MVI - Capital/Financing Update 2018

INFORMATION MEMORANDUM

dated June 23, 2003

Mosel Vitelic Inc.

Hsinchu, Taiwan, R.O.C.

Up to USD 120'000'000 Zero % Guaranteed Convertible Bonds due 2008/2009

swissfirst Bank AG has agreed to purchase these convertible bonds (the “Bonds”).

swissfirst Bank AG

This Information Memorandum is for the use by potential investors. It is established in compliance with Swiss legal requirements regarding disclosure as it appertains to Mosel Vitelic Inc. (the “Issuer” or “MVI”). Swiss legal requirements may not conform with the disclosure requirements of any other jurisdiction, accordingly each party interested in this issue residing outside Switzerland should consult with its financial and/or legal adviser prior to such purchase.

This Information Memorandum does not constitute an invitation to subscribe. The information and data as regards the Issuer and its subsidiaries and affiliates come directly from it and its annual Securities Report and other publications issued by or concerning the Issuer. It must be read in conjunction with the latest consolidated and non-consolidated financial statements of the Issuer which are available for inspection at the Head Office in Zurich of swissfirst Bank AG. swissfirst Bank AG has not independently verified the financial statements of the Issuer.

The Issuer has agreed to provide swissfirst Bank AG during the life of the Bonds with copies of English version or English translation of audited annual consolidated or non-consolidated financial statements and auditor's report thereon and of unaudited consolidated or non-consolidated interim financial statements (if any). Copies of such documents will be available for inspection at the Head Office in Zurich of swissfirst Bank AG.

The Bonds have not been and will not be registered under the U.S. Securities Act of 1933 (the “Securities Act”) and the Bonds are subject to U.S. tax law requirements. Subject to certain exceptions, the Bonds may not be offered, sold or delivered within the United States.

Information Memorandum

I.	Summary of the Terms and Conditions of the Issue	Summary of the Terms and Conditions of the Issue	3
II.	Taxation		5
	1.	Dividends on the Shares	5
	2.	Capital Gains	5
	3.	Subscription Rights	5
	4.	Securities Transaction Tax	6
	5.	Estate Taxation and Gift Tax	6
	6.	Tax Treaty	6
III.	Investment Considerations		7
	1.	Risks Relating to the Group’s Industry and its Business	7
	2.	Risks Relating to the Republic Of China (R.O.C.)	11
	3.	Risks Relating to the Bonds and Relevant Shares	12
	4.	Risks Related to Exchange	12
IV.	Mosel Vitelic Inc.		13
	1.	Basic Information on the Issuer	13
	2.	Information Concerning the Shares of the Issuer	16
	3.	Financial Information on the Issuer	16
	4.	Supplementary Information	18
	5.	Audited Consolidated and Financial Statements	19
V.	Terms of the Bonds		128
	1.	Amount / Form of Bond / Denomination / Custodianship / Printing and Delivery of the Bonds	130
	2.	Interest	130
	3.	Redemption and Purchase	130
	4.	Payments	131
	5.	Conversion	131
	6.	Payment of Additional Amounts / Taxation	135
	7.	Status and Negative Pledge	135
	8.	Events of Default	135
	9.	Substitution of the Issuer	136
	10.	Guarantee	137
	11.	Statute of Limitations	138
	12.	Notices	138
	13.	Currency Indemnity	138
	14.	Replacement of Bonds	138
	15.	Governing Law and Jurisdiction	139
	16.	Bondholders’ Meeting	139
	17.	Amendment to the Terms of the Bonds	141
	18.	Severability	141

Information Memorandum

I. Summary of the Terms and Conditions of the Issue

Issue Issue Size

zero % convertible bonds 2003–2008/2009 (the “Bonds”)

up to USD 120,000,000 in up to twelve tranches of USD 10,000,000 each (the “Tranches”)

Mosel Vitelic Inc. (“MVI” or “Issuer”), 19 Li Hsin Road, Science-Based Industrial Park, Hsinchu, Taiwan, Republic of China ( “R.O.C.”)

Issuer

swissfirst Bank AG, Bellariastrasse 23, 8023 Zurich, Switzerland („swissfirst“)

Guarantor swissfirst Bank AG, Bellariastrasse 23, 8023 Zurich, Switzerland („swissfirst“) Issue Price swissfirst has purchased the Bonds at the price of 100% (before commissions) Offering Price The Bonds are to be offered to investors through a bookbuilding process Interest Rate zero % p.a. Issue Date

For the first Tranche it is expected to be within three months after obtaining the approval of the Securities & Futures Commission of the Republic of China dated April 4, 2003, and if necessary, application will be made for extension (the “Issue Date”)

Pricing Date

Expected to be June 23, 2003 as regards the first Tranche

Maturity Date of each Tranche Final Redemption

5 years from the Issue Date of each Tranche (the “Maturity Date”)

Unless previously redeemed, converted or purchased and cancelled, the Bonds will be redeemed at the principal amount at Maturity Date

Early Redemption at the Option of the Bondholders

Unless previously redeemed, converted or purchased and cancelled, each Bondholder shall have the right to require the Issuer to redeem

(i) all or part of its Bonds on December 20, 2004, at the principal amount.

(ii) all of its Bonds in the event that the Issuer’s Common Shares cease to be listed on the Taiwan Stock Exchange, at the principal amount.

Early Redemption at the Option of the Issuer

Covenants

Denomination

Form of Bonds and Delivery Conversion Rights

Conversion Price

Conversion Price Adjustment

None

Negative pledge / Pari Passu / Cross-Default

USD 1,000

The Bonds are represented by a Permanent Global Certificate; investors do not have the right to request physical delivery of Definitive Bonds.

As regards the first Tranche, each Bondholder has the right to convert the Bonds into common shares (the “Shares”) of the Issuer (“Conversion Rights”) on or after June 24, 2003, up to June 13, 2008.The Conversion Period of the subsequent Tranches will be determined by the parties accordingly to the Bond Purchase, Paying and Conversion Agency Agreement dated June 23, 2003 upon issue of the respective Tranches

The Conversion Price is expected to be set at a premium of 0% to 20% above the closing price of the Pricing Date or the average of the closing prices of the Issuer’s Shares on the Taiwan Stock Exchange during a certain period of days (no more than 30 trading days) immediately preceding the Pricing Date.

In addition to the Conversion Price adjustments customary to similar types of issues from the R.O.C. (for details see Section V), the Conversion Price shall be subject to a Conversion Price Reset upon 10 days prior to every semiannual anniversary of the Issue Date and semi-annually thereafter (the “Reset Dates”) adjusted in the event that the average Closing Price for the 20 consecutive Business Days immediately prior to the Reset Dates, converted into

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USD at the then prevailing NT$/USD exchange rates is lower than the Conversion Price on the Reset Date converted into USD at the fixed NT$/USD exchange rate established on the Pricing Date. The reset Conversion Price shall not be lower than 80% of the Initial Conversion Price.

Sales Restrictions

USA and U.S. Persons

Listing The Shares of the Issuer are listed on the TSE. The Bonds will not be listed. Taxation i) Under present R.O.C. tax regulations, the withholding tax rate on the premium paid on redemption Bonds, if any, for non-resident is 20%.

ii)The securities transaction tax, which is payable by the seller, is levied on the selling of Shares at the rate of 0.3%. In case of any amendment to relevant tax regulations of the R.O.C, all matters shall be construed in accordance with the then prevailing laws.

iii) The Issuer will pay such additional amounts as will result in the receipt by the Bondholders of the net amount after such withholding or deduction equal to the amounts which would otherwise have been received by them had no such withholding or deduction been required.

Risks

See Section III.

Governing Law and The offering and administration shall be governed by Swiss Law / Zurich 2. Jurisdiction The approval for issuance of the Bonds and the exercise of the Conversion Rights will be subject to the R.O.C. laws and regulations and restrictions or limitations provided hereunder.

Issuing Parties Lead Manager swissfirst Bank AG Paying and Conversion Agent swissfirst Bank AG Domestic Financial Advisor Capital Securities Security Numbers / zero % Convertible Bonds 2003-2008/2009 Symbols ISIN: CH0016299791 Ticker Symbol: 2342.CB (as regards the first Tranche)

Common Shares ISIN: TW0002342003 Ticker Symbol: 2342.TW

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II. Taxation

Prospective investors should consult their own advisers concerning the tax consequences of an investment in the Bonds.

The following is a summary of the principal R.O.C. tax consequences of the ownership and disposition of the Bonds to a Non-Resident Individual or Non-Resident Entity that holds Bonds or shares (each a “NonR.O.C. Holder”) under the R.O.C. law currently in effect. As used in the preceding sentence, a “NonR.O.C. Individual” is a foreign narrow individual who owns the Bonds and is not physically present in the R.O.C. for 183 days or more during any calendar year, and a “Non-Resident Entity” is a corporation or a non-corporate body) that owns the Bonds and is organized under the laws of a jurisdiction other than the R.O.C. and has no fixed place of business or other permanent establishment in the R.O.C. Prospective purchasers of Bonds should consult their own tax advisers concerning the tax consequences of owning Bonds or Shares in the R.O.C. and any other relevant taxing jurisdiction to which they are subject.

1. Dividends on the Shares

Dividends (whether in cash or shares) declared by the Issuer out of retained earnings and paid out to holders of Shares are normally subject to R.O.C. income tax collected by way of withholding at the time of distribution. The current rate of withholding for Non-R.O.C. Holders is 20% of the amount of the distribution (in the case of cash dividends) or the par value of the shares (in the case of stock dividends). It is not clear whether distributions of Shares declared by the Issuer out of capital reserves will be subject to R.O.C. withholding tax. The aforementioned 20% withholding tax may be reduced by an amount which is calculated by multiplying 10% of the amount of dividends distributed by a fraction. The numerator of the fraction is the retained earnings on which 10% retained earnings tax has been imposed and the denominator is the accumulated retained earnings as at the distribution date.

2. Capital Gains

Under current R.O.C. law, gain realized upon the sale or other disposition of securities is exempt from R.O.C. income tax. This exemption will apply to a sale or other disposition of the Bonds or Shares. On January 4, 1996, the R.O.C. Legislative Yuan passed a bill for the amendment to the R.O.C. Income Tax Law that would have eliminated the exemption from the R.O.C. income tax for gains realized on the sale of R.O.C. securities and imposed a capital gains tax. On January 12, 1996, this amendment was repealed by the Legislative Yuan. The reintroduction of a capital gains tax would require the Legislative Yuan to engage in the full legislative process for the enactment of tax legislation.

R.O.C. law currently provides no specific provisions regarding the R.O.C. income tax consequences of a conversion of the Bonds into Shares. Without further clarification from the R.O.C. tax authorities, it is impossible to conclude definitively that gain on the conversion of the Bonds into Shares will not be deemed as taxable gain, additional interest income (subject to the 20% withholding tax) or otherwise subject to other R.O.C. taxes. Transfers of the Bonds by Non-R.O.C. Holders are regarded as transactions outside the R.O.C. and thus any gains derived there from are not subject to R.O.C. income tax.

3. Subscription Rights

Distributions of statutory subscription rights for the Issuer's Shares in compliance with the R.O.C. Issuer Law are not subject to R.O.C. tax. Proceeds derived from sales of statutory subscription rights evidenced by securities are currently exempted from income tax but are subject to securities transaction tax currently at the rate of 0.3% of the gross amount received. Proceeds derived from sales of statutory subscription fights that are not evidenced by securities are subject to capital gains tax at the rate of (i) 25% of the gains realized for Non-Resident Entity and (ii) 35% of the gains realized for Non-Resident Individual. Subject to compliance with R.O.C. law, the Issuer has the sole discretion to determine whether statutory subscription fights are evidenced by securities or not.

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4. Securities Transaction Tax

The R.O.C. government imposes a securities transaction tax that will apply to sales of Shares. The transaction tax, which is payable by the seller, is generally levied on sales of shares at the rate of 0.3% of the sales proceeds. No securities transaction tax will apply to transfers of the Bonds.

There is no R.O.C. transfer, stamp, issue or registration tax imposed on the issuance of Shares upon conversion of the Bonds. However, securities transaction tax, gift tax and/or income tax may be imposed in relation to the converting Bondholder's designation of other person to be the holder of the Shares upon conversion of the Bonds.

5. Estate Taxation and Gift Tax

R.O.C. estate tax is payable on any property within the R.O.C. of a deceased Non-Resident Individual, and R.O.C. gift tax is payable on any property within the R.O.C. donated by a Non-Resident Individual. Estate tax is currently imposed at rates ranging from 2% of the first NT$600,000 to 50% of amounts in excess of NT$100,000,000. Gift tax is imposed at rates ranging from 4% of the first NT$600,000 donated to 50% of amounts donated in excess of NT$45,000,000. Under R.O.C. estate and gift tax laws, the Bonds and Shares will be deemed to be located in the R.O.C. without regard to the location of the owner.

6. Tax Treaty

At present, the R.O.C. has income tax treaties with Indonesia, Singapore. Australia, New Zealand, Gambia. Swaziland, Malaysia, Vietnam, Macedonia, South Africa, The Netherlands and the United Kingdom. It is unclear whether a Non-R.O.C. Holder will be considered to own the Bonds or Shares for the purposes of such treaties. Accordingly, a holder of the Bonds or Shares who is otherwise entitled to the benefit of a treaty should consult its own tax advisers concerning eligibility for benefit under the treaty with respect to the Bonds or Shares. The R.O.C. government has announced a plan to suspend or terminate the tax treaty with South Africa in reaction to Sooth Africa's decision to discontinue diplomatic recognition of the R.O.C.

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III. Investment Considerations

Any potential investor in, and buyer of, the Bonds should pay particular attention to the fact that the Issuer and many of its affiliates, including ProMOS Technologies Inc., ChipMOS Technologies Inc. (“ChipMOS”) and PlusMOS Technologies, Inc. (“PlusMOS”, and together with MVI, ProMOS and ChipMOS, the “Group”) are governed in the Republic Of China (R.O.C.) by a legal and regulatory environment which in some respects may be different from that which prevails in other countries. Prior to making an investment decision, prospective investors should carefully consider all of the information set forth in this Information Memorandum, including the following investment considerations.

1. Risks Relating to the Group’s Industry and its Business

1.1. The Semiconductor Industry

The semiconductor industry is characterised by rapid technological changes leading to more complex and powerful products, frequent product introductions and enhancements, difficult product transitions, evolving industry standards and relatively short product life cycles. In addition, the markets for semiconductor products are categorised by intense competition and fluctuations in both supply and demand. These characteristics historically have made the semiconductor industry highly volatile, particularly in the market for DRAMs, which are the Group’s primary semiconductor products.

The selling prices for the Group’s semiconductor products fluctuate significantly with real and perceived changes in the balance of supply and demand for these products. Growth in worldwide supply has outpaced growth in worldwide demand in recent years, resulting in a sharp decrease in average selling prices for the Group’s semiconductor products. In the event that average selling prices continue to decline at such pace, the Group would likely be materially adversely affected in its results of operations and financial condition. The planned expansion of production capacities announced by several major semiconductor companies and future yield improvements by the Group and its competitors could dramatically increase worldwide supply of semiconductor products and increase downward pressure on pricing. Further, the Group has no firm information with which to determine inventory levels of its competitors, or to determine the likelihood that substantial inventory liquidation may occur and cause further downward pressure on pricing.

In the event that average selling prices continue to decline at the preceding months’ pace, the Group would likely be required to make changes in its operations, including but not limited to, reduction of the amount or changes in the timing of its capital expenditures, renegotiation of existing debt agreements, reduction of production and workforce levels, reduction of research and development, or changes in the products produced.

1.2. Technological Change and New Product Development

The rapid changes in design and process technologies which characterise the semiconductor industry require large expenditures for capital investment and research and development. The Group expects that it will be required to introduce, on an ongoing basis, more advanced process technologies in order to anticipate and satisfy customer requirements. The failure by the Group to advance its design and process technologies successfully and in a timely manner, or the inefficient implementation of production increases or transitions, could have a material adverse effect on the Group. There can be no assurance that the Group will be able to continue funding research and development expenditure at such level or that the resources it commits will be sufficient to develop products necessary for the Group to maintain its industry position. The success of the Group’s business will depend on the ability of the Group to develop or acquire advanced design and process technologies, to apply such technologies to develop new semiconductor products on a cost-effective basis and to introduce such products in the marketplace in a timely manner. The success of new product introduction is dependent upon several factors, including timely completion of new product design, achievement of acceptable yields and market acceptance. Because new product development commitments must be made well in advance of sales, however, new product decisions must anticipate both future demand and the design and technology that will be available to supply such demand. Delays in developing new products with anticipated technological advances or in commencing volume shipments of new products may have an adverse effect on the Group’s business. In addition, there can be no assurance that new products will gain market acceptance or will not be adversely affected by new technological changes or new product announcements by competitors.

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1.3. Manufacturing Risks

The process technology for the manufacture of semiconductor products is highly complex, requires advanced and costly equipment and is continuously being modified in an effort to improve yields and product performance. Minor impurities such as dust and other contaminants, difficulties in the production process or defects in the masks used to manufacture a particular device can cause a percentage of the wafers to be rejected or individual IC or “die” on specific wafers to be non-functional, which in each case negatively affects manufacturing yields. Although the Group’s increased manufacturing efficiency has been an important factor in its improved results of operations, there is a risk that from time to time, as is common in the semiconductor industry, there will be production difficulties that could cause delivery delays and reduced yields. There can be no assurance that the Group will not experience manufacturing problems in achieving acceptable yields and/or product delivery delays in the future as a result of, amongst other things, capacity constraints, construction delays, difficulties in upgrading or expanding existing facilities, difficulties in changing its process technologies or delay in delivery of specialised equipment, any of which could result in a loss of future revenues.

1.4. Diversification into Production of LCD Drivers and Non-DRAM Products

The six-inch fab, which has primarily been a speciality DRAM manufacturing plant, since 1997 has incurred significant losses due to the sharp decline in speciality DRAM prices and the facility’s inability to compete with eight-inch manufacturing plants for the main memory DRAM business. As a result, since late 1998, the Group has begun a program to convert the six-inch fab into a non-DRAM manufacturing plant, producing mostly eFlashes and other embedded products. Pursuant to a recent board decision of MVI, the six-inch fab will be converted to produce LCD drivers. In addition, ProMOS plans to allocate a certain portion of the eight-inch fab’s capacity to produce non-DRAM products, including advanced embedded products. There can be no assurance that MVI will be able to successfully convert the six-inch fab, to efficiently manufacture LCD drivers or to generate sufficient customers and revenues to achieve the profitable operation of the six-inch fab on a stand-alone basis. Similarly, there can be no assurance that ProMOS will be able to successfully allocate part of the eight-inch fab to produce embedded nonDRAM products, or to generate sufficient customers for such products. It is not unusual for a Issuer with a successful experience in DRAM production to encounter difficulties in producing non- DRAM products because of the lack of application expertise as is generally required in the non-DRAM business. The Group’s ability to produce commercially viable LCD drivers and embedded non-DRAM products and to offer such products at acceptable prices is largely dependent on its ability to design and develop new generation products and to ramp up such products at acceptable rates to acceptable yields, of which there can be no assurance.

1.5. Breaches of Certain Credit and Other Financing Agreements

MVI failed to pay its first domestic secured corporate bonds issued in Year 2000 ("2000 Bonds") when it came due on April 25 and 26, 2003. On May 28, 2003, MVI settled with all holders of the 2000 Bonds and obtained waivers of the breach of its obligations to the holders of the 2000 Bonds unless the above settlement is in breach. According to the settlement between MVI and all holders of the 2000 Bonds, MVI shall pay to all holders of the 2000 Bonds thirty-five percent (35%) of the outstanding amount on June 2, 2003 and shall pay the remaining amount in ten (10) monthly installments commencing from June 28, 2003. MVI had made the first payment in accordance with the above settlement on June 2, 2003. However, there can be no assurance that MVI will be able to successfully perform the settlement agreement, or if it is unable to do so, that it will be able to reach further settlement or obtain further waivers. MVI's failure to comply with the above settlement may result in the acceleration of its obligations to the holders of the 2000 Bonds and therefore would have a material adverse effect on MVI's financial condition

1.6. Relationship with Siemens

In 1996, MVI entered into a shareholders agreement with Siemens for the joint venture in setting up ProMOS for manufacture and sale of DRAMs and other semiconductor products. In 1999, Siemens spun off its semiconductor group and incorporated the same into Infineon Technologies AG ("Infineon"). Accordingly, Siemens transferred to Infineon its rights and obligations under the shareholders agreement in March 2000, as well as all or substantially all of its shares in ProMOS. Also in March 2000, ProMOS signed into (i) a license agreement with Infineon for the license of 0.17, 0.14 and 0.11 µm technologies, and (ii) a product purchase agreement with Infineon and MVI for allocation of ProMOS' manufacturing

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capacity. In October 3, 2002, MVI received from Infineon a notice of termination of the shareholders agreement, alleging that MVI had been pledged its shares in ProMOS at a percentage greater than the restriction in the shareholders agreement, which constituted a cause for termination. Infineon also asserted that the product purchase agreement should be automatically terminated due to termination of the shareholders agreement, effective as of January 1, 2003. However, MVI has disputed the unilateral termination by Infineon because the over-pledge had been removed within the period as notified by Infineon. As of the end of May 2003, there has been a total outstanding of US$31 million due by Infineon for shipments delivered by ProMOS under the product purchase agreement. An arbitration has been instituted, among others, for confirmation of ProMOS' license under the license agreement and for payment of the aforesaid outstanding amount.

1.7. Substantial Capital Requirements

Semiconductor manufacturers, such as the Group, generally have substantial ongoing capital requirements to maintain, modernise or increase manufacturing capacity. In addition, the semiconductor industry also requires heavy commitments for the funding of the research and development necessary to keep up with the rapid pace of technological change and to develop effective products. Historically, the Group has reinvested substantially all of its cash flows from operations in capacity expansion and enhancement programs and research and development activities. The Group’s cash flows from operations are significantly affected by average selling prices and variable cost per megabit for the Group’s semiconductor products. For 2001, 2002 and the first half of 2003, the rate of decline in average selling prices for semiconductor products surpassed the rate at which the Group was able to decrease average production costs, and as a result the Group’s cash flows were materially adversely affected. If average selling prices decline faster than the rate at which the Group is able to decrease average production costs for any extended period of time, the Group may not be able to generate sufficient cash flows from operations to sustain its operations. MVI anticipates that in 2003 it will spend approximately NT$372 million for purchases of equipment and improvement of MVI’s existing facilities and NT$3,886 million has been spent as of the date of this information memorandum for acquisition of intangible assets. However, in the event of adverse market conditions, the Group does not expect to have sufficient internal sources of liquidity to affect its current operational plan and will need to secure additional financing from external sources. There can be no assurance that external sources of liquidity will be available to fund the Group’s ongoing operations or the Group’s capacity enhancement programs. The failure to obtain financing would hinder the Group’s ability to make continued investments in its capacity enhancement program, which could materially adversely affect the Group’s business and results of operations.

1.8. Dependence on PC Markets

Substantially all of MVI’s consolidated total revenues to customers who used them in PCs or PC-related products. DRAMs are the most widely used semiconductor memory component in most PC systems. Should the rate of growth of sales of PC systems or the rate of growth in the amount of memory per PC system decrease, the growth rate for sales of IC memory products could also decrease, placing further downward pressure on selling prices for the Group’s semiconductor products. The Group is unable to currently predict changes in industry supply, major customer inventory management strategies, or end user demand, which are significant factors influencing pricing for the Group’s IC products. In recent periods the PC industry has seen a shift in demand towards PCs with prices less than US$1,000. While the Group cannot predict the future impact on the PC and semiconductor industry of this shift, possible effects include, but are not limited to, further downward pricing pressure on PC systems and further downward pricing pressure on semiconductor products.

1.9. Competition

The semiconductor industry is highly competitive. The Group competes internationally and domestically with integrated semiconductor companies and end product manufacturers that produce ICs for their own use and/or allocate a portion of their manufacturing capacity to foundry operations, as well as dedicated foundry service providers. The Group’s competitors include companies that have substantially greater production, financial, research and development and marketing resources than the Group. The Group may be at a disadvantage in competing against manufacturers having significantly greater capital resources, manufacturing capacities, engineer and employee bases and portfolios of intellectual property and more diverse product lines. As a result of greater product diversification and resources, the Group’s larger competitors may have long-term advantages in research and new product development, and in their ability to withstand current or future downturns in the semiconductor product market. The Group’s competitors

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are also aggressively seeking improved yields, smaller die size and fewer mask levels in their product designs. These improvements could result in a dramatic increase in worldwide capacity, leading to further downward pressure on product prices. Certain of the Group’s DRAM competitors have announced merger plans. Any such merger or consolidation could put the Group at a further disadvantage with respect to such competitors.

1.10. Intellectual Property Protection

The Group, similar to many other semiconductor producers, has from time to time received, and may in the future receive, communications alleging that its products or its processes may infringe on product or process technology rights held by others. Adverse determinations that the Group’s manufacturing processes or products have infringed on the product or process rights held by others could subject the Group to significant liabilities to third parties, require material changes in production processes or products or restrict the Group from making, using, selling or exporting its products that infringe the protected technology, any of which could have a material adverse effect on the Group’s business, results of operations and financial condition. In addition, management attention consumed by, and legal costs associated with, any patent litigation could have a material adverse effect on the Group’s operating results. The Group has entered into a number of patent and intellectual property license agreements with third parties, some of which require one-time or periodic license fees or royalty payments. It may be necessary or advantageous in the future for the Group to obtain additional patent licenses or to renew existing license agreements. The Group is unable to predict whether these license agreements can be obtained or renewed on terms acceptable to the Group. In the event that the Group were unable to obtain required licenses or other rights on acceptable terms, or that third parties were to make such claims against the Group, the Group’s business and future operating results could be materially adversely affected.

1.11. Dependence on Certain Sources of Supply

The Group’s manufacturing operations depend upon obtaining adequate supplies of raw materials and delivery of equipment on a timely basis. From time to time, suppliers may extend lead times, limit supply to the Group or increase prices due to capacity constraints or other factors, any of which could adversely affect the Group’s results of operations and financial condition. In addition, delays in the delivery of IC manufacturing equipment could delay implementation of the Group’s expansion plan.

The manufacturing of ICs requires significant quantities of electricity and water. Although the Group maintains power conservation and back-up generating devices to prevent damage to sensitive equipment during power shortages, the devices do not provide sufficient power to allow continued operation of the Group’s manufacturing facilities. The Group maintains water holding facilities which can alleviate water shortage problem. Although the Group has not in the past experienced material interruptions due to water or electricity shortages, and although the Hsinchu Science-Based Industrial Park has been assigned a priority with respect to the supply of electricity, Taiwan has in the past experienced shortages of both electricity and water and unexpected interruption of power supply, and no assurance can be given that the Group’s supplies of water and/or electricity may not in the future experience material interruptions.

1.12. Key Customers and Relationships

Aggregate sales to MVI’s top ten customers accounted for 39.4 per cent. and 46.1 per cent .of the MVI’s non-consolidated total revenues in 2002. Many of MVI’s key customers operate in the cyclical PC business and have in the past varied and may in the future vary order levels significantly from period to period. In addition, in an industry downturn, MVI has in the past been and may in the future be requested to reduce prices to limit the level of order cancellations. There can be no assurance that customers that cancel orders or any other customers will continue to place orders with MVI in the future at the same levels as in prior periods. The loss of one or more of MVI’s key customers, or reduced orders by its key customers, could adversely affect MVI’s results of operations.

1.13. Environmental Regulation

The Group is subject to a variety of regulations relating to the use, storage, discharge and disposal of chemicals and gases used in its manufacturing process. Although the Group has not suffered material environmental claims in the past and believes that its activities conform to current applicable environmental regulations in all material respects, environmental claims or the failure to comply with current or future regulations could result in the assessment of damages or imposition of fines against the Group, suspension of production or a cessation of operations. New regulations could require the Group to acquire costly

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equipment or to incur other significant expenses. Any failure by the Group to control the use of, or adequately restrict the discharge of, hazardous substances could subject it to future liabilities.

2. Risks Relating to the Republic Of China (R.O.C.)

2.1. Recent Economic Developments in the R.O.C.

A substantial portion of the Group’s assets are located, and substantially all of the Group’s revenues derived from its operations, in Taiwan. Accordingly, the Group’s financial condition and results of operations and market price of the Shares and the GDSs may be affected by changes in R.O.C. governmental policies, taxation, inflation, interest rates, social instability and other political, economic, diplomatic or social developments in or affecting the R.O.C. which are not within the control of the Group. Recently, the currencies of many East Asian countries, including the R.O.C., have experienced considerable volatility and depreciation. The CBC from time to time has intervened to minimise the fluctuation of US dollar/NT dollar exchange rate and to prevent significant decline in NT dollar value with respect to US dollar.

For 2000, 2001 and 2002, approximately 76 per cent., 65 per cent. and 77 per cent., respectively, of MVI’s consolidated total revenues were denominated in US dollars and 24 per cent., 33 per cent. and 19 per cent., respectively, were denominated in NT dollars, with the remainder denominated in Japanese Yen. In these periods a substantial portion of MVI’s consolidated cost of revenues were denominated in foreign currency, principally US dollars, with the remainder denominated in Japanese Yen. Accordingly, a portion of MVI’s results of operations is exposed to fluctuations amongst the US dollar, the Japanese Yen and the NT dollar exchange rates. The impact of future exchange rate fluctuations amongst these currencies cannot be predicted. Although the impact of exchange rate fluctuations has been partially mitigated by MVI’s practice of hedging its foreign currency receivables and payables through forward exchange rate contracts or other instruments in the past, there can be no assurance that MVI will be able to offset the overall impact of any exchange rate fluctuations in the future. The banking sector in Taiwan has been adversely affected by the general economic downturn in Asia and Taiwan which has resulted in, amongst other things, a depressed property market and an increase in the number of companies filing for corporate reorganisation and protection from their creditors. As a result, Taiwanese and foreign financial institutions are more cautious in providing credit for businesses in Taiwan. Although the Group in the past has not experienced material difficulties in obtaining necessary bank financings to meet its capital expenditure requirements, there can be no assurance that it will continue to have access to the necessary credit, at commercially reasonable rates of interest or at all.

2.2. The R.O.C. Securities Market

The R.O.C. securities market is smaller and more volatile than the securities markets in the United States and in certain European and other countries. The TSE has experienced substantial fluctuations in the prices and volumes of sales of listed securities, and there are currently limits on the range of daily price movements on the TSE. From the beginning of 2000 to 21 April, 2003, the TSE Index peaked at 10,202 on 21 February 2000, and reached a low of 3,446 on 3 October 2001. On 21 April, 2003, the TSE Index closed at 4,648, and the daily closing value of the Shares was NT$3.71 per Share. The TSE has in the past experienced problems such as market manipulation, insider trading and payment defaults. In addition, the R.O.C. government has from time to time intervened in the stock market by directly or indirectly purchasing stocks listed on the TSE. The recurrence of these or similar problems could adversely affect the market price and liquidity of the securities of R.O.C. companies, including the Shares, in both the domestic and the international markets.

2.3. Political Risks

The R.O.C. has an unique international political status. Both the R.O.C. and the PRC assert sovereignty over all of China (i.e., Taiwan, certain other islands and all of mainland China). The PRC government does not recognise the legitimacy of the R.O.C. government. Although significant economic and cultural relations have been established in the past decade between the R.O.C. and the PRC, the PRC has refused to renounce the possibility that it may at some point use force to gain control over Taiwan. Certain past developments in relations between the R.O.C. and the PRC have had, from time to time, an adverse effect on the value of the TSE Index. Relations between the R.O.C. and the PRC may also affect the Group’s results of operations and the market price and liquidity of the Shares.

Information Memorandum

3. Risks Relating to the Bonds and Relevant Shares

Prior to the offer of the Bonds, there has been no market for the Relevant Shares outside the R.O.C. and there has been no market for the Bonds. Following the offer of the Bonds, the only trading market for the Shares will be the TSE. The Bonds will not be listed.

4. Risks Related to Exchange

4.1. Appointment of Local Agent

Bondholders (being either individuals or legal entities) who are non-R.O.C. persons (other than R.O.C. persons who are not permitted to hold or convert the Bonds or to register as shareholders of the Relevant Issuer) will be required to appoint a local agent to, among other things, open a New Taiwan dollar bank account and a securities trading account in the R.O.C. for sale of the relevant Shares deliverable upon conversion.

Information Memorandum

IV. Mosel Vitelic Inc.

1. Basic Information on the Issuer

Name of the issuer Mosel Vitelic Inc. Registered head office 19 Li Hsin Road Science-Based Industrial Park Hsinchu, Taiwan R.O.C. Form of the entity Company limited by shares Duration Unlimited

1.1. Business

MVI designs, develops, manufactures and markets semiconductor products including SRAM, DRAM, flash memory and voice ROM. Its principal affiliates include ProMOS, a 37.25 per cent. Owned affiliate, which designs and manufactures DRAM products using technology developed by Infineon AG (“Infineon”) under a technology transfer agreement; ChipMOS, a 45.08 per cent. owned affiliate, which offers back-end IC packaging and testing services to its customers; and PlusMOS, a newly setup module service provider which is 35 per cent. owned by MVI and 25 per cent. owned by ChipMOS. MVI and ProMOS are two of the leading semiconductor designers and manufacturers in Taiwan. ChipMOS is currently amongst the largest IC packaging and testing providers in Taiwan. MVI, ProMOS, ChipMOS and PlusMOS are together referred to herein as the “Group”. MVI (formerly known as MOS Electronics Taiwan Inc.) was founded in 1987 and acquired MOS Electronics Corporation and Vitelic Corporation in 1990 and 1991, respectively, resulting in MVI. MVl’s headquarters and manufacturing facilities are located at the Science-Based Industrial Park in Hsinchu, Taiwan. It operates a six-inch fab which commended mass production in 1995. Recently MVI has undergone a series of strategic reorganisations with respect to the Group and the business of MVI. MVI reduced its shareholding in ProMOS from 42.5 per cent. at the beginning of 2002 to 37 per cent. as of 1 January, 2003 and may be further reduced both an exchange of Bonds or as a result of further disposal by MVI subject to certain contractual restrictions. As of 30 September, 1999 MVI had a 48 per cent. shareholding in TwinMOS Technologies, Inc., (“TwinMOS”) a module service provider in Taiwan. In December 1999, MVI sold its entire shareholding in TwinMOS. In 1999, MVI set up PlusMOS, another module service provider in Taiwan, which MVI intends to use as its primary module service provider of its semiconductor products for its customers in place of TwinMOS. MVI has also commenced a programme to convert its six-inch fab from a SRAM, DRAM, voice ROM and flash memory fabrication facility into a facility for the design and manufacture of liquid crystal display (“LCD”) drivers.

Business Strategy

MVI’s long-term goal is to maintain and enhance its position as a leading semiconductor product designer and manufacturer. To achieve this goal MVI has implemented the following strategies:

Expand product offerings and enter into the LCD market. In late 1998, the Group commenced a program to convert the six-inch fab from a DRAM producer into a producer of embedded non-DRAM products, particularly eFlash products. Recently the Group has decided to reserve certain manufacturing capacity in the eight-inch fab of ProMOS for the production of, inter alia, embedded non-DRAM products, whereas the six-inch fab will be converted into a producer of LCD drivers. With the advancement in technologies and market demand for DRAM products with smaller die size, the six-inch fab cannot compete with eight-inch or twelve-inch fabs for production of such higher density products. MVI believes that the production of LCD drivers can fully utilise the six-inch fab’s capacity.

Enhance fund raising ability and performance through a “group” structure. The Group currently consists of four members, MVI, ProMOS, ChipMOS and PlusMOS. Under the “group” structure, the Group seeks to provide each of its members with operational independence, which allows management of each member to be directly responsible for its performance. The Group believe that such operational independence and direct responsibility have assisted each of its members to achieve financial independence

Information Memorandum

and to acquire the ability to independently raise needed funding. The Group plans to further enhance its members’ fund raising ability by listing common shares of each member on Taiwan’s stock exchanges. The Group also plans to broaden its access to funding for capital intensive projects, such as construction of additional semiconductor manufacturing facilities, by establishing new members in the future with financial contributions from strategic partners.

Products and Services

MVI designs and manufactures a wide range of semiconductor products, with various packaging and configuration options, architectures and performance characteristics. The principal products include DRAM, SRAM, flash memory and voice ROM products. Production of MVI’s semiconductor products utilises advanced CMOS silicon gate process technology. MVI also provides foundry service to certain selected customers.

The following table sets forth on a non-consolidated basis the total revenues and percentages of MVI’s total revenues accounted for by each type of its products and services for the periods indicated.

As of 31 December 2002

Product	Name	Revenue (NT$m) Percentage
DRAM	10,396	89.87%
SRAM	5	0.04%
AUDO	17	0.15%
Foundry	1,144	9.89%
Other	6	0.05%
	11,567

Intellectual Property

As of December 31, 2002, MVI owned approximately 279 patents, most with registration in Taiwan, the United States and certain European countries, relating to the use of its products and processes. In addition, MVI has over 552 domestic and foreign patent applications pending. MVI seeks to aggressively expand its patent portfolio in order to obtain greater protection against future intellectual property claims as well as offer competitive pricing to its customers through a reduction of license fee payment.

MVI has entered into cross-license and technology transfer agreements in the areas of process technology and design technology with a number of third parties, including Siemens, IBM, Intel Corporation, Lucent Technologies Inc. and NEC. The agreements typically require one-time and/or periodic license fees or royalty payments and expire at various times. One-time payments are typically capitalised and amortised over the shorter of the estimated useful life of the technology, the patent term or the term of the agreement. In the future, it may be necessary or advantageous for MVI to obtain additional patent license or to renew existing license agreements. MVI is unable to predict whether these license agreements can be obtained or renewed on terms acceptable to MVI.

Quality Control

MVI believes that its advanced design and production capability and its reputation for high quality and reliable products and services have been important factors in attracting and retaining major international companies as customers. The six-inch fab has been qualified by several leading companies, including OKI and Seagate Technology Inc., and was certified as meeting ISO 9001 quality standards by the International Organisation for Standardisation (“ISO”) in 1995. ISO is an organisation formed by delegates from member countries to establish international quality assurance standards for products and manufacturing processes. The certification process involves subjecting MVI’s production processes and the quality management systems at its factories to review and surveillance for fixed periods. The ISO certification is required by certain European countries in connection with sales of industrial products in such countries. MVI has established at its facilities quality control systems that seek to ensure high production yields and quality. As of December 31, 2002, MVI maintained a quality control staff of approximately 48 engineers, technicians and other employees whose exclusive duty is to monitor

41 design and production processes in order to ensure high quality. These employees include line inspectors who work with members of the production staff to conduct examination, testing and fine-tuning of products during the production process. Quality control procedures of MVI include a burn-in period for finished products, production reliability audits, failure analysis for identification of production problems

Information Memorandum

and customer service. Management believes that MVI’s testing systems assure the quality of its products and help to control its manufacturing costs.

1.2. Use of Proceeds

The net proceeds of the issue of the Bonds will be utilized for improvements of the financial structure.

1.3. Number of employees

As of 31 December 2002, total number of MVI’s employees is 866.

1.4. Board of Directors and Management

Management

Directors and Supervisors

The R.O.C. Company Law and Articles of Incorporation of the Issuer provide that the Board of Directors of the Issuer are to be elected by and from amongst the Issuer’s shareholders in the annual general shareholders’ meetings at which a quorum, consisting of a majority of all the shares in issue having voting rights, is present. The Chairman is a director (a “Director”) elected by the Board of Directors. The sevenmember Board of Directors is responsible for the management of the business of the Issuer.

The Articles of Incorporation of the Issuer provide for two supervisors (collectively, the “Supervisors”). In accordance with the R.O.C. Company Law, the Supervisors are elected by and from amongst the shareholders of the Issuer and cannot concurrently serve as a Director or officer of, or in a staff position with, the Issuer. The duties and powers of each Supervisor include, amongst other things, investigating the condition of the Issuer, inspecting corporate records, verifying statements prepared by the Board of Directors prior to the annual general shareholders’ meeting, calling shareholders’ meetings, representing the Issuer in negotiations with its Directors and notifying, when appropriate, the Board of Directors to cease acting in contravention of applicable law or regulation or in contravention of the Articles of Incorporation or i.e. regarding debt incurred by MVI. The term of office for the Directors and the Supervisors is three years from the date of election or until the next election, whichever is later. The Directors and the Supervisors may serve any number of consecutive terms and may be removed from office at any time for cause by a resolution adopted at a general meeting of shareholders. The business address of each of the Directors, Supervisors and executive officers is the registered office of the Issuer.

The following table sets forth certain information relating to the Directors and Supervisors.

Hung-Chiu Hu	Chairman
John Seto	Director
Hsing Tuan	Director
Min Liang Chen	Director
Naorai Company Ltd.	Director
(Rep. Louise Yang)
Bernadine International Ltd.	Director
(Rep. James Wang)
PCL Enterprises Holdings Ltd.	Director
(Rep. Thomas Chang)
ChipMOS Technologies Inc.	Supervisor
(Rep. S.J. Cheng)
Thung Sheng Investment Ltd.	Supervisor
(Rep. Che-Ling Chung)

The following table sets forth certain information relating to the executive officers of the Issuer.

Hung-Chiu Hu	Chairman & President
John Seto	Executive Vice President
Hsing Tuan	Executive Vice President
Thomas Chang	Vice President

Information Memorandum

2. Information Concerning the Shares of the Issuer

2.1. Capital

Authorized 4,670,000,000 shares with a nominal value of NT$10; issued 3,639,039,439 shares with a nominal value of NT$10.

2.2. Dividends per Share

Record date NT$ per Share December 31, 1998 0 December 31, 1999 0.12 December 31, 2000 0.1 December 31, 2001 0 December 31, 2002 0

2.3. Listing

The Shares of the Issuer are listed on the Taiwan Stock Exchange since 1995. As of 31December, 2002, MVI had a market capitalisation of NT$ 18,559 million (US$ 533 million).

2.4. Principal Shareholders

The names of the ten largest shareholders of record of the Issuer and their share ownership as at April 25, 2003 were as follows:

2003 were as follows:
Bernadine International S.A.	2.14%
R.O.C. Government Fund	2.09%
Mou Fu Investment Inc.	1.85%
Naorai Company Ltd.	1.46%
Hon-Da Company Ltd.	1.27%
Hon-Fa Company Ltd.	1.10%
Wei-Li Company Ltd.	1.02%
Hung-Chiu Hu	0.80%
Standard Chartered.	0.80%
An-One Company Ltd.	0.71%

3. Financial Information on the Issuer

3.1. Financial Year

The financial year of the Issuer currently begins on January 1 and ends on December 31 of each year.

3.2. Accounting Principles

The non-consolidated financial statements of the Issuer, of which the English version are included herein, are in accordance with the accounting principles generally accepted in Taiwan.

Information Memorandum

3.3. Outstanding Bonds and/or Notes as of December 31, 2002

	The First Unse-	The Second Unse-	The Secured Ex-	The Second Se-
	cured Convertible	cured Convertible	changeable Bonds	cured Corporate
	Bonds	Bonds		Bonds (Index
				Bonds)
Issuing Date	July 8, 1996	May 21, 1998	February, 2000	April, 2000
Total	NT$2,000,000,000	NT$5,000,000,000	US$150,000,000	NT$5,500,000,000
Amount
Coupon	Coupon rate = 2.5%	Coupon rate = 0%	Coupon rate = 1%	Coupon rate = 5.7%
Rate				+ Spread Linked into
				the TSE Index
Tenor	10 years; Maturity:	10 years; Maturity:	5 years; Maturity:	3 years; Maturity:
	July 7, 2006	May 20, 2008	February 2, 2005	April, 2003
		Put in May 2003
Guarantor	N/A	N/A	N/A	N/A
Repayment	Principal amount	Principal amount	Principal amount	Principal amount
	will be redeemed on	will be redeemed on	will be redeemed on	will be redeemed on
	due date; Interest	due date	due date; Interest	due date; Interest
	will be paid annually		will be paid annually	will be paid quarterly
Outstanding	NT$24,000,000	NT$1,610,400,000	US$1,200,000	NT$4,701,000,000

3.4. Subsidiaries and Affiliates

As of December 31, 2002, the Issuer has 17 subsidiaries (any Issuer in which the Issuer holds, directly or indirectly, more than 50 per cent. of the issued share capital) and 5 affiliates (any Issuer in which the Issuer holds, directly or indirectly, not less than 20 per cent. but not more than 50 per cent. of the issued share capital).

The following table sets forth certain information as of December 31, 2002, regarding MVI’s subsidiaries and the principal business of each such entity.

==> picture [439 x 248] intentionally omitted <==

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

MVI
100% 99.994%
100% 35% 100% 100% 100% 100% 54.99%
47.095%
MV KK
Giant Haven (dissolved in Dec. DGI
2001)
64.667% 99.994%
ChipMOS 0.397%
Bermuda
14.31%
69.7%
100%
25% VISION2000
ProMOS ChipMOS PlusMOS MVC MVS KK UMI MFI DenMOS
99.7%
Fortune Wave Billion-Create
(dissolved in Nov. 2001) 56% 49% 99.967% 99.8%
100% 31.51% SFS InterMOS
Herbert PacMOS
Holding Ltd. Land Mark BDI
99.88%
100% 100%
SFSIA
Grousehill Ltd Layline Ltd.
----- End of picture text -----

Information Memorandum

4. Supplementary Information

4.1. Legal Proceedings

The top managers of Mosel and Infineon have held three rounds meeting since Chairman Hu met Infineon’s CEO, Dr. Schumacher, on February 26, 2003. The latest meeting was held on mid April 2003. The two companies exchanged their own opinions toward the Capacity and Technology License agreement and provided their own proposals. The discrepancy between the two companies has been narrowed and the next meeting schedule is expected to be in June 2003.

4.2. No Material Adverse Change

Save as disclosed herein, there has been no material adverse change, nor any event involving a prospective material adverse change, in the financial position, business or prospects of the Issuer since December 31, 2002.

4.3. Responsibility

The Issuer accepts responsibility for all information contained in this Information Memorandum and has taken all reasonable care to ensure itself that the facts stated herein are true and accurate in all material respects and that there are no other material facts the omission of which would make misleading any statement herein whether of fact or opinion.

Information Memorandum

5. Audited Consolidated and Financial Statements

5.1. Audited, consolidated Financial Statements for the year 2001 and 2000

Mosel Vitelic Inc.

Financial Statements as of December 31, 2001 and 2000 Together with Independent Auditor’s Report

English Translation of a Report Originally Issued in Chinese

Independent Auditor’s Report

March 5, 2002

The Board of Directors and the Stockholders Mosel Vitelic Inc.

We have audited the accompanying balance sheets of Mosel Vitelic Inc. as of December 31, 2001 and 2000, and the related statements of income, changes in stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain investee companies, as described in Note 7 as of and for the years then ended, the investment in which is accounted for in the accompanying financial statements using the equity method of accounting. The carrying values of those investments amounted to $509,100 and $1,693,280 as of December 31, 2001 and 2000, respectively, and the equity in their net loss amounted to $1,107 and $118,738 for the years ended December 31, 2001 and 2000, respectively. Those statements were audited by other auditors whose report has been furnished to us and our opinion, insofar as it related to the amounts included for those investee companies, is based solely on the reports of the other auditors.

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

In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Mosel Vitelic Inc. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years then ended in conformity with the Guidelines for Securities Issuers’ Financial Reporting and accounting principles generally accepted in the Republic of China.

As described in Note 2 to the financial statements, Mosel Vitelic Inc. revised the useful life of certain technology acquired from other company from ten years to five years. The revision was approved by the Securities and Futures Commission (SFC). The foregoing change in accounting estimate increased the net loss for the year ended December 31, 2001 by $1,269,060.

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 audit such financial statements are those generally accepted and applied in the Republic of China.

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

BALANCE SHEETS December 31, 2001 and 2000

(In Thousand of New Taiwan Dollars, Except Par Value)

A S S E T S CURRENT ASSETS Cash and cash equivalents (Notes 2 and 3) Investments in mutual funds - net (Notes 2 and 4) Notes receivable Accounts receivable (Notes 2, 5 and 19): Related parties Third party customers - net Inventories - net (Notes 2 and 6) Deferred income taxes (Notes 2 and 18) Forward exchange receivables (Notes 2 and 23) Pledged time deposits (Notes 3, 20 and 22) Prepaid expenses and other current assets (Note 19) Total Current Assets INVESTMENTS IN SHARES OF STOCK (Notes 2, 7, 20 and 24) PROPERTY, PLANT AND EQUIPMENT (Notes 2, 8, 19 and 20) Cost Machinery and equipment Buildings and auxiliary equipment Furniture and fixtures Tooling Transportation equipment Equipment under capital lease Leasehold improvements Total cost Accumulated depreciation Construction in progress and advances on acquisitions of equipment Net Property, Plant and Equipment INTANGIBLE ASSETS – NET (Notes 2 and 9) OTHER ASSETS Deferred income taxes (Notes 2 and 18) Non-operating properties - net (Notes 2, 10 and 20) Refundable deposits (Note 20) Pledged time deposits (Notes 3, 20, 22 and 23) Miscellaneous Total Other Assets TOTAL ASSETS	2001 Amount % $ 5,057,352 9 167,958 - 2,544 - 463,596 1 698,384 1 1,324,664 2 - - 7,386 - 6,116,343 11 409,874 1 14,248,101 25 23,806,632 42 15,009,777 26 2,913,130 5 322,466 1 42,879 - 4,483 - 209,791 - 4,698 - 18,507,224 32 ( 13,968,084 ) ( 24 ) 73,575 - 4,612,715 8 7,757,045 13 3,747,137 7 1,510,961 3 1,170,219 2 174,750 - 42,163 - 6,645,230 12 $ 57,069,723 100	2000 Amount % $ 3,156,323 4 652,928 1 19,356 - 1,870,403 3 1,386,214 2 4,466,352 6 466,000 1 53,694 - 9,824,497 13 382,365 - 22,278,132 30 27,899,070 37 15,482,120 21 3,018,127 4 331,809 - 42,306 - 7,516 - - - 4,698 - 18,886,576 25 ( 12,360,789 ) ( 16 ) 168,959 - 6,694,746 9 11,136,628 15 4,427,631 6 1,519,516 2 795,055 1 165,400 - 31,974 - 6,939,576 9 $ 74,948,152 100	2001 LIABILITIES AND STOCKHOLDERS’ EQUITY Amount % CURRENT LIABILITIES Bank loans (Notes 11 and 20) $ 3,924,565 7 Commercial paper (Note 12) 530,000 1 Notes and accounts payable: Related parties (Note 19) 978,719 1 Third party suppliers 1,583,000 3 Royalties payable (Note 9) 1,010,140 2 Current portion of deferred intercompany profit (Note 2) 140,651 - Excess of cumulative share in net loss of an investee companies over the acquisition costs of investments (Notes 2 and 7) 2,010,361 4 Current portion of long-term liabilities (Notes 2, 13, 14, 15 and 20) 5,514,150 10 Accrued expenses and other current liabilities (Note 19) 1,381,617 2 Total Current Liabilities 17,073,203 30 LONG-TERM LIABILITIES Bank loans (Notes 13 and 20) 525,000 1 Bonds issued (Notes 2 and 14) 12,466,613 22 Samurai bonds issued (Note 15) - - Royalties payable (Note 9) 1,235,483 2 Total Long-Term Liabilities 14,227,096 25 OTHER LIABILITIES Deferred intercompany profit – net of current portion (Note 2) 321,735 - Accrued pension cost (Notes 2 and 16) 42,239 - Total Other Liabilities 363,974 - Total Liabilities 31,664,273 55 STOCKHOLDERS’ EQUITY (Note 17) Capital stock - $10 par value Authorized – 4,670,000 thousand shares Issued –3,239,040 thousand shares in 2001 and 2,926,547 thousand shares in 2000 32,390,394 57 Capital surplus: Paid-in capital in excess of par value 5,010,216 9 Excess of the carrying value over the par value of shares issued upon conversion of bonds (Note 2) 4,252,185 7 Gain on sale of property, plant and equipment and other (Note 2) 2,460,387 4 Retained earnings: Legal reserve 593,051 1 Special reserve - - Unappropriated earnings (accumulated deficit) ( 19,684,530 ) ( 34 ) Cumulative translation adjustments (Note 2) 383,747 1 Total Stockholders’ Equity 25,405,450 45 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 57,069,723 100	2000
				Amount % $ 96,662 - - - 1,006,003 1 1,835,674 3 1,204,462 2 351,611 - 718,549 1 3,405,307 4 608,038 1 9,226,306 12 406,650 - 13,997,943 19 3,612,500 5 2,009,610 3 20,026,703 27 413,925 1 34,347 - 448,272 1 29,701,281 40 29,265,470 39 6,327,162 8 4,230,942 6 2,735,305 4 388,968 - 841 - 2,097,777 3 200,406 - 45,246,871 60 $ 74,948,152 100

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

(With T N Soong & Co report dated March 5, 2002)

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

STATEMENTS OF INCOME

For the Years Ended December 31, 2001 and 2000

(In Thousand of New Taiwan Dollars, Except Amounts Per Share)

PRODUCT SALES SALES RETURNS AND DISCOUNTS ( NET PRODUCT SALES (Notes 2 and 19) COST OF PRODUCTS SOLD (Note 19) REALIZED (UNREALIZED) INTERCOMPANY TRANSACTION - NET (Note 2) GROSS PROFIT (LOSS) ( OPERATING EXPENSES (Note 19) Research and development General and administrative Marketing Total Operating Expenses LOSSES FROM OPERATIONS ( NON–OPERATING INCOME Interest Rent (Note 19) Remuneration as director and supervisor of subsidiaries Gain on disposal of investments in mutual funds and investments in shares of stock (Note 2) Gain on disposal of property, plant and equipment, and non-operating assets (Note 2) Equity in net income of investee companies – net (Notes 2 and 7) Insurance proceeds Other (Note 19) Total Non-Operating Income (Forward)	2001 Amount % $ 9,783,089 346,577 ) ( 9,436,512 100 14,916,964 158 145,838 1 ( 5,334,614 ) (57 ) 5,151,234 54 481,090 5 159,407 2 5,791,731 61 11,126,345 ) (118 ) ( 477,896 5 89,945 1 82,961 1 48,832 1 27,968 - - - - - 41,233 - 768,835 8	2000 Amount % $ 27,203,797 310,455 ) 26,893,342 100 23,939,846 89 112,438 ) - 2,841,058 11 3,487,932 13 552,308 2 227,624 1 4,267,864 16 1,426,806 ) (5 ) 648,852 3 55,584 - 80,466 - 824,967 3 90,013 - 3,193,150 12 181,955 1 40,761 - 5,115,748 19

English Translation of Financial Statements Originally Issued in Chinese

NON-OPERATING EXPENSES Equity in net loss of investee companies - net (Notes 2 and 7) Interest (Note 2) Losses on inventories (Notes 2 and 6) Depreciation expenses of other assets Foreign exchange losses – net (Note 2) Loss on disposal of property, plant and equipment and other assets (Note 2) Provision for losses on investments in mutual funds (Notes 2 and 4) Other Total Non-Operating Expenses INCOME (LOSS) BEFORE INCOME TAX ( INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 18) ( NET INCOME (LOSS) ( EARNINGS (LOSSES) PER SHARE Based on weighted-average number of shares outstanding of 3,238,512 thousand in 2001 and 2,893,863 thousand in 2000 Based on 3,201,411 thousands shares representing the weighted-average shares outstanding in 2000 adjusted for the related stock dividends and bonus to employees in stocks distributed in 2001	$ 5,471,029 58 1,485,822 16 1,162,920 12 77,226 1 15,420 - 164 - - - 41,645 - 8,254,226 87 18,611,736 ) ( 197 ) 1,146,494 ) (12 ) $ 19,758,230 ) (209 ) ($6.10 )	$ - - 1,253,840 5 - - 76,243 1 520,907 2 58,295 - 64,004 - 8,487 - 1,981,776 8 1,707,166 6 401,760 2 $ 2,108,926 8 $ 0.73 $ 0.66
	(

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

(With T N Soong & Co report dated March 5, 2002)

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the Years Ended December 31, 2001 and 2000

(In Thousand of New Taiwan Dollars)

					CAPITAL	CAPITAL	SURPLUS	SURPLUS
								Gain on					RETAINED EARNINGS (Notes 2 and 17)
				Paid-in	Arising from			Disposal of								Unappropriated						CUMULATIVE
	CAPITAL STOCK			Capital in	Conversion			Properties									Earnings					TRANSLATION			TOTAL
	Shares			Excess of	of Bonds			and Other				Legal			Special	(Accumulated						ADJUSTMENTS		STOCKHOLDERS’
	(Thousand)		Amount	Par Value	(Notes 2 and	14)	(Notes 2 and 7)			Total		Reserve			Reserve		Deficit)		Total			(Note 2)			EQUITY
BALANCE, JANUARY 1, 2000	2,491,920		$ 24,919,200	$ 6,327,162	$ 1,474,333			$ 2,963,290		$ 10,764,785	$		-	$	-	$ 3,890,527			$ 3,890,527			( $	841 )		$ 39,573,671
Appropriations of prior year’s earnings
Special reserve		-	-	-		-		-		-			-		841	(	841	)			-		-		-
Legal reserve		-	-	-		-		-		-		388,968			-	(	388,968	)			-		-		-
Remuneration to directors and supervisors		-	-	-		-		-		-			-		-	(	52,512	) (	52,512 )				-	(	52,512 )
Bonus to employees – stock	35,007		350,072	-		-		-		-			-		-	(	350,072	) (	350,072 )				-		-
Stock dividends - 12%	304,034		3,040,338	-		-		-		-			-		-	(	3,040,338	) (	3,040,338 )				-		-
Shares issued upon conversion of bonds	95,586		955,860	-	2,756,609			-		2,756,609			-		-		-				-		-		3,712,469
Net income in 2000		-	-	-		-		-		-			-		-		2,108,926		2,108,926				-		2,108,926
Adjusting arising from changes in ownership percentage in
investees		-	-	-		-	(	296,930 )	(	296,930 )			-		-		-				-		-	(	296,930 )
Share in gain on sale of property, plant and equipment
reported by investees		-	-	-		-		1,435		1,435			-		-	(	1,435	) (		1,435 )			-		-
Reclassification of gain on sale of property, plant and
equipment		-	-	-		-		67,510		67,510			-		-	(	67,510	) (	67,510 )				-		-
Translation adjustments of investees		-	-	-		-		-		-			-		-		-				-		201,247		201,247
BALANCE, DECEMBER 31, 2000	2,926,547		29,265,470	6,327,162	4,230,942			2,735,305		13,293,409		388,968			841		2,097,777		2,487,586				200,406		45,246,871
Appropriations of prior year’s earnings:
Legal reserve		-	-	-		-		-		-		204,083			-	(	204,083	)			-		-		-
Remuneration to directors and supervisors		-	-	-		-		-		-			-		-	(	27,552	) (	27,552 )				-	(	27,552 )
Bonus to employees – stock	18,368		183,682	-		-		-		-			-		-	(	183,682	) (	183,682 )				-		-
Stock dividends – 5.5%	160,960		1,609,601	-		-		-		-			-		-	(	1,609,601	) (	1,609,601 )				-		-
Transfer of paid-in capital in excess of par value to capital
stock	131,695		1,316,946	( 1,316,946 )		-		-	(	1,316,946 )			-		-		-				-		-		-
Reversal of special reserve		-	-	-		-		-		-			- (		841 )		841				-		-		-
Shares issued upon conversion of bonds	1,470		14,695	-	21,243			-		21,243			-		-		-				-		-		35,938
Net loss in 2001		-	-	-		-		-		-			-		-	(	19,758,230	) (	19,758,230 )				-	(	19,758,230 )
Adjusting arising from changes in ownership percentage in
investees		-	-	-		-	(	274,918 )	(	274,918 )			-		-		-				-		-	(	274,918 )
Translation adjustments of investees		-	-	-		-		-		-			-		-		-				-		183,341		183,341
BALANCE, DECEMBER 31, 2001	3,239,040		$ 32,390,394	$ 5,010,216	$ 4,252,185			$ 2,460,387		$ 11,722,788	$	593,051		$	-	($ 19,684,530		)($19,091,479 )				$	383,747		$ 25,405,450

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

(With T N Soong & Co report dated March 5, 2002)

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2001 and 2000

(In Thousand of New Taiwan Dollars)

2001 2000

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	( $ 19,758,230		)	$ 2,108,926
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation		2,194,589			2,829,491
Amortization of intangible assets		3,608,615			2,122,599
Realized deferred technology service revenue and others	(	3,476	)	(	28,670	)
Write off of forward exchange receivables		-			337,094
Equity in net loss (net income) of investee companies – net		5,471,029		(	3,193,150	)
Deferred income taxes		1,146,494		(	401,760	)
Unrealized (realized) intercompany profit	(	145,838	)		112,438
Gain on disposals of:
Investments in shares of stock		-		(	733,538	)
Property, plant and equipment and other assets	(	23,142	)	(	31,718	)
Accrued pension cost		7,892			5,704
Changes in operating assets and liabilities:
Decrease (increase) in:
Notes receivable		16,812			174,833
Accounts receivable		2,094,637			1,219,689
Inventories		3,141,688			746,291
Prepaid expenses and other current assets	(	25,522	)	(	147,474	)
Forward exchange receivables		61,213			23,000
Increase (decrease) in:
Notes and accounts payable	(	279,958	)	(	2,965,483	)
Accrued expenses and other current liabilities		745,691		(	141,904	)
Net Cash Provided by (Used in) Operating Activities	(	1,747,506	)		2,036,368
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property, plant and equipment	(	315,772	)	(	246,794	)
Investments in shares of stock	(	317,332	)	(	2,070,775	)
Properties held for sale	(	25,094	)	(	15,076	)
Decrease (increase) in pledged time deposits		3,698,804		(	7,604,842	)
Decrease (increase) in refundable deposits	(	375,164	)		155,549
Proceeds from disposals of:
Investments in mutual funds – net		484,970			2,114,456
Investments in shares of stock		-			867,324
Property, plant and equipment and other assets		252,068			214,295
Increase in intangible assets	(	1,203,597	)	(	2,250,471	)
Net Cash Provided by (Used in) Investing Activities		2,198,883		(	8,836,334	)

(Forward)

English Translation of Financial Statements Originally Issued in Chinese

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments of):
Bank loans	$	3,827,903		( $	1,410,575	)
Commercial paper		530,000		(	175,000	)
Long-term bank loans	(	1,705,307	)	(	2,442,355	)
Convertible bonds	(	895,392	)		9,990,459
Effect of foreign exchange rates in Samurai bonds	(	280,000	)	(	230,000	)
Payment of remuneration to directors and supervisors	(	27,552	)	(	52,512	)
Net Cash Provided by Financing Activities		1,449,652			5,680,017
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS		1,901,029		(	1,119,949	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		3,156,323			4,276,272
CASH AND CASH EQUIVALENTS, END OF YEAR	$	5,057,352		$	3,156,323
SUPPLEMENTAL INFORMATION
Interest paid	$	1,496,543		$	1,109,984
Income tax paid	$	60,258		$	58,969
Cash paid for acquisition of properties:
Total acquisitions	( $	341,192	)	( $	242,789	)
Payable to contractor and equipment suppliers		25,420		(	4,005	)
	($	315,772	)	($	246,794	)
Cash paid for acquisitions of intangible assets:
Total acquisitions	( $	235,148	)	( $	4,853,848	)
Royalties payable	(	968,449	)		2,603,377
	($	1,203,597	)	($	2,250,471	)
Non-cash investing and financing activities:
Conversion of bonds into capital stock	$	96,900		$	3,245,000
Carrying value of bonds exchanged into investments in
shares of stock	$	-		$	904,407
Current portion of long-term liabilities	$	5,514,150		$	3,405,307

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

(With T N Soong & Co report dated March 5, 2002)

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

NOTES TO FINANCIAL STATEMENTS

(Amounts are in Thousand of New Taiwan Dollars, Unless Specified Otherwise)

1. GENERAL

The Company was incorporated on January 8, 1987 and its shares of stock are listed on the Taiwan Stock Exchange since September 1995.

It designs, manufactures and markets dynamic random access memory (DRAM) chips, DRAM modules, high-speed and standard static random access memory (SRAM) chips, flash memory chips, dual port SRAM based CMOS first-in/first-out memory chips, application specific products, and other semi-conductor products and components.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying financial statements were prepared in conformity with accounting principles generally accepted in ROC. The Company’s significant accounting policies are summarized as follows:

Cash equivalents

Government bonds acquired under resale agreements with original maturity dates of less than three months are classified as cash equivalents.

Investments in mutual funds

These investments are stated at the lower of cost or market value. Costs of investments sold are determined using the weighted-average method.

Allowance for doubtful receivables

Allowance for doubtful accounts is provided based on evaluation of the collectibility of the receivables evaluated based upon the overall financial condition and payment history of the individual customers as well as the age of the receivables.

Sales and allowances for sales returns and discounts

Sales are recognized upon shipment of products to customers. Allowances for sales returns and discounts are provided based on experience; such provisions are deducted from sales and the related costs of products are deducted from cost of products sold.

Inventories

Inventories are stated at the lower of standard cost (which approximates actual weighted average cost) or market value. Market value represents replacement cost for raw materials and net realizable value for other inventories.

Investments in shares of stock

Investments in shares of stock of companies wherein the Company exercises significant influence on their operating or financial decisions are accounted for using the equity method. Under the equity method, the investment are initially carried at cost and subsequently adjusted for the proportionate equity of the Company in the net income or net loss of the investees. The difference between the costs of the investment and the Company’s proportionate share in the net assets of the investees at the date of acquisition is amortized using the straight-line method over five years. Such amortization is recognized as a component of “Equity in net income or net loss of investee companies” account shown in the statements of income.

The Company will discontinue its recognition of its equity in the net loss of the investees when the carrying value of the investment (including advances) is reduced to zero. However, in cases where the Company guarantees the obligations or is committed to provide further financial support to an investee company, or if the investee’s losses are temporary and evidence sufficiently shows imminent return to profitability in the foreseeable future, then, the Company continues to recognize its share in the net loss of the investees. The resulting negative carrying value of the investment and advances are reported as a liability on the balance sheets.

The entire amount of the gains or losses on sales to majority owned subsidiaries are deferred until such gains or losses are realized through the subsequent sale of the related products to third parties. The gains or losses on the sales made by the majority owned subsidiaries to the Company are deferred by the Company to the extent of its equity interest in such subsidiaries until such gains or losses are realized also through the subsequent sale of the related products to unrelated parties. On the other hand, the gains or loss arising from the transactions between more than 20% owned investee companies is deferred in proportion to the ownership percentage in the investee company that recognizes the gains or losses until realized through transactions with third parties.

Other investments in shares of stock are accounted for at costs. A decline in value is accounted for as follows:

a. Stock with quoted market prices. The temporary decline in market values and the reversal of such declines are included in stockholders’ equity. However, an other than temporary decline in the value of the investment is charged to current income.
b. Stock with no quoted market prices. A reduction that is other than a temporary decline in the carrying value of the investment is charged to current income.
10 -

Cash dividends received in the year the investment is made is accounted for as reduction in the carrying value of the investment while cash dividends received in subsequent years are recognized as investment income. No investment income is recognized on stock dividends received.

The costs of investments sold are determined using the weighted average method.

- Property, plant and equipment and non operating properties

Property, plant and equipment and non-operating properties are stated at cost less accumulated depreciation. Major additions, renewals and betterment are capitalized, while maintenance and repairs are expensed currently.

The initial estimate of the service lives of the property, plant and equipment is as follows: Machinery and equipment, 2 to 7 years; buildings and auxiliary equipment, 2 to 55 years; furniture and fixtures, 3 to 5 years; tooling, 2 years; transportation equipment, 3 to 5 years; equipment under capital lease, 2 to 3 years; and leasehold improvements, 3 to 10 years. The foregoing service lives plus one year to represent the estimated salvage value are used to depreciate the property, plant and equipment using the straight-line method. The carrying value of property, plant and equipment, which were fully depreciated using the foregoing service lives, but are still being used by the Company are depreciated over their remaining estimated service lives.

Property, plant and equipment covered by agreements qualifying as capital leases are carried at the lower of the market value of the leased equipment or the present value, at the inception of the lease, of the minimum lease payments, and are depreciated over the leased equipment’s useful lives. The effective interest method is used to allocate each lease payment between principal and interest expense. The difference between the selling price and the carrying value of the leaseback assets was recorded as unrealized loss on sale-leaseback, and is amortized over the contract period as depreciation expense.

Upon sale or disposal of items of properties, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is credited or charged to current income. Any such gain generated prior to 2001, less applicable income tax, is reclassified to capital surplus at end of the year.

Intangible assets

Intangible assets are amortized using the straight-line method over the following periods: Technology, 5 years or contract periods; patents, contract periods; deferred charges, 3 to 10 years; computer software and electrical installation costs, 3 to 5 years.

Convertible and exchangeable bonds

The excess of the stated redemption price over the face value of the bond is recognized as interest expense over a period starting from the issue date to the last day of the redemption period, using the effective interest rate method.

Capital stock account is credited for the face value of the bond converted into the Company’s shares of stock and the excess of the face value of the bond as of the date of its conversion over its face value is credited to capital surplus account.

11 -

The carrying value and the related cost of the exchangeable bonds are removed from the accounts when exchanged for the ProMOS’ shares of stock, and the excess of the conversion price of the bond as of the date of its conversion over its related carrying amounts is credited or charged to income. The issue cost of the convertible and exchangeable bonds is amortized as expenses during the entire term of the bond.

Pension costs

Pension costs are recorded based on actuarial calculations. Unrecognized net transition obligation is amortized over 23 years.

Income tax

The Company adopts inter-period income tax allocation method. Deferred income tax assets are recognized for the tax effects of deductible temporary differences, unused tax credits, and operating loss carryforwards and those of taxable temporary differences are recognized as deferred income tax liabilities. Valuation allowance is provided for deferred tax assets that are not certain to be realized. A deferred tax asset or liability is classified as current or noncurrent based on the classification of the related asset or liability. However, if a deferred asset or liability cannot be related to an asset or liability in the financial statements, then it is classified as current or noncurrent based on the expected reversal date of the temporary difference.

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

Income taxes (10%) on undistributed earnings generated are recorded as expense in the year when the stockholders have effectively decided that earnings shall be retained.

Revenue recognition

Sales are recognized when titles of products and risks of ownerships are transferred to customers, primarily upon shipment.

Derivative financial instruments

Foreign-currency forward exchange contracts are recorded in New Taiwan Dollars as assets or liabilities at spot rates on the inception dates of the contracts. The difference in the New Taiwan Dollars amounts translated using the spot rates and the amounts translated using the contracted forward rates are also recognized as premiums or discounts on the inception dates of the forward contracts. Premiums or discounts are amortized using the straight-line method over the terms of the forward contracts and the amortization is recognized as income. On the balance sheet dates, the gains or losses on the foreign currency receivables or payables arising from these forward contracts are recognized as income.

Also, the receivables and payables related to the forward contracts are netted out, and the net amount is presented as either an asset or a liability.

12 -

Interest rate swap transactions are entered into to hedge the Company’s interest rate exposures on its various obligations. The net interest payable or receivable under such contracts is recorded as an adjustment to the interest income or expense of the obligations hedged.

- Foreign currency transactions

Foreign-currency transactions, except derivative financial instruments, are recorded in New Taiwan Dollars at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan Dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except those foreign currency denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.

Changes in accounting estimates

The useful life of related SRAM technology bought from Infineon Technologies AG was determined to be shorter than previously estimated according to industrial specialist’s judgement. The Company obtained approval from Securities and Futures Commission (SFC) on December 18, 2000 to change the useful life from 10 years to 5 years. The foregoing change in the estimated service life increased the net loss for the year ended December 31, 2001 by $1,269,060.

Reclassifications

Certain accounts in the financial statements as of and for the years ended December 31, 2000 have been reclassified to conform to the financial statements as of and for the year ended December 31, 2001.

3. CASH AND CASH EQUIVALENTS Cash and bank deposits Bonds acquired under resale agreements Less: Pledged time deposits - Current - Non-current	December 31 2001 2000 $ 11,180,437 $ 13,140,477 168,008 5,743 11,348,445 13,146,220 6,116,343 9,824,497 174,750 165,400 $ 5,057,352 $ 3,156,323
	2001 $ 11,180,437 168,008 11,348,445 6,116,343 174,750 $ 5,057,352

13 -

4. INVESTMENTS IN MUTUAL FUNDS Acquisition costs of open-end funds Less - allowance for decline in value	December 31 2001 2000 $ 195,481 $ 716,932 27,523 64,004 $ 167,958 $ 652,928
	2001 $ 195,481 27,523 $ 167,958

The allowance for decline in value for open-end funds is based on the net asset values as of December 31 of each year.

ACCOUNTS RECEIVABLE Related parties Third party Allowances for: Doubtful accounts Sales returns and discounts	December 31 2001 2000 $ 463,596 $ 1,870,403 841,455 1,435,856 31,125 32,684 111,946 16,958 698,384 1,386,214 $ 1,161,980 $ 3,256,617
	2001 $ 463,596 841,455 31,125 111,946 698,384 $ 1,161,980

5. ACCOUNTS RECEIVABLE

INVENTORIES Finished goods Work in process Materials and spare parts Less – allowance for losses	December 31 2001 2000 $ 1,673,552 $ 2,747,262 1,099,498 1,910,027 173,208 267,737 2,946,258 4,925,026 1,621,594 458,674 $ 1,324,664 $ 4,466,352
	2001 $ 1,673,552 1,099,498 173,208 2,946,258 1,621,594 $ 1,324,664

6. INVENTORIES

	December 31	December 31	% of Owner- Ship
2001	% of Owner- Ship 47 100 100 8	2000
Carrying Value $ 15,689,618 4,963,112 2,231,986 291,221		Carrying Value $ 18,836,238 - 2,146,198 289,894
			48 - 100 8

(Forward)

14 -

DenMOS Technology, Inc. (DenMOS) United Memories Inc. (UMI) PlusMOS Technology Inc. (PlusMOS) Mosel Vitelic Semiconductor K. K. (MVS KK) ChipMOS Technologies Inc. (ChipMOS) Dai-Gin Investment Co. (DGI) Cost method: Aplus Technology, Inc. Taiwan Asia Pacific Venture Fund Ltd. (BVI) (TAPVF) Precision Semi-Conductor Mask Co. (PSM) Excess of cumulative share in net loss over the acquisition costs of the investments: Vision2000 Venture (Cayman) Ltd. (Vision2000) Dai-Gin Investment Co. (DGI)	$ 248,138 55 123,424 100 74,589 35 40,909 100 - - - - 92,600 9 28,035 4 23,000 1 $ 23,806,632 $ 1,854,931 100 155,430 100 $ 2,010,361	$ - - 103,068 100 179,636 35 45,324 100 5,553,076 45 602,001 100 92,600 9 28,035 4 23,000 1 $ 27,899,070 $ 718,549 100 - - $ 718,549

The carrying values of the equity-accounted investments (except for MV KK in 2001 and UMI in 2000) and the related equity in net income or net loss for the years ended December 31, 2001 and 2000 were based on audited financial statements in the same period.

The equity in net income or net loss are summarized as follows:

2001 Investees ProMOS ( $ 2,878,186 ) Vision2000 ( 1,165,125 ) DGI ( 767,665 ) Giant Haven ( 629,578 ) ChipMOS 127,492 PlusMOS ( 105,047 ) MVC ( 29,513 ) DenMOS ( 26,802 ) UMI 5,789 MV KK ( 2,778 ) Ultima 1,327 MVS KK ( 943 )	2000 $ 2,837,341 849,572 ( 831,071 ) - 729,753 ( 240,364 ) ( 250,194 ) - ( 12,744 ) - 12,904 97,953

( $ 5,471,029 ) $ 3,193,150

15 -

The following financial statements were audited by auditors other than T N Soong & Co: Financial statements of Ultima as of and for the year ended December 31, 2001 and 2000, and those of Sun-Fund Securities Ltd. (SFS), Land Mark Venture Capital Corp. (LMVC), Ber-Der Investment Co., Ltd. (BDI), Sun-Fund Security Investment Advisory Ltd. (SFSIA), and Mou-Jui Management Consulting Co., Ltd. (MJMC), as of and for the year ended December 31, 2000, the investment in which is accounted for using the equity method of accounting by Mou-Fu Investment Co., Ltd. (MFI) which is accounted for by DGI, using the equity method of accounting.

The direct equity interest of the Company in Ultima represents 8% of its outstanding capital stock (OCS). In addition to indirectly owned equity through ownership in other investee companies, the Company’s total direct and indirect equity interest in Ultima was 21% of its OCS.

The Company exchanged its investment in 377,278 thousands of ChipMOS common shares with 37,728 thousands common shares of ChipMOS Technologies (Bermuda) Ltd. (ChipMOS-Bermuda) pursuant to a Purchase and Subscription Agreement (Agreement) entered into on January 12, 2001. Subsequently, on December 17, 2001, the Company executed another agreement whereby it exchanged all its holdings of common shares of ChipMOS -Bermuda with those of Giant Haven Investments (BVI) Ltd. (Giant Haven). The Company, which prior to the execution of these agreements, had 45% equity interest in ChipMOS, thus became the major shareholder of Giant Haven, which, in turn, has indirect 47% equity interest in ChipMOS through its direct 67% equity interest in ChipMOS-Bermuda. The shares of stock of ChipMOS-Bermuda is listed and traded on National Association of Securities Dealers Automated Quotation (NASDAQ) since June 19, 2001. On March 6, 2001, the Company acquired 27,494 thousand shares of DenMOS, representing 55% of its OCS, for $274,940. DenMOS designs LCD driver integrated circuit products.

The Company, on January 2, 2002, disposed 150,000 thousand ProMOS shares in the open market. The total selling price was $3,150,000 (or an average selling price was $21 per share) and the gain on disposal was $1,561,876. As a result of such disposal, the Company represents 43% of ProMOS’s OCS. In addition, on January 25, 2002, the Company increased its investments on Giant Haven by acquiring 12,000 thousand shares at is US$1 per share. As a result of the said additional acquisition, the Company held 154,006 thousand (100% owned) Giant Haven shares.

8. PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation consists of:

Accumulated depreciation consists of:
Machinery and equipment Buildings and auxiliary equipment Furniture and fixtures (Forward)	December 31 2001 2000 $ 12,410,678 $ 10,996,348 1,213,693 1,050,842 280,411 272,972
	2001 $ 12,410,678 1,213,693 280,411

16 -

Tooling Transportation equipment Equipment under capital lease Leasehold improvements	$ 38,394 3,847 18,161 2,900 $ 13,968,084	$ 32,417 6,308 - 1,902 $ 12,360,789

The Company sold certain machinery and equipment to a domestic leasing company, and simultaneously leased them back under agreements that qualify as capital lease since the agreements contains bargain purchase options. The period of sale-leaseback is 1 year from October 2001 to October 2002 with the lease paid monthly. The future lease obligation amounted to $191,463 as of December 31, 2001.

9. INTANGIBLE ASSETS – NET Technology Patents Deferred charges Computer software and electrical installations	December 31 2001 2000 $ 7,558,104 $ 10,720,271 97,255 258,507 77,522 121,447 24,164 36,403 $ 7,757,045 $ 11,136,628
	2001 $ 7,558,104 97,255 77,522 24,164 $ 7,757,045

The Company paid a specified amount of license fee to Siemens Aktiengesellschaft (SAG) for 64Mb and 256Mb DRAM technology and technologies related to back-end processes pursuant to license agreements dated September 26, 1996 and August 19, 1997. SAG subsequently transferred all its rights and obligations under the foregoing license agreements to Infineon Technologies A.G. (Infineon) on March 15, 2000. Infineon was formerly the semiconductor business of SAG that was spun off into a separate entity in April 1999.

The Company has patent agreements with several foreign companies under which it pays royalties based on schedules of payments set forth in the agreements.

10. NON-OPERATING PROPERTIES – NET Buildings and equipment leased to others Dormitory used by employees Office building and other assets	December 31 2001 2000 $ 853,094 $ 681,146 593,984 621,705 63,883 216,665 $ 1,510,961 $ 1,519,516
	2001 $ 853,094 593,984 63,883 $ 1,510,961

Buildings and equipment leased to others included those leased to ProMOS and DenMOS, among others, under the operating lease agreements.

17 -

BANK LOANS Loan for importation of materials. The amount of the original currencies of the loans was US$1,412 thousand in 2001 and US$445 thousand and￥283,500 thousand in 2000. The 2001 loans mature in June 2002 and the 2000 loans matured in June 2001. The loans bear interest at 2.63% to 4.49% in 2001 and 1.348% to 7.766% in 2000 Operating capital loan. This loan is due in October 2002 and bears interest at 2.62% to 7.85%.	December 31	December 31
	2001 $ 49,350 3,875,215 $ 3,924,565	2000
		$ 96,662 -
		$ 96,662

11. BANK LOANS

The unused credit lines that are available for bank loans as of December 31, 2001 amounted to $1,310,507 (consisting of $1,274,054 and US$1,043 thousand.)

12. COMMERCIAL PAPER

The commercial paper, which was guaranteed by several financial institutions, was due in June 2002 and bore annual interest rate ranging from 2.72% to 4.30%.

13. LONG-TERM BANK LOANS Bank loans collateralized by building. Granted on March 1999. This is payable in 8 semi-annual installments commencing in September 2000 and a final installment in March 2004. The loan bears interest at floating rate that ranges from 7.30% to 7.60% as of December 31, 2001 and ranges from 7.6% to 8.32% as of December 31, 2000 Bank loans collateralized by building. Granted on November 2001. This is payable in monthly installments commencing in December 2002 and a final installment in November 2008. The loan bore interest at floating rate 7.35% Bank loans collateralized by building. Granted on October 30, 1998. This is payable in quarterly installments in April 2002. The loan bore interest at floating rate 6.36% to 6.06% and 6.63% to 6.77% as of December 31, 2001 and 2000. Syndicated Bank Loans granted on: November 14, 1998 September 15,1997	December 31 2001 2000 $ 375,000 $ 525,000 300,000 - 31,650 94,970 - 1,701,257 - 20,730
	2001 $ 375,000 300,000 31,650 - -

13. LONG-TERM BANK LOANS

Bank loans collateralized by building. Granted on March
1999. This is payable in 8 semi-annual installments
commencing in September 2000 and a final installment
in March 2004. The loan bears interest at floating rate
that ranges from 7.30% to 7.60% as of December 31,
2001 and ranges from 7.6% to 8.32% as of December 31,
2000

Bank loans collateralized by building. Granted on
November 2001. This is payable in monthly
installments commencing in December 2002 and a final
installment in November 2008. The loan bore interest
at floating rate 7.35%
Bank loans collateralized by building. Granted on
October 30, 1998. This is payable in quarterly
installments in April 2002. The loan bore interest at
floating rate 6.36% to 6.06% and 6.63% to 6.77% as of
December 31, 2001 and 2000.
Syndicated Bank Loans granted on:
November 14, 1998
September 15,1997

December 31
2001
2000
$ 375,000 $ 525,000
300,000
-
31,650
94,970
- 1,701,257
-
20,730

2001

$ 375,000
300,000
31,650
-
-

(Forward)

18 -

Credit loans granted on September 1999. This is payable	Credit loans granted on September 1999. This is payable
in March 2001 and bore interest at floating rate that
ranges from 8.00% to 8.30%.		$		-	$	70,000
			706,650			2,411,957
Less – current portion			181,650			2,005,307
		$	525,000		$	406,650
14. BONDS ISSUED			December			31
			2001			2000
Bonds issued in July 1996 (the “July 1996 Bonds”)
Aggregate face value of bonds issued		$ 2,000,000			$	2,000,000
Converted into 71,489 thousand shares and
70,019 thousand shares as of December 31, 2001
and 2000, respectively	(	1,976,000		)	(	1,879,100	)
Accrued redemption premium			7,741			38,255
			31,741			159,155
Bonds issued in May 1998 (the “May 1998 Bonds”)
Aggregate face value of bonds issued		5,000,000				5,000,000
Converted into 97,995 thousand shares as of
December 31, 2001 and 2000	(	3,389,600		)	(	3,389,600	)
Accrued redemption premium			507,945			353,782
		2,118,345				1,964,182
Bonds issued in October and November 1998. This is
due in October and November 2001 and bears annual
interest rates of 7.52% and 7.18%.
Original issue			-			2,000,000
Redemption			-		(	600,000	)
			-			1,400,000
Bonds issued in January 1999. This is due in January
2002 and bears interest at floating rate (currently
6.8%, up to 9%)		2,000,000				2,000,000
Issued on February 2000 (the “February 2000 Bonds”)
Aggregate face value of bonds issued		5,242,500				4,962,000
Converted into 7,833 thousand shares as of
December 31, 2001 and 2000.	(		955,533	)	(	904,407	)
Redemption	(		174,750	)		-
Accrued redemption premium			704,310			317,013
		4,816,527				4,374,606
Bonds issued in April 2000. This is due in April 2003
and bears interest at floating rate that ranges from
5.70% to 7.85%.		5,500,000				5,500,000
		14,466,613			15,397,943
Less -current portion		2,000,000				1,400,000
		$ 12,466,613			$ 13,997,943

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The July 1996 Bonds, the May 1998 Bonds and the February 2000 Bonds (collectively the “Bonds”) will mature on July 2006, May 2008 and February 2005, respectively, and bear annual interest rates of 2.5%, 0% and 1%, respectively. The July 1996 Bonds and the May 1998 Bonds are convertible into shares of stock of the Company at $40.40 and $46.58 per share (both adjustable), respectively from October 1996 to July 2006 and from August 1998 to May 2008, respectively. The February 2000 Bonds are convertible into shares of stock of ProMOS at $107.41 (adjustable) per share. The conversion period is from February 2, 2000 to February 1, 2005. The Company may redeem the bonds at certain period prior to the maturity date, and the holders of the May 1998 Bonds and the February 2000 Bonds may redeem the bonds with the par value of the bonds plus the accrued redemption premium from May 2003 and February 2003, respectively.

As of December 31, 2001, the Company has provided shares of 154,800 thousand, 425,004 thousand and 497,201 thousand shares in investment of ProMOS as security for the bonds issued in January 1999, in April 2000, and the February 2000 Bonds, respectively. Also, the Company has provided $369,311 and USD$15,570 thousand of time deposits to security for the bonds issued in January 1999 and the February 2000 Bond, respectively.

15. SAMURAI BONDS Samurai bonds Less – current portion	December 31 2001 2000 $ 3,332,500 $ 3,612,500 3,332,500 - $ - $ 3,612,500
	2001 $ 3,332,500 3,332,500 $ -

The total par value of the bond is ￥12,500,000 thousand. They were issued on June 12, 1997 in Japan and will mature on June 12, 2002. Such bonds, which are unsecured, bear annual fixed interest rate of 2.8% that is payable semi-annually.

16. PENSION PLAN

The Company has a pension plan for all regular employees that provides benefits based on length of service and average monthly salary for the six months before retirement. The Company makes monthly contributions, equal to 2% of salaries, to a pension fund (the “Fund”). The Fund is administered by a pension fund monitoring committee and deposited in the committee’s name in the Central Trust of China.

20 -

Certain pension information is as follows:

			2001		2000
a.	Pension cost
	Service cost	$	15,558	$	19,021
	Interest cost		5,791		7,307
	Projected return on plan assets	(	8,113	) (	7,711	)
	Amortization of unrecognized net transition
	obligation	(	576	) (	1,451	)
		$	12,660	$	17,166
b.	Reconciliation of the funded status of the plan and
	accrued pension cost:
	Benefit obligations:
	Vested benefit obligation	( $	19,122	) ( $	12,101	)
	Nonvested benefit obligation	(	51,313	) (	55,091	)
	Accumulated benefit obligation	(	70,435	) (	67,192	)
	Additional benefits based on future salaries	(	63,347	) (	76,660	)
	Projected benefit obligation	(	133,782	) (	143,852	)
	Fair value of plan assets		136,046		131,020
	Funded status		2,264	(	12,832	)
	Unrecognized net transition obligation		17,061		18,064
	Unrecognized net actuarial gain	(	61,564	) (	44,379	)
	Accrued pension cost	($	42,239	) ($	39,147	)
c.	Vested benefit – undiscounted	($	21,453	) ($	13,413	)
d.	Actuarial assumptions:
	Discount rates used in determining present values		5.0%		6.0%
	Future salary increase rate		5.0%		6.0%
	Expected rate of return on plan assets		5.0%		6.0%
e.	Contributions to pension fund	$	9,568	$	11,397
f.	Payments from pension fund	$	9,834	$	858

17. STOCKHOLDERS’ EQUITY

On September 23,1999, the Company issued 9,980 thousand units of global depositary receipts (GDR), at an aggregate issue price of $2,770,000 or $27.70 per share representing 99,800 thousand shares of its common stock. Simultaneous to the issuance of the GDR, the Company also issued 200 thousand shares to its employees.

Capital surplus, pursuant to ROC Company Law, can be only used to offset a deficit or be transferred to capital as stock dividend. Such transfers from capital surplus to capital (as a stock dividend) are limited to the following: (i) donations (donated capital); (ii) the excess of the issue price over the par value of the capital stock issued; (iii) the excess of the sale price over the par value of treasury stock sold; and (iv) the excess of the issue price over the par value of shares issued in a business combination.

21 -

The Company’s Articles of Incorporation provides that the following may be appropriated, if approved by the stockholders, from the accumulated net income after deducting any previously accumulated deficit and the 10% legal reserve: (a) a special reserve, if deemed necessary, (b) 10% as bonus to employees, in cases where any dividend is distributed or paid by the Company, (c) no more than 2% as remuneration to directors and supervisors, also in cases where any dividend is distributed or paid by the Company, and (d) dividends to stockholders. Also, bonus and dividends can only be distributed and/or paid after all income tax obligations of the Company are paid.

Dividends are either in cash or in he from of stock. Also, the ratio of distribution shall be based on the future capital needed. If the Company acquired sufficient funds from the capital market for operation of the year and when the declared dividends is more than $2 dollars per share, the cash dividends shall be distributed as at least 10% of the excess of total dividends declared over $2 dollars. But, stock dividend can be distributed out of the capital surplus pursuant to relevant regulations after taking into account the finance, business, operation and capital structure of the Company.

These appropriations and the disposition of the remaining net income are approved by the stockholders in the following year and given effect to in the financial statements of that year.

The above-mentioned appropriation for legal reserve is made until the reserve equals the aggregate par value of the Company’s outstanding capital stock. Such reserve can only be used to offset a deficit; or, when it has reached 50% of the aggregate par value of the Company’s outstanding capital stock, up to 50% thereof can be declared as stock dividend.

Pursuant to current regulations promulgated by the Securities and Futures Commission (SFC), a special reserve equivalent to the debit balance of any account shown in the stockholder equity of the balance sheets, such as unrealized loss on investments in shares of stock and cumulative translation adjustments, shall be appropriated from retained earnings. The special reserve shall be adjusted accordingly based on the debit balance of such accounts as at balance sheet dates.

Under the Integrated Income Tax System that became effective on January 1, 1998, resident individual stockholders are allowed tax credits for the income tax paid by the Company on earnings generated also as of January 1, 1998. An Imputation Credit Account (ICA) is maintained by the Company actually paid by or withheld from the Company and the tax credit allocated to each stockholder. The maximum credit available for allocation to each stockholder cannot exceed the balance shown in the ICA on the date of distribution of dividends.

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18. INCOME TAX

a. A reconciliation of income tax expense – there is no income tax expense for year 2001. Current and income tax expense based on income tax at statutory rate for year 2000 is shown below:

		2000
Income tax expense on income before income tax at statutory rate		$ 341,433
Temporary differences	(	9,462	)
Permanent differences and other	(	628,965	)
Income tax expense – current	(	$ 296,994	)

b. Income tax benefit (expense) as of December 31, 2001 and 2000 consist of:

			2001		2000
Income tax expense – current		$	-	$	-
Net change in deferred income tax benefit (expenses)
for the year:
Temporary differences			362,418		119,865
Operating loss carryforwards			2,792,305		747,076
Tax credit	(		76,641	) (	572,720 )
Valuation allowance	(		4,184,045	)	107,539
Additional 10% on the unappropriated earnings	(		40,531	)	-
Income tax benefit (expense)	(	$	1,146,494	)$	401,760

c. Deferred income tax assets as of December 31, 2001 and 2000 consisted of the tax effects of the following:

Current: Tax credit on machinery and equipment Research and development expenditures Temporary differences Tax credit from shareholders’ shares Operating loss carryforwards Less - valuation allowance (	2001 $ 33,974 87,829 639,991 1,363,988 362,156 2,487,938 2,487,938 )( $ -	2000 $ 179,340 29,882 466,001 - - 675,223 209,223 ) $ 466,000

(Forward)

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Noncurrent: Tax credit on machinery and equipment Research and development expenditures Tax credit from shareholders’ shares Operating loss carryforwards Temporary differences ( Less - valuation allowance (	$ 18,363 265,652 1,362,921 5,364,942 420,749 ) ( 6,591,129 2,843,992 ) ( $ 3,747,137	$ 41,368 272,400 2,726,909 2,934,793 609,177 ) 5,366,293 938,662 ) $ 4,427,631

The effective tax rate for deferred income tax as of December 31, 2001 and 2000 is 25%.

d. Integrated income tax information. The balances of the ICA (see Note 17) were $8,241 and $4,299 as of December 31, 2001 and 2000, respectively.

The actual tax credit rate was 0.2% as of December 31, 2000. There was no distribution of retained earnings in 2001.

e. The unappropriated retained earning information. The unappropriated earnings as of December 31, 2001 and 2000 did not include any earning generated prior to December 31, 1997.

Unused tax credits outstanding as of December 31, 2001 will expire as follows:

Year of Expiry 2002 2003 2004 2005 and thereafter		Credits on
	Machinery and Equipment $ 33,974 3,230 1,778 13,355 $ 52,337	R&D Shareholders’ Expenditures Shares $ 87,829 $ 1,363,988 86,897 963,595 90,784 399,326 87,971 - $ 353,481 $ 2,726,909	Operating Loss Carryforwards
				$ 362,156 991,148 1,210,247 3,163,547 $ 5,727,098

Income tax returns through 1998 have been examined and cleared by the tax authorities.

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19. RELATED PARTY TRANSACTIONS

a. The Company has transactions with the following related parties:

Name Relationship

1) Direct subsidiaries

Mosel Vitelic Corporation (MVC) Mosel Vitelic Semiconductor K. K. (MVS KK) ProMOS Technologies Inc. (ProMOS) PlusMOS Technology Inc. (PlusMOS) DenMOS Technology Inc. (DenMOS) Ultima Electronics Co. (Ultima)

United Memories Inc. (UMI) Dai-Gin Investment Co. (DGI) Mosel Vitelic K. K. (MV KK)

A wholly owned subsidiary A wholly owned subsidiary

A 47% owned investee A 35% owned investee A 55% owned subsidiary A 8% directly owned investee (combined directly and indirect equity interest is 21%) A wholly owned subsidiary A wholly owned subsidiary A wholly owned subsidiary (dissolved in December 2001)

2) Indirect subsidiaries

Harvest Century Enterprises Limited A wholly owned subsidiary of (Harvest) PacMOS PacMOS Technologies Holdings A 32% indirectly owned investee Limited (PacMOS) ChipMOS Technologies Inc. A 45% indirectly owned investee (ChipMOS) SyncMOS Technologies Inc., Taiwan A 32% owned investee of PacMOS branch (SyncMOS Taiwan branch) SyncMOS Microelectronic Inc. A 37% owned investee of SyncMOS (SyncMOS) Taiwan Branch InterMOS Technologies Corp. Indirectly owns 100% ownership (InterMOS) Billion Create Technologies Co. A wholly owned subsidiary of (Billion-Create) PlusMOS (dissolved in November

A wholly owned subsidiary of PlusMOS (dissolved in November 2001)

25 -

b. Related party transactions other than those disclosed in other notes:

2001	2000	% 4 2 51 - - - - - - 57 5 - - - - - - - 3 2 10 24 9 - 2
Amount $ 203,149 81,263 77,242 46,565 28,284 23,073 2,754 1,266 - $ 463,596 $ 38,893 7,367 3,306 782 623 292 274 121 117 - $ 51,775 $ 734,167 227,180 17,372 - $ 978,719 $ 375,982 153,889 101,826 12,527 356 149 $ 644,729	Amount $ 129,866 76,149 1,663,670 28 - - - - 690 $ 1,870,403 $ 16,816 - - 750 1,436 416 479 - 10,647 6,842 $ 37,386 $ 687,241 258,212 - 60,550
	$ 1,006,003 $ 32,529 9,697 8,800 12,132 - - $ 63,158	35 5 2 2 1 - - 10

(Forward)

26 -

Prepaid expenses ProMOS Advance in rental ProMOS SyncMOS DenMOS Guarantee deposits ProMOS For the year Product sales Ultima MVC PlusMOS MVS KK SyncMOS PacMOS Harvest DenMOS ChipMOS ProMOS Billion-Create Technology service revenue ChipMOS ProMOS Purchases ProMOS Subcontract expenses ChipMOS PlusMOS	$ 82,926 20 $ 5,307 44 1,881 15 299 2 $ 7,487 61 $ 14,487 1 $ 1,265,998 13 693,987 7 629,412 7 309,021 3 37,899 1 29,943 - 2,719 - 1,190 - 76 - - - - - $ 2,970,245 31 $ 2,967 85 509 15 $ 3,476 100 $ 553,222 8 $ 2,456,419 84 50,542 2 $ 2,506,961 86	$ - - $ - - - - - - $ - - $ 9,685 2 $ 1,461,888 5 2,633,691 10 1,085,774 4 3,924,621 15 - - - - - - - - 192,923 1 2,752 - 283,878 1 $ 9,585,527 36 $ 1,659 8 22,186 104 $ 23,845 112 $ 942,727 6 $ 4,026,532 41 - - $ 4,026,532 41

(Forward)

27 -

Research and development expense MVC UMI ProMOS ChipMOS Marketing expenses – commission MV KK MVC Rental revenue ProMOS SyncMOS DenMOS DGI Rental expense ChipMOS ProMOS Other non-operating income ProMOS ChipMOS SyncMOS SyncMOS Taiwan branch Ultima PlusMOS DenMOS InterMOS MVC Proceeds from disposal of properties SyncMOS ProMOS	$ 442,050 9 161,609 3 13,615 - 62,804 1 $ 680,078 13 $ 3,470 2 2,913 2 $ 6,383 4 $ 59,065 66 6,345 7 2,798 3 80 - $ 68,288 76 $ 5,717 1 5,040 1 $ 10,757 2 $ 30,791 4 7,755 1 7,447 1 7,277 1 2,800 - 2,277 - 1,681 - 987 - 174 - $ 61,189 7 $ 27,258 11 - - $ 27,258 11	$ 372,857 11 135,079 4 58,130 1 38,059 1 $ 604,125 17 $ - - 10,506 5 $ 10,506 5 $ 35,580 64 - - - - $ 35,580 64 $ 7,550 21 5,040 14 $ 12,590 35 $ 37,721 1 7,776 1 - - 1,058 - 1,300 - 1,724 - - - - - - - $ 49,579 2 $ - - 178,531 83 $ 178,531 83

28 -

The sales prices to MVC and MVS KK, as a percentage of the selling prices to third parties, were 90% (increased to 92% starting from July 2001) and 96%, respectively. The payment terms of the sales are similar to those with non-related parties except for the following:

a. Ultima - according to the related contracts with specific days (7 days, 30 days and 120 days) after the shipment dates of the products.
b. PlusMOS - 7 days after the shipment dates of the products.
c. MVS KK - 120 days after the end of the month of sale.

In view of the improvement in the industry, the Company adjusted the payment term of sales to both ChipMOS and ProMOS from 90 days and 120 days, respectively, to 120 days after month end from November 2001 to April 2002.

MVC and UMI are conducting, on behalf of the Company, research and development (R&D) on certain products. The Company reimburses the expenses incurred by MVC and UMI related to foregoing R&D activities plus a fee equivalent to 5% and 10%(adjusted to 2% and 8% from July 2001), respectively, of the actual expenses.

20. PLEDGED OR MORTGAGED ASSETS

The following assets are pledged or mortgaged as collaterals to secure the customs duties obligations, short-term loans, long-term loans, secured bonds, exchangeable bonds of the Company and forward contracts as well as obligations of related companies:

Time deposits: Current Assets Other Assets Refundable deposits: Current assets Other assets Shares of stock (shown as investments in shares of stock): ProMOS – 1,077,005 thousand shares in 2001 and 576,005 thousand shares in 2000 Property, plant and equipment – net Non-operating properties: R&D buildings-net Dormitory used by employees-net	December 31 2001 2000 $ 6,116,343 $ 9,824,497 174,750 165,400 24,919 - 537,466 - 10,979,211 8,605,515 3,191,043 5,092,361 143,859 150,776 538,282 621,706 $ 21,705,873 $ 24,460,255
	2001 $ 6,116,343 174,750 24,919 537,466 10,979,211 3,191,043 143,859 538,282 $ 21,705,873

29 -

21. SIGNIFICANT LONG-TERM OPERATING LEASES

The Company leases parcels of land from the Hsin-Chu Science-Based Industrial Park Administration (SIPA) and ProMOS under several agreements expiring on various dates from 2005 to 2015, but are renewable upon expiration. Annual rentals, which are subjected to adjustments, currently aggregate to $28,649.

The Company also leased certain equipment from Comdisco Trade Inc and Cypress Semiconductor Corp. that will expire in 2002 and 2005, respectively.

Minimum lease payments were as follows:

Years 2002 2003 2004 2005 2006 2007 and thereafter	Equipment $ 459,391 349,500 349,500 174,750 - - $ 1,333,141	Land, Building and Auxiliary- Equipment $ 28,649 28,649 28,649 24,449 23,608 110,032 $ 244,036	Total $ 488,040 378,149 378,149 199,199 23,608 110,032 $ 1,577,177

SIGNIFICANT COMMITMENTS AND CONTINGENCIES

Significant commitments and contingencies as of December 31, 2001, except those disclosed in other notes to the financial statements, are as follows:

a. Unused letters of credit of about US$42 thousand and ￥31,500 thousand.
b. As mentioned in Note 20, a portion of the Company’s time deposits amounting to US$46,935 thousand were used to partially secure an obligation of Vision2000. Also, a portion of the Company’s time deposits amounting to $2,302,527 and US$33,339 thousand were used to partially secure an obligation of MFI, a wholly owned subsidiary of DGI. Further, the Company also has guarantee on the borrowings of Ultima of $2,230,000, Vision2000 of $2,374,336 and MFI (an indirect-wholly owned subsidiary of the Company) of $3,967,721.
c. Purchase, through SAG, of a certain percentage of wafers produced by ProMOS pursuant to a Joint Venture Agreement (JVA) entered into on September 26, 1996 among the Company, ProMOS and SAG. On March 15, 2000, the rights and obligations of SAG under the JVA were substituted by Infineon.
30 -
d. The Company had entered into two forward contracts with Credit Suisse First Boston (Europe) Limited (CSFB) and Credit Suisse First Boston International (CSFBI) in 1997, respectively. The amounts of contracts are US$120,000 thousand and US$50,000 thousand, which matured at October 2002 and December 2002 respectively. According to the contracts, the Company should pay an amount equivalent to 1.825%~1.8325% of the US$120,000 thousand and US$50,000 thousand every year. CSFBI and the Company, respectively, have options to extend the contract, which final extended maturity dates are October and December 2027. The Company will pay a significant amount of penalty if it terminates the contract in advance.

In September 2000, CSFB and CSFBI brought an action in an English Court (the “Court”) to declare the contracts to be valid. In November 2000, the Company terminated the contracts and filed a defense and counterclaim with the Court. The counterclaim seeks to have these two contracts declared invalid or, alternatively, seeks to have CSFB and CSFBI declared to be in breach of the contracts. The counterclaim also seeks repayment for all annual payments totaling to US$6,299 thousand that the Company has paid, the security deposit payments with CSFB and CSFBI of US$5,000 thousand (other assets) and damages as compensation for breach of contract. In January 2001, CSFB and CSFBI also filed their counter suits reasserting that the two contracts are still valid. The counter suits filed by CSFB and CSFBI also seek net claim amounting to approximately US$45,485 thousand in early termination penalty fees.

As of March 5, 2002, the foregoing legal proceedings are still on going in the Court. After consultation with the Company’s general counsel, management believes that the Company’s defense and counterclaim have a reasonable prospect of proving the facts and matters stated in its amended defense and counterclaim, and therefore succeed in its defence. Thus, the management believes that the outcome of the case will not materially affect the Company’s financial position and the result of its operations. Accordingly, no provision has been recorded in the accompanying financial statements in respect of the claims made by CSFB and CSFBI.

e. The Company had entered into the Patent Cross License Agreement with Hitachi Ltd. (“Hitachi”) on October 23, 1997. As of November 21, 2001, Hitachi brought an action in the California court to declare that the Company to be in breach of the contract and claimed compensation for the damages (including 3% of net sales of Mosel Higher Memory Capacity DRAMS made by the Company during the contract period), accrued interest, litigation fee, and other compensation. The ascertainment of responsibility and if it is ascertained, the liabilities to pay compensation are debatable. The case is still under the period of investigation. The management cannot evaluate the possible outcome of the case and the related amount of the liability is not estimable. Accordingly, no any provision has been recorded in the accompanying financial statements in respect of the claims from Hitachi. The legal proceedings are still pending with the California Court.
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23. DERIVATIVE FINANCIAL INSTRUMENTS

The information relative to the derivative transactions of the Company is as follows:

a. Interest rate (and exchange rate) swap agreements

The Company has entered into interest rate swap agreement to hedge its exposures to rising interest rates that is associated with certain floating rate long-term bank debts (see Note 13). Under such agreement, the Company pays rate of interest on the notional amounts based on LIBOR rates and received specific fixed interest that is based also on LIBOR. Such transactions are summarized as follows:

Contract Date January 21, 1997	Period January 23, 1997 – January 23, 2002	Notional Amount (Thousand)
		US$ 4,286

In addition, the Company has also entered into two exchange rate and interest rate swap transactions to hedge exposure to exchange rate fluctuations on its JP￥ -denominated Samurai bonds. The contracts (wherein the Company received interest based on fixed rate of 0.2452% and 0.2438% and pays interest based on variable rates), as of December 31, 2001, are summarized as follows:

Contract Date	Period July 16, 1997 – June 10, 2002	Amount (Thousand) JP￥335,680	Type
July 14, 1997 – July 15, 1997			NT$to JP￥

b. Transaction risks

1) Credit risk. The banks with which the Company has entered into the above contracts are reputable and, therefore, management believes that exposure to credit risks arising from probable default by such counter parties is low.
2) Market risk and hedge strategy. The Company is exposed to market risks arising from changes in interest rates on floating-rate long-term obligations and currency exchange rates arising from U.S. dollar denominated accounts receivable, Yen denominated accounts payable and U.S. dollar denominated debt. In order to manage these exposures, the Company entered into forward contracts and swap contracts. The hedging strategy of the Company is to use the changes in the fair value of the derivatives instruments to offset the changes in the fair value of the hedged items. The Company periodically evaluates the effectiveness of these instruments as hedges of its exposures.
3) Liquidity and cash requirement. Interest and exchange rate swap transactions requires the settlement of the net interest payable or receivable only. The foregoing cash requirements are not material to the Company.
32 -

c. Fair value of financial instruments

Assets Cash and cash equivalents Pledged time deposits (including current portion) Investments in mutual funds – Net Notes receivable Accounts receivable Investments in shares of stock (including credit balance) Refundable deposits (including current portion) Liabilities Bank loans Commercial papers Notes and accounts payable Royalties payable (including current portion) Long-term bank loans (including current portion) Bonds issued (including current portion) Samurai bonds Guarantee deposits (other liabilities) Derivative financial instruments Forward exchange receivables	December 31, 2001 Carrying Value Fair Value $ 5,057,352 $ 5,057,352 6,291,093 6,291,093 167,958 167,958 2,544 2,544 1,161,980 1,161,980 21,796,271 40,815,296 1,195,138 1,195,138 3,924,565 3,924,565 530,000 530,000 2,561,719 2,561,719 2,245,623 2,245,623 706,650 706,650 14,466,613 13,026,938 3,332,500 2,599,350 22,219 22,219 7,386 6,283	December 31, 2000 Carrying Value Fair Value $ 3,156,323 $ 3,156,323 9,989,897 9,989,897 652,928 652,928 19,356 19,356 3,256,617 3,256,617 26,968,537 48,598,621 795,055 795,055 96,662 96,662 - - 2,841,677 2,841,677 3,214,072 3,214,072 2,411,957 2,411,957 15,397,943 14,667,953 3,612,500 3,468,000 17,478 17,478 68,599 -
	Carrying Value $ 5,057,352 6,291,093 167,958 2,544 1,161,980 21,796,271 1,195,138 3,924,565 530,000 2,561,719 2,245,623 706,650 14,466,613 3,332,500 22,219 7,386	Carrying Value $ 3,156,323 9,989,897 652,928 19,356 3,256,617 26,968,537 795,055 96,662 - 2,841,677 3,214,072 2,411,957 15,397,943 3,612,500 17,478 68,599

Fair values of financial instruments were determined as follows:

1) Short-term financial instruments – carrying values.
2) Investments in mutual funds - market values.
3) Investments in shares of stock - market value for listed companies and net equity value for the others.
4) Refundable guarantee deposits – carrying values.
5) Long-term bank liabilities - forecasted cash flows discounted at present value, using interest rates of similar long-term liabilities. Fair values of long-term liabilities are their carrying values as they use floating interest rates.
33 -
6) The Company calculates the fair value of each contract by the interest swap rate published by the bank, according to the maturity rate of each swap contract.

The fair values shown above pertain only to the fair values of financial instruments and did not include the fair values of non-financial instruments. Accordingly, they do not represent the fair value of the Company.

24. ADDITIONAL DISCLOSURES

The following are the additional disclosures required by SFC for the Company and investees:

a. Financing provided: Please see Table 1 attached;
b. Endorsement/guarantee provided: Please see Table 2 attached;
c. Marketable securities held: Please see Table 3 attached;
d. Marketable securities acquired and disposed at costs or prices at least $100,000 or 20% of the paid-in capital: Please see Table 4 attached;
e. Total purchase from or sale to related parties amounting to at least $100,000 or 20% of the paid-in capital: Please see Table 5 attached;
f. Receivable from related parties amounting to at least $100,000 or 20% of the paid-in capital: Please see Table 6 attached;
g. Names, locations and related information of investees on which the Company exercises significant influence: Please see Table 7 attached;
h. Transactions of derivative financial instruments: Please see Note 23 and the followings.

ProMOS

a. ProMOS expects to receive U.S. dollars from its export sales, pays U.S. dollars on its loans and pays Japanese Yen and Euros for certain of its importation of materials, machinery and equipment. It has entered into foreign currency option contracts with banks to hedge exchange rate risks. ProMOS has no open European currency option contract as of December 31, 2001.
b. The transaction risks related to options are as follows:
1) Credit risk. This is risk that the counterparty to the contract is unable to meet its obligation to the contracts at settlement dates. ProMOS manages risks by entering into contract with reputable banks.
34 -
2) Liquidity and cash requirement. The cash flow requirements with respect to the foreign currency options are limited to the premium payments and the net differences between the option rate and the prevailing rate. Options may not have to be exercised at all in cases where the strike price is higher than the related market price at the exercise dates of a given option.
3) Market risk and hedge strategy. ProMOS is exposed to market risks arising from fluctuations in currency exchange rates due to U.S. dollar denominated accounts receivable, Yen denominated accounts payable and U.S. dollar denominated debt. In order to manage these exposures, ProMOS entered into option contracts. ProMOS’s hedging strategy is to use instruments that offset the fluctuations in their values with the changes in the values of the underlying exposures. The effectiveness of the hedges is periodically evaluated.
4) Fair value of ProMOS’s financial instruments are as follows:

Assets Cash Pledged time deposits (including other assets portion) Bank deposits for bridge loans Investments in mutual funds Trade accounts receivable from related parties Trade accounts receivable from third party customers Other receivable from related parties Long-term investment in debt securities Refundable deposits Liabilities Short-term bank loans Commercial paper issued Notes payable Accounts payable Other payables to related parties Payable to contractors and equipment suppliers Bonds issued	December 31, 2001 Carrying Value Fair Value $ 5,398,866 $ 5,398,866 351,000 351,000 6,170,000 6,170,000 957,548 957,679 2,457,341 2,457,341 - - 42,522 42,522 200,000 200,000 15,020 15,020 $ 4,408,673 $ 4,408,673 1,690,000 1,690,000 2,041 2,041 928,978 928,978 57,093 57,093 3,759,118 3,759,118 6,597,028 6,597,028	December 31, 2000 Carrying Value Fair Value $ 11,945,214 $ 11,945,214 332,300 332,300 - - 1,115,351 1,129,012 2,445,985 2,445,985 2,437 2,437 - - - - 10,045 10,045 $ 23,000 $ 23,000 105,000 105,000 - - 950,825 950,825 56,583 56,583 1,721,299 1,721,299 - -
	Carrying Value $ 5,398,866 351,000 6,170,000 957,548 2,457,341 - 42,522 200,000 15,020 $ 4,408,673 1,690,000 2,041 928,978 57,093 3,759,118 6,597,028	Carrying Value $ 11,945,214 332,300 - 1,115,351 2,445,985 2,437 - - 10,045 $ 23,000 105,000 - 950,825 56,583 1,721,299 -

(Forward)

35 -

Obligation under capital
lease (including current
portion)	$ 1,000,000	$ 1,000,000 $	- $	-
Long-term loans
(including current
portion)	14,561,848	14,561,848	12,401,330	12,401,330
Guarantee deposits	840	840	840	840

Fair values were determined as follows:

1) Short-term financial instruments and long-term investment in debt securities – carrying values.
2) Short-term investments – market values.
3) Long-term loans – fair values of long-term liabilities are their carrying values as they use floating interest rates.
4) Refundable and guarantee deposits – carrying values.

Only the fair values of certain non-derivative financial instruments are disclosed above. Accordingly, the sum of the fair values of the financial instruments listed above is not equal to the fair value of the Company.

ProMOS had entered into two forward contracts with Credit Suisse First Boston (CSFB) of US$200,000 thousand and Credit Suisse First Boston International (CSFBI, formerly Credit Suisse Financial Products) of US$225,000 thousand in 1997, respectively. The forward exchange contracts also provide for: (a) payment by ProMOS every year of an amount equivalent to 1.825% and 1.857% of the US$225,000 thousand and US$200,000 thousand, respectively (the “annual payment”), and (b) the contracts could be terminated early in November and December 2002, but there was an option for ProMOS to allow these contracts to continue up to November and December 2027. ProMOS will be required to pay a significant amount of penalty if the contract would be terminated early (the “termination settlement payment”).

In September 2000, CSFB and CSFBI brought an action in an English Court to declare the contracts to be valid. In November 2000, ProMOS terminated the alleged contract and filed a defense and counterclaim with the English Court. The counterclaim seeks to have these two contracts declared invalid or alternatively, seeks to have CSFB and CSFBI declare to be in breach of the contracts. The counterclaim also seeks repayment of all annual payments totaling to US$15,863 thousand that ProMOS has paid, the security deposit payments of US$10,000 thousand and damages compensation for breach of contract. In January 2001, CSFB and CSFBI also filed their counter suits reasserting that the two contracts are still valid. The counter suits filed by CSFB and CSFBI also seek net claim amounting to approximately US$101,000 thousand in early termination penalty fees.

36 -

As of March 5, 2002, the foregoing legal proceeding is still on going in the English Court. After consultation with ProMOS’s general counsel, the management believes that ProMOS has a reasonable prospect of proving the facts and matters stated in its amended defence and counterclaim, and therefore succeed in its defence. Thus, the management believes that the outcome of the case will not materially affect ProMOS's financial position and the result of its operations. Accordingly, no provision has been recorded in the accompanying financial statements in respect of the claims made by CSFB and CSFBI.

ChipMOS

Information on the derivative transactions is as follows:

a. Forward exchange contracts

ChipMOS has no outstanding forward contracts as of December 31, 2001. Net exchange gain on forward exchange contracts was $13,869 for the year ended December 31,2001.

b. European options
1) ChipMOS expects to receive U.S. dollars from its export sales and to pay Japanese yen for its importation of inventories, machinery and equipment. It has entered into foreign currency option contracts with banks to hedge exchange rate risks. As of December 31, 2001, ChipMOS has no outstanding foreign currency option contracts.

The amounts received on options written was $156 for the year ended December 31, 2001.

c. Transaction risks
1) Credit risk. The banks with which ChipMOS has entered into the above contracts are reputable and, therefore, ChipMOS is not expected to be exposed to significant credit risks.
2) Market risk and hedge strategy. ChipMOS is exposed to market risks arising from changes in currency exchange rates due to U.S. dollar denominated accounts receivable, Yen denominated accounts payable and U.S. dollar denominated debt. In order to manage these exposures, ChipMOS entered into forward contracts and option contracts.
3) Liquidity and cash requirement. The cash flow requirements with respect to ChipMOS’s forward contracts are limited to the periodic premium payments and the net differences of the contracted settlement rates. On the other hand, options may not have to be exercised at all in cases where the strike price is higher than the related market price at exercise dates.
37 -

d. The estimated fair values of ChipMOS’s financial instruments are as follows:

Assets Cash Restricted cash Short-term investments – net Notes receivable Accounts receivable Receivables from related parties: Notes and accounts Other Long-term investments Refundable deposits Liabilities Bank loans Accounts payable Payables to related parties: Accounts Other Payable for contractors and equipment suppliers Long-term loans (including current portion) Long-term bonds payable Guarantee deposits Derivative financial instruments European option	December 31, 2001 Carrying Value Fair Value $ 1,174,253 $ 1,174,253 835,625 835,625 969,945 969,945 29,542 29,542 250,709 250,709 1,201,281 1,201,281 106,474 106,474 271,375 325,208 13,796 13,796 $ 1,066,762 $ 1,066,762 120,085 120,085 - - 2,561 2,561 358,757 358,757 1,949,411 1,949,411 1,200,000 1,266,176 329 329 - -	December 31, 2000 Carrying Value Fair Value $ 1,184,985 $ 1,184,985 34,038 34,038 2,048,207 2,048,210 15,198 15,198 1,089,244 1,089,244 871,222 871,222 31,807 31,807 280,330 267,523 44,609 44,609 $ 233,618 $ 233,618 216,588 216,588 11,526 11,526 3,010 3,010 1,038,393 1,038,393 3,001,750 3,001,750 1,200,000 948,341 984 984 - 2,049
	Carrying Value	Carrying Value
	$ 1,174,253 835,625 969,945 29,542 250,709 1,201,281 106,474 271,375 13,796 $ 1,066,762 120,085 - 2,561 358,757 1,949,411 1,200,000 329 -	$ 1,184,985 34,038 2,048,207 15,198 1,089,244 871,222 31,807 280,330 44,609 $ 233,618 216,588 11,526 3,010 1,038,393 3,001,750 1,200,000 984 -

Fair values of financial instruments were determined as follows:

1) Short-term financial instruments – carrying values.
2) Short-term investments – market values.
3) Long-term investment – market value for listed companies and net equity value for the others.
4) Refundable deposits and guarantee deposits – carrying values.
5) Long-term liabilities – forecasted cash flows discounted at present value, using interest rates of similar long-term liabilities. Bonds payable are discounted at present value, using an annual interest rate of 5.95%. Other long-term liabilities are their carrying values as they use floating interest rates.

Accordingly, the sum of the fair values of the financial instruments listed above is not equal to the fair value of ChipMOS.

38 -

Vision2000

In 1997, Vision2000 has forward exchange contracts as follows: (a) with CSFBI whereby Vision2000 will receive US$50,000 thousand, and (b) with CSFB whereby Vision2000 will receive US$120,000 thousand. The forward exchange contracts also provide for: (a) payment by Vision2000 every year of an amount equivalent to 1.825% and 1.8325% of the US$50,000 thousand and US$120,000 thousand, respectively, and (b) the contracts could be terminated early (in Year 2002) but there was an option for Vision2000 to allow these contracts to continue up to Year 2027. Vision2000 is required to pay a significant amount of penalty if the contract is terminated early.

In September 2000, CSFB and CSFBI brought an action in an English Court to declare the contracts to be valid. In November 2000, Vision2000 terminated the alleged contract and filed a defense and counterclaim with the English Court. The counterclaim seeks to have these two contracts declared invalid or alternatively, seeks to have CSFB and CSFBI declare to be in breach of the contracts. The counterclaim also seeks damages compensation for breach of contract. In January 2001, CSFB and CSFBI also filed their counter suits reasserting that the two contracts are still valid. The counter suits filed by CSFB and CSFBI also seek net claim amounting to approximately US$35,009 thousand in early termination penalty fees.

As of March 5, 2002, the foregoing legal proceeding is still on going in the English Court. After consultation with Vision2000’s general counsel, the management believes that Vision2000 has a reasonable prospect of proving the facts and matters stated in its amended defence and counterclaim, and therefore succeed in its defence. Thus, the management believes that the outcome of the case will not materially affect Vision2000's financial position and the result of its operations. Accordingly, no provision has been recorded in the accompanying financial statements in respect of the claims made by CSFB and CSFBI.

25. SEGMENT FINANCIAL INFORMATION

a. Industry. The Company has no business outside the semiconductor industry particularly the fabrication of integrated circuit products.
b. Geographic information. The Company has no operations outside the Republic of China.
c. Export sales

Geographic Area Europe Southeast Asia North America Northeast Asia Other	2001 $ 1,185,410 1,834,865 1,007,075 864,556 2,720	2000 $ 5,328,514 2,323,263 3,992,904 4,596,476 25,793

$ 4,894,626 $ 16,266,950

39 -
d. Major customer. Sales to customers representing at least 10% total net product sales.

Customer A B C D	2001 Amount % $ 1,265,998 13 1,038,812 11 309,021 3 693,987 7	2000 Amount % $ 1,461,888 5 - - 3,924,621 15 2,633,691 10

40 -

TABLE 1

MOSEL VITELIC INC. AND INVESTEES

FINANCING PROVIDED For the Year Ended December 31, 2001

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Financing Name	Counter-Party	Financial Statement Account	Maximum Balance for the Period	Ending Balance	Interest Rate	Financing Nature	Transaction Amount	Financing Reasons	Allowance for Bad Debt	Collateral	Collateral	Financing Limit for Each Borrowing Company	Financing Company’s Financing Amount Limits
										Item	Value
MVC Vision2000 Layline Ltd.	Vision2000 Vision2000 OTC Wireless, Inc. Ark Logics Inc. Vision2000	Accounts receivable - related parties Accounts receivable - related parties Other receivables Other receivables Accounts receivable - related parties	$ 896,699 296,632 3,473 23,406 1,985,960	$ 896,699 296,632 - 23,406 -	4.03% 2.46%~3.55% - - -	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	$ - - - - -	Redemption of the papers at a floating rate Loan Loan Loan Loan	$ - - - - -	- - - - -	$ - - - - -	$ - - - - -	$ - - - - -

41 -

TABLE 2

MOSEL VITELIC INC. AND INVESTEES

ENDORSEMENT/GUARANTEE PROVIDED For the Year Ended December 31, 2001

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Endorsement/Guarantee	Counter-party	Counter-party	Limits on Each Counter-party’s Endorsement/Guar antee Amounts	Maximum Balance for the Period	Ending Balance	Value of Collateral Properties, Plant and Equipment (US$ in Thousand)	Percentage of Accumulated Amount of Collateral on Net Equity of the Latest Financial Statement	Maximum Collateral/ Guarantee Amounts Allowable
	Name	Nature of Relationship
MVI ChipMOS MFI	MFI BDI Vision2000 Ultima Ultima SFS	Subsidiary Subsidiary Subsidiary Investee of 25% ownership Business relationship Investee of 49% ownership	(Note 1) (Note 1) (Note 1) (Note 1) (Note 3) -	$ 4,725,123 500,000 2,534,476 2,400,000 600,000 250,000	$ 3,967,721 - 2,374,336 2,230,000 600,000 250,000	$ 2,302,527 US$ 33,339 - US$ 46,935 - 600,000 Credence	15.6 - 9.3 8.8 5.45 97.68	(Note 2) (Note 2) (Note 2) (Note 2) (Note 4) -

Note 1: Not exceeding 120% ($30,486,540) of the net equity $25,405,450 of MVI for each transaction entity.

Note 2: Not exceeding 150% ($38,108,175) of the net equity $25,405,450 of MVI.

Note 3: Not exceeding 120% ($13,214,737) of the net equity $11,012,281 of ChipMOS for each transaction entity.

Note 4: Not exceeding 150% ($16,518,422) of the net equity $11,012,281 of ChipMOS.

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TABLE 3

MOSEL VITELIC INC. AND INVESTEES

MARKETABLE SECURITIES HELD December 31, 2001

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		December 31, 2001	December 31, 2001	December 31, 2001
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
MVI ProMOS	ProMOS MVC MVS K.K. Vision2000 UMI DGI PlusMOS Taiwan Asia Pacific Venture Fund Ltd. (BVI) (TAPVF) Precision Semi-Conductor Mask Co. (PSM) Ultima Aplus Technology, Inc. DenMOS Giant Haven NITC OTC Fund Ta Chong Bond Fund Masterlink Asia-Pacific Fund Fubon Aggressive Growth Fund EnTrust Phoenix Bond Fund Trustwell Bond Fund Phoenix Bond Fund Tai-Yu Bond Fund Union Bond Fund Solomon Bond Fund Prudential Bond Fund II Macoto Bank Debenture	A 47% owned investee Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary A 35% owned investee Cost-accounted investee Cost-accounted investee A 8% owned investee Cost-accounted investee A 55% owned subsidiary Subsidiary - - - - - - - - - - - -	Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Long-term investments in debt securities	1,539,935 - - 99,000 1,112 99,994 42,000 115 2,300 20,202 1,492 27,494 142,006 3,000 5,080 5,000 2,500 2,192 8,572 983 13,910 26,426 28,156 7,027 -	$ 15,689,618 2,231,986 40,909 ( 1,854,931 ) 123,424 ( 155,430 ) 74,588 28,035 23,000 291,221 92,600 248,138 4,963,112 30,060 60,346 50,000 25,075 30,000 100,000 13,500 150,000 294,048 300,000 100,000 200,000	47 100 100 100 100 100 35 4 1 8 9 55 100 - - - - - - - - - - - -	$ 34,864,125 2,231,986 40,909 ( 1,854,931 ) 114,465 ( 175,177 ) 74,588 28,616 19,760 308,077 - 248,139 4,963,112 17,310 60,510 45,500 14,550 30,088 100,000 13,500 150,000 294,179 300,000 100,000 200,000

(Forward)

43 -

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		December 31, 2001	December 31, 2001	December 31, 2001
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
ChipMOS Mou-Fu Investment Co., Ltd. (MFI)	UBS Taiwan Bond Fund President James Bond Fund HSBC NTD Money Management Fund Aisa Pacific Bond Fund First Global Wan Tai Fixed Income Fund Da Chong Bond Fund TIIM Bond Fund Dresdner Dam Bond Fund Apollo Bond Fund Apollo Solomon Bond Fund Union Bond Fund Tai-yu Long River Bond Fund MVI Samurai Bonds ChipMOS Japan Inc. ChipMOS USA Inc. PlusMOS Ultima MVI EPISIL Technologies Inc. ProMOS Government Bond 89-5 Government Bond 87-2 Government Bond 89-8 MVI-Index Bond MVI March 2000 Bonds-1A MVI May 2000 Bonds-1A First Global Duoli II Fixed Income Fund NITC Taiwan Bond Fund IIT High-Yield Securities Investment Trust Fund ChipMOS-Bermuda Ultima SFS-stock BDI-stock Land Mark-stock	- - - - - - - - - - - - An indirect major shareholder Subsidiary Subsidiary Equity-accounted investee Cost-accounted investee Parent company of DGI - Investee of MVI - - - Parent of DGI Parent of DGI Parent of DGI - - - 65% indirect owned subsidiary of MVI Equity-accounted investee Equity-accounted investee Equity-accounted investee Equity-accounted investee	Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Long-term investments Long-term investments Long-term investments Long-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments	1,706 2,497 1,620 4,305 11,827 5,224 3,431 2,975 4,844 6,767 4,111 10,128 - - 50 30,000 18,586 84,351 255 1 - - - 1,772 sheets 1 sheet 199 sheets 2,114 168 6,222 232 20,866 58,800 17,994 28,000	$ 23,359 35,329 21,055 50,167 152,288 62,218 44,356 31,651 50,175 72,107 45,765 109,223 272,252 ( 1,594 ) ( 9,910 ) 53,276 218,099 1,968,614 8,085 11 56,333 52,099 11,635 184,293 1,000 198,995 28,291 2,163 82,007 46,646 336,379 591,715 266,619 287,144	- - - - - - - - - - - - - 100 100 25 8 - - - - - - - - - - - - - 8.65 49.00 99.97 56.00	$ 23,359 35,329 21,055 50,167 152,288 62,218 44,356 31,651 50,175 72,107 45,765 109,223 272,252 ( 1,594 ) ( 9,910 ) 53,276 283,436 1,056,075 4,562 14 - - - 177,643 773 199,180 28,352 2,166 82,067 16,217 318,212 592,116 266,671 287,280	(78,000 thousand shares pledged) (18,000 thousand shares pledged)

(Forward)

44 -

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		December 31, 2001	December 31, 2001	December 31, 2001
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
Vision2000 DGI PlusMOS Herbert	PlusMOS Hi Corporation SyncMOS Taiwan branch (BVI) InterMOS Technologies Corp. Mou-Jui Management Consulting Co. Ltd. OTC Wireless, Inc. Integrated Memory Tech., Inc. Goal Electronics Inc. PacMOS Ark Logics Inc. Soft Device Inc. Advanced Analogic Technologies, Inc. Herbert Holding Ltd. New Media Networking Corp. TVIA, Inc. MFI EnTrust Phoenix Bond Fund Barits Bond Fund Apollo Bond Fund Fuh-Hwa Albatross Fund HSBC NTD Money Management Fund President James Bond Fund Fuh-Hwa Yuli Fund Grousehill Ltd. Layline Ltd. MVI	Equity-accounted investee Equity-accounted investee 32% indirect investee of MVI Equity-accounted investee Equity-accounted investee Investee of 23% ownership Investee of 23% ownership Investee of 49% ownership Investee of 32% ownership Investee of 94% ownership Investee of 32% ownership Investee of 16% ownership Subsidiary Investee of 5% ownership Investee of 3% ownership Subsidiary - - - - - - - Subsidiary Subsidiary Parent of Vision 2000	Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Long-term investments Long-term investments Short-term investments	17,175 2,070 6,303 2,994 2,994 4,536 2,500 1,760 106,043 1,078,652 7,518 6,008 - 1,600 667 99,994 2,194 1,258 2,422 5,522 3,756 832 316 - - 3,070	$ 29,378 30,600 61,635 24,919 31,197 68,949 41,289 44,612 347,981 - - 119,573 84,895 5,498 41,152 ( 247,536 ) 30,000 14,000 25,000 56,102 48,702 11,735 3,500 783 60,429 38,469	14.31 3.76 19.70 99.80 99.80 23 23 49 32 94 32 16 100 5 3 100 - - - - - - - 100 100 -	$ - - - 24,910 31,197 25,450 18,825 17,546 219,509 ( 10,786 ) ( 2,180 ) - 100,211 - - ( 504,013 ) 30,115 14,040 25,088 56,309 48,830 11,774 3,514 783 60,429 38,469	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

(Forward)

45 -

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		December 31, 2001	December 31, 2001	December 31, 2001
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
Land Mark BDI Mou-Jui Management Consulting Giant Haven ChipMOS-Bermuda	Nano-Architect Research Co. PSM FuPo Electronics Co. Marketech International Co. Advanced Analogic Technologies Incorporated – series B Advanced Analogic Technologies Incorporated – series D Wavesat Telecom Inc. Software911, Inc. Virtual Silicon Technology, Inc. Techwell, Inc. Ark Logic, Inc. Teletronics International, Inc. QPICT, Inc. Darly III Venture Inc. iMAGIC Technologies Co., Ltd. National Bond Fund First Global Duoli II Fixed Income Fund IIT High-Yield Fund MVI -Index Bond PSM Best Return (BVI) National Bond Fund ChipMOS-Bermuda Fortune Wave Profits Limited ChipMOS	- - - - - - - - - - - - - - - - - - Parent company of DGI Investee of MVI Subsidiary - Investee of 65% ownership Subsidiary A 70% owned subsidiary	Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Short-term investments Short-term investments Short-term investments Short-term investments Long-term investments Long-term investments Short-term investments Long-term investment Long-term investment Long-term investment	400 1,500 1,100 457 1,200 600 1,956 133 400 133 47,656 400 1,667 1,000 750 135 2,270 701 100 sheets 1,530 - 200 37,728 - 618,424	$ 5,000 15,000 19,800 23,277 19,824 24,646 19,080 6,123 30,845 18,647 9,323 27,210 34,950 10,000 7,500 20,272 30,366 9,220 10,193 15,300 - 30,000 4,963,112 - 7,675,560	2 1 1 1 1 1 6 2 1 1 4 3 3 5 15 - - - - 1 100 - 65 100 70	$ 2,572 12,300 12,144 14,156 - - - - - - - - - - - 20,327 30,442 9,243 10,025 - - 30,254 2,637,176 - 7,674,639	Note 2

Note 1: Including the investment income (loss) by the equity method and the appropriated stock shares.

Note 2: Unlisted, no public market price to be compared.

46 -

TABLE 4

MOSEL VITELIC INC. AND INVESTEES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

For the Year Ended December 31, 2001

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter-Party	Nature of Relationship	BeginningBalance	BeginningBalance	Acquisition	Acquisition	Disposal	Disposal	Disposal	Disposal	Ending Balance	Ending Balance
					Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Carrying Value	Gain (Loss) on Disposal	Shares/Units (Thousand)	Amount (Note 2)
MVI	ChipMOS ChipMOS-Bermuda DenMOS Giant Haven MV K.K. Da-Chong Bond Fund Grand Cathay Bond Fund First Global Wan Tai Fixed Income Fund AIG Domestic Bond Fund Tai-Yu Long River Bond Fund EnTrust Phoenix Bond Fund JF (Taiwan) Bond Fund Asia Pacific Bond Fund Tiim Bond Fund Apollo Bond Fund Prudential Bond Fund II Nitc Bond Fund Increment Securities Investment Trust Fund IIT High-Yield Bond Fund WANPO Securities Investment Trust Fund Home Run Bond Fund Kwang Hua Bond Fund UBS Taiwan Bond Fund Safe Income Bond Fund Forever Fund Dresdner Dam Bond Fund Union Bond Fund	Investment in shares of stock Investment in shares of stock Investment in shares of stock Investment in shares of stock Investment in shares of stock Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds Investment in mutual funds	ChipMOS ChipMOS-Bermuda DenMOS Giant Haven MV K.K. - - - - - - - - - - - - - - - - - - - - - -	Investee of 45% ownership Indirectly owns 65% of ownership Investee of 55% ownership Subsidiary Subsidiary - - - - - - - - - - - - - - - - - - - - - -	377,279 - - - - 11,039 - - - - - - - - - - - - - - - 9,291 4,147 - 12,964 - 6,800	$ 5,553,076 - - - - 122,266 - - - - - - - - - - - - - - - 122,880 53,314 - 161,287 - 72,000	- 37,728 27,494 142,006 - 71,128 12,691 40,927 21,119 9,316 26,775 10,265 21,987 34,836 48,239 42,134 15,258 47,199 12,605 7,275 25,936 34,638 47,938 28,173 20,800 16,977 26,255	$ - 5,592,690 274,940 4,963,112 2,778 838,000 150,000 523,600 240,000 100,000 359,000 141,000 253,000 439,000 489,000 589,000 194,000 648,000 160,000 100,000 328,000 470,000 646,000 369,000 264,000 177,000 284,000	377,279 37,728 - - - 77,087 12,691 40,927 21,119 9,316 24,583 10,265 21,987 34,836 48,239 42,134 15,258 47,199 12,605 7,275 25,936 43,929 52,085 28,173 33,764 16,977 33,055	$ 5,553,076 4,963,112 - - - 908,165 150,356 524,025 242,569 100,116 329,879 142,118 253,869 440,419 493,673 595,245 195,117 649,146 160,348 100,146 329,623 596,546 708,521 370,084 428,726 177,758 357,202	$ 5,553,076 4,963,112 (Note 1) - - - 899,920 150,000 523,600 240,000 100,000 329,000 141,000 253,000 439,000 489,000 589,000 194,000 648,000 160,000 100,000 328,000 592,880 699,314 369,000 425,287 177,000 356,000	$ - - - - - 8,245 356 425 2,569 116 879 1,118 869 1,419 4,673 6,245 1,117 1,146 348 146 1,623 3,666 9,207 1,084 3,439 758 1,202	- - 27,494 142,006 - 5,080 - - - - 2,192 - - - - - - - - - - - - - - - -	$ - - 248,138 4,963,112 - 60,346 - - - - 30,000 - - - - - - - - - - - - - - - -

(Forward)

47 -

Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter-Party	Nature of Relationship	BeginningBalance	BeginningBalance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Carrying Value	Gain (Loss) on Disposal	Shares/Units (Thousand)	Amount (Note 2)
ProMOS ChipMOS MFI PlusMOS	Trustwell Bond Fund Apollo Bond Fund Barits Bond Fund Apollo Solomon Bond Fund TIIM Bond Fund Tai-Yu Long River Bond Fund Prudential Bond Fund II Fuh-Hwa Bond Fund Union Bond Fund AIG Ju-Lun Bond Fund Forever Fund CCR Management Fund Macoto Bank Debenture Grand Cathay Bond Fund AIG Ju Lun Bond Fund Jih-Sun Bond Fund UBS Taiwan Bond Fund Asia Pacific Bond Fund Sheng Hua 1699 Bond Fund First Global Wantai Assets Income Fund Ta Chong Bond Fund Tiim Bond Fund Tiim High Yield Fund Union Bond Fund Tai-yu Long River Bond Fund Apollo Solomon Bond Fund Apollo Bond Fund Dresdner Dam Bond Fund ProMOS MVI Samurai Bond MVI ProMOS MVI-convertible bonds 2 MVI January 1999 bonds-I MVI bonds –04 MVI May 2000 Bonds-1A05 MVI May 2000 Bonds-1A03 IIT High-Yield Bond Fund National Bond Fund Yuan-Ta Duoli-II Bond Fund National Taiwan Bond Fund Tiim Bond Fund Fuh-Hwa Heirloom Fund President James Bond Fund HSBC NTD Money Management Fund 2 Fuh-Hwa Albatross Fund HSBC NTD Incremental Return Fund 2	Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Long-term investments in debt securities Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - Investee of MVI An indirect major shareholder - - - - - - - - - - - - - - - - -	- - 11,020 9,776 - 5,687 - 10,084 - 27,957 - - - 14,260 20,024 21,764 18,205 17,606 10,620 - - 17,941 9,786 19,216 17,707 - - - - - 82,275 29,677 1,519 1,500 sheets 200 sheets - - - 762 - - 940 - 1,338 - - -	$ - - 115,479 99,000 - 58,247 - 115,000 - 311,000 - US$ 5,002 thousand - 162,102 223,763 259,261 238,717 195,817 114,689 - - 221,188 103,625 204,258 182,208 - - - - - 2,624,225 1,099,338 297,471 157,492 203,348 - - - 110,000 - - 11,546 - 18,000 - - -	30,700 16,105 14,199 28,156 24,749 49,454 9,431 - 27,424 5,293 19,641 2 - 19,414 21,263 23,583 35,497 46,231 - 23,654 13,070 41,728 19,571 88,446 65,918 49,665 13,284 14,621 22,710 - 134,150 44,287 - 372 sheets - 1 sheet 199 sheets 21,423 5,329 52,053 11,519 31,478 9,369 12,590 14,958 12,519 15,931	$ 349,000 164,000 153,000 300,000 315,000 521,000 133,000 - 305,000 60,000 250,000 US$ 17,021 thousand 200,000 223,489 241,640 283,863 477,719 522,520 - 304,288 154,218 526,390 211,301 963,847 700,629 521,531 137,175 154,651 295,367 272,252 2,807,259 1,062,960 - 37,300 - 1,000 198,995 282,000 787,000 695,000 148,000 396,366 100,000 174,479 193,569 127,040 161,917	22,128 16,105 25,219 9,776 24,749 41,231 2,404 10,084 998 33,250 19,641 2 - 33,674 41,287 45,347 51,996 59,532 10,620 11,827 7,846 56,238 29,357 103,551 73,497 42,898 8,440 11,646 22,710 - 132,074 73,963 1,519 100 sheets 200 sheets - - 15,202 6,091 49,940 11,351 32,418 9,369 13,096 11,201 6,997 15,931	$ 250,394 165,061 272,284 100,175 315,295 432,308 33,058 116,057 11,209 374,507 251,387 US$ 22,556 Thousand - 387,493 468,330 546,294 696,606 670,564 114,814 152,288 92,348 707,463 318,112 1,127,512 778,233 452,385 87,295 123,651 480,119 - 2,550,557 2,293,761 162,815 10,340 199,812 - - 200,148 898,343 668,058 146,006 409,200 98,187 181,760 145,094 71,105 164,102	$ 249,000 164,000 268,479 99,000 315,000 429,247 33,000 115,000 10,952 371,000 250,000 US$ 22,023 thousand - 385,591 465,403 543,124 693,077 668,170 114,689 152,000 92,000 703,222 314,926 1,122,340 773,614 449,424 87,000 123,000 295,367 - 3,462,871 2,162,286 297,471 10,500 203,348 - - 199,993 897,000 666,709 145,837 407,912 100,000 180,744 144,868 70,938 161,917	$ 1,394 1,061 3,805 1,175 295 3,061 58 1,057 257 3,507 1,387 US$ 533 Thousand - 1,902 2,927 3,170 3,529 2,394 125 288 348 4,241 3,186 5,172 4,619 2,961 295 651 184,752 - ( 912,314 ) 131,475 ( 134,656 ) ( 160 ) ( 3,536 ) - - 155 1,343 1,349 169 1,288 ( 1,813 ) 1,016 226 167 2,185	8,572 - - 28,156 - 13,910 7,027 - 26,426 - - - - - - - 1,706 4,305 - 11,827 5,224 3,431 - 4,111 10,128 6,767 4,844 2,975 - - 84,351 1 - 1,772 sheets - 1 sheet 199 sheets 6,221 - 2,113 168 - - 832 3,757 5,522 -	$ 100,000 - - 300,000 - 150,000 100,000 - 294,048 - - - 200,000 - - - 23,359 50,167 - 152,288 62,218 44,356 - 45,765 109,223 72,107 50,175 31,651 - 272,252 1,968,613 12 - 184,292 - 1,000 198,995 82,007 - 28,291 2,163 - - 11,735 48,701 56,102 -

(Forward)

48 -

Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter-Party	Nature of Relationship	BeginningBalance	BeginningBalance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Carrying Value	Gain (Loss) on Disposal	Shares/Units (Thousand)	Amount (Note 2)
DGI BDI Giant Haven ChipMOS- Bermuda	MVI-Bond MVI-Bond MVI ProMOS First Global Duoli II Fixed Income Fund IIT High-Yield Bond Fund National Bond Fund ChipMOS-Bermuda ChipMOS	Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Long-term investments Long-term investments	MVI MVI - - - - - MVI Shareholder	Parent company Parent company Parent company Investee of MVI - - - Parent company Investee of 70% ownership	- - 2,000 - - - - - -	$ - - 95,550 - - - - - -	1 sheet 1 sheet 7,078 50,713 17,265 9,576 2,826 37,728 618,424	$ 214,725 214,171 127,706 778,893 231,000 126,000 423,000 4,963,112 8,708,825	1 sheet 1 sheet 9,078 50,713 14,995 8,875 2,692 - -	$ 214,999 214,171 141,374 945,237 201,022 117,000 403,195 - -	$ 214,725 214,171 223,256 778,893 200,634 116,780 402,728 - -	$ 274 - ( 81,882 ) 166,344 388 220 467 - -	- - - - 2,270 701 134 37,728 618,424	$ - - - - 30,366 9,220 20,272 4,963,112 7,675,560

Note 1: The carrying value of the disposal shares included the recognition of the investment income (loss) by the equity method.

Note 2: The ending balance included the recognition of the investment income (loss) by the equity method and appropriated stock shares.

49 -

TABLE 5

MOSEL VITELIC INC. AND INVESTEES

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL For the Year Ended December 31, 2001

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction		Note/Accounts Payable or Receivable	Note/Accounts Payable or Receivable	Note
			Purchase/Sale (Note 1)	Amount	% to Total	Payment Terms	Payment Terms	Unit Price	Ending Balance	% to Total
MVI MVC MVS K.K. ProMOS ChipMOS PlusMOS	MVS K.K. MVC PlusMOS ProMOS ChipMOS Ultima MVI MVI Infineon MVI MVI Ultima MVI	Subsidiary Subsidiary Investee of 35% ownership Investee of 47% ownership Investee of 45% ownership Investee of 8% ownership Parent company Parent company Director and supervisors of ProMOS Major shareholder An indirect major shareholder Investee Major shareholder	Sales Sales Sales Purchase Subcontract expenses Sales Purchase Purchase Sales Sales Sales Sales Purchase	$ 309,021 693,987 629,412 553,222 2,456,419 1,265,998 958,489 309,788 9,192,868 618,189 2,495,046 1,163,383 629,412	3 7 7 8 82 13 100 100 94 6 48 22 69	Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 60 days after shipment dates Note 2 Net 60~120 days from monthly closing date Net 60~90 days from monthly closing date 7 days after arrival	Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Net 120 days from monthly closing date Net 90 days from monthly closing date (Note 3) Note 19	Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19 Note 19	$ 77,242 81,236 46,565 ( 227,180 ) ( 734,167 ) 203,779 ( 45,092 ) ( 77,359 ) 2,110,722 346,619 824,393 375,150 ( 46,828 )	7 7 4 ( 9 ) ( 28 ) 18 ( 78 ) 25 86 14 56 25 ( 53 )	- - - - - - - - - - - -

Note 1: Sales includes technical service income.

Note 2: The sales to MVI are payable within 60 days after the shipment dates in principle. However, in the view of the market recession, the payment term was changed from 60 days to 120 days from November 2001 to April 2002.

Note 3:

The sales to Ultima are payable within 30 days from monthly closing dates in principle. However, in the view of the market recession, the payment term was changed to 90 days from November 2001.

50 -

TABLE 6

MOSEL VITELIC INC. AND INVESTEES

RECEIVABLE FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL December 31, 2001

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Bad Debts
					Amount	Action Taken
MVI MVC ProMOS ChipMOS	Ultima MVI MVI Infineon MVI Ultima	Investee of 8% ownership Parent company Major shareholder Director and supervisor An indirect major shareholder Investee of 8% ownership	$ 203,779 375,982 346,619 2,110,722 824,393 375,150	4.00 1.30 2.03 4.28 3.30 4.70	- - - - - -	- - - - - -	$ 99,211 - 145,812 917,591 143,396 1,158	$ - - - - - -

51 -

TABLE 7

MOSEL VITELIC INC. AND INVESTEES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE For the Year Ended December 31, 2001

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance as of December 31, 2001	Balance as of December 31, 2001	Balance as of December 31, 2001	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				Dec. 31, 2001	Dec. 31, 2000	Shares (Thousand)	Percentage of Ownership	Carrying Value
MVI ChipMOS MFI DGI	MVC MVS K.K. Vision2000 UMI DGI ProMOS PlusMOS Ultima ChipMOS-Bermuda DenMOS MV K. K. Giant Haven ChipMOS Japan Inc. ChipMOS U.S.A. Inc. PlusMOS SFS BDI Land Mark Mou-Jui Management Consulting Co. Ltd. InterMOS Technologies Corp. MFI	California U.S.A. Japan Grand Cayman Colorado U.S.A. Taipei, Taiwan Hsin-Chu, Taiwan Chupei, Taiwan Taipei, Taiwan Bermuda Hsin-Chu, Taiwan Japan British Virgin Islands Tokyo, Japan Sunnyvale U.S.A. Chupei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan	Research, design, develop, manufacture and distribute related IC products To sell, import and export the semiconductor IC and electronic components Holding company Develop of prototype integrated circuits and service generated Investment and holding company Research, design, develop, manufacture and distribute related IC products Manufacture, design and sale of DRAM modules Research, development, manufacture and sale of DRAM modules Holding Company To develop, design, manufacture and market of “ TFT-LCD Source/Gate Driver IC” Holding company Holding company Research and development, and testing of integrated circuits Research and development, and testing of integrated circuits Manufacture, design and sale of DRAM modules Securities company, underwriter and broker Investment and holding company Joint venture company Business consulting firm Electronic equipment installment; automatic control equipment construction Investment and holding company	$ 2,790,332 2,429 99,000 118,084 1,000,000 10,280,001 420,000 254,442 - 274,940 - 4,963,112 2,699 3,088 300,000 553,600 179,940 280,000 29,940 29,940 999,940	$ 2,790,332 2,429 99,000 118,084 1,000,000 10,280,001 420,000 254,442 - - - - 2,699 3,088 300,000 555,893 179,940 280,000 29,940 - 999,940	- - 99,000 1,112 99,994 1,539,935 42,000 20,202 - 27,494 - 142,006 - 50 30,000 58,800 17,994 28,000 2,994 2,994 99,994	100 100 100 100 100 47 35 8 - 55 - 100 100 100 25 49 100 56 100 100 100	$ 2,231,986 40,909 ( 1,854,931 ) 123,424 ( 155,430 ) 15,689,618 74,589 291,221 - 248,138 - 4,963,112 ( 1,594 ) ( 9,910 ) 53,276 591,715 266,619 287,144 31,197 24,919 ( 253,176 )	$ 14,385 ( 943 ) ( 1,172,729 ) 9,057 ( 757,022 ) ( 6,069,952 ) ( 300,136 ) ( 102,580 ) ( 1,134,927 ) ( 48,740 ) ( 2,782 ) - 711 983 ( 300,136 ) ( 76,408 ) 171,729 7,932 496 ( 4,999 ) ( 742,912 )	( $ 29,513 ) ( 943 ) ( 1,165,125 ) 5,789 ( 767,665 ) ( 2,878,186 ) ( 105,047 ) 1,327 ( 629,578 ) ( 26,802 ) ( 2,778 ) - 711 983 ( 75,035 ) ( 37,439 ) 170,819 4,130 490 ( 4,989 ) ( 756,424 )	Note 4 - Note 5 Note 2 - - - Note 3 Note 1 - Note 6 - - - - - - - - - Note 7

(Forward)

52 -

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance	as of December 31, 2001	as of December 31, 2001	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
				Dec. 31, 2001	Dec. 31, 2000	Shares (Thousand)	Percentage of Ownership	Carrying Value
Vision2000 Herbert PlusMOS ChipMOS-Bermuda Giant Haven	OTC Wireless, Inc. Integrated Memory Tech, Inc. Goal Electronics Inc. PacMOS Ark Logics Inc. Soft Device Inc. Herbert Grousehill Layline Billion Create Technology, Inc. ChipMOS Fortune Wave Profits Limited ChipMOS-Bermuda	San Jose, U.S.A Santa clara, U.S.A Canada Hong Kong San Jose, U.S.A Capertino, U.S.A. British Virgin Islands British Virgin Islands British Virgin Islands Hsin-Chu, Taiwan Hsin-Chu, Taiwan British Virgin Islands Bermuda	A Wireless Ethernet Lan design house Flash memory design house Develop of prototype integrated circuits and service generated Holding company Graphic controller design house SRAM design house Investment company Investment company Investment company Manufacture of electronic components Research, development, manufacturing, testing and assembly of integrated circuits Holding company Holding company	$ 75,258 44,753 113,662 483,970 181,209 164,651 - 783 60,715 - 8,708,825 - 4,963,112	$ 71,763 44,753 100,846 483,970 181,209 164,651 1,248,473 70,023 594,705 22,233 - - -	4,536 2,500 1,760 106,043 1,078,652 7,518 - - - - 618,424 - 37,728	23 23 49 32 94 32 100 100 100 - 70 100 65	$ 68,949 41,289 44,612 347,981 - - 84,895 783 60,715 - 7,675,560 - 4,963,112	( $ 73,798 ) ( 66,005 ) ( 32,117 ) ( 298,690 ) ( 10,768 ) ( 46,862 ) ( 613,669 ) 23 ( 3,054 ) ( 3,589 ) ( 1,509,064 ) - ( 1,134,927 )	( $ 19,913 ) ( 17,810 ) ( 17,409 ) ( 102,130 ) ( 13,123 ) ( 20,558 ) ( 612,697 ) ( 500,169 ) ( 90,206 ) ( 5,406 ) ( 1,058,609 ) - -	- - - Note 7 - - Note 7 Note 7 Note 7 Note 8 - - -

Note 1: Including $104,562 of unrealized intercompany transaction loss.

Note 2:

The recognized gain or loss includes the amortization of $3,268 of the difference between the costs of the investment and MVI’s proportionate share in the net assets of the investee at the acquisition date.

Note 3: The recognized gain or loss includes the amortization of $9,927 of the difference between the costs of the investment and MVI’s proportionate share in the net assets of the investee at the acquisition date.

Note 4: The recognized gain or loss includes the amortization of $3,878 of the deferred intercompany profits.

Note 5: The recognized gain or loss includes the amortization of $7,604 of the deferred intercompany profits.

Note 6: The Company recognized the investment loss until the investment carrying value down to zero, and MV KK’s registration was cancelled in December 2001.

Note 7: The recognized gain or loss includes the amortization of the difference between the cost of the investment and the proportionate share in the net assets of the investee at acquisition date.

Note 8: The recognized gain or loss includes the amortization of negative goodwill and the liquidation loss.

53 -
5.2. Audited, consolidated Financial Statements for the nine months ended September 30, 2002 and 2001

Mosel Vitelic Inc.

Financial Statements for the Nine Months Ended September 30, 2002 and 2001

Together with Independent Auditors’ Report

English Translation of a Report Originally Issued in Chinese

Independent Auditors’ Report

October 29, 2002

The Board of Directors and the Shareholders Mosel Vitelic Inc.

We have reviewed the accompanying balance sheets of Mosel Vitelic Inc. as of September 30, 2002 and 2001, and the related statements of income, changes in shareholders’ equity, 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 review.

Except as discussed in the following paragraph, we conducted our reviews in accordance with Statement of Audit Standards No. 36 “Review of Financial Statements”. Because we only do analysis, comparisons and inquiries for the above financial statements, and do not audit them in accordance with auditing standards generally accepted in the Republic of China, we cannot issue an audit opinion.

As mentioned in Note 8 to the financial statements, the carrying values of the entire investments accounted for using the equity method of $7,467,649 thousand and $8,077,307 thousand and the negative carrying value of the investments amounted to $1,207,005 thousand and $2,348,092 thousand as of September 30, 2002 and 2001, respectively, and the related investment income and loss amounted to $72,700 thousand and $2,793,638 thousand for the nine months ended September 30, 2002 and 2001, respectively, are based on unaudited financial statements of investee companies in the same period.

Based on our review, except for the effect of such adjustments, if any, as might have been disclosed had we reviewed the financial statements of investee companies as explained in the preceding paragraph, we do not discover misrepresentations in the financial statements referred to above, in all material respects, not in conformity with the regulations governing the preparation of financial statements of public companies and accounting principles generally accepted in the Republic of China.

As disclosed in Note 3 to the financial statements, the Company adopted Statement of Financial Accounting Standards No. 30, “Accounting for Treasury Stock” (SFAS No. 30) on January 1, 2002. SFAS No. 30 requires, when a subsidiary holds stock of its parent company, the stock be recorded as a treasury stock. The adoption of SFAS No. 30 resulted in the decrease of long-term investments and simultaneous increase of treasury stock by $1,011,413 thousand as of September 30, 2002. Furthermore, net loss decreased by $361,688 thousand for the nine months ended September 30, 2002.

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

BALANCE SHEETS September 30, 2002 and 2001

(In Thousand New Taiwan Dollars, Except Par Value)

	2002			2001			2002			2001
	Amount	%		Amount	%	LIABILITIES AND SHAREHOLDERS’ EQUITY	Amount	%		Amount	%
						CURRENT LIABILITIES
$	755,550	2		$ 6,311,817	10	Bank loans (Notes 12)	$ 3,811,378	9		$3,294,054	5
	2,908,507	6		7,057,869	11	Commercial papers issued (Note 13 and 22)	60,000	-		1,030,000	1
	1,182,568	3		925,483	2	Notes and accounts payable:
						Related parties (Note 21)	1,194,435	3		610,257	1
	753,940	2		360,981	-	Third party suppliers	3,227,445	7		1,066,183	2
	526,024	1		405,537	1	Other payable - related parties (Note 21)	805,279	2		519,307	1
	1,824,375	4		2,789,331	4	Royalties payable (Note 10)	1,197,334	3		1,048,333	2
	-	-		15,241	-	Excess of cumulative share in losses over the
	1,713,336	4		-	-	investment acquisition costs (Notes 2 and 8)	1,207,005	3		2,348,092	4
	330,135	1		470,456	1	Current portion of deferred intercompany profit (Note 2)	128,823	-		228,897	-
	9,994,435	23		18,336,715	29	Current portion of long-term liabilities (Notes 14, 15 and 22)	12,724,894	29		8,110,137	13
	20,805,873	48		24,948,926	39	Accrued expenses and other current liabilities (Notes 9 and 21)	437,767	1		584,076	1
						Total Current Liabilities	24,794,360	57		18,839,336	30
						LONG-TERM LIABILITIES
	15,214,938	35		15,587,267	25	Bank loans (Notes 14 and 22)	843,333	2		225,000	-
	2,960,770	7		2,903,510	5	Bonds issued (Notes 2, 15 and 22)	30,357	-		12,272,534	20
	323,273	1		328,795	-	Royalties payable (Note 10)	670,464	1		1,453,292	2
	222,338	-		-	-	Total Long-Term Liabilities	1,544,154	3		13,950,826	22
	43,868	-		42,792	-
	4,483	-		4,483	-	DEFERRED INTERCOMPANY PROFIT - NET OF CURRENT PORTION
	4,698	-		4,698	-	(Note 2)	261,435	1		309,723	-
	18,774,368	43		18,871,545	30
	(15,301,682)	(35	)	(13,885,521)	( 22)	ACCRUED PENSION COST (Notes 2 and 16)	46,192	-		37,565	-
	31,087	-		74,910	-
	3,503,773	8		5,060,934	8	Total Liabilities	26,646,141	61		33,137,450	52
	5,356,834	12		8,631,971	14	SHAREHOLDERS’ EQUITY (Notes 17)
						Capital stock - $10 par value
						Authorized - 4,670,000 thousand shares in 2002 and 3,880,000 thousand
	1,449,489	3		1,531,455	3	shares in 2001
	522,979	1		668,645	1	Issued - 3,239,040 thousand shares	32,390,394	74		32,390,394
	174,600	-		172,600	-	Advance capital	60,803	-		-	51
	5,352	-		36,962	-
	1,933,222	5		3,747,138	6
	4,085,642	9		6,156,800	10	Capital surplus:
						Paid-in capital in excess of par value	-	-		5,010,216	8
						Excess of the carrying value over the par value of shares issued upon
						conversion of bonds	-	-		4,252,185	7
						Other	667,104	1		2,466,871	4
						Retained earnings:
						Legal reserve	-	-		593,051	1
						Accumulated deficit	( 15,391,368 )	(35)		(15,024,552)	(24 )
						Cumulative translation adjustments	384,896	1		309,731	1
						Treasury stock (at cost) - 91,397 thousand shares (Notes 3, 8 and 18)	(1,011,413) (	2	)	-	-
						Total Shareholders’ Equity	17,100,416	39		29,997,896	48
$	43,746,557	100		$ 63,135,346	100	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 43,746,557	100		$ 63,135,346	100

A S S E T S CURRENT ASSETS Cash and cash equivalents (Notes 2 and 4) Pledged time deposits (Notes 4 and 22) Investments in mutual funds - net (Notes 2 and 5) Notes and accounts receivable (Notes 2, 6 and 21) Related parties Third party customers - net Inventories - net (Notes 2 and 7) Forward exchange receivables (Notes 2 and 25) Refundable deposit (Note 22) Prepaid expenses and other current assets (Note 21) Total Current Assets INVESTMENTS IN SHARES OF STOCK (Notes 2, 8 and 22) PROPERTY, PLANT AND EQUIPMENT (Notes 2, 9, 21 and 22) Cost Machinery and equipment Buildings and auxiliary equipment Furniture and fixtures Equipment under capital lease Tooling Transportation equipment Leasehold improvements Total cost Accumulated depreciation Prepayments for properties Net Property, Plant and Equipment INTANGIBLE ASSETS - NET (Notes 2 and 10) OTHER ASSETS Non-operating properties - net (Notes 2, 11 and 22) Refundable deposits (Note 22) Pledged time deposits (Notes 4, 22 and 24) Miscellaneous Deferred income taxes (Notes 2 and 19) Total Other Assets	2002 Amount % $ 755,550 2 2,908,507 6 1,182,568 3 753,940 2 526,024 1 1,824,375 4 - - 1,713,336 4 330,135 1 9,994,435 23 20,805,873 48 15,214,938 35 2,960,770 7 323,273 1 222,338 - 43,868 - 4,483 - 4,698 - 18,774,368 43 (15,301,682) (35 ) 31,087 - 3,503,773 8 5,356,834 12 1,449,489 3 522,979 1 174,600 - 5,352 - 1,933,222 5 4,085,642 9	$


	$ 43,746,557 100

TOTAL ASSETS

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

(For review only, not audited in accordance with auditing standards generally accepted in the Republic of China; with T N Soong & Co auditors’ review report dated October 29, 2002)

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

STATEMENTS OF INCOME

For the Nine Months Ended September 30, 2002 and 2001 (In Thousand New Taiwan Dollars, Except Loss Per Share)

PRODUCT SALES (Notes 2 and 21) SALES RETURNS AND DISCOUNTS NET PRODUCT SALES COST OF PRODUCTS SOLD (Note 21) REALIZED INTERCOMPANY TRANSACTION - NET (Note 2) GROSS LOSS OPERATING EXPENSES (Note 21) Research and development Marketing General and administrative Total Operating Expenses LOSSES FROM OPERATIONS NON-OPERATING INCOME Gain on disposal of investments in mutual funds and investments in shares of stock (Note 2) 1. Interest Rental (Note 21) Gain on disposal of property, plant and equipment, and non-operating assets (Note 2) Other (Note 21) Total Non-Operating Income (Forward)	(	2002	% ( 100 133 - 33 50 8 4 62 95 40 1 1 1 1 44	2001	% 100 145 1 44 50 2 5 57 101 - 5 1 - 2 8
		Amount $7,848,992 72,701 ) 7,776,291 10,301,532 147 2,525,094 3,849,445 628,302 343,852 4,821,599 7,346,693 3,077,529 106,084 67,472 51,909 95,363 3,398,357		Amount $ 7,692,339 139,337 ) 7,553,002 10,985,096 96,953 3,335,141 3,771,719 120,805 414,899 4,307,423 7,642,564 20,993 397,584 66,337 31,593 129,379 645,886

English Translation of Financial Statements Originally Issued in Chinese

2002 Amount % $948,363 12 878,667 11 167,962 2 69,097 1 42,567 1 31,013 - 55,273 1 2,192,942 28 6,141,278 79 1,831,415 24 $ 7,972,693 103 2002 Before Income Tax After Income Tax $ 1.95 $ 2.53	2002 Amount % $948,363 12 878,667 11 167,962 2 69,097 1 42,567 1 31,013 - 55,273 1 2,192,942 28 6,141,278 79 1,831,415 24 $ 7,972,693 103 2002 Before Income Tax After Income Tax $ 1.95 $ 2.53	2001 Amount % $ 4,633,459 61 1,118,108 15 921,884 12 56,731 1 - - 188,028 3 36,870 - 6,955,080 92 13,951,758 185 1,146,494 15 $15,098,252 200 2001 Before Income Tax After Income Tax $ 4.31 $ 4.66
$

	Before Income Tax $ 1.95	Before Income Tax $ 4.31

The pro forma net loss per share, on the assumption that the stock of parent company held by its subsidiary is treated as an investment instead of treasury stock, are shown as follows (Notes 3 and 18):

NET LOSS LOSS PER SHARE Basic and diluted losses per share	Before Income Tax $6,502,966 $ 2.01	Before Income Tax $6,502,966 $ 2.01	After Income Tax
			$8,334,381 $ 2.57

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

(For review only, not audited in accordance with auditing standards generally accepted in the Republic of China; with T N Soong & Co auditors’ review report dated October 29, 2002)

English Translation of Financial Statement s Originally Issued in Chinese

MOSEL VITELIC INC.

STATEMENTS OF CASH FLOWS

For the Nine months Ended September 30, 2002 and 2001 (In Thousand New Taiwan Dollars)

			2002		2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	(	$	7,972,693	) ( $	15,098,252	)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation			1,392,712		1,683,935
Amortization			2,797,731		2,731,817
Realized deferred technology service revenue and others	(		6,455	) (	2,821	)
Investment loss recognized by equity method - net			948,363		4,633,459
Deferred income taxes			1,813,916		1,146,494
Realized intercompany profit	(		147 )	(	96,953	)
Gain on disposals of:
Investments in shares of stock	(		3,037,379	)	-
Property, plant and equipment and other assets	(		51,909	) (	31,593	)
Foreign exchange losses (gains) in “February 2000 Bonds”		(	4,135	)	190,430
Foreign exchange gains in Samurai Bonds			-		12,500
Accrued pension cost			3,953		3,218
Changes in operating assets and liabilities:
Decrease (increase) in:
Notes and accounts receivable	(		115,440	)	2,509,455
Inventories	(		499,711	)	1,677,021
Prepaid expenses and other current assets			73,300	(	32,430	)
Forward exchange receivables			7,386		53,358
Increase (decrease) in:
Notes and accounts payable			1,411,835	(	1,165,237	)
Other accounts payable - related parties			160,550		456,149
Accrued expenses and other current liabilities		(	258,089	) (	21,244	)
Net Cash Provided by (Used in) Operating Activities	(		2,887,886	) (	1,350,694 )
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property, plant and equipment	(		265,285	) (	72,589	)
Investments in shares of stock	(		1,693,630	) (	317,332	)
Properties held for sale			36,811	(	19,893	)
Increase in investment in mutual funds	(		1,014,610	) (	272,555	)
Decrease in pledged time deposits			3,207,986		2,759,428
Decrease (increase) in refundable deposits and other assets		(	1,064,983	)	126,410

(Forward)

English Translation of Financial Statement s Originally Issued in Chinese

			2002				2001
Proceeds from disposals of:
Investments in shares of stock		$	5,572,536			$	-
Property, plant and equipment and other assets			1,593				28,336
Increase in intangible assets	(		768,906	)	(		943,737	)
Net Cash Provided by Investing Activities			4,011,512				1,288,068
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term bank loans	(	$	113,187	)			$3,197,392
Increase (decrease) in commercial papers issued	(		470,000	)			1,030,000
Increase (decrease) in long-term bank loans			193,350		(		859,220	)
Increase in advance capital			60,803				-
Decrease in convertible bonds	(		1,763,894	)			(143,036	)
Decrease in Samurai bonds	(		3,152,500	)	(		27,552	)
Net Cash Used In Financing Activities		(	5,245,428	)			3,197,584
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS	(		4,121,802	)			3,134,958
Effect of foreign exchange rates in convertible bonds	(		180,000	)			20,536
CASH AND CASH EQUIVALENTS, BEGINNING OF THE
PERIOD			5,057,352				3,156,323
CASH AND CASH EQUIVALENTS, END OF THE PERIOD			$755,550			$	6,311,817
SUPPLEMENTAL INFORMATION
Interest paid		$	950,804			$	1,000,886
Income tax paid		$	48,722			$	47,868
Cash paid for acquisition of property, plant and equipment:
Total acquisitions	(	$	223,142	)	(	$	75,354	)
Payable for properties	(		42,143	)			2,765
	(	$	265,285	)	(	$	72,589	)
Cash paid for acquisitions of intangible assets:
Total acquisitions	(	$	391,081	)	(	$	231,290	)
Royalties payable	(		377,825	)	(		712,447	)
	(	$	768,906	)	(	$	943,737	)
Non-cash investing and financing activities:
Conversion of bonds into capital stock		$	-			$	14,696
Treasury stock - the parent’s share of stock held by
Subsidiaries		$	1,011,413			$	-
Current portion of long-term liabilities		$	12,724,894		$		8,110,137

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

(For review only, not audited in accordance with auditing standards generally accepted in the Republic of China; with T N Soong & Co auditors’ review report dated October 29, 2002)

English Translation of Financial Statement s Originally Issued in Chinese

MOSEL VITELIC INC.

NOTES TO FINANCIAL STATEMENTS

(For review only, not audited in accordance with auditing standards generally accepted in the Republic of China)

(In Thousand New Taiwan Dollars, Except Per Share Data and Specified Otherwise)

1. GENERAL

The Company was incorporated on January 8, 1987 and its shares of stock are listed on the Taiwan Stock Exchange since September 1995.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying financial statements were prepared in conformity with accounting principles generally accepted in ROC. The Company’s significant accounting policies are summarized as follows:

Cash equivalents

Government bonds acquired under resale agreements with original maturity dates of less than three months are classified as cash equivalents.

Investments in mutual funds

These investments are stated at the lower of cost or market value. Costs of investments sold are determined using the weighted-average method.

Allowance for doubtful receivables

Sales and allowances for sales returns and discounts

Inventories

Investments in shares of stock

Investments in shares of stock of companies wherein the Company exercises significant influence on their operating or financial decisions are accounted for using the equity method. Under the equity method, the investment are initially carried at cost and subsequently adjusted for the proportionate equity of the Company in the net income or net loss of the investees. The difference between the costs of the investment and the Company’s proportionate share in the net assets of the investees at the date of acquisition is amortized using the straight-line method over five years. Such amortization is recognized as a component of “Investment income or loss” account shown in the statements of income.

The Company will discontinue its recognition of its investment loss when the carrying value of the investment (including advances) is reduced to zero. However, in cases where the Company guarantees the obligations or is committed to provide further financial support to an investee company, or if the investee’s losses are temporary and evidence sufficiently shows imminent return to profitability in the foreseeable future, then, the Company continues to recognize its investment loss. The resulting negative carrying value of the investment and advances are reported as a liability on the balance sheets.

The entire amount of the gains or losses on sales to majority owned subsidiaries are deferred until such gains or losses are realized through the subsequent sale of the related products to third parties. The gains or losses on the sales made by the majority owned subsidiaries to the Company are deferred by the Company to the extent of its equity interest in such subsidiaries until such gains or losses are realized also through the subsequent sale of the related products to unrelated parties. On the other hand, the gains or losses arising from the transactions between more than 20% owned investee companies is deferred in proportion to the ownership percentage in the investee company that recognizes the gains or losses until realized through transactions with third parties.

Other investments in shares of stock are accounted for at costs. A decline in value is accounted for as follows:

a. Stock with quoted market prices. The temporary decline in market values and the reversal of such declines are included in stockholders’ equity. However, an other than temporary decline in the value of the investment is charged to current income.
b. Stock with no quoted market prices. A reduction that is other than a temporary decline in the carrying value of the investment is charged to current income.
9 -

The costs of investments sold are determined using the weighted average method.

Beginning January 2002, the Company adopted Statements of Financial Accounting Standards No. 30, “Accounting for Treasury Stock” (“SFAS No. 30”) which requires that the Company accounted for its stocks held by its subsidiaries as treasury stocks. The recorded costs of such treasury stocks are based upon the carrying values of the investments of subsidiaries as of January 1, 2002 or the date on which the Company hold the controlling interest over the subsidiaries. However, if its stocks held by subsidiaries as treasury stocks cause the Company continues to recognize its investment loss, then will be reported as a liability on the balance sheets.

- Property, plant and equipment and non operating properties

Property, plant and equipment covered by agreements qualifying as capital leases are carried at the lower of the market value of the leased equipment or the present value of the minimum lease payments at the inception date of the lease, and are depreciated over the leased equipment’s useful lives. The effective interest method is used to allocate each lease payment between principal and interest expense. The difference between the proceeds and the carrying value of the leaseback assets was recorded as unrealized loss on sale-leaseback, and is amortized over the contract period as depreciation expense.

Upon sale or disposal of properties, plant and equipment, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is credited or charged to current income.

Intangible assets

10 -

Convertible and exchangeable bonds

Pension costs

Pension costs are recorded based on actuarial calculations. Unrecognized net transition obligation is amortized over 23 years.

Income tax

Any tax credit arising from the purchase of machinery, equipment and technology, research and development expenditures, personnel training, investments in important technology-based enterprise are recognized by the flow-through method.

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

Income taxes (10%) on undistributed earnings generated are recorded as expense in the year when the stockholders have effectively decided that earnings shall be retained.

Revenue recognition

Sales are recognized when titles of products and risks of ownerships are transferred to customers, primarily upon shipment.

11 -

Derivative financial instruments

The premium or discount of the forward exchange contracts, recorded in New Taiwan dollars as assets and/or liabilities, is computed using the foreign currency amount of the contract multiplied by the difference between the contracted forward rates and the spot rates at the inception dates of the contract. The premium or discount is amortised using the straight-line method over the term of the forward contract with the amortization charged to income. On the balance sheet dates, the gains or losses on the foreign currency receivables or payables arising from these forward contracts are recognized as income.

Also, the receivables and payables related to the forward contracts are netted out, and the net amount is presented as either an asset or a liability.

- Foreign currency transactions

Foreign-currency transactions, except derivative financial instruments, are recorded in New Taiwan Dollars at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan Dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the period of conversion or settlement. At period-end, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except those foreign currency denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.

Reclassifications

Certain accounts in the financial statements as of and for the nine months ended September 30, 2001 have been reclassified to conform to the financial statements as of and for the nine months ended September 30, 2002.

3. CHANGE OF THE ACCOUNTING PRINCIPLE

In accordance with the Statement of Financial Accounting Standards No. 30, “Accounting for Treasury Stock” (SFAS No. 30) and other relevant regulations from Securities and Futures Commission (SFC), the Company should record its stocks held by its subsidiaries as treasury stocks. The reclassification is based on the carrying value of $1,056,072 thousand that the subsidiaries originally invested in the Company as of January 1, 2002. The adoption of SFAS No. 30 resulted in the decrease of investments in shares of stock and the increase of treasury stock by $1,011,413 thousand as of September 30, 2002, and the decrease of net loss for the nine months ended September 30, 2002 by $361,688 thousand.

12 -

CASH AND CASH EQUIVALENTS Cash and bank deposits Bonds acquired under resale agreements Less: Pledged time deposits - Current - Non-current INVESTMENTS IN MUTUAL FUNDS Open-end funds Less - allowance for decline in value	September 30 2002 2001 $ 3,810,657 $ 13,537,286 28,000 5,000 3,838,657 13,542,286 2,908,507 7,057,869 174,600 172,600 $ 755,550 $ 6,311,817 September 30 2002 2001 $ 1,225,135 $ 963,665 42,567 38,182 $ 1,182,568 $ 925,483

4. CASH AND CASH EQUIVALENTS

5. INVESTMENTS IN MUTUAL FUNDS

The allowance for decline in value for open-end funds is based on the net asset values of the funds as of September 30 of each year.

	September 30 2002 2001 753,940 $ 360,226 1,007,229 442,104 470,991 31,416 10,214 4,396 526,024 406,292 1,279,964 $ 766,518 September 30 2002 2001 1,873,002 $ 1,733,045 1,511,814 2,267,979 229,115 168,864 3,613,931 4,169,888 1,789,556 1,380,557	September 30 2002 2001 753,940 $ 360,226 1,007,229 442,104 470,991 31,416 10,214 4,396 526,024 406,292 1,279,964 $ 766,518 September 30 2002 2001 1,873,002 $ 1,733,045 1,511,814 2,267,979 229,115 168,864 3,613,931 4,169,888 1,789,556 1,380,557

$
$

	2002 1,873,002 1,511,814 229,115 3,613,931 1,789,556
$		$

6. NOTES AND ACCOUNTS RECEIVABLE

7. INVENTORIES

$ 1,824,375 $ 2,789,331

13 -

	September 30	September 30	September 30	% of Owner- Ship
2002	% of Owner- Ship	2001
		Carrying Value $16,727,984 - 2,171,217 261,530 120,964 80,602 32,220 5,126,520 284,254 $ 92,600 28,035 23,000 - $ 24,948,926 $849,555 1,498,537 $ 2,348,092
	37 100 100 51 100 35 100 - - 9 4 1 - 100 100			47 - 100 55 100 35 100 65 8 9 4 1 - 100 100

		$
			2,348,092

The carrying values of the equity-accounted investments (except for ProMOS in 2002 and 2001) and the related investment income and loss for the nine months ended September 30, 2002 and 2001 were based on unreviewed financial statements in the same period.

14 -

Investment income (losses) are summarized as follows:

		2002		2001
ProMOS	( $ 1,021,063 )		( $ 1,839,821		)
Giant Haven	(	498,270 )		-
DGI		437,886	(	1,456,177	)
ChipMOS		74,371		95,619
Vision2000		56,685	(	774,139	)
Mosel Vitelic Corporation (MVC)	(	49,085 )	(	63,773	)
Ultima		29,562	(	5,641	)
DenMOS		11,209	(	13,410	)
PlusMOS		6,669	(	99,034	)
MVS KK		3,287	(	12,932	)
UMI		386		4,797
ChipMOS-Bermuda		-	(	466,170	)
MV KK		-	(	2,778	)

($ 948,363 ) ( $ 4,633,459 )

The Company and its affiliate have combined equity interests representing 20% of the outstanding common stock of Ultima as of February 2002. Accordingly, this investment was accounted for by equity method. However, since February 2002, the Company’s affiliate has subsequently disposed its investment in shares of stock of Ultima which had led to a combined equity interests of less than 20%. Accordingly, this investment has been accounted for by cost method since March 2002.

The Company exchanged its investment in 377,279 thousand common shares of ChipMOS with 37,728 thousand common shares of ChipMOS Technologies (Bermuda) Ltd. (ChipMOS-Bermuda) pursuant to a Purchase and Subscription Agreement (Agreement) entered into on January 12, 2001. Subsequently, on December 17, 2001, the Company executed another agreement whereby it exchanged all its holdings of common shares of ChipMOS-Bermuda with those of Giant Haven Investments (BVI) Ltd. (Giant Haven). The Company, which prior to the execution of these agreements, had 45% equity interest in ChipMOS, thus became the major shareholder of Giant Haven, which, in turn, has indirect 47% equity interest in ChipMOS through its direct 67% equity interest in ChipMOS-Bermuda. The shares of stock of ChipMOS-Bermuda is listed on National Association of Securities Dealers Automated Quotation (NASDAQ) since June 19, 2001.

The Company has collectively disposed 210,000 thousand shares of ProMOS stock in January and March 2002, and 20,201 thousand shares of Ultima stock in August and September 2002, which has resulted in a gain on disposal of such investments of $3,037,379 thousand.

15 -

9. PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation consists of:

Machinery and equipment Buildings and auxiliary equipment Furniture and fixtures Equipment under capital lease Tooling Transportation equipment Leasehold improvements	September 30 2002 2001 $ 13,489,104 $ 12,396,108 1,370,817 1,161,521 294,337 284,334 99,886 - 39,936 37,137 4,099 3,742 3,503 2,679 $ 15,301,682 $13,885,521
	2002 $ 13,489,104 $ 1,370,817 294,337 99,886 39,936 4,099 3,503 $ 15,301,682

The Company sold certain machinery and equipment to a domestic leasing company, and simultaneously leased them back under agreements that qualify as capital lease since the agreements contains bargain purchase options. The period of sale-leaseback is 1 year from November 2001 to October 2002 with the lease paid monthly. The future lease obligation amounted to $40,996 thousand as of September 30, 2002.

INTANGIBLE ASSETS - NET Technology Deferred charges Computer software and electrical installation Patents

10. INTANGIBLE ASSETS - NET

The Company has patent agreements with several foreign companies under which it pays royalties based on schedules of payments set forth in the agreements.

16 -

NON-OPERATING PROPERTIES - NET September 30 2002 2001 Buildings and equipment leased to others $ 876,295 $ 714,904 Employee dormitory 573,194 604,686 Office building and other assets - 211,865 $ 1,449,489 $ 1,531,455	NON-OPERATING PROPERTIES - NET September 30 2002 2001 Buildings and equipment leased to others $ 876,295 $ 714,904 Employee dormitory 573,194 604,686 Office building and other assets - 211,865 $ 1,449,489 $ 1,531,455

	$ 1,531,455

11. NON-OPERATING PROPERTIES - NET

Buildings and equipment leased to others included those leased to ProMOS, DenMOS and SynMOS, among others, under the operating lease agreements.

12. SHORT-TERM BANK LOANS The loan due in December 2002 and August 2002 with bear interest at 3.0% to 7.715% and 3.9% to 7.705% in 2002 and 2001, respectively. Loan for importation of materials. NT$94,000 thousand, US$36,507 thousand, and￥8,910 thousand due in February 2003 with interest at 2.55% to 3.13% in 2002; ￥8,910 thousand due in February 2003 with interest at 1.15% in 2002; US$487 thousand due in March 2002 with interest at 3.23% to 4.49%.		September 30 2002 2001 $ 2,440,000 $ 3,277,243 1,371,378 16,811 $ 3,811,378 $ 3,294,054	September 30 2002 2001 $ 2,440,000 $ 3,277,243 1,371,378 16,811 $ 3,811,378 $ 3,294,054
		2002 $ 2,440,000 1,371,378 $ 3,811,378

13. COMMERCIAL PAPERS ISSUED

These commercial papers in the amount of $60,000 thousand and 1,030,000 thousand, respectively, as of September 2002 and 2001, guaranteed by financial institutions, bear annual interest rates of 4% and 3.9% to 4.46%, and have maturity dates of October 16, 2002 and January 2002 for those issued in 2002 and 2001, respectively.

LONG-TERM BANK LOANS Long-term secured working capital loans: Repayable in quarterly installments commencing from August 2004 until May 2012; interest at a floating rate of 5.15% to 5.25% Medium secured syndicated loans at US$25,714 thousand: Repayable in semi-annual installments commencing from November 1998 until November 2001; interest at floating rates of 4.85% to 7.702% in 2001.	September 30 2002 2001 $ 360,000 $ - - 887,657
	2002 $ 360,000 -

14. LONG-TERM BANK LOANS

17 -

(Forward)

18 -

Medium to long-term secured working capital loans: Repayable monthly commencing from December 2002 until November 2008; interest at floating rates of 6.22% to 7.28%. Medium secured working capital loans: Repayable in quarterly installments commencing from August 2003 until May 2007; interest at a floating rate of 5.15% to 5.25%. $ Medium loans for purchase of equipment: Repayable in 15 consecutive quarterly installments commencing from October 1998 until April 2002; interest at floating rates of 6.5% to 6.63% in 2001. Less - current portion $ 15. BONDS ISSUED Bonds issued in July 1996 (the “July 1996 Bonds”) Aggregate face value of bonds issued $ Converted into 71,489 thousand shares and 71,489 thousand shares as of September 30, 2002 and 2001, respectively ( Accrued redemption premium Bonds issued in May 1998 (the “May 1998 Bonds”) Aggregate face value of bonds issued Converted into 97,995 thousand shares as of September 30, 2002 and 2001 ( Accrued redemption premium Bonds issued in October and November 1998. This is due in October and November 2001 and bears annual interest rates of 7.52% and 7.18%. Original issue Redemption

	$
	$

(Forward)

19 -

Bonds issued in January 1999. This is due in January 2002 and bears interest at floating rate (currently 6.8%, up to 9%) Issued on February 2000 (the “February 2000 Bonds”) Aggregate face value of bonds issued Converted into 7,833 thousand shares as of June 30, 2002 and 2001. Redemption Accrued redemption premium Bonds issued in April 2000. This is due in April 2003 and bears interest at floating rate that ranges from 5.70% to 7.85%. Redemption Less - current portion	$ ( $ (

		$

The July 1996 Bonds, the May 1998 Bonds and the February 2000 Bonds (collectively the “Bonds”) will mature on July 2006, May 2008 and February 2005, respectively, and bear annual interest rates of 2.5%, 0% and 1%, respectively. The July 1996 Bonds and the May 1998 Bonds are convertible into shares of stock of the Company at $40.40 and $46.58 per share (both adjustable), respectively from October 1996 to July 2006 and from August 1998 to May 2008, respectively. The February 2000 Bonds are convertible into shares of stock of ProMOS at $107.41 (adjustable) per share. The conversion period is from February 2, 2000 to February 1, 2005. The Company may redeem the bonds at certain period prior to the maturity date, and the holders of the May 1998 Bonds and the February 2000 Bonds may request the company to redeem the bonds with the par value of the bonds plus the accrued redemption premium in May 2003 and February 2003, respectively.

As of September 30, 2002, the Company has provided 591,500 thousand, and 406,400 thousand investment in share of ProMOS as security for the bonds issued, in April 2000, and the February 2000 Bonds, respectively. Also, the Company has provided US$48,351 thousand of refundable deposits to security for the Bond issued in February 2000.

16. PENSION PLAN

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Pension costs for the nine months ended September 30, 2002 and 2001 were $11,061 thousand and $11,107 thousand, respectively, and the balances of the pension fund as of September 30, 2002 and 2001 were $142,752 thousand and $131,658 thousand respectively.

17. SHAREHOLDERS’ EQUITY

On September 23, 1999, the Company issued 9,980 thousand units of global depositary receipts (GDR), at an aggregate issue price of $2,770,000 thousand or $27.70 per share representing 99,800 thousand shares of its common stock. Simultaneous to the issuance of the GDR, the Company also issued 200 thousand shares to its employees.

The Company’s Articles of Incorporation provides that the following may be appropriated, if approved by the shareholders, from the accumulated net income after deducting any previously accumulated deficit and the 10% legal reserve: (a) a special reserve, if deemed necessary, (b) 10% as bonus to employees, including employees of affiliates of the Company, in cases where any dividend is distributed or paid by the Company, (c) 2% as remuneration to directors and supervisors, also in cases where any dividend is distributed or paid by the Company, and (d) dividends to shareholders. Also, bonus and dividends can only be distributed and/or paid after all income tax obligations of the Company are paid.

These appropriations and the disposition of the remaining net income are approved by the shareholders in the following year and given effect to the financial statements of that year.

21 -

Under the Integrated Income Tax System that became effective on January 1, 1998, resident individual shareholders are allowed tax credits for the income tax paid by the Company on earnings generated also as of January 1, 1998. An Imputation Credit Account (ICA) is maintained by the Company actually paid by or withheld from the Company and the tax credit allocated to each shareholder. The maximum credit available for allocation to each shareholder cannot exceed the balance shown in the ICA on the date of distribution of dividends.

The shareholders of the Company has resolved on May 23, 2002 to offset deficit by transferring the accumulated legal reserve in amounts of $593,051 thousand and paid-in capital in amounts of $11,722,788 thousand generated prior to 2001.

The Company expected to issue additional 400,000 thousand shares (with par value of $10 per share) in September 2002. The Company has received approval from SEC on its issue of the new shares. The paid-in capital is expected to be $36,390,394 thousand after the issue. Up to October 29[th] , 2002, the issue is completed.

18. TREASURY STOCK (COMMON STOCK)

(Shares in Thousand)

Purpose of Purchase Nine months ended September 30, 2002 Treasury stock - the parent’s share of stock held by subsidiaries	Beginning Shares 84,351	Increase 43,069	Decrease 36,023		Ending Shares
					91,397

Beginning on January 2002, the Company accounted for its share of capital stock held by subsidiaries as treasury stock in the amount of $1,056,072 thousand and the carrying value and the market value of such stock were $1,011,413 thousand and $743,056 thousand, respectively, as of September 30, 2002. Proceeds from sales of treasury stock for the nine months ended September 30, 2002 were $658,863 thousand. The Company’s share of stock held by subsidiaries, although accounted for under treasury stock method, is still entitled shareholders’ right and privilege.

19. INCOME TAX

a. A reconciliation of income tax expense - there is no income tax expense payable for the nine months ended September 30, 2002 and 2001.
22 -

b. Income tax expense (benefit) as of September 30, 2002 and 2001 consist of:

Income tax expense – current Additional 10% on the unappropriated earnings Income tax credit Net change in deferred income tax benefit (expenses) for the year: Tax credit Temporary differences Operating loss carryforwards Valuation allowance Adjustment of prior years’ taxes Income tax expense	2002 $ - 55,094 (55,094) 117,371 ( 392,539) ( 283,257) 2,372,340 17,500 $ 1,831,415	2001 $ - - ( 55,360 ) ( 390,382) ( 1,810,564) 3,402,800 - $ 1,146,494

c. Deferred income tax assets as of September 30, 2002 and 2001 consisted of the following:

Current Tax credit on machinery and equipment Research and development expenditures Temporary differences Tax credit from stockholders’ shares Operating loss carryforwards Less - valuation allowance Noncurrent Tax credit on machinery and equipment Research and development expenditures Tax credit from stockholders’ shares Operating loss carryforwards Temporary differences Less - valuation allowance		2002 $ 6,427 6,648 864,702 1,363,988 362,051 2,603,816 2,603,816 - $ 17,964 257,408 1,362,921 5,648,304 ( 252,921 ) 7,033,676 5,100,454 $1,933,222		2001 $179,447 29,882 719,033 - - 928,362 928,362 - $ 50,341 318,680 2,726,909 4,745,357 471,827) 7,369,460 3,622,322 $3,747,138
	$		$
			(

The effective tax rate for deferred income tax as of September 30, 2002 and 2001 is 25%.

d. Integrated income tax information. The balances of the ICA (see Note 17) were $8,280 thousand and $8,241 thousand as of September 30, 2002 and 2001, respectively.

The actual tax credit rate was 11.21% in 2000. There was accumulative deficit in 2001.

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e. The unappropriated retained earning information. The unappropriated earnings as of September 30, 2002 and 2001 did not include any earning generated prior to December 31, 1997.

f. As of September 30, 2002, investment tax credits consisted of the following:

Regulation Statute for Upgrading Industries Statute for Upgrading Industries Statute for Upgrading Industries Income Tax Law	Item		Total Tax Credit $ 33,974 3,230 12,882 1,852 $ 51,938 $ 6,648 74,477 89,537 67,975 52,966 $ 291,603 $ 1,363,988 963,595 399,326 $ 2,726,909 $ 362,051 977,936 1,210,111 - 3,460,257 $6,010,355	Unused Tax Credits $ 6,427 3,230 12,882 1,852 $ 24,391 $ 6,648 74,477 89,537 67,975 25,419 $ 264,056 $ 1,363,988 963,595 399,326 $ 2,726,909 $ 362,051 977,936 1,210,111 - 3,460,257 $ 6,010,355	Year of Expiry
	Investments in machinery and equipment Research and development expenditures Investments in important technology based enterprise Loss carryforwards				2002 2003 2004 2006 2002 2003 2004 2005 2006 2002 2003 2004 2002 2003 2004 2005 2006 and thereafter

Income tax returns through 1999 have been examined and cleared by the tax authorities.

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20. LOSS PER SHARE

A reconciliation of numerator and denominator of basic and diluted loss per share calculation is provided as follows:

Nine months ended September 30, 2002 Basic and diluted loss per share loss available to common stockholders Nine months ended September 30, 2001 Basic and diluted loss per share loss available to common stockholders	Amounts (Numerator) Before After Income Income Tax Tax $ 6,141,278 $ 7,972,693 $13,951,758 $15,098,252	Shares (Denominator) (Thousand) 3,150,699 3,238,413	Shares (Denominator) (Thousand) 3,150,699 3,238,413	Loss Per Share Before After Income Income Tax Tax $ 1.95 $ 2.53 $ 4.31 $ 4.66	Loss Per Share Before After Income Income Tax Tax $ 1.95 $ 2.53 $ 4.31 $ 4.66
	Before Income Tax $ 6,141,278 $13,951,758			Before Income Tax $ 1.95 $ 4.31
					$ 2.53 $ 4.66

The influence of stock dividend has been retroactively adjusted when computed earnings per share.

21. RELATED PARTY TRANSACTIONS

a. The Company has transactions with the following related parties:

Name 1) Direct subsidiaries MVC MVS KK UMI DGI MV KK DenMOS ProMOS PlusMOS	Relationship
	A wholly owned subsidiary A wholly owned subsidiary A wholly owned subsidiary A wholly owned subsidiary A wholly owned subsidiary (dissolved in December 2001) A 51% owned subsidiary A 37% owned investee A 35% owned investee

2) Indirect subsidiaries

Ultima A 4% indirectly owned investee (Note 8) SyncMOS Technologies Inc., Taiwan Branch A 32% owned investee (SyncMOS Taiwan branch) Sun-Fund Securities Investment Advisory A 49% indirectly owned investee Co., LTD SyncMOS Microelectronic Inc. (SyncMOS) A 39% owned investee ChipMOS A 47% indirectly owned investee InterMOS Technologies Corp. (InterMOS) Indirectly owns 100% ownership (Forward)

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Name Relationship PacMOS Technologies Holdings Ltd. (PacMOS) A 32% indirectly owned investee PCL Holdings Ltd. (PCL) The director and supervisor of the Company Shanghai SyncMos SemiConductor Corp. (Shanghai SyncMOS) A 22% owned investee Harvest Century Enterprises Ltd. (Harvest) A 32% owned investee b. Related party transactions other than those disclosed in other notes: 2002 2001 Amount % Amount % At end of the period Notes receivable SyncMOS $ 572 1 $ - - InterMOS 24 - - - Ultima - - 755 34 $ 596 1 $ 755 34 Accounts receivable Ultima $ 245,461 19 $ 218,725 29 MVS KK 241,072 19 $ 103,972 14 DenMOS 84,820 7 - - MVC 82,190 6 - - PlusMOS 77,897 6 18,153 2 Shanghai SyncMOS 21,689 2 - - SyncMOS 147 - 9,494 1 PCL 68 - - - PacMOS - - 9,882 1 $ 753,334 59 $ 360,226 47 Other receivables ProMOS $ 28,931 82 $ 25,404 27 SyncMOS 2,516 7 61,956 67 DenMOS 1,365 4 751 11 ChipMOS 915 3 2,713 3 Ultima 525 1 558 1 MVC 430 1 670 1 PlusMOS 400 1 477 - MVS KK 232 1 125 - InterMOS 99 - 31 - DGI 21 - - - SyncMOS - - 362 - $ 35,434 100 $ 93,047 100 Notes payable ChipMOS $ 725,276 16 $ 524,607 31 ProMOS 466,698 11 75,338 4 PlusMOS 2,461 - 10,312 1 $ 1,194,435 27 $ 610,257 36	Relationship	Relationship	Relationship
Amount $ 572 24 - $ 596 $ 245,461 241,072 84,820 82,190 77,897 21,689 147 68 - $ 753,334 $ 28,931 2,516 1,365 915 525 430 400 232 99 21 - $ 35,434 $ 725,276 466,698 2,461 $ 1,194,435

		$ 218,725 $ 103,972 - - 18,153 - 9,494 - 9,882 $ 360,226 $ 25,404 61,956 751 2,713 558 670 477 125 31 - 362 $ 93,047 $ 524,607 75,338 10,312



	27	$ 610,257	36

(Forward)

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2002	2001	% 53 16 28 2 - - 1 -
Amount $ 666,931 102,888 22,712 8,391 4,338 19 - - $ 805,279 $ 110,827 $ 5,307 836 - $ 6,143 $ 14,487 836 $ 15,323 $ 1,360,861 799,806 532,700 456,886 418,340 66,313 52,099 21,159 4,457 3,122 2,269 - $ 3,718,012 $ 564,042 $ 1,613,551 59,039 6,060	Amount $ 278,128 81,377 144,013 12,218 - - 3,556 15 $ 519,307 $ - $ 5,307 1,881 299 $ 7,487 $ 14,487 - $ 14,487 $ 997,792 432,742 250,760 566,227 - - 9,481 - - - 76 9,904 $ 2,266,982 $ 400,786 $ 1,928,893 23,917 3,436
		100
		- 1 - -
		1
		3 -
		3
		13 6 3 7 - - - - - - - -
		29
		7 78 - -

$ 1,678,650 91 $ 1,956,246 78

(Forward)

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2002	2001	% 11 3 14 67 7 3 - - -
Amount $ 336,085 88,995 $ 425,080 $ 44,870 3,411 2,494 407 60 9 $ 51,251 $ 16,847 5,661 2,200 2,087 1,957 1,705 821 132 - $ 31,410 $ 200 150 4 $ 354	Amount $ 428,098 89,963 $ 518,061 $ 44,119 4,441 2,175 - 139 - $ 50,874 $ 23,335 6,017 2,200 6,447 344 1,798 27 123 7,277 $ 47,568 $ - - 27,258 $ 27,258
		77
		18 5 2 5 - 1 - - 6
		37
		- - 96
		96

a. Ultima - according to the related contracts.
b. PlusMOS - 14 days after the shipment dates of the products.
c. MVS KK - 120 days after the end of the month of sale.

In view of the improvement in the industry, the Company adjusted the payment term of sales to ProMOS from 60 days after shipping date to 120 days after month end from November 2001 to August 2002, and to ChipMOS from 90 days to 120 days after month end from November 2001 to April 2002.

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MVC and UMI are conducting, on behalf of the Company, research and development (R&D) on certain products. The Company reimburses the expenses incurred by MVC and UMI related to foregoing R&D activities plus a fee equivalent to 5% and 10%(adjusted to 2% from July 2001), respectively, of the actual expenses.

22. PLEDGED OR MORTGAGED ASSETS

The following assets are pledged or mortgaged as collaterals to secure the customs duties obligations, short-term loans, long-term loans, secured bonds, exchangeable bonds of the Company, capital lease, royalties payable and forward contracts as well as obligations of related companies:

Refundable deposits: Current assets Other Assets Time deposits: Current Assets Other Assets Shares of stock ProMOS – 1,046,230 thousand shares in 2002 and 1,077,005 thousand shares in 2001 Property, plant and equipment - net Non-operating properties: R&D buildings - net Employee dormitory - net		September 30 2002 2001 $1,713,336 $ - 522,979 668,645 2,908,507 7,057,869 174,600 172,600 10,379,877 11,699,275 1,420,598 3,671,212 138,671 145,588 521,416 543,903 $17,779,984 $23,959,092	September 30 2002 2001 $1,713,336 $ - 522,979 668,645 2,908,507 7,057,869 174,600 172,600 10,379,877 11,699,275 1,420,598 3,671,212 138,671 145,588 521,416 543,903 $17,779,984 $23,959,092
		2002 $1,713,336 522,979 2,908,507 174,600 10,379,877 1,420,598 138,671 521,416 $17,779,984

23. SIGNIFICANT LONG-TERM OPERATING LEASES

The Company also leased certain equipment from Cypress Semiconductor Corp. that will expire in 2005.

Minimum lease payments were as follows:

Years 2002 4thquarters 2003 2004 2005	Equipment	Land, Building and Auxiliary- Equipment $ 6,909 27,637 27,637 24,280	Total $ 94,209 376,837 376,837 198,880
	$ 87,300 349,200 349,200 174,600

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2006 2007 and thereafter		- - $ 960,300	$	23,609 110,033 220,105	23,609 110,033 $1,180,405

SIGNIFICANT COMMITMENTS AND CONTINGENCIES

Significant commitments and contingencies as of September 30, 2002, except those disclosed in other notes to the financial statements, are as follows:

a. Unused letters of credit of about ￥54,890 thousand.
b. As mentioned in Note 22, a portion of the Company’s time deposits amounting to US$5,000 thousand and $100,000 thousand were used to partially secure an obligation of Vision2000, and Mou-Fu Investment Co., Ltd., respectively. Further, the Company has guarantee on the borrowings of Ultima of $900,000 thousand, Vision2000 of $2,374,560 thousand and Mou-Fu Investment Co., Ltd. (MFI, an indirect-wholly owned subsidiary of the Company) of $3,100,000 thousand.
c. Purchase, through SAG, of a certain percentage of wafers produced by ProMOS (a 37% owned investee of the company) pursuant to a Joint Venture Agreement (JVA) entered into on September 26, 1996 among the Company, ProMOS and SAG. On March 15, 2000, the rights and obligations of SAG under the JVA were substituted by Infineon. On October 4[, ] 2002, Infineon terminated the agreement with the company. Currently, the legality is uncertain. If the agreement is legally terminated, the productivity-reserved contract signed by the company, Infineon and ProMOS will be terminated on December 31, 2002. The company will discuss the redistribution of the productivity with Infineon.
d. The Company had entered into two forward contracts with Credit Suisse First Boston (Europe) Limited (CSFB) and Credit Suisse First Boston International (CSFBI) in 1997, respectively. The amounts of contracts are US$120,000 thousand and US$50,000 thousand, which matured at October 2002 and December 2002 respectively. According to the contracts, the Company should pay an amount equivalent to 1.825%~1.8325% of the US$120,000 thousand and US$50,000 thousand every year. CSFBI and the Company, respectively, have options to extend the contract, which final extended maturity dates are October and December 2027. The Company will pay a significant amount of penalty if it terminates the contract in advance.
In September 2000, CSFB and CSFBI brought an action in an English Court (the “Court”) to declare the contracts to be valid. In November 2000, the Company terminated the contracts and filed a defense and counterclaim with the Court. The counterclaim seeks to have these two contracts declared invalid or, alternatively, seeks to have CSFB and CSFBI declared to be in breach of the contracts. The counterclaim also seeks repayment for all annual payments totaling to US$6,299 thousand that the Company has paid, the security deposit payments with CSFB and CSFBI of US$5,000 thousand (other assets) and damages as compensation for breach of contract. In January 2001, CSFB and CSFBI also filed their counter suits reasserting that the two contracts are still valid. The
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counter suits filed by CSFB and CSFBI also seek net claim amounting to approximately US$45,485 thousand in early termination penalty fees.

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As of October 29, 2002, the foregoing legal proceedings are still on going in the Court. After consultation with the Company’s general counsel, management believes that the Company’s defense and counterclaim have a reasonable prospect of proving the facts and matters stated in its amended defense and counterclaim, and therefore succeed in its defense. Thus, the management believes that the outcome of the case will not materially affect the Company’s financial position and the result of its operations. Accordingly, no provision has been recorded in the accompanying financial statements in respect of the claims made by CSFB and CSFBI.

e. Advanced Technology Distributors Inc. brought a civil action in July 2002 for alleged price-fixing by a number of manufacturers and sellers of DRAM memory chips. That investigation has not begun. Therefore, the probable outcome of this investigation or the likelihood of an adverse result is still undetermined.

25. DERIVATIVE FINANCIAL INSTRUMENTS

The Company has no derivative transactions as of September 30, 2002.

Fair value of financial instruments

September 30 2002 2001 Carrying Carrying Value Fair Value Value Fair Value Assets Cash and cash equivalents $ 755,550 $ 755,550 $ 6,311,817 $ 6,311,817 Pledged time deposits (including Current portion) 3,083,107 3,083,107 7,057,869 7,057,869 Investments in mutual funds - net 1,182,568 1,182,568 925,483 925,483 Notes and accounts receivable 1,279,964 1,279,964 766,518 766,518 Other receivable-related parties (other current assets) 35,434 35,434 93,047 93,047 Investments in shares of stock (including credit balance) 19,598,868 25,460,335 22,600,834 30,677,773 Refundable deposits (including current portion) 2,236,315 2,236,315 668,645 668,645 (Forward)	September 30	September 30	September 30
		2001
		Carrying Value $ 6,311,817 7,057,869 925,483 766,518 93,047 22,600,834 668,645	Fair Value
			$ 6,311,817 7,057,869 925,483 766,518 93,047 30,677,773 668,645

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September 30	September 30	September 30
2002 Carrying Value Fair Value $ 3,811,378 $ 3,811,378 60,000 60,000 4,421,880 4,421,880 805,279 805,279 44,812 44,812 1,867,798 1,867,798 900,000 900,000 12,698,584 11,182,256 - - 23,332 23,332 - -	2001
Carrying Value $ 3,811,378 60,000 4,421,880 805,279 44,812 1,867,798 900,000 12,698,584 - 23,332 -	Carrying Value $ 3,294,054 1,030,000 1,676,440 519,307 64,300 2,501,625 1,310,137 15,672,534 3,625,000 22,437 15,241	Fair Value
		$ 3,294,054 1,030,000 1,676,440 519,307 64,300 2,501,625 1,310,137 14,352,411 3,443,750 22,437 -

Fair values of financial instruments were determined as follows:

a. Short-term financial instruments - carrying values.
b. Investments in mutual funds - market values.
c. Investments in shares of stock - market value for listed companies and net equity value for the others.
d. Refundable and guarantee deposits - carrying values.
e. Long-term liabilities - forecasted cash flows discounted at present value, using interest rates of similar long-term liabilities. Fair values of long-term liabilities are their carrying values as they use floating interest rates.
f. The Company calculates the fair value of each contract by the interest swap rate published by the bank, according to the maturity rate of each swap contract.

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26. ADDITIONAL DISCLOSURES

The additional disclosures of investee companies are based on unaudited financial statements except for ProMOS. Except for the followings, the Company has no other significant transactions, investees and investments in Mainland China information that should additional disclosures required by the SEC:

a. Financing provided: Please see Table 1 attached;
b. Endorsement/guarantee provided: Please see Table 2 attached;
c. Marketable securities held: Please see Table 3 attached;
d. Marketable securities acquired and disposed at costs or prices at least $100 million or 20% of the paid-in capital: Please see Table 4 attached;
e. Total purchase from or sale to related parties amounting to at least $100 million or 20% of the paid-in capital: Please see Table 5 attached;
f. Receivable from related parties amounting to at least $100 million or 20% of the paid-in capital: Please see Table 6 attached;
g. Names, locations and related information of investees on which the Company exercises significant influence: Please see Table 7 attached;
h. Transactions of derivative financial instruments: Please see Note 25.

ProMOS

a. Derivative financial transactions. The purpose for ProMOS to enter foreign exchange options for the nine months of year 2002 is mainly to avoid risks of net assets and liabilities by foreign currencies, and exchange rate trading, which is non-trading-purpose activities. The related information is disclosed below:

European foreign currency options

Because ProMOS is expected to receive income by US dollars from export, and
pay the imported material and machinery by Japanese Yen and Euro currency, ProMOS signed the foreign-currency-option contract with the bank to avoid the risk of exchange rate fluctuations. Up to the end of September 2002, ProMOS doesn’t have contacts of European foreign currency options that are not due.

Trading risk

The parties that ProMOS trades with are financial institutions with outstanding credit histories. So, material credit risks are not expected.

The risk of market price

The purpose for ProMOS to enter foreign currency options is to avoid exchange rate risks of net assets and liabilities by foreign currencies. Because the gain or loss due to the exchange rate fluctuation will be offset with the hedging tools, the risk of market price is not material.

Current risk and risk of cash flow

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The purpose for ProMOS to enter foreign exchange options is to avoid risks of net assets and liabilities by foreign currencies, and the risk of exchange rate fluctuation for expected trading. Since there would be cash inflow and outflow when contacts are due, ProMOS has enough cash to meet the demand. Thus, there is no risk for raising capital, and foreign currency contracts would be paid by royalties. Therefore, the risk of cash flow would not be material.

Types of derivative financial instruments, purposes, and strategies for achieving such purposes

ProMOS’s derivative financial instruments are held for non-trading purposes, and the hedging purpose is to avoid most of the market price risk. Derivative financial instruments chosen mostly have high negative coefficient with the fluctuation of the fair value of items hedged, and periodic evaluations are performed.

b. Fair value of financial instruments

September 30	September 30	September 30
2002 Carrying Value Fair Value $ 3,437,993 $ 3,437,993 350,700 350,700 773,468 776,026 5,620,539 5,620,539 3,475 3,475 49,621 49,621 200,000 200,000 3,000,000 3,000,000 15,020 15,020	2001
Carrying Value $ 3,437,993 350,700 773,468 5,620,539 3,475 49,621 200,000 3,000,000 15,020	Carrying Value $ 11,690,363 346,700 712,032 1,719,336 468 32,240 - - 14,875	Fair Value
		$ 11,690,363 346,700 719,721 1,719,336 468 32,240 - - 14,875

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September 30	September 30	September 30
2002 Carrying Value Fair Value 4,351,844 4,351,844 250,000 250,000 1,355,966 1,355,966 86,503 86,503 2,269,596 2,269,596 2,700,000 2,700,000 6,911,334 6,911,334 685,000 685,000 $ 9,768,245 $ 9,768,245 840 840	2001
Carrying Value 4,351,844 250,000 1,355,966 86,503 2,269,596 2,700,000 6,911,334 685,000 $ 9,768,245 840	Carrying Value 2,297,869 2,708,000 1,125,328 92,448 5,054,871 - 6,410,852 - $ 12,505,540 840	Fair Value
		2,297,869 2,708,000 1,125,328 92,448 5,054,871 - 6,410,852 - $ 12,505,540 840

Fair values were determined as follows:

1) Short-term financial instruments and long-term investment in debt securitiesCarrying values.
2) Investments in mutual funds - market values.
3) Long-term liabilities - except the fair value of bonds is estimated using the value of discounted future cash flow, fair values of other long-term liabilities are their carrying values as they use floating interest rates.

4) Refundable and guarantee deposits - carrying values.

ProMOS had entered into two forward contracts with Credit Suisse First Boston (CSFB) of US$225,000 thousand and Credit Suisse First Boston International (CSFBI, formerly Credit Suisse Financial Products) of US$200,000 thousand in 1997, respectively. The forward exchange contracts also provide for: (a) payment by ProMOS every year of an amount equivalent to 1.825% and 1.857% of the US$225,000 thousand and US$200,000 thousand, respectively (the “annual payment”), and (b) the contracts could be terminated early in November and December 2002, but there was an option for ProMOS to allow these contracts to continue up to November and December 2027. ProMOS will be required to pay a significant amount of penalty if the contract would be terminated early (the “termination settlement payment”).

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In September 2000, CSFB and CSFBI brought an action in an English Court to declare the contracts to be valid. In November 2000, ProMOS terminated the alleged contract and filed a defense and counterclaim with the English Court. The counterclaim seeks to have these two contracts declared invalid or alternatively, seeks to have CSFB and CSFBI declare to be in breach of the contracts. The counterclaim also seeks repayment of all annual payments totalling to US$15,863 thousand that ProMOS has paid, the security deposit payments of US$10,000 thousand and damages compensation for breach of contract. In January 2001, CSFB and CSFBI also filed their counter suits reasserting that the two contracts are still valid. The counter suits filed by CSFB and CSFBI also seek net claim amounting to approximately US$101,000 thousand in early termination penalty fees.

As of October 22, 2002, the foregoing legal proceeding is still on going in the English Court. After consultation with ProMOS’s general counsel, the management believes that ProMOS has a reasonable prospect of proving the facts and matters stated in its amended defence and counterclaim, and therefore succeed in its defence. Thus, the management believes that the outcome of the case will not materially affect ProMOS's financial position and the result of its operations. Accordingly, no provision has been recorded in the accompanying financial statements in respect of the claims made by CSFB and CSFBI.

Vision2000

In 1997, Vision2000 has forward exchange contracts as follows: (a) with CSFBI whereby Vision2000 will receive US$100,000 thousand, and (b) with CSFB whereby Vision2000 will receive US$50,000 thousand. The forward exchange contracts also provide for: (a) payment by Vision2000 every year of an amount equivalent to 1.825% and 1.8325% of the US$100,000 thousand and US$50,000 thousand, respectively, and (b) the contracts could be terminated early (in Year 2002) but there was an option for Vision2000 to allow these contracts to continue up to Year 2027. Vision2000 is required to pay a significant amount of penalty if the contract is terminated early.

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TABLE 1

MOSEL VITELIC INC. AND INVESTEES

FINANCING PROVIDED For the Nine Months Ended September 30, 2002

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Financing Name	Counter-Party	Financial Statement Account	Maximum Balance for the Period	Ending Balance	Interest Rate	Financing Nature	Transaction Amount	Financing Reasons	Allowance for Bad Debt	Collateral	Collateral	Financing Limit for Each Borrowing Company	Financing Company’s Financing Amount Limits
										Item	Value
MVC Vision2000	Vision2000 Vision2000 Ark Logics Inc.	Accounts receivable - related parties Accounts receivable - related parties Other receivables	$ 911,934 817,363 23,513	$ 911,934 266,984 22,927	2.82% 2.89%-2.12% -	Short-term financing Short-term financing -	$ - - -	Redemption of the papers at a floating rate Loan Loan	$ - - -	- - -	$ - - -	$ - - -	$ - - -

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TABLE 2

MOSEL VITELIC INC. AND INVESTEES

ENDORSEMENT/GUARANTEE PROVIDED For the Nine Months Ended September 30, 2002

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Endorsement/Guarantee	Counter-party	Counter-party	Limits on Each Counter-party’s Endorsement/ Guarantee Amounts	Maximum Balance for the Period	Ending Balance	Value of Collateral Properties, Plant and Equipment (US$ in Thousand)	Percentage of Accumulated Amount of Collateral on Net Equity of the Latest Financial Statement	Maximum Collateral/ Guarantee Amounts Allowable
	Name	Nature of Relationship
MVI ChipMOS	MFI Vision2000 Ultima Ultima	Subsidiary Subsidiary Investee of 4% indirect ownership Business relationship	(Note 1) (Note 1) (Note 1) (Note 3)	$ 4,068,054 2,375,326 2,230,000 600,000	$ 3,100,000 2,374,560 900,000 600,000	$ 100,000 US$ 5,000 - 600,000	20.48 15.69 5.95 5.99	(Note 2) (Note 2) (Note 2) (Note 4)

Note 1: Not exceeding 120% ($20,520,499 thousand) of the net equity $17,100,416 thousand of MVI for each transaction entity.

Note 2: Not exceeding 150% ($25,650,624 thousand) of the net equity $17,100,416 thousand of MVI.

Note 3: Not exceeding 120% ($12,013,042 thousand) of the net equity $10,010,869 thousand of ChipMOS for each transaction entity.

Note 4: Not exceeding 150% ($15,016,303 thousand) of the net equity $10,010,869 thousand of ChipMOS.

39 -

TABLE 3

MOSEL VITELIC INC. AND INVESTEES

MARKETABLE SECURITIES HELD September 30, 2002

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		June 30, 2002	June 30, 2002
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
MVI	Stock ProMOS MVC MVS K.K. Vision2000 UMI DGI Giant Haven DenMOS PlusMOS Taiwan Asia Pacific Venture Fund Ltd. (BVI) (TAPVF) Precision Semi-Conductor Mask Co. (PSM) Ultima Aplus Technology, Inc. Fund Taiyu Bond Fund NITC OTC Fund NITC Taiwan Bond Fund Tachung Gallop Bond Fund TIIM Bond Fund Masterlink Asia-Pacific Fund Fubon Aggressive Growth Fund IIT High-Yield Fund Grand Cathay Bond Fund EnTrust Phoenix Bond Fund	A 37% owned investee Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary A 51% owned subsidiary A 35% owned investee Cost-accounted investee Cost-accounted investee A 4% indirectly owned investee Cost-accounted investee - - - - - - - - -	Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds	1,329,935 - - 1,373,140 1,112 99,994 154,006 27,494 42,000 115 2,300 1 1,492 13,602 3,000 11,397 12,324 11,341 5,000 2,500 12,602 12,367 14,228	$ 13,194,576 2,177,634 47,478 ( 529,370) 124,458 ( 677,635) 4,775,068 261,753 81,258 28,035 23,000 13 92,600 150,000 30,060 150,000 150,000 150,000 50,000 25,075 170,000 150,000 200,000	37 100 100 100 100 100 100 51 35 4 1 - 9 - - - - - - - - -	$ 18,353,101 2,177,634 47,478 ( 496,771) 118,014 ( 61,575) 4,918,966 261,758 81,846 30,179 - 23 29,682 150,000 12,600 150,000 150,000 150,000 38,350 11,600 170,004 150,000 200,014

(Forward)

40 -

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		September 30, 2002	September 30, 2002	September 30, 2002
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
ProMOS ChipMOS	Fund Trustwell Bond Fund Apollo Solomon Bond Fund UBS Taiwan Bond Fund AIG Domestic Bond Fund Tai-Yu Bond Fund HSBC NTD Money Management Fund SKIT High Yield Bond Union Bond Fund Barits Bond Fund National Bond Fund Home Run Bond Fund Grand Cathay Bond Fund Prudential Wellpool Bond Fund TIIM Bond Fund International Diamond Bond Fund DaChong Bond Fund JF Taiwan Bond Fund Fuhwa Bond Fund S-T Bond Fund Bond Macoto Bank Debenture Fund President James Bond Fund USB Taiwan Bond Fund Aisa Pacific Bond Fund Da Chong Bond Fund TIIM Bond Fund Union Bond Fund Tai-yu Long River Bond Fund Trustwell Bond Fund Apollo Solomon Bond Fund Stock MVI Chantek ChipMOS Japan Inc. ChipMOS USA Inc. PlusMOS Ultima	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 47% indirect owned ChipMOS Equity-accounted investee Subsidiary Subsidiary Equity-accounted investee Cost-accounted investee	Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Long-term investments in debt securities Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments	1,679 7,415 749 840 4,540 2,862 1,863 2,708 1,503 71 3,968 2,479 1,741 2,274 1,867 2,468 2,092 2,433 542 - 13,836 3,577 12,594 12,326 15,122 17,581 26,303 12,580 13,777 13,396 118,772 - 50 30,000 18,586	$ 20,000 80,000 10,340 10,000 50,000 40,000 24,980 30,425 17,000 10,914 52,000 30,000 20,336 30,000 20,000 30,000 30,000 30,000 US$6,800 thousand 200,000 $200,000 50,000 150,000 150,000 200,000 200,000 290,000 150,000 150,000 147,356 206,739 ( 1,166 ) ( 9,166 ) 57,865 218,098	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 34 100 100 25 8	$ 20,024 80,745 10,476 10,021 50,060 40,040 25,035 30,803 17,148 11,006 52,060 30,063 20,455 30,071 20,023 30,035 30,031 30,075 US$6,811 thousand 200,000 $200,000 50,000 150,030 150,030 200,000 200,000 290,054 150,030 150,030 108,776 312,370 ( 1,166 ) ( 9,166 ) 57,865 547,356

(Forward)

41 -

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	September 30, 2002	September 30, 2002	September 30, 2002	September 30, 2002
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
Mou-Fu Investment Co., Ltd. (MFI)	Stock MVI ChipMOS-Bermuda SFS BDI Land Mark PlusMOS Hi Corporation Mou-Jui Management Consulting Co. Ltd. SyncMOS Taiwan branch (BVI) InterMOS Technologies Corp. DenMOS Fund First Global Duoli II Fixed Income Fund Prescience Bond Fund INVESCO GP R.O.C. Bond	Parent company of DGI 65% indirect owned subsidiary of MVI Equity-accounted investee Subsidiary of MFI Equity-accounted investee Equity-accounted investee Equity-accounted investee Equity-accounted investee Equity-accounted investee Equity-accounted investee 51% direct owned subsidiary of MVI - - -	Short-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long–term investment Short-term investments Short–term investments Short–term investments	78,001 232 57,560 17,996 28,000 17,684 2,070 2,995 7,523 2,994 265 876 500 2,856	$1,814,800 46,646 525,168 212,629 285,141 31,523 30,600 31,141 68,140 20,776 2,572 12,000 5,000 40,000	- - 48 100 56 15 4 100 24 100 - - - -	$ 633,366 - 525,523 213,433 285,320 - - 31,657 - 20,778 - 12,002 5,000 40,007	45,000 thousand shares pledged - - - - - - - - - - - - -

(Forward)

42 -

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	September 30, 2002	September 30, 2002	September 30, 2002	September 30, 2002	September 30, 2002
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
Vision2000 DGI Land Mark	Stock OTC Wireless, Inc. Integrated Memory Tech., Inc. Goal Electronics Inc. PacMOS Ark Logics Inc. Soft Device Inc. Advanced Analogic Technologies, Inc. New Media Networking Corp. TVIA, Inc. Stock MFI Fund EnTrust Phoenix Bond Fund National Bond Fund NITC Taiwan Bond Fund Stock Nano-Architect Research Co. PSM FuPo Electronics Co. Marketech International Co. Advanced Analogic Technologies Incorporated – series B Advanced Analogic Technologies Incorporated – series D Wavesat Telecom Inc. Software911, Inc.-series A-1 Virtual Silicon Technology, Inc. Techwell, Inc.-series C Ark Logics, Inc. Teletronics International, Inc. QPICT, Inc. Darly III Venture Inc. iMAGIC Technologies Co., Ltd. E-SOFT Technology Corp, Ltd. Nobex Corporation, Inc. CL Semiconductor Co., Ltd.	Investee of 23% ownership Investee of 23% ownership Investee of 49% ownership Investee of 32% ownership Investee of 95% ownership Investee of 32% ownership Investee of 16% ownership Investee of 5% ownership Investee of 3% ownership Subsidiary - - - - Investee of MVI - - - - - - - - - - - - - - - -	Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Short-term investments Short-term investments Short-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments	4,536 2,500 1,760 106,043 1,078,652 7,518 6,008 1,600 667 99,994 2,194 131 1,530 239 1,500 1,100 502 1,200 600 1,956 133 400 213 47,656 400 1,667 2,000 750 338 250 500	$ 46,371 31,177 31,749 454,875 - - 187,073 5,498 41,152 ($134,566) 30,000 20,000 20,000 $5,000 15,000 19,800 23,277 19,946 24,646 19,080 6,123 30,845 32,663 9,323 27,210 34,999 20,000 7,500 5,200 16,829 10,000	23 23 49 32 95 32 16 5 3 100 - - - 1 1 1 1 2 2 1 3 1 9 4 3 19 5 2 4 - 3	$ 18,191 11,225 8,430 332,626 - - - - - ($380,845 ) 30,838 20,126 20,138 $ - 13,950 - 16,883 - - - - - - - - - 20,200 7,898 3,465 - 5,075	－－－－－－ Note 1 Note 1 Note 1 Note 1

(Forward)

43 -

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	September 30, 2002	September 30, 2002	September 30, 2002	September 30, 2002	September 30, 2002
				Shares/Units (Thousand)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
BDI PlusMOS ChipMOS-Bermuda Giant Haven Chantek	Stock PSM Best Return (BVI) ProMOS Fund First Global Duoli II Fixed Income Fund INVESCO GP R.O.C. Bond Union Bond Fund Fund President James Bond Fund Home Run Bond Fund Fuh-Hwa Yuli Fund HSBC NTD Money Management Fund 2 HSBC Jacky Chan Fund Fuh-Hwa Bond Fund UBS Taiwan Bond Fund TIIM Bond Fund HSBC NTD Money Management Fund Stock ChipMOS Stock ChipMOS-Bermuda Forture Wave Profits Limited Third Dimension Semiconductor, Inc Great Wall Semiconductor Corporation Stock WWW Test Technology Inc. GEM Service, Inc. Advanced Micro Chip Technology Co. Ltd. TFN Chantek Investment Co., Ltd. APEC Turbonet Communication Lara Network, Inc. Chantek International (Cayma) Co.,Ltd. Integrated Sillicon Solution, Inc. United Test Center Inc. SOLOMON Technology Corp.	Investee of MVI Subsidiary Investee of MVI - - - - - - - - - - - - Subsidiary Investee of 65% ownership Subsidiary Investee of 32% ownership Investee of 50% ownership －－ Equity-accounted investee － Subsidiary －－－－－－－	Long-term investments Long-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short–term investments Short-term investments Short-term investments Short-term investments Short–term investments Short–term investments Short–term investments Short–term investments Long-term investment Long-term investment Long-term investment Long-term investment Long-term investment Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Long-term investments Short-term investments	1,530 - 7,371 1,241 4,284 1,000 1,533 4,226 316 1,747 96 654 1,436 2,667 724 618,424 37,728 - 28,800 50,000 33,357 667 12,000 2,000 - 500 13 21 602 3 3 1	$ 15,300 122 146,665 17,000 60,000 10,000 $21,856 55,115 3,500 23,013 1,380 8,000 20,000 35,026 10,000 $6,977,575 $4,477,829 - 307,268 86,556 $ - - 32,144 26,000 18,701 8,500 - 3,235 - - 39 36	1 100 - - - - - - - - - - - - - 69.70 65 100 32 50 23 - 38 - 100 1 - - 100 - - -	$14,229 - 101,720 17,003 60,011 9,560 $22,159 55,445 3,606 23,148 1,383 8,086 20,071 35,271 10,125 $6,975,820 $3,359,513 - - - $ - - 32,144 26,000 32,777 8,500 - 3,235 - - 39 12	－ B.V.I. －－－－ - Note 1 Note 1 Note 1 Notes 2 and 5 Note 5 Note 3 Note 4 and 5 Note 6 Note 4 and 5 Note 5 Note 5 Note 5 Note 5 Note 5 －

44 -

Mou-Jui Management Consulting	Lite-On Semiconductor Fund EnTrust Phoenix Bond Fund Forever Bond Fund HSBC NTD Money Management Fund 2 Jihsun Bond Fund RSIT Bond Fund TIIM Bond Fund Stock SFS	－－－－－－－－ Director and supervisors	Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Short-term investments Long-term investment	- 3,007 2,959 1,510 3,943 3,906 2,625 1,240	10 31,000 40,000 20,000 40,000 40,000 30,000 $12,400	- - - - - - - 1	10 31,027 40,022 20,007 40,041 40,012 30,013 $11,321	－－－－－－－

Note 1: Unlisted, no public market price to be compared.

Note 2: 28,350 thousand shares pledged for Long-term liabilities.

Note 3: 6,680 thousand shares pledged for Long-term liabilities.

Note 4: Fully pledged for Long-term liabilities.

Note 5: Market value is listed as the book value.

Note 6: The book value is after the deduction of treasure stocks of $2,540 thousand.

45 -

TABLE 4

MOSEL VITELIC INC. AND INVESTEES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL For the Nine Months Ended September 30, 2002

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter-Party	Nature of Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition	Disposal	Disposal	Disposal	Disposal	Ending Balance	Ending Balance
					Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Carrying Value	Gain (Loss) on Disposal	Shares/Units (Thousand)	Amount
MVI ProMOS	Giant Haven ProMOS Ultima Vision2000 DaChong Bond Fund Taiyu Bond Fund Entrust Phoenix Bond Fund Asia Pacific Bond Fund TIIM Bond Fund Prudential Wellpool Bond Fund NITC Taiwan Bond Fund BSC Fund IIT High-Yield Fund Home Run Bond Fund President James Bond Fund AMRO Select Bond Fund Trustwell Bond Fund HSBC NTD Money Management Fund 2 USB Taiwan Bond Fund Union Bond Fund Debo Bond Fund Apollo Solomon bond fund National Bond Fund SKIT High Yield Bond Forever Bond Fund Asia Pacific Bond Fund Trustwell Bond Fund Apollo Solomon bond fund Prudential Bond FundⅡ USB Taiwan Bond Fund AIG Domestic Bond Fund Entrust Phoenix Bond Fund Tai-Yu Long River Bond Fund Forever Bond fund	Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in shares of stock Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds	Giant Haven - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Subsidiary - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	142,006 1,539,935 20,202 99,000 5,080 - 2,192 - - - - - - - - - - - - - - - - - - 8,572 28,156 7,027 - - 983 13,910 -	$ 4,963,112 15,689,619 291,221 (1,854,931) 60,346 - 30,000 - - - - - - - - - - - - - - - $ - 100,000 300,000 100,000 - - 13,500 150,000 -	12,000 - - 1,274,140 59,264 63,755 33,705 21,491 17,359 66,822 28,605 26,410 42,404 30,070 25,866 11,869 61,500 14,222 66,327 55,372 33,565 23,415 2,502 13,633 15,014 12,736 33,678 72,389 - 14,496 13,514 16,091 88,979 37,213	$ 419,490 - - 1,274,140 713,000 699,000 470,000 253,000 229,000 773,500 376,000 300,000 569,000 389,000 370,000 165,000 729,001 186,000 914,000 621,500 344,000 250,000 380,000 180,000 200,000 $ 150,000 400,000 780,000 - 200,000 160,000 223,000 971,000 500,000	- 210,000 - 52,020 50,153 21,669 21,491 6,018 66,822 17,208 26,410 29,802 30,070 25,866 11,869 61,500 14,222 66,327 55,372 33,565 23,415 2,502 13,633 15,014 - 12,736 40,571 93,130 7,027 13,747 12,674 17,074 98,349 37,213	$ - 4,826,520 746,016 - 624,446 550,141 300,684 253,301 79,173 774,142 226,372 300,347 400,133 389,305 370,320 165,105 730,365 186,372 915,311 621,946 344,629 250,324 380,243 180,092 200,107 $ 150,770 481,572 1,003,837 100,236 191,587 151,284 237,830 1,075,058 502,360	$ - 2,146,435 320,770 - 623,346 549,000 300,000 253,000 79,000 773,500 226,000 300,000 399,000 389,000 370,000 165,000 729,001 186,000 914,000 621,500 344,000 250,000 380,000 180,000 200,000 $ 150,000 480,000 1,000,000 100,000 189,660 150,000 236,500 1,071,000 500,000	$ - 2,512,133 (Note 2) 425,246 - 1,100 1,141 684 301 173 642 372 347 1,133 305 320 105 1,364 372 1,311 446 629 324 243 92 107 $ 770 1,572 3,837 236 1,927 1,284 1,330 4,058 2,360	154,006 1,329,935 1 1,373,140 12,324 13,602 14,228 - 11,341 - 11,397 - 12,602 - - - - - - - - - - - - - 1,679 7,415 - 749 840 - 4,540 -	$ 4,775,068 ( Note 1) 13,194,576 （Note 1） 13 （Note 1） (529,370) （Note 1） 150,000 150,000 200,000 - 150,000 - 150,000 - 170,000 - - - - - - - - - - - - $ - 20,000 80,000 - 10,340 10,000 - 50,000 -

46 -

ChipMOS	HSBC NTD Money Management Fund SKIT High Yield Bond Union Bond Fund Barits Bond Fund National Bond Fund Home Run Bond Fund Grand Cathay Bond Fund FUBON Bond FundⅢ Sheng Hua 5599 Bond Fund Prudential Wellpool Bond Fund TIIM Bond Fund Yuanta Bond Fund International Diamond Bond Fund Prudential Financial Bond Fund DaChong Bond Fund INVESCO GP R.O.C. Bond AMRO Select Bond Fund JF Taiwan Bond Fund S-T Bond Fund President James Bond Fund HSBC NTD Money Management Fund 2	Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds	- - - - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - -	- - 26,426 - - - - - - - - - - - - - - - - 2,497 1,620	- - 294,048 - - - - - - - - - - - - - - - - $35,329 21,055	37,407 16,496 51,432 28,321 1,311 35,425 41,549 30,655 13,116 20,690 12,257 12,842 18,679 21,959 8,226 9,649 28,191 6,974 940 36,131 23,232	520,000 220,000 577,000 320,000 200,000 461,000 500,000 350,000 136,000 240,000 161,000 200,000 200,000 300,000 100,000 135,000 300,000 100,000 US$ 11,800 thousand $519,912 305,142	34,545 14,633 75,150 26,818 1,240 31,457 39,070 30,655 13,116 18,949 9,983 12,842 16,812 21,959 5,758 9,649 28,191 4,882 398 24,792 24,852	482,369 196,392 845,697 305,897 190,147 411,890 471,906 351,363 137,167 220,525 131,435 200,344 180,307 300,283 70,081 135,152 300,245 70,072 US$5,002 thousand $356,800 327,115	480,000 195,019 840,623 303,000 189,086 409,000 470,000 350,000 136,000 219,664 131,000 200,000 180,000 300,000 70,000 135,000 300,000 70,000 US$ 5,000 thousand $355,241 326,197	2,369 1,373 5,074 2,897 1,061 2,890 1,906 1,363 1,167 861 435 344 307 283 81 152 245 72 US$ 2,000 thousand $1,559 918	2,862 1,863 2,708 1,503 71 3,968 2,479 - - 1,741 2,274 - 1,867 - 2,468 - - 2,092 542 13,836 -	40,000 24,980 30,425 17,000 10,914 52,000 30,000 - - 20,336 30,000 - 20,000 - 30,000 - - 30,000 US$ 6,800 thousand $200,000 -

(Forward)

47 -

Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter-Party	Nature of Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition	Disposal	Disposal	Disposal	Disposal	Ending Balance	Ending Balance
					Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Shares/Units (Thousand)	Amount	Carrying Value	Gain (Loss) on Disposal	Shares/Units (Thousand)	Amount (Note 1)
MFI Herbert BDI Giant Haven	USB Taiwan Bond Fund Asia Pacific Bond Fund First Global Wan Tai Fixed Income Fund Da Chong Bond Fund TIIM Bond Fund Union Bond Fund Tai-Yu Long River Bond Fund Trustwell Bond Fund Apollo Solomon bond fund MVI MVI ProMOS Ultima 89 MVI 1A05 National Bond Fund IIT High-Yield Bond fund First Global DuoliⅡFixed Income Fund Home Run Bond Fund Grand Cathay Bond Fund MVI MVI ProMOS First Global Duoli II Fixed Income Fund National Bond Fund Third Dimension Semiconductor, Inc. Great Wall Semiconductor Corporation ,Inc	Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Long-term investment Short-term investment Short-term investment Investments in shares of stock Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Investments in mutual funds Short-term investment Short-term investment Short-term investment Investments in mutual funds Investments in mutual funds Long-term investment Long-term investment	- - - - - - - - - - - - - - - - - - - - Third Dimension Semiconductor, Inc. Great Wall Semiconductor Corporation	- - - - - - - Note 3 - - - - - - - - - - - - Investee of 32% ownership Subsidiary	1,706 4,305 11,827 5,224 3,431 4,111 10,128 - 6,767 - 84,351 1 20,866 199張 - 6,222 2,114 - - 3,070 - - 2,270 135 - -	23,359 50,167 152,288 62,218 44,356 45,765 109,223 - 72,107 - $1,968,614 11 330,442 198,995 - 82,007 $28,291 - - 38,469 - - 30,366 20,272 $ - -	22,825 39,602 15,699 19,781 41,822 62,980 84,433 23,939 37,785 13,396 1,116 9,232 - - 2,272 15,530 83,383 12,453 8,715 - 28,557 35,893 63,099 644 28,800 50,000	316,580 468,154 204,367 240,022 550,834 710,660 926,146 284,249 410,233 242,416 $19,893 263,383 28,231 - 345,000 206,000 $1,125,023 161,000 105,000 - $535,148 732,015 854,000 98,000 $ 314,640 104,850	20,954 31,313 27,526 12,679 30,131 49,510 68,258 11,359 30,775 - 7,466 9,233 20,866 199 sheets 2,272 21,752 84,621 12,453 8,715 3,070 28,557 28,522 64,128 779 - -	290,988 369,948 358,128 153,119 396,215 558,228 747,187 134,854 333,880 - $135,474 211,704 1,034,553 198,995 345,458 288,597 $1,145,156 161,194 105,065 55,368 $523,389 577,748 870,021 118,623 $ - -	289,939 368,321 356,655 152,240 395,190 556,425 745,369 134,249 332,340 - $173,707 263,394 358,673 （Note 5） 198,995 345,000 288,007 $1,141,314 161,000 105,000 58,077 $535,148 585,350 867,366 118,272 $ - -	1,049 1,627 1,473 879 1,025 1,803 1,818 605 1,540 - ( $38,233 ) ( 51,690 ) 675,880 - 458 590 $3,842 194 65 ( 2,709 ) ($11,759 ) (7,602 ) 2,655 351 $ - -	3,577 12,594 - 12,326 15,122 17,581 26,303 12,580 13,777 13,396 78,001 - - - - - 876 - - - - 7,371 1,241 - 28,800 50,000	50,000 150,000 - 150,000 200,000 200,000 290,000 150,000 150,000 147,356 (Note 4) $1,814,800 - - - - - $12,000 - - - $ - 146,665 17,000 - $ 307,268 (Note 1) 86,556 (Note 1)

Note1: The ending balance included the recognition of the investment income (loss) recognized by the equity method.

Note2: Including $67,952 thousand of unrealized intercompany transaction gain.

Note3: An indirect major shareholder.

Note4: ChipMOS reclassified its investments in MVI from short-term to long-term in June 2002 resulted in a realized loss of $95,060 thousand.

Note5: Including the recognized gain or loss by the equity method and the amortization of difference between the cost of the investment and proportionate share in the net assets of the investee at acquisition date.

48 -

TABLE 5

MOSEL VITELIC INC. AND INVESTEES

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL For the Nine Months Ended September 30, 2002

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction		Note/Accounts Payable or Receivable	Note/Accounts Payable or Receivable	Note
			Purchase/Sale (Note 1)	Amount	% to Total	Payment Terms	Payment Terms	Unit Price	Ending Balance	% to Total
MVI ProMOS MVC ChipMOS PlusMOS MVS K.K.	Ultima MVS K.K. MVC PlusMOS DenMOS ProMOS ChipMOS Infineon MVI MVI −MVI Ultima MVI MVI MVI	Investee of 4% indirect ownership Subsidiary Subsidiary Investee of 35% ownership Subsidiary of 51% ownership Investee of 37% ownership Investee of 47% indirect ownership Major shareholder Major shareholder Parent company An indirect major shareholder Investee of 8% ownership Major shareholder Major shareholder Parent company	Sales Sales Sales Sales Sales Purchase Subcontract expenses Sales Sales Purchase Sales Sales Purchase Sales Purchase	$1,360,861 532,700 456,886 799,806 418,340 564,042 1,581,214 $11,508,934 582,367 532,913 $1,609,344 990,017 $799,647 58,609 565,429	( 17.00) ( 7.00) ( 6.00) ( 10.00) ( 5.00) 8.00 87.00 95.00 5.00 100.00 (34.16) (21.01) 75.05 (6.50) 100.00	According to the related contracts with specific days 120 days after the end of the month for sale 60 days after the end of the month for sale 14 days after shipment days 45 days after the end of the month for sale 60 days after arrival According to the related contracts with specific days 60~120 days after shipment dates 120 days after shipment 60 days after the end of the month for sale 90 days from monthly closing date 90 days from monthly closing date 7 days after arrival 30 days after the end of the month for sale 60 days after the end of the month for sale	Note 21 Note 21 Note 21 Note 21 Note 21 Note 21 Note 21 Note 18 Note 18 Note 21 Note 21 90 days from monthly closing date Note 21 Note 21 Note 21	Note 21 Note 21 Note 21 Note 21 Note 21 Note 21 Note 21 - - Note 21 Note 21 - Note 21 Note 21 Note 21	$ 245,461 241,072 82,190 77,897 84,820 ( 466,698) ( 725,276) $5,167,042 453,497 ( 83,917 ) $827,982 174,961 ($74,802 ) 6,548 ($ 241,188)	19.00 19.00 6.00 6.00 7.00 (11.00) (17.00) 92.00 8.00 ( 2.82 ) 43.71 9.10 (69.41) 15.25 (55.38)	- - - - - - - - - - - - - - -

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TABLE 6

MOSEL VITELIC INC. AND INVESTEES

RECEIVABLE FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL September 30, 2002

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Bad Debts
					Amount	Action Taken
MVI ProMOS MVC ChipMOS	Ultima MVS K.K. Infineon MVI MVI MVI Ultima	Investee of 4% indirect ownership Subsidiary Major shareholder Major shareholder Parent company An indirect major shareholder Investee of 8% ownership	$ 245,461 241,072 $ 5,167,042 453,497 666,944 827,982 172,330	5.00 3.00 3.16 1.46 - 1.94 5.74	$ 91,012 9,740 $381,294 420,790 - - -	Receivable on demand Receivable on demand Receivable on demand Receivable on demand - - -	- - 2,033,350 8,107 - - -	$ 48,540 - - - - - -

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TABLE 7

MOSEL VITELIC INC. AND INVESTEES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE For the Nine Months Ended September 30, 2002

(Amounts in Thousand of New Taiwan Dollars, Unless Otherwise Specified)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance	as of September 30, 2002	as of September 30, 2002	Net Income (Loss) of the Investee	Investment Income (Loss)	Note
				September 30, 2002	Dec. 31, 2002	Shares (Thousand)	Percentage of Ownership	Carrying Value
MVI ChipMOS MFI Vision2000 DGI ChipMOS-Bermuda (Forward)	MVC MVS K.K. Vision2000 UMI DGI ProMOS PlusMOS Ultima DenMOS Giant Haven ChipMOS Japan Inc. ChipMOS U.S.A. Inc. PlusMOS Chantek Electronic Co., LTD. SFS BDI Land Mark Mou-Jui Management Consulting Co. Ltd. SyncMOS Inc. InterMOS Technologies Corp. OTC Wireless, Inc. Integrated Memory Tech, Inc. Goal Electronics Inc. PacMOS Ark Logics Inc. Soft Device Inc. Herbert MFI ChipMOS	California U.S.A. Japan Grand Cayman Colorado U.S.A. Taipei, Taiwan Hsin-Chu, Taiwan Hsin-Chu, Taiwan Taipei, Taiwan Hsin-Chu, Taiwan British Virgin Islands Tokyo, Japan Sunnyvale U.S.A. Hsin-Chu, Taiwan Hsin-Chu, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan San Jose, U.S.A. Santa Clara, U.S.A. Canada Hong Kong San Jose, U.S.A. Capertino, U.S.A. British Virgin Islands Taipei, Taiwan Hsin-Chu, Taiwan	Research, design, develop, manufacture and distribute related IC products To sell, import and export the semiconductor IC and electronic components Holding company Develop of prototype integrated circuits and service generated Investment and holding company Research, design, develop, manufacture and distribute related IC products Manufacture, design and sale of DRAM modules Research, development, manufacture and sale of DRAM modules To develop, design, manufacture and market of “TFT-LCD Source/Gate Driver IC” Holding company Research and development, and testing of integrated circuits Research and development, and testing of integrated circuits Manufacture, design and sale of DRAM modules To Package semiconductor IC Securities company, underwriter and broker Investment and holding company Joint venture company Business consulting firm Design and market related electrical products Electronic equipment installment; automatic control equipment construction A Wireless Ethernet Lan design house Flash memory design house Develop of prototype integrated circuits and service generated Holding company Graphic controller design house SRAM design house Investment company Investment and holding company To provide assembly and testing services for high-density, high-level memory products and logics lcs.	$2,790,332 2,429 1,373,140 118,084 999,940 8,878,198 420,000 10 274,940 5,382,602 2,699 3,088 300,000 213,790 541,243 179,960 280,000 29,950 72,492 29,940 75,258 44,753 113,662 483,970 181,209 164,651 - 999,940 8,708,825	$ 2,790,332 2,429 99,000 118,084 999,940 10,280,088 420,000 254,442 274,940 4,963,112 2,699 3,088 300,000 - 553,600 179,940 280,000 29,940 61,635 29,940 75,258 44,753 113,662 483,970 181,209 164,651 - 999,940 8,708,825	- - 1,373,140 1,112 99,994 1,329,935 42,000 1 27,494 154,006 - 50 30,000 118,772 57,560 17,996 28,000 2,995 7,523 2,994 4,536 2,500 1,760 106,043 1,078,652 7,518 - 99,994 618,424	100 100 100 100 100 37 35 - 51 100 100 100 25 34 48 100 56 100 23 100 23 23 49 32 95 32 - 100 69.70	$2,177,634 47,478 (529,370) 124,458 (677,635) 13,194,576 81,258 13 261,753 4,775,068 ( 1,166) ( 9,166) 57,865 206,739 525,168 212,629 285,141 31,141 68,140 20,776 46,371 31,177 31,749 454,875 - - - ( 134,566) 6,977,575	($ 51,770 ) 3,287 84,020 3,546 122,185 ( 2,564,744) 20,571 - 22,688 ( 510,949) 520 724 20,571 ( 941,884) ( 114,704) ( 55,033) ( 683) 156 ( 19,839) ( 4,184) ( 84,984) ( 36,232) ( 17,744) 342,123 ( 5,759) - 16,740 131,733 ( 962,760)	($ 49,085 ) 3,287 56,685 386 437,886 ( 1,021,063) 6,669 29,562 11,209 ( 498,270 ) 520 724 4,587 ( 7,051) ( 54,094) ( 55,021) ( 382) 156 ( 4,353) ( 4,175) ( 22,577) ( 10,112) ( 12,862) 106,894 - - 32,055 121,557 ( 671,044)	Note 1 - Note 2 Note 3 Note 4 Note 5 - Note 6 - Note 7 - - - - - - - - - - - - - - - - - - -

51 -

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance	as of September 30, 2002	as of September 30, 2002	Net Income (Loss) of the Investee	Investment Income (Loss)	Note
				September 30, 2002	Dec. 31, 2002	Shares (Thousand)	Percentage of Ownership	Carrying Value
Giant Haven	ChipMOS-Bermuda Third Dimension Semicond, Inc. Great Wall Semiconductor Co.	British Virgin Islands, Bermuda U.S.A. U.S.A.	Holding company Power IC design Power IC design	$4,963,113 314,640 104,850	$4,963,113 - -	37,728 28,800 50,000	65 32 50	$4,531,582 300,731 86,653	($ 736,721) ( 21,649) ( 36,588)	($ 485,283) ( 7,372) ( 18,294)

Chantek Electronic Co., LTD.	WWT Technology Inc. AMCT Chantek International investment Co., Ltd. Chantek International (Cayman) Co., Ltd.	Hsin-Chu, Taiwan Taipei, Taiwan Taipei, Taiwan Cayman Islands	Semiconductor testing service Electrical products wholesaler and retailer Investment and holding company Investment and holding company	430,286 120,000 98,399 19,426	430,286 120,000 98,399 19,426	33,357 12,000 - 602	23 38 100 100	- 32,144 18,701 -	( 408,504) ( 112,697) ( 1,843) ( 4,487)	( 308,009) ( 43,345) ( 24,258) ( 4,487)	Note 8

Note 1: Including the amortization of $2,685 thousand of the deferred intercompany profits.

Note 2: Investment income or loss includes the amortization of $5,264 thousand of the deferred intercompany profits and the investment loss of $32,599 thousand for the difference on the long-term investments accounted for under equity method by the parent and under cost method by the subsidiaries
Note 3: Investment income or loss includes the amortization of the difference between the costs of the investment and MVI’s proportionate share in the net assets of the investee at the acquisition date.
Note 4: Investment income or loss includes (1) the investment loss of $3,141 thousand for the difference on the long-term investments accounted for under equity method by the parent and under cost method by the subsidiaries, (2) reversal of the disposal loss of $49,983 thousand resulted from the subsidiary’s disposal of the parent company’s stocks, and (3) $268,859 thousand for the provision for loss on parent’s share of stock held by its subsidiaries.
Note 5: Including $4,378 thousand of unrealized intercompany transaction profit.
Note 6: Investment income or loss includes the amortization of the difference between the costs of the investment and MVI’s proportionate share in the net assets of the investee at the acquisition date. At beginning of March 2002, the Company’s accounting for long-term investments in Ultima was changed to cost method because the Company has no more significant influence on Ultima.
Note 7: Investment income or loss includes $30,167 thousand of unrealized intercompany transaction profit, and $42,846 thousand of allowance for decline in value of the parent’s stock held by its subsidiaries.

Note 8: Investment loss this period includes $183,398 thousand permanent loss for decline in value.

52 -

V. Terms of the Bonds

The following is the text of the Terms of the Bonds which will be endorsed on the Permanent Global Certificate and on each Definitive Bond (if delivered) and which govern the rights and obligations of the Issuer (guaranteed by the Guarantor) and of each holder of the Bonds (whether or not Definitive Bonds are delivered).

In these Terms of the Bonds established pursuant to the Bond Purchase, Paying and Conversion Agreement by virtue of which the Bonds are constituted, the terms below shall be defined as follows:

Agreement means the Bond Purchase, Paying and Conversion Agency Agreement. Board of Directors means the board of directors of Mosel Vitelic Inc. Business Day means any day (i) on which SIS is open for business, or (ii) on which commercial banks are open for domestic business and foreign exchange during the entire day in Zurich, Switzerland.

Cent one hundredth of a NT Dollar. Chairman has the meaning given in Section 16(e). Closing Price means the last reported sales price of the Shares Conversion Date means the date on which a Conversion Notice is validly presented in accordance with Section 5.

Conversion Notice means a duly completed notice of conversion deposited by the Bondholder with swissfirst in a form satisfactory to swissfirst acting as conversion agent (such form being available at swissfirst).

Conversion Period means for the first Tranche the period on or after June 24, 2003 up to and including June 13, 2008or, in case of early redemption of the Bonds pursuant to Sections 3 and 8 up to and including such earlier date which is five (5) Business Days prior to the date fixed for early redemption. The Conversion Period of the subsequent Tranches will be determined by the parties accordingly to the Agreement upon issue of the respective Tranches.

Conversion Price means the price allocated to a Share in NT Dollars for the purpose of the conversion of the Bonds.

Conversion Right

Currency

Definitive Bond

Extraordinary Resolution

Final Redemption Amount

Guarantee

means the right of a Bondholder to convert Bonds into Shares at the Conversion Price.

means any other currency than US Dollars, such as Euro or Swiss Francs.

means the printed certificate representing individual Bonds in the denomination of USD 1,000

means an extraordinary resolution of a Bondholders Meeting as defined in Section 16.

means the amount to be repaid to the Bondholders by the Issuer in accordance with the provisions set forth in Section 3(a) on the Maturity Date equalling 100% of the principal amount of all Bonds.

means the guarantee in the meaning of Article 496 of the Swiss Federal Code of Obligations issued by the Guarantor in favour of the Bondholders and securing the Issuers obligations under the Bonds.

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Guarantor

Initial Conversion Price

means swissfirst Bank AG, Bellariastrasse 23, 8027 Zurich, Switzerland.

means 1.49 NT Dollars

Issuer means Mosel Vitelic Inc., Hsinchu, Taiwan, R.O.C. Material Subsidiary has the meaning given in Section 8.

Maturity Date means the date five years from the issue date of each Tranche.

New Issuer has the meaning given in Section 9

Bondholder means a holder of a Bond. Bondholders’ Meeting has the meaning given in Section 16.

Bond Purchase, Paying and Conversion Agreement

Bonds

Ordinary Resolution

Paying Agent

Payment Date

Permanent Global Certificate Pricing Date

Relevant Exchange

means the bond purchase, paying and conversion agreement among the Issuer, swissfirst and Capital Securities Limited entered into effective as of June 23, 2003.

means the zero % convertible Bonds with a principal amount of USD 1,000 issued by the Issuer, due 2008/2009.

means an ordinary resolution of a Bondholders Meeting as defined in Section 16.

means swissfirst acting as sole paying and conversion agent on behalf of the Bondholders pursuant to the Agreement.

means June 23, 2003 as regards the first Tranche. The Payment Date of the subsequent Tranches will be determined by the Parties upon issue of the respective Tranches.

means the permanent global certificate evidencing the Bonds.

means June 23, 2003 as regards the first Tranche. The Pricing Date of the subsequent Tranches will be determined by the Parties upon issue of the respective Tranches.

means the Taiwan Stock Exchange or, if the Shares are no longer admitted to trading on the Taiwan Stock Exchange, the principal stock exchange or securities market on which the Shares are traded.

ROC means the Republic of China SFC means Securities and Futures Commission

Shares means shares of common stock of the Issuer with a nominal value of currently 10 NT Dollars. Upon the exercise of the Conversion Rights the Bonds may be converted into Shares.

Specified Office means swissfirst Bank AG, LSS, Bellariastrasse 23, 8027 Zurich, Switzerland.

SIS means SIS SegaInterSettle AG.

swissfirst means swissfirst Bank AG, Bellariastrasse 23, 8002 Zurich, Switzerland.

Terms of the Bonds

Trading Day

Tranche

Withholding Taxes

means the provisions governing the rights and obligations of the Issuer and of each holder of the Bonds.

means the day (other than Saturday or Sunday) on which the Relevant Exchange is open for business and Shares may be dealt in.

means any one of the up to twelve Tranches with an aggregate principal amount of USD 10’000’000.-- each (ten million US Dollars).

has the meaning given in Section 6.

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1. Amount / Form of Bond / Denomination / Custodianship / Printing and Delivery of the Bonds

(a) The Bonds are issued in up to twelve Tranches.
(b) The Bonds and all rights in connection therewith are documented solely in the form of a Permanent Global Certificate as per Annex B to the Agreement. Each Bondholder retains a quotal coownership interest (Miteigentumsanteil) in the Permanent Global Certificate to the extent of his claim against the Issuer. Except as provided below, no printing of Bonds will occur. Bondholders do not have the right to request the printing and delivery of Definitive Bonds.
(c) The Permanent Global Certificate remains in safekeeping with swissfirst or SIS Segaintersettle, or any other collective safe custody organization approved by the SWX Swiss Exchange, during the entire duration of the issue and until the complete redemption of the Bonds.
(d) Should the Definitive Bonds be printed, they shall be evidenced by bearer certificates in the denomination of USD 1,000 principal amount each.
(e) Should swissfirst or the Issuer deem the printing of Definitive Bonds to be necessary or useful at any time prior to the complete redemption of the Bonds, or if the presentation of Definitive Bonds is required by Swiss or foreign laws in connection with the enforcement of rights (e.g. in cases of bankruptcy, consolidation or reorganization of the Issuer), swissfirst, on behalf of the Issuer, will provide for such printing without cost for the Bondholders. Should the Definitive Bonds be printed, swissfirst will then exchange the Permanent Global Certificate (deposited as above provided) as soon as possible against the Definitive Bonds.
(f) So long as no Definitive Bonds have been issued, the expressions “Bonds” shall mean and include quotal co-ownership interests in the Permanent Global Certificate and the expressions “Bondholder” shall mean and include any person entitled to such quotal co-ownership interests.

2. Interest

The Bonds shall not bear interest until Maturity Date.

3. Redemption and Purchase

(g) Final Redemption

Unless (i) previously converted, (ii) redeemed, or (iii) purchased and cancelled as provided below, the Issuer undertakes to repay all outstanding Bonds at 100% of the Final Redemption Amount without further notice on the Maturity Date.

(h) Redemption at the Option of the Bondholder

Subject to a period of 30 days’ prior notice and unless (i) previously converted, (ii) redeemed, or (iii) purchased and cancelled as provided below, each Bondholder has the right to ask for the redemption of the Bonds in whole, or in part, at the Final Redemption Amount on December 20, 2004.

(i) Unless (i) previously converted, (ii) redeemed, or (iii) purchased and cancelled as provided below, the Bondholder has the right to ask for the redemption of the Bonds in whole, or in part, at the Final Redemption Amount any time after Payment Date and prior to the Maturity Date in the event that the Issuer’s Shares cease to be listed or traded on the R.O.C. Taiwan Securities Exchange.
(j) Purchase

The Issuer and any of its subsidiaries may at any time purchase Bonds by tender, in the open market or otherwise at any price. Any purchase shall be made in accordance with applicable laws or regulations, including (without limitation) applicable stock exchange regulations. The Bonds so purchased, while held by or on behalf of the Issuer or any of its subsidiaries, shall not entitle the holder to vote at any meetings of the Bondholders and shall not be deemed to be outstanding for the

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Information Memorandum

purposes of calculating quorums at meetings of the Bondholders or for the purpose of Sections 8 and 16 below.

Any Bonds purchased by the Issuer or any of their subsidiaries may be held, resold or surrendered for cancellation, subject to applicable laws and regulations.

(k) Cancellation

All Bonds, which are converted, redeemed or surrendered shall forthwith be cancelled. All Bonds so cancelled shall be forwarded to the Specified Office of swissfirst and cannot be reissued or resold.

4. Payments

The amounts required for the payment of the Final Redemption Amount of the Bonds will be made available in good time in freely disposable USD, which will be placed at the free disposal of swissfirst in Switzerland, acting as sole Paying Agent on behalf of the Bondholders, irrespective of any future transfer restrictions and notwithstanding any bilateral or multilateral payment or clearing agreement which may be applicable at the time of such payments.

Upon receipt of the funds in Switzerland and under the same conditions as received, swissfirst will arrange for payment to the Bondholders.

The Issuer undertakes that all payments shall be made in freely disposable USD without collection cost to the Bondholders, and unless provided for by applicable law, without any restrictions and whatever the circumstances may be, irrespective of nationality, residence or domicile of the Bondholders and without requiring any affidavit or the fulfilment of any other formality, at the counters in Switzerland of swissfirst acting as sole Paying Agent.

The receipt by swissfirst of the funds in USD in Switzerland shall release the Issuer of its obligations under the Bonds to the extent of amounts so received.

In the event, however, that it is impossible for the Issuer to make payment as above provided without violating laws or mandatory regulations, then the Issuer will inform swissfirst in good time of this fact. The Issuer will then

(a) at the option of swissfirst and as swissfirst shall specify to the Issuer not less than 10 Business Days prior to the relevant payment date, make payment either (i) in USD at such place as swissfirst shall have specified, or (ii) in any other Currency at such place as swissfirst shall have specified, in either case in such manner as shall not involve violation of any law or mandatory regulation; or
(b) if swissfirst shall fail to exercise its option under paragraph (a) or if none of the alternatives under paragraph (a) are available without violation of any law or mandatory regulation, make payment in any Currency to the respective branch or affiliate or correspondent of swissfirst for its benefit.

The amount of any payment in the respective Currency pursuant to paragraphs (a) and (b) shall be determined by converting the amount of the payment in USD into the Currency at the rate of exchange in effect at the close of business in Zurich on the Business Day immediately prior to the payment date for wholesale purchases of the respective Currency with USD at swissfirst, Zurich. The receipt by swissfirst of such funds in Switzerland shall release the Issuer of its obligations under the Bonds to the extent of the amounts so received.

5. Conversion

Annex C attached to the Agreement, which Annex is available on request at the specified Office of swissfirst (the "Conversion Agent"), contains the full and binding provisions of conversion of the Bonds into Shares.

Under current ROC law, regulation and policy, PRC persons are not permitted to hold or to convert the Bonds or to register as a shareholder of the Issuer.

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Under current ROC law, each converting Bondholder when exercising his conversion right of the Bonds into Shares is required to appoint a local agent in the ROC (each a "Local Agent") with such qualifications as are set by the ROC SFC, to open a securities trading account with a local brokerage firm and a NT dollar bank account, act as custodian for the securities, pay ROC withholding taxes, make confirmation and settlement, remit funds, exercise shareholders’ rights and perform such other matters as may be designated by such converting Bondholder, on behalf of and as agent for such converting Bondholder. Under existing ROC law and regulations, without first obtaining the approval of TSE and the opening of such accounts an investor in the Bonds would not be able to hold or to sell or otherwise transfer the Shares into which the Bonds may have been exchanged on the Relevant Exchange or otherwise.

(a) The right of a Bondholder to convert any Bond into Shares is hereinafter called the "Conversion Right".
(b) As regards the first Tranche, the Bondholder shall have the right, at the option of such Bondholder at any time on or after June 24, 2003 (Zurich time) and prior to the close of business in Zurich on June 13, 2008 (but in no event thereafter) or, in the case that the Bonds are called for redemption on or prior to June 13, 2008 or in the case of the Bonds as to which a redemption notice is provided in accordance with Section 3 b) or c), then prior to the close of business in Zurich on the fifth business day next preceding the date fixed for redemption (unless the Issuer shall default in payment due upon such redemption, but in any case not later than June 13, 2008), to convert the Bonds into Shares; provided however, that the Conversion Right shall be suspended during any Closed Period and the Conversion Period shall not include any such Closed Period. The Conversion Period of the subsequent Tranches will be determined by the parties accordingly to the Agreement upon issue of the respective Tranches.

For the purposes of these Terms of the Bonds:

“Closed Period” shall mean (i) the 60-day period prior to the date of the annual general meeting of shareholders, (ii) the 30-day period prior to a special shareholders’ meeting, (iii) the 5-day period prior to a record date or such other periods as determined by ROC law applicable from time to time, (iv) the period form the date following the third Trading Day prior to the date of notification to the Taiwan Stock Exchange by the Issuer of the record date for the determination of shareholders entitled to the receipt of dividends, subscription of new shares or other benefits and bonuses to such record date, and (v) such other periods during which the Issuer may be required to close the Issuer’s stock transfer books under ROC laws applicable form time to time.

(c) The number of Shares to be transferred and delivered upon conversion of any Bond will be determined as to each conversion to the greatest number of full Shares, disregarding fractions and without cash adjustments therefor, obtainable by dividing the aggregate issue amount of Bonds e.g. USD 1’000.-- surrendered for conversion by the converting Bondholder (translated into NT Dollars at the applicable NT Dollar/USD exchange rate quoted by Citibank N.A., Taipei Branch, on the relevant Conversion Date (as defined below)) by the Conversion Price in effect at the date of conversion.
(d) Notwithstanding the foregoing, in the event of a consolidation or reclassification of Shares by operation of law or otherwise occurring after 2003, the Issuer will upon conversion of the Bonds pay in USD a sum equal to such portion of the principal amount of the Bond or Bonds deposited for conversion as corresponds to any fraction of a Share not issued as aforesaid if such sum exceeds USD 10. For the purpose of calculating the amount of such payment, the Issuer shall use the exchange rate referred to above in this Section 5.
(e) To exercise the Conversion Right attaching to any Bond, the holder thereof must complete, execute and deposit at his own expense between 9:00 a.m. and 5:00 p.m. on any business day in Zurich during the Conversion Period at the Specified Office of the Conversion Agent a conversion notice (a “Conversion Notice”) in duplicate, duly completed and signed, as provided in Annex G to the Agreement, together with the Bonds, if printed, and any certificates and other documents as may be required under the law of the ROC. The Conversion Notice must contain, inter alia, an appointment of a Local Agent. A Conversion Notice once deposited shall be irrevocable and may not be withdrawn without the consent in writing of the Issuer. The price at which such Bonds will be converted will be the Conversion Price in effect on the Conversion Date.
(f) The Issuer, or the Conversion Agent on its behalf, may reject any incomplete or incorrect Conversion Notice or any Conversion Notice which is not accompanied by any amount payable under this

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Section 5. All costs and expenses incurred or caused by an incomplete or incorrect Conversion Notice shall be for the account of the relevant Bondholder.

(g) Together with the Conversion Notice, the Bondholder must pay to the Conversion Agent all stamp, issue, registration and similar taxes and duties and transfer costs (if any) arising on exchange in the country in which the Bond is deposited for exchange, or payable in any jurisdiction consequent upon the transfer or delivery of Shares or any other property or cash upon exchange to or to the order of a person other than the converting Bondholder. Except as aforesaid, the Issuer will pay the expenses arising in the ROC on the transfer and delivery of Shares on Conversion of Bonds and all charges of the Conversion Agent in connection herewith as provided in the Agreement.
(h) The date on which the Bond, the Conversion Notice (in duplicate) relating thereto and all such other certificates and documents as are required under Section 5 are deposited with the Conversion Agent and the payments, if any, required to be paid by the Bondholder are made is hereinafter referred to as the “Deposit Date”. The “Conversion Date” applicable to a Bond shall mean the next day following the Deposit Date, which day is both a Trading Day and occurs during the Conversion Period. Accordingly, if a Conversion Date would otherwise fall within a Closed Period, the Conversion Date shall be the first Trading Day following such period.
(i) Subject as set out below, the Issuer shall procure that Share certificates (which shall be in the name of the Issuer but which are endorsed in accordance with the Exchange Notice of the relevant Bondholder, subject to Annex C of the Agreement) for the Shares or such other evidence of title as shall be available at the relevant time (including any such other evidence of title in respect of Shares as shall be available from time to time under ROC law) for any Shares to which any Bondholder or any person designated by the Bondholder shall become entitled in consequence of exercising the Conversion Right shall be delivered to the Bondholder or any person designated by the Bondholder as soon as practicable and in any event not later than five Trading Days after the relevant Conversion Date together with any other property or cash (including, without limitation, cash payable pursuant to Section 5) required to be delivered upon conversion and such assignments and other documents (if any) as may be required by law to effect the delivery thereof. The date on which such delivery is completed is referred to in these terms of the Bonds as the “Delivery Date”.
Delivery of Shares may be effected through account transfer at Taiwan Securities Central Depository Co., Ltd. (or any successor depository system).
(j) With effect from, and including, the Conversion Date, the converting Bondholder shall, as between it and the Issuer, be entitled to exercise all rights in respect of the Shares and receive all income or other assets arising out of the Shares (except where such rights, income or other assets accrue by reference to a record date which precedes the Conversion Date). The rights of a converting Bondholder in respect of the Shares as between it and any other person shall be provided by applicable law or regulation. In particular, the rights of the converting Bondholder with respect to Shares as between it and the Issuer will be determined by the date on which the name of the Bondholder (or its designee) is registered as owner of the Shares in the shareholders’ register of the Issuer.
(k) The Issuer will procure that the Shares delivered on conversion of Bonds will in all respects rank pari passu with the Shares in issue on the relevant Conversion Date (except for any right the record date for which precedes such Conversion Date and except for any other right excluded by mandatory provisions of applicable law).
(l) The Shares to be delivered on exercise of Conversion Rights shall not include any dividends or other income thereon declared or paid by reference to a record date prior to the Conversion Date.

If the Conversion Date in relation to any converted Bond shall fall after a date with effect from which an adjustment to the Conversion Price is applicable (retroactively or otherwise) pursuant to any of the provisions referred to in Section 5 and Annex C of the Agreement and the relevant Conversion Date falls on a date when the relevant adjustment has not been reflected in the Conversion Price, the Issuer will, within 20 days after the date of such adjustment of the Conversion Price, transfer and deliver such number of Shares as is equal to the excess of the number of Shares that would have been required to be issued on conversion of such Bond if the relevant retroactive adjustment had been made as at the said Conversion Date over the number of Shares previously issued pursuant to such exchange, and in such event and in respect of such number of Shares references in Section 5 to the Conversion Date shall be deemed to refer to the date upon which such retroactive adjustment becomes effective (disregarding the fact that it becomes effective retroacti-

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vely if that is the case). Fractions of Shares will not be issued and no cash adjustment will be made in respect thereof.

(m) The price at which Shares shall be issued if so permitted under the laws of the ROC, upon conversion (hereinafter called the "Conversion Price") shall be initially 1.49 NT Dollars per Share.
(n) The Conversion Price will be subject to adjustment in certain events, details of which are provided in Annex C to the Agreement, including:
a. declaration of a dividend in, or free distribution of, Shares;
b. sub-divisions, consolidations and reclassifications of Shares;
c. authorization to issue to holders of Shares rights or warrants to subscribe for or purchase Shares at less than the then current market price of the Shares;
d. authorization to distribute to holders of Shares other securities, evidences of indebtedness or assets of the Issuer or rights to subscribe for or purchase securities (other than those mentioned above);
e. issue of securities (other than the Bonds) convertible into or exchangeable for Shares at a consideration per Share less than the then current market price (as hereinafter defined in Annex
C);
f. issue of Shares at a consideration less than the then current market price of the Shares or the issue of rights or warrants to subscribe for or purchase Shares (other than those offered or issued by the Issuer to holders of Shares, but including Shares issued under any employee dividend or profit-sharing arrangements) at a initial consideration less than the then current market price of the Shares;
g. any other event or circumstance which would have in the determination of the Issuer or swissfirst an analogous effect to any of the events in (a) to (f) above including, but not limited to, issues of receipts or certificates entitling holders to receive securities;
h. No adjustment will be made where such adjustment would be less than NT Dollar 0.10, provided, however, that any adjustment that otherwise would be required to be made will be carried forward and taken into account in determining any subsequent adjustment;
i. Whenever the Conversion Price is adjusted the Issuer will promptly inform swissfirst Bank AG as Conversion Agent;
j. The Issuer has agreed that, so long as any of the Bonds remains outstanding and convertible, it will not take any action which would result in the adjustment of the Conversion Price if, after giving effect thereto, the Conversion Price would be reduced to such an extent that the Shares to be issued upon conversion could not be legally issued, under applicable ROC law then in effect, at such reduced Conversion Price as fully-paid Shares;
k. Bondholders will be given notice in accordance with Section 10 of all adjustments and all adjustments will be made in accordance with the provisions contained in Annex C to the Agreement. There are several circumstances in which no adjustment will be made and these are set out in Annex C to the Agreement.
(o) In addition, the Conversion Price shall be subject to a Conversion Price Reset upon 10 days prior to every semi-annual anniversary of the Issue Date and semi-annually thereafter (the “Reset Dates”) adjusted in the event that the average Closing Price for the 20 consecutive Business Days immediately prior to the Reset Dates, converted into USD at the then prevailing NT$/USD exchange rates is lower than the Conversion Price on the Reset Date converted into USD at the NT$/USD fixed exchange rate established on the Pricing Date. The reset Conversion Price shall not be lower than 80% of the Initial Conversion Price.
(p) swissfirst and the Issuer may from time to time amend the provisions of this Section 5 and of Annex C to the Agreement without the consent of the Bondholders in the event that swissfirst and the Issuer agree that such amendment is necessary or desirable as a result of any change in the ROC Company Law or other related laws and regulations that may come into effect subsequent to the issue of the Bonds. Such amendments shall be binding on the holders of the Bonds.

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6. Payment of Additional Amounts / Taxation

All payments of principal on the Bonds by the Issuer to the Paying Agent will be made without deduction or withholding for or on account of any present or future taxes, duties or governmental charges of any nature whatsoever imposed, levied or collected by or in or on behalf of the R.O.C. or Switzerland (hereinafter together called “Withholding Taxes”), unless such deduction or withholding is required by law.

In the event that any Withholding Taxes on any such payments to the Paying Agent must be withheld at source by the Issuer or, as the case may be, the Issuer shall pay such additional amounts of principal and as may be necessary in order that the net amounts received by the Bondholders after such deduction or withholding shall equal the respective amounts of principal which would have been receivable had no such deduction or withholding been required. No such additional amounts shall, however, be payable on account of any taxes, duties or governmental charges which

(a) are payable otherwise than by deduction or withholding from payments of principal, or
(b) are payable by reason of the Bondholders having, or having had, some personal or business connection with the R.O.C or Switzerland and not merely by reason of the holding of the Bond, or
(c) are payable by reason of a change in law that becomes effective more than 30 days after the relevant payment of principal becomes due, or is duly provided for and notice thereof is published in accordance with Section 12, whichever occurs later.

In the case of transfer of the Issuer’s domicile to another country, territory or jurisdiction, the preceding provisions shall apply with the understanding that any reference to the R.O.C shall from then on be deemed to refer to such other country, territory or jurisdiction.

7. Status and Negative Pledge

(a) Status

The Bonds constitute direct, unconditional and (subject as provided in paragraph (b) below of this Section) unsecured obligations of the Issuer and rank pari passu and without any preference among themselves and (subject as aforesaid) at least equally with all the Issuer's other unsecured and unsubordinated obligations, except for such preferences as are provided by any mandatory applicable provision of law.

(b) Negative Pledge

So long as any Bond remains outstanding, the Issuer will not create or permit to subsist, otherwise than in the ordinary course of business, any mortgage or other encumbrance upon the whole or any part of its assets (present or future) to secure any Relevant Debt, or any guarantee of or indemnity in respect of any debt unless, at the same time or prior thereto, in the reasonable opinion of swissfirst the Issuer's obligations under the Bonds (i) are secured equally and rateably therewith or benefit from a guarantee or indemnity in substantially identical terms thereto, as the case may be, or (ii) have the benefit of such other security,

8. Events of Default

swissfirst has the right but not the obligation, on behalf of the Bondholders, to declare all Bonds to be immediately repayable at the Final Redemption Amount in the following events:

(a) Non-Payment : there is a failure by the Issuer to pay the principal on any of the Bonds when due and such failure continues for a period of 14 days; or
(b) Breach of Other Obligations : the Issuer does not perform or comply with any one or more of its other obligations under the Terms of the Bonds which default is incapable of remedy or is in the opinion of swissfirst not remedied within 30 days after notice of such default shall have been given by swissfirst to the Issuer; or

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(c) Cross-Default : (i) any other present or future loan or indebtedness of the Issuer or any Material Subsidiary (as defined below) for or in respect of borrowed money with an original maturity in excess of four years becomes due and payable prior to its stated maturity otherwise than at the option of the relevant debtor, or (ii) any such indebtedness is not paid when due or, as the case may be, within any applicable grace period, or (iii) the Issuer or any Material Subsidiary fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any borrowed money with an original maturity in excess of four years, in each case after any applicable grace period, provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this paragraph (c) have occurred equals or exceeds USD 5,000,000 in the case of the Issuer or any Material Subsidiary, or, in either case, its equivalent in another currency; or
(d) Security Enforced : any mortgage, lien or other encumbrance, present or future, created or assumed by the Issuer or any Material Subsidiary becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar person), provided that the aggregate amount of the relevant indebtedness in respect of which such mortgage, lien or other encumbrance was created or permitted to subsist equals or exceeds USD 5,000,000 in the case of the Issuer or any Material Subsidiary, or in either case, its equivalent in another currency; or
(e) Insolvency : the Issuer or any Material Subsidiary is (or is, or could be, deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspend payment of all or a material part of (or of a particular type of) its debts, proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or any part of (or of a particular type of) the debts of the Issuer or any Material Subsidiary; or
(f) Winding-up : an order is made or an effective resolution passed for the winding-up or dissolution of the Issuer or any Material Subsidiary, or the Issuer or any Material Subsidiary ceases or threatens to cease to carry on all or a material part of its business or operations, or a sale or assignment of a material part of the assets of the Issuer(on a consolidated basis) or any Material Subsidiary, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation on terms approved by an Extraordinary Resolution of the Bondholders; or
(g) Change of Control : a dissolution or merger involving the Issuer as a result of which the Issuer is not the subsisting Issuer, unless the successor Issuer assumes all the Issuer’s liabilities; or
(h) Analogous Events : any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of the foregoing paragraphs; or
(i) Guarantee : the Guarantee is not (or is claimed by the Guarantor not to be) in full force and effect.
For purposes of this Section 8, “ Material Subsidiary ” shall mean any subsidiary undertaking of the Issuer included in the Issuer's consolidated financial statements the assets of which constitute more than 25 % of the Issuer's consolidated assets, or the revenues, operating profits or profits after taxes and where the Issuer owns directly or indirectly more than 50% of the equity.

The Issuer has undertaken to inform swissfirst without delay if an event mentioned under paragraph (b), (d), (e), (f), (g), (h) and/or (i) has occurred and to provide swissfirst with the necessary documents. The Issuer accepts responsibility for the information contained in those documents.

If an event of default referred to this Section 8 occurs, swissfirst has the right but not the obligation to serve a written notice of default upon the Issuer. In this event, the Final Redemption Amount of all outstanding Bonds shall be due and payable 30 days after receipt of such notice of default by the Issuer, unless (i) the event of default has been cured within such 30 day period or (ii) security has been posted, in a form satisfactory to swissfirst, for the Final Redemption Amount.

9. Substitution of the Issuer

The Issuer may, without consent of the Bondholders, at any time substitute in respect of all rights and obligations arising under or in connection with the Bonds for itself, any non-Swiss Issuer of which all shares carrying voting rights are directly or indirectly held by the Issuer (the “New Issuer”), provided that

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(a) the New Issuer is in the opinion of swissfirst in a position to fulfil all payment obligations arising from or in connection with the Bonds in freely convertible and transformable legal tender without any need to deduct or withheld any taxes or duties at source and to transfer without restriction all amounts required to be paid under the Bonds to swissfirst and the interests of the Bondholders are adequately protected in the opinion of swissfirst,
(b) the New Issuer has obtained to this effect all necessary governmental authorizations of the country of its domicile or its deemed residence for tax purposes.

Any substitution shall be published in accordance with Section 12.

In the event of such substitution, any reference in the Bond Purchase Agreement plus Annexes and Terms of the Bonds to the Issuer shall be deemed to refer to the New Issuer and any reference to the R.O.C. (as far as made in connection with the Issuer) shall be deemed to refer to the country in which the New Issuer has its domicile or is deemed resident for tax purposes.

10. Guarantee

As security for the 0.00 % Convertible Bonds due 2008/2009 in the aggregate principal amount of up to USD 120,000,000 (one hundred twenty million US Dollars) of the Issuer, the Guarantor has undertaken to issue in respect of each Tranche of Bonds issued by the Issuer the following unconditional and irrevocable Guarantee in accordance with Article 496 of the Swiss Federal Code of Obligations up to an aggregate maximum principal amount of USD 120,000,000, in favour of the Bondholders for the due payment of all amounts payable on the Bonds:

Quote

DECLARATION OF GUARANTEE

(in the meaning of Article 496 of the Swiss Federal Code of Obligations, hereinafter called the

“ Guarantee ”)

The undersigned,

swissfirst Bank AG

(hereinafter referred to as the "Guarantor")

a corporation organized and existing under the laws of Switzerland, and having its principal place of business at Bellariastrasse 23, 8002 Zurich, Switzerland,

declares that it jointly and severally (“solidarisch”), unconditionally and irrevocably guarantees - in accordance with article 496 of the Swiss Federal Code of Obligations (“Solidarbürgschaft”) - to the holders of Bonds (the “Bondholders”) up to a limit of

USD 10,000,000.00 (ten million US Dollars)

the payment of principal and premium (if any) in respect of tranche [●] of the terms of the zero 0.00 % Convertible Bonds 2003-2008/2009 of up to a maximum of USD 120,000,000.00 principal amount issued by Mosel Vitelic Inc. (the “Issuer”)

under the Bond Purchase, Paying and Conversion Agency Agreement dated June 23, 2003 (the "Agreement") and additional amounts (if any), to be paid under the Terms of the Bond attached to the Agreement as per Annex A (the "Terms of the Bonds").

The amount of this Guarantee shall be reduced as and to the extent of payments received by swissfirst Bank AG of principal and additional amounts (if any) to be paid in respect of each respective tranche under the Terms of the Bonds effected by or on behalf of the Guarantor and/or the Issuer.

This Guarantee shall remain in force regardless of any modification of whatsoever nature which may be made in the structure, style or legal form of the Guarantor and/or of the Issuer. It shall remain valid until principal and additional amounts (if any) to be paid in respect of tranche [●] under the Terms of the Bonds, are paid in full, regardless of any concession which the holders of the Bonds may grant to the Issuer.

Should the Issuer for any reason not pay or not be able to pay the principal of, the Bonds and additional amounts (if any), payable in respect of each respective tranche pursuant to the Terms of the Bonds, when

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due, and should payments not be effected immediately after having been requested, pursuant to the Guarantee, the Guarantor will pay the amounts due in respect of each respective tranche on receipt of first written demand from each individual Bondholder without delay in Switzerland in United States Dollars effectively in accordance with the Agreement, the Terms of the Bonds and the Guarantee.

This Guarantee shall be governed by Swiss law.

Any dispute to which it may give rise shall be submitted to the exclusive jurisdiction of the Courts of Justice of the Canton of Zurich, place of jurisdiction being Zurich 2, with the right to appea1 to the Swiss Federa1 Court of Justice in Lausanne where the law permits.

Dated: [●] swissfirst Bank AG

By _________

Unquote

11. Statute of Limitations

Claims for payment of principal cease to be enforceable by legal action in accordance with the applicable Statute of Limitations (presently after 10 years from their due date of payment).

12. Notices

All notices regarding the Bonds shall be published by swissfirst at the expense of the Issuer in due time and shall be valid if published in the Swiss Official Commercial Gazette (Schweizerisches Handelamsblatt).

13. Currency Indemnity

If any payment obligation of the Issuer and/or the Guarantor in favour of the Bondholders has to be changed from US Dollars into a currency other than US Dollars (to obtain a judgment, execution, or for any other reason), the Issuer undertakes as a separate and independent obligation to indemnify the Bondholders for any shortfall caused by fluctuations of the exchange rates applied for such conversions. The rates of exchange to be applied in calculating such shortfall shall be swissfirst's spot rates of exchange prevailing between US Dollars and the currency other than US Dollars on the date on which such conversions are necessary.

14. Replacement of Bonds

Definitive Bonds which are mutilated, stolen, lost or destroyed may be replaced at the Specified Office and against payment of such costs as may be incurred in connection therewith and on such terms as to evidence (including, in the case of stolen, lost or destroyed Bonds, surrender of a copy (certified in a manner satisfactory to the Issuer and swissfirst) of the final and conclusive judgement of nullification from the competent courts as specified in Section 15 below) and such Guarantee as the Issuer and swissfirst may require and, in the case of mutilation, upon surrender of the mutilated Bond.

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15. Governing Law and Jurisdiction

The terms and conditions and form of the Permanent Global Certificate and the Bonds shall be subject to and governed by Swiss law.

Any dispute which might arise between Bondholders on the one hand and the Issuer on the other hand regarding the Terms of the Bonds, the Permanent Global Certificate and the Bonds shall be settled in accordance with Swiss law and falls within the jurisdiction of the Ordinary Courts of the Canton of Zurich, the place of jurisdiction being Zurich 2, with the right of appeal to the Swiss Federal Court of Justice in Lausanne, where the law permits, whose decision shall be final. Only for that purpose and for the purpose of execution in Switzerland, the Issuer elects legal and special domicile at swissfirst Bank AG, Bellariastrasse 23, 8002 Zurich, Switzerland, which has agreed forthwith to notify the Issuer of any communication received under this Section.

The above-mentioned jurisdiction is also exclusively valid for the declaration of cancellation of Bonds.

The Issuer shall be discharged by and to the extent of any payment made to a holder recognized as creditor by an enforceable judgement of a Swiss court.

The Bondholders are also at liberty to enforce their rights and to take legal action before competent courts in the R.O.C, or the country of domicile of the New Issuer or any other competent court or authority, in which case Swiss law shall be applicable with respect to the Terms of the Bonds, the Permanent Global Certificate and the Bonds.

16. Bondholders’ Meeting

(a) swissfirst or the Issuer may at any time convene a meeting of the Bondholders (a “Bondholders' Meeting”).

In case of any event mentioned in Section 8 above and as long as swissfirst has not exercised its rights thereunder, the Bondholders who wish that a Bondholder's Meeting should be convened and who represent at least 20 per cent (twenty per cent) of the aggregate principal amount then outstanding and who are entitled to participate and to vote in accordance with paragraphs (f) and (h) below may at any time require swissfirst to convene a Bondholders' Meeting which shall convene such a meeting as soon as commercially possible upon receipt of such request.

(b) The costs for such Bondholders' Meeting shall be borne by the Issuer or, in the case the Issuer is prohibited by law to pay these costs, by the Bondholders convening such meeting (each of these Bondholders shall bear such costs in relation to its respective holding of Bonds at the time of such Bondholders' request to swissfirst to convene a Bondholders Meeting).
(c) A Bondholders' Meeting may consider any matter affecting the interests of the Bondholders (other than matters on which swissfirst has previously exercised its rights contained in Section 8 above and Section 17 below), except any modification of, or arrangement in respect of the Terms of the Bonds which may be admissible only if an Event of Default has occurred.
(d) Notice convening a Bondholders' Meeting shall be given at least 45 days prior to the proposed date thereof. Such notice shall be given by way of one announcement in accordance with Section 12 above, at the expense of the Issuer. It shall state generally the nature of the business to be transacted at such meeting. If an Extraordinary Resolution (as defined below) is being proposed, the wording of the proposed resolution or resolutions shall be indicated. The notice shall specify the day, hour and place of the meeting and also the formal requirements referred to in paragraph (f) below. The Issuer and the Paying Agent will make a copy of such notice available for inspection by the Bondholders during normal business hours at each of their respective head offices.

Notice of any resolution passed at a Bondholders' Meeting will be published by swissfirst on behalf and at the expense of the Issuer in compliance with Section 12 above not less than 10 days after the date of the meeting. Non-publication of such notice shall not invalidate such resolution.

(e) All Bondholders' Meetings shall be held in Zurich. A chairman (the “ Chairman ”) shall be nominated by swissfirst in writing. If no person has been so nominated or if the nominated person shall

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not be present at the Bondholders' Meeting within 30 minutes after the time fixed for holding the meeting, the Bondholders present shall choose the Chairman.

The Chairman shall lead and preside over the Bondholders' Meeting. Among others, it shall be his duty to determine the presence of persons entitled to vote and to inquire if the necessary quorum (as set forth below) is present. He shall instruct the Bondholders as to the procedure of the Bondholders' Meeting and the resolutions to be considered. He shall sign the minutes referred to in paragraph (l) below.

In the case of any equality of votes, the Chairman shall have a casting vote.

A declaration by the Chairman that a resolution has been supported or supported by a particular majority in accordance with paragraphs (g) and (i) below or lost or not supported by a particular majority in accordance with paragraph g) and i) below shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

(f) Each person who produces a Bond or Bonds or a certificate by a bank in respect of such Bond relating to that Bondholders' Meeting is entitled to attend and to vote on the resolutions proposed at such Bondholders' Meeting. Bank certificates shall be dated before the date of the Bondholders' Meeting and confirm that the Bond(s) is (are) deposited with that bank and will remain deposited with it until and including the date of the Bondholders' Meeting and that it has not issued any other such certificate with respect to such Bond(s).
(g) The quorum necessary in order to vote on resolutions proposed at a Bondholders' Meeting shall be persons entitled under paragraph (f) above and (h) below holding or representing in the aggregate percentages (or more) of the aggregate principal amount of all outstanding Bonds:

each Ordinary Resolution: (as defined below) 25 %

each Extraordinary Resolution: 66 %.

If within thirty minutes after the time appointed for any Bondholders' Meeting a sufficient quorum is not present, the meeting shall be dissolved.

(h) Bondholders' voting rights shall be determined according to the principal amount of outstanding Bonds held i.e. each Bond in the denomination of USD 1,000 shall be entitled to one vote.

Bonds held by or on behalf of the Issuer or any other natural person or legal entity,

(A) which directly or indirectly owns or controls more than 50 % of the equity share capital of the Issuer, or
(B) of which in the case of a legal entity more than 50 % of the equity share capital is controlled by the Issuer directly or indirectly, or
(C) where the Issuer is in a position to exercise, directly or indirectly, a control over the decisions or actions of such natural person or legal entity or representative thereof, irrespective of whether or not the latter is affiliated to the Issuer, shall not be entitled to vote at such Bondholders' Meeting.
(i) A resolution shall be validly passed if approved by the following percentages (or more) of votes cast at a duly convened Bondholders' Meeting held in accordance with this Section 16:

Each Ordinary Resolution: 51 % of the quorum described in paragraph (g) above

Each Extraordinary Resolution: 66 % of the quorum described in paragraph g) above

Every proposal submitted to a Bondholders' Meeting shall be decided upon a poll.

(j) Any resolution which is not an Extraordinary Resolution in accordance with paragraph (k) below shall be deemed to be an Ordinary Resolution.
(k) An Extraordinary Resolution shall be necessary to decide on the following matters at a Bondholders' Meeting:
to postpone the maturity beyond the stated maturity of the principal of any Bond; or
to reduce the amount of principal payable on any Bond; or

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to change any provision for payment contained in the Terms of the Bonds or the place or the currency of repayment of the principal of any Bond; or
to amend or modify or waive the whole or any parts of Sections 6, 7 or 8 above or paragraphs (f), (g), (h), (i) or (k) of this Section 16; or
to create unequal treatment between Bondholders of the same class of an issue; or
to convert the Bonds into equity; or
to change the choice of law and the jurisdiction clause contained in Section 15 above; or
to amend or modify any of the provisions of the Guarantee.

The above-mentioned list of issues for which an Extraordinary Resolution shall be necessary is exclusive.

(l) Any resolution approved at a Bondholders' Meeting held in accordance with this Section 16 shall be conclusive and binding on the Issuer and on all present or future Bondholders, whether present or not, regardless if such Bondholders have approved such resolution. The Bondholders shall not be entitled to any improvement of their position vis-à-vis, as the case may be, pursuant to a resolution approved at a Bondholders' Meeting without prior written approval of the Issuer, as the case may be. Any Resolution approved at a Bondholders’ Meeting which increased the obligations of the Issuer, as the case may be, under the Terms and Conditions of the Bonds shall become effective only after written approval of the Issuer, as the case may be.

Minutes of all resolutions and proceedings at a Bondholders' Meeting shall be made and signed by the Chairman pursuant to paragraph (e) above.

(m) If no Bondholder or an insufficient number of Bondholders shall attend a Bondholders' Meeting, the right to decide on the early repayment of the Bonds or any other measures to protect the interests of the Bondholders shall revert to the absolute discretion of swissfirst. Any such decision of swissfirst shall be final and binding upon the Issuer and the Bondholders. Notice of any such decision shall be published in accordance with Section 12 above.

17. Amendment to the Terms of the Bonds

The Terms of the Bonds may be amended from time to time by agreement between the Issuer and swissfirst on behalf of the Bondholders provided that in the sole opinion of swissfirst such amendment is of a formal, minor or technical nature, is made to correct a manifest error or is not materially prejudicial to the interests of the Bondholders.

Notice of any such amendment shall be transmitted as per Section 12 above. Any such amendment shall be binding on the Issuer and the Bondholders in accordance with its terms.

18. Severability

If at any time any one or more of the provisions of the Terms of the Bonds is or becomes unlawful, invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not be in any way affected or impaired thereby.

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AI assistant

MVI — Capital/Financing Update 2018

52016_rns_2018-12-28_ecbf0471-dd0a-4093-afc5-04c97bea502c.pdf

INFORMATION MEMORANDUM

Mosel Vitelic Inc.

swissfirst Bank AG

Table of Contents

I. Summary of the Terms and Conditions of the Issue

Negative pledge / Pari Passu / Cross-Default

II. Taxation

1. Dividends on the Shares

2. Capital Gains

3. Subscription Rights

4. Securities Transaction Tax

5. Estate Taxation and Gift Tax

6. Tax Treaty

III. Investment Considerations

1. Risks Relating to the Group’s Industry and its Business

1.1. The Semiconductor Industry

1.2. Technological Change and New Product Development

1.3. Manufacturing Risks

1.4. Diversification into Production of LCD Drivers and Non-DRAM Products

1.5. Breaches of Certain Credit and Other Financing Agreements

1.6. Relationship with Siemens

1.7. Substantial Capital Requirements

1.8. Dependence on PC Markets

1.9. Competition

1.10. Intellectual Property Protection

1.11. Dependence on Certain Sources of Supply

1.12. Key Customers and Relationships

1.13. Environmental Regulation

2. Risks Relating to the Republic Of China (R.O.C.)

2.1. Recent Economic Developments in the R.O.C.

2.2. The R.O.C. Securities Market

2.3. Political Risks

3. Risks Relating to the Bonds and Relevant Shares

4. Risks Related to Exchange

4.1. Appointment of Local Agent

IV. Mosel Vitelic Inc.

1. Basic Information on the Issuer

1.1. Business

Business Strategy

Products and Services

As of 31 December 2002

Intellectual Property

Quality Control

1.2. Use of Proceeds

1.3. Number of employees

1.4. Board of Directors and Management

Management

Directors and Supervisors

2. Information Concerning the Shares of the Issuer

2.1. Capital

2.2. Dividends per Share

2.3. Listing

2.4. Principal Shareholders

3. Financial Information on the Issuer

3.1. Financial Year

3.2. Accounting Principles

3.3. Outstanding Bonds and/or Notes as of December 31, 2002

3.4. Subsidiaries and Affiliates

4. Supplementary Information

4.1. Legal Proceedings

4.2. No Material Adverse Change

4.3. Responsibility

5. Audited Consolidated and Financial Statements

Mosel Vitelic Inc.

English Translation of a Report Originally Issued in Chinese

Notice to Readers

MOSEL VITELIC INC.

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

STATEMENTS OF INCOME

For the Years Ended December 31, 2001 and 2000

English Translation of Financial Statements Originally Issued in Chinese

English Translation of Financial Statements Originally Issued in Chinese

MOSEL VITELIC INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the Years Ended December 31, 2001 and 2000

MOSEL VITELIC INC.

STATEMENTS OF CASH FLOWS

MVI Capital/Financing Update 2018