Edgar Filing: TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

1934 Act Registration No. 1-14700

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2007

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

No. 8, Li-Hsin Rd. 6,
Hsinchu Science Park,
Taiwan
(Address of Principal Executive Offices)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F þ Form 40-F o

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes o No þ

(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82: ___.)

Taiwan Semiconductor Manufacturing Company Limited

Financial Statements for the
Six Months Ended June 30, 2007 and 2006 and
Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited

We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of June 30, 2007 and 2006, and the related statements of income, changes in shareholders’ equity and cash flows for the six months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Taiwan Semiconductor Manufacturing Company Limited as of June 30, 2007 and 2006, and the results of its operations and its cash flows for the six months then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and accounting principles generally accepted in the Republic of China.

We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the six months ended June 30, 2007 and 2006, and have expressed an unqualified opinion on the consolidated financial statements.

July 12, 2007

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

Taiwan Semiconductor Manufacturing Company Limited

BALANCE SHEETS
JUNE 30, 2007 AND 2006
(In Thousands of New Taiwan Dollars, Except Par Value)


	2007						2006
	Amount			%			Amount			%
ASSETS

CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4)	$	143,256,382			23		$	127,713,018			22
Financial assets at fair value through profit or loss (Notes 2, 3 and 5)		172,240			—			322,456			—
Available-for-sale financial assets (Notes 2, 3 and 6)		15,259,717			3			62,102,387			11
Held-to-maturity financial assets (Notes 2 and 7)		9,909,497			2			5,738,737			1
Receivables from related parties (Note 23)		20,675,167			3			22,909,889			4
Notes and accounts receivable		16,923,301			3			19,713,819			4
Allowance for doubtful receivables (Note 2)		(694,039	)		—			(975,704	)		—
Allowance for sales returns and others (Note 2)		(2,595,838	)		—			(5,571,076	)		(1	)
Other receivables from related parties (Note 23)		1,280,419			—			1,659,482			—
Other financial assets		545,717			—			872,627			—
Inventories, net (Notes 2 and 8)		21,677,958			3			18,375,580			3
Deferred income tax assets (Notes 2 and 16)		5,622,000			1			6,084,277			1
Prepaid expenses and other current assets		1,197,661			—			954,026			—


Total current assets		233,230,182			38			259,899,518			45


LONG-TERM INVESTMENTS (Notes 2, 6, 7, 9 and 10)
Investments accounted for using equity method		105,071,276			17			54,000,233			9
Available-for-sale financial assets		4,518,721			1			4,873,970			1
Held-to-maturity financial assets		20,788,140			3			23,524,067			4
Financial assets carried at cost		747,218			—			818,969			—


Total long-term investments		131,125,355			21			83,217,239			14


PROPERTY, PLANT AND EQUIPMENT (Notes 2, 11 and 23)
Cost
Buildings		99,707,179			16			91,815,148			16
Machinery and equipment		550,470,017			89			484,487,876			84
Office equipment		8,908,044			1			8,090,185			1

		659,085,240			106			584,393,209			101
Accumulated depreciation		(452,483,898	)		(73	)		(388,228,761	)		(67	)
Advance payments and construction in progress		31,434,579			5			27,054,673			5


Net property, plant and equipment		238,035,921			38			223,219,121			39


INTANGIBLE ASSETS
Goodwill (Note 2)		1,567,756			—			1,567,756			—
Deferred charges, net (Notes 2 and 12)		5,179,415			1			6,163,992			1


Total intangible assets		6,747,171			1			7,731,748			1


OTHER ASSETS
Deferred income tax assets (Notes 2 and 16)		8,489,812			1			7,394,956			1
Refundable deposits		2,552,561			1			83,655			—
Assets leased to others, net (Note 2)		64,278			—			70,012			—
Others		—			—			6,789			—


Total other assets		11,106,651			2			7,555,412			1


TOTAL	$	620,245,280			100		$	581,623,038			100


LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Financial liabilities at fair value through profit or loss (Notes 2, 3 and 5)	$	3,460			—		$	599,909			—
Accounts payable		7,497,105			1			6,772,076			1
Payables to related parties (Note 23)		3,108,623			1			3,281,423			—
Income tax payable (Notes 2 and 16)		4,410,166			1			4,486,901			1
Cash dividends and bonus payable (Note 18)		82,061,862			13			65,257,190			11
Payables to contractors and equipment suppliers		16,515,598			3			16,952,057			3
Accrued expenses and other current liabilities (Note 14)		9,835,302			1			7,385,228			1
Current portion of bonds payable (Note 13)		4,500,000			1			2,500,000			1


Total current liabilities		127,932,116			21			107,234,784			18


LONG-TERM LIABILITIES
Bonds payable (Note 13)		12,500,000			2			17,000,000			3
Other long-term payables (Note 14)		1,343,935			—			1,458,603			—
Other payables to related parties (Notes 23 and 25)		—			—			1,085,366			—


Total long-term liabilities		13,843,935			2			19,543,969			3


OTHER LIABILITIES
Accrued pension cost (Notes 2 and 15)		3,583,542			1			3,484,350			1
Guarantee deposits (Note 25)		3,001,515			—			3,354,046			1
Deferred credits (Notes 2 and 23)		997,610			—			1,173,542			—


Total other liabilities		7,582,667			1			8,011,938			2


Total liabilities		149,358,718			24			134,790,691			23


CAPITAL STOCK — $10 PAR VALUE
Authorized: 28,050,000 thousand shares in 2007 27,050,000 thousand shares in 2006
Issued: 26,423,517 thousand shares in 2007 25,823,357 thousand shares in 2006		264,235,168			43			258,233,569			44


CAPITAL SURPLUS (Notes 2 and 18)		53,725,604			8			53,822,486			9


RETAINED EARNINGS (Note 18)
Appropriated as legal capital reserve		56,406,684			9			43,705,711			8
Appropriated as special capital reserve		629,550			—			640,742			—
Unappropriated earnings		96,973,825			16			92,376,976			16


		154,010,059			25			136,723,429			24


OTHERS (Notes 2, 3, 20 and 22)
Cumulative translation adjustments		(613,674	)		—			(1,145,616	)		—
Unrealized gain on financial instruments		447,480			—			116,554			—
Treasury stock: 34,096 thousand shares in 2007 and 33,926 thousand shares in 2006		(918,075	)		—			(918,075	)		—

		(1,084,269	)		—			(1,947,137	)		—

Total shareholders’ equity		470,886,562			76			446,832,347			77


TOTAL	$	620,245,280			100		$	581,623,038			100

The accompanying notes are an integral part of the financial statements.

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)


	2007				2006
	Amount		%		Amount		%
GROSS SALES (Notes 2 and 23)	$	138,166,350			$	161,789,754

SALES RETURNS AND ALLOWANCES (Note 2)		1,967,831				3,269,063


NET SALES		136,198,519		100		158,520,691		100

COST OF SALES (Notes 17 and 23)		81,342,396		60		80,991,942		51


GROSS PROFIT		54,856,123		40		77,528,749		49

UNREALIZED GROSS PROFIT FROM AFFILIATES		178,259		—		—		—


REALIZED GROSS PROFIT		54,677,864		40		77,528,749		49


OPERATING EXPENSES (Notes 17 and 23)
Research and development		7,279,536		5		7,255,721		4
General and administrative		3,436,220		2		3,379,438		2
Marketing		705,335		1		1,053,473		1


Total operating expenses		11,421,091		8		11,688,632		7


INCOME FROM OPERATIONS		43,256,773		32		65,840,117		42


NON-OPERATING INCOME AND GAINS
Equity in earnings of equity method investees, net (Notes 2 and 9)		1,983,358		2		3,404,382		2
Interest income (Note 2)		1,447,702		1		1,910,958		1
Settlement income (Note 25)		491,385		1		483,734		1
Technical service income (Notes 23 and 25)		353,441		—		344,601		—
Foreign exchange gain, net (Note 2)		214,508		—		—		—
Rental income (Note 23)		200,453		—		100,858		—
Gain on disposal of property, plant and equipment and other assets (Notes 2 and 23)		144,800		—		257,239		—
Valuation gain on financial instruments, net (Notes 2, 5 and 22)		134,930		—		—		—
Gain on settlement and disposal of financial instruments, net (Notes 2, 5 and 22)		—		—		468,482		—
Others (Note 23)		287,575		—		71,693		—


Total non-operating income and gains		5,258,152		4		7,041,947		4

(Continued)

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)


	2007				2006
	Amount		%		Amount			%
NON-OPERATING EXPENSES AND LOSSES
Loss on settlement and disposal of financial instruments, net (Notes 2, 5 and 22)	$	480,606		1	$	—			—
Interest expense		300,973		—		330,600			—
Foreign exchange loss, net (Note 2)		—		—		1,250,047			1
Valuation loss on financial instruments, net (Notes 2, 5 and 22)		—		—		277,453			—
Others (Note 2)		29,957		—		117,909			—


Total non-operating expenses and losses		811,536		1		1,976,009			1


INCOME BEFORE INCOME TAX		47,703,389		35		70,906,055			45

INCOME TAX EXPENSE (Notes 2 and 16)		3,380,808		2		4,051,241			3


NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES		44,322,581		33		66,854,814			42

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES, NET OF TAX BENEFIT OF $82,062 THOUSAND (Note 3)		—		—		(246,186	)		—


NET INCOME	$	44,322,581		33	$	66,608,628			42


	2007				2006
	Before		After		Before		After
	Income		Income		Income		Income
	Tax		Tax		Tax		Tax
EARNINGS PER SHARE (NT$, Note 21)
Basic earnings per share	$	1.81	$	1.68	$	2.68	$	2.53

Diluted earnings per share	$	1.81	$	1.68	$	2.67	$	2.52

(Continued)

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Certain pro forma information (after income tax) is shown as follows, based on the assumption that the Company’s stock held by subsidiaries is treated as an investment instead of treasury stock (Notes 2 and 20):


	2007		2006
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES	$	44,424,343	$	66,937,134


NET INCOME	$	44,424,343	$	66,690,948


EARNINGS PER SHARE (NT$)
Basic earnings per share	$	1.68	$	2.53

Diluted earnings per share	$	1.68	$	2.52


The accompanying notes are an integral part of the financial statements.		(Concluded)

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)


																			Others
								Retained Earnings														Unrealized
	Capital Stock							Legal		Special									Cumulative			Gain on									Total
	Shares (in				Capital			Capital		Capital			Unappropriated						Translation			Financial			Treasury						Shareholders’
	Thousands)		Amount		Surplus			Reserve		Reserve			Earnings			Total			Adjustments			Instruments			Stock			Total			Equity
BALANCE, JANUARY 1, 2007		25,829,688	$	258,296,879	$	54,107,498		$	43,705,711	$	640,742		$	152,778,079		$	197,124,532		$	(1,191,165	)	$	561,615		$	(918,075	)	$	(1,547,625	)	$	507,981,284

Appropriations of prior year’s earnings
Legal capital reserve		—		—		—			12,700,973		—			(12,700,973	)		—			—			—			—			—			—
Special capital reserve		—		—		—			—		(11,192	)		11,192			—			—			—			—			—			—
Bonus to employees — in cash		—		—		—			—		—			(4,572,798	)		(4,572,798	)		—			—			—			—			(4,572,798	)
Bonus to employees — in stock		457,280		4,572,798		—			—		—			(4,572,798	)		(4,572,798	)		—			—			—			—			—
Cash dividends to shareholders — NT$3.00 per share		—		—		—			—		—			(77,489,064	)		(77,489,064	)		—			—			—			—			(77,489,064	)
Stock dividends to shareholders — NT$0.02 per share		51,659		516,594		—			—		—			(516,594	)		(516,594	)		—			—			—			—			—
Bonus to directors and supervisors		—		—		—			—		—			(285,800	)		(285,800	)		—			—			—			—			(285,800	)

Capital surplus transferred to capital stock		77,489		774,891		(774,891	)		—		—			—			—			—			—			—			—			—

Net income for the six months ended June 30, 2007		—		—		—			—		—			44,322,581			44,322,581			—			—			—			—			44,322,581

Adjustment arising from changes in percentage of ownership in equity method investees		—		—		68,411			—		—			—			—			—			—			—			—			68,411

Translation adjustments		—		—		—			—		—			—			—			577,491			—			—			577,491			577,491

Issuance of stock from exercising employee stock options		7,401		74,006		222,824			—		—			—			—			—			—			—			—			296,830

Cash dividends received by subsidiaries from the Company		—		—		101,762			—		—			—			—			—			—			—			—			101,762

Valuation loss on available-for-sale financial assets		—		—		—			—		—			—			—			—			(83,408	)		—			(83,408	)		(83,408	)

Equity in the valuation loss on available-for-sale financial assets held by equity method investees		—		—		—			—		—			—			—			—			(30,727	)					(30,727	)		(30,727	)


BALANCE, JUNE 30, 2007		26,423,517	$	264,235,168	$	53,725,604		$	56,406,684	$	629,550		$	96,973,825		$	154,010,059		$	(613,674	)	$	447,480		$	(918,075	)	$	(1,084,269	)	$	470,886,562

(Continued)


																			Others
								Retained Earnings														Unrealized
	Capital Stock							Legal		Special									Cumulative			Gain on									Total
	Shares (in				Capital			Capital		Capital			Unappropriated						Translation			Financial			Treasury						Shareholders’
	Thousands)		Amount		Surplus			Reserve		Reserve			Earnings			Total			Adjustments			Instruments			Stock			Total			Equity
BALANCE, JANUARY 1, 2006		24,730,025	$	247,300,246	$	57,117,886		$	34,348,208	$	2,226,427		$	106,196,399		$	142,771,034		$	(640,742	)	$	—		$	(918,075	)	$	(1,558,817	)	$	445,630,349

Appropriations of prior year’s earnings
Legal capital reserve		—		—		—			9,357,503		—			(9,357,503	)		—			—			—			—			—			—
Special capital reserve		—		—		—			—		(1,585,685	)		1,585,685			—			—			—			—			—			—
Bonus to employees — in cash		—		—		—			—		—			(3,432,129	)		(3,432,129	)		—			—			—			—			(3,432,129	)
Bonus to employees — in stock		343,213		3,432,129		—			—		—			(3,432,129	)		(3,432,129	)		—			—			—			—			—
Cash dividends to shareholders — NT$2.50 per share		—		—		—			—		—			(61,825,061	)		(61,825,061	)		—			—			—			—			(61,825,061	)
Stock dividends to shareholders — NT$0.15 per share		370,950		3,709,504		—			—		—			(3,709,504	)		(3,709,504	)		—			—			—			—			—
Bonus to directors and supervisors		—		—		—			—		—			(257,410	)		(257,410	)		—			—			—			—			(257,410	)

Capital surplus transferred to capital stock		370,950		3,709,504		(3,709,504	)		—		—			—			—			—			—			—			—			—

Net income for the six months ended June 30, 2006		—		—		—			—		—			66,608,628			66,608,628			—			—			—			—			66,608,628

Adjustment arising from changes in percentage of ownership in equity method investees		—		—		87,920			—		—			—			—			—			—			—			—			87,920

Translation adjustments		—		—		—			—		—			—			—			(504,874	)		—			—			(504,874	)		(504,874	)

Issuance of stock from exercising employee stock options		8,219		82,186		243,864			—		—			—			—			—			—			—			—			326,050

Cash dividends received by subsidiaries from the Company		—		—		82,320			—		—			—			—			—			—			—			—			82,320

Valuation loss on available-for-sale financial assets		—		—		—			—		—			—			—			—			(191,469	)		—			(191,469	)		(191,469	)

Equity in the valuation gain on available-for- sale financial assets held by equity method investees		—		—		—			—		—			—			—			—			308,023			—			308,023			308,023


BALANCE, JUNE 30, 2006		25,823,357	$	258,233,569	$	53,822,486		$	43,705,711	$	640,742		$	92,376,976		$	136,723,429		$	(1,145,616	)	$	116,554		$	(918,075	)	$	(1,947,137	)	$	446,832,347


The accompanying notes are an integral part of the financial statements.		(Concluded)

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(In Thousands of New Taiwan Dollars)


	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	44,322,581		$	66,608,628
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		36,293,514			32,154,504
Unrealized gross profit from affiliates		178,259			—
Amortization of premium/ discount of financial assets		(64,051	)		43,781
Gain on disposal of available-for-sale financial assets, net		(233,970	)		(1,116	)
Gain on disposal of property, plant and equipment and other assets, net		(142,673	)		(248,243	)
Equity in earnings of equity method investees, net		(1,983,358	)		(3,404,382	)
Loss on idle assets		—			37,283
Deferred income tax		(518,685	)		293,722
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets and liabilities at fair value through profit or loss		(134,930	)		1,424,079
Receivables from related parties		(3,805,658	)		(1,859,285	)
Notes and accounts receivable		(645,137	)		877,999
Allowance for doubtful receivables		3,108			(640	)
Allowance for sales returns and others		(155,227	)		1,301,107
Other receivables from related parties		(145,024	)		473,280
Other financial assets		107,743			233,403
Inventories		(2,525,744	)		(2,117,625	)
Prepaid expenses and other current assets		23,538			217,747
Increase (decrease) in:
Accounts payable		1,353,426			(1,280,030	)
Payables to related parties		(218,293	)		24,117
Income tax payable		(3,440,252	)		671,013
Accrued expenses and other current liabilities		1,421,840			(645,267	)
Accrued pension cost		53,426			22,958
Deferred credits		(47,872	)		(47,872	)


Net cash provided by operating activities		69,696,561			94,779,161


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets		(2,151,252	)		(64,826,510	)
Held-to-maturity financial assets		—			(7,754,790	)
Financial assets carried at cost		(34,375	)		(11,479	)
Investments accounted for using equity method		(2,054,634	)		(274,687	)
Property, plant and equipment		(38,511,341	)		(32,170,773	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets		15,163,560			44,101,660
Held-to-maturity financial assets		6,825,120			7,837,000
Property, plant and equipment and other assets		4,787			710,702

(Continued)

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(In Thousands of New Taiwan Dollars)


	2007			2006
Proceeds from return of capital by investees	$	44,258		$	102,662
Increase in deferred charges		(1,322,268	)		(693,239	)
Increase in refundable deposits		(1,246,327	)		(13	)


Net cash used in investing activities		(23,282,472	)		(52,979,467	)


CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in guarantee deposits		(808,446	)		461,101
Repayment of long-term bonds payable		(2,500,000	)		—
Proceeds from exercise of employee stock options		296,830			326,050
Bonus to directors and supervisors		(285,800	)		(257,410	)


Net cash provided by (used in) financing activities		(3,297,416	)		529,741


NET INCREASE IN CASH AND CASH EQUIVALENTS		43,116,673			42,329,435

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		100,139,709			85,383,583


CASH AND CASH EQUIVALENTS, END OF PERIOD	$	143,256,382		$	127,713,018


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	$	420,000		$	420,000

Income tax paid	$	7,330,375		$	2,994,232


INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS

Acquisition of property, plant and equipment	$	44,357,416		$	40,263,600
Increase in payables to contractors and equipment suppliers		(5,846,075	)		(8,092,827	)

Cash paid	$	38,511,341		$	32,170,773


NON-CASH FINANCING ACTIVITIES
Current portion of bonds payable	$	4,500,000		$	2,500,000

Current portion of other long-term payables (under accrued expenses and other current liabilities)	$	2,433,227		$	940,123


The accompanying notes are an integral part of the financial statements.		(Concluded)

Taiwan Semiconductor Manufacturing Company Limited

NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

1. GENERAL

Taiwan Semiconductor Manufacturing Company Limited (the Company or TSMC), a Republic of China (R.O.C.) corporation, was incorporated as a venture among the Government of the R.O.C., acting through the Development Fund of the Executive Yuan; Philips Electronics N.V. and certain of its affiliates (Philips); and certain other private investors. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

The Company is engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks.

As of June 30, 2007 and 2006, the Company had 20,572 and 20,357 employees, respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are presented in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the R.O.C.

For the convenience of readers, the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language financial statements shall prevail.

Significant accounting policies are summarized as follows:

Use of Estimates

The preparation of financial statements in conformity with the aforementioned guidelines, law and principles requires management to make reasonable assumptions and estimates of matters that are inherently uncertain. The actual results may differ from management’s estimates.

Classification of Current and Noncurrent Assets and Liabilities

Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.

Cash Equivalents

Repurchase agreements collateralized by government bonds, asset-backed commercial papers and corporate notes acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value.

Financial Assets/Liabilities at Fair Value Through Profit or Loss

Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

Fair value is estimated using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.

Available-for-Sale Financial Assets

Investments designated as available-for-sale financial assets include debt securities and equity securities. Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

Except structured time deposits whose fair value is estimated using valuation techniques, fair values of open-end mutual funds and publicly traded stocks are determined using the net assets value and the closing-price at the end of the period, respectively. For debt securities, fair value is determined using the average of bid and asked prices at the end of the period.

Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are declared on the earnings of the investee attributable to the period prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares. Any difference between the initial carrying amount of a debt security and the amount due at maturity is amortized using the effective interest method, with the amortization recognized in earnings.

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.

Held-to-Maturity Financial Assets

Financial securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost under the effective interest method except for structured time deposits which are carried at acquisition cost. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.

Allowance for Doubtful Receivables

An allowance for doubtful receivables is provided based on a review of the collectibility of notes and accounts receivable. The Company determines the amount of allowance for doubtful receivables by examining the aging analysis of outstanding notes and accounts receivable and current trends in the credit quality of its customers as well as its internal credit policies.

Revenue Recognition and Allowance for Sales Returns and Others

The Company recognizes revenue when evidence of an arrangement exists, shipment is made, price is fixed or determinable, and collectibility is reasonably assured. Revenues from the design and manufacturing of photo masks, which are used as manufacturing tools in the fabrication process, are recognized when the photo masks are qualified by customers. Provisions for estimated sales returns and others are generally recorded in the period the related revenue is recognized, based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.

Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.

Inventories

Inventories are stated at the lower of cost or market value. Inventories are recorded at standard cost and adjusted to the approximate weighted-average cost at the balance sheet date. Market value represents replacement cost for raw materials, supplies and spare parts and net realizable value for work in process and finished goods. The Company assesses the impact of changing technology on its inventories on hand and writes off inventories that are considered obsolete. Period-end inventories are evaluated for estimated excess quantities and obsolescence based on a demand forecast within a specific time horizon, which is generally 180 days or less. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.

Investments Accounted for Using Equity Method

Investments in companies wherein the Company exercises significant influence over the operating and financial policy decisions are accounted for using the equity method. The Company’s share of the net income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees, net” account. Prior to January 1, 2006, the difference, if any, between the cost of investment and the Company’s proportionate share of the investee’s equity was amortized by the straight-line method over five years, with the amortization recorded in the “equity in earnings/losses of equity method investees, net” account. Effective January 1, 2006, pursuant to the revised Statement of Financial Accounting Standards No. 5, “Long-term Investments in Equity Securities” (SFAS No. 5), the cost of an investment shall be analyzed and the cost of investment in excess of the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized and instead shall be tested for impairment annually. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of non-current assets. The accounting treatment for the investment premiums paid before January 1, 2006 is the same as that for goodwill which is no longer being amortized; while investment discounts continue to be amortized over the remaining periods. When an indication of impairment is identified, the carrying amount of the investment is reduced, with the related impairment loss recognized in earnings.

When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.

Gains or losses on sales from the Company to equity method investees are deferred in proportion to the Company’s ownership percentage in the investees until such gains or losses are realized through transactions with third parties. The entire amount of the gains or losses on sales to investees over which the Company has a controlling interest is deferred until such gains or losses are realized through subsequent sales of the related products to third parties. Gains or losses on sales from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until they are realized through transactions with third parties. Gains or losses on sales between equity method investees are deferred in proportion to the Company’s weighted-average ownership percentages in the investees that the record such gains or losses until they are realized through transactions with third parties.

If an investee’s functional currency is a foreign currency, translation adjustments will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported as a separate component of shareholders’ equity.

Financial Assets Carried at Cost

Investments for which the Company does not exercise significant influence and that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, such as non-publicly traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks and mutual funds are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.

The accounting treatment for cash dividends and stock dividends arising from financial assets carried at cost is the same as that for cash and stock dividends arising from available-for-sale financial assets.

Property, Plant and Equipment and Assets Leased to Others

Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed as incurred.

Depreciation is computed using the straight-line method over the following estimated service lives: Buildings — 10 to 20 years; machinery and equipment — 5 years; and office equipment — 3 to 5 years.

Upon sale or disposal of property, plant and equipment, the related cost and accumulated depreciation are deducted from the corresponding accounts, with any gain or loss recorded as non-operating gains or losses in the period of sale or disposal.

Goodwill

Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Prior to January 1, 2006, goodwill was amortized using the straight-line method over the estimated life of 10 years. Effective January 1, 2006, pursuant to the newly revised Statement of Financial Accounting Standards No. 25, “Business Combinations — Accounting Treatment under Purchase Method” (SFAS No. 25), goodwill is no longer amortized and instead is tested for impairment annually. If an event occurs or circumstances change which indicated that the fair value of goodwill is more likely than not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment loss is not allowed.

Deferred Charges

Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized over the following periods: Technology license fees — the shorter of the estimated life of the technology or the term of the technology transfer contract; software and system design costs and other charges — 3 years. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.

Research and Development

Expenditures related to research activities and those related to development activities that do not meet the criteria for capitalization are charged to expense when incurred.

Pension Costs

For employees who participate in defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during their service periods. For employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial calculations.

Income Tax

The Company applies intra-period and inter-period allocations for its income tax whereby (1) a portion of current period’s income tax expense is allocated to the cumulative effect of changes in accounting principles; and (2) deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.

Any tax credits arising from purchases of machinery, equipment and technology, research and development expenditures, personnel training expenditures, and investments in important technology-based enterprises are recognized using the flow-through method.

Adjustments of prior years’ tax liabilities are added to or deducted from the current period’s tax provision.

Income tax on unappropriated earnings at a rate of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.

The R.O.C. government enacted the Alternative Minimum Tax Act (the AMT Act), which became effective on January 1, 2006. The alternative minimum tax (AMT) imposed under the AMT Act is a supplemental tax levied at a rate of 10% which is payable if the income tax payable determined pursuant to the Income Tax Law is below the minimum amount prescribed under the AMT Act. The taxable income for calculating the AMT includes most of the tax-exempt income under various laws and statutes. The Company has considered the impact of the AMT Act in the determination of its tax liabilities.

Stock-based Compensation

Employee stock option plans that are amended or have options granted on or after January 1, 2004 are accounted for by the interpretations issued by the Accounting Research and Development Foundation. The Company adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period.

Treasury Stock

The Company’s stock held by its subsidiaries is treated as treasury stock and reclassified from investments accounted for using equity method to treasury stock. The gains resulted from disposal of the treasury stock held by subsidiaries and cash dividends received by subsidiaries from the Company are recorded under capital surplus — treasury stock transactions.

Foreign-currency Transactions

Foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at prevailing exchange rates with the resulting gains or losses recognized in earnings.

Recent Accounting Pronouncement

Effective January 1, 2007, the Company adopted the newly released Statement of Financial Accounting Standards No. 37, “Accounting for Intangible Assets”. The Company had reassessed the useful lives and the amortization method of its recognized intangible assets at the effective date. The adoption of the SFAS did not have an effect on the Company’s financial statements as of and for the six months ended June 30, 2007.

3. ACCOUNTING CHANGES

On January 1, 2006, the Company adopted the newly released Statements of Financial Accounting Standards No. 34, “Financial Instruments: Recognition and Measurement” (SFAS No. 34) and No. 36, “Financial Instruments: Disclosure and Presentation”.

The Company had categorized its financial assets and liabilities upon initial adoption of the newly released SFASs. The adjustments made to the carrying amounts of the financial instruments categorized as financial assets or liabilities at fair value through profit or loss were included in the cumulative effect of changes in accounting principles; the adjustments made to the carrying amounts of those categorized as available-for-sale financial assets were recognized as adjustments to shareholders’ equity.

The effect of adopting the newly released SFASs is summarized as follows:


	Recognized as
	Cumulative Effect of
	Changes in Accounting			Recognized as a
	Principles			Separate Component of
	(Net of Tax)			Shareholders’ Equity
Financial assets or liabilities at fair value through profit or loss	$	(246,186	)	$	—
Available-for-sale financial assets		—			—


	$	(246,186	)	$	—

The adoption of the newly released SFASs resulted in a decrease in net income before cumulative effect of changes in accounting principles of NT$31,267 thousand, a decrease in net income of NT$277,453 thousand, and a decrease in basic earnings per share (after income tax) of NT$0.01, for the six months ended June 30, 2006.

Effective January 1, 2006, the Company adopted the newly revised SFAS No. 5 and SFAS No. 25, which prescribe that investment premiums, representing goodwill, be assessed for impairment at least on an annual basis instead of being amortized. Such a change in accounting principle did not have a material effect on the Company’s financial statements as of and for the six months ended June 30, 2006.

4. CASH AND CASH EQUIVALENTS


	June 30
	2007		2006
Cash and deposits in banks	$	84,229,386	$	67,694,314
Repurchase agreements collaterized by government bonds		58,429,635		59,351,764
Asset-backed commercial papers		597,361		—
Corporate notes		—		666,940


	$	143,256,382	$	127,713,018

5. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

	June 30
	2007		2006
Derivatives — financial assets

Forward exchange contracts	$	15,335	$	—
Cross currency swap contracts		156,905		322,456


	$	172,240	$	322,456


Derivatives — financial liabilities

Forward exchange contracts	$	3,460	$	8,265
Cross currency swap contracts		—		591,644


	$	3,460	$	599,909

The Company entered into derivative contracts during the six months ended June 30, 2007 and 2006 to manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting prescribed by SFAS No. 34. Therefore, the Company did not apply hedge accounting treatment for its derivative contracts.

Outstanding forward exchange contracts as of June 30, 2007 and 2006:


		Contract
		Amount
	Maturity Date	(in Thousands)
June 30, 2007

Sell EUR/buy NT$	July 2007 to July 2008	EUR 50,700

June 30, 2006

Sell US$/buy NT$	July 2006	US$ 10,000
Sell EUR/buy US$	July 2006	EUR 10,000

Outstanding cross currency swap contracts as of June 30, 2007 and 2006:


						Range of
	Contract Amount		Range of			Interest Rates
Maturity Date	(in Thousands)		Interest Rates Paid			Received
June 30, 2007

July 2007 to August 2007	US$	765,000		2.36%-5.43	%		1.70%-4.21	%

June 30, 2006

July 2006 to September 2006	US$	2,266,000		2.40%-5.57	%		0.60%-2.78	%

For the six months ended June 30, 2007 and 2006, net losses and net gains arising from derivative financial instruments were NT$579,646 thousand (including realized settlement losses of NT$714,576 thousand and valuation gains of NT$134,930 thousand) and NT$189,913 thousand (including realized settlement gains of NT$467,366 thousand and valuation losses of NT$277,453 thousand), respectively.

6. AVAILABLE-FOR-SALE FINANCIAL ASSETS


	June 30
	2007			2006
Open-end mutual funds	$	10,971,467		$	22,157,124
Corporate bonds		4,176,057			14,297,001
Government bonds		4,133,533			4,831,843
Structured time deposits		497,381			498,190
Agency bonds		—			13,787,394
Corporate issued asset-backed securities		—			10,921,185
Money market funds		—			385,937
Corporate notes		—			97,683

		19,778,438			66,976,357
Current portion		(15,259,717	)		(62,102,387	)


	$	4,518,721		$	4,873,970

In 2004, the Company entered into investment management agreements with three well-known financial institutions (fund managers) to manage its investment portfolios. In accordance with the investment guidelines and terms specified in these agreements, the securities invested by the fund managers cannot be below a pre-defined credit rating. In the second half year of 2006, the Company transferred investment portfolios managed by the fund managers of US$1,277,789 thousand to TSMC Global Ltd. (TSMC Global), a subsidiary of TSMC. The transferred investment portfolios held by TSMC Global are still being managed by the same fund managers in accordance with the aforementioned investment guidelines and terms.

Structured time deposits categorized as available-for-sale financial assets consisted of the following:


	Principal
	Amount		Carrying Amount		Interest Rate			Maturity Date
June 30, 2007

Step-up callable deposits
Domestic deposits	$	500,000	$	497,381		1.76	%	March 2008


June 30, 2006

Step-up callable deposits
Domestic deposits	$	500,000	$	498,190		1.76	%	March 2008

The interest rate of the step-up callable deposits was pre-determined by the Company and the banks.

7. HELD-TO-MATURITY FINANCIAL ASSETS


	June 30
	2007			2006
Corporate bonds	$	11,968,229		$	12,895,132
Structured time deposits		10,047,000			11,127,780
Government bonds		8,682,408			5,239,892

		30,697,637			29,262,804
Current portion		(9,909,497	)		(5,738,737	)


	$	20,788,140		$	23,524,067

Structured time deposits categorized as held-to-maturity financial assets consisted of the following:


	Principal				Range of
	Amount		Interest Receivable		Interest Rates			Maturity Date
June 30, 2007

Step-up callable deposits
Domestic deposits	$	3,500,000	$	13,267		1.69%-1.83	%	October 2007 to October 2008
Callable range accrual deposits
Domestic deposits		3,928,200		4,556	(See below)			September 2009 to December 2009
Foreign deposits		2,618,800		4,828	(See below)			October 2009 to December 2009


	$	10,047,000	$	22,651


June 30, 2006

Step-up callable deposits
Domestic deposits	$	4,000,000	$	27,016		1.40%-2.01	%	June 2007 to March 2009
Callable range accrual deposits
Domestic deposits		3,887,880		4,725	(See below)			September 2009 to December 2009
Foreign deposits		3,239,900		4,914	(See below)			October 2009 to January 2010


	$	11,127,780	$	36,655

The amount of interest earned from the callable range accrual deposits is based on a pre-defined range as determined by the 3-month or 6-month LIBOR plus an agreed upon rate ranging between 2.10% and 3.45%. Based on the terms of the contracts, if the 3-month or 6-month LIBOR moves outside of the pre-defined range, the interest paid to the Company is at a fixed rate ranging between zero and 1.5%. Under the terms of the contracts, the bank has the right to cancel the contracts prior to the maturity date.

As of June 30, 2007 and 2006, the principal of the deposits that resided in banks located in Hong Kong amounted to US$60,000 thousand and US$80,000 thousand, respectively; the principal of those resided in banks located in Singapore amounted to US$20,000 thousand.

8. INVENTORIES, NET


	June 30
	2007			2006
Finished goods	$	4,545,835		$	4,163,346
Work in process		16,447,979			13,243,014
Raw materials		1,137,465			1,236,095
Supplies and spare parts		421,597			537,546

		22,552,876			19,180,001
Allowance for losses		(874,918	)		(804,421	)


	$	21,677,958		$	18,375,580

9. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD


	June 30
	2007				2006
			% of				% of
	Carrying		Owner-		Carrying		Owner-
	Amount		ship		Amount		ship
TSMC Global (Note 6)	$	43,613,633		100	$	—		—
TSMC International Investment Ltd. (TSMC International)		27,053,657		100		25,984,419		100
TSMC (Shanghai) Company Limited (TSMC-Shanghai)		8,799,540		100		9,093,788		100
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)		8,289,538		39		5,094,733		32
Vanguard International Semiconductor Corporation (VIS)		5,637,861		27		5,087,101		27
TSMC Partners, Ltd. (TSMC Partners)		4,567,193		100		4,225,071		100
TSMC North America (TSMC-North America)		2,207,039		100		1,790,365		100
Xintec Inc. (Xintec)		1,366,816		43		—		—
VentureTech Alliance Fund II, L.P. (VTAF II)		858,453		98		707,835		98
VentureTech Alliance Fund III, L.P. (VTAF III)		756,146		98		145,055		98
Emerging Alliance Fund, L.P. (Emerging Alliance)		717,200		99		1,050,087		99
Global UniChip Corporation (GUC)		694,111		38		447,762		45
Chi Cherng Investment Co., Ltd. (Chi Cherng)		168,359		36		113,574		36
Hsin Ruey Investment Co., Ltd. (Hsin Ruey)		166,857		36		113,246		36
TSMC Japan Limited (TSMC-Japan)		94,250		100		96,536		100
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC-Europe)		65,109		100		36,909		100
TSMC Korea Limited (TSMC-Korea)		15,514		100		13,752		100


	$	105,071,276			$	54,000,233

In November 2006, the Company acquired 81 thousand shares in SSMC for SGD115,227 thousand from EDB Investments Pte Ltd. under a Shareholders Agreement. After the acquisition, the number of SSMC shares owned by the Company increased to 463 thousand; the percentage of ownership increased from 32% to 39%.

In January 2007, the Company acquired 90,526 thousand shares in Xintec, representing 43% of the total common shares, for NT$1,357,890 thousand.

For the six months ended June 30, 2007 and 2006, net equity in earnings of NT$1,983,358 thousand and NT$3,404,382 thousand was recognized, respectively. The carrying amounts of the investments accounted for using the equity method and the related equity in earnings or losses of equity method investees were determined based on the audited financial statements of the investees for the same periods as the Company.

10. FINANCIAL ASSETS CARRIED AT COST


	June 30
	2007		2006
Non-publicly traded stocks	$	364,913	$	472,500
Funds		382,305		346,469


	$	747,218	$	818,969

11. PROPERTY, PLANT AND EQUIPMENT
Accumulated depreciation consisted of the following:

	June 30
	2007		2006
Buildings	$	53,445,978	$	46,538,174
Machinery and equipment		392,217,826		335,618,032
Office equipment		6,820,094		6,072,555


	$	452,483,898	$	388,228,761

No interest was capitalized during the six months ended June 30, 2007 and 2006.
12. DEFERRED CHARGES, NET

	June 30
	2007		2006
Technology license fees	$	3,723,447	$	4,708,484
Software and system design costs		1,155,163		1,401,428
Others		300,805		54,080


	$	5,179,415	$	6,163,992

13. BONDS PAYABLE


	June 30
	2007			2006
Domestic unsecured bonds:
Issued in December 2000 and repayable in December 2007, 5.36% interest payable annually	$	4,500,000		$	4,500,000
Issued in January 2002 and repayable in January 2007, 2009 and 2012 in three installments, 2.60%, 2.75% and 3.00% interest payable annually, respectively		12,500,000			15,000,000

		17,000,000			19,500,000
Current portion		(4,500,000	)		(2,500,000	)


	$	12,500,000		$	17,000,000

As of June 30, 2007, future principal repayments for the Company’s bonds were as follows:


Year of Repayment	Amount
2007 (4^th quarter)	$	4,500,000
2009		8,000,000
2012		4,500,000


	$	17,000,000

14. OTHER LONG-TERM PAYABLES

Most of the payables resulted from license agreements for certain semiconductor-related patents. As of June 30, 2007, future payments for other long-term payables were as follows:


Year of Payment	Amount
2007 (3^rd and 4^th quarter)	$	2,094,747
2008		743,575
2009		338,480
2010		338,480
2011		261,880

		3,777,162
Current portion (classified under accrued expenses and other current liabilities)		(2,433,227	)


	$	1,343,935

15. PENSION PLANS

The Labor Pension Act (the Act) became effective on July 1, 2005. The employees who were subject to the Labor Standards Law prior to July 1, 2005 were allowed to choose to be subject to the pension mechanism under the Act with their seniority as of July 1, 2005 retained or continue to be subject to the pension mechanism under the Labor Standards Law. Employees who joined the Company after July 1, 2005 can only be subject to the pension mechanism under the Act.

The pension mechanism under the Act is deemed a defined contribution plan. Pursuant to the Act, the Company has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts starting from July 1, 2005, and recognized pension costs of NT$298,794 thousand and NT$ 309,691 thousand for the six months ended June 30, 2007 and 2006, respectively.

The Company has a defined benefit plan under the Labor Standards Law that provides benefits based on an employee’s service years and average monthly salary for the six-month period prior to retirement. The Company contributes an amount equal to 2% of salaries paid each month to a pension fund (the Fund). which is administered by the pension fund monitoring committee (the Committee) and deposited in the Committee’s name in the Central Trust of China. The Company recognized pension costs of NT$162,308 thousand and NT$152,702 thousand for the six months ended June 30, 2007 and 2006, respectively.

Changes in the Fund and accrued pension cost under the defined benefit plan are summarized as follows:


	Six Months Ended June 30
	2007		2006
The Fund
Balance, beginning of period	$	1,913,002	$	1,658,864
Contributions		111,502		131,250
Interest		46,279		34,384
Payments		—		(4,677	)


Balance, end of period	$	2,070,783	$	1,819,821


Accrued pension cost
Balance, beginning of period	$	3,530,116	$	3,461,392
Accruals		53,426		22,958


Balance, end of period	$	3,583,542	$	3,484,350

16. INCOME TAX

A reconciliation of income tax expense based on “income before income tax” at statutory rate and income tax currently payable was as follows:


	Six Months Ended June 30
	2007			2006
Income tax expense based on “income before income tax” at statutory rate (25%)	$	11,925,847		$	17,726,514
Tax effect of the following:
Tax-exempt income		(2,770,225	)		(6,411,975	)
Temporary and permanent differences		(320,582	)		(721,070	)
Additional tax at 10% on unappropriated earnings		2,686,561			1,156,130
Cumulative effect of changes in accounting principles		—			(82,062	)
Investment tax credits used		(7,260,151	)		(7,462,975	)


Income tax currently payable	$	4,261,450		$	4,204,562

b. Income tax expense consisted of the following:


	Six Months Ended June 30
	2007			2006
Income tax currently payable	$	4,261,450		$	4,204,562
Other income tax adjustments		(361,957	)		(447,043	)
Net change in deferred income tax assets
Investment tax credits		3,082,172			2,756,331
Temporary differences		(760,228	)		(1,423,579	)
Valuation allowance		(2,840,629	)		(1,039,030	)


Income tax expense	$	3,380,808		$	4,051,241

Net deferred income tax assets consisted of the following:


	June 30
	2007			2006
Current deferred income tax assets
Investment tax credits	$	5,622,000		$	6,084,277


Noncurrent deferred income tax assets
Investment tax credits	$	11,252,720		$	15,025,163
Temporary differences		1,600,692			741,309
Valuation allowance		(4,363,600	)		(8,371,516	)


	$	8,489,812		$	7,394,956

Integrated income tax information:

The balance of the imputation credit account as of June 30, 2007 and 2006 was NT$2,759,715 thousand and NT$743,590 thousand, respectively.

The creditable ratios for distribution of earnings of 2006 and 2005 were 5.23% (expected) and 2.88%, respectively.

The imputation credit allocated to shareholders is based on its balance as of the date of dividend distribution. The estimated creditable ratio may change when the actual distribution of imputation credit is made.

	e.		All earnings generated prior to December 31, 1997 have been appropriated.

	f.		As of June 30, 2007, investment tax credits consisted of the following:


		Total		Remaining
		Creditable		Creditable		Expiry
Law/Statute	Item	Amount		Amount		Year
Statute for Upgrading Industries	Purchase of machinery and equipment	$	238,012	$	—		2007
			3,177,526		—		2008
			6,029,482		5,114,037		2009
			6,424,473		6,424,473		2010
			832,574		832,574		2011


		$	16,702,067	$	12,371,084

(Continued)


		Total		Remaining
		Creditable		Creditable		Expiry
Law/Statute	Item	Amount		Amount		Year
Statute for Upgrading Industries	Research and development expenditures	$	1,245,142	$	—		2007
			1,627,095		—		2008
			1,534,230		1,534,230		2009
			1,944,546		1,944,546		2010
			869,050		869,050		2011


		$	7,220,063	$	4,347,826


Statute for Upgrading Industries	Personnel training expenditures	$	16,197	$	—		2007
			40,734		—		2008
			40,442		40,442		2009
			35,564		35,564		2010

		$	132,937	$	76,006


Statute for Upgrading Industries	Investments in important technology-based enterprises	$	79,804	$	79,804		2010

(Concluded)

The profits generated from the following projects are exempt from income tax for a four-year or five-year period:


	Tax-Exemption Period
Construction of Fab 12 — Module A		2004 to 2007
Construction of Fab 14 — Module A		2006 to 2010

The tax authorities have examined income tax returns of the Company through 2004.

17. LABOR COST, DEPRECIATION AND AMORTIZATION


	Six Months Ended June 30, 2007
			Classified as
	Classified as		Operating
	Cost of Sales		Expenses		Total
Labor cost
Salary	$	4,405,268	$	2,160,377	$	6,565,645
Labor and health insurance		277,788		150,831		428,619
Pension		298,525		162,577		461,102
Meal		213,703		80,294		293,997
Welfare		109,186		66,138		175,324
Others		62,796		3,017		65,813


	$	5,367,266	$	2,623,234	$	7,990,500

Depreciation	$	33,044,630	$	1,919,406	$	34,964,036

Amortization	$	905,291	$	403,390	$	1,308,681


	Six Months Ended June 30, 2006
			Classified as
	Classified as		Operating
	Cost of Sales		Expenses		Total
Labor cost
Salary	$	5,183,360	$	2,144,658	$	7,328,018
Labor and health insurance		340,274		167,998		508,272
Pension		309,451		152,942		462,393
Meal		225,304		76,220		301,524
Welfare		94,186		48,784		142,970
Others		103,858		12,901		116,759


	$	6,256,433	$	2,603,503	$	8,859,936


Depreciation	$	29,319,569	$	1,617,095	$	30,936,664

Amortization	$	722,358	$	479,323	$	1,201,681

18. SHAREHOLDERS’ EQUITY

As of June 30, 2007, 1,134,382 thousand ADSs of the Company were traded on the NYSE. The number of common shares represented by the ADSs was 5,671,912 thousand (one ADS represents five common shares).

Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which are limited to a certain percentage of the Company’s paid-in capital.

Capital surplus consisted of the following:


	June 30
	2007		2006
From merger	$	24,003,546	$	24,003,546
Additional paid-in capital		19,422,365		19,788,594
From convertible bonds		9,360,424		9,360,424
From treasury stock transactions		490,950		389,188
From long-term investments		448,264		280,679
Donations		55		55


	$	53,725,604	$	53,822,486

The Company’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, the Company shall first offset its losses in previous years and then set aside the following items accordingly:

	a.		Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve has equaled the Company’s paid-in capital;

	b.		Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;

	c.		Bonus to directors and bonus to employees of the Company of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of the Company are not entitled to receive the bonus to directors. The Company may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;

	d.		Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.

The Company’s Articles of Incorporation also provide that profits of the Company may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.

Any appropriations of the profits are recorded in the year of shareholder approval and given effect to in the financial statements of that year.

The Company no longer has supervisors since January 1, 2007. The required duties of supervisors are being fulfilled by the Audit Committee.

The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if the Company has no unappropriated earnings and the reserve balance has exceeded 50% of the Company’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of the Company’s paid-in capital, up to 50% of the reserve may be transferred to capital.

A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial instruments, but excluding treasury stock) shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve appropriated may be reversed to the extent that the net debit balance reverses.

The appropriations of earnings for 2006 and 2005 had been approved in the shareholders’ meetings held on May 7, 2007 and May 16, 2006, respectively. The appropriations and dividends per share were as follows:


							Dividends Per Share
	Appropriation of Earnings						(NT$)
	For Fiscal			For Fiscal			For Fiscal		For Fiscal
	Year 2006			Year 2005			Year 2006		Year 2005
Legal capital reserve	$	12,700,973		$	9,357,503
Special capital reserve		(11,192	)		(1,585,685	)
Bonus to employees — in cash		4,572,798			3,432,129
Bonus to employees — in stock		4,572,798			3,432,129
Cash dividends to shareholders		77,489,064			61,825,061		$	3.00	$	2.50
Stock dividends to shareholders		516,594			3,709,504			0.02		0.15
Bonus to directors and supervisors		285,800			257,410


	$	100,126,835		$	80,428,051

The shareholders’ meeting held on May 7, 2007 also resolved to distribute stock dividends out of capital surplus in the amount of NT$ 774,891 thousand.

The amounts of the appropriations of earnings for 2006 and 2005 were consistent with the resolutions of the meetings of the Board of Directors held on February 6, 2007 and February 14, 2006, respectively. If the above bonus to employees, directors and supervisors had been paid entirely in cash and charged to earnings of 2006 and 2005, the basic earnings per share (after income tax) for the years ended December 31, 2006 and 2005 shown in the respective financial statements would have decreased from NT$4.93 to NT$4.56 and NT$3.79 to NT$3.50, respectively. The shares distributed as a bonus to employees represented 1.77% and 1.39% of the Company’s total outstanding common shares as of December 31, 2006 and 2005, respectively.

The information about the appropriations of bonuses to employees, directors and supervisors is available at the Market Observation Post System website.

Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by the Company on earnings generated since January 1, 1998.

19. STOCK-BASED COMPENSATION PLANS

The Company’s Employee Stock Option Plans under the 2004 Plan, 2003 Plan and 2002 Plan were approved by the SFB on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum number of options authorized to be granted under the 2004 Plan, 2003 Plan and 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for one common share when exercisable. The options may be granted to qualified employees of the Company or any of its domestic or foreign subsidiaries, in which the Company’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equals to the closing price of the Company’s common shares listed on the TSE on the grant date.

Options of the plans that had never been granted or had been granted but subsequently canceled had expired as of June 30, 2007.

Information about outstanding options for the six months ended June 30, 2007 and 2006 was as follows:


				Weighted-
				average
	Number of			Exercise
	Options			Price
	(in Thousands)			(NT$)
Six months ended June 30, 2007

Balance, beginning of period		52,814		$	37.9
Options granted		1,094			37.9
Options exercised		(7,401	)		40.1
Options canceled		(598	)		45.2


Balance, end of period		45,909			37.6


Six months ended June 30, 2006

Balance, beginning of period		67,758			39.4
Options granted		2,517			39.7
Options exercised		(8,219	)		39.7
Options canceled		(2,304	)		44.5


Balance, end of period		59,752			39.6

The number of outstanding options and exercise prices have been adjusted to reflect the distribution of dividends in accordance with the plans. The options granted were the result of the aforementioned adjustment.

As of June 30, 2007, information about outstanding and exercisable options was as follows:


	Options Outstanding						Options Exercisable
			Weighted-		Weighted-				Weighted-
			average		average				average
	Number of		Remaining		Exercise		Number of		Exercise
	Options (in		Contractual		Price		Options (in		Price
Range of Exercise Price (NT$)	Thousands)		Life (Years)		(NT$)		Thousands)		(NT$)
$25.9-$36.4		30,754		3.66	$	33.2		30,754	$	33.2
$38.9-$51.3		15,155		5.41		46.6		9,264		46.3


		45,909				37.6		40,018		36.2

No compensation cost was recognized under the intrinsic value method for the six months ended June 30, 2007 and 2006. Had the Company used the fair value based method (based on the Black-Scholes model) to evaluate the options granted after January 1, 2004, the assumptions and pro forma results of the Company would have been as follows:


	Six Months Ended June 30
	2007			2006
Assumptions:
Expected dividend yield		1.00%-3.44	%		1.00%-3.44	%
Expected volatility		43.77%-46.15	%		43.77%-46.15	%
Risk free interest rate		3.07%-3.85	%		3.07%-3.85	%
Expected life	5 years			5 years
Net income:
Net income as reported	$	44,322,581		$	66,608,628
Pro forma net income		44,287,092			66,552,140
Earnings per share (EPS) — after income tax (NT$):
Basic EPS as reported	$	1.68		$	2.53
Pro forma basic EPS		1.68			2.52
Diluted EPS as reported		1.68			2.52
Pro forma diluted EPS		1.68			2.52

20. TREASURY STOCK

(Shares in Thousands)


	Beginning		Stock				Ending
	Shares		Dividend		Disposal		Shares
Six months ended June 30, 2007

Parent company stock held by subsidiaries		33,926		170		—		34,096


Six months ended June 30, 2006

Parent company stock held by subsidiaries		32,938		988		—		33,926

As of June 30, 2007 and 2006, the book value of the treasury stock was NT$918,075 thousand each; the market value was NT$2,417,400 thousand and NT$1,952,452 thousand, respectively. The Company’s stock held by subsidiaries is treated as treasury stock and the holders are entitled to the rights of shareholders, with the exception of voting rights.

21. EARNINGS PER SHARE


	Six Months Ended June 30
	2007				2006
	Before		After		Before			After
	Income Tax		Income Tax		Income Tax			Income Tax
Basic EPS (NT$)
Income before cumulative effect of changes in accounting principles	$	1.81	$	1.68	$	2.69		$	2.54
Cumulative effect of changes in accounting principles		—		—		(0.01	)		(0.01	)


Income for the period	$	1.81	$	1.68	$	2.68		$	2.53


Diluted EPS (NT$)
Income before cumulative effect of change in accounting principles	$	1.81	$	1.68	$	2.68		$	2.53
Cumulative effect of changes in accounting principles		—		—		(0.01	)		(0.01	)


Income for the period	$	1.81	$	1.68	$	2.67		$	2.52

EPS is computed as follows:


					Number of		EPS (NT$)
	Amounts (Numerator)				Shares		Before		After
	Before		After		(Denominator)		Income		Income
	Income Tax		Income Tax		(in Thousands)		Tax		Tax
Six months ended June 30, 2007

Basic EPS
Income available to shareholders	$	47,703,389	$	44,322,581		26,385,050	$	1.81	$	1.68

Effect of dilutive potential common stock — stock options		—		—		23,482


Diluted EPS
Income available to shareholders (including effect of dilutive potential common stock)	$	47,703,389	$	44,322,581		26,408,532	$	1.81	$	1.68


Six months ended June 30, 2006

Basic EPS
Income available to shareholders	$	70,577,807	$	66,608,628		26,371,073	$	2.68	$	2.53

Effect of dilutive potential common stock — stock options		—		—		22,850


Diluted EPS
Income available to shareholders (including effect of dilutive potential common stock)	$	70,577,807	$	66,608,628		26,393,923	$	2.67	$	2.52

22. DISCLOSURES FOR FINANCIAL INSTRUMENTS

Fair values of financial instruments were as follows:


	June 30
	2007				2006
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Assets

Financial assets at fair value through profit or loss	$	172,240	$	172,240	$	322,456	$	322,456
Available-for-sale financial assets		19,778,438		19,778,438		66,976,357		66,976,357
Held-to-maturity financial assets		30,697,637		30,616,918		29,262,804		28,857,510
Investments accounted for using equity method (with market price)		6,331,972		28,683,049		5,087,101		9,567,918

Liabilities

Financial liabilities at fair value through profit or loss		3,460		3,460		599,909		599,909
Bonds payable (including current portion)		17,000,000		17,241,349		19,500,000		19,888,147
Other long-term payable (including current portion)		3,777,162		3,777,162		3,484,092		3,484,092

Methods and assumptions used in the determination of fair values of financial instruments

	1)		The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, payables, and payables to contractors and equipment suppliers. The carrying amounts of these financial instruments approximate their fair values due to their short maturities.

	2)		Fair values of financial assets/liabilities at fair value through profit or loss were determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.

	3)		Fair values of available-for-sale and held-to-maturity financial assets were based on their quoted market prices; while fair values of structured time deposits were estimated using valuation techniques.

	4)		Fair value of bonds payable was based on their quoted market price.

	5)		Fair value of other long-term payables was based on the present value of expected cash flows, which approximates their carrying amount.

	c.		Gains and losses recognized for the changes in fair value of derivatives estimated using valuation techniques were NT$134,930 thousand NT$277,453 thousand for the six months ended June 30, 2007 and 2006, respectively.

	d.		As of June 30, 2007 and 2006, financial assets exposed to fair value interest rate risk were NT$50,648,315 thousand and NT$96,561,617 thousand, respectively; financial liabilities exposed to fair value interest rate risk were NT$3,460 thousand and NT$599,909 thousand, respectively, and financial assets exposed to cash flow interest rate risk were NT$6,547,000 thousand and NT$7,127,780 thousand, respectively.

	e.		The Company recognized an unrealized gain of NT$150,562 thousand and an unrealized loss of NT$190,353 thousand directly in shareholders’ equity for the changes in fair value of available-for-sale financial assets for the six months ended June 30, 2007 and 2006, respectively; the Company recognized gains of NT$233,970 thousand and NT$1,116 thousand which was removed from shareholders’ equity and recognized in earnings for the six months ended June 30, 2007 and 2006, respectively. The Company also recognized unrealized losses of NT$30,727 thousand and unrealized gains of NT$308,023 thousand in shareholders’ equity for the changes in fair value of available-for-sale financial assets held by equity method investees for the six months ended June 30, 2007 and 2006, respectively.

	f.		Information about financial risks

	1)		Market risk. The derivative financial instruments categorized as financial assets/liabilities at fair value through profit or loss are mainly used to hedge the exchange rate fluctuations of foreign-currency assets and liabilities; therefore, the market risk of derivatives will be offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets held by the Company are mainly fixed-interest-rate debt securities; therefore, the fluctuations in market interest rates will result in changes in fair values of these debt securities.

	2)		Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties or third-parties to the foregoing financial instruments are reputable financial institutions, business organizations and government agencies. Management believes that the Company’s exposure to default by those parties is low.

	3)		Liquidity risk. The Company has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments and bonds payable. Therefore, the liquidity risk is low.

	4)		Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates.

23. RELATED PARTY TRANSACTIONS

The Company engages in business transactions with the following related parties:

	a.		Philips, a major shareholder of the Company.

	b.		Subsidiaries

			TSMC-North America TSMC-Shanghai TSMC-Europe TSMC-Japan

	c.		Investees

			GUC (with a controlling financial interest) VIS (accounted for using equity method) SSMC (accounted for using equity method)

	d.		Indirect subsidiaries

			WaferTech, LLC (WaferTech) TSMC Technology, Inc. (TSMC Technology)

	e.		Indirect investee

			VisEra (accounted for using equity method)

	f.		Others

			Related parties over which the Company has control or exercises significant influence but with which the Company had no material transactions.

Transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:


	2007				2006
	Amount		%		Amount		%
For the six months ended June 30

Sales
TSMC-North America	$	83,546,469		60	$	94,075,632		58
Philips		—		—		2,318,898		2
Others		465,685		1		406,336		—


	$	84,012,154		61	$	96,800,866		60


Purchases
WaferTech	$	4,804,106		21	$	6,505,148		28
SSMC		2,765,116		12		3,718,466		16
TSMC-Shanghai		2,485,579		11		1,918,584		8
VIS		1,681,324		8		1,712,082		7
Others		732		—		—		—


	$	11,736,857		52	$	13,854,280		59


Manufacturing expenses
VisEra	$	20,500		—	$	—		—
Philips (technical assistance fees, see Note 25a)		—		—		377,952		1


	$	20,500		—	$	377,952		1


Marketing expenses — commission
TSMC-Europe	$	146,354		21	$	116,934		11
TSMC-Japan		115,663		16		125,553		12
Others		11,146		2		1,118		—


	$	273,163		39	$	243,605		23


	2007				2006
	Amount		%		Amount		%
General and administrative expenses — rental
GUC	$	3,473		—	$	7,659		—


Research and development expenses
TSMC Technology	$	145,596		2	$	—		—
Others		59,381		1		19,582		—


	$	204,977		3	$	19,582		—


Sales of property, plant and equipment
TSMC-Shanghai	$	2,378		33	$	173,299		42


Non-operating income and gains
VisEra	$	177,414		4	$	140,079		2
VIS (primarily technical service income, see Note 25h)		173,765		3		105,937		2
TSMC-Shanghai		168,625		3		123,891		2
SSMC (primarily technical service income, see Note 25e)		116,257		2		147,219		2


	$	636,061		12	$	517,126		8


As of June 30

Receivables
TSMC-North America	$	20,642,259		100	$	22,374,338		98
Philips		—		—		382,251		2
Others		32,908		—		153,300		—


	$	20,675,167		100	$	22,909,889		100


Other receivables
VIS	$	809,153		63	$	688,807		42
VisEra		147,186		11		17,376		1
SSMC		97,977		8		92,700		6
TSMC-North America		88,131		7		205,327		12
TSMC-Shanghai		60,263		5		167,585		10
TSMC Technology		—		—		485,449		29
Others		77,709		6		2,238		—


	$	1,280,419		100	$	1,659,482		100


Payables
WaferTech	$	804,285		26	$	1,155,023		35
VIS		780,221		25		943,129		29
SSMC		728,808		23		662,385		20
TSMC-Shanghai		611,054		20		401,379		12
Others		184,255		6		119,507		4


	$	3,108,623		100	$	3,281,423		100


	2007				2006
	Amount		%		Amount		%
Other long-term payables
Philips (Note 25a)	$	—		—	$	1,085,366		100


Deferred credits
TSMC-Shanghai	$	617,113		62	$	635,124		54
VisEra		93,262		9		155,437		13


	$	710,375		71	$	790,561		67

The terms of sales to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices were determined in accordance with mutual agreements.

The Company deferred the gains (classified under the deferred credits) derived from sales of property, plant, and equipment to TSMC-Shanghai and VisEra, and then recognized such gains (classified under non-operating income and gains) over the depreciable lives of the disposed assets.

The Company leased part of its office space from GUC and also leased certain buildings and facilities to VisEra. The related rental expense and rental income were classified under non-operating expenses and income, respectively. The lease terms and prices were determined in accordance with mutual agreements.

24. SIGNIFICANT LONG-TERM LEASES

The Company leases several parcels of land from the Science Park Administration. These operating leases expire on various dates from December 2007 to December 2026 and can be renewed upon expiration.

As of June 30, 2007, future lease payments were as follows:


Year	Amount
2007 (3^rd and 4^th quarter)	$	170,581
2008		301,926
2009		292,960
2010		243,762
2011		242,180
2012 and thereafter		1,820,594


	$	3,072,003

25. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

The significant commitments and contingencies of the Company as of June 30, 2007, except as disclosed in other notes, were as follows:

On June 20, 2004, the Company and Philips (Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006) amended the Technical Cooperation Agreement, which was originally signed on May 12, 1997. The amended Technical Cooperation Agreement is for five years beginning from January 1, 2004. Upon expiration, this amended Technical Cooperation Agreement will be terminated and will not be automatically renewed; however, the patent cross license arrangement between the Company and Philips (now NXP B.V.) will survive the expiration of the amended Technical Cooperation Agreement. Under this amended Technical Cooperation Agreement, the Company will pay Philips (now NXP B.V.) royalties based on a fixed amount mutually agreed-on,

			rather than under a certain percentage of the Company’s annual net sales. The Company and Philips (now NXP B.V.) agreed to cross license the patents owned by each party. The Company also obtained through Philips (now NXP B.V.) a number of cross patent licenses.

	b.		Under a technical cooperation agreement with ITRI, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity if TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. The agreement was automatically renewed in 1992, 1997, 2002 and on January 1, 2007.

	c.		Under several foundry agreements, the Company shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with the Company. As of June 30, 2007, the Company had a total of US$90,985 thousand of guarantee deposits.

	d.		Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. The Company’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. The Company and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, the Company and NXP B.V. currently own approximately 39% and 61% of the SSMC shares, respectively. The Company and Philips (now NXP B.V.) committed to buy specific percentages of the production capacity of SSMC. The Company and Philips (now NXP B.V.) are required, in the aggregate, to purchase up to 70% of SSMC’s capacity, but the Company alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC falls below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.

	e.		The Company provides technical services to SSMC under a Technical Cooperation Agreement (the Agreement) entered into on May 12, 1999. The Company receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.

	f.		Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, the Company shall receive payments for the licensing of certain technology to National. The agreement was to remain in force for ten years and could be automatically renewed for successive periods of two years thereafter unless either party gives written notice for early termination under certain conditions. In January 2003, the Company and National entered into a Termination Agreement whereby the TTA was terminated. Under the Termination Agreement, the Company will be relieved of any further obligation to transfer any additional technology. In addition, the Company granted National an option to request the transfer of certain technologies under the same terms and conditions as the terminated TTA. The option will expire in January 2008.

	g.		In December 2003, the Company entered into a Technology Development and License Agreement with Freescale Semiconductor, Inc. to jointly develop 65-nm SOI (silicon on insulator) technology. The Company will also license related 90-nm SOI technology from Freescale Semiconductor, Inc. Any intellectual properties arising out of the co-development project shall be jointly owned by the parties. In accordance with the agreement, the Company will pay royalties to Freescale Semiconductor, Inc. and will share a portion of the costs associated with the joint development project.

	h.		The Company provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into on April 1, 2004. The Company receives compensation for such technology transfer in the form of royalty payments from VIS computed at specific percentages of net selling price of certain products sold by VIS. VIS agreed to reserve its certain capacity to manufacture for the Company certain products at prices as agreed by the parties.

	i.		TSMC, TSMC-North America and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation (“SMIC”), SMIC (Shanghai) and SMIC Americas. The lawsuits alleged that SMIC companies infringed multiple TSMC patents and misappropriated TSMC’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, SMIC shall pay TSMC US$175,000 thousand over six years to resolve TSMC’s claims. As of June 30, 2007, SMIC had paid US$75,000 thousand in accordance with the terms of this settlement agreement. In August 2006, TSMC, TSMC-North America and Wafertech filed a lawsuit against SMIC in Alameda County Superior Court in California for breach of aforementioned settlement agreement, breach of promissory notes and trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC in the same court, alleging TSMC of breach of the settlement agreement and implied covenant of good faith and fair dealing, in response to TSMC’s August complaint. In November 2006, SMIC filed a complaint with Beijing People’s High Court against TSMC, TSMC-North America, and Wafertech, alleging defamation and breach of good faith. The result of the above-mentioned litigation cannot be determined at this time.

	j.		Amounts available under unused letters of credit as of June 30, 2007 were NT$6,480 thousand.

27. ADDITIONAL DISCLOSURES

	Following are the additional disclosures required by the SFB for the Company and its investees:

	a.		Financing provided: None;

	b.		Endorsement/guarantee provided: None;

	c.		Marketable securities held: Please see Table 1 attached;

	d.		Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 2 attached;

	e.		Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 3 attached;

	f.		Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;

	g.		Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;

	h.		Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;

	i.		Names, locations, and related information of investees over which the Company exercises significant influence: Please see Table 6 attached;

	j.		Information about derivatives of investees in which the Company has a controlling interest:

			TSMC-Shanghai entered into forward exchange contracts during the six months ended June 30, 2007 to manage exposures due to foreign exchange rate fluctuations.

Outstanding forward exchange contracts as of June 30, 2007:

Contract

Amount

Maturity Date

(in Thousands)

Sell RMB/buy EUR

July 2007

EUR

189

Net realized settlement losses and valuation gains arising from TSMC-Shanghai’s forward exchange transactions for the six months ended June 30, 2007 were NT$669 thousand and NT$130 thousand, respectively.

Xintec entered into forward exchange contracts during the six months ended June 30, 2007 to manage exposures due to foreign exchange rate fluctuations.

Outstanding forward exchange contracts as of June 30, 2007:

Contract

Amount

Maturity Date

(in Thousands)

Sell US$/buy NT$

July 2007

US$

2,000

Net realized settlement losses and valuation gains arising from Xintec’s forward exchange transactions for the six months ended June 30, 2007 were NT$1,500 thousand and NT$176 thousand, respectively.

Information on investment in Mainland China

	1)		The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 7 attached.

	2)		Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: Please see Note 23.

TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Investees

MARKETABLE SECURITIES HELD
JUNE 30, 2007
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)


						June 30, 2007
									Market Value or Net
				Shares/Units		Carrying Value		Percentage of	Asset Value
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	(in Thousands)		(US$ in Thousands)		Ownership	(US$ in Thousands)		Note
The Company	Government Bond
	2003 Government Bond Series B	—	Available-for-sale financial assets		—	$	2,344,207	N/A	$	2,344,207
	2004 Government Bond Series B	—	”		—		1,192,161	N/A		1,192,161
	2004 Government Bond Series G	—	”		—		198,586	N/A		198,586
	2006 Government Bond Series D	—	”		—		398,579	N/A		398,579
	2003 Government Bond Series F	—	Held-to-maturity financial assets		—		798,163	N/A		844,440
	2006 Government Bond Series D	—	”		—		3,654,613	N/A		3,637,028
	2003 Government Bond Series B	—	”		—		1,647,899	N/A		1,643,938
	2003 Government Bond Series H	—	”		—		401,144	N/A		399,721
	2004 Kaohsiung Municipal Series A	—	”		—		620,000	N/A		620,273
	2004 Kaohsiung Municipal Series B	—	”		—		249,998	N/A		250,004
	2003 Asian Development Bank Govt. Bond	—	”		—		845,464	N/A		875,103
	European Investment Bank Bonds	—	”		—		376,047	N/A		400,000
	2003 European Bank for Reconstruction and Development Govt. Bond Series A	—	”		—		89,080	N/A		90,000

	Open-end mutual funds
	NITC Bond Fund	—	Available-for-sale financial assets		12,239		2,028,897	N/A		2,028,897
	Fuh Hwa Bond	—	”		102,783		1,380,442	N/A		1,380,442
	Prudential Financial Bond Fund	—	”		83,306		1,226,681	N/A		1,226,681
	NITC Taiwan Bond	—	”		79,132		1,123,358	N/A		1,123,358
	ING Taiwan Income Fund	—	”		63,947		1,020,211	N/A		1,020,211
	Mega Diamond Bond Fund	—	”		70,262		814,510	N/A		814,510
	Taishin Lucky Fund	—	”		68,945		712,420	N/A		712,420
	Polaris De-Bao Fund	—	”		63,273		706,359	N/A		706,359
	Dresdner Bond DAM Fund	—	”		54,286		633,827	N/A		633,827
	HSBC Taiwan Money Management	—	”		34,093		510,018	N/A		510,018
	JF Taiwan Bond Fund	—	”		26,542		408,003	N/A		408,003
	INVESCO Bond Fund	—	”		27,176		406,741	N/A		406,741

	Corporate Bond
	Hua Nan Bank	—	Available-for-sale financial assets		—		1,559,462	N/A		1,559,462
	Cathay Bank	—	”		—		1,169,901	N/A		1,169,901
	Taiwan Power Company	—	”		—		1,048,083	N/A		1,048,083
	Formosa Petrochemical Corporation	—	”		—		398,611	N/A		398,611
	Formosa Petrochemical Corporation	—	Held-to-maturity financial assets		—		3,574,211	N/A		3,555,654
	Taiwan Power Company	—	”		—		3,262,876	N/A		3,262,707
	Nan Ya Plastics Corporation	—	”		—		2,003,757	N/A		2,000,821
	CPC Corporation, Taiwan	—	”		—		1,450,830	N/A		1,449,750
	China Steel Corporation	—	”		—		1,000,000	N/A		996,986
	Formosa Plastic Corporation	—	”		—		386,989	N/A		386,866
	Shanghai commercial & Saving Bank	—	”		—		289,566	N/A		289,495

(Continued)


				June 30, 2007
										Market Value or Net
				Shares/Units		Carrying Value		Percentage of		Asset Value
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	(in Thousands)		(US$ in Thousands)		Ownership		(US$ in Thousands)		Note
	Stocks
	TSMC Global	Subsidiary	Investment accounted for using equity method		1	$	43,613,633		100	$	43,613,633
	TSMC International	Subsidiary	”		987,968		27,053,657		100		27,053,657
	SSMC	Investee accounted for using equity method	”		463		8,289,538		39		7,221,894
	VIS	Investee accounted for using equity method	”		442,262		5,637,861		27		14,550,413
	TSMC Partners	Subsidiary	”		300		4,567,193		100		4,567,193
	TSMC-NA	Subsidiary	”		11,000		2,207,039		100		2,207,039
	Xintec	Investee with a controlling interest	”		90,526		1,366,816		43		1,271,218
	GUC	Investee with a controlling interest	”		41,263		694,111		38		14,132,636
	TSMC-Japan	Subsidiary	”		6		94,250		100		94,250
	TSMC-Europe	Subsidiary	”		—		65,109		100		65,109
	TSMC-Korea	Subsidiary	”		80		15,514		100		15,514
	United Industrial Gases Co., Ltd.	—	Financial assets carried at cost		16,783		193,584		10		277,359
	Shin-Etsu Handotai Taiwan Co., Ltd.	—	”		10,500		105,000		7		257,909
	W.K. Technology Fund IV	—	”		4,000		40,000		2		57,472
	Hontung Venture Capital Co., Ltd.	—	”		2,633		26,329		10		25,113

	Fund
	Horizon Ventures Fund	—	Financial assets carried at cost		—		312,950		12		312,950
	Crimson Asia Capital	—	”		—		69,355		1		69,355

	Capital
	TSMC-Shanghai	Subsidiary	Investment accounted for using equity method		—		8,799,540		100		8,792,573
	VTAF II	Subsidiary	”		—		858,453		98		855,775
	VTAF III	Subsidiary	”		—		756,146		98		748,203
	Emerging Alliance	Subsidiary	”		—		717,200		99		717,200
	Chi Cheng	Subsidiary	”		—		168,359		36		626,923	Treasury stock of NT$458,564 thousand is deducted from the carrying value
	Hsin Ruey	Subsidiary	”		—		166,857		36		626,368	Treasury stock of NT$459,511 thousand is deducted from the carrying value

Chi Cherng	Stocks
	TSMC	Parent Company	Available-for-sale financial assets		17,032		1,207,568		—		1,207,568
	VIS	Investee accounted for using equity method	Investments accounted for using equity method		5,032		104,426		—		165,556

Hsin Ruey	Stocks
	TSMC	Parent Company	Available-for-sale financial assets		17,064		1,209,832		—		1,209,832
	VIS	Investee accounted for using equity method	Investments accounted for using equity method		3,711		81,743		—		122,087

TSMC International	Stocks
	InveStar	Subsidiary	Investments accounted for using equity method		9,207	US$	36,466		97	US$	36,466
	InveStar II	Subsidiary	”		51,300	US$	54,498		97	US$	54,498
	TSMC Development	Subsidiary	”		1	US$	662,082		100	US$	662,082
	TSMC Technology	Subsidiary	”		1	US$	6,286		100	US$	6,286

(Continued)


				June 30, 2007
										Market Value or Net
				Shares/Units		Carrying Value		Percentage of		Asset Value
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	(in Thousands)		(US$ in Thousands)		Ownership		(US$ in Thousands)		Note
TSMC-Development	WaferTech	Subsidiary	Investments accounted for using equity method		—	US$	249,316		100	US$	249,316

TSMC Partners	Common stock
	VisEra Holding Company	Investee accounted for using equity method	Investments accounted for using equity method		43,000	US$	63,098		49	US$	63,098

Emerging Alliance	Common stock
	NetLogic Microsystems, Inc.	—	Financial assets at fair value through profit or loss		55	US$	1,767		—	US$	1,767
	Ikanos Communication, Inc.	—	Available-for-sale financial assets		515	US$	3,917		2	US$	3,917
	Global Investment Holding, Inc.	—	Financial assets carried at cost		10,800	$	100,000		6	$	100,000
	RichWave Technology Corp.	—	”		4,247	US$	1,648		13	US$	1,648
	Pixim, Inc.	—	”		1,036	US$	275		2	US$	275

	Preferred stock
	Pixim, Inc.	—	Financial assets carried at cost		3,606	US$	862		—	US$	862
	Mosaic Systems, Inc.	—	”		2,481	US$	12		6	US$	12
	Reflectivity, Inc.	—	”		3,252	US$	102		4	US$	102
	Miradia, Inc.	—	”		3,040	US$	1,000		3	US$	1,000
	Axiom Microdevices, Inc.	—	”		1,000	US$	1,000		1	US$	1,000
	Optichron, Inc.	—	”		714	US$	1,000		4	US$	1,000
	NuCORE Technology, Inc.	—	”		2,254	US$	1,388		2	US$	1,388
	Next IO, Inc.	—	”		800	US$	500		2	US$	500
	Audience, Inc.	—	”		1,654	US$	250		1	US$	250
	Centrality Communications	—	”		1,325	US$	1,800		3	US$	1,800
	Teknovus, Inc.	—	”		6,977	US$	1,327		3	US$	1,327
	Optimal Corporation	—	”		583	US$	600		4	US$	600
	Mobilygen	—	”		1,415	US$	750		1	US$	750

VTAF II	Common stock
	Yobon	—	Financial assets carried at cost		1,875	US$	919		13	US$	919
	Sentelic	—	”		1,200	US$	2,040		15	US$	2,040
	Leadtrend	—	”		1,150	US$	660		6	US$	660
	RichWave Technology Corp.	—	”		500	US$	231		2	US$	231

	Preferred stock
	Powerprecise Solutions, Inc.	—	Financial assets carried at cost		1,445	US$	1,400		11	US$	1,400
	Tzero Technologies, Inc.	—	”		730	US$	1,500		2	US$	1,500
	Miradia, Inc.	—	”		2,740	US$	2,424		3	US$	2,424
	Axiom Microdevices, Inc.	—	”		4,142	US$	1,812		4	US$	1,812
	Next IO, Inc.	—	”		216	US$	182		—	US$	182
	Ageia Technologies, Inc.	—	”		2,030	US$	2,074		2	US$	2,074
	Audience, Inc.	—	”		2,208	US$	474		1	US$	474
	GemFire Corporation	—	”		600	US$	68		1	US$	68
	Optichron, Inc.	—	”		353	US$	869		2	US$	869
	Xceive	—	”		714	US$	1,000		2	US$	1,000
	5V Technologies, Inc.	—	”		2,357	US$	1,768		11	US$	1,768
	Power Analog Microelectronics	—	”		2,000	US$	1,500		13	US$	1,500
	Impinj, Inc.	—	”		475	US$	1,000		—	US$	1,000
	Beceem Communications	—	”		650	US$	1,600		1	US$	1,600
	Teknovus, Inc.	—	”		518	US$	119		—	US$	119
	Aquantia Corporation	—	”		1,264	US$	1,150		5	US$	1,150
	Pixim, Inc.	—	”		3,279	US$	641		2	US$	641

(Continued)


				June 30, 2007
										Market Value or Net
				Shares/Units		Carrying Value		Percentage of		Asset Value
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	(in Thousands)		(US$ in Thousands)		Ownership		(US$ in Thousands)		Note
VTAF III	Preferred stock
	Mutual-Pak Limited	—	Financial assets carried at cost		370	US$	112		13	US$	112
	Quellan, Inc	—	”		2,231	US$	2,500		7	US$	2,500
	M2000, Inc.	—	”		1,500	US$	1,500		4	US$	1,500
	SynDiTec, Inc.	—	”		4,296	US$	720		7	US$	720
	Validity Sensors, Inc.	—	”		5,333	US$	2,000		7	US$	2,000
	Silicon Technical Services, LLC	—	”		915	US$	1,000		2	US$	1,000
	Neoconix, Inc.	—	”		2,458	US$	4,000		6	US$	4,000
	Advasense Sensors, Inc.	—	”		1,624	US$	1,500		6	US$	1,500
	Tilera, Inc.	—	”		1,698	US$	2,360		3	US$	2,360

	Corporate Bond
	GTBF, Inc.	—	Financial assets carried at cost		—	US$	1,500		N/A	US$	1,500

Investar	Common stock
	Monolithic Power Systems, Inc.	—	Financial assets at fair value through profit or loss		1,975	US$	34,458		7	US$	34,458
	Advanced Power Electronics Corp.	—	Available-for-sale financial assets		58	US$	20		—	US$	20
	Capella Microsystems (Taiwan), Inc.	—	Financial assets carried at cost		530	US$	154		2	US$	154

	Preferred stock
	Integrated Memory Logic, Inc.	—	Financial assets carried at cost		2,831	US$	1,221		9	US$	1,221
	IP Unity, Inc.	—	”		1,008	US$	494		1	US$	494
	Sonics, Inc.	—	”		1,843	US$	3,530		2	US$	3,530
	NanoAmp Solutions, Inc.	—	”		541	US$	853		2	US$	853
	Memsic, Inc.	—	”		2,727	US$	1,500		9	US$	1,500

Investar II	Common stock
	Monolithic Power Systems, Inc.	—	Financial assets at fair value through profit or loss		864	US$	15,085		3	US$	15,085
	Geo Vision, Inc.	—	”		6	US$	40		—	US$	40
	Rich Tek Technology Corp.	—	”		132	US$	2,088		—	US$	2,088
	Geo Vision, Inc.	—	Available-for-sale financial assets		15	US$	91		—	US$	91
	Rich Tek Technology Corp.	—	”		227	US$	3,597		—	US$	3,597
	Ralink Technology (Taiwan), Inc.	—	Financial assets carried at cost		2,383	US$	791		3	US$	791
	Capella Microsystems (Taiwan), Inc.	—	”		534	US$	210		2	US$	210
	Auden Technology MFG. Co., Ltd.	—	”		1,049	US$	223		4	US$	223
	EoNEX Technologies, Inc.	—	”		55	US$	3,048		5	US$	3,048
	Goyatek Technology, Corp.	—	”		2,088	US$	545		7	US$	545
	Trendchip Technologics Corp.	—	”		1,000	US$	574		4	US$	574
	EON Technology, Corp.	—	”		4,243	US$	1,175		6	US$	1,175
	eLCOS Microdisplay Technology, Ltd.	—	”		270	US$	27		1	US$	27
	Epic Communication, Inc.	—	”		191	US$	37		1	US$	37
	Sonics, Inc.	—	”		2,220	US$	32		3	US$	32

	Preferred stock
	Memsic, Inc.	—	Financial assets carried at cost		2,289	US$	1,560		7	US$	1,560
	NanoAmp Solutions, Inc.	—	”		375	US$	1,500		1	US$	1,500
	Kilopass Technology, Inc.	—	”		3,887	US$	2,000		6	US$	2,000
	FangTek, Inc.	—	”		6,930	US$	3,250		16	US$	3,250
	Sonics, Inc.	—	”		2,115	US$	3,082		3	US$	3,082
	eLCOS Microdisplay Technology, Ltd.	—	”		3,500	US$	3,500		8	US$	3,500
	Alchip Technologies Limited	—	”		6,128	US$	2,450		15	US$	2,450

(Continued)


				June 30, 2007
								Market Value or Net
				Shares/Units	Carrying Value		Percentage of	Asset Value
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	(in Thousands)	(US$ in Thousands)		Ownership	(US$ in Thousands)		Note
TSMC Global	Government bonds
	United States Treas Nts	—	Available-for-sale financial assets	—	US$	300	N/A	US$	300
	United States Treas Nts	—	”	—	US$	41,177	N/A	US$	41,177
	United States Treas Nts	—	”	—	US$	16,896	N/A	US$	16,896
	United States Treas Nts	—	”	—	US$	46,322	N/A	US$	46,322
	United States Treas Nts	—	”	—	US$	5,724	N/A	US$	5,724
	United States Treas Nt	—	”	—	US$	26,065	N/A	US$	26,065
	United States Treas Nts	—	”	—	US$	20,611	N/A	US$	20,611
	United States Treas Nts	—	”	—	US$	14,742	N/A	US$	14,742
	United States Treas Nts	—	”	—	US$	5,829	N/A	US$	5,829
	Us Treasury Nts	—	”	—	US$	4,841	N/A	US$	4,841
	Us Treasury Nts	—	”	—	US$	2,480	N/A	US$	2,480
	Us Treasury Nts	—	”	—	US$	2,483	N/A	US$	2,483
	Us Treas Nts	—	”	—	US$	10,290	N/A	US$	10,290

	Corporate bonds
	Anz Cap Tr I	—	Available-for-sale financial assets	—	US$	970	N/A	US$	970
	Axa Finl, Inc.	—	”	—	US$	2,118	N/A	US$	2,118
	Abbott Labs	—	”	—	US$	2,538	N/A	US$	2,538
	Abbott Labs	—	”	—	US$	1,503	N/A	US$	1,503
	Allstate Life Global Fdg Secd	—	”	—	US$	2,978	N/A	US$	2,978
	American Gen Fin Corp.	—	”	—	US$	3,198	N/A	US$	3,198
	American Gen Fin Corp. Mtn	—	”	—	US$	3,458	N/A	US$	3,458
	American Gen Fin Corp. Mtn	—	”	—	US$	1,970	N/A	US$	1,970
	American Honda Fin Corp. Mtn	—	”	—	US$	9,310	N/A	US$	9,310
	American Honda Fin Corp. Mtn	—	”	—	US$	800	N/A	US$	800
	Amgen, Inc.	—	”	—	US$	2,909	N/A	US$	2,909
	Associates Corp. North Amer	—	”	—	US$	2,529	N/A	US$	2,529
	Atlantic Richfield Co	—	”	—	US$	2,168	N/A	US$	2,168
	Bp Cap Mkts P L C	—	”	—	US$	4,447	N/A	US$	4,447
	Bank New York, Inc.	—	”	—	US$	1,496	N/A	US$	1,496
	Bank One Corp.	—	”	—	US$	2,017	N/A	US$	2,017
	Bank One Corp.	—	”	—	US$	1,461	N/A	US$	1,461
	Bank Utd Houston Tx Mtbn	—	”	—	US$	522	N/A	US$	522
	Beneficial Corp. Mtn Bk Entry	—	”	—	US$	2,286	N/A	US$	2,286
	Burlington Res, Inc.	—	”	—	US$	3,639	N/A	US$	3,639
	Cit Group Hldgs, Inc.	—	”	—	US$	3,018	N/A	US$	3,018
	Cit Group, Inc. New	—	”	—	US$	2,504	N/A	US$	2,504
	Chase Manhattan Corp. New	—	”	—	US$	2,102	N/A	US$	2,102
	Chase Manhattan Corp. New	—	”	—	US$	5,059	N/A	US$	5,059
	Chubb Corp.	—	”	—	US$	2,123	N/A	US$	2,123
	Cogentrix Energy, Inc.	—	”	—	US$	3,701	N/A	US$	3,701
	Colonial Pipeline Co.	—	”	—	US$	1,479	N/A	US$	1,479
	Consolidated Edison, Inc.	—	”	—	US$	2,938	N/A	US$	2,938
	Countrywide Fdg Corp. Mtn	—	”	—	US$	2,026	N/A	US$	2,026
	Credit Suisse First Boston Usa	—	”	—	US$	3,119	N/A	US$	3,119
	Credit Suisse First Boston Usa	—	”	—	US$	2,185	N/A	US$	2,185
	Credit Suisse First Boston	—	”	—	US$	732	N/A	US$	732
	Daimlerchrysler North Amer	—	”	—	US$	988	N/A	US$	988
	Daimlerchrysler North Amer Hld	—	”	—	US$	751	N/A	US$	751
	Dayton Hudson Corp.	—	”	—	US$	2,014	N/A	US$	2,014
	Deere John Cap Corp. Mtn Bk Ent	—	”	—	US$	2,159	N/A	US$	2,159
	Deere John Cap Corp.	—	”	—	US$	5,927	N/A	US$	5,927

(Continued)


				June 30, 2007
								Market Value or Net
				Shares/Units	Carrying Value		Percentage of	Asset Value
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	(in Thousands)	(US$ in Thousands)		Ownership	(US$ in Thousands)		Note
	Dell Computer Corp.	—	Available-for-sale financial assets	—	US$	2,809	N/A	US$	2,809
	Diageo Plc	—	”	—	US$	3,478	N/A	US$	3,478
	Emerson Elec Co.	—	”	—	US$	3,208	N/A	US$	3,208
	European Invt Bk	—	”	—	US$	6,054	N/A	US$	6,054
	Federal Home Ln Bks	—	”	—	US$	7,937	N/A	US$	7,937
	Fifth Third Bk Cinc.Innati Oh	—	”	—	US$	2,448	N/A	US$	2,448
	Fleet Finl Group, Inc. New	—	”	—	US$	902	N/A	US$	902
	Fleet Boston Corp.	—	”	—	US$	2,614	N/A	US$	2,614
	Ge Global Ins Hldg Corp.	—	”	—	US$	1,893	N/A	US$	1,893
	General Dynamics Corp.	—	”	—	US$	2,064	N/A	US$	2,064
	General Elec Cap Corp. Mtn	—	”	—	US$	1,167	N/A	US$	1,167
	General Elec Cap Corp. Mtn	—	”	—	US$	3,907	N/A	US$	3,907
	General Elec Cap Corp. Mtn	—	”	—	US$	2,094	N/A	US$	2,094
	General Elec Cap Corp. Mtn	—	”	—	US$	11,267	N/A	US$	11,267
	General Re Corp.	—	”	—	US$	3,233	N/A	US$	3,233
	Genworth Finl, Inc.	—	”	—	US$	3,245	N/A	US$	3,245
	Greenpoint Finl Corp.	—	”	—	US$	980	N/A	US$	980
	Hbos Plc Medium Term Sr Nts	—	”	—	US$	2,976	N/A	US$	2,976
	Hancock John Global Fdg Ii Mtn	—	”	—	US$	5,065	N/A	US$	5,065
	Hancock John Global Fdg Mtn	—	”	—	US$	982	N/A	US$	982
	Hancock John Global Fdg Ii Mtn	—	”	—	US$	2,920	N/A	US$	2,920
	Hartford Finl Svcs Group, Inc.	—	”	—	US$	1,338	N/A	US$	1,338
	Hartford Finl Svcs Group, Inc.	—	”	—	US$	5,025	N/A	US$	5,025
	Heller Finl, Inc.	—	”	—	US$	1,908	N/A	US$	1,908
	Hewlett Packard Co.	—	”	—	US$	1,829	N/A	US$	1,829
	Household Fin Corp.	—	”	—	US$	3,075	N/A	US$	3,075
	Household Fin Corp.	—	”	—	US$	2,916	N/A	US$	2,916
	Huntington National Bank	—	”	—	US$	1,862	N/A	US$	1,862
	Ing Sec Life Instl Fdg	—	”	—	US$	2,478	N/A	US$	2,478
	International Business Machs	—	”	—	US$	3,455	N/A	US$	3,455
	Intl Lease Fin Corp. Mtn	—	”	—	US$	2,951	N/A	US$	2,951
	Intl Lease Fin Corp. Mtn	—	”	—	US$	4,159	N/A	US$	4,159
	J P Morgan Chase + Co.	—	”	—	US$	3,285	N/A	US$	3,285
	Key Bk Na Med Term Nts Bk Entr	—	”	—	US$	4,423	N/A	US$	4,423
	KeyCorp. Mtn Book Entry	—	”	—	US$	3,016	N/A	US$	3,016
	Lehman Brothers Hldgs, Inc.	—	”	—	US$	1,067	N/A	US$	1,067
	Lehman Brothers Hldgs, Inc.	—	”	—	US$	3,150	N/A	US$	3,150
	Lehman Brothers Hldgs, Inc.	—	”	—	US$	486	N/A	US$	486
	Lehman Brothers Hldgs, Inc.	—	”	—	US$	983	N/A	US$	983
	Lehman Brothers Hldgs, Inc.	—	”	—	US$	1,162	N/A	US$	1,162
	Lehman Brothers Hldgs, Inc.	—	”	—	US$	1,628	N/A	US$	1,628
	Mbna America Bank Na Y	—	”	—	US$	6,418	N/A	US$	6,418
	Mgic Invt Corp.	—	”	—	US$	1,197	N/A	US$	1,197
	Ameritech Capital Funding Co.	—	”	—	US$	2,785	N/A	US$	2,785
	Marshall + Ilsley Corp.	—	”	—	US$	8,435	N/A	US$	8,435
	Massmutual Global Fdg Ii Mtn	—	”	—	US$	3,627	N/A	US$	3,627
	Metropolitan Life Global Mtn	—	”	—	US$	3,415	N/A	US$	3,415
	Monumental Global Fdg Ii	—	”	—	US$	1,471	N/A	US$	1,471
	Monunmetal Global Fdg Ii	—	”	—	US$	1,959	N/A	US$	1,959
	Mony Group, Inc.	—	”	—	US$	2,142	N/A	US$	2,142
	Morgan Stanley	—	”	—	US$	1,931	N/A	US$	1,931
	Morgan Stanley	—	”	—	US$	5,458	N/A	US$	5,458

(Continued)


				June 30, 2007
								Market Value or Net
				Shares/Units	Carrying Value		Percentage of	Asset Value
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	(in Thousands)	(US$ in Thousands)		Ownership	(US$ in Thousands)		Note
	National City Corp.	—	Available-for-sale financial assets	—	US$	3,443	N/A	US$	3,443
	National Westminster Bk Plc	—	”	—	US$	1,308	N/A	US$	1,308
	Nationwide Life Global Fdg I	—	”	—	US$	3,477	N/A	US$	3,477
	Oracle Corp. / Ozark Hldg, Inc.	—	”	—	US$	1,966	N/A	US$	1,966
	Pnc Fdg Corp.	—	”	—	US$	1,001	N/A	US$	1,001
	Pepsico, Inc. Mtn Book Entry	—	”	—	US$	3,616	N/A	US$	3,616
	Popular North Amer, Inc.	—	”	—	US$	2,907	N/A	US$	2,907
	Praxair, Inc.	—	”	—	US$	3,122	N/A	US$	3,122
	Premark Intl, Inc.	—	”	—	US$	2,706	N/A	US$	2,706
	Pricoa Global Fdg I Mtn	—	”	—	US$	3,421	N/A	US$	3,421
	Principal Finl Group Australia	—	”	—	US$	1,001	N/A	US$	1,001
	Principal Life Global Fdg I Gl	—	”	—	US$	1,172	N/A	US$	1,172
	Protective Life Secd Trs	—	”	—	US$	2,935	N/A	US$	2,935
	Protective Life Secd Trs Mtn	—	”	—	US$	3,403	N/A	US$	3,403
	Public Svc Elec Gas Co.	—	”	—	US$	3,706	N/A	US$	3,706
	Regions Finl Corp. New	—	”	—	US$	2,381	N/A	US$	2,381
	Mizuho Fin(Cayman)	—	”	—	US$	2,167	N/A	US$	2,167
	Sbc Communications, Inc.	—	”	—	US$	3,312	N/A	US$	3,312
	Sbc Communications, Inc.	—	”	—	US$	695	N/A	US$	695
	Sp Powerassests Ltd Global	—	”	—	US$	980	N/A	US$	980
	Safeco Corp.	—	”	—	US$	711	N/A	US$	711
	St Paul Cos, Inc. Mtn Bk Ent	—	”	—	US$	2,536	N/A	US$	2,536
	Simon Ppty Group L P	—	”	—	US$	2,177	N/A	US$	2,177
	Simon Ppty Group Lp	—	”	—	US$	998	N/A	US$	998
	Suntrust Bk Atlanta Ga Medium	—	”	—	US$	3,454	N/A	US$	3,454
	Us Bk Natl Assn Cincinnati Oh	—	”	—	US$	2,935	N/A	US$	2,935
	Vodafone Airtouch Plc	—	”	—	US$	1,662	N/A	US$	1,662
	Wps Resources Corp.	—	”	—	US$	1,029	N/A	US$	1,029
	Wachovia Corp. New	—	”	—	US$	3,479	N/A	US$	3,479
	Wachovia Corp. New	—	”	—	US$	3,125	N/A	US$	3,125
	Washington Mut, Inc.	—	”	—	US$	1,698	N/A	US$	1,698
	Washington Post Co.	—	”	—	US$	3,001	N/A	US$	3,001
	Wells Fargo + Co. New	—	”	—	US$	2,961	N/A	US$	2,961
	Wells Fargo + Co. New Med Trm	—	”	—	US$	4,310	N/A	US$	4,310
	Westfield Cap Corp. Ltd	—	”	—	US$	2,003	N/A	US$	2,003

	Corporate issued asset-backed securities
	American Home Mtg Invt Tr	—	Available-for-sale financial assets	—	US$	53	N/A	US$	53
	Americredit Automobile Rec Tr	—	”	—	US$	3,253	N/A	US$	3,253
	Americredit Automobile Rec Tr	—	”	—	US$	2,294	N/A	US$	2,294
	Americredit Auto Rec Tr	—	”	—	US$	1,000	N/A	US$	1,000
	Americredit Automobile Receivb	—	”	—	US$	1,996	N/A	US$	1,996
	Americredit Automobile Receiva	—	”	—	US$	2,728	N/A	US$	2,728
	Atlantic City Elc Trns Fdgllc	—	”	—	US$	298	N/A	US$	298
	Ba Cr Card Tr	—	”	—	US$	4,264	N/A	US$	4,264
	Banc Amer Fdg 2006 I Tr	—	”	—	US$	4,044	N/A	US$	4,044
	Bear Stearns Coml Mtg Secs, Inc.	—	”	—	US$	3,518	N/A	US$	3,518
	Bear Stearns Alt A Tr	—	”	—	US$	532	N/A	US$	532
	Bear Stearns Arm Tr	—	”	—	US$	3,259	N/A	US$	3,259
	Bear Stearns Arm Tr	—	”	—	US$	1,943	N/A	US$	1,943
	Cit Equip Coll Tr	—	”	—	US$	893	N/A	US$	893
	Cit Equip Coll Tr	—	”	—	US$	3,986	N/A	US$	3,986
	Cnh Equip Tr	—	”	—	US$	276	N/A	US$	276

(Continued)


						June 30, 2007
												Market Value or Net
						Shares/Units		Carrying Value		Percentage of		Asset Value
Held Company Name	Marketable Securities Type and Name	Relationship with the Company		Financial Statement Account		(in Thousands)		(US$ in Thousands)		Ownership		(US$ in Thousands)		Note
	Cwabs, Inc.		—	Available-for-sale financial assets			—	US$	139		N/A	US$	139
	Cwabs		—		”		—	US$	3,619		N/A	US$	3,619
	Cwmbs, Inc.		—		”		—	US$	784		N/A	US$	784
	Capital Auto Receivables Asset		—		”		—	US$	3,236		N/A	US$	3,236
	Capital Auto Receivables Asset		—		”		—	US$	2,238		N/A	US$	2,238
	Capital One Auto Fin Tr		—		”		—	US$	2,628		N/A	US$	2,628
	Capital One Auto Fin Tr		—		”		—	US$	2,995		N/A	US$	2,995
	Capital One Auto Fin Tr		—		”		—	US$	4,997		N/A	US$	4,997
	Capital One Multi Asset Execut		—		”		—	US$	3,961		N/A	US$	3,961
	Capital One Multi Asset Execut		—		”		—	US$	2,965		N/A	US$	2,965
	Capitial One Prime Auto Receiv		—		”		—	US$	1,414		N/A	US$	1,414
	Capital One Prime Auto Rec		—		”		—	US$	3,968		N/A	US$	3,968
	Caterpillar Finl Asset Tr		—		”		—	US$	8,198		N/A	US$	8,198
	Cbass Tr		—		”		—	US$	4,248		N/A	US$	4,248
	Cendant Rent Car Fdg Aesop Llc		—		”		—	US$	9,361		N/A	US$	9,361
	Chase Mtge Finance Corp.		—		”		—	US$	2,763		N/A	US$	2,763
	Chase Mtg Fin Tr		—		”		—	US$	2,881		N/A	US$	2,881
	Chase Mtge Finance Corp.		—		”		—	US$	1,831		N/A	US$	1,831
	Chase Mtg Fin Tr		—		”		—	US$	950		N/A	US$	950
	Chase Mtg Fin Tr		—		”		—	US$	1,900		N/A	US$	1,900
	Citicorp Mtg Secs		—		”		—	US$	375		N/A	US$	375
	Citibank Cr Card Issuance Tr		—		”		—	US$	9,970		N/A	US$	9,970
	Credit Suisse First Boston Mtg		—		”		—	US$	7,629		N/A	US$	7,629
	Credit Suisse First Boston Mtg		—		”		—	US$	7,677		N/A	US$	7,677
	Credit Suisse First Boston Mtg		—		”		—	US$	300		N/A	US$	300
	Credit Suisse First Boston Mtg		—		”		—	US$	3,563		N/A	US$	3,563
	Credit Suisse First Boston Mtg		—		”		—	US$	3,715		N/A	US$	3,715
	Daimlerchrysler Auto Tr		—		”		—	US$	1,694		N/A	US$	1,694
	Daimlerchrysler Auto Tr		—		”		—	US$	4,295		N/A	US$	4,295
	Deere John Owner Tr		—		”		—	US$	2,447		N/A	US$	2,447
	Drive Auto Receivables Tr		—		”		—	US$	2,306		N/A	US$	2,306
	First Franklin Mtg Ln Tr		—		”		—	US$	4,187		N/A	US$	4,187
	First Horizon Abs Tr		—		”		—	US$	422		N/A	US$	422
	First Union Lehman Bros Mtg Tr		—		”		—	US$	795		N/A	US$	795
	First Un Natl Bk Coml Mtg Tr		—		”		—	US$	2,854		N/A	US$	2,854
	Ford Credit Auto Owner Trust		—		”		—	US$	4,299		N/A	US$	4,299
	Ge Cap Cr Card Master Nt Tr		—		”		—	US$	2,827		N/A	US$	2,827
	Gs Mtg Secs Corp.		—		”		—	US$	4,127		N/A	US$	4,127
	Harley Davidson Motorcycle Tr		—		”		—	US$	4,943		N/A	US$	4,943
	Hertz Veh Fing Llc		—		”		—	US$	5,320		N/A	US$	5,320
	Home Equity Mtg Tr 2006 4		—		”		—	US$	4,167		N/A	US$	4,167
	Honda Auto Receivables		—		”		—	US$	3,362		N/A	US$	3,362
	Hsbc Automotive Tr		—		”		—	US$	2,690		N/A	US$	2,690
	Hyundai Auto Receivables Tr		—		”		—	US$	4,083		N/A	US$	4,083
	Hyundai Auto Receivables Tr		—		”		—	US$	3,941		N/A	US$	3,941
	J P Morgan Mtg Tr		—		”		—	US$	955		N/A	US$	955
	J P Morgan Mtg Tr		—		”		—	US$	943		N/A	US$	943
	J P Morgan Mtg Tr		—		”		—	US$	938		N/A	US$	938
	Jp Morgan Mtg Tr		—		”		—	US$	924		N/A	US$	924
	Lb Ubs Coml Mtg Tr		—		”		—	US$	3,318		N/A	US$	3,318
	Mbna Cr Card Master Nt Tr		—		”		—	US$	4,449		N/A	US$	4,449
	Mastr Asset Backed		—		”		—	US$	3,510		N/A	US$	3,510

(Continued)

June 30, 2007

Market Value or Net

Shares/Units

Carrying Value

Percentage of

Asset Value

Held Company Name

Marketable Securities Type and Name

Relationship with the Company

Financial Statement Account

(in Thousands)

(US$ in Thousands)

Ownership

(US$ in Thousands)

Note

Merrill Lynch Mtg Invs, Inc.

—

Available-for-sale financial assets

—

US$

5,262

N/A

US$

5,262

Morgan Stanley Ixis Estate Tr

—

”

—

US$

3,113

N/A

US$

3,113

Nomura Asset Accep Corp.

—

”

—

US$

4,138

N/A

US$

4,138

Onyx Accep Owner Tr

—