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Letter to Shareholders ........................................................................................................................ 1

Company Overview 1. Company profile ................................................................................................................................................................. 3

2. Corporate governance report .............................................................................................................................................. 5

3. Capital and shareholding .................................................................................................................................................. 18

4. Issuance of corporate bonds .............................................................................................................................................. 20

5. Issuance of preferred stocks .............................................................................................................................................. 20

6. Issuance of global depositary receipts (GDR) .................................................................................................................. 21

7. Exercise of employee stock option plan (ESOP) .............................................................................................................. 22

8. Mergers, acquisitions or issuance of new shares for acquisition of shares of other companies ........................................ 24

9. Implementation of capital allocation plan ......................................................................................................................... 24

Business Overview 1. Business activities ............................................................................................................................................................. 25

2. Market, production and sales ............................................................................................................................................ 29

3. Employees ........................................................................................................................................................................ 33

4. Spending on environmental protections ............................................................................................................................ 33

5. Employees-employer relations ......................................................................................................................................... 34

6. Important contracts ........................................................................................................................................................... 37

Financial Overview 1. Condensed balance sheets, statements of income, names of auditors, and audit opinions (2008 – 2012) ........................ 38

2. Financial analysis (2008 – 2012) ...................................................................................................................................... 39

3. 2012 financial statements.................................................................................................................................................. 41

4. 2012 consolidated financial statements ............................................................................................................................ 76

5. Financial difficulties and corporate events encountered by the Company and affiliates in the past that have

material impact on the financial status of the Company ................................................................................................... 83

Financial Status, Operating Performance and Risk Evaluation 1. Analysis of financial status ............................................................................................................................................. 122

2. Analysis of operating performance ................................................................................................................................. 122

3. Cash flow analysis .......................................................................................................................................................... 123

4. Effect of major capital spending on financial position and business operation .............................................................. 123

5. Industry specific key performance indicator ................................................................................................................... 123

6. Investment policy in the past year, return on investment analysis, improvement plan, and investment plan for the

coming year .................................................................................................................................................................... 123

7. Risk management and assessment .................................................................................................................................. 123

8. Other important events ................................................................................................................................................... 128

Important Notice 1. Profile on affiliates and subsidiaries ............................................................................................................................... 129

1

Letter to Shareholders

Dear Shareholders,

In 2012, the supply glut of global memory industry was rectified through production cut and merger. As the industry

approached an equilibrium, Winbond reported growth in the shipment of DRAM and NOR Flash products, while

increasing the production weights of 46nm and 58nm processes for the year. Winbond continued its leading position in

the low to medium density specialty memory and became the number-one supplier of Serial Flash worldwide.

Financial Performance

We reported revenue of NT$25.419 billion in 2012, down 7% from last year. Our consolidated revenue including

members of Nuvoton Technology Corp. etc. was NT$32.965 billion, a decrease of 5% as compared to the previous

year. Net loss was NT$1.853 billion or NT$0.5 loss per share in 2012.

Technology and Product Development

Winbond is a leading provider of specialty memory solutions, with a balanced DRAM and NOR Flash product portfolio.

We endeavor to build diverse core competencies and focus on the development of products with high added value. With

respect to NOR Flash, we continued to strengthen the specifications and functions, and gradually increased supply of

58nm products in order to maintain our leadership in the Serial Flash market. As far as the Specialty DRAM is concerned,

the migration to 46nm process was on schedule. We actively moved into applications with high entry barrier markets,

such as automobile, industrial applications and KGD (Known Good Die). In the area of Mobile RAM products, we

assiduously developed low to medium density low-power DRAM products in applications of portable devices.

Our capital expenditure in 2013 will be used mainly on 46nm DRAM and 58nm Flash process technology migrations in

order to keep competitive of our products. In addition to our own 12-inch fab with 35,000 wafers per month, we will

outsource when capacity is insufficient and advanced technology process is required under fab-lite strategy.

Market Development

We continued to cultivate first-tier customers worldwide by providing total low/medium-density memory solution used in

the peripheral modules of mobile devices as well as network and automobile electronic applications. By focusing on the

niche market and customer-oriented strategy, Winbond will make efforts to “timely to market”, “customer satisfaction”,

and “processes improvement” to provide more comprehensive product solutions, world-class product quality and

excellent customer services.

Future Outlook

Looking into 2013, as smart phones, tablet computers, LCD TVs and network systems are expected to bring new

opportunities and stronger demand for low/medium-density memory products, Winbond will persist technical and market

innovation to timely respond to market opportunities, optimize product and client compatibility, and improve bottom line.

We also urge our colleagues to create a work culture of accountability, innovation and synergy, to maximize the value of

Company, and to generate outstanding business results on the basis of technological autonomy, core competence and

sound financial structure.

2

On behalf of the management of Winbond, I would like to thank our shareholders for your support and encouragement.

My you have a prosperous year and good health.

Chairman and EO

3

Company Overview

1. Company profile

1.1 Company history

Winbond Electronics Corp. is a Specialty Memory IC Company engaged in design, manufacturing and sales services.

From product design, research and development, wafer fabrication to marketing of brand name product, Winbond

endeavors to provide its global clientele top quality of low to medium density memory solutions.

The Company was established in September 1987 and listed on Taiwan Stock Exchange in 1995 with headquarter in

Central Taiwan Science Park, Taichung, Taiwan.

Winbond has three core business groups - DRAM Product, NOR Flash, and Memory IC Manufacturing. It

continuously seeks product and technological innovation to gain a competitive edge. Winbond’s core product lines

include NOR Flash, Specialty DRAM and Mobile RAM. Our advantage of technological autonomy and prudent

capacity strategy enable us to build a highly flexible production system to produce the synergistic effect of product

mix and allow us to meet the diverse demands of customers while building the brand image.

In the area of NOR Flash memory products, we focus on “low to medium density” market by offering a full range of

products of low to medium density Serial Flash. Our small-size flash memory packages offer the features of low pin

count, small size and low cost. With considerable market share in computer peripheral markets, we also develop

mobile device and consumer electronic related fields.

Winbond specializes in the design of high-performance and low-power memory, and riding on the strength of having

a 12-inch fab, offers a whole series of Mobile RAM and Specialty DRAM products that target a top tier clientele and

quality-oriented applications. Winbond’s products are used extensively in handheld devices, consumer electronics

and computer peripherals. We also focus on high-barrier, high-quality applications, such as KGD, automobile and

industrial electronics.

To provide clienteles around the world prompt services, Winbond has set up bases in the USA, Japan, China, and

Hong Kong and is built distributor networks in different countries to broaden and deepen our sales network. In the

aspect of quality, Winbond implements rigorous process control and quality control, and strengthens yield analysis,

supply chain management to fill customer satisfaction. The long-standing efforts in quality assurance have earned

the Company good reputation and resulted in the accreditation of ISO 9001, TS 16949, QC 080000, ISO 14001,

OHSAS 18001.

In the future, Winbond will continue to provide customer-oriented services and concentrate our resources in markets

in which the Company has a competitive edge. At the same time, under the guidance of core values of

“accountability, innovation and synergy” and incorporating the spirit of corporate slogan of “We Deliver” in all

operational activities, Winbond will make use of advanced semiconductor design and production technologies

coupled with the collective creativity and wisdom of employees to strive towards to become an outstanding supplier

of low to medium capacity special memory solutions.

4

1.2 Major business development in the past year and up to the date of report

Winbond continued to migrate technology processes. In 2012, we migrate part of the Specialty DRAM and Mobile

RAM to self-developed 46nm process, and the NOR Flash to 58nm. The advanced process technology and the cost

advantage are expected to enhance our product competitiveness and ward off the risk of price decline.

To satisfy customer demands in a timely manner, Winbond set up a subsidiary in Suzhou China in June of 2011 for

further deployment in the China market. The subsidiary in Suzhou is also endowed with the functions of market

development and consolidation of human resources for the business development in China market. It is expected to

drive Winbond into a new market and will fortify Winbond’s sales network in China. The Suzhou subsidiary has

commenced operation in January 2012.

For the sake of replenishing working capital and repaying existing loans, Winbond acquired a 3-year, NT$5 billion

syndicated loan from 10 banks in Taiwan in November 2012. With funds in place and strong working capital,

Winbond will be able to provide its customers with complete and steady products and services.

1.3 Investment in affiliates in the past year and up to the date of report

1. In November 2012, Winbond purchased 40,000,000 shares of Chih Xin Investment Corp., Ltd. (“Chih Xin

Investment”) from Walsin Lihwa Co. Subsequently on December 31, 2012, Win Investment Co., Ltd. (“Win

Investment”) merged with Chih Xin Investment with Win Investment being an extinguished company. Winbond

acquired another 130,713,000 shares of Chih Xin Investment as a result of the merger. As of the date of report,

Winbond owns 170,713,000 shares or 35% of Chih Xin equity shares.

2. For other equity investments, please see page 130 of this report

5

2. Corporate governance report

2.1 Organizational structure and major business units

2.1.1 Organizational structure

6

2.2 Profile of directors, supervisors and management

2.2.1 Directors and supervisors (1) March 31, 2013

Title Name

Date

electe

d

Term

Date

first

elected

Shares held when

elected Shares currently held

Shares held by spouse

and minor children

Shares held in

the name of

others

Education/work experience Other

positi

ons

Other officer, director or supervisor who

is the spouse or a relative within second

degree

Shares Shares %

(Note4) Shares

Shares %

(Note4) Shares

Shares %

(Note4) Shares

Shares %

(Note4) Title Name

Relationshi

p

Chairman Arthur Chiao 2011.06.

22 3 years 1987.09.04 53,674,955 1.46% 56,764,955 1.54% 14,750,978 0.40% - -

Master in Electrical Engineering and

Researcher of Management College of

Washington Univ.

Chairman of Walsin Lihwa Corp.

Note 6

Director and Chief

Administrative

Officer

Supervisor

Yung

Chin

Chiao

Yu-Chi

Spouse

Brother

Director Ching-Chu

Chang

2011.06.

22 3 years 1993.03.25 10,067,591 0.27% 10,067,591 0.27% 53,058 0.00% - -

Ph.D. in Electrical Engineering, Princeton

Univ. Master in Business Management of

Graduate School of Stanford Univ.

General Director of Electronic Research

and Service Organization of the

International Technology Research Institute

Vice Chairman of Winbond Electronics

Corp.

Chairman of Vanguard International

Semiconductor Corp (incumbent)

Note 7 None. None. None.

Director

Matthew

Feng-Chiang

Miau

2011.06.

22 3 years Note 3 100,000 0.00% 100,000 0.00% - - - -

Master in Business Administration of

California Univ. at Santa Clara.

B.S. in Electrical Engineering, U.C.

Berkeley


Director Yung Chin 2011.06.

22 3 years 1996.04.09 10,450,537 0.28% 10,450,537 0.28% 61,065,396 1.66% - -

Master in Applied Mathematics,

Washington Univ.

Chief Auditor of Walsin Lihwa Corp.

Vice President of Winbond Electronics

Corp.

Note 9 Chairman and CEO

Supervisor

Arthur

Chiao

Chiao

Yu-Chi

Spouse

Brother and

sister

in-law

Director Walsin Lihwa

Corporation

2011.06.

22 3 years 1987.09.04 858,091,531 23.37% 858,091,531 23.27% - - - - - Note 10 - - -

Director

representa-

tive

Peter Chu

(Representati

ve of Walsin

Lihwa Corp.)

2011.06.

22 3 years 2011.06.22 - - - - - - - -

B.A. in International Trade, Feng Chia

University and Advanced Management

Program (AMP), University of Hawaii

Sales/International Department Manager of

Walsin Lihwa Corp.

Director, President and Compensation

Committee member of Global Brand

Manufacture (incumbent)


7

Director Lu-Pao Hsu 2011.06.

22 3 years 2000.03.01 8,000 0.00% 8,000 0.00% 3,316 0.00% - -

Master in Physics, National Cheng Kung

Univ.

Researcher of High-Level Management

Course of Harvard Business School

Associate Professor of National Chiao

Tung Univ.

Administrative Vice-Executive of

Koninklijke Philips Electronics N.V.,

Managing Director of Walsin Lihwa Corp.


Director Robert Hsu 2011.06.

22 3 years 2002.05.17 1,510,524 0.04% 979,524 0.03% 99,038 0.00% - -

Ph.D. in Electrical Engineering, University

of Southern California

President of Winbond Electronics Corp.

Director and President of Nuvoton

Technology (incumbent)


Director Tong-Yi

Chan

2011.06.

22 3 years 2009.06.19 100,000 0.00% 100,000 0.00% - - - -

PhD. in Electrical Engineering, U.C.

Berkeley Master in Management Science,

Stanford University

BCD Semiconductor CEO


(incumbent)


Director Hong-Chi Yu 2011.06.

22 3 years 2011.06.22 - - - - - - - -

M.S., Stanford University

B.A., Princeton University

President of Union Electric

Director and President of Walton Advanced

Engineering (incumbent)


Supervisor Yu-Chi Chiao 2011.06.

22 3 years Note 4 22,859,166 0.62% 22,859,166 0.62% 4,661,776 0.13% - -

Master in Public Administration, San

Francisco State University

President of Walsin Lihwa Corp.

Chairman of HannStar Color Co.

Chairman of HannsTouch Solution

(incumbent)

Note 16

Chairman and CEO

Director and Chief

Administrative

Officer

Arthur

Chiao

Yung

Chin

Brother

Brother and

sister

in-law

Supervisor Wang-Tsai

Lin

2011.06.

22 3 years Note 5 - - - - - - - -

Special Assistant to Chairman of Walsin

Lihwa Corp. (incumbent) Note 17 None. None. None.

Supervisor Hui-Ming

Cheng

2011.06.

22 3 years 2005.06.10 250,000 0.01% 250,000 0.01% - - - -

Master in Business Administration, Kelley

School of Business at Indiana University.

Master in Science in Chemical

Engineering, University of California, Los

Angeles

CFO at Winbond Electronics Corp.

Chief Financial Officer of Taiwan Mobile

CFO at Fubon Financial Holdings Co.,

Limited.

CFO at HTC Corporation

Director, President and Compensation

Committee member of Walsin Lihwa Corp.

(incumbent)


Note 1: “Percentage” under “Shared held when elected” was based on then issued and outstanding shares common shares of 3,672,539,193 shares.

Note 2: “Percentage” under “Shares currently held” was based on then issued and outstanding common shares of 3,686,826,193 shares as of March 31, 2012, including 1,225,000 shares exercised by employees under the employee stock option plan between

January 1 and March 31, 2012 that are not yet registered for change of capital stock.

8

Note 3: Mr. Matthew Feng-Chiang Miau has been a director of Winbond since May 6, 2003. He also served as a director from March 25, 1993 to Feb. 21, 1994 and from Mar. 30, 1994 to Jan. 29, 2003.

Note 4: Supervisor Mr. Yu-Chi Chiao has been a supervisor of Winbond from April 9, 1996 to February 28, 2000, and from April 30, 2008 until now.

Note 5: Mr. Wang-Tsai Lin has been a Supervisor of Winbond from September 4, 1987 to March 25, 1993, and from June 10, 2005 until now.

Note 6: Mr. Arthur Yu-Cheng Chiao serves concurrently as the CEO of Winbond, Chairman and Compensation Committee member of Capella Microsystems, Chairman of Nuvoton Technology Co. and Chih Xin Investment Corp., Vice Chairman of Walsin

Lihwa Co.; Director of Walsin Technology Corporation , United Biomedical, Inc., Asia, HannStar Color Co., Ltd., Kolin Cons. & Development Co., Ltd., Walsin Lihwa Holdings Co., Walsin Specialty Steel Corporation, Landmark Group Holdings Ltd,

Winbond Int’l Corp., Winbond Electronics Corporation America, Newfound Asian Corp., Peaceful River Corp., Baystar Holdings Ltd., Nuvoton Investment Holding Ltd., Marketplace Management Limited, and Pigeon Creek Holding Co., Ltd.;

management of Goldbond LLC; and Supervisor of MiTac International Corp.; Independent Director and Compensation Committee convenor of Taiwan Cement and Independent Director and Compensation Committee member of Synnex Technology

International.

Note 7: Mr. Ching-Chu Chang serves concurrently as the supervisor of Fine Art Technology Co., Ltd., and the Supervisor of Z-Com, Inc.

Note 8: Mr. Matthew Feng-Chiang Miau serves concurrently as Chairman of Lienhwa Industrial Corporation, MiTac International Corp., MiTac INC, Synnex Technology International Corporation, Union Venture Capital Corp. and Union Technology Corp.

and Director of MiTac Communication, Ares International Corp., MiTac Technology Corp., BOC Lienhwa Industrial Gases Corp.

Note 9: Ms. Yung Chin serves concurrently as the Chief Administrative Officer of Winbond; Chairman of Winbond (H.K.) and Winbond Electronics (HK) Ltd.; Director of Nuvoton Technology Co., Winbond Electronics Corp. America, Newfound Asian

Corp., Peaceful River Corp., Nuvoton Electronics Technology (H.K.) Limited, and Qing An Investment; Supervisor of Yau Cheung Investment Limited, Winbond Electronics Corporation Japan, Nuvoton Technology (Shanghai) Corp. and Winbond

(Suzhou) Integrated Circuit.

Note 10: Walsin Lihwa Corporation serves concurrently as Director of Chih Xin Investment Corp., Touch Micro-System Technology Corp., Kolin Cons. & Development Co., Ltd., Walsin Info-Electric Co., Concord Venture Capital Group, Walsin Technology

Corporation , Walton Advanced Engineering, Inc., HannStar Board Corporation, HannStar Color Co. Ltd., Global Investment Holdings, Kuang Tai Metal Industrial Co., Chip Advanced Materials Corp., I-Chi United Trading Corp.,, Zhong Tai

Technology Development Engineering Co., Walsin Solar Technology and Min Maw Precision Industry Corp.; Supervisor of Touch Micro-System Technology Corp., Walsin Info-Electric Co., Taiwan High Speed Rail Corp., Walsin Solar Technology

and Min Maw Precision Industry Corp.

Note 11: Mr. You-Yi Zhu serves concurrently as the Compensation Committee member of the Company; Director of Walsin Technology Corporation and HannStar Board Corporation; Supervisor of Walsin Lihwa Corp.

Note 12: Mr. Lu-Pao Hsu serves concurrently as Director of Diodes Incorporated, Supervisor of Nuvoton Technology Co.; and Compensation Committee convenor of Walsin Lihwa Corp.

Note 13: Mr. Robert Hsu serves concurrently as Chairman of Nuvoton Electronics Technology (H.K.) Limited, Nuvoton Technology (Shanghai) Corp.; Director of Winbond Int’l Corp., Landmark Group Holdings Ltd., Winbond Electronics Corporation Japan,

Baystar Holdings Ltd., Nuvoton Electronics Technology ShenZhen) Limited, Winbond Technology (Nanjing) Co., Nuvoton Technology Corp. America, Nuvoton Technology Israel Ltd., Nuvoton Investment Holding Ltd.、Marketplace Management

Limited, and Pigeon Creek Holding Co., Ltd.

Note 14: Mr. Tong-Yi Chan serves concurrently as Chairman of Winbond (Suzhou) Integrated Circuit; Director and Compensation Committee member of Walton Advanced Engineering; Director of Landmark Group Holdings Ltd., Winbond Int’l Corp.,

Mobile Magic Design Corp., Winbond Electronics Corporation America, Winbond Electronics Corporation Japan, Newfound Asian Corp., Peaceful River Corp., Baystar Holdings Ltd., Marketplace Management Limited, Pigeon Creek Holding Co.,

Ltd., Nuvoton Technology Corp. America and Winbond (H.K.); CEO of Mobile Magic Design Corp.

Note 15: Mr. Hong-Chi Yu serves concurrently as Chairman and President of Walton Advanced Engineering, Inc.; Independent Director of Advanced Microelectronic Products Inc.; Supervisor of Walsin Technology Co., Ltd., and HannStar Color Co. Ltd.

Note 16: Mr. Yu-Chi Chiao serves concurrently as Chairman of HannStar Color Co. Ltd., Oriental Consortium Investment, Hannstar Display (Nanjing), and Hannspree Display Technology (Nanjing); Director and CEO of HannStar Display Corporation;

Director of Bradford Ltd., HannSpirit (BVI) Holding Ltd., Brightstar Resources Ltd., Guang Bo Resources Co., Hannspree China Holdings Ltd., Hannspree International Holdings Ltd., Hannspree North America Holdings Ltd., Hannspree North

America Inc., and HannStar Board Corporation.

Note 17: Mr. Wang-Tsai Lin serves concurrently as Director of Walsin Lihwa Corp., Chih Xin Investment Corp., Powertek Energy Co., Concord Venture Capital Group, Chong Tai Technology Development Corp, Joint Success Enterprises Limited and Jin

Cherng Business Management and Consulting Corp.; Supervisor of Walsin Technology Co., Ltd., and Jin Cherng Construction Corp.

Note 18: Mr. Hui-Ming Cheng serves concurrently as Director of ACME Electronics Corporation; and Supervisor of Ming Wen Investment Co., Ltd. and Green Garden Investment Corp.

Note 19: Directors who are representative of institutional shareholder and the major shareholders of institutional shareholders

April 16, 2013

Name of institutional shareholder Major shareholders of institutional shareholder

Walsin Lihwa Corporation

Deutsche Bank (4.44%), Chih Xin Investment Corp. (2.83%), Saudi Arabia Central Bank Investment Fund under the custody of JPMorgan Chase Bank N.A. Taipei Branch (2.53%), Vanguard

Emerging Markets Stock Index Fund under the trust of Standard Charter (1.86%), Chiao Yu-Chi (1.78%), Chiao Yu-Heng (1.64%), Dimension Emerging Market Evaluation Fund under the

trust of Citibank (Taiwan) (1.54%), Chiao Yu-Hui (1.45%), Hong Pai-Yung (1.35%), Walsin Lihwa Employee Welfare Committee (1.33%).

Note 20: Major shareholders in Note 19 who are institutional investor and their major shareholders

April 16, 2013

Name of institutional shareholder Major shareholders of institutional shareholder

Ta Cherng Investment Walsin Lihwa (43.93%), Winbond Electronics (35.19%), Arthur Chiao (3.14%), Chiao Yu-Lon (3.14%), Chiao Yu-Heng (3.14%), Chiao Yu-Chi (3.14%), Yu Shiang Investment (2.81%),

Walsin Technology Co. (1.86%), HannStar Board Corporation (1.34%), Prosperity Dielectrics Co. (0.72%).

9

Directors and supervisors (2) March 31, 2013

Criteria

Name

Has at least 5 years of work experience and meet one of the following professional qualifications Meet the independence criteria (Note 1)

Number of other

public companies in

which the director also

serves as an

independent director

An instructor or higher

position in the department of

commerce, law, finance,

accounting or other

department related to the

business needs of the

Company in a public or

private junior college or

university

A judge, public prosecutor,

attorney, accountant, or

other professional or

technical specialist related to

the needs of the Company

who has passed a national

examination and received a

certificate therefor

Having work experience in

commerce, law, finance, or

accounting or a profession

necessary for the business of

the Company

1 2 3 4. 5 6 7 8 9 10

Arthur Chiao V V V V 2

Ching-Chu Chang V V V V V V V V -

Matthew Feng-Chiang Miau V V V V V V V V V V -

Yung Chin V V V V V V -

Walsin Lihwa Corporation

(Representative: Peter Chu) V V V V V V V -

Lu-Pao Hsu V V V V V V V V V V 1

Robert Hsu V V V V V V V V V -

Tong-Yi Chan V V V V V V V V V -

Hong-Chi Yu V V V V V V V V V V 1

Chiao Yu-Chi V V V V V -

Wang-Tsai Lin V V V V V V V V -

Hui-Ming Cheng V V V V V V V V -

Note 1: If the director or supervisor meets any of the following criteria in the two years before being elected or during the term of office, please check “V” the corresponding boxes:

(1) Not an employee of the Company or any of its affiliates;

(2) Not a director or supervisor of the Company or any of its affiliates (the same does not apply if the person is an independent director of the Company or its parent company, or any subsidiary in which the Company holds, directly and

indirectly, more than 50% of the voting shares).

(3) Not a natural-person shareholder whose shareholding, together with those of his/her spouse, minor children, and shares held under others’ names, exceed 1% of the total number of outstanding shares of the Company, or ranks the person in

the top ten shareholders of the Company.

(4) Not a spouse, relative within second degree of kinship, or lineal relative within fifth degree of kinship of any of the persons in the preceding three paragraphs.

(5) Not a director, supervisor or employee of a juristic-person shareholder that holds directly 5% or more of the total number of outstanding shares of the Company or ranks in the top five shareholders.

(6) Not a director, supervisor, manager or shareholder holding 5% or more of the shares of a specified company or institution that has a financial or business relationship with the Company.

(7) Not a professional or an owner, partner, director, supervisor, manager or a spouse of the abovementioned who provides commercial, legal, financial, accounting services or consultation to the Company or an affiliate of the Company,

excluding members of compensation committee who exercise power in accordance with Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Compensation committee of a Company Whose Stock is

Listed on the Stock Exchange or Traded Over the Counter.

(8) Not having a marital relationship or a relative within the second degree of kinship to any other director of the Company.

(9) Not having any of the situations set forth in Article 30 of the Company Act of the R.O.C.

(10) Not a government agency, juristic person, or its representative set forth in Article 27 of the Company Act of the R.O.C.

10

2.2.2 Profile of President, Vice Presidents, Assistant Vice Presidents, and Department Directors

March 31, 2013

Title Name Date

appointed

Shares held Shares held by spouse and

children

Shares held in the name

of others Education/work experience Manager who is the spouse or a relative

within the second degree

Manager who is the spouse

or a relative within Title

Name Date appointed the

second degree

Shares % (Note2) Shares % (Note2) Shares % (Note2) Title Name Relationship

CEO Arthur Chiao 2005.08.01 56,764,955 1.54% 14,750,978 0.40% - -

Master in Electrical Engineering and Researcher

of Management College of Washington Univ.

Chairman of Walsin Lihwa Corp.


President Tong-Yi Chan 2009.02.09 100,000 0.00% - - - -

PhD. in Electrical Engineering, U.C. Berkeley

Master in Management Science, Stanford

University

BCD Semiconductor CEO


(incumbent)


Executive

Vice

President

Wilson Wen 2008.05.02 609 0.00% - - - -

BS in Electronic Physics, National Chiao Tung

Univ.

CEO of Hannstar Display Corporation

President of Mobile Magic Design Corp. None. None. None.

Vice

President and

Chief

Financial

Officer

James Wen 2004.03.16 160,000 0.00% - - - -

MBA, Wharton School in University of

Pennsylvania

President of Cathay Securities Investment Trust

Co., Ltd.


Vice

President Yuan-Mow Su 2005.02.01 1,699,859 0.05% - - - - MSEE, University of Southern California

President of Mobile Magic Design Corp.

Director of Winbond Electronics

Corporation America

Director of Winbond Integrated Circuit

(Suzhou)

None. None. None.

Vice

President Chen-Hsi Lin 2005.02.01 1,000 0.00% - - - -

Ph.D. Applied Physics, Harvard University, USA

Deputy Divisional Director of Corporate

Marketing and Central R&D, UMC

None. None. None. None.

Vice

President Pei-Ming Chen 2005.10.01 361 0.00% - - - - MS of E.E., University of Detroit, USA

Marketing Executive of Mobile Magic

Design Corp.

President of Winbond (Suzhou) Integrated

Circuit Company

Director and president of Winbond

Electronics (HK) Ltd.

Director of Winbond Electronics

Corporation America

None. None. None.

Vice

President Cheng- Kung Lin 2006.11.01 1,160,281 0.03% 161,539 0.00% - -

MS in Engineering Technology of National

Taiwan University of Science and Technology

Department Head and Assistant Vice President

of Winbond Electronics

Director of Winbond (H.K.)

Director of Winbond Integrated Circuit

(Suzhou)

None. None. None.

Vice

President Chin-Fen Tsai 2011.11.01 - - - - - -

Ph.D. in Material Science and Engineering of

Utah University

Vice President in technology and CTO of Sunny


11

Title Name Date

appointed


children







second degree


Optronics Corp.

Vice President of Eversol Corp.

Deputy Divisional Director of QRA, UMC

Chief

Business

Officer

Eungjoon Park 2008.08.04 - - - - - -

Master in Electrical Engineering, U.C. Berkeley

Winbond Electronics Corp. Executive Vice

President

Executive Vice President of NexFlash

Technologies Inc.

Vice President of Azalea Microelectronics Corp.

Division Director of ISSI/NexFlash

Division Director of ICT Inc.

Senior engineer, AMD

President of Winbond Electronics

Corporation America None. None. None.

Assistant

Vice

President

Shi-Yuan Wang 2005.08.01 525,656 0.01% 186,059 0.01% - -

MS in Electric Engineering, National Tsing Hua

University

Junior Engineer, Industrial Technology and

Research Institute

R&D Deputy Executive of Mobile Magic

Design Corp. None. None. None.

Assistant

Vice

President

Chiu-Yi Huang 2006.07.12 473,949 0.01% - - - -

MBA, Indiana University

Controller, Winbond Electronics Corp.

Vice President, Citibank


Assistant

Vice

President

Wen-Gui Hsu Note 3 - - - - - -

MS in Computer Engineering, University of

California.

CIM consultant at Hewlett Packard.

Director of Automation Engineering at Hannstar

Display Corporation.

CIM Solution Architect at Campac.

Senior CIM engineer at Mosel Vitelic.

Senior CIM engineer at ProMOS.


Assistant

Vice

President

Yi-Dar Chang 2007.10.01 1,390,074 0.04% 13,978 0.00% - - EMBA, National Tsing Hua University

Equipment Engineering, ITRI-ERSO None. None. None. None.

Assistant

Vice

President

Chi-Lung Chou 2008.07.01 240,040 0.01% - - - -

Bachelor, Control Engineering, National Chiao

Tung University

Director of Memory Testing Division, Winbond

Electronics

Director of Flash Memory and Testing Engineering

Division, Winbond Electronics

Assistant Manager of United Microelectronics

Manager of Mosel Vitelic Inc.


Assistant

Vice

President

Wen-Hua Lu 2011.07.01 1,098 0.00% 738 0.00% - -

MS in Material Science and Engineering, National

Taiwan University

Assistant Researcher of Material and Chemical

Research Laboratories, ITRI


Assistant

Vice Wen-Chang Hong 2012.01.16 - - 6,000 0.00% - -

M.S. in Industrial Engineering and System

Management, Chung Hua University None. None. None. None.

12

Title Name Date

appointed


children







second degree


President

Assistant

Vice

President

Mao-Hsiang Yen 2012.07.01 31,321 0.00% 15,975 0.00% - - MS in Electric Engineering, National Tsing Hua

University None.

None. None. None.

Department

Manager and

Accounting

Chief

Wen-Ying Liang 2008.08.18 20,000 0.00% - - - - Master in Management Research Institute, Fu Jen

Catholic University None. None. None. None.

Note 1: Management is defined the same as the interpretation provided in the Ministry of Finance letter Tai-Cai-Zheng-San-Zi- 0920001301, including president, vice president, assistant vice president, chief financial officer and chief accounting officer.

Note 2: “Percentage” under “Shares currently held” was based on then issued and outstanding common shares of 3,686,826,193 shares as of March 31, 2012, including 1,225,000 shares exercised by employees under the employee stock option plan between

January 1 and March 31, 2012 that are not yet registered for change of capital stock.

Note 3: Mr. Wen-Gui Hsu served as an assistant vice president of the Company from November 1, 2006 to March 28, 2012. His information disclosed in the table above is up to the date of his termination as a managerial officer of the Company.

Note 4: Refer to Note 6 under Profile of Directors and Supervisors (1).

Note 5: Refer to Note 14 under Profile of Directors and Supervisors (1).

Note 6: VP James Wen serves concurrently as President of Winbond (H.K.); Winbond Electronics Corporation Japan, Winbond Electronics Corporation America, Winbond Electronics (HK), Mobile Magic Design Corp., Winbond (Suzhou) Integrated Circuit,

Winbond Technology (Nanjing), Nuvoton Investment Holding Ltd., Walton Cultural and Educational Foundation, Global Investment Holdings; and independent director of Ta-Ho Maritime Corporation. Mr. Ting-Piao Chiao serves concurrently as

Chairman of Chih Xin Investment Corp.;

Note 7: Assistant VP Chiu-Yi Huang serves concurrently as Director of Winbond Electronics (HK), and Supervisor of Search Marketing Co., Harbinger Venture III Capital Corp and Mobile Magic Design Corp.; management of Goldbond LLC;

13

2.2.3 Remunerations to directors, supervisors, president, and vice presidents in recent years

2.2.3.1 Remuneration to directors December 31, 2012; Unit: NT$1,000; 1,000 shares

Title Name

Director's remuneration Ratio of total (A),

(B), (C), and (D) to

after-tax income

(Note 10) (%)

Pay received as an employee Ratio of total (A),

(B), (C), (D), (E),

(F) and (G) to

after-tax income

(Note 10)

Remuneration

received from

Investees other

than subsidiaries

(Note 11)

Remuneration (A)

(Note 1)

Pension (B)

(Note 2)

Profit sharing (C)

(Note 3)

Business expense

(D) (Note 4)

Salary, bonus and

special allowance

(E) (Note 5)

Pension (F) Profit sharing & bonus

(G) (Note 6)

Shares subscribable

under employee

stock options (H)

(Note 7)

Shares obtained

through restricted

stock award (I)

(Note 8)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9)

Winbond

All

companies

in con-

solidated

statements

(Note 9) Cash

bonus

Stock

bonus

Cash

bonus

Stock

bonus

Chairman Arthur Chiao - - - - - - 360 456 -0.02 -0.03 7,094 7,094 - - - - - - 290 290 - - -0.40 -0.47 Yes 55

Director Ching-Chu

Chang - - - - - - 360 360 -0.02 -0.02 - - - - - - - - - - - - -0.02 -0.02 None. -

Director Matthew

Feng-Chiang

Miau

- - - - - - 360 360 -0.02 -0.02 - - - - - - - - - - - - -0.02 -0.02 Yes 6

Director Yung Chin - - - - - - 360 456 -0.02 -0.03 5,531 5,531 91 91 - - - - 270 270 - - -0.32 -0.38 None. -

Director

Walsin

Lihwa

Corporation

- - - - - - - - - - - - - - - - - - - - - - - - Yes 138

Director

represent-

tative

Walsin

Lihwa Corp.;

represent-

tative:

Peter Chu

302

(Note

12)

302

(Note

12)

- - - - 360 360 -0.04 -0.04 - - - - - - - - - - - - -0.04 -0.04 None. -

Director Lu-Pao Hsu - - - - - 543 360 456 -0.02 -0.06 - - - - - - - - - - - - -0.02 -0.06 None. -

Director Robert Hsu - - - - - 543 360 456 -0.02 -0.06 - 5,323 - 185 - - 882 - - - - - -0.02 -0.46 None. -

Director Tong-Yi

Chan - - - - - - 360 360 -0.02 -0.02 8,134 8,134 - - - - - - 400 400 - - -0.46 -0.53 Yes 28

Director Hong-Chi

Yu - - - - - - 360 360 -0.02 -0.02 - - - - - - - - - - - - -0.02 -0.02 Yes 2,293

Note 1: Remuneration to the director in the past year (including salary, additional pay, severance pay, bonuses and rewards).

Note 2: Pension includes:

a. Amount equal to 6% of the monthly salary paid into an account at the Bureau of Labor Insurance pursuant to the new pension system under the Labor Pension Act.

b. Amount equal to 2% of the monthly salary deposited into an account at Bank of Taiwan under the name of the Company’s Pension Supervision Committee pursuant to the old pension system under the Labor Standards Act.

c. Amount actually paid to the director in the year of retirement.

Note 3: The amount is the proposed remuneration to directors according to the most recent earnings distribution that has been approved by the Board of Directors but has not been submitted to the shareholders’ meeting.

Note 4: This is business expense of directors in the past year (including transportation allowance, special allowance, stipends, dormitory, and car).

Note 5:All pays to the director who is also employee of the Company (including the position of president, vice president, other managerial officer and staff), including salary, additional pay, severance pay, bonuses, rewards, transportation

allowance, special allowance, stipends, dormitory, and car.

14

Note 6: For directors also working as an employee (including the position of president, vice president, other managerial officer and staff), the amount of the proposed profit sharing and bonus according to the most recent earnings

distributionthat has been approved by the Board of Directors but has not been submitted to the shareholders’ meeting.

Note 7: Shares subscribable under employee stock option plan by the director also working as an employee (including the position of president, vice president, other managerial officer and staff) as of the date of report (excluding shares

already exercised).

Note 8: Shares obtained through restricted stock award by the director also working as an employee (including the position of president, vice president, other managerial officer and staff) as of the date of report.

Note 9: The total pay to the director from all companies in the consolidated statements (including the Company).

Note 10: Ratio of total remuneration paid is computed based on the Company’s 2012 after-tax loss in the amount of NT$1,852,536,000; ratio of total remuneration paid by all companies in consolidated statement is computed based on 2012

consolidated net loss of NT$1,615,108,000.

Note 11: a. This field shows the amount of remuneration a director of the Company receives from investees other than subsidiaries of the Company.

b. The remuneration means pay, remuneration, employee bonus and business expense received by the director serving as a director, supervisor or manager of an investee of the Company other than subsidiaries.

Note 12: Remuneration paid to members of Compensation committee.

2.2.3.2 Remuneration to supervisors December 31, 2012; Unit: NT$1,000

Title Name

Supervisor’s Remuneration Ratio of total (A), (B), and (C) to

after-tax income (%) (Note 5)

Remuneration received from Investees other

than subsidiaries (D) (Note 6)

Remuneration (A) (Note 1) Profit sharing (B) (Note 2) Business expense (C) (Note 3)

Winbond

All companies in

consolidated

statements

(Note 4)

Winbond

All companies in

consolidated

statements

(Note 4)

Winbond

All companies in

consolidated

statements

(Note 4)

Winbond

All companies in

consolidated

statement

(Note 4)

Supervisor Chiao Yu-Chi - - - - 360 360 -0.02 -0.02 Yes 8,002

Supervisor Wang-Tsai Lin - - - - 360 360 -0.02 -0.02 None. -

Supervisor Hui-Ming Cheng - - - - 360 360 -0.02 -0.02 None. -

Note 1: Remuneration to supervisors in the past year (including salary, additional pay, severance pay, bonuses and rewards).

Note 2: The amount is the proposed remuneration to supervisors according to the most recent earnings distribution approved by the Board of Directors, but this figure has not yet been submitted to the shareholders’

meeting.

Note 3: This is business expense of supervisors in the past year (including transportation allowance, special allowance, stipends, dormitory, and car).

Note 4: The total pay to supervisors from all companies in the consolidated statements (including the Company).

Note 5: Ratio of total remuneration paid is computed based on the Company’s 2012 after-tax loss in the amount of NT$1,852,536,000; ratio of total remuneration paid by all companies in consolidated statement is

computed based on 2012 consolidated net loss of NT$1,615,108,000.

Note 6: a. This field shows the amount of remuneration a supervisor of the Company receives from investees other than subsidiaries of the Company.

b. The remuneration means pay, remuneration, employee bonus and business expense received by the supervisor serving as a director, supervisor or manager of an investee of the Company other than subsidiaries.

15

2.2.3.3 Remunerations to president and vice president December 31, 2012; Unit: NT$1,000; 1,000 shares

Title Name

Salary (A)

(Note 1)

Pension (B)

(Note 2)

Bonus and special

allowance (C)

(Note 3)

Employee bonus (D) (Note 4)

(Note 4)

Ratio of total (A), (B),

(C), and (D) to

after-tax income (%)

(Note 8)

Shares subscribable

under employee stock

options (Note 5)

Shares obtained through

restricted stock award

(Note 6) Remuneration

received from

Investees other

than subsidiaries

(Note 9) Winbond

All

companies

in con-

solidated

statements

(Note 7)

Winbond

All

companies

in con-

solidated

statements

(Note 7)

Winbond

All

companies

in con-

solidated

statements

(Note 7)

Winbond

All companies in

consolidated

statements (Note 7) Winbond

All

companies

in con-

solidated

statements

(Note 7)

Winbond

All

companies

in con-

solidated

statements

(Note 7)

Winbond

All

companies

in con-

solidated

statements

(Note 7)

Cash

bonus

Stock

bonus

Cash

bonus

Stock

bonus

CEO Arthur Chiao

39,109 45,771 216 470 11,451 11,451 - - - - -2.74 -3.57 1,745 1,745 - -

Yes

83

President Tong-Yi Chan Yes

Executive Vice

President Wilson Wen None.

Vice President James Wen None.

Vice President Yuan-Mow Su None.

Vice President Chen-Hsi Lin None.

Vice President Pei-Ming Chen None.

Vice President Cheng- Kung Lin None.

Vice President Chin-Fen Tsai None.

Note 1: Salary, additional pay, and severance pay received by the president or vice president in the past year.

Note 2: Pension includes:

a. Amount equal to 6% of the monthly salary paid into an account at the Bureau of Labor Insurance pursuant to the new pension system under the Labor Pension Act.

b. Amount equal to 2% of the monthly salary deposited into an account at Bank of Taiwan under the name of the Company’s Pension Supervision Committee pursuant to the old pension

system under the Labor Standards Act.

c. Amount actually paid to the president or vice president in the year of retirement.

Note 3: Bonus, reward, transportation allowance, special allowance, stipends, dormitory, car and other pays received by the president or vice president in the past year.

Note 4: The amount is the employee bonus (including stock bonus and cash bonus) to the president and vice presidents according to the most recent earnings distribution that has been approved by the

Board of Directors but has not been submitted to the shareholders’ meeting.

Note 5: Shares subscribable under employee stock option plan by the president or vice president as of the date of report (excluding shares already exercised).

Note 6: Shares obtained through restricted stock award by president and vice presidents as of the date of report.

Note 7: The total pay to the president or vice president from all companies in the consolidated statements (including the Company).

Note 8: Ratio of total remuneration paid is computed based on the Company’s 2012 after-tax loss in the amount of NT$1,852,536,000; ratio of total remuneration paid by all companies in consolidated

statement is computed based on 2012 consolidated net loss of NT$1,615,108,000.

Note 9: a. This field shows the amount of remuneration the president or vice president of the Company receives from investees other than subsidiaries of the Company.

b. The remuneration means pay, remuneration, employee bonus and business expense received by the president or vice president serving as a director, supervisor or manager of an investee of

the Company other than subsidiaries.

Range of remuneration paid to presidents and vice presidents Names of presidents and vice presidents

Winbond All investees

<NT$2,000,000

NT$2,000,000 (inclusive)～NT$5,000,000 (exclusive) Chen-Hsi Lin, Pei-Ming Chen, Chin-Fen Tsai Chin-Fen Tsai

16

NT$5,000,000 (inclusive)～NT$10,000,000 (exclusive) Arthur Chiao, Tong-Yi Chan, Wilson Wen, James Wen, Cheng- Kung Lin, Yuan-Mow

Su

Arthur Chiao, Tong-Yi Chan, Wilson Wen, James Wen, Yuan-Mow Su,

Chen-Hsi Lin, Pei-Ming Chen, Cheng- Kung Lin

NT$10,000,000 (inclusive)～NT$15,000,000 (exclusive)




> NT$100,000,000

Total 9 people 9 people

17

2.3.4 Analysis of remunerations to directors, supervisors, president and vice presidents as a percentage of earnings

in the last two years and description of the policy, standards and packages of remunerations, procedure for

making such decision and relation to business performance:

(1) Analysis of remunerations to directors, supervisors, president and vice presidents as a percentage of earnings in the

last two years

Title

Total remuneration as a percentage of earnings (%) (Note 1)

2012 2011

Winbond All companies in

consolidated statements Winbond

All companies in

consolidated statements

Director -1.32% -2.00% -2.73% -4.59%

Supervisor -0.06% -0.07% -0.05% -0.06%

President and Vice

President -2.74% -3.57% -7.28% -9.96%

Note 1: Ratio of total remuneration paid is computed based on the Company’s 2012 after-tax loss in the amount of NT$1,852,536,000; ratio of

total remuneration paid by all companies in consolidated statement is computed based on 2012 consolidated net loss of NT$1,615,108,000.

(2) Starting December 2011, the remuneration of directors and supervisors will be decided according to the resolution

passed by the Compensation Committee and the Board of Directors pursuant to the internal Rules for Remuneration

and Performance Evaluation of Directors and Supervisors.(3) Pays to CEO, President and Vice Presidents were made

in accordance with the internal payroll system and the result of performance review. Their retirements are handled in

accordance with the internal rules for the retirement of managers. Starting December 2011, the remuneration of

managerial officers will be decided according to the resolution passed by the Compensation Committee and the

Board of Directors pursuant to the internal Rules for Remuneration and Performance Evaluation of Managerial

Officers.

18

3. Capital and Shareholding

3.1 Sources of capital property other than cash is paid by subscribers March 31, 2013; Unit: shares; NTD

Year/

month

Issue

price

Authorized capital Paid-in capital Remark

Shares Amount Shares Amount Source of capital (Note 1)

Subscriptions

paid with

property other

than cash

Approval date and

number

2012.03 10 6,700,000,000 67,000,000,000 3,680,230,193 36,802,301,930 Exercise of employee

stock options: $69,230,000 None.

3/21/2012

Zhong-Shang-Zi-#101

0006000



5/17/2012

Zhong-Shang-Zi-#101

0011019

2012.09 10 6,700,000,000 67,000,000,000 3,684,333,193 36, 843,331,930 Exercise of employee


9/19/2012

Zhong-Shang-Zi-#101

0021863



11/23/2012

Zhong-Shang-Zi-#101

0027729



3/18/2013

Zhong-Shang-Zi-#102

0006222

Note 1: The 5th

issue of 50,000,000 units of employee stock options took effect on September 5, 2008 pursuant to Jin-Guan-Zhen (1) – 0970045576. The recipients

may subscribe 1 common share for each unit and new shares were issued for the exercise of employee stock options. For details on actual issue and

exercise, please refer to page 22.

Note 2: As of March 31, 2013, 1,225,000 shares issued for employee stock options exercised have not completed registration, and Company’s paid-in capital was

NT$36,868,261,930 with 3,686,826,193 shares issued.

March 31, 102: Unit: shares

Type of stock

Authorized capital

Remark Shares issued and outstanding

(Note 1) Unissued shares Total

Common

shares 3,686,826,193 3,013,173,807 6,700,000,000 Listed stock

Note 1: Shares issued and outstanding include 1,225,000 shares issued for employee stock options exercised between January 1 and March 31, 2013 that

have not completed registration of change of capital.

Note 2: Of the total capital amount, up to NT$5 billion may be used for issues of employee stock options, preferred stocks or corporate bonds with

warrant for a total of 500 million shares with par value of NT$10 per share. Those shares may be issued in installments. The respective amount

for the issue of employee stock options, preferred stocks or corporate bonds with warrant may be adjusted by resolution of the Board of Directors

in view of the capital market situation and business needs.

Note 3: Information on shelf registration: None.

3.2 Shareholder structure March 31, 2013

Quantity\

shareholder

structure

Government

agencies

Financial

institutions

Other juristic

persons

Individual

investors

Foreign

institutions and

foreigners

Chinese investors

(Note 1) Total (Note 2)

Number 4 57 172 219,737 280 3 220,253

Shares held 27,701,435 5,338,639 926,761,679 2,214,169,923 512,854,142 375 3,686,826,193

Shareholding 0.75% 0.14% 25.14% 60.06% 13.91% 0.00% 100.00%

Note 1: Chinese investors refer to Mainland Area individuals, juristic persons, groups, other institutions or companies based in a third area as provided

in Article 3 of the Regulations Governing Investment by People in Mainland Area in Taiwan.

Note 2: Shares held include 1,225,000 shares issued for employee stock options exercised between January 1 and March 31, 2013 that have not

completed registration of change of capital.

19

3.3 Dispersion of equity ownership (1) Common stocks:

March 31, 2013; par value of NT$10 per share

Shares Number of shareholders Total shares held Shareholding (%)

1 ~ 999 59,769 21,150,787 0.57

1,000 ~ 5,000 101,566 245,586,855 6.66

5,001 ~ 10,000 27,684 227,512,705 6.17

10,001 ~ 15,000 8,387 107,454,102 2.92

15,001 ~ 20,000 7,265 137,786,681 3.74

20,001 ~ 30,000 5,464 143,197,803 3.88

30,001 ~ 50,000 4,459 184,048,962 4.99

50,001 ~ 100,000 3,223 237,539,649 6.44

100,001 ~ 200,000 1,342 192,695,657 5.23

200,001 ~ 400,000 576 163,024,688 4.42

400,001 ~ 600,000 194 95,306,760 2.59

600,001 ~ 800,000 66 46,159,938 1.25

800,001 ~ 1,000,000 57 51,673,219 1.40

> NT$1,000,001 201 1,833,688,387 49.74

Total (Note) 220,253 3,686,826,193 100.00

Note: Shares held include 1,225,000 shares issued for employee stock options exercised between January 1 and March 31, 2013 that have not

completed registration of change of capital.

(2) Preferred stocks: N/A.

3.4 List of major shareholders

(1) Names, shares and percentage of shareholding of shareholders with more than 5% of equity: March 31, 2013

Name\shareholding of major shareholder Shares held Shareholding

Walsin Lihwa Corporation 858,091,531 shares 23.27%

3.5 Stock price, net worth, earnings, dividends and related information (2011-2012)

Unit: NT$

Item\Year 2011 2012 2013 up to March 31

Stock price

(Note 1)

High 11.15 6.96 6.34

Low 3.51 3.83 4.91

Average 7.89 5.26 5.80

Net worth per

share (Note 1)

Basic 9.61 9.08 -

Diluted (Note 6) (Note 6) -

Earnings per

share

Weighted average shares (1,000

shares) 3,666,391 3,676,698 -

Earnings per share (0.23) (0.50) -

Dividends per

share

Cash dividend (Note 6) (Note 6) -

Stock

dividend

Earnings (Note 6) (Note 6) -

Capital surplus (Note 6) (Note 6) -

Accumulated unpaid dividend (Note 6) (Note 6) -

Return analysis

Price-earnings ratio (Note 3) N/A N/A -

Price-dividend ratio (Note 4) (Note 6) (Note 6) -

Cash dividend yield (Note 5) (Note 6) (Note 6) -

Note 1: The year’s high and low market prices of common stock are provided, and the average price for the year is computed based on the year’s

transaction amount and volume.

Note 2: Net worth per share is computed based on the number of shares issued and outstanding at the end of the year.

Note 3: Price-earnings ratio＝Year’s average per share closing price / earnings per share.

Note 4: Price-dividend ratio＝Year’s average per share closing price / cash dividend per share.

Note 5: Cash dividend yield＝Cash dividend per share / year’s average per share closing price.

20

Note 6: The Company posted losses in 2011 and 2012, so there was no earnings distribution for those years.

3.6 Dividend policy and implementation status

(1) Dividend policy

Our dividend policy is set up in accordance with the Company Act and the Articles of Incorporation of Winbond

Electronics Corp. in consideration of factors including capital, financial structure, operating status, earnings,

industry characteristics and cycle, etc. The dividends shall be distributed in a prudent manner where appropriate

retained earnings, stock dividend or cash dividend, or both are taken into consideration so as to ensure sustained

development of the Company. The Company requires intensive capital, technologies, and manpower, and is

currently in growth and expansion stage. Hence the distribution of earnings will factor in the future plans for capital

expenditures and working capital. Thus any dividend distribution plan will give priority to cash dividend, whereas

stock dividend can also be considered. Nevertheless, stock dividend to be distributed shall not be more than 50% of

total dividends in principle. The current dividend policy for retained earnings and dividends with respect to their

conditions, timing, amount and type would be adjusted from time to time in accordance with economic and

industrial fluctuations, and in particular, in view of the Company’s future development needs and profitability.

(2) Dividend distribution to be proposed to the shareholders’ meeting: The Company does not plan to distribute

dividends for fiscal year 2012.

3.7 Effect of the proposed stock dividends (to be adopted by the Shareholders’ Meeting) on the operating performance and earnings per share:

Not applicable for the Company does not plan to distribute earnings for fiscal year 2012.

3.8 Employee bonus and remuneration to directors and supervisors

(1) Information on employee bonus and remuneration to directors and supervisors provided in Company’s Articles of

Incorporation

Under the ROC Company Act and Winbond’s Articles of Incorporation, the Company shall, after covering prior

years’ losses and paying all taxes and dues, set aside 10% of its earnings as legal reserve until such reserve equals

the paid-in capital. Of the remainder plus undistributed earnings in prior years or of distributable earnings

resulting from this year’s loss plus undistributed earnings in prior years, special reserve shall be set aside or

reversed according to laws or the competent authority. The remainder surplus may be retained for business needs

or otherwise distributed by the following principle:

1) 1% ~ 2% as remuneration to directors and supervisors;

2) 10 ~ 15% as bonus to employees; and

3) the remainder thereafter as dividends to stockholders where not less than 10% of the total dividends

distributed shall be in the form of cash.

(2) Basis for estimating the amount of employee bonuses and remuneration to directors/supervisors, basis for

calculating the number of shares to be distributed as stock bonuses, and the accounting treatment of the

discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:

The Company posted loss in 2012 and does not plan to distribute earnings for the year. Hence employee bonus and

remuneration to directors/supervisors were not estimated.

(3) Information on planned employee bonus as approved by the Board of Directors

Not applicable for the Company posts loss in 2012 and does not plan to distribute earnings for the year.

(4) Information on actual distribution of employee bonus and remuneration to directors and supervisors in the

previous year

Not applicable for the Company posts loss in 2012 and does not plan to distribute earnings for the year.

3.9 Stock buyback: None.

4. Issuance of corporate bonds: None.

21

5. Issuance of preferred stocks: None.

6. Issuance of global depositary receipts (GDR) March 31, 2013

Date of issue February 5, 1999

Place of issue and trading Luxemburg

Total amount US$333,502,000

Offer price per unit February 5, 1999 – initial issue US$11.45 November 18, 1999 – additional issue

US$16.70

Total units issued

30,336,980

February 5, 1999 – initial issue 14,600,000

November 18, 1999 – additional issue 9,960,000

July 7, 2000 – additional issue for the distribution of

free stock dividends 2,108,252

June 1, 2001 additional issue for the distribution of

free stock dividends 3,668,728

Source of underlying security Issuance of new shares for cash capital increase

Underlying security 10 common shares of Winbond

Rights and obligations of GDR

holder

Dividends, interest distribution and relevant taxes of the underlying shares represented by the

GDRs shall be governed by the laws of the Republic of China, the Depository Agreement and

the Custodial Agreement.

Trustee None

Depository bank Bank of New York Mellon Corp

Custodial bank Bank International Commercial Bank

Balance outstanding (units) 17,732

Fees incurred in issuance and

the outstanding period of the

GDRs

Borne by Winbond Electronics Corp.

Covenants of Depository

Agreement and Custodial

agreement

The deposit, redemption and delivery of the underlying shares represented by the GDRs and the

re-issuance of the GDRs shall be governed by the laws of the Republic of China, Depository

Agreement and the Custodial Agreement.

Unit

price

(US$)

2012

High 2.32

Low 1.33

Average 1.61

2013 up to

March 31

High 2.10

Low 1.69

Average 1.93

22

7. Exercise of employee stock option plan (ESOP)

(1) Employee stock options outstanding and impact on the stockholders’ equity

March 31, 2013

Tranche of ESOP Tranche 5

Date of approval by competent authorities September 5, 2008

Date of grant (Note 4)

First issue of Tranche 5 - October 29, 2008

Second issue of Tranche 5 - February 9, 2009

Third issue of Tranche 5 - April 29, 2009

Fourth issue of Tranche 5 - August 5, 2009

Units granted

Tranche 5 First Issue - 45,764,000

Tranche 5 Second Issue - 614,000

Tranche 5 Third Issue - 77,000

Tranche 5 Fourth Issue - 894,000

Units granted to total shares issued and outstanding

(%)(Note 1) 1.28%

Duration

Tranche 5 First Issue - October 28, 2013

Tranche 5 Second Issue - February 8, 2014

Tranche 5 Third Issue - April 28, 2014

Tranche 5 Fourth Issue - August 4, 2014

Exercise Issue new shares

Vesting schedule and quota (%)

Tranche 5 First Issue

October 29, 2010: 50%

October 29, 2011: 100%

Tranche 5 Second Issue

February 9, 2011: 50%

February 9, 2012: 100%

Tranche 5 Third Issue

April 29, 2011: 50%

April 29, 2012: 100%

Tranche 5 Fourth Issue

August 5, 2011: 50%

August 5, 2012: 100%

Units exercised (shares)




Tranche 5 Fourth Issue - 0

Amount exercised (NT$)

Tranche 5 First Issue - $90,938,240

Tranche 5 Second Issue - $660,330

Tranche 5 Third Issue - $55,700

Tranche 5 Fourth Issue - $0

Units unexercised (shares)

(Note 2)




Tranche 5 Fourth Issue - 697,000

Exercise price for unexercised units (NTD)

Tranche 5 First Issue - $3.02

Tranche 5 Second Issue - $3.19

Tranche 5 Third Issue - $5.57

Tranche 5 Fourth Issue - $6.46

Units unexercised to total outstanding shares (%) 0.23%

Impact on shareholders Give employees the incentive to stay on and build employee loyalty to work

towards the best interest of the Company and shareholders.

Note 1: “Total shares issued and outstanding” are based on 3,686,826,193 common shares of the Company issued as of March 31,

2013.

Note 2: “Units unexercised” include expired employee stock options.

23

(2) Names of managerial officers receiving ESO and names of top ten employees receiving ESO, their exercise and subscription

March 31, 2013

Title Name Units vested

Units vested

as a

percentage of

total shares

issued and

outstanding

(Note 1)

Exercised Unexercised

Units Exercise

price

Exercise amount

(NTD)

Units exercised as

a percentage of

total shares issued

and outstanding

(Note 1)

Units

(Note 4)

Exercise

price

Exercise

amount

(NTD)

Units

unexercised

as a

percentage of

total shares

issued and

outstanding

(Note 1)

Managerial officer

CEO Arthur Chiao

5,115,000 0.14% 2,550,000 3.02 7,701,000 0.07% 2,565,000 3.02~6.46 8,123,900 0.07%

President Tong-Yi Chan

Executive Vice President Wilson Wen

Vice President and Chief

Financial Officer James Wen

Vice President Yuan-Mow Su

Vice President Chen-Hsi Lin

Vice President Pei-Ming Chen

Vice President Cheng-Kung Lin

Chief Business Officer Eungjoon Park

Assistant Vice President Shi-Yuan Wang

Assistant Vice President Chiu-Yi Huang

Assistant Vice President Wen-Gui Hsu

(Note 2)

Assistant Vice President Yi-Dar Chang

Assistant Vice President Chi-Lung Chou

Assistant Vice President Wen-Hua Lu

Assistant Vice President Wen-Chang Hong

Assistant Vice President Mao-Hsiang Yen

Department Manager and

Accounting Chief Wen-Ying Liang

Staff Deputy Technical Director Hsing-Hua Wang

(Note 3) 280,000 0.01% - - - - - - - -

Note 1: “Total shares issued and outstanding” are based on 3,686,826,193 common shares of the Company issued as of March 31, 2013.

Note 2: Mr. Wen-Gui Hsu served as a managerial officer of the Company until March 28, 2012. His information disclosed in the table above is up to the date of his termination as a managerial officer of the

Company.

Note 3: Mr. Hsing-Hua Wang departed on January 2, 2012.

Note 4: “Units unexercised” include expired employee stock options.

(3) Restricted stock awards: None.

24

8. Mergers, acquisitions or issuance of new shares for acquisition of shares of other companies (1) Resolutions adopted by the Board of Directors in the past year and up to the date of report approving a merger, acquisition, or

issuance of new shares due to acquisition of shares of other companies: None. (2) Mergers, acquisitions or issuance of new shares due to acquisition of shares of other companies that have been completed in the

past year and up to the date of report: None.

9. Implementation of capital allocation plan: Not applicable, for the Company was free of the situation of having any securities issuance that was uncompleted or completed in the most recent three years but has not yet fully yielded the planned benefits.

25

Business Overview

1. Business activities

1.1. Business Scope

1.1.1. Major business activities

This company's main business items consist of memory product research and development, production, and sales.

1.1.2. Revenue breakdown by product mix

Winbond carries DRAM and NOR Flash memory. 2012 revenue breakdown by product:

Unit: NT$1,000

Product Sales revenue %

DRAM product income 14,669,796 57.71

Flash memory product income 10,746,779 42.28

Other 2,244 0.01

Total 25,418,819 100.00

1.1.3. Description of product lines

1.1.3.1 DRAM products

This company's DRAM products consist of:

Specialty DRAM

Mobile RAM

This company's Specialty DRAM is chiefly used in the 3C, auto electronics, industrial electronics, and medical

electronics fields. Specifications include 16Mb-2Gb specialty DRAM and KGD (Known Good Die).

Mobile RAM products include 32Mb-256Mb pseudo SRAM and 128Mb-2Gb low-power DRAM. They are chiefly

used in cell phones, low power mobile handheld devices, consumer electronics products, and network

communications products.

1.1.3.2 NOR Flash memory products

This company's Code Storage Flash Memory is widely used in PCs and peripherals (including hard drives, optical

drives, and DVD players), mobile handheld devices and their peripheral modules, network communications

products (wireless networks, modems) and consumer electronics (set-top boxes, TVs, DVD players, and monitors,

etc.), industrial electronics, auto electronics, medical electronics, and household appliance modules, etc.

specifications range from 512Kb-512Mb. Our product quality has improved steadily for many years, and our

products have received the approval of top-notch customers in many application areas, who made Winbond the

world's leading Serial Flash vendor in 2012.

1.1.4. New products and services under development

Products Description

Medium and low density Specialty DRAM

Used in consumer electronics products, PC peripherals, network

communications products, auto electronics products, industrial

electronics products, and medical electronics products

Medium and low density, low-power consumption Mobile

DRAM

Used in cell phones, e-books, 3G/4G portable data cards, tablets,

MP3/PMP, portable industrial electronics products, and portable

medical electronics equipment

A full series of Serial Flash, medium/low density 3V Parallel

Flash, even higher density Code Storage Flash

Used in PCs and their peripherals, mobile handheld devices and

their peripheral modules, network communications products,

consumer electronics, industry electronics, auto electronics,

medical electronics, and household appliance modules, etc.

26

1.2. Industry overview

1.2.1. Industry's current trends and future outlooks

1.2.1.1 DRAM

(1) Current trends and future outlook for the specialty DRAM industry

Demand perspective:

In 2013, DRAM growth was chiefly driven by smart products and cloud-related applications, including

smartphones, tablets, smart TVs, and network communications products. Of these, smartphones and tablets are still

avidly sought by consumers, and have great potential sales growth. Due to replacement by smartphones and tablets,

the global market for functional cell phones, PCs, electronic readers, digital cameras, and PMP/MP3 players will

shrink in the future. In addition, as the world's population ages, demand for medical electronics equipment will

increase steadily in the coming years. With regard to industrial electronics, rising factory wages around the world

will encourage manufacturers to adopt robot production in order to reduce production costs. Automated production

and medical electronics will also drive demand for industrial DRAM. Rising demand for robots will cause demand

for industrial electronics products to increase.

Supply perspective:

Due to producers leaving the market, the retirement, sale, and transfer of capacity, and shrinking capital

expenditures, supply and demand in the DRAM industry will reach an approximate balance in 2013. From a broad

perspective, the industry bottomed out in 4Q of 2012, and began a gradual climb to the next peak. Standard DRAM

prices will return to a level above manufacturing cost, and rising standard DRAM prices will drive price increases

for niche DRAM. The DRAM industry will leave its past low in 2013, and head toward another up part of the

cycle.

(2) Current trends and future outlook for the Mobile RAM industry

Demand perspective:

In 2013, because of the accelerating replacement of functional cell phones with smartphones, global smartphone

(brand + off-brand) sales volume may be able to grow by 40% to 1.1 billion units. Because tablets are replacing

some demand for PCs, global tablet sales volume in 2013 (brand + off-brand) may be able to grow by 45% to 250

million units. Due to increasing app use by consumers, growing demand for multitasking, hardware specifications

competition among cell phone system vendors, and Microsoft's introduction of Office 2013, will continue to boost

the Mobile DRAM capacity of smartphones and tablets. The multiplier effect of terminal product sales growth plus

increasing system memory capacity will sharply increase demand for Mobile DRAM. The rapid growth of Mobile

DRAM will cause it to replace standard DRAM as the main driver of DRAM demand. In 2013, smartphones,

tablets, mobile handheld devices, and peripheral modules will drive demand for Mobile DRAM and give Winbond

impressive potential opportunities.

Supply perspective:

Global Mobile DRAM shipment volume can be largely attributed to three major DRAM vendors (Samsung, SK

Hynix, Micron-Elpida), who enjoy an oligopoly. Unlike the planned production of standard DRAM, Mobile

DRAM is produced after receiving orders (forecasts), which keeps supply and demand in a long-term state of

balance. As a consequence, fluctuations in Mobile DRAM prices have remained relatively small. In 2013, the

rebound in standard DRAM prices will help stabilize Mobile DRAM prices, and may even cause Mobile DRAM

prices to rise during the second half of the year.

1.2.1.2NOR Flash

NOR Flash Memory produced by the Company consists of Serial Flash, which is used in PCs and their peripherals,

network communications products, consumer electronics, mobile handheld devices and peripheral product modules,

industrial electronics, auto electronics, and medical electronics, etc. NOR Flash shipments exceeded 1.7 billion

chips in 2012, making it the leading type of Serial Flash worldwide. Winbond's serial flash had a 32% market share

worldwide in 2012.Drivers of growth in 2013 will include increased terminal product functions and introduction of

new platforms. Apart from demand spurred by steadily increasing Flash Memory capacity, the use of large

quantities of 1.8V Serial Flash in many mobile handheld devices and peripheral module products, and continued

demand growth, will provide an important source of sales and profit growth in 2013.

27

1.2.2. Relationship with suppliers in the industry's supply chain

From a perspective based on the industry's supply chain, the upstream portion consists chiefly of raw material

suppliers, who start with silicon wafers. The wafers are subjected to a series of manufacturing steps, including such

early stage processes as lithography, rapid hi-temperature process, chemical vapor deposition, ion implantation,

etching, chemical machinery polishing and grinding, and process control and monitoring, as well later stage

processes such as packaging and testing. Because the types of applications are diverse, the types of down-stream

customers are likewise varied but consist chiefly of suppliers of PCs and peripherals, printers, hard disks, displays,

cell phones, network communications equipment, and set-top boxes.

1.2.3. Product trends and competition

1.2.3.1 DRAM

In the area of Specialty DRAM, we began mass production of 4xnm products in 2012, and will extend its Fab-Lite

strategy in 2013 by outsourcing more production. We are relying on advanced process technology at DRAM fabs

to develop medium and high density products, which will increase the depth and breadth of our product lines.

In Mobile RAM, we developed new 4xnm 64Mb Pseudo, 512Mb LP DDR, 1Gb LP DDR, 512Mb LP DDR2, 1Gb

LP DDR2, and 2Gb LP DDR2 products in 2012.

1.2.3.2 NOR Flash

We take a full range of Serial Flash as our chief target market, and are continuing to expand our high-density Code

Storage Flash products, giving us an even more complete product line. We currently offer comprehensive product

lines for all Serial Flash series (512Kb to 512Mb), including both high-speed and low-voltage products. Winbond

had already become the world's leading Serial Flash vendor in 2012. Our global market share exceeds 32%. We are

continuing to increase our share of applications markets including mobile handheld devices, peripheral modules,

network communications, and consumer electronics such as LCD TV set-top boxes. In 2012, we completed

conversion to the advanced 58nm process and began mass production, successfully shipped to customers, and

continued large shipments. We will provide even more products with value-added functions in 2013, including

Code Storage Flash products with even higher speeds, even greater capacity, and lower voltage, which we expect to

reach the market during the second half of 2013. These new products are manifestations of our continued pursuit of

progress, increased product competitiveness, expansion into new markets and development of new customers, and

provision of optimized products.

1.3. Overview of Technology and R&D

1.3.1. R&D expenditures

Unit: NT$1,000

Item 2012 2013 up to March 31

R&D Expenses 2,600,733 618,828

1.3.2. Successfully developed technologies and products

1.3.2.1 Product development

R&D Achievements Future R&D Plan

Low, medium, and high density 4xnm Mobile RAM

Low, medium, and high density 4xnm Specialty DRAM

Outsourced medium and high density 3xnm Mobile DRAM

Outsourced medium and high density 3xnm Specialty DRAM

58nm 3V 256-512Mb Parallel Flash, 1.8V 256Mb Serial

Flash mass production

Products with even more value-added functions; high

speed, and low voltage products

Code Storage Flash with even higher density

We are using more advanced manufacturing technologies for

greater cost competitiveness; providing lower voltage and greater

customization for more diversified applications; and developing

various specialty hi-speed flash products

Even more advanced process Code Storage Flash

28

1.3.2.2 Development of manufacturing processes

In 2013, this company's Specialty DRAM and Mobile DRAM will employ advanced 3xnm process technology at

contract wafer plants to develop new products.

In 2013, apart from some low-density products, which will continue to be made using 12" 90nm process

technology, mass production of our medium- and high-density Flash Memory products will shift to 58nm process

technology. We will continue to hold our position as the world's leading Serial Flash producer, while also

developing even more advanced Flash process technology, and new high-function and high-density Code Storage

Flash products.

1.4. Business plan - long-term and short-term

As the world's leading vendor of niche memory, Winbond focuses much of its attention on the medium- and

low-density niche memory market, and provides DRAM and Flash Memory Total Solutions. Winbond offers

outstanding product quality, highly competitive, innovative products, an emphasis on customer service, and

attention to first-rate brand customers worldwide and mutual growth with applications markets. The following is a

summary of our long- and short-term sales development plans:

Our DRAM product lines will focus on core high-performance and low-power-consumption memory technologies,

and we will provide 16Mb to 2Gb Specialty DRAM, 128Mb to 2Gb Low-Power DRAM, and 32Mb to 256Mb

Pseudo SRAM. We will consolidate our presence in niche markets such as KGD (Known Good Die), auto

electronics, industrial product, and MCP and SiP via comprehensive product solutions and long-term stable service.

At the same time, we are actively promoting our Fab-Lite strategy, and taking advantage of the capacity and

advanced process technology of external DRAM fabs to provide even more comprehensive product solutions.

As far as our Flash Memory product line is concerned,we have already become the world's leading vendor of Serial

Flash, and enjoy a 32% share of the global market. Serial Flash is chiefly used in PCs and peripherals, consumer

electronics, mobile handheld devices, and peripheral module products, and we are actively expanding into such

areas as industrial electronics, auto electronics, and medical electronics. We have received certification from

leading international manufacturers, and expect to provide even higher density Code Storage Flash solutions in the

future.

Our company's long-term development goals include continuing to expand into the high-margin terminal product

applications market, cultivating the world leading brand customers, and pursuing stable profits and growth.

29

2. Market, production and sales

2.1. Market analysis

2.1.1. Winbond’s sales breakdown by regions in 2012:

Unit: NT$1,000

Region Sales Percentage

Asia 23,890,194 93.99%

Americas 993,147 3.91%

Europe 532,933 2.10%

Other 301 -

Total 25,416,575 100.00%

2.1.2. Market share and growth potential

2.2.2.1 DRAM

In 2013, we plan to accelerate development of outsourced3xnm products, and actively enter the mobile

handheld device, auto electronics, industrial electronics, and medical electronics equipment markets.

In the area of Specialty DRAM, apart from the outsourcing of 3xnm process products, we plan to further

optimize our applications lineup in 2013, make structural adjustments to our profit sources, and achieve a stable

long-term gross profit ratio.

In Mobile RAM, we will strive to expand our medium- and high-density Mobile DRAM customer base and

applications market in 2013, boost our shipment volume and market share, optimize our overall DRAM product

lineup, and establish a business model ensuring long-term profitability.

2.1.2.2 NOR Flash

Flash process and capacity are shifting toward high-density, and the Mb capacity of each system is continuing

to increase. Thanks also to the pin count and cost effectiveness advantages of Serial Flash, Serial Flash

applications will continue to grow, and the market will expand steadily.

After many years of market expansion efforts, Winbond has become the leading supplier of flash memory. In

conformity with the trends of the last few years, Winbond expanded its 12" 90nm serial flash capacity in 2010,

and shipped close to 1 billion units; this gave Winbond a 35% global market share. Winbond became the

world's leading producer of serial flash memory in the fourth quarter of 2010, which highlighted its

lightning-fast conquest of the Flash market. Winbond plans to further expand its parallel flash product line in

2011, target the high-end network communications and set-top box applications markets, and expand into the

low-price cell phones market employing MCP products. We completed development of our 58nm process in the

fourth quarter of 2011, and shifted mass production of our products to the 58nm process in 2012, maintaining

the dominant status of our products. Our market share reached 32% in 2012, and we became the leading maker

of Serial Flash. In 2013, we will continue to introduce even higher density products, meeting the market's

demands and continuing to expand our market share.

2.1.3. Competitive edge, favorable and adverse factors for long-term growth and response strategy

2.1.3.1 DRAM

(1) Competitive niches

We are a leading manufacturer of niche memory. In 2013, we outsourced 3xnm product production, developed

highly-competitive DRAM products, and further optimized our applications lineup, while continuing to boost

our core competitiveness.

(2) Favorable and unfavorable factors affecting our development vision

Favorable factors:

30

Supply and demand in the DRAM industry is reaching a balance, and rising standard DRAM prices will boost

prices for niche DRAM. Mobile DRAM prices will also benefit from the surge in standard DRAM prices.

The rapid growth smartphone and tablet sales will continue to boost the percentage of Mobile DRAM among

overall DRAM shipments, accelerate the trend towards "non-standard DRAM," and lessen future DRAM

price fluctuations.

Consolidation of the industry will cause the format of competition to shift from "full market competition" to

"oligopoly." Competitive actions will tend to become more rational, and there will be a shift away from

destructive competition.

With the slowing of Moore's law in the wake of the 2xnm process, the contribution of process miniaturization

to DRAM supply growth will shrink.

Unfavorable factors:

The global economic recovery is still fragile, and the world economy will remain in a state of deleveraging in

2013.

Some PC demand will be replaced by tablets, and since PC systems carry five times the DRAM used by

tablets, this replacement effect will be unfavorable to DRAM demand growth.

Growth in the DRAM capacity of PC systems is slowing, and the introduction of Windows 8 will not increase

DRAM capacity.

Rising standard DRAM prices will cause DRAM cost as a share of PC BoM to increase, and reduce the

willingness of PC OEMs to increase DRAM capacity.

(3) Response measures

We will actively enter the mobile handheld device, auto electronics, industrial electronics, and medical

electronics equipment markets, and further optimize our applications lineup.

Continued adoption of advanced processes and development of DRAM products.

2.1.3.2NOR Flash

(1) Competitive niches

We are currently focusing on the medium/low density Flash market, and offer a complete Serial Flash product

series (512Kb-512Mb). We have achieved mass production with the 58nm process since 2011, and are shipping

large quantities of 58nm products. We are also developing high-density Code Storage Flash products. We have

cultivated the Flash Memory market for many years, and possess a 32% share of the global Serial Flash market.

Our shares of the low-price cell phone market, mobile handheld device and peripheral module, consumer

electronics and network communications markets continue to increase, and we plan to make further inroads into

the auto electronics and medical electronics markets, while obtaining certification from leading manufacturers.

(2) Favorable and unfavorable factors affecting our development vision

Favorable factors:

Winbond shifted its whole NOR flash product line to its 12" plant in 2010. Serial flash shipments approached

1.7 billion units in 2012; quality and cost are highly regarded.

We offer a comprehensive Flash product line, and are continuing mass production of 3V high speed Quad I/O

Serial Flash, 2.5V/1.8V low-voltage Serial Flash and MCP products, 3V high-performance high-density

Parallel Flash, and 58nm process products. We are currently developing even more advanced processes, and

will continue to introduce Code Storage Flash products with even higher density.

Our Flash products have a market share of over 40% in PCs and peripherals. Our market shares in consumer

electronics, network communications, and mobile handheld devices and peripheral module products are also

increasing, and we have successfully entered the industrial electronics, auto electronics, and medical

electronics applications markets.

Our introduction of high-density Serial Flash has given us an even more complete product lineup.

We are working together with the world's leading chip vendors to determine standard specifications for the

next generation of serial flash.

Our 12" wafer plant enables us to respond swiftly to changes in market demand.

We simultaneously offer flash and DRAM product lines, providing customers with the convenient of one-stop

shopping.

Unfavorable factors:

Competitors are expanding their production volume and capacity, and cutting prices to capture market share.

31

Increasing demand for capacity, and the replacement of high-density NOR Flash and SLC NAND by eMMC

NAND, will slow the growth in overall demand for NOR Flash and SLC NAND.

(3) Response measures

We have introduced the 58nm process and products with even more value-adding functions, and are producing

high-density, high-speed, low-voltage products meeting customers' diverse needs. We are continuing develop

advanced process technology, and our Flash—which is chiefly high-density Code Storage Flash—will

continue to boost our competitive advantage.

We will adjust our product lineup in order to develop the high profit margin, high capacity code storage Flash

market.

We will continue to increase our share of the cell phone, mobile handheld device and peripheral module,

network communications, TV, set-top box, and auto electronics markets.

We will form alliances with world-leading flash companies and design teams, enables us to provide even more

advanced products and technical services.

2.2. Major product manufacturing processes

2.2.1. Major applications of core products

Products Description

DRAM:

(1) Low/medium/high density SDR/DDR Specialty

DRAM; medium to high density DDR2/DDR3

Specialty DRAM

(2)Pseudo SRAM, Low-Power DRAM

(3) High density GDDR3 Graphic DRAM

(1) Used in computer peripherals and consumer

electronic products

(2) Used in handheld mobile devices and consumer

electronic products

(3) Used in electronic products with graphics and

image processing functions.

NOR Flash: Medium and low density flash memory

and high-density Code-Storage Flash products.

Used in PCs and peripheral, consumer electronics

and mobile handheld devices and peripheral

module product

2.2.2 .Production processes

The integrated circuit manufacturing process consists of five processes: IC design, mask production, wafer

manufacturing, packaging, and testing(see flowchart below):

Define Standards

IC design & layout

design

System design &

software design

Mask Making

Wafer Fabrication

Wafer C.P. test

IC Packaging

Final Testing

32

2.3. State of supply of chief raw materials

Winbond's major raw materials and parts include silicon chips, chemicals used in processes, photoresist fluid,

special gases, and targets, etc. The suppliers of these materials are located in the US, Japan, Germany, Korea,

Malaysia, and Taiwan. All items have approved alternative suppliers, ensuring source, price, supply, and

quality.Outsourced items include testing and packaging; we have at least five different approved suppliers for each

item, which gives us considerable leeway for adjusting engineering capabilities, service quality, and product line.

2.4. Names of suppliers who accounted for more than 10% of the purchase by the Company in the last two years, and the amount of purchase to total purchase

Unit: NT$1,000

Item Name Relationship with

issuer

2012 2011

Amount Percentage of

total purchase %

Amount Percentage of

total purchase %

1 Supplier Z018 None. 503,661 11 728,908 19

Other 4,252,423 89 3,044,380 81

Net purchase 4,756,084 100 3,773,288 100

Reasons for changes:

Supplier Z018: Allocated in accordance with the results of purchasing negotiations in order to reduce the amount of incoming

shipments.

2.5. Names of customers who accounted for more than 10% of the sales in the last two years, and sales as a percentage of total sales

Unit: NT$1,000

Item Name Relationship

with issuer

2012 2011

Amount Percentage of net

sales %

Amount Percentage of net

sales %

1 Winbond Electronics (H.K.)

Ltd. Subsidiary 3,964,101 16 5,008,443 18

Other 21,454,718 84 22,206,011 82

Net sales 25,418,819 100 27,214,454 100

Reasons for changes:

Winbond Electronics (H.K.) Ltd.: We continue to expand our China market in 2012, and established Winbond Electronics

(Suzhou) Ltd. Some customers placed orders with Winbond Suzhou as part of a shift toward domestic purchasing.

2.6. Output volume and value during the most recent two years

2.6.1. Production quantity and value

Unit: NT$1,000

Year 2012 2011

Core products/Output Output volume (note)

Value Output volume (note)

Value Wafer Die Wafer Die

DRAM 6 794,735 13,876,201 33 880,859 15,043,648

Flash 1 1,753,408 8,545,359 - 1,345,782 6,907,352

Total 7 2,548,143 22,421,560 33 2,226,641 21,951,000

Note: Wafer p roduct ion i s measu red in 1 ,000 p ieces; d ie p roduct ion i s measured in 1 ,000 p ieces .

33

2.6.2. Production capacity

Unit: 1,000 pieces

Core products/Year 2012 2011

300mm wafers 431 438

2.7. Sales volume and value during most recent two years Unit: NT$1,000

Year 2012 2011

Product/

Sales volume

and value

Domestic sales Exports Domestic sales Exports

Sales volume (note) Sales Sales volume (note) Sales Sales volume (note) Sales Sales volume (note) Sales

Wafer Die Wafer Die Wafer Die Wafer Die

DRAM - 195,693 2,910,087 6 613,198 11,759,709 - 151,461 2,009,322 33 731,496 15,585,887

Flash - 435,432 2,646,562 - 1,313,888 8,100,217 - 221,305 1,467,218 - 1,081,869 8,068,158

Other - - 60 - - 2,184 - - 68,468 - - 15,401

Total - 631,125 5,556,709 6 1,927,086 19,862,110 - 372,766 3,545,008 33 1,813,365 23,669,446

Note : Wafer sa l es are measured in 1 ,000 p ieces; d ie sa l es are measured in 1 ,000 p ieces .

3. Employees

Year 2011 2012 2013 up to March 31

Number of

employees

Technical personnel

(engineers) 1,250 1,249 1,246

Administration and

sales staff 443 438 432

Assistant to

technicians 319 320 318

Total 2,012 2,007 1,996

Average age 34.40 35.30 35.58

Average years of service 6.12 6.80 7.01

Education

background

(%)

Ph.D. 1.34 1.25 1.25

Master 36.13 36.57 36.57

University/College 53.78 53.31 53.31

High school 8.65 8.67 8.67

Below high school 0.10 0.20 0.20

4. Spending on environmental protections

4.1. Losses due to environmental pollution (including compensation) and total fines during the most recent year and up to the annual report publication date: None.

4.2. Preventive measures taken to ensure a safe working environment and maintain employees' personal safety

This company upholds the spirit of the ISO 14001 environmental management system, and pledges to provide

and maintain a working environment better than required by law and industry practice. We also strive to comply

with international environmental protection standards, and seek to eliminate possible environmental risks through

continuous improvement. As a member of the global village, in line with the principle of environmentally-friendly design, we strive to

develop green products and energy-consuming, low-pollution products that will fulfill our vision of sustainable

corporate development. Throughout production operations, we rely on process optimization to reduce consumption of water and power,

use of raw materials and parts, and pollution emissions for each output unit. In accordance with law, we have

obtained all required environmental protection permits and licenses, and have established appropriate dedicated

34

management positions. Adequate recycling systems for process waste water exhaust gases, and solid wastes were

incorporated during an early stage of the plant design process, enabling us to reduce resource losses and pollutant

discharges.

Thanks to our dedication to environmental protection, we have received honors such as the Green Business

Award, National Outstanding Industrial Waste Reduction Factory and Contributing Group Award, and Industry

Outstanding Voluntary Greenhouse Gas Emission Reduction Factory Award from agencies including the EPA

and MOEA.

Furthermore, we have also undertaken the health, safety, and risk management tasks prescribed in OHSAS 18001

and TOSHMS, and integrated our environmental, health, and safety management system in order to enhance our

overall environmental management performance. We have received many honors over the years, including the

Council of Labor Affairs' Friendly Workplace Award and the Central Taiwan Science Park Administration's

Superior Labor Health and Safety Enterprise Award.

Looking ahead to future, we will continue strengthen our spirit of corporate sustainability, while responding to

increasing environmental consciousness by making appropriate environmental protection expenditures when

needed, employing innovative technologies to improve the efficiency of pollution control equipment, and striving

to minimize the environmental impact of production activities.

5. Employees-employer relations

5.1. Employee welfare, education and training, retirement system and implementation

5.1.1. Employee welfare

This company has established an "Employee Welfare Committee," "retirement reserve fund supervisory

committee," and "environmental, health, safety, and risk management committee," and employees can rely on

channels such as labor-management conferences and improvement suggestion measures to communicate with

management.

5.1.2. Employee training and education

This company has established a complete, diversified learning environment in accordance with the Education and

Training Management Procedures, and has trained several dozen in-house lecturers in line with the ideal of

"respect for the individual and cultivation of professionalism." A total of 491 training classes were held in 2012,

and were attended for a total of 31,916 person-hours. Employees took part in training a total of 12,957

person-times, training expenditures totaled NT$16.8 million, and the average training cost per employee was

NT$8,400. The company's main learning channels included the following:

(1) Training Programs: In accordance with demand, we formulate professional, QC, work safety, management,

and general education and training classes on an annual basis, and hold classes in accordance

with plans; employees may sign up to participate in these classes. The following is a summary of

the various types of classes:

A. We offer management development training activities in accordance with our management

functions blueprint; these activities include high-level, mid-level, and basic-level new

manager training and other elective classes.

B. We offer common, QC, and work safety training in accordance with the company's quality

policy, government laws, and overall demand. Examples of these training classes include

working methods, statistical analysis methods, and emergency response safety training

classes.

C. Professional training is offered when our units have need of specific professional functions.

Examples include R&D design classes, process testing classes, and international seminar

sharing sessions.

D. New employee training classes are geared to getting newcomers quickly up to speed, and

include the employment system, corporate culture, and work adaptation classes.

E. We conduct basic training assessments for direct personnel, including new employees, as well

as continuing advanced professional skills assessments.

35

(2) Online classes: The company's training website provides information on various online classes. To ensure that

learning is not limited to certain times or places, employees can access lecture notes from various

types of classes online at any time. We offer the following types of online classes: Classes on the

company environment and management system, etc.; classes on laws, regulations, and rules of

conduct, and providing basic process training; language classes and other elective classes.

(3) Lifelong learning: To encourage employers' continuing development and personal growth, in accordance with

the In-service Continuing Education Regulations, we recommend that employees study for

master's or Ph.D. degrees at Ministry of Education-accredited domestic universities or approved

foreign universities, and the company will subsidize relevant costs. We also provide employees

subsidies for enhancement and work-related skills training provided by an external or foreign

organization.

5.1.3. Retirement system

This company has drafted retirement regulations in line with the requirements of the Labor Standards Law and

Labor Pension Act, has established a "retirement reserve fund supervisory committee," regularly monitors

disbursements from the retirement reserve fund, and bears responsibility for the review of retirement applications.

5.2.Licensing of personnel involved in meaning the transparency of financial information:

International certified internal auditor (CIA): 1 person.

International certification in control self-assessor (CCSA): 1 person.

5.3. Labor-management harmony and employee rights maintenance measures

1. This company has drafted "labor-management conference implementation regulations," and regularly holds

labor-management conference to discuss and negotiate issues of importance to essential. Items in conference

resolutions must be dealt with fully by relevant units within a limited time.

2. This company has drafted "internal appeal regulations" intended to maintain employees' lawful rights and

interests and help eliminate illegal and unreasonable treatment of employees, ensuring that employees enjoy a

legally-compliant, reasonable, and fair working environment.

5.4 Losses due to labor-management disputes during the most recent year and up to the annual report publication date: None.

5.5 Estimated losses due to current and possible future labor-management disputes and

response measures

This company holds regular labor-management conferences to promote the exchange of views between labor and

management. Labor and management have consistently maintained a state of consensus since the founding of this

company, and no disputes have occurred.

5.6. Employee rules of conduct

This company has drafted comprehensive rules of conduct to provide employees with standards for work ethics

and conduct, protection of intellectual property rights/business secrets, and work orders. These rules, which are

described below, can be viewed by employees via the document management system, announcements in relevant

internal websites, or bulletin board messages.

1. Work ethics and conduct

(1) Work rules: The Company’s regulations contain dedicated service rules and general principles for prevention

of sexual harassment.

(2) Workplace sexual harassment prevention regulations: In accordance with relevant government laws and

regulations, The Company has explicitly drafted workplace sexual harassment prevention regulations and

established a dedicated awareness website, and has adopted appropriate prevention, correction, and

punishment measures.

(3) Employment contracts: Specifies the requirement that employees faithfully perform their duties

(4) Human resource management conduct guidelines: In accordance with relevant government laws and

regulations and company regulations, we have drafted "human resource management conduct guidelines"

36

classes on such subjects as eliminating discrimination, fair treatment, and prohibition of involuntary labor. To

ensure that everyone can work under fair and lawful conditions, all company employees receive extensive

awareness of these guidelines.

2. Rules for protection of intellectual property rights and maintenance of business secrets

(1) Work rules: The Company's regulations contain general principles for maintenance of the confidentiality of

business secrets.

(2) Employment contracts: Employment contracts specify requirements concerning confidentiality duties,

document ownership, secret information, ownership of intellectual or industrial property, and

non-compete terms.

3. Work orders

(1) Division of responsibilities: The "guidelines for responsibility stratification" specify the division of

responsibilities, and serve to guide the performance of on-the-job duties.

(2) Duties of individual units: The mission of each unit is clearly defined.

(3) Restrictions on the hiring of relatives: The "restrictions on the hiring of relatives" specify that relatives should

not be hired to fill certain positions. This is intended to ensure that the effectiveness and efficiency of the

company's internal management is not compromised unnecessarily by family relationships between

employees.

(4) Attendance management

(a) "Request for leave regulations": These regulations explicitly state The Company's leave request principles

and regulations.

(b) "Domestic travel regulations" and "foreign travel regulations": To facilitate personnel management and

activate substitute mechanisms, the company has established operating procedures for travel applications;

To ensure that personnel taking business trips accomplish their missions, such personnel shall be given

appropriate travel subsidies.

(c) "Overtime regulations": These regulations explicitly specify The Company's overtime principles and

standards.

(d) "Regulations concerning work stoppages due to natural disasters and major accidents": These regulations

explicitly state standards for work stoppages in the event of natural disasters and major accidents.

(5) Performance management

(a) "Performance management and evaluation regulations": These regulations seek to provide an

understanding of employees' strengths and weaknesses, and help them to develop their personal abilities,

by assessing the degree to which employees have achieved their personal goals; Employees'

contributions to the organization are determined on the basis of mutual comparisons between peers.

(b) "Performance guidance operating regulations": Performance guidance work seeks to enhance the

productivity of the company as a whole.

(6) Reward and penalty regulations

The "Reward and penalty handling regulations" prescribe appropriate rewards or punishments for those

employees who display superior performance or violate regulations, and have the intent of encouraging and

maintaining on-the-job morale and order.

(7) Manpower development

(a) "In-service continuing education regulations": These regulations establish channels for continuing

education, and have a goal of accumulating the human resources needed for the company's long-term

operations.

(b) "Regulations concerning application to participate in academic groups and organizations": Participation in

academic groups and organizations participate can promote the diffusion of knowledge and experience,

and help employees to find out about the newest information in their professional fields.

(c) "Conference participation and management regulations": Participation in international conferences enables

employees to acquire the newest information in their professional fields.

(8) Communication channels

(a) "Labor-management conference implementation regulations": These regulations enshrine the consensus

and shared welfare of labor and management, promote teamwork for the sake of corporate development

and employee welfare, establish an effective two-way communication system between labor and

management, put an end to labor-management disputes, ensure harmonious labor-management relations,

and encourage maximal productivity.

(b) "Corporate internal appeal regulations": These regulations provide employees with channels expressing

their views and making appeals directly to the company, maintain employees' rights and interests, and

encourage communication of views.

(c) "Employee suggestion regulations": Employee's ideas and creative thinking can help the company to

37

continue to improve. These regulations provide for rewards for employees who submit proposals

concerning the company's operations, and are intended to encourage employees to contribute their

intelligence and experience.

6. Important contracts

Nature of contract

Contracting parties Year and month of contract start and

end Content

Restrictions Terms

Technical cooperation

Qimonda AG of Germany 2007.06-2014.12 Licensing of 75nm and 58nm DRAM technology and reserving specific capacity (Note 1)

None.


Qimonda AG of Germany 2008.04-2015.12 Licensing of 65nm DRAM technology and reserving specific capacity (Note 1)

None.

Syndicated loan

11 banks in the consortium, including Chinatrust Commercial Bank

2008.06-2013.06 NT$7.7 billion syndicated loan for the 12-inch fab None.

Syndicated loan

9 banks in the consortium, including Bank of Taiwan.

2009.07-2012.07 NT$3.7 billion syndicated loan working capital None.


Qimonda AG of Germany 2009.08-permanent (Note 2)

Licensing of graphics DRAM process technology and equipment purchase, expanded licensing for 90-65nm process technology, and settlement of insolvency procedure

None.


Qimonda AG of Germany 2010.04-permanent (Note 2)

Licensing of 45 nm and 46 nm Buried Wordline DRAM processes and equipment purchase

None.

Syndicated loan


99.05-104.05 NT$7 billion syndicated loan for working capital and 12-inch fab

None.

Syndicated loan


2011.09-2016.09 NT$7 billion syndicated loan for the 12-inch fab None.

Syndicated loan

10 banks in the consortium, including Chinatrust Commercial Bank

101.11-104.11 NT$5 billion syndicated loan for operating funds and payment of existing financial liabilities

None.

Purchase of machinery

Powerchip Semiconductor Corp. 101.12- permanent Acquisition of machinery and equipment needed for operations.

None.

Note 1: Winbond and Qimonda AG entered an agreement in August 2009 to terminate the prior agreement on reserving specific

capacity.

Note 2: The licensing of 90-45nm process technologies from Qimonda AG becomes permanent after Winbond pays off royalties

as agreed.

38

Financial Overview 1. Condensed balance sheets, statements of income, names of auditors, and audit opinions

(2008-2012) 1.1 Condensed balance sheets

Unit: NT$1,000

Item\Year Financial information: FY2008 - FY2012

2008 2009 2010 2011 2012

Current assets 14,711,865 12,833,810 15,092,984 14,724,139 15,804,738

Funds and long-term investments

6,067,232 4,932,326 5,188,566 4,951,855 5,508,898

Fixed assets 48,574,062 42,048,999 38,633,321 34,396,036 28,396,274

Intangible assets 565,545 1,530,973 1,059,078 548,754 38,430

Other assets 3,457,755 3,816,552 3,815,609 3,751,588 3,810,639

Total Assets 73,376,459 65,162,660 63,789,558 58,371,372 53,558,979

Current liabilities

Basic 15,702,411 15,854,667 15,885,703 14,668,433 13,009,438

Diluted 15,702,411 15,854,667 15,885,703 14,668,433 13,009,438

Long-term liabilities 19,033,333 15,116,660 10,124,990 7,966,663 6,550,000

Other liabilities 386,406 337,296 337,728 380,776 527,102

Total liabilities Basic 35,122,150 31,308,623 26,348,421 23,015,872 20,086,540

Diluted 35,122,150 31,308,623 26,348,421 23,015,872 20,086,540

Paid-in capital 37,273,812 36,564,972 36,693,502 36,802,302 36,856,012

Capital surplus 13,007,928 13,181,004 2,303,944 2,232,519 2,199,126

Retained earnings

Basic (7,365,903) (15,977,842) (1,640,149) (2,483,440) (4,335,976)

(accumulated loss)

Diluted (7,364,903) (15,977,842) (1,640,149) (2,483,440) (4,335,976)

Unrealized gain (loss) on financial products

4,559,530 (254,377) (51,936) (1,449,394) (1,408,417)

Cumulative translation adjustments

519,091 446,667 242,163 359,900 268,081

Treasury stock (622,089) (106,387) (106,387) (106,387) (106,387)

Total shareholders’ equity

Basic 38,254,309 33,854,037 37,441,137 35,355,500 33,472,439

Diluted 38,254,309 33,854,037 37,441,137 35,355,500 33,472,439

Note 1: The 2012 financial data have been approved by the Board of Directors on February 6, 2013, but have not yet been submitted to the shareholders’ meeting.

Note 2: The financial information for FY 2008 to FY 2012 was audited and certified by accountants.

1.2 Condensed statements of income Unit: NT$1,000

Item\Year Financial information: FY2008 - FY2012

2008 2009 2010 2011 2012

Sales revenue 21,828,011 19,532,712 31,855,462 27,214,454 25,418,819

Gross profit (loss) (2,486,609) (2,947,940) 6,262,200 3,064,955 1,943,103

Operating income (loss) (6,435,130) (5,994,677) 3,158,724 (625,146) (2,016,000)

Non-operating income and gain

1,383,733 130,917 1,284,334 330,195 625,860

Non-operating expense and loss

2,313,506 2,749,179 892,062 548,340 462,396

Income (loss) before tax (7,364,903) (8,612,939) 3,550,996 (843,291) (1,852,536)

Income tax expense - - - - -

Net income (loss) (7,364,903) (8,612,939) 3,550,996 (843,291) (1,852,536)

Earnings (loss) per share (NT$)

(2.00) (2.36) 0.97 0.23 (0.50)

Note 1: The 2012 financial data have been approved by the Board of Directors on February 6, 2013, but have not yet been submitted to the shareholders’ meeting.

Note 2: The financial information for FY 2008 to FY 2012 was audited and certified by accountants.

39

1.3 Names of auditors and audit opinions (2008 – 2012) Year CPA Audit opinion

2008 C. C. Lu and M. Y. Chiu Unqualified opinion

2009 C. C. Lu and M. Y. Chiu Modified unqualified opinion (Note 1 and Note 2)

2010 C. C. Lu and M. Y. Chiu Modified unqualified opinion (Note 2)

2011 K. T. Hong and K. C. Wu Modified unqualified opinion (Note 2)

2012 K. T. Hong and K. C. Wu Unqualified opinion

Note 1: The CPA issued a modified unqualified opinion in their audit report for the Company’s financial statements because the Company adopts the newly revised Statements of Financial Accounting Standard No. 10 – Inventories starting January 1, 2009.

Note 2: The CPA issued a modified unqualified opinion in their 2009-2011 audit reports because the financial statements of some investee companies accounted for by equity method were audited by other CPA.

2. Financial analysis (2008 - 2012)

Item\Year Financial analysis (2008 - 2012)

2008 2009 2010 2011 2012

Financial structure

Debt-to-assets ratio (%) 47.86 48.04 41.30 39.43 37.50

Long-term fund to fixed assets ratio (%) 117.93 116.46 123.12 125.95 140.94

Solvency

Current ratio (%) 93.69 80.94 95.00 100.37 121.48

Quick ratio (%) 64.94 48.78 58.41 54.34 64.00

Times interest earned - - 6.90 - -

Operating ability

Receivables turnover ratio (times) 7.54 8.58 10.45 8.22 7.54

Average days of collection 48 43 35 44 48

Inventory turnover ratio (times) 5.44 5.37 5.18 4.07 3.46

Payables turnover ratio (times) 9.35 7.60 7.22 7.29 6.61

Average days of sales 67 68 70 89 105

Fixed assets turnover ratio (times) 0.46 0.43 0.78 0.74 0.80

Total assets turnover ratio (times) 0.25 0.28 0.49 0.44 0.45

Profitability

Return on assets (%) (8.02) (11.72) 6.28 (0.80) (2.77)

Return on shareholder‘s equity (%) (16.52) (23.88) 9.96 (2.31) (5.38)

Percentage to paid-in capital (%)

Operating income (17.26) (16.39) 8.60 (1.69) (5.46)

Income before tax (19.75) (23.55) 9.67 (2.29) (5.02)

Net profit margin (%) (33.74) (44.09) 11.14 (3.09) (7.28)

Earnings per share (NT$) (2.00) (2.36) 0.97 (0.23) (0.50)

Cash flows

Cash flow ratio (%) 17.38 29.09 71.32 64.81 43.92

Cash flow adequacy ratio (%) 60.27 48.93 64.22 89.78 89.30

Cash reinvestment ratio (%) 3.15 5.73 12.83 10.16 5.81

Leverage Operating leverage (0.74) (0.96) 5.07 (19.90) (4.71)

Financial leverage 0.88 0.90 1.23 0.59 0.84

Reasons for changes in financial ratios exceeding 20%: 1. Decrease in receivables turnover ratio was mainly due to decrease in sales revenue in 2012 amid global economic slowdown. 2. Decrease in inventory turnover ratio was due to decrease in the sale of wafer in 2012, and in addition, increase in capacity and

average wafer start that led to rise in inventory and decrease in turnover ratio. 3. Decrease in return on assets, return on shareholder’s equity, percentage of operating income to paid-in capital, percentage of income

before tax to paid-in capital, net profit margin and earnings per share, which were brought about by price competition in the market in 2012 that led to lower gross profit and loss after tax.

4. Increase in cash flow adequacy ratio was mainly due to decrease in total capital expenditure in the past five years. 5. Decrease in cash reinvestment ratio was mainly due to increase in the gross amount of fixed assets in 2012.

Note 1: Financial data from 2008 to 2012 have been audited by certified public accountant.

Note 2: Computation formulas used in financial analysis:

1. Financial structure

(1) Debt-to-asset ratio = total liabilities / total assets.

(2) Long-term fund to fixed assets ratio＝(net shareholders’ equity + long-term debt) / net fixed assets.

2. Solvency

(1) Current ratio = current assets / current liabilities.

40

(2) Quick ratio = (current assets – inventory – prepaid expense) / current liabilities.

(3) Time interest earned = net income before income tax and interest expense / current interest expense.

3. Operating ability

(1) Receivable (including accounts receivable and business-related notes receivable) turnover ratio = net

operating revenue / average balance of receivable of the period (including accounts receivable and

business-related notes receivable).

(2) Average days of collection ＝365 / receivables turnover ratio.

(3) Inventory turnover ratio＝cost of goods sold / average amount of inventory.

(4) Payable (including accounts payable and business-related notes payable) turnover ratio = cost of goods

sold / average balance of payable of the period (including accounts payable and business-related notes

payable).

(5) Average days of sales ＝365 / inventory turnover ratio.

(6) Fixed assets turnover ratio＝net sales / net average fixed assets.

(7) Total assets turnover ratio＝net sales / total average assets.

4. Profitability

(1) Return on assets ＝ [net income + interest expense (1– tax rate)] / average total assets.

(2) Return on shareholder’s equity＝ net income / net average shareholders’ equity.

(3) Net profit margin＝ net income / net sales.

(4) Earnings per share＝(net income - dividend to preferred stock) / weighted average of shares issued.

5. Cash flows

(1) Cash flow ratio = new cash flows from operating activities / current liabilities.

(2) Cash flow adequacy ratio = net cash flows from operating activities in the past five years / (capital

expenditure + increase in inventory + cash dividend) in the past five years.

(3) Cash reinvestment ratio = (net cash flows from operating activities – cash dividend) / (gross fixed assets +

long-term investment + other assets + working capital).

6. Leverage

(1) Operating leverage＝(net operating income – variable operating cost and expenses) / operating income.

(2) Financial leverage＝operating income / (operating income – interest expense)

Winbond Electronics Corporation Financial Statements for the Years Ended December 31, 2012 and 2011 and Independent Auditors’ Report

- 41 -

3. 2012 financial statements

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders

Winbond Electronics Corporation

We have audited the accompanying balance sheets of Winbond Electronics Corporation (the

“Company”) as of December 31, 2012 and 2011, 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. Certain long-term

investments were accounted for under the equity method based on financial statements as of

and for the year ended December 31, 2011 of the investees, which were audited by other

auditors. Our opinion, insofar as it relates to such investments, is based solely on the reports

of other auditors. The investments in such investees amounted to zero as of December 31,

2011; investment loss amounted to NT$1,341 thousand for the year then ended.

We conducted our audits in accordance with the Rules Governing the Audit of Financial

Statements by Certified Public Accountants and auditing standards generally accepted in the

Republic of China. Those rules and standards require that we plan and perform the audit to

obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts

and disclosures in the financial statements. An audit also includes assessing the accounting

principles used and significant estimates made by management, as well as evaluating the

overall financial statement presentation. We believe that our audits provide a reasonable

basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the financial statements

referred to above present fairly, in all material respects, the financial position of the Company

as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the

years then ended, in conformity with the Guidelines Governing the Preparation of Financial

Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines

Governing Business Accounting relevant to financial accounting standards, and accounting

principles generally accepted in the Republic of China.

- 42 -

We have also audited the consolidated balance sheets of Winbond Electronics Corporation and

its subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of

income, changes in stockholders’ equity, and cash flows for the years then ended (not

presented herewith), and have expressed in our report thereon an unqualified opinion and an

unqualified opinion with explanatory paragraphs dated February 6, 2013, respectively.

February 6, 2013

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.

For the convenience of readers, the auditors’ report and the accompanying financial

statements have been translated into English from the original Chinese version prepared and

used in the Republic of China. If there is any conflict between the English version and the

original Chinese version or any difference in the interpretation of the two versions, the

Chinese-language auditors’ report and financial statements shall prevail. Also, as stated in

Note 2 to the financial statements, the additional footnote disclosures that are not required

under generally accepted accounting principles were not translated into English.

- 43 -

WINBOND ELECTRONICS CORPORATION

BALANCE SHEETS

DECEMBER 31, 2012 AND 2011

(In Thousands of New Taiwan Dollars)

2012 2011 2012 2011

ASSETS Amount % Amount % LIABILITIES AND STOCKHOLDERS’ EQUITY Amount % Amount %

CURRENT ASSETS CURRENT LIABILITIES

Cash and cash equivalents (Notes 2 and 4) $ 3,707,404 7 $ 3,812,987 7 Short-term loans (Note 13) $ 2,716,474 5 $ 1,539,592 3

Financial assets at fair value through profit or loss, current (Notes 2 Short-term bills payable (Note 14) 499,376 1 199,763 -

and 5) 23,551 - 1,703 - Notes payable 812,253 2 849,714 1

Available-for-sale financial assets, current (Notes 2 and 8) 704,091 2 707,542 1 Accounts payable 2,798,923 5 2,640,929 5

Notes receivable, net (Notes 2 and 6) 286 - 382 - Payable on equipment 125,116 - 632,910 1

Accounts receivable, net (Notes 2 and 6) 3,004,575 6 2,447,898 4 Accrued expenses and other payables 1,551,004 3 1,623,695 3

Accounts receivable from related parties, net (Notes 6 and 22) 578,568 1 701,771 1 Current portion of long-term liabilities (Note 15) 4,483,330 9 7,158,327 12

Other financial assets, current 160,902 - 85,609 - Other current liabilities 22,962 - 23,503 -

Inventories (Notes 2 and 7) 7,107,687 13 6,427,420 11

Deferred income tax assets, current (Notes 2 and 20) 147,000 - 210,000 - Total current liabilities 13,009,438 25 14,668,433 25

Other current assets 370,674 1 328,827 1

LONG-TERM LIABILITIES

Total current assets 15,804,738 30 14,724,139 25 Long-term debt (Note 15) 6,550,000 12 7,966,663 13

FUND AND INVESTMENTS OTHER LIABILITIES

Available-for-sale financial assets, noncurrent (Notes 2 and 8) 64,530 - 64,800 - Accrued pension liabilities (Notes 2 and 16) 193,077 - 154,308 1

Financial assets carried at cost, noncurrent (Notes 2, 9 and 22) 56,481 - 61,855 - Reserve for product guarantee (Note 2) 102,297 - 94,271 -

Long-term equity investments at equity method (Notes 2 and 10) 5,387,887 10 4,825,200 9 Other liabilities - others 231,728 1 132,197 -

Total fund and investments 5,508,898 10 4,951,855 9 Total other liabilities 527,102 1 380,776 1

PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 11) Total liabilities 20,086,540 38 23,015,872 39

Cost

Land 799,147 1 799,147 1 STOCKHOLDERS’ EQUITY

Buildings 16,357,176 31 16,148,157 28 Common stock (Note 17) 36,856,012 69 36,802,302 63

Machinery and equipment 66,351,722 124 64,599,851 111 Capital surplus

Other equipment 2,560,421 5 2,504,366 4 Treasury stock transaction 1,971,862 4 1,971,862 3

Total cost 86,068,466 161 84,051,521 144 Adjustment on long-term equity investments under equity method 27,868 - 23,913 -

Accumulated depreciation (57,765,137) (108) (49,782,156) (85) Stock option (Notes 2 and 18) 9,285 - 13,960 -

Construction in progress and prepayments on purchase of equipment 92,945 - 125,671 - Others 190,111 - 222,784 1

Accumulated deficit (4,335,976) (8) (2,483,440) (4)

Property, plant and equipment, net 28,396,274 53 34,395,036 59 Other equity

Cumulative translation adjustments (Note 2) 268,081 - 359,900 1

INTANGIBLE ASSETS (Notes 2 and 12) 38,430 - 548,754 1 Unrealized loss on financial instruments (Note 2) (1,408,417) (3) (1,449,394) (3)

Treasury stock (Notes 2 and 17) (106,387) - (106,387) -

OTHER ASSETS

Refundable deposits 73,522 - 80,455 - Total stockholders’ equity 33,472,439 62 35,355,500 61

Deferred income tax assets, noncurrent (Notes 2 and 20) 3,595,000 7 3,532,000 6

Others 142,117 - 139,133 -

Total other assets 3,810,639 7 3,751,588 6

TOTAL $ 53,558,979 100 $ 58,371,372 100 TOTAL $ 53,558,979 100 $ 58,371,372 100

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

- 44 -


STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2012 AND 2011

(In Thousands of New Taiwan Dollars, Except Loss Per Share)

2012 2011

Amount % Amount %

NET SALES $ 25,418,819 100 $ 27,214,454 100

COST OF SALES (Note 7) 23,475,716 92 24,149,499 89

GROSS PROFIT 1,943,103 8 3,064,955 11

OPERATING EXPENSES

Selling expenses 675,400 3 606,800 2

General and administrative expenses 682,970 3 534,781 2

Research and development expenses 2,600,733 10 2,548,520 9

Total operating expenses 3,959,103 16 3,690,101 13

LOSS FROM OPERATIONS (2,016,000) (8) (625,146) (2)

NON-OPERATING INCOME AND GAINS

Interest income 18,901 - 24,163 -

Investment income recognized under equity method

(Note 10)

423,149 2 131,829 1

Investment income - - 24,668 -

Gain on disposal of property, plant and equipment

(Note 2)

4,483 - 926 -

Gain on disposal of investments - - 7,027 -

Foreign exchange gain (Note 2) - - 58,373 -

Reversal of allowance for doubtful accounts 68,209 - 13,000 -

Gain on valuation of financial instruments (Note 5) 93,806 1 - -

Others 17,312 - 70,209 -

Total non-operating income and gains 625,860 3 330,195 1

NON-OPERATING EXPENSES AND LOSSES

Interest expense 362,797 2 425,495 2

Other investment loss (Note 9) 2,922 - 9,680 -

Loss on disposal of property, plant and equipment

(Note 2)

27 - 1,006 -

Loss on disposal of investment 17,856 - - -

Foreign exchange loss (Note 2) 56,097 - - -

Loss on valuation of financial instruments (Note 5) - - 88,854 -

Others 22,697 - 23,305 -

Total non-operating expenses and losses 462,396 2 548,340 2

(Continued)

- 45 -


STATEMENTS OF INCOME



2012 2011

Amount % Amount %

LOSS BEFORE INCOME TAX $ (1,852,536) (7) $ (843,291) (3)

INCOME TAX EXPENSE (Notes 2 and 20) - - - -

NET LOSS $ (1,852,536) (7) $ (843,291) (3)

2012 2011

Before

Income

Tax

After

Income

Tax

Before

Income

Tax

After

Income

Tax

LOSS PER SHARE (Notes 2 and 21)

Basic loss per share $ (0.50) $ (0.50) $ (0.23) $ (0.23)

Proforma amount, assuming common shares held by subsidiaries were not treated as treasury stock:

2012 2011

Before

Income Tax

After

Income Tax

Before

Income Tax

After

Income Tax

NET LOSS $ (1,852,536) $ (843,291)

BASIC LOSS PER SHARE $(0.50) $(0.50) $(0.23) $(0.23)

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

- 46 -


STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY



Capital Surplus

Adjustments on

Long-term Other Equity

Equity Unrealized

Investments Cumulative Loss on

Treasury Stock under Equity Accumulated Translation Financial

Common Stock Transaction Method Stock Option Others Deficit Adjustments Instruments Treasury Stock Total

BALANCE, JANUARY 1, 2011 $ 36,693,502 $ 1,971,862 $ 23,912 $ 20,104 $ 288,066 $ (1,640,149) $ 242,163 $ (51,936) $ (106,387) $ 37,441,137

Net loss for 2011 - - - - - (843,291) - - - (843,291)

Changes in translation adjustments - - - - - - 117,737 - - 117,737

Changes in unrealized loss on financial instruments - - - - - - - (1,397,458) - (1,397,458)

Issuance of stock from exercising employee stock

options (Note 17) 108,800 - - (10,616) (65,282) - - - - 32,902

Capital surplus from investee under equity method - - 1 - - - - - - 1

Compensation cost of employee stock options

(Note 18) - - - 4,472 - - - - - 4,472

BALANCE, DECEMBER 31, 2011 36,802,302 1,971,862 23,913 13,960 222,784 (2,483,440) 359,900 (1,449,394) (106,387) 35,355,500

Net loss for 2012 - - - - - (1,852,536) - - - (1,852,536)

Changes in translation adjustments - - - - - - (92,184) - - (92,184)

Changes in unrealized gain on financial instruments - - - - - - - 110,462 - 110,462

Capital surplus from investee under equity method - - 76 - - - - - - 76

Issuance of stock from exercising employee stock

options (Note 17) 53,710 - - (4,816) (32,673) - - - - 16,221

Write-off stockholders' equity due to subsidiary

merged (Note 10) - - 3,879 - - - 365 (69,485) - (65,241)

Compensation cost of employee stock options

(Note 18) - - - 141 - - - - - 141

BALANCE, DECEMBER 31, 2012 $ 36,856,012 $ 1,971,862 $ 27,868 $ 9,285 $ 190,111 $ (4,335,976) $ 268,081 $ (1,408,417) $ (106,387) $ 33,472,439

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

- 47 -


STATEMENTS OF CASH FLOWS



2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss $ (1,852,536) $ (843,291)

Adjustments to reconcile net loss to net cash provided by operating

activities

Depreciation 8,489,074 9,680,099

Amortization 529,041 523,434

Reversal of allowance for doubtful accounts (68,209) (13,000)

(Gain) loss on decline in market value and obsolescence and

abandonment of inventories (69,515) 486,680

Loss (gain) on disposal of investments, net 17,856 (7,027)

Investment income recognized under equity method, net (423,149) (131,829)

Impairment losses on financial assets carried at cost 2,922 9,680

Cash dividends from equity method investees 215,254 379,860

Net (gains) losses on disposal of property, plant and equipment (4,456) 80

Compensation cost of employee stock options 141 4,472

Net changes in operating assets and liabilities

Financial assets at fair value through profit or loss, current (21,848) 54,403

Notes receivable 96 970

Accounts receivable (574,969) 613,230

Accounts receivable from related parties 122,828 (275,204)

Other financial assets, current (75,294) (10,165)

Inventories (610,752) (1,476,316)

Other current assets (41,847) 121,595

Other assets (14,768) (35,090)

Notes payable (37,460) (287,725)

Accounts payable 157,993 650,223

Accrued expenses and other payables (72,691) 71,863

Other current liabilities (541) (58,644)

Other liabilities 46,695 48,638

Net cash provided by operating activities 5,713,865 9,506,936

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of property, plant and equipment (3,018,234) (5,965,461)

Acquisition of long-term investments under equity method (403,856) (376,670)

Acquisition of available-for-sale financial assets (86,915) (316,826)

Acquisition of financial assets carried at cost (58,950) -

Proceeds from disposal of available-for-sale financial assets 71,285 -

Proceeds from disposal of financial assets carried at cost 62,708 335

Proceeds from capital return of long-term investments under equity

method 188,874 -

Proceeds from disposal of property, plant and equipment 24,584 4,448

Net cash used in investing activities (3,220,504) (6,654,174)

(Continued)

- 48 -


STATEMENTS OF CASH FLOWS



2012 2011

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in short-term loans 1,176,883 (12,223)

Increase in short-term bills payable 299,613 199,763

Increase in long-term debt 3,200,000 5,000,000

Repayment of long-term debt (7,291,660) (8,491,670)

Proceeds from exercise of employee stock options 16,220 32,902

Net cash used in financing activities (2,598,944) (3,271,228)

NET DECREASE IN CASH AND CASH EQUIVALENTS (105,583) (418,466)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,812,987 4,231,453

CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,707,404 $ 3,812,987

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest during the year $ 420,219 $ 549,022

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND

FINANCING ACTIVITIES

Current portion of long-term liabilities $ 4,483,330 $ 7,158,327

Change in cumulative translation adjustments $ (92,184) $ 117,737

Unrealized gain (loss) on financial instruments $ 110,462 $ (1,397,458)

Acquisitions of available-for-sale financial assets offset by accounts

receivable $ 86,501 $ -

Capital surplus from investee under equity method $ 76 $ 1

Write-off stockholders' equity due to subsidiary merged $ (65,241) $ -

CASH PAYMENT FOR ACQUISITIONS OF PROPERTY, PLANT

AND EQUIPMENT

Net increase in acquisition of property, plant and equipment $ 2,510,440 $ 5,518,277

Add payable for property, plant and equipment, beginning of year 632,910 1,080,094

Less payable for property, plant and equipment, end of year (125,116) (632,910)

Cash payment for acquisitions of property, plant and equipment $ 3,018,234 $ 5,965,461

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

- 49 -


NOTES TO FINANCIAL STATEMENTS


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

1. ORGANIZATION AND OPERATIONS

Winbond Electronics Corporation (the “Company”) was incorporated in the Republic of China (“ROC”) on

September 29, 1987 and is engaged in the design, development, manufacture and marketing of Very Large

Scale Integration (“VLSI”) integrated circuits (“ICs”) used in a variety of microelectronic applications. In

addition to its own products, the Company offers a foundry service for other Taiwanese and foreign IC

producers and designers. An initial public offering of the Company’s common stocks was made on

October 18, 1995, and the stocks are traded on the Taiwan Stock Exchange.

There are 2,007 and 2,012 employees in the Company as of December 31, 2012 and 2011, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared in conformity with the Guidelines Governing

the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines

Governing Business Accounting, and accounting principles generally accepted in the ROC. For readers’

convenience, the accompanying financial statements have been translated into English from the original

Chinese version prepared and used in the ROC. If inconsistencies arise between the English version and

the Chinese version or if differences arise in the interpretations between the two versions, the Chinese

version of the financial statements shall prevail. Significant accounting policies are summarized as

follows:

Foreign Currencies

Non-derivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange

in effect when the transactions occur. At the balance sheet date, foreign-currency monetary assets and

liabilities are revalued using prevailing exchange rates and the exchange differences are recognized in

current income or loss.

At the balance sheet date, foreign-currency nonmonetary assets and liabilities (e.g., equity instruments)

which are measured at fair value shall be revalued using prevailing exchange rates. The exchange

differences treated as recognized in shareholders’ equity if the changes in fair value are recognized in

shareholders’ equity; recognized in profit and loss if the changes in fair value is recognized in profit or loss.

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

rates at trade dates.

Long-term equity investments denominated in foreign currencies are restated at the balance sheet date

exchange rates. The related translation adjustments are reported as an adjustment of stockholders’ equity.

The aforesaid balance sheet date exchange rates are based on the middle prices of the major transaction

banks.

- 50 -

Accounting Estimates

In preparing financial statements in conformity with these guidelines, law and principles, the Company is

required to make some estimates and assumptions that could affect the amounts of allowance for doubtful

accounts, allowance for loss on inventories, property depreciation and impairment, tax, pension liabilities

and product guarantee, etc. Actual results may differ from these estimates.

Current/Noncurrent Assets and Liabilities

Current assets include cash and cash equivalents, and those assets held primarily for trading purposes or to

be realized, sold or consumed within one year from the balance sheet date. All other assets such as

property, plant and equipment and intangible assets are classified as noncurrent. Current liabilities are

obligations incurred for trading purposes or to be settled within one year from the balance sheet date. All

other liabilities are classified as noncurrent.

Cash and Cash Equivalents

Cash includes unrestricted cash on hand and cash in bank. Government bonds under repurchase

agreements and commercial paper with maturities of less than three months from the date of purchase are

classified as cash equivalents. The carrying amount approximates fair value.

Financial Assets at Fair Value through Profit or Loss

Financial instruments at fair value through profit or loss include financial assets and financial liabilities held

for trading purpose. Upon initial recognition, they are recognized at the fair values plus transaction costs.

After initial recognition, they are measured at fair values and the changes in the fair values are recognized

as profits or losses. Cash dividends received are recorded as dividends revenue, including the dividends

received in the year of acquisition. When the financial instruments are disposed of, the difference between

carrying amount and the price received or paid is recognized as the profit or loss. All regular way

purchases or sales of financial assets, derivative financial instrument are recognized on a settlement date

basis, others are recognized on trade date basis.

Derivatives that are not subject to measurement under hedge accounting are classified as financial assets or

financial liabilities at fair value through profit or loss. The positive fair values of derivatives are

recognized as financial assets; negative fair values are recognized as financial liabilities.

The fair value of open-end mutual fund is the published fair value per unit at the balance sheet date.

Marketable securities are stated at the closing price at the balance sheet date.

Impairment of Accounts Receivable

The Company evaluates for indication of impairment of accounts receivable at the end of each reporting

period. When objective evidence indicates that the estimated future cash flow of accounts receivable

decreases as a result of one or more events that occurred after initial recognition of the accounts receivable,

such accounts receivable are deemed to be impaired.

Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process. Inventories are stated

at the lower of cost or net realizable value. Inventory write-downs are made on item-by-item basis. Net

realizable value is the estimated selling price of inventories less all estimated costs of completion and

necessary selling cost.

- 51 -

Available-for-sale Financial Assets

Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are

directly attributable to the acquisition of the financial assets. After initial recognition, they are measured

at fair value and the changes in fair value of available-for-sale financial assets are recorded as an adjustment

of stockholders’ equity. When the financial assets are disposed of, the related accumulated fair value

changes are taken out of stockholders’ equity and recognized in the profit and loss. All regular way

purchases or sales of available-for-sale financial assets are recorded on a trade date basis.

Stock dividends are recorded as an increase in the number of shares and do not affect investment income or

the carrying amount of the investment.


Marketable securities are stated at the closing price at the balance sheet date. Private-placement common

shares of listed company are stated at the closing price at the balance sheet date but adjusted for the effects

of transferred restriction. Open-end mutual funds are stated at net asset values at the balance sheet date.

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in

a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously

recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to

stockholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that

the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.

Financial Assets Carried at Cost

Equity investment for which do not have a quoted market price in an active market and whose fair value

cannot be reliably measured, such as non-publicly traded stocks, are carried at their original cost.

Accounting policies for dividends received are similar to those for available-for-sale financial assets.

An impairment loss is recognized if there is objective evidence of impairment; subsequent reversal of such

impairment loss is not allowed.

Long-term Equity Investments Accounted for Using Equity Method

Investments in corporations in which the Company’s ownership interest is over 20% or the Company

exercises significant influence on the operating and financial policy decision are accounted for by the equity

method.

When equity investments are made, the excess of the purchase cost over the fair value of net assets

representing goodwill will not be amortized, but will be tested for impairment periodically, or more

frequently, if events or changes in circumstances indicate that such carrying value may not be recoverable.

When the Company subscribes for additional investee shares at a percentage different from its existing

ownership percentage, the resulting carrying amount of the investment in the investee will differ from the

amount of the Company’s share of the investee’s net equity. The Company records such difference as an

adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.

If the balance of the capital surplus account relating to a long-term equity investment is not sufficient to

absorb such an adjustment, any excess is charged against retained earnings.

A merger or acquisition transaction is accounted for by purchase method. When equity investment is

made with an asset other than cash, the fair value of the asset given up or of the shares acquired is measured

objectively.

- 52 -

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. For

long-term equity investments for which the Company has significant influence but with no control, the

carrying amount of each investment is compared with its own recoverable amount for the purpose of

impairment testing. For long-term equity investments for which the Company has control, the carrying

amount is compared with the relevant cash-generating units (“CGUs”) of the consolidated financial

statements.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment.

Expenditures that would increase the value or extend the useful lives of property, plant and equipment are

capitalized.

Interest is capitalized during the construction period of property, plant and equipment until a qualifying

asset is substantially completed and ready for its intended use.

Depreciation is provided on the straight-line method over the following estimated useful lives of the related

assets:

Buildings 5 to 20 years

Machinery and equipment 5 years

Other equipment 3 to 5 years

Property, plant and equipment still in use beyond their original estimated useful lives are further

depreciated over their new estimated useful lives.

When an indication of significant impairment is determined, any excess of the carrying amount of an asset

over its recoverable amount is recognized as a loss. If the recoverable amount increases in the future

period, the subsequent reversal of the impairment loss would be recognized as a gain. However, the

increased carrying amount of an asset due to reversal of an impairment loss should not exceed the carrying

amount that would have been determined (net of depreciation), had no impairment loss been recognized for

the assets in prior years.

Upon sale or disposal of property, plant and equipment, the related cost, accumulated depreciation and

accumulated amortized are removed from the accounts and any related gain or loss is included in

non-operating income or non-operating expenses.

Intangible Assets

Intangible assets are stated at acquisition cost less accumulated amortization and included in assets. Such

assets are amortized over three to five years from the commencement of production using the straight-line

method. If the assets’ future benefits are impaired, the excess of carrying amount will be recognized in

current loss to present the fair value of the assets.

Reserve for Product Guarantee

For potential product risk, the Company accrues reserve for product guarantee based on the commitment to

specific customers.

Benefit Pension Plan

For employees under defined contribution plans, pension costs are recorded based on the actual

contributions made to employee’s personal pension accounts. For employees under defined benefit

pension plans, pension costs are recorded based on actuarial calculations.

- 53 -

Income Tax

The Company uses an inter-period tax allocation method for income tax. Deferred income tax assets and

liabilities are recognized for the tax effect of temporary differences, operating loss carryforwards and

investment tax credits. Valuation allowances are provided when necessary to reduce deferred tax assets to

the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable for the

period plus or minus the change during the period in deferred tax assets and liabilities.

Income tax credits, such as for purchase of machinery, research and development expenses and training

expenses, are recognized as deduction of current income tax expense.

Income tax on unappropriated earnings at a rate of 10% is expensed in the year of stockholder approval

which is the year subsequent to the year the earnings are generated.

Loss Per Share

Basic loss per share is calculated by dividing net loss applicable to common stock by the weighted average

number of shares outstanding.

Share-based Compensation

Under the statement, the value of the stock options granted, which is equal to the best available estimate of

the number of stock options expected to vest multiplied by the grant-date fair value, is expensed on a

straight-line basis over the vesting period, with a corresponding adjustment to capital surplus - stock

options. The estimate is revised if subsequent information indicates that the number of stock options

expected to vest differs from previous estimates.

Treasury Stock

The cost of shares purchased or fair value of shares donated by outside parties is charged to the treasury

stock account.

Upon reissuance, the discrepancy between the cost of the treasury shares and the price received is reflected

in stockholders’ equity accounts.

The Company’s stock held by subsidiaries is also treated as treasury stock.

Revenue Recognition

Sales are recognized when titles of products and risks of ownership are transferred to customers.

Reclassifications

Certain accounts in the financial statements as of and for the year ended December 31, 2011 have been

reclassified to conform to the presentation of the financial statements as of and for the year ended

December 31, 2012.

- 54 -

3. CHANGES IN ACCOUNTING PRINCIPLES

Financial Instruments

On January 1, 2011, the Company adopted the newly revised Statement of Financial Accounting Standards

(SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” The main revisions include (1)

finance lease receivables are now covered by SFAS No. 34; (2) the scope of the applicability of SFAS No.

34 to insurance contracts is amended; (3) loans and receivables originated by the Company are now covered

by SFAS No. 34; (4) additional guidelines on impairment testing of financial assets carried at amortized

cost when a debtor has financial difficulties and the terms of obligations have been modified; and (5)

accounting treatment by a debtor for modifications in the terms of obligations. This adoption did not

result in material effect on the financial statements for the year ended December 31, 2011.

Operating Segments

On January 1, 2011, the Company adopted the newly issued SFAS No. 41, “Operating Segments.” The

statement requires that segment information be disclosed based on the information about the components of

the Company that management uses to make operating decisions. SFAS No. 41 requires identification of

operating segments on the basis of internal reports that are regularly reviewed by the Company's chief

operating decision maker in order to allocate resources to the segments and assess their performance. This

statement supersedes SFAS No. 20, “Segment Reporting.” For this accounting change, the Company

disclose in the consolidated financial statements as of and for the year ended December 31, 2011.

4. CASH AND CASH EQUIVALENTS

December 31

2012 2011

Cash on hand $ 230 $ 230

Checking account 30,184 1,036

Demand deposit 330,586 102,956

Time deposit 1,618,004 3,071,752

Short-term bills 1,728,400 637,013

$ 3,707,404 $ 3,812,987

Time deposits in the amounts of $70,733 thousand and $77,836 thousand as of December 31, 2012 and

2011, respectively, were pledged to secure purchase orders of materials and customs tariff obligations and

are included in refundable deposits.

5. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31

2012 2011

Financial assets at fair value through profit or loss, current

Forward exchange contracts $ 23,551 $ 1,703

For the years ended December 31, 2012 and 2011, the Company’s entered into derivative contracts to

manage exposures due to exchange rate and interest rate fluctuation. The financial risk management

objective of the Company is to minimize risks due to changes in fair value or cash flows.

- 55 -

Outstanding forward exchange contracts as of December 31, 2012 and 2011 were as follows:

Currencies Maturity Date

Contract Amount

(In Thousands)

December 31, 2012

Sell forward exchange contracts USD to NTD 2013.01.03-2013.03.14 USD116,000/NTD3,378,206

Sell forward exchange contracts NTD to USD 2013.02.07 NTD289,220/USD10,000

December 31, 2011

Sell forward exchange contracts USD to JPY 2012.01.05 USD925/JPY72,000


The transactions of financial instruments at fair value through profit or loss resulted in net gains of $93,806

thousand and net losses of $88,854 thousand for the years ended December 31, 2012 and 2011,

respectively.

6. NOTES AND ACCOUNTS RECEIVABLE

December 31

2012 2011

Notes receivable $ 286 $ 382

Accounts receivable $ 3,083,063 $ 2,726,898

Less allowance for doubtful accounts (78,488) (279,000)

$ 3,004,575 $ 2,447,898

Accounts receivable from related parties (Note 22) $ 578,568 $ 701,771

7. INVENTORIES

December 31

2012 2011

Finished goods $ 1,505,625 $ 1,606,347

Work-in-process 5,321,377 4,517,692

Raw materials and supplies 263,894 289,609

Inventories in transit 16,791 13,772

$ 7,107,687 $ 6,427,420

As of December 31, 2012 and 2011, the allowance for inventory devaluation was $876,268 thousand and

$985,877 thousand, respectively.

Gain on recovery of loss of inventory and loss on write-down of inventories of $69,515 thousand and

$486,680 thousand were recognized as the cost of sales for the years ended December 31, 2012 and 2011,

respectively. Gain on recovery of decline in market value amounted to $109,608 thousand in the year

ended December 31, 2012, due to net realizable value improvement.

- 56 -

Unallocated fixed manufacturing costs were recognized as cost of sales in the years ended December 31,

2012 and 2011 amounted to $513,589 thousand and $548,177 thousand, respectively.

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31

2012 2011

Amount

Ownership

Percentage Amount

Ownership

Percentage

Listed stocks

Walton Advanced Engineering Inc. $ 420,526 10 $ 480,601 10

Hannstar Display Corporation 192,061 2 123,082 1

Walsin Technology Corporation 91,504 2 103,859 2

Private-placement shares of listed

company


768,621 772,342

Less current portion (704,091) (707,542)

$ 64,530 $ 64,800

In January 2011, the Company acquired 54,000 thousand private-placement shares of Hannstar Display

Corporation. According to Securities and Exchange Act, the private-placement shares of Hannstar

Display Corporation could be resold freely in an active market only after three years from the delivery date

and permitted by the controlling authorities. In September 2012, Hannstar Display Corporation carried

out a capital reduction to offset a deficit, and the proportion of capital reduction is 50%. The Company

deducted 27,000 thousand private-placement shares of Hannstar Display Corporation. As of December 31,

2012, the Company had 27,000 thousand of Hannstar Display Corporation’s private-placement shares.

9. FINANCIAL ASSETS CARRIED AT COST

December 31

2012 2011

Amount

Ownership

Percentage Amount

Ownership

Percentage

Harbinger Venture III Capital Corp. $ 43,228 5 $ - -

YH Bio Explore & Application Co., Ltd. - - 35,520 3

Vita Genomic, Inc. - - 13,082 3

Others 13,253 - 13,253 -

$ 56,481 $ 61,855

a. The Company’s financial assets carried at cost do not have a quoted market price in an active market,

and the fair value cannot be reliably measured. Impairment loss is evaluated periodically.

b. The Company assessed the recoverable amount of the above financial assets; as a result, the Company

recognized an impairment loss of $2,922 thousand, recorded as “other investment loss” for the year

ended December 31, 2012.

- 57 -

c. In September 2012, the Company acquired 4,080 thousand shares of Harbinger Venture III Capital

Corp. at $10.60 per share from related-party Win Investment Corporation (the price was determined by

the investee’s net value). As of December 31, 2012, the Company held 4,080 thousand shares of the

investee with a 5% ownership interest.

d. In September 2012, the Company acquired 2,495 thousand shares of Dynacard Co., Ltd. from

related-party Win Investment Corporation (the price was determined by the investee’s net value). As

of December 31, 2012, the Company sold all of its shares in the investee.

10. LONG-TERM EQUITY INVESTMENTS AT EQUITY METHOD

December 31

2012

Original 2011

Investment

Cost

Carrying

Value

Ownership

Percentage

Carrying

Value

Ownership

Percentage

Nuvoton Technology Corporation

(“NTC”) $ 727,548 $ 1,854,961 61 $ 1,705,202 61

Chin Xin Investment 1,723,588 1,654,103 35 - -

Winbond Int’l Corporation (“WIC”) 3,269,237 1,546,387 100 1,596,774 100

Landmark Group Holdings Ltd.

(“Landmark”) 325,728 240,659 100 372,360 100

Mobile Magic Design Corporation

(“MMDC”) 50,000 54,093 100 50,910 100

Pine Capital Investment Limited

(“PCI”) 41,398 37,684 100 42,805 100

Newfound Asian Corp. (“NAC”) 208,960 - 100 - 100

Winbond Electronics (H.K.) Limited

(“WEHK”) 1,948 - 100 - 100

Win Investment Corporation (“Win”) - - - 1,057,149 100

$ 6,348,407 $ 5,387,887 $ 4,825,200

Equity in (losses) gains of equity method investees was summarized as follows:

Years Ended December 31

2012 2011

NTC $ 383,019 $ 259,730

WIC 16,599 (108,116)

Landmark (13,733) (37,508)

MMDC 3,126 4,364

PCI (3,590) (1,005)

NAC (261) (263)

WEHK (1,083) 5,764

Win 39,072 8,863

$ 423,149 $ 131,829

The financial statements for the year ended December 31, 2011 of CFP Technology Corp. (“CFP”) were

audited by other auditors. In August 2011, Win sold partial investments of CFP. As Win’s ownership

interest in CFP was less than 20% and could not have significant influence over CFP, Win reclassified its

investment in CFP as “financial assets carried at cost”.

Pine Capital Investment Limited (“PCI”) was incorporated in January 2011. PCI’s principal activity is to

invest in various businesses. As of December 31, 2012, the balance of PCI’s capital account amounted to

HK$10,920 thousand and the Company held a 100% ownership interest directly.

- 58 -

In September 2012, the board of directors of Landmark Company resolved capital reduction amounted to

$188,874 thousand.

In November 2012, the Company bought 40,000 thousand shares of Chin Xin Investment from

related-party Walsin Lihwa Corporation. On December 31, 2012, Win Investment, a subsidiary of the

Company was merged into Chin Xin Investment, and accordingly Win Investment was dissolved. The

Company acquired 130,713 thousand shares of Chin Xin Investment after such merger. As of December

31, 2012, the Company had 170,713 thousand shares of Chin Xin Investment with a 35% ownership

interest.

The Company has written off $65,241 thousand of stockholders' equity due to the abovementioned merger

transaction.

The unrealized valuation loss on financial assets recognized as stockholders’ equity amounted to $277,475

thousand as of December 31, 2012.

As of December 31, 2012, fair value of publicly traded stocks of NTC accounted for under equity method

was $4,026,519 thousand.

11. PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation of property, plant and equipment consisted of the following:

December 31

2012 2011

Buildings $ 6,998,943 $ 5,745,036

Machinery and equipment 48,531,960 42,006,660

Others 2,234,234 2,030,460

$ 57,765,137 $ 49,782,156

Capitalized interest for the years ended December 31, 2012 and 2011 amounted to $49,146 thousand and

$122,224 thousand, respectively. The interest rates of interest capitalized were 2.62%-2.70% and

2.59%-2.70%, respectively.

As of December 31, 2012 and 2011, the carrying value of $20,557,599 thousand and $20,906,790 thousand

of land and 12-inch Fab manufacturing facilities were pledged to secure long-term debt. Please refer to

Note 15 to the financial statements.

12. INTANGIBLE ASSET

December 31

2012 2011

Deferred technical assets, net $ 38,430 $ 548,754

In connection with certain technical transfer agreements, the Company made technical transfer fee

payments. Such deferred assets are amortized over three to five years from the commencement of

production using the straight-line method and tested for impairment periodically.

- 59 -

13. SHORT-TERM LOANS

December 31

2012 2011

Interest Rate Amount Interest Rate Amount

Materials procurement loans 1.11%-1.70% $ 154,374 1.09%-2.73% $ 1,539,592

Bank lines of credit 1.33%-1.87% 2,562,100 - -

$ 2,716,474 $ 1,539,592

14. SHORT-TERM BILLS PAYABLE

December 31

2012

Bills Financial 2011

Corporation Interest Rate Amount Amount

Commercial paper payable China bills 0.85% $ 200,000 $ 200,000

MEGA bills 1.15% 300,000 -

Less unamortized discount on

commercial paper payable

(624)

(237)

$ 499,376 $ 199,763

15. LONG-TERM DEBT

December 31

2012 2011

Period Interest Rate Amount Amount

Chinatrust Commercial Bank syndication

agreement (II)

2008.06.27-

2013.06.27

2.68%-2.70% $ 1,283,330 $ 3,849,990

Bank of Taiwan syndication agreement (I) 2009.07.27-

2012.07.27

- - 2,775,000

Bank of Taiwan syndication agreement (II) 2010.06.18-

2015.06.18

2.97%-3.11% 4,850,000 6,000,000

Bank of Taiwan syndication agreement (III) 2011.12.23-

2016.12.23

2.49%-2.63% 2,900,000 2,500,000


agreement (III)

2012.12.27-

2015.12.27

2.65% 2,000,000

-

11,033,330 15,124,990

Less current portion of long-term debt (4,483,330) (7,158,327)

$ 6,550,000 $ 7,966,663

Chinatrust Commercial Bank Syndication Agreement (II)

a. On June 4, 2008, the Company entered into a syndication agreement, amounting to $7.7 billion, with a

group of financial institutions to procure equipment for 12-inch Fab.

b. The principal will be repaid every six months from December 27, 2010 until maturity.

c. Please refer to Note 11 for collateral on bank borrowing.

- 60 -

Bank of Taiwan Syndication Agreement (I)

a. On July 15, 2009, the Company entered into a syndication agreement, amounting to $3.7 billion, with a

group of financial institutions to fund the long-term loan payments and finance the working capital.

b. The principal will be repaid every three months from October 27, 2011 until maturity.

c. Please refer to Note 11 for collateral on bank borrowing and Note 22 for the joint guarantor.

d. The agreement was fully redeemed on July 27, 2012.

Bank of Taiwan Syndication Agreement (II)

a. On May 31, 2010, the Company entered into a syndication agreement, with a group of financial

institutions to procure equipment for 12-inch Fab and fund the long-term loan payments, credit line was

divided into part a and b, which amounted to $3.3 billion and $3.5 billion, respectively, the total line of

credit $6.8 billion.

b. Part A will be repaid every six months from December 18, 2012 until maturity; part B will be repaid

from June 18, 2012 at 20%, 20% and 60% of the principal, respectively.

c. Please refer to Note 11 for collateral on bank borrowing and Note 22 for the joint guarantor.

Bank of Taiwan Syndication Agreement (III)

a. On September 19, 2011, the Company entered into a syndication agreement, amounting to $7 billion,

with a group of financial institutions to procure equipment for 12-inch Fab.

b. The principal will be repaid every six months from June 23, 2014 until maturity.


Chinatrust Commercial Bank Syndication Agreement (III)

a. On November 19, 2012, the Company entered into a syndication agreement, amounting to $5 billion,

with a group of financial institutions to fund the long-term loan payments and finance the working

capital.



The Company is required to maintain certain financial covenants, including current ratio, debt ratio and

tangible net equity, on June 30 and December 31 during the tenors of the loans. Additionally, the

principal and interest coverage should be also maintained on December 31 during the tenors of the loans

except for the interest coverage ratio of Bank of Taiwan Syndication Agreement (II), (III) and Chinatrust

Commercial Bank Syndication Agreement (III) which should be maintained on June 30 and December 31.

The computations of financial ratios mentioned above are done based on the audited consolidated financial

statements.

- 61 -

16. PENSION PLAN

The Company has defined contribution plan based on the “Labor Pension Act.” According to the Act, the

Company has made monthly contributions equal to 6% of each employee’s monthly salaries to employee’s

individual pension accounts. Such pension costs were $89,666 thousand and $81,040 thousand for the

years ended December 31, 2012 and 2011, respectively.

The Company has a defined benefit pension plan covering all eligible employees. Based on the Labor

Standards Law of the Republic of China, the Company’s policy is to fund the plan at 2% of employees’

salaries and wages. The fund is administered by a Pension Fund Administration Committee and is

deposited in the Bank of Taiwan in the committee’s name.

Pension information on the defined benefit plan was summarized as follows:

a. The components of net pension cost:


2012 2011

Service cost $ 17,276 $ 14,485

Interest cost 18,930 17,929

Expected return on plan assets (9,687) (9,949)

Amortization, net 8,867 5,720

Net pension cost $ 35,386 $ 28,185

b. The assumptions used in determining the actuarial present value of the projected benefit obligation were

as follows:

December 31

2012 2011

Discount rate 2.25% 2.25%

Expected long-term rate of return on plan assets 2.00% 2.00%

Rate of increase in compensation 3.00% 3.00%

c. Reconciliation of funded status of the plan and accrued pension liabilities was summarized as follows:

December 31

2012 2011

Benefit obligation

Vested benefit obligation $ 334,645 $ 181,956

Accumulated benefit obligation 683,759 622,254

Projected benefit obligation 928,140 855,929

Funded status

Projected benefit obligation (928,140) (855,929)

Fair value of plan assets 490,682 492,265

Funded status (437,458) (363,664)

Unrecognized net transition obligation 8,500 9,767

Unrecognized net gain 252,788 199,589

Intangible asset - deferred pension cost (16,907) -

Accrued pension liabilities $ (193,077) $ (154,308)

- 62 -

17. STOCKHOLDERS’ EQUITY

Common Stock

December 31

2012 2011

Authorized capital

Shares (in thousand shares) 6,700,000 6,700,000

Par value (in dollars) $ 10 $ 10

Capital $ 67,000,000 $ 67,000,000

Outstanding capital



Capital $ 36,856,012 $ 36,802,302

As of December 31, 2011, the balance of the Company’s capital account amounted to $36,802,302

thousand, divided into 3,680,230 thousand shares at par $10.00 dollars per share.

Employees executed the stock options at $3.02 per share totaling 5,371 thousand shares during the year of

2012. As of December 31, 2012, the balance of the Company’s capital account amounted to $36,856,012

thousand, divided into 3,685,601 thousand shares at par $10.00 dollars per share. Walsin Lihwa is a major

stockholder of the Company and held approximately 23% ownership interest in the Company as of

December 31, 2012.

According to the Company Law of the ROC and the Company’s Articles of Incorporation, if the Company

has surplus earnings at the end of a fiscal year, after covering all losses incurred in prior years and paying

all taxes, the Company shall set aside 10% of said earnings as legal reserve. However, legal reserve need

not be made when the accumulated legal reserve equals the paid-in capital of the Company. After setting

aside or reversing special reserve pursuant to applicable laws and regulations and orders of competent

authorities from (1) the remaining amount plus undistributed retained earnings; or (2) the differences

between the undistributed retained earnings and the losses suffered by the Company at the end of a fiscal

year if the losses can be fully covered by the undistributed retained earnings, the Company shall distribute

the remaining amount (if not otherwise set aside as special reserve and reserved based on business needs) in

the following order:

a. 1% to 2% as remuneration to directors and supervisors;

b. 10% to 15% as bonus to employees;

c. The remaining amount as bonus to shareholders. Not less than 10% of the total shareholders bonus

shall be distributed in form of cash.

“Employees” referred to in item b of the proceeding paragraph, when distributing the stock bonus, include

the employees of subsidiaries of the Company meeting certain criteria. It is authorized to the Board of

Directors to determine the above “certain criteria” or the Board of Directors may authorize the Chairman to

ratify the above “certain criteria”.

The Company loss of the year ended 2011, so the stockholders’ meeting is not assigned. The relevant

information is available on MOPS. And the Company were operating loss of the year 2012, it is not

estimated bonus to employees, directors and supervisors.

- 63 -

Treasury Stock

Treasury stock transactions for the year ended December 31, 2012 were summarized as follows:

Purpose of Buyback

Treasury

Stock Held as

of January 1,

2012

Increase

During the

Year

Decrease

During the

Year

Treasury

Stock Held as

of

December 31,

2012

Common shares held by subsidiaries 7,518,364 - - 7,518,364


Purpose of Buyback

Treasury

Stock Held as

of January 1,

2011

Increase

During the

Year

Decrease

During the

Year

Treasury

Stock Held as

of

December 31,

2011

Common shares held by subsidiaries 7,518,364 - - 7,518,364

As of December 31, 2012 and 2011, Winbond’s subsidiary - Baystar Holdings Ltd. (BHL) held 7,518,364

shares of the Company’s common stock which amounted to $106,387 thousand. The purpose to hold the

share, in order to maintain stockholder’s equity. The shares held by BHL were treated as treasury stocks.

The Company’s stock held by subsidiaries is treated as treasury stock, and the holders are entitled to the

rights of stockholders, except for the right to participate in the Company’s share issuance for cash and vote

in stockholders’ meeting.

18. EMPLOYEE STOCK OPTION

In 2008 and 2009, the Company granted employee stock warrants in the quantity of 45,764 thousand and

1,585 thousand units, respectively. Each individual employee stock warrant is granted the right to

purchase the Company’s new issued one common share. The warrants were granted to qualified

employees of the Company and its subsidiaries. The warrants granted are valid for 5 years and exercisable

at certain percentages after the second anniversary year from the grant date. The warrants were granted at

an exercise price equal to the closing price of the Company’s common shares listed on the Taiwan Stock

Exchange on the grant date. For any subsequent changes in the Company’s paid-in capital, the exercise

price and the number of options are adjusted accordingly.

- 64 -

Employee stock warrants were summarized as follows:


2012 2011

Employee Stock Warrants

Number of

Options (In

Thousands)

Weighted

Average

Exercise

Price

(NT$)

Number of

Options (In

Thousands)

Weighted

Average

Exercise

Price

(NT$)

Outstanding balance, beginning of year 15,516 $ 3.20 27,459 $ 3.12

Warrants granted - - - -

Warrants exercised (5,371) 3.02 (10,880) 3.02

Warrants cancelled - - - -

Warrants expired (371) 3.49 (1,063) 3.05

Outstanding balance, end of year 9,774 3.28 15,516 3.20

Warrants exercisable, end of year 9,751 3.28 14,596 3.11

Information about outstanding warrants was as follows:

December 31

2012 2011

Range of Exercise

Price (NT$)

Weighted Average

Remaining

Contractual Life

(Years)

Range of Exercise

Price (NT$)

Weighted Average

Remaining

Contractual Life

(Years)

$3.02-$6.46 0.9 $3.02-$6.46 1.87

The Company used the fair value method to evaluate the option using Black-Scholes model, the

assumptions and proforma result were as follows:

Grant-date share price (NT$) $3.02-$6.46

Exercise price (NT$) $3.02-$6.46

Expected volatility 52.03%-74.48%

Expected duration (years) 3.75

Expected dividend yield 0%

Risk-free interest rate 0.94%-1.95%

Compensation costs recognized under the fair value method were $141 thousand and $4,472 thousand for

the years ended December 31, 2012 and 2011, respectively.

- 65 -

19. PERSONNEL EXPENSE, DEPRECIATION, AND AMORTIZATION

Year Ended December 31, 2012

Classified as

Cost of Sales

Classified as

Operation

Expenses

Classified as

Non-operation

Expenses and

Losses Total

Personnel expense

Salary $ 1,233,322 $ 799,780 $ - $ 2,033,102

Insurance 95,920 52,128 - 148,048

Pension 78,486 46,566 - 125,052

Others 6,850 3,698 - 10,548

$ 1,414,578 $ 902,172 $ - $ 2,316,750

Depreciation $ 8,372,380 $ 116,694 $ - $ 8,489,074

Amortization $ - $ 510,324 $ 18,717 $ 529,041


Classified as

Cost of Sales

Classified as

Operation

Expenses

Classified as

Non-operation

Expenses and

Losses Total

Personnel expense

Salary $ 1,174,666 $ 713,232 $ - $ 1,887,898

Insurance 88,412 45,174 - 133,586

Pension 80,185 39,226 - 119,411

Others 6,595 3,333 - 9,928

$ 1,349,858 $ 800,965 $ - $ 2,150,823

Depreciation $ 9,579,362 $ 100,737 $ - $ 9,680,099

Amortization $ - $ 510,324 $ 13,110 $ 523,434

20. INCOME TAX

Components of income tax expense (credit) were summarized as follows:


2012 2011

Current income tax credit $ (377,000) $ (165,000)

Deferred income tax assets and valuation allowance adjustment 377,000 165,000

Income tax expense $ - $ -

- 66 -

Components of deferred income tax assets were as follows:

December 31

2012 2011

Deferred income tax assets

Net operating loss carryforwards $ 4,387,000 $ 3,994,000

Investment tax credits 648,000 2,119,000

Allowance for inventory devaluation losses 148,000 167,000

Allowance for doubtful accounts 7,000 42,000

Unrealized reserve for product guarantee 18,000 17,000

Unrealized exchange loss - 1,000

Unrealized investment loss 6,000 6,000

Deferred income tax assets 5,214,000 6,346,000

Less valuation allowance (1,464,000) (2,604,000)

3,750,000 3,742,000

Deferred income tax liabilities

Unrealized gain on financial instruments (4,000) -

Unrealized exchange gains (4,000) -

Deferred income tax assets, net 3,742,000 3,742,000

Deferred income tax assets, current (under other current assets) (147,000) (210,000)

Deferred income tax assets, noncurrent (under other assets) $ 3,595,000 $ 3,532,000

A reconciliation of income tax credit based on loss before income tax at statutory rate of 17% and income

tax loss was as follows:


2012 2011

Income tax credit at statutory rate $ (315,000) $ (143,000)

Decrease in tax resulting from

Unrealized investment income (71,000) (23,000)

Tax-exempt income on disposal of domestic investments - (1,000)

Others 9,000 2,000

Current income tax credit (377,000) (165,000)

Provision for deferred tax assets (60,000) 90,000

Income tax loss $ (437,000) $ (75,000)

The Company’s investment tax credits and operating loss carryforwards as of December 31, 2012 were as

follows:

Expiry Year

Investment Tax

Credits

Operating Loss

Carryforwards

2013 $ 409,000 $ 286,000

2014-2022 239,000 4,101,000

$ 648,000 $ 4,387,000

- 67 -

The information of the integrated income tax was as follows:

December 31

2012 2011

Balance of imputation credit account $ 252,935 $ 217,239

Undistributed earnings for the years of 1997 and before $ - $ -

Undistributed deficit for the years of 1998 and thereafter $ (4,335,976) $ (2,483,440)

The tax returns through 2010, except 2009, have been assessed by the tax authorities.

As of December 31, 2012, the Company has tax refund receivable under other assets - others amounted to

$7,136 thousand which occurred in 2012 and years prior to 2011.

21. LOSS PER SHARE

Calculation of loss per share was summarized as follows:


Amounts (Numerator) Shares Loss Per Share (NT$)

Before After (Denominator) Before After

Tax Tax (In Thousands) Tax Tax

Basic loss per share

Net loss attributed to common

shareholders $ (1,852,536) $ (1,852,536) 3,676,698 $ (0.50)

$ (0.50)







shareholders $ (843,291) $ (843,291) 3,666,391 $ (0.23) $ (0.23)

Proforma amount, assuming common shares were not treated as treasury stock:







shareholders $ (1,852,536) $ (1,852,536) 3,684,216 $ (0.50)

$ (0.50)







shareholders $ (843,291) $ (843,291) 3,673,910 $ (0.23)

$ (0.23)

- 68 -

22. RELATED PARTY TRANSACTIONS

The names and relationships of related parties are as follows:

Related Party Relationship with the Company

Walsin Lihwa Corporation (“Walsin”) Walsin’s chairman is one of the immediate

family members of the Company’s chairman

and Walsin holds a 23% ownership in the

Company as of December 31, 2012

Winbond Electronics (H.K.) Limited (“WEHK”) The Company holds a 100% ownership interest

directly

Mobile Magic Design Corporation (“MMDC”) The Company holds a 100% ownership interest

directly

Win Investment Corporation (“Win”) (Note) The Company holds a 100% ownership interest

directly

Winbond Electronics (Suzhou) Limited (“WECN”) The Company holds a 100% ownership interest

indirectly

Winbond Electronics Corporation America (“WECA”) The Company holds a 100% ownership interest

indirectly

Winbond Electronics Corporation Japan (“WECJ”) The Company holds a 100% ownership interest

indirectly

Nuvoton Technology Corporation (“NTC”) The Company holds a 61% ownership interest

directly

Walton Advanced Engineering Inc. (“Walton”) Walton’s chairman is one of the immediate

family members of the Company’s chairman.

The Company is a director of Walton.

Global Brands Manufacture Ltd. (“GBM”) GBM’s chairman is one of the immediate family

members of the Company’s chairman

Global Brands Manufacture (Dongguan) Ltd. (“GBM

(Dongguan)”)

Related party in substance

Walton Advanced Engineering (Suzhou) Inc. (“Walton

(Suzhou)”)


Note: As of December 31, 2012, Win was merged into Chin Xin Investment.

Major transactions with related parties were summarized below:

Sales


2012 2011

WEHK $ 3,964,101 $ 5,008,443

WECJ 2,284,033 2,058,803

WECN 217,583 -

WECA 177,813 146,446

GBM (Dongguan) 153,402 38,030

NTC 79,893 38,309

GBM - 88,117

Others 482 12

$ 6,877,307 $ 7,378,160

- 69 -

Manufacturing Expenses


2012 2011

Walton $ 1,559,452 $ 1,395,376

Walton (Suzhou) 582,901 571,541

MMDC 2,563 20,081

$ 2,144,916 $ 1,986,998

Selling Expenses


2012 2011

WECA $ 112,054 $ 68,224

WECJ 7,801 9,823

$ 119,855 $ 78,047

General and Administrative Expenses


2012 2011

Walsin $ 7,891 $ 8,062

Research and Development Expenses


2012 2011

WECA $ 260,166 $ 176,860

MMDC 119,917 108,968

WECJ 67,785 55,163

NTC - 500

$ 447,868 $ 341,491

Service Revenue (Recorded as “Non-operating Income and Gains - Others”)


2012 2011

MMDC $ 396 $ 396

- 70 -

Accounts Receivable

December 31

2012 2011

WEHK $ 413,799 $ 558,870

WECJ 87,568 121,316

WECN 44,975 -

GBM (Dongguan) 14,915 14,073

Others 17,311 7,512

$ 578,568 $ 701,771

Other Financial Assets, Current and Other Current Assets

December 31

2012 2011

NTC $ 3,026 $ 2,202

MMDC 99 99

Walsin 20 1,438

$ 3,145 $ 3,739

Refundable Deposits

December 31

2012 2011

NTC $ 440 $ 440

Walsin 203 203

$ 643 $ 643

Notes and Accounts Payable

December 31

2012 2011

Walton $ 394,197 $ 547,613

Walton (Suzhou) 137,081 165,665

Walsin 2,654 2,113

$ 533,932 $ 715,391

- 71 -

Other Payables

December 31

2012 2011

WECA $ 135,610 $ 165,469

MMDC 52,095 58,040

WECJ 12,040 12,662

Walton 6,199 9,326

Walsin 1,076 2,496

Walton (Suzhou) 288 33

NTC - 2,202

$ 207,308 $ 250,228

The related party transactions were conducted under normal terms.

Security Transactions

The Company’s sale of investment to related parties in 2012 was summarized as follows:

Related Party

Securities Name

Shares

(Thousands) Selling Price

Disposal

Gain

Win YH Bio Explore & Application

Co., Ltd.

6,955 $ 36,472 $ 952

Win Vita Genomic, Inc. 1,115 10,065 (96)

$ 46,537 $ 856

The above selling prices were determined in accordance with the investee’s net value. The Company

deferred these gains on disposal of investment to the subsidiary.

The Company’s purchase of investment from related parties in 2012 was summarized as follows:

Related Party

Securities Name

Shares

(Thousands)

Purchase

Cost

Walsin Chin Xin Investment 40,000 $ 403,856

Win Harbinger Venture III Capital Corp. 4,080 43,228

Win Dynacard Co., Ltd. 2,495 12,138

$ 459,222

The above purchase prices were determined in accordance with the investee’s net value. The gain or loss

of the transactions have been fully deferred.

Financing

The board of directors of WECA consented to lend up US$14,000 thousand to the Company. As of

December 31, 2012 and 2011, no amount was drawn.

- 72 -

Property Transactions

The Company’s sale of property to related parties was summarized as follows:


Related Party Sales Items Selling Price

Carrying

Value

Disposal

Gain

NTC Machinery and equipment $ 235 $ 46 $ 189

Guarantee

a. Please refer to Note 24.

b. As of December 31, 2012, the chairman of the Company is a joint guarantor of the long-term debt -

Bank of Taiwan syndication agreement (II). Please refer to Note 15.

Compensation Information of Directors, Supervisors, and Management Personnel


2012 2011

Salary $ 44,000 $ 50,579

Bonus and special compensation 16,718 18,004

$ 60,718 $ 68,583

Total compensation expense for the years ended December 31, 2012 and 2011 included salaries, duty

allowance, retirement pension and income from exercise of employee stock options.

23. PLEDGED AND COLLATERALIZED ASSET

Please refer to Note 4, Note 11 and Note 15.

24. COMMITMENTS AND CONTINGENCIES

Letters of Credit

Amounts available under unused letters of credit as of December 31, 2012 were approximately US$2,035

thousand and JPY3,900 thousand.

- 73 -

25. DISCLOSURES FOR FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

Carrying value and fair value of financial instruments were summarized as follows:

December 31

2012 2011

Carrying Value Fair Value Carrying Value Fair Value

Nonderivative financial instruments

Assets

Available-for-sale financial assets

(current and noncurrent)

$ 768,621 $ 768,621 $ 772,342 $ 772,342

Liabilities

Long-term debt (including current

portion)

11,033,330 11,033,330 15,124,990 15,124,990

Derivative financial instruments

Financial assets at fair value through

profit or loss, current

Forward exchange contracts 23,551 23,551 1,703 1,703

Methods and assumptions used in determining fair value of financial instruments were summarized as

follows:

a. The fair value of cash and cash equivalents, notes and accounts receivable, other financial assets,

refundable deposits, short-term loans, notes and accounts payable, and other payables, approximates

their carrying value due to the short-term maturities of these financial instruments.

b. The fair value of financial instruments at fair value through profit or loss and available-for-sale

financial assets is quoted by market price. The fair value of forward exchange contracts is measured,

according to its specific contract’s settlement rate, by the middle exchange rate and the discount rate

quoted by Reuters.

c. Available-for-sale financial assets which are private - placement shares are based on their quoted prices

in an active market but adjusted for effects of any transferred restriction.

d. The Company’s financial assets carried at cost do not have a quoted market price in an active market,

and the fair value cannot be reliably measured.

e. The fair values of long-term debt are estimated by discounted cash flow analysis, based on the

Company’s current rates for long-term borrowings with similar types. As of December 31, 2012 and

2011, the discount rates used in determining the fair values were 2.86% and 3.24%, respectively.

- 74 -

The fair value of financial instruments that used the quoted market price in active market or other method

of valuation is summarized as follows:

December 31, 2012

Quoted Market

Price in Active

Market

Other Method

of Valuation Total

Assets

Financial assets at fair value through profit or

loss, current $ - $ 23,551 $ 23,551

Available-for-sale financial assets, current and

noncurrent 704,091 64,530 768,621

December 31, 2011

Quoted Market

Price in Active

Market

Other Method

of Valuation Total

Assets


loss, current $ - $ 1,703 $ 1,703


noncurrent 707,542 64,800 772,342

Valuation gains (losses) arising from changes in fair value of financial instruments determined using

valuation techniques were $21,848 thousand and $(54,403) thousand for the years ended December 31,

2012 and 2011, respectively.

As of December 31, 2012, financial assets and liabilities exposure to cash flow risk that resulted from

interest rate changes amounted to $9,192 thousand and $11,200,934 thousand, respectively. Financial

assets and liabilities exposure to fair value risk that resulted from interest rate changes amounted to

$3,407,945 thousand and $3,048,246 thousand, respectively, as of December 31, 2012.





Adjustment of stockholders’ equity due to the fair value changes of available-for-sale financial assets

amounted to $1,130,942 thousand and $1,040,306 thousand as of December 31, 2012 and 2011,

respectively.

Financial Risk Information

a. Market risk

All the derivative financial instruments the Company entered into are forward exchange contracts in

order to hedge changes in fair value of foreign-currency assets and liabilities. The fair value of

forward exchange contracts will fluctuate because of changes in foreign exchange rates.

b. Credit risk

The Company is exposed to the credit risk that counter-parties or third-parties may breach the contracts.

The risk results from the concentrations of credit risk, elements, contract price, and accounts receivable.

The Company requested its major transaction parties to provide collaterals or other rights to reduce such

risk.

- 75 -

c. Liquidity risk

The Company has sufficient operating capital to meet the cash demand for the contracts. Thus, the

fund-raising and cash flow risks are not material.

d. Cash flow risk on change of interest rate

The Company’s long-term debt is with floating interest rate. Effective rate and future cash flow of the

Company will fluctuate as a result of changes in market interest rate. If the market interest rate

increases by 1%, the cash outflow will increase by $112,009 thousand per year.

26. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND

LIABILITIES

Information of financial assets and liabilities, which were denominated in foreign currencies, with

significant influence on the Company was as follows:

December 31

2012 2011

Foreign

Currencies

(Thousands)

Exchange

Rate

New Taiwan

Dollars

(Thousands)

Foreign

Currencies

(Thousands)

Exchange

Rate

New Taiwan

Dollars

(Thousands)

Financial assets

Monetary items

USD $ 171,780 29.04 $ 4,988,486 $ 139,235 30.275 $ 4,215,347

EUR 951 38.49 36,586 2,049 39.18 80,298

JPY 316,678 0.3364 106,531 2,264,748 0.3906 884,611

RMB 46,856 4.6202 216,483 - - -

Investment accounted

for by the equity

method

USD 61,537 29.04 1,787,046 65,042 30.275 1,969,134

Financial liabilities

Monetary items

USD 72,005 29.04 2,091,023 107,175 30.275 3,244,717

EUR 1,264 38.49 48,656 2,197 39.18 86,063

JPY 747,460 0.3364 251,445 2,336,787 0.3906 912,749

27. OPERATING SEGMENT FINANCIAL INFORMATION

The Company has provided the operating segments disclosure in the consolidated financial statements.

28. PRE-DISCLOSURE FOR ADOPTION OF INTERNATIONAL FINANCIAL REPORTING

STANDARDS

The Company has disclosure information for the adoption of International Financial Reporting Standards

(IFRSs) in the consolidated financial statements.

Winbond Electronics Corporation and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2012 and 2011 and Independent Auditors’ Report

- 76 -

4. 2012 consolidated financial statements INDEPENDENT AUDITORS’ REPORT The Board of Directors and Stockholders Winbond Electronics Corporation We have audited the accompanying consolidated balance sheets of Winbond Electronics Corporation and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the years then ended. These consolidated 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. Certain long-term investments were accounted for under the equity method based on financial statements as of and for the year ended December 31, 2011 of the investees, which were audited by other auditors. Our opinion, insofar as it relates to such investments, is based solely on the reports of other auditors. The investments in such investees amounted to zero as of December 31, 2011; investment loss amounted to NT$1,341 thousand for the year then ended. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2012 and 2011, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, and accounting principles generally accepted in the Republic of China. February 6, 2013

Notice to Readers The accompanying consolidated 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 consolidated financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial statements shall prevail. Also, as stated in Note 2 to the consolidated financial statements, the additional footnote disclosures that are not required under generally accepted accounting principles were not translated into English.

- 77 -

WINBOND ELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2012 AND 2011


2012 2011 2012 2011

ASSETS Amount % Amount % LIABILITIES AND STOCKHOLDERS’ EQUITY Amount % Amount %

CURRENT ASSETS CURRENT LIABILITIES

Cash and cash equivalents (Notes 2 and 4) $ 5,814,928 10 $ 6,002,597 10 Short-term loans (Note 13) $ 2,716,474 5 $ 1,681,092 3

Financial assets at fair value through profit or loss, current Short-term bills payable (Note 14) 499,376 1 199,763 -

(Notes 2 and 5) 28,721 - 3,676 - Notes payable 812,253 1 849,713 1

Available-for-sale financial assets, current (Notes 2 and 8) 704,091 1 902,713 1 Accounts payable 3,421,866 6 3,211,805 5

Notes receivable, net (Notes 2 and 6) 327 - 534 - Payable on equipment 173,632 - 650,233 1

Accounts receivable, net (Notes 2 and 6) 4,608,920 8 4,113,894 7 Accrued expenses and other payables 2,187,998 4 2,151,012 4

Accounts receivable from related parties, net (Notes 6 and 22) 46,073 - 50,639 - Current portion of long-term liabilities (Note 15) 4,483,330 8 7,158,327 12

Other financial assets, current 214,172 - 139,144 - Other current liabilities 78,085 - 68,865 -

Inventories (Notes 2 and 7) 8,108,677 15 7,272,562 12

Deferred income tax assets, current (Notes 2 and 20) 222,356 1 281,638 - Total current liabilities 14,373,014 25 15,970,810 26

Other current assets 532,212 1 420,635 1

LONG-TERM LIABILITIES

Total current assets 20,280,477 36 19,188,032 31 Long-term debt (Note 15) 6,550,000 12 7,966,663 13

FUND AND INVESTMENTS OTHER LIABILITIES

Available-for-sale financial assets, noncurrent (Notes 2 and 8) 64,530 - 353,997 1 Accrued pension liabilities (Notes 2 and 16) 417,477 1 368,676 1

Financial assets carried at cost, noncurrent (Notes 2 and 9) 604,185 1 1,245,403 2 Reserve for product guarantee (Note 2) 119,902 - 94,271 -

Long-term equity investments at equity method (Notes 2 and 10) 1,727,128 3 65,092 - Other liabilities - others 100,778 - 99,146 -

Total fund and investments 2,395,843 4 1,664,492 3 Total other liabilities 638,157 1 562,093 1

PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 11) Total liabilities 21,561,171 38 24,499,566 40

Cost

Land 870,460 2 873,493 1 EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT

Buildings 20,067,447 36 19,963,440 33 Common stock (Note 17) 36,856,012 66 36,802,302 60

Machinery and equipment 78,216,631 139 76,529,259 126 Capital surplus

Other equipment 2,888,473 5 2,822,391 5 Treasury stock transaction 1,971,862 4 1,971,862 3

Total cost 102,043,011 182 100,188,583 165 Adjustment on long-term equity investments under equity method 27,868 - 23,913 -

Accumulated depreciation (73,119,244) (130) (65,165,653) (107) Stock option (Notes 2 and 18) 9,285 - 13,960 -

Construction in progress and prepayments on purchase of equipment 97,347 - 126,609 - Others 190,111 - 222,784 1

Accumulated deficit (4,335,976) (8) (2,483,440) (4)

Property, plant and equipment, net 29,021,114 52 35,149,539 58 Other equity

Cumulative translation adjustments (Note 2) 268,081 - 359,900 -

INTANGIBLE ASSETS (Notes 2 and 12) 183,310 - 639,191 1 Unrealized loss on financial instruments (Note 2) (1,408,417) (2) (1,449,394) (2)

Treasury stock (Notes 2 and 17) (106,387) - (106,387) -

OTHER ASSETS

Refundable deposits 148,981 - 160,149 - Equity attributable to stockholders of the parent 33,472,439 60 35,355,500 58

Deferred income tax assets, noncurrent (Notes 2 and 20) 3,996,998 7 3,992,639 7

Others 192,414 1 130,607 - MINORITY INTEREST 1,185,527 2 1,069,583 2

Total other assets 4,338,393 8 4,283,395 7 Total stockholders’ equity 34,657,966 62 36,425,083 60

TOTAL $ 56,219,137 100 $ 60,924,649 100 TOTAL $ 56,219,137 100 $ 60,924,649 100

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

- 78 -


CONSOLIDATED STATEMENTS OF INCOME



2012 2011

Amount % Amount %

NET SALES $ 32,965,283 100 $ 34,696,850 100

COST OF SALES (Note 7) 27,804,925 84 28,640,415 83

(UNREALIZED) REALIZED INTERCOMPANY

PROFIT (74) - 266 -

GROSS PROFIT 5,160,284 16 6,056,701 17

OPERATING EXPENSES

Selling expenses 1,001,627 3 968,768 3

General and administrative expenses 1,126,746 4 954,961 3

Research and development expenses 4,299,021 13 4,306,307 12

Total operating expenses 6,427,394 20 6,230,036 18

LOSS FROM OPERATIONS (1,267,110) (4) (173,335) (1)

NON-OPERATING INCOME AND GAINS

Interest income 43,825 - 39,942 -

Investment income recognized under equity method

(Note 10) 14,458 - 11,963 -

Investment income 47,133 - 84,119 -

Gain on disposal of property, plant and equipment

(Note 2) 21,184 - 7,690 -

Gain on disposal of investments - - 69,880 -

Foreign exchange gain (Note 2) - - 45,765 -

Reversal of allowance for doubtful accounts 67,586 - 8,872 -

Gain on valuation of financial instruments (Note 5) 103,647 1 - -

Others 36,793 - 88,583 1

Total non-operating income and gains 334,626 1 356,814 1

NON-OPERATING EXPENSES AND LOSSES

Interest expense 364,983 1 430,307 1

Other investment loss (Note 9) 25,030 - 86,902 -

Loss on disposal of property, plant and equipment

(Note 2) 3,629 - 2,960 -

Loss on disposal of investment 30,733 - - -

Foreign exchange loss (Note 2) 55,538 - - -

Loss on valuation of financial instruments (Note 5) - - 154,790 1

Others 27,674 - 35,125 -

Total non-operating expenses and losses 507,587 1 710,084 2

(Continued)

- 79 -


CONSOLIDATED STATEMENTS OF INCOME



2012 2011

Amount % Amount %

LOSS BEFORE INCOME TAX $ (1,440,071) (4) $ (526,605) (2)

INCOME TAX EXPENSE (Notes 2 and 20) (175,037) (1) (152,363) -

NET LOSS $ (1,615,108) (5) $ (678,968) (2)

ATTRIBUTED TO

Stockholders of the parent $ (1,852,536) (6) $ (843,291) (2)

Minority interest 237,428 1 164,323 -

$ (1,615,108) (5) $ (678,968) (2)

2012 2011

Before

Income Tax

and

Minority

Interest

After

Income Tax

and

Attributed to

Stockholders

of the Parent

Before

Income Tax

and

Minority

Interest

After

Income Tax

and

Attributed to

Stockholders

of the Parent

LOSS PER SHARE (Notes 2 and 21)

Basic loss per share $ (0.39) $ (0.50) $ (0.14) $ (0.23)

Proforma amount, assuming common shares held by subsidiaries were not treated as treasury stock:

2012 2011

Before

Income Tax

and Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent

Before

Income Tax

and Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent

NET LOSS $ (1,440,071) $ (1,852,536) $ (526,605) $ (843,291)

BASIC LOSS PER SHARE $ (0.39) $ (0.50) $ (0.14) $ (0.23)

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

- 80 -


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY



Capital Surplus Other Equity

Adjustments on

Long-term

Equity

Investments Cumulative Unrealized Loss

Treasury Stock under Equity Accumulated Translation on Financial Minority

Common Stock Transaction Method Stock Option Others Deficit Adjustments Instruments Treasury Stock Interests Total

BALANCE, JANUARY 1, 2011 $ 36,693,502 $ 1,971,862 $ 23,912 $ 20,104 $ 288,066 $ (1,640,149) $ 242,163 $ (51,936) $ (106,387) $ 1,125,537 $ 38,566,674

Net loss for 2011 - - - - - (843,291) - - - 164,323 (678,968)

Changes in translation adjustments - - - - - - 117,737 - - - 117,737

Changes in unrealized loss on financial instruments - - - - - - - (1,397,458) - - (1,397,458)

Capital surplus from investee under equity method - - 1 - - - - - - - 1

Issuance of stock from exercising employee stock options (Note 17) 108,800 - - (10,616) (65,282) - - - - - 32,902

Compensation cost of employee stock options (Note 18) - - - 4,472 - - - - - - 4,472

Changes in minority interests - - - - - - - - - (220,277) (220,277)

BALANCE, DECEMBER 31, 2011 36,802,302 1,971,862 23,913 13,960 222,784 (2,483,440) 359,900 (1,449,394) (106,387) 1,069,583 36,425,083

Net loss for 2012 - - - - - (1,852,536) - - - 237,428 (1,615,108)

Changes in translation adjustments - - - - - - (92,184) - - - (92,184)

Changes in unrealized gain on financial instruments - - - - - - - 110,462 - - 110,462

Capital surplus from investee under equity method - - 76 - - - - - - - 76

Write-off stockholders' equity due to subsidiary merged (Note 10) - - 3,879 - - - 365 (69,485) - - (65,241)

Issuance of stock from exercising employee stock options (Note 17) 53,710 - - (4,816) (32,673) - - - - - 16,221

Compensation cost of employee stock options (Note 18) - - - 141 - - - - - - 141

Changes in minority interests - - - - - - - - - (121,484) (121,484)

BALANCE, DECEMBER 31, 2012 $ 36,856,012 $ 1,971,862 $ 27,868 $ 9,285 $ 190,111 $ (4,335,976) $ 268,081 $ (1,408,417) $ (106,387) $ 1,185,527 $ 34,657,966

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

- 81 -


CONSOLIDATED STATEMENTS OF CASH FLOWS



2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss $ (1,615,108) $ (678,968)

Adjustments to reconcile net loss to net cash provided by operating

activities

Depreciation 8,651,002 9,863,064

Amortization 573,864 571,933

Reversal of allowance for doubtful accounts (67,586) (8,872)

Loss on decline in market value and obsolescence and abandonment

of inventories 158 496,359

Loss (gain) on disposal of investments 30,733 (69,880)

Investment income recognized under equity method (14,458) (11,963)

Cash dividends from equity method investees 6,566 -

Impairment losses on financial assets carried at cost 25,030 86,902

Net gain on disposal of property, plant and equipment (17,555) (4,730)

Compensation cost of employee stock options 198 4,808

Net changes in operating assets and liabilities

Financial assets at fair value through profit or loss (25,044) 60,450

Notes receivable 207 1,700

Accounts receivable (513,941) 299,968

Accounts receivable from related parties 4,566 (11,594)

Other financial assets, current (75,111) (31,605)

Inventories (836,273) (1,394,921)

Other current assets (111,577) 203,880

Deferred income tax assets 54,923 42,962

Other assets 7,224 (13,769)

Notes payable (37,460) (287,726)

Accounts payable 210,061 707,387

Accrued expenses and other payables 28,423 (268,280)

Other current liabilities 9,220 (51,856)

Other liabilities 66,300 74,634

Net cash provided by operating activities 6,354,362 9,579,883

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property, plant and equipment (3,126,853) (6,102,573)

Acquisition of investments under equity method (403,856) -

Acquisition of available-for-sale financial assets (86,915) (748,232)

Acquisition of financial assets carried at cost (1,158) -

Proceeds from disposal of investments accounted for by equity method - 47,527

Proceeds from disposal of available-for-sale financial assets 315,037 135,810

Proceeds from disposal of financial assets carried at cost 16,552 2,078

Proceeds from capital return of financial assets carried at cost 8,617 48,653

Proceeds from disposal of property, plant and equipment 48,145 12,687

Acquisition of intangible assets (89,382) (81,809)

Net cash used in investing activities (3,319,813) (6,685,859)

(Continued)

- 82 -





2012 2011

CASH FLOWS FROM FINANCING ACTIVITIES

Increase in short-term loans $ 1,035,383 $ 65,277

Increase in short-term bills payable 299,613 199,763

Proceeds from long-term debt 3,200,000 5,000,000

Repayment of long-term debt (7,291,660) (8,491,670)

Decrease in minority interest (166,417) (174,035)

Proceeds from exercise of employee stock options 16,220 32,902

Net cash used in financing activities (2,906,861) (3,367,763)

EFFECT OF EXCHANGE RATE CHANGES (57,269) 72,245

EFFECT OF DISPOSAL SUBSIDIARIES (258,088) -

NET DECREASE IN CASH AND CASH EQUIVALENTS (187,669) (401,494)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,002,597 6,404,091

CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,814,928 $ 6,002,597

SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid $ 422,819 $ 553,428

Income tax paid $ 102,782 $ 104,058

NONCASH INVESTING AND FINANCING ACTIVITIES

Current portion of long-term liabilities $ 4,483,330 $ 7,158,327

Change in cumulative translation adjustments $ (92,184) $ 117,737

Unrealized gain (loss) on financial instruments $ 110,462 $ (1,397,458)

Write-off stockholders' equity due to subsidiary merged $ (65,241) $ -

Capital surplus from investee under equity method $ 76 $ 1

Acquisition of available-for-sale financial assets offset by accounts

receivable $ 86,501 $ -

CASH PAYMENT FOR ACQUISITIONS OF PROPERTY, PLANT

AND EQUIPMENT

Net increase in acquisition of property, plant and equipment $ 2,650,252 $ 5,658,231

Add payable for property, plant and equipment, beginning of year 650,233 1,094,575

Less payable for property, plant and equipment, end of year (173,632) (650,233)

Cash payment for acquisitions of property, plant and equipment $ 3,126,853 $ 6,102,573

(Continued)

- 83 -





As of December 31, 2012, fair values of assets and liabilities of Win Investment Corporation (WIN), a

subsidiary was merged by Chin Xin Investment are summarized as follows:

Cash and cash equivalents $ 258,088

Available-for-sale financial assets 433,932

Financial assets carried at cost 620,154

Other current assets and other assets 51,409

Other current liabilities (33)

Net assets of WIN on merger date $ 1,363,550

Net cash used in disposal subsidiaries WIN $ 258,088

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

5. Financial difficulties and corporate events encountered by the Company and affiliates in the

past year and up to the date of report that have material impact on the financial status of the

company: None

- 84 -


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

1. ORGANIZATION AND OPERATIONS

Winbond Electronics Corporation (“Winbond”) was incorporated in the Republic of China (the “ROC”) on

September 29, 1987 and is engaged in the design, development, manufacture and marketing of Very Large

Scale Integration (“VLSI”) integrated circuits (“ICs”) used in a variety of microelectronic applications.

An initial public offering of Winbond’s common stocks was made on October 18, 1995, and the stocks are

traded on the Taiwan Stock Exchange.

There are 3,625 and 3,621 employees in Winbond and its subsidiaries (the “Company”) as of December 31,


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in conformity with the Guidelines Governing the

Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the

ROC. For the convenience of readers, the accompanying consolidated financial statements have been

translated into English from the original Chinese version prepared and used in the Republic of China. If

there is any conflict between the English version and the original Chinese version or any difference in the

interpretation of the two versions, the Chinese-language financial statements shall prevail. However, the

accompanying consolidated financial statements do not include English translation of the additional

footnote disclosures that are not required under generally accepted accounting principles but are required by

the Securities and Futures Bureau for their oversight purposes. Significant accounting policies are

summarized as follows:

Principles of Consolidation

Winbond’s investees in which ownership interest is over 50% or with control ability are included in the

consolidated financial statements. All significant intercompany balances and transactions have been

eliminated upon consolidation. The consolidated entities (collectively, the “Company”) are summarized

as follows:

Name Capital

(In Thousands) Basis for Consolidation

Winbond Int’l Corporation (“WIC”) US$ 104,240 Winbond holds 100% ownership interest

Winbond Electronics Corp. America

(“WECA”)

US$ 58,917 WIC holds 100% ownership interest


(“Landmark”)

US$ 10,313 Winbond holds 100% ownership interest

Winbond Electronics Corp. Japan

(“WECJ”)

JPY 148,500 Landmark holds 100% ownership interest

Peaceful River Corp. (“PRC”) US$ 10,720 Landmark holds 100% ownership interest

(Note 1)

Winbond Electronics (HK) Limited

(“WEHK”)

HK$ 500 Winbond holds 100% ownership interest

Pine Capital Investment Limited (“PCI”) HK$ 10,920 Winbond holds 100% ownership interest

(Continued)

- 85 -

Name Capital

(In Thousands) Basis for Consolidation

Winbond Electronics (Suzhou) Limited

(“WECN)

RMB 8,639 PCI holds 100% ownership interest


(“MMDC”)

NT$ 50,000 Winbond holds 100% ownership interest

Nuvoton Technology Corporation

(“NTC”)

NT$ 2,075,544 Winbond holds 61% ownership interest

Marketplace Management Ltd.

(“MML”)

US$ 8,328 NTC holds 100% ownership interest

Goldbond LLC (“GLLC”) US$ 44,338 MML holds 100% ownership interest

Nuvoton Electronics Technology

(Shanghai) Limited (“NTSH”)

RMB 16,555 GLLC holds 100% ownership interest

Winbond Electronics (Nanjing) Ltd.

(“WENJ”)

RMB 4,046 GLLC holds 100% ownership interest

Pigeon Creek Holding Co., Ltd.

(“PCH”)


Nuvoton Technology Corp. America

(“NTCA”)

US$ 6,050 PCH holds 100% ownership interest

Nuvoton Investment Holding Ltd.

(“NIH”)


Nuvoton Technology Israel Ltd.

(“NTIL”)

ILS 1 NIH holds 100% ownership interest

Nuvoton Electronics Technology (H.K.)

Limited (“NTHK”)

HK$ 107,400 NTC holds 100% ownership interest

Nuvoton Electronics Technology

(“Shenzhen”) Limited (“NTSZ”)

RMB 46,434 NTHK holds 100% ownership interest

Win Investment Corporation (“WIN”) NT$ - (Note 2)

Newfound Asian Corp. (“NAC”) US$ 6,555 Winbond holds 100% ownership interest

Baystar Holdings Ltd. (“BHL”) US$ 22,590 NAC holds 100% ownership interest

(Concluded)

Note 1: In September 2012, Landmark acquired 100% ownership interest of PRC from WIN.

Note 2: WIN was merged by Chin Xin Investment on December 31, 2012.

Foreign Currencies

Non-derivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange

in effect when the transactions occur. At the balance sheet date, foreign-currency monetary assets and

liabilities are revalued using prevailing exchange rates and the exchange differences are recognized in

current income or loss.

At the balance sheet date, foreign-currency nonmonetary assets and liabilities (e.g., equity instruments)

which are measured at fair value shall be revalued using prevailing exchange rates. The exchange

differences treated as recognized in stockholders’ equity if the changes in fair value are recognized in

stockholders’ equity; recognized in profit and loss if the changes in fair value is recognized in profit or loss.

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

rates at trade dates.

Long-term equity investments denominated in foreign currencies are restated at the balance-sheet-date

exchange rates. The related translation adjustments are reported as an adjustment of stockholders’ equity.

The aforesaid balance sheet-date-exchange rates are based on the middle prices of the major transaction

banks.

- 86 -

Accounting Estimates

In preparing consolidated financial statements in conformity with these guidelines and principles, the

Company is required to make some estimates and assumptions that could affect the amounts of allowance

for doubtful accounts, allowance for loss on inventories, property depreciation and impairment, tax, pension

liabilities and product guarantee, etc. Actual results may differ from these estimates.

Current/Noncurrent Assets and Liabilities

Current assets include cash and cash equivalents, and those assets held primarily for trading purposes or to

be realized, sold or consumed within one year from the balance sheet date. All other assets such as

property, plant and equipment and intangible assets are classified as noncurrent. Current liabilities are

obligations incurred for trading purposes or to be settled within one year from the balance sheet date. All

other liabilities are classified as noncurrent.

Cash and Cash Equivalents

Cash includes unrestricted cash on hand and cash in bank. Government bonds under repurchase

agreements and commercial paper with maturities of less than three months from the date of purchase are

classified as cash equivalents. The carrying amount approximates fair value.

Financial Instruments at Fair Value through Profit or Loss

Financial instruments at fair value through profit or loss include financial assets and financial liabilities held

for trading purpose. Upon initial recognition, they are recognized at the fair values plus transaction costs.

After initial recognition, they are measured at fair values and the changes in the fair values are recognized

as profits or losses. Cash dividends received are recorded as dividends revenue, including the dividends

received in the year of acquisition. When the financial instruments are disposed of, the difference between

carrying amount and the price received or paid is recognized as the profit or loss. All regular way

purchases or sales of financial assets, derivative financial instrument are recognized on a settlement date

basis, and others are recognized on a trade date basis.

Derivatives that are not subject to measurement under hedge accounting are classified as financial assets or

financial liabilities at fair value through profit or loss. The positive fair values of derivatives are

recognized as financial assets; negative fair values are recognized as financial liabilities.


Marketable securities are stated at the closing price at the balance sheet date.

Impairment of Accounts Receivable

The Company evaluates for indication of impairment of accounts receivable at the end of each reporting

period. When objective evidence indicates that the estimated future cash flow of accounts receivable

decreases as a result of one or more events that occurred after initial recognition of the accounts receivable,

such accounts receivable are deemed to be impaired.

Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process. Inventories are stated

at the lower of cost or net realizable value. Inventory write-downs are made on item-by-item basis. Net

realizable value is the estimated selling price of inventories less all estimated costs of completion and

necessary selling cost.

- 87 -

Available-for-sale Financial Assets

Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are

directly attributable to the acquisition of the financial assets. After initial recognition, they are measured

at fair value and the changes in fair value of available-for-sale financial assets are recorded as an adjustment

of stockholders’ equity. When the financial assets are disposed of, the related accumulated fair value

changes are taken out of stockholders’ equity and recognized in the profit and loss. All regular way

purchases or sales of available-for-sale financial assets are recorded on a trade-date basis.

Stock dividends are recorded as an increase in the number of shares and do not affect investment income or

the carrying amount of the investment.

The fair value of marketable securities are stated at the closing price at the balance sheet date.

Private-placement common shares of listed company are stated at the closing price at the balance sheet date

but adjusted for the effects of transferred restriction. Open-end mutual funds are stated at net asset values

at the balance sheet date.

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in

a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously

recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to

stockholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that

the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.

Financial Assets Carried at Cost

Equity investment for which do not have a quoted market price in an active market and whose fair value

cannot be reliably measured, such as non-publicly traded stocks, are carried at their original cost.

Accounting policies for dividends received are similar to those for available-for-sale financial assets.

An impairment loss is recognized if there is objective evidence of impairment; subsequent reversal of such

impairment loss is not allowed.

Long-term Equity Investments Accounted for Using Equity Method

Investments in corporations in which the Company’s ownership interest is over 20% or the Company

exercises significant influence on the operating and financial policy decision are accounted for by the equity

method.

When equity investments are made, the excess of the purchase cost over the fair value of net assets

representing goodwill will not be amortized, but will be tested for impairment periodically, or more

frequently, if events or changes in circumstances indicate that such carrying value may not be recoverable.

When the Company subscribes for additional investee shares at a percentage different from its existing

ownership percentage, the resulting carrying amount of the investment in the investee will differ from the

amount of the Company’s share of the investee’s net equity. The Company records such difference as an

adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.

If the balance of the capital surplus account relating to a long-term equity investment is not sufficient to

absorb such an adjustment, any excess is charged against retained earnings.

A merge or acquisition transaction is accounted for by purchase method. When equity investments is

made with an asset other than cash, the measurement of fair value is determined by the asset given up or the

shares acquired, of which is more objective and reliable.

- 88 -

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. For

long-term equity investments for which the Company has significant influence but with no control, the

carrying amount of each investment is compared with its own recoverable amount for the purpose of

impairment testing.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment.

Expenditures that would increase the value or extend the useful lives of property, plant and equipment are

capitalized.

Interest is capitalized during the construction period of property, plant and equipment until a qualifying

asset is substantially completed and ready for its intended use.

Depreciation is provided on the straight-line method over the following estimated useful lives of the related

assets:

Buildings 5 to 20 years

Machinery and equipment 5 years

Other equipment 3 to 5 years

Property, plant and equipment still in use beyond their original estimated useful lives are further

depreciated over their new estimated useful lives.

When an indication of significant impairment is determined, any excess of the carrying amount of an asset

over its recoverable amount is recognized as a loss. If the recoverable amount increases in the future

period, the subsequent reversal of the impairment loss would be recognized as a gain. However, the

increased carrying amount of an asset due to reversal of an impairment loss should not exceed the carrying

amount that would have been determined (net of depreciation), had no impairment loss been recognized for

the assets in prior years.

Upon sale or disposal of property, plant and equipment, the related cost, accumulated depreciation and

accumulated amortized are removed from the accounts and any related gain or loss is included in

non-operating income or non-operating expenses.

Intangible Assets

Intangible assets are stated at acquisition cost less accumulated amortization and included in assets. Such

assets are amortized over three to five years from the commencement of production using the straight-line

method. If the assets’ future benefits are impaired, the excess of carrying amount will be recognized in

current loss to present the fair value of the assets.

Reserve for Product Guarantee

For potential product risk, the Company accrues reserve for product guarantee based on the commitment to

specific customers.

Benefit Pension Plan

For employees under defined contribution plans, pension costs are recorded based on the actual

contributions made to employee’s personal pension accounts. For employees under defined benefit

pension plans, pension costs are recorded based on actuarial calculations.

- 89 -

Income Tax

The Company uses an inter-period tax allocation method for income tax. Deferred income tax assets and

liabilities are recognized for the tax effect of temporary differences, operating loss carryforwards and

investment tax credits. Valuation allowances are provided when necessary to reduce deferred tax assets to

the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable for the

period plus or minus the change during the period in deferred tax assets and liabilities.

Income tax credits, such as for purchase of machinery, research and development expenses and training

expenses, are recognized as deduction of current income tax expense.

Income tax on unappropriated earnings at a rate of 10% is expensed in the year of stockholder approval

which is the year subsequent to the year the earnings are generated.

Loss Per Share

Basic loss per share is calculated by dividing net loss applicable to common stock by the weighted average

number of shares outstanding.

Share-based Compensation

Under the statement, the value of the stock options granted, which is equal to the best available estimate of

the number of stock options expected to vest multiplied by the grant-date fair value, is expensed on a

straight-line basis over the vesting period, with a corresponding adjustment to capital surplus - stock

options. The estimate is revised if subsequent information indicates that the number of stock options

expected to vest differs from previous estimates.

Treasury Stock

The cost of shares purchased or fair value of shares donated by outside parties is charged to the treasury

stock account.

Upon reissuance, the discrepancy between the cost of the treasury shares and the price received is reflected

in stockholders’ equity accounts.

Winbond’s stock held by subsidiaries is also treated as treasury stock.

Revenue Recognition

Sales are recognized when titles of products and risks of ownership are transferred to customers.

Reclassifications

Certain accounts in the consolidated financial statements as of and for the year ended December 31, 2011

have been reclassified to conform to the presentation of the consolidated financial statements as of and for

the year ended December 31, 2012.

- 90 -

3. EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES

Financial Instruments

On January 1, 2011, the Company adopted the newly revised Statement of Financial Accounting Standards

(SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” The main revisions include (1)

finance lease receivables are now covered by SFAS No. 34; (2) the scope of the applicability of SFAS

No. 34 to insurance contracts is amended; (3) loans and receivables originated by the Company are now

covered by SFAS No. 34; (4) additional guidelines on impairment testing of financial assets carried at

amortized cost when a debtor has financial difficulties and the terms of obligations have been modified; and

(5) accounting treatment by a debtor for modifications in the terms of obligations. This adoption did not

result in material effect on the consolidated financial statements for the year ended December 31, 2011.

Operating Segments

On January 1, 2011, the Company adopted the newly issued SFAS No. 41, “Operating Segments.” The

statement requires that segment information be disclosed based on the information about the components of

the Company that management uses to make operating decisions. SFAS No. 41 requires identification of

operating segments on the basis of internal reports that are regularly reviewed by the Company's chief

operating decision maker in order to allocate resources to the segments and assess their performance. This

statement supersedes SFAS No. 20, “Segment Reporting.” For this accounting change, please refer to

Note 27 to the consolidated financial statements.

4. CASH AND CASH EQUIVALENTS

December 31

2012 2011

Cash on hand $ 713 $ 640

Cash in bank 1,319,076 1,451,014

Time deposit 2,750,739 3,799,930

Short-term bills 1,744,400 751,013

$ 5,814,928 $ 6,002,597

Time deposits in the amounts of $132,160 thousand and $139,964 thousand as of December 31, 2012 and

2011, respectively, were pledged to secure land lease agreement, purchase orders of materials, customs

tariff obligations and sales deposits and are reclassified as refundable deposits.

5. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31

2012 2011

Financial assets at fair value through profit or loss, current

Listed stocks $ 3,533 $ 3,461

Forward exchange contracts 25,188 215

$ 28,721 $ 3,676

For the years ended December 31, 2012 and 2011, the Company’s entered into derivative contracts to

manage exposures due to exchange rate and interest rate fluctuation. The financial risk management

objective of the Company is to minimize risks due to changes in fair value or cash flows.

- 91 -

Outstanding forward exchange contracts as of December 31, 2012 and 2011 were as follows:

Currencies Maturity Date

Contract Amount

(In Thousands)

December 31, 2012


Sell forward exchange contracts NTD to USD 2013.02.07 NTD289,220/USD10,000

December 31, 2011


Sell forward exchange contracts USD to JPY 2012.01.05 USD925/JPY72,000

The transactions of financial instruments at fair value through profit or loss resulted in net gains of

$103,647 thousand and net losses of $154,790 thousand for the years ended December 31, 2012 and 2011,

respectively.

6. NOTES AND ACCOUNTS RECEIVABLE

December 31

2012 2011

Notes receivable $ 327 $ 534

Accounts receivable $ 4,721,523 $ 4,426,386

Less allowance for doubtful accounts (112,603) (312,492)

$ 4,608,920 $ 4,113,894

Accounts receivable from related parties (Note 22) $ 46,073 $ 50,639

7. INVENTORIES

December 31

2012 2011

Finished goods $ 1,643,222 $ 1,720,658

Work-in-process 6,091,663 5,123,038

Raw materials and supplies 357,001 398,506

Inventories in transit 16,791 30,360

$ 8,108,677 $ 7,272,562

As of December 31, 2012 and 2011, the allowance for inventory devaluation was $1,245,240 thousand and

$1,331,172 thousand, respectively.

Loss on write-down of inventories of $158 thousand and $496,359 thousand were recognized as the cost of

sales for the years ended December 31, 2012 and 2011, respectively. Gain on recovery of decline in

market value amounted to $85,930 thousand in the year ended December 31, 2012, due to net realizable

value improvement.

- 92 -

Unallocated fixed manufacturing costs were recognized as cost of sales in the years ended December 31,

2012 and 2011 amounted to $513,589 thousand and $548,177 thousand, respectively.

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31

2012 2011

Amount

Ownership

Percentage Amount

Ownership

Percentage

Listed stocks

Walton Advanced Engineering Inc. $ 420,526 10 $ 480,601 10


Walsin Technology Corporation 91,504 2 103,859 2

Walsin Lihwa Corporation - - 143,880 -

Emerging Memory & Logic

Solutions Inc.

- - 140,738 7

Japan Material Co., Ltd. - - 14,097 1

Capella Microsystems, Inc. - - 69,563 2

Chaintech Corp. - - 5,760 -

Private-placement shares of listed

company


768,621 1,256,710

Less current portion (704,091) (902,713)

$ 64,530 $ 353,997

In January 2011, the Company acquired 108,000 thousand private-placement shares of Hannstar Display

Corporation. According to Securities and Exchange Act, the private-placement shares of Hannstar

Display Corporation could be resold freely in an active market only after three years from the delivery date

and approved by the controlling authorities. In September 2012, Hannstar Display Corporation carried out

a capital reduction to offset a deficit, at a 50% capital reduction. The Company deduced 54,000 thousand

private-placement shares of Hannstar Display Corporation. There were 27,000 thousand of Hannstar

Display Corporation’s private-placement shares held by the Company are decreased due to WIN (dissolved

company) was merged by Chin Xin Investment on December 31, 2012. As of December 31, 2012, the

Company had 27,000 thousand of Hannstar Display Corporation’s private-placement shares.

9. FINANCIAL ASSETS CARRIED AT COST

December 31

2012 2011

Amount

Ownership

Percentage Amount

Ownership

Percentage

LTIP Trust Fund $ 394,944 - $ 411,740 -

United Industrial Gases Co., Ltd. 81,081 4 154,867 8

Harbinger III Venture Capital Corp. 39,808 5 39,678 5

Strategic Value Fund II 1,967 24 15,752 24

Ta Cherng Investing Co. - - 199,870 10

(Continued)

- 93 -

December 31

2012 2011

Amount

Ownership

Percentage Amount

Ownership

Percentage

Walsin Color Corporation $ - - $ 121,197 9

YH Bio Explore & Application Co.,

Ltd.

- -

83,011 8

Others 86,385 - 219,288 -

$ 604,185 $ 1,245,403

(Concluded)

a. The Company’s financial assets carried at cost do not have a quoted market price in an active market,

and the fair value cannot be reliably measured. Impairment loss is evaluated periodically.

b. The Company assessed the recoverable amount of the above financial assets; as a result the Company

recognized an impairment loss of $25,030 thousand and $86,902 thousand, recorded as “other

investment loss” for the years ended December 31, 2012 and 2011, respectively.

10. LONG-TERM EQUITY INVESTMENTS AT EQUITY METHOD

December 31

2012 2011

Original

Investment Carrying Ownership Carrying Ownership

Cost Value Percentage Value Percentage

Chin Xin Investment $ 1,723,588 $ 1,654,103 35 $ - -

Nyquest Technology Co., Ltd.

(“Nyquest”) 28,808 73,025 29 65,092 30

$ 1,752,396 $ 1,727,128 $ 65,092

Equity in gains (losses) of equity method investee was summarized as follows:


2012 2011

Nyquest $ 14,458 $ 13,304

CFP Technology Corp. (“CFP) - (1,341)

$ 14,458 $ 11,963

The financial statements for the year ended December 31, 2011 of CFP were audited by other auditors. In

August 2011, the Company sold partial investments of CFP. As the Company’s ownership interest in CFP

was less than 20% and could not have significant influence over CFP, WIN reclassified its investment in

CFP as “financial assets carried at cost”.

Nyquest was incorporated in 2006 and mainly engaged in the manufacture and sale of computer related

products. In July 2011, the Company sold 900 thousand shares of Nyquest at $35 per share to non-related

parties and recognized a disposal income of $18,885 thousand that was included in gain on disposal of

investments in 2011. As of December 31, 2012, the Company had 4,815 thousand shares, with a 29%

ownership interest in Nyquest.

- 94 -

In November 2012, the Company bought 40,000 thousand shares of Chin Xin Investment from

related-party Walsin Lihwa Corporation. On December 31, 2012, Win Investment, a subsidiary of the

Company was merged with Chin Xin Investment, and accordingly Win Investment was dissolved. The

Company acquired 130,713 thousand shares of Chin Xin Investment after such merger. As of December

31, 2012, the Company had 170,713 thousand shares of Chin Xin Investment with a 35% ownership

interest.

The Company has written off $65,241 thousand of stockholders' equity due to the above-mentioned merger

transaction.

The unrealized valuation loss on financial assets recognized as stockholders’ equity amounted to $277,475

thousand as of December 31, 2012.

11. PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation of property, plant and equipment consisted of the following:

December 31

2012 2011

Buildings $ 10,507,177 $ 9,259,781

Machinery and equipment 60,110,008 53,606,482

Other equipment 2,502,059 2,299,390

$ 73,119,244 $ 65,165,653

Capitalized interest for the years ended December 31, 2012 and 2011 amounted to $49,146 thousand and

$122,224 thousand, respectively. The interest rates of interest capitalized were 2.62%-2.70% and

2.59%-2.70%, respectively.

As of December 31, 2012 and 2011, the carrying value of $20,557,599 thousand and $20,906,790 thousand

of land and 12-inch Fab manufacturing facilities were pledged to secure long-term debt, respectively.

Please refer to Note 15 to the consolidated financial statements.

12. INTANGIBLE ASSET

December 31

2012 2011

Deferred technical assets, net $ 179,372 $ 638,357

Others 3,938 834

$ 183,310 $ 639,191

In connection with certain technical transfer agreements, the Company made technical transfer fee

payments. Such deferred assets are amortized over three to five years from the commencement of

production using the straight-line method and tested for impairment periodically.

- 95 -

13. SHORT-TERM LOANS

December 31

2012 2011

Interest Rate Amount Interest Rate Amount

Bank lines of credit 1.33%-1.87% $ 2,562,100 1.89%-2.58% $ 141,500

Materials procurement loans 1.11%-1.70% 154,374 1.09%-2.73% 1,539,592

$ 2,716,474 $ 1,681,092

14. SHORT-TERM BILLS PAYABLE

December 31

2012

Bills Financial 2011

Corporation Interest Rate Amount Amount

Commercial paper payable China bills 0.85% $ 200,000 $ 200,000

MEGA bills 1.15% 300,000 -

Less unamortized discount on

commercial paper payable

(624)

(237)

$ 499,376 $ 199,763

15. LONG-TERM DEBT

December 31

2012 2011

Period Interest Rate Amount Amount


agreement (II)

2008.06.27-

2013.06.27

2.68%-2.70% $ 1,283,330 $ 3,849,990

Bank of Taiwan syndication agreement (I) 2009.07.27-

2012.07.27

- - 2,775,000

Bank of Taiwan syndication agreement (II) 2010.06.18-

2015.06.18

2.97%-3.11% 4,850,000 6,000,000

Bank of Taiwan syndication agreement (III) 2011.12.23-

2016.12.23

2.49%-2.63% 2,900,000 2,500,000


agreement (III)

2012.12.27-

2015.12.27

2.65% 2,000,000

-

11,033,330 15,124,990

Less current portion of long-term debt (4,483,330) (7,158,327)

$ 6,550,000 $ 7,966,663

Chinatrust Commercial Bank Syndication Agreement (II)

a. On June 4, 2008, Winbond entered into a syndication agreement, amounting to $7.7 billion, with a




- 96 -

Bank of Taiwan Syndication Agreement (I)

a. On July 15, 2009, Winbond entered into a syndication agreement, amounting to $3.7 billion, with a


b. The principal will be repaid every three months from October 27, 2011 until maturity.

c. Please refer to Note 11 to the consolidated financial statements for collateral on bank borrowing and

Note 22 to the consolidated financial statements for the joint guarantor.

d. The agreement was fully redeemed on July 27, 2012.

Bank of Taiwan Syndication Agreement (II)

a. On May 31, 2010, Winbond entered into a syndication agreement, with a group of financial institutions

to procure equipment for 12-inch Fab and fund the long-term loan payments, credit line was divided

into part a and b, which amounted to $3.3 billion and $3.5 billion, respectively, the total line of credit

$6.8 billion.

b. Part A will be repaid every six months from December 18, 2012 until maturity; part B will be repaid

from June 18, 2012 at 20%, 20% and 60% of the principal, respectively.

c. Please refer to Note 11 to the consolidated financial statements collateral on bank borrowing and Note

22 to the consolidated financial statements for the joint guarantor.

Bank of Taiwan Syndication Agreement (III)

a. On September 19, 2011, Winbond entered into a syndication agreement, amounting to $7 billion, with a


b. The principal will be repaid every six months from June 23, 2014 until maturity.

c. Please refer to Note 11 to the consolidated financial statements for collateral on bank borrowing.

Chinatrust Commercial Bank Syndication Agreement (III)

a. On November 19, 2012, Winbond entered into a syndication agreement, amounting to $5 billion, with a



c. Please refer to Note 11 to the consolidated financial statements for collateral on bank borrowing.

Winbond is required to maintain certain financial covenants, including current ratio, debt ratio and tangible

net equity, on June 30 and December 31 during the tenors of the loans. Additionally, the principal and

interest coverage should be also maintained on December 31 during the tenors of the loans except for the

interest coverage ratio of Bank of Taiwan Syndication Agreement (II), (III) and Chinatrust Commercial

Bank Syndication Agreement (III) which should be maintained on June 30 and December 31. The

computations of financial ratios mentioned above are done based on the audited consolidated financial

statements.

- 97 -

16. PENSION PLAN

The Company has defined contribution plan based on the “Labor Pension Act.” According to the Act, the

Company has made monthly contributions equal to 6% of each employee’s monthly salaries to employee’s

individual pension accounts. Such pension costs were $140,268 thousand and $129,544 thousand for the

years ended December 31, 2012 and 2011, respectively.

The Company has defined benefit pension plan covering all eligible employees. Based on the Labor

Standards Law of the Republic of China, the Company’s policy is to fund the plan at 2% of employees’

salaries and wages. The fund is administered by a Pension Fund Administration Committee and is

deposited in the Bank of Taiwan in the committee’s name.

Pension information on the defined benefit plan was summarized as follows:

a. The components of net pension cost:


2012 2011

Service cost $ 27,621 $ 27,848

Interest cost 33,879 35,352

Expected return on plan assets (18,907) (20,125)

Amortization, net 14,509 11,362

Net pension cost $ 57,102 $ 54,437

b. The assumptions used in determining the actuarial present value of the projected benefit obligation were

as follows:

December 31

2012 2011

Discount rate 1.75%-2.25% 2.00%-2.25%

Expected long-term rate of return on plan assets 2.00% 2.00%

Rate of increase in compensation 1.00%-3.00% 1.00%-3.00%

c. Reconciliation of funded status of the plan and accrued pension liabilities was summarized as follows:

December 31

2012 2011

Benefit obligation

Vested benefit obligation $ 644,650 $ 373,292

Accumulated benefit obligation 1,369,212 1,213,549

Projected benefit obligation 1,790,366 1,606,975

Funded status

Projected benefit obligation (1,790,366) (1,606,975)

Fair value of plan assets 957,810 951,013

Funded status (832,556) (655,962)

Unrecognized net transition obligation 90,308 97,217

Unrecognized net gain 341,678 190,069

Deferred pension cost (16,907) -

Accrued pension liabilities $ (417,477) $ (368,676)

- 98 -

17. STOCKHOLDERS’ EQUITY

Winbond’s Common Stock

December 31

2012 2011

Authorized capital



Capital $ 67,000,000 $ 67,000,000

Outstanding capital



Capital $ 36,856,012 $ 36,802,302

As of December 31, 2011, the balance of Winbond’s capital account amounted to $36,802,302 thousand,

divided into 3,680,230 thousand shares at par $10.00 per share.

Employees executed the stock option at $3.02 per share totaling 5,371 thousand shares during the year of

2012. As of December 31, 2012, the balance of Winbond’s capital account amounted to $36,856,012

thousand, divided into 3,685,601 thousand shares at par $10.00 dollars per share. Walsin Lihwa is a major

stockholder of Winbond and held approximately 23% ownership interest in Winbond as of December 31,

2012.

According to the Company Law of the ROC and Winbond’s Articles of Incorporation, if Winbond has

surplus earnings at the end of a fiscal year, after covering all losses incurred in prior years and paying all

taxes, Winbond shall set aside 10% of said earnings as legal reserve. However, legal reserve need not be

made when the accumulated legal reserve equals the paid-in capital of Winbond. After setting aside or

reversing special reserve pursuant to applicable laws and regulations and orders of competent authorities

from (1) the remaining amount plus undistributed retained earnings; or (2) the differences between the

undistributed retained earnings and the losses suffered by Winbond at the end of a fiscal year if the losses

can be fully covered by the undistributed retained earnings, Winbond shall distribute the remaining amount

(if not otherwise set aside as special reserve and reserved based on business needs) in the following order:

a. 1% to 2% as remuneration to directors and supervisors;

b. 10% to 15% as bonus to employees;

c. The remaining amount as bonus to shareholders. Not less than 10% of the total shareholders bonus

shall be distributed in form of cash.

“Employees” referred to in item b of the proceeding paragraph, when distributing the stock bonus, include

the employees of subsidiaries of Winbond meeting certain criteria. It is authorized to the Board of

Directors to determine the above “certain criteria” or the Board of Directors may authorize the Chairman to

ratify the above “certain criteria”.

The Company was loss of the year ended 2011, so the stockholders’ meeting in not assigned. The relevant

information is available on MOPS. And the Company were operating loss of the year 2012, it is not

estimated bonus to employees, directors and supervisors.

- 99 -

Treasury Stock


Purpose of Buyback

Treasury

Stock Held as

of January 1,

2012

Increased

During the

Year

Decreased

During the

Year

Treasury

Stock Held as

of

December 31,

2012

Common shares held by

subsidiaries

7,518,364 - - 7,518,364


Purpose of Buyback

Treasury

Stock Held as

of January 1,

2011

Increased

During the

Year

Decreased

During the

Year

Treasury

Stock Held as

of

December 31,

2011

Common shares held by

subsidiaries

7,518,364 - - 7,518,364

As of December 31, 2012 and 2011, Winbond’s subsidiary - Baystar Holdings Ltd. (BHL) held 7,518,364

shares of Winbond’s common stock which amounted to $106,387 thousand. The purpose of holding the

shares was to maintain stockholder’s equity. The shares held by BHL were treated as treasury stocks.

Winbond’s stock held by subsidiaries is treated as treasury stock, and the holders are entitled to the rights of

stockholders, except for the right to participate in Winbond’s share issuance for cash and vote in

stockholders’ meeting.

18. EMPLOYEE STOCK OPTION

In 2008 and 2009, Winbond granted employee stock warrants in the quantity of 45,764 thousand and 1,585

thousand units, respectively. Each individual employee stock warrant is granted the right to purchase

Winbond’s new issued one common share. The warrants were granted to qualified employees of Winbond

and its subsidiaries. The warrants granted are valid for 5 years and exercisable at certain percentages after

the second anniversary year from the grant date. The warrants were granted at an exercise price equal to

the closing price of Winbond’s common shares listed on the Taiwan Stock Exchange on the grant date.

For any subsequent changes in Winbond’s paid-in capital, the exercise price and the number of options are

adjusted accordingly.

- 100 -

Employee stock warrants were summarized as follows:


2012 2011

Employee Stock Warrants

Number of

Options (In

Thousands)

Weighted

Average

Exercise Price

(NT$)

Number of

Options (In

Thousands)

Weighted

Average

Exercise Price

(NT$)

Outstanding balance, beginning of

year 15,516 $ 3.20 27,459 $ 3.12

Warrants granted - - - -

Warrants exercised (5,371) 3.02 (10,880) 3.02

Warrants cancelled - - - -

Warrants expired (371) 3.49 (1,063) 3.05

Outstanding balance, end of year 9,774 3.28 15,516 3.20

Warrants exercisable, end of year 9,751 3.28 14,596 3.11

Information about outstanding warrants was as follows:

December 31

2012 2011

Range of Exercise

Price (NT$)

Weighted Average

Remaining

Contractual Life

(Years)

Range of Exercise

Price (NT$)

Weighted Average

Remaining

Contractual Life

(Years)

$3.02-$6.46 0.90 $3.02-$6.46 1.87

Winbond used the fair value method to evaluate the option using Black-Scholes model, the assumptions and

proforma result were as follows:

Grant-date share price (NT$) $3.02-$6.46

Exercise price (NT$) $3.02-$6.46

Expected volatility 52.03%-74.48%

Expected duration (years) 3.75

Expected dividend yield 0%

Risk-free interest rate 0.94%-1.95%

Compensation costs recognized under the fair value method were $198 thousand and $4,808 thousand for

the years ended December 31, 2012 and 2011, respectively.

- 101 -

19. PERSONNEL EXPENSE, DEPRECIATION, AND AMORTIZATION


Classified as

Cost of Sales

Classified as

Operation

Expenses

Classified as

Non-operation

Expenses and

Losses Total

Personnel expense

Salary $ 1,877,264 $ 2,546,280 $ - $ 4,423,544

Insurance 142,821 152,646 - 295,467

Pension 110,186 161,263 - 271,449

Others 10,165 44,910 - 55,075

$ 2,140,436 $ 2,905,099 $ - $ 5,045,535

Depreciation $ 8,483,615 $ 164,784 $ 2,603 $ 8,651,002

Amortization $ - $ 555,148 $ 18,716 $ 573,864


Classified as

Cost of Sales

Classified as

Operation

Expenses

Classified as

Non-operation

Expenses and

Losses Total

Personnel expense

Salary $ 1,783,498 $ 2,393,995 $ - $ 4,177,493

Insurance 133,954 140,209 - 274,163

Pension 113,247 162,565 - 275,812

Others 9,764 42,926 - 52,690

$ 2,040,463 $ 2,739,695 $ - $ 4,780,158

Depreciation $ 9,703,620 $ 156,858 $ 2,586 $ 9,863,064

Amortization $ - $ 558,823 $ 13,110 $ 571,933

20. INCOME TAX

Components of income tax expense (credit) were summarized as follows:


2012 2011


Deferred income tax assets and valuation allowance adjustment 361,796 171,234

Others 22,493 36,926

Income tax expense $ 175,037 $ 152,363

- 102 -

Components of deferred income tax assets were as follows:

December 31

2012 2011

Deferred tax assets

Net operating loss carryforwards $ 4,857,328 $ 4,504,203

Investment tax credits 1,175,366 2,783,976

Allowance for inventory devaluation losses 211,000 167,000

Other temporary differences 265,125 338,990

Deferred income tax assets 6,508,819 7,794,169

Less valuation allowance (2,281,465) (3,519,892)

4,227,354 4,274,277

Deferred income tax liabilities

Unrealized gain on financial instruments (4,000) -

Unrealized exchange gains (4,000) -

Deferred income tax assets, net 4,219,354 4,274,277

Deferred income tax assets, current (222,356) (281,638)

Deferred income tax assets, noncurrent $ 3,996,998 $ 3,992,639

A reconciliation of income tax credit base on loss before income tax at statutory rate and current income tax

credit was as follows:


2012 2011

Income tax credit at statutory rate $ (147,929) $ (30,444)

Increase (decrease) in tax resulting from

Tax-exempt income on disposal of domestic investments (71,000) (8,090)

Other permanent difference 9,677 (17,263)


Winbond and NTC’s investment tax credits and operating loss carryforwards as of December 31, 2012 were

as follows:

Expiry Year

Investment Tax

Credit

Operating Loss

Carryforwards

2013 $ 615,000 $ 286,000

2014-2022 240,000 4,101,000

$ 855,000 $ 4,387,000

As of December 31, 2012, WECA has operating loss carryforwards of US$15,990 thousand, which will

expire in 2025.

The information of the imputation credit of Winbond was as follows:

December 31

2012 2011

Balance of Imputation Credit Account $ 252,935 $ 217,239

Undistributed earnings for the years of 1997 and before $ - $ -

Accumulated deficit for the years of 1998 and thereafter $ (4,335,976) $ (2,483,440)

- 103 -

Winbond’s income tax returns through 2010, except 2009, have been assessed by the tax authority.

As of December 31, 2012, Winbond has tax refund receivable under other assets - others amounted to

$7,136 thousand which occurred in 2012 and years prior to 2012.

21. LOSS PER SHARE


Amounts (Numerator) Loss Per Share (NT$)

Before Income

Tax and

Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent

Shares

(Denominator)

(In Thousands)

Before Income

Tax and

Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent



shareholders $ (1,440,071) $ (1,852,536) 3,676,698 $ (0.39)

$ (0.50)



Before Income

Tax and

Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent

Shares

(Denominator)

(In Thousands)

Before Income

Tax and

Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent



shareholders $ (526,605) $ (843,291) 3,666,391 $ (0.14) $ (0.23)

Proforma amount, assuming common shares of parent held by subsidiaries were not treated as treasury

stock:



Before Income

Tax and

Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent

Shares

(Denominator)

(In Thousands)

Before Income

Tax and

Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent



shareholders $ (1,440,071) $ (1,852,536) 3,684,216 $ (0.39)

$ (0.50)



Before Income

Tax and

Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent

Shares

(Denominator)

(In Thousands)

Before Income

Tax and

Minority

Interest

After Income

Tax and

Attributed to

Stockholders

of the Parent



shareholders $ (526,605) $ (843,291) 3,673,910 $ (0.14)

$ (0.23)

- 104 -

22. RELATED PARTY TRANSACTIONS

The names and relationships of related parties are as follows:

Related Party Relationship with the Company

Walsin Lihwa Corporation (“Walsin”) Walsin’s chairman is one of the immediate family

members of Winbond’s chairman and Walsin holds a

23% ownership of Winbond as of December 31, 2012

Nyquest Technology Co., Ltd (“Nyquest”) An equity-method investee

Global Brands Manufacture Ltd. (“GBM”) GBM’s chairman is one of the immediate family

members of Winbond’s chairman

Walton Advanced Engineering Inc. (“Walton “) Walton’s chairman is one of the immediate family

members of Winbond’s chairman. Winbond is one

of the Walton’s directors

Global Brands Manufacture (Dongguan) Ltd.

(“GBM (Dongguan)”)


Walton Advanced Engineering (Suzhou) Inc.

(“Walton (Suzhou)”)


Major transactions with related parties were summarized below:

Sales


2012 2011

Nyquest $ 212,401 $ 217,818

GBM (Dongguan) 153,402 38,030

GBM - 88,117

Others 651 14,249

$ 366,454 $ 358,214

Purchase


2012 2011

Nyquest $ 4,179 $ 4,403

Manufacturing Expenses


2012 2011

Walton $ 1,559,452 $ 1,395,376

Walton (Suzhou) 582,901 571,541

$ 2,142,353 $ 1,966,917

- 105 -

General and Administrative Expenses


2012 2011

Walsin $ 7,891 $ 8,062

Research and Development Expense


2012 2011

Nyquest $ 174 $ -

Notes and Accounts Receivable

December 31

2012 2011

Nyquest $ 31,109 $ 36,506

GBM (Dongguan) 14,915 14,068

Others 49 65

$ 46,073 $ 50,639

Other Financial Assets, Current and Other Current Assets

December 31

2012 2011

Walsin $ 20 $ 1,438

Refundable Deposits

December 31

2012 2011

Walsin $ 203 $ 203

Notes and Accounts Payable

December 31

2012 2011

Walton $ 394,197 $ 547,613

Walton (Suzhou) 137,081 165,665

Others 3,061 2,639

$ 534,339 $ 715,917

- 106 -

Other Payables

December 31

2012 2011

Walton $ 6,199 $ 9,326

Others 1,567 2,529

$ 7,766 $ 11,855

The related-party transaction was conducted under normal terms.

Security Transactions

The Company’s purchase of investment from related parties in 2012 was summarized as follows:

Related-party

Securities Name

Shares

(Thousand)

Purchase Cost

Walsin Chin Xin Investment 40,000 $403,856

Guarantee

a. Please refer to Note 24 to the consolidated financial statements.

b. As of December 31, 2012, the chairman of Winbond is a joint guarantor of the long-term debt - Bank of

Taiwan syndication agreement (II). Please refer to Note 15 to the consolidated financial statements.

Compensation Information of Directors, Supervisors, and Management Personnel


2012 2011

Salary $ 136,718 $ 158,219

Bonus and special compensation 45,423 45,474

$ 182,141 $ 203,693

Total compensation expense for the years ended December 31, 2012 and 2011 included salaries, duty

allowance, retirement pension and income from exercise of employee stock options.

23. PLEDGED AND COLLATERALIZED ASSET

Please refer to Note 4, Note 11 and Note 15.

24. COMMITMENTS AND CONTINGENCIES

Letters of Credit

The Company’s amounts available under unused letters of credit as of December 31, 2012 were

approximately US$2,035 thousand and JPY3,900 thousand.

- 107 -

25. DISCLOSURES FOR FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

Carrying value and fair value of financial instruments were summarized as follows:

December 31

2012 2011

Carrying

Value

Fair

Value

Carrying

Value

Fair

Value

Nonderivative financial instruments

Assets

Financial assets at fair value

through profit or loss, current $ 3,533 $ 3,533

$ 3,461 $ 3,461

Available-for-sale financial

assets (current and noncurrent) 768,621 768,621

1,256,710 1,256,710

Liabilities

Long-term debt (including

current portion) 11,033,330 11,033,330

15,124,990 15,124,990

Derivative financial instruments

Financial assets at fair value

through profit or loss, current

Forward exchange contracts 25,188 25,188 215 215

Methods and assumptions used in determining fair values of financial instruments were summarized as

follows:

a. The fair value of cash and cash equivalents, notes and accounts receivable, other financial assets,

refundable deposits, short-term loans, notes and accounts payable, and other payables, approximates

their carrying value due to the short-term maturities of these financial instruments.

b. The fair values of financial instruments at fair value through profit or loss and available-for-sale

financial assets are quoted by market price. The fair value of forward exchange contracts is measured,

according to its specific contract’s settlement rate, by the middle exchange rate and the discount rate

quoted by Reuters.

c. Available-for-sale financial assets which are private-placement shares are based on their quoted prices

in an active market but adjusted for effects of any transferred restriction.

d. The Company’s financial assets carried at cost do not have a quoted market price in an active market,

and the fair value cannot be reliably measured.

e. The fair values of long-term debt are estimated by discounted cash flow analysis, based on the

Company’s current rates for long-term borrowings with similar types. As of December 31, 2012 and

2011, the discount rate used in determining the fair values is 2.86% and 3.24%, respectively.

- 108 -

The fair value of financial instruments that used the quoted market price in active market or other method

of valuation is summarized as follows:

December 31, 2012

Quoted Market

Price in Active

Market Other Method

of Valuation Total

Assets


loss, current

$ 3,533 $ 25,188 $ 28,721


noncurrent

704,091 64,530 768,621

December 31, 2011

Quoted Market

Price in Active

Market Other Method

of Valuation Total

Assets


loss, current

$ 3,461 $ 215 $ 3,676


noncurrent

1,127,110 129,600 1,256,710

Valuation gains (losses) arising from changes in fair value of financial instruments determined using

valuation techniques were $24,973 thousand and $(60,010) thousand for the years ended December 31,










Adjustment of stockholders’ equity due to the fair value changes of available-for-sale financial assets

amounted to $1,130,942 thousand and $1,449,394 thousand as of December 31, 2012 and 2011,

respectively.

Financial Risk Information

a. Market risk

All the derivative financial instruments the Company entered into are forward exchange contracts in

order to hedge changes in fair value of foreign-currency assets and liabilities. The fair value of

forward exchange contracts will fluctuate because of changes in foreign exchange rates.

- 109 -

b. Credit risk

The Company is exposed to the credit risk that counter-parties or third-parties may breach the contracts.

The risk results from the concentrations of credit risk, elements, contract price, and accounts receivable.

The Company requested its major transaction parties to provide collaterals or other rights to reduce such

risk.

c. Liquidity risk

The Company has sufficient operating capital to meet the cash demand for the contracts. Thus, the

fund-raising and cash flow risks are not material.

d. Cash flow risk on change of interest rate

The Company’s long-term debt is with floating interest rate. Effective rate and future cash flow of the

Company will fluctuate as a result of changes in market interest rate. If the market interest rate

increases by 1%, the cash outflow will increase by $112,009 thousand per year.

26. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND

LIABILITIES

Information of financial assets and liabilities, which were denominated in foreign currencies, with

significant influence on the Company was as follows:

December 31

2012 2011

Foreign

Currencies

(Thousands)

Exchange

Rate

New Taiwan

Dollars

(Thousands)

Foreign

Currencies

(Thousands)

Exchange

Rate

New Taiwan

Dollars

(Thousands)

Financial assets

Monetary items

USD $ 238,052 29.04 $ 6,913,019 $ 198,558 30.275 $ 6,011,352

EUR 951 38.49 36,586 2,075 39.18 81,307

JPY 646,039 0.3364 217,328 2,617,609 0.3906 1,022,438

RMB 99,603 4.6202 460,188 38,935 4.8049 187,081

ILS 35,355 7.7845 275,217 28,287 7.925 224,175

AUD - - - 2,706 30.735 83,169

Non-monetary item

USD 15,281 29.04 443,766 16,140 30.275 488,647

KRW - - - 5,351,246 0.0263 140,738

Financial liabilities

Monetary items

USD 80,871 29.04 2,348,480 114,872 30.275 3,477,755

EUR 1,270 38.49 48,866 2,197 39.18 86,063

JPY 795,581 0.3364 267,633 2,398,822 0.3906 936,980

ILS 5,136 7.7845 39,978 3,082 7.925 24,425

- 110 -

27. OPERATING SEGMENT FINANCIAL INFORMATION

a. Basic information of operating segment

The Company’s reportable segments under SFAS No. 41 are as follows:

1) Segment of DRAM IC product

The DRAM IC product segment engages mainly in the manufacturing, selling, researching,

designing and after-sales service of Mobile RAM, Specialty DRAM, Graphic DRAM and

Commodity DRAM.

2) Segment of Flash IC product

The Flash IC product segment engages mainly in the manufacturing, selling, researching, designing

and after-sales service of Flash IC product.

3) Segment of Logic IC product

The Logic IC product segment engages mainly in the manufacturing, selling, researching, designing

and after-sales service of Logic IC product.

Principles of measuring reportable segments, profit, assets and liabilities:

1) The significant accounting principles of each operating segment are the same as those stated in Note

2 to the consolidated financial statements. The Company’s operating segment profit or loss

represents the profit or loss earned by each segment. The profit or loss is controllable by segment

managers and is the basis for assessment of segment performance.

2) Individual segment assets are disclosed as zero since those measures are not reviewed by the chief

operating decision maker. Major liabilities are arranged based on the capital cost and deployment

of the whole company, which are not controlled by individual segment managers.

b. Segment revenues and operating results

Segment Revenue Segment Profit and Loss

Years Ended December 31 Years Ended December 31

2012 2011 2012 2011

DRAM IC product $ 14,804,286 $ 17,953,304 $ (1,280,224) $ (745,663)

Flash IC product 10,811,168 9,440,302 901,824 1,729,434

Logic IC product 7,348,191 7,299,233 712,687 546,545

Total segment revenue 32,963,645 34,692,839 334,287 1,530,316

Others 1,638 4,011 1,638 4,011

Total net sales $ 32,965,283 $ 34,696,850

Unallocated expenses

Administrative and

supporting expenses (791,072) (629,601)

Sales and other common

expenses (811,963) (1,078,061)

Total operating (loss) income (1,267,110) (173,335)

(Continued)

- 111 -

Segment Revenue Segment Profit and Loss

Years Ended December 31 Years Ended December 31

2012 2011 2012 2011

Non-operating gains and losses

Interest income (expense),

net $ (321,158) $ (390,365)

Investment income

recognized under equity

method 14,458 11,963

Investment income (loss) 22,103 (2,783)

Gain on disposal of property,

plant and equipment 17,555 4,730

(Loss) gain on disposal of

investments (30,733) 69,880

Foreign exchange (loss) gain (55,538) 45,765

Reversal of allowance for

doubtful accounts 67,586 8,872

Valuation gain (loss) on

financial instruments 103,647 (154,790)

Other income (losses) 9,119 53,458

Loss before tax $ (1,440,071) $ (526,605)

(Concluded)

c. Geographical information

The Company’s net sales and the non-current assets by geographical location are detailed below.


2012 2011

Non-current

Assets Net Sales

Non-current

Assets Net Sales

Asia $ 29,145,955 $ 30,672,773 $ 35,639,946 $ 32,407,678

United States 233,976 1,501,960 279,391 1,383,826

Europe - 660,024 - 762,320

Others - 130,526 - 143,026

$ 29,379,931 $ 32,965,283 $ 35,919,337 $ 34,696,850

Non-current assets excluded those classified as held for sale, financial instruments, deferred tax assets,

and pension liabilities.

d. Major customers information

No revenue from any individual customer exceeded 10% of the Company’s net sales for the years

ended December 31, 2012 and 2011.

- 112 -

28. PRE-DISCLOSURE FOR ADOPTION OF INTERNATIONAL FINANCIAL REPORTING

STANDARDS

Under Rule No. 0990004943 issued by the Financial Supervisory Commission (FSC) on February 2, 2010,

the Company pre-discloses the following information on the adoption of International Financial Reporting

Standards (IFRSs) as follows:

a. On May 14, 2009, the FSC announced the “Framework for Adoption of International Financial

Reporting Standards by Companies in the ROC.” In this framework, starting 2013, companies with

shares listed on the TSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market

should prepare their financial statements in accordance with the Guidelines Governing the Preparation

of Financial Reports by Securities Issuers and the International Financial Reporting Standards,

International Accounting Standards, and the Interpretations as well as related guidance translated by the

ARDF and issued by the FSC. To comply with this framework, the Company has set up a project

team and made a plan to adopt the IFRSs. Leading the implementation of this plan is the

vice-president of Winbond. The main contents of the plan, time schedule and status of execution as of

December 31, 2012 were as follows:

Contents of Plan Responsible Department Status of Execution

Assessing phase (2010.01.01-2011.12.31)

Setting up a project team and making a

plan to adopt the IFRSs

Accounting division Completed

Processing the first phase internal

training for employees


Comparing and analyzing the difference

between the existing accounting policies

and IFRSs


Assessing the adjustments for the

existing accounting policies


Assessing the adoption of IFRS 1

“First-time Adoption of International

Financial Reporting Standards”


Assessing the adjustments for the

information systems

Information division Completed

Assessing the adjustments for the internal

controls

Related departments Completed

Preparing phase (2011.01.01-2012.12.31)

Deciding how to adjust existing

accounting policies according to IFRSs


Deciding how to adopt IFRS1 “First-time

Adoption of International Financial

Reporting Standards”


Adjusting related information systems Information division Completed

Adjusting internal controls Related departments Completed

Processing the second phase internal

training for employees


(Continued)

- 113 -

Contents of Plan Responsible Department Status of Execution

Implementing phase

(2012.01.01-2013.12.31)

Testing the operation of related

information system

Information division Completed

Collecting materials and preparing to

draw up the opening balance for balance

sheet and comparative financial

statements

Accounting division 2012 comparative

financial statement

has been completed

Drawing up financial statements

according to IFRSs

Accounting division Positively executing

(Concluded)

b. The Company assessed, the significant differences between the Company’s current accounting policies

under R.O.C. GAAP and the one’s under IFRSs as follows:

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

Effect of Transition to IFRSs

Recognition

and

R.O.C. GAAP Measurement Presentation IFRSs

Item Amount Different Difference Amount Item Note

Assets

Current assets Current assets

Cash and cash

equivalents

$ 6,002,597 $ - $ (106,916 ) $ 5,895,681 Cash and cash

equivalents

Note 1

Financial assets at fair

value through profit or

loss, current

3,676 - - 3,676 Financial assets at fair


loss, current

Available-for-sale

financial assets,

current

902,713 - - 902,713 Available-for-sale

financial assets,

current

Notes receivable, net 534 - - 534 Notes receivable, net

Accounts receivable, net 4,113,894 - - 4,113,894 Accounts receivable, net

Accounts receivables

from related parties,

net

50,639 - - 50,639 Account receivables


net

Other financial assets,

current

139,144 - 106,916 246,060 Other financial assets,

current

Note 1

Inventories 7,272,562 - - 7,272,562 Inventories

Deferred income tax

assets, current

281,638 - (281,638 ) - - Note 2

Other current assets 420,635 - - 420,635 Other current assets

Total current assets 19,188,032 - (281,638 ) 18,906,394 Total current assets

Fund and investments Noncurrent assets

Available-for-sale

financial assets,

noncurrent


financial assets,

noncurrent

Financial assets carried at

cost, noncurrent

1,245,403 56,264 - 1,301,667 Financial assets carried at

cost, noncurrent

Note 3

Long-term equity

investments at equity

method

65,092

-

-

65,092

Long-term equity


method

Total fund and

investments

1,664,492

56,264

-

1,720,756

Property, plant and

equipment

35,149,539

-

-

35,149,539

Property, plant and

equipment

Intangible assets 639,191 - - 639,191 Intangible assets

Other assets

Refundable deposits 160,149 - - 160,149 Refundable deposits

Deferred income tax

assets, noncurrent

3,992,639 - 281,638 4,274,277 Deferred income tax

assets, noncurrent

Note 2

Others 130,607 - - 130,607 Others

Total other assets 4,283,395 - 281,638 4,565,033

Total $ 60,924,649 $ 56,264 $ - $ 60,980,913 Total

(Continued)

- 114 -


Recognition

and



Liabilities and

stockholder’s equity

Current liabilities Current liabilities

Short-term loans $ 1,681,092 $ - $ - $ 1,681,092 Short-term loans

Short-term bills payable 199,763 - - 199,763 Short-term bills payable

Notes payable 849,713 - - 849,713 Notes payable

Accounts payable 3,211,805 - - 3,211,805 Accounts payable

Payable on equipment 650,233 - - 650,233 Payable on equipment

Accrued expenses and

other payables

2,151,012 60,601 - 2,211,613 Accrued expenses and

other payables

Note 4

Current portion of

long-term liabilities

7,158,327 - - 7,158,327 Current portion of


Other current liabilities 68,865 - - 68,865 Other current liabilities

Total current liabilities 15,970,810 60,601 - 16,031,411 Total current liabilities

Long-term liabilities Noncurrent liabilities

Long-term debt 7,966,663 - - 7,966,663 Long-term debt

Other liabilities

Accrued pension

liabilities

368,676 362,076 - 730,752 Accrued pension

liabilities

Note 5

Reserve for product

guarantee

94,271 - - 94,271 Reserve for product

guarantee

Others 99,146 - - 99,146 Others

Total other liabilities 562,093 362,076 - 924,169

Total liabilities 24,499,566 422,677 - 24,922,243 Total liabilities

Equity attributable to

stockholders of the

parent

Stockholders’ equity

Common stock 36,802,302 - - 36,802,302 Common stock

Capital surplus 2,232,519 (21,460 ) - 2,211,059 Capital surplus Note 6

Accumulated deficit (2,483,440 ) 65,182 - (2,418,258 ) Accumulated profit and

loss

Others Others

Cumulative translation

adjustments

359,900 (359,900 ) - - Cumulative translation

adjustments

Note 7

Unrealized loss on

financial

instruments

(1,449,394 ) (12,576 ) - (1,461,970 ) Unrealized loss on

financial

instruments

Note 8

Treasury stock (106,387 )

-

-

(106,387 )

Treasury stock


stockholders of the

parent

35,355,500 (328,754 ) - 35,026,746 Equity attributable to

stockholders of the

parent

Minority interest 1,069,583

(37,659 )

-

1,031,924

Non-controlling interest Note 9

Total stockholders’ equity 36,425,083 (366,413 ) - 36,058,670 Total stockholders’ equity

Total $ 60,924,649 $ 56,264 $ - $ 60,980,913 Total

(Concluded)

Note 1: The Company’s long-term time deposits, in accordance with the IFRSs are classified as

other financial assets, current. Please see Note 5) d).

Note 2: Deferred income tax assets - current, in accordance with IFRSs is classified as non-current

items. Please see Note 5) a).

Note 3: The translation of functional currency of subsidiaries retroact and adjust financial asset

carried at cost. Please see Note 5) g).

Note 4: Under IAS No. 19, the Company recognized as an expense when employees provide

service to increase their paid vocation. Please see Note 5) b).

Note 5: Under IAS No. 19, “Employee Benefits,” the Company elects to recognize actuarial gains

and losses immediately in full in the period in which they occur, as other comprehensive

income. The subsequent reclassification to earnings is not permitted. Please see Note

5) c).

- 115 -

Note 6: The changes of investment percentage arise from the investment company not subscribing

for new shares issued by the investee; the increase or decrease in the investment

company’s equity is adjusted in the capital surplus. In accordance with the IFRSs of the

above-mentioned capital surplus should be retrospective adjustment to accumulated

losses. Please see Note 5) e).

Note 7: In accordance with IFRS 1, the Company elected to set to zero its cumulative translation

adjustment in stockholders’ equity by reclassifying the amount to retained earnings at the

date of transition to IFRS. Please see Note 4).

Note 8: The translation of functional currency of subsidiaries retroact and adjust unrealized loss on

financial instruments. Please see Note 5) g).

Note 9: The equity of subsidiaries was decreased, so non-controlling interest was adjusted

retroactively.

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


Recognition

and



Assets

Current assets Current assets

Cash and cash

equivalents

$ 5,814,928 $ - $ (104,015 ) $ 5,710,913 Cash and cash

equivalents

Note 1

Financial assets at fair


loss, current

28,721 - - 28,721 Financial assets at fair


loss, current

Available-for-sale

financial assets,

current


financial assets,

current

Notes receivable, net 327 - - 327 Notes receivable, net

Accounts receivable, net 4,608,920 - - 4,608,920 Accounts receivable, net

Accounts receivable


net

46,073 - - 46,073 Accounts receivable


net

Other financial assets,

current

214,172 - 104,015 318,187 Other financial assets,

current

Note 1

Inventories 8,108,677 - - 8,108,677 Inventories

Deferred income tax

assets, current

222,356 - (222,356 ) - - Note 2

Other current assets 532,212 - - 532,212 Other current assets

Total current assets 20,280,477 - (222,356 ) 20,058,121 Total current assets

Fund and investments Noncurrent assets

Available-for-sale

financial assets,

noncurrent


financial assets,

noncurrent

Financial assets carried at

cost, noncurrent

604,185 74,403 - 678,588 Financial assets carried at

cost, noncurrent

Note 3

Long-term equity


method

1,727,128

(595 )

-

1,726,533

Long-term equity


method

Notes 4 and 5

Total fund and

investments

2,395,843

73,808

-

2,469,651

Property, plant and

equipment

29,021,114

-

-

29,021,114

Property, plant and

equipment

- - 80,747 80,747 Investment property Note 6

Intangible assets 183,310 - - 183,310 Intangible assets

Other assets

Refundable deposits 148,981 - - 148,981 Refundable deposits

Deferred income tax

assets, noncurrent

3,996,998 - 222,356 4,219,354 Deferred income tax

assets, noncurrent

Note 2

Others 192,414 (16,907 ) (80,747 ) 94,760 Others Note 6

Total other assets 4,338,393 (16,907 ) 141,609 4,463,095

Total $ 56,219,137 $ 56,901 $ - $ 56,276,038 Total

(Continued)

- 116 -


Recognition

and



Liabilities and

stockholders’equity

Current liabilities Current liabilities

Short-term loans $ 2,716,474 $ - $ - $ 2,716,474 Short-term loans

Short-term bills payable 499,376 - - 499,376 Short-term bills payable

Notes payable 812,253 - - 812,253 Notes payable

Accounts payable 3,421,866 - - 3,421,866 Accounts payable

Payable on equipment 173,632 - - 173,632 Payable on equipment

Accrued expenses and

other payables

2,187,998 70,361 - 2,258,359 Accrued expenses and

other payables

Note 7

Current portion of


4,483,330 - - 4,483,330 Current portion of


Other current liabilities 78,085 (256 ) - 77,829 Other current liabilities Note 5

Total current liabilities 14,373,014 70,105 - 14,443,119 Total current liabilities

Long-term liabilities Noncurrent liabilities

Long-term debt 6,550,000 - - 6,550,000 Long-term debt

Other liabilities

Accrued pension

liabilities

417,477 525,280 - 942,757 Accrued pension

liabilities

Note 8

Reserve for product

guarantee

119,902 - - 119,902 Reserve for product

guarantee

Others 100,778 3,947 - 104,725 Others

Total other liabilities 638,157 529,227 - 1,167,384

Total liabilities 21,561,171 599,332 - 22,160,503 Total liabilities


stockholders of the

parent

Stockholders’ equity

Common stock 36,856,012 - - 36,856,012 Common stock

Capital surplus 2,199,126 (21,784 ) - 2,177,342 Capital surplus Note 4

Accumulated deficit (4,335,976 ) (94,774 ) - (4,430,750 ) Accumulated deficit

Others Others

Cumulative translation

adjustments

268,081 (349,829 ) - (81,748 ) Cumulative translation

adjustments

Note 9

Unrealized loss on

financial

instruments

(1,408,417 ) - - (1,408,417 ) Unrealized loss on

financial

instruments

Treasury stock (106,387 ) - - (106,387 ) Treasury stock


stockholders of the

parent

33,472,439 (466,387 ) - 33,006,052 Equity attributable to

stockholders of the

parent

Minority interest 1,185,527

(76,044 )

-

1,109,483

Non-controlling interest Note 10

Total stockholders’ equity 34,657,966 (542,431 ) - 34,115,535 Total stockholders’ equity

Total $ 56,219,137 $ 56,901 $ - $ 56,276,038 Total

(Concluded)

Note 1: The Company’s long-term time deposits, in accordance with the IFRSs are classified as

other financial assets, current. Please see Note 5) d).

Note 2: Deferred income tax assets - current in accordance with IFRSs is classified as non-current

items. Please see Note 5) a).

Note 3: The translation of functional currency of subsidiaries retroact and adjust financial asset

carried at cost. Please see Note 5) g).

Note 4: The changes of investment percentage arise from the investment company not subscribing

for new shares issued by the investee; the increase or decrease in the investment

company’s equity is adjusted in the capital surplus. In accordance with the IFRSs of the

above-mentioned capital surplus should be retrospective adjustment to accumulated

losses. Convert into IFRSs, the company decreased $339 thousands in long-term equity

investment at equity method, and $21,784 thousands in capital surplus. Please see Note

5) e).

Note 5: Unrealized profit from downstream transactions with an equity-method investee is $256

thousand. It would convert from other current liabilities to long-term equity investment.

Please see Note 5) f).

- 117 -

Note 6: A property held under an operating lease was reclassified from other assets to investment

property. Please see Note 5) g).

Note 7: Under IAS No. 19, the Company recognized as an expense when employees provide

service to increase their paid vocation. Please see Note 5) b).

Note 8: Under IAS No. 19, “Employee Benefits,” the Company elects to recognize actuarial gains

and losses immediately in full in the period in which they occur, as other comprehensive

income. The subsequent reclassification to earnings is not permitted. According IAS

No. 19, the Company reclassified unrecognized actuarial loss into accumulated loss,

which increase $362,072 thousands in accrued pension liabilities. Furthermore, under

IAS No. 9, the Company reclassified net pension cost and difference in actuarial loss into

other comprehensive income, which increase $163,208 thousands in accrued pension

liabilities. Above all the accrual pension liabilities increased $525,280 thousands.

Please see Note 5) c).

Note 9: In accordance with IFRS 1, the Company elected to set to zero its cumulative translation

adjustment in stockholders’ equity by reclassifying the amount to retained earnings at the

date of transition to IFRS. The cumulative translation adjustment decrease $359,900

thousands. Otherwise, the tranlative in function currency which increase $10,071

thousands in cumulative translation adjustments. Please see Note 5) e).

Note 10: The equity of subsidiaries was decreased, so non-controlling interest was adjusted

retroactively.

3) Reconciliation of consolidated statement of comprehensive income for the year ended December

31, 2012

R.O.C. GAAP Effect of Transition

to IFRSs IFRSs

Item Amount Amount Amount Item Note

Net sale $ 32,965,283 $ - $ 32,965,283 Net sale

Cost of sales 27,804,925 (2,628 ) 27,802,297 Cost of sales Notes 1 and 2

Less: Unrealized gain on

inter-affiliate

(74 )

74

-

- Note 2

Gross profit 5,160,284 2,702 5,162,986 Gross profit

Operating expense 6,427,394 4,588 6,431,982 Total operating expense Note 1

Loss from operations (1,267,110 ) (1,886 ) (1,268,996 ) Loss from operations

Non-operation income and expense (172,961 ) (2,629 ) (175,590 ) Non-operation income and expense Notes 3 and 4

Loss before income tax (1,440,071 ) (4,515 ) (1,444,586 ) Loss before income tax

Income tax expense (175,037 ) - (175,037 ) Income tax expense

Net loss $ (1,615,108 ) $ (4,515 ) (1,619,623 ) Net loss

(93,274 ) Exchange differences on translating

foreign operations

53,553 Net valuation gain on

available-for-sale financial assets

(187,984 )

Defined benefit obligation’s

actuarial gain and losses

(227,705 )

Other comprehensive income for

the period, net of tax effect

$ (1,847,328 ) Total comprehensive income for the

period

Note 1: For the year ended December 31, 2012, the Company increased “salary expenses” by

$9,760 thousand. Pension cost and other comprehensive income for the year ended

December 31, 2012 were also adjusted for a decrease of $7,874 thousand and $187,984

thousand, respectively. Please see Note 5) b and c).

Note 2: In accordance with IFRSs, the Company reclassified unrealized gain on inter-affiliate to

cost of sales as a reduction in comprehensive income.

- 118 -

Note 3: Long-term equity investments accounted for under the equity method caused equity

changes. This situation will be recognized as capital surplus under R.O.C. GAAP, but

under IFRSs shall recognized as investment gain, so we shall adjust investment gain $190

thousand. Please see Note 5) e).

Note 4: Change of functional currency of subsidiaries shall retroact and adjust, as a result, it

increase available-for-sale financial assets. The Company disposed of financial assets,

so it will increase investment loss $12,576 thousand. Otherwise, the Company

recognized gain on exchange $8,841 thousand, which is from subsidiary’s capital

reduction.

4) Exemptions from IFRS 1

IFRS 1, “First-time Adoption of International Financial Reporting Standards,” establishes the

procedures for the Company’s first consolidated financial statements prepared in accordance with

IFRSs. According to IFRS 1, the Company is required to determine the accounting policies under

IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of

transition to IFRSs (January 1, 2012; the transition date); except for optional exemptions to such

retrospective application provided under IFRS 1. The main optional exemptions the Company

adopted are summarized as follows:

a) Share-based payment. The Company elected to take the optional exemption from applying

IFRS 2, “Share-based Payment,” retrospectively for the shared-based payment transactions

granted and vested before January 1, 2012.

b) Employee benefits. The Company elected to recognize all cumulative actuarial gains and

losses in retained earnings as of January 1, 2012.

c) Cumulative translation difference. The Company elected to set to zero its cumulative

translation adjustment in stockholders’ equity by reclassifying the amount to retained earnings

at the date of transition to IFRS.

d) Compound financial instrument. Compound financial instrument issued in the past, part of its

liabilities does not exit at the time of conversion to IFRSs day, so the Company chose not to be

traced back to financial instrument into two equity component.

e) Borrowing costs. The Company selected meet the elements of the assets of the borrowing

costs. Its capitalization start date occurs after the conversion to IFRSs day began to apply the

IAS No. 23. “borrowing cost”.

The above exemption option on the Company’s financial statement have been incorporated into

following.

5) Notes to the reconciliation of the significant differences:

The Company-specific areas of possible material differences between the existing accounting

policies and the accounting policies to be adopted under IFRSs were as follows:

a) Deferred income tax asset/liability

Under R.O.C. GAAP, valuation allowance is provided to the extent, if any, that it is more likely

than not that deferred income tax assets will not be realized. In accordance with IAS No. 12,

“Income Taxes,” deferred tax assets are only recognized to the extent that it is probable that

there will be sufficient taxable profits and the valuation allowance account is no longer used.

- 119 -

In addition, under R.O.C. GAAP, a deferred tax asset or liability is classified as current or

noncurrent in accordance with the classification of its related asset or liability. However, if a

deferred income tax asset or liability does not relate to an asset or liability in the financial

statements, it is classified as either current or noncurrent based on the expected length of time

before it is realized or settled. Under IFRSs, a deferred tax asset or liability is classified as

noncurrent asset or liability.

As of December 31, 2012 and January 1, 2012, the amounts reclassified from deferred income

tax assets to noncurrent assets were $222,356 thousand and $281,638 thousand, respectively.

b) Short-term employee benefits

Short-term employee benefits under R.O.C. GAAP are not expressly stipulated and usually

recorded when paid. After the date of transition to IFRS, it is recognized as an expense when

employees provided services to increase their paid vacation.

As of December 31, 2012 and January 1, 2012, the Company increased accounts payable by

$70,361 thousand and $60,601 thousand for short-term employee benefits. In addition, for the

year ended December 31, 2012, the Company increased “salary expenses” by $9,760 thousand.

c) Employee benefits - gain or loss on actuarial valuation on defined benefit plan

According to SFAS No. 18, the unrecognized transition obligation due to first adoption of SFAS

No. 18, “Accounting for Pension,” should be amortized over the expected remaining working

lives of employees. On the date of transition to IFRSs, the retained earnings should be

adjusted for unrecognized transition obligation.

Under R.O.C. GAAP, when using the corridor approach, actuarial gains and losses should be

amortized over the expected average remaining working lives of the participating employees.

Under IAS No. 19, “Employee Benefits,” the Company elects to recognize actuarial gains and

losses immediately in full in the period in which they occur, as other comprehensive income.

The subsequent reclassification to earnings is not permitted.

As of December 31, 2012 and January 1, 2012, the Company performed the actuarial valuation

under IAS No. 19, “Employee Benefits,” and recognized the valuation difference directly to

retained earnings under the requirement of IFRS 1; accrued pension liabilities was adjusted for

an increase of $525,280 thousand and $362,076 thousand, respectively. Pension cost and other

comprehensive income for the year ended December 31, 2012 were also adjusted for a decrease

of $7,874 thousand and $187,984 thousand, respectively.

d) Reclassification of long-term time deposit

Under R.O.C. GAAP, time deposit is classified as cash which must be readily convertible to a

known amount of cash and be subject to an insignificant risk of changes in value. Under

IFRSs, time deposits are held for the purpose of meeting short-term cash commitments is

classified as cash and cash equivalents and others is classified as other financial assets.

As of December 31, 2012 and January 1, 2012 the amounts reclassified from cash and cash

equivalents to other financial assets were $104,015 thousand and $106,916 thousand,

respectively.

e) Investments and capital surplus - long-term equity investments when associates/subsidiaries

issue new shares and the shareholder is not subscribing in accordance with its percentage of

shares of the investee/parent company.

- 120 -

According to R.O.C. GAAP, the changes of investment percentage arise from the investment

company not subscribing for new shares issued by the investee in accordance with its

percentage of ownership before the new subscription; the increase or decrease in the investment

company’s equity is adjusted in the “capital surplus and “long-term equity investment.”

Under IFRSs, such transaction is deemed a disposal and aforementioned difference is

recognized in the same accounts accordingly. In addition, according to “Q&A for adopting

IFRSs” issued by the TSE, accounts that do not conform to IFRSs or not covered under the

Company Law as well as capital surplus items required by the Ministry of Economics Affairs

should be adjusted at the date of transition to IFRSs.

As of January 1, 2012, the Company recorded different amount as above mentioned, capital

surplus was adjusted for a decrease of $21,460 thousand.

As of December 31, 2012, the Company recorded different amount as above mentioned,

long-term equity investment at equity method was adjusted for a decrease of $339 thousand and

capital surplus was adjusted for a decrease of $21,784 thousand in addition, other gains and

losses was adjusted for an increase of $190 thousand.

f) Downstream transactions with an equity-method investee

Under R.O.C. GAAP, profit from downstream transactions with an investee without

equity-method are eliminated in proportion to the Company’s percentage of ownership in the

investee. Under IFRSs, unrealized profit reclassify to sales, cost of sales and investment

income recognized under equity-method.

As of December 31, 2012, the Company recorded different amount as above mentioned,

long-term equity investment at equity and other current liabilities were adjusted for a decrease

both of $256 thousand.

g) Translation of functional currency of foreign operations

Under R.O.C. GAAP, various indicators are comprehensively adopted to identify functional

currency. Under IFRSs, IAS No. 21 “The Effects of Changes in Foreign Exchange Rates”

rules that the primary indicators should be considered first and then the secondary indicators in

the determination of functional currency. According to the rules, the overseas associates and

subsidiaries change their functional currency from U.S. dollars to N.T. dollars and adjust

retroactively the balances of assets and liabilities in N.T. dollars at the date of transition to

IFRSs. As of December 31, 2012 and January 1, 2012, the financial assets carried at cost of

the Company increased by $74,403 thousand and $56,264 thousand, respectively; loss on

valuation of financial instruments of the Company increased by zero and $12,576 thousand,

respectively.

h) Investment property

Under R.O.C. GAAP, a property held under an operating lease may be classified as other assets,

under IFRSs, property held to earn rentals or capital appreciation or both should be reclassified

to investment property.

As of December 31, 2012 and January 1, 2012, the Company’s properties held under operating

leases reclassified to investment property were $80,747 thousand and zero, respectively.

- 121 -

c. Special reserve recognized at the date of transition

According to Rule No. 1010012865 issued by the Financial Supervisory Commission (FSC) on April 6,

2012, in the first-time adoption of IFRSs, the Company is required to record special reserve equal to the

total amount of unrealized revaluation increments and cumulative translation differences under

stockholders` equity reclassified to retained earnings in accordance with IFRS 1; however, if the

amount of the credit adjustments to retained earnings at the date of transition to IFRSs is smaller than

the total amount of unrealized revaluation increments and cumulative translation differences, only the

amount of the credit adjustments to retained earnings is reclassified to special reserve. Reserve is

reversed proportionately when using, disposing and reclassifying the related assets. As of January 1,

2012, the amount of accumulated deficit was recognized losses, so the Company did not recognize

special reserve.

d. The Company’s aforementioned assessment is based on the 2010 version of IFRSs translated by the

ARDF and on the Guidelines Governing the Preparation of Financial Reports by Securities Issuers

issued by the FSC on December 22, 2011. However, the assessment result may be impacted as the

FSC may issue new rules governing the adoption of IFRSs, and as other laws and regulations may be

amended to comply with IFRSs. Actual results may differ from these assessments.

122

Financial Status, Operating Performance and Risk Evaluation

1. Analysis of financial status Unit: NT$1,000

Item\Year 2012 2011 Amount Change (%)

Current assets 15,804,738 14,724,139 1,080,599 7

Funds and long-term

investments 5,508,898 4,951,855 557,043 11

Fixed assets 28,396,274 34,395,036 (5,998,762) (17)

Intangible assets 38,430 548,754 (510,324) (93)

Other assets 3,810,639 3,751,588 59,051 (2)

Total Assets 53,558,979 58,371,372 4,812,393 (8)

Current liabilities 13,009,438 14,668,433 1,658,995 (11)

Long-term liabilities 6,550,000 7,966,663 1,416,663 (18)

Other liabilities 527,102 380,776 146,326 38

Total liabilities 20,086,540 23,015,872 2,929,332 (13)

Paid-in capital 36,856,012 36,802,302 53,710 -

Capital surplus 2,199,126 2,232,519 (33,393) (1)

Accumulated loss 4,335,976 2,483,440 1,852,536 75

Equity adjustment 1,246,723 1,195,881 (50,842) 4.

Total shareholders’ equity 33,472,439 35,355,500 1,883,061 (5)

Main reasons for significant changes:

1. Decrease in intangible assets was due to amortization of technology assets.

2. Increase in accumulated loss was due to operating loss incurred in 2012.

2. Analysis of operating performance Unit: NT$1,000

Item\Year 2012 2011 Amount Change (%)

Net sales 25,418,819 27,214,454 1,795,635 (7)

Operating cost 23,475,716 24,149,499 (673,783) 3

Gross profit 1,943,103 3,064,955 1,121,852 (37)

Operating expenses 3,959,103 3,690,101 269,002 7

Operating loss 2,016,000 (625,146) 1,390,854 222

Non-operating income and gain 625,860 330,195 295,665 90

Non-operating expense and loss 462,396 548,340 (85,944) (16)

Loss before tax 1,852,536 (843,291) 1,009,245 120

Income tax expense - - - -

Net loss 1,852,536 (843,291) 1,009,245 120

Main reasons for significant changes:

1. Decrease in gross profit and increase in operating loss were mainly due to price drop and decrease in OEM income in 2012.

2. Increase in non-operating income and gain was mainly due to increase in investment profit in 2012.

Sales forecast for the coming year and main reasons for the forecast of growth in sales:

Based on current market performance, future market demands and the Company’s capacity, we project that the outputs of 12-inch wafer

(equivalent) could reach 410,000 units in 2013.

123

3. Cash flow analysis Unit: NT$1m

Cash balance,

beginning

Cash inflow from operating

activities

Cash outflow due to

investing and financing

activities

Cash surplus

Remedial measures for

cash deficit

Investment

plan

Financial

plan

3,813 5,713. (5,819) 3,707 - -

1. Analysis on the cash flow changes of the current year:

(1) Operating activities: Operating activities produced a net cash inflow of NT$57 billion.

(2) Investing activities: Purchase of production equipment for the plant in Taichung Science Park produced a net cash outflow of NT$6

billion. In addition, equity investment produced a cash outflow of approx. NT$700 million.

(3) Financing activities: Net cash outflow of NT$26 billion primarily resulted from repayment of long- and short-term borrowing.

2. Remedial action for cash deficit and liquidity analysis: N/A.

3. Cash flow analysis for the coming year (note):

Net cash inflow from operating activities in the coming year is projected to be NT$6.4 billion, and net cash outflow due to investing

and financing activities is projected to be NT$5.5 billion for primarily capital expense and loan repayment.

Note: Unaudited figures.

4. Effect of major capital spending on financial position and business operation

4.1 Utilization of fund on major capital spending and sources of funds Unit: NT$1m

Project Actual or expected source of funds

Actual or

estimated

completion

date

Total funding

need

Actual or expected status of

spending

2011 2012

Expansion of capacity

and process upgrade

Bank loan, capitalization of retained

earnings or operating profit 2013 8,606 5,742. 2,864

4.2 Anticipated benefit

Expanded capacity, accelerated upgrade of process technology, and sustained market share.

5. Industry-specific key performance indicator

Performance indicator 2012

Output of 12-inch wafer Approx. 430,000 wafers

Average in-line yield 98.9%

6. Investment policy in the past year, profit/loss analysis, improvement plan, and investment plan for the coming year

(1) Investment policy: The Company makes investment in the hope to boost business performance in principle.

(2) Investment profit or loss in recent years: The Company recognized NT$400 million of gain on equity investment in

2012 as the Company’s subsidiaries reported stable revenue and profits.

(3) Investment plan for the next year: The Company will formulate investment plan in view of operating needs of the

Company and invested enterprises.

7. Risk management and evaluation

7.1 Impact of interest rate and exchange rate changes and inflation on Company’s profit and response measures

124

(1) Interest rate change

The Company currently has both variable-rate and fixed-rate long-term loans. The Company keeps constant watch of

and analyze the impact of interest rate fluctuation in the financial markets on cash flows associated with the

Company’s loans and would take response actions in view of actual needs.

(2) Exchange rate change

The Company exports most of its products. Because the products are denominated mostly in USD, the Company

frequently has net inflow of USD. As the exchange rate of NTD to USD fluctuates considerably recently, the

Company engaged in hedging on the basis of exchange rate at the time of book entry by selling USD and selling

forwards. The exchange gains (losses) on the disposal of USD are within controllable range. The Company will

continue this hedging policy in the hope to minimize the impact of exchange rate fluctuation on Company profit. In

addition, as machinery and equipment purchased by the Company this year will need to be paid in different foreign

currencies later on, the Company will engage in necessary hedging transactions in consideration of the payment term

and changes in the international financial markets to minimize the impact of exchange rate changes on Company

profit.

(3) Inflation

The inflation problem has not been serious in recent years and hence has had limited impact on Company’s

profit.

7.2 Policies of engaging in high-risk, high-leverage investments, lending to others, providing endorsement and guarantee, and derivatives transactions, profit/loss analysis, and future response measures

(1) The Company does not engage in any high-risk, high-leverage investment. The Company’s derivatives trading

policy aims to minimize the risk of fair value fluctuation for assets and liabilities actually owned by the Company

under the objective of economic hedge. Under this principle, all derivatives trading undertaken by the Company

correspond to the real positions held by the Company. Any gain or loss resulting from derivative transactions and

hedged positions during the period arises from difference in time of disposing a real position and the time a gain or

loss on a derivative trading is realized. Such gain or loss is insignificant. Other than those derivatives transactions

described above, the Company does not engage in other high-risk derivatives transactions and will continue to

observe the principle of hedging only positions actually owned by the Company.

(2) The Company does not extend loans to other companies or individuals.

(3) The Company does not make endorsement/guarantee for other companies or individuals.

7.3 Future R&D projects and estimated R&D expenditure

R&D project/product Estimated R&D

expenditure

Low to medium density specialty DRAM

R&D expenditures for

2013 are projected at

NT$26 billion.

Medium to high density and low-power mobile DRAM

58nm process for more new products with additional functions, high capacity, high

speed and low voltage

Development of advanced process for high-capacity flash used for code storage

7.4 Major changes in government policies and laws at home and broad and the impact on Company finance and business

The Company finance and business are not affected by major changes in government policies and laws at home and

abroad in 2012.

7.5 Impact of recent technological and market changes on the Company’s finance and business, and response measures

125

Winbond began the volume production of 4Xnm specialty DRAM and mobile RAM 2012. In 2013, we plan to

outsource the production of 3xnm medium to high density low-power mobile DRAM and specialty DRAM,

targeting the handset market, and in addition, will actively develop other high-barrier markets.

Winbond has successfully launched its flash memory and serial flash products into the application markets of PC

and peripherals, consumer electronics, mobile handheld devices and peripheral modules, industrial electronics,

automobile electronics, and medical electronics. Our 32% market share in 2012 made us the market leader

worldwide. We began volume production of 58nm process in Q4 2011 and will continue to launch new 58nm

products to enhance our competitive advantage. Aside from developing the high profit margin KGD market, the

volume productions of 2.5V/1.8V low-voltage, medium and low density serial flash and 3V high-speed, high-density

parallel flash, and 1.8V, 3V MCP, and higher capacity code storage flash products planned for the latter half of 2013

will help the Company expand the breadth of product lines and make headways into the mobile handheld devices

and peripherals to meet the diverse needs of customers and enhance our competitiveness and profitability.

The demands for PC computing are expected to slow down and will gradually switch to mobile computing. Driven

by the falling prices of TFT LCD, the penetration of high-frequency LED/LCD TV, Smart TV, and 3D TV will

increase further in 2012. New applications, including the massive use of new1.8V serial flash in mobile handheld

devices and peripheral modules will bring many new opportunities for the capacity expansion of our memory

products.

In response to the evolvement and demands of PC and peripherals, network communication and consumer electronic

products, mobile handheld devices and peripheral modules, industrial electronics, automobile electronics and

medical electronics, and in the continuing efforts to enhance the competitiveness of our products, we have been

accelerating the rollout of complete series of 58nm flash since 2012 to enhance the competitive edge of our products.

We will also endeavor in developing the high profit margin KGD market while developing advanced processes

mainly for high-capacity code storage flash to maintain the competitiveness and profitability of our products.

7.6 Impact of corporate image change on risk management and response measures

Winbond believes in honesty and integrity in business practice. We emphasize honest dealing with customers and

rigorously demand self-discipline and compliance with internal rules from employees. We are committed to

information disclosure and financial transparency, and utilize all kinds of communication channels to help

shareholders, institutional investors and the general public know more about Winbond and win their recognition and

support for our management philosophy and directions. In addition, we have departments set up to take charge of

investor relations, employee relationship, internal audit, risk management, quality management, and customer

service. Those departments work closely with related business units to unite the resources and strength throughout

the company. In case of any contingency, the Company’s senior officer will act as the convenor and promptly set up

a crisis response team to quickly address the crisis, and prepare readiness plans to prevent and control all kinds of

latent risks. As of the date of report, the Company is free of corporate image change event that calls for prompt

actions in crisis management.

7.7 Expected benefits and potential risks of merger and acquisition

The Company does not any merger and acquisition plan in the last year and up to the date of report.

7.8 Expected benefits and potential risks of capacity expansion

All undertakings of expansion and construction of new-generation fab have had feasibility evaluation done by

relevant professional teams before the project is proceeded. The purpose of fab expansion is to enhance the process

technology and reduce production costs so as to fend off market competition and make headway into end-market

applications. In light of the high market volatility of the memory industry, we will watch closely the market

movement and supply-demand situation. We will take a prudent approach to capacity allocation, and opt for a

diversity of optimal product mixes to keep our production plans flexible. We will also adopt advanced process to

optimize the cost structure in the efforts to minimize the risk associated with market volatility. Financially, we will

plan our future expansion and the necessary capital expenditure and funds in a prudent manner. We will also draw

up sound business plans to lower the risk of incurring heavy debt. We believe we will have sufficient profit and cash

flows to meet the additional investment needs and repayment obligations. Our technical team consists of wafer

126

fabrication experts and IC design experts with dozens of years of experience in related fields. We also import

advanced processes from abroad and embark on R&D with our own technology. Our 46nm DRAM and 58nm flash

processes have been successfully validated in Q4 2011 and entered into volume production. The switch to high-end

process is expected to improve our cost control capacity and augment the possibility of product expansion. To sum

up, Winbond will endeavor in fending off the risk of market volatility from the aspects of product, finance and

technology, and in the process, maximize our profitability.

7.9 Risks associated with over-concentration in purchase or sale and response measures

Purchasing from a sole supplier offers the advantage of price negotiation power, but it also carries the risk of

over-concentration that the Company may not receive timely delivery when the supplier’s plant has an accident or

the supplier has financial or quality problems. The Company has at least two key suppliers for all of its main

materials and hence does not have the concern of over-concentration in purchasing.

Concentration in sales was a result of adjustment of customer structure and long-term strategic cooperation. The

Company has credit management and internal control and audit systems in place, and hence does not run the risk of

over-concentration in sales.

7.10 Impact of mass transfer of equity by or change of directors, supervisors, or shareholders holding more than 10% interest on the Company, associated risks and response measures

The Company is free of the aforementioned situation in recent years up to the date of report.

7.11 Impact of change of management rights on the Company, associated risk and response measures

The Company is free of the aforementioned situation in recent years up to the date of report.

7.12 Material litigious or non-litigious events

7.12.1 Concluded or pending litigious, non-litigious or administrative litigation event as of the date of report:

The Company and its U.S. subsidiary are accused of violating the U.S. antitrust law on price-fixing involving

Winbond’s DRAM products sold in the U.S. and are named as co-defendants in a class action suit in the U.S.

federal court. Currently only the class action suit with the state attorney generals and the indirect purchasers is in

process, and the suit has reached settlement, pending the court’s approval.

7.12.2 The outcome of concluded or pending litigious, non-litigious, or administrative litigation events

involving the director, supervisor, president, de facto responsible person, major shareholders holding more

than 10% interest, or subsidiary of the Company

(1) With respect to pending litigious events as of the date of report, Winbond Chairman Arthur Chiao has made a

reply to the Company as follows:

A. I am involved in only one pending lawsuit as of the date of your company’s annual report.

B. Description of the lawsuit:

(A) Facts, amount of claim, lawsuit start date, main parties concerned:

The Securities and Futures Investor Protection Center (“SFIPC”) filed a lawsuit with Taiwan Taipei District

Court on April 27, 2005 over misrepresentation of the financial statements of Pacific Electric Wire & Cable Co.,

Ltd. (“Pacific Electric”). The lawsuit names myself and others (including other directors, supervisors and

accounting firm) as co-defendants on grounds that I acted as a director of Pacific Electric between 1999 and

2001 and SFIPC requests compensation for damages from the co-defendants (Case No.: Taiwan Taipei District

Court (referred to as “Taipei District Court” hereunder) 94-Jing-Zi-#22).

When SFIPC first initiated the action on April 27, 2005, it sought compensation in the amount of

NT$7,910,422,313 from 277 defendants. SFIPC later added Fubon Life Insurance and Hsing Yo Investment to

the list of defendants on June 21, 2005 that brought the number of defendants to 279. SFIPC subsequently made

several expansions and reductions of claim due to increase in the number of people who appoint SFIPC as their

representative in the class action suit and settlement reached with several defendants. Thus the court has been in

127

the stage of procedural examination for a long time. So far, SFIPC has reached settlement with 248 defendants

involving total settlement amount of NT$196,100,000. The court started the trial phase in 2009.

(B) Current status:

This case is currently in the first stance proceedings in Taipei District Court.

(C) My and my attorney’s views and action plan on the case:

The case is still in first instance proceedings. The oral argument phase has started, but not yet concluded. Thus

my appointed attorney and I are not in the position to assess the results of the trial at the present time.

(D) Possible maximum loss and possible amount of indemnification received from the case:

Based on the settlement information provided by SFIPC, the amount of settlement reached between SFIPC and

individual director or supervisor of Pacific Electric ranges between NT$12,330,000 and NT$26,000,000. Thus

even if I am later found to be liable for damages as a director of Pacific Electric at one time, my liability should

not be too far off the amounts of settlement described above.

C. I am not financially strapped or losing my good credit standing as of the date of this reply.

An evaluation of the aforementioned lawsuit by the Company concludes that because the lawsuit is a personal

affair of the chairman and does not involve the Company’s finance or business, it is not expected to have any

material impact on the interests of the Company’s shareholders or stock price.

(2) With respect to pending litigious events as of the date of report, Winbond Director Yung Chin has made a reply to

the Company as follows:

A. I am involved in only one pending lawsuit as of the date of your company’s annual report.

B. Description of the lawsuit:

(A) Facts, amount of claim, lawsuit start date, main parties concerned:

The Securities and Futures Investor Protection Center (“SFIPC”) filed a lawsuit with Taiwan Taipei District

Court on April 27, 2005 over misrepresentation of the financial statements of Pacific Electric Wire & Cable Co.,

Ltd. (“Pacific Electric”). The lawsuit names myself and others (including other directors, supervisors and

accounting firm) as co-defendants on grounds that I acted as a supervisor of Pacific Electric from 1999 to

September 24, 2001 and SFIPC requests compensation for damages from the co-defendants (Case No.: Taiwan

Taipei District Court (referred to as “Taipei District Court” hereunder) 94-Jing-Zi-#22).

When SFIPC first initiated the action on April 27, 2005, it sought compensation in the amount of

NT$7,910,422,313 from 277 defendants. SFIPC later added Fubon Life Insurance and Hsing Yo Investment to

the list of defendants on June 21, 2005 that brought the number of defendants to 279. SFIPC subsequently made

several expansions and reductions of claim due to increase in the number of people who appoint SFIPC as their

representative in the class action suit and settlement reached with several defendants. Thus the court has been in

the stage of procedural examination for a long time. So far, SFIPC has reached settlement with 248 defendants

involving total settlement amount of NT$196,100,000. The court started the trial phase in 2009.

(B) Current status:

This case is currently in the first stance proceedings in Taipei District Court.

(C) My and my attorney’s views and action plan on the case:

The case is still in first instance proceedings. The oral argument phase has started, but not yet concluded. Thus

my appointed attorney and I are not in the position to assess the results of the trial at the present time.

(D) Possible maximum loss and possible amount of indemnification received from the case:

Based on the settlement information provided by SFIPC, the amount of settlement reached between SFIPC and

individual director or supervisor of Pacific Electric ranges between NT$12,330,000 and NT$26,000,000. Thus

even if I am later found to be liable for damages for I was once a director of Pacific Electric, my liability should

not be too far off the amounts of settlement described above.

C. I am not financially strapped or losing my good credit standing as of the date of this reply.

An evaluation of the aforementioned lawsuit by the Company concludes that because the lawsuit is a personal

affair of the director and does not involve the Company’s finance or business, it is not expected to have any

material impact on the interests of the Company’s shareholders or stock price.

(3) With respect to pending litigious, non-litigious or administrative lawsuit events as of April 10, 2013 involving

corporate director of the Company Walsin Lihwa Corporation (“Walsin”):

Solarion AG (a German company), an investee of Walsin filed an arbitration claim with DIS (the German

Institution of Arbitration) against Walsin, requesting the termination of technical cooperation agreement and

128

seeking liquidated damages and other losses from Walsin. Based on the recommendations of Walsin’s German

lawyers made in view of German company law and insolvency law, the parties have reached consensus and

entered a settlement agreement on April 9, 2013 to resolve all disagreements and disputes between the parties.

The terms of the settlement agreed by the parties will not produce material impact on the operations and finance

of Walsin.

An evaluation of the aforementioned lawsuit by the Company concludes that because the lawsuit is an affair of the

corporate director and does not involve the Company’s finance or business, it is not expected to have any material

impact on the interests of the Company’s shareholders or stock price.

7.13 Risk management organization framework

The Company’s risk management tasks are dispersed among different functions inside the Company. The Company

has established sound internal management guidelines and operating procedures, and has developed comprehensive

plans and processes for risk aversion, loss prevention and crisis management. In addition, the Company’s

management keeps continuous watch over changes in the macroeconomic environment that might affect the

Company business and operations, and has assigned staff to make planning and formulate response actions against

all kinds of contingencies to reduce operational uncertainties to the minimum.

7.14 Other significant risks and response measures: None.

8. Other important events: None.

129

Important Notice

1. Profiles on affiliates and subsidiaries

1.1 Consolidated business report

1.1.1 Corporate affiliation chart

December 31, 2012

130

1.1.2 Profile of individual subsidiary Dec. 31, 2012; Unit: NT$1,000

Name of enterprise Date of

establishment Address Paid-in capital Principal business or core products

Landmark Group Holdings Ltd. 2005.07.25 Palm Grove House, P. O. Box 438, Road Town, Tortola, British Virgin Islands

US$10.313 Investments

Winbond Electronics

Corporation Japan 2001.01.05

No. 2 Ueno-Bld.,7-18 , 3 chome, Shinyokohama

Kohoku-ku, Yokohama-shi, 222-0033, Japan JPY 148,500

Research, development and sales of semiconductor parts and components, and

after-sale service

Peaceful River Corporation 1997.03.12 Flemming House,Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands

US$10,720 Investments

Winbond International

Corporation 1995.08.28

Flemming House, Wickhams Cay, P.O. Box 662,

Road Town, Tortola, British Virgin Islands US$104,240 Investments

Winbond Electronics Corporation America

1998.07.01 32 Loockerman Square, suite L-100, Dover, Kent 19904, Delaware

US$58,917 Design, sales and service of semiconductor parts and components


2003.07.25 2F, No. 40, Industrial East 4th Road, Hsinchu Science-Based Industrial Park

NT$50,000

Research, development, design,

manufacturing and sales of Pseudo RAM

and Low-Power SDRAM

Winbond Electronics (H.K.) Ltd.

2008.06.13

Unit 9-11, 22F, JOS Tower Millennium City

2, No 378 Kwun Tong Road, Kowloon, Hong

Kong

HKD 500 Sales and service of semiconductor parts and components

Pine Capital Investment Ltd. 2011.01.12 Unit 9-11, 22F, JOS Tower Millennium City 2, No 378 Kwun Tong Road, Kowloon, Hong

Kong

HKD 10,920 Investments

Winbond Electronics (Suzhou)

Ltd. 2011.06.11

No.8, Zhao Feng Road, Huaqiao Town, Kunshan

City, Jiangsu Province, China RMB 8,639

Research, design, development and sales of integrated circuit and equipments, and

after-sale service

Nuvoton Technology Corp. 2008.04.09 No. 4, Yan Hsing 3rd Road, Hsinchu

Science-Based Industrial Park NT$2,075,544

Research, design, development,

manufacturing and sales of logic IC, 6” fab production, testing, and OEM

Marketplace Management Limited

2000.07.28 P. O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands


Goldbond LLC 2000.09.22 1912 Capitol Ave, Cheyenne, WY 82001 US$43,675 Investments

Nuvoton Electronics

Technology (Shanghai) Ltd. 2001.03.30 27F, No. 2299, Yen An W. Road, Shanghai RMB 16,555

Revision, testing and technology consultation service on IC, system and

related software

Winbond Technology (Nanjing)

Ltd. 2005.09.21

Suite 413-40, Gao Xing Technology Industrial

Development Zone Office Building, Nanjing RMB 4,046

Computer software services (except for IC

design)

Pigeon Creek Holding Co., Ltd. 1997.03.12 Flemming House, Wickhams Cay, P.O. Box 662,

Road Town, Tortola, British Virgin Islands US$13,868 Investments

Nuvoton Technology

Corporation America 2008.05.01

2711 Centerville Road, Suite 400, Wilmington,

DE 19808, Delaware US$6,050

Design, sales and service of

semiconductor parts and components

Nuvoton Electronics

Technology (H.K.) Ltd. 1989.04.04

Unit 9-11, 22F, Millennium City 2, No 378

Kwun Tong Road, Kowloon, Hong Kong HKD 107,400

Post-delivery service of semiconductor

parts and components

Nuvoton Electronics

Technology (Shenzhen) Ltd. 2007.02.16

1502,15F, New World Business Center at 6009

Yi Tian Road, Futian District, Shenzhen City RMB 46,434

Computer software services (except for IC

design), computer and peripheral equipment, and wholesale of software


2005.03.21

3rd Floor, Omar Hodge Building, Wickhams Cay

I,PO Box 362, Road Town, Tortola, British

Virgin Islands


Nuvoton Technology Israel Ltd. 2005.03.22 8 Hasadnaot Street, Herzlia B,46130 Israel ILS 1 Design, sales and service of

semiconductor parts and components

Newfound Asian Corporation 1997.03.12 Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands


Baystar Holdings Ltd. 1998.08.18 Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands


131

1.1.3 Profiles on shareholders deemed to have dominant-subordinate relations： None

1.1.4 Profiles of directors, supervisors and presidents of affiliates and subsidiaries

Dec. 31, 2012; Unit: shares

Name of enterprise Title Name or Representative Shares held

Shares %


Director

Director

Director

Winbond Electronics Corp. Representative - Arthur Yu-Cheng Chiao

Winbond Electronics Corp. Representative - Tung-Yi Chan

Winbond Electronics Corp. Representative - Robert I.S. Hsu

16,293,000

(Note1) 100%

Winbond Electronics Corporation Japan

Director

Director

Director

Director

Supervisor

Landmark Group Holdings Ltd. Representative - Tung-Yi Chan

Landmark Group Holdings Ltd. Representative - Robert I.S. Hsu

Landmark Group Holdings Ltd. Representative - Tatsuo Okamoto

Landmark Group Holdings Ltd. Representative - James Wen

Landmark Group Holdings Ltd. Representative - Yung Chin

2,970

(Note1) 100%

President Tatsuo Okamoto - -

Winbond International Corporation

Director

Director

Director



Winbond Electronics Corp. Representative - Robert I.S. Hsu

104,240,000

(Note1) 100%

Winbond Electronics Corporation America

Chairman

Director

Director

Director

Director

Director

Director

Winbond International Corporation Representative - Kuang-Yi Chiu

Winbond International Corporation Representative - Arthur Yu-Cheng Chiao

Winbond International Corporation Representative - Tung-Yi Chan

Winbond International Corporation Representative - Yung Chin

Winbond International Corporation Representative - Yuan-Mou Su

Winbond International Corporation Representative - Pei-Ming Chen

Winbond International Corporation Representative - James Wen

3,067

(Note1) 100%

President Eungjoon Park - -

Winbond Electronics (H.K.) Ltd.

Chairman

Director

Director

Director

Winbond Electronics Corp. Representative - Yung Chin

Winbond Electronics Corp. Representative - Pei-Ming Chen

Winbond Electronics Corp. Representative - James Wen

Winbond Electronics Corp. Representative – Jessica C. Huang

500,000

(Note1) 100%

President Pei-Ming Chen - -

Pine Capital Investment Ltd.

Chairman

Director

Director



Winbond Electronics Corp. Representative – Cheng-Kung Lin

10,920,000

(Note1) 100%

President James Wen - -

Winbond Electronics (Suzhou) Ltd.

Chairman

Director

Director

Director

Supervisor

Pine Capital Investment Ltd. Representative - Tung-Yi Chan

Pine Capital Investment Ltd. Representative – James Wen

Pine Capital Investment Ltd. Representative - Yuan-Mou Su

Pine Capital Investment Ltd. Representative - Cheng-Kung Lin

Pine Capital Investment Ltd. Representative - Yung Chin

(Note2) 100%

President Pei-Ming Chen (Note2) -


Chairman

Director

Director

Supervisor

Winbond Electronics Corp. Representative - Wilson Wen


Winbond Electronics Corp. Representative - James Wen

Winbond Electronics Corp. Representative - Jessica C. Huang

5,000,000

(Note1) 100%

President Yuan-Mow Su - -

Nuvoton Technology Corp

Chairman

Director

Director



Winbond Electronics Corp. Representative - Keh-Shew Lu

126,620,087

(Note1) 61%

Director Robert I.S. Hsu 420,328

Director Chi-Lin Wea - -

Director Gary Y.Cheng - -

Nuvoton Technology Corp.

Director Eric Chen - -

Director David Huang - -

Director Yu-Chun Hong - -

Supervisor Yang-Kun Lai - -

Supervisor Chao-Ming Meng - -

Supervisor Lu-Pao Hsu - -

President Robert I.S. Hsu 420,328 -

132

Name of enterprise Title Name or Representative Shares held

Shares %

Marketplace Management Limited

Director

Director

Director

Nuvoton Technology Corp. Representative - Arthur Yu-Cheng Chiao

Nuvoton Technology Corp. Representative - Robert I.S. Hsu

Nuvoton Technology Corp. Representative - Tung-Yi Chan

8,327924

(Note1) 100%

Goldbond LLC

Manager

(Note 3)

Manager

(Note 3)

Manager

(Note 3)

Marketplace Management Limited Representative -Arthur Yu-Cheng Chiao

Marketplace Management Limited Representative - Jessica C. Huang

Marketplace Management Limited Representative - Hsiang-Yun Fan

(Note4) 100%

Nuvoton Electronics Technology (Shanghai) Ltd.

Chairman

Director

Director

Supervisor

Goldbond LLC Representative - Robert I.S. Hsu

Goldbond LLC Representative - Stephen R. M. Huang

Goldbond LLC Representative - Hsiang-Yun Fan

Goldbond LLC Representative - Yung Chin

(Note5) 100%

President Mau-Sen Chen (Note5) -

Winbond Technology (Nanjing) Ltd.

Chairman

Director

Director

Goldbond LLC Representative - Stephen R. M. Huang

Goldbond LLC Representative - Robert I.S. Hsu

Goldbond LLC Representative - James Wen

(Note6) 100%

President Mau-Sen Chen (Note6) -

Pigeon Creek Holding Co., Ltd.

Director

Director

Director


Nuvoton Technology Corp. Representative - Tung-Yi Chan


13,867,925

(Note1) 100%

Nuvoton Technology Corporation America

Chairman

Director

Director

Director

Director

Pigeon Creek Holding Co., Ltd. Representative - Wen Chu

Pigeon Creek Holding Co., Ltd. Representative - Robert I.S. Hsu

Pigeon Creek Holding Co., Ltd. Representative - Stephen R. M. Huang

Pigeon Creek Holding Co., Ltd. Representative - Tung-Yi Chan

Pigeon Creek Holding Co., Ltd. Representative - Hsiang-Yun Fan

60,500

(Note1) 100%

President Saleel Awsare - -


Director

Director

Director



Nuvoton Technology Corp. Representative – James Wen

21,000,000

(Note1) 100%

Nuvoton Technology Israel Ltd.

Chairman

Director

Director

Director

Director

Director

Nuvoton Investment Holding Ltd. representative – His-Jung Tsai

Nuvoton Investment Holding Ltd. representative - Por-Yuan Huang

Nuvoton Investment Holding Ltd. representative – Hsiang-Yun Fan

Nuvoton Investment Holding Ltd. representative - Robert I.S. Hsu

Nuvoton Investment Holding Ltd. representative – Biranit Levany

Nuvoton Investment Holding Ltd. representative – Erez Naory

1,000

(Note1) 100%

President Por-Yuan Huang - -

Nuvoton Electronics Technology (H.K.) Ltd.

Chairman

Director

Director

Director


Nuvoton Technology Corp. Representative - Yung Chin

Nuvoton Technology Corp. Representative - Hsiang-Yun Fan

Nuvoton Technology Corp. Representative -Bosco Chi-Sing Law

107,400,000

(Note1) 100%

President Nuvoton Technology Corp. Representative -Bosco Chi-Sing Law - -

Nuvoton Electronics Technology (Shenzhen) Ltd.

Chairman

Director

Director

Supervisor

Nuvoton Electronics Tech. (H.K.) Ltd. Representative - Stephen R. M. Huang

Nuvoton Electronics Tech. (H.K.) Ltd. Representative - Robert I.S. Hsu

Nuvoton Electronics Tech. (H.K.) Ltd. Representative - Hsiang-Yun Fan

Nuvoton Electronics Tech. (H.K.) Ltd. Representative - His-Yung Lin

(Note7) 100%

President Bosco Chi-Sing Law (Note7) -

President Yung Chin - -

Peaceful River Corporation

Director

Director

Director

Win Investment Corp. Representative - Arthur Yu-Cheng Chiao

Win Investment Corp. Representative - Tung-Yi Chan

Win Investment Corp. Representative - Yung Chin

10,720,000

(Note1)

100%

Newfound Asian Corporation

Director

Director

Director




6,555,000

(Note1) 100%

Baystar Holdings Ltd.

Director

Director

Director

Newfound Asian Corporation Representative - Arthur Yu-Cheng Chiao

Newfound Asian Corporation Representative - Tung-Yi Chan

Newfound Asian Corporation Representative - Robert I.S. Hsu

22,590,000

(Note1) 100%

Note 1: Institutional Shareholder

133

Note 2: Winbond Electronics (Suzhou)Ltd. is not share issuing limited liability companies.

Note 3: Goldbond LLC adopts the manager system.

Note 4: Goldbond LLC is not share issuing limited liability companies.

Note 5: Nuvoton Electronics Technology (Shanghai) Ltd. is not share issuing limited liability companies.

Note 6: Winbond Technology (Nanjing) Ltd., is not share issuing limited liability companies.

Note 7: Nuvoton Electronics Technology (Shenzhen) Ltd. is not share issuing limited liability companies.

134

1.1.5 Business overview of affiliates and subsidiaries Dec. 31, 2012 Unit: NT$1,000

Name of enterprise Capital Total Assets Total

liabilities Book Value Revenue

Operating

Profit (loss)

Net Profit

(loss)

Net earnings

(loss) per

share (NTD)

Landmark Group Holdings Ltd. 299,490 240,849 190 240,659 9,065 (13,733) (13,733) (1.33)

Winbond Electronics Corporation Japan 49,955 328,696 133,638 195,058 2,575,000 27,369 24,182 8,142.09

Peaceful River Corporation 311,309 56,791 12,239 44,552 29 (18,929) (18,929) (1.77)

Winbond International Corporation 3,027,130 1,578,098 31,711 1,546,387 17,203 16,599 16,599 0.16

Winbond Electronics Corporation America 1,710,955 1,222,108 39,321 1,182,787 591,119 17,022 17,203 5,609.06

Mobile Magic Design Corporation 50,000 70,777 16,684 54,093 122,480 3,727 3,126 0.63

Winbond Electronics (H.K.) Ltd. 1,874 437,383 456,312 (18,929) 3,763,829 (2,613) (1,083) (2.17)

Pine Capital Investmenr Ltd. 40,917 38,110 426 37,684 1 (3,590) (3,590) (0.33)

Winbond Electronics (Suzhou) Ltd. 39,913 88,073 51,177 36,896 243,869 (4,027) (3,081) (註 1)

Nuvoton Technology Corp. 2,075,544 4,822,790 1,782,302 3,040,488 7,160,090 714,289 627,703 3.02

Marketplace Management Limited 241,843 76,368 40 76,328 0 (12,763) (12,763) (1.53)

Goldbond LLC 1,287,565 77,862 1,977 75,885 3,205 (12,467) (12,467) (註 1)

Nuvoton Electronics Technology (Shanghai) Ltd. 76,486 86,719 8,953 77,766 34,624 (13,266) 3,201 (註 1)

Winbond Technologies (Nanjing) Ltd. 18,691 1,397 3,234 (1,837) 0 0 2 (註 1)

Pigeon Creek Holding Co., Ltd. 402,725 154,432 13,494 140,938 5,674 5,478 5,478 0.40

Nuvoton Technology Corporation America 175,692 228,286 74,560 153,726 617,611 13,831 5,674 93.79

Nuvoton Electronics Technology (H.K.) Ltd. 402,428 496,119 88,555 407,564 1,818,636 (1,353) 617 0.01

Nuvoton Electronics Technology (Shenzhen) Ltd. 214,534 212,767 11,346 201,421 66,808 (6,604) 270 (註 1)

Nuvoton Investment Holding Ltd. 609,840 263,770 27 263,743 18,954 18,676 18,676 0.89

Nuvoton Technology Israel Ltd. 8 321,148 58,643 262,505 525,428 20,209 18,954 18,954.02

Newfound Asian Corporation 190,357 60,909 40 60,869 0 (261) (261) (0.04)

Baystar Holdings Ltd. 656,014 38,172 40 38,132 0 (119) (119) (0.01)

Note 1: Goldbond LLC, Nuvoton Electronics Technology (Shanghai) Ltd. Winbond Technology (Nanjing) Ltd., and Nuvoton Electronics Technology

(Shenzhen) Ltd., Winbond Electronics (Suzhou) Ltd. are not share issuing limited liability companies

Note 2: Exchange rates of items of “total assets and total liabilities”: 1 USD= 30.275 NTD；1JPY= 0.3906 NTD；1RMB= 4.8049 NTD; 1 ILS=

7.9250 NTD

Note 3: Exchange rates of items of “profit and loss”：1 USD=29.39 NTD；1 JPY= 0.3689 NTD；1 RMB = 4.5485NTD; 1 ILS= 8.2226 NTD

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