Macronix — Interim / Quarterly Report 2012

Jun 26, 2013

Macronix International Co., Ltd.

Financial Statements for the Three Months Ended March 31, 2012 and 2011 and Independent Accountants’ Review Report

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

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

We have reviewed the accompanying balance sheets of Macronix International Co., Ltd. (the “Company”) as of March 31, 2012 and 2011 and the related statements of income and cash flows for the three months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these 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 7 to the financial statements, we did not review the financial statements for the three months ended March 31, 2012 and 2011 of the investees accounted for by the equity method of accounting. The carrying values of those investments as of March 31, 2012 and 2011 amounted to NT$2,910,174 thousand and NT$3,379,150 thousand, respectively. The related investment net loss for the three months ended March 31, 2012 and 2011 amounted to NT$175,753 thousand and NT$105,344 thousand, respectively. These amounts as well as the related financial information of the investees as disclosed in Note 25 to the financial statements were based on the investees’ 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 values of equity-method investments, equity in losses of equity-method investees, as well as the related disclosures of the investment information were based on unreviewed financial statements of the investees, and except for the effects of such adjustment, if any, as might have been made had we applied review procedures on the financial statements of the investees referred to in the preceding paragraph, we are not aware of any material modifications that should be made to the financial statements as of and for the three months ended March 31, 2012 and 2011 referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting standards, and accounting principles generally accepted in the Republic of China.

April 25, 2012

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and 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 financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the accountants’ review report and the accompanying 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 accountants’ review report and financial statements shall prevail.

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MACRONIX INTERNATIONAL CO., LTD.

BALANCE SHEETS MARCH 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Par Value) (Reviewed, Not Audited)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 2 and 4) Notes and accounts receivable, net (Notes 2, 3 and 5) Receivables from related parties, net (Notes 2, 3 and 20) Other receivables, net (Note 20) Inventories (Notes 2 and 6) Deferred income tax assets - current (Notes 2 and 18) Other current assets Total current assets LONG-TERM INVESTMENTS (Notes 2, 7, 8, 9 and 23) Investments accounted for using equity method Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Total long-term investments PROPERTY, PLANT AND EQUIPMENT (Notes 2, 10 and 21) Cost: Land Buildings and structures Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Less: Accumulated depreciation Construction in progress and prepayments for equipment Net property, plant and equipment INTANGIBLE ASSETS (Note 2) Software, net Deferred charges, net Net intangible assets OTHER ASSETS Deferred income tax assets - noncurrent (Notes 2 and 18) Restricted assets - noncurrent (Note 21) Other assets Total other assets TOTAL		2012 Amount % $ 17,120,701 26 2,218,088 3 891,712 1 145,844 - 7,272,563 11 361,225 1 587,284 1 28,597,417 43 2,910,174 5 779,974 1 98,056 - 3,788,204 6 598,076 1 21,611,256 33 76,358,093 115 5,392,172 8 25,546 - 2,419 - 993,994 1 104,981,556 158 73,403,115 111 1,918,464 3 33,496,905 50 242,605 - 600 - 243,205 - 177,552 1 164,177 - 26,197 - 367,926 1 $ 66,493,657 100		2011 Amount % $ 19,934,931 31 2,332,775 4 966,360 1 195,662 - 4,961,786 8 323,525 - 713,298 1 29,428,337 45 3,379,150 5 882,337 2 159,556 - 4,421,043 7 598,076 1 20,743,502 32 62,572,311 96 1,566,440 2 26,677 - 2,419 - 925,505 2 86,434,930 133 67,720,383 104 11,887,114 18 30,601,661 47 65,695 - 13,924 - 79,619 - 387,097 1 36,210 - 32,483 - 455,790 1 $ 64,986,450 100

LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Short-term bank loans (Note 11) Notes and accounts payable Payables to related parties (Note 20) Income tax payable (Notes 2 and 18) Accrued expenses Accrued bonuses to employees, directors and supervisors (Notes 2 and 14) Payables for equipment Current portion of long-term bank loans (Notes 12, 21 and 23) Other current liabilities Total current liabilities LONG-TERM LIABILITIES Long-term bank loans, net of current portion (Notes 12, 21 and 23) Long-term notes payable Total long-term liabilities OTHER LIABILITIES Accrued pension cost (Notes 2 and 13) Others Total other liabilities Total liabilities SHAREHOLDERS' EQUITY (Notes 2, 14, 15, 16 and 23) Capital stock, $10 par value Authorized - 6,550,000 thousand shares Issued - 3,392,197 thousand shares in 2012 and 3,378,175 thousand shares in 2011 Capital surplus Treasury stock transactions Donation Long-term investments Employee stock options Retained earnings Legal capital reserve Unappropriated earnings Other adjustments Unrealized gains on financial instruments Cumulative translation adjustments Treasury stock (at cost) - 3,757 thousand shares Total shareholders' equity TOTAL		2012 Amount % $ 125,465 - 1,845,209 3 144,983 - 331,409 - 1,731,991 3 530,775 1 536,613 1 1,979,718 3 78,526 - 7,304,689 11 17,712,852 27 - - 17,712,852 27 379,690 - 1,694 - 381,384 - 25,398,925 38 33,921,967 51 25,075 - 37 - 3,685 - 317,653 - 2,407,003 4 3,994,438 6 641,767 1 (74,528) - (142,365) - 41,094,732 62 $ 66,493,657 100		2011
				Amount % $ 4,272,445 7 2,070,429 3 173,314 - 760,300 1 1,771,479 3 1,339,469 2 4,517,636 7 111,237 - 53,474 - 15,069,783 23 3,379,236 5 1,050 - 3,380,286 5 363,473 1 2,591 - 366,064 1 18,816,133 29 33,781,743 52 18,704 - 37 - 2,073 - 332,702 1 1,630,512 2 9,759,166 15 875,901 1 (88,156) - (142,365) - 46,170,317 71 $ 64,986,450 100

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

(With Deloitte & Touche review report dated April 25, 2012)

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MACRONIX INTERNATIONAL CO., LTD.

STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) (Reviewed, Not Audited)

GROSS SALES SALES RETURNS AND ALLOWANCES NET SALES (Notes 2 and 20) COST OF SALES (Notes 2, 6, 17 and 20) GROSS PROFIT REALIZED INTERCOMPANY PROFIT (Note 2) REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 17 and 20) Sales and marketing General and administrative Research and development Total operating expenses INCOME (LOSS) FROM OPERATION NON-OPERATING INCOME AND GAINS Interest income (Note 23) Gain on disposal of assets, net (Note 2) Reversal of allowance for doubtful accounts (Notes 2, 3 and 5) Others (Note 20) Total non-operating income and gains NON-OPERATING EXPENSES AND LOSSES Equity in losses of equity-method investees, net (Notes 2 and 7) Foreign exchange loss, net (Note 2) Interest expense (Notes 10 and 23) Others Total non-operating expenses and losses INCOME (LOSS) BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 2 and 18) NET INCOME (LOSS)		2012 Amount % $ 5,128,155 44,851 5,083,304 100 4,369,613 86 713,691 14 3,945 - 717,636 14 208,198 4 344,160 7 951,658 18 1,504,016 29 (786,380) (15) 37,536 1 5,702 - - - 13,921 - 57,159 1 175,753 4 123,441 2 57,385 1 73 - 356,652 7 (1,085,873) (21) 5,298 - $ (1,091,171) (21)		2011
				Amount % $ 6,586,654 13,916 6,572,738 100 3,838,601 58 2,734,137 42 8,066 - 2,742,203 42 211,347 4 400,442 6 863,435 13 1,475,224 23 1,266,979 19 29,666 1 9,334 - 34,567 1 16,912 - 90,479 2 105,344 2 14,509 - - - 916 - 120,769 2 1,236,689 19 174,434 3 $ 1,062,255 16

(Continued)

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MACRONIX INTERNATIONAL CO., LTD.

STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) (Reviewed, Not Audited)

EARNINGS (LOSS) PER SHARE (Note 19) Basic Diluted		2012 Before Income Tax After Income Tax $ (0.32) $ (0.32) $ (0.32) $ (0.32)		2011	2011
		Before Income Tax $ (0.32) $ (0.32)		Before Income Tax $ 0.37 $ 0.36	After Income Tax $ 0.32 $ 0.31

Certain pro forma information (after income tax) is shown as follows, based on the assumption that the Company’s stock held by subsidiaries is treated as an investment instead of treasury stock (Note 16):

NET INCOME (LOSS) EARNINGS (LOSS) PER SHARE Basic Diluted	2012 $(1,091,171) $(0.32) $(0.32)	2011 $ 1,062,255 $0.32 $0.31

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

(With Deloitte & Touche review report dated April 25, 2012)

(Concluded)

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MACRONIX INTERNATIONAL CO., LTD.

STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation Amortization Realized intercompany profit Provision (reversal of allowance) for doubtful accounts Gain on disposal of assets, net Equity in losses of equity-method investees, net Deferred income taxes Net changes in operating assets and liabilities: Notes and accounts receivable Receivables from related parties Other receivables Inventories Other current assets Notes and accounts payable Payables to related parties Income tax payable Accrued expenses Accrued bonuses to employees, directors and supervisors Other current liabilities Accrued pension cost Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Increase in restricted assets Acquisitions of investments accounted for using equity method Proceeds from disposal of financial assets carried at cost Acquisitions of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in intangible assets Decrease in other assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in short-term bank loans Increase in long-term bank loans Repayment of long-term bank loans Increase (decrease) in guarantee deposits Proceeds from exercise of employee stock options Net cash provided by financing activities	2012 $ (1,091,171) 1,807,462 21,309 (3,945) 20,021 (5,702) 175,753 5,298 172,910 448,532 (33,886) (873,774) (180,227) (291,284) (1,875) (3,726) (340,695) - 16,161 19,539 (139,300) - - 19,500 (791,505) 14,646 (193,438) 2,395 (948,402) (1,675,023) 2,170,000 (83,762) (172) 70,757 481,800	2011 $ 1,062,255 1,176,619 15,179 (8,066) (34,567) (9,334) 105,344 63,946 (237,133) 53,936 132,615 (1,139,840) (284,997) 200,663 15,588 107,715 (101,284) 190,253 (25,975) (1,030) 1,281,887 (33,503) (113,892) - (3,258,571) 8,877 (10,354) 1,899 (3,405,544) 1,466,365 1,200,000 (2,117,096) 248 155,514 705,031

(Continued)

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MACRONIX INTERNATIONAL CO., LTD.

STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid (excluding capitalized interest) Income tax paid NON-CASH FINANCING ACTIVITIES: Amounts reclassified from fixed assets to deferred assets Current portion of long-term bank loans INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS Acquisitions of property, plant and equipment Net decrease (increase) in payables to contractors and equipment suppliers Cash paid	2012 $ (605,902) 17,726,603 $ 17,120,701 $ 64,307 $ - $ 26 $ 1,979,718 $ 458,345 333,160 $ 791,505	2011 $ (1,418,626) 21,353,557 $ 19,934,931 $ - $ 2,774 $ - $ 111,237 $ 5,806,417 (2,547,846) $ 3,258,571

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

(With Deloitte & Touche review report dated April 25, 2012)

(Concluded)

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MACRONIX INTERNATIONAL CO., LTD.

NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise) (Reviewed, Not Audited)

1. GENERAL

Macronix International Co., Ltd. (the “Company”), a Republic of China (ROC) corporation, was incorporated in the Hsinchu Science Park (HSP), Taiwan on December 9, 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.

As of March 31, 2012 and 2011, the Company had 4,782 and 4,415 employees, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the ROC.

For the convenience of readers, the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the ROC. 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 financial statements shall prevail.

The Company’s significant accounting policies are summarized as follows:

Foreign Currency

Non-derivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange differences arising from settlement of foreign-currency assets and liabilities are recognized in profit or loss.

At the balance sheet date, foreign-currency monetary assets and liabilities are revalued using prevailing exchange rates and the exchange differences are recognized in profit or loss.

At the balance sheet date, foreign-currency nonmonetary assets (such as equity instruments) and liabilities that are measured at fair value are revalued using prevailing exchange rates, with the exchange differences treated as follows:

• a. Recognized in shareholders’ equity if the changes in fair value are recognized in shareholders’ equity; b. Recognized in profit and loss if the changes in fair value is recognized in profit or loss.

Foreign-currency nonmonetary assets and liabilities that are carried at cost continue to be stated at exchange rates at trade dates.

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If the functional currency of an equity-method investee is a foreign currency, translation adjustments will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported as a separate component of shareholders’ equity.

Accounting Estimation

Under above guidelines, law and principles, certain estimates and assumptions have been used for the allowance for doubtful accounts, allowance for sales returns and discounts, allowance for loss on inventories, depreciation of property, plant and equipment, depreciation of intangible asset, asset impairment, pension cost, income tax, bonuses to employees, directors and supervisors, etc. Actual results may differ from these estimates.

Classification of Current and Noncurrent Assets and Liabilities

Current assets include cash and cash equivalents and those assets expected to be converted to cash and cash equivalent, sold or consumed within one year from the balance sheet date. All other assets such as property, plant and equipment and intangible assets are classified as noncurrent. Current liabilities are obligations incurred and expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.

Cash Equivalents

Cash equivalents, consisting of repurchase agreements collateralized by bonds, are highly liquid financial instruments with maturities of three months or less when acquired and with carrying amounts that approximate their fair values.

Available-for-sale Financial Assets

Available-for-sale financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are remeasured at fair value, with changes in fair value recognized in equity until the financial assets are disposed of, at which time, the cumulative gain or loss previously recognized in equity is included in profit or loss for the period. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

Fair values of open-end mutual funds and publicly traded stocks are determined using the net assets value and the closing-price at the end of the period, respectively.

Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as reductions to the original cost of investment if such dividends are declared on the earnings of the investee attributable to periods prior to the purchase of the investments. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares.

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss on equity securities decreases, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity.

Financial Assets Carried at Cost

Investments without quoted market prices in an active market and whose fair value cannot be reliably measured, such as non-publicly traded stocks, are carried at their original cost. The accounting treatment for cash and stock dividend arising from financial assets carried at cost is the same as that for available-for-sale financial assets. If there is objective evidence of financial asset impairment, a loss is recognized. This impairment loss is irreversible.

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Impairment of Accounts Receivable

An allowance for doubtful accounts is provided based on a review of the collectability of accounts receivable. The Company determines the amount of allowance for doubtful accounts by examining the aging analysis of outstanding accounts receivable and current trends in the credit quality of its customers as well as its internal credit policies.

As discussed in Note 3 to the financial statements, on January 1, 2011, the Company adopted the third-time revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” One of the main revisions is that the impairment of receivables originated by the Company should be covered by SFAS No. 34. Accounts receivable are assessed for impairment at the end of each reporting period and 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 accounts receivable, the estimated future cash flows of the asset have been affected. Objective evidence of impairment could include:

• Significant financial difficulty of the debtor;

• Accounts receivable becoming overdue; or

• It becoming probable that the debtor will enter bankruptcy or financial re-organization.

The amount of the impairment loss recognized is the difference between the asset carrying amount and the present value of estimated future cash flows, discounted at the receivable’s original effective interest rate.

The carrying amount of the accounts receivable is reduced through the use of an allowance account. When accounts receivable are considered uncollectible, they are written off against the allowance account. Recoveries of amounts previously written off are credited to the allowance account. Changes in the carrying amount of the allowance account are recognized as bad debt in profit or loss.

Asset Impairment

If impairment of equity-method investments, property, plant and equipment and intangible assets are assessed on the balance sheet date and the carrying amount of an asset exceeds its recoverable amount, the excess is recognized as loss. If the recoverable amount increases in a future period, the subsequent reversal of the impairment loss is recognized as gain. However, the increased carrying amount of an asset due to reversal of an impairment loss should not exceed the carrying amount that would have been determined (net of depreciation and amortization), had no impairment loss been recognized for the asset in prior years.

For long-term equity investments for which the Company has significant influence but with no control, the carrying amount (including goodwill) of each investment is compared with its own recoverable amount for the purpose of impairment testing.

Allowance for Sales Returns

Allowance for sales returns and discounts is recognized on the basis of past experience and other relevant factors.

Inventories

Inventories consist of raw materials, supplies and spare parts, work-in-process, finished goods and merchandise. Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made item 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.

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Investments Accounted for Using Equity Method

Investments in companies wherein the Company holds over 20% ownership or exercises significant influence over the operating and financial policy decisions are accounted for using equity method.

The acquisition cost is allocated to the assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition, and the acquisition cost in excess of the fair value of the identifiable net assets acquired is recognized as goodwill. Goodwill is not being amortized. The fair value of the net identifiable assets acquired in excess of the acquisition cost is used to reduce the fair value of each of the noncurrent assets acquired (except for financial assets other than investments accounted for using the equity method, noncurrent assets held for sale, deferred income tax assets, prepaid pension or other postretirement benefit) in proportion to the respective fair values of the noncurrent assets, with any excess recognized as an extraordinary gain.

When the Company subscribes for its investee’s newly issued shares at a percentage different from its percentage of ownership in the investee, the Company records the change in its equity in the investee’s net assets as an adjustment to investments, with a corresponding amount credited or charged to capital surplus. When the adjustment should be debited to capital surplus, but the capital surplus arising from long-term investments is insufficient, the shortage is debited to retained earnings.

Profits from downstream transactions with an equity-method investee are eliminated in proportion to the Company’s percentage of ownership in the investee; however, if the Company has control over the investee, all the profits are eliminated. Profits from upstream transactions with an equity-method investee are eliminated in proportion to the Company’s weighted average ownership percentage in the investee. Profits from side stream transactions with an equity-method investee are eliminated in proportion to the Company’s weighted average ownership percentage in the investee. Deferred profit will be recognized while it accrue.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Borrowing costs directly attributable to the acquisition or construction of property, plant and equipment are capitalized as part of the cost of those assets. Significant additions, renewals, betterments and interest expense incurred during the construction period are capitalized, while maintenance and repairs are expensed currently.

Depreciation is calculated using the straight-line method over service lives which are initially estimated as follows: buildings and structures, 5 to 20 years; machinery equipment, 5 years; research and development equipment, 5 years; transportation equipment, 5 years; leasehold improvements, 5 years; miscellaneous equipment, 2 to 5 years. Property, plant and equipment still in use beyond their original estimated useful lives are further depreciated over their newly estimated useful lives.

Upon sale or disposal of property, plant and equipment, the related cost and accumulated depreciation are deducted from the corresponding accounts, with any gain or loss credited or charged to non-operating gains or losses in the period of sale or disposal.

Intangible Assets

Intangible assets consist of software and technology license fees, which are amortized using the straight-line method over 1 to 5 years or the contract term.

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Research and Development

Expenditures on research activities and those related to development activities that do not meet the criteria for capitalization are charged to expense when incurred. Expenditures on development activities that meet the criteria for capitalization are recognized as intangible assets and amortized using the straight-line method over service lives.

Pension Costs

Pension cost under a defined benefit plan is determined by actuarial valuations. Contributions made under a defined contribution plan are recognized as pension cost during the period in which employees render services.

Income Tax

The Company applies inter-year allocation method for its income tax. Deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, unused loss carryforward and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or non-current in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or non-current based on the expected length of time before it is realized or settled.

Any tax credits arising from purchases of machinery, equipment and technology, research and development expenditures, personnel training expenditures and investment in important technology-based enterprises are recognized using the flow-through method.

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

Income tax on unappropriated earnings at a rate of 10% is expensed in the year of shareholders’ approval to retain earnings which is the year subsequent to the year the earnings are generated.

Stock-based Compensation

Employee stock options granted or modified in the period from January 1, 2004 to December 31, 2007 are accounted for under the interpretations issued by the Accounting Research and Development Foundation (ARDF). The Company adopted the intrinsic value method, under which the compensation expense was recognized on a straight-line basis over the employee vesting period. Employee stock options that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with SFAS No. 39, “Accounting for Share-based Payment” (SFAS No. 39). The Company did not grant or modify any employee stock options since January 1, 2008.

Bonuses to Employees, Directors and Supervisors

The Company adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors,” which requires companies to record bonuses paid to employees, directors and supervisors as expenses rather than as appropriations of earnings.

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 from the Company’s investment gains and adjusted under capital surplus - treasury stock transactions.

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Revenue Recognition

Revenue from sales of goods is recognized when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods, primarily upon shipment, because the earnings process has been completed and the economic benefits associated with the transaction have been realized or are realizable. The Company 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.

Sales prices are determined at fair value taking into account related sales discounts agreed on by the Company and its customers. Since the receivables from sales are collectible within one year and sales transactions are frequent, fair value of receivables is equivalent to the nominal amount of the cash to be received.

Royalties are recognized when:

• a. It is probable that the economic benefits of a transaction will flow to the Company; and

• b. The revenue can be measured reliably.

Royalties are recognized on an accrual basis in accordance with the substance of the contract.

If a contract meets the recognition criteria for sales of goods and the following conditions, royalties are recognized at the time of sale:

• a. The amount of the royalties is fixed or the royalties are nonrefundable;

• b. The contract is noncancellable;

• c. The contract permits the licensee to exploit the assigned rights freely; and

• d. The licensor has no remaining obligations to perform.

3. ACCOUNTING CHANGES

Recognition and Measurement of Financial Instruments

On January 1, 2011, the Company prospectively adopted the newly revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” The main revisions include (1) finance lease receivables are now covered by SFAS No. 34; (2) the scope of the applicability of SFAS No. 34 to insurance contracts is amended; (3) loans and receivables originated by the Company are now covered by SFAS No. 34; (4) additional guidelines on impairment testing of financial assets carried at amortized cost when the debtor has financial difficulties and the terms of obligations have been modified; and (5) accounting treatment by a debtor for modifications in the terms of obligations. The adoption resulted in an increase of $34,567 thousand in net income and of $0.01 in basic EPS after income tax for the period ended March 31, 2011.

Operating Segments

On January 1, 2011, the Company adopted the newly issued SFAS No. 41, “Operating Segments.” This statement supersedes SFAS No. 20, “Segment Reporting.” The statement requires identification and disclosure of operating segments on the basis of how the Company’s chief operating decision maker regularly reviews information in order to allocate resources and assess performance. This newly issued SFAS No. 41 did not have significant effect on the Company’s disclosure of operating segments.

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4. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash on hand and petty cash Checking and savings accounts Time deposits Cash equivalents - repurchase agreements collateralized by bonds		March	31
		2012 $ 75 1,520,505 15,550,000 50,121 $ 17,120,701	2011 $ 150 3,779,345 16,055,360 100,076 $ 19,934,931

5. NOTES AND ACCOUNTS RECEIVABLE

NOTES AND ACCOUNTS RECEIVABLE
Notes receivable Accounts receivable Less: Allowance for doubtful accounts Allowance for sales returns and discounts Movements of the allowance for doubtful accounts were as follows: Balance, beginning of period Provision (reversal of provision) for doubtful accounts Balance, end of period		**March 31 **
	2012 2011 $ 7,523 $ 11,872 2,243,697 2,330,374 20,021 - 13,111 9,471 2,210,565 2,320,903 $ 2,218,088 $ 2,332,775 Three Months Ended March 31
			2012 $ - 20,021 $ 20,021	2011 $ 31,330 (31,330) $ -

Movements of the allowance for sales returns and discounts were as follows:

Balance, beginning of period Provision (reversal of provision) for sales returns and discounts Balance, end of period	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012 $ 10,473 2,638 $ 13,111	2011 $ 12,980 (3,509) $ 9,471

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6. INVENTORIES

INVENTORIES
Finished goods and merchandise Work in process Raw materials Supplies and spare parts		March 31
		2012 $ 920,919 5,911,488 297,885 142,271 $ 7,272,563	2011 $ 765,005 3,542,786 477,391 176,604 $ 4,961,786

The allowance for inventory losses as of March 31, 2012 and 2011 was $689,177 thousand and $447,911 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the three months ended March 31, 2012 and 2011 was $4,369,613 thousand and $3,838,601 thousand, respectively. The cost of goods sold for the three months ended March 31, 2012 and 2011 included $136,524 thousand and $5,083 thousand write-downs of inventories, respectively.

7. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd. Magic Pixel Inc. MaxRise Inc. Infomax Communication Co., Ltd. Mxtran Inc. MoDioTek Co., Ltd. MXB Inc.		**March 31 **	**March 31 **	**March 31 **
		2012 % of Carrying Owner- Amount ship $ 240,460 100.00 1,620,305 100.00 31,159 100.00 81,382 100.00 135,958 72.54 33,553 79.70 411,890 92.69 217,136 88.15 138,331 70.88 - - $ 2,910,174		2011
				% of Carrying Owner- Amount ship $ 228,076 100.00 1,629,339 100.00 26,859 100.00 119,002 100.00 38,484 30.81 103,648 79.70 699,379 92.69 319,444 88.15 214,743 70.88 176 50.00 $ 3,379,150

Investment income (loss) recognized under the equity method that was based on unreviewed financial statements of the investees was summarized as follows:

Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd.	Three Months Ended March 31
	2012 2011 $ 1,644 $ 11,423 (13,396) 45,825 (1,491) (1,234) (9,218) (10,232) (Continued)

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Magic Pixel Inc. MaxRise Inc. Infomax Communication Co., Ltd. Mxtran Inc. MoDioTek Co., Ltd. MXB Inc.	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012 $ (31,029) (17,747) (56,489) (26,303) (21,724) - $ (175,753)	2011 $ (13,455) (21,258) (67,900) (27,667) (20,821) (25) $ (105,344) (Concluded)

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Publicly traded stocks 9. FINANCIAL ASSETS CARRIED AT COST Non-publicly traded stocks		March 31
		2012 2011 $ 779,974 $ 882,337 **March 31 **
		2012 $ 98,056	2011 $ 159,556

The above investments did not have quoted market prices in an active market and fair value could not be determined using established valuation techniques. Therefore, these equity securities were carried at cost.

10. PROPERTY, PLANT AND EQUIPMENT

Cost: Land Buildings and structures Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Construction in progress and prepayments for equipment Accumulated depreciation: Buildings and structures Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment			Three Months Ended March 31, 2012	Three Months Ended March 31, 2012
		Balance, Beginning of Period $ 598,076 21,479,586 75,224,280 2,120,639 26,103 2,419 985,023 6,097,549 106,533,675 14,274,274 55,390,754 1,158,360 17,568 2,419 835,134 71,678,509 $ 34,855,166	Additions $ - 131,670 1,293,363 3,201,263 2,100 - 9,034 (4,179,085) $ 458,345 $ 298,285 1,378,051 109,170 712 - 21,244 $ 1,807,462	Disposals Reclassification $ - $ - - - 70,532 (89,018 ) 18,748 89,018 2,657 - - - 36 (27 ) - - $ 91,973 $ (27) $ - $ - 61,620 3,253 18,748 (3,253 ) 2,451 - - - 36 (1) $ 82,855 $ (1)	Balance, End of Period $ 598,076 21,611,256 76,358,093 5,392,172 25,546 2,419 993,994 1,918,464 106,900,020 14,572,559 56,710,438 1,245,529 15,829 2,419 856,341 73,403,115 $ 33,496,905

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Cost: Land Buildings and structures Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Construction in progress and prepayments for equipment Accumulated depreciation: Buildings and structures Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment			Three Months Ended March 31, 2011	Three Months Ended March 31, 2011
		Balance, Beginning of Period $ 598,076 20,445,410 60,817,179 1,635,510 26,677 2,419 923,650 8,216,363 92,665,284 13,193,185 51,579,362 1,110,882 15,198 2,419 792,375 66,693,421 $ 25,971,863	Additions $ - 316,560 1,776,746 23,406 - - 18,954 3,670,751 $ 5,806,417 $ 270,347 849,002 35,543 762 - 20,965 $ 1,176,619	Disposals Reclassification $ - $ - 18,468 - 105,347 83,733 8,743 (83,733 ) - - - - 14,144 (2,955 ) - - $ 146,702 $ (2,955) $ 18,468 $ - 105,347 76,049 8,743 (76,049 ) - - - - 14,144 (2,955) $ 146,702 $ (2,955)	Balance, End of Period $ 598,076 20,743,502 62,572,311 1,566,440 26,677 2,419 925,505 11,887,114 98,322,044 13,445,064 52,399,066 1,061,633 15,960 2,419 796,241 67,720,383 $ 30,601,661

Information on interest capitalization is summarized as follows:

Total interests Capitalized interests Capitalization rate	Three Months Ended March 31
	2012 2011 $ 76,208 $ 22,892 18,823 22,892 1.48% 1.35%

11. SHORT-TERM BANK LOANS

Letter of credit loan: US$4,252 thousand, with interest rates which ranged 0.84%-2.04% in 2012; US$99,329 thousand and JPY3,808,920 thousand, with interest rates which ranged 0.77%-1.43% in 2011 LONG-TERM BANK LOANS Repayable semi-annually from December 2012 to December 2015, with annual floating interest which ranged 1.54% -1.55% in 2012 and at 1.30% in 2011 Repayable semi-annually from March 2013 to September 2014, with annual floating interest at 1.81% in 2012 Repayable according to an agreed loan payment term to maturity date, with annual floating interest at 1.54% in 2012 and 1.35% in 2011		March 31
		2012 2011 $ 125,465 $ 4,272,445 **March 31 **
	2012 2011 $ 15,030,000 $ 2,500,000 1,600,000 - 1,500,000 600,000 (Continued)

12. LONG-TERM BANK LOANS

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Repayable quarterly from March 2013 to September 2014, with annual floating interest at 1.65% in 2012 Repayable quarterly from March 2013 to March 2015, with annual floating interest at 1.62% in 2012 Repayable semi-annually from March 2012 to September 2014, with annual floating interest at 1.81% in 2012 Repayable monthly from May 2003 to April 2016, with annual floating interest at 1.84% in 2012 and ranged 1.62%-1.67% in 2011 Repayable quarterly from September 2013 to September 2014, with annual floating interest at 2.08% in 2012 Repayable semi-annually from June 2008 to June 2011, with annual floating interest at 2.17% in 2011 Less: Current portion		**December 31 **	**December 31 **
		2012 $ 500,000 400,000 333,333 279,237 50,000 - 19,692,570 1,979,718 $ 17,712,852	2011 $ - - - 347,621 - 42,852 3,490,473 111,237 $ 3,379,236 (Concluded)

For expansion of production capability and for long-term operation needs, the Company made a Syndicated Loan of $18 billion for 5 years, with Taiwan Cooperative Commercial Bank and 14 other financial organizations in September 2010. The line of credit has been used $16.53 billion as of March 31, 2012.

The loan agreement requires the maintenance of certain financial ratios based on semi-annual and annual consolidated financial statements.

The details of long-term loans pledged as collateral are shown in Note 21.

13. PENSION PLANS

The Company’s pension plan under the Labor Pension Act (the “LPA”) is a defined contribution plan. The rate of contribution by an employer to employees’ personal pension accounts should not be less than 6% of each employee’s monthly salary or wage. Such pension costs were $46,022 thousand and $41,976 thousand for the three months ended March 31, 2012 and 2011, respectively.

The Company’s pension plan under the Labor Standards Law is a defined benefit pension plan. Under this pension plan, an employee should receive a lump sum payment of retirement benefits equal to two base units for each year of service for the first 15 years, and one base unit for each year of service exceeding 15 years; the maximum is 45 units. Benefit payments are calculated on the basis of years of employment and the average monthly basic compensation for the last six months prior to retirement. The Company’s monthly contribution to the pension fund (the Fund) is at 2% of employee salaries. The Fund is deposited in the Bank of Taiwan, a government-designated custodian of pension funds, in the name of Company’s Pension Fund Administration Committee. The pension fund balances in BT as of March 31, 2012 and 2011 were $750,951 thousand and $755,217 thousand, respectively. The net periodic pension costs based on a defined benefit pension plan for the three months ended March 31, 2012 and 2011 were $5,451 thousand and $4,961 thousand, respectively.

The net periodic pension costs based on executive pension plan for the three months ended March 31, 2012 and 2011 were $21,212 thousand and $1,014 thousand, respectively.

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14. SHAREHOLDERS’ EQUITY

Capital Surplus

Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock may be appropriated as stock dividends, which is limited to a certain percentage of the Company’s paid-in capital. Under the revised Company Law issued on January 4, 2012, the aforementioned capital surplus also may be distributed in cash. The capital surplus from long-term investments may not be used for any purpose.

Retained Earnings Distribution and Dividends 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.

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 made in the form of stock dividend. Furthermore, with the approval of the shareholders at such meetings, the dividend and bonus may be held wholly or partially as retained earnings for distribution in future years.

Employees eligible to receive stock dividends may include employees of affiliated companies if they meet the criteria set by the board of directors.

Due to the net loss for the three months ended March 31, 2012, there was no accrual for bonus to employees and remuneration to directors and supervisors. For the three months ended March 31, 2011, the accrued bonus to employees was $169,773 thousand, and the accrued remuneration to directors and supervisors was $20,480 thousand. The bonus to employees represented 16% of net income. The remuneration to directors and supervisors was 1.8% of net income. Material differences between such estimated amounts and the amounts proposed by the board of directors in the following year are adjusted for in the current year. If the actual amounts subsequently resolved by the shareholders differ from the proposed amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If a share bonus is resolved to be distributed to employees, the number of shares is determined by dividing the amount of the share bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day immediately preceding the shareholders’ meeting.

The Company no longer has supervisors since June 10, 2009. The required duties of supervisors are being fulfilled by the audit committee.

Legal reserve shall be appropriated until it has reached the Company’s paid-in capital. This reserve may be used to offset a deficit. Under the revised Company Law issued on January 4, 2012, when 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.

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The appropriations of earnings for 2011 and 2010 had been proposed in the board of directors’ meeting on March 13, 2012 and had been approved in the shareholders’ meeting on June 10, 2011, respectively. The appropriations and dividends per share were as follows:

Legal capital reserve Cash dividends Stock dividends		**Appropriation **	of Earnings For Year 2010 $ 776,491 5,735,394 - $ 6,511,885	Dividends Per Share (NT$)
		For Year 2011 $ 288,272 1,288,408 1,288,408 $ 2,865,088		For For Year 2011 Year 2010 $0.38 $1.70 0.38 -

The bonus to employees and the remuneration to directors and supervisors for 2010 were approved in the shareholders’ meeting on June 10, 2011. The appropriations were as follows:

Amounts approved in shareholders’ meeting Amounts recognized in respective financial statements	Remuneration to Directors Bonus to and Employees Supervisors $ 1,012,129 $ 139,768 1,008,689 140,527 $ 3,440 $ (759)

The differences between the approved amounts of the bonus to employees and the remuneration to directors and supervisors and the accrual amounts reflected in the financial statements for the year ended December 31, 2010 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 year ended December 31, 2011.

The bonus to employees and the remuneration to directors and supervisors for 2011 in the amounts of $454,732 thousand and $51,889 thousand, respectively, were proposed in the board of directors’ meeting on March 13, 2012. The amounts of the bonus to employees and the remuneration to directors and supervisors proposed by the board of directors were lower by $23,115 thousand and $1,039 thousand compared with the amounts accrued in the financial statements for the year ended December 31, 2011. The differences were primarily due to change in estimates (numbers of the outstanding shares and income tax expense). The differences will be adjusted in profit and loss for the year ended December 31, 2012 after approval in the shareholders’ meeting.

The 2011 appropriations of earnings, bonus to employees and remuneration to directors and supervisors will be resolved by the shareholders in their meeting scheduled for June 6, 2012.

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

15. EMPLOYEE STOCK OPTION PLANS

The Company has three employee stock option plans (“2004 Plan”, “2005 Plan” and “2007 Plan”) approved by the ROC Securities and Futures Bureau (SFB) to grant options up to 200,000 thousand units, 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

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and vested at certain percentages subsequent to the second anniversary of 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. As stipulated in the plans, the exercise price and quantity are subject to adjustments for any changes in capital structure or cash dividends.

As of March 31, 2012, there were 7,448 thousand of employee stock options exercised for which 7,448 thousand common shares were issued but not yet officially registered with the Ministry of Economic Affairs, ROC.

Information with respect to the Company’s stock option plans was as follows:

Three months ended March 31, 2012 Balance, beginning of period Options exercised Options cancelled Balance, end of period Three months ended March 31, 2011 Balance, beginning of period Options exercised Options cancelled Balance, end of period	2007 Plan Number of Outstanding Weighted- Stock average Option Exercise Rights Price 68,334 $ 10.50 (13,447) 10.50 (227) 10.50 54,660 10.50	Unit: Option Numbers in Thousand and NT$ Per Share 2007 Plan 2005 Plan Number of Number of Outstanding Weighted- Outstanding Weighted- Stock average Stock average Option Exercise Option Exercise Rights Price Rights Price 49,794 $ 9.5 37 $ 4.00 (7,448) 9.5 - - (61) 9.5 (37) 4.00 42,285 9.5 - - 2005 Plan 2004 Plan Number of Number of Outstanding Weighted- Outstanding Weighted- Stock average Stock average Option Exercise Option Exercise Rights Price Rights Price 19,521 $ 5.90 40 $ 7.78 (4,144) 5.90 (11) 7.60 - - (29) 7.85 15,377 5.90 - -	Unit: Option Numbers in Thousand and NT$ Per Share 2007 Plan 2005 Plan Number of Number of Outstanding Weighted- Outstanding Weighted- Stock average Stock average Option Exercise Option Exercise Rights Price Rights Price 49,794 $ 9.5 37 $ 4.00 (7,448) 9.5 - - (61) 9.5 (37) 4.00 42,285 9.5 - - 2005 Plan 2004 Plan Number of Number of Outstanding Weighted- Outstanding Weighted- Stock average Stock average Option Exercise Option Exercise Rights Price Rights Price 19,521 $ 5.90 40 $ 7.78 (4,144) 5.90 (11) 7.60 - - (29) 7.85 15,377 5.90 - -
			Number of Outstanding Weighted- Stock average Option Exercise Rights Price 37 $ 4.00 - - (37) 4.00 - - 2004 Plan
			Number of Outstanding Weighted- Stock average Option Exercise Rights Price 40 $ 7.78 (11) 7.60 (29) 7.85 - -

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

As of March 31, 2012, information about the Company’s outstanding and exercisable option was as follows:

llows:
Exercise Price (NT$/Per Share) $9.50	Options Issued on or After January 1, 2004 and Outstanding Number Outstanding (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 42,285 1.74 $9.50	Options Exercisable
		Number Exercisable (Thousand) Exercise Price (NT$/Per Share) 42,285 $9.50

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No compensation cost was recognized under the intrinsic value method for the three months ended March 31, 2012 and 2011. 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, 2012 and 2011 would have been as follows:

Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield Net income (loss): Net income (loss) as reported Pro forma net income (loss) Earnings (Loss) per share (EPS (LPS), NT$): Basic EPS (LPS) as reported Pro forma basic EPS (LPS) Diluted EPS (LPS) as reported Pro forma diluted EPS (LPS)	Three Months Ended March 31
	2012 2011 1.55%-2.54% 1.55%-2.54% 4.38 4.38 51.16%-57.50% 51.16%-57.50% - - $ (1,091,171) $ 1,062,255 $ (1,091,171) $ 1,057,196 $(0.32) $0.32 $(0.32) $0.31 $(0.32) $0.31 $(0.32) $0.30

16. TREASURY STOCK

As of March 31, 2012 and 2011, the information about the Company’s issued shares held by the subsidiary was as follows:

was as follows:
	Shares	Original
Company	(Thousand)	Carrying Value	Market Value
March 31, 2012
Hui Ying Investment, Ltd.	3,757	$ 142,365	$	41,324
March 31, 2011
Hui Ying Investment, Ltd.	3,757	$ 142,365	$	73,256

The subsidiary holding the Company’s issued shares retain shareholders’ rights and privileges on these shares, except for the right to participate in the Company’s issuance of capital stock for cash and the right of vote.

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17. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSES

Labor cost Salary Insurance Pension Others Depreciation Amortization			Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
			2012	Total $ 1,122,795 80,102 72,685 53,425 $ 1,329,007 $ 1,807,462 $ 21,309			2011
		Classified as Cost of Sales $ 607,046 51,481 31,329 32,693 $ 722,549 $ 1,626,630 $ 8,674	Classified as Operating Expenses $ 515,749 28,621 41,356 20,732 $ 606,458 $ 180,832 $ 12,635			Classified as Cost of Sales $ 687,122 45,480 28,494 30,394 $ 791,490 $ 1,070,692 $ 2,674	Classified as Operating Expenses $ 573,247 25,806 19,457 18,002 $ 636,512 $ 105,927 $ 8,613	Total $ 1,260,369 71,286 47,951 48,396 $ 1,428,002 $ 1,176,619 $ 11,287

18. INCOME TAX

• a. A reconciliation of income tax expense based on “income (loss) before income tax” at statutory rate (17%) and income tax currently payable was as follows:

Income tax expense based on “income (loss) before income tax” at statutory rate Tax effect of the following: Permanent differences Temporary differences Investment tax credits Tax-exempt income Income tax currently payable	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012 $ (184,598) 29,630 (75,945) - - $ (230,913)	2011 $ 210,237 29,217 (18,025) (77,682) (33,259) $ 110,488

• b. Income tax expense consisted of the following:

Income tax currently payable Net change in deferred income tax assets: Loss carryforward Investment tax credits Temporary differences Other adjustment in valuation allowance Income tax expense	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012 $ - (230,913) - 99,513 136,698 $ 5,298	2011 $ 110,488 - 77,682 17,624 (31,360) $ 174,434

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c. Net deferred income tax assets consisted of the following:

Current deferred income tax assets Loss carryforward Investment tax credits Temporary differences Valuation allowance Non-current deferred income tax assets Investment tax credits Temporary differences Valuation allowance		March 31	March 31
		2012 $ 230,913 882,774 303,771 1,417,458 (1,056,233) $ 361,225 $ 444,924 1,591,530 2,036,454 (1,858,902) $ 177,552	2011 $ - 1,454,742 197,716 1,652,458 (1,328,933) $ 323,525 $ 589,542 1,734,414 2,323,956 (1,936,859) $ 387,097

As of March 31, 2012, the Company’s tax credits were as follows:

Regulatory Basis of Tax Credits Items Income Tax Law Loss carryforward Statute for Upgrading Purchase of machinery Industries equipment Statute for Upgrading Research and development Industries expenditures Statute for Upgrading Investments in important Industries technology-based enterprises	Total Creditable Amounts $ 230,913 $ 74,397 30,295 7,349 $ 112,041 $ 663,759 544,176 $ 1,207,935 $ 4,000 3,722 $ 7,722	Remaining Creditable Expiry Amounts Year $ 230,913 2023 $ 74,397 2012 30,295 2013 7,349 2014 $ 112,041 $ 663,759 2012 544,176 2013 $ 1,207,935 $ 4,000 2013 3,722 2014 $ 7,722

The Company’s profits attributable to the following expansion and construction projects were exempted from income tax:

Tax-exemption Period

Expansion of Construction Project in 2004

January 1, 2011 to January 31, 2014

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

d. The integrated income tax information

The balance of imputation tax credits account Unappropriated earnings generated before January 1, 1998		March 31	March 31
		2012 $ 184,671 $ -	2011 $ 18,871 $ -

The estimated and actual tax creditable ratio for distribution of earnings of 2011 and 2010 earnings were 3.63% and 8.11%, respectively.

For distribution of earnings generated after January 1, 1998, the ratio for the imputation credits allocated to shareholders of the Company is based on the balance of the ICA as of the date of dividend distribution. The expected creditable ratio for the 2011 earnings may be adjusted, depending on the ICA balance on the date of dividend distribution.

19. EARNINGS (LOSS) PER SHARE (EPS/LPS)

Three months ended March 31, 2012 Basic and diluted LPS Loss for the period attributable to common shareholders Three months ended March 31, 2011 Basic EPS Income for the period attributable to common shareholders Effect of dilutive potential common stock Employee stock option Bonus to employees Diluted EPS Income for the period attributable to common shareholders plus effect of potential dilutive common stock		Number of Amounts (Numerator) Shares Before After (Denominator) Income Tax Income Tax (In Thousands) $ (1,085,873) $ (1,091,171) 3,385,204 $ 1,236,689 $ 1,062,255 3,368,351 - - 37,567 - - 66,470 $ 1,236,689 $ 1,062,255 3,472,388		EPS (LPS) (NT$)	EPS (LPS) (NT$)
				Before Income Tax $ (0.32) $ 0.37 $ 0.36	After Income Tax $ (0.32) $ 0.32 $ 0.31
		Before Income Tax $ (1,085,873) $ 1,236,689 - - $ 1,236,689

The ARDF issued Interpretation 2007-052 that requires companies to recognize bonuses paid to employees, directors and supervisors as compensation expenses beginning January 1, 2008. These bonuses were previously recorded as appropriations from earnings. If the Company may settle the bonus to employees by cash or shares, the Company should presume that the entire amount of the bonus will be settled in shares and the resulting potential shares should be included in the weighted average number of shares outstanding used in the calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the entire amount of the bonus by the closing price of the shares at the balance sheet date. Such dilutive effect of the potential shares should be included in the calculation of diluted EPS until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year. The bonus to employees, which had no dilutive effect on the basic loss per share of the

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Company, was not included in the calculation of diluted loss per share for the three months ended March 31, 2012.

As disclosed in Note 15 to the financial statements, the Company uses treasury stock method, according to SFAS No. 24 “Earnings per Share”, to determine whether the employee stock options 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, 2012.

20. RELATED PARTY TRANSACTIONS

Except as disclosed elsewhere in the financial statements and other notes, the following is a summary of significant related party transactions:

• a. Related parties and their relationships associated with the Company:

Related Parties Macronix America Inc. (“MXA”) Mxtran Inc. (“Mxtran”) MoDioTek Co., Ltd. (“MoDioTek”) Infomax Communication Co., Ltd. (“INFOMAX”) MaxRise Inc. (“MaxRise”) Magic Pixel Inc. (“MPI”) Macronix (Hong Kong) Co., Ltd. (“MXHK”) Macronix Europe NV. (“MXE”) Macronix Pte Ltd. (“MPL”) Macronix (Asia) Limited (“MX Asia”) Ardentec Corporation (“Ardentec”) Macronix Education Foundation (“MXIC Education”) MegaChips Corporation (“MegaChips”) Others

Relationship with the Company

Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary The Company serves as member of its board of directors Same chairman with the Company Its subsidiary, Shun Ying Investment, is represented in the Company’s board of directors Related parties over which the Company has control or exercises significant influence but with which the Company had no material transactions. Please see Note 25.

• b. Significant transactions with related parties:

• 1) Sales to related parties were as follows:

Related Parties MegaChips MXHK MXA Others		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012 Amount % of Net Sales $ 1,464,048 29 525,133 10 123,313 3 322 - $ 2,112,816 42		2011
				Amount % of Net Sales $ 2,608,452 40 533,060 8 159,283 2 582 - $ 3,301,377 50

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Sale prices to MXHK and MXA were negotiated based on those charged to ultimate customers and were not comparable to those with external customers as MXHK and MXA were the primary regional distributors. Sales prices to MegaChips and other related parties were not comparable to those with external customers as the Company was the sole provider for them. The sales term to the related parties was between 30 to 60 days after monthly closing, similar to those with external customers.

• 2) Subcontract processing charges from related parties were as follows:

Related Parties Ardentec		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012	% 2		2011
		Amount $ 94,661			Amount $ 96,178	% 3

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

• 3) Operating expense

Related Parties MXA MX Asia MXE MPL MXIC Education MXHK Others		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012	% 3 2 1 1 - - - 7		2011
		Amount $ 38,328 32,546 17,630 6,313 6,250 - 224 $ 101,291			Amount $ 41,589 31,616 8,770 5,434 6,500 10,976 1,492 $ 106,377	% 3 2 1 - - 1 - 7

The above operating expenses paid to MXA and MXHK, Macronix (Asia) Limited, MPL and MXE were mainly for commission and marketing expenses.

• 4) Operating leases to related parties were as follows:

Related Parties Mxtran MoDioTek INFOMAX MPI MaxRise Others		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012	% 10 10 10 8 6 - 44		2011
		Amount $ 1,403 1,398 1,309 1,092 877 25 $ 6,104			Amount $ 889 1,419 1,240 1,094 664 3 $ 5,309	% 5 8 8 6 4 - 31

The Company leased offices to the above related parties. The Company collected monthly lease income from the related parties. The amount of lease payment was based on the office space leased by each related party and recorded as other income under non-operating income and gains.

• 27 -

• 5) Software, pattern and other revenue:

Related Parties Mxtran MoDioTek INFOMAX Others		Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2012	% 2 1 1 1 5		2011
		Amount $ 349 182 77 60 $ 668			Amount $ 239 356 112 80 $ 787	% 1 3 1 - 5

Under certain contracts, the Company authorized the above related parties to use the Company’s pattern and software. The specifically negotiated terms were not comparable to those with external customers.

• 6) Accounts receivable

Related Parties MegaChips MXHK MXA INFOMAX Mxtran Others			**March 31 **	**March 31 **	**March 31 **
		2012	% 58 37 5 - - - 100		2011
		Amount $ 520,590 328,170 41,424 556 423 549 $ 891,712			Amount $ 519,617 368,184 76,604 554 256 1,145 $ 966,360	% 54 38 8 - - - 100

• 7) Other receivables

Related Parties Mxtran MoDioTek Others			March 31	March 31	March 31
		2012	% - - - -		2011
		Amount $ 179 115 82 $ 376			Amount $ 151 146 93 $ 390	% - - - -

Under a certain rule, if the collection period for accounts receivable from related parties exceeded the average credit period for external customers, accounts receivable should be reclassified into other receivables. As of March 31, 2012, no reclassification was made because the collection period did not exceed the average credit period for external customers.

• 28 -

8) Accounts payable

Related Parties Ardentec MXA MXE MX Asia MPL MXIC Education MXHK			March 31	March 31	March 31
		2012	% 60 23 8 8 1 - - 100		2011
		Amount $ 87,128 33,173 12,065 10,710 1,907 - - $ 144,983			Amount $ 101,238 39,817 6,308 12,785 1,985 6,710 4,471 $ 173,314	% 58 23 4 7 1 4 3 100

21. PLEDGED ASSETS

The Company pledged its assets for gas purchase agreement, land lease agreement with the Hsinchu Science Park Administration, for domestic sales guarantee with the Taipei Customs Office and for long-term bank loans. Assets pledged as collaterals were as follows:

Property, plant and equipment, net Pledged time deposits - noncurrent		March 31	March 31
		2012 $ 18,001,751 164,177 $ 18,165,928	2011 $ 4,187,625 36,210 $ 4,223,835

22. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

Significant commitments and contingencies of the Company as of March 31, 2012, excluding those disclosed in other notes, were as follows:

• a. The Company had significant equipment contracts totaling approximately $1,478,139 thousand. As of March 31, 2012, the Company has paid $672,119 thousand of this amount pursuant to these contracts. Future irrevocable payment in total is $806,020 thousand. Unused letters of credit for purchases of imported machinery and equipment amounted to $43,557 thousand.

• b. The land on which the Company is located is being leased from the Hsinchu Science Park Administration under renewable operating lease agreements. The lease term is from 1994 to 2029. Future minimum annual rentals under the leases are as follows:

Year 2ndto 4thquarter, 2012 2013 2014 2015 2016 2017 and later	Amount $ 56,625 75,501 70,779 46,247 17,304 204,156 $ 470,612

• 29 -

• c. The Company entered into a technology development and foundry service agreement with E Company in June 2006, the term for the agreement is 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, 2012, the Company had paid US$7,392 thousand.

• 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 of the Patents Cross-License Agreement.

23. DISCLOSURES FOR FINANCIAL INSTRUMENTS

• a. Fair values of financial instruments were as follows:

Non-derivative financial instruments Assets Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Liabilities Long-term bank loans (including current portion)	March 31	March 31
	2012 Carrying Amount Fair Value $ 779,974 $ 779,974 98,056 - 19,692,570 19,692,570	2011
		Carrying Amount Fair Value $ 882,337 $ 882,337 159,556 - 3,490,473 3,490,473

• b. Methods and assumptions for the fair values of financial instruments

• 1) The above financial instruments do not include cash and cash equivalents, notes and accounts receivable (including related parties), other receivables, pledged time deposits, short-term bank loans and notes and accounts payable (including related parties). The carrying amounts of these instruments reported in the balance sheets approximate their fair values.

• 2) Available-for-sale financial assets have quoted market prices in an active market; the quoted market prices are the basis of fair values.

• 3) Financial assets carried at cost are investments in unquoted shares, which have no quoted prices in an active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore, no fair value is presented.

• 4) Fair value of long-term bank loans is estimated using discounted cash flow analysis, based on the Company’s current incremental borrowing rates for borrowings with similar characteristics (e.g. similar maturity dates). The fair values of long-term bank loans with floating interest rates are equivalent to their carrying values.

• 30 -

• c. As of March 31, 2012 and 2011, financial assets (liabilities) exposed to fair value interest rate risk and cash flow interest rate risk were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	March 31
	2012 2011 $ 15,764,388 $ 16,191,714 (125,465) (4,272,445) 1,520,415 3,779,276 (19,692,570) (3,490,473)

• d. Interest income and expense on financial assets and liabilities, excluding those at fair value through profit and loss, for the three months ended March 31, 2012 and 2011 were as follows:

Total interest income Total interest expenses (including capitalized amount)	Three Months Ended March 31
	2012 2011 $ 37,536 $ 29,666 76,208 22,892

• e. The Company did not enter into derivative contracts for the three months ended March 31, 2012 and 2011, respectively.

• f. Unrealized Valuation Gain (Loss) on Financial Instruments

Components of unrealized gain (loss) on financial instruments were summarized as follows:

Available-for- sale Financial Assets Recognized by the Company’s Ownership Percentages in the Investees Period ended March 31, 2012 Balance, beginning of period $ 385,366 $ 46,729 Recorded as a separate component of shareholders’ equity 133,416 76,256 Balance, end of period $ 518,782 $ 122,985 Period ended March 31, 2011 Balance, beginning of period $ 763,403 $ 275,029 Recorded as a separate component of shareholders’ equity (142,258) (20,273) Balance, end of period $ 621,145 $ 254,756

Total $ 432,095 209,672 $ 641,767 $1,038,432 (162,531) $ 875,901

• g. Financial risks

• 1) Market price risk. The financial instruments held by the Company are exposed to interest rate, foreign exchange rate and price risks.

• 31 -

• 2) Credit risk. The Company is exposed to credit risk in the event of non-performance of the counter parties to forward contracts on maturity. Contracts with positive fair values at the balance sheet date are evaluated for credit risk. In order to manage this risk, the Company conducts transactions only with financial institutions with good credit ratings. As a result, no material losses resulting from counter party defaults are anticipated. Credit risk represents the positive net settlement amount of those contracts with positive fair value on the balance sheet date. The positive net settlement amount represents the loss that would be incurred by the Company if the counter parties breached the contracts. The banks, which are the counter parties to the foregoing derivative financial instruments, are reputable financial institutions. Management believes its exposure related to the potential default by those counter-parties is low.

• 3) Liquidity risk. Investment in financial assets carried at cost do not have an active market, thus, the liquidity risk of those investment is material. The Company has sufficient operating capital to meet cash demand.

• 4) The cash flow risk of interest rate. As of March 31, 2012, long-term bank loans have floating interest rates, which are affected by changes in market interest rates.

24. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES

As of March 31, 2012 and 2011, the information for material foreign financial assets and liabilities were as follows:

Financial assets Monetary items JPY USD EUR Investments accounted for using equity method USD Financial liabilities Monetary items JPY USD EUR HKD SGD CHF	2012 Foreign Currencies Exchange Rate $ 4,540,743 0.36 90,064 29.51 74 39.41 63,055 29.51 807,687 0.36 32,497 29.51 574 39.41 13 3.80 85 23.49 106 32.705	2010
		Foreign Currencies Exchange Rate $ 6,155,535 0.36 166,497 29.40 16,257 41.71 63,183 29.40 6,345,339 0.36 225,548 29.40 17,772 41.71 20 3.78 89 23.34 - -

• 32 -

25. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the Securities and Futures Bureau for the Company and its investees:

• a. Financing provided: None

• b. Endorsements/guarantees provided: None

• c. Marketable securities held: Table 1 (attached)

• d. Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: None

• e. Acquisition of individual real estate at costs of at least NT$100 million or 20% of the paid-in capital: None

• f. Disposal of individual real estate at prices of at least NT$100 million or 20% of the paid-in capital: None

• g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Table 2 (attached)

• h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3 (attached)

• i. Names, locations, and related information of investees over which the Company exercises significant influence: Table 4 (attached)

• j. Derivative transactions of investees over which the Company has a controlling interest: None

• k. Investments in Mainland China

• 1) Name of the investees in Mainland China, main businesses and products, paid-in capital, method of investment, information on inflow or outflow of capital, percentage of ownership, investment income or loss, ending balance of investment, dividends remitted by the investee, and the limit of investment in Mainland China: Table 5 (attached)

• 2) Significant direct or indirect transactions with the investees, prices and terms of payment, unrealized gain or loss: 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

• 33 -

26. OPERATING SEGMENT FINANCIAL INFORMATION

Based on the segment information reviewed periodically by the chief operating decision maker, the Company is considered to have only one operating segment, and the basis for evaluation of the operating segment is in conformity with the basis for preparing financial reports. The revenue and result of the operating segment can be found in the consolidated financial statements as of and for the three months ended March 31, 2012 and 2011.

27. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved by the Company’s management on April 25, 2012.

• 34 -

TABLE 1

MACRONIX INTERNATIONAL CO., LTD.

MARKETABLE SECURITIES HELD MARCH 31, 2012

(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,	2012		Note
				Shares/Units (In Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
The Company	Stock Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd. Magic Pixel Inc. MaxRise 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.	Subsidiary 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	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 Investments accounted for using equity method Available-for-sale financial assets - non-current Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent	100,000 223,300,000 - - 21,153,675 29,091,973 148,296,140 51,127,000 34,021,160 34,209,409 5,274,212 105,981 145,850 5,850,000	$ 240,460 1,620,305 31,159 81,382 135,958 33,553 411,890 217,136 138,331 779,974 58,500 - - 39,556	100.00 100.00 100.00 100.00 72.54 79.70 92.69 88.15 70.88 7.50 3.06 0.32 0.30 15.00	$ 2,404.47 7.38 - - 6.43 1.15 2.78 4.25 4.07 22.80 22.21 4.02 - 6.21	Note 1 Note 1 Notes 1 and 3 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 2 Note 1 Note 4 Note 4 Note 1

(Continued)

• 35 -

Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		**March 31, **	2012		Note
				Shares/Units (In Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
Macronix (BVI) Co., Ltd. Macronix (Hong Kong) Co., Ltd. Run Hong Investment, Ltd. Hui Ying Investment, Ltd. Infomax Communication Co., Ltd.	Stock New Trend Technology Inc. Macronix Europe NV. Macronix Pte Ltd. Macronix (Hong Kong) 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. MaxRise 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.	Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary None None None None Equity investee Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary The Company None 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 Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent 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 - noncurrent Financial assets carried at cost - noncurrent Investments accounted for using equity method	25,850,000 999 174,000 89,700,000 800,000 1,088,319 26,924,500 8,773,395 2,000,000 - 1,410,980 1,821,350 2,395,200 7,984,000 2,894,000 2,395,200 3,756,702 696,405 5,150,000	US$ 10,382,771 US$ 2,671,222 US$ 465,910 US$ 21,837,306 US$ 1,647,920 US$ 1,410,647 US$ 1,186,101 US$ 7,717,956 US$ 1,220,000 US$ 10,389,267 $ 9,071 2,101 9,739 22,174 12,292 9,739 41,324 - 6,891	100.00 100.00 100.00 100.00 100.00 0.18 3.34 2.73 2.52 100.00 4.84 4.99 4.99 4.99 4.99 4.99 0.11 10.99 100.00	US$ 0.88 US$ 2,671.23 US$ 2.67 US$ 0.24 US$ 2.06 US$ 1.30 US$ 0.04 US$ 0.88 US$ 0.93 US$ - $ 6.43 1.15 4.07 2.78 4.25 4.07 11.00 20.09 1.47	Note 1 Note 1 Note 1 Note 1 Note 1 Note 2 Note 2 Note 2 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 2 Note 1 Note 1

(Continued)

• 36 -

Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		**March 31, **	2012		Note
				Shares/Units (In Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
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	Stock Infomax Holding Company Limited Stock Infomax Communication (Suzhou) Co., Ltd. Stock Mosatek Co., Ltd. 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 Stock Maxtran Technology Co., Ltd.	Indirect subsidiary Indirect subsidiary Indirect subsidiary 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 Investments accounted for using equity method Investment accounted for using equity method Investments accounted for using equity method	29,982,500 - 2,420,000 12,905,100 - 1,950,000 11,700,000 - 300,000 2,262,000 -	US$ 231,639 US$ 206,504 $ 5,307 US$ 166,124 US$ 158,769 $ 6,630 US$ 182,542 US$ 173,953 $ 2,813 US$ 85,290 US$ 75,646	100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	US$ 0.01 US$ - $ 2.19 US$ 0.01 US$ - $ 3.4 US$ 0.02 US$ - $ 9.38 US$ 0.04 US$ -	Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1

(Continued)

• 37 -

(Concluded)

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, 2012.

Note 3: The book value excluded $41,324 thousand, held by a subsidiary.

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

• 38 -

TABLE 2

MACRONIX INTERNATIONAL CO., LTD.

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, 2012

(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. The Company The Company	Its subsidiary, Shun Ying Investment, is represented in the Company’s board of directors Indirect subsidiary Subsidiary Indirect subsidiary Subsidiary	Sales Sales Sales Purchase Purchase	$ 1,464,048 525,133 123,313 US$ 17,625,617 US$ 4,136,395	29% 11% 2% 100% 100%	30 days after monthly closing 45 days after monthly closing Net 60 days 45 days after monthly closing Net 60 days	Note 20 Note 20 Note 20 No material difference No material difference	Note 20 Note 20 Note 20 No material difference No material difference	$ 520,590 328,170 41,424 US$ 11,097,800 US$ 1,404,295	58% 37% 5% 100% 100%	- - - - -

• 39 -

TABLE 3

MACRONIX INTERNATIONAL CO., LTD.

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL MARCH 31, 2012

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

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate		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 the Company’s board of directors Indirect subsidiary	$ 520,590 328,170	2.03 times 1.51 times	$ 17,796 -	Accelerating the collection of overdue accounts -	$ - -	$ - -

• 40 -

TABLE 4

MACRONIX INTERNATIONAL CO., LTD.

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE THREE MONTHS ENDED MARCH 31, 2012

(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, 2012	Balance as of March 31, 2012	Balance as of March 31, 2012	Net Income (Loss) of the Investee	Investment Income (Loss) Recognized	Note
				March 31, 2012	December 31, 2011	Shares (In Thousands)	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	Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd. Magic Pixel Inc. MaxRise 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. MaxRise 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	San Jose, California, U.S.A. Tortola, British Virgin Islands Taipei, Taiwan Taipei, Taiwan Hsinchu, 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 Hsinchu, Taiwan Samoa Hong Kong China Samoa Hong Kong China Samoa Hong Kong China Samoa Hong Kong	Marketing Investment holding company Investment Investment Research, development, design, manufacturing and sales of digital skill camera controller IC and flat panel display controller IC Research, design and sales of digital multimedia broadcasting and IC controlled chips. Research, design and sales of base-band chip and Analog baseband chip. Research, design and sales of mobile payment control chip. Research, design and sales of audio multimedia chip. IC design After-sale service After-sale service Marketing Investment holding company Design, maintenance and test of IC systems and rendering of related technical consultation and services Research, development, design, manufacturing and sales of digital skill camera controller IC and flat panel display controller IC Research, design and sales of digital multimedia broadcasting and IC controlled chips. Research, design and sales of audio multimedia chip. Research, design and sales of base-band chip and Analog baseband chip. Research, design and sales of mobile payment control chip. Research, design and sales of audio multimedia chip. Investment holding company Investment holding company Software system consulting service, software system design service, software integrating service Investment holding company Investment holding company Research, develop, design and sales of application software and rendering of related technical consultation and services Investment holding company Investment holding company Software for calculator. Research, develop, design (except IC design) and sales of application software and rendering of related technical consultation and services Investment holding company Investment holding company	$ 2,640 7,348,057 500,000 984,432 194,133 310,825 1,482,961 512,371 340,212 US$ 25,850,000 US$ 63,984 US$ 100,000 US$ 11,500,000 US$ 800,000 US$ 9,000,000 $ 17,286 21,707 25,452 79,840 29,279 25,452 162,317 US$ 2,900,000 US$ 2,550,000 $ 76,350 US$ 1,655,250 US$ 1,650,000 $ 62,138 US$ 1,500,000 US$ 700,000 $ 9,557 US$ 290,000	$ 2,640 7,348,057 500,000 984,432 194,133 310,825 1,482,961 512,371 340,212 US$ 25,850,000 US$ 63,984 US$ 100,000 US$ 11,500,000 US$ 800,000 US$ 9,000,000 $ 17,286 21,707 25,452 79,840 29,279 25,452 153,245 US$ 2,900,000 US$ 2,550,000 $ 76,350 US$ 1,655,250 US$ 1,650,000 $ 56,242 US$ 1,300,000 US$ 500,000 $ 9,557 US$ 290,000	100,000 223,300,000 - - 21,153,675 29,091,973 148,296,140 51,127,000 34,021,160 25,850,000 999 174,000 89,700,000 800,000 - 1,410,980 1,821,350 2,395,200 7,984,000 2,894,000 2,395,200 5,150,000 29,982,500 - 2,420,000 12,905,100 - 1,950,000 11,700,000 - 300,000 2,262,000	100.00 100.00 100.00 100.00 72.54 79.70 92.69 88.15 70.88 100.00 100.00 100.00 100.00 100.00 100.00 4.84 4.99 4.99 4.99 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	$ 240,460 1,620,305 31,159 81,382 135,958 33,553 411,890 217,136 138,331 US$ 10,382,771 US$ 2,671,222 US$ 465,910 US$ 21,837,306 US$ 1,647,920 US$ 10,389,267 $ 9,071 2,101 9,739 22,174 12,292 9,739 6,891 US$ 231,639 US$ 206,504 $ 5,307 US$ 166,124 US$ 158,769 $ 6,630 US$ 182,542 US$ 134,605 $ 2,813 US$ 85,290	$ 1,640 (13,396 ) (1,491 ) (9,218 ) (42,775 ) (22,267 ) (60,944 ) (29,839 ) (30,649 ) US$ 79 US$ 56,528 US$ 10,225 US$ (628,505 ) US$ 62,304 US$ 91,566 $ (42,775 ) (22,267 ) (30,649 ) (60,944 ) (29,839 ) (30,649 ) (9,318 ) US$ 4,657 US$ 10,550 $ (3,949 ) US$ (133,902 ) US$ (133,902 ) $ (1,965 ) US$ (41,201 ) US$ (41,340 ) $ (2,192 ) US$ (74,279 )	$ 1,644 (13,396 ) (1,491 ) (9,218 ) (31,029 ) (17,747 ) (56,489 ) (26,303 ) (21,724 ) Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note
										(Continued)

• 41 -

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance as of March 31, 2012	Balance as of March 31, 2012	Balance as of March 31, 2012	Net Income (Loss) of the Investee	Investment Income (Loss) Recognized	Note
				March 31, 2012	December 31, 2011	Shares (In Thousands)	Percentage of Ownership	Carrying Amount
Mxtran (H.K.) Holding Co., Limited	Maxtran Technology Co., Ltd.	Beijing	R&D on software and communication; sales of application; technical consultation; technical services; technical training; application software; counseling on business management; service of accounting and finance; hardware, software, and related products of computer; communication product; electronic product; importation/exportation for goods and technology; agent for importation/exportation	US$ 280,300	US$ 280,300	-	100.00	US$ 75,646	US$ (74,279 )	Note

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

(Concluded)

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TABLE 5

MACRONIX INTERNATIONAL CO., LTD.

INFORMATION ON INVESTMENT IN CHINA THREE MONTHS ENDED MARCH 31, 2012 (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, 2012 (Note 3)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of March 31, 2012 (Note 3)	Percentage of Ownership (Note 6)	Investment Income (Loss) (Notes 4, 5 and 6)	Carrying Amount as of March 31, 2012 (Notes 3, 5 and 6)	Accumulated Inward Remittance of Earnings as of March 31, 2012
							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.	Design, maintenance and test of IC systems and rendering of related technical consultation and service Software system consulting service, software system design service, software integrating service Research, develop, design and sales of application software and rendering of related technical consultation and services Software for calculator. Research, develop, design (except IC design) and sales of application software and rendering of related technical consultation and services R&D on software and communication; sales of application; technical consultation; technical services; technical training; application software; counseling on business management; service of accounting and finance; hardware, software, and related products of computer; communication product; electronic product; importation/exportation for goods and technology; agent for importation/exportation		RMB 63,995,690 $ 300,037 RMB 17,698,920 $ 82,980 RMB 11,634,750 $ 54,548 RMB 4,653,449 $ 21,817 RMB 1,900,000 $ 8,908		(Note 1) (Note 2) (Note 2) (Note 2) (Note 2)	US$ 9,000,000 $ 265,590 US$ 2,550,000 $ 75,251 US$ 1,650,000 $ 48,692 US$ 500,000 $ 14,755 US$ 280,300 $ 8,722	US$ - US$ - US$ - US$ 200,00 $ 5,902 US$ -	US$ - US$ - US$ - US$ - US$ -	US$ 9,000,000 $ 265,590 US$ 2,550,000 $ 75,251 US$ 1,650,000 $ 48,692 US$ 700,000 $ 20,657 US$ 280,300 $ 8,722	100.00% 97.68% 80.86% 77.38% 93.14%	US$ 91,566 $ 2,700 US$ 10,305 $ 304 US$ (108,273) $ (3,193) US$ (31,989) $ (943) US$ (69,183) $ (2,040)	US$ 10,389,267 $ 306,587 US$ 201,713 $ 5,953 US$ 128,381 $ 3,789 US$ 134,605 $ 3,972 US$ 70,457 $ 2,079	US$ - US$ - US$ - US$ - US$ -
Accumulated Investment in March 31, 2012	China as of	Investment Amount Authorized by the Investment Commission, MOEA			Upper Limit on Investment
US$ 14,980,300 $ 442,069 (Note 3)		US$ 17,530,300 $ 517,319 (Note 3)			$ 24,656,839

(Continued)

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(Concluded)

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

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

Note 3: The foreign currency amount is converted into New Taiwan dollars based on the exchange rate at March 31, 2012.

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, 2012.

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

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

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