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 (4th 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 (3rd and 4th 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.   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  
 
           
  c.   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  
 
           
  d.   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)
  g.   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  
  h.   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
  a.   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  
  b.   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 (3rd and 4th 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:
  a.   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.
k.   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