.

2. The company’s splitting and de-capitalization proposal The proposal was passed in the meeting unanimously upon the inquiry of the presiding chairman.

It was enforced in accordance with the splitting proposal resolved. It was enforced in accordance with the de-capitalization proposal resolved. The base date for de-capitalization was temporarily scheduled on June 01, 2010 up to the print of the annual report.

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37

2. The important resolutions of the Board of Directors:

Time Subjects

07.08.2009 1. The base date for de-capitalization from the cancellation of the company’s Treasury stock was scheduled on July 07, 2009.

2. The base date for the issuance of stock share and the distribution of cash dividend for the capitalization from retained earnings in 2008 was scheduled on August 24, 2009.

08.26.2009 1. Recognized the company’s financial statements and consolidatedfinancial statements in the first half year of 2009.

2. It was resolved to retain the service of KPMG International Standards Group with CPA S.F. Yeng and CPA G.L. Yu retained since the second half year of 2009.

3. The company’s IFRS transfer plan and progress report 10.28.2009 Defined loan interest rate of loans granted to CastleNet Technology, Nova,

and Cosmos by ASUSTeK’s subsidiary, ATEN (Soochow). 12.11.2009 1. Resolved to have the OEM business of the company held in the form of

long-term equity investment and with the related business splitting processed; also, proposed it to the shareholders meeting for discussion.

2. Resolved the company’s splitting and de-capitalization proposal; also, proposed it to the shareholders meeting for discussion.

3. Resolved to pass the Articles of Incorporation of the new incorporation; also, proposed it to the shareholders meeting for discussion.

4. Resolved to elect the directors and supervisors for the new incorporation; also, proposed it to the shareholders meeting for discussion.

5. 5. Resolved to summon the company’s first extraordinary shareholders meeting in 2010.

12.25.2009 1. Resolved to have the Company invested indirectly to setup “ASUS (China) Holdings.”

2. Resolved to pass the company’s “Internal Material Information Processing Procedure.”

3. 3. Resolved to pass the company’s “2010 Auditing Plan” proposed. 01.01.2010 1. Resolved to revoke the company’s directors and supervisors of the new

incorporation elected in the board meeting dated December 11, 2009. 2. Resolved to modify the reasons for summoning the company’s first

extraordinary shareholders meeting in 2010. 01.28.2010 1. Resolved the date and subjects of general shareholders meeting in 2010.

2. Resolved the company was to process shareholder’s proposal in the shareholders meeting in 2010.

3. Resolved to have the company’s first convertible bond in Taiwan ceased transferring.

03.12.2010 1. Briefed the company’s 2009 business operation report. 2. Briefed the shareholder’s proposals processed in the company’s general

shareholders meeting. 3. Passed the proposal for the replacement of the company’s CPAs (due to

the internal restructure of the CPA Firm). 4. Recognized the company’s 2009 financial statements and consolidated

financial statements. 5. Recognized the company’s 2009 distribution of retained earrings. 6. Passed the company’s “Articles of Incorporation” amendment.

38

38

Time Subjects 7. Passed the company’s 2009 “Declaration of Internal Control System.” 8. Resolved to change the reasons for summoning shareholders meeting in

2010.

(XI) The directors or supervisors who have objected to the resolutions reached by the board of directors and the objections are recorded or declared in writing in the most recent years and up to the date of the annual report printed: None

(XII) The resignation or discharge of personnel who are responsible for financial statements in the

most recent years and up to the date of the annual report printed: None

IV. CPAs fees

CPA firm CPA Auditing period Note ERNST & YOUNG LEE MING-YU YANG

CHIH-HUEI Jan 1, 2009~Jun 30, 2009 ASUSTek has retained the service of KPMG in response to the consideration of integrated buisness management and development.

KPMG YEN HSIN-FU YU CHI-LUNG Jul 1, 2009~Sep 30, 2009

KPMG YEN HSIN-FU LO JUI-LAN Oct 1, 2009~Dec 31, 2009

The tem of CPAs fee Amount bracket Auditing fees Non-auditing fees Total

1 Below 2,000 thousand

2 2,000 thousands（included）~4,000 thousand

3 4,000 thousands（included）~6,000 thousand V

4 6,000 thousands（included）~8,000 thousand V

5 8,000 thousands（included）~10,000 thousand

6 Over 10,000 thousand（included） V

(I) The non-auditing fees paid to CPAs, CPA firm, and the CPA firm’s related party accounted for over a quarter of the total auditing fees, the auditing amount and non-auditing amount; also, the non-auditing service must be disclosed:

CPA firm （Note 1） CPA

Auditing fees

Non-auditing fees Auditing

period Note System design

Industrial and

commercial registration

Human resources

Others （Note 2） Total

ERNST & YOUNG

LEE MING-YU

2,700 0 226 0 200 426Jan 1,

2009~Jun 30, 2009

1. ASUSTek has retained the service of KPMG in response to the consideration of integrated buisness management and development.

2. Non-auditing service includes profit business income tax withhelding

YANG CHIH-HUEI

KPMG YEN

HSIN-FU 3,850 0 0 0 5,500 5,500

Jul 1, 2009~ Dec 31, 2009

Non-auditing service includes spliting service, pricing transfer,

39

39

YU CHI-LUNG

and administrative measures

LO JUI-LAN

Note 1: If the company has retained the service of another CPA Firm or CPAs, the auditing period must be detailed and with the reason for the change of CPA service detailed in the note. The infomraiton of auditing fees, the auditing amount and non-auditing amount; also, the non-auditing service must be disclose.

Note 2: The information of non-auditing service must be disclosed in details. If the “others” of the non-auditing service amounts over 25% of the non-auditing amount, the content of service must be detailed in the note.

(II) If the auditing fee paid in the year retaining service from another CPA Firm is less than the

auditing fee paid in the year before, the amount of auditing fee before and after the change of CPA Firm and the reasons for the said change must be disclosed: None

(III) If the auditing fee paid in the year retaining service from another CPA Firm is over 15% less

than the auditing fee paid in the year before, the amount and ratio of auditing fee reduced and the reasons for the said change must be disclosed: Not applicable since the company’s auditing fee paid in 2009 was not over 15% less than the auditing fee paid in 2008.

V. CPA’s information:

(I) Former CPAs

Date of change Aug 26, 2009 Reasons and explanation of changes

In response to the company’s integrated business management and development

State whether the appointment is terminated or rejected by the consignor or CPAs

Client

Status CPA Consignor

Appointment terminated automatically

V

Appointment rejected (discontinued)

The opinions other than unqualified opinion issued in the last two years and the reasons for the said opinions

None

Is there any difference in opinion with the issuer

Yes

Accounting principle or practice

Disclosure of financial statements

Auditing scope or procedures

Others

No V

Explanation

Supplementary disclosure (disclosures specified in Article 10.5.1.4 of the standards) None

40

40

(II) Successor CPAs

CPA firm KPMG

CPA YEN HSIN-FU, YU CHI-LUNG

Date of Appointment Oct 6, 2009

Inquiry made on the accounting process of specific transactions, accounting principle, and possible opinions issued on the financial statements, and the result

None

Written opinions of the successing CPAs that are different from the former CPA’s opinions None

(III) The reply of former CPAs on Article 10.5.1 and Article 10.5.2.3 of the standards: None

VI. If the chairman, president, and financial or accounting manager of the company who had worked for the independent auditor or the related party in the most recent year, the name, title, and the term with the independent auditor or the related party must be disclosed: None

VII. Information on Net Change in Shareholding and Net Change in Shares Pledged by

Directors, Supervisors, Department Heads and Shareholders of 10% Shareholding or More:

(1) Information on Net Change in Shareholding

Title Name 2009 As of February 22 (Note 2)

Net Change in Shareholding

Net Change in Share Pledged



Chairman & Chief Branding Officer

Jonney Shih 413,633 0 0 0

Vice Chairman & Deputy Chief

Branding Officer Jonathan Tsang 112,794 0 0 0

Director & President Jerry Shen 445,020 0 0 0

Director & V.P. H.C. Hung 73,815 0 0 0

Director Ivan Ho 62,523 0 0 0

Director & V.P. Tony Chen 75,191 0 0 0

Director Eric Chen 130,464 0 0 0

Supervisor Tze-Kaing Yang 0 0 0 0

Supervisor Chung-Jen Cheng 17 0 0 0

Supervisor L.H. Yang 26,718 0 0 0

V.P. S.Y. Shian (62,726) 0 (54,000) 0

V.P. Joe Hsieh 45,016 0 (36,000) 0

V.P. PC Wang 151,509 0 (10,000) 0

V.P. Henry Yeh 71,019 0 0 0

41

41

Title Name 2009 As of February 22 (Note 2)





V.P. Samson Hu (175,285) 0 0 0

V.P. Benson Lin 111,579 0

Finance & Accounting Officer

David Chang 78,620 0 0 0

Note 1: The parties involved in shares transfer or equity pledge are known as the related party and they must have the following forms filled out.

Note 2: The data collected up to February 22, 2010 were included in the report that was printed on March 22, 2010 for data accuracy.

Note 3: V.P., Samson Hu, filed the transfer of trusted 300,000 shares on December 8, 2009. Vice President, Mr. C.L. Lin reported to duty on June 1, 2009.

(2) Information of shares transferred: There is no party involved in shares transfer known as the related party.

(3) Information of equity pledged: There is no party involved in equity pledge knows as the related

party. VIII. The relation of the top ten shareholders as defined in the Finance Standard Article 6:

Name Shareholding

Shareholding of spouse and minor

Shares held by other

persons in their name

The relation and name of the top

ten shareholders as defined in the

Finance Standard Article 6

Shares % Shares % Shares % Name RelationASUS’s

Certificate of Depository with

CitiBank 169,065,935 3.98% 0 0 0 0 None None

Ted Hsu 130,349,192 3.07% 52,364,252 1.23% 0 0 None None

Wayne Hsieh 101,129,266 2.38% 0 0 0 0 None None

Jonney Shih 97,230,543 2.29% 0 0 0 0 None None

T.H. Tung 84,303,938 1.99% 28,438,228 0.67% 0 0 None None

ChungHwa Post Co., Ltd. 69,731,172 1.64% 0 0 0 0 None None

Jonney Shih’s trust account with the First

Bank

60,000,000 1.41% 0 0 0 0 None None

Rabobank’s investment account of CitiBank (Taiwan)

55,062,713 1.30% 0 0 0 0 None None

42

42

Name Shareholding

Shareholding of spouse and minor

Shares held by other

persons in their name

The relation and name of the top

ten shareholders as defined in the

Finance Standard Article 6

Shares % Shares % Shares % Name RelationCivil Servants Pension Fund Commission

51,575,426 1.21% 0 0 0 0 None None

T.S. Tong’s trust account with Chinatrust

50,000,000 1.18% 0 0 0 0 None None

Note: The shareholdings stated in the table exclude trust shareholdings that are with the “rights to use” reserved.

IX. Investments of Directors, Supervisors, Managers and directly or indirectly controlled business on the reinvested business and the total shareholding ratio:

Total Shareholding Ratio

Baseline date: 12.31.2009, Unit: Share; %

Reinvestment Investment of the

Company

Investments from Directors, Supervisors, Managers and directly

or Indirectly Controlled Business

Total Investment

Shares % Shares % Shares % ASUS TECHNOLOGY INCORPORATION 19,000,000 100.00 19,000,000 100.00

PEGATRON CORPORATION 2,286,053,935 100.00 2,286,053,935 100.00 Pegatron International Investment Co., Ltd. 10,000 100.00 10,000 100.00

Askey Computer Corporation 815,640,733 100.00 815,640,733 100.00

Enertronix, Inc. 40,238,437 100.00 40,238,437 100.00

AGAiT Technology Corporation 20,000,000 100.00 20,000,000 100.00

Hua-Cheng Venture Capital Corp. 80,000,000 100.00 80,000,000 100.00

Hua-Min Investment Co., Ltd. 20,000,000 100.00 20,000,000 100.00

AXUS MICROSYSTEMS INC. 10,046,980 85.00 10,046,980 85.00

eCareme Technologies, Inc. 7,700,000 77.00 7,700,000 77.00

ASMEDIA TECHNOLOGY INC. 24,193,000 60.48 24,193,000 60.48

International United Technology Co., Ltd. 14,181,707 56.73 14,181,707 56.73

SHINEWAVE INTERNATIONAL INC. 5,469,750 51.00 5,469,750 51.00

ADVANTECH Co., Ltd. 76,109,051 14.75 76,109,051 14.75

UNIMAX ELECTRONICS INC. 21,300,000 100.00 21,300,000 100.00

AzureWave Technologies, Inc. 7,800,000 8.64 42,895,846 47.52 50,695,846 56.16GREENASUS RECYCLING CO., LTD. (be liquidated) 100,000 100.00 100,000 100.00

Jie-Li Technology Co., Ltd. 2,425,000 9.70 4,850,000 19.40 7,275,000 29.10

43

43


Company



Total Investment

Shares % Shares % Shares % Yu-Lian Technology Co., Ltd. 5,000,000 25.00 5,000,000 25.00

United Microelectronics Corporation 4,142,260 0.03 4,142,260 0.03

ENE Technology Inc. 1,658,776 2.22 1,105,851 1.48 2,764,627 3.70

Alcor Micro Corp. 1,099,879 1.46 2,349,879 3.12 3,449,758 4.58

Kwong-Yuan Investment Co., Ltd. 10,000,000 7.81 10,000,000 7.81

D-LINK CORPORATION 12,116,840 1.87 12,424,740 1.92 24,541,580 3.79PRIME VIEW INTERNATIONAL CO., LTD. 621,084 0.07 621,084 0.07

Edison Opto Corporation 500,000 0.75 500,000 0.75

Nuvoton Technology Corporation 2,500,000 1.25 2,500,000 1.25 5,000,000 2.50

YUAN-SHENG Technology Co., Ltd.(*) 1,500,000 10.00 1,500,000 10.00

APAQ Technology Co., Ltd. 11,063,163 18.91 11,063,163 18.91

uPI Semiconductor Corp. 1,500,000 6.00 1,500,000 6.00

MStar Semiconductor Inc. 2,798,000 0.79 2,798,000 0.79

Pu-Chi Technology Co., Ltd. - 100.00 - 100.00

ASUS COMPUTER INTERNATIONAL 50,000 100.00 50,000 100.00

Asus Holland B. V. 3,000,000 100.00 3,000,000 100.00

ASUS INTERNATIONAL LTD 89,730,042 100.00 89,730,042 100.00

Asustek Holdings Limited 53,452,104 100.00 53,452,104 100.00

ASUSCHANNEL Corp. 50,000 100.00 50,000 100.00Azurewave (Cayman) Holding Inc. (be liquidated) - 9.13 - 51.32 - 60.45

CHANNEL PILOT LIMITED 30,033,000 100.00 30,033,000 100.00

ASUS TECHNOLOGY PTE. LIMITED 30,002,500 100.00 30,002,500 100.00

Asus Middle East FZCO 5 100.00 5 100.00

ASUS COMPUTER GmbH - 100.00 - 100.00

ASUS COMPUTER Benelux B.V. - 100.00 - 100.00

ASUS FRANCE SARL - 100.00 - 100.00

ASUSTEK (UK) LIMITED - 100.00 - 100.00ASUS TECHNOLOGY (HONG KONG) LIMITED 500,000 100.00 500,000 100.00

ASUS KOREA Co., Ltd. 358,433 100.00 358,433 100.00ASUSTEK COMPUTER (SINGAPORE) PTE, LTD. 20,002 100.00 20,002 100.00

ASUS Polska Sp. z o.o. 1,000 100.00 1,000 100.00

ASUS Technology Private Limited 8,040,797 100.00 8,040,797 100.00

ASUS Technology Holland B.V. 200,000 100.00 200,000 100.00

ASUS Technology (Vietnam) Co., LTD. - 100.00 - 100.00

44

44


Company



Total Investment

Shares % Shares % Shares % ASUSTEK ITALY S.R.L. - 100.00 - 100.00

ASUS IBERICA S.L. 3,000 100.00 3,000 100.00

ASUS Technology (Suzhou) Co. Ltd. - 100.00 - 100.00

Asus Japan Incorporation 500 100.00 500 100.00

ASUS COMPUTER Czech Republic s.r.o. - 100.00 - 100.00ASUSTEK COMPUTER (SHANGHAI) CO. LTD. - 100.00 - 100.00

ASUS EGYPT L.L.C. - 100.00 - 100.00ASUS Hungary Services Limited Liability Company - 100.00 - 100.00

ASUS PORTUGAL, SOCIEDADE UNIPESSOAL LDA 30,000 100.00 30,000 100.00

Asus Switzerland GmbH 800 100.00 800 100.00

Askey International Corp. 3,700,000 100.00 3,700,000 100.00

Dynalink International Corp. 39,160,172 100.00 39,160,172 100.00

Magic International Co., Ltd. 82,525,738 100.00 82,525,738 100.00Askey (Vietnam) Company Limited (be liquidated) 2,883,359 100.00 2,883,359 100.00

Double Tech Ltd. 50,000 100.00 50,000 100.00

Big Profit Limited 50,000 100.00 50,000 100.00

Famous Star Investments Limited 20,050,000 100.00 20,050,000 100.00

Magicom International Corp. 71,030,000 100.00 71,030,000 100.00

Askey Technology (Shanghai) Limited - 100.00 - 100.00

Openbase Limited 50,000 100.00 50,000 100.00

Goodsmart International Ltd. 50,000 100.00 50,000 100.00

Leading Profit Co., Ltd. 50,000 100.00 50,000 100.00

UNI Leader International Ltd. 50,000 100.00 50,000 100.00

Askey Technology (Jiangsu) Limited - 100.00 - 100.00

ASON TECHNOLOGY (SUZHOU) LTD - 100.00 - 100.00ASHINE TECHNOLOGY (SUZHOU) LTD. - 100.00 - 100.00

WUJIANG WILL STAR INVESTMENTS LIMITED - 100.00 - 100.00

eMES (SHUZHOU) CO., LTD. - 100.00 - 100.00

GREAT EXTEND INVESTMENT CORP. 412,662 100.00 412,662 100.00

International United Technology Co., Ltd. - 100.00 - 100.00

AGAiTech Holding Limited 1,000,000 100.00 1,000,000 100.00

SOUTH TEC ASIA LIMITED 5,660,000 100.00 5,660,000 100.00

CENTRAL TEC ASIA LIMITED 2,020,000 100.00 2,020,000 100.00

45

45


Company



Total Investment

Shares % Shares % Shares % ENERTRONIX HOLDING LIMITED 12,835,000 100.00 12,835,000 100.00ENERTRONIX INTERNATIONAL LIMITED 10,000 100.00 10,000 100.00

ASUS COMPUTER (SHANGHAI) CO., LTD. - 100.00 - 100.00Shandong Enertronix Electronic Co., Ltd. (be liquidated) - 100.00 - 100.00

Enertronix (HuiZhou) Co., Ltd. - 100.00 - 100.00

DEEP DELIGHT LIMITED 11,422,000 100.00 11,422,000 100.00

UNIMAX HOLDINGS LIMITED 6,500,000 100.00 6,500,000 100.00

Potix Corporation (Cayman) 5,000,000 22.22 5,000,000 22.22

ASUS COMPUTER CORPORATION 3,000,000 100.00 3,000,000 100.00

MOBOSTAR TECHNOLOGY LIMITED 50,000 100.00 50,000 100.00

Investar Burgeon Venture Capital Inc. 379 10.84 379 10.84

UNIHAN CORPORATION 840,105,000 100.00 840,105,000 100.00

AMA PRECISION INC. 52,000,000 100.00 52,000,000 100.00

Advansus Corp. 18,000,000 50.00 18,000,000 50.00

ASROCK Incorporation 67,462,159 58.65 67,462,159 58.65KINSUS Interconnect Technology Corporation 173,917,729 39.00 173,917,729 39.00

ABILITY ENTERPRISE CO., LTD. 55,247,023 13.00 55,247,023 13.00

Lumens Digital Optics Inc. 11,305,180 56.52 11,305,180 56.52

STARLINK ELECTRONICS CORP. 69,000,000 100.00 69,000,000 100.00ASUSPOWER INVESTMENT INCORPORATION 841,900,000 100.00 841,900,000 100.00

ASUS INVESTMENT INCORPORATION 908,600,000 100.00 908,600,000 100.00

ASUSTEK INVESTMENT INCORPORATION 872,700,000 100.00 872,700,000 100.00

ASFLY TRAVEL SERVICE LIMITED - 100.00 - 100.00

HUA-YUAN Investment Limited - 100.00 - 100.00

PEGAVISION CORPORATION 30,400,000 84.56 30,400,000 84.56

EzWAVE Technology Inc. 500,000 100.00 500,000 100.00

Yo-Far Technologies Co., Ltd. 1,050,000 17.50 1,050,000 17.50

AzureLighting Technologies, Inc. 2,000,000 100.00 2,000,000 100.00

AVY Precision Technology INC. 15,115,631 20.39 15,115,631 20.39

Ability International Investment Co., Ltd. 57,313,286 100.00 57,313,286 100.00

Wai-Gin Industry Co. 3,000,000 7.50 3,000,000 7.50

The Infopro Group 446,805 4.60 446,805 4.60

Terax Communication Technologies Inc. 12,140 0.08 12,140 0.08

46

46


Company



Total Investment

Shares % Shares % Shares % Hua-Wei Investment Co., Ltd. - 48.78 - 48.78

PEGA INTERNATIONAL LIMITED - 100.00 - 100.00

Zowie Technology Co., Ltd. 472,000 1.72 472,000 1.72

Ralink Technology Corp. 4,886,720 3.89 4,886,720 3.89

Mobitek Communication Corp. 5,662,500 14.01 5,662,500 14.01

LOTES Co., Ltd. 1,883,485 2.47 1,883,485 2.47

TrendChip Technologies Corp. 2,952,351 8.30 2,952,351 8.30YOUNG FAST OPTOELECTRONICS CO., LTD 248,547 0.19 248,547 0.19

WIN Semiconductors Corp. 7,500,000 1.26 7,500,000 1.26

PEGATRON HOLDING LIMITED 660,197,567 100.00 660,197,567 100.00

UNIHAN HOLDING LIMITED 211,600,026 100.00 211,600,026 100.00

PEGATRON USA 50,000 100.00 50,000 100.00

Asuspower Corp. 349,000,000 100.00 349,000,000 100.00

Pegatron Japan Inc. - 100.00 - 100.00MAGNIFICENT BRIGHTNESS LIMITED 177,961,090 100.00 177,961,090 100.00

BOARDTEK HOLDINGS LIMITED 52,085,790 100.00 52,085,790 100.00BOARDTEK HOLDINGS LTD.(Cayman) 100,000,000 100.00 100,000,000 100.00

BOARDTEK (H.K.) TRADING LIMITED 200,000 100.00 200,000 100.00

PROTEK GLOBAL HOLDINGS LIMITED 233,050,000 100.00 233,050,000 100.00

ASLINK PRECISION CO., LTD. 19,093,263 100.00 19,093,263 100.00

NORTH TEC ASIA LIMITED 75,050,000 100.00 75,050,000 100.00DIGITEK GLOBAL HOLDINGS LIMITED 50,000 100.00 50,000 100.00

POWTEK HOLDINGS LIMITED 8,050,000 100.00 8,050,000 100.00

CASETEK HOLDINGS LIMITED 138,099,685 100.00 138,099,685 100.00MAINTEK COMPUTER (SUZHOU) CO., LTD. - 100.00 - 100.00

BOARDTEK COMPUTER (SUZHOU) CO., LTD. - 100.00 - 100.00

CASETEK COMPUTER (SUZHOU) CO., LTD. - 100.00 - 100.00

Powtek (Shanghai) Co., Ltd. - 100.00 - 100.00

UNITED NEW LIMITED 17,396,100 51.00 17,396,100 51.00AVY PRECISION ELECTROPLATING (SUZHOU) CO., LTD. - 100.00 - 100.00

SLITEK HOLDINGS LIMITED 1,210,000 100.00 1,210,000 100.00

PROTEK (SHANGHAI) LIMITED - 100.00 - 100.00

47

47


Company



Total Investment

Shares % Shares % Shares % LINKTEK PRECISION (SUZHOU) CO., LIMITED - 100.00 - 100.00

TOPTEK PRECISION INDUSTRY CO., LIMITED - 100.00 - 100.00

ASAP INTERNATIONAL CO., LIMITED 8,875,000 51.00 8,875,000 51.00

AMA Technology Corporation 300,000 100.00 300,000 100.00

AMA Holdings Limited 5,131,948 100.00 5,131,948 100.00

EXTECH LTD. 1,908,000 90.51 1,908,000 90.51

METAL TRADINGS LTD. 2,107,000 100.00 2,107,000 100.00FENGSHUO TRADING (TONGZHOU) CO., LTD. - 100.00 - 100.00

Grandtech Precision Ltd. - 100.00 - 100.00

KINSUS INVESTMENT CO.,LTD. 50,000,000 100.00 50,000,000 100.00

KINSUS CORP. (USA) 500,000 100.00 500,000 100.00KINSUS HOLDING (SAMOA) LIMITED 50,000,000 100.00 50,000,000 100.00

KINSUS HOLDING (CAYMAN) LIMITED 50,000,000 100.00 50,000,000 100.00

KINSUS INTERCONNECT TECH. (SUZHOU) CORP. - 100.00 - 100.00

PEGATRON TECHNOLOGY SERVICE INC. 2,800 100.00 2,800 100.00

ASUS SERVICE CANADA 500 100.00 500 100.00

STRATEGY Technology Co., Ltd. 1 100.00 1 100.00

COTEK HOLDINGS LIMITED 12,260,000 100.00 12,260,000 100.00

Top Quark Limited 7,550,000 100.00 7,550,000 100.00

RUNTOP (SHANGHAI) CO., LTD. - 100.00 - 100.00COTEK ELECTRONICS (SUZHOU) CO., LTD. - 100.00 - 100.00

PEGATRON Mexico, S.A. DE C.V - 100.00 - 100.00

ASUS HOLLAND HOLDING B.V. - 100.00 - 100.00

Pegatron Czech s.r.o. - 100.00 - 100.00

Azwave Holding (Samoa) Inc. 12,000,000 100.00 12,000,000 100.00

AzureWave Technologies (Shanghai) Inc. - 100.00 - 100.00AZURELIGHTING TECHNOLOGIES INC. - 100.00 - 100.00

Eminent Star Company Limited 387,923 100.00 387,923 100.00

Jade Technologies Limited 44,781 100.00 44,781 100.00

Hannex International Limited 178,235 100.00 178,235 100.00

AzureWave Technologies (ShenZhen) Inc. - 100.00 - 100.00

YEH-HUA Technologies (Nanjing) Inc. - 100.00 - 100.00

48

48


Company



Total Investment

Shares % Shares % Shares % ASLINK (H.K.) PRECISION CO., LTD. 4,785,010 100.00 4,785,010 100.00

ASIAROCK TECHNOLOGY LIMITED 40,000,000 100.00 40,000,000 100.00

Leader Insight Holdings Ltd. 2,100,000 100.00 2,100,000 100.00

ASROCK EUROPE B.V. 200,000 100.00 200,000 100.00

CalRock Holdings, LLC. 2,000,000 100.00 2,000,000 100.00

Firstplace International Ltd. 2,050,000 100.00 2,050,000 100.00

ASRock America, Inc. 2,000,000 100.00 2,000,000 100.00

Lumens Europe BVBA 20 100.00 20 100.00

Lumens Integration Inc. 1,222,000 100.00 1,222,000 100.00

Lumens Digit Image Inc.(SAMOA) - 100.00 - 100.00

CHIEH-HSIN INTERNATIONAL INC. 94,000 94.00 94,000 94.00

Lumens (Suzhou) Digital Image Inc. - 100.00 - 100.00

ABILITY ENTERPRISE (BVI) CO., LTD - 100.00 - 100.00ASSOCIATION INTERNATIONAL LTD. - 100.00 - 100.00

VIEWQUEST TECHNOLOGIES INTERNATIONAL INC. - 100.00 - 100.00

VIEWQUEST TECHNOLOGIES (BVI) INC. - 100.00 - 100.00

ACTION PIONEER INTERNATIONAL LTD. - 100.00 - 100.00

Ability Technology (Dongguan) Co., Ltd. - 100.00 - 100.00EVER PINE INTERNATIONAL LTD.(BVI) - 34.65 - 34.65

SHIN-EI YORKEY INTERNATIONAL LTD.(BVI) - 50.00 - 50.00

YORKEY OPTICAL INTERNATIONAL(CAYMAN) - 17.37 - 17.37

PENTAX VQ CO., LTD. - 40.00 - 40.00ASAP TECHNOLOGY (JIANGXI) CO., LIMITED. - 100.00 - 100.00

KAEDAR TRADING LTD. 5,000,000 100.00 5,000,000 100.00

KAEDAR HOLDINGS LIMITED 25,000,000 100.00 25,000,000 100.00KAEDER ELECTRONICS (KUNSHAN) CO., LTD - 100.00 - 100.00

Core-Tek (Shanghai) Limited - 100.00 - 100.00GHING HONG PRECISE MOULD INDUSTRY (SUZHOU) - 100.00 - 100.00

HONG HUA TECHNOLOGY (SUZHOU) CO., LTD - 100.00 - 100.00

Bao-Yi Enterprise Co., Ltd. 200,000 100.00 200,000 100.00SHANGHAI INDEED TECHNOLOGY CORPORATION - 100.00 - 100.00

Zhangjiagang E. Kao-Shin Metal Products Co., Ltd. - 20.00 - 20.00

49

49


Company



Total Investment

Shares % Shares % Shares % Atheros Communications Inc. 503,741 1.00 503,741 1.00

WILSON HOLDINGS LIMITED 4,000,000 49.00 4,000,000 49.00

INDEED HOLDINGS LIMITED 19,600,000 49.00 19,600,000 49.00

Asia Cement Corporation 275,525 0.01 275,525 0.01

China Steel Corporation 426,587 0.00 426,587 0.00

CHROMA ATE INC. 190,359 0.05 190,359 0.05

CHUNG HUNG STEEL CO.,LTD. 700,377 0.04 700,377 0.04

Tripod Technology Corporation 101,000 0.02 101,000 0.02

50

50

IV. Stock Subscription

I. Capital and shares

(1) History of capitalization 1. Type of shares

February 22, 2010 / Unit: Shares

Type of Shares

Authorized Shares

RemarksListed (Available for trading on the

TSE) (Note) Unissued shares Total

Order common stock 4,246,777,484 503,222,516 4,750,000,000

Note: Listed stock

2. Stock capital

Month / Year

Par value (NT$)

Authorized shares Issued shares Remarks

Shares (1,000)

Amount ($1,000)

Shares (1,000)

Amount ($1,000) Source of capital Non-monetary

capital

Approval date and approval no. of

capitalization by the SEC, Ministry of Finance

1990.03 10 3,000 30,000 3,000 30,000 Incorporation －－ 1990.11 10 8,000 80,000 8,000 80,000 Cash $50 million －－

1991.12 10 15,000 150,000 15,000 150,000Cash $40 million Retained earnings $30 million

－－

1993.04 10 19,900 199,000 19,900 199,000 Cash $49 million －－

1993.09 10 30,845 308,450 30,845 308,450 Retained earnings $109.45 million －

1993.08.27 SFE Ruling (82) Tai-Tsai-Cheng (1) No. 30832

1994.08 10 45,033.7 450,337 45,033.7 450,337 Retained earnings $141.887 million －


1995.06 10 60,000 600,000 60,000 600,000 Retained earnings $149.663 million －


1996.09 10 200,000 2,000,000 120,000 1,200,000Cash $12 million Retained earnings $588 million

－ 1996.06.28 SFE Ruling (85) Tai-Tsai-Cheng (1) No. 40947

1997.05 10 650,000 6,500,000 323,000 3,230,000

Cash (GDR) $210 million Retained earning $1.82 billion

－

1997.05.05 SFE Ruling (86) Tai-Tsai-Cheng (1) No. 30903 1997.04.17 SFE Ruling (86) Tai-Tsai-Cheng (1) No. 30279

1998.06 10 1,400,000 14,000,000 811,500 8,115,000 Retained earning $4.885 billion －


1998.10 10 1,400,000 14,000,000 813,500 8,135,000 Cash $20 million － 1998.08.30 SFE Ruling (87) Tai-Tsai-Cheng (1) No. 35007

1999.06 10 1,400,000 14,000,000 1,144,900 11,449,000 Retained earning $3.314 billion －


1999.08 10 1,400,000 14,000,000 1,146,400 11,464,000 Cash $15 million － 1999.06.16 SFE Ruling (88) Tai-Tsai-Cheng (1) No. 53605

2000.06 10 2,000,000 20,000,000 1,567,104 15,671,040 Retained earnings $4.20704 billion －


2001.06 10 2,100,000 21,000,000 1,976,880

19,768,800 Retained earnings $4.09776 billion －


2002.07 10 2,100,000 21,000,000 1,998,880 19,988,800 Retained earnings $220 million －


51

51

Month / Year

Par value (NT$)

Authorized shares Issued shares Remarks

Shares (1,000)

Amount ($1,000)

Shares (1,000)

Amount ($1,000) Source of capital Non-monetary

capital

Approval date and approval no. of

capitalization by the SEC, Ministry of Finance

2003.07 10 2,450,000 24,500,000 2,281,740 22,817,400 Retained earnings $2.8286 billion －

2003.07.08 SFE Ruling Tai-Tsai-Cheng (1) No. 0920130466

2004.08 1 0 2,872,000 28,720,000 2,552,914 25,529,140 Retained earnings $2.71174 billion －

2004.07.12 FSC Ruling Jin-Kwong-Cheng (1) No. 0930130836



2005.12 1 0 3,380,000 33,800,000 2,920,798 29,207,982 Stock shares $595,928,350 －


2006.01 1 0 3,380,000 33,800,000 2,924,521 29,245,209 Convertible bond for stock $37,226,200 － 2006.02.03 Jin-So-Son-Tzi

No. 09501019910

2006.03 1 0 3,380,000 33,800,000 2,998,184 29,981,838 Stock shares $736,629,610 －

2006.01.13 FSC Ruling Jin-Kwong-Cheng (1) No. 0940161197 2006.02.27 FSC Ruling Jin-Kwong-Cheng (1) No. 0950106726


No. 09501073310




No. 09601090540



2007.09 1 0 4,250,000 42,500,000 3,682,512 36,825,116 Stock share $298,245,610 －



No. 09601256950


No. 09701012350


No. 09701109460


No. 09701207890

2008.09 1 0 4,750,000 47,500,000 4,245,897 42,458,967 Retained earnings $4.94065172 billion － 2008.07.17 Jin-So-Son-Tzi

No. 0970036193


No. 09701269640

2009.07 1 0 4,750,000 47,500,000 4,219,926 42,199,262

Purchased Treasury stock for cancellation with decrease of $261,250,000

－ 2009.07.15 Jin-So-Son-Tzi No. 09801153240

2009.08 1 0 4,750,000 47,500,000 4,246,777 42,467,77 Retained earnings $268,512,150 － 2009.07.01 Jin-So-Son-Tzi

No. 0980032762

3. Self-registration system: None

(2) Status of shareholders

Status of ShareholdersFebruary 22, 2010

Status of shareholders

QTY

Government Agencies

Financial Institutions

Other Juridical Persons

Domestic Natural Persons

Foreign Institutions &

Natural Persons Total

Number of Shareholders 10 23 568 228,239 1,190 230,030

Shareholding 41,866,536 77,272,772 606,210,846 1,804,066,508 1,717,360,822 4,246,777,484

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Shareholding ratio (%) 0.99 1.82 14.28 42.47 40.44 100.00

(3) Status of Shareholding Distributed

1. Status of Shareholding Distributed

(The par value of each share is NT$10) February 22, 2010

Classification Number of Shareholder Shareholding Shareholding

Ratio 1- 999 87,517 16,216,240 0.38%

1,000- 5,000 99,738 215,610,210 5.08% 5,001- 10,000 21,781 151,241,341 3.56% 10,001- 15,000 8,207 96,490,355 2.27% 15,001- 20,000 3,506 61,169,693 1.44% 20,001- 30,000 3,613 86,284,181 2.03% 30,001- 50,000 2,449 93,039,671 2.19% 50,001- 100,000 1,614 109,955,374 2.59% 100,001- 200,000 618 84,581,807 1.99% 200,001- 400,000 336 94,691,100 2.23% 400,001- 600,000 155 77,241,913 1.82% 600,001- 800,000 91 64,442,410 1.52% 800,001-1,000,000 51 46,556,003 1.10% Over 1,000,001 354 3,049,257,186 71.80%

Total 230,030 4,246,777,484 100.00%

2. Preferred Stock Shares: None (4) Roster of Major Shareholders

Roster of Major Shareholders

As of February 22, 2010

Shareholding Shareholder’s Name

Shareholding Shareholding Ratio (%)

ASUS’s Certificate of Depository with CitiBank 169,065,935 3.98%

Ted Hsu 130,349,192 3.07%

Wayne Hsieh 101,129,266 2.38%

Jonney Shih 97,230,543 2.29%

T.H. Tung 84,303,938 1.99%

Chunghwa Post Co., Ltd. 69,731,172 1.64%

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Shareholding Shareholder’s Name

Shareholding Shareholding Ratio (%)

Jonney Shih’s trust account with the First Bank 60,000,000 1.41%

Rabobank’s investment account of CitiBank (Taiwan) 55,062,713 1.30%

Civil Servants Pension Fund Commission 51,575,426 1.21%

T.S. Tong’s trust account with Chinatrust 50,000,000 1.18%

(5) Market Price, Net Worth, Earnings & Dividend per Share of the Last Two Years

Market Price, Net Worth, Earnings & Dividend per Share

Unit: NT$/Share

Fiscal year Item 2008 2009

As of February 28, 2010 (Note 9)

Market price per share (Note 1)

Max. 101.00 66.50 70.60Min. 32.05 29.50 56.00

Average 73.60 47.66 63.59Net worth per share (Note 2)

Before appropriation 39.40 40.78 -

After appropriation 37.18 (Note 8)

Earnings per share Weighted average shares

4,245,535 thousand

shares

4,242,156 thousand

shares -

Earnings per shares (Note 3)

Before adjustment 3.88 2.94 -

After adjustment 3.88 (Note 8)

Dividends per share

Cash dividends 2.00 (Note 8) -

Stock dividends

Stock dividends from Retained

earnings 0.02 (Note 8) -

Stock dividends from Additional paid-in capital

0 (Note 8) -

Accumulated unpaid dividends (Note 4) - - -

Analysis of return on investment

Price/Earning Ratio (Note 5) 18.97 16.21 - Price/Dividend Ratio (Note 6) 36.80 (Note 8) - Cash dividends yield rate (Note 7) 2.72% (Note 8) -

＊For the stock distribution from the capitalization with retained earnings or additional pain-in capital, the information of market price and cash dividend adjusted retroactively in accordance with the stock shares issued must be disclosed.

Note 1: List the highest and lowest market price per share; also, calculate the average market price per share in accordance with the trade amount and shares.

Note 2: Please base the information on the shares issued at yearned and the resolution for stock distribution in shareholders meeting.

Note 3: If the stock dividend is to be adjusted retroactively, please list the earnings per share before and after the adjustment.

Note 4: According to the regulations of security issuance, if the dividend that is not distributed can be accumulated till the year with retained earnings, the accumulated unpaid dividend of the year must be disclosed.

Note 5: Profit ratio = Closing price per share of the year / Earning per share Note 6: Earning ratio = Closing price per share of the year / Cash dividend per share Note 7: Cash dividend yield rate = Cash dividend per share / Closing price per share of the year Note 8: Subject to the approval of the annual shareholders meeting. Note 9: The data collected up to February 28, 2010 were included in the report printed on March 22, 2010 for data

accuracy.

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(6) Execution of Dividend Policy

1. Dividend Policy The company is in a changing industrial environment and a growing industrial life cycle. For the company’s long-term financial planning and the shareholder’s need for cash inflow, the annual distribution of cash dividend may not be for an amount below 10% of cash dividend and stock dividend together.

2. Proposed Distribution of Dividends: (1) The company’s had appropriated legal surplus for an amount of $1,247,906,564 equivalent to

10% of net income, $12,479,065,636, in 2009. Therefore, an amount of $11,231,150,072 was available for distribution in 2009 and with the retained earnings of prior periods available for distribution amounted $65,136,092,187 for a grand total of $76,367,251,259 at yearend that was distributed in accordance with the “Articles of Incorporation” as follows (Please refer to the distribution of retained earrings table for details):

i. Shareholder dividend: NT$ 4,246,777,484, distributed in cash. ii. Shareholder cash dividends: NT$ 4,671,455,232.

(2) If shareholder’s cash dividend is less than NT$ 1, the distribution will be made in the form of cash rounded and adjusted by a specific represent arranged by the Chairman of the Board of Directors.

(3) The distribution of retained earnings was scheduled before the base date for dividend distribution. If the dividend distribution rate is affected by the changes in outstanding stock shares due to the conversion of convertible bond to stock shares or the purchase of Treasury stock, the shareholders meeting may be authorize the board of directors to handle it.

(4) The board of directors is authorized to schedule the base date for dividend distribution and handle the process upon a resolution is reached in the shareholders meeting.

Distribution of Retained Earnings2009 /Unit: NT$

Account Name Amount Remarks

Unappropriated Earning, Beginning (Before adjusted) 65,568,784,392

(-)Cancelled Treasury stock 440,173,025 (+)Effect of Changes of The Investee

Companies' Equity 7,480,820

Unappropriated Earning 65,136,092,187 FY2009 Profit After Tax 12,479,065,636

(-)10% Legal Reserve 1,247,906,564 FY2009 Distributable Profit 11,231,159,072 FY2009 Distributable Earnings 76,367,251,259 Appropriation Items:

Dividend Interest (10%) 4,246,777,484 NTD$1.0 / share Cash Dividend 4,671,455,232 NTD$1.1 / share

FY2009 Undistributed Profit 2,312,926,356 FY2009 Unappropriated Earnings, Ending 67,449,018,543 Notes: Employee’s Bonus 698,438,530 Remuneration for Directors and Supervisors 69,843,815 Note: The proposed profit distribution is allocated from 2009 retained earnings available for distribution.

(7) Impact of the proposed stock dividend in shareholders meeting on business performances and EPS:

Not Applicable Note: The Company did not have financial forecast proposed up to the date of the annual report

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printed.

(8) Bonus to employees and remuneration to directors and supervisors 1. Information of dividend to employee and remuneration to directors and supervisors was

prescribed in the Articles of Incorporation. The Company's net income before tax must be used to pay tax and make up accumulated loss first, then with 10% legal reserve and 10% special reserve appropriated; also, 10% dividend interest paid thereafter; also, an amount not less than 1% of the balance thereafter is appropriated for the distribution of dividend to employees, an amount not over 1% of the balance thereafter is appropriated for the distribution of remuneration to directors and supervisors. The subsidiary’s employees are entitled to the distribution of stock dividend of the parent company. The board of directors is then proposed the distribution of the net balance in shareholders meeting for approval.

2. Accounting process applied to the estimation base of dividend to employee and

remuneration to directors and supervisors, outstanding shares computing base for stock dividend distribution, and the spread between amount distributed and estimated: For the estimation base of dividend to employee and remuneration to directors and supervisors, net income is used to pay tax and make up loss first, appropriating 10% legal surplus thereafter and 10% dividend afterwards. Employee bonus is for an amount equivalent to 10% of the net income thereafter and the remuneration to Directors and Supervisors is for an amount equivalent to 1% of the net income. The outstanding shares computing base for stock dividend distribution is based on the closing price of the day before the shareholders meeting and the ex-right and ex-dividend effect. The spread between amount distributed and estimated is deemed as changes in accounting estimation and debited or credited to the profit and loss account upon in the distributing year.

3. Dividend distribution of employees in 2009 resolved by the board of directors (1)Distribution amount of cash dividend and stock dividend to employees and

remuneration to directors and supervisors proposed: Amount of Distribution (NTD) Cash dividend to employees 698,438,530

Stock dividend to employees 0

Remuneration to directors and supervisors 69,843,815

The spread amount between the expense accrued and estimated must be disclosed and with the causes and processes detailed: None

(2) Proposed stock dividend amount to employees and the ratio of that amount to the total amount of net income and total dividend to employees

(3) Earnings per share including the proposed stock dividend to employees and remuneration to directors and supervisors: Not applicable since the stock dividend to employees and remuneration to directors and supervisors is expensed in accounting books.

4. The distribution of dividend to employees and remuneration to directors and

supervisors (including shares and amount distributed and stock price) in 2008; the

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spread between the accrued amount and estimated amount must be disclosed and with the causes and processes detailed:

(1) Distribution of dividend to employees and remuneration to directors and supervisors in the year: Cash dividend to employees: NTD250,837,320

Stock dividend to employees: NTD700,000,000 For the capitalization of dividend to employees, it was computed in accordance with the closing price $40.10 on June 15, 2009 and the ex-right and ex-dividend effect. 18,411,362 shares were issued from the capitalization of dividend to employees for an amount of $700,000,000 and with cash dividend of $16 distributed to odd shares. Remuneration to directors and supervisors: NTD52,824,296

(2) The spread between the accrued amount and estimated amount of dividend to employees and remuneration to directors and supervisors must be disclosed and with the causes and processes detailed: None

(9) Purchase of Treasury stock:

Term of call 1st time in 2009

Purpose of call For protecting the company’s credit and

shareholder’s interest Call period February 19, 2009 ~ April 18, 2009 Call price NT$23 ~ 48

Type and volume of stock shares called Common stock 26,125,000 shares Amount of call NT$873,459,789

Stock shares written off and transferred None Shareholdings 26,125,000 shares

Ratio of shareholdings to total shares issued 0.62 ％

II. Arrangement of corporate bond:

(I) Arrangement of corporate bond: 1. CB

Type of corporate bond The 1st domestic convertible bond

Date of issuance (process) November 7, 2006

Face value NT$100 thousand

Location of issuance and trade Taiwan, GreTai securities market

Issuing price Issued at the face value 100%

Total amount NT$12,000,000 thousand

Interest rate 0%

Term Five-year term Due date: November 7, 2011

Guarantee institute -

Trustee Trust Department of TAIPEIFUBON COMMERCIAL BANK CO., LTD

Underwriter Fubon Securities Co., Ltd.

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Type of corporate bond The 1st domestic convertible bond

Attorney -

CPA -

Solvency

Unless the bondholders have the corporate bonds converted to the company’s common stock in accordance with Article 11 of Corporate Bond Issuance & Conversion Act, or, the corporate bonds are “put” in accordance with Article 20 of Corporate Bond Issuance & Conversion Act, or, the company has the corporate bonds “called” in accordance with Article 11 of Corporate Bond Issuance & Conversion Act, the corporate bonds are liquidated at the face value on the due date.

Outstanding Principal NT$3,805,900,000 (up to the date of the report printed)

Redeemed or liquidated before maturity date

（a）The company may have the convertible bonds “called”from the 31st day of the issuance date to forty days before the due date. If the closing price of the company’s common stock at SEC exceeds the conversion price for over 50% for thirty working days consecutively, the company may send a “bond call notice” (the said period starts from the date of notice sent by the company; also, the baseline date for “call”is on the last day of the period; moreover, the baseline date for “call” may not fall in the no-conversion period of this convertible bond) in thirty working days to creditors (based on the roster on the fifth working day before sending the “Bond Call Notice; however, a notice is published for the knowledge of investors who have acquired the convertible bond by trade or other means) by certified mail. Inform GreTai in writing to have it published; also, the convertible bonds are “called” at face value on the due date.

（b）From the 31st day of the bond issuance to forty days before the due date, if the convertible bond in circulation is for an amount less than 10% of total issuance, the company may send a “bond call notice”(the said period starts from the date of notice sent by the company; also, the baseline date for “call” is on the last day of the period; moreover, the baseline date for “call” may not fall in the no-conversion period of this convertible bond) to creditors (based on the roster on the fifth working day before sending the “Bond Call Notice;” however, a notice is published for the knowledge of investors who have acquired the convertible bond by trade or other means) by certified mail. Inform GreTai in writing to have it published; also, the convertible bonds are “called” at face value on the due date.

Restrictive clauses - Rating institute, rating date, corporate bond rating

-

Other rights Converted (exchanged or

NT$7,000,000 (up to the date of the report printed)

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Type of corporate bond The 1st domestic convertible bond subscribed) common stock, GDR, or marketable securi ty up to the date of the report printed

Issuance & conversion (exchange or subscript ion) Act

Except for periods of (1) the no-conversion period defined by law (2) from three working days prior to ex-right date for stock dividend registered with SEC by the company to the baseline date of equity distribution; from three working days prior to ex-dividend date for cash capitalization to the baseline date of stock distribution; three working days prior to cut-off date for cash capitalization to the baseline date of equity distribution; and three working days prior to the baseline day for merger or stock split to the baseline date, creditors may request the company to have convertible bonds converted to the company’s common stock in accordance with Article 11, Article 12, and Article 17 of this Act at any time from the 31st day of the issuance date to ten days before the due date.

ssuance and conversion, exchange or subscription measures; the influence of issuance conditions on the dilution of equity and shareholder’s equity

（a）The convertible bond helps avoid profit erosion and minimize the dilution of shareholder’s equity and ERP resulted from the substantial increase of stock shares; therefore, it is to the best interest of shareholders.

（b）Based on the conversion price of NT$105.4, the dilution of shareholder’s equity caused by the convertible corporate bond is 3.23%; therefore, the dilution effect is insignificant.

Depository institute -

(II) Convertible Bonds

1st domestic convertible bond

Type of Corporate Bond 1st domestic convertible bond Year

Item 2009 As of March 22, 2010

Market price of convertible bond

Max. NT$108.00 NT$109.95 Min. NT$98.05 NT$104.00

Average NT$100.33 NT$106.92 Conversion price NT$68.7

Issuing (processing) date & conversion price November 7, 2006 NT$105.4 Obligation of Conversion New stock issuance

(III) Information of CB: None

(IV) Self registration of CB: None (V) Bond with stock option: None

III. Preferred stock (with stock option): None

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IV. Issuance of global depository receipts:

GDR

Date of issuance (process)

Item May 30, 1997

Date of issuance (process) May 30, 1997

Location of issuance and trade London

Total amount US$235, 830,000

Unit Price US$11.23 / GDR

Total issuance 21,000,000 GDRS

Source of common stock recognition

One GDR stands for one common stock share of ASUS (The Company’s stock exchange ratio has changed from one GDR for one common stock share to one GDR to five common stock shares since January 2, 2008.)

Total marketable security shares recognized Stands for 21,000,000 common stock shares of ASUS

Rights and obligations of GDR holders Please refer to Attachment A

Trustee None

GDR institute CITIBANK, NA

Depository institute Citibank Taiwan Limited

Outstanding GDR 34,177,885 GDRS (December 31, 2009) Issuance and expense amortization throughout the issuance period

It is to be amortized in three years on average after issuance according to Article 243 of Company Law

GDR agreement and depository agreement Please refer to Attachment B

Market price per unit (US$)

2008

Max. US$10.42

Min. US$4.00

Average US$7.16

As of April 23, 2009

Max. US$11.04

Min. US$8.75

Average US$9.43 Attachment A 1. Voting rights: May not exercise voting rights directly but instructing the GDR institute to

exercise voting rights according to the GDR agreement. 2. Dividend distribution, stock option, and other rights:

(1) Entitled to distribution of dividend and stock shares just like the common shareholders of ASUS. GDR institute may have GDR issued proportionally to shareholdings or increase the common stock shares recognized with each GDR or have stock dividend sold on behalf of GDR holders and with the income distributed to GDR holders proportionally.

(2) GDR institute may have the said rights provided to GDR holders within the scope defined by the law of R.O.C. or international law, or, GDR institute may have the said rights sold on behalf of GDR holder and with the income distributed to GDR holders proportionally.

Attachment B 1. GDR agreement:

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(1) Transfer/split: The ownership of GDR is evidenced by EUROCLEAR and CEDEL book transaction and split system.

(2) Dividend and others: Cash dividend in US$ net of GDR institute fees and tax withholding is distributed to

GDR holders proportionally to their holdings. For the distribution of stock dividend, GDR holders are to have the total GDR adjusted

proportionally to the shareholding ratio recognized with GDR holdings; also, adjusted the GDR of GDR holders accordingly. GDR institute may have the income distributed to GDR holders proportionally.

While having new stock shares issued for cash capitalization or arranging stock option, GDR institute may (I) arrange stock subscription or (II) entrust the said right to GDR holders; however, the new stock shares for cash capitalization are limited to the exemption registered with SFC.

GDR institute must strive to have cash dividend and stock dividend distributed to GDR holders.

(3) Voting rights: Unless otherwise agreed upon, GDR institute must base on the GDR agreement, law of R.O.C., and the instruction of GDR holders to exercise the voting rights of the marketable security recognized with GDR.

2. Depository agreement: (1) Submit marketable security for the issuance of GDR. (2) Inform GDR institute to have GDR issued. (3) Deliver marketable security for the exchange of GDR (4) Confirm the volume of GDR monthly (5) Confirm the volume of GDR on the registration date

V. Employee stock option certificates: None VI. Merger and acquisition (including merger, acquisition, and split):

(1) The merger completed, stock shares transferred, and new stock shares issued in recent years and up to the date of the annual report printed:

1. The opinions of the security underwriter who is responsible for merger, accepting other company’s stock share, and issuing new stock shares in the most recent quarter: None

2. If the business performance of the last quarter does not meet the expectation, please state the impact on shareholder’s equity and the corrective action proposed: None

(2) If the merger is completed, stock shares is transferred, and new stock shares are issued in recent years and up to the date of the annual report printed, the information of the merger and the merged or acquired company must be disclosed: None

VII. Fund implementation plan

Up to the last quarter before the printing of the financial statements, outstanding equity issuance or marketable security subscription or the completed equity issuance or subscribed marketable security without success: Not Applicable

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V. Overview of Business Operation

I. Principal activities (I) Operating Scope

The company’s 3C integrated products are awarded with many honors for the excellent quality and advanced technology this year. ASUS received 3,268 awards worldwide from media and professional rating institutes in 2009. ASUS has been selected by Business Week as the Top-100 science and technology companies for eleven years straight from 1998.

ASUSTeK had generated sales revenue of NTD248.2 billion in 2009. In terms of sales generated from branded products, 22 million pieces motherboards, 6.8 million notebooks, and 5.4 million EeePC were sold. ASUSTeK sold the largest quantity of motherboard and Video Graphics Array (VGA) in the world while the volume sale of notebook was ranked in the 6th place worldwide. ASUSTeK is determined to make record sales in the coming year to show our appreciation to the supportive and inspirational shareholders.

1. Product lines of the company

a. Desktop / server b. 3D AutoCAD c. Advanced sound blaster d. NB e. EeePC computer and Eee series Eee PC f. Intelligent Navigation phone g. LED display h Broadband & communication products i. Advanced server

2. Product development projects

a. Digital control wireless transmission technology dual core CPU MB b. Advanced 3D image display and wireless TV transmission graphic card c. Intelligent phone GPS d. Ultra Mobile PC e. High-speed router / exchanger / firewall / VPN f. New-generation advanced server g. Professional LED display h. WiMAX broadband products i. EeePC touch, long-lasting computer j. Eee Top PC、Eee Box PC、Eee Keyboard PC

(II) Industry Overview

1. Progress and development of the industry The market demand for light-weighted and thin notebook will continue to grow. The surface of digital content industry and multimedia entertainment; also, the increasing demands of game players, demand for 3D-multimedia and

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high-performance video and audio will be activated. Multimedia entertainment will sure increase the demand of high quality notebook accessories. The development of notebook goes for not only the quality of “light-weighted, thin, small, and look” but also “personalization, video and audio entertainment, wireless communication, and green environment.”

2. Correlation of the upper-stream, mid-stream, and down-stream of the industry In terms of the correlation of upper-stream, mid-stream, and down-stream of the industry, upper-stream industry includes semiconductor (IC design, wafer foundry, and testing and packaging), electronic parts (passive components, rectifier diode, etc.), and others (LED, printed circuit board, connector, etc.). Mid-stream industry includes optoelectronic (monitor, LCD, etc.), electronic parts (motherboard, VGA, etc.), and computer peripherals (computer case, mouse, keyboard, etc.). Down-stream industry includes the business of table-top computer and notebook computer.

3. Product development trends

(1) USB3.0 AUSU 3.0 transmission technology reaches 5Gb per second transmission speed, which is ten times faster than ASUS USB 2.0 and three times faster than USB 2.0 in transmission large files. Moreover, ASUS USB 3.0 supplies 900mAh power to support more computer peripherals and to recharge power faster.

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ASUS has demonstrated excellent R&D capability to launch the first notebook compatible with USB3.0 in the world and the first motherboard with USB-IF (USB Implementers Forum) official certificate received. ASUSTeK has done it again pioneering market trends and technology.

(2) Cloud Computing Cloud Computing is to provide data access and/or application service by terminal installation and through Internet connection to remote server or device. Cloud Computing is the next innovative technology for the world after Web 2.0/3.0. On the arrival of Cloud Computing era, ASUSTeK plans to introduce a series of Cloud Computing related services and products with the quality of portability, easy to use, connection, and service in depth reinforced in order to provide the more comprehensive products and solutions: notebook, nettop, e-books, super personal computer, home server, storage equipment, and communication products that allow users enjoying the convenience provided by Cloud Computing and information flowing through the diversified equipment freely.

4. Competition The continuing volume growth of notebook is expected; however, low-price effect remains in effect due to severe market competition; therefore, product design is focusing on personalization to stimulate demands. ASUSTeK goes for product differentiation and segmentation in accordance with the demand of each consumer. The importance of marketing strategy is more than ever in order to create profit niche for each enterprise. At the same time, the development of notebook is moving towards upgrading product value by integrating it with new technology, for example, light-weighted, thin, portable, energy and power saving, and green environment to help ASUSTeK outperform competitors in the minds of consumers. In addition to the quality of light-weighted, thin, and long-lasting effect, ASUS notebook is designed with unique power management technology to increase using time and power efficiency; also, is with LED and nature material such as bamboo blended in response to the calling for environmental protection.

MB, VGA, and CD-ROM are computer elements industry that has a supply chain formed with CPU, module, PCB, and Connector. ASUS has kept a profound and excellent relationship with the aforementioned businesses currently. ASUS has setup subsidiaries to manufacture the aforementioned components for refining product development technology and securing stable supply of components. Therefore, ASUS has a comprehensive deployment of vertical integration substantiated. In terms of global distribution structure, ASUS has worked with over 300 agents and over twenty thousand distributors closely worldwide. ASUS is the world number one brand in Europe, Asia, and America; in other words, ASUS is a dominant brand name in market.

(III) Research and Development

ASUS has striven in R&D since the day of incorporation to control self-developed technology for the R&D, production, and marketing of advanced MB, Graphics Cards, Notebook, Eee PC, Server, mobile phone and to develop 4C (computer, communication, consumer electronics, and automobile electronics) integrated products. ASUS has ATEC

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setup in 2003 and with three R&D divisions setup including broadband wireless communication, wireline / wireless exchanger, and VCD / DVD key technology. For ASUS, R&D Division and R&D Center work together reciprocally. R&D Center focuses on technology study and commercialization of creativity. R&D Center is entrusted with the responsibility to conduct preliminary study and assessment on the software and hardware key technology, module, and applied program development platform in depth for the reference of R&D director in judging technology movement and selecting partners. R&D Division focuses on system integration and product introduction and commercialization. Technology is transformed into income eventually; also, part of the income is contributed to the creativity or technology supplier reasonably. R&D Center will be operated permanently under such a positive cycle. The attention of and incentives provided by the company’s management will allow ASUS to recruit R&D talents for technology R&D continuously. In the constantly changing computer world, the company has key technologies and leading products to compete in market and to create product value. ASUS was with a R&D expense of $3,967,382 thousand booked in 2009. ASUS is known for fast product R&D and Time to Volume. ASUS leads the industry to develop advanced products successfully and with the following new products to show for:

1. Product R&D in 2009:

a. Eee PC touch computer b. Eee PC long-lasting computer c. Eee PC - New Generation Simple Series for home use d. Intelligent Navigation phone GPS e. LED TV with built-in Set-up box f. Advanced energy-saving MB g. Ultra Mobile PC

2. R&D planned in 2010:

a. Super thin high-performance notebook b. Multimedia video and audio entertainment notebook c. Advanced 3D imagery display notebook d. Advanced 3D imagery LCD screen e. Hybrid phase design advanced energy-saving motherboard f. GPS smart phone g. EeeTop new generation All-in-one computer h. EeePC touch panel and long-lasting simple computer i. Eee Keyboard PC home computer j. New Eee series playstation

(IV) Long-term and short-term development plan

1. Short-term development plan ASUSTeK will continue to exercise the brand spirit of “fabulous innovation and quality perfection” to develop products with the quality of green technology, multimedia video and audio entertainment, and Cloud Computing. The product development cover three platforms with advanced digital technology and user’s

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life experienced blend in: Open platform products including motherboard, drawing card, play station, LCD, and network server; system products including notebook and Eee PC™ Eee series; and handheld products including smart navigation phone for consumer’s innovative design.

2. Long-term development plan

ASUS has become a 100% brand name company since 2008. For long-term planning, the development of Digital Home and Media Center will be a new stage for ASUS. ASUS is moving toward the integration of 4C communication, information, consumer electronics, and automobile electronics. ASUS will stay competing in the second-generation information war since Digital Home, Digital Office, and Digital Person are the future.

II. Market analysis and the conditions of sales and production

(1) Market analysis 1. Sales regions

Unit: NT$ thousands Year

Item 2008 2009

Subtotal Total Subtotal Total Domestic operating income Internal operating income America / Canada Asia Pacific Europe Africa Net operating income

15,042,211209,371,978

5,835,153305,689

18,795,920

230,555,031

249,350,951

2,170,317213,630,267

244,216288,099

16,244,005

216,332,899

232,576,904

2. Market share and market demand and supply and market growth

(1) Market demand and supply of computer components The MB of ASUS took up the largest market share worldwide in 2009 with the strength of excellent R&D capability, scale of mass production, comprehensive supply chain of upper-stream and down-stream components, product quality, and competitive production cost.

ASUS USB 3.0 is made as the global standard for new generation digital data transmission. ASUSTeK is the technology leader having the motherboard transformed perfectly, in which, P6X58D Premium with advanced function and design is the first motherboard with USB-IF(USB Implementers Forum) certification. ASUSTeK has done it again pioneering market trends and technology.

ASUSTeK had sold 22 million pieces motherboards in 2009. If motherboard is the soul of a computer, VGA drawing card and CD ROM are the body and extremes of a computer. ASUSTeK had managed to kept competitors in distance in 2009 by the “Lion King” strategy. ASUSTeK had led VGA and CD ROM to a new territory that symbolized several more “Lion Kings” of the enterprise. ASUSTeK has declared to activate the “55 Project” aiming to take up 50% market share of motherboards in

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2014. ASUSTeK has introduced excellent products with high quality, high performance, and high cost-performance value to the upper-stream, mid-stream, and lower-stream market. ASUSTeK is determined to be dominant in global motherboard market and construct its lion kingdom of technology.

(2) Market demand and supply of NB:

Made-in-Taiwan notebook has experienced tremendous growth in recent years. Global Top-Ten notebook vendors have worked with Taiwanese manufacturers one way or the other. Taiwan is now officially the largest production base for notebook computer. The prevailing rate of notebook is growing rapidly in the world. ASUSTeK has been in the business for twelve years and has performed wonderfully in the sense of product quality, R&D technology, and business development. According to the statistical data of 2009Q4 of international market survey institutes, ASUS notebook is on the Top-Six list with 6.8 million notebook computers shipped in 2009 representing 17% growth from the year before; also, 5.4 million EeePC in 2009 representing 10% growth from the year before. ASUSTeK had done well with both products in market. ASUS notebook aims high in market share this year on the way to the Top-Four list in 2010 and then the Top-Three list in 2011.

(3) Short-term development of IT industry:

On the arrival of Cloud Computing era, ASUSTeK plans to introduce a series of Cloud Computing related services and products with a specific solution designed for the cloud computing of mobile computation, multimedia entertainment, and eCommerce and the quality of portability, easy to use, connection, and service in depth reinforced in order to provide users with a boundary-free and timeless convenient life and information at fingertip. Professionals may apply cloud computing business tool freely to explore business opportunities, upgrade competitiveness, and share rich and diversified multimedia entertainment with family members. ASUSTeK has managed to introduce pioneering convenient service in the field of cloud computing since the introduction of Eee PC™ in 2007. ASUSTeK is a leading brand in cloud computing terminal installation and with the most comprehensive product solutions: notebook, nettop, e-books, super personal computer, home server, storage equipment, video and audio player, and state-of-the-art communication products that allow users enjoying the convenience provided by cloud computing and information flowing through the diversified equipment freely.

3. Business goals

The company’s strategic planning has matched up to market development trend in recent years. ASUSTeK had generated sales revenue of NTD248.2 billion in 2009. In addition to care for the core businesses, ASUSTeK will initiate diversified business operation carefully too. Sales of new products have grown by several folds. ASUSTeK will continue to serve customers with practical and stable business operation; also, world-class technology innovation, and excellent product quality.

4. Competitiveness, advantages and disadvantages of development, and responsive strategies

Industrial development and vision

(1) Advantages

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a. Intel’s promoting the energy-saving platform of CULV and Microsoft introduces the Windows 7 processing system has helped bring IT industry new business opportunities. The business that controls the most advanced key technology, rapid R&D, and flexibility will be the market leader. ASUS is confident in becoming the leader in market.

b. The production value of hardware is expected to grow in 2010. NB and MB are two indexes for the development of global information industry. The said two products are expected with positive development; therefore, they are the focus of ASUS in business. The combination of product and market is one of the advantages of ASUS.

(2) Disadvantages and responsive strategies

Global warming is getting worse. The awareness of environmental protection is awakening; therefore, power saving is the notion shared by the world. Governments announce strict environmental protection provisions on electronic products for power saving effort to the industry; therefore, enterprises must be able to respond to global environmental protection polices for smooth business development. ASUSTeK, a global citizen, has been researching and developing lead-free and cadmium-free green motherboard since the year of 2002; moreover, the concept of environmental protection has been introduced into other product lines and with the first power-saving motherboard with “smart EPU” introduced in 2007 to save CO2 emission throughout the power-on process. ASUSTeK has become the benchmark of green industry and has substantiated the responsibility of a business citizen. While the surge of green production takes up the world, for solving the problem of global warming and environmental issues, green technology is the driving force of economy. Products in conformity with EuP directive are “green products with environmental protection design” that can be circulated freely in European Community and demonstrate ASUSTeK’s green competition advantage.

ASUSTek was awarded with the “Enterprises Ongoing Business Development First Prize” in Taiwan in 2007; also, the company was the first technology enterprise in the world to receive the EuP directive certification. AUSUTeK notebook was the first product to receive Environmental Product Declaration (EPD), BSI Carbon Footprint, and EU Flower certification in 2009 evidencing ASUSTeK’s endless effort in power saving and environmental protection.

Moreover, ASUSTeK expects have a more flexible and efficient organizational operation with three business groups formed including: System business group, open platform business, and handheld business in order to collect recourses and respond to market changes with responsive measures. Each business group will then be able to focus on improving procedure, form optimal strategy, and execute strategy completely.

ASUS will continue to have recourses used for the products with economic scale and competition advantage; also, to support the three business groups with the most competitive product lines and sales channels. ASUS is dedicating itself to provide consumers with better products and services; also, to upgrade the brand value in the mind of consumers, finally, to turn consumer’s brand recognition into market share.

Operating environment

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(1) Advantages

a. ASUSTeK demonstrates R&D capability and introduces the first notebook and motherboard compatible with USB 3.0 ahead of competitors in the sense of advanced technology development with business opportunity and leading position secured.

b. Comprehensive notebook and motherboard related components industry is constructed breaking free from the technology restriction of Japan and Korea. ASUSTeK is able to cope with the rapid growth of motherboard and notebook computer in the sense of production.

c. ASUSTeK dedicates itself to the tasks of environmental protection, power saving, and earth ongoing concern. Several innovative products are launched at CES and Cebit international exhibitions this year with the core green technology for the appreciation of the media from all over the world. ASUSTeK has innovative green energy applied to the R&D and production of notebook computer, Eee PC™, EeeBox, LED backlight screen, and motherboard that shall help gain leverage in business opportunity and market under the surge of green environmental protection.

(2) Disadvantages

The significant fluctuation of exchange rate in both directions has affected exporting business negatively.

(3) Responsive strategies

Monitor exchange rate closely and adjust the position of foreign exchange to the optimal level.

Internal conditions (1) Advantages

a. Profound finance and sufficient funds b. Profound inventory control and healthy turnover rate c. The R&D technologies and talents of ASUS are world class; also, the technology

of ASUS dominants the industry. d. The strategic planning of ASUS is with profound and moderate vision; also,

market trend matches up industrial development. e. Talents are assets of ASUS. ASUS has improved employee’s welfare and salary

and welfare facilities constantly to keep employee’s morale high and employee’s performance outstanding.

(2) Disadvantages

ASUS grows significantly in both business operation and organizational structure; therefore, it is crucial to improve the management effectively.

Product and technological development (1) Advantages

a. ASUS is with a strong R&D team for the development of MB, Graphics Cards, CD-ROM, NB, server, desktop computer, Intelligent Navigation phone, wireless broadband mobile device, and Eee series. The excellent R&D talents of ASUS are

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known in the industry and with many patents received and many products in development constantly.

b. The department heads and the management of ASUS are mostly with technological background; moreover, they understand industrial trend and product development technology well; therefore, they are able to take advantage of the development, to plan product lines in depth, to apply recourses effectively, and to generate added value.

c. ASUS has contributed significant R&D and marketing resources to promote the star product Eee PC and Eee series in order to develop products with the merits of good price, cosmetic design, industrial design, light weight, and easy interface.

(2) Disadvantages

The sales channel of mobile device is different from the one for information products; therefore, it is necessary to have the sales channel for mobile device developed.

Sales and marketability (1) Advantages

a. Under a profound sales management plan, ASUS has products distributed to all areas evenly; therefore, negative economic development in any area will not cause critical loss to ASUS. The said balanced market development does provide ASUS with the best risk management.

b. Chinese and Russian market are with significant growth in recent years; therefore, ASUS has deployment arranged progressively and does expect to perform well this year with the emerging business opportunities in the said areas.

c. French market, Italian market, German market, and Russian market are the developed regions in Europe. ASUSTeK has deployed market for motherboard for years and with a great success achieved in the year of 2008. In fact, ASUSTeK has cornered the highest market share for motherboard in Europe. In terms of notebook computer, ASUSTeK is ranked number one in Taiwan, number three in Europe, number three in China, number one or two in Eastern Europe, and number three or four in Western Europe; also, is ranked world number six worldwide. In terms of global network service, forty-nine official websites are constructed in twenty-six languages for substantiating localized operating strategy and developing local market.

(2) Disadvantages

The availability of resources and the control of cost are crucial to the business performance of the subsidiaries overseas; therefore, the head office must be able to control the said key elements effectively.

(2) Application and production process of major products

1. Application of major products a. MB, VGA, and CD-ROM are important elements to desktop computer and server.

ASUS is in a leading position with all the aforementioned products worldwide. b. NB and PDA are with potential to grow in commercial market (governmental offices

and business) and home market (personal consumption and use). NB and PDA of ASUS are with bright future along with the prevailing concept of mobile office.

c. For the development of information products, wireless broadband mobile device should be linked to personal life; therefore, the most important communication

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interface is wireless broadband communication technology. For the development of the professional and star product, it is necessary to control the key technology for developing marketable products and ASUS is moving towards the said direction.

2. Production Process of Major Products

a. MB and VGA: Automatic SMT →Pick and place→soldering pot→burning→test. b. NB and other products: Automatic SMT→pick and place→soldering pot

→burning→PCB test→assemblying→system test。

(III) Supply of major raw materials

Major raw materials Suppliers Chips AMD, Intel, Nvidia, SiS, VIA Logic IC Winbond, Newland, RT PCB HSB, GCE, Nova, Tzi-Yin Connectors HON HAI, LOTES, Tyco) DRAM ELPIDA、HYNIX、SAMSUNG、Nanya LCD LGD, AUO, CMI, HannStar

Most of the aforementioned manufacturers are domestic and international with good quality and reputation built; moreover, they have been in business with ASUS for years in a good term with raw materials supplied to ASUS that help the company to stay competitive.

(IV) Major Customers with over 10% net sales and Suppliers with over 10% total purchases

of the last two fiscal years

1. Major Suppliers of the last two fiscal years Unit: NT$ thousands

2008 2009 2010Q1 (Note 1)

Item Name Amount Percentage of

net annual purchase (%)

Relation with issuer Name Amount

Percentage of net annual

purchase (%)

Relation with

issuer Name Amount

Percentage of net purchase of Q1 (%)

Relation with issuer

1 P Customer 81,188,608 36

Invested company

valued with equity

method

P customer 60,554,197 31.83

Invested company valued with

equity method

2 F customer 40,882,473 21.5 None

Others Others Others

Net

purchase amount

100 Net

purchase amount

100 Net

purchase amount

100

Note 1: The 2010Q1 financial statements audited by the CPA were not yet available up to the print of annual report on March 22, 2010.

Note 2: The aforementioned purchase amount excluded the raw material purchased on behalf of the related party

Note 3: Causes of increase and decrease – for business operation

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2. Major Customers of the last two fiscal years Unit: NT$ thousands

2008 2009 2010Q1 (Note 1)

Item Name Amount

Percentage of annual net sales

(%)

Relation with issuer Name Amount

Percentage of annual net sales

(%)

Relation with issuer

Name Amount

Percentage of net sales of Q1 (%)

Relation

with issuer

1 A customer 203,543,087 82

Invested company

valued with equity

method

ASTP 210,597,333 91

Invested company

valued with equity

method

Others 45,807,864 18 Others 21,979,571 9 Others

Net sales amount 249,350,951 100

Net sales

amount232,576,904 100

Net sales

amount

Note 1: The 2010Q1 financial statements audited by the CPA were not yet available up to the print of annual report on March 22, 2010.

Note 2: Causes of increase and decrease – for business operation

(V) Production/Sales Quantities and Value over the Past Two Year: N/A (VI) Sales quantities and value of the last two fiscal years:

Unit: Piece (unit); NT$ thousands

2008 2009

Domestic Sales Export Sales Domestic Sales Export Sales

QTY Amount QTY Amount QTY Amount QTY Amount

Computer system 753,088 11,417,890 12,937,840 161,222,785 779,560 9,484,706 12,309,452 159,289,851

3C products 1,713,058 2,453,463 38,444,080 65,182,573 1,847,744 3,763,793 32,910,343 51,875,178Others - 4,924,567 - 4,149,673 - 2,995,506 - 5,167,870Total - 18,795,920 - 230,555,031 - 16,244,005 - 216,332,899

III. Employees

Status of employees over the past two years and up to the date of the report printed March 22, 2010

Year 2008 2009 As of March 22, 2010

Employee Direct Labor 0 0 0 Indirect labor 3,933 3,455 3,430 Total 3,933 3,455 3,430

Average age 30.61 31.44 31.60 Average years of service 3.13 3.92 4.02

Education （%）

Ph. D. 0.71% 0.70% 0.64% Masters 44.95% 46.45% 46.73% College /University 47.39% 47.03% 47.03% Senior High School 5.42% 4.05% 4.29% Junior High School and below 1.53% 1.77% 1.31%

Year

QTY & Amount

Items

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Note: ASUS had brand name business and OEM/ODM business divided officially on January 1, 2008. The brand name business was the responsibility of ASUS while OEM/ODM was the responsibility of Pegatron Corporation and Unihan Corporation.

IV. Expenditure on environmental protection

(I) Material capital expenditure invested in environmental protection activity:1. ASUS is certified with ISO14001; also, bases on the spirit of reserving natural resources

moving towards the direction of preventing and improving pollution. 2. ASUS is certified with OHSAS18001; also, has safety and health risk in control and

goes for the on going concern of the company with zero disaster. 3. ASUSTeK completed the “ISO14064 Greenhouse Gas Emission Investigation”

certification in 2008. ASUSTeK has greenhouse gas emission investigation modified since January 2008 in response to the reorganization. The “ISO14064 Greenhouse Gas Emission Investigation” validation process has been passed in the year of 2009. ASUSTeK has initiated the greenhouse gas emission reduction plan since the base year of 2008. The goal is to reduce 15% gas emission by the year of 2015, reduce the impact of business and office activities on the environment, and protect the earth.

4. ASUS fellows will join environmental protection organizations and get involved in environmental protection activities.

5. ASUS has promoted green product and recycling mechanism in compliance with the environmental requirement of RoHS and WEEE.

6. ASUS has joined Taipei Environmental Protection Volunteers Squad to help clean up the beach and perform environmental protection community service in Beitou are. ASUS has striven to fulfill social responsibility and protect our environment as a green corporate should do.

7. Arrange environmental protection, recycling, and merciful donation activities from time to time; also, contribute the income generated to charities activities.

(II) The total amount of loss and fine paid for environmental pollution in 2009 and up to the

date of the report printed: None (III) Estimated environmental protection expenses:

1. ASUSTeK will continue to conduct ISO14064 Greenhouse Gas Emission Validation and product carbon footprint validation process.

2. ASUS will introduce energy management system forcefully to save energy and reduce green house gas emission.

3. ASUS will continue to invest in green design, green procurement, green production, and green marketing for fulfilling corporate social responsibility to the earth.

(III) The responsive actions of ASUS to environmental regulations:

ASUS cares about environmental protection, perpetual application of resources, and ecosystem issues; also, bases on the company’s environmental and occupational safety and health policy to establish environmental protection and health management system in order to substantiate ASUS’s on going concern with continuing improvement. ASUS does not take the importance of “green design, green procurement, green production, and green marketing” lightly and ASUS has initiated many tasks that are new in Taiwan and leads to and activates the industry for on going concern. In addition to promoting GreenASUS internally, the SERASUS is promoted to work with suppliers promoting green supply chain, reinforcing green design, developing green products, encouraging green products recycling mechanism and power-saving products design in compliance with the global environmental protection equipments of WEEE, RoHS, and EuP; also,

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ASUS has received international environmental protection citation and awards as a leading green high-tech enterprise should be. 1. ASUS has complied with global environmental regulations:

ASUS has GreenASUS setup to monitor and to respond to global environmental protection regulations including RoHs, WEEE, EuP, battery and packing material application and waste management in order to comply with the requirements for products shipped to the world directly and indirectly. ASUS has RoHS test equipment available to have the components, work-in-process goods, and by-product tested; also, to ensure the finished goods shipped complying with international environmental protection standard.

2. The certification of environmental protection system: In fulfilling the quality assurance of environmental protection system, ASUS’s Quality Management System is stipulated in accordance with ISO and HSPM of IECQ QC 080000. ASUS has received the certification of IECQ QC080000 and IECQ hazard substances procedure management system.

3. International environmental protection citation and award: ASUSTeK had continued aggressively to promote green products and demonstrate excellent green design concept. In terms of EU Flower logo and Czechoslovakia environmental protection logo, in addition to the awards to several models of notebook computers again, EeeBox of ASUS received tabletop computer certificate. In addition to the first award of EPEAT Gold Medal to the notebook computer made in Taiwan in 2008, EeePC, EeeBox, and display were also awarded. AUSUTeK were awarded with 28pcs of EPEAT Gold Medal and 12pcs of EPEAT Silver Medal in 2009. ASUSTeK has enforced and received the “Class III Environmental Product Declaration (EPD)”certification for the 15.6” notebook computer in accordance with ISO14025 this year. Discussed product’s carbon footprint under the foundation of EPD; also, conducted product’s carbon footprint investigation in accordance with BSI PAS 2050:2008 Directive. ASUS N51V notebook computer was the first to receive “Carbon footprint” validation in October 2009. On TIME Magazine’s “Green Design 10” technology product category list, ASUS U6V notebook computer cover is made with environment-friendly bamboo material instead of plastic or alloys. According to TIME Magazine, ASUS U6V notebook is with excellent power saving advantage and helps minimize greenhouse gas emission. That is why ASUS U6V notebook computer is the chosen one. The permanence, deftness, and effectiveness of Eee PC 1000HE were complimented in the “Your Green World” of CNN. ASUS Eee PC 1000HE was awarded with the title of “Deft Notebook Computer” in the “Deft Notebook Computer Contest” with the merits of “practical deign,” “comfortable keyboard,” and “5.1-hour permanence” by Money Magazine and CNNMoney.com. ASUS U6V and Eee PC 1000HE are the canons of green technology products. Please visit ASUS’s website for more products awarded with environmental protection citations: http://csr.asus.com/chinese/index.aspx#74

ASUS’s green achievements: (1) The Halogen-free policy has been initiated since the year of 2008 and into the

year of 2009 with NB, PDAs, display, EeePC, and VGA marketed. Investigate

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components continuously for the realization of halogen-free of entire product line.

(2) Construct ASUS corporate social responsibility website (http://csr.asus.com/) to disclose the information related to the responsibility of ASUS for environmental protection and society. It is the interaction platform for stakeholders who care about information related to the environmental protection of ASUS.

(3) The green design and recycling system plan of ASUS is to establish “green design and green recycling management platform” including establishing international environmental protection regulations information control system, green product easy-dismounting and easy recycling/reusing design and validation system, and green recycling and processing control system. Moreover, ASUS had submitted the green design and recycling system plan to attend international environmental protection contest and was ranked by Oekom, a reputable European institute, in the first place in the category of computer and peripheral products in 2007. Integrate the achievements in promoting environmental protection and add it with the image of brand name and outstanding performance in environmental protection to demonstrate how the visibility and value of brand name can be improved by taking advantage of international green environment. The said project was awarded with the award of demonstrative plan by MOEA.

(4) Developed the first lead-free and halogen-free MB in Taiwan (attended the directive product development plan of Industrial Development Bureau MOEA and was awarded in 2006). In assessing and selecting environmental material for MB, testing and analyzing assembly features, establishing process technology standard, and inspecting product function and validating quality, ASUS has R&D, experiment, test, and application validated. ASUS has cherished natural resources, fulfilled social responsibility and environmental protection, and substantiated safety and health policy; also, has mass produced the first MB that is compliance with the strict requirement of European Community on electrical engineering and electronic materials.

(5) Constructed the first Green Product Management System (GPMS) in Taiwan and it was the first management platform used for the prohibited substances to shorten product development cycle, upgrade product quality, speed up Time to Market effect, and activate consulting suppliers in the supply chain to comply with RoHS and packaging directives of European Community. ASUS has consulted over one thousand suppliers to supply green components and encourage the application of green components as a good role model to the industry.

(6) Established the first e-Material system and acceptance procedure to shorten the time in accepting the banned material and component and product development process.

(7) Constructed green supply chain e-platform and it was awarded with “IT Award” by the MOEA.

(8) ASUS has conducted Quality Business Review (QBR) periodically and annually to ensure suppliers, contractors, and new suppliers in conformity with ASUS’s standards including writing review and annual audit. QBR suppliers and contractors will receive further audit from ASUS including QC080000 and ISO 9001, ASUS’s technical standard, and three-in-one management including QSA (Quality System Audit), QPA (Quality Process Audit), and GA (ASUS’s HSF

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green components acceptance, Hazardous Substance Free) in order to have the pursuit of perfect quality realized on ASUS’s green supply chain management.

(9) Joined the RoHS (Restriction of Hazardous Substances Directive, restriction on hazardous substances directive) service of the MOEA to consult Taiwanese manufacturers in green supply chain by sharing the experience in green design and green supply chain management by speeches/seminars/media interview.

(10) Constructed recycling system in Europe and became the first Taiwanese manufacturer in the United States providing consumers with free-of-charge recycling service to have the recycled computers processed properly and environment-friendly in order to minimize the impact of recycled products on environment.

(11) Developed the first WEEE easy to dismounting and recycling Green Design system in Taiwan in order to comply with the 3R recycling ratio of European Community, construct green recycling IT platform, and monitor and control recycling information.

(12) Conduct product’s life cycle investigation and assess and analyze environmental impact; also, complete Class III EPD and Carbon Footprint PAS 2050. Demonstrate and share Taiwan Mechanical Product Life Cycle Evaluation Table and related experience with Taiwanese industry; also, construct product life cycle investigation database with TEEMA in Taiwan.

(13) For the purposes of caring for environment, reducing garbage volume, disposing waste effectively, and minimizing the burden of environmental pollution, ASUS has focused on choosing environment-friendly material, environment-friendly design, power-saving, longer life cycle, waste management, and product packaging management to reduce environmental pollution and to apply for environmental protection labels, for example, EPEAT, EU Flower, Czech Republic, Energy Star of the United States, Taiwan Environmental Protection Labels, J-MOSS of Japan, and Power-saving of China for promoting the concept of environmental protection.

V. Employee/employer relations

The realization of business goals relies on the commitment, deduction, and effort of employees; however, employees cannot exercise their talents without the support of the employer; therefore, a harmonious employer-employee relation is what ASUS after. ASUS has treated employees with an honest and open attitude; also, has working regulations and rules defined in the company’s Work Code for the reference of employees. In terms of salary, benefit, and training policy, it is designed to help employees realize their objectives; therefore, they are able to have themselves heard and to have their working safety secured; also, their work satisfaction and profound economic interest fulfilled without the need of organizing an union. Employer and employees are unified and share the same concept to work for the future of the organization.

(I) Employee’s welfare package ASUS has made the “respecting humanity and caring for employees” one of the operating concepts. For the purpose of taking care of employees sufficiently and protecting their living security in order to work for the company worry-free, ASUS provides basic protection to employees; also, provides or sponsors welfare projects specially. Employee’s Welfare Committee is formed by the employees to plan and enforce welfare activities as follows:

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1. ASUS has the following benefits provided in accordance with Company Law: Health insurance, labor insurance, group insurance, pension reserve, accrual pension reserve according to old contribution plan deposited in Bank of Taiwan, arrearage reserve, and appropriating welfare fund with a percentage of sales revenue and paid-in capital.

2. ASUS has the following benefits provided specially: Season-greeting bonus and performance bonus, appropriating bonus to employees with retained earnings, annual physical check up, libraries, EAP, and indoor warm water swimming pool and gym; also, encouraging employees to propose their advanced study plan for financial aid.

3. “Employee Welfare Committee” Season-greeting bonus, wedding/funeral/celebration and emergency financial aid, group activities, birthday, scholarship and financial aid to employee’s children, tours and functions, and language classes

(II) Education and training

ASUS has years of experience in cultivating talents in accordance with operating concepts of “cultivation, cherishment, caring for employees, and helping ASUS fellows reaching their potential;” moreover, ASUS has a profound operating model setup in education and training and with excellent internal tradition formed. The talents cultivation and development is illustrated as follows: 1. Substantiate talents development mechanism: Learning process

The “cultivation, cherishment, and caring for employees” is illustrated in the company’s operating concept. Therefore, the company’s talents development mechanism is planned to help directors and talents build up the most needed ability in fulfilling personal work objectives with a personal learning program drafted up. Directors and employees are to discuss and plan personal learning program in accordance with the concept of “job-oriented learning,” the company’s core value and the occupational ability needed for job performance by each employee in order to carry out learning systematically and effectively. There were 2,600 persons/times joined the learning program in 2009.

2. Construct diversified learning resources

(1) Management and core vocational training AUSUTeK plans comprehensive learning blueprint for each employee to help build up their occupational competence. Annual management training program including junior management training, management competency training in all levels, management seminars, and elite management courses is to help the management upgrade managing ability systematically and exercise management effectiveness. Plan core value training courses to help staff generate ASUS DNA and upgrade staff’s work skills and performance. Management competency and core value training courses arranged in the year of 2009:

Item Type Course Time(hr.) Person-time Expense

(NTD)

Management training

Classroom 39 259 1,098 1,175,576 E-learning 24 28.5 810 -

Core vocational Classroom 114 904 9,242 1,261,383

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training E-learning 37 25 2,596 -

Total 225 1207.5 13,746 2,436,959 Note: Twenty-two management training courses (classrooms) and 92 core value training courses

(classrooms) were arranged by internal instructors; therefore, free of charge.

(2) Professional occupational training ASUS has new recruits trained with various professional and practical courses to help them adapt to working culture and accumulate professional skills in depth and width. There were 537 professional courses arranged by each department in 2009.

(3) Self-development resources and seminars ASUSTeK promotes digital learning system and resources to help staff worldwide conduct voluntary learning wherever and whenever; also, plans Business English courses, spiritual seminars, and physical library for the benefit of staff in learning, upgrading personal competency, and building up proper work attitude and sense of value. Four Business English seminars, nine Business English courses, and four spiritual seminars were arranged in the year of 2009. There are over 700 books in the physical library of ASUSTeK.

(4) External training In addition to the internal training courses planned in accordance with the demands of the staff taking as a whole, employees are assigned to be trained externally in response to the demand of each individual in order to upgrade the professional ability needed for performing the task. External training arranged in 2009:

Item Course Expense (NTD)

Professional 124 489,504 Management 42 302,555

Language 3 12,525 Others 26 206,240 Total 195 1,010,824

(5) On-job training ASUSTeK offers diversified on-job training including project training, deputyship, occupational coach, encourage, etc. to help staff learn at work and to reinforce personal knowledge and skill. In order to help staff conduct on-job training systematically and upgrade training effect, ASUSTeK encourages the management to plan annual competency training programs for staff in the learning plan. The 2010 learning plan is with 443 on-job training programs planned.

(III) Code of employee’s conducts and ethics

The “sincerity, thrift, profundity, and practicality” is one of the company’s operating concepts. For the common understanding of ASUS fellows, the company has the Chinese traditions “modesty, sincerity, theft, swiftness, courage” made to be the code of employee’s conduct socially and personally. The importance of industry’s moral and social responsibility cannot be stressed enough internationally; therefore, industry with the continuous trust and respect of consumers, business partners, and the public will be able to operate permanently. For regulating employee’s conducts in compliance with the company’s moral code and helping the

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company’s related party understand the moral standard of the employees in performing job responsibilities, ASUS has the “Code of Business Conducts” regulated to reinforce the moral and professionalism of the company and the employees. The employees of ASUS are expected to demonstrate work ethics and to help make ASUS a respectable company. The company’s “Code of Business Conducts” is structured in accordance with EICC and “Reference for the Code of Conducts by Listed/OTC Companies” as follows: Chapter 1 General rules Chapter 2 Business integrity principle Chapter 3 Preventing conflict of interest Chapter 4 Gifts, business entertainment, and social standard Chapter 5 Public information Chapter 6 Fair trade, advertisement, and competition Chapter 7 Community watch Chapter 8 Punishment Chapter 9 Others

(IV) Working environment and worker’s safety protection:

1. Establishment of Labor Health & Safety Committee: The company has labor safety and health department setup according to the regulations and with the responsible personnel designated to protect the working environment and the safety and health of employees; also, to carry out labor safety and health tasks in accordance with the regulations and governmental rules.

2. Arrange labor safety and health education and training and employee’s health check-up periodically In addition to having labor safety and health department organized, the company must have labor safety and health education and training arranged for the new recruits. The designated area for special working process is with directors assigned to monitor the related activities. The company has arranged special education and training and physical check up for the workers who are responsible for special working process annually for their own protection and safety.

3. Establishment of medical units There are nurses at the ASUS Medical Units to care for the staff; also, physicians are there to provide outpatient and advisory service to the staff.

4. ASUSTeK constructs EAP psychological consultation, free eye sights examination and muscles and bones check up, and arrange H1N1 vaccines injection onsite in accordance with the operating concept of “incubation, cherish, and care for employees.”

5. ASUSTeK was awarded with the “Enterprise Health Excellence Award” of Taipei City in 2009 and the “Health Promotion Logo” of Bureau of Health Promotion, Department of Health R.O.C. (Taiwan); also, was the first enterprise to receive the “Nutrition Health Award”

6. Conduct fire drill and emergency evacuation training and hydrant equipment inspection periodically Draft up firefighting plan, organize firefighting team and rehearse firefighting equipment application. ASUS will arrange in-house firefighters training, notice, evacuation drill, rescue training, firefighting seminars and firefighting training in accordance with regulations to substantiate firefighting tasks and protect the safety of employees.

7. Conduct working environment inspection periodically, define safety and health goals, and ensure employee’s safety and health

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ASUS conducts working environment inspection periodically in accordance with domestic regulations and arrange special workers education and training and health inspection to ensure the health of workers responsible for special working process.

8. Establish TOSHMS management and complete global chemicals control system amendment For the safety and health of the company’s employees and subcontractors; also, for preventing accidents and environmental pollution from occurring effectively, ASUS has procedures amended in accordance with the TOSHMS of the competent authority and the amendment of global chemicals control system completed.

9. Charity activities ASUSTeK has focused on “shortening digital divide,” “upgrading innovation ability,” “incubating science and technology talents,” “encouraging cooperation between industry and academia,” and “promoting environmental protection and power saving” in a long run. ASUSTeK has ASUS Foundation setup in 2008 to have resources integrated effectively, to feedback the society more effectively, and to fulfill corporate social responsibility. Activities promoted by ASUS and ASUS Foundation in 2009: (1) Work with ETMALL arranging “Infinite love, online tribe” activity to donate 135

computers to 17 tribe elementary schools. (2) Work with APEC on the shortening digital divide plan (ADOC 2.0); also,

construct the following digital learning centers with Institute for Information Industry to help children in remote areas and on the street break free from poverty.

- Setup one digital learning center in Jakarta Indonesia - Setup two digital learning centers and two digital learning automobiles in

Philippines (3) Sponsor scholarship to colleges and universities in China for cultivating talents (4) Sponsor eleven exhibitions including Cowparada public arts activities, Taipei 4th

Digital Art Festival, and Taipei Contemporary Art Gallery. Promote culture and art business aggressively, recover traditional local art, and upgrade citizen’s spiritual life.

(5) Sponsor Hondao Senior Citizen’s Welfare Foundation to promote digitalized exercise in senior citizens community

(6) Cooperate with Public TV promoting environmental protection education and arranging national environmental protection documentary tournament

(7) Sponsor Public TV to film a documentary on black-faced spoonbill for promoting environmental conservation education.

(8) Sponsor ADOC 2.0 private office publishing books and filming documentary to promote digital learning and shorten digital divide.

(9) HSBC and ASUS Foundation donated 16 computers together to the “Minority Community Project” of EDEN Foundation

(10)Sponsor Matthew Lien to help Taiwan Fund for Children and Families raise funds for concerts

(11) Sponsor farmers to adopt toxic-free rice field(12) Work with National Tsing Hua University to arrange Indigene Science Internet

exhibition and help arrange indigene children education. (13) Donate computers to help promote digital learning (Tzuchi, HongHua Children’s

Orphange, organic rice field…) (14) ASUSTeK encouraged employees to donate money voluntarily and join disaster

relief program.

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(15) “Children Are Us” Bakery stationed in the food court of the headquarters with job opportunities for minority. ASUSTeK included “Children Are Us” on the payroll as a way to care for and feedback the society.

(V) Retirement plan

In response to the company’s having the business operation dividend into brand name business and OEM/ODM since 2008, the seniority of the workers with ROC nationality was settled and with the pension paid on the end of January 2008. Workers with ROC nationality who have been employed in 2008 are entitled to the Defined Contribution Pension Plan. White-collar workers without ROC nationality are entitled to the prior-existing pension plan. Blue-collar workers are contracted for three years without the concern of pension.

(VI) Other agreements The company’s loss from employee-employer dispute in recent years and up to the date of the report printed: None

VI. Major agreements: March 22, 2010

Nature of agreement Client Beginning and ending

date of agreement Content Provisions

Marketing agreement Microsoft 08.01.2008

~01.31.2010 Project plan

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VI. Financial Information

I. Condensed balance sheet, income statement, and auditor’s opinions over the last five years

(I) Summarized Balance Sheets Unit: NT$ thousands

Year

Item

Summarized Balance sheets of fiscal year 2005~2009 (Note 2)

As of March 22,

2010 (Note3)

2005 (adjusted)

2006 (adjusted)

2007 (adjusted)

2008 (Note 6) 2009

Current Assets 117,694,105 191,989,157 184,002,080 94,196,563 99,144,691 -

Funds & investments 76,808,799 96,622,084 105,954,737 121,141,147 121,788,684 -

Fixed assets 8,720,196 8,958,559 8,582,153 4,710,986 4,273,269 -

Intangible Assets - - 233,383 223,647 174,074 -

Other Assets 1,646,016 1,560,487 1,703,097 301,871 3,548,961 -

Total Assets 204,869,116 299,130,287 300,475,450 220,574,214 228,929,679 -

Current Liabilities

Before allocation 84,294,984 153,025,476 122,013,748 50,793,105 52,939,062 - After allocation 88,080,862 158,971,183 132,488,611 59,232,957 (Note1) -

Long-term Liabilities 10,091,538 12,276,580 15,823,297 - - -

Other Liabilities 1,147,750 2,643,109 3,309,838 2,494,491 2,806,640 -

Total Liabilities

Before allocation 95,534,272 167,945,165 141,146,883 53,287,596 55,745,702 -

After allocation 99,320,150 173,890,872 151,621,746 61,727,448 (Note1) -

Capital Stock 29,970,082 34,070,702 37,283,589 42,460,513 42,467,775 - Additional paid-in capital 18,495,574 21,730,753 28,380,731 29,696,393 30,237,586 -

Retained earnings

Before allocation 61,593,204 73,097,529 92,029,109 93,003,248 96,525,371 - After allocation 54,137,262 64,745,781 76,613,594 84,478,998 (Note1) -

Unrealized gain from the financial assets for sales

(86,977) 2,724,181 511,248 (1,568,528) 2,159,201 -

Cumulative translation adjustments

（637,039）（435,027） 1,124,179 3,696,120 1,490,885 -

Net loss not recognized as pension cost

- （3,016）（289） (1,128) (3,202) -

Unrealized gains on cash flow hedges

- - - - 306,361

Total Shareholder’s Equity

Before allocation 109,334,844 131,185,122 159,328,567 167,286,618 173,183,977 -

After allocation 105,548,966 125,239,415 148,853,704 158,846,766 (Note1) -

Note 1: General shareholders meeting has not yet been summoned up to March 22, 2010; therefore, the amount after adjustment is not disclosed.

Note 2: The financial information of the last five years is reviewed by CPA. Note 3: The Q1 2010 financial statements have not yet been audited by CPA up to the date of the report printed on

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March 22, 2010. Note 4: ASUSTeK had acquired Askey by stock exchange and had the said acquisition processed with equity

combination method; therefore, financial statements of 2005 were recompiled under the circumstance. Note 5: ASUS has adopted the principles under Accounting Research and Development Foundation in Taiwan (97)

Kee.mi.tzi No. 331 Letter and (98) Kee.mi.tzi No. 046 Letter to have the convertible bond adjusted retroactively. Therefore, the 2006 and 007 financial information were adjusted retroactively.

Note 6: Some accounts and amounts in the financial statements of 2008 were adjusted in response to the presentation of 2009 financial statements. The said reclassification did not have a material impact on the financial statements.

(II) Summarized Income Statements Unit: NT$ thousands

Year

Item

Summarized Income Statements of fiscal year 2005~2009 (Note 1) As of March 22,

2010 (Note 2)

2005 (adjusted)

2006 (adjusted)

2007 (adjusted)

2008 (Note 6) 2009

Net sales 179,764,037 386,039,184 589,905,832 249,350,951 232,576,904 -

Gross Profit 23,000,841 27,462,425 41,209,222 16,382,030 11,965,792 -

Operating Income 11,079,873 9,376,688 16,032,957 7,187,803 3,545,695 -

Non-operating Income 7,396,713 14,800,872 18,436,763 14,063,659 9,764,265 -

Non-operating Expenses 1,120,977 499,665 1,418,726 694,914 489,190 - Income from Continuing Operations before Tax 17,355,609 23,677,895 33,050,994 20,556,548 12,820,770 -

Income from Continuing Operations 15,277,112 18,951,364 27,283,328 16,456,567 12,479,066 -

Income from Discontinued Operations - - - - - -

Extraordinary Gain and Loss - - - - - -

Cumulative effect of Change in Accounting Principle

- 8,903 - - - -

Net Income 15,277,112 18,960,267 27,283,328 16,456,567 12,479,066 - Earnings per share (non-retroactive) 4.64 5.57 7.43 3.88 2.94 -

Note 1: The financial information of the last five years is reviewed by CPA. Note 2: The Q1 2010 financial statements have not yet been audited by CPA up to the date of the report printed

on March 22, 2010. Note 3: No capitalized interest expenses booked in the last five years. Note 4: ASUSTeK had acquired Askey by stock exchange and had the said acquisition processed with equity

combination method; therefore, financial statements of 2005 were recompiled under the circumstance. Note 5: ASUS has adopted the principles under Accounting Research and Development Foundation in Taiwan

(97) Kee.mi.tzi No. 331 Letter and (98) Kee.mi.tzi No. 046 Letter to have the convertible bond adjusted retroactively. Therefore, the 2006 and 007 financial information were adjusted retroactively.


(III) Auditing by CPAs

CPAs and their auditing opinions in the past five years Auditing Year CPAs Opinions

2005 Ming-Yu Lee, Mushen Chen Modified unqualified

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2006 Ming-Yu Lee, Mushen Chen Modified unqualified

2007 Ming-Yu Lee, Chih-Huei Yang Modified unqualified

2008 Ming-Yu Lee, Chih-Huei Yang Modified unqualified

2009 Hsin-Fu Yen, Jui-Lan Lo Modified unqualified

II. Financial analysis in the past five years

Year

Item (Note 2)

Financial analysis in the past five years As of March 22,

2010 (Note 5)

2005 (adjusted)

2006 (adjusted)

2007 (adjusted)

2008 (Note 10) 2009

Financial structure（％）

Ratio of liabilities to assets 46.63 56.14 46.97 24.16 24.35 -

Ratio of long-term capital to fixed assets 1369.54 1601.39 2040.88 3,550.99 4,052.73 -

Solvency (%)

Current ratio (%) 139.62 125.46 150.80 185.45 187.28 -

Quick ratio (%) 83.73 77.60 105.90 126.91 154.53 -

Times interest earned ratio 10707.73 584.33 62.11 66.82 127.32 -

Operating

ability

Account receivable turnover (times) 6.23 5.11 5.56 3.38 5.41 -

Days sales in accounts receivable 58.58 71.42 65.64 107.98 67.46 - Inventory turnover (times) 5.51 5.92 8.47 5.43 9.26 - Account payable turnover (times) 3.79 3.76 5.50 4.41 7.20 - Average days in sales 66.24 61.65 43.09 67.21 39.41 - Fixed assts turnover (times) 20.61 43.09 68.74 52.93 54.43 - Total assets turnover (times) 0.88 1.29 1.96 1.13 1.02 -

Profitability

Ratio of return on total assets (%) 9.68 7.54 9.24 6.41 5.60 - Ratio of return on shareholders’ equity (%) 15.88 15.77 18.78 10.08 7.33 -

Ratio to issued capital stock (%)

Operating income 36.97 27.52 43.00 16.93 8.35 -

Income before tax 57.91 69.50 88.65 48.41 30.19 -

Profit ratio (%) 8.50 4.91 4.62 6.60 5.37 - Earnings per share ($) 4.64 5.57 7.43 3.88 2.94 -

Cash flow (％)

Cash flow ratio (%) 11.32 1.97 9.44 34.82 46.17 -

Cash flow adequacy ratio (%) 30.00 18.66 26.37 31.01 51.68 -

Cash reinvestment ratio (%) 4.65 (0.02) 3.54 4.86 9.01 -

Balance Degree of operating leverage 1.52 1.88 1.62 1.26 2.60 -

Degree of financial leverage 1.00 1.00 1.03 1.05 1.03 -

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The root causes of the financial ratio change in the last two years: Ratio of liabilities to assets: Accounts payable for the inventory purchased was increased due to the economic recovery in 2009Q4. Ratio of long-term capital to fixed assets: Shareholders’ equity was up and change in fixed assets was insignificant due to the increase of net income; therefore, Ratio of long-term capital to fixed assets was increased.Current ratio: Accounts receivable from the sales of goods was increased due to the economic recovery in 2009Q4 and sales growth.Quick ratio: Accounts receivable from the sales of goods was increased due to the economic recovery in 2009Q4 and sales growth.Times interest earned ratio: The amortization of CB in the year was decreased (ASUS CB and ECB were without interest paid; however, CB discount expense was credited to interest expense in accordance with the new notice even there was no cash actually paid); therefore, Times interest earned ratio was increased. Account receivable turnover (times): ASUSTeK had OEM business spited to the subsidiary in the last year; therefore, the beginning accounts receivable included OEM business and Account receivable turnover (times) of prior period was low. Inventory turnover (times): The management of ASUSTeK striven to control inventory level and with lower inventory amount on the book; therefore, Inventory turnover (times) was low.Account payable turnover (times): ASUSTeK had OEM business spited to the subsidiary in the last year; therefore, the beginning accounts payable included OEM business and Account payable turnover (times) of prior period was low.Total assets turnover (times): The sales revenue of 2009Q1~Q3 was decreased due to recession; therefore, Total assets turnover (times) was decreased. Ratio of return on total assets: The net income of was decreased due to recession in 2009Q1~Q3. Ratio of return on shareholders’ equity: The net income of was decreased due to recession in 2009Q1~Q3. Ratio of operating income to issued capital stock: The sales revenue was decreased and operating income was decreased too due to recession in 2009Q1~Q3. Profit ratio: Profit ratio was reduced due to the severe market competition, selling price adjusted down per the company’s policy, and gross profit rate was decreased. Cash flow ratio: Cash flow ratio was up from the year before due to the effort of the management in controlling inventory level, reducing total amount of inventory, and causing net cash inflow from operating activity to go up. Cash flow adequacy ratio: Cash flow adequacy ratio was up from the year before due to the effort of the managementin controlling inventory level, reducing total amount of inventory, and causing net cash inflow from operating activityto go up. Cash reinvestment ratio: Cash reinvestment ratio was up from the year before due to the effort of the management in controlling inventory level, reducing total amount of inventory, and causing net cash inflow from operating activity to go up.

Note 1: ASUS has adopted the principles under Accounting Research and Development Foundation in Taiwan (97) Kee.mi.tzi No. 331 Letter and (98) Kee.mi.tzi No. 046 Letter to have the convertible bond adjusted retroactively. Therefore, the 2006 and 007 financial information were adjusted retroactively.

Note 2: The financial information is reviewed by CPA. Note 3: Accounts receivable includes the amount of long-term accounts receivable- related party that is in

compliance with trade terms and conditions. Note 4: ASUS had acquired Askey by stock exchange under Equity Method; therefore, the 2005 financial

statements were adjusted. Note 5: The Q1 2010 financial statements have not yet been audited by CPA up to the date of the report

printed on March 22, 2010. Note 6: Equations:

1. Financial structure (1) Ratio of liabilities to assets = Total liability/Total assets (2) Ratio of long-Term capital to fixed assets = (Net shareholders’ equity + Long-term liability)

/ Net fixed assets 2. Solvency

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(1) Current ratio = Current assets / current liability (2) Quick ratio = (Current assets – Inventory – Prepaid expense) / Current liability (3) Times interest earned ratio = Net income before tax and interest expense / Interest expense

of the year 3. Operating ability

(1) Account receivable turnover (including accounts receivable and notes receivable derived from business operation) = Net sales / Average accounts receivable (including accounts receivable and notes receivable derived from business operation)

(2) Days sales in accounts receivable = 365 / Account receivable turnover (3) Inventory turnover = Cost of goods sold / Average inventory amount (4) Account payable turnover (including accounts payable and notes payable derived from

business operation) = Cost of goods sold/ Average accounts payable (including accounts payable and notes payable derived from business operation)

(5) Average days in sales = 365 / Inventory turnover (6) Fixed assts turnover = Net sales / Net fixed assets (7) Total assets turnover = Net sales / Total assets

4. Profitability (1) Return on assets = [Net income (loss) + interest expense x (1-tax rate)] / Average total assets (2) Return on shareholder’s equity = Net income (loss) / Net average shareholders’ equity (3) Ratio to issued capital stock = Net income before tax / Issued capital stock (4) Profit ratio = Net income (loss) / Net sales (5) Earnings per share = (Net income – preferred stock dividend) / Weighted average stock

shares issued 5. Cash flow

(1) Cash flow ratio = Net cash flow from operating activity / Current liability (2) Cash flow adequacy ratio = Net cash flow from operating activity in the past five years /

(Capital expenditure + Inventory increase + Cash dividend) in the past five years (3) Cash reinvestment ratio = (Net cash flow from operating activity – Cash dividend) / (Fixed

assets + Long-term investment + Other assets + Working capital) 6. Balance:

(1) Degree of operating leverage = (Net operating income – Variable operating cost and expense) / Operating income

(2) Degree of financial leverage = Operating income / (Operating income – interest expense) Note 7: The following factors are to be included for consideration for the calculation of earnings per

share: 1. It is based on the weighted average common stock shares instead of the outstanding stock shares

at yearend. 2. For capitalization with cash or Treasury stock trade, the stock circulation must be included for

consideration to calculate weighted average stock shares. 3. For capitalization with retained earnings and additional paid-in capital, the earnings per share

calculated semi-annually and annually must be adjusted retroactively and proportionally to the capitalization but without considering the issuance period of the capitalization.

4. If preferred stock shares are nonconvertible and cumulative, the dividend of the year (whether it is distributed or not) should be deducted from net income or added to the net loss. If preferred stock shares are not cumulative, preferred stock dividend should be deducted from net income if there is any but it needs not be added to net loss if there is any.

Note 8: The following factors are to be included for consideration for the analysis of cash flow: 1. Net cash flow from operating activity meant for the net cash inflow from operating activity on

the Statement of Cash Flow. 2. Capital expenditure meant for the cash outflow of capita investment annually.

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3. Increase of inventory is counted only when ending inventory exceeds beginning inventory. If the ending inventory is decreased, it is booked as zero value.

4. Cash dividend includes the amount for common stock and preferred stock. 5. Gross fixed assets meant for the total fixed assets before deducting the cumulative depreciation.

Note 9: Issuers are to have operating cost and operating expenses classified into the category of fixed and variable. If the classification of operating cost and operating expense involves estimation or discretional judgment, it must be made reasonably and consistently.


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III. Supervisors’ report in the most recent years

ASUSTek Computer Inc. SUPERVISORS’ REPORT

ASUS SUPERVISORS’ REPORT

We have examined the accompanying financial statements and consolidated financial

statements as of 2009 that are composed by the Board of Directors, business report, and

distribution of retained earnings. In our opinion, it is in compliance with Company Law;

therefore, the Supervisor’s Report is hereby issued in accordance with Article 219 of

Company Law.

Sincerely yours,

2010 General Shareholders’ Meeting of ASUS Supervisors: Tze-Kaing Yang

March 19, 2010

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88

ASUSTek Computer Inc.

SUPERVISORS’ REPORT






Company Law.

Sincerely yours,

2010 General Shareholders’ Meeting of ASUS Supervisors: Chung-Jen Cheng

March 19, 2010

89

89

ASUSTek Computer Inc. SUPERVISORS’ REPORT






Company Law.

Sincerely yours,

2010 General Shareholders’ Meeting of ASUS Supervisors: L.H. Yang

March 19, 2010

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90

IV. Financial statements of the most recent years: Please refer to Page 91-130 for details. V. Consolidated financial statements of the parent company and subsidiary in the most

recent years: Please refer to Page 131-196 for details.

VI. Financial difficulties faced by the company and the related party in the most recent years and up to the date of the annual report printed: None

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45

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73,9

06

6.2

Not

es a

nd a

ccou

nts

paya

ble

– re

late

d pa

rtie

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ote

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me

tax

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ble

2,47

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d ot

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ent l

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9,17

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l lia

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ies

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sure

d at

fai

r va

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thro

ugh

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it or

lo

ss –

cur

rent

(no

tes

4(2)

and

4(7

))

285,

823

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1

85

9,93

1

0.4

Rec

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s in

adv

ance

(no

te 5

)

56

1,05

1

0.2

956,

724

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4B

onds

pay

able

– c

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nt (

note

4(7

))

3,64

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tes

4(2)

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5)

1,43

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455,

350

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2D

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red

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me

tax

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te 4

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0

2,80

6,64

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1.2

2,49

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1

1.2

Tot

al li

abili

ties

55

,745

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24

.3

53

,287

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ockh

olde

rs’

equi

ty:

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mon

sto

ck (

note

4(9

))

42,4

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75

18.6

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13

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ition

al p

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in c

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l (no

te 4

(9))

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n ca

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ss o

f pa

r va

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28,2

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81

12.4

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48

12.6

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ers

1,96

3,10

5

0.8

1,83

5,14

5

0.9

30

,237

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13

.2

29

,696

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etai

ned

earn

ings

(no

tes

4(9)

and

10(

3))

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al r

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ve

18,9

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13

8.3

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pria

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ear

ning

s

77

,615

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33

.9

75

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34

.3

96,5

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10

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48

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ity a

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t:

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e tr

ansl

atio

n ad

just

men

ts

1,49

0,88

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loss

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as p

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(1,1

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ains

(lo

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fin

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s

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9

(1

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nrea

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n ca

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173

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tock

hold

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equ

ity

$ 22

8,92

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9

100.

0

220,

574,

214

10

0.0

94

See accompanying notes to financial statements.

ASUSTeK COMPUTER INC.

Statements of Income

For the years ended December 31, 2009 and 2008 (expressed in thousands of New Taiwan dollars, except earnings per share amounts)

2009 2008 Amount % Amount %

Sales revenue (note 5) $ 236,530,280 101.7 258,609,575 103.7Less: sales returns and allowances 3,953,376 1.7 9,258,624 3.7

Net sales 232,576,904 100.0 249,350,951 100.0Cost of sales (notes 4(4), 5 and 10) 220,611,112 94.9 232,968,921 93.4

Gross profit 11,965,792 5.1 16,382,030 6.6Changes in unrealized inter-company profits (906,321) (0.4) 1,010,035 0.4

Realized gross profit 11,059,471 4.7 17,392,065 7.0Operating expenses (notes 4(8), 5 and 10):

Selling 2,169,774 0.9 3,776,457 1.5General and administrative 1,376,620 0.6 1,384,827 0.6Research and development 3,967,382 1.7 5,042,978 2.0

7,513,776 3.2 10,204,262 4.1Operating income 3,545,695 1.5 7,187,803 2.9

Non-operating income and gains: Interest income 71,798 - 300,394 0.1Investment income under the equity method, net

(note 4(5)) 7,572,667 3.2 9,039,978 3.6Dividends 235,002 0.1 310,233 0.1Foreign currency exchange gain, net 823,503 0.4 732,351 0.3Gain on bad debt recovery - - 1,329,486 0.5Gain on valuation of financial assets, net 143,601 0.1 12,256 - Gain on valuation of financial liabilities, net (note 4(7)) 192,378 0.1 942,440 0.4Others 725,316 0.3 1,396,521 0.6

9,764,265 4.2 14,063,659 5.6Non-operating expenses and losses:

Interest expense (note 4(7)) 101,497 0.1 312,301 0.1Impairment loss (notes 4(2) and (6)) 301,617 0.1 37,141 - Others 86,076 - 345,472 0.1

489,190 0.2 694,914 0.2Net income before income tax expense 12,820,770 5.5 20,556,548 8.3

Income tax expense (note 4(10)) 341,704 0.1 4,099,981 1.6Net income $ 12,479,066 5.4 16,456,567 6.7

Before income tax

Afterincome tax

Beforeincome tax

Afterincome tax

Earnings per share (note 4(11)) Basic earnings per share (in dollars) $ 3.02 2.94 4.84 3.88Diluted earnings per share (in dollars) $ 2.95 2.87 4.45 3.54

95

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96



Statements of Cash Flows

For the years ended December 31, 2009 and 2008 (expressed in thousands of New Taiwan dollars)

2009 2008

Cash flows from operating activities: Net income $ 12,479,066 16,456,567Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 1,432,376 897,252Bad debt expenses (gain on recovery) 68,302 (1,329,486)Loss on impairment 301,617 37,141Loss (gain) on valuation of financial liabilities (179,298) (942,440)Amortization of discount on bonds 128,051 267,507Dividends on shares held in trust paid to employees 26,339 112,124Investment income under the equity method, net (7,572,667) (9,039,978)Cash dividends received from long-term investment under the equity method 4,987,395 3,822,301Decrease (increase) in financial assets measured at fair value through profit or loss – current (4,880,632) (1,098,026)Decrease (increase) in notes and accounts receivable, net (8,081,853) 70,194,420Decrease (increase) in inventories, net 12,297,443 (5,937,618)Decrease (increase) in other receivables, net 2,514,791 (1,260,781)Changes in deferred income tax assets and liabilities, net (623,462) (369,244)Increase (decrease) in notes and accounts payable 11,170,820 (35,759,549)Increase (decrease) in income tax payable (1,282,878) (2,035,341)Increase (decrease) in deferred credits 906,321 (1,010,034)Increase (decrease) in accrued expenses, receipts in advance, and other current liabilities 1,239,095 (14,377,956)Others (491,507) (941,026)

Net cash provided by operating activities 24,439,319 17,685,833

Cash flows from investing activities: Acquisition of investments (1,365,251) (1,849,206)Proceeds from disposal of investments (including capital decrease) 5,507,318 14,245Acquisition of property, plant and equipment (648,281) (396,749)Additions to deferred expenses and intangible assets (630,062) (972,896)Other assets and others (3,218,894) 190,127Cash transferred to spun-off subsidiaries - (2,000,000)

Net cash used in investing activities (355,170) (5,014,479)

Cash flows from financing activities:Employee bonuses and directors’ and supervisors’ remuneration - (1,220,106)Redemption of bonds payable (9,147,365) (483,807)Cash dividends (8,439,852) (9,351,630)Increase (decrease) in deposits received 308 (11,721)Redemption of treasury stock (873,459) -

Net cash used in financing activities (18,460,368) (11,067,264)

Net increase in cash and cash in banks 5,623,781 1,604,090Cash and cash in banks at beginning of year 10,778,309 9,174,219Cash and cash in banks at end of year $ 16,402,090 10,778,309Supplementary disclosures of cash flow information:

Cash paid during the year for: Interest $ 121,861 42,787Income tax $ 2,595,706 6,530,673

Investing and financing activities not affecting cash flows:Bonds payable converted to common stock and additional paid-in capital $ - 1,484,149Employee bonuses payable transferred to common stock and additional paid-in capital $ 700,000 - Employee bonuses payable - 47,623Bonds payable – could be repaid within one year $ 3,647,296 12,210,103

Investing and financing activities partially affecting cash flows: Items affected by spin-off of subsidiaries:

Non-cash assets transferred to spun-off subsidiaries $ 111,851,499Liabilities transferred to spun-off subsidiaries (31,851,499)Acquisition of long-term equity investments from spun-off subsidiaries (82,000,000)Cash transferred to spun-off subsidiaries $ (2,000,000)

97

(Continued)


Notes to Financial Statements

December 31, 2009 and 2008 (expressed in thousands of New Taiwan dollars unless otherwise specified)

1. Organization

ASUSTeK Computer Inc. (the Company) was established on April 2, 1990. The Company’s common shares were listed on the Taiwan Stock Exchange (TSE). Its main activities are to produce, design and sell notebook PCs, main boards, CD-ROMs and add-on cards.

The Company resolved to spin-off its OEM businesses on January 1, 2008. Pursuant to the Company’s resolution, the Company transferred its computer and non-computer OEM businesses to its spun-off subsidiaries PEGATRON CORPORATION (PEGATRON) and UNIHAN CORPORATION (UNIHAN), respectively.

The Company’s headcounts aggregated 3,455 and 3,933 as of December 31, 2009 and 2008, respectively.

2. Summary of Significant Accounting Policies

The financial statements are prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the Business Accounting Law, the Criteria Governing Handling of Commercial Accounting, and accounting principles and practices generally accepted in the Republic of China. The significant accounting policies and measurement basis adopted in preparing the accompanying financial statements are as follows:

(1) Use of estimates

The preparation of the accompanying 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 financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

(2) 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.

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.

98

2

ASUSTEK COMPUTER INC.


(3) Foreign currency transactions and translation of financial statements in foreign currencies

Transactions involving non-derivative financial instruments denominated in foreign currencies are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occurred. Translation gains or losses arising from the settlement of assets and liabilities denominated in foreign currencies are included in profit or loss in the year of actual settlement.

Monetary assets and liabilities denominated in foreign currencies are remeasured on the balance sheet date using the exchange rates in effect as on that date, with related exchange gains and losses included in the statements of income.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through stockholders’ equity are remeasured at the exchange rate prevailing on the balance sheet date, with related exchange gains or losses recorded as cumulative translation adjustment in stockholders’ equity. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through profit or loss are remeasured at the exchange rate prevailing on the balance sheet date, with related exchange gains or losses recorded in the statements of income. Non-monetary assets and liabilities denominated in foreign currencies that are measured at cost are remeasured at the historical exchange rate.

Long-term investments in foreign investees, which are accounted for under the equity method, are stated on the basis of stockholders’ equity in the foreign-currency financial statements of investees. Translating gains or losses from long-term investments are recognized as cumulative transition adjustment in stockholders’ equity.

(4) Impairment of assets

The Company assesses all applicable assets subject to R.O.C. Statement of Financial Accounting Standard (‘SFAS’) No. 35 for indication of impairment on the balance sheet date. If any indication of impairment exists, the Company then compares the carrying amount with the recoverable amount of the assets or the cash-generating unit (“CGU”) and writes down the carrying amount to the recoverable amount. If the recoverable amount of an asset other than goodwill has increased as a result of the increase in its estimated service potential, the Company reverses the impairment loss to the extent that the carrying amount after the reversal would not exceed the amount (net of amortization or depreciation) that would otherwise result had no impairment loss been recognized in prior periods.

The Company assesses the goodwill and intangible assets that have indefinite lives or that are not yet available for use periodically and on an annual basis and recognizes an impairment loss on the carrying value in excess of the recoverable amount. The loss is first recorded against the goodwill allocated to the CGU, with any remaining loss allocated to other assets on a pro rata basis proportionate to their carrying amounts. The write-down of goodwill is not reversed in subsequent periods under any circumstances.

99

3



(5) Financial instruments

In accordance with R.O.C. SFAS No. 34 “Financial Instruments: Recognition and Measurement” and the “Criteria Governing the Preparation of Financial Reports by Securities Issuers”, financial assets are classified as financial assets at fair value through profit or loss, financial assets carried at cost, or available-for-sale financial assets, as appropriate. Financial liabilities are classified either as financial liabilities at fair value through profit or loss, or as financial liabilities at cost.

The Company accounts for purchases and sales of financial assets on the trade date, or the date on which the Company commits to purchase or sell the asset. At initial recognition, financial assets are recognized at fair value plus, in the case of investments that are not reported at fair value through profit or loss, directly attributable transaction costs.

A. Financial assets measured at fair value through profit or loss

These financial assets are subsequently measured at fair value with changes in fair value recognized in profit and loss. Stocks of listed companies, convertible bonds and closed-end funds are measured at closing prices on the balance sheet date. Open-end funds are measured at the unit price of the net assets on the balance sheet date.

B. Financial assets carried at cost

Equity investments without reliable market prices, including emerging and other unlisted stocks, are measured at cost. If objective evidence of impairment exists, the Company recognizes impairment loss, which is not reversed in subsequent periods.

C. Available-for-sale financial assets

Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, or loans and receivables. These assets are then measured at fair value. The gain or loss arising from change in fair value, excluding impairment loss and exchange gain or loss from the translation of monetary financial assets denominated in foreign currencies, is recognized in a separate component of stockholders’ equity until such investment is reclassified or disposed of, upon which the cumulative gains or losses previously charged to stockholders’ equity are transferred to current profit or loss.

Subsequent to initial recognition, the Company measures all financial liabilities at amortized cost except for financial liabilities at fair value through profit or loss, which are measured at fair value.

(6) Allowance for doubtful accounts

Allowance for doubtful accounts is recognized on the basis of the estimated collectability of accounts receivable and other receivables.

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(7) Inventories

The costs of inventories include those necessary expenditures incurred in bringing each item of inventory to its usable condition and location. Cost is calculated on a weighted-average basis.

Up to December 31, 2008, inventories were valued at the lower of cost or market value using the gross method. The market values of raw materials and supplies were based on the replacement cost, while those of work in process and finished goods were based on net realizable value.

Effective January 1, 2009, inventories are valued at the lower of cost or net realizable value. Net realizable value by item is determined based on the estimated selling price in the ordinary course of business, less estimated costs of completion and costs incurred in order to make the sale.

(8) Long-term equity investments

Long-term investments are accounted for under the equity method when the percentage of ownership held by the Company and its subsidiaries exceeds 20% or if the Company and its subsidiaries own less than 20% of the investee’s common stock but have significant influence on the investee’s operations. If an investee company accounted for under the equity method issues new shares and the Company does not purchase new shares proportionately, then the investment percentage, and therefore the equity in net assets of the investee, will be changed. The effect of such change is adjusted against the additional paid-in capital resulting from long-term equity investments or retained earnings.

The difference between the cost of the investment and the amount of underlying equity in net assets of an investee attributed to depreciable, depletable, or amortizable assets is amortized over the estimated remaining economic years. The difference attributed to the carrying amount in excess of or lower than the fair value of assets is written off entirely when the difference disappears. The cost of investment in excess of the fair value of identifiable net assets is recognized as goodwill and is no longer amortized. The difference attributed to the fair value of identifiable net assets in excess of the cost of investment causes a proportional decrease in the carrying amount of non-current assets. When the carrying amount of non-current assets is decreased to zero, the remaining difference is recorded as extraordinary gain or loss.

The difference between the disposal price and carrying amount of long-term equity investment under the equity method on the disposal date is recognized as gain or loss from disposal of long-term equity investment. The associated additional paid-in capital resulting from long-term equity investment is reclassified into current gain or loss in proportion to disposal of long-term equity investment.

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When the equity of long-term equity investment under the equity method including unrealized gain on financial instruments, foreign currency translation adjustments, net loss not recognized as pension cost, and unrealized losses on cash flow hedges is changed, the changes in percentage of ownership are reflected in those related accounts and long-term equity investment under the equity method.

Unrealized inter-company profits or losses resulting from transactions between the Company and its subsidiaries and investees accounted for under the equity method are deferred until realized.

The investees over which the Company has control are consolidated into the Company’s financial statements. The Company prepares consolidated financial statements on a quarterly basis.

(9) Property, plant and equipment, leased assets, idle assets, and depreciation

Property, plant and equipment are stated at cost. Cost associated with significant additions, improvements, and replacements to property, plant and equipment are capitalized. Expenditures for regular repairs and maintenance are charged against operating income.

Depreciation of property, plant and equipment is provided over the estimated useful lives of the assets by using the straight-line method. If the property, plant and equipment have reached the end of their estimated useful lives but are still in use, the Company will estimate their remaining useful lives and residual value, and depreciate the residual value using the same method. Property, plant and equipment leased to other parties under operating leases are classified as leased assets. The related depreciation is accounted for as a reduction of rental income. The useful lives of fixed assets, leased assets and idle assets are as follows:

A. Buildings and equipment: 3 to 50 years.

B. Machinery and equipment: 3 to 8 years.

C. Other equipment: 2 to 15 years.

Property, plant and equipment not currently used in operations are transferred to idle assets. The cost, accumulated depreciation, and accumulated impairment of the original assets not currently used in operations are all transferred to idle assets or other assets, and depreciated.

(10) Intangible assets and deferred expenses

Intangible assets represent computer software, which is amortized using the straight-line method over 3 years.

Deferred expenses represent office decorations, which are amortized using the straight-line method over 2 to 5 years.

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(11) Convertible bonds payable

According to R.O.C. SFAS No. 36 “Financial Instruments: Disclosure and Presentation” and Interpretation (95) 078 by the Accounting Research and Development Foundation (ARDF), convertible bonds with a put option issued by the Group before December 31, 2005, are accounted for in accordance with SFAS No. 21. The derivative instrument embedded in a non-derivative host debt instrument is not separated from the equity component of the instrument. Costs incurred for the issuance of redeemable convertible bonds are deferred and amortized during the period between the issuance date and the last redeemable date.

Bonds issued after January 1, 2006, are accounted for in accordance with R.O.C. SFAS No. 36 and Interpretations (95) 290, (97) 331 and (98) 046 by the ARDF as follows:

A. The issuance costs are allocated to the related liability and equity components in proportion of the initially recognized amounts.

B. Convertible bonds bearing a clause on conversion price adjustment based on stock market price do not include the equity component. For the liability components, the fair value of the conversion right and call/put option is determined first; then the book value of main debt component is determined based on the net amount of the issuance price after deducting the fair value of the call/put option and conversion right with a clause on price adjustment.

C. Convertible bonds are subsequently measured at amortized cost. Derivatives with call/put options and conversion rights with a clause on price adjustment are recognized as “financial liabilities at fair value through profit or loss” and are subsequently measured at fair value. Movements in the fair value of the derivatives are recognized as “gain/ (loss) on valuation of financial liabilities”.

D. If the bondholder exercises the right to convert the bonds ahead of the maturity date of the bonds, the book value of the liability component i s ad jus ted to the value on the conversion date, which serves as the basis for the recording of the issuance of common stock so that no conversion gain and loss is recognized thereon.

E. If the bondholder is eligible to exercise the put option within one year, the bonds payable are reclassified as current liability. When the put option expires, those bonds payable are reclassified as long-term liability if the liability meets the definition of long-term liability.

(12) Retirement plan

The Company makes monthly contributions to the pension fund at 2% of the total monthly salaries and wages as required by the Labor Standards Law. The fund is administrated by the Employees Retirement Fund Committee. This pension fund is considered absolutely separate from the Company after contribution; therefore, it is not included in the accompanying financial statements.

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Effective from 1995, the Company adopts R.O.C. SFAS No. 18 “Accounting for Pensions”. The funding status of the pension plan as of December 31, 1995, was measured on an actuarial basis. Because the accrued pension liability is equal to the funding status of the pension plan, no unrecognized transitional net assets or net obligations shall be amortized in the future. In accordance with R.O.C. SFAS No. 18, net pension cost was recognized from January 1, 1996. In addition, except for a few foreign employees, the Company had settled its financial obligations to its employees’ under the pension plan accounted for base on SFAS No. 18 as of December 31, 2007.

The new Labor Pension Act became effective on July 1, 2005, and prescribes a defined contribution pension plan for all new employees and for any employees employed before that date who opted to adopt it. Under this defined contribution pension plan, the Company contributes monthly oat the rate of no less than 6% of salaries and wages to employees’ individual pension fund accounts with the Bureau of Labor Insurance, and this contribution is recorded as pension expenses in the accompanying statements of income.

(13) Revenue recognition

The Company recognizes revenue when the revenue earning process has been significantly completed, which means the revenue has been realized or is readily realizable and earned. Cost is recognized when the related revenue is accrued; expenses are recognized as current expenses when incurred.

(14) Employees’ bonuses and directors’ and supervisors’ remuneration and share-based payment

Appropriation of earnings after January 1, 2008, for employees’ bonuses and directors’ remuneration according to the R.O.C. Company Act and each entity’s article of incorporation accounts, is accounted for under Interpretation (96) 052 issued by the ARDF. Accordingly, the Company and domestic subsidiaries estimate the amount of directors’ and supervisors’ remuneration according to the Interpretation and recognize it as expenses. 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 as profit or loss. The Group adopts R.O.C. SFAS No. 39 to account for the transfer of equity instruments from shareholders and the Group to the Group’s employees.

(15) Income taxes

Income tax is calculated on the basis of accounting income. The differences between the tax bases and the book values of assets and liabilities are recorded as deferred tax using the enacted tax rates for the periods in which the deferred tax is expected to be reversed. The tax effects from taxable temporary differences are recognized as deferred tax liabilities, while the deductible temporary differences, and investment tax credits are accounted for as deferred tax assets, which are assessed an allowance for deferred tax assets based on further realization.

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Deferred income tax assets or liabilities are classified as current or non-current based on the classification of items that resulted in the deferred item or based on the timing of the expected reversal, for certain transactions not directly related to an asset or liability.

The 10% additional income tax on unappropriated earnings is recorded as current income tax expense in the following year when the shareholders resolve not to distribute the earnings.

Current income tax is the higher of current income tax payable or the Alternative Minimum Tax (“AMT”) calculated by applying the Income Basic Tax Act (“IBTA”). The Company has taken into consideration the impact of the AMT in the determination of its current income tax expense and its future impact when estimating the realizable value of the deferred tax assets.

(16) Treasury stock

The Company adopts R.O.C. SFAS No. 30 “Accounting for Treasury Stocks” to account for treasury stock transaction and recognizes the treasury stock at purchase cost. A gain on the sale of treasury stock is credited to additional paid-in capital – treasury stock. Losses are charged to additional paid-in capital, but only to the extent of available net gains from previous sales or retirements of the same class of stock; otherwise, losses are charged to retained earnings. The cost of treasury stock is computed using the weighted-average method.

When treasury stock is retired, the weighted-average cost of the retired treasury stock is written off against the par value of the shares and the paid-in capital derived from the issuance of shares in excess of par value. If the weighted-average cost written off exceeds the sum of the par value and the paid-in capital in excess of par value, the difference is debited to additional paid-in capital – treasury stock arising from the same class of stock or to retained earnings, and if vice versa, the difference is credited to additional paid-in capital – treasury stock.

(17) Earnings per share

Earnings per share of common stock are computed based on the weighted-average number of common shares outstanding during the period. Earnings per share for the prior period are retroactively adjusted to reflect the effects of new shares issued by transferring additional paid-in capital, retained earnings, and employees’ bonuses approved in the annual stockholders’ meetings held before and in 2008.

The convertible bonds and employee stock bonuses which have not yet been approved in the stockholders’ meeting are potential common shares. Only basic earnings per share are disclosed if there is no dilution effect. Otherwise, both basic and diluted earnings per share are disclosed. For the purpose of calculating diluted earnings per share, the potential common shares are deemed to have been converted into common stock at the beginning of the period, and the effect on net income of the additional common shares outstanding is considered accordingly.

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(18) Spin-off transactions

The Company resolved to spin off its OEM businesses on January 1, 2008. The Company transferred its computer and non-computer OEM businesses to its spun-off subsidiaries PEGATRON and UNIHAN and obtained their issued equity. The Company adopts Interpretation (91) 128 issued by the ARDF to account for its spin-off transactions. Because the transferor company and the transferee company are affiliated, the transferor company shall recognize long-term investment under the equity method based on the book value (if the transferor has any impairment loss, the transferee shall recognize the book value based on impairment loss recognized) of the assets and liabilities of the transferor company without any transfer gain/(loss).

3. Changes in Accounting Policy and Their Influence

(1) Effective from January 1, 2009, the Company measured its inventories initially and subsequently in accordance with R.O.C. SFAS No. 10 “Inventories”. Accordingly, net income decreased by $868,183 and basic earnings per share decreased by 0.2 dollars for the year ended December 31, 2009.

(2) Effective from January 1, 2008, the Company adopted R.O.C. SFAS No. 39 and Interpretation (96) 052 issued by the ARDF for share-based payment transaction. The adoption of these new accounting principles decreased net income by $903,925 and basic earnings per share by NTD 0.21 for the year ended December 31, 2008. In accordance with Interpretation (97) 169 issued by the ARDF, the new shares issued as employees’ bonuses in 2008 and later years are no longer retroactively adjusted when calculating basic earnings per share and diluted earnings per share. Employees’ bonuses issued in form of stock with dilutive effect are considered in the calculation of diluted earnings per share. The Company adopted R.O.C. SFAS No. 39 “Share-based payment” to account for the transfer of equity instruments from shareholders to the Company’s or affiliated companies’ employees. Accordingly, net income decreased by $286,224 and basic earnings per share decreased by 0.07 dollars for the year ended December 31, 2008.

4. Details of Significant Accounts

(1) Cash and cash in banks

2009/12/31 2008/12/31

Petty cash and cash on hand $ 265 264 Checking accounts and demand deposits 4,961 359,755 Time deposits 16,396,864 10,418,290

$ 16,402,090 10,778,309

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The financial instruments held by the Company as of December 31, 2009 and 2008 were as follows:

2009/12/31 2008/12/31 Financial assets measured at fair value through profit

or loss: Open-end funds $ 13,183,532 8,344,301 Stocks of listed companies 52,295 - Forward foreign currency exchange contracts - 10,894

$ 13,235,827 8,355,195Financial liabilities measured at fair value through

profit or loss: Current:

Call/put options and conversion right – convertible bonds $ 285,823 859,931

Available-for-sale financial assets: Current:

D-Link Corporation $ 408,338 252,588Non-current:

Advantech Co., Ltd. $ 5,464,630 3,597,195 Others 71,247 111,922

$ 5,535,877 3,709,117Financial assets carried at cost:

Current: Edison Opto Corporation $ 40,000 - GREENASUS RECYCLING CO., LTD.

(GREENASUS) 790 - Asureware (Cayman) Holding Inc.

(Asureware Cayman) 372 - $ 41,162 -

Non-current:

AmTrust Capital I Corp $ 62,859 62,859 ASUSCOM Network Inc. - 16,350 Nuvoton Technology Corporation 45,000 - Others 135,000 1

$ 242,859 79,210

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A. Forward foreign currency exchange contracts:

The forward foreign currency exchange contracts were intended mainly to hedge foreign currency risk from operating activities. As of December 31, 2009 and 2008, the Company did not meet the criteria for hedge accounting. The derivatives recognized as financial instruments held for trading were as follows (in thousands of dollars):

2009/12/31 2008/12/31 NominalAmount Period

NominalAmount Period

Derivative financial liabilities:

USD forward foreign currency exchange contracts sold USD - - USD 20,000

2008.12.3~ 2009.1.22

The Company had settled all forward foreign currency exchange contracts and foreign currency option contracts as of December 31, 2009. The gain (loss) resulting from changes in fair value of forward foreign currency exchange contracts and option contracts amounted to $83,235 and $(79,604) for the years ended December 31, 2009 and 2008, respectively.

B. Available-for-sale financial assets:

For the years ended December 31, 2009 and 2008, the unrealized gains (losses) on available-for-sale financial assets amounted to $2,086,902 and $(1,952,781), respectively, and were recorded as a separate component of stockholders’ equity.

C. Financial assets carried at cost:

(a) ASUSCOM Network Inc. a completed its liquidation in year 2009. GREENASUs and Azureware Cayman began their liquidation procedures in December and October 2009, respectively. The Company has stopped applying the equity method in accordance with related regulations.

(b) The Company assessed and compared the book value and collectable amount of financial assets carried at cost – non-current and recognized impairment loss amounting to $0 and $37,141 for the years ended December 31, 2009 and 2008, respectively.

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(3) Notes and accounts receivable – non-related parties

2009/12/31 2008/12/31

Notes receivable $ 5 644 Accounts receivable 902,409 430,977 902,414 431,621 Less: allowance for doubtful accounts (82,263) (13,961)

$ 820,151 417,660

(4) Inventories

2009/12/31 2008/12/31

Finished goods $ 167,682 1,705,279 Merchandise inventory 13,379,163 22,136,644 Work in process 514,009 945,185 Raw materials 2,817,832 5,142,401 Inventories in transit 596,863 253,283 Less: allowance for inventory valuation loss and

obsolescence (2,388,054) (2,797,854)$ 15,087,495 27,384,938

Inventories recognized as expenses and gains amounted to $406,281 and expenses of $1,609,516, of which $(409,800) and $1,619,516 were a deduction from (addition to) the cost of sales due to a write-down (reversal) of inventory cost to its net realizable value, for the years ended December 31, 2009 and 2008, respectively.


2009/12/31 2008/12/31

Investee Company Interest Owned Amount

Interest Owned Amount

PEGATRON 100% $ 95,397,920 100% 89,528,482 ASUS INTERNATIONAL LIMITED (AIL) 100% 7,165,908 100% 14,914,064 Askey Computer Corp. (Askey) 100% 8,874,563 100% 9,285,216 ASUSTEK HOLDINGS LIMITED 100% 1,671,186 100% 1,821,172 Hua-Cheng Venture Capital Corp. 100% 1,056,282 100% 533,794 Others 1,844,089 1,270,092

$ 116,009,948 117,352,820

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A. In order to enhance competitiveness and boost productivity, the Company’s shareholders resolved, on October 30, 2007, to restructure the Company’s businesses into own-brand and OEM. The date of the spin-off was January 1, 2008. Pursuant to the resolution, the Company transferred its computer OEM business with estimated value of $70,000,000 to its newly established subsidiary PEGATRON by subscribing 1,600,000,000 newly issued shares of PEGATRON at $43.75 (dollars) per share. In addition, the Company transferred its non-computer OEM business and machine hull and molding tool R&D business with estimated value of $12,000,000 to its newly established subsidiary UNIHAN by subscribing 800,000,000 newly issued shares of UNIHAN at $15 (dollars) per share. The plan was approved by the relevant authorities. The registration of changes was completed in January 2008. The assets and liabilities for the spin-off were as follows:

PEGATRON UNIHAN Total

Assets Current assets $ 21,999,830 12,555,287 34,555,117 Long-term investments 66,867,161 7,060,209 73,927,370 Property, plant and equipment 4,761,981 127,143 4,889,124 Other assets 353,066 126,822 479,888 93,982,038 19,869,461 113,851,499

Liabilities Current liabilities (23,982,038) (7,869,461) (31,851,499)

Net Assets $ 70,000,000 12,000,000 82,000,000

In response to foreign currency risk resulting from changes in net assets and inventory denominated in foreign currencies, the Company signed an agreement with PEGATRON and UNIHAN requiring whoever benefited from foreign currency translation arising from the spin-off transaction to compensate the other, where appropriate, for loss due to exchange rate fluctuation, from December 28, 2007, to March 31, 2008. As of March 31, 2008, the Company was compensated by PEGATRON and UNIHAN in the amount of $1,602,711 and $255,748, respectively, and the compensation was recognized as “credit to foreign exchange loss”. However, the Company also compensated PEGATRON and UNIHAN in the amount of $365,523 and $109,050, respectively, for valuation loss on inventory, and the compensation made was recognized as adjustment to “cost of sales”. The agreement was valid until March 31, 2008. The Company collected the aforementioned compensation during the fourth quarter of 2008.

B. The investment income recognized from these investments under the equity method which amounted to $7,572,667 and $9,039,978 for the years ended December 31, 2009 and 2008, respectively, was determined based on the investee companies’ audited financial statements.

C. Some investee companies decreased their capital in 2009. The Company received a capital refund of $5,093,110 accordingly.

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D. The Company received cash dividends in 2009 and 2008 amounting to $4,987,395 and $3,822,301, respectively, stated as a deduction from long-term equity investment.

E. The unrealized gains (losses) on financial assets resulting from long-term equity investments were $1,640,827 and $(126,995) for the years ended December 31, 2009 and 2008, respectively.

F. Long-term investment credit amounting to $225,515 and $157,013 was included in deferred credits on December 31, 2009 and 2008, respectively.

(6) Property, plant and equipment, leased assets, and idle assets

A. The Company entered into agreements to lease a portion of its office space and plant facilities. Under these agreements, the rental is payable monthly. As of December 31, 2009 and 2008, the leased assets consisted of the following:

2009/12/31 2008/12/31 Land, buildings and others $ 118,964 75,331 Less: accumulated depreciation (20,055) (33,465)

$ 98,909 41,866

B. Idle assets consisted of the following:

2009/12/31 2008/12/31

Other equipment $ 1,330,660 - Less: accumulated depreciation (1,029,043) -

accumulated impairment (301,617) - $ - -

There is no indication of cash flow in future years for idle assets which are currently not used for operation; therefore, the Group recognized the net fair value as the recoverable amount. After evaluating and comparing the carrying value of idle assets and the recoverable amount, the Company recognized loss on impairment of $301,617 for the year ended December 31, 2009.

C. Property, plant and equipment, leased assets, and idle assets are not pledged as collateral.

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(7) Bonds payable

A. The Company issued the first Euro unsecured convertible bonds (ECB 1) on the Luxembourg Stock Exchange on January 15, 2004, with a zero-coupon rate, a duration of five years, and a face value of US$320,000,000. The details of ECB 1 are as follows:

2009/12/31 2008/12/31 Aggregate principal amount (USD 320,000,000) $ 10,822,400 10,822,400 Converted amount (USD 273,711,000) (9,256,906) (9,256,906) Redeemed amount (USD 46,289,000) (1,565,494) - Premium on bonds payable (USD 2,000) - 68 Foreign currency exchange gain - (113,797)

- 1,451,765 Less: Convertible bonds payable – due within

one year - (1,451,765)Corporate bonds payable – net $ - -

The Company classified ECB 1 under current liabilities beginning March 31, 2008, since the maturity date of convertible bonds was on January 15, 2009.

B. The Company issued redeemable domestic unsecured convertible bonds with a zero-coupon rate and a face value of $12,000,000 on November 7, 2006. In accordance with SFAS No. 36, the Company separated the embedded derivative debt and non-derivative debt components as follows:

The main debt component at issuance $ 10,653,600 The embedded derivative debt at issuance 1,346,400The total amount of the convertible bonds at issuance $ 12,000,000

The main issuance terms of the domestic unsecured convertible bonds are as follows:

(a) Duration of issuance: 5 years (from November 7, 2006, to November 7, 2011.)

(b) Conversion period: Each bondholder has the right to convert all or from time to time any portion of its convertible bonds into common shares during the conversion period (up to 31 days after the original issued date to 10 days before the maturity date).

(c) Conversion price and adjustment: The conversion price is NT105.4 dollars per common share initially. The conversion price will be adjusted upon the occurrence of an increase in the number of common shares. The Company adjusted the conversion price to NT74.8 dollars on August 24, 2009. Furthermore, the conversion price was reset to NT68.7 dollars on October 1, 2009, in accordance with certain conversion terms.

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(d) Call option: The Company could redeem the convertible bonds at par value at any time during the period from December 8, 2006, to September 28, 2011, under the following conditions: the closing price of the common shares on each of 30 consecutive trading days reaches or exceeds 50% of the conversion price, or the outstanding balance of the bonds is less than 10% of the original issuance.

(e) Put option: Each bondholder has the right to put the convertible bonds at par value after the 3rd and 4th year.

The information on the above bonds payable is as follows:

2009/12/31 2008/12/31 Aggregate principal amount $ 12,000,000 12,000,000 Accumulated converted amount (7,000) (7,000) Accumulated redeemed amount (8,187,100) (496,600) Discount on bonds payable (158,604) (738,062) 3,647,296 10,758,338 Less: Convertible bonds payable –redeemable

within one year (3,647,296) (10,758,338)Corporate bonds payable – net $ - - Debt-component embedded derivative: － call/put option and conversion price reset

option $ 9,515 193,140 － conversion rights 276,308 666,791

$ 285,823 859,931

2009/1/1~12/31 2008/1/1~12/31

Gain/(loss) on valuation of financial liabilities $ 179,298 942,440Interest expense $ 128,051 267,507

The Company reclassified the convertible bonds and the related financial liabilities as current liabilities as of December 31, 2009, because the bondholders could opt to request the Company to redeem the convertible bonds on November 7, 2010.

(8) Pension

A. Because of the spin-off, except for a few foreign employees, the Company had settled its financial obligation to employees under the pension plan accounted for based on SFAS No. 18 as of December 31, 2007. Thereafter, the Company is subject to the Labor Pension Act.

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B. The Company obtained permission from the Labor Affairs Bureau, Taipei, to suspend the appropriation of pension funds for those foreign employees subject to the Labor Standards Laws in 2009.

(9) Stockholders’ equity

A. Capital stock

On June 11, 2008, the stockholders resolved to increase capital by 494,065,000 shares by capitalizing the retained earnings and employees’ bonuses of $4,940,652. The holders of ECB 1 had converted the bonds into 23,627,000 shares of common stock in 2008.

On June 16, 2009, the stockholders resolved to increase capital by 26,851,000 shares by capitalizing the retained earnings and employees’ bonuses of $268,512. The record date of this capital increase was set as August 24, 2009. The registration procedures related to the issuance of shares were completed.

As of December 31, 2009 and 2008, the authorized capital of the Company was $47,500,000 ($500,000 was reserved for employee stock options). Each share of this authorized capital has a par value of $10 per share.

The Company issued Global Depositary Receipts (GDRs), and the GDRs are now listed on the London Stock Exchange. The GDRs (originally 21,000,000 units issued and changed to 4,200,000 units from January 2, 2008) represent 21,000,000 shares of the Company’s common stock.

B. Treasury stock

Movements of treasury stock were as follows:

2009/1/1~2009/12/31 Shares (in thousands) Amount

Beginning of the year $ - - Addition 26,125 873,459 Retirement (26,125) (873,459)Ending of the year $ - -

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Pursuant to the Securities and Exchange Act, the total shares of treasury stock shall not exceed 10% of the number of shares issued, and the total purchase cost shall not exceed the sum of the retained earnings, additional paid-in capital-premiums, and realized additional paid-in capital. For shares bought back with the intent of maintaining the Company’s credibility and stockholders’ rights, the registration procedure must be completed within six months from the date of buyback. Treasury stock held by the Company cannot be pledged and does not have the right to receive dividends or vote until it is disposed of.

C. Additional paid-in capital

Pursuant to the Company Act, additional paid-in capital can only be used to offset a deficit or to increase common stock. Cash dividends cannot be declared out of additional paid-in capital. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases through the capitalization of paid-in capital in excess of par value should not exceed 10% of total common stock outstanding. In addition, capital increases through the capitalization of paid-in capital in excess of par value can only commence in the year following the initial year.

As of December 31, 2009 and 2008, due to the non-proportional investment in investee’s increase in capital, additional paid-in capital amounting to $1,963,105 and $1,835,145,respectively, was recognized, in accordance with SFAS. As this additional paid-in capital is not regulated by the R.O.C. Company Act, Article 241, the transfer thereof to retained earnings is prohibited.

D. Limitation on distribution of retained earnings

According to the Company’s articles of incorporation, annual net income after making up prior years' losses, if any, should be distributed as follows: 10% as legal reserve, an appropriate amount as special reserve according to relevant regulation or as required by the government, 10% of capital stock as capital interest, no less than 1% as employees’ bonuses, and no more than 1% as directors’ and supervisors’ bonuses. When the employees’ bonuses are distributed in stock, the recipients must include the employees of subsidiaries. After the distribution of earnings, the remained earnings, if any, may be appropriated according to a resolution adopted in a stockholders’ meeting.

The Company is facing a rapidly changing industrial environment, with the life cycle of the industry in the growth phase. In light of the long-term financial plan of the Company and the demand for cash by the stockholders, the Company should distribute cash dividends of no less than 10% of the aggregate of all dividends.

E. Based on the resolutions approved by the stockholders during their annual stockholders’ meetings on June 16, 2009, and June 11, 2008, the employees’ bonuses and directors’ and supervisors’ remuneration were appropriated from the distributable retained earnings of 2008 and 2007 as follows:

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2008 2007 Employees’ bonuses – cash $ 250,837 912,030 Employees’ bonuses – stock (note) 700,000 1,200,000 Directors’ and supervisors’ remuneration 52,824 211,203

$ 1,003,661 2,323,233

Note: For 2007, employees’ bonuses – stock are presented based on par value of the shares..

There was no difference between the amount of earnings actually distributed for 2008 and that accrued in the 2008 financial statements, and the earnings distribution for 2008 was recorded as expense in 2008; the earnings distribution for 2007 was recorded as a deduction from unappropriated retained earnings. The related information about the distribution of employees’ bonuses and directors’ and supervisors’ remuneration determined by the meeting of the board of directors and approved in the stockholders’ meeting can be accessed from the Market Observation Post System.

F. According to the Company Act and the Company’s articles of incorporation, the employees’ bonuses and directors’ and supervisors’ remuneration were estimated and accrued in the 2009 and 2008 financial statements based on a fixed amount approved by the management. The recognized employees’ bonuses amounted to $698,438 and $950,837, and directors’ and supervisors’ remuneration amounted to $69,844 and $52,824 for the years ended December 31, 2009 and 2008, respectively. The number of shares distributable as stock dividend is determined based on the closing price of the day before the shareholders’ meeting date and considering the ex-rights and ex-dividends effects. 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 in the year of actual distribution.

(10) Income taxes

A. The Company was certified to meet the definition of “Business Operation Headquarters” as defined by the “Statute for Upgrading Industries,” Article 70-1. According to the statute, the Company can obtain an income tax exemption on dividends declared by the board of directors of an investee. The Company has obtained the exemption certificates for 2009 and 2008.

B. The Company are subject to income tax at a statutory rate of 25%. The Company is also subject to the “Income Basic Tax Act” to calculate income tax. According to the amended tax law issued on May 27, 2009, the statutory income rate will be reduced to 20% commencing from 2010. The components of income tax expense of the Company for the years ended December 31, 2009 and 2008, were as follows:

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2009/1/1~12/31 2008/1/1~12/31

Current income tax expense $ 1,052,520 4,232,696 The 10% additional income tax on unappropriated earnings 628,666 915,311 Investment tax credits (471,550) (678,782) 1,209,636 4,469,225Deferred income tax expense (benefit):

Decrease (increase) in unrealized sales profit on inter-affiliate accounts (204,075) 252,509

Increase in unrealized purchase discounts (228,945) - Decrease in bad debt losses 2,195 86,128 Decrease (increase) in inventory valuation loss 46,424 (404,879) Deferred tax effect resulting from change in income

tax rate (75,878) - Increase (decrease) in investment income under

equity method (484,522) 229,851

Decrease (increase) in unrealized accrued expense 122,006 (373,160) Others (45,137) (159,693)

(867,932) (369,244)Income tax expense $ 341,704 4,099,981

C. The income tax computed on pre-tax financial income at the statutory rate was reconciled with the income tax expense for the years ended December 31, 2009 and 2008, as follows:

2009/1/1~12/31 2008/1/1~12/31

Income tax calculated on pre-tax financial income $ 3,205,183 5,139,127 The 10% additional income tax on unappropriated

earnings 628,666 915,311 Investment tax credits (471,550) (678,782) Estimated tax effect of tax exemption on investment

income, net (1,442,598) (1,002,305) Business Operation Headquarters income tax

exemption on dividends declared by investees (806,620) (938,754) The amount of basic income tax in excess of the

regular income tax - 1,001,819 Tax effect resulting from change in income tax rate (211,510) - Tax-exempt cash dividend (58,750) (76,386) Difference between prior years income tax estimation

and assessed results (648,538) 7,343 Others 147,421 (267,392)Income tax expense $ 341,704 4,099,981

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D. The components of deferred income tax assets (liabilities) as of December 31, 2009 and 2008, were as follows:

2009/12/31 2008/12/31

Deferred income tax assets: Unrealized sales profit $ 240,931 74,584 Inventory provisions 477,611 699,464 Unrealized accrued expense 248,764 468,645 Others 293,634 32,931 1,260,940 1,275,624

Deferred income tax liabilities: Investment income recognized under the equity

method (overseas) (1,157,758) (2,039,488) Others (282,115) - (1,439,873) (2,039,488)

$ (178,933) (763,864)

2009/12/31 2008/12/31

Net deferred income tax assets – current $ 1,192,244 1,270,295 Net deferred income tax liabilities – non-current (1,371,177) (2,034,159)

$ (178,933) (763,864)

E. The R.O.C. tax authorities have examined the Company’s income tax returns through 2007 except for the year 2006. The Company disagreed with the assessment and filed formal tax appeals for tax returns of years 1997, 1999, and 2000 through 2002. The total amounts of the assessed additional income tax were recognized in the accompanying statements of income. These tax appeals were resolved in 2009 and the Company adjusted income tax expense according to the result thereof. In addition, the income tax return for the year 2005 was examined in 2009, and the Company adjusted income tax expense accordingly. The tax authorities assessed further the Company for additional income tax of $716,266 for the years 1996 and 1998. The Company disagreed with the assessment and filed formal tax appeals. These additional income tax assessments were recognized in the accompanying statements of income.

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F. Imputation credit account and creditable ratio

2009/12/31 2008/12/31

Unappropriated retained earnings for 1997 and prior years $ 2,858,766 3,298,939 Unappropriated retained earnings for 1998 and thereafter 74,756,392 72,439,752

$ 77,615,158 75,738,691ICA balance $ - 11,130,263

2009 2008

Creditable ratio for earnings distribution - % (expected) 18.12% (actual)


Earnings per share for the years ended December 31, 2009 and 2008, were computed as follows. (All earnings per share amounts are expressed in dollars, and all shares are in thousand shares.)

2009/1/1~12/31 2008/1/1~12/31 Before

income taxAfter

income taxBefore

income taxAfter

income tax Basic earnings per share: Net income $ 12,820,770 12,479,066 20,556,548 16,456,567Weighted-average number of shares

outstanding 4,242,156 4,242,156 4,245,535 4,245,535Earnings per share $ 3.02 2.94 4.84 3.88Diluted earnings per share: Net income $ 12,820,770 12,479,066 20,556,548 16,456,567Effects of dilutive potential common stock:

Convertible bonds payable (11,436) (21,389) (734,823) (711,705)Net income for calculating diluted earnings

per share $ 12,809,334 12,457,677 19,821,725 15,744,862Weighted-average number of shares

outstanding 4,242,156 4,242,156 4,245,535 4,245,535

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2009/1/1~12/31 2008/1/1~12/31 Before

income taxAfter

income taxBefore

income taxAfter

income tax Effects of dilutive potential common stock:

Convertible bonds payable 75,339 75,339 180,002 180,002Employees’ bonuses that could be declared

in the form of stock bonus and have not been approved by the stockholders’ meeting 22,764 22,764 25,890 25,890

Weighted-average shares for calculating diluted earnings per share 4,340,259 4,340,259 4,451,427 4,451,427

Diluted earnings per share $ 2.95 2.87 4.45 3.54

(12) Related information about financial instruments

A. Fair value of financial instruments

As of December 31, 2009 and 2008, the details of fair value of financial assets and financial liabilities, except for those close to the maturity date and therefore measured at book value, were as follows:

2009/12/31 2008/12/31 Book Value Fair Value Book Value Fair Value

Financial assets: Financial assets measured at

fair value through profit or loss – current

$ 13,235,827 13,235,827 8,355,195 8,355,195

Available-for-sale financial assets – current

408,338 408,338 252,588 252,588

Financial assets carried at cost – current

41,162 - - -

Available-for-sale financial assets – non-current

5,535,877 5,535,877 3,709,117 3,709,117

Financial assets carried at cost – non-current

242,859 - 79,210 -

Financial liabilities: Financial liabilities

measured at fair value through profit or loss – current

285,823 285,823 859,931 859,931

Bonds payable – current 3,647,296 3,659,373 12,210,103 12,274,476

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B. The following methods and assumptions were used in estimating fair values:

(a) The book value of short-term financial instruments is assessed to be the fair value due to the short-term maturity periods of these instruments. Such method is applied to cash and cash equivalents, notes and accounts receivable (payable), other current financial assets, accrued expenses and other payables.

(b) Financial assets (or liabilities) measured at fair value through profit or loss and available-for-sale financial assets: If public quote of financial assets and liabilities is available, then the quoted price is adopted as the fair value. If market value is not available, an assessment method that refers to quoted prices is used. The assumptions used are the same as those used by financial market traders when quoting their prices.

(c) Financial assets carried at cost: Those are investments in companies whose shares are not publicly listed and have no available market prices.

(d) The fair value of convertible bonds payable is not available, and a valuation technique is used. The assumptions used in the said valuation are the same as those used by financial market traders when quoting their prices. However, the fair value is not expected to equal future cash outflow.

C. The fair value of financial assets and financial liabilities evaluated by the Company using public quotes or an assessment method was as follows:

2009/12/31 2008/12/31 Public

quote value Assessment value

Public quote value

Assessment value

Financial assets:

Financial assets measured at fair value through profit or loss – current $ 13,235,827 - 8,344,301 10,894

Available-for-sale financial assets – current 408,338 - 252,588 -

Available-for-sale financial assets – non-current 5,535,877 - 3,709,117 -

Financial liabilities: Financial liabilities measured

at fair value through profit or loss – current - 285,823 - 859,931

Bonds payable – current - 3,659,373 - 12,274,476

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The gains resulting from the valuation of financial instruments using a valuation technique amounted to $210,629 and $862,836 for the years ended December 31, 2009 and 2008, respectively.

D. Information about financial risk

(a) Market risk

(i) The main currency for purchases and sales of the Company is the US dollar. The Company uses the principle of natural hedge to mitigate the risk and utilizes spot or forward contracts to hedge foreign currency risk. The forward contracts’ duration corresponds to the Company’s foreign currency assets’ and liabilities’ due date and future cash flows. The exchange gains and losses resulting from foreign currency assets and liabilities will be offset by the exchanges gains and losses resulting from the forward contracts. Thus, the market risk of foreign currency exchange rate changes does not have material impact on the Company.

(ii) The open-end funds and stocks of listed companies held by the Company are classified as financial assets measured at fair value through profit or loss and available-for-sale financial assets. As these assets are measured at fair value, the Company has risk exposure related to changes in fair value in an equity securities market.

(b) Credit risk

(i) Credit risk means the potential loss of the Company if the counterpart involved in that transaction defaults. Since the Company’s derivative financial instrument agreements are entered into with financial institutions with good credit ratings, management believes that there is no significant credit risk from these transactions.

(ii) The primary potential credit risk is from financial instruments like cash, bank deposits, equity securities under non-equity method, and accounts receivable. The Company deposits cash in different financial institutions. Equity securities under non-equity method were funds and listed stock issued by companies with good credit ratings. The Company manages credit risk exposure related to each financial institution and believes that there is no significant concentration of credit risk of cash and equity securities. The customers of the Company have good credit and profit records. The Company is able to evaluate the financial condition of these customers in order to reduce credit risk of accounts receivable.

(c) Liquidity risk

(i) The Company’s objective is to maintain a balance of funding continuity and flexibility through the use of financial instruments such as cash and cash in bank, and bonds payable.

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(ii) The open-end funds and stocks of listed companies held by the Company have public quoted prices and could be sold at the approximate market price. As to the forward exchange contracts, there are no significant financing risks due to expected sufficient capital. Management believes that the cash flow risk is not significant because contracted foreign currency exchange rates are fixed.

(iii) Equity investments recorded as financial assets carried at cost do not have reliable market prices and are expected to have liquidity risk.

5. Related-party Transactions

(1) Names and relationships of the related parties

Related Party Relationship with the Company

ASUS TECHNOLOGY INCORPORATION (ASUS TECHNOLOGY)

Investee evaluated under the equity method

PEGATRON Investee evaluated under the equity method Azurewave Technologies, Inc. (Azurewave

Technologies)Investee evaluated under the equity method

Askey Investee evaluated under the equity method Shinewave International Inc. Investee evaluated under the equity method Enertronix, Inc. (Enertronix) Investee evaluated under the equity method Asint Technology Corporation (Asint) Investee evaluated under the equity method ASMEDIA TECHNOLOGY INC. Investee evaluated under the equity method AGAiT Technology Corporation Investee evaluated under the equity method eCareme Technologies, Inc. Investee evaluated under the equity method Excelliance MOS Corporation Investee evaluated under the equity method ASUS COMPUTER INTERNATIONAL Investee evaluated under the equity method ASUS HOLLAND B.V. Investee evaluated under the equity method Azurewave Cayman Investee evaluated under the equity method

(Begun liquidation from 2009) ASUS TECHNOLOGY PTE. LIMITED (ASTP) Investee evaluated under the equity method ASUS COMPUTER GmbH Investee evaluated under the equity method ASUS IBERICA S.L. Investee evaluated under the equity method ASUSTEK Italy S.R.L. Investee evaluated under the equity method ASUSTEK COMPUTER (SINGAPORE) PTE, Ltd. Investee evaluated under the equity method ASUS Technology (Suzhou) Co., Ltd. Investee evaluated under the equity method UNIMAX ELECTRONICS INCORPORATION Investee evaluated under the equity method ASUS Computer (Shanghai) Co., Ltd. Investee evaluated under the equity method ASKEY TECHNOLOGY (JIANGSU) LTD. Investee evaluated under the equity method ASHINE TECHNOLOGY (SUZHOU) LTD. Investee evaluated under the equity method Double Tech Ltd. Investee evaluated under the equity method

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Openbase Limited Investee evaluated under the equity method ASUSPOWER INVESTMENT CO., LTD.

(ASUSPOWER INVESTMENT) Investee evaluated under the equity method

ASUS INVESTMENT CO., LTD. (ASUS INVESTMENT)


ASUSTEK INVESTMENT CO., LTD. (ASUSTEK INVESTMENT)


ADVANSUS CORP. Investee evaluated under the equity method UNIHAN Investee evaluated under the equity method Ability Enterprise Co., Ltd. Investee evaluated under the equity method AMA PRECISION INC. Investee evaluated under the equity method CASETEK COMPUTER (SUZHOU) CO., LTD. Investee evaluated under the equity method CORE-TEK (SHANGHAI) LIMITED Investee evaluated under the equity method AVY PRECISION ELECTROPLATING

(SUZHOU) CO., LTD. Investee evaluated under the equity method

PEGATRON TECHNOLOGY SERVICE INC. Investee evaluated under the equity method PEGATRON JAPAN INC. Investee evaluated under the equity method ASFLY TRAVEL SERVICE LIMITED Investee evaluated under the equity method KINSUS INTERCONNECT TECHNOLOGY

CORP.Investee evaluated under the equity method

STARLINK ELECTRONICS CORPORATION Investee evaluated under the equity method ASROCK Incorporation Investee evaluated under the equity method PEGATRON Mexico, S.A. DE C.V. Investee evaluated under the equity method ASUSPOWER CORPORATION Investee evaluated under the equity method BOARDTEK COMPUTER (SUZHOU) CO., LTD.

(BOARDTEK COMPUTER) Investee evaluated under the equity method

MAINTEK COMPUTER (SUZHOU) CO., LTD. Investee evaluated under the equity method Protek (ShangHai) Limited Investee evaluated under the equity method NORTH TEC ASIA (SHANGHAI) LIMITED Investee evaluated under the equity method DIGITEK GLOBAL HOLDINGS LIMITED Investee evaluated under the equity method BOARDTEK (H.K.) TRADING LIMITED Investee evaluated under the equity method PEGATRON Czech s.r.o. Investee evaluated under the equity method ASLINK PRECISION CO., LTD. Investee evaluated under the equity method ASLINK (H.K.) PRECISION CO., LIMITED

(ASLINK H.K.) Investee evaluated under the equity method

ASAP INTERNATIONAL CO., LIMITED Investee evaluated under the equity method ASIAROCK TECHNOLOGY LIMITED Investee evaluated under the equity method STRATEGY Technology Co., Ltd. Investee evaluated under the equity method AMA Technology Corporation Investee evaluated under the equity method SHANGHAI INDEED TECHNOLOGY CO., LTD. Investee evaluated under the equity method

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ASUSALPHA Computer Inc. Investee evaluated under the equity method (merged with PEGATRON on April 1, 2008)

The directors, supervisors and major management The directors, supervisors and major management

(2) Summary of significant transactions with related parties

A. Sales

2009/1/1~12/31 2008/1/1~12/31 Amount % Amount %

ASTP $ 210,597,333 91 203,543,087 82 ASUS TECHNOLOGY 13,296,236 6 13,753,504 5 Others 1,713,538 1 5,549,224 2

$ 225,607,107 98 222,845,815 89

(a) The sales prices of related-party transactions were decided on the basis of the economic environment and market competition in each sales area. The terms of the transactions are O/A 90 days or open account 30 to 90 days. The terms of the above transactions are not different from those with third parties.

(b) The unrealized gain resulting from the above transactions as of December 31, 2009 and 2008, was $1,204,657 and $298,337, respectively, which would be recognized as deferred credits.

B. Purchases

2009/1/1~12/31 2008/1/1~12/31 Amount % Amount %

PEGATRON $ 60,544,197 32 81,188,608 36 BOARDTEK COMPUTER 1,516,942 1 - - Asint 1,359,623 1 328,159 - ASLINK (HK) 396,624 - 253,287 - UNIHAN 43,520 - 2,796,491 1 Azurewave Technologies 56,386 - 1,492,002 1 Others 1,230,475 - 2,088,362 1

$ 65,147,767 34 88,146,909 39

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Purchase terms are open account 30 to 60 days or 7 to 90 days from receipt of goods for related parties and were similar to those for third-party customers. The purchase amount mentioned above does not include purchase of raw materials on behalf of related parties.

C. Cost, and processing and testing expenses:

Items 2009/1/1~12/31 2008/1/1~12/31

PEGATRON Testing, processing expenses and other costs

$ 1,079,627 460,086

DIGITEK GLOBAL HOLDINGS LIMITED

Processing expenses 26,245 1,430,579

Others 15,869 100,682$ 1,121,741 1,991,347

D. Notes and accounts receivable, notes and accounts payable, other receivables and other current liabilities:

2009/12/31 2008/12/31 Amount % Amount %

Notes and accounts receivable: ASTP $ 44,160,703 94 35,213,105 91 ASUS TECHNOLOGY 1,935,800 4 2,809,554 7 Others 169,734 - 305,109 1

$ 46,266,237 98 38,327,768 99Notes and accounts payable:

PEGATRON $ 11,746,997 32 10,108,884 42 BOARDTEK COMPUTER 261,314 1 - - Asint 753,128 2 - - UNIHAN 20,601 - 267,057 1 Others 754,869 2 522,563 2

$ 13,536,909 37 10,898,504 45

Other receivables from affiliated companies (non-financing):

PEGATRON $ 25,306 1 1,142,696 18 Others 44,344 1 328,194 5

$ 69,650 2 1,470,890 23

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2009/1/1~12/31 2008/1/1~12/31 Amount % Amount %

Accrued expense, other current liabilities,

and receipt in advance:

PEGATRON $ 764,417 8 251,633 3 Others 221,518 2 607,066 6

$ 985,935 10 858,699 9

The Company reclassified accounts receivable from related parties which were overdue for three months to other receivable – related parties amounting to $4,218 and $331,627 as of December 31, 2009 and 2008, respectively.

E. Securities transactions

The Company purchased 100% ownership of Enertronix from PEGATRON for $313,785 and purchased 8.64% ownership of Azurewave Technologies from Azurewave Cayman for $126,180 in the third quarter of 2009.

The Company purchased International United Technology (Taiwan) from ASUSPOWER INVESTMENT, ASUS INVESTMENT and ASUSTEK INVESTMENT for $56,072, $55,307 and $10,850, respectively, on May 12, 2008. After acquiring the stock, the Company owned 56.73% of International United Technology (Taiwan).

F. Guarantees

2009/12/31 2008/12/31

PEGATRON $ 9,597,000 13,218,400 UNIHAN - 1,640,000 PEGATRON and UNIHAN - 629,760

$ 9,597,000 15,488,160

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G. Salaries and remuneration of key management

The salaries and remuneration the Company paid to the directors, supervisors and major management in 2009 and 2008 were as follows:

2009/1/1~12/31 (Estimated)

2008/1/1~12/31 (Actual)

Salaries $ 91,914 71,817 Incentives 22,527 53,698 Distribution of earnings 69,844 52,824 Employees’ bonus 160,671 84,115

For the explanation of estimation of directors’ and supervisors’ remuneration and employees’ bonus, please refer to the section on stockholders’ equity.

6. Pledged Assets

Assets Items 2009/12/31 2008/12/31 Guaranteed deposits – pledged

time deposit Guarantee for import duty $ 82,079 87,825

7. Commitments and Contingencies

As of December 31, 2009, the details of commitments and contingencies were as follows:

(1) See note 5 for guarantees made to related parties.

(2) Lawsuit for infringement of intellectual property rights

A. In October 2009, the Company and IBM entered into a cross license agreement, and all lawsuits between the Company and IBM ceased with the agreement.

B. In January 2007, a Japanese company filed a lawsuit against the Company and its US subsidiary for infringement of intellectual property rights. In May and September 2007, another plaintiff, a US company, also filed a lawsuit against the Company and its US subsidiary for patent infringement and violation of trade secrets. These lawsuits are currently under investigation in a Utah court in the US. The outcome of these lawsuits is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

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C. In September 2008, a US patentee filed a lawsuit against the Company’s US subsidiary alleging that the subsidiary was engaged in patent infringement. This lawsuit is currently under investigation in an East Texas court in the US and its outcome is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

D. Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in a Delaware court, in an East Texas court, and by the United States International Trade Commission. The outcome of the lawsuits is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

(3) To ensure the supply of raw materials, the Company has entered into an agreement with a supplier for a guaranteed quantity of materials at a discount to market price. The Company prepaid $3,217,000, recorded as other assets – others.

(4) The Company entered into operating lease contracts for its offices and parking spaces. Future lease payments under those leases are as follows:

Year Amount

2010 $ 82,333 2011 74,202 2012 72,480 2013 20,558

8. Significant Disaster Loss: None.

9. Subsequent Events

The Company held its extraordinary shareholders’ meeting on February 9, 2010, and passed a resolution for the spin-off of its ODM business. Such resolution requires the Company to spin off the ODM assets and business (the Company's 100%-owned long-term equity investment in Pegatron) to the Company's wholly owned existing subsidiary Pegatron International Investment Co., Ltd. Pegatron International Investment Co., Ltd. will issue new shares to the Company and the shareholders of the Company as consideration. The Company will have a capital reduction of $36,097,609 or a capital reduction of approximately 85%. It is expected that the Company will acquire approximately 25% of the equity in Pegatron International Investment Co., Ltd. and that the shareholders of the Company will in total acquire approximately 75% of the equity in Pegatron International Investment Co., Ltd. The spin-off date is expected to be June 1, 2010.

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10. Others

(1) Personnel expenses, depreciation, and amortization for the years ended December 31, 2009 and 2008, were as follows:

2009/1/1~12/31 2008/1/1~12/31 Cost of

sales Operating expenses Total

Cost of sales

Operating expenses Total

Personnel expenses

Salaries - 3,303,572 3,303,572 - 3,763,341 3,763,341Labor and health insurance - 193,355 193,355 - 162,570 162,570Pension - 128,966 128,966 - 114,953 114,953Other - 117,891 117,891 - 130,520 130,520

Depreciation 519,396 233,535 752,931 - 211,524 211,524Amortization 481,644 197,801 679,445 507,969 177,739 685,728

(2) The Company’s significant agreement as of December 31, 2009, was as follows:

Name of Contract Party Content Marketing Agreement Microsoft Corporation Project planning

(3) Reclassification

Certain accounts in the 2008 financial statements, have been reclassified to conform to the 2009 financial statements presentation. Such reclassification does not have any significant impact on the accompanying financial statements.

11. Segment Information

A. Industrial information

The Company is engaged in a single industry and is mainly engaged in the design, production and sale of main boards.

B. Geographic information

The Company has no foreign operation segment.

C. Export sales

Export sales to geographic areas in 2009 and 2008 were as follows:

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Destination area 2008 2007 Asia Pacific $ 213,630,267 209,371,978 United States and Canada 2,170,317 15,042,211 Europe 244,216 5,835,153 Africa 288,099 305,689 $ 216,332,899 230,555,031

D. Major clients

Sales to individual customers constituting over 10% of the total revenue in 2009 and 2008 were as follows:

Destination area 2009 2008 A Company $ 210,597,333 203,543,087

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:

L

ong-

term

inve

stm

ents

und

er e

quity

met

hod

(not

es 4

(6)

and

5)

2,14

5,77

6

0.6

2,77

3,57

5

0.9

Ava

ilabl

e-fo

r-sa

le f

inan

cial

ass

ets

– no

n-cu

rren

t (no

te 4

(2))

7,

805,

382

2.

1

4,

556,

392

1.

2Fi

nanc

ial a

sset

s he

ld to

mat

urity

– n

on-c

urre

nt (

note

4(2

))

-

-

16,4

25

- Fi

nanc

ial a

sset

s ca

rrie

d at

cos

t – n

on-c

urre

nt (

note

4(2

))

2,42

1,04

9

0.7

2,47

7,41

0

0.7

Inve

stm

ent –

land

use

rig

ht (

note

4(1

1))

432,

705

0.

1

44

3,24

6

0.1

12,8

04,9

12

3.

5

10

,267

,048

2.

9P

rope

rty,

pla

nt a

nd e

quip

men

t (n

otes

4(8

), 5

and

6):

Lan

d

4,

349,

763

1.

2

4,

725,

655

1.

3B

uild

ings

29

,872

,128

8.1

27,1

10,5

09

7.6

Mac

hine

ry a

nd e

quip

men

t

48

,315

,649

13.1

50

,830

,334

14

.2In

stru

men

ts a

nd e

quip

men

t

3,

603,

244

0.

9

3,

330,

385

0.

9O

ther

equ

ipm

ent

10,4

04,4

13

2.

8

9,

293,

174

2.

6

96,5

45,1

97

26

.1

95,2

90,0

57

26.6

Les

s: a

ccum

ulat

ed d

epre

ciat

ion

(34,

115,

550)

(9.2

)

(2

9,17

6,05

5)

(8.1

)A

ccum

ulat

ed im

pair

men

t – f

ixed

ass

ets

(235

,304

)

-

(617

,339

)

(0.2

)Pr

epay

men

ts f

or p

urch

ase

of e

quip

men

t

2,52

2,56

2

0.6

5,35

5,25

4

1.5

64

,716

,905

17.5

70

,851

,917

19

.8In

tang

ible

ass

ets:

Com

pute

r so

ftw

are

and

othe

rs

741,

168

0.

2

85

3,10

8

0.2

Goo

dwill

(no

te 4

(10)

)

96

2,87

6

0.3

890,

146

0.

3L

and

use

righ

ts (

note

6)

2,61

8,68

7

0.7

2,58

0,83

6

0.7

4,32

2,73

1

1.2

4,32

4,09

0

1.2

Oth

er a

sset

s:

L

ease

d as

sets

, net

(no

te 4

(8))

88

2,12

7

0.2

858,

767

0.

2Id

le a

sset

s (n

otes

4(8

) an

d 6)

84

7,25

8

0.2

80,5

49

- D

efer

red

expe

nses

3,

577,

742

1.

0

3,

751,

627

1.

1O

ther

ass

ets

(not

es 4

(10)

, 4(1

5), 4

(17)

, 6 a

nd 7

)

4,

567,

688

1.

2

1,

424,

998

0.

4

9,87

4,81

5

2.6

6,11

5,94

1

1.7

Tot

al a

sset

s$

370

,007

,102

100.

0

358

,288

,265

10

0.0

20

09

2008

L

iabi

litie

s an

d St

ockh

olde

rs’

Equ

ity

Am

ount

%

A

mou

nt

%

Cur

rent

liab

iliti

es:

Shor

t-te

rm d

ebt a

nd s

hort

-ter

m n

otes

and

bill

s pa

yabl

e (n

otes

4(1

2))

$

12,5

03,0

33

3.4

14,5

73,8

44

4.1

Not

es a

nd a

ccou

nts

paya

ble

(not

e 5)

98

,634

,612

26

.7

84

,892

,167

23

.7In

com

e ta

x pa

yabl

e

3,

950,

865

1.

1

5,

504,

329

1.

5A

ccru

ed e

xpen

ses

and

othe

r cu

rren

t lia

bilit

ies

(not

e 4(

17))

36

,306

,121

9.

8

31

,292

,346

8.

7Fi

nanc

ial l

iabi

litie

s m

easu

red

at f

air

valu

e th

roug

h pr

ofit

or lo

ss –

cu

rren

t (no

tes

4(2)

and

4(1

4))

283,

596

0.

1

1,

721,

005

0.

5R

ecei

pts

in a

dvan

ce

4,62

7,73

8

1.2

5,48

4,32

8

1.5

Bon

ds p

ayab

le –

cur

rent

(no

te 4

(14)

)

3,

609,

633

1.

0

11

,988

,037

3.

4C

urre

nt p

ortio

n of

long

-ter

m lo

ans

paya

ble

(not

e 4(

13))

83

7,77

2

0.2

2,21

9,23

9

0.6

160

,753

,370

43

.5

157

,675

,295

44

.0L

ong-

term

and

oth

er li

abili

ties

:

L

ong-

term

deb

t (no

te 4

(13)

)

9,

486,

372

2.

5

9,

750,

388

2.

7D

efer

red

inco

me

tax

liabi

litie

s an

d ot

hers

(no

tes

4(15

) an

d 4(

17))

2,

116,

396

0.

6

2,

680,

167

0.

8

11,6

02,7

68

3.1

12,4

30,5

55

3.5

Tot

al li

abili

ties

172

,356

,138

46

.6

170

,105

,850

47

.5St

ockh

olde

rs’

equi

ty:

Com

mon

sto

ck (

note

4(1

6))

42,4

67,7

75

11.5

42,4

60,5

13

11.8

Add

ition

al p

aid-

in c

apita

l: (n

ote

4(16

))

Paid

-in

capi

tal i

n ex

cess

of

par

valu

e

28

,274

,481

7.

6

27

,861

,248

7.

8O

ther

s

1,

963,

105

0.

5

1,

835,

145

0.

5

30,2

37,5

86

8.1

29,6

96,3

93

8.3

Ret

aine

d ea

rnin

gs: (

note

4(1

6))

Leg

al r

eser

ve

18,9

10,2

13

5.1

17,2

64,5

57

4.9

Una

ppro

pria

ted

reta

ined

ear

ning

s

77

,615

,158

21

.0

75

,738

,691

21

.1

96,5

25,3

71

26.1

93,0

03,2

48

26.0

Equ

ity a

djus

tmen

t:

C

umul

ativ

e tr

ansl

atio

n ad

just

men

ts

1,49

0,88

5

0.4

3,69

6,12

0

1.0

Net

loss

not

rec

ogni

zed

as p

ensi

on c

ost

(3,2

02)

-

(1,1

28)

-

Unr

ealiz

ed g

ains

(lo

sses

) on

fin

anci

al a

sset

s

2,

159,

201

0.

6

(1

,568

,528

)

(0.4

)U

nrea

lized

gai

ns o

n ca

sh f

low

hed

ges

306,

361

0.

1

-

-

3,

953,

245

1.

1

2,

126,

464

0.

6M

inor

ity in

tere

st

24,4

66,9

87

6.6

20,8

95,7

97

5.8

Tot

al s

tock

hold

ers’

equ

ity

1

97,6

50,9

64

53.4

1

88,1

82,4

15

52.5

T

otal

liab

iliti

es a

nd s

tock

hold

ers’

equ

ity

$ 3

70,0

07,1

02

100.

0

358

,288

,265

10

0.0

134


ASUSTeK COMPUTER INC. AND SUBSIDIARIES

Consolidated Statements of Income

For the years ended December 31, 2009 and 2008 (expressed in thousands of New Taiwan dollars, except earnings per share amounts)

2009 2008 Amount % Amount %

Net sales (note 5) $ 610,120,403 100.0 664,238,639 100.0Cost of sales (notes 5 and 10) 548,105,350 89.8 591,506,247 89.1

Gross profit 62,015,053 10.2 72,732,392 10.9Operating expenses: (notes 4(15), 5 and 10)

Selling 21,306,349 3.5 28,695,069 4.3General and administrative 10,106,984 1.8 9,440,979 1.4Research and development 14,867,522 2.4 13,950,877 2.1

46,280,855 7.7 52,086,925 7.8Operating income 15,734,198 2.5 20,645,467 3.1

Non-operating income and gains: Interest income 286,044 0.1 1,078,816 0.2Investment income under the equity method, net

(note 4(6)) 332,956 0.1 52,249 - Dividends 255,108 - 404,200 - Gain on disposal of investments (note 5) 814,876 0.1 304,315 - Foreign currency exchange gain, net - - 1,366,308 0.2Gain on bad debt recovery - - 1,360,968 0.2Gain on valuation of financial assets, net (note 4(2)) 1,339,020 0.2 - - Gain on valuation of financial liabilities, net

(notes 4(2) and 4(14)) 192,867 - 68,979 - Others (note 9) 3,476,936 0.6 3,266,980 0.5

6,697,807 1.1 7,902,815 1.1Non-operating expenses and losses:

Interest expense (note 4(14)) 334,067 - 784,603 0.2Impairment loss (notes 4(2), 4(8) and 4(10)) 958,461 0.2 952,215 0.1Loss on valuation of financial assets - - 190,992 - Others 1,843,317 0.3 2,083,633 0.3

3,135,845 0.5 4,011,443 0.6Net income before income tax expense 19,296,160 3.1 24,536,839 3.6

Income tax expense (note 4(17)) 3,040,625 0.5 5,611,908 0.8Consolidated net income $ 16,255,535 2.6 18,924,931 2.8

Distributed to: Parent company’s shareholders $ 12,479,066 2.0 16,456,567 2.5Minority interest 3,776,469 0.6 2,468,364 0.3

$ 16,255,535 2.6 18,924,931 2.8

Before income tax

Afterincome tax

Beforeincome tax

Afterincome tax

Earnings per share (note 4(18)) Basic earnings per share (in dollars) $ 3.02 2.94 4.84 3.88Diluted earnings per share (in dollars) $ 2.95 2.87 4.45 3.54

135

See

acco

mpa

nyin

g no

tes

to f

inan

cial

sta

tem

ents

.

ASU

STek

CO

MP

UT

ER

IN

C. A

ND

SU

BSI

DIA

RIE

S

Con

solid

ated

Sta

tem

ents

of

Cha

nges

in S

tock

hold

ers’

Equ

ity

For

the

yea

rs e

nded

Dec

embe

r 31

, 200

9 an

d 20

08

(exp

ress

ed in

tho

usan

ds o

f N

ew T

aiw

an d

olla

rs)

R

etai

ned

earn

ings

U

nrea

lized

U

nrea

lized

Add

itio

nal

Cum

ulat

ive

Net

loss

not

gain

s (l

osse

s)

gain

s

C

omm

on

paid

-in

Leg

al

tr

ansl

atio

n re

cogn

ized

as

on f

inan

cial

on

cas

h T

reas

ury

Min

orit

y

st

ock

capi

tal

rese

rve

Una

ppro

pria

ted

adju

stm

ents

pens

ion

cost

asse

ts

flow

hed

ge

stoc

kIn

tere

st

Tot

al

Bal

ance

on

Janu

ary

1, 2

008

(Adj

uste

d)

$ 3

7,28

3,58

9

28,

380,

731

1

4,50

2,22

9

77

,526

,880

1,

124,

179

(289

)

51

1,24

8

-

-

20

,352

,462

1

79,6

81,0

29A

ppro

pria

tions

and

dis

trib

utio

ns o

f 20

07 e

arni

ngs

Leg

al r

eser

ve

-

-

2,76

2,32

8

(2

,762

,328

)

-

-

-

-

-

-

-

Em

ploy

ee b

onus

es

-

-

-

(9

12,0

30)

-

-

-

-

-

-

(912

,030

)E

mpl

oyee

bon

uses

tran

sfer

red

to c

omm

on s

tock

1,

200,

000

-

-

(1,2

00,0

00)

-

-

-

-

-

-

-

D

ivid

ends

tran

sfer

red

to c

omm

on s

tock

3,

740,

652

-

-

(3,7

40,6

52)

-

-

-

-

-

-

-

C

ash

divi

dend

s

-

-

-

(9,3

51,6

30)

-

-

-

-

-

-

(9,3

51,6

30)

Dir

ecto

rs’

and

supe

rvis

ors’

rem

uner

atio

n

-

-

-

(211

,203

)

-

-

-

-

-

-

(2

11,2

03)

Cum

ulat

ive

tran

slat

ion

adju

stm

ents

-

-

-

-

2,

571,

941

-

-

-

-

-

2,

571,

941

Adj

ustm

ents

to in

vest

ee c

ompa

ny’s

sto

ckho

lder

s’ e

quity

-

(218

,438

)

-

(66,

913)

-

(8

39)

(126

,995

)

-

-

-

(413

,185

)D

ivid

ends

on

shar

es h

eld

in tr

ust p

aid

to e

mpl

oyee

s

-

286,

223

-

-

-

-

-

-

-

-

286,

223

Con

vers

ion

of b

onds

pay

able

23

6,27

2

1,

247,

877

-

-

-

-

-

-

-

-

1,48

4,14

9C

hang

es in

unr

ealiz

ed g

ains

or

loss

es o

n fi

nanc

ial a

sset

s

-

-

-

-

-

-

(1,9

52,7

81)

-

-

-

(1

,952

,781

)N

et c

onso

lidat

ed in

com

e fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 200

8

-

-

-

16,4

56,5

67

-

-

-

-

-

2,

468,

364

18,9

24,9

31C

hang

e in

min

ority

inte

rest

-

-

-

-

-

-

-

-

-

(1,9

25,0

29)

(1,9

25,0

29)

Bal

ance

on

Dec

embe

r 31

, 200

8 $

42,

460,

513

2

9,69

6,39

3

17,

264,

557

75,7

38,6

91

3,

696,

120

(1,1

28)

(1

,568

,528

)

-

-

20,8

95,7

97

188

,182

,415

Bal

ance

on

Janu

ary

1, 2

009

$ 4

2,46

0,51

3

29,

696,

393

1

7,26

4,55

7

75

,738

,691

3,

696,

120

(1,1

28)

(1

,568

,528

)

-

-

20

,895

,797

1

88,1

82,4

15A

ppro

pria

tions

and

dis

trib

utio

ns o

f 20

08 e

arni

ngs

L

egal

res

erve

-

-

1,

645,

656

(1,6

45,6

56)

-

-

-

-

-

-

-

D

ivid

ends

tran

sfer

red

to c

omm

on s

tock

84

,398

-

-

(8

4,39

8)

-

-

-

-

-

-

-

Cas

h di

vide

nds

-

-

-

(8

,439

,852

)

-

-

-

-

-

-

(8

,439

,852

)E

mpl

oyee

bon

uses

tran

sfer

red

to c

omm

on s

tock

and

a

dditi

onal

pai

d-in

cap

ital

184,

114

515,

886

-

-

-

-

-

-

-

-

700,

000

Cum

ulat

ive

tran

slat

ion

adju

stm

ents

-

-

-

-

(2

,205

,235

)

-

-

-

-

-

(2,2

05,2

35)

Adj

ustm

ents

to in

vest

ee c

ompa

ny’s

sto

ckho

lder

s’ e

quity

-

127,

960

-

7,

480

-

(2

,074

)

1,6

40,8

27

30

6,36

1

-

-

2,

080,

554

Div

iden

ds o

n sh

ares

hel

d in

trus

t pai

d to

em

ploy

ees

-

69

,383

-

-

-

-

-

-

-

-

69

,383

Cha

nge

in u

nrea

lized

gai

ns o

r lo

sses

on

fina

ncia

l ass

ets

-

-

-

-

-

-

2

,086

,902

-

-

-

2,

086,

902

Purc

hase

of

trea

sury

sto

ck

-

-

-

-

-

-

-

-

(

873,

459)

-

(8

73,4

59)

Tre

asur

y st

ock

retir

emen

t

(2

61,2

50)

(172

,036

)

-

(440

,173

)

-

-

-

-

87

3,45

9

-

-

N

et c

onso

lidat

ed in

com

e fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 200

9

-

-

-

12,4

79,0

66

-

-

-

-

-

3,

776,

469

16,2

55,5

35C

hang

e in

min

ority

inte

rest

-

-

-

-

-

-

-

-

-

(205

,279

)

(2

05,2

79)

Bal

ance

on

Dec

embe

r 31

, 200

9 $

42,

467,

775

3

0,23

7,58

6

18,

910,

213

77,6

15,1

58

1,49

0,88

5

(3

,202

)

2,1

59,2

01

306,

361

-

24,4

66,9

87

197

,650

,964

136



Consolidated Statements of Cash Flows

For the years ended December 31, 2009 and 2008 (expressed in thousands of New Taiwan dollars)

2009 2008

Cash flows from operating activities: Net income $ 16,255,535 18,924,931Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 13,126,684 10,248,180Loss on impairment 958,461 952,215Loss (gain) on valuation of financial liabilities (179,298) (68,979)Amortization of discount on bonds 128,051 267,507Dividends on shares held in trust paid to employees 69,383 286,223Investment income under the equity method, net (332,956) (52,249)Cash dividends received from long-term investment under the equity method 169,090 215,686Decrease (increase) in financial assets measured at fair value through profit or

loss – current (7,688,477) (8,529)Increase (decrease) in financial liabilities measured at fair value through profit or loss –

current (878,100) 407Decrease (increase) in notes and accounts receivable, net 2,509,244 39,887,426Decrease (increase) in inventories, net 9,959,535 6,131,153Decrease (increase) in other receivables, net 2,533,997 (1,515,552)Changes in deferred income tax assets and liabilities, net (401,246) (1,143,529)Decrease (increase) in prepaid and other current assets 669,654 (1,239,187)Increase (decrease) in notes and accounts payable 13,698,535 (57,104,837)Increase (decrease) in income tax payable (1,588,938) (1,905,273)Increase (decrease) in accrued expenses, receipts in advance, and other current liabilities 4,248,512 7,375,619Others 272,748 214,946

Net cash provided by operating activities 53,530,414 21,466,158Cash flows from investing activities:

Acquisition of investments (1,639,421) (2,540,579)Proceeds from disposal of investments (including capital decrease) 2,429,591 1,666,225Decrease (increase) in refundable deposits 407,040 (40,307)Acquisition of property, plant and equipment (7,844,366) (12,689,532)Additions to deferred expenses and intangible assets (2,628,735) (4,643,036)Other assets and others (2,913,479) 718,758

Net cash used in investing activities (12,189,370) (17,528,471)Cash flows from financing activities:

Employee bonuses and directors’ and supervisors’ remuneration (70,958) (1,220,106)Increase (decrease) in short-term loans (2,082,754) 7,332,433Redemption of long-term loans (3,243,466) (1,097,852)Increase in long-term loans 1,698,826 10,001,484Redemption of bonds payable (9,147,365) (712,499)Cash dividends (8,439,852) (9,351,630)Changes in minority interest (1,913,241) (2,456,178)Redemption of treasury stock (873,459) - Others 165,432 90,528

Net cash provided by (used in) financing activities (23,906,837) 2,586,180Effect of exchange rate changes (1,091,395) (75,872)Effect of change in ownership of subsidiaries (72,657) (375,400)Change in cash due to change in ownership of subsidiaries 264,580 60,089Net increase in cash and cash equivalents 16,534,735 6,132,684Cash and cash equivalents at beginning of period 49,718,467 43,585,783Cash and cash equivalents at end of period $ 66,253,202 49,718,467Supplementary disclosures of cash flow information:

Cash paid during the period for: Interest $ 391,270 501,023Income tax $ 5,017,356 8,908,524

Investing and financing activities not affecting cash flows:Bonds payable converted to common stock and additional paid-in capital $ - 1,484,149Employee bonuses payable transferred to common stock and additional paid-in capital $ 700,000 - Bonds payable – could be repaid within one year $ 3,609,633 11,988,037Long-term loan – could be repaid within one year $ 837,772 2,219,239

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Notes to Consolidated Financial Statements

December 31, 2009 and 2008 (expressed in thousands of New Taiwan dollars unless otherwise specified)

1. Organization

ASUSTeK Computer Inc. (the Company) was established on April 2, 1990. The Company’s common shares were listed on the Taiwan Stock Exchange (TSE). Its main activities are to produce, design and sell notebook PCs, main boards, CD-ROMs and add-on cards.

The Company resolved to spin-off its OEM businesses on January 1, 2008. Pursuant to the Company’s resolution, the Company transferred its computer and non-computer OEM businesses to its spun-off subsidiaries PEGATRON CORPORATION (PEGATRON) and UNIHAN CORPORATION (UNIHAN), respectively.

The Group’s headcounts aggregated 113,324 and 104,294 as of December 31, 2009 and 2008, respectively.

2. Summary of Significant Accounting Policies

The consolidated financial statements are prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles and practices generally accepted in the Republic of China. The significant accounting policies and measurement basis adopted in preparing the accompanying financial statement are as follows:

(1) Basis of consolidation

When the Group holds more than 50% of the voting rights of investees (including the exercisable and convertible potential voting rights owned by the Group except when there is any evidence indicating that the Group has no controlling power from their percentage of ownership) or when any one of the criteria listed below is met, the Group is considered to have control over the investees. The Group not only accounts for such investments under the equity method but also consolidates them into the Group’s consolidated financial statements quarterly.

A. Has ability to acquire more than half of investee’s voting rights with agreement of other investors.

B. Has ability to control the financial, operating and human resources functions of investee according to regulations or agreements.

C. Has authority to appoint more than half of the members of the board of directors (or its equivalent) to control the board (or its equivalent).

D. Has authority to secure more than half of the voting rights of the board (or its equivalent) to control the board (or its equivalent).

E. Has other circumstances that prove the controlling power.

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As of December 31, 2009 and 2008, the Company and subsidiaries (the Group) included in the consolidated financial statements and the Company’s direct and indirect percentage of ownership were as follows:

Percentage of ownership Name of subsidiary Nature of business 2009/12/31 2008/12/31

ASUS COMPUTER INTERNATIONAL

Sales and repair service center in North America

100% 100%

ASUS TECHNOLOGY INCORPORATION

Trading electronic appliances, communication appliances, data software, electronicmaterial and office equipment

100% 100%

AXUS Microsystems Inc. Designing, manufacturing, processing and selling storage products

85% 85%

Shinewave International Inc.

Software R&D 51% 51%

ASUS HOLLAND B.V. Sales and repair service center in Europe

100% 100%

ASUS INTERNATIONAL LIMITED

Investing activities 100% 100%

ASUSTEK HOLDINGS LIMITED


ASUSCHANNEL CORPORATION

Investing and trading activities 100% 100%

eCareme Technologies, Inc Network service 77% 77% International United

Technology Co., Ltd. (Taiwan) (IUT (Taiwan))

Database service, wired communication, manufacturing mechanical equipment, and manufacturing, selling and developing ink-jet printing technology

56.73% 56.73%

ASMEDIA TECHNOLOGY INC.

Designing products and data software, information processing and supply

60.48% 91.24%

Askey Computer Corp. (Askey)

Designing, manufacturing and selling modems, peripheral equipment, transportable equipment and related spare parts

100% 100%

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(Continued)


PEGATRON Designing, manufacturing, maintaining and selling computer peripherals and audio-video products

100% 100%

Pegatron International Investment Co., Ltd.

Investing activities 100% -

Hua-Cheng Venture Capital Corp.

Venture capital investing activities

100% 100%

Hua-Min Investment Co., Ltd.


AGAiT Technology Corporation

Designing and selling computer peripherals

100% -

Enertronix, Inc. Wireless and wired communication equipment

100% 100%

AzureWave Technologies, Inc. (AzureWave)

Manufacturing office machinery, electronic parts, and computer peripherals, and selling precision equipment and digital cameras

56.16% 58.09%

eMES (SUZHOU) CO., LTD.

Computer security systems, messenger management systems, and automation systems R&D; providing related technology and after-sales service

51% 51%

GREAT EXTEND INVESTMENT CORP.

Providing management consulting service

60.48% 91.24%

Askey International Corp. Manufacturing and selling communication products

100% 100%

Dynalink International Corp.

Investment in overseas companies

100% 100%

Magic International Co., Ltd.


100% 100%

Askey (Vietnam) Company Limited

Manufacturing and selling communication products

100% 100%

Double Tech Ltd. Merchandise trading 100% 100% Big Profit Limited Merchandise trading 100% 100% Famous Star Investments

Limited Investment in overseas

companies 100% 100%

Magicom International Corp.


100% 100%

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(Continued)


ASKEY TECHNOLOGY (SHANGHAI) LTD.

Developing and selling communication products

100% 100%

Openbase Limited Merchandise trading 100% 100% Goodsmart International

Ltd. Merchandise trading 100% 100%

Leading Profit Co., Ltd. Merchandise trading 100% 100% UNI Leader International

Ltd. Merchandise trading 100% 100%

ASKEY TECHNOLOGY (JIANGSU) LTD. (ASKEY JIANGSU)


100% 100%

ASON TECHNOLOGY (SUZHOU) LTD.


100% 100%

ASHINE TECHNOLOGY (SUZHOU) LTD.


100% 100%

WUJIANG WILL STAR INVESTMENTS LIMITED (WUJIANG WILL STAR)

Developing, constructing and selling real estate projects

100% 100%

International United Technology Co., Ltd.

International trading 56.73% 56.73%

MOBOSTAR TECHNOLOGY LIMITED


AGAiTech Holding Ltd. Investing and trading activities 100% - Enertronix International

Limited Investing and trading activities 100% 100%

ENERTRONIX HOLDING LIMITED


Huizhou Enertronix Co., Ltd.

Manufacturing and selling new electronic parts

100% 100%

Shandong Enertronix Co., Ltd.

Manufacturing and selling electronic parts

100% 100%

SOUTH TEC ASIA LIMITED


CENTRAL TEC ASIA LIMITED


ASUS Computer (Shanghai) CO., LTD.

Repairing computers, electroniccomponents and related products, and providing after-sales service

100% 100%

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(Continued)


DEEP DELIGHT LIMITED


CHANNEL PILOT LIMITED


UNIMAX HOLDINGS LIMITED


ASUS COMPUTER CORPORATION


ASUS TECHNOLOGY PTE. LIMITED (ASTP)

Trading of IT products 100% 100%

Asus Middle East FZCO Sales and repair service center in Middle East

100% 100%

ASUS EGYPT L.L.C. Sales and service center in Egypt

100% -

ASUS COMPUTER GmbH Sales and repair service center in Germany

100% 100%

ASUS COMPUTER Benelux B.V.

Sales and service center in Netherlands

100% 100%

ASUS FRANCE SARL Sales and service center in France

100% 100%

ASUSTEK (UK) LIMITED Sales and service center in UK 100% 100% ASUS TECHNOLOGY

(HONG KONG) LIMITED

Sales and repair service center inHong Kong

100% 100%

ASUS KOREA CO., LTD. Sales and repair service center in Korea

100% 100%

ASUSTEK COMPUTER (SINGAPORE) PTE, LTD.

Sales and repair service center in Singapore

100% 100%

ASUS Polska Sp. z o.o. Sales and service center in Polska

100% 100%

ASUS Technology Private Limited

Sales and repair service center inIndia

100% 100%

ASUS Technology Holland B.V.


ASUS Technology (Vietnam) Co., Ltd.

Repair service center in Vietnam 100% 100%

ASUSTEK Italy S.R.L. Sales and service center in Italy 100% 100% ASUS IBERICA S.L. Sales and service center in Spain 100% 100%

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ASUS Technology (Suzhou) Co., Ltd.

Researching and developing LCDs, computers, main boards and the peripherals of related multimedia and network communication products, and providing after-sales service

100% 100%

ASUS Japan Incorporation Sales and repair service center inJapan

100% 100%

ASUS COMPUTER Czech Republic s.r.o.

Sales and service center in Czech Republic

100% 100%

ASUSTEK COMPUTER (SHANGHAI) CO., LTD. (formerly ASUS UNITEDTECHNOLOGY (SHANGHAI) CO., LTD.)

Selling notebooks, main boards, medium-sized computers, high-class personal computers, servers, and computer peripherals; importing/exporting, wholesaling and integrating mobile communication equipment; and providing technology consulting and after-sales services

100% 100%

ASUS Hungary Services Limited Liability Company

Sales and repair service center inHungary

100% 100%

ASUS PORTUGAL, SOCIEDADE UNIPESSOAL LDA.

Sales and service center in Portugal

100% 100%

ASUS Switzerland GmbH Sales and service center in Switzerland

100% -

UNIMAX ELECTRONICS INCORPORATION

Manufacturing and selling electronic appliances and telecommunication products

100% 100%

UNIHAN Designing, manufacturing, maintaining and selling computer peripherals and audio-video products

100% 100%

ASUSPOWER INVESTMENT CO., LTD.


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(Continued)


ASUS INVESTMENT CO., LTD.


ASUSTEK INVESTMENT CO., LTD.


ADVANSUS CORP. (ADVANSUS)

Manufacturing computer peripherals

50% (Note 2)

50% (Note 2)

Pegatron Holding Ltd. Investing activities 100% 100% PEGATRON USA, INC. Sales and repair service center

in North America100% 100%

ASUS HOLLAND HOLDING B.V.


AMA PRECISION INC. Designing and developing computer parts

100% 100%

Ability Enterprise Co., Ltd. (Ability Enterprise)

Selling computer peripherals, office automation equipment, and digital cameras; retailing/ wholesaling of food products; and leasing

12.63% 12.99%

Unihan Holding Ltd. Investing activities 100% 100% STARLINK

ELECTRONICS CORPORATION

Manufacturing electronic parts and plastic products, and manufacturing and wholesaling electronic components

100% 100%

KINSUS INTERCONNECT TECHNOLOGY CORP. (KINSUS)

Manufacturing electronic parts, wholesaling and retailing electronic components, and providing business management consultant service

39% 39%

ASROCK Incorporation (ASROCK)

Data storage and processing equipment, manufacturing wired and wireless communication equipment, and wholesaling of computer equipment and electronic components

58.65% 58.41%

Lumens Digital Optics Inc. Researching, manufacturing and selling computer data projectors and related peripherals

56.52% (Note 1)

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(Continued)


PEGAVISION CORPORATION

Manufacturing medical equipment

49.88% -

ASUSPOWER CORPORATION


PEGATRON TECHNOLOGY SERVICE INC.

Sales and repair service center in North America

100% 100%

PEGA INTERNATIONAL LIMITED

Design service and sales 100% (Note 1)

PEGATRON JAPAN INC. Sales and repair service center inJapan

100% 100%

PEGATRON Mexico, S.A. DE C.V.

Sales and repair service center in Mexico

100% 100%

ASFLY TRAVEL SERVICE LIMITED

Travel agency 100% 100%

HUA-YUAN INVESTMENT LIMITED


PEGATRON Czech s.r.o. Installing, repairing and selling electronic products

100% 100%

AMA Technology Corporation

Trading of computer peripherals 100% 100%

AMA Holdings Limited Investing activities 100% 100% METAL TRADINGS LTD. Trading activities 100% 100% EXTECH LTD. Trading of electronic parts 90.51% 88.91% Toptek Precision Industry

(Suzhou) Co., Ltd.Manufacturing and selling new

electronic parts and premium hardware

100% 100%

FENGSHUO TRADING (TONGZHOU) CO., LTD.

Trading activities 100% 100%

GRANDTECH PRECISION (TONGZHOU) CO., LTD.

Manufacturing, developing and selling electronic parts

90.51% 88.91%

STRATEGY Technology Co., Ltd.


KINSUS INVESTMENT CO., LTD.

Investing activities 39% -

KINSUS CORP. (USA) Developing and designing new technology and products; analyzing marketing strategy and developing new customers

39% 39%

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(Continued)


KINSUS HOLDING (SAMOA) LIMITED


KINSUS HOLDING (CAYMAN) LIMITED


KINSUS INTERCONNECT TECHNOLOGY (SUZHOU) CORP.

Manufacturing and selling circuit boards

39% 39%

ASIAROCK TECHNOLOGY LIMITED

Manufacturing and selling database storage and processing equipment

58.65% 58.41%

Leader Insight Holdings Ltd.

Investing activities 58.65% 58.41%

ASROCK EUROPE B.V. Database service and trading of electronic components

58.65% 58.41%

CalRock Holdings, LLC. Office building leasing 58.65% 58.41% Firstplace International

Ltd. Investing activities 58.65% 58.41%

Asrock America, Inc. Database service and trading of electronic components

58.65% 58.41%

Lumens Integration Inc. Selling computer communication products and peripherals

56.52% (Note 1)

Lumens Digit Image Inc. Investing activities 56.52% (Note 1) Lumens Europe BVBA Selling computer

communication products and peripherals

56.52% (Note 1)

Jie Xin Inc. Manufacturing and wholesaling electronic parts

53.13% (Note 1)

Lumens (Suzhou) Digital Image Inc.

Researching, manufacturing and selling projectors, projection screens and related products, and after-sales service

56.52% (Note 1)

BOARDTEK HOLDINGS LTD. (CAYMAN)

Investing and trading activities 100% -

BOARDTEK HOLDINGS LIMITED


MAGNIFICENT BRIGHTNESS LIMITED


PROTEK GLOBAL HOLDINGS LTD.


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(Continued)


NORTH TEC ASIA LIMITED


ASLINK PRECISION CO., LTD.


DIGITEK GLOBAL HOLDINGS LIMITED


COTEK HOLDINGS LIMITED


TOP QUARK LIMITED Investing and financial holding activities

100% -

POWTEK HOLDINGS LIMITED


BOARDTEK COMPUTER (SUZHOU) CO., LTD.

Developing, manufacturing and selling new electronic components, circuit boards and related products, and after-sales service

100% 100%

BOARDTEK (H.K.) TRADING LIMITED

Trading activities 100% -

MAINTEK COMPUTER (SUZHOU) CO., LTD.

Manufacturing, developing and selling power supply units, computer cases, computer systems, notebooks, main boards, and computer peripherals, and providing maintenance service

100% 100%

Protek (ShangHai) Limited R&D, manufacturing and assembling satellite communication systems equipments, satellite navigator receiving equipments and key parts, mobile phones, medium and large-sized computers, portable micro calculator, printing equipments and electronic components; wholesaling of the products mentioned above, and repairing and design of related products.

100% 100%

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(Continued)


COTEK ELECTRONICS (SUZHOU) CO., LTD.

R&D, manufacturing and selling new electronic components, providing mold technology, and providing after-sales service

100% 100%

RUNTOP (SHANGHAI) CO., LTD.

Manufacturing and selling computer parts and peripherals of digitalautomatic data processors, multimedia computer system accessories, power supply units, network switches, and modems

100% -

Powtek (Shanghai) Co., Ltd.

Selling main boards, computer peripherals, notebooks, serversand software, and providing after-sales service

100% 100%

ASLINK (H.K.) PRECISION CO., LIMITED


ASAP INTERNATIONAL CO., LIMITED

Investing activities 59.17% 51%

ASAP TECHNOLOGY (JIANGXI) CO., LIMITED

Manufacturing and selling data transit wire and cable

59.17% 51%

CASETEK HOLDINGS LIMITED


CASETEK COMPUTER (SUZHOU) CO., LTD.

Manufacturing, developing and selling computers, computer parts, application systems, and providing after-sales service

100% 100%

SLITEK HOLDINGS LIMITED


KAEDAR HOLDINGS LIMITED


KAEDAR TRADING LTD. Investing and trading activities 100% 100%

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(Continued)


CORE-TEK (SHANGHAI) LIMITED

Researching and producing notebook parts, designing nonmetal tooling, electronic specific equipment and related products, repairing and producing precisionequipment, and providing after-sales service

100% 100%

UNITED NEW LIMITED Investing and trading activities 51% 51% KAEDAR ELECTRONICS

(KUNSHAN) CO., LTD. Tooling module of stainless steel

computer cases 100% 100%

AVY PRECISION ELECTROPLATING (SUZHOU) CO., LTD.

Manufacturing and selling electronic parts, camera parts and accessories

51% 51%

EZWAVE TECHNOLOGIES, INC.

Selling computer peripherals 56.16% 58.09%

AzureLightingTechnologies, Inc.

Manufacturing and selling ofLED lights

56.16% -

Azwave Holding (Samoa) Inc.


Eminent Star Company Limited


AzureWave Technologies (Shanghai) Inc.

Manufacturing of electronic parts

56.16% 58.09%

Jade Technologies Limited Investing activities 56.16% 58.09% Hannex International

Limited Investing activities 56.16% 58.09%

Azurewave Technology (Shenzhen) Co., Ltd.

Designing, researching, and selling computer products

56.16% 58.09%

Scientek Nanjing Co., Ltd. Designing, researching, and selling computer products

56.16% 58.09%

ABILITY ENTERPRISE (BVI) CO., LTD.


ACTION PIONEER INTERNATIONAL LTD.

Trading activities 12.63% 12.99%

VIEWQUEST TECHNOLOGIES INTERNATIONAL INC.

Selling computer peripherals, digital cameras and electronic components

12.63% 12.99%

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(Continued)


VIEWQUEST TECHNOLOGIES (BVI) INC.

Manufacturing and selling computer peripherals, digital cameras and electronic components

12.63% 12.99%

ASSOCIATION INTERNATIONAL LTD.


Ability International Investment Co.,Ltd.


Ability Technology (Dongguan) Co., Ltd.

Manufacturing and selling digital cameras

12.63% 12.99%

Azurelighting Technologies Inc.

Manufacturing and selling ofLED, inside and outside lightings

56.16% -

GREENASUS RECYCLING CO., LTD.

Selling recycled resources and repairing electrical appliances and products

(Note 1) 100%

Azurewave (Cayman) Holding Inc.

Investing and trading activities (Note 1) 60.49%

ASUS New Zealand Limited

Sales and repair service center inNew Zealand

(Note 1) 100%

STRONG CHOICE GROUP LIMITED

Investing and trading activities (Note 1) 100%

WEST TEC ASIA LIMITED

Investing and trading activities (Note 1) 100%

NORTH TEC ASIA (SHANGHAI) LIMITED

Manufacturing, developing and selling mobile phones, computers, routers, DTV and electronic components, and providing after-sales service

(Note 1) 100%

LINKTEK PRECISION (SUZHOU) CO., LIMITED

Manufacturing and selling earphone parts

(Note 1) 100%

TWINHAN TECHNOLOGY CO., LTD.

Designing, manufacturing and selling computer products

- (Note 1)

Asus Service Canada, Inc. Maintenance service (Note 1) 100% ASUSPRO (SUZHOU)

CO., LTD. Trading computer peripherals,

PDAs, and media players, acting as commission agent, and providing after-sales service

- (Note 1)

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(Continued)


ASUS UNITED TECHNOLOGY (GUANG ZHOU) CO., LTD.

Selling main boards, servers, computer peripherals, and software, and providing after-sales service

- (Note 1)

EAST TEC ASIA LIMITED

Investing and trading activities - (Note 1)

AMA CORPORATION Investing activities (Note 1) 100% NxNet Systems Holdings

CorporationInvesting and trading activities - (Note 1)

NxNet Systems, Inc. (China)

Manufacturing and selling software, integrated circuits, and network technology

- (Note 1)

NxNet Systems, Inc. (Taiwan)

Manufacturing and selling wired and wireless communication equipment

- (Note 1)

NxNet Systems, Inc. Designing and selling communication and computer equipment, and providing consultant service

- (Note 1)

AXIS PRECISION INC. Manufacturing and selling electronic parts

- (Note 1)

ASUSALPHA Computer Inc.

Manufacturing and selling computer peripherals, and providing electronic information supply service

- (Note 1)

Asmobile Communication Inc.

Manufacturing, importing and selling telecommunication equipment

- (Note 1)

Wei Chun Investment Corp. Investing activities - (Note 1) ASUSPOWER Computer

(HK) Ltd. Trading activities - (Note 1)

ASUS (UK) LIMITED Sales and repair service center in UK

- (Note 1)

Note 1: The Group had no control or lost control over these entities.

Note 2: The Group only consolidates the proportion of the joint venture owned by itself to the consolidated financial statements.

All significant inter-company transactions have been eliminated.

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(Continued)

(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 financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

(3) 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.

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.

(4) Foreign currency transactions and translation of financial statements in foreign currencies

Transactions involving non-derivative financial instruments denominated in foreign currencies are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occurred. Translation gains or losses arising from the settlement of assets and liabilities denominated in foreign currencies are included in profit or loss in the year of actual settlement.

Monetary assets and liabilities denominated in foreign currencies are remeasured on the balance sheet date using the exchange rates in effect as of that date, with related exchange gains and losses included in the statements of income.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through stockholders’ equity are remeasured at the exchange rate prevailing on the balance sheet date, with related exchange gains or losses recorded as cumulative translation adjustment in stockholders’ equity. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through profit or loss are remeasured at the exchange rate prevailing on the balance sheet date, with related exchange gains or losses recorded in the statements of income. Non-monetary assets and liabilities denominated in foreign currencies that are measured at cost are remeasured at the historical exchange rate.

Long-term investments in foreign investees, which are accounted for under the equity method, are stated on the basis of stockholders’ equity in the foreign-currency financial statements of investees. Translating gains or losses from long-term investments are recognized as cumulative translation adjustment in stockholders’ equity.

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(Continued)

(5) Impairment of assets

The Group assesses all applicable assets subject to R.O.C. Statement of Financial Accounting Standards (‘SFAS’) No. 35 for indication of impairment on the balance sheet date. If any indication of impairment exists, the Group then compares the carrying amount with the recoverable amount of the assets or the cash-generating unit (“CGU”) and writes down the carrying amount to the recoverable amount. If the recoverable amount of an asset other than goodwill has increased as a result of the increase in its estimated service potential, the Group reverses the impairment loss to the extent that the carrying amount after the reversal would not exceed the amount (net of amortization or depreciation) that would otherwise result had no impairment loss been recognized in prior periods.

The Group assesses the goodwill and intangible assets that have indefinite lives or that are not yet available for use periodically and on an annual basis and recognizes an impairment loss on the carrying value in excess of the recoverable amount. The loss is first recorded against the goodwill allocated to the CGU, with any remaining loss allocated to other assets on a pro rata basis proportionate to their carrying amounts. The write-down of goodwill is not reversed in subsequent periods under any circumstances.


In accordance with R.O.C. SFAS No. 34 “Financial Instruments: Recognition and Measurement” and the “Criteria Governing the Preparation of Financial Reports by Securities Issuers”, financial assets are classified as financial assets at fair value through profit or loss, financial assets carried at cost, or available-for-sale financial assets, as appropriate. Financial liabilities are classified either as financial liabilities at fair value through profit or loss or as financial assets carried at cost.

The Group accounts for purchases and sales of financial assets on the trade date, or the date on which the Group commits to purchase or sell the asset. At initial recognition, financial assets are recognized at fair value plus, in the case of investments that are not reported at fair value through profit or loss, directly attributable transaction costs.

A. Financial assets measured at fair value through profit or loss

These financial assets and liabilities are subsequently measured at fair value with changes in fair value recognized in profit and loss. Stocks of listed companies, convertible bonds and closed-end funds are measured at closing prices on the balance sheet date. Open-end funds are measured at the unit price of the net assets on the balance sheet date.

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(Continued)

B. Financial assets carried at cost

Equity investments without reliable market prices, including emerging and other unlisted stocks, are measured at cost. If objective evidence of impairment exists, the Group recognizes impairment loss, which is not reversed in subsequent periods.

C. Available-for-sale financial assets

Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, or loans and receivables. These assets are then measured at fair value. The gain or loss arising from change in fair value, excluding impairment loss and exchange gain or loss from the translation of monetary financial assets denominated in foreign currencies, is recognized in a separate component of stockholders’ equity until such investment is reclassified or disposed of, upon which the cumulative gains or losses previously charged to stockholders’ equity are transferred to the current profit or loss.

D. Financial assets held to maturity

Debt securities for which the Company has a positive intention and ability to hold to maturity are classified as financial assets held to maturity and are carried at amortized cost under the effective interest method. If objective evidence of impairment exists, the Group recognizes impairment loss. If, in a subsequent period, the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversible amount may not exceed the amortized cost that would have been determined if no impairment loss had been recognized.

E. Derivative financial assets and liabilities for hedging

The Group recognizes the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged item when hedging relationships meet the criteria for hedge accounting which is accounted for as follows:

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

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(Continued)

(b) Cash flow hedge: 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. For hedges other than those covered by the preceding statement, the associated cumulative gain or loss is removed from equity and recognized in profit or loss in the same period or periods during which the hedged forecast transaction affects profit or loss.

Subsequent to initial recognition, the Group measures all financial liabilities at amortized cost except for financial liabilities at fair value through profit or loss, which are measured at fair value.

(7) Allowance for doubtful accounts

Allowance for doubtful accounts is recognized on the basis of the estimated collectability of accounts receivable and other receivables.

(8) Inventories

The costs of inventories include those necessary expenditures incurred in bringing each item of inventory to its usable condition and location. Cost is calculated on a weighted-average basis.

Up to December 31, 2008, inventories were valued at the lower of cost or market value using the gross method. The market values of raw materials and supplies were based on the replacement cost, while those of work in process and finished goods were based on net realizable value.

Effective January 1, 2009, inventories are valued at the lower of cost or net realizable value. Net realizable value by item is determined based on the estimated selling price in the ordinary course of business, less estimated costs of completion and costs incurred in order to make the sale.

(9) Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amounts are recoverable through a sale transaction within one year rather than through continuing use. Non-current assets held for sale (disposal group) are measured at the lower of carrying amount or fair value less costs to sell.

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(Continued)

(10) Long-term equity investments (including interests in joint ventures)

Long-term investments are accounted for under the equity method when the percentage of ownership exceeds 20% or if the Group owns less than 20% of the investee’s common stock but has significant influence on the investee’s operations. The Group has control over a joint venture investment and accounts the investment under equity method. The Group prepares consolidated financial statements using the proportionate consolidation method on balance sheet date. If an investee company accounted for under the equity method issues new shares and the Company does not purchase new shares proportionately, then the investment percentage, and therefore the equity in net assets of the investee, will be changed. The effect of such change is adjusted against the additional paid-in capital or retained earnings and long-term equity investments.

The difference between the cost of the investment and the amount of underlying equity in net assets of an investee attributed to depreciable, depletable, or amortizable assets is amortized over the estimated remaining economic years. The difference attributed to the carrying amount in excess of or lower than the fair value of assets is written off entirely when the difference disappears. The cost of investment in excess of the fair value of identifiable net assets is recognized as goodwill and is no longer amortized. The difference attributed to the fair value of identifiable net assets in excess of the cost of investment causes a proportional decrease in the carrying amount of non-current assets. When the carrying amount of non-current assets is decreased to zero, the remaining difference is recorded as extraordinary gain or loss.

The difference between the disposal price and carrying amount of long-term equity investment under the equity method on the disposal date is recognized as gain or loss from disposal of long-term equity investment. The associated additional paid-in capital resulting from long-term equity investment is reclassified into current gain or loss in proportion to disposal of long-term equity investment.

When the equity of long-term equity investment under the equity method including unrealized gain on financial instruments, foreign currency translation adjustments, net loss not recognized as pension cost, and unrealized losses on cash flow hedges is changed, the changes in percentage of ownership are reflected in those related accounts and long-term equity investment under the equity method.

Unrealized inter-company profits or losses resulting from inter-company transactions between the Group and investees which are accounted for under the equity method are deferred until realized.

(11) Investment – land use right

Investment – land use right is stated at cost, and amortized by using the average method over the contract period. If evidence of impairment exists the recovery from impairment is difficult, impairment loss is recognized.

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(Continued)

(12) Property, plant and equipment, leased assets, idle assets, and depreciation

Property, plant and equipment are stated at cost. Cost associated with significant additions, improvements, and replacements to property, plant and equipment are capitalized. Expenditures for regular repairs and maintenance are charged against operating income.

Depreciation of property, plant and equipment is provided over the estimated useful lives of the assets by using the straight-line method. If the property, plant and equipment have reached the end of their estimated useful lives but are still in use, the Company will estimate their remaining useful lives and residual value, and depreciate the residual value using the same method. Property, plant and equipment leased to other parties under operating leases are classified as leased assets. The related depreciation is accounted for as a reduction of rental income. The useful lives of fixed assets, leased assets and idle assets are as follows:

A. Buildings and buildings improvements: 3 to 60 years.

B. Machinery and equipment: 2 to 10 years.

C. Instruments and equipment: 1 to 8 years.

D. Other equipment: 1 to 20 years.

Property, plant and equipment not currently used in operations are transferred to idle assets. The cost, accumulated depreciation, and accumulated impairment of the original assets not currently used in operations are all transferred to idle assets or other assets, and depreciated.

(13) Intangible assets and deferred expense

Intangible assets represent trademarks, technological know-how, computer software and land use rights, which are amortized using the straight-line method over their estimated economic lives. Also, intangible assets are evaluated periodically for impairment in accordance with the R.O.C. SFAS No. 35. Deferred expense represents office decoration tooling, which is amortized using the straight-line method over 9 months to 10 years.

(14) Accrued product warranty liability

When the sales of the products attached with a warranty clause are recognized, warranty liabilities are accrued and current expenses are recorded according to historical return rates and repair costs, failure rates and warranty periods.

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(Continued)

(15) Convertible bonds payable

According to R.O.C. SFAS No. 36 “Financial Instruments: Disclosure and Presentation” and Interpretation (95) 078 by the Accounting Research and Development Foundation (ARDF), convertible bonds with a put option issued by the Group before December 31, 2005, are accounted for in accordance with SFAS No. 21. The derivative instrument embedded in a non-derivative host debt instrument is not separated from the equity component of the instrument. Costs incurred for the issuance of redeemable convertible bonds are deferred and amortized during the period between the issuance date and the last redeemable date.

Bonds issued after January 1, 2006, are accounted for in accordance with R.O.C. SFAS No. 36 and Interpretations (95) 290, (97) 331 and (98) 046 by the ARDF as follows:

A. The issuance costs are allocated to the related liability and equity components in proportion of the initially recognized amounts.

B. Convertible bonds bearing a clause on conversion price adjustment based on stock market price do not include the equity component. For the liability components, the fair value of the conversion right and call/put option is determined firs; then the book value of main debt component is determined based on the net amount of the issuance price after deducting the fair value of the call/put option and conversion right with a clause on price adjustment.

C. Convertible bonds are subsequently measured at amortized cost. Derivatives with call/put options and conversion rights with a clause on price adjustment are recognized as “financial liabilities at fair value through profit or loss” and are subsequently measured at fair value. Movements in the fair value of the derivatives are recognized as “gain/ (loss) on valuation of financial liabilities”.

D. If the bondholder exercises the right to convert the bonds ahead of the maturity date of the bonds, the book value of the liability component i s ad jus ted to the value on the conversion date, which serves as the basis for the recording of the issuance of common stock so that no conversion gain and loss is recognized thereon.

E. If the bondholder is eligible to exercise the put option within one year, the bonds payable are reclassified as current liability. When the put option expires, those bonds payable are reclassified as long-term liability if the liability meets the definition of long-term liability.

(16) Retirement plan

The Company and domestic subsidiaries make monthly contributions to the pension fund at 2% of the total monthly salaries and wages as required by the Labor Standards Law. The fund is administrated by the Employees Retirement Fund Committee. This pension fund is considered absolutely separate from the Company after contribution; therefore, it is not included in the accompanying financial statements.

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According to ROC SFAS No. 18 “Accounting for Pensions”, the Company and domestic subsidiaries have their pension plan actuarially valued at year-end and recognizes the net periodic pension costs, including service cost, net unrecognized transaction assets, prior service cost, and gains or losses on pension over the average remaining service period of the employees. If the minimum pension liability exceeds the total of unamortized prior service cost and unamortized unrecognized transaction net benefit liabilities, the net loss not recognized as pension cost is recognized and classified as a reduction of stockholders’ equity. In addition, except for a few foreign employees, the Company had settled its financial obligations to its employees’ under the pension plan accounted for base on SFAS No. 18 as of December 31, 2007.

The new Labor Pension Act became effective on July 1, 2005, and prescribes a defined contribution pension plan for all new employees and for any employees employed before that date who opted to adopt it. Under this defined contribution pension plan, the Company and domestic subsidiaries contribute monthly at the rate of no less than 6% of salaries and wages to employees’ individual pension fund accounts with the Bureau of Labor Insurance, and this contribution is recorded as pension expenses in the accompanying statements of income.

The overseas subsidiaries which adopt a defined contribution pension plan contribute periodically on the basis of each local labor law, and such contribution is recorded as current expense.

(17) Revenue recognition

The Group recognizes revenue when the revenue earning process has been significantly completed, which means the revenue has been realized or is readily realizable and earned. Cost is recognized when the related revenue is accrued; expenses are recognized as current expenses when incurred.

(18) Employees’ bonuses and directors’ and supervisors’ remuneration and share-based payment

Appropriation of earnings after January 1, 2008, for employees’ bonuses and directors’ remuneration according to the R.O.C. Company Act and each entity’s article of incorporation accounts, is accounted for in accordance with Interpretation (96) 052 issued by the ARDF. Accordingly, the Company and domestic subsidiaries estimate the amount of directors’ and supervisors’ remuneration according to the Interpretation and recognize it as expenses. 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 as profit or loss. The Group adopts R.O.C. SFAS No. 39 to account for the transfer of equity instruments from shareholders and the Group to the Group’s employees.

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(Continued)

(19) Income taxes

Income tax is calculated on the basis of accounting income. The differences between the tax bases and the book values of assets and liabilities are recorded as deferred tax using the enacted tax rates for the periods in which the deferred tax is expected to be reversed. The tax effects from taxable temporary differences are recognized as deferred tax liability, while the deductible temporary differences, loss carryforward and tax credits are accounted for as deferred tax assets, which are assessed an allowance for deferred tax assets based on future realization.

Deferred income tax assets or liabilities are classified as current or non-current based on the classification of items that resulted in the deferred assets or liabilities or, based on the timing of the expected reversal for certain transactions not directly related to an asset or liability.

Investment tax credits are accounted for using the flow-through method. Therefore, deferred income tax credits generated from purchases of machinery and equipment and production technology, development and research expenses, and human resource training expenses are recognized in the year in which the credit arises.

The 10% additional income tax on unappropriated earnings of the Company and domestic subsidiaries is recorded as current income tax expense in the following year when the shareholders resolve not to distribute the earnings.

Current income tax is the higher of current income tax payable or the Alternative Minimum Tax (“AMT”) calculated by applying the Income Basic Tax Act (“IBTA”). The Company and domestic subsidiaries have taken into consideration the impact of the AMT in the determination of their current income tax expense and its future impact when estimating the realizable value of the deferred tax assets.

The income tax for each consolidated entity is reported on an individual basis with the relevant country and is not reported on a consolidated basis. The consolidated income tax expense is the total of income tax expenses for all consolidated entities.

(20) Treasury stock

The Company adopts R.O.C. SFAS No. 30 “Accounting for Treasury Stocks” to account for treasury stock transaction and recognizes the treasury stock at purchase cost. A gain on the sale of treasury stock is credited to additional paid-in capital – treasury stock. Losses are charged to additional paid-in capital, but only to the extent of available net gains from previous sales or retirements of the same class of stock; otherwise, losses are charged to retained earnings. The cost of treasury stock is computed using the weighted-average method.

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When treasury stock is retired, the weighted-average cost of the retired treasury stock is written off against the par value of the shares and the paid-in capital derived from the issuance of shares in excess of par value. If the weighted-average cost written off exceeds the sum of the par value and the paid-in capital in excess of par value, the difference is debited to additional paid-in capital – treasury stock arising from the same class of stock or to retained earnings, and if vice versa, the difference is credited to additional paid-in capital – treasury stock.


Earnings per share of common stock is computed based on the weighted-average number of common shares outstanding during the period. Earnings per share for the prior period is retroactively adjusted to reflect the effects of new shares issued by transferring additional paid-in capital, retained earnings, and employees’ bonuses approved in the annual stockholders’ meetings held before and in 2008.

The convertible bonds and employee stock bonuses which have not yet been approved in the stockholders’ meeting are potential common shares. Only basic earnings per share is disclosed if there is no dilution effect. Otherwise, both basic and diluted earnings per share are disclosed. For the purpose of calculating diluted earnings per share, the potential common shares are deemed to have been converted into common stock at the beginning of the period, and the effect on net income of the additional common shares outstanding is considered accordingly.

3. Changes in Accounting Policy and Their Influence

(1) Effective from January 1, 2009, the initial recognition and subsequent measurement of inventories are made in accordance with R.O.C. SFAS No. 10 “Inventories”. Accordingly, net income decreased by $1,053,208 and basic earnings per share decreased by 0.25 dollars for the year ended December 31, 2009.

(2) Effective from January 1, 2008, the Group adopted R.O.C. SFAS No. 39 and Interpretation (96) 052 issued by the ARDF for share-based payment transaction. The adoption of these new accounting principles decreased net income by $2,033,489 and basic earnings per share by NTD 0.48 for the year ended December 31, 2008. In accordance with Interpretation (97) 169 issued by the ARDF, the new shares issued as employees’ bonuses in 2008 and later years are no longer retroactively adjusted when calculating basic earnings per share and diluted earnings per share. Employees’ bonuses issued in form of stock with dilutive effect are considered in the calculation of diluted earnings per share. The Group adopted R.O.C. SFAS No. 39 “Share-based payment” to account for the transfer of equity instruments from the Group and its shareholders to the Company’s or affiliated companies’ employees. Accordingly, net income decreased by $290,298 and basic earnings per share decreased by 0.07 dollars for the year ended December 31, 2008.

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(Continued)

4. Details of Significant Accounts

(1) Cash and cash in banks

2009/12/31 2008/12/31

Petty cash and cash on hand $ 49,634 157,215 Checking accounts and demand deposits 23,694,059 12,277,493 Time deposits 42,509,501 37,188,791 Cash equivalents 8 94,968

$ 66,253,202 49,718,467

(2) Financial instruments (excluding derivative financial instruments for hedging)

The financial instruments held by the Group as of December 31, 2009 and 2008, were as follows:

2009/12/31 2008/12/31

Financial assets measured at fair value through profit or loss－current:Open-end funds $ 20,280,774 12,432,694 Corporate bonds 498,145 466,678 Forward foreign currency exchange contracts 292,416 10,894 Stocks of listed companies 261,496 34,873 Currency swap contracts 12,112 4,264 Re-purchase bonds 301,863 289,167 Depositary receipts 10,389 16,171 Credit linked notes - 40,738

$ 21,657,195 13,295,479Financial liabilities measured at fair value through

profit or loss: Current:

Forward foreign currency exchange contracts $ 724 878,824 Call/put options and conversion right –

convertible bonds 282,872 842,181$ 283,596 1,721,005

Available-for-sale financial assets: Current:

Stocks of listed companies $ 1,848,464 516,306

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(Continued)

2009/12/31 2008/12/31

Non-current:Stocks of listed companies $ 7,803,861 4,556,392 Government Bonds 1,521 -

$ 7,805,382 4,556,392Financial assets carried at cost:

Current:Stocks of unlisted companies $ 41,162 -

Non-current:Stocks of unlisted companies $ 2,170,188 2,182,210 Beneficiary certificates 250,861 295,200

$ 2,421,049 2,477,410Financial assets held to maturity:

Current:Principal guaranteed notes $ 16,425 -

Non-current:Principal guaranteed notes $ - 16,425

A. Derivative financial instruments:

The forward foreign currency exchange contracts were intended mainly to hedge foreign currency risk from operating activities. As of December 31, 2009 and 2008, the derivative financial instruments for which hedge accounting was not adopted were as follows (foreign currencies are expressed in thousands):

2009/12/31 2008/12/31 Nominal

AmountContract

Period Nominal

Amount Contract

Period Derivative financial assets:

EUR forward foreign currency exchange contracts sold (EUR/USD) EUR 130,000 2009.11~2010.02

USD forward foreign currency exchange contracts sold (USD/NTD)

USD 20,000 2008.12~2009.01

SEK forward foreign currency exchange contracts sold (SEK/USD) SEK 40,791 2009.12~2010.01

GBP forward foreign currency exchange contracts sold (GBP/USD) GBP 3,000 2009.12~2010.01

CHF forward foreign currency exchange contracts sold (CHF/USD) CHF 1,007 2009.11~2010.01

JPY forward foreign currency exchange contracts sold (JPY/USD) JPY 5,706 2009.11~2010.01

USD currency swap contracts (USD/NTD) USD 49,600 2009.12~2010.01 USD 31,740 2008.12~2009.01

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(Continued)

2009/12/31 2008/12/31 Nominal

AmountContract

Period Nominal

Amount Contract

Period Derivative financial liabilities:

GBP forward foreign currency exchange contracts sold (GBP/USD)

GBP 23,000 2008.11~2009.02

EUR forward foreign currency exchange contracts sold (EUR/NTD)

EUR 2,509 2008.12~2009.01

EUR forward foreign currency exchange contracts sold (EUR/USD)

EUR 446,600 2008.11~2009.03

SEK forward foreign currency exchange contracts sold (SEK/USD)

SEK 49,000 2008.12~2009.02

CHF forward foreign currency exchange contracts sold (CHF/USD)

CHF 4,085 2008.12~2009.02

AUD forward foreign currency exchange contracts sold (AUD/USD) AUD 1,000 2009.12~2010.01

The gains (losses) resulting from changes in fair value of derivative instruments amounted to $(411,265) and $(999,050) for the years ended December 31, 2009 and 2008, respectively.

B. Available-for-sale financial assets:

The Group assessed and compared the book value and collectable amount of available-for-sale financial assets and recorded impairment loss thereon of $61,662 and $132,143 for the years ended December 31, 2009 and 2008, respectively.

For the years ended December 31, 2009 and 2008, the unrealized gains (losses) on available-for-sale financial assets amounted to $3,727,729 and $(2,079,776), respectively, and were recorded as a separate component of stockholders’ equity.

C. Financial assets carried at cost:

The Group assessed and compared the book value and collectable amount of financial assets carried at cost – non-current and recorded impairment loss thereon of $127,973 and $327,047 for the years ended December 31, 2009 and 2008, respectively.

(3) Derivative financial assets and liabilities used for hedging purpose

2009/12/31 2008/12/31

Financial assets for hedging – current: Forward foreign currency exchange contracts $ 306,361 -

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(Continued)

The Group had expected the risk of changes in the foreign currency cash flow from forecasted transactions due to changes in market rate for the year ended December 31, 2009. As the risk was evaluated to be significant, and the Group had entered into forward foreign currency exchange contracts for hedging purpose.

A. As of December 31, 2009, the fair value of the derivative financial assets for cash flow hedging was as follows:

Hedged item Hedging instrumentFair value of designated instrument for hedging

Period for which the hedge is designated

Expected period for related gains or losses to be recognized

Forecastedtransactions

Forward foreign currency exchange contracts

$ 306,361 2009.10~2010.03 2009.10~2010.03

B. As of December 31, 2009, the unexpired financial instrument contracts were as follows (foreign currencies are expressed in thousands):

2009/12/31 Nominal

Amount Contract

Period Derivative financial assets for hedging:

GBP forward foreign currency exchange contracts sold (GBP/USD) GBP 4,300 2009.11~2010.03

EUR forward foreign currency exchange contracts sold (EUR/USD) EUR 150,000 2009.10~2010.03

SEK forward foreign currency exchange contracts sold (SEK/USD) SEK 24,100 2009.11~2010.03

CHF forward foreign currency exchange contracts sold (CHF/USD) CHF 5,200 2009.11~2010.03

NOK forward foreign currency exchange contracts sold (NOK/USD) NOK 8,100 2009.11~2010.03

DKK forward foreign currency exchange contracts sold (DKK/USD) DKK 3,600 2009.11~2010.02

AUD forward foreign currency exchange contracts sold (AUD/USD) AUD 2,000 2009.11~2010.02

JPY forward foreign currency exchange contracts sold (JPY/USD) JPY 1,445,000 2009.10~2010.03

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(Continued)

(4) Notes and accounts receivable

A. The Group’s notes and accounts receivable were as follows:

2009/12/31 2008/12/31

Notes receivable $ 2,470,319 1,066,216 Accounts receivable 86,018,994 89,913,997 88,489,313 90,980,213 Less: allowance for doubtful accounts (1,003,535) (1,086,215)

$ 87,485,778 89,893,998

B. As of December 31, 2009 and 2008, KINSUS had sold accounts receivable as follows:

Write-off of accounts receivable

Receipt in advance

Limits for sales of

accounts Purchaser 2009/12/31 2008/12/31 2009/12/31 2008/12/31 Collateral receivableMega International

Commercial Bank $ 313,090 233,717 192,404 - None Note

Note: As of December 31, 2009 and 2008, the limits for sales of accounts receivable were USD 30,000,000.

(5) Inventories

2009/12/31 2008/12/31

Finished goods $ 22,710,126 21,724,425 Merchandise inventory 30,464,515 40,899,482 Work in process 4,391,802 5,515,001 Raw materials 30,787,455 31,116,894 Inventories in transit 6,043,186 5,538,744 Less: allowance for inventory valuation loss and

obsolescence (6,659,892) (7,337,476)$ 87,737,192 97,457,070

Inventories recognized as expenses and losses amounted to $15,745 and $5,297,963, of which $(398,806) and $5,016,356 were a addition to (deduction from) the cost of sales due to a write-down (reversal) of inventory cost to its net realizable value, for the years ended December 31, 2009 and 2008, respectively.

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(Continued)


2009/12/31 2008/12/31

Investee Company Interest

Owned Amount Interest

Owned Amount

YORKEY OPTICAL INTERNATIONAL (CAYMAN) LTD.

Note 20.69% 1,169,211

INDEED HOLDINGS LIMITED 49.00% $ 726,939 49.00% 471,971 AVY Precision Technology Inc. 20.39% 811,883 19.60% 430,683 WILSON HOLDINGS LIMITED 49.00% 160,340 49.00% 153,279 EVER PINE INTERNATIONAL

LTD. (BVI) 34.65% 121,207 34.65% 136,963 ASHINE PRECISION CO., LTD. - - 40.00% 141,989 Others 325,407 269,479

$ 2,145,776 2,773,575

Note：The Group had lost control over YORKEY OPTICAL INTERNATIONAL (CAYMAN) Ltd. and its investment thereon was reclassified as available-for-sale financial asset – current.

The investment income recognized from these investments under the equity method , which amounted to $332,956 and $52,249 for the years ended December 31, 2009 and 2008, respectively, was determined based on the investee companies’ audited financial statements.

(7) Interests in joint ventures

PEGATRON has a joint venture investment in ADVANSUS whose common stock amounting to $360,000 and $600,000 as of December 31, 2009 and 2008, respectively. PEGATRON holds 50% interest of ADVANSUS, which was consolidated in proportion to the Group. Assets, liabilities, revenues and expenses of PEGATRON’s interest were as follows:

2009/12/31 2008/12/31 Current assets $ 487,823 420,029 Non-current assets 17,290 24,495 Current liabilities 283,972 134,951 Other liabilities 742 345

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(Continued)

2009/1/1~2009/12/31 2008/1/1~2008/12/31

Revenues $ 1,473,862 978,070 Expenses 1,442,692 955,173

(8) Property, plant and equipment, leased assets, and idle assets

A. Leased assets consisted of the following:

2009/12/31 2008/12/31 Land, buildings and equipments $ 1,069,305 943,527 Less: accumulated depreciation (127,809) (95,864)

accumulated impairment (69,061) - Add: fair value adjustment for identifiable assets 9,692 11,104

$ 882,127 858,767

B. Idle assets consisted of the following:

2009/12/31 2008/12/31 Lands, buildings and equipment $ 986,829 133,248 Machinery and others 3,334,624 567,948 Less: accumulated depreciation (2,140,009) (416,803)

accumulated impairment (1,334,186) (203,844)$ 847,258 80,549

There is no indication of cash flow in future years for idle assets which are currently not used in operation; therefore, the Group recognized the net fair value as the recoverable amount for these assets. After evaluating and comparing the carrying value of idle assets and the expected recoverable amount, the Group recognized impairment loss thereon of $798,614 and $116,460 for the years ended December 31, 2009 and 2008, respectively.

C. After evaluating and comparing the carrying value of property, plant, and equipment and the expected recoverable amount, the Group recognized gain on recovery of impairment of assets amounting to $29,788 and impairment loss of assets amounting to $136,565 for the years ended December 31, 2009 and 2008, respectively.

D. Please refer to Note 6 for details of property, plant and equipment, leased assets, and idle assets pledged as collateral.

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(Continued)

(9) Non-current assets held for sale

2008/12/31

Items Cost Accumulated Depreciation Book Value

Land $ 110,115 - 110,115 Buildings 58,203 18,064 40,139 $ 168,318 18,064 150,254 Add: Fair value adjustment

for identifiable assets

32,622 $ 182,876

A. There is no indication of cash flow in future years for non-current asset held for sales which are currently not used for operation; therefore, the Group recognized the net fair value as the recoverable amount.

B. The Company obtained control over Ability Enterprise from a share swap and adopted R.O.C. SFAS No. 25 to adjust the difference between acquisition cost and fair value of the non-current assets held for sale based on the Group’s percentage of ownership. As of December 31, 2008, the adjustment amounted to $32,622.

C. Ability Enterprise entered into a real estate purchase/sell contract in March 2009, to sell for $360,000 the above non-current asset held for sale. The gain realized from such sale amounted to $178,573, after deducting the carrying value and related expenses. The payment had been collected in 2009.

(10)Intangible assets and other assets

A. In accordance with the R.O.C. SFAS No. 35, the Group assessed for impairment of the goodwill arising from acquisition of Ability Enterprise under the purchase method and recorded impairment loss thereon of $240,000 in 2008.

B To ensure the supply of raw materials, the Company has entered into an agreement with a supplier for a guaranteed quantity of materials at a discount to market price. The Company prepaid $3,217,000, which was recorded as other assets － others.

C Due to the restriction imposed by local government, KINSUS purchased farmland in the name of KINSUS’s chairman instead of KINSUS. Before KINSUS may take over the title to the farmland as well as completing the registration procedures, the land is temporarily recorded as other assets. As of December 31, 2009 and 2008, the book value of the farmland was $30,784.

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(Continued)

(11)Investments – land use right

In 2006, WUJING WILL STAR entered into a contract with Wujiang City Government, to obtain two land use rights for RMB 143,825,000. As of December 31, 2009, WUJING WILL STAR has paid RMB 92,360,000 for one of the land use rights and recognized it as investment – land use right.

(12)Short-term loans and short-term notes bills payable

2009/12/31 2008/12/31

Unsecured loans $ 11,863,692 14,224,407 Secured loans 589,408 348,000 Letter of credit - 1,437 Short-term notes and bills payable 49,933 -

$ 12,503,033 14,573,844Range of interest rates 0.44%~5.04% 1.16%~4.34%

The Group provided its assets as collateral for short-term loans. Please refer to note 6 for details.

(13) Long-term loans

Usage and redemption Bank duration 2009/12/31 2008/12/31 Taiwan Business Bank 2006.10.15~2009.07.15, payable

in quarterly installments, commencing one year after the day next to the project completion date.

$ - 15,000

Taipei Fubon Bank - syndicated loan

2006.11.01~2009.11.01, USD 5,000,000 payable on May 1, 2009, and the remaining amount on maturity date.

- 1,640,000

Mega International Commercial Bank

2004.3.31~2009.07.30, payable in 20 installments, commencing the closest 15th of January, April, July or October of the date of borrowing.

- 26,750


2004.12.31~2011.12.31, payable in 20 quarterly installments, commencing the closest 15th of January, April, July or October of the date of borrowing.

10,720 248,221

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Usage and redemption Bank duration 2009/12/31 2008/12/31 Mega International Commercial Bank

2009.12.16~2016.12.15, payable in 20 quarterly installments, commencing the date of borrowing with an extension of two years.

348,582 -


2005.01.31~2012.01.31, payable in 20 quarterly installments, commencing the date of borrowing with an extension of two years.

53,606 -


2008.04.07~2011.04.07, payable in 3 semi-annual installments, commencing two years after the initial date of borrowing, with the remaining balance payable in full in the last installment.

959,701 984,000

The Shanghai Commercial &Savings Bank, Ltd.

2006.12.08~2013.10.15, interest is payable monthly and principal is payable in quarterly installments from the thirteenth month, commencing the date of borrowing.

21,320 29,167


2006.12.08 ~2013.10.15, interest is payable monthly and principal is payable in quarterly installments from the thirteenth month, commencing the date of borrowing. The entire debt was fully paid in advance on June 30, 2009.

- 27,308

Industrial and Commercial Bank of China Limited

2007.11.23~2011.11.22, demand loan payable in lump sum on maturity date

518,111 959,821

ABN AMRO – syndicated loan

2008.10.30~2011.10.30, $1.5 billion is payable in 3 semi-annual installments from the eighteenth month, commencing on April 30, 2010, and the remaining amount is payable on maturity date.

7,200,000 8,000,000

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Usage and redemption Bank duration 2009/12/31 2008/12/31 Industrial and Commercial Bank of China Limited

2009.10.09~2011.10.08, interest is payable quarterly, and principal amount is payable in lump sum on maturity date.

140,549 -


2009.06.08~2012.06.08, payable in lump sum on maturity date

719,775 -



95,940 -



23,985 -

The Shanghai Commercial & Savings Bank, Ltd.


231,855 -

AVY CO., LTD. (BVI) 2007.10.22~2010.04.02, payable in lump sum on maturity date. Fully repaid in advance in 2009.

- 39,360

10,324,144 11,969,627 Less: Current portion (837,772) (2,219,239)

$ 9,486,372 9,750,388Range of interest rates 0.85%~5.18% 1.00%~6.56%

A. Askey was the guarantor for Askey (Jiaugsu), committed total percentage of the direct and indirect ownership of Askey by the Company, PEGATRON and UNIHAN should be over 67% and the direct and indirect ownership in Askey (Jiangsu) by Askey should be 100%. Askey is required to pledge with the bank every year accounts receivable of no less than USD 30,000,000 as a guarantor. In addition, Askey committed to maintain certain debit ratio, interest coverage ratio, and tangible net assets. The above covenants are subject to review every six-

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month based on the consolidated semi-annual and annual financial statements, and anytime the bank considers necessary. Askey was in compliance with the above covenants in 2009 and 2008.

B. Askey was the guarantor for the loan payable by Leading Profit Co., Ltd. Therefore, Askey has covenanted that the total percentage of the direct and indirect ownership of Askey by the Company and its related companies should exceed 67% of Askey’s ownership.

C. According to the loan agreements, PEGATRON must comply with the following financial covenants until its entire loan is fully paid. The calculations of the following financial ratios should be based on audited annual consolidated financial statements and reviewed semi-annual consolidated financial statements of PEGATRON that are approved by management of the bank.

(i) Current ratio (current assets/current liabilities): should be no less than 100%.

(ii) Debt ratio ((total liabilities + contingent liabilities)/tangible net assets): should not be higher than 50%.

(iii) Interest coverage ratio (EBITDA/interest expenses): should be no less than 400%.

(iv) Tangible net assets (stockholders equity (including minority shareholders) – intangible assets): should not be less than $90,000,000.

D. PEGATRON has provided promissory note as collateral for the unsecured loans.

E. Please refer to Note 6 for details regarding the assets pledged as collateral.

(14)Bonds payable

A. The Company issued the first Euro unsecured convertible bonds (ECB 1) on the Luxembourg Stock Exchange on January 15, 2004, with a zero-coupon rate, a duration of five years, and a face value of US$320,000,000. The details of ECB 1 are as follows:

2009/12/31 2008/12/31 Aggregate principal amount (USD 320,000, 000) $ 10,822,400 10,822,400 Converted amount (USD 273,711, 000) (9,256,906) (9,256,906) Redeemed amount (USD 46,289,000) (1,565,494) - Premium on bonds payable (USD 2,000) - 68 Foreign currency exchange gain - (113,797)

- 1,451,765 Less: Convertible bonds payable － due within

one year - (1,451,765)Corporate bonds payable – net $ - -

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The Company classified ECB 1 under current liabilities beginning March 31, 2008, since the maturity date of convertible bonds was on January 15, 2009.

B. The Company issued redeemable domestic unsecured convertible bonds with a zero-coupon rate and a face value of $12,000,000 on November 7, 2006. In accordance with SFAS No. 36, the Company separated the embedded derivative debt and non-derivative debt components as follows:

The main debt component at issuance $ 10,653,600 The embedded derivative debt at issuance 1,346,400The total amount of the convertible bonds at issuance $ 12,000,000

The main issuance terms of the domestic unsecured convertible bonds are as follows:

(a) Duration of issuance: 5 years (from November 7, 2006, to November 7, 2011.)

(b) Conversion period: Each bondholder has the right to convert all or from time to time any portion of its convertible bonds into common shares during the conversion period (up to 31 days after the original issued date to 10 days before the maturity date).

(c) Conversion price and adjustment: The conversion price is NT105.4 dollars per common share initially. The conversion price will be adjusted upon the occurrence of an increase in the number of common shares. The Company adjusted the conversion price to NT74.8 dollars on August 24, 2009. Furthermore, the conversion price was reset to NT68.7 dollars on October 1, 2009, in accordance with certain conversion terms.

(d) Call option: The Group could redeem the convertible bonds at par value at any time during the period from December 8, 2006, to September 28, 2011, under the following conditions: the closing price of the common shares on each of 30 consecutive trading days reaches or exceeds 50% of the conversion price, or the outstanding balance of the bonds is less than 10% of the original issuance.

(e) Put option: Each bondholder has the right to put the convertible bonds at par value after the 3rd and 4th year.

The information on the above bonds payable is as follows:

2009/12/31 2008/12/31 Aggregate principal amount $ 12,000,000 12,000,000 Accumulated converted amount (7,000) (7,000) Accumulated redeemed amount (8,226,400) (733,900) Discount on bonds payable (156,967) (722,828) 3,609,633 10,536,272

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2009/12/31 2008/12/31 Less: Convertible bonds payable –redeemable

within one year (3,609,633) (10,536,272)Corporate bonds payable – net $ - - Debt-component embedded derivative: － call/put option and conversion price reset

option $ 9,417 189,153 － conversion rights 273,455 653,028

$ 282,872 842,181

2009/1/1~12/31 2008/1/1~12/31

Gain/(loss) on valuation of financial liabilities $ 179,298 942,440Interest expense $ 128,051 269,514

The Company reclassified the convertible bonds and the related financial liabilities as current liabilities as of December 31, 2009, because the bondholders could opt to request the Company to redeem the convertible bonds on November 7, 2010.

(15) Pension

A. Because of the spin-off, except for a few foreign employees, the Company had settled its financial obligation to employees under the pension plan accounted for based on SFAS No. 18 as of December 31, 2007. Thereafter, the Company is subject to the Labor Pension Act.

B. The Company obtained permission from the Labor Affairs Bureau, Taipei, to suspend the appropriation of pension funds for those foreign employees subject to the Labor Standards Laws in 2009.

C. The pension cost for the years ended December 31, 2009 and 2008, consisted of the following:

2009/1/1~2009/12/31 2008/1/1~2008/12/31 Net pension cost

Defined benefit pension plan $ 9,923 (20,516) Defined contribution pension plan (including annuity) $ 1,490,653 566,465

D. The Company and the subsidiaries in R.O.C. had an actuarial valuation of their defined benefit pension plan as of December 31, 2009 and 2008. According to the actuarial reports, the funded status was reconciled with prepaid pension cost as follows:

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December 31, 2009 December 31, 2008 Benefit obligation:

Vested benefit obligation $ (3,543) (2,784) Non-vested benefit obligation (166,470) (144,854)Accumulated benefit obligation (170,013) (147,638) Projected future employee compensation

increases (102,442) (103,581)Projected benefit obligation (272,455) (251,219)

Fair value of plan assets 278,262 260,142Funded status 5,807 8,923 Net unrecognized transition assets 48,523 44,358 Unrecognized net gain (53,419) (67,313) Additional accrued pension liability (10,490) (3,057)Accrued pension liability $ (9,579) (17,089)Prepaid pension cost $ 33,064 27,836 Accrued pension liability (42,643) (44,925)

$ (9,579) (17,089)

Actuarial assumptions were as follows:

2009/1/1~2009/12/31 2008/1/1~2008/12/31

Discount rate 2.00%~2.25% 2.50%~2.75% Future salary increase rate 1.00%~3.00% 2.00%~3.00% Expected long-term rate of return on plan assets 2.00%~2.50% 2.50%~2.75%

The net pension costs in 2009 and 2008 consisted of the following:

2009/1/1~2009/12/31 2008/1/1~2008/12/31 Service cost $ 4,524 5,926 Interest cost 6,425 7,312 Expected return on plan assets (6,959) (6,277) Amortization and deferral 4,372 4,598 Gain on curtailment or settlement - (36,763)Net pension cost $ 8,362 (25,204)

As of December 31, 2009 and 2008, the vested benefits were approximately $3,964 and $3,831, respectively.

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(16) Stockholders’ equity

A. Capital stock

On June 11, 2008, the stockholders resolved to increase capital by 494,065,000 shares by capitalizing the retained earnings and employees’ bonuses of $4,940,652. The holders of ECB 1 had converted the bonds into 23,627,000 shares of common stock in 2008.

On June 16, 2009, the stockholders resolved to increase capital by 26,851,000 shares by capitalizing the retained earnings and employees’ bonuses of $268,512. The record date of this capital increase was set as August 24, 2009. The registration procedures related to the issuance of shares were completed.

As of December 31, 2009 and 2008, the authorized capital of the Company was $47,500,000 ($500,000 was reserved for employee stock options). Each share of this authorized capital has a par value of $10 per share.

The Company issued Global Depositary Receipts (GDRs), and the GDRs are now listed on the London Stock Exchange. The GDRs (originally 21,000,000 units issued and changed to 4,200,000 units from January 2, 2008) represent 21,000,000 shares of the Company’s common stock.

B. Treasury stock

Movements of treasury stock were as follows:

2009/1/1~2009/12/31 Shares (in thousands) Amount

Beginning of the year - $ - Addition 26,125 873,459 Retirement (26,125) (873,459)Ending of the year - $ -

Pursuant to the Securities and Exchange Act, the total shares of treasury stock shall not exceed 10% of the number of shares issued, and the total purchase cost shall not exceed the sum of the retained earnings, additional paid-in capital-premiums, and realized additional paid-in capital. For shares bought back with the intent of maintaining the Company’s credibility and stockholders’ rights, the registration procedure must be completed within six months from the date of buyback. Treasury stock held by the Company cannot be pledged and does not have the right to receive dividends or vote until it is disposed of.

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C. Additional paid-in capital

Pursuant to the Company Act, additional paid-in capital can only be used to offset a deficit or to increase common stock. Cash dividends cannot be declared out of additional paid-in capital. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases through the capitalization of paid-in capital in excess of par value should not exceed 10% of total common stock outstanding. In addition, capital increases through the capitalization of paid-in capital in excess of par value can only commence in the year following the initial year.

As of December 31, 2009 and 2008, due to the non-proportional investment in investee’s increase in capital, additional paid-in capital amounting to $1,963,105 and $1,835,145,respectively, was recognized, in accordance with SFAS. As this additional paid-in capital is not regulated by the R.O.C. Company Act, Article 241, the transfer thereof to retained earnings is prohibited.

D. Limitation on distribution of retained earnings

According to the Company’s articles of incorporation, annual net income after making up prior years' losses, if any, should be distributed as follows: 10% as legal reserve, an appropriate amount as special reserve according to relevant regulation or as required by the government, 10% of capital stock as capital interest, no less than 1% as employees’ bonuses, and no more than 1% as directors’ and supervisors’ bonuses. When the employees’ bonuses are distributed in stock, the recipients must include the employees of subsidiaries. After the distribution of earnings, the remained earnings, if any, may be appropriated according to a resolution adopted in a stockholders’ meeting.

The Company is facing a rapidly changing industrial environment, with the life cycle of the industry in the growth phase. In light of the long-term financial plan of the Company and the demand for cash by the stockholders, the Company should distribute cash dividends of no less than 10% of the aggregate of all dividends.

E. Based on the resolutions approved by the stockholders during their annual stockholders’ meetings on June 16, 2009, and June 11, 2008, the employees’ bonuses and directors’ and supervisors’ remuneration were appropriated from the distributable retained earnings of 2008 and 2007 as follows:

2008 2007 Employees’ bonuses – cash $ 250,837 912,030 Employees’ bonuses – stock (note) 700,000 1,200,000 Directors’ and supervisors’ remuneration 52,824 211,203

$ 1,003,661 2,323,233

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Note: For 2007, employees’ bonuses – stock are presented based on par value of the shares.

There was no difference between the amount of earnings actually distributed for 2008 and that accrued in the 2008 financial statements, and the earnings distribution for 2008 was recorded as expense in 2008; the earnings distribution for 2007 was recorded as a deduction from unappropriated retained earnings. The related information about the distribution of employees’ bonuses and directors’ and supervisors’ remuneration determined by the meeting of the board of directors and approved in the stockholders’ meeting can be accessed from the Market Observation Post System.

F. According to the Company Act and the Company’s articles of incorporation, the employees’ bonuses and directors’ and supervisors’ remuneration were estimated and accrued in the 2009 and 2008 financial statements based on a fixed amount approved by the management. The recognized employees’ bonuses amounted to $698,438 and $950,837, and directors’ and supervisors’ remuneration amounted to $69,844 and $52,824 for the years ended December 31, 2009 and 2008, respectively. The number of shares distributable as stock dividend is determined based on the closing price of the day before the shareholders’ meeting date and considering the ex-rights and ex-dividends effects. 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 in the year of actual distribution.

(17) Income taxes

A. The Company was certified to meet the definition of “Business Operation Headquarters” as defined by the “Statute for Upgrading Industries,” Article 70-1. According to the statute, the Company can obtain an income tax exemption on dividends declared by the board of directors of an investee. The Company has obtained the exemption certificates for 2009 and 2008.

B. The Company and domestic subsidiaries are subject to income tax at a statutory rate of 25% and subject to the “Income Basic Tax Act” to calculate income tax. According to the amended tax law issued on May 27, 2009, the statutory income rate will be reduced to 20% commencing from 2010. Those subsidiaries abroad are subject to income tax according to the tax laws of the related foreign jurisdiction. The components of income tax expense for the years ended December 31, 2009 and 2008, were as follows:

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2009/1/1~12/31 2008/1/1~12/31

Current income tax expense $ 4,189,500 7,531,672 The 10% additional income tax on unappropriated earnings 812,256 1,081,881 Investment tax credits (1,022,393) (1,255,772) 3,979,363 7,357,781Deferred income tax expense (benefit):

Decrease (increase) in inventory valuation loss 335,108 (733,118) Deferred tax effect resulting from change in income

tax rate (177,686) - Increase in investment tax credits (1,110,144) (603,946) Decrease (increase) in unrealized accrued expense 216,284 (522,396) Others (202,300) 113,587

(938,738) (1,745,873)Income tax expense $ 3,040,625 5,611,908

C. The income tax computed on pre-tax financial income at the statutory rate was reconciled with the income tax expense for the years ended December 31, 2009 and 2008, as follows:

2009/1/1~12/31 2008/1/1~12/31

Income tax calculated on pre-tax financial income $ 4,824,030 6,134,200 The 10% additional income tax on unappropriated

earnings 812,256 1,081,881 Investment tax credits (1,022,393) (1,255,772) The amount of basic income tax in excess of the

regular income tax 34,936 1,002,574 Tax effect resulting from change in income tax rate (239,030) - Others (1,369,174) (1,350,975)Income tax expense $ 3,040,625 5,611,908

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D. The components of deferred income tax assets (liabilities) as of December 31, 2009 and 2008, were as follows:

2009/12/31 2008/12/31

Deferred income tax assets: Unrealized sales profit $ 283,562 179,278 Inventory provisions 890,363 1,197,417 Unrealized accrued expense 523,103 790,511 Loss carryforward 480,393 362,390 Investment tax credits 2,145,185 1,576,753 Others 561,232 544,309Deferred tax assets 4,883,838 4,650,658 Valuation allowance (1,828,144) (1,366,318) 3,055,694 3,284,340

Deferred income tax liabilities: Income and investment income (overseas) (1,518,182) (2,247,110) Others (385,581) (26,333) (1,903,763) (2,273,443)

Net deferred tax assets $ 1,151,931 1,010,897

2009/12/31 2008/12/31

Deferred income tax assets – current $ 2,607,912 2,829,817 Deferred income tax assets – non-current 245,995 427,640 Deferred income tax liabilities – current (415) (16,971) Deferred income tax liabilities – non-current (1,701,561) (2,229,589)

$ 1,151,931 1,010,897

E. Tax appeals of the Group:

(a) The R.O.C. tax authorities have examined the Company’s income tax returns through 2007 except for the year 2006. The Company disagreed with the assessment and filed formal tax appeals for tax returns of years 1997, 1999, and 2000 through 2002. The total amounts of the assessed additional income tax were recognized in the accompanying statements of income. These tax appeals were resolved in 2009 and the Company adjusted income tax expense according to the result thereof. In addition, the income tax return for the year 2005 was examined in 2009, and the Company adjusted income tax expense accordingly. The tax authorities assessed further the Company for additional income tax of $716,266 for the years 1996 and 1998. The Company disagreed with the assessment and filed formal tax appeals. These additional income tax assessments were recognized in the accompanying statements of income.

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(b) Ability Enterprise disagreed with the tax office’s income tax assessments for the years 2004, 2005 and 2006 regarding investment tax credits. Ability Enterprise has filed formal tax appeals.

(c) TWINHAN Technology Co., Ltd (liquidated after its merger with AzureWave in 2008) disagreed with the tax offices’ assessment on its tax exemption periods from 2002 to 2004. After it was turned down during the administrative proceeding, AzureWave has appealed such assessment to the Supreme Court in December 2008. However, AzureWave has recognized the possible additional tax liabilities from the said assessment.

F. Imputation credit account and creditable ratio

2009/12/31 2008/12/31

Unappropriated retained earnings for 1997 and prior years

$ 2,858,766 3,298,939

Unappropriated retained earnings for 1998 and thereafter 74,756,392 72,439,752

$ 77,615,158 75,738,691ICA balance $ 12,833,212 11,130,263

2009 2008

Creditable ratio for earnings distribution 20.40% (expected) 18.12% (actual)

G. According to the ROC Income Tax Act, the unused tax credits of the Group in the R.O.C. can be carried forward over a period of five years.

The unused investment tax credit were as follows:

Name of company Unused tax credits Expiry year

PEGATRON and its subsidiaries $ 1,221,246 2010~2013 Askey and its subsidiaries 714,424 2010~2013 Other consolidated subsidiaries 209,515 2010~2013

$ 2,145,185

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H. According to the ROC Income Tax Act, losses which can be used to offset against future taxable income were as follows:

Name of company Year incurred Unused tax credits Expiry year

PEGATRON and its subsidiaries 2003~2009 $ 74,031 2013~2019 Askey and its subsidiaries 2007~2009 57,469 2017~2019 Other consolidated subsidiaries 2003~2009 348,893 2011~2019

$ 480,393

I. Other tax benefits applicable to the Group were as follows:

Name of company Item Expiry year

PEGATRON Five –year tax exemption period 2005.01.31~2012.04.29 KINSUS Investment in newly emerging,

important and strategic industries 2004.07.01~2013.09.29


Earnings per share for the years ended December 31, 2009 and 2008, were computed as follows. (All earnings per share amounts are expressed in dollars, and all shares are in thousand shares.)

2009/1/1~12/31 2008/1/1~12/31 Before

income taxAfter

income taxBefore

income taxAfter

income tax Basic earnings per share: Net income $ 12,820,770 12,479,066 20,556,548 16,456,567Weighted-average number of shares

outstanding 4,242,156 4,242,156 4,245,535 4,245,535Earnings per share $ 3.02 2.94 4.84 3.88Diluted earnings per share: Net income $ 12,820,770 12,479,066 20,556,548 16,456,567Effects of dilutive potential common stock:

Convertible bonds payable (11,436) (21,389) (734,823) (711,705)Net income for calculating diluted earnings

per share $ 12,809,334 12,457,677 19,821,725 15,744,862

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2009/1/1~12/31 2008/1/1~12/31 Before

income taxAfter

income taxBefore

income taxAfter

income tax Weighted-average number of shares

outstanding 4,242,156 4,242,156 4,245,535 4,245,535Effects of dilutive potential common stock:

Convertible bonds payable 75,339 75,339 180,002 180,002Employees’ bonuses that could be declared

in the form of stock bonus and have not been approved by the stockholders’ meeting 22,764 22,764 25,890 25,890

Weighted-average shares for calculating diluted earnings per share 4,340,259 4,340,259 4,451,427 4,451,427

Diluted earnings per share $ 2.95 2.87 4.45 3.54

(19) Related information about financial instruments

A. Fair value of financial instruments As of December 31, 2009 and 2008, the details of fair value of financial assets and financial liabilities, except for those close to the maturity date and therefore measured at book value, were as follows:


Financial assets: Financial assets measured at

fair value through profit or loss – current $ 21,657,195 21,657,195 13,295,479 13,295,479

Available-for-sale financial assets – current 1,848,464 1,848,464 516,306 516,306

Financial assets held to maturity – current 16,425 - - -

Derivative financial assets for hedging – current 306,361 306,361 - -

Financial assets carried at cost – current 41,162 - - -

Available-for-sale financial assets – non-current 7,805,382 7,805,382 4,556,392 4,556,392

Financial assets held to maturity – non-current - - 16,425 -

Financial assets carried at cost – non-current 2,421,049 - 2,477,410 -

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at fair value through profit or loss – current 283,596 283,596 1,721,005 1,721,205

Bonds payable – current 3,609,633 3,621,586 11,988,037 12,051,082

Long-term loans (including current portion) 10,324,144 10,324,144 11,969,627 11,969,627

B. The following methods and assumptions were used in estimating fair values:

(a) The book value of short-term financial instruments is assessed to be the fair value due to the short-term maturity periods of these instruments. Such method is applied to cash and cash equivalents, notes and accounts receivable (payable), other current financial assets, accrued expenses and other payables.

(b) Financial assets (or liabilities) measured at fair value through profit or loss and available-for-sale financial assets: If public quote of financial assets and liabilities is available, then the quoted price is adopted as the fair value. If market value is not available, an assessment method that refers to quoted prices is used. The assumptions used are the same as those used by financial market traders when quoting their prices.

(c) Financial assets carried at cost and financial assets held to maturity: Those are investments in companies whose shares are not publicly listed and beneficiary certificates, and have no available market prices.

(d) The fair value of derivative financial assets and liabilities for hedging is determined using a valuation technique. The estimates and assumptions used in such valuation are similar to those used by market participants when deciding a price for financial assets or liabilities. That information is available to the Group.

(e) The fair value of convertible bonds payable is not available, and a valuation technique is used. The assumptions used in the said valuation are the same as those used by financial market traders when quoting their prices. However, the fair value is not expected to equal future cash outflow.

(f) The fair value of long-term loans was estimated by the discounted value of expected cash flow. The discount rate used was based on the interest rate of long-term loans with similar conditions. Based on the results of the evaluation, the fair value is close to book value.

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C. The fair value of financial assets and financial liabilities evaluated by the Group using public quotes or an assessment method was as follows:

2009/12/31 2008/12/31 Public

quote value Assessment

value Public

quote value Assessment

value Financial assets:

Financial assets measured at fair value through profit or loss – current $ 21,352,667 304,528 13,280,321 15,158

Available-for-sale financial assets－current 1,848,464 - 516,306 -

Derivative financial assets for hedging－current - 306,361 - -

Available-for-sale financial assets－non-current 7,805,382 - 4,556,392 -


at fair value through profit or loss – current

- 283,596 - 1,721,005

Bonds payable – current - 3,621,586 - 12,051,082Long-term loans (including

current portion) - 10,324,144 - 11,969,627

The gains (loss) resulting from the valuation of financial instruments using a valuation technique amounted to $(231,967) and $(56,610) for the years ended December 31, 2009 and 2008, respectively.

D. Information about financial risk

(a) Market risk

(i) The Group is exposed to foreign currency risks arising from purchases or sales denominated in foreign currencies. The Group uses the principle of natural hedge to mitigate the risk and utilize spot or forward contracts to hedge foreign currency risk. The notional amounts of the foreign currency contracts are the same as the amounts of the hedged items. In principle, the Group does not enter into any forward contracts for commitments of uncertain nature. The Group enters into forward currency contracts to hedge the exchange rate risk of assets, liabilities and commitments denominated in foreign currencies. The Group’ hedging strategy is to avoid most market price risks. The Group uses the derivatives that have highest negative correlation with the hedged items as hedging instruments and evaluates the hedge effectiveness periodically.

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(ii) The open-end funds & stocks of listed companies held by the Company are classified as financial assets measured at fair value through profit or loss and available-for-sale financial assets. As these assets are measured at fair value, the Group has risk exposure related to changes in fair value in an equity securities market.

(b) Credit risk

(i) Credit risk means the potential loss of the Group if the counterpart involved in that transaction defaults. Since the Group’s derivative financial instrument agreements are entered into with financial institutions with good credit ratings, management believes that there is no significant credit risk from these transactions.

(ii) The primary potential credit risk is from financial instruments like cash, bank deposits, equity securities under non-equity method, and accounts receivable. The Group deposits cash in different financial institutions. Equity securities under non-equity method were funds and listed stock issued by companies with good credit ratings. The Group manages credit risk exposure related to each financial institution and believes that there is no significant concentration of credit risk of cash and equity securities. As the customers of the Group have good credit and profit records, the Group is able to evaluate the financial conditions of these customers in order to reduce credit risk of accounts receivable.

(c) Liquidity risk

(i) The Group’s objective is to maintain a balance of funding continuity and flexibility through the use of financial instruments such as cash and cash in bank, and bonds payable.

(ii) The open-end funds & stocks of listed companies held by the Company have publicly quoted prices and could be sold at the approximate market price. As to the forward exchange contracts, there are no significant financing risks due to expected sufficient capital. Management believes that the cash flow risk is not significant because contracted foreign currency exchange rates are fixed.

(iii) Equity investments recorded as financial assets carried at cost do not have reliable market prices and are expected to have liquidity risk.

(iv) The derivative financial instruments for hedging are intended mainly to hedge the exchange rate risk from future cash flows. The forward contracts’ duration corresponds to the Group’s foreign currency future cash flows. The Group will settle the foreign currency liabilities at expiration of the contracts. Thus, management believes that the cash flow risk is not significant.

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(d) Cash flow risk arising from variation in interest rates

The Group’s long-term loans bear floating interest rates. Changes in the prevailing market rate will affect the effective interest rate on long-term loans and cause future cash flows to fluctuate.

5. Related-party Transactions

(1) Names and relationships of the related parties


Asint Technology Corporation (Asint Technology) Investee evaluated under the equity method Excelliance MOS Corporation Investee evaluated under the equity method ASHINE PRECISION CO., LTD. (ASHINE PRECISION) Investee indirectly evaluated under the equity methodHONG HUA TECHNOLOGY (SUZHOU) CO., LTD.

(HONG HUA (SUZHOU)) Investee indirectly evaluated under the equity method

Avy Precision Technology Inc. (Avy Precision) Investee indirectly evaluated under the equity methodAvy Co., Ltd. (Avy) Investee indirectly evaluated under the equity methodDongGuan ChengGuang Precision Hardware Co., Ltd.

(DongGuan ChengGuang) Investee indirectly evaluated under the equity method

AVY PRECISION METAL COMPONENTS (SUZHOU) Investee indirectly evaluated under the equity methodCHING HONG PRECISE MOULD INDUSTRY

(SUZHOU) CO., LTD. Investee indirectly evaluated under the equity method

SHANGHAI INDEED TECHNOLOGY CO., LTD. (SHANGHAI INDEED)

Investee indirectly evaluated under the equity method

PEGA INTERNATIONAL LIMITED Investee indirectly evaluated under the equity method (Consolidated due to adjustment of investment structure in 2009)

AVY High Tech Limited Investee indirectly evaluated under the equity method PENTAX VQ CO., LTD. (PENTAX) Investee indirectly evaluated under the equity method YORKEY OPTICAL TECHNOLOGY LTD. (SAMOA) De facto related party of Ability Enterprise (YORKEY OPTICAL) Ability Investment Co., Ltd. Common chairman of the board with Ability EnterpriseThe Group’s directors, supervisors and major management The Group’s directors, supervisors and major

management Others (related parties with non- significant transactions) Related parties under the definition of R.O.C. SFAS

No. 6

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(Continued)

(2) Summary of significant transactions with related parties

A. Sales

2009/1/1~12/31 2008/1/1~12/31 Amount % Amount %

Summary $ 230,310 - 296,723 -

The terms of the above related-party transactions are 45 days from receipt of goods or terms agreed by both parties.

B. Purchases

2009/1/1~12/31 2008/1/1~12/31 Amount % Amount %

SHANGHAI INDEED $ 2,404,616 1 642,505 - Asint Technology 1,359,623 - 328,159 - PENTAX 372 - 1,941,266 - Others 1,511,446 - 1,242,238 -

$ 5,276,057 1 4,154,168 -

Purchase terms are open account 45 to 120 days, 90 days from receipt of goods, or within 1 to 6 months for related parties.

C. Notes/accounts receivable (payable)

2009/12/31 2008/12/31 Amount % Amount %

Notes and accounts receivable: Summary $ 25,602 - 96,872 -

Notes and accounts payable: Asint Technology $ 753,128 1 - - SHANGHAI INDEED 421,073 1 481,706 - Avy Precision 220,798 - 259,776 - Others 316,987 - 361,256 -

$ 1,711,986 2 1,102,738 -

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(Continued)

D. Sale of long-term investment

2009/1/1~12/31

Related party Item Sales price Book value Disposal gain

(note)

Avy Precision Long-term investment under the equity method – ASHINE PRECISION $ 177,466 143,812 33,654

Note: Disposal gain included realized and unrealized disposal gain amounting to $26,166 and $7,488, respectively.

2008/1/1~12/31 Related party Item Sales price Book value Disposal gain

Avy High Tech Limited

Non-current assets held for sale – Dong Guan Avy Precision Metal components Co., Ltd.

USD 5,276,000 USD 4,514,000 USD 762,000

E. Asset transactions

The details of assets purchased from related parties were as follows:

2009/1/1~12/31 Related party Item Sales price

Avy Long-term investment under the equity method –

Avy Precision $ 178,067 Others Molding tools 104,375

$ 282,442

2008/1/1~12/31 Related party Item Sales price

ASHINE PRECISION Molding tools $ 33,142 Others Molding tools and leasehold improvement 55,771

$ 88,913

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(Continued)

F. Salaries and remuneration of key management

The salaries and remuneration the Group paid to the directors, supervisors and major management in 2009 and 2008 were as follows:

2009/1/1~12/31 (Estimated)

2008/1/1~12/31 (Actual)

Salaries $ 214,795 160,108 Incentives 62,420 73,359 Distribution of earnings 69,844 52,824 Employees’ bonuses 258,598 148,247

For the explanation of estimation of directors’ and supervisors’ remuneration and employees’ bonus, please refer to the section on stockholders’ equity.

6. Pledged Assets

As of December 31, 2009 and 2008, the following assets were pledged as collateral:

Book value Assets Items Purposes 2009/12/31 2008/12/31

Other assets or

other current assets

Time deposits and inventories

Customs duty guarantee, bank loans, rent deposits, credit contracts, issued letter of credit, travel agency guarantee, lawsuit collateral, etc.

$ 421,408 393,868

Notes receivable Notes receivable Bank loans 449,764 - Other assets Refundable

deposits Customs deposits for importing

processing booklet, etc. 338,842 32,272

Property, plant and equipment

Buildings Bank loans 2,370,230 466,522

Property, plant and

equipment Machinery and equipment

Bank loans 984,143 309,984

Intangible assets Land use rights Bank loans 657,770 84,341Idle assets Machinery and

equipment (Note)Bank loans - -

$ 5,222,157 1,286,987

Note: As of December 31, 2009 and 2008, the unadjusted book value of idle assets amounted to $7 and $100, respectively. After recognizing the impairment losses, the net book value was reduced to zero as of the same dates.

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(Continued)

7. Commitments and Contingencies

(1) As of December 31, 2009, the Group’s outstanding letters of credit were as follows (foreign currencies are expressed in thousands):

Currency Amount

USD $ 44,639 GBP 9 EUR 497 JPY 3,112,833 NTD 5,141

(2) Guarantee for subsidiaries amounted to $16,601,228.

(3) Lawsuit for infringement of intellectual property rights

A. In October 2009, the Company and IBM entered into a cross license agreement, and all lawsuits between the Company and IBM ceased with the agreement.

B. In January 2007, a Japanese company filed a lawsuit against the Company and its US subsidiary for infringement of intellectual property rights. In May and September 2007, another plaintiff, a US company, also filed a lawsuit against the Company and its US subsidiary for patent infringement and violation of trade secrets. These lawsuits are currently under investigation in a Utah court in the US. The outcome of these lawsuits is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

C. In September 2008, a US patentee filed a lawsuit against the Company’s US subsidiary alleging that the subsidiary was engaged in patent infringement. This lawsuit is currently under investigation in an East Texas court in the US and its outcome is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

D. Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in a Delaware court, in an East Texas court, and by the United States International Trade Commission. The outcome of the lawsuits is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

E. In December 2007, an American company filed an investigation for patent infringement against PEGATRON with United States International Trade Commission. The related investigation has been completed in July 2009. The results of the investigation indicate that PEGATRON did not infringe the company’s patents. Both parties agreed to settle the case and

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(Continued)

have entered into a settlement agreement in September 2009 to close the case.

F. AVerMedia Technologies Inc. filed an attachment for damage loss against Lumens Digital Optics Inc. with Taiwan HsinChu District court on January 3, 2005. Lumens Digital Optics Inc. pledged a deposit of $90,000 as counter-security to the Court for rescinding the attachment. In addition, AVerMedia Technologies Inc., again, filed an attachment for the same reason with the court. HsinChu District court has seized the inventory of Lumens Digital Optics Inc. amounting to $16,410. This case is currently under investigation and Lumens Digital Optics Inc. believes that there is no material loss on the aforementioned case.

G. One of ASUSPOWER CORPORATION’s American customers voluntarily filed for bankruptcy with United States Bankruptcy Court of California District on June 8, 2005. The customer has made payments for goods amounting to US$1,439,484 to ASUSPOWER COPORATION 90 days before filing the bankruptcy. Insolvency administrator of the customer filed a lawsuit with California court later on claiming that according to United States Bankruptcy Code § 547, the payments could be returned and requested ASUSPOWER CORPORATION to return the amount paid. ASUSPOWER CORPORATION received a notice from the court in September 2009, and entered a plea. This lawsuit is still under investigation.

(4) To ensure the supply of raw materials, the Company has entered into an agreement with a supplier for a guaranteed quantity of materials at a discount to market price. The Company has paid in advance. Please refer to note 4(10) B.

(5) The Group entered into operating lease contracts for its offices and parking spaces. Future lease payments under those leases are as follows:

Year Amount

2010 $ 319,274 2011 251,787 2012 215,911 2013 104,016

2014 and after 80,413

(6) Details of operating lease for significant property used by ASUS COMPUTER INTERNATIONAL are as follows:

Lessor Leased Asset Period Refundable Deposits Sobrato Interest, LP The office and warehouse in

Fremont, California2008/6/1~2018/5/31 USD 1,500,000

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(Continued)

Rental expenses for each year are as follows:

Year Amount

(in USD thousands)

2010 $ 1,464 2011 1,402 2012 1,451 2013 1,502

2014 and after 7,279

(7) PEGATRON and its subsidiaries entered into irrevocable construction contracts amounting to $3,834,469 of which $185,385 is unpaid.

(8) WUJIANG WILL STAR entered into a contract with Wujiang City Government in 2006 to obtain land use rights. As of December 31, 2009, the land use right amounting to RMB 51,465,000 were not paid and obtained.

8. Significant Disaster Loss: None.

9. Subsequent Events:


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(Continued)

10. Others

(1) Personnel expenses, depreciation, and amortization for the years ended December 31, 2009 and 2008, were as follows:

2009/1/1~12/31 2008/1/1~12/31 Cost of

sales Operating expenses Total

Cost of sales

Operating expenses Total

Personnel expenses

Salaries 13,243,618 17,490,079 30,733,697 14,846,394 13,965,530 28,811,924Labor and health insurance 449,894 966,131 1,416,025 653,489 822,690 1,476,179Pension 848,563 652,013 1,500,576 197,342 348,607 545,949Other 193,093 480,697 673,790 301,014 466,681 767,695

Depreciation 7,927,877 1,978,869 9,906,746 6,228,215 1,755,208 7,983,423Amortization 1,875,989 1,343,949 3,219,938 1,347,905 916,852 2,264,757

(2) The Company’s significant agreement as of December 31, 2009, was as follows:

Name of Contract Party Content Marketing Agreement Microsoft Corporation Project planning

(3) In order to enhance competitiveness and boost productivity, the Company’s shareholders resolved, on October 30, 2007, to restructure the Company’s businesses into own-brand and OEM. The date of the spin-off was January 1, 2008. Pursuant to the resolution, the Company transferred its computer OEM business with estimated value of $70,000,000 to its newly established subsidiary PEGATRON by subscribing 1,600,000,000 newly issued shares at 43.75 dollars per share of PEGATRON. In addition, the Company transferred its non-computer OEM business and machine hull and molding tool R&D business with estimated value of $12,000,000 to its newly established subsidiary UNIHAN by subscribing 800,000,000 newly issued shares at 15 dollars per share of UNIHAN. The plan was approved by the relevant authorities. The registration of changes was completed in January 2008. The assets and liabilities for the spin-off were as follows:


Assets Current assets $ 21,999,830 12,555,287 34,555,117 Long-term investments 66,867,161 7,060,209 73,927,370 Property, plant and equipment 4,761,981 127,143 4,889,124 Other assets 353,066 126,822 479,888 93,982,038 19,869,461 113,851,499

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Liabilities Current liabilities (23,982,038) (7,869,461) (31,851,499)

Net Assets $ 70,000,000 12,000,000 82,000,000

(4) Reclassification

Certain accounts in 2008 the consolidated financial statements have been reclassified to conform to the 2009 financial statements presentation. Such reclassification does not have any significant impact on the accompanying consolidated financial statements.

12. Segment Information

A. Industrial information

The Group is engaged in a single industry and is mainly engaged in the design, production and sale of main boards.

B. Geographic information

2009

Taiwan

Asia Pacific (Taiwan not included) Other Eliminations Consolidated

Revenue from third parties $ 188,429,773 298,708,528 122,982,102 - 610,120,403Revenue from the parent

company and subsidiaries 593,641,589 115,660,729 7,811,797 (717,114,115) - Total revenues $ 782,071,362 414,369,257 130,793,899 (717,114,115) 610,120,403Segment income (loss) $ 15,918,238 3,672,134 13,504,419 (13,797,520) 19,297,271Interest expense (334,067)Investment income under

equity method

332,956Consolidated income before

minority interest in net income of subsidiaries

$ 19,296,160Identifiable assets $ 308,904,848 189,996,503 195,361,663 (327,364,564) 366,898,450Long-term investments

under equity method

2,145,776Goodwill 962,876Total assets $ 370,007,102

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2008

Taiwan

Asia Pacific (Taiwan not included ) Other Eliminations Consolidated

Revenue from third parties $ 363,753,539 288,604,157 11,880,943 - 664,238,639Revenue from the parent

company and subsidiaries 424,542,606 144,513,742 13,553,753 (582,610,101) - Total revenues $ 788,296,145 433,117,899 25,434,696 (582,610,101) 664,238,639Segment income (loss) $ 19,232,028 8,999,244 12,785,951 (15,748,030) 25,269,193Interest expense (784,603)Investment income under

equity method

52,249Consolidated income before

minority interest in net income of subsidiaries

$ 24,536,839Identifiable assets $ 252,630,502 146,640,841 255,383,494 (300,030,293) 354,624,544Long-term investments

under equity method

2,773,575Goodwill 890,146Total assets $ 358,288,265

C. Export sales

Export sales to geographic areas in 2009 and 2008 were as follows:

Destination area 2009/1/1~12/31 2008/1/1~12/31 Asia Pacific $ 260,561,929 208,647,935 United States and Canada 122,886,974 114,282,964 Europe 201,826,991 237,881,510 Africa 937,218 905,658 $ 586,213,112 561,718,067

D. Major clients

Sales to individual customers constituting over 10% of the total revenue in 2009 and 2008 were as follows:

Name of Company 2009/1/1~12/31 2008/1/1~12/31 B Company $ 80,201,427 92,658,082

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VII. Review of financial position, management performance and risk management

I. Analysis of financial position

Comparison of Financial Position

Unit: NT$ thousands

Year Item

2009 2008 Difference

Amount % Current assets 99,144,691 95,725,535 4,948,128 5.25

Fixed assets 4,273,269 3,703,815 (437,717) (9.29) Long-term investment and

other assets 125,511,719 122,679,180 3,845,054 3.16

Total assets 228,929,679 222,108,530 8,355,465 3.79

Current liabilities 52,939,062 52,327,421 2,145,957 4.22 Long-term liabilities and

other liabilities 2,806,640 2,494,491 312,149 12.51

Total liabilities 55,745,702 54,821,912 2,458,106 4.61

Capital stock 42,467,775 42,460,513 7,262 0.02

Additional paid-in capital 30,237,586 29,696,393 541,193 1.82

Retained earnings 96,525,371 93,003,248 3,522,123 3.79

Adjustments 3,953,245 2,126,464 1,826,781 85.91

Total Shareholders’ Equity 173,183,977 167,286,618 5,897,359 3.53

Analysis of financial ratio change: 1. Current assets: Accounts payable from the goods sold was increased significantly due

to the economic recovery in 2009Q4; also, inventory level was controlled; therefore, inventory amount was decreased.

2. Long-term investment, intangible assets, and other assets: It was resulted from the increaseof long-term prepayment/

3. Current liabilities: Accounts payable for the inventory purchased was increased due to the economic recovery in 2009Q4.

II. Business performance (I) Comparison of business performance

Unit: NT$ thousands

Item 2009 2008 Amount change Ratio change (%)Total operating income $236,530,280 $258,609,575 (22,079,295) (8.54)Minus: Sales return and discount (3,953,376) (9,258,624) 5,305,248 (57.30)Net operating income 232,576,904 249,350,951 (16,774,047) (6.73)Operating cost (220,611,112) (232,968,921) 12,357,809 (5.30)Gross profit 11,965,792 16,382,030 (4,416,238) (26.96)(Minus) add: Realized

(unrealized) gross profit of the affiliates

(906,321) 1,010,035 (1,916,356) (189.73)

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Item 2009 2008 Amount change Ratio change (%)Realized gross profit 11,059,471 17,392,065 (6,332,594) (36.41)Operating expense (7,513,776) (10,204,262) 2,690,486 (26.37)Operating income 3,545,695 7,187,803 (3,642,108) (50.67)Non-operating income and gain

Interest income 71,798 300,394 (228,596) (76.10)Investment income (Equity Method) 7,572,667 9,039,978 (1,467,311) (16.23)

Dividend income 235,002 310,233 (75,231) (24.25)Gain from exchange 823,503 732,351 91,152 12.45 Gain from reversal of bad debts - 1,329,486 (1,329,486) (100.00)

Gain from financial asset valuation 143,601 12,256 131,345 1,071.68

Gain from financial liability valuation 192,378 942,440 (750,062) (79.59)

Other income 725,316 1,396,521 (671,205) (48.06)Total non-operating income and gain 9,764,265 14,063,659 (4,299,394) (30.57)

Non-operating expense and loss Interest expense 101,497 312,301 (210,804) (67.50)Impairment loss 301,617 37,141 264,476 712.09 Other loss 86,076 345,472 (259,396) (75.08)Total Non-operating expense and loss 489,190 694,914 (205,724) (29.60)

Net income before tax 12,820,770 20,556,548 (7,735,778) (37.63)Minus: Estimated income tax (341,704) (4,099,981) 3,758,277 (91.67)Net income $12,479,066 $16,456,567 (3,977,501) (24.17)

Analysis of financial ratio change: 1. Operating income and operating cost: Sales revenue did not grow until 2009Q4 due to the recession

extended from 2008Q4 to early 2009. 2. Operating expense: Sales expense and R&D expense were reduced by sizing down the organization and

manpower and controlling expenses strictly. 3. Non-operating income and gain: The decline of non-operating income and gain in the year was due to the

investment income valued with equity method was less than the year before; also, the conversion of bad debt to earnings in the year was less than the year before also.

4. Estimated income tax expense:The decline of estimated income tax expense in the year was due to the reduction of income tax levied in the year.

(II) Analysis of gross profit

Unit: NT$ Thousands

Change amount Root cause

Difference of price Difference of sales combination

Difference of quantity

Gross profit (4,416,238) (4,026,154) 1,009,370 (1,399,454)

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Remark The decline of gross profit in 2009 was due to the unfavorable difference of price and unfavorable difference of quantity exceeding favorable effect of gross profit increase.

III. Analysis of cash flow

(I) Liquidity analysis of the last two years

Year

Item 2009 2008 Financial ratio change

Current ratio 46.17％ 34.82％ 11.35％

Cash adequacy ratio 51.68％ 31.01％ 20.67％

Cash reinvestment ratio 9.01％ 4.86％ 4.15％ Analysis of financial ratio change: Current ratio, Cash adequacy ratio, and Cash reinvestment ratio were increased in 2009 from 2008. Root cause: Net cash inflow from operating activity was up due to the effort of the

management in controlling inventory level and reducing total amount of inventory.

(II) Analysis of cash liquidity in one year

Unit: NT$100 million

Beginning cash balance

Expected net cash flow from

operating activity of the year

Expected cash outflow of the year

Expected cash surplus (deficit)

＋－

Remedial measures for the expected insufficient cash

Investing activity

Financing activity

164.02 178.81 100 242.83 - -

1. Analysis of cash flow change: (1)Operating activity: Net cash inflow from operating activity for an amount of

NT$17.881 billion (2)Investing activity: Net cash outflow from investing activity including long-term

investment for an amount of NT$1 billion (3)Financing activity: Net cash outflow from financing activity including dividend

distribution for an amount of NT$9 billion 2. Remedial measures for the expected insufficient cash and liquidity analysis: N/A

IV. The impact of significant capital expenditure on finance in recent years:

Significant capital expenditure and the source of fund: N/A V. Reinvestment in recent years:

Unit: NT$ thousands Item

(Note 1) Amount

(NT$1,000) Policy Gain or Loss in 2009

Root cause of profit or loss

Corrective action Investment Plans

Own brand business -

Divide business into own brand business and

1,071,890Focus on brand marketing and business

- -

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OEM business for competition and

business performance.

development

OEM business - 6,448,853Focus on OEM business development

- -

Note 1: Own brand business included: ASUS TECHNOLOGY PTE. LIMITED, ASUS TECHNOLOGY INCORPORATION, ASUS COMPUTER INTERNATIONAL, ASUSTEK COMPUTER (SHANGHAI) CO. LTD. and ASUS COMPUTER GmbH. OEM business included: PEGATRON CORPORATION and Askey Computer Corporation。

VI. Risk analysis and evaluation in recent years and up to the date of the annual report

printed:

(I) The impact of interest rate, exchange rate, and inflation on the company’s income and expense and the responsive measures:

1. The impact of interest rate on the company’s income and expense and the responsive measures: The interest income in 2009 amounted to less than 0.03% of total operating income; therefore, the impact of interest rate on the company was insignificant.

2. The impact of exchange rate on the company’s income and expense and the responsive measures: The exchange gain recognized in 2009 amounted to 0.35% of total operating income; therefore, the impact of exchange rate on the company was insignificant.

3. The impact of inflation on the company’s income and expense and the responsive measures: There was no inflation issued in 2009.

(II) Conducting high-risk and high-leverage investment, granting loans to others, endorsement & guarantee and directives policy, root cause of profit and loss, and the responsive measures:

The company has granted loans to others, endorsement & guarantee, and directives trade processed in accordance with the “Assets Acquisition and/or Disposition Procedure” and “Loans and Endorsement & Guarantee Procedure” of the company and the responsive measures. The endorsement and guarantee of the company in 2009 was made for business transactions in accordance with the “Loans and Endorsement & Guarantee Procedure.” The company’s Endorsement & Guarantee is with a limit of NT$121,228,784 thousand. The subsidiaries that are guaranteed by the company operate profoundly with low risk expected.

(III) R&D plans and budgeted R&D expense: ASUS cannot stress enough the importance of R&D team cultivation and training since the incorporation. ASUS is able to have the key technology of products controlled to secure the timing of mass production. ASUS will base on the said fine tradition to reinforce the R&D capability of the company and add it with market movement to have unique and innovative information products developed. 1. Products development planned in 2008:

(1) Digital control wireless transmission technology dual core CPU MB (2) Advanced 3D image display and wireless TV transmission graphic card (3) Intelligent phone GPS (4) Ultra Mobile PC (5) High-speed router / exchanger / firewall / VPN

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(6) New-generation advanced server (7) Professional LED display (8) WiMAX broadband products (9) EeePC touch, long-lasting computer (10) Eee Top PC, Eee Box PC, and Eee Keyboard PC

2. R&D budget in 2009: NT$5.3 billion (IV) The impact of domestic and international policies and law change on the company’s

finance and the responsive measures: None. (V) The impact of technology change and industrial change on the company’s finance and

the responsive measures: ASUS constantly strives to be an integrated 3C solution provider (Computer, Communications, Consumer electronics). Technology change provides the company with business opportunity for new products. The company was with 9.26 times of inventory turnover in 2009; apparently, there was not any significant negative impact on finance.

(VI) The impact of industrial image change on business risk management and the responsive measures:

ASUS has maintained a fine industrial image and there is not any negative report on the company’s image.

(VII) The expected effect, potential risk, and responsive measures of merger: The company’s did not have any merger conducted in 2008 and up to the date of the annual report printed: N/A

(VIII) The expected effect, potential risk, and responsive measures of plant expansion: N/A (IX) The risk faced by procurements and sales hub and the responsive measures:

The company’s procurements and sales are not centralized and with a good customer relationship established; therefore, no risk of procurements and sales centralization.

(X) The impact of massive stock transfer or change by directors, supervisors, and shareholders with over 10% shareholding, the risk, and the responsive measures:

There was not any massive stock transfer or change by directors, supervisors, and shareholders with over 10% shareholding in 2009 and up to the date of the annual report printed.

(XI) The impact of right to operation change on the company, the risk, and the responsive measures: N/A

(XII) Legal and non-legal events: 1. The company’s major legal issues, non-legal issues, or administrative lawsuits

settled or in pending: (1) In October 2009, the Company and IBM entered into a cross license

agreement, and all lawsuits between the Company and IBM ceased with the agreement.

(2) In January 2007, a Japanese company filed a lawsuit against the Company and its US subsidiary for infringement of intellectual property rights. In May and September 2007, another plaintiff, a US company, also filed a lawsuit against the Company and its US subsidiary for patent infringement and violation of trade secrets. These lawsuits are currently under investigation in a Utah court in the US. The outcome of these lawsuits is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

(3) In September 2008, a US patentee filed a lawsuit against the Company’s US

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subsidiary alleging that the subsidiary was engaged in patent infringement. This lawsuit is currently under investigation in an East Texas court in the US and its outcome is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

(4) Several patentees filed lawsuits or investigations for patent infringement against the Company. These lawsuits or investigations are currently under investigation in a Delaware court, in an East Texas court, and by the United States International Trade Commission. The outcome of the lawsuits is not certain. The Company continuously evaluates the possible loss, and a provision has been estimated and recognized in the books.

2. The related party’s major legal issues, non-legal issues, or administrative lawsuits settled or in pending: N/A

(XIII) Other significant risks and responsive measures: N/A (XIV) Risk management policy, structure and function

1. Risk management policy ASUSTeK has the Risk Control & Contingency Policy stipulated to secure the ongoing concern of the enterprise and to fulfill corporate social responsibility to stakeholders. The purpose of the Risk Control & Contingency Policy is to minimize the impact on and damage to the enterprise. The Risk Control & Contingency Policy probably won’t help ASUSTeK generate profits immediately; however, it is definitely necessary for the ongoing concern of ASUSTeK. Therefore, a self-directed risk control mechanism is established in accordance with the company’s operating concept and altruism. ASUSTeK is to make decisions that have minimized negative impact of disaster on the organization; also, provide employees with a safe and harmless working environment. The Risk Control & Contingency Commission and the authorized units under this policy are responsible to stipulate risk control policy for risk assessment in accordance with the following six criteria: (1) Material incident occurred (2) Potential high risk (3)Extensive scope of influence (4) Lack of experience in risk control (5) Significant impact on business and brand image (6) Incomprehensive regulations Sieve material risk emergency issues and review them with priority; also, demand the responsible departments to promote and carry out the tasks in order to protect enterprises from the risks that they cannot or unwilling to face to. The Risk Control & Contingency Commission must respond to an excellent internal audit and control system, coordinate with the chief organizer (deputy organizer), and integrate the management task for material risk. The Risk Control & Contingency Commission is to handle the following tasks: (1) Define profound and actual action plan and regulations in accordance with the

vision and objective strategy of the Risk Control & Contingency Commission with modification to it made from time to time.

(2) Risk Control & Contingency Commission is to have a decision made over the material risk and crisis reported by each department.

(3) Evaluate material risk and emergency scenario periodically and review the performance of the responsible department and SOP strategy.

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(4) Review and modify the regulations periodically and adjust the subjects and chief organizer (deputy organizer) of risk management in accordance with the actual practice.

(5) Monitor and evaluate the risk management performed by each department onsite.

2. Organizational structure of risk management

manager manager manager manager manager manager manager manager manager manager manager manager manager

ComputerManagement

ProductionManagement

R&Dmanagement

LegalCompliance

Chief Executive Officer

HumanResources

SupplyManagement

ADMFinancial

ManagementCustomer

ServiceHandheldBusiness

MBBusiness

NBBusiness

QualityAssurance

Risk Management Center

Board of Directors

Corporate Sustainability Office

Chairman

Corporate Sustainability Officer

3. Functions of risk management

Risk management is performed to help ASUSTeK fulfill corporate social responsibility to the stakeholders and to become a centennial enterprise. (1) Assist the headquarters and subsidiaries (Europe and America, Asia Pacific,

and China) worldwide to reinforce their responsive ability to risk and to achieve the goal of ongoing concern.

(2) The contribution of risk management is in helping protect ASUSTeK brand value for an amount equivalent to NTD13 billion, which was computed at 25% of the brand value of ASUSTeK. The core members for strategic planning and enforcement of risk management include [Ongoing Concern Office] Director, Deputy Director, and [Risk Management Center] Chief Officer.

4. Action procedure of risk management

(1) Consider internal and external environment of the organization, justice or competent authorities, competitors, and stakeholders including vendors and investors with strategic risk management goal defined.

(2) Conduct risk identification and risk quantification. (3) Compute the company’s risk appetite (tolerable and intolerable standard) in

accordance with the probability of risk and the loss resulted from the risk. (4) Determine the company’s most adequate risk response strategy in accordance

with the cost benefit analysis. (5) The management of the Risk Control & Contingency Commission is

responsible for risk control and procedure improvement. (6) Follow up the outcomes of risk control.

The enforcement of the aforementioned stable procedure helps secure the company’s brand image, enterprise reputation, and value creation; also, fulfill stockholder’s expectation.

VII. Other material events: None

204

204

VIII. Special disclosures

I. Related party

(II) Consolidated financial statements of the related party 1. Related party (1) Organizational structure of related party: Please refer to Page 205-209. (2) Company profile of related party: Please refer to Page 210-217. (3) A controlling and hierarchical relationship according to Article 369.3 of Company

Law: None (4) Business scope of ASUS Group: The business scope of ASUS and the related party includes computer-related product

design, production, processing, and sales. Some related parties are in the business of investment. In general, the collaboration within the organization is to generate the best result through reciprocal support in technology, production, marketing, and sales.

(5) Directors, supervisors, and president of the related party: Please refer to Page 218-225.

2. Business operation of the related party: Please refer to Page 226-233.

(II) Consolidated financial statements of the related party: Please refer to Page 131-196.

(III) Related Party Report: N/A

II. Subscription of marketable securities privately in the most recent years and up to the date of the report printed: None

III. The stock shares of the company held or disposed by the subsidiaries in the most recent

years and up to the date of the report printed: None IV. Supplementary disclosures: None V. Occurrence of events defined in Securities Transaction Law Article 36.2.2 that has great

impact on shareholder’s equity or security price in the most recent years and up to the date of the report printed:


205

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ta s

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are,

ele

ctro

nic

mat

eria

l an

d of

fice

equi

pmen

t eC

arem

e Te

chno

logi

es, I

nc.

89.0

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Ta

ipei

City

10

0,00

0N

etw

ork

serv

ice

Pega

tron

Inte

rnat

iona

l Inv

estm

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o.,

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98

.12.

28

Taip

ei C

ity

100

Inve

stin

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tiviti

es

ASU

S IN

TER

NA

TIO

NA

L LT

D.

91.0

3.08

C

aym

an Is

land

s 2,

870,

464

Inve

stin

g ac

tiviti

es

CH

AN

NEL

PIL

OT

LIM

ITED

94

.03.

30

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ish

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land

s 96

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A

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. (A

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94

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Sing

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ASU

S TE

CH

NO

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Y (H

ON

G K

ON

G)

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ITED

94

.11.

25

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loon

, Hon

g K

ong

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les a

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pair

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cent

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g K

ong

ASU

S C

OM

PUTE

R B

enel

ux B

.V.

95.0

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Em

men

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les a

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rvic

e ce

nter

in N

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s A

SUS

CO

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80.0

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RD

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85Sa

les a

nd re

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cent

er in

Ger

man

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SUS

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NC

E SA

RL

91.0

7.12

Pa

ris, F

ranc

e 4,

887

Sale

s and

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rvic

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nter

in F

ranc

e A

SUST

EK (U

K) L

IMIT

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95.0

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U

K

2,58

0Sa

les a

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nter

in U

K

ASU

S K

OR

EA C

o., L

td.

95.0

7.01

K

orea

49

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Sale

s and

repa

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orea

A

SUST

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PUTE

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ING

APO

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PT

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TD.

92.1

0.21

Si

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Sale

s and

repa

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rvic

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nter

in S

inga

pore

ASU

S PO

LSK

A S

P.Z.

O.O

. 94

.07.

31

War

saw

, Pol

and

555

Sale

s and

serv

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cent

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Pol

ska

Asu

s Tec

hnol

ogy

Priv

ate

Lim

ited

95.0

9.13

In

dia

55,0

47Sa

les a

nd re

pair

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cent

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Indi

a A

SUS

Tech

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96.0

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n V

ietn

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ASU

STEK

ITA

LY S

.R.L

. 89

.07.

21

Italy

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213

Sale

s and

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ZCO

96

.10.

22

Dub

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A

SUS

IBER

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, S.L

. 93

.05.

19

Bar

celo

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pain

1,

383

Sale

s and

serv

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cent

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Spa

in

ASU

S Te

chno

logy

(Suz

hou)

Co.

Ltd

. 97

.03.

12

Suzh

ou, C

hina

48

1,13

5R

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and

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LCD

s, co

mpu

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, m

ain

boar

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and

the

perip

hera

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of

rela

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mul

timed

ia a

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211

211

NA

ME

OF

CO

RP

OR

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AL

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ASU

STEK

CO

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TER

(SH

AN

GH

AI)

C

O. L

TD.

89.0

6.09

Sh

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hina

31

1,14

8

Selli

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note

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ain

boar

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med

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chno

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sulti

ng

and

afte

r-sa

les s

ervi

ces

ASU

S Ja

pan

Inco

rpor

atio

n 97

.05.

28

Japa

n 1,

736

Sale

s and

repa

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rvic

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nter

in Ja

pan

ASU

S C

OM

PUTE

R C

ZEC

H

REP

UB

LIC

S.R

.O.

94.1

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Pr

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epub

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347

Sale

s and

serv

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ASU

S EG

YPT

L.L

.C.

97.0

9.11

C

airo

, Egy

pt

800

Sale

s and

serv

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DEE

P D

ELIG

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91

.01.

23

Brit

ish

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land

s 36

5,39

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and

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A

SUS

CO

MPU

TER

CO

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RA

TIO

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87.0

3.26

B

ritis

h V

irgin

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95,9

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vest

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and

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ctiv

ities

U

NIM

AX

HO

LDIN

GS

LIM

ITED

96

.02.

15

Cay

man

Isla

nds

207,

935

Inve

stin

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iviti

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Uni

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Ele

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Inc.

96

.04.

17

Taip

ei C

ount

y 21

3,00

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actu

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and

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lect

roni

c ap

plia

nces

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d te

leco

mm

unic

atio

n pr

oduc

ts

ASU

STEK

HO

LDIN

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ITED

88

.09.

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Cay

man

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ities

SO

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ASI

A L

IMIT

ED

89.0

2.03

B

ritis

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irgin

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nds

181,

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Inve

stin

g an

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ding

act

iviti

es

CEN

TRA

L TE

C A

SIA

LIM

ITED

89

.02.

03

Brit

ish

Virg

in Is

land

s 64

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Inve

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iviti

es

ASU

S C

ompu

ter (

Shan

ghai

) Co.

, Ltd

. 89

.06.

30

Shan

ghai

, Chi

na

76,6

57R

epai

ring

com

pute

rs,

elec

troni

c co

mpo

nent

s an

d re

late

d pr

oduc

ts, a

nd p

rovi

ding

afte

r-sa

les s

ervi

ce

ASU

S Te

chno

logy

Hol

land

B.V

. 96

.03.

06

Ned

erla

nd

17,2

88In

vest

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and

tradi

ng a

ctiv

ities

A

SUS

Hun

gary

Ser

vice

s Lim

ited

Liab

ility

Com

pany

96

.05.

10

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gary

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095

Sale

s and

repa

ir se

rvic

e ce

nter

in H

unga

ry

ASU

S PO

RTU

GA

L, S

OC

IED

AD

E U

NIP

ESSO

AL

LDA

. 97

.05.

21

Portu

gal

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3Sa

les a

nd se

rvic

e ce

nter

in P

ortu

gal

Asu

s Sw

itzer

land

Gm

bH

98.0

5.10

Sw

itzer

land

2,

466

Sale

s and

serv

ice

cent

er in

Sw

itzer

land

Sh

inew

ave

Inte

rnat

iona

l Inc

. 86

.08.

06

Taip

ei C

ity

107,

250

Softw

are

R&

D

eMES

(Suz

hou)

Co.

, Ltd

. 91

.03.

22

Suzh

ou, C

hina

8,

143

Com

pute

r se

curit

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stem

s, m

esse

nger

m

anag

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stem

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d au

tom

atio

n sy

stem

s R

&D

; pro

vidi

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ed te

chno

logy

and

afte

r-sa

les

serv

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ASM

edia

Tec

hnol

ogy

Inc.

93

.03.

31

Taip

ei C

ity

400,

000

Des

igni

ng p

rodu

cts

and

data

sof

twar

e, in

form

atio

n pr

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sing

and

supp

ly

GR

EAT

EXTE

ND

INV

ESTM

ENT

CO

RP.

97

.01.

03

Sam

oa Is

land

s 13

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Prov

idin

g m

anag

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t con

sulta

nt se

rvic

e

212

212

NA

ME

OF

CO

RP

OR

AT

ION

D

AT

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F

EST

AB

LIS

HM

EN

TA

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RE

SS

CA

PIT

AL

MA

JOR

BU

SIN

ESS

/ P

RO

DU

CT

ION

IT

EM

S

Inte

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iona

l Uni

ted

Tech

nolo

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o.,

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(Tai

wan

) (IU

T (T

aiw

an))

87

.06.

16

Hsi

nchu

Sci

ence

Par

k 25

0,00

0

Dat

abas

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wire

d co

mm

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man

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and

man

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and

deve

lopi

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ink-

jet

prin

ting

tech

nolo

gy

Inte

rnat

iona

l Uni

ted

Tech

nolo

gy C

o.,

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91

.05.

21

Sam

oa Is

land

s (N

ote

1)In

tern

atio

nal t

radi

ng

Hua

-Min

Inve

stm

ent C

o., L

td.

97.0

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Ta

ipei

City

20

0,00

0In

vest

ing

activ

ities

MO

BO

STA

R T

ECH

NO

LOG

Y

LIM

ITED

91

.07.

09

Brit

ish

Virg

in Is

land

s 1,

600

Inve

stin

g an

d tra

ding

act

iviti

es

Hua

-Che

ng V

entu

re C

apita

l Cor

p.

97.0

5.27

Ta

ipei

City

80

0,00

0V

entu

re c

apita

l inv

estin

g ac

tiviti

es

Ask

ey C

ompu

ter C

orp.

78

.11.

10

Taip

ei C

ount

y 8,

156,

520

Des

igni

ng,

man

ufac

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lling

m

odem

s, pe

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quip

men

t, tra

nspo

rtabl

e eq

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ent a

nd

rela

ted

spar

e pa

rts

Ask

ey In

tern

atio

nal C

orp.

85

.06.

28

CA

, USA

11

8,36

3M

anuf

actu

ring

and

selli

ng c

omm

unic

atio

n pr

oduc

ts

Dyn

alin

k In

tern

atio

nal C

orp.

85

.10.

01

Brit

ish

Virg

in Is

land

s 1,

252,

734

Inve

stm

ent i

n ov

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as c

ompa

nies

M

agic

Inte

rnat

iona

l Co.

, Ltd

. 88

.05.

13

Brit

ish

Virg

in Is

land

s 2,

639,

998

Inve

stm

ent i

n ov

erse

as c

ompa

nies

A

skey

(Vie

tnam

) Co.

, Ltd

. 85

.11.

01

HO

CH

I MIN

H C

ITY

, VIE

TNA

M

92,2

39M

anuf

actu

ring

and

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ng c

omm

unic

atio

n pr

oduc

ts

Dou

ble

Tech

Lim

ited

90.1

0.04

B

ritis

h V

irgin

Isla

nds

1,60

0M

erch

andi

se tr

adin

g B

ig P

rofit

Lim

ited

95.0

6.07

A

pia,

Sam

oa

1,60

0M

erch

andi

se tr

adin

g Fa

mou

s Sta

r Inv

estm

ent L

imite

d 95

.12.

12

Api

a, S

amoa

64

1,40

0In

vest

men

t in

over

seas

com

pani

es

Ask

ey T

echn

olog

y (J

iang

su) L

td.

90.0

8.30

Ji

angs

u, C

hina

2,

604,

810

Man

ufac

turin

g an

d se

lling

com

mun

icat

ion

prod

ucts

A

son

Tech

nolo

gy (S

uzho

u) L

td.

96.0

4.27

Su

zhou

, Chi

na

35,6

79M

anuf

actu

ring

and

selli

ng c

omm

unic

atio

n pr

oduc

ts

Ash

ine

Tech

nolo

gy (S

uzho

u) L

td.

96.1

2.26

Su

zhou

, Chi

na

416,

482

Man

ufac

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mun

icat

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prod

ucts

M

agic

om In

tern

atio

nal C

orp.

88

.06.

23

Brit

ish

Wes

t Ind

ies

2,27

2,25

0In

vest

men

t in

over

seas

com

pani

es

Ask

ey T

echn

olog

y (S

hang

hai)

Ltd.

92

.07.

01

Shan

ghai

, Chi

na

116,

329

Dev

elop

ing

and

selli

ng c

omm

unic

atio

n pr

oduc

ts

Lead

ing

Prof

it C

o., L

td.

93.0

3.12

Po

rt Lo

uis M

alrit

ius

1,60

0M

erch

andi

se tr

adin

g U

NI L

eade

r Int

erna

tiona

l Ltd

. 93

.09.

02

Port

Loui

s Mal

ritiu

s 1,

600

Mer

chan

dise

trad

ing

Ope

nbas

e Li

mite

d 94

.01.

10

Brit

ish

Virg

in Is

land

s 1,

600

Mer

chan

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trad

ing

Goo

dsm

art I

nter

natio

nal L

td.

94.0

1.07

B

ritis

h V

irgin

Isla

nds

1,60

0M

erch

andi

se tr

adin

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Wuj

iang

Will

Sta

r Inv

estm

ents

Lim

ited

95.1

2.26

W

ujia

ng, C

hina

67

7,87

2D

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onst

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and

selli

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eal

esta

te

proj

ects

A

GA

iT T

echn

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y C

orpo

ratio

n 98

.06.

06

Taip

ei C

ount

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0,00

0D

esig

ning

and

selli

ng c

ompu

ter p

erip

hera

ls

AG

AiT

ech

Hol

ding

Lim

ited

98.0

6.03

Sa

moa

Isla

nds

31,9

90In

vest

ing

and

tradi

ng a

ctiv

ities

En

ertro

nix,

Inc.

94

.11.

24

Taip

ei C

ity

402,

384

Wire

less

and

wire

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mm

unic

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n eq

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Ener

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x In

tern

atio

nal L

imite

d 95

.03.

30

Brit

ish

Virg

in Is

land

s 32

0In

vest

ing

and

tradi

ng a

ctiv

ities

En

ertro

nix

Hol

ding

Lim

ited

94.1

2.21

B

ritis

h V

irgin

Isla

nds

410,

592

Inve

stin

g an

d tra

ding

act

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es

213

213

NA

ME

OF

CO

RP

OR

AT

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D

AT

E O

F

EST

AB

LIS

HM

EN

TA

DD

RE

SS

CA

PIT

AL

MA

JOR

BU

SIN

ESS

/ P

RO

DU

CT

ION

IT

EM

S

Shan

dong

Ene

rtron

ix C

o., L

td.

95.0

3.30

Sh

ando

ng, C

hina

19

9,75

9M

anuf

actu

ring

and

selli

ng e

lect

roni

c pa

rts

Hui

zhou

Ene

rtron

ix C

o., L

td.

95.0

3.30

H

uizh

ou, C

hina

25

0,56

9M

anuf

actu

ring

and

selli

ng n

ew e

lect

roni

c pa

rts

Pega

tron

Cor

pora

tion

96.0

2.27

Ta

ipei

City

22

,860

,539

Des

igni

ng, m

anuf

actu

ring,

mai

ntai

ning

and

selli

ng

com

pute

r per

iphe

rals

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aud

io-v

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duct

PE

GA

TRO

N U

SA, I

NC

97

.01.

03

CA

, USA

15

,995

Sale

s and

repa

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rvic

e ce

nter

in N

orth

Am

eric

a A

SUSP

OW

ER IN

VES

TMEN

T C

O.,

LTD

. 86

.12.

31

Taip

ei C

ity

8,41

9,00

0In

vest

ing

activ

ities

ASU

S IN

VES

TMEN

T C

O.,

LTD

. 87

.03.

24

Taip

ei C

ity

9,08

6,00

0In

vest

ing

activ

ities

A

SUST

EK IN

VES

TMEN

T C

O.,

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. 87

.03.

24

Taip

ei C

ity

8,72

7,00

0In

vest

ing

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ities

A

DV

AN

SUS

CO

MPU

TER

CO

., LT

D

95.0

1.27

Ta

ipei

City

36

0,00

0M

anuf

actu

ring

com

pute

r per

iphe

rals

Uni

han

Cor

pora

tion

96.0

2.27

Ta

ipei

City

8,

401,

050

Des

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ring,

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218

218

(5)Directors, Supervisors and Presidents of Affiliated Enterprises As of 12/31/2009

NAME OF CORPORATION TITLE NAME OF PERPRESENTATIVE SHAREHOLDING SHARES %

ASUS TECHNOLOGY INC.

Chairman Director Director & President Supervisor

Asustek Computer Inc.（Representative：Jonathan Tsang） Asustek Computer Inc.（Representative：Jonney Shih） Asustek Computer Inc.（Representative：Jerry Shen） Asustek Computer Inc.（Representative：Sandy Wei）

19,000,000－－－

100.00%－－－

Pegatron Corporation


Asustek Computer Inc.（Representative：T.H. Tung） Asustek Computer Inc.（Representative：Ted Hsu） Asustek Computer Inc.（Representative：Jason Cheng） Asustek Computer Inc.（Representative：Jerry Shen）

2,286,053,935－－－

100.00%－－－

Pegatron International Investment Co., Ltd.

Chairman Director Director Supervisor

Asustek Computer Inc.（Representative：T.H. Tung） Asustek Computer Inc.（Representative：Ted Hsu） Asustek Computer Inc.（Representative：Jason Cheng） Asustek Computer Inc.（Representative：Vincent Hong）

100,000－－－

100.00%－－－

Askey Computer Corporation


Asustek Computer Inc.（Representative：Cheng-kuei Lin*） Asustek Computer Inc.（Representative：Jonney Shih） Asustek Computer Inc.（Representative：Yu-Zhong Huang*） Asustek Computer Inc.（Representative：Sharon Su）

815,640,733－－－

100.00%－－－

Enteronix, Inc.

Chairman Director & President Director Supervisor

Pegatron Corporation（Representative：Jerry Shen） Pegatron Corporation（Representative：T.C. Chen） Pegatron Corporation（Representative：S.Y. Shian） Pegatron Corporation（Representative：Mark Lee）

40,238,437－－－

100.00%－－－

AGAiT Technology Corporation


Asustek Computer Inc.（Representative：Jerry Shen） Asustek Computer Inc.（Representative：T.C. Chen） Asustek Computer Inc.（Representative：Jonney Shih） Asustek Computer Inc.（Representative：Mark Lee）

20,000,000－－－

100.00%－－－

Hua-Cheng Venture Capital Corp.


Asustek Computer Inc.（Representative：Jonney Shih） Asustek Computer Inc.（Representative：Jonathan Tsang） Asustek Computer Inc.（Representative：Jerry Shen） Asustek Computer Inc.（Representative：David Chang）

80,000,000－－－

100%－－－

Hua-Min Investment Co., Ltd.


Asustek Computer Inc.（Representative：Jonney Shih） Asustek Computer Inc.（Representative：Jonathan Tsang） Asustek Computer Inc.（Representative：Jerry Shen） Asustek Computer Inc.（Representative：David Chang）

20,000,000－－－

100%－－－

AXUS MICROSYSTEMS INC.

Chairman Director Director Supervisor President

Asustek Computer Inc.（Representative：Jonney Shih） Asustek Computer Inc.（Representative：Jonathan Tsang） Asustek Computer Inc.（Representative：Jerry Shen） Asustek Computer Inc.（Representative：Sandy Wei） Jeffer Wang

10,046,980－－－ 393,999

85.00%－－－

3.33%

eCareme Technologies, Inc.

Chairman Director Director Director Director & President Supervisor Supervisor

Asustek Computer Inc.（Representative：Eric Chen） Asustek Computer Inc.（Representative：Tom-Wk Lin） Asustek Computer Inc.（Representative：Samson Hu） Chung-Yuan Chu* Han-Chang Wu* Asustek Computer Inc.（Representative：Mark Lee） Hou-Sheng Li*

7,700,000－－

1,185,714428,583－ 440,714

77.00%－－

11.86%4.29%－

4.41%

ASMEDIA TECHNOLOGY INC.


Asustek Computer Inc.（Representative：Jerry Shen） Asustek Computer Inc.（Representative：Che-Wei Lin*） Asustek Computer Inc.（Representative：HH Cheng） Asustek Computer Inc.（Representative：Sandy Wei）

24,193,000－－－

60.48%－－－

International United Technology Co., Ltd.

Chairman Director & President Director

Asustek Computer Inc.（Representative：Jerry Shen） Asustek Computer Inc.（Representative：Daniel Lan） HUA ENG WIRE & CABLE CO.,LTD. （Representative：MS Lin*）

14,181,707－

2,384,570

56.73%－

9.54%

219

219


Supervisor Supervisor

Asustek Computer Inc.（Representative：Mark Lee） China International Investment Co., Ltd.（Representative：JP Hsieh）

－ 215,500

－ 0.86%

SHINEWAVE INTERNATIONAL INC.

Chairman Director Director Supervisor President

Asustek Computer Inc.（Representative：H.C. Hung） Asustek Computer Inc.（Representative：Jonney Shih） Mercuries Data Systems Ltd.（Representative：Shiang-Jhong Chen*） Asustek Computer Inc.（Representative：CK Hsieh） CHUN-HUA YU

5,469,750－

1,072,000－ 264,000

51.00%－

10.00%－

2.46%

GREENASUS RECYCLING CO., LTD. (be liquidated)


Asustek Computer Inc.（Representative：Jonney Shih） Asustek Computer Inc.（Representative：Jason Cheng） Asustek Computer Inc.（Representative：Sandy Wei） Asustek Computer Inc.（Representative：James Huang）

100,000－－－

100%－－－

ASUS COMPUTER INTERNATIONAL

Director Director Director President

Asustek Computer Inc.（Representative：Jonney Shih） Asustek Computer Inc.（Representative：T.H. Tung） Asustek Computer Inc.（Representative：Ivan Ho） Steve Chang

50,000－－－

100%－－－

Asustek Holdings Limited Chairman & President Asustek Computer Inc.（Representative：Jonney Shih） 53,452,104 100%ASUS INTERNATIONAL LTD Chairman Asustek Computer Inc.（Representative：Jonney Shih） 89,730,042 100%Asus Holland B. V. Chairman & President Asustek Computer Inc.（Representative：Jonney Shih） 30,000,000 100%ASUSCHANNEL corp. Chairman & President Asustek Computer Inc.（Representative：Jonney Shih） 50,000 100%DEEP DELIGHT LTD Chairman ASUS INTL LTD（Representative：Jonney Shih） 11,422,000 100%Asus Computer Corp. Chairman & President ASUS INTL LTD（Representative：Jonney Shih） 3,000,000 100%Central Tec Asia Ltd. Chairman & President Asustek Holdings Limited（Representative：Jonney Shih） 2,020,000 100%South Tec Asia Ltd. Chairman & President Asustek Holdings Limited（Representative：Jonney Shih） 5,660,000 100%ENERTRONIX INTERNATIONAL LIMITED Chairman Enertronix, Inc. (Representative：Jerry Shen) 10,000 100%ENERTRONIX HOLDING LIMITED Chairman Asustek Holdings Limited (Representative：Jerry Shen) 12,835,000 100%ASUS UNITED TECHNOLOGY (GUANGZHOU) CO., LTD. (be liquidated)

Chairman South Tec Asia Ltd.（Representative：Jackie Hsu）－ 100%

ASUS COMPUTER (SHANGHAI) CO., LTD. Chairman Central Tec Asia Ltd.（Representative：David Wu）－ 100%Shandong Enertronix Electronic Co., Ltd. (be liquidated)

Director ENERTRONIX HOLDINGS LTD (Representative：Hwa-Rong Jeng*)

－ 100%

Enertronix (HuiZhou) Co., Ltd. Director ENERTRONIX HOLDINGS LTD(Representative：T.C.Chen) － 100%

eMES (SHUZHOU) CO., LTD. Chairman SHINEWAVE INTERNATIONAL INC. （Representative：Jiunn-Hwa Yu*）

－ 100%

UNIMAX HOLDINGS LIMITED Director ASUS INTL LTD（Representative：Jonney Shih） 6,500,000 100%

UNIMAX ELECTRONICS INC.

Director Director Director & President Supervisor

UNIMAX HOLDINGS LIMITED（Representative：Jonathan Tsang）

UNIMAX HOLDINGS LIMITED（Representative：Justin Lin） UNIMAX HOLDINGS LIMITED（Representative：Chih-Peng wu） UNIMAX HOLDINGS LIMITED（Representative：Mark Lee）

21,300,000 －－－

100%－－－

CHANNEL PILOT LTD. Chairman ASUS INTL LTD（Representative：Jonney Shih） 30,033,000 100%

ASUS TECHNOLOGY PTE LTD. Chairman Director Director

CHANNEL PILOT LTD. （Representative：Jonathan Tsang） CHANNEL PILOT LTD. （Representative：Benson Lin） CHANNEL PILOT LTD. （Representative：Darwin Wu）

30,002,500－－

100%－－

ASUS TECHNOLOGY (HONG KONG) LIMITED

Chairman Director

ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang）

ASUS TECHNOLOGY PTE LTD.（Representative：Benson Lin）

500,000 －

100%－

ASUSTEK COMPUTER (SHANGHAI) CO. LTD.

Director ASUS TECHNOLOGY PTE LTD.（Representative：Peter Shih）－ 100%

ASUS COMPUTER Czech Republic s.r.o.

Director Director

ASUS TECHNOLOGY PTE LTD.（Representative：Steve Chang） ASUS TECHNOLOGY PTE LTD.（Representative：Jeremin Hsieh）

－－

100%－

ASUS COMPUTER GmbH Director ASUS TECHNOLOGY PTE LTD.（Representative：Eric Chen）－ 100%ASUS COMPUTER Benelux B.V. Director ASUS TECHNOLOGY PTE LTD.（Representative：Eric Chen）－ 100%ASUSTEK (UK) LIMITED Director ASUS TECHNOLOGY PTE LTD.（Representative：Benjamin Yeh）－ 100%

220

220


ASUS FRANCE SARL Director ASUS TECHNOLOGY PTE LTD.（Representative：Madeleine Hung）－ 100%ASUSTEK ITALY S.R.L. Director ASUS TECHNOLOGY PTE LTD.（Representative：Eric Chen）－ 100%

ASUS KOREA CO., LTD. Chairman Director Director


ASUS TECHNOLOGY PTE LTD.（Representative：Bensom Lin） ASUS TECHNOLOGY PTE LTD.（Representative：Kevin Du）

358,433－－

100%－－

ASUS POLSKA SP.z.o.o. Director ASUS TECHNOLOGY PTE LTD.（Representative：Eric Chen） 1,000 100%ASUSTEK COMPUTER (Singapore) PTE, LTD.

Director ASUS TECHNOLOGY PTE LTD.（Representative：Darwin Wu） 20,002 100%

ASUS TECHNOLOGY PRIVATE LIMITED

Chairman Director Director


ASUS TECHNOLOGY PTE LTD.（Representative：Darwin Wu） ASUS TECHNOLOGY PTE LTD.（Representative：Albert Tung）

8,040,797－－

100%－－

ASUS IBERICA S.L. Director ASUS TECHNOLOGY PTE LTD.（Representative：Eric Chen） 3,000 100%ASUS Technology Holland B.V. Director ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang） 200,000 100%ASUS Hungary Services Limited Liability Company

Director Asus Technology Holland B.V.（Representative：Eric Chen） 50,000 100%

ASUS PORTUGAL, SOCIEDADE UNIPESSOAL LDA

Director Asus Technology Holland B.V.（Representative：Sean Chen） 30,000 100%

ASUS SWITZERLAND GmbH Director Asus Technology Holland B.V.（Representative：Eric Chen） 800 100%ASUS Technology (Vietnam) Co., LTD. Director ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang）－ 100%

Asus Middle East FZC



ASUS TECHNOLOGY PTE LTD.（Representative：BensonLin） ASUS TECHNOLOGY PTE LTD.（Representative：Chen-Hung Su*）

5－－

100%－－

Asus Japan Incorporation Chairman Director

ASUS TECHNOLOGY PTE LTD.（Representative：Kevin Du） ASUS TECHNOLOGY PTE LTD.（Representative：Hideki Sato）

500－

100%－

ASUS EGYPT L.L.C. Chairman Director

ASUS TECHNOLOGY PTE LTD.（Representative：Jonathan Tsang） CHANNEL PILOT LTD.（Representative：Jonney Shih）

－－

0.1%

99.9%ASUS Technology (Suzhou) Co. Ltd. Director ASUS TECHNOLOGY PTE LTD.（Representative：Victor Kao）－ 100%AGAiTech Holding Ltd. Director AGAiT Technology Corporation（Representative：Jerry Shen） 1,000,000 100%MOBOSTAR TECHNOLOGY LTD.

Director DEEP DELIGHT LTD（Representative：Jonney Shih） 50,000 100%

International United Technology Co., Ltd. Director International United Technology Co., Ltd. (Representative：Jerry Shen) － 100%GREAT EXTEND INVESTMENT CORP. Director ASMEDIA TECHNOLOGY INC. (Representative：Che-Wei Lin*) 412,662 100%Dynalink International Corporation Director Askey Computer Corp. (Representative：Cheng-Kuei Lin*) 39,160,172 100%Magic International Company Limited Director Askey Computer Corp. (Representative：Cheng-Kuei Lin*) 82,525,738 100%Askey International Corporation Director Askey Computer Corp. (Representative：Cheng-Kuei Lin*) 3,700,000 100%

Magicom International Corporation Director Magic International Company Limited(Representative：Cheng-Kuei

Lin*) 71,030,000 100%

Leading Profit Company Limited Director Magic International Company Limited(Representative：Cheng-Kuei

Lin*) 50,000 100%

Uni Leader International Limited Director Magic International Company Limited(Representative：Cheng-Kuei

Lin*) 50,000 100%

Goodsmart International Limited Director Magic International Company Limited(Representative：Cheng-Kuei

Lin*) 50,000 100%

Openbase Limited Director Magic International Company Limited(Representative：Cheng-Kuei

Lin*) 50,000 100%

Double Tech Limited Director Dynalink International Corporation(Representative：Cheng-Kuei Lin*) 50,000 100%Askey (Vietnam) Company Limited (be liquidated)

Director Dynalink International Corporation(Representative：Cheng-Kuei Lin*) 2,883,359 100%

BIG Profit Ltd. Director Dynalink International Corporation(Representative：Cheng-Kuei Lin*) 50,000 100%Famous Star Investments Ltd. Director Dynalink International Corporation(Representative：Cheng-Kuei Lin*) 20,050,000 100%

221

221


Askey Technology (Shanghai) Limited Chairman President

Magic International Company Limited(Representative：Cheng-Kuei

Lin*)

Han-Wen Lei *

－－

100%－

Askey Technology (Jiangsu) Limited Director & President Magicom International Corporation(Representative：Yu-Chung Huang*) － 100%ASHINE TECHNOLOGY (SUZHOU) LTD.

Director & President Magicom International Corporation(Representative：Yu-Chung Huang*) － 100%

ASON TECHNOLOGY (SUZHOU) LTD

Director & President Magicom International Corporation(Representative：Chi-Hsish Chang*) － 100%

WUJIANG WILL STAR INVESTMENTS LIMITED

Director & President Famous Star Investments Ltd. (Representative：Han-Wen Lei*) － 100%

Unihan Corporation


Pegatron Corporation（Representative：T.H. Tung） Pegatron Corporation（Representative：Ted Hsu） Pegatron Corporation（Representative：Jason Cheng） Pegatron Corporation（Representative：Jerry Shen）

840,105,000－－－

100%－－－

AMA PRECISION INC.

Chairman Director & President Director Director Director Supervisor Supervisor

Unihan Corporation（Representative：T.H. Tung） Unihan Corporation（Representative：Eric Chang） Unihan Corporation.（Representative：Kevin Wang） Unihan Corporation（Representative：Davis Lu） Unihan Corporation（Representative：Hank Chung） Unihan Corporation（Representative：Hank Chung） Unihan Corporation（Representative：Vivian Hsieh）

52,000,000－－－－－－

100%－－－－－－

ADVANSUS COMPUTER CO., LTD

Chairman & President Director Director Director Director Supervisor Supervisor

ADVANTECH Co., Ltd. (Representative：KC Liu) ADVANTECH Co., Ltd. (Representative：CHENG-LIEN LO*) Pegatron Corporation（Representative：Ted Hsu） Pegatron Corporation（Representative：Ht Tung） CHUN- SHENG CHEN* Pegatron Corporation（Representative：Sharon Su） ADVANTECH Co., Ltd. (Representative：Shu-Mei Tsai*)

18,000,000－

18,000,000－－－－

50% －

50% －－－－

ASROCK Inc.

Chairman Director Director Director & President Independent director Independent director Independent director Supervisor Supervisor Supervisor

Ted Hsu Asus Investment Inc.（Representative：T.H. Tung） Asus Investment Inc.（Representative：GARY CHENG） Asus Investment Inc.（Representative：Sterling Wu） Tze-Kaing Yang* Yi-Ju Liu* Ai Wei* Asuspower Investment Inc.（Representative：Sharon Su） Hsu-Ling Wang* Chen-Hung Tsai*

－ 57,217,754－－－－－

2,791,001－－

－ 49.74%

－－－－－

2.43%－－

KINSUS Interconnect Technology Corporation

Chairman Director Director Director Director & President Director Independent director Independent director Independent director Supervisor Supervisor Supervisor

Asus Investment Inc.（Representative：T.H. Tung） Asuspower Investment Inc.（Representative：Ted Hsu） Asuspower Investment Inc.（Representative：Jerry Shen）Ching-Yi Chang* Ming-Tung Kuo* Jane Lu Chin-Tsai Chen* Chung-Pen Chang* Chun-Pao Huang* Asustek Investment Inc.（Representative：CharlesCT Lin） Hsiang-Hsiang Wu* Chung-Jen Cheng*

60,128,41755,556,221－－

2,706,8952,245,007－－－

58,233,091－－－

13.48%12.46%

－－

0.61%0.50%－－－

13.06%－－－

ABILITY ENTERPRISE CO., LTD. Chairman Director Vice Chairman

Chia Mei Investment Co., Ltd.(Representative：Ching-His Tong*) Chia Mei Investment Co., Ltd.(Representative：Chiung-Shiung Tong*)

Unihan Corporation（Representative：Sj Liao）

495,053－

55,236,195

0.11%－

12.63%

222

222


Managing director Director Director & President Director Director Director Supervisor Supervisor

Unihan Corporation（Representative：T.H. Tung） Unihan Corporation（Representative：Ht Tung） Unihan Corporation（Representative：Ming-Jen Tseng*） Unihan Corporation（Representative：Ming-Jang Ju*） Unihan Corporation（Representative：Susie Wang） Lin Shih Investment Co., Ltd.(Representative：Yarn-Chen Chen*) Chia Nine Investment Co., Ltd.(Representative：Yi-Nai Tung*) Asuspower Investment Inc.(Representative：Eric Chang)

－－－－－

5,274,0212,143,085

10,828

－－－－－

1.21%0.49%0.00%

STARLINK ELECTRONICS CORP.


Asuspower Investment Inc.（Representative：James Huang） Asustek Investment Inc.（Representative：Gordon Tu） Asustek Investment Inc.（Representative：Eric Chung） Asustek Investment Inc.（Representative：Lisa Wu）

35,770,79611,558,824

－－

51.84%16.75%

－

－

ASUSPOWER INVESTMENT CO., LTD.


Pegatron Corporation（Representative：Ted Hsu） Pegatron Corporation（Representative：T.H. Tung） Pegatron Corporation（Representative：Jason Cheng） Pegatron Corporation（Representative：Sharon Su）

841,900,000－－－

100%－－－

Asus Investment Co., Ltd.


Pegatron Corporation（Representative：T.H. Tung） Pegatron Corporation（Representative：Jason Cheng） Pegatron Corporation（Representative：Ted Hsu） Pegatron Corporation（Representative：Sharon Su）

908,600,000－－－

100%－－－

Asustek Investment Co., Ltd.


Pegatron Corporation（Representative：T.H. Tung） Pegatron Corporation（Representative：Ted Hsu） Pegatron Corporation（Representative：Jason Cheng） Pegatron Corporation（Representative：Sharon Su）

872,700,000－－－

100%－－－

AzureWave Technologies, Inc.

Chairman Director Director Director Director & President Supervisor Supervisor Supervisor

Unihan Corporation（Representative：Ted Hsu） Unihan Corporation（Representative：Sharon Su） Unihan Corporation（Representative：T.H. Tung） Unihan Corporation（Representative：Jason Cheng） Tseng-Chieh Lee* Asustek Investment Co., Ltd.（Representative：Lisa Wu） Asustek Investment Co., Ltd.（Representative：CharlesCT Lin） Asustek Investment Co., Ltd.（Representative：Y.C._Shen）

32,500,000－－－

2,635,7716,820,846－－

36.00%－－－

2.92%7.56%－－

Lumens Digital Optics Inc.

Chairman Director Director & President Director Director Supervisor Supervisor

ASUSPOWER INVESTMENT CO., LTD.（Representative：T.H. Tung） ASUSPOWER INVESTMENT CO., LTD.（Representative：Wen-Chin Cheng*） Mu-Jung Wen* YUN HSIN Co., Ltd.*（Representative：Te-Chiang Liu） Chung-Ho Tai Asus Investment Co., Ltd.（Representative：Lisa Wu） WEI CHIN Investment Co., Ltd.*（Representative：Pu-Pin Chou*）

10,256,232

10,256,232

39,27162,834

364,438617,974707,513

51.28%

51.28%

0.2%0.3%1.82%3.09%3.54%

KINSUS INVESTMENT CO.,LTD.


KINSUS Interconnect Technology Corp.（Representative：T.H. Tung） KINSUS Interconnect Technology Corp. (Representative：Ming-Tung Kuo*) KINSUS Interconnect Technology Corp.（Representative：Hsiang-Hsiang Wu*） KINSUS Interconnect Technology Corp.（Representative：Chung-Pen Chang*）

50,000,000

－－－

100% －－－

PEGAVISION CORPORATION


KINSUS INVESTMENT CO.,LTD.（Representative：T.H. Tung） KINSUS INVESTMENT CO.,LTD. (Representative：Ming-Tung Kuo*) ASUSPOWER INVESTMENT CO., LTD.（Representative：Sharon Su）

20,400,000

－

10,000,000

56.67% －

27.78%

223

223


Director Director & President Supervisor

ASUSPOWER INVESTMENT CO., LTD.（Representative：Ching Lu*） Liang-Jung Hsu* Chi-Liang Chen*

－ 400,000－

－ 1.11%－

AzureLighting Technologies, Inc.


AzureWave Technologies, Inc.（Representative：Tseng-Chieh Lee*） AzureWave Technologies, Inc.（Representative：Shao-Yu Lu*） AzureWave Technologies, Inc.（Representative：Hung-Lin Shih*） AzureWave Technologies, Inc.（Representative：Ching-Yi Hung*）

2,000,000－－－

100%－－－

EzWAVE Technology Inc.

Chairman & President Director Director Supervisor

AzureWave Technologies, Inc. (Representative：Tseng-Chieh Lee*) AzureWave Technologies, Inc. (Representative：Jing-Xiang Lee*) AzureWave Technologies, Inc. (Representative：Yan-Rui Lee*) AzureWave Technologies, Inc. (Representative：Hung-Lin Shih*)

500,000－－－

100%－－－

ASFLY TRAVEL SERVICE LIMITED Chairman Asus Investment Inc.（Representative：T.H. Tung）－ 100%HUA-YUAN Investment Limited Chairman Asus Investment Inc.（Representative：T.H. Tung）－ 100%PEGA INTERNATIONAL LIMITED

Chairman ASUSPOWER INVESTMENT CO., LTD. （Representative：T.H. Tung）

－ 100%

PEGATRON HOLDING LIMITED Director Pegatron Corporation（Representative：T.H. Tung） 660,197,567 100%UNIHAN HOLDING LIMITED Director Unihan Corporation（Representative：T.H. Tung） 211,600,025 100%Pegatron USA President Pegatron Corporation（Representative：Jerry Yeh） 50,000 100%Asuspower Corp. Chairman & President Asuspower Investment Inc.（Representative：Ted Hsu） 349,000,000 100%Pegatron Japan Inc. Chairman Asuspower Investment Inc.（Representative：Sj Liao）－ 100%Magnificent Brightness Ltd. Director Pegatron Holding Limited（Representative：T.H. Tung） 177,961,090 100%Boardtek Holdings Ltd.(Cayman) Director Pegatron Holding Limited（Representative：T.H. Tung） 100,000,000 100%Boardtek Holdings Ltd. Director Boardtek Holdings Ltd.(Cayman)（Representative：T.H. Tung） 52,085,790 100%PROTEK GLOBAL HOLDINGS LTD. Director Pegatron Holding Limited（Representative：T.H. Tung） 233,050,000 100%ASLINK PRECISION CO., LTD Director Pegatron Holding Limited（Representative：Jerry Shen） 19,093,263 100%NORTH TEC ASIA LTD Director Pegatron Holding Limited（Representative：T.H. Tung） 75,050,000 100%DIGITEK GLOBAL HOLDINGS LTD. Director Pegatron Holding Limited（Representative：T.H. Tung） 50,000 100%Casetek Holdings Ltd. Director Unihan Holding Limited（Representative：T.H. Tung） 139,099,684 100%

MAINTEK COMPUTER (SUZHOU) CO., LTD. Chairman Magnificent Brightness Ltd. (Representative：Feng-Chang Kang*)

－ 100%

BOARDTEK COMPUTER (SUZHOU) CO., LTD Chairman Boardtek Holdings Ltd.（Representative：Feng-Chang Kang*）－ 100%CASETEK COMPUTER (SUZHOU) CO., LTD. Chairman Casetek Holdings Ltd.（Representative：Feng-Chang Kang*）－ 100%SLITEK HOLDING LTD. Chairman Casetek Holdings Ltd.（Representative：Eric Chang） 1,210,000 100%PROTEK (SHANGHAI) LIMITED Chairman PROTEK GLOBAL HOLDINGS LTD.（Representative：Timber Chang）－ 100%LINKTEK PRECISION (SUZHOU) CO., LIMITED (be liquidated)

Chairman ASLINK (H.K.) PRECISION CO., LTD （Representative：Yu-Chin Chuang*）－ 100%

AMA TECHNOLOGY CORPORATION Director AMA PRECISION INC.（Representative：SteveHC_Huang） 300,000 100%AMA Holdings Limited Director AMA PRECISION INC.（Representative：T.H. Tung） 5,131,947 100%EXTECH LTD. Director AMA Holdings Limited（Representative：SteveHC_Huang） 2,108,000 88.91%METAL TRADINGS LTD. Director AMA Holdings Limited（Representative：SteveHC_Huang） 2,107,000 100%TOPTEK PRECISION INDUSTRY CO., LIMITED

Director AMA Holdings Limited（Representative：Grace Chou）－ 100%

FENGSHUO TRADING (TONGZHOU) CO. LTD

Chairman EXTECH LTD.（Representative：Michael Yeh）－ 100%

Grandtech Precision Ltd. Chairman METAL TRADINGS LTD.（Representative：Michael Yeh）－ 100%

KINSUS CORPORATION(USA) Chairman Director Director

KINSUS Interconnect Technology Corp.（Representative：Ming-Tung Kuo*）

T.H. Tung Ivan Ho

500,000－－

100%－－

KINSUS HOLDING(SAMOA) LIMITED

Chairman KINSUS Interconnect Technology Corp.（Representative：Ming-Tung Kuo*） 50,000,000 100%

KINSUS HOLDING (CAYMAN) LIMITED Chairman KINSUS HOLDING(SAMOA) LIMITED（Representative：Ming-Tung Kuo*） 50,000,000 100%

224

224


KINSUS INTERCONNECT TECH.(SUZHOU) CORP.

President KINSUS HOLDING(CAYMAN) LIMITED （Representative：Ching-Feng Cheng*）

－ 100%

PEGATRON TECHNOLOGY SERVICE INC.

Chairman Director Director Director

Asuspower Investment Inc.（Representative：Ivan Ho） Asuspower Investment Inc.（Representative：Jay Huang） Asuspower Investment Inc.（Representative：Roger Kulai） Asuspower Investment Inc.（Representative：Andy Yang）

2,800－－－

100%－－－

STRATEGY TECHNOLOGY CO.,LTD. Director STARLINK ELECTRONICS CORP.（Representative：James Huang） 1 100%Cotek Holdings Ltd. Director STRATEGY TECHNOLOGY CO.,LTD（Representative：James Huang） 12,260,000 100%COTEK ELECTRONICS (SUZHOU) CO., LTD.

Chairman Cotek Holdings Ltd.（Representative：Feng-Chang Kang*）－ 100%

Pegatron MEXICO S.A.DEC.V. Director Director Chairman

Asuspower Investment Inc. Asus Investment Inc. Jay Huang

－－－

40.51%59.49%

－

ASUS HOLLAND HOLDING B.V. Director Director

Pegatron Corporation（Representative：T.H. Tung） Asus Investment Inc.（Representative：T.H. Tung）

－－

92.44%7.56%

PEGATRON CZECH S.R.O. Director & President ASUS HOLLAND HOLDINGS B.V. （Representative：Jason Cheng）

－ 100%

Azurewave (Cayman ) Holding Inc. (be liquidated)

Chairman UNIHAN HOLDING LTD.（Representative：Ted Hsu） 12,098,722 60.49%

AZWAVE Holding(SAMOA)INC. Director AzureWave Technologies, Inc. (Representative：Tseng-Chieh Lee*) 2,000,000 100%AzureWave Technologies (Shanghai) Inc. Chairman AZWAVE Holding (SAMOA) INC. (Representative：Tseng-Chieh Lee*) － 100%EMINENT STAR COMPANY LIMITED

Director AzureWave Technologies, Inc. （Representative：Hung-Lin Shih*）

387,923 100%

JADE TECHNOLOGIES LIMITED Director EMINENT STAR COMPANY LTD.（Representative：Hung-Lin Shih*） 44,781 100%HANNEX INTERNATIONAL LIMITED

Director EMINENT STAR COMPANY LTD.（Representative：Hung-Lin Shih*） 178,235 100%

AzureWave Technologies (ShenZhen) Inc.

Director Director

JADE TECHNOLOGIES LTD.（Representative：Hung-Lin Shih*） EMINENT STAR COMPANY LTD.（Representative：Hung-Lin Shih*）

－－

33.33%66.67%

YEH-HUA Technologies (Nanjing) Inc. Director HANNEX INTERNATIONAL LIMITED（Representative：Hung-Lin Shih*）－ 100%ASLINK (H.K.) PRECISION CO., LIMITED Director ASLINK PRECISION CO., LTD(CAYMAN)（Representative：Jerry Shen） 4,785,010 100%ASIAROCK TECHNOLOGY LIMITED Chairman ASROCK Inc.（Representative：Ted Hsu） 40,000,000 100%LEADER INSIGHT HOLDINGS Ltd. Chairman ASROCK Inc.（Representative：Ted Hsu） 2,100,000 100%ASROCK EUROPE B.V. Director & President ASIAROCK TECHNOLOGY LIMITED（Representative：Gary Tsui） 200,000 100%CALROCK HOLDINGS LLC. Chairman ASIAROCK TECHNOLOGY LIMITED（Representative：Ted Hsu） 2,000,000 100%FIRSTPLACE INT’L Ltd. Chairman LEADER INSIGHT HOLDINGS Ltd.（Representative：Ted Hsu） 2,050,000 100%ASROCK AMERICA INC. Director FIRSTPLACE INT’L Ltd. （Representative：Sterling Wu） 2,000,000 100%

Ability International Investment Co., Ltd.


Ability Enterprise Co., Ltd. (Representative：Ming-Jen Tseng*) Ability Enterprise Co., Ltd. (Representative：Jin-Ju Tong*) Ability Enterprise Co., Ltd. (Representative：Jason Yang) Ability Enterprise Co., Ltd. (Representative：Susie Wang)

57,313,286－－－

100%－－－

ABILITY ENTERPRISE (BVI) CO.,LTD. Chairman Ability Enterprise Co., Ltd. (Representative: Ching-His Tong*) － 100%ASSOCIATION INTERNATIONAL

LIMITED Chairman Ability Enterprise Co., Ltd.(Representative: Chiung Shiung Tong*) － 100%

VIEWQUEST TECHNOLOGIES INTERNATIONAL INC.

Director Director Director

Ability Enterprise Co., Ltd. (Representative: Sen-Tai Wen*) ABIKITY ENTERPRISE CO., LTD(Representative: Ming-Jen Tseng*)

Ability Enterprise Co., Ltd.(Representative: Robert Wen-Pin Tsai*)

－－－

100%－－

VIEWQUEST TECHNOLOGIES (BVI) INC. Chairman Ability Enterprise Co., Ltd. (Representative: Ching-His Tong*) － 100%

ACTION PIONEER INTERNATIONAL LTD. Chairman Ability Enterprise Co., Ltd. (Representative: Chiung-Shiung Tong*)

－ 100%

Ability Technology (Dongguan) Co., Ltd. Chairman ABILITY ENTERPRISE (BVI) CO.,LTD. (Representative: Ching-His Tong*)

－ 100%

ASAP INTERNATIONAL CO., LIMITED.

Director ASLINK PRECISION CO., LTD (Representative: Cheng-Wei Wu*)

6,375,000 51%

225

225


ASAP TECHNOLOGY (JIANGXI) CO., LIMITED.

Executive Director ASAP INTERNATIONAL CO., LIMITED. (Representative: Cheng-Wei Wu*)

－ 100%

KAEDER TRADING LTD Director Casetek Holdings Limited (Representative: Eric Chang) 5,000,000 100%KAEDER HOLDINGS LIMITED Director Casetek Holdings Limited (Representative: Eric Chang) 25,000,000 100%Core-Tek (Shanghai) Limited Director Casetek Holdings Limited (Representative: Timber Chang) － 100%KAEDER ELECTRONICS (KUNSHAN) CO., LTD

Director KAEDER HOLDINGS LIMITED (Representative: Li-Hsiang Wu*)

－ 100%

BOARDTEK (HK) TRADING LIMITED Director Boardtek Holdings Ltd. (Representative:Harold Lin) 200,000 100%Lumens Integration Inc. Chairman Mu-Jung Wen* － 100%Lumens Digit Image Inc. Chairman Mu-Jung Wen* － 100%Lumens Europe BVBA Chairman Mu-Jung Wen* － 100%

CHIEH-HSIN INTERNATIONAL INC.


Lumens Digital Optics Inc.(Representative:Mu-Jung Wen*) Wen-Chin Cheng* Tasi-Chieh Yang* Shui-Chin Hsu*

94,0002,0002,0002,000

94.00%2.0%2.0%2.0%

Lumens (Suzhou) Digital Image Inc. Chairman Chun Wen* － 100%

Top Quark Limited Chairman PEGATRON HOLDING LTD. (Representative:Huang, Shih-Chen

7,550,000 100%

RUNTOP (SHANGHAI) CO., LTD. Executive Director Top Quark Limited（Representative：Timber Chang）－ 100%POWTEK HOLDINGS LTD Chairman & President Pegatron Holding Ltd.（Representative：T.H. Tung） 8,050,000 100%Powtek (Shanghai) Co., Ltd. Executive Director POWTEK HOLDINGS LTD（Representative：Timber Chang）－ 100%UNITED NEW LIMITED Chairman Asustek Holdings Limited（Representative：Eric Chang） 17,396,100 51.00%AVY PRECISION ELECTROPLATING (SUZHOU) CO., LTD.

Chairman UNITED NEW LIMITED（Representative：Chun-Yi Tung*）－ 100%

AZURELIGHTING TECHNOLOGIES INC Chairman AZWAVE Holding(SAMOA)INC. (Representative：Tseng-Chieh Lee*)

－ 100%

Note1: Stock shares are yet to be confirmed. Note2: (*) Standards for the English transliteration of company’s name or individual’s name.

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234

ASUSTeK Computer Inc. Declaration of Internal Control

Date: March 12, 2010

The internal control system in 2009 is with the following declarations made in accordance with the self-inspection conducted: 1. We understand it is the responsibility of the company’s management to have internal control system

established, enforced, and maintained. The company has the internal control system established to provide a reasonable assurance for the realization of operating effect and efficiency (including profits, performance, and assets safety), the reliability of financial report, and the obedience of relevant regulations.

2. Internal control system is designed with limitations; therefore, no matter how perfect it is designed, an

effective internal control system is to ensure the realization of the aforementioned three objectives. Due to the change of environment and condition, the effectiveness of an internal control system could change at any time. Our internal control system is designed with self-monitoring mechanism; therefore, we are able to have corrective actions initiated upon identifying any nonconformity.

3. We have based on the internal control criteria of “Governing Rules for handling internal control system

by public offering companies” (referred to as “the Governing Rules” hereinafter) to determine the effectiveness of internal control design and enforcement. The internal control criteria of the “Governing Rules” is the management control process and with the internal control divided into five elements: 1. Environment control, 2. Risk analysis, 3. Control process, 4. Information and communication, and 5. Supervision. Each element is subdivided into several items. Please refer to the “Governing Rules” for the details of the said items.

4. We have based on the aforementioned internal control criteria to inspect the effectiveness of internal

control design and enforcement. 5. We believe that our audits provide a reasonable basis for our opinion. On December 31, 2009, those

standards require that we plan and perform the audit to obtain reasonable assurance about whether the internal control system (including the supervision and management over the subsidiaries) including the fulfillment of business performance and efficiency, the reliability of financial statements and the obedience of governing regulations, and the design and enforcement of internal control system is free of material misstatement and is able to ensure the realization of the aforementioned objectives.

6. The Declaration of Internal Control is the content of our annual report and prospectus for the

information of the public. For any forgery and concealment of the aforementioned information to the public, we will be held responsible by law in accordance with Securities Transaction Regulation No. 20, No. 32, No. 171, and NO. 174.

7. We hereby declared that the Declaration of Internal Control was approved by the Board of Directors on

March 12, 2010 unanimously by the directors at the meeting

ASUSTeK Computer Inc.

Chairman: Jonney Shih

President: Jerry Shen

235

ASUSTek Computer Inc. Chairman

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2009 ASUS Annual Report English

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