Unless stated otherwise, the discussion and analysis of our financial condition and results of operations in this section apply to our financial information as prepared in accordance with IFRS Accounting Standards. You should read the following discussion of our financial condition and results of operations together with the consolidated financial statements and the notes to such statements included in this Annual Report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” or in other parts of this Annual Report on Form 20-F. For the convenience of readers, NT dollar amounts used in this section for, and as of, the year ended December 31, 2025, have been converted into U.S. dollar amounts using US$1.00 = NT$31.37, the foreign currency exchange rate on December 31, 2025, as released by the Board of Governors of the Federal Reserve System. The U.S. dollar conversion appears in parentheses next to the relevant NT dollar amount. Overview We are one of the world’s leading independent semiconductor foundries, providing comprehensive wafer fabrication services and technologies to our customers based on their designs. Cyclicality of the Semiconductor Industry As the semiconductor industry is highly cyclical, our revenues have varied significantly over this period. In recent years, the industry has undergone a shift in demand in response to several prevalent trends, including the widespread implementation of 5G communications, the proliferation of the Internet of Things, and the advancement and adoption of electric vehicles and related technologies. After experiencing a period of sustained growth, there were inevitably cases of repeated orders to foundries, resulting in higher-than-normal inventory levels. In addition, the foundry industry was adversely affected by various factors, such as the war in Ukraine and COVID-19 lockdown measures and reopening in China, and faced sluggish demand and inventory adjustments in 2023. Although industry conditions have gradually improved since then, these challenges have continued to weigh on overall demand and have prevented a full recovery to the peak utilization levels experienced in prior up-cycles. Our average capacity utilization rate was 68.5%, 68.7% and 75.2% for the years ended December 31, 2023, 2024 and 2025, respectively. We believe that our operating results continue to reflect the ongoing uncertainty in the global economy. Pricing We price our products on either a per die or a per wafer basis, taking into account a variety of factors, including the complexity of the technology, the prevailing market conditions, the order size, the cycle time, the strength and history of our relationship with the customer and our capacity utilization. Because semiconductor wafer prices tend to fluctuate frequently, we regularly review our pricing on a quarterly basis. As a majority of our costs and expenses are fixed or semi-fixed in nature, fluctuations in our products’ average selling price historically have had a substantial impact on our margins and profitability. Our average selling price decreased by 5.0% from 2023 to 2024 and decreased by 5.4% from 2024 to 2025, which reflects the nominal price erosion in 2024 and 2025. We believe that our current level of pricing is comparable to that of other leading foundries in each respective geometry. We believe that our ability to provide a wide range of advanced foundry services and process technologies as well as large manufacturing capacity will enable us to provide competitive pricing with other leading foundries at a comparable price level. Capacity Utilization Rates Our operating results are characterized by relatively high fixed costs. In 2023, 2024 and 2025, approximately 63.9%, 69.6% and 70.8%, respectively, of our manufacturing costs consisted of depreciation, a portion of indirect material costs, amortization of license fees, indirect labor and utilities costs. If our utilization rates increase, our costs would be allocated over a larger number of units, which generally leads to lower unit costs. As a result, our capacity utilization rates can significantly affect our margins. Our utilization rates have varied from period to period to reflect our production capacity and market demand. Our average capacity utilization rate was 68.5%, 68.7% and 75.2% for the years ended December 31, 2023, 2024 and 2025, respectively. Utilization rates were primarily affected by global macroeconomic factors. Other factors affecting utilization rates are efficiency in production facilities, product flow management, the complexity and mix of the wafers produced, overall industry conditions, the level of customer orders, mechanical failure, disruption of operations due to expansion of operations, relocation of equipment or disruption of power supply, acquisition and disposition of foundry assets, and fire or natural disaster. 39 Table of Contents Our production capacity is determined based on the capacity ratings of the equipment in the fab, provided by engineers, adjusted for, among other factors, actual output during uninterrupted trial runs, expected down time due to set up for production runs and maintenance, expected product mix and research and development. Because these factors include subjective elements, our measurement of capacity utilization rates may not be comparable to those of our competitors. Change in Product Mix and Technology Migration Because the price of wafers processed with different technologies varies significantly, the mix of wafers that we produce is among the primary factors that affect our revenues and profitability. The value of a wafer is determined principally by the complexity and performance of the processing technology used to produce the wafer, as well as by the yield and defect density. Production of devices with higher levels of functionality and performance, with better yields and lower defect density as well as with greater system-level integration requires better manufacturing expertise and generally commands higher wafer prices. The increase in price generally has more than offset associated increases in production cost once an appropriate economy of scale is reached. Prices for wafers of a given level of technology generally decline over the processing technology life cycle. As a result, we have continuously been migrating to increasingly sophisticated technologies to maintain the same level of profitability. We introduced our 28-nanometer technology to customers in 2011 and commenced large-scale commercial production in 2014. The development of 22nm started in 2018 and entered into volume production in 2021. The logic and specialty process technology offerings from 22nm as well as 28nm specialty technologies satisfy new market demand as customers adopt our latest 12-inch process solutions. Our 28nm and below technologies contributed approximately 30.7%, 33.7% and 36.8% of our foundry revenue in 2023, 2024 and 2025 respectively. The table below sets forth a breakdown of percentage of our wafer sales by process technologies in 2023, 2024 and 2025. Years Ended December 31, Process Technologies 2023 2024 2025 % % % 14 nanometers and under 0.0 0.0 0.0 28 nanometers 30.7 33.7 36.8 40 nanometers 13.7 13.8 16.1 65 nanometers 19.2 16.0 17.0 90 nanometers 9.6 10.7 7.6 0.11/0.13 micron 10.6 10.2 7.4 0.15/0.18 micron 9.4 10.1 9.5 0.25/0.35 micron 4.8 4.4 4.3 0.50 micron or higher 2.0 1.1 1.3 Total 100.0 100.0 100.0 Manufacturing Yields Manufacturing yield per wafer is measured by the number of functional dice on that wafer over the maximum number of dice that can be produced on that wafer. A small portion of our products is priced on a per die basis, and our high manufacturing yields have allowed us to achieve higher margins. In addition, with respect to products that are priced on a per wafer basis, we believe that our ability to deliver high manufacturing yields generally has allowed us to either charge higher prices per wafer or attract higher order volumes, resulting in higher margins. We continually upgrade our process technologies. At the beginning of each technological upgrade, the manufacturing yield utilizing the new technology is generally lower, sometimes substantially lower, than the yield under the current technology. The yield is generally improved through the expertise and cooperation of our research and development personnel and process engineers, as well as equipment and at times raw material suppliers. Our policy is to offer customers new process technologies as soon as the new technologies have passed our internal reliability tests. Investments Most of our investments were made to improve our market position and for strategy considerations, a significant portion of which are in foundry-related companies including fabless design customers, raw material suppliers and IP vendors. We have, from time to time, disposed of investments for financial, strategic or other purposes in recent years. See “Item 4. Information on the Company—B. Business Overview—Our Investments” for a description of our investments. 40 Table of Contents Treasury Share and Repurchase Programs We have from time to time announced plans, none of which were binding on us, to repurchase up to a fixed amount of our common shares on the Taiwan Stock Exchange at the price range set forth in the plans. On April 24, 2019, our board of directors resolved to purchase up to 200 million common shares on the Taiwan Stock Exchange at a price between NT$8.40 and NT$18.10 per share during the period from April 25, 2019 to June 24, 2019 for cancellation. Our board of directors further resolved to repurchase up to 200 million common shares on the Taiwan Stock Exchange during a two-month period from June 8, 2020 to transfer to employees. We repurchased the total of 105 million common shares from June 8, 2020 through August 7, 2020 at a price between NT$11.55 and NT$23.25, with an average price of NT$15.98 per share. During 2023, 2024 and 2025, we did not purchase any of our common shares. A. Operating Results Operating Revenues We generate our operating revenues primarily from the manufacture and sales of wafers that are fabricated at our foundries. We also derive a small portion of our operating revenues from wafer probe services that we perform internally as well as mask tooling services and assembly and test services that we subcontract to other companies. Operating Costs Our operating costs consist principally of: • overhead, including depreciation and maintenance of production equipment, indirect labor costs, indirect material costs, supplies, utilities and royalties; • wafer costs; • direct labor costs; and • service charges paid to subcontractors for mask tooling, assembly and test services. Our total depreciation expenses were NT$37,758 million, NT$45,472 million and NT$56,427 million (US$1,799 million) in 2023, 2024 and 2025, respectively. Operating Expenses Our operating expenses consist of the following: • Sales and marketing expenses, which consist primarily of salaries expenses, related personnel expenses and mask expenses; • General and administrative expenses, which consist primarily of salaries for our administrative, finance and human resource personnel, fees for professional services, and expenses of computer systems; • Research and development expenses, which consist primarily of salaries and related personnel expenses, research testing related expenses, depreciation on the equipment and expenses of computer systems; and • Expected credit impairment gains (losses). For notes, accounts receivable and contract assets, we apply a simplified approach in calculating expected credit losses (ECLs) and recognize a loss allowance based on lifetime ECLs at each reporting date. ECLs are measured based on our historical credit loss experience and customers’ current financial condition, adjusted for forward-looking factors, such as customers’ economic environment. Net Other Operating Income and Expenses Net other operating income and expenses consist primarily of: • Amortization of deferred government grants related to machinery and equipment; • Gains or losses arising from disposal of property, plant and equipment; and • Net rental income or loss from property. 41 Table of Contents Non-operating Income and Expenses Our non-operating income and expenses primarily consist of the following: 1. Interest income, which is primarily derived from time deposits. 2. Other income, which principally consists of dividend income, which is primarily derived from financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. 3. Other gains and losses, which principally consist of: • gains or losses on valuation of financial assets and liabilities, which are primarily derived from disposal of and changes in the values of financial assets and liabilities classified as fair value through profit or loss; and • gains or losses on disposal of investments, which are primarily derived from our disposal of investments accounted for under the equity method and disposal of a subsidiary. 4. Finance costs, which principally consist of: • interest expenses, which are primarily derived from bonds payable and bank loans; and • financial expenses, which are primarily derived from shareholder services proxy fee. 5. Share of profit or loss of associates and joint ventures, which is primarily derived from the recognition of investee companies’ net profit based on the ownership percentage we hold. 6. Bargain purchase gain, which is derived from the acquisition of significant influence over SILICON INTEGRATED SYSTEMS CORP. (SIS). SIS was previously measured at fair value through other comprehensive income and reclassified as investments accounted for under the equity method. Our share of the net fair value of SIS’s identifiable assets and liabilities was in excess of the fair value of the previously held investment in SIS at the acquisition date, and the difference was recognized as bargain purchase gain. For more information, please refer to Note 6(7) to our audited consolidated financial statements included in this Annual Report. Taxation In the R.O.C., the corporate income tax rate and unappropriated earnings tax rate are 20% and 5%, respectively. Our branch in Singapore enjoys tax exemption for income derived from tax-exempted activities under Singapore’s Income Tax Act and Economic Expansion Incentive (Relief from Income Tax) Act. These tax exemptions resulted in tax savings of approximately NT$1,387 million, NT$422 million and NT$614 million (US$20 million) in 2023, 2024, and 2025, respectively. Under the amendment to the R.O.C. Statute of Industrial Innovation in 2019, the amounts of unappropriated earnings from 2018 and thereafter used for constructing or purchasing buildings, qualified equipment and technology can qualify for deduction when computing the income tax on unappropriated earnings. We also benefit from other tax incentives generally available to technology companies in Taiwan, such as tax credits applicable against corporate income tax that range from 10% to 25% of qualified research and development expenditures and 3% to 5% of the amount of investment in certain qualified equipment and technology. These tax incentives resulted in tax savings of approximately NT$3,074 million, NT$1,652 million and NT$1,050 million (US$33 million) in 2023, 2024, and 2025, respectively. The R.O.C. government enacted the R.O.C. Income Basic Tax Act, also known as the “Alternative Minimum Tax Act,” or the AMT Act, to impose an alternative minimum tax. AMT is a supplemental tax which is payable if the income tax payable pursuant to the R.O.C. Income Tax Act is below the minimum amount prescribed under the AMT Act. Most tax-exempt income under the R.O.C. Income Tax Act is considered to be taxable under the AMT Act, such as eligible income generated during tax holidays and capital gain from selling domestic securities, and tax credits are not allowed to deduct AMT. The tax rate for business entities is 12%. According to the R.O.C. Controlled Foreign Company (CFC) rules enacted in 2016 and implemented since January 1, 2023, certain undistributed profits generated by companies operating in low-tax jurisdictions will be subject to deemed distribution and advance taxation by their Taiwanese parent company. Certain subsidiaries of the Group operate in jurisdictions where OECD Pillar Two legislation has been enacted or substantively adopted. These regulations take effect in phases beginning in 2024, and impose a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum rate. After taking into account the tax exemptions and tax incentives discussed above, we recorded NT$8,311 million, NT$8,370 million and NT$7,903 million (US$252 million) of income tax expenses in 2023, 2024, and 2025, respectively. Our effective income tax rate in 2025 was 16.44%. 42 Table of Contents Comparisons of Results of Operations The following table sets forth some of our results of operations data as a percentage of our operating revenues for the periods indicated. Years Ended December 31, 2023 2024 2025 % % % Operating revenues 100.0 100.0 100.0 Operating costs (65.1 ) (67.4 ) (71.0 ) Gross profit 34.9 32.6 29.0 Operating expenses Sales and marketing (1.4 ) (1.1 ) (1.0 ) General and administrative (3.4 ) (3.1 ) (2.8 ) Research and development (6.0 ) (6.7 ) (7.5 ) Expected credit impairment gains 0.1 0.0 0.0 Subtotal (10.7 ) (10.9 ) (11.3 ) Net other operating income and expenses 1.8 0.5 0.8 Operating income 26.0 22.2 18.5 Non-operating income and expenses 4.8 2.4 1.7 Income from continuing operations before income tax 30.8 24.6 20.2 Income tax expense (3.8 ) (3.6 ) (3.3 ) Net income 27.0 21.0 16.9 Total other comprehensive income (loss) 2.3 4.0 (2.3 ) Total comprehensive income 29.3 25.0 14.6 Net income (loss) attributable to: Shareholders of the parent 26.8 21.0 17.0 Non-controlling interests 0.2 (0.0 ) (0.1 ) Comprehensive income (loss) attributable to: Shareholders of the parent 29.1 25.0 14.7 Non-controlling interests 0.2 (0.0 ) (0.1 ) Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Operating revenues. Operating revenues increased by 2.3% from NT$232,303 million in 2024 to NT$237,553 million (US$7,573 million) in 2025, primarily due to an increased customer demand from 3,446 thousand 12-inch equivalent wafers in 2024 to 3,870 thousand 12-inch equivalent wafers in 2025, partially offset by a decline of 5.4% in average selling price from 2024 to 2025, and a 2.9% appreciation of the NTD against the U.S. dollar in 2025 compared to 2024. Operating costs. Operating costs increased by 7.7% from NT$156,649 million in 2024 to NT$168,647 million (US$5,376 million) in 2025, primarily due to the increase in shipments, the increasing depreciation cost and higher utilities costs. Gross profit and gross margin. Gross profit decreased from NT$75,654 million in 2024 to NT$68,906 million (US$2,197 million) in 2025. Our gross margin decreased from 32.6% in 2024 to 29.0% in 2025, primarily due to an annual decline of 5.4% in average selling price and a 2.9% appreciation of the NTD against the U.S. dollar in 2025 compared to 2024, partially offset by the increase in capacity utilization. Operating income and operating margin. Operating income decreased from NT$51,613 million in 2024 to NT$43,949 million (US$1,401 million) in 2025. Our operating margin decreased from 22.2% in 2024 to 18.5% in 2025. The decrease in operating margin was largely due to the decrease in gross profit as described above. Operating expenses increased by 6.2% from NT$25,365 million in 2024 to NT$26,948 million (US$859 million) in 2025. Sales and marketing expenses. Our sales and marketing expenses decreased by 9.9% from NT$2,702 million in 2024 to NT$2,433 million (US$78 million) in 2025, mainly due to the decrease of NT$290 million (US$9 million) in IP and IP royalty expenses and NT$105 million (US$3 million) in personnel expenses, partially offset by the increase of NT$162 million (US$5 million) in mask expenses. Our sales and marketing expenses as a percentage of our operating revenues decreased from 1.1% in 2024 to 1.0% in 2025. 43 Table of Contents General and administrative expenses. Our general and administrative expenses decreased by 4.6% from NT$7,117 million in 2024 to NT$6,792 million (US$216 million) in 2025, mainly due to the decrease of NT$406 million (US$13 million) in personnel expenses, partially offset by the increase of NT$64 million (US$2 million) in professional services fees. Our general and administrative expenses as a percentage of our operating revenues decreased from 3.1% in 2024 to 2.8% in 2025. Research and development expenses. Our research and development expenses increased by 13.5% from NT$15,616 million in 2024 to NT$17,725 million (US$565 million) in 2025. The increase in research and development expenses was mainly due to the increase of NT$1,338 million (US$43 million) in depreciation on the equipment, NT$571 million (US$18 million) in research expenses, NT$295 million (US$9 million) in IP expenses, NT$82 million (US$3 million) in maintenance expenses, and NT$81 million (US$3 million) in indirect material expenses, partially offset by the decrease of NT$266 million (US$8 million) in personnel expenses and NT$135 million (US$4 million) in computer usage expenses. Our research and development expenses as a percentage of our operating revenues increased from 6.7% in 2024 to 7.5% in 2025. Expected credit impairment gains (losses). Our expected credit impairment gains decreased from NT$70 million in 2024 to NT$2 million (US$0 million) in 2025. The decrease in expected credit impairment gains was mainly due to the decrease in reversal of loss allowance on accounts receivable. Our expected credit impairment gains as a percentage of our operating revenues decreased from 0.0% in 2024 to 0.0% in 2025. Net other operating income and expenses. Net other operating income increased by 50.3% from NT$1,324 million in 2024 to NT$1,990 million (US$63 million) in 2025, mainly due to an increase of NT$553 million (US$18 million) in government grants. Net other operating income and expenses as a percentage of our operating revenues increased from 0.5% in 2024 to 0.8% in 2025. Non-operating income and expenses. Non-operating income decreased by 23.9% from NT$5,432 million in 2024 to NT$4,133 million (US$132 million) in 2025, mainly due to a decrease of NT$1,392 million in interest income caused by the decline in the average deposit balance and interest rate, a shift from net exchange gains of NT$1,329 million to net exchange losses of NT$583 million, partially offset by a shift in other gains and losses from a loss of NT$303 million in 2024 to a gain of NT$925 million (US$29 million) in 2025, and an increase of NT$1,204 million in other income. The increase in other gains and losses was resulted from an increase on valuation of financial assets and liabilities at fair value through profit or loss, shifting from a loss of NT$321 million in 2024 to a gain of NT$707 million (US$23 million) in 2025. Other comprehensive income (loss). Our other comprehensive income (loss) decreased from an income of NT$9,322 million in 2024 to a loss of NT$5,509 million (US$176 million) in 2025. We attributed this change primarily to the change in exchange differences on translation of foreign operations from a gain of NT$9,056 million in 2024 to a loss of NT$5,340 million (US$170 million) in 2025, the change of unrealized gain (loss) from equity instruments investments measured at fair value through other comprehensive income from a loss of NT$514 million in 2024 to a loss of NT$3,207 million (US$102 million) in 2025, in share of other comprehensive income (loss) of associates and joint ventures which may be reclassified subsequently to profit or loss from a gain of NT$299 million in 2024 to a loss of NT$10 million (US$0 million) in 2025. These gains and losses were partially offset by the change in share of other comprehensive income of associates and joint ventures which will not be reclassified subsequently to profit or loss from a gain of NT$330 million in 2024 to a gain of NT$2,933 million (US$93 million) in 2025. Net income (loss) attributable to the shareholders of the parent. Due to the factors described above, our net income decreased by 17.3% from NT$48,779 million in 2024 to NT$40,360 million (US$1,287 million) in 2025. Comprehensive income (loss) attributable to the shareholders of the parent. Due to the factors described above, our comprehensive income decreased by 40.0% from NT$58,101 million in 2024 to NT$34,851 million (US$1,111 million) in 2025. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 For the comparison of our operating results for the year ended December 31, 2024 to the year ended December 31, 2023, please refer to “Item 5. Operating and Financial Review and Prospects—Operating Results—Comparisons of Results of Operations—Year Ended December 31, 2024 Compared to Year Ended December 31, 2023” of our annual report on Form 20-F filed with the SEC on April 24, 2025. B. Liquidity and Capital Resources The foundry business is highly capital intensive. Our development over the past three years has required significant investments. Additional expansion for the future generally will continue to require significant cash for acquisition of plant and equipment to support increased capacities, particularly for the production of 12-inch wafers, although our expansion program will be adjusted from time to time in response to market conditions and customer demand. In addition, the semiconductor industry has historically experienced rapid changes in technology. To maintain competitiveness at the same capacity, we are required to make adequate investments in plant and equipment. In addition to our need for liquidity to support the substantial fixed costs of capacity expansion and the upgrading of our existing plants and equipment for new technologies, as we ramp up production of new plant capacity, we require significant working capital to support purchases of raw materials for our production and to cover variable operating costs such as labor costs until production yields provide sufficiently positive margins for a fabrication facility to produce operating cash flows. 44 Table of Contents Resource for Liquidity We have financed our capital expenditure requirements in recent years from operating cash inflows, bank borrowings, as well as the issuance of corporate bonds. Operating cash inflows significantly exceed operating income, reflecting the significant non-cash depreciation expense. Our working capital is sufficient for our present requirements at least in the next 12 months. As of December 31, 2025, we had NT$110,660 million (US$3,528 million) of cash and cash equivalents and NT$569 million (US$18 million) of current financial assets at fair value through profit or loss. As of December 31, 2025, our cash and cash equivalents were primarily held in U.S. dollars, New Taiwan dollars and Renminbi. Cash equivalents included time deposits with original maturities of three months or less and repurchase agreements collateralized by government bonds and corporate notes. These agreements bore interest rates ranging from 0.71% to 0.85%, 0.85% to 0.98% and 0.84% to 0.98%, in 2023, 2024 and 2025, respectively. The terms of these agreements were typically less than one month. As of December 31, 2023, 2024 and 2025, we held repurchase agreements in the amount of NT$1,948 million, NT$6,098 million and NT$7,639 million (US$244 million), respectively. As of December 31, 2025, we had US$22 million outstanding in foreign currency forward contracts to sell U.S. dollars against NT dollars for hedging purposes. In mid-June 2014, we issued an aggregate principal amount of NT$5,000 million of seven-year and ten-year domestic unsecured corporate bonds, with a denomination of NT$1 million per bond. The seven-year domestic unsecured corporate bond was issued with an aggregate principal amount of NT$2,000 million with an annual coupon bearing an interest rate of 1.7%. The ten-year domestic unsecured corporate bond was issued with an aggregate principal amount of NT$3,000 million with an annual coupon bearing an interest rate of 1.95%. All the principal has been fully repaid. The proceeds of this bond offering were used for repayment of debts. In late March 2017, we issued another five-year and seven-year domestic unsecured corporate bonds totaling NT$8,300 million, with a face value of NT$1 million per unit. The five-year domestic unsecured corporate bond was issued in the amount of NT$6,200 million. Interest is due and payable annually at 1.15%, and the principal was repaid in March 2022. The seven-year domestic unsecured corporate bond was issued in the amount of NT$2,100 million. Interest is due and payable annually at 1.43%, and the principal was repaid in March 2024. The proceeds of this bond offering were used for repayment of debts. In early October 2017, we issued another five-year and seven-year domestic unsecured corporate bonds totaling NT$5,400 million, with a face value of NT$1 million per unit. The five-year domestic unsecured corporate bond was issued in the amount of NT$2,000 million. Interest is due and payable annually at 0.94%, and the principal was repaid in October 2022. The seven-year domestic unsecured corporate bond was issued in the amount of NT$3,400 million. Interest is due and payable annually at 1.13%, and the principal was repaid in October 2024. The proceeds of this bond offering were used for repayment of debts. In late April 2021, we issued another five-year, seven-year and ten-year domestic unsecured corporate bonds totaling NT$9,600 million, with a face value of NT$1 million per unit. The five-year domestic unsecured corporate bond was issued in the amount of NT$5,500 million. Interest is due and payable annually at 0.57%, and the principal will be repayable in April 2026 upon maturity. The seven-year domestic unsecured corporate bond was issued in the amount of NT$2,000 million. Interest is due and payable annually at 0.63%, and the principal will be repayable in April 2028 upon maturity. The ten-year domestic unsecured corporate bond was issued in the amount of NT$2,100 million. Interest is due and payable annually at 0.68%, and the principal will be repayable in April 2031 upon maturity. The proceeds of this bond offering were used for purchasing machinery and equipment and environmental protection related expenditures. As of December 31, 2025, NT$9,600 million aggregate principal amount of these bonds were outstanding. In early July 2021, we issued zero coupon exchangeable bonds due 2026. The exchangeable bond offerings consist of US$400 million bonds exchangeable into common shares of Novatek Microelectronics Corp., Ltd., or Novatek. As of December 31, 2025, no bonds had been exchanged into common shares of Novatek and we had repurchased and cancelled the outstanding principal amount of exchangeable bonds totaling US$187 million in 2022. In mid-December 2021, we issued another five-year domestic unsecured corporate bonds totaling NT$5,000 million, with a face value of NT$1 million per unit. Interest is due and payable annually at 0.63%, and the principal will be repayable in December 2026 upon maturity. The proceeds of this bond offering were used for purchasing machinery and equipment. As of December 31, 2025, NT$5,000 million aggregate principal amount of these bonds were outstanding. In mid-September 2023, we issued another five-year domestic unsecured corporate bonds totaling NT$10,000 million, with a face value of NT$1 million per unit. Interest is due and payable annually at 1.62%, and the principal will be repayable in September 2028 upon maturity. The proceeds of this bond offering were used for green building. As of December 31, 2025, NT$10,000 million aggregate principal amount of these bonds were outstanding. 45 Table of Contents In late June 2025, we issued two series of five-year domestic unsecured corporate bonds totaling NT$5,200 million, with a face value of NT$1 million per unit. The five-year domestic unsecured corporate bond was issued in the amount of NT$2,000 million. Interest is due and payable annually at 1.94%, and the principal will be repayable in June 2030 upon maturity. Another five-year domestic unsecured corporate bond was issued in the amount of NT$3,200 million. Interest is due and payable annually at 1.99%, and the principal will be repayable in June 2030 upon maturity. The proceeds of this bond offering were used for environmental protection related expenditures and repayment of debts. As of December 31, 2025, NT$5,200 million aggregate principal amount of these bonds were outstanding. In late August 2025, we issued another three-year domestic unsecured corporate bonds totaling NT$5,000 million, with a face value of NT$1 million per unit. Interest is due and payable annually at 1.80%, and the principal will be repayable in August 2028 upon maturity. The proceeds of this bond offering were used for repayment of debts. As of December 31, 2025, NT$5,000 million aggregate principal amount of these bonds were outstanding. In late October 2025, we issued another three-year domestic unsecured corporate bonds totaling NT$5,000 million, with a face value of NT$1 million per unit. Interest is due and payable annually at 1.70%, and the principal will be repayable in October 2028 upon maturity. The proceeds of this bond offering were used for repayment of debts. As of December 31, 2025, NT$5,000 million aggregate principal amount of these bonds were outstanding. In early December 2025, we issued another three-year and five-year domestic unsecured corporate bonds totaling NT$4,800 million, with a face value of NT$1 million per unit. The three-year domestic unsecured corporate bond was issued in the amount of NT$2,300 million. Interest is due and payable annually at 1.55%, and the principal will be repayable in December 2028 upon maturity. The five-year domestic unsecured corporate bond was issued in the amount of NT$2,500 million. Interest is due and payable annually at 1.60%, and the principal will be repayable in December 2030 upon maturity. The proceeds of this bond offering were used for repayment of debts. As of December 31, 2025, NT$4,800 million aggregate principal amount of these bonds were outstanding. Operating Activities In 2025, net cash provided by operating activities was NT$99,864 million (US$3,183 million), primarily due to net income before income tax of NT$48,082 million (US$1,533 million) and the add-back of non-cash items, such as depreciation and amortization in the amount of NT$59,259 million (US$1,889 million). In 2024, net cash provided by operating activities was NT$93,872 million, primarily due to net income before income tax of NT$57,045 million and the add-back of non-cash items, such as depreciation and amortization in the amount of NT$48,168 million. In 2023, net cash provided by operating activities was NT$86,000 million, primarily due to net income before income tax of NT$68,450 million and the add-back of non-cash items, such as depreciation and amortization in the amount of NT$40,484 million. Investing Activities In 2025, net cash used in investing activities was NT$53,154 million (US$1,694 million), primarily due to cash used for acquisition of property, plant and equipment amounting to NT$47,745 million (US$1,522 million) and net increase of financial assets measured at amortized cost amounting to NT$8,263 million (US$263 million). In 2024, net cash used in investing activities was NT$85,941 million, primarily due to cash used for acquisition of property, plant and equipment amounting to NT$88,544 million. In 2023, net cash used in investing activities was NT$97,787 million, primarily due to cash used for acquisition of property, plant and equipment amounting to NT$91,474 million and net increase of financial assets measured at amortized cost amounting to NT$5,617 million. Financing Activities In 2025, net cash used in financing activities was NT$39,204 million (US$1,250 million), primarily due to NT$35,784 million (US$1,141 million) for cash dividend payment and NT$21,796 million (US$695 million) due to net decrease in bank loans, partially offset by NT$19,984 million (US$637 million) due to bonds issued. In 2024, net cash used in financing activities was NT$39,200 million, primarily due to NT$37,586 million for cash dividend payment. In 2023, net cash used in financing activities was NT$29,086 million, primarily due to NT$45,015 million for cash dividend payment and NT$21,209 million for payment of other financial liabilities, partially offset by NT$17,388 million due to net increase in bank loans, NT$10,423 million due to net increase in guarantee deposits and NT$9,989 million due to bonds issued. 46 Table of Contents We had bonds payable of NT$50,228 million (US$1,601 million) in the aggregate as of December 31, 2025. The following table sets forth our outstanding long-term bank loans as of December 31, 2025: Unsecured long-term bank loans Secured long-term bank loans (in NT$ millions) (in US$ millions) (in NT$ millions) (in US$ millions) Due in 2026 2,924 93 107 4 Due in 2027 2,939 94 97 3 Due in 2028 4,670 149 88 3 Due in 2029 2,055 66 39 1 Due in 2030 1,350 43 39 1 Due in 2031 & thereafter 12 0 12 0 The interest rates of our long-term bank loans range from 1.53% to 2.98%. As of December 31, 2025, the current or exchangeable portion of bonds due within one year was NT$16,157 million (US$515 million), and the current portion of long-term bank loans due within one year was NT$3,031 million (US$97 million). Capital Expenditures We will continue to employ a ROI-driven approach in our capital expenditure planning as our expansion projects will be supported by customers who have signed multi-year supply agreements with us. As of December 31, 2025, our construction contracts amounted to NT$24,191 million (US$771 million) and the portion of the contracts not yet recognized was approximately NT$5,454 million (US$174 million). In 2023, 2024 and 2025, we incurred capital expenditures of approximately NT$94,087 million, NT$91,052 million and NT$50,562 million (US$1,612 million), respectively, primarily to purchase equipment for research and development and production at our fabs. On February 24, 2022, our board of directors approved a plan to build a new advanced manufacturing facility next to our existing 300mm fab (Fab 12i) in Singapore. The first phase of this greenfield fab is expected to have a design capacity of 30,000 wafers per month, with production expected to commence in the second half of 2026. The new fab (Fab 12i P3) will utilize 28nm and 22nm process technologies. Contractual Obligations Our material cash requirement for known contractual obligation came from bonds, loans, lease obligation, commitment for purchase obligations and the guarantee deposits. As of December 31, 2025, the total contractual cash obligations, including the amounts which has yet been recorded on our balance sheet as of December 31, 2025, are NT$193,028 million (US$6,153 million), among which NT$86,811 million (US$2,767 million) will be due within one year and NT$106,217 million (US$3,386 million) will be due after one year. In addition, as part of the normal course of business, we have entered into multi-year contract to purchase renewable energy. We will purchase more than 30 billion kilowatt-hours of Offshore Wind Power over least 30 years. The amounts to be paid under this contract will be based on the actual volumes of electricity to be generated by the power generation equipment specified in the contract. Our payment obligations under this contract are not readily determinable. Transactions with Related Parties See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” and Note 7 to our audited consolidated financial statements included in this Annual Report. C. Research, Development, Patents and Licenses The semiconductor industry is characterized by rapid changes in technology, frequently resulting in obsolescence of process technologies and products. As a result, effective research and development is essential to our success. We invested approximately NT$13,284 million, NT$15,616 million and NT$17,725 million (US$565 million) in 2023, 2024 and 2025, respectively, in research and development, which represented 6.0%, 6.7% and 7.5%, respectively, of operating revenues for such years. Following our operation and development planning, our IP division has formulated strategies and plans for the protection and development of intellectual property to promote the steady growth of the number of patent rights. Status on the implementations is reported to the board of directors at least once a year. We were granted a total of 623 domestic and foreign patents in 2025, 303 of which are US patents, 176 R.O.C. (Taiwan) patents, 95 China patents, and 49 patents from the rest of the world. The total accumulated number of our patents is more than 16,700, which can provide a thorough and strong IP foundation for our technologies. 47 Table of Contents Our current research and development activities seek to optimize the use of available capacity by developing specialty technology platforms into existing technology nodes. Although we emphasize firm-wide participation in the research and development process, we maintain central research and development teams primarily responsible for developing cost-effective technologies that can serve the manufacturing needs of our customers. We believe we have a strong foundation in research and development and intend to continue our efforts on technology developments. Our management believes in the value of continued support of research and development efforts and intends to continue our foundry position by providing customers with comprehensive technology solutions in the industry. D. Trend Information Please refer to “Item 5. Operating and Financial Review and Prospects—Overview” for a discussion of the most significant recent trends in our production, sales, costs and selling prices. In addition, please refer to discussions included in this Item 5 for a discussion of known trends, uncertainties, demands, commitments and events that we believe are reasonably likely to have a material effect on our operating revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. E. Critical Accounting Estimates Please refer to Note 5 to our audited consolidated financial statements included elsewhere in this Annual Report.