Macronix — Interim / Quarterly Report 2012

Jun 26, 2013

Macronix International Co., Ltd.

Financial Statements for the Nine Months Ended September 30, 2012 and 2011 and Independent Accountants’ Review Report

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

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

We have reviewed the accompanying balance sheets of Macronix International Co., Ltd. (the “Company”) as of September 30, 2012 and 2011 and the related statements of income and cash flows for the nine months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our reviews.

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

As disclosed in Note 8 to the financial statements, we did not review the financial statements for the nine months ended September 30, 2012 and 2011 of the investees accounted for using equity method of accounting. The carrying values of those investments as of September 30, 2012 and 2011 amounted to NT$2,530,272 thousand and NT$3,054,380 thousand, respectively. The related investment net loss for the nine months ended September 30, 2012 and 2011 amounted to NT$472,026 thousand and NT$309,301 thousand, respectively. These amounts as well as the related financial information of the investees as disclosed in Note 26 to the financial statements were based on the investees’ unreviewed financial statements for the same periods.

• 1 -

Based on our reviews, except as discussed in the preceding paragraph that the carrying value of equity method investments, the equity in losses of equity method investees, as well as the related disclosures of the investment information were based on unreviewed financial statements of the investees, and except for the effects of such adjustment, if any, as might have been made had we applied review procedures on the financial statements of investees referred to in the preceding paragraph. We are not aware of any material modifications that should be made to the financial statements as of and for the nine months ended September 30, 2012 and 2011 referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting standards, and accounting principles generally accepted in the Republic of China.

October 23, 2012

Notice to Readers

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

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

• 2 -

MACRONIX INTERNATIONAL CO., LTD.

BALANCE SHEETS SEPTEMBER 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Par Value) (Reviewed, Not Audited)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 2 and 4) Financial assets at fair value through profit or loss - current (Notes 2, 5 and 24) Notes and accounts receivable, net (Notes 2, 3 and 6) Receivables from related parties, net (Notes 2, 3 and 21) Other receivables, net (Notes 2 and 21) Inventories (Notes 2 and 7) Deferred income tax assets - current (Notes 2 and 19) Other current assets Total current assets LONG-TERM INVESTMENTS (Notes 2, 8, 9, 10 and 24) Investments accounted for using equity method Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Total long-term investments PROPERTY, PLANT AND EQUIPMENT (Notes 2, 11 and 22) Cost Land Buildings and structures Machinery equipment Research and development equipment Transportation equipment Leasehold improvements Miscellaneous equipment Less: Accumulated depreciation Construction in progress and prepayments for equipment Net property, plant and equipment INTANGIBLE ASSETS (Note 2) Software, net Deferred charges, net Net intangible assets OTHER ASSETS Deferred income tax assets - noncurrent (Notes 2 and 19) Restricted assets - noncurrent (Note 22) Other assets Total other assets TOTAL		2012		2011 Amount % LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES $ 15,396,679 23 Short-term bank loans (Note 12) Notes and accounts payable - - Payables to related parties (Note 21) 2,763,510 4 Income tax payable (Notes 2 and 19) 1,692,778 3 Accrued expenses 208,417 - Accrued bonuses to employees, directors and supervisors (Notes 2 6,130,777 9 and 15) 270,011 - Payables for equipment 486,592 1 Current portion of long-term bank loans (Notes 13, 22 and 24) Other current liabilities 26,948,764 40 Total current liabilities 3,054,380 5 LONG-TERM LIABILITIES 619,190 1 Long-term bank loans, net of current portion (Notes 13, 22 and 24) 117,556 - Long-term notes payable 3,791,126 6 Total long-term liabilities OTHER LIABILITIES Accrued pension cost (Notes 2 and 14) 598,076 1 Others 21,154,198 32 67,890,179 101 Total other liabilities 1,836,115 3 26,677 - Total liabilities 2,419 - 963,435 1 SHAREHOLDERS' EQUITY (Notes 2, 15, 16, 17 and 24) 92,471,099 138 Capital stock, NT$10 par value 70,176,446 105 Authorized - 6,550,000 thousand shares 13,202,370 20 Issued - 3,521,369 thousand shares in 2012 and 3,382,456 thousand shares in 2011 35,497,023 53 Capital surplus Treasury stock transactions Donation 59,186 - Long-term investments 5,112 - Employee stock options Retained earnings 64,298 - Legal capital reserve Unappropriated earnings (accumulated deficit) Other adjustments 420,061 1 Unrealized gains on financial instruments 89,950 - Cumulative translation adjustments 30,652 - Treasury stock (at cost) - 3,899 thousand shares in 2012 and 3,757 thousand shares in 2011 540,663 1 Total shareholders' equity $ 66,841,874 100 TOTAL		2012		2011
		Amount % $ 17,779,400 27 10,728 - 2,636,439 4 1,937,044 3 182,859 - 6,970,290 11 364,385 1 479,643 1 30,360,788 47 2,530,272 4 699,662 1 98,056 - 3,327,990 5 598,076 1 21,898,070 34 77,021,136 118 5,810,607 9 29,754 - 2,419 - 1,007,725 1 106,367,787 163 76,978,668 118 1,507,448 2 30,896,567 47 293,390 - 388 - 293,778 - 132,532 - 164,177 1 31,878 - 328,587 1 $ 65,207,710 100				Amount % $ 283,031 - 1,887,528 3 247,916 - 47,079 - 2,257,075 4 - - 432,817 1 5,940,718 9 164,218 - 11,260,382 17 16,440,993 25 - - 16,440,993 25 431,476 1 130 - 431,606 1 28,132,981 43 35,213,693 54 26,502 - 37 - 4,050 - 317,329 1 2,695,275 4 (1,441,298) (2) 491,412 - (89,906) - (142,365) - 37,074,729 57 $ 65,207,710 100		Amount % $ 3,394,175 5 2,105,053 3 148,427 - 206,465 - 1,684,679 3 342,265 1 3,019,229 5 1,001,718 1 56,828 - 11,958,839 18 13,561,711 20 420 - 13,562,131 20 361,139 1 2,224 - 363,363 1 25,884,333 39 33,824,564 51 25,075 - 37 - 3,123 - 322,524 - 2,407,003 4 4,121,558 6 412,340 - (16,318) - (142,365) - 40,957,541 61 $ 66,841,874 100

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

(With Deloitte & Touche review report dated October 23, 2012)

• 3 -

MACRONIX INTERNATIONAL CO., LTD.

STATEMENTS OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) (Reviewed, Not Audited)

GROSS SALES SALES RETURNS AND ALLOWANCES NET SALES (Notes 2 and 21) COST OF SALES (Notes 2, 7, 18 and 21) GROSS PROFIT REALIZED INTERCOMPANY PROFIT (Note 2) REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 18 and 21) Sales and marketing General and administrative Research and development Total operating expenses INCOME (LOSS) FROM OPERATION NON-OPERATING INCOME AND GAINS Interest income (Note 24) Dividend income (Note 2) Gain on disposal of assets (Note 2) Valuation gain on financial assets (Notes 2 and 24) Gain on disposal of financial instruments, net (Note 2) Gains on return of bad debt accounts (Notes 2, 3 and 6) Others (Note 21) Total non-operating income and gains NON-OPERATING EXPENSES AND LOSSES Equity in losses of equity method investees, net (Notes 2 and 8) Interest expense (Notes 11 and 24) Loss on disposal of assets (Note 2)		2012 Amount % $ 18,216,070 70,565 18,145,505 100 15,965,741 88 2,179,764 12 583 - 2,180,347 12 689,686 4 1,119,927 6 3,391,244 18 5,200,857 28 (3,020,510) (16) 113,370 1 56,840 - 13,422 - 10,728 - 1,620 - - - 45,101 - 241,081 1 472,026 3 214,062 1 98,269 1		2011
				Amount % $ 19,512,574 82,657 19,429,917 100 12,482,784 64 6,947,133 36 9,325 - 6,956,458 36 614,442 3 1,124,762 6 2,861,945 15 4,601,149 24 2,355,309 12 88,177 1 85,896 1 10,224 - - - 252 - 34,271 - 46,543 - 265,363 2 309,301 2 6,016 - - - (Continued)

• 4 -

MACRONIX INTERNATIONAL CO., LTD.

STATEMENTS OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) (Reviewed, Not Audited)

Foreign exchange loss, net (Note 2) Others Total non-operating expenses and losses INCOME (LOSS) BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 2 and 19) NET INCOME (LOSS) EARNINGS (LOSS) PER SHARE (Note 20) Basic Diluted		2012 Amount % $ 55,440 - 4,561 - 844,358 5 (3,623,787) (20) 38,032 - $ (3,661,819) (20) 2012 Before Income Tax After Income Tax $ (1.03) $ (1.04) $ (1.03) $ (1.04)		2011	2011
				Amount % $ 51,946 - 2,669 - 369,932 2 2,250,740 12 314,549 2 $ 1,936,191 10 2011
		Before Income Tax $ (1.03) $ (1.03)		Before Income Tax $ 0.64 $ 0.63	After Income Tax $ 0.55 $ 0.54

Certain pro forma information (after income tax) is shown as follows, based on the assumption that the Company’s stock held by subsidiaries is treated as investment instead of treasury stock (Note 17):

NET INCOME (LOSS) EARNINGS (LOSS) PER SHARE Basic Diluted	2012 $ (3,660,392) $(1.04) $(1.04)	2011 $ 1,942,562 $0.55 $0.54

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

(With Deloitte & Touche review report dated October 23, 2012)

(Concluded)

• 5 -

MACRONIX INTERNATIONAL CO., LTD.

STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation Amortization Provision (reversal of allowance) for doubtful accounts Equity in losses of equity method investees, net Gain on disposal of financial instruments, net Loss (gain) on disposal of assets, net Realized intercompany profit Deferred income tax 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 Long-term accounts receivable 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 operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets Acquisitions of investments accounted for using equity method 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 in other assets Net cash used in investing activities	2012 $ (3,661,819) 5,711,319 85,887 49,533 472,026 (229) 84,847 (583) 47,158 (10,728) (225,420) (596,800) (70,901) (571,501) (72,586) (59,699) (248,965) 101,058 (288,056) 184,389 (530,775) 98,491 71,325 567,971 (150,000) 150,229 - 19,500 (2,291,975) 17,079 (308,590) - 6,880 (2,556,877)	2011 $ 1,936,191 3,758,422 44,933 (34,271) 309,301 (252) (10,224) (9,325) 84,496 - (668,164) (672,482) 119,860 (2,308,831) (58,291) - 234,657 (9,299) (446,120) (188,084) (806,951) (21,362) (3,364) 1,250,840 (250,000) 250,252 (113,892) 42,000 (12,250,257) 20,925 (20,179) (87,243) 3,730 (12,404,664) (Continued)

• 6 -

MACRONIX INTERNATIONAL CO., LTD.

STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

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 Cash dividends Net cash provided by financing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid (excluding capitalized interest) Income tax paid NON-CASH 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 (increase) in payables to contractors and equipment suppliers Cash paid	2012 $ (1,517,457) 4,960,000 (184,621) (1,562) 73,751 (1,288,408) 2,041,703 52,797 17,726,603 $ 17,779,400 $ 190,318 $ 278,930 $ 25 $ 5,940,718 $ 1,855,019 436,956 $ 2,291,975	2011 $ 588,095 12,350,000 (2,194,140) 229 188,156 (5,735,394) 5,196,946 (5,956,878) 21,353,557 $ 15,396,679 $ 5,012 $ 664,259 $ 4,608 $ 1,001,718 $ 13,299,696 (1,049,439) $ 12,250,257

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche review report dated October 23, 2012)

(Concluded)

• 7 -

MACRONIX INTERNATIONAL CO., LTD.

NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise) (Reviewed, Not Audited)

1. GENERAL

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

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

As of September 30, 2012 and 2011, the Company had 4,879 and 4,743 employees, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

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

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

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

Foreign Currency

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

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

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

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

• 8 -

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

Accounting Estimation

Under above guidelines, law and principles, certain estimates and assumptions have been used for the allowance for doubtful accounts, allowance for sales returns and discounts, allowance for loss on inventories, depreciation of property, plant and equipment, amortization 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 equivalent, sold or consumed within one year from the balance sheet date. All other assets such as property, plant and equipment and intangible assets are classified as noncurrent. Current liabilities are obligations incurred and expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.

Cash Equivalents

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

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.

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.

• 9 -

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 the impairment of receivables originated by the Company should be covered by SFAS No. 34. Accounts receivable are assessed for impairment at the end of each reporting period and considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the accounts receivable, the estimated future cash flows of the asset have been affected. Objective evidence of impairment could include:

• Significant financial difficulty of the debtor;

• Accounts receivable becoming overdue; or

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

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

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

Asset Impairment

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

• 10 -

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

Allowance for Sales Returns 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.

Investments Accounted for Using Equity Method

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

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

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

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

Property, Plant and Equipment

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

• 11 -

Depreciation is calculated using the straight-line method over service lives which are initially estimated as follows: buildings and structures, 5 to 21 years; machinery equipment, 5 to 6 years; research and development equipment, 5 to 6 years; transportation equipment, 4 to 6 years; leasehold improvements, 6 years; miscellaneous equipment, 2 to 6 years. Property, plant and equipment still in use beyond their original estimated useful lives are further depreciated over their newly estimated useful lives.

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

Intangible Assets

Intangible assets consist of software and technology license fees, which are amortized using the straight-line method over 3 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.

Income Tax

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

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

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

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

Stock-based Compensation

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

• 12 -

Bonuses to Employees, Directors and Supervisors

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

Treasury Stock

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

Revenue Recognition

Revenue from sales of goods is recognized when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods, primarily upon shipment, because the earnings process has been completed and the economic benefits associated with the transaction have been realized or are realizable. The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

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

Royalties are recognized when:

• a. It is probable that the economic benefits of a transaction will flow to the Company; and b. The revenue can be measured reliably.

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

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

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

• b. The contract is noncancellable;

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

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

3. ACCOUNTING CHANGES

Recognition and Measurement of Financial Instruments

On January 1, 2011, the Company prospectively adopted the newly revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” The main revisions include (1) finance lease receivables are now covered by SFAS No. 34; (2) the scope of the applicability of SFAS No. 34 to insurance contracts is amended; (3) loans and receivables originated by the Company are now covered by SFAS No. 34; (4) additional guidelines on impairment testing of financial assets carried at amortized cost when the debtor has financial difficulties and the terms of obligations have been modified; and (5) accounting treatment by a debtor for modifications in the terms of obligations. The adoption resulted in an increase of $34,271 thousand in net income and of $0.01 in basic EPS after income tax for the period ended September 30, 2011.

• 13 -

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.

4. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Petty cash Checking and savings accounts Time deposits Cash equivalents - repurchase agreements collateralized by bonds		September 30
		2012 $ 85 1,029,287 16,700,000 50,028 $ 17,779,400	2011 $ 214 2,712,141 12,584,280 100,044 $ 15,396,679

5. FINANCIAL INSTRUMENTS AT FVTPL

FINANCIAL INSTRUMENTS AT FVTPL
	September 30,
	2012
Financial assets held for trading
Forward exchange contracts	$ 10,728

The Company did not enter into any forward exchange contracts during the nine months ended September 30, 2011. The Company entered into forward exchange contracts during the nine months ended September 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 September 30, 2012 were as follows:

					Contract Amount
			Currency	Maturity Date	(In Thousands)
September	30,	2012
Sell			JPY/NT$	2012.10	JPY2,000,000/NT$756,700
Sell			US$/NT$	2012.10	US$16,000/NT$479,724

Net gain on financial assets held for trading for the nine months ended September 30, 2012 was $12,119 thousand.

• 14 -

6. NOTES AND ACCOUNTS RECEIVABLE

NOTES AND ACCOUNTS RECEIVABLE
Notes receivable Accounts receivable Less: Allowance for doubtful accounts Allowance for sales returns and discounts Movements of the allowance for doubtful accounts were as follows: Balance, beginning of period Reversal of provision for doubtful accounts Balance, end of period		September 30
		2012 2011 $ 51 $ 6,517 2,648,717 2,769,137 - 296 12,329 11,848 2,636,388 2,756,993 $ 2,636,439 $ 2,763,510 Nine Months Ended September 30, 2011 $ 31,330 (31,034) $ 296

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

Balance, beginning of period Provision (reversal of provision) for sales returns and discounts Balance, end of period	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012 $ 10,473 1,856 $ 12,329	2011 $ 12,980 (1,132) $ 11,848

7. INVENTORIES

INVENTORIES
Finished goods and merchandise Work in process Raw materials Supplies and spare parts		September 30
		2012 $ 959,927 5,525,065 354,595 130,703 $ 6,970,290	2011 $ 768,550 4,787,097 411,604 163,526 $ 6,130,777

The allowance for inventory losses as of September 30, 2012 and 2011 were $1,492,100 thousand and $544,323 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the nine months ended September 30, 2012 and 2011 were $15,965,741 thousand and $12,482,784 thousand, respectively. The cost of goods sold for the nine months ended September 30, 2012 and 2011 included $964,627 thousand and $263,871 thousand write-downs of inventories, respectively.

• 15 -

8. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd. Magic Pixel Inc. MaxRise Inc. Infomax Communication Co., Ltd. Mxtran Inc. MoDioTek Co., Ltd. MXB Inc.		September 30	September 30	September 30
		2012 % of Carrying Owner- Amount ship $ 246,769 100.00 1,536,571 100.00 31,852 100.00 64,380 100.00 85,538 72.54 18,172 87.91 287,067 92.69 164,481 88.15 95,442 70.88 - - $ 2,530,272		2011
				% of Carrying Owner- Amount ship $ 250,764 100.00 1,579,817 100.00 33,887 100.00 100,511 100.00 18,476 30.81 71,214 79.70 548,731 92.69 272,718 88.15 178,091 70.88 171 50.00 $ 3,054,380

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

Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd. Magic Pixel Inc. MaxRise Inc. Infomax Communication Co., Ltd. Mxtran Inc. MoDioTek Co., Ltd. MXB Inc.	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012 $ 9,801 (14,147) (2,224) (26,207) (81,432) (33,128) (181,364) (78,739) (64,586) - $ (472,026)	2011 $ 25,028 135,139 (601) (28,846) (33,500) (54,033) (219,718) (74,929) (57,816) (25) $ (309,301)

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS

AVAILABLE-FOR-SALE FINANCIAL ASSETS
Publicly traded stocks		September 30
		2012 $ 699,662	2011 $ 619,190

10. FINANCIAL ASSETS CARRIED AT COST

FINANCIAL ASSETS CARRIED AT COST
Non-publicly traded stocks		September 30
		2012 $ 98,056	2011 $ 117,556

• 16 -

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.

11. 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 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			Nine Months	Ended September 30, 2012	Ended September 30, 2012
		Balance, Beginning of Period $ 598,076 21,479,586 75,224,280 2,120,639 26,103 2,419 985,023 6,097,549 106,533,675 14,274,274 55,390,754 1,158,360 17,568 2,419 835,134 71,678,509 $ 34,855,166	Additions $ - 422,915 2,334,626 3,636,275 10,070 - 41,234 (4,590,101) $ 1,855,019 $ 908,836 4,198,011 538,979 2,611 - 62,882 $ 5,711,319 Nine Months	Disposals Reclassifi- cation $ - $ - (4,431) - (442,807) (94,643) (41,270) 94,643 (6,419) - - - (18,505) (27) - - $ (513,432) $ (27) $ (4,431) $ - (341,024) 3,423 (41,270) (3,423) (5,928) - - - (18,505) (2) $ (411,158) $ (2) Ended September 30, 2011		Balance, End of Period $ 598,076 21,898,070 77,021,136 5,810,607 29,754 2,419 1,007,725 1,507,448 107,875,235 15,178,679 59,251,164 1,652,646 14,251 2,419 879,509 76,978,668 $ 30,896,567
		Balance, Beginning of Period $ 598,076 20,445,410 60,817,179 1,635,510 26,677 2,419 923,650 8,216,363 92,665,284 13,193,185 51,579,362 1,110,882 15,198 2,419 792,375 66,693,421 $ 25,971,863	Additions $ - 735,417 7,174,474 326,167 - - 77,631 4,986,007 $ 13,299,696 $ 818,560 2,756,856 118,238 2,244 - 62,524 $ 3,758,422	Disposals $ - (26,629) (185,207) (41,829) - - (30,283) - $ (283,948) $ (26,629) (173,701) (41,828) - - (30,284) $ (272,442)	Reclassifi- cation $ - - 83,733 (83,733) - - (7,563) - $ (7,563) $ - 76,049 (76,049) - - (2,955) $ (2,955)	Balance, End of Period $ 598,076 21,154,198 67,890,179 1,836,115 26,677 2,419 963,435 13,202,370 105,673,469 13,985,116 54,238,566 1,111,243 17,442 2,419 821,660 70,176,446 $ 35,497,023

• 17 -

Information on interest capitalization is summarized as follows:

Total interests Capitalized interests Capitalization rate	Nine Months Ended September 30
	2012 2011 $ 243,454 $ 99,239 29,392 93,223 1.52% 1.44%

12. SHORT-TERM BANK LOANS

Letter of credit loan: US$3,698 thousand and JPY462,500 thousand, interest rates ranged 0.82%-1.30% in 2012; US$71,046 thousand and JPY3,091,050 thousand, interest rates ranged 0.52%-2.25% in 2011 LONG-TERM BANK LOANS Repayable semi-annually from December 2012 to December 2015, with annual floating interest which ranged 1.54%-1.57% in 2012 and 1.29%-1.53% in 2011 Repayable semi-annually from March 2013 to September 2014, with annual floating interest which ranged 1.81%-1.84% in 2012 and at 1.80% in 2011 Repayable according to an agreed loan payment term to maturity date, with annual floating interest which ranged 1.54%-1.57% in 2012 and 1.35%-1.52% in 2011 Repayment of principal is 10% per quarter for three quarters from December 2012 and 70% in September 2013, with annual floating interest at 1.68% in 2012 Repayable according to loan payment term to agreed maturity date, with annual floating interest at 1.83% in 2012 and 1.80% in 2011 Repayable quarterly from September 2014 to September 2015, with annual floating interest which ranged 1.88%-2.00% in 2012 and at 2.00% in 2011 Repayable quarterly from March 2013 to September 2014, with annual floating interest at 1.65% in 2012 and 2011 Repayable quarterly from June 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%-1.84% in 2012 and at 1.80% in 2011 Repayable monthly from May 2003 to April 2016, with annual floating interest at 1.84% in 2012 and ranged 1.62%-2.12% in 2011 Less: Current portion		September 30, 2012	September 30, 2012
		2012 2011 $ 283,031 $ 3,394,175 September 30
		2012 $ 15,470,000 1,600,000 1,500,000 1,000,000 800,000 600,000 500,000 400,000 266,667 245,044 22,381,711 5,940,718 $ 16,440,993	2011 $ 9,400,000 1,600,000 1,500,000 - 800,000 50,000 500,000 - 400,000 313,429 14,563,429 1,001,718 $ 13,561,711

13. LONG-TERM BANK LOANS

• 18 -

For expansion of production capability and for long-term operation needs, the Company made a Syndicated Loan of $18 billion for 5 years, with Taiwan Cooperative Commercial Bank and other 14 financial organizations in September 2010. The line of credit has been used $16.97 billion as of September 30, 2012.

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

The details of long-term loans pledged as collateral are shown in Note 22.

14. PENSION PLANS

The Company’s pension plan under the Labor Pension Act (the “LPA”) is a defined contribution plan. The rate of contribution by an employer to employees’ personal pension accounts should not be less than 6% of each employee’s monthly salary or wage. Such pension costs were $139,739 thousand and $130,201 thousand for the nine months ended September 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 nine months prior to retirement. The Company’s monthly contribution to the pension fund (the Fund) is at 2% of employee salaries. The Fund is deposited in the Bank of Taiwan, a government-designated custodian of pension funds, in the name of Company’s Pension Fund Administration Committee. The pension fund balances in BT as of nine months ended September 30, 2012 and 2011 were $761,269 thousand and $757,495 thousand, respectively. The net periodic pension cost based on a defined benefit pension plan for the nine months ended September 30, 2012 and 2011 were $16,351 thousand and $14,882 thousand, respectively.

The net periodic pension costs based on executive pension plan for the nine months ended September 30, 2012 and 2011 were $76,838 thousand and $3,208 thousand, respectively.

15. 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

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

• 19 -

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

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

Due to the net loss for the nine months ended September 30, 2012, there was no accrual for bonus to employees and remuneration to directors and supervisors. For the nine months ended September 30, 2011, the accrued bonus to employees was $307,424 thousand, and the accrued remuneration to directors and supervisors was $34,841 thousand. The bonus to employees represented 16% of net income. The remuneration to directors and supervisors was 1.8% of net income. Material differences between such estimated amounts and the amounts proposed by the board of directors in the following year are adjusted for in the current year. If the actual amounts subsequently resolved by the shareholders differ from the proposed amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If a share bonus is resolved to be distributed to employees, the number of shares is determined by dividing the amount of the share bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day immediately preceding the shareholders’ meeting.

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

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

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

The appropriations of earnings for 2011 and 2010 had been approved in the shareholders’ meetings 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 -

• 20 -

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 Company’s employees. The shareholders had authorized the chairman to adjust the cash and stock dividend per share when the outstanding shares at the ex-dividend date are increased. The above appropriation 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’ meeting 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 nine months ended September 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.

16. EMPLOYEE STOCK OPTION PLANS

The Company has three employee stock option plans (“2004 Plan”, “2005 Plan”, and “2007 Plan”) approved by the Securities and Futures Bureau (SFB) to grant options up to 200,000 thousand units, 200,000 thousand units and 120,000 thousand units, respectively. Each stock option may subscribe for one new share of common stock of the Company. The options are valid for six years subsequent to the grant dates and vested at certain percentages subsequent to the second anniversary of the grant date. The options were granted at the exercise price equal to the higher of closing price of the Company’s common shares listed on the TSE or the Company’s net asset value per common share on the grant date. As stipulated in the plans, the exercise price and quantity are subject to adjustments for any changes in capital structure or cash dividends.

As of September 30, 2012, there were 227 thousand employee stock options exercised for which 227 thousand common shares were issued but not yet officially registered with the Ministry of Economic Affairs, ROC.

• 21 -

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

Unit: Option Numbers in Thousand and NTD Per Share

Nine months ended September 30, 2012 Balance, beginning of period Options granted Options exercised Options cancelled Balance, end of period Nine months ended September 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 (15,154) 10.47 (813) 9.90 52,367 9.50	2007 Plan Number of Outstanding Weighted- Stock average Option Exercise Rights Price 49,794 $9.50 1,556 8.80 (7,780) 9.48 (1,281) 8.84 42,289 8.80 2005 Plan Number of Outstanding Weighted- Stock average Option Exercise Rights Price 19,521 $5.90 (8,553) 5.90 (10,931) 4.20 37 4.00	**2005 Plan **
			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 September 30, 2012, information about the Company’s outstanding and exercisable option was as follows:

Exercise Price (NT$/Per Share) $8.80	Options Issued on or After January 1, 2004 and Outstanding Remaining Number Contractual Exercise Price Outstanding Life (In (NT$/Per (Thousand) Years) Share) 42,289 1.24 $ 8.80	Options Exercisable
		Number Exercise Price Exercisable (NT$/Per (Thousand) Share) 42,289 $ 8.80

• 22 -

No compensation cost was recognized under the intrinsic value method for the nine months ended September 30, 2012 and 2011. Had the Company used the fair value based method to evaluate the options, using the Black-Scholes model, the assumptions and pro forma results of the Company for the nine months ended September 30, 2012 and 2011 would have been as follows:

Assumptions: Risk-free interest rate Expected life (in years) Expected volatility Expected dividend yield Net income (loss): Net income (loss) as reported Pro forma net income (loss) Earnings (Loss) per share (EPS (LPS), NT$): Basic EPS (LPS) as reported Pro forma basic EPS (LPS) Diluted EPS (LPS) as reported Pro forma diluted EPS (LPS)	Nine Months Ended September 30
	2012 2011 1.55%-2.54% 1.55%-2.54% 4.38 4.38 51.16%-57.50% 51.16%-57.50% - - $ (3,661,819) $ 1,936,191 $ (3,661,819) $ 1,921,283 $(1.04) $0.55 $(1.04) $0.55 $(1.04) $0.54 $(1.04) $0.54

17. TREASURY STOCK

Purpose of Treasury Stock Number of Shares, Beginning of Period Nine months ended September 30, 2012 Company’s shares held by its subsidiaries (Note) 3,757 Nine months ended September 30, 2011 Company’s shares held by its subsidiaries 3,757	Addition During the Period Number of Shares, End of Period 142 3,899 - 3,757

Note: The number of shares held by a subsidiary had been adjusted for the nine months ended September 30, 2012 to reflect the distribution of stock dividends.

As of September 30, 2012 and 2011, the information about the Company’s issued shares held by the subsidiary is as follows:

subsidiary is as follows:
	Shares	Original
Company	(Thousand)	Carrying Value	Market Value
September 30, 2012
Hui Ying Investment, Ltd.	3,899	$ 142,365	$	38,175
September 30, 2011
Hui Ying Investment, Ltd.	3,757	$ 142,365	$	41,136

• 23 -

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

18. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSES

Labor cost Salary Insurance Pension Others Depreciation Amortization		Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012	Total $ 3,338,375 241,354 232,928 172,398 $ 3,985,055 $ 5,711,319 $ 85,887		2011
		Classified Classified as as Cost Operating of Sales Expenses $ 1,763,619 $ 1,574,756 154,671 86,683 94,427 138,501 102,765 69,633 $ 2,115,482 $ 1,869,573 $ 4,960,160 $ 751,159 $ 41,894 $ 43,993			Classified Classified as as Cost Operating of Sales Expenses $ 1,898,528 $ 1,608,188 142,605 78,898 88,730 59,561 100,478 58,286 $ 2,230,341 $ 1,804,933 $ 3,430,848 $ 327,574 $ 8,530 $ 23,910	Total $ 3,506,716 221,503 148,291 158,764 $ 4,035,274 $ 3,758,422 $ 32,440

19. INCOME TAX

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

Income tax expense based on “income (loss) before income tax” at statutory rate Tax effect of the following: Permanent differences Temporary differences Tax-exempt income Additional tax at 10% on unappropriated earnings Investment tax credits Income tax currently payable	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012 $ (616,044) 72,348 109,785 - 5,191 (5,191) $ (433,911)	2011 $ 382,626 70,247 37,412 (189,006) 127,131 (251,362) $ 177,048

• b. Income tax expense consisted of the following:

Income tax currently payable Adjustments for prior year’s tax Net changes in deferred income tax assets: Loss carryforward Investment tax credits Temporary differences Other adjustment in valuation allowance Income tax expense	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012 $ - (9,124) (433,911) 165,178 (110,029) 425,918 $ 38,032	2011 $ 177,048 53,005 - 342,400 (38,535) (219,369) $ 314,549

• 24 -

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

Current deferred income tax assets Loss carryforward Investment tax credits Temporary differences Valuation allowance Non-current deferred income tax assets Loss carryforward Investment tax credits Temporary differences Valuation allowance		September 30
		2012 2011 $ 325,433 $ - 1,006,831 1,005,485 592,551 293,037 1,924,815 1,298,522 (1,560,430) (1,028,511) $ 364,385 $ 270,011 $ 108,478 $ - 155,689 774,081 1,512,290 1,695,252 1,776,457 2,469,333 (1,643,925) (2,049,272) $ 132,532 $ 420,061

As of September 30, 2012, the Company’s tax credits were as follows:

Regulatory Basis of Tax Credits Items Income Tax Law Loss carryforward Statute for Upgrading Purchase of machinery and Industries equipment Research and development expenditures Investment in important technology-based enterprises	Total Creditable Amounts $ 433,911 $ 74,397 30,295 7,349 $ 112,041 $ 503,772 544,176 $ 1,047,948 $ 4,000 3,722 $ 7,722	Remaining Creditable Expiry Amounts Year $ 433,911 2023 $ 69,206 2012 30,295 2013 7,349 2014 $ 106,850 $ 503,772 2012 544,176 2013 $ 1,047,948 $ 4,000 2013 3,722 2014 $ 7,722

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

Tax-exemption Period

Expansion of Construction Project in 2004

January 1, 2011 to January 31, 2014

• 25 -

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

d. The integrated income tax information

The balance of imputation tax credits account Unappropriated earnings generated before January 1, 1998		September 30	September 30
		2012 $ 208,074 $ -	2011 $ 184,671 $ -

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

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

Nine months ended September 30, 2012 Basic and diluted LPS Loss for the period attributable to common shareholders Nine months ended September 30, 2011 Basic EPS Income for the period attributable to common shareholders Effect of dilutive potential common stock Employee stock option Bonus to employees Diluted EPS Income for the period attributable to common shareholders plus effect of potential dilutive common stock		Number of Amounts (Numerator) Shares Before After (Denominator) Income Tax Income Tax (In Thousands) $ (3,623,787) $ (3,661,819) 3,516,121 $ 2,250,740 $ 1,936,191 3,502,197 - - 32,494 - - 29,521 $ 2,250,740 $ 1,936,191 3,564,212		EPS (NT$)	EPS (NT$)
				Before Income Tax $ (1.03) $ 0.64 $ 0.63	After Income Tax $ (1.04) $ 0.55 $ 0.54
		Before Income Tax $ (3,623,787) $ 2,250,740 - - $ 2,250,740

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 nine months ended September 30, 2012.

As disclosed in Note 16 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 nine months ended September 30, 2012.

• 26 -

The weighted-average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends (see Note 15). The adjustment caused the basic EPS and diluted after income tax EPS for the nine months ended September 30, 2011 to decrease from NT$0.57 to NT$0.55 and from NT$0.56 to NT$0.54, respectively.

21. RELATED-PARTY TRANSACTIONS

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

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

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

Relationship

Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary Indirect subsidiary The Company serves as member of its board of directors Same chairman with the Company Its subsidiary, Shun Ying Investment, is represented in the Company’s board of directors Related parties over which the Company has control or exercises significant influence but with which the Company had no material transactions. Please see Note 26.

• b. Significant transactions with related parties:

• 1) Sales to related parties were as follows:

Related Parties MegaChips MXHK MXA Mxtran MoDioTek Others		Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012 Amount % of Net Sales $ 5,554,643 31 1,870,512 10 486,849 3 634 - 123 - 1,565 - $ 7,914,326 44		2011
				Amount % of Net Sales $ 5,411,333 28 2,467,871 13 453,059 2 434 - 397 - 1,395 - $ 8,334,489 43

• 27 -

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

• 2) Purchases from related parties were as follows:

Purchases from related parties were as follows:
Related Parties MegaChips	Nine Months Ended September 30, 2012
		Amount % $ 137,057 3

Materials purchased from MegaChips are for manufacturing process. The payment term was 30 days after monthly closing, similar to those with external customers.

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

Related Parties Ardentec		Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012	% 2		2011
		Amount $ 296,638			Amount $ 269,268	% 2

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

4) Operating expense

Related Parties MXA MX Asia MXE MPL MXIC Education MXHK Others		Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012	% 3 2 1 - - - - 6		2011
		Amount $ 128,223 104,505 51,260 18,946 18,750 - 682 $ 322,366			Amount $ 122,153 94,475 31,781 17,032 19,500 22,793 7,312 $ 315,046	% 3 2 1 - - 1 - 7

The above operating expenses paid to MXA, MXHK, MX Asia, MXE and MPL were mainly for commission and marketing expenses.

• 28 -

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

Related Parties INFOMAX Mxtran MoDioTek MPI MaxRise Others		Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012	% 11 9 9 7 4 - 40		2011
		Amount $ 4,511 4,209 4,194 3,275 1,754 - $ 17,943			Amount $ 3,737 2,668 4,258 3,278 1,956 12 $ 15,909	% 8 6 9 7 4 - 34

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

• 6) Software, pattern and other revenue:

Related Parties Mxtran Ardentec MoDioTek INFOMAX MPI Others		Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30	Nine Months Ended September 30
		2012	% 3 3 1 - - - 7		2011
		Amount $ 1,008 974 676 224 181 2 $ 3,065			Amount $ 1,174 1,521 1,052 280 237 7 $ 4,271	% 3 3 2 1 - - 9

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

7) Accounts receivable

Related Parties MegaChips MXHK MXA INFOMAX Mxtran MoDioTek Others Less: Allowance for doubtful accounts			September 30	September 30	September 30
		2012	% 71 25 4 - - - - 100 - 100		2011
		Amount $ 1,378,385 475,267 81,917 725 566 - 184 1,937,044 - $ 1,937,044			Amount $ 1,028,206 610,040 52,501 581 721 389 340 1,692,778 - $ 1,692,778	% 61 36 3 - - - - 100 - 100

• 29 -

8) Other receivables

Related Parties Mxtran MoDioTek MPI INFOMAX			September 30	September 30	September 30
		2012	% - - - - -		2011
		Amount $ 308 238 61 27 $ 634			Amount $ 597 127 61 - $ 785	% - - - - -

Under a certain rule, if the collection period for accounts receivables from related parties exceeded the average credit period for external customers, accounts receivable should be reclassified into other receivables. As of September 30, 2012, no reclassification was made because the collection period did not exceed the average credit period for external customers.

• 9) Accounts payable

Related Parties Ardentec MegaChips MXA MX Asia MXE MPL			September 30	September 30	September 30
		2012	% 43 27 18 6 5 1 100		2011
		Amount $ 106,358 66,259 45,714 14,278 11,206 4,101 $ 247,916			Amount $ 88,855 - 33,578 14,110 7,831 4,053 $ 148,427	% 60 - 23 10 5 2 100

22. PLEDGED ASSETS

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

Property, plant and equipment, net Pledged time deposits - noncurrent (Restricted assets - noncurrent)		September 30	September 30
		2012 $ 18,662,169 164,177 $ 18,826,346	2011 $ 9,093,308 89,950 $ 9,183,258

23. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

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

• a. The Company had significant equipment contracts totaling approximately $1,567,860 thousand. As of September 30, 2012, the Company has paid $588,762 thousand of this amount pursuant to these

• 30 -

contracts. Future irrevocable payment in total is $979,098 thousand. Unused letters of credit amounted to $20,808 thousand.

• b. The land on which the Company is located is being leased from the Hsinchu Science Park Administration under renewable operating lease agreements. The lease term is from 1994 to 2031.

Future minimum annual rentals under the leases are as follows:

Year 4thquarter, 2012 2013 2014 2015 2016 2017 and after	Amount $ 18,920 75,677 70,956 46,423 17,481 206,804 $ 436,261

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

• d. The Company entered into the Phase-Change Memory technology agreement with IBM Company in January 2010, and the term of the agreement is from January 2010 to January 2013. Under the agreement, both parties have to share in the related expenditures of the technology development. As of September 30, 2012, the Company had paid US$8,976 thousand.

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

24. DISCLOSURES FOR FINANCIAL INSTRUMENTS

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

Non-derivative financial instruments Assets Available-for-sale financial assets - noncurrent Financial assets carried at cost - noncurrent Liabilities Long-term bank loans (including current portion)	September 30	September 30
	2012 Carrying Amount Fair Value $ 699,662 $ 699,662 98,056 22,381,711 22,381,711	2011
		Carrying Amount Fair Value $ 619,190 $ 619,190 117,556 14,563,429 14,563,429 (Continued)

• 31 -

Derivative financial instruments Assets Financial assets held for trading - current	September 30	September 30
	2012 Carrying Amount Fair Value $ 10,728 $ 10,728	2011
		Carrying Amount Fair Value $ - $ - (Concluded)

• 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 viewed 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.

• c. As of September 30, 2012 and 2011, financial assets (liabilities) exposed to fair value interest rate risk and cash flow interest rate risk were as follows:

and cash flow interest rate risk were as follows:
Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	September 30
	2012 2011 $ 16,914,282 $ 12,774,343 (283,031) (3,394,175) 1,029,210 2,712,072 (22,381,711) (14,563,429)

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

Total interest income Total interest expenses (including capitalized amount)	Nine Months Ended September 30
	2012 2011 $ 113,370 $ 88,177 243,454 99,239

• e. Valuation gain arising from change in fair value of financial instruments determined using valuation techniques was $10,728 thousand for the nine months ended September 30, 2012.

• 32 -

• 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 September 30, 2012 Balance, beginning of period $ 385,366 $ 46,729 Recorded as a separate component of shareholders’ equity 53,104 6,213 Balance, end of period $ 438,470 $ 52,942 Period ended September 30, 2011 Balance, beginning of period $ 763,403 $ 275,029 Recorded as a separate component of shareholders’ equity (405,405) (220,687) Balance, end of period $ 357,998 $ 54,342

Total $ 432,095 59,317 $ 491,412 $ 1,038,432 (626,092) $ 412,340

• 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.

• 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 incurred by the Company if the counter parties breached the contracts. The banks, which are the counter parties to the foregoing derivative financial instruments, are reputable financial institutions. Management believes its exposure related to the potential default by those counter-parties is low.

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

• 4) The cash flow risk of interest rate. As of September 30, 2012, long-term bank loans have floating interest rates, which are affected by changes in market interest rates.

• 33 -

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

As of September 30, 2012 and 2011, the information for material foreign financial assets and liabilities were as follows:

Financial assets Monetary items JPY USD EUR Investments accounted for using equity method USD Financial liabilities Monetary items JPY USD EUR SGD CHF HKD	2012 Foreign Currencies Exchange Rate $ 4,866,322 0.38 109,468 29.30 253 37.89 60,865 29.30 1,236,878 0.38 51,819 29.30 945 37.89 175 23.92 - - 22 3.78	2011
		Foreign Currencies Exchange Rate $ 4,552,262 0.40 118,852 30.48 36,586 41.23 60,064 30.48 5,826,854 0.40 107,498 30.48 35,976 41.23 176 23.51 106 33.81 9 3.91

26. 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)

• 34 -

• 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, and 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

27. OPERATING SEGMENT FINANCIAL INFORMATION

Based on the segment information reviewed periodically by the chief operating decision maker, the Company is considered to have only one operating segment, and the basis for evaluation of the operating segment is in conformity with the basis for preparing financial reports. The revenue and result of the operating segment can be found in the consolidated financial statements as of and for the nine months ended September 30, 2012 and 2011.

28. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved by the Company’s management on October 23, 2012.

• 35 -

TABLE 1

MACRONIX INTERNATIONAL CO., LTD.

MARKETABLE SECURITIES HELD SEPTEMBER 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		September 30, 2012	September 30, 2012		Note
				Shares/Units (In Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
The Company Macronix (BVI) Co., Ltd.	Stock Macronix America Inc. Macronix (BVI) Co., Ltd. Hui Ying Investment, Ltd. Run Hong Investment, Ltd. Magic Pixel Inc. 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. Stock New Trend Technology Inc. Macronix Europe NV. Macronix Pte Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary The Company serves as member of its board of directors None None None The Company serves as member of its board of directors 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 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 Investments accounted for using equity method Investments accounted for using equity method Investments accounted for using equity method	100,000 223,300,000 - - 21,153,675 29,091,973 148,296,140 51,127,000 34,021,160 34,551,224 6,065,343 105,981 145,850 5,850,000 25,850,000 999 174,000	$ 246,769 1,536,571 31,852 64,380 85,538 18,172 287,067 164,481 95,442 699,662 58,500 - - 39,556 US$ 10,260,925 US$ 2,685,586 US$ 498,371	100.00 100.00 100.00 100.00 72.54 87.91 92.69 88.15 70.88 7.49 3.06 0.32 0.30 15.00 100.00 100.00 100.00	$ 246,769 1,536,571 70,026 64,380 85,538 16,588 287,067 164,481 95,442 699,662 112,989 338 (251) 32,619 US$ 22,685,887 US$ 2,685,586 US$ 498,371	Note 1 Note 1 Notes 1 and 3 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 2 Note 1 Note 4 Note 4 Note 1 Note 1 Note 1 Note 1

(Continued)

• 36 -

Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		September 30, 2012	September 30, 2012		Note
				Shares/Units (In Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
Macronix (Hong Kong) Co., Ltd. Run Hong Investment, Ltd. Hui Ying Investment, Ltd. Infomax Communication Co., Ltd. Infomax Holding Co., Ltd. Infomax Holding Company Limited	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. Stock Infomax Holding Company Limited Stock Infomax Communication (Suzhou) Co., Ltd.	Indirect subsidiary Indirect subsidiary None None None None Indirect subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary The Company None Indirect subsidiary Indirect subsidiary Indirect subsidiary	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 Investments accounted for using equity method Investments accounted for using equity method	89,700,000 800,000 1,088,319 26,924,500 584,893 1,000,000 - 1,410,980 1,821,350 2,395,200 7,984,000 2,894,000 2,395,200 3,899,382 738,189 5,900,000 29,982,500 -	US$ 21,539,496 US$ 1,814,081 US$ 1,727,490 US$ 1,056,381 US$ 5,170,454 US$ 220,000 US$ 10,417,937 $ 5,707 1,138 6,719 15,454 9,311 6,719 38,175 - 7,272 US$ 140,669 US$ 129,522	100.00 100.00 0.18 3.34 2.71 2.52 100.00 4.84 5.50 4.99 4.99 4.99 4.99 0.11 10.86 100.00 100.00 100.00	US$ 21,539,494 US$ 1,814,081 US$ 1,727,490 US$ 1,056,381 US$ 5,170,454 US$ 796,756 US$ 10,417,937 $ 5,707 1,038 6,719 15,454 9,311 6,719 38,175 15,169 7,272 US$ 140,669 US$ 129,525	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 Note 1 Note 1

(Continued)

• 37 -

Holding Company	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		September 30, 2012	September 30, 2012		Note
				Shares/Units (In Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
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 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	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 equitymethod	2,720,000 12,905,100 - 1,950,000 11,700,000 - 300,000 2,620,000 -	$ 4,226 US$ 130,650 US$ 123,321 1,944 US$ 66,341 US$ 57,750 16,020 US$ (83,040) US$ (92,685)	100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	$ 4,226 US$ 130,650 US$ 123,321 1,944 US$ 66,341 US$ 57,750 16,020 US$ (83,040) US$ (92,687)	Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1

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

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

Note 3: The book value excluded $38,175 thousand, held by a subsidiary.

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

(Concluded)

• 38 -

TABLE 2

MACRONIX INTERNATIONAL CO., LTD.

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL NINE MONTHS ENDED SEPTEMBER 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
The Company Macronix (Hong Kong) Co., Ltd. Macronix America Inc.	MegaChips Corporation Macronix (Hong Kong) Co., Ltd. Macronix America Inc. MegaChips Corporation The Company The Company	Its subsidiary, Shun Ying Investment, is represented in the Company’s board of directors Indirect subsidiary Subsidiary Its subsidiary, Shun Ying Investment, is represented in the Company’s board of directors Indirect subsidiary Subsidiary	Sales Sales Sales Purchase Purchase Purchase	$ 5,554,643 1,870,512 486,849 137,057 US$ 62,912,273 US$ 16,360,619	31% 10% 3% 8% 100% 100%	30 days after monthly closing 45 days after monthly closing Net 60 days 30 days after monthly closing 45 days after monthly closing Net 60 days	Note 21 Note 21 Note 21 Note 21 No material difference No material difference	Note 21 Note 21 Note 21 Note 21 No material difference No material difference	$ 1,378,385 475,267 81,917 66,259 - US$ 1,560,477	30% 10% 2% 3% 100% 100%	- - - - - -

• 39 -

TABLE 3

MACRONIX INTERNATIONAL CO., LTD.

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL SEPTEMBER 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
The Company	MegaChips Corporation Macronix (Hong Kong) Co., Ltd.	Its subsidiary, Shun Ying Investment, is represented in the Company’s board of directors Indirect subsidiary	$ 1,378,385 475,267	6.45 times 5.91 times	$ - -	- -	JPY - thousand US$ 8,552 thousand	$ - -

• 40 -

TABLE 4

MACRONIX INTERNATIONAL CO., LTD.

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

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

Investor Company	Investee Company	Location	Main Businesses and Products	Original Inves	tment Amount	Balance a	s of September 30, 2012	s of September 30, 2012	Net Income (Loss) of the Investee	Investment Income (Loss) Recognized	Note
				September 30, 2012	December 31, 2011	Shares	Percentage of Ownership	Carrying Amount
The Company Macronix (BVI) Co., Ltd. Macronix (Hong Kong) Co., Ltd. Run Hong Investment, Ltd. Hui Ying Investment, Ltd. Infomax Communication Co., Ltd. Infomax Holding Co., Ltd. Infomax Holding Company Limited MoDioTek Co., Ltd. Mosatek Co., Ltd. Mosatek (H.K.) Company Limited Magic Pixel Inc. Magic Pixel Inc. Magic Pixel Holding Company Limited Mxtran Inc.	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.	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	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	$ 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 25,452 184,642 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	$ 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 25,425 153,245 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	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 5,900,000 29,982,500 - 2,720,000 12,905,100 - 1,950,000 11,700,000 - 300,000	100.00 100.00 100.00 100.00 72.54 87.91 92.69 88.15 70.88 100.00 100.00 100.00 100.00 100.00 100.00 4.84 5.50 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	$ 246,769 1,536,571 31,852 64,380 85,538 18,172 287,067 164,481 95,442 US$ 10,260,925 US$ 2,685,586 US$ 498,371 US$ 21,539,496 US$ 1,814,081 US$ 10,417,937 5,707 1,138 6,719 15,454 9,311 6,719 7,272 US$ 140,669 US$ 129,522 4,226 US$ 130,650 US$ 123,321 1,944 US$ 66,341 US$ 57,750 16,020	$ 9,801 (14,147 ) (796 ) (26,207 ) (112,259 ) (41,565 ) (195,667 ) (89,324 ) (91,120 ) US$ (121,768 ) US$ 152,767 US$ 30,235 US$ (849,040 ) US$ 153,939 US$ 196,886 (112,259 ) (41,565 ) (91,120 ) (195,667 ) (89,324 ) (91,120 ) (31,099 ) US$ (85,110 ) US$ (65,227 ) (13,862 ) US$ (167,955 ) US$ (167,929 ) (6,628 ) US$ (156,701 ) US$ (156,578 ) (7,187 )	$ 9,801 (14,147 ) (2,224 ) (26,207 ) (81,432 ) (33,128 ) (181,364 ) (78,739 ) (64,586 ) Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note

(Continued)

• 41 -

Investor Company	Investee Company	Location	Main Businesses and Products	Original Inves	tment Amount	Balance	as of September 30, 2012	as of September 30, 2012	Net Income (Loss) of the Investee	Investment Income (Loss) Recognized	Note
				September 30, 2012	December 31, 2011	Shares	Percentage of Ownership	Carrying Amount
Mxtran Holding (Samoa) Co., Ltd. Mxtran (H.K.) Holding Co., Limited	Mxtran (H.K.) Holding Co., Limited. Maxtran Technology Co., Ltd.	Hong Kong China	Investment holding company 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$ 290,000 US$ 280,300	US$ 290,000 US$ 280,300	2,262,000 -	100.00 100.00	US$ (83,040 ) US$ (92,685 )	US$ (242,534 ) US$ (242,532 )	Note Note

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

(Concluded)

• 42 -

TABLE 5

MACRONIX INTERNATIONAL CO., LTD.

INFORMATION ON INVESTMENT IN MAINLAND CHINA NINE MONTHS ENDED SEPTEMBER 30, 2012 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Investee Company	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 September 30, 2012 (Note 3)	Percentage of Ownership (Note 6)	Investment Income (Loss) (Notes 4 and 6)	Carrying Amount as of September 30, 2012 (Notes 3 and 6)	Accumulated Inward Remittance of Earnings as of September 30, 2012
					Outflow	Inflow
Macronix Microelectronics (Suzhou) Co., Ltd. Infomax Communication (Suzhou) Co., Ltd. Modiotek (Suzhou) Co., Ltd. Magic Pixel (Shen Zhen) Co., Ltd. Maxtran Technology Co., Ltd.	Design, maintenance and test of IC systems and rendering of related technical consultation and service Software system consulting service, software system design service, software integrating service Research, develop, design and sales of application software and rendering of related technical consultation and services Software for calculator. Research, develop, design (except IC design) and sales of application software and rendering of related technical consultation and services R&D on software and communication; sales of application; technical consultation; technical services; technical training; application software; counseling on business management; service of accounting and finance; hardware, software, and related products of computer; communication product; electronic product; importation/exportation for goods and technology;agent for importation/exportation	RMB 63,995,690 $ 295,656 RMB 17,698,920 $ 81,768 RMB 11,634,750 $ 53,752 RMB 4,653,449 $ 21,499 RMB 1,900,000 $ 8,778	(Note 1) (Note 2) (Note 2) (Note 2) (Note 2)	US$ 9,000,000 $ 263,655 US$ 2,550,000 $ 74,702 US$ 1,650,000 $ 48,337 US$ 500,000 $ 14,648 US$ 280,300 $ 8,211	US$ - US$ - US$ - US$ 200,000 $ 5,859 US$ -	US$ - US$ - US$ - US$ - US$ -	US$ 9,000,000 $ 263,655 US$ 2,550,000 $ 74,702 US$ 1,650,000 $ 48,337 US$ 700,000 $ 20,507 US$ 280,300 $ 8,211	100.00% 97.68% 80.86% 77.38% 93.14%	US$ 196,886 $ 5,831 (Note 5) US$ (63,715) $ (1,887) (Note 5) US$ (135,787) $ (4,022) (Note 5) US$ (121,160) $ (3,588) (Note 5) US$ (225,897) $ (6,690) (Note 5)	US$ 10,417,937 $ 305,193 (Note 5) US$ 126,517 $ 3,706 (Note 5) US$ 99,718 $ 2,921 (Note 5) US$ 44,687 $ 1,309 (Note 5) US$ (86,326) $ (2,529) (Note 5)	US$ - US$ - US$ - US$ - US$ -

Accumulated Investment in Mainland China as of September 30, 2012	Investment Amount Authorized by the Investmen Commission, MOEA	t Upper Limit on Investment
US$ 14,980,300 $ 438,848 (Note 3)	US$ 18,230,300 $ 534,057 (Note 3)	$ 22,244,838

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

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

Note 3: The foreign currency amount is converted into New Taiwan dollars based on the exchange rate at September 30, 2012.

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

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

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

• 43 -