2011 Q3 Business Review
	Revenue was NT$135.8bn, up 79% yoy and in line with original guidance Net income reached NT$18.68bn, up 68% yoy, 7% qoq Shipment grew 93% yoy to 13.2mn units Gross margin and operating margin were 28.0% and 14.9% respectively, both within guidance range
	2011 Q4 Business Guidance
	Due to global macro economic downturn and market competition, the assumptions of 2011 Q4 financial forecast provided earlier are no longer applicable. HTC expects 2011 Q4 revenue to be approximately the same as Q4 last year. Despite 2011 Q4 revenue is not what we expected, HTC has strong confidence in its products and operation. We expect that growth will return in 2012 H1.

	2011 Q2 Business Review
	2Q revenue was NT$124.40bn, up 104% yoy, better than original guidance 2Q net income reached NT$17.52bn, up 103% yoy and 18% qoq 2Q shipment grew 124% yoy to 12.1mn units 2Q GPM in line with original guidance at 28.8% 2Q OPEX ratio was 13.3%; 2Q operating margin was 15.5%, within the guidance range
	2011 Q3 Business Guidance
	3Q revenue expected to be around NT$137bn, up 10% qoq and 80% yoy 3Q shipment expected to be around 13.5mn units, up 98% yoy GPM expected to be around 28%±0.5% OPM expected to be in the range of 15%±0.5% * All numbers above are on consolidated basis.

	2011 Q1 Business Review
	1Q shipment grew 192% yoy to 9.7mn units. 1Q revenue was NT$104.16bn, up 174% yoy, better than original guidance. 1Q GPM in line with original guidance at 29.3%. 1Q OPEX ratio was 13.4%, better than original guidance; 1Q operating margin at 15.8%, also better than expected.
	2011 Q2 Business Guidance
	2Q shipment expected to be around 11~11.5 mn units, up 103~113% yoy. 2Q revenue expected to be around NT$120bn, up 97% yoy. GPM expected to be around 29%±0.5%. OPM expected to be in the range of 15.5%±0.5%. * All numbers above are on consolidated basis.

	2010 Q4 Business Review
	4Q shipment grew 163% yoy to 9.1mn units. 4Q revenue reached NT$104bn, up 153% yoy, better than original guidance. 4Q GPM in line with original guidance at 30%. 4Q OPEX ratio in line with original guidance at 13.9%; 4Q operating margin reached 16.1%. * All numbers above are based on consolidated financial statements.
	2011 Q1 Business Guidance
	We continue to see strong demand from existing products and expect recently launched 4G products to help drive shipment growth in 2011. Demand remains visible and solid; management expects a relatively muted seasonal slowdown than previous years. 1Q shipment expected to be around 8.5mn units, up 157% yoy. 1Q revenue expected to be around NT$94bn, up 147% yoy. GPM expected to be around 29.5%±0.5%. OPEX ratio expected to be in the range of 14.5%±0.5%. * All numbers above are on consolidated basis.

HTC upholds the ideals of comprehensive environmental protection, proper health and safety management, and progressive improvement in energy efficiency, and provides a safe and healthy working environment for our employees. For the benefits of its employees, customers, suppliers, and contractors, and to achieve sustainable corporate development, HTC has made the following basic commitments in the area of corporate social responsibility:

> HTC will scrupulously abide by all local laws and regulations.
> HTC will protect employees' work-related rights and interests and ensure fair employment opportunities.
> HTC will actively participate in energy saving, carbon reduction, and environmental protection.
> HTC will be transparent in its management.
> HTC will continue to innovate in products and services to raise the level of customer satisfaction.
> HTC will enhance shareholder interests, while supporting underprivileged groups, charitable and public service activities.

As the Company grows and develops, HTC must respond to environmental, safety, and health issues driven by increasing level of production. Each year, HTC receives affirmation from third-party certification institutions for effective implementation of ISO14001 and OHSAS 18001 standards. From 2010, HTC has implemented the EICC (Electronic Industry Citizenship Coalition) Code of Conduct and the ISO 5001 energy management standards, as it continues to strengthen its corporate social responsibility (CSR) in environmental protection and efficient use of energy.

HTC is working to monitor and reduce carbon emission at its production facilities in Taoyuan and around Taiwan. The Company uses the ISO 5001 energy management standards to effectively manage carbon emissions and reduce their resulting impact on global climate change.

In energy saving, HTC is reducing electricity use by implementing time-controlled lighting, installing infrared sensor switches, and replacing T8 lighting with energy saving T5 fixtures in plants and offices. From 2010, it has successively converted to the use of energy saving LED lighting in its newly built offices and plants in Taoyuan, Xindian, and Tainan.

HTC continues to reduce the volume of industrial waste resulting from its manufacturing processes and increase resource recycling. Actual recycling rate for HTC mobile phones, including reuse, recovery and recycling, far exceeds the requirements of the EU WEEE (Waste Electrical and Electronic Equipment) standards.

In the area of health and safety, HTC begins by assessing risks and adopting necessary measures in order to reduce accidents related to manufacturing, equipment, working environment, or chemical exposure.

HTC's employees are its most valuable asset - the crucial factor that allows it to compete successfully in the global marketplace. HTC provides comprehensive safety and health management, a friendly, healthy working environment, and professional employee assistance programs. Our employees understand our commitment to their welfare. Participation in HTC's Family Day by employees and their families also helps promote identification with Company values and understanding of the Company's commitment to public interest, health, and the environment.

Safety and health management

The OHSAS 18001 occupational health and safety management standards and HTC workplace accident prevention plans are the key elements of our efforts to prevent the possible occurrence of workplace accidents. Key points of implementation include observing health and safety laws and regulations, identifying hazards as a means of lowering risk, creating standards for management of harmful and dangerous substances, providing information on health and safety, and implementing management of contractors. All employees participate in the programs for reduction of health and safety risks. Emergency incidents caused by human error or natural disasters, including incidents such as fire, explosions, typhoons, accidental substance releases, mechanical equipment injuries, contagious diseases, or earthquakes, are managed through prevention in-advance, response measures during the incident, and critical appraisal and feedback after-the-fact. In addition, HTC regularly conducts emergency response drills and firefighting exercises to ensure that the impact of any accident on employee safety and Company assets is minimized.

HTC has established a response organization at the corporate level for major infectious diseases to ensure proper handling of any suspected cases. Implementation of the response plan is outlined below:

> The Environment, Health and Safety Committee meets regularly, focusing on the environmental, safety, and health projects under implementation during the given quarter. During the meetings, committee members and HTC department representatives hear reports on issues such as achievement of improvement goals, analyses of accidents, employee health promotion, implementation of environment projects, and the results of testing carried out in employee work environments.

> Ever since its founding, HTC has undertaken risk assessments that target its production processes, equipment, and use of chemical products. It adopts measures necessary on the basis of the assessment results in order to reduce accidents caused by processes, equipment, or working environments, and to reduce harmful exposure to chemical products. Measures include:

• Chemical substances management
• Regular inspections of dangerous machinery and equipment
• Employee education, training, and guidance, including general labor safety and health related education and first-aid training.
• Regular compilation and statistical analysis of accidents occurred.
• Notice and explanations in relation to hazardous conditions and dynamic management of the work area at irregular intervals.

Creating a friendly workplace

HTC provides its employees with a variety of services, including a convenience store, coffee shop, travel agency, health center and resident physician, fitness center, outdoor multi-sport playing field, game area, massage station, and library. To meet the diverse needs of employees, it has also actively expanded green spaces, designed facilities for easy access by workers and visitors with physical disabilities, and provided breast feeding rooms for mothers.

In addition to providing a comfortable and friendly work environment as described above, HTC also implements measures closely related to the lives and well-being of its employees, such as providing appropriate air quality control and lighting in work areas, to ensure that its employees can work in the best possible environment.

Healthy work environment

In order to provide a healthier work environment for its employees, HTC has set up a health center to provide employee health care, wellness promotion, health management, and related consulting. Regular check-ups are provided (new employee physical exams, yearly exams, and special exams). Health management includes setting up basic health data files, follow-up exams and tracking of reported problems, analysis of yearly check-up data, management of chronic conditions, and interviews and follow-up on special conditions. Other services provided to help safeguard employee health include first-aid training, health care provided through consultation with a resident physician, prevention of occupational illnesses, epidemic prevention, and sharing of health education information.

Lifestyle diseases are usually the result of a buildup of long-ignored danger signals. HTC's health center works together with other health care providers to help track and provide diagnosis and treatment to employees belonging to high-risk groups, and assists employees with prevention and management of any such conditions through accurate understanding and lifestyle changes. In addition, with facilities such as the health center, library, fitness center, massage rooms/stations, and multi-sport playing field, HTC also provides employees with outlets for relieving pressure so they can develop the habit of exercising and taking care of their own well-being. HTC also creates a smoke-free working environment, providing information on giving up tobacco and activities for smokers wanting to quit.

Employee assistance programs

Many employees in the modern workplace experience psychological burdens arising from the fast pace of life or the pressures of their lives, families, or work obligations. Through a program offered in cooperation with the Hsinchu Lifeline, HTC provides its employees with opportunities for professional psychological counseling while ensuring that they receive all the necessary guarantees of privacy. Regular and irregular counseling services are arranged and informative classes are available to all employees in the areas of work and career, family and relatives, relationships, and physical and psychological stress. Classes include awareness promotion, department head consultations, sensitivity training for entry-level managers, and physical and psychological stress-relief groups to help reduce the negative impact of work-related stress.

Family Day

Every year, HTC invites employees and their families to participate in Family Day activities to promote family values and help employees and their families understand HTC corporate culture and values. On Family Day, employees and their families are invited to participate in enjoyable activities and share in the Company's accomplishments. The theme of the 2010 Family Day was "green life", with activities centering on HTC's three principles of "public interest, health, and the environment." The "health" aspect was emphasized through an event emphasizing love for walking: "6,000 steps a day brings health one step at a time." This event engaged the interest of employees, and during the course of 3 months, 243 employees from 10 different departments participated, logging a total of 69,228,000 steps.

Human rights guarantees

HTC has adopted non-discriminatory hiring and management rules that respect the ethnicity, gender, and beliefs of its employees. It has also instituted an equal pay for equal work policy, and provides wages, compensation, and welfare benefits competitive with the marketplace.

To ensure proper management and prevent exploitation or unequal treatment of foreign workers, HTC enters into contracts directly with intermediary companies supplying foreign labor as a guarantee of their rights and interests. Medical checkups are also provided with the same frequency and covering the same items as local workers to help guarantee the health of foreign workers.

In addition to having obtained ISO 1400 certification for environment management, HTC also takes the initiative in observing local environment-related laws and regulations in carrying out related environmental work. It also actively promotes energy-saving and waste-reduction through measures such as replacing traditional lighting with energy-saving T5 and LED lighting fixtures, introducing water-saving devices and recycling and reusing rainwater. HTC has placed effective controls on the use of air-conditioning systems, its dormitories use heat pumps in place of natural gas, and waste is also separated for recycling. Since 2008, in response to global concerns about greenhouse gases, it undertook an inventory of its carbon emissions and actively assessed related carbon reduction strategies. Its goal is to help fulfill its responsibility as a corporate citizen by reducing emissions of the greenhouse gas carbon dioxide.

In research and development of green products, HTC emphasizes each phase of a product's life, from its design, manufacture, use, up through the end-of-life to find new ideas for eco- friendly product design. The thinking behind HTC's eco-friendly product designs extends from the end-of-the-pipeline treatment directly back to the initial design stages, using design concepts centered around low toxicity, energy efficiency, and recyclability to develop a variety of new, greener products.

Measures to improve energy savings and energy-saving promotion

During their construction, both production facilities and offices incorporated water- and electricity-saving design concepts. Measures to improve energy conservation continue to be implemented during operation. HTC also continues to promote measures for conservation of water and electricity and environmental protection, which are described briefly below:

• Greening the area around its facilities through landscaping and tree planting to help reduce carbon dioxide emissions and global warming.
• Installation of water treatment facilities to reduce release of polluted water.
• Using recycled water for irrigation in green landscape projects and for washroom flushing.
• Creating a rainfall storage reservoir to collect, filter, and use rainwater.
• Installation of reduced-flow faucets in break rooms, shower rooms and restrooms and use of two-stage flushing systems to reduce unnecessary water use.
• Promoting and enhancing reduction of ordinary waste and sorting of recyclable waste.
• Frequency converters are added to motors and pumps to help save energy.

Greenhouse gases inventory management

HTC is actively carrying out its responsibility as a corporate citizen to protect the Earth's environment. In line with implementation of the guidance plan for greenhouse gas reduction by the Industrial Development Bureau of the Ministry of Economic Affairs, HTC inventories the sources and volumes of its greenhouse gas emissions in accordance with IISO14064-1 standards.

• Inventorying greenhouse gas emissions allows better understanding of energy use and is helpful in establishing energy-saving strategies.
• At the beginning of each year, HTC implements inspection of its greenhouse gas inventory by a certification agency and recieves an inventory certificate.
• HTC discloses information on its greenhouse gas emissions each year through the Taiwan Environmental Protection Agency's National Greenhouse Gas Registration Platform and other international nonprofit organizations.

Greenhouse gases are not currently listed as statutory air pollutants in Taiwan; HTC currently has no facilities to directly measure the emissions of those gases. It primarily makes use of the emissions coefficient method applied by the majority of organizations in Taiwan and applies the chemical mass balance method as a secondary method. HTC's 2008 greenhouse gas emissions results, focusing primarily on the organizational boundary of its Taoyuan headquarters, showed that electricity use was the main source of emissions, which amounted to about 21,000 metric tons. Extending the organizational boundary to include all HTC Taiwan offices as well as its Taoyuan production facility in 2009, initial estimates placed its volume of greenhouse gas emissions at 30,000 metric tons. The expansion of the Taoyuan facilities in 2010 correspondingly altered the organizational boundary, causing total greenhouse gas emissions to increase to 34,800 metric tons. Going forward, HTC will undertake further measures to reduce greenhouse gases in anticipation of the introduction of the ISO 50001 energy management standards.

Eco-friendly products

In research and development of eco-friendly products, early 2000 marked the introduction of a design process in which each stage of design, manufacture, use, and even the end of product life cycle were scrutinized to find new room for eco-friendly design. The thinking behind our eco-designs extends from their end-of-the-pipeline treatment directly back to the initial design stages; one consideration is the reduction in the use of environmentally harmful substances such as lead, cadmium, hexavalent chromium, and mercury. Another requirement is increasing recycling and the ratio of reusable components in products in order to reduce negative environmental impact. A variety of green products have therefore been developed using design concepts based on low toxicity, energy efficiency, and recyclability. These environmentally friendly products not only meet customer needs but also conform with international environmental regulations and help enhance HTC's green competitiveness and its vision of sustainable corporate development.

> Low toxicity design

In response to trends in international environmental regulation and related concerns of our international customers, HTC placed controls on harmful substances in year 2000. By 2005, it produced the world's first PDA phone that met standards of the EU's RoHS Directive (Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive). Since then, HTC has required that all parts, modules, and materials delivered to its plants conform with its substances control checklist. Its control of restricted substances goes beyond the six controlled substances listed in the RoHS Directive, and includes other substances such as formaldehyde, ozone-depleting substances, and chlorinated paraffin, which, pursuant to international environmental laws and regulations or requirements of our international customers, are also deemed controlled substances.

In hazardous substance management, HTC obtained QC-080000 certification from the IECQ (International Electrotechnical Commission Quality Assessment System) in 2007. In 2010, it completed the second-stage recertification audit to ensure that its hazardous substance management system continues to operate effectively on an ongoing basis.

> Energy-efficient designs

From the point of view of the overall life cycle of an electronic communications product, the period of use by the consumer is the most energy-intensive. Most production of greenhouse gases in connection with those products occurs during this stage. For that reason, HTC puts a lot of emphasis on energy efficiency during the research and development process. To enhance energy efficiency, all HTC product power supplies must conform to the international energy use standards below:

• The US EPA Energy Star program
• California Energy Commission standards
• The EU Code of Conduct
• The EU EuP Directive

In addition, our R&D team has developed outstanding power management systems. Based on consumer habits, handsets automatically switch to energy-saving mode that reduces energy use and extends battery life. Some models also include light sensors that trigger an automatic LCD backlighting function, which not only creates more readable displays but also saves energy.

> Design for recyclability

HTC makes design-for-recyclability assessments and other simulations part of its initial research and development. It disassembles products and performs material simulations to estimate material compositions and recycling rates. Labeling of materials, simplified component design, and design for ease of disassembly are strategies used to provide feedback on designs to the R&D team. Current HTC products are designed to meet both current and future recycling standards.

> Green packaging

In addition to visual appeal and packaging strength, HTC's green packaging concepts extend to developing materials that satisfy the environmental design concepts of low toxicity, low volume, and recyclability.

• Low-toxicity design

– Packaging materials meet the standards of the EU directive on packaging materials. Levels of lead, cadmium, mercury, and hexavalent chromium are all below legal limits.
– Packaging materials use no PVCs.
– Packaging materials contain no ODS (ozone depleting substances) restricted by the Montreal Protocol.
– Printing inks are low-volatility or environmental vegetable-based inks such as soy ink.

• Low-volume design

– Expanded polystyrene foam (EPS) beads are not used.
– Volume per unit of stacking space is maximized to reduce the amounts of packing materials required during shipping.
– Improved shock-absorbing packaging reduces the need for shock-absorbing packing materials during shipping.

• Design for recyclability

– Corrugated board for mobile phone packaging is manufactured with more than 90% recycled paper.
– If the use of virgin materials is difficult to avoid because of visual design considerations, packaging materials with FSC (Forest Stewardship Council), PEFC (Programme for the Endorsement of Forest Certification schemes), or SFI (Sustainable Forestry Initiative) certification are used.

Recycling and reuse of waste materials

HTC's primary product lines are handheld computers and smart phones. During their manufacture, only soldering generates exhaust emission. No wastewater is produced, with the exception of domestic wastewater from employees. HTC makes pollution control a high priority, devoting extensive funding to pollution control facilities and the deployment of dedicated personnel to reduce environmental impact. The Company provides personnel with external training to obtain relevant certification, allowing them to assume full responsibility for the management of pollution control facilities. Through training and auditing, normal operation of all pollution controls is maintained through appropriate management designed to steadily diminish our environmental impact. HTC anticipates continued reduction in environment impact and achievement of the goal of completely "clean production."

> HTC's strategy for waste reduction begins with rigorous sorting and waste reduction. Production of waste is reduced from the beginning, while priority is also given to reuse of materials in order to improve recycling rates. The parts of plastic assembly panels that can be recycled are reused, and the remaining recyclable materials are outsourced to a recovery enterprise approved by the Ministry of Economic Affairs' Industrial Development Bureau for purification and processing into industrial-grade materials for further use. The resulting average annual recycling rate is higher than 62 percent. Other waste is dealt with by physical sorting to increase reusability; and parts that cannot be reused are incinerated. Only when landfill disposal is unavoidable does it become the final method of handling. HTC carries out regular online reporting in accordance with laws and regulations with regard to the status of production and temporary storage of waste.

> One of HTC's environmental initiatives is to minimize waste by recycling general domestic waste such as aluminum foil, PET bottles, steel and aluminum cans, and plastic containers. Used batteries, fluorescent light tubes, and computer and electronics equipment are also fully recycled.

> Employees are provided with environmentally friendly tableware for use in the employee cafeteria. Eco-friendly reusable cups are also provided for internal personnel, guests, and people visiting on business in order to reduce the use of paper cups.

> In observance of Earth Day, HTC promoted the use of eco-friendly reusable cups in cooperation with its on-site 7-11 and Starbucks by offering discounts to employees who bring their own reusable cups when they make purchases.

Promoting green buildings

HTC has already moved to introduce green building techniques in its new headquarters, which are expected to meet the US LEED (Leadership in Energy and Environmental Design) green building standards. These standards will be observed for all new buildings and plants in the future and will allow HTC to provide even more environmental, energy-saving, pleasant, and healthy working environments.

In addition to environmental protection, health and safety, energy management, and providing a safe and healthy working environment for its workers, HTC continues to engage in other public service activities such as caring for the victims of the February 28 floods in Taiwan, making donations of blood, employing people with disabilities, and taking part in community environmental cleanups. The HTC Foundation also promoted character-building educational activities for children and young people.

HTC and World Vision Taiwan teamed up to provide temporary housing units in Jinfeng Township, Taitung County. They were the first completed temporary housing units to be occupied by victims of the February 28 floods, and won the praise of President Ma Yingjiou on an inspection tour. President Ma offered personal encouragement when HTC organized the first echelon of volunteer workers to serve in the disaster area, which resulted in a very special kind of Mid-Autumn Festival experience for all of the participating employees. In addition, to help children living in the affected area leave the experience behind, HTC employees organized on their own a caring mission to the Jialan tribe of Taitung. Through their "surprise shoebox" campaign, they donated gift boxes that conveyed their well wishes in a way that children affected by the disaster will remember all their lives.

In recent years, HTC has been involved with promoting character-building education for children and young people, working together with cities and communities to create a culture of character and showing concern for disadvantaged groups by providing extra educational opportunities for their children. In addition to providing programs to encourage continuing study, HTC also works tirelessly with others to help promote a culture of values which will foster individuals who are upright, honest, caring, positive and concerned about natural resources. HTC is continuing a three-year project it began in March 2008 when it signed a "character white paper" with the Taoyuan County Government to create "100 character-building schools," promoting character education in all areas among educational administrators, schools, communities, and families. HTC's character village project is underway in Hualien County's Yu Li Township and Taoyuan County's Long Tan Township, where it has signed related memorandums of understanding to promote a culture of character education through character training and class work. HTC, in cooperation with the Hualien County Government, has established a Character and English Institute in Hualien's Meilun district, which is already operating. The Institute's first location was set up in idle facilities at the Ci Zhih School in Hualien. Thorough renovation by HTC made the facilities look new again; and it began providing free classes so students could study character and English there in an enjoyable and pressure-free environment. A new Character and English Institute has been set up in Yunlin and began operating in September 2010 in the same mode as the Hualien Institute, providing educational opportunities to children of disadvantaged groups or those living in remote areas. A third Character and English Institute is planned for Chiayi, and is scheduled to begin operation in September 2011.