Macronix - Interim / Quarterly Report 2012

Macronix International Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Six Months Ended June 30, 2012 and 2011 and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

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

We have audited the accompanying consolidated balance sheets of Macronix International Co., Ltd. and subsidiaries (the “Company”) as of June 30, 2012 and 2011 and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the six months then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of certain consolidated subsidiaries accounted for using equity method. The financial statements of these subsidiaries were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for such subsidiaries, is based solely on the reports of such other auditors. Such subsidiaries’ financial statements reflect total assets of NT$1,058,244 thousand and NT$1,569,939 thousand, representing 1.62% and 2.36% of the Company’s consolidated total assets as of June 30, 2012 and 2011, respectively, and also reflect net sales of NT$43,099 thousand and NT$41,705 thousand, representing 0.39% and 0.32% of the Company’s consolidated net sales for the six months then ended.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Macronix International Co., Ltd. and subsidiaries as of June 30, 2012 and 2011, and the consolidated results of their operations and their consolidated cash flows for the six months then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.

August 22, 2012

Notice to Readers

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

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

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Par Value)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 2 and 4) Financial assets at fair value through profit or loss - current (Notes 2 and 7) Notes and accounts receivable, net (Notes 2, 3 and 5) Receivables from related parties, net (Notes 2, 3 and 20) Other receivables, net Inventories (Notes 2 and 6) Deferred income tax assets - current (Notes 2 and 18) Restricted assets - current (Note 21) Other current assets (Note 22) Total current assets LONG-TERM INVESTMENTS (Notes 2, 7, 8, 9 and 25) Financial assets at fair value through profit or loss - noncurrent Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Total long-term investments PROPERTY, PLANT AND EQUIPMENT (Notes 2, 10, 20 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 Idle assets, net (Note 2) Deferred income tax assets - noncurrent (Notes 2 and 18) Restricted assets - noncurrent (Note 21) Other assets Total other assets TOTAL		2012		2011
		Amount % $ 17,870,676 27 3,981 - 3,356,910 5 668,080 1 86,444 - 7,695,203 12 470,589 1 45,585 - 552,985 1 30,750,453 47 - - 932,307 2 134,510 - 1,066,817 2 598,076 1 22,008,218 34 76,495,069 117 6,058,034 9 31,166 - 26,136 - 1,114,408 2 106,331,107 163 75,438,437 116 1,721,951 3 32,614,621 50 274,127 - 69,331 - 343,458 - 286,340 1 60,297 - 164,177 - 53,044 - 563,858 1 $ 65,339,207 100		Amount % $ 20,825,766 31 - - 3,564,872 6 340,774 1 155,829 - 5,542,255 8 224,856 - 6,188 - 742,222 1 31,402,762 47 34,470 - 1,241,811 2 194,600 - 1,470,881 2 598,076 1 21,041,007 32 64,446,409 97 1,953,877 3 29,594 - 25,099 - 1,038,591 1 89,132,653 134 69,164,655 104 12,723,922 19 32,691,920 49 61,410 - 82,303 - 143,713 - 275,272 1 439,261 1 85,963 - 47,187 - 847,683 2 $ 66,556,959 100

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 and 21) Other current liabilities Total current liabilities LONG-TERM LIABILITIES Long-term bank loans, net of current portion (Notes 12 and 21) Long-term notes payable Total long-term liabilities OTHER LIABILITIES Accrued pension cost (Notes 2 and 13) Others Total other liabilities Total liabilities EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT (Notes 2, 14, 15 and 16) Capital stock, $10 par value Authorized - 6,550,000 thousand shares Issued - 3,392,302 thousand shares in 2012 and 3,381,545 thousand shares in 2011 Stock dividends to be distributed Capital surplus Treasury stock transactions Donation Long-term investments Employee stock options Retained earnings Legal capital reserve Unappropriated earnings (accumulated deficit) Other adjustments Unrealized gains on financial instruments Cumulative translation adjustments Treasury stock (at cost) - 3,757 thousand shares Total equity attributable to shareholders of the parent MINORITY INTERESTS (Note 2) Total shareholders' equity TOTAL		2012		2011
		Amount % $ 215,173 - 2,098,324 3 104,274 - 69,016 - 1,906,005 3 506,621 1 561,167 1 3,607,718 6 1,425,244 2 10,493,542 16 16,067,756 24 - - 16,067,756 24 399,191 1 3,125 - 402,316 1 26,963,614 41 33,923,020 52 1,288,408 2 25,075 - 37 - 3,793 - 317,601 1 2,695,275 4 (259,617 ) - 487,439 - (58,068 ) - (142,365) - 38,280,598 59 94,995 - 38,375,593 59 $ 65,339,207 100		Amount % $ 4,727,712 7 1,818,156 3 77,565 - 143,975 - 1,670,978 3 1,430,337 2 1,457,245 2 68,384 - 5,824,478 9 17,218,830 26 7,932,140 12 735 - 7,932,875 12 362,327 - 1,752 - 364,079 - 25,515,784 38 33,815,453 51 - - 18,704 - 37 - 2,751 - 324,168 1 2,407,003 3 3,762,748 6 804,042 1 (118,871 ) - (142,365) - 40,873,670 62 167,505 - 41,041,175 62 $ 66,556,959 100

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

(With Deloitte & Touche audit report dated August 22, 2012)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

GROSS SALES SALES RETURNS AND ALLOWANCES NET SALES (Notes 2 and 20) COST OF SALES (Notes 2, 6, 17 and 20) 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) Dividend income (Note 2) Gain on disposal of assets (Note 2) Valuation gain on financial assets (Notes 2 and 7) Reversal of allowance for doubtful accounts (Notes 2, 3 and 5) Gain on disposal of financial instruments (Note 2) Others Total non-operating income and gains NON-OPERATING EXPENSES AND LOSSES Interest expense (Notes 10 and 23) Loss on disposal of assets (Note 2) Foreign exchange losses, net (Note 2) Loss on disposal of financial instruments (Note 2) Others Total non-operating expenses and losses		2012 Amount % $ 11,094,311 67,927 11,026,384 100 9,605,507 87 1,420,877 13 570,783 5 817,225 7 2,394,336 22 3,782,344 34 (2,361,467) (21) 82,909 1 15,823 - 12,578 - 3,981 - - - - - 29,848 - 145,139 1 132,196 1 98,193 1 37,230 1 12,792 - 8,747 - 289,158 3		2011
				Amount % $ 13,125,853 46,662 13,079,191 100 8,064,129 62 5,015,062 38 458,226 3 852,187 7 2,098,587 16 3,409,000 26 1,606,062 12 63,639 - 18,196 - 8,956 - 1,161 - 86,439 1 252 - 30,701 - 209,344 1 3,399 - 600 - 15,119 - - - 2,193 - 21,311 - (Continued)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

INCOME (LOSS) BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 2 and 18) CONSOLIDATED NET INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent Minority interests CONSOLIDATED EARNINGS (LOSS) PER SHARE (Note 19) Basic Diluted

		Before Income Tax $ (0.70) $ (0.70)

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

(With Deloitte & Touche audit report dated August 22, 2012)

(Concluded)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Per Share Amount)

					Equity Attributab	Equity Attributab	le to Shareholde	of the Parent
	Capital S	tock Aggregate Par Value $ 33,847,486 - - - 75,534 - - - - - - $ 33,923,020 $ 33,623,017 - - 192,436 - - - - - - $ 33,815,453	Stock Dividends to Be Distributed $ - - - 1,288,408 - - - - - - - $ 1,288,408 $ - - - - - - - - - - $ -		Capital Surplus			Retained Earnings	Ot	her Adjustments Cumulative Translation Adjustments Treasury Stock $ (29,881 ) $ (142,365 ) - - - - - - - - - - - - - - - - - - (28,187) - $ (58,068) $ (142,365) $ (91,242 ) $ (142,365 ) - - - - - - - - - - - - - - (27,629 ) - - - $ (118,871) $ (142,365)
								Unappropriated Earnings Legal Capital (Accumulated Reserve Deficit) $ 2,407,003 $ 5,085,609 288,272 (288,272 ) - (1,288,408 ) - (1,288,408 ) - - - - - (2,480,138 ) - - - - - - - - $ 2,695,275 $ (259,617) $ 1,630,512 $ 8,714,773 776,491 (776,491 ) - (5,735,395 ) - - - (17,521 ) - 1,577,382 - - - - - - - - $ 2,407,003 $ 3,762,748	Unrealized Gain (Loss) on Financial Instruments $ 432,095 - - - - - - 32,499 22,845 - - $ 487,439 $ 1,038,432 - - - - - (154,113 ) (80,277 ) - - $ 804,042
(	Shares in Thousands) 3,384,749 - - - 7,553 - - - - - - 3,392,302 3,362,302 - - 19,243 - - - - - - 3,381,545			Treasury Stock Transactions $ 25,075 - - - - - - - - - - $ 25,075 $ 18,704 - - - - - - - - - $ 18,704	Donation $ 37 - - - - - - - - - - $ 37 $ 37 - - - - - - - - - $ 37	Long-term Investments $ 3,436 - - - - 357 - - - - - $ 3,793 $ - - - - 2,751 - - - - - $ 2,751	Employee Stock Options $ 321,377 - - - (3,776 ) - - - - - - $ 317,601 $ 335,915 - - (11,747 ) - - - - - - $ 324,168

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

(With Deloitte & Touche audit report dated August 22, 2012)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) attributable to shareholders of the parent Net loss attributable to minority interests Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation Amortization Provision (reversal of allowance) for doubtful accounts Gain on disposal of financial instruments, net Loss (gain) on disposal of assets, net Valuation gain on financial assets, net Deferred income taxes Net changes in operating assets and liabilities: Financial assets held for trading 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 Proceeds from disposal of financial assets designated as at fair value through profit or loss Acquisition of available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets Proceeds from return of capital by financial assets carried at cost Acquisitions of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in intangible assets Increase in restricted assets Decrease (increase) in refundable deposits Decrease (increase) in other assets Net cash used in investing activities	2012 $ (2,480,138) (41,381) 3,782,061 84,679 20,021 (1,414) 85,615 - 22,312 (3,981) (487,448) 249,983 35,008 (1,227,129) (64,731) (56,535) 22,030 (279,950) (283,178) (24,154) 51,115 38,957 (558,258) 40,042 (150,000) 150,229 19,500 (1,611,288) 16,606 (269,901) (22,580) 1,122 (11,777) (1,838,047)	2011 $ 1,577,382 (75,348) 2,448,970 59,181 (86,439) (252) (8,356) (1,161) 124,863 - (1,065,630) 306,005 183,247 (1,555,974) (220,829) (78,648) (15,569) (520,991) (295,076) 281,121 (15,625) (2,259) 1,038,612 - (250,000) 250,252 - (9,361,839) 20,511 (25,784) (83,267) (114) 3,256 (9,446,985) (Continued)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

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 Increase in minority interests Net cash provided by financing activities EFFECT OF EXCHANGE RATE CHANGES 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 Interest paid (excluding capitalized interest) Income tax paid NON-CASH INVESTING AND 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 in payables to contractors and equipment suppliers Cash paid	2012 $ (1,585,315) 2,170,000 (100,858) (319) 71,758 939 556,205 (16,321) (1,856,421) 19,727,097 $ 17,870,676 $ 139,795 $ 273,671 $ 25 $ 3,607,718 $ 1,296,622 314,666 $ 1,611,288	2011 $ 1,921,632 5,770,000 (2,177,045) 214 180,689 1,071 5,696,561 (14,879) (2,726,691) 23,552,457 $ 20,825,766 $ 3,399 $ 684,459 $ 4,608 $ 68,384 $ 8,821,731 540,108 $ 9,361,839

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

(With Deloitte & Touche audit report dated August 22, 2012)

(Concluded)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

1. GENERAL

Macronix International Co., Ltd. (“MXIC”), a Republic of China (ROC) corporation, was incorporated in the Hsinchu Science Park (HSP), Taiwan on December 9, 1989. MXIC operates principally as a designer, manufacturer and supplier of integrated circuits and memory chips. MXIC also performs design, research and development, consultation, and trade of relevant products.

MXIC’s shares have been listed on the Taiwan Stock Exchange (TSE) since March 15, 1995. MXIC 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 June 30, 2012 and 2011, MXIC and its subsidiaries had 5,470 and 5,176 employees, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements have been presented in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the ROC.

For the convenience of readers, the accompanying consolidated 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 consolidated financial statements shall prevail.

Significant accounting policies are summarized as follows:

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of all directly and indirectly majority owned subsidiaries of MXIC, and the accounts of investees in which MXIC’s ownership percentage is less than 50% but over which MXIC has a controlling interest. Balances and transactions of all significant affiliated companies and subsidiaries which MXIC has a controlling interest are eliminated upon consolidation.

The consolidated entities were as follows:

As of June 30, 2012, MXIC has direct and indirect majority ownership in the following subsidiaries: MXB, Inc. (“MXB”), Run Hong Investment, Ltd. (“Run Hong”), Hui Ying Investment, Ltd. (“Hui Ying”), Magic Pixel Inc. (“MPI”), Mxtran Inc. (“Mxtran”), Infomax Communication Co., Ltd. (“INFOMAX”), MoDioTek Co., Ltd. (“MoDioTek”), MaxRise Inc. (“MaxRise”), Macronix America Inc. (“MXA”), Macronix (BVI) Co., Ltd. (“MXBVI”), Magic Pixel Inc. (“MPI Samoa”), Magic Pixel Holding Company Limited (“MPI HK”), Magic Pixel (Shen Zhen) Co., Ltd. (“MPI SZ”), Mxtran Holding (Samoa) Co., Ltd. (“Mxtran Samoa”), Mxtran (H.K.) Holding Co., Limited (“Mxtran HK”), Maxtran Technology Co., Ltd. (“Maxtran Beijing”), Infomax Holding Co., Ltd. (“Infomax Samoa”), Infomax Holding Company Limited (“Infomax HK”), Infomax Communication (Suzhou) Co., Ltd. (“Infomax SU”), Mosatek Co., Ltd. (“Mosatek Samoa”), Mosatek (HK) Company Limited (“Mosatek HK”), Modiotek (Suzhou) Co., Ltd. (“Modiotek SU”), New Trend Technology Inc. (“NTTI”), Macronix (Asia) Limited (“MX Asia”),

Macronix Pte. Ltd. (“MPL”), Macronix Europe NV. (“MXE”), Macronix (Hong Kong) Co., Ltd. (“MXHK”) and Macronix Microelectronics (Suzhou) Co., Ltd. (“MXm”).

Investor
Investees
Main Business
MXIC
MXB
Sales and marketing
MXIC
Run Hong
Investment company
MXIC
Hui Ying
Investment company
MXIC and Run Hong
MPI
Research, development, design, manufacturing and sales of
digital skill camera controller IC and flat panel display
controller IC
MXIC and Run Hong
Mxtran
Research, development, design, manufacturing and sale of
Combi-SIM IC
MXIC and Run Hong
INFOMAX
Research, development, design, manufacturing and sale of
baseband and analog chips
MXIC, Run Hong
and Hui Ying
MoDioTek
Research, development, design, manufacturing and sale of
mobile audio chips and solutions
MXIC and Run Hong
MaxRise
IC design, research, development, design, manufacturing
and sales of digital TV receivable chips
MXIC
MXA
Sales and marketing
MXIC
MXBVI
Investment company
MPI
MPI Samoa
Investment company
MPI Samoa
MPI HK
Investment company
MPI HK
MPI SU
Development, sales and design of application software,
system integration (except IC design). Sales of
application software and rendering of related technical
consultation and services
MPI HK
MPI SZ
Research, develop (except IC design) and sales of
application software and rendering of related technical
consultation and services
Mxtran
Mxtran Samoa
Investment company
Mxtran Samoa
Mxtran HK
Investment company
Mxtran HK
Maxtran 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
INFOMAX
Infomax Samoa
Investment company
Infomax Samoa
Infomax HK
Investment company
Infomax HK
Infomax SU
Research, develop, test software and sales of application
software and rendering of related technical consultation
and services
MoDioTek
Mosatek Samoa
Investment company
Mosatek Samoa
Mosatek HK
Investment company
Mosatek HK
Modiotek SU
Research, develop, design and sales of application software
and rendering of related technical consultation and
services
MXBVI
NTTI
IC design
MXBVI
MX Asia
Investment company
MXBVI
MPL
After-sale service
MXBVI
MXE
After-sale service
MXBVI
MXHK
Sales and marketing
MXHK
MXm
Design, development and testing of integrated circuit
system and software

Percentage of
Ownership at June 30
2012
2011
Note
50.00%
50.00%
1
100.00%
100.00%
-
100.00%
100.00%
-
77.38%
35.65%
-
93.14%
93.14%
-
97.68%
97.68%
-
80.86%
80.86%
-
84.69%
84.69%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
-
100.00%
2
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-
100.00%
100.00%
-

Note 1: MXB is in the process of liquidation in 2011. As of June 30, 2012, the liquidation has not been completed and MXB’s revenue and expense before liquidation had been included in the consolidated financial statements of 2011.

Note 2: MPI SU had completed the liquidation in 2011 and its revenue and expenses before liquidation had been included in the consolidated financial statements.

10 -

The following diagram presents the relationship and ownership percentage between MXIC and its consolidated subsidiaries as of June 30, 2012.

==> picture [503 x 231] intentionally omitted <==

----- Start of picture text -----

MXIC
50.00% 100% 100% 72.54% 88.15% 92.69% 70.88% 79.70% 100% 100%
MXB Run Hong Hui Ying MPI Mxtran INFOMAX MoDioTek MaxRise MXA MXBVI
4.84% 4.99% 4.99% 4.99% 4.99% 4.99%
100% 100% 100% 100% 100% 100% 100% 100% 100%
MPI Samoa Mxtran Samoa Infomax Samoa Mosatek Samoa NTTI MX Asia MPL MXE MXHK
100% 100% 100% 100%
100%
MPI HK Mxtran HK Infomax HK Mosatek HK
MXm
100% 100% 100% 100%
MPI SZ Maxtran Beijing Infomax SU Modiotek SU
----- End of picture text -----

MXIC together with its subsidiaries are hereinafter referred to collectively as the “Company.” Minority interests are presented as a separate component of shareholders’ equity.

Foreign Currency

The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the following exchange rates: Assets and liabilities - spot rates at period-end; shareholders’ equity - historical rates; dividends - at the exchange rate prevailing on the dividend declaration date; income and expenses - average rates during the period. The resulting translation adjustments are recorded as a separate component of shareholders’ equity. Such exchange differences are recognized in profit or loss in the period in which the foreign operations are disposed of.

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 are 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.

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.

11 -

Accounting Estimation

Under above guidelines 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, assets held for trading purposes, and those assets expected to be converted to cash and cash equivalents, 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 have carrying amounts that approximate their fair values.

Financial Assets at Fair Value through Profit or Loss

Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss (“FVTPL”) include financial assets or financial liabilities held for trading. The Company recognizes a financial asset or a financial liability on its balance sheet when the Company becomes a party to the contractual provisions of the financial instrument. A financial asset is derecognized when the obligation specified in the relevant contract is discharged, cancelled or expired.

The fair value of foreign bond is based on the closing price as of balance sheet date. Derivatives that do not meet the criteria for hedge accounting are treated as financial assets or liabilities held for trading. When the fair value is a positive amount, the derivative is treated as a financial asset; when the fair value is a negative amount, the derivative is treated as a financial liability.

At the balance sheet date, fair values of financial assets and financial liabilities with quoted prices in an active market are based on their quoted prices in an active market; for those financial assets and financial liabilities with no quoted prices; their fair values are determined using valuation techniques.

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 settlement 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.

12 -

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.

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 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 is 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 property, plant and equipment, intangible assets and idle 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.

13 -

Allowance for Sales Returns and Discounts

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.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment. 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, 4 to 5 years; leasehold improvements, 3 to 10 years; miscellaneous equipment, 2 to 5 years; idle Assets, 6 to 8 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.

Idle Assets

Land and equipment not used in operation are transferred to idle assets; the related costs, accumulated depreciation and accumulated impairment loss are removed from the accounts; they are valued at the lower of net realizable value or book value.

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.

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.

14 -

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 (excluding earnings from foreign consolidated subsidiaries) 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).

Employee stock options granted on or after January 1, 2010 are accounted for in accordance with Rule No. 0990006370 issued by the FSC on March 15, 2010. Under the statement, the value of the stock options granted, which is equal to the best available estimate of the number of stock options expected to vest multiplied by the grant-date fair value, is expensed on a straight-line basis over the vesting period, with a corresponding adjustment to capital surplus - employee stock options. Employee stock options granted between January 1, 2008 and December 31, 2009 were accounted for in accordance with Rule No. 0960065898 issued by the Financial Supervisory Commission (“FSC”) under the Executive Yuan on December 12, 2007. Thus, the stock options granted were measured at their intrinsic value until exercise or annulment.

Bonuses to Employees and Directors

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.

15 -

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.

Reclassifications

Certain accounts in the consolidated financial statements as of and for the period ended June 30, 2011 have been reclassified to conform to the presentation of the consolidated financial statements as of and for the period ended June 30, 2012.

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 June 30, 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.

16 -

4. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Petty cash Checking and savings accounts Time deposits Cash equivalents - repurchase agreements collateralized by bonds		June 30
		2012 $ 522 1,209,316 16,610,629 50,209 $ 17,870,676	2011 $ 819 4,403,014 16,421,933 - $ 20,825,766

5. NOTES AND ACCOUNTS RECEIVABLE

NOTES AND ACCOUNTS RECEIVABLE
June 30 2012 2011 Notes receivable $ 555 $ 13,187 Accounts receivable 3,387,601 3,617,302 Less: Allowance for doubtful accounts 20,039 53,903 Allowance for sales returns and discounts 11,207 11,714 3,356,355 3,551,685 $ 3,356,910 $ 3,564,872 Movements of the allowance for doubtful accounts were as follows: Six Months Ended June 30 2012 2011 Balance, beginning of period $ 18 $ 139,397 Provision (reversal of provision) for doubtful accounts 20,021 (83,202) Translation adjustment - (2,292) Balance, end of period $ 20,039 $ 53,903 Movements of the allowance for sales returns and discounts were as follows: Six Months Ended June 30 2012 2011 Balance, beginning of period $ 11,987 $ 14,455 Reversal of provision for sales returns and discounts (760) (2,702) Translation adjustment (20) (39) Balance, end of period $ 11,207 $ 11,714	June 30
	2012 2011 $ 555 $ 13,187 3,387,601 3,617,302 20,039 53,903 11,207 11,714 3,356,355 3,551,685 $ 3,356,910 $ 3,564,872 Six Months Ended June 30
		2012 $ 11,987 (760) (20) $ 11,207	2011 $ 14,455 (2,702) (39) $ 11,714

17 -

6. INVENTORIES

INVENTORIES
Finished goods and merchandise Work in process Raw materials Supplies and spare parts		June 30
		2012 $ 1,049,394 6,097,370 403,160 145,279 $ 7,695,203	2011 $ 759,468 4,280,192 182,712 319,883 $ 5,542,255

The allowance for inventory losses as of June 30, 2012 and 2011 were $1,323,416 thousand and $706,618 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the six months ended June 30, 2012 and 2011 were $9,605,507 thousand and $8,064,129 thousand, respectively. The cost of goods sold for the six months ended June 30, 2012 and 2011 included $644,784 thousand and $215,626 thousand write-downs of inventories, respectively.

7. FINANCIAL INSTRUMENTS AT FVTPL

FINANCIAL INSTRUMENTS AT FVTPL
Financial assets held for trading-current Forward exchange contracts Financial assets designated as at fair value through profit or loss-noncurrent Foreign publicly-traded convertible bonds		June 30
		2012 $ 3,981 $ -	2011 $ - $ 34,470

The company did not enter into any forward exchange contracts during the six months ended June 30, 2011. The company entered into forward exchange contracts during the six months ended June 30, 2012 to manage exposures due to exchange rate and interest rate fluctuations. The financial risk management objective of the Company is to minimize risks due to changes in fair value or cash flows.

Outstanding forward exchange contracts as of June 30, 2012 were as follows:

					Contract Amount
			Currency	Maturity Date	(In Thousands)
June	30,	2012
Sell			JPY$/NT$	2012.07	JPY600,000/NT$230,118
Sell			US$/NT$	2012.07	USD6,000/NT$179,738

Net loss on financial assets held for trading for the six months ended June 30, 2012 was $10,225 thousand. Net gain on financial assets designated as at fair value through profit or loss for the six months ended June 30, 2012 was $1,161 thousand.

18 -

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

AVAILABLE-FOR-SALE FINANCIAL ASSETS
Publicly traded stocks Foreign publicly traded stocks - US$7,020 thousand in 2012 and US$11,379 thousand in 2011		June 30
		2012 $ 722,535 209,772 $ 932,307	2011 $ 914,941 326,870 $ 1,241,811

9. FINANCIAL ASSETS CARRIED AT COST

FINANCIAL ASSETS CARRIED AT COST
Non-publicly traded stocks Foreign non-publicly traded stocks - US$1,220 thousand in 2012 and 2011		June 30
		2012 $ 98,056 36,454 $ 134,510	2011 $ 159,556 35,044 $ 194,600

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				Six Months EndedJune 30, 2012
		Balance, Beginning of Period $ 598,076 21,717,424 75,224,281 2,381,513 28,192 26,553 1,096,751 6,097,550 107,170,340 14,287,420 55,390,754 1,326,924 19,501 21,709 917,325 71,963,633 $ 35,206,707	Additions $ - 296,138 1,737,075 3,596,240 7,670 87 35,081 (4,375,669) $ 1,296,622 $ 605,679 2,802,259 322,151 1,604 1,700 48,668 $ 3,782,061	Disposals Reclassification $ - $ - (1,352 ) - (362,791 ) (103,496 ) (22,884 ) 103,496 (4,662 ) - - - (16,055 ) (27 ) - - $ (407,744) $ (27) $ (1,352 ) $ - (261,008 ) (20,126 ) (22,884 ) 20,126 (4,301 ) - - - (15,978) (2) $ (305,523) $ (2)	Translation Adjustment $ - (3,992 ) - (331 ) (34 ) (504 ) (1,342 ) 70 $ (6,133) $ (193 ) - (149 ) (31 ) (386 ) (973) $ (1,732)	Balance, End of Period $ 598,076 22,008,218 76,495,069 6,058,034 31,166 26,136 1,114,408 1,721,951 108,053,058 14,891,554 57,911,879 1,646,168 16,773 23,023 949,040 75,438,437 $ 32,614,621

19 -

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				Six Months EndedJune 30, 2011
		Balance, Beginning of Period $ 598,076 20,665,899 60,817,179 1,891,926 30,882 26,826 1,019,247 8,216,363 93,266,398 13,198,719 51,579,362 1,249,220 19,258 21,185 861,767 66,929,511 $ 26,336,887	Additions $ - 398,414 3,684,256 172,056 - 750 58,696 4,507,559 $ 8,821,731 $ 545,178 1,760,611 92,883 1,523 896 47,879 $ 2,448,970	Disposals Reclassification $ - $ - (22,527 ) - (138,760 ) 83,733 (19,312 ) (90,750 ) (1,223 ) - (2,106 ) - (38,410 ) (547 ) - - $ (222,338) $ (7,564) $ (22,527 ) $ - (127,253 ) 76,049 (19,164 ) (81,966 ) (1,223 ) - (2,090 ) - (37,926) 2,962 $ (210,183) $ (2,955)	Translation Adjustment $ - (779 ) 1 (43 ) (65 ) (371 ) (395 ) - $ (1,652) $ (24 ) - (20 ) (64 ) (313 ) (267) $ (688)	Balance, End of Period $ 598,076 21,041,007 64,446,409 1,953,877 29,594 25,099 1,038,591 12,723,922 101,856,575 13,721,346 53,288,769 1,240,953 19,494 19,678 874,415 69,164,655 $ 32,691,920

Information on interest capitalization is summarized as follows:

Total interests Capitalized interests Capitalization rate 11. SHORT-TERM BANK LOANS Letter of credit loan: Interest rates ranged 0.88%-1.30% in 2012 and 0.75%-1.43% in 2011. 12. 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 1.29%-1.45% in 2011 Repayable according to an agreed loan payment term to maturity date, with annual floating interest which ranged 1.54%-1.55% in 2012 and 1.35%-1.46% in 2011		Six Months Ended June 30
		2012 2011 $ 156,683 $ 52,263 24,487 48,864 1.51% 1.41% June 30
		2012 2011 $ 215,173 $ 4,727,712 June 30
	2012 2011 $ 15,030,000 $ 6,170,000 1,500,000 1,500,000 (Continued)

20 -

Repayable semi-annually from March 2013 to September 2014, with annual floating interest which ranged 1.81%-1.83% in 2012 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 which ranged 1.81%-1.83% in 2012 Repayable monthly from May 2003 to April 2016, with annual floating interest at 1.84% in 2012 and ranged 1.62%-1.76% in 2011 Repayable quarterly from September 2013 to September 2014, with annual floating interest at 2.08% in 2012 Less: Current portion		June 30	June 30
		2012 $ 1,600,000 500,000 400,000 333,333 262,141 50,000 19,675,474 3,607,718 $ 16,067,756	2011 $ - - - - 330,524 - 8,000,524 68,384 $ 7,932,140 (Concluded)

For expansion of production capability and for long-term operation needs, MXIC made a Syndicated Loan of $18 billion for 5 years, with Taiwan Cooperative Commercial Bank and other 14 financial organizations in September 2010. The line of credit has been used $16.53 billion as of June 30, 2012.

The loan agreement requires the maintenance of certain financial ratios based on semi-annual and annual consolidated financial statements. For the six months ended June 30, 2012, MXIC had met the financial ratio requirements.

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. Furthermore, other overseas subsidiaries are required by local regulations to make monthly contributions at certain percentages of the basic salary of their employees. Based on the LPA, the Company has made monthly contributions to employees’ personal pension accounts and recognized pension costs of $115,325 thousand and $105,177 thousand for the six months ended June 30, 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 in 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. MXIC and its domestic subsidiaries’ 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 June 30, 2012 and 2011 were $760,531 thousand and $757,674 thousand, respectively. The net periodic pension costs based on a defined benefit pension plan for the six months ended June 30, 2012 and 2011 were $11,085 thousand and $9,922 thousand, respectively.

21 -

The net periodic pension costs based on executive pension plan for the six months ended June 30, 2012 and 2011 were $42,424 thousand and $2,078 thousand, respectively.

14. SHAREHOLDERS’ EQUITY

Capital Surplus

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

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

Retained Earnings Distribution and Dividends Policy

MXIC’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 MXIC’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 MXIC’s financial, sales or operating condition. MXIC’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 six months ended June 30, 2012, there was no accrual for bonus to employees and remuneration to directors and supervisors. For the six months ended June 30, 2011, the accrued bonus to employees was $249,920 thousand, and the accrued remuneration to directors and supervisors was $28,520 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.

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

22 -

Appropriation of earnings to legal reserve shall be made until the legal reserve equals MXIC’s paid-in capital. Legal reserve may be used to offset deficit. If MXIC has no deficit and the legal reserve has exceeded 25% of MXIC’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 MXIC on earnings generated since January 1, 1998.

The appropriations of earnings for 2011 and 2010 had been approved in the shareholders’ meeting on June 6, 2012 and 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 5,735,395 - $ 6,511,886	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 above appropriation of stock dividends of $1,288,408 thousand from 2011 earnings to paid-in capital will be adjusted when the outstanding shares at the ex-dividend date are increased due to exercise of stock options by the MXIC’s employees. The shareholders had authorized the chairman to adjust the cash and stock dividend per share when the outstanding shares at the ex-dividend date are increased. The above appropriation of stock dividends was approved by the Securities and Futures Bureau of Financial Supervisory Commission, Executive Yuan on June 19, 2012. The ex-dividend date was designated on July 18, 2012 by the chairman.

The bonus to employees and the remuneration to directors and supervisors for 2011 and 2010 were approved in the shareholders’ meetings on June 6, 2012 and June 10, 2011, respectively. The appropriations were as follows:

Amounts approved in shareholders’ meeting Amounts recognized in respective financial statements		For Year 2011 Remuneration to Directors Bonus to and Employees Supervisors $ 454,732 $ 51,889 477,847 52,928 $ (23,115) $ (1,039)		For Year 2010
				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 years ended December 31, 2011 and 2010 which were primarily due to changes in estimates (numbers of the outstanding shares and income tax expense) had been adjusted in profit and loss for the six months ended June 30, 2012 and 2011, respectively.

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

23 -

15. EMPLOYEE STOCK OPTION PLANS

MXIC

MXIC has three employee stock option plans (“2004 Plan”, “2005 Plan” and “2007 Plan”) approved by the R.O.C. 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 MXIC. The options are valid for six years subsequent to the grant dates 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 MXIC’s common shares listed on the TSE or MXIC’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 June 30, 2012, there were 105 thousand of employee stock options exercised for which 105 thousand common shares were issued but not yet officially registered with the Ministry of Economic Affairs, ROC.

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

Six months ended June 30, 2012 Balance, beginning of period Options exercised Options cancelled Balance, end of period Six months ended June 30, 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 $10.50 (14,596) 10.50 (318) 10.50 53,420 10.50	Unit: Option Numbers in Thousand and NT$ 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 $9.50 37 $4.00 (7,553) 9.50 - - (65) 9.50 (37) 4.00 42,176 9.50 - - 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 $7.78 (7,948) 5.90 (11) 7.60 (4) 5.90 (29) 7.85 11,569 5.90 - -	Unit: Option Numbers in Thousand and NT$ 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 $9.50 37 $4.00 (7,553) 9.50 - - (65) 9.50 (37) 4.00 42,176 9.50 - - 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 (7,948) 5.90 (11) 7.60 (4) 5.90 (29) 7.85 11,569 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 June 30, 2012, information about MXIC’s outstanding and exercisable option was as follows:

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) 42,176 1.49 $ 9.50	Options Exercisable
		Number Exercisable (Thousand) Exercise Price (NT$/Per Share) 42,176 $ 9.50

24 -

MoDioTek

Approved by the Board of Directors of MoDioTek on April 2, 2007, December 3, 2007, August 18, 2008 and December 11, 2008, MoDioTek was authorized to issue employee stock options for 1,500 thousand units, 579 thousand units, 671 thousand units and 40 thousand units, respectively. Each stock option may subscribe for one new share of new common stock of MoDioTek. The options are valid for six years subsequent to second anniversary of the grant date or the early of the first anniversary of the grant date or date of application for share listing on the TSE or GreTai Securities Market. As stipulated in the plans, the exercise price and quantity are subject to adjustments for any changes of capital structure or cash dividends.

Information with respect to MoDioTek’s stock option plan is as follows:

Balance, beginning of period Options cancelled Balance, end of period	Six Months Ended June 30	Six Months Ended June 30
	2012 Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 2,040 $10.35 (29) 10.35 2,011 10.35	2011
		Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 2,289 $10.35 (90) 10.35 2,199 10.35

As of June 30, 2012, information about MoDioTek outstanding and exercisable option was as follows:

Exercise Price (NT$/Per Share) $10.00 10.00 11.40 11.40	Options Issued on or After January 1, 2004 and Outstanding Number Outstanding (Thousand) Remaining Contractual Life (In Years) Exercise Price (NT$/Per Share) 1,109 0.75 $10.00 400 1.42 10.00 482 2.13 11.40 20 2.45 11.40 2,011	Options Exercisable
		Number Exercisable (Thousand) Exercise Price (NT$/Per Share) 1,109 $10.00 400 10.00 482 11.40 20 11.40 2,011

Mxtran

Approved by the Board of Directors of Mxtran on April 2, 2007, December 21, 2007 and August 12, 2011, Mxtran was authorized to issue employee stock options for 600 thousand units, 625.6 thousand units and 2,344 thousand units, respectively. Each stock option may subscribe for one new share of new common stock of Mxtran. The options are valid for six years subsequent to the grant dates and vested at certain percentages subsequent to the second anniversary of the grant date. As stipulated in the plans, the exercise price and quantity are subject to adjustments for any changes of capital structure or cash dividends.

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

25 -

Information with respect to Mxtran’s stock option plan is as follows:

Balance, beginning of period Options cancelled Balance, end of period	Six Months Ended June 30	Six Months Ended June 30
	2012 Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 2,664 $10.31 (168) 10.31 2,496 10.31	2011
		Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 1,078 $12.32 (189) 12.32 889 12.32

As of June 30, 2012, information about Mxtran’s outstanding and exercisable option was as follows:

Options Issued on or After January 1, 2004 and

	Options Issued on or After January 1, 2004 and
Exercise Price (NT$/Per Share) $12.07 12.55 10.00	Outstanding Number Outstanding (Thousand) Weighted- average Remaining Contractual Life (In Years) Weighted- average Exercise Price (NT$/Per Share) 163 0.77 $12.07 173 1.48 12.55 2,160 5.11 10.00 2,496	Options Exercisable
		Number Exercisable (Thousand) Weighted- average Exercise Price (NT$/Per Share) 163 $12.07 173 12.55 2,160 10.00 2,496

Options granted during the six months ended June 30, 2012 were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

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

For the six months ended June 30, 2012, the compensation cost recognized was $110 thousand. As of June 30, 2012, the estimated percentage of forfeiture due to termination of employment over the remaining vesting period was 6%.

INFOMAX

Approved by the Board of Directors of INFOMAX on April 2, 2007, November 16, 2007, December 21, 2007, April 2, 2010 and January 26, 2011, INFOMAX was authorized to issue employee stock options for 2,577 thousand units, 423 thousand units, 1,910 thousand units, 8,654 thousand units and 1,346 thousand units, respectively. Each stock option may subscribe for one new share of new common stock of INFOMAX. The options authorized on April 2, 2007, November 16, 2007 and December 21, 2007 are valid for six years, eight years and eight years, respectively, subsequent to the grant dates. The options authorized on April 2, 2010 and January 26, 2011 are valid in the early of six years to the grant dates or two months to the date of application for share listing on the TSE or Gre-Tai Securities Market. As stipulated

26 -

in the plans, the exercise price and quantity are subject to adjustments for any changes of capital structure or cash dividends.

Information with respect to INFOMAX’s stock option plan is as follows:

Balance, beginning of period Options granted Options cancelled Balance, end of period	Six Months Ended June 30	Six Months Ended June 30
	2012 Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 10,943 $ 10.00 - - (970) 10.00 9,973 10.00	2011
		Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 12,294 $ 10.00 1,346 10.00 (1,902) 10.00 11,738 10.00

As of June 30, 2012, information about INFOMAX’s outstanding and exercisable option was as follows:

Options Issued on or After January 1, 2004 and

	Options Issued on or After January 1, 2004 and
Exercise Price (NT$/Per Share) $10.00 10.00 10.00	Outstanding Number Outstanding (Thousand) Weighted- average Remaining Contractual Life (In Years) Weighted- average Exercise Price (NT$/Per Share) 1,780 0.76 $ 10.00 1,189 3.48 10.00 7,004 3.86 10.00 9,973	Options Exercisable
		Number Exercisable (Thousand) Weighted- average Exercise Price (NT$/Per Share) 1,780 $ 10.00 1,189 10.00 - 10.00 2,969

Options granted during the six months ended June 30, 2012 and 2011 were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Grant-date share price (NT$) Exercise price (NT$) Expected volatility Expected life (years) Expected dividend yield Risk-free interest rate	Six Months Ended June 30
	2012 2011 $5.17 $5.17 10.00 10.00 37.82% 37.82% 4.25 4.25 - - 0.91% 0.91%

For the six months ended June 30, 2012 and 2011, compensation costs recognized were $365 thousand and $1,225 thousand, respectively. As of June 30, 2012 and 2011, the estimated percentage of forfeiture due to termination of employment over the remaining vesting period were both 3%.

27 -

MaxRise

Approved by the Board of Directors of MaxRise on January 12, 2007, April 18, 2007, November 16, 2007, December 21, 2007, August 14, 2008, April 15, 2009, May 5, 2010, and January 3, 2011, MaxRise was authorized to issue employee stock options for 1,160 thousand units, 230 thousand units, 110 thousand units, 1,350 thousand units, 780 thousand units, 225 thousand units, 863 thousand units and 2,007 thousand units, respectively. Each stock option may subscribe for one new share of new common stock of MaxRise. The options are valid for six years subsequent to the grant dates and vested at certain percentages subsequent to the second anniversary of the grant date. As stipulated in the plans, the exercise price and quantity are subject to adjustments for any changes of capital structure or cash dividends

Information with respect to MaxRise’s stock option plan is as follows:

Balance, beginning of period Options granted Options cancelled Balance, end of period	Six Months Ended June 30	Six Months Ended June 30
	2012 Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 3,034 $ 10.70 - - (203) 10.70 2,831 10.70	2011
		Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 1,455 $ 12.60 2,007 10.00 (115) 13.20 3,347 10.70

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

As of June 30, 2012, information about MaxRise’s outstanding and exercisable option was as follows:

Options Issued on or After January 1, 2004 and

	Options Issued on or After January 1, 2004 and
Exercise Price (NT$/Per Share) $10.00- 13.30	Outstanding Number Outstanding (Thousand) Weighted- average Remaining Contractual Life (In Years) Weighted- average Exercise Price (NT$/Per Share) 2,831 3.69 $10.70	Options Exercisable
		Number Exercisable (Thousand) Weighted- average Exercise Price (NT$/Per Share) 915 $13.40

Options granted during the six months ended June 30, 2012 and 2011 were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Grant-date share price (NT$) Exercise price (NT$) Expected volatility Expected life (years) Expected dividend yield Risk-free interest rate	Six Months Ended June 30
	2012 2011 $1.55-$2.58 $1.55-$2.58 10.00 10.00 32.48%-34.84% 32.48%-34.84% 4.25 4.25 - - 0.84%-0.96% 0.84%-0.96%

28 -

The compensation costs during the six months ended June 30, 2012 and 2011 were minor; thus, they were not recognized.

MPI

Approved by the Board of Directors of MPI on June 20, 2007 and May 1, 2012, MPI was authorized to issue employee stock options for 2,400 thousand units and 841 thousand units. Each stock option may subscribe for one new share of new common stock of MPI. The options are valid for six years subsequent to the grant date and vested at certain percentages subsequent to the second anniversary of the grant date. As stipulated in the plans, the exercise price and quantity are subject to adjustments for any changes of capital structure or cash dividends.

Information with respect to MPI’s stock option plan is as follows:

Balance, beginning of period Options granted Options cancelled Balance, end of period	Six Months Ended June 30	Six Months Ended June 30
	2012 Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 167 $ 67.30 841 10.00 (38) 37.30 970 18.80	2011
		Number of Outstanding Stock Option Rights (Thousand) Weighted- average Exercise Prices (NT$/Per Share) 979 $ 47.30 - - (199) 47.30 780 47.30

As of June 30, 2012, information about MPI’s outstanding and exercisable option was as follows:

Options Issued on or After January 1, 2004 and

	Options Issued on or After January 1, 2004 and
Exercise Price (NT$/Per Share) $67.30 10.00	Outstanding Number Outstanding (Thousand) Weighted- average Remaining Contractual Life (In Years) Weighted- average Exercise Price (NT$/Per Share) 149 0.98 $67.30 821 4.16 10.00 970	Options Exercisable
		Number Exercisable (Thousand) Weighted- average Exercise Price (NT$/Per Share) 149 $67.30 821 10.00 970

Options granted during the six months ended June 30, 2012 were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

model and the inputs to the model were as follows:
Grant-date share price (NT$)	$	6.93
Exercise price (NT$)		10.00
Expected volatility		48.23%
Expected life (years)		4.25
Expected dividend yield		-
Risk-free interest rate		1%

The compensation cost during the six months ended June 30, 2012 was minor; thus, it was not recognized.

29 -

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 six months ended June 30, 2012 and 2011 would have been as follows:

MXIC Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield MoDioTek Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield Mxtran Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield INFOMAX Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield MaxRise Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield MPI Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield	Six Months Ended June 30
	2012 2011 1.55%-2.54% 1.55%-2.54% 4.38 4.38 51.16%-57.50% 51.16%-57.50% - - 1.90%-2.68% 1.90%-2.68% 6 6 - - - - 1.90%-2.68% 1.90%-2.68% 6 6 - - - - 0.91%-2.68% 0.91%-2.68% 6-8 6-8 - - - - 0.84%-2.68% 0.84%-2.68% 6 6 - - - - 2.20%-2.68% 2.20%-2.68% 6 6 - - - - (Continued)

MXIC
Assumptions:
Risk-free interest rate
Expected life (in years)
Expected volatility
Expected dividend yield
MoDioTek
Assumptions:
Risk-free interest rate
Expected life (in years)
Expected volatility
Expected dividend yield
Mxtran
Assumptions:
Risk-free interest rate
Expected life (in years)
Expected volatility
Expected dividend yield
INFOMAX
Assumptions:
Risk-free interest rate
Expected life (in years)
Expected volatility
Expected dividend yield
MaxRise
Assumptions:
Risk-free interest rate
Expected life (in years)
Expected volatility
Expected dividend yield
MPI
Assumptions:
Risk-free interest rate
Expected life (in years)
Expected volatility
Expected dividend yield

Six Months Ended June 30

2012
2011
1.55%-2.54%
1.55%-2.54%
4.38
4.38
51.16%-57.50%
51.16%-57.50%
-
-
1.90%-2.68%
1.90%-2.68%
6
6
-
-
-
-
1.90%-2.68%
1.90%-2.68%
6
6
-
-
-
-
0.91%-2.68%
0.91%-2.68%
6-8
6-8
-
-
-
-
0.84%-2.68%
0.84%-2.68%
6
6
-
-
-
-
2.20%-2.68%
2.20%-2.68%
6
6
-
-
-
-
(Continued)

30 -

Consolidated net income attributable to shareholders of the parent: Net income (loss) as reported Pro forma net income (loss) Consolidated earnings (loss) per share (EPS - LPS) - after income tax (NT$): Basic EPS (LPS) as reported Pro forma basic EPS (LPS) Diluted EPS (LPS) as reported Pro forma diluted EPS (LPS)		Six Months Ended June 30	Six Months Ended June 30
		2012 $ (2,480,138) $ (2,480,138) $(0.71) $(0.71) $(0.71) $(0.71)	2011 $ 1,577,382 $ 1,567,299 $0.45 $0.45 $0.44 $0.44 (Concluded)

16. TREASURY STOCK

As of June 30, 2012 and 2011, the information about MXIC’s issued shares held by the subsidiary was as follows:

follows:
	Shares	Original
Company	(Thousands)	Carrying Value	Market Value
June 30, 2012
Hui Ying Investment, Ltd.	3,757	$ 142,365	$	35,200
June 30, 2011
Hui Ying Investment, Ltd.	3,757	$ 142,365	$	66,118

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

17. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSES

Labor cost Salary Insurance Pension Others Depreciation Amortization				Six Months Ended June 30	Six Months Ended June 30	Six Months Ended June 30
			2012	Total $ 2,597,072 193,592 168,834 123,497 $ 3,082,995 $ 3,782,061 $ 81,588			2011
		Classified as Cost of Sales $ 1,195,693 102,657 72,179 67,403 $ 1,437,932 $ 3,290,102 $ 23,022	Classified as Operating Expenses $ 1,401,379 90,935 96,655 56,094 $ 1,645,063 $ 491,959 $ 58,566			Classified as Cost of Sales $ 1,300,353 93,384 65,142 63,654 $ 1,522,533 $ 2,206,425 $ 5,470	Classified as Operating Expenses $ 1,403,526 79,162 52,035 46,889 $ 1,581,612 $ 242,545 $ 48,788	Total $ 2,703,879 172,546 117,177 110,543 $ 3,104,145 $ 2,448,970 $ 54,258

31 -

18. INCOME TAX

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

	Six Months Ended June 30	Six Months Ended June 30
	2012 2011 $ (416,390) $ 322,752 46,903 67,454 (39,933) (23,263) (17,839) (30,642) (5,191) (181,368) - (128,212) 5,191 127,131 $ (427,259) $ 153,852 Six Months Ended June 30
	2012 2011 $ 3,021 $ 153,852 (9,124) 14,607 (459,545) 31,144 38,602 204,511 38,020 33,609 405,059 (145,662) $ 16,033 $ 292,061 June 30
2012 $ 409,034 960,430 446,251 1,815,715 (1,345,126) $ 470,589 $ 576,508 349,383 1,576,529 2,502,420 (2,442,123) $ 60,297		2011 $ - 1,027,394 258,829 1,286,223 (1,061,367) $ 224,856 $ 474,921 1,143,815 1,731,942 3,350,678 (2,911,417) $ 439,261

32 -

As of June 30, 2012, the information of the Company’s tax credits and loss carryforward was as follows:

Regulatory Basis of Tax Credits Items Income Tax Law Loss carryforwards Statute for Upgrading Purchase of machinery Industries equipment Research and development expenditures Statute for Upgrading Investments in important Industries technology-based enterprises	Total Creditable Amounts $ 4,975 3,431 15,460 48,380 76,747 179,592 91,330 105,946 50,647 409,034 $ 985,542 $ 74,397 30,295 7,349 $ 112,041 $ 558,577 635,858 $ 1,194,435 $ 4,000 4,528 $ 8,528	Remaining Creditable Expiry Amounts Year $ 4,975 2013 3,431 2015 15,460 2016 48,380 2017 76,747 2018 179,592 2019 91,330 2020 105,946 2021 50,647 2022 409,034 2023 $ 985,542 $ 69,206 2012 30,295 2013 7,349 2014 $ 106,850 $ 558,577 2012 635,858 2013 $ 1,194,435 $ 4,000 2013 4,528 2014 $ 8,528

MXIC’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

The tax returns through 2008 have been assessed by the tax authorities. MXIC disagreed with the tax authorities’ assessment of its 2008 tax return and had applied for a re-examination. Nevertheless, MXIC 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		June 30	June 30
		2012 $ 466,828 $ -	2011 $ 707,055 $ -

33 -

The actual tax creditable ratio for distribution of earnings of 2011 and 2010 earnings were 9.18% and 8.11 %, respectively.

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

Six months ended June 30, 2012 Consolidated basic LPS Loss for the period attributable to common shareholders of the parent Six months ended June 30, 2011 Consolidated basic EPS Income for the period attributable to common shareholders of the parent Effect of dilutive potential common stock Employee stock option Bonus to employees Consolidated diluted EPS Income attributable to common shareholders of the parent plus effect of potential dilutive common stock		Number of Amounts (Numerator) Shares Before After (Denominator) Income Tax Income Tax (In Thousands) $ (2,467,126) $ (2,480,138) 3,515,506 $ 1,842,396 $ 1,577,382 3,499,903 - - 34,426 - - 16,373 $ 1,842,396 $ 1,577,382 3,550,702		EPS (LPS)(NT$)	EPS (LPS)(NT$)
				Before Income Tax $ (0.70) $ 0.53 $ 0.52	After Income Tax $ (0.71) $ 0.45 $ 0.44
		Before Income Tax $ (2,467,126) $ 1,842,396 - - $ 1,842,396

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 Company, was not included in the calculation of diluted loss per share for the six months ended June 30, 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 six months ended June 30, 2012.

The weighted-average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends (see Note 14). The adjustment caused the basic EPS and diluted EPS after income tax for the six months ended June 30, 2011 decreased from NT$0.47 to NT$0.45 and from NT$0.46 to NT$0.44, respectively.

34 -

20. RELATED PARTY TRANSACTIONS

Except as disclosed elsewhere in the consolidated 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 Ardentec Corporation (“Ardentec”) Macronix Education Foundation (“MXIC Education”) MegaChips Corporation (“MegaChips”) Others	Relationship
	MXIC serves as member of its board of directors Same chairman with MXIC Its subsidiary, Shun Ying Investment, is represented in MXIC’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 Others		Six Months Ended June 30	Six Months Ended June 30	Six Months Ended June 30
		2012 Amount % of Net Sales $ 2,829,587 26 978 - $ 2,830,565 26		2011
				Amount % of Net Sales $ 3,684,013 28 900 - $ 3,684,913 28

Sales prices to related parties are not comparable with those with external customers as the Company is the sole provider for them. The sales term to the related parties is between 30 to 45 days after monthly closing, similar to those with external customers.

2) Purchases from related parties were as follows:

Related Parties MegaChips		Six Months Ended June 30	Six Months Ended June 30	Six Months Ended June 30
		2012 Amount % of Net Purchase $ 22,094 8		2011
				Amount % of Net Purchase $ 1,283 -

The terms of purchases from related parties were similar to those from third parties. The payment term is 60 days after monthly closing.

3) Subcontract processing charges from related parties were as follows:

Related Parties Ardentec		Six Months Ended June 30	Six Months Ended June 30	Six Months Ended June 30
		2012 Amount % $ 186,113 2		2011
				Amount % $ 183,417 2

35 -

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

4) Operating expense

Six Months Ended June 30	Six Months Ended June 30	Six Months Ended June 30	Six Months Ended June 30
2012 2011 Amount % Amount % $ 12,500 - $ 13,000 - 385 - 2,563 - - - 102 - $ 12,885 - $ 15,665 - Six Months Ended June 30		2011

2012 $ 5,769 -		2011
	Amount % $ 11,474 - Six Months Ended June 30, 2012
		Amount $ 974	% 2

5) Joint development revenue
6) Software, pattern and other revenue

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

7) Accounts receivable

Related Parties MegaChips Others Less: Allowance for doubtful accounts		June 30	June 30	June 30
		2012 Amount % $ 667,909 100 171 - 668,080 100 - - $ 668,080 100		2011
				Amount % $ 340,699 100 75 - 340,774 100 - - $ 340,774 100

36 -

8) Accounts payable

Related Parties Ardentec Others		June 30	June 30
		2012 Amount % $ 96,824 93 7,450 7 $ 104,274 100		2011
				Amount % $ 77,565 100 - - $ 77,565 100

21. PLEDGED ASSETS

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

Pledged time deposits - current (showed as restricted assets, current) Property, plant and equipment, net Pledged time deposits - noncurrent (showed as restricted assets, noncurrent)		June 30	June 30
		2012 $ 45,585 19,535,029 164,177 $ 19,744,791	2011 $ 6,188 4,021,262 85,963 $ 4,113,413

22. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

Significant commitments and contingencies of the Company as of June 30, 2012, excluding those disclosed in other notes, were as follows:

a. MXIC had significant equipment contracts totaling approximately $1,249,747 thousand. As of June 30, 2012, MXIC has paid $624,881 thousand of this amount pursuant to these contracts. Future irrevocable payment in total is $624,866 thousand. Unused letters of credit amounted to $270,067 thousand.
b. The land on which MXIC is located is being leased from the Hsinchu Science Park Administration under renewable operating lease agreements. The lease term is from 1994 to 2031. Future minimum annual rentals under the leases are as follows:

Year 3rdto 4thquarter 2012 2013 2014 2015 2016 2017 and later	Amount $ 37,833 75,665 70,945 46,412 17,469 206,633 $ 454,957

37 -

The offices on which MXA, MXE, Mxtran, MaxRise and MPI are located were leased under renewable operating leases. These leases will expire in 2011 to 2015.

Future minimum annual rentals under the operating leases are as follows:

Year 3rdto 4thquarter 2012 2013 2014 2015	Amount $ 5,150 2,538 2,350 1,235 $ 11,273

c. MXIC 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. MXIC had paid off the entire technology development fees on December 31, 2007.
d. MXIC 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 June 30, 2012, MXIC had paid US$8,184 thousand.
e. MXIC 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, MXIC has to pay the royalty of the Patents Cross-License Agreement.
f. According to Share Purchase Agreement and Amendment between Tower and MXBVI in December 2000 and November 2006, Tower established a prepaid account with a credit balance in favor of MXBVI. The credit balance of the prepaid account will be increased when MXBVI’s contracted purchase price of Tower’s shares exceeds market price. Such Tower prepayments can be used for MXBVI’s future purchase of wafers, conversion to Tower’s shares and payment for royalty. When the prepayments were used by the Company for purchase of wafers from Tower, the Company classified certain amount of the prepayments as part of accounts receivable (converted wafer credit) from Tower and to be paid by Tower on or before December 31, 2009. As of June 30, 2012, the total amount of accounts receivable from Tower prepayments was US$7,458 thousand (classified as other current assets) with full allowance for doubtful receivables. However, MXBVI entered into the payment term agreement with Tower in December 2009, and the term of the agreement is payment by Tower in eight installments from December 2009 to September 2011. As of December 31, 2011, Tower has paid off the eight installments.
g. Based on the resolution at the shareholders’ general meeting in June 2012, MaxRise resolved its merger with INFOMAX through share swap. It is expected that 1.353 shares of MaxRise will be exchanged for 1 share of INFOMAX, which is on the basis of INFOMAX’s reduced paid-in capital of $502,208 thousand divided into 50,203 thousand shares, and INFOMAX will continue to exist. As of August 22, 2012, the business combination was still in progress.
38 -

23. DISCLOSURES FOR FINANCIAL INSTRUMENTS

a. Fair values of financial instruments were as follows:

Non-derivative financial instruments Assets Financial assets at fair value through profit or loss - noncurrent Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Liabilities Long-term bank loans (including current portion) Derivative financial instruments Assets Financial assets at fair value through profit or loss - current	June 30	June 30
	2012 Carrying Amount Fair Value $ - $ - 932,307 932,307 134,510 19,675,474 19,675,474 3,981 3,981	2011
		Carrying Amount Fair Value $ 34,470 $ 34,470 1,241,811 1,241,811 194,600 8,000,524 8,000,524 - -

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 reviewed as 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.
5) Fair values of derivatives are based on their quoted prices in an active market. For those derivatives with no quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants to price financial instruments.
39 -
c. As of June 30, 2012 and 2011, financial assets (liabilities) exposed to fair value interest rate risk and cash flow interest rate risks were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	June 30
	2012 2011 $ 16,426,682 $ 15,799,468 (215,173) (4,727,712) 1,653,234 5,117,631 (19,675,474) (8,000,524)

d. Interest income and expense on financial assets and liabilities, excluding those at fair value through profit and loss, for the six months ended June 30, 2012 and 2011 were as follows:

Total interest income Total interest expenses (including capitalized amount)	Six Months Ended June 30
	2012 2011 $ 82,909 $ 63,639 156,683 52,263

e. Valuation gain arising from change in fair value of financial instruments determined using valuation techniques was $3,981 thousand for the six months ended June 30, 2012.
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 June 30, 2012
Balance, beginning of period
$ 385,366
$ 46,729

Recorded as a separate component of
shareholders’ equity

32,499

22,845

Balance, end of period
$ 417,865
$ 69,574

Period ended June 30, 2011
Balance, beginning of period
$ 763,403
$ 275,029

Recorded as a separate component of
shareholders’ equity
(154,113)

(80,277)

Balance, end of period
$ 609,290
$ 194,752

Total
$ 432,095

55,344
$ 487,439
$1,038,432
(234,390)
$ 804,042

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.
40 -
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’s investment in debt instruments are traded in active markets and can be disposed of quickly at close to their fair values. The Company has sufficient operating capital to meet cash demand.
4) Cash flow risk of interest rate. As of June 30, 2012, most 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 June 30, 2012 and 2011, the information for material foreign financial assets and liabilities were as follows.

Financial assets Monetary items JPY KRW USD RMB HKD EUR SGD Non-monetary items USD Financial liabilities Monetary items JPY USD RMB EUR HKD SGD	June 30	June 30
	2012 Foreign Currencies Exchange Rate $ 2,392,725 0.38 158,346 0.0259 149,308 29.88 9,783 4.72 2,633 3.85 1,905 37.56 329 23.52 9,708 29.88 1,129,493 0.38 42,695 29.88 2,850 4.72 883 37.56 235 3.85 14 23.52	2011
		Foreign Currencies Exchange Rate $ 3,706,342 0.36 120,912 0.0266 212,468 28.73 4,860 4.44 3,209 3.69 2,299 41.63 333 23.38 15,347 28.73 5,888,911 0.36 177,296 28.73 2,952 4.44 284 41.63 - 3.69 49 23.38

41 -

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
42 -

l. The following is a summary of significant related party transactions:

Transaction Subject	Transaction Object	Relation (Note 1)	Transaction Summary	Transaction Summary	Transaction Summary
			Account	Amount	Term of Transaction (Note 6)	% to Total Assets or Total Revenue
Six months ended June 30,2012
MXIC	MXHK	2	Sales	$1,077,005	Note 2	10%
			Notes and accounts receivable	294,739		-
			Accountspayable	35		-
	MXE	2	Operatingexpenses	34,656		-
			Accountspayable	11,217		-
	MXA	1	Sales	294,350	Note 2	3%
			Operatingexpenses	82,884		1%
			Notes and accounts receivable	79,442		-
			Accountspayable	49,438		-
	Mxtran	1	Sales	351	Note 3	-
			Rental revenue	2,806	Note 4	-
			Other revenue (software, mold,etc.)	673	Note 5	-
			Notes and accounts receivable	604		-
			Other receivables	222		-
	MoDioTek	1	Sales	104	Note 3	-
			Rental revenue	2,796	Note 4	-
			Other revenue (software, mold,etc.)	373	Note 5	-
			Other receivables	124		-
	MX Asia	2	Operatingexpenses	69,073		-
			Accountspayable	14,025		-
	MPL	2	Operatingexpenses	12,851		-
			Accountspayable	4,425		-
	INFOMAX	1	Rental revenue	2,628	Note 4	-
			Other revenue (software, mold,etc.)	159	Note 5	-
			Notes and accounts receivable	539		-
			Other receivables	26		-
	MaxRise	1	Rental revenue	1,754	Note 4	-
	MPI	1	Rental revenue	2,184	Note 4	-
			Other revenue (software, mold,etc.)	121	Note 5	-
			Other receivables	61		-
Six months ended June 30,2011
MXIC	MXHK	2	Sales	1,345,183	Note 2	10%
			Operatingexpenses	22,793		-
			Notes and accounts receivable	557,594		1%
			Accountspayable	3,827		-
	MXE	2	Operatingexpenses	20,565		-
			Accountspayable	7,776		-
	MXA	1	Sales	302,496	Note 2	2%
			Operatingexpenses	87,301		-
			Notes and accounts receivable	80,146		-
			Accountspayable	44,997		-
						(Continued)

43 -

Transaction Object	Relation (Note 1)	Transaction Summary	Transaction Summary	Transaction Summary
		Account	Amount	Term of Transaction (Note 6)	% to Total Assets or Total Revenue
Mxtran	1	Sales	75	Note 3	-
		Rental revenue	1,777	Note 4	-
		Other revenue (software, mold,etc.)	690	Note 5	-
		Notes and accounts receivable	881		-
		Other receivables	186		-
MoDioTek	1	Sales	333	Note 3	-
		Rental revenue	2,839	Note 4	-
		Other revenue (software, mold,etc.)	830	Note 5	-
		Notes and accounts receivable	519		-
		Other receivables	342		-
MX Asia	2	Operatingexpenses	62,070		-
		Accountspayable	11,760		-
MPL	2	Operatingexpenses	11,065		-
		Accountspayable	3,956		-
INFOMAX	1	Rental revenue	2,487	Note 4	-
		Other revenue (software, mold,etc.)	208	Note 5	-
		Notes and accounts receivable	1,045		-
		Other receivables	41		-
MaxRise	1	Rental revenue	1,310	Note 4	-
MPI	1	Rental revenue	2,186	Note 4	-
		Other revenue (software, mold,etc.)	171	Note 5	-
		Notes and accounts receivable	161		-
		Other receivables	61		-

(Concluded)

Note 1: 1. Transaction was between the parent company and subsidiaries.
Transaction was between the parent company and indirect subsidiaries.
Note 2: The sale price referred to the product price of end customer.
Note 3: The sale price referred to cost plus mark up.
Note 4: MXIC leased office to related parties and collected rental revenue according to the floor space per month.
Note 5: MXIC had signed contract with related parties. The related transaction term was negotiated bilaterally, so there was no comparable basis.
Note 6: The transaction terms with related parties were 30 to 60 days after monthly closing and were similar to those with third parties.
44 -

26. OPERATING SEGMENT FINANCIAL INFORMATION

Information is provided to the chief operating decision maker to allocate resources and measure performance of departments based on types of product and service. Pursuant to SFAS No. 41, “Operating Segments,” the Company determined its operating segments based on business activities as follows:

Memory products and wafer fabrication IC design

a. Segment revenues and results

Segment Revenue	Segment Revenue		Segment Profit	Segment Profit
Six Months Ended June 30			Six Months Ended June 30
	2011 $ 13,037,486 41,705 $ 13,079,191		2012 2011 $ (2,001,527) $ 2,000,072 (359,940) (394,010) (2,361,467) 1,606,062 82,909 63,639 (85,615) 8,356 (37,230) (15,119) 3,981 1,161 (132,196) (3,399) 24,132 133,395 $ (2,505,486) $ 1,794,095 June 30

		$	2012 64,280,963 1,058,244 65,339,207	2011 $ 64,987,263 1,569,696 $ 66,556,959
		$

b. Segment assets and liabilities

45 -

27. PRE-DISCLOSURE OF THE ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

Under Rule No. 0990004943 issued by the Financial Supervisory Commission (FSC) on February 2, 2010, the Company’s pre-disclosure information on the adoption of International Financial Reporting Standards (IFRSs) was as follows:

a. On May 14, 2009, the FSC announced the roadmap of IFRSs adoption for ROC companies. Accordingly, starting 2013, companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare the consolidated financial statements in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, IFRSs, International Accounting Standards (IASs), interpretations as well as related guidance issued by the FSC. To comply with the amendments, the Company established a taskforce headed by the assistant general manager to monitor and execute the IFRSs adoption plan. The important plan items, responsible divisions and plan progress are listed as follows.

Plan Item 1) Establish the IFRSs taskforce 2) Set up a work plan for IFRSs adoption 3) Complete the identification of GAAP differences and impact 4) Complete the identification of consolidated entities under IFRSs 5) Complete the evaluation of impact on the Company as a result of the exemptions and adoptions under IFRS 1, “First-time Adoption of International Financial Account Standards” 6) Complete evaluation of the IT systems 7) Complete modification to the relevant internal controls 8) Determine IFRSs accounting policies 9) Determine options and exemptions with IFRS 1, “First-time Adoption of International Financial Accounting Standards” 10) Complete the preparation of opening date balance sheet under IFRSs 11) Prepare comparative financial information under IFRSs for 2012 12) Complete modification to the relevant internal controls	Responsible Division Finance center Finance center Finance center Finance center Finance center Finance center and information technology center Finance center Finance center Finance center Finance center Finance center Finance center and auditing office	Plan Progress
		Finished Finished Finished Finished Finished Finished Finished Finished Finished Finished In progress according to the plan In progress according to the plan

46 -
b. Exemptions from IFRS 1

IFRS 1, “First-time Adoption of International Financial Reporting Standards,” establishes the procedures for the preparation of the Company’s first consolidated financial statements in accordance with IFRSs. According to IFRS 1, the Company is required to determine the accounting policies under IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of transition to IFRSs (January 1, 2012), except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The main optional exemptions the Company adopted are summarized as follows:

1) Business combinations. The Company elected not to apply IFRS 3, “Business Combinations,” retrospectively to business combinations that occurred before the date of transition to IFRSs. Therefore, the amount of goodwill and related assets and liabilities included in business combination and the non-controlling interest generated from business combinations reported in the balance sheet as of January 1, 2012 remain the same as those reported under ROC GAAP as of December 31, 2011.
2) Share-based payment. The Company elected to take the optional exemption from applying IFRS 2, “Share-based Payment,” retrospectively for the shared-based payment transactions granted and vested before the date of transition to IFRSs.
3) Employee benefits. The Company elected to recognize all unrecognized cumulative actuarial gains and losses in retained earnings at the date of transition to IFRSs.
c. Based on the Company’s assessment, the significant differences between the Company’s current accounting policies under ROC GAAP and the ones under IFRSs are stated as follows:
1) Reconciliation of consolidated balance sheet as of January 1, 2012

ROC GAAP	Amount $ 19,727,097 2,889,463 918,063 121,452 6,468,003 133,299 23,005 474,848 30,755,230 39,357 879,392 154,491 1,073,240 35,206,707 172,068 - 419,899 290,125		Effect of Transit	ion to IFRSs Presentation Difference $ - 11,987 - - - (133,299 ) - 543 (120,769) - - - (5,117,177 ) (23,593) 5,407,302 133,299 (290,125 )		IFRSs Amount Item Note $ 19,727,097 Cash and cash equivalents 2,901,450 Notes and accounts receivable, net a) 918,063 Receivables from related parties, net 121,452 Other receivables, net 6,468,003 Inventories - Deferred income tax assets - current b) 23,005 Prepayments 475,391 Other current assets c) 30,634,461 Total current assets 39,357 Financial assets at fair value through profit or loss - noncurrent 879,392 Available-for-sale financial assets - noncurrent 154,491 Financial assets carried at cost - noncurrent 1,073,240 Total noncurrent assets 30,089,530 Net property, plant and equipment d), f) 148,475 Intangible assets c), e) 5,407,302 Prepayments for equipment f) 553,198 Deferred income tax assets - noncurrent b) - - d) (Continued)
			Recognition and Measurement Difference $ - - - - - - - - - - - - - - - - - -
Item Current assets Cash and cash equivalents Notes and accounts receivable, net Receivables from related parties, net Other receivables, net Inventories Deferred income tax assets - current Restricted assets - current Other current assets Total current assets Financial assets at fair value through profit or loss - noncurrent Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Total long-term investments Net property, plant and equipment Net intangible assets Deferred income tax assets - noncurrent Idle assets, net

47 -

ROC GAAP	Amount $ 42,389 164,177 916,590 $ 68,123,835 $ 1,800,488 2,154,754 82,244 348,966 2,189,183 530,775 875,833 85,504 1,527,718 9,595,465 16,078,719 360,234 3,661 363,895 26,038,079 33,847,486 349,925 2,407,003 5,085,609 432,095 (29,881 ) (142,365) 41,949,872 135,884 42,085,756 $ 68,123,835		Effect of Transit	ion to IFRSs Presentation Difference $ 23,050 - 5,273,526 $ 11,987 $ - - - - - - - 11,987 - 11,987 - - - - 11,987 - - - - - - - - - - $ 11,987		IFRSs Amount Item Note $ 65,439 Other noncurrent assets c), e) 164,177 Other noncurrent assets 6,190,116 $ 68,135,822 Total Current liabilities $ 1,800,488 Short-term bank loans 2,154,754 Notes and accounts payable 82,244 Payables to related parties 348,966 Income tax payable 2,189,183 Other payables 530,775 Accrued bonuses to employees, directors and supervisors 875,833 Payables for equipment 161,458 Other current liabilities a), h) 1,527,718 Current portion of long-term bank loans 9,671,419 16,078,719 Noncurrent liabilities 622,566 Accrued pension cost i) 3,661 Other noncurrent liabilities 626,227 26,376,365 Total liabilities 33,847,486 Common stock 346,489 Capital surplus g) 2,407,003 Legal capital reserve 4,776,572 Unappropriated earnings h), i), j) 432,095 Other equity (30,048 ) Cumulative translation adjustments h) (159,061) Treasury stock j) 41,620,536 Total equity attributable to shareholders of the parent 138,921 Non-controlling interest g), h), i) 41,759,457 Total shareholders’ equity $ 68,135,822 Total
			Recognition and Measurement Difference $ - - - $ - $ - - - - - - - 63,967 - 63,967 - 262,332 - 262,332 326,299 - (3,436 ) - (309,037 ) - (167 ) (16,696) (329,336 ) 3,037 (326,299) $ -
Item Other assets Restricted assets - noncurrent Total other assets Total Current liabilities Short-term bank loans Notes and accounts payable Payables to related parties Income tax payable Accrued expenses Accrued bonuses to employees, directors and supervisors Payables for equipment Other current liabilities Current portion of long-term bank loans Total current liabilities Total long-term liabilities Accrued pension cost Others Total other liabilities Total liabilities Shareholders' equity Capital stock Capital surplus Legal capital reserve Unappropriated earnings Unrealized gains on financial instruments Cumulative translation adjustments Treasury stock Total equity attributable to shareholders of the parent Minority interests Total shareholders' equity Total

(Concluded)

2) Reconciliation of consolidated balance sheet as of June 30, 2012

ROC GAAP	Amount $ 17,870,676 3,981 3,356,910 668,080 86,444 7,695,203 470,589 45,585 552,985 30,750,453 932,307 134,510 1,066,817		Effect of Transit	ion to IFRSs Presentation Difference $ - - 11,207 - - - (470,589 ) - 534 (458,848) - - -		IFRSs Amount Item Note $ 17,870,676 Cash and cash equivalents 3,981 Financial assets at fair value through profit or loss - current 3,368,117 Notes and accounts receivable, net a) 668,080 Receivables from related parties, net 86,444 Other receivables 7,695,203 Inventories - Deferred income tax assets - current b) 45,585 Prepayments 553,519 Prepayments c) 30,291,605 Total current assets 932,307 Available-for-sale financial assets - noncurrent 134,510 Financial assets carried at cost - noncurrent 1,066,817 Total noncurrent assets
			Recognition and Measurement Difference $ - - - - - - - - - - - - -
Item Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Notes and accounts receivable, net Receivables from related parties, net Other receivables, net Inventories Deferred income tax assets - current Restricted assets - current Other current assets Total current assets Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Total long-term investments

(Continued)

48 -

ROC GAAP	Amount $ 32,614,621 343,458 - 60,297 286,340 53,044 164,177 563,858 $ 65,339,207 $ 215,173 2,098,324 104,274 69,016 1,906,005 506,621 561,167 1,425,244 3,607,718 10,493,542 16,067,756 399,191 3,125 402,316 26,963,614 33,923,020 1,288,408 346,506 2,695,275 (259,617 ) 487,439 (58,068 ) (142,365) 38,280,598 94,995 38,375,593 $ 65,339,207		Effect of Transit	ion to IFRSs Presentation Difference $ (735,162 ) (4,759) 1,021,502 470,589 (286,340 ) 4,225 - 1,209,976 $ 11,207 $ - - - - - - - 11,207 - 11,207 - - - - 11,207 - - - - - - - - - - - $ 11,207		IFRSs Amount Item Note $ 31,879,459 Property, plant and equipment d), f) 338,699 Intangible assets c), e) 1,021,502 Prepayments for equipment f) 530,886 Deferred income tax assets - noncurrent b) - - d) 57,269 Other noncurrent assets c), e) 164,177 Restricted assets - noncurrent 1,773,834 $ 65,350,414 Total Current liabilities $ 215,173 Short-term bank loans 2,098,324 Notes and accounts payable 104,274 Payables to related parties 69,016 Income tax payable 1,906,005 Other payables 506,621 Accrued bonuses to employees, directors and supervisors 561,167 Payables for equipment 1,503,399 Other current liabilities a), h) 3,607,718 Current portion of long-term bank loans 10,571,697 16,067,756 Noncurrent liabilities 657,767 Accrued pension cost i) 3,125 Other noncurrent liabilities 660,892 27,300,345 Total liabilities 33,923,020 Common stock 1,288,408 Stock dividends to be distributed 342,713 Capital surplus g) 2,695,275 Legal capital reserve (567,954 ) Unappropriated earnings h), i), j) 487,439 Other equity (58,131 ) Cumulative translation adjustments h) (159,061) Treasury stock j) 37,951,709 Total equity attributable to shareholders of the parent 98,360 Non-controlling interest g), h), i) 38,050,069 Total shareholders’ equity $ 65,350,414 Total (Concluded)
			Recognition and Measurement Difference $ - - - - - - - - $ - $ - - - - - - - 66,948 - 66,948 - 258,576 - 258,576 325,524 - - (3,793 ) - (308,337 ) - (63 ) (16,696) (328,889 ) 3,365 (325,524) $ -
Item Net property, plant and equipment Net intangible assets Prepayments for equipment Deferred income tax assets - noncurrent Idle assets, net Other assets Restricted assets - noncurrent Total other assets Total Current liabilities Short-term bank loans Notes and accounts payable Payables to related parties Income tax payable Accrued expenses Accrued bonuses to employees, directors and supervisors Payables for equipment Other current liabilities Current portion of long-term bank loans Total current liabilities Total long-term liabilities Accrued pension cost Others Total other liabilities Total liabilities Shareholders' equity Capital stock Stock dividends to be distributed Capital surplus Legal capital reserve Unappropriated earnings Unrealized gains on financial instruments Cumulative translation adjustments Treasury stock Total equity attributable to shareholders of the parent Minority interests Total shareholders' equity Total

3) Reconciliation of consolidated statement of comprehensive income for the six months ended June 30, 2012

ROC GAAP	Amount $ 11,026,384 9,605,507 1,420,877 570,783 817,225 2,394,336 3,782,344 (2,361,467)		Effect of Transit	ion to IFRSs Presentation Difference $ - - - - - - - -		IFRSs Amount Item Note $ 11,026,384 Net sales 9,604,169 Cost of sales h), i) 1,422,215 Gross profit 569,811 Sales and marketing h), i) 817,811 General and administrative h), i) 2,395,360 Research and development h), i) 3,782,982 Total operating expenses (2,360,767) Loss from operations (Continued)
			Recognition and Measurement Difference $ - (1,338) 1,338 (972 ) 586 1,024 638 700
Item Net sales Cost of sales Gross profit Operating expenses Sales and marketing General and administrative Research and development Total operating expenses Loss from operations

49 -

ROC GAAP	Amount $ 82,909 15,823 12,578 3,981 29,848 145,139 132,196 98,193 37,230 12,792 8,747 289,158 (2,505,486 ) 16,033 $ (2,521,519)		Effect of Transit	ion to IFRSs Presentation Difference $ - - - - - - - - - - - - $ -		IFRSs Amount Item Note Non-operating income and gains $ 82,909 Interest income 15,823 Dividend income 12,578 Gain on disposal of assets, net 3,981 Valuation gain on financial assets 29,848 Others 145,139 Total non-operating income and gains 132,196 Interest expense 98,193 Loss on disposal of assets 37,230 Foreign exchange losses 12,792 Loss on sale of financial instruments 8,747 Others 289,158 Total non-operating expenses and losses (2,504,786 ) Loss before income tax 16,033 Income tax expense (2,520,819 ) Consolidated net loss (28,132 ) Exchange differences on translating foreign operations 55,344 Net valuation gain on available-for-sale financial assets 27,212 Other comprehensive income for the period, net of tax effect $ (2,493,607) Total comprehensive loss for the period
			Recognition and Measurement Difference $ - - - - - - - - - - 700 - $ 700
Item Non-operating income and gains Interest income Dividend income Gain on disposal of assets Valuation gain on financial assets Others Total non-operating income and gains Non-operating expenses and losses Interest expense Loss on disposal of assets Foreign exchange losses, net Loss on sale of financial instruments Others Total non-operating expenses and losses Loss before income tax Income tax expense Consolidated net loss

4) Special reserve at the date of transition to IFRSs

In accordance with the order VI-1010012865 issued by the FSC on April 6, 2012, at the first-time adoption of IFRSs, an entity shall appropriate to special reserve an amount equal to IFRS-adoption adjustments to retained earnings when an entity elects to use exemptions specified in IFRS 1 and resets unrealized revaluation increment and cumulative translation differences under stockholders’ equity to zero by reclassifying them to retained earnings. However, if the IFRS-adoption adjustments to retained earnings are less than the amount of unrealized revaluation increment and cumulative translation differences reclassified to retained earnings, the amount appropriated to special reserve is limited to the IFRS-adoption credit adjustments to retained earnings. The special reserve shall be reversed proportionate to the subsequent usage, disposal or reclassification of the related assets. The Company’s total IFRS-adoption adjustments at the first-time adoption of IFRSs resulted in a decrease of retained earnings; therefore, no special reserve was appropriated.

5) Notes to the reconciliation of the significant differences:

From the Company’s assessment, the significant differences between the Company’s current accounting policies under ROC GAAP and under IFRSs are stated as follows:

a) Allowance for sales returns and others

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

50 -

As of June 30, 2012 and January 1, 2012, the amounts reclassified from allowance for sales returns and others to provisions were $11,207 thousand and $11,987 thousand, respectively.

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

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

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

As of June 30, 2012 and January 1, 2012, the amounts reclassified from deferred income tax assets - current to deferred income tax assets - noncurrent were $470,589 thousand and $133,299 thousand, respectively.

c) Reclassification of burgage

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

As of June 30, 2012, the amounts reclassified to lease prepayments - current (classified under other current assets) and lease prepayments - noncurrent (classified under other noncurrent assets) were $534 thousand and $23,251 thousand, respectively. As of January 1, 2012, the amounts reclassified to lease prepayments - current and lease prepayments - noncurrent were $543 thousand and $23,920 thousand, respectively.

d) Reclassification of idle assets

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

As of June 30, 2012 and January 1, 2012, the amounts reclassified from idle assets to property, plant and equipment were $286,340 thousand and $290,125 thousand, respectively.

e) Reclassification of deferred assets

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

As of June 30, 2012 and January 1, 2012, the amounts reclassified from deferred assets to intangible assets were $19,026 thousand and $870 thousand, respectively.

f) Presentation of prepayments for equipment

Under ROC GAAP, prepayments for obtaining equipment are classified as prepayments for equipment under property, plant and equipment. After the adoption of IFRSs, prepayments for obtaining equipment are reclassified as prepaid items under noncurrent assets.

51 -

As of June 30, 2012 and January 1, 2012, the amounts reclassified from prepayments for equipment to prepaid items were $1,021,502 thousand and $5,407,302 thousand, respectively.

g) Capital surplus of subsidiaries - employee stock options

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

As of June 30, 2012 and January 1, 2012, the amounts reclassified to non-controlling interest were $3,793 thousand and $3,436 thousand, respectively.

h) Employee benefits - short-term accumulating compensated absences

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

At the transition to IFRSs, the Company elected to recognize all the resulting accounting difference of compensated absences in retained earnings. As of June 30, 2012 and January 1, 2012, other current liabilities were increased by $66,948 thousand and $63,967 thousand, respectively; non-controlling interests were decreased by $659 thousand and $630 thousand, respectively; cumulative translation adjustments were decreased by $63 thousand and $167 thousand, respectively. For the six months ended June 30, 2012, the adjustments of cost of sales and operating expenses were increased by $728 thousand and $2,328 thousand, respectively

i) Employee benefits - corridor approach

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

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

At the transition date, the Company performed actuarial valuation under IAS No. 19, “Employee Benefits,” and recognized the valuation difference directly to retained earnings under the requirement of IFRS 1, “First-time Adoption of International Financial Reporting Standards.” As of June 30, 2012 and January 1, 2012, accrued pension cost was adjusted for an increase of $258,576 thousand and $262,332 thousand, respectively; non-controlling interest was adjusted for an increase of $231 thousand on both dates. Pension cost for the six months ended June 30, 2012 was also adjusted for a decrease in cost of sales of $2,066 thousand and a decrease in operating expenses of $1,690 thousand, respectively.

52 -
j) Treasury stock transactions

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

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

As of June 30, 2012 and January 1, 2012, the book value of treasury stock was increased by $16,696 thousand on both dates.

d. The Company’s assessment is based on the 2010 version of IFRSs translated by ARDF and the Guidelines Governing the Preparation of Financial Reports by Securities Issuers issued by the FSC on December 22, 2011. However, the assessment result may be impacted as the FSC may issue new rules governing the adoption of IFRSs, and as other laws and regulations may be amended to comply with the adoption of IFRSs. Actual results may differ from these assessments.

28. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved by the Board of Directors on August 22, 2012.

53 -

TABLE 1

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

MARKETABLE SECURITIES HELD JUNE 30, 2012

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

Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		June 30, 2012	June 30, 2012	June 30, 2012	Note
				Shares/Units (In Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
MXIC	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 MXIC serves as member of its board of directors None None None MXIC 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 - noncurrent 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 6,065,343 105,981 145,850 5,850,000	$ 246,157 1,574,805 29,737 73,282 113,874 19,720 357,013 192,985 117,566 679,057 58,500 - - 39,556	100.00 100.00 100.00 100.00 72.54 79.70 92.69 88.15 70.88 7.49 3.06 0.32 0.30 15.00	$ 246,112 1,574,805 64,937 73,282 113,874 19,720 357,013 192,985 117,553 679,057 108,042 358 - 33,142	Note 1 Note 1 Notes 1 and 3 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 2 Note 4 Note 4 Note 4 Note 4

(Continued)

54 -

Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		June 30, 2012	June 30, 2012	June 30, 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 Indirect subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary MXIC 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 5,500,000	US$ 10,261,332 US$ 2,561,917 US$ 471,141 US$ 21,616,862 US$ 1,704,675 US$ 1,455,099 US$ 1,186,176 US$ 5,834,308 US$ 1,220,000 US$ 10,402,356 $ 7,598 1,235 8,277 19,220 10,924 8,277 35,200 - 6,686	100.00 100.00 100.00 100.00 100.00 0.18 3.34 2.72 2.52 100.00 4.84 4.99 4.99 4.99 4.99 4.99 0.11 10.99 100.00	US$ 22,686,294 US$ 2,561,917 US$ 471,141 US$ 21,617,062 US$ 1,704,675 US$ 1,455,099 US$ 1,186,176 US$ 5,834,308 US$ 1,801,343 US$ 10,402,354 $ 7,598 1,235 8,276 19,220 10,924 8,276 35,200 14,573 6,686	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)

55 -

Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		June 30, 2012	June 30, 2012	June 30, 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 - 2,720,000 12,905,100 - 1,950,000 11,700,000 - 300,000 2,262,000 -	US$ 141,009 US$ 122,869 $ 9,512 US$ 304,724 US$ 297,396 $ 4,368 US$ 129,420 US$ 120,829 $ 604 US$ 10,312 US$ 668	100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	US$ 141,009 US$ 122,865 $ 9,512 US$ 304,724 US$ 297,396 $ 4,368 US$ 129,522 US$ 120,829 $ 604 US$ 10,312 US$ 668	Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1

(Continued)

56 -

(Concluded)

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

Note 2: The market value was based on the closing price as of June 30, 2012.

Note 3: The book value excluded $35,200 thousand, held by a subsidiary.

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

57 -

TABLE 2

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL SIX MONTHS ENDED JUNE 30, 2012

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

Company Name	Related Party	Nature of Relationship	Transaction	Transaction	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
MXIC Macronix (Hong Kong) Co., Ltd. Macronix America Inc.	MegaChips Corporation Macronix (Hong Kong) Co., Ltd. Macronix America Inc. MXIC MXIC	Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors Indirect subsidiary Subsidiary Indirect subsidiary Subsidiary	Sales Sales Sales Purchase Purchase	$ 2,829,587 1,077,005 294,350 US$ 36,327,122 US$ 9,923,018	26% 10% 3% 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 25 Note 25 No material difference No material difference	Note 20 Note 25 Note 25 No material difference No material difference	$ 667,909 294,739 79,442 US$ 1,163 US$ 1,654,559	17% 7% 2% 100% 100%	- - - - -

58 -

TABLE 3

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL JUNE 30, 2012

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

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Doubtful Accounts
					Amounts	Action Taken
MXIC	Macronix (Hong Kong) Co., Ltd. MegaChips Corporation	Indirect subsidiary Its subsidiary, Shun Ying Investment, is represented in MXIC’s board of directors	$ 294,739 667,909	7.14 times 6.49 times	$ - -	- -	US$ 9,864 thousand JPY 1,575,129 thousand	$ - -

59 -

TABLE 4

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE SIX MONTHS ENDED JUNE 30, 2012

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

Investor Company	Investee Company	Location	Main Businesses and Products	Original Inves	tment Amount	Balan	ce as of June 30	, 2012	Net Income (Loss) of the Investee	Investment Income (Loss) Recognized	Note
				June 30, 2012	December 31, 2011	Shares (In Thousands)	Percentage of Ownership	Carrying Amount
MXIC 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 25,452 172,644 US$ 2,900,000 US$ 2,550,000 $ 85,221 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 5,500,000 29,982,500 - 2,720,000 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	$ 246,157 1,574,805 29,737 73,282 113,874 19,720 357,013 192,985 117,566 US$ 10,261,332 US$ 2,561,917 US$ 471,141 US$ 21,616,862 US$ 1,704,675 US$ 10,402,356 $ 7,598 1,235 8,277 19,220 10,924 8,277 6,686 US$ 141,009 US$ 122,869 $ 9,512 US$ 304,724 US$ 297,396 $ 4,368 US$ 129,420 US$ 120,829 $ 604 US$ 10,312	$ 4,256 (18,714 ) (2,917 ) (17,335 ) (73,254 ) (39,622 ) (120,359 ) (57,350 ) (60,040 ) US$ (121,361 ) US$ 104,645 US$ 20,692 US$ (797,771 ) US$ 90,662 US$ 155,007 $ (73,254 ) (39,622 ) (60,040 ) (120,359 ) (57,350 ) (60,040 ) (19,950 ) US$ (85,243 ) US$ (72,353 ) $ (8,691 ) US$ 6,028 US$ 6,054 $ (4,262 ) US$ (93,792 ) US$ (93,733 ) $ (4,412 ) US$ (149,173 )	$ 4,300 (18,714 ) (2,917 ) (17,335 ) (53,139 ) (31,579 ) (111,561 ) (50,457 ) (42,543 ) Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note
										(	Continued)

60 -

Investor Company	Investee Company	Location	Main Businesses and Products	Original Inves	tment Amount	Balan	ce as of June 30	, 2012	Net Income (Loss) of the Investee	Investment Income (Loss) Recognized	Note
				June 30, 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$ 668	US$ (149,088 )	Note

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

(Concluded)

61 -

TABLE 5

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARY

INFORMATION ON INVESTMENT IN CHINA SIX MONTHS ENDED JUNE 30, 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)	Investme	nt Flows	Accumulated Outflow of Investment from Taiwan as of June 30, 2012 (Note 3)	Percentage of Ownership (Note 7)	Investment Income (Loss) (Notes 4 and 8)	Carrying Amount as of June 30, 2012 (Notes 3 and 7)	Accumulated Inward Remittance of Earnings as of June 30, 2012
						Outflow (Note 3)	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 $ 302,328 RMB 17,698,920 $ 83,613 RMB 11,634,750 $ 54,965 RMB 4,653,449 $ 21,984 RMB 1,900,000 $ 8,976	(Note 1) (Note 2) (Note 2) (Note 2) (Note 2)	US$ 9,000,000 $ 268,920 US$ 2,550,000 $ 76,194 US$ 1,650,000 $ 49,302 US$ 500,000 $ 14,940 US$ 280,300 $ 8,375	US$ - US$ - US$ - US$ 200,00 $ 5,976 US$ -	US$ - US$ - US$ - US$ - US$ -	US$ 9,000,000 $ 268,920 US$ 2,550,000 $ 76,194 US$ 1,650,000 $ 49,302 US$ 700,000 $ 20,916 US$ 280,300 $ 8,375	100.00% 97.68% 80.86% 77.38% 93.14%	US$ 155,007 $ 4,581 US$ (70,676) $ (2,089) US$ 4,896 $ 145 US$ (72,531) $ (2,144) US$ (138,941) $ (4,107)	US$ 10,402,356 $ 310,822 US$ 120,018 $ 3,586 US$ 240,474 $ 7,185 US$ 93,497 $ 2,794 US$ 622 $ 19	US$ - US$ - US$ - US$ - US$ -

Accumulated Investment in June 30, 2012	China as of	Investment Amount Authorized by the Investment Commission, MOEA		Upper Limit on Invest		ment
US$ 14,980,300 $ 447,611 (Note 3)		US$ 17,530,300 $ 523,805 (Note 3)		$ 22,968,359

(Continued)

62 -

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

Note 2: The Company invested in a 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 June 30, 2012.

Note 4: The foreign currency amount is converted into New Taiwan dollars based on the average exchange rate of the six months ended June 30, 2012.

Note 5: The prescribed investment gain and long-term investment balance were recognized based on the financial statements audited by the parent company’s CPA for the same period.

Note 6: The prescribed investment loss and long-term investment balance were recognized based on the financial statements audited by an international CPA firm which cooperates with Taiwan’s CPA firms for the same period.

Note 7: The percentage of ownership is based on the total holding percentage owned by MXIC and its subsidiaries.

Note 8: The percentage of ownership is based on the total weighted-average percentage owned by MXIC and its subsidiaries.

(Concluded)

63 -

AI assistant

Macronix — Interim / Quarterly Report 2012

52013_rns_2013-06-26_a929ae34-ad31-4eca-be21-3b473a85d805.pdf

Macronix International Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REPORT

Notice to Readers

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Par Value)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Per Share Amount)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

MACRONIX INTERNATIONAL CO., LTD. AND SUBSIDIARIES

1. GENERAL

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

Foreign Currency

Accounting Estimation

Classification of Current and Noncurrent Assets and Liabilities

Cash Equivalents

Financial Assets at Fair Value through Profit or Loss

Available-for-sale Financial Assets

Financial Assets Carried at Cost

Impairment of Accounts Receivable

Asset Impairment

Allowance for Sales Returns and Discounts

Inventories

Property, Plant and Equipment

Idle Assets

Intangible Assets

Research and Development

Pension Costs

Income Tax

Stock-based Compensation

Bonuses to Employees and Directors

Treasury Stock

Revenue Recognition

Reclassifications

3. ACCOUNTING CHANGES

Recognition and Measurement of Financial Instruments

Operating Segments

4. CASH AND CASH EQUIVALENTS

5. NOTES AND ACCOUNTS RECEIVABLE

6. INVENTORIES

7. FINANCIAL INSTRUMENTS AT FVTPL

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

9. FINANCIAL ASSETS CARRIED AT COST

10. PROPERTY, PLANT AND EQUIPMENT

13. PENSION PLANS

14. SHAREHOLDERS’ EQUITY

Capital Surplus

Retained Earnings Distribution and Dividends Policy

15. EMPLOYEE STOCK OPTION PLANS

MXIC

MoDioTek

Mxtran

Options Issued on or After January 1, 2004 and

INFOMAX

MaxRise

MPI

Options Issued on or After January 1, 2004 and

16. TREASURY STOCK

17. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSES

18. INCOME TAX

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

20. RELATED PARTY TRANSACTIONS

8) Accounts payable

21. PLEDGED ASSETS

22. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

23. DISCLOSURES FOR FINANCIAL INSTRUMENTS

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

25. ADDITIONAL DISCLOSURES

26. OPERATING SEGMENT FINANCIAL INFORMATION

a. Segment revenues and results

Macronix Interim / Quarterly Report 2012