ASMi Annual Report 2012 - ASM International

ASMi Annual Report 2012 - ASM International

ANNUAL REPORT 2012 L AYERING THE FUTURE ASM INTERNATIONAL  |  ANNUAL REPORT 2012  TABLE OF CONTENTS ASMI AT A GLANCE ABOUT ASMI LETTER TO SHAREH...

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ANNUAL REPORT 2012

L AYERING THE FUTURE

ASM INTERNATIONAL  |  ANNUAL REPORT 2012



TABLE OF CONTENTS ASMI AT A GLANCE ABOUT ASMI LETTER TO SHAREHOLDERS STRATEGY & FOCUS AREAS CORPORATE RESPONSIBILITY OUR MANAGEMENT INVESTOR RELATIONS & OTHER INFORMATION ASM INTERNATIONAL WORLDWIDE CORPORATE GOVERNANCE REPORT OF THE SUPERVISORY BOARD TECHNOLOGY LAYERING THE FUTURE FORM 20-F FINANCIAL STATEMENTS

3 6 8 11 16 22 24 25 30 40 43 46 50 133

2

CONTENTS

ASMI at a glance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

3

ASMI AT A GLANCE

ASM International NV (ASMI) is a leading supplier of semiconductor equipment, materials and process solutions for the wafer processing, assembly & packaging, and surface mount technology markets. Our customers include all of the top semiconductor device manufacturers in the world. We help them create faster, cheaper and more powerful semiconductors that bring greater opportunities for people to understand, create and share more.

Sales EUR million

Cash EUR million

Operating result (EBIT) EUR million

1,418 290 88 Debt EUR million

81 Operational cash flow EUR million

42

Bookings EUR million

Net earnings (on common shares) EUR million

1,377 7 Earnings per share (diluted) EUR

Staff FTE

0.13 17,404

CONTENTS

ASMI at a glance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

4

ASMI AT A GLANCE KEY FIGURES YEAR ENDED DECEMBER 31, EUR In euros and US dollars (millions, except per Share data and full-time equivalents)

EUR

EUR

EUR

EUR

US $

1)

2008

2009

2010

2011

2012

2012

Net sales:

747

591

1,223

1,634

1,418

1,871

Front-end

297

160

293

456

370

489

Back-end

451

430

930

1,178

1,048

1,382

Earnings (loss) from operations

60

(25)

329

367

88

116

Net earnings (loss) 2):

57

(68)

243

316

40

53

Shareholder of the parent

18

(108)

111

187

7

9

Minority interest

38

39

132

129

33

44

Net working capital 3)

254

181

289

430

477

629

Total assets

768

852

1,214

1,582

1,500

1,978

(4)

(29)

(125)

(215)

(230)

(303)

Backlog:

91

197

500

331

289

382

Front-end

53

50

163

105

92

121

Back-end

38

146

337

226

198

261

11,714

12.067

16,699

16,194

17,404

17,404

Operations:

Allocation of net earnings (loss)

Balance sheet:

Net debt (cash) 4)

Number of staff: Full-time equivalents: Front-end

1,667

1.294

1,450

1,631

1,636

1,636

Back-end

10,047

10,773

15,249

14,563

15,768

15,768

Basic net earnings (loss)

0.35

(2.08)

2.11

3.38

0.13

0.17

Diluted net earnings (loss)

0.35

(2.08)

2.09

3.16

0.13

0.17

Basic

52,259

51,627

52,435

55,210

56,108

56,108

Diluted

52,389

51,627

62,316

64,682

56,767

56,767

Per Share data: Net earnings (loss) per share (in euro):

Weighted average number of shares used in computing per share amounts (in thousands):

1

2

3

4

For the convenience of the reader, Financial Highlights and Selected Comparative Financial Data for 2012 have been converted into US dollars at the exchange rate according to the European Central Bank of 1,3194 US dollar per euro, at December 30, 2012. Following the adoption of ASC 810(-10 45-23) in 2009 results on dilution of investments in subsidiaries are accounted for directly in equity. The 2009 results and changes in equity have been adjusted accordingly. Net working capital includes accounts receivable, inventories, other current assets, accounts payable, provision for warranty and accrued expenses and other. Since 2009 Evaluation tools at customers are no longer reported under inventories but under non-current assets. The historical figures have been adjusted for this reclassification. Net debt (cash) includes long-term debt, convertible subordinated debt, the conversion option and notes payable to banks, less cash and cash equivalents.

CONTENTS

ASMI at a glance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

5

ASMI AT A GLANCE KEY FIGURES

NET SALES 2012

NET SALES 2011

% by region

% by region Other

Other Malaysia

Malaysia

10.9 6.6

South Korea

6.9

1,418

4.2

Japan

Japan

5.9

EUR MILLION

7.8

China

5.1

South Korea

32.6

6.0

9.5

China

6.7

33.7

1,634 EUR MILLION

Taiwan

Taiwan

11.4

18.0

14.0

USA

Europe

USA

20.7 Europe

NET SALES 2012

CASHFLOW FROM OPERATIONS

EUR million

EUR million

0

300

600

900

1,200

0

2012

2012

2011

2011

2010

2010

2009

2009

Front-end

Back-end

ASMI

100

200

300

CONTENTS

About ASMI

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

6

ABOUT ASMI ASM International NV (ASMI) is a leading supplier of semiconductor equipment, materials and process solutions for the wafer processing, assembly and packaging, and surface mount technology markets. Our customers include all of the top semiconductor device manufacturers in the world. We’re a truly global company. Based in 13 countries, we benefit from a wider perspective and the advantages of bringing together the best brains in the world to create new breakthroughs.

along their technology roadmap. Making integrated circuits or chips

››High-k metal gate; ››Dielectrics for double patterning; ››Low-k dielectrics for interconnect and; ››Strained silicon.

smaller, faster and more powerful for everyone.

Enabling the industry to move to smaller line-widths and better

Our broad portfolio of innovative technologies and products are being used right now by the most advanced semiconductor fabrication plants around the world. Helping them to progress

transistors that use new materials. Our discoveries are resulting The ASMI group includes:

in greater efficiencies for businesses and greater opportunities for

››ASM, a wholly owned subsidiary specializing in wafer processing

everyone.

technologies and products;

››ASM Pacific Technology (ASMPT), in which ASMI holds a substantial ownership of approximately 40%, is a leading supplier

ASSEMBLY & PACKAGING

of semiconductor process equipment for assembly & packaging,

On December 31, 2012 ASMI owned 51.96% of ASM Pacific

and for surface mount technology.

Technology Ltd (ASMPT). ASMPT is the world’s largest assembly & packaging equipment supplier for the semiconductor and LED

WAFER PROCESSING

industries and is a leading supplier of stamped and etched leadframes.

Within wafer processing, we focus on three distinct processes: wafer manufacturing, transistor formation and interconnect.

With headquarters in Hong Kong, and operations in the People’s Republic of China, Singapore and Malaysia, ASMPT offers the

Our core strengths are in Atomic Layer Deposition (ALD), Plasma

most comprehensive leading edge portfolio for all of the major

Enhanced ALD (PEALD), Epitaxy, Plasma Enhanced Chemical

process steps in assembly & packaging, from die attach through to

Vapor Deposition (PECVD), Low Pressure Chemical Vapor

encapsulation.

Deposition (LPCVD) and Oxidation/Diffusion. With this portfolio of established and newer technologies, we’re addressing the key

On March 15, 2013 ASMI reduced its stake in ASMPT to

areas on the semiconductor industry roadmap:

approximately 40%.

CONTENTS

About ASMI

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

7

SURFACE MOUNT TECHNOLOGY

Systems business from Siemens AG. With its headquarters in

In early 2011, ASMPT entered the Surface Mount Technology (SMT)

Munich, Germany, ASM Assembly Systems (ASMAS) offers SMT

market through the acquisition of the Siemens Electronics Assembly

placement tools for the global electronics manufacturing industries.

ASMI AT A GLANCE Founded:

1968

Headquarters:

Almere, the Netherlands

Ticker:

Nasdaq: ASMI. Euronext: ASMI.

Market capitalization:

EUR 1,8 billion

Fiscal 2012 net sales:

EUR 1,418 million

Manufacturing:

Singapore, Malaysia, Hong Kong, Germany and the People's Republic of China

R&D:

Europe, North America and Asia

Employees:

17,404 FTE​

ASM AT A GLANCE ASM is the part of ASMI that handles equipment for Front-end wafer processing for the semiconductor industry.​ Founded:

1968

Headquarters:

Almere, the Netherlands

Fiscal 2012 net sales:

EUR 370 million

Employees:

1,636 FTE

ASMPT AT A GLANCE ASMPT, in which ASMI holds a substantial ownership of approximately 40%, is a leading supplier of semiconductor process equipment for wafer assembly and packaging, and for surface mount technology. Founded:

1975

Headquarters:

Hong Kong, People's Republic of China

Fiscal 2012 net sales:

EUR 1,048 million

Employees:

15,768 FTE

CONTENTS

Letter to shareholders

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

8

LETTER TO SHAREHOLDERS 2012 was a challenging period for our industry. Global economic uncertainty put pressure on customer spending as the year unfolded, resulting in an overall decline in capital expenditures of between 15 and 20% from the prior year. In the second half of 2012, investments in new wafer fab equipment for logic, NAND and DRAM were at relatively low levels. In the foundry segment, however, demand for wafer fab equipment remained relatively strong, which included capacity buys for the 28 nanometer node.

ASMI 2012 consolidated revenues came in at EUR 1.4 billion, 13%

strengthening of the overall operation. For the full year, R&D

below 2011. Front-end net sales declined 19% to EUR 370 million.

expenses were 10% of consolidated net sales, with Front-end

Revenues for technology investments, especially reflected in our

research and development costs up 21%, and Back-end up 12%

ALD and PEALD products held up well, while our other Front-end

from the 2011 level. 8% of this increase is due to currency

product lines were impacted by the market decline. Back-end

movements.

annual revenues decreased 11% to EUR 1,048 million. While revenues for assembly, packaging and SMT equipment fell 23%

The net impact was a significant decline in earnings from operations

year-over-year, our lead-frame business grew 9% from the prior

compared to 2011. Front-end operating income was EUR 0.5 million,

year, posting record revenue.

and Back-end EUR 87.7 million. Net earnings allocated to the shareholders of the parent decreased to EUR 7.1 million, down from

2012 consolidated gross margin was 31%, compared to 35% the

EUR 187 million in 2011, which included EUR 57 million related to the

prior year, with both Front- and Back-end operations experiencing

recognition of the badwill on the acquisition of the Surface Mount

declines of slightly over 4%. The decrease in the Front-end margin

Technology (SMT) business of Siemens.

was mainly the result of efficiency losses early in the year, lower loading of our factories that caused under-absorption, and higher

For the full year 2012, EUR 42 million net cash was provided by

investments in evaluation tools. For Back-end, the decrease in

operations compared to EUR 217 million in 2011. During 2012, we

gross margin was the result of product mix and lower activity levels,

repurchased 1,500,000 common shares for a total consideration of

especially for assembly & packaging equipment, combined with

EUR 41 million. We exercised our option to call the outstanding

lower selling prices.

6.5% convertible subordinated bonds, due 2014. With the conversion of the EUR 150 million issue into 9,1 million shares

Front-end SG&A up 5% over the prior year, and Back-end, up 21%.

ASMI’s Front-end business is debt free. Back-end has

Currencies played an important role causing an increase of 8% both

approximately EUR 80 million in debt. At the 2013 Annual General

for Front-end as well as Back-end. Besides this the increase in

Meeting of Shareholders (AGM) we will propose that the Company

Back-end is reflecting to a large degree costs associated with

declares an ordinary dividend of EUR 0.50 per share.

CONTENTS

Letter to shareholders

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

9

FRONT-END: CONTINUED MOMENTUM IN (PE)ALD

Our cost effective 100mm x 300mm ultra-wide lead-frame

Despite the weak macro-economic environment, momentum in our

multiple very-thin memory dies for flash memory in an ultra-clean

ALD and PEALD technologies remained strong in 2012. Led by a

environment, our comprehensive suite of solutions for various flip

broadening adoption of our ALD and PEALD technologies, we

chip applications, our mold under fill (MUF) solution for encapsulation

qualified new process applications in the logic, memory and foundry

of flip chip packages and the CA (Chip Assembly) machine from

segments, for the 2x and 1x nm technology nodes.

our SMT equipment business unit that supports direct die attach,

packaging solution, our ISLinda die bonder for stack bonding of

flip-chip bonding and placement of SMT components in one pass During the year, we launched two new platforms that feature leading

in large panel format represent other new offerings with advanced

edge process performance with high productivity: the Intrepid XP,

capabilities that have been well-received in 2012 at leading

a four reactor system designed for the deposition of strained ­

edge customers.

silicon-based epitaxial films in advanced CMOS transistors; and, the XP8, an eight reactor PEALD or PECVD platform targeted for

We increased SMT shipments to Asian customers during the

double and quadruple patterning spacers, and other applications.

second half of last year.

This represents a significant step in the further standardization of our product platforms.

In 2012 we launched an aggressive cost reduction program in Back-end. We are adjusting our manufacturing cost structure by

We shipped a 450mm PECVD tool to Albany for testing and

increasing outsourcing to provide more flexibility, especially during

process development and are actively participating in the G450C

industry upturns. In addition, we are intensifying our efforts to

consortium as an associate partner.

further integrate our SMT equipment businesses within ASM Pacific Technology, and accelerate our cost reduction efforts, such as in

Due to the weak market circumstances in 2012 we initiated a cost

the area of insourcing components in the SMT operations.

reduction program in the fourth quarter of 2012, as part of which we announced in December to reduce cost in our manufacturing organization in Singapore.

STUDY At the Annual General Meeting of Shareholders (AGM) held in May

BACK-END: STRONG FIRST HALF, WEAK SECOND HALF

2012, the Company announced that it would carry out a study into the causes of the lack of recognition by the markets of the value of the combined businesses (Front-end and Back-end) of the Company.

In Back-end, our equipment business (IC/discrete, CIS (CMOS

Following that announcement the Company appointed Morgan

Image Sensor) and LED) experienced a strong pick-up during the

Stanley and HSBC Bank plc to act as its financial advisers and to

first half of 2012. Unfavourable economic conditions, however,

assist the Company in carrying out the study.

stalled the momentum during the second half of 2012, as the industry was hit by a slowdown with significantly lower demand

The study was completed in Q1 2013. As reported in the two press

from Chinese customers. 2012 also saw positive strides in our

releases that we issued on March 13, 2013, the Management Board

Back-end business.

and the Supervisory Board of the Company concluded that a partial secondary placement of 8% to 12% of the Company’s stake in

We made significant progress with our new thermal compression

ASMPT was the most suitable step to be taken to address the

bonder technology used in areas such as fine pitch flip chip

non-recognition by the markets of the value of the combined

bonding, system in package and packaging of 2.5D or 3D devices.

businesses of the Company. This course of action was chosen taking

We believe that thermal compression bonding offers significant

into account, amongst others, equity market capacity, tax efficiency

business opportunities and growth potential, driven by future

and ongoing corporate stability at ASMI and ASMPT. This step

generations of mobile devices.

provided flexibility for further action, if deemed appropriate.

CONTENTS

Letter to shareholders

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

10

The Management and Supervisory Boards of the Company have

volume device manufacturing is an area where ASM has

proceeded with this action. The board of directors of ASMPT had

demonstrated technology leadership. As more customers will be

expressed its support to this proposed action. In addition, certain

introducing these new materials in high volume manufacturing in the

major shareholders of the Company representing approximately 27%

2x and 1x node in 2013 and beyond, we expect this to be a major

of the total outstanding shares in the Company were consulted in

driver in the development of ASM Front-end’s top line.

advance with regard to this proposed action and expressed support thereof.

In Back-end, we expect that adoption of 2.5D and 3D packages will accelerate. ASMPT has been investing aggressively in this area,

After this decision had been taken, on March 15, the Company

developing technologies and solutions for both thermal

sold a stake of 12% of the total outstanding share capital in

compression bonding and encapsulation. We expect these

ASM Pacific Technology Ltd (ASMPT) through a partial secondary

investments to deliver meaningful returns in the foreseeable future.

share placement.

In our LED equipment business, we believe that improvements in LED technology and manufacturing, as well as continuous decrease

The Company proposes to distribute EUR 4.25 per ordinary share to

in the pricing of LED will help to expedite the adoption of LED

its shareholders, representing approximately 65% of the cash

general lighting. With our strong market position, we expect that

proceeds from the placement. This distribution will be in addition to

ASMPT will benefit from a possible taking off of the LED general

the proposed ordinary dividend of EUR 0.50 per share. The

lighting market.

remainder of the proceeds of the placement will be used to further strengthen the business of the Company. Following the divestment,

We appreciate the commitment of our workforce, our customers

the Company now owns approximately 40% of the shares in ASMPT.

and shareholders. We remain confident in the future of ASM as we look forward to new opportunities to maximize the value of ASM for

The Company will further report on the outcome of the study at the

all of our stakeholders.

2013 AGM, which is scheduled to take place on May 16, 2013. Almere, the Netherlands

OUTLOOK

April 4, 2013

ASM’s innovative product and process solutions in both Front-end and Back-end are well positioned to benefit from shrink-related capital spending. Our many years of strategic investments and innovations have enabled our core technologies today to provide industry leading solutions that address our current and future customers’ scaling challenges. Mobile devices, including smartphones, tablets and ultrabook

Charles D. (Chuck) del Prado

computers, continue to be the dominant market driver for further

President and Chief Executive Officer

miniaturization and high performance capability at lower power levels. In Front-end, we are currently witnessing a broadening of customer acceptance of atomic layer deposition, by foundry, logic and memory manufacturers. The demand for feature rich portable devices with high performance at lower power levels is driving innovation at our customers, and as a result we are seeing the introduction of new materials in our customers’ leading edge devices at an increasing rate. This area of thin film engineering, and introducing the deposition processes of these new materials in high

CONTENTS

STRATEGY & FOCUS AREAS

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

11

STRATEGY & FOCUS AREAS At ASMI, our long track record as experienced innovation leaders is a result of focusing on key issues. The areas where we can make the greatest difference to our customers. These issues may change over time but one thing will always remain the same – we will keep bringing the results of our breakthrough technologies through to volume manufacturing for the benefit of our customers.

MISSION & STRATEGY Our mission and vision guide all of our activities while our strategy outlines our specific current efforts to realize them.

STRATEGY

››Our strategic objective is to realize profitable, sustainable growth by capitalizing on our technological innovations, manufacturing infrastructure and sales and support offices located close to our

MISSION

global customers. The key elements of our strategy include:

ASMI’s mission is to provide our customers with the most

Further streamlining our wafer processing (Front-end)

advanced, cost-effective, and reliable products, service and global

manufacturing by systematically reducing manufacturing costs

support network in the semiconductor industry and beyond. We bring forward the adoption of our technology platforms by

through global sourcing and consolidating our product platforms;

››Maintaining our global reach through our global operating, sales

developing new materials and process applications that

and customer service organization and its facilities in key parts of

progressively align us with our customers’ long-term technology

the world, in order to establish and maintain long-term customer

roadmaps.

VISION We aim to delight our customers, employees and shareholders by driving innovation with new technologies and delivering excellence with dependable products. By doing this, we’ll create new

relationships;

››Leveraging our combined strong wafer processing (Front-end) and assembly & packaging (Back-end) technology leadership and manufacturing capabilities through advancements in our products and processes early in the technology lifecycle;

››Expanding the scope and depth of our research and development

possibilities for everyone to understand, create and share more of

capabilities through strategic alliances with independent research

what they love.

institutes, universities, customers and suppliers, and expanding our patent portfolio where it is necessary and beneficial.

CONTENTS

STRATEGY & FOCUS AREAS

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

FOCUS AREAS

12

and surface mount technology.

››High-k metal gate; ››Dielectrics for double patterning; ››Low-k dielectrics for interconnect; and ››Strained silicon.

WAFER PROCESSING

Enabling the industry to move to smaller line-widths and better

Within wafer processing, we focus on three distinct processes:

transistors that use new materials. Our discoveries are resulting in

wafer manufacturing, transistor formation and interconnect.

greater efficiencies for businesses and greater opportunities for

ASMI focuses on three parts of the semiconductor industry manufacturing process: wafer processing, assembly & packaging

everyone. Our core strengths are in Atomic Layer Deposition (ALD), Plasma Enhanced ALD (PEALD), Epitaxy, Plasma Enhanced Chemical

ASSEMBLY & PACKAGING

Vapor Deposition (PECVD), Low Pressure Chemical Vapor

On December 31 2012, ASMI owned 51.96% of ASM Pacific

Deposition (LPCVD) and Oxidation/Diffusion. With this portfolio of

Technology Ltd (ASMPT). ASMPT is the world’s largest assembly &

established and newer technologies, we’re addressing the key

packaging equipment supplier for the semiconductor and LED

areas on the semiconductor industry roadmap:

industries and is a leading supplier of stamped and etched lead-frames.

CONTENTS

STRATEGY & FOCUS AREAS

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

13

With headquarters in Hong Kong, and operations in the People’s

Our assembly & packaging business focuses on assembly &

Republic of China, Singapore and Malaysia, ASMPT offers the most

packaging and surface mount technology equipment. For more

comprehensive leading edge portfolio for all of the major process

detail on the markets and products of this business, see our

steps in assembly & packaging, from die attach through to

ASM Pacific Technology website: www.asmpacific.com.

encapsulation.

PRODUCTS On March 15, 2013 ASMI reduced its stake in ASMPT to

Our wafer processing products come from a number of product

approximately 40%.

platforms each designed to host and enable specified process technologies. Products in each product platform are linked by

SURFACE MOUNT TECHNOLOGY

common technology elements like common in-system software

In early 2011, ASMPT entered the Surface Mount Technology (SMT)

framework, common critical components or similar logistics (batch

market through the acquisition of the Siemens Electronics Assembly

or single wafer processing).

Systems business from Siemens AG. With its headquarters in Munich, Germany, ASM Assembly Systems (ASMAS) offers SMT

The XP is our standard single wafer processing platform. It’s

placement tools for the global electronics manufacturing industries.

designed to accommodate ALD, PEALD, PECVD and Epitaxy process application modules with common platform standards.

MARKETS & PRODUCTS

The XP8 is a high productivity platform for PECVD and PEALD. It’s

ASMI is a leading player in the market for semiconductor

based on our common XP platform standard with an expanded

manufacturing equipment. The semiconductor capital equipment

configuration that enables up to eight chambers to be integrated on

market is composed of three major market segments: wafer

one wafer-handling platform.

processing equipment, assembly & packaging equipment, and test equipment.

The A400, A412 and A4ALD are our batch Vertical Furnace products offering Oxidation/Diffusion, LPCVD and ALD.

MARKETS Our wafer processing business supplies equipment to the leading semiconductor manufacturers in the Logic, Foundry and Memory

BREAKTHROUGH TECHNOLOGY

markets, primarily for the deposition of thin films. The Logic market

For 45 years, we’ve grown by meeting customer demand for more

is made up of manufacturers who create chips that are used to

sophisticated wafer processing. From the very start of the

process data, the Foundry market consists of businesses that

semiconductor industry to the present day, we’ve been technology

operate semiconductor fabrication plants to manufacture the

leaders who have pioneered innovation and brought new processes

designs of other semiconductor companies and the Memory

into mainstream manufacturing.

market covers manufacturers who make chips that store information either temporarily or permanently such as Random

RECOGNIZING THE POTENTIAL OF ALD

Access Memory (RAM).

We were one of the first companies to have the vision to realize the potential of Atomic Layer Deposition (ALD) technology for the

We have a strong position in leading edge technologies. Our

semiconductor industry. In 1999, we acquired Microchemistry in

portfolio of Atomic Layer Deposition (ALD) products is an enabling

Finland forming ASM Microchemistry. Originally developed for use in

technology for our customers helping them to manufacture

the oil industry, ALD had already been researched for petrochemical

semiconductor devices at smaller line-widths with new materials

applications for over 20 years. We dedicated a further 8 years R&D

and 3D architectures. We support our customers to introduce new

to turning it into a process that could be used reliably and efficiently

products such as smartphones and tablets with higher performance

by advanced semiconductor chip manufacturers.

and reduced energy consumption.

CONTENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

STRATEGY & FOCUS AREAS

14

INCREDIBLE PRECISION

Using ALD technology, we have been able to scale devices to

What benefits does ALD bring? Using ALD allows semiconductor

45nm and below while reducing the power consumption of

manufacturers to form thin films atom by atom. Creating nanoscale

transistors. All of which helps to keep the industry on Moore’s Law.

structures and devices with unique properties to meet the challenges posed at very small dimensions.

ALD is now our basic platform for the development of a wide range of new materials. Our research centers in Finland, the US, Japan,

To put it in perspective, a 22 nanometer (nm) transistor is roughly

Korea, the Netherlands, and Belgium are working on ALD. We’re

3000 times thinner than a single hair. And a single strand of human

also conducting joint research projects with Europe’s largest

DNA is 2.5 atoms wide. ALD creates films as thin as a single atom

independent research institute IMEC.

thick. All this is helping to make ALD one of the principal drivers of future Building devices, atom by atom, gives us very precise control over

growth in microelectronics.

the process. It means we can deliver deposition materials at a uniform thickness over all types of topographies. Such precision

ALD IS NOW MAINSTREAM

also enables the use of materials that could not be considered

ALD and PEALD are now both mainstream technologies used in

before.

volume manufacturing in the semiconductor industry. ASMI’s ALD technology is now being used to build a wide range of applications

ALD – A DRIVER OF FUTURE GROWTH

such as leading edge products like high performance computers as

Using ALD, we are now able to deposit new materials several

well as wireless handheld smart devices. The results of ALD are

atoms thick on wafers at low temperatures producing ultra-thin

everywhere in the world around us.

films of exceptional quality and uniformity. In Plasma Enhanced ALD (PEALD), plasma is used to further enhance the process.

CONTENTS

STRATEGY & FOCUS AREAS

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

15

ENHANCING INNOVATION

Our research centers in Finland, the US, Japan, Korea, the

Plasma Enhanced ALD (PEALD) is another in the long line of ASMI

Netherlands, and Belgium are all working on ALD. We also have

innovations. It widens the spectrum of materials that can be

joint research projects with Europe’s largest independent research

deposited. Its capability to deposit materials at temperatures as low

institute, IMEC, in Belgium. ASMI is a truly global company. Diversity

as room temperature makes it possible to carry out processes on

means that we get the benefit of wider viewpoints while being able

temperature sensitive substrates like photoresist.

to bring together the best minds in the world to work create new breakthroughs.

This technology is currently in use for Direct Spacer Defined Double Patterning (DSDDP). A technique that can reduce device

We will continue to expand the scope and depth of our research

dimensions at 32nm and below, postponing the need for new

and development capabilities through strategic alliances with

lithography technologies. This is just one example of how ALD

independent research institutes, universities, customers and

continues to open up new possibilities for further process

suppliers. We will also keep expanding our patent portfolio where

breakthroughs.

necessary and beneficial.

GLOBAL R&D

SUSTAINABLE GROWTH FOR THE NEXT DECADE

The key to our success lies in our commitment to Research and

This is just the beginning. Fundamentally, ALD has been around for

Development (R&D). We maintain the widest and most diverse ALD

30 years but as a technology in semiconductor manufacturing it is

development organization in the industry. We’re active at all stages

still relatively new. We expect it to be one of the principal drivers of

in its life cycle, from developing the basic chemistry to implementing

growth in microelectronics over the coming decade. At ASMI, we

at our customer’s production sites.

will continue to develop the huge potential of ALD in support of the semiconductor industry. Helping the industry to support future demands from consumers who want to understand, create and share more of what they love.

CONTENTS

CORPORATE RESPONSIBILITY

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

16

CORPORATE RESPONSIBILITY At ASMI, we help enable leading edge film deposition technologies for semiconductor manufacturing, allowing our customers to introduce electronic devices with better performance at lower power levels. These new technologies increase the quality of life for people everywhere, helping them to understand, create and share more. At the same time, we provide careers for skilled people at our workplaces across the world under good working conditions.

Our continued strong investment in R&D drives fundamental

Our commitment to “Zero Harm” aligns with our core value “Safety

scientific research. We work together with our customers and

First and Everywhere” and our guiding principle “Drive Innovation,

research partners to go beyond the boundaries of what was

Deliver Excellence.”

previously possible. Advancing society through technology. In both our Front-end and Back-end businesses, we pride ourselves in

We are committed to conducting business, both in our own

being responsible corporate citizens. The following addresses

operations and throughout our supply chain, in a manner consistent

our Front-end Corporate Responsibility. More information on our

with the Electronics Industry Citizenship Coalition (EICC) tenets to

Back-end Corporate Responsibility can be found on ASM Pacific

protect our employees, customers, communities, shareholders and

Technology’s website: www.asmpacific.com.

the environment.

ELECTRONICS INDUSTRY CITIZENSHIP COALITION

We strive to earn the trust of all stakeholders through responsible

We are committed to the Electronics Industry Citizenship Coalition

and ethical corporate practices.

(EICC) tenets to conduct our business responsibly in all areas of Environment, Health & safety, Labor, Ethics and Supply chain.

We are committed to an innovative framework during the design, manufacture, distribution and support of our products that meets or

OUR CORPORATE RESPONSIBILITY POLICY

exceeds all applicable regulations in order to minimize

ASMI is committed to making positive contributions to achieve zero

environmental impact and to prevent occupational illness or injury.

harm to our people and planet. We will establish objectives to improve our management systems, standards, culture, and performance. We will conduct periodic reviews of our programs and performance and regularly and transparently update the world on our progress.

CONTENTS

CORPORATE RESPONSIBILITY

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ENVIRONMENT

SUPPLY CHAIN

We strive to minimize our environmental impact on the world around

We are committed to driving our beliefs and the EICC tenets

us across all our operations. We are driving continuous

throughout our supply chain.

17

improvement in our environmental performance through a global ISO14001 certification and a predetermined framework.

ENVIRONMENTAL

HEALTH & SAFETY

At ASMI, we are committed to minimizing our environmental

Zero Harm: every one of our people is committed to this philosophy.

footprint. We believe that we make the world a better place by

We believe all injuries are preventable. We believe we can achieve a

supporting the manufacture of electronic devices that provide

zero injury work environment with the help of all our people. Safety

people with more opportunities. But we believe that we should do

always comes first, every time, everywhere.

this without harming the environment.

LABOR

ISO CERTIFICATION

We set and maintain high standards governing the way we conduct

We are currently ISO14001 certified at most of our worldwide

business. Standards that comprise corporate social responsibility

facilities, and are actively working to attain a global ISO14001

and sound business ethics including compliance with all applicable

certification to unify and standardize the environmental programs

national and international laws and regulations.

throughout our organization.

ETHICS

We believe all of our global operations must contribute in order for

We are committed to conducting our business according to ethical

this to succeed. To drive this, we have set the Global Environmental

standards. These same ethics guide all our interactions with our

Targets as outlined below:

customers, suppliers, competitors and the public. We strive to be trustworthy for everyone.

CONTENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

Our Environmental Performance sets the baseline for these targets:

CORPORATE RESPONSIBILITY

18

CONTENTS

CORPORATE RESPONSIBILITY

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

19

HEALTH & SAFETY

company in order to cause no harm or injury. At ASMI, health

At ASMI, we know that it takes a team to create a safe working

and safety is everyone’s business.We maintain an industry-leading

environment. This includes management support and commitment

Recordable Injury Case Rate (RCR) that we continuously strive

and every employee setting aside sufficient time before each task to

to improve.

assess potential risks. We foster a cooperative spirit throughout the

STOP WORK

LABOR

At ASMI, every employee has the right to STOP WORK for any

We set and maintain standards for the way we conduct business.

safety reason, without any repercussions. This applies regardless of

Our standards comprise corporate social responsibility and sound

the location they are working at or circumstances they are working

business ethics including compliance with all applicable national

under. STOP WORK is an ASMI employee right in any case of any

and international laws and regulations. But, at heart, they are

safety concern.

simple. They are about mutual respect and support and doing what is right for everyone.

PREVENTION We believe that prevention is key to a successful safety program.

GLOBAL STANDARDS

We strongly endorse a “Safety Management By Walking Around”

These standards apply to all categories of ASMI employees.

and “Good Catch” program for all employees to participate in. This

However, they are not meant to describe the full scope of ASMI

program encourages everybody to proactively look for and fix

human resource policies or practices. More detailed statements on

hazards in the working environment.

policies, procedures and practices are contained in documents such as our Code of Ethics and Global Employment Standards. Our Global Employment Standards summarizes our position on key human rights issues and our approach to managing our responsibility to respect human rights through our global operations and value chain. The principles embody common principles laid out by the United Nations in several acts and declarations.

CONTENTS

CORPORATE RESPONSIBILITY

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

20

Managers and employees are required to comply with all ASM

We believe that good, ethical decisions are made when adequate

policies, procedures and practices at all times and are responsible

information and resources are readily available. At the same time,

for consulting their management if they have any questions. Our

we want to be explicit. We do not want to leave any doubt as to

goal is to ensure full compliance with these principles by ASMI

what we expect in terms of ethical business conduct, which is an

managers and employees as well as our suppliers.

integral part of all decision making.

HUMAN RIGHTS

CODE OF ETHICS

We are committed to maintaining and improving our systems and

At ASMI, we have adopted a Code of Ethics that sets out clear

processes to avoid complicity in human rights violations related to

standards in different areas of business life. Its purpose is to

our own operations, supply chain or products. We are currently

promote a clear, strong and consistent culture of ethics that applies

setting up management controls and we will introduce due diligence

to our entire workforce around the globe.

to regularly assess human rights-related risks and potential impacts, review our policies and management processes, and seek input

ETHICS TRAINING

from stakeholders on our approach.​

These ethical standards are necessary. They serve to guide us in making the best possible decisions. But because written standards

ETHICS

alone are not sufficient, we also place great emphasis on training

The principles referenced in our Code of Ethics and Global

our workforce on an annual basis. During training sessions, we

Employment Standards apply without restriction to the whole

present our workforce with dilemmas based on examples derived

workforce of ASMI.

from daily practice. Regular training like this focuses and reinforces the behaviors critical to how we wish to conduct business.

We will work towards an integrated approach to managing human rights across our business. We will appoint review committees in

PERSONAL RESPONSIBILITY

each relevant section of our business. The committees will be

As ASMI employees, each of us is personally responsible for

responsible for conducting due diligence and implementing policies

reading, understanding, embracing and complying with the

and procedures to support our adherence to the principles as laid

guidelines set out in our Code of Ethics as well as other company

down in Global Employment Standards.

policies. We have a duty to personally understand and interpret the standards. What’s more, we are committed to fostering a shared

ETHICS

understanding of the standards through open communication and by acting as role models.

We are committed to upholding ethical standards in our workplace and in our business dealings. Our values are at the basis of

SPEAKING UP

everything we do. They determine our success. They range from

We will speak up if we are in doubt about any action or unclear

working as a team to creating a safe and trustworthy workplace for

about ASMI’s expectations that might conflict with the Code of

our employees. At ASMI, every decision is an ethical decision.

Ethics. We will speak up if asked to engage in conduct that is not consistent with the Code of Ethics. We will speak up if we become

ETHICALLY-BASED DECISIONS

aware of conduct that is not consistent with the Code of Ethics. At

Every day, our employees have to make decisions that impact on

any time, ASMI employees can seek guidance from their manager,

our business, our business partners, our co-workers, and the

the Human Resources Department or the Compliance Officer of our

communities in which we operate. Ultimately, our decisions affect

company on ethical matters.

our reputation as a company. Even simple decisions can require us to simultaneously consider multiple elements.

At ASMI, we are proud of our reputation for honest and fair business dealings. We are committed to creating, facilitating and reinforcing the conditions required to safeguard that reputation.

CONTENTS

CORPORATE RESPONSIBILITY

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

21

SUPPLY CHAIN

ASMI CONFLICT MINERALS POLICY

At ASMI, we see the bigger picture. Our corporate responsibility

As a member of the global corporate community, ASMI has a

does not stop at the factory gates; it applies to everyone across the

strong commitment to its environmental and sustainability programs

world that works with us and that includes all of our suppliers.

and is aware and focused on human rights violations that are associated with the mining of certain minerals under potentially

OUR POLICIES AND OUR SUPPLY CHAIN

violent conditions in certain parts of the world. ASMI supports the

The following extracts from our Corporate Responsibility Policy are

principles endorsed by the Electronic Industry Citizenship Coalition

directly relevant for our relationship with our supply chain.

(EICC) and the Dodd-Frank Wall Street Regulation and Consumer Protection Act to avoid the use of Conflict Minerals.

“ASMI is committed to making positive contributions towards causing no harm to our people or the planet.”

Conflict Minerals refers to minerals or other derivatives including tin, tantalum, gold and tungsten, which when mined in the Democratic Republic of the Congo (DRC) and adjoining countries, directly or indirectly finance armed groups engaged in civil war resulting in social and environmental abuses.

WHAT WE EXPECT FROM OUR SUPPLIERS

ASMI is committed to sourcing components and materials from

We require our supply chain to commit to the Electronic Industry

companies that share these values concerning human rights, ethics

Citizenship Coalition (EICC) tenets to follow guidelines for

and environmental and social sustainability.

performance and compliance with critical Corporate Social Responsibility (CSR) policies, including all areas of Ethics, Labor,

ASMI expects its suppliers to source materials from socially

Environment, Health & safety and Management Systems.

responsible suppliers. ASMI expects its suppliers to comply with all regulations pertaining to Conflict Minerals and to provide all the

CONFLICT MINERALS

necessary declarations. As this is an evolving global issue, ASMI is

We are actively working with our supply chain to address the issue

committed to continuous improvement in this area both for itself

of Conflict Minerals. We require all suppliers to commit to a Conflict

and its supply chain.

Mineral-free supply chain. Our Conflict Mineral policy serves as the basis upon which we operate. We expect our entire supply chain to comply with this policy.

“ASM is committed to conducting business, both in our own operations and throughout our supply chain, in a manner consistent with the Electronics Industry Citizenship Coalition (EICC) tenets to protect our employees, customers, communities, shareholders and the environment.”

CONTENTS

Our Management

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

22

OUR MANAGEMENT SUPERVISORY BOARD GERT-JAN KRAMER1 (1942)

HEINRICH W. KREUTZER3 (1949)

MARTIN C.J. VAN PERNIS5 (1945)

Chairman

Nationality: German

Nationality: Dutch

Nationality: Dutch

Current term expires: 2014

Current term expires: 2014

Current term expires: 2013 Chairman of the Supervisory Board

Chairman of the Supervisory Board

Vice-Chairman of the Board of Damen

of Micronas Semiconductor GmbH

of Batenburg Techniek NV

Shipyards Group NV

in Freiburg, Germany

Chairman of the Supervisory Board of

Member of the Supervisory Board of Fugro NV

Chairman of the Board of Directors of

Dutch Space BV – a subsidiary of EADS

Member of the Supervisory Board

Micronas Semiconductor AG in Zurich,

Vice Chairman of the Supervisory Board

of Bronwaterleiding Doorn

Switzerland

of Aalberts Industries NV

Member of the Supervisory Board

Chairman of the Supervisory Board of

Member of the Supervisory Board

of Energie Beheer Nederland BV

BKtel Communications GmbH, Germany

of Feyenoord Rotterdam NV

Chairman of the Supervisory Board of Delft

Chairman of the Supervisory Board

Technical University

JAN C. LOBBEZOO4 (1946)

of GGZ Delfland

Chairman of the Service Organization

Nationality: Dutch

Chairman of the Supervisory Board

Protestant Churches in the Netherlands

Current term expires: 2013

of SFG/Vlietland Group

Chairman of the Foundation of Friends

President of the Royal Institute

of the Pieterskerk Leiden

Member of the Board of FEI, a US-based

of Engineers – KIVI NIRIA

Chairman of the Board of the Pieterskerk

nanotechnology equipment company

Chairman of the Platform

Leiden

Non-executive Member of the one-tier

‘Vernieuwing Bouw’

Member of the Board of the Foundation

Board of TMC Group NV

Beelden aan Zee Museum

Chairman of the Supervisory Board

Member of the Board of the Frans Hals

of Mapper Lithography BV

ULRICH H.R. SCHUMACHER‍6 (1958)

Museum

Chairman of the Supervisory Board

Nationality: German

Member of the Advisory Board of

of Mutracx BV

Current term expires: 2016

De Nieuwe Kerk Amsterdam

Chairman of the Supervisory Board

Chairman of Amsterdam Sinfonietta

of Salland Engineering BV

Managing Director of CGS Consulting

Chairman of The Hague Philharmonic

Member of the Supervisory Board

Member of the Supervisory Board

Member of the Board of the

of ALSI NV

of Directors of Siano Mobile Silicon

Concertgebouw Fund Foundation

Chairman of the Supervisory Board

Chairman of the Supervisory Board

of the Point One Innovation Fund

of PACT XPP Technologies AG, Munich

JOHAN M.R. DANNEELS2 (1949) Nationality: Belgian Current term expires: 2016 Chief Executive Officer of Essensium NV

1 2 3 4 5 6

Chairman Nomination, Selection and Remuneration Committee Member Nomination, Selection and Remuneration Committee Member of the Audit Committee Chairman of the Audit Committee Member Nomination, Selection and Remuneration Committee Member of the Audit Committee

CONTENTS

Our Management

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

HONORY CHAIRMAN

SENIOR MANAGEMENT

ARTHUR H. DEL PRADO (1931)

CHARLES D. (CHUCK) DEL PRADO

J.M.M. (IVO) RAAIJMAKERS

Chairman of the Management Board,

of Research & Development Front-end

President and Chief Executive Officer

Operations

PETER A.M. VAN BOMMEL

PETER GAUDETTE

Member of the Management Board,

Vice President Operational Excellence

Nationality: Dutch Chairman of the Board of ASM Pacific

23

Chief Technology Officer and Director

Technology Ltd

Chief Financial Officer

BAUKE BROERSMA PER OVE (PEO) HANSSON

Director Global Human Resources

General Manager Thermal Products

Front-end

Business Unit, General Manager ASM America Inc. and

RICHARD W. (DICK) BOWERS

ASM Europe BV

Chief Legal Officer Front-end Operations

TOMINORI YOSHIDA

LEE WAI KWONG

General Manager Plasma Product

Member of the Board of Directors and

Business Unit,

Chief Executive Officer of ASM Pacific

General Manager ASM Japan KK and

Technology Ltd

ASM Genitech Korea Ltd

LO TSAN YIN, PETER FOKKO LEUTSCHER

Member of the Board of Directors and

Vice President Front-end Global Operations

Vice Chairman of ASM Pacific Technology Ltd

TOM WU

CHOW CHUEN, JAMES

Vice President Front-end Global Sales &

Member of the Board of Directors and

Service

Chief Operating Officer of ASM Pacific Technology Ltd

J.F.M. (HAN) WESTENDORP Vice President Corporate Marketing

NG CHER TAT, ROBIN

Front-end

Member of the Board of Directors and Chief Financial Officer of ASM Pacific Technology Ltd

CONTENTS

INVESTOR RELATIONS & OTHER INFORMATION

ASM INTERNATIONAL | ANNUAL REPORT 2012

24

INVESTOR RELATIONS & OTHER INFORMATION INVESTOR RELATIONS

OTHER INFORMATION

Victor Bareño Almere, The Netherlands

TRANSFER AGENTS AND REGISTRARS

TRADEMARK LIST AS OF JANUARY 1, 2013

T: +31 (0)88 100 8500

Citibank

ASM, the ASM International logo, Advance,

E: [email protected]

New York, NY, United States

Aurora, Dragon, Eagle, EmerALD, Epsilon,

Mary Jo Dieckhaus, DD&W LTD

ABN AMRO Bank NV

registered trademarks of ASM International

New York, NY, United States

Amsterdam, the Netherlands

NV A400, A412, ALCVD, Atomic Layer

Intrepid, Polygon, Pulsar and Silcore are

CVD, Loadstar, NCP and PEALD are

T: +1 212 986 2900 E: [email protected]

INDEPENDENT AUDITORS

trademarks of ASM International NV.

Deloitte Accountants BV Amsterdam, the Netherlands

ASM PACIFIC TECHNOLOGY LTD

“The Switch Is On” and “Drive Innovation, Deliver Excellence” are our service marks.

TRADE REGISTER Lee Hung Kuen, Leonard

Chamber of Commerce

AB500B, Cheetah, DreamPAK, DRYLUB,

Hong Kong

Number 30037466

EQUIPMANAGER, EQUIPMGR, FAB Farming, IDEALCompress, IDEALine,

T: +852 24 24 2021 / +852 2619 2529

ANNUAL GENERAL MEETING OF SHAREHOLDERS

IDEALsystem, IDEALab, IDEALNet, PGS,

Jerry Dellheim

The Annual General Meeting of

Ultravac are registered trademarks of ASM

San Jose, CA, United States

Shareholders will be held on May 16, 2013

Pacific Technology Ltd.

FINANCIAL CALENDAR FOR 2013

Eagle60, Harrier, Hummingbird, IDEALmold,

E: [email protected]

SMARTWALK, SOFTEC, SmartSurf and

T: +1 408 451 0804 E: [email protected]

OSPREYLine, TwinEagle, SolarCSI,

April 23, 2013

SolarWIS, SolarMTS, SolarLAS, NANOCU,

Announcement of First Quarter results 2013

SolarXchange, SolarATM and DYNAMAX are trademarks of ASM Pacific Technology.

July 24, 2013 Announcement of Second Quarter results 2013

October 29, 2013 Announcement of Third Quarter results 2013

CONTENTS

ASM INTERNATIONAL WORLDWIDE

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

25

ASM INTERNATIONAL WORLDWIDE

FRONT-END EUROPE

FINLAND

IRELAND

NETHERLANDS

ASM Microchemistry Oy

ASM Services & Support Ireland Ltd

ASM International NV

Väinö Auerin katu 12 A

Unit 23

Versterkerstraat 8

00560 Helsinki

Hills Industrial Estate

1322 AP Almere

T: +358 9 525 540

Lucan, Co Dublin

T: +31 88 100 8810

F: +358 9 525 54600

T: +353 1 621 9100

F: +31 88 100 8830 (HEADQUARTERS)

F: +353 1 628 0206 FRANCE

ASM France SARL

ISRAEL

ASM Europe BV

176, avenue de la Royale

ASM Service & Support Israel Ltd

Versterkerstraat 8

ZA les Cousteliers

Edwards Building

1322 AP Almere

34160 Castries

Habarzel Street 5

T: +31 36 540 6711

T: +33 499 13 6640

82107 Kiryat Gat

F: +31 36 540 6710

F: +33 467 64 2778

T: +972 8 860 9181

BELGIUM

GERMANY

ASM Belgium NV

ASM Germany Sales BV

Kapeldreef 75

Peter-Henlein-Strasse 28

3001 Leuven

85540 Haar

T: +32 16 28 1639

T: +49 89 462 3650

F: +32 16 28 1221

F: +49 89 462 36566

F: +972 8 860 9182

CONTENTS

ASM INTERNATIONAL WORLDWIDE

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NORTH AMERICA

Nagaoka Factory

SOUTH KOREA

UNITED STATES

392-1 Mishimashimbo

ASM Genitech Korea Ltd

ASM America, Inc

Nagaoka-shi

Head Office

3440 East University Drive

Niigata 940-2311

SungKong-Kwan 1 Dong

Phoenix, AZ 85034-7200

T: +81 258 42 2400

Cheonan Valley, 514 Sameun-ri

T: +1 602 470 5700

F: +81 258 41 2490

Jiksan-eup, Cheonan-si

F: +1 602 437 1403

Chungcheongnam-do 330-816 Yokkaichi Service Center

T: +82 70 7596 7800

Regional Sales/Service Office:

2F-D, NJ Building

F: +82 41 5890 209

97 East Brokaw Road

1-7 Shimizucho, Yokkaichi-shi

Suite 100

Mie 510-0814

ASM Genitech Korea Ltd

San Jose, CA 95112-4209

T: +81 59 332 3537

BunDang Branch Office

T: +1 408 451 0830

F: +81 59 332 3598

10F-1001, 1st bldg., Pangyo 7

Regional Service Office:

MALAYSIA

633 Sampyoung-dong, Bundang-gu

2500 NW 229th Avenue

ASM Wafer Process Equipment

Sungnam-si

Suite 100

Singapore Pte Ltd

Kyonggi-do 463-400

Hillsboro, OR 97124-7114

(Malaysia Branch)

T: +82 70 7596 7788

T: +1 503 629 1360

Suite 17&18, Incubator Block

F: +82 31 8016 9970

F: +1 503 533 4637

1st Floor, KHTP Techno Centre

Venture Valley

Kulim Hi-Tech Park

TAIWAN - R.O.C.

ASIA

09000 Kulim

ASM Front-End Sales & Services

CHINA

Kedah Darul Aman

Taiwan Co Ltd

ASM China Ltd

T: +604 4039330

Hsin-Chu Office

A/N, 15F, No. 720 Pudong Avenue

T: +604 4080140

2F-5, No.1, Jinshan 8th St

Shanghai 200120

East dist., Hsinchu City 300

T: +86 21 50 368588

SINGAPORE

T: +886 3 666 7722

F: +86 21 50 368878

ASM Front-End Manufacturing

F: +886 3 564 8899

Singapore Pte Ltd JAPAN

543 Yishun Industrial Park A

ASM Front-End Sales & Services

ASM Japan KK

Singapore 768765

Taiwan Co, Ltd

23-1, 6-chome Nagayama

T: +65 6512 2922

Tai-Chung Office

Tama-shi

F: +65 6512 2966

No.20-2, Lane 128, Sec. 3,

Tokyo 206-0025

Taichung Port Rd

T: +81 42 337 6311

ASM Wafer Process Equipment

Situn dist., Taichung City 407

F: +81 42 389 7555

Singapore Pte Ltd

T: +886 4 2465 1086

543 Yishun Industrial Park A

F: +886 4 2463 3707

Kumamoto Service Center

Singapore 768765

3F, Mayfair-Suizenji

T: +65 6512 2962

ASM Front-End Sales & Services

21-30, 1-chome, Suizenji

F: +65 6512 2961

Taiwan Co, Ltd

Kumamoto-shi

Tai-Nan Office

Kumamoto 862-0950

Room 612, 6F, No.13, Guoji Rd

T: +81 96 387 7300

Xinshi dist., Tainan City 744

F: +81 96 387 7301

T: +886 6 589 2368 F: +886 6 589 2710

26

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ASM INTERNATIONAL WORLDWIDE

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

27

BACK-END EUROPE

SWEDEN

ASIA

AUSTRIA

ASM Assembly Systems AB

CHINA

ASM Assembly Systems GmbH

Sofielundsvaegen 2

ASM Assembly Systems Ltd

Kuerschnergasse 6

PO Box 700

20F Majesty Building

1210 Vienna

19127 Sollentuna

138 Pu Dong Avenue

T: +43 1 259 0529 100

T: +46 8 703 3576

Pu Dong New Area

F: +43 1 259 0529 660

F: +46 8 703 3501

Shanghai 200120 T: +86 21 5887 3030

ASM Assembly Systems

UNITED KINGDOM

GmbH & Co KG

ASM Assembly Systems UK Ltd

Kuerschnergasse 6

Imperial Court, 2 Exchange Quay

Shenzhen ASM Microelectronic

1210 Vienna

Manchester  M5 3EB

Technology Company Ltd

T: +43 1 259 0529 100

T: +44 161 457 2156

6/F Block A, Hai Peng Industrial Estate

F: +43 1 259 0529 660

F: +44 161 457 2151

2052, Wu Tong Road

FRANCE

NORTH AMERICA

T: +86 755 8396 3000

ASM Assembly Systems SAS

MEXICO

F: +86 755 2555 2434

ZAC Parc Gustave Eiffel

ASM Assembly Systems, S de RL de CV

6, avenue Gutenberg

Av. Periferico Sur 7980-3B

ASM Microelectronic Technical

77600 Bussy Saint Georges

Col. Nueva Sta. Maria CP 45530

Services (Shanghai) Company Ltd

T: +33 1 7994 8122

Tlaquepaque, Jalisco

(Chengdu Branch)

F: +33 1 6003 2153

T: +1 770 797 3000

Room D348, Chengdu Hi-Tech Zone

F: +1 770 797 3457

Innovation Service Centre

GERMANY

T: +52 333 884 1935

Chengdu 611731

ASM Assembly Systems Management

F: +52 333 884 1920

T: +86 28 8784 6551

F: +86 21 5887 6100

Yantian, Shenzhen 518081

GmbH

F: +86 28 8784 6562

Rupert-Mayer-Str. 44

UNITED STATES

81379 Munich

ASM Assembly Systems, LLC

ASM Microelectronic Technical

T: +49 89 20800 33400

3975 Lakefield Court, Ste 106 Suwanee

Services (Shanghai) Company Ltd

F: +49 89 20800 27438

GA 30024

(Dong Guan Branch)

T: +1 770 797 3000

Room 9-11, 4th Floor

F: +1 770 797 3457

Block A, Tai’an Square Zhang Mu Tou Town

ASM Assembly Systems GmbH & Co KG

Dong Guan City

Rupert-Mayer-Str. 44

ASM Pacific Assembly Products, Inc

Guang Dong 523620

81379 Munich

3421 E. Harbor Drive Suite 200

T: +86 769 8712 5600

T: +49 89 20800 33400

Phoenix, AZ 85034

F: +86 769 8712 5601

F: +49 89 20800 27438

T: +1 602 437 4760 F: +1 602 437 4630

ASM Microelectronic Technical Services (Shanghai) Company Ltd

ITALY

ASM Assembly Systems Srl

ASM Pacific Assembly Products, Inc

(Nan Chang Branch)

Via Firenze 11

Western Regional Office

Room 1402-4, Jiangxin Guoji Jiayuan

20063 Cernusco sul Naviglio (MI)

97 East Brokaw Road

Yinzuo

T: +39 02 9290 4609

Suite 100

No. 85 Jiefangxi Road, Qingyunpu District

F: +39 02 9290 4622

San Jose, CA 95112-4209

Nanchang 330002

T: +1 408 451 0800

T: +86 791 8820 1517

F: +1 408 451 0808

F: +86 791 8820 7178

CONTENTS

ASM INTERNATIONAL WORLDWIDE

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ASM Microelectronic Technical

ASM Microelectronics Technical

ASM Technology (Huizhou)

Services (Shanghai) Company Ltd

Services (Shanghai) Company Ltd

Company Ltd

(Shanghai Branch)

(Xiamen Branch)

198, Jinshi Road 7

2/F, No. 55 Zu Chong Zhi Road, Lot 1505

Room B, 31/F, Bi Li Da Building

Jiulong Hi-tech Industrial Park

Shanghai Zhangjiang

No. 22 LuLing Road

Xiaojinkou, Huicheng

Hi-Tech Park

Xiamen 361009

Huizhou, Guangdong 516023

Shanghai 201203

T: +86 592 550 9125

T: +86 752 821 3000

T: +86 21 5080 5465

F: +86 592 550 9121

F: +86 752 821 3001

F: +86 21 5080 5467 ASM Microelectronic Technical

ASM Manufacturing Services Ltd

ASM Microelectronic Technical

Services (Shanghai) Company Ltd

12/F, Watson Centre

Services (Shanghai) Company Ltd

(Zhongshan Branch)

16-22 Kung Yip Street

(Shenzhen Branch)

Room 203, No.1 MLS Road

Kwai Chung, NT

4/F, Block 2, East Wing

Xiaolan Town, Zhongshan City

Hong Kong

CATIC (Zhonghang), Shahe Industrial Zone

Guangdong Province 518053

T: +852 2619 2000

Qiao Xiang Road, Nanshan District

T: +86 760 2382 2335

F: +852 2619 2118/9

Shenzhen 518053

F: +86 760 2382 2327 ASM Pacific Technology Ltd

T: +86 755 8830 8533 Edgeward Trading (ShengZhen) Ltd

12/F, Watson Center

9A-01-C08 Tian Xiang Building

16-22 Kung Yip Street

ASM Microelectronic Technical

Che Gong Miao

Kwai Chung, NT

Services (Shanghai) Company Ltd

Fu Tian District, Shenzhen 518040

Hong Kong

(Suzhou Branch)

T: +86 755 8359 7359

T: +852 2424 2021

Room 05-03/06, Block A

F: +86 755 8344 6245

F: +852 2481 3367

F: +86 755 8344 6245

No. 5 Xing Han Street

(HEADQUARTERS)

Suzhou Industrial Park

ASM Materials China Ltd

Suzhou 215021

Block 10-17, Fuqiao 2nd Industrial Estate

ASM Pacific (Hong Kong) Ltd

T: +86 512 6762 6278

Yong Fu Road, Fuyong

4/F, Watson Center

F: +86 512 6762 6378

Baoan District, Shenzhen 518103

16-22 Kung Yip Street

T: +86 755 2961 8000

Kwai Chung, NT

F: +86 755 2733 5548

Hong Kong

ASM Microelectronic Technical Services (Shanghai) Company Ltd

T: +852 2619 2000

(Tian Jin Branch)

ASM Technology (China) Company Ltd

Room 704-705, Block B

No. 1239, Yizhou Avenue

Da An Building, No. 41 You Yi Road

Hi-Tech District, Chengdu, Sichuan

ASM Technology Hong Kong Ltd

He Xi District

Chengdu 610041

20/F, Watson Center

TianJin 300211

T: +86 28 6287 0000

16-22 Kung Yip Street

T: +86 22 5881 3008

F: +86 28 6287 0001

Kwai Chung, NT

F: +86 22 5881 3009

F: +852 2619 2118/9

Hong Kong T: +852 2619 2000 F: +852 2619 2118/9

28

CONTENTS

ASM INTERNATIONAL WORLDWIDE

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ASM Technology Asia Ltd

SINGAPORE

ASM Pacific (Holding) Ltd

12/F, Watson Center

ASM Assembly Systems Singapore

(Taiwan Branch) Kaohsiung

16-22 Kung Yip Street

Pte Ltd

No. 4-2, East 3 Road Street

Kwai Chung, NT

2 Corporation Road

N.E.P.Z., Kaohsiung

Hong Kong

#01-03, Corporation Place

T: +886 7 367 6300

T: +852 2619 2000

Singapore 618494

F: +886 7 367 6399

F: +852 2619 2118/9

T: +65 6866 7000 F: +65 6866 7071

29

ASM Pacific (Holding) Ltd (Taiwan Branch) Taichung

JAPAN

ASM Assembly Technology Co Ltd

ASM Technology Singapore Pte Ltd

8F-1, No. 135, Sec. 2

5F, Tachikawa F Building

2, Yishun Avenue 7

Chung-Shan Road

1-7-18, Nishiki-Cho, Tachikawa-shi

Singapore 768924

Tantzu dist., Taichung City

Tokyo 190-0022

T: +65 6752 6311

T: +886 4 2535 6390

T: +81 42 521 7751

F: +65 6758 2287

F: +886 4 2535 6820

SOUTH KOREA

THAILAND

MALAYSIA

ASM Pacific KOR Ltd

ASM Assembly Equipment Bangkok Ltd

ASM Assembly Equipment (M) Sdn Bhd

3F, 628-6, Deung

51/3 Vibhavadi Tower

Bayan Point, Block A

Chon Dong

18/2 Floor

No. 15-1-23, 15-1-24

Kangseo Gu

Ngamwongwan Road

Medan Kampung Relau

Seoul 157-030

Ladyao, Chathuchak

11900 Penang

T: +82 22659 4174

Bangkok 10900

T: +604 644 9490

F: +82 22659 4216

T: +66 2 941 3181/3182

F: +81 42 521 7750

F: +604 645 1294

F: +66 2 941 3183 TAIWAN - R.O.C.

ASM Technology (M) Sdn Bhd

ASM Pacific (Holding) Ltd

INDIA

Plo. 534, Jalan Keluli 3

(Taiwan Branch) Taipei

ASM Assembly Systems India Pvt Ltd

Kawasan Perindustrian, Pasir Gudang

10F, No. 530, Sec. 2

# 202 Second Floor

81700 Pasir Gudang, Johor

Chung Shan Road

Gold Tower Office Complex

T: +60 7 253 3500

Chung Ho Dist

No. 50 Residency Road

F: +60 7 253 3533

New Taipei City

Bangalore 560025

T: +886 2 2227 3388

Karnataka

F: +886 2 2227 3399

T: +91 80 4097 9029/7816

PHILIPPINES

Edgeward Development Ltd -

F: +91 80 4112 6183

Philippines Branch

ASM Pacific (Holding) Ltd

7th Floor, NOL Tower

(Taiwan Branch) Hsinchu

Commerce Avenue

1F, No. 7, Lane 91

Madrigal Business Park

Dongmei Road

Ayala Alabang, Muntinlupa City

Hsinchu City

Philippines 1770

T: +886 3 5733750

T: +63 2 850 4543

F: +886 3 5733551

F: +63 2 850 4547

CONTENTS

Corporate governance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

30

CORPORATE GOVERNANCE As we are listed on both the NASDAQ Global Select Market (NASDAQ) and the NYSE Euronext Amsterdam Stock Exchanges, we are required to comply with the applicable Sarbanes-Oxley Act corporate governance requirements, and applicable best practices set out by NASDAQ, the US Securities and Exchange Commission (SEC) and the Dutch Corporate Governance Code published in December 2008 (the “Code”).

At ASMI, we are committed to upholding high standards in

by designating it as a code of conduct pursuant to article 2:391

corporate governance and ethics practices. We have established

subsection 5 of the Dutch Civil Code. A copy of the Code can be

numerous internal policies and procedures that we believe provide a

downloaded from www.commissiecorporategovernance.nl.

good structure for operating ASMI that meets the best interests of our shareholders and customers as well as applicable legal

Pursuant to rule III.5.11 of the Code, the Chairman of the

requirements. We endeavor to ensure that our policies and

Supervisory Board should not act as Chairman of the Remuneration

procedures comply with both applicable US and Dutch corporate

Committee. However, ASMI does not have a separate Remuneration

governance requirements, to the extent possible and desirable. In

Committee. It has rather combined the Remuneration Committee

this section, we explain our corporate governance structure that

and the Selection and Nomination Committee as envisaged by the

has been established in accordance with the Code.

Code in a Nomination, Selection and Remuneration Committee (NSRC) which is chaired by Mr Kramer. To the extent that the

Corporate governance related documents are available on our

Chairmanship of Mr Kramer of the NSRC qualifies as a deviation

website. These include the Supervisory Board Profile, Supervisory

from the Code, ASMI believes that such deviation is in the best

Board Rules, Management Board Rules, the Audit Committee

interests of the Company and its stakeholders. This is given the

Charter, the Nomination, Selection and Remuneration Committee

overriding importance of having the Chairman of the Supervisory

Charter, the Code of Ethics, the Whistleblower Policy, the Anti-

Board deeply involved in the nomination and selection process for

Fraud Policy, the Rules concerning Insider Trading and the

Management and Supervisory Board members.

Remuneration Policy. In general, we agree with rule II.2.8 of the Code that in most

DUTCH CORPORATE GOVERNANCE CODE

circumstances a maximum severance payment of one year for

This Code contains principles and best practices for Dutch

Management Board members is appropriate. However, we want to

companies with listed shares. It requires companies to either

reserve the right to agree to different amounts in case we deem this

comply with these best practice provisions or to explain why they

to be required by the circumstances. Any deviations will be

deviate from the Code. The Code has been granted statutory force

disclosed.

CONTENTS

Corporate governance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

31

MANAGEMENT BOARD

RESPONSIBILITIES

Board with all information that they reasonably require for the

In addition to the duties of the Management Board stipulated by law

fulfillment of their obligations and the exercise of their powers

and our Articles of Association, the Management Board has the

in a timely fashion.

following responsibilities:

››achieving the aims, strategy, policy and results of the Company; ››managing the risks associated with the activities of the Company; ››ensuring proper financing of the Company; ››establishing and maintaining disclosure controls and procedures

The Management Board shall provide the General Meeting of Shareholders with all information that they reasonably require for the fulfillment of their obligations and the exercise of their powers in a timely fashion, unless this would be in conflict with an overriding

that ensure that all major financial information is known to the

interest of the Company. If the Management Board invokes an

Management Board in order to ensure that the external financial

overriding interest, it must give reasons for doing so.

reporting is acheived in a timely, complete and accurate manner;

››and determining relevant aspects and achieving aims relating to corporate social responsibility and sustainability.

The Management Board is responsible for the quality and completeness of financial and other reports that are publicly

The Management Board shall be guided by the interests of the

disclosed by or on behalf of the Company, including all reports and

Company, and shall also take the interests of all stakeholders into

documents the Company is required to file with regulatory agencies.

consideration.

CONFLICTS OF INTEREST The members of the Management Board are collectively responsible

Each Management Board member shall immediately report any

for managing the Company. They are collectively and individually

potential conflict of interest to the Chairman of the Supervisory

accountable to the Supervisory Board and the General Meeting of

Board and to the other Management Board members. In such

Shareholders for executing the Management Board’s

cases a Management Board member shall provide the Chairman of

responsibilities. The Management Board has the general authority

the Supervisory Board and the other Management Board members

to enter into binding agreements with third parties.

with all information relevant to the conflict and follow the procedures as set out in the Management Board Rules.

The Management Board shall ensure that the Company has an adequately functioning Internal Risk Management and Control

APPOINTMENT, SUSPENSION AND DISMISSAL

Framework. The Management Board shall periodically discuss the

The General Meeting of Shareholders appoints a Management

internal risk management and control systems with the Supervisory

Board member based on a binding nomination drawn up by the

Board and the Audit Committee, including any significant changes

Supervisory Board. The General Meeting of Shareholders may set

that have been made and any major improvements that are

aside a binding nomination by a resolution taken with an absolute

planned. The Management Board shall provide the Supervisory

majority of the votes cast, representing at least one third of the

CONTENTS

Corporate governance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

32

share capital. If such a binding nomination is set aside, a new

Stock Option Plan for members of the Management Board (MSOP).

binding nomination will be drawn up by the Supervisory Board and

The number of options outstanding, under the stock option plans or

submitted to a newly called General Meeting of Shareholders. If this

under any other plan or arrangement combined, may never exceed

binding nomination is set aside, the General Meeting of

7.5% of ASMI’s share capital, which is in accordance with the ASMI

Shareholders is free to appoint a Management Board member, but

Remuneration Policy.

only with an absolute majority of the votes cast representing at least one third of our issued capital.

For further information regarding the remuneration of the Management Board, please see the Remuneration Policy, which is

A Management Board member may be suspended at any time by

posted on our website, the Remuneration Report 2012, the Report

the Supervisory Board. A Management Board member may, in

of the Supervisory Board 2012, which is included in our Annual

accordance with a proposal by the Supervisory Board, be

Report 2012, and Item 6.B “Directors, Senior Management and

dismissed by the General Meeting of Shareholders through a

Employee Compensation” and in Note 28 “Board Remuneration”

majority vote. A resolution to suspend or to dismiss a member of

of the Annual Report 2012 on Form 20-F, which will be posted on

the Management Board, other than in accordance with a proposal

our website.

of the Supervisory Board, shall require the affirmative vote of a majority of the votes cast at a meeting. The affirmative votes must represent at least one third of our issued capital.

INTERNAL RISK MANAGEMENT AND CONTROL FRAMEWORK

The Management Board is currently composed solely of men.

The Management Board is responsible for designing, implementing

The Company recognizes the importance of diversity in its members

and operating an adequately functioning Internal Risk Management

in respect to gender and makes all reasonable efforts to ensure

and Control Framework in the Company. The objective of this

a balanced participation by men and women in the Management

Framework is to identify and manage the strategic, operational,

Board. However, the Company has not achieved the requisite

financial, financial reporting and compliance risks to which the

gender balance for the current Management Board because the

Company is exposed, to promote effectiveness and efficiency in the

pool of suitable candidates, in terms of relevant expertise and

Company’s operations, to promote reliable financial reporting and to

industry experience, is very limited at the moment. When this

promote compliance with laws and regulations. The Management

situation changes, the Company shall make all reasonable efforts

Board is aware that such a Framework can neither provide absolute

to see that 30% of the seats of the Management Board are taken

assurance that its objectives will be achieved, nor can it entirely

by women.

prevent material errors, losses, fraud and the violation of laws and regulations. For a detailed discussion of our risk factors, see

REMUNERATION

Item 3.D. “Risk Factors” of our Annual Report 2012 on Form 20-F,

The remuneration of individual members of the Management Board

which will be posted on our website.

is decided upon by the Supervisory Board, based on the

Our Internal Risk Management and Control Framework is based

recommendations by the Nomination, Selection and Remuneration

on the framework in Internal Control – Integrated Framework issued

Committee of the Supervisory Board and on the Company’s

by the Committee of Sponsoring Organizations of the Treadway

Remuneration Policy. Our Remuneration Policy was last adopted

Commission (COSO). The framework aims to provide reasonable

by the General Meeting of Shareholders in 2010. The remuneration

assurance regarding effectiveness and efficiency of an entity’s

structure includes four components: a fixed (base) salary

operations, reliability of financial reporting, prevention of fraud

component, a variable component (annual bonus or short-term

and compliance with laws and regulations.

incentive), a long-term component (stock options) and pension provisions and fringe benefits. The remuneration structure reflects

Our Internal Risk Management and Control Framework has the

short-term and long-term elements of the responsibilities of

following key components:

members of the Management Board.

RESPONSIBILITIES ASMI has adopted a stock option plan, which was submitted to

The Management Board is responsible for designing, implementing

and adopted by the General Meeting of Shareholders at the 2001

and operating an adequately functioning Internal Risk Management

Annual General Meeting of Shareholders. At the 2006 Annual

and Control Framework in the Company. Management of our

General Meeting of Shareholders, this plan was extended for a

subsidiaries is responsible for managing performance, risks and

five-year period that ended in 2011. In 2011, a new stock option

effectiveness of its operations, within our Management Board’s

plan was adopted by the Company that consists of two sub-plans:

guidelines, and supported and supervised by ASMI departments.

the ASMI Stock Option Plan for employees (ESOP) and the ASMI

CONTENTS

Corporate governance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

AUTHORIZATION

Our Anti-Fraud Policy provides specific rules to promote ethical

Management of risks is supported by authorization limits with

conduct and understanding of legal requirements regarding

respect to expenditures and commitments.

anti-corruption matters (such as bribery and corruption of

33

governmental officials) and anti-fraud matters (such as maintaining

PLANNING AND CONTROL CYCLE

accurate and complete Company records, protection and use of the

The annual budgets of the Front-end and Back-end operating units

Company’s resources, information security and conflicts of interest).

are approved by the Management Board and the Supervisory Board. For the Front-end, the planning and control cycle starts with an

ENVIRONMENT, HEALTH AND SAFETY PROCEDURES

annual strategy meeting. The budget includes objectives and

We have embedded various procedures related to the environment,

targets, which provide the basis for monitoring performance. For

health and safety in most of our operations. With respect to safety

the Front-end activities, the budget is followed up by monthly

procedures, material safety incidents are monitored and reported to

outlooks and quarterly forecasts. The Management Board monitors

the Management Board.

both operational and financial performance on a monthly basis, which includes discussion with management of the operating

DISCLOSURE CONTROLS AND PROCEDURES

(business and support) units. In addition, performance and action

We have established extensive guidelines for the lay-out and

plans are discussed in operational performance reviews of the

content of our annual reports. These guidelines are primarily based

operating units.

on applicable laws. We apply the requirements of the US Securities and Exchange Act 1934 in preparing our Annual Report 2012 on

The ASMPT Board is responsible for ongoing monitoring of the

Form 20-F, and prepare the financial statements included therein in

performance of the Back-end activities, including the acquired

accordance with US GAAP. We follow the requirements of

Assembly Systems business. The actual results of the Back-end

applicable Dutch laws and regulations in preparing our Statutory

operating unit are discussed with the ASMPT Audit Committee and

Annual Report 2012, and prepare the financial statements included

reported to the ASMI Management Board on a quarterly basis.

therein in accordance with International Financial Reporting

Updates are discussed between the ASMPT Board and ASMI

Standards (IFRS). With respect to the preparation process of these

Management Board on a monthly basis.

and other financial reports, we apply internal procedures to safeguard completeness and correctness of such information as

Each quarter, the actual performance of our Front-end and

part of our disclosure controls and procedures.

Back-end operating units is compared to the budgets and planning, and this is discussed with the ASMI Audit Committee and the

The Disclosure Committee, consisting of senior managers from

Supervisory Board.

various functional areas within the Company, assists the Management Board in overseeing the Company’s disclosure

CODE OF ETHICS, WHISTLEBLOWER POLICY AND ANTI-FRAUD POLICY

activities. It ensures compliance with applicable disclosure

Our Code of Ethics applies to all of our employees worldwide, as

requirements. The Disclosure Committee obtains information for its

well as our Supervisory Board and Management Board. The Code

recommendations from the operational and financial reviews, letters

of Ethics is designed to promote honest and ethical conduct and

of representation, which include a risk and internal control self-

timely and accurate disclosure in our periodic financial reports.

assessment, input from the documentation and assessment of our

requirements arising under US and Dutch law and regulatory

internal controls over financial reporting and input from risk Our Whistleblower Policy provides for the reporting of alleged

management activities during the year.

violations of the Code of Ethics and alleged irregularities of a financial nature by the Company’s employees or other stakeholders

After evaluating the effectiveness of our disclosure controls and

to the Management Board and/or the Supervisory Board without

procedures and recommendation of the Disclosure Committee, the

any fear of reprisal against the individual who reports the violation or

Management Board concluded that, as of December 31, 2012 our

irregularity.

disclosure controls and procedures were effective.

CONTENTS

Corporate governance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

34

POLICIES AND PROCEDURES

affected, or are reasonably likely to materially affect, the Company’s

We have implemented financial policies and procedures, including

internal control over financial reporting.

accounting policies and a standard chart of accounts, information technology policies and procedures and non-financial policies and

All internal control systems, no matter how well designed and

procedures to ensure control by the Management Board over the

implemented, have inherent limitations. Even systems determined to

Company’s operations. Managing directors and finance directors of

be effective may not prevent or detect misstatements or fraud and

our main subsidiaries and business and support units sign a

can only provide reasonable assurance with respect to disclosure

detailed letter of representation quarterly to confirm compliance with

and financial statement presentation and reporting. Additionally,

financial reporting, internal controls and ethical principles.

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because

RISK MANAGEMENT AND INTERNAL CONTROLS

of changed conditions and that the degree of compliance with the

We have embedded an Internal Risk Management and Control

policies or procedures may deteriorate.

Framework (Framework) in the Company. Within the Framework, we continue to enhance our identification and assessment of our

In view of all of the above, the Management Board believes that it

strategic, operational, financial, financial reporting and compliance

complies with the requirements of rule II.1.5 of the Code.

risks, and continue to expand our risk management policies. We have documented our internal controls for financial reporting both

IDENTIFICATION AND ASSESSMENT OF RISKS

on the transaction level and entity level, and continuously assess

Risk management is a continuous process that is the responsibility

such internal controls. We have identified key controls over financial

of management. Efforts have been made to establish a process for

reporting and embedded these in common business and financial

separate monitoring and reporting of business risks. Interviews and

reporting processes to provide further assurance for the reliability of

meetings with the Management Board and senior management

our financial reporting.

have been conducted to identify and assess those risks that threaten ASMI in achieving our company objectives and strategy,

The Framework and the evaluation of the effectiveness of our

and the mitigating controls and programs have been put in place.

internal controls and areas for improvement are regularly discussed

The assessment process is in progress and will continue on an

with the Audit Committee and Deloitte Accountants, our external

ongoing basis. To provide an understanding of our business risks,

auditor. The Audit Committee reports on these matters to the

we provide an indication below of some risks that we face. We also

Supervisory Board.

refer to the section entitled “Risks related to our business” set forth in our Form 20-F filed with the SEC. This does not constitute a

The Management Board conducted an evaluation of the

complete list of all strategic, operational, compliance, financial and

effectiveness of our internal control over financial reporting (as

financial reporting risks to which we are exposed, nor does it imply

defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) based on

an order of priority.

the Internal Control – Integrated Framework issued by the

››Economic and market risk ASMI is vulnerable to changing

Committee of Sponsoring Organizations of the Treadway

economic circumstance and market conditions. The

Commission (COSO). Based on this evaluation of the effectiveness

semiconductor industry and market have always been very

of the Company’s internal control over financial reporting, in

cyclical and dependent on the economic climate. The industry

accordance with the requirements of Section 404 of the Sarbanes

has recovered from the severe economic downturn in 2008-2009

Oxley Act of 2002 (SOX 404), all of the members of the

and the impact of the resulting credit crisis. In the second half of

Management Board concluded that, as of December 31, 2012 the

2011, the industry faced the consequences of the Euro crisis and

Company’s internal control over financial reporting was effective and

slower growth of the Chinese economy, which have negatively

provides reasonable assurance for the reliability of financial reporting

impacted the order intake from our customers. We face the risk of

and the preparation of financial statements for external purposes in

not being able to respond rapidly and effectively to these industry

accordance with generally accepted accounting principles. In

cycles, and of not being able to reduce our activities and

addition, to the best of the knowledge of the Management Board,

expenses in time. On the other hand, industry upturns which we

the management report includes a fair review of the development

experienced in 2010 and the first half of 2011 have been

and performance of the business and the position of the Company

characterized by fairly abrupt increases in demand for

and the undertakings included in the consolidation as a whole, as

semiconductor devices and equipment and insufficient production

well as a description of the principal risks and uncertainties that the

capacity. During a period of increasing demand and rapid growth,

Company faces. No changes to the Company’s internal control over

we must be able to quickly increase manufacturing capacity to

financial reporting have occurred during 2012 that have materially

meet customer demand and to take on a sufficient number of additional qualified personnel. These variable economic and

CONTENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

Corporate governance

35

market conditions materially affect our revenues, income, assets

the sales managers with support from the regional and finance

and liquidity and capital resources. This cyclical nature is inherent

managers. Furthermore, provisioning has taken place to mitigate

to the semiconductor industry, but we endeavor to mitigate its

the impact of bad debts.

effects. As an example, we have increased flexibility with our

››Availability of financial back-up facilities ASMI has credit

employees. We also focus on the sales of spare parts and

facilities for short-term funding of working capital. The renewal of

customer service, which are less affected by the economic

credit facilities may be at risk when financial institutions are not

climate and are expected to continue even in a period of declining

willing to provide new facilities and this can lead to liquidity

demand.

stringency. The current cash position and credit facilities of ASMI

››Cash resources risk Managing our cash position becomes

are considered adequate. We refer to Item 5 “Operating and

more important in periods of economic decline and affects our

Financial Review and Prospects” set forth in our Form 20-F 2012,

revenues and the creditworthiness of customers. As a result, our

for more insight into the financing position of the Company. ASMI

cash position may be severely impacted. Credit facilities and

has short-term and long-term credit facilities and loans. In

loans are in place to mitigate the impact on our cash position. We

November 2012, our outstanding Convertible Subordinated Debt

also try to find a balance between cost control and reduction of

was fully converted into common shares of the Company.

expenses on the one hand, and continued investment in

-- Foreign currency exchange rates risk The foreign currency

engineering and research and development in advanced

exchange risk exists for three types of risk: Transaction Risk We

technology on the other hand.

conduct business in a number of foreign countries, with certain

››Balancing cost control and long-term investments

transactions denominated in currencies other than our

As market conditions affect our business through a decline in

functional currency (euro) or the currency of one of our

revenues, cost control becomes an important measure to reduce

subsidiaries. We might manage the effect of exchange rate

the impact on financial results. Our industry is subject to rapid

fluctuations on revenues, costs and eventual cash flows and

declines in revenues and we may not be able to respond in time

assets and liabilities denominated in selected foreign currencies,

by reducing costs and expenses to avoid this having a negative

in particular in the US dollar, through derivative instruments

impact on financial results. Furthermore, our future success

(including forward exchange contracts).

depends to a large extent upon our ability to define and realize

-- Translation Risk The translation of financial results from our

product roadmaps that are well aligned with the industry, and may

foreign entities could lead to translation effects of reported

contain technology projections for as much as 5 to 10 years

results. These translation effects (especially from the US dollar,

forward. The execution of a product roadmap requires

the Singapore dollar, the Korean won and the Japanese yen to

expenditures in investments for research and development

the euro) may have a material effect on the reported results.

programs.

Since the translation to the reporting currency does not lead to realized currency exchange results, and local activities are done

Our ability to reduce costs and expenses is limited by our need for continued investments. In addition, long lead time for production

in the same currency, the translation risk is not covered. -- Economic Risk The activities in different countries and foreign

and delivery of some of our products creates a risk that we may

currencies may have the economic risk that exchange rate

incur expenditures and purchase inventories for products that we

changes lead to unfavorable competitive circumstances. The

cannot sell.

mismatch of currency between revenues and expenditures leads to economic exposure. We have taken the following

››Customer creditworthiness Our customers operate under

mitigating measures: loans in local currency to mitigate the

volatile market conditions and this affects the creditworthiness of

economic risk from currency mismatch, increased flexibility in

several of these companies. We may not succeed in completely

the currency of sourcing, and bringing manufacturing activities

avoiding the effect of bad debts. It has become more critical to

to Singapore. The movement to Singapore should primarily

assess the creditworthiness of customers and to closely monitor

improve our competitive edge, but will also limit our economic

our outstanding receivables. Therefore, we review risk profiles of

risk to a certain extent.

customers and adjust them, based on due diligence information. The assessment process is carried out under the responsibility of

CONTENTS

Corporate governance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

SUPERVISORY BOARD

36

APPOINTMENT In accordance with Dutch law and the Code, the Supervisory Board

RESPONSIBILITIES

has drawn up a profile for its own composition. This Supervisory

The supervision over the policies of our Management Board and the

Board Profile is available on our website. The Supervisory Board

general course of our business, and the related management

shall consist of at least three members. The members should

actions, is entrusted to the Supervisory Board. In our two-tier

operate independently of each other and within a good relationship

structure under applicable Dutch law, the Supervisory Board is a

of mutual trust. They should be experienced in the management of

separate body independent from the Management Board.

an international, publicly listed company, and have sufficient time available to fulfill the function of a Supervisory Board member. The

The Supervisory Board supervises and advises the Management

Supervisory Board members appoint a Chairman from among

Board in executing its responsibilities, particularly regarding:

themselves.

››the achievement of the Company’s objectives;

››corporate strategy and the risks inherent in the business activities; ››the structure and operation of the internal risk management and control systems;

››the financial reporting process;

››compliance with legislation and regulations; ››the relation of the Company to its shareholders; ››and relevant aspects of corporate social responsibility.

The Supervisory Board is currently composed of six members who are appointed in the same way as the members of the Management Board. Supervisory Board members serve a four-year term and may be re-elected twice. The Supervisory Board is currently composed solely of men. The Company recognizes the importance of diversity in its members in respect to gender and makes all reasonable efforts to ensure a

CONFLICTS OF INTEREST

balanced participation by men and women in the Supervisory

A Supervisory Board member facing a conflict of interest shall, in

Board. However, the Company has not achieved the requisite

accordance with Article 13 of our Supervisory Board Rules, inform

gender balance for the current Supervisory Board because the pool

the Chairman of the Supervisory Board immediately. The Chairman

of suitable candidates in terms of relevant expertise and industry

shall, if possible in consultation with the other members of the

experience is very limited at the moment. When this situation

Supervisory Board, determine the course of action to be taken.

changes, the Company shall make all reasonable efforts to see that 30% of the seats of the Supervisory Board are taken by women.

CONTENTS

Corporate governance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

Any (re)appointment to the Supervisory Board shall be based on the candidate’s match with the Supervisory Board Profile. For reappointment, the candidate’s performance during the

37

-- review our annual operating results with management and the independent auditors our annual operating results; -- and consider the adequacy of the internal control procedures

previous period shall be taken into account. A Supervisory Board

and the procedures and evaluations relating to the auditor’s

member who is available for reappointment must be interviewed

independence.

by the Chairman of the Supervisory Board Nomination, Selection and Remuneration Committee. The Chairman of the Nomination,

As recommended by the Sarbanes-Oxley Act and the Code, we

Selection and Remuneration Committee must be interviewed by the

intend for the Audit Committee to include at least one Financial

Chairman of the Supervisory Board. All members of the Supervisory

expert, who must have in-depth experience and knowledge of

Board follow an introduction program after their first appointment,

financial statements, international accounting principles and internal

in which financial and legal aspects as well as financial reporting

controls and procedures for financial reporting. The Supervisory

and specific features of ASMI are discussed.

Board has concluded that Mr Lobbezoo meets these requirements.

REMUNERATION

››Nomination, Selection and Remuneration Committee

The remuneration of the Supervisory Board was last approved by the

This Committee advises the Supervisory Board on matters

shareholders in the 2011 Annual General Meeting of Shareholders.

relating to the selection and nomination of the members of the Management Board and Supervisory Board. The Committee

INDEPENDENCE

further monitors and evaluates the remuneration policy for the

All members are considered to be independent under the NASDAQ

Management Board. This Committee consists of Mr Kramer

regulations and the Code.

(Chairman), Mr Danneels and Mr van Pernis. The objective of the remuneration policy is twofold:

COMPOSITION AND ROLE OF KEY COMMITTEES OF THE SUPERVISORY BOARD In order to more efficiently fulfill its role and in compliance with the Code, the Supervisory Board has created the following committees:

››Audit Committee This Committee has a supervisory task with

-- to create a remuneration structure that will allow ASMI to attract, reward and retain qualified executives who will lead ASMI in achieving its strategic objectives; -- and to provide and motivate these executives with a balanced and competitive remuneration.

regard to monitoring the integrity of our financial reports and risk management. The Audit Committee consists of Mr Lobbezoo

The remuneration structure includes five elements: base salary,

(Chairman), Mr Schumacher and Mr Kreutzer. The Audit Committee

annual incentive (bonus), long-term incentive (stock options),

supervises the activities of the Management Board with respect to:

pension and other arrangements. The remuneration structure

-- the structure and operation of the internal risk management

reflects short-term and long-term elements of the responsibilities

and control systems, including supervision of the enforcement

of members of the Management Board.

of the relevant legislation and regulations; -- our release of financial information;

The Nomination, Selection and Remuneration Committee ensures

-- compliance with recommendations and observations

that a competitive remuneration structure is provided by

of internal and external auditors;

benchmarking with other multinational companies of comparable

-- our policy on tax planning;

size and complexity operating in comparable geographical and

-- relations with the external auditor, including, in particular,

industrial markets. The Nomination, Selection and Remuneration

its independence;

Committee evaluates the achievement of performance criteria

-- remuneration, and any non-audit services performed for us;

specified per Management Board member. After the evaluation,

-- our financing and financial position;

it recommends the level of remuneration to the Supervisory Board.

-- and the applications of information and communication technology. On an annual basis, the Nomination, Selection and Remuneration The Audit Committee meets periodically to:

Committee reports to the Supervisory Board on the application of

-- nominate a firm to be appointed as independent auditors;

the Remuneration Policy in the past year and recommends the

-- audit the financial statements and perform services related

Remuneration Policy for the following years.

to the audit; -- review the scope and results of the audit with the independent auditors;

CONTENTS

Corporate governance

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

38

Pursuant to rule III.5.11 of the Code, the Chairman of the Supervisory

RECORD DATE

Board should not act as Chairman of the Remuneration Committee.

In accordance with Dutch law, the record date to exercise voting

However, ASMI does not have a separate Remuneration Committee.

rights by shareholders at a general meeting is twenty-eight days

It has rather combined the Remuneration Committee and the

prior to the meeting. Only shareholders of record at that date will

Selection and Nomination Committee as envisaged by the Code in

be entitled to attend and vote at the meeting.

a Nomination, Selection and Remuneration Committee (NSRC) which

and its stakeholders. This is given the overriding importance of having

ROLE, APPOINTMENT, REMUNERATION AND ASSESSMENT OF THE FUNCTIONING OF THE EXTERNAL AUDITOR AND THE INTERNAL AUDIT FUNCTION

the Chairman of the Supervisory Board deeply involved in the

Our external auditor is appointed by the General Meeting of

nomination and selection process for Management and Supervisory

Shareholders and is nominated for appointment by the Audit

Board members.

Committee. Our current external auditor, Deloitte Accountants BV

is chaired by Mr Kramer. To the extent that the Chairmanship of Mr Kramer of the NSRC qualifies as a deviation from the Code, ASMI believes that such deviation is in the best interests of the Company

(Deloitte), was reappointed in the 2012 General Meeting of

THE SHAREHOLDERS AND GENERAL MEETING OF SHAREHOLDERS

Shareholders. The Audit Committee has determined that the provision of services by Deloitte and its member firms is compatible with maintaining Deloitte’s independence. All audit and permitted non-audit services provided by Deloitte and its member firms during

POWERS

2012 were pre-approved by the Audit Committee.

A General Meeting of Shareholders is held each year to discuss the Annual Report and to adopt the Annual Accounts.

The Audit Committee has adopted the following policies and

In the General Meeting of Shareholders, each ordinary share with a

procedures for pre-approval of all audit and permitted non-audit

nominal value of EUR 0.04 entitles the holder to cast one vote, each

services provided by our independent registered public accounting

financing preferred share with a nominal value of EUR 40.00 entitles

firm:

the holder to cast one thousand votes and each preferred share

››Audit Services Management submits to the Audit Committee for

with a nominal value of EUR 40.00 entitles the holder to cast one

pre-approval the scope and estimated fees for specific services

thousand votes. Presently there are no preferred shares and

directly related to performing the independent audit of our

financing preferred shares outstanding.

consolidated financial statements for the current year.

››Audit-Related Services The Audit Committee may pre-approve The powers of the General Meeting of Shareholders are defined in

expenditures up to a specified amount for services included in

our Articles of Association. The main powers of the shareholders

identified service categories that are related extensions of audit

are to appoint, suspend and dismiss members of the Management

services and are logically performed by the auditors. Additional

Board and Supervisory Board, to adopt the financial statements,

services exceeding the specified pre-approved limits require

to declare dividends, to discharge the Management Board and Supervisory Board from responsibility for the performance of their

specific Audit Committee approval.

››Tax Services The Audit Committee may pre-approve

respective duties for the previous financial year, to appoint the

expenditures up to a specified amount per engagement and in

external auditors, to adopt amendments to the Articles of

total for identified services related to tax matters. Additional

Association, to issue shares and grant subscriptions for shares,

services exceeding the specified pre-approved limits, or involving

to authorize the Management Board to issue shares and grant

service types not included in the pre-approved list, require specific

subscriptions for shares, to withdraw pre-emptive rights of

Audit Committee approval.

shareholders upon issuance of shares, to authorize the

››Other Services In the case of specified services for which

Management Board to withdraw pre-emptive rights of shareholders

utilizing our independent registered public accounting firm creates

upon issuance of shares and to authorize the Management Board

efficiencies, minimizes disruption or preserves confidentiality, or

to repurchase or cancel outstanding shares.

for which management has determined that our independent registered public accounting firm possesses unique or superior qualifications to provide such services, the Audit Committee may pre-approve expenditures up to a specified amount per engagement and in total. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific Audit Committee approval.

CONTENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

Corporate governance

39

INTERNAL AUDIT

CORPORATE GOVERNANCE STATEMENT

The Internal Audit function is established to strengthen the

According to the Governmental Decree of December 23, 2004

governance of the Company by creating an independent, objective

(as lastly amended on December 10, 2009), the Company has to

function that adds value by improving operation by providing

publish a statement on corporate governance. This statement has

assurance, audit recommendations and advisory activities. Internal

to report on compliance with the Code. Furthermore, a description

Audit assists the Audit Committee and the Management Board in

must be included of the main characteristics of the internal risk

accomplishing their objectives by bringing a systematic, disciplined

management and control systems connected with the Company’s

approach to evaluate and improve the effectiveness of risk

financial reporting process. The corporate governance statement

management, control and governance processes. In addition,

must also provide information on the functioning of the General

Internal Audit provides an advisory service to the Company, based

Meeting of Shareholders, including its main rights, the composition

on the outcome of its experience in reviewing and appraising

of the Management Board and the Supervisory Board, including its

operations and systems.

committees, and the information which must be disclosed pursuant to the Decree Article 10 Takeover Directive.

DECLARATIONS

The Management Board states that the information required by the December 23, 2004 (as lastly amended on December 10, 2009)

RESPONSIBILITY STATEMENT AS REQUIRED BY ARTICLE 5:25C OF THE DUTCH ACT ON FINANCIAL SUPERVISION The members of the Management Board state that, to the best of their knowledge, (i) the financial statements, as shown on pages F-1 to F-62 of this Annual Report 2012, provide a true and fair view of the assets, liabilities, financial position and results for the financial year 2012 of the Company and its subsidiaries included in the consolidated statements, (ii) the Annual Report 2012 provides a true and fair view of the position and the business of the Company and its subsidiaries (details of which are contained in the financial statements), and (iii) the Annual Report 2012 provides a description of the principal risks and uncertainties that the Company faces.

decree is included in this “Corporate Governance” chapter.

CONTENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

Report of the Supervisory Board

40

REPORT OF THE SUPERVISORY BOARD FINANCIAL STATEMENTS We present the ASMI 2012 Annual Report and Annual Accounts for Form 20-F in accordance with US GAAP, as prepared by the Management Board and reviewed by the Supervisory Board. Our independent auditors, Deloitte Accountants BV, have audited these Annual Accounts and issued an unqualified opinion. Their report appears on page F-1 of the Form 20-F.

All of the members of the Supervisory Board have signed the

causes of the lack of recognition by the markets of the value of the

Financial Statements in respect of the financial year 2012.

combined businesses (Front-end and Back-end) of the Company. During the course of the study, the Supervisory Board reviewed

SUPERVISION

analyses made by the financial advisers, and reviewed different scenarios as part of the process to conclude that a partial

Supervision of the Management Board, its policy decisions and

secondary placement of 8% to 12% of the Company’s stake in

actions, are entrusted to the Supervisory Board. In accordance with

ASMPT was the most suitable step to be taken to address the

Dutch law, the Supervisory Board is a separate body, independent

non-recognition by the markets of the value of the combined

of the Management Board. The Supervisory Board supervises and

businesses of the Company. Another important focus of the Boards

advises the Management Board in executing its responsibilities.

was for Front-end to further improve profitability, and in Back-end

The profile of the Supervisory Board describes the range of expertise

to further integrate the Surface Mount Technology business which

that should be represented within the Board. The procedures of

we acquired in 2011. The Supervisory Board devoted also time in

the Supervisory Board and the division of its duties are laid down

discussions on the Company strategy.

in the Supervisory Board Rules. Both documents are available on our website www.asm.com.

In addition, the Supervisory Board discussed the functioning of the Supervisory Board and its individual members, the relationship

MEETINGS OF THE SUPERVISORY BOARD During 2012, the Supervisory Board met with the Management

between the Supervisory Board and the Management Board, the composition of the Management Board, its performance, and the performance of its individual members without the members of the Management Board attending.

Board on eight occasions, and in a number of conference calls. Furthermore, the Supervisory Board held a few conference calls without the Management Board participating. All Supervisory Board

CORPORATE GOVERNANCE

members attended all eight meetings with the Management Board

Included in the responsibilities of the Supervisory Board is to

in person, with the exception of one meeting where one of the

oversee the Company’s compliance with corporate governance

Supervisory Board members attended by telephone. In these

standards and best practices in the Netherlands and the United

meetings, the Boards discussed operations, business risks, product

States. The changes to the amended Dutch Corporate Governance

and market developments, the Company’s organization, management

Code relate, amongst others, to risk management of the Company,

and financial structure and performance, and initiatives of shareholders.

remuneration of Management Board members and corporate social

In 2012, an important focus of the Boards was the study into the

responsibility issues. These matters were broadly discussed within

CONTENTS

Report of the Supervisory Board

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

41

the Company complies with the Sarbanes-Oxley Act and applicable

NOMINATION, SELECTION AND REMUNERATION COMMITTEE

corporate governance requirements and best practices set out by

The role of the Nomination, Selection and Remuneration Committee

NASDAQ, the US Securities and Exchange Commission (SEC), and

is described in its charter, which is available on the Company’s

the Dutch Corporate Governance Code, except for those discussed

website, www.asm.com. In general, the Committee advises the

in the Corporate Governance section, which follows this report.

Supervisory Board on matters relating to the selection and

the Supervisory Board. The Supervisory Board is of the opinion that

nomination of new Management Board members, as well as

SUPERVISORY BOARD COMPOSITION The Supervisory Board is currently composed of six members.

the remuneration of the members of the Management Board. This Committee consists of Messrs Gert-Jan Kramer (Chairman), Martin van Pernis and Johan Danneels.

The composition of the Supervisory Board did not change in 2012. In 2012, the Nomination, Selection and Remuneration Committee

MANAGEMENT BOARD COMPOSITION The Management Board is composed of two members.

held two meetings and several conference calls. The topics discussed included the remuneration of the individual members of the Management Board and the evaluation of the remuneration policy for the Management Board. During the meetings of the

SUPERVISORY BOARD COMMITTEES

Committee, the Chief Executive Officer was present, except on the occasion when his own remuneration was discussed.

AUDIT COMMITTEE

The remuneration of the members of the Management Board is

The role of the Audit Committee is described in its charter, which

disclosed in Item 6.B. of the Annual Report on Form 20-F,

is available on the Company’s website, www.asm.com. The Audit

“Directors, Senior Management and Employees – Compensation.”

Committee consists of Messrs Jan Lobbezoo (Chairman),

The remuneration of the members of the Management Board during

Heinrich Kreutzer and Ulrich Schumacher. During the year, the

2012 is fully in accordance with the Remuneration Policy. The

Audit Committee held five meetings with the Management Board

Remuneration Policy for the Management Board has been submitted

and Deloitte Accountants, the Company’s independent auditors.

to, and adopted by, the 2010 Annual General Meeting of Shareholders.

Audit Committee discussions included: the Company’s internal risk management systems; progress in testing operating effectiveness of internal controls required by Section 404 of the Sarbanes-Oxley

WORD OF THANKS

Act; the Company’s financial position and financing programs;

We extend gratitude and appreciation to ASMI employees

the application of accounting principles; the establishment of an

worldwide for their many contributions and enduring commitment

internal audit function; the appointment of Deloitte Accountants;

to the Company. It is their commitment and determination that

the audit performed, and its findings, the Annual Report and

enabled us to make substantial progress in 2012. We recognize

Annual Accounts; and the budget and the quarterly progress

that the cumulative efforts of our workforce are truly creating real

reports prepared by the Management Board.

value for all of our stakeholders

On one occasion, the Audit Committee met with Deloitte Accountants, without the members of the Management Board

SUPERVISORY BOARD

present, to discuss the risk of fraud. Furthermore, the Audit

G.J. Kramer, Chairman

Committee discussed the auditor’s performance with the

J.M.R. Danneels

Management Board without Deloitte Accountants present.

H.W. Kreutzer J.C. Lobbezoo M.C.J. van Pernis U.H.R. Schumacher Almere, The Netherlands April 4, 2013

CONTENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

DECLARATIONS

Report of the Supervisory Board

42

CORPORATE GOVERNANCE STATEMENT According to the Governmental Decree of December 23, 2004 (as

RESPONSIBILITY STATEMENT AS REQUIRED BY ARTICLE 5:25C OF THE DUTCH ACT ON FINANCIAL SUPERVISION

lastly amended on December 10, 2009), the Company has to

The members of the Management Board state that, to the best of

must be included of the main characteristics of the internal risk

their knowledge, (i) the financial statements, as shown on pages

management and control systems connected with the Company’s

F-1 to F-62 of our Annual Report 2012, provide a true and fair view

financial reporting process. The corporate governance statement

of the assets, liabilities, financial position and results for the financial

must also provide information on the functioning of the General

year 2012 of the Company and its subsidiaries included in the

Meeting of Shareholders, including its main rights, the composition

consolidated statements, (ii) the Annual Report 2012 provides a

of the Management Board and the Supervisory Board, including its

true and fair view of the position and the business of the Company

committees, and the information which must be disclosed pursuant

and its subsidiaries (details of which are contained in the financial

to the Decree Article 10 Takeover Directive.

publish a statement on corporate governance. This statement has to report on compliance with the Code. Furthermore, a description

statements), and (iii) the Annual Report 2012 provides a description of the principal risks and uncertainties that the Company faces.

The Management Board states that the information required by the December 23, 2004 (as lastly amended on December 10, 2009) decree is included in this “Corporate Governance” chapter.

CONTENTS

Technology

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

43

TECHNOLOGY Since the birth of the semiconductor industry, ASMI has been pioneering new and ever more efficient ways to make integrated circuits (ICs) – more commonly known as chips – smaller, cheaper and more powerful.

MOORE’S LAW

on which the electrical components are formed. At the Back-end –

Moore’s Law states that the average number of transistors on a chip

the end of the manufacturing ‘line’ – the wafers are divided up into

will double every 18 to 24 months. What is a chip? Chips are pieces

individual chips and tested before being assembled and packaged.

of silicon wafer made up of interconnected electrical components created on a microscopic scale. Transistors are the most fundamental

At ASMI, innovation has been part of our way of life since we were

component: electrically operated switches that can be turned on or

founded by visionary entrepreneur Arthur del Prado in 1968. Today,

off producing the zeros and ones of binary arithmetic that are at the

we’re a leading edge supplier of the equipment needed to carry out

heart of even the most advanced computer operations.

both the Front-end and Back-end parts of manufacturing chips.

To keep the industry performing to Moore’s Law, ASMI has helped reduce the size of transistors so more can fit in the same space.

LAYERING

Creating greater density. So advanced is this effort, that today,

During Front-end wafer processing, several technologies that we

our process technologies are making transistors that are only

pioneered deposit thin layers or films, one at a time, on the silicon

32 nanometers (nm) in size and smaller.

wafer. Patterns are added using lithography. Guided by these patterns, portions of the films are removed. This process is repeated

It’s difficult to imagine things at this scale. So let’s put it in perspective.

many times until the basic components ‘grow’ and start to take

There are a billion nanometers in 1 meter. A human hair is roughly

shape. Creating the fundamental building blocks of the finished chip.

100,000nm thick. A strand of human DNA is 2.5nm in diameter. ASMI’s new Atomic Deposition Layering technology works by

These components are then electrically connected during further

forming layers atom by atom. In other words, it works at a smaller

deposition and patterning cycles. The finished wafer will contain up

scale than DNA – the fundamental building block of human life.

to several thousand individual chips in a diameter space of 300mm and some chips can hold billions of transistors. To manufacture at

MANUFACTURING PROCESS

this scale and density requires incredible precision and reliability.

To explain how this is possible, let’s take a look at how a chip is

All of this takes place in clean rooms. Manufacturing sites where all

made. There are two basic parts to chip manufacturing. We refer to

foreign particles are kept out. The smallest trace of contamination

them as Front-end and Back-end. At the Front-end – the start of the

can render an entire wafer unusable.

manufacturing ‘line’ – manufacturers process wafers made of silicon,

CONTENTS

Technology

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

44

CHIP MAKING

Their use has revolutionized how we live, work and play. Enabling

Semiconductors are everywhere. In the dishwashers, microwaves

us to understand, create and share information faster and more

and TVs in our homes. In our smartphones, PCs and tablets.

easily. We now assume that devices will get more powerful and

In our workplaces and in the transportation we use – cars, trains,

ever smaller every year. But, despite this, how semiconductors

ships and planes. Driving the everyday devices we have come

are actually made remains a mystery to the general public.

to take for granted over the past 40 years.

Here’s how it is done.

CONTENTS

Technology

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

45

1. FROM SAND TO PURE SILICON

Deposition

It all starts with one simple, common substance – sand. The silicon

Dielectric or insulating film is deposited in the trenches by one

found in sand is in the form of silicon dioxide. To make chips,

of a number of deposition technologies such as Chemical Vapor

manufacturers need pure silicon so the first step in the process is

Deposition (CVD), Atomic Layer Deposition (ALD) or Plasma

to separate the silicon from the oxygen molecules. The pure silicon

Enhanced ALD (PEALD). Gates are formed between the trenches

needed to make silicon chips can have only one foreign atom for

creating part of the many millions of transistors that may be created

every billion silicon atoms. It must also be mono-crystalline form.

on a single chip. Gates can be switched to allow charge carriers

The way that atoms are organized in this form of silicon is essential

like electrons to flow or to prevent them.

to some of the later processes. Contacts are formed by each gate to create a source and drain.

2. WAFER BLANKS

Ion implantation is used to implant special elements into the wafer

The silicon is then extracted, or pulled, from liquid silicon in the form

for the source and drain. The charge carrier enters a gate channel

of long cylindrical ingots at roughly 1,400 degrees centigrade.

at the source contact and exits at the drain contact.

3. WAFERS ARE CUT

Connect

Wafers are cut from the ingots before being polished to produce

once the basic chip components have been created they need to

a smooth surface. They’re then sent to chip manufacturers for

be connected. The same processes of lithography, etching and

processing. The following steps in wafer processing are then

deposition are used to form trenches filled with metal connections.

repeated many times to create the finished wafer containing chips.

These connections between components are created not just on one level but on many. The finished wafer will contain up to several

4. COATING A WAFER

thousand individual chips in a space of 200 to 300mm and some

The wafer is put into a high temperature furnace and exposed

chips can hold billions of transistors.

to oxygen forming a layer of silicon dioxide on the surface. Then Chemical Vapor Deposition (CVD) is used to add a layer

7. WAFERS SEPERATED INTO INDIVIDUAL CHIPS

or film of nitride.

Once wafer processing has been completed, the finished wafers are transported to another plant for cutting, assembly & packaging.

5. CREATING MASKS

The individual wafers are cut into separate chips.

Once the circuit layout of the chips has been designed, glass plates or masks are created which help copy the design onto the surface

8. LEAD-FRAMES

of the wafer. Several masks are used in sequence to add more and

Chips are then placed in a lead-frame forming a protective housing.

more complexity to the chips.

9. TESTING PACKING 6. ADDING THE PATTERN

Each chip is then tested before being packaged to be sent for

Now it’s time to begin creating the design on the surface of the

placement on circuit boards.

wafer using the masks as a guide. Photolithography, a type of optical printing, is used. The wafer is first coated with photoresist

SUMMARY

that changes when exposed to ultraviolet (UV) light. The mask

The equipment and processes used to create chips are very

is placed above the wafer and precisely aligned with it. UV light

complex and draw on leading edge research. But the objective is

shining above the mask reacts with the exposed parts of the

simple. To keep enabling us to understand, create and share more.

photoresist creating a pattern. The wafer is covered with a developing solution to develop these patterns that are then etched leaving the parts not exposed to UV light intact. The surface now contains trenches that run across the surface.

CONTENTS

L AYERING THE FUTURE

Global demand for semiconductors is exploding as chips enable technological advances for an expanding number of applications. The cloud, smart vehicles, the desire to be fully connected at all times for email, phone and the internet. All these factors and more are driving the demand for smaller, faster, cheaper chips.

THE FUTURE IS MADE UP OF MANY L AYERS ASMI’s technology enables the deposition of the semiconductor material layers that create the advanced chips of the future. More applications, more transistors, more complexity all adds up to more layers. And all these different layers are combining to create a world of new possibilities. ASMI is helping to solve the key issues on the semiconductor technology roadmap today and in the future.

CONTENTS

MOORE’S L AW

LESS IS MOORE

“THE NUMBER OF TRANSISTORS ON A CHIP WILL DOUBLE APPROXIMATELY EVERY TWO YEARS.” Gordon E. Moore (Intel)

The semiconductor industry is committed to reducing the size of transistors so that more of them fit in the same physical space. Our customers are now manufacturing transistors 22 nanometers wide. That’s roughly four thousand times smaller than the width of a single human hair. Today’s most advanced microprocessor chips include over 2 billion transistors. To deliver these ever-shrinking dimensions while improving transistor performance, the top chip manufacturers rely on ASM deposition technology.

MOORE TO COME In 1999, ASMI was one of the first companies to recognize the potential of Atomic Layer Deposition (ALD), making it possible to manufacture today’s 22nm wide transistors with great precision. ALD is now one of our most important platforms for a whole new set of materials that will keep giving the world Moore.

CONTENTS

SMALL IS BIG

Future Innovations ALD technology enables us to achieve scaling using new materials and 3D chips.

We’re all creating more data. 90% of all the data in the world that exists today has been created in the last two years. Small, connected, handheld devices and smarter machines are making it easier for us to share with the world. Bringing unprecedented opportunities to discover insights in real time.

INNOVATION CREATES UNDERSTANDING Big Data puts pressure on semiconductor manufacturers for more powerful processing. For individuals and for the companies who want to understand them better. Our 45-year track record of innovation means we’re already well positioned to respond to their needs. Innovation is in our genes.

CONTENTS

CHAIN REACTION

Seduced by the latest ‘must have’ smartphone or tablet? Then you’re not only part of a new phenomenon, you’re also helping to change the semiconductor industry supply chain. Smart devices are bringing a new type of consumer and something else – faster reactions.

CO-CREATION Our advanced technology road map is helping our customers respond to shorter product cycles. Ensuring the latest smart devices get to market early. Our relationships with the top semiconductor manufacturers are so closely aligned that we call what we do ‘co-creation’.

FORM 20-F

CONTENTS FORM 20-F

form 20-f

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

51

Table of Contents s

UNITED STATES STATES UNITED SECURITIESAND AND EXCHANGE EXCHANGE COMMISSION SECURITIES COMMISSION WASHINGTON, D.C. 20549 Washington, D.C. 20549 ____________________________________

FORM20-F 20-F FORM

_____________________________________

Registration Statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934. Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 2012

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Date of event requiring this shell company report For the transition period from

to Commission File Number: 0-13355 ____________________________________________

ASMINTERNATIONAL INTERNATIONAL NVNV ASM

(EXACT NAME OFof REGISTRANT IN its ITScharter) CHARTER) (Exact name Registrant AS as SPECIFIED specified in

___________________________________________ The Netherlands (jurisdiction of incorporation or organization) Versterkerstraat 8, 1322 AP, Almere, the Netherlands (Address of principal executive offices) Richard Bowers Telephone: (602) 432-1713 Fax: (602) 470-2419 Email: [email protected] Address: 3440 E. University Dr., Phoenix, AZ 85034, USA (Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class

Name of each exchange on which registered

Common Shares, par value € 0.04

The NASDAQ Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None ____________________________ Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 63,095,986 common shares; 0 preferred shares. No Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes If this annual report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been No subject to such filing requirements for the past 90 days. Yes Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months No (or for such shorter period that the registrant was required to submit and post such files). Yes Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer

Accelerated filer

Non-accelerated filer

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: International Financial Reporting Standards as issued by the International U.S. GAAP Accounting Standards Board Other If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 18 Item 17 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No

CONTENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

52

form 20-f

TABLE OF CONTENTS PART I ITEM1 ITEM2 ITEM3 ITEM4 ITEM4A ITEM5 ITEM6 ITEM7 ITEM8 ITEM9 ITEM10 ITEM11 ITEM12

Identity of directors, senior management and advisors Offer statistics and expected timetable Key information Information on the Company Unresolved staff comments Operating and financial review and prospects Directors, senior management and employees Major shareholders and related party transactions Financial information The offer and listing Additional information Quantitative and qualitative disclosures about market risk Description of securities other than equity securities

53 53 53 67 86 86 106 110 112 113 114 121 124

Defaults, dividend arrearages and delinquencies Material modifications to the rights of security holders and use of proceeds Controls and procedures

125 125 125

PART II ITEM13 ITEM14 ITEM15 ITEM16 A. Audit Committee Financial Expert

126

B. Code of Ethics

126

C. Principal Accountant Fees and Services

126

D. Exemptions from the Listing Standards for Audit Committees

127

E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

127

F. Change in Registrant’s Certifying Accountant

128

G. Corporate Governance

128

Financial statements Financial statements Exhibits (*)

130 130 131

PART III ITEM17 ITEM18 ITEM19

Signatures 132 Index to Consolidated Financial Statements 2012 F-1

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ITEM 1 | PART I | form 20-f

53

PART I As used in this report, the terms “we,” “us,” “our,” “ASMI,” and “ASM International” mean ASM International NV and its subsidiaries, unless the context indicates another meaning, and the term “common shares” means our common shares, par value €0.04 per share. Since we are a Netherlands company, the par value of our common shares is expressed in euros (“€”). The terms “United States” and “US” refer to the United States of America.

FORWARD LOOKING SAFE HARBOR STATEMENT Some of the information in this report constitutes forward-looking statements within the meaning of the United States federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements regarding future revenue, sales, income, expenditures, sufficiency of cash generated from operations, maintenance of a substantial interest in ASM Pacific Technology Ltd, business strategy, product development, product acceptance, market penetration, market demand, return on investment in new products, product shipment dates, corporate transactions, restructurings, liquidity and financing matters, currency fluctuations, litigation involving intellectual property, shareholder matters, and outlooks. These statements may be found under Item 4, “Information on the Company,” Item 5, “Operating and Financial Review and Prospects” and elsewhere in this report. Forward-looking statements are statements other than statements of historical fact and typically are identified by use of terms such as “may,” “could,” “should,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,” “intend,” “continue” and similar words, although some forward-looking statements are expressed differently. You should be aware that these statements involve risks and uncertainties and our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including the matters discussed in Item 4, “Information on the Company” and the risks discussed in Item 3.D, “Risk factors.” The risks described are not the only ones facing ASMI. Some risks are not yet known and some that we do not currently believe to be material could later become material. Each of these risks could materially affect our business, revenues, income, assets, liquidity and capital resources. All statements are made as of the date of this report, and we assume no obligation to update or revise any forward-looking statements to reflect future developments or circumstances.

ITEM 1

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS not applicable.

ITEM 2

OFFER STATISTICS AND EXPECTED TIMETABLE not applicable.

ITEM 3

KEY INFORMATION A. SELECTED CONSOLIDATED FINANCIAL DATA The following selected financial data has been derived from ASMI’s historical audited consolidated financial statements. The selected financial data should be read in conjunction with Item 5, “Operating and Financial Review and Prospects” and Item 18, “Financial Statements,” and the accompanying notes for the corresponding fiscal years:

CONTENTS FORM 20-F

ITEM 3 | PART I | form 20-f

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

   (EUR thousand, except per Share data)

54

YEAR ENDED DECEMBER 31, 2008

2009

2010

2011

2012

Consolidated Statements of Operations data: Net sales

747,362

590,739

1,222,900

1,634,334

1,418,067

Cost of sales

(477,100)

(409,224)

(673,322)

(1,063,708)

(977,638)

GROSS PROFIT

270,262

181,515

549,578

570,626

440,429

(126,591)

(107,777)

(130,596)

(174,107)

(200,799)

(75,011)

(62,806)

(78,785)

(129,400)

(149,219)

(475)

(401)

(357)

(911)

(1,264)

(1,395)

-

-

-

-

Operating expenses: Selling, general and administrative Research and development, net Amortization of other intangible assets Impairment of goodwill Impairment of property, plant and equipment Restructuring expenses TOTAL OPERATING EXPENSES

-

-

-

(8,038)

-

(7,068)

(35,687)

(11,201)

-

(891)

(210,540)

(206,671)

(220,939)

(312,456)

(352,173)

-

-

-

109,279

-

Operating income: GAIN ON BARGAIN PURCHASE

59,722

(25,156)

328,640

367,450

88,256

Interest income

4,047

1,018

1,221

2,902

1,989

Interest expense

(7,745)

(8,556)

(15,677)

(13,497)

(12,113)

Gain (loss) resulting from early extinguishment of debt

7,956

(1,759)

(3,609)

(824)

(2,209)

EARNINGS (LOSS) FROM OPERATIONS

Accretion interest expense convertible notes

-

(4,286)

(6,010)

(4,401)

(4,469)

Revaluation conversion option

-

(24,364)

(19,037)

(4,378)

-

785

(1,384)

(65)

5,604

(3,957) (766)

Foreign currency exchange results Result from investments

-

-

-

-

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

64,765

(64,487)

285,463

352,856

66,731

Income tax expense

(12,144)

(3,786)

(42,939)

(36,692)

(26,300)

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE DILUTION ON INVESTMENT IN SUBSIDIARY

52,621

(68,273)

242,524

316,164

40,431

4,088

-

-

-

-

56,709

(68,273)

242,524

316,164

40,431

Shareholders of the parent

18,411

(107,517)

110,639

186,770

7,149

Non-controlling interest

38,298

39,244

131,884

129,394

33,282

€0.35

-€2.08

€2.11

€3.38

€0.13

Gain on dilution of investment in subsidiary 1)

NET EARNINGS (LOSS) Net earnings (loss) for allocation between shareholders of the parent and non-controlling interest Allocation of net earnings (loss)

Earnings per Share data: Basic net earnings (loss) per share Diluted net earnings (loss) per share:

€0.35

-€2.08

€2.09

€3.16

€0.13

Basic weighted average number of shares (thousands)

52,259

51,627

52,435

55,210

56,108

Diluted weighted average number of shares (thousands)

52,389

51,627

61,494

64,682

56,767

54,275

51,745

52,932

55,377

63,096

-

-

-

€0.40

€0.50

21,985

-

-

-

-

Other data: Number of common shares outstanding at year end (in thousands) Dividends declared on common shares

3)

Number of preferred shares outstanding at year end (thousands)

CONTENTS FORM 20-F

55

ITEM 3 | PART I | form 20-f

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

Consolidated Balance Sheet data: Cash and cash equivalents

157,277

293,902

340,294

390,250

290,475

TOTAL ASSETS

767,798

851,700

1,214,117

1,582,221

1,499,506

Net current assets 2)

372,029

419,535

509,867

739,252

690,283

TOTAL DEBT

153,682

265,430

215,681

195,409

80,623

Capital stock

TOTAL SHAREHOLDERS’ EQUITY

2,171

2,070

2,117

2,215

2,584

317,902

241,229

411,460

659,796

741,876

Cash Flow data: Cash flow from operating activities

137,402

62,652

259,884

216,581

42,480

Cash flow from investing activities

(33,009)

(15,493)

(100,566)

(70,035)

(71,891)

Cash flow from financing activities

(121,538)

90,890

(123,027)

(78,537)

(73,489)

1

2 3

Following the adoption of ASC 810(-10 45-23) in 2009 results on dilution of investments in subsidiaries are accounted for directly in equity. The 2009 results and changes in equity have been adjusted accordingly. Net current assets is calculated as the difference between total current assets, including cash and cash equivalents, and total current liabilities. The dividends are related to the preceding financial year.

Exchange Rate Information We publish our consolidated financial statements in euros. In this Annual Report, references to “€”, “euro” or “EUR” are to euros, and references to “$”, “US dollar”, “USD” or “US$” are to United States dollars. The following table sets forth, for each period indicated, specified information regarding the US dollar per euro exchange rates based on the rates of the European Central Bank, referred to as the “reference rate.” On March 15, 2013, the reference rate was 1.3086 US dollars per euro. Prior to January 1, 2009, the exchange rate was based on the noon buying rate in New York City for cable transfers payable in euros as certified for customs purposes by the Federal Reserve Bank of New York, which is often referred to as the “noon buying rate.”

US Dollar per Euro Exchange Rate SEPTEMBER 2012

OCTOBER 2012

NOVEMBER 2012

DECEMBER 2012

JANUARY 2013

FEBRUARY 2013 1)

MARCH 2013 1)

High

1.3095

1.3120

1.2994

1.3302

1.3550

1.3644

1.3090

Low

1.2568

1.2877

1.2694

1.2905

1.3012

1.3077

1.2937

 

  Average exchange rate 2) 1 2

YEARS ENDED DECEMBER 31, 2008

2009

2010

2011

2012

1.4695

1.3963

1.3207

1.4000

1.2932

Through March 15, 2013. Average of the exchange rates on the last day of each month during the period presented.

B. CAPITALIZATION AND INDEBTEDNESS Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS Not applicable.

D. RISK FACTORS You should carefully consider each of the risks and uncertainties described below and all other information contained in this Annual Report on Form 20-F. In order to help assess the major risks in our business, we have identified many, but not all, of these risks, which may not be

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ITEM 3 | PART I | form 20-f

56

in order of likelihood or materiality. Due to the scope of our operations, a wide range of factors both known and unknown could materially affect future developments and performance. If any of the following risks are realized, our business, financial condition, cash flow or results of operations could be materially and adversely affected, and as a result, the trading price of our common stock could be materially and adversely impacted. These risk factors should be read in conjunction with other information set forth in this Report, including without limitation Item 4 Information on the Company, Item 5 Operating and Financial Review and Prospects, and our Consolidated Financial Statements and related notes.

Risks related to our industry The industry in which we operate is highly cyclical. We sell our products to the semiconductor manufacturing industry, which is subject to sudden, extreme, cyclical variations in product supply and demand. Starting late in 2008 and continuing in 2009, this industry experienced a dramatic and unprecedented decline in demand for semiconductor devices due to the worldwide economic downturn, which led to significant layoffs, plant closings, reduced capital expenditures and other cost reduction measures by semiconductor manufacturers. These conditions caused a substantial decrease in the demand for our products, which represent capital expenditures for our customers although a pick-up in demand was evident in the second half of 2009 and continued through 2010. During 2011 order intake was mixed in the uncertain global climate and industry conditions. While overall industry conditions were generally decent during the first half of 2012, the second half experienced a weakening and slowing of the market which impacted ASMI. The timing, length and severity of these cycles cannot be predicted and future downturns may result in changes in the semiconductor manufacturing industry and the manner in which we must conduct our business in ways that cannot now be predicted. Semiconductor manufacturers may contribute to the severity of downturn and upturn cycles by misinterpreting the conditions in the industry and over-investing or under-investing in semiconductor manufacturing capacity and equipment. In any event, the lag between changes in demand for semiconductor devices and changes in demand for our products by semiconductor manufacturers accentuates the intensity of these cycles in both expansion and contraction phases. We may not be able to respond timely and effectively to these industry cycles in the expansion and contraction phases. Industry downturns historically have been characterized by reduced demand for semiconductor devices and equipment, production over-capacity and a decline in average selling prices. During periods of declining demand, we must quickly and effectively reduce expenses. However, our ability to reduce expenses is limited by our need for continued investment in engineering and research and development and extensive ongoing customer service and support requirements. In addition, in a downturn, our ability to reduce inventories quickly is limited by the long lead time for production and delivery of some of our products, reduced sales, order cancellations and delays, and delays associated with reducing deliveries from our supplier pipeline. During an extended downturn, a portion of our inventory may have to be written down as excess or obsolete if it is not sold in a timely manner. Industry upturns have been characterized by fairly abrupt increases in demand for semiconductor devices and equipment and insufficient production capacity. During a period of increasing demand and rapid growth, we must be able to quickly increase manufacturing capacity to meet customer demand and hire and assimilate a sufficient number of additional qualified personnel, and fund such increase of manufacturing capacity. Our inability to quickly respond in times of increased demand, because of the effect, for example, of our ongoing programs to reduce expenses and regulate the rate of purchases from our suppliers, could harm our reputation and cause some of our existing or potential customers to place orders with our competitors rather than us. Our industry along with global financial markets and regions have been in flux since 2008. In particular, financial turmoil in the Eurozone has recently been unsettling, including the debt burden of certain nations and their ability to meet future obligations, euro currency stability, and the continued suitability of the euro as a single currency. These concerns could possibly result in the reintroduction of individual currencies or even the dissolution of the euro itself. If the euro ended, the contractual and legal consequences for holders of euro denominated obligations cannot be predicted; however, these possible developments and fluid market perceptions could negatively affect the value of euro denominated obligations and assets. These financial concerns in Europe as well as the health of the overall global financial markets and an uncertain or a weaker or deteriorating global economy could also adversely impact our business, financial condition and operating results, such as lower sales due to decreased capital purchases by our customers, financial instability or insolvency of suppliers and customers, and other such similar or related adverse effects.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

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Our industry is subject to rapid technological change and we may not be able to forecast or respond to commercial and technological trends in time to avoid competitive harm. Our future success depends upon commercial acceptance of products incorporating new technologies we are developing, such as new plasma enhanced and atomic layer deposition processes, new epitaxy processes and new materials and chemistries. The semiconductor industry and the semiconductor equipment industry are subject to rapid technological change and frequent introductions of enhancements to existing products which can result in significant write-downs and impairment charges and costs. Technological changes have had and will continue to have a significant impact on our business. Our operating results and our ability to remain competitive are affected by our ability to accurately anticipate customer and market requirements and develop technologies and products to meet these requirements. Our success in developing, introducing and selling new and enhanced products depends upon a variety of factors, including, without limitation:

››successful innovation of processes and equipment; ››accurate technology and product selection; ››timely and efficient completion of product design, development and qualification; ››timely and efficient implementation of manufacturing and assembly processes; ››successful product performance in the field; ››effective and timely product support and service; and ››effective product sales and marketing. We may not be able to accurately forecast or respond to commercial and technical trends in the semiconductor industry or to the development of new technologies and products by our competitors. Our competitors may develop technologies and products that are more effective than ours or that may be more widely accepted. We may also experience delays and technical and manufacturing difficulties in future introductions or volume production of new systems or enhancements. Significant delays can occur between a product’s introduction and the commencement of volume production of that product. Any of these events could materially and negatively impact our operating results and our ability to generate the return we intend to achieve on our investments in new products.

If we fail to adequately invest in research and development, we may be unable to compete effectively. We have limited resources to allocate to research and development, and must allocate our resources among a wide variety of projects in our Front-end and Back-end businesses. If we have insufficient cash flow from our businesses to support the necessary level of research and development, we will have to fund such expenditures by diminishing our cash balances, or utilizing our credit facilities or reducing our level of research and development expenses. Because of intense competition in our industry and constant technological evolution, the consequences of failing to invest in strategic developments are significant. In order to enhance the benefits obtained from our research and development expenditures, we have contractual and other relationships with independent research institutes. If we fail to adequately invest in research and development or lose our ability to collaborate with these independent research entities, we may be unable to compete effectively in the Front-end and Back-end markets in which we operate.

We face intense competition from companies which have greater resources than we do, and potential competition from new companies entering the market in which we compete. If we are unable to compete effectively with these companies, our market share may decline and our business could be harmed. We face intense competition in both the Front-end and Back-end segments of the semiconductor equipment industry from other established companies. Our primary competitors in the Front-end business include Applied Materials, LAM Research Corporation, Tokyo Electron, Kokusai, and Jusung. Our primary competitors in the Back-end business include Kulicke & Soffa, ESEC, Shinkawa, Apic Yamada, BE Semiconductor Industries, Towa, Shinko and Mitsui. A number of our competitors have substantially greater financial, technological, engineering, manufacturing, marketing and distribution resources, which may enable them to:

››better withstand periodic downturns in the semiconductor industry; ››compete more effectively on the basis of price, technology, service and support; ››more quickly develop enhancements to and new generations of products; and ››more effectively retain existing customers and attract new customers. In addition, new companies may enter the markets in which we compete, further increasing competition in the semiconductor equipment industry.

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We believe that our ability to compete successfully depends on a number of factors, including, without limitation:

››our success in developing new products and enhancements; ››performance of our products; ››quality of our products; ››ease of use of our products; ››reliability of our products; ››cost of ownership of our products; ››our ability to ship products in a timely manner; ››quality of the technical service we provide; ››timeliness of the services we provide; ››responses to changing market and economic conditions; and ››price of our products and our competitors’ products. Some of these factors are outside our control. We may not be able to compete successfully in the future, and increased competition may result in price reductions, reduced profit margins, loss of market share, and inability to generate cash flows that are sufficient to maintain or expand our development of new products.

Industry alliances may not select our equipment. Our customers are entering into alliances or other forms of cooperation with one another to expedite the development of processes and other manufacturing technologies. One of the results of this cooperation may be the definition of a system or particular tool set for a certain function or a series of process steps that uses a specific set of manufacturing equipment. These decisions could work to our disadvantage if a competitor’s equipment becomes the standard equipment for such function or process. Even if our equipment was previously used by a customer, that equipment may be displaced in current and future applications by the equipment standardized through such cooperation. These forms of cooperation may have a material adverse effect on our business, financial condition and results of operations.

Risks related to our business Our customers face challenges in economic downturns and if they cannot perform their obligations to us our financial results will suffer. We face increased payment and performance risk in economic downturns from our customers. If any of our customers become insolvent or commence bankruptcy or similar proceedings, our receivables from such customers may become uncollectible. In order to promote sales, we may be required to provide extended payment terms, financing arrangements or other modified sale terms for some customers, which will increase our sales expenses and further increase our exposure to customer credit risk, all in an environment of downward pressure on average selling prices. Even though we may be a secured creditor in these arrangements with rights in the underlying equipment, the equipment may have only limited value upon a customer default, especially if activity in our markets remains at low levels, which may result in substantial write-downs upon any such default. If we do not accurately evaluate our customers’ creditworthiness in connection with sales financing arrangements involving increased exposure to customer payment risk, our bad debt expense will increase. If we are too cautious in our sales practices because of this, we may lose sales. In either case, our results of operations and financial condition would be negatively affected.

We derive a significant percentage of our revenue from sales to a small number of large customers, and if we are not able to retain these customers, or if they reschedule, reduce or cancel orders, or fail to make payments, our revenues would be reduced and our financial results would suffer. Our largest customers account for a significant percentage of our revenues. Our largest customer accounted for 8.8% of our consolidated net sales in 2012. Our largest customer accounted for 33.6% and 4.9% of our Front-end and Back-end 2012 net sales, respectively. Our ten largest customers accounted for 31.6% of our consolidated net sales in 2012. Our ten largest customers accounted for 75.3% and 25.1% of our Front-end and Back-end 2012 net sales, respectively. Sales to and the relative importance of these large customers have varied significantly from year to year and will continue to fluctuate in the future. These sales also may fluctuate significantly from quarter to quarter. We may not be able to retain our key customers or they may cancel purchase orders or reschedule or decrease their level of purchases from us, which would reduce our revenues and negatively affect our financial results, perhaps materially. In addition, any difficulty in collecting amounts due from one or more key customers could harm our financial results.

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We may need additional funds to finance our future growth and ongoing research and development activities. If we are unable to obtain such funds, we may not be able to expand our business as planned. In the past, we have experienced capital constraints that adversely affected our operations and ability to compete, particularly in our Frontend business. We may require additional capital to finance our future growth and fund our ongoing research and development activities particularly with regard to our Front-end business. We have only limited ability to reallocate funds from our Back-end business to our Frontend business and some limitations on our ability to reallocate funds among our Front-end businesses. If we raise additional funds through the issuance of equity securities, the percentage ownership of our existing shareholders would be diluted. If we finance our capital requirements with debt, we may incur significant interest costs. Additional financing may not be available to us when needed or, if available, may not be available on terms acceptable to us, particularly in times of global or European financial crisis or uncertainty that may dramatically affect the availability of bank and other sources of debt financing. If we are unable to raise needed additional funds, we may have to reduce the amount we spend on research and development, slow down our introduction of new products, reduce capital expenditures necessary to support future growth and/or take other measures to reduce expenses which could limit our growth and ability to compete.

Our products (primarily in the Front-end) generally have long sales cycles and implementation periods, which increase our costs of obtaining orders and reduce the predictability of our earnings. Our products are technologically complex. Prospective customers generally must commit significant resources to test and evaluate our products and to install and integrate them into larger systems. In addition, customers often require a significant number of product presentations and demonstrations, in some instances evaluating equipment on site, before reaching a sufficient level of confidence in the product’s performance and compatibility with the customer’s requirements to place an order. As a result, our sales process is often subject to delays associated with lengthy approval processes that typically accompany the design and testing of new products. Accordingly, the sales cycles of our products often last for many months or even years, thereby requiring us to invest significant resources in attempting to complete sales. Long sales cycles also subject us to other risks, including customers’ budgetary constraints, internal acceptance reviews and cancellations. In addition, orders expected in one quarter could shift to another because of the timing of customers’ purchase decisions. The time required for our customers to incorporate our products into their systems can vary significantly with the needs of our customers and generally exceeds several months, which further complicates our planning processes and reduces the predictability of our earnings from operations.

Our ability to compete could be jeopardized if we are unable to protect our intellectual property rights from challenges by third parties; claims or litigation regarding intellectual property rights could require us to incur significant costs. Our success and ability to compete depend in large part upon protecting our proprietary technology. We rely on a combination of patent, trade secret, copyright and trademark laws, nondisclosure and other contractual agreements and technical measures to protect our proprietary rights and confidential information. These agreements and measures may not be sufficient to protect our technology from third party infringement or to protect us from the claims of others. In addition, patents issued to us may be challenged, invalidated or circumvented, rights granted to us under patents may not provide competitive advantages to us, and third parties may assert that our products infringe their patents, copyrights or trade secrets. Third parties could also independently develop similar products or duplicate our products. Intellectual property laws may not adequately support our proprietary rights or may change in an unfavorable manner. Patent rights may not be granted or construed as we expect, and key patents may expire resulting in technology becoming available that may hurt our competitive position. In addition, monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology. The laws of some countries in which our products are or may be developed, manufactured or sold, including various countries in Asia, may not protect our products or intellectual property rights to the same extent as do the laws of the Netherlands and the United States and thus make the possibility of piracy of our technology and products more likely in such countries. If competitors are able to use our technology as their own, our ability to compete effectively could be harmed.

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In past years, there has been substantial litigation regarding patent and other intellectual property rights in our semiconductor and related technology industries. In the future, litigation may be necessary to enforce patents issued to us, to protect trade secrets or know-how owned by us or to defend us against claimed infringement of the rights of others and to determine the scope and validity of the proprietary rights of others. Claims that our products infringe the proprietary rights of others would force us to defend ourselves and possibly our customers or suppliers against the alleged infringement. Such claims, if successful, could subject us to significant liability for damages and potentially invalidate our proprietary rights. Regardless of the outcome, patent infringement litigation is time-consuming and expensive to resolve and diverts management time and attention. Intellectual property litigation could force us to do one or more of the following, any one of which could severely harm our business with adverse financial consequences:

››forfeit proprietary rights; ››stop manufacturing or selling our products that incorporate the challenged intellectual property; ››obtain from the owner of the infringed intellectual property right a license to sell, produce, use, have sold, have produced or have used the relevant technology, which license may not be available on reasonable terms or at all or may involve significant royalty payments;

››pay damages, including potential treble damages and attorney’s fees in some circumstances; or ››redesign those products that use the challenged intellectual property. We license the use of some patents from a competitor pursuant to a settlement agreement; if the agreement is terminated, our business could be adversely affected. In October 1997, we entered into an agreement to settle mutual patent infringement litigation with Applied Materials, which was amended and restated in 1998, pursuant to which Applied Materials agreed to grant us a worldwide, non-exclusive and royalty-bearing license to use all of the litigated patents and certain additional patents that were not part of the litigation. In return we agreed to pay Applied Materials a settlement fee and to grant it a worldwide, non-exclusive and royalty-free license to use a number of our patents including but not limited to those patents which we were enforcing in the litigation. All licenses granted by Applied Materials to us expire at the end of the life of the underlying patents which expire at various times through approximately 2016. Our obligation to pay certain royalties to Applied Materials generally continues until the expiration of the corresponding underlying patent to the extent we practice such patent. In addition, the settlement agreement included covenants for limited periods during which the parties would not litigate the issue of whether certain of our products infringe any of Applied Materials’ patents that were not licensed to us under the settlement agreement. These covenants, which lasted for different periods of time for different products, have expired. Upon the occurrence of an event of default or other specified events, including, among other things, our failure to pay royalties, a change of control of ASM International, and improper use of the licenses, Applied Materials may terminate the settlement agreement, including the licenses included in the agreement. Additional litigation with Applied Materials regarding the operation of the settlement agreement or other matters could occur. Litigation with Applied Materials, which has greater financial resources than we do, could negatively impact our earnings and financial position.

Our net earnings could be negatively impacted by currency fluctuations. Our assets, liabilities and operating expenses and those of our subsidiaries are to a large extent denominated in the currency of the country where each entity is established. Our financial statements, including our Consolidated Financial Statements, are expressed in euros. The translation exposures that result from the inclusion of financial statements of our subsidiaries that are expressed in the currencies of the countries where the subsidiaries are located are not hedged. As a result, our assets, liabilities and operating expenses are exposed to fluctuations of various foreign currency exchange rates. In addition, foreign currency fluctuations may affect the prices of our products. Prices for our products for sales to our customers throughout the world are currently denominated in various foreign currencies including, but not limited to, US dollar, euro, Japanese yen and Chinese Yuan. If there is a significant devaluation of the currency in a specific country, the prices of our products will increase relative to that country’s currency, and could increase relative to prices of our competitors, and our products may be less competitive in that country. Also, we cannot be sure that our international customers will continue to be willing to place orders denominated in these currencies. If they do not, our revenue and earnings from operations could be subject to additional foreign exchange rate fluctuations.

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Although we monitor our exposure to currency fluctuations, these fluctuations could negatively impact our financial position, net earnings and cash flow.

Substantially all of our equipment orders are subject to operating, performance, safety, economic specifications and other contractual obligations. We occasionally experience unforeseen difficulties in compliance with these criteria, which can result in increased design, installation and other costs and expenses. Substantially all of our equipment sales are conditioned on our demonstration, and our customer’s acceptance, that the equipment meets specified operating and performance criteria, either before shipment or after installation in a customer’s facility. We occasionally experience difficulties demonstrating compliance with such terms, which can lead to unanticipated expenses for the performance of the contract or the redesign, modification and testing of the equipment and related software. To the extent this occurs in the future, our cost of goods sold and earnings from operations will be adversely affected. If we are not able to demonstrate compliance with the particular contract or the performance and operating specifications in respect of specific equipment, we may have to pay penalties to the customer, issue credit notes to the customer and/or take other remedial action, including payment of damages or adjusted pricing, any one of which could negatively affect our earnings from operations.

We are subject to various legal proceedings and claims, the outcomes of which are uncertain. If we fail to accurately evaluate the probability of loss or the amount of possible losses, an adverse outcome may materially and adversely affect our financial condition and results of operations. We are party to various legal proceedings and claims generally incidental to our business including without limitation intellectual property and product liability claims, as disclosed in Note 22 of Notes to Consolidated Financial Statements included elsewhere in this report. For each of these proceedings and claims, our management evaluates, based on the relevant facts and legal principles, the likelihood of an unfavorable outcome and whether the amount of the loss can be reasonably estimated, in connection with our determination of whether or not to record a charge to earnings. Significant subjective judgments are required in these evaluations, including judgments regarding the validity of asserted claims and the likely outcome of legal, arbitration and administrative proceedings. The outcome of these proceedings is subject to a number of factors beyond our control. In addition, estimates of the potential costs associated with legal, arbitration and administrative proceedings frequently cannot be subjected to any sensitivity analysis, as damage estimates or settlement offers by claimants may bear little or no relation to the eventual outcome. Finally, in any particular proceeding, even where we believe that we would ultimately prevail, we may agree to settle or to terminate a claim or proceeding where we believe that doing so, when taken together with other relevant commercial considerations, is more cost-effective than engaging in an expensive and protracted contest. If we do not accurately assess the probability of an unfavorable outcome or the range of possible loss, an unfavorable outcome could have a material adverse impact on our financial condition and results of operations.

If our products are found to be defective, we may be required to recall and/or replace them, which could be costly and result in a material adverse effect on our business, financial position and net earnings. One or more of our products may be found to be defective after we have already shipped the products in volume, requiring a product replacement or recall. We may also be subject to product returns and product liability claims that could impose substantial costs and have a material and adverse effect on our business, financial position and net earnings.

Although we currently are a substantial shareholder of ASM Pacific Technology, we no longer have a majority interest, as a consequence we do not control ASM Pacific Technology, which prevents us from consolidating its results of operations with ours as from the cease of control date of March 15, 2013. This event has a significant negative effect on our consolidated earnings from operations. We in the past derived a significant portion of our net sales, earnings from operations and net earnings from the consolidation of the results of operations of ASM Pacific Technology in our results. ASM Pacific Technology is a Cayman Islands limited liability company that is based in Hong Kong and listed on the Hong Kong Stock Exchange. As of December 31, 2012, we owned 51.96% of ASM Pacific Technology through our wholly-owned subsidiary, ASM Pacific Holding BV and the remaining 48.04% was owned by the public. In March 2013, we sold a 12% stake so we now own 40.08% of ASM Pacific Technology. Accordingly from March 15, 2013 we are no longer able to consolidate ASM Pacific Technology’s results of operations in ours. Instead, our proportionate share of ASM Pacific Technology’s earnings will be reflected as a separate line-item called “share of results from investments” in our Consolidated Statements of Operations. We will no longer be able to consolidate the assets and liabilities of ASM Pacific Technology and will have to reflect the net investment in ASM Pacific Technology in the line-item “investments” in our Consolidated Balance Sheet. This event will have a significant negative effect on our

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consolidated earnings from operations, although our net earnings will be reduced only to the extent of the reduction of our ownership interest in ASM Pacific Technology. The ASM Pacific Technology shares we own are partly pledged as security for our revolving credit facility.

Although we are a substantial shareholder, ASM Pacific Technology is not obligated to pay dividends to us and may take actions or enter into transactions that are detrimental to us. Certain directors of ASM Pacific Technology are directors of ASM International. However, they are under no obligation to take any actions that are beneficial to us. Issues and conflicts of interest therefore may arise which might not be resolved in our best interest. In addition, the directors of ASM Pacific Technology are under no obligation to declare a payment of dividends to shareholders. As a shareholder of ASM Pacific Technology, we cannot compel the payment or amount of dividends. With respect to the payment of dividends, the directors must consider the financial position of ASM Pacific Technology after the dividend. Cash dividends received from ASM Pacific Technology totaled €65.6 million, €86.9 million, and €29.6 million in 2010, 2011, and 2012, respectively. In the past, we have used these dividends in our Front-end business. In November 2006, we announced our commitment that for at least the years 2007, 2008 and 2009 we would not use these cash dividends to support our Front-end business, but instead would use such dividends to retire outstanding convertible debt, repurchase our common shares, pay dividends on our common shares, or purchase shares of ASM Pacific Technology. At our 2010 Annual General Meeting, we announced that we would continue this commitment for at least another two years through 2011. See Item 5, “Operating and Financial Review and Prospects – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.” The directors of ASM Pacific Technology owe their fiduciary duties to ASM Pacific Technology, and may approve transactions to which we are a party only if the transactions are commercially beneficial to ASM Pacific Technology. Further, under the listing rules of the Hong Kong Stock Exchange, directors who are on the boards of both ASM Pacific Technology and ASM International are not permitted to vote on a transaction involving both entities. This would disqualify all affiliates of ASM International who serve on the board of ASM Pacific Technology from voting on any such transaction. As a shareholder of ASM Pacific Technology, we can vote our shares in accordance with our own interests. However, we may not be entitled to vote on transactions involving both us and ASM Pacific Technology under the listing rules of the Hong Kong Stock Exchange and the Hong Kong Takeovers Code. In particular, under the Hong Kong Takeovers Code we would be excluded from voting on a takeover transaction requiring shareholder approval if we have an interest in such transaction.

We may not be able to recruit or retain qualified personnel or integrate qualified personnel into our organization. Consequently, we could experience reduced sales, delayed product development and diversion of management resources. Our business and future operating results depend in part upon our ability to attract and retain qualified management, technical, sales and support personnel for our operations on a worldwide basis. Competition for qualified personnel is intense, and we cannot guarantee that we will be able to continue to attract and retain qualified personnel particularly during sustained economic upturns in the industry. Availability of qualified technical personnel varies from country to country, and may affect the operations of our subsidiaries in some parts of the world. Our operations could be negatively affected if we lose key executives or employees or are unable to attract and retain skilled executives and employees as needed. In particular, if our growth strategies are successful, we may not have sufficient personnel to manage that growth and may not be able to attract the personnel needed. We have agreements with some, but not all, key employees restricting their ability to compete with us after their employment terminates. We do not maintain insurance to protect against the loss of key executives or employees. Our future growth and operating results will depend on:

››our ability to continue to broaden our senior management group; ››our ability to attract, hire and retain skilled employees; and ››the ability of our officers and key employees to continue to expand, train and manage our employee base. We have in the past experienced intense competition for skilled personnel during market expansions and believe competition will be intense if the semiconductor market experiences a sustained expansion. Consequently, we generally attempt to minimize reductions in skilled personnel in reaction to industry downturns, which reduces our ability to lower costs by payroll reduction.

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Because the costs to semiconductor manufacturers of switching from one semiconductor equipment supplier to another can be high, it may be more difficult to sell our products to customers having a competing installed base, which could limit our growth in sales and market share. We believe that once a semiconductor manufacturer has selected a supplier’s equipment for a particular product line, that manufacturer generally continues to rely on that supplier for future equipment requirements, including new generations of similar products. Changing from one equipment supplier to another is expensive and requires a substantial investment of resources by the customer. Accordingly, it is difficult to achieve significant sales to a customer using another supplier’s equipment. Our inability to sell our products to potential customers who use another supplier’s equipment could adversely affect our ability to increase revenue and market share.

Our reliance on a limited number of suppliers and a single manufacturing facility in our Front-end could result in disruption of our operations. We outsource a portion of the manufacturing of our Front-end business to a limited number of suppliers. If our suppliers were unable or unwilling to deliver products in a timely manner to us in the quantities we require for any reason, including without limitation, capital constraints, natural disaster, labor unrest, capacity constraints, supply chain management problems or contractual disputes, we may be unable to fill customer orders on a timely basis, which could negatively affect our customer relationships and financial performance. Many of our suppliers face economic challenges in a depressed or difficult global economy, which increases our risk of disruption from a supplier’s failure to perform its obligations to us in a timely manner. We have shifted an increasing portion of our Front-end manufacturing to our Front-end Manufacturing Singapore (FEMS) facility. If this facility experiences a manufacturing disruption for any reason, including without limitation, natural disaster, labor unrest, capacity constraints, supply chain management problems or contractual disputes, our ability to timely meet our customers’ needs may be impaired, which would negatively affect our customer relationships and financial performance.

We operate worldwide; economic, political, military or other events in a country where we make significant sales or have significant operations could interfere with our success or operations there and harm our business. We market and sell our products and services throughout the world. A substantial portion of our manufacturing employees and operations are in the People’s Republic of China and the success of our business depends substantially on those operations. In addition, we have operating facilities in the Netherlands, the United States, Japan, Hong Kong, Singapore, Malaysia and South Korea. Our operations are subject to risks inherent in doing business internationally, including, without limitation:

››unexpected changes in regulatory or legal requirements or changes in one country in which we do business which are inconsistent with regulations in another country in which we do business;

››potentially adverse tax consequences; ››fluctuations in foreign currency exchange rates and foreign currency controls; ››political conditions and instability; ››economic conditions and instability; ››terrorist activities; ››human health emergencies, such as the outbreak of infectious diseases or viruses; ›› tariffs and other trade barriers, including current and future import and export restrictions and compliance requirements, and freight rates; ››difficulty in staffing, coordinating and managing international operations; ››burden of complying with a wide variety of foreign laws and licensing requirements; ››differences in intellectual property right protection; ››differences in rights to enforce agreements; ››differences in commercial payment terms and practices; and ››business interruption and damage from natural disasters, such as earthquakes, tsunamis and floods. These factors could increase our costs of doing business in a particular region or result in delays or cancellations of purchase orders or disrupt our supply chain, any of which could materially and adversely impact our business and operating results.

Environmental laws and regulations may expose us to liability and increase our costs. Our operations are subject to many environmental laws and regulations wherever we operate governing, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal and the investigation and remediation of soil and

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groundwater contamination. To the extent such regulations or directives apply to our business throughout the world, these measures could adversely affect our manufacturing costs or product sales by forcing us or our suppliers to change production processes or use more costly or scarce materials. As with other companies engaged in similar activities, we face inherent risks of environmental liability in our current and historical manufacturing R&D activities. Accordingly, costs associated with such future environmental compliance or remediation obligations could adversely affect our business.

Any acquisitions or investments we may make could disrupt our business and harm our financial condition. We may consider from time to time additional investments in complementary businesses, products or technologies, such as the recent acquisition by ASM Pacific Technology of the SEAS Business in early 2011. We may not be able to successfully integrate these businesses, products, technologies or personnel that we might acquire in the future, and accordingly we may not realize the anticipated benefits from such acquisitions. In particular, our operation of acquired businesses involves numerous risks, including without limitation:

››problems integrating the purchased operations, technologies or products; ››unanticipated costs and liabilities for which we are not able to obtain indemnification from the sellers; ››diversion of management’s attention from our core business; ››adverse effects on existing business relationships with customers; ››risks associated with entering markets in which we have no, or limited, prior experience; ››risks associated with installation, service and maintenance of equipment of which we have limited or no prior experience; ››limited technical documentation of the equipment developed in the acquired company; and ››potential loss of key employees, particularly those of the acquired organizations. In addition, in the event of any future acquisitions of such businesses, products or technologies, we could:

››issue shares that would dilute our current shareholders’ percentage ownership; ››incur debt; ››assume liabilities; ››incur impairment expenses related to goodwill and other intangible assets; or ››incur substantial accounting write-offs. Risks related to an investment in our shares ASMI announced the sale of a 12% stake in ASMPT and reported on outcome study into causes of non-recognition by the markets of the value of the combined businesses of the Company On March 15, 2013, ASMI sold a 12% stake in ASMPT. The shares were sold in a partial secondary placement raising proceeds of €422 million. The Company intends to distribute approximately 65% of the cash proceeds to ASMI shareholders; a proposal thereto will be placed on the agenda of the upcoming AGM scheduled for May 16, 2013. The remaining proceeds will be used to further strengthen the business of the Company. As of today, the Company continues to be the largest shareholder of ASMPT with a 40% stake. At the Annual General Meeting of Shareholders (AGM) held in May 2012, the Company announced that it would carry out a study into the causes of the lack of recognition by the markets of the value of the combined businesses (Front-end and Back-end) of the Company. Following that announcement, the Company appointed financial advisors to assist the Company in carrying out the study. The study was initiated shortly after the 2012 AGM and was recently completed. Each of the Company’s financial advisors independently carried out an investigation involving frequent discussions with the Company’s Management Board and legal and tax advisors. The advisors also presented their findings to the Company’s Supervisory Board. No single or predominant factor was identified in causing the valuation discrepancy. However, a number of causes and circumstances were identified as potentially influencing the valuation discrepancy, including a holding company discount related to the current corporate structure. Subsequently, an analysis was conducted by the Company in close cooperation with its advisors of the various potential courses of action, including those suggested by shareholders. The alternatives that were investigated included a full or partial placement or sale of the Company’s stake in ASMPT, a spin-off of shares in ASMPT and several merger alternatives.

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As part of this analysis, the Company carefully considered the interests of the Company, its shareholders, as well as other relevant stakeholders. The Company has also taken into account the various operational connections between the Front-end business and Backend business, as well as potential accounting, legal and tax implications and execution risks. The Management Board and the Supervisory Board of the Company concluded that a partial secondary placement of 8% to 12% of ASMPT shares was the most suitable step to be taken to address the non-recognition by the markets of the value of the combined businesses of the Company. This course of action was chosen taking into account, amongst others, equity market capacity, tax efficiency and ongoing corporate stability at ASMI and ASMPT. This step provides flexibility for further action, if deemed appropriate. The Management and Supervisory Boards of the Company have proceeded with this proposed action and the Board of Directors of ASMPT has expressed its support to this proposal. In addition thereto, certain major shareholders of the Company representing approximately 27% of the total outstanding shares in the Company were consulted in advance with regard to this proposed action and have expressed support thereof. The Company will further report on the outcome of the study at the upcoming 2013 AGM, which is scheduled to take place May 16, 2013.

Lehman Bros. liquidation administrators have notified us that our common shares purchased by Lehman and held by Lehman in custody accounts on our behalf may have a shortfall. During 2008, we engaged Lehman to repurchase ordinary ASMI shares on the Euronext and Nasdaq markets. As of September 15, 2008, Lehman had purchased and held 2,552,071 shares for our account. Lehman went into bankruptcy administration on September 15, 2008, and we subsequently filed a submission giving notice of our proprietary interest in the shares believed to be held in custody by Lehman. At our May 2009 AGM, our shareholders resolved to cancel all of these treasury shares and we so notified Lehman of the cancellation. However we were notified in September 2010 by the Lehman administrators that there is a possible shortfall in the number of shares held by Lehman as reflected in the statements of our accounts with Lehman. To the extent the number of treasury shares held by Lehman as of the date of their cancellation is lower than 2,552,071 only such lower number of shares have been cancelled and the shortfall of shares may still be considered outstanding. The Lehman administrators report that some time prior to its bankruptcy, Lehman put into a segregated client omnibus account a cash sum on our behalf of $6,758,796, which the administrators apparently regard as money to which we have a proprietary right in lieu of some or all of the missing shares. We are uncertain at this time as to the accuracy of the shortfall of shares, the sufficiency of this cash sum to cover the value of any such discrepancy, and our entitlement to all or a portion of such sum when distributions are determined and made since there is likely to also be a shortfall in Lehman assets subject to proprietary rights. Given the magnitude of the overall Lehman administration, the timeline for clarity and resolution of this item is expected to be considerable, perhaps up to several years. For additional information, see Note 19 to the consolidated financial statements.

Our founder who is also Chairman of the Board of ASM Pacific Technology controls approximately 17.98% of the voting power which gives him significant influence over matters voted on by our shareholders, including the election of members of our Supervisory Board and Management Board and makes it substantially more difficult for a shareholder group to remove or elect such members without his support. Our founder, Arthur H. del Prado, controlled approximately 17.98% of the voting power of our outstanding common shares as of December 31, 2012. Accordingly, he has significant influence on the outcome of matters submitted to a shareholder vote, such as the election of the members of our Supervisory Board and Management Board. Persons nominated by the Supervisory Board for appointment by the shareholders to the Supervisory Board or Management Board at a general meeting of shareholders will be elected if they receive a majority of the votes cast at the meeting. Nominees to the Supervisory Board or Management Board who are not proposed by the Supervisory Board are appointed if they receive the affirmative vote of a majority of the votes cast at the meeting, provided such affirmative votes represent at least one third of our issued capital. Members of the Supervisory and Management Boards may be removed only by the affirmative vote of a majority of the votes cast at a meeting, and, unless such removal is recommended by the Supervisory Board, the affirmative votes must represent at least one third of our issued capital. This makes it difficult for a group of shareholders to remove or elect members of our Supervisory Board or Management Board without the support of our founder.

Our anti-takeover provisions may prevent a beneficial change of control. The Company has granted to Stichting Continuïteit ASM International (“Stichting”), a non-membership organization with a board composed of three members independent of ASMI, the right to acquire and vote our preferred shares. The objective of Stichting is to serve the

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interests of the Company. To that objective Stichting may, among other things, acquire, own and vote our preferred shares in order to maintain our independence and/or continuity and/or identity. This may prevent a change of control from occurring that shareholders may otherwise support. On May 14, 2008, Stichting exercised this right in response to a perceived threat to our continuity and acquired shares of our preferred stock representing 29.9% of the total voting power of our outstanding capital shares at that time. These shares were retired in 2009 and a new right was issued to Stichting to acquire and vote preferred shares in certain situations in the future. For additional information regarding Stichting, see Item 7, “Major Shareholders and Related Party Transactions.” The voting power of Stichting makes it more difficult for a shareholder or a group of shareholders to cause us to enter into a change of control transaction not supported by Stichting, even if such transaction offers our shareholders an opportunity to sell their shares at a premium over the market price.

We must offer a possible change of control transaction to Applied Materials first. Pursuant to our 1997 settlement agreement with Applied Materials, as amended and restated in 1998, if we desire to effect a change of control transaction, as defined in the settlement agreement which generally involves our Front-end operations and not our holdings in ASMPT, with a competitor of Applied Materials, we must first offer the change of control transaction to Applied Materials on the same terms as we would be willing to accept from that competitor pursuant to a bona fide arm’s-length offer made by that competitor.

Our stock price has fluctuated and may continue to fluctuate widely. The market price of our common shares has fluctuated substantially in the past. Between January 1, 2012 and December 31, 2012, the sale price of our common shares, as reported on the NASDAQ Global Select Market, ranged from a low of US$29.39 to a high of US$40.35. The market price of our common shares will continue to be subject to significant fluctuations in the future in response to a variety of factors, including the risk factors discussed in this report and the following, without limitation:

››future announcements concerning our business or that of our competitors or customers; ››the introduction of new products or changes in product pricing policies by us or our competitors; ››litigation regarding proprietary rights or other matters; ››changes in analysts’ earnings estimates and recommendations; ››developments in the financial markets; ››quarterly fluctuations in operating results; ››hedge fund and shareholder activist activities; ››general economic, political and market conditions, such as recessions or foreign currency fluctuations; and ››general conditions in the semiconductor and semiconductor equipment industries. In addition, public stock markets frequently experience substantial price and trading volume volatility, particularly in the high technology sectors of the market. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to or disproportionately impacted by the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our common shares.

Our quarterly revenues and earnings from operations have varied significantly in the past and may vary in the future due to a number of factors, including, without limitation:

››cyclicality and other economic conditions in the semiconductor industry; ››production capacity constraints; ››the timing of customer orders, cancellations and shipments; ››the length and variability of the sales cycle for our products; ››the introduction of new products and enhancements by us and our competitors; ››the emergence of new industry standards; ››product obsolescence; ››disruptions in sources of supply; ››our ability to time our expenditures in anticipation of future orders; ››our ability to fund our capital requirements; ››changes in our pricing and pricing by our suppliers and competitors; ››our product and revenue mix;

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››seasonal fluctuations in demand for our products; ››foreign currency exchange rate fluctuations; e.g. appreciation of the euro versus the Japanese yen and US dollar, which would negatively affect the competitiveness of those manufacturing activities that are domiciled in countries whose currency is the euro; and

››economic conditions generally or in various geographic areas where we or our customers do business. In addition, in our Front-end segment we derive a substantial portion of our net sales from products that have a high average selling price and significant lead times between the initial order and delivery of the product. The timing and recognition of net sales from customer orders can cause significant fluctuations in our earnings from operations from quarter to quarter. Gross margins realized on product sales vary depending upon a variety of factors, including the mix of products sold during a particular period, negotiated selling prices, the timing of new product introductions and enhancements and manufacturing costs. A delay in a shipment near the end of a fiscal quarter or year, due, for example, to rescheduling or cancellations by customers or to unexpected manufacturing difficulties experienced by us, may cause sales in a particular period to fall significantly below our expectations and may materially adversely affect our earnings from operations for that period. Further, our need to continue expenditures for research and development and engineering make it difficult for us to reduce expenses in a particular quarter even if our sales goals for that quarter are not met. Our inability to adjust spending quickly enough to compensate for any sales shortfall would magnify the adverse impact of a sales shortfall on our earnings from operations. In addition, announcements by us or our competitors of new products and technologies could cause customers to defer purchases of our existing systems, which could negatively impact our financial position and net earnings. As a result of these factors, our revenues or earnings from operations may vary significantly from quarter to quarter. Any shortfall in revenues or earnings from operations from levels expected by securities analysts and investors could cause a decrease in the trading price of our common shares.

ITEM 4

INFORMATION ON THE COMPANY The information in this Item 4 should be read in conjunction with the risks discussed under Item 3.D., “Risk Factors.”

A. HISTORY AND DEVELOPMENT OF THE COMPANY ASM International NV was incorporated on March 4, 1968 as a Netherlands naamloze vennootschap, or public limited liability company, and was previously known as Advanced Semiconductor Materials International NV. Our principal executive offices are located at Versterkerstraat 8, 1322 AP, Almere, the Netherlands. Our telephone number at that location is +31 8810 08810. Our authorized agent in the United States is our subsidiary, ASM America Inc, a Delaware corporation, located at 3440 East University Drive, Phoenix, Arizona 85034.

B. BUSINESS OVERVIEW Introduction Our Business We are an equipment supplier mainly to the semiconductor, LED and electronics manufacturing industry. We design, manufacture and sell equipment and services to our customers for the production of semiconductor devices, or integrated circuits, for the production of LEDs, and for electronics manufacturing in general. The semiconductor capital equipment market is composed of three major market segments: wafer processing equipment, assembly and packaging equipment, and test equipment. ASMI is mainly active in the wafer processing and assembly and packaging market segments. The wafer processing segment is referred to as “Front-end”. Assembly and packaging is referred to as “Back-end”. We also sell lead-frames for semiconductor assembly. In addition, ASM AS, the surface-mount technology (“SMT”) business acquired in 2011 is offering SMT placement solutions for the global electronics manufacturing industries. Front-end production systems perform processes on round slices of silicon, called wafers, which are typically 200mm or 300mm in diameter. During these processes, thin films, or layers, of various materials are grown or deposited onto the wafer. These films are electrically conductive, electrically insulating, or semiconducting. By depositing multiple layers of films, multi-level, integrated electrical

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circuits are created. Such circuits are referred to as “dies” or “chips”. There are many dies on each wafer. After testing the individual circuits for correct performance, the dies on the wafer are separated. Back-end production systems then assemble and connect one or more known good dies in a single package to form a complex semiconductor device that will perform calculations, store data and interface with its environment. Our Front-end operations are conducted through wholly-owned subsidiaries, the most significant being ASM Front-End Manufacturing Singapore Pte Ltd. (“FEMS”), located in Singapore, ASM Europe BV (“ASM Europe”), located in the Netherlands, ASM America, Inc. (“ASM America”), located in the United States, ASM Japan K.K. (“ASM Japan”), located in Japan, and ASM Genitech Korea Ltd. (“ASM Genitech”) located in Korea. Our Back-end and SMT equipment operations are conducted through ASM Pacific Technology Ltd. (“ASM Pacific Technology”), with principal operations in Hong Kong, the People’s Republic of China, Singapore, Germany and Malaysia. At December 31, 2012, we owned 51.96% of the outstanding equity of ASM Pacific Technology. In March 2013 we sold a 12% stake so we now own 40.08% of ASM Pacific Technology. The location of our Front-end facilities allows us to interact closely with customers in the world’s major Front-end geographic market segments: Europe, North America, and Asia. The principal market we address in the Front-end is a portion of the deposition market segment. Our Front-end segment accounted for 28% of our net sales in 2011 and 26% of our net sales in 2012. Our Back-end and SMT equipment facilities are in close proximity to where most customer assembly and packaging operations are located. The principal markets we address in Back-end are portions of the Bonding Equipment, Packaging Equipment and Integrated Assembly Systems segments, which segments include assembly and packaging equipment for LEDs. For the SMT equipment business, we mainly address the placement equipment market. We also manufacture and sell lead-frames which are substrates connecting the various circuits on a chip to the devices in which the chips are installed. Our Back-end segment accounted for 72% of our net sales in 2011 and 74% of our net sales in 2012.

Industry Background and Major Business Trends Semiconductor devices are the key enablers of the electronic age. Each semiconductor device can hold many individual components, most of which are transistors. For over 30 years now, the average number of components per integrated semiconductor device, at the optimum cost-per-component, has been increased by a factor of two every 18 to 24 months. This trend is generally referred to as Moore’s law. Increases in complexity, along with simultaneous reductions in the cost-per-component, have mainly been achieved by reducing the size of individual transistors, so that a larger number of transistors fit within a given size die. Today, transistors less than 22nm (1 nm is equal to one billionth of a meter) long are manufactured in high volume, and several billion transistors can be manufactured on a single die with an area of a few square centimeters. A second development that has decreased the cost per device is the increased size of the wafer, so that more devices can be produced within one production cycle. Today, almost all of the newly installed semiconductor device fabrication capacity employs 300mm diameter wafers, with each wafer typically holding between a few dozen to several thousand individual circuits. A transition to 450mm diameter wafers is now being discussed for volume manufacturing around 2017-2019. The yield, or the fraction of dies that operates according to specifications, is one of the key variables that influences the cost at which integrated circuits can be manufactured. Large initial investments are needed to build an automated production line in an ultra-clean environment to achieve such high yield. The capital equipment in the production line is an important determinant for the yield of the factory, and the speed with which the yield can be optimized for new device generations. Another trend is that towards vertical or 3D transistors. This trend also helps to keep the industry on track with Moore’s law (“more Moore”) because more functions can be stacked vertically on a wafer or chip than in two dimensions. Recent announcements have introduced “FinFET’s” and several 3D memory transistor architectures. Also on die level the trend is towards 3D by stacking several chips in one package. These chips can come from different supply chains, each optimized for its own performance and cost, enabling the manufacture of heterogeneous devices with even more integrated capability. This latter trend is sometimes referred to as “more than Moore.”

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The trends outlined above are the main drivers of the broad semiconductor roadmap which semiconductor equipment companies track in developing new production systems and process technologies. These new systems and technologies must be developed well ahead of volume demand for the semiconductor devices they make. As a result, there is a large lead time between the investment in a new technology, and its commercial success. With the combination of a long lead time and the short product life-cycles comes the inherent difficulty of matching supply and demand, which results in the high volatility associated with the semiconductor equipment industry. In this highly cyclical industry, the Front-end and Back-end market segments have historically reacted differently to market forces. The semiconductor industry was driven in 2012 by a US$1.88 trillion global electronics industry (VLSI Research Chip Insider February 4, 2013), that required approximately $248 billion (ibid.) in semiconductors. The semiconductor industry in turn, supported the approximately $45 billion (ibid.) semiconductor capital equipment industry, which supplies the needed production systems and services. The semiconductor industry declined in 2012 which led to a decline in the equipment business.

Our Strategy Our strategic objective is to realize profitable, sustainable growth by capitalizing on our technological innovations, manufacturing infrastructure and sales and support offices located close to our global customers. The key elements of our strategy include:

››Streamlining our Front-end and Back-end manufacturing by systematically reducing manufacturing costs through global sourcing and product platform consolidation.

››Maintaining our global reach through our global operating, sales and customer service organization and its facilities in key parts of the world in order to establish and maintain long-term customer relationships.

››Leveraging our Front-end and Back-end technology leadership and manufacturing capabilities through advancements in our products and processes early in the technology lifecycle.

››Expanding the scope and depth of our research and development capabilities through strategic alliances with independent research institutes, universities, customers and suppliers, and expanding our patent portfolio where this is deemed necessary and beneficial.

Background of Semiconductor Manufacturing Processes Overview The process of manufacturing an integrated semiconductor, from raw material to finished device, includes amongst others the segments in which we participate: Front-end and Back-end.

Front-end Manufacturing Process The Front-end manufacturing process, or wafer processing, can be divided in three distinct parts: wafer manufacturing, transistor formation (known as Front-end of the line (“FEOL”) processing), and interconnect formation (known as Back-end of the line (“BEOL”) processing). We develop and sell technology, develop, manufacture and sell equipment, and provide services used by semiconductor device manufacturers in each of these sections of Front-end manufacturing. In the wafer manufacturing process, a large single crystal of very pure silicon is grown from molten silicon. The crystal is then sliced into a large number of thin slices, or wafers, of single crystalline silicon. These slices are polished to an atomic level flatness before the next steps are executed. For advanced applications, some layers are deposited on the wafer for later use, by either epitaxy or diffusion/oxidation (described below). Epitaxial wafers are even flatter and contain fewer defects at the surface than polished wafers. During FEOL and BEOL wafer processing, multiple thin films of either electrically insulating material, also called dielectrics, or conductive material are modified, grown, or deposited on a silicon wafer. First, several material processing cycles are used in the FEOL to build the basic transistor and other components such as capacitors and resistors. Second, several processing cycles are used in the BEOL to electrically connect the large amount of transistors and components, and to build additional passive components such as capacitors, inductors and resistors. Patterning of deposited layers with lithography and etching (described below) creates the transistors, passive components and connecting wires, which together make up the integrated circuit. Each integrated circuit is on a single “chip” or a “die” on the wafer. A finished wafer may contain a few dozen to several thousand individual dies. Front-end processes are performed either one wafer at a time in single wafer processing systems or many wafers at a time in batch processing systems. Multiple deposition, and patterning processes are performed on the same wafer.

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The number and precise order of the process steps vary depending upon the complexity and design of the integrated circuit. The performance of the circuit is determined in part by the various electrical characteristics of the materials used in the layers of the circuit and the wafer. Simple circuits may have as few as ten layers, while complex circuits may have more than one hundred layers. The Front-end manufacturing process is capital intensive, requiring multiple units of several different production systems. Many different but complementary methods are used to modify, grow, or deposit materials on the wafers. We are predominantly active in developing and manufacturing the equipment used by semiconductor device manufacturers in the deposition processes, i.e., those steps that involve the creation of insulating, conducting and semi-conducting layers on the wafer surface. The Front-end manufacturing process is complete when all of the layers have been deposited and patterned on the wafer. As a last step, the correct electrical functioning of the integrated circuits on each die is confirmed by probing. Non-functioning circuits are marked so they can be eliminated before the Back-end processing (see next section). The introduction of even trace levels of foreign particles or material can make a circuit, or even an entire wafer, unusable. To reduce the level of foreign particles or material, Front-end processing is performed in clean rooms with ultra-low particle and contamination levels. Once the Front-end processing is complete, the entire wafer with multiple, functioning, integrated circuits is shipped to the Back-end facility where it is separated into dies, which are then bonded to a suitable substrate or lead-frame, packaged, and tested before final shipment of the semiconductor device to the end customer. Back-end processes do not require the same level of contaminant control. These processes are performed in facilities that differ from facilities in which Front-end processes are performed.

Back-end Manufacturing Process When the wafer with confirmed working integrated circuits is received in the Back-end facility, wafers are first cut (“diced”) into individual dies or chips. The individual dies are then attached to a lead-frame or other substrate by a bonding process. The lead-frame or substrate provides the interface between the electrical circuit on the die and the system in which the die is incorporated. Lead-frames are produced by stamping or etching out a pattern on a strip of copper or iron-nickel alloy. High precision lead-frames are produced by an etching process, also to achieve a shorter time to market. Stamped frames are typically used for very high volumes on mature designs. The electrical connection of the electrical circuit to the lead-frame is made by wire bonding. As few as one or as many as a thousand or more separate wires are connected between the die and the lead-frame. After this assembly and wire bonding interconnection process, the dies are encapsulated to protect them from environmental influences. Singulated dies will then move through inspection, electrical test, marking and packing to prepare the tested and finished devices for shipment to the customer. Another method used for chips with high pin count and speed is flip chip. The flip chip process eliminates the need for die and wire bonding. Instead, it involves populating the electrical interconnect points on a chip with small solder balls made of low melting point materials, a process called bumping. The substrate is designed such that it has an identical pattern to that of the device. Flip chip methods are increasingly being adopted. Among these methods is Thermal Compression flip chip Bonding with copper pillar bumping, using non-conductive paste. Wafer level packaging (“WLP”) is another emerging technique that places all the protective layers, interconnections and interconnection points directly on the surface of the wafer, such that completely packaged devices are made at wafer level. After probing and dicing, the die can be separated and may be directly attached to printed circuit boards.

LED Manufacturing Process Light Emitting Diodes (LEDs) are manufactured on sapphire or silicon carbide substrates of typically 2” to 4” in diameter. The LED is formed by depositing thin films on the substrate surface. Following this process electrical contacts are provided by a mask aligner. Individual dies are singulated by a laser scriber and a dicing machine. The individual LED dies are then tested and binned in different performance categories. Subsequently LED dies are attached to the package substrates. The electrodes of the LED die are connected to the leads of the package substrate with fine gold wire by a wire bonder. The packages are tested and sorted according to performance categories, and then taped to a reel for SMT processing.

The SMT Placement Process (Electronics Assembly) Modern electronic modules are produced by placing various components and connectors on printed circuit boards. To ensure the precision and efficiency required to handle ever smaller components at ever lower cost, the placement process takes place on highly automated surface-mount technology (SMT) lines.

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These SMT lines and the placement process in general can be divided into three main segments:

››The solder paste printer, which applies solder paste to the printed circuit board (PCB) in order to keep the components in place during the entire placement process.

››The placement machine, which places various components on the printed circuit board in predefined positions. A placement head, which can move along three axes and rotate around the Z-axis, uses suction to pick up a component from the tape or tray, checks the component’s position with the help of a camera system, computes its angle and offset from the nominal position, and places it onto the printed circuit board. When all components have been placed, a conveyor system moves the board to the next station and replaces it with a fresh, empty board. To increase the throughput rate, modern placement machines have several “revolver-type” placement heads, each of which is able to pick up and place multiple components per cycle in order to minimize the travel time between pick-up and placement positions. And thanks to their modular design, the machines can be configured with different feeder modules, placement heads, camera systems, etc. in order to best meet the specific production requirements. For products with many components and high line throughput requirements, multiple SMT placement machines are usually positioned in a line.

››The reflow oven, in which the solder paste is heated and hardened or adhesives are cured in order to create a permanent bond between the components and the printed circuit board’s conducting paths. Once all components have been placed, the PCB is transported into the reflow oven, where the board is heated to the appropriate processing temperature. The solder balls in the solder paste melt and create a mechanical as well as an electrical connection between the components and the printed circuit board. If the SMD components were glued on, the reflow oven is used to cure the adhesive at a temperature that is lower than the heat required to melt the solder paste. Once the adhesive has hardened, the boards are flow-soldered – usually after additional special components have been installed. Modern SMT lines contain additional systems and components such as quality control systems (e.g., automated optical inspection or AOI systems) or special process control systems (e.g., barcode readers).

Important Technology Trends for our Business Technology Trends in Front-end and Back-end The continuous demand for smaller, faster and cheaper semiconductor components drives the technology advances in the semiconductor manufacturing process. As the transistors in an integrated circuit become smaller, the cost-per-component decreases. Fortuitously, at the same time the operating speed of the transistor increases. Thus the minimum size of a single transistor in an integrated circuit is an extremely important parameter. This minimum size can be characterized by the so-called half-pitch, which is about equal to the smallest line width in the device. Today, our customers manufacture semiconductor devices having a half-pitch as small as 45 to 22 nanometers (one nanometer is one billionth of a meter). Our customers are qualifying and testing new critical processes to generate devices with line widths at or below 22 to 10nm, sometimes in a vertical 3D transistor architecture. Simultaneously, in our customers’ laboratories and several collaborative research environments advanced 10nm and 7nm design rule devices are being developed. Today, most of the newly installed semiconductor device fabrication capacity employs 300mm wafers. A transition towards 450mm wafers is now planned. Early research in consortia is already taking place, while the first 450mm pilot factories are now expected to emerge around 2015 to 2016. In developing faster and smaller devices, our Front-end customers’ major technology requirements are:

››new thin film materials and device designs that can reduce the amount of power consumed in the device, increase the speed and reliability of the circuit, and increase the amount of charge that can be stored;

››reliable manufacturing of taller three-dimensional structures in devices; ››lithography of ever smaller feature sizes, now much smaller than the wavelength of visible light; and ››new manufacturing processes that reduce device variability and increase yield. Technological developments in the Front-end process have resulted in new requirements for the Back-end manufacturing process. The ability to place millions of transistors onto a thumbnail-size device with vastly increased functionality has created the first major trend: the need for more input/output terminals in the same or smaller space. The challenge for Back-end equipment suppliers is to connect this increasing number of terminals in a package that sometimes is barely larger than the chip. Wire bonding has been at the forefront of this transition, but for integrated circuits with very high terminal count, the industry has developed ball grid array (“BGA”) and flip chip packaging that use the entire surface of a die, and not just the perimeter.

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A second major trend in the Back-end market segment is driven by the strong growth in demand for hand held devices. There is an ongoing need to build ever smaller and more complex packages at lower cost for this market. Individual dies must be packaged in areas that are just slightly larger than the individual dies they contain. These chip scale packages minimize the amount of space occupied by the end product on the circuit board. A third major trend relates to the industry demand for a much higher level of integration, but still at lower cost and optimized yield. This has resulted in a requirement to place multiple dies into the same package. The assembly of a combination of “known good dies” in a package can lead to higher yield than the combination of the same functionality blocks on a single chip. Such a System-in-Package (“SiP”) is more than a simple collection of multiple dies: SiP products are fully functional systems or sub-systems. Moreover, devices from different supply chains, with sometimes entirely different feature sizes or technologies can be integrated this way. Dies can be placed next to and/or on top of each other, using stacked die bonding techniques and sometimes mixing flip chip and wire bonding techniques in the same package. SiP is an advanced package incorporating multiple devices into a single package. The devices can be integrated circuit dies, passive components and even pre-packaged dies, that are bonded together by wire bonding or by flip chip bonding. SiP may also incorporate stacked die bonding. It is a powerful package that creates highly integrated products at low cost, minimized size and high performance. Smaller form factor with more advanced functionality of emerging mobile electronic devices is driving the demand for SiP solutions. Stacked die packages have grown significantly in recent years, achieving high density packaging at low cost, and are especially popular in memory manufacturing. Stacked die packages can be made in different configurations, including stair stacked and pyramid stacked packages. It appears that in the near future an increasing fraction of the value of the device will be in the package, at the cost of the fraction that is for the die. In wire bonding of semiconductor packages, copper wire bonding technology is emerging as a replacement of gold wire bonding, thanks to the lower overall package cost compared to gold wire bonding. Higher electrical conductivity, reduced operating resistance and lower heat dissipation make copper wire bonding an ideal replacement of gold wire bonding. Copper also offers better thermal stability and mechanical properties that increase wire loop stability and bond strength. After overcoming several manufacturing challenges, copper wire bonding is now in production for a large range of package types, such as QFNs, BGAs, QFPs, TSSOPs, and SOICs. In addition, other alloy wire bonding technologies, such as silver alloy bonding are set to replace gold wire in semiconductors.

Technology Trends in Electronics Assembly

››As a result of the above, new technological requirements for placement equipment arise from the component side as well as from downstream production processes and from the markets for end products.

››The trend toward integrating ever more complex functions in the smallest amount of space continues unabated and will keep playing a significant role in the development of placement equipment and SMT production techniques. Examples of this trend include: -- More use of dies, which can be placed closer together because of their lack of packaging, and package-on-package (PoP) designs, which are placed one on top of the other -- More optical circuitry for faster transmission rates -- More component diversity

››The market for LED placement equipment is a good example of some of these technological requirements: The setup processes and programs must be able to handle the different LED brightness categories and accommodate them with the addition of series resistors or by permitting only the placement of LEDs in the same brightness category. Since LED components are very fragile, they must be positioned with great care using special nozzle shapes. In addition, the placement machines and conveyor systems must be able to process extra-long boards, because the multiple clusters of backlight units are often very large.

››These and other developments in the component and PCB field pose ever tougher demands on the precision and flexibility of the placement equipment – from drives and gantries to feeders and vision systems to placement heads and pick-up systems. And since producers are also subject to increasing pressure in terms of costs and efficiency, this level of precision must be delivered even for high placement speeds and over long periods of time. Another challenge is the feeding of components directly from the wafer, which is a way of eliminating time-consuming and expensive process steps such as the packaging of dies and flip-chips. Other challenges are posed by the growth in selected application fields such as LED placement.

››New requirements arise also at the customer end. Shorter product life cycles and the rising number of product variants along with optimized logistics chains reduce the average lot sizes and make for shorter lead times. At the same time, today’s lines run at much higher speeds. As a result, each shift must be able to handle more and more product changeovers, which means that the associated setup procedures reduce the productivity of traditional SMT lines.

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››In the process control area, customers want more features ranging from monitoring to full-fledged component traceability for sophisticated applications in medical technology, aerospace engineering and the automobile industry. But no matter which industry they serve, electronics manufacturers have to deal with huge competitive and cost pressures as well as a highly cyclical market environment.

››As far as recent trends in LED packaging are concerned, the sapphire or silicon carbide substrate for LED chip fabrication is migrating from 50mm to 100mm, some are moving to 150mm substrates in production. Larger substrates can produce more LED chips in a wafer. Some manufacturers are moving to silicon substrates to reduce cost.

››With reference to chip sizes, High Power LED increases the chip size to 1mm or above to increase the total output power for a single chip. Furthermore, as the LED efficiency increases, more chips move to 0.15mm to reduce the cost for small power application such as indicators. For package substrates, more High Power LED packages employ ceramic and silicon substrates for better heat dissipation.

Our Response to Technology Trends We develop and manufacture wafer processing systems and new thin film materials that enable our customers to produce devices that consume less power, are faster, show less variability, are more reliable and are able to store more electrical charge. Today, our leading-edge high volume production systems support the manufacturing of semiconductor devices having a half-pitch as small as 45 to 22 nanometers (one nanometer is one billionth of a meter). At ASMI, and in close cooperation with our customers, we are qualifying and testing new critical process equipment for line widths of 32 to 15nm. Simultaneously, we are developing new 10 to 7nm technologies in our laboratories. Today, most of the newly installed semiconductor device fabrication capacity employs 300mm wafers. Accordingly, our system and process development and sales effort is concentrated in 300mm equipment. Initial developments of 450mm equipment have started in parallel. In order to meet our customers’ needs, we have developed, and are still developing many new materials. For example, in the FEOL, high-k dielectrics and novel metal gate electrodes can improve the performance and reduce the power consumption of a device, thereby enhancing battery life. This same class of materials can also lead to larger charge storage in a smaller capacitor, critical for memories and RF circuits. Whereas in the recent past much focus has been on the development of the high-k dielectric, today as much focus is on new technologies and materials for the metal gate electrode and the gate sidewall passivation. Another example of new materials in the FEOL are our silicon-germanium (“SiGe”) and silicon-carbon (“SiC”) and silicon-carbon-phosphorous (“SiCP”) epitaxial materials that can increase the switching speed of the transistors and the circuit in which they are embedded by so-called strain engineering. This can be done without negatively affecting the power these transistors consume. We expect that the creation of 3D vertical transistors will increase the demand for processes with better coverage of 3D structures. In response to this trend, we have developed and are still developing a variety of Atomic Layer Deposition (ALD) and epitaxy processes. ALD is an advanced technology that deposits atomic layers one at a time on wafers. This process is used to create ultra-thin films of exceptional quality and flatness. Plasma is sometimes used to enhance the process further (Plasma Enhanced ALD, or PEALD). In the BEOL or interconnect process, a continued demand to improve the speed at which signals travel through thin copper wires has led to the development of a full suite of low-k materials. These low-k materials can decrease the amount of delay in signal propagation, resulting in, for example, faster microprocessors. Simultaneously these low-k materials can reduce the amount of power loss in the interconnections. We have been one of the leaders in successfully introducing these low-k materials in the market. We are continuing to develop improvements to this low-k technology to enable faster interconnect circuits. We have also developed and sold new processes and wafer processing equipment to enable the creation of narrow lines having dimensions beyond the resolution of common lithography, and with low line width variability. For that purpose we have developed low temperature plasma enhanced ALD processes that are compatible with the photoresist processes that are common to lithography tools.

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In addition to addressing the technology needs of our customers, the relentless drive of the industry to reduce cost corresponds to significant spending on development programs that further increase throughput, equipment reliability, and yield in our customer’s line, and further lower the cost of the wafer processing systems. In order to enable further efficiencies in our manufacturing process, we have improved, and will continue to improve the level of standardization in our equipment portfolio by migrating to common platforms, subassemblies and components. This requires a significant engineering effort. For our Back-end customers, lead-frame and wire bond technology continues to offer the most flexible method of connecting the die to the printed circuit board. Increasing pressure on the number of I/O terminals per unit area of silicon continues to drive down the distance between two adjacent interconnect points or pads, reducing the bond pad pitch and allowable wire diameter. In order to achieve lower manufacturing costs for lead-frames, high density lead-frames need to be produced. This can be achieved by maximizing strip unit density and manufacturing larger matrix lead-frames. The increasing I/O requirement has also resulted in the use of several rows of these pads on a single die. Production is now ongoing with a bond pad pitch of 30 microns. Wire bonding must not only address decreasing wire diameters and pitch, but also address the throughput to reduce the overall cost of the device. Future wire bonding platforms will be able to operate in an environment that requires the bond pad pitch to be at 25 microns. The increasing row count will require better control of the wire shapes and looping profiles to maintain signal integrity at high communication speeds. All of this must be achieved with the highest possible speed and reliability. In addition, semiconductor manufacturers are looking to automation and integration of Back-end equipment as ways to reduce costs and increase productivity. Increasing pressure on the level of integration and reduction in size of handheld or mobile devices has given rise to several alternative assembly and bonding techniques and materials, such as flip chips and several chip-scale packaging methods. Stacked die packages, in which more than one die is stacked on top of another, to form a single device, play a major role in the handheld appliance market. We are responding to the need of stacked die packages by developing better wire bonding techniques, for example, by controlling the shape of the wire loop. We are currently developing methods of working with insulated wires, which will allow for more crossed connections in a device. The newly developed ASM Die Bonder ISLinDA offers a wide range of benefits with the sole target of producing highest speed and quality at lowest cost per die placement. Special handling and operating aspects of stacked and thin die are incorporated in the machine concept. The extremely fast vision system and the ultra-light pick and place head with innovative linear motor technology offer a significant increase in performance, product quality and yield. In Electronics Assembly, in close coordination with customers and other partners, our SMT placement machines, under the brand name SIPLACE, are developed and manufactured to process a broad spectrum of components with high speed, precision and reliability. Our modular machine designs allow customers to flexibly adapt their SMT lines to shorter lead times, fluctuating workloads, frequent product changes and smaller lot sizes. With their digital vision systems, intelligent SIPLACE X-feeders, head models, conveyor systems and linear drives, all current SIPLACE platforms use a shared pool of basic hardware modules to simplify the production and maintenance of the entire portfolio. To put the performance and flexibility of its machines to the best possible use, ASM Assembly Systems has developed the extensive SIPLACE software suite, which ranges from production scheduling to line and process control to monitoring, setup verification and traceability. In addition, the SIPLACE FACTS materials management system and the SIPLACE LES line execution system for setupoptimized production synchronization provide customers with powerful software solutions.

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Products Market Coverage The table below indicates the major market segments of the semiconductor equipment industry. The principal market segments in which we participate are underlined.

MARKET SEGMENT 1)

TEST AND RELATED SYSTEMS

IC FABRICATION EQUIPMENT OR FRONT-END

IC ASSEMBLY EQUIPMENT OR BACK-END

 

Automated Test Systems

Microlithography and Mask Equipment

Assembly Inspection Equipment

 

Material Handling Systems

CMP Equipment

Dicing Equipment

 

 

Ion Implanters

Bonding Equipment

 

 

Deposition and Related Tools 2)

Packaging Equipment

 

 

Etching and Cleaning Tools

Integrated Assembly Systems

 

 

Process Diagnostic Equipment

Leadframes 3)

1 2 3

Based on VLSI Research Industry Segmentation (www.vlsiresearch.com). This segment also includes diffusion and oxidation furnaces. While the materials segment is not included by VLSI Research in the Back-end segment, lead-frames are a significant component of our revenues.

Front-end Segment Products ASMI’s Front-end segment products come from a number of product platforms, with each platform designed to host and enable specified process technologies. The products in each product platform are linked through common technology elements of the platform, for example a common in-system software framework, common critical components, similar logistics (batch or single wafer processing), or a similar wafer processing environment (wet or dry). The following table lists our principal product platforms for the Front-end market, the main process technology that they enable, and the semiconductor device manufacturing solution for which the products from that platform are used. PRODUCT PLATFORM ASMI PROCESS TECHNOLOGY

PRODUCTS

Advance® Series

ALD, CVD, diffusion/oxidation, LPCVD

A400, A412, A4ALD, Vertical Furnace Systems

XP 1)

ALD, PECVD, PEALD, Epitaxy

Pulsar® and EmerALD ALD Products, PECVD Products, PEALD Products, Intrepid® Epitaxy 2)

XP8 1)

PECVD, PEALD

Eagle® PEALD and Dragon PECVD

Epsilon

Epitaxy, LPCVD

Epsilon 2000 and Epsilon 3200 3) Single Wafer Epitaxy Systems

Polygon®

ALD

Polygon 8200, Polygon 8300 4), Pulsar 4) Single Wafer Atomic Layer Deposition Systems

1

2 3

The XP is our standard single wafer processing platform designed to accommodate multiple process application modules with common platform standards. In 2012 ASM launched the XP8 high productivity platform for PECVD and PEALD, based on our common XP platform standard with an expanded configuration that enables integration of up to 8 chambers on one wafer handling platform. In 2012 ASM launched the Intrepid XP tool which enables up to 4 Epitaxy process modules integrated on the XP platform. The functionality of the Polygon, Pulsar and EmerALD has merged with the XP platform starting in 2009.

Description of our Front-end Segment’s Product Platforms Advance The Advance is our Vertical Furnace, batch processing platform. Products built on this product platform are used for diffusion, oxidation, (LP)CVD and ALD. The product platform is used in many manufacturing steps, from the production of silicon wafers to the final anneal in interconnect. The A400 is a system for 150 and 200mm wafers, while the A412 is for 300mm wafers. The A412 systems feature two reactors above a rotating carousel, a dual-boat concept for high productivity, and a wide range of process applications with variable load sizes from 25 wafers for shortest cycle time requirements, up to 150 wafers for lowest cost requirements in a single run. In this series, we also offer the A4ALD, for atomic layer deposition of dielectrics and metals.

XP Platform The XP is our high productivity common single wafer product platform, for 300mm. The XP platform will enable integration of sequential process steps on one platform. The XP is now available with Pulsar and EmerALD ALD modules, Intrepid Epitaxy modules, as well as PECVD and PEALD modules.

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The XP common platform will benefit our customers through reduced operating costs since multiple ASM products now will use many of the same parts and consumables and a common control architecture improves ease of use. The XP common platform enables us to improve the coherency in our product portfolio.

XP8 Platform The XP8 platform follows the basic architectural standards of the XP, but provides even higher productivity with up to 8 chambers integrated on a single wafer platform. The XP8 is now available with PECVD and PEALD modules.

Epsilon The Epsilon is our platform for single wafer epitaxy. The Epsilon product platform offers a wide range of epitaxy products and materials for many applications, ranging from high temperature silicon used in silicon starting material manufacturing, to low temperature, selective or non-selective silicon, silicon germanium (“SiGe”), silicon-carbon (“SiC”) used in CMOS devices and silicon germanium carbon (“SiGeC”) used in bipolar devices. The Epsilon 2000 is a single wafer, single reactor system for 150mm and 200mm wafers. The Epsilon 3200 is a single wafer, single reactor system for 300mm wafers.

Polygon The Polygon is a single wafer atomic layer deposition platform. It features a six-sided central vacuum handler, capable of hosting up to four reactors. The Polygon 8200 is used for 150 and 200mm wafers, and for magnetic head substrates. The Polygon 8300 is used for 300mm wafers. One or more Pulsar modules with ALD technology can be integrated onto the platform. Products built on this product platform are currently being used in, among others, ALD high-k gate dielectrics for high performance logic, metal-insulator-metal capacitors for system on a chip applications, and magnetic head gap fill.

Description of our Front-end Segment’s Process Technology Platforms Depending on application, a process technology can be used in more than one product platform. Process technologies that are intended for use across multiple product platforms are called a process technology platform. The technologies in a process technology platform share a common knowledge base and patent portfolio. ALCVD, for example, is enabled on both our single wafer and batch product platforms. This gives us the principal ability to provide a single wafer tool for a certain application early in the lifecycle, when short development cycle times are needed, and later in the lifecycle switch to a batch tool for efficiencies in high volume production, using the same chemistry and maintaining basic materials properties.

ALCVD: Atomic Layer Deposition and Plasma Enhanced Atomic Layer Deposition ALCVD is one of the newest technologies to deposit ultra-thin films of exceptional flatness and uniformity. This technology was brought into ASMI in 1999 with the acquisition of ASM Microchemistry, who first developed the thermal ALD technology. PEALD is an extension of this original ALD technology that uses plasma, which was brought into ASMI in 2001 through a partnership with Genitech and a subsequent acquisition in 2004. The use of plasma enables us to deposit high quality films at very low temperatures. Collectively ASMI refers to these two technologies as its ALCVD process technology platform. ALCVD is a very versatile technology platform that can be used to deposit high-k insulating materials, conductors, silicon oxide and silicon nitride. Selected ALCVD processes are released on our Polygon, XP, XP8 and Advance product platforms. We expect that the trends of continued scaling, and evolution towards three dimensional device structures plays into the strength of our ALCVD position.

LPCVD: novel chemistries On our LPCVD process technology platform we have developed processes with new chemistries (under the trademark Silcore) that enable the deposition of silicon and silicon containing materials at low temperatures. We offer processes on our Intrepid module and Epsilon product platform for selective and non-selective epitaxy, single wafer LPCVD, and on our Advance 400 product platform for thin, smooth polycrystalline Si. Our strategy for the LPCVD process technology platform as a whole is to continue to qualify new chemistries developed by, and with, our chemical suppliers for all of our product platforms, well in advance of the development of our customers’ needs.

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Back-end Segment Products The following table lists ASM Pacific Technologies (ASMPT) principal products for the Back-end market and the main technologies that they enable. PRODUCT PLATFORM

ASMI PROCESS TECHNOLOGY

PRODUCTS

Die Attach Equipment

Die Bonding

AD8312epoxy, ISLinDA stack die, AD830, AD838, AD838L, AD210. MCM12 multi chip, SD832D soft solder, IS898 glass attach Systems, AD211/AD220 Eutectic Die Bonder

Scanning and Sorting Equipment

Die Sorting

AS899, MS100 Plus die sorting Systems; ES101/ES201 Automated Optical Inspection System

Flip Chip Equipment

Flip Chip Bonding

AD9012A, , AD9012TS, AD9212 solder flip chip bonder, AD9312 TCB flip chip, AD9012TC, Hummingbird stud bumping Systems

Wire Bonding Equipment

Thermosonic Gold/Copper Wire Bonding

TwinEagleXtremeGo/Cu iHawkXtreme GoCu EagleXtremeGoCu, A350

Wire Bonding Equipment

Ultrasonic Aluminum Wedge Bonding

Heavy Aluminum Wire Bonder AL501, AB530, AL512, AB559A rotating bond head, Leo-H

Singulation Equipment

Singulation

Laser Scriber LS100

Encapsulation Equipment

Molding, Dispensing and Jetting

IDEALmold 3G mold and Osprey transfer molding Systems, IDEALcompress/ IDEALab Silicone Liquid Molding, DS500 dam-and-fill Systems, DS520 Jetting System, DS86 Dispense and Compensation System

Post Encapsulation Equipment

Ball Placement, Testing and Marking, Trim and Form, Singulation, Binning

BP2000 ball placement, iSAP jig saw and sorting, MPhoenix, MP-TAB trim form system, FT2030S, FT-mini, FT2018, FV2030 Vision Inspection, SLS230 LED Testing & Sorting, SLT400/AT410 LED Taping, IP360 Package Sorting and Taping System

Die and Flip Chip Bonding, and Die Sorting Products ASMPT manufactures several die bonding models as well as die sorting equipment to address various markets including semiconductors and light emitting diodes (LED). The latest epoxy die bonder platform for 300mm wafers continues the path undertaken by ASMPT to provide customers with high quality cost-efficient systems. With its capability of handling up to 300mm wafers, fully automatic operation, epoxy writer, pre and post bond inspection and wafer mapping, this platform is able to provide customers with favorable operational results. Variations on this platform have been developed to address the requirements of the growing stacked die market. The ability to handle silicon devices down to 25 microns in thickness is a key feature for the future. ASMPT’s ISLinDA is a cutting edge 12” die bonder for stacked and thin die bonding capability. It is excellent in thin die handling employing various patented thin die ejecting systems. It can achieve high throughput and accuracy by a dual head system and a powerful vision system. To facilitate accurate factory automation during stacked die package manufacturing, it is also equipped with the intelligent iLaser system and bond arm system for automatic die layer and thickness detection. The Twin832 is a high speed epoxy die bonder equipped with an innovative dual patented bond head system. It is suitable for handling a large range of IC/discrete packages, especially SiP, for multi-chip bonding for standalone or in-line machines. High density lead-frames can be applied in the Twin832 as its large range of work-holder track width maximizes customer’s productivity at low production cost. Packaged device performance is continually pushed to higher levels. In critical applications, devices are increasingly utilizing flip chip interconnect methods to provide higher levels of electrical performance. Our flip chip platform provides high speed flip chip die bonding for IC applications. Variations of this platform have evolved to provide for the use of ultrasonics, heat force or the combination of these to affect the process. There continues to be a very large market in which the die and wafer sizes are relatively small, under 30 mils square. A mil is 1/1000 of an inch. Many of these devices are attached directly to printed circuit boards (Chip on Board, “COB”) or very large arrays. Therefore, many different handling methods are required. We have several systems addressing the various form factors represented in the market.To address the increasing adoption of flip chip technologies in mobile electronics, ASMPT newly developed a high precision Thermal Compression flip chip bonder - the AD9312. The AD9312 is equipped with innovative shared optics to achieve ultra high bonding accuracy. It is also adopting the intelligent bond head active tilting control and patented active vibration control for high quality bonding with excellent coplanarity and stability.

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The LED business requires both high speed and high precision manipulation of very small devices. Many of these devices are assembled in arrays with a die attach process. In these arrays brightness and color must match. We have developed several platforms for sorting these devices and segregating them according to the customers’ requirements. The high power LED market for general purpose illumination continues to grow. These devices have unique thermal and electrical requirements that must be met by the die attach process. We have a new platform that addresses the use of soft solder in a special atmosphere that facilitates this special process. Machines may be configured to operate stand-alone or connected to epoxy curing ovens and wire bonders.

Wire Bonding Products GoCu is ASMPT’s state-of-the-art copper wire bonding solution. A series of ASMPT’s high performance gold wire bonder can be upgradable for copper wire bonding, such as the Eagle Xtreme, the iHawk Xtreme, the Harrier Xtreme and the TwinEagle Xtreme. With GoCu, copper wire bonding can be faster and can also provide better aluminum remnant control than using gold. Together by offering a revolutionary solution for the second bond, GoCu provides an excellent copper wire bonding solution ready for customers’ mass production. The Eagle Xtreme and iHawk Xtreme gold wire bonders continue to extend the productivity of the process as well as exceed the industry roadmaps for required bond pad pitch. Additional features on the Eagle Xtreme allow it to deal with the complex wire geometries and extreme height variations that are prevalent in the stacked die packages being built today at higher productivity rates. The productivity envelope was enlarged with the introduction of our latest dual head platform, the TwinEagle Xtreme and Harrier Xtreme. This tool provides all the capabilities of our standard Xtreme but with higher output per floor space required. We also extended our product portfolio in the wedge bonder area with newer, faster, more flexible systems to address the consumer products market that focuses on cost effective solutions. The expansion of the flip chip process has also provided us with opportunities to take advantage of our wire bonder technology to provide platforms capable of applying gold or copper stud bumps on wafers up to 300mm in diameter.

Encapsulation Products Our auto molding product line continues to build on the success of our earlier automated multi-plunger molding systems. The IDEALmold serves the industry segment that requires very high throughput with production flexibility. The recent shift in lot sizes and package variability also required a new platform. We have met this requirement with our Osprey single strip molding system. With this platform, the emphasis is on quick material and package conversions for low volume, high mix situations. As with all ASMPT products, it can be configured for stand-alone or integrated in the IDEALine (see below) with many of our other Back-end products.

Post Encapsulation Products Ball placement systems have seen strong growth as the ball grid array (“BGA”) package types continue to expand. These are the mainstream packages for microprocessors and other high performance chips found in computer systems today. Our early work in this area has allowed us to be the exclusive supplier of ball placement systems to the major provider of such components. As the number of package variants continues to increase along with the lead-frame unit density, our post encapsulation products (“PEP”) have also evolved. The variation requires systems that are more flexible and faster to convert. The increased density has reduced the need for press speed but increased the emphasis on precision. The decrease in package thickness has dictated a change in the tooling methodology to provide more support throughout the trim, form, and singulation processes. Significant changes have been made in design to migrate to turret handling and offloading for small packages. These changes allow the incorporation of faster handling across more processes in a smaller footprint than the conventional linear approach. Significant inroads have been made in the incorporation of test heads into these lines so that units emerge ready to ship.

Automated Systems The FT2018/ FT-Mini is our high speed turret based test handler for small discrete (FT2018) and mini discrete (FT-Mini) applications. Both FT2018/ FT-Mini are equipped with a highly accurate turret system and tape-and-reel system for high quality testing and finishing processes. The FT2018/ FT-Mini also offers intelligent features, such as iContact for package protection and iContact Plus for automatic position learning to have optimized contact level.

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The IDEALine integrates Back-end assembly, packaging, and test handling equipment. Such lines can be fully controlled by computers minimizing operator intervention and providing better quality through more stringent process recipe control. We believe we are the only manufacturer of Back-end equipment capable of offering such an extensive integrated line using our own equipment. These lines integrate serial process steps with mechanical and software linkages. Offered in a modular format, customers may integrate some or all of the following processes that we supply: die bonding and inspection, epoxy curing, wire bonding and inspection, encapsulation, post mold curing, package singulation, test handling, inspection, laser marking, packing, and finishing.

SMT Products The following table lists the ASM Pacific Technologies (ASMPT) principal product platforms for the SMT market and the main applications/ industries they are targeted at.

Electronics Assembly Products (Hardware) TYPE OF PRODUCTION

APPLICATIONS/INDUSTRIES

PLATFORMS

High-end/high-speed environments

Large EMS providers, telecommunication & IT products, LED placement

SIPLACE X, SIPLACE CA

High-quality/high-mix environments

Small and medium-sized EMS providers, machine controls, automobile industry, aerospace

SIPLACE SX

Cost-sensitive high-volume environments

Medium-sized and large EMS providers

SIPLACE D

Within the platforms, machines with different gantry and head configurations are available (e.g., SIPLACE Di1, SIPLACE Di2, SIPLACE Di4, or SIPLACE SX1, SIPLACE SX2, SIPLACE SX4 etc.)

Electronics Assembly Products (Software) APPLICATIONS

PRODUCTS

Production planning, optimization and line control

SIPLACE Pro, SICluster / SICluster Pro, SIPLACE EDM

Production monitoring, process control

SIPLACE OIS, SIPLACE Feeder Manager, SIPLACE Explorer

Setup verification, traceability

SIPLACE Setup Center, SIPLACE Traceability

Order & materials management

SIPLACE FACTS

Line execution & process synchronization

SIPLACE LES

The SIPLACE X Series is our powerful high-end SMT platform able to handle 01005 components, which is the smallest component size being processed today, with no slowdown in high-volume environments. The SIPLACE X-Series is an attractive solution for large EMS companies, mobile phone production and the growing LED placement market. The SIPLACE CA Series is the first placement platform that can supply components directly from the wafer as well as with classic SMT feeder technologies. For the electronics manufacturer, this capability means increased flexibility and investment protection. The highly flexible SIPLACE SX placement platform has special interchangeable gantries, intelligent feeders and innovative setup concepts, all of these make SIPLACE SX an ideal solution for high-mix environments. The key feature of this highly innovative solution is the “Capacityon-Demand” function. The newly developed SIPLACE MultiStar placement head switches automatically between Collect & Place mode, Pick & Place mode and a special mixed mode, which is why it can be used for the fast placement of standard components as well as for the end-of-line placement of large components. Thanks to these properties, even high-mix lines can operate well balanced at all times for improved total line productivity. With the digital SIPLACE Di-Series, which combines high-tech innovations with proven technologies, a favorable price-performance ratio and cost of ownership, SIPLACE offers a platform for highly cost-sensitive users in the standard and high-performance segment who require lots of flexibility and the latest technology.

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Intellectual Property and Trademarks Intellectual Property Because of the rapid technological advances in the microelectronics field, our products must continually change and improve. Accordingly, we believe that our success will depend upon the technical competence and creative ability of our personnel as well as the ownership of and the ability to enforce our intellectual property rights. We own and license patents that cover some of the key technologies, features and operations of our products and are registered in the principal countries where semiconductor devices or equipment are manufactured or sold. For instance, we have hundreds of issued patents that relate to our ALCVD process technology platform. As another example, we have a significant number of issued patents related to Silcore and other specialized LPCVD process chemistries. The following table shows the number of patents for which we made an initial filing during the indicated year and the number of patents in force at the end of the indicated year. As part of a program to reduce cost, the patent portfolio was critically reviewed against the current business strategy in 2009. Cost control measures and stricter patent filing prioritization in 2010 resulted in a lower initial patent filing rate in 2010 compared to 2009. Increased R&D activity in 2011 resulted in a higher filing rate. For year:

2008

2009

2010

2011

2012

Front-end Initial patent filings Patents in force at year end

79

47

33

51

64

872

830

931

1,043

1,127

Back-end Initial patent filings Patents in force at year end

18

19

18

21

33

332

399

436

731

813

We have entered into worldwide, non-exclusive, non-transferable and non-assignable licenses with Applied Materials for patents related to epitaxy and certain chemicals used to deposit insulating layers for PECVD. We pay Applied Materials a royalty on sales of equipment that use certain patented technologies. A number of the licensed patents have already expired and the royalties related to these patents have ended. The remaining royalty bearing patents that we use expire at various times through 2013. Upon expiration of the patents, the technology may be used royalty-free by the public, including us. For further information, see Item 3.D, “Risk factors – We license the use of some patents from a competitor pursuant to a settlement agreement; if the agreement is terminated our business could be adversely affected.” We have licensed our intellectual property in parts of our ALCVD process technology platform through non-exclusive, restricted field of use license agreements to a limited number of companies. In addition to generating revenue, we seek to accelerate market acceptance of our ALCVD technology through our licensing efforts. We have licensed our RTP portfolio of 61 issued patents and 11 pending patents to Levitech BV. In the Back-end market, companies generally compete based on their cumulative expertise in applying well known technologies to improve productivity and cost-efficiency. As a result, we have historically filed fewer patents related to our Back-end operations. Due to increasing pressure on new technology development in the Back-end market, and the increasing fractional value of the package in the device, we expect the importance of patents in the Back-end market segment to increase over the following years. Wherever deemed necessary, ASM Pacific Technology will file for protection of its innovations.

Trademarks ASM, the ASM International logo, Advance, Aurora, Dragon, Eagle, EmerALD, Epsilon, Polygon, Pulsar and Silcore are our registered trademarks. A400, A412, ALCVD, Atomic Layer CVD, Intrepid, NCP, PEALD, are our trademarks. “The Process of Innovation”, “The Switch Is On” and “Drive Innovation. Deliver Excellence.” are our service marks. AB500B, Cheetah, DreamPAK, DRYLUB, EQUIPMANAGER, EQUIPMGR, FAB Farming, IDEAL Compress, IDEALine, IDEALsystem, IDEALab, IDEALNet, PGS, SMARTWALK, SOFTEC, SmartSurf, and Ultravac are registered trademarks of ASM Pacific Technology Ltd.

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Eagle60, Harrier, Hummingbird, IDEALmold, OSPREYLine, TwinEagle, SolarCSI, SolarWIS, SolarMTS, SolarLAS, NANOCU, SolarXchange, SolarATM and DYNAMAX are trademarks of ASM Pacific Technology. SIPLACE is a trademark licensed from Siemens AG by ASM Pacific Technology in respect of its electronics assembly systems business.

Litigation There has been substantial litigation regarding patent and other intellectual property rights in semiconductor-related industries. Although we have been involved in significant litigation in the past, we are at present not involved in any litigation which we believe is likely to have a material adverse effect on our financial position. In the future, additional litigation may be necessary to enforce patents issued to us, to protect trade secrets or know-how owned by us or to defend ASMI against claimed infringement of the rights of others and to determine the scope and validity of the proprietary rights of others. Any such litigation could result in substantial cost and diversion of effort by us, which could have a material adverse effect on our business, financial condition, and earnings from operations. Adverse determinations in such litigation could result in our loss of proprietary rights, subject us to significant liabilities to third parties, require us to seek licenses from third parties or prevent us from manufacturing or selling our products, any of which could have a material adverse effect on our business, financial condition and earnings from operations.

Research and Development We believe that our future success depends to a large extent upon our ability to develop new products and add improved features to existing products. Accordingly, our global product development policies and local activities are for the most part directed toward expanding and improving present product lines to incorporate technology advances and reduce product cost, while simultaneously developing new products that can penetrate new markets. These activities require the application of physics, chemistry, materials science, chemical engineering, electrical engineering, precision mechanical engineering, software engineering, and system engineering. Our net research and development expenses were €78.8 million, €129.4 million and €149.2 million in 2010, 2011 and 2012, respectively. We expect to continue investing significant resources in research and development in order to enhance our product offerings. Our research and development activities are chiefly conducted in the principal semiconductor markets of the world, which enables us to draw on innovative and technical capabilities on an international basis. Each geographic center provides expertise for specific products and/ or technologies. This approach, combined with the interactions between the individual centers, permits efficient allocation of technical resources and customer interaction during development. In 2010, we formed a globally Platform Engineering group that addresses the needs for common platforms for the various products in our Front-end Segment. Selected resources in Belgium, Almere and Helsinki have been grouped under Corporate R&D, addressing the common needs for advanced materials research and process integration work for the 15nm to 7nm nodes.

LOCATION

NUMBER OF R&D EMPLOYEES AS OF DECEMBER 31, 2012, EXCLUSIVE OF TEMPORARY WORKERS

Front-end Almere, the Netherlands

47

Leuven, Belgium

24

Helsinki, Finland

14

Phoenix, Arizona, United States Cheonan, South Korea Singapore Tama, Japan

105 37 4 79

Back-end Hong Kong, the People’s Republic of China

500

Singapore

351

Chengdu, the People’s Republic of China

185

Munich, Germany

187

United Kingdom

TOTAL

1 1,534

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As part of our research and development activities, we are engaged in various formal and informal arrangements with customers and institutes. At December 31, 2012, our Front-end segment was engaged in several formal joint development programs with customers for 300mm applications of our products. As part of these efforts, we may sell new products to customers at a significantly reduced margin, and invest significant resources in the joint development and subsequent product qualification. We sometimes also cooperate with other semiconductor capital equipment suppliers in complementary fields, in order to gain knowledge on the performance of our own deposition processes, in cooperation with other processes, either in bilateral or in publicly funded projects. In addition to cooperating with customers and other capital equipment suppliers, we also enter into research projects with technical universities and institutes (including for example TNO and IMEC, in the Netherlands and Belgium respectively). We participate also in publicly funded programs, mainly in Europe, to develop the production technology for semiconductor devices with line widths of 15 and 11nm and below, and in More-than-Moore technologies. Among our current cooperative efforts are projects awarded under the Information Society Technologies (IST) seventh framework program. We are also a partner in several cluster development programs in the Eureka initiative by MEDEA+ (Micro Electronics Development for European Applications) and its successor CATRENE (Cluster for Application and Technology Research in Europe on Nano-Electronics. In 2011 we renewed our strategic R&D partnership with the Interuniversity MicroElectronics Center (IMEC) in Leuven, Belgium. Our Epsilon, A412, Pulsar, EmerALD, Dragon and Eagle based products are involved in this partnership. In 2012 we significantly expanded our partnership with additional ALD and Epi capability. This gives us the opportunity to investigate, both jointly and independently, the integration of individual process steps in process modules and electrically active devices. We have been partnering with IMEC since 1990. In December 2003, we commenced a five-year partnership with University of Helsinki that aims at further development of atomic layer deposition processes and chemistries. This partnership was extended for a second quinquennial in December 2008.

Manufacturing and Suppliers Our manufacturing operations consist of the fabrication and assembly of various critical components, product assembly, quality control and testing. In 2004, in order to reduce manufacturing costs in our Front-end operations we established FEMS, a manufacturing facility in Singapore, to manufacture certain generic subsystems and subassemblies for our Vertical Furnaces that we previously outsourced. In 2009 we started the transition of manufacturing of ASM products to be final assembled in Singapore, i.e. including final assembly, test and shipment of the system to the customer from the FEMS facility. We closed down our manufacturing operations in Almere, the Netherlands, at the end of 2009, and we closed our manufacturing facilities in Phoenix (US) and in Nagaoka (Japan) in 2010. With this transition we have also implemented a global organization for our procurement activities. In 2012 we strengthened our organization with a global supply chain function, that includes, in addition to procurement, responsibility for supply chain quality and inventories. Our Back-end operations are vertically integrated. The manufacturing activities in Hong Kong and Singapore consist primarily of assembling and testing components and subassemblies manufactured at our main manufacturing facilities in the People’s Republic of China and Malaysia.

Marketing and Sales We market and sell our products with the objective of developing and maintaining an ongoing, highly interactive service and support relationship with our customers. We provide prospective customers with extensive process and product data, provide opportunities for tests on demonstration equipment and, if required, install evaluation equipment at the customer’s site. Once equipment has been installed, we support our customers with, among other things, extensive training, on-site service, spare parts and process support. All of this is further supported by in-house development to enhance the productive life of existing equipment. We make hardware improvements available in the form of retrofit kits as well as joint development of new applications with our customers.

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Because of the significant investment required to purchase our systems and their highly technical nature, the sales process is complex, requiring interaction with several levels of a customer’s organization and extensive technical exchanges, product demonstrations and commercial negotiations. As a result, the full sales cycle can be as long as 12 to 18 months for sales of Front-end equipment and 2 to 4 months for sales of Back-end equipment. Purchase decisions are generally made at a high level within a customer’s organization, and the sales process involves broad participation across our organization, from senior executive management to the engineers who designed the product. To market our products, we operate demonstration and training centers where customers can examine our equipment in operation and can, if desired, process their wafers or individual dies for further in-house evaluation. Customers are also trained to properly use purchased equipment. To execute the sales and service functions in the Front-end, we have established a global sales force, in which all regional units report directly into the global sales organization. We have sales offices located in Europe (in the Netherlands, France, Ireland, Germany and Italy), Israel, Taiwan, Korea, the People’s Republic of China, Singapore, the United States of America and Japan. At the end of 2012, 248 employees were employed in sales and marketing of Front-end products, representing 15 % of total Front-end segment staff. Sales of Back-end equipment and materials are provided by our principal offices in Hong Kong and Singapore, through direct sales offices in the People’s Republic of China, Taiwan, the Philippines, Malaysia, Thailand, Japan, Europe and North America, and through sales representatives in South Korea and some parts of the United States. At the end of 2012, 566 employees were employed in sales and marketing of Back-end products, representing 4% of total Back-end segment staff.

Customers We sell our products predominantly to manufacturers of semiconductor devices, manufacturers of silicon wafers and assembly companies. Our customers include most of the leading semiconductor and wafer manufacturers. Our customers vary from independent semiconductor manufacturers that design, manufacture, and sell their products on the open market, to large electronic systems companies that design and manufacture semiconductor devices for their own use, to semiconductor manufacturers, known as foundries that manufacture devices on assignment of other companies, including “fabless” companies that design chips but do not have wafer processing factories. Our largest customer accounted for approximately 5.2%, 6.4% and 8.8% of our net sales in 2010, 2011 and 2012, respectively. For our Front-end segment this was 21.6%, 22.8% and 33.6% of our net sales in 2010, 2011 and 2012, respectively. For our Back-end segment this was 4.3%, 3.5% and 4.9% of our net sales in 2010, 2011 and 2012, respectively. Our ten largest customers accounted for approximately 27.9%, 27.9% and 31.6% of our net sales 2010, 2011 and 2012, respectively. For our Front-end segment this was 61.2%, 70.4% and 75.3% of our net sales in 2010, 2011 and 2012, respectively. For our Back-end segment this was 23.7%, 20.2% and 25.1% of our net sales 2010, 2011 and 2012, respectively. Historically, a significant percentage of our net sales in each year has been attributable to a limited number of customers; however, the largest customers for our products may vary from year to year depending upon, among other things, a customer’s budget for capital expenditures, timing of new fabrication facilities and new product introductions. The following table shows the distribution of net sales, by segment and geographic destination of the product: FULL YEAR FRONT-END

BACK-END

GEOGRAPHIC DESTINATION

2010

2011

2012

2010

2011

2012

S.E. Asia

8.2%

9.2%

8.4%

68.9%

52.8%

55.4%

Europe

5.6%

6.6%

5.5%

0.7%

14.1%

12.6%

United States

7.5%

9.1%

9.3%

1.7%

2.3%

4.6%

Japan

TOTAL

2.7%

3.0%

2.9%

4.7%

2.9%

1.3%

24.0%

27.9%

26.1%

76.0%

72.1%

73.9%

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Customer Service We provide responsive customer technical assistance to support our marketing and sales. Technical assistance is becoming an increasingly important factor in our business as most of our equipment is used in critical phases of semiconductor manufacturing. Field engineers install the systems, perform preventive maintenance and repair services, and are available for assistance in solving customer problems. Our global presence permits us to provide these functions in proximity to our customers. We also maintain local spare part supply centers to facilitate quick support. We provide maintenance during the product warranty period, usually one to two years, and thereafter perform maintenance pursuant to individual orders issued by the customer. In addition to providing ongoing service, our customer service operations are responsible for customer training programs, spare parts sales and technical publications. In appropriate circumstances, we will send technical personnel to customer locations to support the customer for extended periods of time in order to optimize the use of the equipment for the customer’s specific processes. For our Front-end operations, where the availability of field support is particularly important for a sale, 560 employees were employed in customer service at the end of 2012 representing 34% of total Front-end segment staff. For our Back-end operations 1,175 employees were employed in customer service at the end of 2012, representing 7% of total Back-end segment.

Competition The semiconductor equipment industry is intensely competitive, and is fragmented among companies of varying size, each with a limited number of products serving particular segments of the semiconductor process. Technical specifications of the individual products are an important competitive factor, especially concerning capabilities for manufacturing of new generations of semiconductor devices. As each product category encompasses a specific blend of different technologies, our competitive position from a technology standpoint may vary within each category. Customers evaluate manufacturing equipment based on technical performance and cost of ownership over the life of the product. Main competitive factors include overall product performance, yield, reliability, maintainability, service, support and price. We believe that we are competitive with respect to each of these factors, and that our products are cost effective. As the variety and complexity of available machinery increases, some semiconductor manufacturers are attempting to limit their suppliers. In addition, semiconductor manufacturers are located throughout the world, and expect their equipment suppliers to have offices worldwide to meet their supply and service needs. Semiconductor equipment manufacturers with a more limited local presence are finding it increasingly difficult to compete in an increasingly global industry. Our primary competitors in the Front-end market are from the United States, Japan and Korea. Our primary competitors in the Back-end market are from the United States, Europe and Japan. In each of our product lines, we compete primarily with two or three companies which vary from small to large firms in terms of the size of their net sales and range of products. Our primary competitors in the Front-end market include Applied Materials, LAM Research Corporation, Tokyo Electron, Kokusai, Wonik IPS and Jusung. Our primary competitors in the Back-end market include Kulicke & Soffa, ESEC, Shinkawa, Apic Yamada, BE Semiconductor Industries, Towa, Shinko and Mitsui. The primary competitors of SIPLACE in the placement market are Fuji, Panasonic, Juki, and Yamaha (Japan); Assembleon (Europe); and Universal (U.S.).

C. ORGANIZATIONAL STRUCTURE ASM International NV is a holding company that operates through its subsidiaries. Our major operating subsidiaries as of March 15, 2013 are:

SUBSIDIARY NAME AND LOCATION

COUNTRY OF INCORPORATION

PERCENTAGE OWNED BY ASM INTERNATIONAL NV

ASM Europe BV Almere, the Netherlands

The Netherlands

100%

ASM America, Inc Phoenix, Arizona, United States

United States

100%

ASM Japan KK Tama, Japan

Japan

100%

ASM Front-End Manufacturing Singapore Pte Ltd, Singapore

Singapore

100%

ASM Pacific Technology Ltd Hong Kong, the People’s Republic of China

Cayman Islands

40.08%

See Exhibit 8.1 for a list of our main subsidiaries.

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D. PROPERTY, PLANT AND EQUIPMENT To develop and manufacture products to local specifications and to market and service products more effectively in the worldwide semiconductor market, our Front-end facilities are located in the Netherlands, the United States, Japan and Singapore and our Back-end facilities are located in Hong Kong, the People’s Republic of China, Singapore and Malaysia. Our principal facilities are summarized below:

LOCATION

PRIMARY USES

APPROXIMATE AGGREGATE SQUARE FOOTAGE

Front-end Almere, the Netherlands

Executive offices of ASMI Marketing, research and offices

Tama and Nagaoka, Japan

Wafer processing equipment marketing, research and offices

80,000

Phoenix, Arizona, United States

Wafer processing equipment marketing, research and offices

130,000

Singapore

Wafer processing equipment manufacturing and offices

169,000

Cheonan, South Korea

Wafer processing equipment manufacturing, marketing, ­research and offices

34,000

Helsinki, Finland

Wafer processing equipment research and offices

139,000

6,000

Back-end Hong Kong, People’s Republic of China

Semiconductor assembly and encapsulation equipment ­manufacturing, marketing, research and offices

280,000

Shenzhen, People’s Republic of China

Semiconductor assembly equipment parts and modules ­manufacturing, lead-frame manufacturing and offices

2,112,000

Chengdu, People’s Republic of China

Semiconductor assembly equipment research and offices

179,000

Singapore

Semiconductor assembly equipment and etched lead-frame manufacturing, marketing, research and offices

403,000

Johor Bahru, Malaysia

Semiconductor assembly equipment parts and modules ­manufacturing, etched lead-frame manufacturing and offices

315,000

Munich, Germany

SMT equipment manufacturing, marketing, research and offices

325,000

Our principal facilities in the Netherlands, the United States, Korea, Finland, Hong Kong, the People’s Republic of China, Singapore and Malaysia are subject to leases expiring at various times from 2012 to 2024. Some facilities we own are subject to mortgages. We believe that our facilities are maintained in good operating condition and are adequate for our present level of operations. Back-end’s new manufacturing plant in Huizhou has its second phase being fully-operational since September 2012. The second phase consists of one casting center with two automatic resin sand casting lines for steel and aluminum respectively and a metallurgy laboratory to support metallic material research and development and casting technology development, and one machining center building with CNC machines and CNC lathes. The etched leadframe production facility in Fuyong Plant in China is fully-operational to support the growing China market.

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ITEM 4A

UNRESOLVED STAFF COMMENTS none.

ITEM 5

OPERATING AND FINANCIAL REVIEW AND PROSPECTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are an equipment supplier mainly to the semiconductor, LED and electronics manufacturing industry. We design, manufacture and provide services to our customers for the production of semiconductor devices, or integrated circuits, for the production of LED’s and for electronics manufacturing in general. The semiconductor capital equipment market is composed of three major market segments: wafer processing equipment, assembly and packaging equipment, and test equipment. ASMI is mainly active in wafer processing (Front-end) and assembly and packaging (Back-end). Front-end equipment performs various fabrication processes in which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our Front-end business, which accounted for 26% of our net sales in 2012, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our Back-end business, which accounted for 74% of our net sales in 2012, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore, Malaysia and Germany. Our Back-end operations are conducted through our 51.96% majority-owned subsidiary, ASM Pacific Technology, which ownership was decreased to 40.08% in March 2013. We sell our products to the semiconductor manufacturing industry and the assembly (pick and placement) industry, which is subject to sudden, extreme, cyclical variations in product supply and demand. 2012 was a challenging year for ASM. We started the year with a low order book. Order intake in Q1 and Q2 was healthy. While the whole industry was expecting a strong second half of 2012, this didn’t happen. As a consequence we ended the year again on a low order book level, below the level at the end of 2011. Towards the end of 2012 we saw strong order intake in our Front end activities, however order intake in the back end operations remained weak. As a consequence sales for the year ended at a level of €1,418 million, compared to a level of €1,634 million in 2011. Sales in the Front-end show a decrease from €456 million to €370 million for the full year. This 19% decrease of net sales was driven by lower equipment sales, especially in the older, capacity-driven technologies. Our Back-end segment sales decreased from €1,178 million to €1,048 million. In this segment lower equipment sales in the so-called existing activities, were partly compensated by higher Leadframes sales. The Assembly System AS activities, acquired in 2011 of Siemens, contributed approximately €100 million less in sales revenue compared to 2011. The gross margin for ASMI consolidated decreased from 34.9% in 2011 to 31.1% in 2012. Gross margin in our Front-end segment decreased from 37.8% in 2011 to 33.6% in 2012, while our Back-end segment showed a decrease from 33.8% to 30.2% for the same period. The decrease of the gross margin in our Front-end segment compared to last year is mainly attributable to product mix differences, lower loading of the factories and in-efficiencies. The latter especially had an impact on the first half year margin. The gross profit margin in the comparable Back-end segment decreased due to mix differences between equipment and lead-frame sales, higher price pressure in the equipment sales and the lower loading of the factories.

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The result from operations as a percentage of sales decreased from 22.5% in 2011 to 6.2% in 2012. In 2011 the purchase price allocation of the newly acquired Siemens Electronics Assembly System (SEAS) business, now called ASM Assembly Systems, resulted in a bargain purchase gain of €109 million, equal to 6% of sales. The operating margin of our Front-end segment decreased from 13.7% in 2011 to 0.4% in 2012. For the same period the operating margin of our Back-end segment, excluding the purchase price allocation, decreased from 18.1% to 8.4%. Net earnings decreased from €187 million (€136 million excluding the bargain purchase gain of SEAS) in 2011 to €7 million in 2012. The Company generated a positive operational cash flow in 2012 of €42 million compared to €217 million in 2011. Both the Front-end as the Back-end operations were generating a positive operational cash flow in 2012. In October 2012, we exercised our right to call the outstanding 6.50% convertible subordinated notes (due 2014), resulting in conversion of all remaining notes at November 20, 2012.

A. OPERATING RESULTS Sales Our Front-end sales are concentrated in the United States, Europe, Japan and Asia and our Back-end sales are concentrated in Asia and Europe. The following table shows the geographic distribution of Front-end and Back-end sales of both our segments for the years 2010, 2011 and 2012:  

YEAR ENDED DECEMBER 31,

(amounts in million)

2010

2011

2012

Front-end: United States

€91.7

31.3%

€148.4

32.5%

€131.8

35.6%

Europe

67.9

23.1%

107.8

23.6%

77.9

21.0%

Taiwan

35.1

12.0%

37.8

8.3%

47.2

12.7%

Japan

33.0

11.2%

49.7

10.9%

40.6

11.0%

South Korea

37.3

12.7%

70.2

15.4%

49.1

13.3%

China

21.5

7.3%

23.6

5.2%

16.1

4.3%

Other

6.9

2.4%

18.6

4.1%

7.7

2.1%

€293.4

100.0%

€456.1

100.0%

€370.4

100.0%

€350.0

37.7%

€527.6

44.8%

€445.8

42.6%

Back-end: People’s Republic of China Europe

8.3

0.9%

230.2

19.5%

177.9

17.0%

Taiwan

148.8

16.0%

71.9

6.1%

63.6

6.1%

Malaysia

112.1

12.1%

84.0

7.1%

93.5

8.9%

South Korea

97.8

10.5%

41.4

3.5%

36.2

3.5%

Hong Kong

39.9

4.3%

26.7

2.3%

27.6

2.6%

Thailand

42.1

4.5%

32.5

2.8%

42.7

4.1%

Japan

57.4

6.2%

47.0

4.0%

18.8

1.8%

Singapore

13.8

1.5%

16.7

1.4%

15.0

1.4%

Philippines

34.4

3.7%

34.8

3.0%

25.2

2.4%

United States

21.1

2.3%

37.5

3.2%

65.7

6.3%

3.8

0.4%

28.0

2.4%

35.7

3.4%

€929.5

100.0%

$1,178.3

100.0%

€1,047.7

100.0%

Other

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The sales cycle from quotation to shipment for our Front-end equipment generally takes several months, depending on capacity utilization and the urgency of the order. The acceptance period after installation may be as short as four to five weeks. However, if customers are unfamiliar with our equipment or are receiving new product models, the acceptance period may take as long as several months. The sales cycle is longer for equipment which is installed at the customer’s site for evaluation prior to sale. The typical trial period ranges from six months to one year after installation. The sales cycle for Back-end products is typically shorter than for Front-end products. Generally, the majority of our Back-end equipment is built in standard configurations. These products are approximately 85% complete in anticipation of customer orders. Upon receipt of a customer’s order and specifications, the remaining 15% of the manufacturing is completed. This allows us to complete the assembly of our equipment in a short period of time. We therefore require between two to six weeks for final manufacturing, testing, crating, and shipment of our Back-end equipment. Our Back-end customers’ acceptance periods are generally shorter than those for Front-end equipment. Our local staff provide installation, training and technical support to our customers in all of our major markets. A substantial portion of our Front-end sales is for equipping new or upgraded fabrication plants where device manufacturers are installing complete fabrication equipment. As a result our Front-end sales in this segment tend to be uneven across customers and financial periods. Sales to our ten largest Front-end customers accounted for 61.2%, 70.4% and 75.3% of Front-end net sales in 2010, 2011 and 2012, respectively. The composition of our ten largest Front-end customers changes from year to year. The largest Front-end customer from these ten accounted for 21.6%, 22.8% and 33.6% of Front-end net sales in 2010, 2011 and 2012, respectively. Back-end sales per customer tend to be more level over time than Front-end sales, because Back-end operations can be scaled up in smaller increments at existing facilities. Sales to our ten largest Back-end customers accounted for 27.3%, 20.2% and 25.1% of Back-end net sales in this segment in 2010, 2011 and 2012, respectively. Because our Back-end customers’ needs are more level over time, the composition of our ten largest customers is more stable from year to year than in the Front-end segment. Our largest Back-end customer accounted for 4.3%, 3.5% and 4.9% of Back-end net sales 2010, 2011 and 2012, respectively.

Research and Development We continue to invest heavily in research and development. As part of our research and development activities, we are engaged in various development programs with customers and research institutes these allow us to develop products that meet customer requirements and to obtain access to new technology and expertise. Research and development costs are expensed as incurred. The costs relating to prototypes and experimental models, which we may subsequently sell to customers are charged to the cost of sales. Our research and development operations in the Netherlands and the United States receive research and development grants and credits from various sources. For a further discussion of research and development expenses see Item 4.B, “Business Overview – Research and Development” and “Results of Operations,” below.

Critical Accounting Policies and Estimates The preparation of consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the US (“US GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported. Note 1 of “Notes to Consolidated Financial Statements” describes the significant accounting policies used in the preparation of the consolidated financial statements. Some of these significant accounting policies are considered to be critical accounting policies. A critical accounting policy is defined as one that is both material to the presentation of ASMI’s consolidated financial statements and that requires management to make difficult, subjective or complex judgments that could have a material effect on ASMI’s financial condition or results of operations. Specifically, these policies have the following attributes: (1) ASMI is required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates ASMI could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on ASMI’s financial condition or results of operations. Estimates and assumptions about future events and their effects cannot be determined with certainty. ASMI bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as ASMI’s operating environment changes. These changes have

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historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. These uncertainties include those discussed in Item 3D, “Risk Factors.” Based on a critical assessment of its accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that ASMI’s consolidated financial statements are fairly stated in accordance with US GAAP, and provide a meaningful presentation of ASMI’s financial condition and results of operations. An analysis of specific sensitivity to changes of estimates and assumptions are included in the notes to the financial statement.

Management believes that the following are critical accounting policies: Revenue recognition ASMI recognizes revenue when all four revenue recognition criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) seller’s price to buyer is fixed or determinable; and (4) collectability is probable. Each sale arrangement may contain commercial terms that differ from other arrangements. In addition, we frequently enter into contracts that contain multiple deliverables. Judgment is required to properly identify the accounting units of the multiple deliverable transactions and to determine the manner in which revenue should be allocated among the accounting units. Moreover, judgment is used in interpreting the commercial terms and determining when all criteria of revenue recognition have been met in order for revenue recognition to occur in the appropriate accounting period. While changes in the allocation of the estimated sales price between the units of accounting will not affect the amount of total revenue recognized for a particular sales arrangement, any material changes in these allocations could impact the timing of revenue recognition. In 2009, the Financial Accounting Standards Board issued amended revenue recognition guidance for arrangements with multiple deliverables and certain software sold with tangible products. This new guidance eliminates the residual method of revenue recognition. It allows management to use a best estimate of selling price for individual elements of an arrangement when vendor specific evidence or third party evidence is unavailable. ASMI implemented this guidance beginning in the first quarter of 2011 for transactions that were initiated or materially modified during 2011. The implementation of the new guidance had no significant impact on reported net sales as compared to net sales under previous guidance. This was because the new guidance did not change the units of accounting within sales arrangements. Also, the elimination of the residual method for the allocation of arrangement consideration did not have a major impact on the amount and timing of reported net sales. A major portion of our revenue is derived from contractual arrangements with customers that have multiple deliverables, such as equipment and installation. For each of the specified deliverables ASMI determines the selling price by using either vendor specific objective evidence (“VSOE”), third party evidence (“TPE”) or by best estimate of the selling price (“BESP”). For transactions entered into, or materially modified, as of January 1, 2011, in which the Company is unable to establish relative selling price using VSOE or TPE, the Company uses BESP in its allocation of arrangement consideration. The total arrangement consideration is allocated at inception of the arrangement to all deliverables on the basis of their relative selling price. The revenue relating to the undelivered elements of the arrangements is deferred at their relative selling prices until delivery of these elements. On December 31, 2011 and December 31, 2012 we deferred revenues from installations in the amount of €6.3 million and €3.5 million respectively. Our Front-end sales frequently involve sales of complex equipment, which may include customer-specific criteria, sales to new customers or sales of equipment with new technology. For each sale, the decision of whether to recognize revenue is, in addition to shipment and factory acceptance, based on: the contractual agreement with a customer, the experience with a particular customer, the technology and the number of similarly configured equipment previously delivered. Based on these criteria we may decide to defer revenue until completing installation at the customer’s site and obtaining final acceptance from the customer. On December 31, 2012 we deferred revenue from sales of equipment of €1.9 million. As of December 31, 2011 we had no deferred revenue from sales of equipment.

Warranty We provide maintenance on our systems during the warranty period, which is usually one to two years. Costs of warranty include the cost of labor, material and related overhead necessary to repair a product during the warranty period. We accrue for the estimated cost of the warranty on products shipped in a provision for warranty, upon recognition of the sale of the product. The costs are estimated based on actual historical expenses incurred and on estimated future expenses related to current sales, and are updated periodically. Actual warranty

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costs are charged against the provision for warranty. The actual warranty costs may differ from estimated warranty costs, and we adjust our provision for warranty accordingly. Future warranty costs may exceed our estimates, which could result in an increase of our cost of sales.

Business combinations ASC Topic 805 (“Business Combinations”) requires that companies record acquisitions under the purchase method of accounting. Accordingly, the purchase price is allocated to the tangible assets and liabilities and intangible assets acquired, based on their estimated fair values. The excess purchase price over the fair value is recorded as goodwill. Purchased intangibles with definite lives are amortized over their respective useful lives. When a bargain purchase incurs, which is the case when the fair value of the acquired business exceeds the purchase price, this surplus in fair value is recognized as a gain from bargain purchase.

Long-lived assets Long-lived assets include goodwill, other intangible assets and property, plant and equipment. Goodwill is tested for impairment annually on December 31 and whenever events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. Our Front-end impairment test and the determination of the fair value is based on a discounted future cash flow approach that uses our estimates of future revenues, driven by assumed market growth and estimated costs, as well as appropriate discount rates. These estimates are consistent with the plans and estimated costs we use to manage the underlying business. Our Back-end impairment test is based on the market value of the listed shares of ASMPT. The material assumptions used by management for the annual impairment test performed per December 31, 2011 were:

››For Front-end external market segment data, historical data and strategic plans to estimate cash flow growth per product line have been used;

››Cash flow projections for the first four years. After these four years perpetuity growth rates are set based on market maturity of the products. For maturing product the perpetuity growth rates used are 1% or less and for enabling technology products the rate used is 3% or less;

››An average discount rate of 22.7% (2011: 20.5%) representing the pre-tax weighted average cost of capital. This relatively high rate is a consequence of the current situation whereby certain production lines are in the early phase of the product life-cycle, hence reflecting a higher risk;

››For Back-end the market value of the listed shares of ASMPT on the Hong Kong Stock exchange was used in our analysis. Management believes that the fair value calculated reflects the amount a market participant would be willing to pay. Based on this analysis management believes that the fair value of the reporting units substantially exceeded its carrying value and that, therefore, goodwill was not impaired as of December 31, 2012. The calculation of fair value involves certain management judgments and was based on our best estimates and projections at the time of our review. The value may be different if other assumptions are used. In future periods we may be required to record an impairment loss based on the impairment test performed, which may significantly affect our results of operations at that time. On December 31, 2012, we determined that a decrease in estimated cash flows of 10% and an increase of 10% of the discount rate used in calculating the fair value would not result in an impairment of the carrying value of goodwill. Other intangible assets and property, plant and equipment are reviewed by us for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, we estimate the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The cash flow estimates that we use include certain management judgments and are based on our best estimates and projections at the time of our review, and these may be different if other assumptions are used. In future periods, however, we may be required to record impairment losses, which may significantly affect our results of operations at that time. On December 31, 2012, we determined that a decrease in estimated cash flows of 10% would not result in an impairment of the carrying value of long-lived assets.

Allowance for doubtful accounts ASMI maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. This allowance is based on historical experience, credit evaluations, specific customer collection history and any customerspecific issues ASMI has identified. Changes in circumstances, such as an unexpected adverse material change in a major customer’s

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ability to meet its financial obligation to ASMI or its payment trends, may require us to further adjust our estimates of the recoverability of amounts due to ASMI, which could have an adverse material effect on ASMI’s financial condition and results of operations. On December 31, 2012 the allowance for doubtful accounts amounted to €8.6 million, which is 2.8% of our total accounts receivable.

Inventories Inventories are stated at the lower of cost (first-in, first out method) or market value. Inventory in the newly acquired SEAS business is generally determined on the basis of an average method. Costs include net prices paid for materials purchased, charges for freight and custom duties, production labor costs and factory overhead. Allowances are made for slow moving, obsolete or unsellable inventory and are reviewed on a quarterly basis. We regularly evaluate the value of our inventory of components and raw materials, work in progress and finished goods, based on a combination of factors. These include: forecasted sales, historical usage, product end of life cycle, estimated current and future market values, service inventory requirements and new product introductions, as well as other factors. Purchasing requirements and alternative uses for the inventory are explored within these processes to mitigate inventory exposure. We record write downs for inventory based on the above factors and take worldwide quantities and demand into account in our analysis. On December 31, 2012 our allowance for inventory obsolescence amounted to €65.3 million, which is 16.2% of our total inventory. If circumstances related to our inventories change, our estimate of the values of inventories could materially change. On December 31, 2012, an increase of our overall estimate for obsolescence and lower market value by 10% of our total inventory balance would result in an additional charge to cost of sales of €40 million.

Share-based compensation expenses The cost relating to employee stock options is measured at fair value on the grant date. The grant-date fair value of stock options is determined using a Black-Scholes option valuation model. This Black-Scholes model requires the use of assumptions, including expected share price volatility, the estimated life of each award and the estimated dividend yield. The risk-free interest rate used in the model is determined, based on a euro government bond with a life equal to the expected life of the options.  

OPTIONS Expected life (years)

DECEMBER 31, 2011

2012

7

7

3.5%

3.3%

Dividend yield

0.32%

0.64%

Expected volatility

40.9%

42.0%

Risk free interest rate

Income taxes We currently have significant deferred tax assets, which resulted primarily from operating losses incurred in prior years as well as other temporary differences. We have established a valuation allowance to reflect the likelihood of the realization of deferred tax assets. Based on available evidence, we regularly evaluate whether it is more likely than not that the deferred tax assets will not be realized. This evaluation includes our judgment on the future profitability and our ability to generate taxable income, changes in market conditions and other factors. On December 31, 2012, we believe that there is insufficient evidence to substantiate recognition of substantially all net deferred tax assets with respect to net operating loss carry forwards, and we have established a valuation allowance in the amount of €83.2 million. Future changes in facts and circumstances, if any, may result in a change of the valuation allowance to these deferred tax asset balances which may significantly influence our results of operations at that time. If our evaluation of the realization of deferred tax assets would indicate that an additional 10% of the net deferred tax assets as of December 31, 2012 is not realizable, this would result in an additional valuation allowance and an income tax expense of €0.8 million. Consistent with the provisions of ASC 740, as of December 31,2012, ASMI has a liability of unrecognized tax benefits of €22.5 million (2011: €21.7 million). A reconciliation of the beginning balance on January 1, 2012 and the ending balance on December 31, 2012 of the liability for unrecognized tax benefits is as follows:

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LIABILITY OF UNRECOGNIZED TAX (EUR million)

21.7

BALANCE JANUARY 1, 2012 Gross increases – tax positions in current year

1.2

Foreign currency translation effect

(0.4)

BALANCE DECEMBER 31, 2012

22.5

Unrecognized tax benefits mainly relate to transfer pricing positions, operational activities in countries where we are not tax registered and tax deductible costs. We estimate that no interest and penalties are related to these unrecognized tax benefits. Unrecognized tax benefits would, if recognized, impact the Company’s effective tax rate. The Company provided for the amount of €22.5 million, representing managements best estimate to mitigate possible impact in case of an unfavorable outcome. The calculation of our tax positions involves dealing with uncertainties in the application of complex tax laws. Our estimate for the potential outcome of any uncertain tax position is highly judgmental. Settlement of uncertain tax positions in a manner inconsistent with our estimates could have a material impact on our earnings, financial position and cash flows.

Results of operations The following table shows certain Consolidated Statement of Operations data as a percentage of net sales for our Front-end and Back-end segments for the years 2010, 2011 and 2012:  

YEAR ENDED DECEMBER 31,

 

RESULTS OF OPERATIONS

FRONT-END

BACK-END

TOTAL

2010

2011

2012

2010

2011

2012

2010

2011

2012

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Cost of sales

(60.9%)

(62.2%)

(66.4%)

(53.2%)

(66.2%)

(69.9%)

(55.1%)

(65.0%)

(68.9%)

GROSS PROFIT

39.1%

37.8%

33.6%

46.8%

33.8%

30.2%

44.9%

35.0%

31.1%

Selling, general and administrative expenses

(17.2%)

(13.4%)

(17.3%)

(8.6%)

(9.7%)

(13.1%)

(10.7%)

(10.7%)

(14.2%)

Research and development expenses

(12.5%)

(10.7%)

(15.8%)

(4.6%)

(6.9%)

(8.6%)

(6.4%)

(7.9%)

(10.5%)

Amortization of other intangible assets

(0.1%)

-

(0.1%)

-

(0.1%)

(0.1%)

-

(0.1%)

(0.1%)

-

-

-

-

(0.7%)

-

-

(0.5%)

-

Net sales

Impairment of PP&E Gain bargain purchase

-

-

-

-

9.3%

-

-

6.6%

-

Restructuring expenses

(3.8%)

-

(0.2%)

-

-

-

(0.9%)

-

(0.1%)

EARNINGS (LOSS) FROM OPERATIONS

5.4%

13.7%

0.2%

33.6%

25.9%

8.4%

26.9%

22.5%

6.2%

Net interest income (expense)

(5.1%)

(2.7%)

(2.8%)

0.1%

0.1%

-

(1.2%)

(0.6%)

(0.7%)

Accretion of interest convertible

(2.1%)

(1.0%)

(1.2%)

-

-

-

(0.5%)

(0.3%)

(0.3%)

Revaluation conversion option

(6.5%)

(1.0%)

0.0%

-

-

-

(1.6%)

(0.3%)

-

Gain (expense) resulting from early extinguishment of debt

(1.2%)

(0.2%)

(0.6%)

-

-

-

(0.3%)

-

(0.2%)

Foreign currency exchange gains (losses)

(0.6%)

1.8%

(0.8%)

0.2%

(0.2%)

(0.1%)

-

0.3%

(0.3%)

-

-

(0.2%)

-

-

-

-

-

(0.1%)

(10.1%)

10.6%

(5.5%)

33.9%

25.7%

8.3%

23.3%

21.6%

4.7%

(2.1%)

(1.0%)

(2.4%)

(4.0%)

(2.7%)

(1.7%)

(3.5%)

(2.2%)

(1.9%)

(12.2%)

9.8%

(7.9%)

29.9%

23.0%

6.6%

19.8%

19.4%

2.9%

9.0%

11.4%

0.5%

10.8%

7.9%

2.4%

Result from investments EARNINGS (LOSS) BEFORE INCOME TAXES AND DILUTION Income tax income / (expense)

NET EARNINGS (LOSS) Allocation of net earnings (loss) Shareholders of the parent Minority interest

CONTENTS FORM 20-F

ITEM 5 | PART I | form 20-f

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

93

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011 Net sales The following table shows net sales of our Front-end and Back-end segments for the full year 2012 compared to the same period in 2011: FULL YEAR

NET SALES (EUR million)

2011

2012

% CHANGE

Front-end

456.1

370.4

(19%)

Back-end

1,178.3

1,047.7

(11%)

ASMI CONSOLIDATED

1,634.3

1,418.1

(13%)

The decrease of net sales in the full year 2012 in our Front-end segment compared to the same period last year was driven by decreased equipment sales as a result of decreased activity at our customers. In our Back-end segment sales decreased due to a lower activity level in equipment sales (as well IC/DE equipment as assembly equipment). The impact of currency changes year-over-year was an increase of 8%.

Gross profit margin The following table shows gross profit and gross profit margin for the Front-end and Back-end segments for the full year 2012 compared to the same period in 2011: FULL YEAR GROSS PROFIT

GROSS PROFIT MARGIN

(EUR million)

2011

2012

2011

2012

INCREASE OR (DECREASE) PERCENTAGE POINTS

Front-end

172.3

124.5

37.8%

33.6%

(4.2)pt

Back-end

398.3

315.9

33.8%

30.2%

(4.6)pt

ASMI CONSOLIDATED

570.6

440.4

34.9%

31.1%

(4.5)pt

GROSS PROFIT MARGIN

The decrease of the gross margin in our Front-end segment compared to the same period last year is mainly attributable to efficiency losses and lower loading of our factories which caused under absorption and inventory corrections, on the one hand, and higher investments in evaluation tools, on the other. The gross profit margin in the Back-end segment decreased mainly due to mix differences (higher lead-frame activities), increased price pressure and a lower activity level. The impact of currency changes year-over-year was a increase of 8%.

Selling, general and administrative expenses The following table shows selling, general and administrative expenses (SG&A) for our Front-end and Back-end segments for the full year 2012 compared to the same period in 2011: FULL YEAR

SG&A

(EUR million)

2011

2012

% CHANGE

Front-end

61.2

64.4

5%

Back-end

113.8

137.6

21%

ASMI CONSOLIDATED

175.0

202.1

15%

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

94

ITEM 5 | PART I | form 20-f

As a percentage of net sales, selling, general and administrative expenses (SG&A) were 14% in the full year 2012 and 10% in the same period of 2011. For the full year 2012 selling, general and administrative expenses as a percentage of net sales of our Front-end segment, increased to 17% compared with 14% for the same period of 2011. The SG&A expenses include a provision of €2.1 million for Elpida. For the Back-end segment selling, general and administrative expenses as a percentage of net sales increased from 9% in 2011 to 13% in 2012. Cost increases mainly took place in the Back-end equipment and lead-frames business, caused by a strengthening of the organization. The impact of currency changes year-over-year was an increase of 8%.

Research and development expenses The following table shows research and evelopment expenses for our Front-end and Back-end segments for the full year 2012 compared to the same period in 2011: FULL YEAR

R&D

(EUR million)

2011

2012

% CHANGE

Front-end

48.5

58.7

21%

Back-end

80.9

90.5

12%

129.4

149.2

15%

ASMI CONSOLIDATED

As a percentage of net sales, research and development expenses were 10% in the full year 2012 compared to 7% for the same period of 2011. The impact of currency changes year-over-year was an increase of 8%.

Impairment charge for property, plant and equipment In 2011 the Company recorded an impairment charge of €8,038 related to machinery and equipment. The Company impaired certain items of property, plant and equipment related to the Back-end lead-frame business. The impairment loss was recognized based on the difference between the carrying value and the fair value of the relevant assets.

Restructuring expenses In the fourth quarter of 2012 we started a cost reduction program in our Front-end operation. We are reducing headcount in our manufacturing organization in Singapore with 110 people. Related to these actions, an amount of €0.9 million in restructuring expenses was recorded in 2012.

Gain on bargain purchase On January 7, 2011, ASMPT acquired the entire equity interest of 13 direct and indirect subsidiaries of Siemens Aktiengesellschaft (“SEAS Entities”). We recognized a gain of €109.3 million on the bargain purchase, representing the excess of the net fair value of the identifiable assets acquired and the liabilities assumed over the aggregate of the consideration transferred. The gain on bargain purchase of €109 million was recognized upon completion of the acquisition of the SEAS entities. The gain on bargain purchase was mainly attributable to the depressed market value of the acquired business because of years of losses. These were due to the challenging economic environment and the bad global economic environment during the period of negotiation for the acquisition.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

95

ITEM 5 | PART I | form 20-f

Earnings from operations The following table shows earnings from operations for our Front-end and Back-end segments for the full year 2012 compared to the same period in 2011: FULL YEAR

EARNINGS FROM OPERATIONS (EUR million)

2011

2012

CHANGE

62.6

1.4

(61.2)

-

(0.9)

(0.9)

62.6

0.5

(62.1)

203.7

87.7

(116.0)

Front-end: BEFORE SPECIAL ITEMS -- Restructuring charges AFTER SPECIAL ITEMS Back-end: BEFORE SPECIAL ITEMS -- Impairment charges

(8.0)

-

8.0

-- Gain bargain purchase SEAS

109.3

-

(109.3)

AFTER SPECIAL ITEMS

304.9

87.7

(217.2)

ASMI CONSOLIDATED

367.5

88.3

(279.2)

The impact of currency changes year to year was an increase of 10%.

Net interest expense Net interest expense amounted to €10.1 million in 2012 compared to the net interest expense of €10.6 million in 2011. This increase in net interest expenses resulted mainly from a higher average debt in the Back-end segment.

Accretion interest expense convertible notes Both of our convertible bonds due in 2011 and 2014, included a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into common shares of the Company (“conversion option”). ASC 815 requires separate recognition of these components. The fair value of the liability component is estimated using the prevailing market interest rate at the date of issue, for similar non-convertible debt. Subsequently, the liability is measured at amortized cost. The interest expense on the liability component is calculated by applying the market interest rate for similar non-convertible debt at the date of issue to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible subordinated notes, thus creating a non-cash interest expense. For 2012 this accretion interest was €4.5 million (2011: €4.4 million).

Revaluation conversion option All convertible bonds include a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into common shares of the Company (“conversion option”). ASC 815 requires separate recognition of these components. For the conversion options of the convertible bonds due 2011, the accounting is different from the conversion option of the convertible bonds due 2014. Since the convertible bonds due 2011 were denominated in US$ and the ASM International common shares to which they can be converted are denominated in Euro, these conversion options are recognized as a liability measured at fair value. The conversion option is measured at fair value through the income statement. For 2011, until early redemption in February 2011, this revaluation at fair value resulted in a loss of €4.4 million. For the conversion options of the convertible bonds due 2014 the fixed-for-fixed principle is met as both the debt instrument (the bond) and the entity’s equity shares to which they can be converted are denominated in the functional currency (Euro). Based on the before mentioned criteria the conversion option qualifies as permanent equity.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

96

ITEM 5 | PART I | form 20-f

Loss resulting from early extinguishment of debt On October 3, 2012 we announced the redemption, per November 27, 2012, of all outstanding principal balance of our 6.50% Convertible Subordinated Notes due 2014, which resulted in the conversion of almost all outstanding notes prior to the redemption date. The loss from the early extinguishment of the notes of €2,209, which reflects the write-off of unamortized debt issuance costs, has been recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2012. On January 3, 2011 we announced the redemption of all outstanding principal balance of our 4.25% Convertible Subordinated Notes due 2011, which resulted in the conversion of almost all remaining notes prior to the redemption date. The loss from the early extinguishment of the notes of €824, which includes the write-off of unamortized issuance costs, has been recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2011.

Income tax expense Income tax expense decreased from €37 million in 2011 to €26 million in 2012, resulting from the balance of a decrease of result before tax in 2012 and the usage of a deferred tax position in Japan. This is related to the sale of certain IP to our Dutch IP Holding Company. While having a negative effect on our net result of €13.0 million, there are no cash flow effects. Moreover, it will reduce our tax payments in future years.

Net earnings allocated to the shareholders of the parent The following table shows net earnings for our Front-end and Back-end segments for the full year 2012, compared to the same period in 2011: FULL YEAR

NET EARNINGS ALLOCATED TO THE SHAREHOLDERS OF THE PARENT (EUR million)

2011

2012

CHANGE

49.7

(26.1)

(75.8)

-

(0.9)

(0.9)

-- Loss from early extinguishment of debt

(0.8)

(2.2)

(1.4)

-- Fair value change conversion options

(4.4)

-

4.4

-- Special items

(5.2)

(3.1)

2.1

44.5

(29.1)

(73.6)

89.4

36.3

(53.1)

Front-end: BEFORE SPECIAL ITEMS -- Restructuring

AFTER SPECIAL ITEMS Back-end: BEFORE EXCLUDING SPECIAL ITEMS -- Impairment charges

(4.2)

-

4.2

57.0

-

(57.0)

AFTER BEFORE INCLUDING SPECIAL ITEMS

142.2

36.3

(105.9)

ASMI CONSOLIDATED, TOTAL EARNINGS 1)

186.8

7.2

(179.6)

-- Net gain on bargain purchase SEAS

1

Allocated to the shareholders of the parent.

Net earnings for the Back-end segment reflect our 51.96% ownership of ASM Pacific Technology.

Subsequent events Reduction shareholding ASMPT On March 13, 2013, ASMI sold a 12% stake in ASMPT. The shares were sold in a partial secondary placement raising proceeds of €422 million. The Company intends to distribute approximately 65% of the cash proceeds to ASMI shareholders; a proposal thereto will be placed on the agenda of the upcoming AGM scheduled for May 16, 2013. The remaining proceeds will be used to further strengthen the business of the Company. As of today, the Company continues to be the largest shareholder of ASMPT with a 40% stake.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ITEM 5 | PART I | form 20-f

97

At the Annual General Meeting of Shareholders (AGM) held in May 2012, the Company announced that it would carry out a study into the causes of the lack of recognition by the markets of the value of the combined businesses (Front-end and Back-end) of the Company. Following that announcement the Company appointed Morgan Stanley and HSBC Bank plc to act as its financial advisers and to assist the Company in carrying out the study. The study was initiated shortly after the 2012 AGM and has recently been completed. Each of the Company’s financial advisers independently carried out an investigation involving frequent discussions with the Company’s Management Board and legal and tax advisers. The advisers also presented their findings to the Company’s Supervisory Board. No single or predominant factor was identified in causing the valuation discrepancy. However, a number of causes and circumstances were identified as potentially influencing the valuation discrepancy, including a holding company discount related to the current corporate structure. Subsequently, an analysis was conducted by the Company in close cooperation with its advisers of the various potential courses of action, including those suggested by shareholders. The alternatives that were investigated included a full or partial placement or sale of the Company’s stake in ASMPT, a spin-off of shares in ASMPT and several merger alternatives. As part of this analysis, the Company has carefully considered the interests of the Company, its shareholders as well as other relevant stakeholders. The Company has also taken into account the various operational connections between the Front-end business and the Back-end business as well as potential accounting, legal and tax implications and execution risks. The Management Board and the Supervisory Board of the Company have concluded that a partial secondary placement of 8% to 12% of the Company’s stake in ASMPT is the most suitable step to be taken to address the non-recognition by the markets of the value of the combined businesses of the Company. This course of action has been chosen taking into account, amongst others, equity market capacity, tax efficiency and ongoing corporate stability at ASMI and ASMPT. This step provides flexibility for further action, if deemed appropriate. The Management and Supervisory Boards of the Company have resolved to proceed with this proposed action and the board of directors of ASMPT has expressed its support to this proposal. In addition thereto, certain major shareholders of the Company representing approximately 27% of the total outstanding shares in the Company have been consulted in advance with regard to this proposed action and have expressed support thereof. The Company will further report on the outcome of the study at the upcoming 2013 AGM, which is scheduled to take place on May 16, 2013. The sale of the 12% stake causes ASMI’s cease of control on ASMPT. According to general accepted accounting principles (both US GAAP and IFRS) the accounting of this sale consists of two separate transactions:

››a sale of a 51.96% subsidiary; ››a purchase of a 40.08% associate. The first transaction, the sale, will result in a substantial gain and the deconsolidation of ASMPT in the consolidated ASMI accounts. The purchase of the associate will, following a purchase price allocation, result in the recognition of the associate at fair value. We are in the process of determining the financial impact; further information will be disclosed at the announcement of the Q1 2013 results.

Bankruptcy Elpida The reorganization plan re the Elpida bankruptcy in Japan was approved by creditors and the Court in February 2013. The court approval order has been appealed, subject to resolution of the appeal, the amounts we will receive regarding our secured and unsecured claims are set and approved to be paid in installments over a seven year period. While the dates for the installment payments are not yet finalized as they are subject to certain funding conditions, the dates are anticipated to be set once the appeal is concluded and the installment payments to commence accordingly. Per December 31, 2012 the allowance for this doubtful account covers the outcome of the aforementioned reorganization plan. Information regarding the hedging of foreign currency net investments is provided in Item 11, and is incorporated herein by reference.

CONTENTS FORM 20-F

98

ITEM 5 | PART I | form 20-f

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010 Net sales The following table shows net sales of our Front-end and Back-end segments for the full year 2011 compared to the same period in 2010: NET SALES (EUR million)

FRONT-END

2010

2011

% CHANGE

293.4

456.1

55%

929.5

734.4

(21%)

-

443.8

n/a

929.5

1,178.2

27%

1,222.9

1,634.3

34%

Back-end -- Excluding ASM AS (comparable) -- ASM AS BACK-END TOTAL

ASMI CONSOLIDATED

The increase of net sales in the full year 2011 in our Front-end segment compared to last year was driven by increased equipment and higher spares and service sales amongst others due to strong inroads made with enabling new technologies in (PE)ALD and as a result of increased activity at our customers. In our Back-end segment record sales were realized due to the acquisition of SEAS (ASMAS). The impact of currency changes year-over-year was a decrease of 5%.

Gross Profit Margin The following table shows gross profit and gross profit margin for the Front-end and Back-end segments for the full year 2011 compared to the same period in 2010: FULL YEAR GROSS PROFIT

GROSS PROFIT (EUR million)

GROSS PROFIT MARGIN INCREASE OR (DECREASE) PERCENTAGE POINTS

2010

2011

2010

2011

114.6

172.3

39.1%

37.8%

(1.3)pt

435.0

284.5

46.8%

38.7%

(8.1)pt

-

113.8

n/a

25.6%

n/a

BACK-END TOTAL

435.0

398.3

46.8%

33.8%

(13.0)pt

ASMI CONSOLIDATED

549.6

570.6

44.9%

34.9%

(10.0)pt

FRONT-END Back-end -- Excluding ASM AS (comparable) -- ASM AS

The decrease of the gross margin in our Front-end segment compared to the same period last year is mainly attributable to the product mix differences. The gross profit margin in the Back-end segment decreased due to mix differences between equipment and lead-frame sales, the increase in raw material prices for its lead-frame business, the acquisition of the AS business with its lower gross margin, and the lower trading in the course of 2011. Business combination accounting rules require us to account for inventories assumed from our acquisitions at their fair values. The revaluation of the acquired inventories increased both cost of sales and the gain on bargain purchase with €11.5 million. The impact of currency changes year to year was a decrease of 5%.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

99

ITEM 5 | PART I | form 20-f

Selling, General and Administrative Expenses The following table shows selling, general and administrative expenses for our Front-end and Back-end segments for the full year 2011 compared to the same period in 2010: FULL YEAR

SG&A

(EUR million)

2010

2011

% CHANGE

FRONT-END

51.0

61.2

20%

79.9

76.5

(4%)

-

35.0

n/a

Back-end -- Excluding ASM AS (comparable) -- ASM AS -- Acquisition related transaction costs BACK-END TOTAL

ASMI CONSOLIDATED

-

2.4

n/a

79.9

113.8

43%

131.0

175.0

34%

As a percentage of net sales, selling, general and administrative expenses were 11% in the full year of 2011, flat compared to the same period of 2010. For the full year of 2011 selling, general and administrative expenses as a percentage of net sales of our Front-end segment, were reduced to 13% compared with 17% for the full year of 2010. On a comparable base- excluding the AS business- for the period under review the selling, general and administrative expenses in the Back-end segment as a percentage of net sales increased from 9% in 2010 to 10% in 2011. The impact of currency changes year to year was a decrease of 4%.

Research and Development Expenses The following table shows research and development expenses for our Front-end and Back-end segments for the full year 2011 compared to the same period in 2010: FULL YEAR

R&D

(EUR million)

2010

2011

% CHANGE

FRONT-END

36.5

48.5

33%

42.3

43.3

2%

Back-end -- Excluding ASM AS (comparable) -- ASM AS

-

37.5

n/a

BACK-END TOTAL

42.3

80.8

91%

ASMI CONSOLIDATED

78.8

129.3

64%

As a percentage of net sales, research and development expenses were 8% in the full year of 2011, an increase of 1%-point compared to the same period of 2010. The impact of currency changes year to year was a decrease of 4%.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

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ITEM 5 | PART I | form 20-f

Impairment charge property, plant and equipment In 2011 the Company recorded an impairment charge of €8,038 related to machinery and equipment. The Company impaired certain items of property, plant and equipment related to the Back-end lead-frame business. The impairment loss was recognized based on the difference between the carrying value and the fair value of the relevant assets.

Gain on bargain purchase On 7 January 2011, ASMPT acquired the entire equity interest of 13 direct and indirect subsidiaries of Siemens Aktiengesellschaft (SEAS Entities). We recognized a gain of €109.3 million on the bargain purchase representing the excess of the net fair value of the identifiable assets acquired and the liabilities assumed over the aggregate of the consideration transferred. The gain on bargain purchase of €109 million was recognized upon completion of the acquisition of the SEAS entities. The gain on bargain purchase was mainly attributable to depressed market value of the acquired business because of years of losses due to challenging economic environment and the bad global economic environment during the period of negotiation of the acquisition.

Earnings from Operations The following table shows earnings from operations for our Front-end and Back-end segments for the full year 2011 compared to the same period in 2010: FULL YEAR

EARNINGS FROM OPERATIONS (EUR million)

2010

2011

CHANGE

EXCLUDING IMPAIRMENTS AND RESTRUCTURING

27.1

62.6

35.5

Restructuring

(11.2)

-

11.2

INCLUDING IMPAIRMENTS AND RESTRUCTURING

15.9

62.6

46.7

Front-end

Back-end 312.8

164.8

(148.0)

ASM AS

-

41.3

41.3

Impairments

-

(8.0)

(8.0)

Gain bargain purchase SEAS

-

109.3

109.3

COMPARABLE

Acquisition related transaction cost

-

(2.4)

(2.4)

BACK-END TOTAL

312.8

304.9

(7.9)

ASMI CONSOLIDATED

328.6

367.5

38.9

The impact of currency changes year to year was a decrease of 6%.

Net Interest Expense Net interest expense amounted to €10.6 million in 2011 compared to the net interest expense of €14.5 million in 2010. This decrease in net interest expenses mainly resulted from a lower average debt in 2011.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ITEM 5 | PART I | form 20-f

101

Accretion interest expense convertible notes Both our convertible bonds due 2011 and 2014, include a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into common shares of the Company (“conversion option”). ASC 815 requires separate recognition of these components. The fair value of the liability component is estimated using the prevailing market interest rate at the date of issue, for similar non-convertible debt. Subsequently, the liability is measured at amortized cost. The interest expense on the liability component is calculated by applying the market interest rate for similar non-convertible debt at the date of issue to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible subordinated notes, thus creating a non-cash interest expense. For 2011 this accretion interest was €4.4 million (2010; €6.0 million).

Revaluation conversion option All convertible bonds include a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into common shares of the Company (“conversion option”). ASC 815 requires separate recognition of these components. For the conversion options of the convertible bonds due 2011 the accounting is different from that for the conversion option of the convertible bonds due 2014. As the convertible bonds due 2011 was denominated in USD and the ASM International common shares in which they can be converted to are denominated in Euro, these conversion options are recognized as a liability measured at fair value. The conversion option is measured at fair value through the income statement, for 2011, until early redemption in February 2011, this revaluation at fair value resulted in a loss of €4.4 million (2010: €19.0 million). For the conversion options of the convertible bonds due 2014 the fixed–for-fixed principle is met as both the debt instrument (the bond) and the entity’s equity shares in which they can be converted to are denominated in the functional currency (Euro). Based on the before mentioned criteria the conversion option qualifies as permanent equity.

Loss resulting from early extinguishment of debt On January 3, 2011 we announced the redemption for all outstanding principal balance of our 4.25% Convertible Subordinated Notes due 2011, which resulted in the conversion of almost all remaining notes prior to the redemption date. The loss from the early extinguishment of the notes of €824, which includes the write-off of unamortized issuance costs, has been recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2011. In 2010 US$56.5 million convertible subordinated notes have been repurchased for a market value of US$74.6 million. The loss from the early extinguishment of the notes of €3,609, which includes the write-off of unamortized issuance costs and the amortization of unamortized interest expenses, has been recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2010.

Income Tax Expense Income tax expense decreased from €43 million in 2010 to €37 million in 2011, resulting from the balance of an increase of result before tax in 2011 and a release of certain valuation allowances.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

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ITEM 5 | PART I | form 20-f

Net Earnings allocated to the shareholders of the parent The following table shows net earnings for our Front-end and Back-end segments for the full year, 2011 compared to the same period in 2010: FULL YEAR

NET EARNINGS (EUR million)

2010

2011

CHANGE

Front-end EXCLUDING SPECIAL ITEMS Restructuring charges Loss from early extinguishment of debt

(1.8)

49.7

51.6

(11.2)

-

11.2

(3.6)

(0.8)

2.8

Fair value change conversion options

(19.0)

(4.4)

14.7

Special items

(33.8)

(5.2)

28.6

INCLUDING SPECIAL ITEMS

35.7

44.5

80.2

146.3

89.4

(56.9)

-

(4.2)

(4.2)

Gain bargain purchase SEAS

-

57.0

57.0

Special items

-

52.8

52.8

INCLUDING SPECIAL ITEMS

146.3

142.2

(4.1)

ASMI CONSOLIDATED, TOTAL EARNINGS 1)

110.6

186.8

76.1

Back-end EXCLUDING SPECIAL ITEMS Impairments

1

Allocated to the shareholders of the parent.

Net earnings for the Back-end segment reflect our 52.17% ownership of ASM Pacific Technology. Information regarding the hedging of foreign currency net investments is provided in Item 11, and is incorporated herein by reference.

B. LIQUIDITY AND CAPITAL RESOURCES Our liquidity is affected by many factors, some of which are related to our ongoing operations and others of which are related to the semiconductor and semiconductor equipment industries, and to the economies of the countries in which we operate. Although our cash requirements fluctuate based on the timing and extent of these factors, we believe that cash generated by operations, together with the liquidity provided by our existing cash resources and our financing arrangements, will be sufficient to fund working capital, capital expenditures and other ongoing business requirements for at least the next twelve months.

Cash flow Net cash provided by operations in 2012 was €42 million as compared to €217 million for 2011. This decrease results mainly from lower net earnings. Net cash used in investing activities in 2012 of €72 million was at the same level compared to €70 million for 2011. Net cash used in financing activities in 2012 was €73 million compared to €79 million for the same period in 2011.

Debt In October 2012, we exercised our right to call the outstanding 6.50% Convertible Subordinated Loan (due 2014), resulting in conversion of all remaining notes (€150 million) on November 27, 2012. In July 2011 we finalized the increase and extension of ASMI’s existing standby revolving credit facility. The credit commitment was increased from €90 million to €150 million and the maturity date was extended from November 1, 2012 until July 31 2014. In the event all outstanding convertible bonds due November 6, 2014 are converted, repaid or replaced prior to June 30, 2014, the maturity date will be July 31, 2015. As per December 31, 2011 the amount outstanding of the 6.5% Convertible Subordinated Loan (due 2014) is €150 million. As a result of the dividend paid in 2011 the conversion rate decreased from €17.06 to €16.85. As a result of the dividend paid in 2012 the conversion rate decreased from €16.85 to €16.53.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ITEM 5 | PART I | form 20-f

103

In May 2010 the remaining outstanding US$16.9 million of our 5.25% Convertible bonds due 2010 were converted into common shares. In January, July and December 2010, respectively US$39.4 million, US$7.2 million and US$9.9 million of our 4.25% Convertible bonds due 2010 were repurchased. In January, 2011 we announced the redemption of all of the outstanding principal balance of our 4.25% Convertible Subordinated Notes due 2011, which resulted in the conversion of all remaining notes prior to the redemption date scheduled for February 15, 2011. See notes 4, 5, 14, 17, 18 and 23 to our consolidated financial statements for discussion of our funding, treasury policies and our ­ long-term debt.

Liquidity On December 31, 2012, the Company’s principal sources of liquidity consisted of €290 million in cash and cash equivalents and EUR 276 million in undrawn bank lines. Approximately €145 million of the cash and cash equivalents and €126 million of the undrawn bank lines are restricted to use for the Company’s Back-end operations. For the most part, our cash and cash equivalents are not guaranteed by any governmental agency. We place our cash and cash equivalents with high quality financial institutions to limit our credit risk exposure. On December 31, 2012 the net cash of ASMI, excluding Back-end, was €145 million (2011: €65 million). ASMI excluding Back-end is free of debt. Furthermore, ASMI, excluding Back-end, has available credit lines of €150 million.

Working capital Net working capital, consisting of accounts receivable, inventories, other current assets, accounts payable, accrued expenses, advance payments from customers and deferred revenue, increased from €407 million December 31, 2011 to €448 million on December 31, 2012. The number of outstanding days of working capital, measured based on quarterly sales, increased from 106 days on December 31, 2011 to 126 days on December 31, 2012. For the same period, our Front-end segment increased from 100 days to 110 days and our Back-end segment increased from 109 days to 132 days.

Pension plans The Company’s employees of the Front-end segment in the Netherlands, approximately 179 full-time employees (FTE), participate in a multi-employer union plan ”Bedrijfstakpensioenfonds Metalektro” (“PME”) determined in accordance with the collective bargaining agreements effective for the industry in which ASMI operates. This collective bargaining agreement has no expiration date. This multiemployer union plan covers approximately 1,220 companies and 150,000 contributing members. ASMI’s contribution to the multi-employer union plan is less than 5.0% of the total contribution to the plan as per the annual report for the year ended December 31, 2011. The plan monitors its risks on a global basis, not by company or employee, and is subject to regulation by Dutch governmental authorities. By law (the Dutch Pension Act), a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of the plan assets to its obligations. This coverage ratio must exceed 104.25% for the total plan. Every company participating in a Dutch multiemployer union plan contributes a premium calculated as a percentage of its total pensionable salaries, with each company subject to the same percentage contribution rate. The premium can fluctuate yearly based on the coverage ratio of the multi-employer union plan. The pension rights of each employee are based upon the employee’s average salary during employment. ASMI’s net periodic pension cost for this multi-employer union plan for any period is the amount of the required contribution for that period. A contingent liability may arise from, for example, possible actuarial losses relating to other participating entities because each entity that participates in a multi-employer union plan shares in the actuarial risks of every other participating entity. It can also arise from any responsibility under the terms of a plan to finance any shortfall in the plan if other entities cease to participate. The coverage ratio of the multi-employer union plan increased to 93.9% as of December 31, 2012 (December 31, 2011: 90.0%). Because of the low coverage ratio, PME prepared and executed a so-called “Recovery Plan” which was approved by “De Nederlandsche Bank”, the Dutch central bank, which is the supervisor of all pension companies in the Netherlands. Due to the low coverage ratio and according the obligation of the “Recovery Plan” the pension premium percentage is 24.0% in both 2011 and 2012. The coverage ratio is calculated by dividing the plan assets by the total sum of pension liabilities and is based on actual market interest.

CONTENTS FORM 20-F

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ASMPT Our Back-end segment, which is conducted through ASM Pacific Technology, our 51.96%-owned subsidiary on December 31, 2012 had a debt of €81 million. The cash resources and borrowing capacity of ASM Pacific Technology are not available to our Front-end segment, due to restrictions imposed by the Hong Kong Stock Exchange, on which the ASM Pacific Technology common shares are listed. We historically relied on dividends from ASM Pacific Technology for a portion of our cash flow for use in our Front-end operations. Cash dividends received from ASM Pacific Technology during 2010, 2011 and 2012 were €65.6 million, €86.9 million and €29.6 million, respectively. In November 2006, we announced our commitment that for at least the next three years we would not use these cash dividends to support our Front-end business, but instead would use such dividends to retire outstanding convertible debt, repurchase our common shares, pay dividends on our common shares or, in the event of dilution resulting from the exercise of employee stock options in ASM Pacific Technology, purchase shares of ASM Pacific Technology to maintain our percentage ownership at its current level. At our Annual General Meeting of Shareholders in May 2010 we decided to extend this policy for the years 2010 and 2011. The following table shows the dividends received from ASM Pacific Technology and the use of those dividends within the Front-end business: DIVIDENDS  RECEIVED FROM ASM PACIFIC TECHNOLOGY

REPURCHASED ­COMMON SHARES OF ASM INTERNATIONAL

REPURCHASED CONVERTIBLE BONDS

DIVIDEND PAID TO SHAREHOLDERS OF ASM INTERNATIONAL

BALANCE OF DIVIDENDS  RECEIVED

2007

49.1

-

(32.9)

(5.4)

10.8

2008

49.1

(36.5)

(27.1)

-

(14.5)

2009

21.4

-

(27.0)

-

(5.6)

2010

65.6

-

(55.8)

-

9.8

2011

86.9

-

-

(22.1)

64.8

2012

29.6

(40.6)

-

(27.5)

(38.5)

301.7

(77.1)

(142.8)

(55.0)

26.8

DIVIDENDS RECEIVED FROM ASM PACIFIC TECHNOLOGY (EUR million)

TOTAL

Although certain directors of ASM Pacific Technology are directors of ASM International, ASM Pacific Technology is under no obligation to declare dividends to shareholders or enter into transactions that are beneficial to us. As a substantial shareholder, we can approve the payment of dividends, but cannot compel their payment or size. The market value of our investment in ASM Pacific Technology at the end of 2012 was approximately €1,913 million. At the end of 2011 this was approximately €1,799 million.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC Research and development See Item 4.B. “Business Overview, Research and Development” and Item 5.A. “Operating Results, Operating and Financial Review and Prospects”.

Intellectual property matters See Item 3.D. “Risk Factors, Our ability to compete could be jeopardized if we are unable to protect our intellectual property rights from challenges by third parties; claims or litigation regarding intellectual property rights could require us to incur significant costs.” and “We license the use of some patents from a competitor pursuant to a settlement agreement; if the agreement is terminated, our business could be adversely affected.” and Item 4.B. “Business Overview, Intellectual Property and Trademarks”.

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ITEM 5 | PART I | form 20-f

D. TREND INFORMATION Backlog Our backlog includes orders for which purchase orders or letters of intent have been accepted, typically for up to one year. Historically, orders have been subject to cancellation or rescheduling by customers. In addition, orders have been subject to price negotiations and changes in specifications as a result of changes in customers’ requirements. Due to possible customer changes in delivery schedules and requirements and to cancellation of orders, our backlog at any particular date is not necessarily indicative of actual sales for any succeeding period. The following table shows the level of new orders during 2011 and 2012, and the backlog and book-to-bill ratios on December 31, 2011 and 2012: FULL YEAR

THE BACKLOG AND BOOK-TO-BILL (EUR million, except book-to-bill ratio)

2011

2012

% CHANGE

New orders

398.3

360.1

(10%)

Backlog at December 31

105.1

91.7

(13%)

0.9

1.0

New orders

971.2

1,017.1

5%

Backlog at December 31

225.5

197.5

(12%)

0.8

1.0

1,369.5

1,377.2

1%

330.6

289.2

(13%)

0.8

1.0

Front-end:

Book-to-bill ratio (new orders divided by net sales) Back-end:

Book-to-bill ratio (new orders divided by net sales) Total

NEW ORDERS BACKLOG AT DECEMBER 31 BOOK-TO-BILL RATIO (NEW ORDERS DIVIDED BY NET SALES)

Outlook We have developed forecasts and projections of cash flows and liquidity needs for the upcoming year. This takes into account the current market conditions, reasonably possible changes in trading performance based on such conditions, and our ability to modify our cost structure as a result of changing economic conditions and sales levels. We have also considered in the forecasts the total cash balances amounting to €290.5 million as of December 31, 2012; available borrowings; the ability to renew debt arrangements and to access additional indebtedness; and whether or not we will maintain compliance with our financial covenants. Based on this, we believe that our cash on hand at the end of 2012 is adequate to fund our operations, our investments in capital expenditures and to fulfill our existing contractual obligations for the next twelve months.

E. OFF-BALANCE SHEET ARRANGEMENTS We have contractual obligations, some of which are required to be recorded as liabilities in our consolidated financial statements, including long- and short-term debt. Other contractual arrangements, such as operating lease commitments and purchase obligations, are not generally required to be recognized as liabilities on our consolidated balance sheet, but are required to be disclosed.

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106

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS The following table summarizes our contractual obligations as of December 31, 2012 aggregated by type of contractual obligation: TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

TOTAL

LESS THAN 1 YEAR

1-3 YEARS

3-5 YEARS

MORE THAN 5 YEARS

Notes payable to banks 1)

62,686

62,686

-

-

-

Long-term debt

19,957

6,821

13,136

-

-

Operating leases

72,526

21,430

29,904

13,963

7,229

Pension liabilities

12,540

418

931

1,603

9,588

141,908

139,221

2,687

-

-

Capital expenditure commitments

10,553

10,273

280

-

-

Unrecognized tax benefits (ASC 740)

22,511

22,511

-

-

-

342,681

263,360

46,938

15,566

16,817

1)

Purchase obligations: Purchase commitments to suppliers

TOTAL CONTRACTUAL OBLIGATIONS 1

Including accrued interest based on the percentages at the reporting date.

For a further discussion of our contractual obligations see Notes 14, 17, 18, 21, 23 and 26 to our Consolidated Financial Statements, which are incorporated herein by reference. We outsource a substantial portion of the manufacturing of our Front-end operations to certain suppliers. As our products are technologically complex, the lead times for purchases from our suppliers can vary and can be as long as nine months. Generally, contractual commitments are made for multiple modules or systems in order to reduce our purchase prices per module or system. For the majority of our purchase commitments, we have flexible delivery schedules depending on the market conditions, which allow us, to a certain extent, to delay delivery beyond originally planned delivery schedules.

New Accounting Pronouncements For information regarding new accounting pronouncements, see Note 1 to our “Consolidated Financial Statements”, which is incorporated herein by reference.

ITEM 6

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. DIRECTORS AND SENIOR MANAGEMENT The members of our Supervisory Board and Management Board and our other senior managers are as follows: DIRECTORS AND SENIOR MANAGEMENT Gert-Jan Kramer 2) Johan M.R. Danneels

YEAR OF BIRTH

TERM EXPIRES

Chairman of the Supervisory Board

1942

2013

Member of the Supervisory Board

1949

2016

Heinrich W. Kreutzer 1)

Member of the Supervisory Board

1949

2014

Jan C. Lobbezoo

Member of the Supervisory Board

1946

2013

Member of the Supervisory Board

1945

2014

Member of the Supervisory Board

1958

2016

Charles D. (Chuck) del Prado

Chairman of the Management Board, President and Chief Executive Officer

1961

2014

Peter A.M. van Bommel

Member of the Management Board and Chief Financial Officer

1957

2014

W.K. Lee

Chief Executive Officer of ASM Pacific Technology Ltd.

1954

-

2)

1)

Martin C.J. van Pernis 2) Ulrich H.R. Schumacher

1 2

1)

Member of Audit Committee. Member of Nomination, Selection and Remuneration Committee

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Gert-Jan Kramer was elected to the Supervisory Board in May 2009 and is currently Chairman of the Supervisory Board. Until his retirement in 2005, Mr Kramer served as President and Chief Executive Officer of Fugro NV for more than 20 years. He is on the Supervisory Board of Damen Shipyards Group NV (Vice-Chairman), Fugro NV, Bronwaterleiding Doorn, Energie Beheer Nederland BV and the Delft Technical University (Chairman). He is also on the Board of the Service Organization Protestant Churches in the Netherlands (Chairman), Foundation of Friends of the Pieterskerk Leiden (Chairman) and the Pieterskerk Leiden (Chairman). Mr Kramer is on the Board of many cultural organizations, such as several museums and orchestras: the Foundation Beelden aan Zee, the Frans Hals Museum, De Nieuwe Kerk Amsterdam, the Amsterdam Sinfonietta (Chairman), the Hague Philharmonic (Chairman) and the Concertgebouw Fund Foundation. Johan M.R. Danneels was initially elected a member of the Supervisory Board in May 2000 and was reappointed on May 15, 2012 for a period of four years. Mr Danneels is Chief Executive Officer at Essensium, the company he founded in 2005 as a spin off from the IMEC research institute. He was Chairman of IMEC from 2000 to 2005. Prior to that he spent 25 years at Alcatel. He held several management functions for all major product lines, was Corporate Executive Vice President of Alcatel NV, Chief Executive Officer of Alcatel Microelectronics and most recently Group Vice President of STMicroelectronics. He holds a PhD degree in Engineering from the Catholic University of Leuven, Belgium and a MBA degree from Boston University. Heinrich W. Kreutzer was initially elected a member of the Supervisory Board in November 2006 and was reappointed on May 20, 2010 for a period of four years. Between 1999 and 2003 Mr Kreutzer was a member of the Management Board as Chief Operating Officer and Chief Technology Officer of Alcatel SEL AG. From 2004 to 2006 he was Managing Director of Kabel Deutschland GmbH in Munich, Germany. Prior to that he worked at several companies including General Telephone & Electronics in Waltham, USA and Alcatel in Stuttgart, Germany. Mr Kreutzer is currently on the Board of Directors of Micronas Semiconductor AG (Chairman) in Zurich, Switzerland, Micronas Semiconductor GmbH (Chairman) in Freiburg, Germany and BKtel Communications GmbH (Chairman), Germany. He holds a Master’s degree in Engineering and a Master’s degree in Economics, and studied at the Technical University of Berlin and the University of Hagen, Germany. Jan C. Lobbezoo was elected a member of the Supervisory Board in May 2009. Mr Lobbezoo was Executive Vice-President and Chief Financial Officer of the semiconductor division of Royal Philips Electronics from 1994 to 2005. He was a member of the Board of TSMC for 12 years until 2007 and remains its advisor, specifically in the areas of US corporate governance, international reporting and financial review. He is on the Board of FEI, a US-based nano-technology equipment company and on the One-tier Board of TMC Group NV (Non-Executive Member). He is also on the Supervisory Board of Mapper Lithography BV (Chairman), Mutracx BV (Chairman), Salland Engineering BV (Chairman), ALSI NV and Point One Innovation Fund (Chairman). He holds a Master’s degree in Business Economics from the Erasmus University Rotterdam, the Netherlands and is a Dutch Registered Accountant. Martin C.J. van Pernis was elected a member of the Supervisory Board in May 2010. Mr Van Pernis joined Siemens in 1971 and retired from the Siemens Group at the end of 2009 as Chairman of the Management Board of Siemens Nederland NV. He is on the Supervisory Board of Batenburg Techniek NV (Chairman), Dutch Space BV - a subsidiary of EADS (Chairman), Aalberts Industries NV (Vice Chairman), Feyenoord Rotterdam NV, GGZ Delfland (Chairman), SFG/Vlietland Group (Chairman), The Platform “Vernieuwing Bouw” (Chairman) and President of The Royal Institute of Engineers - KIVI NIRIA. Ulrich H.R. Schumacher was initially elected a member of the Supervisory Board in May 2008 and was reappointed on May 15, 2012 for a period of four years. Presently Mr Schumacher is Managing Director of CGS Consulting. From 1986 to 1999 he held various engineering and management positions at Siemens AG. Between 1996 and 1999 he was CEO and President of Siemens Semiconductor Group, and became President and CEO of Infineon Technologies AG after the spin off from Siemens Semiconductor Group in 1999. From 2004 to 2007 he was a Partner at Francisco Partners, a private equity investment company based in the U.S. Between 2007 and 2010 he was the CEO and President of Grace Semiconductor Manufacturing Corporation. Mr Schumacher is on the Supervisory Board of Siano Mobile Silicon and PACT XPP Technologies AG (Chairman). He holds a PhD degree in Electrical Engineering from the University of Aachen, Germany and has completed further education in Business Administration. Charles D. (Chuck) del Prado was appointed a member of the Management Board in May 2006 and President and Chief Executive Officer on March 1, 2008. Between 1989 and 1996 Mr Del Prado held several marketing and sales positions at IBM Nederland NV. From 1996 to 2001 he worked in various management positions at ASML, in manufacturing and sales in Taiwan and the Netherlands. He was appointed Director Marketing, Sales & Service of ASM Europe in March 2001. From 2003 to 2007 he was President and General Manager of

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

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ASM America. From January 1, 2008 to February 29, 2008, he acted as Executive Vice President Front-end Operations at ASM America. He holds a Master’s of Science degree in Industrial Engineering and Technology Management from the University of Twente, the Netherlands. Peter A.M. van Bommel was appointed a member of the Management Board on July 1, 2010 and became Chief Financial Officer on September 1, 2010. Mr Van Bommel has more than twenty years of experience in the electronics and semiconductor industry. He spent most of his career at Philips, which he joined in 1979. From the mid-1990s until 2005 he acted as CFO of several business units of the Philips group. Between 2006 and 2008 he was CFO at NXP, formerly Philips Semiconductors. He was CFO of Odersun AG, a manufacturer of thin-film solar cells and modules until August 31, 2010. In April 2012 Mr Van Bommel was appointed a member of the Supervisory Board and a member of the Audit Committee of the Royal KPN NV. He holds a Master’s degree in Economics from the Erasmus University Rotterdam, the Netherlands. W.K. Lee became Chief Executive Officer of ASM Pacific Technology Ltd effective January 1, 2007 and has been General Manager Southern Region of ASM Pacific Technology since 1990. Mr Lee has been employed by ASM Pacific Technology for over 30 years. Prior to becoming in 1990 General Manager of ASM Pacific Technology’s activities in Singapore, he was involved in product development. He was a member of the Management Board of the Company from January 1, 2007 to December 31, 2010. He holds a Bachelor’s degree in Science and a Master’s degree in Philosophy in Electronics from the Chinese University of Hong Kong, and a Master’s degree in Business Administration from the National University of Singapore.

B. COMPENSATION For information regarding remuneration of members of our Management Board and Supervisory Board, see Note 30 to our Consolidated Financial Statements, which is incorporated herein by reference. For further information regarding remuneration of members of our Management Board, see our Remuneration Policy and Remuneration Reports, which are posted on our website (www.asm.com). We have granted stock options to certain key employees. For information regarding such options see Note 20 to our Consolidated Financial Statements, which is incorporated herein by reference.

C. BOARD PRACTICES Under Netherlands law, the Supervisory Board has the duty to supervise and advise the Management Board. Persons nominated by the Supervisory Board to be appointed by the shareholders to the Supervisory Board are elected if they receive a majority of the votes cast at a meeting of shareholders. Nominees to the Supervisory Board who are not proposed by the Supervisory Board are appointed if they receive the affirmative vote of a majority of the votes cast at a meeting, which affirmative votes represent at least one third of our issued capital. A resolution to remove a member of the Supervisory Board, other than in accordance with a proposal of the Supervisory Board, shall require the affirmative vote of a majority of the votes cast, which affirmative votes represent at least one third our issued capital. The Supervisory Board members serve a four year term and may be re-elected after each term. The Supervisory Board members may be re-elected twice. The Management Board is entrusted with our management under the supervision of the Supervisory Board and has the general authority to enter into binding agreements with third parties. Persons nominated by the Supervisory Board to be appointed by the shareholders to the Management Board are elected if they receive a majority of the votes cast at a meeting of shareholders. Nominees to the Management Board who are not proposed by the Supervisory Board are appointed if they receive the affirmative vote of a majority of the votes cast at a meeting, if such affirmative votes represent at least one third of our issued capital. A Management Board member may at any time be suspended by the Supervisory Board. A Management Board member may, in accordance with a proposal of the Supervisory Board, be dismissed by the General Meeting of Shareholders with a majority of the votes cast. A resolution to suspend or to dismiss a member of the Management Board, other than in accordance with a proposal of the Supervisory Board, shall require the affirmative vote of a majority of the votes cast at a meeting, which affirmative votes represent at least one third of our issued capital. The Audit Committee of the Supervisory Board has a supervisory task with regard to monitoring the integrity of our financial reports and risk management. The Audit Committee consists of Mr Lobbezoo (Chairman), Mr Kreutzer and Mr Schumacher. The Audit Committee supervises the activities of the Management Board with respect but not limited to:

CONTENTS FORM 20-F

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ASM INTERNATIONAL  |  ANNUAL REPORT 2012

››the operation of the internal risk management and control systems, including supervision of the enforcement of the relevant legislation and regulations, and supervising the operation of codes of conduct;

››our release of financial information; ››compliance with recommendations and observations of external auditors; ››our policy on tax planning; ››relations with the external auditor, including, in particular, its independence, remuneration and any non-audit services performed for us; ››our financing and financial position; and ››the applications of information and communication technology (ICT). The Audit Committee meets periodically to nominate a firm to be appointed as independent auditors to audit the financial statements and to perform services related to the audit, review the scope and results of the audit with the independent auditors, review with management and the independent auditors our annual operating results and consider the adequacy of the internal accounting procedures and the effect of the procedures relating to the auditor’s independence. The Nomination, Selection and Remuneration committee of the Supervisory Board advises the Supervisory Board on matters relating to the selection and nomination of the members of the Management Board and Supervisory Board. The committee further monitors and evaluates the remuneration policy for the Management Board. This committee consists of Mr Kramer (Chairman), Mr Danneels and Mr van Pernis. We have entered into indemnity agreements with each of our Supervisory Board and Management Board members in which we agree to hold each of them harmless, to the extent permitted by law, from damage resulting from a failure to perform or a breach of duties by our board members, and to indemnify each of them for serving in any capacity for the benefit of the Company, except in the case of willful misconduct or gross negligence in certain circumstances.

D. EMPLOYEES As of December 31, 2012, we had 17,404 employees, including 1,534 employees primarily involved in research and development activities, 814 in marketing and sales, 1,735 in customer service, 985 in finance and administration, and 12,336 in manufacturing. The following table lists the total number of our employees and the number of our employees in our Front-end and Back-end business at the dates indicated, exclusive of temporary workers: DECEMBER 31, 2010

DECEMBER 31, 2011

DECEMBER 31, 2012

FRONTEND

BACKEND

TOTAL

FRONTEND

BACKEND

TOTAL

FRONTEND

BACKEND

TOTAL

The Netherlands

148

10

158

165

9

174

176

3

179

EMEA

136

5

141

157

883

1,040

171

917

1,088

United States

361

10

371

457

87

544

535

92

627

Japan

180

21

201

182

21

203

177

22

199

Southeast Asia

625

15,203

15,828

670

13,563

14,233

577

14,734

15,311

1,450

15,249

16,699

1,631

14,563

16,194

1,636

15,768

17,404

GEOGRAPHIC LOCATION Europe

TOTAL

Our Dutch operations, which employed 166 persons as of March 15, 2013, is subject to standardized industry bargaining under Netherlands law, and is required to pay wages and meet conditions established as a result of negotiations between all Netherlands employers in their industry and unions representing employees of those employers. Additionally, management personnel in the Netherlands facilities meet as required by Netherlands law with a works council consisting of elected representatives of the employees to discuss working conditions and personnel policies as well as to explain major corporate decisions and to solicit their advice on major issues. Many of our employees are highly skilled, and our continued success will depend in part upon our ability to continue to attract and retain these employees, who are in great demand. We believe that our employee relations are good.

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ITEM 7  | PART I | form 20-f

E. SHARE OWNERSHIP Information with respect to shares and options held by members of our Supervisory Board and Management Board is included in Item 7, “Major Shareholders and Related Party Transactions” and Notes 30 and 31 to our Consolidated Financial Statements, which are incorporated herein by reference. With the exception of Chuck del Prado, as of March 15, 2013, none of the members of our Supervisory Board or Management Board owned beneficially more than 1% of our outstanding common shares. We maintain various stock option plans for the benefit of our employees. For information about our stock option plans, see Note 20 to our Consolidated Financial Statements, which is incorporated herein by reference.

ITEM 7

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. MAJOR SHAREHOLDERS The following table sets forth information with respect to the ownership of our common shares as of March 15, 2013 by each beneficial owner known to us of more than 5% of our common shares:

Arthur H. del Prado 1,2) Aberdeen asset managers Ltd

3)

Capital Research and Management Company 4) 1 2

3 4

NUMBER OF SHARES

PERCENT

11,346,323

17.96%

8,351,517

9.87%

3,237,708

5.13%

Calculated on the basis of 63,169,136 Common Shares outstanding as of March 15, 2013, and without regard to options. Includes 3,039 common shares owned by Stichting Administratiekantoor ASMI, a trust controlled by Arthur H. del Prado and 713,000 common shares beneficially owned by Chuck D. del Prado, Arthur H. del Prado’s son. Based on the notification dated August 14, 2012. Based on the notification dated March 15, 2013.

A “beneficial owner” of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares (i) voting power which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power which includes the power to dispose, or to direct the disposition, of such security. In addition, a person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial ownership of such security, as defined above, within 60 days, including but not limited to any right to acquire: (i) through the exercise of any option, warrant or right; (ii) through the conversion of a security; or (iii) pursuant to the power to revoke, or pursuant to the automatic termination of, a trust, discretionary account, or similar arrangement. Pursuant to the Dutch Financial Supervision Act (‘Wet op het financieeltoezicht’ or ‘Wft’), legal entities as well as natural persons must immediately notify the Dutch Authority for the Financial Markets (AFM) when a shareholding equals or exceeds 5% of the issued capital. The AFM must be notified again when this shareholding subsequently reaches, exceeds or falls below a threshold. This can be caused by the acquisition or disposal of shares by the shareholder or because the issued capital of the issuing institution is increased or decreased. Thresholds are: 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. The AFM incorporates the notifications in the public register, which is available on its website. Failure to disclose the shareholding qualifies as an offense, and may result in civil penalties, including suspension.

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On May 28, 1997, we entered into an agreement with Stichting Continuïteit ASM International (Stichting), pursuant to which Stichting was granted an option to acquire up to a number of our preferred shares corresponding with a total par value equal to 50% of the par value of our common shares issued and outstanding at the date of the exercise of the option. Stichting is a non-membership organization organized under Netherlands law. The objective of Stichting is to serve the interests of the Company. To that objective Stichting may, amongst others, acquire, own and vote our preferred shares in order to maintain our independence and/or continuity and/or identity. The members of the board of Stichting are: Michael J.C. van Galen (chairman)

Retired Managing Director, Breevast N.V.

Rinze Veenenga Kingma

President Archeus Consulting B.V.

Jan Klaassen

Emeritus Professor, Vrije Universiteit Amsterdam

On May 14, 2008, Stichting exercised its right to acquire preferred shares in the Company and acquired 21,985 preferred shares representing 21,985,000 votes, which constituted 29.9% of the total voting power of our outstanding capital stock as of May 14, 2008. Stichting paid €219,850, which constituted one-fourth of the nominal value of the preferred shares acquired, in accordance with the option agreement. This amount was paid by Stichting using an existing credit line. On May 14, 2009, the Annual Meeting of Shareholders resolved to cancel the outstanding preferred shares and to reissue an option to Stichting Continuïteit to acquire preferred shares. Except as described above regarding Stichting, we are unaware of any arrangement which we anticipate will result in a change in control of ASM International. All shares of our common stock (including shares held by major shareholders) entitle the holder to the same voting rights. Our preferred shares entitle the holder to 1,000 votes per share. Of our 63,095,986 outstanding common shares at March 15, 2013, 2,142,039 are registered with us in the Netherlands, 56,056,253 are registered with our transfer agent in the Netherlands, ABN AMRO Bank NV, and 4,897,694 are registered with our transfer agent in the United States, Citibank, N.A., New York. Our common shares registered with Citibank, N.A., New York are listed on the NASDAQ Global Select Market under the symbol “ASMI.” As of March 15, 2013 there were approximately 125 record holders of our common shares registered with Citibank. ASM’s Ordinary Shares are listed on NYSE Euronext in Amsterdam (symbol: ASM) and also trade on NASDAQ (symbol: ASM).

B. RELATED PARTY TRANSACTIONS For information regarding related party transactions, see Note 31 to our Consolidated Financial Statements, which is incorporated herein by reference.

C. INTEREST OF EXPERTS & COUNSEL Not applicable.

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ITEM 8

FINANCIAL INFORMATION A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION Consolidated financial statements See Item 18, “Financial Statements.”

Legal proceedings See Item 4.B., “Business Overview” and Note 22 to our Consolidated Financial Statements, which is incorporated herein by reference. See also Item 3.D, “Risk Factors – We are subject to various legal proceedings and claims, the outcomes of which are uncertain. If we fail to accurately evaluate the probability of loss or the amount of possible losses, an adverse outcome may materially and adversely affect our financial condition and results of operations.”

Dividend policy ASMI aims, as part of its financing policy, to pay a sustainable annual dividend. Annually the Supervisory Board, upon proposal of the Management Board, will assess the amount of dividend that will be proposed to the Annual General Meeting of Shareholders. The decision that a dividend be proposed to the Annual General Meeting of Shareholders will be subject to the availability of distributable profits as well as retained earnings and may be affected by our potential future funding requirements. Accordingly, dividend payments may fluctuate and could decline or be omitted in any year. In 2007, we paid an interim dividend of €0.10 per common share. We did not pay dividends in 2008, 2009, 2010 and in any year prior to 2007. In 2011, we paid a dividend of €0.40 per common share. In 2012, we paid a dividend of €0.50 per common share and we intend to propose to the forthcoming 2013 Annual General Meeting of Shareholders to declare a dividend of €0.50 per share and an extraordinary distribution of €4.25.

B. SIGNIFICANT CHANGES We in the past derived a significant portion of our net sales, earnings from operations and net earnings from the consolidation of the results of operations of ASM Pacific Technology in our results. ASM Pacific Technology is a Cayman Islands limited liability company that is based in Hong Kong and listed on the Hong Kong Stock Exchange. As of December 31, 2012, we owned 51.96% of ASM Pacific Technology through our wholly-owned subsidiary, ASM Pacific Holding BV and the remaining 48.04% was owned by the public. In March 2013, we sold a 12% stake so we now own 40.08% of ASM Pacific Technology. Accordingly from March 15, 2013, we are no longer able to consolidate ASM Pacific Technology’s results of operations in ours. Instead, our proportionate share of ASM Pacific Technology’s earnings will be reflected as a separate line-item called “share of results from investments” in our Consolidated Statements of Operations. We will no longer be able to consolidate the assets and liabilities of ASM Pacific Technology and will have to reflect the net investment in ASM Pacific Technology in the line-item “investments” in our Consolidated Balance Sheet. This event will have a significant negative effect on our consolidated earnings from operations, although our net earnings will be reduced only to the extent of the reduction of our ownership interest in ASM Pacific Technology.

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ITEM 9

THE OFFER AND LISTING A. OFFER AND LISTING DETAILS The following table sets forth, for the periods indicated, the high and low closing prices of our common shares as reported on the NASDAQ Global Select Market and the high and low closing prices as reported on Euronext Amsterdam:

Price Range of Common Shares   

 

NASDAQ CLOSING PRICES

EURONEXT CLOSING PRICES

HIGH

LOW

HIGH

LOW

2008

$32.66

$6.60

€20.96

€5.00

2009

25.75

6.30

17.80

4.92

2010

35.09

19.10

26.50

15.32

2011

44.60

22.23

31.68

16.01

2012

40.35

29.39

32.89

22.64

$41.64

$33.72

€30.66

€24.99

Annual Information

Quarterly Information 2011: First Quarter Second Quarter

44.60

35.84

31.68

25.02

Third Quarter

40.87

22.23

28.18

16.01

Fourth Quarter

30.94

22.67

22.76

16.78

$38.84

$29.39

€29.11

€22.64

2012: First Quarter Second Quarter

39.84

32.52

30.24

25.36

Third Quarter

40.35

33.37

32.89

26.11

Fourth Quarter

36.55

31.73

27.64

24.39

$37.54

$33.73

€28.72

€26.11

Monthly Information September 2012 October 2012

35.68

31.73

27.43

24.39

November 2012

35.00

31.86

27.10

24.97

December 2012

36.55

34.27

27.64

26.30

January 2013

40.19

36.87

29.74

28.01

February 2013

40.93

38.66

30.49

29.42

40.53

35.54

31.30

27.51

March 1, 2013 1

1)

Through March 15, 2013.

B. PLAN OF DISTRIBUTION Not applicable.

C. MARKETS Our common shares are listed on the NASDAQ Global Select Market under the symbol “ASMI” and listed on Euronext Amsterdam under the symbol “ASM.” See item 9.A. “Offer and listing Details”.

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D. SELLING SHAREHOLDERS Not applicable.

E. DILUTION Not applicable.

F. EXPENSES OF THE ISSUE Not applicable.

ITEM 10

ADDITIONAL INFORMATION A. SHARE CAPITAL Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION The information required by Item 10.B. is incorporated by reference to Exhibit 1.1 in our Form 20-F filed with the United States Securities and Exchange Commission on March 16, 2007 and the Form 6-K filed on April 30, 2007. Our current Articles of Association are filed hereto as Exhibit 1.1.

C. MATERIAL CONTRACTS As discussed in Item 4, ASMPT acquired the SEAS business from Siemens AG. In January 2011 nominal consideration was paid by ASMPT to Siemens for the business as well as certain loan and equity commitments were made by ASMPT to fund the ongoing acquired business. A copy of the acquisition agreement was filed as Exhibit 4.13 to our Form 20-F filed on March 26, 2011.

D. EXCHANGE CONTROLS There are no foreign exchange controls or other governmental laws, decrees or regulations in the Netherlands restricting the import or export of capital or affecting the remittance of dividends, interest or other payments to non-resident shareholders. Neither the laws of the Netherlands nor the Articles of Association of ASM International restrict remittances to non-resident shareholders or the right to hold or vote such securities.

E. TAXATION Summary of Dutch Tax Provisions Applicable to Nonresident Shareholders with a particular focus on U.S. Shareholders The statements below briefly summarize the current Dutch tax laws, based on the laws as in force at January 1, 2012. The description is limited to the tax implications for shareholders who neither are nor are deemed to be a resident of the Netherlands for purposes of the relevant tax codes. The description does not address special rules that may apply to holders of special classes of shares and should not be interpreted as extending by implication to matters not specifically referred to in this document. As to individual tax consequences, shareholders are advised to consult their own tax advisors.

Withholding Tax Dividends distributed by us generally are subject to a withholding tax imposed by the Netherlands at a rate of 15%. The expression “dividends distributed” includes, among other things:

››direct and indirect distributions in cash or in kind, deemed and constructive distributions and repayments of paid-in capital which is not recognized as such for Dutch dividend withholding tax purposes;

››liquidation proceeds, proceeds of redemption of ordinary shares or consideration for the repurchase of ordinary shares by us, or one of our subsidiaries, to the extent that such consideration exceeds the average paid-in capital which is recognized as such for Dutch dividend withholding tax purposes;

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››the par value of ordinary shares issued to a holder of ordinary shares or an increase in the par value of ordinary shares, as the case may be, to the extent that it does not appear that a contribution, which is recognized as such for Dutch dividend withholding tax purposes, has been made or will be made; and

››partial repayments of paid-in capital, which is recognized as such for Dutch dividend withholding tax purposes, to the extent there are net profits (zuivere winst). Exception to this rule may apply in case the general meeting of our shareholders has decided in advance to make such repayment and the par value of the ordinary shares concerned has been reduced by an amount equal to the repayment by way of an amendment to the articles of association. If a holder of ordinary shares resides in a country that signed a double taxation convention with the Netherlands and such convention is in effect, such holder of ordinary shares may, depending on the terms of that double taxation convention, be eligible for a full or partial exemption from, reduction or refund of Dutch dividend withholding tax. The Netherlands has concluded such a convention with the United States, among other countries.Under the Convention between the United States of America and the Kingdom of the Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “US Tax Treaty”) currently in effect, dividends we pay to a corporate holder of our common shares who is not, or is not deemed to be, a resident of the Netherlands for Dutch tax purposes but who is a resident of the United States as defined in the US Tax Treaty may be eligible for a reduction of the 15% Netherlands withholding tax. In the case of certain U.S. corporate shareholders owning at least 10% of ASM International voting power, the Netherlands withholding tax may be reduced to 5%, provided that such shareholder does not have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or permanent representative in the Netherlands to which the dividends are attributable. A full exemption of Netherlands withholding tax is applicable for a U.S. corporate shareholder owning at least 80% of voting power in the Company for a period of at least twelve months prior to the distribution, provided that this shareholder meets specific tests of the limitation of benefits clause of the US Tax Treaty. The US Tax Treaty provides for complete exemption from tax on dividends received by exempt pension trusts and exempt organizations, as defined therein. Except in the case of exempt organizations, the reduced dividend withholding rate can be applied at the source upon payment of the dividends, provided that the proper forms have been filed prior to the payment. Exempt organizations remain subject to the statutory withholding rate of 15% and are required to file an application for a refund of such withholding. A holder who is not, or is not deemed to be, a resident of the Netherlands may only claim the benefits of the US Tax Treaty if:

››the holder is a resident of the United States as defined therein; and ››the holder’s entitlement to such benefits is not limited by the provisions of Article 26 (“limitation on benefits”) of the US Tax Treaty. Under current Dutch law, in situations where we distribute dividends which we received ourselves (flow through dividends) from subsidiaries established in countries with which the Netherlands has concluded a tax treaty, we may be permitted under limited circumstances to deduct and retain from the withholding a portion of the amount that otherwise would be required to be remitted to the Dutch Tax Authorities. That portion generally may not exceed 3% of the total dividend distributed by us during the calendar year and the two preceding calendar years. If we retain a portion of the amount withheld from the dividends paid, the portion (which is not remitted to the tax authorities) might not be creditable against your domestic income tax or corporate income tax liability. We will endeavor to provide you with information concerning the extent to which we have applied the reduction described above to dividends paid to you and advise you to check the consequences thereof with your local tax advisor. A refund, reduction, exemption or credit of Dutch dividend withholding tax on the basis of Dutch tax law or on the basis of a tax treaty between the Netherlands and another state, will be granted only if the dividends are paid to the beneficial owner of the dividends. The Dutch Supreme Court has defined that a person is a beneficial owner if: (i) that person is the legal owner of the dividend coupons and (ii) is in the position to freely dispose of the dividends so received and (iii), not acting in the capacity of an agent or fiduciary for someone else. A receiver of a dividend is not considered to be the beneficial owner of a dividend in an event of “dividend stripping” in which he has paid a consideration related to the receipt of such dividend. In general terms, “dividend stripping” can be described as the situation in which a foreign or domestic person (usually, but not necessarily, the original shareholder) has transferred his shares or his entitlement to the dividend distributions to a party that has a more favorable right to a refund or reduction of Dutch dividend withholding tax than the foreign or domestic person. In these situations, the foreign or domestic person (usually the original shareholder), by transferring his shares or his entitlement to the dividend distributions, avoids Dutch dividend withholding tax while retaining his “beneficial” interest in the shares and the dividend distributions. This regime may also apply to the transfer of shares or the entitlement to dividend distributions as described above, if the avoidance of dividend withholding tax is not the main purpose of the transfer.

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Income Tax and Corporate Income Tax on Dividends A nonresident individual or corporate shareholder will not be subject to Dutch income tax with respect to dividends distributed by us or with respect to capital gains derived from the sale, disposal or deemed disposal of our common shares, provided that:

››such holder is neither resident nor deemed to be resident in the Netherlands nor has made an election for the application of the rules of the Dutch 2001 Income Tax Act as they apply to residents of the Netherlands;

››such holder does not have, and is not deemed to have, an enterprise or an interest in an enterprise which is, in whole or in part, carried on through a permanent establishment, a deemed permanent establishment, or a permanent representative in the Netherlands and to which enterprise or part of an enterprise the shares are attributable with the primary aim to avoid levying Dutch income tax or dividend withholding tax for others, nor does such holder carry out any other activities in the Netherlands that exceed regular asset management;

››such holder does not have a profit share in, or any other entitlement to the assets or income of an enterprise, other than by way of securities, which enterprise is effectively managed in the Netherlands and to which enterprise the shares are attributable;

››such holder does not carry out and has not carried out employment activities with which the holding of the shares is connected directly or indirectly; and

››such holder, individuals relating to such holder and some of their relations by blood or marriage in the direct line (including foster children) do not have a substantial interest or deemed substantial interest in us, or, if such holder has a substantial interest or a deemed substantial interest in us, it forms part of the assets of an enterprise. Generally, a nonresident holder will have a substantial interest if he, his partner, certain other relatives (including foster children) or certain persons sharing his household, alone or together, directly or indirectly:

››hold shares representing 5% or more of our total issued and outstanding capital (or the issued and outstanding capital of any class of our shares),

››hold or have rights to acquire shares (including the right to convert notes or stock options into shares), whether or not already issued, that at any time (and from time to time) represent 5% or more of our total issued and outstanding capital (or the issued and outstanding capital of any class of our shares); or

››hold or own certain profit-participating rights that relate to 5% or more of our annual profit and/or to 5% or more of our liquidation proceeds. The same criteria apply to a nonresident entity, save for the extension to partners, certain other relatives, and certain persons sharing the holder’s household.

Gift and Inheritance Tax In principle, liability for Dutch gift tax or inheritance tax arises in respect of any gifts of common shares by or inheritance of common shares from any person who resides in the Netherlands at the time of the gift or death. A gift or inheritance of common shares from a nonresident shareholder will not be subject to Dutch gift and inheritance tax, provided that:

››the nonresident shareholder does not have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands to which or to whom the common shares are attributable;

››the nonresident shareholder is not entitled to a share in the profits of an enterprise that is effectively managed in the Netherlands other than by way of securities or through an employment contract, the common shares being attributable to that enterprise; and

››the nonresident shareholder makes a gift of shares and does not die within 180 days after the date of the gift, while being resident or deemed to be resident in the Netherlands at the time of his death. For the purposes of Dutch gift and inheritance tax, a Dutch national is deemed to be a resident of the Netherlands if he resided in that country at any time during a period of ten years preceding the date of the gift or death, as the case may be. In addition, for the purposes of Dutch gift tax, a person not possessing Dutch nationality is also deemed to be a Dutch resident, irrespective of his nationality, if he was a Dutch resident at any time during a period of twelve months preceding the time at which the gift was made. The Netherlands has concluded a treaty with the United States, based on which double taxation on inheritances may be avoided if the inheritance is subject to Netherlands and/or U.S. inheritance tax and the deceased was a resident of either the Netherlands or the United States.

United States Federal Income Taxation The following is a general description of select U.S. federal income tax consequences of the ownership and disposition of our common shares by a U.S. Holder (as defined below). This summary only applies to “U.S. Holders” (as defined below) that hold their shares as capital assets. This discussion does not purport to be a comprehensive description of all U.S. federal income taxation considerations that may be

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relevant to holders of shares in view of their particular circumstances, and does not deal with holders subject to special rules, such as, but not limited to, the alternative minimum tax provisions of the Internal Revenue Code of 1986 (“Internal Revenue Code”) or the Internal Revenue Code’s provisions applicable to dealers in securities or foreign currencies, traders in securities that elect to use a mark-to-market method of accounting, certain financial institutions, tax-exempt organizations, tax-qualified employer plans and other tax-qualified accounts, insurance companies, persons that actually or constructively own 10% or more of our voting stock, persons holding common shares as part of a straddle, hedging, conversion or constructive sale transaction or holders of common shares whose “functional currency” is not the US dollar. This discussion does not address U.S. state and local or any other non-U.S. federal income tax consequences of the ownership and disposition of our common shares by a U.S. Holder. This discussion is based on the Internal Revenue Code, as amended to the date hereof, final, temporary and proposed U.S. Treasury Department regulations promulgated thereunder, and administrative and judicial interpretations thereof, any or all of which could be changed subsequent to the date of this summary, possibly with retroactive effect. Any such change could affect the tax consequences described in this summary. We will not update this summary to reflect any such changes after the date of this annual report. In addition, there can be no assurance that the Internal Revenue Service will not challenge any tax treatment that is based upon or consistent with any discussion of tax consequences described in this summary, and we have not obtained, nor do we intend to obtain, a ruling from the Internal Revenue Service or an opinion of counsel with respect to the U.S. federal income tax consequences of acquiring or holding common shares. Prospective holders of shares should consult their own tax advisors as to the application of the U.S. federal income tax laws to their particular situation, as well as to any tax consequences that may arise under the U.S. federal estate or gift tax laws or under any state, local or foreign tax laws with respect to the ownership and disposition of our common shares. The U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local provisions. The following discussion is a summary of the tax rules applicable to U.S. Holders of common shares and does not consider any U.S. federal income tax consequences to non-U.S. Holders. As used in this summary, “U.S. Holder” means a beneficial owner of common shares that is (i) an individual citizen or resident alien of the United States (as defined for U.S. federal income tax purposes), (ii) a corporation (or any other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any State, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if either (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) a valid election is in place to treat the trust as a U.S. person. A “non-U.S. Holder” is a beneficial owner of common shares that is not a U.S. Holder as so defined herein. If a partnership (or other entity treated as a partnership for US federal income tax purposes) holds common shares, the tax treatment of a partner in that partnership generally will depend upon the status and tax residency of the partner and the activities of the partnership. Partners in a partnership that holds common shares are urged to consult their own tax advisor regarding the specific tax consequences of the owning and disposing of such common shares by the partnership.

Taxation of Dispositions A U.S. Holder will recognize gain or loss for U.S. federal income tax purposes upon a taxable sale or other disposition of common shares. The amount of such gain or loss will equal the difference between the amount realized by the U.S. Holder and the U.S. Holder’s adjusted tax basis in the common shares. For these purposes, a U.S. Holder’s adjusted tax basis in the common shares generally will equal the US dollar cost of the common shares to the U.S. Holder. Subject to the passive foreign investment company rules described below, gain or loss realized by a U.S. Holder on a sale or other disposition of common shares generally will be treated as capital gain or loss, and will be longterm capital gain or loss if the common shares were held for more than one year as of the date of the sale or other disposition. Except in certain circumstances, any such gain generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Net long-term capital gain recognized by a U.S. Holder who is an individual generally is subject to reduced rates of taxation. The deduction of capital losses is subject to certain limitations. Prospective investors should consult their own tax advisors in this regard. If we repurchase our common shares, the repurchase may qualify to be treated as a sale or exchange of the common shares subject to the rules discussed above. However, under certain circumstances as provided in Section 302 of the Internal Revenue Code, the repurchase may be treated fully or partially as a dividend taxable as described below under “Taxation of Distributions.” U.S. Holders should consult their own tax advisors concerning the U.S. federal income tax consequences of our repurchase of their common shares.

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Taxation of Distributions Subject to the anti-deferral tax rules described below, the gross amount (before reduction for Netherlands withholding taxes) of any distribution actually or constructively paid with respect to common shares will be included in the gross income of the U.S. Holder as foreign source dividend income to the extent the distributions are paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution. To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits, the distribution will first be treated as a tax-free return of capital to the extent of the U.S. Holder’s adjusted tax basis in the common shares (thereby increasing the amount of gain or decreasing the amount of loss to be recognized on the subsequent disposition of the common shares), and to the extent that such distribution exceeds the U.S. Holder’s adjusted tax basis in the common shares such excess will be taxed as capital gain. We do not maintain calculations of our earnings and profits under U.S. federal income tax principles, and therefore it may not be possible to determine whether or to what extent a distribution should be treated as a dividend for U.S. federal income tax purposes. Distributions treated as dividends generally will not be eligible for the dividends received deduction allowed to corporations under the Internal Revenue Code. The availability of this deduction is subject to several complex limitations which are beyond the scope of this summary. If a U.S. Holder receives a dividend in euros, the amount of the dividend for U.S. federal income tax purposes should be the US dollar value of the dividend, determined at the spot rate in effect on the date of such payment, regardless of whether the payment is later converted into US dollars. In the case of such later conversion, the U.S. Holder may recognize U.S. source ordinary income or loss as a result of currency fluctuations between the date on which the dividend is paid and the date the dividend amount is converted to US dollars. Dividends received by a U.S. Holder generally will be taxed at ordinary income rates. However, certain dividends received by individuals through taxable years beginning on or before December 31, 2012, may qualify to be taxed at capital gain rates (15% or less), provided (i) the recipient has held the underlying stock for more than 60 days during the 121 day period beginning 60 days before the ex-dividend date and (ii) the dividends are received from a “qualified foreign corporation.” A non-U.S. corporation (other than a non-U.S. corporation treated as a passive foreign investment company in the taxable year in which the dividend is paid, or the preceding taxable year) generally will be considered to be a “qualified foreign corporation” if (i) the shares of the non-U.S. corporation are readily tradable on an established securities market in the United States or (ii) the non-U.S. corporation is eligible with respect to substantially all of its income for the benefits of a comprehensive income tax treaty with the United States which contains an exchange of information program. We believe that we are, and will continue to be, a “qualified foreign corporation.” Individual U.S. Holders should consult their tax advisors regarding the impact of distributions paid with respect to their common shares in light of their particular situations.

Foreign Tax Credit Dividends distributed by us generally are subject to a withholding tax imposed by the Netherlands at a rate of 15% (see “Summary of Dutch Tax Provisions Applicable to Nonresident Shareholders with a particular focus on U.S. Shareholders – Withholding Tax”). Subject to certain conditions and limitations set forth in the Internal Revenue Code, foreign withholding tax paid with respect to dividends on common shares generally will be eligible for credit against a U.S. Holder’s U.S. federal income tax liability. Alternatively, a U.S. Holder may claim a deduction for the amount of foreign withholding taxes, but only for a year for which the U.S. Holder elects to do so with respect to all foreign income taxes. Under current Dutch law, we may be permitted, under limited circumstances, to retain a portion of Netherlands taxes we withhold from dividends paid to our shareholders, rather than pay that portion of the withheld taxes to the taxing authorities in the Netherlands (see “Summary of Dutch Tax Provisions Applicable to Nonresident Shareholders with a particular focus on U.S. Shareholders – Withholding Tax”). This amount generally may not exceed 3% of the total dividend distributed by us during the calendar year and the two preceding calendar years. If we retain a portion of the Netherlands withholding taxes, the retained amount in all likelihood will not qualify as a creditable tax for U.S. federal income tax purposes. We will endeavor to provide U.S. Holders with information concerning the extent to which we retain any Netherlands taxes on dividends paid to U.S. Holders. There are two principal classes (passive and general) of income for purposes of calculating foreign tax credit limitations. Dividends will generally constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” Except in certain circumstances, gain from a sale, exchange or other disposition of our common shares by a U.S. Holder will be treated as U.S. source income for foreign tax credit purposes. The rules relating to the determination of the U.S. foreign tax credit are complex and contain certain other limitations. U.S. Holders should consult their own tax advisors with respect to the availability of a foreign tax credit or deduction for foreign, including Netherlands, taxes withheld.

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Anti-Deferral Tax Rules The Internal Revenue Code contains various provisions that impose current U.S. federal income tax on the U.S. shareholders of certain foreign corporations if such corporations derive certain types of passive income and fail to make adequate distribution of profits to their U.S. shareholders. These provisions include the controlled foreign corporation(“CFC”) rules. Other provisions of the Internal Revenue Code impose potentially adverse tax consequences on the U.S. shareholders of a non-U.S. corporation that qualifies as a “passive foreign investment company” (“PFIC). While we do not believe that we should be classified as either a CFC or a PFIC, we are not certain that we can avoid these tax rules because we cannot predict with any degree of certainty the amount and character of our future income or the amount of our common shares any particular U.S. Holder will own. Accordingly, we will only briefly summarize those provisions and then only the rules that we believe may have the greatest likelihood of applying to us in the future.

Passive Foreign Investment Company. As a foreign corporation with U.S. Holders, we could potentially be treated as a “passive foreign investment company” (“PFIC”) as defined in the Internal Revenue Code. The PFIC provisions of the Internal Revenue Code can have significant adverse tax effects on U.S. Holders. In general, a foreign corporation will be a PFIC in a particular tax year and for all succeeding tax years if:

››75% or more of its gross income (including the foreign corporation’s pro rata share of the gross income of any U.S. or foreign company in which the corporation owns or is considered to own 25% or more of the shares by value) in a taxable year is passive income (which generally includes interest, dividends and certain rents and royalties); or

››at least 50% of the average value of the corporation’s gross assets in a taxable year (average determined as of the end of each quarter of the corporation’s taxable year and ordinarily determined based on gross fair market value, including the proportionate share of the assets of any U.S. or foreign company in which the corporation owns or is considered to own 25% or more of the shares by value) produce, or are held for the production of, passive income. Certain rules apply with respect to U.S. Holders who acquire shares of a foreign corporation that previously qualified as a PFIC (i.e., prior to the date that the U.S. Holder acquired the shares) but no longer qualifies as a PFIC as of the date the U.S. Holder acquires such shares. In addition, where a U.S. Holder acquires shares of a PFIC, it may be possible to file an election to “purge” the PFIC taint where certain other requirements are met. If we were a PFIC for a taxable year during which a U.S. Holder owned our shares, then a U.S. Holder would likely incur increased tax liabilities (possibly including an interest charge) upon the sale or other disposition of our common shares or upon receipt of “excess distributions”. In such case, gain recognized by a U.S. Holder on a sale or other disposition of our common shares would be allocated ratably over the U.S. Holder’s holding period for the common shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest marginal income tax rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on the amount allocated to that taxable year. Further, the rules provide essentially that any distribution in excess of 125 percent of the average of the annual distributions on common shares received by the U.S. Holder during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, would be subject to taxation as described above. Although certain elections may be available (including a qualified electing fund election and a mark to market election) to U.S. Holders that might mitigate the adverse consequences resulting from PFIC status, in the event we are determined to be a PFIC in the current or a future taxable year we do not anticipate providing U.S. Holders with the information necessary to support a qualified electing fund election. In addition, if we are treated as a PFIC in a taxable year in which we pay a dividend, or in the preceding taxable year, the 15% capital gain rate (discussed above) currently applicable in the U.S. with respect to certain dividends paid to U.S. Holders on or before to December 31, 2012 would not apply. We believe that we are not a PFIC, and we do not expect to become a PFIC. However, we cannot assure that we will not qualify as a PFIC in the current year or in the future. You may be required in some cases to report ownership of our shares on Internal Revenue Service Form 8938. In addition, if you own our shares during any year that we are a PFIC, you may be required to file Internal Revenue Service Form 8621. The PFIC rules are very complex and U.S. Holders should consult their own tax advisors on this issue.

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Controlled Foreign Corporation Rules If more than 50% of the voting power or total value of all classes of our common shares is owned, directly or indirectly, by U.S. Holders, each of which owns 10% or more of the total combined voting power of all classes of our common shares, we could be treated as a controlled foreign corporation (“CFC”) under Subpart F of the Internal Revenue Code. This classification would result in many complex consequences, including the required inclusion into income by such 10% or greater shareholders of their pro rata shares of our “Subpart F Income,” as defined in the Internal Revenue Code. In addition, under Section 1248 of the Internal Revenue Code, gain from the sale or exchange of common shares by any U.S. Holder who is or was a 10% or greater U.S. shareholder at any time during the five-year period ending with the sale or exchange will be dividend income to the extent of our earnings and profits attributable to the common shares sold or exchanged and accumulated during the periods that we were a CFC. Under certain circumstances, a U.S. Holder that directly owns 10% or more of our voting common shares and is a corporation may be entitled to an indirect foreign tax credit for a portion of the amounts characterized as dividends under Section 1248 of the Internal Revenue Code. We believe that we are not a CFC and we will not become a CFC, however, we cannot assure you that we will not become a CFC in the future.

United States Backup Withholding Tax and Information Reporting Under certain circumstances, a U.S. Holder may be subject to information reporting and backup withholding with respect to certain payments made in respect of the common shares and the proceeds received on the disposition of the common shares paid within the U.S. (and in certain cases, outside the U.S.). Such amounts may be subject to a 28% U.S. backup withholding tax unless the U.S. Holder otherwise establishes an exemption. For example, backup withholding generally will not apply to a U.S. Holder who (1) is a corporation or qualifies under certain other exempt categories and, when required, demonstrates that fact, or (2) furnishes a correct taxpayer identification number and makes certain other required certifications as provided by the backup withholding rules. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle a U.S. Holder to a refund, provided that the required information is furnished to the Internal Revenue Service. The discussion set forth above is included for general information only and may not be applicable depending upon a holder’s particular situation. Holders should consult their tax advisors with respect to the tax consequences of the purchase, ownership and disposition of common shares including the tax consequences under state, local and other laws and the possible effects of changes in United States federal and other tax laws.

F. DIVIDENDS AND PAYING AGENTS Not Applicable.

G. STATEMENT BY EXPERTS Not Applicable.

H. DOCUMENTS ON DISPLAY We are subject to certain reporting requirements of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”). As a “foreign private issuer,” we are exempt from the rules under the Exchange Act prescribing certain disclosure and procedural requirements for proxy solicitations, and our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act, with respect to their purchases and sales of shares. In addition, we are not required to file reports and financial statements with the Commission as frequently or as promptly as companies that are not foreign private issuers whose securities are registered under the Exchange Act. However, we are required to file with the Commission, within four months after the end of each fiscal year, an annual report on Form 20-F containing financial statements audited by an independent accounting firm and interactive data comprising financial statements in extensible business reporting language which, with respect to our annual report on Form 20-F for the year ended December 31, 2012. We publish unaudited interim financial information after the end of each quarter. We furnish this quarterly financial information to the Commission under cover of a Form 6-K. Documents we file with the Commission are publicly available at its public reference facilities at 100 F Street, N.E., Washington, DC 20549. Copies of the documents are available at prescribed rates by writing to the Public Reference Section of the Commission at 100 F Fifth Street, NE, Washington DC 20549. The Commission also maintains a website that contains reports and other information regarding

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registrants that are required to file electronically with the Commission. The address of this website is http://www.sec.gov. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

I. SUBSIDIARY INFORMATION See Item 4.C. “Organizational Structure”.

ITEM 11

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks (including foreign exchange rate risk and interest rate risk), credit risk and liquidity risk. We use forward exchange contracts to hedge foreign exchange risk. We do not enter into financial instrument transactions for trading or speculative purposes.

Foreign exchange rate risk management We conduct business in a number of foreign countries, with certain transactions denominated in currencies other than the functional currency of ASM International (euro) or one of our subsidiaries conducting the business. The purpose of the Company’s foreign currency management is to manage the effect of exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in selected foreign currencies, in particular denominated in US dollars. We use forward exchange contracts to hedge its foreign exchange risk of anticipated sales or purchase transactions in the normal course of business, which occur within the next twelve months, for which it has a firm commitment from a customer or to a supplier. The terms of these contracts are consistent with the timing of the transactions being hedged. The hedges related to forecasted transactions are designated and documented at the inception of the hedge as cash flow hedges, and are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income in Shareholders’ Equity, and is reclassified into earnings when the hedged transaction affects earnings. The majority of revenues and costs of our Front-end segment are denominated in Singapore dollars and US dollars. Since foreign currency exposure is not significant, no forward exchange contracts are used. The effect of exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in foreign currencies is periodically reviewed. The majority of revenues and costs of our Back-end segment are denominated in Hong Kong dollars, Chinese Yuan and US dollars. The functional currency of our Back-end segment (Hong Kong dollar) is linked to the US dollar. The effect of exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in foreign currencies is periodically reviewed. Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in earnings. We record all derivatives, including forward exchange contracts, on the balance sheet at fair value in other current assets or accrued expenses. No unrealized gains were included in accumulated other comprehensive income as of December 31, 2012. Hedge ineffectiveness was insignificant for the years ended December 31, 2012 and December 31, 2011. Furthermore, we might manage the currency exposure of certain receivables and payables using derivative instruments, such as forward exchange contracts (fair value hedges) and currency swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains or losses on these instruments provide an offset to the gains or losses recorded on receivables and payables denominated in foreign currencies. The derivative instruments are recorded at fair value and changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the Consolidated Statement of Operations. Receivables and payables denominated in foreign currencies are recorded at the exchange rate at the balance sheet date and gains and losses as a result of changes in exchange rates are recorded in earnings under foreign currency exchange gains (losses) in the Consolidated Statement of Operations.

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We do not use forward exchange contracts for trading or speculative purposes. To the extent that foreign currency fluctuations affect the value of our investments in our foreign affiliates, they are not hedged. The cumulative effect of these fluctuations is separately reported in Consolidated Shareholders’ Equity. For the year ended December 31, 2011, we recorded a favorable movement of €13.4 million. For the year ended December 31, 2012, we recorded a unfavorable movement of €6.6 million. See Note 19 to our Consolidated Financial Statements, which is incorporated herein by reference. The following table summarizes our financial instruments as of December 31, 2012 and analyzes the sensitivity of the fair value of our financial instruments to an immediate change in foreign currency rates. Fair values represent the present value of forecasted future cash flows at market foreign currency exchange rates. The sensitivity analysis assumes an immediate 10% favorable or unfavorable change in all foreign currency exchange rates against the euro from their levels as of December 31 with all other variables kept constant. A favorable 10% change indicates a strengthening of the currency in which our financial instruments are denominated, primarily the US dollar, against the euro and an unfavorable change indicates a weakening of the currency in which our financial instruments are denominated, primarily the US dollar, against the euro. The selection of 10% favorable or unfavorable change in foreign currency exchange rates should not be construed as a prediction by us of future market events, but rather, to illustrate the potential impact of such an event. The modeling technique used to calculate the exposure does not take into account correlation among foreign currency exchange rates, or correlation among various markets (i.e., the foreign exchange, equity and fixed-income markets). Even though we believe it to be possible that all of the foreign currency exchange rates to which we are exposed would simultaneously change by more than 10%, we find it meaningful to “stress test” our exposure under this 10% fluctuation scenario and other hypothetical adverse market scenarios. Our actual experience may differ from the results in the table below due to the correlation assumptions utilized, or if events occur that were not included in the methodology, such as significant liquidity or market events. SENSITIVITY ANALYSIS

FX MANAGEMENT (in million)

CURRENCY AND NOTIONAL AMOUNT

CARRYING AMOUNT

FAIR  VALUE

FAVORABLE FX CHANGE OF 10%

UNFAVORABLE FX CHANGE OF 10%

As of December 31, 2012: Notes payable to banks, due within twelve months

HK$

630.7

61.7

61.7

55.5

67.8

HK$

193.8

18.9

18.9

17.1

20.8

US$

27.1

0.1

0.1

0.1

0.2

Long-term debt with maturities: due November 29, 2015 Foreign exchange contracts: sale of currency contracts to be settled within twelve months:

For long-term debt, the estimated fair values of our long-term debt are based on current interest rates available to us for debt instruments with similar terms and remaining maturities. The fair values of our convertible subordinated debt borrowings are based on our estimates. For forward exchange contracts, market values based on external quotes from banks have been used to determine the fair value. The following tables analyze our sensitivity to a hypothetical 10% strengthening and 10% weakening of the US dollar, Singapore dollar, Hong Kong dollar or Japanese yen against the euro as of December 31, 2012. This analysis includes foreign currency denominated monetary items and adjusts their translation at year end for a 10% increase and 10% decrease of the US dollar, Singapore dollar, Hong Kong dollar or Japanese yen against the euro. A positive amount indicates an increase in equity. Recognized in equity is the revaluation effect of subsidiaries denominated in US dollars, Singapore dollars, Hong Kong dollars and Japanese yen.

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ITEM 11 | PART I | form 20-f

 

IMPACT ON EQUITY DECEMBER 31, 2011

DECEMBER 31, 2012

10% increase of US dollar versus euro

3,656

4,564

10% decrease of US dollar versus euro

(3,656)

(4,564)

10% increase of Singapore dollar versus euro

5,028

5,868

10% decrease of Singapore dollar versus euro

(5,028)

(5,868)

 

10% increase of Hong Kong dollar versus euro

66,702

56,693

10% decrease of Hong Kong dollar versus euro

(66,702)

(56,693)

10% increase of Japanese yen versus euro

4,908

5,294

10% decrease of Japanese yen versus euro

(4,908)

(5,294)

A hypothetical 10% strengthening or 10% weakening of any currency other than the US dollar, Singapore dollar, Hong Kong dollar or Japanese yen against the euro as of December 31, 2011 and December 31, 2012 would not result in a material impact on equity. The following table analyzes our sensitivity to a hypothetical 10% strengthening and 10% weakening of the US dollar, Hong Kong dollar and Japanese Yen against the euro at average exchange rates for the years 2011 and 2012. A positive amount indicates an increase in net earnings.  

  10% increase of Japanese yen versus euro 10% decrease of Japanese yen versus euro 10% increase of US dollar versus euro 10% decrease of US dollar versus euro

IMPACT ON NET EARNINGS DECEMBER 31, 2011

DECEMBER 31, 2012

(519)

923

519

(923)

1,887

915

(1,887)

(915)

10% increase of Hong Kong dollar versus euro

14,392

3,630

10% decrease of Hong Kong dollar versus euro

(14,392)

(3,630)

A hypothetical 10% strengthening or 10% weakening of any currency other than the US dollar, Hong Kong dollar and Japanese Yen against the euro at average exchange rates for the years 2011 and 2012 would not result in a material impact on net earnings.

Interest risk We are exposed to interest rate risk primarily through our borrowing activities. The Company does not enter into financial instrument transactions for trading or speculative purposes or to manage interest rate exposure. At December 31, 2012 the Company had €18,948 in long-term debt at fixed interest rates and €61,675 in other borrowings with variable short-term interest rates. A hypothetical change in the average interest rate by 10% on the portion of the Company’s debt bearing interest at variable rates would not result in a material change in interest expense at December 31, 2011 and December 31, 2012 borrowing levels.

Credit risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and derivative instruments. These instruments contain a risk of counterparties failing to discharge their obligations. We monitor credit risk and manage credit risk exposure by type of financial instrument by assessing the creditworthiness of counterparties. Our customers are semiconductor device manufacturers located throughout the world. We generally do not require collateral or other security to support financial instruments with credit risk.

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Concentrations of credit risk (whether on or off-balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. A significant percentage of our revenue is derived from a small number of large customers. Our largest customer accounted for approximately 8.8% of net sales in 2012 (2011: 6.4%; 2010: 5.2%) and the ten largest customers accounted for approximately 31.6% of net sales in 2011 (2011: 27.9%; 2010: 27.9%). Sales to these large customers also may fluctuate significantly from time to time depending on the timing and level of purchases by these customers. Significant orders from such customers may expose us to a concentration of credit risk and difficulties in collecting amounts due, which could harm our financial results. At December 31, 2012 one customer accounted for 6.5% of the outstanding balance in accounts receivable (2011: 4.5%; 2010: 6.0%). We place our cash and cash equivalent and derivative instruments with high quality financial institutions to limit the amount of credit risk exposure. The maximum credit exposure is equal to the carrying values of cash and cash equivalent and accounts receivable.

ITEM 12

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES not applicable.

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PART II ITEM 13

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES none.

ITEM 14

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS not applicable.

ITEM 15

CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures: Our CEO and CFO, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 20-F, have concluded that as of December 31, 2012 our disclosure controls and procedures were effective. (b) Management’s Annual Report on Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with applicable generally accepted accounting principles. Internal control over financial reporting includes policies and procedures for maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Management, including our CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2012. Deloitte Accountants BV, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this annual report on Form 20-F and, as part of the audit, has issued an attestation report, included herein, on ASMI’s internal control over financial reporting. (c) Attestation Report of the Registered Public Accounting Firm: The attestation report of Deloitte Accountants BV is included in this annual report on Form 20-F and is incorporated by reference herein. (d) Changes in Internal Control Over Financial Reporting: There were no changes to our internal control over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 16 | PART II | form 20-f

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS All internal control systems no matter how well designed and implemented have inherent limitations. Even systems determined to be effective may not prevent or detect misstatements or fraud and can only provide reasonable assurance with respect to disclosure and financial statement presentation and reporting. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changed conditions and the degree of compliance with the policies or procedures may deteriorate.

ITEM 16 A. AUDIT COMMITTEE FINANCIAL EXPERT The Supervisory Board has determined that Mr Lobbezoo, an independent member of the Supervisory Board, qualifies as an Audit Committee Financial Expert. For Mr Lobbezoo’s experience see Item 6 “Directors, Senior Management and Employees”.

B. CODE OF ETHICS Our code of ethics applies to all of our employees worldwide, as well as our Supervisory Board and Management Board. The code of ethics is designed to promote honest and ethical conduct and timely and accurate disclosure in our periodic financial reports. For further information, see the Code of Ethics and other related policies including our Rules Concerning Insider Trading, which are posted on our website (www.asm.com).

C. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit fees Deloitte Accountants BV (“Deloitte”), has served as our independent registered public accounting firm for each of the three financial years up to December 31, 2012. The following table sets out the aggregate fees for professional audit services and other services rendered by Deloitte Accountants BV and its member firms and/or affiliates in 2011 and 2012:  

  Audit fees Audit-related fees

EUR THOUSANDS

AS A % OF TOTAL FEES

2011

2012

2011

2012

1,345

1,195

77%

77%

193

115

11%

7%

Tax fees

218

241

12%

16%

TOTAL

1,756

1,551

100%

100%

Audit Committee pre-approval policies The Audit Committee has determined that the provision of services by Deloitte described in the preceding paragraphs is compatible with maintaining Deloitte’s independence. All audit and permitted non-audit services provided by Deloitte during 2012 were pre-approved by the Audit Committee. The Audit Committee has adopted the following policies and procedures for pre-approval of all audit and permitted non-audit services provided by our independent registered public accounting firm:

Audit Services Management submits to the Audit Committee for pre-approval the scope and estimated fees for specific services directly related to performing the independent audit of our Consolidated Financial Statements for the current year.

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Audit-Related Services The Audit Committee may pre-approve expenditures up to a specified amount for services included in identified service categories that are related extensions of audit services and are logically performed by the auditors. Additional services exceeding the specified pre-approved limits require specific Audit Committee approval.

Tax Services The Audit Committee may pre-approve expenditures up to a specified amount per engagement and in total for identified services related to tax matters. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific Audit Committee approval.

Other Services In the case of specified services for which utilizing our independent registered public accounting firm creates efficiencies, minimizes disruption, or preserves confidentiality, or for which management has determined that our independent registered public accounting firm possesses unique or superior qualifications to provide such services, the Audit Committee may pre-approve expenditures up to a specified amount per engagement and in total. Additional services exceeding the specified pre-approved limits, or involving service types not included in the pre-approved list, require specific Audit Committee approval.

D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not applicable.

E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS On May 15, 2012, the General Meeting of Shareholders authorized, for an 18-month period, to be calculated from the date of the General Meeting to cause the Company to repurchase its own shares up to a maximum of 10% of the number of common shares issued, at a price at least equal to the shares’ nominal value and at most a price equal to 110% of the share’s average closing price according to the listing on the NYSE Euronext Amsterdam stock exchange during the five trading days preceding the acquisition date. 1,500,000 shares were repurchased during 2012 under the authorization of May 15, 2012. These treasury shares were used for a part of the conversion of the subordinated debt as per November 27, 2012. The maximum number of shares that may yet be purchased under the authorization takes into account any treasury shares held by the Company (at December 31, 2012 there are no treasury shares held by the Company) and the maximum number of common shares which the Company can hold is 10% of the number of common shares issued. Of our treasury shares, 2,552,071 shares were held for our account by Lehman Brothers International (Europe) (“Lehman”), which was placed into administration on September 15, 2008. These shares were cancelled in 2009 by resolution of the 2009 Annual General Meeting of Shareholders. During 2008, we engaged Lehman to repurchase ordinary ASMI shares on the Euronext and Nasdaq markets. As of September 15, 2008, Lehman had purchased and held 2,552,071 shares for our account. Lehman went into bankruptcy administration on September 15, 2008, and we subsequently filed a submission giving notice of our proprietary interest in the shares believed to be held in custody by Lehman. At our May 2009 AGM, our shareholders resolved to cancel all of these treasury shares and we so notified Lehman of the cancellation. However we were notified in September 2010 by the Lehman administrators that there is a possible shortfall in the number of shares held by Lehman as reflected in the statements of our accounts with Lehman. To the extent the number of treasury shares held by Lehman as of the date of their cancellation is lower than 2,552,071 only such lower number of shares have been cancelled and the shortfall of shares may still be considered outstanding. The Lehman administrators report that some time prior to its bankruptcy, Lehman put into a segregated client omnibus account a cash sum on our behalf of $6,758,796, which the administrators apparently regard as money to which we have a proprietary right in lieu of some or all of the missing shares. We are uncertain at this time as to the accuracy of the shortfall of shares, the sufficiency of this cash sum to cover the value of any such discrepancy, and our entitlement to all or a portion of such sum when distributions are determined and made since there is likely to also be a shortfall in Lehman assets subject to proprietary rights. Given the magnitude of the overall Lehman administration, the timeline for clarity and resolution of this item is expected to be considerable, perhaps up to several years. For additional information, see Note 19 to the Consolidated financial statements.

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F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Not applicable.

G. CORPORATE GOVERNANCE Because we are a Netherlands public limited liability company, with principal executive offices outside of the U.S., some of our corporate practices vary from those required by the NASDAQ Listing Rules. Nasdaq Listing Rule 5615(3) permits a foreign private issuer to follow its home country practice in lieu of the corporate governance requirements of the Rule 5600 Series of the Nasdaq Listing Rules, with certain exceptions. Set forth below are descriptions of the home country practices that we follow in lieu of various Nasdaq Listing Rules:

(i) Listing Rule 5620(c): Quorum Nasdaq Listing Rule 5620(c) requires an issuer to provide in its bylaws for a quorum for any meeting of the holders of common stock, and that such quorum may not be less than one-third of the outstanding common voting stock. It is the generally accepted business practice for Dutch companies not to provide for a quorum requirement in their articles, and there is no contrary requirement in the Dutch securities laws or under the rules of NYSE Euronext Amsterdam. Accordingly, our Articles of Association do not provide for a quorum other than for resolutions in relation to the limitation of pre-emptive rights of existing shareholders and the cancellation of outstanding shares, which quorum requirements correspond with mandatory Dutch law. Furthermore, pursuant to Dutch corporate law (section 2:120 sub 2 Dutch Civil Code) the validity of a resolution by the general meeting of shareholders does not depend on the proportion of the capital or shareholders represented at the meeting (i.e. quorum), unless the law or articles of association of a company otherwise provide. Accordingly, our Articles of Association provide that a resolution of the general or any extraordinary meeting of shareholders will be adopted upon the favorable vote of a majority of the votes cast at the meeting. In addition, our Articles of Association provide that in the case of a shareholder appointment of persons to, or dismissal of persons from, our Supervisory Board and Management Board not proposed by our Supervisory Board, such resolution requires the affirmative vote of a majority of the votes cast at an annual or extraordinary shareholders meeting, which affirmative votes represent at least one third of our issued capital. To this extent, our practice varies from the requirement of Listing Rule 5620(c).

(ii) Listing Rule 5620(b): Proxies Nasdaq Listing Rule 5620(b) requires that an issuer shall solicit proxies and provide proxy statements for all meetings of shareholders. The solicitation of proxies and the distribution of proxy statements for meetings of shareholders are not required under Dutch law or by the rules of NYSE Euronext Amsterdam, and it is business practice for Dutch companies not to solicit proxies or distribute proxy statements in respect of European shareholders. Therefor, our practice in respect of the holders of shares other than our common shares listed on the NASDAQ Global Select Market varies from that required by Listing Rule 5620(b). As to our common shares listed on the NASDAQ Global Select Market, which we refer to as New York registry shares, we prepare a proxy statement and solicit proxies from the holders of such shares since there are procedures in place under the Securities Exchange Act of 1934, as amended, for soliciting proxies from beneficial owners.

(iii) Listing Rule 5615(a)(3): Shareholder Approval of Equity Plans Nasdaq Listing Rule 5635(c) requires shareholder approval prior to the issuance of securities in connection with equity-based compensation of officers, directors, employees or consultants. On December 30, 2011, our Supervisory Board adopted the ASM International NV 2011 Stock Option Plan for Members of the Management Board and the ASM International NV 2011 Stock Option Plan for Employees (the “Stock Option Plans”). In lieu of the specific shareholder approval prior to the issuance of securities in connection with equity-based compensation of officers, directors, employees or consultants, required by Nasdaq Listing Rule 5635(c), we followed Dutch company law regarding the issuance of shares or securities in connection with the remuneration of the management board and/or the employees of a Dutch listed public company (beursgenoteerde naamloze vennootschap). According to Dutch company law, a Dutch public company may issue shares or grant rights to acquire shares pursuant to a resolution of the general meeting of shareholders or pursuant to a resolution of another corporate body designated by the general meeting of shareholders. Consistent with previous years, at our 2012 Annual General Meeting of Shareholders on May 15, 2012, our shareholders designated the Management Board as the competent body to issue common shares, subject to Supervisory Board approval, including granting rights to acquire common shares. Furthermore, our shareholders designated our Management Board as the competent body to

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ITEM 16 | PART II | form 20-f

129

issue common shares, subject to Supervisory Board approval, including granting rights to acquire common shares in connection with our stock option plans for employees and the stock option plan for the Management Board. Pursuant to Dutch company law, the remuneration policy (including any amendments thereto) for the management board of a Dutch public company shall be determined by the general meeting of shareholders. Individual compensation of management board members shall be determined by the general meeting of shareholders unless the articles of association appoint another corporate body as such. Our Articles of Association provide that the individual compensation of Management Board members shall be determined by the Supervisory Board. Pursuant to Dutch company law, the remuneration (including any equity components) of employees is not subject to prior shareholder approval. At our 2010 Annual General Meeting of Shareholders on May 20, 2010, our shareholders determined the remuneration policy of the Management Board. The remuneration policy includes a framework for the granting of stock options to the Management Board members, to be determined by the Supervisory Board. The remuneration policy is publicly available on our website: www.asm.com. The Stock Option Plans provide the terms and conditions governing the procedures for the granting of stock options to employees and the Management Board. These terms and conditions include, among others, the determination of the exercise price and the vesting period. The Stock Option Plans do not grant rights to Management Board members or employees to acquire shares, nor do the Stock Option Plans provide for an obligation by us to grant such rights. The granting of rights to acquire shares through stock options is, with respect to members of our Management Board, determined by the Supervisory Board, and with respect to employees, determined by the Management Board.

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

PART III ITEM 17

FINANCIAL STATEMENTS not Applicable.

ITEM 18

FINANCIAL STATEMENTS See pages F-1 through F-62, which are incorporated herein by reference.

ITEM 17  | PART III | form 20-f

130

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ITEM 19  | PART III | form 20-f

131

ITEM 19

EXHIBITS (*) EXHIBIT NUMBER DESCRIPTION

INCORPORATED BY REFERENCE TO:

INCLUDED HEREIN:

1.1

English Informal Translation of ASM International N.V.’s Articles of Association, as amended

4.1

2001 Stock Option Plan

Exhibit 99.1 to the Registrant’s Form S-8 filed on April 30, 2002

4.3

Trust Deed and Rules of The ASM Pacific Technology Employee Share Incentive Scheme, dated March 23, 1990

Exhibit 4.14 to the Registrant’s Form 20-F filed on April 17, 2003

4.4

Deed of Adherence Relating to Participation in the Employee Share Incentive Scheme of ASM Pacific Technology Limited, dated April 12, 1999

Exhibit 4.15 to the Registrant’s Form 20-F filed on April 17, 2003

4.5

Supplemental Deed Relating to the Employee Share Incentive Scheme of ASM Pacific Technology Limited

Exhibit 4.16 to the Registrant’s Form 20-F filed on April 17, 2003

4.6

Overview of Remuneration of Members of the Management Board, dated May 20, 2010

4.7

Overview of Remuneration of Mr. Peter van Bommel

Exhibit 4.7 to the Registrant’s Form 20-F filed on March 25, 2011

4.8

Form of Supervisory Board Member Indemnification Agreement

Exhibit 10.1 to the Registrant’s Form 20-F filed on March 16, 2007

4.9

Form of Management Board Member Indemnification Agreement

Exhibit 10.2 to the Registrant’s Form 20-F filed on March 16, 2007

4.10

Amended and Restated Settlement Agreement dated as of December 16, 1998 by and among ASM International N.V., ASM America, Inc. and Applied Materials, Inc. 2)

Exhibit 10.3 to the Registrant’s Form 20-F filed on March 16, 2007

4.11

Summary of the material elements of employment contract with Mr. C.D. del Prado (effective as of March 1, 2008)

Exhibit 99.9 to the Registrant’s Form 6-K filed on May 20, 2008

4.12

Overview of remuneration of Mr. W.K. Lee

Exhibit 4.13 to the Registrant’s Form 20-F filed on March 16, 2007

4.13

Master Sale and Purchase Agreement re SEAS acquisition dated July 28, 2010

Exhibit 4.24 to the Registrant’s Form 20-F filed on March 25, 2011

4.14

ASM International N.V. 2011 Stock Option Plan for Members of the Management Board

Exhibit 4.14 to the Registrant's Form 20-F filed on March 28, 2012

8.1

Subsidiaries

X

12.1

Certification of CEO pursuant to Rule 13a-14(a)

X

12.2

Certification of CFO pursuant to Rule 13a-14(a)

X

13.1

Certification of CEO and CFO pursuant to Rule 13a-14(b) and 18 U.S.C. 1350

X

15.1

Consent of Independent Registered Public Accounting Firm

X

1

2

X

X

Pursuant to Instruction 2(b)(ii), the Registrant has omitted certain agreements with respect to long-term debt not exceeding 10% of consolidated total assets. The Registrant agrees to furnish a copy of any such agreements to the Securities Exchange Commission upon request. Redacted version, originally filed as an exhibit to Registrant’s Form 6-K filed February 11, 1999. Portions of the Agreement have been omitted pursuant to a request for confidential treatment.

X

CONTENTS FORM 20-F ASM INTERNATIONAL  |  ANNUAL REPORT 2012

ITEM 19  | PART III | form 20-f

SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. ASM INTERNATIONAL NV Date: April 4, 2013 /S/ CHARLES D. DEL PRADO

Charles D. (Chuck) del Prado Chief Executive Officer

132

CONSOLIDATED FINANCIAL STATEMENTS 2012

CONTENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

financial statements

F-1

INDEX Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Total Equity Consolidated Statements of Cash Flows

F-2 F-3 F-4 F-5 F-6 F-7 F-8

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

financial statements

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To: the Supervisory Board and Shareholders of ASM International NV We have audited the accompanying consolidated balance sheets of ASM International NV and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, total equity, and cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ASM International NV and subsidiaries at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 4, 2013 expressed an unqualified opinion on the Company’s internal control over financial reporting. /s/ Deloitte Accountants BV Amsterdam, the Netherlands April 4, 2013

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

financial statements

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To: the Supervisory Board and Shareholders of ASM International NV We have audited the internal control over financial reporting of ASM International NV and subsidiaries (the “Company”) as of December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2012 of the Company and our report dated April 4, 2013 expressed an unqualified opinion on those financial statements. /s/ Deloitte Accountants BV Amsterdam, the Netherlands April 4, 2013

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-4

CONSOLIDATED BALANCE SHEETS   (EUR thousand except per share data)

DECEMBER 31, NOTES

2011

2012

Cash and cash equivalents

4

390,250

290,475

Accounts receivable, net

6

330,891

304,840

Inventories, net

7

376,667

403,400

907

890

26

14,350

17,967

Assets

Income taxes receivable Deferred tax assets Other current assets TOTAL CURRENT ASSETS Pledged cash

82,715

90,807

1,195,780

1,108,379

5

20,000

20,000

Debt issuance costs

18

4,389

735

Deferred tax assets

26

13,072

5,955

8

14,776

13,915

Other intangible assets, net Goodwill, net

9

52,131

51,888

Evaluation tools at customers

12

13,987

16,922

Investments

13

1,044

278

Property, plant and equipment, net

10

260,180

275,436

Assets held for sale

11

6,862

5,998

1,582,221

1,499,506

40,680

61,675

157,549

151,761

TOTAL ASSETS Liabilities and shareholders’ equity Notes payable to banks

-

14

Accounts payable Provision for warranty

15

42,684

38,623

Accrued expenses and other

16

152,891

132,060

54,878

27,625

Income taxes payable Deferred tax liabilities

26

3,513

36

Current portion of long-term debt

17

4,332

6,316

456,527

418,096

TOTAL CURRENT LIABILITIES Pension liabilities

20

9,887

12,540

Deferred tax liabilities

26

868

952

Provision for warranty

15

6,828

5,298

Long-term debt

17

15,319

12,632

Convertible subordinated debt

18

135,078

-

624,507

449,518

2,215

2,584

-

-

TOTAL LIABILITIES Commitments and contingencies

21, 22

Common shares: Authorized 110,000,000 shares, par value €0.04, issued and outstanding 55,377,020 and 63,095,986 shares Financing preferred shares: Authorized 8,000 shares, par value €40, none issued Preferred shares: Authorized 118,000 shares, par value €40, none issued

-

-

Capital in excess of par value

376,217

480,152

Retained earnings

301,515

288,082

Accumulated other comprehensive loss

(20,151)

(28,942)

659,796

741,876

Non-controlling interest

297,918

308,112

TOTAL EQUITY

957,714

1,049,988

1,582,221

1,499,506

TOTAL SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

See Consolidated Financial Statements.

19

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-5

CONSOLIDATED STATEMENTS OF OPERATIONS   (EUR thousand, except per share data)

Net sales

YEAR ENDED DECEMBER 31, NOTES

2010

2011

2012

27

1,222,900

1,634,334

1,418,067

(673,322)

(1,063,708)

(977,638)

549,578

570,626

440,429

Cost of sales GROSS PROFIT

27

Operating expenses: -- Selling, general and administrative -- Research and development, net -- Amortization of other intangible assets

(130,596)

(174,107)

(200,799)

24

(78,785)

(129,400)

(149,219)

8

(357)

(911)

(1,264)

-- Impairment charge property, plant and equipment

10

-

(8,038)

-

-- Restructuring expenses

25

(11,201)

-

(891)

(220,939)

(312,455)

(352,173)

3

-

109,279

-

27

328,640

367,450

88,256

Interest income

1,221

2,902

1,989

Interest expense

(15,677)

(13,497)

(12,113)

TOTAL OPERATING EXPENSES Operating income: -- Gain on bargain purchase RESULT FROM OPERATIONS

Loss resulting from early extinguishment of debt

18

(3,609)

(824)

(2,209)

Accretion interest expense convertible notes

18

(6,010)

(4,401)

(4,469)

Revaluation conversion option

18

(19,037)

(4,378)

-

(65)

5,604

(3,957)

Foreign currency exchange gains (losses), net Results on investments

-

-

(766)

285,462

352,855

66,731

(42,939)

(36,692)

(26,300)

242,523

316,164

40,431

110,639

186,770

7,149

131,884

129,394

33,282

Basic net earnings from continuing operations

2.11

3.38

0.13

Diluted net earnings from continuing operations Weighted average number of shares used in computing per share amounts (in thousands):

2.09

3.16

0.13

-- Basic

52,435

55,210

56,108

-- Diluted

61,494

64,682

56,767

EARNINGS (LOSS) BEFORE INCOME TAXES Income tax expense

26

NET EARNINGS (LOSS) Net earnings (loss) for allocation between shareholders of the parent and non-controlling interest Allocation of net earnings: -- Shareholders of the parent -- Non-controlling interest Net earnings per share (in euro):

See Notes to Consolidated Financial Statements.

29

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-6

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   (EUR thousand)

YEAR ENDED DECEMBER 31, NOTES

NET EARNINGS (LOSS)

2010

2011

2012

242,523

316,164

40,431

41,309

18,062

(10,110)

Other comprehensive income (loss): -- Foreign currency translation effect -- Unrealized gains (losses) on derivative instruments, net of tax -- Actuarial loss TOTAL OTHER COMPREHENSIVE INCOME (LOSS)

19

COMPREHENSIVE INCOME (LOSS)

136

(13)

-

(87)

1,139

(3,716)

41,358

19,188

(13,826)

283,881

335,352

26,605

141,154

200,858

(1,642)

142,727

134,494

28,247

Allocation of comprehensive income (loss): -- Common shareholders -- Non-controlling interest

See Consolidated Financial Statements.

19

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-7

CONSOLIDATED STATEMENTS OF TOTAL EQUITY

51,745,140

BALANCE JANUARY 1, 2009 Compensation expense stock options

2,070 287,768

-

16,146

(64,754) 241,230 144,684

TOTAL EQUITY

NONCONTROLLING INTEREST

TOTAL SHAREHOLDERS’ EQUITY

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

RETAINED EARNINGS

TREASURY SHARES AT COST

CAPITAL IN EXCESS OF PAR VALUE

NOTES

EUR

COMMON SHARES

(thousand, except for share data)

 

NUMBER OF COMMON SHARES

  

385,914

-

-

2,526

-

-

-

2,526

-

2,526 17,649

Conversion of debt into common shares

18

878,491

35

17,614

-

-

-

17,649

-

Exercise stock options by issue of common shares

19

308,250

12

3,932

-

-

-

3,944

-

3,944

-

-

-

- 110,639

- 110,639 131,884

242,523

-

-

-

-

-- Dividend paid

-

-

-

-- Dilution

-

-

-

Net earnings to common shareholders Other comprehensive income

19

30,515

10,843

41,358

-

-

(58,162)

(58,162)

-

4,957

6,518

11,475

(34,239) 411,460 235,767

647,227

-

30,515

-

-

-

4,957

Other movements in non-controlling interest:

52,931,881

BALANCE DECEMBER 31, 2010 Compensation expense stock options

2,117 311,841

- 131,741

-

-

1,872

-

-

-

1,872

-

1,872

Conversion of debt into common shares

18

2,151,020

86

58,439

-

-

-

58,525

-

58,525

Exercise stock options by issue of common shares

19

294,119

12

4,065

-

-

-

4,077

-

4,077

-

-

-

- 186,770 129,395

316,165

Net earnings to common shareholders

- 186,770

Dividend paid to common shareholders Other comprehensive income

(22,262)

19

(22,262)

-

(22,262)

-

-

-

-

-

14,088

14,088

5,100

19,188

-

-

-

-

-

-

-

(79,474)

(79,474)

-

-

-

5,266

-

5,266

7,130

12,396

(20,151) 659,796 297,918

957,714

Other movements in non-controlling interest: -- Dividend paid -- Dilution

55,377,020

BALANCE DECEMBER 31, 2011 Compensation expense stock options Purchase of common shares

2,215 376,217

- 301,515

-

-

3,242

-

-

-

3,242

-

3,242

(1,500,000)

-

-

(40,554)

-

-

(40,554)

-

(40,554)

-

- 139,407

-

139,407

Conversion of debt into newly issued common shares

18

9,074,396

363

98,490

40,554

Exercise stock options by issue of common shares

19

144,570

6

2,203

-

-

-

2,209

-

2,209

-

-

-

-

7,149

-

7,149

33,282

40,431

(27,519)

-

(27,519)

(8,791)

(5,035)

(13,826)

Net earnings to common shareholders Dividend paid to common shareholders Other comprehensive income

(27,519) -

-

-

-

Dividend paid

-

-

-

Dilution

-

-

-

19

-

(8,791)

-

-

-

-

(27,024)

(27,024)

-

6,937

-

6,937

8,971

15,908

Other movements in non-controlling interest:

BALANCE DECEMBER 31, 2012

See Consolidated Financial Statements.

63,095,986

2,584 480,152

- 288,082

(28,942) 741,876 308,112 1,049,988

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-8

CONSOLIDATED STATEMENTS OF CASH FLOWS   (EUR thousand)

YEAR ENDED DECEMBER 31, NOTES

2010

2011

2012

242,523

316,164

40,431

8, 10

37,794

49,450

58,460

10

-

8,038

-

-

(109,279)

-

13,452

23,065

Cash flows from operating activities: NET EARNINGS (LOSS) Adjustments required to reconcile net earnings(loss) to net cash from operating activities: Depreciation and amortization Impairments Gain on bargain purchase Share-based compensation

20

13,901

Non cash result components convertible bonds

18

28,656

8,779

6,678

4,092

(27,691)

(147)

Accounts receivable

(95,260)

67,293

17,905

Inventories

(77,236)

8,390

(39,920)

(20,732)

(20,335)

(6,713)

104,485

(94,601)

(32,077) -

-- Deferred income taxes Changes in assets and liabilities:

Other current assets Accounts payable and accrued expenses Accruals for restructuring expenses

1,863

-

Payments from provisions

(9,297)

(3,159)

-

29,096

80

(25,968)

259,884

216,581

42,480

10

(102,974)

(89,218)

(68,162)

8

(624)

(7,051)

(4,630)

Acquisition of business

9

-

(994)

-

Cash acquired in business combination

3

-

43,434

-

Pledged bank deposit in business combination

5

-

(20,000)

-

10

3,032

3,794

901

(100,566)

(70,035)

(71,891)

(68,810)

(23,096)

(24,726)

42,173

47,677

3,945

4,122

2,209

Purchase of treasury shares ASMI

-

-

(40,554)

Purchase of treasury shares ASMPT

-

-

(3,552)

Dividends to common shareholders of ASMI

-

(22,262)

(27,519)

(58,162)

(79,474)

(27,024)

(123,027)

(78,537)

(73,489)

10,096

(18,052)

3,125

Current income taxes NET CASH PROVIDED BY OPERATING ACTIVITIES Cash flows from investing activities: Capital expenditures Net purchase of intangible assets

Proceeds from sale of property, plant and equipment NET CASH USED IN INVESTING ACTIVITIES Cash flows from financing activities: Debt redemption Debt proceeds, net Proceeds from issuance of shares and exercise of stock options

Dividends to minority shareholders ASMPT NET CASH USED IN FINANCING ACTIVITIES FOREIGN CURRENCY TRANSLATION EFFECT NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

46,387

49,956

(99,775)

Cash and cash equivalents at beginning of year

4

293,902

340,294

390,250

CASH AND CASH EQUIVALENTS AT END OF YEAR

4

340,294

390,250

290,475

14,786

10,742

10,124

9,751

39,929

52,425

Supplemental disclosures of cash flow information Cash paid during the year for: Interest Income taxes Supplemental on cash investing and financing activities: Subordinated debt converted

18

13,473

32,202

150,000

Subordinated debt converted into number of shares

18

878,491

2,151,020

9,074,396

See Notes to Consolidated Financial Statements.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 1  |  financial statements

F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1- GENERAL INFORMATION / SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL INFORMATION ASM International NV (“ASMI” or “the Company”) is a Dutch public liability company domiciled in the Netherlands with its principal operations in Europe, the United States and Asia. The Company dedicates its resources to the research, development, manufacturing, marketing and servicing of equipment and materials used to produce mainly semiconductor devices. We are an equipment supplier mainly to the semiconductor, LED and electronics manufacturing industry. We design, manufacture and sell equipment and services to our customers for the production of semiconductor devices, or integrated circuits, for the production of LEDs, and for electronics manufacturing in general. The semiconductor capital equipment market is composed of three major market segments: wafer processing equipment, assembly and packaging equipment, and test equipment. ASMI is mainly active in the wafer processing and assembly and packaging market segments. We also sell lead-frames for semiconductor assembly. In addition, ASM AS is offering surface-mount technology (“SMT”) placement tools for the global electronics manufacturing industries. The wafer processing segment is referred to as “Front-end.” Assembly and packaging and SMT is referred to as “Back-end.” The Company’s shares are listed for trading on the NASDAQ (symbol ASMI) and the Euronext Amsterdam Stock Exchange (symbol ASM). The accompanying consolidated financial statements include the financial statements of ASM International NV headquartered in Almere, the Netherlands, and its consolidated subsidiaries (together referred to as “ASMI” or the “Company”).

BASIS OF PREPARATION The Company follows accounting principles generally accepted in the United States of America (“US GAAP”) and applies the going concern basis in preparing its consolidated financial statements. Historical cost is used as the measurement basis unless otherwise indicated. The accompanying consolidated financial statements are stated in thousands of Euros (“EUR”) unless indicated otherwise. Amounts in these financial statements are rounded to the nearest thousand Euro; therefore amounts may not equal (sub) totals due to rounding.

USE OF ESTIMATES The preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, ASMI evaluates its estimates. ASMI bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

CONSOLIDATION The consolidated financial statements include the accounts of ASMI NV and all of its subsidiaries where ASMI holds a controlling interest. The non-controlling interest is disclosed separately in the consolidated financial statements. All intercompany profits, transactions and balances have been eliminated in consolidation. Subsidiaries are all entities over which ASMI has the power to govern the financial and operating policies. As further described in the Notes to Consolidated Financial Statements herein, from time to time, the consolidated subsidiary ASM Pacific Technology Ltd (ASMPT) will issue common shares pursuant to their Employee Share Incentive Scheme. The effect of these issuances is a dilution of the ownership in ASMPT. Results on dilution of investments in subsidiaries are accounted for directly in equity. Subsidiaries are fully consolidated from the date on which control is transferred to ASMI and are deconsolidated from the date on which ASMI’s control ceases.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 1  |  financial statements

F-10

BUSINESS COMBINATIONS ASC Topic 805 (“Business Combinations”) requires that companies record acquisitions under the purchase method of accounting. Accordingly, the purchase price is allocated to the tangible assets and liabilities and intangible assets acquired, based on their estimated fair values. The excess purchase price over the fair value is recorded as goodwill. Purchased intangibles with definite lives are amortized over their respective useful lives. When a bargain purchase incurs, which is the case when the fair value of the acquired business exceeds the purchase price, this surplus in fair value is recognized as a gain from bargain purchase.

SEGMENT REPORTING The Company organizes its activities in two operating segments, Front-end and Back-end. Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer (“CEO”), which is the chief operating decision maker (according to ASC 280). The Front-end segment manufactures and sells equipment used in wafer processing, encompassing the fabrication steps in which silicon wafers are layered with semiconductor devices. The segment is a product driven organizational unit comprised of manufacturing, service, and sales operations in Europe, the United States, Japan and Southeast Asia. The Back-end segment manufactures and sells equipment and materials used in assembly and packaging, encompassing the processes in which silicon wafers are separated into individual circuits and subsequently assembled, packaged and tested. In January 2011 ASMPT acquired the surface-mount technology from Siemens. The segment is organized in ASM Pacific Technology Ltd., in which the Company holds a majority of 51.96% interest, whilst the remaining shares are listed on the Stock Exchange of Hong Kong.

FOREIGN CURRENCY TRANSLATION Items included in the financial statements of each ASMI’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial information is presented in euro (EUR), which is the functional currency of the Company and the group’s presentation currency. In the preparation of ASMI’s consolidated financial statements, assets and liabilities of foreign subsidiaries of which the functional currency is not the euro, are translated into euros at the exchange rate in effect on the respective balance sheet dates. Income and expenses are translated into euros based on the average exchange rates for the corresponding period. Resulting translation adjustments are directly recorded in shareholders’ equity. Currency differences on intercompany loans that have the nature of a long-term investment are also accounted for directly in shareholders’ equity.

DERIVATIVE FINANCIAL INSTRUMENTS ASMI and its subsidiaries conduct business in a number of foreign countries, with certain transactions denominated in currencies other than the functional currency of the Company (euro) or one of its subsidiaries conducting the business. The purpose of the Company’s foreign currency management is to manage the effect of exchange rate fluctuations on income, expenses, cash flows and assets and liabilities denominated in selected foreign currencies, in particular denominated in US dollar. The Company uses forward exchange contracts to hedge its foreign exchange risk of anticipated sales or purchase transactions in the normal course of business, which occur within the next twelve months, for which the Company has a firm commitment from a customer or to a supplier. The terms of these contracts are consistent with the timing of the transactions being hedged. The hedges related to forecasted transactions are designated and documented at the inception of the hedge as cash flow hedges, and are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income (loss) net of taxes in shareholders’ equity, and is reclassified into earnings when the hedged transaction affects earnings. Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in earnings. The Company records all derivatives, including forward exchange contracts, on the balance sheet at fair value in other current assets or accrued expenses and other. Substantially all amounts, which are net of taxes, included in accumulated other comprehensive loss at December 31, of any year, will be reclassified to net earnings within the next twelve months, upon completion of the underlying transactions. If the underlying transaction

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 1  |  financial statements

F-11

being hedged fails to occur, or if a portion of any derivative is ineffective, the gain or loss is immediately recognized in earnings under foreign currency exchange gains (losses) in the consolidated statement of operations. Furthermore, the Company might manage the currency exposure of certain receivables and payables using derivative instruments, such as forward exchange contracts (fair value hedges) and currency swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains or losses on these instruments provide an offset to the gains or losses recorded on receivables and payables denominated in foreign currencies. The derivative instruments are recorded at fair value and changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the consolidated statement of operations. Receivables and payables denominated in foreign currencies are recorded at the exchange rate at the balance sheet date and gains and losses as a result of changes in exchange rates are recorded in earnings under foreign currency exchange gains (losses) in the consolidated statement of operations. The Company does not use forward exchange contracts for trading or speculative purposes.

CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise deposits held at call with banks and other short-term highly liquid investments with original maturity of three months or less. Bank overdrafts are included in notes payable to banks in current liabilities. Cash and cash equivalents of the Company’s subsidiary ASMPT are restricted to be used only in the operations of ASMPT.

ACCOUNTS RECEIVABLE Accounts receivable are stated at nominal value less an allowance for doubtful accounts. A significant percentage of our accounts receivable is derived from sales to a limited number of large multinational semiconductor device manufacturers located throughout the world. In order to monitor potential credit losses, we perform ongoing credit evaluations of our customers’ financial condition. An allowance for doubtful accounts is maintained for potential credit losses based upon management’s assessment of the expected collectability of all accounts receivable. The allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowance. In making this assessment, management takes into consideration any circumstances of which we are aware regarding a customer’s inability to meet its financial obligations; and our judgments as to potential prevailing economic conditions in the industry and their potential impact on the Company’s customers.

INVENTORIES Inventories are stated at the lower of cost (first-in, first-out method) or market value. Inventory in the SMT business is generally determined on the basis of an average method. Costs include net prices paid for materials purchased, charges for freight and custom duties, production labor cost and factory overhead. Allowances are made for slow moving, obsolete or unsellable inventory. Allowances for obsolescence of inventory are determined based on the expected demand as well as the expected market value of the inventory. We regularly evaluate the value of our inventory of components and raw materials, work in progress and finished goods, based on a combination of factors including the following: forecasted sales, historical usage, product end of life cycle, estimated current and future market values, service inventory requirements and new product introductions, as well as other factors. Purchasing requirements and alternative uses for the inventory are explored within these processes to mitigate inventory exposure. We record write downs for inventory based on the above factors and take into account worldwide quantities and demand into our analysis.

EVALUATION TOOLS AT CUSTOMERS Evaluation tools at customers (“evaluation tools”) are systems generally delivered to customers under evaluation or a conditional purchase order and include substantial customization by ASM engineers and ASM-R&D staff in the field. Evaluation tools are recorded at cost and depreciated over their useful life (5 years). The depreciation period may be shorter, depending on circumstances. The depreciation expenses are reported as Cost of sales. On final acceptance of the system the purchase consideration is recognized as revenue. The carrying value of the evaluation tool at that point in time is recognized as cost of sales. In the circumstance that the system is returned, at the end of the evaluation period, a detailed impairment review takes place, and future sales opportunities and additional costs are identified. Only when the fair value is below the

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 1  |  financial statements

F-12

carrying value of the evaluation tool an additional depreciation is recognized. The remaining carrying value is recognized as finished goods (inventory).

LONG-LIVED ASSETS Long-lived assets include goodwill, other intangible assets and property, plant and equipment. Property, plant and equipment are carried at cost, less accumulated depreciation and any accumulated impairment losses. Capital leased assets are recorded at the present value of future lease obligations. Depreciation is calculated using the straight-line method over the estimated useful lives. Leasehold improvements are depreciated over the lesser of the estimated useful life of the leasehold improvement or the term of the underlying lease. Business combinations are accounted for under the purchase acquisition method. The Company tests its recorded goodwill and other intangible assets with indefinite lives for impairment each year on December 31 and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill is allocated to reporting units for purposes of impairment testing and tested for impairment on a two-step approach. The implied fair value of goodwill is determined. First the recoverability is tested by comparing the carrying amount of the goodwill with the fair value being the sum of the discounted future cash flows. If the carrying amount of the goodwill at reporting unit level is higher than the fair value of the goodwill, the second step should be performed. The goodwill impairment is measured as the excess of the carrying amount of the goodwill over its fair value. Other intangible assets with finite lives are amortized over the estimated useful lives using the straight-line method.

ASSETS HELD FOR SALE A long-lived asset to be sold is classified as held for sale in the period in which all of the following criteria are met:

››Management, having the authority to approve the action, commits to a plan to sell the asset. ››The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets.

››An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated. ››The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year. ››The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value. If at any time these criteria are no longer met a long-lived asset classified as held for sale will be reclassified as held and used. If during the initial one-year period, circumstances arise that previously were considered unlikely and, as a result, a long-lived asset previously classified as held for sale is not sold by the end of that period and all of the following conditions are met:

››During the initial one-year period the entity initiated actions necessary to respond to the change in circumstances. ››The asset is being actively marketed at a price that is reasonable given the change in circumstances. The period required to complete the sale of a long-lived asset may be extended beyond one year.

RECOVERABILITY OF LONG-LIVED ASSETS Long-lived assets (except those not being amortized) to be held and used by the Company are reviewed by the Company for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use of the asset. If the undiscounted future cash flow is less than the carrying amount of the asset, the asset is deemed impaired. The amount of the impairment is measured as the difference between the carrying value and the fair value of the asset. Long-lived assets and other intangibles (except those not being amortized) to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

REVENUE RECOGNITION The Company recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; seller’s price to buyer is fixed or determinable; and collectability is reasonably assured.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 1  |  financial statements

F-13

Our Front-end sales frequently involve sales of complex equipment, which may include customer-specific criteria, sales to new customers or sales of equipment with new technology. For each sale, the decision whether to recognize revenue is, in addition to shipment and factory acceptance, based on: the contractual agreement with a customer; the experience with a particular customer; the technology and the number of similarly configured equipment previously delivered. Based on these criteria we may decide to defer revenue until completion of installation at the customer’s site and obtaining final acceptance from the customer. Revenue in our AS business on sales subjected to customer acceptance is not recognized until customer acceptance occurs. A major portion of our revenue is derived from contractual arrangements with customers that have multiple deliverables, such as equipment and installation. When a sales arrangement contains multiple elements, such as equipment and installation, ASMI allocates revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or best estimated selling price (BESP) if neither VSOE nor TPE is available. ASMI generally utilizes the BESP due to the nature of our products. The total arrangement consideration is allocated at inception of the arrangement to all deliverables on the basis of their relative selling price. The revenue relating to the undelivered elements of the arrangements is deferred at their relative selling prices until delivery of these elements. At December 31, 2010, December 31, 2011 and December 31, 2012 we have deferred revenues from installations in the amount of €4.4 million, €6.3 million and €3.5 million respectively. In general, we recognize revenue from sales of equipment upon transfer of title, which is upon shipment of the equipment, only if testing at the factory has proven that the equipment has met substantially all of the customer’s criteria and specifications The Company recognizes revenue from installation of equipment upon completion of installation at the customer’s site. At the time of shipment, the Company defers that portion of the sales price related to the relative selling price of installation. The relative selling price of the installation process is measured based upon the per-hour amounts charged to clients for similar installation services. Installation is completed when testing at the customer’s site has proven that the equipment has met all of the customer’s criteria and specifications. The completion of installation is signed-off by the customer (“final acceptance”). We provide training and technical support service to customers. Revenue related to such services is recognized when the service is rendered. Revenue from the sale of spare parts and materials is recognized when transfer of title took place, in general upon shipment of the goods. Freight charges billed to customers are recognized as revenue, the related costs are recognized as cost of sales. Revenues are recognized excluding the taxes levied on revenues.

COST OF SALES Cost of sales comprise direct costs such as labor, materials, cost of warranty, depreciation, shipping and handling costs and related overhead costs. Cost of sales also includes third party commission, depreciation expenses of evaluation tools at customers, royalty payments and costs relating to prototype and experimental products, which the Company may subsequently sell to customers. Costs of warranty include the cost of labor, material and related overhead necessary to repair a product during the warranty period.

WARRANTY We provide maintenance on our systems during the warranty period, usually one to two years. Costs of warranty include the cost of labor, material and related overhead necessary to repair a product during the warranty period. We accrue for the estimated cost of the warranty on products shipped in a provision for warranty, upon recognition of the sale of the product. The costs are estimated based on actual historical expenses incurred and on estimated future expenses related to current sales, and are updated periodically.

RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. Costs, which relate to prototype and experimental models and are sold to customers, are charged to cost of sales. Subsidies and other governmental credits to cover research and development costs relating to approved projects are recorded as research and development credits in the period when such project costs occur. The research and development expenses are presented net of the development credits.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 1  |  financial statements

F-14

SHARE-BASED COMPENSATION EXPENSES The cost relating to employee stock options (compensation expense) are recognized based upon the grant date fair value of the stock options. The fair value at grant date is estimated using a Black-Scholes option valuation model. This model requires the use of assumptions including expected stock price volatility, the estimated life of each award and the estimated dividend yield. The grant date fair value of the stock options is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of stock options that will eventually vest. The impact of the true up of the estimates is recognized in the consolidated statement of operations in the period in which the revision is determined. For further information on ASMI’s employee stock option plans reference is made to Note 20.

RESTRUCTURING COSTS Restructuring expenses are recognized for exit or disposal activities when the liability arising from restructuring plans is incurred. Reference is made to Note 25. Distinction is made in one-time employee termination expenses, contract termination expenses and other associated expenses. For the accounting on the distinguished elements of restructuring expenses we apply to the policy as mentioned below. The expenses have been charged to “restructuring expenses”. One-time termination expenses represent the payments provided to employees that have become redundant and are terminated under the terms and conditions of a restructuring plan. A restructuring plan exists at the date the plan meets all of the following criteria and has been communicated to employees:

››Management commits to the plan. ››The plan identifies the number of employees that become redundant and the expected completion date. ››The plan sets out the terms and conditions of the arrangement in sufficient detail to enable employees to determine the type and amount of benefits they will receive.

››Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The timing of the recognition and measurement of a liability for one-time termination expenses depends on whether employees will be retained to render service beyond a minimum retention period. Contract termination expenses are related to the termination of an operating lease or another contract. These expenses are distinguished in:

››Expenses related to the termination of the contract before the end of its term. These expenses are recognized when the contract is terminated. The liability is measured at its fair value in accordance with the contract terms.

››Expenses related to contracts that will last for its remaining term without economic benefit to the entity. This is the case when a lease contract for premises is not terminated while the premises are not (completely) in use anymore. The liability is accrued for at the cease-use date, the date the company determined that it would no longer occupy the premises, which is conveyed to it under the contractual operating lease. The liability is measured at its fair value in accordance with the contract terms. Other costs related to restructuring include costs to consolidate or close facilities and relocate employees. A liability for other expenses related to a restructuring such as transition costs is recognized and measured in the period in which the liability is incurred. The costs incurred are directly related to the restructuring activity. The definition of exit costs excludes expected future operating losses.

INCOME TAXES The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using currently enacted tax rates. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the Consolidated Statement of Operations in the period in which the enacted rate changes. Deferred tax assets are reduced through a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 1  |  financial statements

F-15

ASC 740 prescribes a two-step approach for recognizing and measuring tax positions taken or expected to be taken in a tax return. Prior to recognizing the benefit of a tax position in the financial statements, the tax position must be more-likely-than-not of being sustained based solely on its technical merits. Once this recognition threshold has been met, tax positions are recognized at the largest amount that is morelikely-than-not to be sustained. ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

PENSION PLANS AND SIMILAR COMMITMENTS The Company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the Company’s operations in the Netherlands, Germany and Japan. The Company’s employees in the Netherlands participate in a multi-employer plan. Payment to defined contribution plans and the multi-employer plan are recognized as an expense in the Consolidated Statement of Operations as they fall due. The Company’s employees in Germany and Japan participate in a defined benefit plan. Pension costs in respect of these defined benefit plans are determined using the projected unit credit method. These costs primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of the expected return on plan assets. Obligations for retirement benefit and related net periodic pension costs are determined in accordance with actuarial valuations. These valuations rely on key assumptions including discount rates, expected return on plan assets, expected salary increases, mortality rates and health care trend rates. The discount rate assumptions are determined by reference to yields on high-quality corporate bonds of appropriate duration and currency at the end of the reporting period. In case such yields are not available, discount rates are based on government bonds yields. The expected returns on plan asset assumptions are determined on a uniform methodology, considering long-term historical returns and asset allocations. Due to changing market and economic conditions, the underlying key assumptions may differ from actual development and may lead to significant changes in retirement benefit obligations. In accordance with ASC 715, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” the Company recognizes in its Consolidated Balance Sheet an asset or a liability for the plan’s overfunded status or underfunded status respectively. The unfunded status is recognized as a liability. Actuarial gains and losses are recognized in other comprehensive income when incurred. Reference is made to Note 19 and Note 20.

COMMITMENTS AND CONTINGENCIES The Company has various contractual obligations, some of which are required to be recorded as liabilities in the Company’s consolidated financial statements, including long- and short-term debt. Others, namely operating lease commitments, purchase commitments and commitments for capital expenditure, are generally not required to be recognized as liabilities on the Company’s balance sheet but are required to be disclosed. Reference is made to Note 21.

COMPREHENSIVE INCOME Comprehensive income consists of net earnings (loss) and other comprehensive income. Other comprehensive income includes gains and losses that are not included in net earnings, but are recorded directly in Shareholders’ Equity.

NEW ACCOUNTING PRONOUNCEMENTS In June 2011, the FASB issued authoritative guidance on the presentation of comprehensive income (ASU 2011-05) to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This authoritative guidance eliminates the option to present the components of other comprehensive income as part of the statement of equity. This guidance was effective for ASMI for the year 2012, and has been applied retrospectively. The implementation of this authoritative guidance did not change the presentation of comprehensive Income. As a result of this application the deferral of the date as per ASU 2011-12 was not relevant for ASMI. In May 2011, the FASB issued ASU 2011-04 “Fair Value Measurement (Topic 820)” to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. This authoritative guidance limits the highest-and-best-use measure to non-financial assets, permits certain financial assets

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 1  |  financial statements

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and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. This authoritative guidance also expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. The new guidance was effective for ASMI in 2012. The implementation of this authoritative guidance did not have a material impact on ASMI’s financial position or results of operations. In September 2011, the FASB issued ASU No. 2011-08, “Intangibles-Goodwill and Other (Topic 350).” The amendments in this ASU will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step Quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The ASU was effective for ASMI in 2012, but did not have any effect on ASMI’s consolidated financial statements. In July 2012, the FASB issued ASU 2012-02 “Testing indefinite-lived intangible assets for impairment”. This ASU is an amendment on the guidance in ASC 350-30 on testing indefinite-lived intangible assets, other than goodwill, for impairment. This ASU was issued in response of feedback on ASU 2011-08. This new guidance will be effective on impairment tests performed for fiscal years beginning after September 15, 2012. The ASU will not have any effect on ASMI’s consolidated financial statements. In December 2011, the FASB issued ASU 2011-11 “Disclosures about offsetting assets and liabilities”. Under the new guidance entities must disclose both gross information and net information on instruments and transactions eligible for offset on the balance sheet in accordance with the offsetting guidance in ASC 210-20-45 or ASC 815-10-45, and instruments and transactions subject to an agreement similar to a master netting arrangement. The new guidance will be effective for ASMI beginning January 1, 2013. We do not expect this new guidance to have material impact on our consolidated financial statements. In October 2012, the FASB issued ASU 2012-04 “Technical corrections and improvements”. This ASU makes certain technical correction to the FASB Accounting Standards Codification. The new guidance will be effective for fiscal years beginning after December 15, 2012. We do not expect this new guidance to have material impact on our consolidated financial statements.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-17

NOTE 2  |  financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

2- LIST OF SIGNIFICANT SUBSIDIARIES % OWNERSHIP DECEMBER 31,

NAME

LOCATION

2011

2012

ASM Europe BV 1) ASM United Kingdom Sales BV1)

Almere, the Netherlands Almere, the Netherlands

100.00% 100.00%

100.00% 100.00%

ASM Germany Sales BV1)

Almere, the Netherlands

100.00%

100.00%

ASM Pacific Holding BV

Almere, the Netherlands

100.00%

100.00%

ASM France S.A.R.L.

Montpellier, France

100.00%

100.00%

ASM Belgium NV

Leuven, Belgium

100.00%

100.00%

ASM Italia S.r.l.

Agrate, Italy

100.00%

100.00%

ASM Microchemistry Oy

Helsinki, Finland

100.00%

100.00%

ASM Services and Support Ireland Ltd

Dublin, Ireland

100.00%

100.00%

ASM Services and Support Israel Ltd

Tel Aviv, Israel

100.00%

100.00%

ASM America, Inc.

Phoenix, Arizona, United States

100.00%

100.00%

ASM Japan K.K.

Tokyo, Japan

100.00%

100.00%

ASM Wafer Process Equipment Ltd

Quarry Bay, Hong Kong, ­People’s ­Republic of China

100.00%

100.00%

ASM China Trading Ltd

Shanghai, People’s Republic of China

100.00%

100.00%

ASM Wafer Process Equipment Singapore Pte Ltd

Singapore

100.00%

100.00%

ASM Front-End Sales & Services Taiwan Co., Ltd

Hsin-Chu, Taiwan

100.00%

100.00%

ASM Services & Support Malaysia SDN BDH

Kuala Lumpur, Malaysia

0.00%

100.00%

ASM Front-End Manufacturing Singapore Pte Ltd

Singapore

100.00%

100.00%

ASM NuTool, Inc.

Phoenix, Arizona, United States

100.00%

100.00%

ASM Genitech Korea Ltd

Cheonan, South Korea

100.00%

100.00%

ASM IP Holding BV 1)

Almere, the Netherlands

100.00%

100.00%

ASM Pacific Technology Ltd

Kwai Chung, Hong Kong, People’s Republic of China

52.17%

51.96%

ASM Assembly Automation Ltd 2)

Kwai Chung, Hong Kong, People’s Republic of China

52.17%

51.96%

ASM Assembly Materials Ltd 2)

Kwai Chung, Hong Kong, People’s Republic of China

52.17%

51.96%

3)

ASM Technology Singapore Pte Ltd

Singapore

52.17%

51.96%

ASM Technology (M) Sdn. Bhd. 2)

Johor Bahru, Malaysia

52.17%

51.96%

ASM Semiconductor Materials (Shenzhen) Co. Ltd 2)

Shenzhen, People’s Republic of China

52.17%

51.96%

Edgeward Development Ltd 2)

Guernsey, Channel Islands

52.17%

51.96%

Shenzhen ASM Micro Electronic Technology Co. Ltd 2)

Shenzhen, People’s Republic of China

52.17%

51.96%

ASM Assembly Systems Management GmbH. 4)

Munich, Germany

52.17%

51.96%

ASM Assembly Systems Management GmbH & Co KG

Munich, Germany

52.17%

51.96%

ASM Assembly Systems Ltd 4)

Shanghai, People’s Republic of China

52.17%

51.96%

ASM Pacific (Hong Kong) Ltd 4)

Kwai Chung, Hong Kong, People’s Republic of China

52.17%

51.96%

ASM Pacific (Holdings) Ltd

Kwai Chung, Hong Kong, People’s Republic of China

52.17%

51.96%

ASM Microelectronic Technical Services (Shanghai) Company Ltd

Shanghai, People’s Republic of China 52.17%

51.96%

ASM (Assembly Systems) GmbH & Co KG 4)

Vienna, Austria

52.17%

51.96%

ASM Assembly Systems, LLC 4)

Suwanee, United States

52.17%

51.96%

ASM Assembly Systems Pte. Ltd 4)

Singapore

52.17%

51.96%

ASM Technology (Huizhon) Ltd

People’s Republic of China

52.17%

51.96%

ASM Technology China Ltd

People’s Republic of China

52.17%

51.96%

2)

 4)

1

2 3 4

For these subsidiaries ASM International NV has filed statements at the Dutch Chamber of Commerce assuming joint and several liability in accordance with Article 403 of Book 2, Part 9 of the Netherlands Civil Code. 100% subsidiaries of ASM Pacific Technology Ltd. Established in 2008, ASM Pacific Holding BV is holding 51.96% of the shares in ASM Pacific Technology Ltd. 100% subsidiaries of ASM Pacific Technology Ltd, Acquired January 7, 2011.

The accounts of the above mentioned entities and of certain insignificant subsidiaries not mentioned above have been consolidated in the Consolidated Financial Statements.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 3  |  financial statements

F-18

3- ACQUISITION On January 7, 2011 ASMPT acquired the entire (voting) equity interest of SEAS Entities for a cash consideration of €36.5 million from Siemens Aktiengesellschaft. The principal activities of the SEAS Entities are development, production, sale and service of surface mount technology placement machines. We consider that the surface mount technology (“SMT”) industry is a natural field of expansion for ASMPT and an area to achieve significant synergies given it has similar engineering, technical and production process characteristics compared to the semiconductor equipment industry. The headquarter of SEAS is located in Munich, Germany with production sites in Germany and Singapore. It also has marketing, sales and service offices in China, Unites States of America (“USA”), Austria, United Kingdom, France, Sweden, Italy, Mexico and Brazil. Apart from the cash consideration paid, ASMPT entered into certain financial commitments to the ASM AS Entities and Siemens AG pursuant to the Master Sale and Purchase Agreement of the Acquisition entered into between Siemens AG and the Company (the “MSP Agreement”) which are summarized as set out below. ASMPT undertook to pay an equity amount of €20.0 million as a capital injection to increase ASM AS KG’s registered limited partnership interest, and to grant ASM AS KG a revolving loan facility of up to €20.0 million for a period of at least three years from the completion of the acquisition subject to the terms and conditions as set out in the MSP Agreement (the “Loan Commitment”). ASMPT shall not alter, rescind, rewind or in any other way contradict the letter of support granted to ASM AS KG up to an amount of €120.0 million valid as for a duration of six years following the completion of the acquisition. The letter of support is to procure that ASM AS KG will for a period of six years after the completion of the acquisition be in position to fulfill its obligations towards its creditors when the obligations become due. ASMPT undertook to procure that ASM AS KG will not reduce or decrease the registered limited partnership interest of ASM AS KG for a period of three years following the completion of the acquisition. Further, ASMPT undertook to Siemens AG that for a period of three years from date of the completion of the acquisition that the ASMPT would not directly or indirectly, (i) make, resolve, initiate, enable or accept any withdrawals from ASM AS KG or any of its partial or entire successors conducting the business or parts thereof (the “Sustained Business”), (ii) make, resolve on, initiate, enable or accept dividend payments or loan repayments by the Sustained Business, (iii) encumber, induce or impose the encumbrance of any assets of ASM AS KG or any of its successors other than in the ordinary course for the regular operative business of ASM AS KG, (iv) accept other non-arm’s length advantages from the Sustained Business, or (v) change, alter, rescind, rewind or in any other way contradict the equity commitment and loan commitment as set out in the MSP Agreement; (vi) impose transaction or management fees on the target companies; (vii) enter into any consultancy agreement in excess of €100; enter into any agreement or transaction which may result in a partial or entire change of the shareholding in the target companies or in the transfer of any asset relevant for the business from the target companies. In addition, ASMPT undertook to Siemens AG that certain employment protection clauses of ASM AS KG as included in the MSP Agreement, including the maintenance of existing site in Munich, Germany and Munich as the headquarters of the group comprising principally the ASM AS Entities, and compliance with certain collective labor agreements, for a period of 3 years after closing date. ASMPT also undertook for a period of 3 years after closing date not to lay off any employees of SEAS KG for operational reason. ASMPT also undertook to pay Siemens AG liquidated damages in the amount up to €20.0 million if ASMPT does not comply with its obligations in respect of the Sustained Business and employment protection as set out in the MSP Agreement and is not able to cure such non-compliance within a reasonable period of time. ASMPT agreed to provide Siemens AG with a bank guarantee which shall secure the obligations of ASMPT as set out above in an amount of not less than €20.0 million. The guarantee is to cover a period of four years and the aggregate expense to ASMPT would be €600,000 which represents part of the acquisition cost and is regarded as part of the consideration for the acquisition.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-19

NOTE 3  |  financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

The following table summarizes the total purchase consideration and the identified assets and liabilities that were separately recognized in the purchase price allocation.

Inventories

CARRYING VALUE OF NET ASSETS ­ACQUIRED (EXCLUDING ACQUIRED CASH)

PURCHASE PRICE ­ALLOCATION

FAIR VALUE

91,812

11,529

103,341

Trade and other receivables

132,418

-

132,418

CURRENT ASSETS

224,230

11,529

235,759

Property, plant and equipment

13,077

Intangible assets

13,077

1,542

3,520

5,062

494

-

494

15,113

3,520

18,633

TOTAL ASSETS

239,343

15,049

254,392

Trade and other payables

151,624

-

151,624

6,738

-

6,738

16,199

-

16,199

174,561

-

174,561

Other non-current assets NON-CURRENT ASSETS

Short-term debt Deferred tax liabilities CURRENT LIABILITIES Deferred tax liabilities

4,428

-

4,428

Other non-current liabilities

10,699

-

10,699

NON-CURRENT LIABILITIES

15,127

-

15,127

189,688

-

189,688

49,655

15,049

64,704

TOTAL LIABILITIES

IDENTIFIED NET ASSETS Cash acquired

81,075 145,779

Total consideration

(36,500)

GAIN BARGAIN PURCHASE

109,279

The purchase price allocation resulted in the valuation of acquired technology. Acquisition related costs have been excluded from the cost of acquisition and recognized as an expense in the year when incurred as within the “general and administrative expenses” line item in the consolidated statement of operations. Cumulative acquisition related costs in respect of the acquisition amounted to €5.2 million of which €0.8 million, €3.6 million and €0.7 million incurred in respectively 2009, 2010 and 2011. The gain from a bargain purchase of €109,279 was recognized upon completion of the acquisition of the SEAS entities in 2011. The gain from a bargain purchase on acquisition was mainly attributable to depressed market value of the acquired business because of years of losses due to challenging economic environment and the bad global economic environment during the period of negotiation of the acquisition. Estimated future amortization expense associated with the intangible assets acquired SEAS at December 31, 2012 is as follows: 2013

1,012

2014

1,012

2015

1,012

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-20

NOTE 4  |  financial statements

The following unaudited pro forma summary presents information as if SEAS had been acquired as of January 1, 2009, the first day of the Company’s 2009 fiscal year. In addition to an adjustment to amortization expense to reflect the value of intangibles recorded for this acquisition. No adjustment was made to reduce historical interest income to reflect the Company’s use of available cash in this acquisition. The proforma amounts do not reflect any benefits from economies that might be achieved from combining the operations of the two companies. The pro forma information presented below (in thousands, except per share data) does not necessarily reflect the actual results that would have occurred had the companies been combined during the periods presented, nor is it necessarily indicative of the future results of operations of the combined companies. DECEMBER 31,

Net sales Net income

2009

2010

808,042

1,571,357

(185,001)

271,240

Basic earnings per share

€(3.27)

€2.40

Diluted earnings per share

€(3.27)

€2.33

Since the acquisition date, January 7, 2011, SEAS contributed €444 million to net sales and €53 million to result from operations as reported in the consolidated statement of operations for the year ended December 31, 2011.

4- CASH AND CASH EQUIVALENTS At December 31, 2012, cash and cash equivalents of the Company’s subsidiary ASMPT amounted to €145,414, which are restricted to be used only in the operations of ASMPT. No further restrictions on usage of cash and cash equivalents exist. The carrying amount approximates their fair value.

5- PLEDGED BANK DEPOSIT Pursuant to the Master Sale and Purchase Agreement of the acquisition (see note 3) entered into between ASMPT and Siemens Aktiengesellschaft, ASMPT provided a bank guarantee to Siemens AG upon completion of the acquisition for the purpose of securing certain obligations to an amount of €20 million. Per December 31, 2012, a bank deposit amounting to €20 million is pledged for the purpose of securing the bank guarantee. The pledged bank deposit will be released on January 7, 2015. The pledged bank deposit carried interest at market rates of 0.1% (2011: 0.95%) per annum.

6- ACCOUNTS RECEIVABLE The carrying amount of accounts receivable is as follows: DECEMBER 31, 2011

DECEMBER 31, 2012

264,224

223,546

Overdue <30 days

31,529

38,666

Overdue 31-60 days

12,126

13,537

Overdue 61-120 days

13,579

13,954

Current

Overdue >120 days

TOTAL

9,433

15,137

330,891

304,840

In the total amount of accounts receivable for the year ended December 31, 2012, an amount of €42,588 relates to notes receivable.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 7  |  financial statements

F-21

The changes in the allowance for doubtful accounts receivable are as follows: DECEMBER 31,

BEGINNING BALANCE Charged to selling, general and administrative expenses Utilization Foreign currency translation effect

ENDING BALANCE

2011

2012

(9,304)

(7,601)

(356)

(2,825)

2,109

1,841

(50)

34

(7,601)

(8,551)

The carrying amount of the accounts receivable approximates their fair value.

7- INVENTORIES Inventories consist of the following: DECEMBER 31,

 

2011

2012

Components and raw materials

189,174

180,575

Work in process

175,564

196,313

Finished goods

70,918

91,799

435,656

468,687

TOTAL INVENTORIES, GROSS Allowance for obsolescence

TOTAL INVENTORIES, NET

(58,989)

(65,287)

376,667

403,400

The changes in the allowance for obsolescence are as follows: BALANCE JANUARY 1, 2010 Charged to cost of sales Utilization

(46,939) (3,248) 14,628

Foreign currency translation effect

(5,742)

BALANCE DECEMBER 31, 2010

(41,301)

Charged to cost of sales

(28,122)

Utilization

12,526

Foreign currency translation effect

(2,092)

BALANCE DECEMBER 31, 2011

(58,989)

Charged to cost of sales

(10,858)

Utilization Foreign currency translation effect

BALANCE DECEMBER 31, 2012

3,569 991 (65,287)

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-22

NOTE 8  |  financial statements

8- OTHER INTANGIBLE ASSETS Other intangible assets include purchased technology from third parties and software developed or purchased (including licences) for internal use. The changes in the amount of other intangible assets are as follows:

SOFTWARE

PURCHASED TECHNOLOGY AND OTHER INTANGIBLE ASSETS

TOTAL

14,433

3,192

17,625

3,417

3,682

7,099

-

-

-

44

4,782

4,826

At cost: BALANCE JANUARY 1, 2011 Additions Reclassification Acquisitions Disposals

(104)

(47)

(151)

Foreign currency translation effect

252

603

855

BALANCE DECEMBER 31, 2011

18,042

12,212

30,254

BALANCE JANUARY 1, 2012

7,809

10,785

10,820

Amortization for the year

2,901

2,784

4,471

Accumulated amortization:

Disposals

(104)

(10)

(151)

Foreign currency translation effect

179

(113)

338

10,785

13,446

15,478

DECEMBER 31, 2011

7,257

7,519

14,776

DECEMBER 31, 2012

6,900

7,015

13,915

BALANCE DECEMBER 31, 2012 Other intangible assets, net:

Other intangible assets are amortized over their useful lives of 3 to 7 years. Estimated amortization expenses relating to other intangible assets are as follows: 2013

5,696

2014

4,046

2015

2,499

2016

1,182

2017

492 13,915

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-23

NOTE 9  |  financial statements

9- GOODWILL The changes in the carrying amount of goodwill are as follows: FRONT-END

BACK-END

TOTAL

11,193

39,622

50,815

Foreign currency translation effect

-

1,316

1,316

BALANCE DECEMBER 31, 2011

11,193

40,938

52,131

BALANCE JANUARY 1, 2011

Foreign currency translation effect

456

(699)

(243)

11,649

40,239

51,888

2011

2012

ASM Microchemistry Oy

3,560

3,560

ASM Genitech Korea Ltd

7,633

8,089

ASM Pacific Technology Ltd

40,938

40,239

TOTAL

52,131

51,888

BALANCE DECEMBER 31, 2012

The allocation of the carrying amount of goodwill is as follows:   Front-end segment:

Back-end segment:

We perform an annual impairment test at December 31 of each year or if events or changes in circumstances indicate that the carrying amount of goodwill exceeds its fair value. Our Front-end impairment test and the determination of the fair value is based on a discounted future cash flow approach that uses our estimates of future revenues, driven by assumed market growth and estimated costs as well as appropriate discount rates. Our Back-end impairment test is based on the market value of the listed shares of ASMPT. The material assumptions used for the fair value calculation of the reporting unit are:

››An average discount rate of 22.7% (2011: 20.5%) representing the pre-tax weighted average cost of capital. This relative high rate is a consequence of the current situation whereby certain production lines are in the early phase of the product lifecycle, hence reflecting a higher risk.

››For Front- end external market segment data, historical data and strategic plans to estimate cash flow growth per product line have been used.

››Cash flow calculations are limited to five years of cash flow; after these years perpetuity growth rates are set based on market maturity of the products. For maturing product the perpetuity growth rates used are or less and for enabling technology products the rate used is or less.

››For Back-end the market value of the listed shares of ASMPT on the Hong Kong Stock exchange has been used in our analysis. These estimates are consistent with the plans and estimated costs we use to manage the underlying business. Based on this analysis management believes that as per December 31, 2012 the fair value of the reporting units exceeded the carrying value.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 10  |  financial statements

F-24

10- PROPERTY, PLANT AND EQUIPMENT The changes in the amount of property, plant and equipment are as follows:

LAND, BUILDINGS AND LEASEHOLD IMPROVEMENTS

MACHINERY, EQUIPMENT, FURNITURE AND FIXTURES

TOTAL

131,431

409,889

541,320

At cost: BALANCE JANUARY 1, 2011 Capital expenditures

38,993

50,226

89,219

Acquisition

276

11,249

11,525

Impairment

(1,416)

(6,622)

(8,038)

Retirements and sales

(9,361)

(30,692)

(40,053)

(235)

235

-

Reclassification Foreign currency translation effect

8,186

20,665

28,851

BALANCE DECEMBER 31, 2011

167,874

454,950

622,824

23,355

44,807

68,162

Retirements and sales

(278)

(10,253)

(10,531)

Reclassification

428

(748)

(320)

Capital expenditures

Foreign currency translation effect

BALANCE DECEMBER 31, 2012

(3,499)

(13,127)

(16,626)

187,880

475,629

663,509

74,216

269,167

343,383

Accumulated Depreciation: BALANCE JANUARY 1, 2011 Depreciation for the year

9,170

30,815

39,985

Retirements and sales

(9,310)

(26,920)

(36,230)

Foreign currency translation effect

3,020

12,486

15,506

BALANCE DECEMBER 31, 2011

77,096

285,548

362,644

Depreciation for the year

12,420

35,282

47,702

(81)

(9,558)

(9,639)

3

(323)

(320)

Retirements and sales Reclassification Foreign currency translation effect

BALANCE DECEMBER 31, 2012

(2,061)

(10,253)

(12,314)

87,377

300,696

388,073

90,778

169,402

260,180

100,503

174,933

275,436

Property, Plant and Equipment, net: BALANCE DECEMBER 31, 2011

BALANCE DECEMBER 31, 2012

Useful lives in years: Buildings and leasehold improvements

10-25

Machinery and equipment

2-10

Furniture and fixtures

2-10

In 2011 the Company recorded an impairment charge of 8,038 related to machinery and equipment. The Company impaired certain items of property, plant and equipment related to the Back-end lead-frame business. The impairment loss of 8,038 was recognized based on the recoverable amount of the relevant assets.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 11  |  financial statements

F-25

11- ASSETS HELD FOR SALE The changes in the carrying value of assets held for sale are as follows:

JAPAN

THE  NETHERLANDS

TOTAL

6,070

277

6,347

Foreign currency translation effect

515

-

515

BALANCE DECEMBER 31, 2011

6,585

277

6,862

BALANCE JANUARY 1, 2011

Foreign currency translation effect

BALANCE DECEMBER 31, 2012

(864)

-

(864)

5,721

277

5,998

In 2009 the decision was made to dispose certain items of property, plant and equipment. These assets represent a carrying value as per December 31, 2012 of 5,998. The assets held for sale are located in Japan and The Netherlands. In Japan (Tama) a building that was used for research and development activities was ceased to be used in December 2009. The carrying value of €4.8 million is lower than the fair value less cost to sell. Also in Japan, a piece of land that was purchased to build a research and development center has now been regarded as held for sale. The carrying value of €0.9 million is below the expected selling price. The expected selling prices were determined, based on various inputs and considerations, including an appraisal from an outside firm performed during 2011. In the Netherlands the former ASMI head office located in Bilthoven has been regarded as held for sale. The carrying value of €0.3 million is lower than the fair value less cost to sell. The expected selling prices were determined, based on various inputs and considerations, including an appraisal from an outside firm performed during 2009. During 2012 both the Japanese and the Dutch properties were under the interest of the market. Though the assets have not been sold yet, mainly as a result of the economical circumstances and the earthquake in Japan in 2011 leading to a low level of interest of the markets in these assets, the outside firms maintain the expected selling prices.

12- EVALUATION TOOLS AT CUSTOMERS The changes in the amount of evaluation tools are as follows: BALANCE JANUARY 1, 2011 Evaluation tools shipped

6,644 14,901

Depreciation

(2,518)

Evaluation tools sold

(7,830)

Transfer from inventories

1,913

Foreign currency translation effect

877

BALANCE DECEMBER 31, 2011

13,987

Evaluation tools shipped

11,120

Depreciation

(3,798)

Evaluation tools sold

(3,277)

Foreign currency translation effect

BALANCE DECEMBER 31, 2012

(1,110) 16,922

Useful lives in years:

Evaluation tools are systems delivered to customers under evaluation agreements. Evaluation tools are recorded at cost and depreciated over their useful life (5 years). The depreciation period may be shorter, depending on circumstances. The depreciation expenses are reported as Cost of sales.

5

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 13  |  financial statements

F-26

13- INVESTMENTS The investment of €278 as per December 31, 2012 reflects the net equity value of the interest in Levitech BV Resulting from the management buy-out in 2009 of the RTP business, ASM International NV obtained a 20% interest in Levitech BV. The changes in the investment are as follows: 1,044

BALANCE DECEMBER 31, 2011 Share of result

(766) 278

BALANCE DECEMBER 31, 2012

14- NOTES PAYABLE TO BANKS Information on notes payable to banks is as follows:  

 

DECEMBER 31, 2011

2012

7,734

-

ASMPT

32,946

61,675

TOTAL

40,680

61,675

Short-term debt outstanding in: Japan

Short-term debt outstanding in local currencies is as follows (in thousands):  

 

DECEMBER 31, 2011

2012

Japanese yen

775,000

-

Hong Kong dollar

331,144

630,686

ASMI and its individual subsidiaries borrow under separate short-term lines of credit with banks in the countries where they are located. The lines contain general provisions concerning renewal and continuance at the option of the banks. At December 31, 2012, short-term debt bears interest at LIBOR plus a margin per annum or HIBOR plus a margin per annum, at a weighted average effective interest rate of 1.64% (2011: 1.83%) per annum. Total short-term lines of credit amounted to €337,567 at December 31, 2012. The amount outstanding at December 31, 2012 was €61,675 and the undrawn portion totaled €275,893. The undrawn portion includes the Company’s standby revolving credit facility of €150,000 with a consortium of banks. The facility is available through July 31, 2015. Once the facility is used, this usage is secured by a portion of the Company’s shareholding in ASMPT. The undrawn portion further includes €125,893 for ASMPT, which amount is restricted to be used only in the operations of ASMPT. The credit facility of €150,000 includes two financial covenants: a minimum long-term committed capital and a total net debt/equity ratio. These financial covenants are measured twice each year, at June 30 and December 31. The minimum level of long-term committed capital for the year ended December 31, 2012 was €320 million, the long-term committed capital as per that date was €742 million. Long-term committed capital is defined as the consolidated total equity. The net debt/equity ratio should not exceed 2.0, whereby equity is defined as consolidated total equity. For the year ended December 31, 2012 net cash was €145 million and total equity €742 million. The Company is in compliance with these financial covenants as of June 30, 2012 and as of December 31, 2012.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-27

NOTE 15  |  financial statements

ASMI does not provide guarantees for borrowings of ASMPT and there are no guarantees from ASMPT to secure indebtedness of ASMI. Under the rules of the Stock Exchange of Hong Kong, ASMPT is precluded from providing loans and advances other than trade receivables in the normal course of business, to ASMI or its non ASMPT subsidiaries.

15- PROVISION FOR WARRANTY The changes in the amount of provision for warranty are as follows: 8,273

BALANCE JANUARY 1, 2011 Charged to cost of sales

29,809

Acquisition SEAS

33,733

Deductions

(24,822)

Foreign currency translation effect

2,519

BALANCE DECEMBER 31, 2011

49,512

Charged to cost of sales

26,527

Deductions

(31,948)

Foreign currency translation effect

(170)

BALANCE DECEMBER 31, 2012

43,921

Non-current portion

(5,298)

Current portion

38,623

Costs of warranty include the cost of labor, material and related overhead necessary to repair a product during the warranty period. The warranty period is usually one to two years. The Company accrues for the estimated cost of the warranty on its products shipped in the provision for warranty, upon recognition of the sale of the product. The costs are estimated based on actual historical expenses incurred and on estimated future expenses related to current sales, and are updated periodically. Actual warranty costs are charged against the provision for warranty.

16- ACCRUED EXPENSES AND OTHER Accrued expenses and other consist of the following: DECEMBER 31,

  Advance payments from customers Accrual for onerous contracts Deferred revenue Accrual for salaries, wages and related taxes and expenses Interest payable Payables arising from acquisition of property, plant and equipment Other

2011

2012

29,621

29,350

446

125

6,340

5,938

60,039

56,246

1,881

307

20,509

14,027

34,055

26,067

152,891

132,060

The accrual for onerous contracts relates to operating lease contracts for buildings for which no economic benefits are expected. The accrual for onerous contracts is expected to be utilized by 2013.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-28

NOTE 17  |  financial statements

17- LONG-TERM DEBT Long-term debt consists of the following: DECEMBER 31,

 

2011

2012

17,764

-

-

18,948

1,746

-

Term loans: -- Japan, 1.2-2.0%, due 2012 – 2014 -- ASMPT LIBOR +2.5% Mortgage loans: -- Japan, 2.1-2.2%, due 2012 Capital lease commitments: -- Japan, 1.8%, due 2012

Current portion Non-current portion

141

-

19,651

18,948

(4,332)

(6,316)

15,319

12,632

Long-term debt, including current portion, in local currencies is as follows (in thousands):  

  Japanese yen US dollar

DECEMBER 31, 2011

2012

1,969,097

-

-

25,000

Aggregate annual principal repayments for years subsequent to December 31, 2012 are: 2013

6,316

2014

6,316

2015

6,316 18,948

Capital lease commitments relate to commitments for equipment and machinery.

18- CONVERTIBLE SUBORDINATED DEBT As per 1 January 2009, ASMI applies ASC 815 “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”. Our convertible bonds initially due 2011 and 2014, included a component that creates a financial liability to the Company and a component that grants an option to the holder of the convertible note to convert it into common shares of the Company (“conversion option”). ASC 815 requires separate recognition of these components. For the conversion options of the convertible bonds due 2011 the accounting was different from that for the conversion option of the convertible bonds due 2014. As the convertible bonds due 2011 were denominated in USD and the ASM International common shares in which they can be converted to are denominated in Euro, these conversion options were recognized as a liability measured at fair value. The conversion option was measured at fair value through the income statement. For the conversion options of the convertible bonds due 2014 the fixed–for-fixed principle is met as both the debt instrument (the bond) and the Company’s equity shares, in which they can be converted to, are denominated in the same currency (Euro). Based on this criterion the conversion option qualifies as permanent equity.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-29

NOTE 18  |  financial statements

The fair value of the liability component is estimated using the prevailing market interest rate at the date of issue, for similar non-convertible debt. Subsequently, the liability is measured at amortized cost. The interest expense on the liability component is calculated by applying the market interest rate for similar non-convertible debt at the date of issue to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible subordinated notes, thus creating a non-cash interest expense. For the financial year 2012 this accretion interest expense was €4,469 (2011: €4,401). On October 8, 2012 we initiated a full redemption for all of the outstanding principle balance of our 6.50% Convertible Subordinated notes due 2014, as per November 27, 2012. This proposal for redemption resulted in a full conversion of convertible notes into 9,074,396 common shares. On December 31, 2010 we initiated a full redemption for all of the outstanding principal balance of our 4.25% Convertible Subordinated notes due 2011, as per February 15, 2011. This proposal for redemption resulted in an almost full conversion of convertible notes into common shares. Until conversion, the conversion option was valued at fair value resulting in a non-cash loss during 2011 of €4.4 million. The changes in the outstanding amounts of convertible subordinated debt are as follows: 5.25% CONVERTIBLE SUBORDINATED NOTES DUE 2010:

4.25% CONVERTIBLE SUBORDINATED NOTES, DUE 2011

6.50% CONVERTIBLE UNSECURED NOTES, DUE 2014

-

111,682

150,000

Conversion component at date of issuance

-

(18,329)

(23,601)

LIABILITY COMPONENT AT DATE OF ISSUANCE

-

93,353

126,399

BALANCE JANUARY 1, 2011

-

32,438

130,804

-- Conversion of notes

-

(32,536)

-

-- Accrual of interest

-

126

4,274

-- Foreign currency translation effect

-

(29)

-

BALANCE DECEMBER 31, 2011

-

-

135,078

-- Conversion of notes

-

-

(139,407)

-- Accrual of interest

-

-

4,329

-- Foreign currency translation effect

-

-

-

BALANCE DECEMBER 31, 2012

-

-

-

Reported as non-current liabilities

-

-

-

Reported as current liabilities

-

-

-

5.25% CONVERTIBLE SUBORDINATED NOTES DUE 2010:

4.25% CONVERTIBLE SUBORDINATED NOTES, DUE 2011

6.50% CONVERTIBLE UNSECURED NOTES, DUE 2014

Balance December 31, 2011

-

-

n/a

Balance December 31, 2012

-

-

-

Liability at redemption value at date of issuance

Nominal value in US$

Nominal value in € Balance December 31, 2011

-

-

150,000

Balance December 31, 2012

-

-

-

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 18  |  financial statements

F-30

4.25% CONVERTIBLE SUBORDINATED NOTES, DUE 2011 In December 2004, ASMI issued US$150.0 million in principal amount of 4.25% convertible subordinated notes due in December 2011 in a private offering. Interest on the notes was payable on June 6 and December 6 of each year. The notes were subordinated in right of payment to all of the Company’s existing and future senior indebtedness. The notes were convertible, at the option of the holder, into shares of the Company’s common stock initially at a conversion rate of 48.0307 shares of common stock for each US$1,000 principal amount of notes, subject to adjustment in certain circumstances. This was equivalent to an initial conversion price of US$20.82 per share. Effective December 6, 2007, the conversion price was adjusted for the cash dividend paid in September 2007 to US$20.71 per share. On or after December 6, 2007, the Company could redeem any of the notes at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest, if the closing price of the Company’s common shares exceeded 130% of the conversion price for at least 20 trading days in any period of 30 consecutive trading days. In the event of a change in control, the Company could be required to repurchase the notes. In 2007, US$14.6 million of the US$150.0 million convertible subordinated notes were repurchased. The US$14.6 million were repurchased for a market value of US$19.4 million. The loss for the early extinguishment of the notes of €3,740, which includes the premium paid above par and the write-off of unamortized issuance costs, was recorded as expense from early extinguishment of debt in the Consolidated Statement of Operations for the year 2007. In 2008 US$7.7 million in convertible subordinated notes were converted into 372,426 common shares of which 102,509 consisted of the treasury shares previously purchased by the Company and 269,917 newly issued common shares. In 2009 US$26.3 million convertible subordinated notes were repurchased for a market value of US$33.7 million. The loss from the early extinguishment of the notes of €1,548 thousand, which includes the write-off of unamortized issuance costs and the amortization of unamortized interest expenses, was recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2009. In 2010 US$56.5 million convertible subordinated notes was repurchased for a market value of US$74.6 million. The loss from the early extinguishment of the notes of €3,609, which includes the write-off of unamortized issuance costs and the amortization of unamortized interest expenses, was recorded as a loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2010. In 2010 US$7 thousand in convertible subordinated notes were converted into 337 common shares, newly issued by the Company. On January 3, 2011 we announced that we initiated a full redemption for all of the outstanding principal balance of the 4.25% Convertible Subordinated Notes due 2011. The Notes which were not converted into common shares were redeemed on February 16, 2011, at a redemption price of 100.00% of the principal amount thereof, plus accrued and unpaid interest to February 15, 2011. The Notice of Redemption for the Notes was sent to all registered holders on January 3, 2011.

6.50% CONVERTIBLE SUBORDINATED NOTES, DUE 2014 In November 2009, ASMI issued €150.0 million in principal amount of 6.50% convertible unsecured notes due in November 2014 in a private offering. Interest on the notes is payable on February 6, May 6, August 6 and November 6 of each year. The notes are subordinated in right of payment to all of the Company’s existing and future senior indebtedness. The notes are convertible into shares of the Company’s common stock only, initially at a conversion rate of 58.5851 shares of common stock for each €1,000 principal amount of notes, subject to adjustment in certain circumstances. This is equivalent to an initial conversion price of €17.09 per share. As a result of the dividend paid on common shares during 2011 and 2012 the conversion price was adjusted to €16.85 and €16.53 respectively. On or after November 27, 2012, the Company could redeem any of the notes at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest, if the closing price of the Company’s common shares had exceeded 130% of the conversion price for at least 20 trading days in any period of 30 consecutive trading days. On October 8, 2012 we announced that we initiated a full redemption for all of the all outstanding 6.5% senior unsecured convertible bonds on November 27, 2012 at their principal amount, together with accrued but unpaid interest. The Notice of Redemption for the Notes was sent to all registered holders on October 8, 2012. Bondholders could exercise their right to convert their Bonds into

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 18  |  financial statements

F-31

ordinary shares ultimately on November 20, 2012. This proposal for redemption resulted in a full conversion of convertible notes into 9,074,396 common shares.

CONVERSION OPTION The conversion component of the subordinated notes qualifying as a liability was measured at fair value. The fair values for these options were determined using a Black-Scholes option valuation model.

DEBT ISSUANCE COSTS The fees incurred for the issuance of the convertible subordinated notes are included as debt issuance costs in the Consolidated Balance Sheet and amortized by the effective interest method as interest expense during the economic life of the debts. Upon the conversion of the 6.50% convertible unsecured notes the balance of the unamortized debt issuance costs impaired, an amount of €2,209 was recognized as loss from early extinguishment of debt in the Consolidated Statement of Operations for the year 2012.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 19  |  Financial statements

F-32

19- SHAREHOLDERS’ EQUITY COMMON SHARES, PREFERRED AND FINANCING PREFERRED SHARES The authorized capital of the Company amounts to 110,000,000 shares of €0.04 par value common shares, 118,000 shares of €40 par value preferred shares and 8,000 shares of €40 par value financing preferred shares, of which 63,095,986 common shares, no preferred and no financing preferred shares were outstanding as at December 31, 2012. All shares have one vote per €0.04 par value. Treasury shares held by the Company cannot be voted on. Financing preferred shares are designed to allow ASMI to finance equity with an instrument paying a preferred dividend, linked to EURIBOR loans and government loans, without the dilutive effects of issuing additional common shares. Preferred and financing preferred shares are issued in registered form only and are subject to transfer restrictions. Essentially, a preferred or financing preferred shareholder must obtain the approval of the Company’s Supervisory Board to transfer shares. If the approval is denied, the Supervisory Board will provide a list of acceptable prospective buyers who are willing to purchase the shares at a cash price to be fixed by consent of the Supervisory Board and seller within two months after the approval is denied. If the transfer is approved, the shareholder must complete the transfer within three months, at which time the approval expires. Preferred shares are entitled to a cumulative preferred dividend based on the amount paid-up on such shares. Financing preferred shares are entitled to a cumulative dividend based on the par value and share premium paid on such shares. The preferred dividend on the amount paid-up was €5 for the year 2009, since 2009 no preferred dividend was paid. In the event preferred shares are issued, the Management Board must, within two years after such preferred shares were issued, submit to the general meeting a proposal to annul the preferred shares. On May 14, 2008, 21,985 preferred shares were issued to Stichting Continuïteit ASM International (“Stichting”). The amount paid-up by Stichting was €220, which is the equivalent of one/fourth of the nominal value of the preferred shares. On May 14, 2009 the Annual Meeting of Shareholders resolved to cancel the outstanding preferred shares and to reissue an option to Stichting Continuïteit to acquire preferred shares. During 2008, ASM engaged Lehman Bros (“Lehman”). to repurchase ordinary ASMI shares on the Euronext and Nasdaq markets on behalf of ASMI. As of September 15, 2008, at the time it went into bankruptcy administration, Lehman reported that it had purchased and held on our behalf 2,552,071 shares, which were accounted for as treasury shares accordingly. ASM filed a submission with the Lehman administrators giving notice of the shares held in custody by Lehman. At ASMI’s May 2009 Annual General Meeting, our shareholders resolved to cancel all of these treasury shares which, accordingly, was accounted for in our 2009 Annual Report as a reduction of the number of outstanding shares. Lehman was notified of the cancellation of shares at the time. In September 2010, Lehman’s administrators notified us that there is a possible shortfall in the number of shares held by Lehman of 479,279 shares (out of the 2,552,071 shares), which cannot currently be accounted for by Lehman. During 2011 we received further information based on which we conclude that the possible shortfall in the number of shares held by Lehman is now reduced to 246,983 shares. The Lehman administrators also reported a segregated collateral cash account of US$6,759, that ASMI may be entitled to in the absence of the shares. We have not been able to obtain additional information to confirm and understand the potential shortfall of shares or our ability to recover the US$6,759 from the Lehman bankruptcy proceedings in lieu of the shares. Accordingly, we are uncertain at this time as to the accuracy of the shortfall of shares, our ability to claim the collateral cash sum to cover the value of any such discrepancy, and our entitlement to all or a portion of such sum when distributions are determined and made by the administrator since there is likely to also be a shortfall in Lehman assets subject to proprietary rights. Given the magnitude of the overall Lehman administration, we believe it may take several years to obtain clarity or resolution about the potential shortfall or claim to cash. ASMI is in the process of filing a claim with the Lehman administrators to safeguard our interests. Considering the factual and legal uncertainties, it is premature to conclude that the 246,983 shares should still be considered as outstanding or that ASMI has a US$6,759 receivable from Lehman. ASMI has, therefore, neither reversed the cancellation of these shares

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-33

NOTE 19  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

that we recorded in 2009, nor recorded a receivable from Lehman. If the shares would be considered as outstanding, the negative impact on our basic and diluted earnings per share (€1) as at December 31, 2012 would have been €0.001 and €0.001 respectively per share.

RETAINED EARNINGS Distributions to common shareholders are limited to the extent the total amount of shareholders’ equity exceeds the amounts of nominal paid-in share capital (exclusive any share premium) and any reserves to be formed pursuant to law or the Company’s articles of association. The amounts are derived from the Statutory Financial Statements of ASM International NV. Results on dilution of investments in subsidiaries are accounted for directly in equity. For 2012 and 2011 these dilution gains were €7,284 and €5,266 respectively.

ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in the amount of accumulated other comprehensive loss are as follows:

FOREIGN CURRENCY TRANSLATION EFFECTS

UNREALIZED GAINS (LOSSES) ON DERIVATIVE INSTRUMENTS, NET OF TAX

UNRECOGNIZED PENSION ­OBLIGATIONS, NET OF TAX

TOTAL

(33,687)

13

(565)

(34,239)

13,357

-

-

13,357

Increase in fair value of derivative instruments, net of tax

-

(13)

-

(13)

Actuarial loss

-

-

744

744

BALANCE JANUARY 1, 2011 Foreign currency translation effect on translation of foreign operations

Total change in accumulated other comprehensive loss

13,357

(13)

744

14,088

(20,330)

-

179

(20,151)

(6,994)

-

-

(6,994)

Increase in fair value of derivative instruments, net of tax

-

-

-

-

Actuarial loss

-

-

(1,797)

(1,797)

BALANCE DECEMBER 31, 2011 Foreign currency translation effect on translation of foreign operations

Total change in accumulated other comprehensive loss

BALANCE DECEMBER 31, 2012

(6,994)

-

(1,797)

(8,791)

(27,324)

-

(1,618)

(28,942)

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS On May 15, 2012, the General Meeting of Shareholders authorized the Company, for an 18-month period, to be calculated from the date of the General Meeting, to repurchase its own shares up to the statutory maximum, at a price at least equal to the shares’ nominal value and at most a price equal to 110% of the share’s average closing price according to the listing on the Euronext Amsterdam stock exchange during the five trading days preceding the purchase date. Per March 15, 2013, 1,500,000 shares were bought back under the authorization of May 15, 2012. The maximum of shares that may yet be purchased under the program takes into account the treasury shares held by the Company (at December 31, 2012 there were no treasury shares held) and the maximum number of common shares which the Company can hold according to its Articles of Association. This maximum is 10% of the number of common shares issued.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 20  |  Financial statements

F-34

20- EMPLOYEE BENEFITS PENSION PLANS Front-end For the Front-end segment the Company has retirement plans covering substantially all employees. The principal plans are defined contribution plans, except for the plans of the Company’s operations in the Netherlands and Japan.

Multi-employer plan The Company’s employees of the Front-end segment in the Netherlands, approximately 179 employees, participate in a multi-employer union plan, “Bedrijfstakpensioenfonds Metalektro”, (“PME”) determined in accordance with the collective bargaining agreements effective for the industry in which ASMI operates. This collective bargaining agreement has no expiration date. This multi-employer union plan covers approximately 1,220 companies and 150,000 contributing members. ASMI’s contribution to the multi-employer union plan is less than 5.0% of the total contribution to the plan as per the annual report for the year ended December 31, 2012. The plan monitors its risks on a global basis, not by company or employee, and is subject to regulation by Dutch governmental authorities. By law (the Dutch Pension Act), a multi-employer union plan must be monitored against specific criteria, including the coverage ratio of the plan assets to its obligations. This coverage ratio must exceed 104.25% for the total plan. Every company participating in a Dutch multi-employer union plan contributes a premium calculated as a percentage of its total pensionable salaries, with each company subject to the same percentage contribution rate. The premium can fluctuate yearly based on the coverage ratio of the multi-employer union plan. The pension rights of each employee are based upon the employee’s average salary during employment. ASMI’s net periodic pension cost for this multi-employer union plan for any period is the amount of the required contribution for that period. A contingent liability may arise from, for example, possible actuarial losses relating to other participating entities because each entity that participates in a multi-employer union plan shares in the actuarial risks of every other participating entity or any responsibility under the terms of a plan to finance any shortfall in the plan if other entities cease to participate. The coverage ratio of the multi-employer union plan increased to 93.9% as of December 31, 2012 (December 31, 2011: 90.0%). Because of the low coverage ratio PME prepared and executed a so-called “Recovery Plan” which was approved by De Nederlandsche Bank, the Dutch central bank, which is the supervisor of all pension companies in the Netherlands. Due to the low coverage ratio and according the obligation of the “Recovery Plan” the pension premium percentage is 24.0% in both 2013 and 2012. The coverage ratio is calculated by dividing the plan assets by the total sum of pension liabilities and is based on actual market interest. The Company accounts for the multi-employer plan as if it were a defined contribution plan as the manager of the plan, PME, stated that its internal administrative systems do not enable PME to provide the Company with the required Company-specific information in order to account for the plan as a defined benefit plan. The Company’s net periodic pension cost for the multi-employer plan for a fiscal period is equal to the required contribution for that period.

Defined benefit plan The Company’s employees of the Front-end segment in Japan participate in a defined benefit plan. The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at December 31, 2012. The present value of the defined benefit obligation and the related current service cost and passed service cost were measured using the Projected Unit Credit Method. The funded status of the plan and the amounts not yet recognized in the Consolidated Statement of Operations and the amounts recognized in the Consolidated Balance Sheet are as follows:

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 20  |  Financial statements

F-35

DECEMBER 31,

  Defined benefit obligations Fair value of plan assets

FUNDED STATUS DEFICIT

2011

2012

(9,485)

(8,357)

4,090

4,794

(5,395)

(3,563)

The changes in defined benefit obligations and fair value of plan assets are as follows: DECEMBER 31,

 

2011

2012

Defined benefit obligations Balance January 1

8,805

9,485

-- Current service cost

664

731

-- Interest on obligation

107

121

(53)

(436)

-- Benefits paid

(176)

(423)

-- Curtailment and settlement

(630)

-

-- Actuarial losses (gains)

-- Foreign currency translation effect

768

(1,121)

9,485

8,357

3,189

4,090

-- Expected return on plan assets

103

144

-- Actuarial losses

(219)

52

-- Company contribution

852

1,544

-- Benefits paid

(176)

(423)

BALANCE DECEMBER 31 Fair value of plan assets Balance January 1

-- Foreign currency translation effect

BALANCE DECEMBER 31

341

(613)

4,090

4,794

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-36

NOTE 20  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

The net periodic benefit cost consists of the following: DECEMBER 31,

 

2010

2011

2012

Current service cost

629

664

731

Interest on obligation

139

107

121

(77)

(103)

(144)

1

6

46

Expected return on plan assets Amortization deferred actuarial loss Amortization of past service cost

NET PERIODIC PENSION BENEFIT COST

-

(12)

(55)

692

662

699

The actual return on plan assets was €(116) and €196 for the years ended December 31, 2011 and 2012 respectively. The assumptions in calculating the actuarial present value of benefit obligations and net periodic benefit cost are as follows: DECEMBER 31,

 

2010

2011

2012

Discount rate for obligations

1.25%

1.25%

1.55%

Expected return on plan assets

3.00%

3.00%

3.00%

Expected rate of compensation increase

2.93%

2.93%

2.93%

The allocation of plan assets is as follows: DECEMBER 31, 2011

2012

Equity

940

23%

1,087

23%

Bonds

2,488

61%

2,957

62%

Loans

368

9%

463

10%

Real estate Other

66

2%

72

2%

228

6%

215

4%

4,090

100%

4,794

100%

The investment strategy is determined based on an asset-liability study in consultation with investment advisers and within the boundaries given by regulatory bodies for pension funds. Equity securities consist primarily of publicly traded Japanese companies and common collective funds. Publicly traded equities are valued at the closing prices reported in the active market in which the individual securities are traded (level 1). Common collective funds are valued at the published price (level 1) per share multiplied by the number of shares held as of the measurement date. Fixed income (bonds and loans) consists of corporate bonds, government securities and common collective funds. Corporate and government securities are valued by third-party pricing sources (level 2). Common collective funds are valued at the net asset value per share (level 2) multiplied by the number of shares held as of the measurement date. Real estate fund and other values are primarily reported by the fund manager and are based on valuation of the underlying investments (level 3) which include inputs such as cost, discounted cash flows, independent appraisals and market based comparable data. The plan assets do not include any of the Company’s shares.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-37

NOTE 20  |  Financial statements

Back-end For the Back-end segment the ASMPT has retirement plans covering a substantial portion of its employees. The principal plans are defined contribution plans. The plans for employees in Hong Kong are registered under the Occupational Retirement Schemes Ordinance (“ORSO Scheme”) and a Mandatory Provident Fund Scheme (“MPF Scheme”) established under the Mandatory Provident Fund Schemes Ordinance in December 2000. The assets of the schemes are held separately from those of ASMPT in funds under the control of trustees. The ORSO Scheme is funded by monthly contributions from both employees and ASMPT at rates ranging from 5% to 12.5% of the employee’s basic salary, depending on the length of services with ASMPT. For members of the MPF Scheme, ASMPT contributes 5% of relevant payroll costs to the MPF Scheme subject only to the maximum level of payroll costs amounting to HK$25,000 per employee, which contribution is matched by the employees. The employees of ASMPT in Mainland China, Singapore and Malaysia are members of state managed retirement benefit schemes operated by the relevant governments. ASMPT is required to contribute a certain percentage of payroll costs to these schemes to fund the benefits. The only obligation of ASMPT with respect to these schemes is to make the specified contributions. The assets of the schemes are held separately from those of ASMPT in funds under the control of trustees, and in the case of Singapore and Malaysia, by the Central Provident Fund Board of Singapore and Employee Provident Fund of Malaysia respectively. Certain ASM AS (the former SEAS) entities operate funded defined benefits pension scheme for all their qualified employees. Pension benefits provided by ASM AS Entities are currently organized primarily through defined benefit pension plans which cover virtually all German employees and certain foreign employees of ASM AS entities. Furthermore, ASM AS entities provide other post-employment benefits, which consist of transition payments and death benefits to German employees after retirement. These predominantly unfunded other post-employment benefit plans qualify as defined benefit plans. Defined benefit plans determine the entitlements of their beneficiaries. An employee’s final benefit entitlement at regular retirement age may be higher than the fixed benefits at the reporting date due to future compensation or benefit increases. The net present value of this ultimate future benefit entitlement for service already rendered is represented by the Defined Benefit Obligation (“DBO”), which is calculated with consideration of future compensation increases by actuaries. The DBO is calculated based on the projected unit credit method and reflects the net present value as of the reporting date of the accumulated pension entitlements of active employees, former employees with vested rights and of retirees and their surviving dependents with consideration of future compensation and pension increases. In the case of unfunded plans, the recognized pension liability is equal to the DBO adjusted by unrecognized past service cost. In the case of funded plans, the fair value of the plan assets is offset against the benefit obligations. The net amount, after adjusting for the effects of unrecognized past service cost, is recognized as a pension liability or prepaid pension asset. DECEMBER 31, 2011

2012

Defined benefit obligations

(22,303)

(33,987)

Fair value of plan assets

21,364

27,035

(939)

(6,952)

FUNDED STATUS DEFICIT

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-38

NOTE 20  |  Financial statements

The changes in defined benefit obligations and fair value of plan assets are as follows: DECEMBER 31,

 

2011

2012

Defined benefit obligations Balance January 1 Obligation assumed in the acquisition of SEAS Current service cost Interest on obligation Past service costs Actuarial losses (gain)

-

22,303

22,305

-

1,502

1,691

898

1,095

-

104

(2,662)

8,532

Benefits paid

(26)

(55)

Transfers

(65)

85

Contribution participants

89

222

Foreign currency translation effect

BALANCE DECEMBER 31

262

10

22,303

33,987

-

21,364

22,199

-

Fair value of plan assets Balance January 1 Fair value of plan assets at completion date of acquisition of SEAS Expected return Actuarial (losses) gains Contribution participants Contribution employer Foreign currency translation effect

BALANCE DECEMBER 31

673

853

(1,646)

2,981

89

222

-

1,615

49

-

21,364

27,035

The actual return on plan assets was €973 for the year ended December 31, 2011 and €3,834 for the year ended December 31, 2012. The investment strategy is determined based on an asset-liability study in consultation with investment advisers and within the boundaries given by regulatory bodies for pension funds. Equity securities consist primarily of publicly traded companies and common collective funds. Publicly traded equities are valued at the closing prices reported in the active market in which the individual securities are traded (level 1). Common collective funds are valued at the published price (level 1) per share multiplied by the number of shares held as of the measurement date. Fixed income (bonds and loans) consists of corporate bonds, government securities and common collective funds. Corporate and government securities are valued by third-party pricing sources (level 2). Common collective funds are valued at the net asset value per share (level 2) multiplied by the number of shares held as of the measurement date. Real estate fund and other values are primarily reported by the fund manager and are based on valuation of the underlying investments (level 3) which include inputs such as cost, discounted cash flows, independent appraisals and market based comparable data. The plan assets do not include any of the Company’s shares. The assumptions in calculating the actuarial present value of benefit obligations and net periodic benefit cost are as follows:

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-39

DECEMBER 31,

 

2011

2012

Discount rate for obligations

5.25%

3.50%

Expected return on plan assets

4.00%

3.50%

Expected rate of compensation increase

2.26%

2.25%

The allocation of plan assets is as follows: DECEMBER 31,

  Equity Fixed income and corporate bonds Cash and other assets

2011

2012

3,418

16%

5,677

21%

17,519

82%

20,817

77%

427

2%

541

2%

21,364

100%

27,035

100%

The plan assets do not include any of the Company’s shares.

Other post-employment benefit plans ASMPT Employees who joined ASM Assembly Systems GmbH & Co KG, a subsidiary located in Germany, on or before 30 September 1983, are entitled to transition payments and death benefits. In respect of the transition payments for the first six months after retirement, participants receive the difference between their final compensation and the retirement benefits payable under the corporate pension plan. Employees of the Group in France are entitled to retirement indemnity plans as required by the French labor laws. The reconciliation of the funded status of the other post-employment benefit plans to the amount recognized in the consolidated statement of financial position per December 31, 2012 is as follows: Defined benefit obligation (unfunded)

1,414

1,634

The reconciliation of the changes in the benefit obligation for the other post-employment benefits for the year ended December 31, 2012 is as follows: DECEMBER 31,

 

2011

2012

1,470

1,414

-- Current service cost

63

45

-- Interest on obligation

65

69

Defined benefit obligations BALANCE JANUARY 1

-- Actuarial losses (gains) -- Benefits paid -- Transfers -- Foreign currency translation effect

BALANCE DECEMBER 31

(174)

372

(18)

(181)

-

(85)

8

-

1,414

1,634

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-40

The components of the principal pension benefit plans and the other post-employment benefit plans recognized in the consolidated statement of operations in respect of these defined benefit plans and other post-employment benefits for year ended December 31, 2012 are as follows:  

  Current service cost Interest on obligation

DECEMBER 31, 2011 PRINCIPAL DEFINED BENEFIT PLANS

OTHER POSTEMPLOYMENT BENEFIT PLANS

(1,502) (897)

Past service costs Expected return on plan assets

NET PERIODIC PENSION BENEFIT COST

DECEMBER 31, 2012

TOTAL

PRINCIPAL DEFINED BENEFIT PLANS

OTHER POSTEMPLOYMENT BENEFIT PLANS

TOTAL

(63)

(1,565)

(1,691)

(45)

(1,736)

(65)

(962)

(1,095)

(69)

(1,164)

-

-

-

(104)

-

(104)

673

-

673

853

-

853

(1,726)

(128)

(1,854)

(2,037)

(114)

(2,151)

Other retirement benefit obligations ASMPT The consolidated statement of financial position also includes liabilities for other retirement benefit obligations consisting of liabilities for severance payments in Italy and Austria amounting to €353 as at December 31, 2012 (2011: €317).

Retirement plan costs for ASMI consolidated ASMI expects to contribute €4,525 to the defined benefit plan in 2013. The Company expects to pay benefits for years subsequent to December 31, 2012 as follows: FRONT-END SEGMENT

BACK-END SEGMENT

TOTAL

2013

250

168

418

2014

254

143

397

2015

307

227

534

2016

431

321

752

2017

451

400

851

Aggregate for the years 2018-2022

3,495

4,259

7,754

TOTAL

5,188

5,518

10,706

Retirement plan costs for ASMI consolidated consist of the following:  

DECEMBER 31,

  Defined contribution plans

2010

2011

2012

10,423

15,990

16,952

1,207

1,111

1,420

Multi-employer plans Defined benefit plans

TOTAL RETIREMENT PLAN COSTS

673

1,844

2,779

12,303

18,945

21,151

The Company does not provide for any significant post-retirement benefits other than pensions.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 20  |  Financial statements

F-41

Employee Stock Option Plan The Company has adopted various stock option plans and has entered into stock option agreements with various employees. Under these plans, employees may purchase a specific number of shares of the Company’s common stock. Options are priced at market value in euro or US dollars on the date of grant. In 2011 a new Stock Option Plan was adopted. In the new plan to limit potential dilution, the amount of outstanding (vested and nonvested) options granted to the Management Board and to other employees will not exceed 7.5% of the issued ordinary share capital of ASMI. The new Stock Option Plan 2011 consists of two sub-plans: the ASMI Stock Option Plan for employees (ESOP) and the ASMI Stock Option for members of the Management Board (MSOP). A leading principle of the option plans is that options are issued to employees and Management Board members once per annum as at 31 December of the relevant year, this includes the possible grant to newly hired employees. The number of options outstanding under the option plans or under any other plan or arrangement in aggregate may never exceed 7.5% of ASMI’s share capital. This is in accordance with the ASMI Remuneration Policy. By resolution of the AGM of 15 May 2012 the formal authority to issue options and shares was allocated to the Management Board subject to the approval of the Supervisory Board. This authority is valid for 18 months and needs to be refreshed annually by the AGM to allow the continued application of the SOPS beyond 15 November 2013. The ESOP is principally administered by the Management Board and the MSOP is principally administered by the Supervisory Board. This complies with applicable corporate governance standards. However, the Supervisory Board has no power to represent the Company. For external purposes the Management Board remains the competent body under both SOPS. The SOPS envisage that the Supervisory Board, or – in the case of the ESOP – the Management Board with the approval of the Supervisory Board, will determine the number of options to be granted to the Management Board members and to employees as of 31 December of any financial year (the Grant date). For employees and existing Management Board members the Grant Date for all options granted is 31 December of the relevant year. In each of these situations the three year Vesting Period starts at the Grant Date. The exercise price in euro of all options issued under the SOPS is determined on the basis of the market value of the ASMI shares in as at (i.e. immediately prior to) the Grant Date. The exercise period is 4 years starting at the 3rd anniversary of the vesting date. At December 31, 2012, options to purchase 1,396,005 shares have been issued under the 2011 Stock Option Plan representing 2.2% of the shares outstanding per December 31, 2012. Under previous plans no more options to purchase shares can be issued. Under the various stock option plans a total of 2,325,088 options to purchase common stock were outstanding at December 31, 2012, expiring at various dates through 2019. The number of options outstanding at December 31, 2011 and 2012 were 1,835,067 and 2,325,088 respectively.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-42

The following is a summary of changes in options outstanding:

NUMBER OF ­OPTIONS

WEIGHTED AVERAGE ­EXERCISE PRICE IN US$

NUMBER OF ­OPTIONS

WEIGHTED AVERAGE EX­ERCISE PRICE IN €

822,900

19.00

927,258

14.89

Options granted

42,000

35.01

64,500

22.53

Options forfeited

(35,700)

19.73

(67,185)

16.97

Options exercised

(143,140)

16.83

(165,110)

13.12

BALANCE DECEMBER 31, 2010

686,060

20.40

759,463

15.74

-

-

687,114

22.33

BALANCE JANUARY 1, 2010

Options granted Options forfeited

(1,080)

16.65

-

-

Options exercised

(169,870)

19.10

(126,620)

14.82

BALANCE DECEMBER 31, 2011

515,110

20.83

1,319,957

19.08

Options granted

-

-

708,891

27.04

Options forfeited

(29,400)

20.63

(44,500)

15.49

Options exercised

BALANCE DECEMBER 31, 2012

(85,310)

20.42

(59,660)

15.08

400,400

20.94

1,924,688

22.22

The weighted average fair values of employee stock options granted in US dollars were US$17.02 in 2010. The weighted average fair values of employee stock option granted in Euro were €13.94 in 2010, €10.43 in 2011 and €12.27 in 2012. The weighted average remaining contractual life of the outstanding options granted in 2012 is 7 years at December 31, 2012. The total intrinsic value of options exercised was €2,322, €4,307 and €2,220 for the years ended December 31, 2010, 2011 and 2012 respectively. In 2010, 2011 and 2012 new shares have been issued for the exercise of 308,250 options, 296,490 options and 144,970 options respectively.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-43

NOTE 20  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

On December 31, 2012 options outstanding and options exercisable classified by range of exercise prices are:  

RANGE OF EXERCISE PRICES

OPTIONS OUTSTANDING

OPTIONS EXERCISABLE

NUMBER ­ UTSTANDING O

WEIGHTED ­AVERAGE REMAINING CONTRACTUAL LIFE

WEIGHTED AVERAGE EXERCISE PRICE

NUMBER ­ XERCISABLE E

WEIGHTED AVERAGE ­EXERCISE PRICE

 

In years

In US$

 

In US$

50,000

6.13

7.50

18,000

7.41

In US$ 1.00-10.00 10.00-15.00

66,500

3.21

11.94

41,420

11.84

15.00-20.00

30,900

4.54

18.35

18,500

17.98

20.00-30.00

211,000

4.08

24.54

117,400

25.12

30.00-40.00

42,000

4.00

35.01

16,800

35.01

400,400

4.22

20.94

212,120

21.18

US$1.00-40.00 In €

In years

In €

11,200

0.89

7.90

6,000

7.79

10.00-15.00

130,500

3.07

12.65

127,060

12.69

15.00-20.00

378,983

3.43

16.27

218,383

17.00

20.00-25.00

655,614

6.00

22.33

-

-

25.00-30.00

748,391

6.84

27.01

15,800

26.50

1,924,688

5.59

22.22

367,243

15.77

1.00-10.00

€1.00-30.00

In €

At December 31, 2012, the aggregate intrinsic value of all options outstanding and all options exercisable is €14,160 and €5,681 respectively. The cost relating to employee stock options is measured at fair value on the grant date. The fair value was determined using the Black-Scholes option valuation model with the following weighted average assumptions: DECEMBER 31,

  Expected life (years) Risk free interest rate

2011

2012

7

7

3.5%

3.28%

Dividend yield

0.32%

0.64%

Expected volatility

40.9%

41.98%

The grant date fair value of the stock options is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of stock options that will eventually vest. The impact of the true up of the estimates is recognized in the consolidated statement of operations in the period in which the revision is determined. We recorded compensation expenses of €2,526, €1,872 and €3,242 for 2010, 2011 and 2012 respectively.

Employee Share Incentive Scheme ASMPT In 1989, the shareholders of ASMPT approved a plan to issue up to 5.0 percent of the total issued shares of ASMPT to directors and employees. This plan was extended in 1999 for a term up to March 23, 2010. At the annual general meeting of the ASMPT held on 24 April 2009, the shareholders approved to extend the period of the Scheme for a term of a further 10 years up to March 23, 2020 and allow up to 7.5% of the issued share capital of ASMPT from time to time (excluding any shares subscribed for or purchased pursuant to the Scheme since 23 March 1990) to be subscribed for or purchased pursuant to the Scheme during such extended period and that no more than 3.5% of the issued share capital of ASMPT from time to time (excluding any shares subscribed for or purchased pursuant to the Scheme since 23 March 1990) to be subscribed for or purchased pursuant to the Scheme for the period from 24 March 2010 to 23 March 2015.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-44

NOTE 21  |  Financial statements

The directors annually may approve an amount of supplemental compensation to the designated directors and officers, which will be used to issue or purchase ASMPT’s common shares for the designees at current market value. On 21 March 2012, the directors resolved to grant, and the Company granted, a total of 1,950,300 shares (the “2012 Incentive Shares”) in the Company to certain employees and members of the management of the Group upon expiration of the defined qualification period. The vesting period of such grant, which is the qualification period, was from 21 March 2012 to 15 December 2012. On 28 March 2012 (the “Adoption Date”), a Share Award Scheme was adopted by the Company to establish a trust to subscribe and purchase shares of the Company for the benefit of employees and members of the management of the Group under the Employee Share Incentive Scheme. The scheme is valid and effective for a period of 8 years commencing from the Adoption Date. Pursuant to the rules of the scheme, the Company has appointed a trustee, Law Debenture Trust (Asia) Limited, for purpose of administering the scheme and holding the awarded shares. As a result of such Share Award Scheme, 328,000 shares (the “2012 Awarded Share”) was allocated from the 2012 Incentive Shares as the 2012 Awarded Shares. On December 15, 2012, 1,607,400 common shares of ASMPT were issued, for cash at par value of HK$0.10 per share, pursuant to the Employee Share Incentive Scheme of ASMPT and 14,900 shares were forfeited and unallocated by ASMPT. 328,000 shares of the 2012 Awarded Shares were vested on the same date. In 2010 and 2011, respectively 1,726,900 and 1,518,100 ASMPT shares were issued to certain directors and employees under the plan. The effect of this transaction on ASMI was a dilution of its ownership interest in ASMPT of 0.21% in 2012, 0.19% in 2011 and 0.23% in 2010. The shares issued under the plan in 2012 have diluted ASMI’s ownership in ASMPT to 51.96% as of December 31, 2012. The fair value of the 2012 Incentive shares granted was determined with reference to the market value of the shares at the grant date taking into account the expected dividends as the employees are not entitled to received dividends paid during the vesting period, while for the 2012 Awarded Shares, its fair value was determined with reference to the cost of purchase from the market included transaction costs, which is not significantly differenct from the fair value at the grant date. Total compensation expenses related to the Employee Share Incentive Scheme of respectively €11,580 in 2011 and €19,823 in 2012 were charged to the Consolidated Statement of Operations.

21- COMMITMENTS AND CONTINGENCIES Capital leases included in property, plant and equipment are as follows: DECEMBER 31,

Machinery and equipment Furniture and fixtures

Less accumulated depreciation

2011

2012

3,953

3,485

389

344

4,342

3,829

(4,075)

(3,829)

267

-

At December 31, 2012 minimum rental commitments under capital leases and operating leases having initial or remaining non-cancelable terms in excess of one year are as follows: 2013

21,430

2014

17,548

2015

12,356

2016

8,539

2017

5,424

Years thereafter

TOTAL

7,229 72,526

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-45

NOTE 22  |  Financial statements

Aggregate rental expense for operating leases was €10,173 in 2010, €22,335 in 2011 and €24,661 in 2012. At December 31, 2012 the Company had entered into purchase commitments with suppliers in the amount of €141,908 for purchases, of which €139,221 for purchases within the next 12 months. Commitments for capital expenditures at December 31, 2012 were €10,552.

CHANGE OF CONTROL TRANSACTION Pursuant to our 1997 settlement agreement with Applied Materials, as amended and restated in 1998, if we desire to effect a change of control transaction, as defined in the settlement agreement which generally involves our Front-end operations and not our holdings in ASMPT, with a competitor of Applied Materials, we must first offer the change of control transaction to Applied Materials on the same terms as we would be willing to accept from that competitor pursuant to a bona fide arm’s-length offer made by that competitor.

22- LITIGATION AND ENVIRONMENTAL MATTERS The Company is a party to various legal proceedings incidental to its business and is subject to a variety of environmental and pollution control laws and regulations. As is the case with other companies in similar industries, the Company faces exposure from actual or potential claims and legal proceedings. Although the ultimate disposition of legal proceedings cannot be predicted with certainty, it is the opinion of the Company’s management that the outcome of any claim which is pending or threatened, either individually or on a combined basis, will not have a material effect on the financial position of the Company, its cash flows and result of operations.

23- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT FINANCIAL INSTRUMENTS Financial instruments include: Financial assets:  

  Cash and cash equivalents Pledged cash deposits Accounts receivable Investments Derivative instruments designated in cash flow hedges

DECEMBER 31, 2011

2012

390,250

290,475

20,000

20,000

330,891

304,840

1,044

278

-

145

Financial liabilities:  

  Notes payable to banks Accounts payable Current portion of long-term debt Long-term debt Convertible subordinated debt Derivative instruments designated in fair value hedges

DECEMBER 31, 2011

2012

40,680

61,675

157,549

151,761

4,332

6,316

15,319

12,632

135,078

-

1,764

-

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-46

NOTE 23  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

Gains or losses related to financial instruments are as follows:  

YEAR ENDED DECEMBER 31,

 

2011

2012

Interest income

2,902

1,989

Interest expense

(13,497)

(12,113)

(4,401)

(4,469)

(824)

(2,209)

Accretion interest expense convertible notes at amortized value Loss resulting from early extinguishment of debt Result from investments

-

(766)

Revaluation conversion option

(4,378)

-

Losses Foreign currency exchange, net

7,040

(3,957)

(356)

(2,825)

Addition to allowance for doubtful accounts receivable

Fair value is the price that would be received to sell an asset pr paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASMI uses the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.

Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. There were no transfers between levels during the years ended December 31, 2012 and December 31, 2011. The following table presents the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis. AT FAIR VALUE AT CARRYING VALUE

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

1,764

-

1,764

December 31, 2011 Liabilities: Derivative financial instruments

1)

1,764 1,764

-

1,764

-

1,764

Derivative financial instruments 1)

145

-

145

-

145

TOTAL

145

-

145

-

145

TOTAL December 31, 2012 Assets:

1

Derivative financial instruments consist of forward foreign exchange contracts.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 23  |  Financial statements

F-47

The valuation technique used to determine the fair value of forward foreign exchange contracts (used for hedging purposes) approximates the Net Present Value technique which is the estimated amount that a bank would receive or pay to terminate the forward foreign exchange contracts at the reporting date, taking into account current interest rates and current exchange rates.

FINANCIAL RISK FACTORS ASMI is exposed to a number of risk factors: market risks (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Company uses forward exchange contracts to hedge its foreign exchange risk. The Company does not enter into financial instrument transactions for trading or speculative purposes.

FOREIGN EXCHANGE RISK ASMI and its subsidiaries conduct business in a number of foreign countries, with certain transactions denominated in currencies other than the functional currency of the Company (euro) or one of its subsidiaries conducting the business. The purpose of the Company’s foreign currency management is to manage the effect of exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in selected foreign currencies, in particular denominated in US dollar. We use forward exchange contracts to hedge its foreign exchange risk of anticipated sales or purchase transactions in the normal course of business, which occur within the next twelve months, for which the Company has a firm commitment from a customer or to a supplier. The terms of these contracts are consistent with the timing of the transactions being hedged. The hedges related to forecasted transactions are designated and documented at the inception of the hedge as cash flow hedges, and are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive loss in Shareholders’ Equity, and is reclassified into earnings when the hedged transaction affects earnings. The majority of revenues and costs of the Company’s Back-end segment are denominated in Hong Kong dollars, Chinese Yuan and US dollars. The effect of exchange rate fluctuations on revenues, costs and cash flows and assets and liabilities denominated in foreign currencies is periodically reviewed. Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized in earnings. The Company records all derivatives, including forward exchange contracts, on the balance sheet at fair value in other current assets or accrued expenses. If the underlying transaction being hedged fails to occur, or if a portion of any derivative is ineffective, the gain or loss is immediately recognized in earnings under foreign currency exchange gains (losses) in the Consolidated Statement of Operations. Hedge ineffectiveness was insignificant for the years ended December 31, 2011 and December 31, 2012. Furthermore, the Company might manage the currency exposure of certain receivables and payables using derivative instruments, such as forward exchange contracts (fair value hedges) and currency swaps, and non-derivative instruments, such as debt borrowings in foreign currencies. The gains or losses on these instruments provide an offset to the gains or losses recorded on receivables and payables denominated in foreign currencies. The derivative instruments are recorded at fair value and changes in fair value are recorded in earnings under foreign currency exchange gains (losses) in the Consolidated Statement of Operations. Receivables and payables denominated in foreign currencies are recorded at the exchange rate at the balance sheet date and gains and losses as a result of changes in exchange rates are recorded in earnings under foreign currency exchange gains (losses) in the Consolidated Statement of Operations. To the extent that exchange rate fluctuations impact the value of the Company’s investments in its foreign subsidiaries, they are not hedged. The cumulative effect of these fluctuations is separately reported in Consolidated Shareholders’ Equity. Reference is made to Note 19.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-48

The outstanding forward exchange contracts are as follows:

 

CURRENCY

NOTIONAL AMOUNT

FAIR VALUE

INCLUDED IN ­ACCUMULATED OTHER ­COMPREHENSIVE INCOME (LOSS)

FAIR VALUE

INCLUDED IN ­ACCUMULATED OTHER ­COMPREHENSIVE INCOME (LOSS)

US$

-

-

-

-

-

US$

(56,975)

1,764

-

1,764

-

US$

(27,100)

(145)

-

(145)

-

December 31, 2011 Liabilities: Cash flow hedge contracts: Short position

Fair value hedge contracts: Short position December 31, 2012 Assets: Fair value hedge contracts: Short position

For forward exchange contracts, market values based on external quotes from banks have been used to determine the fair value. The following table analyzes the Company’s sensitivity to a hypothetical 10% strengthening and 10% weakening of the US dollar, Singapore dollar, Hong Kong dollar and Japanese yen against the euro as of December 31, 2011 and December 31, 2012. This analysis includes foreign currency denominated monetary items and adjusts their translation at year end for a 10% increase and 10% decrease of the US dollar, Singapore dollar, Hong Kong dollar or Japanese yen against the euro. A positive amount indicates an increase in equity. Recognized in equity is the revaluation effect of subsidiaries denominated in US dollar, Singapore dollar, Hong Kong dollar and Japanese yen.  

 

IMPACT ON EQUITY 2011

2012

10% increase of US dollar versus euro

3,656

4,564

10% decrease of US dollar versus euro

(3,656)

(4,564)

10% increase of Singapore dollar versus euro

5,028

5,868

10% decrease of Singapore dollar versus euro

(5,028)

(5,868)

10% increase of Hong Kong dollar versus euro

66,702

56,693

10% decrease of Hong Kong dollar versus euro

(66,702)

(56,693)

10% increase of Japanese yen versus euro

4,908

5,294

10% decrease of Japanese yen versus euro

(4,908)

(5,294)

A hypothetical 10% strengthening or 10% weakening of any currency other than the US dollar, Hong Kong dollar, Singapore dollar and Japanese yen against the euro as of December 31, 2011 and December 31, 2012 would not result in a material impact on equity. The following table analyzes the Company’s sensitivity to a hypothetical 10% strengthening and 10% weakening of the US dollar, Hong Kong dollar and Japanese Yen against the euro at average exchange rates for the years 2011 and 2012. A positive amount indicates an increase in net earnings.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-49

NOTE 23  |  Financial statements

 

IMPACT ON NET EARNINGS

 

2011

2012

10% increase of Japanese yen versus euro

(519)

923

519

(923)

1,887

915

10% decrease of Japanese yen versus euro 10% increase of US dollar versus euro 10% decrease of US dollar versus euro

(1,887)

(915)

10% increase of Hong Kong dollar versus euro

14,392

3,630

10% decrease of Hong Kong dollar versus euro

(14,392)

(3,630)

A hypothetical 10% strengthening or 10% weakening of any currency other than the US dollar, Hong Kong dollar and the Japanese yen against the euro at average exchange rates for the years 2011 and 2012 would not result in a material impact on net earnings.

INTEREST RISK We are exposed to interest rate risk primarily through our borrowing activities. The Company does not enter into financial instrument transactions for trading or speculative purposes or to manage interest rate exposure. At December 31, 2012 the Company had €18,948 in long-term debt at fixed interest rates and €61,675 in other borrowings with variable short-term interest rates. A hypothetical change in the average interest rate by 10% on the portion of the Company’s debt bearing interest at variable rates would not result in a material change in interest expense at December 31, 2011 and December 31, 2012 borrowing levels.

CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and derivative instruments. These instruments contain a risk of counterparties failing to discharge their obligations. We monitor credit risk and manages credit risk exposure by type of financial instrument by assessing the creditworthiness of counterparties. We do not anticipate nonperformance by counterparties given their high creditworthiness. The Company’s customers are semiconductor device manufacturers located throughout the world. We perform ongoing credit evaluations of our customers’ financial condition. We take additional measures to mitigate credit risk when considered appropriate by means of down payments, letters of credit. We generally do not require collateral or other security to support financial instruments with credit risk. Concentrations of credit risk (whether on or off-balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company derives a significant percentage of its revenue from a small number of large customers. The Company’s largest customer accounted for approximately 8.8% of net sales in 2012 (2011: 6.4%; 2010: 5.2%) and the ten largest customers accounted for approximately 31.6% of net sales in 2012 (2011: 27.9%; 2010: 27.9%). Sales to these large customers also may fluctuate significantly from time to time depending on the timing and level of purchases by these customers. Significant orders from such customers may expose the Company to a concentration of credit risk and difficulties in collecting amounts due, which could harm the Company’s financial results. At December 31, 2012 one customer accounted for 6.5% of the outstanding balance in accounts receivable (2011: 4.5%; 2010: 6.0%). We invest our cash and cash equivalents in short-term deposits and derivative instruments with high-rated financial institutions. We only enter into transactions with a limited number of major financial institutions that have high credit ratings and we closely monitor the creditworthiness of our counterparties. Concentration risk is mitigated by limiting the exposure to a single counterparty. The maximum credit exposure is equal to the carrying values of cash and cash equivalent and accounts receivable.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-50

NOTE 24  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

LIQUIDITY RISK The following table summarizes the Company’s contractual obligations as at December 31, 2012 aggregated by type of contractual obligation:

TOTAL

LESS THAN 1 YEAR

1-3 YEARS

3-5 YEARS

MORE THAN 5 YEARS

Notes payable to banks 1)

62,686

62,686

-

-

-

Long-term debt

1)

19,957

6,821

13,136

-

-

Operating leases

72,526

21,430

29,904

13,963

7,229

Pension liabilities

12,540

418

931

1,603

9,588

141,908

139,221

2,687

-

-

Capital expenditure commitments

10,553

10,273

280

-

-

Unrecognized tax benefits (ASC 740)

22,511

22,511

-

-

-

342,681

263,360

46,938

15,566

16,817

Purchase obligations: Purchase commitments to suppliers

TOTAL CONTRACTUAL OBLIGATIONS 1

Including accrued interest based on the percentages at the reporting date.

Total short-term lines of credit amounted to €337,567 at December 31, 2012. The amount outstanding at December 31, 2012 was €61,675 and the undrawn portion totaled €275,893. The undrawn portion includes the standby revolving credit facility of €150,000 with a consortium of banks. The facility, available through July 31, 2015, is secured by a portion of the Company’s shareholding in ASMPT. The undrawn portion includes €61,675 for ASMPT, which amount is restricted to be used only in the operations of ASMPT. The Company uses notes payable to banks to manage short term liquidity and uses long-term debt and convertible subordinated debt to manage long term liquidity. For the majority of purchase commitments, the Company has flexible delivery schedules depending on the market conditions, which allows the Company, to a certain extent, to delay delivery beyond originally planned delivery schedules.

24- RESEARCH AND DEVELOPMENT Research and Development consists of the following: YEAR ENDED DECEMBER 31,

  Research and development expenses

2010

2011

2012

79,331

130,153

150,118

Research and development grants and credits

(546)

(753)

(899)

TOTAL RESEARCH AND DEVELOPMENT

78,785

129,400

149,219

The Company’s operations in the Netherlands, Germany and the United States receive research and development grants and credits from various sources. The research and development grants and credits received from governmental sources in the Netherlands include a credit which is contingently repayable to the extent the Company recognizes sales of products to which the credit is related within an agreed upon period. The Company does not recognize a liability on the Consolidated Balance Sheet in respect of this credit until it recognizes sales of products to which the credit is related, within the agreed upon period and is then charged to cost of sales when such sales are recorded. The repayment amounts to 4.0% of the realized sales of these products.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-51

NOTE 25  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

With the disposal of our RTP business in 2009 the liability has been transferred to Levitech BV, the vehicle in which the management buy-out has been constructed. ASM International NV participates for 20% in Levitech BV. With the disposal of our RTP business we have licensed our RTP portfolio of 61 issued patents and 11 pending patents to Levitech BV.

25- RESTRUCTURING EXPENSES In the fourth quarter of 2012 we started a cost reduction program in our Front-end operation. We are reducing headcount in our manufacturing organization in Singapore with 110 people. Related to these actions, an amount of €0.9 million in restructuring expenses was recorded in 2012. In 2009 ASMI started the implementation of a major restructuring in the Front-end segment (PERFORM!). The main components of the Company’s accelerated execution plans are:

››The consolidation of our global Front-end manufacturing operations from Europe, the United States and Japan, into our Front-end manufacturing operations in Singapore by the end of 2010. This will be achieved by completing the previously announced transfer from Almere, the Netherlands, which was finalized during 2009; the phasing out the manufacturing operation in Phoenix, Arizona, in the first half of 2010; and by transferring manufacturing from Nagaoka, Japan, no later than the fourth quarter of 2010.

››The reduction of selling, general and administration expenses by making fundamental changes in our global support infrastructure. This includes a significant simplification and streamlining of our warehousing operations and the further strengthening of the global sales & service organization which was created last year.

››The leveraging of research and development and our product portfolio by reprioritization of strategic programs in order to maximize their potential. The following table summarizes the aggregated restructuring expenses by type: YEAR ENDED DECEMBER 31,

 

2010

2011

2012

4,534

-

891

779

-

-

Transition expenses

3,806

-

-

Other expenses

2,082

-

-

11,201

-

891

Employee related expenses Contract termination related expenses

TOTAL RESTRUCTURING EXPENSES

Related to these execution plans, an amount of €11.2 million in restructuring expenses was recorded in 2010. These expenses were mainly costs for severance packages, retention costs, provisions for vacancy and other costs related to the transition of activities to Singapore.

26- INCOME TAXES The components of earnings (loss) before income taxes and Non-controlling interest consist of:  

  The Netherlands

YEAR ENDED DECEMBER 31, 2010

2011

2012

(48,177)

(3,450)

(70,263)

Other countries

333,639

356,305

136,994

EARNINGS BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST

285,462

352,855

66,731

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-52

NOTE 26  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

The income tax expense consists of:  

YEAR ENDED DECEMBER 31,

 

2010

2011

2012

Current: The Netherlands Other countries

(505)

(494)

(110)

(38,342)

(64,684)

(26,337)

(38,847)

(65,178)

(26,447)

-

-

-

(4,092)

28,486

147

(42,939)

(36,692)

(26,300)

Deferred: The Netherlands Other countries

INCOME TAX EXPENSE

The provisions for income taxes as shown in the Consolidated Statements of Operations differ from the amounts computed by applying the Netherlands statutory income tax rates to earnings before taxes. A reconciliation of the provisions for income taxes and the amounts that would be computed using the Netherlands statutory income tax rates is set forth as follows:  

  Earnings before income taxes and Non-controlling interest

YEAR ENDED DECEMBER 31, 2010

2011

2012

285,462

352,855

66,731

Netherlands statutory income tax rate

25.5%

25.0%

25.0%

Income tax provision at statutory rate

(72,793)

(88,214)

(16,683)

(8,250)

(8,228)

(6,508)

Non-deductible expenses Foreign taxes at a rate other than the Netherlands statutory rate

24,198

12,983

(2,699)

Valuation allowance

(3,698)

17,991

(14,876)

Non-taxable income

18,536

30,156

4,887

(932)

(1,380)

9,579

(42,939)

(36,692)

(26,300)

Other 1)

INCOME TAX EXPENSE 1

Other consist of tax credits €3,163 and unwinding of temporary differences in the current year for which no deferred tax was recognized in prior years €5,549.

Included in non-taxable income for 2012 is €3,244 regarding the Company’s manufacturing operations in Singapore and other countries where income covering certain products is non-taxable or subject to concessional tax rates under tax incentive schemes granted by the local tax authority. The majority of these tax incentive schemes have terms ending by December 31, 2020. On May 29, 2006 and June 8, 2009 the Singapore Economic Development Board (“EDB”) granted Pioneer Certificates to ASM Front End Manufacturing Singapore Pte Ltd (“FEMS”, a principal subsidiary of the Group,) to the effect that profits arising from certain manufacturing activities by FEMS of Front End equipment will in principle be exempted from tax for a period of 10 years effective from dates ranging between April 1, 2005 and July 1, 2008, subject to fulfillment of certain criteria during the period. On July 12, 2010, the EDB granted a Pioneer Certificate to ASM Technology Singapore Pte Limited (“ATS”), a principal subsidiary of the Group, to the effect that profits arising from certain products will be exempted from tax for a period of 10 years effective from dates ranging between June 1, 2010 and January 1, 2012 across specified products, subject to fulfillment of certain criteria during the period. EDB had also granted a 5 year Development and Expansion Incentive (DEI) to ATS to the effect that the profits arising from certain existing products shall be subject a concessionary tax rate of 10% for a period of 5 years from January 1, 2011, subject to the fulfillment of certain criteria during the period.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-53

NOTE 26  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

On the same date, the EDB also granted ATS an International Headquarters (“IHQ”) Award to the effect that certain income arising from qualifying activities conducted by ATS, excluding income from business transactions with companies or end customers in Singapore, shall be subject to concessionary tax rate of 5% for a period of 10 years from January 1, 2011, subject to fulfillment of certain criteria during the period. The Netherlands statutory tax rate amounted to 25.5% in 2010. For 2011 and 2012 this rate was 25.0%. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. The Company’s deferred tax assets and liabilities have been determined in accordance with these statutory income tax rates. Deferred income taxes developed as follows: BALANCE JANUARY 1

BALANCE DECEMBER 31 CONSOLIDATED STATEMENT OF OPERATIONS

EQUITY

163

3,860

-

(74,935)

ACQUISITIONS

RECLASSIFICATIONS

7,020

255

153,407

7,038

2011

EXCHANGE DIFFERENCES

2011

(337)

(546)

10,415

-

1,210

86,720

Deferred tax assets: -- Reserves and allowances -- Net operating losses -- Depreciation

2,331

(1,164)

-

(801)

-

(3)

363

-- Other

1,216

(12,302)

-

18,438

-

(961)

6,391

GROSS DEFERRED TAX ASSETS

163,974

(6,173)

163

(53,438)

(337)

(300)

103,889

Less: valuation allowance

(149,600)

-

73,010

-

123

(76,467)

14,374

(6,173)

163

19,572

(337)

(177)

27,422

(322)

(13,295)

(163)

8,914

-

485

(4,381)

14,052

(19,468)

-

28,486

(337)

308

23,041

NET DEFERRED TAX ASSETS DEFERRED TAX LIABILITIES

NET DEFERRED INCOME TAXES

BALANCE JANUARY 1

BALANCE ­DECEMBER 31 CONSOLI­DATED STATE­MENT OF OPERA­TIONS

3,985 508

1,478

2012

ACQUI­ SITIONS

RECLASSI­ FICATIONS

-- Reserves and allowances

10,415

-

-- Net operating losses

86,720

-

363

-

EQUITY

EXCHANGE DIFFERENCES

2012

4,928

1,730

(736)

20,322

(2,303)

-

(939)

83,478

-

(89)

2,260

Deferred tax assets:

-- Depreciation -- Other

6,391

-

(6,525)

1,345

28

(127)

1,112

GROSS DEFERRED TAX ASSETS

103,889

-

(2,032)

5,448

1,758

(1,891)

107,172

Less: valuation allowance

(76,467)

-

(180)

(6,442)

-

(161)

(83,250)

NET DEFERRED TAX ASSETS

27,422

-

(2,212)

(994)

1,758

(2,052)

23,922

DEFERRED TAX LIABILITIES

(4,381)

-

2,212

1,142

-

39

(988)

23,041

-

-

148

1,758

(2,013)

22,934

NET DEFERRED INCOME TAXES

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-54

NOTE 26  |  Financial statements

Deferred tax assets and liabilities are classified in the consolidated balance sheet as follows:  

DECEMBER 31,

 

2011

2012

Deferred tax assets – current

14,350

17,967

Deferred tax assets – non-current

13,072

5,955

(3,513)

(36)

(868)

(952)

23,041

22,934

Deferred tax liabilities – current Deferred tax liabilities – non-current

Based on tax filings, ASMI and its individual subsidiaries have net operating losses available at December 31, 2012 of €318,477 for tax return purposes to reduce future income taxes, mainly in Europe. The Company believes that realization of its net deferred tax assets is dependent on the ability of the Company to generate taxable income in the future. Given the volatile nature of the semiconductor equipment industry, past experience, and the tax jurisdictions where the Company has net operating losses, the Company believes that there is currently insufficient evidence to substantiate recognition of substantially all net deferred tax assets with respect to net operating losses. Accordingly, a valuation allowance of €76,467 in 2011 and €83,250 in 2012 has been recorded. The amounts and expiration dates of net operating losses for tax purposes are as follows:

TOTAL OF NET OPERATING LOSSES FOR TAX PURPOSES

NET OPERATING LOSSES FOR WHICH DEFERRED TAX ASSETS ARE RECOGNIZED

2013

16,309

-

2014

37,607

-

2015

-

-

2016

-

-

2017

47,429

-

2018

47,293

-

2019

35,905

-

2020

147

-

2021

60,564

149

-

-

22,374

-

EXPIRATION YEAR

2022-2028 2029 2030 Unlimited

TOTAL

3,689

-

47,160

80

318,477

229

The Company has not provided for deferred foreign withholding taxes, if any, on undistributed earnings of its foreign subsidiaries. At December 31, 2012 the undistributed earnings of subsidiaries, subject to withholding taxes, were approximately €82,596. These earnings could become subject to foreign (withholding) taxes if they were remitted as dividends and / or if the Company should sell its interest in the subsidiaries. Consistent with the provisions of ASC 740, as of December 31, 2012, ASMI has a liability of unrecognized tax benefits of €22.5 million. A reconciliation of the beginning and ending balance of the liability for unrecognized tax benefits is as follows:

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-55

NOTE 27  |  Financial statements

15,663

BALANCE JANUARY 1, 2010 -- Gross increases – tax positions in current year

3,230

-- Foreign currency translation effect

1,164 20,057

BALANCE DECEMBER 31, 2010 -- Gross increases – tax positions in current year

950

-- Foreign currency translation effect

742 21,749

BALANCE DECEMBER 31, 2011 -- Gross increases – tax positions in current year

1,157

-- Foreign currency translation effect

(395)

BALANCE DECEMBER 31, 2012

22,511

Unrecognized tax benefits mainly relate to transfer pricing positions, operational activities in countries where the Company is not tax registered and tax deductible costs. The Company estimates that no interest and penalties are related to these unrecognized tax benefits. In the year ended December 31, 2012, no settlement with tax authorities and no reduction as a result of a lapse of statute of limitations occurred. Unrecognized tax benefits of would, if recognized, impact the Company’s effective tax rate. The Company provided for the amount of €22,511 reflecting managements best estimate to mitigate possible impact in case of an unfavorable outcome. The unrecognized tax benefits are classified in the consolidated balance sheet under “accrued expenses and other” and are covered with purchased tax certificates which are classified in the consolidated balance sheet under “other current assets”. A summary of open tax years by major jurisdiction is as follows: JURISDICTION Japan

2009-2012

Hong Kong

2006-2012

The Netherlands

2011-2012

Singapore

2006-2012

United States

1997-2012

South Korea

2007-2012

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws. The Company’s estimate for the potential outcome of any unrecognized tax benefits is highly judgmental. Settlement of unrecognized tax benefits in a manner inconsistent with the Company’s expectations could have a material impact on the Company’s financial position, net earnings and cash flows. The Company is subject to tax audits in its major tax jurisdictions, local tax authorities may challenge the positions taken by the Company.

27- DISCLOSURES ABOUT SEGMENTS AND RELATED INFORMATION The Company organizes its activities in two operating segments, Front-end and Back-end. Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer (“CEO”), which is the chief operating decision maker (according to ASC 280). The Front-end segment manufactures and sells equipment used in wafer processing, encompassing the fabrication steps in which silicon wafers are layered with semiconductor devices. The segment is a product driven organizational unit comprised of manufacturing, service, and sales operations in Europe, the United States, Japan and Southeast Asia.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

NOTE 27  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-56

The Back-end segment manufactures and sells equipment and materials used in assembly and packaging, encompassing the processes in which silicon wafers are separated into individual circuits and subsequently assembled, packaged and tested. The segment is organized in ASM Pacific Technology Ltd., in which the Company holds a majority of 51.96% interest, whilst the remaining shares are listed on the Stock Exchange of Hong Kong. The segment’s main operations are located in Hong Kong, the People’s Republic of China, Singapore, Malaysia and Germany. YEAR ENDED DECEMBER 31, 2010

YEAR ENDED DECEMBER 31, 2011

YEAR ENDED DECEMBER 31, 2012

FRONTEND

BACKEND

TOTAL

FRONTEND

BACKEND

TOTAL

FRONTEND

BACKEND

TOTAL

Net sales to unaffiliated customers

293,356

929,544

1,222,900

456,065

1,178,270

1,634,334

370,409

1,047,658

1,418,067

Gross profit

114,624

434,954

549,578

172,318

398,308

570,626

124,531

315,898

440,429

15,954

312,686

328,640

62,581

304,869

367,450

539

87,717

88,256

615

605

1,221

976

1,925

2,902

1,015

974

1,989

Result from operations Interest income Interest expense

(15,677)

-

(15,677)

(13,142)

(354)

(13,497)

(11,381)

(732)

(12,113)

Loss resulting from early extinguishment of debt

(3,609)

-

(3,609)

(824)

-

(824)

(2,209)

-

(2,209)

Accretion interest expense convertible notes

(6,010)

-

(6,010)

(4,401)

-

(4,401)

(4,329)

(140)

(4,469)

(19,037)

-

(19,037)

(4,378)

-

(4,378)

-

-

-

(1,809)

1,744

(65)

8,296

(2,692)

5,604

(3,050)

(907)

(3,957)

Revaluation conversion option Foreign currency exchange gains (losses), net Income tax expense Net earnings (loss)

(6,106)

(36,833)

(42,939)

(4,581)

(32,111)

(36,692)

(8,965)

(17,335)

(26,300)

(35,679)

278,202

242,523

44,527

271,637

316,164

(29,146)

69,577

40,431

Allocation of net earnings (loss): Shareholders of the parent

110,639

Non-controlling interest Capital expenditures Net purchase of other intangibles

7,149

186,770

131,884

33,282

129,394

17,653

85,320

102,974

16,369

72,849

89,218

21,973

46,189

68,162

43

582

625

6,141

910

7,051

2,042

2,588

4,630

Depreciation

-

Depreciation property, plant and equipment

8,930

21,700

30,630

9,162

30,823

39,985

10,968

36,829

47,797

Depreciation evaluation tools at customers

2,477

-

2,477

2,518

-

2,518

3,799

-

3,799

Amortization of other intangible assets

2,338

397

2,735

2,655

1,815

4,471

4,071

2,793

6,864

-

-

-

-

(8,038)

(8,038)

-

-

-

142,420

197,874

340,294

228,114

162,136

390,250

145,061

145,414

290,475

11,193

39,622

50,815

11,193

40,939

52,131

11,649

40,239

51,888

Impairment of property, plant and equipment Cash and cash equivalents Capitalized goodwill Other intangible assets

6,089

715

6,804

9,643

5,133

14,776

9,049

4,866

13,915

Other identifiable assets

281,076

535,129

816,204

336,090

788,973

1,125,063

334,399

808,829

1,143,228

Total assets

440,777

773,340

1,214,117

585,040

997,181

1,582,221

500,158

999,348

1,499,506

Total debt

215,681

-

215,681

162,464

32,946

195,409

-

80,623

80,623

1,450

15,249

16,699

1,631

14,563

16,194

1,636

15,768

17,404

Headcount in full-time equivalents 1) 1

Headcount includes those employees with a fixed contract, and is exclusive of temporary workers.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-57

NOTE 28  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

There are no inter-segment transactions, other than charges for management services, which are based on actual cost. The accounting policies used to measure the net earnings and total assets in each segment are identical to those used in the Consolidated Financial Statements. The measurement methods used to determine reported segment earnings are consistently applied for all periods presented. There were no asymmetrical allocations to segments. Geographical information is summarized as follows: YEAR ENDED DECEMBER 31, 2010

Net sales to unaffiliated customers Long-lived assets Total assets Capital expenditures Purchase of intangible assets

EUROPE

UNITED STATES OF AMERICA

JAPAN

SOUTHEAST ASIA

76,235

112,863

90,394

1,978

9,395

19,409

40,470

85,065

186

7,059

-

-

CORPORATE

CONSOLIDATED

943,408

-

1,222,900

167,020

135

197,937

92,547

839,720

156,315

1,214,117

5,388

90,279

62

102,974

-

607

17

624

YEAR ENDED DECEMBER 31, 2011

Net sales to unaffiliated customers Long-lived assets Total assets Capital expenditures Purchase of intangible assets

338,065

185,943

96,697

1,013,629

-

1,634,334

16,021

13,110

18,273

212,605

171

260,180

406,586

131,498

120,717

733,571

189,849

1,582,221

7,425

8,429

1,559

71,720

85

89,218

29

779

635

1,378

4,230

7,051

255,795

197,566

59,385

905,321

-

1,418,067

YEAR ENDED DECEMBER 31, 2012

Net sales to unaffiliated customers Long-lived assets

17,587

22,567

17,313

217,849

120

275,436

473,561

128,484

71,838

717,986

107,637

1,499,506

Capital expenditures

7,098

12,837

4,947

43,280

-

68,162

Purchase of intangible assets

1,732

437

72

997

1,392

4,630

Total assets

1

Headcount includes those employees with a fixed contract, and is exclusive of temporary workers.

Long-lived assets for the years ended December 31, 2010, 2011 and 2012 consist of the Company’s property, plant and equipment.

28- SELECTED OPERATING EXPENSES AND ADDITIONAL INFORMATION Personnel expenses for employees were as follows: DECEMBER 31,

 

2010

2011

2012

236,746

318,944

353,437

Social security

17,402

42,622

47,124

Pension expenses

12,303

18,945

21,151

266,451

380,511

421,712

Wages and salaries

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

F-58

NOTE 29  |  Financial statements

The average number of employees, exclusive of temporary workers, by geographic area during the year was as follows: DECEMBER 31,

 

2010

2011

2012

The Netherlands

170

167

178

Other European countries

139

993

1,057

United States of America

358

468

594

13,389

15,716

15,300

Southeast Asia Japan

197

181

203

14,253

17,525

17,332

29- EARNINGS PER SHARE Basic net earnings per common share is computed by dividing net earnings by the weighted average ordinary shares outstanding for that period. Diluted net earnings per ordinary share reflects the potential dilution that could occur if stock options under the ASMI Option Plan were exercised and if convertible notes were converted, unless potential dilution would have an anti-dilutive effect. The following represents a reconciliation of net earnings and weighted average number of shares outstanding (in thousands) for purposes of calculating basic and diluted net earnings per share:  

2010

2011

2012

110,639

186,770

7,149

17,670

17,670

-

128,309

204,440

7,149

52,435

55,210

56,108

282

570

659

8,777

8,902

-

61,494

64,682

56,767

Basic net earnings from continuing operations

2.11

3.38

0.13

Diluted net earnings from continuing operations

2.09

3.16

0.13

Net earnings used for purpose of computing basic earnings per common share After-tax equivalent of interest expense on convertible subordinated notes NET EARNINGS USED FOR PURPOSES OF COMPUTING DILUTED NET EARNINGS PER COMMON SHARE Basic weighted average number of shares outstanding during the year used for purpose of computing basic earnings per share (thousands) Dilutive effect of stock options Dilutive effect of convertible subordinated notes DILUTIVE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Net earnings per share:

For the year ended December 31, 2012, the effect of 8,231,432 conversion rights was anti-dilutive. For the year ended December 31, 2011, 81,500 option rights were not in the money and therefore not implicated in the dilutive effect of stock options. For the year ended December 31, 2010, the effect of 2,630,113 conversion rights was anti-dilutive. During 2008, ASM engaged Lehman Bros (“Lehman”) to repurchase ordinary ASMI shares on the Euronext and Nasdaq markets on behalf of ASMI. As of September 15, 2008, at the time it went into bankruptcy administration, Lehman reported that it had purchased and held on our behalf 2,552,071 shares, which were accounted for as treasury shares accordingly. ASM filed a submission with the Lehman administrators giving notice of the shares held in custody by Lehman. At ASMI’s May 2009 Annual General Meeting, our shareholders resolved to cancel all of these treasury shares which, accordingly, was accounted for in our 2009 Annual Report as a reduction of the number of outstanding shares. Lehman was notified of the cancellation of shares at the time.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-59

NOTE 30  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

In September 2010, Lehman’s administrators notified us that there is a possible shortfall in the number of shares held by Lehman of 479,279 shares (out of the 2,552,071 shares), which cannot currently be accounted for by Lehman. During 2011 we received further information based on which we conclude that the possible shortfall in the number of shares held by Lehman is now reduced to 246,983 shares. The Lehman administrators also reported a segregated collateral cash account of US$6,759, that ASMI may be entitled to in the absence of the shares. We have not been able to obtain additional information to confirm and understand the potential shortfall of shares or our ability to recover the US$6,759 from the Lehman bankruptcy proceedings in lieu of the shares. Accordingly, we are uncertain at this time as to the accuracy of the shortfall of shares, our ability to claim the collateral cash sum to cover the value of any such discrepancy, and our entitlement to all or a portion of such sum when distributions are determined and made by the administrator since there is likely to also be a shortfall in Lehman assets subject to proprietary rights. Given the magnitude of the overall Lehman administration, we believe it may take several years to obtain clarity or resolution about the potential shortfall or claim to cash. ASMI has filed a claim with the Lehman administrators to safeguard our interests. Considering the factual and legal uncertainties, it is premature to conclude that the 246,983 shares should still be considered as outstanding or that ASMI has a US$6,759 receivable from Lehman. ASMI has, therefore, neither reversed the cancellation of these shares that we recorded in 2009, nor recorded a receivable from Lehman. If the shares would be considered as outstanding, the negative impact on our basic and diluted earnings per share (€1) as at December 31, 2012 would have been €0.001 and €0.001 respectively per share.

30- BOARD REMUNERATION The remuneration of members of the Management Board has been determined by the Supervisory Board. The following table sets forth as to all current and former members of the Management Board of the Company, information concerning all remuneration from the Company (including its subsidiaries) for services in all capacities:

PENSIONS

SHARE BASED PAYMENT EXPENSES 2)

OTHER

TOTAL

177

76

398

59

1,220

339

69

182

56

1,146

500

559

84

365

41

1,549

367

144

88

325

59

983

2011

360

233

54

141

46

834

2010

140

150

26

71

4

391

BASE COMPENSATION

BONUSES

2012 3)

510

2011

500

2010

  Management Board: C.D. del Prado

P.A.M. van Bommel 1)

2012 3)

1 2 3

For the period July 1, 2010 through August 31, 2010 at 40% and for the period September 1, 2010 through December 31, 2010 full time. These amounts represent the vesting expenses related to the financial year. A one-time crisis levy of 16% as imposed by the Dutch government amounts to €175 in total. This crisis tax levy is payable by the employer and is charged over income of employees exceeding a €150 threshold in 2012. These expenses do not form part of the remuneration costs mentioned.

BONUS Each year, a variable cash incentive can be earned, based on achievement of specific challenging targets. These targets are for 75% based on company financial targets and for 25% based on non-financial targets. The on-target bonus percentage for the members of the Management Board is 75%, with a maximum pay-out of 125% of base salary.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-60

NOTE 30  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

STOCK OPTIONS The members of the Management Board are eligible to receive stock options under the ASM International NV 2011 Stock Option Plan for members of the Management Board (“plan”) in order to focus on the long term interest of the company. Stock options vest in three years subject to continued employment and expire after 7 years.

PENSION BENEFIT The members of the Management Board are offered participation of the pension plan of the industry wide pension fund (“Bedrijfstakpensioenfonds Metalektro”) for the base salary up to the predetermined ceiling. For the base salary above the ceiling, the members of the Management Board are offered participation of a defined contribution plan, insured by Nationale Nederlanden.

OTHER COMPENSATION Other compensation is covering compensation relative to use of a (company) car, a representation and expense allowance, social security premium and premium for health and disability insurance. The following table shows the outstanding options to purchase ASM International NV common shares held by current and former members of the Management Board, and changes in such holdings during 2012:

YEAR OF GRANT

OUTSTANDING JANUARY 1, 2012

GRANTED IN 2012

EXERCISED IN 2012

OUTSTANDING DECEMBER 31, 2012

EXERCISE PRICE

END DATE

C.D. del Prado 1), 5)

2003

20,000

-

-

20,000

US$11.35

February 1, 2013

C.D. del Prado

2)

2007

19,645

-

-

19,645

€19.47

May 23, 2015

C.D. del Prado 2)

2008

125,000

-

-

125,000

€12.71

March 31, 2016

C.D. del Prado 3)

2009

50,000

-

-

50,000

€15.09

December 31, 2017

C.D. del Prado

4)

2011

75,000

-

-

75,000

€22.33

December 31, 2018

C.D. del Prado 4)

2012

-

60,000

-

60,000

€27.04

December 31, 2019

3)

P.A.M. van Bommel 

2010

25,000

-

-

25,000

€16.27

August 7, 2018

P.A.M. van Bommel 4)

2011

53,000

-

-

53,000

€22.33

December 31, 2018

P.A.M. van Bommel 4)

2012

-

40,000

-

40,000

€27

December 31, 2019

May 23, 2015

  Current members:

Former members: A.H. del Prado 2)

2007

52,886

-

-

52,886

€19.47

2)

J.F.M. Westendorp 

2007

22,452

-

-

22,452

€19.47

May 23, 2015

J.F.M. Westendorp 3)

2009

40,000

-

-

40,000

€15.09

December 31, 2017

482,983

100,000

-

582,983

1 2

3 4 5

These options are granted for a term of ten years, and became exercisable in equal parts over a five year period. These options are conditional. A percentage-not exceeding 150%-of the options which have been granted conditionally will become unconditional after three years, based on the total return of the Company’s shares for the three years after the options are granted compared to the average total return of the shares of a relevant number of companies which are similar to the Company during the same three-year period. The options are granted for a term of eight years. These options are granted for a term of eight years, and become exercisable after a 3 year vesting period. These options are granted for a term of seven years and become exercisable after a 3 year vesting period. These options have been exercised on January 25, 2013 at a share price of €29.04.

The fair value per option of options granted to current and former members of the Management Board was €16.92 in 2010, €10.43 in 2011 and €12.27 in 2012. In 2012 no options to purchase ASM International NV common shares were exercised and as a result no new shares were issued for the exercise of these options.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-61

NOTE 31  |  Financial statements

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

The following table sets forth as to all current and former members of the Supervisory Board of the Company information concerning all remuneration (base compensation, no bonuses or pensions were paid) from the Company (including its subsidiaries) for services in all capacities:  

YEAR ENDED DECEMBER 31,

 

2011

2012

G.J. Kramer

68

68

J.M.R. Danneels

50

50

H.W. Kreutzer

50

50

J.C. Lobbezoo

53

53

M.C.J. van Pernis

50

50

U.H.R. Schumacher

50

50

321

321

Supervisory Board:

The remuneration of members of the Supervisory Board has been determined by the General Meeting of Shareholders. No stock options have been issued to members of the Supervisory Board.

31- SHARE OWNERSHIP AND RELATED PARTY TRANSACTIONS The ownership or controlling interest of outstanding common shares of ASM International NV by members of the Management Board and Supervisory Board or members of their immediate family are as follows: DECEMBER 31, 2011

A.H. del Prado C.D. del Prado (member of the Management Board) Stichting Administratiekantoor ASMI

DECEMBER 31, 2012

SHARES OWNED

PERCENTAGE OF COMMON SHARES OUTSTANDING

SHARES OWNED

PERCENTAGE OF COMMON SHARES OUTSTANDING

9,204,284

16.62%

9,204,284

14.59%

132,945

0.24%

132,945

0.21%

2,142,039

3.87%

2,142,039

3.39%

Stichting Administratiekantoor ASMI is a trust controlled by Mr A.H. del Prado. The number of shares owned by Stichting Administratiekantoor ASMI includes 713,000 common shares which are beneficially owned by Mr C.D. del Prado. The Company has a related party relationship with its subsidiaries, equity accounted investees and members of the Supervisory Board and the Management Board. Related party transactions are conducted on an at arm’s length basis with terms comparable to transactions with third parties. For transactions with the Supervisory Board and the Management Board see note 30 “Board Remuneration”. The Group has no significant transactions or outstanding balances with its equity-accounted investees other than its equity-interest holdings.

32- SUBSEQUENT EVENTS Reduction shareholding ASMPT On March 13, 2013, ASMI sold a 12% stake in ASMPT. The shares were sold in a partial secondary placement raising proceeds of €422 million. The Company intends to distribute approximately 65% of the cash proceeds to ASMI shareholders; a proposal thereto will be placed on the agenda of the upcoming AGM scheduled for May 16, 2013. The remaining proceeds will be used to further strengthen the business of the Company. As of today, the Company continues to be the largest shareholder of ASMPT with a 40% stake.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS ASM INTERNATIONAL  |  ANNUAL REPORT 2012

NOTE 32  |  Financial statements

F-62

At the Annual General Meeting of Shareholders (AGM) held in May 2012, the Company announced that it would carry out a study into the causes of the lack of recognition by the markets of the value of the combined businesses (Front-end and Back-end) of the Company. Following that announcement the Company appointed Morgan Stanley and HSBC Bank plc to act as its financial advisers and to assist the Company in carrying out the study. The study was initiated shortly after the 2012 AGM and has recently been completed. Each of the Company’s financial advisers independently carried out an investigation involving frequent discussions with the Company’s Management Board and legal and tax advisers. The advisers also presented their findings to the Company’s Supervisory Board. No single or predominant factor was identified in causing the valuation discrepancy. However, a number of causes and circumstances were identified as potentially influencing the valuation discrepancy, including a holding company discount related to the current corporate structure. Subsequently, an analysis was conducted by the Company in close cooperation with its advisers of the various potential courses of action, including those suggested by shareholders. The alternatives that were investigated included a full or partial placement or sale of the Company’s stake in ASMPT, a spin-off of shares in ASMPT and several merger alternatives. As part of this analysis, the Company has carefully considered the interests of the Company, its shareholders as well as other relevant stakeholders. The Company has also taken into account the various operational connections between the Front-end business and the Back-end business as well as potential accounting, legal and tax implications and execution risks. The Management Board and the Supervisory Board of the Company have concluded that a partial secondary placement of 8% to 12% of the Company’s stake in ASMPT is the most suitable step to be taken to address the non-recognition by the markets of the value of the combined businesses of the Company. This course of action has been chosen taking into account, amongst others, equity market capacity, tax efficiency and ongoing corporate stability at ASMI and ASMPT. This step provides flexibility for further action, if deemed appropriate. The Management and Supervisory Boards of the Company have resolved to proceed with this proposed action and the board of directors of ASMPT has expressed its support to this proposal. In addition thereto, certain major shareholders of the Company representing approximately 27% of the total outstanding shares in the Company have been consulted in advance with regard to this proposed action and have expressed support thereof. The sale of the 12% stake causes ASMI’s cease of control on ASMPT. According to general accepted accounting principles (both US GAAP and IFRS) the accounting of this sale consists of two separate transactions:

››a sale of a 51.96% subsidiary; ››a purchase of a 40.08% associate. The first transaction, the sale, will result in a substantial gain and the deconsolidation of ASMPT in the consolidated ASMI accounts. The purchase of the associate will, following a purchase price allocation, result in the recognition of the associate at fair value. We are in the process of determining the financial impact; further information will be disclosed at the announcement of the Q1 2013 results. The Company will further report on the outcome of the study at the upcoming 2013 AGM, which is scheduled to take place on May 16, 2013.

Bankruptcy Elpida The reorganization plan re the Elpida bankruptcy in Japan was approved by creditors and the Court in February 2013. The court approval order has been appealed, subject to resolution of the appeal, the amounts we will receive regarding our secured and unsecured claims are set and approved to be paid in installments over a seven year period. While the dates for the installment payments are not yet finalized as they are subject to certain funding conditions, the dates are anticipated to be set once the appeal is concluded and the installment payments to commence accordingly. Per December 31, 2012 the allowance for this doubtful account covers the outcome of the aforementioned reorganization plan.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

F-63

ASM INTERNATIONAL  |  ANNUAL REPORT 2012

SAFE HARBOR STATEMENT

orders, market acceptance of new products, competitive factors,

In addition to historical information, this Annual Report contains

litigation involving intellectual property, shareholder and other

statements relating to our future business and/or results, including,

issues, commercial and economic disruption due to natural

among others, statements regarding future revenue, sales, income,

disasters, terrorist activity, armed conflict or political instability,

expenditures, sufficiency of cash generated from operations,

epidemics and other risks indicated in our Annual Report on Form

maintenance of a substantial interest in ASM Pacific Technology

20-F for the year ended December 31, 2012 and other filings from

Ltd, business strategy, product development, product acceptance,

time to time with the SEC. The risks described are not the only ones

market penetration, market demand, return on investment in new

facing ASMI. Some risks are not yet known and some that we do

products, facility completion dates and product shipment dates,

not currently believe to be material could later become material.

corporate transactions, restructurings, liquidity and financing

Each of these risks could materially affect our business, revenues,

matters, outlooks and any other non-historical information in this

income assets, liquidity and capital resources. All statements are

Annual Report. These statements include certain projections and

made as of the date of this report unless otherwise noted, and

business trends, which are “forward-looking” within the meaning of

we assume no obligation to update or revise any forward-looking

the United States Private Securities Litigation Reform Act of 1995.

statements to reflect future developments or circumstances.

You can identify these statements by the use of words like “may”, “could”, “should”, “project”, “believe”, “anticipate”, “expect”, “plan”,

STATUTORY ANNUAL REPORT

“estimate”, “forecast”, “potential”, “intend”, “continue” and

The Consolidated Financial Statements included in this Annual Report

variations of these words or comparable words. Forward-looking

are prepared in accordance with generally accepted accounting

statements do not guarantee future performance and involve risks

principles in the United States (US GAAP). A copy of our Statutory

and uncertainties. You should be aware that our actual results may

Annual Report prepared in accordance with International Financial

differ materially from those contained in the forward-looking

Reporting Standards (IFRS), is available free of charge by writing to

statements as a result of certain risks and uncertainties. These risks

our corporate offices, sending an email to [email protected]

and uncertainties include, but are not limited to, economic conditions

com or downloading the file through our website www.asm.com.

and trends in the semiconductor industry and the duration of industry downturns, currency fluctuations, the timing of significant

ASM International Versterkerstraat 8 1322 AP Almere The Netherlands www.asm.com