Item 19. Exhibits

269K characters. Original on sec.gov · Markdown

Item 19. Exhibits


Exhibit Number		Description of Document

2.1#		Sale and Purchase Agreement, dated as of December 22, 2010, between NXP Semiconductors N.V., NXP B.V., the Dover Corporation, Knowles Electronics, LLC and EFF Acht Beteiligungsverwaltung GmbH (incorporated by reference to Exhibit 2.1 of the Form 20-F of NXP Semiconductors N.V. filed on March 13, 2012)

3.1		Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of Amendment No. 7 to the Registration Statement on Form F-1 of NXP Semiconductors N.V., filed on August 2, 2010 (File No. 333-166128))

3.2		Articles of Association of NXP Semiconductors N.V. (incorporated by reference to Exhibit 3.2 of Amendment No. 7 to the Registration Statement on Form F-1 of NXP Semiconductors N.V., filed on August 2, 2010 (File No. 333-166128))

4.1		Senior Secured Indenture dated as of October 12, 2006 among NXP B.V. and NXP Funding LLC as Issuers, each of the Guarantors named on the signature pages thereto, Deutsche Bank Trust Company Americas as Trustee, Morgan Stanley Senior Funding Inc. as Global Collateral Agent and Mizuho Corporate Bank Ltd. as Taiwan Collateral Agent (incorporated by reference to Exhibit 4.1 of the Registration Statement on Form F-4 of NXP B.V. filed on April 23, 2007 (File No. 333-142287))

4.2		Collateral Agency Agreement dated as of September 29, 2006 among NXP Semiconductors N.V. (formerly known as KASLION Acquisition B.V.), NXP B.V., the Guarantors named therein, the Secured Parties as defined therein and from time to time parties thereto, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent and Mizuho Corporate Bank Ltd. as Taiwan Collateral Agent (incorporated by reference to Exhibit 4.3 of the Registration Statement on Form F-4 of NXP B.V. filed on April 23, 2007 (File No. 333-142287))

4.3		Senior Secured Indenture dated as of July 20, 2010 among NXP B.V. and NXP Funding LLC as Issuers, each of the Guarantors named on the signature pages thereto, Deutsche Bank Trust Company Americas as trustee, Morgan Stanley Senior Funding Inc. as Global Collateral Agent and Mizuho Corporate Bank Ltd. as Taiwan Collateral Agent (incorporated by reference to Exhibit 4.5 of Amendment No. 5 to the Registration Statement on Form F-1 of NXP Semiconductors N.V., filed on July 22, 2010 (File No. 333-166128))

4.4		Amended and Restated Shareholders’ Agreement dated August 5, 2010 among the AlpInvest Parties, Apax Parties, Bain Capital Parties, Co-Invest Parties, Kaslion S.à r.l., KASLION Holding B.V., the KKR Parties, Koninklijke Philips Electronics N.V., the Silver Lake Parties and Stichting Management Co-Investment NXP (incorporated by reference to Exhibit 2 of the current report on Form 6-K of NXP Semiconductors N.V. filed on August 10, 2010)

4.5		Registration Rights Agreement dated August 5, 2010 among NXP Semiconductors N.V., AlpInvest Partners CSI 2006 Lion C.V., AlpInvest Partners Later Stage II-A Lion C.V., Meridian Holding S.à.r.l., Bain Pumbaa Luxco S.à.r.l., KKR NXP Investor S.à.r.l., NXP Co-Investment Investor S.à.r.l., SLII NXP S.à.r.l., Koninklijke Philips Electronics N.V., Stichting Management Co-Investment NXP and certain hedge funds party to the agreement (incorporated by reference to Exhibit 3 of the current report on Form 6-K of NXP Semiconductors N.V. filed on August 10, 2010)

4.6		Secured Term Credit Agreement dated March 4, 2011 among NXP B.V. and NXP Funding LLC as borrower, Barclays Bank PLC as Administrative Agent, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent, Mizuho Corporate Bank, Ltd. as Taiwan Collateral Agent, and the lenders party thereto. (incorporated by reference to Exhibit 4.8 of the Form 20-F of NXP Semiconductors N.V. filed on March 13, 2012)

4.7		Joinder and Amendment Agreement dated November 18, 2011 amending the Secured Term Credit Agreement dated March 4, 2011 among NXP B.V. and NXP Funding LLC as borrower, Barclays Bank PLC as Administrative Agent, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent, Mizuho Corporate Bank, Ltd. as Taiwan Collateral Agent, and the lenders party thereto. (incorporated by reference to Exhibit 4.9 of the Form 20-F of NXP Semiconductors N.V. filed on March 13, 2012)


Exhibit Number		Description of Document

4.8		New Term Loan Joinder Agreement dated February 16, 2012 amending the Secured Term Credit Agreement dated March 4, 2011 among NXP B.V. and NXP Funding LLC as borrower, Barclays Bank PLC as Administrative Agent, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent, Mizuho Corporate Bank, Ltd. as Taiwan Collateral Agent, and the lenders party thereto. (incorporated by reference to Exhibit 4.10 of the Form-20F of NXP Semiconductors N.V. filed on March 13, 2012)

4.9		Senior Secured Indenture dated as of November 10, 2011 among NXP B.V. and NXP Funding LLC as Issuers, each of the Guarantors named on the signature pages thereto, Deutsche Bank Trust Company Americas as trustee, registrar, paying agent, calculation agent and transfer agent, Morgan Stanley Senior Funding Inc. as Global Collateral Agent, and Mizuho Corporate Bank Ltd. as Taiwan Collateral Agent. (incorporated by reference to Exhibit 4.10 of the Form-20F of NXP Semiconductors N.V. filed on March 13, 2012)

4.10		Secured Revolving Credit Agreement dated April 27, 2012 among NXP Semiconductors N.V., NXP B.V. and NXP Funding LLC as borrower, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent and Administrative Agent, Mizuho Corporate Bank, Ltd. as Taiwan Collateral Agent and the lenders party thereto

4.11		Incremental Joinder Agreement, dated October 24, 2012, to the Secured Revolving Credit Agreement dated April 27, 2012 among NXP Semiconductors N.V., NXP B.V. and NXP Funding LLC as borrower, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent and Administrative Agent, Mizuho Corporate Bank, Ltd. as Taiwan Collateral Agent and the lenders party thereto

4.12		New Term Loan Joinder Agreement dated December 10, 2012 amending the Secured Term Credit Agreement dated March 4, 2011 among NXP B.V. and NXP Funding LLC as borrower, Barclays Bank PLC as Administrative Agent, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent, Mizuho Corporate Bank, Ltd. as Taiwan Collateral Agent, and the lenders party thereto

4.13		Senior Unsecured Indenture dated as of February 14, 2013 among NXP B.V. and NXP Funding LLC as Issuers, each of the Guarantors named on the signature page thereto as borrower and Deutsche Bank Trust Company Americas as trustee

10.1		Intellectual Property Transfer and License Agreement dated as of September 28, 2006 between Koninklijke Philips Electronics N.V. and NXP B.V. (incorporated by reference to Exhibit 10.1 of the Amendment No. 3 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 30, 2010 (File No. 333-166128))

10.2		Intellectual Property Transfer and License Agreement dated as of November 16, 2009 among NXP B.V., Virage Logic Corporation and VL C.V. (incorporated by reference to Exhibit 10.2 of the Amendment No. 3 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 30, 2010 (File No. 333-166128))

10.3		Secured Revolving Credit Facility dated as of September 29, 2006 among NXP Semiconductors N.V., NXP B.V. and NXP Funding LLC as borrowers, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent and Mizuho Corporate Bank, Ltd., as Taiwan Collateral Agent, Deutsche Bank AG, London Branch, as Syndication Agent, Merrill Lynch Capital Corporation as Documentation Agent and Morgan Stanley Bank International Limited, Deutsche Bank AG, London Branch and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Joint-lead arrangers and Joint bookrunners (incorporated by reference to Exhibit 10.1 of the Registration Statement on Form F-4 of NXP B.V. filed on April 23, 2007 (File No. 333-142287))

10.4		Shareholders’ agreement dated as of March 30, 1999, as amended among EBD Investments Pte. Ltd., Koninklijke Philips Electronics N.V. and Taiwan Semiconductor Manufacturing Company Ltd. (incorporated by reference to Exhibit 10.4 of the Amendment No. 3 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 30, 2010 (File No. 333-166128))

10.5		Lease Agreement dated as of December 23, 2004 between Jurong Town Corporation and Systems on Silicon Manufacturing Company Pte. Ltd. for the property at No. 70 Pasir Ris Drive 1, Singapore (incorporated by reference to Exhibit 10.8 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))


Exhibit Number		Description of Document

10.6		Lease Agreement dated September 26, 2003 between Huangjiang Investment Development Company and NXP Semiconductors (Guangdong) Company Ltd. for the property at Tian Mei High Tech Industrial Park, Huang, Jiang Town, Dongguan City, China (incorporated by reference to Exhibit 10.9 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.7		Building Lease Contract dated as of May 12th, 2000 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.10 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.8		Agreement with regard to the Lease of a Single (vehicle) Shelter dated as of October 30, 2009 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.11 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.9		Agreement with regard to the Lease of Standard Plant Basements dated as of July 1, 2011 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd.

10.10		Agreement with regard to the Lease of a Single (vehicle) Shelter dated as of March 8, 2010 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.13 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.11		Agreement with regard to the Lease of Additional Land dated as of July 1, 2008 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.14 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.12		Agreement with regard to the Lease of a Dangerous Goods Warehouse dated as of November 27, 2009 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.15 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.13		Agreement with regard to the Lease of Land at Property Number AL012 dated as of July 1, 2008 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.18 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.14		Agreement with regard to the Lease of Land at Property Number AL020 dated as of July 1, 2008 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.19 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.15		Agreement with regard to the Lease of Land at Property Number AL071 dated as of July 1, 2008 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.20 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.16		Agreement with regard to the Lease of Land at Property Number CL102 dated as of July 1, 2008 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.21 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.17		Agreement with regard to the Lease of Land dated as of September 30, 2008 between the Export Processing Zone Administration (Ministry of Economic Affairs) and NXP Semiconductors Taiwan Ltd. (incorporated by reference to Exhibit 10.22 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))

10.18		Management Equity Stock Option Plan Terms and Conditions dated August 2010 (incorporated by reference to Exhibit 10.19 of the Form-20F of NXP Semiconductors N.V. filed on March 13, 2012)

10.19		Management Equity Stock Option Plan Terms and Conditions dated January 2011 (incorporated by reference to Exhibit 10.20 of the Form-20F of NXP Semiconductors N.V. filed on March 13, 2012)


Exhibit Number		Description of Document

10.20		Long Term Incentive Plan 2010 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan, Restricted Stock Unit Plan and Share Plan (incorporated by reference to Exhibit 10.21 of the Form-20F of NXP Semiconductors N.V. filed on March 13, 2012)

10.21		NXP Global Equity Incentive Program (incorporated by reference to Exhibit 10.26 of the Amendment No. 3 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 30, 2010 (File No. 333-166128))

10.22		Long Term Incentive Plan 2011 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan, Restricted Stock Unit Plan and Share Plan (incorporated by reference to Exhibit 4.8 of the Form-20F of NXP Semiconductors N.V. filed on March 13, 2012)

10.23		Long Term Incentive Plan 2012/3 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan, Restricted Stock Unit Plan and Share Plan

12.1		Certification of R. Clemmer filed pursuant to 17 CFR 240. 13a-14(a)

12.2		Certification of P. Kelly filed pursuant to 17 CFR 240. 13a-14(a)

13.1		Certification of R. Clemmer furnished pursuant to 17 CFR 240. 13a-14(b)

13.2		Certification of P. Kelly furnished pursuant to 17 CFR 240. 13a-14(b)

21.1		List of Significant Subsidiaries of the Registrant

22		Consent of KPMG Accountants N.V.

#	Confidential treatment previously requested and granted

GLOSSARY



32 bit ARM microcontrollers		Microcontroller based on a 32-bit processor core developed and licensed by ARM Technologies.

AC-DC		Conversion of alternating current to direct current.

Analog		A form of transmission that is a continuous wave of an electrical signal that varies in frequency and/or amplitude in response to variations of physical phenomena such as human speech or music.

Back-end		The packaging, assembly and testing stages of the semiconductors manufacturing process, which takes place after electronic circuits are imprinted on silicon wafers in the front-end process.

BCDMOS		Bipolar CMOS DMOS. A process technology that combines elements of bipolar, CMOS and DMOS technology and is capable of handling high voltages.

BiCMOS		A process technology that combines bipolar and CMOS processes, typically by combining digital CMOS circuitry with higher voltage or higher speed bipolar circuitry.

Bipolar		A process technology used to create semiconductors for applications involving the use of higher power levels than are possible with a CMOS chip. Due to the geometry of a bipolar circuit, these devices are significantly larger than CMOS devices. The speed of the most advanced bipolar devices exceeds those attainable with CMOS, but only at very large electrical currents. As a result, the number of bipolar devices that can be integrated into a single product is limited.

Can tuner		A module component used in television systems to convert broadcasts into a format suitable for television projection. Can tuners are rapidly being replaced by silicon tuners.

CAN		Controller Area Network. A network technology used in automotive network architecture.

CATV		An abbreviation for cable television.

Car access and immobilizers		An automobile technology segment focused on keyless entry and car immobilization applications. An automobile immobilizer is an electronic device fitted to an automobile which prevents the engine from running unless the correct key (or other token) is present.

Chip		Semiconductor device.

CFL		Compact Fluorescent Light. A type of fluorescent lamp designed to replace an incandescent lamp, while using less power and increasing rated life.

CMOS		Complementary Metal Oxide Semiconductor. The most common integrated circuit fabrication technology in the semiconductor industry. The technology is used to make integrated circuits where small size and high speed are important. As a result of the very small feature sizes that can be attained through CMOS technology, however, the ability of these integrated circuits to cope with high electrical currents and voltages is limited.

Coolflux DSP		A low power digital signal processor designed for mobile audio applications.

Digital		A form of transmission where data is represented by a series of bits or discrete values such as 0 and 1.

Diode		A semiconductor that allows currents to flow in one direction only.

Discrete semiconductors		Unlike integrated circuits, which contain up to tens of millions of transistors, discrete semiconductors are single devices, usually with two terminals (diodes) or three terminals (transistors). These are either applied as peripheral components on printed circuit boards, or used for special purposes such as very high power applications.

DMOS		Diffused Metal on Silicon Oxide Semiconductor. A process technology used to manufacture integrated circuits that can operate at high voltage.

DOCSIS 3.0		Data Over Cable Service Interface Specification (DOCSIS). Methods for transporting data over a cable (CATV) plant utilizing QAM and/or QPSK RF modulation.



DSP		Digital signal processor. A specialized microprocessor optimized to process sequences of numbers or symbols which represent signals.

DVB-C2		Digital Video Broadcasting—the DVB European consortium standard for the broadcast transmission of digital television over cable.

DVB-T2		Digital Video Broadcasting—Second Generation Terrestrial. A television broadcasting standard used to transmit compressed digital audio, video and other data using land based (terrestrial) signals.

EMI filtering		Electromagnetic interference (or EMI, also called radio frequency interference or RFI when in high frequency or radio frequency) is disturbance that affects an electrical circuit due to either electromagnetic induction or electromagnetic radiation emitted from an external source.

e-passport		A passport with secure data source chip used in providing personalized information.

ESD		Electrostatic discharge. The sudden and momentary electric current that flows between two objects caused by direct contact or induced by an electrostatic field. This term is used in the context of electronics to describe momentary unwanted currents that may cause damage to electronic equipment.

EURIBOR		Euro Interbank Offered Rate. The benchmark rate at which euro interbank term deposits within the eurozone are offered by one prime bank to another prime bank.

Fab (or wafer fab)		A semiconductor fabrication facility in which front-end manufacturing processes take place.

Fabless semiconductor company		A semiconductor company that does not have any internal wafer fab manufacturing capacity but instead focuses on designing and marketing its products, while outsourcing manufacturing to an independent foundry.

FlexRay		A new communications protocol designed for the high data transmission rates required by advanced automotive control systems.

Foundry		A semiconductor manufacturer that manufactures chips for third parties.

Front-end		The wafer processing stage of the semiconductors manufacturing process in which electronic circuits are imprinted onto raw silicon wafers. This stage is followed by the packaging, assembly and testing stages, which together comprise the back-end process.

GPS		Global Positioning System.

HDMI		High-Definition Multimedia Interface. A compact audio/video interface for transmitting uncompressed digital data.

I2 C		A multi-master serial single-ended computer bus that is used to attach low-speed peripherals to a motherboard, embedded system or mobile phone.

Integrated Circuit		Integrated Circuit. A miniaturized electronic circuit that has been manufactured in the surface of a thin substrate of semiconductor material.

ICN5,6,8		NXP wafer fab facilities located in Nijmegen, Netherlands, processing 5”, 6” or 8” diameter wafers.

In-process research and development		The value allocated to incomplete research and development projects in acquisitions treated as purchases.

Leadframe		A thin layer of metal that connects the wiring from tiny electrical technicals on the semiconductor surface to the large scale circuitry on electrical devices and circuit boards. Leadframes are used in almost all semiconductor packages.

LDMOS		Laterally Diffused Metal Oxide Semiconductor. A transistor used in RF/microwave power amplifiers.

LDOs		low-dropout or LDO regulator is a DC linear voltage regulator which can operate with a very small input–output differential voltage. The advantages of a low dropout voltage include a lower minimum operating voltage, higher efficiency operation and lower heat dissipation.

LED		Light Emitting Diode. A semiconductor device which converts electricity into light.

LIN		Local Interconnect Network. A network technology used in automotive network architecture.



LNA		Low-Noise Amplifier. An electronic amplifier used to amplify very weak signals.

Magneto-resistive device		A device fabricated with magneto-resistive material (material that has the ability to change the value of its electrical resistance when an external magnetic field is applied to it).

Memory		Any device that can store data in machine readable format. Usually used synonymously with random access memory and read only memory.

Microcontroller		A microprocessor combined with memory and interface integrated on a single circuit and intended to operate as an embedded system.

Micron		A metric unit of linear measure which equals one millionth of a meter. A human hair is about 100 microns in diameter.

MIFARE		Trademarked name, owned by NXP, for the most widely used contactless smart card, or proximity card, technology, for payment in transportation systems.

Mixed-signal		The mixed-signal part of an application solution refers to the devices and sub-system solutions that translate real world analog signals and phenomena such as radio frequency communication and power signals, sound, light, temperature, pressure, acceleration, humidity and chemical characteristics into digital or power signals that can be fed into the central microprocessing or storage devices at the heart of an application system solution.

MMIC		Monolithic Microwave Integrated Circuit. A type of integrated circuit device that operates at microwave frequencies.

MOS		Metal Oxide Semiconductor. A metal insulator semiconductor structure in which the insulating layer is an oxide of the substrate material.

MOSFET		Metal Oxide Semiconductor Field Effect Transistor. A device used for amplifying or switching electronic signals.

Nanometer		A metric unit of linear measure which equals one billionth of a meter. There are 1,000 nanometers in 1 micron.

NFC		Near field communication. A technology which allows devices to establish a secure point-to-point wireless connection at very close ranges (within several centimeters), and which is being increasingly adopted in mobile devices and point-of-sale terminals or other devices.

ODM		Original Design Manufacturer. A company which manufactures a product which ultimately will be branded by another firm for sale.

OEM		Original Equipment Manufacturer. A manufacturer that designs and manufactures its products for the end consumer market.

Power MOS		A specific type of metal oxide semiconductor designed to handle large amounts of power.

Power scaling		Design technique used to increase output power without changing the geometry, shape, or principle of operation.

Process technologies		The technologies used in front-end processes to convert raw silicon wafers into finished wafers containing hundreds or thousands of chips.

QAM		Quadrature-Amplitude Modulation

QPSK		Quadrature phase shift keying

Rectifier		An electrical device that converts alternating current to direct current.

RF		Radio Frequency. A high frequency used in telecommunications. The term radio frequency refers to alternating current having characteristics such that, if the current is input to an antenna, an electromagnetic (EM) field is generated suitable for wireless broadcasting and/or communications.

Radio Frequency Identification		An RF chip used for identification.



Semiconductors		Generic term for devices such as transistors and integrated circuits that control the flow of electrical signals. The most common semiconductor material for use in integrated circuits is silicon.

Silicon		A type of semiconducting material used to make wafers. Silicon is widely used in the semiconductor industry as a base material.

Silicon tuners		Semiconductor devices for receiving broadcast television signals. Silicon tuners are expected to displace mechanical can tuners as the dominant technology in television receivers.

SIM		Subscriber Identity Module. A smart card that stores the key identifying a cellular phone service subscriber and related information.

Solid State Lighting		A type of lighting that uses semiconductor light-emitting diodes (LEDs), organic light-emitting diodes (OLED), or polymer light-emitting diodes (PLED) as sources of illumination rather than electrical filaments, plasma or gas.

SPI		Serial Peripheral Interface Bus. A synchronous serial data link standard that operates in full duplex mode.

SS MOS		Small signal power discrete including a metal oxide semiconductor field effect transistor.

SS Transistor		A small signal transistor.

Substrate		The base material made from silicon on which an integrated circuit is printed.

Telematics		The science of sending, receiving and storing information via telecommunication devices.

Thyristor		A four-layer semiconductor that is often used for handling large amounts of electrical power.

UART		Universal Asynchronous Receiver/Transmitter. An integrated circuit used for serial communications over a computer or peripheral device serial port.

USB		Universal Serial Bus. A standard that provides a serial bus standard for connecting devices, usually to a computer.

WACC		Weighted Average Cost of Capital. A calculation of a company’s cost of capital in which each category of capital is proportionally weighted.

Wafer		A disk made of a semiconducting material, such as silicon, usually either 100, 125, 150, 200 or 300 millimeters in diameter, used to form the substrate of a chip. A finished wafer may contain several thousand chips.

White goods		A term which refers to large household appliances such as refrigerators, stoves, dishwashers and other similar items.

Yield		The ratio of the number of usable products to the total number of manufactured products.

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.


				NXP Semiconductors N.V. (Registrant)

/s/ RICK CLEMMER				/s/ PETER KELLY
Rick Clemmer				Peter Kelly
Chief Executive Officer (Principal Executive Officer)				Chief Financial Officer (Principal Financial and Accounting Officer)

Date: March 1, 2013

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following financial statements and related schedules, together with the report of independent registered public accounting firms thereon, are filed as part of this Annual Report:

Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm, KPMG Accountants N.V.
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010			F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010			F-4
Consolidated Balance Sheets as of December 31, 2012 and 2011			F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010			F-6
Consolidated Statements of Changes in Equity for the years ended December 31, 2012, 2011 and 2010			F-7
Notes to the Consolidated Financial Statements			F-8

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of NXP Semiconductors N.V.:

We have audited the accompanying consolidated balance sheets of NXP Semiconductors N.V. and subsidiaries (“the Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2012. We also have audited the Company’s internal control over financial reporting 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 (COSO). The Company’s management is responsible for these consolidated financial statements, 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 Report on Internal Control over Financial Reporting in Item 15 of this Form 20-F. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting 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.

/s/ KPMG Accountants N.V.

Amstelveen, the Netherlands

March 1, 2013

Consolidated Statements of Operations of NXP Semiconductors N.V.


($ in millions unless otherwise stated)	For the years ended December 31,
	2012			2011			2010
Revenue		4,358			4,194			4,402
Cost of revenue		(2,370	)		(2,288	)		(2,579	)

Gross profit		1,988			1,906			1,823
Research and development		(628	)		(635	)		(568	)
Selling, general and administrative		(977	)		(918	)		(966	)
Other income (expense)		29			4			(16	)

Operating income (loss)		412			357			273
Financial income (expense):
Extinguishment of debt		(161	)		(32	)		57
Other financial income (expense)		(276	)		(225	)		(685	)

Income (loss) before income taxes		(25	)		100			(355	)
Benefit (provision) for income taxes		(1	)		(21	)		(24	)
Results relating to equity-accounted investees		(27	)		(77	)		(86	)

Income (loss) from continuing operations		(53	)		2			(465	)
Income (loss) on discontinued operations, net of tax		1			434			59

Net income (loss)		(52	)		436			(406	)
Attribution of net income (loss) for the period:
Net income (loss) attributable to stockholders		(115	)		390			(456	)
Net income (loss) attributable to non-controlling interests		63			46			50

Net income (loss)		(52	)		436			(406	)
Earnings per share data:
Basic and diluted earnings per common share attributable to stockholders in $
– Income (loss) from continuing operations		(0.46	)		(0.17	)		(2.25	)
– Income (loss) from discontinued operations		—			1.74			0.26
– Net income (loss)		(0.46	)		1.57			(1.99	)
Weighted average number of shares of common stock outstanding during the year (in thousands)
– Basic and diluted		248,064			248,812			229,280

See accompanying notes to the consolidated financial statements.

F-3

Consolidated Statements of Comprehensive Income of NXP Semiconductors N.V.


($ in millions )	For the years ended December 31,
	2012			2011			2010
Net income (loss)		(52	)		436			(406	)
Other comprehensive income (loss), net of tax:
Net investment hedge, net of deferred taxes of $(8), $0 and $0		18			(203	)		—
Foreign currency translation adjustments		10			(19	)		160
Net actuarial gain (loss), net of deferred taxes of $3, $(2) and $1		(51	)		7			(19	)
Reclassification adjustments:
Foreign currency translation adjustments		—			(2	)		(2	)
Amortization of net actuarial gain (loss)		—			2			—

Total other comprehensive income (loss)		(23	)		(215	)		139

Total comprehensive income (loss)		(75	)		221			(267	)

Attribution of comprehensive income (loss) for the period:
Comprehensive income (loss) attributable to stockholders		(138	)		175			(317	)
Comprehensive income (loss) attributable to non-controlling interests		63			46			50

Total comprehensive income (loss)		(75	)		221			(267	)

See accompanying notes to the consolidated financial statements.

F-4

Consolidated Balance Sheets of NXP Semiconductors N.V.


($ in millions unless otherwise stated)	As of December 31,
	2012			2011
Assets
Current assets:
Cash and cash equivalents		617			743
Receivables, net		510			479
Assets held for sale		10			39
Inventories, net		715			618
Deferred tax assets		12			5
Other current assets		90			82

Total current assets		1,954			1,966

Non-current assets:
Investments in equity-accounted investees		45			37
Other non-current assets		128			144
Property, plant and equipment, net		1,070			1,063
Identified intangible assets, net		965			1,171
Goodwill		2,277			2,231

Total non-current assets		4,485			4,646

Total assets		6,439			6,612

Liabilities and equity
Current liabilities:
Accounts payable		562			455
Liabilities held for sale		—			21
Restructuring liabilities—current		138			47
Accrued liabilities		489			474
Short-term debt		307			52

Total current liabilities		1,496			1,049

Non-current liabilities:
Long-term debt		3,185			3,747
Pension and postretirement benefits		269			218
Restructuring liabilities		32			52
Other non-current liabilities		173			189

Total non-current liabilities		3,659			4,206

Equity:
Non-controlling interests		235			212
Stockholders’ equity:
Common stock, par value €0.20 per share:
Authorized: 430,503,000 shares (2011: 430,503,000 shares)
Issued and fully paid: 251,751,500 shares (2011: 251,751,500 shares)		51			51
Capital in excess of par value		6,090			6,047
Treasury shares, at cost: 2,726,000 shares (2011: 3,915,144 shares)		(58	)		(57	)
Accumulated deficit		(5,334	)		(5,219	)
Accumulated other comprehensive income (loss)		300			323

Total Stockholders’ equity		1,049			1,145

Total equity		1,284			1,357

Total liabilities and equity		6,439			6,612

See accompanying notes to the consolidated financial statements.

F-5

Consolidated Statements of Cash Flows of NXP Semiconductors N.V.


($ in millions)	For the years ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net income (loss)		(52	)		436			(406	)
(Income) loss from discontinued operations, net of tax		(1	)		(434	)		(59	)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization		533			591			684
Stock-based compensation		52			31			12
Net (gain) loss on sale of assets		(20	)		10			21
(Gain) loss on extinguishment of debt		161			32			(57	)
Results relating to equity-accounted investees		27			77			86
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets		2			(32	)		109
(Increase) decrease in inventories		(61	)		(104	)		8
Increase (decrease) in accounts payable and accrued liabilities		61			(373	)		(237	)
Decrease (increase) in other non-current assets		26			51			(157	)
Exchange differences		(28	)		(128	)		353
Other items		22			18			4

Net cash provided by (used for) operating activities		722			175			361
Cash flows from investing activities:
Purchase of identified intangible assets		(29	)		(10	)		(7	)
Capital expenditures on property, plant and equipment		(251	)		(221	)		(258	)
Proceeds from disposals of property, plant and equipment		2			15			31
Proceeds from disposals of assets held for sale		—			11			8
Purchase of interests in businesses		(2	)		—			(8	)
Proceeds from (consideration related to) sale of interests in businesses		26			—			(60	)
Proceeds from return of equity investment		12			—			—
Decrease (increase) in non-current assets and deposits		(1	)		3			25

Net cash provided by (used for) investing activities		(243	)		(202	)		(269	)
Cash flows from financing activities:
Net (repayments) borrowings of short-term debt		—			17			8
Amounts drawn under the revolving credit facility		760			200			—
Repayments under the revolving credit facility		(530	)		(600	)		(200	)
Repurchase of long-term debt		(1,676	)		(1,997	)		(1,383	)
Principal payments on long-term debt		(20	)		(10	)		(2	)
Net proceeds from the issuance of long-term debt		958			1,578			974
Dividends paid to non-controlling interests		(40	)		(67	)		(2	)
Net proceeds from the issuance of common stock		—			—			448
Cash proceeds from exercise of stock options		14			10			—
Purchase of treasury shares		(40	)		(57	)		—

Net cash provided by (used for) financing activities		(574	)		(926	)		(157	)
Net cash provided by (used for) continuing operations		(95	)		(953	)		(65	)
Cash flows from discontinued operations:
Net cash provided by (used for) operating activities		—			20			10
Net cash provided by (used for) investing activities		(45	)		791			(17	)
Net cash provided by (used for) financing activities		—			(2	)		2

Net cash provided by (used for) discontinued operations		(45	)		809			(5	)
Net cash provided by (used for) continuing and discontinued operations		(140	)		(144	)		(70	)
Effect of changes in exchange rates on cash positions		14			(21	)		(63	)

Increase (decrease) in cash and cash equivalents		(126	)		(165	)		(133	)
Cash and cash equivalents at beginning of period		743			908			1,041

Cash and cash equivalents at end of period		617			743			908
Less: cash and cash equivalents at end of period-discontinued operations		—			—			10

Cash and cash equivalents at end of period-continuing operations		617			743			898

See accompanying notes to the consolidated financial statements.

F-6

Consolidated Statements of Changes in Equity for the years ended December 31, 2012, 2011 and 2010


($ in millions)	Outstanding number of shares (in thousands)			Common stock		Capital in excess of par value			Treasury shares at cost			Accumulated deficit			Accumulated other comprehensive income (loss)			Total stockholders’ equity			Non- controlling interests			Total equity
Balance as of January 1, 2010		215,252			42		5,555			—			(5,153	)		399			843			198			1,041
Net income (loss)													(456	)					(456	)		50			(406	)
Other comprehensive income																139			139						139
Share-based compensation plans							12												12						12
Net proceeds from the issuance of common stock (IPO)		34,000			9		439												448						448
Issuance of additional shares		1,500																	—						—
Dividends non-controlling interests																						(2	)		(2	)
Changes in participations																						(13	)		(13	)

Balance as of December 31, 2010		250,752			51		6,006			—			(5,609	)		538			986			233			1,219
Net income (loss)													390						390			46			436
Other comprehensive income																(215	)		(215	)					(215	)
Share-based compensation plans							31												31						31
Issuance of additional shares		1,000																	—						—
Treasury shares		(5,689	)							(57	)								(57	)					(57	)
Shares issued pursuant to stock awards		1,774					10												10						10
Dividends non-controlling interests																						(67	)		(67	)

Balance as of December 31, 2011		247,837			51		6,047			(57	)		(5,219	)		323			1,145			212			1,357
Net income (loss)													(115	)					(115	)		63			(52	)
Other comprehensive income																(23	)		(23	)					(23	)
Share-based compensation plans							52												52						52
Treasury shares		(1,245	)				8			(34	)								(26	)					(26	)
Shares issued pursuant to stock awards		2,434					(19	)		33									14						14
Equity classified financial instruments							2												2						2
Dividends non-controlling interests																						(40	)		(40	)

Balance as of December 31, 2012		249,026			51		6,090			(58	)		(5,334	)		300			1,049			235			1,284

See accompanying notes to the consolidated financial statements.

F-7

Notes to the Consolidated Financial Statements of NXP Semiconductors N.V.

All amounts in millions of $ unless otherwise stated

1 Basis of Presentation

The Company

NXP Semiconductors N.V. (including our subsidiaries, referred to collectively herein as “NXP”, “NXP Semiconductors”, “we”, “our”, “us” and the “Company”) is a global semiconductors company and leading provider of High Performance Mixed Signal and Standard Product solutions We provide leading High Performance Mixed Signal and Standard Product solutions that leverage our deep application insight and our technology and manufacturing expertise in RF, analog, power management, interface, security and digital processing products. Our product solutions are used in a wide range of automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer and computing applications.

NXP was incorporated in the Netherlands as a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under the name KASLION Acquisition B.V. on August 2, 2006, in connection with the sale by Philips of 80.1% of its semiconductor business to the “Private Equity Consortium”. For a list of the specific funds that hold our common stock and their respective share ownership, see Part I, Item 7A. Major Shareholders elsewhere in this document. Initially, the Private Equity Consortium invested in our Company through KASLION Holding B.V., a Dutch private company with limited liability.

On May 21, 2010, we converted into a Dutch public company with limited liability (naamloze vennootschap) and changed our name to NXP Semiconductors N.V. Concurrently, we amended our articles of association in order to effect a 1-for-20 reverse stock split of our shares of common stock.

In August 2010, we made an initial public offering of 34 million shares of our common stock and listed our common stock on the NASDAQ Global Select Market.

On March 31, 2011, certain of our stockholders offered 30 million shares of our common stock, priced at $30.00 per share. The underwriters of the offering exercised in full their option to purchase from the selling stockholders 4,431,000 additional shares of common stock at the secondary offering price. We did not receive any proceeds from this secondary offering.

Reverse stock split

In connection with the IPO, the Company amended its Articles of Association on August 2, 2010 in order to effect a 1-for-20 reverse stock split of its shares of common stock. As a consequence, the number of shares outstanding on August 2, 2010 (4,305,030,000 shares) has been adjusted to 215,251,500 shares retrospectively to reflect the reverse stock-split in all periods presented. Basic and diluted weighted average shares outstanding and earnings per share have been adjusted retrospectively to reflect the reverse stock split in all periods presented. Also, the exercise price and the number of shares of common stock issuable under the Company’s share based compensation plans were proportionately adjusted retrospectively to reflect the reverse stock split. In addition, authorized and issued share capital has been adjusted retrospectively to reflect the reverse stock split.

Conversion

In addition to the reverse stock split, the Company has also amended its Articles of Association in order to convert a certain percentage of previously authorized common stock to preferred stock. Including the shares issued upon the public offering in August 2010 and the subsequent issuance of shares of common stock under equity incentive plans in November 2010 and 2011, the stock capital of the Company as of December 31, 2011 consists of 1,076,257,500 authorized shares, including 430,503,000 authorized shares of common stock (of which 251,751,500 are issued and outstanding), as well as 645,754,500 authorized but unissued shares of preferred stock.

Accounting policies

The Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). Historical cost is used as the measurement basis unless otherwise indicated.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain items previously reported under specific financial statement captions have been reclassified to conform to the current period presentation.

F-8

Pension and Post-retirement benefits amounts previously reflected on the Consolidated Balance Sheets within the captions Long-term provisions and Other non-current liabilities have been reclassified for all periods presented to a separate caption in the current year presentation. The remaining balance within Long-term provisions was reclassified and is now reflected in Other non-current liabilities for all periods presented.

Discontinued operations

During 2011, the Company sold its Sound Solutions business. See Note 17 “Discontinued Operations”.

2 Significant Accounting Policies

Principles for consolidated financial statements

The Consolidated Financial Statements include the accounts of the Company together with its consolidated subsidiaries, including NXP B.V and all entities in which the Company holds a direct or indirect controlling interest, in such a way that the Company would have the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb the losses or the right to receive benefits of the entity that could be potentially significant to the Company. Investments in companies in which the Company exercises significant influence but does not control, are accounted for using the equity method. The Company’s share of the net income of these companies is included in results relating to equity-accounted investees in the consolidated statements of operations.

All intercompany balances and transactions have been eliminated in the Consolidated Financial Statements. Net income (loss) includes the portion of the earnings of subsidiaries applicable to non-controlling interests. The income (loss) and equity attributable to non-controlling interests are disclosed separately in the consolidated statements of operations and in the consolidated balance sheets under non-controlling interests.

Business combinations are accounted for using the acquisition method. Under the acquisition method, the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree are recognized as at the acquisition date, which is the date on which control is transferred to the Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

For acquisitions on or after January 1, 2010, the Company measures goodwill at the acquisition date as:

	•		The fair value of the consideration transferred; plus

	•		The recognized amount of any non-controlling interest in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less

	•		The net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognized at fair value at the acquisition date. The contingent consideration is remeasured at fair value and changes in the fair value of the contingent consideration are recognized in the statement of operations.

Fair value measurements

Fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. In the absence of active markets for an identical asset or liability, we develop assumptions based on market observable data and, in the absence of such data, utilize internal information that we consider to be consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Priority is given to observable inputs. These two types of inputs form the basis for the following fair value hierarchy.

	•		Level 1: Quoted prices for identical assets or liabilities in active markets.

	•		Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and valuations based on models where the inputs are observable or where the significant value drivers are observable.

	•		Level 3: Significant inputs to the valuation model are unobservable.

Accounting for capital transactions of a subsidiary or an equity-accounted investee

The Company recognizes dilution gains or losses related to changes in ownership of consolidated entities directly in equity. In the case of loss of control of a subsidiary any dilution gain or loss is recognized in the consolidated statement of operations in the line item other income and expense. Dilution gains and losses related to equity-accounted investees are presented in the line item results relating to equity-accounted investees.

F-9

Foreign currencies

The Company uses the U.S. dollar as its reporting currency. The functional currency of the Holding company is the euro. For consolidation purposes, the financial statements of the entities within the Company with a functional currency other than the U.S. dollar, are translated into U.S. dollars. Assets and liabilities are translated using the exchange rates on the applicable balance sheet dates. Income and expense items in the statements of operations, statements of comprehensive income and statements of cash flows are translated at monthly exchange rates in the periods involved.

The effects of translating the financial position and results of operations from functional currencies are recognized in other comprehensive income and presented as a separate component of accumulated other comprehensive income (loss) within stockholder’s equity. However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is recorded under non-controlling interests. When the Company’s ownership in a foreign operation is disposed of such that control, significant influence or joint control is lost, the related cumulative translation adjustments are recognized as income or expense as part of the gain or loss on the disposal. However, when the Company disposes only a part of its ownership interest in a foreign subsidiary while retaining control, the relevant proportion of the cumulative translation adjustments is reattributed to non-controlling interests. When the Company disposes of only part of its investment in a foreign equity-accounted investee, while retaining significant influence or joint control, the relevant proportion of the cumulative translation adjustments is recognized as income or expense as part of the gain or loss on the disposal. However, translation results from the Company’s functional currency (euro) into the Company’s reporting currency (U.S. dollar) will not be recycled to the statement of operations as long as there is the assumption that the proceeds from the sale will be reinvested.

The following table sets out the exchange rates for euros into U.S. dollars applicable for translation of NXP’s financial statements for the periods specified.


	$ per € 1
	period end		average 1)		high		low
2012		1.3190		1.2887		1.2238		1.3347
2011		1.2938		1.3908		1.2938		1.4531
2010		1.3370		1.3326		1.2183		1.4402

(1)	The average rates are the average rates based on monthly quotations.

The functional currency of foreign entities is generally the local currency, unless the primary economic environment requires the use of another currency. When foreign entities conduct their business in economies considered to be highly inflationary, they record transactions in the Company’s reporting currency instead of their local currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of operations, except when the foreign exchange exposure is part of a qualifying cash flow or net investment hedge accounting relationship, in which case the related foreign exchange gains and losses are recognized directly in other comprehensive income to the extent that the hedge is effective and presented as a separate component of accumulated other comprehensive income (loss) within stockholders’ equity. To the extent that the hedge is ineffective, such differences are recognized in the statement of operations. Currency gains and losses on intercompany loans that have the nature of a permanent investment are recognized as translation differences in other comprehensive income and are presented as a separate component of accumulated other comprehensive income (loss) within equity.

Derivative financial instruments including hedge accounting

The Company uses derivative financial instruments in the management of its foreign currency risks and the input costs of gold for a portion of our anticipated purchases within the next 12 months.

The Company measures all derivative financial instruments based on fair values derived from market prices of the instruments or from option pricing models, as appropriate, and records these as assets or liabilities in the balance sheet. Changes in the fair values are immediately recognized in the statement of operations unless cash flow hedge accounting is applied.

Changes in the fair value of a derivative that is highly effective and designated and qualifies as a cash flow hedge are recorded in accumulated other comprehensive income (loss), until earnings are affected by the variability in cash flows of the designated hedged item. The application of cash flow hedge accounting for foreign currency risks is limited to transactions that represent a substantial currency risk that could materially affect the financial position of the Company.

Foreign currency gains or losses arising from the translation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized directly in other comprehensive income, to the extent that the hedge is effective, and are presented as a separate component of accumulated other comprehensive income (loss) within stockholders equity.

To the extent that a hedge is ineffective, the ineffective portion of the fair value change is recognized in the consolidated statement of operations. When the hedged net investment is disposed of, the corresponding amount in the accumulated other comprehensive income is transferred to the statement of operations as part of the profit or loss on disposal.

F-10

On initial designation of the hedge relationship between the hedging instrument and hedged item, the Company documents this relationship, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80-125 percent.

When cash flow hedge accounting is discontinued because it is not probable that a forecasted transaction will occur within a period of two months from the originally forecasted transaction date, the Company continues to carry the derivative on the consolidated balance sheets at its fair value, and gains and losses that were accumulated in other comprehensive income are recognized immediately in earnings. In situations in which hedge accounting is discontinued, the Company continues to carry the derivative at its fair value on the consolidated balance sheets, and recognizes any changes in its fair value in earnings.

Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments with a maturity of three months or less at acquisition that are readily convertible into known amounts of cash. It also includes cash balances that cannot be freely repatriated based on certain country restrictions. Cash and cash equivalents are stated at face value which approximates fair value.

Receivables

Receivables are carried at amortized cost, net of allowances for doubtful accounts and net of rebates and other contingent discounts granted to distributors. When circumstances indicate a specific customer’s ability to meet its financial obligation to us is impaired, we record an allowance against amounts due and value the receivable at the amount reasonably expected to be collected. For all other customers, we evaluate our trade accounts receivable for collectability based on numerous factors including objective evidence about credit-risk concentration, collective debt risk based on average historical losses, and specific circumstances such as serious adverse economic conditions in a specific country or region.

Inventories

Inventories are stated at the lower of cost or market, less advance payments on work in progress. The cost of inventories is determined using the first-in, first-out (FIFO) method. An allowance is made for the estimated losses due to obsolescence. This allowance is determined for groups of products based on purchases in the recent past and/or expected future demand and market conditions. Abnormal amounts of idle facility expense and waste are not capitalized in inventory. The allocation of fixed production overheads to the inventory cost is based on the normal capacity of the production facilities.

Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method over the expected economic life of the asset. Depreciation of special tooling is also based on the straight-line method unless a depreciation method other than the straight-line method better represents the consumption pattern. Gains and losses on the sale of property, plant and equipment are included in other income and expense. Plant and equipment under capital leases are initially recorded at the lower of the fair value of the leased property or the present value of minimum lease payments. These assets and leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset.

Goodwill

The Company accounts for goodwill in accordance with the provisions of ASC 350 “Intangibles-Goodwill and Other”. Accordingly, goodwill is not amortized but tested for impairment annually in the fourth quarter or more frequently if events and circumstances indicate that goodwill may be impaired.

An impairment loss is recognized to the extent that the carrying amount of goodwill exceeds the asset’s implied fair value. This determination is made at the business operating segment level, which is for the Company the reporting unit level in accordance with ASC 350. The Company has used the option to assess first qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if the Company concludes otherwise, it is required to perform the first step of the two-step impairment test. The Company then determines the carrying value of each reporting unit by assigning the assets and liabilities, including the goodwill and intangible assets, to the reporting units. Furthermore, the Company determines the fair value of each reporting unit and compares it to the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, the Company performs the second step of the impairment test. In the second step, the Company compares the implied fair value of the reporting unit’s goodwill with the carrying amount of the reporting unit’s goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all of the assets (recognized and unrecognized) and liabilities of the reporting unit in a manner similar to acquisition accounting in a business combination. The residual fair

F-11

value after this allocation is the implied fair value of the reporting unit’s goodwill. The Company generally determines the fair value of the reporting units based on discounted projected cash flows in the absence of other observable inputs such as quoted prices.

The determination of the fair value of the reporting unit requires us to make significant judgments and estimates including projections of future cash flows from the business. These estimates and required assumptions include estimated revenue and revenue growth rates, operating margins used to calculate projected future cash flows, estimated future capital expenditures, future economic and market conditions, determination of market comparables and the estimated weighted average cost of capital (“WACC”).

We base our estimates on assumptions we believe to be reasonable but any such estimates are unpredictable and inherently uncertain. Actual future results may differ from these estimates. In addition, we make judgments and assumptions in allocating assets and liabilities to each of our reporting segments.

Identified Intangible assets

Identified Intangible assets with definitive lives arising from acquisitions are amortized using the straight-line method over their estimated useful lives. Remaining useful lives are evaluated every year to determine whether events and circumstances warrant a revision to the remaining period of amortization. The Company considers renewal and extension options in determining the useful life. However, based on experience the Company concluded that these assets have no extension or renewal possibilities. In-process research and development (“IPR&D”) projects acquired as part of a business combination with no alternative use are capitalized and indefinitely lived until completion or abandonment of the associated R&D efforts in accordance with ASC 350 “Intangibles-Goodwill and Other”. Upon completion of each project, IPR&D assets are amortized over their estimated useful lives. During development IPR&D, assets are not amortized but tested annually for impairment. There are currently no intangible assets with indefinite lives. Patents, trademarks and other intangible assets acquired from third parties are capitalized at cost and amortized over their estimated remaining useful lives.

Certain costs relating to the development and purchase of software for internal use are capitalized and subsequently amortized over the estimated useful life of the software in conformity with ASC 350.

Impairment or disposal of identified intangible assets and tangible fixed assets

The Company accounts for intangible assets other than goodwill and tangible fixed assets in accordance with the provisions of ASC 360 “Property, Plant and Equipment”. Long-lived assets other than goodwill are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company determines the fair value based on discounted projected cash flows. The review for impairment is carried out at the level where discrete cash flows occur that are largely independent of other cash flows in the absence of other observable inputs such as quoted prices. Management must make significant judgments and apply a number of assumptions in estimating the future cash flows. The estimated cash flows are determined based on, among other things, our strategic plans, long-range forecasts, estimated growth rates and assumed profit margins. For the Manufacturing Operations segment, the review of impairment of long-lived assets is carried out on a Company-wide basis, as Manufacturing Operations is the shared manufacturing base for the other business segments with, for this purpose, no discrete cash flows that are largely independent of other cash flows. Assets held for sale are reported at the lower of the carrying amount or fair value less cost to sell.

Non-current assets held for sale and disposal groups

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. For this to be the case the asset (or disposal group) must be available for immediate sale in its present condition and the sale must be highly probable.

Non-current assets (or disposal groups) classified as held for sale are measured at the lower of the asset’s carrying amount and the fair value less costs to sell. The Company determines the fair value based on discounted projected cash flows in the absence of other observable inputs such as quoted prices. Depreciation or amortization of an asset ceases when it is classified as held for sale, or included within a disposal group that is classified as held for sale.

Discontinued operations

A discontinued operation is a component of the Company that either has been disposed of, or that is classified as held for sale, and: (i) represents a separate major line of business or geographical area of operations that can be clearly distinguished from the rest of the Company in terms of operations and cash flows or (ii) is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations. Generally, a major line of business is a segment or business unit. Discontinued operations are carried at the lower of carrying amount or fair value less cost to sell. The Company determines the fair value based on discounted projected cash flows in the absence of other observable inputs such as quoted prices. Results from discontinued operations until the date of disposal are presented separately as a single amount in the consolidated statements of operations together with any gain or loss from disposal. Results from discontinued operations are reclassified for all periods presented and reflected as income (loss) from discontinued operations, net of tax, within the consolidated statements of operations.

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Research and development

Costs of research and development are expensed in the period in which they are incurred, except for in-process research and development assets acquired in business combinations, which are capitalized and, after completion, are amortized over their estimated useful lives.

Advertising

Advertising costs are expensed when incurred.

Guarantees

The Company complies with ASC 460 “Guarantees”. The Company recognizes, at the inception of a guarantee, a liability at the fair value of the obligation incurred, for guarantees within the scope of the recognition criteria. The Company determines the fair value based on either quoted prices for similar guarantees or discounted projected cash flows, whichever is available.

Debt Issuance Costs

Direct costs incurred to obtain financings are capitalized and subsequently amortized over the term of the debt using the effective interest rate method. Upon extinguishment of any related debt, any unamortized debt issuance costs are expensed immediately.

Earnings per share

Basic earnings per share attributable to stockholders is calculated by dividing net income or loss attributable to stockholders of the Company by the weighted average number of common shares outstanding during the period.

Diluted earnings per share attributable to stockholders is determined using the weighted-average number of common and potentially dilutive common shares outstanding during the period using the treasury stock method for outstanding stock options, performance share unit and restricted stock unit awards. Under the treasury stock method, the amount the employee must pay for exercising stock options, performance share unit and restricted stock unit awards, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of excess tax benefits that would be recorded in additional paid-in capital when the award becomes deductible are assumed to be used to repurchase shares.

Revenue recognition

The Company’s revenue is primarily derived from made-to-order sales to Original Equipment Manufacturers (“OEMs”) and similar customers. The Company’s revenue is also derived from sales to distributors.

The Company applies the guidance in SEC Staff Accounting Bulletin (SAB) Topic 13 ‘Revenue Recognition’ and recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or the service has been provided, the sales price is fixed or determinable, and collection is reasonably assured, based on the terms and conditions of the sales contract. For made-to-order sales, these criteria are met at the time the product is shipped and delivered to the customer and title and risk have passed to the customer. Examples of delivery conditions typically meeting these criteria are ‘Free on board point of delivery’ and ‘Costs, insurance paid point of delivery’. Generally, the point of delivery is the customer’s warehouse. Acceptance of the product by the customer is generally not contractually required, since, for made-to-order customers, design approval occurs before manufacturing and subsequently delivery follows without further acceptance protocols. Payment terms used are those that are customary in the particular geographic market. When management has established that all aforementioned conditions for revenue recognition have been met and no further post-shipment obligations exist, revenue is recognized.

For sales to distributors, revenue is recognized upon sale to the distributor (sell-in accounting). The same recognition principles apply and similar terms and conditions as for sales to other customers are applied. However, for some distributors contractual arrangements are in place, which allow these distributors to return products if certain conditions are met. These conditions generally relate to the time period during which return is allowed and reflect customary conditions in the particular geographic market. Other return conditions relate to circumstances arising at the end of a product life cycle, when certain distributors are permitted to return products purchased during a pre-defined period after the Company has announced a product’s pending discontinuance. Long notice periods associated with these announcements prevent significant amounts of product from being returned, however. Repurchase agreements with OEMs or distributors are not entered into by the Company.

For sales where return rights exist, the Company has determined, based on historical data, that only a very small percentage of the sales to this type of distributor is actually returned. In accordance with these historical data, a pro rata portion of the sales to these distributors is not recognized but deferred until the return period has lapsed or the other return conditions no longer apply.

Revenue is recorded net of sales taxes, customer discounts, rebates and other contingent discounts granted to distributors. Shipping and handling costs billed to customers are recognized as revenue. Expenses incurred for shipping and handling costs of internal movements of goods are recorded as cost of revenue. Shipping and handling costs related to revenue to third parties are reported as selling expenses within selling, general and administrative.

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Royalty income, which is generally earned based upon a percentage of revenue or a fixed amount per product sold, is recognized on an accrual basis. Royalty income and other license income that is received in the form of non-refundable upfront payments is recognized as revenue pro rata over the term of the contract unless a separate earnings process has been completed. Income from the sale of patents is also reported as revenue. The carrying value of the sold patents is reported as cost of sales. Government grants, other than those relating to purchases of assets, are recognized as income as qualified expenditures are made. Software revenue is recognized in accordance with ASC 985 “Software Revenue Recognition” when the 4 criteria of SAB Topic 13 are met.

Financial income and expense

Financial income comprises interest income on funds invested and the net gain on the disposal of other financial assets.

Financial expense comprises interest expense on borrowings, accretion of the discount on provisions and contingent consideration, losses on disposal of financial assets, impairment losses recognized on financial assets (other than trade receivables) and losses on hedging instruments recognized in the statement of operations.

Borrowing costs that are not directly attributable to the acquisition, construction or production of property, plant and equipment are recognized in the statement of operations using the effective interest method.

Foreign currency gains and losses, not related to accounts receivable, accounts payable and intercompany current accounts, are reported on a net basis as either financial income or financial expense in the statement of operations depending on whether foreign currency movements are in a net gain or net loss position. Foreign currency gains and losses on accounts receivable, accounts payable and intercompany current accounts that are not hedged in a net investment hedge are reported under cost of revenue in the statement of operations.

Income taxes

Income taxes are accounted for using the asset and liability method. Income tax is recognized in the statement of operations except to the extent that it relates to an item that is initially recognized directly within equity or other comprehensive income (loss), in which case the related tax effect is also recognized there.

Current tax is the expected tax payable on the taxable income for the year, using the tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts. Measurement of deferred tax assets and liabilities is based upon the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date of the change. Deferred tax assets and liabilities are not discounted. Deferred tax liabilities for withholding taxes on dividends from subsidiaries are recognized in situations where the company does not consider the earnings permanently reinvested and to the extent that these withholding taxes are not expected to be refundable.

Deferred tax assets, including assets arising from loss carryforwards, are recognized, net of a valuation allowance, if it is more likely than not that the asset will be realized. The Company has significant deferred tax assets primarily related to net operating losses in the Netherlands, France, Germany, the USA and other countries. The realization of deferred tax assets is not assured and is dependent on the generation of sufficient taxable income in the future. We have exercised judgment in determining whether it is more likely than not that we will realize the benefit of these net operating losses and other deductible temporary differences, based upon estimates of future taxable income in the various jurisdictions and any feasible tax planning strategies.

The income tax benefit from an uncertain tax position is recognized only if it is more likely than not that the tax position will be sustained upon examination by the relevant taxing authorities, based on the technical merits of the position. The income tax benefit recognized in the financial statements from such position is measured based on the largest benefit that is more than 50% likely to be realized upon settlement with a taxing authority that has full knowledge of all relevant information. The liability for unrecognized tax benefits and the related interest and penalties is recorded under accrued liabilities and other non-current liabilities in the balance sheet based on the timing of the expected payment. Penalties are recorded as income tax expense, whereas interest is reported as financial expense in the statement of operations.

Postretirement benefits

The Company accounts for the cost of pension plans and postretirement benefits other than pensions in accordance with ASC 715 “Compensation-Retirement Benefits”.

The Company’s employees participate in pension and other postretirement benefit plans in many countries. The costs of pension and other postretirement benefits and related assets and liabilities with respect to the Company’s employees participating in defined-benefit plans are based upon actuarial valuations. Some of the Company’s defined-benefit pension plans are funded with plan assets

that have been segregated and restricted in a trust, foundation or insurance company to provide for the pension benefits to which the Company has committed itself.

The net pension liability or asset recognized in the balance sheet in respect of defined benefit pension plans is the present value of the projected defined-benefit obligation less the fair value of plan assets at the balance sheet date.

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Most of the Company’s plans are unfunded and result in a pension provision or a net pension liability.

The projected defined-benefit obligation is calculated annually by qualified actuaries using the projected unit credit method. For the Company’s major plans, the discount rate is derived from market yields on high quality corporate bonds. Plans in countries without a deep corporate bond market use a discount rate based on the local government bond rates.

Pension costs in respect of defined-benefit pension plans 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 and net of employee contributions.

Actuarial gains and losses arise mainly from changes in actuarial assumptions and differences between actuarial assumptions and what has actually occurred. They are recognized in the statement of operations, over the expected average remaining service periods of the employees only to the extent that their net cumulative amount exceeds 10% of the greater of the present value of the obligation or of the fair value of plan assets at the end of the previous year (the corridor). Events which invoke a curtailment or a settlement of a benefit plan will be recognized in our statement of operations.

In calculating obligation and expense, the Company is required to select actuarial assumptions. These assumptions include discount rate, expected long-term rate of return on plan assets and rates of increase in compensation costs determined based on current market conditions, historical information and consultation with and input from our actuaries. Changes in the key assumptions can have a significant impact to the projected benefit obligations, funding requirements and periodic pension cost incurred. A sensitivity analysis is provided in Note 9, “Postretirement Benefit Plans”.

Unrecognized prior-service costs related to pension plans and postretirement benefits other than pensions are amortized to the statements of operations over the average remaining service period of the active employees.

Contributions to defined-contribution and multi-employer pension plans are recognized as an expense in the statements of operations as incurred.

In accordance with the requirements of ASC 715, if the projected benefit obligation exceeds the fair value of plan assets, we recognize in the consolidated balance sheet a liability that equals the excess. If the fair value of plan assets exceeds the projected benefit obligation, we recognize in the balance sheet an asset that equals the excess.

The Company determines the fair value based on quoted prices for the plan assets or comparable prices for non-quoted assets. For a defined-benefit pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement defined benefit plan it is the accumulated postretirement benefit obligation.

The Company recognizes as a component of other comprehensive income, net of taxes, the gains or losses and prior service costs that arise during the year but are not recognized as a component of net periodic benefit cost pursuant to ASC 715. Amounts recognized in accumulated other comprehensive income, including the gains or losses and the prior services costs are adjusted as they are subsequently recognized as components of net periodic benefit costs pursuant to the recognition provisions of ASC 715.

For all of the Company’s defined pension benefit plans, the measurement date is year-end.

Share-based compensation

Share-based payment plans were first introduced by NXP Semiconductors N.V. for NXP employees in 2007 and new plans were introduced after NXP’s initial public offering of common shares in the United States in 2010. All plans are accounted for in accordance with the provisions of ASC 718 “Compensation, Stock Compensation” at the estimated fair value of the equity instruments measured at the grant date. For the grants issued up to August 2010 under the 2007 plans, the Company used a binomial option-pricing model to determine the estimated fair value of the options and determined the fair value of the equity rights on the basis of the estimated fair value of the Company, using a discounted cash flow technique. For grants issued since August 2010 the Company uses the Black-Scholes-Merton method. The estimated fair value of the equity instruments is recognized as compensation expense over the vesting period on a straight-line basis taking into account estimated forfeitures. For performance share units the recognition of cost is based on graded vesting of the performance share units.

The share-based compensation plans that the Company’s employees participate in contain contingent cash settlement features upon an exit or change in control in combination with a termination of employment. The Company has concluded that the likelihood of these events occurring is remote and therefore not probable. Also, upon death or disablement the Company may offer cash settlement, but the employee or his dependents must consent. Therefore, the Company has concluded that the requirement in ASC 718 that share options and restricted shares that have contingent cash settlement features that are outside the control of the employee, such as a change in control or the death or disability of an employee, to be accounted for as liabilities rather than equity if the contingent event is probable of occurring, is not applicable to the Company. However, if it is determined that vested share-based payment rights will become cash settled such instruments will be recorded as liabilities at fair value at the date of such event.

During 2009, NXP executed an option exchange program for options granted in 2007, 2008 and 2009 which were estimated to be deeply out of the money. Under this option exchange program, options with new exercise prices, different volumes and—in certain cases—revised vesting schedules were granted to eligible individuals, in exchange for their owned options. By accepting the new options, all options (vested and unvested) owned by the eligible individuals were cancelled. As of May 2009 until August 2010, options were granted to

F-15

eligible individuals under the revised stock option program. In accordance with the provisions of ASC 718 the unrecognized portion of the compensation costs of the cancelled options continues to be recognized over their remaining requisite vesting period. For the replacement options, the compensation cost was determined as the difference between the fair value of the cancelled options immediately before the grant date of the replacement options and the fair value of these replacement options at the grant date. This compensation cost was recognized in accordance with the vesting schedule over the remaining vesting period. Since November 2010, following NXP Semiconductors N.V. becoming a listed company, new option programs and share programs were launched in addition to the option program and equity rights program launched before November 2010.

Accounting standards adopted in 2012

The following accounting pronouncements became effective in 2012 and were adopted by the Company

	•		ASU No. 2011-04 “Fair Value Measurement (Topic 820). Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”

In May 2011 the FASB issued ASU 2011-04, which provides guidance about fair value measurements and related disclosures.

The guidance changes some fair value measurement principles and disclosure requirements. The key changes to U.S. GAAP that impact NXP are:

	–	The guidance states that the concepts of highest and best use and valuation premise are only relevant when measuring the fair value of non-financial assets (that is, it does not apply to financial assets or any liabilities).

	–	The guidance extends the prohibition on using a blockage factor to all fair value measurements. Premiums or discounts related to size as a characteristic of the entity’s holding (that is, a blockage factor) instead of as a characteristic of the asset or liability (for example, a control premium), are not permitted.

	–	The guidance does not apply to instruments issued as share-based compensation.

	–	The most significant change requires disclosure of quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements for recurring Level 3 fair value measurements. New disclosures are required about the level in the fair value hierarchy of assets and liabilities not recorded at fair value but where fair value is disclosed.

	–	The ASU became effective for NXP as of January 1, 2012. It did not have a significant impact on the Company’s fair value measurements or result in more extensive disclosures about valuation processes and sensitivity analysis.

	•		ASU No. 2011-05 “Comprehensive Income (Topic 220). Presentation of Comprehensive Income” and ASU No. 2011-12 “Comprehensive Income (Topic 220). Deferral of the Effective date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”

ASU 2011-05 requires presenting comprehensive income either in one single statement of comprehensive income or in 2 consecutive statements. The latter is currently the presentation manner of NXP.

The FASB issued ASU 2011-12 in December 2011, which deferred certain requirements of ASU No. 2011-05. These amendments were made to allow the FASB time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income for all periods presented. The new guidance is to be applied retrospectively.

ASU 2011-05 does not provide new requirements for the components of other comprehensive income or other accounting-related matters. The ASUs became effective for NXP beginning January 1, 2012.

	•		ASU No. 2011-08 “Intangibles – Goodwill and Other (Topic 350). Testing Goodwill for Impairment”

Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. This update became effective for NXP on January 1, 2012.

In 2012, NXP has used the option to first assess qualitative factors and has determined, based on this assessment, it is not more likely than not that the fair value of the reporting units is less than the carrying value of the reporting units.

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	•		ASU No. 2011-11 “Balance Sheet (Topic 210). Disclosures about Offsetting Assets and Liabilities”

ASU 2011-11 was issued by the FASB in December 2011 with an effective date for NXP of January 1, 2013. It requires retrospective application to prior periods reported.

The ASU primarily requires more extensive disclosures about financial assets and financial liabilities that have been offset in the statement of financial position or that were allowed to be offset but for which the Company made an accounting policy choice not to offset. The disclosures are either by type of financial asset and financial liability or by counterparty. The offsetting conditions were not changed by the ASU. The ASU has no significant impact on the Company’s financial statements.

New standards to be adopted after 2012

	•		ASU 2012-04 “Technical Corrections and Improvements”

The amendments in this Update make technical corrections, clarifications and limited-scope improvements to various Topics throughout the Codification. The ASU has no significant impact on the Company’s financial statements.

3 Supplemental Financial Information

Statement of Operations Information

Revenue composition


	2012		2011		2010
Goods		4,346		4,170		4,392
Patents and licenses		12		24		10

		4,358		4,194		4,402

Depreciation, amortization and impairment

Depreciation and amortization, including impairment charges, are as follows:


	2012		2011		2010
Depreciation of property, plant and equipment		247		290		359
Impairment of assets held for sale		—		—		30
Amortization of internal use software		24		10		14
Amortization of identified intangible assets		262		291		281

		533		591		684

Depreciation of property, plant and equipment in 2012 includes an additional write-off in connection with the retirement of property, plant and equipment of $1 million (2011: $1 million; 2010: $7 million). Depreciation of property, plant and equipment resulting from the acquisition accounting of $11 million (2011: $10 million; 2010: $21 million) is also included. Furthermore, depreciation of property, plant and equipment in 2012 includes $2 million relating to write-downs and impairment charges (2011: $6 million; 2010: $21 million). The 2010 write-downs related to additional depreciation of our ICN5 and ICN6 wafer fabs in Nijmegen, the Netherlands.

In 2010 an impairment of $30 million for real estate and other property was recognized as a result of classifying certain tangible fixed assets as held-for-sale.

Amortization of identified intangible assets in 2012 reflects amortization of identified intangible assets resulting from acquisition accounting of $262 million (2011: $291 million; 2010: $281 million).

Depreciation of property, plant and equipment is primarily included in cost of revenue. Amortization of intangible assets is primarily reported in the selling, general and administrative expenses.

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Other income and expense

Other income and expense consists of the following:


	2012			2011			2010
Result on disposal of property, plant and equipment:
- income		1			8			8
- expense		—			(18	)		—
Result on disposal of businesses:
- income		19			—			—
- expense		—			—			(37	)
Result on other items:
- income		10			17			19
- expense		(1	)		(3	)		(6	)

Total other income		30			25			27
Total other expense		(1	)		(21	)		(43	)

Total other income (expense)		29			4			(16	)

In 2012, the result on disposal of properties consists of various smaller items. In 2011, the result on disposal of properties mainly related to the sale of land and buildings in San Jose, USA (a loss of $17 million) and the sale of equipment in Nijmegen, the Netherlands (a gain of $5 million). Furthermore, the sale of a building in Southampton, UK, which was classified as assets held for sale, resulted in a gain of $2 million. In 2010, the result on disposal of properties mainly related to the sale of a building in Hamburg, Germany ($5 million), which was classified as assets held for sale.

In 2012, the result on disposal of businesses related to the sale of our High Speed Data Converter business. In 2011, no results on disposal of businesses were recorded. In 2010, the result on disposal of businesses mainly related to the divestment of the Home business to Trident (loss $26 million) and the divestment of NuTune (loss $7 million).

The remaining income and expense on other items consists of various smaller items for all periods reported.

Foreign exchange differences

In 2012, cost of revenue included foreign exchange differences amounting to a loss of $4 million (2011: a gain of $9 million; 2010: a loss of $20 million).

Financial income and expense


	2012			2011			2010
Interest income		4			5			2
Interest expense		(270	)		(312	)		(320	)

Total interest expense, net		(266	)		(307	)		(318	)
Net gain (loss) on extinguishment of debt		(161	)		(32	)		57
Sale of securities and other financial assets		—			—			8
Foreign exchange rate results		28			128			(331	)
Miscellaneous financing costs/income, net		(38	)		(46	)		(44	)

Total other financial income and expense		(171	)		50			(310	)

Total		(437	)		(257	)		(628	)

In 2012, interest expense, net, of $266 million (2011: $307 million; 2010: $318 million) was mainly related to the interest expense on the euro-denominated and U.S. dollar-denominated notes. The lower interest expense in 2012 resulted from several transactions to optimize our debt portfolio. See Note 5 “Debt”.

Furthermore in 2012, a net loss on extinguishment of debt of $161 million (2011: a loss of $32 million; 2010: a gain of $57 million) was recorded in connection with the various bond exchange and repurchase offers. See Note 5 “Debt”.

Included in the sale of securities and other financial assets is the sale of Virage shares in 2010 (a gain of $7 million).

In 2012 foreign exchange results amounted to a gain of $28 million (2011: a gain of $128 million; 2010: a loss of $331 million) and are composed of the following exchange rate fluctuations:

	•		the remeasurement of the U.S. dollar-denominated notes and short-term loans, which reside in a euro functional currency entity, of a gain of $9 million (2011: a gain of $124 million; 2010: a loss of $307 million);

	•		intercompany financing resulting in a gain of $3 million (2011: a loss of $7 million; 2010: a gain of $16 million);

	•		the Company’s foreign currency cash and cash equivalents resulting in a gain of $16 million (2011: a gain of $10 million; 2010: a loss of $43 million);

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	•		foreign currency contracts resulting in a loss of $1 million (2011: a gain of $1 million; 2010: a gain of $2 million);

	•		remaining items, a gain of $1 million in 2012 (2011: no material results; 2010: a gain of $1 million).

Included in miscellaneous financing costs in 2012 is the amortization of capitalized debt issuance costs of $32 million (2011: $27 million; 2010: $31 million). In 2011 and 2010, this position also included incidental interest on capital lease obligations of $10 million and $13 million, respectively.

The Company has applied net investment hedging since May, 2011. The U.S. dollar exposure of the net investment in U.S. dollar functional currency subsidiaries of $1.7 billion has been hedged by our U.S. dollar-denominated notes. As a result in 2012 a benefit of $26 million (2011: a charge of $203 million) was recorded in other comprehensive income (loss) relating to the foreign currency result on the U.S. dollar-denominated notes that are recorded in a euro functional currency entity.

Earnings per share

The computation of earnings per share (EPS) is presented in the following table:


	2012			2011			2010
Income (loss) from continuing operations		(53	)		2			(465	)
Less: Net income (loss) attributable to non-controlling interests		63			46			50

Income (loss) from continuing operations attributable to stockholders		(116	)		(44	)		(515	)
Income (loss) from discontinued operations attributable to stockholders		1			434			59

Net income (loss) attributable to stockholders		(115	)		390			(456	)
Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands):
Basic and diluted		248,064			248,812			229,280
Basic and diluted EPS attributable to stockholders in $: 1)
Income (loss) from continuing operations		(0.46	)		(0.17	)		(2.25	)
Income (loss) from discontinued operations		—			1.74			0.26

Net income (loss)		(0.46	)		1.57			(1.99	)

1)	In 2012, 32,394,794 securities (2011: 27,789,634 securities; 2010: 24,350,650 securities) that could potentially dilute basic EPS were not included in the computation of dilutive EPS because the effect would have been anti-dilutive for the periods presented.

Balance Sheet Information

Cash and cash equivalents

At December 31, 2012, our cash balance was $617 million (2011: $743 million), of which $288 million (2011: $261 million) was held by SSMC, our joint venture company with TSMC. A portion of this cash can be distributed by way of dividend to us, but 38.8% of the dividend will be paid to our joint venture partner as well. In 2012, there was a dividend distribution from SSMC amounting to $100 million (2011: $170 million) of which $39 million (2011: $66 million) was paid to TSMC.

Receivables, net

Accounts receivable are summarized as follows:


	2012			2011
Accounts receivable from third parties		463			425
Allowance for doubtful accounts		(4	)		(4	)
Accounts receivable from equity-accounted investees (net)		—			20
Other receivables		51			38

		510			479

The current portion of income taxes receivable of $3 million (2011: $14 million) is included under other receivables.

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Inventories, net

Inventories are summarized as follows:


	2012		2011
Raw materials		70		69
Work in process		515		415
Finished goods		130		134

		715		618

The portion of the finished goods stored at customer locations under consignment amounted to $20 million as of December 31, 2012 (2011: $15 million).

The amounts recorded above are net of an allowance for obsolescence of $61 million as of December 31, 2012 (2011: $62 million).

Property, plant and equipment, net

The following table presents details of the Company’s property, plant and equipment, net of accumulated depreciation:


	Useful Life (in years)		2012			2011
Land				59			62
Buildings		9 to 50		452			432
Machinery and installations		2 to 7		1,338			1,332
Other Equipment		1 to 5		186			185
Prepayments and construction in progress				68			54

				2,103			2,065
Less accumulated depreciation				(1,033	)		(1,002	)

Property, plant and equipment, net of accumulated depreciation				1,070			1,063

Land with a book value of $59 million (2011: $62 million) is not depreciated.

Property and equipment includes $77 million (2011: $75 million) related to assets acquired under capital leases. Accumulated depreciation related to these assets was $65 million (2011: $57 million). See Note 10 for information regarding capital lease obligations.

There was no significant construction in progress and therefore no related capitalized interest.

Accrued liabilities

Accrued liabilities are summarized as follows:


	2012		2011
Payroll and related benefits		193		143
Pension-related benefits		21		21
Utilities, rent and other		28		17
Income tax payable (refer to Note 15)		29		36
Deferred tax liabilities (refer to Note 15)		4		1
Liability for unrecognized tax benefits		—		6
Communication & IT costs (including accruals related to EDA contracts)		25		10
Distribution costs		9		7
Sales-related costs		12		13
Purchase-related costs		4		5
Interest accruals		25		74
Derivative instruments—liabilities (refer to Note 6)		2		3
Other accrued liabilities		137		138

		489		474

Other accrued liabilities in 2012 include approximately $50 million relating to legal claims.

Other accrued liabilities in 2011 include approximately $45 million of liabilities incurred in connection with the sale of the Sound Solutions business. The settlement of these liabilities in 2012 was reported as cash flows from discontinued operations.

The remaining other accrued liabilities in 2012 and 2011 consist of various smaller items.

F-20

Accumulated other comprehensive income (loss), net of tax

Total comprehensive income (loss) represents net income (loss) plus the results of certain equity changes not reflected in the Consolidated Statements of Operations. The after-tax components of accumulated other comprehensive income (loss) and their corresponding changes are shown below:


	Net investment hedge			Currency translation differences			Net actuarial gain/(losses)			Accumulated Other Comprehensive Income (loss)
As of December 31, 2009		—			367			32			399
2010 other comprehensive income (loss)		—			158			(19	)		139

As of December 31, 2010		—			525			13			538
2011 other comprehensive income (loss)		(203	)		(21	)		9			(215	)

As of December 31, 2011		(203	)		504			22			323
2012 other comprehensive income (loss)		18			10			(51	)		(23	)

As of December 31, 2012		(185	)		514			(29	)		300

Cash Flow Information


($ in millions)	For the years ended December 31,
	2012			2011			2010
Net cash paid during the period for****:
Interest		292			301			278
Income taxes		28			25			19
Net gain (loss) on sale of assets****:
Cash proceeds from the sale of assets		31			30			6
Book value of these assets		(12	)		(40	)		(142	)
Non-cash gains (losses)		1			—			115

		20			(10	)		(21	)
Non-cash investing information****:
Assets received in lieu of cash from the sale of businesses:
Trident shares		—			—			177
Others		3			—			—
Other items****:
Other items consist of the following non-cash elements in income:
Value adjustments/impairment financial assets		—			—			(4	)
Non-cash interest cost due to applying effective interest method		22			18			15
Others		—			—			(7	)

		22			18			4

4 Fair Value of Financial Assets and Liabilities

The following table summarizes the estimated fair value and carrying amount of our financial instruments measured on a recurring basis:


			December 31, 2012						December 31, 2011
	Fair value hierarchy1)		Carrying amount			Estimated fair value			Carrying amount			Estimated fair value
Assets:
Other financial assets		2		18			18			17			17
Derivative instruments-assets		2		1			1			2			2
Liabilities:
Short-term debt		2		(42	)		(42	)		(52	)		(52	)
Short-term debt (bonds)		1		(265	)		(267	)		—			—
Long-term debt (bonds)		1		(2,332	)		(2,453	)		(3,122	)		(3,296	)
Long-term debt (bonds) 2)		2		(608	)		(635	)		(606	)		(609	)
Other long-term debt		2		(245	)		(245	)		(19	)		(19	)
Derivative instruments-liabilities		2		(2	)		(2	)		(3	)		(3	)

1)	Transfers between the levels of fair value hierarchy are recognized when a change in circumstances would require it. There were no transfers during the reporting periods presented in the table above.

2)	Represent bonds which are privately held (floating rate secured notes 2016).

The following methods and assumptions were used to estimate the fair value of financial instruments:

F-21

Other financial assets

For other financial assets, the fair value is based upon significant other observable inputs depending on the nature of the other financial asset.

Debt

The fair value is estimated on the basis of the quoted market prices for certain issues, or on the basis of discounted cash flow analyses based upon the incremental borrowing rates for similar types of borrowing arrangements with comparable terms and maturities. Accrued interest is included under accounts payable and not within the carrying amount or estimated fair value of debt.

Assets and liabilities recorded at fair value on a non-recurring basis

We measure and record our non-marketable equity investments (non-marketable equity method and cost method investments) and non-financial assets, such as intangible assets and property, plant and equipment, at fair value when an impairment charge is required.

5 Debt

Short-term debt


	2012		2011
Other short-term bank borrowings		36		35
Current portion of long-term debt		271		17

Total		307		52

At December 31, 2012, other short-term bank borrowings of $36 million (2011: $35 million) consisted of a local bank borrowing by our Chinese subsidiary.

The applicable weighted average interest rate during 2012 was 3.6% (2011: 4.4%).

Long-term debt


	Range of interest rates		Average rate of interest		Amount outstanding 2012		Due in 2013		Due after 2013		Due after 2017		Average remaining term (in years)		Amount outstanding December 31, 2011
EUR notes		3.0		3.0		187		187		—		—		0.8		476
USD notes		3.1-9.8		5.8		3,018		78		2,940		1,336		5.0		3,262
Revolving Credit Facility		2.7		2.7		230		—		230		—		4.2		—
Bank borrowings		2.0		2.0		5		—		5		—		2.0		4
Liabilities arising from capital lease transactions		2.6-13.8		5.8		16		6		10		—		2.0		22

				5.4		3,456		271		3,185		1,336		4.7		3,764
Corresponding data of previous year				7.4		3,764		17		3,747		1,846		4.7

The following amounts of long-term debt at book value as of December 31, 2012 are due in the next 5 years:


2013			271
2014			28
2015			25
2016			629
2017			1,167
Due after 5 years			1,336

			3,456

As of December 31, 2012, the Company’s euro-denominated notes and U.S. dollar-denominated notes represented 6% and 94% respectively, of the total principal amount of the notes outstanding with maturities ranging from 1 to 8 years. The fixed rate notes and floating rate notes represented 13% and 87% respectively of the total principal amount of the notes outstanding at December 31, 2012. The remaining tenor of secured debt is on average 4.7 years.

Debt exchange and repurchase

At December 31, 2012 long-term debt has been reduced to $3,185 million from $3,747 million at December 31, 2011 and $4,128 million at December 31, 2010.

F-22

In 2012, the book value of our long-term debt decreased by $562 million to $3,185 million, mainly due to the full repayment of the Senior Notes 2015, the full repayment of the Super Priority Notes 2013 and the partial repayment of the Senior Notes 2018 offset in part by issuance of a new Term Loan due 2019, a new Term Loan due 2020 and borrowings under a new Revolving Credit Facility due 2017. Extinguishment of debt in 2012 amounted to a loss of $161 million compared to a loss of $32 million in 2011. The Senior Secured notes due 2013, outstanding as of December 31, 2012 and due within one year are classified within short-term debt.

2019 Term Loan

On February 16, 2012, our subsidiary, NXP B.V. together with NXP Funding LLC entered into a new $475 million aggregate principal amount Senior Secured Term Loan Facility due March 19, 2019. The Term Loan was issued with an original issue discount at 98.5% of par and was recorded at its fair value of $468 million on the accompanying Consolidated Balance Sheet. The net proceeds of this issuance, together with a $330 million draw-down under our pre-existing Revolving Credit Facility and approximately $52 million of cash on hand, were used to redeem $510 million of the U.S. dollar-denominated 9 1/2% Senior Notes due October 2015, €203 million of the euro-denominated 8 5/8% Senior Notes due October 2015, and pay related call premiums of $36 million and accrued interest of $31 million.

2017 Revolving Credit Facility

On April 27, 2012, NXP B.V. and NXP Funding LLC concluded a new Senior Secured Revolving Credit Agreement (“RCA”) under which it borrowed $330 million to settle and close its pre-existing Revolving Credit Facility. It subsequently reduced its outstanding drawings to $230 million as of December 31, 2012.

On October 24, 2012, NXP B.V. and NXP Funding LLC agreed with certain participating banks to increase the borrowing capacity under the RCA subject to an effective date of October 29, 2012. The borrowing capacity under the RCA was increased by €120 million (approximately $155 million) up to a total amount of €620 million ($818 million). The RCA will expire on March 1, 2017 and will be used for general corporate purposes.

2013 Super Priority Notes

During 2012, we repurchased all of our Euro denominated Super Priority Notes 2013 for a principal amount of €29 million and all USD denominated Super Priority Notes 2013 for a principal amount of $221 million.

2020 Term Loan

On December 10, 2012, our subsidiary, NXP B.V. together with NXP Funding LLC entered into a new $500 million aggregate principal amount Senior Secured Term Loan Facility due January 11, 2020. The Term Loan was issued with an original issue discount at 99.5% of par and was recorded at its fair value of $498 million on the accompanying Consolidated Balance Sheet. The net proceeds of this issuance, together with a $100 million draw-down under our existing Revolving Credit Facility and approximately $12 million of cash on hand, were used to settle our tender offer for $500 million of the U.S. dollar-denominated 9 3/4 % Senior Notes due 2018, and pay related call premiums of $86 million, accrued interest of $18 million and debt issuance costs of $6 million.

The Company may from time to time continue to seek to retire or purchase its outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise.

Other effects on the total long-term debt position relate to the translation of euro-denominated notes outstanding.

Euro notes

The Euro note outstanding as of the end of December 2012 consists of the following:

	•		a €142 million aggregate principal amount of floating rate senior secured notes due 2013 with an interest rate of three-month EURIBOR plus 2.75%.

U.S. dollar-denominated notes

The U.S. dollar-denominated notes consist of the following seven series:

	•		a $58 million aggregate principal amount of floating rate senior secured notes due 2013 with an interest rate of three-month LIBOR plus 2.75%; and

	•		a $616 million aggregate principal amount of floating rate senior secured notes due 2016 with an interest rate of three-month LIBOR plus 5.5%; and

	•		a $491 million aggregate principal amount of floating rate senior secured term loan due 2017 with an interest rate of LIBOR plus 3.25% with a floor of 1.25%; and

	•		a $494 million aggregate principal amount of floating rate senior secured term loan due 2017 with an interest rate of LIBOR plus 4.25% with a floor of 1.25%; and

F-23

	•		a $422 million aggregate principal amount of 9.75% senior secured notes due 2018; and

	•		a $471 million aggregate principal amount of floating rate senior secured term loan due 2019 with an interest rate of LIBOR plus 4% with a floor of 1.25%; and

	•		a $500 million aggregate principal amount of floating rate senior secured term loan due 2020 with an interest rate of LIBOR plus 3.50% with a floor of 1.25%.

Certain terms and Covenants of the Euro and U.S. dollar-denominated notes

The Company is not required to make mandatory redemption payments or sinking fund payments with respect to the notes. With respect to the Term Loans, the Company is required to repay $20 million annually ($5 million per Term Loan).

The indentures governing the notes contain covenants that, among other things, limit the Company’s ability and that of restricted subsidiaries to incur additional indebtedness, create liens, pay dividends, redeem capital stock or make certain other restricted payments or investments; enter into agreements that restrict dividends from restricted subsidiaries; sell assets, including capital stock of restricted subsidiaries; engage in transactions with affiliates; and effect a consolidation or merger.

Certain portions of long-term and short-term debt as of December 31, 2012 in the principal amount of $3,470 million (2011: $3,033 million) have been secured by collateral on substantially all of the Company’s assets and of certain of its subsidiaries.

The notes are fully and unconditionally guaranteed jointly and severally, on a senior basis by certain of the Company’s current and future material wholly owned subsidiaries (“Guarantors”).

Pursuant to various security documents related to the above mentioned secured notes and the $818 million (denominated €620 million) committed revolving credit facility, the Company and each Guarantor has granted first priority liens and security interests in, amongst others, the following, subject to the grant of further permitted collateral liens:

	(a)	all present and future shares of capital stock of (or other ownership or profit interests in) each of its present and future direct subsidiaries, other than SMST Unterstützungskasse GmbH, and material joint venture entities;

	(b)	all present and future intercompany debt of the Company and each Guarantor;

	(c)	all of the present and future property and assets, real and personal, of the Company, and each Guarantor, including, but not limited to, machinery and equipment, inventory and other goods, accounts receivable, owned real estate, leaseholds, fixtures, general intangibles, license rights, patents, trademarks, trade names, copyrights, chattel paper, insurance proceeds, contract rights, hedge agreements, documents, instruments, indemnification rights, tax refunds, but excluding cash and bank accounts; and

	(d)	all proceeds and products of the property and assets described above.

Notwithstanding the foregoing, certain assets may not be pledged (or the liens not perfected) in accordance with agreed security principles, including:

	•		if the cost of providing security is not proportionate to the benefit accruing to the holders; and

	•		if providing such security requires consent of a third party and such consent cannot be obtained after the use of commercially reasonable efforts; and

	•		if providing such security would be prohibited by applicable law, general statutory limitations, financial assistance, corporate benefit, fraudulent preference, “thin capitalization” rules or similar matters or providing security would be outside the applicable pledgor’s capacity or conflict with fiduciary duties of directors or cause material risk of personal or criminal liability after using commercially reasonable efforts to overcome such obstacles; and

	•		if providing such security would have a material adverse effect (as reasonably determined in good faith by such subsidiary) on the ability of such subsidiary to conduct its operations and business in the ordinary course as otherwise permitted by the indenture; and

	•		if providing such security or perfecting liens thereon would require giving notice (i) in the case of receivables security, to customers or (ii) in the case of bank accounts, to the banks with whom the accounts are maintained. Such notice will only be provided after the secured notes are accelerated.

Subject to agreed security principles, if material property is acquired by the Company or a Guarantor that is not automatically subject to a perfected security interest under the security documents, then the Company or relevant Guarantor will within 60 days provide security over this property and deliver certain certificates and opinions in respect thereof as specified in the indenture governing the notes.

6 Other Financial Instruments, Derivatives and Currency Risk

We conduct business in diverse markets around the world and employ a variety of risk management strategies and techniques to manage foreign currency exchange rate, interest rate and commodity price risks. Our risk management program focuses on the unpredictability of financial markets and seeks to minimize the potentially adverse effects that the volatility of these markets may have on our operating results. One way we achieve this is through the active hedging of risks through the selective use of derivative instruments.

F-24

Derivatives are recorded on our Consolidated Balance Sheets at fair value which fluctuates based on changing market conditions.

The Company does not purchase or hold financial derivative instruments for trading purposes.

Currency risk

Currency fluctuations may impact the Company’s financial results. A higher proportion of our revenue is in U.S. dollars or U.S. dollar- related currencies, compared to our costs and expenses resulting in a structural currency mismatch. Accordingly, our results of operations may be affected by changes in foreign exchange rates, particularly between the euro and the U.S. dollar. A strengthening of the euro against the U.S. dollar during any reporting period will reduce the operating income of the Company.

In addition, the U.S. dollar-denominated debt held by our Dutch subsidiary which has a euro functional currency may generate adverse currency results in financial income and expenses depending on the exchange rate movement between the euro and the U.S. dollar. This exposure has been partially mitigated by the application of net investment hedge accounting. In accordance with the provisions in ASC 815, “Derivatives and Hedging”, the Company has applied net investment hedging since May 2011. The U.S. dollar exposure of our net investment in U.S. dollar functional currency subsidiaries has been hedged by our U.S. dollar denominated debt for an amount of $1.7 billion. The hedging relationship is assumed to be highly effective. Foreign currency gains or losses on this U.S. dollar debt that is recorded in a euro functional currency entity that are designated as, and to the extent they are effective as, a hedge of the net investment in our U.S. dollar foreign entities, are reported as a translation adjustment in other comprehensive income within equity, and offset in whole or in part the foreign currency changes to the net investment that are also reported in other comprehensive income. As a result, in 2012, a benefit of $26 million (2011: a charge of $203 million) was recorded in other comprehensive income relating to the foreign currency result on the U.S. dollar-denominated notes that are recorded in a euro functional currency entity. Absent the application of net investment hedging, this amount would have been recorded as a gain within financial income (expense) in the statement of operations. No amount resulting from ineffectiveness of net investment hedge accounting was recognized in the statement of operations in 2012 (2011: no amount).

The Company’s transactions are denominated in a variety of currencies. The Company uses financial instruments to reduce its exposure to the effects of currency fluctuations. The Company generally hedges foreign currency exposures in relation to transaction exposures, such as receivables/payables resulting from such transactions and part of anticipated sales and purchases. The Company generally uses forwards to hedge these exposures.

Changes in the fair value of foreign currency accounts receivable/payable as well as changes in the fair value of the hedges of accounts receivable/payable are reported in the statement of operations under cost of revenue. Cash flow hedge accounting for foreign currency risk is not applied.

Derivative instruments relate to

	•		hedged balance sheet items,

	•		hedged anticipated currency exposures with a duration of up to 12 months.

The fair value of our derivative assets at the end of 2012 was less than $1 million (December 31, 2011: $2 million) whereas the fair value of our derivative liabilities amounted to $1 million (December 31, 2011: $3 million) and are included in other current assets and accrued liabilities, respectively, in the Consolidated Balance Sheets.

It is the Company’s policy that transaction exposures are hedged. Accordingly, the Company’s organizations identify and measure their exposures from transactions denominated in other than their own functional currency.

We calculate our net exposure on a cash flow basis considering balance sheet items, actual orders received or made and anticipated revenue and expenses.

Interest rate risk

The Company has significant outstanding debt, which creates an inherent interest rate risk. Through a combination of several private and open market transactions since 2009, the Company’s long-term debt profile has been improved. At December 31, 2012, long-term debt has been reduced to $3,185 million from $3,747 million at December 31, 2011 and $4,128 million at December 31, 2010.

F-25

The following table summarizes the outstanding notes as of December 31, 2012:


	Principal amount*		Fixed/ floating		Current coupon rate			Maturity date
Senior Secured Notes	$	422		Fixed		9.75	%		2018
Senior Secured Notes	$	616		Floating		5.81	%		2016
Senior Secured Notes	€	142		Floating		2.96	%		2013
Senior Secured Notes	$	58		Floating		3.09	%		2013
Term Loan	$	491		Floating		4.5	%		2017
Term Loan	$	494		Floating		5.5	%		2017
Revolving Credit Facility	$	230		Floating		2.71	%		2017
Term Loan	$	471		Floating		5.25	%		2019
Term Loan	$	500		Floating		4.75	%		2020

*	amount in millions

A sensitivity analysis in relation to our long-term debt shows that if interest rates were to increase by 1% from the level of December 31, 2012 with all other variables held constant, the annualized interest expense would increase by $12 million. If interest rates were to decrease by 1% from the level of December 31, 2012 with all other variables held constant, the annualized interest expense would decrease by $3 million. This impact is based on the outstanding debt position as of December 31, 2012.

Commodity Price Risk

We are exposed to price risk related to forecasted purchases of gold that we use as raw material in many of our products. Gold forward contracts generally are not subject to the accounting requirements for derivative instruments and hedging activities under the normal purchases exception. We do not, by policy, use financial instruments for speculative purposes.

We may use gold forward contracts to hedge the input costs of gold for a portion of our anticipated purchases within the next 12 months. During the second quarter of 2012, we entered into non-deliverable forward contracts for gold which require net-settlement. These derivative instruments are highly effective and qualify for hedge accounting treatment. As of and for the year ended December 31, 2012 the impact to our financial statements related our gold forward contracts designated as cash flow hedges was not material. As of December 31, 2012, the notional value of our gold futures contracts was less than $1 million.

7 Identified Intangible Assets

Intangible assets, net of accumulated amortization and impairments of $965 million and $1,171 million as of December 31, 2012 and 2011 respectively were composed of the following:


	December 31, 2012					December 31, 2011
	Gross		Accumulated amortization and impairments			Gross		Accumulated amortization and impairments
Marketing-related		18		(16	)		18		(16	)
Customer-related		427		(177	)		411		(143	)
Technology-based		2,053		(1,383	)		2,044		(1,156	)

Other intangible assets		2,498		(1,576	)		2,473		(1,315	)
Software		113		(70	)		63		(50	)

Identified intangible assets		2,611		(1,646	)		2,536		(1,365	)

The estimated amortization expense for these identified intangible assets for each of the five succeeding years is:


2013			232
2014			153
2015			132
2016			127
2017			113

All intangible assets, excluding goodwill, are subject to amortization and have no assumed residual value.

The expected weighted average remaining life of identified intangibles is 6 years as of December 31, 2012.

F-26

The estimated amortization expense for software as of December 31, 2012 for each of the five succeeding years is:


2013			21
2014			20
2015			2
2016			—
2017			—

The expected weighted average remaining lifetime of software is 2 years as of December 31, 2012.

8 Goodwill

The changes in goodwill in 2012 and 2011 were as follows:


	2012			2011
Balances as of January 1
Cost		2,454			2,529
Accumulated impairment		(223	)		(230	)

Book value		2,231			2,299
Changes in book value:
Acquisitions		11			—
Divestments		(6	)		—
Translation differences		41			(68	)

Total changes		46			(68	)
Balances as of December 31
Cost		2,502			2,454
Accumulated impairment		(225	)		(223	)

Book value		2,277			2,231

Acquisitions in 2012 relate to the acquisition of the Catena Group. Divestments in 2012 relate to the divestment of the High Speed Data Converter business.

No goodwill impairment charges were required to be recognized in 2012 or 2011.

The fair value of the reporting units substantially exceeds the carrying value of the reporting units.

See Note 19, “Segment and Geographical Information”, for goodwill by segment and Note 16, “Acquisitions and Divestments”.

9 Postretirement Benefit Plans

Pensions

Our employees participate in employee pension plans in accordance with the legal requirements, customs and the local situation in the respective countries. These are defined-benefit pension plans, defined-contribution plans and multi-employer plans.

The Company’s employees in The Netherlands participate in a multi-employer plan, implemented for the employees of the Metal and Electrical Engineering Industry (“Bedrijfstakpensioenfonds Metalektro or PME”) in accordance with the mandatory affiliation to PME effective for the industry in which NXP operates. As this affiliation is a legal requirement for the Metal and Electrical Engineering Industry it has no expiration date. This PME multi-employer plan (a career average plan) covers approximately 1,250 companies and 630,000 participants. The plan monitors its risk on an aggregate basis, not by company or participant and can therefore not be accounted for as a defined benefit plan. The pension fund rules state that the only obligation for affiliated companies will be to pay the annual plan contributions. There is no obligation for affiliated companies to fund plan deficits. Affiliated companies are also not entitled to any possible surpluses in the pension fund.

Every participating company contributes the same fixed percentage of its total pension base, being pensionable salary minus an individual offset. The Company’s pension cost for any period is the amount of contributions due for that period.

The coverage ratio of the PME plan was 93.9% as of December 31, 2012. Regulations require PME to have a coverage ratio (ratio of the plan’s assets to its obligations) of 104.3% for the total plan as of December 31, 2013, which needs to be achieved via a Recovery Plan. As the coverage ratio as of December 31, 2012 is below the path indicated in the Recovery Plan, PME has announced a reduction of pension rights of 5.1% as of April 1, 2013. In case the coverage ratio is still lower than 104.3% as of December 31, 2013 an additional reduction of the pension rights may be required. The contribution rate will increase from 26.5% (2012) to 27.0% (2013) to meet the funding requirements for the accrual of new pension rights.

F-27


PME multi-employer plan	2012		2011		2010
NXP’s contributions to the plan		53		59		53
(including employees’ contributions)		4		2		2
Average number of NXP’s active employees participating in the plan		3,229		3,256		3,537
NXP’s contribution to the plan exceeded more than 5 percent of the total contribution (as of December 31 of the plan’s year end)		No		No		No

The amount for pension costs included in the statement of operations for the year 2012 was $84 million (2011: $90 million; 2010: $83 million) of which $19 million (2011: $16 million; 2010: $15 million) represents defined-contribution plans and $47 million (2011: $54 million; 2010: $48 million) represents the PME multi-employer plans.

Defined-benefit plans

The benefits provided by defined-benefit plans are based on employees’ years of service and compensation levels. Contributions are made by the Company, as necessary, to provide assets sufficient to meet the benefits payable to defined-benefit pension plan participants.

These contributions are determined based upon various factors, including funded status, legal and tax considerations as well as local customs. The Company funds certain defined-benefit pension plans as claims are incurred.

The total cost of defined-benefit plans amounted to $18 million in 2012 (2011: $20 million; 2010: $20 million) consisting of $20 million ongoing cost (2011: $21 million; 2010: $20 million) and a gain of $2 million from special events resulting from restructurings, curtailments and settlements.

F-28

The table below provides a summary of the changes in the pension benefit obligations and defined-benefit pension plan assets for 2012 and 2011, associated with the Company’s dedicated plans, and a reconciliation of the funded status of these plans to the amounts recognized in the consolidated balance sheets.


	2012			2011
Projected benefit obligation
Projected benefit obligation at beginning of year		342			347
Additions		—			3
Service cost		11			12
Interest cost		14			15
Actuarial (gains) and losses		60			(5	)
Curtailments and settlements		(2	)		(6	)
Plan amendments		—			(1	)
Benefits paid		(18	)		(13	)
Exchange rate differences		12			(10	)

Projected benefit obligation at end of year		419			342
Plan assets
Fair value of plan assets at beginning of year		147			148
Actual return on plan assets		14			10
Employer contributions		14			13
Curtailments and settlements		—			(6	)
Benefits paid		(18	)		(13	)
Exchange rate differences		5			(5	)

Fair value of plan assets at end of year		162			147
Funded status		(257	)		(195	)

Classification of the funded status is as follows
- Prepaid pension cost within other non-current assets		13			25
- Accrued pension cost within other non-current liabilities		(260	)		(211	)
- Accrued pension cost within accrued liabilities		(10	)		(9	)

Total		(257	)		(195	)
Accumulated benefit obligation
Accumulated benefit obligation for all Company-dedicated benefit pension plans		364			299
Plans with assets less than accumulated benefit obligation
Funded plans with assets less than accumulated benefit obligation
- Fair value of plan assets		24			22
- Accumulated benefit obligations		65			60
- Projected benefit obligations		85			79
Unfunded plans
- Accumulated benefit obligations		174			140
- Projected benefit obligations		194			153
Amounts recognized in accumulated other comprehensive income (before tax)
Total AOCI at beginning of year		(30	)		(21	)
- Net actuarial loss (gain)		52			(9	)
- Prior service cost (credit)		—			(1	)
- Exchange rate differences		—			1

Total AOCI at end of year		22			(30	)
Changes in accumulated other comprehensive income (before tax) consist of
Total net actuarial loss (gain) at beginning of year		(30	)		(22	)
- Net actuarial loss (gain) arising during the year		52			(9	)
- Net actuarial (loss) gain recognized in income during the year		—			—
- Exchange rate difference		—			1

Total net actuarial loss (gain) at end of year		22			(30	)
Total prior service cost (credit) at beginning of year		—			1
- Prior service cost (credit) arising during the year		—			(1	)

Total prior service cost (credit) at end of year		—			—

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The weighted average assumptions used to calculate the projected benefit obligations were as follows:


	2012			2011
Discount rate		3.5	%		4.4	%
Rate of compensation increase		2.4	%		3.1	%

The weighted average assumptions used to calculate the net periodic pension cost were as follows:


	2012			2011			2010
Discount rate		4.4	%		4.3	%		4.8	%
Expected returns on plan assets		4.1	%		4.2	%		4.3	%
Rate of compensation increase		3.1	%		3.1	%		3.0	%

For the Company’s major plans, the discount rate used is based on high quality corporate bonds (iBoxx Corporate Euro AA 10+).

Plans in countries without a deep corporate bond market use a discount rate based on the local sovereign rate and the plans maturity (Bloomberg Government Bond Yields).

Expected returns per asset class are based on the assumption that asset valuations tend to return to their respective long-term equilibria. The Expected Return on Assets for any funded plan equals the average of the expected returns per asset class weighted by their portfolio weights in accordance with the fund’s strategic asset allocation.

The components of net periodic pension costs were as follows:


	2012			2011			2010
Service cost		11			12			12
Interest cost on the projected benefit obligation		14			15			15
Expected return on plan assets		(6	)		(6	)		(6	)
Amortization of prior service cost		—			—			—
Amortization of net (gain) loss		—			—			(1	)
Curtailments & settlements		(2	)		(1	)		(1	)
Other		1			—			1

Net periodic cost		18			20			20

A sensitivity analysis shows that if the discount rate increases by 1% from the level of December 31, 2012, with all other variables held constant, the net periodic pension cost would increase by $2 million. If the discount rate decreases by 1% from the level of December 31, 2012, with all other variables held constant, the net periodic pension cost would decrease by $2 million.

The estimated net actuarial loss (gain) and prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year (2013) are $1 million and nil, respectively.

Plan assets

The actual pension plan asset allocation at December 31, 2012 and 2011 is as follows:


	2012			2011
Asset category:
Equity securities		26	%		21	%
Debt securities		58	%		64	%
Insurance contracts		3	%		4	%
Other		13	%		11	%

		100	%		100	%

We met our target plan asset allocation. The investment objectives for the pension plan assets are designed to generate returns that, along with the future contributions, will enable the pension plans to meet their future obligations. The investments in our major defined benefit plans largely consist of government bonds, “Level 2” Corporate Bonds and cash to mitigate the risk of interest fluctuations. The asset mix of equity, bonds, cash and other categories is evaluated every three years by an asset-liability modeling study for our largest plan. The assets of funded plans in other countries mostly have a large proportion of fixed income securities with return characteristics that are aligned with changes in the liabilities caused by discount rate volatility. Total pension plan assets of $162 million include $149 million related to the German, Swiss and Philippine pension funds.

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The following table summarizes the classification of these assets.


	2012						2011
	Level I		Level II		Level III		Level I		Level II		Level III
Equity securities		3		38		—		1		29		—
Debt securities		20		68		—		17		71		—
Other		13		4		3		7		5		4

		36		110		3		25		105		4

From the remaining assets of $13 million an amount of $4 million relates to assets held by insurance companies.

The Company currently expects to make cash contributions of $84 million in 2013, consisting of $4 million of employer contributions to defined-benefit pension plans, $22 million of employer contributions to defined-contribution pension plans, $49 million of employer contributions to multi-employer plans and $9 million of expected cash payments in relation to unfunded pension plans.

Estimated future pension benefit payments

The following benefit payments are expected to be made (including those for funded plans):


2013			16
2014			13
2015			15
2016			14
2017			14
Years 2018-2022			95

Postretirement benefits other than pensions

In addition to providing pension benefits, the Company provides other postretirement benefits, primarily retiree healthcare benefits in the United States accounted for as defined-benefit plans. The Company funds these other postretirement benefit plans as claims are incurred.

The amounts included in the consolidated statements of operations for 2012 are an expense of $1 million (2011: $1 million; 2010: $1 million).

The accumulated postretirement benefit obligation other than pensions at the end of 2012 equals $9 million (2011: $7 million).

10 Commitments and Contingencies

Lease Commitments

Property, plant and equipment includes $12 million as of December 31, 2012 (2011: $18 million) for capital leases and other beneficial rights of use, such as building rights and hire purchase agreements. The financial obligations arising from these contractual agreements are reflected in long-term debt. Long-term operating lease commitments totaled $153 million as of December 31, 2012 (2011: $171 million). The long-term operating leases are mainly related to the rental of buildings. These leases expire at various dates during the next 30 years. Future minimum lease payments under operating and capital leases are as follows:


	Operating Leases		Capital Leases
2013		30		7
2014		29		7
2015		27		2
2016		18		1
2017		12		1
Thereafter		37		—

Total future minimum leases payments		153		18
Less: amount representing interest				2

Present value of future minimum lease payments				16

Rent expense amounted to $54 million in 2012 (2011: $51 million; 2010: $60 million).

Guarantees

At the end of 2012 there were no material guarantees recognized by the Company.

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Other commitments

The Company has made certain commitments to TSMC, whereby the Company is obligated to make cash payments to TSMC with respect to long-term obligations for a joint development process should it fail to purchase an agreed-upon accumulative volume of wafers. The maximum commitment is $18 million and expires at the end of 2015.

Environmental remediation

In each jurisdiction in which we operate, we are subject to many environmental, health and safety laws and regulations that govern, among other things, emissions of pollutants into the air, wastewater discharges, the use and handling of hazardous substances, waste disposal, the investigation and remediation of soil and ground water contamination and the health and safety of our employees. We are also required to obtain environmental permits from governmental authorities for certain of our operations.

As with other companies engaged in similar activities or that own or operate real property, the Company faces inherent risks of environmental liability at our current and historical manufacturing facilities. Certain environmental laws impose liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances. Certain of these laws also assess liability on persons who arrange for hazardous substances to be sent to disposal or treatment facilities when such facilities are found to be contaminated.

Soil and groundwater contamination has been identified at our properties in Hamburg, Germany and Nijmegen, the Netherlands. The remediation processes have been ongoing for several years and are expected to continue for several years.

Our former property in Lent, the Netherlands, is affected by trichloroethylene contamination. ProRail B.V., owns certain property located nearby and has claimed that we have caused trichloroethylene contamination on their property. We have rejected ProRail’s claims, as we believe that the contamination was caused by a prior owner of our property in Lent. While we are currently not taking any remediation or other actions, we estimate that our aggregate potential liability, if any, in respect of this property will not be material.

Asbestos contamination has been found in certain parts of our properties in Manchester in the United Kingdom and in Nijmegen, the Netherlands. Both in the United Kingdom and the Netherlands, we will be required to dispose of the asbestos when the buildings currently standing on the property are demolished or divested. We estimate our potential liability will not be material. Additionally, in the Netherlands, we will be required to remediate the asbestos contamination at a leased property, upon termination of the lease. The lease is not expected to end soon and we estimate the cost of remediation will not be material.

Litigation

We are regularly involved as plaintiffs or defendants in claims and litigation relating to matters such as commercial transactions and intellectual property rights. In addition, our divestments sometimes result in, or are followed by, claims or litigation by either party. From time to time, we also are subject to alleged patent infringement claims. We rigorously defend ourselves against these alleged patent infringement claims, and we rarely participate in settlement discussions. Although the ultimate disposition of asserted claims and proceedings cannot be predicted with certainty, it is our belief that the outcome of any such claims, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial position. However, such outcomes may be material to our consolidated statement of operations for a particular period.

With the support from its in-house and outside counsel and based on its best estimate, the Company records an accrual for any claim that arises whenever it considers that it is probable that it is exposed to a loss contingency and the amount of the loss contingency can be reasonably estimated. Based on the most current information available to it and based on its best estimate, the Company also reevaluates at least on a quarterly basis the claims that have arisen to determine whether any new accruals need to be made or whether any accruals made need to be adjusted.

Based on the procedures described above, the Company has an aggregate amount of approximately $59 million accrued for legal proceedings pending as of December 31, 2012, compared to approximately $15 million as of December 31, 2011. Such accruals are part of the “Other accrued liabilities,” as referred to in Note 3, “Supplemental Financial Information”. There can be no assurance that the Company’s accruals will be sufficient to cover the extent of its potential exposure to losses. Historically, legal actions have not had a material adverse effect on the Company’s business, results of operations or financial condition.

Set forth below are descriptions of our most important legal proceedings pending as of December 31, 2012, for which the related loss contingency is either probable or reasonably possible, including the legal proceedings for which accruals have been made:

	*	Three former employees of Signetics Corp, a predecessor of NXP Semiconductors USA, Inc. and their respective children each separately filed various counts against NXP Semiconductors USA, Inc. (negligence, premises liability, strict liability, abnormal and ultrahazardous activity, willful and wanton misconduct and loss of consortium) asserting exposure to harmful chemicals and substances while the employees concerned were working in a factory “clean room” of Signetics Corp., resulting in alleged physical injuries and eventual birth defects to their children (cases No. N09C-10-032 JRJ, N10C-05-137 JRJ and 1-10-CV-188679). Initial discovery has commenced by both sides in above mentioned cases. Actual substantive responses are pending. Trial dates for Case No. N09C-10 032 and Case No. N10C-05-137 have been set at October 7, 2013 and April 28, 2014, respectively. In Case No. 1-10-CV-188679 a trial setting conference is scheduled for April 30, 2013.

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	*	Norit Winkelsteeg B.V. and Vitens N.V. alleged that NXP Semiconductors Netherlands B.V. breached a contract it had entered into with them to build a so-called “permeate-water” factory or, in the alternative, had terminated negotiations to enter into such contract in bad faith. Claimants hold NXP Semiconductors Netherlands B.V. liable for all costs, expenses and damages, including loss of profit. In an interim judgment dated January 27, 2009, the Court of Appeal in Arnhem, the Netherlands, recognized that part of the claim related to costs and expenses could be awarded but the Court further stated that reticence must be observed in awarding compensation for loss of profits. Court ruling is adjourned to April 9, 2013.

	*	In 2007, certain former employees of NXP Semiconductors France SAS employed by a subsidiary of the DSP Group, Inc. filed a claim against NXP Semiconductors France SAS before the Tribunal de Grande Instance in an emergency procedure (procédure de référé) to demand re-integration within NXP Semiconductors France SAS, following the closure of the DSP Group’s activities in France and the consequent termination of their employment agreements. The claim was rejected by the Tribunal de Grande Instance. The employees concerned then brought the same claim before the Social Court (Conseil de Prud’hommes) in Caen which, on April 27, 2010, also ruled in favor of NXP Semiconductors France SAS. The claimants filed for an appeal in last resort on May 18, 2010, which is still pending.

In addition, on January 7, 2009, the European Commission issued a release in which it confirmed it had started an investigation in the smart card chip sector. The European Commission has reason to believe that the companies concerned may have violated European Union competition rules prohibiting certain practices such as price fixing, customer allocation and the exchange of commercially sensitive information. As one of the companies active in the smart card chip sector, NXP is subject to this ongoing investigation and is assisting the regulatory authorities in this investigation. The investigation is still ongoing and it is currently not possible to reliably estimate its outcome.

On April 5, 2012, the ICC arbitration tribunal arrived at an award in a dispute between NXP and STMicroelectronics (“ST”) about the interpretation of the contractual arrangements concerning underloading in the NXP wafer fabs and ST’s liability for the associated costs. Based on the award, ST paid NXP approximately $59 million in the second quarter of 2012. No appeal is available to ST on this award, however, ST commenced a separate arbitration aiming to convince the ICC Tribunal to reverse the economic effect of its award in the first arbitration. The hearing for this second arbitration took place from June 2 – 7, 2012; this second arbitration still continues.

The estimated aggregate range of reasonably possible losses is based on currently available information in relation to the claims that have arisen and on the Company’s best estimate of such losses for those cases for which such estimate can be made. For certain claims, the Company believes that an estimate cannot currently be made. The estimated aggregate range requires significant judgment, given the varying stages of the proceedings (including the fact that many of them are currently in preliminary stages), the existence of multiple defendants (including the Company) in such claims whose share of liability has yet to be determined, the numerous yet-unresolved issues in many of the claims, and the attendant uncertainty of the various potential outcomes of such claims. Accordingly, the Company’s estimate will change from time to time, and actual losses may be more than the current estimate. As at December 31, 2012, the Company believes that for all litigation pending its aggregate exposure to loss in excess of the amount accrued could range between $0 and approximately $26 million.

11 Stockholders’ Equity

The Company amended its Articles of Association on August 2, 2010 in order to effect a 1-for-20 reverse stock split of its shares of common stock. As a consequence, the number of shares outstanding on August 2, 2010 (4,305,030,000 shares) has been adjusted to 215,251,500 shares. The exercise price and the number of shares of common stock issuable under the Company’s share-based compensation plans were proportionately adjusted to reflect the reverse stock split. Basic and diluted weighted average shares outstanding and earnings per share have been calculated to reflect the reverse stock split in all periods presented. The share capital of the Company as of December 31, 2012 and 2011 consists of 1,076,257,500 authorized shares, including 430,503,000 authorized shares of common stock, and 645,754,500 authorized but unissued shares of preferred stock.

In 2010, the Company completed its initial public offering of 34 million shares of common stock, priced at $14 per share, resulting in net proceeds of $448 million, after deducting underwriting discounts and commissions and offering expenses totaling $28 million. As a result, the number of common shares increased from 215,251,500 shares to 249,251,500 shares. In connection with long-term equity incentive plans introduced in November 2010 and 2011, the Company has issued a total number of 2,500,000 additional shares of common stock.

At December 31, 2012, the Company has issued and paid up 251,751,500 shares (2011: 251,751,500 shares) of common stock each having a par value of €0.20 or a nominal stock capital of €50 million.

Option rights/restricted share units/equity rights

The Company has granted stock options, restricted share units and equity rights to the employees of the Company and its subsidiaries to receive the Company’s shares or depository receipts in the future. See Note 13, “Share-based Compensation”.

Treasury shares

In connection with the Company’s share repurchase programs, which commenced in 2011, and in accordance with the Company’s policy to provide share awards from its treasury share inventory, shares which have been repurchased and are held in treasury for delivery upon exercise of options and under restricted share programs, are accounted for as a reduction of stockholders’ equity. Treasury shares are

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recorded at cost, representing the market price on the acquisition date. When issued, shares are removed from treasury shares on a first-in, first-out (FIFO) basis.

Differences between the cost and the proceeds received when treasury shares are reissued, are recorded in capital in excess of par value. Deficiencies in excess of net gains arising from previous treasury share issuances are charged to retained earnings.

The following transactions took place resulting from employee option and share plans in 2012:


	2012
Total shares in treasury at beginning of year		3,915,144
Total cost		57
Shares acquired under repurchase program		1,843,694
Average price in $ per share		21.70
Amount paid		40
Shares delivered		3,032,838
Average price in $ per share		12.97
Amount received		15
Total shares in treasury at end of year		2,726,000
Total cost		58

12 Related-party Transactions

The Company’s related parties are the Private Equity Consortium, the members of the board of directors of NXP Semiconductors N.V., Philips, the members of the management team of NXP Semiconductors N.V. and equity-accounted investees.

Advisory Services Agreements

The members of the Private Equity Consortium provide certain advisory services to NXP Semiconductors N.V. We have entered into separate agreements in this regard with the respective parties, under which each of the various legal entities receive an annual advisory fee of $25,000 (with an aggregate total amount of $125,000 annually).

Shareholders’ Agreement

Prior to the consummation of the initial public offering of NXP Semiconductors N.V. in August 2010, the members of the Private Equity Consortium restructured their indirect shareholding in the common stock of NXP Semiconductors N.V. such that each of them holds directly, or indirectly through a separate Luxembourg holding company, shares of its common stock. At the same time, KASLION Holding B.V. ceased to hold shares of common stock of NXP Semiconductors N.V. In connection with this restructuring, the members of the Private Equity Consortium, Philips and the Management Foundation (together, the “Existing Shareholders”) entered into a new shareholders’ agreement among themselves, which replaced the shareholders’ agreement entered into on September 29, 2006. We are not a party to the new shareholders’ agreement.

Other

We have a number of strategic alliances and joint ventures. We have relationships with certain of our alliance partners in the ordinary course of business whereby we enter into various sale and purchase transactions, generally on terms comparable to transactions with third parties. However, in certain instances upon divestment of former businesses where we enter into supply arrangements with the former owned business, sales are conducted at cost.

The following table presents the amounts related to revenue and expenses incurred in transactions with these related parties:


	2012		2011		2010
Revenue		33		133		292
Purchase of goods and services		204		137		139

The following table presents the amounts related to accounts receivable and payable balances with these related parties:


	2012		2011
Receivables (net)		—		20
Payables		30		38

On September 7, 2010, Philips Pension Trustees Limited purchased Philips’ 42,715,650 shares of common stock in the Company (“Transfer Shares”) in a private transaction. In a subsequent private transaction, on October 29, 2010, PPTL Investment LP purchased the Transfer Shares from Philips Pension Trustees Limited by way of a transfer agreement, to which also Philips is a party (“Amended Transfer

F-34

Agreement”). PPTL Investment LP acquired the Transfer Shares for the purpose of owning and managing such assets as may be contributed to Philips Pension Trustees Limited. In the period running from the aforementioned acquisition to December 31, 2012, PPTL Investment LP disposed of 22,141,217 shares of common stock in 6 separate transactions.

13 Share-based Compensation

We record share-based compensation arrangements in accordance with ASC 718 “Compensation-Stock Compensation”. All share-based payments, including grants of stock options, performance share units, restricted share units and equity rights are recognized in our Consolidated Financial Statements based upon their respective grant date fair value.

Share-based compensation plans for employees were introduced in 2007. Subsequent to becoming a listed company in August 2010, the Company introduced additional share-based compensation plans for eligible employees since November 2010. The plans introduced since November 2010 are referred to as the “Post-IPO Plans” and the plans introduced prior to November 2010 are referred to as the “Pre-IPO Plans”.

Share-based compensation expense is included in the following line items in our statement of operations:


	2012		2011		2010
Cost of revenue		2		1		1
Research and development		5		2		—
Selling, general and administrative		45		28		11

		52		31		12

Post-IPO Plan

Under the Post-IPO plan performance shares, stock options and restricted shares were granted to eligible employees. The options have a strike price equal to the closing share price on the grant date. The fair value of the options has been calculated with the Black-Scholes-Merton formula, using the following assumptions:

	•		an expected life of 6.25 years, calculated in accordance with the guidance provided in SEC Staff bulletin No. 110 for plain vanilla options using the simplified method, since our equity shares have been publicly traded for only a limited period of time and we do not have sufficient historical exercise data;

	•		a risk-free interest rate varying from 0.8% to 1.3% (2011 grant 1.2% to 2.78%; 2010: 1.67%);

	•		no expected dividend payments; and

	•		a volatility of 45% based on the volatility of a set of peer companies. Peer company data has been used given the short period of time our shares have been publicly traded.

Changes in the assumptions can materially affect the fair value estimate.

Stock options vest ratably on a yearly basis over 4 years from the date of grant. Performance share units and restricted share units vest, subject to relevant performance criteria being met, ratably on a yearly basis over 3 years from the date of grant.

A charge of $44 million was recorded in 2012 for Post-IPO Plans (2011: $17 million; 2010: $2 million).

A summary of the status of NXP’s Post-IPO stock options and share rights and changes during 2012 and 2011 is presented below.

Stock options


	2012					2011
	Stock options			Weighted average exercise price in USD		Stock options			Weighted average exercise price in USD
Outstanding at January 1		7,366,908			15.49		3,749,932			13.27
Granted		4,972,081			23.36		4,045,537			17.35
Exercised		(637,858	)		14.14		(71,542	)		13.27
Forfeited		(791,017	)		15.94		(357,019	)		13.65

Outstanding at December 31		10,910,114			19.12		7,366,908			15.49
Exercisable at December 31		1,819,243			15.05		853,732			13.27

The weighted average per share grant date fair value of stock options granted in 2012 was $10.44 (2011: $7.81; 2010: $6.04).

The intrinsic value of the exercised options was $7 million (2011: $0.3 million), whereas the amount received by NXP was $9 million (2011: $1 million).

The number of vested stock options at December 31, 2012 is 1,819,243 (2011: 853,732).

At December 31, 2012, there was a total of $64 million of unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a weighted-average period of 3.3 years (2011: 3.5 years).

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The outstanding options issued under the Post-IPO Plans are categorized by exercise price as follows:

USD-denominated


Year granted	Exercise price		Shares		Intrinsic value in millions		Weighted average remaining contractual term
2012		23.49		4,047,450		11		9.8
2012		22.62		197,550		1		9.6
2012		26.32		158,930		—		9.3
2012		21.63		493,865		2		9.1
2011		25.01		86,492		—		8.1
2011		31.81		61,040		—		8.3
2011		19.78		82,365		1		8.6
2011		16.84		3,298,913		31		8.8
2010		13.27		2,483,509		32		7.8

The aggregate intrinsic value in the tables and text above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2012 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders if the options had been exercised on December 31, 2012.

Performance share units


	2012					2011
	Shares			Weighted average grant date fair value in USD		Shares			Weighted average grant date fair value in USD
Outstanding at January 1		1,487,149			16.00		846,819			13.27
Granted		1,171,600			23.35		987,225			17.38
Vested		(30,311	)		22.66		(249,962	)		13.27
Forfeited		(219,964	)		15.28		(96,933	)		13.27

Outstanding at December 31		2,408,474			19.55		1,487,149			16.00

The weighted average grant date fair value of performance share units granted in 2012 was $23.35 (2011: $17.38; 2010: $13.27). The number of vested performance share units at December 31, 2012 is 280,273 (2011: 249,962). The fair value of the performance share units at the time of vesting was $1 million (2011: $4 million).

At December 31, 2012, there was a total of $29 million (2011: $19 million) of unrecognized compensation cost related to non-vested performance share units. This cost is expected to be recognized over a weighted-average period of 1.9 years (2011: 2.5 years).

Restricted share units


	2012					2011
	Shares			Weighted average grant date fair value in USD		Shares			Weighted average grant date fair value in USD
Outstanding at January 1		2,360,806			16.08		1,283,295			13.27
Granted		2,021,918			23.31		1,571,236			17.52
Vested		(849,289	)		15.72		(400,835	)		13.27
Forfeited		(233,312	)		16.74		(92,890	)		13.81

Outstanding at December 31		3,300,123			20.56		2,360,806			16.08

The weighted average grant date fair value of restricted share units granted in 2012 was $23.31 (2011: $17.52; 2010: $13.27). The number of vested restricted share units at December 31, 2012 is 1,250,124 (2011: 400,835). The fair value of the restricted share units at the time of vesting was $21 million (2011: $7 million; 2010: $0 million).

At December 31, 2012, there was a total of $54 million (2011: $31 million) of unrecognized compensation cost related to non-vested restricted share units. This cost is expected to be recognized over a weighted-average period of 2.4 years (2011: 2.5 years).

Pre-IPO Plans

Under these plans, stock options were issued to certain employees of the Company. In addition, certain members of our management have the right to purchase depository receipts of shares of common stock of NXP Semiconductors N.V. upon exercise and payment of the exercise price, after these rights have vested and only upon a sale of shares by the Private Equity Consortium or upon a change of control (in particular, the Private Equity Consortium no longer jointly holding at least 30% of our common stock). In addition, exercise of stock options is also contingent upon a sale of shares by the Private Equity Consortium or upon a change of control as defined above.

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The exercise prices of stock options granted in 2007 and 2008 range from €20.00 to €50.00 after taking into account the reverse stock split in August, 2010. Also, equity rights were granted to certain non-executive employees containing the right to acquire our shares of common stock for no consideration after the rights have vested and upon a change of control (in particular, the Private Equity Consortium no longer jointly holding 30% of our common stock).

Since none of our stock options, equity rights or shares of common stock were traded on any stock exchange until August 2010, and exercise is dependent upon certain conditions, employees can receive no value nor derive any benefit from holding these options or rights without the fulfillment of the conditions for exercise. We have concluded that the fair value of the share-based payments could best be estimated by the use of a binomial option-pricing model because such model takes into account the various conditions and subjective assumptions that determine the estimated value. In addition to the estimated value of the Company based on projected cash flows, the assumptions used until 2010 were:

	•		Expected life of the options and equity rights is calculated as the difference between the grant dates and an exercise triggering event not before the end of 2012. For the options granted under the Pre-IPO Plans, expected lives varying from 4.25 to 3 years have been assumed;

	•		Risk-free interest rate, varying from 4.1% to 1.6%;

	•		Expected asset volatility, varying from 27% to 38% (based on the average volatility of comparable companies over an equivalent period from valuation date to exit date);

	•		Dividend pay-out ratio of nil;

	•		Lack of marketability discounts of 26% to 35%;

	•		The Business Economic Value of the Company based on projected discounted cash flows as derived from our business plan for the next 3 years, extrapolated until 2021 with 3% terminal growth rates (the discount factor was based on a weighted average cost of capital of 12.4%).

Because the options and rights are not traded, an option-based approach (the Finnerty model) was used to calculate an appropriate discount for lack of marketability. The expected life of the options and rights is an estimate based on the time period private equity on average takes to liquidate its investment. The volatility assumption has been based on the average volatility of comparable companies over an equivalent period from valuation date to exit date.

In May 2009, we executed a stock option exchange program for stock options previously granted which were deeply out of the money. Under this stock option exchange program, stock options with new exercise prices, different volumes and, in certain cases, revised vesting schedules, were granted to eligible individuals, in exchange for their owned stock options. By accepting the new stock options, all stock options (vested and unvested) owned by the eligible individuals were cancelled. The number of employees eligible for and affected by the stock option exchange program was approximately 120. Since May 2009, stock options have been granted to eligible individuals under the revised stock options program. The exercise prices of these stock options range from €2.00 to €40.00. No modifications occurred with respect to the equity rights of the non-executive employees.

After the Company’s initial public offering, it amended the terms of its Pre-IPO plan for those participants who voluntarily exchanged the right to accelerated vesting of their Pre-IPO options upon an exit event for a five year exercise period commencing upon the date of an exit event. This modification resulted in an additional cost of $4 million.

In accordance with the provisions of ASC 718, the unrecognized portion of the compensation costs of the cancelled options continues to be recognized over their remaining requisite vesting period. For the replacement options the incremental compensation costs are determined as the difference between the fair value of the cancelled options immediately before the grant date of the replacement options and the fair value of these replacement options at the grant date. This incremental compensation cost will be recognized over a weighted average period of 2.0 years.

A charge of $8 million was recorded in 2012 (2011: $14 million, 2010: $10 million) for Pre-IPO Plans, of which $8 million related to incremental compensation costs for the modified stock option scheme (2011: $6 million; 2010: $6 million) and including the $4 million modification described above.

The requisite service period for stock options is 4 years.

F-37

The following table summarizes the information about NXP’s outstanding Pre-IPO stock options and changes during 2012 and 2011.

Stock options


	2012					2011
	Stock options			Weighted average exercise price in EUR		Stock options			Weighted average exercise price in EUR
Outstanding at January 1		16,128,196			24.46		18,050,123			23.30
Granted		—			—		—			—
Exercised		(544,462	)		7.65		(1,051,993	)		6.61
Forfeited		(469,518	)		21.86		(869,934	)		22.08

Outstanding at December 31		15,114,216			25.14		16,128,196			24.46
Exercisable at December 31		2,372,254			11.96		2,875,053			12.46

The exercise prices range from €2.00 to €50.00

The intrinsic value of exercised options was $8 million (2011: $19 million), whereas the amount received by NXP was $6 million (2011: $9 million).

The number of vested options at December 31, 2012 was 13,603,205 (2011: 12,194,166 vested options) with a weighted average exercise price of €22.96 (2011: €25.78 weighted average exercise price).

Upon completion of the secondary offering on April 5, 2011, in total up to 22% of the options under the Pre-IPO Plans became exercisable, subject to the applicable laws and regulations.

Upon completion of the secondary offering on February 7, 2013, in total up to 38% of the options under the Pre-IPO Plans became exercisable, subject to applicable laws and regulations. If the secondary offering had occurred before end of 2012, then the exercisable number of options would have been 5,173,338 with a weighted average exercise price of €14.65.


	Weighted average fair value in EUR
Weighted average grant-date fair value in euros of options granted during:
2010		1.20
2009		1.80

None of the options will expire as a result of exceeding the maximum contractual term because such maximum term is not applicable.

The outstanding options issued under the Pre-IPO plans are categorized by exercise prices as follows:

Euro-denominated


exercise price	Shares		Intrinsic value in millions
2.00 – 9.50		1,260,268		29
15.00		4,957,155		32
20.00		1,479,889		—
30.00		3,083,343		—
40.00		3,612,921		—
50.00		720,640		—

		15,114,216		61

At December 31, 2012, there was a total of $1 million of unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a weighted-average period of 1 year.

A summary of the status of NXP’s Pre-IPO equity rights and changes during 2012 and 2011 is presented below. All equity rights have an exercise price of nil.

F-38

Equity rights


	2012					2011
	Shares			Weighted average grant date fair value in EUR		Shares			Weighted average grant date fair value in EUR
Outstanding at January 1		444,395			9.34		472,742			9.13
Granted		—			—		—			—
Released		(381,630	)		9.10		—			—
Forfeited		—			—		(28,347	)		5.80

Outstanding at December 31		62,765			10.80		444,395			9.34
Exercisable at December 31		—			—		—			—

In 2012 and 2011 there were no new equity rights issued. The number of vested equity rights at December 31, 2012 was 62,765 (December 31, 2011: 444,395).

At December 31, 2012, no amount of unrecognized compensation cost related to non-vested equity rights remains.

As resolved by the Board of Directors of the Company, the Equity Rights of participants still employed by the Company were automatically exercised on April 27, 2012. As a consequence, 381,630 NXP shares were delivered to these participants. The remaining equity rights outstanding as of December 31, 2012 relate to vested rights of former employees subject to the original terms and conditions of the Pre-IPO plan and are only exercisable upon a sale of shares by the Private Equity Consortium or upon a change of control (in particular, the Private Equity Consortium no longer jointly holding at least 30% of our common stock). The accelerated exercise of the equity rights was not foreseen in the terms and conditions of the Pre-IPO plan and was accounted for as a modification resulting in an additional cost of $1.0 million.

14 Restructuring Charges

The provision for restructuring relates to the estimated costs of initiated restructurings that have been approved by Management. When such plans require discontinuance and/or closure of lines of activities, the anticipated costs of closure or discontinuance are recorded at fair value when the liability has been incurred. The Company determines the fair value based on discounted projected cash flows in the absence of other observable inputs such as quoted prices. The restructuring liability includes the estimated cost of termination benefits provided to former or inactive employees after employment but before retirement, costs to terminate leases and other contracts, and selling costs associated with assets held for sale and other costs related to the closure of facilities. One-time employee termination benefits are recognized ratably over the future service period when those employees are required to render services to the Company, if that period exceeds 60 days or a longer legal notification period. However, generally, employee termination benefit are covered by a contract or an ongoing benefit arrangement and are recognized when it is probable that the employees will be entitled to the benefits and the amounts can be reasonably estimated. At each reporting date, we evaluate our restructuring liabilities, which consist primarily of severance and benefits, to ensure that our accruals are still appropriate.

The most significant projects for restructuring in 2012

In 2012 we announced a cost savings and restructuring initiative, designed to improve operational efficiency and to competitively position the Company for sustainable growth. We recorded a restructuring charge of $90 million in 2012 associated with this initiative classified within the statement of operations under cost of goods sold of $17 million, mainly relating to the consolidation of MOS technologies from our German fabrication facility in Hamburg to the Company’s 8-inch Dutch facility in Nijmegen, and selling, general and administrative of $52 million and research and development of $21 million, to consolidate resources. This charge primarily relates to a worldwide workforce reduction of approximately 650 employees, with the majority of the headcount reductions in Europe and the U.S. The restructuring liabilities of $90 million recognized for this initiative are reflected within current liabilities ($64 million) and non-current liabilities ($26 million) as of December 31, 2012 and primarily relate to severance and employee benefit related costs. The OPEX Reduction Program is expected to be completed mid 2015.

The most significant projects for restructuring in 2011

In 2011 NXP undertook restructuring actions which include:

	•		the future closure of ICN 4 wafer fabrication facilities in Nijmegen, the Netherlands.

	•		actions to lower headcount, primarily in locations within Europe.

The ICN 6 wafer fabrication facility in Nijmegen is expected to be closed in 2013.

The most significant projects for restructuring in 2010

There were no new restructuring projects in 2010. In 2010 the restructuring charges mainly related to the divestment of a major portion of our former Home business.

F-39

The following table presents the changes in the position of restructuring liabilities in 2012 by segment:


	Balance January 1, 2012		Additions		Utilized			Released			Other changes(1)			Balance December 31, 2012
HPMS		59		27		(4	)		(2	)		—			80
SP		4		17		(3	)		(1	)		1			18
Manufacturing Operations		20		4		(6	)		—			(9	)		9
Corporate and Other		16		55		(16	)		(1	)		9			63

		99		103		(29	)		(4	)		1			170

(1)	Other changes primarily related to translation differences and internal transfers

The total restructuring liability as of December 31, 2012 of $170 million is classified in the balance sheet under current liabilities ($138 million) and non-current liabilities ($32 million).

The following table presents the changes in the position of restructuring liabilities in 2011 by segment:


	Balance January 1, 2011		Additions		Utilized			Released			Other changes(1)			Balance December 31, 2011
HPMS		24		43		(3	)		(2	)		(3	)		59
SP		1		4		(1	)		—			—			4
Manufacturing Operations		44		11		(30	)		(3	)		(2	)		20
Corporate and Other		28		8		(20	)		(3	)		3			16

		97		66		(54	)		(8	)		(2	)		99

(1)	Other changes primarily related to translation differences.

The total restructuring liability as of December 31, 2011 of $99 million is classified in the balance sheet under current liabilities ($47 million) and non-current liabilities ($52 million).

Releases of restructuring liabilities of $4 million were recorded in 2012 (2011: $8 million; 2010: $40 million), primarily attributable to lower severance payments due to attrition and employees that were transferred to other positions in NXP, who were originally expected to be laid off.

The utilization of the restructuring liabilities mainly reflects the execution of ongoing restructuring programs the Company initiated in earlier years.

The components of restructuring charges less releases recorded in the liabilities in 2012, 2011 and 2010 are as follows:


	2012			2011			2010
Personnel lay-off costs		101			66			5
Impairment of assets		—			—			2
Lease and Contract Terminations		2			—			—
Release of provisions/accruals		(4	)		(8	)		(40	)

Net restructuring charges		99			58			(33	)

The following table summarizes the significant activity within, and components of, the Company’s restructuring obligations:


	Personnel lay-off costs			Lease and Contract Terminations			Total
Balance at December 31, 2010		87			10			97
Expense		58			—			58
Utilized 1)		(45	)		(9	)		(54	)
Other changes 2)		(2	)		—			(2	)

Balance at December 31, 2011		98			1			99
Expense		97			2			99
Utilized 1)		(29	)		—			(29	)
Other changes 2)		1						1

Balance at December 31, 2012		167			3			170

1)	Represents cash payments.

2)	Other changes primarily related to translation differences.

F-40

The restructuring charges less releases recorded in operating income are included in the following line items in the statement of operations:


	2012		2011		2010
Cost of revenue		18		24		(14	)
Selling, general and administrative		59		15		(10	)
Research & development		22		19		(9	)

Net restructuring charges		99		58		(33	)

In addition, restructuring related costs (excluding product transfers) of $12 million were directly charged to operating income in 2012 (2011: $32 million; 2010: $53 million), and included in the following line items:


	2012			2011		2010
Cost of revenue		5			13		26
Selling, general and administrative		8			16		30
Research & development		—			3		2
Other income and expenses		(1	)		—		(5	)

		12			32		53

The details by segment were as follows:


	2012			2011		2010
HPMS		(1	)		2		—
SP		3			2		4
Manufacturing Operations		3			4		23
Corporate and Other		7			24		27
Divested Home activities		—			—		(1	)

		12			32		53

In total, restructuring charges less releases and restructuring related costs charged to operating income for 2012 amounted to $111 million (2011: $90 million; 2010: $20 million).

15 Provision for Income Taxes

In 2012, NXP generated a loss before income taxes of $25 million (2011: $100 million income; 2010: $355 million loss). The components of income (loss) before income taxes are as follows:


	2012			2011			2010
Netherlands		(93	)		(27	)		(490	)
Foreign		68			127			135

		(25	)		100			(355	)

The components of the provision for income taxes are as follows:


	2012			2011			2010
Current taxes:
Netherlands		(1	)		(3	)		(12	)
Foreign		(20	)		(29	)		(40	)

		(21	)		(32	)		(52	)
Deferred taxes:
Netherlands		5			(10	)		3
Foreign		15			21			25

		20			11			28

Total provision for income taxes		(1	)		(21	)		(24	)

F-41

A reconciliation of the statutory income tax rate in the Netherlands as a percentage of income (loss) before income taxes and the effective income tax rate is as follows:


(in percentages)	2012			2011			2010
Statutory income tax in the Netherlands		25.0			25.0			25.5
Increase (reduction) in rate resulting from:
Rate differential local statutory rates versus statutory rate of the Netherlands		64.0			(15.7	)		1.6
Net change in valuation allowance		(178.0	)		12.7			(16.7	)
Prior year adjustments		5.2			(2.0	)		(1.6	)
Non-taxable income		41.6			(10.8	)		0.7
Non-tax-deductible expenses/losses		(69.6	)		19.6			(12.3	)
Other taxes and tax rate changes		18.2			(1.0	)		0.1
Withholding taxes		(7.6	)		6.9			(4.1	)
Unrecognized tax benefits		(24.8	)		(1.0	)		(2.5	)
Tax incentives		122.0			(12.7	)		2.5

Effective tax rate		(4.0	)%		21.0	%		(6.8	)%

The Company benefits from income tax holiday incentives in certain jurisdictions which provide that we pay reduced income taxes in those jurisdictions for a fixed period of time that varies depending on the jurisdiction. The income tax holiday of one of our subsidiaries is expected to expire at the end of 2021. The related tax benefit of 89% is recorded above within tax incentives.

The Company has considered all items of income (including items recorded in other comprehensive income) in determining the amount of tax benefit that should be allocated to a loss from continuing operations. As a result, we recorded $8 million non-cash tax benefit on a loss from continuing operations arising in one of our jurisdictions for the year ended December 31, 2012 which was exactly offset by $8 million income tax expense in other comprehensive income. Because the income tax expense on other comprehensive income is equal to the income tax benefit from continuing operations, our net deferred tax positions at December 31, 2012 were not impacted by this tax allocation.

Deferred tax assets and liabilities

The principal components of deferred tax assets and liabilities are presented below:


	2012						2011
	Assets			Liabilities			Assets			Liabilities
Intangible assets		13			(200	)		22			(245	)
Property, plant and equipment		20			(33	)		25			(28	)
Inventories		2			—			1			—
Receivables		1			—			—			(13	)
Other assets		3			(5	)		—			(4	)
Liabilities:
Pensions		42			(1	)		27			(2	)
Restructuring		46			—			23			—
Other		21			—			27			(1	)
Long-term debt		1			(7	)		—			(22	)
Undistributed earnings of foreign subsidiaries		—			(27	)		—			(27	)
Tax loss carryforwards (including tax credit carryforwards)		659			—			694			—

Total gross deferred tax assets (liabilities)		808			(273	)		819			(342	)

Net deferred tax position		535						477
Valuation allowances		(589	)					(545	)

Net deferred tax assets (liabilities)		(54	)					(68	)

The Company has significant deferred tax assets resulting from net operating loss carryforwards, tax credit carryforwards and deductible temporary differences that may reduce taxable income in future periods. Valuation allowances have been established for deferred tax assets based on a “more likely than not” threshold. The realization of our deferred tax assets depends on our ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction.

The following possible sources of taxable income have been considered when assessing the realization of our deferred tax assets:

	•		Future reversals of existing taxable temporary differences;

	•		Future taxable income exclusive of reversing temporary differences and carryforwards;

	•		Taxable income in prior carryback years; and

	•		Tax-planning strategies.

F-42

The valuation allowance increased by $44 million during 2012 (2011: $63 million increase).

When the Company’s operating performance improves on a sustained basis, our conclusion regarding the need for such valuation allowance could change.

Subsequently recognized tax benefits related to the valuation allowance for deferred tax assets as of December 31, 2012, will be allocated as follows: $582 million of income tax benefit that would be reported in the consolidated statement of comprehensive income, $7 million to additional paid-in capital.

After the recognition of the valuation allowance against deferred tax assets, a net deferred tax liability remains of $54 million at December 31, 2012 (2011: $68 million). This net deferred tax liability relates to certain taxable temporary differences reversing outside the tax loss carryforward periods, deferred tax liabilities recorded for profitable entities and deferred tax liabilities for withholding taxes on undistributed earnings of foreign subsidiaries.

At December 31, 2012 tax loss carryforwards of $2,515 million will expire as follows:


	Balance December 31, 2012		Scheduled expiration
		2013		2014	2015	2016	2017	2018-2022	later	unlimited
Tax loss carryforwards		2,515		1	5	191	748	525	159	156	730

The Company also has tax credit carryforwards of $92 million, which are available to offset future tax, if any, and which will expire as follows:


	Balance December 31, 2012		Scheduled expiration
		2013		2014	2015	2016	2017	2018-2022	later	unlimited
Tax credit carryforwards		92		—	—	—	—	—	—	10	82

The classification of the deferred tax assets and liabilities in the Company’s consolidated balance sheets is as follows:


	2012			2011
Deferred tax assets within current assets		12			5
Deferred tax assets within other non-current assets		22			19
Deferred tax liabilities within accrued liabilities		(4	)		(1	)
Deferred tax liabilities within other non-current liabilities		(84	)		(91	)

		(54	)		(68	)

The net income tax payable (excluding the liability for unrecognized tax benefits) as of December 31, 2012 amounted to $26 million (2011: $33 million payable) and includes amounts directly payable to or receivable from tax authorities.

As from 2009 the Company intends to repatriate the undistributed earnings of subsidiaries. Consequently, the Company has recognized a deferred income tax liability of $27 million at December 31, 2012 (2011: $27 million) for the additional withholding taxes payable upon the future remittances of these earnings of foreign subsidiaries.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2012			2011			2010
Balance as of January 1,		169			195			52
Increases from tax positions taken during prior periods		16			—			10
Decreases from tax positions taken during prior periods		(25	)		(12	)		(7	)
Increases from tax positions taken during current period		2			10			140
Decreases relating to settlements with the tax authorities		(23	)		(24	)		—

Balance as of December 31,		139			169			195

Of the total unrecognized tax benefits at December 31, 2012, $15 million, if recognized, would impact the effective tax rate. All other unrecognized tax benefits, if recognized, would not affect the effective tax rate as these would be offset by compensating adjustments in the Company’s deferred tax assets that would be subject to valuation allowance based on conditions existing at the reporting date.

The Company classifies interest related to unrecognized tax benefits as financial expense and penalties as income tax expense. The total related interest and penalties recorded during the year 2012 amounted to $(5) million (2011: $3 million; 2010: $5 million).

As of December 31, 2012 the Company has recognized a liability for related interest and penalties of $3 million (2011: $8 million; 2010: $11 million). It is reasonably possible that the total amount of unrecognized tax benefits may significantly increase/decrease within the next 12 months of the reporting date due to, for example, completion of tax examinations; however, an estimate of the range of reasonably possible change cannot be made.

Tax years that remain subject to examination by major tax jurisdictions (mainly related to the Netherlands, Germany, USA, China, Taiwan, Thailand and the Philippines) are 2007, 2008, 2009, 2010, 2011 and 2012.

F-43

16 Acquisitions and Divestments

2012

In April 2012, the Company acquired Catena, an electronic design and IP company. The purchase price consideration of $20 million, including the issuance of 599,000 treasury shares with a fair value of $14 million was allocated to goodwill of $11 million, other intangible assets with an amortization period of five years of $9 million, assets acquired of $7 million and liabilities assumed of $7 million. The goodwill is not deductible for income tax purposes.

The results of Catena are consolidated in the Automotive operating segment that is part of the reportable segment HPMS.

On July 19, 2012, we sold the High Speed Data Converter business (a product line of the High Performance Mixed Signal segment) to Integrated Device Technology (IDT). The positive deal result of $19 million, as included in other income (expense), is calculated as the excess of the selling price of $31 million over the carrying value of the business transferred less any transaction-related direct costs.

2011

On July 4, 2011, we sold our Sound Solutions business to Knowles Electronics, LLC, an affiliate of Dover Corporation for $855 million in cash. See Note 17 “Discontinued Operations” for additional information.

2010

On December 14, 2010, we sold our joint venture (55% shareholding) NuTune, formed in June 2008 with Technicolor, to combine NXP’s and Technicolor’s can tuner module operations, to affiliates of AIAC (American Industrial Acquisition Corporation). As a consequence, these divested operations (formerly included in Corporate and Other) were deconsolidated in our consolidated balance sheet as at December 31, 2010. The results of the divested business until the date of transaction, December 14, 2010, are included in our 2010 consolidated statements of operations and cash flows under Corporate and Other.

In September 2010 we sold all of the Virage Logic’s shares we held.

On July 26, 2010, we acquired 100% ownership of Jennic Ltd., a leading developer of low power RF solutions for wireless applications in smart energy, environment, logistics and consumer markets, for a consideration of approximately $8 million plus up to $8 million in additional contingent consideration over the next two years. In 2011, no additional payments were made and the additional contingent consideration has been canceled. As from the acquisition date it is consolidated within the segment HPMS.

On February 8, 2010, the Company sold its digital television and set-top-box business to Trident Microsystems, Inc., at that time publicly listed on the NASDAQ in the United States.

This transaction consisted of the sale of our television systems and set-top-box business lines, together with an additional net payment of $54 million (of which $7 million was paid subsequent to the closing date) to Trident, for a 60% shareholding in Trident valued at $177 million, based on the quoted market price at the transaction date and included in our balance sheet as “Investments in equity accounted investees”. The transaction resulted in a net loss of $26 million and is reported under other income (expense) in 2010.

On January 4, 2012, Trident filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code and was subsequently delisted from the NASDAQ. An initial distribution to shareholders took place on December 21, 2012. In view of the aforementioned distribution, NXP B.V. returned its shares in Trident. See Note 18 “Investments in Equity Accounted Investees” for an additional discussion of Trident.

17 Discontinued Operations

On July 4, 2011, we sold our Sound Solutions business (formerly included in our Standard Products segment) to Knowles Electronics, LLC (“Knowles Electronics”), an affiliate of Dover Corporation for $855 million in cash. The transaction resulted in a gain of $414 million, net of post-closing settlements, transaction-related costs, including working capital settlements, cash divested and taxes, which is included in income from discontinued operations. In relation to the other costs of this disposal, liabilities were included in the accrued liabilities and provisions for continuing operations. Cash payments of $45 million made in 2012 related to these liabilities are reported as cash flows from discontinued operations. The Consolidated Financial Statements have been reclassified for all periods presented to reflect the Sound Solutions business as a discontinued operation.

F-44

The following table summarizes the results of the Sound Solutions business included in the consolidated statements of income as discontinued operations for 2012, 2011 and 2010:


	2012		2011			2010
Revenue		—		140			354
Costs and expenses		—		(116	)		(283	)

Income attributable to discontinued operations		—		24			71
Provision for income taxes		—		(4	)		(12	)

Income attributable to discontinued operations, net of taxes, before disposal		—		20			59
Gain on disposal of discontinued operations (net of taxes)		1		414			—

Income from discontinued operations after disposal		1		434			59

18 Investments in Equity-accounted Investees

Results relating to equity-accounted investees


	2012			2011			2010
Company’s share in income (loss)		7			(77	)		(86	)
Other results		(34	)		—			—

		(27	)		(77	)		(86	)

Company’s share in income (loss)


	2012		2011			2010
Trident		—		(82	)		(94	)
ASMC		3		3			4
ASEN		4		2			4
Others		—		—			—

		7		(77	)		(86	)

Other results

Other results in 2012 include a loss of $46 million related to extra provisions for litigations, claims and proceedings and a gain of $12 million related to a partial recovery of our equity investment in Trident.

Investments in equity-accounted investees

The changes in 2012 are as follows:


	Investments
Balance as of January 1		37
Changes:
Acquisitions/additions		—
Deductions		—
Share in income (loss)		7
Translation and exchange rate differences		1

Balance as of December 31		45

The total carrying value of investments in equity-accounted investees is summarized as follows:


	2012				2011
	Shareholding %		Amount		Shareholding %		Amount
ASMC		27		17		27		14
ASEN		40		28		40		23
Trident		—		—		57		—

				45				37

Investments in equity-accounted investees are included in Corporate and Other.

The fair value of NXP’s shareholding in the publicly listed company ASMC based on the quoted market price at December 31, 2012 is $18 million.

On January 4, 2012, Trident and one of its subsidiaries, Trident Microsystems (Far East) Ltd., filed voluntary petitions under Chapter 11 of the United States Bankruptcy code, in the U.S. Bankruptcy Court for the District of Delaware and was subsequently delisted from the NASDAQ. The U.S. Bankruptcy Court approved the plan of liquidation and entered an order confirming such plan on December 13, 2012. An initial distribution to shareholders took place on December 21, 2012. In view of the aforementioned distribution, NXP B.V. returned its shares in Trident.

In 2011, the share in net loss of NXP’s equity accounted participation in Trident is based on the losses reported by Trident in its unaudited condensed consolidated financial information for the financial year ended December 31, 2011, which has been furnished to the SEC on a Form 8-K on March 8, 2012. Based on the equity accounting methodology used to account for NXP’s equity interest in Trident, and irrespective of the Chapter 11 filing, the carrying value of the investment on NXP’s balance sheet is written down to zero as of December 31, 2011, compared to a carrying value of $82 million as of the end of 2010.

F-45

Trident condensed consolidated financial information (unaudited)

Trident’s 2011 condensed consolidated statements of operations (unaudited) are presented below:


($ in thousands)	For the year ended December 31, 2011
Net revenues		298,349
Cost of revenues		(233,920	)

Gross profit		64,429
Research and development expenses		(138,972	)
Selling, general and administrative expenses		(65,263	)
Goodwill impairment		—
Restructuring charges		(10,042	)

Operating loss		(149,848	)
Gain (loss) on investment		2,098
Gain on acquisition		—
Interest and other income (expense), net		5,089

Loss before income taxes		(142,661	)
Provision for income taxes		(7,689	)

Net loss		(150,350	)

Trident’s 2011 condensed consolidated balance sheets (unaudited) are presented below:


($ in thousands)	December 31, 2011
Cash and cash equivalents		54,208
Accounts receivable, net		25,998
Accounts receivable from related parties		2,713
Inventories		12,783
Note receivable from related party		20,884
Prepaid expenses and other current assets		11,005

Total current assets		127,591
Property and equipment, net		9,236
Intangible assets, net		43,913
Long-term receivable from related party		—
Other assets		21,148

Total assets		201,888
Accounts payable		13,152
Accounts payable to related parties		23,395
Accrued expenses and other current liabilities		49,857
Income taxes payable		3,085

Total current liabilities		89,489
Long-term income taxes payable		23,471
Deferred income tax liabilities		301
Other long-term liabilities		7,878

Total liabilities		121,139
Common stock		183
Additional paid-in capital		441,614
Accumulated deficit		(361,048	)

Total stockholders’ equity		80,749

Total liabilities and stockholders’ equity		(201,888	)

The unaudited condensed consolidated financial information of Trident included in the tables above is extracted from Trident’s Form 8-K, which information was furnished to the SEC on March 8, 2012. More recent audited Consolidated Financial Statements of Trident were not made available.

For other information related to equity-accounted investees, see Note 12, “Related Party Transactions”.

19 Segments and Geographical Information

NXP is organized into three reportable segments including two market-oriented business segments, High Performance Mixed Signal (“HPMS”) and Standard Products (“SP”) and one other reportable segment, Manufacturing Operations. Corporate and Other represents the remaining portion to reconcile to the Consolidated Financial Statements along with the Divested Home activities, which were divested in 2010.

F-46

Our Chief Executive Officer, who is our Chief Operating Decision Maker, or CODM, regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance. Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses and deferred income tax assets and liabilities.

Our HPMS business segment delivers High Performance Mixed Signal solutions to our customers to satisfy their system and sub-systems needs across eight application areas: automotive, identification, mobile, consumer, computing, wireless infrastructure, lighting and industrial.

Our SP business segment offers standard products for use across many application markets, as well as application-specific standard products predominantly used in application areas such as mobile handsets, computing, consumer and automotive.

Our manufacturing operations are conducted through a combination of wholly owned manufacturing facilities, manufacturing facilities operated jointly with other semiconductor companies and third-party foundries and assembly and test subcontractors, which together form our Manufacturing Operations segment. While the main function of our Manufacturing Operations segment is to supply products to our HPMS and SP segments, revenue and costs in this segment are to a large extent derived from revenue of wafer foundry and packaging services to our divested businesses in order to support their separation and, on a limited basis, their ongoing operations. As these divested businesses develop or acquire their own foundry and packaging capabilities, our revenue from these sources is declining.

Corporate and Other includes unallocated research expenses not related to any specific business segment, corporate restructuring charges and other expenses, as well as operations not included in our two business segments, such as manufacturing, marketing and selling of can tuners through our joint venture NuTune Singapore Pte. Ltd. (“NuTune”), which was sold on December 14, 2010, and software solutions for mobile phones “NXP Software” business. Revenue recorded in Corporate and Other is primarily generated by the NXP Software business.

On February 8, 2010, our wholly-owned subsidiary, NXP B.V., divested a major portion of our former Home segment to Trident Microsystems, Inc. (“Trident”). For the periods up to divestment on February 8, 2010, the results of the divested operations are presented in our consolidated accounts separately under “Divested Home Activities”. The continuing business of the former Home segment not divested has been regrouped into High Performance Mixed Signal and Corporate and Other. All previous periods have been restated accordingly.

Detailed information by segment for the years 2012, 2011 and 2010 is presented in the following tables.


Segments	Revenue		Research and development		Operating income (loss)			Operating income (loss) as a % of revenue			Results relating to equity-accounted investees
2012
HPMS		3,282		539		527			16.1			—
SP		832		43		37			4.4			—
Manufacturing Operations		211		1		(36	)		(17.1	)		—
Corporate and Other (1)		33		45		(116	)		N.M.			(27	)

		4,358		628		412			9.5			(27	)
2011
HPMS		2,906		554		339			11.7			—
SP		925		37		141			15.2			—
Manufacturing Operations		316		—		(60	)		(19.0	)		—
Corporate and Other (1)		47		44		(63	)		N.M.			(77	)

		4,194		635		357			8.5			(77	)
2010
HPMS		2,846		454		387			13.6			—
SP		848		32		91			10.7			—
Manufacturing Operations		525		18		(57	)		(10.9	)		—
Corporate and Other (1)		136		48		(117	)		N.M.			(86	)
Divested Home activities		47		16		(31	)		(66.0	)		—

		4,402		568		273			6.2			(86	)

(1)	Corporate and Other is not a segment under ASC 280 “Segment Reporting”.

N.M. Not meaningful

F-47

Certain assets of the Company have been used jointly or managed at Corporate level. Arithmetical allocation of these assets to the various businesses is not deemed to be meaningful and as such total assets by segment has been omitted. Instead, inventories by segment are included.


Segments	Inventories		Long-lived assets 1)		Total liabilities excl. debt		Gross capital expenditures property, plant and equipment		Depreciation property, plant and equipment (2)
2012
HPMS		388		2,248		300		12		12
SP		182		706		102		11		26
Manufacturing Operations		145		1,041		666		200		163
Corporate and Other (3)		—		317		595		28		46

		715		4,312		1,663		251		247
2011
HPMS		340		2,390		258		14		13
SP		161		760		152		17		41
Manufacturing Operations		117		1,014		489		162		179
Corporate and Other (3)		—		301		557		28		57

		618		4,465		1,456		221		290
2010
HPMS		240		2,670		313		15		13
SP		136		828		127		15		35
Manufacturing Operations		137		1,055		748		209		220
Corporate and Other (3)		—		396		599		19		91
Divested Home activities		—		—		—		—		—

		513		4,949		1,787		258		359
Discontinued operations						80

						1,867

(1)	Long-lived assets include property, plant and equipment, goodwill and identified intangible fixed assets.

(2)	Excluding additional write down of property classified as held for sale (2010: $30 million).

(3)	Corporate and Other is not a segment under ASC 280 “Segment Reporting”.


Goodwill assigned to segments	Cost at January 1, 2012		Acquisitions		Divestments			Translation differences and other changes		Cost at December 31, 2012
HPMS		1,785		11		(7	)		32		1,821
SP		305		—		—			6		311
Manufacturing Operations		316		—					5		321
Corporate and Other (1)		48		—		(1	)		2		49

		2,454		11		(8	)		45		2,502


	Accumulated impairment at January 1, 2012			Divestments		Impairment		Translation differences and other changes			Accumulated impairment at December 31, 2012
HPMS		(175	)		2		—		(3	)		(176	)
SP		—			—		—		—			—
Manufacturing Operations		—			—		—		—			—
Corporate and Other (1)		(48	)		—		—		(1	)		(49	)

		(223	)		2		—		(4	)		(225	)

(1)	Corporate and Other is not a segment under ASC 280 “Segment Reporting”.

F-48

Geographical Information


Main countries	Total revenue		Property, plant and equipment		Gross capital expenditures property, plant and equipment		Depreciation property, plant and equipment
2012
China		1,699		131		43		31
Netherlands		94		180		22		43
Taiwan		112		80		32		23
United States		303		8		2		3
Singapore		436		226		58		47
Germany		447		88		17		26
South Korea		238		—		—		—
Other countries		1,029		357		77		74

		4,358		1,070		251		247
2011
China		1,514		120		40		32
Netherlands		123		187		23		60
Taiwan		80		70		18		25
United States		329		9		2		3
Singapore		383		229		64		45
Germany		508		96		17		41
South Korea		216		—		—		—
Other countries		1,041		352		57		84

		4,194		1,063		221		290
2010
China		1,496		112		33		31
Netherlands		126		232		12		98
Taiwan		115		81		29		25
United States		337		34		4		6
Singapore		480		210		62		53
Germany		434		109		19		30
South Korea		202		—		—		—
Other countries		1,212		386		99		116

		4,402		1,164		258		359

Concentration of risk

A substantial portion of our revenue is derived from our top OEM customers, some of whom are supplied through distributors, in the automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer and computing markets. No end customer accounted for greater than 10% of the Company‘s revenues for the years presented. However, sales to one of our distributors, WPG, in 2012, 2011 and 2010 represented 12%, 12% and 11%, respectively, of revenue.

Furthermore, the Company is using outside suppliers or foundries for a portion of its manufacturing capacity.

We have operations in Europe and Asia subject to collective bargaining agreements which could pose a risk to the Company in the near term but we do not expect that our operations will be disrupted if such is the case.

20 Subsequent Events

Management change

Effective January 7, 2013, Hans Rijns and Dave French became jointly responsible for research and development. Mr Rijns has been appointed chief technology officer and has combined that role with his current position of senior vice president and head of research. Mr French has been appointed executive vice president of research and development in combination with his role as general manager of High-Performance Mixed-Signal portable and computing.

Private offering of 5.75% senior notes due 2021 to institutional investors

On February 1, 2013, we announced the pricing of a private offering to institutional investors of $500 million aggregate principal amount of U.S. dollar-denominated 5.75% senior notes due 2021 by our wholly-owned subsidiaries NXP B.V. and NXP Funding LLC. This offering closed on February 14, 2013. We will use the net proceeds of this private offering to repay amounts outstanding under our Second 2017 Term Loan.

F-49

Secondary offering of common shares

On February 4, 2013, we announced a secondary offering of 30,000,000 shares of our common stock to be sold by certain of our principal stockholders, pursuant to our shelf registration statement on Form F-3, at a price to the public of $30.35 per share. The offering was settled and closed on February 7, 2013. Subsequent to the settlement and closing, the consortium of funds advised by KKR, Bain, Silver Lake, APAX and Alpinvest collectively beneficially owns 42% of our shares of common stock as of that date. NXP did not receive any proceeds from the sale of shares in the offering.

F-50

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