Respectfully submitted to:

Chairman Tzong-Leh Hwang
The Fair Trade Commission, the Executive Yuan, the Republic of China

WHEREAS: Microsoft Corporation was founded 27 years ago and is one of the most significant investors in fundamental research and general product development of computer software in the world. Microsoft's objective is to create low-price, mass-market software that can be used on a wide array of hardware platforms. Microsoft products have enabled numerous enterprises around the world to take advantage of some of today's best information technologies at only a tiny fraction of the value derived from such products. Microsoft strives to contribute to the entire ecosystem of the information industry by working extensively with partners, distribution channels, and independent software vendors, in Taiwan as well as elsewhere. It has been estimated that for every dollar Microsoft earns, its partners earn eight dollars.

WHEREAS: Since it was established in Taiwan 13 years ago, Microsoft Taiwan Corporation ("MSTC") has made and kept its commitment to be a good corporate citizen. Microsoft's objective here is to contribute to Taiwan's economic and technological development by working and growing with our about 8,500 channels, partners, and ISVs in Taiwan. Microsoft has taken concrete actions to show our commitment to Taiwan: our team works with Taiwan's leading IT firms in technology & blueprint sharing, R&D effort, product prototyping, order taking, and quality assurance. Recent efforts within these 3 years involve Tablet PC, PDA and Smartphone, etc. Microsoft conducts annual Windows hardware engineering conference in Taipei, which attracts over 1,000 engineer attendees from Asia Pacific. It is the only conference of its type held outside the United States. Microsoft also has one of a limited number of Windows hardware quality labs in Taiwan to accelerate the shipment of PC & PC peripherals produced by Taiwanese f irms. Microsoft is therefore actively engaged in helping Taiwan' s hardware and software companies become as competitive as they can be in the world marketplace. Microsoft is here to grow with our partners in Taiwan and contribute to the economic development of Taiwan.

WHEREAS: MSTC believes that Microsoft's operations in Taiwan are entirely consistent with the Fair Trade Law, but understands that the society may have greater expectations about how MSTC can be even more responsive to the opinions of various constituencies.

NOW THEREFORE: MSTC and its relevant affiliates Microsoft Corporation, Microsoft Operations Pte Ltd and Microsoft Regional Sales Corporation1, in accordance with the provisions of this Settlement Agreement, commit to the following bulleted undertakings to show their commitments2 to Taiwan consumers and to the development of the information technology industry in Taiwan and to bring to a close of the TFTC' s investigation into the present case.3 MSTC executes this Settlement Offer on those affiliates' behalf:

1.	Pricing of Microsoft Software Products for Consumers and Academic Customers
1.1	Microsoft and its relevant affiliates fully recognize the importance of the views of the community when setting prices for consumer and academic software products in the ROC.
1.2	With respect to the determination of Relevant Software Products4 prices in the ROC, MSTC and its relevant affiliates agree to comply with relevant provisions of the Fair Trade Law with respect to pricing.
1.3	MSTC and its relevant affiliates agree to comply with provisions regarding tying in the Fair Trade Law with respect to Relevant Software Products in the ROC.
1.4	MSTC will, within 90 days of the effective date of the Settlement, offer ample quantities of supply for individual components of the Office Standard (Word, Excel, PowerPoint, and Outlook) in Relevant Software Products, in ROC language version where such version has been created and otherwise in English language version.
1.5	MSTC and its relevant affiliates agree to comply with the Fair Trade Law with respect to non-restriction of the freedom in setting resale prices by LADs (Large Account Distributors) or LARs (Large Account Resellers).
2.	Promoting Consumer Interests
2.1	MSTC and its relevant affiliates agree, within 30 days after the effective date of this Settlement, to provide in end user license agreements with consumers purchasing Relevant Software Products in the ROC that, in complying with the ROC regulations and legal practices, the ROC courts adjudicating related disputes may apply the ROC laws, and not to require in such licenses that licensees shall submit to the jurisdiction of courts other than the ROC courts. As to those license agreements entered into by MSTC or its relevant affiliates with consumers in the ROC before the effective date of this Settlement, the ROC courts adjudicating related disputes can decide whether to apply the ROC laws.
2.2	MSTC and its relevant affiliates confirm that they adopt the ROC language as the governing language for end user license agreements with consumers purchasing Relevant Software Products in Taiwan.
2.3	MSTC agrees that it will make the best efforts to ensure that when it uses national flags in product documentation, websites or advertisements for identification purposes, it will do so in an appropriate manner under the circumstances and in consistent with international standards.
2.4	MSTC and its relevant affiliates agree that, within 60 days after the effective date of the Settlement, they will post on the MSTC website a process by which members of the public can offer comments on the matter that Microsoft and its affiliates exercise their intellectual property rights in Taiwan. Should members of the public submit views within 30 days, MSTC and its relevant affiliates shall closely study those views.
3.	Facilitating Intra-Brand Competition
3.1	MSTC and its relevant affiliates agree that users of MS products have the freedom to change LARs.
3.2	MSTC and its relevant affiliates agree that LARs of MS products have the freedom to change LADs.
3.3	MSTC and its relevant affiliates agree that, after the effective date of the Settlement, they shall not deprive users of their rights to change LARs and LARs of their rights to change LADs by reasons of internal document delivery or similar reasons.
3.4	MSTC and its relevant affiliates shall notify LADs and LARs in writing, within 30 days after the effective date of the Settlement, that the abolition of "Guidelines Governing Product Shipping and Order Placement by LARs and LADs" is to be effective, and confirm that they shall fully comply with the Fair Trade Law with respect to non-interference in contractual relations between LARs and users, and between LADs and LARs.
3.5	MSTC and its relevant affiliates agree that, as of the effective date of this Settlement, in licensing its intellectual property rights to the ROC IT manufacturers, they shall not violate the Fair Trade Law regarding non-discriminatory treatments to trading counterparts without justifiable causes, with respect to the terms and conditions of such licenses.
3.6	MSTC and its relevant affiliates agree to identify, within 30 days of the effective date of this Settlement, some factors that could be considered in making licensing decisions.
4.	After-Sale Services for Microsoft Products
4.1	MSTC and its relevant affiliate(s) will make reasonable efforts to make their after-sale services available to consumers in a manner consistent with business practices and market conditions. Within 60 days of the effective date of the Settlement, MSTC will post its after-sale service programs on its website and invite public comments for a period of 30 days and will reasonably take these views into consideration when establishing after-sale service policies.
4.2	Within 90 days of the effective date of the Settlement, MSTC will form a working group to liaise directly with a single designated central government agency to establish a mechanism by which the government can take advantage of Microsoft' s security alert system, through which MSTC or its relevant affiliates will inform such entity of identified security loopholes and provide related patches or other ways, free of charges, to resolve the problem.
4.3	MSTC agrees, after the effective date of the Settlement, to provide a single designated central government agency with updated information about the Microsoft security alert system so as to enhance their technological understanding and skills in security-related matters.
5.	Reasonable Sharing of Software Code
5.1	MSTC and its relevant affiliates agree to engage in discussions with the Taiwanese government on Microsoft's Government Security Program ("Government Security Program") shared source program, with a view to entering into a contract in the near future.
5.2	MSTC and its relevant affiliates will positively and actively consider the eligibility of Taiwan-based enterprises to take part in Microsoft' s Enterprise Shared Source program ("Enterprise Shared Source Program").
6.	Implementation of the U.S. Consent Decree in Taiwan
In order to implement the content of the agreement entered into between the U.S. Department of Justice and nine U.S. State governments and Microsoft ("Consent Decree") in Taiwan, within 90 days of the effective date of the Settlement, MSTC and its relevant affiliates will take the following concrete steps to actively assist the Taiwan public and Taiwan-based information technology companies:
Provide access to information regarding its implementation of the Consent Decree on the MSTC website; Hold public seminars and discussions on Microsoft' s obligations under the Consent Decree and the steps it is taking to meet those obligations; Hold technical seminars and discussions with Taiwan-based IT professionals on the steps Microsoft is taking to implement its obligations under the Consent Decree and the manner in which they can benefit from those steps; and Set up a hotline to allow the Taiwan public and Taiwan-based IT companies to ask questions and request non-confidential information regarding Microsoft' s implementation of the Consent Decree and the manner in which they can benefit from such implementation.
7.	Dispute Resolution Mechanism
7.1	MSTC or its relevant affiliates agree to fully cooperate with the TFTC with respect to the implementation of this Settlement.
7.2	MSTC or its relevant affiliates agree to offer a written response within 21 days after receiving a written notice of a decision made by the Fair Trade Commission finding a breach of the Settlement by MSTC or its relevant affiliates. When the TFTC believes that it is necessary, the TFTC may request MSTC or its relevant affiliates to present themselves in the commission to express their views, and agrees to give such entities reasonable period of time for preparation.
7.3	Subject to any applicable TFTC rules, MSTC or its relevant affiliates have the right to access related statements and evidence of alleged breach of this Settlement.
7.4	In the event that MSTC or its relevant affiliates fail to comply with 7.2 by not submitting a written response, not appearing before the TFTC to present their views, or not to cease or correct their breach of the Settlement within a reasonable period of time set by the decision of the TFTC, the TFTC can make a resolution to terminate this Settlement agreement.
7.5	If the breach in 7.4 is material and it causes the substantial failure of the fundamental purpose of this Settlement, the TFTC can, by a resolution of the commissioner meeting, rescind this Settlement agreement.
8.	Effective Date and termination of the agreement
8.1	The commitments made in this Settlement Agreement by MSTC or its relevant affiliates shall terminate after five years from the effective date of this Settlement Agreement.
8.2	This Settlement Agreement shall become effective upon MSTC's receipt of a written notice from the TFTC in accordance with a decision of the TFTC commissioner meeting.
8.3	The investigation of the subject case will terminate upon the effective date of this Settlement Agreement.

Microsoft Taiwan Corporation
Statutory Representative:_______
Date: February 26, 2003

1 When the text of a particular provision in this Settlement includes "relevant MSTC affiliates", it includes only those affiliates that have direct authority over the subject matter of such provision, and such affiliates submit to the jurisdiction of Taiwan Fair Trade Commission ("the TFTC") only to the extent of such direct authority, and reserve on jurisdictional issues in all other respects.

2 Neither the execution nor the performance of the settlement will in any way indicate or imply an admission of guilt or liability by MSTC or its affiliates.

3 The "present case" refers to all TFTC' s proceedings prior to the effective date of this Settlement. Unless specifically permitted by law to reopen investigation, following settlement in this matter TFTC will not revisit issues involved in the present case on the basis of facts that exist prior to the effective date of this Settlement.

4 The term "Relevant Software Products" herein shall mean ROC language FPP versions of Windows, Office and Office component products.