Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the Internal Revenue Service ("IRS") documentation requirements and the corresponding German tax administrative procedures that enable United States holders of American Depositary Shares ("ADSs") of Halcyon Semiconductor Aktiengesellschaft ("Halcyon" or the "Company") to claim the reduced fifteen percent (15%) withholding rate on dividends under Articl

II. Background: The ADR Dividend Payment Chain An understanding of the structural mechanics of the dividend payment chain in a Level III ADR program is essential to the analysis of treaty benefit certification procedures. This Section describes the flow of dividends from Halcyon to the ultimate US ADS holders and identifies the points at which German withholding tax is imposed. A. Structure of Dividend Flows The flow

1. Declaration and Payment by Halcyon. Halcyon Semiconductor AG declares dividends denominated in euros on its ordinary shares (Stammaktien). Dividend declarations are made by the general meeting of shareholders (Hauptversammlung) upon proposal by the management board (Vorstand) and supervisory board (Aufsichtsrat), in accordance with the German Stock Corporation Act (Aktiengesetz) and Halcyon's articles of associati

2. Custody of Underlying Shares. The ordinary shares underlying the ADSs will be held by a German sub-custodian appointed under the Deposit Agreement. The sub-custodian is expected to hold such shares through the Ashgrove Enterprises Banking AG settlement infrastructure, which provides the central securities depository and settlement system for German-listed securities. The identity of the German sub-custodian has no

3. Payment to German Custodian. Dividends declared on the deposited ordinary shares are paid by Halcyon (through its dividend-paying bank) to the German custodian. At this stage, German withholding tax (Kapitalertragsteuer plus Solidaritätszuschlag) is imposed and deducted at source, as described in Section II.B below.

4. Remittance to Meridian Trust. The German custodian remits the net-of-withholding dividend amounts to Meridian Trust Company, N.A., as depositary, in accordance with the terms of the custodian agreement and the Deposit Agreement.

5. Currency Conversion and Distribution. Meridian Trust converts the euro-denominated net dividend amounts to United States dollars at the prevailing exchange rate and distributes the dollar-denominated net dividends to ADS holders through The Depository Trust Company ("DTC"). Prior to distribution, Meridian Trust deducts the applicable depositary fees, which include the $0.05 per ADS per annum depositary service fee

6. Distribution Through DTC to ADS Holders. ADS holders receive dividend distributions through their respective brokers, banks, or other nominees that are DTC participants. The DTC participant credits the dividend to the ADS holder's account in accordance with the DTC participant's customary practices. The vast majority of ADS holders will hold their ADSs in "street name" through DTC participants and will not have a

III. Applicable Treaty Provisions This Section reviews the relevant provisions of the US-Germany Income Tax Treaty and related guidance bearing on the availability and conditions of the reduced withholding rate for US holders of Halcyon ADSs. A. US-Germany Income Tax Treaty — Article 10 (Dividends)

Article 10 of the Treaty governs the taxation of dividends and establishes the allocation of taxing rights between the United States and Germany.

Article 10(1) provides that dividends paid by a company that is a resident of a Contracting State (in this case, Germany) to a resident of the other Contracting State (in this case, the United States) may be taxed in the other state. That is, the United States retains the right to tax its residents on dividends received from a German company such as Halcyon.

Article 10(2) provides, however, that the Contracting State in which the paying company is a resident (Germany) may also tax such dividends, but if the beneficial owner of the dividends is a resident of the other Contracting State (the United States), the tax so charged shall not exceed: (a) 5% of the gross amount of the dividends if the beneficial owner is a company that directly holds at least 10% of the voting pow

Article 28 of the Treaty contains limitation on benefits ("LOB") provisions designed to prevent "treaty shopping" — i.e., the use of the Treaty by persons who are not bona fide residents of the United States or Germany to obtain treaty benefits to which they would not otherwise be entitled. Under Article 28, a resident of the United States claiming benefits under the Treaty must satisfy one or more of the qualifying

IV. IRS Documentation Requirements This Section discusses the IRS documentation requirements applicable to holders of Halcyon ADSs and the interplay between the US withholding tax documentation system and the German treaty benefit claim procedures. A. Forms W-8BEN and W-8BEN-E — Overview Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)) is us

V. German Treaty Benefit Claim Procedures This Section describes the two principal procedures available to US ADS holders for claiming the benefit of the reduced 15% withholding rate under Article 10 of the Treaty: (a) relief at source and (b) the refund procedure. A. Standard Procedure — Bundeszentralamt für Steuern (BZSt) The German Federal Central Tax Office (Bundeszentralamt für Steuern, "BZSt"), located in Bonn,

1. Relief at Source (*Freistellung/Erstattung im Steuerabzugsverfahren*). Under the relief-at-source procedure, the reduced treaty rate is applied at the time the dividend is paid. This means that the German custodian or withholding agent withholds only 15% (rather than the full 26.375% statutory rate), and the US ADS holder receives a net dividend reflecting the treaty-reduced withholding from the outset. This is th

2. Refund Procedure (*Erstattungsverfahren*). Under the refund procedure, the full statutory rate of 26.375% is withheld at source, and the US ADS holder subsequently files a claim with the BZSt for a refund of the excess withholding (i.e., the difference between the 26.375% statutory rate and the 15% treaty rate, or 11.375% of the gross dividend amount). This procedure is the fallback option when relief at source is

1. BZSt Refund Application Form. The BZSt prescribes a standard application form for refund claims (Antrag auf Erstattung der deutschen Kapitalertragsteuer). This form is typically available in German, although English-language versions may be available from the BZSt or through intermediary service providers. The form requires detailed information about the applicant, the paying company, the dividend amount, the tax

2. Certificate of US Tax Residency — IRS Form 6166. The applicant must provide a valid IRS Form 6166 certifying that the applicant is a resident of the United States for purposes of the Treaty. The procedures for obtaining Form 6166 are described in Section V.D below.

3. Proof of Dividend Entitlement. The applicant must provide a dividend voucher (Dividendenabrechnung) or equivalent documentation evidencing that the applicant was the beneficial owner of the Halcyon shares (or, in the case of ADS holders, the ADSs) on the relevant record date and received (or was entitled to receive) the dividend in question. For ADS holders, this documentation would typically take the form of a br

4. Evidence of Beneficial Ownership. The applicant must provide documentation establishing that the applicant is the beneficial owner of the dividends — i.e., that the applicant bears the economic risk and reward of ownership and that the dividend income is attributable to the applicant for tax purposes. For most individual US ADS holders, this requirement is satisfied by the brokerage account statement together with

5. Completed German Tax Forms. In addition to the BZSt refund application form, the BZSt may require the completion of additional German tax forms or questionnaires, including LOB questionnaires for entity holders. Refund Timeline. Based on current BZSt processing practices, the refund of excess German withholding tax typically takes approximately six to eighteen months from the date a complete application is filed.

VI. Coordination Through the Depositary-Custodian Chain The practical effectiveness of the treaty benefit certification procedures depends on the operational coordination among the key intermediaries in the ADR dividend payment chain. This Section addresses the role of each intermediary and the arrangements that must be established to facilitate the reduced withholding rate for US ADS holders. A. Role of Meridian Tru

VII. Prospectus Disclosure Recommendations Based on the analysis set forth in this memorandum, we recommend the following disclosures in the draft prospectus (Form F-1) for the Halcyon IPO. A. German Withholding Tax Disclosure The prospectus taxation section — which is being prepared as a separate draft by Leonard Cross with input from Bähr Stein Rechtsanwälte on German tax matters — must clearly and completely discl

VIII. US Foreign Tax Credit Considerations US holders of Halcyon ADSs will need to take into account the US foreign tax credit rules in determining the net US federal income tax consequences of German withholding taxes paid on Halcyon dividends. This Section provides an overview of the relevant considerations. A. Creditability of German Withholding Tax US holders may generally claim a credit against their US federal

IX. FATCA Considerations The Foreign Account Tax Compliance Act ("FATCA"), enacted as part of the Hiring Incentives to Restore Employment Act of 2010 and codified principally in IRC Sections 1471 through 1474, imposes a 30% withholding tax on "withholdable payments" — including US-source dividends and certain gross proceeds — made to foreign financial institutions ("FFIs") and non-financial foreign entities ("NFFEs")

X. Information Reporting and Backup Withholding (US Side) A. IRS Information Reporting Meridian Trust Company, N.A. (or, in the case of ADS holders holding through DTC participants, the broker or bank acting as the holder's intermediary) is required to report dividend payments to US ADS holders on IRS Form 1099-DIV (Dividends and Distributions). The information reported on Form 1099-DIV includes: • The gross dividend