Macronix — Interim / Quarterly Report 2013

Nov 13, 2013

Macronix International Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Three Months Ended March 31, 2013 and 2012 and Independent Accountants’ Review Report

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and the Stockholders Macronix International Co., Ltd.

We have reviewed the accompanying consolidated balance sheets of Macronix International Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

Except as stated in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 36, “Engagements to Review Financial Statements,” issued by the Auditing Committee of the Accounting Research and Development Foundation (ARDF) of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

As disclosed in Note 4 to the financial statements, we did not review the financial statements as of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012 and for the three months ended March 31, 2013 and 2012 of non-major subsidiaries. The carrying values of the assets of those non-major subsidiaries as of March 31, 2013 and 2012 amounted to NT$5,123,409 thousand and NT$5,063,346 thousand, representing 8.61% and 7.59% of the Group’s consolidated total assets as of March 31, 2013 and 2012, respectively. The carrying values of the liabilities of those non-major subsidiaries as of March 31, 2013 and 2012 amounted to NT$564,320 thousand and NT$547,867 thousand, representing 2.13% and 2.12% of the Group’s consolidated total liabilities as of March 31, 2013 and 2012, respectively. The total comprehensive loss of non-major subsidiaries for the three months ended March 31, 2013 and 2012 amounted to NT$203,371 thousand and NT$150,110 thousand, representing 10.12% and 15.93%, respectively of the Group’s total comprehensive loss for the three months then ended. These amounts as well as the related financial information of the investees as disclosed in Note 35 to the financial statements were based on the subsidiaries’ unreviewed financial statements for the same periods.

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Based on our reviews, except as discussed in the preceding paragraph that the carrying value of the subsidiaries as well as the related disclosures of the investment information were based on unreviewed financial statements of the subsidiaries, and except for the effects of such adjustment, if any, as might have been made had we applied review procedures on the consolidated financial statements of investees referred to in the preceding paragraph. We are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, International Financial Reporting Standard 1, “First-time Adoption of International Financial Reporting Standards,” and International Accounting Standard 34, “Interim Financial Reporting,” endorsed by the Financial Supervisory Commission of the Republic of China.

May 2, 2013

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, consolidated results of operations and consolidated cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the independent accountant’s review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent accountant’s review report and consolidated financial statements shall prevail.

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4, 5 and 7) Notes receivable and trade receivables, net (Notes 4, 5 and 10) Receivables from related parties, net (Notes 4, 5, 10 and 31) Other receivables (Notes 4 and 10) Inventories (Notes 4 and 11) Other financial assets - current (Notes 15 and 32) Other current assets (Notes 14 and 16) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Notes 4, 5 and 7) Available-for-sale financial assets - non-current (Notes 4 and 8) Financial assets measured at cost - non-current (Notes 4 and 9) Property, plant and equipment (Notes 4, 5, 12 and 32) Intangible assets (Notes 4, 5 and 13) Deferred tax assets (Notes 4, 5 and 25) Other financial assets - non-current (Notes 15 and 32) Other non-current assets (Notes 14 and 16) Total non-current assets TOTAL		March 31, 2013		December 31, 2012		March 31, 2012		January 1, 2012 Amount % LIABILITIES AND EQUITY CURRENT LIABILITIES $ 19,727,097 29 Short-term borrowings (Note 17) Financial liabilities at fair value through profit or loss - current - - (Notes 4, 5 and 7) Notes payable and trade payables (Note 18) 2,901,450 4 Payables to related parties (Note 31) Other payables (Note 19) 918,063 1 Salary and bonus payable 121,198 - Payable for purchase of equipment 6,468,003 10 Current tax liabilities (Notes 4, 5 and 25) 23,005 - Provisions - current (Notes 4, 5 and 20) 475,483 1 Current portion of long-term borrowings (Notes 17 and 32) 30,634,299 45 Other current liabilities Total current liabilities NON-CURRENT LIABILITIES 39,357 - Long-term borrowings (Notes 17 and 32) Accrued pension cost (Notes 4 and 21) 879,392 2 Others 154,491 - Total non-current liabilities 35,496,832 52 Total liabilities 148,475 - 553,198 1 EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 4 and 22) 178,736 - Ordinary shares 51,042 - Capital surplus Retained earnings 37,501,523 55 Legal reserve Unappropriated earnings (accumulated deficit) Other equity Treasury shares Equity attributable to owners of the Company NON-CONTROLLING INTERESTS (Notes 4 and 22) Total equity $ 68,135,822 100 TOTAL		March 31, 2013		December 31, 2012		March 31, 2012		January 1, 2012
		Amount % $ 17,035,644 29 - - 2,825,023 5 265,741 - 142,790 - 7,536,659 13 6,999 - 774,299 1 28,587,155 48 - - 926,544 2 89,260 - 28,339,320 48 396,004 1 914,079 1 183,763 - 66,853 - 30,915,823 52 $ 59,502,978 100		Amount % $ 19,096,662 30 6,199 - 2,911,980 5 427,453 1 106,203 - 6,859,892 11 47,105 - 479,392 1 29,934,886 48 - - 888,685 1 97,862 - 29,883,778 48 360,936 1 909,843 2 186,922 - 67,776 - 32,395,802 52 $ 62,330,688 100		Amount % $ 18,973,510 28 - - 2,628,946 4 520,590 1 151,042 - 7,337,817 11 22,914 - 652,656 1 30,287,475 45 - - 1,084,361 2 134,058 - 34,111,469 51 307,566 1 547,550 1 178,226 - 46,751 - 36,409,981 55 $ 66,697,456 100				Amount % $ 227,980 - 1,849 - 1,847,647 3 113,535 - 2,147,172 4 - - 273,152 1 344,255 1 68,905 - 5,503,718 9 93,277 - 10,621,490 18 15,171,134 26 747,411 1 1,837 - 15,920,382 27 26,541,872 45 35,214,623 59 343,883 - 2,695,275 4 (5,597,687 ) (9 ) 420,863 1 (159,061) - 32,917,896 55 43,210 - 32,961,106 55 $ 59,502,978 100		Amount % $ 88,406 - - - 1,834,141 3 136,005 - 2,632,380 4 - - 394,986 1 339,661 1 81,635 - 5,233,718 8 99,347 - 10,840,279 17 15,799,897 26 717,793 1 1,694 - 16,519,384 27 27,359,663 44 35,214,623 56 343,869 - 2,695,275 4 (3,528,992 ) (5 ) 346,196 1 (159,061) - 34,911,910 56 59,115 - 34,971,025 56 $ 62,330,688 100		Amount % $ 125,465 - - - 1,853,825 3 87,128 - 1,804,780 3 530,775 1 542,236 1 343,175 - 74,287 - 1,979,718 3 110,979 - 7,452,368 11 17,712,852 27 640,227 1 3,999 - 18,357,078 28 25,809,446 39 33,921,967 51 342,766 - 2,407,003 4 3,691,310 5 567,272 1 (159,061) - 40,771,257 61 116,753 - 40,888,010 61 $ 66,697,456 100		Amount % $ 1,800,488 3 - - 2,154,754 3 82,244 - 2,189,183 3 530,775 1 875,833 1 348,966 1 75,954 - 1,527,718 2 85,504 - 9,671,419 14 16,078,614 24 622,566 1 3,766 - 16,704,946 25 26,376,365 39 33,847,486 50 346,489 - 2,407,003 3 4,776,572 7 402,047 1 (159,061) - 41,620,536 61 138,921 - 41,759,457 61 $ 68,135,822 100

The accompanying notes are an integral part of the consolidated financial statements.

(With Deloitte & Touche review report dated May 2, 2013)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

NET OPERATING REVENUE (Notes 4, 5, 23 and 31) OPERATING COSTS (Notes 11, 21, 24 and 31) GROSS PROFIT (LOSS) OPERATING EXPENSES (Notes 21, 24 and 31) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses LOSS FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income (Notes 4, 24 and 30) Other gains and losses (Notes 4 and 24) Finance costs (Notes 4 and 24) Total non-operating income and expenses LOSS BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4, 5 and 25) NET LOSS OTHER COMPREHENSIVE INCOME Exchange differences on translating foreign operations (Note 22) Unrealized gain on available-for-sale financial assets (Note 22) Other comprehensive income for the period, net of income tax TOTAL COMPREHENSIVE LOSS FOR THE PERIOD		**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2013 Amount % $ 4,404,789 100 4,590,250 104 (185,461) (4) 251,559 6 403,998 9 1,255,245 29 1,910,802 44 (2,096,263) (48) 46,812 1 52,250 1 (87,171) (2) 11,891 - (2,084,372) (48) 1,045 - (2,085,417) (48) 41,725 1 33,034 1 74,759 2 $ (2,010,658) (46)		2012
				Amount % $ 5,143,476 100 4,388,306 85 755,170 15 279,115 5 388,477 8 1,053,345 21 1,720,937 34 (965,767) (19) 47,461 1 (125,669) (2) (57,385) (1) (135,593) (2) (1,101,360) (21) 6,251 - (1,107,611) (21) (44,522) (1) 209,672 4 165,150 3 $ (942,461) (18)

(Continued)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

NET LOSS ATTRIBUTABLE TO: Owner of the Company Non-controlling interests TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: Owner of the Company Non-controlling interests EARNINGS PER SHARE (Note 26) Basic Diluted		**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2013 Amount % $ (2,068,695) (47) (16,722) - $ (2,085,417) (47) $ (1,994,028) (45) (16,630) (1) $ (2,010,658) (46) $(0.59) $(0.59)		2012
				Amount % $ (1,085,262) (21) (22,349) (1) $ (1,107,611) (22) $ (920,037) (18) (22,424) - $ (942,461) (18) $(0.31) $(0.31)

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 2, 2013) (Concluded)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

BALANCE AT JANUARY 1, 2012 Net loss for the three months ended March 31, 2012 Other comprehensive income for the three months ended March 31, 2012, net of income tax Total comprehensive loss for the three months ended March 31, 2012 Additional non-controlling interest arising on issue of employee share options by subsidiaries Issue of ordinary shares under employee share options BALANCE AT MARCH 31, 2012 BALANCE AT JANUARY 1, 2013 Changes in capital surplus from investments in associates accounted for by using equity method Net loss for the three months ended March 31, 2013 Other comprehensive income for the three months ended March 31, 2013, net of income tax Total comprehensive loss for the three months ended March 31, 2013 Additional non-controlling interest arising on issue of employee share options by subsidiaries Increase in non-controlling interests BALANCE AT MARCH 31, 2013		Equity Attributable to Owners of the Company	Equity Attributable to Owners of the Company	Non-controlling Total Interests $ 41,620,536 $ 138,921 (1,085,262) (22,349) 165,225 (75) (920,037) (22,424) - 256 70,758 - $ 40,771,257 $ 116,753 $ 34,911,910 $ 59,115 14 (14) (2,068,695) (16,722) 74,667 92 (1,994,028) (16,630) - 230 - 509 $ 32,917,896 $ 43,210	Total Equity $ 41,759,457 (1,107,611) 165,150 (942,461) 256 70,758 $ 40,888,010 $ 34,971,025 - (2,085,417) 74,759 (2,010,658) 230 509 $ 32,961,106
	Share Capital Capital Surplus $ 33,847,486 $ 346,489 - - - - - - - - 74,481 (3,723) $ 33,921,967 $ 342,766 $ 35,214,623 $ 343,869 - 14 - - - - - - - - - - $ 35,214,623 $ 343,883	Retained Earnings Unappropriated Earnings (Accumulated Legal Reserve Deficit) $ 2,407,003 $ 4,776,572 - (1,085,262) - - - (1,085,262) - - - - $ 2,407,003 $ 3,691,310 $ 2,695,275 $ (3,528,992) - - - (2,068,695) - - - (2,068,695) - - - - $ 2,695,275 $ (5,597,687)	Other Equity Exchange Unrealized Differences on Gain from Translating Available-for-sale Foreign Financial Operations Assets Treasury Shares $ (30,048) $ 432,095 $ (159,061) - - - (44,447) 209,672 - (44,447) 209,672 - - - - - - - $ (74,495) $ 641,767 $ (159,061) $ (102,785) $ 448,981 $ (159,061) - - - - - - 41,633 33,034 - 41,633 33,034 - - - - - - - $ (61,152) $ 482,015 $ (159,061)

The accompanying notes are an integral part of the consolidated financial statements.

(With Deloitte & Touche review report dated May 2, 2013)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Loss before income tax Adjustments for: Depreciation expense Amortization expense Impairment loss recognized on trade receivables Finance costs Compensation cost of employee share options Interest income Gain on disposal of property, plant and equipment Gain on disposal of investments Gain on foreign currency exchange Changes in operating assets and liabilities Increase in financial liability held for trading Decrease in notes receivable and trade receivables Decrease in receivables from related parties Increase in other receivables Increase in inventories Increase in other current assets Increase (decrease) in notes payable and trade payables Increase (decrease) in payables to related parties Decrease in other payables Decrease in provisions Increase (decrease) in other current liabilities Increase in accrued pension liabilities Cash used in operations Interest received Interest paid Income tax paid Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on sale of financial assets measured at cost Proceeds from return of capital by financial assets measured at cost Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Payments for intangible assets Decrease in other financial assets Decrease in other non-current assets Net cash used in investing activities		Three Months Ended March 31	Three Months Ended March 31
		2013 $ (2,084,372) 1,919,702 55,816 5,206 87,171 230 (39,448) (36) - (51,817) 8,048 139,318 160,010 (36,587) (676,767) (295,543) 14,287 (22,317) (489,923) (12,730) (6,319) 29,618 (1,296,453) 40,294 (87,084) (687) (1,343,930) - 8,775 (481,948) 62 (101) 59 (90,749) 40,106 1,028 (522,768)	2012 $ (1,101,360) 1,822,579 38,051 20,021 57,385 256 (41,530) (5,474) (1,182) (61,682) - 202,719 380,120 (29,844) (869,814) (175,665) (279,200) 4,662 (378,361) (1,667) 32,545 17,661 (369,780) 39,606 (64,307) (6,394) (400,875) 39,546 19,500 (793,859) 14,651 (85) 217 (210,520) 91 17,757 (912,702) (Continued)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Proceeds from guarantee deposits received Refund of guarantee deposits received Increase in other non-current liabilities Proceeds from exercise of employee stock options Increase in non-controlling interests Cash generated from (used in) financing activities EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		Three Months Ended March 31	Three Months Ended March 31
		2013 $ 145,835 (4,740) - (358,763) 100 - 43 - 509 (217,016) 22,696 (2,061,018) 19,096,662 $ 17,035,644	2012 $ 67,035 (1,640,708) 2,170,000 (83,762) - (83) 405 70,758 - 583,645 (23,655) (753,587) 19,727,097 $ 18,973,510

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 2, 2013) (Concluded)

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MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2013 AND 2012 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

Macronix International Co., Ltd. (the “Company”) was incorporated in the Republic of China (“ROC”) on December 9, 1989 and commenced business in December 1989. The Company operates principally as a designer, manufacturer and supplier of integrated circuits and memory chips. The Company also performs design, research and development, consultation and trade of relevant products.

The Company’s shares have been listed on the Taiwan Stock Exchange (TSE) since March 15, 1995. The Company listed a portion of its shares on the NASDAQ Stock Market in the form of American Depositary Shares (ADSs) in May 1996 but delisted on October 29, 2007.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were reported to the Board of Directors and issued on May 2, 2013.

APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS

The Company and its entire controlled subsidiaries (the “Group”) have not applied the following IFRSs that have been issued by the IASB.

New, Revised Standards, Amendments and Interpretations Endorsed by the FSC but the effective date have not yet been determined by the FSC Amendments to IFRSs Improvements to IFRSs 2009 - Amendment to IAS 39 IFRS 9 (2009) Financial Instruments Amendment to IAS 39 Embedded Derivatives Not yet endorsed by the FSC Amendments to IFRSs Improvements to IFRSs 2010 - Amendment to IAS 39 Amendments to IFRSs Annual Improvements to IFRSs 2009-2011 Cycle Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters Amendments to IFRS 1 Government Loans

Effective Date Announced by IASB (Note)

January 1, 2009 or January 1, 2010 January 1, 2015 Effective in fiscal year beginning on or after June 30, 2009 July 1, 2010 or January 1, 2011 January 1, 2013 July 1, 2010 January 1, 2013 (Continued)

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New, Revised Standards, Amendments and Interpretations

Effective Date Announced by IASB (Note)

Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters Amendment to IFRS 7 Disclosures - Offsetting Financial Assets and January 1, 2013 Financial Liabilities Amendments to IFRS 9 and Mandatory Effective Date and Transition January 1, 2015 IFRS 7 Disclosure Amendment to IFRS 7 Disclosures - Transfers of Financial Assets July 1, 2011 Amendment to IFRS 9 Financial Instruments January 1, 2015 IFRS 10 Consolidated Financial Statements January 1, 2013 IFRS 11 Joint Arrangements January 1, 2013 IFRS 12 Disclosure of Interests in Other Entities January 1, 2013 Amendments to IFRS 10, Consolidated Financial Statements, Joint January 1, 2013 IFRS 11 and IFRS 12 Arrangements, and Disclosure of Interests in Other Entities: Transition Guidance Amendments to IFRS 10, Investment Entities January 1, 2014 IFRS 12 and IFRS 27 IFRS 13 Fair Value Measurement January 1, 2013 Amendment to IAS 1 Presentation of Items of Other Comprehensive July 1, 2012 Income Amendment to IAS 12 Deferred Tax: Recovery of Underlying January 1, 2012 Assets Amendment to IAS 19 Employee Benefits January 1, 2013 Amendment to IAS 27 Separate Financial Statements January 1, 2013 Amendment to IAS 28 Investments in Associates and Joint Ventures January 1, 2013 Amendment to IAS 32 Offsetting of Financial Assets and Financial January 1, 2014 Liabilities IFRIC 20 Stripping Costs in the Production Phase of A January 1, 2013 Surface Mine (Concluded)

Note: Unless otherwise noted, the above new and revised Standards, Amendments and Interpretations are effective for annual periods beginning on or after the respective effective dates.

Except for the following, the initial application of the above new and revised Standards, Amendments and Interpretations had not had any material impact on the Group’s accounting policies:

a. Initial application of IFRS 9, Financial Instruments

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” to be subsequently measured at amortized cost or fair value. Specifically, financial assets that are held within a business model by the Company whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the balance sheet date.

As for financial liabilities, the main changes are with regard to the classification and measurement of financial liabilities designated as at fair value through profit or loss. IFRS 9 requires that the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss.

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• b. Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 introduce a new disclosure terminology for other comprehensive income, which require additional disclosures in other comprehensive income. The items of other comprehensive income will be grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. In addition, income tax on items of other comprehensive income is also required to be allocated on the same basis. The Company expects the aforementioned amendments will change the Company’s presentation on the statement of comprehensive income.

c. Amendments to IAS 19, “Employee Benefits”

The amendments to IAS 19 change the accounting for defined benefit plans, which require the Company to recognize changes in defined benefit obligations or assets, to disclose the components of the defined benefit costs, to eliminate the corridor approach and to accelerate the recognition of past service cost. According to the amendments, all actuarial gains and losses will be recognized immediately through other comprehensive income; the past service cost, on the other hand, will be expensed immediately when it incurred and no longer amortized over the average period before vesting on a straight-line basis. In addition, the amendment also requires a broader disclosure of defined benefit plans.

Since the FSC has not announced the effective date of the above new and revised Standards, Amendments and Interpretations, it is not practicable to provide a reasonable estimate of the impact of the initial application of the Standards, Amendments and Interpretations on the financial position and results of the Group until a detailed review has been completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

On May 14, 2009, the FSC announced the “Framework for the Adoption of IFRSs by the Companies in the ROC.” In this framework, starting 2013, companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare their consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, and the Interpretations approved by the FSC.

The consolidated financial statements of the Company and its entire controlled subsidiaries are the first IFRS interim financial statements for part of the period covered by its first IFRS financial statements, the consolidated financial statements for 2013. The date of transition to IFRSs was January 1, 2012. Refer to Note 37 for the impact of IFRS conversion on the consolidated financial statements.

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, IFRS 1 “First-time Adoption of International Financial Reporting Standards” and IAS 34 “Interim Financial Reporting” as endorsed by the FSC. Disclosure information included in interim financial reports is less than disclosures required in a full set of annual financial reports.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

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The opening consolidated balance sheets as of the date of transition to IFRSs was prepared in accordance with IFRS 1 “First-time Adoption of International Financial Reporting Standards”. The applicable IFRSs have been applied retrospectively by the Group except for some aspects where other IFRSs prohibit retrospective application and specified areas where IFRS 1 grants limited exemptions from the requirements of other IFRSs. For the exemptions that the Group elected, refer to Note 37. The significant accounting policies are set out as below.

• c. Classification of current and non-current assets and liabilities

Current assets include cash and cash equivalents and those assets held primarily for trading purposes or to be realized within twelve months after the reporting period, unless the asset is to be used for an exchange or to settle a liability, or otherwise remains restricted, at more than twelve months after the reporting period. Property, plant and equipment, intangible assets, other than assets classified as current are classified as non-current. Current liabilities are obligations incurred for trading purposes or to be settled within twelve months after the reporting period and liabilities that do not have an unconditional right to defer settlement for at least twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue. Liabilities that are not classified as current are classified as non-current.

• d. Basis of consolidation

• 1) Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries). Control is achieved when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

Non-controlling interests shall be presented in the consolidated balance sheets within equity, separately from the equity of the owners of the Company.

- Attribution of total comprehensive income to non controlling interests

Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

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• 2) Subsidiary included in consolidated financial statements:

As of March 31, 2013, the Company has direct and indirect majority ownership in the following subsidiaries: Run Hong Investment, Ltd. (“Run Hong”), Hui Ying Investment, Ltd. (“Hui Ying”), Magic Pixel Inc. (“MPI”), Mxtran Inc. (“Mxtran”), Infomax Communication Co., Ltd. (“INFOMAX”), MoDioTek Co., Ltd. (“MoDioTek”), Macronix America Inc. (“MXA”), Macronix (BVI) Co., Ltd. (“MXBVI”), Magic Pixel Inc. (“MPI Samoa”), Magic Pixel Holding Company Limited (“MPI HK”), Magic Pixel (Shen Zhen) Co., Ltd. (“MPI SZ”), Mxtran Holding (Samoa) Co., Ltd. (“Mxtran Samoa”), Mxtran (H.K.) Holding Co., Limited (“Mxtran HK”), Maxtran Technology Co., Ltd. (“Maxtran Beijing”), Infomax Holding Co., Ltd. (“Infomax Samoa”), Infomax Holding Company Limited (“Infomax HK”), Infomax Communication (Suzhou) Co., Ltd. (“Infomax SU”), Mosatek Co., Ltd. (“Mosatek Samoa”), Mosatek (HK) Company Limited (“Mosatek HK”), Modiotek (Suzhou) Co., Ltd. (“Modiotek SU”), New Trend Technology Inc. (“NTTI”), Macronix (Asia) Limited (“MX Asia”), Macronix Pte. Ltd. (“MPL”), Macronix Europe NV. (“MXE”), Macronix (Hong Kong) Co., Ltd. (“MXHK”) and Macronix Microelectronics (Suzhou) Co., Ltd. (“MXm”).

The consolidated entities as of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012 were as follows, except that the entities which were not subject to Article 2-1 of the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants were not reviewed:

Investor Investee Main Business The Company MXB Sales and marketing The Company Run Hong Investment company The Company Hui Ying Investment company The Company and Run Hong MPI Fabless multimedia system on chip The Company and Run Hong Mxtran Combi-SIM IC and the related service The Company and Run Hong INFOMAX Baseband chip, analog baseband chip, and power management chip The Company, Run Hong and Hui Ying MoDioTek Mobile audio platform and smart remote controller The Company and Run Hong MaxRise IC design, research, development, design, manufacturing and sales of digital TV receivable chips The Company MXA Sales and marketing The Company MXBVI Investment company MPI MPI Samoa Investment company MPI Samoa MPI HK Investment company MPI HK MPI SZ Sales and technical support of fabless multimedia system on chip Mxtran Mxtran Samoa Investment company Mxtran Samoa Mxtran HK Investment company Mxtran HK Maxtran Beijing Technical support of Combi-SIM IC INFOMAX Infomax Samoa Investment company Infomax Samoa Infomax HK Investment company Infomax HK Infomax SU Software, rendering and technical service MoDioTek Mosatek Samoa Investment company Mosatek Samoa Mosatek HK Investment company Mosatek HK Modiotek SU Sales and technical support of mobile audio platform and smart remote controller MXBVI NTTI IC design MXBVI MX Asia Investment company MXBVI MPL After-sales service

% of Ownership March 31, 2013 December 31, 2012 March 31, 2012 January 1, 2012 Remark - - 50.00 50.00 Note 1 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 77.38 77.38 77.38 77.38 - 93.14 93.14 93.14 93.14 - 97.34 97.34 97.68 97.68 - 80.86 80.86 80.86 80.86 - - - 84.69 84.69 Note 2 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - (Continued)

• 13 -

Investor Investee Main Business MXBVI MXE After-sales service MXBVI MXHK Sales and marketing MXHK MXm Development of integrated circuit system and software	% of Ownership March 31, 2013 December 31, 2012 March 31, 2012 January 1, 2012 Remark 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 -

(Concluded)

Note 1: MXB was in the process of liquidation in 2011 and completed the liquidation in 2012.

Note 2: MaxRise merged with INFOMAX through share swap in December 2012, and INFOMAX continues to exist. MaxRise’s revenues and expenses before the merger were included in the consolidated financial statements of 2012.

e. Business combinations

The Group does not apply IFRS 3 “Business Combination” to account for business combinations involving entities under common control. The consolidated financial statements were prepared on the basis of the acquiree's carrying amount less identified losses.

f. Foreign currencies

The functional currency of the Company is New Taiwan dollars. In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. Functional currency is the currency of the primary economic environment in which the entity operates. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising are recognized in other comprehensive income and accumulated in equity attributed to the owners of the Company and non-controlling interests as appropriate.

g. Cash equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

h. Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at standard cost and adjusted to approximate weighted-average cost at the balance sheet date.

• 14 -

• i. Property, plant, and equipment

Property, plant and equipment are tangible items that are held for use in the production or supply of goods and are expected to be used during more than one period. Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Freehold land is not depreciated.

Depreciation is recognized so as to write off the cost of assets less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

• j. Intangible assets

• 1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life, residual value, and amortization method are reviewed at the end of each year, with the effect of any changes in estimate being accounted for on a prospective basis which is in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”.

• 2) Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

• 3) Derecognition of intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

• k. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to the individual cash-generating units; otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

• 15 -

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

When an impairment loss subsequently is reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

• l. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial instruments are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial instruments other than financial instruments at fair value through profit or loss are added to or deducted from the fair value of the financial instruments, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial instruments at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a settlement date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

• 1) Measurement category

Financial assets are classified into the following specified categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The categories of financial assets held by the Group are financial assets at fair value through profit or loss, available-for-sale financial assets and loans and receivables.

• a) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

• i. Financial asset is classified as held for trading if:

• i) It has been acquired principally for the purpose of selling it in the near term; or

• ii) On initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

iii) It is a derivative that is not designated and effective as a hedging instrument.

• 16 -

• ii. A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss upon initial recognition when doing so results in more relevant information and if:

• i) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• ii) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis.

In addition, if a contract contains one or more embedded derivatives, the entire combined contract asset or liability can be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is not included in the other gains and losses line item. Fair value is determined in the manner described in Note 30.

• b) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are recognized in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets.

• c) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including cash and cash equivalent, trade receivables, other receivables and long-term receivables) are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

• 17 -

• 2) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial assets, such as trade receivables and other receivables, assets are assessed for impairment on a collective basis even if they were assessed as not impaired individually.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• a) Significant financial difficulty of the issuer or counterparty; or

• b) Breach of contract, such as a default or delinquency in interest or principal payments; or

• c) It becoming probable that the borrower will enter bankruptcy or financial re-organization; or

• d) The disappearance of an active market for that financial asset because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. When a trade receivable and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account.

• 3) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

• 18 -

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

Financial liabilities

• 1) Subsequent measurement

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method, less any impairment.

Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when the financial liability is held for trading.

• a) A financial liability is classified as held for trading if:

• i. It has been acquired principally for the purpose of repurchasing it in the near term; or

• ii. On initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

iii. It is a derivative that is not designated and effective as a hedging instrument.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is not included in the other gains and losses line item. Fair value is determined in the manner described in Note 30.

• 2) Derecognition of financial liabilities

The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Derivative financial instruments

The Group enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risks.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

• m. Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

• 19 -

n. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns and recognizes a liability for returns based on previous experience and other relevant factors.

• 1) Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

• a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• c) The amount of revenue can be measured reliably;

• d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

• e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

Specifically, sales of goods are recognized when goods are delivered and title has passed.

• 2) Rendering of services

Service income is recognized when services are provided.

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. The stage of completion of the contract is determined by the contractual rates as labor hours and direct expenses are incurred.

• 3) Royalties

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Royalty arrangements that are based on production, sales and other measures are recognized by reference to the underlying arrangement.

• 4) Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

• 20 -

o. Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

1) The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

• 2) The Group as lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Contingent rents arising under operating leases are recognized as an expense in the period in which they are incurred.

• p. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred other than stated above.

• q. Retirement benefit costs

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. Actuarial gains and losses that exceed 10% of the greater of the present value of the Group's defined benefit obligation and the fair value of plan assets as at the end of the prior year are amortized over the expected average remaining working lives of the participating employees. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognized in the consolidated balance sheets represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognized past service cost and actuarial losses, plus the present value of available refunds and reductions in future contributions to the plan.

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-time events.

• r. Share-based payment arrangements

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date.

• 21 -

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value determined at the grant date of the equity-settled share-based payments is recognized as an expense in full at the grant date when the share options granted vest immediately.

At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the capital surplus - employee share options.

The above accounting policy only applies to the equity instruments granted after November 7, 2002 and also vested after January 1, 2012. For the other rest equity instruments, equity-settled share-based payments are not recognized as an expense.

• s. Treasury stock

The Company’s stock held by subsidiaries is treated as treasury stock and reclassified from investments accounted for using equity method into treasury stock. The gains on disposal of treasury stock held by subsidiaries and cash dividends received by subsidiaries from the Company deducted are from the Company’s investment gains and adjusted under capital surplus - treasury stock transactions.

• t. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

• 1) Current tax

Interim period income taxes are assessed on an annual basis. Interim period income tax expense is calculated by applying to an interim period's pre-tax income the tax rate that would be applicable to expected total annual earnings.

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

• 2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment and technology, and research and development expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

• 22 -

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred tax for the period

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies, which are described in note 4, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

a. Revenue recognition

The Group recognizes revenue when the conditions described in Note 4 are satisfied. The Group also records a provision for estimated future returns and other allowances in the same period the related revenue is recorded. Provision for estimated sales returns and other allowances is generally made and adjusted at a specific percentage based on historical experience and any known factors that would significantly affect the allowance, and the Group periodically reviews the adequacy of the percentage used.

• 23 -

As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, the Group recognized provisions for estimated sales returns and other allowances of NT$5,834 thousand, NT$11,062 thousand, NT$14,587 thousand and NT$11,987 thousand, respectively.

b. Estimated impairment of notes receivable and trade receivables

When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, the carrying amount of notes receivable and trade receivables (including receivables from related parties) was NT$3,090,764 thousand, NT$3,339,433 thousand, NT$3,149,536 thousand and NT$3,819,513 thousand, respectively (after deducting allowance of NT$0 thousand, NT$18thousand, NT$20,039 thousand and NT$18 thousand, respectively).

• c. Impairment of tangible and intangible assets

In the process of evaluating the potential impairment of tangible and intangible assets, the Group is required to make subjective judgments in determining the independent cash flows, useful lives, expected future revenue and expenses related to the specific asset groups with the consideration of the nature of semiconductor industry. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges in future periods.

For the three months ended March 31, 2013 and 2012, the Group did not have impairment loss.

d. Income taxes

As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, the carrying amount of the deferred tax assets in relation to unused tax losses was NT$4,771,419 thousand, NT$4,435,207 thousand, NT$4,226,423 thousand and NT$4,075,921 thousand, respectively. As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, no deferred tax asset has been recognized on the tax loss of NT$3,857,340 thousand, NT$3,525,364 thousand, NT$3,678,873 thousand and NT$3,522,723 thousand, respectively, due to the unpredictability of future profit streams. The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such reversal takes place.

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which those deferred tax assets can be utilized. Assessment of the realization of the deferred tax assets requires the Group’s subjective judgment and estimate, including the future revenue growth and profitability, tax holidays, the amount of tax credits that can be utilized and feasible tax planning strategies. Any changes in the global economic environment, the industry trends and relevant laws and regulations could result in significant adjustments to the deferred tax assets.

As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, the deferred tax assets were NT$914,079 thousand, NT$909,843 thousand, NT$547,550 thousand and NT$553,198 thousand, respectively.

• 24 -

• e. Fair value of derivatives and other financial instruments

As described in note 30, the Group’s management uses its judgment in selecting an appropriate valuation technique for financial instruments that do not have quoted market price in an active market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments, assumptions were based on quoted market rates adjusted for specific features of the instruments. Other financial instruments were valued using a discounted cash flow analysis that includes assumptions based on quoted market prices or rates (if available).

f. Useful lives of property, plant and equipment

As described in note 4 above, the Group reviews the estimated useful lives of property, plant and equipment at each year.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalent Time deposits Repurchase agreements collateralized by bonds	March 31, 2013 $ 495 2,273,302 14,761,847 - $ 17,035,644	December 31, 2012 $ 610 1,292,609 17,803,443 - $ 19,096,662	March 31, 2012 $ 734 2,019,409 16,903,246 50,121 $ 18,973,510	January 1, 2012 $ 863 3,201,151 16,275,083 250,000
				$ 19,727,097

The market rate intervals of cash in bank and repurchase agreement collateralized by bonds at the end of the reporting period were as follows:

	March 31,	December 31,	March 31,	January 1,
	2013	2012	2012	2012
Bank balance	0.00%-2.85%	0.00%-2.85%	0.00%-3.50%	0.00%-3.50%
Repurchase agreement
collateralized by bonds	-	-	0.89%	0.75%-0.89%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

	March 31,	March 31,	December 31,	December 31,	March 31,	March 31,	January	1,
		2013		2012		2012	2012
Financial assets held for trading
Derivative financial assets (not
under hedge accounting)
Foreign exchange forward
contracts (a)	$	-	$	6,199	$	-	$	-
							(Continued)

• 25 -

	March 31,	March 31,	December	December	31,	March 31,	March 31,	January	January	1,
		2013		2012			2012		2012
Financial assets designated as at
FVTPL
Foreign publicly-traded convertible
bonds (b)	$	-	$		-	$	-	$	39,357
Financial assets at FVTPL	$	-	$	6,199		$	-	$	39,357
Current	$	-	$	6,199		$	-	$		-
Non-current		-			-		-		39,357
	$	-	$	6,199		$	-	$	39,357
Financial liabilities held for trading
Derivative financial liabilities (not
under hedge accounting)
Foreign exchange forward
contracts (a)	$	1,849	$		-	$	-	$		-
Current	$	1,849	$		-	$	-	$		-
								(Concluded)

• a. At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:

			Contract Amount
Contract	Currency	Maturity Date	(In Thousands)
March 31, 2013
Sell	USD/NTD	2013.04	USD10,000/NTD296,869
December 31, 2012
Sell	JPY/NTD	2013.01	JPY400,000/NTD141,800
Sell	USD/NTD	2013.01	USD10,000/NTD290,456

The Group entered into foreign exchange forward contracts during the three months ended March 31, 2013 and 2012 to manage exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities. However, those contracts did not meet the criteria of hedge effectiveness and therefore were not accounted for by using hedge accounting.

• b. The foreign publicly-traded convertible bonds with annual rate of 5% were matured and the amounts of principal and interest were received on January 12, 2012.

• 26 -

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

March 31, 2013 December 31, 2012 Domestic investments Emerging market shares $ 771,287 $ 725,526 Foreign investments Quoted shares 155,257 163,159 Available-for-sale financial assets $ 926,544 $ 888,685 Non-current $ 926,544 $ 888,685 FINANCIAL ASSETS MEASURED AT COST March 31, 2013 December 31, 2012 Domestic unlisted common shares $ 82,698 $ 91,473 Overseas unlisted common shares 6,562 6,389 $ 89,260 $ 97,862 Non-current $ 89,260 $ 97,862	March 31, 2012 $ 821,603 262,758 $1,084,361 $1,084,361 March 31, 2012 $ 98,056 36,002 $ 134,058 $ 134,058	January 1, 2012 $ 678,663 200,729 $ 879,392 $ 879,392 January 1, 2012 $ 117,556 36,935 $ 154,491 $ 154,491

9. FINANCIAL ASSETS MEASURED AT COST

Management believed that the fair value of the above unlisted equity investments held by the Group cannot be reliably measured due to the significant range of reasonable fair value estimates, therefore, they were measured at cost less impairment at the end of the reporting period.

10. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

a. Trade Receivables

Notes receivable Notes receivable - operating Trade receivables Trade receivables Less: Allowance for impairment loss	March 31, 2013 December 31, 2012 $ 346 $ 1,077 2,824,677 $2,910,921 - 18 2,824,677 2,910,903 $ 2,825,023 $ 2,911,980	March 31, 2012 $ 7,547 2,641,438 20,039 2,621,399 $ 2,628,946	January 1, 2012 $ 6,486 2,894,982 18 2,894,964 $ 2,901,450 (Continued)

• 27 -

Other receivables Tax receivable Others	March 31, 2013 December 31, 2012 $ 114,018 $ 89,485 28,772 16,718 $ 142,790 $ 106,203	March 31, 2012 $ 126,430 24,612 $ 151,042	January 1, 2012 $ 94,744 26,454 $ 121,198 (Concluded)

The average credit period for sales of goods was 60 days. In determining the recoverability of a trade receivable, the Group evaluates each customer’s credibility and financial position and considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period.

Before accepting any new customer, the Group uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed twice a year. As of March 31, 2013, 96% of the trade receivables that were neither past due nor impaired had the better credit scoring attributable under the internal credit scoring system used by the Group.

Of the trade receivables balance at the end of the period, NT$583,286 thousand, NT$700,044 thousand, NT$334,976 thousand and NT$453,838 thousand as of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, respectively, was due from Group A, the Group’s main customer (see Note 30). There were no other customers who represent more than 10% of the total balance of trade receivables.

Of the trade receivables balance (see aging analysis below) that are past due at the end of the reporting period, the Group had not recognized an allowance for impaired notes receivable and trade receivables for NT$231,054 thousand, NT $226,243 thousand, NT$19,897 thousand and NT$44,161 thousand as of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, respectively, because there had not been a significant change in credit quality and the amounts were still considered recoverable.

Age of receivables that were past due but not impaired was as follows:

Neither past due nor impaired Past due but not impaired Less than 30days 31-60days 61-90days 91-120days Over 120days	March 31, 2013 December 31, 2012 $ 2,593,623 $ 2,684,660 88,918 106,016 39,397 38,162 44,142 27,048 21,633 38,966 36,964 16,051 $ 2,824,677 $ 2,910,903	March 31, 2012 $ 2,601,502 14,497 5,400 - - - $ 2,621,399	January 1, 2012 $ 2,850,803 39,394 4,767 - - -
			$ 2,894,964

Above analysis was based on the past due date.

• 28 -

Movements in the allowance for impairment loss recognized on trade receivables were as follows:

Balance at January 1 Add: Impairment losses recognized on receivables Less: Impairment losses reversed Balance at March 31	2013 $ 18 - 18 $ -	2012 $ 18 20,021 - $ 20,039

As of March 31, 2013, collaterals held by the Group for trade receivables were checks of NT$1,970 thousand, letters of credit of NT$39,189 thousand, certificate of deposits of NT$107,750 and bank guarantee of NT$198,750 thousand.

b. Notes Receivable

No allowance for impairment loss of notes receivable was recognized since the notes receivable of the Group were not past due and no uncertainty of recoverability was assessed.

11. INVENTORIES

INVENTORIES
Finished goods Work in progress Raw materials	March 31, 2013 $ 1,122,047 6,043,275 371,337 $ 7,536,659	December 31, 2012 $ 1,004,290 5,511,200 344,402 $ 6,859,892	March 31, 2012 $ 964,264 5,920,121 453,432 $ 7,337,817	January 1, 2012 $ 1,045,265 5,002,956 419,782
				$ 6,468,003

The cost of inventories recognized as cost of goods sold for the three months ended March 31, 2013 and 2012 was NT$4,590,250 thousand and NT$4,388,306 thousand, respectively. The cost of inventories recognized as an expense includes NT$358,071 thousand and NT$152,226 thousand for the three months ended March 31, 2013 and 2012, respectively, in respect of write-downs of inventory to net realizable value, and had been reduced by NT$0 thousand and NT$805 thousand for the three months ended March 31, 2013 and 2012, respectively, in respect of the reversal of such write-downs. Previous write-downs were reversed as a result of increased sales prices in certain markets.

12. PROPERTY, PLANT AND EQUIPMENT

		March 31,	December 31,	December 31,		March 31,		January 1,
		2013		2012		2012		2012
Carrying amount of each class
Freehold land	$	883,889	$	876,366	$	880,870	$	888,201
Buildings		6,544,752		6,701,794		7,256,193		7,430,004
Machinery equipment		15,495,878		16,592,121		19,647,655		19,833,527
Research and development
equipment		3,997,038		4,041,246		4,229,119		1,054,589
								(Continued)

• 29 -

Transportation equipment Leasehold improvements Miscellaneous equipment Advance payments and construction in progress	March 31, 2013 $ 14,560 22,657 142,432 1,238,114 $ 28,339,320	December 31, 2012 $ 15,557 23,236 158,981 1,474,477 $ 29,883,778	March 31, 2012 $ 9,869 4,155 165,144 1,918,464 $ 34,111,469	January 1, 2012 $ 8,691 4,844 179,426 6,097,550 $ 35,496,832 (Concluded)

Cost Balance at January 1, 2012 Additions Disposals Effect of foreign currency exchange differences Reclassification Balance at March 31, 2012 Balance at January 1, 2013 Additions Disposals Effect of foreign currency exchange differences Reclassification Balance at March 31, 2013 Accumulated depreciation and impairment Balance at January 1, 2012 Disposals Depreciation expense Effect of foreign currency exchange differences Reclassification Balance at March 31, 2012 Balance at January 1, 2013 Disposals Depreciation expense Effect of foreign currency exchange differences Reclassification Balance at March 31, 2013	Freehold Land $ 1,264,367 - - (16,836 ) - $ 1,247,531 $ 1,237,187 - - 17,276 - $ 1,254,463 $ (376,166 ) - - 9,505 - $ (366,661) $ (360,821 ) - - (9,753 ) - $ (370,574)	Buildings $ 21,717,424 131,670 - (5,765 ) - $ 21,843,329 $ 22,209,968 148,876 - 6,801 - $ 22,365,645 $ (14,287,420 ) - (300,033 ) 317 - $ (14,587,136) $ (15,508,174 ) - (312,127 ) (592 ) - $ (15,820,893)	Machinery Equipment $ 75,224,281 1,293,362 (70,532 ) - (89,018) $ 76,358,093 $ 76,913,234 260,252 (26,178 ) - 837 $ 77,148,145 $ (55,390,754 ) 61,620 (1,378,051 ) - (3,253) $ (56,710,438) $ (60,321,113 ) 26,178 (1,356,495 ) - (837) $ (61,652,267)	Research and Development Equipment $ 2,381,513 3,201,339 (18,747 ) (486 ) 89,018 $ 5,652,637 $ 6,037,523 179,970 (6,258 ) 439 (837) $ 6,210,837 $ (1,326,924 ) 18,747 (118,801 ) 207 3,253 $ (1,423,518) $ (1,996,277 ) 6,239 (224,248 ) (350 ) 837 $ (2,213,799)	Transportation Equipment $ 28,192 2,100 (2,657 ) (52 ) - $ 27,583 $ 32,155 - - 45 - $ 32,200 $ (19,501 ) 2,451 (712 ) 48 - $ (17,714) $ (16,598 ) - (1,002 ) (40 ) - $ (17,640)	Leasehold Improvements $ 26,553 - - (998 ) - $ 25,555 $ 44,894 253 - 442 - $ 45,589 $ (21,709 ) - (475 ) 784 - $ (21,400) $ (21,658 ) - (1,307 ) 33 - $ (22,932)	Miscellaneous Equipment $ 1,096,751 10,876 (1,545 ) (1,909 ) (42) $ 1,104,131 $ 1,142,967 7,408 (3,229 ) 1,692 - $ 1,148,838 $ (917,325 ) 1,486 (24,507 ) 1,357 2 $ (938,987) $ (983,986 ) 3,222 (24,523 ) (1,119 ) - $ (1,006,406)	Advance Payments and Construction in Progress $ 6,097,550 (4,179,086 ) - - - $ 1,918,464 $ 1,474,477 (236,645 ) - 282 - $ 1,238,114 $ - - - - - $ - $ - - - - - $ -	Total $ 107,836,631 460,261 (93,481 ) (26,046 ) (42)
									$ 108,177,323
									$ 109,092,405 360,114 (35,665 ) 26,977 -
									$ 109,443,831
									$ (72,339,799 ) 84,304 (1,822,579 ) 12,218 2
									$ (74,065,854)
									$ (79,208,627 ) 35,639 (1,919,702 ) (11,821 ) -
									$ (81,104,511)

Impairment assessment was performed in the three months ended March 31, 2013, but no impairment was recognized. No impairment assessment was performed in the three months ended March 31, 2012 as there was no indication of impairment.

The carrying amount of the freehold land in U.S.A. which is unutilized by the Group as of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012 was US$9,583 thousand.

The above items of property, plant and equipment were depreciated on a straight-line basis at the following rates per annum:

rates per annum:
Buildings	5-40 years
Machinery equipment	5-6 years
Research and development equipment	1-6 years
Transportation equipment	3-6 years
Leasehold improvements	3-16 years
Miscellaneous equipment	1-16 years

The major component parts of the buildings held by the Group included plants, electro-powering machinery, factory equipment and landscape construction which were depreciated over their estimated useful lives of 20-40 years, 11-20 years, 6 years and 20 years, respectively.

• 30 -

Refer to note 32 for the carrying amount of property, plant and equipment that had been pledged by the Group to secure long-term bank loans granted to the Group.

13. INTANGIBLE ASSETS

Carrying amount of each class Software Licenses Mask Others Cost Balance at January 1, 2012 Additions Reclassification Effect of foreign currency exchange differences Balance at March 31, 2012 Balance at January 1, 2013 Additions Disposals Effect of foreign currency exchange differences Balance at March 31, 2013 Accumulated amortization Balance at January 1, 2012 Amortization expense Reclassification Effect of foreign currency exchange differences Balance at March 31, 2012 Balance at January 1, 2013 Amortization expense Disposals Effect of foreign currency exchange differences Balance at March 31, 2013	March 31, 2013 $ 366,604 21,211 4,038 4,151 $ 396,004 Software $ 163,865 193,677 27 (251) $ 357,318 $ 480,358 87,831 (11,832) 375 $ 556,732 $ (87,174) (22,323) (2) 200 $ (109,299) $ (157,305) (44,415) 11,832 (240) $ (190,128)	December 31, 2012 March 31, 2012 $ 323,053 $ 248,019 26,288 43,168 9,643 14,922 1,952 1,457 $ 360,936 $ 307,566 Licenses Mask Others $ 220,451 $ 161,324 $ 23,166 16,600 - 243 (13,406) - - - - 55 $ 223,645 $ 161,324 $ 23,464 $ 58,339 $ 22,633 $ 9,185 - 80 2,838 (4,743) - (6,853) - - - $ 53,596 $ 22,713 $ 5,170 $ (172,129) $ (139,569) $ (21,460) (8,348) (6,833) (547) - - - - - - $ (180,477) $ (146,402) $ (22,007) $ (32,051) $ (12,990) $ (7,233) (5,076) (5,685) (640) 4,742 - 6,854 - - - $ (32,385) $ (18,675) $ (1,019)	January 1, 2012 $ 76,691 48,322 21,755 1,707 $ 148,475 Total $ 568,806 210,520 (13,379) (196) $ 765,751 $ 570,515 90,749 (23,428) 375 $ 638,211 $ (420,332) (38,051) (2) 200 $ (458,185) $ (209,579) (55,816) 23,428 (240) $ (242,207)
			$

The above items of other intangible assets were amortized on a straight-line basis at the following rates per annum:

Software 1-6 years Licenses 1-3 years Mask 1-3 years Others 1-3 years

• 31 -

14. PREPAYMENTS FOR LEASE

PREPAYMENTS FOR LEASE
	March 31,		December 31,		March 31,		January 1,
		2013		2012		2012		2012
Current asset (included in other
current assets)	$	538	$	523	$	530	$	543
Non-current asset (included in
other non-current assets)		23,012		22,477		23,207		23,920
	$	23,550	$	23,000	$	23,737	$	24,463

As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, prepaid lease payments include land use rights with carrying amounts of NT$23,550 thousand, NT$23,000 thousand, NT$23,737 thousand and NT$24,463 thousand, respectively, which are located in Mainland China. The Group has obtained the land use right certificates.

15. OTHER FINANCIAL ASSETS

Restricted time deposits Refundable deposits Long-term receivables Current Non-current	March 31, 2013 December 31, 2012 $ 171,176 $ 211,282 12,563 12,667 7,023 10,078 $ 190,762 $ 234,027 $ 6,999 $ 47,105 183,763 186,922 $ 190,762 $ 234,027	March 31, 2012 $ 187,091 14,049 - $ 201,140 $ 22,914 178,226 $ 201,140	January 1, 2012 $ 187,182 14,559 - $ 201,741 $ 23,005 178,736 $ 201,741

16. OTHER ASSETS

Supplies Prepayments Prepayments for lease Offset against business tax payable Others Current Non-current	March 31, 2013 December 31, 2012 $ 298,911 $ 308,755 451,640 147,957 23,550 23,000 21,286 20,085 45,765 47,371 $ 841,152 $ 547,168 $ 774,299 $ 479,392 66,853 67,776 $ 841,152 $ 547,168	March 31, 2012 $ 328,049 304,564 23,737 17,728 25,329 $ 699,407 $ 652,656 46,751 $ 699,407	January 1, 2012 $ 326,961 135,140 24,463 17,043 22,918 $ 526,525 $ 475,483 51,042 $ 526,525

Other assets-others are the commitment fee of the syndicated loans and the drawdown fee of long-term bank loans, which are amortized monthly over five and three years respectively.

• 32 -

17. BORROWINGS

a. Short-term borrowings

Unsecured borrowings Letter of credit loan	March 31, 2013 December 31, 2012 $ 227,980 $ 88,406	March 31, 2012 $ 125,465	January 1, 2012 $ 1,800,488

The weighted-average effective interest rate on the letter of credit loans was 0.81%-1.06% per annum (March 31, 2012: 1.22%-1.60% per annum).

• b. Long-term borrowings

March 31, 2013 Secured borrowings Bank loans $ 14,349,852 Unsecured borrowings Bank loans 6,325,000 20,674,852 Less: Current portion 5,503,718 Long-term borrowings: Non-current $ 15,171,134 Maturity Date I Floating rate borrowings Secured syndicated loan denominated in NT$ 2015.12.16 Repayable NT$1,571,000 thousand semi-annually from December 2012 to June 2015, and pay off NT$6,284,000 thousand in December 2015. 1 Un-secured syndicated loan denominated in NT$ 2015.12.16 - 1 Un-secured bank borrowing denominated in NT$ 2014.09.26 Repayable NT$200,000 thousand quarterly from March 2013 to June 2014, and pay off NT$1,000,000 thousand in September 2014 1 Un-secured bank borrowing denominated in NT$ 2014.11.14 Repayable NT$100,000 thousand quarterly from February 2014 to August 2014, and pay off NT$700,000 thousand in November 2014. Un-secured bank borrowing denominated in NT$ 2013.09.26 - Un-secured bank borrowing denominated in NT$ 2014.09.26 Repayable NT$10,000 thousand quarterly from September 2013 to September 2014. 1 Un-secured bank borrowing denominated in NT$ 2014.09.16 Repayable NT$75,000 thousand quarterly from March 2013 to June 2014, and pay off NT$50,000 thousand in September 2014. Un-secured bank borrowing denominated in NT$ 2015.03.26 Repayable NT$50,000 thousand quarterly from June 2013 to March 2015. Secured bank borrowing denominated in NT$ 2016.04.16 Repayable NT$5,699 thousand monthly from May 2003 to April 2016 1 Un-secured bank borrowing denominated in NT$ 2014.09.26 Repayable NT$66,667 thousand semi-annually from March 2012 to September 2014 1	December 31, 2012 $ 14,366,948 6,666,667 21,033,615 5,233,718 $ 15,799,897 Effective nterest Rate March 31, 2013 .30%-1.58% $ 14,139,000 .35%-1.58% 1,500,000 .80%-1.85% 1,400,000 1.69% 1,000,000 1.84% 800,000 .88%-2.08% 600,000 1.65% 425,000 1.62% 400,000 .84%-2.12% 210,852 .80%-1.85% 200,000 $ 20,674,852	December 31, 2012 $ 14,366,948 6,666,667 21,033,615 5,233,718 $ 15,799,897 Effective nterest Rate March 31, 2013 .30%-1.58% $ 14,139,000 .35%-1.58% 1,500,000 .80%-1.85% 1,400,000 1.69% 1,000,000 1.84% 800,000 .88%-2.08% 600,000 1.65% 425,000 1.62% 400,000 .84%-2.12% 210,852 .80%-1.85% 200,000 $ 20,674,852	March 31, 2012 $ 15,309,237 4,383,333 19,692,570 1,979,718 $ 17,712,852 December 31, 2012 Marc 20 $ 14,139,000 $ 15,0 1,500,000 1,5 1,600,000 1,6 1,000,000 800,000 600,000 500,000 5 400,000 4 227,948 2 266,667 3 $ 21,033,615 $ 19,6	March 31, 2012 $ 15,309,237 4,383,333 19,692,570 1,979,718 $ 17,712,852 December 31, 2012 Marc 20 $ 14,139,000 $ 15,0 1,500,000 1,5 1,600,000 1,6 1,000,000 800,000 600,000 500,000 5 400,000 4 227,948 2 266,667 3 $ 21,033,615 $ 19,6	March 31, 2012 $ 15,309,237 4,383,333 19,692,570 1,979,718 $ 17,712,852 December 31, 2012 Marc 20 $ 14,139,000 $ 15,0 1,500,000 1,5 1,600,000 1,6 1,000,000 800,000 600,000 500,000 5 400,000 4 227,948 2 266,667 3 $ 21,033,615 $ 19,6	January 1, 2012 $ 13,556,332 4,050,000 17,606,332 1,527,718 $ 16,078,614 h 31, 12 January 1, 2012 30,000 $ 13,260,000 00,000 1,500,000 00,000 1,600,000 - - - - 50,000 50,000 00,000 500,000 00,000 - 79,237 296,332 33,333 400,000 92,570 $ 17,606,332	January 1, 2012 $ 13,556,332 4,050,000 17,606,332 1,527,718 $ 16,078,614 h 31, 12 January 1, 2012 30,000 $ 13,260,000 00,000 1,500,000 00,000 1,600,000 - - - - 50,000 50,000 00,000 500,000 00,000 - 79,237 296,332 33,333 400,000 92,570 $ 17,606,332
			$
	Effective nterest Rate .30%-1.58% .35%-1.58% .80%-1.85% 1.69% 1.84% .88%-2.08% 1.65% 1.62% .84%-2.12% .80%-1.85%			December 31, 2012 $ 14,139,000 1,500,000 1,600,000 1,000,000 800,000 600,000 500,000 400,000 227,948 266,667 $ 21,033,615		h 31, 12 30,000 00,000 00,000 - - 50,000 00,000 00,000 79,237 33,333 92,570
		$ 20,674,852			$ 19,6		$ 17,606,332

• 33 -

The Group had provided notes used as refundable guarantees for borrowings that will be cancelled upon termination of the guarantee.

In addition, the Group’s interest bearing floating rate borrowing was reset every one to three months.

The loan agreement requires the maintenance of current ratio, debt ratio, and times interest earned ratio based on semi-annual and annual consolidated financial statements.

The details of assets pledged as collaterals for long-term loans are shown in Note 32.

18. NOTES PAYABLE AND TRADE PAYABLES

Notes payable Notes payable - operating Trade payables Trade payables - operating	March 31, 2013 December 31, 2012 $ 22 $ 105 1,847,625 1,834,036 $ 1,847,647 $ 1,834,141	March 31, 2012 $ 1,072 1,852,753 $ 1,853,825	January 1, 2012 $ 5,412 2,149,342
			$ 2,154,754

The average credit period for purchases of goods was 71 days and no interest was charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

19. OTHER PAYABLES

Other payables Payable for rework fees Payable for royalties Payable for maintenance and repair Bonus Payable for pension Others	March 31, 2013 $ 692,070 531,036 276,270 146,446 57,067 444,283 $ 2,147,172	December 31, 2012 $ 851,804 544,531 354,863 270,794 56,709 553,679 $ 2,632,380	March 31, 2012 $ 333,457 539,417 278,394 138,324 55,750 459,438 $ 1,804,780	January 1, 2012 $ 252,234 613,531 367,167 335,344 54,380 566,527
				$ 2,189,183

20. PROVISIONS

PROVISIONS
Employee benefits Customer returns and rebates Current	March 31, 2013 December 31, 2012 $ 63,071 $ 70,573 5,834 11,062 $ 68,905 $ 81,635 $ 68,905 $ 81,635	March 31, 2012 $ 59,700 14,587 $ 74,287 $ 74,287	January 1, 2012 $ 63,967 11,987
			$ 75,954
			$ 75,954

• 34 -

Employee benefits Customer Returns and Rebates Balance at January 1, 2012 $ 63,967 $ 11,987 Additional provisions recognized - 32,592 Reversing un-usage balances (4,072) (29,954) Effect of foreign currency exchange differences (195) (38) Balance at March 31, 2012 $ 59,700 $ 14,587 Balance at January 1, 2013 $ 70,573 $ 11,062 Additional provisions recognized 53,995 1,501 Reversing un-usage balances (61,479) (6,768) Effect of foreign currency exchange differences (18) 39 Balance at March 31, 2013 $ 63,071 $ 5,834

Total $ 75,954 32,592 (34,026) (233) $ 74,287 $ 81,635 55,496 (68,247) 21 $ 68,905

• a. The provision for employee benefits represents vested long service leave entitlements accrued.

• b. The provision of customer returns and rebates was based on historical experience, management's judgments and other known reasons estimated product returns and rebates may occur in the year. The provision was recognized as a reduction of operating income in the periods of the related goods sold.

21. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company, Magic Pixel Inc., Mxtran Inc., Infomax Communication Co., Ltd., MoDioTek Co., Ltd. and MaxRise Inc. of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Based on the LPA, the Group makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group's subsidiary in China are members of a state-managed retirement benefit plan operated by the government of China. The subsidiary is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

The total expense recognized in profit or loss for the three months ended March 31, 2013 and 2012 was NT$55,675 thousand and NT$51,265 thousand, respectively, which represents contributions payable to these plans by the Group at rates specified in the rules of the plans. As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, contributions of NT$48,820 thousand, NT$48,604 thousand, NT$48,824 thousand and NT$47,417 thousand due in the respective reporting periods had not been paid over to the plans. The amounts were paid subsequent to the end of the reporting period.

b. Defined benefit plans

The Company and Magic Pixel Inc. of the Group adopted the defined benefit plan provided in the Labor Standard Law (the”LSL”). Under the LSL, pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company and Magic Pixel Inc. contribute amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name.

• 35 -

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 31 December 2012. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method. For the three months ended March 31, 2013 and 2012, the Group recognized employee benefit expenses calculated using the actuarially determined pension cost rate as of December 31, 2012 and January 1, 2012, respectively.

The net periodic pension costs of the Company’s separate executive pension plan for the three months ended March 31, 2013 and 2012 were $31,522 thousand and $21,212 thousand, respectively.

The principal assumptions used for the purposes of the actuarial valuations were as follows:

	Valuation at	Valuation at
	December 31,	January 1,
	2012	2012
Discount rate(s)	1.50%-1.75%	1.75%
Expected return on plan assets	1.50%	1.75%-2.00%
Expected rate(s) of salary increase	3.00%	3.00%

Employee benefit expenses for the three months ended March 31, 2013 and 2012 were included in the following line items:

Operating cost Marketing expenses Administration expenses Research and development expenses	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2013 $ 3,003 $ 306 $ 32,386 $ 1,105	2012 $ 1,968 $ 178 $ 21,842 $ 889

The amount included in the consolidated statement of financial position arising from the Group's obligation in respect of its defined benefit plans was as follows:

December 31, 2012 Present value of funded defined benefit obligation $ 1,488,815 Fair value of plan assets (779,374) Present value of unfunded defined benefit obligation 709,441 Net actuarial losses not recognized (143,983) Past service cost not yet recognized 11,681 Net liability arising from defined benefit obligation $ 577,139	January 1, 2012 $ 1,345,642 (765,489) 580,153 - 12,394 $ 592,547

• 36 -

The major categories of plan assets at the end of the reporting period for each category were as follows:

	December 31,	January 1,
	2012	2012
Deposits in financial institution	25.71	23.87
Investment in stock and beneficiary certificate	37.94	40.75
Short-term commercial papers	9.81	7.61
Government bond and fixed income investment	26.54	27.64
Infrastructure loans to government and government-owned
enterprises	-	0.13
	100.00	100.00

The overall expected rate of return was based on historical return trends and analysts' predictions of the market for the asset over the life of the related obligation, with reference to the use of the Labor Pension Fund by Labor Pension Fund Supervision Committee, taking into consideration the effect of possible differences between the guaranteed minimum income and the return on local banks’ two-year time deposits.

The Group chose to disclose the history of experience adjustments as the amounts determined for each accounting period prospectively from the date of transition to IFRSs:

December 31, 2012 Present value of defined benefit obligation $ 1,488,815 Fair value of plan assets $ 79,374 Deficit $ 709,441 Experience adjustments on plan liabilities $ 94,904 Experience adjustments on plan assets $ (45)	January 1, 2012 $ 1,345,642 $ 765,489 $ 580,153 $ - $ -

The Group expects to make a contribution of NT$30,367 thousand to the defined benefit plans during the next financial year.

22. EQUITY

• a. Share capital

1) Ordinary shares

Ordinary shares
Numbers of shares authorized Shares issued	March 31, 2013 $ 65,500,000 $ 35,214,623	December 31, 2012 $ 65,500,000 $ 35,214,623	March 31, 2012 $ 65,500,000 $ 33,921,967	January 1, 2012 $ 65,500,000
				$ 33,847,486

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

A total of 864,704 thousand shares and 650,000 thousand shares of the Company’s authorized shares were reserved for the issuance of convertible bonds and employee share options.

• 37 -

b. Capital surplus

Capital surplus
Arising from treasury share transactions Arising from donations Arising from share of changes in capital surplus of associates Arising from employee shares	March 31, 2013 $ 26,502 37 127 317,217 $ 343,883	December 31, 2012 $ 26,502 37 113 317,217 $ 343,869	March 31, 2012 $ 25,075 37 - 317,654 $ 342,766	January 1, 2012 $ 25,075 37 - 321,377
				$ 346,489

A reconciliation of the carrying amount at the beginning and at the end of the three months ended March 31, 2013 and 2012, for each class of capital surplus was as follows:

Treasury Share Transactions Balance at January 1, 2012 $ 25,075 Issue of ordinary shares under employee share options - Balance at March 31, 2012 $ 25,075 Balance at January 1, 2013 $ 26,502 share of changes in capital surplus of associates - Balance at March 31, 2013 $ 26,502	Donations Share of Changes in Capital Surplus of Associates Employee Share Options $ 37 $ - $ 321,377 - - (3,723) $ 37 $ - $ 317,654 $ 37 $ 113 $ 317,217 - 14 - $ 37 $ 127 $ 317,217

The premium from shares issued in excess of par (treasury share transactions and employee share options) and donations may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Company’s capital surplus and once a year).

The capital surplus from long-term investments may not be used for any purpose.

c. Retained earnings and dividend policy

The Company’s Articles of Incorporation provide that any profit after annual closing should be used first to cover income tax and accumulated deficit. Then appropriate for legal reserve 10% of the remaining amount (until the amount of the legal reserve equals the amount of the Company’s capital stock) and appropriate for (or reverse) special reserve in accordance with law. Appropriation for remuneration to directors and supervisors should be made at 2% of the remaining amount. Any remaining amount will be added to the undistributed earnings from previous years and distributed in the following manner: (a) shareholders’ dividends - 85%; (b) employees’ bonus - 15%. Employees’ bonus will be distributed in the same form as the distribution of dividends to shareholders on a proportionate basis.

• 38 -

Distributions, except for the remuneration to directors and supervisors, may be made in the form of cash dividend or stock dividend, as determined by the shareholders at an Annual General Meeting. Both the shareholders’ bonus and employees’ bonus take the form of cash dividend as the first choice. Nevertheless, it still depends on the Company’s financial, sales or operating condition. The Company’s Articles of Incorporation provide that no more than 50% of the current year’s total amount of distributable earnings can be distributed in the form of stock dividend.

Due to the net loss for the three months ended March 31, 2013 and 2012, there were no accrual for bonus to employees and remuneration to directors and supervisors.

Under Rule No. 100116 and Rule No. 0950000507 issued by the FSC, an amount equal to the net debit balance of certain shareholders’ equity accounts (including unrealized revaluation increment, unrealized gain or loss on financial instruments, net loss not recognized as pension cost, cumulative translation adjustments) shall be transferred from unappropriated earnings to a special reserve before any appropriation of earnings generated before January 1, 2012 shall be made. Any special reserve appropriated may be reversed to the extent of the decrease in the net debit balance.

Under Rule No. 1010012865 issued by the FSC on April 6, 2012 and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, on the first-time adoption of IFRSs, a company should appropriate to a special reserve of an amount that was the same as these of unrealized revaluation increment and cumulative translation differences (gains) transferred to retained earnings as a result of the company’s use of exemptions under IFRS 1. However, at the date of transitions to IFRSs, if the increase in retained earnings that resulted from all IFRSs adjustments is not enough for this appropriation, only the increase in retained earnings that resulted from all IFRSs adjustments will be appropriated to special reserve. The special reserve appropriated as above may be reversed to retained earnings in proportion to the usage, disposal or reclassification of the related assets and thereafter distributed. The special reserve appropriated on the first-time adoption of IFRSs may be used to offset deficits in subsequent years. No appropriation of earnings shall be made until any shortage of the aforementioned special reserve is appropriated in subsequent years if the Company has earnings and the original need to appropriate a special reserve is not eliminated.

Appropriation of earnings to Legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Under the Integrated Income Tax System that became effective on January 1, 1998, ROC resident shareholders are allowed a tax credit from their proportionate share in the income tax paid by the Company on earnings generated since January 1, 1998.

The appropriations of earnings for 2011 had been approved in the shareholders’ meetings on June 6, 2012. The appropriations and dividends per share were as follows:

Legal capital reserve Cash dividends Stock dividends	For the Year Ended 2011
	Appropriation of Earnings Dividends Per Share (NT$) $ 288,272 1,288,408 $ 0.38 1,288,408 0.38 $ 2,865,088

• 39 -

The above appropriation for stock dividends of NT$1,288,408 thousand from 2011 earnings will be adjusted when the outstanding shares at the ex-dividend date are increased due to exercise of stock options by the Company’s employees. The shareholders had authorized the chairman to adjust the cash and stock dividend per share when the outstanding shares at the ex-dividend date are increased. The above appropriation for stock dividends was approved by the Securities and the Futures Bureau of Financial Supervisory Commission, Executive Yuan on June 19, 2012 and had been officially registered with the Ministry of Economic Affairs, ROC.

Amounts approved in shareholders’ meetings Amounts recognized in respective financial statements		For the Year Ended 2011
		Bonus to Employees Remuneration of Directors and Supervisors $ 454,732 $ 51,889 477,847 52,928 $ (23,115) $ (1,039)

The differences between the approved amounts of the bonus to employees and remuneration to directors and supervisors and the accrual amounts reflected in the financial statements for the years ended December 31, 2011 which were primarily due to changes in estimates (numbers of the outstanding shares and income tax expense) had been adjusted in profit and loss for the years ended December 31, 2012.

On March 8, 2013, the Board of Directors approved the use of legal capital reserve to offset accumulated deficit in the amount of NT$2,695,275 thousand. Action on the 2012 loss will be resolved by the shareholders in their meeting scheduled on June 19, 2013.

Information about the appropriations of earnings is available on the Market Observation Post System website of the Taiwan Stock Exchange.

• d. Special reserves appropriated following first-time adoption of IFRSs

The Company had a decrease in retained earnings that resulted from all IFRSs adjustments; therefore, no special reserve was appropriated.

e. Others equity items

• 1) Foreign currency translation reserve

Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency (i.e. New Taiwan dollars) were recognized directly in other comprehensive income and accumulated in the foreign currency translation reserve. Gains and losses on hedging instruments that were designated as hedging instruments for hedges of net investments in foreign operations were included in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve in respect of translating both the net assets of foreign operations and hedges of foreign operations were reclassified to profit or loss on the disposal of the foreign operation.

• 2) Investments revaluation reserve

The investments revaluation reserve represents the cumulative gains and losses arising on the revaluation of available-for-sale financial assets that have been recognized in other comprehensive income, net of amounts reclassified to profit or loss when those assets have been disposed of or are determined to be impaired.

• 40 -

f. Non-controlling interests

Balance at January 1 Attributable to non-controlling interests: Share of loss for the period Issue of employee share options by subsidiaries Cancel of employee share options by subsidiaries Exchange difference arising on translation of foreign entities Non-controlling interest relating to outstanding share options held by the employees of subsidiaries Balance at March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2013 $ 59,115 (16,722) 230 (14) 92 509 $ 43,210	2012 $ 138,921 (22,349) 256 - (75) - $ 116,753

g. Treasury shares

	Number of
	Shares,
	Beginning and
	End of Period
Purpose of Buy-back	(In Thousands)
Three months ended March 31, 2013
The Company’s shares held by its subsidiaries	3,899
Three months ended March 31, 2012
The Company’s shares held by its subsidiaries	3,757

The Company’s shares held by its subsidiaries at the end of the reporting periods were as follows:

	Number of
	Shares Held	Carrying
Name of Subsidiary	(In Thousands)	Amount	Market Price
March 31, 2013
Hui Ying Investment, Ltd.	3,899	$159,061	$ 33,574
December 31, 2012
Hui Ying Investment, Ltd.	3,899	159,061	33,808
March 31, 2012
Hui Ying Investment, Ltd.	3,757	159,061	41,324
January 1, 2012
Hui Ying Investment, Ltd.	3,757	159,061	45,456

• 41 -

The subsidiaries holding treasury shares, however, retain shareholders’ rights, except the rights to participate in any share issuance for cash and to vote.

23. REVENUE

REVENUE
Revenue from the sale of goods Others		**Three Months Ended March 31 **
		2013 $ 4,400,978 3,811 $ 4,404,789	2012 $ 5,138,974 4,502 $ 5,143,476

The analysis of the Group's products and revenue is shown in Note 36.

24. NET LOSS

Net loss had been arrived at after crediting

• a. Other income

Interest income Others Other gains and losses Net foreign exchange gains/(losses) Net gain/(loss) arising on financial assets classified as held for trading Other losses Finance costs Interest on loans Others Less: Amounts included in the cost of qualifying assets	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
	2013 2012 $ 39,448 $ 41,530 7,364 5,931 $ 46,812 $ 47,461 Three Months Ended March 31
	2013 2012 $ 52,796 $ (125,501) (294) 1,182 (252) (1,350) $ 52,250 $ (125,669) Three Months Ended March 31
		2013 $ 87,171 - - $ 87,171	2012 $ 76,190 18 (18,823) $ 57,385

• b. Other gains and losses

• c. Finance costs

• 42 -

Information about capitalized interest was as follows:

Capitalized interest Capitalization rate Impairment losses on financial assets Trade receivables Other non-current financial assets	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
	2013 2012 $ - $ 18,823 - 1.48% Three Months Ended March 31
		2013 $ - 2,151 $ 2,151	2012 $ 20,021 - $ 20,021

• d. Impairment losses on financial assets

The above impairment loss of financial assets was included in bad debt expense under operating expenses.

• e. Depreciation and amortization expenses

Property, plant and equipment Intangible assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Operating expenses Employee benefits expense Post-employment benefits (see Note 21) Defined contribution plans Defined benefit plans	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
	2013 2012 $ 1,919,702 $ 1,822,579 55,816 38,051 $ 1,975,518 $ 1,860,630 $ 1,613,689 $ 1,626,631 306,013 195,948 $ 1,919,702 $ 1,822,579 $ 27,110 $ 8,674 28,706 29,377 $ 55,816 $ 38,051 Three Months Ended March 31
		2013 $ 55,675 36,800 92,475	2012 $ 51,265 24,877 76,142 (Continued)

f. Employee benefits expense

• 43 -

Share-based payments Equity-settled share-based payments Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses g. Gain or loss on foreign currency exchange Foreign exchange gains Foreign exchange losses	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
	2013 2012 $ 230 $ 256 1,332,097 1,399,256 $ 1,424,802 $ 1,475,654 $ 725,301 $ 719,695 699,501 755,959 $ 1,424,802 $ 1,475,654 (Concluded) Three Months Ended March 31
		2013 $ 162,072 (109,276) $ 52,796	2012 $ 114,416 (239,917) $ (125,501)

25. INCOME TAX

• a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

The major components of tax expense were as follows:
Current tax In respect of the current period Deferred tax In respect of the current period Income tax expense recognized in profit or loss	Three Months Ended March 31
		2013 $ 1,045 - $ 1,045	2012 $ 953 5,298 $ 6,251

• 44 -

b. Integrated income tax

Unappropriated earnings (Accumulated deficit) Unappropriated earnings generated before January 1, 1998 Unappropriated earnings generated on and after January 1, 1998 Imputation credit accounts	March 31, 2013 December 31, 2012 $ - $ - (5,597,687) (3,528,992) $ (5,597,687) $ (3,528,992) $ 207,924 $ 207,924	March 31, 2012 $ - 3,691,310 $ 3,691,310 $ 184,671	January 1, 2012 $ - 4,776,572
			$ 4,776,572
			$ 184,671

No tax creditable ratio was calculated for accumulated deficit of 2012. The actual tax creditable ratio for distribution of earnings of 2011 was 9.17%.

c. Income tax assessments

The tax returns through 2009 have been assessed by the tax authorities. The Company disagreed with the tax authorities’ assessment of its 2009 and 2008 tax returns and had applied for re-examination. Nevertheless, the Company has provided for the income tax assessed by the tax authorities.

26. LOSS PER SHARE

LOSS PER SHARE
Basic and diluted loss per share	Unit: NT$ Per Share Three Months Ended March 31
		2013 $ (0.59)	2012 $ (0.31)

The amount of loss and weighted average number of ordinary shares outstanding used in the computation of loss per share from continuing operations were as follows:

Net loss for the period

Loss for the period attributable to owners of the Company		**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2013 $ (2,068,695)	2012 $ (1,085,262)

Weighted average number of ordinary shares outstanding (in thousand shares):

Weighted average number of ordinary shares in computation of basic loss per share		**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2013 3,517,563	2012 3,513,775

• 45 -

As disclosed in Note 27 to the financial statements, the Company conforms according to IAS 33 “Earnings per Share”, in determining whether the share-based payments are potential ordinary stocks. The aforementioned stock options were not included in the calculation of diluted loss per share because they were antidilutive for the three months ended March 31, 2013 and 2012.

The weighted-average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends (see Note 22). This adjustment caused the basic and diluted after-tax loss per share for the three months ended March 31, 2012 to both decrease from NT$0.32 to NT$0.31.

27. SHARE-BASED PAYMENT ARRANGEMENTS

The Company

The Company has two employee stock option plans (“2005 Plan” and “2007 Plan”) approved by the ROC Securities and Futures Bureau (SFB) to grant options up to 200,000 thousand units and 120,000 thousand units, respectively. Each stock option may subscribe for one new share of common stock of the Company. The options are valid for six years subsequent to the grant dates and exercisable at certain percentages after the second anniversary from the grant date. The options were granted at the exercise price equal to the higher of closing price of the Company’s common shares listed on the TSE or the Company’s net asset value per common share on the grant date. For any subsequent changes in the Company’s capital surplus, the exercise price is adjusted accordingly.

Information on employee share options was as follows:

Unit: Option Numbers in Thousand and NT$ Per Share

Three months ended March 31, 2013	2007 Plan	2007 Plan
Balance, beginning of period Options cancelled Three months ended March 31, 2012 Balance, beginning of period Options exercised Options cancelled Balance, end of period
	Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 49,794 $ 9.50 (7,448) 9.50 (61) - 42,285 9.50

The number and exercise prices of outstanding options had been adjusted to reflect the stock dividends and the cancellation of common stock.

• 46 -

As of March 31, 2013, information about the Company’s outstanding and exercisable options was as follows:

ollows:
Range of Exercise Price (NT$) $8.80	Options Issued on or After January 1, 2004 and Outstanding Number Outstanding (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 42,035 0.74 $8.80	Options Exercisable
		Number Exercisable (Thousand) Exercise Price (NT$/Per Share) 42,035 $8.80

MoDioTek

Approved by the Board of Directors of MoDioTek on April 2, 2007, December 3, 2007, August 18, 2008 and December 11, 2008, MoDioTek was authorized to issue employee stock options for 1,500 thousand units, 579 thousand units, 671 thousand units and 40 thousand units, respectively. Each stock option may subscribe for one new share of common stock of MoDioTek. The options are valid for six years and exercisable at certain percentages after the second anniversary from the grant date or the earlier of the first anniversary of the grant date or date of application for share listing on the TSE or GreTai Securities Market. For any subsequent changes in MoDioTek’s capital surplus, the exercise price is adjusted accordingly.

As of March 31, 2013, information about MoDioTek’s outstanding and exercisable options was as follows:

Three Months Ended March 31

Balance, beginning of period Options cancelled Balance, end of period	2013 Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 1,989 $ 10.35 (105) - 1,884 10.35	2012
		Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 2,040 $ 10.35 (22) - 2,018 10.35

As of March 31, 2013, information about MoDioTek’s outstanding and exercisable option was as follows:

Range of Exercise Price (NT$) $10.00 10.00 11.40 11.40	Options Issued on or After January 1, 2004 and Outstanding Number Outstanding (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 1,036 - $10.00 376 0.67 10.00 452 1.38 11.40 20 1.70 11.40 1,884	Options Exercisable
		Number Exercisable (Thousand) Exercise Price (NT$/Per Share) 1,036 $10.00 376 10.00 452 11.40 20 11.40 1,884

• 47 -

Mxtran

Approved by the Board of Directors of Mxtran on April 2, 2007, May 4, 2007, November 16,2007, December 21, 2007 and August 12, 2011, Mxtran was authorized to issue employee stock options for 1,409 thousand units, 74 thousand units, 17 thousand units, 1,564 thousand units and 2,344 thousand units, respectively. Each stock option may subscribe for one new share of common stock of Mxtran. The options are valid for six years and exercisable at certain percentages after the second anniversary from the grant date. For any subsequent changes in Mxtran’s capital surplus, the exercise price is adjusted accordingly.

Mxtran cancelled and increased its share capital by 12,000 thousand shares and 20,000 thousand shares on March 5, 2009 and March 9, 2009, respectively. Each stock option has subscribed for 0.4 common stock share and the exercise price was subject to adjustments for any change of capital structure.

As of March 31, 2013, information about Mxtran’s outstanding and exercisable options was as follows:

Balance, beginning of period Options cancelled Balance, end of period	**Three Months Ended March 31 **	**Three Months Ended March 31 **
	2013 Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 2,270 $ 10.30 (61) - 2,209 10.28	2012
		Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 2,664 $ 10.31 (35) - 2,629 10.31

As of March 31, 2013, information about Mxtran’s outstanding and exercisable option was as follows:

Options Issued on or After January 1, 2004 and

	Options Issued on or After January 1, 2004 and
Range of Exercise Price (NT$) $12.07 12.55 10.00	Outstanding Number Outstanding (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 134 0.02 $12.07 155 0.73 12.55 1,920 4.36 10.00 2,209	Options Exercisable
		Number Exercisable (Thousand) Exercise Price (NT$/Per Share) 134 $12.07 155 12.55 - 10.00 289

Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

follows:
Grant-date share price (NT$)	$	3.23
Exercise price (NT$)		10.00
Expected volatility		44.82%
Expected life (years)		4.25
Expected dividend yield		-
Risk-free interest rate		1.11%

For the three months ended March 31, 2013 and 2012, the compensation cost recognized was $49 thousand and $0 thousand, respectively. As of March 31, 2013 and 2012, the estimated percentages of forfeiture due to termination of employment over the remaining vesting period were both 6%.

• 48 -

INFOMAX

Approved by the Board of Directors of INFOMAX on April 2, 2007, November 16, 2007, December 21, 2007, April 2, 2010 and January 26, 2011, INFOMAX was authorized to issue employee stock options for 2,577 thousand units, 423 thousand units, 1,910 thousand units, 8,654 thousand units and 1,346 thousand units, respectively. Each stock option may subscribe for one new share of common stock of INFOMAX. The options authorized on April 2, 2007, November 16, 2007, December 21, 2007 and January 26, 2011 are valid for six years, eight years, eight years and six years, respectively. The options authorized on April 2, 2010 are valid for the earlier of six years to the grant dates or two months to the date of application for share listing on the TSE or GreTai Securities Market. The options granted are exercisable at certain percentages after the second anniversary from the grant date. For any subsequent changes in INFOMAX’s capital surplus, the exercise price is adjusted accordingly.

As of March 31, 2013, information about INFOMAX’s outstanding and exercisable option was as follows:

Balance, beginning of period Options cancelled Balance, end of period	Three Months Ended March 31	Three Months Ended March 31
	2013 Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 3,059 $ 31.87 - - 3,059 31.87	2012
		Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 10,943 $ 10.00 (709) - 10,234 10.00

As of March 31, 2013, information about INFOMAX’s outstanding and exercisable option was as follows:

Options Issued on or After January 1, 2004 and

	Options Issued on or After January 1, 2004 and
Range of Exercise Price (NT$) $31.87 31.87 31.87	Outstanding Number Outstanding (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 559 0.60 $31.87 373 2.72 31.87 2,127 3.82 31.87 3,059	Options Exercisable
		Number Exercisable (Thousand) Exercise Price (NT$/Per Share) 559 $31.87 373 31.87 1,064 31.87 1,996

Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

follows:
Grant-date share price (NT$)	$	5.17
Exercise price (NT$)		10.00
Expected volatility		37.82%
Expected life (years)		4.25
Expected dividend yield		-
Risk-free interest rate		0.91%

For the three months ended March 31, 2013 and 2012, the compensation cost recognized was $181 thousand and $256 thousand, respectively. As of March 31, 2013 and 2012, the estimated percentages of forfeiture due to termination of employment over the remaining vesting period were both 3%.

• 49 -

MaxRise

Approved by the Board of Directors of MaxRise on January 12, 2007, April 18, 2007, November 16, 2007, December 21, 2007, August 14, 2008, April 15, 2009, May 5, 2010 and January 3, 2011, MaxRise was authorized to issue employee stock options for 1,160 thousand units, 230 thousand units, 110 thousand units, 1,350 thousand units, 780 thousand units, 225 thousand units, 863 thousand units and 2,007 thousand units, respectively. Each stock option may subscribe for one new share of common stock of MaxRise. The options are valid for six years and exercisable at certain percentages after the second anniversary from the grant date. For any subsequent changes in MaxRise’s capital surplus, the exercise price is adjusted accordingly.

As of March 31, 2013, information about MaxRise’s outstanding and exercisable options was as follows:

Balance, beginning of period Options cancelled Balance, end of period	Three Months Ended March 31, 2012
	Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 3,034 $ 11.07 (150) - 2,884 11.13

The weighted-average exercise prices of outstanding options had been adjusted to reflect the capital reduction making up for losses.

As of December 31, 2012, there was no outstanding option of MaxRise due to the merger of MaxRise and INFOMAX.

Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

follows:
Grant-date share price (NT$)	$1.55-$2.58
Exercise price (NT$)	10.00
Expected volatility	32.48%-34.84%
Expected life (years)	4.25
Expected dividend yield	-
Risk-free interest rate	0.84%-0.96%

The compensation cost for the three months ended March 31, 2012 was minor; thus, it was not recognized.

MPI

Approved by the Board of Directors of MPI on June 20, 2007 and May 1, 2012, MPI was authorized to issue employee stock options for 2,400 thousand units and 841 thousand units, respectively. Each stock option may subscribe for one new share of common stock of MPI. The options are valid for six years and exercisable at certain percentages after the second anniversary from the grant date. For any subsequent changes in MPI’s capital surplus, the exercise price is adjusted accordingly.

• 50 -

As of March 31, 2013, information about MPI’s outstanding and exercisable options was as follows:

Balance, beginning of period Options cancelled Balance, end of period	Three Months Ended March 31	Three Months Ended March 31
	2013 Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 915 $ 19.07 (71) - 844 18.54	2012
		Number of Options (In Thousands) Weighted-average Exercise Price (NT$) 167 $ 67.30 (6) - 161 67.30

As of March 31, 2013, information about MPI’s outstanding and exercisable options was as follows:

Options Issued on or After January 1, 2004 and

	Options Issued on or After January 1, 2004 and
Range of Exercise Price (NT$) $67.30 10.00	Outstanding Number Outstanding (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 126 0.22 $67.30 718 5.08 10.00 844	Options Exercisable
		Number Exercisable (Thousand) Exercise Price (NT$/Per Share) 126 $67.30 718 10.00 844

The compensation cost during the three months ended March 31, 2013 was minor; thus, it was not recognized. Had the Company used the fair value based method to evaluate the options, using the Black-Scholes model, the assumptions and pro forma results of the Company for the three months ended March 31, 2013 and 2012 would have been as follows:

The Company Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield MoDioTek Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield	Three Months Ended March 31
	2013 2012 1.55%-2.54% 1.55%-2.54% 4.38 4.38 51.16%-57.50% 51.16%-57.50% - - 1.90%-2.68% 1.90%-2.68% 6 6 - - - - (Continued)

• 51 -

Mxtran Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield INFOMAX Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield MaxRise Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield MPI Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield Consolidated net loss attributable to shareholders of the parent: Net loss as reported Pro forma net loss Consolidated loss per share (LPS) - after income tax (NT$): Basic and diluted LPS as reported Pro forma basic and diluted LPS	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2013 1.90%-2.68% 6 - - 0.91%-2.68% 6-8 - - 0.96%-2.68% 6 - - 2.20%-2.68% 6 - - $ (2,068,695) $ (2,068,695) $(0.59) $(0.59)	2012 1.90%-2.68% 6 - - 0.91%-2.68% 6-8 - - 0.96%-2.68% 6 - - 2.20%-2.68% 6 - - $ (1,085,262) $ (1,085,262) $(0.31) $(0.31)

(Concluded)

28. OPERATING LEASE ARRANGEMENTS

a. The Group as lessee

Operating leases relate to leases of land, offices, employee dormitories and office equipment with lease terms between 1 and 50 years. The Group does not have a bargain purchase option to acquire the leased land, offices, employee dormitories and office equipment at the expiry of the lease periods.

• 52 -

As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, refundable deposits paid under operating leases amounted to NT$8,793 thousand, NT$8,523 thousand, NT$8,453 thousand and NT$8,781 thousand, respectively.

The future minimum lease payments for non-cancellable operating lease commitments were as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years	March 31, 2013 December 31, 2012 $ 90,379 $ 89,938 173,461 159,256 196,527 189,339 $ 460,367 $ 438,533	March 31, 2012 $ 85,942 203,737 199,846 $ 489,525	January 1, 2012 $ 86,259 218,819 204,156 $ 509,234

The lease payments recognized as expenses were as follows:

The lease payments recognized as expenses were as follows:
Minimum lease payment	For the Three Months Ended March 31
		2013 $ 27,053	2012 $ 26,484

• b. The Group as lessor

Operating leases relate to the building owned by the Group with lease terms between 1 to 5 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, deposits received under operating leases amounted to NT$335 thousand, NT$326 thousand, NT$139 thousand and NT$144 thousand, respectively.

The future minimum lease revenue from non-cancellable operating leases was as follows:

	March 31,	March 31,	December 31,	December 31,	March 31,	March 31,	January 1,	January 1,
		2013		2012		2012		2012
Not later than 1 year	$	3,736	$	3,728	$	3,493	$	2,881
Later than 1 year and not later
than 5 years		10,810		11,599		13,996		13,987
Later than 5 years		-		-		378		919
	$	14,546	$	15,327	$	17,867	$	17,787

29. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to operate under the premises of going concern and growth while maximizing the return to shareholders through the optimization of the debt and equity balance.

• 53 -

The Group’s strategy for managing the capital structure is to lay out the plan of product development and expand the market share considering the growth and the magnitude of industry and further developing an integral plan founded on the required capacity, capital outlay, and magnitude of assets in long-term development. Ultimately, considering the risk factors such as the fluctuation of the industry cycle and the life cycle of products, the Group determines the optimal capital structure by estimating the profitability of products, operating profit ratio, and cash flow based on the competitiveness of products. The management of the Group periodically examines the capital structure and contemplates on the potential costs and risks involved while exerting different financial tools. In general, the Group implements prudent strategy of risk management.

30. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments

• 1) Fair value of financial instruments not carried at fair value

The management considers that the carrying amounts of financial assets and financial liabilities recognized in the condensed consolidated financial statements approximate their fair values or their fair values cannot be reliably measured.

• 2) Fair value measurements recognized in the condensed balance sheets

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

• a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• b) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• c) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

March 31, 2013

Available-for-sale financial assets - non-current Securities listed in ROC Equity securities Financial liabilities at FVTPL - current	Level 1 $ 926,544 $ -	Level 2 $ - $ 1,849	Level 3 $ - $ -	Total $ 926,544 $ 1,849

• 54 -

December 31, 2012

Financial assets at FVTPL - current Available-for-sale financial assets - non-current Securities listed in ROC Equity securities March 31, 2012 Available-for-sale financial assets - non-current Securities listed in ROC Equity securities January 1, 2012 Financial assets at FVTPL - non-current Available-for-sale financial assets - non-current Securities listed in ROC Equity securities	Level 1 $ - $ 888,685 Level 1 $ 1,084,361 Level 1 $ 39,357 $ 879,392	Level 2 $ 6,199 $ - Level 2 $ - Level 2 $ - $ -	Level 3 $ - $ - Level 3 $ - Level 3 $ - $ -	Total $ 6,199 $ 888,685 Total $ 1,084,361 Total $ 39,357 $ 879,392

There were no transfers between Level 1 and Level 2 in the current and prior periods.

• 3) Valuation techniques and assumptions applied for the purpose of measuring fair value

The fair values of financial assets and financial liabilities were determined as follows:

• a) The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices;

• b) The fair values of derivative instruments were calculated using quoted prices. Where such prices were not available, a discounted cash flow analysis was performed using the applicable yield curve for the duration of the instruments for non-optional derivatives. The estimates and assumptions used by the Group were consistent with those that market participants would use in setting a price for the financial instrument;

• 55 -

• b. Categories of financial instruments

		March 31,	December	December	31,		March 31,		January 1,
		2013		2012			2012		2012
Financial assets
Fair value through profit or loss
(FVTPL)
Held for trading	$	-	$	6,199		$	-	$	-
Designated as at FVTPL		-			-		-		39,357
Loans and receivables (i)		20,459,960		22,776,325			22,475,228		23,869,549
Available-for-sale financial
assets (ii)		1,015,804		986,547			1,218,419		1,033,883
Financial liabilities
Fair value through profit or loss
(FVTPL)
Held for trading		1,849			-		-		-
Amortized cost (iii)		25,284,338		26,119,533			24,106,004		24,708,834

• 1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, trade and other receivables (including receivables from related parties), other receivables, and other financial assets (including current and non-current assets).

• 2) The balances included the carrying amount of available-for-sale financial assets measured at cost.

• 3) The balances included financial liabilities measured at amortized cost, which comprise short-term loans, trade and other payables (including payables to related parties), other payables, payable for purchase of equipment, and long-term loans (including current portion).

• c. Financial risk management objectives and policies

The Group manages its exposure to risks relating to the operations through market risk, credit risk, and liquidity risk with the objective to reduce the potentially adverse effects the market uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by management in accordance with procedures required by relevant regulations or internal controls. During the implementation of such plans, the Group must comply with certain treasury procedures that provide guiding principles for overall financial risk management.

• 1) Market risk

The Group's activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (1) below), interest rates (see (2) below), and other price risk (see (3) below).

a) Foreign currency risk

Several subsidiaries of the Company had foreign currency sales and purchases, which exposed the Group to foreign currency risk. Exchange rate exposures were managed within approved policy parameters utilizing forward foreign exchange contracts.

• 56 -

Sensitivity analysis

The Group was mainly exposed to the USD and JPY.

Sensitivity analysis of rate is for the transactions in currencies other than the entity’s functional currency (foreign currencies) which are recognized at the rates of exchange prevailing at the dates of the transactions.

The following table details the Group’s sensitivity to a 3% and 10% increase in New Taiwan dollars (the functional currency) against the relevant foreign currencies, respectively. The sensitivity rates used are 3% and 10% when reporting foreign currency risk internally to key management personnel.

Pre-tax loss	Currency USD Impact For the Three Months Ended March 31 2013 2012 $ 29,426 $ 43,943	Currency JPY Impact
		For the Three Months Ended March 31
		2013 2012 $ (9,183) $ 134,831

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings.

The carrying amounts of the Group's financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows.

		December 31,
	March 31, 2013	2012	March 31, 2012	January 1, 2012
Fair value interest rate risk
Financial assets	$ 14,847,779	$ 17,835,488	$ 16,569,661	$ 16,001,937
Financial liabilities	227,980	88,406	-	-
Cash flow interest rate risk
Financial assets	2,358,499	1,471,846	2,590,206	3,911,479
Financial liabilities	20,674,852	21,033,615	19,818,035	19,406,820

Sensitivity analysis of interest is calculated based on the financial liabilities exposed to cash flow interest rate risk at the end of each reporting period.

If interest rates had been 50 basis points higher/lower, the Group’s pre-tax loss for the three months ended March 31, 2013 and 2012 would increase/decrease by NT$25,844 thousand and NT$24,733 thousand, respectively.

• c) Other price risk

The Group was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.

Sensitivity analysis of equity price is calculated based on the fair values of available-for-sale investments at the end of each reporting period.

• 57 -

If equity prices had been 10% higher/lower, pre-tax loss for the three months ended March 31, 2013 and 2012 would have increased/decreased by NT$92,654 thousand and NT$108,436 thousand, respectively, as a result of the changes in fair value of available-for-sale investments.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group’s exposure to credit risk mainly arises from trade receivables - operating, bank deposits, and other financial instruments. Credit risk is managed separately for business related and financial related exposures.

Business related credit risk

In order to maintain the credit quality of trade receivables, the Group has established procedures to monitor and limit exposure to credit risk on trade receivables.

Credit evaluation is performed in the consideration of the relevant factors which may affects the customer’s paying ability such as financial condition, external and internal credit scoring, historical experience, and economic conditions. The Group holds some of the credit enhancements such as prepayments and collateral to mitigate its credit risks.

Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of trade receivables and, where appropriate, credit guarantee insurance cover is purchased.

Apart from Group A and Company B, the two largest customers, the Group did not have significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group’s concentration of credit risk from Group A and Company B were accounted for 27%, 34%, 27% and 33% of the total trade receivable (including receivables from related parties) as of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, respectively.

The Group’s concentration of credit risk by geographical locations was mainly in ROC, which accounted for 39%, 37%, 36% and 32% of the total trade receivables (including receivables from related parties) as of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, respectively.

Financial credit risk

The Group’s exposure to financial credit risk which pertained to bank deposits and other financial instruments were evaluated and monitored by Corporate Treasury function. The Group only deals with creditworthy counterparties and banks so that no significant credit risk was identified.

3) Liquidity risk

The objective of liquidity risk management is to ensure the Group has sufficient liquidity to fund its business requirements of cash and cash equivalents and the unused of financing facilities associated with existing operations.

The Group relies on bank borrowings as a significant source of liquidity. As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, the Group had available unutilized overdraft and short-term bank loan facilities of approximately NT$6,635,223thousand, NT$6,856,768 thousand, NT$12,236,904 thousand and NT$10,099,344 thousand, respectively.

• 58 -

Liquidity and interest rate risk tables

The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows.

Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

To the extent that interest flows are floating rate, the undiscounted amount was derived from the expected borrowing interest rate at the end of the reporting period.

March 31, 2013

Weighted Average Effective Interest Rate (%) Non-derivative financial liabilities Non-interest bearing - Variable interest rate liabilities 1.63 Fixed interest rate liabilities 0.97 Derivative financial liabilities Foreign exchange forward contracts Gross settled Inflows Outflows December 31, 2012 Weighted Average Effective Interest Rate (%) Non-derivative financial liabilities Non-interest bearing - Variable interest rate liabilities 1.63 Fixed interest rate liabilities 0.94 Derivative financial liabilities Foreign exchange forward contracts Gross settled Inflows Outflows March 31, 2012 Weighted Average Effective Interest Rate (%) Non-derivative financial liabilities Non-interest bearing - Variable interest rate liabilities 1.58	On Demand or Less than 1 Year $ 4,381,506 5,811,037 228,791 $ 10,421,334 $ 296,869 298,718 On Demand or Less than 1 Year $ 4,997,512 5,559,431 88,767 $ 10,645,710 $ 432,256 426,057 On Demand or Less than 1 Year $ 4,287,969 2,421,405 $ 6,709,374	1-3 Years $ - 15,494,521 - $ 15,494,521 $ - - 1-3 Years $ - 16,174,602 - $ 16,174,602 $ - - 1-3 Years $ - 9,089,204 $ 9,089,204	3-5 Years $ - 5,704 - $ 5,704 $ - - 3-5 Years $ - 22,886 - $ 22,886 $ - - 3-5 Years $ - 9,196,982 $ 9,196,982	5+ Years $ - - - $ - $ - - 5+ Years $ - - - $ - $ - - 5+ Years $ - - $ -	Total $ 4,381,506 21,311,262 228,791
					$ 25,921,559
					$ 296,869 298,718 Total $ 4,997,512 21,756,919 88,767
					$ 26,843,198
					$ 432,256 426,057 Total $ 4,287,969 20,707,591
					$ 24,995,560

• 59 -

January 1, 2012

January 1, 2012
Weighted Average Effective Interest Rate (%) Non-derivative financial liabilities Non-interest bearing - Variable interest rate liabilities 1.58	On Demand or Less than 1 Year $ 5,302,014 3,619,702 $ 8,921,716	1-3 Years $ - 8,308,774 $ 8,308,774	3-5 Years $ - 8,358,820 $ 8,358,820	5+ Years $ - - $ -	Total $ 5,302,014 20,287,296
					$ 25,589,310

31. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which were related parties of the Company, had been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties were disclosed below.

a. Trading transactions

Trading transactions
Key management personnel Substantial related parties		Sales of Goods For the Three Months Ended March 31 2013 2012 $ 864,540 $ 1,464,048 867 174 $ 865,407 $ 1,464,222		Purchases of Goods
				For the Three Months Ended March 31
		2013 $ 864,540 867 $ 865,407		2013 $ 164,910 - $ 164,910	2012 $ - - $ -

Sales prices to related parties were not comparable to those with external customers as the Company was the sole provider for them. The sales terms to the related parties were between 30 to 60 days after monthly closing, similar to those with external customers. Materials purchased from related parties are for manufacturing process. The payment term was 30 days after monthly closing, similar to those with external vendors.

The Group is its major management authority Key management personnel Substantial related parties	Manufacturing Expense For the Three Months Ended March 31 2013 2012 $ 110,614 $ 94,661 - - - - $ 110,614 $ 94,661	Manufacturing Expense For the Three Months Ended March 31 2013 2012 $ 110,614 $ 94,661 - - - - $ 110,614 $ 94,661	Operating Expense	Operating Expense	Operating Expense
			For the Three Months Ended March 31
		2013 $ 110,614 - - $ 110,614		2013 $ 288 2,581 6,250 $ 9,119	2012 $ 224 - 6,250 $ 6,474

The subcontract processing charges of related parties were comparable to those with other vendors. The payment term is 75 days after monthly closing.

• 60 -

The following balances of trade receivables from related parties were outstanding at the end of the reporting period:

Key management personnel Substantial related parties	March 31, 2013 December 31, 2012 $ 265,715 $ 427,401 26 52 $ 265,741 $ 427,453	March 31, 2012 $ 520,590 - $ 520,590	January 1, 2012 $ 918,063 - $ 918,063

The following balances of trade payables from related parties were outstanding at the end of the reporting period:

The Group is its major management authority Substantial related parties	March 31, 2013 December 31, 2012 $ 113,535 $ 118,455 - 17,550 $ 113,535 $ 136,005	March 31, 2012 $ 87,128 - $ 87,128	January 1, 2012 $ 82,244 - $ 82,244

The outstanding of trade receivables from related parties are unsecured and will be settled in cash. No guarantees had been given or received for trade payables to related parties. No expense had been recognized for the three months ended March 31, 2013 and 2012 for allowance for impairment of trade receivables in respect of the amounts owed by related parties.

b. Compensation of key management personnel

The remuneration of directors and other members of key management personnel for the three months ended March 31, 2013 and 2012 was as follows:

Short-term benefits Post-employment benefits	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2013 $ 29,287 31,677 $ 60,964	2012 $ 31,507 21,345 $ 52,852

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

• 61 -

32. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings, the tariff of imported raw materials guarantees or the deposit for hiring foreign workers:

Pledge deposits (classified as other financial assets - current) Property, plant and equipment, net Pledge deposits (classified as other financial assets - non-current)	March 31, 2013 $ 6,999 17,843,079 164,177 $ 18,014,255	December 31, 2012 $ 47,105 18,773,742 164,177 $ 18,985,024	March 31, 2012 $ 22,914 18,001,751 164,177 $ 18,188,842	January 1, 2012 $ 23,005 13,119,861 164,177
				$ 13,307,043

33. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of March 31, 2013 were as follows:

• a. As of March 31, 2013, December 31, 2012, March 31, 2012 and January 1, 2012, unused letters of credit amounted to approximately NT$301,175 thousand, NT$15,930 thousand, NT$43,557 thousand and NT$50,489 thousand, respectively.

• b. Unrecognized commitments are as follows:

Acquisition of property, plant and equipment	March 31, 2013 December 31, 2012 $ 1,891,150 $ 812,424	March 31, 2012 $ 806,020	January 1, 2012 $ 716,395

• c. The Company entered into a technology development and foundry service agreement with E Company in June 2006. The terms of the agreements are five and seven years, respectively, from the commencement date. The Company had paid off the entire technology development fees on December 31, 2007.

• d. The Company entered into the Phase-change memory technology agreement with IBM Company in January 2010, and the term of the agreement is from January 2010 to January 2013. Under the agreement, both parties have to share in the related expenditures of the technology development. As of March 31, 2013, the Company had paid US$10,468 thousand. The Company entered into another Phase-change memory technology agreement with IBM Company in January 2013, and the term of the agreement is from January 2013 to January 2016.

• e. The Company entered into the Patents Cross-License Agreement with J Company in December 2009, and the term of the agreement is from December 2009 to December 2015. Under the agreement, the Company has to pay the royalty on the Patents Cross-License Agreement.

• 62 -

34. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant financial assets and liabilities denominated in foreign currencies were as follows:

March 31, 2013

	Foreign
	Currencies	Exchange Rate
Financial assets
Monetary items
JPY	$ 1,485,745	0.32
USD	85,194	29.83
RMB	4,690	4.76
Financial liabilities
Monetary items
JPY	1,772,728	0.32
USD	52,312	29.83
RMB	2,499	4.76
December 31, 2012
	Foreign
	Currencies	Exchange Rate
Financial assets
Monetary items
JPY	$ 2,452,014	0.34
USD	89,627	29.04
RMB	3,822	4.62
Financial liabilities
Monetary items
JPY	861,058	0.34
USD	50,585	29.04
RMB	2,561	4.62

• 63 -

March 31, 2012

March 31, 2012
	Foreign
	Currencies	Exchange Rate
Financial assets
Monetary items
JPY	$ 4,553,678	0.36
USD	81,033	29.51
RMB	2,895	4.69
Financial liabilities
Monetary items
JPY	808,367	0.36
USD	31,397	29.51
RMB	1,243	4.69
January 1, 2012
	Foreign
	Currencies	Exchange Rate
Financial assets
Monetary items
JPY	$ 6,450,652	0.39
USD	94,522	30.28
RMB	2,287	4.80
Financial liabilities
Monetary items
JPY	3,733,623	0.39
USD	58,094	30.28
RMB	768	4.80

35. SEPARATELY DISCLOSED ITEMS

Information on significant transactions and information on investees:

• a. Lending funds to others: None

• b. Providing endorsements or guarantees for others: None

• c. Holding of securities at the end of the period: Table 1 (attached)

• d. Aggregate purchases or sales of the same securities reaching NT$100 million or 20 percent of paid-in capital or more: None

• e. Acquisition of real estate reaching NT$100 million or 20 percent of paid-in capital or more: None

• f. Disposal of real estate reaching NT$100 million or 20 percent of paid-in capital or more: None

• 64 -

• g. Purchases or sales of goods from or to related parties reaching NT$100 million or 20 percent of paid-in capital or more: Table 2 (attached)

• h. Trade receivables from related parties reaching NT$100 million or 20 percent of paid-in capital or more: Table 3 (attached)

• i. Information on investees: Table 4 (attached)

• j. Trading in derivative instruments: None

• k. The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions between them: Table 5 (attached)

• l. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and limit on the amount of investment in the mainland China area: Table 6 (attached)

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses: None

• 3) Endorsements, guarantees or collateral directly or indirectly provided to the investees: None

• 4) Financing directly or indirectly provided to the investees: None

• 5) Other transactions that significantly impacted current period’s profit or loss or financial position: None

36. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group's reportable segments under IFRS 8 “Operating Segments” were as follows:

Memory products and wafer fabrication

IC design

The reported segments above were separated by the nature of the operation. The accounting policies adopted by the segments have no significant differences from summary of significant accounting policies stated in Note 4.

• 65 -

a. Segment revenues and results

The following was an analysis of the Group's revenue and results from continuing operations by reportable segment.

Memory products and wafer fabrication IC design Revenues from continuing operations Other income Other gains and losses Finance costs Loss before tax (continuing operations) Segment total assets Memory products and wafer fabrication IC design Consolidated total assets	Segment Revenue Three Months Ended March 31 2013 2012 $ 4,388,503 $ 5,125,260 16,286 18,216 $ 4,404,789 $ 5,143,476 March 31, 2013 December 31, 2012 $ 58,119,460 $ 61,639,280 1,383,518 691,408 $ 59,502,978 $ 62,330,688	Segment Revenue Three Months Ended March 31 2013 2012 $ 4,388,503 $ 5,125,260 16,286 18,216 $ 4,404,789 $ 5,143,476 March 31, 2013 December 31, 2012 $ 58,119,460 $ 61,639,280 1,383,518 691,408 $ 59,502,978 $ 62,330,688	Segment Loss	Segment Loss	Segment Loss
			Three Months Ended March 31
		2013 $ 4,388,503 16,286 $ 4,404,789 March 31, 2013 $ 58,119,460 1,383,518 $ 59,502,978		2013 $ (1,928,221) (168,042) (2,096,263) 46,812 52,250 (87,171) $ (2,084,372) March 31, 2012 $ 65,499,416 1,198,040 $ 66,697,456	2012 $ (778,291) (187,476) (965,767) 47,461 (125,669) (57,385) $ (1,101,360) January 1, 2012 $ 66,726,569 1,409,253 $ 68,135,822

• b. Segment total assets

37. FIRST-TIME ADOPTION OF IFRSs

• a. Basis of the preparation for financial information under IFRSs

The Group’s condensed consolidated financial statements for the three months ended March 31, 2013 were the first IFRS interim financial statements. The Group not only follows the significant accounting policies stated in Note 4 but also applies the requirements under IFRS 1 “First-time Adoption of IFRS” as the basis for the preparation.

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b. Effects of transition to IFRSs

After transition to IFRSs, the effect on the Group’s consolidated balance sheets and consolidated statements of comprehensive income is stated as follows:

• 1) Reconciliation of consolidated balance sheet as of January 1, 2012

ROC GAAP	Amount $ 19,727,097 2,889,463 918,063 121,198 6,468,003 133,299 23,005 474,940 30,755,068 39,357 879,392 154,491 1,073,240 35,206,707 172,068 290,125 419,899 164,177 42,551 916,752 $ 68,123,835 $ 1,800,488 2,154,754 82,244 348,966 2,189,183 530,775 875,833 1,527,718 85,504 9,595,465 16,078,719 360,234 3,661 363,895 26,038,079 33,847,486 349,925 2,407,003 5,085,609 432,095		Effect of Transit	ion to IFRSs Presentation Difference $ - 11,987 - - - (133,299 ) - 543 (120,769) - - - - 290,125 (23,593) (290,125 ) 133,299 - 23,050 (133,776) $ 11,987 $ - - - - - - - - 11,987 11,987 - - - - 11,987 - - - - -		IFRSs Amount Item Note Current assets $ 19,727,097 Cash and cash equivalents 2,901,450 Notes receivable and trade receivables, net a) 918,063 Receivables from related parties, net 121,198 Other receivables 6,468,003 Inventories - - b) 23,005 Other financial assets - current 475,483 Other current assets c) 30,634,299 Total current assets Long-term investments 39,357 Financial assets at fair value through profit or loss - non-current 879,392 Available-for-sale financial assets - non-current 154,491 Financial assets measured at cost - non-current 1,073,240 Total long-term investments 35,496,832 Property, plant and equipment d) 148,475 Intangible assets c), e) Other assets - - d) 553,198 Deferred tax assets b) 164,177 Other financial assets - non-current 65,601 Other non-current assets c), e) 782,976 Total other assets $ 68,135,822 Total Current liabilities $ 1,800,488 Short-term borrowings 2,154,754 Notes payable and trade payables 82,244 Payables to related parties 348,966 Current tax liabilities 2,189,183 Other payables 530,775 Salary and bonus payable 875,833 Payable for purchase of equipment 1,527,718 Current portion of long-term borrowings 161,458 Other current liabilities a), g) 9,671,419 Total current liabilities 16,078,719 Total long-term liabilities Other liabilities 622,566 Accrued pension cost h) 3,661 Others 626,227 Total other liabilities 26,376,365 Total liabilities Equity 33,847,486 Ordinary shares 346,489 Capital surplus f) 2,407,003 Legal reserve 4,776,572 Unappropriated earnings g), h), i) 432,095 Unrealized gains on available-for-sale financial instruments (Continued)
			Recognition and Measurement Difference $ - - - - - - - - - - - - - - - - - - - - $ - $ - - - - - - - - 63,967 63,967 - 262,332 - 262,332 326,299 - (3,436 ) - (309,037 ) -
Item Current assets Cash and cash equivalents Notes and accounts receivable, net Receivables from related parties, net Other receivables, net Inventories Deferred income tax assets - current Restricted assets - current Other current assets Total current assets Long-term investments Financial assets at fair value through profit or loss - non-current Available-for-sale financial assets - non-current Financial assets carried at cost - non-current Total long-term investments Net property, plant and equipment Net intangible assets Other assets Idle assets, net Deferred income tax assets - non-current Restricted assets - non-current Other assets - other Total other assets Total Current liabilities Short-term bank loans Notes and accounts payable Payables to related parties Income tax payable Accrued expenses Accrued bonuses to employees, directors and supervisors Payables for equipment Current portion of long-term bank loans Other current liabilities Total current liabilities Total long-term liabilities Other liabilities Accrued pension cost Others Total other liabilities Total liabilities Shareholders' equity Capital stock Capital surplus Legal capital reserve Unappropriated earnings Unrealized gains on financial instruments

• 67 -

ROC GAAP	Amount $ (29,881 ) (142,365) 41,949,872 135,884 42,085,756 $ 68,123,835		Effect of Transit	ion to IFRSs Presentation Difference $ - - - - - $ 11,987		IFRSs Amount Item Note $ (30,048 ) Exchange differences on translating foreign operations g) (159,061) Treasury shares i) 41,620,536 Equity attributable to owners of the company 138,921 Non-controlling interests f), g), h) 41,759,457 Total equity $ 68,135,822 Total
			Recognition and Measurement Difference $ (167 ) (16,696) (329,336 ) 3,037 (326,299) $ -
Item Cumulative translation adjustments Treasury stock Total equity attributable to shareholders of the parent Minority interests Total shareholders' equity Total

(Concluded)

2) Reconciliation of consolidated balance sheet as of March 31, 2012

ROC GAAP	Amount $ 18,973,510 2,614,359 520,590 151,042 7,337,817 368,450 22,914 652,126 30,640,808 1,084,361 134,058 1,218,419 33,828,675 330,389 282,794 179,100 164,177 38,507 664,578 $ 66,682,869 $ 125,465 1,853,825 87,128 343,175 1,804,780 530,775 542,236 1,979,718 110,979 7,378,081 17,712,852		Effect of Transit	ion to IFRSs Presentation Difference $ - 14,587 - - - (368,450 ) - 530 (353,333) - - - 282,794 (22,823) (282,794 ) 368,450 - 22,293 107,949 $ 14,587 $ - - - - - - - - 14,587 14,587 -		IFRSs Amount Item Note Current assets $ 18,973,510 Cash and cash equivalents 2,628,946 Notes receivable and trade receivables, net a) 520,590 Receivables from related parties, net 151,042 Other receivables 7,337,817 Inventories - - b) 22,914 Other financial assets - current 652,656 Other current assets c) 30,287,475 Total current assets Long-term investments 1,084,361 Available-for-sale financial assets - non-current 134,058 Financial assets measured at cost - non-current 1,218,419 Total long-term investments 34,111,469 Property, plant and equipment d) 307,566 Intangible assets c), e) Other assets - - d) 547,550 Deferred tax assets b) 164,177 Other financial assets - non-current 60,800 Other non-current assets c), e) 772,527 Total other assets $ 66,697,456 Total Current liabilities $ 125,465 Short-term borrowings 1,853,825 Notes payable and trade payables 87,128 Payables to related parties 343,175 Current tax liabilities 1,804,780 Other payables 530,775 Salary and bonus payable 542,236 Payable for purchase of equipment 1,979,718 Current portion of long-term borrowings 185,266 Other current liabilities a), g) 7,452,368 Total current liabilities 17,712,852 Total long-term liabilities (Continued)
			Recognition and Measurement Difference $ - - - - - - - - - - - - - - - - - - - $ - $ - - - - - - - - 59,700 59,700 -
Item Current assets Cash and cash equivalents Notes and accounts receivable, net Receivables from related parties, net Other receivables, net Inventories Deferred income tax assets - current Restricted assets - current Other current assets Total current assets Long-term investments Available-for-sale financial assets - non-current Financial assets carried at cost - non-current Total long-term investments Net property, plant and equipment Net intangible assets Other assets Idle assets, net Deferred income tax assets - non-current Restricted assets - non-current Other assets - other Total other assets Total Current liabilities Short-term bank loans Notes and accounts payable Payables to related parties Income tax payable Accrued expenses Accrued bonuses to employee directors and supervisors Payables for equipment Current portion of long-term bank loans Other current liabilities Total current liabilities Total long-term liabilities

• 68 -

ROC GAAP	Amount $ 379,803 3,999 383,802 25,474,735 33,921,967 346,450 2,407,003 3,994,375 641,767 (74,531 ) (142,365) 41,094,666 113,468 41,208,134 $ 66,682,869		Effect of Transit	ion to IFRSs Presentation Difference $ - - - 14,587 - - - - - - - - - - $ 14,587		IFRSs Amount Item Note Other liabilities $ 640,227 Accrued pension cost h) 3,999 Others 644,226 Total other liabilities 25,809,446 Total liabilities Equity 33,921,967 Ordinary shares 342,766 Capital surplus f) 2,407,003 Legal reserve 3,691,310 Unappropriated earnings g), h), i) 641,767 Unrealized gains on available-for-sale financial instruments (74,495 ) Exchange differences on translating foreign operations g) (159,061) Treasury shares i) 40,771,257 Equity attributable to owners of the company 116,753 Non-controlling interests f), g), h) 40,888,010 Total equity $ 66,697,456 Total
			Recognition and Measurement Difference $ 260,424 - 260,424 320,124 - (3,684 ) - (303,065 ) - 36 (16,696) (323,409 ) 3,285 (320,124) $ -
Item Other liabilities Accrued pension cost Others Total other liabilities Total liabilities Shareholders' equity Capital stock Capital surplus Legal capital reserve Unappropriated earnings Unrealized gains on financial instruments Cumulative translation adjustments Treasury stock Total equity attributable to shareholders of the parent Minority interests Total shareholders' equity Total

(Concluded)

3) Reconciliation of consolidated balance sheet as of December 31, 2012

ROC GAAP	Amount $ 19,096,662 6,199 2,900,918 427,453 106,203 6,859,892 231,541 47,105 478,869 30,154,842 888,685 97,862 29,040 1,015,587 29,605,488 375,243 278,290 678,302 164,177 47,697 1,168,466 $ 62,319,626		Effect of Transit	ion to IFRSs Presentation Difference $ - - 11,062 - - - (231,541 ) - 523 (219,956) - - - - 278,290 (14,307) (278,290 ) 231,541 - 13,784 (32,965) $ 11,062		IFRSs Amount Item Note Current assets $ 19,096,662 Cash and cash equivalents 6,199 Financial assets at fair value through profit or loss - current 2,911,980 Notes receivable and trade receivables, net a) 427,453 Receivables from related parties, net 106,203 Other receivables 6,859,892 Inventories - - b) 47,105 Other financial assets - current 479,392 Other current assets c) 29,934,886 Total current assets Long-term investments 888,685 Available-for-sale financial assets - non-current 97,862 Financial assets measured at cost - non-current 29,040 Prepayments for investment 1,015,587 Total long-term investments 29,883,778 Property, plant and equipment d) 360,936 Intangible assets c), e) Other assets - - d) 909,843 Deferred tax assets b) 164,177 Other financial assets - non-current 61,481 Other non-current assets c), e) 1,135,501 Total other assets $ 62,330,688 Total (Continued)
			Recognition and Measurement Difference $ - - - - - - - - - - - - - - - - - - - - - $ -
Item Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Notes and accounts receivable, net Receivables from related parties, net Other receivables, net Inventories Deferred income tax assets - current Restricted assets - current Other current assets Total current assets Long-term investments Available-for-sale financial assets - non-current Financial assets carried at cost - non-current Prepayments for investment Total long-term investments Net property, plant and equipment Net intangible assets Other assets Idle assets, net Deferred income tax assets - non-current Restricted assets - non-current Other assets - other Total other assets Total

• 69 -

=

ROC GAAP	Amount $ 88,406 1,834,141 136,005 339,661 2,632,380 394,986 5,233,718 99,347 10,758,644 15,799,897 462,774 1,694 464,468 27,023,009 35,214,623 348,123 2,695,275 (3,220,362 ) 448,981 (102,918 ) (142,365) 35,241,357 55,260 35,296,617 $ 62,319,626		Effect of Transiti	on to IFRSs Presentation Difference $ - - - - - - - 11,062 11,062 - - - - 11,062 - - - - - - - - - - $ 11,062		IFRSs Amount Item Note Current liabilities $ 88,406 Short-term borrowings 1,834,141 Notes payable and trade payables 136,005 Payables to related parties 339,661 Current tax liabilities 2,632,380 Other payables 394,986 Payable for purchase of equipment 5,233,718 Current portion of long-term borrowings 180,982 Other current liabilities a), g) 10,840,279 Total current liabilities 15,799,897 Total long-term liabilities Other liabilities 717,793 Accrued pension cost h) 1,694 Others 719,487 Total other liabilities 27,359,663 Total liabilities Equity 35,214,623 Ordinary shares 343,869 Capital surplus f) 2,695,275 Legal reserve (3,528,992 ) Unappropriated earnings g), h), i) 448,981 Unrealized gains on available-for-sale financial instruments (102,785 ) Exchange differences on translating foreign operations g) (159,061) Treasury shares i) 34,911,910 Equity attributable to owners of the company 59,115 Non-controlling interests f), g), h) 34,971,025 Total equity $ 62,330,688 Total (Concluded)
			Recognition and Measurement Difference $ - - - - - - - 70,573 70,573 - 255,019 - 255,019 325,592 - (4,254 ) - (308,630 ) - 133 (16,696) (329,447 ) 3,855 (325,592) $ -
Item Current liabilities Short-term bank loans Notes and accounts payable Payables to related parties Income tax payable Accrued expenses Payables for equipment Current portion of long-term bank loans Other current liabilities Total current liabilities Total long-term liabilities Other liabilities Accrued pension cost Others Total other liabilities Total liabilities Shareholders' equity Capital stock Capital surplus Legal capital reserve Unappropriated earnings Unrealized gains on financial instruments Cumulative translation adjustments Treasury stock Total equity attributable to shareholders of the parent Minority interests Total shareholders' equity Total

• 4) Reconciliation of consolidated statement of comprehensive income for the three months ended March 31, 2012

ROC GAAP	Amount $ 5,143,476 4,396,894 746,582 279,844 389,106 1,054,845 1,723,795 (977,213) 41,530 5,474 1,182 5,931 54,117		Effect of Transiti	on to IFRSs Presentation Difference $ - (5,734) 5,734 16 244 - 260 5,474 - (5,474 ) - - (5,474 )		IFRSs Amount Item Note $ 5,143,476 Net operating revenue 4,388,306 Operating costs g), h), j) 755,170 Gross profit Operating expenses 279,115 Sales and marketing expenses g), h), j) 388,477 General and administrative expenses g), h), j) 1,053,345 Research and development expenses g), h), j) 1,720,937 Total operating expenses (965,767) Loss from operations Non-operating income and gains 41,530 Interest income - - j) 1,182 Valuation gain on financial assets at fair value through profit or loss 5,931 Others 48,643 Total non-operating income and gains (Continued)
			Recognition and Measurement Difference $ - (2,854) 2,854 (745 ) (873 ) (1,500 ) (3,118) 5,972 - - - - -
Item Net sales Cost of sales Gross profit Operating expenses Sales and marketing General and administrative Research and development Total operating expenses Loss from operations Non-operating income and gains Interest income Gain on disposal of assets Valuation gain on financial assets, net Others Total non-operating income and gains

• 70 -

ROC GAAP	Amount $ 57,384 125,501 1,351 184,236 (1,107,332 ) (6,251) $ (1,113,583)		Effect of Transiti	on to IFRSs Presentation Difference $ - - - - - - $ -		IFRSs Amount Item Note Non-operating expenses and losses $ 57,384 Interest expense 125,501 Foreign exchange losses, net 1,351 Others 184,236 Total non-operating expenses and losses (1,101,360 ) Loss before income tax (6,251) Income tax benefit (1,107,611) Net loss (44,522 ) Exchange differences on translating foreign operations 209,672 Unrealized gain on available-for-sale financial assets 165,150 Other comprehensive income for the period, net of tax $ (942,461) Total comprehensive loss for the period
			Recognition and Measurement Difference $ - - - - 5,972 - $ 5,972
Item Non-operating expenses and losses Interest expense Foreign exchange losses, net Others Total non-operating expenses and losses Loss before income tax Income tax benefit Consolidated net loss

(Concluded)

• 5) Reconciliation of consolidated statement of comprehensive income for the year ended December 31, 2012

ROC GAAP	Amount $ 24,228,738 21,684,781 2,543,957 1,176,455 1,718,845 4,972,689 7,867,989 (5,324,032) 166,316 62,455 60,825 17,172 6,199 64,287 377,254 302,953 161,829 155,480 6,583 5,685 632,530 (5,579,308 ) 61,385 $ (5,517,923)		Effect of Transiti	on to IFRSs Presentation Difference $ - 139,698 (139,698) (499 ) 590 (1,481 ) (1,390) (138,308) - - - (17,172 ) - - (17,172 ) - - (155,480 ) - - (155,480 ) - - $ -		IFRSs Amount Item Note $ 24,228,738 Net operating revenue 21,823,165 Operating costs g), h), j) 2,405,573 Gross profit Operating expenses 1,174,486 Sales and marketing expenses g), h), j) 1,720,759 General and administrative expenses g), h), j) 4,972,261 Research and development expenses g), h), j) 7,867,506 Total operating expenses (5,461,933) Loss from operations Non-operating income and gains 166,316 Interest income 62,455 Gain on disposal of financial instruments, net 60,825 Dividend income - - j) 6,199 Valuation gain on financial assets at fair value through profit or loss 64,287 Others 360,082 Total non-operating income and gains Non-operating expenses and losses 302,953 Interest expense 161,829 Foreign exchange losses, net - - j) 6,583 Impairment losses 5,685 Others 477,050 Total non-operating expenses and losses (5,578,901 ) Loss before income tax 61,385 Income tax benefit (5,517,516) Net loss (Continued)
			Recognition and Measurement Difference $ - (1,314) 1,314 (1,470 ) 1,324 1,053 907 407 - - - - - - - - - - - - - 407 - $ 407
Item Net sales Cost of sales Gross profit Operating expenses Sales and marketing General and administrative Research and development Total operating expenses Loss from operations Non-operating income and gains Interest income Gain on disposal of financial instruments, net Dividend income Gain on disposal of assets Valuation gain on financial assets, net Others Total non-operating income and gains Non-operating expenses and losses Interest expense Foreign exchange losses, net Loss on disposal of assets Impairment losses Others Total non-operating expenses and losses Loss before income tax Income tax benefit Consolidated net loss

• 71 -

ROC GAAP Item Amount	Effect of Transition to IFRSs Recognition and Measurement Presentation Difference Difference		IFRSs Amount Item Note $ (72,850 ) Exchange differences on translating foreign operations 16,886 Unrealized gain on available-for-sale financial assets (55,964 ) Other comprehensive income for the period, net of tax $ (5,573,480) Total comprehensive loss for the period (Concluded)

• 6) Exemptions from IFRS 1

IFRS 1 establishes the procedures for the Group’s first condensed consolidated financial statements prepared in accordance with IFRSs. According to IFRS 1, the Group is required to determine the accounting policies under IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of transition to IFRSs, January 1, 2012; except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The major optional exemptions the Group adopted are summarized as follows:

a) Business combinations

The Group elected not to apply IFRS 3, “Business Combinations,” retrospectively to business combinations that occurred before the date of transition. Therefore, in the opening balance sheet, the amount of goodwill generated from past business combinations remains the same compared with the one under ROC GAAP as of December 31, 2011.

b) Share-based payment transactions

The Company elected to take the optional exemption from applying IFRS 2 “Share-based Payment” retrospectively for the shared-based payment transactions granted and vested before the date of transition.

• c) Employee benefits

The Group elected to recognize all cumulative actuarial gains and losses in retained earnings as of the date of transition.

• 7) Explanations of significant reconciling items in the transition to IFRSs

Material differences between the accounting policies under ROC GAAP and the accounting policies adopted under IFRSs were as follows:

• a) Allowance for sales returns and others

Under ROC GAAP, provisions for estimated sales returns and others are recognized as a reduction in revenue in the period the related revenue is recognized based on historical experience. Allowance for sales returns and others is recorded as a deduction in accounts receivable. Under IFRSs, the allowance for sales returns and others is a present obligation with uncertain timing and an amount that arises from past events; it is therefore reclassified as provisions (classified under current liabilities) accordingly.

• 72 -

As of December 31, 2012, March 31, 2012 and January 1, 2012, the amounts reclassified from allowance for sales returns and others to provisions were NT$11,062 thousand, NT$14,587 thousand and NT$11,987 thousand, respectively.

b) Classifications of deferred income tax asset/liability and valuation allowance

Under ROC GAAP, valuation allowance is provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. Under IFRSs, deferred tax assets are only recognized to the extent that it is probable that there will be sufficient taxable profits and the valuation allowance account is no longer used.

In addition, under ROC GAAP, a deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or noncurrent based on the expected length of time before it is realized or settled. Under IFRSs, a deferred tax asset or liability is classified as noncurrent asset or liability.

As of December 31, 2012, March 31, 2012 and January 1, 2012, the amounts reclassified from deferred income tax assets - current to deferred income tax assets - non-current were NT$231,541 thousand, NT$368,450 thousand and NT$133,299 thousand, respectively.

c) Reclassification of burgage

Under ROC GAAP, held burgage is classified under intangible assets. Under IFRSs, burgage is reclassified as lease prepayments in accordance with IAS No 17, “Leases”.

As of December 31, 2012, the amounts reclassified to lease prepayments - current (classified under other current assets) and lease prepayments - non-current (classified under other non-current assets) were NT$523 thousand and NT$22,477 thousand, respectively. As of March 31, 2012, the amounts reclassified to lease prepayments - current and lease prepayments - non-current were NT$530 thousand and NT$23,207 thousand, respectively. As of January 1, 2012, the amounts reclassified to lease prepayments - current and lease prepayments - non-current were NT$543 thousand and NT$23,920 thousand, respectively.

d) Reclassification of idle assets

Under ROC GAAP, idle assets are classified under other assets. After the adoption of IFRSs, idle assets are reclassified under property, plant and equipment in accordance with IAS No 16, “Property, Plant and Equipment”.

As of December 31, 2012, March 31, 2012 and January 1, 2012, the amounts reclassified from idle assets to property, plant and equipment were NT$278,290 thousand, NT$282,794 thousand and NT$290,125 thousand, respectively.

• e) Reclassification of deferred assets

Under ROC GAAP, deferred assets are classified under other assets. Under IFRSs, deferred assets are reclassified under intangible assets.

As of December 31, 2012, March 31, 2012 and January 1, 2012, the amounts reclassified from deferred assets to intangible assets were NT$8,693 thousand, NT$914 thousand and NT$870 thousand, respectively.

• 73 -

• f) Capital surplus of subsidiaries - employee stock options

Under ROC GAAP, employee stock options granted by a subsidiary are recognized by the parent company according to its ownership percentage as capital surplus - employee stock options under the equity attributable to shareholders of the parent in the consolidated financial statements. Under IFRSs, the equity not attributable, directly or indirectly, to a parent is non-controlling interest.

As of December 31, 2012, March 31, 2012 and January 1, 2012, the amounts reclassified to non-controlling interest were NT$4,254 thousand, NT$3,684 thousand and NT$3,436 thousand, respectively.

• g) Employee benefits - short-term accumulating compensated absences

Short-term accumulating compensated absences are not specifically addressed under ROC GAAP and usually recognized as salary expense while distributed. Under IFRSs, accumulating compensated absences are recognized as salary expense when the employees render services that increase their entitlement to future compensated absences.

At the transition to IFRSs, the Company elected to recognize all the resulting accounting difference of compensated absences in retained earnings. As of December 31, 2012, March 31, 2012 and January 1, 2012, other current liabilities increased by NT$70,573 thousand, NT$59,700 thousand and NT$63,967 thousand, respectively; non-controlling interests all decreased by NT$630 thousand; cumulative translation adjustments increased by NT$133 thousand, NT$36 thousand and decreased by NT$167 thousand, respectively. For the year ended December 31, 2012, the cost of sales and operating expenses increased by NT$2,858 thousand and NT$4,048 thousand, respectively. For the three months ended March 31, 2012, cost of sales and operating expenses decreased by NT$1,819 thousand and NT$2,245 thousand, respectively.

• h) Employee benefits - corridor approach

Under ROC GAAP, unrecognized net transition obligation from first-adoption of SFAS No. 18, “Accounting for Pensions”, should be amortized over the expected average remaining service lives of the employees who are still in service and expected to receive pension benefits using the straight-line method and recorded in net pension cost. Transition to IFRSs, the Company is not subject to the transition requirements of IAS 19 “Employee Benefits.” Thus, unrecognized net transition obligation should be recognized immediately to unappropriated earnings.

Under ROC GAAP, actuarial gains and losses are accounted for under the corridor approach which resulted in the deferral of gains and losses. When using the corridor approach, actuarial gains and losses should be amortized over the expected average remaining working lives of the participating employees and be recognized directly to retained earnings. At the transition to IFRSs, the Company decided to adopt the corridor approach continuously in accordance with IAS No. 19, “Employee Benefits,” and as its accounting policy.

• 74 -

At the transition date, the Company performed actuarial valuation under IAS No. 19, “Employee Benefits,” and recognized the valuation difference directly to retained earnings under the requirement of IFRS 1, “First-time Adoption of International Financial Reporting Standards.” As of December 31, 2012, March 31, 2012 and January 1, 2012, accrued pension cost was adjusted for an increase of NT$255,019 thousand, NT$260,424 thousand and NT$262,332 thousand, respectively; non-controlling interest on all the dates adjusted for an increase of NT$231 thousand. Pension cost for the year ended December 31, 2012 was adjusted for a decrease in cost of sales of NT$4,172 thousand and a decrease in operating expenses of NT$3,141 thousand. Pension cost for the three months ended March 31, 2012 was also adjusted for a decrease in cost of sales of NT$1,035 thousand and a decrease in operating expenses of NT$873 thousand.

• i) Treasury stock transactions

Under ROC GAAP, the Company’s stocks held by subsidiaries were accounted for as treasury stock. For its first-time adoption of SFAS No. 30, ”Accounting for Treasury Stocks,” the recorded cost of the stock is based on its carrying amount as of January 1, 2002, which may not equal to its acquisition cost.

At the transition to IFRSs, treasury stock is stated at cost and shown as a deduction in shareholders’ equity. The Company is not subject to the transition requirement; thus, the amounts of the related accounts in the statements of changes in shareholders’ equity should be adjusted retrospectively.

As of December 31, 2012, March 31, 2012 and January 1, 2012, the book value of treasury stock increased by NT$16,696 thousand on all dates.

• j) The reclassification of line items in the consolidated statement of comprehensive loss

Under IFRSs, based on the nature of operating transactions, the Group reclassified net loss on disposal of property, plant and equipment of NT$138,308 thousand for the year ended December 31, 2012 as an increase in cost of sales of NT$139,698 thousand and a decrease in operating expenses of NT$1,390 thousand. For the three months ended March 31, 2012, the Group also reclassified net gain on disposal of property, plant and equipment of NT$5,474 thousand as a decrease in cost of sales of NT$5,734 thousand and an increase in operating expenses of NT$260 thousand.

• 8) Material adjustments to the statement of cash flows

According to ROC GAAP, interest paid and received and dividends received are classified as operating activities while dividends paid are classified as financing activities. Additional disclosure is required for interest expenses when reporting cash flow using indirect method. However, under IAS 7“Statement of Cash Flows”, cash flows from interest and dividends received and paid shall each be disclosed separately. Each shall be classified in a consistent manner from period to period as operating, investing or financing activities. Therefore, interests received by the Group of NT$39,606 thousand, for the three months ended March 31, 2012 were presented separately at the date of transition to IFRSs.

Except for the above differences, there are no other significant differences between ROC GAAP and IFRSs in the consolidated statement of cash flows.

• 75 -

TABLE 1

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

MARKETABLE SECURITIES HELD MARCH 31, 2013

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		March 31, 2013	March 31, 2013		Note
				Shares/Units (In Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
The Company Macronix (BVI) Co., Ltd.	Stock Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd. Magic Pixel Inc. Infomax Communication Co., Ltd. Mxtran Inc. MoDioTek Co., Ltd. Ardentec Corporation United Industrial Gases Co., Ltd. Zowie Technology Co., Ltd. Aetas Technology Inc. Honbond Venture Capital Co., Ltd. Stock New Trend Technology Inc. Macronix Europe NV. Macronix Pte Ltd. Macronix (Hong Kong) Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary The Company serves as member of its board of directors None None None The Company serves as member of its board of directors Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary	Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Available-for-sale financial assets - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Financial assets measured at cost - non-current Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method	100,000 223,300,000 - - 21,153,675 50,322,240 51,127,000 34,021,160 34,551,224 6,065,343 105,981 145,850 4,972,500 25,850,000 999 174,000 89,700,000	$ 254,455 1,519,717 28,727 47,152 35,478 157,384 116,957 49,632 697,935 58,500 - - 24,198 US$ 10,136,684 US$ 2,748,936 US$ 513,073 US$ 20,605,382	100.00 100.00 100.00 100.00 72.54 92.31 88.15 70.88 7.48 3.06 0.32 0.29 15.00 100.00 100.00 100.00 100.00	$ 254,455 1,519,717 62,301 47,152 35,475 970,477 117,241 49,631 697,935 131,599 321 (148) 22,757 US$ 22,561,647 US$ 2,748,936 US$ 513,024 US$ 20,605,381	Note 1 Note 1 Notes 1 and 3 Note 1 Note 1 Note 1 Note 1 Note 1 Note 2 Note 4 Note 4 Note 4 Note 4 Note 1 Note 1 Note 1 Note 1

(Continued)

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Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		March 31, 2013	March 31, 2013		Note
				Shares/Units **(In Thousands) **	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
Macronix (Hong Kong) Co., Ltd. Run Hong Investment, Ltd. Hui Ying Investment, Ltd. Infomax Communication Co., Ltd. Infomax Holding Co., Ltd. Infomax Holding Company Limited MoDioTek Co., Ltd.	Macronix (Asia) Limited Chipbond Technology Corporation Key ASIC Bhd Tower Semiconductor Ltd. Global Strategic Investment Fund Stock Macronix Microelectronics (Suzhou) Co., Ltd. Stock Magic Pixel Inc. MoDioTek Co., Ltd. Infomax Communication Co., Ltd. Mxtran Inc. Stock MoDioTek Co., Ltd. Macronix International Co., Ltd. Raio Technology Co., Ltd. Stock Infomax Holding Co., Ltd. Stock Infomax Holding Company Limited Stock Infomax Communication (Suzhou) Co., Ltd. Stock Mosatek Co., Ltd.	Indirect subsidiary None None None None Indirect subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary The Company None Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary	Investments accounted for using equity method Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Financial assets carried at cost - non-current Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Available-for-sale financial assets - non-current Financial assets measured at cost - non-current Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method	800,000 1,088,319 26,924,500 584,893 1,000,000 - 1,410,980 2,395,200 2,742,506 2,894,000 2,395,200 3,899,382 738,189 6,620,000 29,982,500 - 3,090,000	US$ 1,589,654 US$ 2,459,437 US$ 1,087,947 US$ 4,117,647 US$ 220,000 US$ 10,415,103 $ 2,367 3,494 8,576 6,621 3,494 33,574 - 8,414 US$ 214,805 US$ 215,306 $ 5,281	100.00 0.18 3.34 1.57 2.52 100.00 4.84 4.99 5.03 4.99 4.99 0.11 10.86 100.00 100.00 100.00 100.00	US$ 1,589,654 US$ 2,459,437 US$ 1,087,947 US$ 4,117,647 US$ 779,008 US$ 10,415,103 $ 2,367 3,494 52,882 6,637 3,494 33,574 16,460 8,414 US$ 214,805 US$ 215,306 $ 5,281	Note 1 Note 2 Note 2 Note 2 Note 4 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 2 Note 4 Note 1 Note 1 Note 1 Note 1

(Continued)

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Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		March 31, 2013	March 31, 2013		Note
				Shares/Units **(In Thousands) **	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
Mosatek Co., Ltd. Mosatek (H.K) Company Limited Magic Pixel Inc. Magic Pixel Inc. Magic Pixel Holding Company Limited Mxtran Inc. Mxtran Holding (Samoa) Co., Ltd. Mxtran (H.K.) Holding Co., Limited	Stock Mosatek (H.K) Company Limited Stock Modiotek (Suzhou) Co., Ltd. Stock Magic Pixel Inc. Stock Magic Pixel Holding Company Limited Stock Magic Pixel (Shen Zhen) Co., Ltd. Stock Mxtran Holding (Samoa) Co., Ltd. Stock Mxtran (H.K.) Holding Co., Limited Maxtran Technology Co., Ltd.	Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary	Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method	12,905,100 - 2,200,000 12,870,000 - 920,000 6,152,000 -	US$ 163,625 US$ 156,322 $ 4,529 US$ 78,530 US$ 70,768 $ 12,198 US$ 279,056 US$ 264,456	100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	US$ 163,625 US$ 156,322 $ 4,580 US$ 78,530 US$ 70,768 $ 12,198 US$ 279,056 US$ 264,485	Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1

Note 1: Recognized based on the unreviewed financial statements for the same period as the Company.

Note 2: The market value was based on the closing price as of March 31, 2013.

Note 3: The book value excluded $33,574 thousand, held by a subsidiary.

Note 4: The calculation is based upon the most recent financial statements available to the Company.

(Concluded)

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TABLE 2

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL THREE MONTHS ENDED MARCH 31, 2013

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details	Transaction Details	Non-arm’s Length Transaction	Non-arm’s Length Transaction	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Term	Ending Balance	% to Total
The Company Macronix (Hong Kong) Co., Ltd. Macronix America Inc.	MegaChips Corporation Macronix (Hong Kong) Co., Ltd. Macronix America Inc. MegaChips Corporation The Company The Company	Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary Subsidiary Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary Subsidiary	Sales Sales Sales Purchase Purchase Purchase	$ 864,540 645,346 105,960 164,910 US$ 21,998,175 US$ 3,576,514	20 15 2 11 100 100	30 days after monthly closing 45 days after monthly closing Net 60 days 30 days after monthly closing 45 days after monthly closing Net 60 days	Note 35 Note 35 Note 35 Note 35 No material difference No material difference	Note 35 Note 35 Note 35 Note 35 No material difference No material difference	$ 265,715 367,029 50,538 - US$ 12,305,448 US$ 1,906,626	9 11 2 11 100 100	- - - - - -

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TABLE 3

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL MARCH 31, 2013

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Doubtful Accounts
					Amounts	**Action Taken **
The Company	MegaChips Corporation Macronix (Hong Kong) Co., Ltd.	Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary	$ 265,715 367,029	9.98 times 7.21 times	$ - -	- -	JPY 738,912 thousand US$ 5,881 thousand	$ - -

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TABLE 4

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE THREE MONTHS ENDED MARCH 31, 2013

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance as of March 31, 2013	Balance as of March 31, 2013	Balance as of March 31, 2013	Net Income (Loss) of the Investee	Investment Income (Loss) Recognized	Note
				March 31, 2013	December 31, 2012	Shares	Percentage of Ownership	Carrying Amount
The Company Macronix (BVI) Co., Ltd. Macronix (Hong Kong) Co., Ltd. Run Hong Investment, Ltd. Hui Ying Investment, Ltd. Infomax Communication Co., Ltd. Infomax Holding Co., Ltd. Infomax Holding Company Limited MoDioTek Co., Ltd. Mosatek Co., Ltd. Mosatek (H.K.) Company Limited Magic Pixel Inc. Magic Pixel Inc. Magic Pixel Holding Company Limited Mxtran Inc. Mxtran Holding (Samoa) Co., Ltd. Mxtran (H.K.) Holding Co., Limited	Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd. Magic Pixel Inc. Infomax Communication Co., Ltd. Mxtran Inc. MoDioTek Co., Ltd. New Trend Technology Inc. Macronix Europe NV. Macronix Pte Ltd. Macronix (Hong Kong) Co., Ltd. Macronix (Asia) Limited Macronix Microelectronics (Suzhou) Co., Ltd. Magic Pixel Inc. MoDioTek Co., Ltd. Infomax Communication Co., Ltd. Mxtran Inc. MoDioTek Co., Ltd. Infomax Holding Co., Ltd. Infomax Holding Company Limited Infomax Communication (Suzhou) Co., Ltd. Mosatek Co., Ltd. Mosatek (H.K) Company Limited Modiotek (Suzhou) Co., Ltd. Magic Pixel Inc. Magic Pixel Holding Company Limited Magic Pixel (Shen Zhen) Co., Ltd. Mxtran Holding (Samoa) Co., Ltd. Mxtran (H.K.) Holding Co., Limited. Maxtran Technology Co., Ltd.	San Jose, California, U.S.A. Tortola, British Virgin Islands Taipei, Taiwan Taipei, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan San Jose, California, U.S.A. Belgium Singapore Hong Kong Cayman Island China Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Samoa Hong Kong China Samoa Hong Kong China Samoa Hong Kong China Samoa Hong Kong China	Marketing Investment holding company Investment Investment Fabless multimedia system on chip Baseband chip, analog baseband chip, and power management chip Combi-SIM IC and the related service Fabless multimedia system on chip IC design After-sale service After-sale service Marketing Investment holding company Development of integrated circuit system and software Fabless multimedia system on chip Fabless multimedia system on chip Baseband chip, analog baseband chip, and power management chip Fabless multimedia system on chip Fabless multimedia system on chip Investment holding company Investment holding company Technical support of Combi-SIM IC Investment holding company Investment holding company Sales and technical support of mobile audio platform and smart remote controller Investment holding company Investment holding company Selling and technical support of fabless multimedia system on chip Investment holding company Investment holding company Technical support of Combi-SIM IC	$ 2,640 7,348,057 500,000 984,432 194,133 520,117 512,371 340,212 US$ 25,850,000 US$ 63,984 US$ 100,000 US$ 11,500,000 US$ 800,000 US$ 9,000,000 $ 17,286 25,452 28,879 29,279 25,452 205,610 US$ 2,900,000 US$ 2,550,000 $ 96,085 US$ 1,655,250 US$ 1,650,000 $ 69,468 US$ 1,650,000 US$ 850,000 $ 27,809 US$ 790,000 US$ 775,300	$ 2,640 7,348,057 500,000 984,432 194,133 520,117 512,371 340,212 US$ 25,850,000 US$ 63,984 US$ 100,000 US$ 11,500,000 US$ 800,000 US$ 9,000,000 $ 17,286 25,452 28,879 29,279 25,452 195,457 US$ 2,900,000 US$ 2,550,000 $ 91,644 US$ 1,655,250 US$ 1,650,000 $ 65,050 US$ 1,600,000 US$ 800,000 $ 27,809 US$ 790,000 US$ 775,300	100,000 223,300,000 - - 21,153,675 50,322,240 51,127,000 34,021,160 25,850,000 999 174,000 89,700,000 800,000 - 1,410,980 2,395,200 2,742,506 2,894,000 2,395,200 6,620,000 29,982,500 - 3,090,000 12,905,100 - 2,200,000 12,870,000 - 920,000 6,152,000 -	100.00 100.00 100.00 100.00 72.54 92.31 88.15 70.88 100.00 100.00 100.00 100.00 100.00 100.00 4.84 4.99 5.03 4.99 4.99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	$ 254,455 1,519,717 28,727 47,152 35,478 157,384 116,957 49,632 US$ 10,136,684 US$ 2,748,936 US$ 513,073 US$20,605,382 US$ 1,589,654 US$ 10,415,103 $ 2,367 3,494 8,576 6,621 3,494 8,414 US$ 214,805 US$ 215,306 $ 5,281 US$ 163,625 US$ 156,322 $ 4,529 US$ 78,530 US$ 70,768 $ 12,198 US$ 279,056 US$ 264,456	$ (3,015 ) (10,194 ) (1,458 ) (7,786 ) (32,965 ) (70,076 ) (23,597 ) (30,212 ) US$ (30 ) US$ 46,873 US$ 7,813 US$ (416,072 ) US$ 21,611 US$ (160,237 ) $ (32,965 ) (30,212 ) (70,076 ) (23,597 ) (30,212 ) (10,041 ) US$ 32,524 US$ 39,093 $ (5,093 ) US$ (21,578 ) US$ (21,578 ) $ (2,246 ) US$ (50,712 ) US$ (50,973 ) $ (1,889 ) US$ (63,667 ) US$ (63,668 )	$ (3,015 ) (10,194 ) (1,458 ) (7,786 ) (23,912 ) (64,687 ) (20,800 ) (21,413 ) Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note

Note: Under relevant regulations, no disclosure of investment gain (loss) is needed.

• 81 -

TABLE 5

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

TRANSACTIONS AMONG CONSOLIDATED ENTITIES THREE MONTHS ENDED MARCH 31, 2013 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Transaction Subject	Transaction Object	Relation (Note 1)			Transaction Summary
			Account	Amount	Term of Transaction (Note 5)	% to Total Assets or Total Revenue
MXIC	MXHK	2	Sales	$645,346	Note 2	15
			Notes receivable and trade receivables	367,029		1
	MXE	2	Operatingexpenses	16,698		-
			Tradepayables	116,930		-
	MXA	1	Sales	105,960	Note 2	2
			Operatingexpenses	38,523		1
			Notes receivable and trade receivables	50,538		-
			Tradepayables	56,841		-
	Mxtran	1	Rental revenue	1,403	Note3	-
			Other revenue(software,mold,etc.)	278	Note 4	-
	MoDioTek	1	Rental revenue	1,398	Note3	-
	MX Asia	2	Operatingexpenses	28,371		1
			Tradepayables	14,947		-
	INFOMAX	1	Rental revenue	1,895	Note3	-
	MPI	1	Rental revenue	1,092	Note 3	-

Note 1: 1. Transaction was between the parent company and subsidiaries.

1. Transaction was between the parent company and indirect subsidiaries.

Note 2: The sale price referred to the product price to end customer.

Note 3: The Company leased office to related parties and collected rental revenue according to the floor space per month.

Note 4: The Company had signed contract with related parties. The related transaction term was negotiated bilaterally, so there was no comparable basis.

Note 5: The transaction terms with related parties were 30 to 60 days after monthly closing and were similar to those with third parties.

• 82 -

TABLE 6

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

INFORMATION ON INVESTMENT IN MAINLAND CHINA THREE MONTHS ENDED MARCH 31, 2013 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Investee Company	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital (Note 3)		Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2013 (Note 3)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of March 31, 2013 (Note 3)	Percentage of Ownership (Note 6)	Investment Income (Loss) (Notes 4 and 6)	Carrying Amount as of March 31, 2013 (Notes 3 and 7)	Accumulated Inward Remittance of Earnings as of March 31, 2013
							Outflow	Inflow
Macronix Microelectronics (Suzhou) Co., Ltd. Infomax Communication (Suzhou) Co., Ltd. Modiotek (Suzhou) Co., Ltd. Magic Pixel (Shen Zhen) Co., Ltd. Maxtran Technology Co., Ltd.	Development of integrated circuit system and software Software, rendering and technical service Sales and technical support of mobile audio platform and smart remote controller Selling and technical support of fabless multimedia system on chip Technical support of Combi-SIM IC		RMB 63,995,690 $ 304,467 RMB 17,698,920 $ 84,205 RMB 11,634,750 $ 55,354 RMB 5,596,904 $ 26,628 RMB 5,000,000 $ 23,788		(Note 1) (Note 2) (Note 2) (Note 2) (Note 2)	US$ 9,000,000 $ 268,425 US$ 2,550,000 $ 76,054 US$ 1,650,000 $ 49,211 US$ 800,000 $ 23,860 US$ 775,300 $ 23,123	US$ - US$ - US$ - US$ 50,000 $ 1,491 US$ -	US$ - US$ - US$ - US$ - US$ -	US$ 9,000,000 $ 268,425 US$ 2,550,000 $ 76,054 US$ 1,650,000 $ 49,211 US$ 850,000 $ 25,351 US$ 775,300 $ 23,123	100.00% 97.34% 80.86% 77.38% 93.14%	US$ (160,237 ) $ (4,755 ) (Note 5) US$ 38,053 $ 1,129 (Note 5) US$ 17,448 $ 518 (Note 5) US$ (39,443 ) $ (1,170 ) (Note 5) US$ (59,299 ) NT$ (1,760 ) (Note 5)	US$ 10,415,103 $ 310,630 (Note 5) US$ 209,579 $ 6,251 (Note 5) US$ 126,402 $ 3,770 (Note 5) US$ 54,760 $ 1,633 (Note 5) US$ 246,315 NT$ 7,346 (Note 5)	US$ - US$ - US$ - US$ - US$ -
Accumulated Investment in Mainland China as of March 31, 2013		Investment Amount Authorized by the Investment Commission, MOEA			Upper Limit on Investment
US$ 15,625,300 $ 466,025 (Note 3)		US$ 18,725,300 $ 558,482 (Note 3)			$ 19,750,737

Note 1: The Company invested in a company located in Mainland China indirectly through an existing company in a third country.

Note 2: The Company invested in a company located in Mainland China indirectly through an investing company in a third country.

Note 3: The foreign currency amount is converted into New Taiwan dollars based on the exchange rate at March 31, 2013.

Note 4: The foreign currency amount is converted into New Taiwan dollars based on the average exchange rate of the three months ended March 31, 2013.

Note 5: The investment gain (loss) and long-term investment balance were recognized based on the unreviewed financial statements during the same period.

Note 6: The percentage of ownership is based on the total holding percentage owned by the Company and its subsidiaries.

• 83 -